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IDEMITSU PETROLEUM NORGE AS ANNUAL REPORT 2005


YOKOSO VELKOMMEN WELCOME

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ANNUAL REPORT 2005


Idemitsu Petroleum Norge AS Annual Report 2005 Design and Art Direction: Uniform AS Colour photgraphy: Uniform AS Black and white photgraphy: Tove K. Breistein Cover printed on Keaykolour Recycled stock, made from 75% recycled fibre. Pages printed on Lessebo Bok, a totally chlorine free stock. Chlorine used to bleach some paper creates dioxins that can pollute our water harming fish, wildlife and humans.

IDEMITSU PETROLEUM NORGE AS

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CONTENTS AND TRANSLATOR’S EXPLANATORY NOTE

KEY DATA MESSAGE FROM THE MANAGING DIRECTOR EXPLORATION PRODUCTION AND OPERATIONS IDEMITSU GROUP ANNUAL REPORT OF THE BOARD OF DIRECTORS PROFIT AND LOSS STATEMENT BALANCE SHEET CASH FLOW STATEMENT ACCOUNTING PRINCIPLES NOTES TO THE ACCOUNTS AUDIT REPORT

4 5 6 8 11 12 16 17 19 20 22 31

Statutory accounts in Norway are required to be prepared and presented in accordance with the requirements of the Norwegian Companies Act of 1997 and in accordance with accounting principles and practices generally followed in Norway. The statutory accounts include by law the report of the Board of Directors. The accompanying translated statements have not been reclassified or adjusted in any way to conform with accounting principles generally accepted in countries other than Norway.

ANNUAL REPORT 2005

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KEY DATA Operating revenues million NOK Operating profit million NOK Profit after tax million NOK Crude oil sales million barrels Daily oil production, thousand barrels Investments, million NOK Equity in % of balance Cash flow before financing, million NOK Crude oil reserves, million Sm3 Return on capital

Daily oil production Investments Crude oil reserves Return Capital

4

= = = = =

IDEMITSU PETROLEUM NORGE AS

2005

2004

2003

2002

2001

4093 2148 497 10.6 31.7 357 37% 1117 21.3 71%

4234 2226 462 15.6 40.2 283 46% 1434 20.4 64%

3136 1707 423 14.3 39.3 582 48% 439 20.6 61%

2787 1551 369 13.2 36.5 614 49% -28 21.3 23%

3103 1916 462 13.4 37.2 464 46% 945 18.5 34%

Average daily oil production, Idemitsu share Offshore investments excl. production rights Probable, commercially recoverable resources Annual profit + interest expense +/- unrealized forex loss/gain on loan Share capital and interest-bearing loans at year end


MESSAGE FROM THE MANAGING DIRECTOR

In 2005 Idemitsu Petroleum Norge AS (“Idemitsu”) made a significant step towards a new phase in its activities in Norway. On 4 October, IPN was pre-qualified as an operator on the NCS. The pre-qualification was based on a thorough evaluation of Idemitsu’s technical, geological and HSE-related competence by the petroleum authorities. One factor in the process was the Idemitsu group’s substantial experience from the drilling of more than 40 offshore wells as an operator in Australia and South East Asia. In the APA2005 licensing round Idemitsu was offered one operatorship, for PL377 S. In addition Idemitsu was awarded interests in two licenses as a partner. These achievements have been possible thanks to a long term commitment to build up competence and experience in Norway. I am hopeful that this new status for Idemitsu will create additional business opportunities and increased flexibility in our license activities. With regards to exploration activities, 2005 has been a remarkable year for Idemitsu. The company participated in three exploration wells, and discoveries were made in all three of them. One of the discoveries will be put into production in 2006. For the other two, commerciality studies are ongoing. These

discoveries are expected to make substantial additions to Idemitsu’s resource base. I would like to express my strong appreciation of the efforts made by our staff, partners and operators to achieve these results. Social responsibility and contribution to society are main elements in the management philosophy of the Idemitsu group since 1911. Based on this philosophy, safety and environment protection have always had high priority in the group’s activities. With our new status as operator in Norway we will increasingly be focusing on HSE issues, and further improvement of the HSE culture among all our staff is a main goal. My sincere wish for Idemitsu is to expand in Norway and be well recognized as an active and contructive operator and partner in exploration, development and production, while improving our managerial culture, technological expertise and capabilities of business development.

Yasuhiro Haba Managing Director

ANNUAL REPORT 2005

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EXPLORATION 2005 has been an extraordinary year for Idemitsu’s exploration in Norway. According to the NPD only 12 exploration/delineation wells were spudded in 2005. Idemitsu participated in three of them and all three were discoveries. Further, our license portfolio was increased by three licenses awarded in APA2005. During 2005 Idemitsu passed the pre-qualification as operator and was awarded the first NCS operatorship in block 35/7 in the Northern North Sea. Currently the Authorities are working to award blocks in the 19th licensing round and Idemitsu has applied in two areas off MidNorway. In APA2005 and the 19th round we have had significant cooperation with other companies and applied partly under AMIA (Area of Mutual Interest Agreement) and as a single company. Several farm-in opportunities have been evaluated during 2005, but for various reasons none were completed. In PL089 (block 34/7, 9.6% interest) exploration is in a late phase and is made timely according to possible production to existing infrastructure. The activity often has the character of step-out/delineation drilling and in 2005 the so-called M5 compartment in the southeastern part of the Vigdis field proved oil in the lower Brent Group. A further step-out well into a new compartment may be drilled in 2007. PL090 (mainly within block 35/11) is a license with high activity: The prospects are commonly Jurassic fault blocks next to or in-between

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IDEMITSU PETROLEUM NORGE AS

the existing discoveries. Well 35/11-13 on the Astero prospect proved oil and gas in Upper Jurassic sandstones, similar to those producing in the adjacent Fram Vest field. Planning of production and development has already started. The PL090 group was awarded a small part of block 35/12 in APA2005 (PL090D). Idemitsu holds 15% in the Fram area. PL318 (block 35/2), in the northernmost part of the North Sea, was awarded with 20% to Idemitsu in the 18th licensing round. A seismic anomaly was the target for the first well and 35/2-1 recorded gas in Quaternary sands, less than two hundred meters below sea bottom. The accumulation has commercial potential. In 2006 testing and high resolution 3D seismic are being planned. In APA2005 Idemitsu was awarded 25% interest in block 34/4 with BG as operator. A firm obligation well is being planned for 2007 on a Jurassic target. The Idemitsu-operated PL377 S (block 35/7) has a 3D seismic work obligation and the intention is to acquire seismic in 2006. The block is just west of the Fram B/Camilla/Belinda development which is progressing towards a PDO in late 2006. Idemitsu is keen to acquire more exploration acreage and will be evaluating acreage for APA2006. In addition we will continue to seek farm-in opportunities, especially in the North Sea and Mid-Norway.


