1

Norwegian experience with project status-based classificationErik Søndenå, Petoro

UNECE AD HOC GROUP OF EXPERTS ON HARMONIZATION OF FOSSIL ENERGY AND MINERAL RESOURCES TERMINILOGY 17-19 OCTOBER 2007

The Norwegian petroleum regime in a changing business environment

1960s 1970s 1980s 1990s 2000→

Weak Weak regulatory regulatory frameworkframework

National management and National management and controlcontrol

Market Market oriented oriented

policypolicy

Resource growth perexploration well

Exploration costs perresource growth

Deg

ree

of co

mm

erci

alis

m

Increasing maturity

GlobaliGlobali--sationsation

SDFI established

1985

Petoroestablished

2001

2

The Norwegian government in oil and gas

The Norwegian Parliament

The Government

Ministry of Labourand Social Affairs

(MLSA)

Ministry of Finance (MOF)

Ministry of the Environment

(MOE)

ShellExxonMobilConocoPhillipsTotalBPEnietc.

Oil and gas companies

Petoro (100%)

Statoil (62,5%)

STATE OWNERSHIP

EXERCISING AUTHORITY

Norwegian Petroleum Directorate

(NPD)

Petroleum Supervisory Body (PS)

Ministry of Petroleum and Energy (MPE)

The net government cash flow from the petroleum activities

Source: Norwegian Public Accounts/National Budget

-50

0

50

100

150

200

250

300

350

1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004

Bill

NOK

2006

val

ue

Taxes Royalty and area fee

CO2 Statoil dividend

SDFI State net cash flow

3

• 2006 – best financial result in the history of Petoro• High oil price, high activity, pressure on resources, increasing

cost of goods and services

Record high financially – underlying challenges

97177Reserves addition (mill fat oe)

2015Production cost (NOK/boe)

8,38,3Personell injuries (H2)

1 2441 198Total production (1 000 boe/d)

7375Gas production (mill scm/d)

788723Oil and NGL production (1 000 b/d)

99 175126 213Net cash flow transferred to the government

113 172128 467Income after financial items

20052006

12

6

19

24

256

6 2 °

6 0 °

5 8 °

T ro n d heim

Kristian su nd

Ber g enOslo

Stav ang er

Harstad

5

5

1 23

4

1110987

15 16 17 18

26 27

32

31

29

3433 35

62026203

62046205

36

70 °

1 4 °

1 2 °

1 0 °

8 °

2 0 °22 °

2 4 °26 °

28 °3 0 °

18 °16 °

32 °

72 °

7 4 °

71207122

6 7 °

6 5 °

6 °

4 °2 °

TampenTampen

OsebergOseberg

TrollTroll

Norwegian SeaNorwegian Sea

Barents SeaBarents Sea

Southernmost NCSSouthernmost NCS

Management company to the SDFI

Facts:Facts:• 112 production licenses• 16 partnerships/companies

related to transport &terminals

• >37 fields in production• 2 large fields under development

Characteristics:• NCS only• Partner – not operator• Statoil markets oil and gas• Large share in licenses• Long term perspective• 60 employees

24 %

16 %

12 %

41 %22 %

12 %

Oil reserves

Gas reserves

PetoroStatoil

Hydro

PetoroHydro

Statoil

4

Maximising SDFI value

Start 2006 value@ 1/1/06

0

875billionNOK

Resource ClassificationResource Classification

5

• Only recoverable volumes are classified

• Projects are classified

• The resources are classified according to maturity Prospect -> discovery -> field ->produced volumes

• Fields and discoveries can have several projects with differing grades of maturity – thus a field/discovery can have resources in different resource classes.

Important principles regarding classification

SPE/WPC/AAPG 2000 NPDResource class Category Project status

PRODUCTION Sold0 Sold and delivered

RESERVES 1 In productionF2A

Approved for development

F

proved proved plusprobable

proved plusprobable pluspossible

Reserves3

ADecided for development

CONTINGENT RESOURCES F4A

Planned for development

F5A

Development likely but undecided

6 Development not very likely

Low estimate

Best estimate

High estimate

7 F

Contingent resources

ANot yet evaluated

Unrecoverable

PROSPECTIVE RESOURCES 8 ProspectsLow estimate

Best estimate

High estimate

Undiscovered resources 9 Leads and plays

Unrecoverable

6

F: First recoveryA: Additional recovery

F: First recoveryA: Additional recovery

7

Data ManagementData Management

Why report resource estimates?

