SDFI and Petoro annual report 2022
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Management comment regarding the SDFI annual accounts


Since its establishment in 2001, Petoro has served as the licensee for the state’s participating interests in production licences, fields, pipelines and land-based facilities. Petoro is charged with managing the SDFI portfolio on the basis of sound business principles. As of the end of 2022, the portfolio consisted of 178 production licences, 6 fewer than at the beginning of the year. In January 2022, the Ministry of Petroleum and Energy completed its Awards in Predefined Areas (APA 2021), where 7 production licences were awarded with SDFI participation. Over the course of 2022, 2 production licences were carved out from existing licences with SDFI participation, and 15 production licences were relinquished.


The annual accounts are presented in accordance with the Provisions on Financial Management in Central Government, circular R-115 from the Ministry of Finance, and requirements in the instructions on financial management of the SDFI in Petoro, with the exceptions granted for the SDFI. The board hereby confirms that the annual accounts, which comprise the appropriation and capital accounts prepared on a cash basis, provide a true and fair picture in accordance with the cash basis. The general ledger accounts report presents accounting figures for the SDFI as reported to the government accounts in accordance with the standard chart of accounts for state-owned undertakings.

The Board confirms that the company accounts have been prepared in accordance with the Accounting Act and Norwegian generally-accepted accounting principles (NGAAP), and provide a true and fair picture of the SDFI’s assets, obligations and financial results at 31 December 2022.

Assessment of significant factors

Appropriation and capital accounts

In accordance with the supplemental allocation letter dated 21 December 2022, the SDFI’s appropriation for investments1 totalled NOK 28.0 billion. The appropriation for operating income2 totalled NOK 559.3 billion. The appropriation for interest on the state’s capital3 totalled NOK 2.4 billion. Operating income in accordance with the cash basis is affected first and foremost by the price of oil and gas and the volume of the SDFI’s production sold. Equinor handles marketing and sale of SDFI’s products through the marketing and sale instructions issued by the Ministry of Petroleum and Energy.

The general ledger accounts report on the cash basis shows net reported revenues including financial income totalling NOK 630.1 billion in 2022, compared with NOK 255.8 billion in 2021. These revenues were largely affected by significantly higher oil and gas prices in 2022. Expenses reported in the appropriation accounts comprise payments of NOK 28.4 billion as investments and NOK 75.0 billion as operating expenses. Payments in 2021 amounted to NOK 24.8 billion related to investments and NOK 38.1 billion related to operations. Payments to operations were primarily related to the operation of fields and facilities, processing and transport costs, as well as exploration and field development expenses. This is in addition to payment of financial expenses. Depreciation of fields and facilities amounted to NOK 26.3 billion in 2022, compared with NOK 25.6 billion in 2021.
1Ch./item 2440.30
2Ch./item 5440.24
3Ch./item 5440.80
The SDFI accounts include a number of significant estimates which are subject to uncertainties and rely on discretionary assessments. These e.g. include capitalised exploration costs, estimates of reserves as the basis for depreciation, decommissioning expenses based on estimates for costs to be incurred far into the future, and assessment of impairment charges on tangible fixed assets.

Net cash flow to the state from the SDFI at year-end amounted to NOK 528 billion, 342 billion higher than last year. The cash flow was positively affected by persistently high oil and gas prices, and increased sales of gas. The increase was offset, in part, by reduced oil sales and increased costs associated with third-party gas purchases for resale and production expenses, as well as increased transport expenses.

Total production reached 1,044 thousand barrels of oil equivalent per day (kboed), an increase of 17 kboed compared with last year. 

Gas production amounted to 109 million standard cubic metres (mill. scm) per day, an increase of seven per cent compared with last year. The increase was mainly caused by increased gas extraction on Troll, a full year of production for Martin Linge and production starting up from Snøhvit following the fire on Melkøya. The average realised gas price was NOK 11.95, compared with NOK 4.78 per scm in 2021. The reason for the persistently high gas prices is mainly the loss of Russian gas deliveries to Europe as a result of the war in Ukraine. The effect of this loss of supply is lower than feared due to record-high LNG imports and reduced demand in Europe compared with 2021.

