NORWAY. Report on Oil & Gas Projects

Transcription

1 Report on Oil & Gas Projects NORWAY ICE - Istituto nazionale per il Commercio Estero Via liszt Roma Tel Fax r.marinaccio@ice.it 1

2 CONTENTS 1. Introduction Economic Scenario Energy Oil& Gas Crude Oil Natural Gas Electricity Project Owner Review Data Tables

3 INTRODUCTION - POLITICAL Few will doubt that the centre-left political coalition, comprising the Labour Party, the Centre Party and the Socialist Left Party (SV) that was returned to office after the September 2009 election, is expected to stay on until the local elections in September 2011, despite there being several issues of disagreement over policy matters. The government s survival will depend to a great deal on the willingness of the parties to compromise over changes to the healthcare system, environmental and energy policies and local government reform, among other issues. Labour s preference would be to reduce the number of local authorities and to introduce a greater degree of central control over education and healthcare (including rationalising the hospital network). Faced with opposition from its two coalition parties and the trade unions, Labour will need to make concessions on all these issues. It is likely funds will be found to maintain local hospital services, but this will have to come from elsewhere in the budget. The implementation of local government reform may need to be postponed (again). A major difficulty facing the coalition is the balance between offshore petroleum exploration in north Norway and environmental concerns and protection of fisheries. Labour generally favours the development of offshore oil and gas, but both the SV and the Centre Party are opposed to exploration, and will seek to bolster support by highlighting the disaster in the Gulf of Mexico. The Ministry of the Environment and the Ministry of Petroleum and Energy are held, respectively, by the SV and the Centre Party, which allows these two green parties considerable influence, the Economist Intelligence Unit said in one of its latest reports. Labour will try to maintain the coalition government until the general election in However, the government will face a test at the local elections in Should the governing parties do badly, and especially if the SV fails to attract back some of the voters it lost at the 2009 general election, there will be pressure from the parties grass roots to dissolve the coalition. If either or both of the SV and Centre Party leave the government, Labour could continue as a minority government, depending on the support of their former partners or two other small centrist parties. 3

4 Foreign policy has been a divisive area for the centre-left coalition. The SV is opposed to Norway s NATO membership, although it is expected to continue to acquiesce in the participation of Norwegian troops in NATO s International Security and Assistance Force (ISAF) in Afghanistan. The government has welcomed the US s new emphasis on civilian aid and training of the Afghan army, but it will also resist US pressure to send more troops. Norway will be watching with interest to see whether there are any policy shifts over Afghanistan by the new British government, as the UK is still seen as a reference point in defence matters by Norway. European affairs may also split the coalition. There is little chance that Norway will seek EU membership while the red-green coalition is in office, as this is opposed by the SV and the Centre Party. But, the country is expected to retain close links to the EU through membership of the European Economic Area (EEA), which extends the EU s single market to Norway (except for agriculture and fisheries). Some EU-inspired legislation will meet with opposition from the SV and the Centre Party and although Labour can try to secure a majority with some of the opposition parties, there is a small risk that it may fail to do so. Norway has been eager to encourage low-level cross-border co-operation with Russia in the Barents region, where the two countries share a border. In April 2010 the two countries resolved a long-running dispute over the division of the Barents Sea, although differences remain over the status of the waters around Svalbard. Norway aims to build up its coastguard and military resources to ensure that it can protect its interests in these regions. The growing strategic importance of the Arctic, which stems partly from the potential for petroleum exploration there, will also lead Norway to cooperate more closely with Finland and Sweden on defence. ECONOMIC SCENARIO Norway has weathered the global financial and economic crisis well, thanks in part to timely responses by policymakers. In the wake of the crisis, the authorities provided liquidity support to Norway s banks, which has now been scaled back, and solvency problems have been largely absent. The main worry now relates to the high exposure of some Norwegian banks to the shipping and commercial property sectors, which are vulnerable to a softening of global growth. (Exposure to the heavily indebted peripheral members of the euro area is believed to be low.) Another concern is the sustainability of the current rally in house prices, which is being fuelled by low interest rates. With interest rates likely to remain low, the government may need to consider less favourable tax treatment of housing investment to prevent another property bubble. To promote long-term fiscal sustainability, a reform of the pension system will be phased in from A major shake-up of regional government is being discussed, but in the absence of broad cross-party agreement, this could be delayed. The government will continue to try to promote the development of the High North of Norway (areas adjacent to the Arctic). The government is due to present an update of its management plan for the Barents Sea and Lofoten in late 2010 or early It is expected to give the go-ahead for further petroleum exploration, although this is controversial within the coalition and there will therefore be significant restrictions. The general government budget will remain comfortably in surplus in , but at a lower level than during the red-green coalition s first term in office. Oil prices are unlikely to reach the highs of 2008, which will reduce tax receipts from the offshore sector. The government has earmarked future public spending for road and rail infrastructure programmes and an expansion of healthcare; it also faces a growing public pension bill. Moreover, expansionary budgets in 2009 and 2010 entailing higher infrastructure spending have raised the use of petroleum receipts to a high level. 4

