Lars Troen Sørensen - Sr. VP, IR Eldar Sætre - CFO

Anne Gjøen - Kaupthing Lars Troen Sørensen - Senior Vice President, Investor Relations: Ladies and Gentlemen, welcome to this StatoilHydro Third Quarter 2007 Results Presentation. My name is Lars Sørensen and I am the Head of Investor Relations. This morning at 8 o' clock, Central European time, the press release, stock market announcement and presentation material were published both through the Oslo Stock Exchange and via our website, statoilhydro.com. The presentation used in today's webcast can be downloaded from statoilhydro.com and that's what... that's where you have the material that would be used in this presentation. Please note, that the report that we have here is excluding the oil and gas activities of Norsk Hydro as the merger was effective of the 1st October i.e., the fourth quarter. Then I would like to draw your attention to the disclaimer as usual, which describes the non-GAAP elements used in the presentation and the forward-looking statements. A couple of words of safety as usual and for us here at the auditorium in Oslo, if the fire alarm goes off, there are two fire exits in this room. This is one there, which reaches straight out into open. And there is one there which leads to the reception where you came in; meeting point is just across the road outside the main entrance. With us here today to take us through the third quarter presentation is StatoilHydro's Chief Executive... Chief Financial Officer, Eldar Sætre and with no further ado, I will just leave the work to Eldar. Please Eldar. Eldar Sætre - Chief Financial Officer: Thank you, Lars and good afternoon to all of you. Now as a consequence of the merger, Statoil ASA changed its name from the 1st of October this year to StatoilHydro ASA and as the merger with Hydro's... Norsk Hydro's Oil and Gas business was effective from the 1st October as Lars said, today's third quarter numbers, they are then excluding StatoilHydro's Oil and Gas activities. Tomorrow, Norsk Hydro will present their third quarter results including the oil and gas business. Furthermore, on the 12th of November, we will issue the consolidated third quarter pro forma accounts together with relevant guiding for the full year of 2007 on CapEx and on expected production volumes. During the third quarter of this year, part of the organization, I would say, have been quite extensively involved in the merger process. And this I have to say has been both quite complex, but also comprehensive and I would add successful effort, which has been performed according to plans, all the way until completion as I said on the 1st of October. The completion of the integration process and further work on capturing the full potential of synergies will obviously also continue beyond day one and with full force. So, let's now look at the main highlights for the first quarter's... for the third quarter excuse me. As already mentioned the merger process has been successful all the way until completion on the 1st of October. We continue to deliver solid financial results during the third quarter, mainly driven by strong oil and gas prices. During the third quarter, we started producing from three new world-class gas projects on the Norwegian Continental Shelf; the Ormen Lange, the Snøhvit and also Statfjord Late Life project. While Kristin at the same time is came into full production In the third quarter, we also added important positions for longer term growth through an opportunity to participate in the Phase I of the Shtokman development project and also adding new acreage position in the Gulf or deepwater part of Gulf of Mexico. On the NCS, we have delivered some of the most complicated offshore projects and at the same time driving technology implementation through these projects and we have continued to deliver safe and efficient production at a competitive production unit cost despite the industry cost pressure that we're seeing. Our combined experience and position has emerged, company is obviously also interesting and attractive to others. We are quite convinced that StatoilHydro's position as the world's largest offshore operator, pipeline operator and our Arctic LNG experience are important reasons why we have been awarded the opportunity to participate in the Shtokman... development of the Shtokman project in the Barents Sea. Then to the financials; StatoilHydro again excluding Hydro oil and gas had a net operating income in the third quarter of NOK 24.4 billion compared to NOK 30.2 billion in the same quarter last year. This 19% decrease was mainly due to lower downstream resource, a 15% decrease in gas prices measured in Norwegian kroner and also increasing cost both related to operational activities, depreciations, and increased exploration activities. The net income was 26% higher than last year and this is primarily due to significantly higher income from financial items. In addition, we had a lower tax rate of 64.3% compared to 69.5% in the same quarter last year. And the lower tax rate mainly related to the financial items. The income on net financial items is mostly due to the lower U.S. dollar exchange rate to the Norwegian kroner. The U.S. dollar fell from 5.90 Norwegian Kroner per dollar at the beginning of the third quarter to 5.44 at the end of the quarter. That's a difference of almost 8%, generating a positive P&L effect both on the long-term debt, which is all kept in U.S. dollar, and also the short-term debt and liquidity positions. This quarter the net financial items provided an income of NOK 5.5 billion, while we had a cost of 2.3 in the same quarter last year. Earnings per share increased by 29%, as a result of the growth in net earnings and the released number of shares due to the share buyback program. Total production, oil and gas production in third quarter was 1,056,000 barrels a day, which is down 2% from last year... the same quarter last year. Oil production was down 4% while gas production was up 2%. The international production grew by 19% on a quarter-to-quarter basis. And as you can see, total oil and gas liftings was up 2% compared to last year, indicating an over lift in this quarter of approximately 22,000 barrels a days. Turnaround activities had an impact in this quarter, both from the international and the Norwegian activities of approximately 45,000 barrels a day, which is exactly in line with what we guided on in the previous quarter. Based on the total oil and gas production and then again excluding the Hydro oil and gas portfolio, we maintain the guiding of an average full year production for 2007, or between 1,150,000 and 1.2 million barrels a day. However, we expect to end in the low end of this range. I'd like to add, moving gas in time to create value is contributing to this development. And as already mentioned, we would provide further guidance on the