PL373 S 34/3

Peon PL318 35/2

SNORRE AREA 34/4 34/7

Sygna

Snorre

Statfjord Øst

PL 377 S 35/7

Vigdis M5

Borg

Tordis Fram B

FRAM AREA 35/11 Astero

Fram Vest Fram Øst

Fields and Discoveries PL090

Fram Øst / Fram Vest

PL090 B

Astero

PL090 C

Fram B

PL090 D

-

PL057, PL089

Snorre

PL037, PL089

Statfjord Øst

PL037, PL089

Sygna

PL089

Tordis

PL089

Vigdis

PL089

M5

PL318

Peon

PL373 S

-

PL377 S

-

ANNUAL REPORT 2005

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PRODUCTION AND OPERATIONS TAMPEN AREA

Five of Idemitsu’s six producing fields are located in the Tampen Area of the North Sea. Idemitsu is pleased that a good cooperation has been achieved among the fields in this area with Statoil as the common operator. All fields are represented in a Tampen Forum where we have common aspirations to improve health, safety and environmental standards while optimizing economic recovery of resources. Through cooperation in the Tampen Forum, companies have established common use of Light Well Intervention vessels, sharing of longterm rig contracts, joint seismic acquisition and a common Emergency Preparedness Plan. The fields are furthermore striving together to find optimum long-term solutions for their late phase production. Idemitsu is also grateful for the strong cooperation on the HSE side through the Tampen HSE Forum. Here companies share experience from their own HSE measures and verification activities. Common efforts include an area-wide falling object campaign and joint focus on the barrier “continuous risk assessment” through the Safe Behaviour Programme. SNORRE

The Snorre reservoir is comprised of the Statfjord and Lunde sandstone formations at depths of 2300 to 2700 m which contain oil zones of varying recoverability. The field has been developed in two phases. In the first phase, a tension leg platform (Snorre A) and a subsea production facility were installed. Production 8

IDEMITSU PETROLEUM NORGE AS

started on Snorre A from the Statfjord formation in 1992. In 1993, production also started from the Lunde formation via the subsea template. Partially stabilized oil is exported to Statfjord A for final processing and offshore loading. Gas not used for injection at the Snorre field is exported through the Gassled system to Kårstø. The second phase comprises a semisubmersible floater (Snorre B) located about 7 km north of Snorre A platform. The platform was installed in 2001. Production is mainly from the Lunde formation. Stabilized oil is exported to Statfjord B platform for offshore loading. Gas not used for injection is exported via Snorre A. The year for Snorre was characterized by Snorre A’s recovery from the serious subsea gas blow-out that occurred in November 2004. We are very grateful that all Snorre A workers came through the incident safely. Idemitsu is pleased that Snorre A still produced 5.52 million Sm3 of oil despite a long shutdown. Idemitsu’s share of the crude oil production from the Snorre field was 0.84 million Sm3 (5.3 MMSTB), as compared to 1.10 million Sm3 (6.9 MMSTB) in 2004. Improvement of HSE has been an important common effort of Snorre partners, and Idemitsu was appreciative of the opportunity to coordinate the partners’ participation in management HSE inspections on- and offshore.


Tordis IOR subsea processing facility

TORDIS

The Tordis Area, consisting of the structures Tordis, Tordis Øst, Tordis Sørøst and Borg is developed by subsea installations tied in to Gullfaks C by two production pipelines and one injection pipeline. The production from Tordis started in 1994 and during the years of operation, the Tordis Area has shown generally good production performance and high regularity. After more than ten years of operation, the Tordis Area is now experiencing a natural decline in production. In order to counteract this development, the license partners have decided to implement the Tordis IOR (Increased Oil Recovery) project. This project will accelerate and increase production from today’s estimate of 51% recovery to 55% recovery. The project is divided into two steps: 1) Enable low pressure production at the Gullfaks C facilities 2) Expand the Tordis subsea facilities to include a subsea processing facility Tordis IOR step two will be an important step to bring subsea processing forward as a proven technology. The experience that will be gained by utilizing subsea processing for the Tordis IOR project is expected to be of great value for the industry. Subsea processing is a key element in order to develop future deep water fields and long distance tiebacks.

Idemitsu’s share of the Tordis crude oil production was 0.30 million Sm3 (1.8 MMSTB) in 2005, as compared to 0.35 million Sm3 (2.2 MMSTB) in 2004. VIGDIS The Vigdis field is a satellite development tied in to Snorre A. Vigdis started its production in 1997. In 2003 the first phase of the Vigdis Extension project came on stream. Phase two of the Vigdis Extension project has just recently been approved by the license partners and will start production in 2007. The phase two of the Vigdis Extension project will ensure the possibility to extend with a phase three development. This is obtained by installing a 4-slot template of which only two slots will be used for the phase two development. After completion of the Vigdis Extension projects, the field will altogether comprise six 4-slot templates and two satellite structures. Idemitsu’s share of the Vigdis crude oil production was 0.35 million Sm3 (2.2 MMSTB) in 2005, as compared to 0.34 million Sm3 (2.2 MMSTB) in 2004. STATFJORD ØST

Statfjord Øst is a subsea satellite field tied into the Statfjord C platform. In Statfjord Øst Idemitsu’s share of crude oil production was 0.05 million Sm3 (0.3 MMSTB) in 2005, as compared to 0.07 million Sm3 (0.4 MMSTB) in 2004. ANNUAL REPORT 2005

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SYGNA

FRAM ØST

Sygna is also a subsea satellite field tied into the Statfjord C platform. Idemitsu’s share of the Sygna field’s crude oil production was 0.03 million Sm3 (0.2 MMSTB) in 2005, as compared to 0.05 million Sm3 (0.3 MMSTB) in 2004.

The Fram Øst PDO was submitted to the authorities on 23 February 2005 and approved on 22 April 2005. The Fram Øst development is the second phase of Fram Area development after the successful Fram Vest in 2003.

FRAM AREA

In 2002 Idemitsu purchased a 15% share in the PL090 license and parts of the surrounding area, and thereby established a new core area for the company. FRAM VEST

The Fram Vest field is located 20 kilometres north of the Troll C platform. The wellstream is transported to the Troll C platform for processing, and stabilised oil is transported to Mongstad through the Troll oil pipeline, while the gas is re-injected into the reservoir for pressure support. The Fram Vest started production in October 2003. Idemitsu’s share of the Fram Vest crude oil production in 2005 was 0.27 million Sm3 (1.7 MMSTB), as compared to 0.43 million Sm3 (2.7 MMSTB) in 2004.

