"StatoilHydro's results and deliveries in 2008 were strong, and we are well positioned to steer through the current economic downturn. Good exploration results and targeted business development strengthen our resource base and underpin our long-term growth strategy."
We experienced a year of extremes in 2008. After a number of years of growth, the world now finds itself in a severe economic downturn. Oil prices peaked last summer at more than USD 140 per barrel, and have since declined by more than two-thirds. The global economy and our industry currently face more volatility and uncertainty than for a long time.
I believe StatoilHydro is well positioned to deal with this uncertainty. We are attacking the new realities with a strong balance sheet, a robust project portfolio and excellent people. We have made plans for upsides and downsides, and are prepared to react quickly to changing conditions. My priority is to steer through the turmoil with our financial flexibility intact, while continuing to deliver on our long-term strategy.
A downturn also represents an opportunity to achieve improvements. We want to work hard to reduce our own costs and to boost efficiency in the organisation. We will also work actively with our suppliers and partners to enhance quality and bring costs down to more sustainable levels. This will enable us to emerge from this crisis as an even stronger company.
Continuing to improve our operational performance and deliver projects on cost and schedule is our best protection against the turmoil. Our deliveries in 2008 were encouraging, and strengthened our industrial and financial platform. We increased our production and delivered on the production guidance we had given the market, we drilled more efficiently and improved our turnaround performance, and we strengthened our resource base by adding more than 3.5 billion barrels of oil equivalent (boe) through exploration and business development. I am proud of the fact that our people achieved strong deliveries while at the same time executing an extensive and complex merger.
The world's oil and gas resources are often found in areas which pose major development challenges, such as poverty, corruption and violations of human rights. We have to conduct our business with a high degree of transparency and within a clear performance framework defined by our values, health, safety and environmental principles, and ethical platform. Conducting an effective, efficient and profitable business within this framework is our best contribution to social development.
The safety of our people and those working for us is our overriding priority. We believe all accidents can be avoided, and we are constantly working to improve our performance in sustainability and HSE. I am particularly pleased that HSE results on our offshore installations improved in 2008, and we are dedicated to maintaining this progress. In spite of that, we were very regrettably involved in two fatalities last year, which were unacceptable and tragic losses for us and for the next of kin.
The focus on climate change in recent years has highlighted one of the greatest dilemmas of our time: how to strike a sustainable balance between the climate effects of energy consumption and the need to ensure a secure supply of energy for the years ahead. Our industry finds itself at the intersection of these considerations. As an international energy company, we have an important contribution to make in finding the right balance.
This dilemma affects us on a daily basis. We endeavour to make our energy production even more cost-effective in order to improve the return on investment for our shareholders, and we are taking environmental actions to help solve the challenges which arise from the use of hydrocarbons. Our future licence to operate will increasingly depend on our performance in both dimensions.
Despite the best of intentions, it is a fundamental energy reality that the world is decades away from a low-carbon society. Hydrocarbons will continue to dominate the energy mix, and population growth and increased prosperity will continue to increase the demand for energy. It seems clear to me that the world needs to utilise every source of energy to meet rising demand. The challenge is how this energy can be developed and produced and at the same time limit carbon emissions. It is important that the public debate on these topics reflects reality if society is to achieve concerted action in the future.
Technology development is a key part of our strategic response to climate change. One of our ambitions is to remain at the forefront of carbon capture and storage (CCS). The European test centre for CCS at Mongstad is a specific example of our efforts in this respect. In a short- to medium-term perspective, we must continue to improve the efficiency of our operations with regard to both energy consumption and environmental impact.
Looking further ahead, we must gradually direct more skills and resources towards the commercial production of renewable energy. However, we should not underestimate the challenge involved in replacing fossil fuels as the most important component in global energy supply. There is no quick fix. Further expansion of renewables will require more research and technological development as well as better collaboration between commercial enterprises, research institutions, universities and others. Last but not least, the provision of a stable and attractive investment framework by governments will be essential if investment in this area is to increase.
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