20-F 1 eqnr20f19.htm EQUINOR ANNUAL REPORT ON FORM 20-F 2019  

 

 

 

 

 

 

 

 

2019

Annual Report

on Form 20-F

 

 


 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 20-F

(Mark One)

    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

x    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019

OR

    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to

OR

    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

 

Commission file number 1-15200

Equinor ASA

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name Into English)

Norway

(Jurisdiction of Incorporation or Organization)

Forusbeen 50, N-4035, Stavanger, Norway

(Address of Principal Executive Offices)

Lars Christian Bacher

Chief Financial Officer

Equinor ASA

Forusbeen 50, N-4035

Stavanger, Norway

Telephone No.: 011-47-5199-0000

Fax No.: 011-47-5199-0050

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Trading Symbol(s)

Name of Each Exchange On Which Registered

American Depositary Shares

EQNR

New York Stock Exchange

Ordinary shares, nominal value of NOK 2.50 each

New York Stock Exchange*

 

*Listed, not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the Securities and Exchange Commission

 

Securities registered or to be registered pursuant to Section 12(g) of the Act:    None 

 

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:    None 

 

 

Equinor, Annual Report on Form 20-F 2019    1  


 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Ordinary shares of NOK 2.50 each

3,305,008,097

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

x Yes    No

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

 

 Yes   No

 

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 

Yes    No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files)

 

x Yes    No

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   x

Accelerated filer   

Non-accelerated filer   

Emerging growth company   

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. 

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP  

International Financial Reporting Standards as issued

by the International Accounting Standards Board     x

Other   

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  

Item 18  

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

 Yes   No

  

2   Equinor, Annual Report on Form 20-F 2019      


 

 

 

We are Equinor

 

 

We are an international energy company committed to long-term value creation in a low carbon future inspired by its vision of shaping the future of energy.

 

 

 

Our values​ are

Open​

Collaborative​

Courageous ​

Caring

 

 

 

We energize the lives of 170 million people. Every day.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equinor, Annual Report on Form 20-F 2019    3 


 

 

Always safe, high value, low carbon

 

 

We continue to pursue our strategy of always safe, high value and low carbon through developing and maximising the value of our unique Norwegian continental shelf position, our international oil and gas business, our manufacturing and trading activities and our growing new energy business.

 

Below are some key figures related to 2019 presented.

 

 

4   Equinor, Annual Report on Form 20-F 2019     


 

2019 highlights

 

January:

Awarded 29 exploration licences on the NCS

 

February:

Danske Commodities, a trading company for power and gas, becomes a wholly owned subsidiary of Equinor

 

March:

Record-breaking offshore lift completes the Johan Sverdrup field centre on the NCS

 

April:

Formal opening of Arkona Windfarm, offshore Germany, awarded seven exploration licences in offshore Argentina, final investment decision (FID) on Azeri-Central-East, Azerbaijan

 

May:

Increased share in Caesar Tonga to 46%, US Gulf of Mexico, Huldra removal on the NCS, approved PDO for Johan Sverdrup phase 2

 

June:

Awarded five exploration licences on the UKCS, operatorship of Wisting in the Barents Sea was transferred from OMV to Equinor

 

July:

Trestakk onstream on the NCS, Lundin-transaction increasing Equinor’s direct share in Johan Sverdrup, Winner in the New York state’s first large-scale competitive offshore wind solicitation.

August:

Start-up of the heavy oil field Mariner, UKCS

 

September:  

Winning bid on Dogger Bank in the UK, launched USD 5 billion share buy-back programme, Statfjord field 40 years of production celebration, Utgard started production on the NCS and UKCS, Snefrid Nord onstream with record breaking 1,309 meters below sea-level

 

October:

Start-up of Johan Sverdrup on the NCS, FID for Hywind Tampen floating offshore wind park to supply the Gullfaks and Snorre fields with renewable electric power.

 

November:

Announced divestment of Eagle Ford onshore asset in the US

 

December:

Increased position in Scatec Solar ASA to 15,2%, final investment decision on North Komsomolskoye, Russia

 

 

Equinor, Annual Report on Form 20-F 2019    5 


 

About the report

 

This document constitutes the Annual report on Form 20-F in accordance with the US Securities Exchange Act of 1934 applicable to foreign private issuers, for Equinor ASA for the year ended 31 December 2019. A cross reference to the Form 20-F requirements are set out in section 5.10 in this report. The Annual report on Form 20-F and other related documents are filed with the US Securities and Exchange Commission (the SEC). The Annual report and Form 20-F are filed with the Norwegian Register of company accounts.

 

The Equinor annual report and Form 20-F may be downloaded from Equinor’s website at www.equinor.com/reports. References to this document or other documents on Equinor’s website are included as an aid to their location and are not incorporated by reference into this document. All SEC filings made available electronically by Equinor may be found at www.sec.gov.

 

 

Table of contents

 

INTRODUCTION

 

About the report

6

Message from the chair of the board

9

Chief executive letter

11

 

 

 

 

STRATEGIC REPORT

 

2.1 Strategy and market overview

13

2.2 Business overview

20

2.3 Exploration & Production Norway (E&P Norway)

28

2.4 Exploration & Production International (E&P International)

37

2.5 Marketing, Midstream & Processing  (MMP)

47

2.6 Other group

50

2.7 Corporate

55

2.8 Operational performance

63

2.9 Financial review

82

2.10 Liquidity and capital resources

91

2.11 Risk review

97

2.12 Safety, security and sustainability

110

2.13 Our people

117

 

 

3. CORPORATE GOVERNANCE

121

3.1 Introduction

122

3.2 General meeting of shareholders

125

3.3 Nomination committee

126

3.4 Corporate assembly

127

3.5 Board of directors

130

3.6 Management

140

3.7 Compensation to governing bodies

147

3.8 Share ownership

155

3.9 External auditor

157

3.10 Risk management and internal control

159

 

