IDEMITSU PETROLEUM NORGE AS ANNUAL REPORT 2007
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Annual Report 2007, Idemitsu Petroleum Norge AS Design and Art direction: Uniform AS Photography: Page 5 and 14: Kai Myre Page 9: StatoilHydro. Page 11 and 13: Idemitsu Print: RK Grafisk AS
IDEMITSU PETROLEUM NORGE AS
2
CONTENTS KEY DATA
04
MESSAGE FROM THE MANAGING DIRECTOR
05
EXPLORATION
06
PRODUCTION AND OPERATIONS
08
IDEMITSU GROUP
11
ANNUAL REPORT OF THE BOARD OF DIRECTORS
12
PROFIT AND LOSS STATEMENT
16
BALANCE SHEET
17
CASH FLOW STATEMENT
19
ACCOUNTING PRINCIPLES
20
NOTES TO THE ACCOUNTS
23
AUDIT REPORT
31
ANNUAL REPORT 2007
3
KEy data 2007
2006
2005
2004
2003
Operating revenues, million NOK
5057
4592
4093
4234
3136
Operating profit, million NOK
2125
1967
2148
2226
1707
Profit after tax, million NOK
530
492
497
462
423
Crude oil sales, million barrels
11.2
10.2
10.6
15.6
14.3
Daily oil production, thousand barrels
31.2
27.9
31.7
40.2
39.3
Investments, million NOK
831
695
357
283
582
48%
41%
37%
46%
48%
Cash flow before financing, million NOK
487
- 426
1117
1434
439
Crude oil reserves, million Sm3
15.6
19.8
21.3
20.4
20.6
Return on capital
74%
72%
71%
64%
61%
Equity in % of balance
DEFINITIONS
4
Daily oil production
= Average daily oil production, Idemitsu share
Investments
= Offshore investments excl. production rights
Crude oil reserves
= Probable, commercially recoverable resources
Return
= Annual profit + interest expense +/- unrealized forex loss/gain on loan
Capital
= Share capital and interest-bearing loans at year end
IDEMITSU PETROLEUM NORGE AS
Kosuke Tsuji, Managing Director
message from the managing director The year 2007 has been a year of growth and increased activity for Idemitsu Petroleum Norge AS (Idemitsu). The company’s license portfolio has steadily increased over several years, and this increase continued in 2007 through license farm-in and Awards in Predefined Areas (APA). Idemitsu is determined to be a key value creator in the Norwegian oil industry, by actively following up its existing licenses and by acquiring and exploring new prospective acreage in all parts of the Norwegian Continental Shelf. In order to support the increased activity, Idemitsu has actively recruited additional staff in 2007. Among our keys goals is to offer our employees superior professional challenges and a good working environment based on cooperation and team spirit. The expanded organization is creating stronger demand for a professional management and support organization. Idemitsu has made significant efforts to develop its management system in order to sharpen its focus on HSE and assure reliable financial reporting. The Japanese version of the Sarbanes-Oxley act was adopted in 2006, and we are working closely with our parent company in order to document and improve our internal control. On the operational side, various important projects have been advancing further during 2007. The PDO for Vega Sør was approved by the government in June 2007 and the development is so far progressing according to schedule. Also in quadrant 35, Fram Øst completed its first full year in operation, with production beyond what has been expected. Exploration activity remained high in the Fram area. In 2007 one discovery was made, and another successful well was commenced. In Idemitsu’s other important core area, Tampen, the main attention has been awarded to the future of Snorre. The expected production life of Snorre has been extended several times, and efforts are now being made to optimize the later stages of Snorre’s production cycle. Idemitsu will take an active role in order to support the operator’s efforts to maintain a high HSE standard and maximize the value creation from Snorre. Corporate Social Responsibility has always played a key role in the company philosophy of the Idemitsu group. In 2007 Idemitsu renewed its close ties with the Munch museum in Norway, by entering a sponsorship agreement related to the restoration project for the recovered Scream and Madonna paintings. I am hopeful that this agreement will create a foundation for many years of continued fruitful cooperation to the mutual benefit of both parties.
Kosuke Tsuji Managing Director ANNUAL REPORT 2007
5
EXPLORATION 2007 was a successful year for Idemitsu’s exploration activities in Norway. The Norwegian Petroleum Directorate quotes 32 NCS exploration and appraisal wells being spudded in a year that yielded 12 discoveries. Idemitsu participated in three of the wells with exploration and/or appraisal objectives. Both of the two wells now completed (January 2008) proved up new oil and gas resources. Following applications for Awards in Pre-defined Areas 2006 Idemitsu was awarded ownership in two new exploration licenses during February 2007. The licenses, designated PL 318 B (IPN interest 20%) and PL 420 (IPN interest 30%), comprise part blocks 35/4 & 5 and the western part of block 35/9, respectively. PL 318 B is located south of our PL 318 Peon gas discovery, while PL 420 is situated close to the Gjøa oil and gas discovery. In PL 057 (part block 34/4; 9.6% IPN interest), remaining exploration potential is under evaluation. In PL 089 (part block 34/7; 9.6% IPN interest) exploration has entered a late phase. However, the license still contains attractive exploration potential. In 2007 no exploration drilling was carried out due to limited rig availability. In PL 090 (located in block 35/11) exploration well 35/11-15 S was drilled by the semisubmersible rig “Transocean Winner” to explore the H Nord prospect. The well proved oil and gas in Upper Jurassic sandstones. Also well 35/11 B 23-H, which was drilled by the semisubmersible “Bideford Dolphin”, proved oil in the Middle Jurassic sandstones, in the C-Øst prospect. Both discoveries are considered for production via tie-in to one of the facilities in the Fram area. Further work to mature undrilled prospects has been undertaken and will proceed. In PL 090 B (located mainly within block 35/11; 15% IPN interest), pre-PDO studies for the Astero discovery have been undertaken.
