Den norske stats oljeselskap a.s Annual Report and Accounts 1974

statoil Den norske stats oljeselskap a.s

Statoil was established by a unanimous decision by the Starting on June 14. 1972. The Company's objectives, as stated in its Articles of Association, are as follows: Statoil has as its objective inde­ pendently, or in participation or in co-operation with other companies to carry out explo­ ration and production, transportation, refining and marketing of petroleum and related products and other activities in close relationship with this.

The pipelaying barge Choctaw I working on the Norpipe line from Ekofisk to Emden in West-Germany. so far the worlds longest offshore pipeline. 2

Report for 1974

Preface authorities. Statoil may not in offshore oil activity and parti­ The year 1974 has been a year execute projects with significant cipation in pipeline transpor­ of extensive and increasing political or practical implications tation systems (Norpipe), in the activity for Statoil as a result of before they are approved or petrochemical complex at Bam­ the tasks the Company has been cleared by superior political ble and in the marketing of given through d0cisions taken bodies. It is this principle which the State's royalty crude oil. by the authorities. This has made is now clarified and formalized continuous rapid growth of by the new regulations and the The Board's task to a large the Company's organization Articles of Association for extent is to ensure that Statoil necessary so as to enable it Statoil, approved by the Stor­ discharges its duties with proper to handle the State's business ting in June 1974. care in accordance with the interests in the petroleum sector authorities' wishes and in a way in the best possible way. The new Articles of Association best suited to making the best provide that the Board shall put possible use of the State's busi­ Internationally 1974 has been before the General Meeting all ness interests. At the same time, dominated by the new oil price matters "which can be assumed it is quite clear that the Board's structure and the changed situa­ to have important political as­ role should not be a passive one. tion in petroleum supply. Sharp pects or aspects of principle The Articles of Association give inflation has greatly increased and/or can have important social the Board the necessary freedom the cost of a number of the pro­ and socio-economic impli­ to carry on business within the jects in which Statoil is engaged. cations". The Articles also con­ framework prescribed by the At the same time Norwegian oil tain a list of the most important authorities at any given time. and gas reserves have increased cases covered by this rule. The in value. The international energy new Articles must also be seen It is also one of Statoil's tasks supply situation still seems to in the light of the fact that to act as an advisory agency to be less stable than it used to be. the Starting decided that it shall the authorities. In this connec­ This gives Norway a certain have laid before it each year in tion Statoil will be in a position, global responsibility, a respon­ the form of a Government White thanks to its knowledge and sibility which is acknowledged Paper "the main aspects of expertise, to provide factual in­ by the Norwegian authorities. Statoil's plans and projects to­ formation, to put forward view­ The role of the large private oil gether with economic estimates points and evaluations, and to companies seems to have and other items involving impor­ make suggestions to the authori­ changed as a result of the tant questions of principle or ties as to the courses they nationalization of oil production political aspects". Statoil's plan should follow. in most of the large oil-producing for any year will normally be countries and the expansion of decided upon at a regular Gene­ 3. Concession round the state-owned oil companies ral Meeting in the spring of During 1974 the Government in these countries. But in Europe the preceding year. pronounced its decision on the and elsewhere it also seems third concession round. In ac­ likely that state-owned compa­ These decisions have formalized cordance with the rules laid nies will have increasing impor­ the established practical pattern down by the Storting, this was tance as part of the different of the way business is handled a limited allocation, with five countries' national oil policy. between state-owned companies concession areas, partly along In West Germany, the United and their General Meeting i.e. the median line with UK waters, Kingdom, Canada and Australia The Ministry of Industry. Statoil's and partly in deepwater areas steps were taken during 1974 role and importance in Norwe­ extending to 62 degrees north, to create oil companies under gian society had created a desire close to the coast. While 50% state control and ownership. for such formalized rules. state participation had earlier been the maximum, in the new Relationship with the authorities The aim of these Articles is to concessions it is a minimum. 1974 saw a clarification of ensure the overall governmental Statoil's participation can be in­ Statoil's situation, especially guidance and control which creased with the volume of with regard to its relationship the Storting had indicated that it eventual production and in cer­ with the political authorities. desired. The Company's special tain cases can reach 75%. It has always been quite clear purpose, which is to carry out Statoil has been given the task, that Statoil's objectives are to the decisions of the superior for the first time, of acting as look after the State's business political authorities, has been operator for one area. This is the interests in the petroleum sector underlined by these new Articles. area covering Blocks 15/11, in accordance with the Articles It is a special characteristic of 15/12 and 6/3. The Company of Association, rules and regu­ Statoil's activities that all the has prepared itself for its role lations laid down by the authori­ tasks of any importance have as operator by, inter alia, leasing ties at any given time. Statoil is been given to the Company a drilling rig, supply ships, etc. thus an instrument for the politi­ through decisions either by the An agreement on principles has cal authorities and carries out the Government or by the Storting. been reached with Esso, which objectives decided upon by the This applies to all participation gives Statoil the opportunity to

4 draw on technical and other assi­ When there is a find, the part­ key blocks, which had been set stance from Essa to the extent ners (including Statoil) must aside for State development, that Statoil wishes. decide within certain agreed after the Ministry of Industry had time limits whether they wish given Statoil this planning task As in the case of Statfjord to take part in the development earlier. For the blocks which in (Blocks 33/9 and 33/12), Statoil of the find and in later produc­ Statoil's jugdment should be may take over at a given time tion development. explored in the course of the as operator of the other areas next few years, Statoil submitted al located, except for the area Statoil shall not pay its share a plan whereby the State through where Norsk Hydro is operator. of the development costs ac­ Statoil on the one hand would crued after the find is declared have control with development The conditions in the standard commercial before it has been and exploitation of possible joint-venture agreements which decided that Statoil shall take finds, and which on the other the Government has negotiated part in the development. hand would ensure the Company are based on the same frame­ the necessary technical and work which the Ministry of Indu­ The State's supervision and other assistance. Through the stry first laid down in the Stat­ control is ensured partly through proposed plan, the State will fjord concession in 1973, general rules about different li­ retain full ownership of any although some parts have been cences and through regulations petroleum which might be found. enlarged. Statoil's share of the from the Government, and partly Possible partners will be ensured exploration costs is met by through Statoil, which through the right to agreed amounts of the other partners and Statoil its participation' percentage has produced petroleum from such does not bear these costs, a large say in decisions in the finds through agreements which whether anything is found or not. different joint ventures. will enable the partners to The costs of development /d recover the invested capital with production are borne .. /'· interest and at the same time in full, in proportion t " will give them a reasonable cipation percentage. profit and a risk premium. In accordance with the wishes of \ "~::~ the Government it is also provi­ \'~. ded that the Norwegian compa­ nies Norsk Hydro and Saga \\ Petroleum s~all be broght into ·.. \ the development in some of the . \ \ key block areas in joint-venture agreements with Statoil.

