Norway aims at sustained NCS production while ramping up far north exploration, said Minister of Energy Torhild Widvey.

Q. What is the largest challenge facing the Norwegian petroleum industry today?

A. We will talk about the challenges first. I would say the biggest challenge is increasing exploration activity - not only the exploration activity but the recovery from existing fields. We also must reduce the cost level on the Norwegian Continental Shelf (NCS). And, of course, we must focus on the expertise of the Norwegian petroleum sector. I will always say we would not be where we are today if it were not for the international companies. It is important for me to continue to broaden the internationalization of the Norwegian petroleum industry.

Q. And the biggest accomplishments in the first year of your ministry?

A. When we talk about the biggest accomplishments, I would say to have developed a successful strategy of attracting new companies to the shelf. That is very important. We can now see that there have been a considerable number of companies that have showed interest in the NCS. A number of them have been pre-qualified. Also of importance is our promotion of Norwegian companies abroad.

But the question that all companies are asking all the time - that they underline all the time - indicates that probably the best and smartest thing the government can do is give them new acreage. So, extensive awards of acreage are probably the most important accomplishment.

Q. There is a new licensing round coming up, with quite a bit of Barents Sea acreage. What specifically have you done to promote that round?

A. The round will contain acreage both from the Norwegian Sea and the Barents Sea. The Barents Sea is the least explored area on the NCS. We estimate that over one-third of our undiscovered resources are in the Barents Sea. In the future there is a need for a substantial amount of exploration in the Barents Sea area. It's a huge area in which to really evaluate petroleum potential. I think that we will see that much of the exploration activity will turn northward. And we actually saw that, when we announced it and asked for nominations, there was a huge interest for the Barents Sea area.

Q. How do you evaluate Barents Sea exploration to date?

A. Of course we explore in hopes of finding something. This is our purpose in opening new areas. Having said that, we are always aware that, for different reasons, you may not be able to find something. So, I don't think that the results for the last drilling that took place in the Barents Sea will keep the companies away from the 19th licensing round. My message is that I am listening to what the companies are telling me about the Barents Sea. They asked for more acreage, and I am willing to give them more.

Q. How has your policy of zero discharge in the Barents Sea worked? Are you moving closer to true zero discharge?

A. Absolutely, we are moving closer to zero discharge. And my impression is that the companies really try hard to meet the goals the government has set for participation in the Barents Sea area. My wish is that we also enter into discussion with other countries, like Denmark, the United States, Canada and Russia, with a view to participation and cooperation in the Arctic area. We could sit down and have a talk about how we could develop that in a sustainable manner.

So, it is my feeling that we will be able to reach this goal of zero discharge.

Q. You mention sitting down with your Arctic neighbors to discuss sustainable, responsible development of the Arctic regions. Has that actually happened?

A. We have already had some meetings with our Russian colleagues. I have an understanding that the Russians would also like to see this development of the area. I also took an initiative in the summer for hosting an Arctic summit. I invited people from Russia and from several other countries including the United States and the European Union. There was also participation from companies, including international companies such as Total, Statoil, Norsk Hydro, ConocoPhillips and Gazprom. It is important that we sit down and discuss how we can put sustainable Arctic development on the agenda - how we should try to reach the goal for the future.

Q. What areas - environmental issues, developing technology, for example - do you expect to deal with in the summit?

A. It will be all of that. It is important that we focus on the technology. It is important for us also to focus on the environment.

Q. Could you identify the three most important technologies that will have to be developed for the future of the NCS?

A. I think that what we have achieved so far in expertise from the Ormen Lange and Snøhvit projects are the subsea solutions. For these two developments, everything will be happening under the sea with export to the mainland by pipeline for process on land. As you know, the Snøhvit project will be the northernmost LNG project in Europe and the northern-most LNG project ever. I think that the Ormen Lange and Snøhvit technology are extremely important because we do see in the Barents Sea these sorts of challenges and others.

The main one is associated with the ice.

