Good afternoon, everybody. I've been given the task of talking a bit about the macro and market perspectives. Before I do that, I give you the usual warning on our forward-looking statements, and that applies to also the two other presentations that you'll hear later today. I'll try and give you a little bit of when we do forecasting, I guess it's there's a danger that you always become extremely concerned with what's going on at present. I thought I would try and give you a little bit of perspective on the long-term history.
Then I'll do a little bit of long-term, forward-looking future, and then I'll end up with something which is a shorter term future and focus then on, in particular on the oil market since Rune will cover the gas markets. We are in a business where volatility is an important part of the game. This show the historical development in oil and gas prices since the early days of the spot markets, at least, both in the US and in Europe in terms of gas prices. It show the oil price since before the oil crisis in the early seventies.
I guess volatility is one thing that stands out when you see these charts, in particular taking into account that when we invest, we invest for several decades. It's something we have to live with. Another message, I guess, historically is that we've seen over the last decade an increase in the oil price. We've seen an increase in the European gas prices in real terms. Then notably towards the end of this period, we've seen the decoupling of the North American gas price level relative to what we see in Europe. Of course, these are important factors driving cash flows and concerns and interest from the analysts to our business.
Our view, our job when we forecast is of course to see through some of these volatilities and try to make our best estimates of the long-term averages of these prices, which might be very different from both the current spot price, but also the recent developments in these prices. A little bit about uncertainty. We're in a situation where those of us who lived through the financial crisis, which is everybody here, tend to think that the world is extremely uncertain. We look at, for instance, the Dow Jones Industrial Average, this is what it looks like when you take it from the first of January 1900. You all know that the economic growth covers industrial averages and a nominal value of stock companies.
In order to illustrate real changes, you need to put this on a logarithmic scale, and then it looks slightly different. We get a little bit of respect for the depression in the thirties, where the value of the US companies had to wait until after the Korean War until they reached the values they had before the crisis in 1929. While the financial crisis as we know it took two years and some months before the Dow Jones was back. When you look at uncertainty as shown as the monthly changes in this industrial average, it goes up and down all the time with roughly the same oscillation. Uncertainty is here. It makes my job interesting because I'm in the job of forecasting. It makes your job interesting and profitable, and it makes a lot of room for good discussions.
The world is always changing. Then we ask ourselves, "What is it that doesn't change?" Well, one thing that doesn't change is a very strong trend of economic gravity now moving back to where people live to the east. This is one of the certain long-term trends that will affect everything. It's one of the democratic consequences of the economic wandering in Asia, is that money moves back to where people are. Money that left that area in relative terms after the Industrial Revolution when it moved westwards, it passed the economic point of gravity, passed Norway at the start of World War II, went out into the Norwegian Sea, turned around at Jan Mayen, which is also Norway, and then goes back. It will at some point move.
I don't know how you calculate the point of gravity on a sphere like the globe, but that's what it is. It will move back towards the east. That will affect everything, including consumption patterns, trade patterns, where money will go, and energy demand. For us, that's a key driver long-term. When one way of illustrating that is to show the share of global energy demand, where the OECD 10 years ago used 50% of the overall energy in the world, will go down to below 30, we think, by the end of the thirties and by 2040.
While for instance, China's share of overall energy demand will go from some 10-11% by the turn of the last millennium and up to some 25% by 2040. We all already see this crude tankers turn to the left instead of to the right when they come out of the Straits of Hormuz, and the same goes with the Qatari LNG vessels. It will affect trade patterns and consumption. A colleague of mine, a chief economist in DNB some years ago, calculated what would happen if every Chinese used the Norwegian Hurtigruten, which is a tourist vessel that goes along the Norwegian coastline. If they do that once a year, once a lifetime after they turn sixty. Well, the number of vessels currently is 14, I think.
If every Chinese decide to do that, we would have to increase the number of vessels to some 2,000. When 1.3 billion people, and then you can add on the 1.3 in India and several hundred million in Pakistan and Bangladesh and Philippines, when they start to consume, it will change our lives also in the West. The energy demand is one example of that. When we go about long-term forecasting of energy demand, we start out with the premise and the realization that economic growth is a very important driver of energy demand. We have to forecast economic growth. We do that, we have done it. Our estimate is that it will grow, global economic, total economic return, total money, will grow by some 2.8% per year until 2040.