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IDEMITSU PETROLEUM NORGE AS

Fram Øst reservoir will be developed by two 4 slot subsea templates with five producers and two water injectors. The wellstream will be routed to the new pipeline and existing Fram Vest pipeline to Troll facilities on the Troll C platform for processing. Production is expected to start in late October 2006, with a plateau oil volume of 7 000 Sm3/sd. Peak gas production will reach 1.5 million Sm3/sd.


IDEMITSU GROUP

The Idemitsu group was founded in 1911 by Sazo Idemitsu in order to realize his ideas and philosophy through business. The group has achieved remarkable business growth, especially through the second half of the twentieth century, and is now one of the largest independent energy corporations in Japan. For over nine decades the company has adhered to a management philosophy rooted in “Wa”, the traditional Japanese concept of harmonious relationship. Today still, Idemitsu group has put into practice the concept of respect for human dignity in the conduct of business and is seeking to be a corporation that deserves the high expectations and trust of society. The activities of the group now include oilrelated business for stable supply of energy, and also compound energy businesses such as onsite fuel cell/gaseous energy, oil exploration, highly value-added production of petrochemicals and lubricants, electronic materials and new biotechnology business.

Idemitsu’s exploration activities started in 1971, with an aim to develop a full line integrated petroleum business that runs both upstream and downstream of petroleum business. Since the successful discovery of the first oil field offshore Japan in 1972, we have explored, developed and produced oil and gas for more than 30 years. Norway has been a core area since we entered the Snorre development in 1989. Idemitsu group commits to expand investments on the NCS and contribute to Norwegian society continuously.

IDEMITSU KEY FIGURES

(Consolidated group figures for the year ended 31 March 2005) Sales revenue 2 764 billion JPY Balance 2 229 billion JPY Employees 7 881 VLCCs 6 LPG ocean carriers 2 Gas stations 5 358 Refineries in Japan 4 Petrochemical plants in Japan 2 Overseas offices 36 cities

ANNUAL REPORT 2005

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ANNUAL REPORT OF THE BOARD OF DIRECTORS BUSINESS AREA

OPERATIONS

Idemitsu Petroleum Norge AS (Idemitsu) is engaged in exploration for, development and production of crude oil and natural gas on the Norwegian Continental Shelf (NCS). Idemitsu was founded on 25 September 1989. On 2 October 1989, a 9.6% interest in the production licenses 057 and 089 was acquired from Statoil. These production licenses are located in the Tampen area in the Northern North Sea, and comprise the Snorre, Tordis, Statfjord Øst, Sygna, Vigdis and Borg fields.

The total production from Idemitsu’s producing fields in 2005 was substantially lower than in 2004. Snorre A suffered significant production loss due to the gas leak incident in late 2004. On Snorre B, the drilling operations were delayed compared to schedule. The PDO for Fram Øst was submitted in February 2005 and production start is planned in October 2006. OPERATOR PRE-QUALIFICATION

In February 2002, Idemitsu’s bid for one of the Fram packages of SDFI was accepted by the Norwegian state. The Fram package included a 15% share in PL090. Within PL090, Fram Vest started production in October 2003 while Fram Øst is currently being developed.

In October 2005, Idemitsu was pre-qualified as operator on the NCS. The pre-qualification was based on a thorough evaluation of Idemitsu’s technical and geological competence. In addition, the company’s HSE related competence was considered.

Idemitsu is part of the Japanese Idemitsu Kosan group. Idemitsu Snorre Oil Development Co., Ltd. (ISD), a Japanese company registered in Tokyo, owns all the shares. An owner share in ISD of 49.5% was sold in 2005 from the state owned company JNOC to a holding company owned by Osaka Gas and Petro Summit Investment (Sumitomo).

GAS SALES

All dry gas from the Tampen fields is sold to Statoil on a long term contract. In order to efficiently transport the gas to the delivery point, Idemitsu has entered into a contract with one of the larger gas producers on the NCS for dispatching and booking services in the Gassled system. NGL products which are extracted from the rich gas entering the Kårstø terminal are sold exit Kårstø.

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IDEMITSU PETROLEUM NORGE AS


EXPLORATION & PORTFOLIO

Idemitsu has participated in three exploration wells in 2005. Discoveries were made in all three wells. One of these wells will be put into production in 2006, while commerciality studies are ongoing for the other two wells. The Board of Directors is very satisfied with the exploration results in 2005.

booked cost for this obligation in 2005 is 775.4 million NOK. In relation to this obligation for 2005, a liability of 120.6 million USD to the seller is booked at year end 2005.

Idemitsu was awarded three license shares in APA 2005. All three licenses are located in the Northern North Sea. Idemitsu is the operator of PL377 S. This is Idemitsu’s first operatorship on the NCS. Furthermore, Idemitsu has applied for several licenses in the 19th licensing round.

(2) Balance, liquidity and cash flow Idemitsu currently has no long term loans. Proposed dividend for 2005 is 594.2 million NOK. Idemitsu has a comfortable liquidity situation. Equity represents 36.6% of total assets.

The Board of Directors regards the potential on the NCS as being good. Idemitsu intends to actively take part in coming licensing rounds and seek further investment opportunities on the NCS.

Most of the USD to NOK currency exchange risk was covered by short term foreign exchange contracts. Risk reductions by using the mentioned financial instruments will never exceed the actual risk position.

FINANCIAL RESULT

The 2005 financial statement is given under the going concern assumption.

(1) Profit and loss statement Total sales income has decreased by 3% compared to 2004. The reduction is mainly due to lower crude oil sales volume, especially from Snorre (cf. Operations above). The total sales volume of crude oil came down from 15.6 million barrels in 2004 to 10.6 million barrels in 2005. But the high oil price cushioned the effects of the fall in sales volume. Operating expenses have been fairly steady. As part of the sales agreement for PL089 and PL057, Idemitsu must pay to the seller 50% of sales value of petroleum above a certain threshold level of the crude oil price. The total

Total investment in productions facilities in 2005 was 357 million NOK.

