Petoro - a driving force on the Norwegian continental shelf

SDFI and Petoro annual report 2017

Petoro AS - Notes

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Note 1 - Government contribution and other revenue

The appropriation for the year, excluding VAT, was NOK 274.1 million for Petoro AS and NOK 7.4 million for Petoro Iceland AS, giving a total amount of NOK 281.5 million for the group. The company recorded an operating contribution from the Norwegian government totalling NOK 274.1 million excluding VAT as income in 2017. For the group, the amount was NOK 280.2 million.

Other revenue primarily relates to invoicing of services provided to operators of joint ventures and other joint venture partners.


Note 2 - Deferred revenue

The change in deferred revenue recorded in the income statement comprises deferred revenue related to NOK 5 million  in investments made during 2017, as well as NOK 3.1 million in depreciation of investments made during the year and in earlier years.


Note 3 - Payroll expenses, number of employees, benefits, etc.

Payroll expenses (all figures in NOK 1 000)



Wages and salaries 107 223 97 225
Directors' fees 1 787 1 778
Payroll tax 16 038 15 214
Pensions (note 11) 31 222 31 389
Other benefits 4 350 4 637
Total 160 620 150 243



Employees at 31 December.



Employees with a signed contract who had not started work at 31 Dec.



Average number of full-time equivalents employed 64.4 62.7


Remuneration of senior executives 
(all figures in NOK 1 000)

Fixed salaries1

Loyalty scheme2

Cash allowance3

Other taxable benefits4

Taxable pay

Expensed pension


Grethe K Moen

3 184




3 651

2 113
Rest of the management team:            

Olav Boye Sivertsen

1 838 180 241 162 2 422 421

Marion Svihus

2 234 200 70 153 2 658 1 070
Roy Ruså 2 267 202 74 165 2 708 782
Kjell Morisbak Lund5 2 626 133 71 153 2 983 185
Hege Manskow 1 290


182 157 1 629 183
Ole Njærheim6 1 751



147 1 898 159
Laurits Haga7 1 940 344 74 80 2 438 413
Rest of the management team: 13 946 1 059 712 1 017 16 736 3 213

  1. Fixed salaries consist of basic salary and holiday pay.
  2. The company’s loyalty scheme made disbursements in 2017 to five managers who satisfied the terms for the scheme. This disbursement is not included in pensionable income. This scheme was discontinued in 2017.
  3. Cash allowance not included in pensionable income.
  4. Other administratively set remuneration.
  5. Fixed salaries include cash allowance as compensation for loss of the defined benefit pension scheme calculated based on actuarial assumptions and pensionable income.
  6. Remuneration since 20 February.
  7. Remuneration through 30 June.

Expensed pension represents the current year’s estimated cost of the overall pension liability for the CEO plus the rest of the management team, including calculated premium in the defined contribution scheme for managers covered by this. The loyalty scheme was discontinued in 2017. The first discontinuation rate was disbursed in June 2017.



The declaration on remuneration for the CEO and other senior executives is in line with the provisions of the Norwegian Public Limited Liability Companies Act and the guidelines for state ownership, including the Guidelines on pay and other remuneration for senior executives in wholly or partly state-owned enterprises and companies, which came into force on 13 February 2015.

Guidelines on remuneration
Petoro’s remuneration guidelines are entrenched in the company’s vision, goals and values. The relationship between the level of performance, demonstrated leadership/collegiality and reward shall be predictable, motivational, clear and easy to communicate. Petoro has a uniform pay policy and system for the whole company, and aims to pay a competitive rate without being a pacesetter on remuneration in relation to the relevant market for the petroleum industry.

Decision-making process
The board has appointed a compensation sub-committee comprising the deputy chair and another director. The human resources manager provides the secretariat function for this committee, which prepares proposals and recommendations for the board on compensation issues. The board determines compensation for the CEO, who in turn determines the compensation for other members of the company’s senior management within the approved framework.

Main principles for remuneration
Petoro’s wage policy is to be competitive without being a pacesetter on overall remuneration, including the company’s pension schemes.

The compensation package for the CEO and the other senior executives shall reflect the responsibilities and complexity of the role in question, the company’s values and culture, the relevant executive’s behaviour and performance, and the need to attract and retain key personnel. The arrangements are transparent and in accordance with the principles for good corporate governance.

Basic pay is the main component in Petoro’s compensation scheme. Senior executives are also entitled to benefits on an equal footing with others in the company, including car allowance as well as pension and insurance benefits and a system for communication allowance.