That's exactly the same as it has been growing over the last 30 years. Of course, an increasing share of that growth will come from the non-OECD countries, the emerging economies, in particular in the East. We try to estimate when we go forward, instead of doing demand side calculations of economic growth like we did in Economics 101, we do supply side economics when we do long-term. We look at productive capacity. We look at the amount of people that are available to work, average working hours, availability of capital, and the productivity by which we combine those two factors of production. When we do that, we get higher growth rate outside of OECD, but tapering off as we go forward.
Much higher growth the next decade and the decade after that than in the last decade of our forecasting period to 2040. One of the reasons being that they catch up with us. They become as rich, more or less, as we are on average, so the catch-up effect becomes less. The number of millions of people that they can take out of agricultural production and into higher productivity manufacturing goes down substantially. The Chinese labor force will start to reduce at this moment. The population growth factor in economic growth will be smaller. One of the reasons why economic growth will be lower. We still forecast China to grow by 4% per year in the 2030s, which is substantial.
The 2.8% on average then translates into a GDP growth, which is equal to the magenta line in the middle of the middle chart. Then the question is, how much more energy efficient will we be? Well, we believe that we will come back to a trend where energy efficiency increases, so that we'll use less energy per dollar of GDP going forward. We believe we'll improve energy efficiency so that we use, we are 40% more efficient at the end of this period. We're less aggressive here than our colleagues in ExxonMobil, slightly. Slightly more aggressive than other forecasters. That translates into 1.3% average growth in energy demand.
2.8% economic growth, 1.3% energy demand growth, which leads to some 35% higher energy demand by 2040 than currently. We all note that all the growth in energy demand, roughly speaking, will happen outside the OECD. OECD energy use will be roughly stable. That's long term. Another long-term factor, we're not out of oil and gas, and we will continue to produce oil and gas, and oil and gas will be demanded. Fossil fuels are here to stay. In line with what the IEA just have presented in their recent World Energy Outlook, we also see fossil fuels constituting more than 70% of overall energy demand by 2040.
In our forecast, we have oil demand peaking, not supply, but demand peaking at some point around 2030 when economies in Asia have matured sufficiently so that the growth in transportation demand is balanced by the reduction in oil demand from other parts of the world. OECD oil demand has already peaked, is on its way down, but the rest of the world will raise oil demand. Gas will continue to grow. It will grow faster than energy demand overall, so it will take market share from coal and from oil. We believe gas demand will grow by some 1.6% per year on average, leading to some 50% higher gas demand by the end of the forecasting period. Fossil fuels are here to stay.
Slightly shorter in time, in our medium, short-medium term, in our perspective, very short term, but in your, in most of the analysts' term, maybe medium term perspective, three, four, five years from now, economic growth is more about demand-side variations. The ability to fight the effects of the financial crisis. In our forecast, we call this muddling through. Relatively slow economic growth. Risks of the most severe consequences of the financial crisis and the subsequent debt crisis have faded away somewhat over the last year. We're slightly more optimistic about the Eurozone growth, which finally has come out a long recession, record long recession. We believe the Eurozone will continue to grow, but at very historically low rates.
Substantial risk and uncertainty on the downside for all these regions. Also, I guess what some people have found surprising is that now most of the optimism or the recent upward revisions of growth forecasts have come in the OECD area, while the downward revisions have come in some of the emerging economies, and some are worried about the stability and the growth model in some of the emerging economies. We see most of these key emerging economies continuing to grow, but not at the rates that we have become used to over the last decade.
Still, we believe that Chinese reform policy will undermine an ability to grow somewhere in the area of 6%-7.5% per year over the next years. That leads to a relatively moderate growth in oil demand, which is why it is important to forecast economic growth in our case. Over the recent years, we've seen these types of movements in oil prices and gas prices. Substantial action in terms of the spot pricing of oil over the last three years, up and down. With a very stable medium-term price forecast as reflected in the price of delivery at the end of 2017.
Moving in a band around $90, which is an indication of what the market thinks is sort of the normal marginal cost of producing, we think. Substantial spot prices movements and the volatility that I showed you at the start of presentation. How this will develop going forward, of course, depends on market sentiments and some of the movements in supply and demand that I'll come back to in a moment. Gas and LNG prices have shown these persistent differences in gas pricing once the American price came down, Henry Hub came down. One of the big questions and one of the big debates, of course, is how long this will persist and what type of movements between these prices you could expect. IEA is very clear.
Just this morning, it said that there's no reason to expect American-level prices in Europe over the long term. One of the reasons, of course, is that it costs $4-$6 per MMBtu to get the gas to Europe. Those people that think we'll have Henry Hub pricing in Europe need to think again. Where these prices will go, we'll see. As I said, I'll focus at the end of my presentation on oil, as we'll have a long presentation on gas subsequently.
