Dear audience,
It is a distinct pleasure for me to be here at the Sanderstølen Conference. This is an important meeting place.

I grew up on the coast of northern Norway, where fisheries were the major source of income. This leads me to a phrase often heard when I was young: “We are all in the same boat”.

How do I transfer this phrase to my address today?

It is meant to illustrate the ambition that the energy world with its authorities, producers and consumers are in the same boat and that we need to put more efforts into rowing in the same direction. And how do we make the waters we row in more tranquil? The joint challenges we need to capture and act upon are many. To me two important elements are:

• Security of energy supply
• The need to further increase sustainable and environmentally good oil and gas activities, and thereby also contributing to improve the political and public perception of the oil and gas sector.

My approach here today will be to address some of the current issues on our common energy agenda.

The political basis for this Government is in popular terms called the Soria Moria declaration. It contains important elements with regard to the petroleum sector, underlining the importance of the petroleum sector, the long term perspectives and hence predictability for the industry.

The main goal for the Government is to maintain and further develop value creation, employment and competence in the petroleum sector. Our ambition is for Norway to be world leading in technology and environmental performance. Fulfilling this ambition is crucial, not least for petroleum activities in the high north.

Realizing these aims is also dependent on efforts, innovation and activity from the industry. Maintaining and developing the petroleum sector road map is a joint task between the authorities and the industry. I therefore emphasise the value of a rewarding dialogue between us and express this as an ambition.

Together with many other petroleum provinces in the world, our continental shelf has suffered from low exploration activities in recent years. The Government intends to develop incentives so that exploration activities can increase. In this respect, we emphasize the industry’s need for access to new prospective acreage, but we expect at the same time that industry gives priority to exploration activities.

Recent awards of new licences, as well as the applications for the 19 ^th> licensing round lay the foundation for Norway being an important petroleum province also in the years to come. I am pleased to see the number of new companies applying for pre-qualification as partners and operators. We welcome new companies just as we continue to need the experience of established companies.

In recent years, important measures have been taken with respect to infrastructure. The development of the new pipelines Langeled to the UK and Tampen Link to the UK shelf increases capacity and improves flexibility in the gas transportation system, thereby strengthening Norway's position as a stable supplier of gas to the European markets.

Several new projects are under consideration and likely to be developed in the near future. Moreover, during the course of the last year, several discoveries were made in the Norwegian Sea. The development of the major gas field Ormen Lange is well over half-way completed, and the field will come on stream next year. Norway’s position as a long-term energy supplier will further develop in 2007 when the Snøhvit LNG production starts, making it possible to also supply markets outside Europe. The Snøhvit gas field also serves as a bridgehead for development in the Barents Sea, and new projects are likely to follow in the future. The encouraging discoveries at the Goliat oil field have confirmed that there are more resources to be found in the Barents Sea, and that the Barents Sea also has an interesting potential as an oil province. The Government will evaluate the Goliat field development plan in due course. My concern is to establish a sustainable energy agenda for the north, as this region may prove to become a new petroleum province in Europe and thus become important as regards security of supply.

Technology is a vital prerequisite in the development of Norwegian petroleum resources. We now see discoveries made years and even decades ago being developed. This is mostly due to cutting-edge technology enabling development of resources in deep waters with high pressure and geological complexity. New technology also enables increased recovery from existing fields. The Government has the establishment of a CO ₂ value chain high on its agenda. I believe this has the potential to further increase oil recovery, while also contributing to Norway meeting its international, commitments concerning greenhouse gas emissions.

Prices and markets
I will now share with you some comments on prices and markets.

During the last couple of years the oil industry has received a strong impetus from higher oil prices. Some believe the surge in oil prices is a temporary cyclical upturn. Although cyclical elements clearly play a part, I think there are good reasons to believe that a higher level of oil prices is sustainable. This is because:

• Non-OECD countries account for an increasing share of oil demand. In these countries there is an unsaturated need for oil and demand is growing rapidly;
• There is a trend towards higher reserve replacement costs, meaning that more resources than before are needed to add capacity;
• The OPEC countries have raised their price objectives since prices at 40 – 50 USD seemingly do not reduce oil demand severely;
• There is little excess capacity across the value chain – upstream as well as downstream. In fact, one can argue that the high price level we have today, is the result of many years of under investment in energy infrastructure. It will take time to correct this.

