Equinor ASA (OSL:EQNR)

Status Update

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Nov 26, 2019

Thank you very much. Thank you. I could not have done that in English, never mind Norwegian. So on my behalf, welcome from to everybody here today. On behalf of Equinor's Investor Relations department and the team that we've got presenting here. It's always good to have so many of you here both here, but also on the website as well. Just a reminder, so we've got a series of presentations, 5 in all, sort of 15, 20 minutes or so, each one covering various topics. And then we'll break into Q and A. We'll do some Q and A the event here. And also for those watching on the website, if you were to send me any questions that you wish to ask, then I can raise those during that normal Q and A session. So I'd like to welcome all the speakers here today. We'll be kicking off with Erik Varnes, who'll be giving us an update on the macro, always good value, always good to listen to. We're then going to 0 in a little bit more on the NGLs. So we've got Luis Alfredo Ruiz going to talk to us about that market, very important for our liquids production, particularly on the NCS. Then we're going to look at digitalization. We've got a couple of presentations on that one, little bit of an update and then a specific example. So we've got Torbjorn Figuero talking to us about the overall thing. And then, Ben Tedois Toussillon, who's going be talking to us about the IOC, the Integrated Operations Center, which is now up and running. And then finally, before we go into the Q and A, the very delighted to welcome the EVP of the Nest business, Paul Eitrehein, who's going to talk to us particularly about the offshore wind. So with that, I'll ask Erik to step up. Thank you. Thank you for the kind introduction, Peter. Having the privilege of talking about macro and market updates is not always very uplifting, but still we can try. And it's always exciting. There's a lot of uncertainty around us and nobody knows where markets or prices are going. If we pretend we do, don't believe us. We can make scenarios, but predicting anything with any kind of detail is extremely difficult these days, both short and long term. We're facing markets that are characterized by significant uncertainty in a lot of dimensions, which will affect behavior and also strategic decisions with a long term perspective, but also in the short term. And to get our eyes around all of these, the thoughts around all of these uncertainty dimensions is extremely difficult, not only for the energy industry, but I think for the globe as a whole. We're talking about sustainable development. That was the main topic of this morning's conference in the theater nearby. And it's not only one dimension of sustainability, but it's 17, and we have to deliver on all of them, and we have 10 years 2 months to do it. So how will that impact energy markets and energy industries and macroeconomic growth if we try to deliver on this. That's a main uncertainty for all of us. We are in lack of political leadership. It was mentioned in the conference just an hour ago, an hour and a half ago that in the United States, they're not now looking to the President for leadership, so they have to find it elsewhere. That's a significant development, I would say. And to the extent that, that continues, then delivering on sustainability will be extremely difficult. So uncertainty about policy changes, continued polarization. Every time somebody tries to do something with impact, whether it's in climate or another way, you get protests, often characterized by yellow vests. We have countries leaving trade organizations. At the same time, we have a trade war going on between 2 large players that will affect economic growth. It affects risk premiums and it affects investments. And going forward also in terms of what will be the future of work, how will digitalization in micro, as we're going to listen to later, impact macro? When do we start seeing productivity impacts of the digital opportunities? Will we? And how and how will it affect future work as an example. So there are massive uncertainties surrounding also the energy sector and global macroeconomics. And with all that, where is the world going to be in 2025 or 2022 for that matter or not to mention 2,040 and 2,050? So those are some of the things that we struggle with on a daily basis and then I know that many of you are thinking about as well. I'll touch a little bit upon the macroeconomic picture and then I'll go into the macro oil market and the macro gas market as we've seen it so far this year. I guess one aspect of global macroeconomics is that we see indications of increased elevated geopolitical worry, if you like, to the if you have this Economic Policy Uncertainty Index, which measures feelings of uncertainty, it's never been as high as it is now. And you can see some peaks there with the Gulf War, with financial crisis, with the Eurozone crisis in 2011 and then with the combined impact of Brexit and Trump. And now we're at top probably driven by the combined impact of trade wars, Brexit, which never disappears, it seems. Yellow vests, polarization issues, Hong Kong, as one example, trade war, all of that impacting sentiment of uncertainty. And then another I guess we're waiting for something to happen in terms of the United States. We've just passed the record number of months of continued economic expansion. We have 123 months behind us. When is the recession coming is what people are asking. We have very low unemployment, lack of flexibility of that market to continue to grow, if you like. And will recession hit? When? Will it just be a moderate slowdown or will it be more impactful? One key parameter that we're looking at and not being able to predict into any kind of detail. And what will be the impact if the United States were to turn into negative territory? How big will be the impact be on other parts of the global economy, etcetera, etcetera. So elevated economic uncertainty. And we're now seeing also that the Chinese slowdown filters through to manufacturing indices and sentiment indications in the manufacturing sector as well. And on the Chinese side, record low economic growth over the last hasn't been as low over the last 25 to 27 years. And the big question is, will they be able to boost productivity? They have still have muscles there to be able to do something, but will they have an impact? And then the spread to sort of business sentiment on the manufacturing side, which previously probably was even more than it is now because the manufacturing sector is no less important in many economies than it used to be. So the quick question now is to what extent will this reduction in optimism, if you like, on behalf of the manufacturing sectors in different parts of the world spread to the service sector, which in some of these countries now have become much bigger, much more important. But as an example, in the case of the United States, we're talking about a manufacturing sector that is 12%, 15% of GDP. So it's not that big, but it's the issue of how does that how is that reflected in service sector development. Our base case for the short term is that at the global level, we think of a sort of a muddling through type of GDP development, no global recession. I mean, that's extremely rare if that happens anyway. That has basically only happened once over the last at least in the last generation. So our base case is that GDP at the global level will grow on average 2.7 percent on average over the next 3 years, so 2020 to 2022, which is moderate, but still growth. But then, of course, with significant uncertainty on both on the more granular development in different regions, but also certainly around that average level and what that means for things like oil demand, for instance. So then to the oil market highlights so far this year, and there's not much left. I guess this is going to be the highlights for 2019. Fundamentally, a lot of factors that could drive prices up, but then combined with a number of other factors that more than compensate, if you like, and take away at least visible proof of things like geopolitical concerns and unrest. A lot of these factors are driven or affected or impacted by developments in the United States, even though they take place or they're visible elsewhere. Of course, the continued record growth of shale oil has a dampening impact on oil markets. And if people believe that that's going to continue for a long period or that the flexibility is enormous, then you should have a dampening impact of anything else in the price in the oil price. That is partly, but only partly balanced by the OPEC plus holding back production. Then the United States, on the one hand, providing this massive bearish element in the oil market helps on the other side by tightening sanctions against Venezuela, against Iran. We have Venezuelan production now, which is almost 2,000,000 barrels per day lower than what it was at peak. The Iranian supply is 1,500,000 barrels lower than it was early 2018. And of course, that contributes to tightening the market. And then we have the underlying geopolitical tensions in the key producing regions of the world, the Middle East, visibly by the terrorist attack in September, having a fantastic impact on the price for about 12 hours, where after the market came back to what it was just before. And where we probably haven't seen all of the consequences quite yet, but at least what it serves to show is that the market fundamentally believes it's very well supplied and that it could handle the largest disruption in supply ever with such a little impact on price. And then, of course, the main reason why low spare capacity, high demand still growing by slightly less than 1,000,000 barrels per day. Why you can handle those types of events then with that low impact is, of course, the underlying fear that the economic growth will slow down and thereby affect demand negatively. So that's been a massive bearish element in the market over this year. And so sort of the normal visibility of geopolitical premiums that we should see here are not there. And the reason is, of course, the sentiment in terms of slowing demand growth driven by trade war, and then we'll see how that works going forward. So then going into next year, the conclusion our conclusion is that on the supply side, which is the columns to the left there, going into next year, we have continued growth in supply, not only from shale oil, which will grow but slower, we think. And we see some indications now on the rig counts, etcetera, etcetera, that could indicate that, that growth could slow down. But we will see growth in Norway, the fantastic ramp up of Johan Sverdrup being the most visible example of that. We'll see growth in Brazil. And as a consequence, there's a risk of oversupply if you look at it over the whole year as a whole, where demand growth still will be there, but moderately so slightly higher, we think, than this year. But with continued OPEC policies in terms of not affecting supply growth negatively or positively from the OPEC to any scale, supply growth will be higher than demand growth on average next year. And then a gradual rebalancing, if you like, or a better balancing of the market going forward. And this is reflected, of course, in what the markets now see in terms of an indicator or some prices with the backwardation and indicating that the market agrees with us. This is a well supplied market for the next couple of years. So and then over the medium to long term, our belief is that there will be movements going both ways, but gradually over the medium and long term. The factors that are bullish will pull the market somewhat up gradually, more than what we've seen over last year. Last year, here we have the different variables that have different impacts on the prices. So the shale oil growth, is then driving prices down is one element. We have slower growth in demand, pulling prices down. We have the OPEC rebalancing contributing to a higher price. And of course, the underlying geopolitical situation should have been more visible. And then if you look going forward, we think that OPEC will have much more of a balancing effect. Gradually. Over the long term, the shale oil development will also not contribute to lower prices, but still would be part of a balancing picture and slightly further into the future in terms of a year or 2 from now, we'll have also