One of the key things that have been driving these spot price movements and sort of undermined oil prices at the levels we've seen over the last three-four years in spite of the financial crisis and the outcome and the lower growth rates is this tendency of persistent crude supply losses. Surprises, losses of production, partly in the Middle East and North Africa, and partly in some other spots as well, which have sort of compensated for the growth in onshore tight oil production in the U.S. So that the balance in the.
On the non-OPEC side, plus some of the OPEC falloffs sort of have worked together so that over the last three years, we've had this close to 3 million barrels per day growth in onshore oil production in the US, but at the same time, we've had crude supply losses at roughly the same level. It seems that the moment one of these supply losses is solved, for instance, Libya, something else comes up. Then the Libya surprise is on the downside again this summer, which of course keeps the spot price at the very high level. Going forward, as I mentioned, we have relatively moderate growth forecast over the next years, which leads to a relatively moderate oil demand growth forecast.
At the same time, we see that parts of the non-OPEC will deliver more supply. I mean, it's difficult to estimate sort of a persistent supply loss. We expect some of the current supply losses to reduce their importance. If they do, we have a spare capacity increase coming up in OPEC. You can see that at this gray area at the bottom of the left chart. That usually goes together with a slightly weaker spot market spot price. To the extent that we're right, we should expect some more weakness in the market than we've seen over the last three years, over the medium term. We can always be surprised at another supply loss.
Note, go back to remember the graph that I showed you, that the market has shown a sort of a substantial stability in its medium-term outlook for the price, as given by this December 2017 price. It's been in the area of $90 for a long period, with these spot price variations at the top. We expect the spare capacity in OPEC to grow, which is an indicator of medium-term weakness in the market. When it's very tight, it's tighter than when it's at $4, $5, it has traditionally gone together with a weaker oil market than we see at the moment.
Most of the growth is in non-OPEC, of course in North America, and we expect that to continue, but where the growth will taper off in a few years. Turning back again to the long term, don't expect new future supply sources to come around at very low oil prices. The globe has, or the world has, a substantial challenge in replacing crude oil from today's levels. When you look at decline rates, we have to develop more, we have to develop quickly the things that we've found, and we have to explore, and we have to look for more, and we have to replace. We don't know, we have to find as well.
There's a lot of the production profile in the next decade and the decades afterwards that still has to be found. There's not a big reason to expect those sources of oil to be cheap. The chart to the right here shows. It's not very clear on this screen, but it shows some estimates of marginal cost of production of new sources of oil going forward. Of course, one of the questions is how this will move over time. Some of the new sources that we've seen, U.S. tight oil, is the magenta area slightly to the right of the middle of the chart. Then we expect tight oil outside of North America, which is the other purple area there, to have higher costs.
The ultra-deep water in Angola and Brazil are costly sources of oil, and the same with oil sands. There is sufficient oil to deliver on demand that we reach a peak oil demand by 2030. It cannot be delivered at very low oil prices. What that oil price will be is, of course, another story because you have to estimate exactly where that demand curve crosses the supply curve in any given year. Future sources of oil will come at a cost that are higher than what we have been used to seeing in the terms of the fields that are now doing the bulk of the production.
We think there is yet to find. There are discovered fields. There are new fields coming on production but they require a price which on average is much higher than the average oil price the last 30 years. The average oil price the last 30 years is roughly $50, $55. That's my macro and market overview for you. Thank you for listening.
Thank you very much, Eirik. Our next speaker is Rune Bjørnstad. Rune is the Senior Vice President of Natural Gas in Statoil . His main responsibilities cover all areas of Statoil 's natural gas business, including marketing, trading, and sales of pipeline natural gas and LNG from European, U.S., and Caspian gas markets. In addition, he is responsible for Statoil 's overall gas supply planning. It's my pleasure to welcome Rune Bjørnstad.
Thank you, Hilde. Good afternoon, everybody, including those on webcast. My messages or what I would like you to take out of this room is basically three things. Firstly, we see a European gas market that is very robust. I know this is something that has been questioned, but in our mind, it stays robust for years to come. I'll come back to that. Because while demand is currently weak, supply is very tight and prices remain robust. We see declining indigenous production, excluding Norway that is, and that means that Europe will have a growing supply gap to fill. Second message is that we have changed our strategy for selling gas into Europe to capture the opportunities or the new opportunities, I should say, in the liberalized or liberalizing market.