WORKING ENVIRONMENT

At the end of the year, the company had 20 permanent employees. The Board of Directors regards the working environment as good. Total sick leave in 2005 was 864 hours, equaling 2.1% of total working time. There have been no accidents or damage incidents. Operators Hydro and Statoil report the working environment, sick leave and accidents in Idemitsu’s licenses. Idemitsu has a practice of equal opportunity for both genders. The number of women in the Board of Directors has been 1 (20%) in 2005. ANNUAL REPORT 2005

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HSE

Idemitsu is committed, as a license partner and operator, to monitor and enhance safety and protection of the external environment in our licenses. The objective is to avoid accidents and provide a safe work environment for everybody working on installations where Idemitsu is a partner. Safety and environmental matters arising from the activities in our partner-operated licenses are reported to the authorities by operators Hydro and Statoil. Idemitsu is working systematically to build a solid HSE culture among all its staff.

be profitable even at significantly lower crude oil prices.

The company’s office activities have not caused pollution to the external environment.

ALLOCATION OF THE ANNUAL PROFIT

OUTLOOK

Dividends

594 200 000

Retained earnings Total allocated

-96 977 795 497 222 205

Idemitsu’s annual profits are closely linked to the crude oil price and exchange rates. These elements, especially the crude oil price, are difficult to estimate. Idemitsu expects the crude oil price to remain high also in 2006. Due to the solid equity and high cash flow from existing licenses, Idemitsu can expect to

The Board of Directors is not aware of any significant matters not already presented in this report or in the financial statements.

The profit for the year of NOK 497 222 205 is proposed allocated as follows:

All of the Retained earnings are available for dividends. 19 April 2006

Trond Stang

Yasuhiro Haba

Chairman

Managing Director

Cathrine Hambro

14

The crude oil production and sales volume also affect the annual results. The 2006 production is expected to be slightly lower than in 2005, due to declining production in existing fields and lack of available drilling rigs.

IDEMITSU PETROLEUM NORGE AS

Shogo Hirahara

Yasuhito Fukuda


ZAIMU SHOHYO ÅRSREGNSKAP ACCOUNTS

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ANNUAL REPORT 2005


2005

2004

Sales of crude oil

4 016 626 654

1, 12

3 776 272 921

Sales of NGL

1

130 817 032

96 677 905

Sales of dry gas

1

151 123 193

89 302 005

Tariff income and other revenue

1

Total operating revenues

34 492 972

31 809 963

4 092 706 118

4 234 416 527

OPERATING EXPENSES Production cost, processing tariff, CO2

531 860 433

464 822 711

Gas and transportation costs

138 208 935

117 481 130

Statoil premium

7

775 366 517

352 977 200

Changes in inventory and over- / underlift

9

- 203 550 650

195 215 156

Exploration costs Abandonment accrual expense Salaries, social security, pension payments

10

28 394 197

35 739 186

12 790 000

49 140 000

2, 3

38 217 437

43 722 227

3

36 138 916

36 385 031

Ordinary depreciation

4, 5

537 704 684

636 872 509

Ordinary depreciation of production rights

5, 7

51 902 031

81 946 955

- 2 714 013

- 5 860 381

Total operating expenses

1 944 318 487

2 008 441 723

Operating profit

2 148 387 631

2 225 974 804

Other operating and administrative costs

Capitalized administration costs

FINANCIAL INCOME AND EXPENSES Interest income Foreign exchange gain

49 275 096

14 338 804

11, 12

259 972 643

201 188 210

21 647 739

4 909 796

11, 12

221 278 253

251 915 399

Interest expense Foreign exchange loss Other financial expenses Net financial items

Profit before taxes

Taxes on ordinary result

PROFIT FOR THE YEAR

6

158 383

69 505

66 163 363

- 41 367 685

2 214 550 994

2 184 607 119

1 717 328 789

1 722 730 915

497 222 205

461 876 204

Proposed dividend

594 200 000

353 000 000

Allocated to retained earnings

-96 977 795

108 876 204

497 222 205

461 876 204

Total allocated

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IDEMITSU PETROLEUM NORGE AS

PROFIT AND LOSS STATEMENT

Note OPERATING REVENUE


BALANCE SHEET

Note

31.12.2005

31.12.2004

FIXED ASSETS

INTANGIBLE FIXED ASSETS Production rights

5, 7

Total intangible fixed assets

725 711 833

777 613 865

725 711 833

777 613 865

TANGIBLE FIXED ASSETS Successful efforts exploration wells

5

89 611 220

26 253 866

5, 8

2 582 341 084

2 890 784 447

Production facilities under development

5

141 985 340

8 476 485

Furniture and fixtures and cars

5

5 657 816

5 292 056

2 819 595 461

2 930 806 854

Production facilities in operation

Total tangible fixed assets

FINANCIAL FIXED ASSETS Employee long term receivables Other long term receivables

9

Total financial fixed assets

TOTAL FIXED ASSETS

705 100

408 000

1 000

2 221 695

706 100

2 629 695

3 546 013 394

3 711 050 413

68 517 853

48 241 823

CURRENT ASSETS

STOCKS Inventory, gas banking and underlift

9

DEBTORS Accounts receivable Receivables from group companies Other current assets

40 124 805

10 363 118

339 772 194

327 087 688

28 558 367

103 931 066

408 455 366

441 381 872

1 880 135 731

1 446 948 732

TOTAL CURRENT ASSETS

2 357 108 950

1 936 572 428

TOTAL ASSETS

5 903 122 344

5 647 622 841

Total debtors

BANK Bank and cash

ANNUAL REPORT 2005

17


31.12.2005

31.12.2004

Paid-in share capital

13

727 900 000

727 900 000

Retained earnings

13

1 430 400 354

1 858 678 149

2 158 300 354

2 586 578 149

TOTAL EQUITY

LIABILITIES

PROVISIONS Pension liabilities

2

1 049 684

773 146

Deferred tax

6

1 020 162 334

947 989 742

Abandonment accrual

10

Total provisions

243 510 000

230 720 000

1 264 722 019

1 179 482 888

CURRENT LIABILITIES Suppliers payable

65 305 743

28 979 644

Payables group companies

1 772 843

1 862 912

Accrued payroll taxes, VAT, etc.

