According to Oil and Gas Journal (OGJ), Norway had 8.5 billion barrels of proven oil reserves as of January 2005, the largest in Western Europe. All of Norway’s 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 Norway's 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, due to high costs and environmental concerns. However, it is believed that the Barents Sea could contain sizable oil and gas reserves, and the Norwegian government has begun to grant licensing blocs in the area.

The Norwegian government holds a dominant stake in the oil sector. Statoil, 71 percent-owned by the government, controls over 60 percent of Norway's 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 some 40 percent of the country's 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.

Due to the nature of oil exploration and production in the NCS, the region has traditionally been accessible only by international oil majors. Because of harsh weather and operating conditions, projects in the NCS require sizable initial investments. Further, the structure of Norway's 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 Norway's 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 Norway's oil sector, as they are interested in developing mature fields and smaller undeveloped oil pools, in which larger companies are no longer interested.
 
Source: Energy Information Administration