demand contributing to a pickup. And relevant with the long term is also, of course, the view on what are the marginal supply costs going to be. That doesn't matter over the next 2, 3 years. But when we get into the longer period, then we have to look at where the supply curve is going and that's also something that should moderately help on the oil price side. And then on to the gas highlights for this year, which is a little bit of or much of the same story in a sense. And then you just replace the shale oil with LNG as a variable. And then you have the same story. Massive growth in supply of LNG. We come to the end of a 5 year period of capacity additions, which is visible in the market. Australia has now passed Qatar as the largest supplier of LNG globally. And these numbers you can see there is the change in the relevant variable year on year from October 2018 to October 2019. So we've had a growth in capacity of 12%. LNG imports to Asia only growing 3%, which is then the main reason why most of that LNG growth ended up in Europe and Europe is then sort of sitting in the middle between exports out of the United States and an Asian market that grew less than many people had thought, partly because of the weather during the summer and also the general low demand growth caused by the trade tensions. And finally, also some nuclear capacity coming in again into the power markets. And as a consequence then, of course, you have a massive growth, relatively speaking, a massive growth in LNG imports to Europe, even though LNG is not that big a part of the European demand picture. But you can see how much that grew, 77%. And in a situation where the overall demand for gas only grew 3%, that has had a bearish impact and then a pull down on the gas price also in Europe. We've had a record year on new FIDs as well on the LNG side. I guess, Qatar is one of the countries that want to take back its position as the biggest LNG exporter. That will not impact the market yet. That will come into play several years down the road and will be necessary to deliver on the growth the underlying growth in gas demand when you look in the period 2020 3 and onwards, basically. So because we are now at the end of we gradually see that the new capacity of LNG will continue to be significant next year. But then in 2021 and going further, we will not see that type of growth. But then the current or the recent FIDs will then come back into play in 2023, 2025. One difference between oil and gas or I should say crude and gas is that the regional markets are still an important characteristics of global gas. So the regional balances are important to take into account and which are also sort of a key indicator for the demand for LNG exports or imports. On the European side, looking a bit forward, what we forecast is relatively stable demand outlook, growing gas to power demand. Gas has, in fact, now become fashionable again even in Germany. And with the decline in indigenous production, in particular in Groningen, we should have a relatively good development in the import demand, so need for imports into Europe. And then, of course, to what extent that will contribute to the tightening of the market and it depends on the situation in Asia, if you like. In the United States, we see a growing surplus, growing need for exports, partly driven also by associated gas, which combined with shale oil production also meaning that of the fundamentals of the gas market not necessarily is the main important main factor driving the development on gas supply. It's more the development of oil resources that also at the margin delivers more or less gas. And fundamentally then in Asia, what we see is a growing supply gap. It's a region which doesn't have enough indigenous gas, which will have to increasingly have to import gas. And part of that is going to be pipe gas, but a lot of it will be LNG when you look a little bit further into the future. And this is the same story as the IEA just gave you even for the very long term in this morning's conference and in the world energy outlook is mass long term massive growth in LNG demand in Asia even if the world were to turn towards delivering on climate targets. So and then there's sort of the same short and the medium and longer term picture for what other how do we expect these different drivers to affect the European prices. This is the for the drivers for the European markets. And you can see it in the summary of 2019 with the with the LNG supply contributing to lower prices, LNG demand, good gas demand being relatively neutral, we think. Falling domestic production contributes to higher prices. Pipeline imports from Russia and Norway contribute to lower prices were well supplied there, etcetera, etcetera. That's how it has looked for the short term. If you go into the longest part of this time horizon, we have, again, slightly more bullish factors driving the price up than what we've seen lately. So an improving balance over the medium term is what we expect. You can see also what the market said, I guess, just before the weekend in terms of gas price development, things like storage levels, expectations for the Russia Ukraine issue in terms of transport at the end of the year is or beginning of next year is an important factor affecting the very short term prices. Expectations for development of French nuclear electricity is another element that can rapidly shift these short term price curves up or down in Europe. And since I'm not a meteorologist, I cannot tell you what the weather is going to be. But if people believe in a mild or a normal or an extremely cold winter in Europe in February, March, it's going to impact the price forecast. So with all that uncertainty and bullish and various factors, I guess I'll just give the word to Louis on NGLs. Thank you. Good afternoon, everyone. Thank you for having me. You hear that also those streaming. We'll give you an overview on NGLs or natural gas liquids. And I will start with a brief introduction of what it is and our position as a company, following by the market overview. So natural gas liquids, this is a mixed bag. This is not one single product. And the most important products you have in this bag are ethane, propane, butane and natural gasoline. They have different purposes. They go to different markets. Sometimes they compete as a face in the same market. So those pose several dynamics or interesting dynamics in terms of prices when you consider them. 50% of this demand comes from a mix of propane and butane also called LPG. And it's important to notice that you cannot really control any of them in the mix and they are by product. So the balance happens on the demand side. In our portfolio, 51% of the total equity volumes are liquids. That means crude, condensate and NGLs, and 17% of our share is NGLs. We have a very robust portfolio in terms of chipping and trading. We have over 800 voyages per year and we trade around 7.9% of LPG of waterborne LPG. That means also that we trade around 8,000,000 tons a year of LPG and 1,000,000 tons a year of Itein. The shipping portfolio is above around 20 or above 20 time charter vessels and that allows us to have this global reach. When it comes to the market overview, the first one I want to show you is how the mix of overall mix of crude is nowadays. The mix is becoming lighter and lighter and that goes a bit with the comments from earlier before in production of shale oil has contributed a lot to this. And the oil doesn't come alone. It comes with a lot of NGLs on it. And as you can see here, in the period of 2018 to 2023, we have a much lighter mix and higher shares of NGLs coming. This picture will change a bit afterwards as the additions of oil will be medium and heavier And in some areas, you will have the depletion of a production and the picture will change a bit after 2026, 2027. But for the coming years, what we have is really a lot of NGL coming our way, essentially from the U. S. So LPG, supply roll, is mainly driven for oil and gas production. So when we come to where it comes from the sector, it comes mostly from processing oil and gas. That is linked to the comment also on the shale oil. As more you get there, more NGLs you get. But also come from the refineries. So from those places where you have refining hubs like the Middle East and Asia, you will also have a supply of NGLs. When it comes to location, you can see on the right, is mostly coming from North America that is processing the oil and gas. And then you have Asia and Middle East. As I mentioned, refining hubs, that supply comes from the refiners. And this is also where I put the first slide. If you see how light the mix becomes in terms of oil and the mix goes to the refineries, you also increase the share of NGLs coming from refining. When it comes to the demand, this really the picture on the left, this really shows what I said before. More than 50% of the demand is residential consumption. As you can imagine that is very much linked to development in the countries and policies. If you want to displace biomass or so called wood or kerosene and you support that, you increase demand. And that will come essentially from developing countries from petrochemicals, industrial or also for fuel transportation. When it comes to petrochemical, that part of the demand is also linked to macroeconomics. As better the world goes, more demand for plastics or other elements on the petrochemical sector you will have. If you see on the right, really compared to other indicators, the growth of LPG is impossible in terms of the demand, in terms of when it comes to consumption on the residential sector and also for petrochemical. This shows a bit how the chips are nowadays and that picture can flip very, very fast. It's very lean to the trade war, it's very lean to where the demand come from, it's very lean for the supply. So if you see North America, Middle East, they are the net exporters. And the flows will go that way to South East Asia or Far East and even to Latin America. Africa is a very special place because you will have kind of a balancing situation, but it has a lot of demand to a lot of potential, sorry, to increase demand. But the demand in Africa is really scattered around and there is no policy there is no harmonized policy for replacement of biomass in the region. So that is an area I would say that to pay attention in the future, because some of the demand will come from that region. And at the moment, with the conditions we have between U. S. And China, majority of the North American volumes are going to Japan, South Korea or Taiwan, instead of going to China. And China is replacing those volumes with material coming from the Middle East and even Australia. So as you can imagine, if there is an agreement eventually there, these can flip freely the trade flows. When it comes to prices, if we go far to the left, that was a world in which everything was probably a bit more quiet and less volatile. And you see a better relationship across commodities. You see a better relationship between gas and oil and also ethane and propane. That is early 2000s. If you are in the middle of the graph, as we enter into a more volatile world, you start to see that at times these commodities decoupled from oil. And as if you go further to the right, you see that the oversupply of the LGL has really pushed prices down. What I mean here is that not necessarily the commodities are decoupling from oil, but that is a situation that we might experience over time. As we go into 2020, that situation will roll. We will see lower prices from the NGLs, especially after debottlenecks on the Permian Basin in the U. S. And also some debottleneck on the infrastructure that will allow the U. S. To put LPG to the order. So that situation will roll a bit into 2020, 2021 and will change a bit afterwards. So the future of the LPG market really is how you bridge that demand in Asia and try to connect with the volumes coming from the U. S. If you see the key points to us, of course, we have the U. S.