Annual report 2001 SDFI and Petoro AS Contents Petoro – the best partner . .1 This is Petoro . .2 Petoro AS directors’ report 2001 .6 SDFI directors’ report 2001 . .9 The portfolio . .13 SDFI accounts based on the accruals principle: SDFI income statement . .16 SDFI balance sheet . .17 SDFI cash flow statement . .18 SDFI accounts on a cash basis: SDFI appropriation accounts . .19 SDFI capital accounts . .19 SDFI accounting principles . .20 SDFI notes . .21 Overview of SDFI reserves: Estimated oil and gas reserves . .30 Petoro accounts: Petoro AS income statement . .31 Petoro AS balance sheet . .32 Petoro AS cash flow statement . .33 Petoro AS notes . .34 Petoro AS auditor’s report . .37 Design and production: Printers AS, Stavanger BARENTS SEA NORWEGIAN SEA NORTH SEA Petoro - the best partner Kjell Pedersen, president and CEO The establishment of Petoro realise its vision of being the best information, building knowledge, followed from the decision of the partner. Petoro intends to be an comparing performances and apply - Storting (parliament) in the spring active partner, contributing to ing unified perspectives to increase of 2001 that commercial aspects of increased value creation through value creation. the state’s direct financial interest unified assessments. (SDFI) on the Norwegian continen - In order to follow up its focus, tal shelf (NCS) should be managed The company must add something Petoro’s knowledge and influence by a wholly state-owned limited new or better if it is to make “a must find expression in the rele - company. positive difference”, and to create vant fora – and in accordance with more value than purely passive the rules of the game which apply On that basis, Petoro will act as the ownership. on the NCS. To a great extent, licensee for the interests which it therefore, the arena for the compa - manages on behalf of the govern - Petoro will not cover the same ny’s operations is the individual ment. This means in practice that range of activities as the other play - licences and projects, while its Petoro has the rights and duties of ers. Its overall operations will pro - greatest contribution will be to see a participant as specified in joint vide a platform to enhance value opportunities for increased value operating agreements between creation on the NCS beyond the creation in a broader context. licensees, and otherwise as a level which would otherwise be licensee under the regulations attained. Petoro must give priority to the governing offshore operations. areas – and the phases in decision- The company will devote all its making processes – where it can In discharging its responsibilities, attention, expertise and capital to make a constructive contribution in Petoro will set the highest possible developing Norwegian resources. the most targeted and effective way performance standards. The com - Its large and broad participation as a proactive partner and value pany’s daily operations will aim to provides opportunities for gathering creator. 1 This is Petoro Petoro manages large assets on and processing facilities at Kårstø, • it will be focused on the NCS behalf of the Norwegian state. Its Kollsnes, Zeebrugge, Emden, St principal job is to create the largest Fergus, Dunkerque, Tjeldbergodden • the size, breadth and value financial value, on a commercial and Mongstad. of its portfolio make Petoro basis, from the government’s oil a very significant player and gas portfolio. The company’s The main features of its mandate key duties are accordingly: are: • a strong position is held in • Petoro will manage, as the licens - gas fields and infrastructure • managing the state’s direct ee, the SDFI on the NCS financial interest (SDFI) in those • it will have the same rights and • it will be a professional part - partnerships where such holdings duties as other licensees ner – not an operator exist at any given time • it will provide acceptable man - • monitoring Statoil’s sale of the agement in accordance with com - • its ownership and resources petroleum produced from the mercial principles lay the basis for a long-term SDFI, as specified in the sales • its aim is to achieve the best commercial involvement. and marketing instruction issued possible result for the govern - to Statoil ment as owner – a common These unique features will be • financial management, including owner strategy. developed to provide Petoro’s char - accounting, for the SDFI. acter and strength. On the basis of its mandate and After some 21.5 per cent of the portfolio, Petoro is characterised by On the basis of the knowledge and SDFI’s assets have been sold off, five unique features which provide information gained from work in Petoro is a licensee in 80 produc - a foundation for its work: the licences, three perspectives are tion licences as well as terminals central for value creation: 2 • The NCS perspective results and exerting selective This involves a focus on issues influence on areas with the high - Strategic direction which will be relevant for the whole est potential NCS as well as for developing the - major assets demand professional