 

FINANCIAL STATEMENTS AND SUPPLEMENTS

 

4.1 Consolidated financial statements of the Equinor group

162

4.2 Supplementary oil and gas information (unaudited)

240

 

 

ADDITIONAL INFORMATION

 

5.1 Shareholder information

253

5.2 Use and reconciliation of non-GAAP financial measures

263

5.3 Legal proceedings

268

5.6 Terms and abbreviations

269

5.7 Forward-looking statements

272

5.8 Signature page

273

5.9 Exhibits

274

5.10 Cross reference to Form 20-F

275

6   Equinor, Annual Report on Form 20-F 2019     


 

 

Equinor, Annual Report on Form 20-F 2019    7  


 

 

We believe the company is well prepared to deal with future market uncertainties, and has the competence, capacity and leadership capabilities necessary to create new business opportunities and long-term value for our shareholders.

Jon Erik Reinhardsen

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8   Equinor, Annual Report on Form 20-F 2019      


 

Message from the chair of the board

Dear fellow investors,

 

The biggest transition our modern-day energy systems have ever seen is underway, and Equinor is well positioned for the changes that need to take place. The board of directors believe Equinor can be a leading company in the energy transition, shaping a resilient and competitive portfolio while creating significant value for shareholders. 

 

Safety and security are on top of the board of directors agenda. The Board receives regular updates related to safety and security from the administration, and it is the first item on the agenda of every board meeting. Overall, we see many positive developments, but the company needs to further enhance its efforts related to serious incidents and personal injuries. Also during 2019, accidents have reminded us of the importance of a continued and strong focus on the safety of our people.

 

Equinor continues to improve and demonstrate strong operational performance. High production and continued strong cost and capital discipline contributed to solid results, despite lower commodity prices. The net operating income was
USD 9.30 billion compared to USD 20.1 billion in 2018. 

 

The company has a strong balance sheet and remains committed to competitive capital distribution. We delivered a 42% increase in capital distribution in 2019, including the effect of the share buy-back programme introduced in 2019. For the fourth quarter 2019 we propose to the AGM a quarterly dividend of USD 0.27 per share, an increase of 4%. The proposed increase is consistent with the dividend policy to grow the annual cash dividend in line with expected long-term underlying earnings. 

 

The company expects a strong equity production growth in 2020 of around 7% and a 3% annual average production growth from 2019 to 2026. New projects coming on stream in 2019 had an average breakeven oil price of around USD 30 per barrel. Equinor is also set for a value driven growth in renewables, developing as a global offshore wind major. In 2026 the production capacity is expected to be 4-6 GW[1] , which is around 10 times current capacity.

 

Equinor has taken new initiatives to prolong production at several offshore installations on the Norwegian Continental Shelf. The company is also further developing its international portfolio and strengthening its presences in core areas. The international portfolio is delivering high value and we expect production to increase by more than 3% annually for 2019 to 2026.

 

The global challenge of climate change will dominate many debates in 2020 and the years ahead. Equinor`s joint statement with Climate Action 100+ from April 2019, forms the starting point for our investor dialogue in support of the goals of the Paris Agreement. In our updated climate roadmap, we recognise the need for significant changes in the energy markets, which means that also Equinor`s portfolio will have to change accordingly to remain competitive. We will produce less oil in a low carbon future, but value creation will still be high. Oil and gas production with low greenhouse gas emissions will be an even stronger competitive advantage for us. In addition, profitable growth in renewables gives significant new opportunities to create attractive returns.

 

Our markets are volatile by nature, and the effects of the Covid-19 and the sharp drop in the oil price in March 2020, are strong reminders of this. For the board of directors, it is essential that Equinor maintains its position as a robust and resilient company. We believe the company is well prepared to deal with future market uncertainties, and has the competence, capacity and leadership capabilities necessary to create new business opportunities and long-term value for our shareholders.

 

I would like to thank all employees for their dedication and commitment to Equinor and our shareholders for their continued investment.

 

 

Jon Erik Reinhardsen

Chair of the board

 

 

[1] Including our 15.2% equity in Scatec Solar ASA

Equinor, Annual Report on Form 20-F 2019    9  


 

A person wearing a suit and tie

Description automatically generated

 

 

We aim to strengthen our industry-leading position within carbon efficient operations and to grow profitably from a strong and competitive renewables business. The company is well positioned for long-term shareholder value creation and to be competitive also in a low-carbon future.

 

           Eldar Sætre

 

 

 

 

 

10   Equinor, Annual Report on Form 20-F 2019     


 

Chief executive letter

Dear fellow shareholder,

 

Equinor is committed to sustainability and recognize that the energy systems must go through profound changes to meet the goals of the Paris-agreement. We know that the world needs to reach net zero emissions as soon as possible and that we at the same time, must provide enough energy to meet a growing demand. Equinor is a leading company within our sector, driving towards a low-carbon future. As a broad energy company, we are strengthening our portfolio to underpin a competitive and resilient business model fit for long term value creation, and in line with the Paris Agreement. 

 

The safety and security of our people and integrity of our operations is our top priority. The frequency of personal injuries was down last year, while we did not see the same positive trend for our serious incident frequency. We need to continue our relentless efforts to avoid serious incidents and further reduce personal injuries. The serious work-related accident at the Heimdal platform in the North Sea last November, is a strong reminder of the importance of safety for our people. And the impact from the Hurricane Dorian at the South Riding Point terminal in the Bahamas illustrates the need for preparedness also towards a new type of incidents. 