6
IDEMITSU PETROLEUM NORGE AS
During 2007 Idemitsu acquired a 15% interest in PL 293 (blocks 34/12 and 35/10) from Eni Norge. Early November 2007 exploration well 34/12-1 spudded to test the Afrodite prospect, and drilling was ongoing as of January 2008. In PL 318 (block 35/2; 20% IPN interest) the Peon gas discovery was made during August 2005, about 100 km west of the coast of Sogn og Fjordane county. A programme aiming to increase the understanding of the discovery is now underway, in order to seek an optimal field development solution. Additional data acquisition and planning activities are in progress, and further drilling activities lie ahead. In PL 373 S (part block 34/4; 25% IPN interest) reprocessing and interpretation of 3D seismic were performed. An obligation well will be drilled during 2008. In Idemitsu-operated PL 377 S (part block 35/7; 70% IPN interest) 3D seismic acquisition over the prospective areas was completed in June 2007. In PL 390 (blocks 6506/4 and 6505/6 & 9; 30% IPN interest) and PL 391 (block 6506/1; 20% IPN interest), 3D seismic acquisition over both licenses was carried out. In PL 420 (part block 35/9; 30% IPN interest) reprocessing of 3D seismic has been undertaken. Idemitsu will utilise its staff of skilled E&P professionals to continue and strengthen its exploration activities during the years to come. An important contribution towards meeting this end is further acquisition of promising exploration acreage through active licensing round participation and pursuit of attractive farm-in opportunities.
Gas Oil Condensate Idemitsu licensed areas Production license
Interest (%) Field/discovery
057
9.6
Snorre
089
9.6
Statfjord Øst Sygna Tordis Vigdis
Marulk
Norne Idun
PL 39 391 9
090
15.0
Fram area H-Nord C-Øst
090 B
15.0
Astero
090 C
15.0
Vega Sør
090 D
15.0
293
15.0
318
20.0
318 B
20.0
373 S
25.0
377 S
70.0
390
30.0
391
20.0
420
30.0
Skarv
PL 390
6505 6505 5
Victoria
Snadd
6506 6 6
65 65 650 507 7
6508 6 508 8
650 650
6408 6 8
6 a 640
Heidrun Smørbukk
Peon
Åsgard
Kristin
Midgard
Tyrihans Tyrihans Sør Lavrans
6 5 6405
Mikkel
6406 6 6
6 07 640 7
211
PL 318
a Trondheim
PL 318 B
Snorre
Statfjord Øst
Bergen Oslo
35
34
Sygna
b
Agat
Peon
PL 373 S
Visund
PL 377 S
Vigdis Tordis
Gullfaks
3 PL 420
Vega
Kvitebjørn rn
Gjøa
Vega Sør Astero PL 293 PL 090 C PL 090 B H-Nord C-Øst Fram PL 090
3
30
31
Huldra Veslefrikk
3
Troll
b ANNUAL REPORT 2007
7
Production and operations TAMPEN AREA Five of Idemitsu’s six producing fields are located in the Tampen Area of the North Sea. Good cooperation has been achieved among the fields in this area with StatoilHydro as the common operator. Through cooperation, the Tampen fields have established common use of Light Well Intervention vessels, sharing of long-term 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, which for the Snorre field is expected to be at least until 2030. Snorre Spanning blocks 34/4 and 34/7, the Snorre field has been producing since 1992, and embraces two platforms A and B. Snorre A is an integrated production, drilling and quarters (PDQ) unit. This tension leg platform is moored to the seabed by steel tethers. Oil and gas from Snorre A is piped to the nearby Statfjord A platform for final processing. The oil is then loaded into shuttle tankers. Gas not used for injection at the Snorre field is exported through the Gassled system to Kårstø. The Snorre B platform came on stream in June 2001. This semisubmersible PDQ floater lies about seven kilometers north of the A platform. Oil from Snorre B is piped to Statfjord B for storage and export. 8
IDEMITSU PETROLEUM NORGE AS
Gas not used for injection may be exported via Snorre A. Water Alternate Gas (WAG) injection is used to maintain pressure in the reservoir. Snorre A is in the process of being modified for safe operation in the extended production period to 2030. Major activities cover upgrade of the safety systems, new facilities for better working environment, modifications for increased robustness and increased recovery. This will improve the HSE level and the production regularity of the platform. Idemitsu’s share of the crude oil production from the Snorre field was 0.80 million Sm3 (5.1 MMSTB) in 2007, as compared to 0.78 million Sm3 (4.9 MMSTB) in 2006. Idemitsu actively contributes to the HSE work for the field by participating in management HSE inspections on- and offshore. The Snorre unit has a determined strategy for increasing field recovery with a defined schedule for various IOR projects the next years. There are also plans being developed for continued production after possible shut-down of the connected facilities. 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. Water injection is used to maintain pressure in the reservoirs.
