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    Statutory report 2009 1


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    Statutory report 2009 Board of directors report 1 The Statoil share 1 Group profit and loss analysis 2 Our business 4 Cash flows 5 Liquidity and capital resources 6 Return on Average Capital Employed 7 Research and Development 7 Risks 8 Group outlook 9 Health, safety and the environment 9 People and the organisation 10 Environment and climate 11 Society 11 Board developments 13 Statement on compliance 14 Board statement on corporate governance 15 Implementation of the code of practice 15 Business 16 Equity and dividends 16 Equal treatment and close associates 17 Freely negotiable shares 17 General meetings 17 Nomination committee 18 Corporate assembly, board of directors 19 The work of the board of directors 19 Risk management and internal control 20 Remuneration of the board of directors 21 Remuneration of executive management 21 Information and communications 23 Take-overs 23 Auditor 23 Consolidated Financial Statements 25 1 Organisation 33 2 Significant accounting policies 33 3 Business combinations 43 4 Asset acquisitions and disposals 43 5 Segments 43 6 Financial risk management 49 7 Capital management 52 8 Remuneration 53 9 Other expenses 54 10 Financial items 55 11 Income taxes 56 12 Earnings per share 59 13 Property, plant and equipment 60 14 Intangible assets 62 15 Investments in associated companies 63 16 Non-current financial assets 63 17 Inventories 64 18 Trade and other receivables 64 19 Current financial investments 64 20 Cash and cash equivalents 65 21 Transactions impacting shareholders equity 65 22 Non-current financial liabilities 66 23 Pension liabilities 68 24 Asset retirement obligations, other provisions and other liabilities 74 25 Trade and other payables 75 26 Current financial liabilities 75 27 Leases 76 28 Other commitments and contingencies 77 29 Related parties 79 30 Financial instruments by category 79 31 Financial instruments: measurement and market risk sensitivities 85 32 Merger with Hydro Petroleum 92 33 Subsequent events 92 34 Supplementary oil and gas information (unaudited) 92


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    Financial statements for Statoil ASA 104 1 Organisation and basis of presentation 108 2 Summary of significant accounting policies 108 3 Financial risk management and derivatives 113 4 Business developments 117 5 Revenues 117 6 Remuneration 118 7 Share-based compensation 123 8 Auditors' remuneration 123 9 Research and development expenditures 123 10 Financial items 124 11 Income taxes 124 12 Property, plant and equipment 126 13 Investments in subsidiaries and associated companies 126 14 Financial assets 127 15 Inventories 128 16 Trade and other receivables 128 17 Cash and cash equivalents 129 18 Equity and shareholders 129 19 Non-current financial liabilities 131 20 Pension liabilities 133 21 Asset retirement obligations, other provisions and other liabilities 138 22 Trade and other payables 139 23 Current financial liabilities 139 24 Leases 139 25 Other commitments and contingencies 140 26 Related parties 141 27 Subsequent events 142 Report of Ernst & Young AS on the financial statements of Statoil ASA 143 HSE accounting 144 HSE performance indicators 145 Environmental posters 148 Recommendation of the corporate assembly 152


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    Board of directors report Statoil delivered a strong operational performance in 2009. The company has a solid financial position and is well placed to continue to deliver long term growth and shareholder value. The company increased its equity production in 2009 by 2% to 1.962 mboe per day. Statoil also delivered a successful exploration programme, while maintaining a strict cost control and capital discipline. However, net operating income was down by 39%, mainly because of lower prices for both oil and gas. Net operating income amounted to NOK 121.6 billion. Around 80% of the synergies from the merger in 2007 have been achieved. Additional cost savings have been implemented during 2009. The company has had a strong cash flow through times of financial turmoil and has maintained its sound financial position. Statoil is thus positioned to deliver according to its stated production guidance for 2012, despite the current weakness in the gas markets. The group has a strong resource potential and a high quality project portfolio to underpin profitable growth also beyond 2012. The Statoil share The board of directors proposes a dividend of NOK 6.00 per share for 2009 making a total of NOK 19.1 billion. The board of directors has decided to make adjustments to the dividend policy in order to establish a more predictable dividend level going forward. The new policy does not imply any change in the long-term dividend level, including potential share buy-backs, compared to the previous policy. The ambition is to grow the annual cash dividend, measured in NOK per share, in line with long-term underlying earnings. When proposing the annual dividend level, the board of directors will take into consideration expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. In 2008, ordinary dividend was NOK 4.40 per share, as well as NOK 2.85 per share in special dividend for a total of NOK 7.25 per share and an aggregate total of NOK 23.1 billion. The Statoil share price development reflected the growing economic optimism as the share price is showing an upward trend during 2009, starting out 2 January 2009 at NOK 118.40, ending up at NOK 144.80 at the end of 2009. Statoil, Statutory report 2009 1


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    Group profit and loss analysis Net operating income was NOK 121.6 billion in 2009, compared to NOK 198.8 billion in 2008.The decrease was primarily attributable to lower prices of liquids and gas, and increased depreciation, amortisation and impairment losses, partly offset by income from higher volumes sold. Consolidated statement of income For the year ended 31 December (in NOK billion) 2009 2008 Change Revenues and other income Revenues 462.3 652.0 (29%) Net income from associated companies 1.8 1.3 39% Other income 1.4 2.8 (51%) Total revenues and other income 465.4 656.0 (29%) Operating expenses Purchase, net of inventory variation 205.9 329.2 (37%) Operating expenses 56.9 59.3 (4%) Selling, general and administrative expenses 10.3 11.0 (6%) Depreciation, amortisation and net impairment losses 54.1 43.0 26% Exploration expenses 16.7 14.7 14% Total operating expenses 343.8 457.2 (25%) Net operating income 121.6 198.8 (39%) Net financial items (6.7) (18.4) (64%) Income tax (97.2) (137.2) (29%) Net income 17.7 43.3 (59%) Earnings per share for income attributable to equity holders of company basic and diluted 5.7 13.6 (58%) Revenues and other income was NOK 465.4 billion in 2009, compared to NOK 656.0 billion in 2008. Most of the revenues stem from the sale of lifted crude oil, natural gas and refined products. In addition, we also market and sell the Norwegian state's share of liquids from the NCS. All purchases and sales of the Norwegian state's production of liquids are recorded as purchases net of inventory variations and sales, respectively. Group realised oil prices The NOK 190.6 billion decrease in revenues from 2008 to 2009 was mainly attributable to lower prices of both liquids and gas. Realised prices of liquids measured in NOK decreased by 29% from USD/boe NOK/boe 120 2008 to 2009, contributing NOK 56.5 billion to the reduction in revenues. Gas prices were down 600 21% in 2009 compared to last year, and contributed NOK 25.0 billion to the reduction in revenues. 100 500 The reduction in revenues was partly compensated by the 4% increase in liftings of both liquids and gas, with a total off-setting effect of NOK 15.2 billion. The decrease in revenues related to volumes 80 400 purchased from The Norwegian state contributed NOK 124.3 billion. 60 300 Total liquids liftings amounted to 1.045 mmboe per day in 2009, an increase of 3% compared to last year. 40 200 2006 2007 2008 2009 Total liftings of gas increased by 6% from 696 mboe per day in 2008 to 740 mboe per day in Realised price (USD/boe) Realised price (NOK/boe) 2009. 2 Statoil, Statutory report 2009


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    Net income from associated companies was NOK 1.8 billion in 2009 compared to NOK 1.3 billion in 2008. Other income was NOK 1.4 billion in 2009, compared with NOK 2.8 billion in 2008. The income in 2009 was mainly related to income from insurance proceeds regarding business interruptions. The income in 2008 was mainly related to gain from sale of assets. Purchase, net of inventory variation amounted to NOK 205.9 billion in 2009, compared to NOK 329.2 billion in 2008. The 37% decrease from 2008 to 2009 mainly stem from lower prices of liquids measured in NOK. Operating expenses include field production and transport systems costs related to the company's share of oil and natural gas production. Operating expenses were NOK 56.9 billion in 2009, which is a reduction of 4% since 2008. The reduction was mainly attributable to reduced transportation costs and the reversal of provisions related to a take-or-pay contract in previous periods. Total liquids and gas entitlement production increased from 1.751 mmboe per day in 2008 to 1.806 mmboe per day in 2009. Equity production of oil and gas increased from 1.925 mmboe per day in 2008 to 1.962 mmboe per day in 2009. The production cost per boe based on equity volumes for the two periods was NOK 35.3 and NOK 34.6, respectively. Adjusted for restructuring costs and other costs arising from the merger recorded in the fourth quarter of 2007 and gas injection costs, the production cost per boe for the 12 months ending 31 December 2009 and 2008, was NOK 35.3 and NOK 33.3, respectively. Selling, general and administrative expenses amounted to NOK 10.3 billion in 2009, compared to NOK 11.0 billion in 2008. The improvement is mainly due to cost savings. Depreciation, amortisation and net impairment losses includes depreciation of production installations and transport systems, depletion of fields in production, amortisation of intangible assets and depreciation of capitalised exploration expenditure. It also includes write-downs of impaired long-lived assets and reversals of impairments. These expenses amounted to NOK 54.1 billion in 2009, compared to NOK 43.0 billion in 2008. The 26% increase in depreciation, amortisation and impairment expenses was mainly due to increased production and impairment charges net of reversals of NOK 7.1 billion, mostly related to assets in the Gulf of Mexico and refinery assets in Norway and Denmark. Exploration expenditures are capitalised to the extent that exploration efforts are considered successful, or pending such assessment. Otherwise, such expenditures are expensed. The exploration expense consists of the expensed portion of our exploration expenditure in 2009 and write-offs of exploration expenditure capitalised in previous years. In 2009, the exploration expenses were NOK 16.7 billion, up 14% from 2008. The increase was mainly due to a higher number of wells drilled and a higher portion of exploration expenditure capitalised in previous years being impaired. For the year ended 31 December Exploration (in NOK billion) 2009 2008 change Exploration expenditure (total activity level) 16.9 17.8 (5%) Expensed, previously capitalised exploration expenditure 7.0 3.7 89% Capitalised share of current periods exploration activity (7.2) (6.8) 6% Exploration expense 16.7 14.7 14% In 2009, a total of 68 exploration and appraisal wells and two exploration extension wells were completed, 41 on the NCS and 29 internationally. Thirty- eight exploration and appraisal wells and two exploration extension wells have been declared as discoveries. In 2008, a total of 79 exploration and appraisal wells and nine exploration extension wells were completed, 48 on the NCS and 40 internationally. Thirty-five exploration and appraisal wells and six exploration extension wells were declared as discoveries. Net operating income was NOK 121.6 billion in 2009, compared to NOK 198.8 billion in 2008. The decrease was primarily attributable to lower prices of liquids and gas, and increased depreciation, amortisation and impairment losses, partly offset by income from higher volumes sold. In 2009, net operating income was affected by the following items: impairment losses net of reversals (NOK 12.2 billion) and underlift (NOK 1.2 billion) negatively affected net operating income, while higher fair value of derivatives (NOK 2.2 billion), higher values of products in operational storage (NOK 2.1 billion), other accruals (NOK 1.3 billion), gain on sale of assets (NOK 0.5 billion) and reversals of restructuring costs (NOK 0.3 billion) all positively affected net operating income in 2009. In 2008, net operating income was affected by the following items: impairment charges net of reversals (NOK 4.8 billion), lower values of products in operational storage (NOK 2.8 billion), underlift (NOK 2.4 billion) and other accruals (NOK 2.3 billion) all affected net operating income in 2008 negatively, while increased fair value of derivatives (NOK 1.8 billion), gains on derivatives to hedge the value of inventories (NOK 0.8 billion), gains on sales of assets (NOK 1.4 billion) and reversal of restructuring cost accrual (NOK 1.6 billion) positively affected net operating income in 2008. Net financial items amounted to a loss of 6.7 billion in 2009, compared to a loss of NOK 18.4 billion in 2008. The NOK 11.7 billion positive change was mostly attributable to NOK 2.0 billion net currency gains caused by a 17% weakening of US dollar versus the NOK for the year ended 31 December 2009, compared to NOK 32.6 billion in net currency losses caused by a 29% strengthening of the US dollar versus the NOK for the year ended 31 December 2008. Statoil, Statutory report 2009 3


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    Income taxes were NOK 97.2 billion in 2009, equivalent to a tax rate of 84.6%, compared to NOK 137.2 billion in 2008, equivalent to a tax rate of 76.0%. The increase in the tax rate from 2008 to 2009 was mainly due to significant taxable exchange gains, which do not have an impact on the statement of income for companies in the group whose functional currency is USD. In 2009 the taxable income related to these exchange gains is estimated to be NOK 25.0 billion higher than income before tax, which increases the tax rate. In addition, the tax rate was increased by relatively higher income from the NCS with higher than average tax rates, and impairment losses with lower than average tax rates. In 2009, the non-controlling interest (minority interest) in net profit was negative NOK 0.6 billion, compared to NOK 0.005 billion in 2008. The non- controlling interest is primarily related to the Mongstad refinery. Net income was NOK 17.7 billion in 2009, compared to NOK 43.3 billion in 2008. The 59% decrease from 2008 to 2009 is mainly due to reduced operating income caused by lower revenues from liquids and gas sales and a higher effective tax rate, only partly offset by reduced loss on net financial items. Considering the proposed dividend for 2009, the remaining net income in the parent company will be allocated to reserve for valuation variances and retained earnings with NOK 14.9 billion and NOK (5.1) billion, respectively. The company's distributable equity after allocations amounts to NOK 98.1 billion. In accordance with Section 3-3 of the Norwegian Accounting Act, the board of directors confirms that the financial statements have been prepared on the basis of the going concern assumption. Our business Statoil is an integrated energy company based in Norway. The company is present in 40 other countries worldwide. We are the leading operator on the NCS and are also experiencing strong growth in our international production. Statoil ASA is a public limited company organised under the laws of Norway. The largest offices are in Stavanger, Bergen and Oslo, and the group had approximately 29,000 employees as of 31 December 2009. Ownership structure * Fixed assets Upstream assets Downstream 22% Non-OECD Free float Norwegian 33% continental shelf 42% OECD Norwegian State International 67% 36% *As per 31 December 2009 The combined exploration and production business had an average equity liquids and natural gas Oil and gas* production of 1,962 mmboe per day, and as of 31 December 2009, Statoil had proved reserves of 2,174 mmbbl of oil and 514 bcm of natural gas, corresponding to aggregate proved reserves of 5,408 mmboe. Gas Statoil ranks among the world's largest net sellers of crude oil and condensate and is the second largest supplier of natural gas to the European market. We have also substantial processing and refining activities and have approximately 2000 service stations in Scandinavia, Poland, the Baltic Oil States and Russia. Statoil is contributing to developing new energy resources, and have ongoing activities in the fields of wind power and marine biofuels. The company is at the forefront in implementing technologies for *Entitlement production carbon capture and storage (CCS). In further developing our international business, Statoil intends to utilise its core expertise in areas such as deep waters, heavy oil, harsh environments and gas value chains in order to exploit new opportunities and execute high quality projects. 4 Statoil, Statutory report 2009