-China trade war. The way that develops will really impact the flows around. Then we you also have recent supply from the Middle East. If something happens in the Middle East, you are affecting 1 of the other course of supply. And that is the supply now going into China essentially. You can also talk about global economy slowdown and that will impact directly the demand of LPG for both residential and also for the petrochemical. That is why this demand is also linked what I call to the macro indicators, because that is really what at the end of the day poor demands on the petrochemical side. And of course, how good our countries or governments into pushing these policies to replacing biomass. This is a big issue in India or in China, and we are trying to replace wood that is for cooking by using LPG. How effective, how successful the policies are will affect also demand. On our side, the Equinor response, of course, what we are aiming to have is a flexible supply. So we have reach, global reach. So we are present in several markets and we are in a very robust portfolio. And we are trying to develop a lot of flexible outlets, not only in the region, even though Norway, Europe is our hub, but we are also developing in Latin America, Met and Southeast Asia. And of course, we maintain our competitive advantage in the Northwest Europe as a reliable supplier and our position and market share on ethane. This is what I have for you. On a remark, I will have to have a comment about what happened on Saudi Arabia and that Eric also mentioned it. In the aftermath of the attack, we were very focused on oil essentially. And given the scale of the attack and the plants that were affected by that, really the response of LPG market was strong. And that was because LPG balances are thinner than for oil. There are not the same storages. And also we had lack of news about that. So the price response on the LPG was very news as well. But we have focused really on oil instead of the LPG part. And that is a common aside because such events sometimes divert our attention. On the package, you will have a list of the quotes that we are using. This is just for your information. And these are all the relevant quotes we use for the pricing of NGLs. Thank you. Okay. So then we move from the market in the market to the work we are doing within digital in Equinor. So now it's around 2 years ago since Equinor launched our company wide digital roadmap. And since then, we have set our ambitions. We have made some early technology strategic choices. We have recruited new competence to Equinor and also formed new partnership with external companies. And we take a business approach to everything we're doing in digital. And you will see that a bit later from Bant to Solan ensuring that the business for us have a strong ownership to all the initiatives we are running. So what you're asking ourselves, what parts of our value chain can we improve or transform by using some kind of digital technology. And we are seeing that our several areas that we can improve and the most important is within safety. We use our data over soon 50 years of experience to make even better risk better efficient. And how can we use automation to move human exposure into operating? Further, we have set target to reduce the development cost, overall cost base of the company, but we see even higher potential from increasing the value side. That means, HOKA increased production, increased the probability of commercial discoveries and increase the recovery rates of our reservoirs. And finally, we see that by using both data and automation, we can both contribute to taking down the carbon footprint of existing asset as well as supporting Paul that will speak shortly with renewables agenda. To succeed with offshore wind, best within data and data analytics. So we have communicated a set of targets to achieve this. We believe we can increase the value creation from existing fields by $2,000,000,000 in the period between 2020 to 2025, Equinor share pretax. Further, we have set a target to further take down the drilling cost by 15% on top of the improvement we saw in the company from 2013 to 2017 under the STEP program. And then we are now working on the early concepts or fields of the future. We have a vision to reduce the future CapEx by 30% and OpEx by 50%. We have started on this journey with Fallmeron that is now have the control room in Varian with Uesebar Westfanken that is now operated from Usobergen field center and don't have a heliport or a toilet offshore and then you can really take down the site. And to achieve this, we both need to use and work on the change management of those people and on the data. And we see that data is going to be key to innovation in our industry in the coming years. To succeed reducing our data in new ways, we need to disconnect data from current legacy application, which we have more than 3,000 of within Equinor. So 2 years ago, we decided to establish a cloud based data platform that is called Omnia. And over time, we will expose more and more of our data into Omnia and build all of our new solution on top of this data platform. This is a strategic partnership we're having together with Microsoft, but we also use open source technology and other vendors to build this, but this is our architectural concept. And Omnia is key both to ensure that data is shared across within Equinor, across application, but also across organizational boundaries, but also in the way we work with the external ecosystem. So we're using something we call APIs to connect with external vault and we're already now sharing data both with service companies within drilling and well subsurface and increasing this also with equipment companies related to integrated operation center that Per will talk more about. And Equinor has also fronted a few industry initiatives to agree on common standards for how to build the data structure into the cloud. One of those is something called open subsurface data universe that Equinor was part of from the beginning and all the big IOCs and service companies are taking part of those efforts. Then we ensure that we are not creating something in Equinor that is not talking with other IOCs or other supplier companies. We believe open subsurface data universe can really change how we work within our industry. So let me then give a few examples of what we are working on for the last couple of years and the solution built on top of this data platform. 1 of the big areas we have looked into is what we call Operation center. And that will deep dive into the one that we have set up for Norway. A similar center was established in the U. S. A couple of years ago, run out of Austin. So today, we are streaming data from over 1200 onshore wells through Omnia, and then we can use data analytics in new ways. And similarly, within our GE operations, we have set up a center in Bergen and tasks that previously were carried offshore are now done offshore in that center. Some examples of what we're working in, letting people work in new ways and then using data to make better decision. And then within the operation maintenance and project area, we'll be working on a concept that we call digital field orchard. And here we have made a decision to upgrade many of our offshore assets both in Norway internationally. So until now we haven't had sufficient connectivity at many of our brownfield assets, but that is not what we are investing in. So we either get 4 gs or Wi Fi offshore. And then we are providing our operators with our tablets, tablet out in the field and a set of application that is have been developed so far. And then the future will bring us the same as we use our iPhones today. The operators will have more and more application that they can use to have a more safe and efficient workday offshore. So this is something that already have been tested and now broadly implemented in Equinor. And one of the application we have developed is called echo, our digital twin. It's already been implemented at Johan Sverdrup, Kasper, Mariner, Oster Hansteen and Hammerfest LNG. And in Eco, we are taking the 3 d model that was not easily accessible before and make it easily accessible so we can have it on the phone, on a tablet and so forth. And then they use this Omnia platform to find all relevant facility data, asset data, drawings, P and IDs, real time data and make it available in the 3 d model. So now the operator engineers can navigate around on the installation and find all the information and update information as needed. And finally, we're also broadly scaling something we call the operational planning tool. This is being used by our operational team when they plan the activities. Previously, they used between 7 10 application to do the 2 weeks plan, 4 weeks plan, 3 months plan. And everybody in the room had a different opinion and view on the operation that we're going to do. No data from this system is integrated through Omnia into one application and everybody looks at the same data and have the same risk understanding. We're also using something called natural language processing, a cognitive technique. So the machine automatically going into the work order, read what is going to be done and go into all our historical incidents report and recommend the most relevant previous incident to our engineers before they do the work. If it wasn't relevant, they hit this button and the recommendation engine goes down for the next people using it. Very interesting technology. We can use other places in the company as well. And then within the subsurface and drilling well area, we also see huge opportunities. So half of our data volumes in Equinor is subsurface related, reservoir data, seismic data, wells data. Now we're gathering all this data also in Omnia. And so far, we've implemented something we call as subsurface data lake at more than 30 of our installation, both in Norway and internationally. And the subsurface community are already quite data savvy, but when they suddenly can look at this data across assets and across organizational units, this can really change the way they work. And the first product we have built on top of the subsurface data is called our Reservoir Experience platform that you see here. And in our legacy system, it took almost 20 minutes just to load the relevant data that it needed to do a task. This is now done in 2nd on a much broader data set. And approximately half of our subsurface community is already using this solution and week by week is being made available to more of our employees. And within drilling a well, we have communicated that we're going to drill more than 3,000 wells over the next 20 years. And today, based on the current technology, all of these cannot be drilled profitable. So we need to use new technology and digital solution to ensure that these can be drilled commercially. So one of the technology we have been working for many years on is called automatic drilling control. And we have made significant progress on this technology. It was tested in 2017 in the Barents Sea and then we successfully avoided 2 sidetracks, saving around US10 1,000,000 dollars We're going for this pilot in the Barents Sea and the technology is now available on 8 drilling rigs and our mission is to have it implemented of 15 within a year or so. And this is the main technology to take out the target asset of 15 per sub. And this is just the start of some of the projects we are currently scaling and then we have the portfolio we are working on in more prototyping, shaping phase. And so how does all these technology come together? So recently we have both started up Johan Sverdrup and Marinar. Both have branded themselves as digital flagship and digital frontrunners, but that is without reason. So Johan Sverdrup was a pilot both using that. This is the ecosystem I talked about. They use the field worker concept and several others. And by using these tools to work in new ways, they were able to start the operation 1 month earlier compared to plan. 7 Magnaire have used several of the same technologies and have more than 30 first use technology when they started off. And Valladenhart is also connected to the integrated operation center that Bernd will soon talk about. So to conclude my presentation, what does it take to succeed with the digital transformation of Equinor? And then I'm back to the beginning. This needs to be driven and owned by the business and we need to have those knowing the operation subject matter experts engage from day 1. And we need to engage the whole Equinor workforce into this journey. So we have launched a digital academy and have run more than 50,000 training sessions so far as example. And then finally, while we have many smart people in our company, most of the best ideas will come from the outside. That's also why we are working with new partners and we're using Omnia solution to think in new ways