 

In 2019, we delivered a solid result with adjusted earnings[2]  of USD 13.5 billion and USD 4.93 billion after tax. Our net operating income was USD 9.30 billion in 2019, compared to USD 20.1 billion in 2018. The decrease was primarily driven by lower liquids and gas prices. The return on average capital employed was 9% and we delivered USD 13.5 billion in cash flow from operations after tax. This was combined with an increase in total capital distribution of more than 40%, reflecting a 13% step-up in cash dividend, the conclusion of the scrip programme as planned, as well as the introduction of our share buy-back programme. 

 

Last year, Equinor delivered high total equity production of 2,074 mboe per day and has a world-class project portfolio with an average break-even oil price below USD 35 per barrels. Six new projects came on stream in 2019, including the start-up of Johan Sverdrup. Organic capital expenditures amounted to USD 10 billion[3]  for 2019.

We have a strong balance sheet and expect growth in long-term underlying earnings, driven by a high-quality portfolio, as well as a range of improvement efforts across our portfolio. At an assumed oil price of USD 65 per barrel we expect to increase our adjusted return on average capital employed to around 15% in 2023, and to deliver organic cash flow of around USD 30 billion in total, after tax and organic investments – from 2020 to 2023. 

 

Driven by the strong opportunity set of high-quality projects in front of us, we expect organic investments to be USD 10-11 billion on average in 2020 and 2021, and around USD 12 billion on average in the two following years. 

 

2019 was also truly a game-changing year for our renewables business. We made the investment decision for Hywind Tampen in Norway and won the opportunities to develop Empire Wind offshore New York and Dogger Bank in the UK, the world’s largest offshore wind development. Projects under development will add 2.8 gigawatts of renewables electricity capacity to Equinor.

 

In our updated climate roadmap, we have set new targets for both short, medium and long-term climate performance. We aim to strengthen our industry-leading position within carbon efficient operations and to grow profitably from a strong and competitive renewables business. The company is well positioned for long-term shareholder value creation and to be competitive also in a low-carbon future. Our results confirm that we are on track with our ambitions to increase returns, grow production and cash flow in the years to come.

 

We know that our markets are volatile and that we always need to be prepared for unexpected events that could impact our business. The outbreak of the Covid-19 virus and the sharp drop in the oil price, are both examples of this. Thanks to strict cost discipline, strong commercial mindset and substantial improvement measures over several years, we are a more resilient company today with significant business flexibility to handle volatility.

 

 

Eldar Sætre

President and CEO

Equinor ASA

 


[2] See section 5.2 for non-GAAP measures.

[3] IFRS capital expenditures for 2019 were USD 14,8 billion.

Equinor, Annual Report on Form 20-F 2019    11 


 

2.1

Strategy and market overview

 

 

A picture containing wearing, hat, jacket, yellow

Description automatically generated

Digital field worker, Kårstø, Norway.

 

 

Equinor’s business environment

Market overview

In 2019 the global economy grew at its weakest pace since the global financial crisis a decade ago. The global growth rate, estimated at 2.6%, reflects common challenges across countries as well as country-specific factors. Trade conflicts and uncertainty led to stagnation in trade, dragging down business sentiment and activity globally. Geopolitical tensions, Brexit and rising policy uncertainty have influenced investments and resulted in sluggish consumer demand and weaker industry production. Central banks have reacted to the weaker activity with loosened monetary policy that has averted a deeper slowdown.

 

The estimated growth rate for the US in 2019 is 2.3%. Business investment and the manufacturing sector represented significant drags on growth during the year, reflecting rising protectionism and elevated policy uncertainty. However, the private sector has shown resilience, supported by employment growth and persistently low interest rates. In China, uncertainty and escalating tariffs on export to the US had a negative effect on industry production and investment throughout the year. Estimated growth ended at 6.1% for 2019. It was a troublesome year for the Eurozone, with threats of increased tariffs on export to US and Brexit. Despite gaining some momentum towards year-end, the Eurozone growth rate for the year is estimated at 1.2%. 

 

Looking ahead, early signs of stabilization in manufacturing activity and trade could persist and reinforce the link between the resilient consumer sector and improved business spending. In addition, the effects of monetary easing across economies in 2019 are expected to continue working their way through the global economy in 2020. However, downside risk remains significant, including the potential for further worsening in the US-China relations, rising geopolitical tensions, as well as the effects of Covid-19 virus, keeping the global economic growth forecast modest. 

 

Oil prices and refining margins

The average price for Dated Brent in 2019 was USD 64.3 per barrel, 10% lower than USD 71.1 per barrel in 2018. Prices were less volatile than in 2018, staying mostly within the USD 60-70 range, despite multiple disruptions both to supply and demand throughout the year. The Organization of the Petroleum Exporting Countries and its allies (Opec+) continued attempts to balance an oversupplied market amidst weaker oil demand growth impacted by the US-China trade conflict.

Even though in December 2018 the Opec+ group agreed to renew the supply cuts, 2019 started with an oversupplied market. Nonetheless, prices recovered from around USD 50 per barrel at the end of December 2018 to around USD 62 per barrel by the end

12   Equinor, Annual Report on Form 20-F 2019     


 

of January 2019. The upward trend continued during the first quarter, supported by a new round of US sanctions on Venezuela and Iran, removing more supply from the market, on top of the agreed Opec+ cuts.

Dated Brent reached its highest in April and May at above USD 70 per barrel, driven by pressure on supply due to increased tensions in the Middle East, mainly in Saudi Arabia, following the US decision not to extend import waivers for Iranian oil.

However, subsequently prices weakened again, hovering around USD 64 per barrel in June and July. The extension of the Opec+ cuts and continuous threats in the Middle East, including tanker attacks in the strait of Hormuz, did not balance out the perceived impact of the increase in global supply and the negative impact of the US-China trade war on oil demand growth.

One of the major events in 2019 was the September attack on Saudi Arabian oil processing plants that decreased temporarily global supply by around 5% (~5 mmboe per day). However, after a one-day surge to USD 68.2 per barrel, prices stabilized at around USD 60 per barrel by end of September. This underlined the sentiment of oversupply and concerns mostly focused on signs of weaker demand growth.