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    Statoil business areas are presented below: Exploration & Production Norway is responsible for Statoil's exploration, field development and production operations on the Norwegian Continental Shelf (NCS). Total production amounted to 1.45 mmboe per day in 2009, representing 74% of Statoil's equity production.The business area had approximately 8,000 employees as of 31 December 2009. International Exploration & Production is responsible for exploration, development and production of oil and gas outside the NCS. Total production amounted to 512 mboe per day in 2009, representing 26% of Statoil's equity production. The business area had approximately 1,700 employees as of 31 December 2009. Natural Gas is responsible for Statoil's transportation, processing and marketing of pipelined gas and LNG worldwide, including the development of additional processing, transportation and storage capacity. The business area had approximately 1,300 employees as of 31 December 2009. Manufacturing & Marketing is responsible for the processing and sale of our production of crude oil and natural gas liquids (NGL), and the sale of refined products. The business area also markets and sells the Norwegian State's volumes of crude and NGL. The business area had approximately 11,300 employees as of 31 December 2009. Technology & New Energy is responsible for the development of technology and renewable energy. The business area had approximately 2,800 employees as of 31 December 2009. Projects is responsible for planning and executing all development and modification projects exceeding NOK 50 million. The business area had approximately 1,100 employees as of 31 December 2009. Sweden Norway Denmark Estonia Finland Lat via Faroe Island Russia Lithuania Canada United Kingdom Ireland Poland Belgium Germany Kazakhstan United States Turkey Azerbaijan Turkmen istan China Iraq Iran Algeria Libya Eg ypt Saudi Mexico Cuba Ar ab ia India United Ar ab Venezuela Nigeria Emir at es Qatar Singapor e Indonesia Tanzania Brazil An gola Mo zambique 1 0 0 0 0 8 _ ST N 0 3 5 0 2 3 Au stralia Cash flows Cash flows from underlying operations, less tax payments, contributed NOK 81.5 billion. Cash flows used in investing activities amounted to NOK 75.4 billion. Cash flows from operating activities Statoil's primary source of cash flow consists of funds generated from operations. Cash flow provided by operating activities was NOK 73.0 billion in 2009, compared to NOK 102.5 billion in 2008. Adjusting for changes in cash flows due to changes in working capital and other non-current items related to operating activities, cash flows from underlying operations less tax payments contributed NOK 81.5 billion. The NOK 29.5 billion decrease in cash flows from operating activities was primarily due to a NOK 57.9 billion decrease in cash flows from underlying operations, an increase in cash flows used due to changes in working capital of NOK 7.0 billion and a decrease in cash flows from non-current items related to operating activities of NOK 3.7 billion. These effects were partly offset by a decrease in taxes paid of NOK 39.1 billion. Statoil, Statutory report 2009 5


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    Cash flows used in investing activities Cash flows used in investing activities amounted to NOK 75.4 billion in 2009, a NOK 10.5 billion decrease from 2008. The decrease stems mostly from acquisitions paid for in 2008, partly offset by NOK 3.9 billion less in proceeds from sales. Sources and use of cash flows in 2009 Cash flows used in financing activities Net cash flows provided by financing activities for 2009 amounted to NOK billion NOK 11.3 billion, compared to cash flow used in financing activities of 200 NOK 17.0 billion for 2008. The NOK 28.3 billion change was mainly 175 related to NOK 41.7 billion in net changes in long-term borrowing and 150 NOK 4.0 billion in less dividend paid in 2009, partly offset by repayment 100 of short-term borrowings by NOK 7.1 billion in 2009, compared with an 75 increase in short-term borrowings by NOK 10.5 billion in 2008. 50 25 0 Cash flows Changes Change in Taxes Investing Net change Net change Dividends Other Net change from in non-current paid activities in LT in ST paid changes in underlying working operating financing financing in liquid assets operations capital items cash flows Liquidity and capital resources Statoil has maintained a strong financial position through times of financial turmoil with a net debt ratio of 27% at year end 2009. Liquidity Our annual cash flow from operations is highly dependent on oil and gas prices and our levels of production. It is only influenced to a small degree by seasonality and maintenance turnarounds. Fluctuations in oil and gas prices, which are outside our control, will cause fluctuations in our cash flows. We will use available liquidity to finance Norwegian petroleum tax payments, any dividend payment and investments. As of 31 December 2009, we had liquid assets of NOK 31.7 billion, including NOK 24.7 billion in cash and cash equivalents and NOK 7.0 billion of current financial investments. Compared to year end 2008, current financial investments decreased by NOK 2.7 billion during 2009, and cash and cash equivalents increased by NOK 6.1 billion. The increase of liquid assets during 2009 was mainly due to new long term debt. As of 31 December 2009, the group also had USD 2.0 billion available in a committed revolving credit facility from international banks, including a USD 500 million swing-line facility. The facility is available for drawdowns until December 2011. Statoil's general policy is to maintain a liquidity reserve in the form of cash and cash equivalents in its balance sheet, and committed, unused credit facilities and credit lines in order to ensure that it has sufficient financial resources to meet its short-term requirements. Long-term funding is raised when the group identifies a need for such financing based on its business activities and cash flows, as well as when market conditions are considered favourable. We aim to keep ratios relating to net debt at levels consistent with our objective of maintaining our long-term credit rating at least within the single A category. In this context Statoil carries out different risk assessments, some of them in line with financial matrices used by S&P and Moody's, such as free cash flow from operations over net debt and net debt to capital employed. Our long-term and short-term ratings from Moody's are Aa2 and P-1, respectively. Our long-term rating from Standard & Poor's is AA-, reflecting the majority ownership by the Norwegian state. Standard & Poor's short-term rating of Statoil is A-1+. The current rating outlook is stable from both agencies. Statoil will in 2010 continue to secure necessary financial flexibility and, depending upon oil- and gas price development, may issue bonds if market conditions are viewed as attractive. 6 Statoil, Statutory report 2009


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    Net interest bearing financial liabilities Net interest-bearing financial liabilities amounted to NOK 75.3 billion at 31 December 2009, compared to NOK 46.0 billion at 31 December 2008. The change of NOK 29.3 billion was mainly NOK bn related to an increase in non-current financial liabilities of NOK 41.1 billion, decreased current 100 financial liabilities of NOK 12.5 billion, and an increase in cash, cash equivalents and current financial (4.9) investments of NOK 3.4 billion. 75 (12.6) 0.2 46.3 The net debt to capital employed ratio, defined as net interest-bearing debt in relation to capital 50 75.3 employed, was 27.3% at 31 December 2009, compared with 17.5% at 31 December 2008. The 45.9 9.8% increase was mainly related to an increase of net financial liabilities of NOK 29.3 billion, in 25 combination with an increase in capital employed of NOK 13.4 billion. Net New Repayment Change Change The group's borrowing needs are mainly covered through the issuing of short-term and long-term Net financial LT loans of LT in other in liquid financial liabilities loans securities, including utilisation of a US Commercial Paper Programme and a Euro Medium Term Note liabilities assets liabilities 31.12.08 31.12.09 (EMTN) Programme (the limits of the programme being USD 4 billion and USD 6 billion, respectively), and through draw-downs under committed credit facilities and credit lines. After the effect of currency swaps, 100% of our borrowings are in US dollars. Our financial policies take into consideration funding sources, the maturity profile of long-term debt, interest rate risk management, currency risk and management of liquid assets. Our borrowings are denominated in various currencies and swapped into USD, since the largest proportion of our net cash flow is denominated in USD. In addition, we use interest rate derivatives, primarily consisting of interest rate swaps, to manage the interest rate risk of our long-term debt portfolio. Return on Average Capital Employed Statoil achieved a competitive rate of return on the capical employed in 2009. Return on capital employed (ROACE) We use ROACE to measure the return on capital employed, regardless of whether the financing is through equity or debt. ROACE was 10.4% in 2009, compared with 21.0% in 2008. The decrease % from last year was due to a 43% drop in net income adjusted for financial items after tax and a 15% 25 increase in capital employed. ROACE is defined as a non-GAAP financial measure. 20 15 10 5 2007 2008 2009 Research and Development Statoil is a technology intensive company. Research and development is an integral part of our strategy. In addition to technological development in field development projects, a significant part of Statoil's research is carried out at centres for research and technology development in Trondheim, Bergen, Porsgrunn in Norway and Calgary in Canada. The research and development is carried out in close co- operation with universities, research institutions, other operators and the supplier industry. Research and development expenditures were NOK 2.1 billion in 2009. The technology strategy is driven by our key business challenges, aiming to build even stronger industry positions. Technology is a key enabler to achieving this and will make significant contributions to field development in frontier deep waters and Arctic areas, heavy oil production, subsalt exploration, and environmental and climate issues. The ambition is to achieve distinctiveness and industry leadership in selected technologies and to stay competitive in a broad range of core and emerging technologies along the energy provision value chain. Statoil, Statutory report 2009 7


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    Furthermore, improved oil and gas recovery and improved drilling and well solutions are important to successfully fight declining production from mature fields. Statoil has achieved some of the petroleum industry's highest recovery factors on the NCS by combining scientific and engineering capabilities and boldly introducing new technology. We intend to further advance the most important technologies to meet our improved oil recovery ambitions. Risks The financial results are very dependent upon the prices of crude oil and natural gas, the USDNOK exchange rate and realised refining margins. The financial results of operations largely depend on a number of factors, most significantly those that affect the price we receive in NOK for our sold products. Specifically, such factors include the level of crude oil and natural gas prices; trends in the exchange rate between the USD and NOK; equity production and entitlement sales volumes of liquids and natural gas; available petroleum reserves, and Statoil's, as well as its partners' expertise and co- operation in recovering oil and natural gas from those reserves; and changes in the portfolio of assets due to acquisitions and disposals. The results will also be affected by trends in the international oil industry, including possible actions by governments and other regulatory authorities in the jurisdictions in which the group operates. Also possible or continued actions by members of the Organization of Petroleum Exporting Countries (Opec) that affect price levels and volumes, refining margins, increasing cost of oilfield services, supplies and equipment, increasing competition for exploration opportunities and operatorships, and deregulation of the natural gas markets may cause substantial changes to the existing market structures and to the overall level and volatility of prices. The following table shows the yearly averages for quoted Brent Blend crude oil prices, natural gas contract prices, Statoil's benchmark refining margins (FCC margin) and the USDNOK exchange rates for 2009, 2008 and 2007. Yearly average 2009 2008 2007 2006 Crude oil (USD/bbl brent blend) 58.0 91.0 70.5 63.2 Natural gas (NOK per scm)(1) 1.9 2.4 1.7 1.9 FCC margins (USD/bbl)(2) 4.3 8.3 7.5 7.1 USDNOK average daily exchange rate 6.3 5.6 5.9 6.4 (1) From the Norwegian Continental Shelf. (2) Refining margin. INDICATIVE EFFECTS ON 2010 RESULTS The illustration shows how certain changes in the crude oil price, natural gas contract prices and the USDNOK exchange rate, if sustained for a full year, could impact the financial results in 2010. (NOK billion) Oil price: 15 + USD 21.2/bbl The estimated sensitivity of our financial results to each of the factors has been estimated based on 47 the assumption that all other factors would remain unchanged. The estimated effects on the financial 6 Gas price: results would differ from those that would actually appear in our consolidated financial statements 21 + NOK 0.49/scm because our consolidated financial statements would also reflect the effect on depreciation, trading 4 Exchange rate: margins, exploration expenses, inflation, potential tax system changes and the effect of any hedging USDNOK +0.60 (P&L 17 effect excl finance) programmes in place. Our oil and gas price hedging policy is designed to assist our long-term strategic development and our The sensitivity analysis is based on actual oil prices, actual Net income effect attainment of targets by protecting financial flexibility and cash inflows. USDNOK and estimated gas price and shows the 12 months effect of changes in parameters Net operating income effect Fluctuating foreign exchange rates can have a significant impact on our operating results. Our revenues and cash flows are mainly denominated in, or driven by US dollars, while our operating expenses and income taxes payable largely accrue in NOK. The group seek to manage this currency mismatch by issuing or swapping long-term debt in USD. This debt policy is an integrated part of our total risk management programme. The group also engage in foreign currency hedging in order to cover our non-USD needs, which are primarily in NOK. We manage the risk arising from our interest rate exposure through the use of interest rate derivatives, primarily interest rate swaps, based on a benchmark for the interest reset profile of our long-term debt portfolio. In general, an increase in the value of USD in relation to NOK can be expected to increase our reported earnings. 8 Statoil, Statutory report 2009


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    Group outlook Statoil's guidance for equity production is between 1,925 and 1,975 mboe per day in 2010 and between 2.1 and 2.2 mmboe per day in 2012. The expected volumes are exclusive of any Opec cuts. Commercial considerations related to gas sales activities, operational regularity, the timing of new capacity coming on stream and gas off-take represent the most significant risks related to the production guidance. Capital expenditures for 2010, excluding acquisitions and capital leases, are estimated to be around USD 13 billion. Unit production cost for equity volumes is estimated to be NOK 35-36 per boe, which is on par with 2009. The company will continue to mature the large portfolio of exploration assets and expects an exploration activity level in 2010 of around USD 2.3 billion. We anticipate that prices for crude oil, products and natural gas will continue to be volatile in the short to medium term. Refining margins have been low for more than a year, and we anticipate that they will remain rather low in the short to medium term. In the long term, we maintain our positive view of gas as an energy source. Domestic production of gas in the EU continues to decline, while demand for gas is expected to increase in the long term, particularly due to the lower carbon footprint of natural gas compared with oil and coal. In the US we believe that our position in the Marcellus shale gas acreage, in combination with Gulf of Mexico production and our LNG regasification capacity position at the Cove Point terminal in Maryland will provide a foundation for growth in our US market position in the years to come. Statoil's income could vary significantly with changes in commodity prices, while volumes are fairly stable through the year. There is a small seasonal effect on volumes between winter and summer seasons due to normally higher off-takes of natural gas during cold periods. There is normally an additional small seasonal effect on volumes from a higher level of maintenance of offshore production facilities since generally better weather conditions allow for more maintenance work during the second and third quarter each year. These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Health, safety and the environment Statoil's ambition is to operate with zero harm to people and the environment and in accordance with principles for sustainable development. Safe and efficient operations is our first priority. We suffered six fatal accidents in 2009. Three of our employees in Brazil were on board Air France flight 447 which disappeared over the Atlantic on 1 June. On 7 May 2009 we experienced an accident in connection with the dismantling of scaffolding on Oseberg B, when one of our contractor employees was fatally injured. On 7 September a fatal accident occurred on the LPG carrier "Lady Shana" during a port call at Petit Couronne in France, when one crew member fell from the shore gangway and into the river Seine. On 17 October a fatality occurred when one of our contractor employees was fatally injured during work at the Leismer project in Canada. The board of directors emphasises the importance of understanding factors that create risks in order to avoid major accidents. We work systematically to mitigate risks that are critical to operating safely and reliably, and continuous improvement for better safety results has high attention in all our business areas. In order to meet our goal of improving safety results in all our businesses, we hold a large number of training sessions in compliance and risk management. Major organisational changes have been planned and implemented in a safe manner. For Statoil's North Sea operations, strong cooperation between offshore units, onshore support functions and management is essential. A new organisational model has now been implemented, and there is a particular focus on risk management in this respect. Compensatory measures are continuously implemented in order to reduce the probability of any kind of accident occuring. Our compliance programme focuses on the integration of our values in all activities, and on compliance with internal and external requirements. Where requirements cannot be met, the risk will be identified and controlled as part of the systematic handling of non-conformities. Statoil's safety results with respect to serious incidents have been at a stable level in recent years. The overall Serious Incident Frequency (SIF) improved from 2.2 in 2008 to 1.9 in 2009. We strive to ensure a working environment that promotes job satisfaction and good health. This work involves monitoring of physical, chemical and organisational factors in the working environment, and a system for following up on groups or individuals that are exposed to risks in their working environment. Special attention is devoted to chemical health hazard. Statoil, Statutory report 2009 9


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    The sick leave rate in Statoil was 4% in 2009, and is followed closely by managers at all levels. Statoil was fined NOK 25 million by the public prosecution authorities in Norway on 18 December 2009 in connection with an oil leakage incident that took place on 12 December 2007 on the Norwegian continental shelf. People and the organisation Statoil will create value for the owners based on a clear performance framework defined by our corporate values and principles for HSE, ethics and leadership. Statoil's ambition is to be a globally competitive company. It is a key priority to create a stimulating working environment and provide employees with good opportunities for professional and personal development. The group seeks to achieve this through developing a strong, value-based performance culture, clear principles for leadership and an effective management and control system. In Statoil, the way in which the results are achieved is as important as the results themselves. Corporate governance, our values, leadership model, operating model and corporate policies are described in the Statoil Book, which has been made available for all employees. The group has recently reviewed its global people policies to ensure consistent common standards across the group. Through our global people development and deployment process, we seek to ensure a good match between professional interests and goals, while at the same time offering challenging and meaningful job opportunities. Statoil remains committed to providing financial and non-financial rewards that attract and motivate the right people, and it continues to focus on equal opportunities for all talents. We promote diversity among our employees. The importance of diversity is stated explicitly in Statoil's values and ethical codes of conduct. We try to create the same opportunities for everyone and do not tolerate discrimination or harassment of any kind in our workplace. By December 2009, 37% of our employees were women, and 40% of the members on the board of directors were women. Of the 84 senior vice presidents, 24% are female, and 35% of our successor pool for these roles are female. The proportion of female managers was 25%, and among managers under the age of 45 the proportion was 34%. Through our development programmes, we aim to increase the number of female managers, and we endeavour to give equal representation to men and women in leadership development programmes. In 2009, we worked systematically on the development, deployment and succession planning of business- critical leadership positions. Of leaders promoted to the top 170 roles in 2009, 47% were female. Salary ratio men to women Statoil works systematically with recruitment and development programmes in order to increase the number of women in male-dominated positions and discipline areas. The reward system in Statoil is non-discriminatory and supports equal opportunities, which means that, given the same position, Operations & Support 96% experience and performance, men and women will be at the same salary level. However, due to Associates differences between women and men in types of positions and number of years' experience, there are 98% some differences in compensation when comparing the general pay levels of men and women. Professional 97% The Statoil group employs approximately 29,000 permanent employees in 41 countries, and more Principal 100% than 18,000 of them are employed in Norway, whereas approximately 11,000 were employed Leading 98% outside Norway. Of these, 9,400 were employed in the retail business. Manager & Executives 98% 10 Statoil, Statutory report 2009