For the global economy, high oil prices pose a risk, although the impact on growth so far seems to have been limited. Poor, developing countries without domestic energy resources stand to suffer the worst by high prices.

More investment in new oil fields and refineries is needed to meet future demand and to curb rising oil and energy prices. Governments and industry has a shared responsibility to bring this about.

Stability in the oil market with prices at a reasonable level is in the interest of both oil exporting and oil importing countries.

One way towards more efficient oil markets are better data on market fundamentals. Accurate, timely data can increase efficiency, reduce volatility, and make forecasts more precise. Today there is lack of timely and accurate data about supply, transparency in the oil market, demand, inventories and reserves. International organisations are working on these important issues. The efforts of the industry in this respect are of obvious importance.

When it comes to the European gas market, we have experienced some less than normal months. Cold weather and limited supply caused extremely high spot gas prices this fall, both in the UK and on the Continent. Further, security of gas supplies is becoming an increasingly important issue in Europe and was further accentuated by the 48 hour disruption of Russian gas supplies to Ukraine at New Year. I see this as an isolated incident and it is my view that all exporters to Europe have a good record as secure and reliable suppliers over the last 40 years.

It is of crucial importance to Norway to remain a stable and secure supplier of gas. The Norwegian gas industry is fully adapted to a new future, but consumer countries must provide an attractive market for gas. For instance, taxation of gas distorting competition and not based on relative environmental merits may lead to discomfort for investors in new gas capacity. The same goes for subsidies on competing fossil energy sources. I will return to this topic.

In order to establish security of supply, consumer countries must help build confidence in gas as a preferred choice of energy. Consumer countries can to a large extent themselves ensure that Norway – and other suppliers – can remain long term suppliers of gas to the European market.

The market needs more gas supplies, and a considerable part of the growth will come from Norway. Production from the continental shelf has been record high this winter, and production is set to rise in the coming years. Next year, in addition to pipeline deliveries, LNG will be transported from Norway to the US and European markets. In that way we will take part in the "globalisation" of gas markets. We are moving – slowly – towards a future of interlinked regional markets. This development is driven by technology, but also by the fact that gas has to be transported from sources further away from the main markets.

Our shelf is situated close to the European market, which means that transportation costs are low compared to many other sources. The natural gas transportation system is continuously expanded. With the Langeled and Tampen Link as the most recent examples, these developments will provide increased capacity andflexibility also ensuring that gas can be transported to the markets most in need of gas at any given time. Norway’s proximinity to a growing market makes it an attractive province for further investments.

Let me also briefly comment upon the topic of energy security in a more global context. Energy security is high on the agenda for the G8 Summit in July under the Russian presidency. It is important to address this topic as it will enhance the understanding of stable supplies of energy as a prerequisite for sustainable growth of the world economy. In my opinion there is a need to further enhance the producer/consumer dialogue and the interlink between security of supply and security of demand. Important elements in this respect are increased transparency, stability and predictability in the energy markets; investment incentives based on predictable framework conditions; taxation of energy sources based on relative environmental merits; and facilitation of a secure and affordable access to energy transport networks.

Norwayand the EU
Let me now expand a bit on our important relationship with the EU.

Liberalisation of the European gas market has been on the agenda for many years. Ongoing investments on the Norwegian Continental Shelf are being undertaken without 100 % coverage of new long term contracts. Previously, such contracts almost without exception provided a necessary economic basis for field developments. This is a consequence of a developed and liberalised British gas market and the full opening of the Norwegian gas sector. Further focus on efficiency in all parts of the value chain, also in the downstream Continental markets, is important for the European economy. This will give the market players comfort to invest in new gas capacity compared to other energy sources. A level playing field between gas producing and gas transportion compansies is essential for the development of long term investments in gas projects.

I therefore appreciate the permanent focus of the EU Commission on these issues and I share the overall conclusions of the progress report and the sector inquiry presented last November. I will, however, stress that long-term gas contracts will still be needed to undertake huge investments in the upstream sector and thereby strengthening security of supply for consumers.