composition of the SDFI portfolio. financial management and report - Examples include research and ing of results. development, new applictions for Examples: Operative oil Passive information technology/infrastruc - - following up targets in licences co5mpany par5ticipant ture, environmental issues, devel - - HSE monitoring opment of small fields, improved - unitisation/redetermination recovery and efficient systems and - SDFI budget and accounts operations. - Petoro budgeting and cost control Active partner on the NCS who will contribute through leading-edge - basis for valuations and perform - expertise to enhanced value creation • Area perspective/oil focus ance targets. A partner who participates in a licence management department is number of licences in an area will • Proactive partner to maximise value creation for the be able to take an overall view - licence know-how combined with owner through its work in the vari - more easily than others and obtain the various perspectives provides ous production licences and by iden - area-wide gains. Active coordina - opportunities for acting as a tifying and achieving synergy gains tion across licences – for both proactive partner in value-creating between various licences in specific development and operation – could activities. areas of the NCS. Its staff will reduce unit costs and enhance Examples: accomplish this by stretching them - recovery in an area. Revenues from - Tampen area towards its final selves to fulfil the vision of being the oil side will play a key role in phase the best partner, which guides the SDFI portfolio over the next - improved recovery on the NCS/in behaviour in relation to the authori - few years, and this requires a high specific areas ties, the industry and the communi - level of attention. Petoro will both - new concepts for unitisation/ ty to which Petoro belongs. contribute to higher value creation redetermination and ensure that the government - environmental challenges for the Petoro will be a small, knowledge- receives its rightful share. industry based organisation managing the - step-change within safety. largest portfolio on the NCS in • Gas perspective accordance with commercial princi - Gas plays a crucial role in Petoro will create lasting value from ples. This means that the licence Norwegian resource management, oil and gas through commercial management department will focus both because it is used to improve operations which also take account its resources on fields and area with oil production and because the cost of the environment and help ensure the greatest potential for value cre - structure and field properties make that health and safety standards are ation. Agreements to provide busi - coordination of the gas business met. It is important that the compa - ness management on Petoro’s behalf essential. The termination of the ny’s permanent staff commands a could be concluded for other fields. gas negotiating and gas supply significant part of the expertise committees (GFU/FU) provides new needed to fulfil its responsibilities. John Vemmestad incentives for the players, changes However, interaction with external (53), vice president motivating forces and collaborative expertise will be important for oper - licence manage - patterns in the Norwegian gas busi - ating effectively with a small, flexi - ment. Graduate ness, and strengthens the need for ble organisation. Even with its very engineer. Previous unified assessments. extensive portfolio, Petoro is intend - experience includes ed to have a lean permanent staff of the Norwegian In its work on these perspectives, about 60 people, supplemented by Petroleum Directorate (NPD) and Petoro has defined the following outsourcing certain tasks. BP, where he was area manager mode of working and two principal for the southern NCS. roles: LICENCE MANAGEMENT • Licence monitoring/financial man - Petoro is the licensee and commer - INFRASTRUCTURE agement cial manager of the state’s direct The infrastructure department will - licences are central for monitoring interests on the NCS. The job of the maximise value creation for the 3 owner by managing the state’s Almost 20 years of experience at Tor Rasmus extensive interests in pipeline sys - Conoco, including various manage - Skjærpe (52), vice tems and land-based facilities. To ment posts in the USA, Dubai, president technology ensure the largest possible value Sweden and Norway. and ICT. Graduate creation from oil and gas fields, engineer, Norwegian Petoro will lay the basis for com - FINANCE AND PROCUREMENT Institute of mercial utilisation of the infrastruc - Organising and implementing overall Technology (NTH). ture. The company is actively planning, budgeting, accounting and Long experience from oil and gas involved in further development of reporting for the SDFI portfolio is a operations. Previously head of Norsk the NCS, both as manager of the key role for Petoro. The finance and Hydro’s operations in the Tampen largest infrastructure holdings and procurement department will handle area of the northern North Sea. as a field licensee.