We are gradually adapting our traditional and typically oil index long-term contracts to new market realities and entering into new, also new long-term contracts. We're also diversifying our sales channels by selling an increasing amount of gas into liquid hubs and directly into large or to large end users. Final message is that we are expanding our global gas business by developing new value chains. We are working to develop our discoveries in Tanzania. With the Shah Deniz gas field in the Caspian Sea, Statoil is active in opening up a new supply corridor to Europe. In the US, we are continuously positioning ourselves to access premium gas market based on our shale gas production, mainly from the Marcellus area. Now I should have clicked. This was the one that was supposed to be there in the introduction.
Anyway, let me start by sharing some of the recent highlights from our gas business. During 2012 and early 2013, we have made three large gas discoveries off the coast of Tanzania. These discoveries amount to a total of between 15 and 17 trillion cubic feet, which is four times more than the yearly gas export out of Norway. Our ambition is, of course, to develop a value chain for these resources, adding to our LNG portfolio. This spring, we also received governmental approval for developing the Aasta Hansteen gas field on the Norwegian shelf. This development marks the opening of a new gas province in the Norwegian Sea. I think also it underlines our commitment to continuously develop our gas position on the NCS. The gas will be brought to Europe through a new pipeline system, Polarled.
This summer, we also selected together with our partners the Trans Adriatic, that is, not the Trans-Atlantic, Atlantic. That's still some time out. The Trans Adriatic Pipeline, TAP, to transport gas from the Shah Deniz field into Italy. Just a couple of months ago, agreements were concluded with nine European buyers for the sale of around 10 billion cubic meters of gas from this Shah Deniz field. Another recent highlight was the landing of what we think is a very innovative gas to power contract in Germany. In June, we signed a long-term contract with Stadtwerke Düsseldorf to supply gas to an upcoming gas-fired power plant. Lastly, this month, based on our production from Marcellus, we started supplying New York City through a new pipeline into Manhattan.
I will come back in somewhat more details to this issue later in my presentation. If we then turn to 2012. 2012 was a very good year for our gas business. Market prices were very high. There was a substantial premium associated with our long-term contracts. In addition, our export from the Norwegian Continental Shelf were record high. As for the development so far this year, market prices has remained high. For the first 9 months, there has been a decrease in our average invoice gas price. The background for this is basically threefold. Our U.S. gas production now constitutes a larger share of our portfolio, lowering our average invoice price. We have seen a reduction in prices in our long-term contracts. Finally, the margins on short-term sales has been lower than in 2012.
While our reported earnings from short-term sales and tradings were weak the first half of 2013, they were substantially improved in Q3. In many ways, this illustrates the volatility we expect in these markets that will also lead to variation in our future results. Turning to our production volumes. Our NCS production is also somewhat lower than last year. This is mainly due to lower Troll production and divestments. At the same time, we have, however, seen an increase in our U.S. production. Now, we do see, as I said, a robust outlook for European gas market in the long term. As you can see in the graph, the heating and industry sector will remain the backbone of European gas demand for the foreseeable future.
However, the power sector, which seems to draw most media attention, demand in this sector is hit by economic recession, strong growth in heavily subsidized renewables, combined with low CO2 prices, which in many ways encourages a high burn rate of very cheap coal. If we look towards and beyond 2020, market conditions for gas to power are expected to improve. A large amount of the current coal capacity is due to be phased out, driven by age, but also by environmental regulation. This phased out capacity is likely to be replaced mainly by less emitting and more flexible gas power plants. There are also increasing expectation for a growth in the use of gas in the transport sector, fueling a growing number of heavy trucks and ships.
However, I think it's fair to say that the uncertainty for gas demand do remain, and in many ways are dependent on both future, climate and energy policy. Most European countries are today changing their energy policy and legislation, the development of demand in the power sector, and, last but not least, the impact of energy efficiency programs in the heating sector. While the demand side is expected to grow, the indigenous gas production in Europe, apart from Norway, will continue to decline. This leaves Europe with a large and emerging supply gap, and the options for filling it are quite limited. Piped imports from Norway, from Russia, and the Caspian can increase. Shale gas might, to some degree, contribute, but is potentially highly uncertain, not only because of the reservoir characteristics, but also because of lack of regulatory framework.
