avatar Equinor Holding Netherlands B.V. Mining
  • Location: ZUID-HOLLAND 
  • Founded: 2006-03-22
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    icy seas burning deserts Annual report and accounts 2005


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    On course towards new goals A liquefied natural gas carrier in open seas provides a good illustration of the way we have expanded the scope of our activities. From producing and selling Norwegian gas to European customers, we are now also a player in the transatlantic market. This vessel and its wide horizon is also a metaphor for a group experiencing strong international growth. We are currently represented in 33 countries, and our non-Norwegian oil and gas production grew by 60% in 2005. That makes our internationalisation a natural theme in this annual report. Many of the challenges we face will not be solved by good profits alone. The way we achieve our financial results is just as important as the results themselves. As a consequence, this annual report and our report on sustainable development – which are published concurrently – contain a good deal of information about the way we are creating a value-based performance culture in a group which is undergoing rapid international expansion.


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    Key figures INCOME CASH FLOW RETURN NOK billion NOK billion Per cent 100 60 30 90 50 25 80 70 40 20 60 50 30 15 40 20 10 30 20 10 5 10 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Income before financial items, other items, Cash flow used Return on average capital income taxes and minority interest in investing activities employed after tax Net income Cash flow provided by operating activities OIL PRODUCTION/PRICE GAS PRODUCTION/PRICE PROVED OIL/GAS RESERVES USD/barrel 1,000 bbls per day NOK/scm 1,000 boe per day Million boe 60 800 1.75 500 5,000 450 700 1.50 50 400 4,000 600 1.25 350 40 500 300 3,000 1.00 30 400 250 0.75 300 200 2,000 20 150 0.50 200 100 1,000 10 100 0.25 50 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Entitlement oil production Sales equity gas production Natural gas Average oil price Brent Blend Average gas price Oil and NGL CARBON DIOXIDE (CO2) TOTAL RECORDABLE INJURY FREQUENCY SERIOUS INCIDENT FREQUENCY Million tonnes 14 8 12 12 10 6 10 8 8 6 4 6 4 4 2 2 2 0 -2 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 2001 2002 2003 2004 2005 Number of total recordable injuries Number of serious incidents CO2 reductions made through measures per million working hours per million working hours implemented between 1997 and 2005 for Statoil operations Total CO2 emissions from Statoil operations


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    USGAAP USGAAP––Hovedtall Financial highlights 2004 2005 2003 2004 2002 2003 2001 2002 2000 2001 Finansielle data (i millioner Financial information (NOKkroner) million) Driftsinntekter Total revenues 306 218 393,298 249 375 306,218 243 814 249,375 236 961 243,814 230 425 236,961 Resultat før finans, Income before andreitems, financial poster, skatt other og minoritetsinteresser items, income taxes 65 107 48 916 43 102 56 154 59 991 Årets resultatinterest and minority 24 916 95,096 16 554 65,107 16 846 48,916 17 245 43,102 16 153 56,154 Kontantstrøm Net income fra operasjonelle aktiviteter 38 807 30,730 30 797 24,916 24 023 16,554 39 173 16,846 56 752 17,245 Kontantstrøm benyttet Cash flow provided til investeringsaktiviteter by operating activities 31 959 56,250 23 198 38,807 16 756 30,797 12 838 24,023 16 014 39,173 Rentebærende Cash flow usedgjeld in investing activities 36 189 37,664 37 278 31,959 37 128 23,198 41 795 16,756 36 982 12,838 Netto rentebærende Interest-bearing debtgjeld 20 326 34,198 20 906 36,189 23 592 37,278 34 077 37,128 23 379 41,795 Gjeldsgrad Net interest-bearing debt 19,0% 19,492 22,6% 20,326 28,7% 20,906 39,0% 23,592 25,0% 34,077 Avkastning Net debt topå gjennomsnittlig capital employed sysselsatt kapital etter skatt 23,5% 15.3% 18,7% 19.0% 14,9% 22.6% 19,9% 28.7% 18,7% 39.0% Return on average capital employed after tax 27.6% 23.5% 18.7% 14.9% 19.9% Operasjonelle data Olje- og naturgassproduksjon Operational information (tusen fat o.e./dag) 1 106 1 080 1 074 1 007 1 003 Sikre olje- og Combined naturgassreserver oil and gas production(millioner (thousandfatboe/day) o.e.) 4 289 1,169 4 264 1,106 4 267 1,080 4 277 1,074 4 317 1,007 Proved oil and gas reserves (million boe) 4,295 4,289 4,264 4,267 4,277 Produksjonskostnader (USD/fat) 3,5 3,2 3,0 2,8 3,0 Funn- og utviklingskostnader Production cost (NOK/boe) (USD/fat) (3-års gjennomsnitt) 8,5 22.2 5,9 23.3 6,2 22.4 9,1* 8,2* Reserveerstatningsrate (3-års Reserve replacement ratio gjennomsnitt) (three-year average) 1,01 1.02 0,95 1.01 0,78 0.95 0,68 0.78 0,86 0.68 Share information(i(in Aksjeinformasjon kroner, NOK, unntatt antall aksjer) except number of shares) Resultat per per Net income aksje share 11,50 14.19 7,64 11.50 7,78 7.64 8,31 7.78 8,18 8.31 Aksjekurs Share priceOslo BørsStock at Oslo 31. desember Exchange 31 December 95,00 155.00 74,75 95.00 58,50 74.75 61,50 58.50 - 61.50 Vektet gjennomsnittlig Weighted antall average number ofutestående ordinary aksjer 2 166 142 636 2 166 143 693 2 165 422 239 2 076 180 942 1 975 885 600 shares outstanding 2,165,740,054 2,166,142,636 2,166,143,693 2,165,422,239 2,076,180,942 (1) Engangseffekter gjelder spesielle effekter knyttet til fjerningsfordelingsloven, salgsgevinster, nedskrivninger og avsetninger. Se «Ledelsens finansielle analyse». * Follow-up changed from USD/boe to NOK/boe. Netto rentebærende gjeld Net interest-bearing debt == Produksjonskostnader Production costs per barrel per fat oilo.e. = virksomhet. Totaltengines, boilers, furnaces, CO 2 -utslipp flares,omfatter drilling of Definisjoner Definitions Brutto rentebærende gjeld Gross interest-bearing debtfratrukket betal- less cash and Driftskostnader equivalent= forbundet med produk- alle utslippskilder exploration som turbiner, and production wellskjeler, and well ingsmidler og kortsiktige investeringer. cash equivalents. sjonen av olje Operating og naturgass, expenses associateddividert med with pro- ovner, motorer, fakler, testing/workovers. boring avinlete- Reductions og emissions samlet ductionproduksjon (løfting) of oil and natural av olje og gas divided by total produksjonsbrønner are accumulated for the og period 1997-2005. Gjeldsgrad Net debt to=capital employed = naturgass. production (lifting) of oil and natural gas. brønntesting/brønnopprenskning. Forholdet mellom The relationship netto rentebærende between net interest- Oppnådde reduksjoner Total recordable injuryi frequency utslippene er = gjeld ogdebt bearing sysselsatt kapital. and capital employed. Funn- Reserve ogreplacement utviklingskostnader ratio = = akkumulert The number for perioden of total 1997-2004. recordable injuries per Beregnes Additions tout proved fra nye reserves, sikre reserver, including million working hours. Employees of Statoil Gjennomsnittlig sysselsatt=kapital = Average capital employed eksklusiv acquisitionskjøp andogdisposals, salg av reserver. divided by volu- and its contractors are included. Personskadefrekvens = Gjennomsnitt Average of theav kapitalen capital som er employed atsyssel- the mes produced. Antall personskader per million arbeids- satt ved begynnelsen beginning og accounting and end of the slutten av period. Reserveerstatningsrate = timer. SeriousStatoil-ansatte og leverandører incident frequency = er regnskapsperioden. Sysselsatt Capital employed is net kapital er interest-bearing Tilgang Barrel of avoil nye sikre reserver, equivalent (boe)inkludert = kjøp inkludert. The number of incidents of a very serious netto rentebærende debt plus gjeld shareholders’ pluss equity andegenkapital og Oil salg, dividert and gas volumes med produserte expressed as areserver. common nature per million working hours. An incident og minoritetsinteresser. minority interest. unit of measurement. One boe is equal to is an event Alvorlig or chain of events which hendelsesfrekvens = has one barrel of crude, Oljeekvivalent (o.e.)or =159 standard cubic Antall causeduønskede hendelser or could have causedmed stor injury, alvor- illness Avkastning på gjennomsnittlig Return on average capital employed Olje og gass metres of gas.omregnet til felles måleenhet. lighetsgrad and/or damageperto/loss millionofarbeidstimer. property, theEn sysselsatt after tax =kapital etter skatt = 1 fat oljeekvivalent er lik 1 fat råolje eller uønsket hendelse environment er en or a third hendelse eller et party. Årets resultat Net income pluss plus minoritetsinteresser minority interest and net og 159 Carbonstandard dioxide kubikkmeter (CO2) = naturgass. hendelsesforløp som har forårsaket eller netto finanskostnader financial expenses afteretter tax asskatt i prosent a percentage Carbon dioxide emissions from Statoil ope- kunne ha forårsaket personskade, sykdom av gjennomsnittlig of capital employed.sysselsatt kapital. rations embrace(CO Karbondioksid all sources 2) = such as turbines, og/eller skade på/tap av materiell, skade Karbondioksidutslipp fra Statoil-operert på miljøet eller tredjepart.


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    Contents Our future International value creation by chief executive Helge Lund 3 Statoil’s strategy 4 The Statoil group 6 Topic: From Barents cold to African heat 8 Our operations Overview of our business 14 Exploration & Production Norway 18 International Exploration & Production 21 Natural Gas 24 Manufacturing & Marketing 26 Technology & Projects 28 People and society 32 The environment 37 Our results Directors’ report 2005 42 The corporate executive committee 52 Corporate governance 54 Shares and shareholder matters 60 Operating and financial review and prospects 62 The Statoil group - USGAAP 93 Auditors’ report 132 Proved reserves report 133 HSE accounting for 2005 134 General information 142 Articles of association for Statoil ASA 143 In addition to this report we publish the sustainability report, the financial statements according to the Norwegian accounting principles and the 20-F report as specified by the US Securities and Exchange Commission. Read more about these reports on page 144. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 1


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    2 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our future International value creation by chief executive Helge Lund We have never been better positioned, either industrially or financially, after presenting a profit for fiscal 2005 which represents our best-ever result. Since being listed on the stock market in 2001, we have set ambitious targets for production, for the build-up of new reserves and for return on capital employed. And we have delivered in line with our promises. In the years ahead we will continue to create both on the NCS and further east in coopera- for the use of carbon dioxide for improved oil growth, profitability and value for our tion with the Russian oil industry. recovery. The project entails generating shareholders and the communities in which we The challenges ahead of us will be tougher electricity at a gas-fired power station, with operate. We will also conduct our business on than those we have dealt with so far. This is carbon capture and use of carbon dioxide to the basis of high standards for environmental because new oil and gas resources will be more enhance oil recovery from two fields off mid- and safety work. It is gratifying to note that we difficult to produce and bring to market. Based Norway. The gas will then be stored in the sub- achieved a substantial reduction in serious on our historical results, we are confident of surface. The gas-fired power station will also be personal injuries and other serious incidents in mastering these challenges. We have brought able to supply electricity to several offshore 2005 compared with the year before. That the Kristin field on stream under conditions of fields, enabling them to cease their own energy reflects conscious work, which will be extreme pressure and temperature which make production and thereby cut their carbon and maintained with great commitment. But the this a global pioneering project. Our techno- nitrogen oxide emissions. The project is safety picture is not uniformly positive, and we logical solution for improving recovery from pioneering in that it will make a strong must continue to improve. Our goal is zero Tordis means that this field will become the first contribution to solving the long-term problem harm to people and the environment. in the world with subsea processing. of carbon emissions. Within relatively few years, we have We must also meet tougher environmental It is our leaders and employees, in close developed our international activity from a standards. The International Energy Agency cooperation with our contractors and partners, fairly modest level to representation in 33 (IEA) expects that two-thirds of the world’s who must solve the many new challenges we countries. Our non-Norwegian production energy needs in 25 years’ time must be met by face. We will achieve these results in a sound increased by 60% from 2004 to 2005. This oil and natural gas. For the industry, the key performance culture entrenched in our values. international expansion coincides with a question is how we can help to cover this These values form the basis for our confidence continued strong commitment to the growth in demand while simultaneously cutting that we can continue to create growth, Norwegian continental shelf (NCS), where we the amount of greenhouse gases released. profitability and value for our shareholders and can take pleasure from new discoveries, new Carbon capture and storage occupy a key positive spin-offs in those communities where projects and a high level of exploration activity. place in our efforts to reduce emissions. In this we pursue our operations. Our successful commitment in other context, we will build further on experience countries has been made possible by expertise gained from the world’s most extensive storage built up through demanding and innovative of large carbon dioxide volumes in geological projects on the NCS. These waters will remain formations beneath the seabed. We are also the cornerstone of our oil and gas production pursuing other solutions based on a concept of for many years to come. Activities there will converting carbon dioxide into a commercial continue to present new challenges in product. maintaining a high level of production. We also In collaboration with Shell, we are working Helge Lund have exciting opportunities in the far north, to develop the world’s largest offshore project President and CEO STATOIL ANNUAL REPORT AND ACCOUNTS 2005 3