5 The government will have to under-spend in subsequent years if it is to comply with its own fiscal rules (which permit an average of 4per cent of the Government Pension Fund Global to be spent each year, over the course of the economic cycle). Thus, the government is expected gradually to reduce the structural non-oil budget deficit from around 7 per cent of mainland GDP in A failure to do so would, all else being equal, put upward pressure on interest rates, encourage krone appreciation and further undermine the competitiveness of Norway s traditional industries. A more rapid appreciation of the krone than we assume, or a severe shock to the wider European economy, would result in a slower increase in rates. The performance of the global economy is deeply split between Asia (excluding Japan), which experienced only a slowdown in 2009 and is now growing strongly, and the OECD countries, which experienced their most severe recession since the second world war in Most EU countries have emerged from recession, but with confidence indicators subdued and public finances weak, it is far from certain that this improving trend will continue once de-stocking ends and as fiscal stimuli are withdrawn. Our central forecast is that strongly expansionary fiscal and monetary policy in the US will lead to growth of 3.3 per cent in 2010, but that the need for fiscal tightening will reduce growth there to 2 per cent in We expect the EU to grow more slowly in both years, by 0.7 per cent in 2010 and 1.1 per cent in There is a considerable risk that fiscal consolidation in major EU countries could lead to a second downward dip in Norway experienced an economic recession in the second half of 2008 and the first half of 2009, but the downturn was less pronounced than in most other European countries and the economy is now recovering. The rise in unemployment has been much lower than was feared, partly because labour supply has fallen, but also because public-sector employment has increased. The level of petroleum investment now looks likely to dip slightly during , although uncertainties surrounding the level of offshore investment are extremely high. On the external side, Norway s traditional export industries were hit hard by the global downturn, and foreign demand is likely to recover partly in 2010 but is expected to ease back again in Throughout the outlook period, real GDP growth will be curbed by the trend decline in petroleum output. Headline inflation has been volatile over the past year or so. Having fallen from 3.4 per cent in June 2009 to 0.6 per cent in October, the rate of inflation spiked to 3.3 per cent in April 2010, as cold weather pushed electricity prices higher, but fell back to 2.5 per cent in May. Core inflation also remains on a downward trend. Norway s oil and gas industry is also being affected by the oil spill in the Gulf of Mexico, which has damaged the reputation of a UK petroleum company, BP. In response to the crisis, which is one of the worst environ- 5

6 mental disasters to afflict the US, the authorities there have imposed a moratorium on deepwater drilling. Statoil has significant investments in the Gulf of Mexico, and had two exploration rigs operating in deep water at the time of BP s accident. In addition, the Norwegian government has placed an embargo on all new deepwater drilling in the North Sea until the results of a full inquiry by the US are made available (although drilling at the deepwater Gro field is continuing). No awards for deepwater blocs will be made as part of the 21st Norwegian licensing round, for which nominations closed in January 2010 (with licence awards due to be announced in early 2011). ENERGY Norway s energy sector is a major contributor to the economy, generating around 25 per cent of GDP in 2009, with 21 per cent accounted for by the petroleum sector, according to Statistics Norway. The country has the largest proven crude oil reserves in western Europe, amounting to 6.7 billon barrels. Exports of crude oil, natural gas and refined petroleum products typically account for around 40 per cent of total exports, and the sector also contributes around one-third of state budget revenue. Norway is not a member of OPEC, but has occasionally followed invitations to reduce production, although less so in recent years. Most of Norway s energy output is exported. This is attributable to the fact that almost all of Norway s electricity is generated by hydropower. Total energy consumption can change significantly from one 6