The Snorre A platform
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 decided in 2005 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 The Tordis IOR step one was completed in 2006 and the pressure at Gullfaks C has been reduced. Tordis IOR step two was completed and started operation in December 2007, and 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 0.23 million Sm3 (1,45 MMSTB) in 2007, as compared to 0.16 million Sm3 (1.01 MMSTB) in 2006. A prolonged revision stop resulted in lower production than planned. 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, while Vigdis extension phase two will start production in 2008. After completion of the Vigdis extension projects, the field will altogether comprise six 4-slot templates and two satellite structures. A project has been established to utilize spare water injection capacity from Statfjord C to the Vigdis area. Additional capacity can be used for future developments. This project will start operation in October 2008. Idemitsu’s share of the Vigdis crude oil production was 0.32 million Sm3 (2.02 MMSTB) in 2007, as compared to 0.36 million Sm3 (2.26 MMSTB) in 2006. Statfjord øst Statfjord Øst is a subsea satellite field tied in to the Statfjord C platform. In Statfjord Øst Idemitsu’s share of crude oil production was 0.06 million Sm3 (0.4 MMSTB) in 2007. This is approximately the same production as in 2006. ANNUAL REPORT 2007
9
Sygna Sygna is also a subsea satellite field tied in to the Statfjord C platform. Idemitsu’s share of the Sygna field’s crude oil production was 0.02 million Sm3 (0.1 MMSTB) in 2007. Also Sygna produced approximately the same volume as in 2006. FRAM AREA In 2002 Idemitsu purchased a 15% share in the PL 090 license, which later has been divided into PL 090, PL 090 B and PL 090 C and further expanded with area PL 090 D. Today the Fram licenses are among the core areas 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 2007 was 0.19 million Sm3 (1.2 MMSTB), as compared to 0.23 million Sm3 (1.4 MMSTB) in 2006. Fram Øst The Fram Øst is developed by two 4-slot subsea templates with five producers and two water injectors. By the end of 2007 3 producers were in operation, while the remaining 2 producers and 2 injectors are planned to be completed by the beginning of 2009. Production started 30th October 2006, with an expected plateau oil volume of 7 000 Sm3/day. Idemitsu’s share of the Fram Øst crude oil production in 2007 was 0.20 million Sm3 (1.3 MMSTB) as compared to 0.02 million Sm3 (0.1 MMSTB) in 2006. Gas Export from Fram Vest and Øst Gas export started from the Fram Vest and Fram Øst wells on 1 October 2007 at a gross rate of 0.77 million Sm3/day (Idemitsu’s share 0.11 million Sm3/day). The export rate will increase to a gross rate of 1.1 million Sm3/day (Idemitsu’s share 17 million Sm3/day) from 1 October 2008 and to a gross rate of 2 million Sm3/day from 1 October 2009 (Idemitsu’s share 0.30 million Sm3/day) and onwards. The Fram gas is routed via Troll C to Kollsnes,
10
IDEMITSU PETROLEUM NORGE AS
where the liquids are extracted and sent to Mongstad, while the dry gas is piped to the market in Europe. Vega Sør The Vega Sør PDO was approved by the authorities in June 2007. Vega Sør will be jointly developed with PL 248 (Vega Sentral and Vega Nord). The development consists of 2 producers drilled from a subsea 4-slot template and a new production pipeline connected to Gjøa platform through Vega Sentral and Vega Nord template. The production will be processed on the Gjøa platform. Condensate will be transported through a new pipeline to Troll II transportation system, while gas will be transported through a new gas pipeline through the FLAGS system to the terminal in St. Fergus UK. Production start is planned to be October 2010. Work is at present ongoing to include the Vega Sør oil volumes in the Vega Sør gas development through drilling of commingled wells (producing simultaneously from the gas/condensate and oil reservoirs). The main challenge is related to oil handling capacity on Gjøa. Expected concept selection is 2nd quarter 2008 and PDO approval within 3rd quarter 2008. Astero The concept selection for a possible Astero development is scheduled to 2nd quarter of 2009. Seismic shooting is at present ongoing (also covering the Vega area) and further interpretation will be carried out during 2008. Future development within the Fram Area There have been 3 discoveries within the PL 090 and PL 090 D areas through pilot wells drilled as sidetracks to the producers in Fram Øst in 2007. These discoveries make valuable contributions to the future development of the area and different development scenarios will be pursued both internally in IPN and within the license.