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    Number of employees women Geographical Region 2009 2008 2007 2009 2008 2007 Norway 18,100 17,891 17,959 31% 30% 29% Rest of Europe 9,593 10,475 10,151 50% 47% 46% Africa 165 144 117 28% 32% 34% Asia 150 169 144 55% 54% 52% North America 584 448 315 34% 39% 33% South America 147 102 72 48% 53% 53% TOTAL 28,739 29,229 28,758 37% 35% 37% Non - OECD 2,703 3,009 2,904 64% 65% 66% Environment and climate The group works actively to limit the negative environmental impacts related to its operations. The group is committed through its climate policy to contribute to sustainable developments. We recognise that there is a link between the use of fossil fuels and man-made climate change, and the climate policy takes into account the need for proactively combating global climate change, as well as the need to increase company efforts on renewables and clean technology. Statoil's environmental management system seeks to identify the most important environmental aspects of all facilities, set targets for improvement, and is an integrated part of the overall management system. Our climate policy sets out the principles for addressing the challenge of global warming and our ambition of maintaining the position as an industry leader in relation to sustainable development. The climate policy has been implemented in all our business planning and strategy development. Statoil is continuously focusing on energy efficiency at our installations. Requirements for energy efficiency are incorporated in relevant governing documents. We continuously monitor our emissions. Several modification projects for further reductions are being implemented, and Statoil has established corporate wide principles for oil spill response in relation to our operations. The group also continued an extensive research and development program aimed at adapting its oil spill response to arctic areas. The most important group-wide indicators to measure environmental performance are oil spills, emissions of carbon dioxide and nitrogen oxides, energy consumption and the recovery rate for non-hazardous waste. The current emissions of CO2 per tonne of oil and gas produced from Statoil-operated fields at the Norwegian Continental Shelf in 2009 correspond to 43% of the oil and gas industry 2009 average.The volume of accidental oil spills decreased from 342 cubic metres in 2008 to 170 cubic metres in 2009. Carbon dioxide emissions have decreased from 14.4 million tonnes in 2008, to 13.1 million tonnes in 2009. Nitrogen oxides emissions have decreased from 46.7 thousand tonnes in 2008 to 42.3 thousand tonnes in 2009. Energy consumption has decreased from 69.6 TWh in 2008 to 63.6TWh in 2009. The recovery rate for non-hazardous waste has increased from 29% in 2008 to 68.7% in 2009. Society Statoil has continued to strengthen compliance with its policies and standards for social responsibility, ethics and anti-corruption across its operations throughout 2009. Growing and sustaining our business depends on our ability to establish enduring and mutually beneficial relationships with the societies in which we operate. Wherever we operate, we make decisions based on how they affect our interests and those of the societies around us. Stakeholders include governments, communities, partners, contractors and suppliers, employees, customers and investors. It is Statoil's responsibility to create value for its stakeholders. This is not only an ethical imperative. Living up to these responsibilities is required to support long-term profitability and consistency in complex environments. In line with our corporate policy on social responsibility, we are committed to: Statoil, Statutory report 2009 11


  • Page 15

    making decisions based on how they affect the group's interests and the interests of the affected societies ensuring transparency, anti-corruption, and respect for human rights and labour standards generating positive spin-offs from core activities to help meet the aspirations of the societies in which the group operates Throughout 2009, we have continued to strengthen compliance with our policies and standards for social responsibility and ethics and anti-corruption across our operations. Stricter requirements and processes for integrity due diligence for assessing and managing risks in its business relationships have been implemented. To further comply with our Ethics Code of Conduct policy, the group rolled out an ethics training and awareness programme reaching staff from 37 countries of operation, especially targeting senior management, procurement staff and others regularly exposed to third parties. We have commenced an extensive process for the implementation of the Voluntary Principles on Security and Human Rights (VPSHR) in priority countries. That process, which is still in progress, includes performing a human rights due diligence focusing on the company's security arrangements, addressing any identified risks and networking with international and/or local NGOs or other appropriate organisations to provide training on the VPSHR. In 2009, the focus was on the continued mainstreaming of our Ethics Code of Conduct throughout the organisation and on strengthening our ability to manage and mitigate integrity risks in our operations. We screen new investments, partners, contractors and suppliers for integrity and human rights risks, and implement strict requirements for integrity due diligence (IDD) to improve our processes for managing integrity risks in our business relationships. The "Horton case" was finally closed by the US authorities on 19 November 2009 after Statoil had successfully fulfilled its obligations under the Settlements with the Department of Justice and the Securities and Exchange Commission (SEC) entered into in October 2006 as a result of the so-called "Horton Affair". The closing of the court case was a formal recognition that Statoil had fulfilled all the conditions of the settlements entered into with the US authorities. We continue to promote local sourcing and we look for opportunities to support sustainable and competitive enterprises in many of our countries of operations. In 2009, we spent an estimated NOK 2.5 billion on goods and services from companies based in non-OECD countries, down from NOK 3.1 billion in the previous year. Our business also generates significant revenues for governments. In 2009, we made total payments and contributions to governments estimated at NOK 145.8 billion. Direct and indirect taxes paid in Norway amounted to NOK 102.1 billion, and direct and indirect taxes paid outside Norway totalled NOK 23.7 billion in 2009. Statoil procurements from local suppliers in non-OECD countries was approximately NOK 2.5 billion in 2009, compared to NOK 3.1 billion in 2008. The group invested in capacity-building and skills development for its local employees and communities alike, as well as in local enterprise skills upgrading and development in Brazil, Canada and Nigeria to provide them with the right skills and expertise, standards and certifications required to compete successfully and work in the oil and gas industry. 12 Statoil, Statutory report 2009


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    Board developments Jakob Stausholm is a new member of the board of Statoil ASA since July 2009, and is also member of the board's audit committee. Stausholm replaced Kurt Anker Nielsen. Einar Arne Iversen, elected by the employees, is also new member of the board of Statoil ASA since June 2009 and replaces Claus Clausen. Geir Nilsen and Ragnar Fritsvold were observers in the board up to June 2009. The board held 11 meetings in 2009 and the meeting attendance was 94%. The board's audit committee held six meeting in 2009 and the meeting attendance was 95%. The compensation committee held eight meetings in 2009 and the meeting attendance was 81%. Stavanger, 17 march 2010 tHe Board of dIreCtorS of StatoIl aSa SveIn rennemo CHaIr marIt arnStad lIll-HeIdI BaKKerUd KJell BJørndalen dePUty CHaIr roy franKlIn elISaBetH GrIeG eInar arne IverSen GraCe reKSten SKaUGen JaKoB StaUSHolm morten Svaan HelGe lUnd PreSIdent and Ceo Statoil, Statutory report 2009 13


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    Statement on compliance Board and management confirmation Today, the board of directors, the Chief Executive Officer and the Chief Financial Officer reviewed and approved the board of directors report and the Statoil ASA consolidated and separate annual financial statements as of 31 December 2009. To the best of our knowledge, we confirm that: the Statoil ASA consolidated annual financial statements for 2009 have been prepared in accordance with IFRSs and IFRICs as adopted by the European Union (EU), IFRSs as issued by the International Accounting Standards Board (IASB) and additional Norwegian disclosure requirements in the Norwegian Accounting Act, and that the separate financial statements for Statoil ASA have been prepared in accordance with the Norwegian Accounting Act and Norwegian Accounting Standards, and that the board of directors report for the group and the parent company is in accordance with the requirements in the Norwegian Accounting Act and Norwegian Accounting Standard no 16, and that the information presented in the financial statements gives a true and fair view of the company's and the group's assets, liabilities, financial position and results for the period viewed in their entirety, and that the board of directors' report gives a true and fair view of the development, performance, financial position, principle risks and uncertanties of the company and the group. Stavanger, 17 march 2010 tHe Board of dIreCtorS of StatoIl aSa SveIn rennemo CHaIr marIt arnStad lIll-HeIdI BaKKerUd KJell BJørndalen dePUty CHaIr roy franKlIn elISaBetH GrIeG eInar arne IverSen GraCe reKSten SKaUGen JaKoB StaUSHolm morten Svaan eldar Sætre HelGe lUnd CHIef fInanCIal offICer PreSIdent and Ceo 14 Statoil, Statutory report 2009


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    Board statement on corporate governance To ensure sound corporate practice, Statoil's organisation is structured and managed in accordance with the Norwegian Code of Practice for Corporate Governance. Nominations and elections – Statoil ASA Statoil, being listed on the Oslo Stock Exchange, must annually report on compliance with the Norwegian Code of Practice for Corporate General meeting Governance from the Norwegian Corporate Governance Board (the Employees External auditor "Code") and possible deviations from the Code must be explained. The Nomination Corporate Assembly Code covers 15 topics, and the statement shall cover each of these topics. committee Board of directors Statoil's board of directors has endorsed the Code and states that Statoil has complied with the Code throughout 2009. Audit Compensation committee committee Corporate auditor Nomination President and CEO Election Implementation of the code of practice The board of directors places emphasis on maintaining a high standard of corporate governance in line with Norwegian and international standards of best practice. The foundation for the Statoil group's governance structure is Norwegian law, with Statoil ASA being a Norwegian registered public limited liability company with its primary listing on the Oslo stock exchange. Our share is also listed on the New York Stock Exchange (NYSE) and we are subject to the listing requirements of NYSE and the requirements of the US Securities and Exchange Commission. Good corporate governance is a prerequisite for a sound and sustainable company, and it is built on openness and equal treatment of our shareholders. Our governing structures and controls help ensure that we run our business in a justifiable and profitable manner to the benefit of our employees, shareholders, partners, customers and society. We continuously consider prevailing international standards of best practice in defining and exercising company policies as we believe there is a clear link between high quality governance and the creation of shareholder value. At Statoil, the way we deliver is as important as what we deliver. The Statoil Book, which adresses all Statoil employees, sets the standards for our behaviour, our delivery and our leadership. Our values guide the behaviour of all Statoil employees. Our corporate values are "courageous", "open", "hands-on" and "caring". Both our values and ethics are treated as an integral part of our business activities. Our Ethics Code of Conduct is further described in item 10. Our governance and management system is further elaborated on our website at http://www.statoil.com/en/About/CorporateGovernance/Pages/default.aspx , where shareholders and other stakeholders can explore any topic of particular interest in more detail and easily navigate to related documentation. Statoil, Statutory report 2009 15


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    Business Statoil's objectives are set out in the articles of association and specified in our corporate strategy. Statoil's objectives are defined in the company's articles of association. Statoil shall, either on its own or through participation in or together with other companies, carry out exploration, production, transportation, refining and marketing of petroleum and petroleum derived products, and other forms of energy, as well as other businesses. Targets and strategies are adopted, both for Statoil as a group and for each business area, to support the company objective. Our corporate strategy has the following three main pillars: exploiting the full potential of the Norwegian continental shelf (NCS) establishing and developing growth positions outside the NCS, capitalising on our NCS and value chain competence and gradually developing a business within renewables based on synergies with our legacy business. All within a framework of strict capital, cost and financial discipline. We set absolute requirements for health, safety and the environment. Safe and efficient operations is our first priority. We aim to meet the world's growing demand for energy, while showing consideration for the environment and making an active effort to fight global climate change. We are contributing to sustainable development in relation to our core activities in the countries in which we operate. We are committed to openness and anti-corruption, as well as respect for human rights and employee rights. That applies both to our own activities and to those parts of the value chain over which we have significant influence. Full text of the articles of association can be found on our website at www.statoil.com/articlesofassociation. Equity and dividends The board of directors emphasises the importance of maintaining a predictable and attractive dividend level yet with equity capital at a level appropriate to Statoil's goals, strategy and risk profile. Shareholders' equity The group shareholders' equity at 31 December 2009 was NOK 198.3 billion, which represented 35% of the group's total assets. The board considers this satisfactory given the group's requirement for solidity in relation to its expressed goals, strategy and risk profile. Dividend policy The board of directors has decided to adjust the company's dividend policy in order to create a more predictable dividend level going forward. It is Statoil's ambition to grow the annual cash dividend, measured in NOK per share in line with long term underlying earnings. When deciding the annual dividend level, the Board will take into consideration expected cash flow, capital expenditure plans, financing requirements and appropriate financial flexibility. In addition to cash dividend, Statoil might buy back shares as part of total distribution of capital to the shareholders The direct link to the highly volatile IFRS net income has been removed, and the focus will be on growing the annual cash dividend per share in line with long- term underlying earnings. The new policy does not imply a change in the long-term dividend level, including potential share buy-backs, compared to the previous policy. Purchase of own shares for use in the share savings programme Since 2004, Statoil has had a share savings plan for its employees. The purpose of this plan is to strengthen the business culture and encourage loyalty through employees becoming part-owners of the company. The annual general meeting of shareholders annually authorises the board to acquire Statoil shares in the market in order to continue implementation of the employees' share saving plan. The authorisation is valid until the next annual general meeting (AGM), no longer, however, than until 30 June the following year. 16 Statoil, Statutory report 2009


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    Equal treatment and close associates Equal treatment of all shareholders is a core governance principle in Statoil. Statoil has one class of shares, and each share confers one vote at the general meeting. The articles of association contain no restrictions on voting rights. The repurchase of own shares for use in the share savings programme for own employees (or, when applicable, for subsequent cancellation) is carried out through the Oslo stock exchange. The Norwegian State as majority owner The Norwegian state is the largest shareholder in Statoil with a 67% ownership interest, see more on our website at www.statoil.com/shareholders. The state's ownership in Statoil is managed by the Ministry of Petroleum and Energy. It is declared Norwegian state ownership policy that the principles in the Code will be endorsed for state ownership, and the Norwegian Government has stated that it expects companies in which the state has ownership interests to follow the Code. The principles are presented in the state's yearly ownership report, and the report for 2008 can be found on the website: www.eierberetningen.nhd.no/2008/index.php?lang=english. Contact between the State as owner and ourselves takes place in the same manner as for other institutional investors. In all matters in which the State acts in its capacity as shareholder, the exchange with the company is based on information that is available to all shareholders. We ensure that the objectives of any interaction between the Norwegian State and Statoil are based on distinction between the various roles that the Norwegian State encompasses. The State has no appointed board members or members of the corporate assembly in Statoil. As majority shareholder, the State has appointed a member of Statoil's nomination committee. Sale of the State's oil and gas In accordance with Statoil's articles of association, Statoil has a duty to sell the State's oil and natural gas together with the group's own production.. The Norwegian state has a common ownership strategy aimed at maximising the total value of its ownership interests in Statoil and its own oil and gas interests. This is preserved in the owner's rules of procedure, which oblige Statoil, in its activities on the Norwegian continental shelf, to emphasise these overall interests in decisions that may be of significance to the implementation of the sales arrangements. The state-owned oil company Petoro AS handles commercial matters relating to the Norwegian state's direct involvement in petroleum activities on the Norwegian continental shelf and pertaining activities. Freely negotiable shares Statoil's articles of association contain no form of restriction on negotiability of shares. Statoil's primary listing is on the Oslo stock exchange. Our American Depository Rights (ADRs) are traded on the New York Stock Exchange. Each Statoil ADR represents one underlying ordinary share. The shares and ADRs are freely negotiable. General meetings The general meeting of shareholders is Statoil's supreme corporate body that serves as a democratic and efficient forum for the interaction between the company's shareholders, board of directors and management. The main framework as regards the convening and holding of an AGM in Statoil is as follows: Pursuant to the company's articles of association, the AGM must be held by the end of June each year. Notice of the meeting and documentation for the AGM are published on Statoil's website at least 21 days prior to the meeting and consecutively sent by mail to all shareholders whose address is known within 21 days before the AGM. All shareholders who are registered in the Norwegian Central Securities Depository (VPS) will receive an invitation to the AGM. Statoil, Statutory report 2009 17