combined Statoil and Hydro 2007 volumes on the 12th of November. Let me run you briefly through each of the business segments starting with the E&P Norway. Net operating income from E&P Norway was NOK 21.9 billion, which is unchanged from the same quarter of last year. There was a decrease in the transfer price of gas... natural gas by 4%, and also a minor decrease in lifted volumes of oil and gas. These decreases were partly offset by increase in other income of NOK 1.8 billion, mainly due to change in fair value of some derivatives. Operating expenses increased by NOK 5.6 billion, mainly due to the overall industry cost inflation that we see, but also new fields and increased general... excuse me, increased maintenance activities, and also well related activities. Depreciation also increased with approximately NOK 500 million due to higher asset retirement cost from 2007. Net operating income from the international E&P was at NOK 2.8 billion in the quarter compared to NOK 2.5 billion in the same quarter last year. And this was mainly due to a 23% growth in the lifted volumes, which contributed to the improvement by NOK 1.2 billion. On the negative side, we had an effect of approximately NOK 1.1 billion from decrease in the realized gas price. In addition, the realized oil price was down 2% and we also had an increase in exploration and operating expenses mainly driven by higher activity levels. Exploration expenses were at NOK 1.3 compared to NOK 1 billion in the same quarter last year. Net operating income within the Natural Gas segment was slightly negative at NOK 0.1 billion... NOK 100 million this quarter compared to an income of NOK 2.4 billion last year. This decrease of NOK 2.5 billion was mainly due to a 15% production in the sales price of piped natural gas reducing income by NOK 2 billion. At the same time, the internal transfer price was reduced as I have already mentioned by only 4% due to the simplified and rather mechanical way of calculating the internal transfer price directly linked to the Brent planned. Now this is leaving a significantly reduced internal margin of 23 [ph] plus under cubic million... cubic meter for the natural gas business. The fair value of derivates was reduced by approximately NOK 300 million this quarter compared to a gain of NOK 0.9 billion last year in the same quarter. So that explains NOK 1.2 billion of the EBIT reduction from the third quarter of last year. Natural gas sales for the third quarter was at 7.3 bcm compared to 6.6 bcm in the third quarter last year. This is an increase of 11%. Of the total gas sales in the third quarter, 5.8 bcm was equity gas compared to 5.9 bcm equity gas last year. The sale of natural gas from the In Salah field, and the Shah Deniz fields are reported separately by the International E&P segment. Net operating income for Manufacturing & Marketing in the third quarter was a negative NOK 0.1 billion compared to NOK 2.1 billion last year. The decrease was mainly due to currency losses on inventories, combined with lower refinery margins. The net operating income within oil sales trading and supply was negative NOK 0.6 billion compared to a positive contribution of NOK 0.5 last year. This was as just mentioned mainly due to currency losses on inventories of approximately NOK 700 million and also slightly low resource from trading activities this quarter. Net operating income for the manufacturing part of this business segment was NOK 0.4 billion compared to NOK 1.2 in the same quarter last year. Now this reduction is again mainly due to the lower realized refinery margins and combined with the lower U.S. dollar exchange rate. And in addition, we had a somewhat lower throughput and regulatory factor at the methanol plant at Tjeldbergodden. Net operating income for the energy and retail was approximately NOK 200 million in this quarter compared to approximately NOK 400 million last year. And this reduction is due to one-off costs only. And now to some of the larger project deliveries that we have seen this quarter, and they are quite impressive. The Ormen Lange gas field started producing on the 13th of September, adding new volumes to the already opened Langeled pipeline to the U.K. and via this Sleipner hub, this field consist of supply gas both to the Continental Europe and the U.K. The Snøhvit LNG facility outside of Hammerfest in the Northern Norway also started production in this quarter, actually on the same date. And the first cargo of 145,000 standard cubic meters was shipped onboard the Arctic Princess just a little over a week ago. The opening of the Tampen link pipeline also marked the startup of the Statfjord Late Life project gradually converting one of the most profitable, I would say and largest oil fields on the Norwegian Continental shelf into a gas producer that will produce gas for more than 2 decades ahead of us. And finally, the issues at the Kristin high temperature, high pressure field are now been solved and the field is producing with a full capacity of 9 wells. I would also like to mention that the drilling progress at the Kristin... Kvitebjørn field, which is temporarily shut down is also good and the field is expected to be back in production during the fourth quarter as we have guided earlier. On the exploration side, we had... have had an extensive exploration program also this quarter, both on the NCS and internationally, participating in 47 exploration wells so far, up until today in 2007. 37 of these wells have been completed providing 19 discoveries so far. We have seen only five dry wells concluded and 13 wells are awaiting final evaluation. Ten wells were ongoing at the end of the quarter. And we are quite confident that we will reach our Statoil only to put it that way, activity ambition for 2007 of completing at least 40 wells in total. We are also very pleased with this achievement, both in terms of the ability to actually execute this comprehensive drilling program and in terms of the high discovery rate. 18 of the completed wells are on the Norwegian Shelf, and out of the 19 wells we have completed internationally, 6 are located in the deepwater Gulf of Mexico and all of these are still under evaluation. So let's now take a closer look at the Gulf of Mexico position for the new company. I think the deepwater U.S. Gulf of Mexico is a very good example of how the merger has created an even stronger company on the basis of existing positions from each company before the merger. This map shows an overview over StatoilHydro's total lease portfolio in the Gulf of Mexico as a merged company. In the western lease sale in August and in the central lease sale in early October, we were awarded a total of 78 leases mainly in the deepwater areas of the Gulf of Mexico. So that means that StatoilHydro is now one of the largest players in the deepwater regions of the Gulf. Exploration for