One of the Idemitsu petrol stations in Japan
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. Idemitsu has placed the concept “Respect for Human Beings” at the starting point of management. This line of thought is based on the fact that human beings are the main entity of economy and society, not materials and money – a caution against the cart before the horse. We emphasize “Respecting Harmony and Servicing the Public with Selflessness”, ideals that have been cherished by Japanese people since ancient times. 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. In order to secure future oil and gas reserves and production, Idemitsu is actively pursuing a balanced combination of asset opportunities and new exploration acreages in our core areas of Norway, United Kingdom and Southeast Asia. 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 31.03.2007)
Sales revenue
3 395 billion JPY
Balance
2 333 billion JPY
Employees
7 474
Gas stations
5 059
Refineries in Japan Petrochemical plants in Japan Overseas offices
4 2 36 cities
ANNUAL REPORT 2007
11
ANNUAL REPORT OF THE BOARD OF DIRECTORS 2007 Introduction 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, and Vigdis fields. 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 PL 090. Within PL 090, Fram Vest and Fram Øst started production in 2003 and 2006 respectively. Idemitsu is a 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% is held by the holding company Osaka Gas Summit Resources Co., Ltd. (Osaka Gas 70% and Sumitomo 30%) Exploration & Portfolio Idemitsu was awarded two license shares in early 2007 from the Awards in Predefined Areas (APA) 2006. They are both located in the Northern North Sea. Idemitsu also farmed into the PL 293 license, where an exploration well was 12
IDEMITSU PETROLEUM NORGE AS
spudded in late 2007. There were two discoveries in Fram area in 2007, H-North and C-Øst. Both of them are close to the existing production facilities. The Board of Directors is pleased that the active area of Idemitsu is expanding, and 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. Production & Operations The total net production from Idemitsu’s producing fields in 2007 was higher than in 2006. Various IOR projects and the added production from Fram Øst has contributed to the increased production in 2007. Gas sales from the Fram area commenced on 1 October 2007. For the Vega Sør development (PL 090 C), the PDO was approved by the government in June 2007. Production is scheduled to start in 2010. Idemitsu is the operator for PL 377 S in the Northern North Sea. In 2007, the acquisition of 3D seismic was completed and the block evaluation is ongoing. Health, Safety & Environment (HSE) Idemitsu takes the ‘see to’ duty as partner and operator seriously. We are committed to monitor and enhance health and safety and protect the external environment in our
In June 2007 IPN and the Munch Museum entered into a sponsorship agreement by which IPN will support the Munch Museum with an amount of NOK 4 million for research and conservation of the paintings “Scream” and “Madonna”. (Anette Wiig Bryn, Oslo City Council and Kosuke Tsuji, Managing Director.)
licenses. The objective is to avoid accidents and provide a safe work environment for everybody working on installations where Idemitsu is a partner and operator. As of yet, Idemitsu has no responsibility for offshore drilling or production operations. Idemitsu participated in 2007 in a management HSE inspection on Snorre A and Snorre B in accordance with our ‘see to’ duty as a partner. Safety and environmental matters arising from the activities in our partner-operated licenses are reported to the authorities by the operators, in accordance with industry practice. In the Idemitsu operated license PL 377 S a bridging document was prepared between Idemitsu and the operator of the seismic vessel, including HSE issues such as handling of potential emergency situations. HSE preparation for possible own drilling in 2010 was initiated and this activity will expand in the years to come. Idemitsu is continuing the systematic build up of a solid HSE culture in the company. This responsibility is taken seriously, and the company’s monitoring and follow-up is consistent with and supported by its Governing Documentation. At the end of the year, the company had 24 permanent employees. The Board of Directors regards the working environment as good. Total sick leave in 2007 was 1929 hours, equaling 4.7% of total working time. This was slightly below the sick leave in 2006. There have been no accidents or damage incidents. Idemitsu has a practice of equal opportunity for both genders.
The number of women in the Board of Directors has been 1 (20%) in 2007. The company’s office activities have not caused pollution to the external environment. Financial result (1) Profit and loss statement Total sales income has increased by 13% compared to 2006. The increase is mainly due to higher crude oil price. The total sales volume of crude oil increased from 10.2 to 11.2 million barrels. Operating expenses have increased with almost 12%. As part of the sales agreement for PL 089 and PL 057, Idemitsu must pay to the seller 50% of sales value of petroleum above a certain threshold level of the crude oil price. The total booked cost for this obligation in 2007 is 1108.6 million NOK. Depreciation also increased compared to 2006 due to higher production. Total investment in productions facilities in 2007 was 831 million NOK. (2) Balance, liquidity and cash flow Idemitsu has currently no long term loans. No dividend has been proposed for 2007. Equity represents 47.9% of total assets. 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. The 2007 financial statement is given under the going concern assumption. ANNUAL REPORT 2007
13
Financial risk The company has so far been fully exposed to oil price fluctuation 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. 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. OUTLOOK 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 2008. Due to the solid equity and high cash flow from existing licenses,
Idemitsu can expect to be profitable even at significantly lower crude oil prices. The crude oil production and sales volume also affect the annual results. The 2008 production is not expected to change significantly compared to 2007. The Board of Directors is not aware of any significant matters not already presented in this report or in the financial statements. ALLOCATION OF THE ANNUAL PROFIT The profit for the year of NOK 530 222 272 is proposed allocated as follows: Dividends
0
Retained earnings
530 222 272
Total allocated
530 222 272
All of the accumulated retained earnings are available for dividends.