Nevertheless, as the trade talks between US and China started to show positive signals, prices started to rally in November, also supported by many refineries coming out of maintenance. Dated Brent in November averaged USD 63.0 per barrel.

2019 ended on an upward trend, with average Dated Brent price at USD 67.0 per barrel in December. Faced with further oversupply in 2020, the Opec+ alliance decided to extend and increase the cut agreement at the meeting in Vienna early in December. As the date for the US-China trade deal was announced, and expected in January, the market welcomed 2020 with a fresh wave of optimism towards oil demand growth. 

Recently, there has been price volatility, triggered, among other things by the changing dynamic among Opec+ members and the uncertainty regarding demand created by the Covid-19 pandemic. 

Refinery margins

For a standard upgraded refinery in North-West Europe, margins were slightly stronger than in 2018. Margins were weak in the first two months of 2019, but then gradually rose to a peak in October before dropping towards year-end. One distinct feature in 2019 was the preparation for producing IMO 2020 fuel, the low-sulphur bunker fuel for ships to be sold from year-end. This led to strong margins for low-sulphur fuel oil components already from July, due to purchases for storage. That again gave unusually strong margins for low complex refineries that ran on light, low-sulphur crudes.

 

Margins for the high-sulphur HSFO bunker fuel fell slowly until early October, when they collapsed. That gave weak margins for refineries running heavy, high-sulphur crude oils and having a substantial yield of HSFO.

 

Margins for naphtha were weak through the year. Being the main feedstock for the petrochemical industry, it was hurt by a low demand for petrochemical products, ascribed to the US-China trade conflict. Gasoline margins were depressed by high US stock levels early in the year but were normal through summer. Diesel margins were normal and on par with 2018. A peak in October was due to purchase for storage by those who believed that marine diesel would become the IMO 2020 fuel. Refinery margins are calculated as the relevant product prices against physical dated Brent crude oil. However, product prices are generally traded and set against the Brent prices in the paper market at the ICE exchange. Strength in dated Brent vs. ICE therefore tends to depress refinery margins, and vice versa. Specific strength in dated Brent depressed margins in June and in the last one and a half month of the year.    

 

Natural gas prices

Gas prices – Europe

The National Balancing Point (NBP) in the UK started 2019 at
7.5 USD/MMBtu, down 8% from December 2018. Abundant LNG availability, high pipeline flows as well as mild weather contributed to a decreasing trend in European prices during the first quarter. In addition, winter storage inventories remained well above the five-year average. In late March, Asian LNG prices dropped below NBP at 5.2 USD/MMBtu, increasing the incentive for LNG to go to Europe rather than Asia. European prices continued to decline during the second quarter and reached 3.5 USD/MMBtu in June. Record high temperatures and start of the maintenance season provided some support to NBP during July, but in August prices fell again. Despite another round of maintenance on Norwegian assets in September, prices lacked support and remained below 3.5 USD/MMBtu. NBP recovered towards the end of the year due to colder weather and uncertainty related to the Russia-Ukraine transit agreement, closing the year at 4.2 USD/MMBtu.

 

Gas prices – North America

The Henry Hub price showed a downward trend during 2019, averaging 2.5 USD/MMBtu for the year, compared to
3.1 USD/MMBtu in 2018. High dry gas production, driven by the addition of pipeline capacity in the Northeast and Texas put downward pressure on the price. Storage levels rose above the five-year average for the first time in two years. Demand gains have not been able to keep pace with supply growth, despite more than 20 Bcm of new LNG capacity entering service in 2019, as well as record demand in Mexican pipeline exports and the gas-to-power sector.

Equinor, Annual Report on Form 20-F 2019    13 


 

  

Global LNG prices

Asian LNG prices started the first quarter at 8.2 USD/MMBtu but fell steadily to 5.2 USD/MMBtu in March. Ample supply, as newly started LNG liquefaction trains ramped up to nameplate capacity, and lack of prompt demand have weighed on LNG prices. During the second and third quarters, the oversupply situation continued, forcing significant volumes of LNG into European storages. As a result, prices reached a low of
4.2 USD/MMBtu. In the fourth quarter, Asian LNG prices recovered with the start of the heating season. However, high nuclear availability in Japan and above-normal winter temperatures resulted in an average of 5.8 USD/MMBtu for the quarter, well below the fourth quarter average price of 9.9 USD/MMBtu in 2018.

 

European electricity and CO2 prices

Western European (United Kingdom, France, Germany, Belgium, Netherlands, Spain and Italy) electricity prices averaged
43.9 EUR/MWh in 2019, which was 20% lower than in 2018. While 2019 began strong with prices around 61 EUR/MWh for January, milder weather, a quick decrease in the underlying fuel prices, better nuclear availability and a further increase in renewable capacity drove the electricity prices down. The average price was already at around 42 EUR/MWh in March and trended down to end the year at an average of 38 EUR/MWh in December.

 

The European Union Emission Trading System (EU ETS) CO2 price continued its strength in 2019, at an average of
24.9 EUR/tonne. Prices peaked in July, with the highest closing price at 29.8 EUR/tonne. Throughout the year, the CO
2 price suffered from volatility due to uncertainties surrounding Brexit and various energy policy announcements, such as the decision to phase out coal-fired power generation in Germany by 2038.

  

Although the high CO2 price put pressure on the power generation costs, the bearish conditions such as above average temperatures, low gas prices and growth in renewables, more than offset this pressure. Nevertheless, the high CO2 price helped to further accelerate the coal to gas switch in European power generation, consequently driving down CO2-emissions from the sector.

 

Equinor’s corporate strategy

Equinor is an international energy company committed to long-term value creation in a low carbon future inspired by its vision of shaping the future of energy.