7 year to the next as a result of variations in weather patterns, changes in offshore extraction activity and the pace of economic growth. Like most other industrialised countries, Norway is pursuing policies designed to improve energy efficiency and increase the share of energy coming from renewable/cleaner sources, with the principal aim of reducing emissions of carbon dioxide (CO2) and other greenhouse gases. Economic expansion and a gradual increase in the population will cause energy consumption to grow in Norway, which will raise demand for fossil fuels (especially natural gas), despite improvements in energy efficiency and efforts to promote renewable energy sources. There is little prospect of nuclear power being considered in Norway. No nuclear power plant has ever been established. A legal framework for licensing the construction and operation of nuclear installations exists, but discussions aimed at developing a nuclear energy industry have failed to produce a strategy. Even if such plans were to proceed, it would be many years before nuclear power could contribute to the energy mix. Looking ahead, the energy issues that Oslo will deal with will include: the struggle to meet its revised target for a reduction of carbon dioxide (CO2) emissions of 40 per cent by 2020 (from 1990 levels). This is one of the most ambitious targets of any country in the world and compares with a previous government policy to cut emissions by 30 per cent over the same period; a key element in Norway s greenhouse gas reduction strategy is the development of carbon capture and storage (CCS). However, the technology remains untested, deadlines have slipped and concerns remain about the commercial viability and safety of CO2 storage; and renewable energy will be encouraged, in part through a common green certificate system with Sweden (to be introduced by 2012), and will become a more important part of the energy mix. OIL AND GAS POLICY Despite being a major producer of oil and gas, which provides energy security, Norway awards a high priority to environmentally friendly energy usage. In 2008 the Norwegian government announced an aim to become carbon neutral by 2030 and raised its previous target for a reduction of CO2 emissions of 30 per cent by 2020 (from 1990 levels) to 40 per cent. The aim is to make around two-thirds of these cuts in Norway, with the remainder achieved by buying emissions quotas on the international market. A key element in Norway s greenhouse gas reduction strategy is the development of carbon capture and storage (CCS). Not only has this technology been used on a relatively small scale in Norway s offshore oil industry, the government has required CCS on a larger scale to be developed alongside new gas-fired power stations in Norway at Mongstad and Karsto. 7

8 production. Petroleum policy is a crucial element in the government s energy plans and it is also an important source of disagreement between the parties in the ruling centre-left coalition, which consists of the Labour Party, and two smaller green parties, the Centre Party and the Socialist Left Party (SV). The government s petroleum policies have come under fire from the Norwegian Oil Industry Association (Oljeindustriens Landsforening or OLF), which has called for a transparent long-term strategy to maximise the potential of oil and gas The OLF reserves particular criticism for the fact that all of the new oil and gas discoveries on the Norwegian Continental Shelf (NCS) are generally small in size, which it attributes to the fact that no new areas have been opened up to exploration activity in the past 15 years. The new minister for petroleum and energy, Terje Riis- Johansen, is currently preparing a white paper that will cover all aspects of the government s petroleum policies for the years ahead. The government will continue to offer blocks under licence to petroleum companies exploring for oil and gas on the NCS. In addition to the annual licensing round, the Awards in Predefined Areas, the government operates a round of concessions for frontier areas of the NCS where the potential for petroleum is less explored, which is typically held every two years. The latest (21st) frontier licensing round was announced by the Ministry of Petroleum and Energy on November 5th 2009, with a decision on the blocks to be awarded expected before mid-2010 and the final awards to be made in early During the forecast period there will be a particular focus on promoting the development of the High North of Norway (the areas adjacent to the Arctic). A detailed management plan for the nation s oil resources, published at the end of March 2006, prohibited oil activity in the area around Lofoten in the northern part of the Norwegian Sea, although exploration and production was allowed in the Barents Sea. A revised management plan is due to be presented soon, which will be followed by a series of public hearings and a parliamentary report in The government will need to consider whether to give the go-ahead to further petroleum exploration in the waters of Lofoten and around the Vesteralen islands, which are believed to hold close to 20 per cent of the NCS s remaining undisco ered petroleum resources in the Norwegian Sea (around 1.4 billion barrels of oil equivalent). Labour s preference would be to allow the development of offshore oil and gas in North Norway. However, the Ministry of the Environment and the Ministry of Petroleum and Energy are held, respectively, by the SV and the Centre Party, which allows these two green parties to put a brake on offshore development. It is likely that the government will open new areas for exploration, but with some restrictions. CRUDE OIL DEMAND/SUPPLY High levels of consumption of hydroelectricity mean that oil consumption is low compared with other Scandinavian countries. The majority of petroleum consumption is accounted for by the transport sector. Consumption has been on an upward trend since 1990, with small yearly fluctuations depending on economic conditions. 8

