Doing Business in the Stavanger Region

1. Doing Business in the Stavanger Region

2. The Business Case for Being Present ... • ...on the Norwegian Continental Shelf • Large production, larger future resources • Changed exploration and licensing policy • facilitating exploration and development of smaller fields in mature areas within the life span of existing infrastructure • ... in the Stavanger Region • Most other companies are here, forming a strong and diverse oil and gas cluster • Research and development focused on the oil and gas industry • Quality of life and infrastructure geared toward international relations and foreign residents

3. Business Opportunities

4. Exploration Areas

5. Pipelines

6. Future of the Norwegian Oil & Gas Market Oil: 50 more years Gas: 100 more years Gas resources • Size • World’s 3rd largest exporter of crude oil • Ranks sixth among oil producers (NGL included). • 30 years of production have depleted less than a quarter of the resources. • Expected remaining petroleum resourcesis more than 10.6 billion m3 of oil equivalents. • Focused Areas • Gas has the largest future potential • Potential new discoveries in the deep-water areas in the western parts of the Norwegian Sea and northern areas outside Lofoten and in the Barents Sea • Exploring mature areas (satelite fields and improved recovery of existing fields) • Remaining resources are becoming more difficult to produce

7. Market trends • Simplified ownership structure • Increased opportunities to enter Norway through asset swapping / purchases • Investments in sea floor installation • Increased focus on profit through cost reduction on existing investments • Deregulation of the gas market leads to more players, higher risk and need of infrastructure and systems • Statoil is being privatized • Gassco is set up to deal with infrastructure for the transportation of gas and Petoro has taken over the administration of SDFI-assets (the State's Direct Financial Interest). Both are located in the Stavanger Region. • Internationalisation of Statoil and Hydro • 50 % of Statoil’s crude is expected to be produced out of Norway

8. Public Authorities Ministry of Petroleum and Energy Responsible for resource management and for administering petroleum activities in Norway. Ensures that petroleum activities are conducted in accordance with applicable legislation and policies adopted by the Storting. Ministry of Labour and Government Administration In the field of safety and working environment, the ultimate regulatory responsibility lies with the Ministry of Local Government and Regional Development, but the NPD has been delegated supervisory responsibility within this field for petroleum activities on the continental shelf. Norwegian Petroleum Directorate (NPD) Shall have the best possible knowledge concerning discovered and undiscovered petroleum resources on the Norwegian continental shelf. Carries out supervision to ensure that the licensees manage the resources in an efficient and prudent manner.

9. AEDC PETORO Aker Energy Ultimate Customers in the Oil & Gas Industry • All multinationals are present in Norway, with offices in Stavanger or Oslo. • The largest operators have their headquarters in Stavanger, except Hydro. • Other licensees are spread between Oslo and Stavanger. Production Licence Operators Other Licensees Stavanger Oslo Other Locations Svenska Petroleum Ugland

10. Main Contractors and Supplier Segments Foreign based international companies include: Large Norwegian companies include:

11. Companies Recently Establishing or Expanding a Presence in Stavanger The Small Upstream Company • British independent oil and gas E&P company listed on the London Stock Exchange. Assets in the U.K., Danish and Norwegian North Sea, Indonesia, Romania, U.S. and Tunisia. • Following the acquisition of Petro-Canada’s Norwegian interests early 2001, Paladin set up a Scandinavian headquarters in Stavanger. The office also runs Paladin’s growing Danish interests. • After the first year in business, Scandinavia constitutes around 50% of Paladin’s total production and reserves. The company sees a large potential in the region and aims at further growth. • Although conditions in respect to infrastructure and quality of life were little emphazised in the first phases, Paladin employees highly appreciate these once settled.

12. Companies Recently Establishing or Expanding a Presence in Stavanger The Major Downstream Company • Following a change of corporate strategies during the late 1990's the French downstream company Gaz de France decided to enter the upstream segments. • A Norwegian office was set up in the beginning of 2001. The decision to settle in Stavanger was caused by a wish to be in the middle of the Norwegian oil and gas business community and with their first partner Statoil. • Licence partnership shares were bought from Statoil and Gaz de France was also awarded licenses in the latest licensing round. • Gaz de France sees no obstacles in continuing to expand in Norway. • Local amenities are very much appreciated.

