The document summarizes Statoil's response to the European Commission's Green Paper on energy strategy. Some key points include: - Europe needs to ensure a role for its indigenous oil and gas resources and industry. - The internal energy market framework needs to provide stability for energy companies to invest. - Infrastructure investments should be made on a commercial basis rather than by the Commission. - Cooperation between transmission system operators could improve security of supply. - A level playing field is important for different energy sources to have a balanced energy mix.

1. Statoil Response to the Commission Green Paper -
A European Strategy for Sustainable, Competitive and Secure Energy

2. Summary of Key Messages
• Europe needs to secure an important role for its indigenous oil and gas resources
and a thriving oil and gas industry. The Action Plan to be presented to the Head of
States and Governments in Spring 2007 should account for this;
• The Internal Energy Market needs to deliver a predictable and stable framework
for European energy companies to work within. The key action points for the further
development of the internal market suggested by the Commission in the Green
Paper merit the following observations:
o The development of a European Grid Code would be an important step in
developing an effective integrated European transportation system;
o In the present market situation, priority should be given to strengthen
national regulators’ independence, competencies and their capacity to
coordinate. Time should not be spent on trying to establish a European
Energy Regulator at this juncture;
o All infrastructure investment decisions must be left to be made on a
commercial basis. The Commission should focus on development of effective
incentives and structures that facilitate such commercial decisions. Long term
contracts have a unique role to play in securing infrastructure investments
also in the future;
o Unbundling in the transportation part of the value chain should be carried
out to the extent it ensures that the provider of transport services has the
proper incentives to offer this to the users in an effective way;
• Closer co-operation between transmission system operators across Europe should
be supported. If entities such as a European Energy Supply Observatory or a
European Centre for Energy Networks are established these need to be
complementary to the transmission system operators and not interfere with market
dynamics;
• The need for gas storage will increase. Application of existing legislation should
not hinder sufficient capacity to be built. Any review of existing Directives on
security of supply or a new legislative proposal concerning gas stocks should not
undermine the commercial attractiveness of building storage;
• The EU Strategic Energy Review should address the status of inter-fuel
competition in the EU today and provide for actions ensuring and safeguarding a
level playing field amongst primary energy carriers;
• Energy efficiency plans and initiatives as well as the development of a long term
plan for renewable energy sources all need to respect the requirement for a level
playing field amongst energy carriers and take into due account entire value chains
when the actual contribution to addressing the global climate challenge is
considered;
• For CO2 capture and storage (CCS) and bio fuel to take on a significant role in
tackling climate change, large investments by the industry will be required. For
these investment to take place appropriate incentives, as well as predictable and

3. stable framework conditions, will be essential. Such incentives and framework
conditions must to the extent possible remain neutral between energy carriers and
furthermore they need to be established at an EU level and not on a national basis;
• A Strategic European Technology Plan would be particularly valuable where it
also to reflect the importance of oil and gas for Europe’s competitiveness and, in
partnership with industry, address long term technological challenges in the
following areas:
o Advanced reservoir management technology;
o Advanced off-shore production facility technologies (surface/subsea)
required for operations in challenging climatic and environmental sensitive
areas such as the Arctic Seas;
o Heavy oil refining and upgrading technology;
o Cleaner fossil fuels technology, in particular more cost effective carbon
capture technologies.
• Securing and diversifying future energy supplies to Europe will require political,
legal and regulatory frameworks that facilitate development of new energy projects
targeting the European market. Regulatory provisions both in producing and
importing countries should be brought to promote investments, not hinder them. To
this effect the establishment of a pan-European Energy Community and a common
regulatory space should be pursued;
• Europe’s aim of diversifying transportation routes for natural gas necessitates the
inclusion of a Northern axis in the Priority Interconnection Plan and future revisions
of the TEN-E guidelines as well as intensified relations with Norway.