9 Petroleum consumption fell from 9,204 kilo tonnes oil equivalent (ktoe) in 2008 to 9,125 ktoe in 2009, despite lower international prices. The downturn in economic growth and greater efforts at fuel conservation were the primary causes, but petroleum consumption is projected to recover gradually from 2010 in line with an economic recovery. The Economist Intelligence Unit forecasts that Norway will be consuming 9,452 ktoe by 2014; over the latter part of the forecast period we expect consumption to fall gradually. Greater investment in public transport and efforts to curb carbon emissions (resulting in the increased use of more fuel-efficient vehicles) are expected to slow the rate of increase of demand from road transport in comparison with recent years. Offsetting this will be greater demand for air transport, which is currently the fastest-rising component of energy consumption in the transport sector. Consequently, by 2020, the transport sector will account for over 60 per cent of total petroleum consumption. The Norwegian Petroleum Directorate (NPD) puts total discovered and undiscovered petroleum resources on the NCS are around 13.4 billion standard cubic metres of oil equivalent (scm oe). Around 40 per cent of this had already been produced by the end of The remaining recoverable resources therefore amount to 8.1 billion scm oe, of which 4.8 billion scm oe are proven resources. Norway s oil and gas reserves are all located offshore on the NCS. Most of Norway s oil production occurs in the mature North Sea section but the frontier Barents Sea is attracting industry attention. Norway s importance as a global energy supplier has grown steadily since oil production first began in the early 1970s. It is the largest offshore oil producer in the world and the world s 11th-largest producer in total. Norway has the largest proven oil reserves of any country in western Europe. However, the country is also a mature oil producer and faces a long-term decline in oil output and exports. Norway s production of crude oil peaked at 3.4 million barrels a day (b/d) in 2001, according to the International Energy Agency (IEA). In 2009 the 53 fields in operation in Norway (in the North Sea, Norwegian Sea and Barents Sea) produced 2.34million b/d of crude oil. Production of crude oil is expected to decline steadily during the forecast period, to around 1.81 million b/d by Norway exports a little over 90 per cent of its crude oil and petroleum products. According to the US government s Energy Information Administration, the UK is Norway s single-largest export destination (accounting for about 35 per cent of exports). The countries are linked by the Norpipe pipeline. North-west European countries (the Netherlands, France, Germany and Belgium) are also significant export destinations. The five account for around two-thirds of Norway s total oil exports. Norway also produces a surplus of petroleum products, which it exports to the EU. Norway has a crude oil refining capacity of 315,000 b/d, according to the Oil & Gas Journal. Its two largest refineries are the 116,000 b/d Slagen plant, operated by a US oil company, ExxonMobil, and the 199,000 b/d Mongstad refi ery, which is operated by Norwegian state-owned 9

10 Statoil. Statoil, which changed its name from StatoilHydro in November 2009, having been formed in October 2007 from the merger of the original Statoil company with the oil and gas activities of Hydro (formerly Norsk Hydro), is the largest oil and gas producer in Norway. The company is 67 per cent state-controlled. Statoil is among the world s top oil producers and has a significant international presence, operating in 40 countries. The company has also entered a joint venture with Russia s Gazprom to develop the giant Shtokman gas field in the Barents Sea (although a final investment decision has been pushed back to 2011). The deal gives Statoil a 24 per cent stake in the Shtokman Development Company, alongside Gazprom (51 per cent) and France s Total (25 per cent). Statoil s annual production was 1.95 million barrels of oil equivalent (boe) per day in 2009 and it estimates that this will rise to 2.2 million boe by The second-largest oil company in Norway is Petoro, which is wholly owned by the Norwegian government. Petoro was formed by the government in 2001 to take over and manage 78.5 per cent of the state s direct financial interest (SDFI) fields. The company controls a total of 40 per cent of the estimated gas reserves and 24 per cent of oil reserves on the NCS. Ahead of the initial public offering (IPO) of Statoil in June 2001, Statoil had administrated the SDFI fields on behalf of the government. Other companies with a sizeable presence on the NCS include the US-based ConocoPhillips and ExxonMobil, Total (France), Royal Dutch Shell and Eni of Italy. Given the expected decline in oil production, the government is under pressure from the petroleum industry to open up the area around the Lofoten islands for exploration when it issues its revised management plan in April However, the prospects for this are uncertain. The centre-left government was re-elected for a second four-year term in September Although the Labour Party is generally in favour of exploiting oil and gas resources to promote economic development in the High North, the SV and the Centre Party oppose drilling near 10