13. Companies Establishing or Expanding a Presence in Stavanger in Later Years The Major Services Supplier • The international giant Schlumberger employs 4000 in Scandinavia. Scandinavian headquarters are in Stavanger. • A research satellite was established in 1999 and now employs around 700.The satellite works with NCS oil and gas companies in research and problem-solvingactivities related to oil and gas fields on the Norwegian continental shelf. • The main topics worked on are within seismic stratigraphic interpretation, multi component seismic and reservoir monitoring. In these core areas research done by Schlumberger here is utilised quite extensively on other global markets. • Schlumberger considers Norway a favourable place to invest in R&D activities, due to the tax regime and highly qualified personnel.

14. Spin-off Possibilities in Other Markets Growing Exports From the Norwegian Offshore Industry • Companies gaining experience in Norway, use their knowledge in other markets. • An indicator is the development of the Norwegian supplier industry, now going international as never before.

15. Variety of Business Life Oil & Gas is dominating, but not unique • The Stavanger region has a large number of employees in the manufacturing sector and is the centre of North Sea oil and gas activity in Norway. • The Stavanger region is a major producer of hydroelectric power in Norway. • Bank, finance, wholesale and retail trade, hotel and restaurant services, as well as public services, are also growth areas in the region. • Rogaland is the most important agricultural region in Norway measured both in terms of gross product and man-labour years. • Egersund and Karmsund land more fish than any other port in Norway. Fish and shell farming are also important.

16. Infrastructure

17. Harbours and Supply Bases Europe's Largest Offshore Supply Bases • Europe's largest offshore supply bases is in Risavika / Tananger and Dusavika • In addition harbours for short and long distance transport of general goods are located in Mekjarvik, Risavika, central Stavanger and central Sandnes • Stavanger harbour is the centre for inter- and intra-regional and international passenger transport and cruise ships. • Egersund (50 km to the south) hasferry connections with Denmark Mekjarvik Dusavik Stavanger Risavika – Tananger Sandnes Supply Base Other Harbour

18. Connections and Transportation Well Connected Ferry Links Direct Air Connections • Stavanger Airport Sola is located 15-20 minutes by car from Stavanger and Sandnes. • In 2001 about 2,5 million passengers used Stavanger Airport, 0,5 million on international flights. • Railways link the region to Kristiansand in the south and to Oslo. • Major haulage companies have bases in this region and engage in extensive transport to and from other locations in Norway as well as the UK and the Continent via ferries in Stavanger, Egersund and Kristiansand. • Long-distance buses connect the region to Bergen, Kristiansand and Oslo. Buses and vessels connect the Stavanger area with the rest of Rogaland county. • Public transportation runs in the urbanised area on the Stavanger region.

19. Installed and Planned IT Structure in the North Sea Telecommunications World Class Network of Broadband and Fibre Cables • A high speed telecom network is fully operational in the region with direct connections over Ekofisk in the North Sea to Scotland and Europe. • Fibre-optic cables cover most of the fields in the North Sea offering very large transmission capacities and improved communication quality. • Telecom costs are very favourable in Norway compared to most countries.

20. Supply Base & Offices Dusavika Central Stavanger University Area, NPD, R&D activities Supply Base & Offices 15 km (minutes) on road between the major city centres of Sandnes and Stavanger Risavika / Tananger Forus business area Central Sandnes Distances A Compact Region • The Stavanger Region houses around 190.000 in the city area and 270.000 in the wider region. • The main city centres are Stavanger and Sandnes, only 15 km (10 miles) apart. • Offices, supply bases and warehouses are located on the fringes of the residencial areas. • Extensive public transportation, networks of roads and a north-south railway, easily facilitates travelling. • 15-20 minutes travelling distance between most locations: Residence, office, customers, airport.