4. Introduction
Statoil welcomes the Commission Green Paper - A European Strategy for sustainable,
competitive and secure energy, released March 8 2006, and the opportunity to contribute
to the timely and important debate.
Statoil shares the analysis of the European Commission that Europe now faces a
different energy landscape, with increasingly interdependent world regions in terms of
security of energy supply and economic performance.
In such a world, Europe needs to secure an important role for its indigenous oil and gas
resources and a thriving oil and gas industry. This is, in our view, not sufficiently
reflected in the six priorities areas defined by the Green Paper. These areas and the
series of questions raised do, therefore in our view, bear further comment.
As a major, international oil and gas company we intend to play part in making the
vision of sustainable, competitive and secure energy for Europe a reality. To this effect
we would like to underline the below issues.
An energy strategy for Europe
Statoil shares the view of the Commission that the internal energy market is a very
important part of a common energy strategy. Most essential in our view is that the
internal market is made to deliver a predictable and stable framework for European
energy companies to work within. A market is never only attractive due to its share size.
From a supplier perspective the role to be played by long term contracts, necessary to
bring forward significant investments, as well as infrastructure barriers are key elements
in evaluating delivery options.
Competitiveness and the internal energy market
Statoil endorses the Commission in that the development of the internal market for gas
and electricity should continue at full pace. Today, the use of Europe’s liquid market
places has become an integrated element of Statoil’s gas business.
With respect to some of the key action points suggested by the Commission in the paper
we would like to share the following observations:
• Statoil fully endorse the development of a European Grid Code and consider this
an important step in developing an effective integrated European gas transportation
system;
• Presently Statoil favours the development of strong national regulators as most
regulatory challenges today are related to local/national issues. A network of
regulators modelled on the European Competition Network should suffice to
address regional and European regulatory perspectives and issues;
• Statoil welcomes the focus on improvement of interconnection and need for new
infrastructure investments. Although a priority interconnection plan and a better use
of the TEN-E instruments can be valuable Community initiatives, it must be ensured
that investment decisions are made on a commercial basis. The Commission should
focus on development of effective incentives and structures that facilitate such
commercial decisions. In this respect the acknowledgment of the important role of
long term gas sales contracts is essential. Such contracts are key to the sharing of risk
between sellers and buyers of natural gas. In undeveloped non-liquid markets such

5. instruments are the only way to ensure new investments. In more developed
markets, long-term contracts play an additional role in developing competitive
products and complementary risk sharing tools. Furthermore, in becoming
increasingly market reflective over time, long term contracts will be conducive of the
development of a competitive internal market. This is because they will form the
backbone from which market players will carry out various market decisions for
optimisation and flexibility purposes, and for adding on new capacity;
• Statoil believe unbundling in the transportation part of the value chain should be
carried out to the extent it ensures that the provider of transport services has the
proper incentives to offer this to the users in an effective way. The success of the
model is based on the following principles:
o economic rent being allocated to the users of the system;
o regulated tariffs;
o neutral third party access, however incentives for users that invest in the
system;
o an independent transport system operator (i.e. GASSCO on the Norwegian
Continental Shelf);
o transportation system could be owned and developed independently or by
a group of companies that broadly reflects the users of the system.
Transportation arrangements on the Norwegian Continental Shelf (NCS) reflects the
needs of the producing fields (both gas and oil) and is regulated and managed in a
way that reflects the goal of ensuring maximum value creation by the total portfolio
of fields on the NCS. The model caters for continuous improvements and
development of the system through a process including all stakeholders in the
Norwegian oil and gas industry. Although the NCS system is uniquely designed to
meet upstream production requirements, Statoil believe similar principles could be
utilised for downstream systems, with focus on effective distribution to customers
and markets, and facilitated non-discriminatory access for all suppliers and
customers.

