ANNUAL REPORT 2020 CONTENTS LETTER FROM THE CEO 4 BOARD OF DIRECTORS 44 KEY FIGURES 2020 8 EXECUTIVE MANAGEMENT TEAM 48 HIGHLIGHTS 2020 10 BOARD OF DIRECTORS’ REPORT 52 THE VALHALL AREA 16 REPORTING OF PAYMENTS TO GOVERNMETS 72 IVAR AASEN 20 BOD’S REPORT ON CORPORATE GOVERNANCE 74 THE SKARV AREA 24 FINANCIAL STATEMENTS WITH NOTES 88 THE ULA AREA 28 THE ALVHEIM AREA 32 JOHAN SVERDRUP 36 THE NOAKA AREA 40 COMPANY PROFILE Aker BP is an independent exploration and production Aker BP is headquartered at Fornebu outside Oslo and has company conducting exploration, development and produ- offices in Stavanger, Trondheim, Harstad and Sandnessjøen. ction activities on the Norwegian continental shelf (NCS). Aker BP ASA is owned by Aker ASA (40%), bp p.l.c. (30%) Measured in production, Aker BP is one of the largest and other shareholders (30%). independent oil and gas companies in Europe. Aker BP is the operator of Alvheim, Ivar Aasen, Skarv, Valhall, Hod, Ula The company is listed on the Oslo Stock Exchange with and Tambar, a partner in the Johan Sverdrup field and holds ticker “AKRBP”. a total of 135 licences, including non-operated licences. As of 2020, all the company’s assets and activities are based in Norway and within the Norwegian offshore tax regime. OUR ASSETS arstad AND OFFICES andnessen ar Trondei lei orne taaner ar asen oan erdrp operated inor laTaar alallod · ESG IN AKER BP SUSTAINABILITY REPORT 2020 Aker BP’s Sustainability report 2020 describes the ESG in Aker BP company’s management approach and performance to environment, social and governance. The report can be found here LETTER FROM THE CEO UNIQUELY POSITIONED FOR VALUE CREATION 2020 proved a more challenging year than any of us could have imagined. The COVID-19 pandemic shut down the world and oil prices plummeted. We all had to deal with unprecedented uncertainty and fast-paced change. I am immensely proud to say that the Aker BP team rose to the challenges. We enter 2021 stron- ger than we were a year ago, with a robust balance sheet and a solid investment portfolio, poised for further value creation. Strong performance in a challenging year We delivered on our production guidance for 2020 and our Operating our assets safely, efficiently, and with low costs is costs came in below projections for the year. Production the cornerstone of Aker BP’s value creation. Despite challen- costs amounted to USD 8.3 per barrel, a significant redu- ges, we delivered strong operational performance in 2020. ction compared with the corresponding 2019 figure. Factors that contributed to this cost reduction include top-quartile Protecting our people and operations was our immediate production efficiency of 92 percent, and new low-cost priority in response to the COVID-19 outbreak. We moved production from the Johan Sverdrup field. Our ambition is a swiftly to establish a comprehensive regime of personnel production cost below USD 7 per barrel. transport, quarantine hotels, and testing stations. Our mea- sures proved effective: By year-end, our operations had not Our CO2 emissions intensity for 2020 was 4.5 kg per barrel experienced any COVID-19 disruptions. of oil equivalent (boe), which is approximately one-third of the world average for our industry. Nevertheless, our Protecting our financial strength was another initial key ambition is not only to remain below 5 kg/boe, but to further priority in our pandemic response. We adapted to macro reduce emission intensity. uncertainties and put all new investment decisions on hold, postponed exploration wells, and reduced quarterly dividend payments by two thirds. 4 · Aker BP Annual Report 2020 · Letter from the CEO LOWER EMISSION INTENSITY LOWER COST CO₂ kg/boe Production cost USD/boe 30 30 14 14 25 25 12 12 10 10 20 20 8 8 15 15 6 6 10 10 4 4 5 5 2 2 0 0 0 0 North Africa Global Norway BP BP BP 20 20 2020 BP America 20 avg. 20 20 2020 ambition ambition 20 20 next decade next decade Source: NOROG/IOGP Pure-play oil and gas company with industry- Efficient low-cost operations enabled by leading low emissions digitalisation The energy transition the world is facing will require the Digitalisation remains one of the pillars of Aker BP’s impro- most carbon and cost efficient barrels of oil that can be vement program, and we have made significant progress in produced. Low-cost, low-carbon-emission production is an this area over the last several years. integral part of Aker BP’s business strategy. Through the Cognite Data Fusion we are aggregating all Aker BP is and will continue as a pure-play oil and gas our operational data in one single platform, available 24/7 company. For the world to maintain an affordable, secure, with exceptionally low latency. We utilise the data gathered and sustainable energy system throughout the energy trans- to improve our business and decision-making processes. ition, oil and gas must remain