how we're going to collaborate with external ecosystem. So then I will give the word to Bernd that will give a detail in the integrated operation center being one of the key initiatives we are running. So my name is Bernd Islan. As Torbjorn also said, I'm Head of Equinor's new integrated operations center. We call it, for short, IOC, of course, not to be confused with an international oil company. So actually, you see a picture here from our monitoring center in Bergen. That is really from our center, so it's not a picture we have stolen from anybody else. It's definitely a great pleasure for me to be here today to present on behalf of Equinor how we do use the Industrial Internet of Things in IOC to deliver even better with respect to safe and efficient operations, lower emissions and higher cash flow. As you know, we in Equinor covers all traditional areas within oil and gas as well as new energy solutions. We operate offshore platforms worldwide, most of them still on the Norwegian continental shelf. We are technical service providers for several gas receiving plants in Norway, and these are all customers for the integrated operation center. We support many of them with concrete services that I will come back to shortly, and we have a rollout plan so that we can onboard all of them. We also have a smaller integrated operation center for shale oil and gas. That is not part of my presentation here today. So our CEO, Eldar Sietre, was very clear, I think, to the Capital Market Update in London in February 2018 that the IOC will help within the following ambition. First of all, we will utilize data and digital tools to reduce safety risk and carbon footprint from our operations. Secondly, increased value creation by US2 $1,000,000,000 Equinor share pretax in the period from 2020 to 2025. I will say that we are actually already generating value through IOC, and I will talk a little bit more about that later. The IOC vision is forward looking operations through better decision support and tools. In concrete terms, we can actually visualize this by what you see on the slide behind me. Point 1 on the slide addresses regularity on the producing facilities, both offshore and onshore. We, in IOC, helped the facilities to avoid unplanned shutdown of important equipment through online monitoring and by early finding degradation that can lead to unplanned downtime, and hence, we are able to deliver more of our products to the market every day. Points 23 on the slide indicates how we stream data actively from wells and processing equipment at our facilities, both offshore and also coming onshore into our new digital solutions. We consolidate and visualize live data in order to get new insight. We monitor this data daily, focusing on proactive support to the producing facilities so that they can produce at maximum production potential as well as increasing production further through analysis and adjustment of production bottlenecks. Finally, 0.4 on this slide points to how we support the producing facilities in minimizing energy consumption and flaring of gas and thus the carbon footprint from our operations, which also, of course, generates lower cost in terms of lower CO2 tax. So to sum up, the IOC business case is very much connected to higher daily production, but it also helps out with reducing operational cost and increased safety, and I will talk even more about that. So how does it really work? Well, 1st, as Torbjorn also talked about, we actually now stream sensor data not only to on premise services servers, but further to Equinor's new cloud based data platform Omnia. The focus is to really enable data to be a key asset for IOC engineers in our support to the producing facilities. This includes enabling centralized online monitoring, data analysis, machine learning, sharing, visualization and analysis of the data. On Omnia, we combine sensor data from wells and equipment with other needed data to make faster and better decision support to the producing assets from one focal point in Equinor. In IOC, we use awareness visualization that are built by user centric agile teams. And at a glance, my teams can then get a high level overview of their domain and determine the state of the process, learn and share across the producing facilities. Our digital solutions are now being continuously improved through sprints, integrating more data from the value chain, building new visualization and machine learning models to reach clear common targets with respect, again, to improve safety, increase production and lower emissions. Here you see really the principle of the operating model. You see the integrated operation center in the middle. And this slide is also trying to depict how we are organized and the services that we do provide to the producing facilities. We are organized with a multidisciplinary monitoring team composed of personnel from my units for production optimization and predictive maintenance. This team run daily monitoring and is based in Bergen. We also have expert operational support in Stavanger, Stordal and Bergen that actively support the producing facilities and our internal unit for development of new digital tools. Our monitoring and operational support services are delivered by engineers with background in petroleum technology, process engineering, process control and automation, rotating and static mechanical engineers, electrical engineers as well as specialists on field and metering, instrumentations, valves and telecommunication. Since our engineers work on data that is now gathered from the producing facilities into one common cloud based solution, one engineer can follow-up many installations in a fleet overview from our onshore IOC facility. This increases productivity by having less asset specific follow-up. Let me give you just one example. We use now 2 engineers to follow-up rotating equipment across almost 40 assets, including Mariner. In the old days, there could be as much as 1 engineer per asset. Further, our setup gives better cross facility learning, both with respect to production and energy optimization and the follow-up of equipment and generating then more production every day. Even with cloud based digital solutions, the colocation that we have, especially within monitoring in Bergen, is really giving added value because our engineers always have colleagues with different engineering background to discuss issues and problems at the facility that we support. And they do this within one physical room. And thus faster and better support the producing facilities with effective multidisciplinary advice. Then we also have development of new tools. So development of new digital tools is really our software delivery unit. We have 4 so called agile teams. They are typically 8 to 10 people with information technology and subject matter background. They are based in Stavanger and Bergen. Their main task is to liberate data from many data silos that also Torbjorn talked about within each producing facility. They design tools, also in close collaboration with external suppliers so that the monitoring engineers in IOC can have easy access to multidisciplinary contextualized data and be empowered to make faster and better decision support to the producing facilities. We are also using suppliers in building an ecosystem where the suppliers are integrated as a virtual part of the integrated operations. We are today a little bit over 100 people working in the IOC, but it's important to say we have done this without increasing headcount at all in Equinor. So when we started in Opera IC in September last year, we supported 4 offshore platforms with newly developed digital tools for production optimization. We have now scaled to 16 offshore platforms. Actually, we have increased to 17 this week. And we will complete the rollout on the Norwegian Continental Shelf, covering 32 assets by late fall next year. 1st January, we also established our own department for energy and low carbon. We have also for several years been monitoring selected heavy rotating machinery, offshore telecommunication systems and physical metering equipment. But last year, we consolidated these units in to the IOC. We are now supporting all operated offshore producing facilities in Norway with deliveries from this area And I've since IOC started up last September also added on many onshore gas receiving facilities without increasing, again, the number of engineers that we use. For newer facilities, we are also monitoring selected valves, field instrumentation and electrical equipment. The purpose, of course, is to reduce unplanned production losses, and it has really given us the possibility to change predictive maintenance programs from calendar based to a concept where we use online monitoring of equipment condition to decide when to do maintenance. Again, let me give you an example. We have, for one of our newer facilities, reduced the preventive maintenance program with 30%, and thus we can also have less people offshore and reduce cost. We are working closely with our colleagues in the international operated facilities in Brazil and the U. K. And also with the greenfield projects and, of course, new energy solutions that Paul Etheim also will talk about and how we can support them more. Think big, start small, scale fast is often a term that is heard within digitalization. And for us in the IOC, this gives real meaning. We do think that what we work with will change production, operation and maintenance significantly. At the same time, we want to make sure that we deliver real bottom line effects and results. So we needed to start rather small. We are scaling fast in several directions, both with digital tools, the range of equipment we monitor and the number of facilities we support and the international reach of our support. The first machine learning algorithms are already in production, and we are together with partners inside and outside Equinor developing this into all areas. The way we work in IOC is really new, a new way of working. Beside myself and my department leaders, all people are allocated in from different departments in Equinox and from suppliers. And this is covering our make sure that we get learning also out to the other departments when they are rotating. Further, the IOC model allows a wider use of condition based maintenance concepts and on-site monitoring of wells and equipment, especially for newer facilities. And this reduced the need for offshore manning and also cost. New development work continuously together with both subject matter experts to improve our digital tools. And I will say that our multidisciplinary teams generate bottom line value constantly. As mentioned, our target is US2 $1,000,000,000 Equinor share pretax 20 to 25. However, in order to make sure that we can deliver on this, we established internal cash flow KPIs starting already last year. We measure cash flow increase for each case we have been able to deliver fully. And I will give you a short status and some examples on what we are delivering together with the producing facilities. So on the left side, you see the delivery areas that I have already talked about. As mentioned, we have official targets of USD 2,000,000,000 to USD 25,000,000,000 dollars but we have already established the internal targets. What I can say is that we did deliver on our internal target last year, and we have also passed our internal target this year in 2019. I brought with me some concrete examples. The first example is on loss prevention. In this case, a good collaboration between IOC and other Equinor technical expertise and the producing facility in question made us able to use new data in our analysis to solve a problem with efficiency of a gas turbine, driving the gas export compressor at that facility. We got full efficiency up much faster than we normally would have done, and this has a significant value in terms of avoiding production loss. The second example in the middle is from another facility, and it simplifies how continuous data flow and visualization of production constraints makes it possible to proactively put together a task force from IOC, from Operation Technology and from the facility to remove a bottleneck without doing any physical modifications. In this case, we were able to lift gas production with more than 2,800,000 standard cubic meters per day, generating increased cash flow every day. The last example is related to CO2 intensity. Here, the energy network in Equinor