In connection with the announce­ ments of the results of the third concession round, the Ministry of Industry in principle made a decision on Statoil's plan for key block development. The Ministry informed Statoil that the plan­ ning necessary for the Ministry to grant production licences for blocks 24/12 and 1/9 could im­ mediately be proceeded with regard to the tempo of develop­ ment of the other key blocks, the Government would bide their time for the moment. Activity on the British shelf may, however, necessitate allocation of other key blocks in the near future.

It is here only reasonable to poir'lt out that other actions by the State may become necessary if structures are found on licen­ sed Norwegian blocks where the structures stretch into unallo­ cated areas.

5 Participation in petroleum A division of the gas reserves the construction of a Norwegian expl,oration and production between the British and Norwe­ petrochemical plant at Bamble, Including the blocks allocated gian Shelves has not yet been Norway. The basis for this joint in November 1974, Statoil now made. Statoil's ownership of venture was the State's option holds participation rights in 37 the Norwegian part of Frigg to have NGL (natural gas liquids) blocks or parts of blocks on (Block 25/1) is five per cent. from the Phillips Group's Ekofisk the Norwegian Continental Shelf, field landed in Norway. The and also in four blocks on the The Heimdal Field, also a gas Storting gave its decision on the Dutch Shelf. Three finds in the find, was declared commercial project in June 1974. The State's blocks where Statoil participates in April 1974. Statoil has an op­ option for the NGL contract was have been declared commercial; tion to take a 40 per cent parti­ exercised and transferred to the these are Frigg, Heimdal and cipation in the find. The esti­ three companies. The construc­ Statfjord. The Dutch blocks were mated recoverable reserves of tion work started during the transferred to Statoil by decision natural gas are approx. 60.000 summer of 1974. The ethylene of the Storti ng in May 1973, million cubic metres. Statoil's cracker owned by the joint ven­ together with the other State Boa~d have advised the Ministry ture company Noretyl is sche­ participation agreements which of Industry that the option for duled to go into operation in the State had entered into up State participation should be 1977. The polyethylene and poly­ to that point. exercised. propylene plants which are owned by the joint venture The declaration of Statfjord as Statoil is part owner of company Norpolefin are schedu­ a commercial oil field in August Statex a.s., whose object is the led to go into operation in the 1974 is of great importance and processing of seismic data and period 1977-1980. Statoil has consequence for Statoil as an the establishment of a data bank a 33% holding in both l/S Noretyl oil company. The receoverable to store of data from the Conti­ and l/S Norpolefin. reserves are estimated at 400 nental Shelf which the State will million tons of oi l (3.000 million accumulate in due course. Marketing of royalty oil barrels). Statoil holds a 50% Statoil and Kongsberg Vapen­ In 1974 Statoil. after a request ownership. The find also contains fabrikk own 50% of the shares from the Government, com­ considerable amounts of associ­ each. Statex commenced opera­ menced marketing the State's ated gas. The Statoil/Mobil Group tion during the summer of 1974 royalty oil from Ekofisk. Owing has submitted an application to and by the end of tf'le year had to technical difficulties at the the authorities for a production built up a staff of about 50. Ekofisk field the volume in 1974 plan for Phase I of the Statfjord was less than expected. The oil field development. Statoil's Participation in petroleum is mainly sold in the form of Board has advised the Ministry transportation refined products to customers of Industry that Statoil should ex­ During 1974 the development in Norway, in the other Scandi­ ercise its 50 % ownership right. of an organization for the pipe­ navian countries and elsewhere line company Norpipe a.sand its in Europe. An agreement with The Starting approved in June British sister company Norpipe A/S Norske Shell for refining 1974 the Petronord/Statoil Petroleum UK Ltd. was set in the oil at the Sola refinery was Group's application for the lan­ motion. Statoil owns 50% of entered into. Statoil's work in ding of the gas from the Frigg the shares in both companies. this connection has given the field to St. Fergus in Scotland. The pipeline from Ekofisk to Company important expe~ence As part of the approval, the State Teesside is expected to go into which will be of great value for can demand that certain volumes operation in the middle of 1975. further work in marketing petro­ of gas from the Frigg area should Full operation of the oil pipeline leum products. As in 1974, the be landed in Norway. If gas is cannot, however, be expected Government has decided that in brought ashore in Norway, it before the terminal and pro­ 1975 the State wi 11 take its could be the basis for the con­ cessing installations in Teesside royalty in kind from the Ekofisk struction of a gas-fired power are ready, presumably in the production. The agreement with plant and further development of second quarter of 1976. At the Shell for refining this oil has the Norwegian petrochemical same time it is expected that the been extended through 1975, industry. The Frigg field is now gas pipeline to Emden w ill be with the consent of the authori­ under development. The first ready for use. A substantial cost ties. deliveries to the UK were origi­ escalation has led to the need for nally planned to take place in an increase in Norpipe's equity Organization development 1976. A technical mishap with capital. Statoit increased its staff during one of the permanent platforms 1974 from 54 to 118 at the end when it was about to be installed Participation in petrochemicals of the year. This is a very rapid in the field, however, has ad­ After guidelines had been drawn growth but recruiting has so far versely affected the time­ up by the Norwegian authorities, not been a problem. There has schedule and deliveries cannot an agreement was reached early been a steady flow of well-quali­ now be expected to start before in 1974 between Norsk Hydro, fied applicants and Statoil has the first ha lf of 1977. Saga Petrokjemi and Statoil for already bu ilt up an organization