21. Convention Facilities Third Largest in Norway • Stavanger hosts on an annual basis more than 20 international conferences / congresses and is Norway's third largest venue for these kind of arrangements. • ONS international conference and exhibition is by far the most important for the oil & gas industry. • Key facts: • 4 conference halls seating more than 500 participants, the largest with a a capacity of 1800. • A hotel capacity of 2800 rooms. • Labelled most important conference city in Europe for the oil and gas industry

22. Supply Base & Offices Dusavika Central Stavanger University Area, NPD, R&D activities Risavika / Tananger Supply Base & Offices Forus business area Central Sandnes Real Estate Availability and Costs Lower Cost Than Elsewhere In Norway • Cost for offices and warehouses are among the lowest among in Norway • Offices: NOK 1000-1500 per m2. Other major cities have average prices exceeding NOK 2000. • Warehouses: NOK 400-750 per m2 • Office availability is fair and several projects are being planned • Housing • Large and experienced rental market

23. Regulations

24. Corporate and Personal Taxation Taxation of Business Profit Personal Taxation • Business profits of companies, including capital gains, are subject to a general income tax at a rate of 28%. • Permanent establishment of foreign companies in Norway are taxed at the same rate, 28%. • Value Added Tax, 24% (VAT). • The tax rates for individuals range from 28% to 55,3%. (Including the employee’s contribution to the Norwegian National Insurance Scheme)

25. The Licensing System Production Licenses Are Normally Awarded Through Licensing Rounds Nomination Announcement Application Negotiations Awarding of licenses

26. The Licensing System Two types of oil and gas licenses on the NCS A Production License grants the holders an exclusive right to explore for and produce petroleum within a specified geographical area. The licensees become the owners of the petroleum produced from the field covered by the license A Reconnaissance License grants the holder the right to carry out geological, petrophysical, geophysical, geochemical and geotechnical surveys in a specified geographical area of the NCS

27. Health, Safety and Environment (HSE) Regulations Extensive Regulation With Regard to Health, Safety and the Environment • Licensees and other persons engaged in petroleum operations are required to maintain at all times a plan to deal with emergency situations. • The Norwegian Petroleum Directorate has adopted a wide range of regulations that set forth detailed requirements as to the HSE aspects of petroleumoperations. In addition, a number of regulations adopted under other acts, such as the Working Environment Act of 1977 and the Pollution Act of1981, apply. • Violations of such regulations can lead to fines. Holders of licenses under the Petroleum Actare subject to strict statutory liability in respect of losses to damages suffered as aresult of pollution caused by spills or discharges of petroleum from petroleum facilities covered by any of our licenses.

28. Labour Regulations and Organisations Legislation and Regulations Organisations • Citizens of the EEA-countries are free to enter Norway and to work here. Citizens of non-EEA countries must apply for entry visas and work permits in order to live and work here.Special attention should be paid in this respect. • The relationship between employer and employee is to a great extent subject to statutory regulations. • Foreign employers should also take note of the national social security system and tax considerations including stock option programs for expats. • NHO • The Confederation of Norwegian Business and Industry • LO • The NorwegianConfederation of Trade Unions

29. Workforce Quals and Business Networks

30. Cooperation and Networking National forums Regional Forum and Portals • OLF – The Norwegian Oil Industry Association • INTSOK – Norwegian Oil and Gas Partners. • TBL - Federation of Norwegian Manufacturing Industries • PIL - Federation of Norwegian Process Industries • KON-KRAFT – New top executive forum led by Ministry of Petroleum and Energy with participants from oil companies, suppliers, trade unions, research institutions and government bodies. • Regional Forums • World Energy Cities – Municipality Cooperation between energy cities around the world • Deep Community • Stavanger Chamber of Commerce • Stavanger Your Quality Partner • Portals • NPF – Norwegian Petroleum Association • Offshore.no Magazine • Scandinavian Oil & Gas Magazine

31. Business Innovation Climate Centres of Research and Development Research Labs and Institutions Throughout Rogaland • RF Rogaland Research • Rogaland Science Park • A new international research center for improved oil recovery is established in Stavanger • Tax rules makes Norway an attractive country for R&D investments for oil & gas companies. • Schlumberger has set up an R&D department employing more than 700. • Private / corporate investments are focused on agri-/aquaculture and energy/petroleum as shown on the map

