Norway Takes the Cake: NOK 356B from O&G in 2008

Due to high oil prices the State's net cash flow from the petroleum sector reached record levels. The earnings correspond to NOK 80 000 per each Norwegian citizen, said Aslaug Haga, Minister of Petroleum and Energy in Norway.

The State's net cash flow from the petroleum sector is estimated at NOK 356 billion in 2008. Of the total cash flow taxes and fees constitute NOK 216 billion, the net cash flow from the State Direct Financial Interest (SDFI) is at NOK 123 billion and dividend from StatoilHydro is at NOK 17 billion.

The net cash flow this year constitutes about 32 percent of the State's total income, which is an increase of about NOK 40 billion from 2007. Compared to the approved budget for 2008 the estimate of the net cash flow for 2008 has increased by NOK 54 billion. This is due to higher oil price expectations, which more than offsets the reduction in production estimates.

In the Revised National Budget for 2008 (RNB 2008) the average price of Norwegian crude oil is estimated at NOK 500/barrel for 2008 and NOK 400/barrel for 2009. This is a considerable adjustment upward compared to the latest approved budget for 2008. There is a considerable uncertainty inherent in the future oil prices. The weakening of the US economy contributes to a reducion in demand for oil. On the other hand there is little spare capacity and uncertainty linked to the supply of oil from several countries. Increased capital flows into oil and other commodities from investment funds have also had an impact on the market price for oil.

Since the start-up of the oil activities in Norway we have produced roughly a third of the expected recoverable petroleum resources. We have produced a considerably larger amount of oil than gas. As of today approximately half of the total expected oil resources have been produced. The remaining resources are mainly connected to existing fields, or they have yet to be discovered. A strong focus on existing fields and on exploration is crucial to ensure a long-term development on the Norwegian continental shelf.

Total oil production (including NGL* and condensate) is estimated at 2,4 million barrels per day in 2008. This is slightly lower than the production in 2007. The oil production is expected to continue to decrease gradually in the coming years. The expected oil production in the next few years has been adjusted slightly downward compared to the National Budget for 2008.

The gas production on the Norwegian shelf is in a continual state of growth. The gas sales in 2008 are estimated at 100 billion cubic meters (bcm), which is roughly 10 percent higher than in 2007. In 2009 the gas sales are expected to increase to about 110 bcm. This growth is expected to continue in the subsequent years.

In 2008 the petroleum investments (including investments in exploration) are expected to reach about NOK 125 billion. This is an increase of about 10 percent from 2007 and a considerable adjustment upward of the investment forecast compared to the National Budget for 2008. The investments are also expected to remain at a high level in the next few years.