It is therefore my assessment at least that Europe will have to depend on increasing imports of LNG. This means that European buyers will have to compete on price with buyers in other regions, especially Asia, but also Latin America. This is likely to impact the European market price for gas, and in many ways is very good news for those who are able to deliver gas to Europe at competitive cost, which I think is the case for us, for Statoil . I think we have a very strong and competitive position with a large resource base close to the Northwest European markets. European markets are becoming increasingly liberalized. This development has provided us with a lot of new business opportunities, leading to adapt and change our sales strategy.
Just a few years ago, most of our gas was sold under long-term contracts to incumbent players, which typically had control over the entire value chain within their home markets. Now, this traditional value chain is gradually breaking up, enabling us to diversify our sales channels. We've seen the emergence and growth of liquid marketplaces with increasingly transparent and reliable price quotations. We're also able to move downward the value chain, accessing new customers and segments directly. Since 2009, the volumes sold through traded markets and directly to end users have more than doubled. We expect this rebalancing between long-term contract and alternative marketing channels to continue for some time to come. At the same time, we have modernized our long-term contracts through commercial negotiations, securing a competitive or competitiveness in this liberalized changed market.
We will continue to develop the important relationship we have with our existing long-term buyers of natural gas. In sum, although less gas is sold on long-term contracts, these contracts therefore will continue to play an important role in our sales portfolio. I think in many ways, the recent agreement we've done with Centrica, with Wintershall, and with Stadtwerke Düsseldorf illustrates exactly this point. Another channel is the traded market. Offsetting our gas in the traded market is also becoming an increasingly important part of our sales activities. In 2012, we sold around 25% of our volumes through these traded markets. The hubs we were most active are the NBP in the U.K., TTF in the Netherlands, and Zeebrugge in Belgium, because these are the hubs with the highest liquidity.
We have also started selling an increasing amount on the German hubs, the NCG and Gaspool, where I would say liquidity is improving as we speak. An important tool for our traders is utilizing the flexibility provided by our upstream and downstream position to capture value from fluctuations in prices and differences in demand between the various geographical markets. Historically, volume flexibility was held by the customer as part of the long-term contract structure. Now, the flexibility is increasingly sold by us as a separate product or used by our traders in order to add additional value.
We're also enhancing our LNG trading business and seeking the most cost-efficient logistics solution based on our existing position to reach the most attractive markets. As you might have read in the press, we have recently diverted a cargo from Europe through the Northeast Passage to reach the higher-priced Japanese market. Sales directly, as I said, to large end users are also growing. We started our direct sales in the U.K. in the early 1990s, and then we moved into the Netherlands in 2004 through sales to the fertilizer industry. Today, we're expanding this business also into other markets and other sectors. Typical customers include independent power plants, large industry, and local distribution companies. An example of this activity is our recent agreement with Stadtwerke Düsseldorf.
The German Stadtwerke are of a particular interest to us because they are large players serving a huge and solid local customer base. It's also the way we reach the residential market. To illustrate this, for instance, Stadtwerke Düsseldorf services a city of around 600,000 inhabitants with power, heat, gas, and drinking water. The gas to be supplied by us will fuel what will become one of the world's most efficient gas power plants, and through an element of electricity indexation, the gas sales agreement reduces the plant's exposure to fluctuating power prices. It has also, it's fair to say, been a key enabler for making the project bankable. For Statoil , this is a stepping stone in our effort to promote gas into the power segment. In sum in Europe, we have changed and adapted our European sales model.
We have done so to address both the structural changes in the industry and the liberalization of the markets. To further strengthen our supplies into Europe, we are also participating in bringing gas from the Caspian region to Europe. Before I conclude, I would like to touch upon this in addition to our growing U.S. gas position. Our view that the European gas market is robust has been a key driver moving forward with the Shah Deniz field development in the Caspian Sea. A final investment decision for stage two development is planned to be taken by the end of this year. When stage two comes on stream in 2019, 16 billion cubic meters of gas will be exported. Recently, the consortium agreed on a transport solution for bringing this gas into the European gas market.
The gas will be transported first through Georgia, then through Turkey and further into Europe, ending at the heel of the Italian peninsula. We have been able to land a 25-year gas sales contracts for this gas. Of the 10 billion cubic meters sold to nine different European buyers, 2 billion cubic meters will go to Greece and Bulgaria, the rest to Italy. Turning to the US, there we have an increasing gas production, primarily from the Marcellus area. We have also there secured transportation capacity from the production area where there is an abundance of supply and corresponding low prices. From here, we have transported gas to high-consuming markets like Toronto and New York to capture a price premium or a much higher price. These mega cities are already large consumers of gas.