9 189 565

8 007 889

890 167 413

844 789 983

Taxes payable

6

Other current liabilities and overlift

1 513 664 408

997 921 377

Total current liabilities

2 480 099 972

1 881 561 805

TOTAL LIABILITIES

3 744 821 990

3 061 044 693

TOTAL EQUITY AND LIABILITIES

5 903 122 344

5 647 622 841

Trond Stang

Yasuhiro Haba

Chairman

Managing Director

Cathrine Hambro

18

9, 14

IDEMITSU PETROLEUM NORGE AS

Shogo Hirahara

Yasuhito Fukuda

BALANCE SHEET

Note EQUITY


CASH FLOW STATEMENT

2005

2004

CASH GENERATED FROM / USED IN OPERATING ACTIVITIES Profit / (loss) before taxes for the year Taxes paid Ordinary depreciation Accrual for abandonment cost Pension accrual Unrealized forex (gain) / loss on loan (Gain) / loss on sale of fixed assets Generated from the year’s operations

2 214 550 994

2 184 607 119

-1 599 778 766

-1 684 105 402

589 606 715

718 819 464

12 790 000

49 140 000

276 538

135 927

0

0

- 282 507

- 299 221

1 217 162 975

1 268 297 887

Change in inventory and short term assets and liabilities (excl. dividend payment) Net cash flow from operations

A

324 611 213

452 650 603

1 541 774 188

1 720 948 490

- 3 776 748

- 3 486 211

392 470

314 160

CASH FLOW USED FOR INVESTMENTS Investment in furniture and fixtures and cars Proceeds from sales of fixtures and cars Investment in production rights Investment in production facilities Investment in successful exploration wells Change in other long term assets Net cash flow to investments

B

0

0

- 357 413 943

- 283 303 639

- 65 412 563

0

1 923 595

- 219 245

- 424 287 189

- 286 694 934

CASH FLOW USED FOR FINANCING Share capital increases / (decreases) Paid dividend

0

0

- 684 300 000

- 614 400 000

New loans

0

0

Loan repayments

0

0

- 684 300 000

- 614 400 000

Net cash flow to financing

Net movement in bank and cash Bank and cash at 1 January

BANK AND CASH AT 31 DECEMBER

Bank and cash: restricted funds for employee withholding tax

C

A+B+C

433 186 998

819 853 555

1 446 948 732

627 095 177

1 880 135 731

1 446 948 732

MNOK

MNOK

4,6

4,6

ANNUAL REPORT 2005

19


ACCOUNTING PRINCIPLES

from the time when a discovery is deemed to give future commercial production. Development costs are depreciated using the Unit of Production (U.O.P.) method. Under this method, the annual depreciation charge is based on the percentage of the remaining estimated produceable reserves of an oil field actually extracted in a given year. Certain future investments are required to produce the remaining estimated produceable reserves. These future investments are included in the depreciation base. For tax purposes, offshore development costs are depreciated straight line over 6 years. If the net recorded value after deduction of accumulated depreciation for a field exceeds its value of future net cash flows, an extraordinary write-down is made.

SHARES IN JOINT VENTURES

The company’s shares in joint ventures on the Norwegian Continental Shelf are booked under the respective lines in the profit and loss statement and the balance sheet.

CAPITALIZED INTEREST COSTS

All interest costs associated with the development of production fields are capitalized up to production start and are thereafter depreciated using the U.O.P. method.

REVENUES

Revenues are recognized according to the Sales method as opposed to the Entitlement method. DEFERRED TAXES / TAX EXPENSE

Tax expense comprises payable tax and deferred tax. The deferred tax asset or liability is calculated based upon net temporary differences between assets and liabilities recognized in the financial statements and their bases for tax purposes after offsetting for tax loss carry-forwards, special tax deductions and uplift. The full liability method is followed and the asset or liability is not discounted to a net present value. Current tax rates are used when calculating deferred tax. Uplift reduces the special petroleum tax paid by oil companies under the current tax regime. The uplift related to investments will therefore also reduce the deferred special petroleum tax liability. The full effect of uplift is recorded in the accounts when the investment is made.

CAPITALIZED GENERAL AND ADMINISTRATIVE COSTS

All general and administrative costs associated with the development of petroleum fields are capitalized according to man-hours spent on each field up to production start and are thereafter depreciated using the U.O.P. method. PRODUCTION RIGHTS

Production rights represent the excess of the price paid over the cost of assets acquired by the company. Production rights are depreciated using the U.O.P. method. FURNITURE, FIXTURES AND CARS

Fixed assets are recorded in the balance sheet at cost after deduction of total ordinary depreciation. Ordinary depreciation is based on cost and is calculated on a straight line basis over the estimated economic life of the asset, which is 3 or 5 years. EXPLORATION COSTS

DEVELOPMENT COSTS AND DEPRECIATION AND WRITE DOWN

All offshore development costs are capitalized

20

IDEMITSU PETROLEUM NORGE AS

Exploration costs are accounted for in accordance with the “Successful efforts” method. Under this method, all costs


associated with the exploration of licenses are expensed as incurred, with the exception of drilling and testing costs of exploration wells where a commercial discovery is made. Such expenses are capitalized under ‘Tangible fixed assets’ and depreciated using the U.O.P. method together with the producing asset the discovery gave rise to. Exploration wells where the status of a discovery is pending are initially capitalized, and written off fully if the discovery is later deemed non-commercial.

are revalued individually at Norges Bank year end rates, and unrealized gains and losses are recognized through the profit and loss statement. FINANCIAL INSTRUMENTS

Short term forward currency exchange contracts outstanding at the end of the year are revalued to market value. All other gains and losses are recognized at the time of realization. CURRENT ASSETS AND LIABILITIES

Annual provisions are made for the future costs of well closure and removal of offshore installations. Provisions are calculated using the U.O.P. method on nominal figures.

Current assets and liabilities include items falling due within one year. ‘Bank and cash’ includes short term time deposits in banks. Current assets are recorded at face value. No losses are anticipated.

SALARY PRESENTATION IN PROFIT AND LOSS

INVENTORIES AND OVER-/UNDERLIFT OF

STATEMENTS

PETROLEUM PRODUCTS

The Accounting Act § 6 1 requires salaries to be presented separately in the profit and loss statement. Such detailed information is not available in the license accounts, and salaries from the license accounts are therefore included in the respective lines in the income statement.

Liabilities arising from lifting more than the company’s share of the joint venture’s petroleum production (overlifting) are valued at the higher of gross market value and production cost, and booked under ‘Other current liabilities and overlift’. Inventories and underlifting are valued at the lower of production or acquisition cost and net market value, and booked under ‘Current assets’. Full production cost including indirect cost is used for crude oil. For natural gas liquids and dry gas, full production cost after separation from crude oil is included according to the economic carrying ability principle.