Pay levels in a reference market comprising relevant companies in the upstream oil and gas industry provide the basic guidelines for the company’s remuneration profile. Basic pay is primarily fixed on the basis of the responsibilities and complexity of the position. Basic pay is subject to an annual assessment.

On 29 March 2017, the board approved the introduction of a performance-related salary scheme. The principle and framework for performance-related salary have been stipulated by the board within the applicable “Guidelines on pay and other remuneration for senior executives in wholly or partly state-owned enterprises and companies”, which came into force on 13 February 2015. This scheme covers all employees, including the CEO, with an equal percentage of basic salary. The performance-related salary scheme is entrenched in the senior executive pay guidelines, which e.g. state: “Performance-related salary shall be based on objective, definable and measurable criteria that the executive can influence. Multiple relevant measurement criteria should be used as a basis”. There must be a clear connection between the goals forming the basis for performance-related salary and the company’s goals. The board will stipulate the annual goals based on criteria in the senior executive pay guidelines. The board will assess goal attainment and stipulate performance-related salary in accordance with the assessed goal attainment within the framework of 10 per cent of basic salary.

On 4 May 2017, the board decided to discontinue the loyalty scheme for employees. The CEO was not covered by this scheme, which was established in 2013 to aid the competitive situation. No allocation was made to the scheme in 2016. Disbursement from the scheme first took place in January 2016 for employees who fulfilled the terms, and the next disbursement took place in January 2017. The discontinuation will be implemented such that employees who were part of the scheme at the date of discontinuation will be paid amounts due in 3 equal rates. The first discontinuation rate was disbursed in June 2017, the second other rate was disbursed in January 2018 and the last rate will be disbursed in January 2019.

Share programmes, options and other option-like arrangements are not used by the company.

Petoro implemented a new pension plan with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. From the same date, Petoro has no collective pension plan for employees with pay above 12 G. Petoro has a transitional scheme that is still defined-benefit for pay above 12 G. This is the same for executives as for other employees less than 15 years from retirement age (67) at 1 January 2016. Senior executives with employment contracts entered into before 13 February 2015 are covered by the same transitional scheme as other employees.

The CEO’s retirement age is 67. Her employment contract stipulates a mutual six-month period of notice. Agreement has been entered into on a pay guarantee scheme of 12 months in addition to the period of notice. One member of the management team can choose to resign at age 65 with reduced benefits. The remaining executives retire at 67. These pension agreements were established before the new guidelines of 13 February 2015 on employment terms for senior executives in state-owned companies came into force.

Senior executives appointed after the new guidelines came into force will only be covered by the company’s defined contribution plan for pay below 12 G. Consequently, after these new guidelines came into force, Petoro will have no new senior executives with a defined benefit pension and no pension expenses over and above those which follow from the tax-favoured defined benefit plan.
Remuneration principles and their implementation in the preceding year 
The annual evaluation of the basic pay of the CEO and other senior executives is conducted with effect from 1 July. The board addressed the wage evaluation of the CEO in the board meeting on 14 September 2017. In 2017, the evaluation of other executives was carried out in the third quarter.


Note 4 - Tangible fixed assets


All figures in NOK 1 000

Fixtures and fittings

Operating equipment



Acquisition cost 1 January 2017 4 434 8 553 31 892 44 879
Additions fixed assets 544


4 436 4 980
Disposal fixed assets/obsolescence





Acquisition cost 31 December 2017 4 979 8 553 36 327 49 859
Accumulated depreciation 1 January 2017 4 231 8 143 28 306 40 680
Reversed accumulated depreciation





Depreciation for the year 141 228 2 712 3 082
Accumulated depreciation 31 December 2017 4 372 8 372 31 018 43 762
Book value 31 December 2017 607 181 5 309 6 097
Economic life

Until lease expires in 2020

3/5 years

3 years

Depreciation schedule Straight line       Straight line       Straight line        

Operational leasing contracts include office equipment and machines. The initial lease period is 3-5 years.


Note 5 – Financial items

Financial items (all figures in NOK 1 000)



Financial income



     Interest income 860 933
     Currency gain 460 142

Financial expenses



     Interest expenses



     Currency loss 110 152
     Other financial expenses



Net financial items Petoro AS 1 210 923
Net financial items from subsidiary 18 30
Net financial items group 1 228 953


Note 6 - Investments in subsidiary

Petoro AS received a contribution of NOK 2 million in 2012 which was earmarked as share capital for Petoro Iceland AS. This contribution has been offset against the acquisition price of the shares. For that reason, investment in Petoro Iceland has been recorded as NOK 0 in the balance sheet.

