Opportunities and challenges for the Norwegian Petroleum sector. ABB 08.03.07 Sveinung Sletten, vice president external affairs, Petoro

Opportunities and challenges for the Norwegian Petroleum sector ABB 08.03.07 Sveinung Sletten, vice president external affairs, Petoro

Petoro Opportunities and challenges for the NCS Petoro s strategy The Statoil-Hydro merger

The net government cash flow from the petroleum activities 350 Bill NOK 2006 value 300 250 200 150 100 50 Taxes CO2 SDFI Royalty and area fee Statoil dividend State net cash flow 0-50 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 Source: Norwegian Public Accounts/National Budget

Record high financially underlying challenges Income after financial items Net cash flow transferred to the government Oil and NGL production (1 000 b/d) Gas production (mill scm/d) Total production (1 000 boe/d) Reserves addition (mill fat oe) Production cost (NOK/boe) Personell injuries (H2) 2006 128 467 126 213 723 75 1 198 177 15 8,3 2005 113 172 99 175 788 73 1 244 97 20 8,3 2006 best financial result in the history of Petoro High oil price, high activity, pressure on resources, increasing cost of goods and services

33 29 24 6 6 5 25 7 6202 5 34 15 16 17 18 1 6203 35 31 26 8 2 6204 36 32 27 9 3 19 10 4 12 Management company to the SDFI Oil reserves 12 % 2 67 4 6 8 1 0 16 18 20 74 22 24 26 1 2 7 2 1 4 7 0 Harstad 7120 7122 Barents Sea Hydro Petoro 16 % Statoil 28 3 0 32 24 % Facts: 112 production licenses 16 partnerships/companies related to transport & terminals >37 fields in production 2 large fields under development Norwegian Sea 65 Norwegian Sea Gas reserves 12 % Tampen Hydro 62 Tampen 60 Oseberg Southernmost NCS 5 8 6205 Troll Troll Ber g en Oseberg Statoil 22 % Stav an g er 11 Trondheim K r istian su n d Oslo Petoro 41 % Characteristics: NCS only Partner not operator Statoil markets oil and gas Large share in licenses Long term perspective 60 employees

Opportunities and challenges

NCS - Large areas yet to be explored Norwegian continental shelf: 1.4 mill. Km 2 (3.5 times the size of California) 60%: Open for exploration drilling 9 % of opened area is licensed

Production as high in 2025 as in 1995?

Source: NPD/MPE Production level hinges on major fields

Two thoughts at the same time Troll gass 28% Visund 40% Gjøa 50% Produksjon New discoveries in new areas Snøhvit 16 % Ormen Lange 13% Åsgard 60 % Heidrun 64 % Grane 68 % Kristin 72% Make the most of mature areas Kvitebjørn 78% Snorre 80% Vigdis 83% Oseberg 81 % Ekofisk 88% Gullfaks 89% Statfjord Nord 87 % Norne 91% Tordis 90% Tune 96% Draugen 91% Statfjord øst 99 % Troll olje 92% Veslefrikk 93% Exploration Development Plateau Mature Tail-end 0-20% 21-50% 51-95% 96-100%

Trend: production decline, cost rise

Stigende kostnader* Driftskostnader 20 000 15 000 10 000 Driftskostnadene stiger 32% i perioden 2004 2007. 5 000 0 2003 2004 2005 2006 2007 2008 2009 2010 RNB2003 RNB2004 RNB2005 RNB2006 Virkelig kostnad RNB2007 Basis drift og vedlikehold 8 000 Basis drift og vedlikehold stiger 14% i perioden 2004 2007 (mill NOK - 100 %) 7 000 6 000 5 000 4 000 3 000 2 000 1 000 0 2003 2004 2005 2006 2007 2008 2009 2010 * Analyse av 12 utvalgte felt som utgjør 60% av kostnadene i Petoro portefølje Budsjett Virkelig RNB2007

(kbd - 100 %) 2 000 1 500 1 000 500 Industrien leverer ikke som lovet og enhetskostnadene stiger* Produksjon - olje og NGL Produksjonen faller 17% i perioden 2004-2007 0 2003 2004 2005 2006 2007 2008 2009 2010 RNB2003 RNB2004 RNB2005 RNB2006 RNB2007 Virkelig produksjon (kbd) 30 25 Enhetskostnad Enhetskostnadene (NOK/foe) stiger 53% i perioden 2004-2007 20 15 10 5 0 2003 2004 2005 2006 2007 2008 2009 2010 * Analyse av 12 utvalgte felt som utgjør 75 % av væskeproduksjonen i Petoro portefølje RNB2003 RNB2004 RNB2005 RNB2006 Virkelig kostnad RNB2007