ABANDONMENT COSTS

PENSION COSTS

The company finances a collective defined benefit retirement plan which covers all its local employees. This plan is administered by a Norwegian insurance company. In accordance with actuarial calculations the net present value of the future pension obligations is estimated and compared with the value of all funds paid and previously saved. The difference is shown in the balance sheet under ‘Other long term liabilities’. Paid pension premiums and changes in net liability are recorded under ‘Salaries, social security, pension payments’ in the profit and loss statement. FOREIGN CURRENCY TRANSACTIONS

Transactions in foreign currencies are translated at the exchange rates prevailing at the time of the transaction. Unrealized gains and losses arising from the individual revaluation of long term assets and liabilities at Norges Bank year end rates are recognized through the profit and loss statement. Unrealized gains are not recognized for tax purpose except to the extent that they represent a reversal of a previously recorded loss. Short term assets and liabilities

GAS BANKING

Gas banking inventories are valued at the lower of production cost (see above) and net market values. RESEARCH AND DEVELOPMENT

The company’s research and development costs, which are immaterial amounts, are expensed as incurred. MAINTENANCE

Maintenance costs are expensed as incurred. No accrual is made for periodic maintenance. CASH FLOW MODEL

The indirect model is used. ‘Cash and bank’ includes bank deposits available for use at year end, except as noted for restricted funds.

ANNUAL REPORT 2005

21


NOTE NOTER NOTES TO THE ACCOUNTS

IDEMITSU PETROLEUM NORGE AS

22


NOTE 1 SALES

CRUDE OIL:

All of the company’s crude oil production is sold to the ultimate parent company, Idemitsu Kosan Co., Ltd. The crude oil is sold on a FOB (Free On Board) basis. Idemitsu Kosan Co., Ltd. sells this oil directly to Statoil on a long term sales agreement. Idemitsu Petroleum Norge AS receives the norm price linked price paid by Statoil less a margin for Idemitsu Kosan Co., Ltd. This margin covers all sales and transportation and shipping activities as well as swapping arrangements to secure crude oil supply to Japan. In 2005, a total of 10.6 million barrels were sold. ROYALTY:

Idemitsu does not participate in production licenses where royalty is levied. NGL:

NGL is sold to Norsk Hydro based upon market prices, except ethane which is sold to Statoil. DRY GAS:

All dry gas is sold to Statoil on a long term contract. TARIFF INCOME:

Vigdis well stream is processed at the Snorre TLP. Idemitsu has a 9.6% share of both fields. The processing tariff revenue and cost, which are booked under ‘Tariff income’ and ‘Production cost and Process Tariff’ respectively, have no net profit impact on the company’s accounts.

NOTE 2 PENSIONS

Pension rights for Japanese employees are covered in Japan by group companies. Idemitsu has a group pension insurance with Vital for the non-Japanese employees. Net pension obligations are recorded under ‘Provisions’ in the Balance sheet. The annual change in net obligation is recorded as expense under ‘Other operating and administrative expenses’ in the Profit and loss statement. Below 12G

Amounts in NOK

Service cost Interest cost

Above 12G

2005

2005

824 072

640 925

350 415

427 751

-323 307

-189 719

Amortization

66 257

157 600

Administration

49 090

37 176

966 527

1 073 733

Return on pension plan assets

Net pension cost

Below 12G

Mimimum obligation

Above 12G

31.12.05

31.12.04

31.12.05

31.12.04

5 545 630

4 244 148

4 765 629

3 801 446

Estimated effect of future salary increase

2 000 045

1 613 525

4 080 332

4 028 082

Estimated pension obligations

7 545 675

5 857 673

8 845 961

7 829 528

Pension plan assets (market value)

6 712 849

5 372 726

3 966 655

3 128 944

0

0

586 227

644 850

1 923 440

1 470 548

2 152 782

2 296 987

-1 090 614

-985 601

2 140 297

1 758 747

Unrecognized effects of change of plan Unrecognized effects of estimate deviations Net benefit obligations

Economical assumptions: Discount rate

5,5 %

Expected compensation increase

4,0 %

Expected return on pension plan assets

5,5 %

Adjustments in National Insurance base rate

2,5 %

Adjustments in pensions

2,5 %

ANNUAL REPORT 2005

23


Total booked compensation to auditor PriceWaterhouseCoopers AS is NOK 217 421, of which NOK 207 221 for statutory audit.

Split of payroll expenses:

2005

2004

Wages and salaries

30 240 069

34 635 600

Social security tax

6 050 375

6 873 151

Pensions including pension liability

2 040 260

1 693 860

420 994

428 255

Allowances

The Idemitsu net remaining reserves (P50) at the end of 2005 are broken down as follows. million Sm3

MMSTB

11.0

69

Tordis Area

1.8

11

Vigdis Area

2.4

15

Statfjord Øst & Sygna

0.4

3

Fram Area (O.E.)

5.7

36

Total (31.12.05)

21.3

134

Snorre

The net remaining reserves at the beginning of 2005 were 20.4 million Sm3 (128 MMSTB). During 2005, 1.8 million Sm3 (12 MMSTB) of net crude was produced while still increasing the remaining reserves. This reserve replacement was mainly due to the addition of the Fram B reserves in the resource base, and other reserve upgrades in the Fram Area.

24

IDEMITSU PETROLEUM NORGE AS

NOTE 4 DEPRECIATION AND RESERVES

The reserve numbers shown below are the estimated total producable reserves. The depletion of the reserves requires substantial future investments. These future investments are included in the depreciation base. The resulting depreciation charge is estimated to be equal to the depreciation of current investments over the reserves exploitable from the current investments. Production rights are depreciated using the U.O.P. method based on the total production from the area in question. Idemitsu only accounts for reserves of crude oil (except for Fram Area), as reserves of natural gas liquids and dry gas have very little net economic value for the company.

NOTE 3 ADMINISTRATION COSTS

Non-employed Directors have each received NOK 10 000 as remuneration. Employed Directors have not received remuneration for their work as members of the Board. Total compensation to Managing Director was 2.9 million NOK. No employee has options, profit-sharings or “golden parachutes”. There are no loans or pledges of security to the Managing Director or board members.