6 with considerable know-how and products. The rules and regula­ capital requirement for 1975 expertise. The Company is also tions will be drafted by the arises from Statoil's participation in the fortunate position of authorities. The same w ill apply in the Statfjord project and in the being able, through its agree­ to a similar engagement for the petrochemical project at Bamble. ments with cooperating compa­ refining of oil. nies, to obtain special training for In March 1974 Statoil submitted its personnel, both on the theore­ With the considerable volume of to the Ministry of Industry the tical and the practical side. In petroleum which will in the future first estimates of the Company's addition, the Company is also be handled by the State, there capital needs for the period able in various ways to draw is no doubt a need to clarify what 1974-80. The question was upon the substantial personnel should be done with a future thereupon put before the Stor­ resources in cooperating compa­ State-controlled refining and t:ing in Storting Proposal no. 149 nies. With the rather small marketing organization. (1973- 74). organization the Company still has, it is of vital importance for Capital requirements The accounts for 1974 Statoil that if should have the Statoil has earlier pointed out The profit and loss accounts for flexibility of being able to draw that the State's active business 1974 shows a loss of approx. on other companies' know-how interest in the petroleum sector 29 million N. kroner including and assistance. will lead to a considerable need estimated capital tax of for investment. The oil industry N.kr. 500 OOO. The accumulated Future prospects requires large amounts of capital, loss to date is approx. 43 million The Government has made it and there is a substantial time N. kroner. clear that Statoil will assume lag between the time the invest­ the main responsibility for the ment is made and the time it Administrative and operating offshore operations north of 62 is recovered. Statoil will in the costs account for approx. ~3 degrees northern latitude. Work next few years be in an invest­ million N. kroner of the loss in on future exploration and de­ ment phase. On the other hand, 1974, while net interest expences velopment programmes in these it is reasonable to assume that amount to approx. 7 m'illion areas is now in progress. Th is is these investments will be very N. kroner. The gross surplus on carried out in close cooperation beneficical to the Company when sale of oil products is approx. with the Norwegian Petr9leum the different fields are brought 2 million N. kroner. · Directorate, the Ministry of into production. This is expected Industry and other bodies. With to have full impact in the 1980's. With regard to the accounts the know-how the Company further explanation is given in the already has within its organiza­ Following advance notification Notes to the Financial Statement, tion, and through the knowledge to the authorities by the Com­ which form part of this report. which will be bu ilt up during pany, the equity capital was The Board operational participation on the increased by 150 million N. kro­ At the General Meeting in southern part of the Continental ner in 1974 bringing the total to June 1974, the former Chairman Shelf, it is felt that Statoil will 305 million N.kroner. Statoil has of the Board Mr. Jens Chr. Hauge, be well prepared for the tasks applied to the authorities for an Vice-Chairman Vidkunn Hveding which it will have to take on to allocation of an additional 450 and Member of the .Board Per carry out work in the northern million N.kroner in 1975. In addi­ M. Hanssen left the Board, areas. The Company aims to tion to the build-up of equity capi- having served on it since the establish a branch office in ta l in the form of increased share cr~ation of the Company iri North Norway during 1975. capital, it is expected that Statoil September 1972. The Alternate will borrow substantially in 1975. Member Aage Solbakken left the It has been made clear by the This will partly be handled Board in April 1974, to take up political authorities that the through the different ioint ven­ a new posit:ion with another oil State, through Statoil, ought to ture companies. and partly be in company. The present members engage itself in a rational way the form of direct loans to of the Board were· elected at in the distribution of petroleum Statoil. The main part of the the same General Meeting. Stavanger, February 15, 1975 The board of Den norske stats oljeselskap a.s ~/$~ad Finn Lied Ole Chairmann

Aksel Fossen Einar H. Moxnes Tore Sund Ottar Vollan Hans Johan 0degaard

7 Review of the Projects

1974 has been a very active year w ill have a capacity of 12,000 before a decision could be for Statoil. lihe year was domi­ million cubic metre·s of gas taken. nated by further development annually. This capacity can be of existing projects, but some expanded at a later date to The development of the field very important new projects 18,000 million cubic metres. started during 1974. A technical have also been added during mishap with the first platform the year. Frigg and a prolonged strike at one Statoil owns five per cent of the of the construction sites in Scot­ The Norpipe Companies Frigg Field. Frigg is located in land may cause delays in the The laying of the oil pipel'ine Blook 25/1 licensed to the production start. The develop­ from Ekofisk to Teesside in the French-Norwegian Petronord ment programme schedule was UK was completed during the Group. Nors'k Hydro owns revised at the end of the year, spring of 1974. The laying of the 32,87 % and Elf Norge is the and it is now estimated that the gas pipeline to Emden in West operator. first deliveries of gas through Germany proceeded largely In June 1974 the Starting the pipeline will start in 1977. according to schedule, and the approved the landing of the maritime portion of the line was Frigg gas in St. Fergus ·in Scot­ In connection with the Frigg completed in November. By the land. Two pipelines will be laid; development the Norwegian end of the year some of the during 1974 55 kilometres of Government has appointed a pipeline onshore in Germany the f.irst line was laid. special negotiating committee for and the compressor platforms Drilling in the Frigg area has Frigg. The committee's task is to still remained to be completed. resulted in a number of gas discuss with the British authori­ It is expected that the oil pipe­ shows. It has been proved that ties the special problems of jo·int line will be operational in mid- part of the Frigg field stretches exploitation of the field on both 1975, and the whole pipeline into Block 30/10, where Esso is sides of the median line, as system, including the land instal­ the licence holder. Unitization agreed by the licensee·s. Since lations in Teesside and Emden negotiations with Esso have Frigg ·is the first field in the North will be fully operational by been initiated. Further drilHng Sea which straddles the median mid-1976. The Norpipe pipeline will be carried out in the Frigg line, and where international system is at present the largest area in 1975. partition problems occur, the offshore pipeline project in the The division of the Frigg field outcome of the discussions world. between the UK and Norway was will probably have important not clarified during 1974 because bearings on later problems of Statoil owns 50 % of Norpipe, it was felt that further evaluation a similar kin d. and the same proportion of the of the reservoir was needed sister company Norpipe Petro­ Heimdal leum UK Ltd. The remaining The Heimdal structure in Block 50 % is owned by the PhiM ips 25/4 was declared commercial Group. This group consists of in April 1974. Statoil has an op­ the following companies: tion for a 40% participation in Phili'ips Petroleum Heimdal. Statoil has recommen­ Company Norway 36.960 % ded to the Ministry of industry American Petrofina that the option should be exer­ Exploration Company 30.000 % cised. The deadline for exer­ Norsk Agip A/S 13.040 % cising the option is May 1975. Norsk Hydro a.s. 6. 700 % Elf Norge A/S 5.396 % A well on a structure other than Total Marine Norsk A/S 4.047 % Heimdal in Block 25/4 was drilled Aquitaine Norge A/S 2.698 % in the autumn of 1974. The result Eurafrep Norge A/S 0.456 % was a small gas find, not consi­ Coparex Norge A/S 0.399 % dered commercial. During 1975, Cofranord A/S 0.304 % it is expected that two appraisal The head offices of Norpipe a.s wells will be drilled on Heimdal are in Stavanger, and its organi­ proper, to gather more informa­ zation is being developed in tion from the field. Elf Norge is Norway and in Teesside. Nor­ the operator for Heimdal. p·ipe Petroleum UK Ltd. is incor­ Blocks with Statoil participation porated in London. The two on the Norwegian continental companies have identical Boards shelf. of Directors. Upper picture: lihe Chairman of both companies There are large dimensions on the pipe­ comes from Statoil. The capacity lines. This is just one section. of the oi l pipeline is 50 million Lower left: tons of oi l and condensate (NGL) The pipeline on its way to the sea floor. Lower right: a year, while the gas pipeline Technical control of a pipe section.