Furthermore, oil price-indexation is one of several risk‑sharing instruments used by commercial parties. Policy makers should not limit the possibilities to enter into mutually beneficial arrangements.

As regards the EU energy agenda, the EU Energy Commissioner Mr. Piebalgs pointed out in his presentation important fields of action. I support and subscribe to the agenda presented by the Commission, as it is well in line with Norwegian energy policy. Through our EEA agreement we are closely following policy developments related to the internal energy market for natural gas and electricity, as well as areas such as energy efficiency and renewable energy. Norway is integrated in the internal markets as regards legislation, but also in physical terms through gas and electricity infrastructure. This is both communicated and discussed in the constructive energy dialogue we have with the EU Commission.

Being a major energy producer and exporter, it is important that we have rules of the game that are transparent and predictable. It is therefore of utmost importance for us in our position as non-member of the EU to be well informed about how policies and directives are being shaped through the Council and the European Parliament, and to have ample opportunity to voice views in the different processes.

Regarding our cooperation with the EU in general the coming four years, it is stated in the inaugural statement of the Government that our relationship with the EU will continue to be based on the EEA Agreement.

I look forward to continuing and further strengthening the energy dialogue between Norway and the European Union. A new energy dialogue meeting between Norway and the EU is scheduled to take place in Brussels early this summer.

A policy for the high north
An important element of our continued dialogue with the EU and other parties, is the issues related to the northern areas.

The Norwegian Parliament decided to open the southern part of the Norwegian part of the Barents Sea for petroleum activities in 1980. Two discoveries have been made – the Snøhvit gas field and the Goliat oil field. Where do we go from here?

The increasing global interest for the Barents Sea was not least triggered when the US Geological Survey estimated that almost one fourth of the world’s undiscovered petroleum resources may be located in the Arctic. Combined with general forecasts from the IEA showing a possible global growth in the need for energy by as much as 60 % in the next twenty-five years, the security of energy supply dimension has contributed to placing the northern areas high on the geopolitical agenda.

We believe that the Barents Sea could represent a new petroleum province of Europe. Thus, the Norwegian Government has an active policy for future exploration of the Norwegian part of the Barents Sea. The first step is the 19 ^th> licensing round, where we received applications in November last year. I am very pleased with the interest the industry has shown for the Barents Sea through these applications, which could lay the fundament for awards of important core-blocks in the Barents Sea.

The new focus on the Arctic leads us to reconsider our policies and views with regard to fisheries, environmental concerns, climatic issues and oil and gas activities.

These new perspectives affect Norway in many ways. More than one third of Norway's territory is located north of the Arctic Circle. Areas under Norwegian jurisdiction reach far into the Polar oceans. Our responsibilities and obligations in this respect concern areas that are more than six times the size of Norwegian territory. Thus, our tasks in the north are complex. But our attitude is clear: We have a responsibility in this respect and we will fulfill this responsibility.

The Barents Sea is described as one of the cleanest oceans of the world. This must be preserved. Value creation here must therefore take place in such manner as to ensure an acceptable co-existence between the different users of the sea and the environment. This calls for strict rules of safety and environmental protection.

Recognising that the north has become an energy political power centre in a global context, the new Government has the northern areas as a main focal point. Good solutions require comprehensive policies where all relevant issues are seen together. Two important tools in this respect are:

• Knowledge, and
• understanding

Knowledge is fundamental. Knowledge about the geological and marine resource base, the environment, the climate, the northern society and how it can benefit from value creation must be enhanced. This may be useful for sustainable petroleum activities in the Arctic. In a few weeks, the Government will also present to Parliament a management plan for the ocean areas in the Barents Sea and the Norwegian Sea. In this plan, all relevant sectors will be considered jointly so as to ensure an eco-system based exploitation of the marine and the non-renewable resources here.

Another example is that the Government has launched a new project called Barents 2020. Under this umbrella, cooperation projects for research and development in the north will be carried out under Norwegian auspices, with participation from our Russian neighbours and other international partners. I already mentioned another way of gaining knowledge - which is through exploration for oil and gas in the Barents Sea. Petroleum activities in the Barents Sea and the specific challenges with regard to environmental issues and resource management will form an important part of the Barents 2020 project.