new deepwater resources and the potential later development of these resources will require both organizational capacity and relevant technology and experience from the operators of these fields, and I think that is exactly what StatoilHydro can bring into this game from its strong competence base on the Norwegian Continental Shelf. And then a few comments to Shtokman. Last Thursday, the CEOs of Gazprom and StatoilHydro signed a frame agreement relating to the development of Phase 1 of the giant Shtokman Gas and Condensate field in the Barents Sea. StatoilHydro will participate, we'll partner up with Gazprom and Total through an equity share of 24% in the Shtokman Development Company. The first objective would be to establish an acceptable, technical and commercial basis for the final investment decision expected to be made in the second half of 2009. Phase I will consist of an LNG facility and piped gas production of almost 24 bcm per year for a period of 25 years. The total field is estimated to contain some 3700 bcm or 3.7 trillion of natural gas. Both Statoil and Hydro have been working on realizing this project for years and the entering of this agreement is a strong demonstration of the capabilities of the merged company. We are very pleased with being selected as a partner in this giant and arctic project development and also to be able to further develop a long lasting relationship both Gazprom and Total. We expect to be able to utilize our experience both from arctic LNG, gas transportation and general offshore experience in general to design a value creating project for our shareholders at the time of the final investment decision in 2008. Let us now towards the end, take a look at some of the important events to be aware of, in the fourth quarter. We are planning to start, any day now, the production from the Tordis IOR project, which is an important step in our subsea technology development. Njord and Volve will also start up in the fourth quarter together with Marimba, north in Angola which is already producing. Both Snøhvit and Ormen Lange will continue their ramp up of their production and we also plan to complete as already mentioned, the last well at the Kvitebjørn field and start production before year end. The merger was effective on 1st of October. That also means that we will accrue for a committed restructuring cost in the fourth quarter accounts. The main part of this cost provision would be related to the earlier retirement scheme as a consequence of the merger. We will revert with guiding on the size of these cost accruals before the fourth quarter presentation, when necessary and reliable estimates have been established for the cost production. On the 12th of November this year, this month we will issue pro forma set of consolidated accounts for StatoilHydro, that is for the third quarter and for the first three quarters of this year including Hydro oil and gas activity and we will also include a full year guidance on CapEx and production for the combined company in that announcement. On the 9th of January, we will arrange our first Capital Markets Day for the new company, discussing both relevant strategies going forward and also more specific targets for the new company. Then to summarize this third quarter, we have successfully completed the merger between StatoilHydro Oil and Gas according to plans and at the same time, we have been running our operations in both safe and efficient management. Solid financial results; with earnings per share increased by 29% from last year, we have delivered three giant gas projects in the third quarter and each of these are frontier projects in their own ways, highlighting our strong capability. The Kristin field now produces at full capacity from nine completed wells and we have kept on securing growth options in the future for the future growth, both related to the Shtokman opportunities and also through the new acreage added in the Gulf of Mexico. And before I end my presentation just... I would just like to repeat three important dates. The first one is tomorrow on the 30th, you can listen into StatoilHydro's... Norsk Hydro presenting hydro part of the Oil and Gas business, which is now merged. On the 12th of November as already mentioned, we will issue pro forma accounts and on the 9th of January next year we will have our first Capital Markets Day. So, that concludes my presentation. Thank you very much for the attention so far. Question And Answer Lars Troen Sørensen - Senior Vice President, Investor Relations: All right. Ladies and gentlemen, then we will open for questions and just to inform you, listening in from the internet, there is a submit question button on your screen as you want to ask questions to us here in Oslo. Please write in your questions and send it to me here on my PC and I will read them aloud and we will answer the questions from here. With me here in Oslo, if we can get room on the table here, in addition to Eldar Sætre, our CFO we have the Head of Performance Management and Control, Thorgren Reiten [ph] to answer questions. So, while we see, I'm just taking questions from the internet and then leave the questions to you here in Oslo afterwards. So, there's a question from Neil McMahon from Sanford Bernstein and he asks, could you give us any guidance on the dividend and buyback policy through the rest of the year or will we find that out on the 12th of November? Eldar Sætre - Chief Financial Officer: Well, I don't think we will communicate any further information on the dividend and buyback policies to put it that way on the 12th of November. So, I think that's something, you would have to revert to and get to our Capital Markets Day. Basically, there is no change to our dividend policy and we have also demanded from the General Assembly to buyback shares at the same level as we did last year. So, demand is exactly the same as we had last year. So, beyond that there would be no additional information on the 12th of November. Lars Troen Sørensen - Senior Vice President, Investor Relations: Allright. We'll take another question from the internet then. It's from Iain Reid at UBS. Can you explain why international E&P gas prices fell so far in third quarter? Eldar Sætre - Chief Financial Officer: Actually not, I'm not in a position there too. There are two fields that... basically two; northwest fields in the U.K, but its about Shah Deniz and In Salah and I'm not in a position to disclose any specific information on either contractual arrangements there or nor the gas prices realized under any of these contracts. So, all I can do is simply state the fact that the average gas price has been reduced by 44% and they are having an impact of NOK 1.2 billion on the accounts on a quarter-to-quarter basis. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is a question here from Woodford at BNP [ph].