• The data collected in connection with the Norwegian National Budget is used as a basis for :

– Norway’s oil policy– Norway’s economic policy– Norway’s environmental policy

• Legislation requires reporting annually of both produced and planned volumes

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Reporting

• All operating companies reports annually, on behalf of the licensees – resources, forecasts for production, cost and emissions

• Norwegian Petroleum Directorate submits aggregated forecasts to the Ministry of Finance via the Ministry of Petroleum and Energy.

Operating companies

Types of Data reported to NPD

• Resources (volume) – Resource category 0-8– In-Place volumes– Reserves– Contingent resources– Prospective resources (prospects) within licensed areas

• Profiles for Reserves and resources in planning phase – Production sales profiles

–Oil, Gas, NGL and Condensate, including uncertainty ranges– Costs

–Investments (CAPEX), Operating cost (OPEX), Tariff expenditures• Environmental data

– Emissions–CO2, NOx, nmVOC, CH4

– Background data (Water production, Injection profiles)

CONSISTENCY

9

The petroleum resources on the The petroleum resources on the Norwegian Continental ShelfNorwegian Continental Shelf

Source: NPD

10

Comparison of resource account onNorwegian continental shelf, 1996 vs 2006

1996 2006Source: NPD

2046

4573

3274

3659

1078

585

1210

270

1360

654

3470

3400

0

2000

4000

6000

8000

10000

12000

14000

1 2

mill S

m3

Undiscovered resources

Contingent resources in discoveries

Possible future measures forimproved recoveryContingent resources in fields

Reserves

Sold and delivered

Comparison of Resource estimateFields on NCS per 31.12.03

0,3 0,5 0,8

3,4

3,73,7

4,0

1,60,9 0,8

0,3

0

1

2

3

4

5

6

2000 -data 2001 -data 2002 -data 2003 -data

bill

Sm3 o

.e

Produced Reserves Contingent resources Source: NPD

11

ProductionProduction

Forecast Norwegian Total Production

Source: NPD

12

Source: NPD

Norwegian oil production forecast from 1995 compared with actual production

0

50

100

150

200

1996 1998 2000 2002 2004 2006 2008 2010

mill

Sm

³ oil

pr y

r

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

mill

bbl

/d

Undiscovered resources

Resources in discoveries

Resources in fields

Reserves

Source: NPD

Norwegian oil production forecast from 1995 compared with actual production

0

50

100

150

200

1996 1998 2000 2002 2004 2006 2008 2010

mill

Sm

³ oil

pr y

r

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

mill

bbl

/d

Undiscovered resourcesResources in discoveriesResources in fieldsReservesForecast 2007Actual production

13

Comparison of oil forecast 1995-2006 withactual production based on 1995 status

0

200

400

600

800

1000

1200

1400

1600

1800

2000

1995 forecast Actual

mill

Sm

3

Undiscovered resources

Contingent resources indiscoveriesContingent resources in fields

Reserves

- 4% lower oil production+ 8% fields decided before 1996- 16 % from discoveries- 98 % from undiscovered

Source: NPD

Norwegian oil production forecast from 1995 compared with actual production

0

50

100

150

200

250

1996 1998 2000 2002 2004 2006 2008 2010

mill Sm³ oil / year

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

mill bbl / day

Uncertainty Range

Actual

Forecast 1995

Source: NPD

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Comparison of SEC –reporting (2004)and NPD estimate

• SEC reporting Hydro: – 72 % of NPD reserves (RC 1-3)

• SEC reporting Statoil: – 71 % of NPD reserves

• P90 reserves NPD :– 73 % of the mean reserves

• Including contingent resources (RC 4-7)

– 122 % compared with NPD reserves

0

1000

2000

3000

4000

5000

6000

Statoil Hydrom

ill b

oeSEC reporting NPD reserves

Thank you for your attention