Equally important, we need to ensure that all interested parties – both national and international – fully understand and acknowledge Norwegian policies and concerns in this respect. This shall be fulfilled trough active dialogues with other countries with interests in the Arctic. Such dialogues have already been initiated with the US, Canada, the EU, France, Germany and Great Britain.

We share the Barents Sea with our Russian neighbours. The relationship between Norway and Russia is an important element of our policies concerning this region. A main point is that the challenges in the north can only be solved in the best possible manner in close cooperation between our two countries.

Russia is moving closer to a new era in their oil and gas history with significant offshore production. As a good neighbour we will share the experiences we have had in this respect for the last forty years.

In the north, our common task is to ensure a sustainable development and management of the northern areas. Norway and Russia share an interest in obtaining this goal. In this respect we have good experiences with the contents and processes of the Norwegian environmental assessment studies. This can be part of Norway’s contribution.

Further, we should work together to establish the highest level of safety and the strictest environmental requirements for the petroleum activities in the Arctic. This is one important part of securing public acceptance to operate in these areas. Understanding and respect between the different stakeholders is crucial for all activities in the Arctic.

One initiative in this respect was in fact taken when the Arctic Energy Agenda was initiated in Kirkenes. The idea is to create a meeting place and discussion forum for high level decision makers from the political arena and the industry in Norway, Russia, the EU and the USA. This is a good concept for providing and developing joint ideas between the authorities and the industry. Developing the energy potential of the north in compliance with strict environmental and safety standards, is in many ways a joint task for governments and companies involved. Advancing the knowledge base, securing relevant research and development and close co-operation between countries and companies are crucial elements in this respect. This will also form the basis of realising the value creation potential within the framework of sustainable development.

The Norwegian Government would like to meet the challenges in the Barents Sea in a partnership with Russia and other States with interests in the north. We will also seek to continue our productive dialogue and cooperation with the industry in meeting these challenges. Forming the Arctic Energy Agenda demands clear commitment and a long term perspective. I will continue this process, as I think it is possible to have extensive petroleum activities in the Arctic in line with sustainable development criteria.

A famous statement goes something like this: “I have no suggestions for a solution, but I love addressing the challenge”. This will simply not do for the northern areas. That is why we need to be even more solution-oriented in this context. The agenda is set, the strategy is under work, and it will be implemented when it is finalised.

The CO ₂ challenge
Finally, I will briefly address the climate challenge.

The challenges posed by climate change are global. Carbon capture and storage could play an important role in the portfolio of mitigating actions for stabilization of atmospheric greenhouse gas concentrations. In addition, injection of CO ₂ in producing fields could contribute to enhanced oil and gas recovery and thereby also contribute to improved reservoir management. However, we have to acknowledge that realizing carbon capture and storage on a large scale is still a very challenging task, which requires close cooperation with the institutional players.

In my opinion we have achieved a lot though our efforts to reduce discharges to sea. The same cannot, however, yet be said for the situation as regards emissions to air.

The Government has ambitious goals regarding capture, use and storage of CO _2. The commitment to develop gas-fired power stations with carbon capture and storage in Norway is an important element of our energy policy. To ensure a sound economic and legal framework for the involvement of the State to realize carbon capture and storage, concrete work will be carried out in 2006.

Further, there is still a need to develop the technology in this area. In an effort to speed up the development of CO ₂ capture and storage technologies, supporting development of pilot projects is important. Joint efforts with industry could bring up the rate of activity to several hundred million Norwegian Kroner per year. This is a considerable effort in an international context.

In summing up, I have addressed some topics that I consider important. I have also underlined that processes in connection with these and other issues crucial to the petroleum sector and the public “yesability” of the petroleum sector are a joint responsibility for the authorities and the industry.

I have aimed at leaving you with confidence in Norway taking its share of responsibilities and actions to contribute to energy stakeholders rowing in the same direction. The best way to predict the future is to have an opportunity to shape it. Dear audience; together we have that opportunity.

Thank you for your attention!