[indiscernible]. A question regarding the eight possible on stock on the possible $800 million that you are going to pay. If you are going to pay that, will that imply that you could book some reserves on Shtokman for instance, the second half of 2009? Eldar Sætre - Chief Financial Officer: Well, when it comes to the potential bonus payment related to the Shtokman, all I can say is that, we haven't paid any bonus. However, if there is a positive investment decision made and we are part of that investment decision in 2009, there would be a bonus, a cash bonus payment to be paid. But I cannot confirm any specific amounts or comment on any specific amount related to that. When it comes to booking a reserve; that is complicated issue I can tell you. And all I can say is that, there is... as it is complicated, there is a lot of elements that goes into that consideration and some of these takes us in a positive contribution, some of it in the opposite and is simply too early for us to conclude on that issue. So, what I would like to add though is that, booking in itself doesn't create any value, that's just a number on a piece of paper. So, it's really the setup, the commercial terms and the value creation that we see, and this is important for us and it should be important for the shareholder, although we recognize that, it is... it has some value in itself to put it that way, to be able to book this. But basically, we are looking at the fundamental value creation potential. Lars Troen Sørensen - Senior Vice President, Investor Relations: Yes as a follow up question from Stan Harbison [ph] at the Hudson River Global Energy. Can you tell us how you can support the possibility of a possible return on investment in Shtokman. Do you have any estimates of cost timing margins? Eldar Sætre - Chief Financial Officer: Well obviously, we have some estimate. But I am not ready to disclose. Obviously, when you enter into a frame agreement like this, I know you do a lot of calculations and assumptions. But at this point, it's far too early to be specific on the cost of estimates for instances, that's something which is really going to be looked out over the next couple of years. So, basically I am not in a position to disclose any specific information. What I could refer to is, on the start updates is that Gazprom has indicated 2013 for the pipe gas as the start-up and 2014 for the energy. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is a number of Shtokman questions here. We will take a couple of them from James Hubbard at Deutsche Bank. To be involved in such a large scale project such as Shtokman, would you expect lower returns say, 10% IRR? Eldar Sætre - Chief Financial Officer: Well, I can say is that, we will accept the returns that we find reasonable for a project of this nature and to be specific on any... specific criteria on specific projects that's something I wouldn't sort of discuss about. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay. There is a question from Jason Kenney from ING. Can you give us any further information on the earn-out agreement? Has that impacted the E&P Norway business by positive 1.5 billion in third quarter? Eldar Sætre - Chief Financial Officer: Well these are related to assets sales that were made in the 90s actually and it's not only one agreement. It's a couple of assets transactions that were made at that time and those that made those transactions they were, probably maybe able to look into the future. So, clauses that were included in those contracts, it was related to actually higher levels of future oil prices, which I don't think anybody expected at that time. But now, they are coming into money in a way and that's what it simply adds to the revenues from the assets sales of that type. So, it's not only one contract, there are couple of contracts and it goes back to the 90s actually. And this is the sort of future value, as we look into the forward prices or the assumed prices into the future and changes in those assumptions on the total of these contrasts, so I think accumulated they have a positive value of approximately NOK 7 billion for the time being. Lars Troen Sørensen - Senior Vice President, Investor Relations: I think we actually left the Shtokman questions, but there is one, I think we need to take because probably there are some misunderstandings out here. One question is from Neil McMahon of Sanford Bernstein. He says you mentioned how entry into Shtokman could be a catalyst for additional joint activity with Gazprom offshore Russia. Are there any discoveries which interest you in the region i.e., of the two discoveries shown on slide 13 discoveries you would like to be involved in? And there is nothing, I mean Shtokman, our participation in Shotkman has nothing to do with the discoveries shown on that slide. It's just to show where Shotkman is positioned. So, I mean people shouldn't misunderstand, but that's not connected with those two discoveries at all. So, just let it say, it's a matter of indication where Shotkman is placed, there is nothing else indicated in those two fields. Then we will follow up with a question from Iain Reid at UBS. International E&P, OpEx and general and admin cost rose by 15% year-on-year in dollar terms in Q3. Is this likely to be the ongoing run rate? Eldar Sætre - Chief Financial Officer: Well on the international side, I think what the main driver... there are two... basically two drivers; one is, what you see all over the place in the whole industry, there is a cost pressure and the cost inflation going on which obviously also hits the U.S. dollar as such and we see that also on our international projects. The second one is simply that we have more fields coming into production. So the portfolio of fields like the Shah Deniz, ACG is growing. In Amenas has come into production since last year and so on and it simply a bigger portfolio fields adding to the production cost. And that is going to continue going forward, as we will continue to see a growing production from the international portfolio, but this specific on 15%, or other numbers that I am not ready to do that at the moment. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is a question from the Colin Smith at Dresdner. Please provide guidance on [indiscernible] status. Please confirm Kristin production level, now is at plateau? And when in the quarter the plateau was reached? Eldar Sætre - Chief Financial Officer: Well, yes -- Lars Troen Sørensen - Senior Vice President, Investor Relations: Well there is a similar question from Michele Della Vigna at Goldman Sachs. Eldar Sætre - Chief Financial Officer: Yes, it's as I said we have 9 wells and none of them are held back in anyway because of pressure issue in the reservoir, so all of these wells are producing at full capacity. There are still some additional capacity on the platform, not very much though. So we are very close to the full capacity now. There are still three more wells to be completed of the total number of wells is... that is planned on the Kristin is 12 wells. We will not see the last well until going into 2008 were being completed, that's the toughest. But we are very close to that full capacity of the platform and all wells are now producing at full capacity. Lars Troen Sørensen - Senior Vice President, Investor Relations: Then there is a question from James Habbard. Sorry, there's is a question from Huw Williams at Bear Stearns. Could you comment on the potential impact on economic sort of opposed to North American Oil Sands Corporation project of the proposed revisions to Alberta royalties? Eldar Sætre - Chief Financial Officer: Well, we have observed that there have been... this proposal have been made and there has been made some political decision also in terms of going forward with these proposals, which is basically increased royalty and also corporate tax based on the sliding scale starting from US$55 and or Canadian dollar and moving... U.S. dollar, excuse me, and increasing as the oil prices is increasing. We also recognize that there are some specifics that needs to be outlined and further elaborated on in these proposals before it is effective. What I can say is that when we did the acquisition, we obviously realized that there was some uncertainty and risk related to tax system and assertion, and that's something that we have taken into account and all I can say now is that we will have to simply take these adjustments also into account when we make our future decisions on further developments. So that is what I can say, that obviously any tax increase has a negative impact, but I cannot be specific on quantitative terms. Lars Troen Sørensen - Senior Vice President, Investor Relations: Yes.

[inaudible] securities. When you emphasized, it might be discussed, cash flow in 2009. Can you exclude and that you will be willing to discuss ownership in Snøhvit or Ormen Lange or is that not something that you would like to comment on that might be part of the negotiations? Eldar Sætre - Chief Financial Officer: This is a cash flow... Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay we'll take another question from the internet, James Hubbard again from Deutsche. Why do you think that the Norwegian government didn't want to give you the go ahead for the further relevant of the Troll field? Eldar Sætre - Chief Financial Officer: Basically, I'd tempt that you should ask them, its... and that's probably the way we are approaching it. But what they have stated is basically these are related to concerns on risk... resurf or resource management as such and that the development of the further development of the oil... of the gas, excuse me, would lead to lower potential on the oil side and so that's what they have stated as reason and I have no reasons to believe that there are any other elements included in their conclusion. What I can say is that we have obviously made these kind of evaluations ourselves and we believe that the propositions that we have been working on, on the expansion, we took reasonably care of resource evaluations and considerations as well. So that then we came up with a different conclusion, but all I can say, we have to respect the conclusion made by the government. Lars Troen Sørensen - Senior Vice President, Investor Relations: Anne? Anne Gjøen - Kaupthing: Anne Gjøen, Kapustin. I have a follow-up question on that Eastern Government decision related to the new pressure tests that they have done of the area? Eldar Sætre - Chief Financial Officer: Again, I have no reason to believe that's what we are basing our information on different studies, I think we have access to the same piece of information, so I believe that we have to do with the different ways of looking at it. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is a question from the internet, let's just say that Isfeldt Gudmund is coming on from, one from Jason Kenney and from Theepan at Morgan Stanley. Basically could you give us any further information on the loss in the trading and supply part of the M&M division? Eldar Sætre - Chief Financial Officer: Well as I said this... there is a lot of elements going into this, some of them are related to actual underlying performance on a quarter-to-quarter basis and some are more accounting effects from FIFO principles, from hedging activities that we do on some oil inventories and then there are currency effects. And what happened in this quarter, specifically was that due to the strengthening of the Norwegian kroner, we saw a 700 million negative development in the value of the inventories and that immediately has to be taken into the accounts through the profit and loss statement. Last quarter, same quarter last year we actually had an opposite development of something like 150 million, so between 800 million and 900 million is the change between the two quarters in terms of currency effect on inventories. In addition to that, we had... we always see variances on our actually underlying performance on our trading activities and this quarter, it was slightly lower compared to what we saw in the same quarter last year. So it's the currency effect and also slightly lower performance on the underlying trading activities.