8

The gas from Heimdal has not yet Statfjord extension on November for Hydro's polyvinylchloride been sold. There is an option 1974. No result of this drilling was (PVC) plant. The problems to sell the gas to the British Gas avaiiable at the end of the year. arising in connection with the Corporation, but no contract has PVC production have resulted been signed, and no decision On the Norwegian side four in a delay of the final decision for about the landing of the gas has wells have been drilled on Stat­ a time-schedule for the vinylchlo­ been taken. fjord so far, and further drilling ride plant, but this has not crea­ will commence when the drillin g ted major problems for the petro­ The licensee for Heimdal is the rig Norskald is back from British chemical project as such. Pan Ocean/Petronord Group. waters in the spring of 1975. If Statoil's option is exercised Marketing the ownership will be as follows: Statoil has a 50% participation, Preliminary work on a practical Pan Ocean Oil and there is a deadline 'in August solution of the marketing ques­ I Norge A/S 19.375 % 1975 for the decision as to tion has been carried out through­ K/S Femogtyvefire whether or not to participate in out the year. The marketing II Norsk A/S 10. 750 % further development. It has been question has important national Bow Valley Exploration recommended to the authorities and socio-economic implications Norge A/S 8.000 % that Statoil shall continue to and the Ministry of Industry is Sunningdale Oils participate in the development. now working on a national Norge A/S 3.875 % Mobil Development Norway A/S solution. It is expected that Stat­ Norsk Hydro a.s 6.228 % is the operator for the Statoil/ oil's role in this field will be Elf Norge A/S 5.233 % Mobil Group which consists of determined during 1975. Total Marine Norsk A/S 3.924 % the following companies: Aquitaine Norge A/S 2.615 % Statoil 50% Statex Statoil 40.000 % Mobil Development A/S Kongsberg Vapenfabrikk Norway A/S 15 % and Statoil established the com­ Statfjord Norske Conoco A/S 10 % pany Statex early in 1975. Th is The Statfjord field in Blocks 33/9 A/S Norske Shell 10% company carries out the proces­ and 33/12 was discovered in Esso Exploration sing of seismic data from the February 1974 and was declared Norway A/S 10 % Continental Shelf and one of its commercial in August. Statfjord Saga/Amoco Group 5 % objectives is to establish a appears to be among the largest The Saga/Amoco Group consists data bank for the Norwegian petroleums finds yet discovered of the following companies: Shelf. Statex is also currently en­ in the North Sea. Development Saga Petroleum A/S 45/24 % gaged in work in establishing a planning is under way. The Amoco Norway A/S 25/24 % geological research laboratory in Statoil/Mobil Group is planning Amerada Hess Norwegian close collaboration with the Con­ a two-phase development for Exploration A/S 25/24 % tinental Shelf Division of the Statfjord. A plan for Phase I Texas Eastern Royal Norwegian Institute for development has been sub­ Norway A/S 25/24 % Scientific and Industrial mitted to authorities; th is calls Research. Statex is currently for on·e concrete production Petrochemicals building up its administration in platform, now being constructed The construction work on a pe­ Stavanger. in Stavanger, Norway, and trochemical complex at Bamble, offshore loading of the oil into Telemark, Norway started during Administration Building tankers. This development can at the summer of 1974, after the Statoil is currently constructing the earliest give a production Storting had approved the an administration building in start at the turn of the year Government's recommendation Stavanger. It will be completed 1977 /78, subject to Government for utilization of the condensate during the autumn of 1975 and approval. (NGL) from the Ekofisk area. The will provide office space for first part of the construction work approximately 250 persons. This A later Phase II would call for consisted of the building of a building will not, however, suffice more platforms, and pipelines new road through the area, and for Statoil's long term needs. It ashore. Statoil has been given this work was completed in 1974. has been decided to purchase a the task of submitting a plan for Initial surface works also started. larger area at Forus, Stavanger, the different pipeline alternatives The main contracts for the ethy­ for future development. from Statfjord, and the first lene cracker and the polyethylene preliminary conclusions on this and polypropylene plants were Dusavig are expected in 1975. awarded during the year. In connection with operations in The etylene cracker will have an the North Sea and employment It is possible that a smaller part annual capacity of 300,000 tons of the drilling rig, Statoil has of the Statfjord field stretches of ethylene. Half of the ethylene acquired a site in Dusavig near into Blocks 211/24 and 211/25 will be utilized by Norpolefin, Stavanger for development as a on the British shelf. The conces­ and the other half by Norsk storage area for equipment and sionaires on the British shelf Hydro for a vinylchloride plant, spare parts for the drilling started drilling on the possible which in turn will be feedstock operations.