Less return on investments in drilling and wells (Mill NOK) 70 000 60 000 50 000 40 000 30 000 20 000 10 000 0 Investeringer i SDØE porteføljen Rørledninger og landanlegg 100 % Innretning Boring og brønn 80 % Andel boring av totale investeringer 2007 2008 2009 2010 2011 2012 Oseberg 60 % 40 % 20 % 0 % Ca. 40% of investments in the SDFI portfolio relates to drilling and wells Large gap in drilling progress and reserves additions, compared to plans Antall dager 2000 1800 1600 1400 1200 1000 800 600 400 200 0 Planlagt Virkelig Budsjett Virkelig 18 16 14 12 10 8 6 4 2 0 mill Sm3 Petoro has initiated a project to evaluate the potential for adding value and to identify measures to capture this potential Boredager Reserver

No improvement of production efficiency over the last 5 years Production efficiency 2001-2004 Norway + UK North/Central % of max. production potential Median Topp kvartil 94 94 94 93 94 91 91 90 89 90 2001 2002 2003 2004 2005 Kilde: McKinsey

Petoro strategy: AREA DEVELOPER MATURING RESERVES, EARLY APPLICATION OF TECHNOLOGY

5 5 Main strategy: Area developer 16 1 8 20 2 24 26 2 8 3 0 3 2 7 4 Area developer 7 2 7120 7122 Maturing resources Early application of new technology 1 4 7 0 1 2 Harstad Immature areas Deep water Norwegian Sea 2 4 6 8 1 0 Barents Sea 67 New field developments 65 Troll area Trondheim New fields on Haltenbanken 6202 6203 6204 6205 K r istian su n d 62 33 34 35 36 Mature areas Tampen 29 60 31 32 Ber g en Oslo Oseberg 6 24 25 26 27 Stav an g er Producing fields on Haltenbanken 5 8 15 16 17 18 6 7 8 9 19 10 11 12 4 1 2 3 Mainly measures for improved oil recovery

Offshore 4D seismic Smart operations High capacity digital network Onshore Realtime applications Smart wells Grane Soil Modelling and vizualisation tools Instrumented fields Operations centres Source: Halliburton, Petoro

5% production increase through integrated operations NOK 175 milliarder 2003: NOK 75 milliarder OLF-study: IO potential 250 bn NOK Reservoir and production optimalisation among the value drivers We have achieved more than 5% increased production due to IO Jens Hagen Hydro Brage Sandstad ConocoPhillips Trond Unneland Chevron Kilde: NPF s IO konferanse september 2006 Intelligent fields and integrated operations

Statoil-Hydro merger

What really counts for Norway Inc.? The NCS! Taxes 159,3 Royalties 4,4 SDFI 111,2 Dividend from Statoil 8,1 Total 283,0

5 5 12 Statoil-Hydro position in the 15 largets SDFI fields* 74 16 72 18 20 22 24 Snøhvit 7120 7122 Statoil-Hydro/SDFI: average ownership 75% Norskehavet/Barentshavet 12 14 70 Harstad Statoil/Hydro owner in 14 of the fields (ex. Draugen), and biggest owner in 9 fields higher average ownership that SDFI in the 14 largest fields (41% vs 36%) operator of 13 of the fields (ex Draugen and production phase of Ormen Lange) Petoro is going to lose Statoil or Hydro as key licensee in 11 of the fields Gullfaks Snorre 62 29 Tordis&Vigdis Visund Oseberg Grane 58 67 65 Ormen Lange Tampen/Oseberg 33 60 24 6 6 2 25 15 16 17 18 7 6202 34 6203 35 31 26 8 4 6204 36 27 Troll Ber gen 32 Troll Kvitebjørn Stavanger 9 6 6205 19 10 C. 8 11 10 Norne Heidrun Åsgard Kristin Draugen Kristiansund Trondheim Oslo 4 1 2 3 These fields represents more that 85% of the SDFI value - Wood Mackenzie 2006

Future value creation on the NCS Statoil vs Hydro has produced strong solutions for the NCS Strong focus on NCS + best practices from abroad could benefit the NCS But reduced competition and diversity is a negative getting the most out of a maturing NCS requires the efforts and results that diversity and competition can bring to the table The loss of S or H could to some degree be offset by stronger engagement by the mulitinationals - but will it happen? Management of SDFI at current levels requires a strengthening of Petoro: Primarily technical and commecial competence/capacity Still partner not a new operator A limited budget for R&D could compensate for S-H dominance on technology development

The best partner