with IOC representatives were able to use data across the value chain from offshore asset A to onshore asset B and reduce the receiving pressure at Asset B, thus resulting in higher gas production without increasing fuel consumption and thus lower the CO2 intensity and, of course, also lower cost in terms of avoided CO2 tax. So to sum up, the IOC setup works. All results are products of active use of data collected through the Industrial Internet of Things and very good collaboration between IOC, other technical expertise inside and outside Equinor and of course, the producing facilities that we do support. So thank you for your attention. So I guess the one of the good things about all the stuff we are developing now on the digital side is that it's developed and paid for by oil and gas assets. So that makes it even better for the New Energy Solution assets to actually do take them over and use them. And that links very closely to what is my motivation for new energy solutions, and that is actually to develop a profitable business for Equinor with a line of sight to a long term future for the company. And then also make sure that we actually do it in areas where in areas and in ways which we think are close to our DNA and where we think we can compete. And clearly, there is an element also on the renewable side that we are balancing growth with a performance element, and that is also influencing our priorities. And we need to demonstrate the same cost and capital discipline on the renewable side of the business as we do on the oil and gas part. So what I'll do is I'll briefly give an update on strategy and portfolio and then an update on some of our key projects and including updates on floating wind. But let me start with some disclaimers on my side. I will focus on offshore wind. I will not spend a lot of time on onshore renewables, on solar and onshore wind in different parts of the world, Nor will I address the low carbon part of it. So inside of my area is also carbon capture and storage and Northern Lights. So we'll come back to that in a different setting. And then the 3rd disclaimer is that if you have high hopes for getting a lot of new numbers on returns and CapEx and stuff like that, You're not going to get it today, so you have to wait until Capital Markets Day where we are going to provide a little bit more detail. 2019 was a pretty good year for Equinor. It was also a pretty good year for the part of our business that I am responsible for. We started up Johan Sverdrup in Norway. We started up Mariner in U. K. And for those of you who were at the autumn conference today, I think Eldar captured it very well. He said there would be no Dogger Bank without Johan Sverdrup. And clearly, there is a cash flow element to that, but there is also an underlying phenomenal competence and capability element that is creating those links. And everything we can do on rotating equipment in the IOC and everything we can do equipment in the IOC and everything we can do in terms of algorithms, we can actually a lot of that, we can also deploy into the offshore wind space. On the net side, we have won bids for Empire Wind in New York and for Dogger Bank in the U. K. Dogger Bank in the U. K. Is going to be the biggest current offshore wind project under development. So that is a massive project for us. I'm going to come back to why do I think that is strategically important because size is not the goal in itself. It is an enabler for quite a few other things that I'm going to come back to in a moment. Then you've seen that we have sanctioned the Hywind Tompen project. That is, 1st and foremost, a technology development project. It is one of those projects that is going to move the needle for floating wind, not the way we need to be in terms of cost, but actually taking a notch up in terms of scale. And it is also a significant measure in terms of reducing our footprint on the Norwegian continental shelf. 200,000 tons of CO2, which are the effects of Hywind Tom Pan is material for our portfolio on the NCS. We've also accessed the new lease in Massachusetts in the U. S, and we farmed down half of our share in Arkona. And for those of you who wonder if offshore wind assets can be good business, I think farming down 25% of Arkona for €500,000,000 is demonstrating that there is value to be created also in this space for Equinor. And then finally, we are working on a robust pipeline for growth in the long term, but we are quite satisfied with the near term portfolio we have. We now have the opportunity of looking slightly further out in time and making sure that our focus now is on executing on the projects that we have in our bag. There are some success factors that I want to draw your attention to in terms of offshore wind and how that space actually works. Scale is 1. This is a business where being big is not necessarily a goal in itself. It is an enabler for synergies. We see it on procurement where the number of turbines that you are procuring matters a lot in terms of the costs that and the prices that you are able to get. And we also see quite a lot of upside on the operational and maintenance side in terms of being able to capture synergies between different projects over time, driving costs down. Why is this important? It is fundamental because it is the direct factor influencing your competitiveness in the next auction. This is a cost game. It's a zero sum game. There is a winner take it all principle. And if you're not competitive, if you have to start fiddling with the financials or play with power prices, then I think you are on a slippery slope in terms of actually building a robust and profitable business. The second thing that we see is important in this space is continuity of portfolio. Having the opportunity to move warm teams from one project to the next, taking in new technology and taking the learning from one project to the next is also a significant factor for driving costs down. And we do see that with the portfolio we now have, including the Baltics and Poland, we are going to have continuous project execution between now and 2,030. And clearly, there is a capability building element of that, that is also going to reinforce our competitiveness for new opportunities as we go forward. Access to new technology. Bigger turbines has a lot to say in terms of cost. And if you actually go and see these things, you stop thinking of them as turbines, I. E, pieces of kit. They are power plants. Go to Rotterdam and see the Haliade X that we're going to install on Dogger Bank. They are just massive. The blades alone are the length of football field. So they are getting really, really massive. And finding that balance between innovation and turbine technology and industrializing models so that you actually churn out enough of them to bring the cost down is going to be key going forward. And then lastly, don't get carried away by winners' curse in auctions. Cost and capital discipline is also a key element for this business as we go forward. It is clearly a growing market, and it has unlike many of the other renewables, it has the benefit of offering scale. We've heard the IEA at the autumn conference today, and they were recently out with their outlook for offshore wind. And I think the tabloid version of their assessment is that by 2,040, offshore wind could be the biggest power source in electricity or biggest source of power generation in the EU by 2,040. And then we see even more ambitious targets arising in parts of Asia going forward. For me, offshore wind is not the strategic step out for Equinor. It is a strategic extension of a lot of the things we have in house. In the same IEA study, they basically point to considerable overlap between the oil and gas part of the supply chain and what we have on the offshore wind side. They are talking about something around 40%. But I see it every day because I am pulling and buying resources out of the Equinor matrix every day. It's the same community that's been working on the Oster Hansteen gas development that is working on the highben project. It's the same HVDC community that has worked on Johan Sverdrup that is now going to work on Dogger Bank. And that is, to me, a quite strong confirmation that we have some continuity in terms of carrying our capabilities forward. These projects are getting bigger. That is very close to our DNA. We are good at managing projects and large projects. We know the supply chain, not necessarily all the brand names in this segment, but we have quite a few of the same players on the turbine side, on the marine operations side and on export solutions and cables that we know from the oil and gas side. We also have brand equity in this market. We see that vendors actually want to work with us. And to some extent, I get a sense sometimes that it's as important that the vendors choose us as us choosing them because they are doing the same crystal balling ahead of auctions in terms of where they are positioning their resources as we are doing when we are competing. Auctions are won and lost. It's a winner take all. You build this portfolio in a very, very different way than what we do on the oil and gas side. And we already established in some of the key markets for renewable and offshore wind growth going forward, be it in the U. K, be it in the U. S. And elsewhere, where we've had organizations in place for many, many years. And then lastly, as these projects grow and risks increase, having a balance sheet to back it up is also quite important in terms of actually improving returns as we proceed. But still, it's also very different from oil and gas. I've spent 20 of my 21 years at Equinor on the oil and gas side, and I now have a little bit over a year on the renewables side. It's been very, very interesting to see the speed that this is developing in and also the agility that you actually need that Torbjorn alluded to, to be able to move the needle as we go forward. The risk picture is very different. So I'm used to dealing with exploration risk. There is no exploration risk here. When we have a measurement tool in the water, we know what the wind resources are going to be like. We still have and will continue to have in many markets and geographies a guaranteed revenue stream with guaranteed prices protecting you from the downside for quite a few years going forward. But I also think that we do see we are going to be increasingly exposed to market risks in the mature markets. But you will see these markets move at different speeds and there is no way that one market can leapfrog onto the cost level of the previous one simply because so much of that cost effect is taken out by having an effective supply chain. And I think that is broadly recognized in this industry. I don't think merchant risk will come overnight. As I said, I think it will come gradually in over time. And secondly, I also think that we're going to see a drive towards higher returns as the market risk element increases going forward. That is the risk that we know from the oil and gas side. We have been dealing with market risk for oil and gas for many, many years. This industry at the moment has all the characteristics of any growing markets. We see new entrants. We see a nascent supply industry. We see steep learning curves and rapid cost reductions. But one of the things that attracts me is that it offers scale, and you can, 1, if you were to compare onshore renewable projects with the Dogger Bank, you need a hell of a lot of onshore renewable to be able to get to that scale. It's offshore, which is an environment that we are used to dealing with, and we know the risks and we are actually quite comfortable with that we can manage those risks. But we do think that this market will evolve. We have been in this space for around a decade with the sharing shoal back in 2012. We have developed Dodgen and we've been in the U. K. For many, many years. I think that experience is quite useful as we are building the next legacy in this area. I also believe that we are quite well positioned in some of the main geographies. Most of the near term growth is expected in Europe. We see that U. S. Is taking off and all the Eastern seaboard have defined very clear targets for how much renewable poweroffshore wind power they would like to have in their respective portfolios. And then we have a foothold in Asia that is clearly now also setting offshore wind on the agenda. And finally, I think the position we have taken very, very