11 the islands. It may be that the need to preserve the cohesion of the coalition will take precedence. NATURAL GAS DEMAND/SUPPLY Natural gas consumption fell in 2009, but has been on an upward curve over the last decade. Until recently, only a small proportion of Norway s gas production has been directed towards domestic consumption (less than 2 per cent). However, domestic demand for gas will be given a boost during the forecast period, given the construction of natural-gas-fired power plants at Karsto (which came on-stream in late 2007) and at Mongstad (which is due to begin operating later in 2010). Whether or not construction of additional plants gets under way will depend upon a number of factors, including necessary public investment and decisions on whether CO2 emissions have been adequately addressed. In late 2007 the government controversially amended a 2006 agreement requiring the capture of CO2 emissions at the Mongstad plant, delaying the start of CCS operations to Natural gas production has been steadily increasing since the early 1990s. Norway is the world s fifth-largest gas producer, producing about 85.9 million tonnes oil equivalent (mtoe) in 2009 and in 2008 was the world s third-biggest net exporter, according to Cedigaz, thanks to low levels of domestic consumption. Declining oil production will be partly offset by an expected increase in the production of natural gas. According to NPD s figures, total oil and gas production stood at 239 million scm oe in 2009, of which 43 per cent or million scm oe was accounted for by natural gas. Production is expected to rise moderately during the forecast period, with the result that gas will account for over half of total production from the middle of the forecast period. Norway is an especially valuable source of natural gas because of its political stability and close proximity to European markets. The country is the second-largest supplier of natural gas to the EU, behind Russia. The largest importers of Norwegian gas by pipeline are Germany, the UK and France. The single biggest field is Troll, which had recoverable reserves of 971 billion cubic metres at the end of 2009, 11

12 almost one-half of Norway s gas. Another important development in recent years was the Snohvit gas field, which had recoverable reserves of 155 billion cubic metres at end Snohvit, which is located in the Norwegian sector of the Barents Sea, was the first offshore development in the Barents Sea. It came onstream in September 2007, with output feeding a liquefied natural gas (LNG) terminal at Melkoya, near Hammerfest, which is Europe s first LNG export facility of scale. Norway also has a small LNG terminal located in Tjeldbergodden. ELECTRICITY DEMAND/SUPPLY Electricity consumption has been on a broadly upward trend in recent years, although there tends to be some annual variation as a result of economic conditions, and changes in weather conditions and hence prices (which are heavily influenced by levels of rainfall, given Norway s dependency on hydropower). The consumption of electricity declined by an estimated 0.5 per cent in 2009 as a result of a sharp contraction in activity from the energy-intensive manufacturing industries, as well as higher prices. A gradual recovery is expected in 2010 as foreign demand for Norway s traditional exports from the household sector revives. Thereafter, electricity consumption is expected to climb to 125,610 giga watt hours (gwh) by 2015, with the potential to reach 135,540 gwh by On the supply front, Oslo s waterfalls have been used to generate power since the late 19th century. Norway s 850 hydroelectric plants have an installed hydroelectric generation capacity of almost 30,000 mega watts (mw), accounting for 98 per cent of electricity production. The largest player is the state-owned Statkraft, which currently accounts for around 30 per cent of generating capacity. More than one-half of the power-generating capacity of the country is still owned by local authorities. Private companies, both domestic and foreign, account for only 15 per cent of all the supply side of the power market (mainly involving metals producers that require abundant sources of energy). Coal production in Norway is small-scale and occurs only on the far northern Svalbard Islands (Spitsbergen and Svea Nord), where Norway s only coal-fired power plant is also located. Demand for coal is otherwise met through imports. Norway currently has one nuclear power station, a heavy-water reactor, which has never contributed significantly to power generation. Sources: Economist Intelligence Unit, Norway Statistics, Oil & Gas Journal, DMS Analytic Bureax in Bahrain, Calgary, Toronto and Beijing. PROJECT OWNER REVIEW STATOIL ASA Statoil engages in the exploration, production, transportation, refining, and marketing of petroleum and petroleum-derived products. The company involves in the exploration, development, and production of crude oil and natural gas in Norway and internationally, as well as extraction of natural gas liquids. It also transports and markets natural gas and natural gas products; and operates 2,000 full-service stations in Scandinavia, Poland, the Baltic States, and Russia, as well as 300 automated truck stops. 12