 

Equinor continues to pursue its strategy of always safe, high value and low carbon through developing and maximising the value of its unique Norwegian continental shelf position, its international oil and gas business, its manufacturing and trading activities and its growing new energy business.

 

The energy context is expected to remain volatile characterised by geopolitical shifts, challenges in liquids- and gas resource replenishments, market cyclicality, structural changes to costs and increasing momentum towards low carbon. Equinor expects volatility in energy prices. Equinor’s strategic response is focused on creating value by building a more resilient, diverse, and option-rich portfolio, delivered by an empowered organisation. To do so, Equinor will continue to concentrate its strategy realisation and development around the following areas:

 

·        Norwegian continental shelf transform the NCS to deliver sustainable value for decades

·        International oil and gas – deepen core areas and develop growth options  

·        New energy solutions – value driven growth in renewables

·        Midstream and marketing – secure premium market access and grow value creation through economic cycles 

Equinor’s unique position at the Norwegian continental shelf has enabled the company to develop new technologies and scale them industrially. Equinor has today a strong set of industrial value drivers:

 

·        Operational excellence

·        World-class recovery

·        Leading project deliveries

·        Premium market access

·        Digital leadership

In sum, these drivers strengthen the company’s competitiveness. Internationally, Equinor is increasingly taking the role of operator, allowing the company to leverage its industrial value drivers. Across its business, Equinor is targeting opportunities that play to its strength.

 

 

14   Equinor, Annual Report on Form 20-F 2019     


 

 

 

 

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Johan Sverdrup, NCS.

 

 

Equinor, Annual Report on Form 20-F 2019    15 


 

Equinor is actively shaping its future portfolio guided by the following strategic principles:

 

·        Cash generation capacity – generating positive cash flows from operations, even at low oil and gas prices, in order to sustain dividend and investment capacity through the economic cycles

·        Capex flexibility – having sufficient flexibility in organic capital expenditure to be able to respond to market downturns and avoid value destructive measures as well as ability to always prioritise projects expected to deliver greater value.

·        Capture value from cycles – ensuring the ability and capacity to act counter-cyclically to capture value through the cycles

·        Low-carbon advantage – maintaining competitive advantage as a leading company in carbon-efficient oil and gas production, while building a low-carbon business to capture new opportunities in the energy transition

To deliver on the strategy, Equinor has identified four key strategic enablers that will continue to support the business’s needs:

 

·        Safe and secure operations: The safety and security of its people and the integrity of its operations is Equinor’s top priority. In 2019 several strategic improvement initiatives were carried out guided by the corporate wide project “Safety beyond 2020”. The goal has been to further strengthen culture and drive performance through embedding safety and security thinking and proactive behaviour at all organisational levels. Equinor has continued its efforts to reinforce the security culture and capability through implementation of the 2020 Security Roadmap, and an Information Technology Strategy which aims at protecting people and assets against digital threats.

·        Technology and innovation: Equinor recognises technology and innovation as enablers for its strategy. Equinor’s technology strategy guides the company’s technology development and implementation activities, providing technologies to shape the future of energy. While Equinor conduct in-house R&D in areas that give us a competitive advantage, the majority of its activities are conducted in collaboration with partners to ensure that Equinor makes the best use of the external technology eco-system. Equinor continues to invest in digitalisation to unlock the value from its data. In 2019, USD 400 million (pre-tax) was delivered in cash flow impact from digital initiatives, which enabled a month earlier start-up of Johan Sverdrup by leveraging new digital solutions as well as increased uptime driven by Equinor’s integrated operations centre.

·        Empowered people: Equinor promotes a culture of collaboration, innovation, and safety, guided by its values. A diverse and inclusive Equinor continues to recruit and develop employees to deliver on the future-fit portfolio ambition.

·        Stakeholder engagement: Equinor engages with stakeholders to secure industrial legitimacy, its social contract, trust, and strategic support from stakeholders. This engagement extends to internal and external collaboration, partnerships, and other co-operation with suppliers, partners, governments, NGOs, and communities in which Equinor operates.

Equinor maintains its advantage as a leading company in carbon-efficient oil and gas production while building a low carbon business to capture new opportunities in the energy transition. Equinor believes a lower carbon footprint will make it more competitive in the future and sustainability is integrated in Equinor’s strategic work.

 

Equinor’s new climate roadmap presents a series of short-, mid- and long-term ambitions to reduce its own greenhouse gas emissions and to ensure a competitive and resilient business model in the energy transition, fit for long term value creation and in line with the Paris Agreement:

 

A person standing next to a body of water

Description automatically generated

16   Equinor, Annual Report on Form 20-F 2019     


 

 

Peregrino FPSO, Brazil.

 

Equinor aims to:

·        reduce the net carbon intensity, from initial production to final consumption, of energy produced by at least 50% by 2050,

·        grow renewable energy capacity tenfold by 2026, developing as a global offshore wind major, and

·        strengthen its industry leading position on carbon efficient production, aiming to reach carbon neutral global operations by 2030.

 

Equinor expects to meet the net carbon intensity ambition primarily through significant growth in renewables and changes in the scale and composition of its oil and gas portfolio. In addition, operational efficiency and further development of new businesses such as carbon capture, utilisation and storage (CCUS) and hydrogen are expected to be important. Equinor may also use recognised offset mechanisms and natural sinks as a supplement. To reach carbon neutral global operations, the main priority will be to reduce GHG emissions from Equinor’s own operations. Remaining emissions are expected to be compensated either through quota trading systems, such as the European Union Emissions Trading System (EU ETS), or high-quality offset mechanisms. Further information can be found in section 2.12 Safety, security and sustainability.