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    Statoil’s strategy Globally competitive A unique workplace for performance and development Statoil aims to be able to compete Statoil the best results in its history achieve improvements in activities with the best in priority areas, both for 2005. The group has a strong which are significant for future in its domestic markets and where it financial position, which provides growth and earnings. These have participates internationally. The the basis for future freedom of made good progress, something group’s key operational objectives in action and growth. At the same which is also necessary in a highly the years ahead are: time, it is important to recognise competitive market. • maintain an equity production of that most international oil compa- one million barrels of oil nies have benefited from high HSE and financial results equivalent per day from the petroleum prices, and that Great attention is devoted to work Norwegian continental shelf competition over access to new on health, safety and the environ- (NCS) after 2010 projects will become tougher. ment, which has high priority. • build up an international Based on projects already Statoil can report improvements portfolio which helps the group sanctioned, Statoil expects its in most areas where HSE results to achieve a long-term growth production to increase by about 8% are measured. A close relationship of 2-4% in 2007-10 per year in 2004-07. From 2007- has also been demonstrated • double sales of equity gas to 50 10 annual growth is expected to be generally between a good HSE billion cubic metres per annum 2-4%. performance and a company’s by 2015 financial results. The group’s work • increase value creation in Investment and future growth with social responsibility and manufacturing and marketing To achieve future growth, Statoil sustainability is important, and through improvements to the will invest in the order of NOK 110- this commitment was rewarded in business, integration and world- 115 billion in 2005-07. Statoil’s 2005 when it came top among oil class operations faith in the NCS has also been companies in the Dow Jones • be acknowledged as a project strengthened. The group’s strong sustainability index. developer with first-class commitment in coming years will expertise and technology. depend on meeting its requirements Expertise, values and culture for profitability and robustness. Amid ever tougher competition, the High oil and gas prices combined Statoil started a series of expertise and experience of Statoil’s with a high level of production gave initiatives in the autumn of 2004 to employees will be increasingly 4 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our future Exploration and reservoir important. Strong international swiftly, while the group must also be and to building expertise. Strict management are important growth will characterise the group good at integrating new personnel. requirements are specified for the priority areas in Statoil’s technology strategy. At the for a number of years to come. This Statoil works actively to create a way in which the group is run and centre for operations means that both its entities and its performance culture which delivers results achieved. Statoil will be an support in Stjørdal near employees must display the results, and devotes substantial enterprise with clear values and Trondheim, data from wells willingness and ability to adapt resources to trainee programmes leadership. being drilled can be sent to the centre and analysed during the drilling process. Statoil’s goals Statoil’s goals for 2007 were 2007, based on an expected The table below presents published in 2004 and reaffirmed in average oil price in 2005-07 of Statoil’s targets for 2007 as well as 2005. They embrace production, around USD 30 per barrel. That out- results achieved in 2004 and 2005 operations and profitability. put represents an average annual for total production, normalised Normalised return on capital growth of 8% in 2004-07. The return on capital employed, and employed is used to measure highest percentage of production production costs per barrel. improved profitability in the expansion will take place interna- underlying business. The group’s tionally, but an increase in output on target for normalised return on the NCS will also be necessary. capital employed is 13% in 2007. At 31 December 2005 Statoil had a Financial and operational Achieved Achieved results and targets 2004 2005 Target 2007 normalised return on capital employed of 11.7%. Production (boe/d)1 1,106,000 1,169,000 1,400,000 Statoil’s oil and gas production in Return on capital employed2 12.3% 11.7% 13% 2005 averaged 1,169,000 boe per Production costs (boe) 1,2 USD 3.5 NOK 22.3 NOK 22.0 day. The goal is to increase this 1) Target for 2007 based on an average oil price of around USD 30 per barrel in 2005-07 output to 1,400,000 boe per day in 2) Normalised STATOIL ANNUAL REPORT AND ACCOUNTS 2005 5


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    The Statoil group Statoil is an integrated oil and gas company with considerable international activities. Represented in 33 countries, it is engaged in exploration and production in 15 of these. The group’s head office is in Stavanger, Norway. At 31 December 2005, Statoil had 25,644 employees. Forty-nine per cent work outside Norway. The group is operator for 24 oil and stations in the Scandinavian the environment. With our values gas fields on the Norwegian countries, Poland, the Baltic states, base as a starting point, we will continental shelf and accounts for Russia and Ireland. We are one of create value for our owners and the 60% of all Norwegian petroleum the world’s largest sellers of crude communities in which we work production. As operator for 23 oil and a substantial supplier of through profitable and safe seabed facilities, Statoil is a leader in natural gas to the European market. operations. The Statoil share is listed www.statoil.com/statoils_world subsea production. Statoil is one of the world’s most on the Oslo and New York stock International production is environmentally-efficient produc- exchanges. In 2005 the group’s growing strongly. We have ers and transporters of oil and gas. total revenues came to NOK 393 substantial industrial activity and We aim to conduct our business billion. operate about 2,000 service without causing harm to people or History Statoil was founded by a decision of offshore oil discoveries. Statoil has floating production facilities and the Storting (parliament) in 1972, 44% of the unitised field, which came subsea developments. Statoil grew three years after Ekofisk had become on stream in 1979 with Mobil as strongly, expanded in product the first major oil discovery on operator. markets and made a commitment to Norway’s continental shelf. Wholly The 1980s saw the group international exploration and owned by the Norwegian state, the become a big player in the European production in alliance with BP. company’s role was to be the gas market and lead negotiations on In 2001, Statoil was partially government’s commercial instrument Troll deliveries. It took over as privatised and its shares secured in the new industry then emerging. operator on Statfjord and acquired a listings on the Oslo and New York Its development can be divided presence in Denmark and Sweden stock exchanges. The group has into four eras: through the acquisition of Esso’s strengthened its position on the NCS, The 1970s were characterised by service stations, refineries and and its international exploration and the build-up of expertise, national petrochemical industries in these production operations are set to positioning and major challenges countries. increase substantially over the rest of relating to the development of The 1990s were characterised by the decade. Statfjord, one of the world’s largest technological innovation, with 6 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our future Norway Denmark Sweden Estonia Faroe Islands Latvia UK Russia Ireland Lithuania Belgium Poland France Germany Kazakhstan Georgia USA Turkey Azerbaijan Algeria Iran Egypt Qatar Libya United China Saudi Arabia Arab Emirates Mexico Venezuela Nigeria Singapore Angola Brazil Statoil is represented in 33 countries. Highlights in 2005 • Net income of NOK 30.7 billion – the best-ever result in Statoil’s history • 60% increase in international oil and gas production • Extensive acquisitions of fields and exploration licences in the Gulf of Mexico, with first field development initiated • New vigour on the NCS – technological innovation, 12 new developments, 9 finds and 16 new licences awarded • Record-high reserve replacement ratio STATOIL ANNUAL REPORT AND ACCOUNTS 2005 7


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    Topic: Internationalisation From Barents cold Statoil’s annual report for 2002 contained not a single line about Algeria – under- standably enough, since the group had no activity in that country. Today, it is a part- ner in Algeria’s third- and fourth-largest gas projects and has also begun exploring Hassi Mouina, a Saharan licence equal to half the land area of Denmark. 8 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our future to African heat Twenty-five financial analysts were International Exploration & icy Barents Sea. Expertise acquired invited by Statoil to Algeria in Production (INT) business area. “I through demanding assignments off September 2005. Representing the believe that offers a good alterna- Norway has permitted a successful largest finance houses in Europe and tive to a briefing in a meeting room.” commitment in other countries. The the USA, they were flown into the Statoil’s expressed ambition is to NCS will remain the cornerstone of Sahara to look at In Salah and In be among the companies with the Statoil’s oil and gas production for Amenas. These two gas projects will strongest growth. The commitment many years, and continue to offer give Statoil a combined energy in Algeria provides a good illustration new and demanding challenges. The production of 60-70,000 barrels of of this expansion, as do its produc- ambition is to maintain the present oil equivalent (boe) per day. In their tion figures. At 31 December 2005, production level of more than one efforts to value companies, financial INT reached an output of 200,000 million boe per day into the next analysts are just as concerned with boe per day – an increase of 60,000 decade. But the international share the way companies prepare for the barrels from a year earlier. will gradually increase. future as they are with the results Operations outside Norway are being delivered here and now. NCS commitment still strong now making a solid mark on the “We accordingly felt it was This international growth is not annual result and 17% of Statoil’s important to let them see for being pursued at the expense of the net income for 2005 derived from themselves how we’re making a group’s commitment to the international oil and gas production. commitment in Algeria in order to Norwegian continental shelf. There Seeking collaboration with other realise our international growth is little distinction between national oil companies represents an ambition,” says Peter Mellbye, operating a drilling rig amidst important element in the interna- executive vice president for the Algeria’s baking desert sands or in an tional strategy. Opportunities have STATOIL ANNUAL REPORT AND ACCOUNTS 2005 9


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    opened here in Venezuela, Algeria, operated most of the pipeline that Statoil had to establish Libya, Brazil and Russia. systems on the NCS.” international positions. The group Another strategic element is to Gas reserves in the Caspian, north was not going to live and die as a exploit Statoil’s experience in Africa and the Barents Sea today mere reaper of resources on the establishing value chains for offer new supply opportunities for NCS. The commitment outside natural gas, which derives from Europe and not least for the USA, Norway nevertheless had the producing, transporting and selling where Statoil is already delivering character of pinprick manoeuvres, substantial volumes of this liquefied natural gas by ship. and the results achieved by the commodity to European custom- beginning of the 1990s were not ers. Had to go international impressive. It was accordingly clear “That represents important Statoil was established in 1972 as a to Harald Norvik, Mr Johnsen’s experience, which opens new wholly state-owned company, successor, that Statoil needed a new opportunities,” says Mr Mellbye. primarily to serve as the govern- strategy for expanding into the “Many companies need partners ment’s commercial instrument in the wider world. they can cooperate with over new Norwegian oil industry. The answer came in the form of market access for gas. It’s more Management attention also focused a strategic exploration alliance with complicated and demanding than in the 1970s and 1980s primarily BP, concluded in 1990 and lasting selling oil once you’ve completed a on building up the company and on until the new millennium. This development. We can offer the many major challenges faced on partnership gave Statoil access to experience gained from developing the NCS. But Arve Johnsen, who exploration licences in such and operating fields and transport served as chief executive until countries as Angola, Nigeria and systems. We’ve planned, built and 1988, was convinced from the start Azerbaijan. The group now has 10 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our future substantial oil and gas output in deepwater licence interests held by Leaders from new lands Angola and Azerbaijan, and is due to the Canadian company EnCana in Although finding new reserves will start production off Nigeria in the Gulf of Mexico for USD 2 billion be demanding, and competition 2008. – its biggest-ever acquisition. over access to exploration acreage is “Our alliance with BP lifted our Discoveries have been made in three getting tougher, Mr Mellbye is international exploration and areas, with the largest being the optimistic. production activities from a rather Tahiti oil field due to come on stream “There are plenty of doubters, tentative activity to a significant in 2008 and to provide Statoil with and they didn’t believe that we could business for us,” says Mr Mellbye. 30,000 barrels of oil per day. The get as far as we have,” he says. “I’m Statoil has also taken important group is now building up an confident that we’ll succeed in international positions outside the organisation in Houston to handle its building up additional reserves and BP collaboration. These include involvement in the Gulf. Plans call expanding production. We’ve production in Algeria, Venezuela, for production to reach 100,000 created an able exploration team, China and the UK continental shelf. It barrels per day from several fields we have interests in a lot of licences operates a major offshore develop- after 2012. and have an extensive drilling ment in Iran and has many explora- Statoil’s largest international programme. Many of the countries tion licences on the Faroese and output derives from the Angolan in which we’ve become involved Brazilian continental shelves, in Libya continental shelf, where the first oil have specialists with a solid and in the Gulf of Mexico. consignment was lifted in December education. It’s important that we 2001. The group will reach an equity recruit more leaders from these Going deep in the Gulf production of 100,000 barrels from lands for our organisation.” In 2005, Statoil purchased the six fields in 2006. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 11


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    Topic: Internationalisation International from the start Statoil’s operations have had an with the Statfjord oil, which began Spread over more than 3,600 international orientation from its flowing on 24 November 1979. This individual cargoes per year, Statoil earliest years – not so much through event marked not only the start to ships some 100 million tonnes of exploration, but more in relation to production from one of the world’s crude oil, oil and gas products, and oil and gas sales and borrowing large offshore oil fields, but also the methanol to discharging ports transactions. launch of an oil trading business at worldwide. As early as 1974, the group Statoil which has acquired global Without Statfjord, Statoil would began to sell royalty oil received by dimensions. have been a completely different the Norwegian government from The group ranks today as the company today. This field gave the the Ekofisk field. The volumes traded world’s third largest net seller of group valuable operator experience were small, but they provided a new crude oil. From offering a limited and international know-how as an and young team with the knowledge number of oil types, it now trades oil trader. In addition, it provided and understanding required to tackle 25 different crudes from the NCS early experience of operating in the much greater tasks. These arrived and its international production. international capital market. The subsequent cash flow gave Statoil the financial muscle to invest in service station operation, refining and petrochemicals outside Norway. This field has also been very significant for the development of Statoil’s expertise as a gas company. In addition to huge oil volumes, Statfjord contains substantial quantities of natural gas. The sale of this commodity represented Statoil’s first major challenge in a European market where it met demanding customers with considerable negotiating experi- ence. Klaus Liesen from Ruhrgas (left) and Statoil’s Arve Johnsen in 1981, holding the agreement to sell gas from the Statfjord field to a consortium of European gas companies. 12 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our future The tanker Grena from shipping company J Ludwig Mowinckel in Bergen, loads oil on the Statfjord field. With the big volumes of oil for sale when Statfjord came on stream in the autumn of 1979, Statoil built up its importance as an international crude oil trader. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 13


