Petoro - a driving force on the Norwegian continental shelf

SDFI and Petoro annual report 2013
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The business

Petoro is a limited company owned by the Norwegian state. Its main duties are specified in chapter 11 of the Petroleum Act and the company’s articles of association, and are defined in more detail by the Ministry of Petroleum and Energy in the annual letter of assignment. 
The purpose of the company is, on behalf of the state and at the expense and risk of the state, to be responsible for the commercial aspects related to the state's direct involvement in petroleum activities on the Norwegian continental shelf (NCS), and business associated herewith.

Petoro’s principal objective is to create the highest possible financial value from the state’s oil and gas portfolio on the basis of sound business principles.

The company has three main duties:
  • management of the state’s participatory interests in the joint ventures where the state has such interests at any given time
  • monitoring Statoil’s marketing and sale of the petroleum produced from the state’s direct participatory interests, pursuant to the marketing and sale instruction issued to Statoil
  • financial management, including preparation of budgets and keeping of accounts, of the state’s direct participatory interests.

Petoro’s operations are subject to the Norwegian Limited Liability Companies Act and the Norwegian Petroleum Act, and to the government’s financial regulations – including the rules on appropriations and accounting. Its activities are governed by the Ministry of Petroleum and Energy’s instruction for financial management of the SDFI and the annual letter of assignment (previously the letter of award). In addition, the company’s articles of association, strategy, values and guidelines on business ethics, including its guidelines for exercising the company’s CSR, provide guidance for the conduct of Petoro’s business.
The company’s vision is to be a driving force on the NCS.

Petoro’s strategy is focused on the value potential of the portfolio and positions where Petoro has the greatest ability to exercise influence. The strategy was revised in 2013 and falls into three parts. It continues to be weighted towards an active role in mature fields – both because of their value in the portfolio and because taking investment decisions which secure the recovery of the remaining resources is time-critical. The strategic topics are:
​mature fields:
  • investing for improved recovery
  • field development: safeguarding future opportunities
  • far north: promoting integrated development.

The organisation is designed to support the new strategy and drive its realisation forward.

The company is the licensee – with the same rights and obligations as the other licensees – for holdings in 179 production licences and 15 joint ventures and companies for pipelines and terminals at 31 December 2013. The SDFI participates in 33 producing fields, of which the 10 largest account for about 80 per cent of the portfolio’s value. Petoro is an active partner which, through overall assessments and a purposeful commitment, contributes to maximising the value of the portfolio. This work is oriented towards areas and assignments in which the company, on the basis of the portfolio and in collaboration with other players on the NCS, can best contribute to achieving value creation. Petoro is concerned to achieve good governance in the joint ventures, and cooperates with its partners on further development of good performance-management processes in selected licences.
 
The company has internal instructions for dealing with inside information received by Petoro. These apply to the company’s directors, employees, auditor, advisers or others in a relationship with the company who receive information expressly defined as “inside information” within the meaning of the Norwegian Securities Trading Act. A special system has also been established for approving external directorships held by employees.
  
Petoro presents separate accounts for SDFI portfolio transactions, which form part of the government’s accounts and are audited by the Auditor General of Norway. Cash flows generated from the portfolio are transferred to the government’s own accounts with the Bank of Norway. Petoro reports annual cash flows from petroleum activities on the NCS to the government in accordance with the regulation implementing the extractive industries transparency initiative (Eiti) in Norway, which came into force on 1 July 2009.