 

Norwegian continental shelf – Transforming the NCS for continued high value creation and low carbon emissions for the coming decades

For more than 40 years, Equinor has explored, developed, and produced oil and gas from the NCS. It represents approximately 60% of Equinor’s equity production at 1.235 million boe per day in 2019. NCS cash generation capacity will continue to be substantial going forward, even at lower oil- and gas prices.

At the same time, Equinor aims to continue to improve the efficiency, reliability, carbon emissions, and lifespan of fields already in production. During 2019, Equinor updated the climate ambitions for Norway. Driven by a large remaining resource potential on the NCS, Equinor aims to reduce the absolute greenhouse gas emissions from its operated offshore installations and onshore plants in Norway with 40% by 2030, 70% by 2040, and towards near zero by 2050, compared to 2005. The 2030 ambition alone is expected to require investments of around NOK 20 billion Equinor share, in projects within energy efficiency, electrification, infrastructure consolidation, digitalization, and new value chains, such as CCS and Hydrogen.

Equinor has decided to create a new unit for its late life assets on the NCS. The purpose of the new unit is to realise the full potential of its late life fields, by realising additional subsurface potential, lean operations, cost efficient lifetime extensions, and decommissioning cost reductions.

Equinor continues to add highly profitable barrels through increased oil and gas recovery and Equinor is making progress towards the ambition of 60% oil recovery and 85% gas recovery for operated fields.

In July, Equinor agreed with Lundin Petroleum AB to divest a 16% shareholding in Lundin Petroleum for a direct interest of 2.6% in the Johan Sverdrup field and a cash consideration. In October, the Johan Sverdrup field came on stream, ahead of schedule and below cost, and with a world class ramp-up, the field is already producing more than 350 mboe per day (100%). In the next few years, Equinor aims to bring several large projects on stream including Johan Sverdrup phase 2, Troll phase 3, Johan Castberg, and Martin Linge, and the refurbished Njord, in addition to a large number of subsea tiebacks. Strong overall volume growth is expected towards a potential historically high production level in 2026. More information on assets in operations and projects under development in Norway is provided in section 2.3 E&P Norway – Exploration & Production Norway.

International oil and gas – Deepen core areas and develop growth options

Equinor has been growing its international portfolio for over 25 years. International oil and gas production represented approximately 40% of Equinor’s equity production at 0.839 million boe per day in 2019. In 2019, Equinor made significant progress in growing and de-risking its international oil and gas portfolio: successful start-ups of both Mariner and Utgard in the UK; high value license extensions in Angola Blocks 15 and 17; access to new acreage both onshore and offshore in Argentina, on the UK Continental shelf, offshore Canada, and in US GoM; ACE development sanction in Azerbaijan; investment decision on the first stage of the North Komsomolskoye full field development in Russia. Key projects in Equinor’s international project portfolio include Bay du Nord, Rosebank, Vito, Peregrino phase 2, Bacalhau (formerly Carcará), BM-C-33, North Komsomolskoye, North Platte, and Block 17 satellites in Angola.

 

In Argentina Equinor is building a broad energy company – onshore production in Vaca Muerta, 8 new oil & gas leases across various basins offshore, and within onshore wind and solar.

 

In the United States, Equinor high-graded its onshore portfolio through the divestment of Eagle Ford and increased its equity share in Caesar Tonga in the Gulf of Mexico. Equinor continues to focus on increasing and sustaining the profitability of existing portfolio. With drone technology, Equinor has significantly reduced methane emissions from onshore operations.

 

In Brazil, Equinor is sustaining and growing a competitive portfolio of high-quality assets in all development phases, including a promising exploration portfolio. The Bacalhau field FPSO concept is an example of project optimization, while reducing carbon emissions.

Equinor, Annual Report on Form 20-F 2019    17 


 

 

Equinor is set up for growing with quality and expects its international business to grow steadily for a long time, with an organic cash flow contribution of USD 7 billion after tax and investments over the next 4 years at 65 USD per bbl. Equinor is focused on continuing to deliver improvements on cost, cashflow, and earnings to increase competitiveness across its international portfolio. Equinor aims at reducing carbon intensity across the operated international portfolio, to ambition level of <10kg CO2 per boe by 2025. More information on assets in operation and projects under development internationally is provided in section 2.4 E&P International – Exploration & Production International.

 

New energy solutions – Develop a high value renewable business

The renewable market is changing and growing at unprecedented pace, presenting opportunities for decades of growth. Equinor has a strong renewable portfolio in production and is leveraging its core competencies in managing complex oil and gas projects when growing in offshore wind. By 2026 Equinor expects to increase installed capacity from renewable projects to between 4 and 6 GW[4], Equinor share, mainly based on the current project portfolio. This is around 10 times higher than today’s capacity, implying an annual average growth rate of more than 30% in electricity production. Towards 2035, Equinor expects to increase installed renewables capacity further to between 12 and 16 GW, depending on availability of attractive project opportunities. Equinor expects to spend USD 0.5-1 billion in 2020-2021 and USD 2-3 billion in 2022-2023 (Annual gross capex before project financing, Equinor share, organic net capex 2022-2023 below USD 1.5 billion on average annually).

 

Becoming a global offshore wind major 

The last year has been transformational for Equinor’s offshore wind portfolio. With the recent additions of Dogger Bank (UK) and Empire Wind (US), Equinor is on the path to becoming a global offshore wind major. Dogger Bank is expected to be the world’s largest offshore wind farm development with an installed capacity of 3.6GW and a total potential of more than 20GW - enough to supply one third of UK electricity demand. Empire Wind will provide renewable electricity to one of the busiest cities in the world: New York City. With a capacity of 816MW, it is expected to deliver power to the equivalent of one million homes.

Equinor has a decade of operating experience from floating offshore wind. Up to 80% of the world’s offshore wind potential will likely require floating solutions and Equinor is well positioned to industrialise floating wind. Equinor’s ambition is to bring floating wind towards commerciality by 2030.