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    Our operations 14 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    OPER ATIONS Its shafts extend more than 300 metres from the seabed up to the production deck, but it is not only the physical dimensions of the Troll A platform that are enormous. Its production – which in 2005 amounted to over 20% of Statoil’s total gas output – is also considerable. Natural gas’s share of Statoil’s total output is growing rapidly. In 2005 it accounted for 40% of the group’s total production. In 2001 the figure was 25%. The following pages of this annual report give a glimpse of Statoil’s operations in 2005, a year characterised by a high level of activity and future-oriented decisions. Exploration activities have been considerable. Twenty exploration and appraisal wells were complet- ed, and finds were made in 14 of these. Eight development projects, five of them on the NCS, were finalised and brought on stream. The technologically-pioneering Kristin project is one of them. Twelve new projects on the NCS were sanc- tioned and five international development decisions were taken. In 2005, Statoil made the biggest acquisition in the group’s history when it took over the deepwater portfolio in the Gulf of Mexico from the Canadian company, EnCana. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 15


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    Business strategies Exploration & Production Norway The business area is to maintain daily production of one million barrels of oil equivalent from the NCS after 2010. Improved recovery from existing fields, production from new fields and good results within health, safety and the environment (HSE) are important preconditions for success. The development activities are moving northwards in the Norwegian and Barents Seas, and Statoil sees considerable opportunities in these waters. Growing gas exports demand optimum transport solutions for all the key gas markets. Statoil aims to lead the development for all types of field and infrastructure solutions on the NCS. International Exploration & Production The International Exploration & Production business area will ensure production growth through improved recovery from producing fields and through developing new fields. Statoil will in addition lay the basis for an annual long-term growth of 2-4% from 2007-10 through effective business development and exploration in potentially resource-rich regions. An important element in the international strategy is exploiting expertise and technology from activities off Norway. Natural Gas Statoil aims to develop further its position on the NCS and in the European gas markets through increased production, investments in new fields and infrastruc- ture, and safe operations with high regularity. The business area will develop market positions to supply the European markets with gas from several sources, such as north Africa and the Caspian Sea. NG will also develop further the transatlantic LNG position represented by the Snøhvit development and the Cove Point terminal on the USA’s east coast. Manufacturing & Marketing Statoil’s Manufacturing & Marketing business area aims to optimise value creation from the total crude oil, natural gas liquids and refined products available to the group and the Norwegian government. Active efforts are being made to achieve value through improved integration, brand-building, and exploitation of synergies and growth opportunities. The improvement activities at the Mongstad, Kalundborg and Tjeldbergodden facilities will be further developed as industrial centres in the value chain. Statoil intends to strengthen its position in retailing and sale of petroleum products and renewable energy forms in its core markets. Technology & Projects The most important commercial challenges within Statoil’s technology strategies are to increase the group’s oil and gas output from existing fields, help to find new reserves, establish a basis for future business opportunities and strengthen project execution. The most important areas on which this commitment will concentrate are exploration operations and reservoir management, subsea field development, environmental protection, development of the gas value chain, cost efficiency and safe operations. 16 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations Facts Key events in 2005 Exploration & Production Norway is responsible for Statoil’s operations on • Plan for development and operation of Statfjord late life and the the Norwegian continental shelf. Fields operated by the group account for Tampen Link gas pipeline approved by the Storting (parliament) about 60% of total Norwegian oil and gas production. Statoil is operator for in June 24 on-stream oil and gas fields, which comprise 20 platforms or production • Production start-up on the Kristin field. Plan for development ships with crew, four unstaffed installations and 23 subsea facilities. and operation submitted for Tyrihans – Kristin’s satellite Employees: 6,099, of whom 3,422 work offshore • Statoil was awarded 10 operatorships in a new licensing round • Delayed start to deliveries and increased costs on the Snøhvit project International Exploration & Production is responsible for Statoil’s • Operating result and production increased by 100% and 60% exploration, development and production of oil and gas outside the NCS. In respectively compared with 2004 2005 the group had production in Angola, Algeria, Azerbaijan, China, the UK • Opening of the Baku-Tbilisi-Ceyhan oil pipeline and Venezuela. The business area stood for 16% of Statoil’s total oil and gas • Acquisition of deepwater licences with discoveries and production and output shows strong growth. exploration prospects in the US Gulf of Mexico Employees: 713, of whom 405 work outside Norway. • New exploration acreage secured in Libya, Brazil, Nigeria, the Faeroes and the UK • NOK 2.2 billion write-down related to a delayed start-up and increased costs on the South Pars project in Iran Natural Gas is responsible for transporting, processing and marketing • Record gas sales and virtually full utilisation of production Statoil’s own gas from the NCS to European destinations. Also marketing permits supplies belonging to the Norwegian government, it accounts for two- • Ambition established of doubling annual equity gas production thirds of Norway’s gas exports. The business area is responsible for from 25 to 50 billion cubic metres by 2015 international gas marketing and for Statoil’s commitment to the market for • New gas sales contracts with Scottish Power and Verbundnetz liquefied natural gas (LNG). Statoil has large interests in and responsibility Gas AG for technical operation of export pipelines, land-based facilities and • Successful completion of the KEP2005 expansion project at terminals. Employees: 851, of whom 202 work outside Norway. Kårstø Manufacturing & Marketing embraces the group’s overall operations in • Record oil prices, with Brent Blend reference crude trading at transportation of oil, processing, sale of crude oil and refined products and USD 67.3 per barrel retail activities. Responsible for selling and refining Statoil’s and the • Record refining margins and high operating regularity for the Norwegian government’s crude oil as well as selling natural gas liquids, group’s refineries refined products and natural gas in the Nordic countries. Statoil operates two • Statoil sold its 50% interest in the Borealis petrochemicals refineries and one methanol plant, and has more than 2,000 service stations company for EUR 1 billion in nine countries. • The group strengthened global trading with liquefied petroleum Employees: 14,149, of whom 12,591 work outside Norway. gases, and secured access to the US market with a 10-year terminal contract Technology & Projects is responsible for Statoil’s technology expertise, • Tordis became the world’s first field with subsea processing research and development, and for planning and executing development • Tyrihans will be the first field with untreated seawater injected projects. The group’s research centre in Trondheim is part of the business directly into its reservoir from seabed installations area and has a special responsibility for technological innovation which • One hundred different measures were pursued to improve oil contributes to finding more oil and gas, and to recovering more of the recovery from the NCS resources in producing fields. It is in charge of commercialising technology • A centre for drilling and well operations was established and industrial rights. Employees: 1,916, of whom 89 work outside Norway. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 17


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    Exploration & Production Norway production platform and four Key figures (NOK million) 2005 2004 2003 subsea templates. Its gas is piped to Total revenues 97,623 74,050 62,494 Kårstø, while condensate goes to Income before financial items, other items, taxes and minority interest 74,132 51,029 37,855 the Åsgard C storage ship. The plan Gross investments 16,257 16,776 13,136 for development and operation of Tyrihans was submitted to the government in July 2005. This will Statoil’s equity production of oil proven finds and new discoveries in be a subsea satellite to Kristin, with and gas from the Norwegian the Norwegian Sea. production scheduled to begin in continental shelf in 2005 averaged A new subsea template began 2009. 985,000 barrels of oil equivalent producing on Åsgard in August, while (boe) per day. The group has an Urd came on stream during Novem- Statfjord late life www.statoil.com/ norwegian_fields ambition of maintaining production ber. Comprising the Stær and Svale The Statfjord licensees have at one million boe per day beyond satellites, the latter development has resolved to implement a late-life 2010. In the short term, its goal is been tied back to the Norne development, and intend to invest to produce 1.1 million daily boe in production ship. These projects NOK 16.0 billion including the 2007. ensure good capacity utilisation on Tampen Link gas pipeline. These their respective main fields. plans will maintain production Continued growth in Halten/ towards 2020 and were approved Nordland Kristin – a pioneering project by the Storting (parliament) in June. Ten years of production from Kristin came on stream in November Heidrun was celebrated in October and represents a substantial Troll 2005. This field marked Statoil’s technological leap. Highly-deviated Two new compressors on Troll A inauguration as a production wells have never previously been began operating on 1 October, on operator in the Halten/Nordland drilled through subsea templates schedule and to budget. These units area of the Norwegian Sea. In 2005, into a reservoir with such high will help to maintain the existing the group averaged some 162,000 pressure and temperature. level of gas production from the boe per day from the Heidrun, The technology and experience field. They rank as the first Norne, Åsgard, Mikkel, Kristin and developed on Kristin equip Statoil installations of their kind on the NCS Urd fields. The goal is to expand this and its contractors to solve new to be driven by electricity transmit- output over the coming decade challenges both on the NCS and ted from land. Statoil has launched a through improved recovery from internationally. This development study in cooperation with Hydro and existing fields, development of embraces a semi-submersible Gassco on increasing gas produc- Proud platform manager on Kristin A well-pleased Hilde Ådland (38) got her first platform manager job on Kristin, which came on stream in November 2005. She was previously production supervisor on the Heidrun platform where she worked for 10 years. The Kristin field contains gas and condensate and is characterised by high pressure and high temperature in the reservoir. Handling the pressure and temperature conditions on Kristin represents a new stage in technological development. The field lies on the Halten Bank, 240 kilometres off the coast of mid-Norway. 18 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations tion from Troll and developing the extends project execution in the Barents Sea during 2005. Four are gas phase in the western segment final phase and adds to costs. due to be drilled in the North Cape of the field. This will be the largest and Hammerfest Basins close to new development project on the New Barents Sea wells Snøhvit. A major seismic survey is NCS over the next few years. New wells were spudded in the also planned in the area. The aim is Snøhvit costs up Statoil’s average oil and gas production - Norwegian continental shelf Important milestones were reached 1,000 barrels of oil equivalent/day by the Snøhvit project during 2005. Field 2005 Statoil’s share All pipelines have been laid, the Statfjord 71.3 51.88% drilling and completion programme Statfjord East 7.4 25.05% is on schedule, and the cooling Statfjord North 9.1 21.88% tower and processing plant were Sygna 3.0 24.73% transported and installed on Gullfaks 179.9 61.00% Melkøya as planned. But the project Snorre 24.2 15.58% review during the autumn unfortu- Vigdis 19.7 28.22% nately made it necessary to expand Visund 9.5 32.90% the investment framework for the Tordis 16.5 28.22% land-based plant by NOK 7 billion, Troll Gas Phase 1 101.3 20.80% and to postpone the scheduled Kvitebjørn 58.3 43.55% start-up date by eight months. Sleipner West 119.3 49.50% Deliveries of liquefied natural gas Sleipner East 23.9 49.60% are now expected to begin in the Gungne 17.4 52.60% autumn of 2007. Veslefrikk 5.0 18.00% Snøhvit was originally expected Huldra 8.5 19.88% to cost NOK 39.5 billion. The latest Glitne 8.4 58.90% cost revision has increased the Norne 29.8 31.00% anticipated investment from NOK Urd 1.8 50.45% 51.3 billion to NOK 58.3 billion. Kristin 3.1 41.30% Several factors account for this Heidrun 20.2 12.41% development. Engineering has been Åsgard 89.0 25.00% delayed, with changes made at a Mikkel 18.5 33.97% late date. The scope of the work Total Statoil-operated 845.1 was underestimated, particularly Total partner-operated 139.8 for the electrical discipline. Quality Total production 984.9 deficiencies with and delays to Underlifting 0.7 modules from Europe have created Total lifted production 984.2 additional work at Melkøya, which 985 991 991 989 940 423 1 366 319 330 249 691 670 1 625 661 Statoil’s share of oil and gas production, 562 Norwegian continental shelf 2005 2004 2003 Oil (thousand barrels per day) 562 625 661 2001 2002 Natural gas (thousand boe per day) 423 366 331 Olje Gass Total production (thousand boe per day) 985 991 991 2005 2004 2003 Oil Gas STATOIL ANNUAL REPORT AND ACCOUNTS 2005 19