Q. How soon might northern Barents Sea development start?

A. I see development in the northern section of the Barents Sea although it is not on the critical development path at the moment. It's deepwater, cold and environmentally sensitive. I believe we need to focus on technology that can be used responsibly in the north. And my role, as minister of energy, is to put in place the right framework and initiatives for the Norwegian petroleum cluster to undertake the research and identification of the technology that is needed. I very much see the need for focusing more resources on research in general. In fact, we have already done that with our national budget from my ministry. I have also put high on the agenda during my time in the ministry the development of increased public funding for R&D (research and development) that the industry alone would not conduct but is needed to meet long-term challenges. And I will work to secure incentives for R&D in the future.

I do think if we look forward to Snøhvit, today we are 89 miles (143 km) away from the mainland. When we are talking about northern projects like Shtokman, it is 341.5 miles (550 km) from land. Thus it is necessary to focus on these technologies if we are going to sanction these developments.

Q. What of the Shtokman project?

A. I know that both Statoil and Norsk Hydro have an interest in participating in the development. I know also that they are in discussions with Gazprom. I wish that both could be successful but time will tell.

Q. Do your plans to push R&D forward include plans to include industry? For instance, in Shtokman?

A. We have, so far, had a very good experience in inviting international companies to participate. We wouldn't be where we are today if it had not been for the participation of the international companies. And that is my message to my colleagues in Russia today - which I do think they can achieve something by inviting international companies to participate. They will get some international investment but also exposure to the international technologies different countries can contribute.

Q. In Norway, the Storting and public opinion have a large role to play. Are public opinion and the Storting solidly behind moving exploration and development into the Barents Sea and other environmentally sensitive areas?

A. As you probably know, in 2003 my government had a discussion whether we should re-open the Barents Sea because it was closed then. We made a decision by December 2003 that we should reopen the Barents Sea South. We presented a white paper for the Storting and in 2004 it was approved by the Storting. So, the majority of the Storting agreed with the Norwegian government that the Barents Sea South should be open for petroleum activities. Having said that, I know that some of the parties are against it, but the majority of the Storting supports it.

Q. As you move forward, does the Ministry have any estimates of the potential in the Barents Sea and the actual potential on the rest of the NCS?

A. So far, on the NCS we have produced one third of our total production potential. We also know where our remaining resources are as well as the remaining resources left in the world. Interestingly, our expert resources are telling us that as much as 25% of the world's remaining oil and gas resources are in the Arctic area. The US Geological Survey, for example, makes this estimate. And, as I said, as much as one-third of Norway's undiscovered resources are situated in the Barents Sea. It is definitely our most interesting area.

Q. What of the traditional areas of the NCS?

A. The 19th round will contain regions from the Norwegian Sea as well as the Barents Sea, so we are still focusing on areas with a history of activity to determine what we can do to increase the recovery rate. This is also very important to the future of the NCS. Again, we need to focus on the technology - how can we find the right tools and the right technology to increase recovery rates within the next 10 years. When we started development of the NCS, recovery rates ran about 17%. Our mission today is a 50% rate. Probably we need to strengthen this ambition in the future. We have, in the last few months, proposed a white paper for the Storting - "Activities on the Statfjord Area" - so that activities can continue in that area until nearly 2020. So, an increase in recovery rates is absolutely on the political agenda.

Q. Going forward, is Norwegian production on a plateau or peaking to a slow decline.

A. It is peaking toward a slow decline. In 2007 or 2008, oil production will start slowing down. For gas, last year we produced about 76 Bcm. Next year it will be about 120 Bcm. The message from the companies is that we need to find some more oil and gas. That is the reason the last licensing round (18th licensing round) was the biggest since the 1965.

And that is the reason that we need more exploration and higher recovery rates on the NCS. I think that the current high prices should encourage the oil and gas companies in that direction.

I think that we are at the beginning of a new oil history in Norway, our next "oil decade." The potential up in the north is very big. I think that everyone's eyes will be focused on that northern, Arctic potential. My message to my neighbors, especially in Russia, is that we have a common interest in developing the resources in the north in a sustainable manner. And I think we will achieve something from both the Russian and the Norwegian side.