Norways Revises 2007 Budget

The Ministry of Petroleum and Energy annually prepares estimates for the future activity level on the Norwegian continental shelf (NCS). The estimates are based on data from the operators and evaluations made by the Norwegian Petroleum Directorate and the Ministry of Petroleum and Energy.

In the Revised National Budget for 2007 (RNB 2007) the average price for Norwegian crude oil is estimated at NOK 370/barrel for 2007 and NOK 350/barrel for 2008. Compared to the National Budget for 2007 (NB07) this is an adjustment downward of NOK 20 this year while the estimate for next year remains unchanged. Continued growth in the demand for oil, limited spare production capacity and uncertainties regarding oil supply from several important producing countries, indicate that crude oil prices could remain at a fairly high level in 2007 and into 2008. OPEC has cut production twice in the last six months and seems to be aiming at a price around 55 - 60 USD/barrel.

Norwegian oil production has remained at plateau level of about 3 million barrels per day since 1995. Total oil production (including NGL ) is estimated to 2.6 million barrels per day in 2007. This is slightly lower than the production in 2006 and an adjustment downward compared to the estimate in NB07. In 2008 a certain growth in the oil production is expected, before it gradually decreases in the following few years.

The gas sales are expected at about 93 billion cubic meters (bcm) in 2007 and 109 bcm in 2008. This is a slight adjustment downward compared to the estimates in NB07. In the following years, however, the prognosis for the gas sales has been adjusted upward. This is, among other factors, due to the fact that production start-up on certain fields has been delayed.

Norwegian gas deliveries are very important to the European energy market, says Mr. Odd Roger Enoksen, Minister of Petroleum and Energy. -Norway is the second largest supplier of gas to Europe and the world's third largest gas exporter. Norwegian gas exports have increased from roughly 50 bcm in 2000 to an expected level of more than 90 bcm in 2007. The gas deliveries from Norway will continue to increase as a result of increased capacity in both production and transport, says Minister Enoksen.

There is currently a high activity level on the NCS. In 2007 the petroleum investments, including investments in exploration, are expected to reach about NOK 107 billion. This is an increase of NOK 13 billion compared to the estimate in NB07. The investments are expected to continue increasing over the next years. This is, among other factors, due to growing well costs. The number of production wells and exploration wells, as well as the average well costs, have risen since NB07.

The State's net cash flow from the petroleum sector is estimated at NOK 300 billion in 2007. Taxes and fees constitute NOK 184 billion, the net cash flow from the State Direct Financial Interest (SDFI) is at NOK 103 billion and dividend from Statoil is at NOK 14 billion. The estimate for the State's net cash flow in 2007 has decreased by NOK 60 billion compared to the estimate in NB07. A decrease in the net cash flow from the SDFI constitutes NOK 20 billion of this amount. The decrease in the State's net cash flow is caused by a combination of reduced oil price estimates, lower production, increased investments and a rise in operating costs.