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    to strengthen the resource base in output from and extend the were identified during testing with order to expand the Melkøya producing life of existing installa- one of the three freefall lifeboats on facility. tions in the North and Norwegian Veslefrikk B. This prompted a Statoil participated in nine Seas. temporary production shutdown. All completed exploration and appraisal six of the freefall lifeboats on this wells during 2005. Discoveries Gas blowout on Snorre A installation and on the Kristin were made in six of these. Three Statoil has conducted an extensive platform have been modified and exploration wells were in progress causal analysis of the gas blowout are now back in place. All freefall with Statoil participation at 31 on the Snorre A platform in lifeboats on the NCS are being INVESTMENTS PER BUSINESS AREA December, and two with the group November 2004. This study investigated by the Norwegian Oil as operator. identified weaknesses in various Industry Association (OLF), and 46.2 42.8 areas, and measures have been necessary modifications will be More exploration in 2006 adopted. The group received a NOK made. A big expansion in exploration 80 million penalty in November activity on the NCS is planned for 2005 as a result of the incident. On Heading for zero discharges 2006. Statoil expects to participate the basis of an overall assessment, Statoil is working to reach the 24.1 in 15-20 wells, and will be operator it has accepted this penalty. target of zero environmentally- for roughly half of these. A contractor employee was harmful discharges to the sea. Work Awards in predefined areas (APA) killed in January 2005 during work was completed on many of the of the NCS for 2005 were on the Kristin platform while it was fields during 2005 in connection announced in December, when the being outfitted at Aker Stord. with the execution of planned zero- NOK bn group received 10 operatorships discharge measures, while others and interests in six other licences. Weaknesses with lifeboats will require rather more time. This This acreage can help to boost In June 2005, design weaknesses job will continue in 2006, with the 2003 2004 2005 Other Manufacturing & Marketing Projects under development Natural Gas Statoil’s Production Plateau production Lifetime- International Exploration & Production Field share start Statoil’s share1 number of years Exploration & Ormen Lange2 10.84% 2007 49,000 30 Production Norway Snøhvit 33.53% 2007 40,000 30 Skinfaks/Rimfaks IOR 61.00% 2006 21,000 11 Volve 49.60% 2007 30,000 6 Statfjord late life 44.34% 2007 22,0003 12 Tyrihans 46.80% 2009 50,000 17 Fram East2 20.00% 2006 9,000 15 1) Boe/day. 2) Partner-operated project. 3) New additional production Impressive deck load On 11 July 2005, the world’s largest heavy-lift vessel Blue Marlin arrived at Melkøya with the process plant for the Hammerfest LNG facility. The 33,000- tonne process plant was constructed as an integrated unit on a barge measuring 154 by 54 metres. It was built in Cadiz, Spain, and the 5,000-kilometre journey to Melkøya took 11 days. Two days after arrival, the process plant was berthed in the Melkøya dock. 20 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations emphasis on upgrading equipment, Conservation of Nature notified the replaced. This replacement process making existing solutions more OLF in early 2005 that PFOS, an has been virtually completed on robust and adopting new technol- additive used in fire-extinguishing production installations operated by ogy. foam, is very harmful to people and Statoil. Similar action will be taken The Norwegian Society for the the environment and should be on mobile rigs. International Exploration & Production development due to start production Key figures (NOK million) 2005 2004 2003 during the first half of 2006. Statoil Total revenues 19,563 9,765 6,615 also operates the Hassi Mouina Income before financial items, other items, taxes and minority interest 8,364 4,188 1,781 exploration block. Seismic was shot Gross investments 25,295 18,987 8,019 over this area in 2005, and plans call for drilling to start during 2006. Statoil signed a letter of intent in Operating income for the Interna- 2003 to over NOK 25 billion in August with Algerian state oil and gas tional Exploration & Production (INT) 2005. company Sonatrach on cooperation business area doubled from 2004 to With three new fields due to come in Algeria, Norway and internation- 2005. Output increased over the on stream in Angola, Azerbaijan and ally. The companies will explore same period by 60%, from 115,000 Algeria, 2006 will be another opportunities for establishing an barrels of oil equivalent (boe) per important year. Exploration activity integrated project for liquefied day to 184,000. will help to lay the basis for long- natural gas in Algeria. This is likely to Important strategic steps were term growth. INT expects to embrace exploration, development also taken in laying the basis for long- participate in 15-20 exploration and marketing of the gas in North term production growth at Statoil wells during 2006, including four- America. through collaboration agreements, five operated by Statoil. licensing rounds, and the acquisition Libya of exploration prospects and proven Algeria An office was opened by Statoil in discoveries. The growth in interna- The group’s portfolio of projects in Libya during the summer of 2005. tional exploration and production is Algeria comprises the In Salah gas The group secured the operatorship reflected in the investment figures, field, on stream since 2004, and the of two licences in an exploration which rose from NOK 8 billion in In Amenas gas and condensate bidding round during October. It is 184 43 142 115 15 Statoil’s share of oil and gas production 89 100 3 outside Norway 2005 2004 2003 87 Oil (thousand barrels per day) 142 100 87 Natural gas (thousand boe per day) 43 15 3 Total production (thousand boe per day) 184 115 89 2005 2004 2003 Oil Gas STATOIL ANNUAL REPORT AND ACCOUNTS 2005 21


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    sole licensee for Cyrenaica 94, and 17 and 31. Kizomba B in block 15 2005. The second phase started partners British Gas on a 50-50 basis came on stream in July, significantly production in late December 2005. in Kufra 171. These two licences ahead of schedule. Three new Oil from ACG will be transported cover a total of 21,000 square developments on this acreage were through the 1,770-kilometre Baku- kilometres. Plans call for seismic to be sanctioned in 2005 – Mondo, Saxi- Tbilisi-Ceyhan (BTC) pipeline to STATOIL’S OIL AND GAS RESERVES shot in 2007, with the first wildcat Batuque and Marimba. Dalia in block Turkey for onward shipment. The first 4,289 4,295 expected in 2008 at the earliest. 17 is expected to begin production shipment is expected in May 2006. 2,569 2,534 towards the end of 2006. Statoil Statoil also participates in the Shah Angola again enjoyed exploration success in Deniz gas and condensate field, The Angolan continental shelf is the this country during 2005, with which is expected to begin produc- Million boe largest source of Statoil production discoveries in seven exploration tion in the second half of 2006. outside Norway, and yielded more wells. than 70,000 barrels per day for the Gulf of Mexico 1,720 1,761 group in 2005. That represents Azerbaijan Statoil agreed in April to acquire about 40% of its combined Phase one of the main field develop- EnCana’s deepwater licences in the 2004 2005 international oil and gas output. ment for Azeri-Chirag-Gunashli US Gulf. With a purchase price of USD Oil Gas Statoil has 13.33% of blocks 15, (ACG) came on stream in February 2 billion, this ranks as the group’s largest-ever acquisition. The acreage contains several proven finds and Statoil’s international oil and gas production very interesting exploration (1,000 barrels of oil equivalent/day) prospects. Statoil believes that the Field 2005 Statoil’s share Gulf of Mexico could develop into a Girassol+Jasmim, Angola 27.4 13.33% key growth area, providing it with Xikomba, Angola 5.0 13.33% more than 100,000 barrels per day. Kizomba A, Angola 28.1 13.33% Kizomba B, Angola 13.7 13.33% Venezuela In Salah (gas), Algeria 40.6 31.85% Azeri-Chirag-Gunashli, Azerbaijan 10.5 8.56% This country is an important priority Azeri (Phase 1&2), Azerbaijan 9.0 8.56% area for Statoil. The bulk of the www.statoil.com/statoils_world Sincor, Venezuela 24.2 15.00% group’s production of about 25,000 LL652, Venezuela 0.8 27.00% barrels per day comes from the Lufeng, China 6.8 75.00% Sincor field in north-eastern Alba, UK 9.8 17.00% Venezuela. Together with Total, Dunlin, UK 1.5 28.76% Statoil is in negotiations over a Merlin, UK 0.05 2.35% further development of this project. Schiehallion, UK 3.9 5.88% The group is also operator for an Caledonia, UK 0.4 21.32% exploration licence in block 4 on Jupiter (gas), UK 1.9 30.00% Plataforma Deltana. Total 183.65 The contractual terms relating to Field development in the Gulf of Mexico In August, a decision was taken to develop the first phase of the Tahiti field in the Gulf of Mexico. Statoil has a 25% interest and its partners are Total and Chevron, which is operator. The computerised drawing shows the process plant on Tahiti built on a spar floater. Daily production capacity will be 125,000 barrels of oil and two million cubic metres of gas. Tahiti lies in 1,220 metres of water about 300 kilometres south-west of New Orleans. Recoverable reserves are estimated at 400-500 million barrels. The field is expected to come on stream in the summer of 2008. 22 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations the present Sincor involvement were topsides and laying of the third Exploration tightened during 2005, which means pipeline have been delayed, with Statoil was awarded 45% of block higher royalty payments to the substantial cost increases as a 315 off Nigeria in August, after a government. This change is being consequence. Statoil wrote down the bidding round. Petrobras is operator PRODUCTION IN 2005 disputed by the partners in the book value of South Pars six-eight by for this licence, which lies in more project, who are negotiating with the NOK 2.2 billion in the fourth quarter than 1,500 metres of water off the 16% authorities to arrive at an overall of 2005. northern Niger delta. solution for Sincor. Interests in two further deep- Russia water blocks were awarded to the Iran In recent years, Statoil has increased group in Brazil’s seventh licensing The group is operator for the its commitment to business round, bringing the number of offshore part of development phases development in Russia, and licences in these waters with Statoil 84% six-eight on the South Pars gas field, negotiations are being pursued with involvement to seven. The group International comprising three production Gazprom on participation in a operates three of them. NCS platforms and the same number of Shtokman gas development in the Statoil was awarded holdings in pipelines to land. The platform Barents Sea. In late April 2005, four blocks during the second jackets and two pipelines have been Statoil submitted proposals for Faeroese licensing round in January installed. developing the field. After assessing 2005, including three as operator. Statoil completed the drilling, these, Gazprom has invited the group Overall, the group now has interests completion and test programme in to collaborate further during the in six licences off the Faroes, and DISTRIBUTION OF RESERVES IN 2005 January 2006, ahead of schedule and process of reaching a final decision on operates five of these. with good test results. However, which companies will form a 19.4% installation and commissioning of the Shtokman partnership. Projects under development Statoil’s Production Plateau production Lifetime- Field share start Statoil’s share1 number of years 80.6% ACG Phase 3 8.56% 2008 20,000 19 International Shah Deniz 25.50% 2006 37,000 25 NCS Dalia 13.33% 2006 27,000 20 Rosa 13.33% 2007 18,000 19 Marimba 13.33% 2007 5,000 15 Tahiti 25.00% 2008 30,000 25 Corrib 36.50% 2008 20,000 18 South Pars 6, 7 and 8 37.00% 2007 15,000 42 In Amenas 50.00% 2006 28,000 17 Agbami 18.85% 2008 40,000 17 1) Boe/day based on an oil price of approx USD 30/bbl. 2) Pay-back period. TOTAL OIL AND GAS PRODUCTION 1,400 1,169 1,074 1,082 1,106 1,007 1,000 boe/day Venezuela important producer Yanet Silva works as operative on the Sincor project in which Statoil has a 15% interest. Sincor provided 24,200 boe in 2005, and is one of Statoil’s largest international producers. The group also 2001 2002 2003 2004 2005 2007 has exploration activities off Venezuela in the Plataforma Deltana field. Oil Gas Target STATOIL ANNUAL REPORT AND ACCOUNTS 2005 23


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    Natural Gas in very high spot prices in the UK Key figures (NOK million) 2005 2004 2003 market. A better balance between Total revenues 45,823 33,326 25,452 supply and demand is expected as Income before financial items, other items, taxes and minority interest 5,901 6,784 6,005 new pipelines and receiving Gross investments 2,542 2,368 860 terminals for liquefied natural gas come into operation in both Britain and continental Europe. Statoil ranks today as one of the European consumption rising The North American gas market largest suppliers of natural gas to Consumption of natural gas is is also characterised by high gas Europe. The bulk of these continuing to rise in Europe, and prices and expectations of rising deliveries are produced from the reached 535 billion cubic metres in consumption. According to the IEA, Norwegian continental shelf, but 2004. Figures from the Interna- gas demand should grow from the group also has ambitions to tional Energy Agency (IEA) show a today’s 772 billion cubic metres to continue expanding its interna- growth of 3.9% for the first nine 965 billion in 2020. A flattening- tional gas business. In June, it months of 2005. The IEA expects out in domestic US production will presented an ambition of doubling European consumption to reach open the way to substantial LNG equity production of this 690 billion cubic metres by 2020. imports, which rose by 28% in commodity by 2015. That However, today’s high gas prices 2004 compared with the year involves an increase from some 25 represent a source of uncertainty before. billion cubic metres today to 50 for the increase in demand, since billion through growth both in they open the way for greater use Strong market position Norway and internationally. of alternative energy sources. The In addition to its equity production, The gas ambition presents IEA has accordingly somewhat Statoil markets gas for the state’s Statoil with three challenges. First, reduced its forecast for growth in direct financial interest (SDFI) on a number of field and infrastruc- gas consumption. the NCS. A realisation of the group’s ture developments must be Prices rose sharply during 2005 gas ambition will make it possible pursued on the NCS. Second, for natural gas volumes sold both for Statoil – including the SDFI – to access to new gas resources has under long-term contracts, with preserve its market positions in an to be secured internationally prices indexed primarily against oil expanding European gas market through business development products, and in the open market over the next 10-15 years. and exploration. Finally, market where prices are set by supply and To succeed in these growth access must be obtained for these demand. A tight supply position ambitions, sufficient capacity must additional gas volumes. during the autumn of 2005 resulted be secured for processing and Landfall for Langeled The laying of the southern section of the Langeled line was completed in 2005. The picture shows equipment for pulling the line ashore at Easington on the UK east coast. The line will carry gas from the Ormen Lange field with a capacity equivalent to 20% of present UK gas consumption. Statoil is operator for the pipeline project and Hydro is operator for the field development. At 31 December 2005, 50% of the 1,200-kilometre line had been laid. 24 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


  • Page 29

    Our operations transporting gas. It could be Snøhvit to Cove Point on the US Sales for Norwegian power necessary to expand the land-based east coast, Statoil will seek to generation plants at Kårstø, Kollsnes and establish new positions for gas A contract was signed with Melkøya, and to secure additional liquefaction. Norwegian electricity generator transport capacity to Europe. Statkraft to meet that company’s Statoil – including the SDFI – New gas sales fuel needs for the gas-fired power has about 10% of the European Statoil achieved almost full station planned by Naturkraft at market for natural gas. Deliveries utilisation of its production permits Kårstø. Starting in October 2007, are made to 13 countries, with the in 2005, and also generated this agreement covers about 0.3 largest volumes going to Germany, additional value through trading and billion cubic metres annually for 10 the UK and France. The group had optimising its positions. Demand for years and represents a major around 15% of the German market gas is currently high throughout the expansion in Statoil’s gas sales deals in 2004 and met no less than 25% European market, and Statoil in Norway. The group also extended of French demand. Statoil is concluded new sales totalling 20 its existing sales contract with constantly strengthening its billion cubic metres in 2005. A 10- Germany’s Verbundnetz Gas AG by position in the UK market through year contract covering annual six years, which involves additional new contracts. deliveries of 0.5 billion cubic metres deliveries of 12 billion cubic metres Positions in north Africa and the from October 2007 was secured up to 2022. Caspian region, in particular, will from the Scottish Power gas and play a key role for international electricity company. This deal will Share of power station sold growth. Statoil is due to begin gas help to strengthen the group’s In January 2006, Statoil sold its deliveries to Turkey, Georgia and position in the UK, and to improve 30% stake in Synergen Power which Azerbaijan in 2006. Through the utilisation of its expanded transport owns the Ringsend gas power value chain created for LNG from capacity to that market. station in Ireland’s capital, Dublin, to More capacity at Kårstø Capacity at the gas processing plant investment estimate. The Kårstø The success of this project at Kårstø north of Stavanger has expansion project 2005 (KEP2005) derived primarily from four been expanded in order to handle ranked as one of Norway’s largest important factors – thorough output from the Kristin field industrial developments on land, and preliminary work before project operated by Statoil in the Norwegian increased capacity by 20% to 88 kick-off, no changes along the way, Sea. This project was completed in million cubic metres of gas per day. A the right timing of contract awards October 2005 on schedule and at a plant for extracting ethane and in relation to price, and good project total cost of NOK 4.1 billion – NOK carbon dioxide from sales gas also execution. 1.6 billion below the original formed part of KEP2005. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 25