In New York, they also have an incentive to extend gas use further in order to reduce emissions and improve local air quality. We see now a development where gas is replacing fuel oil due to what is called the Clean Heat Program. New York City now reports the cleanest air in 50 years. New York is also about to transform its public fleet of buses to run on compressed natural gas. For us, in sum, a very attractive market. Because due to the high price differential between gas and fuel oil or diesel that it replaces. There is a high willingness to pay a premium well above the reference price in the Marcellus production area, where production is by far much higher than the consumption.
Lastly, on the U.S., we are also now seeking market opportunities for our gas production from the South Marcellus, where we can create additional value, in the sale of natural gas liquids. To conclude, the main messages are still that we think the European gas prices remain high, and we see a robust outlook for European gas demand in combination with lack of supply. Our gas and marketing strategy fits well with the European, energy markets, and we will sell an increasing amount of gas on the hubs and directly to large end users and to distribution companies. We continue to build new value chains, expanding our gas business, on the NCS and globally with the Shah Deniz and Marcellus as prime examples. Thank you for your attention.
Thank you very much, Rune Bjørnstad, for that interesting presentation. We will now take a break until 2:30 CET. Welcome back from the break, everybody. We are now ready for our last session for today. We will have Jon Arnt Jacobsen talking about globalization of our procurement strategy. Jon Arnt Jacobsen has been Chief Procurement Officer since first of January 2011. He was Executive Vice President in Manufacturing and Marketing in Statoil from 2004 to 2010. Jacobsen is also a member of the Board of Directors of Storebrand ASA. It's my pleasure to welcome Jon Arnt.
Thank you. Good afternoon, ladies and gentlemen. It's a great pleasure to be here and talk about something which is very important to Statoil and to the industry and something which we think will be growing in importance in the future. I'll talk a little bit about, you know, our relationships to our suppliers, how we manage them, some insight into our approach, and also give you some examples of what we have achieved and what we're working on. When we talk about supplier relations, we really talk about the supply chain. The oil and gas industry is complex, and it has a huge and complex supply chain which is integrated into our activities. Our success is very much dependent upon their success, and we are a key enabler in their success.
In Statoil , we have three ambitions when it comes to our work with suppliers and supply chain. It's creating value, and we try to do that through the right strategies, the right market approach, through tendering process and overall relationship management with our suppliers. The second, and that's actually the easy part. The next part, or the next ambition is actually being able to realize that value through how we manage our contracts and how we manage the relationships on a day-to-day basis. The third is, because these are highly complex supply chains, to ensure that there is no value leakage in the value chain. A typical value leakage will be that the supplier delivers the right goods at the right price, but at the wrong time.
There, with the complexity we have, there is tremendous potential for tremendous value leakage. It's very much about managing risk and being very proactive and hands-on. As the largest operator in Norway and with significant international positions, there are clear expectations for us, both when it comes to actually being able to maximize the value and ensure that we run our projects and operations in a safe and efficient manner, but also in leaving behind and creating job opportunities, competence, industry building, and local content. We have set down a set of clear principles and expectations so that we can have an open dialogue with our counterparts and with our stakeholders, and we are being transparent. We can live up to these challenges.
That also means we have very clear expectations to our suppliers because the supply chain increasingly is becoming a global supply chain. We need not only be concerned about our suppliers, but we need to be concerned about the quality of our supplier's supplier and probably their suppliers as well. With increased expectation, and increased complexity, we need to drive the development both on standards in behavior, but also standards in quality and performance. We believe that there is a significant potential to improve the quality and performance both of our suppliers, ourselves, and the supply chain. That's one of the most fascinating things about this job, is that we see a lot of good examples on how we can work together with our suppliers and improve their performance and improve our performance. I will revert a little bit to that.
First, a few words on the total size of our activity, to put the discussion in somewhat of a context. Total spend in 2012 was NOK 145 billion. This year, we are at a running rate of NOK 160 billion. Mind you, this is spend which we are operator for 100%. The biggest element, as you can see, is maintenance and modification, followed closely by drilling and well and capital projects. Over the next few years, we expect the drilling and well and the capital projects components to increase in value. Then, you know, when we base on projects or sanctioning, or projects that we have already sanctioned.
