According to the International Energy Agency's (IEA) World Energy Outlook for 2008, fossil fuels will continue to be the prime source of incremental energy supply in the decades ahead. However, on a regional level, the growth in demand for specific fuels will vary. In developing countries, coal is expected to see the fastest growth in demand, whereas natural gas is expected to continue to be the fastest growing fossil fuel in the OECD markets.

In the IEA reference scenario, global primary demand for natural gas will expand by just over half between 2006 and 2030, to 4,400 bcm, a rate of increase of 1.8% per year. Natural gas's share of total global primary energy demand is expected to increase to 22% in 2030. Some 57% of the projected increase in gas demand comes from the power sector, pushing up its share of global gas use from 39% today to 45%. Inter-regional gas trade is projected to more than double towards 2030, from 441 bcm in 2006 to more than 1000 bcm in 2030. The European Union expects the biggest increase in import volumes.

Natural gas can substitute for other fuels in almost any application. In many global scenarios for the mitigation of climate change, there is an implicit assumption that gas use will increase. Thus, future demand for natural gas looks robust and sustainable, assuming that the necessary regulatory and competitive frameworks are established.

On the supply side, there is major concern over possible energy deficits (or "gaps") in several major gas-producing countries. In consequence, international natural gas markets will be influenced by policy decisions in key producing and reserve holding countries such as Russia, Iran, Algeria and Qatar.

From around 2010, it is expected that Europe will need additional supplies of piped gas and/or LNG in order to meet demand. Gas from the NCS is attractive in the European market due to its high regularity and geographical location. We therefore expect that demand for gas from Norway will continue to increase in our primary gas markets, as domestic gas production elsewhere in Europe continues to decline.

The international gas industry is driven by several trends that have implications for our business:

• Accelerated growth in energy demand driven by population and economic growth, with natural gas playing a more important role in the energy mix. The IEA expects the current economic setback to be reversed by the end of 2009, with demand drivers for additional energy picking up again.
• Due to increased import dependency, natural gas will be transported over increasingly long distances, both as LNG and via pipelines.
• Environmental concerns and climate change policies are becoming more important.
• Major resource-holding countries will have an even stronger impact on the global supply picture for gas.
• Gas and power markets will continue to converge, especially in mature markets such as the OECD.

These trends and developments mean new opportunities for our gas business. While robust demand will continue to underpin the longer term supply business, increased transparency, connectivity and liquidity in the market place will open up new areas for value creation through optimisation and trading.

Hence, our gas strategy aims to continue to strengthen the long-term supply business while at the same time grasping new business opportunities as market developments allow.