NOTE 5 FIXED ASSETS (1000 NOK)

a) Petroleum fields under development Cost 01.01.05

Additions in 2005

Disposals in 2005

Book value 31.12.05

Capitalized interest

Fram Øst

8 476

133 509

-

141 985

-

Total

8 476

133 509

-

141 985

-

Book value 31.12.05

Capitalized interest

b) Petroleum fields in operation Cost 31.12.05

Accum. depr. 01.01.05

Depr. in 2005

Accum. depr. 31.12.05

-

3 652 985

-

1 584 945

-2 558 378

-188 510

-2 746 888

906 097

325 327

-483 651

-143 055

-626 706

958 238

12 304

-

130 017

289 744

-254 590

-10 245

-264 835

24 908

776 879

18 284

15 814

-

795 163

-669 205

-48 402

-717 608

77 555

950 493

24 706

38 947

-

989 440

-646 591

-85 537

-732 127

257 313

39 587

Cost 01.01.05

Additions in 2005

Disposals in 2005

Snorre

3 553 967

99 018

Snorre B

1 534 814

50 131

Statfjord Øst

277 440

Tordis Vigdis Sygna

90 062

494

-

90 556

-71 647

-5 123

-76 771

13 786

2 939

508 283

4 727

-

513 010

-117 091

-51 475

-168 566

344 444

16 546

7 691 937

223 905

-

7 915 842

-4 801 152

-532 348

-5 333 501

2 582 341

554 936

Accum. depr. 01.01.05

Depr. in 2005

Accum. depr. 31.12.05

Book value 31.12.05

Capitalized interest

Prod.rights Snorre

-633 350

-27 438

-660 787

358 313

21 879

Prod.rights Fram

-59 137

-24 464

-83 602

367 398

0

-692 487

-51 902

-744 389

725 712

21 879

Cost 31.12.05

Accum. depr. 31.12.05

Book value 31.12.05

Capitalized interest

Fram Vest Total

c) Production rights - See Note 7

Cost

Total

1 470 101

d) Successful efforts exploration wells Cost 01.01.05

Additions in 2005

34/7-25S (STUJ)

Disposals in 2005

7 338

-

7 338

-3 867

3 471

-

34/7-29S (H-North)

10 798

-

10 798

-

10 798

-

34/7-31A (Borg N)

13 796

-

13 796

-3 866

9 930

-

35/11-13 (Astero)

-

28 307

28 307

-

28 307

-

34/7-D4-H (M5)

-

17 659

17 659

-

17 659

-

35/2-1 (Peon)

-

19 446

19 446

-

19 446

-

31 932

65 413

-

97 344

-7 733

89 611

-

Cost 01.01.05

Additions in 2005

Disposals in 2005

Cost 31.12.05

Accum. depr. 01.01.05

Depr. in 2005

Depr. disposals in 2005

Accum. depr. 31.12.05

Book value 31.12.05

21 222

3 777

-977

24 021

-15 930

-3 301

867

-18 364

5 658

Total

e) Other fixed assets

Furniture & fixtures

f) Additions of fixed assets (million NOK) Year Petroleum fields Furniture & fixtures

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

382

691

856

640

374

306

286

285

165

225

734

813

464

614

582

283

357

1

1

1

0

0

1

3

2

1

3

4

3

3

2

3

3

3

Sales of fixed assets is less than 2 million NOK accumulated.

ANNUAL REPORT 2005

25


Profit before tax Permanent differences

2005

2004

2 214 550 994

2 184 607 119

81 054 592

89 408 221

17 892 639

49 943 786

Movement temporary differences - fixed assets - other temporary differences Tax basis - corporate tax (28%) -uplift Tax basis - special tax (50%)

-74 381 681

95 288 919

2 239 116 544

2 419 248 044

-165 686 988

-175 014 624

2 073 429 555

2 244 233 420

1 663 667 413

1 799 506 162

Tax cost of the year Payable tax Correction prior years payable tax Change deferred tax Total tax cost

-18 511 216

-292 614

72 172 593

-76 482 633

1 717 328 789

1 722 730 915

Deferred tax liability related to temporary differences 31.12 Fixed assets

1 651 245 385

Other temporary differences Basis for corporate tax

1 669 138 024

-143 300 322

-217 682 003

1 507 945 063

1 451 456 021

-uplift, to be received

-312 069 628

-368 291 909

Basis for special tax

1 195 875 434

1 083 164 112

406 407 686

Deferred corporate tax

28%

422 224 618

Deferred special tax

50%

597 937 717

541 582 056

1 020 162 334

947 989 742

Total deferred tax

26

IDEMITSU PETROLEUM NORGE AS

NOTE 6 TAXES (NOK)

Difference between profit before tax and tax basis


NOTE 7 §10-RULINGS

The Petroleum Tax Act §10 states that transfer of interests in production licenses is subject to approval by the Norwegian government, and that the government can set certain conditions for approval related to the tax treatment of the transfer of interest. In connection with Idemitsu’s 1989 acquisition of a 9.6% interest in the production licenses 057 and 089 from Statoil, such a §10-ruling was made. This ruling states that:

Cash payment to Statoil shall be treated as follows:

NOK

Cash payment for 9.6% of PL 057 and PL 089

1 100 000 000

Interest

21 879 151

Total

1 121 879 151

Allocated to Development cost Snorre

- 102 778 360 - 1)

Remainder - Production rights

1 019 100 791 - 2)

1) Tax deductible over 5 years straight line. Uplift is given. 2) Never tax deductible for corporate tax or special petroleum tax purposes. No uplift given.

In the Assignment Agreement for purchase of the 9.6% shares in PL057 and PL089, Idemitsu and Statoil agreed that Statoil shall receive 50% of the excess monthly value of petroleum production from these fields if the norm price exceeds USD 20/bbl, inflation-adjusted from 1989. There is a cap on the total amount. In 2005, the norm price exceeded this level in all months. An accrual of 120.6 million USD has been made in the 2005 accounts for the payment of such premium. The liability is valued at the USD/NOK rate of 31.12.05. In connection with Idemitsu’s acquisition in 2002 of shares in licenses 090, 174 and 191 from SDFI, another §10-ruling was made. This ruling states that the consideration to SDFI shall be nondeductible for Idemitsu. The consideration is classified as ‘Production rights’ in Idemitsu’s Balance sheet, and the depreciation according to the U.O.P. method is not deducted for tax purpose.

NOTE 8 INTERESTS IN NORWEGIAN PRODUCTION LICENSES (AS OF 31.12.05)

Production license

Block

Expiry year

Producing fields

Operator

Interest

057

34/4

2015

Snorre

Statoil

9.6%

089

34/7

2024

Snorre, Tordis area, Vigdis area

Statoil

9.6%

Statfjord Øst

Statoil

4.8%

1)

Sygna

Statoil

4.32%

2)

Fram Vest

N. Hydro

15% 15%

090

35/11

2024

090B

35/11

2024

N. Hydro

090C

35/11

2024

N. Hydro

15%

35/2

2010

N. Hydro

20%

318

1) According to current unitization agreement where PL089 and PL037 each has 50% interest. 2) According to first and final unitization agreement between PL089 and PL037.