Petoro Iceland AS receives its own appropriations over the central government budget to fund its operations. It has also entered into an agreement with the parent company, Petoro AS, on an overdraft facility of NOK 3 million. This agreement has been established according to the arm’s-length principle and is based on normal commercial terms and principles, and is thereby considered to accord with the pricing of corresponding financial services in the market. The facility remained undrawn at 31 December 2017.


Note 7 - Other receivables

Other receivables consist in their entirety of pre-paid costs relating primarily to rent, insurance, licences, subscriptions for market information and VAT credits.


Note 8 - Bank deposits

Of consolidated bank deposits totalling NOK 213.4 million, Petoro AS accounts for NOK 211.9 million. This includes NOK 155.0 million in withheld tax and pension plan assets.


Note 9 - Share capital and shareholder information

The company’s share capital at 31 December 2017 comprised 10 000 shares with a nominal value of NOK 1 000 each. All shares are owned by the Ministry of Petroleum and Energy on behalf of the Norwegian state, and all have the same rights.


Note 10 - Equity


Petoro AS (All figures in NOK 1 000)

Share capital

Other equity


Equity at 31 Dec 2015

10 000

11 789 21 789
Correction of errors as at 1 Jan 2016   (7 918) (7 918)
Corrected equity at 1 Jan 2016 10 000 3 871 13 871
Result for 2016   (4 461) (4 461)
Correction pension cost 2016   1 463 1 463
Corrected equity at 31 Dec 2016

10 000


10 873

Result for 2017


6 378 6 378
Equity at 31 Dec 2017

10 000

7 251 17 251

Certain elements in the company’s unsecured pension liabilities were not taken into consideration and incorporated into the company’s pension liabilities in the annual accounts for 2016. The correction is aimed at input equity for 2016 and the comparative figures have been reworked.


2016 accounts Rework Comparative figures
Pension liabilities at 1 Jan 2016 130 426 7 918 138 344
Recorded pension cost 2016 32 852 (1 463) 31 389
Pension liabilities at 31 Dec 2016 142 425 6 455 148 880
Other equity at 1 Jan 2016 11 789 (7 918) 3 871
Other equity at 31 Dec 2016 7 328 6 455 873


Group (All figures in NOK 1 000)

Share capital

Other equity


Equity at 1 Jan 2017

10 000

2 855 12 855
Change in equity for the year




Net profit


6 670 6 670
Equity at 31 Dec 2017

10 000

9 525 19 525

Consolidated reserves include a contribution of NOK 2 million from the Norwegian government in connection with establishment of Petoro Iceland AS.


Note 11 - Pension costs, assets and liabilities

The company is obliged to offer an occupational pension scheme under the Norwegian Act on Mandatory Occupational Pension Schemes. The company’s pension plans comply with the requirements of this Act.

Petoro implemented a new pension plan with effect from 1 January 2016. This is a defined contribution plan pursuant to the Defined Contribution Pensions Act. The company has a transitional arrangement for employees who are less than 15 years from retirement age on 1 January 2016. Premiums for the defined contribution plan are expensed on a continuous basis.

Certain elements in the company’s unsecured pension liabilities were not taken into consideration and incorporated into the company’s pension liabilities in the annual accounts for 2016. The correction is aimed at input equity for 2016. Comparative figures have been corrected. Cf. Note 10.

Net pension costs (Figures in NOK 1 000)



Present value of benefits earned during the year 15 614 16 314
Interest expense on pension obligation 7 237 7 240
Return on pension plan assets (2 852) (3 428)
Recorded change in estimates 3 260 5 912
Recorded change in pension plan 0 (213)
Payroll tax 2 045 2 300
Pension cost, defined benefit scheme 25 304 28 125
Pension cost, defined contribution plan 5 918 4 727
Net pension cost before change 2016   32 852
Change (reduction) in pension cost 2016   (1 463)
Net pension cost 31 222 31 389
Capitalised pension obligation



Estimated pension obligation at 31 Dec. 313 665 274 435
Pension plan assets (market value) (92 900) (83 035)
Net pension obligations before payroll tax 220 765 191 400
Unrecorded change in estimates (61 703) (48 975)
Correction of errors 2016   6 455
Capitalised pension obligation 159 062 148 880

Calculation of the year’s net pension cost is based on the assumptions of previous years. The net pension liability is calculated on basis of assumptions in the present year.