10 Upper picture: The site of the petrochemical complex under construction at Bamble, Telemark. The first part of the work was construc­ tion of a new road through the area. Surface work also &tarted dunng 1974 (Foto Fjellanger Wlderee)

Statement of Profit and Loss fortheYear1974 l

1974 1973 N.kr. N.kr. Sales, oil products ...... (1) 98 151 846 Crude oil and direct costs ...... 96 276 406 1 875 440 Salaries and social insurance ...... 7 967 137 2 142 210 Directors' and General Managers' remuneration ... . 306 100 289 200 Other administrative expenses ...... 13 002 925 1804806 Research expenditure ...... 320 999 116 839 Registration fees ...... 1 500 150 1550548 23 097 311 5 903 603 Loss before depreciation ...... 21 221 871 5 903 603 Depreciation ...... 304163 173 385 Loss after depreciation ...... 21 526 034 6 076 988 Interest income and other financial income ...... 14575811 2 862 373 Interest on debts ...... 21 535 012 5691 212 Currency risk fund ...... 4 759 945 6 959 201 7 588 784 Loss before taxes ...... 28485 235 13 665 772 Taxes ...... · · · · · · · · · · · · · · · 500 OOO 14 622 Net loss ...... 28 985 235 13680 394

Upper picture: Persons are dwarfed Inside one of the storage tanks ot Norplpe's site In Teesslde, England. Each tank holds approximately 750 OOO barrels of oil.

Lower picture: The Norplpe facllltles at Teesside, England are among the largest In Europe.

13 Balance Sheet a!S at December 31, 1974

Assets 1974 1973 N.kr. N.kr. Current Assets (2) Cash in hand ...... 60 080 19 868 Deposits with Norwegian banks ...... 107 381 572 47 539 607 Deposits in foreign currency ...... 87 955 974 73 301 619 195 397 626 120 861 094 Short-Term Receivables (3) Accounts receivable ...... 3 960 748 157 747 Interest earned but not due ...... 463 221 459 514 4 423 969 617 261 Investments and Long-Term Receivables Long-term receivables ...... 951 346 763 297 Shares in Norwegian Companies ...... (4) 192 650 OOO 192 150 OOO Shares in Foreign Companies ...... (5) 37 458 980 37 458 975 231 060 326 230 372 272 Fixed Assets (6) Operation equipment ...... 801 747 Transportation equipment ...... 239 OOO 117 OOO Fixture and fittings ...... 3 187 OOO 1 681 150 Installations under construction ...... 28 415 285 Participation in fields (options exercised) ...... (7) 32 348 OOO 5 577 451 Real Estate ...... 6 987 048 335 230 71 978 080 7710831

502 860 001 359 561 458

Stavanger,

Finn Lied Ole Myrvoll Aksel Fossen Einar H. Moxnes Chairrnann Vice-Chairmann

Audited, Auditor's Report submitted fobruary 21, 1975 Karl-Johan Endresen Certified Public Accountant (Norway)

14 Liabilities and shareholders' equity 1974 1973 N.kr. N.kr. Current Liabilities Accounts payable ...... 16 866 065 17 084 294 Interest payable ...... 1646427 2 246 149 Provision for taxes ...... 500 OOO 19 012 492 19 330 443 Long-Term Debt Miscellaneous long-term debts ...... (7) 32 348 OOO 5 577 451 Bank loans ...... (8) 188 575 OOO 188 575 OOO Mortgage debenture (regarding employees housing) .. 88 935 104 246 221 011 935 194 256 697

Currency risk fund 606 436 4 759 945

Shareholders' Equity Share capital ...... (9) 305 OOO OOO 155 OOO OOO Less Accumulated losses ...... 42 770 862 13 785 627 262 229 138 141 214 373

Joint liability kr. 4 754 873 ...... (10)

502 860 001 359 561 458

December 31 , 1974 February 15, 1975

Tore Sund Ottar Vollan Hans J. 0degaard

Arve Johnsen Managing Director

15 Notes to Financial Statements December 31, 1974

General comments Shares in Norwegian and foreign The Frigg field lies on both The Profit and Loss Account companies (none of them quoted sides of the median line bet­ for the year is charged for the on stock exchanges) have been ween the UK and Norway. The following items: valued at purchase price. field will be developed as a a) All expenditure relating to the unit and the accumulated costs Company's development and Special comments to date are based on a preli­ operational actMties; also minary division of the field. registration fees in connection 1) The sales income is derived The division of the field will be with the increase of share from the sale of refined pro­ adjusted at a later date. The capital. ducts. It is made up as follows: amount also includes Statoil's b) Expenditure relating to the Norway . . . . 32 mill. N. kroner cumu lative investments in purchase, collection and pro­ Exports .... 66 mill. N. kroner Pipeline No. 2 to St. Fergus· in Scotland with a Statoil share cessing of geophysical data. Total ...... 98 mill. N. kroner c) All interest charges. of 5 %. 2) Of the Current Assets, depo­ According to the participation Depreciation sits in foreign currency amount agreement (Petronord agree­ Fixed assets have been depre­ to N.kr 87 955 974. These ment) the Petronord Group will ciated according to recommen­ deposits are all in US $ and finance Statoil's share in ded rates, provided the fixed are valued at the exchange full, including interest. The asset ·in question has come into rate ruling on Dec. 31. of N.kr. same amount is therefore en­ use during the year. 5,20 to the US $. tered as long-term debt. This 3) Of the short-term receivables, debt will be repaid out of net Conversion principles N.kr. 385 352 is short-term production profits according for foreign currency finance for employees' to the agreement. Foreign currencies have been housing. If repayment is not completed converted to Norwegian kroner 4) Shares in Norwegian compa­ before the production licence according to the following prin­ nies include Statoil's 50 % expires, the rest of the debt ciples: share in Norpipe a.s and will be waived. Statoil has a) Statement of profit and loss Statex a.s. The total share an option to make prepayment - Expenditure/Income is en­ capital of Norpipe a.s is N.kr. of the debt, and thus take over tered accordinq to the ex­ 384 300 OOO divided into the financing of its share. change rate prevailing at the 3 843 OOO shares of N.kr. 100 8) Bank loans include loans in time of payment each, and of Statex a.s is Norwegian currency amoun­ b) Balance sheet N.kr. 1 OOO OOO divided into ting to N.kr. 25 OOO OOO and - Cash and short-term receiv­ 10 OOO shares ofN.kr. 100each. loans of US $ 30 OOO OOO ables are converted at the 5) Shares in foreign companies converted at the exchange rate exchange rate prevailing at include Statoil's 50 % share of prevail'ing when drawn Dec. 31. the equity capital of Norpipe (N.kr. 5,4525 to the US $). - Long-term receivables/In­ Petroleum UK Ltd. which to­ The exchange rate ruling at vestments are entered at the tals£ 5415228. Dec. 31. was N.kr. 5,20 to the exchange rate prevailing at the 6) See detailed schedule of fixed us$. time they were received/made assets below. 9} The share capital was increa­ - Current liabilities are con­ 7) On May 24, 1973 Statoil sed by N.kr. 150 OOO OOO during verted at the exchange rate exercised its option to acquire 1974. The amount was received prevailing when the loans were a 5 % interest in Production in September 1974. drawn L·icence No. 024 (Frigg). 1O) Statoil, together with the - Estimated currency losses The book value of N.kr. other partners in l/S Noretyl according to these principles 32 348 OOO represents Statoil's and l/S Norpolefin. is jointly are entered against the Cur­ estimated total costs to date liable for the joint-venture rency Risk Fund. in respect of this licence. companies' debt.