ANNUAL REPORT 2005

27


Inventory

Inventory

Field

in barrels

value NOK

Vigdis

29 131

1 970 124

Tordis

14 951

977 329

Snorre

74 850

10 024 679

Fram

45 208

Value recorded as asset 31.12

3 192 370

A

Field

16 164 502

Overlift in barrels

Net liability NOK

31 172

12 385 343

Statfjord Øst Sygna

1 215

NOTE 9 INVENTORY

Crude oil

482 747

Value recorded as Other current liabilities and overlift 31.12

12 868 090

Inventory Natural gasoline Value recorded as asset 31.12

value NOK B

67 894 Net liability NOK

Value recorded as Other current liabilities and overlift 31.12

3 068 681

Idemitsu does not have inventory of propane and butane, as these products are sold on a monthly production basis to Norsk Hydro.

Inventory Ethane Value recorded as asset 31.12

value NOK C

94 435 Net liability NOK

Value recorded as Other current liabilities and overlift 31.12

212 414

Gas banking As a participant in Statfjord Øst, Idemitsu has stored gas at Statfjord. The stored volumes are valued at the lower of production cost and net market value. Value recorded as asset at 31.12

D

NOK 3 723 987

Stock of spare parts etc. held by operators

E

NOK 48 467 036

Total inventory value A+B+C+D+E

NOK 68 517 853

Idemitsu records accruals for future removal and well closure cost according to the U.O.P. method for nominal numbers, retrospectively from each field’s start of production. Each year, the accrual is based upon updated information, and the accumulated accrual includes accrual for 2005 production, and changes in accruals for prior periods due to updated information. There are significant uncertainties inherent in the calculations of abandonment costs, which is highly dependent upon future technology levels and the degree of removal required. Idemitsu obtains abandonment cost estimates from the operators. The removal estimates are based upon complete removal and onshore disposal of any installations not below the seabed. Pipelines will be cleaned and left buried. Well closure cost includes cleaning wells and installing cement plugs in the permeable zones and upper part of the well. 28

IDEMITSU PETROLEUM NORGE AS

NOTE 10 ABANDONMENT COSTS

The Norwegian government may, at the termination of production or expiration of a license, require Idemitsu to remove offshore installations. Given reserve estimates at license expiry, Idemitsu finds it unlikely that the Norwegian government will exercise its option to take over the installations. With current and expected future fishery and environmental concerns, it is likely that the Norwegian government or international institutions and legislation will require the installations to be removed. It is also necessary to close down all production and injection wells as their use is completed. Well closure and removal cost accrual is recorded gross before tax.


Full field well closure cost

Full field removal cost

IPN share

Reservoir produced

IPN net well closure cost

IPN net removal cost

IPN total accrual

Snorre

823

675

9.6%

62 %

50.52

41.43

91.95

Snorre B

637

500

9.6%

30 %

18.71

14.69

33.40

Tordis

344

119

9.6%

72 %

24.09

8.33

32.42

Vigdis

701

142

9.6%

58 %

39.40

7.98

47.38

Statfjord Øst

264

199

4.8%

84 %

10.93

8.23

19.16

Sygna

120

30

4.32 %

68 %

3.62

0.91

4.53

Fram Vest

295

81

15 %

26 %

11.51

3.16

14.67

158.78

84.73

243.51

Previously recorded

149.41

81.31

230.72

This year’s expense

9.37

3.42

12.79

(million NOK) Field

Idemitsu’s through-put based share of pipeline / transportation system removal is immaterial. There is currently no legislation for onshore installation of pipelines on foreign territories. No accrual is made.

NOTE 11 FINANCIAL INSTRUMENTS

Revenues are largely denominated in USD, while investments and operating costs generally accrue in NOK. Idemitsu uses forward exchange contracts to minimize this NOK exposure. All foreign exchange contracts entered into are short term.

NOTE 12 FINANCIAL RISK

With the exception of some short term foreign exchange contracts being entered into, Idemitsu is fully exposed to fluctuations in the USD / NOK exchange rate.

Idemitsu had a number of forward exchange contracts outstanding as of 31.12.05. All outstanding contracts have been revaluated to market value at 31.12.05. The annual requirement to exchange currencies from USD to NOK is approximately between 200 and 300 million NOK for operations. In addition, all tax payments must be made in NOK. For investment in petroleum fields, the exchange requirement varies. The credit risk of these foreign exchange contracts is negligible as the counterparties are financially strong banks. The foreign exchange contracts are linked to the real foreign exchange requirement so there is no liquidity risk.

In 2005, the company was fully exposed to oil price fluctuation risk. At year end, Idemitsu had no long term assets or liabilities in foreign currency.

ANNUAL REPORT 2005

29


Changes in equity: Retained earnings 31.12.04 Profit 2005 Extraordinary dividend December 2005 Dividends declared Retained earnings 31.12.05

1 858 497 331 594 1 430

678 222 300 200 400

149 205 000 000 354

Offshore assets are insured at replacement value with third party insurance companies. Idemitsu itself has not been a party to any legal disputes, but is a partner in partnerships which are involved in several legal disputes. None of these legal disputes are assessed to have a material negative impact on Idemitsu’s financial position. Through its license ownership interests, Idemitsu has certain obligations for future investments. There are also substantial investments planned in fields where PDOs are not yet submitted to or approved by the government. Idemitsu does not have any leasing agreements that can be defined as financial leases. Current leasing agreements are operational and the expenses are included under ‘Other operating and administrative costs’. Idemitsu is committed to certain dry gas delivery, transportation, and processing obligations as an integral part of the license activity. These obligations are not in excess of planned future production.

30

IDEMITSU PETROLEUM NORGE AS

NOTE 14 OTHER LIABILITIES AND COMMITMENTS

Idemitsu, as all other oil companies operating on the Norwegian Continental Shelf, has unlimited liability for possible compensation claims arising from its offshore operations, including pollution. To cover these liabilities, Idemitsu has obtained insurance covering such liabilities up to 1 065 million NOK for 100% share. The deductible is 30 million NOK. Liabilities arising from well blow outs are covered up to 1 916 million NOK for a 100% share, with a deductible of 30 million NOK. Liabilities arising from transportation of crude oil are the responsibility of the buyer, Idemitsu Kosan Co., Ltd.

NOTE 13 EQUITY

The share capital consists of 7 279 shares of NOK 100 000, all fully paid. All shares are owned by Idemitsu Snorre Oil Development Co. Ltd., Japan.


ANNUAL REPORT 2005

31


ARIGATO TUSEN TAKK THANKS 32

IDEMITSU PETROLEUM NORGE AS

Annual Report 2005  

Annual report

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