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    Shareholders are entitled to have a proposal dealt with at the general meeting if the proposal has been submitted in writing to the board of directors in sufficient time to allow inclusion in the distributed notice of meeting. Shareholders who are prevented from attending may vote by proxy. The deadline for registration for the AGM is the day before the AGM is due to take place. The AGM is normally opened and chaired by the chair of the corporate assembly. If there is a dispute concerning individual matters and the chair of the corporate assembly belongs to one of the disputing parties or is for some other reason not perceived as being impartial, another person will be appointed to chair the AGM in order to ensure impartiality in relation to the matters to be considered. The AGM is conducted in Norwegian and translated simultaneously into English. As Statoil has a large number of shareholders with a wide geographical distribution, Statoil offers its shareholders the opportunity to follow the AGM by webcast with simultaneous translation into English. At the AGM the following decisions are made: Election of the shareholders' representatives to the corporate assembly Election of the nomination committee (referred to as the election committee in the articles of association) Election of the external auditor and stipulation of the auditor's fee Approval of the board of directors' report, the financial statements and any dividend, proposed by the board of directors and recommended by the corporate assembly Any other matters listed in the notice convening the AGM. All shares carry an equal right to vote at general meetings. Resolutions at AGMs are normally passed by simple majority. However, Norwegian company law requires a qualified majority for certain resolutions, including resolutions to waive preferential rights in connection with any share issue, approval of a merger or demerger, amendment of the articles of association or authorisation to increase or reduce the share capital. These matters require the approval of at least two-thirds of the aggregate number of votes cast as well as two-thirds of the share capital represented at the AGM. Minutes from the AGM are made available on Statoil's website at www.statoil.com/agm immediately after the meeting. In 2010, a proposal to revise the articles of association will be forwarded by the board for approval by the AGM. The revision, if approved, will allow distribution of documents to future AGMs at Statoil's website. A shareholder may nevertheless request that documents, which relate to matters to be dealt with by the AGM, are sent to him/her by regular mail. Nomination committee Pursuant to Statoil's articles of association, the nomination committee consists of four members who are shareholders or representatives of shareholders. The nomination committee (in Statoil's articles of association referred to as the "election committee") is independent of both the board and the company's management. The duties of the nomination committee are: to present recommendations to the general meeting of shareholders for the election of shareholder-elected members and deputy members of the corporate assembly and members of the nomination committee to present recommendations to the corporate assembly for the election of shareholder-elected members to the board of directors to present a proposal for the remuneration of members of the board of directors, the nomination committee and the corporate assembly. The members of the nomination committee are elected by the general meeting of shareholders. Two of the members are elected from among the shareholder-elected members of the corporate assembly. Members of the nomination committee are normally elected for a term of two years. More information on the members of Statoil ASA's nomination committee and the committee's rules of procedure can be found on our website at: www.statoil.com/electioncommittee. Furthermore, an electronic mail-box for shareholders' proposals to the committee is accessible on our website at www.statoil.com/proposecandidate. The nomination committee's rules of procedure are determined by the corporate assembly's shareholder-elected members, at the proposal of the board of directors.The rules of procedures state that the nomination committee will inter alia focus on the following criteria when preparing nominations: experience, competence, capacity, appropriate rotation, gender and independence. The company covers the costs of the nomination committee. The nomination committee held 16 meetings in 2009. 18 Statoil, Statutory report 2009


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    Corporate assembly, board of directors The main duties of the corporate assembly and the board of directors are defined in the Norwegian company law. Statoil's corporate assembly Pursuant to Statoil's articles of association, our corporate assembly consists of 18 members 12 of whom, and four deputy members, are elected by the annual general meeting. Six members, with deputy members, and three observers are elected by and from among our employees. The corporate assembly elects its own chair and deputy chair from among its members. Members of the corporate assembly are normally elected for a term of two years. Members of the board of directors and management cannot be members of the corporate assembly, but they are entitled to attend and to speak at meetings of the corporate assembly unless the corporate assembly decides otherwise in individual cases. The duties of the corporate assembly are defined in section 6-37 of the Norwegian Public Limited Liability Companies Act. Our corporate assembly held five meetings in 2009. The list of members of the corporate assembly is accessible on our website at www.statoil.com/corporateassembly. Composition of the board of directors In accordance with Norwegian law, the corporate assembly elects Statoil's board of directors. Pursuant to Statoil's articles of association, our board of directors consists of 10 members. Pursuant to Norwegian company law, the company's employees are entitled to elect three board members, with deputy members, while seven members of the board are elected by the shareholders. There are no deputy members for shareholder representatives on the board. The management is not represented on the board. Members of the board are normally elected for a term of two years. A majority of the members of the board are deemed to be "independent" board members. One board member qualifies as "audit committee financial expert", as defined in the US Securities and Exchange Commission requirements. There are no board member service contracts that provide for benefits upon termination of office. Each board member is presented on our website, including information about other directorships and offices held (current and recent), age, skills and experience, possible family connections within the company's governing bodies, information about loans from the company as well as share ownership in Statoil, see www.statoil.com/board. The work of the board of directors The board of directors of Statoil ASA is responsible for the overall management of the Statoil group, and for supervising the group's activities in general. The board of directors handles matters of major importance or of an extraordinary nature. However, it may require management to refer any matter to it. The board of directors appoints the president and chief executive officer (CEO), and stipulates the job instructions, powers of attorney and terms and conditions of employment for the president and CEO. The work of the board is based on rules of procedure that describe the board's responsibility, duties and administrative procedures. The rules of procedure also describe the duties of the CEO and his/her duties vis-à-vis the board of directors. The board's rules of procedures are accessible on our website at www.statoil.com/board. Besides the board of directors, members of the executive committee and other members of senior management attend board meetings by invitation. Recurrent items on the board's yearly agenda are: corporate strategy issues, approval of business plans, approval of quarterly and annual results, management's monthly performance reporting, handling of the annual report, management compensation issues, CEO and top management leadership asssessment and succession planning, HSE (health, safety and environment) review, project status review, people and organisation strategy and priorities, enterprise risk evaluation and an annual review of the board's governing documentation. In addition, the board carries out an annual board evaluation, with input from various sources and with external facilitation. The board of directors held 11 meetings in 2009 and meeting attendance was 94%. Statoil, Statutory report 2009 19


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    Statoil's board of directors has two sub-committees: The board's audit committee The role of the audit committee is to assist in the exercise of the board's management and control responsibilities and to ensure that the group has an independent and effective external and internal auditing system. The duties of the audit committee include maintaining continuous contact with Statoil's elected auditor concerning the auditing of the company's accounts. The committee also supervises the implementation of and compliance with the group's ethical guidelines. The audit committee assesses and makes a recommendation concerning the choice of external auditor, and it is responsible for ensuring that the external auditor meets the requirements set by the authorities in Norway and in other countries in which Statoil is listed on the stock exchange. The board's audit committee held 6 meetings in 2009 and meeting attendance was 95%. The instructions for the board's audit committee are available on our website at www.statoil.com/auditcommittee. The board's compensation committee The role of the compensation committee is to assist the board in its work on terms and conditions of employment for the chief executive, and on the philosophy, principles and strategy for the compensation of leading executives in Statoil. The board's compensation committee held 8 meetings in 2009 and meeting attendance was 81%. The instructions for the board's compensation committee are available on our website at www.statoil.com/compensationcommittee. Risk management and internal control The board of directors and management attach great importance to the quality of Statoil's risk management and control functions, and this is reflected in Statoil's management and control systems. Risk management Statoil manages risk to ensure safe operations and to achieve corporate objectives in compliance with prevailing requirements. The overall risk management approach includes continuous assessment and management of risk in all activities. The company has a separate corporate risk committee which is chaired by the chief financial officer. The committee meets eight to ten times a year to consider and adopt the company's strategies for risk management. A thorough report on the company's risk management is presented in chapter 6 in the annual report on Form 20-F. In Statoil, risk management is divided into three main categories: Strategic risks that are long-term market risks, and which are monitored by the company's corporate risk committee. The corporate risk committee gives advice and makes recommendations to the corporate executive committee based on strategic market risk policies. Tactical risks, which are short-term trading risks based on underlying exposures, are managed by the principle business segment line managers. Operational risks, which cover all major operational goals and underlying risk drivers, are managed as an integral part of line managers' resposibilities at all levels. In addition, insurable risks are handled by the captive insurance company operating in the Norwegian and international insurance markets. Furthermore, Statoil has started implementation of business continuity management as a new risk handling strategy. The management's report on internal control of financial reporting The management of Statoil ASA is responsible for establishing and maintaining adequate internal control of financial reporting. Our internal control of financial reporting is a process designed under the supervision of the chief executive officer and chief financial officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of Statoil's financial statements for external reporting purposes in accordance with International Financial Reporting Standards as adopted by the European Union (EU). The accounting policies applied by the group also comply with IFRS as issued by the International Accounting Standards Board (IASB). The management has assessed the effectiveness of internal control of financial reporting based on the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, the management has determined that Statoil's internal control of financial reporting as of 31 December 2009 was effective. 20 Statoil, Statutory report 2009


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    Statoil's Ethics Code of Conduct and anti-corruption compliance programme Our ability to create value is dependent on applying high ethical standards, and we are determined that Statoil shall be known for them. Ethics is treated as an integral part of our business activities. The group requires high ethical standards of everyone who acts on our behalf and will maintain an open dialogue on ethical issues, internally and externally. Our Ethics Code of Conduct describes Statoil's commitment and requirements in connection with issues of an ethical nature that relate to business practice and personal conduct. In our business activities, we will comply with applicable laws and regulations and act in an ethical, sustainable and socially responsible manner. Respect for human rights is an integral part of Statoil's values base. The Ethics Code of Conduct is valid for everyone working for the Statoil group, including the members of the board of directors of Statoil and its subsidiaries. The Ethics Code of Conduct is available at www.statoil.com/ethics. Statoil's Anti-corruption Compliance Programme can also be found on the same webpage. In September 2009, Statoil's then Independent Compliance Consultant, retained by Statoil as part of the settlements with the US authorities in connection with the Horton matter, certified that Statoil "has implemented an anti-corruption compliance program that is appropriately designed and implemented to ensure compliance with the Foreign Corrupt Practises Act." Business partners are also expected to have ethical standards that are consistent with Statoil's ethical requirements. Statoil has a dedicated ethics helpline that may be used by employees who want to express concerns or seek advice regarding the legal and ethical conduct of our business. Remuneration of the board of directors Members of the board of directors receive remuneration in accordance with their individual roles. The remuneration of the board is not dependent on results, and none of the shareholder-elected board members has a pension scheme or agreement on pay after termination of their office with the company. Information about all remuneration paid to each member of the board of directors is presented in the parent company financial statements, note 6. Remuneration of executive management Statoil's remuneration policy is rooted in the company's personnel policy. Statoil's remuneration policy Statoil's remuneration policy is strongly linked to the company's value-based performance framework. Certain key principles have been adopted for the design of the company's remuneration concept. These principles pertain in general but they are applied differently to the different remuneration systems and job categories. The remuneration concept shall; reflect our competitive market strategy and local market conditions strengthen the common interests of people in the Statoil group and its shareholders be in accordance with statutory regulations and good corporate governance be fair, transparent and non-discriminatory reward and recognise delivery and behaviour equally differentiate on the basis of responsibilities and performance reward both short-term and long-term contributions and results. Our rewards and recognition are designed to attract and retain people who perform, change and learn. The overall remuneration level and composition of the total reward reflect the national and international framework and business environment Statoil operates within. The decision-making process The decision-making process for changing remuneration policies and concepts and the determination of salaries and other remuneration of the corporate executive committee are in accordance with the provisions of the Norwegian Public Limited Liability Companies Act sections 5-6, 6-14, 6-16 a) and the board's Rules of Procedures as last amended on 31 July 2008. Statoil, Statutory report 2009 21


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    The remuneration concept for the corporate executive committee Statoil's remuneration concept for the corporate executive committee consists of the following main elements: Fixed remuneration Variable pay Pensions and insurance schemes Severance pay arrangements Other benefits. Fixed remuneration Fixed remuneration consists of base salary and a long-term incentive. Base salary The base salary shall be competitive in the markets in which the company operates and shall reflect the individual's responsibility and performance. The evaluation of performance is based on fulfilment of certain pre-defined goals; refer to "Variable pay" below. The base salary is normally reviewed once a year. Long-term incentive (LTI) Statoil will carry on the established long-term incentive system for a limited number of senior managers, including the members of the corporate executive committee. The LTI system is a fixed, monetary compensation calculated in per cent of the participant's base salary; ranging from 20 to 30% depending on the participant's position. The participant is obliged to buy Statoil shares in the market for the fixed LTI amount (after tax deduction) every year and to hold the shares for a lock-in period of three years. The LTI and the annual variable pay system constitute a remuneration concept that focuses on both short-term and long-term goals and results. The LTI contributes to strengthening the common interests between the top management and the shareholders of Statoil. Variable pay The intention is to continue the company's variable pay concept in 2010. Based on performance, the chief executive officer is entitled to annual variable pay with a maximum potential of 50% of the fixed remuneration. The executive vice presidents have an equivalent variable pay scheme with a maximum potential of 40%. In order to obtain an improved distribution of the annual variable pay, and to underpin a drive towards an even stronger performance, it has been decided to adjust the pay out level for performance at target level from 67 per cent to 50 per cent of the maximum potential. Remuneration policies' effect on risk The remuneration concept is an integrated part of our performance management system. An overarching principle is that there should be a close link between performance and remuneration. Individual salary and annual variable pay reviews shall be based on the performance evaluation in our performance management system. However, participation in the LTI scheme and the size of the annual LTI element are not directly based on performance but linked to the executive's position level. The goals forming the basis for the performance assessment are established between the manager and the employee as part of our performance management process. The performance goals have two dimensions: delivery and behaviour, where delivery and behaviour are equally important and given equal weight. Delivery goals are established for each of the five perspectives: HSE, finance, operations, market, people and organisation. In each perspective, both longer-term strategic objectives and shorter-term targets and Key Performance Indicator (KPI) targets are set, as well as actions to be executed. Several of these actions will be risk-mitigating actions derived from strategic or operational risk assessments. Behaviour goals are based on Statoil's core values and leadership principles and address the behaviour required and expected in order to achieve our delivery goals Performance evaluation is a holistic evaluation combining measurement and assessment of performance against both delivery and behaviour goals. Hence, sound judgement and hindsight information are applied before final conclusions are drawn. For instance, measured KPI results are reviewed in relation to their strategic contribution, sustainability and significant changes in assumptions. This balanced scorecard approach, with goals defined in both the delivery and behaviour dimension, and a holistic performance evaluation, should significantly reduce the risk that our remuneration policies are likely to have a material adverse effect. In the performance contracts of the chief executive officer and chief financial officer, one of several targets is related to the company's relative total shareholder return (TSR). The amount of the annual variable pay is decided on the basis of an overall assessment of the achieving of various targets, including but not limited to the company's relative TSR. 22 Statoil, Statutory report 2009


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    Statement regarding remuneration The board's statement regarding all remuneration of the corporate executive committee, as well as information about all remuneration paid to each member of the executive committee, is presented in the parent company financial statements, note 6. Information and communications Statoil has established guidelines for the company's reporting of financial and other information based on openness and taking into account the requirement for equal treatment of all participants in the securities market. The purpose of these guidelines is to ensure the dissemination of timely and correct information about the company to our shareholders and society in general. A financial calendar and shareholder information is published at www.statoil.com/calendar. The investor relations corporate staff function is responsible for coordinating the group's communication with capital markets and for relations between Statoil and existing and potential investors in the company. Investor relations is responsible for distributing and registering information in accordance with the legislation and regulations that apply where Statoil securities are listed. Investor relations reports directly to the chief financial officer. The group's management holds regular presentations for investors and analysts. The company's quarterly presentations are broadcasted live on the internet. The pertaining reports are made available together with other relevant information at www.statoil.com/investor. Take-overs Statoil's articles of association do not set limits on share acquisitions. Statoil's board of directors endorses the principles concerning equal treatment of all shareholders, and is obliged to act professionally and in accordance with the applicable principles for good corporate governance if a situation were to arise in which this principle in the Code of Practice were put to the test. Auditor Pursuant to its instructions, the board's audit committee is responsible for ensuring that the company group is subject to an independent and effective audit. Our independent registered public accounting firm (independent auditor) is independent in relation to Statoil and is appointed by the general meeting of shareholders. The independent auditor's fee must be approved by the general meeting of shareholders. Pursuant to the instruction for the board's audit committee (audit committee) approved by the board of directors, the audit committee is responsible for ensuring that the company is subject to an independent and effective external and internal audit. Every year, the independent auditor presents a plan for the audit committee for the execution of the independent auditor's work. The independent auditor is present at the board meeting that deals with the preparation of the annual accounts. The independent auditor participates in meetings with the audit committee at which the internal control system is discussed. When evaluating the independent auditor, emphasis is placed on the firm's competence, capacity, local and international availability, and the size of the fee. The audit committee evaluates and makes a recommendation regarding the choice of independent auditor, and it is responsible for ensuring that the independent auditor meets the requirements in Norway and in the countries where Statoil is listed. The independent auditor is subject to the provisions of US securities legislation, which stipulate that a responsible partner may not lead the engagement for more than five consecutive years. Statoil, Statutory report 2009 23