Pur- Pur- Pur- Total De pre- Accumu- Net Book chased chased chased Pur- ciated lated Value 1972 1973 1974 chase 1974 Depreation Dec. 31 Equipment 801 747 801 747 801 747 Transportation Equipment 122 508 151 470 273 978 29 470 34 978 239 OOO Fixtures and Fittings 14 500 1 834 527 1 780 543 3 629 570 274 693 442 570 3187 OOO Installations under construction (*) 28 415 285 28 415 285 28 415 285 Interest in fields (option exercised) 5 577 451 26 770 549 32 348 OOO 32 348 OOO Real Estate 335 230 6 651 818 6 987 048 6 987 048 Total 14 500 7 869 716 64 571 412 72 455 628 304 163 477 548 71 978 080 (*) Participation in Noretyl and Norpolefin N.kr. 27 345 925

16 Analysis of Changes in Financial Position

1974 1973 Capital used for N.kr. N.kr. Increase in Norwegian currency deposits ...... 74 536 532 115 985 255 Increase in short-term receivables ...... 3 806 708 609 817 Reduction of current liabilities ...... 317 951 Increase in long-term receivables ...... 688 054 230 316 990 Purchase of fixed assets ...... 64571412 7 869 716 Reduction of currency risk fund ...... 4 153 509 Net loss ...... 28 985 235 Depreciation ...... 304 16:3 28 681 072 13 507 009 176 755 238 368 288 787 Capital provided by Increase in short-term debt ...... 19 272 145 Increase in long-term debt ...... 26 755 238 194 256 697 Currency risk fund ...... 4 759 945 Increase in issued share capital ...... 150 OOO OOO 150 OOO OOO 176 755 238 368 288 787

17 Organization, December 1974

Geophysics, Drilling Market - Analysis Financing Internal and External lnforme­ Regional Geology, Well Complatlon Market - Planning Concessions Budgetlng, Corpo- Personnel Manage- tion rate Planning ment Eva!uotlon Geology, Well Evaluation Trans po rt an dSIae B usI ness L aw Public Affairs Evaluation of Purchasing - Office Production Geology, Reservoir Engineering of Gas.Crude oil and Taxation Finished Product on Projects Board Insurance - Offices Competitor Activities Secondary Recovery Norwegian and Secretarlate Economic Control Office Services International Drilling Operations Markets Accountlng Production Operations Insurance Engineering Technology : Data Processing Pipelines Offshore Structures Production Systems Sub-sea Technology I Storage, Loading I Safety, Environment

Construction Offshore I Down Stream Operations: OperaUons I Technical Resources Project Development Planning Procurement of Materials and Services f

The Departments activities in 1974 Exploration Department. field. Other drilling operations on nizing the section and preparing The Department had seven the Norwegian shelf, where plans for Statoil's own drilling employees at the beginning of Statoil holds ownership, have operations in 1975. By the end of the year. New employees were been followed up. During 1974 the year the section numbered added throughout the year. At the department planned and 14 persons. the end of the year the staff num­ carried out seismic exploration Training programmes were initi­ bered 27. Recruiting visits have along a total length of 3.000 ated and personnel have been been made to the Universities in kilometres on the shelf south of training with the companies Elf, Bergen, Trondheim and Oslo. 62 degrees North. Planning of Amoco, Mobil, Conoco and Shell. The need for additional training seismic exploration for 1975 was The main tasks during the year has been substantial and most of initiated. Regional geological have been in connection with the the personnel have participated work south of 62 degrees was th ird concession round, key in different courses and training started and this work will blocks, block and field evalua­ assignments both inside and continue in 1975. tion. The section has also been outside Norway. engaged in follow-up work The department had been given Technical Department connected with the construction a number of important assign­ Hydrocarbon Development of the drilling rig which Statoil ments, including detailed work on Technology section has chartered as from the sum­ Heimdal and Statfjord and Th is section of the department mer of 1975, contracts for equip­ mapping and determination of the started 1974 with four persons. ment, servicing, supply ships, rig extent and volume of the Frigg Most of the year was spent orga- maintenance, etc., have been