early, and I have to say with quite a lot of strategic foresight from the people who work with it, we've taken an early position in floating wind. And my personal view is that it's going to be the next wave of growth in this area as the bottom fixed potential is being developed. And that is clearly an area where a lot of our offshore legacy is going to have a direct relevance. We have a solid portfolio of producing assets, and we communicated that the real post tax IRR for the producing portfolio is around 10%. It is a portfolio that has given us quite a bit of important learning and experiences, and we do have operational experience from operating in this area. And I don't think safe and efficient operations will be less important for us in this area, but we are systematically benchmarking ourselves with externals to make sure that we are in the ballpark where we need to be. When we deconstruct those numbers, they show that we are we still have a way to go before we are among the very, very best, but we also have clear line of sight to where we need to be. And when we deconstruct the result of auctions, either auctions we have lost or auctions where we have got access to the data, I'm encouraged to see that we are not losing because we are too capital intensive and we are not losing because our OpEx is too high. If that was our starting point, it would have been a very different story, but we are actually quite competitive in those areas. So there are other levers that competitors have to pull in order to knock us out of the game. There was a lot of talk in the previous session on digitalization in terms of improvement, and I think that we see quite a lot of upside also on the operational side through digital tools and also through ways of working differently going forward than what we have been doing. And we also think that it's possible to realize upsides from wrapping those types of risks for new entrants that are coming in. So operations O and M for profit model going forward is something that this industry is likely to see also because of many of the players that come in with rather limited technical and operational experience. In the short term, we have quite a strong pipeline of bottom fixed wind coming. It's a pipeline that will give us scale that I think is crucial to take us forward. I have the personally, I have the view that projects build companies, and I keep reminding people how the old hydro and Stater were built. Hydro were very much built on the back of Troll and Oseberg. Stottel was very much built on the back of Gullfox and Stottvjord. These big projects, they shape capabilities and they develop generations of leaders and professionals that also can serve other projects and build that capability on a portfolio scale. We are currently in 2019 and what we have been able to do, I think we are currently ranked around number 5 in 3 of the areas that we have highlighted as clusters for our on our side. Zooming towards the landing by going through quickly a few of the projects where we are in. I said that scale matters. And Dogger Bank, 3.6 gigawatts separated into 3 projects of 1 point 2 gigawatt each. The potential in the Dogger Bank area in total is probably around 20 gigawatts. And if you look 15, 20 years down the line, and you know the role that the Sleipner field has played on the Norwegian continental shelf as the gas junction where everything is tied in, that is this could be the socket for the North Sea in the longer term. It is that's why I'm saying it's strategic. It's smack in the middle of a lot of the developments that are going to come, and that was one of the reasons why we were so eager to get on the inside of it. This project these three projects alone can supply up to 5% of the U. K. Power demand. Why is scale important? It's strategically important because of the positioning. It is important because it improves our bargaining power with supplier and basically taking cost down. It is also important in the operational synergies that we see going forward and how we can think of the U. K. As an integrated area with the opportunities that Bernd described with the integrated operations center and that type of a thinking going forward. It is also an observation that it is clearly attractive to tap into infrastructure investment market and pension funds who see this as a type of attractive asset going forward. I know that some of you are interested in, so what are the technology advances that are that we bring into the Dogger Bank development? And how can we sort of take the back ground we have not as a pure bed offshore wind developer, but as a broad energy company with a strong legacy and capability in oil and gas. Just to give you a couple of examples on how Dogger is leveraging that legacy that we have. First of all, it's a willingness to go for the largest machine out there in the turbine from GE, the Haliade X. We do have that risk appetite because we are used to qualifying new technology, and we're willing to make those kinds of calculated risks with new technology. That is very close to our DNA as a company. The second one is that we are building a completely new installation vessel. So instead of transporting 1 and 1 monopile to site, we're going to do 10 at a time. And again, an experience that we have from the oil and gas side in terms of optimizing logistics. And then lastly, and back to Eldar's no doge bank without Johan Sverdrup. The HVDC that RBB and Ebo are that comes directly from the offshore experience that they have on Johan Sverdrup and elsewhere. And they have been supplying offshore wind also in Germany. So they are systematically building a base of capability that is giving them a new strategic leg. I was in New York a few weeks ago talking to New York stakeholders, and I was amazed to see the interest in the Empire Windfield. And it made me was a strong element of pride, which Norwegians tend to have when Americans say that we are doing something something interesting. And then secondly, we also have quite a bit of respect for the fact that we're going to develop something that will be really, really important for the future energy philosophy of New York State. This is the cornerstone and the stepping stone of building a profitable business on the U. S. East Coast. We've taken a lease in Massachusetts that we're also going to bid in auctions going forward, and there's still significant potential, more than 1.5 gigawatt left after the 8 16 Megawatt Award in New York. So we are seeing the East Coast as an integrated business system. We are developing knowledge of the supply chain and the local power markets, and we are developing relationship with stakeholders that's going to serve us as we go forward. And we're, of course, also going to utilize the capabilities of Danske Commodities on the power trading side. Lastly, floating wind. Why do I spend so much time on that the public domain? Isn't this something that is very far out in time and far too expensive and we're never going to get there, etcetera? When we look at the map and the water depths, the moment you go beyond 60 ish meters, that's when bottom fixed becomes too expensive and too complicated, and that's when you have to go floating. And if you look at the areas around the world that could be potentially used for power production, some 80% of that potential will have to be developed by floating solutions. We have worked on this since 2,009. We've taken the cost systematically down, and we have set an ambition for Hywind Tampen to take it down another 45% compared to where we are, and we've set the long term ambition in 2,030 of delivering power from floating wind at €40,000,000 to €60 per megawatt hour. Further out, you have higher capacity factors. The wind is stronger and more steady. You are further out, so the NIMBY lots of issues that lots of issues that we need to manage, but they clearly have some advantages. So for instance, doing onshore or nearshore developments. And it opens up a whole range of interesting options for us in the future. Areas like Japan, South Korea and California, the nature of their shelf means that they have to go not necessarily via a big bottom fixed development before they get to floating. They will probably have to go floating much earlier, and those are markets that are clearly interesting from our side. So I'll stop there, and then I guess we are ready for Q and A, Peter, or yes. Thank you. Thanks, Paul. Lars, will you take over Q and A? So the last part of this session will be a Q and A session. And if you think you have heard a lot of details during these presentations, that has exactly been the purpose. This is an opportunity for you to dive into details, which you would not hear about at the CMUs and other events where we more emphasize the headlines and perhaps also the things that are really driving the interest for the company in the long term. However, the company is built up on a lot of details, and some of these you heard about today. This is an opportunity through the Q and A to dive in further into these details. So I encourage you all here to take some questions. We will also have some questions from the U. K. Side through the Internet, and Peter will provide these questions and Erik as well, I think. So I think we'll start with some questions from this audience. If I see some hands, I will immediately turn over. I'll start here with Jurgen. Yes. Thank you. Jurgen Brossard from Nordea Markets. I have two questions regarding offshore wind for Paul. So just going back to what you said about the appetite from pension funds and long money buying into these type of projects. How dependent is your business case and your expected returns on these projects on farming down, I. E. How sensitive are you to interest rates remaining at the current levels for your business case? That's the first question. And the second question is, if I look at your competition in the U. K. And what Erstad has done on the Hornsea projects, your CapEx per megawatt is roughly 30% higher and your strike price is roughly 30% lower than what we've seen on Hornstein 2. Is there any specifics in the projects that would differ in terms of transmission assets and so on? And are you investing in infrastructure in Dogger Bank for any future extensions in terms of clusters? Thank you. Are we going to answer as they come in or Yes, I think we should do so, yes. So how dependent are we on long money and divestments? I think that there are different every asset will have different rationale for how you actually sit with it and what type of equity shares you are left with in the end. And you will see a mix of different structures in our portfolio at the moment. It is clearly so that there is a considerable upside to returns if you're able to farm down to basically long money with different sort of return expectations going forward. But there could be other reasons for farming down and bringing in other types of partners more of an industrial nature, whether they are providing benefits in terms of offloading CapEx in a period or grid connection, transmission, knowing the market, etcetera. So it's not black and white, and I don't want to quantify it, but we clearly see that this is one of the sources of added value creation that is out there. And judging from the experience that at least I have in NES, so far, the interest out there is very, very big. And I think we it was if you take Arkona as an example, it's one of the few times I have experienced that making a shortlist was extremely difficult. There was a lot of companies who wanted to be shortlisted and potentially go forward. So that interest is there. And how the interest market, etcetera, will develop going forward, that's outside of my control. What I can do is to derisk the asset and make sure that we have a quality package to potentially offer at some point. To be honest, I don't know Hornsea 2 very well, so I'm hesitant to make an explicit comparison. But obviously, it is in a different assets in different periods and different times. Will have different profiles, both in terms of CapEx and also where you which round you bid them into. I think the difference for from an Equinor point of view to some other assets is that we're going to have a quite significantly bigger turbine. And yes, there is built in optionality or room to optimize this asset for things that might come in future. That we're not pre investing in capacity, but we've clearly thought about the scenario where there might be