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    The audit committee considers all reports from the independent auditor before they are considered by the board of directors. The audit committee holds regular meetings with the independent auditor without the company's management being present. Audit committee pre-approval policies and procedures In the instruction for the audit committee, the board of directors has delegated to the audit committee authority to pre-approve assignments to be performed by the independent auditor. The audit committee has issued guidelines for the management's pre-approval of assignments to be performed by the independent auditor. All services provided by the independent auditor must be pre-approved by the audit committee. Provided that the suggested types of services are permissible under SEC guidelines, pre-approval is usually granted at a regular audit committee meeting. The chair of the audit committee has been authorised to pre-approve services in accordance with policies established by the audit committee, specifying in detail the types of services that qualify, and provided that any services pre-approved in this manner are presented to the full audit committee at its next meeting. Some pre-approvals may therefore be granted by the chair of the audit committee if an urgent reply is deemed necessary. In the annual consolidated financial statements and in the parent company's financial statements, the independent auditor's remuneration is split between the audit fee and audit-related and other services fees. In the presentation for the annual general meeting of shareholders, the chair presents the split between the audit fee and audit-related and other services fees. 24 Statoil, Statutory report 2009


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    Consolidated Financial Statements CONSOLIDATED STATEMENT OF INCOME For the year ended 31 December (in NOK million) Note 2009 2008 2007 REVENUES AND OTHER INCOME Revenues 462,292 651,977 521,665 Net income from associated companies 15 1,778 1,283 609 Other income 1,363 2,760 523 Total revenues and other income 5 465,433 656,020 522,797 OPERATING EXPENSES Purchases [net of inventory variation] (205,870) (329,182) (260,396) Operating expenses (56,860) (59,349) (60,318) Selling, general and administrative expenses (10,321) (10,964) (14,174) Depreciation, amortisation and net impairment losses 13 (54,056) (42,996) (39,372) Exploration expenses (16,686) (14,697) (11,333) Total operating expenses (343,793) (457,188) (385,593) Net operating income 5 121,640 198,832 137,204 FINANCIAL ITEMS Net foreign exchange gains (losses) 1,993 (32,563) 10,043 Interest income and other financial items 3,708 12,207 2,305 Interest and other finance expenses (12,451) 1,991 (2,741) Net financial items 10 (6,750) (18,365) 9,607 Income before tax 114,890 180,467 146,811 Income tax 11 (97,175) (137,197) (102,170) Net income 17,715 43,270 44,641 Attributable to: Equity holders of the company 18,313 43,265 44,096 Non-controlling interest (Minority interest) (598) 5 545 17,715 43,270 44,641 Earnings per share for income attributable to equity holders of the company - basic and diluted 12 5.75 13.58 13.80 Statoil, Statutory report 2009 25


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    CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December (in NOK million) 2009 2008 2007 Net income 17,715 43,270 44,641 Foreign currency translation differences (13,637) 30,880 (9,858) Actuarial gains (losses) on employee retirement benefit plans 3,191 (7,945) 74 Change in fair value of available for sale financial assets (66) (1,362) 926 Income tax on income and expense recognised directly in OCI (742) (802) (175) Other comprehensive income (OCI) (11,254) 20,771 (9,033) Total comprehensive income 6,461 64,041 35,608 Attributable to: Equity holders of the parent company 7,059 64,036 35,063 Non-controlling interest (598) 5 545 6,461 64,041 35,608 26 Statoil, Statutory report 2009


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    CONSOLIDATED BALANCE SHEET At 31 December At 31 December At 1 January 2009 2008 2008 (in NOK million) Note (restated) (restated) ASSETS Non-current assets Property, plant and equipment 13 340,835 329,841 278,352 Intangible assets 14 54,253 66,036 44,850 Investments in associated companies 15 10,056 12,640 8,421 Deferred tax assets 11 1,960 1,302 793 Pension assets 23 2,694 30 1,622 Financial investments 16 13,267 16,465 15,266 Derivative financial instruments 30 17,644 21,282 12,768 Financial receivables 16 5,747 4,914 3,515 Total non-current assets 446,456 452,510 365,587 Current assets Inventories 17 20,196 15,151 17,696 Trade and other receivables 18 58,895 69,931 69,378 Current tax receivable 179 3,840 0 Derivative financial instruments 30 5,369 9,366 8,802 Financial investments 19 7,022 9,747 3,359 Cash and cash equivalents 20 24,723 18,638 18,264 Total current assets 116,384 126,673 117,499 TOTAL ASSETS 562,840 579,183 483,086 Statoil, Statutory report 2009 27


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    CONSOLIDATED BALANCE SHEET At 31 December At 31 December At 1 January 2009 2008 2008 (in NOK million) Note (restated) (restated) EQUITY AND LIABILITIES Equity Share capital 7,972 7,972 7,972 Treasury shares (15) (9) (6) Additional paid-in capital 41,732 41,450 41,370 Additional paid-in capital related to treasury shares (847) (586) (359) Retained earnings 145,909 147,998 140,909 Other reserves 3,568 17,254 (12,611) Statoil shareholders’ equity 198,319 214,079 177,275 Non-controlling interest (Minority interest) 1,799 1,976 1,792 Total equity 200,118 216,055 179,067 Non-current liabilities Financial liabilities 22 95,962 54,606 44,374 Derivative financial instruments 1,657 1,617 27 Deferred tax liabilities 11 76,322 68,144 67,477 Pension liabilities 23 21,142 25,538 19,092 Assets retirement obligations, other provisions and other liabilities 24 55,834 54,359 43,845 Total non-current liabilities 250,917 204,264 174,815 Current liabilities Trade and other payables 25 59,801 61,200 64,624 Current tax payable 40,994 57,074 50,941 Financial liabilities 26 8,150 20,695 6,166 Derivative financial instruments 30 2,860 19,895 7,473 Total current liabilities 111,805 158,864 129,204 Total liabilities 362,722 363,128 304,019 TOTAL EQUITY AND LIABILITIES 562,840 579,183 483,086 28 Statoil, Statutory report 2009


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    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Other reserves Additional paid-in capital Available Statoil Additional related to for sale Currency share- Non- Number of Share Treasury paid-in treasury Retained financial translation holders’ controlling (in NOK million, except share data) shares issued capital shares capital shares earnings assets adjustments equity interest Total At 1 January 2007 3,208,805,951 8,022 (54) 44,684 (3,605) 122,153 450 (3,817) 167,833 1,574 169,407 Net income for the period 44,096 44,096 545 44,641 Income and expense recognised directly in OCI 211 614 (9,858) (9,033) (9,033) Total recognised income and expense for the period* 35,608 Dividend paid (25,694) (25,694) (25,694) Cash distributions (to) from non-controlling interest (327) (327) Merger related adjustments 143 143 143 Effectuation of annulment (20,158,848) (50) 50 (3,426) 3,426 0 0 Equity settled share based payments (net of allocated shares) 112 112 112 Treasury shares purchased (net of allocated shares) (2) (180) (182) (182) At 31 December 2007 3,188,647,103 7,972 (6) 41,370 (359) 140,909 1,064 (13,675) 177,275 1,792 179,067 Net income for the period 43,265 43,265 5 43,270 Income and expense recognised directly in OCI (9,094) (1,015) 30,880 20,771 20,771 Total recognised income and expense for the period* 64,041 Dividend paid (27,082) (27,082) (27,082) Cash distributions (to) from non-controlling interest 179 179 Equity settled share based payments (net of allocated shares) 80 80 80 Treasury shares purchased (net of allocated shares) (3) (227) (230) (230) At 31 December 2008 3,188,647,103 7,972 (9) 41,450 (586) 147,998 49 17,205 214,079 1,976 216,055 Statoil, Statutory report 2009 29


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    CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Other reserves Additional paid-in capital Available Statoil Additional related to for sale Currency share- Non- Number of Share Treasury paid-in treasury Retained financial translation holders’ controlling (in NOK million, except share data) shares issued capital shares capital shares earnings assets adjustments equity interest Total At 31 December 2008 3,188,647,103 7,972 (9) 41,450 (586) 147,998 49 17,205 214,079 1,976 216,055 Net income for the period 18,313 18,313 (598) 17,715 Income and expense recognised directly in OCI 2,432 (49) (13,637) (11,254) (11,254) Total recognised income and expense for the period* 6,461 Dividend paid (23,085) (23,085) (23,085) Cash distributions (to) from non-controlling interest 421 421 Merger related adjustments 251 251 251 Equity settled share based payments (net of allocated shares) 282 282 282 Treasury shares purchased (net of allocated shares) (6) (261) (267) (267) At 31 December 2009 3,188,647,103 7,972 (15) 41,732 (847) 145,909 0 3,568 198,319 1,799 200,118 * For detailed information, see Consolidated statement of comprehensive income 30 Statoil, Statutory report 2009


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    CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2009 2008 2007 (in NOK million) (restated) (restated) OPERATING ACTIVITIES Income before tax 114,890 180,467 146,811 Adjustments to reconcile net income to net cash flows provided by operating activities: Depreciation, amortisation and impairment losses 54,056 42,996 39,372 Exploration expenditures written off 6,998 3,872 1,660 (Gains) losses on foreign currency transactions and balances 6,512 15,243 (559) (Gains) losses on sales of assets and other items (526) (2,704) (188) Termination benefits 0 0 8,633 Changes in working capital (other than cash and cash equivalents): • (Increase) decrease in inventories (5,045) 2,470 (2,434) • (Increase) decrease in trade and other receivables 11,036 (1,129) (6,493) • (Increase) decrease in net current financial derivative instruments (13,038) 11,858 4,277 • (Increase) decrease in current financial investments 2,725 (6,388) (2,327) • Increase (decrease) in trade and other payables (1,365) (5,466) 10,447 Taxes paid (100,473) (139,604) (102,422) (Increase) decrease in non-current items related to operating activities (2,769) 918 (2,851) Cash flows provided by operating activities 73,001 102,533 93,926 INVESTING ACTIVITIES Additions through business combinations 0 (13,120) 0 Additions to property, plant and equipment (67,152) (58,529) (63,785) Exploration expenditures capitalised (7,203) (6,821) (4,569) Changes/Additions to other intangibles (795) (10,828) (7,186) Changes in long-term loans granted and other long-term items (1,636) (1,910) (652) Proceeds from sale of assets 1,430 5,371 1,080 Cash flows used in investing activities (75,356) (85,837) (75,112) Statoil, Statutory report 2009 31


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    CONSOLIDATED STATEMENT OF CASH FLOWS For the year ended 31 December 2009 2008 2007 (in NOK million) (restated) (restated) FINANCING ACTIVITIES New long-term borrowings 46,318 2,596 1,723 Repayment of long-term borrowings (4,905) (2,864) (2,876) Distribution (to)/from non-controlling interests 421 179 (327) Dividend paid * (23,085) (27,082) (25,695) Treasury shares purchased (343) (308) (217) Norsk Hydro ASA merger balance 0 0 18,687 Net short-term borrowings, bank overdrafts and other ** (7,115) 10,450 797 Cash flows provided by (used in) financing activities 11,291 (17,029) (7,908) Net increase (decrease) in cash and cash equivalents 8,936 (333) 10,906 Effect of exchange rate changes on cash and cash equivalents (2,851) 707 (160) Cash and cash equivalents at the beginning of the period 18,638 18,264 7,518 Cash and cash equivalents at the end of the period 24,723 18,638 18,264 Interest paid 2,912 2,771 3,709 Interest received 3,962 4,544 2,256 * Dividend paid in 2007 includes NOK 6.1 billion charged to Hydro Petroleum from Norsk Hydro ASA under the terms of the merger plan. ** Regarding redemption of shares held by the state, Statoil has paid the state NOK 2.4 billion in 2007. 32 Statoil, Statutory report 2009


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    1 Organisation Statoil ASA, originally Den Norske Stats Oljeselskap AS, was founded in 1972 and is incorporated and domiciled in Norway. Effective 1 October 2007, Statoil ASA merged with the oil and gas activities of Norsk Hydro ASA (Hydro Petroleum), and the company's name changed to StatoilHydro ASA. As of 1 November 2009 the name was changed back to Statoil ASA. The address of its registered office is Forusbeen 50, N-4035 Stavanger, Norway. Statoil's business consists principally of the exploration, production, transportation, refining and marketing of petroleum and petroleum-derived products. Statoil ASA is listed on the Oslo Stock Exchange (Norway) and the New York Stock Exchange (USA). Statoil's oil and gas activities and net assets on the Norwegian Continental Shelf (NCS) were until 31 December 2008 owned by Statoil ASA and by Statoil Petroleum AS. With effect from 1 January 2009, Statoil ASA transferred the ownership of its NCS net assets to Statoil Petroleum AS, a 100% owned operating subsidiary. Following the transfer, all NCS net assets are owned by Statoil Petroleum AS. As a result of this group internal reorganisation, the nature of the parent company Statoil ASA's operations and transactions were changed so that its functional currency also changed from NOK to USD effective as of the same date and with prospective effect. The functional currency of Statoil Petroleum AS has not changed and remains NOK. The presentation currency for the Statoil group remains NOK. 2 Significant accounting policies Statement of compliance The Consolidated financial statements of Statoil ASA and its subsidiaries ("Statoil") have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU). The accounting policies applied by the group also comply with IFRSs as issued by the International Accounting Standards Board (IASB). Basis of preparation The financial statements are prepared on the historical cost basis with some exceptions, as detailed in the accounting policies set out below. These policies have been applied consistently to all periods presented in these consolidated financial statements. Operating expenses in the statements of income are presented as a combination of function and nature in conformity with industry practice. Purchases [net of inventory variation] and Depreciation, amortisation and impairment losses are presented in separate lines by their nature, while Operating expenses and Selling, general and administrative expenses as well as Exploration expenses are presented on a functional basis. Significant expenses such as salaries, pensions, etc. are presented by their nature in the notes to the financial statements. Standards and interpretations in issue, not yet adopted At the date of these financial statements the following standards and interpretations were in issue but not yet effective: The revised version of IFRS 3 Business Combinations, issued in January 2008, covers definition, identification, accounting for and disclosure of business combinations, inclusive of business combinations achieved in stages. It will be applicable to business combinations occurring in annual periods beginning on or after 1 July 2009. There is not expected to be any material effect on Statoil's reported net income or equity upon adoption of the revised standard on 1 January 2010. The amended version of IAS 27 Consolidated and Separate Financial Statements, issued in January 2008, primarily covers amendments related to accounting for non-controlling interests and the loss of control of a subsidiary, and is effective for annual periods beginning on or after 1 July 2009. There is not expected to be any material effect on Statoil's reported net income or equity on adoption of the amendment on 1 January 2010. The Improvements to IFRS 2009 issued in April 2009 include amendments effective for accounting periods beginning on or after 1 July 2009 or 1 January 2010 respectively, depending on the standard involved, and include amendments to a number of accounting standards. None of the amendments are expected to significantly impact Statoil's net profit, equity or classifications in the balance sheet or statement of income. IFRS 9 Financial Instruments, issued in November 2009, covers the classification and measurement of financial assets and will be effective from 1 January 2013. IFRS 9 also entails amendments to various other IFRSs effective from the same date. Statoil has not yet determined its adoption date for this standard, and is still evaluating the potential impact of this standard. The revised IAS 24 Related Party Disclosures issued in November 2009 defines the term related party and establishes disclosure requirements to be applied, and will be effective from 1 January 2011. Statoil will comply with the revised standard and provide relevant disclosure upon adoption as applicable. The amendment to IFRIC 14 Prepayments of a Minimum Funding Requirement issued in November 2009 and effective as of 1 January 2011 is not expected to have any material effect on Statoil's reported net income or equity on adoption. Statoil, Statutory report 2009 33