13 The full-service stations sell transportation fuels, car accessories, and basic vehicle service products, as well as consumer goods, convenience products, and basic groceries. In addition, Statoil engages in petroleum refining operations; and marketing crude oil and refined petroleum products. Statoil is involved in a number of pipelines, including Zeepipe, Statpipe, Europipe I and Europipe II, and Franpipe from the Norwegian continental shelf to Western Europe in addition to the Baku-Tbilisi-Ceyhan pipeline in Central Asia. The pipelines from Norway are organized through Gassled. The company has trading offices for crude oil, refined petroleum products and natural gas liquids in London, Stamford and Singapore. Activities in Recent Years: In 2006, Statoil was approved to become the world s largest project to implement carbon sequestration as a means to mitigate carbon emissions to the atmosphere. In September 2007, Statoil and the Brazilian oil company Petrobras signed a deal aimed at expanding exploration, sub-sea and bio-fuels cooperation. With the acquisition of Hydro Statoil became a partner in Brazil s offshore Peregrino oil field, which commenced operation in Under the agreement Statoil became a partner on six offshore licenses, as well as expanding biofuels production. Petrobras and Statoil announced plans to create dozens of refineries in Brazil and the rest of the world where vegetable oil will be added to crude to create a no-sulphur fuel. On 4 March 2008, Statoil bought Anadarko Petroleum Corporation s 50 per cent share of the Peregrino oil field for $1.8 billion. At the time of acquiring the license, the field s recovery factor was estimated to be 9 per cent. However, with the current reservoir depletion plan of the field calling for the use of produced water injection and rock compaction, Peregrino s recovery factor has increased to 20%. On 3 March 2009, Statoil ASA and the Norwegian state reached a settlement in the Kårstø expansion case. Statoil agreed to pay a NOK 500 million settlement and NOK 270 million in interest, after tax. On 23 March 2009, Statoil announced that the Shell operated Vito appraisal well in deep water US Gulf of Mexico has encountered more than 600 net feet of high quality oil. Statoil holds a 25% working interest in the block. On 26 March 2009, Statoil signed an agreement with Chesapeake which added approximately 59,000 net acres to Statoil s current 600,000 net acre position in the Marcellus shale gas play. ITALIAN PROJECT OWNER REVIEW ENI S.p.A. Eni a leading global integrated energy company with interests in oil and gas, electricity generation and sale, petrochemicals, oilfield services construction and engineering industries. In these businesses it has a strong edge and leading international market position. Eni is active in around 70 countries with a staff of 13

