We are currently the second largest supplier of natural gas to Europe, with a market share of approximately 15% in Europe, including the volumes from the State's Direct Financial Interest. Gas exports from the NCS were at a record level in 2008 and are expected to grow. In 2008, StatoilHydro sold 39.3 bcm of entitlement gas. In addition, we sold 32.0 bcm NCS gas on behalf of the SDFI. Most of the gas was sold to European energy providers under long-term contracts. Our market share is approximately 20-25% in Germany and France and approximately 15% in the UK.
Two significant factors strongly influence our financial results: the external sales price and the internal transfer price.
In 2008, natural gas prices reached record highs. Our volume-weighted average price was NOK 2.40 per scm in 2008, an increase of 45% from 2007. Most gas supply contracts in Europe are indexed towards oil products, which means that a change in oil prices will affect the gas markets with some time delay (6-9 months). Increasing oil prices up until the summer months of 2008 were followed by high prices in the gas markets in late 2008. During the second half of 2008 oil prices fell sharply from more than 140 dollars per barrel to some 40 dollars per barrel. We expect this to affect natural gas prices in 2009.
All of the gas from the NCS sold by the Natural Gas business area is purchased from Exploration & Production Norway (E&PN). Previously, the internal transfer price formula was linked to the oil price for Brent Blend. A new market-based internal price for natural gas was put into effect from 1 January 2008. The transfer price formula for natural gas has been updated to better reflect fundamental changes in the markets for competing energies, i.e. crude oil, developments in natural gas markets and changes in the natural gas sales contracts portfolio. In 2008 the transfer price was NOK 1.87 per scm.
The total capital expenditure of NOK 2.0 billion in 2008 was lower than in previous years, mainly due to fewer pipelines, storage and processing plants being under development.