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    The amendment to IAS 32 Classification of Rights Issues issued in November 2009 and effective from accounting periods beginning 1 February 2010 or later, the amendment to IFRS 2 Group Cash-settled Share-based Payment Transactions issued in July 2009 and effective from 1 January 2010 and IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments issued in November 2009 and effective for annual periods beginning on or after 1 July 2010 are currently not relevant for Statoil. Significant changes in accounting policies With effect from 1 January 2009 Statoil adopted amendments to IAS 1 Presentation of Financial Statements issued in September 2007. The Statement of recognised income and expenses has been replaced with the Consolidated statement of comprehensive income and the Consolidated statement of changes in equity, which Statoil previously presented in the Equity note. The Consolidated statement of changes in equity shows changes in non-controlling interests separately. Based on amendments to IAS 1 Presentation of Financial Statements included in the improvements to IFRSs effective 1 January 2009, Statoil in 2009 reclassified certain instruments in the IAS 39 Financial Instruments: Recognition and Measurement related held for trading category from current assets or liabilities to non-current assets or liabilities. Statoil's principle as applied in the balance sheet for 31 December 2009 is described in relevant paragraphs below, while information on reclassified amounts is included in note 30. The policy change has been applied retrospectively by adjusting the balance sheets for 31 December 2008 and 1 January 2008 respectively, and in consequence a balance sheet as at 1 January 2008 has been included in these financial statements. As of 31 December 2009 Statoil adopted revisions to the oil and gas estimation and disclosure requirements. For additional information see "Critical accounting judgements and key sources of estimation uncertainty; Proved oil and gas reserves". Basis of consolidation Subsidiaries The consolidated financial statements include the accounts of Statoil ASA and its subsidiaries. Subsidiaries are entities controlled by the company. Control exists when Statoil has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Subsidiaries are consolidated from the date of their acquisition, being the date on which Statoil obtains control, and continue to be consolidated until the date that such control ceases. All intercompany balances and transactions, including unrealised profits and losses arising from group internal transactions, have been eliminated in full. Non-controlling interests (minority interests) represent the portion of profit or loss and net assets in subsidiaries that are not directly or indirectly held by the parent company and are presented separately within equity in the balance sheet. Jointly controlled assets, associates and joint venture entities Interests in jointly controlled assets are recognised by including Statoil's share of assets, liabilities, income and expenses on a line-by-line basis. Interests in jointly controlled entities are accounted for using the equity method. Investments in companies in which Statoil does not have control or joint control, but has the ability to exercise significant influence over operating and financial policies, are classified as associates and are accounted for using the equity method. Statoil as operator of jointly controlled assets Indirect operating expenses such as personnel expenses are accumulated in cost pools. These costs are allocated to business areas and Statoil operated jointly controlled assets (licences) on an hours incurred basis. Costs allocated to the other partners' share of operated jointly controlled assets reduce the costs in the group statements of income. Only Statoil's share of the statement of income and balance sheet items related to Statoil operated jointly controlled assets are reflected in the statement of income and balance sheet. Foreign currency Functional currency A group entity's functional currency is the currency of the primary economic environment in which the entity operates. Foreign currency translation In preparing the financial statements of the individual entities, transactions in foreign currencies (those other than functional currency) are translated at the foreign exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated to the functional currency at the foreign exchange rate at the balance sheet date. Foreign exchange differences arising on translation are recognised in the statement of income. Non-monetary assets that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transactions. Presentation currency For the purpose of the consolidated financial statements, the statements of income and balance sheets of each entity are translated into Norwegian kroner (NOK), which is the presentation currency of the consolidated financial statements. The assets and liabilities of entities whose functional currencies are other than NOK are translated into NOK at the foreign exchange rate at the balance sheet date. The revenues and expenses of such entities are translated using average monthly foreign exchange rates, which approximates the foreign exchange rates on the dates of the transactions. Foreign exchange differences arising on translation are recognised separately in Other comprehensive income. 34 Statoil, Statutory report 2009


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    Business combinations and goodwill In order to meet the criteria for a business combination the acquired asset or group of assets must constitute a business (an integrated set of activities and assets conducted and managed for the purpose of providing a return to investors). This requires judgment to be applied on a case by case basis as to whether the acquisition meets the definition of a business combination. Acquisitions of exploration and evaluation licences are assessed under the relevant criteria to establish whether the transaction represents a business combination or an asset purchase. Acquisitions of licences for which a development decision has not yet been made have largely been concluded to represent asset purchases. Business combinations, except for transactions between entities under common control, have been accounted for using the purchase method of accounting. The acquired identifiable tangible and intangible assets, liabilities and contingent liabilities are measured at their fair values at the date of the acquisition. Any excess of the cost of purchase over the net fair value of the identifiable assets acquired is recognised as goodwill. Goodwill on acquisition is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill may also arise upon investments in jointly controlled entities and associates, being the surplus of the cost of investment over the group's share of the net fair value of the identifiable assets. Such goodwill is recorded within investments in jointly controlled entities and associates, and any impairment of the goodwill is included in income from jointly controlled entities and associates. Revenue recognition Revenues associated with sale and transportation of crude oil, natural gas, petroleum and chemical products and other merchandise are recognised when title and risk pass to the customer, which is normally at the point of delivery of the goods based on the contractual terms of the agreements. Revenues from the production of oil and gas properties in which Statoil has an interest with other companies are recognised on the basis of volumes lifted and sold to customers during the period (the sales method). Where Statoil has lifted and sold more than the ownership interest, an accrual is recorded for the cost of the overlift. Where Statoil has lifted and sold less than the ownership interest, costs are deferred for the underlift. Revenue is presented net of customs, excise taxes and royalties paid in-kind on petroleum products. Sales and purchases of physical commodities, which are not settled net, are presented on a gross basis as revenue and cost of goods sold in the statements of income. Activities related to trading and commodity-based derivative instruments are reported on a net basis, with the margin included in revenue. Transactions with the Norwegian State Statoil markets and sells the Norwegian State's share of oil and gas production from the Norwegian Continental Shelf (NCS). The Norwegian State's participation in petroleum activities is organised through the State's direct financial interest (SDFI). All purchases and sales of SDFI oil production are recorded as purchases [net of inventory variation] and revenue, respectively. Statoil sells, in its own name, but for the Norwegian State's account and risk, the State's production of natural gas. This sale, and related expenditures refunded by the State, are recorded net in Statoil's financial statements. Employee benefits Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by employees of the group. The accounting policy for share-based payments and pension obligations is described below. Share-based payments Statoil operates an employee bonus share program. The cost of equity-settled transactions (bonus share awards) with employees is measured by reference to the estimated fair value at the date at which they are granted and is recognised as an expense over the average vesting period of 2.5 years. The awarded shares are accounted for as personnel expense, and recorded as an equity transaction (included in additional paid-in capital). Research and development Statoil undertakes research and development both on a funded basis for licence holders, and unfunded projects at its own risk. Statoil's share of the licence holders' funding and the total costs of the unfunded projects are development costs that are considered for capitalisation. Development costs which are expected to generate probable future economic benefits are capitalised as intangible assets if, and only if, all of the following have been demonstrated: The technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and the ability to reliably measure the expenditure attributable to the intangible asset during its development. All other research and development expenditure is expensed as incurred. Subsequent to initial recognition, capitalised development costs are reported at cost less accumulated amortisation and accumulated impairment losses. Income tax Income tax in the Consolidated statement of income for the year comprises current and deferred tax expense. Income tax is recognised in the Consolidated statement of income except to the extent that it relates to items recognised directly in Other comprehensive income. Statoil, Statutory report 2009 35


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    Current tax is the expected tax payable on the taxable income for the year and any adjustment to tax payable in respect of previous years. Uncertain tax positions and potential tax exposures are analysed individually and the best estimate of the probable amount for liabilities to be paid (unpaid potential tax exposure amounts, including penalties) and virtually certain amount for assets to be received (disputed tax positions for which payment has already been made) in each case is recognised within current tax or deferred tax as appropriate. Interest income and interest expenses relating to tax issues are estimated and recorded in the period in which they are earned or incurred, and are presented as financial items in the statement of income. Deferred tax assets and liabilities are recognised for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases, subject to the initial recognition exemption. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. In order for a deferred tax asset to be recognized based on future taxable profits, convincing evidence is required taking into account the existence of contracts, production of oil or gas in the near future based on volumes of proved reserves, observable prices in active markets, expected volatility of trading profits and similar facts and circumstances. A special petroleum tax is levied on profits derived from petroleum production and pipeline transportation on the NCS. The special petroleum tax is currently levied at a rate of 50%. The special tax is applied to relevant income in addition to the standard 28% income tax, resulting in a 78% marginal tax rate on income subject to Norwegian petroleum tax. The basis for computing the special petroleum tax is the same as for income subject to ordinary corporate income tax, except that onshore losses are not deductible against the special petroleum tax, and a tax-free allowance, or uplift, is granted at a rate of 7.5% per year. The uplift is computed on the basis of the original capitalised cost of offshore production installations. The uplift may be deducted from taxable income for a period of four years, starting in the year in which the capital expenditures are incurred. Uplift benefit is recorded when the deduction is included in the current year tax return and impacts taxes payable. Unused uplift may be carried forward indefinitely. Oil and gas exploration and development expenditure Statoil uses the "successful efforts" method of accounting for oil and gas exploration costs. Expenditures to acquire mineral interests in oil and gas properties and to drill and equip exploratory wells are capitalised as exploration and evaluation expenditure within intangible assets until the well is complete and the results have been evaluated. If, following evaluation, the exploratory well has not found proved reserves, the previously capitalised costs are evaluated for derecognition or tested for impairment. Geological and geophysical costs and other exploration expenditures are expensed as incurred. For exploration and evaluation asset acquisitions (farm-in arrangements) in which Statoil has made arrangements to fund a portion of the selling partners' (farmor's) exploration and/or future development expenditures, these expenditures are reflected in the financial statements as and when the exploration and development work progresses. Exploration and evaluation asset dispositions (farm-out arrangements) are accounted for on a historical cost basis with no gain or loss recognition. Exchanges (swaps) of exploration and evaluation assets are accounted for at the carrying amounts of the assets given up with no gain or loss recognition. Unproved oil and gas properties are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount, and at least once a year. Exploratory wells that have found reserves, but where classification of those reserves as proved depends on whether a major capital expenditure can be justified, will remain capitalised during the evaluation phase for the exploratory finds. Thereafter it will be considered a trigger for impairment evaluation of the well if no development decision is planned for the near future, and there moreover are no concrete plans for future drilling in the licence. Impairment of unsuccessful wells is reversed, as applicable, to the extent that conditions for impairment are no longer present. Impairment and reversals of impairment of exploration and evaluation assets are charged to Exploration expenses in the statement of income. Capitalised exploration and evaluation expenditure, including expenditures to acquire mineral interests in oil and gas properties, related to wells that find proved reserves are transferred from Exploration expenditure (Intangible assets) to Assets under development (Property, plant and equipment) at the time of sanctioning of the development project. Property, plant and equipment Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of a decommissioning obligation, if any, and, for qualifying assets, borrowing costs. Property, plant and equipment also include assets acquired under the terms of profit sharing agreements (PSAs) in certain countries, and which qualify for recognition as assets of the group. State-owned entities in the respective countries however normally hold the legal title to such PSA-based Property, plant and equipment. Exchanges of assets are measured at the fair value of the asset given up unless the exchange transaction lacks commercial substance or the fair value of neither the asset received nor the asset given up is reliably measurable. Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets, inspection costs and overhaul costs. Where an asset or part of an asset is replaced and it is probable that future economic benefits associated with the item will flow to the group, the expenditure is capitalised. Inspection and overhaul costs associated with major maintenance programs are capitalised and amortised over the period to the next inspection. All other maintenance costs are expensed as incurred. 36 Statoil, Statutory report 2009


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    Capitalised exploration and evaluation expenditure, development expenditure on the construction, installation or completion of infrastructure facilities such as platforms, pipelines and the drilling of development wells, and field-dedicated transport systems for oil and gas are capitalised as producing oil and gas properties within Property, plant and equipment and are depreciated using the unit of production method based on proved developed reserves expected to be recovered from the area during the concession or contract period. Capitalised acquisition costs of proved properties are depreciated using the unit of production method based on total proved reserves. Depreciation of other assets and transport systems used by several fields is calculated on the basis of their estimated useful lives, normally using the straight-line method. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. For exploration and production (E&P) assets Statoil has established separate depreciation categories for platforms, pipelines, and wells as a minimum. The estimated useful lives of property, plant and equipment are reviewed on an annual basis and changes in useful lives are accounted for prospectively. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in other income or operating expenses, respectively, in the period the item is derecognised. Leases Leases in terms of which Statoil assumes substantially all the risks and rewards of the ownership are reflected as finance leases within Property, plant and equipment and Financial liabilities, respectively. Assets under development for finance lease purposes, and for which Statoil carries substantially all the risk in the construction period, are recorded as finance leases under development within Property, plant and equipment based on the stage of completion at period end, unless another amount better reflects the realities of the arrangement. All other leases are classified as operating leases and the costs are charged to income on a straight line basis over the lease term, unless another basis is more representative of the benefits of the lease to the group. Finance lease assets are reflected at an amount equal to the lower of fair value and the present value of the minimum lease payments at inception of the lease, and subsequently reduced by accumulated depreciation and impairment losses, if any. When an asset leased by a jointly controlled asset in which Statoil participates qualifies as a finance lease, Statoil reflects its proportionate share of the leased asset and related obligations in the balance sheet as Property, plant and equipment and Financial liabilities, respectively. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term using the depreciation methods described under Property, plant and equipment above, depending on the nature of the leased asset. Statoil distinguishes between leases, which imply the right to use a specific asset for a period of time, and capacity contracts, which confer on the group the right to and the obligation to pay for certain capacity volume availability related to transport, terminalling, storage etc. Such capacity contracts that do not involve specified single assets or that do not involve substantially all the capacity of an undivided interest in a specific asset are not considered by the group to qualify as leases for accounting purposes. Capacity payments are reflected as Operating expenses in the Consolidated statements of income in the period for which the capacity contractually is available to Statoil. Intangible assets Intangible assets are stated at cost, less accumulated amortisation and accumulated impairment losses. Intangible assets include expenditure on the exploration for and evaluation of oil and natural gas resources, goodwill and other intangible assets. Intangible assets acquired separately from a business are carried initially at cost. An intangible asset acquired as part of a business combination is recognised separately from goodwill at its fair value if the asset is separable or arises from contractual or other legal rights and its fair value can be measured reliably. Intangible assets relating to expenditure on the exploration for and evaluation of oil and natural gas resources are not amortised. Such an asset is subject to impairment testing when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount (or at least on an annual basis), and is reclassified to property, plant and equipment when the decision to develop a particular area is made. Other intangible assets are amortised on a straight-line basis over their expected useful lives. The expected useful lives of the assets are reviewed on an annual basis and changes in useful lives are accounted for prospectively. Financial assets Financial assets are initially recognised at fair value when Statoil becomes a party to the contractual provisions of the asset. For additional information on fair value methods, refer to the "Measurement of fair values" section below. The subsequent measurement of the financial assets depends on which category they have been classified into at inception. At initial recognition the group classifies its financial assets into the following three main categories; financial instruments at fair value through profit or loss; loans and receivables; and available-for-sale (AFS) financial assets. The first main category, financial instruments at fair value through profit or loss, further consists of two sub-categories; financial assets held for trading and financial assets that on initial recognition are designated as fair value through profit and loss. The latter may also be referred to as the "fair value option". Financial assets classified in the loans and receivables category are carried at amortised cost using the effective interest method. Gains and losses are recognised in the statement of income when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Trade and other receivables are carried at the original invoice amount, less a provision for doubtful receivables, which is made when there is objective evidence that Statoil will be unable to recover the balances in full. Financial assets classified as AFS mainly include non-listed equity instruments. AFS financial assets are carried on the balance sheet at fair value, with the change in fair value recognised directly in Other comprehensive income until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative change in fair value previously reported in Other comprehensive income is recognised in the statement of income. Statoil, Statutory report 2009 37