Discount rate

2.50 %

2.60 %

Expected return on plan assets

4.00 %

3.30 %

Expected increase in pay

2.50 %

2.25 %

Expected increase in pensions

0.40 %

0.00 %

Expected adjustment of the National Insurance Scheme's Basic Amount (G)

2.25 %

2.00 %

The actuarial assumptions are based on common assumptions made in the insurance business for demographic factors.


Note 12 - Other current liabilities

Other current liabilities relate almost entirely to provision for costs incurred, pay outstanding and holiday pay.


Note 13 - Auditor’s fees

Erga Revisjon AS is the group’s chosen auditor. Fees charged for external auditing of the group’s financial statements in 2017 totalled NOK 0.4 million. The figure for Petoro AS was NOK 0.3 million. NOK 0.1 million has also been invoiced for additional services in 2017.

In accordance with the Act relating to the Office of the Auditor General of 7 May 2004, the OAG is the external auditor for the SDFI. PricewaterhouseCoopers AS (PwC) has been engaged as the company’s financial accountant in order to prepare a financial audit of the SDFI accounts as part of the company’s internal auditing. PwC invoiced NOK 1.2 million for financial auditing in 2017. PwC has also delivered services within partner auditing totalling NOK 3 million.


Note 14 - Leases

Petoro AS entered into a lease with Smedvig Eiendom AS for office premises in the autumn of 2003. The ordinary term of the lease expired on 31 December 2014. Petoro chose to exercise its option to extend the lease to 31 December 2020. The remaining term of the lease is now three years, with an option to renew for a further five-year period. Rent for the year totalled NOK 10.4 million, which included all operating and shared expenses.


Note 15 - Significant contracts

Petoro has entered into an agreement with Upstream Accounting Excellence (UPAX) for the delivery of accounting and associated ICT services related to the SDFI. This agreement entered into force on 1 March 2014 and runs for five years with an option for Petoro to extend it for a further year. Petoro has exercised the option for a one-year extension. Evry is the sub-contractor for ICT services. The recorded accounting fee for UPAX in 2017 amounted to NOK 14.9 million. Other services purchased from the contractor totalled NOK 1.4 million.


Note 16 - Close associates

Statoil ASA and Petoro AS have the same owner, the Ministry of Petroleum and Energy, and are close associates. Petoro AS purchased services in 2017 relating to the audit of licence accounts, as well as other minor services. These were purchased at market price on the basis of hours worked. NOK 4.3 million has been invoiced for services rendered to Statoil ASA at market price, based on hours worked by Petoro personnel and external personnel.


Note 17 - Intra-group transactions

Petoro Iceland AS has entered into a management agreement with Petoro AS. The objective of the agreement is for Petoro AS to manage the operations of Petoro Iceland AS on the terms and conditions specified in the agreement. NOK 0.6 million was invoiced in 2017 for the purchase of hours and services. These services are calculated at market price on the basis of hours worked and the government rates for travel expenses. The parent company has a credit of NOK 0.3 million with the subsidiary. The amounts have been eliminated in the consolidated accounts.


Note 18 - Licences/interests

The Petoro Iceland AS branch on Iceland manages the Norwegian participating interest of 25 per cent in production licences awarded by the Icelandic authorities. The work programme is divided into three phases, and the licensees can opt to relinquish the licences at the end of each phase. The first phase for one production licence, IS2013/2 awarded in 2013, expired on 4 January 2017, and the production licence was relinquished pursuant to the operator’s recommendation, following the decision that state participation will not be continued for Petoro Iceland AS. The third and last production licence, which was awarded in January 2014, completed the work programme for the first phase in 2017. The operator, CNOOC, deemed that proceeding to the next phase was insufficiently attractive and recommended relinquishment based on a comprehensive assessment. Petoro Iceland AS supported the operator’s assessment and conclusion and chose to announce its withdrawal in January 2018.

As a result of relinquishing the last production licence on the Icelandic continental shelf, Petoro Iceland AS is no longer involved in any production licences. Some supplementary work for the most recently relinquished license will continue in 2018.


Note 19 - Tax - consolidated

Tax expense for the year, broken down as follows:



Tax payable



Icelandic tax (71) 69

Total tax expense






Calculation of tax base for the year



Profit before tax expense 283 463
Permanent differences



Change in temporary differences



Loss carried forward (30) (463)
Tax base for the year 253


Tax payable