14 73,000 employees. Eni operates in the refining and marketing of petroleum products through its Refining & Marketing Division. The Division s activities are mainly concentrated in Italy, Europe. The marketing activities of the Refining & Marketing Division also include the sale of fuels, combustibles and lubricating oils to the industrial, agricultural and transport sectors, as well as to public administrations and for civilian heating purposes. Eni owns a number of production plants for finished lubricants and greases in Italy, Europe, North and South America, and the Far East. Through its subsidiary company, Agip Gas brand, Eni also markets LPG for domestic, heavy and light industrial and agricultural uses. The entire chain of refining and marketing activities is made possible by crude trading activities, for the procurement of supplies for the company s refining operations but also involving sales on international markets. Activities in Recent Years: In 1997 Eni signed a contract for the purchase of 6 billion cubic metres per year of Norwegian gas, which is transported to Dunkerque and Zeebrugge, through the Franpipe and Zeepipe gas pipelines. In 2008, gas was discovered at Dompap and Gamma. The Gamma project, with recoverable reserves estimated at 18.7 million boe, entered the pre-development phase and the gas produced will be treated at the Aasgaard facility. The appraisal operations carried out at the Marulk discovery have confirmed the mining potential. Development operations in 2008 were mainly aimed at maintaining production levels in the area by means of sidetracking and infilling operations carried out in the main production areas. The main development projects currently underway are the mining structures in the area near Kristin. Tyrihans (6.23% owned by Eni) will be developed by connecting the planned production wells (9, plus another 3 water gas injection wells) with the Kristin production facility. The wells are expected to come into production in 2009 at the same time as production from the Kristin field declines, so the capacity for treating the gas can be used for gas produced from Tyrihans. The recent discoveries of oil and gas in the area around Aasgard are currently being developed, in particular: In May 2008 the competent authorities gave their approval of the development project for the Morvin discovery (30% owned by Eni), which includes connecting it to the existing production facilities that are due to be upgraded. Start-up is planned for 2010, with a production peak of 12,000 boe/day net to Eni in Drilling operations were completed at Yttergryta and production started up in the first few months of 2009 with 2.3 million cubic metres per day. Eni is involved in 6 production licenses in the Norwegian Sea with the main deposits in production being Aasgard (14.82% owned by Eni), Kristin (8.25% owned by Eni), Heidrun (5.12% owned by Eni), Mikkel (14.9% owned by Eni) and Norne (6.9% owned by Eni), which in 2008 provided 67% of Eni s production in the country. The Asgard facility collects together all the gas produced from the fields in the area, after which it is transported through a pipeline to the treatment centre at Karsto and from there to the Dornum terminal in Germany. The production of liquid in the area is obtained mainly through FPSO and is sold FOB. Eni holds stakes ranging from 12% to 45% in 5 Prospecting Licenses and is the operator in one of these. In the same year, Eni also successfully completed the drilling and testing of exploration well 34/12-1, in the Afrodite gas and condensate deposit. The well is situated in PL293 license at a depth of around 373 metres in the Norwegian part of the North Sea, approximately 165 kilometres from the town of Bergen. Eni is the operator of 14

15 the discovery and holds a 45% stake. Pre-development are currently being carried out with a view to evaluating the economic feasibility of the next development phase. A number of projects are also being carried out aimed at maintaining and optimising production of Ekofisk by drilling infilling wells, developing the southern part of the area, upgrading existing facilities and optimising water injection. The main production field is Ekofisk (12.39% owned by Eni) in PL018, which in 2008 produced 42,000 boe/day net to Eni representing 33% of Eni s production in the country. The production from Ekofisk and its satellites is transported via pipeline to the Teeside terminal in the United Kingdom for oil and to the Emden terminal in Germany for gas. In May 2009, Eni was awarded the operatorship and a 40% stake in the PL 533 and PL 529 licenses and a 30% stake in the PL 532 license. In addition, in the Barents Sea Eni is the operator of prospecting licenses 201 (67% owned by Eni), 489 (40% owned by Eni) and B-229C (65% owned by Eni) and is involved in license 393 (30% owned by Eni) and Seismic Area C (31% owned by Eni). Operations in the area are aimed at appraising the commercial potential of the important Goliat discoveries that were made in 2000 in PL229 at a depth of 370 metres, with a view to developing them commercially. The project is continuing as planned with production start-up expected in 2013, full production of 100,000 barrels/day and recoverable reserves of 175 million boe. In 2008, study contracts were awarded for evaluating two possible development solutions involving the utilisation of a cylindrical FPSO, with the final investment decision expected in ITALIAN MAIN CONTRACTOR REVIEW Saipem & Snamprogetti Saipem is at present one of the largest, most resourceful, most international and best balanced turnkey contractor in the oil and gas industry. The organization, while providing many different kinds of services - including specialised services and maintenance, modification and operations - has been rationalised into three global business units: Onshore, Offshore, Drilling. It enjoys a superior competitive position for the provision of EPIC/ services to the oil industry both onshore and offshore; with a particular focus on the toughest and most technologically challenging projects - activities in remote areas, deepwater, gas, difficult oil. The new Group is a truly global contractor, with strong local presence in strategic and emerging areas such as West Africa and FSU, Central Asia, Middle East, North Africa and South East Asia. Crossing ocean and sea, Saipem s offshore activities arm has built a global reputation as one of the true innovators in its field. Over the last ten years, Saipem has completed some 120 offshore construction projects including modular deck drilling and production platforms, integrated deck platforms, wellhead platforms, accommodation platforms, FPSOs often, and increasingly so, in an integrated contractor role. Since the 1970s, Saipem has also been involved in the construction of marine terminals, conventional buoy moorings, jetties and piers. 15

