SDFI - Notes 1-10

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Twelve production licences were awarded with SDFI participation in 2015. Nine of these were formally allocated, along with two carve-outs, by the Ministry of Petroleum and Energy on 7 February 2015 in connection with the awards in predefined areas (APA) for 2014. In addition, one licence was carved out of an existing licence with SDFI participation. Twenty production licences were relinquished. In January 2016, Petoro received interests to manage in 13 production licences under the 2015 APA.
    
Plans for development and operation (PDOs) for Johan Sverdrup and Maria were approved in 2015. In addition, PDOs were approved for Gullfaks Rimfaksdalen and the first phase of the Shetland/Lista development on Gullfaks. A unitisation of the Gullfaks area took place.


 
 

All figures in NOK million	Book value at 31 Dec 14	Historical cost at 1 Jan 15	Acc. depreciation 1 Jan 15	Addition 2015	Impair-ment 2015	Dis-posal 2015	Trans-fers 2015	De-preciation 2015	Book value at 31 Dec 15
Fields under development	11 044	11 044	0	4 363	0	0	(4 315)	0	11 092
Fields in operation	185 581	495 702	(310 121)	14 542	(4 746)	0	6 392	(27 330)	174 439
Pipelines and  terminals	34 979	69 209	(34 230)	2 250	0	0	0	(2 007)	35 222
Capitalised exploration expenses	6 541	6 541	0	1 093	(60)	(735)	(2 077)	0	4 763
Total tangible fixed assets	238 146	582 497	(344 351)	22 248	(4 806)	(735)	0	(29 337)	225 516
Intangible assets	417	615	(199	22	(350)	0	0	(13)	76
Financial fixed assets	101	101	0	180	0	0	0	0	280
Total fixed assets (NGAAP)	238 663	583 213	(344 550)	22 450	(5 157)	(735)	0	(29 350)	225 872
Translation to cash basis	(49 175)	(81 877)	32 702	6 505	3 914	735	0	5 623	(32 398)
Total fixed assets on cash basis	189 488	501 336	(311 848)	28 955	(1 243)	0	0	(23 726)	193 474

 

Tangible fixed assets for the Snøhvit field include a capitalised long-term financial charter for three ships used for LNG transport from the field. These vessels are being depreciated over 20 years, which is the duration of the charter.
    
Substantial impairment charges were taken in 2015 on certain fixed assets under fields in operation. The utility value is calculated using discounted expected cash flows, which are discounted using a discount rate based on the WACC. Impairment tests are based on Petoro’s best estimate of cash flows (market prices, production, costs and exchange rate assumptions). Where the utility value is assessed to be lower than the book value, the assets are written down to their utility value.
    
Intangible assets relate mainly to rights in the gas storage facility at Aldbrough. Total capacity for the SDFI and Statoil is 100 million scm, of which the SDFI’s share is 48.3 per cent. The amount invested is depreciated on a straight-line basis over the estimated 25-year economic life. An impairment charge of NOK 350 million was taken for Aldbrough in 2015, primarily because of lower prices and reduced volatility as well as higher operating expenses. Investment in further development of the Etzel gas storage facility and a small amount for Åsgard Transport are included in intangible assets.
    
Financial fixed assets of NOK 280 million include the following.

• Capacity rights for regasification of LNG at the Cove Point terminal in the USA, with an associated agreement on the sale of LNG from Snøhvit to Statoil Natural Gas LLC (SNG) in the USA, reclassified with effect from 2009 as a financial fixed asset. This activity is assessed as an investment in an associate and recorded in accordance with the equity method. See also note 11. The SDFI participates in SNG under the marketing and sale instruction with regard to activities related to the marketing and sale of the government’s LNG from Snøhvit. Cash flows from the SNG are settled on a monthly basis in connection with the purchase and sale of LNG from 2014.
• A total book value of NOK 3.98 million is recorded for shareholdings in Norsea Gas AS and Norpipe Oil AS.

 

Market primarily comprises revenue from the onward sale of gas and tariff revenues.

 

All crude oil, NGL and condensate from the SDFI are sold to Statoil, and all gas is sold by Statoil at the SDFI’s expense and risk. Virtually all the gas is sold to customers in Europe, and about 30 per cent of the annual volumes are purchased under long-term contracts by the four largest customers.