32. Selected Demographic Developments Growing Population and a High Level of Education • Norway has a high educational attainment compared to other OECD-countries. • Approximately 85 % of the population in Norway aged 25 to 64 years had at least completed an upper secondary education in 1999. • The country mean across OECD was 62 %

33. Oil & Gas Employees (year 2000) 40 000 30 000 20 000 10 000 900000 800000 Rogaland Rest of Norway 700000 Wages for Management and Salaried Employees (Kverneland ASA case) 600000 Top mgmt 500000 Junior mgmt. 400000 Officers 300000 200000 100000 0 Norway Netherl. Germany France Work Force – Size and Salaries Qualified and Available Personell with Reasonable Salaries Half of the Employees in the Oil & Gas Industry Live in the Stavanger Region • Companies like Baker Hughes, Paladin Resources and Gaz de France express that Norwegian petroleum engineers are both highly qualified and available, and the levels of salaries are competitive. All three have their Norway headquarters in Stavanger. • Schlumberger estimates that a Norwegian researcher cost 1/3 of his American counterpart • The company Kverneland (non-O&G) compared its Norway-based employees with collegues in three other European countries. Result: The compensation is level with or lower in Norway (see illustration)

34. Employers' social Training costs contributions Safety and health 2 % Salaries in kind 7 % 0 % 8 % Taxes deducted Direct cost incl subsidies salary 11 % 69 % Payments for days not worked* 3 % (Annual cost year 2000 of NOK 684.319 NOK) Oil & Gas Industry – Some More Workforce Characteristics Average Labour Costs Sickness Absence and Work Stoppages • The average labour costs per full-time equivalent employee in oil and gas extraction and mining were NOK 684 000 in 2000. Total Labour Costs per Full Time Employee, Oil&Gas

35. Quality of Life

36. Pulpit Rock (see picture) is situated above Lysefjord and Kjerag located at the other side of the same fjord. Fishing is a popular leisure time activity in the region ranging from sea fishing in the fjords, to salmon or trout fishing in many of the rivers and lakes. Photo: Rogalandfylkeskommune/Rogaland Reiseliv Recreational Opportunities Fjords, Beaches and Mountains Offer a Variety of Activities The Pulpit Rock Is the Most Famous • 70 kilometers of beaches. Some of these are the most suited in Norway for surfing, wind surfing and kite activities. • Tracks and pathways throughout the region. • Nordsjøvegen is one of the main arteries of the region, twisting and turning from sea level to a height of 900 metres. • Sandnes is called the ”Bicycle Town”, city bikes, which are free to borrow, make it fast and easy to visit the city centre. • Mountain ski-areas can In the winter be reached within an hour by car from Stavanger.

37. Photo: Sandnes & Sola Golfklubb Cultural Opportunities Music, Theatre, Galleries, Museums, Restaurants and Pubs Festivals and Sports • Concert halls where artists and orchestras from Norway and abroad give concerts. • Stavanger Symphony Orchestra • Music Conservatory • Children’s Music School. • Libraries • Cinemas (films are shown in original version with Norwegian subtitles.) • More than 30 museums and galleries • Nearly 200 restaurants • Large variety of pubs and nightclubs (largely due to 30 years of oil workers influence and the university centre.) • the Gladmat Food Festival, the Blues Festival, the Oil Festival, the Emigration Festival, the Humour Festival and the Kite Festival. (a.o.) • The mountains are a popular area for parachute jumping/paragliding and basejumping. • Several golf courses • Sports and music opportunities for children • Sports-centres and swimming pools

38. Health centres and social welfare offices, medical centres, dentists, psychologists, post offices, banks, hairdressers and pharmacies Local grocery stores and super markets Several large stores for furniture, toys, food and other. You can buy sea food directly from the local fishing boat in the harbour close to where you live. Vegetables and fruits can be bought directly from the farmers during the harvest season. ’Kvadrat’ , the largest shopping centre in Norway, is situated at Forus. Randaberg Stavanger City Madlakrossen Hillevåg Forus Sola Sandnes City Public and Private Services Major Commercial Centres A Great Variety of Small and Large Businesses