added assets coming into this particular area because it is quite attractive. We will now turn to Theodor Sunilsson. Thank you for great presentations from all of you. I have two questions to Paul. First, you mentioned 2 gigawatt hours target. When are you aiming for reaching that? And from where will you bridge the current production up to 2 gigawatt hours production? And the second question is actually pretty technical. I'm not sure whether it's relevant or not, but could you discuss a little bit around challenges for current in the sea for the Empire project versus the Dogge Bank project? Thank you. On the last one, I don't feel like the right person is going to do that. I'm then I would be so far outside of my comfort zone that I will say something I regret. But I'll refer you to somebody who can address it. I don't think I refer to a 2 gigawatt hour target. That is news to me. If I said that, I must have been talking. Yes, but that was probably the production level that we are getting close to now. I don't think we have articulated a target. We've actually we are a bit hesitant to be volume driven and target driven with along the lines that you are indicating because I think it puts some incentives on developing this business that is not necessarily what we are looking for. My main driver is that whatever we end up doing needs to have a business case at heart. And we are actually walking away from quite a few opportunities out there because we don't see a line of sight to competing effectively and having suboptimal business cases. So I don't have a volume target for my organization, and we don't have it on our scorecard. So but we are nearing 2 gigawatt hours in production from our portfolio, but it's not the target to get there. And obviously, our production when the Arkona transaction is closed will go down because we're farming away 25% of that. No, I can't confirm it. I'm not that close to that issue. So I've actually, I don't feel like commenting on it even. Can we now pass the mic to Anders? Markus, also questions around for Paul. Typically, these projects nowadays are long term contracts. Will you then also typically seek project financing with a rather high for you at least debt level? And is it typically that the transmission assets is part of kind of your development project or that you've got control of it? Again, it's difficult to give a sweeping answer that will answer everything. I think the honest answer is that it will vary a bit. So if you look at the portfolio we have now, we are sitting with Empire 100 percent Equinor. That gives us quite a bit of optionality in terms of what we want to do and how long we want to sit with that. To put it this way, we are not going to decommission Empire as 100% equity owner. That is very, very unlikely. Then we have some geographies where project finance is almost a requirement because the partnering that is required will drive us in that direction. Then there are other geographies where we think that could be a good thing to do from a risk management point of view if you have more political risk or country risk type of structures in there. But I'm quite flexible in terms of how we are going to finance it. But clearly, this is an area where project financing is more normal than what we know from our traditional sort of oil and gas business. And again, on transmission assets, that varies a lot. So in some cases like the U. K, you develop it and then you basically divest it back at a certain rate. In other geographies, even in Europe, this is taken care of and is being developed by others and you basically plug your system into their system. So again, it's we can work in both systems. But in general, I like being in control of the transmission assets, especially offshore, because that gives us an integrated overview of the entire supply chain. And if I could choose, that is what I would actually prefer. It is very clear that wind is popular among this audience as well, Paul. I hope there are some questions to the rest of the So do I. All the presenters. But returning now to questions from the Internet. Erik, you got some there? Yes. A couple of 2 from London and one from, let's say, London Paris. It's Sociede Generale. But let me start with in the order of the speakers, Eirik, Varnes. This is from Exxon from Alwyn Thomas. Given the softer looking outlook for gas prices heading into 2020, should we now expect lower flex gas volumes? And then to Louise, that is from Societe Generale. And the question is, if you could talk more about specific changes observed in terms of end markets, geographically speaking, for NGL volumes produced by Equinor in North America. And then the third one to digitalization. This is from Barclays, Joshua Stone. As you roll out digital solutions within Equinor, what safeguards are you putting in place to protect the company from the risk of cyber attacks? Good. I think we'll take the questions in that order. So Erik, if you will Okay. On a question for gas price outlook and consequences for flex gas, I guess, I wouldn't necessarily say that I said softer outlook for gas prices, but a soft outlook for the gas market going into next year. That's the way most of this most of these variables point in that direction. We have storage levels at very high levels. If I were able to speculate with any kind of security about next winter's and next summer's weather, I could be more certain where this market is going, but I'm not in that position. And we will have New LNG capacity coming in, but at the same time, gas demand is relatively stable in Europe and it's growing elsewhere. We also have had a change in the production permit for the oilfield for this gas here taking into account a slightly lower framework for production. But so how the market develops into next year depends also on the Russian Ukraine situation, as I said, and where we will end up we will see this during the summer. And where we'll end up on that is sort of the result of all that. So it's impossible to say with any kind of detail whether we will see more or less flex gas. Turn to Luis. Okay. Regarding the changes, if we go back to the 17% share, that is essentially the Norwegian continental shelf and that is exported out of Norway really into Europe and other markets. And we are, let's suppose, some of the volumes coming from the U. S. Essentially. We are also the investing for Igloo 4, so there are less volumes coming in the portfolio from there. And we are adding Johannes Ferro. And on the long term, that will really decrease a bit the position on the NGL market. Okay. And the last question was on digitalization? Yes. Regarding cybersecurity. I think, first of all, cybersecurity is a threat that is continually evolving. So we need to work very hard to understand it. It's an area where we never kind of can say that we have we are finished or have accomplished everything we need. But we work along at least 4 main access. 1 is to ensure that we have up to date governance, steering documentation based on international standards and best practice. So that's number 1. Secondly, we work on the technology phase in terms of we are separating the office net with operational net. I mentioned our data platform that is built based on Microsoft technology. So then we're working very closely with Microsoft and kind of work on their cybersecurity measure. And the third one is awareness. The biggest risk in fact is us as employees, us as humans. If we click the wrong link, if we open the wrong e mail. So we run a lot of internal awareness campaign. So we improve the cybersecurity culture within Equinor. And the 4th area, if something happened, we need to be ready to act on it. So we run a lot of training, desktop training to be prepared if something happened. Anything to add on that? No, I think you're spot on. And I think that's also what we learned from others. If you listen to what Heidro also had us a experience, it's really also about training and preparing because you cannot guarantee 100%. Thelberg? You will get the mic right now. One question to Erik on oil market. You said that a base case GDP forecast over the next few years was 2% to 2.7%, is it? 2.7% on average. 2.7, right. And then I guess then also you have a scenario of oil demand growth of 400,000 to 800,000 barrels per day maybe. In that scenario, what kind of oil prices do you see oil price scenarios? And of course, you might disagree with my assumption of 400,000 to 800,000 barrels per day. Yes. I do. I think we're close. I guess I showed you, I mean, the average growth is like for the next 2, 3 years is slightly below 1,000,000 barrels per day per year in demand growth. And the 2.7 average GDP growth, that's on market exchange rates, so don't confuse that with PPP type of growth rates. So make sure you compare the right type of growth rates. Of course, uncertain. As I said, we have at the moment well balanced, if you like, oil market with but characterized with massive geopolitical uncertainty as well. We have very low spare production capacity. If we got another attack like the one in Saudi Arabia, the impact on price could be massive depending on the sentiment in the market at that moment. We see now tendencies of rig rates or rig count coming down in the U. S, how is that going to develop. At the same time, we have a lot of oil supply out of the market. And with a different type of geopolitical climate, trade climate, you can allow some of that coming in. So how will that plays out? A lot of things indicate that significantly lower prices than what we have now would have an impact on the shale production going forward. At the same time, if you have much higher prices than we have now that the marginal demand will be impacted. So our base case is that over the next couple of years, it's going to be roughly in the same area that we have now, but gradually picking up. As we've said, the prices that in 2025 and 2030 in 2030, we'll reach $80 per barrel real. That's our base forecast. And that is driven partly also by the fact that we think long term supply curves are going to start to matter when you get into the 2025 area and going forward. We will now return to On the Own. I have a question for Louis related to NGL. You said that in 2018, the NGL share in Norway was 17%. And but this year, it's been higher. But it will be reduced again with the start up you also had. But is it possible to indicate the NGL share when Johan Sverdrup Phase 1 reach plateau production? 17% is the share of the NGLs of the 51% liquids of the volume of the equity. That translate more or less to 6%, 8% NGLs from the total equity really, to clarify that one. Johannes Feld will add probably 20 kilos tons of NGLs per month, but I don't really have the exact figure of how that will impact the whole portfolio. It's a medium type crude, so it's a very low really volume of NGL coming from Johan Sverdrup. So I don't think it will have a big impact. Because I would assume that it would clearly reduce the share compared to what we have seen now most recently. Over time. I might say that, that is certainly the case because it's primarily crude that we get from Johan Sverdrup. Also keep in mind that we are divesting the Eagle Ford. And Eagle Ford is producing something close to 50,000 barrels to us now, and 45 about 45% of that is NGLs. So that's going out to the mix. And then you get Johan Sverdrup into the mix. So clearly, the overall percentage of NGLs in our production is decreasing. But still, it is important. And having some knowledge about the NGL market is an advantage if you're looking into estimating earnings for Equinor. Let me see, do we have more questions from the Internet, Erik? Yes. One more from Exane BNP Paribas. Again, on digitalization, can you estimate the level of carbon emissions reduced due to digitalization methods per year since implemented? So our approach to that is that the digital can enable the ambition we have in the broader. So we have an ambition to reduce about 3,200,000 ton. So far, we have reduced by around 1.6 and we're seeing that digital tools, both in terms of using data in new ways, but also for the future fields where we can have more unmanned, more remote operated that will of course have a positive contribution. And then Bant, one of your teams is working with SecoDOT on the existing assets. Yes. It's exactly as Torbjorn is saying. So and we are actually reaching probably closer to 1.8 this year. And it's we'll build digital solutions to follow-up each and every