According to Oil and Gas Journal (OGJ), Norway had 7.7 billion barrels of proven oil reserves as of January 2006, the largest in Western Europe. All of Norway’s oil reserves are located offshore on the Norwegian Continental Shelf (NCS), which is divided into three sections: the North Sea, the Norwegian Sea and the Barents Sea. The bulk of Norway's oil production occurs in the North Sea, with smaller amounts in the Norwegian Sea. There is no current production and little exploration activity in the Barents Sea, but it is believed that the Barents Sea could contain sizable oil and gas reserves.

Because Norway only consumed 228,000 bbl/d in 2005, the country is able to export the vast majority of its oil production. In 2005, Norway was the third-largest net oil exporter in the world, behind Saudi Arabia and Russia.

The Norwegian government holds a dominant stake in the oil sector. Statoil, 71 percent-owned by the government, controls over 60 percent of Norway's oil and gas production. The Norwegian government also holds a 44 percent stake in Norsk Hydro, an aluminum and energy company. Along with shares in these production companies, the Norwegian government has direct ownership over part of the country's oil production through the State Direct Financial Interest (SDFI). State-owned Petoro administers these ownership interests, while Statoil is responsible for managing actual production from SDFI assets. International oil majors do have a sizable presence in the NCS, but they must act in partnership with Statoil. The largest private oil producers in Norway are ConocoPhillips, ExxonMobil, and BP.

The NCS region has traditionally been accessible only by international oil majors, due to the harsh weather and operating conditions requiring sizable initial investments. Further, the structure of Norway's petroleum taxes means that smaller, marginal fields often are not profitable. Finally, stringent environmental, safety, and labor regulations further increase operating costs. However, as is the case with the United Kingdom, many oil majors have begun to withdraw from the NCS in order to pursue projects in high-growth regions. Statoil and Norsk Hydro have begun to sell NCS interest in order to pursue projects in Latin America and Africa. BP has also started to pull back from the NCS, selling its interest in the Gyda field in 2003 to Talisman Energy and declining to bid in Norway's latest licensing round. Other new entrants include UK-based Paladin Resources, Revus Energy, and Petra. Some outside observers have noted that the entrance of smaller firms will benefit Norway's oil sector, as they are interested in developing mature fields and smaller undeveloped oil pools, in which larger companies are no longer interested.

Norwegian oil production rose dramatically from 1980 until the mid-1990s, but has since begun to decline (see chart). During the first half of 2006, Norway's oil production averaged 2.8 million bbl/d. As North Sea fields continue to mature, Norwegian oil production will likely remain steady or decline, though there is some hope that new developments in the Barents Sea will offset some of this decline. Currently, the largest oil field in Norway is Ecofisk, operated by ConocoPhillips, which produced 280,000 bbl/d in Jan-May 2006. Other important oil fields include Grane (220,000 bbl/d), Troll (202,000 bbl/d), Heidrun (140,000 bbl/d), and Gullfaks (130,000 bbl/d). Statoil controls the largest share of total oil production, followed by Norsk Hydro. The largest foreign oil producer is ConocoPhillips.

Industry analysts consider the NCS a mature oil producing region. Most of the country’s flagship oil fields have peaked, with production remaining flat or declining slightly. For example, the Oseberg complex produced 503,000 bbl/d in 1993, but only 120,000 bbl/d during the first half of 2006. Companies are still discovering oil in the NCS, but none of the recent finds have been significant. In 2003, the Norwegian Ministry of Petroleum and Energy (MPE) reported that oil companies made eleven new discoveries, potentially holding 189 to 566 million barrels of oil, far less than what the country produced for the year. There are about 60 oil and natural gas discoveries that are still undeveloped, representing about 4.4 billion barrels of liquids and 16 trillion cubic feet (Tcf) of natural gas. Drilling activity in 2005 was down from the previous year, after also falling in 2004.