18 negotiated. Furthermore, the is organized in three sections: Statoil are under development. section is now engaged in selling, buying and exchange of Finance and salary accounting recruiting drilling supervisors for products; transport and supply; have been transferred to data the rig. marketing planning and processing. From the beginning budgeting. of 1975 a large operation accoun­ Technical Department Since April 1974 the department ting system has been introduced. Engineering Technology section has been responsible on behalf The ,data processing section is By the end of 1974 this section of the Ministry of Industry for the under systematic development. had a total strength of 13. The transportation, refining and sel­ section has given high priority ling of the royalty oil from developing know-how for pipe­ Ekofisk. For the year 1974 this Administration Department laying technology. During the amounted to 262.000 tons of The department employed 16 year it also built up competence products. persons at the end of the year. in areas such as statics, material Its main areas of responsibility technology, construction techno­ are: logy and petroleum equipment Legal Department Personnel management technology. This work will be By the end of 1974 the depart­ Organization continued during 1975. In the ment employed four persons. Office premises near future areas such as pollu­ Its ma in task is to be responsible Office equipment tion control, environmental data for all the legal aspects of the Office services (waves, weather, wind, etc.) will Company's activities. During the be covered. year the department took part The department's work load The Statfjord projects were given inter alia in the negotiations for increased substantially owing to highest priority during the last new concessions and in the the large increase in the Com­ half of 1974. A special group planning work in connection with pany's total workforce. The same consisting of nine persons was the key blocks. in close sort of development is expected created to study the transpor­ cooperation with the Ministry of during 1975. tation problems connected with Industry. The department also Among the tasks which have the landing of the Statfjord oil. took part in the negotiations needed and will need special In the evaluation work the pro­ regarding the creation of the attention are: blems connected with landing of petrochemical industry in Nor­ Recruiting oil and gas in Norway have been way and subsequent develop­ Housing thoroughly investigated. ment in this connection. The planning of a future admini­ The work of the secretariat to stration centre the Board of Directors is the Organization development Technical Department responsibility of this department. These tasks will call for additio­ Down-stream Operations section na l personnel in 1975. The section for down-stream operations was organized during Finance and Economic the year. By the end of the year Planning Department Public Affairs and its staff numbered 13. The department had a total Information Department The section works in three diffe­ strength of 14 at the end of the This department was established rent fields, processing opera­ year. in 1974 and by the end of the tions, technical resources and It is divided into the following year had a staff of five. The planning. The procurement of sections: department is responsible for the materials and services for Statoil Finance and insurance Company's external and internal is a also one of the section's Economic planning and evaluation information and additiona l public functions. Accounting affairs. Processing operations include Economic control During 1974 Statoil received a coordination responsibility for Data processing considerable number of visits Noretyl and Norpolefin, Frigg During the year substantial con­ from Norwegian and foregn au­ and Heimdal. Some of the per­ tacts were made with both the thorities, news media, industrial sonnel will be trained under va­ Norwegian and international representatives, political orga­ rious agreements which Statoil finance and foreign exchange nizations etc. Extensive travel­ has with its international part­ markets. ling has also been needed. ners. During 1974 our personnel The department participated in In addition, the department is attended a number of different finance committees for Frigg, working on a film about Statoil courses or received on-site Norpipe, Heimdal, Norpolefin and on a number of different training with other companies in and Noretyl. publications. Regular contact has Europe and USA. Substantial work has been done been maintained with Norwegian to create budget systems and and international press, radio and routines for economic control in television. On behalf of the Marketing Department Statoil. Economic evaluation of Statoil/Mobil Group the depart­ The department employed eight different projects has been car­ ment is responsible for the infor­ persons at the end of the year. It ried out. AccounNng systems for mation on the Statfjord project.

19 Articles of Association

Art. 1 The object of Den norske The normal term of office of the types of activity and locali­ stats oljeselskap a.s is, either Representatives is two years. zation of important elements alone or through participation in of the Company's operations. and cooperation with other Art. 8 An Ordinary General Mee­ f) Plans to participate in the companies, to carry out explora­ ting shall be he ld each year exploration of petroleum tion for and production, transpor­ before the end of May. General resources in or outside Nor­ tation, refining and marketing of Meetings are held in Stavanger way, including the exercise of petroleum and related products or in Oslo. government participation and other activities in close rela­ Extraordinary General Meetings option rights. tionship with this. shall be summoned whenever so g) Semi-annual reports on the demanded by the shareholder Company's operations, inclu­ Art. 2 The reg istered office of the or the Board. ding operations of subsidi­ Company is in Stavanger. aries and cooperation ven­ Art. 9 The Ordinary General tures with other companies Art. 3 The share capital of the Meeting deals with: of importance. Company is N.kr. 305 OOO OOO, a) The annual report, annual divided into 3 050 OOO shares of accounts and the auditor's Matters which the Board sub­ N.kr. 100 each. report. mits to the General Meeting b) The question of adopting the pursuant to this Article and, if Art. 4 The Company's Board of annual accounts. possible, matters which the Directors, including the Chair­ c) The appropriation of profit. Ministry has announced that it man and Vice-Chairman, is elec­ d) The election of the Com­ wishes to consider at such ted by the General Meeting. The pany's officers an alternate General Meeting, shall, if pos­ Board shall be composed of officers, and the amount of sible, be set out in writing and seven Directors. Two Directors their remuneration. delivered to the Min istry in good shall be appointed by the Gene­ e) The election of the auditor time before the General Meeting. ral Meeting from among six and the amount of his remu­ If there has been no opportunity nominees elected by and from neration. to submit matters as mentioned among the employees in accor­ f) Any other matters that are above to the General Meeting dance with the rules then in force. specified in the agenda in advance, the General Meeting For the two Directors appointed accompanying the notice of shall proptly be notified of the from among the six nominees meeting or that are taken up Board's resolutions. who are elected by and from pursuant to the Companies Whenever possible, matters as among the employees, one first Act, Section 69A, fourth mentioned in a) and g) above and one second alternate shall paragraph. should be submitted to the Board be appointed from among the of Representatives for their four other nominees. Art. 10 The Board shall submit opin'ion. For the other Directors, two to the General Meeting, ordi­ The General Meeting decides alternates shall be elected, one nary or extraordinary, all whether to take note of the first and one second alternate matters which are presumed Board's submissions under this member. to involve significant political Section, to approve them or The normal term of office of the questions or questions of alter them. Directors is two years. principle and/or which may have important effects on the Art. 11 The provisions of the Art. 5 Any two Directors jointly nation or its economy. Companies Act shall be supple­ may sign for the Company. The Such matters shall be deemed mentary to these Articles of Board may grant power of pro­ to include, inter alia: Association. curation. a) Plans for the next following year with economic surveys, Art. 6 T·he Board shall engage the including plans to cooperate Company's General Manager with other companies. (Managing Director) and stipu­ b) Essential changes of such late his salary. plans as mentioned in a) above. Art. 7 The Company shall have a c) Plans for future activities, Board of Representatives consis­ inculding participation in ting of 12 Representatives. Eight activities of major importan­ Representatives are elected ce in other companies or by the General Meeting and four cooperation ventures in which Representatives by and from the Company participates or among the employees in accor­ plans to participate. dance with the rules then in d) Matters which seem to ne­ force. cessitate additional appro­ The Board of Representatives priation of Government funds. shall meet at least twice a year. e) Plans for establishing new

20 Participation agreements

Norwegian continental shelf

1969 licence: 1971 agreement:

(- '• • ,•. : 1 ' :~·~: -': :;-:, ,-~;_I•<) ' ',. - - .

