Petoro - a driving force on the Norwegian continental shelf

SDFI and Petoro annual report 2012

Directors’ report 2012

Petoro manages the State’s Direct Financial Interest (SDFI), which represents about a third of Norway’s total oil and gas reserves. The company’s principal objective is to create the highest possible financial value from this portfolio.
Net income in 20121 came to NOK 150 billion, compared with NOK 133.7 billion the year before. Total operating revenue was NOK 213.9 billion, compared with NOK 188.8 billion in 2011. This yielded a cash flow to the government of NOK 146.9 billion as against NOK 128.1 billion the year before. Total production averaged 1 132 000 barrels of oil equivalent per day (boe/d), which was 11 per cent higher than the 2011 figure of 1 016 000 boe/d. The net reserve addition in 2012 was 278 million boe.

Income, revenues, costs and reserves
An income after financial items of NOK 150 billion was up by 12 per cent from 2011. This rise reflected higher gas sales and prices, while that effect was offset to some extent by increased costs in buying gas for onward sale and by greater depreciation and write-downs. Overall oil and gas sales for the year averaged 1 197 000 boe/d, compared with 1 083 000 boe/d in 20112.Further maturation of the portfolio meant only a limited decline in oil production, which was down just two per cent from the year before. Gas output rose by 22 per cent from 2011.

Income before financial items came to NOK 152.7 billion. Net financial expenses of NOK 2.7 billion consisted mainly of calculated interest expenses on future removal liabilities for the SDFI.

Revenue for the year from dry gas sales totalled NOK 106.4 billion as against NOK 81.7 billion in 2011. Total gas sold rose by 20 per cent from 2011 to 44.8 billion standard cubic metres (scm), including sales of third-party volumes. That corresponds to 770 000 boe/d3.  Troll accounted for 43 per cent of total gas revenue. The average gas price for the year was NOK 2.35 per scm, up nine per cent from 2011.

Total revenue for the year from oil and natural gas liquids (NGL) was NOK 96.3 billion, on a par with the year before. The sales volume totalled 156 million boe, or a daily average of 427 000 boe. The average oil price obtained for the year was NOK 657 per barrel, up by four per cent from 2011.

Other revenues, which primarily comprise tariff earnings from Gassled, amounted to NOK 11.1 billion in 2012 and were on a par with 2011.
Investment came to NOK 25.8 billion, up by 20 per cent from 2011. The biggest spending related to a high level of drilling activity on Troll, Gullfaks and Oseberg, further development of Ormen Lange and the development of a subsea compression facility on Åsgard. In addition come capitalised exploration costs, which brought total investment for 2012 to NOK 26.4 billion.

The cost of operating fields, pipelines and land-based facilities was NOK 16.4 billion, up by five per cent from 2011. This rise reflects increased well maintenance on a number of fields. Exploration-related costs amounted to NOK 1.8 billion, of which NOK 600 million was capitalised as investment related to possible and confirmed discoveries, and NOK 1.1 billion was expensed as exploration costs for dry wells. Correspondingly, exploration expenses totalled NOK 2.3 billion in 2011, of which NOK 1.3 billion was expensed. A total of 12 exploration wells were completed during 2012, two fewer than the year before. Hydrocarbons representing a recoverable volume of 470-580 million boe for the SDFI were proven in seven wells, compared with 320-550 million boe in 2011. The most positive exploration results in 2012 came from Geitungen, adjacent to Johan Sverdrup, as well as from appraisal wells on Johan Sverdrup, Skrugard and Maria.


Net income
At 31 December 2012, the portfolio’s expected remaining oil, condensate, NGL and gas reserves comprised 6 623 million boe – up by 136 million boe from the year before. Petoro reports the portfolio’s expected reserves on the basis of categories 1-3 in the classification system used by the Norwegian Petroleum Directorate (NPD).

New reserves totalling 290 million boe were added to the SDFI in 2012. At the same time, reserves were downgraded for certain fields, making the net increase 278 million boe. The biggest contribution came from the decision to develop the Martin Linge field. Substantial volumes were also contributed by Heidrun as a result of adjustments to its reserves as well as the SDFI’s increased holding, and by Troll following decisions on new wells and improved understanding of the fluid content in gas from this field. The net reserve replacement rate for 2012 was 67 per cent, compared with 160 per cent the year before, and the average replacement rate for the portfolio over the past three years came to 86 per cent. The corresponding figure for 2009-11 was 49 per cent.



Reserve replacement rate

1 All figures are based on the accounts compiled in accordance with the Norwegian Accounting Act and Norwegian generally accepted accounting principles (NGAAP). 

2 Sales of entitlement oil, NGL and gas in 2012 totalled 1 129 000 boe/d compared with 1 015 000 boe/d the year before.

3 One billion scm of gas equals one million scm oe, which corresponds to about 17 200 boe per day (17.2 kboed).

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