an essential part of the global We have established our own digital organisation, EurekaX, energy mix in coming years. The climate challenge can only tasked with managing all our digital projects and driving the be resolved if oil and gas companies mobilise the full range necessary digital transformation at Aker BP. of their technological and commercial capabilities. Thus, Aker BP’s dedication as a pure-play oil and gas company remains I am convinced that digitalisation can deliver radical impro- firm. vements in project execution time, cost, and quality. Such improvements will result in greater returns on Aker BP’s We will maximise the value creation from our assets and investments. Our long-standing collaboration with Aker activities. In so doing, we will not only grow the profits we Solutions has led to the establishment of Aize, an indus- can distribute to our shareholders, but also make impor- trial software company in which Aker BP has a 10 percent tant contributions through the taxes we pay. Such profits ownership interest. Aize helps customers make fundamen- and taxes can then be redeployed, wherever economic and tal, data-driven changes to the planning and execution of environmental returns are most beneficial. complex, capital-intensive projects and operations. We are committed to minimising emissions from our ope- Our next big digitalisation initiative is within subsurface, rations. Reducing emissions is important, and not only from where we already have enormous amounts of data. Once we an environmental perspective. As the cost of emitting carbon liberate these data and make them available on one platform, dioxide rises, CO2 emissions have a direct financial impact. I believe we will experience a revolution in data-driven auto- mation, innovation, and insight, which will in turn facilitate We will share our data, know-how and technology with further value creation. other industries. Aker BP’s role in the energy transition is not limited to how we produce energy. It is also about developing innovative industries and generating new busi- ness opportunities. 5 · Aker BP Annual Report 2020 · Letter from the CEO Project execution through world-class alliances footprint. Ærfugl has contributed to an increase in produ- Aker BP has formed strategic partnerships with key suppli- ction from the Skarv FPSO and up to 30 percent cut in CO2 ers. Collaborating under our One Team approach in the Aker emissions per barrel of oil equivalent. We have demonstrated BP alliance model, we have established eight alliances, and top-class teamwork. Together with our alliance partners, have made great advances. Our subsea tieback projects are Aker BP has introduced new technology, such as a full digital executed significantly faster than before, our drilling opera- twin of the topsides, wells and subsea, and a high level of tions have become more efficient, and we are constructing automation that will fast-track Skarv into the future. platforms faster and cheaper than ever. Strong production growth from investing in high- On 12 November 2020, Aker BP and our partners Equinor, return barrels Wintershall DEA, and PGNiG announced production In June 2020, the Norwegian parliament introduced tem- start-up at Ærfugl Phase 1 in the Norwegian Sea. This porary changes to Norway’s petroleum tax regime. These alliance project was delivered on time and budget. Ærfugl, changes were made in response to a sharp decline in invest- which is a tie-in to the Skarv FPSO, has become one of the ment activity. The purpose of the time-limited changes is to most profitable development projects on the Norwegian stimulate companies to resume investing, thus protecting continental shelf with a break-even price below USD 15 per jobs, and preserving expertise and industry capacity and barrel. capabilities. The tax regime is also intended to support value creation and generate additional long-term tax revenues for From concept selection in 2017 to production start the Norway. Ærfugl development has recorded a 20 percent CAPEX reduction and an improvement in the per-barrel break-even The temporary tax regime applies to all CAPEX in 2020 price of more than 50 percent. Moreover, execution time has and 2021, and all CAPEX up until production start for new been cut by 40 percent compared with a more traditional projects where a field development plan is submitted to the project execution model. The Subsea Alliance, Semi Alliance, relevant authorities by year-end 2022. Aker BP has prepared and Modification Alliance have all played a vital role in these a list of 11 prioritised projects that we intend to fit within the achievements. temporary tax system. Collectively, these projects represent more than 500 million barrels of net oil and gas resources To me the Ærfugl development project is a manifest of with an average break-even price of USD 27 per barrel.