When these projects are on stream, you know, our maintenance and modification spend will make another jump, while we try to limit and work hard on reducing our business support spend. Norwegian suppliers have, and the Norwegian supply industry, have a very strong position in Norway and mind you, also globally. They account for almost 80% of the invoices, i.e., the invoices go to Norwegian addresses for almost 80%. We see also in international projects that the Norwegian supply industry is very competitive. I have also put on here as a reminder, there is a lot of discussions around allocation of contracts, and local value creation. It's important to remind everyone that in a typical lifetime of a greenfield project, which includes the topside, CapEx is one-third, OpEx is one-third, and DrillEx is one-third of the total cost.
Also keeping in mind the complexity and the risks associated with the CapEx side of this spend. This spend is likely to increase, primarily because of all the sanctions that we've made, but it has also increased over the last few years due to the cost increases we have seen in the industry. I would like to spend a few minutes on trying to explain and talk about a little bit about that. Because increasingly we see that costs, increasing costs, is a major issue, and with this is an illustration of cost increases that has taken place over the last 10 years and the complexity of the cost increase. We need to attack this more forcefully, than we have in the past because this development cannot continue.
It will not lead to the type of robust and sustainable project development that we would like to see. I think you're all familiar with this discussion. I think we have more insight and more experience on how to attack these costs than what we've been, have been before. The challenge, but also the upside of the picture as we see it, is that the reason for the cost increase is actually there is not one single reason for it. There is a set of issues which we have developed together with our suppliers that has led to this cost increase. It says on the slide, higher margins of suppliers. Actually, not that many suppliers have achieved increased margins. Certain sectors has, but most of our suppliers have not experienced a significant margin increase.
We need to address this issue differently than what we've done before. I can hear all of you say, you know, "Yes, we have seen this before, Jon ArntJacobsen, and why will it be different this time?" I think it will be different this time because we have more experience, and we have more insight, and I think there is an increasing realization across the supply chain that this cannot continue. We have built in a complexity that we have to solve, and that's what I like to start to describe some of the steps that we have taken, are taking to solve this. First of all, we have completely redesigned our category governance and category strategy is typically how we go about procuring the needs that we have.
We have completely redesigned it to ensure that there's a much closer link to our corporate strategy, much closer link to our technology strategy and to our technical requirements strategy in order to simplify, standardize, bundle where it's appropriate, work closer with our suppliers where it's appropriate, or take a commodity approach where that is appropriate. Much more a risk and criticality approach. Management involvement earlier, framing both processes and strategy at an earlier stage. We believe that that will enable us to drive standardization and simplification much harder than in the past. It should enable better and closer cooperation with some of our key suppliers where we think that's appropriate.
It should mean that we run our technology requirements, which we think, by the way, is one of the reasons why we have this increased complexity and increased cost in a different manner than what we've done in the past. I'm not saying it's an easy and straightforward, but we've put some of the main milestones in place main instruments in place in order to drive this differently than what we have done in the past. A few reflections on a typical tendering process, procurement process, and there's a few important points that I would like to point out. Systematically in this process, learning has become much more important. We're spending much more time with our peers to learn from their experiences.
We're spending much more time on benchmarking and discussing with our suppliers, how can we solve these tasks, or what does the market look like compared to what we do than did before. Benchmark every project, everything we do is benchmarked to a much greater detail than what it has done before. Second element in this process, which is different than what we've done before, is we're spending more time with our suppliers to really be comfortable that they understand the task at hand. Because we have seen a number of examples where our suppliers have underestimated, and we have underestimated their capability to deliver on a project or a job. We need to take much more responsibility and be deeper into really understanding the supplier's capability.
As I mentioned, a little bit earlier, we also need to understand the supplier's sub-supplier and their sub-supplier again. Because we see increasingly, part of the globalization of this, industry, that things stop up because a sub-supplier has actually sitting on a critical part or a critical element and is not delivering on quality on time, and then a huge project, then grinds to halt because of that lack of performance. We need to be much more hands-on and much more understand the risks associated with these, supply chains than what we've done in the past. In that process, we also need to ensure that this supply chain facilitates and lives up to the expectations we have to local content requirement, which is a part of, the expectations that, our stakeholders has to us.
We're running the ITT processes slightly differently than what we've done in the past. We're spending much more time and are much more systematic on the supplier relationship management. As mentioned, you know, they are key. They are an integrated part of our supply chain. We have 12,000 suppliers. We hand out, or we enter into more than 1,000 frame agreements per year, more than 4,000 single contracts a year. It's a huge business, and we need to ensure that it's managed in the totality. We need to drive it. We need to drive performance harder and clearer than what we've done in the past. We need to ensure that there is a systematic approach from top management down to contract management at the bottom of that, this hierarchy.