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    the Royal Bank of Scotland Power joint venture, with state-owned know-how is very important to the Investments. The other owner, the Gassco as operator. Statoil serves growth ambitions set for Statoil’s Irish Electricity Supply Board as technical service provider (TSP) gas business, both in Norway and International (ESBI) has retained its for the bulk of these facilities. Both internationally. The TSP role is 70% stake. Statoil will continue to as an infrastructure owner through accordingly important for the group. supply gas to Synergen under a Gassled and as a user of the long-term agreement to deliver transport system, Statoil has a about 600 million cubic metres of strong interest in secure operation gas per year to the power station. with high regularity. In addition, the TSP job allows it to continue Technical operations expertise developing its operational and The Norwegian gas transport technological expertise in gas system is owned by the Gassled transport and processing. This Manufacturing & Marketing utilised. This drove up the level of Key figures (NOK million) 2005 2004 2003 prices. Fears of a shortfall material- Total revenues 339,380 267,177 218,642 ised in August and September, when Income before financial items, other items, taxes and minority interest 7,646 3,921 3,555 hurricanes Katrina and Rita caused a Gross investments 1,630 4,162 1,546 shutdown of all production in the US Gulf. Refinery output in Texas and Louisiana was also sharply reduced. Statoil is one of the world’s largest by expectations of strong growth in net crude oil traders, and sold some demand and limited spare capacity Record oil prices 2.1 million barrels per day in 2005. in members of the Organisation of Brent Blend reference crude That corresponds to about 10 times Petroleum Exporting Countries reached a peak of USD 67.3 per Norway’s daily domestic require- (Opec). More attention was also barrel, but fell back quickly after the ments. increasingly paid in the market to a US government and the Interna- The international crude oil possible scarcity of products tional Energy Agency (IEA) market was characterised in 2005 because refining capacity was fully announced that they would release www.statoil.com/mongstad Refinery and terminal The Mongstad refinery near Bergen is a modern, highly-upgraded oil refinery with a capacity of 10 million tonnes of crude per year. It is owned 79% by Statoil and 21 % by Shell. Mongstad also has a big terminal for intermediate storage of crude. The oil is stored in large rock caverns with a total storage capacity of 9.4 million barrels. 26 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations oil from strategic stocks. The Ireland. Statoil has been in the Irish and pipe transport of LPG, oil and average price for 2005 was a new market since 1992, advancing gas, and operates the largest record at USD 54.5 per barrel. during this period from fifth place to terminal for import, storage and Refining margins in north- its present market leadership. Today export of LPG in the USA. Statoil western Europe were significantly the company has 20% of the has a 10% share of the world’s stronger in 2005 than the year automotive fuels market, 1,100 waterborne LPG trade. before. A high level of demand over employees, 236 service stations the past three years has put general and interests in terminals and Disposal of Borealis pressure on world refining capacity. distribution companies for heating Statoil sold its 50% holding in the Statoil refined 16% of its equity oil oil. The decision to leave the Irish Borealis petrochemical group in in 2005 and produced about 15 market is of a strategic nature. 2005 to Abu Dhabi’s International million tonnes of refined products. Statoil is the leading player in Petroleum Investment Company CRUDE OIL SOLD The volume sold through the group’s Scandinavia for energy product (IPIC) and OMV AG of Austria. The BY STATOIL retail business accounted for 40% sales, with more than 25% of the sales sum was EUR 1 billion, 32.6% 38.5% of this quantity. Statoil also sold a market. It sells heating oil, corresponding to NOK 7.8 billion, large volume of third-party lubricating and marine oils, jet fuel, which gave Statoil a book gain of products. Its principal markets were liquefied petroleum gases (LPG) and NOK 1.5 billion. in the Nordic countries, the rest of natural gas. This disposal was prompted by 28.9% north-western Europe and North The group has signed a 10-year the fact that Borealis no longer America. agreement with the US company formed part of Statoil’s core Entitlement production Increased pressure on automo- Enterprise Products Operating LP, business. The sale to the IPIC and Crude bought from tive fuel margins in certain countries entailing export and storage of LPG OMV also represents a good the Norwegian government and rising oil prices characterised products at Enterprise’s terminal at industrial solution for Borealis. Oil bought from a third party the retail sector in 2005. After the Mont Belvieu, Texas. The agree- Statoil had been a part owner of acquisition of ICA’s 50% holding in ment will form the basis for further Borealis since the latter was Statoil Detaljhandel Skandinavia development for trading LPG in the established in 1994 on the basis of (SDS), measures have been US market, an important import petrochemical operations at Statoil www.statoil.com/traded_products implemented to secure the benefits market for LPG produced from the and Finland’s Neste. Statoil helped of greater integration between the North Sea. Enterprise has a to develop the petrochemical group various countries where the group substantial business in processing industrially and financially to the www.statoil.com/crudeinfo operates service station networks. This work will continue over the coming year. Oil prices (USD per barrel) 2005 2004 Planning to sell Irish business Lowest: 38.2 29.1 Early in 2006 Statoil announced its Highest: 67.3 52.0 plans to sell its retail and commer- Average: 54.3 37.8 cial and industrial business in Service stations in nine countries Statoil has about 2,000 service stations in nine countries. In Russia they are concentrated in the Murmansk area. Norway Sweden Denmark Ireland Poland Lithuania Latvia Estonia Murmansk Number of stations 521 587 305 208 195 65 60 51 6 Market position 1 1 3 1 3* 2 1 1 1 Market share (%) 27 24 16 16 5 22 21 30 48 *Ranking among international companies STATOIL ANNUAL REPORT AND ACCOUNTS 2005 27


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    strong position it occupies today. owners which have petrochemicals ranks as the biggest customer for Given the big investment require- as their core business. Statoil’s natural gas liquids. ment facing Borealis, not least in Borealis will remain an important Abu Dhabi, it is best served with partner in the future, because it Technology & Projects The Technology & Projects business seabed installations. Removing water technology to be used means that area is responsible for Statoil’s from the oil and gas flow provides a Tordis will be the world’s first field technological expertise and number of advantages, including an with subsea processing. Water and development as well as for research improvement in the recovery factor sand contained in the wellstream will and the planning and execution of through direct injection of the water. be separated from the oil and pumped major developments. Combining Produced water will not need to be into a sub-surface formation for technology and projects in the same treated before discharge, oil and gas storage. A multiphase pump will drive organisation is intended to strengthen transport capacity is increased and oil and gas through the existing the group’s ability to implement big storage capacity on the installations pipeline to Gullfaks C for further developments. will be reduced. processing and transport. The group ranks as one of the Substantial technological and Tordis IOR represents a significant leading operators of floating environment-related challenges are contribution to improving recovery production platforms and production posed when continuing the develop- from fields which are smaller, in deep ships, with a total of 11 installations ment of production installations for water and remote from fixed on stream. It is also the world’s ultra-deep water and in sea areas installations. This project also helps to www.statoil.com/technology second-largest operator of subsea oil with very demanding weather achieve a substantial reduction in and gas facilities after Petrobras. At conditions. Statoil is also working to produced water discharges. 31 December 2005, Statoil was develop facilities for small and The Tyrihans field in the Norwe- operating 284 subsea-completed commercially-marginal fields. gian Sea represents another wells on 23 fields. technological advance. Due to come New and demanding challenges Technological advances on stream in 2009, it will be the first are faced by the group in the Halten/ The Tordis improved oil recovery subsea development where Nordland area of the Norwegian Sea. (IOR) project is expected to raise the untreated seawater is injected by These involve increasing production recovery factor on this field from 49 seabed pumps into the reservoir to from subsea wells and separating oil, to 55%, equivalent to an additional boost recovery. This solution could gas and water in the wellstream from output of 35 million barrels. And the increase oil recovery by 18 million Statoil’s key technology areas Statoil’s opportunities for creating additional • environmental technology value depend heavily on its ability to develop • exploration technology and apply technology. Five priority areas are • reservoir management particularly important for strengthening its • subsea technology competitiveness: • gas technology 28 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations Subsea systems: Safer, cleaner and more efficient Subsea installations produce oil and waters in the Arctic or sub-tropical reservoirs with extremely high gas from facilities installed on the storms. In addition, subsea pressure and temperature in very seabed rather than on conventional separation of produced water from deep water. platforms. Such solutions make it the wellstream and water injection In addition, the offshore part of commercially interesting to tie small into geological formations beneath the Snøhvit development in the fields back to larger units and field the seabed will greatly reduce Arctic region of the NCS is based on centres. In areas without estab- discharges of possibly harmful a complete subsea solution. This lished infrastructure, subsea waste products. field is tied back to the processing systems can be linked directly with Statoil has substantial experi- and gas liquefaction plant on land by processing plants on land. ence in this area, and is planning to a 143-kilometre multiphase flow In addition to reduced develop- strengthen its position even further pipeline for the unprocessed ment costs and increased produc- in coming years. The Åsgard and wellstream. Located on Melkøya tion, subsea installations offer Norne fields operated by the group island outside Hammerfest, the www.statoil.com/snohvit advantages related to health, safety in the Norwegian Sea represent the liquefaction plant is due to come on and the environment. Shipping and latest offshore technology with line before the end of 2007. fishing can be pursued far more regard to subsea development and safely when production facilities sit the use of production ships. on the seabed. These systems are Similarly, the start of production The offshore part of the not affected by extreme weather from the Kristin gas and condensate Snøhvit project is a seabed conditions, whether these be icy field is a breakthrough for producing development. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 29


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    barrels. Tyrihans will be tied back to achieve IOR, including extensive use support personnel pursuing drilling the Kristin field by a 43-kilometre of four-dimensional seismic data and well operations on rigs and pipeline which is electrically heated to which include the time dimension, production installations. Real-time prevent hydrate formation. innovative drilling technology, new data transfer between sea and land is wells and phasing-in satellite fields. an important tool in this work. Improved oil recovery The programme aims to increase Developing and applying new IOR with carbon injection effective drilling time from 77 to 90% technology opens big opportunities Carbon dioxide poses a problem as a by the end of 2007. Statoil’s drilling for IOR, and is an important priority greenhouse gas, but represents a and well operation function embraces area for Statoil. IOR helps to extend commercial opportunity as an 750 of its own people but employs the producing life of existing injection gas to improve recovery 7,000 personnel at contractor installations and other infrastructure, from mature fields. It is possible to companies. The group cooperates and to increase the value of mature transport the gas to offshore fields by closely with the latter. fields. ship or pipeline, and inject it into the Statoil is a leader in developing reservoirs in order to drive residual oil Project execution new IOR technology. No less than volumes towards the production The business area worked in 2005 on 100 different IOR-related measures wells. Natural gas is normally used for improvement measures aimed at were being implemented during this, but carbon dioxide has far better delivering development projects to 2005 on fields it operates. The properties for extracting more oil. In budget and on schedule, at their average recovery factor on subsea- addition, a substantial positive expected level of quality and without completed fields with measures environmental effect will be achieved harm to people or the environment. www.statoil.com/co2 already sanctioned is close to 42%. by storing the carbon dioxide once it This work concentrates on the Revised estimates for stock tank oil has been separated from the oil. composition of management teams, originally in place (Stooip) and for Statoil is exploring opportunities for the establishment of efficient reserves, as well as changes to the using this gas for IOR on a number of processes for project development composition of the portfolio, mean fields in the North Sea. and execution, integration and that this figure will vary somewhat cooperation with industry, and reuse from year to year. The ambition is to Drilling and well operations of good solutions. A special project increase the average factor for Statoil ranks as the world’s second- academy has been established. subsea fields to 55% over their largest offshore drilling operator, and During the year, it was resolved to producing life. The average recovery is engaged at any given time in about initiate measures to improve factor on fields with platform- 15-20 drilling and well operations production on a number of existing completed wells is calculated to be related to exploration and production. fields. Statfjord late life was 58% with measures already A special programme has been sanctioned, along with Huldra tail sanctioned. Statoil’s ambition here is initiated to enhance the efficiency of production, improved recovery from to reach an average of 70% over their such work. One measure involves the Tordis, and the development of Volve producing life. creation of a centre staffed by able and Tyrihans through tie-backs to A number of approaches can and experienced specialists to existing infrastructure. 20 years of successful research VISTA for 20 years collaboration The story of Some NOK 200 million has been an exceptional partnership contributed by Statoil over the past two decades to back basic research Twenty years of collaboration in areas of great significance for the between the Norwegian Academy Norwegian oil and gas industry. This of Science and Letters and Statoil support has been channelled through was celebrated with the the Vista programme run by the publication of The story of an exceptional partnership. 30 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations Commercialising new technology Statoil invests NOK 100-300 million costs for shipping companies and every year in new companies to help operators. the development and commercialisa- Through its own supplier tion of good technological ideas. The development programme (LUP), bulk of these start-ups originate in Statoil has supported creative ideas the group’s operational or research- developed by small and medium- based activities. At 31 December sized enterprises. Backing is provided 2005, this involvement embraced 30 for about 15-20 projects every year. companies providing some 250 jobs. Fifteen were under way at 31 In recent years, important December 2005, and 10 new ones priority areas have been water and had been established during the year. gas treatment technologies, exploration and reservoir technol- Ballast water treatment ogy, and solutions relating to gas A technology development transport and industrial utilisation. agreement has been concluded through the LUP with Norway’s Ship/offshore simulator MetaFil company, which will develop The group acquired an interest in and industrialise a treatment system Marine Cybernetics during 2005, for ballast water on ships. The and invested in the development of introduction of alien species and new technology for testing control organisms from ballast water and management systems on ships discharges represents a global and offshore installations. This environmental threat and is regarded company makes the CyberSea as one of the four biggest marine Simulator, which devises possible pollution problems. MetaFil’s faults and operating problems by technology was tested in full scale connecting a simulator box to the during 2005, and is due to become control units in a management commercially available in 2006. The system. Systems can then be tested system will meet the discharge while the ship or installation is either standards set by the UN’s Interna- under construction or in operation. tional Maritime Organisation (IMO), The technology enhances safety, which comes into force for newbuild- improves efficiency and reduces ings in 2009. Island Wellserver has been specially designed to be able to perform downhole interventions as cost-effectively as possible. Norwegian Academy of Science and This programme was established The challenges have increased Letters. on the initiative of Statoil’s manage- and the tasks have become more Determined by Statoil’s business ment, which realised in the early difficult, observes vice president and long-term requirements, the 1980s that there was a need to Ingve Theodorsen at Statoil’s content of this programme currently enhance national expertise by stimu- research centre, who chairs the Vista covers the four core areas of lating basic research and encourag- programme. Today’s discoveries are exploration, improved recovery, oil ing various academic communities to smaller than before, and reservoirs and gas processing and environmen- cooperate. Building up sub-surface are more demanding to produce. tal protection. Vista funds go to expertise was not least important in “We therefore need research doctoral and post-doctoral studies, order to reduce exploration costs communities with a higher level of project management and funding of and improve the recovery factor on ability than we’ve seen so far,” he university chairs. Norwegian offshore fields. says. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 31