~ '' ' . ' .: . ,. .1 ~ ·· . ·.·) . ' ... - .

1973 licence:

- ' . ' --: . . ' . ~

• •I• • ' ~ • '

1974 licence:

Changes in 1965 agreements

Dutch shelf

In connection with changes in 1965 agreement with Conoco/Gulf . ....-- - •--;• Norpipe Pipelines . - • / . . . . Statoil's share 50% \ • ; '- ~ f ~ • I ;-- I ' ( ~ • ,' •

I ' : f ' ' • ~{ ' : ~.• ~ I > 1, ' l I • r ' ~ ~ ; :, • l l - - . . I \ ! I I I I I I I I l ' ' \ \ \ I I I \ Ekofisk I \

:i•esside

21 Oil and Gas Discoveries on the Norwegians Continental Shelf

Phillips Group ...... block 7/ 11 Cod ...... Condensate 1968 Murphy Group ...... block 2/3 2/3 ...... Gas 1969 Phillips Group ...... block 2/4 Ekoflsk ...... Oil/gas 1970 Essa ...... block 25/8 25/8 ...... Oil 1970 Amoco/Noco Group ...... block 2/5-2/4 Tor ...... Oil/gas 1970 Phillips Group ...... block 2/7 Eldfisk ...... Oil/gas 1970 Phillips Group ...... block 2/4 West-Ekofisk ...... Oil/gas 1970 Petroaord Group ...... block 25/1 Frigg ...... Gc:s 1971 Phillips Group ...... block 17/12 Bream ...... Oil 1971 Amoco/Noco Group ...... block. 2/5 SE-Tor ...... Oil/gas 1972 Pan Ocean/ Petronord Group ...... block 25/4 Heimdal ...... Gas 1972 Phillips Group ...... block 2/7 Edda ...... Oil/gas 1972 Shell/ Phillips Group ...... block 1/6-2/4 Albuskjell ...... Oil/gas 1973 Petronord Group ...... block 25/2 E-Frigg ...... Gas 1973 Phillips GrQUP ...... block 17/12 Brisling ...... Oil 1973 Ph illips Group ...... block 2/4 NW-Tor ...... Oil 1973 Statoil/Mobil Group ...... block 33/12 Statfjord ...... Oil/gas 1974 Essa ...... block 30/12 Odin ...... Gas 1974 Petronord Group ...... block 25/1 NE-Frigg ...... Gas 1974 Esso ...... block 15/6 15/6 ...... Gas 1974 Petronord Group ...... block 25/1 SE-Frigg ...... Gas 1974 Amoco/Noco Group ...... block 2/11 Hod ...... Oil 1974

22 Den norske stats oljeselskap a.s

The Board : Director Finn lied, chairman, Skedsmo Member of the Storting Ole Myrvoll, vice chairman, Bergen Member of the Storting Aksel Fossen, Hordaland District Governor Einar H. Moxnes, S0r-Trnndelag Engineer Tore Sund, Stavanger County councillor Ottar Vollan, Bod0 Economist Hans Johan 0degaard, Stavanger

ALTERNATE MEMBERS: For the members Lied, Myrvoll, Fossen, Moxnes, Vollan: Professor Hans J. A. Kreyberg, Trondheim Member of the Stortlng Kristin L0nningdal, Roga land

For the members Sund, 0degaard: Engineer Erik Kastellet, Stavanger Secretary Ase Gjerdsj0, Stavanger * The Board members Sund and 0degaard and the alternate members Gjerdsj0 and Kastellct are elected among the Statoil staff.

AUDITOR: Certified public accountant Karl-Johan Endresen

Board of Representatives: Elected January 20. 1975 Member of the Storting Egil Aarvik, chairman, Akershus Secretary Ronald Bye, vice chairman, Oslo LO-secretary Odd Bakkejord, Bod0 Member of the Stortlng Bodil Bjartnes, Oppland Teacher Grete Westergaard Bj0rlo, Alesund Economist Erik Elk, Sandnes Managing director Egli Flaatin, Mo i Rana Engineer Ove E. Huus, Stavanger Geologist Arne Lervlk, Stavang er Lord Mayor Arne Rettedal, Stavanger Member of the Stortlng Kai 0verland, s,1ir-Trnndelag Economist Hans Petter Aas, Stavanger

ALTERNATE MEMBERS: Economical director Johannes Andreassen, Narvik Engineer lngebret Gausland, Stavanger Lord Mayor Asbj0rn Jordal, Kristiansund N. Secretary Evy Buverud Pedersen, Oslo Economist Einar Slagstad, Stavanger

* The representatives Eik, Huus, Lervik and Aas and the alternate members Gausland and Slagstad are elected among the Statoil staff.

Administration : Arve Johnsen, Managing director Olav K. Christiansen, Manager Technical Department Tor Especial, Manager Finance and Economic planning Department. Philip H. Halstead, Manager, Exp loration Department Arne H. Halvorsen, Manager Public Affairs and Information Department Christian Halvorsen, Manager Adm inistration Department Eugene B. Muehlberger, Manager Technical Department Jon Rud, Manager Legal Department Erik Schanche, Manager Marketing Department Helge Sklnnemoen, Manager Technical Department

23 Den norske stats oljeselskap a.s. Lagardsveien 80 -P. 0 . Box 300 - 4001 Stavanger - Norway Phone (045) 33 180 - Telex: 33211 stato n