39. Hundvåg and Buøy Stavanger: City & East Jaatun Paradis University area Hillevåg Hommersåk Tananger / Risavika Hinna Forus Sola Smeaheia Vatne etc. Sandnes City Bogafjell & Vedafjell Residencial Commercial Urban Development Major Development Projects and Plans Past and Present • Past • The foundation of Stavanger and its early history are closelytied to the history of St.Svithuns Cathedral. The date of thetown's foundation has been set to 1125. • The historic town of Stavanger, better known as Gamle Stavanger, is the biggest and best conserved wooden housing settlement in North Europe. UNESCO has placed it on the list of human patronage. • Present • Major residencial, commercial and office locations are spread around the area, mainly on a north-south axis with Forus as the major business area. • Public and private development projects are currently being processed for several areas along the north-south axis and in Tananger/Risavika in the west to residencial areas in Sandnes to the south and east.

40. Security and Crime A Peaceful Country • Norway is a comparatively peaceful country, with fewer cases of homicide and armed robberies. Oslo is in that respect among the safest capitals of the western world. • The degree of lesser serious crimes is more like the European average. • Norway is a rich country and has more reported crimes like thefts, car thefts and burglaries than the European average, but less than countries like Denmark, Sweden, Germany, France, Italy, UK, Canada and the USA. • Norway has considerably fewer prisoners than the European average and only 1/10 compared to the USA (per 100.000 inhabitants). • The illustration shows some crime rates in the largest counties (Oslo/Akershus, Rogaland includes Stavanger, Hordaland includes Bergen, Sør-Trøndelag includes Trondheim)

41. Healthcare A Well-developed National Health Service Regional Services • Extensive health services and a well-developed social safety net. • All residents have a right to economic assistance and other forms of community support during illness, old age or unemployment. • All employed persons have a right to sick pay from the first day of absence. • Treatment during hospitalisation is free of charge and children receive free medical and dental care in school. • The main hospital in the region is ‘Sentralsykehuset i Rogaland’. Patients may however choose any other Norwegian hospital. • The general practitioner service is well established in Norway • Everyone who wishes it is offered a permanent general practitioner to go to. • Private medical centres operate independently from the public health service. • An increasing number of private centres offer alternative treatment.

42. Photo: Sverre G. Hauge The International Community Ca. 4000 Resident Foreigners Are Working in the Oil & Gas Industry • The petroleum business has influenced the region since the early 70’s • The international organisations in the district are many; the International Cultural Centre; Petroleum Wives’ Club; Stavanger International Rotary Club for Business People (English speaking); US in Norway; Stavanger Partner Information (SPIN); Asociacion Hispano-Noruega, Centre Culturel Franco-Norvegien amongst others. • The International School of Stavanger is the largest of its kind in Europe with more than 500 students • Great amount of different religious communities with their own places of worship

43. Educational Opportunities For Children and Adults University Studies • Well developed primary and lower secondary education system • Variety of further education options, also at college level. • The Norwegian educational system covers the age groups 6-12 years (primary school), 12-15 years (lower secondary school) and 16-19 (upper secondary school / high school). • The largest International School in Europe (500 students), • French, British and Dutch schools. • Primary schools offer teaching in 52 languages. • The University Centre in Stavanger, offers petrochemical subjects among other. • The Norwegian School of Management BI offers master programmes in economics and marketing. • Folkeuniversitetet Adult Education Association provides adult education at college and university level.

44. Weather and Climate Mild Winters, Cool Summers • The coastal districts in Norway have a temparate marine climatewith mild winters and relatively cool summers. • Because of the Gulf Stream, the coast and harbours on the west coastusually are free from ice during the winter. • The average rainfall for the Stavanger district is 46 inches (1180 mm) per year. • Temperatures are fairly stable, varying between 32 and 60 degrees Fahrenheit (0-15 degrees Celsius). • Spring comes early. April and May are beautiful months with strong spring sun and dry spells.The warmest months are usually July and August. • The average temperatures for January and February are usually just above freezing. Snow does occur however. Average temperatures (oC) Average rainfall (mm)