Outlook for 2005 and beyond
Hydro's oil and gas production is expected to average about 575,000 barrels of oil equivalents for 2005. The 2005 target for production cost per barrel is NOK 24.
This is an increase from the levels in 2003 and 2004 and is largely attributable to the higher costs of purchasing injection gas for the Grane field, as well as somewhat higher costs linked to new fields coming on stream.
Hydro will increase its exploration activity in 2005. Hydro is planning to participate in 30 wells in 2005, of which about 20 are on the NCS. In 2005 Hydro will drill exploration wells in the Barents Sea, Norwegian Sea and in the North Sea.
Hydro anticipates a somewhat higher production of primary aluminium as a result of the full effect of the Sunndal expansion and increased access to primary aluminium in 2005 following the Alouette expansion in Canada. The company’s efforts to improve the competitive position of its upstream operations will continue, and Hydro will press on to improve the situation for businesses that do not generate a satisfactory rate of return. The strategy of growing in highly profitable downstream markets will continue.
Hydro is expecting somewhat flatter production growth in 2005 than in 2004, but is maintaining and continuing its long-term production goals. Oil and gas production from Hydro’s existing portfolio is expected to climb to more than 700,000 boe per day in 2008. This means that the company is still planning for an average annual growth in oil and gas production, in the period 2001-2008, of about 8 percent. Production of primary aluminium is expected to increase from about 1.6 million tonnes in 2004 to approximately 2.0 million tonnes in 2009. This estimate includes the impact of the new plant in Qatar.
The investment level for 2005 is expected to be about NOK 24 billion, inclusive of exploration. The investments come from a financially robust project portfolio that is expected to contribute to further production growth and solid profitability in the years ahead. A greater share of the investments in the years to come will be linked to development projects in Oil & Energy. For 2005 investments in Oil & Energy will amount to approximately NOK 16 billion. In addition, the exploration activity will be increased to a level of about NOK 2 billion.
Hydro has in 2004 made good progress towards achieving its 2006 RoaCE target of 7.5-8.5 percent, when measured based on the new normalized prices.