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    People and society We have described our values and business, where turnover has managers in our group, and for 34% leadership approach in the We in generally been high, we are now of people below the age of 45 in such Statoil document. This was updated working to reverse this trend. positions. The female proportion in December 2004 and provides We continued our corporate varies somewhat between the clear guidelines on the business trainee programme in 2005. By various business areas, but those culture we want to develop providing a structured development with the lowest share showed an collectively. The revised values were path, this is intended to meet part of improvement over the past year. We introduced to the organisation during our long-term expertise require- have special development pro- 2005 through a number of training ments within selected specialities. grammes for managers, and the and communication activities. Our Twenty-four new trainees were proportion of female participants in values and leadership approach are taken on in 2005, including 10 from these has been around 30% in recent being integrated in corporate human countries outside Norway. The goal years. resources activities. for 2006 is to increase the number of Our ethical guidelines were also participants to 50. Big share of skilled workers revised during 2005 and published in Statoil ASA is Norway’s largest We are a knowledge-based a separate booklet entitled Ethics in employer of apprentices, with a high company, where 27% of the Statoil. and stable training activity for skilled workforce hold a skill qualification All entities in the Statoil ASA workers. The parent company took and 55% have a college or university parent company completed training on 129 apprentices in 2005, education. Women account for 20% in ethics and social responsibility compared with 128 the year before, of our skilled workers, and for 41% of during 2005, while 400 senior and at 31 December had 269 of new recruits in this category during executives were trained in combating these trainees in 11 trades. 2005. The average basic pay of corruption. Ethics committees were skilled women workers was rather established at corporate and business Equal opportunities lower than for men in equivalent jobs. area levels. Ensuring equality of opportunity is That reflects differences between part of our human resources policy. males and females in terms of posts More than 25,000 employees Women currently account for 27.5% and length of experience. Our workforce totalled 25,644 of the parent company’s workforce. Women are relatively well- people at 31 December. We recruited Thirty-three per cent of externally- represented in technical disciplines. 4,397 new employees in 2005, while recruited personnel in 2005 were Twenty-two per cent of staff 2,747 people left us. Workforce female, up by two percentage points engineers are female, and their turnover in Statoil ASA is very low, at from 2004. average pay is 98.5% of the just 0.65%. In the downstream Women account for 25% of corresponding figure for their male GEOGRAPHICAL DISTRIBUTION OF EMPLOYEES IN SELECTED COUNTRIES/CONTINENTS (AT 31 DECEMBER 2005) Norway 13,128 Denmark 3,695 Poland 3,221 Women in Statoil 2005 2005 2004 Sweden 1,698 Ireland 1,318 Parent company employees 27.5% 27% Lithuania 673 Latvia 640 Managerial positions in the group 25% 26% Estonia 550 Parent company apprentices 31% 29% UK 159 Russia 146 New parent company recruits 33% 31% Germany 80 Belgium 50 France 11 Faroe Islands 9 Asia 97 America 115 Africa 54 32 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations colleagues. This differential primarily Employees on maternity leave Working environment survey reflects length of experience. Women maintain their relative salary grade Employee assessments of manage- with up to 20 years of experience during their leave. We meet the ment and organisational conditions account for 32% of staff engineers difference between state maternity are identified through the annual and their level of pay is the same as benefits and actual pay received from working environment and organisa- for males. us. tion survey (Amou). This poll is The figures quoted in the anonymous, and the response rate preceding paragraphs reflect a Occupational health and the has lain at 85% of the workforce in positive trend during 2005. The working environment recent years. exception is the share of women High standards for occupational Results from the Amou carried out managers, which declined by one health and the working environment in the autumn of 2005 show that percentage point and is something help create job satisfaction and employees have confidence in we will be following up in 2006. improve efficiency. Our goal is zero management and regard the working occupational injuries and illnesses. We environment as good. They also Revised equal opportunities deal devoted greater attention in 2005 to consider that high priority is given to We worked with our unions to occupational health and working health, safety and environmental conclude a revised equal opportuni- environment challenges related to the conditions in the workplace. ties agreement for Statoil ASA in expansion of our international 2005. business. Safety Employees in the parent company A number of precautionary The goal is to conduct our business in are remunerated in accordance with principles to safeguard occupational such a way that it causes no harm to their position, competence, results health and the working environment people or the environment. and behaviour. In the annual pay were implemented, including Unfortunately, however, two awards for individual employees, we preventive measures against such contractor employees lost their lives also apply the principle of equal pay diseases as malaria, the adoption of while working for us. One person died for work of equal value. strict health requirements for on 31 January in connection with the As a general rule, all permanent working in extreme climatic completion of the Kristin platform at parent-company employees are conditions, and tighter control of Aker Stord. The other fatality employed on a full-time basis. hygiene. occurred on 2 October when supplies However, we can grant a temporary We give weight to ensuring that were being lifted onto a tanker reduction in working hours on employees with health problems berthed at the Mongstad oil terminal. application. Women account for the should be able to remain at work with Both accidents have been investi- majority of such applicants. We have good monitoring and customised gated, and measures initiated. arrangements such as flexible arrangements. Our average A serious gas leak occurred on 28 working hours and teleworking when retirement age in 2005 was 62.2. November 2004 in a well on the the nature of the job makes this Sickness absence for the year was Snorre A platform. Our internal possible without causing particular stable at the low level of 3.5% – inquiry report as well as the inconvenience for the business. about half the Norwegian average. investigation by the Petroleum Safety Extreme weather sets major require- ments to equipment and the safety mindset. This tugboat is helping to tow a cargo ship from the jetty at Melkøya in a rough sea and strong winds. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 33


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    Authority Norway produced a • human rights and labour rights initiative between the UN, companies, number of criticisms. A number of • local spin-offs. organisations and the authorities, follow-up measures were pursued who undertake to work for sustain- during 2005 in the wake of this Priority areas able development by observing serious incident. We outline the national plans for principles which cover the topics of social responsibility in Algeria in our human rights, standards in working Positive trend for injuries sustainability report, and look at our life, environmental protection and Our safety performance indicators for efforts to give social responsibility a fighting corruption. 2005 were the best we have ever specific content in Murmansk and recorded, and we saw a clear Archangel in north-western Russia in Social investment improvement compared with 2004. this report. We devoted about USD 10 million to The total recordable injury frequency We publish a number of key figures social investment projects in 2005. declined from 5.9 to 5.1, while the from our production countries, such This represented a marked rise from serious incident frequency fell from as income, taxes paid and payroll 2004, when the amount was USD 3.2 to 2.3. expenses. In this way, we want to 6.5 million. The increase was a We will continue our systematic contribute to greater transparency consequence of our expanding and detailed safety efforts to improve around our own business and to international operations. these results even further. We have influence the industry and the various These investments are spread found a great commitment across the government agencies in the same over various projects in 11 countries group to our improvement activities, direction. Openness about financial which fall within the framework of Statoi’s ethical standards and which give a central place to training, transactions will lead to greater our three priority areas of openness, requirements and the group’s values are compiled in these cooperation with suppliers and stability for our frame conditions by human rights and local spin-offs. At booklets. contractors, and risk management in making the oil and gas industry more the same time, they reflect the scope an international perspective. predictable and transparent, and of our activities in the respective Our values: For more information, see the HSE thereby more resistant to corruption. countries. The Akassa project in • Imaginative accounting on page 134. Nigeria, which we founded together • Hands-on Human rights with two charitable organisations, • Professional Social responsibility The most important work on human was acclaimed as the best social • Truthful We drew up a strategy for social and labour rights is done in our day- project in 2005 by the World • Caring responsibility in 2005 which makes it to-day activities. These efforts are Petroleum Council. It is described in easier to integrate this in our daily entrenched in our overarching values, more detail on page 62 of the work and business operations. The and given a specific content through sustainability report. strategy is being implemented our support for a number of through individual plans for each international initiatives. One of the country in which we are involved, and most important of these is the 10 is built up around three priority areas: principles of the Global Compact, • openness about financial which we have accepted. The Global transactions Compact is a voluntary collaborative Linda Kolstø (left) and Mariann Gaard have completed apprenticeships in crane and lifting operations. Roughly 500 people work in lifting operations on Statoil-operated facilities on the NCS, 300 of whom are crane operators. 34 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations Topic: Collaboration with Murmansk and Archangel We initiated a collaboration in 2005 with the authorities in the Russian counties of Murmansk and Archangel with a view to developing a plan for social responsibility in this region. The basis for this cooperation is our long-term perspective on petroleum developments in the far north. Oil and gas deposits both on land and ties or interest organisations. Our • helping to develop the social offshore are expected to be among role will primarily be to make sector. the world’s largest. The decision to expertise available and ensure that Where development of the develop the major Shtokman gas projects are funded and organised in supplies industry is concerned, we field in the Russian sector of the such a way that they can be have opted to build on the good Barents Sea has encouraged growing executed in an acceptable manner. experience gained in west Finnmark optimism in a region characterised These projects can be divided county from the Snøhvit project. by a lack of jobs and a weakly- into four main categories: Local companies took the initiative developed industrial structure. • identifying and developing the to form an industry association supplies industry in the region which has been in close dialogue Local ownership • strengthening the educational both with us as the operator and In close cooperation with the two sector to meet the requirements with important contractors. We have counties, we have identified a of a new industrialisation offered to help the authorities in Russo-Norwegian number of projects and will make represented by petroleum Murmansk and Archangel in creating collaboration in practice: almost NOK 40 million available over activities similar local industry associations, welder Peter Aleksan- a three-five year period in the form • encouraging greater understand- backed by specialist expertise from drovich Lazarev of human resources and financial ing for and commitment to the the people who were responsible for produces steel support. The projects will be owned environmental aspect of the new establishing the Snøhvit Industry components in and driven forward by the authori- industry Murmansk for Statoil’s Association. gas processing plant at Kollsnes near Bergen. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 35