6. Security of supply and the internal market
Well functioning competitive internal market for energy constitutes an important factor
in providing secure energy supplies to consumers. A prerequisite for a well functioning
market is an appropriate level of infrastructure and a performant operation of such
infrastructure.
On these grounds, Statoil supports the idea of closer co-operation between transmission
system operators across Europe. If entities such as a European Energy Supply
Observatory or a European Centre for Energy Networks were to be established one
would need to make sure that they were complementary to the transmission system
operators and that no interference with market dynamics occurs.
Storage is an essential interruption management instrument both in oil and in natural
gas. In our view, the need for gas storage will increase as new supplies will have to
come from sources further a field, with possible increasing interference challenges. With
this increasing need for storage, it is important that:
• Any review of existing Directives on security of supply or a new legislative
proposal concerning gas stocks should not undermine the commercial attractiveness
of building storage;
• Though the general rule should be that access to storage based on a neutral TPA-
regime, Statoil recommends a liberal practice with regard to third party access
exemptions in order to facilitate development of new capacity;
• The build of storage to meet upstream needs (producing fields) must still be
possible.
Diversification of the energy mix
A truly balanced energy mix accounts for the cost and environmental properties of
energy carriers, as well as diversity of sources and transportation routes. Hence, the
general ambitions for an energy mix cannot be much different from that of the overall
energy policy: To secure cost-efficient, environmental friendly and secure energy for
consumers.
A truly balanced energy mix is fostered by creating a level playing field amongst the
different energy carriers, taking their various cost, supply security and environmental
properties into consideration. The EU Strategic Energy Review should, in our view,
address the status of inter-fuel competition in the EU today and in the future and
provide for actions ensuring and safeguarding a level playing field amongst primary
energy carriers.

7. We expect Member States to play the primary role in establishing the framework in
which energy companies will work. Should Member States also agree to work with
overall strategic objectives at the EU level they need to ensure that there are no
incompatibilities between these and those implemented at the national level. Such
inconsistencies would, in our view lead to increased uncertainty and thereby damage
investments.
An EU Strategic Energy Review also needs to recognise the remaining significant
hydrocarbon production potential in Europe. Statoil is working hard to make sure that
such resources will continue to make a valuable and important contribution to Europe’s
energy supply also in the future.
Sustainable development and the challenge of climate change
The Green Paper’s emphasis on sustainable development and tackling climate change is
commendable. It is important that energy efficiency plans and initiatives as well as the
development of a long term plan for renewable energy sources all are developed with a
view of the level playing field between energy carriers and that they take into due
account the entire value chains when considering the actual contribution to addressing
the global climate challenge.
For CO
2
capture and storage (CCS) and biofuels to take on a significant role in
combating climate change, large investments by the industry will be required. Today’s
technology and costs levels indicate that such investments could take long to
materialise. Energy efficiency is therefore important in order to curb the CO
2
emissions
in a short and medium-term perspective.
Another important medium-term tool is a credible and well functioning market for
climate gas emission allowances. We see such a market as vital in order to obtain cost
effective reductions of CO2
emissions. While we support the general ideas behind the
current EU Emmission Trading Scheme (ETS), there are strong needs for improvements
both in terms of institutional implementation, long term predictability and quota
allocation mechanisms.
In the longer term both carbon capture and storage and biofuel infrastructure will be
built. However, in particular carbon capture and storage infrastructure is costly and
investment incentives, as well as predictable and stable framework conditions, will be
required. In this context a legal framework that makes safe underground storage of CO
2
an effective tool to reduce emissions substantially is of high importance. This framework
should also open up for carbon capture and storage projects to be accepted as Clean
Developments Mechanisms (CDM) under the Kyoto Protocol. Such incentives and
framework conditions must to the extent possible remain neutral and furthermore