Liquids production was 359 kboed, 29 kboed lower than last year. The reduction in liquids production was primarily caused by natural production decline on multiple mature fields, as well as turnarounds. Extraction of NGL products from the gas stream has also been reduced to optimise the value of gas in the strong gas market. The reduction was offset, in part, by contributions from a full year of production for Martin Linge and production starting up from Snøhvit following the fire on Melkøya. The average realised oil price was USD 104, compared with USD 70 per barrel in 2021. However, the price increase in USD was somewhat bolstered by a weakened NOK, meaning that the achieved oil price measured in NOK was 988, compared with NOK 603 per barrel last year. The increase in the oil price compared with 2021 was caused by strong growth in demand, which was not matched by equivalent growth in supply. This development has partially reversed in the second half of 2022 due to rising interest rates, lower economic growth and a fear of recession. A stable increase in production from the US has also partly offset the loss of Russian oil imports.

Cash investments amounted to just over NOK 28 billion, 3 billion higher than in 2021. The investments increased due to greater activity on the Breidablikk and Ormen Lange phase III projects, as well as on Oseberg in connection with upgrading the gas capacity. Increased drilling activity on Heidrun and Valemon has also provided a contribution. The increase was partly offset by reduced development investments following the completion of Martin Linge in 2021.

Total operating expenses amounted to NOK 103 billion, NOK 40 billion higher than the same period the year before. The increase was mainly caused by increased costs for purchasing third-party gas, totalling NOK 22 billion, as well as increased production and transport costs. Increased costs for purchasing third-party gas were mainly caused by higher gas prices in combination with higher volumes. Production costs amounted to NOK 23 billion, nearly NOK 6 billion higher than in 2021. The increase was mainly caused by higher electricity costs and increased CO2 emission credit prices, as well as increased maintenance activity on certain fields and installations.

Total exploration costs during the period came to NOK 2 billion, of which a net of NOK 0.5 billion has been recognised as capitalised exploration expenses.

The financial result for 2022 was a net income of NOK 539 billion, NOK 317 billion higher than the previous year. The increase was mainly caused by higher revenues as a result of significantly higher prices for oil and gas, as well as increased sales of gas from Troll, Martin Linge and Snøhvit.

The book value of assets at 31 December 2022 was NOK 328 billion. The assets mainly consist of fixed assets related to field installations, pipelines and onshore plants, as well as current debtors. Equity at year-end came to NOK 198 billion, which is an increase of NOK 11 billion compared with 2021. The increase was caused by the transfer to the state being 11 billion lower than the annual result for accounting purposes. Overall debt amounted to NOK 130 billion, of which 69 billion was related to estimated future removal obligations. Removal obligations were reduced by NOK 10 billion compared with 2021, as a result of updated removal estimates and a higher discount rate.

The portfolio’s estimated remaining reserves totalled 4,779 million boe at the end of the year, down by 193 million boe from the year before. Reserve growth totalled 188 million boe, which is mainly derived from the Dvalin (incl. Dvalin Nord) and Irpa projects, as well as Gullfaks Sør, Statfjord blowdown and Åsgard (Blåbjørn). With a production of 381 million boe, this yielded a reserve replacement rate of 49 per cent, compared with 80 per cent in 2021 and 20 per cent in 2020.

Additional information

The Office of the Auditor General (OAG) is the external auditor, and approves the annual accounts for the SDFI. On completing its annual audit, the OAG issues a final audit letter (report) which summarises the conclusion of its audit work. The result of the audit will be reported by 1 May 2023.

The Board has appointed PwC to conduct a financial audit of the SDFI accounts as part of Petoro’s internal audit process. As internal auditor, PwC submits its audit report to the Petoro AS board regarding the annual accounts pursuant to the accounting principles on a cash basis and in accordance with international auditing standards.