We need to ensure that our management of our suppliers actually understands and drives the performance of their people at the contract level. With 12,000 suppliers, we have taken a criticality approach, so we have segmented our suppliers in different segments. The top segment has between 12 and 15 key suppliers, and we meet them on top level, on top management level very regularly. Top management meetings are typically characterized by reasonably detailed performance reviews, both our performance review of our suppliers, but also their feedback and their performance review of Statoil . Because we see that we are key in their, in enabling them to succeed, and that we need to improve our own performance to enable them to succeed.
It's too simple just to point to our suppliers and say, "You did not deliver." Typically, at least a couple of fingers points back at us. We need to work it more systematically than what we've done in the past. We'll also then create a common improvement agenda with all of our main suppliers, and we revisit that on a regular basis and ensure that there's consistency between, you know, the top supplier on the top management level and, the contract management level. This is really about realizing what we have created through our tendering process, our contract awards, and it's avoiding that we have value leakage in the supply chain.
Because historically, it's been such that, you know, 1/3 of our, the deliveries to Statoil within certain categories has been more than 10 days late, and it has had no consequence to our suppliers. We need to change that. We are changing that. We have a good dialogue with our suppliers to ensure that that actually happens. Then is there an optimal Statoil supplier? No, there is not an optimal supplier because we see that performance is not consistent. Even among the best, performance is not consistent. We have also to say that also internally in Statoil, we are not the best customer in the world and not necessarily a constructive and challenging customer for our suppliers, so this needs to be worked on. We see very clearly that where we succeed, it has significant improvement potential.
We have worked over the last two years on parts of our portfolio, and we've seen improvement in productivity of, you know, easily double-digit figures. We believe there's a tremendous potential in ensuring and working on this. This is not something that the procurement function works on its own. It's actually an integrated work together with the various business areas to ensure that we speak with one Statoil , one agenda, one set of key performance indicators, and a common understanding of the contracts and the obligations that we have respectively in this relationship. I would like to give you a few examples of how we worked on pursuing standardization and industrialization, as well as what we're working on moving forward. We believe there is a significant potential in standardizing industrializing.
I think we from an industry point of view, you know, net present value is a fantastic tool, and we use that a lot, but we need to complement that with other measures as well to ensure that we have robust projects and robust commercial terms. In the culture we have developed over the years, we value optionality a lot, and we're not always able to capture the values that we have put into the optionality. We probably need to standardize, not delete, and work more systematically on industrializing what we do. Then give away some of the options which we think are not likely to be captured. Fast-track project is probably the most famous, and we have learned a lot from the fast-track project.
We are now in the middle of executing on wave two and trying to mature and develop a potential wave three. The floating storage units for Heidrun and Mariner. We changed the technical requirements, went into the market, in a different way than we typically do and achieved synergies. We have now a significant portfolio in Korea and in Asia. There are synergies across these projects, and there are learnings across these projects which we systematically try to capture. We are in the process of building Cat D and Cat E and Cat J, where we see that there are also synergies and there are efficiencies to be taken out. We look forward to doing that when these tools are coming into operation. We're looking at Johan Castberg and Johan Sverdrup with the same type of approach.
Say, what is it that we can do to standardize and reuse? Where are our technical requirements different from industry standards and challenge those differences to see if there is a good, sound business judgment behind it, and how can we then use the market differently than what we've done in the past. In that process, we believe and we hope, and we think that we will be able to develop our culture and develop how we approach our projects so that we can reduce cost and have a much more industrial approach. The good thing is that we have a fantastic project portfolio that we can practice on every day.
You know, in a world where 50% of the projects are above cost and behind schedule, and we are on schedule and on track, we are quite humble as to the task at hand to ensure that we remain on track and on cost. It's a very challenging environment. It's a very challenging project, and irrespective of who would have had these contracts, it would have been challenging. We mobilized our best people, and we are working very hands-on and detailed with our suppliers and our sub-suppliers to ensure that we will deliver on these projects according to expectations and promises.
Because we think that when we succeed with that, we have actually lifted Statoil 's performance and execution capabilities one level, and that will position us for this new set of projects that we hope that we have in the pipeline and that we will hope will have more of in the pipeline. Because in all the supply chain and our suppliers' performance is critical to our performance. I think, Hilde, I'll stop there and then we can have a Q&A session. Thank you.
Okay. Thank you very much, Jon Arnt, for that interesting presentation. This will end our webcast for today. Thank you all very much to those of you who have been following us on the webcast.