16 With the recent acquisition of Snamprogetti, the already considerable onshore activities of Saipem, traditionally focused on world-class construction, have found an excellent match and complement. The new combined Company now offers a complete range of project definition and execution services, from feasibility and front end studies to design, engineering, procurement and field construction (), in virtually every world market, leveraging on its specialised skills across the most significant product lines in the oil, gas, refining, chemical and power industries. The new Saipem group is therefore a one-stop-shop to give life to the most complex and largest onshore projects in the world. 16

17 Data Tables Eni Activities in Norway Project Name Operators Location Project Type / Status Eni Marulk Gas & Statoil Condensate Field DONG E&P Norge AS Norwegian Sea Eni Goliat Oil & Gas Field Statoil Barents Sea Valuation Measures Results 2009 Net profit: 4.37 billion Dividend proposal: 1.00 per share Net sales from operations: billion Cash flow: billion Market capitalization: 64.5 billion Results for the first quarter of 2010 Adjusted operating profit: up 15.4% to 4.33 billion Adjusted net profit: up 3.6% to 1.82 billion Net profit: up 16.7% to 2.22 billion Cash flow: 4.55 billion 17

18 ENI Norway Valuation Measures (NOK 1 000) NNote 1. quarter quarter Revenue Other revenue Total revenues Production expenses Exploration and evaluation expenses Payroll expenses Other operating expenses Loss on sale of licenses Total operating expenses Operating results before depreciation and amortization (EBITDA) Depreciation Write-downs Net operating result (EBIT) Net financial items Ordinary result before tax (EBT) Income tax expenses Net result for the period Other comprehensive income: Value adjusted financial instruments Currency translation

19 difference Total comprehensive net result for the period Earnings per share Basic -0,09-0,32-2,17 Diluted -0,09-0,32-2,17 NORECO Activities in Norway Project Name Operators Location Norwegian Energy PL 411 Company ASA North Sea Spring Energy Norwegian Energy PL 412 Company ASA Lundin Norway AS North Sea VNG Norge AS Norwegian Energy Company ASA PL 451 Det norske North Sea oljeselskap ASA Rocksource ASA Norwegian Energy PL 455 Company ASA Skeie Energu AS North Sea Lotos Norwegian Energy Company ASA PL 484 E.ON Ruhrgas Norge AS Dønna Terrace Dana Petroleum Norway AS PL 540 Noreco Dong North Sea Noreco PL 545 Spring Energy North Sea Petoro Project Type / Status 19

20 PL 396 Norwegian Energy Company ASA Discover Petroleum Petoro Barents Sea Norks Norway Valuation Measures MNOK= NOK million Q1 10* Q4 09 Q3 09 Q2 09 Q Oil and gas production 218,191 (barrels) 179, , , , , ,732 Oil price achieved 76.0 (USD/barrel) Operating revenues 97.1 (MNOK) Exploration expenses (MNOK) , Operating profit/loss (MNOK) , Profit/loss for the period (MNOK) No. of employees No. of licenses 74(37) (operatorships) 67(34) 52(28) 51(28) 48(27) Income Statement (All figures in NOK 1,000) Note Q Q Petroleum revenues Other operating revenues Total operating revenues Exploration expenses 1, Change in inventories Payroll and payroll-related expenses Depreciation Write-downs Other operating expenses Total operating expenses Operating profit/loss Interest income

21 Saipem Activities in Norway Project Name Operators Location PL 159B PL 094 Gudrun Oil & Gas Field PL 120 Morvin Oil & Gas Field Statoil Norwegian Sea Dong E&P Norge Statoil Petoro AS Total Norwegian Sea ExxonMobil Eni Statoil Marathon Norge Norwegian Sea GDF Suez E&P Norge Statoil Petoro AS ConocoPhillips North Sea Skandinavia AS Total E&P Norge AS Statoil Eni Norwegian Sea Total Project Type / Status Valuation Measures (million euro) Q Q Q Q vs Q (%) Revenues 2,578 2,592 2, Operating profit Net profit (2.2) Cash flow Investments (16.8) New contracts 2,518 2,968 2,

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