Bjorn [indiscernible], you got a positive impact from financial items, in which range do you expect the tax to be in the fourth quarter and then 2008. Eldar Sætre - Chief Financial Officer: Well, I think you want me to guide on tax effect on financial items, that's the science I wouldn't dare to go into really. But, maybe you are talking about comment on this issue. Lars Troen Sørensen - Senior Vice President, Investor Relations: I am sure, I can. I think the tax rate on the financials is --

On the overall. Eldar Sætre - Chief Financial Officer: On the overall. Lars Troen Sørensen - Senior Vice President, Investor Relations: On the overall. Eldar Sætre - Chief Financial Officer: Yes. I think in general terms, I mean what we have said is that in our international business, we will increase in share over time. And as you will expect somewhat decline in the quarter, of tax rates. Now that is going to take a long time. And the number that we see currently for this quarter is on the lower side on what is there normal tax rate as such, and then, there will be distortions quarter-to-quarter and we will see quite a large fluctuations in the corporate taxes due to currency effects and due to financials as such. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay. There's another question from Bjorn [ph] from Oslo.

You previously stated that your strategy is to keep the Norwegian production flat and you growth will come from international activities. Given that the gas at the Statfjord project did not get through. Do you still believe that's possible to keep Norwegian production flat through 2015 and what about your plans in Norwegian Sea, how will they be affected by this? Eldar Sætre - Chief Financial Officer: I think when it comes to any new statements now on the potential for the Norwegian Continental Shelf, I think that's something we would have to come back to, because now we are really... we have to be allowed to spend some time to put together our portfolios and see how that's going to look and also the potential that you are asking for on the Norwegian Continental Shelf. But obviously, I mean what happened on the Troll and the expansion of the network... gas network that has pointed not in a positive direction. On the other hand, we are not sort of digging ourselves into a hole. So what we have to do now, given that assumption is we really have to look at sort of the alternatives and what other ways of sort of getting gas out from the Norwegian Continental Shelf wherever it might be located.

What kind of ownership stake where you prepared to take in the pipeline, I understand they are referring of course to the pipeline running from the Norwegian Sea to Troll? Eldar Sætre - Chief Financial Officer: You know if I had that percentage, I am not sure I would disclose it, but actually don't have it, so I am not quite sure actually that the discussion we come to that conclusion of that at all. At this stage, we decided to terminate the plans. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay there's a follow-up question, then just go ahead.

There is actually just another question that is, I mean you are guiding here that you will meet the lower end of your production forecast of 1150. Just how confident are you about that given the high number of startup fields that we see here, we have an increased oil recovery projects and so on? Eldar Sætre - Chief Financial Officer: Okay, that's a good question. But I can assure you we are thinking about it almost everyday, how certain are you about the production forecast. There is obviously uncertainties in the numbers, still although it's only 2 months left, but because of the reason that you mentioned, we have the ramp up on the Langeled. We have the ramp up of Snøhvit and that means there is still a lot of risk involved in the numbers. We haven't been come back in production on the Kvitebjørn. That is we have... the first well has been turn out positive. The second one we are getting close to reservoir now that could be surprises, so there is always that kind of issues and in addition I would like to highlight the gas side. And as usual, we would have to expect sort of normal behavior in the market on the gas side. Lars Troen Sørensen - Senior Vice President, Investor Relations: Yes, there is a question from Mark from Oslo. Go ahead.

[indiscernible]A quick question on the EBIT, sorry, on the international part of the gas production. We saw a very low gas price, as you mentioned. Should we expect that going forward? Is there a reason for this short news that the prices are very much lower than other gas prices in other regions? Eldar Sætre - Chief Financial Officer: I think I answered that more or less that question that I am not in a position to go into specifics, because I mean there are two contracts. And I cannot, if I start to talk about average, we are very close to a resolution, there are reasons in various contract, I am not in a position to talk about the commercial arrangements on this contract. So I think I have to give you the same answer really. Lars Troen Sørensen - Senior Vice President, Investor Relations: There are a couple of questions from the internet on the Snøhvit and the ramp up there are. I mean both ENV to Theepan from Morgan Stanley Jason Kenney, Colin Smith and so on ask about when did they start up production? When will plateau be reached on both fields? And how much today should produce? And third caller is, on how much will they produce in fourth quarter? Do you have any guidance on that? Eldar Sætre - Chief Financial Officer: It's very difficult to give an exact number on this. What we have said on the Snøhvit that we are gradually stabilizing and increasing the production and normally, we will see irregularities in the production going forward into next year at least into the first quarter of next year. But we have defined what we call commercial deliveries and we expect to have commercial deliveries that is reasonably stable full capacity deliveries on the Snøhvit from 1st of December. But we also expect irregularities on and issues that could arise, since we are still in very early days in the running period of such a big complicated facility. On the Ormen Lange, I haven't got any... I mean we are gradually building for the capacity and that's going to go on beyond this year as well. So, but the specific dates for sort of the well program and profile on the build up, I haven't got that specific information for you today. Lars Troen Sørensen - Senior Vice President, Investor Relations: Another question from John Olaisen from Kar [ph]

It's John Olaisen from Kar [ph]. Regarding the production cost per barrel, that's up from NOK 26.6 per barrel to NOK 31.5. Can you go into how much of that is cost inflation and how much is tax that you are facing in new fields? Eldar Sætre - Chief Financial Officer: I say 10% to 20% of that is cost inflation. The rest of that and some is related to actually that we have operational cost on Kvitebjørn, but there are no barrels. So that is accounting for 10% to 20% that kind of events, and then the rest is simply in the activity levels. We have seen... we have to address maintenance activities at a higher level and also some well activities to tight the decline that we see. So that's part of the explanation and then also we are on some other fields that we are ramping up production on like on the Ormen Lange, Snøhvit and so on we have a full cost of running these fields, but we haven't got the full barrels yet. So its simply preparations for production and early production phases that is also impacting this. So there is various reasons going into... but specifically on the cost inflation as such I would estimate that to be between 10% and 20%.