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    A significant part of Statoil's commercial papers, bonds and listed equity securities are managed together as an investment portfolio of the group's captive insurance company and are held in order to comply with specific regulations for capital retention. The investment portfolio is managed and evaluated on a fair value basis in accordance with an investment strategy and is accounted for using the fair value option with changes in fair value recognised through profit or loss. Current financial investments are initially recognized in the category financial instruments at fair value through profit or loss, either as held for trading or through the group's application of the fair value option. Following from that classification the current financial investments are carried in the balance sheet at fair value with changes in their fair values recognised in the statement of income. Financial assets are presented as current if they contractually will expire or otherwise are expected to be recovered within 12 months after the balance sheet date, or if they represent derivative financial instruments held for the purpose of being traded. Other financial assets expected to be recovered more than 12 months after the balance sheet date and for which there is no plan of realization are classified as non-current. Financial assets are derecognised when the contractual rights to the cash flows expire or substantially all risks and rewards related to the ownership of the financial asset are transferred to a third party. Financial assets and financial liabilities are shown separately in the balance sheet unless Statoil has both a legal right and a demonstrable intention to net settle certain balances payable to and receivable from the same counterparty, in which case they are shown net in the balance sheet. Such offsetting of balances takes place and is reflected within Trade and other receivables and Trade and other payables, and Derivative financial instrument assets and liabilities, respectively. Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the first-in first-out method and comprises direct purchase costs, cost of production, transportation and manufacturing expenses. Impairment Impairment of intangible assets and property, plant and equipment Statoil assesses assets or groups of assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Individual assets are grouped based on levels with separately identifiable and largely independent cash inflows. Normally, separate cash- generating units are individual oil and gas fields or plants. For capitalised exploration expenditure, the cash-generating units are individual wells. In assessing whether a write-down of the carrying amount of a potentially impaired asset is required, the asset's carrying amount is compared to the recoverable amount. Frequently the recoverable amount of an asset proves to be Statoil's estimated value in use, which is determined using a discounted cash flow model. The estimated future cash flows are adjusted for risks specific to the asset and discounted using a real post-tax discount rate based on Statoil's post-tax weighted average cost of capital (WACC). Statoil considers post-tax calculations sufficiently objective and consistently applicable across the various tax regimes, while still for all significant purposes leading to the same conclusion that application of pre tax rates in accordance with IAS 36 Impairment of assets would have yielded. If assets are determined to be impaired, the carrying amounts of those assets are written down to the recoverable amount which is the higher of fair value less costs to sell and value in use. Impairments are reversed as applicable to the extent that conditions for impairment are no longer present. Impairment of goodwill Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. At the acquisition date, any goodwill acquired is allocated to each of the cash-generating units expected to benefit from the business combination's synergies. Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised, firstly on goodwill and then pro-rata on the other assets of that unit. Impairments of goodwill once recorded are not reversed in future periods. Impairment of financial assets Statoil assesses at each balance sheet date whether a financial asset or group of financial assets is impaired, except for the financial assets classified in the fair value through profit and loss category. If there is objective evidence that an impairment loss has been incurred for assets carried at amortised cost, the carrying amount of the asset is reduced, with the amount of the loss recognised in the statement of income. Any subsequent reversal of an impairment loss correspondingly also is recognised in the statement of income. If an AFS financial asset is impaired, i.e. a decline in the fair value of an equity instrument has been assessed to be significant or prolonged, the difference between cost and fair value is transferred from Other comprehensive income to the Statement of income. When impairments of equity instruments classified as AFS are reversed this is recognised directly in Other comprehensive income. 38 Statoil, Statutory report 2009


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    Financial liabilities Financial liabilities are initially recognised at fair value when Statoil becomes a party to the contractual provisions of the liability. For additional information on fair value methods, refer to the "Measurement of fair values" section below. The subsequent measurement of the financial liabilities depends on which category they have been classified into. The categories applicable for Statoil is either financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost using the effective interest method. The latter applies to Statoil's non-current bank loans and bonds. Trade and other payables are carried at payment or settlement amounts. Financial liabilities are presented as current if the liability is due to be settled within 12 months after the balance sheet date, or if they are derivative financial instruments held for the purpose of being traded. Other financial liabilities which contractually will be settled more than 12 months after the balance sheet date are classified as non-current. Financial liabilities are derecognised when the contractual obligation expires, is discharged or cancelled. Gains and losses arising on the repurchase, settlement or cancellation of liabilities are recognised either in Interest income and other financial items or in Interest and other finance expenses. Derivative financial instruments Statoil uses derivative financial instruments to manage certain exposures to fluctuations in foreign currency exchange rates, interest rates and commodity prices. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured at fair value through profit and loss. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Derivative assets or liabilities expected to be recovered, or with the legal right to be settled more than 12 months after the balance sheet date are classified as non-current, with the exception of derivative financial instruments held for the purpose of being traded. Contracts to buy or sell a non-financial item that can be settled net in cash or another financial instrument, or by exchanging financial instruments, as if the contracts were financial instruments, are accounted for as financial instruments. However contracts that are entered into and continued to be held for the purpose of the receipt or delivery of a non-financial item in accordance with Statoil's expected purchase, sale or usage requirements, also referred to as "own use", are not accounted for as financial instruments. This is applicable to a significant number of contracts for the purchase or sale of crude oil and natural gas, which are recognised upon delivery. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value. Contracts are assessed for embedded derivatives when Statoil becomes a party to them, including at the date of a business combination. Such embedded derivatives are measured at fair value at each period end, and the changes in fair value are recognised in profit or loss for the period. Pension liabilities Statoil has pension plans for employees that either provide a defined pension benefit upon retirement, or a pension dependent on defined contributions. For defined benefit schemes, the benefit to be received by employees generally depends on many factors including length of service, retirement date and future salary levels. Statoil's net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their services in the current and prior periods. That benefit is discounted to determine its present value, and the fair value of any plan assets is deducted. The discount rate is the yield at the balance sheet date reflecting the maturity dates approximating the terms of the group's obligations. The calculation is performed by an external actuary. Current service cost is an element of net periodic pension cost and recognised in the statement of income. The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation, taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost is recognised in the statement of income as a part of the net periodic pension cost. Net periodic pension cost is accumulated in cost pools and allocated to business areas and Statoil operated jointly controlled assets (licences) on an hours incurred basis and recognised in the statement of income based on the function of the cost. Past service cost is recognised immediately when the benefits become vested or on a straight-line basis until the benefits become vested. When a settlement (eliminating all obligations for benefits already accrued) or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are re-measured using current actuarial assumptions and the gain or loss is recognised in the statement of income during the period in which the settlement or curtailment occurs. Actuarial gains and losses are recognised in full in the statement of comprehensive income in the period in which they occur. Following the parent company Statoil ASA's change in functional currency as of 1 January 2009, the significant part of the group's pension obligations will be payable in a foreign currency (ie. NOK). Actuarial gains and losses related to the parent company's pension obligation as a consequence include the impact of exchange rate fluctuations. Contributions to defined contribution schemes are recognised in the statement of income in the period in which the contribution amounts are earned by the employees. Statoil, Statutory report 2009 39


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    Provisions and contingent assets and liabilities Provisions are recognised when Statoil has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as Other finance expenses. Contingent liabilities arising from past events and for which it is not probable that an outflow of resources will be required to settle the obligation, if any, are not recognised but disclosed with indication of uncertainties relating to amounts and timing involved, unless the possibility of an outflow in settlement is remote. Possible assets arising from past events that will only be confirmed by future uncertain events and are not wholly within Statoil's control (contingent assets), are not recognised, but are disclosed when an inflow of economic benefits is probable. Onerous contracts Statoil recognises as provisions the obligation under contracts defined as onerous. Contracts are deemed to be onerous if the unavoidable cost of meeting the obligations under the contract exceeds the economic benefits expected to be received in relation to the contract. A contract which forms an integral part of the operations of a cash generating unit whose assets are dedicated to that contract, and for which the economic benefits cannot be reliably separated from those of the cash generating unit, is included in impairment considerations for the applicable cash generating unit. Asset retirement obligations (ARO) Liabilities for decommissioning costs are recognised when Statoil has an obligation to dismantle and remove a facility or an item of property, plant and equipment and to restore the site on which it is located, and when a reliable estimate of that liability can be made. Cost is estimated upon current regulation and technology, considering relevant risks and uncertainties, to arrive at best estimates. Normally an obligation arises for a new facility, such as an oil and natural gas production or transportation facility, upon construction or installation. An obligation for decommissioning may also crystallise during the period of operation of a facility through a change in legislation or through a decision to terminate operations. At the time of the obligating event, a decommissioning liability is recognised and classified as Asset retirement obligations, other provisions and other liabilities. The amount recognised is the present value of the estimated future expenditure determined in accordance with local conditions and requirements. Refining and processing plants that are not limited by licence periods are deemed to have indefinite lives and in consequence no asset retirement obligation has been recorded. For retail outlets, decommissioning provisions are estimated on a portfolio basis. When a liability for decommissioning cost is recognised, a corresponding amount is recorded to increase the related property, plant and equipment. This is subsequently depreciated as part of the costs of the facility or item of property, plant and equipment. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding property, plant and equipment. Measurement of fair values Observable prices quoted in an active market represent the best evidence of fair value, and are used by Statoil in determining the fair values of assets and liabilities to the extent possible. A financial instrument is regarded as quoted in an active market if the prices quoted are readily and regularly available, normally through an exchange, and the prices quoted by the exchange represent actual and regularly occurring market transactions that in all significant aspects are identical to the instrument being valued. Statoil considers both the actual volume and the timing of recent market transactions in determining whether prices are quoted in a sufficiently active market. Financial instruments quoted in active markets will typically include commodity based futures, exchange traded option contracts, commercial papers, bonds and equity instruments with quoted market prices obtained from the relevant exchanges or clearing houses. The fair values of quoted financial assets, financial liabilities and derivative instruments are determined by reference to bid and ask prices, at the close of business on the balance sheet date. Where there is no active market, fair value is determined using valuation techniques. These include using recent arm's-length market transactions; reference to other instruments that are substantially the same; discounted cash flow analysis; and pricing models. In the valuation techniques the group also takes into consideration counterparty and own credit risk. This is either reflected in the discount rate used, or through direct adjustments to the calculated cash flows. Consequently, where Statoil records elements of long-term physical delivery commodity contracts at fair value, such fair value estimates to the extent possible are based on quoted forward prices in the market and underlying indexes in the contracts, as well as assumptions of forward prices and margins where market prices are not available. Similarly, the fair values of interest and currency swaps are estimated based on relevant quotations from active markets, quotes of comparable instruments, and other appropriate valuation techniques. Critical accounting judgements and key sources of estimation uncertainty Critical judgements in applying accounting policies The following are the critical judgements, apart from those involving estimations (see below), that Statoil has made in the process of applying the accounting policies and that have the most significant effect on the amounts recognised in the financial statements: Revenue recognition - gross versus net presentation of traded SDFI volumes of oil and gas production 40 Statoil, Statutory report 2009


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    As described under Transactions with the Norwegian State above, Statoil markets and sells the Norwegian State's share of oil and gas production from the NCS. Statoil includes the costs of purchase and proceeds from the sale of the SDFI oil production in Purchases [net of inventory variation] and Revenues, respectively. In making the judgement Statoil considered the detailed criteria for the recognition of revenue from the sale of goods, and in particular assessed whether the risk and reward of the ownership of the goods had been transferred from the SDFI to Statoil. As also described above, Statoil sells, in its own name, but for the Norwegian State's account and risk, the State's production of natural gas. This sale, and related expenditures refunded by the State, are recorded net in Statoil's financial statements. In making the judgment Statoil considered the same criteria as for the oil production and concluded that the risk and reward of the ownership of the gas had not been transferred from the SDFI to Statoil. Method of accounting applied for the Hydro Petroleum merger The merger between former Statoil ASA and Hydro Petroleum in 2007 was accounted for using the carrying amounts of the assets and liabilities. When making this judgement Statoil considered firstly whether the former Statoil ASA and Hydro Petroleum were under the common control of the Norwegian State, and secondly, given the conclusion that both entities were under the control of the Norwegian State, assessed what method of accounting would provide the most meaningful portrayal of the merger for accounting purposes. Statoil concluded that such a reorganisation would be best presented using the carrying amounts of assets and liabilities, and it is presented in the financial statements for all periods presented as if the companies had always been combined. Key sources of estimation uncertainty The preparation of consolidated financial statements requires that management make estimates and assumptions that affect reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the result of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis considering the current and expected future market conditions. Statoil is exposed to a number of underlying economic factors, such as liquids prices, natural gas prices, refining margins, foreign exchange rates, interest rates as well as financial instruments with fair values derived from changes in these factors, which affect the overall results. In addition, Statoil's results are influenced by the level of production, which in the short term may be influenced by for instance maintenance programmes. In the long term, the results are impacted by the success of exploration and field development activities. The matters described below are considered to be the most important in understanding the key sources of estimation uncertainty that are involved in preparing these financial statements and the uncertainties that could most significantly impact the amounts reported on the results of operations, financial position and cash flows. Proved oil and gas reserves. Proved oil and gas reserves have been estimated by internal experts on the basis of industry standards and governed by criteria established by regulations of the SEC. The SEC revised Rule 4-10 of Regulation S-X and changed a number of oil and gas reserve estimation requirements effective for the year ending 31 December 2009. This required, on a prospective basis, the use of a price based on a 12-month average for reserve estimation instead of a single end-of-year price and allows for non-traditional sources such as bitumen extracted from oil sands to be included as reserves. The Financial Accounting Standards Board (FASB) also aligned the requirements for supplemental oil and gas disclosures with the changes made by the SEC. Statoil estimates that implementation of the revisions had an immaterial impact on proved reserves as of 31 December 2009 and will have an immaterial impact on unit of production depreciation starting in 2010. However, the comparability of disclosures between years is impacted by the new requirements. Reserves estimates are based on subjective judgments involving geological and engineering assessments of in-place hydrocarbons volumes, the production, historical extraction recovery and processing yield factors and installed plant operating capacity. For future development projects, proved reserves estimates are included only where there is a significant commitment to project funding and execution and when relevant governmental and regulatory approvals have been secured or are reasonably certain to be secured. The reliability of these estimates at any point in time depends on both the quality and quantity of the technical and economic data and the efficiency of extracting and processing the hydrocarbons. An independent third party has evaluated Statoil's proved reserves estimates, and the results of such evaluation do not differ materially from management estimates. Proved oil and gas reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Unless evidence indicates that renewal is reasonably certain, estimates of economically producible reserves only reflect the period before the contracts providing the right to operate expire. The project to extract the hydrocarbons must have commenced or the operator must be reasonably certain that it will commence within a reasonable time. Future changes in proved oil and gas reserves, for instance as a result of changes in prices, could have a material impact on unit of production rates used for depreciation and amortisation. Expected oil and gas reserves. Expected oil and gas reserves have been estimated by internal experts on the basis of industry standards and are used for impairment testing purposes and for calculation of asset retirement obligations. Reserves estimates are based on subjective judgments involving geological and engineering assessments of in-place hydrocarbons volumes, the production, historical extraction recovery and processing yield factors, installed plant operating capacity and operating approval limits. The reliability of these estimates at any point in time depends on both the quality and quantity of the technical and economic data and the efficiency of extracting and processing the hydrocarbons. Future changes in expected oil and gas reserves, for instance as a result of changes in prices, could have a material impact on asset retirement obligations, as well as for the impairment testing of upstream assets, which could have a material effect on operating income as a result of changed impairment charges. Statoil, Statutory report 2009 41