8. they need to be established at an EU level and not on a country-to-country basis.
Solutions need to be more European than national.
Innovation and technology
Statoil supports the idea of a Strategic European Technology Plan. Such a plan would in
of our view be particularly valuable where it also to reflect the importance of oil and gas
for Europe’s competitiveness and address the challenge of developing environmentally
improved technologies to find and produce oil and gas.
Over the years Statoil has earned the reputation of being at the very forefront of our
industry in applying new technology in projects. Today we therefore see a competitive
edge for the European supply industry to be gained through increased focus on
hydrocarbon R&D. EU projects should focus on long term challenges that can provide
the basis for important breakthrough solutions and projects that can benefit from broad
industry participation. In our view, attaching the right importance to such research in a
Strategic European Technology Plan would contribute to the economic and social
development of Europe.
In concrete terms Statoil would like to see the plan address:
• Advanced reservoir management technology;
• Advanced off-shore production facility technologies (surface/subsea) required for
operations in challenging climatic and environmental sensitive areas such as the
Arctic Seas;
• Heavy oil refining and upgrading technology;
• Cleaner fossil fuels technology, in particular more cost effective carbon capture
technologies.
With respect to future European Framework Programs these should include research in
the petroleum field. A Europe that will be dependent on oil and gas for year to come
should, in partnership with industry, invest in long term advanced research on how to
find, extract and use such valuable resources in an ever increasing sustainable way.
External energy policy
Close relations with consumer and producer countries alike will be increasingly
important in the future. Pursuing energy partnerships, co-operations or dialogues are
commendable actions in this respect.
Europe’s security of energy supply very much hinges on its capacity to promote stability
and peace in vulnerable producer countries. The European Union’s successful
experiences in economic support to and integration of Eastern European states provide

9. important lessons in addressing sources of social and political instability in other areas,
not least it’s near foreign policy domains in North- and West Africa and ensuring
continued stability in the Caspian/Caucasus region.
A key element in a policy of securing and diversifying energy supplies should be the
development of political, legal and regulatory frameworks that facilitate development of
new energy projects targeting the European market. We regard the Energy Charter
process as particularly important in this respect.
In addition, alongside our competitors, Statoil today faces national legislative and
regulatory constraints in energy producing countries that, for investments to be made
and hydrocarbons to flow, will require finding solutions with respect to EU competition
rules. It is important to acknowledge that regulatory provisions both in producing and
importing countries should be brought to promote investments, not to hinder them.
In view of the above, Statoil supports the idea of developing a pan-European Energy
Community and a common regulatory space ruling trade and transit and with due
account being given to environmental rules and regulations. Such a Community could
also be used to promote sustainable oil and gas production raising social and
environmental standards in neighbouring regions.
Finally, we support the extension of the Trans European Energy Networks (TEN-E) and
the associated financial facilities to third country partners and would argue that it is
time for a Northern axis to be included in a future modification of the TEN-E
programme or a Priority Interconnection Plan.
* * * * *

10. ANNEX: Sustainable, Competitive and Secure Energy for Europe - The Role of
Statoil
Statoil is a major international oil and gas company with a presence in more than 30
countries globally. We have a strong heritage of pioneering complex offshore
exploration, project development, technical operation of the world’s largest offshore
gas pipeline systems, and operations under tough conditions on the Norwegian
Continental Shelf. Strong company values, high ethical standards, concern for the
environment and a broad society perspective are fundamental drivers in all our
activities.
A major supplier of natural gas to the European market and the world's third largest
net sellers of crude oil, we have a strong commitment to future energy supplies in
Europe and the US. In 2004 Statoil launched an ambitious strategic roadmap with a
unique combination of profitability and growth. In its simplest form Statoil's strategy
consists of two parts:
• Maximise the value creation from the Norwegian Continental Shelf;
• Build international platforms for long term growth.
In pursuit of this strategy we have established demanding short-term targets and
long-term ambitions:
• Our targets include producing 1,4 million boe per day in 2007 following with an
ambition of 2-4 per cent average annual growth until 2010 (growth expected to
come from several areas including North- and West Africa, the Caspian, US Gulf
of Mexico and the NCS);
• We have an ambition of producing 50 bcm/a gas by 2015 and keeping a
production of 1 million boe per day from the NCS until 2015;
• We believe the Barents Sea will be Europe's next offshore oil- and gas province
and are ready to take on a role as industrial architect in the region.
Our growth ambition is supported by efforts to maximise value potential throughout
the value chain in three distinct areas:
• - World class project execution
• - An aggressive exploration strategy
• - Non-organic growth measures
These ambitions are in our view very much aligned with the orientation Europe
looks to forge through the development of a common strategy for sustainable,
competitive and secure energy for Europe. Such an alignment bodes well for the
significant role we expect to play in securing energy to Europe for generations to
come.