From what you are saying I would gather that, is it likelier that the production cost per barrel will be sort of coming somewhat down again or is this levels we could anticipate going forward? Eldar Sætre - Chief Financial Officer: I think what I kind of referred to now is simply what we have said. That's rather vague, but we expect definitely to see a cost level of above 30 Norwegian kroner per barrel for the full year. And, but there are sort of certainly forces, which is sort of putting pressure on the cost developments. As I mentioned about sort of maturing and older field that we need to take care of, to fight the decline, we need to sort of be willing to spend sort of the necessary money to create value on our fields and so on. And there is the cost inflation, and the industry, and there is also increasingly fields with which is production more and more water and a lot of liquids but it is not that much oil that it used to be so. But operating these fields at the same cost as irrespective of what would be produced. So there are forces, which is sort of pushing the cost, but then on the other hand, we have to continuously fight this, and work on cost improvements and so on, and the merger in itself would be one of the tools that we will use to fight the cost development. So where this balance is taking us, I don't know, but there is definitely a cost pressure also on the operating cost.

I wonder also on the Alberta Oil Sands, the oil in Kristen before. But to what extent, did you foresee that the tax rate were going to increase as much as it did and now it's also gone back half a year since you entered into the agreement. Have you sort of come any further, or what sort of progress and when we can sort of get some more signals from you to sort of what extent we are going to invest and explore and develop that license? Eldar Sætre - Chief Financial Officer: Well, on the... as I had touched a little bit on the tax changes. Tax risk is something that we account for and we are able to look little bit into the future because of that, and to some extent address that risk. In this case, it is not affecting sort of the breakeven levels of these developments because sort of they don't hit us until they have reached US$45 to US$55 per barrel of WTI. So but it is something as again as I said that has a negative impact on the higher level of earnings here. But when it comes to the news here, the license of the demonstration part that has been approved by the authorities, we still have to go through our internal process of deciding on that. That's going to happen quite soon and then we simply and it's early days and we are still looking, really looking into how to develop this and is far too early actually to be specific on sort of the major developments of this opportunity at this time, beyond what we have said previously, that sort of the first... the first step is likely to come something in the mid of this, of the next century and towards the end of the century at full capacity, that's the best guidance I can give you right now... through the decade, it's a little bit heavy. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is a question form Paul Sbedding [ph]. Could you tell about how talks are going for the marketing of the second phase of the Shah Deniz and which export route do you think will be used? Eldar Sætre - Chief Financial Officer: NO, it's... I don't think I am prepared to sort of talk specifically about the progress. I think there has been progress to put it that way, if that's of some help and when it comes to expert routes, we are still in a situation, where we are looking at several opportunities on that. But one of them is obviously to look through Turkey and into the European market. Lars Troen Sørensen - Senior Vice President, Investor Relations: There are a couple of questions from... both from Neil Morton and from Dan Barcelo at Bank of America. Neal Morton is with MF global. This quarter you had considerable success in the U.S. Gulf of Mexico lease sale. Are you able to provide more detail around the strategy? Eldar Sætre - Chief Financial Officer: This is strategy, what we did was I think like all others to really look deep into... and we were working on this for a long time, where do we see the best opportunities for us and we placed our bids and based on the valuation and also some obviously consideration of where, how the competitive situation would look on each of the specific opportunities. So, quite thorough job, so there isn't general statement on the strategy other than that we have been doing a thorough job and being evaluating each of the opportunities based on the economics and on the competitive situation and we are very happy with the conclusions. Just remind you that, there is still some time before sort of we've all the formalities in place on these leases. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is a follow up question on that from Neil Morton at MF Global. You've got some 100% leases, that you intend to proceed on 100% basis or is it your intention to calm down to your interest in due course? Eldar Sætre - Chief Financial Officer: Again, I cannot give a specific answer on... that's something obviously; we would be willing to firm down and work on some of these opportunities together with partners. That's a part of the strategy, which is quite typical in that part of the region, I guess. That's, there is a lot of sort of transaction and firming is being done following lease rounds like this. So that's policy that we also would like to pursue. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay. There are some question from Kjetil Bakken at FondsFinans. Are you looking the opportunity... at any opportunities in Iraq? How do you view the current situation with regard to legal framework and security situation? Eldar Sætre - Chief Financial Officer: It goes without saying that it is a challenging situation in Iraq. And that's why, we have said for a long time, I think Iraq is, I know... there is a lot of interesting prospectivity in Iraq. And if we look... and I think sort of, what we do, like most other companies here is to look at these opportunities and put that together with how you look at the political situation and the security issues and so on. So, yes, Iraq is something that we are screening quite actively, but still we haven't made any specific moves in that respect. