According to Oil and Gas Journal (OGJ), Norway had 7.7 billion barrels of proven oil reserves as of January 2006, the largest in Western Europe. All of Norways oil reserves are located offshore on the Norwegian Continental Shelf (NCS), which is divided into three sections: the North Sea, the Norwegian Sea and the Barents Sea. The bulk of Norways oil production occurs in the North Sea, with smaller amounts in the Norwegian Sea. There is no current production and little exploration activity in the Barents Sea, but it is believed that the Barents Sea could contain sizable oil and gas reserves.Because Norway only consumed 228,000 bbl/d in 2005, the country is able to export the vast majority of its oil production. In 2005, Norway was the third-largest net oil exporter in the world, behind Saudi Arabia and Russia. The Norwegian government holds a dominant stake in the oil sector. Statoil, 71 percent-owned by the government, controls over 60 percent of Norways oil and gas production. The Norwegian government also holds a 44 percent stake in Norsk Hydro, an aluminum and energy company. Along with shares in these production companies, the Norwegian government has direct ownership over part of the countrys oil production through the State Direct Financial Interest (SDFI). State-owned Petoro administers these ownership interests, while Statoil is responsible for managing actual production from SDFI assets. International oil majors do have a sizable presence in the NCS, but they must act in partnership with Statoil. The largest private oil producers in Norway are ConocoPhillips, ExxonMobil, and BP.
Norwegian oil production rose dramatically from 1980 until the mid-1990s, but has since begun to decline (see chart). During the first half of 2006, Norways oil production averaged 2.8 million bbl/d. As North Sea fields continue to mature, Norwegian oil production will likely remain steady or decline, though there is some hope that new developments in the Barents Sea will offset some of this decline. Currently, the largest oil field in Norway is Ecofisk, operated by ConocoPhillips, which produced 280,000 bbl/d in Jan-May 2006. Other important oil fields include Grane (220,000 bbl/d), Troll (202,000 bbl/d), Heidrun (140,000 bbl/d), and Gullfaks (130,000 bbl/d). Statoil controls the largest share of total oil production, followed by Norsk Hydro. The largest foreign oil producer is ConocoPhillips. Industry analysts consider the NCS a mature oil producing region. Most of the countrys flagship oil fields have peaked, with production remaining flat or declining slightly. For example, the Oseberg complex produced 503,000 bbl/d in 1993, but only 120,000 bbl/d during the first half of 2006. Companies are still discovering oil in the NCS, but none of the recent finds have been significant. In 2003, the Norwegian Ministry of Petroleum and Energy (MPE) reported that oil companies made eleven new discoveries, potentially holding 189 to 566 million barrels of oil, far less than what the country produced for the year. There are about 60 oil and natural gas discoveries that are still undeveloped, representing about 4.4 billion barrels of liquids and 16 trillion cubic feet (Tcf) of natural gas. Drilling activity in 2005 was down from the previous year, after also falling in 2004.The NCS region has traditionally been accessible only by international oil majors, due to the harsh weather and operating conditions requiring sizable initial investments. Further, the structure of Norways petroleum taxes means that smaller, marginal fields often are not profitable. Finally, stringent environmental, safety, and labor regulations further increase operating costs. However, as is the case with the United Kingdom, many oil majors have begun to withdraw from the NCS in order to pursue projects in high-growth regions. Statoil and Norsk Hydro have begun to sell NCS interest in order to pursue projects in Latin America and Africa. BP has also started to pull back from the NCS, selling its interest in the Gyda field in 2003 to Talisman Energy and declining to bid in Norways latest licensing round. Other new entrants include UK-based Paladin Resources, Revus Energy, and Petra. Some outside observers have noted that the entrance of smaller firms will benefit Norways oil sector, as they are interested in developing mature fields and smaller undeveloped oil pools, in which larger companies are no longer interested.
According to Statistics Norway, the country exported 2.2 million bbl/d of crude oil and petroleum products in 2005. The largest single recipient of Norways exports in 2005 was the United Kingdom, which imported 808,000 bbl/d from Norway, or 36 percent of Norways total exports. Other significant destinations included the Netherlands, France, and the United States. Because Norway shares the North Sea region with the United Kingdom, the two must coordinate efforts when dealing with reserves that straddle the division of each countries respective zone. In April 2005, the two countries signed a bilateral treaty detailing the handling of such resources. The treaty was the first step toward a general framework for inter-boundary oil projects, as previous projects have been governed by separate treaties and negotiations. Talisman Energy planned to bring the Enoch and Blane fields on stream in late 2006, which straddle the border between the UK and Norway. Norway is the second-largest supplier of natural gas to continental Europe.