14 March 2008
Trond Stang Chairman
Kosuke Tsuji Managing Director
Cathrine Hambro
Hajime Oshima
Shogo Hirahara
14
IDEMITSU PETROLEUM NORGE AS
ÅRSREGNSKAP ACCOUNTS
財務諸表
Profit and loss statement NOTE
2007
2006
OPERATING REVENUE Sales of crude oil
1, 12
4 841 250 258
4 281 419 096
Sales of NGL
1
96 335 134
128 458 180
Sales of dry gas
1
91 335 149
153 344 899
Tariff income and other revenue
1
28 496 128
29 046 154
5 057 416 668
4 592 268 329
615 397 483
573 257 358
Total operating revenues
OPERATING EXPENSES Production cost, processing tariff, CO2 Gas and transportation costs Statoil premium
7
Changes in inventory and over- / underlift
9
Exploration costs
81 428 197
95 777 405
1 108 647 080
995 064 963
12 311 705
58 179 265
108 896 350
74 189 337
10
136 250 000
200 889 994
2, 3
33 686 472
35 554 738
3
27 007 413
34 201 329
Ordinary depreciation
4, 5
743 836 913
513 927 759
Ordinary depreciation of production rights
5, 7
Abandonment accrual expense Salaries, social security, pension payments Other operating and administrative costs
64 924 184
48 510 030
Total operating expenses
2 932 385 797
2 625 644 828
Operating profit
2 125 030 871
1 966 623 501
41 714 384
69 128 547
119 287 737
257 905 213
FINANCIAL INCOME AND EXPENSES Interest income Foreign exchange gain
11, 12
Interest expense Foreign exchange loss
11, 12
Other financial expenses
34 324 287
170 186 092
313 017 499
146 899
313 108
Net financial items
- 15 902 453
- 20 621 134
Profit before taxes
2 109 128 418
1 946 002 368
1 578 906 146
1 454 451 009
530 222 272
491 551 359
0
554 900 000
Allocated to retained earnings
530 222 272
- 63 348 641
Total allocated
530 222 272
491 551 359
Taxes on ordinary result
PROFIT FOR THE YEAR Proposed dividend
16
6 571 583
IDEMITSU PETROLEUM NORGE AS
6
BAlance sheet NOTE
31.12.2007
31.12.2006
5, 7
612 277 620
677 201 804
612 277 620
677 201 804
FIXED ASSETS INTANGIBLE FIXED ASSETS Production rights Total intangible fixed assets
TANGIBLE FIXED ASSETS Successful efforts exploration wells
5
313 291 477
163 561 247
5, 8
2 977 359 886
2 905 945 512
Production facilities under development
5
52 272 596
6 066 181
Furniture and fixtures and cars
5
4 014 092
4 587 319
3 346 938 051
3 080 160 259
514 000
428 600
429 857
0
Production facilities in operation
Total tangible fixed assets
FINANCIAL FIXED ASSETS Employee long term receivables Pension assets
2
Other long term receivables
1 613 592
873 141
Total financial fixed assets
2 557 449
1 301 741
3 961 773 120
3 758 663 804
82 706 444
76 839 519
TOTAL FIXED ASSETS
CURRENT ASSETS STOCKS AND UNDERLIFT Inventory, gas banking and underlift
9
DEBTORS Accounts receivable
28 594 796
22 333 869
Receivables from group companies
507 245 090
336 270 864
Other current assets
106 361 856
17 371 048
Total debtors
642 201 743
375 975 781
791 776 671
859 590 327
1 516 684 858
1 312 405 627
5 478 457 977
5 071 069 431
BANK Bank and cash
TOTAL CURRENT ASSETS
TOTAL ASSETS
ANNUAL REPORT 2007
17
BALANCE SHEET NOTE
31.12.2007
31.12.2006
EQUITY Paid-in share capital
13
727 900 000
727 900 000
Retained earnings
13
1 897 273 985
1 367 051 713
2 625 173 985
2 094 951 713
TOTAL EQUITY
LIABILITIES PROVISIONS Pension liabilities
2
0
1 297 854
Deferred tax
6
790 128 320
891 996 303
10
580 649 994
444 399 994
1 370 778 315
1 337 694 152
293 834 347
137 322 668
769 314
1 681 219
Abandonment accrual Total provisions
CURRENT LIABILITIES Suppliers payable Payables group companies Accrued payroll taxes, VAT, etc. Taxes payable
6
Other current liabilities and overlift
9, 14
6 217 337 768 661 432
202 410 595
724 540 910
Total current liabilities
1 482 505 678
1 638 423 566
TOTAL LIABILITIES
2 853 283 992
2 976 117 718
5 478 457 977
5 071 069 431
TOTAL EQUITY AND LIABILITIES
Kosuke Tsuji
Trond Stang
Cathrine Hambro
IDEMITSU PETROLEUM NORGE AS
Shogo Hirahara
Managing Director
Chairman
18
4 318 369 981 173 053
Hajime Oshima
cash flow statement 2007
2006
2 109 128 418
1 946 002 368
CASH GENERATED FROM / USED IN OPERATING ACTIVITIES Profit / (loss) before taxes for the year
- 1 468 262 508
- 1 704 123 020
Ordinary depreciation
Taxes paid
808 761 097
562 437 789
Accrual for abandonment cost
136 250 000
200 889 994
Pension accrual
- 1 727 711
248 170
- 104 000
- 221 620
- 85 622 397
- 656 712 506
1 498 422 900
348 521 174
- 2 077 290
- 2 069 465
104 000
221 620
0
0
Investment in production facilities
- 831 022 251
- 695 045 297