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    Cooperation with universities collaboration in the environmental crucial for deploying the most We have a close dialogue in the area through professional dialogue, effective collection equipment. education sector with the university experience transfer and the That represents an important in Archangel to develop academic implementation of specific environmental protection measure, programmes in finance and measures. since a growing number of Russian administration, with the emphasis on We will be assisting in the oil shipments are passing along the petroleum management. This work preparation of an environmental Norwegian coast. has been partly funded by the plan for the Kola Fjord. In Archangel, Norwegian Ministry of Foreign we are also due to contribute Tackling social deprivation Affairs in close cooperation with the experience from the NCS on We see opportunities in the social University of Trondheim. We have cooperation between the oil sector for supporting local and contributed to a professional industry and fishing interests. international organisations which discussion between Archangel work with the socially deprived. A Technical University and the Norwegian oil-spill collection number of Norwegian bodies are University of Stavanger on widening equipment already active in north-western the curriculum in the Russian Two projects are in the process of Russia. Our primary goal is to institution to embrace advanced being implemented in the Mur- conclude multi-year collaboration drilling, offshore and subsea mansk area. One concerns the deals on programmes directed at technology. The plan is to implement transfer of upgraded Norwegian oil- building capacity and expertise this expanded programme of studies spill collection equipment to an among the local authorities and in the autumn of 2006. A dialogue emergency response centre in the organisations. A great need exists to has also been initiated with the port itself, and helping to train support homes for children and medical university in Archangel in people in its use. The other aims to young people as well as foster family order to exchange experience and establish a laboratory which will col- schemes. information in areas relating to Arctic lect and preserve oil samples in We are also making a contribution medicine. order to predict the physical on the cultural front by supporting development of such hydrocarbons Murmansk’s philharmonic orchestra. Environmental collaboration in the event of a spill or a shipwreck. We have an agreement with the Environmental challenges are high Norway’s Sintef research founda- Norwegian Opera on staging annual Statoil’s collaboration with on the agenda in both counties, and tion has developed an advanced performances in the Russian port. Murmansk (pictured) and the environmental consequences of analysis programme which we are We also contribute to several Russo- Archangel embraces industrial activities are attracting making available. This allows the Norwegian projects which build on education, environmental physical development of oil over close cultural ties between eastern growing attention and commitment protection and support for in Russia. We participate in a broad time to be predicted, which is Finnmark and the Kola Peninsula. the socially deprived. 36 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations The environment Our goal is zero harm to people and Emissions to the air primarily embrace oil, other organic com- the environment. We work purpose- involve carbon dioxide, methane, pounds and chemicals, and derive fully and continuously on improve- volatile organic compounds (VOC), principally from produced water and ment measures to minimise waste, and sulphur and nitrogen oxides. drilling. Possible harmful environmen- emissions and discharges, and to These contribute to the greenhouse tal effects relate particularly to secure efficient and environmentally- effect, the formation of ground-level compounds which are slow to appropriate use of natural resources. ozone and acid precipitation. degrade and are highly toxic or have a Our ambition is to pursue our Offshore operations account for the potential for bio-accumulation. business in an environmentally bulk of our carbon dioxide and Operations on the NCS are the acceptable manner and to be among nitrogen oxide emissions, while largest source of our discharges to the front runners on a world basis. refining is responsible for most of the the sea. The volume of produced sulphur dioxide we release. water has risen significantly in recent Emissions/discharges and environ- To a great extent, emissions to the years because a number of the large ment impact air are regulated by international oil fields have reached a mature Producing oil and gas involves agreements. Of particular importance phase. Water production in the emissions and discharges to the for our business operations are the Tampen area of the North Sea is now natural environment. Their level is Kyoto protocol on reducing green- twice as high as oil output. influenced by each field’s reservoir house gas emissions and the The Ospar convention regulates conditions and age as well as the Gothenburg protocol. The latter discharges of oil and chemicals in the design, technology and operational embraces commitments to reduce north-east Atlantic. This calls for the regularity of its installations. the release of nitrogen and sulphur total annual volume of oil to be Emissions relating to oil and gas oxides as well as VOC. reduced by 15% from the 2000 level processing depend on the type of during 2006. From 2007, the oil feedstock involved and the products Rising water production content in produced water for being produced. Discharges to the sea primarily discharge must not exceed 30 World’s largest carbon dioxide project for improved oil recovery In March 2006, Shell and Statoil The project could potentially utilise signed an agreement to examine the and store approximately 2-2.5 million possibilities of developing the world’s tonnes of carbon dioxide annually in largest offshore project for the use of the Draugen field, and in time, in the carbon dioxide for improved oil Heidrun field. recovery (IOR). The project consists of Establishing this carbon dioxide a gas-fired power station at Tjeldber- value chain is technologically and godden in mid-Norway which will commercially challenging. The project provide carbon dioxide to the Draugen requires the involvement of other and Heidrun oil and gas fields in the industrial players, and will depend on Norwegian Sea. Electricity from the considerable government financing power station will be sent to the and cooperation. platforms, thereby reducing carbon Shell was a pioneer in the use of and nitrogen oxide emissions from carbon dioxide to improve oil these installations to almost zero. recovery in the 1970s. The project is in line with Statoil has been a pioneer in international and national climate carbon dioxide capture and storage on aspirations and responds to the the Sleipner fields in the North Sea Carbon dioxide from the gas-fired power station in mid-Norway will be sent to the Draugen and Heidrun (pictured) platforms, where the challenges of increasing energy since 1996, and through its work in greenhouse gas will be used to improve oil recovery. requirements and the related the Snøhvit project outside Hammer- increasing carbon dioxide emissions. fest and the In Salah project in Algeria. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 37


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    milligrams per litre. The average oil possible hazard to the environment. the release of greenhouse gases in a content in produced water from our We are well on our way to meeting cost-effective manner. operations in the NCS was 16.1 mg/l government requirements for zero Work is under way to reach our in 2005. harmful discharges on our oil and gas goal for reducing annual greenhouse In addition to Ospar, the fields from the end of 2005. For gas emissions from the facilities we Norwegian government requires zero practical reasons, however, the operate by 1.5 million tonnes of harmful discharges from oil and gas necessary measures had to be carbon dioxide by 2010, compared 116.3 installations. These requirements postponed until 2006 on a few fields. with the amount which would have mean a halt to or a substantial cut in Managing chemicals remained an been emitted without special discharges of defined environmental important priority area in 2005. measures. At 31 December 2005, toxins, and a significant reduction in Chemicals released from our offshore 47% of the 2010 target had been the risk that discharging and using operations declined from 53,600 met. A reduction resulting from chemicals could cause harm. The tonnes in 2004 to 43,800 tonnes. Of carbon dioxide injection in the European Union’s directive on chemicals used in 2005, 84% posed Sleipner area is additional to this. We integrated pollution prevention and little or no environmental risk while give weight to consistent reporting in 44.8 control (IPPC) also applies to 16% had acceptable environmental line with international guidelines for Kg CO2/scm o e operations in Norway, and calls for properties. Only 0.1% (2004: 0.3%) defining environmental measures, and the use of the best available were potentially harmful to the the basis for calculating action taken technology to cut discharges. environment. in earlier years was therefore updated The condition of the environment in 2005. Environment-friendlier production around our installations is monitored We made the necessary Statoil OGP* Continuous efforts are being made to through regular programmes. preparations for utilising the Kyoto Emissions of CO2 per produced reduce emissions to the air and Environmental monitoring embraces mechanisms, and participate in volumes oil/gas (scm o e) from Statoil-operated activities discharges to the sea through both water quality and seabed emission trading in order to meet on the NCS, compared with world industry average. research into and development of sediments, and shows small or no future requirements for lower ever better technology, effective impact from discharges. Similar moni- greenhouse gas emissions. *International Association of Oil & Gas Producers (OGP)2004 emergency response and good toring is conducted around our land- management based on extensive risk based plants, particularly with regard Biological diversity assessments. The aim is continuous to acidification and over-fertilisation. Preserving biological diversity is improvement through enhanced Once again, the impact is small or crucial for sustainable development. energy efficiency and other focused undetectable. Our goal is to protect such diversity www.statoil.com/hse measures on existing and future by conserving natural ecosystems, installations. Climate and emission trading avoiding the introduction of alien Discharges to the sea are We support the Kyoto protocol as the species and seeking not to affect the attracting particular attention. Work first step towards a more far- level of plant and animal populations has been devoted to developing new reaching international agreement, through our operations. We technological solutions and to phasing and the introduction of emission participate in a broad international out chemicals which represent a trading as an instrument for limiting collaboration with other companies Surveying the treatment process Process technician Jørgen A Olsen keeps a watchful eye on the water treatment plant on Statfjord C. This platform was the first to install the CTour treatment technology developed by Statoil, in cooperation with the Rogaland Research Foundation in Stavanger. 38 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our operations and environmental organisations to lubricating oils and electricity. Our diesel with rapeseed oil on the preserve biodiversity. objective is that these commodities Swedish market. All the 95 octane will rank among the best for technical petrol we sell in Sweden contains 5% Strict transport requirements user qualities and environmental bioethanol, and we offer E-85 – a Roughly 100 million tonnes of properties. petrol with 85% bioethanol – at 90 hydrocarbons were shipped by tanker Burning oil and gas products can Swedish service stations. from fields, terminals and refineries to have a negative impact on the We are steadily increasing customers worldwide, with the main environment locally, regionally and deliveries of renewable energy activity in northern Europe. Tanker globally. Emissions per unit of energy through the production and sale of More information about operations in 2005 caused no produced have been substantially wood pellets made from forest Statoil and the environ- significant oil or chemical spills. reduced in recent years through industry waste. This product provides ment can be found in Road tankers belonging to us or cleaner products and improved an alternative to heating oil, natural the section about HSE hired from others covered about 46 engine and treatment technologies. gas and electricity. We sold 191,000 accounting on pages 134, million kilometres in 2005 delivering We have introduced a more tonnes of pellets in 2005, which and in the section about products to service stations and environment-friendly heating oil in corresponds to 10% of the total the environment on page customers. Carbon dioxide emissions Scandinavia, with a reduced sulphur market. 41 of Statoil’s sustain- relating to these consignments are content and additives which keep ability report. estimated at some 57,200 tonnes in furnaces clean throughout the year. In Investments and costs 2005, or roughly 0.6% of the total Denmark, we have cut the sulphur A provision of NOK 20 billion had released from our operations. content in heating oil and now deliver been made at 31 December 2005 to Safety and environmental only oil with 10 or 50 parts per million meet the future cost of shutting performance are important in (ppm) of sulphur. The sulphur content down and removing oil and gas selecting road tankers. Key environ- is higher in Norway and Sweden, but production facilities. In this respect, mental measures include a high we offer a heating oil in the Swedish NOK 1.3 billion was charged against carrying capacity to reduce the market with 10 ppm of sulphur and income in 2005. number of consignments, modern one in Norway with 50 ppm. The Reusing offshore installations and engine technology with lower fumes, result is reduced consumption and equipment offers financial and optimal route planning through good lower emissions. environmental gains. We earned NOK navigation systems, and using diesel All petrol and diesel oil now 65 million from the sale of surplus oils with good environmental delivered to the Scandinavian market materials in 2005, compared with properties. from our Kalundborg and Mongstad NOK 48 million the year before. refineries is now virtually sulphur-free Annual carbon dioxide tax paid by Products better adapted to the (sulphur content below 10 ppm). Statoil for 2005 on emissions from environment the NCS totalled NOK 801 million. We produce and sell a number of Biofuels reduce emissions products, such as crude oil, natural Using automotive biofuels cuts gas, automotive fuels, heating oils, greenhouse gas emissions. We sell methanol, wood pellets, chemicals, petrol containing bioethanol and Biggest tanker in the world With three tugs alongside as the French crude oil carrier Flandre prepares to set sail from Mongstad to Canada, safety is paramount. The big ship can carry 300,000 tonnes of oil. But the Mongstad port is able to berth supertankers up to 440,000 deadweight tonnes. In other words, with few exceptions, the world’s largest tankers can call at Mongstad. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 39


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    Our results 40 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    RESULTS Statoil’s industrial position is stronger than ever, and the group can build further on a clear strategy, a strong financial foundation, solid market positions and an able organisation. This perspective is identified in the directors’ report which begins on the following page. The board makes it clear that the strong results in 2005 lay a good basis for meeting our ambition to be a competi- tive global company and a unique workplace for performance and development. The board’s objective is also to secure the best possible return for the shareholders, which finds expression through the proposal for ordinary and special dividends adding up to NOK 8.20 per share. That means dividend per share has almost trebled since 2001, the year of our flotation. This chapter also encompasses the annual accounts, the HSE accounting, financial review, shareholder information and a detailed survey of corporate governance, which has been substantially expanded since the previous report. STATOIL ANNUAL REPORT AND ACCOUNTS 2005 41


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    Directors’ report 2005 Statoil’s industrial and financial position at the start of 2006 is strong. In 2005 the group delivered its best annual results to date. Production and profitability were higher than ever before. Moreover, 2005 also saw the sanctioning of a record number of upstream projects. Combined with focused improvement work, this should give Statoil a good platform for developing into a globally competitive company. The best annual results ever 2004. Increased investment is the considerably higher than anticipated According to the American generally main reason for this change. in 2004 when Statoil sets its targets accepted accounting priciples High oil and gas production made for 2007, which means an early (USGAAP), the Statoil group had a net a solid contribution to the record transition from a cost-covering to a income of NOK 30.7 billion in 2005, results. Statoil produced 1,169,000 profit-generating phase. In PSA which is a NOK 5.8 billion improve- barrels of oil equivalent (boe) per day contracts, the higher the oil price ment on 2004. Income before in 2005, which is 63,000 boe per day when the field becomes profitable, financial items, tax and minority more than in 2004. Higher gas the smaller the share of production interest was NOK 95.1 billion, production and increased production that goes to the partners. The compared with NOK 65.1 billion in from international activities helped to concrete effect varies from 2004. Return on capital employed secure the highest production figures agreement to agreement and country was 27.6% in 2005, compared with to date. The average normalised to country. 23.5% the previous year. This production cost fell from NOK 23.3 Statoil has an oil and gas increase was mainly due to higher oil per boe in 2004 to NOK 22.3 per boe production target of 1,400,000 boe and gas prices and increased in 2005. per day in 2007. This target is based production. Adjusted for market The high price of oil meant that on an average oil price of approxi- conditions of USD 22 per barrel, the earnings and profitability in interna- mately USD 30 per barrel in the average return on employed capital tional projects with production period 2005-07. If the price of oil was 11.7%, compared with 12.4% in sharing agreements (PSA) were were to remain at the current level Jannik Lindbæk (67) Chair of the board On the board of directors since November 2003. Education and professional background: President and CEO of Storebrand, chief executive of the Nordic Invest- ment Bank, executive vice president of the International Finance Corporation. Other elective posts: Chair of the board of the Bergen International Festival, Transparency International Norway, Plan International Norway and Gearbulk. Director of Kristian Gerhard Jebsen Skipsrederi. Number of shares in Statoil: 0 42 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our res ults throughout 2006 and 2007, the extensions. Twelve wells were In view of its high ambitions, negative effect on international PSA completed in 2004. Statoil’s activities still involve too projects in 2007 would be in the area In 2005 Statoil made the biggest many undesirable incidents. The of 50,000-60,000 boe per day. acquisition in the group’s history when board will therefore prioritise follow- Statoil will therefore adjust for PSA it took over the deepwater portfolio up of improvement work in this area. effects when it reports on production in the Gulf of Mexico from the Statoil accepted the fine of NOK and production unit costs in the Canadian company EnCana. The 80 million imposed on it after the gas period leading up to 2007. portfolio harmonises well with blowout on the Snorre A platform in The PSA effect and, to some Statoil’s core competence and the North Sea in November 2004. extent, the stepping up of exploration comprises several high-quality This was a serious incident that could activity and increased investments discoveries and exploration projects. have caused major harm. An extensive are all linked to the high price of oil. Statoil adjusted its portfolio during action plan has been drawn up to They will have a negative impact on 2005 in order to strengthen its core prevent similar occurrences in the the normalised return on capital activities. It sold its 50% holding in the future. Safety at the group’s facilities employed. Given the normalisation Borealis petrochemical group for EUR and installations is an area to which assumptions adopted in 2004, the 1 billion, realising a book profit of NOK the board devotes great attention. normalised return on employed 1.5 billion. At the beginning of 2006 Statoil is still under investigation capital in 2007 is likely to fall short of Statoil sold its 30% holding in the by the American authorities for the target of 13%. Ringsend gas power station in Ireland. possible violation of US criminal and In 2005 the group replaced 102% Major work is being put into the securities legislation, including «The of its production with new oil and gas improvement initiatives launched in Foreign Corrupt Practices Act». The reserves, compared with 106% in 2004 with the aim of promoting investigation concerns the 2004. At the end of 2005, remaining operational improvement and new agreement with Horton Investment proven reserves amounted to 4.3 business opportunities. These will Ltd on consultancy services in Iran. billion boe. provide an important source of Statoil is cooperating with the US The board proposes that the increased value creation until 2007. authorities to obtain the necessary annual general meeting allocates a Good results in the area of health, information. total ordinary and special dividend of safety and the environment are NOK 8.20 per share for 2005, important to Statoil. The group is Markets and surroundings compared with NOK 5.30 per share working hard to achieve its goal of Positive economic development in for 2004. This is an increase of 55%. zero harm to people and the the USA and China plus progress in Exploration activity has been environment. Statoil’s safety Europe and Japan were important stepped up considerably. A total of 20 indicators show a continued factors in continued global economic exploration and appraisal wells were improvement. The group has growth in 2005. The growth in the completed in 2005, 14 of which ambitious targets and works on the global economy generated a further resulted in discoveries. We are still assumption that all accidents can be increase in energy demand. A awaiting the final evaluation of one prevented. It is therefore extremely persistent shortage of production well. Furthermore, discoveries were regrettable that two people lost their and refining capacity – combined made in four of the five exploration lives while working for Statoil in 2005. with loss of production due to Kaci Kullmann Five (55) Deputy chair On the board of directors since August 2002. Acting chair from September to November 2003. Deputy chair from November 2003. Profession: Self-employed. Education and professional background: MSc in political science from the University of Oslo. Member of the Norwegian Parliament 1981-1997. Minister for trade and shipping 1989-1990. Head of the Norwegian Conservative Party 1991-1994. Executive vice president in Aker RGI 1998-2002. Other elective posts: Member of the Norwegian Nobel Committee. Number of shares in Statoil: 1,000 STATOIL ANNUAL REPORT AND ACCOUNTS 2005 43