Opportunities in onshore renewables  

Equinor believes in diversifying its offshore wind business and pursuing additional growth options. Having a flexible portfolio gives Equinor the ability to provide power from numerous renewable energy sources including offshore wind, solar, and onshore wind. Over time Equinor expects to build profitable onshore positions in select power markets.

In December 2019, Equinor acquired 6.500.000 shares in Scatec Solar, corresponding to 5.2% of the shares and votes. Following the transaction Equinor owns a total of 18.965.400 shares of Scatec Solar, raising its total shareholding to 15.2% of the shares and votes. Equinor is present in two solar projects in South America (Brazil and Argentina). More information on new energy assets in operation and projects under development is provided in section 2.6 Other group.

Midstream and marketing – Secure premium market access and grow value creation through economic cycles

The main objective for Equinor’s Midstream, Marketing & Processing unit’s (MMP) mid- and downstream activities is to process and transport Equinor’s oil and gas production (including the Norwegian State’s petroleum) competitively to premium markets, realising maximum value. In addition, MMP is expanding its marketing of a growing electricity portfolio. Focus in 2019 has been on:

·        Safe, secure, and efficient operations

·        Securing flow assurance and premium market access for Equinor’s equity production and the Norwegian State’s direct financial interest volumes

·        Building and maintaining resilience through asset backed trading, value chain positioning, and counter-cyclical actions

·        Reducing carbon emissions and carbon intensity from its operations

·        Optimising regional piped gas value chains and pursuing selective trading positions in liquefied natural gas (LNG)

·        Renewing the contracted shipping portfolio with ships that are more efficient and have less emissions.

 

Since Equinor’s closing of the acquisition of Danske Commodities (DC) on 1 February 2019, Equinor and DC have realised several synergies, including positioning DC as Equinor’s route-to-market for renewables. In early fall, DC entered the American power market and building on this successful market entry, Equinor and DC are looking at entering additional power markets. More information on mid- and downstream activities is provided in section 2.5 MMP – Marketing, Midstream & Processing.

 

Group outlook

Equinor’s plans address the current business environment while continuing to invest in high-quality projects. Equinor continues to reiterate its efforts and commitment to deliver on its strategy.


[4] Including 15.2% equity in Scatec Solar ASA

18   Equinor, Annual Report on Form 20-F 2019     


 

·         Organic capital expenditures[5] are estimated at an annual average of USD 10-11 billion for 2020-2021 and around
USD 12 billion annual average for 2022-2023

·         Equinor intends to continue to mature its large portfolio of exploration assets and estimates a total exploration activity level of around USD 1.4 billion for 2020, excluding signature bonuses and field development costs

·         Equinor’s ambition is to keep the unit of production cost in the top quartile of its peer group

·         For the period 2019 – 2026, production growth[6] is expected to come from new projects resulting in around 3% CAGR (Compound Annual Growth Rate)

·         Production6 for 2020 is estimated to be around 7% above 2019 level

·         Scheduled maintenance activity is estimated to reduce the quarterly production by approximately 20 mboe per day in the first quarter of 2020. In total, maintenance is estimated to reduce equity production by around 45 mboe per day for the full year of 2020

·         Renewable equity generation capacity in 2026 is expected to be between 4 and 6 GW (this includes 15.2% share of Scatec Solar ASA)

These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Deferral of production to create future value, gas off-take, timing of new capacity coming on stream, operational regularity, impact of Covid-19, activity level in the US onshore, as well as uncertainty around the closing of the announced transactions represent the most significant risks related to the foregoing production guidance. In particular, recently there has been considerable uncertainty created by the Covid-19 pandemic as well as the changing dynamics among Opec+ members. We are unable to predict the impact of these events. For further information, see section 5.7 Forward-looking statements.

 


[5] See section 5.2 for non-GAAP measures.

[6] The production guidance reflects our estimates of proved reserves calculated in accordance with US Securities and Exchange Commission (SEC) guidelines and additional production from other reserves not included in proved reserves estimates. The growth percentage is based on historical production numbers, adjusted for portfolio measures.

Equinor, Annual Report on Form 20-F 2019    19 


 

2.2

Business overview

 

 

History in brief

 

18 September 1972   

Equinor, formerly Statoil, was formed by a decision of the Norwegian parliament and incorporated as a limited liability company under the name Den norske stats oljeselskap AS. At the time owned 100% by the Norwegian State, Equinor's initial role was to be the government's commercial instrument in the development of the oil and gas industry in Norway. Growing in parallel with the Norwegian oil and gas industry, Equinor’s operations were primarily focused on exploration, development and production of oil

and gas on the Norwegian continental shelf (NCS).

 

1979 – 1981

The Statfjord field was discovered in the North Sea

and commenced production. In 1981 Equinor was the first Norwegian company to be given operatorship

for a field, at Gullfaks in the North Sea.

 

1980s and 1990s

Equinor grew substantially through the development of the NCS (Statfjord, Gullfaks, Oseberg, Troll and others). Equinor also became a major player in the European gas market by entering into large sales contracts for the development and operation of gas transport systems and terminals. During these decades, Equinor was also involved in manufacturing and marketing in Scandinavia and established a comprehensive network of service stations. This line of business was fully divested in 2012.

 

2001

Equinor was listed on the Oslo and New York stock exchanges and became a public limited company under the name Statoil ASA, now Equinor ASA, with a 67% majority stake owned by the Norwegian State.

 

2007 - 2018

Equinor’s ability to fully realise the potential of the NCS and grow internationally was strengthened through the merger with Norsk Hydro's oil and gas division on 1 October 2007. Equinor’s business grew as a result of substantial investments on the NCS and internationally. Equinor delivered the world’s longest multiphase pipelines on the Ormen Lange and Snøhvit gas fields, and the giant Ormen Lange development project was completed in 2007. Equinor also expanded into Algeria, Angola, Azerbaijan, Brazil, Nigeria, UK, and the US Gulf of Mexico, among others. Equinor’s US onshore operations represents its largest international production outside Norway, and with the Peregrino field, Equinor is the largest international operator in Brazil.