Investment in successful exploration wells
- 177 515 164
- 77 377 795
- 825 850
- 595 641
- 1 011 336 556
- 774 866 578
0
0
- 554 900 000
- 594 200 000
0
0
(Gain) / loss on sale of fixed assets Change in inventory and short term assets and liabilities (excl. dividend payment) Net cash flow from operations
A
CASH FLOW USED FOR INVESTMENTS Investment in furniture and fixtures and cars Proceeds from sales of fixtures and cars Investment in production rights
Change in other long term assets Net cash flow to investments
B
CASH FLOW USED FOR FINANCING Share capital increases / (decreases) Paid dividend New loans Loan repayments Net cash flow to financing
Net movement in bank and cash
0
0
C
- 554 900 000
- 594 200 000
A+B+C
- 67 813 656
- 1 020 545 404
Bank and cash at 1 January
859 590 327
1 880 135 731
BANK AND CASH AT 31 DECEMBER
791 776 671
859 590 327
MNOK
MNOK
4.8
4.6
Bank and cash: Restricted funds for employee withholding tax
ANNUAL REPORT 2007
19
ACCOUNTING PRINCIPLES 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. 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. DEVELOPMENT COSTS AND DEPRECIATION AND WRITE-DOWN All offshore development costs are capitalized 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.
20
IDEMITSU PETROLEUM NORGE AS
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. 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. 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 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.
ABANDONMENT COSTS 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.
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.
SALARY PRESENTATION IN PROFIT AND LOSS STATEMENTS 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.
CURRENT ASSETS AND LIABILITIES 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.
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 are 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’ or ‘Financial fixed assets’. 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 are revalued individually at Norges Bank year end rates, and unrealized gains and losses are recognized through the profit and loss statement.
INVENTORIES AND OVER- / UNDERLIFT OF PETROLEUM PRODUCTS 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. 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 2007
21
注記
NOTER NOTES
NOTES TO THE ACCOUNTS
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 StatoilHydro on a long term sales agreement. Idemitsu Petroleum Norge AS receives the norm price linked price paid by StatoilHydro 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 2007, a total of 11.2 million barrels was sold. DRY GAS: All dry gas is sold to StatoilHydro on long term contracts.
2.
NGL: All NGL is sold to StatoilHydro on long term contracts. 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. ROYALTY: Idemitsu does not participate in production licenses where royalty is levied.
PENSIONS
Pension rights for Japanese employees are covered in Japan by group companies. Idemitsu has a group pension insurance with Vital covering 17 local employees. The group pension insurance is in accordance with the requirements stated in Norwegian pension legislation. 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. Amounts in NOK
Below 12G
Above 12G
2007
2007
Service cost
1 873 237
361 722
Interest cost
380 969
81 803
Return on pension plan assets
- 428 510
- 41 761
Amortization, termination of scheme
-
- 3 476 368
Amortization, change of plan
-
527 604
Amortization, estimate deviations
39 902
781 706
Administration
57 656
-
1 923 254
- 1 765 294
Net pension cost
Mimimum obligation
31.12.07
Below 12G 31.12.06
31.12.07
Above 12G 31.12.06
5 266 632
7 215 798
513 801
4 394 130
Estimated effect of future salary increase
3 234 700
4 253 273
1 226 691
3 785 846
Estimated pension obligations
8 501 332
11 469 071
1 740 492
8 179 976
Pension plan assets (market value)
8 077 397
8 145 618
726 284
4 703 608
Unrecognized effects of change of plan Unrecognized effects of estimate deviations Net benefit obligations
0
0
0
527 604
1 557 141
4 202 672
310 859
771 691
- 1 133 206
- 879 219
703 349
2 177 073
Economical assumptions: Discount rate
4.70%
Expected compensation increase
4.50%
Expected return on pension plan assets
5.75%
Adjustments in National Insurance base rate
4.25%
Adjustments in pensions
2.00% ANNUAL REPORT 2007
23
3.