installation, especially on the NCS towards how they are actually using their energy so that we can reduce the carbon footprint from our operations. One target that you have communicated is we've done our U. S. Onshore business is to reduce the miles driven by 25 percent and that's the center we have in the U. S. That is using algorithms for route optimization where we can optimize that. So that has both positive cost, safety and CO2 impact. So that's we are on our way towards that target. I think we have a question on ODDWAY, Bjorgen. Is that great, ODDWAY? Yes. Question for Erik on natural gas. As in these days, everybody seems to be so bearish on natural gas prices in the short to medium term. But recently I've seen spot prices in Europe going up dramatically over last 14 days from below $3 to today it's like $5.56 or something. Do you see any other reasons than the colder weather for this actually this surge in actual spot natural gas prices? No. Well, I think I wouldn't exclude that we're getting closer to the point in time where we need a clarification of the Russian Ukraine transport issue. And we've seen I mean, the forward markets have shown that type of impact now for several months. And we're now approaching a time where that needs to be clarified. We're getting into winter and you add on those two impacts. The weather has been slightly better, if you like, or for gas demand in Asia as well. So I think it's probably a combination of those factors, including the weather here. That is the main reason why that why we've seen that increase over the last month or like last weeks, if you like. And I mean, the flip side of that is, of course, that if I mean, the markets might overshoot also here in terms of if we get a clarification. If the winter in late January, February turns out to be milder than what is based into the or where the current forward market is basing their forecast basically. We could get a refraction again and a lower price and again. So that's because this is probably very sensitive to very small changes on these 2, 3 variables. Okay. Do we have any questions from the Internet at this moment? No. Then I think, Jon, did I see your hand? No, it's Theodoy. Is there your hand? Okay, Theodoy. Thank you. I just wanted to it's a maybe a question for I think it was Toru. When I talked about $2,000,000,000 value creation long term pretax based on various initiatives. Will that be driven by cost reductions or increased resources or increased production? Or could you give some more details on those 2,000,000,000, please? So the 2,000,000,000 is equal to 3 percent production increase. So it's only driven by production increase of existing assets. That's the driver behind that target. So it's aggregated from until 2025. So kind of cost targets on board that we have internally comes in addition to that target. So it's increase in maximum production potential and a reduction in losses. Okay. Sure. Understood. And then my last question for today hopefully is on Paul, you said in your disclaimer that you didn't want to disclose any new numbers on internal rate of returns on CapEx on the renewable projects. That's fine. But on the Capital Markets Day, what kind of parameters should we expect you to provide some guidance on? The flippant answer is common see. No, I don't want to pre guide the guiding. We are in the middle of working on that, and we clearly recognize your sort of interest in getting to know more and more transparency such We clearly recognize that. But I don't want to sort of put out the teaser now. We're in the middle of that process now. So let's see when we come to February. That's fair. It's an excellent opportunity to remind you all that the CMU will be at 6 February for Equinor. Same day, we have the 4th quarter results. Do we have any more questions from the audience? Yes, we do. Paul Vindien, Urgesbank, it's for IDK. The futures curve indicate an oil price in 2025 around $60 And I know that is a thin market and everything. But you have a price assumption as far as I know of $78 real in $2,102 I think. Yes, whatever. Indicating a nominal price around €85,000,000 Can you elaborate on that price difference between the futures curve of €60,000,000 percent and yours on 85 percent, please? Well, I guess, first of all, the future price is generally a fantastic indicator of 2 variables, which is today's spot price and the sentiments about how well supply the market could be some months into the future. And that's generally what that curve shows. And as you said, I mean, the market out there is extremely thin. And I think you would see an impact on that price if we started to trade around at that point in time. So when we make our long term longer term forecasts from 3 years into the future and way beyond that. We look at things like where do we think the marginal cost is going to move, how does that look with FIDs been taken over the last 2 years, technology development, the likelihood of a tightening or weakening of the supplier markets, things like also different tightness for different types of crudes. The price you're referring to is a Brent type of crude. And with all that, looking at whether we think the market is most likely going, we see a significant increase in the price over the medium term, whether that's going to be exactly 77 by 2025 and then 80 by 2023, that's where we are with a large range of uncertainty around it. And when you look at how different consultants, for instance, look at what price do you need to have a breakeven profitability of different kinds of oil needed to fill the gap between we lose 5,000,000 barrels a day every year, just to normal decline, and that has to be replaced. And then so when you look at what, for instance, Wood Mackenzie says that what is necessary to fill that gap and what's the breakeven of that. You can get very thin with very small variations in supply and demand. You can deliver with resources at $65 a barrel or $90 a barrel, depending on which is the marginal source of supply once you get 5 to 10 years into the future. So it's within that space. We think that definitely with we need in order to deliver on a 104, 5,000,000 barrels per day of demand in 2025, we need a higher price than we have it today. It looks like the final question we have second last question we will have is from the Internet. Erik? Yes. It's from Kepler Cheuvreux, Anders Holter. I'll be back to question to Paul. Return development on offshore wind, where are you compared to your targeted unlevered IRR on Empire and Durbank? And any guiding to be expected on the annual cost of operation for either of the projects at the CEMU? So we haven't communicated a target for any of the future projects. What we have communicated is basically the existing producing portfolio. So we haven't indicated a range. I think there are different forces working in different directions. So clearly, we see that cost is continuing to come down. We see that turbine sizes are getting bigger, and that means less steel and less installation cost and all of these things. But then we also obviously see that the prices are coming down in the auctions and have been coming down significantly. So we are kind of in a process where these are pulling in slightly different directions. The second sort of generic observation is that it's very sensitive to what point in time do you actually look at returns because you are going to work with these business cases from the moment you access them and all the way through to production and then you are potentially commercializing parts of your share. And obviously, the returns will be different at different points in time. I'm unlikely to be not likely to sort of guide on individual assets on operational cost per asset. That expectation, I don't think you should have. You will recognize our approach in this area from what you know from the oil and gas side as well of guiding on a portfolio level and guiding on numbers where we are sort of where there's reasonable quality in the base of it. Otto Perga? Yes. Another question to Paul. It seems like you expect a lot of offshore wind project awards on the East Coast or the U. S. Going forward. But how realistic is that when you have probably a U. S. Natural gas market that will be oversupplied for the next 5, 10, 15 years or something? And how easy is it to compare with those prices? And do you need a lot of subsidies, you think? If you could elaborate a little bit on that. So the East Coast isn't the East Coast kind of. It consists of 7 different states with different priorities, different regimes, different mixes in their energy systems. And even though they are part of greater regions in energy terms, they vary quite a bit. I think that in terms of auctions and activity going forward, all of these states have in common that they have put out some very specific targets in terms of their power mix going forward. And that power mix is very different from state to state. Some are importing power from Canada and some are doing other things and some are gas and some are coal, etcetera. So I'm encouraged by the fact that there is a very strong political drive to actually get this in place, and it's very strongly anchored in the various congresses of the various states. So that's I'm encouraged by that. But then there are a couple of other factors that play into this. Leasing is a federal responsibility, and it's actually the same federal agency that is leasing offshore wind acreage, that is leasing oil and gas acreage that we know well from the oil and gas side. But that also needs to be linked to the state's procurement schemes. And you should not expect anything like a 5 year plan from BOEM where they say here are the lease sales that are going to come going forward and then perfectly synchronized with the different states because they're also competing to attract these opportunities. So Empire Wind, for instance, can we can basically bid in different states from that lease because of the location that we have, and we are likely to do so going forward. Massachusetts has some of the same optionality. So it's a long answer to say I'm confident that the U. S. Will continue. I'm confident that prices will continue to go down as the supply chain matures, but I'm also clear that there needs to be in the early phase, there needs to be incentives in place to be able to drive this in the right direction. That's the last comment on that. The regimes also vary quite a bit when it comes to whether it's a pure price play or whether there are expectations to local content. That varies also from state to state. So New York, for instance, is a state where the local content expectation was baked into the procurement and the tender, and we basically had to deliver on that. And then you have other states where it's a pure price mechanism where I think the feedback I'm getting from them is that they think that they have been surprised to see the price level that players are willing to compete on in the various states. Thank you. If I can just supplement as well, it's just these states have very different ambitions and to some extent also very ambitious carbon pricing targets that would impact the profitability of wind versus gas. Thank you very much. You truly delivered some detailed questions. Thank you. That will conclude the Q and A session. And I leave the word back to Peter Halfmann. Well, all I want to say is, well, I see 3 sets of thank you first. Last, well done. You can do it on the Q and A as well. That was very well done. Thank you for everybody coming today on especially on a fairly inclement day, not exactly what good for solar, okay for wind, better for gas in terms of the weather. Thanks to all our speakers, Louise, Paul, Eric, Bernd and Torbjorn, thank you very much. As always, one of the things that I think Equinor has always been appreciated for is it gives access to a wide range of people who are actually doing the day job in the detail and that's always appreciated. So on behalf of investors, my thanks as well. And then last and absolutely not least, this is also an opportunity for me to thank and also to make sure that everybody here knows all the team that we have in Investor Relations here in Oslo. So last, you know, Eric is here, Ida. We've got you may not know Marta, who has joined us fairly recently to look after ESG and Sophie as well. So thank you very much to everybody, and pleasant afternoon. Thank you.

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