 

All figures in NOK million	2015	2014
Production expenses
Licence	15 264	17 375
Other infrastructure	1 445	1 904
Total production expenses	16 709	19 280
Other operating expenses
Licence	13 500	13 419
Market	6 178	5 804
Elimination internal purchases	(4 600)	(4 699)
Total other operating expenses	15 078	14 524
Total operating expenses	31 787	33 804
Conversion to cash basis	3 435	862
Total cash basis	35 222	34 666

Market primarily comprises the cost of purchasing gas for onward sale and tariff expenses. 

 

 

All figures in NOK million	2015	2014
Petroleum products	2 370	2 548
Spare parts	1 916	2 490
Total inventories	4 287	5 038

Petroleum products comprise LNG and natural gas. The SDFI does not hold inventories of crude oil, which is sold in its entirety to Statoil.
    
Not relevant to the accounts on a cash basis.

 

Interest on the state’s fixed capital is incorporated in the accounts on a cash basis. Interest amounts are calculated in accordance with the requirements in the 2015 letter of assignment to Petoro from the Ministry of Petroleum and Energy.
    
Interest on the state’s fixed capital is charged to operations in order to take account of capital costs and to provide a more accurate picture of the use of resources. This is a calculated expense without cash effect.
    
The accounts on a cash basis included an open account with the government which represents the difference between charging to type/category in the appropriation accounts and liquidity movements.
    
Interest on the open account with the government is calculated in accordance with the 2015 letter of assignment to Petoro from the Ministry of Petroleum and Energy. The interest rate applied is related to the interest rate on short-term government securities and corresponds to the interest rate applied to short-term loans to the Treasury, calculated on the basis of the average monthly balance in the open account with the government.
    
Not relevant to the accounts based on the Accounting Act (NGAAP).
 

 

Net financial items	2015	2014
Interest	53	1
Other financial revenue	42	42
Currency gain	11 697	9 055
Currency loss	(10 754)	(7 251)
Interest costs	(397)	(397)
Interest on decommissioning liability	(1 632)	(1 910)
Net financial items	(991)	(462)

 

The government, represented by the Ministry of Petroleum and Energy, owns 67 per cent of Statoil and 100 per cent of Gassco. These companies are classified as close associates of the SDFI. Petoro has significant equity interests in pipelines and land-based facilities operated by Gassco.
    
Statoil is the buyer of the government’s oil, condensate and NGL. Sales of oil, condensate and NGL from the SDFI to Statoil totalled NOK 59.9 billion (corresponding to 152 million boe) for 2015, compared with NOK 86.4 billion (150 million boe) for 2014. 
    
Statoil markets and sells the government’s natural gas at the government’s expense and risk, but in Statoil’s name and together with its own production. The government receives the market value for these sales. The government sold dry gas directly to Statoil to a value of NOK 550 million in 2015, compared with NOK 461 million in 2014. Statoil is reimbursed by the government for its relative share of costs associated with the transport, storage and processing of dry gas, the purchase of dry gas for onward sale and administrative expenses relating to gas sales. These reimbursements amounted to NOK 15.1 billion in 2015, compared with NOK 15.4 billion in 2014. Open accounts with Statoil totalled NOK 4.2 billion in favour of the SDFI, converted at the exchange rate prevailing at 31 December, compared with NOK 5.7 billion in 2014.
    
Pursuant to the marketing and sale instruction, the SDFI also participates with a financial interest in Statoil Natural Gas LLC (SNG) in the USA. Cash flows from SNG are settled continuously on a monthly basis in connection with the purchase and sale of LNG. The investment is recorded in accordance with the equity method, and is covered in more detail in note 11.
    
Open accounts and transactions relating to activities in the production licences are not included in the above-mentioned amounts. Hence, no information has been included with regard to open accounts and transactions relating to licence activities with Statoil and Gassco. The SDFI participates as a partner in production licences on the NCS. These are accounted for in accordance with the proportionate consolidation method.

 

No bad debts were recorded in 2015. Trade debtors and other debtors are otherwise recorded at face value pursuant to the NGAAP.