In 2008 the total production from the NCS was 4.16 mmboe per day. Improved oil recovery from existing fields is an important factor in maintaining the current production level, and most of the IOR activities are related to the drilling of new wells. Natural gas production is increasing and we expect production of natural gas to constitute a larger share of total production in the future.

A major challenge for the industry has been to secure rig capacity, which is vital to increasing the recovery factor. A tight supplier market on the back of recent years' oil price increases has put upward pressure on rig rates, as well as on overall oil service expenses.

The global financial crisis that escalated in September will probably have an impact on this situation. However, much of the rig fleet is on longer term contracts, so a considerable change is not likely to be seen before 2010 or 2011. The recent turmoil in the financial and commodity markets has sharpened the focus on capital efficiency and cost control. Investment plans have been prioritised, and our portfolio of field projects and exploration prospects has been trimmed and high graded. However, short-term IOR efforts are fairly robust.

Another challenge facing the companies on the NCS is that future production is expected to come from smaller and more complicated fields. New field development projects typically have more complex reservoirs and are technically more challenging than before. They will therefore demand more resources per barrel than the older and larger fields. As the NCS matures, the investment level is expected to remain at a high level.

We believe there is still a large undiscovered resource potential on the NCS, both in mature and frontier areas. According to estimates published by the Norwegian Petroleum Directorate, approximately one-third of the resources on the NCS are undiscovered. Existing infrastructure ensures profitability for small discoveries in mature areas that would not otherwise justify stand-alone development. The majority of the remaining large discoveries are expected to be located in the frontier areas.

Access to attractive acreage is an important factor in realising the potential of the NCS. In January 2009, 40 companies were awarded 34 new licences in the North Sea, the Norwegian Sea and the Barents Sea through Awards in Predefined Areas (APA) 2009. The annual APA concession system offers previously relinquished acreage and unawarded blocks offered in previous licensing rounds located in specific mature parts of the NCS. The APA system ensures that large areas close to existing and planned infrastructure are made available to the industry, and the APA area will be expanded as new exploration areas are matured.

The deadline for applications in the 20th licensing round expired on 7 November 2008 with a total of 46 companies submitting applications. According to a press release from the Norwegian Petroleum Directorate, this was one of the largest licensing rounds ever, and the oil companies' interest demonstrated "that new exploration areas on the Norwegian Shelf are competitive in an international perspective." Awards are planned for March/April 2009.

Ensuring safe and stable operation with no harm to people or the environment is an essential aspect of operating on the NCS, and there has been increased focus on this issue in recent years.