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay. There is a question on rigs and rigs rates, that's from James Hubbard at Deutsche Bank. Based on your heavy involvement in the drilling market this year, are you seeing any sign of rig rate declines starting in any rig segments? Eldar Sætre - Chief Financial Officer: I wouldn't say declines. But we have seen sort of, that's parts of... this has sort of flattened in a way. And then I am talking about sort of more of the conventional rigs. So, we haven't seen sort of the increases that we have seen for the last few years; that has continued. But no decline so far, more stabilization of the situation. That also goes for the more, sort of ultra deepwater and harsh environment type of rigs. Going forward, I think we see a slight... a more tight situation on that type of rigs in general than we do for the more conventional rigs. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay. There's a question from Mark Bloomfield at Citigroup. Can you offer any guidance on expected maintenance in fourth quarter and can you offer any guidance on the split between maintenance on Norwegian Shelf and international in the next 4 months going forward? Eldar Sætre - Chief Financial Officer: I think that it would be very limited maintenance in the fourth quarter. So, I would say approximately 5000 barrels a day as maintenance and 75% of that within the international E&P business. Lars Troen Sørensen - Senior Vice President, Investor Relations: All right. We have a general question from Nick Pope [ph]. What is your decline rate for oil and gas on the NCS? Eldar Sætre - Chief Financial Officer: Well on the gas side, we still haven't seen a lot of decline then these fields tend to be more stable over time. And so when you talk about decline rates, you are more talking about the oil fields. Then I would say that there are two types of decline rates; one is sort of the naturally decline in a way that comes from the reservoirs and then as you know, we have also been struggling and we are not the only ones, we are struggling with having enough capacity to drill sufficient volume of production wells. So, that has added to decline that we have seen over the last couple of years. So, I would say if we sort of able to sort of really drill the planned number and the planned number of production wells that we would like to see, I would say that we typically would see a decline rates in the ration of 4% to 6% on the average on the oil side on the Norwegian Continental Shelf, that's on the mature parts of the Norwegian Continental Shelf. But we have seen slightly higher rates because of the issues that we have had in terms of not succeeding with the drilling programs on the production rates. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay, there is a -- Eldar Sætre - Chief Financial Officer: You might add that is, that is not sort of, that doesn't have an impact on the reservoirs and the reserve for such, that's volume that is still there. But it would take simply more time to sort of recover those volumes. Lars Troen Sørensen - Senior Vice President, Investor Relations: There is question from Mark Bloomfield from Citigroup again on the OpEx and the DD&A were open, I think we already answered that. But going further, can you offer a broader comment on the level of industry cost inflation which you are seeing to the extent, to which you are able to offset this. And there is a similar question from Mark Hume at Credit Suisse. What measures are you taking to mitigate cost inflation and where do you see the pressure point of this cost inflation and what are the results of increases and so on? Eldar Sætre - Chief Financial Officer: Well, there is a general pressure on cost I think, what is really important here is also to be able... to be willing to spend money, spend activities on really relevant activities that sort of can add values to increase production, IRR and so on. I think that is these days as also very important. So to hit the right activities in terms of, what are you actually doing and what are you not doing. Then obviously what is important for us is to take up the full effect of the merger and that's something that we will come back to when we get to the 9th of January. So there is a lot of value capture to be made from the merger and synergies, also from the operational side, that's something that we would go after with full force and that is maybe, for the time being, the most important effort that we can put in place in order to fight the increasing cost. Lars Troen Sørensen - Senior Vice President, Investor Relations: Then we have a couple of questions left from the internet here. We have a question from Dan Baselovet of Bank of America. International production was up strongly year-on-year, but you noted that PSA effects in Angola and U.K. declined partly offset the growth. Are you able to quantify this impact either year-on-year or quarter-to-quarter? Eldar Sætre - Chief Financial Officer: I mean the PSA effects are quite stable for the time being. I mean we have said that we have... based on the guiding on the six development well, development in oil price and then what we see currently so far, year-to-date is a PSA effect of around 3000 to 5000 barrels a day, so far this year as such. So that should be added substitute to the reported production to get to there... get to the 60 barrel equivalents. Furthermore, the rest of the year in PSA effects, we don't expect any new fields to hit any new tranches in the short term, its of course very dependent on the oil price and if you see, extremely high oil prices, things moves faster into the next tranches, so but there will be a few field that enters into new tranches next quarter or the first quarter of 2008. Lars Troen Sørensen - Senior Vice President, Investor Relations: There's a question from Olen [ph] in Oslo.

John Olaisen from Carnegie [ph]. Is it possible to say anything about sort of timing of events regarding Shtokman? What do you sort of anticipate regarding when first gas can be reached? Eldar Sætre - Chief Financial Officer: I think what I can do here is, I simply referred to the Gazprom, they have indicated the first pipe gas from 2013 and LNG from 2014 and I cannot add any, or subtract any to that information which has been provided, that's their estimate for the time being.

And is it possible to get some information of the total cost... total investment costs? Eldar Sætre - Chief Financial Officer: No. So that's something we would have to come back to when we get the first and final investment decision. Lars Troen Sørensen - Senior Vice President, Investor Relations: Okay. We have a couple of detail questions that we'll come back to basically face to face or we will call the single persons there and inform them about. Its public information, so there is nothing new that you won't to have, but it's a very detail things to go into, so we will just leave it at that. And with these words, we just say thank you very much and good bye.