Petoro is a limited company owned by the Norwegian state. Its main duties are specified in chapter 11 of the Petroleum Activities Act and the company’s articles of association, and defined in more detail by the Ministry of Petroleum and Energy in the annual letter of award.
The purpose of the company is, on behalf of the state and at the expense and risk of the state, to hold the responsibility for and to attend to the commercial aspects related to the state’s direct involvement in petroleum activities on the Norwegian continental shelf, 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:
Petoro established Petoro Iceland AS in December 2012 as a Norwegian sub-sidiary with an Icelandic branch office in order to conduct on-going management of Norwegian participatory interests in two production licences awarded by the Icelandic government on 4 January 2013. The branch office serves as the licensee and participant in two joint ventures on Iceland’s continental shelf. The partici-patory interest in each of these production licences is 25 per cent, as described in more detail in Proposition 42 to the Storting (2012-2013).
Petoro’s operations are subject to the Norwegian Act on Limited Companies and the Norwegian Petroleum Activities 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 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 Norwegian continental shelf.
Petoro’s strategy is focused on the value potential of the portfolio and where Petoro has the greatest ability to exercise influence. The strategy falls into three parts and is weighted particularly towards an active role in mature fields – both because of their value in the portfolio and because of the limited attention paid to them by other licensees in these fields. The strategic components are:
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 158 production licences and 15 joint ventures and companies for pipelines and terminals. 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.
Through article 11 in Petoro’s articles of association and the marketing and sale instruction issued to Statoil, the govern-ment has made Petoro responsible for monitoring that Statoil performs its duties in accordance with the instruction. As the majority shareholder in Statoil and the sole owner of Petoro, the government exercises a common ownership strategy through the marketing and sale instruction approved by the general meeting of Statoil.
A duty of confidentiality applies to
information Petoro has received during
its monitoring of Statoil’s marketing and sales and in its work on the budget and accounts relating to the marketing and sale of the state’s petroleum. The
company’s ethical guidelines emphasise that the recipient of such confidential information must use it only for its intended purpose, and must not trade in Statoil’s securities for as long as the information is not publicly known.
The company also 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 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.
Petoro has a share capital of NOK 10 million. The limited company’s own operating expenses are covered by annual appropriations over the central government budget, which are presented as operating revenues in the accounts of the limited company.