Extreme prices yield record-high cash flow

[28.10.2021) - Press release - Third quarter 2021
-It would be easy to take this revenue for granted, but it's important to remember that we benefit every day from decisions and investments that in many instances were made many years ago,- says CEO of Petoro Kristin Kragseth. Photo: Elisabeth Tønnessen
"It would be easy to take this revenue for granted, but it's important to remember that we benefit every day from decisions and investments that in many instances were made many years ago," says CEO of Petoro Kristin Kragseth. Photo: Elisabeth Tønnessen
Petoro delivered a cash flow of NOK 98 billion as of the third quarter. Cash flow for the third quarter in isolation amounted to NOK 44 billion, which is the highest single-quarter figure in Petoro's history.
"We've experienced a substantial increase in energy prices, particularly over the last six months, and prices are now so high that this is not sustainable at length," says Petoro CEO Kristin Kragseth. "The reasons for this are complex, but both dry and calm weather conditions which limit power generation, as well as increased demand since the pandemic started subsiding have resulted in significant price effects."
 
"It would be easy to take this revenue for granted, but it's important to remember that we benefit every day from decisions and investments that in many instances were made many years ago," says Kragseth. This supports one of Petoro's goals, namely long-term value creation from the Norwegian shelf. "We work actively every day in the partnerships to realise the projects in our portfolio in the best possible way, thus ensuring value for the broader community," says Kragseth.
 
Important contributors naturally include major fields such as Johan Sverdrup, but at least equally important are further developments of mature fields such as the Snorre Expansion Project, which came on stream around the end of 2020. "The development of Troll phase 3 is particularly significant, as it just came on stream and will continue to produce for several decades," Kragseth emphasised.
 
Petoro has an ownership interest of 56 per cent in Troll, and the field is in a class of its own in a Norwegian and European context. The field produced just over 35 billion cubic metres of gas in 2020, almost one-third of overall Norwegian gas production and 8 per cent of the gas used in Europe. This is also three times as much as the second-largest gas-producing field, Ormen Lange – where a decision was recently made to invest in subsea compression to further improve production.
 
Gas prices have continued to climb throughout 2021, and the increase has been particularly strong in the third quarter, when the gas price more than doubled. At the end of the quarter, gas was traded at prices 4-5 times higher than the normal price level. With these prices, the gas is now about twice as expensive as oil measured by energy content.
 
"We've been experiencing quite extreme energy prices recently, particularly when it comes to gas and electricity," says Kragseth. "Despite the substantial revenues high energy prices provide for Norway, we are also seeing the impact this is having in the form of global unrest surrounding predictable and reasonable access to energy. This comes in addition to the significant generation of renewable electricity in Europe provided by wind. If the wind isn't blowing, no power is being generated. This demonstrates the vulnerability of the energy system, and not least our continued reliance on stabilising energy sources such as gas," Kragseth points out.
 
The situation has reached critical levels in the United Kingdom. Among other things, coal power plants have been started up again, while power distributors are requesting emergency aid from the government. "Since we're all aware of the crucial importance of cutting emissions in order to reach the objectives of the Paris Agreement, this development underscores the complexity of the energy system," Kragseth says. "We'll continue to work toward cutting as many of our own emissions as possible, while at the same time ensuring stable energy deliveries."
 
Petoro has multiple projects in its portfolio aiming to help ensure that we reach the national targets for cutting emissions. One crucial contribution is cutting emissions in the production segment to ensure that, moving forward, we are able to develop emission-free and decarbonised value chains. "Snøhvit in the Barents Sea is an important field for us in this context," says Kragseth. "Melkøya, which is Snøhvit's onshore facility, represents one of the major emission points in Norway. The facility's planned lifetime extends to 2050, and Petoro will provide an active contribution toward maturing full electrification to an investment decision in 2022. This measure will be an important contribution toward national reductions in CO2 emissions, while at the same time positioning Snøhvit for a low-carbon future."
 
Result as of the third quarter
12 serious incidents were registered year to date in the SDFI portfolio, compared with 21 during the same period last year. This yields a serious incident frequency of 0,58 for the last 12 months, which is a reduction from 0,9 at year-end.
 
Net cash flow from the State's Direct Financial Interest (SDFI) in the oil and gas activities totalled NOK 98 billion as of the 3rd quarter, an increase of NOK 53 billion from the same period last year. This is due to a substantial increase in prices, increased demand, as well as good, safe operations."
 
Overall oil and gas production totalled 1,002 thousand barrels of oil equivalent per day (kboed), 22 kboed higher than the same period last year. The increase was mainly caused by higher gas output on Troll and Oseberg, as well as higher oil production from Johan Sverdrup as a result of increased production capacity.
 
Read the Board's quarterly report for additional details.
 
Press contact
Head of Communications
Christian Buch Hansen
+47 926 24 255
 

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