ADMINISTRATION COSTS
Fee to non-employed Directors was NOK 70 000. Employed Directors have not received remuneration for their work as members of the Board. Total compensation to the Managing Director was 2.4 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. The company had 24 employees at the end of 2007. Total booked compensation to auditor PriceWaterhouseCoopers AS is NOK 320 000 excl. VAT, of which NOK 240 000 for statutory audit. Split of payroll expenses
2007
2006
Wages and salaries
30 415 916
30 015 949
Social security tax
4 009 602
4 458 353
Pensions including pension liability
645 961
2 166 145
Allowances
212 512
339 846
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. The Idemitsu net remaining reserves (P50) at the end of 2007 are broken down as follows. million Sm3
MMSTB
Snorre
8.8
55
Tordis Area
1.2
7.5
Vigdis Area
1.9
12
Statfjord Øst & Sygna
0.4
2.5
Fram Area (O.E.)
3.3
21
Total (31.12.07)
15.6
98
The net remaining reserves at the beginning of 2007 were 19.8 million Sm3 (125 MMSTB). During 2007, 1.8 million Sm3 (10 MMSTB) of net crude oil was produced. Reevaluation of the reserves negatively revised the volume in some fields, and the impact of the reduction is 2.4 million Sm3. The reserve numbers have not been audited.
24
IDEMITSU PETROLEUM NORGE AS
5.
FIXED ASSETS (1000 NOK)
a) Petroleum fields under development Cost 01.01.07
Additions in 2007
Disposals in 2007
Transfer to fields in operation
Book value Capitalized 31.12.07 interest
Vega Sør
6 066
46 206
-
-
52 273
-
Total
6 066
46 206
-
-
52 273
-
Cost 01.01.07
Additions in 2007
Disposals in 2007
Cost 31.12.07
Accum. depr. 01.01.07
Snorre
3 769 392
234 572
-
4 003 964
Snorre B
1 635 468
69 733
-
1 705 201
b) Petroleum fields in operation Depr. in 2007
Accum. depr. 31.12.07
- 2 951 717
- 228 593
- 3 180 309
823 655
325 327
- 759 539
- 188 932
- 948 470
756 730
130 017
Book value Capitalized 31.12.07 interest
Statfjord Øst
300 086
17 370
-
317 456
- 278 555
- 12 160
- 290 715
26 740
15 814
Tordis
943 371
121 011
-
1 064 382
- 750 251
- 62 370
- 812 621
251 761
24 706
Vigdis
1 046 261
160 894
-
1 207 155
- 805 375
- 109 680
- 915 055
292 100
39 587
Sygna
91 047
543
-
91 591
- 79 955
- 4 870
- 84 826
6 765
2 939
Fram
961 181
208 478
-
1 169 660
- 215 469
- 134 582
- 350 051
819 608
16 546
Total
8 746 806
812 601
-
9 559 407
- 5 840 861
- 741 186
- 6 582 048
2 977 360
554 936
Accum. depr.
Depr.
Accum. depr.
01.01.07
in 2007
31.12.07
31.12.07
interest
Production rights Snorre
- 685 630
- 27 953
- 713 582
305 518
21 879
Production rights Fram
- 107 269
- 36 972
- 144 241
306 759
0
- 792 899
- 64 924
- 857 823
612 278
21 879
c) Production rights – See Note 7
Cost
Total
1 470 101
Book value Capitalized
d) Successful efforts exploration wells
Total
Cost 01.01.07
Additions in 2007
Disposals in 2007
Transfer to fields in operation
Cost 31.12.07
174 722
177 515
-
- 38 946
313 291
Cost 01.01.07
Additions in 2007
Disposals in 2007
Cost 31.12.07
Accum. depr. 01.01.07
Depr. in 2007
Depr. disposals in 2007
23 374
2 214
- 4 544
21 044
- 18 787
- 2 651
4 407
e) Other fixed assets
Furniture & fixtures
Accum. depr. Book value 31.12.07 31.12.07 - 17 030
4 014
ANNUAL REPORT 2007
25
6.
TAXES (NOK)
Difference between profit before tax and tax basis Profit before tax Permanent differences
2007
2006
2 109 128 418
1 946 002 368
71 659 319
66 555 832
173 819 937
5 487 343
Movement temporary differences - fixed assets - other temporary differences Tax basis - corporate tax (28%) - financial items w/o special tax effect
- 64 347 579
138 704 939
2 290 260 095
2 156 750 482
15 887 957
-uplift
- 216 347 597
- 177 207 887
Tax basis - special tax (50%)
2 089 800 455
1 979 542 595
1 686 173 054
1 593 661 432
Tax cost of the year Payable tax Correction prior years payable tax
- 5 398 925
- 11 044 392
Change deferred tax
- 101 867 983
- 128 166 031
Total tax cost
1 578 906 146
1 454 451 009
Fixed assets
1 495 733 164
1 645 758 042
Other temporary differences
- 241 452 747
- 282 005 261
Basis for corporate tax
1 254 280 417
1 363 752 781
-uplift, to be received
- 376 420 810
- 343 461 731
Basis for special tax
877 859 607
1 020 291 050
Deferred tax liability related to temporary differences 31.12
Deferred corporate tax
28%
351 198 517
381 850 779
Deferred special tax
50%
438 929 804
510 145 525
790 128 320
891 996 303
Total deferred tax
Reconciliation of nominal and effective tax rate
26
Nominal tax rate
78,0 %
Uplift
- 5,9 %
Permanent differences
2,7 %
Financial items applied onshore only
0,4 %
Tax adjustment prior years
- 0,3 %
Effective tax rate
74,9 %
IDEMITSU PETROLEUM NORGE AS
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: Cash payment for 9.6% of PL 057 and PL 089
NOK
1 100 000 000
Interest Total
21 879 151 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 PL 057 and PL 089, 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 2007, the norm price exceeded this level in all months. 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 non-deductible 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.