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    adverse weather conditions and new resources and industrial Production from five new Statoil- political uncertainty in important oil- opportunities. The board assumes operated projects, including the producing countries – resulted in that this competition will intensify in technologically-pioneering Kristin record high oil and gas prices in 2005. the years ahead. Statoil is well field, started in 2005. In addition, 12 The average price of oil in 2005 was positioned for value creation and new upstream projects were USD 53.6 per barrel, compared with growth, and the good results in 2005 sanctioned for development. One of USD 38.1 per barrel in 2004. enhance the company’s long-term these was Statfjord late life, which will Translated into NOK this represents potential. ensure continued profitable an increase of NOK 88 per barrel, to production from the Statfjord field up NOK 345 per barrel in 2005. Exploration & Production Norway: to 2020. Important energy markets such as record results and new projects A continuously high level of Europe and the USA are becoming Statoil’s ambition for the Norwegian exploration activity is a prerequisite increasingly dependent on the import continental shelf (NCS) is to maintain for realising Statoil’s long-term of gas, and supply reliability has been a production level of one million boe ambitions for production from the the centre of increased political focus. per day for as long as possible beyond NCS. Statoil has an assertive Statoil is working proactively to 2010. exploration strategy and sees great develop long-term and stable gas Income before financial items, tax potential in both mature and new supply sources for these markets. Gas and minority interest totalled NOK areas. In 2005 the group participated prices in Europe and the USA 74.1 billion in 2005, compared with in the completion of nine exploration continued to rise in 2005. In 2005 the NOK 51.0 billion in 2004. This and appraisal wells on the Norwegian average realised gas price was NOK improvement is primarily due to continental shelf, six of which resulted 1.45 per cubic metre, compared with higher oil and gas prices. in discoveries. Furthermore, NOK 1.10 per cubic metre in 2004. Statoil’s production from the NCS discoveries were made in four of five Standardised refining margins averaged 985,000 boe per day in exploration extensions. Statoil was (fluid catalytic cracker margin) rose 2005. This is slightly lower than the awarded shares in 16 new licences in from USD 6.4 per barrel in 2004 to previous year and somewhat short of 2005 and submitted a wide-ranging USD 7.9 per barrel in 2005. The the target for the year. This decrease application for the 19th licensing average contract price for methanol is expected to be of a temporary round. increased from EUR 213 per tonne in nature and is mainly due to an A new review of the progress and 2004 to EUR 225 per tonne in 2005. unforeseen loss of production from the scope of work remaining in the The intensification of activity in important fields and delayed start-up Snøhvit project revealed the the industry in recent years has led to on new fields. Oil production from necessity of increasing the invest- considerable pressure on capacity and mature fields is waning, but is being ment budget by NOK 7 billion, to NOK prices in several of the supplier compensated for by new fields, 58.3 billion. Statoil has a 33.53% markets, including those for steel, increased gas production and stake in Snøhvit. Furthermore, the rigs, marine operations, engineering improved oil recovery measures. planned start-up of regular gas and fabrication. The board is happy with Statoil’s deliveries was deferred by eight There is growing competition in proactive approach to industrial and months to December 2007. These the oil and gas industry for access to commercial development on the NCS. changes were mainly a result of Knut Åm (62) On the board of directors since April 1999. Profession: Independent consultant. Education and professional background: Degree in geological and geophysical engineering from the Norwegian Institute of Technology. Senior vice president in Phillips Petroleum, with responsibility for exploration and production, previously held positions in the Geological Survey of Norway, the Norwegian Petroleum Directorate and Statoil. Other elective posts: Chair of the Industrial Council of the Norwegian Academy of Technological Sciences, chair of IOR- Chemco AS, EnVision AS and EnVision StreamLine AS. Director of Badger Explorer AS and the Physics of Geological Processes Centre of Excellence at the University of Oslo. Number of shares in Statoil: 14,594 44 STATOIL ANNUAL REPORT AND ACCOUNTS 2005


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    Our res ults delayed engineering, and deficient compared with NOK 4.2 billion in With its acquisition of EnCana’s quality and delays in sub-deliveries. 2004. This improvement primarily portfolio in the Gulf of Mexico, Statoil More of the work has been trans- reflects strong growth in production has laid the foundations for a new ferred to Melkøya, which entails a and higher oil and gas prices. international growth area. The more drawn-out and more expensive International oil and gas produc- position will allow the group to use its completion. Statoil has initiated a tion increased by 60% from an expertise in exploration, reservoir number of measures aimed at average of 115,000 boe per day in management and subsea technology. promoting the safe and efficient 2004 to 184,000 boe in 2005. In 2005 Statoil also signed an completion of the project. In order to Three new fields came on stream agreement with ExxonMobil on support its implementation, in 2005: Kizomba B in Angola, and exploration activity in the Gulf of responsibility for the project has been phase one and the first of two Mexico, thereby further solidifying its transferred to the Technology & developments in phase two (West position there. Projects business area. Azeri) in the Azeri-Chirag-Gunashli Statoil’s proposal for possible Efficient project execution is field in Azerbaijan. In 2005 Statoil also solutions for the development of the important for the group’s financial decided to sanction the development Shtokman field in the Barents Sea was results as well as for Statoil’s of five new international projects. submitted to Gazprom in April. Statoil reputation as a development Following substantial cost is one of five applicants invited to operator. The board would stress the increases and delays in developing the participate further in the allocation value of applying experience from Iranian gas and condensate field process for Shtokman. Snøhvit to future projects. The South Pars, Statoil wrote down the In 2005 new offices were opened project is profitable and strategically book value by NOK 1.6 billion after in the USA, Qatar, Jordan and Libya. and industrially significant. It involves tax. This was primarily a result of the development of new technology productivity and quality problems Natural Gas: record gas sales at in several areas, opens up opportuni- with the main contractor, who had high prices ties in the Barents Sea and Russia and already been chosen before Statoil At the moment natural gas is the fast- introduces Norwegian gas into the US took over as operator. est growing energy carrier in the market through Statoil’s position at On the international front, Statoil world, and the market prospects are the Cove Point gas terminal. took part in 11 completed exploration good both in Europe and the USA. and appraisal wells in 2005. Finds Statoil aims to double its own produc- International Exploration & were made in eight of the wells and tion of natural gas to 50 billion cubic Production: strong growth in one well is still being evaluated. In metres by 2015. This will require new production 2005 Statoil acquired 11 new projects on the NCS, access to Statoil’s international activity is exploration licences. The board would international gas resources and intended to build positions to form stress that high-level international further development of the group’s the basis for long-term growth in commercial development and market positions. production. exploration activity must be Income before financial items, tax In 2005 net income before continued, as they are important and minority interest amounted to financial items, tax and minority contributory factors to Statoil’s long- NOK 5.9 billion, which is NOK 0.9 interest amounted to NOK 8.4 billion, term growth. billion less than in 2004. This decrease Finn Hvistendahl (64) On the board of directors since April 1999, chair of the board’s audit committee. Profession: Business development consultant. Education and professional background: Degree in industrial chemistry. Has been chief financial officer and chief executive of Norsk Hydro and group CEO of Den norske Bank. Other elective posts: Chair of the board of the Financial Supervisory Authority of Norway (Kredittilsynet). Number of shares in Statoil: 2,947 STATOIL ANNUAL REPORT AND ACCOUNTS 2005 45


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    is primarily due to the higher internal Manufacturing & Marketing: good holding. Agreements entered into with transfer price of gas from the NCS. operations and high refining Borealis for deliveries of raw materials The business area has never sold margins will be continued. more gas than last year. Total gas Manufacturing & Marketing aims to At the beginning of 2006 Statoil sales increased to 27.3 billion cubic maximise the group’s total access to was given permission to build a gas- metres, compared with 25.0 billion crude oil, NGL and refined products. fired power station at Tjeldbergodden. cubic metres in 2004. Of the total gas Integration, brand building and active Statoil will evaluate the project sales in 2005, 24.6 billion cubic exploitation of profitable synergy and carefully in light of the final stipula- metres were entitlement gas. growth opportunities will all tions from the authorities and New contracts for the sale of gas contribute to increased value creation. profitability. were signed with Scottish Power, the The business area had its best Dutch company NUON and Norway’s annual result ever in 2005. Net Technology & Projects: new Statkraft. Statoil has extended its gas income before financial items, tax and projects with pioneering sales agreement with the German minority interest totalled NOK 7.6 technology company Verbundnetz Gas by six billion in 2005, compared with NOK The most important strategic task of years. 3.9 billion in 2004. This increase is this business area is to continue to Statoil has signed a 20-year mainly due to substantially greater build up Statoil as an efficient agreement on the expansion of the refining margins in Europe, high industrial player and project developer LNG receiving terminal at Cove Point regularity from refining activities and with first-class technology and in the USA. Implementation of this the sale of the Borealis holding. expertise. agreement will increase Statoil’s Increased pressure on fuel margins For many years Statoil has been annual supply capacity from 2.4 billion and higher oil prices made their mark solving large and complex develop- to over 10 billion cubic metres. Work on retailing operations in 2005. The ment tasks which have contributed to is currently ongoing to receive the board would stress the importance of a high level of value creation. necessary approval for the expansion the ongoing improvement pro- Requirements for efficient project and to establish the supply chain for gramme in the work to achieve the execution are becoming increasingly increased LNG export to the USA. The 2007 profitability target. stringent and the board attaches Cove Point terminal position is of On 13 October 2005, Statoil sold great importance to continuous considerable strategic value to Statoil. its 50% holding in the Borealis improvement in this area. The securing of sufficient capacity petrochemical group for NOK 7.8 New technology has added for the treatment and transport of billion. The sale was realised as part of substantially to value creation in gas is a prerequisite if Statoil is to real- Statoil’s efforts to strengthen its core Statoil. Pioneering technology lay ise its gas targets. The gas processing activity. behind the decision to develop two plant at Kårstø was expanded by 20% Net income from Borealis before new Statoil-operated projects: the in 2005 to enable it to receive new financial items, tax and minority project for improved oil recovery on gas from the Kristin field. The project interest prior to the sale was NOK 2.2 the Tordis field (Tordis IOR) involves was delivered at a cost that was NOK billion, compared with NOK 0.8 billion the development of technology that 1.6 billion less than originally in 2004. NOK 1.5 billion of this was a will make the field the first in the world estimated. tax-free gain on the sale of the to use subsea processing of water, Grace Reksten Skaugen (52) On the board of directors since June 2002. Profession: Self-employed Education and professional background: PhD in laser physics from the Imperial College of Science and Technology, London University, and an MBA from the Norwegian School of Management. Director of corporate finance at Enskilda Securities, Oslo. Adviser for Aircontactgruppen, Oslo and Fearnley Finance Ltd, London. Postdoctoral research in the field of microelectronics at Columbia University in New York. Other elective posts: Board chair at Entra Eiendom, deputy chair at Opera Software. Director of Tandberg, Storebrand, Atlas Copco AB and Berg-Hansen Holding. Number of shares in Statoil: 0 46 STATOIL ANNUAL REPORT AND ACCOUNTS 2005

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