There is a great emphasis on increasing production from existing projects, including the incorporation of smaller satellite fields. This allows companies to take advantage of existing infrastructure and utilize processing capacity that has been freed-up by declining production at main fields. Statoil, for example, brought the Urd field online in November 2005, a project that incorporated two satellite fields (Svale and Staer) of its existing Norne project. In June 2006, Statoil announced that it had made oil discoveries in the Valemon and Morvin exploratory areas, which are, respectively, satellites of the company’s existing Kvitebjorn and Kristin platforms. In February 2006, the Norwegian Parliament approved plans by Statoil to develop the Tyrihans field, containing an estimated 180 million barrels of recoverable reserves. Statoil will develop Tyrihans by using existing facilities at the Kirstin platform. The company is also developing satellite wells at the Asgard field.

A potential source of new oil production is the Barents Sea, which could contain large quantities of oil reserves. There have already been some large oil finds in the area, including Eni’s Goliath, which contains an estimated 250 million barrels of recoverable reserves. However, between 1996-2006, there were no new exploration licenses granted for the Barents Sea, though drilling did continue on previously-granted ones. In March 2006, the newly-elected Norwegian government released a plan that would allow the granting of new exploration licenses in some parts the area. However, the plan enacted strict environmental criteria for exploration in the area and forbid exploration in the Lofoten islands until at least 2010.

Areas in the Barents Sea were the focus of Norway’s 19th licensing round, held in the second half of 2005. The round, which included 34 blocks in the Barents Sea and 30 blocks in the Norwegian Sea, attracted bids from 24 companies. In March 2006, the Norwegian government announced that it had awarded 17 companies the right to participate in production licenses, with seven companies having the right of operatorship. One of the most successful companies in the licensing round was BG Group, which won eight new production licenses and five operatorships.

Because Norway shares the North Sea region with the United Kingdom, the two must coordinate efforts when dealing with reserves that straddle the division of each countries' respective zone. In April 2005, the two countries signed a bilateral treaty detailing the handling of such resources. The treaty was the first step toward a general framework for inter-boundary oil projects, as previous projects have been governed by separate treaties and negotiations. Talisman Energy planned to bring the Enoch and Blane fields onstream in late 2006, which straddle the border between the UK and Norway.

According to Statistics Norway, the country exported 2.2 million bbl/d of crude oil and petroleum products in 2005. The largest single recipient of Norway's exports in 2005 was the United Kingdom, which imported 808,000 bbl/d from Norway, or 36 percent of Norway's total exports. Other significant destinations included the Netherlands, France, and the United States.

There is an extensive network of subsea oil pipelines linking offshore platforms with onshore terminals. The 765,000-bbl/d Oseberg Transport System (OTS) connects the Oseberg field with the Stura receiving terminal. Operated by Norsk Hydro, OTS also carries crude oil from fields in the vicinity of Oseberg, which connect to the OTS through auxiliary lines. Norsk Hydro also operates the 265,000-bbl/d Grane pipeline, linking its Grane field to Stura. Statoil operates the twin Troll I/II pipeline system; the 265,000-bbl/d Troll I connects the Troll B platform to the receiving terminal at Mongstad, while the 300,000-bbl/d Troll II connects the Troll C platform to Mongstad. There are numerous, smaller pipelines that connect North Sea fields to either the OTS or Troll I/II systems, with the remaining offshore production brought ashore via shuttle tanker.

ConocoPhillipps operates the 900,000-bbl/d Norpipe, which connects Norwegian oil fields in the Ekofisk system to the oil terminal and refinery at Teesside, England.

According to OGJ, Norway had 310,000 bbl/d of crude oil refining capacity in 2006. The country has two major refining facilities: the 110,000-bbl/d Slagen plant, operated by ExxonMobil, and the 200,000-bbl/d Mongstad, operated by Statoil. Norway produces more petroleum products than it consumes, with surpluses exported to Europe. In particular, Norway is an important supplier of gasoline and diesel fuel to the EU, as the production of these fuels at the Mongstad plant complies with stringent EU environmental rules. Statoil dominates the retail products market in Norway, and the company has also expanded aggressively into other European markets.