8.
INTERESTS IN NORWEGIAN PRODUCTION LICENSES (AS OF 31.12.07) Block
Expiry Year
Producing Fields
Operator
Interest
057
Production License
34/4
2015
Snorre
StatoilHydro
9.6%
089
34/7
2024
Snorre, Tordis area, Vigdis area
StatoilHydro
9.6%
Statfjord Øst
StatoilHydro
4.8%
1)
Sygna
StatoilHydro
4.32%
2)
090
35/11
2024
StatoilHydro
15%
090 B
35/11
2024
StatoilHydro
15%
090 C
35/11
2024
StatoilHydro
15%
35/12
2010
StatoilHydro
15%
34/12, 35/7, 10
2008
Eni Norge
15%
090 D 293 318
Fram Vest, Fram Øst
35/2
2010
StatoilHydro
20%
318B
35/4, 5
2010
StatoilHydro
20%
373 S
34/2,3,5,6
2011
BG Norge
25%
35/7
2013
Idemitsu
70%
390
377 S
6505/6,9 6506/4
2011
BG Norge
30%
391
6506/1
2011
BG Norge
20%
420
35/9
2012
RWE Dea
30%
1) According to current unitization agreement where PL 089 and PL 037 each has 50% interest. 2) According to first and final unitization agreement between PL 089 and PL 037. ANNUAL REPORT 2007
27
9.
INVENTORY
Crude oil
Inventory
Field
value NOK
Statfjord Ă˜st
2 273 483
Sygna
576 964
Fram Value recorded as asset 31.12
757 517 A
Field
3 607 963
Net liability NOK
Snorre
58 679 882
Vigdis
668 527
Tordis
14 229 111
Value recorded as Other current liabilities and overlift 31.12
73 577 520
Natural gasoline
value NOK
Inventory
Value recorded as asset 31.12
B
664 860 Net liability NOK
Value recorded as Other current liabilities and overlift 31.12
116 133
Idemitsu does not have inventory of propane and butane, as these products are sold on a monthly production basis to StatoilHydro. Inventory
Ethane Value recorded as asset 31.12
value NOK C
146 675 Net liability NOK
Value recorded as Other current liabilities and overlift 31.12
Stock of spare parts etc. held by operators Total inventory value A+B+C+D
28
IDEMITSU PETROLEUM NORGE AS
1 039 172
D
78 286 946
82 706 444
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. 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 2007 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.
(Million NOK) Field
Full field well closure cost
Full field removal cost
IPN share
Reservoir produced
IPN net well closure cost
IPN net removal cost
IPN net total accrual
1 292
1 782
9.6%
68%
84.23
116.20
200.43
Snorre B
619
1 180
9.6%
44%
25.99
49.54
75.53
Tordis
764
567
9.6%
80%
58.90
43.74
102.64
Vigdis
Snorre
1 161
372
9.6%
67%
74.73
23.96
98.69
Statfjord Øst
580
141
4.8%
85%
23.67
5.75
29.42
Sygna
265
68
4.32%
81%
9.22
2.37
11.59
1 163
207
15%
30%
Fram
52.95
9.40
62.35
329.69
250.96
580.65
Previously recorded
233.15
211.25
444.40
This year’s expense
96.54
39.71
136.25
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.
ANNUAL REPORT 2007
29
INSTRUMENTS 11. FINANCIAL 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. Idemitsu had a number of forward exchange contracts outstanding as of 31.12.07. All outstanding contracts have been revalued at market value 31.12.07. 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.
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. In 2007, the company was fully exposed to oil price fluctuation risk. At year-end, Idemitsu had no long term assets or liabilities in foreign currency.
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. Group accounts are prepared by the ultimate parent company, Idemitsu Kosan Co., Ltd. and are available at www.idemitsu.co.jp. The parent company is located in Tokyo, Japan. 30
IDEMITSU PETROLEUM NORGE AS
Changes in equity Retained earnings 31.12.06 Profit 2007
530 222 272
Retained earnings 31.12.07
14.
1 367 051 713
1 897 273 985
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. Offshore assets are insured at replacement value with third party insurance companies. Idemitsu has been involved together with other partners in a forced arbitration process against Hydro regarding pension liabilities in Hydro-operated licenses for the period prior to 2001. No accrual has been made for any such possible liabilities. Through its license ownership interests, Idemitsu has certain obligations for future investments and drilling activities. There are also substantial investments planned in fields where PDOs are not yet submitted 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.
ANNUAL REPORT 2007
31
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