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    Exploration and leasehold acquisition costs. Statoil capitalises the costs of drilling exploratory wells pending determination of whether the wells have found proved oil and gas reserves. Statoil also capitalises leasehold acquisition costs and signature bonuses paid to obtain access to undeveloped oil and gas acreage. Judgments as to whether these expenditures should remain capitalised or written down due to impairment losses in the period may materially affect the operating income for the period. Impairment/reversal of impairment. Statoil has significant investments in property, plant and equipment and intangible assets. Changes in the circumstances or expectations of future performance of an individual asset may be an indicator that the asset is impaired requiring the book value to be written down to its recoverable amount. Impairments are reversed if conditions for impairment are no longer present. Evaluating whether an asset is impaired or if an impairment should be reversed requires a high degree of judgement and may to a large extent depend upon the selection of key assumptions about the future. Unproved oil and gas properties are assessed for impairment when facts and circumstances suggest that the carrying amount of the asset may exceed its recoverable amount and at least annually. If, following evaluation, an exploratory well has not found proved reserves, the previously capitalised costs are tested for impairment. Subsequent to the initial evaluation phase for a well it will be considered a trigger for impairment testing of a well if no development decision is planned for the near future, and there moreover is no concrete plan for future drilling in the licence. Impairment of unsuccessful wells is reversed, as applicable, to the extent that conditions for impairment are no longer present. Estimating recoverable amounts involves complexity in estimating relevant future cash flows, based on assumptions about the future, and discounted to their present value. Impairment testing requires long-term assumptions to be made concerning a number of often volatile economic factors such as future market prices, refinery margins, currency exchange rates and future output, discount rates and political and country risk among others, in order to establish relevant future cash flows. Impairment testing frequently also requires judgement to be applied as regards applicable probabilities and probability distributions as well as levels of sensitivity inherent in the establishment of recoverable amount estimates, and consequently in ensuring that the recoverable amount estimates' robustness where relevant is factored sufficiently into the impairment evaluations and reflected in the impairment or reversal of impairment recorded in the financial statements. Long-term assumptions for major economic factors are made at group level, and there is a high degree of reasoned judgement involved in establishing these assumptions, in determining other relevant factors such as forward price curves, in estimating production outputs, and in determining the ultimate termination value of an asset. Employee retirement plans. When estimating the present value of defined pension benefit obligations that represent a gross long-term liability in the balance sheet, and indirectly, the period's net pension expense in the statement of income, management make a number of critical assumptions affecting these estimates. Most notably, assumptions made about the discount rate to be applied to future benefit payments, the expected return on plan assets and the annual rate of compensation increase have a direct and potentially material impact on the amounts presented. Significant changes in these assumptions between periods can have a material effect on the financial statements. Asset retirement obligations. Statoil has significant obligations to decommission and remove offshore installations at the end of the production period. Legal obligations associated with the retirement of non-current assets are recognised at their fair value at the time the obligations are incurred. Upon initial recognition of a liability, that cost is capitalised as part of the related non-current asset and allocated to expense over the useful life of the asset. It is difficult to estimate the costs of these decommissioning and removal activities, which are based on current regulations and technology, considering relevant risks and uncertainties. Most of the removal activities are many years into the future and the removal technology and costs are constantly changing. The estimates include assumptions of both the time required and the day rates for rigs, marine operations and heavy lift vessels that can vary considerably depending on the assumed removal complexity. As a result, the initial recognition of the liability and the capitalised cost associated with decommissioning and removal obligations, and the subsequent adjustment of these balance sheet items, involve the application of significant judgement. Derivative financial instruments. When not directly observable in active markets, the fair value of derivative contracts must be computed internally based on internal assumptions as well as directly observable market information, including forward and yield curves for commodities, currencies and interest. Changes in internal assumptions and forward curves could materially impact the internally computed fair value of derivative contracts, particularly long-term contracts, resulting in corresponding impact on income or loss in the statement of income. Income tax. Statoil annually incurs significant amounts of income taxes payable to various jurisdictions around the world, and also recognises significant changes to deferred tax assets and deferred tax liabilities, all of which are based on management's interpretations of applicable laws, regulations and relevant court decisions. The quality of these estimates is highly dependent upon management's ability to properly apply at times very complex sets of rules, to recognise changes in applicable rules and, in the case of deferred tax assets, management's ability to project future earnings from activities that may apply loss carry forward positions against future income taxes. 42 Statoil, Statutory report 2009


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    3 Business combinations In 2008 Statoil increased the interest in the Peregrino heavy-oil field offshore Brazil from 50% to 100%, after closing the deal to acquire Anadarko's 50% stake on 10 December 2008. Statoil paid a cash consideration of USD 1.8 billion, including expenditures incurred in the period 1 January to 10 December 2008, for 100% of the shares in Anadarko's wholly owned company Anadarko Petroleo Ltda and Anadarko's 50% share of the company South Atlantic Holding BV. Conditional on future oil prices above pre-defined threshold levels, Statoil will pay an additional maximum pre-tax amount of USD 0.3 billion to be earned by 2020, related to the Peregrino field. The value of the contingent consideration element at the time of closing the deal, estimated to USD 0.2 billion, has been recognised as part of the acquisition price. The Peregrino acquisition has been assessed to constitute a business combination under IFRS 3 and changes in the fair value of the contingent consideration element will be recorded as an adjustment to the book value of the assets acquired. The transaction was recorded in the segment International Exploration and Production. 4 Asset acquisitions and disposals In November 2008 Statoil acquired a 32.5% interest in the Marcellus shale gas acreage from Chesapeake Appalachia, L.L.C. The Marcellus shale gas acreage covers 1.8 million net acres (7,300 square kilometres) in the Appalachia region of the Northeastern USA. Statoil paid a cash consideration of USD 1.3 billion and are paying an additional USD 2.1 billion in the form of funding of 75% of Chesapeake's expenditures for drilling and completion of wells during the period 2009 to 2012. The Marcellus assets are in the exploration and evaluation phase and the funding of Chesapeake's expenditures will be recorded in the financial statements at the time the expenditures for the wells are incurred. The transaction was recorded in the segment International Exploration and Production. In February 2008 Statoil's participation in the Petrocedeño project (former Sincor project) was reduced from 15% to 9.677% as a result of the transformation of the Sincor project into the incorporated joint venture Petrocedeño, S.A., which has 60% participation by the Venezuelan state through its wholly owned company Petroleos de Venezuela, S.A. The Petrocedeño project involves the exploitation of extra heavy crude oil from the reservoirs in the Orinoco Belt offshore Venezuela. An accounting gain from the reduction of the participation interest was recognised in the Consolidated statements of income in 2008 by NOK 1.1 billion net of tax. The transaction was recorded in the segment International Exploration and Production. The remaining interest in Petrocedeño is reflected in the Consolidated financial statements under the equity method, while the previous interest in the Sincor project was accounted for as a jointly controlled asset consolidated on a line-by-line basis. In the second quarter of 2007 Statoil acquired all shares of North American Oil Sands Corporation (NAOSC) for a consideration of CAD 2.2 billion. The principle asset in the acquisition was the 257,200 acres (1,110 square kilometres) of oil sands leases that NAOSC operates, located in the Athabasca region of Alberta, northeast of Edmonton. The transaction was recorded in the segment International Exploration and Production. In the first quarter of 2007 Statoil acquired two of Anadarko Petroleum Corporation's US Gulf of Mexico discoveries and one prospect at a cost of USD 0.9 billion. The assets are located in the Greater Tahiti and Walker Ridge areas. As part of the transaction Statoil acquired an additional 15% working interest in the Big Foot discovery and has now a 27.5% working interest. The transaction was recorded in the segment International Exploration and Production. 5 Segments Operating segments Statoil manages its operations in four operating segments; Exploration and Production Norway, International Exploration and Production, Natural Gas and Manufacturing and Marketing. The Exploration and Production Norway and International Exploration and Production segments explore for, develop and produce crude oil and natural gas, and extract natural gas liquids. The Natural Gas segment transports and markets natural gas and natural gas products. Manufacturing and Marketing is responsible for petroleum refining operations and the marketing of crude oil and refined petroleum products except for natural gas and natural gas products. The "Other" section consists of the activities of Corporate services, Corporate center, Group Finance, Technology & New energy and Projects. The "Eliminations" section encompasses elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products. Inter- segment revenues are based upon estimated market prices. Operating segments align with internal management reporting to the company's chief operating decision maker, defined as the Corporate Excecutive Committee (CEC). The operating segments are determined based on differences in the nature of their operations, products, services and geographical location of the activity. The measure of segment profit is Net operating income. Financial items and tax expense are not allocated to the operating segments. The measurement basis for the net operating income for each operating segment follows the accounting principles used in the financial statements as described in note 2 Significant accounting policies. Statoil, Statutory report 2009 43


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    Segment data for the years ended 31 December, 2009, 2008 and 2007 is presented below: International Exploration and Exploration Manufacturing (in NOK million) Production Norway and Production Natural Gas and Marketing Other Eliminations Total Year ended 31 December 2009 Revenues third party and Other income 4,153 12,301 96,973 348,941 1,287 0 463,655 Revenues inter-segment 154,431 28,459 1,241 2,014 2,295 (188,440) 0 Net income from associated companies 79 1,075 399 280 (55) 0 1,778 Total revenues and other income 158,663 41,835 98,613 351,235 3,527 (188,440) 465,433 Net operating income 104,318 2,599 18,488 (541) (1,146) (2,078) 121,640 Significant non-cash items recognised in segment profit or loss - Depreciation and amortisation 25,653 16,231 1,778 2,390 687 0 46,739 - Impairment losses 0 873 1,001 5,369 74 0 7,317 - Inventory valuation 0 0 (24) (5,171) 0 1,377 (3,818) - Commodity based derivatives (1,781) 0 (2,814) 1,072 (122) 0 (3,645) - Exploration expenditure written off 1,177 5,821 0 0 0 0 6,998 Investments in associated companies 214 4,962 2,829 917 1,134 0 10,056 Other segment non-current assets 175,998 152,678 34,797 28,587 3,028 0 395,088 Non-current assets, not allocated to segments* 41,312 Total non-current assets 446,456 Additions to PP&E and intangible assets** 34,875 39,354 2,528 7,618 1,340 0 85,715 * Deferred tax assets, post employment benefit assets and non-current financial instruments are not allocated to segments. ** Excluding movements due to changes in abandonment and removal obligations. 44 Statoil, Statutory report 2009


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    International Exploration and Exploration Manufacturing (in NOK million) Production Norway and Production Natural Gas and Marketing Other Eliminations Total Year ended 31 December 2008 Revenues third party and Other income 2,879 10,289 108,704 530,165 2,700 0 654,737 Revenues inter-segment 216,882 35,031 1,882 966 2,212 (256,973) 0 Net income from associated companies 82 809 225 216 (49) 0 1,283 Total revenues and other income 219,843 46,129 110,811 531,347 4,863 (256,973) 656,020 Net operating income 166,907 12,784 12,541 4,548 (731) 2,783 198,832 Significant non-cash items recognised in segment profit or loss: - Depreciation and amortisation 24,043 11,619 2,310 2,117 596 0 40,685 - Impairment losses 0 2,063 0 0 248 0 2,311 - Inventory valuation 0 0 24 5,203 0 (1,377) 3,850 - Commodity based derivatives (109) 0 (1,341) (1,306) (37) 0 (2,793) - Exploration expenditure written off 749 2,957 0 0 0 0 3,706 Investments in associated companies 149 6,114 4,898 1,063 416 0 12,640 Other segment non-current assets 165,493 160,580 35,735 34,420 3,854 0 400,082 Non-current assets, not allocated to segments* 20,889 Total non-current assets 433,611 Additions to PP&E and intangible assets** 34,941 48,694 2,041 8,488 1,256 0 95,420 * Deferred tax assets, post employment benefit assets and non-current financial instruments are not allocated to segments. ** Excluding movements due to changes in abandonment and removal obligations. Statoil, Statutory report 2009 45


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    International Exploration and Exploration Manufacturing (in NOK million) Production Norway and Production Natural Gas and Marketing Other Eliminations Total Year ended 31 December 2007 Revenues third party and Other income 5,925 13,483 72,447 427,342 2,851 140 522,188 Revenues inter-segment 173,259 27,746 927 468 1,600 (204,000) 0 Net income from associated companies 60 372 60 233 (116) 0 609 Total revenues and other income 179,244 41,601 73,434 428,043 4,335 (203,860) 522,797 Net operating income 123,150 12,161 1,562 3,776 (2,260) (1,185) 137,204 Significant non-cash items recognised in segment profit or loss: - Depreciation and amortisation 23,030 9,857 1,595 1,896 564 0 36,942 - Impairment losses 0 1,246 250 937 (3) 0 2,430 - Pension costs* 5,300 738 700 700 1,300 0 8,738 - Commodity based derivatives (2,920) 577 3,318 1,031 (88) 0 1,918 - Exploration expenditure written off 50 1,610 0 0 0 0 1,660 Investments in associated companies 125 2,253 4,516 1,066 461 0 8,421 Other segment non-current assets 153,115 107,261 35,552 27,627 2,933 0 326,488 Non-current assets, not allocated to segments** 18,519 Total non-current assets 353,428 Additions to PP&E and intangible assets*** 31,100 36,200 2,100 4,800 800 0 75,000 * Pension cost includes early retirement cost (exclusive of curtailment effects) and past service cost. ** Deferred tax assets, post employment benefit assets and non-current financial instruments are not allocated to segments. *** Excluding movements due to changes in abandonment and removal obligations. 46 Statoil, Statutory report 2009


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    For the year ending 31 December 2009, the International Exploration and Production segment recognised net impairment losses of NOK 6.3 billion, mainly related to assets in the Gulf of Mexico. The net impairment losses consist of impairment losses of NOK 8.0 billion and reversals of previous periods impairment losses of NOK 1.7 billion. The net impairment losses have been presented as Exploration expenses of NOK 5.4 billion and Depreciation, amortisation and net impairment losses of NOK 0.9 billion on the basis of their nature as intangible assets (exploration assets) and property, plant and equipment (development and producing assets), respectively. In 2009, Statoil also recognised impairment losses of NOK 5.4 billion related to refinery assets in the Manufacturing and Marketing segment. The basis for the impairment losses are value in use estimates triggered by decreasing expectations on refining margins in NOK. The impairment losses have been presented as Depreciation, amortisation and net impairment losses. In addition, Statoil has recognised an impairment loss of NOK 1.4 billion in 2009 related to an investment in a refinery company which was classified as an available for sale financial asset. This impairment loss was not allocated to a specific segment but was presented as a financial item. In 2008, Statoil recognised net impairment losses of NOK 4.5 billion in the International Exploration and Production segment, of which the main part relates to assets in the Gulf of Mexico. The impairment charges have been presented as Exploration expenses of NOK 2.4 billion and Depreciation, amortisation and impairment losses of NOK 2.1 billion. In 2007, the International Exploration and Production segment recognised net impairment losses of NOK 1.2 billion, of which the main part related to exploration and production assets (Intangible assets and Property, plant and equipment) in the Gulf of Mexico while the Manufacturing and Marketing segment recognised an impairment loss of NOK 0.9 billion related to property plant and equipment and intangible assets in the Energy and Retail business in Sweden. In assessing the need for impairment of the carrying amount of a potentially impaired asset, the asset's carrying amount is compared to the recoverable amount. The recoverable amount is the higher of fair value less costs to sell and estimated value in use. When preparing a value in use calculation the estimated future cash flows are adjusted for risks specific to the asset and discounted using a real post-tax discount rate adjusted for asset specific differences, such as tax rates and horizon of cash flows. The discount rate is 6.5% real after tax in a 28% tax regime and is derived from Statoil's weighted average cost of capital. With effect from 1 January 2008, the internal price for natural gas sold between the segments Exploration and Production Norway and Natural Gas was updated to better reflect changes in the markets for competing energies. The 2007 Financial statements included an expense of NOK 10.7 billion before tax related to restructuring expenses and other expenses related to the merger between Statoil and Hydro's oil and gas division in 2007. The major part of these expenses was related to pensions and early retirement packages offered to all employees above the age of 58 years. The total expense impacted the net operating income of all segments, and most significantly the segment Exploration and Production Norway. Based on a settlement and estimate changes in 2008, Statoil recognised NOK 1.7 billion before tax as a cost reduction in 2008. The main part of this amount relates to the segment Exploration and Production Norway. Geographical areas Statoil is present in 42 countries, and manages its business segments on a worldwide basis. In presenting information on the basis of geographical areas, revenues from external customers are attributed to the country of the legal entity executing the external sale. Assets are based on the geographical location of the assets. Geographical data for the year ended 31 December 2009, 2008 and 2007 is presented below: (in NOK million) Crude oil Gas NGL Refined products Other Total sale Year ended 31 December 2009 Norway 182,353 80,018 34,655 45,927 18,137 361,090 USA 19,836 5,555 117 14,017 672 40,197 Sweden 0 0 0 16,556 3,795 20,351 Denmark 0 0 0 15,105 1,957 17,062 Other 9,978 2,959 154 10,762 1,102 24,955 Total revenues (excluding net income from associated companies) 212,167 88,532 34,926 102,367 25,663 463,655 Statoil, Statutory report 2009 47

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