 

2018

Statoil ASA changed its name to Equinor ASA following approval of the name change by the company’s annual general meeting on 15 May 2018. The name supports the company’s strategy and development as a broad energy company in addition to reflecting Equinor’s evolution and identity as a company for the generations to come.

 

2019 and present

Equinor’s access to crude oil in the form of equity, governmental and third-party volumes makes Equinor a large seller of crude oil, and Equinor is the second-largest supplier of natural gas to the European market. Processing, refining, offshore wind and carbon capture and storage are also part of our operations.

 

In recent years, Equinor has utilised its expertise to design and manage operations in various environments to grow upstream activities outside the traditional area of offshore production. This includes the development of shale oil and gas projects.

 

As part of Equinor’s strategy, the company is investing actively in new energy, such as offshore wind, and solar energy, in order to expand energy production, strengthen energy security and combat climate change.

 

Equinor operates in more than 30 countries and as of 31 December 2019 employs 21,412 people worldwide.

 

Equinor’s registered office is at Forusbeen 50, 4035 Stavanger, Norway. The telephone number of its registered office is +47 51 99 00 00.

 

20   Equinor, Annual Report on Form 20-F 2019     


 

 

Equinor’s competitive position

Key factors affecting competition in the oil and gas industry are oil and gas supply and demand, exploration and production costs, global production levels, alternative fuels, and environmental and governmental regulations. When acquiring assets and licences for exploration, development and production and in refining, marketing and trading of crude oil, natural gas and related products, Equinor competes with other integrated oil and gas companies.

 

Equinor continues to explore new business opportunities in offshore wind, solar, hydrogen and carbon capture, usage and storage (CCUS). Improvements in cost and technology for renewables have rapidly changed the landscape. Equinor is a player within the renewables business.

Equinor's ability to remain competitive will depend, among other things, on continuous focus on reducing costs and improving efficiency. It will also depend on technological innovation to maintain long-term growth in reserves and production, and the ability to seize opportunities in new areas and utilise new opportunities for digitalisation.

 

The information about Equinor's competitive position in the strategic report is based on a number of sources such as investment analyst reports, independent market studies, and internal assessments of market share based on publicly available information about the financial results and performance of market players.

 

 

 

Equinor, Annual Report on Form 20-F 2019    21 


 

Equinor’s value chain

 

 

 

Corporate structure

Equinor is a broad international energy company, its value chain includes most phases from exploration of hydrocarbons through developing, production and manufacturing, marketing and trading, and a growing renewables business. Equinor’s operations are managed through eight business areas: Development & Production Norway (DPN), Development & Production International (DPI), Development & Production Brazil (DPB), Marketing, Midstream & Processing (MMP), New Energy Solutions (NES), Technology, Projects & Drilling (TPD), Exploration (EXP) and Global Strategy & Business Development (GSB). The business areas are aggregated into four reporting segments; E&P Norway, E&P International, MMP and Other. For more information, see Segment reporting later in this chapter.

 

On 28 April 2018, Equinor announced changes in its business area structure to strengthen its ability to deliver on Equinor’s always safe, high value and low carbon strategy as Equinor develops as a broad energy company. DPB was established as a separate business area representing a new core geographic area, holding promising offshore oil and gas basins with a significant resource base. Equinor’s US operations were integrated in DPI as US operations have been maturing over the last few years. Equinor is pursuing unconventional onshore business opportunities globally and sees synergies in having US onshore operations which are organised within DPI.

 

Development & Production Norway (DPN)

Managing Equinor’s upstream activities on the NCS, DPN explores for and extracts crude oil, natural gas and natural gas liquids in the North Sea, the Norwegian Sea and the Barents Sea. DPN aims to ensure safe and efficient operations and transform the NCS to deliver sustainable value for many decades. DPN is shaping the future of the NCS with a digital transformation and solutions to achieve a lower carbon footprint and high recovery rates.

 

Development & Production International (DPI)

DPI manages Equinor’s worldwide upstream activities in all countries outside Norway and Brazil. DPI operates across six continents covering offshore and onshore exploration and extraction of crude oil, natural gas and natural gas liquids; and implementing rigorous safety standards, technological innovations and environmental awareness. DPI's intent is to build and grow a competitive international portfolio - always safe, high value and low carbon.

 

Development & Production Brazil (DPB)

DPB manages the development and production of oil and gas resources in Brazil, which Equinor considers to be a core area for long-term growth. Equinor has a diverse portfolio in Brazil with activities in all development stages from exploration to production. Most of Brazil licences are in deep-water areas, some of them more than 2,900 metres deep. Equinor has been producing in Brazil since 2011 with the Peregrino field, in the Campos Basin. DPB intends to grow a competitive portfolio creating value by increasing capacity and increasing recovery from mature fields, while reducing emissions and focusing on safety as priority.

 

22   Equinor, Annual Report on Form 20-F 2019     


 

Marketing, Midstream & Processing (MMP)

MMP works to maximise value creation in Equinor’s global midstream and downstream positions. MMP is responsible for global marketing and trading of crude, petroleum products, natural gas and electricity, including marketing of the Norwegian State’s natural gas and crude on the Norwegian continental shelf. MMP is also responsible for onshore plants and transportation in addition to the development of value chains to ensure flow assurance for Equinor’s upstream production and to maximise value creation.

 

 

 

New Energy Solutions (NES)

NES reflects Equinor’s long-term goal to complement Equinor’s oil and gas portfolio with profitable renewable energy and other low-carbon energy solutions. NES is responsible for wind farms and carbon capture and storage as well as other renewable energy and low-carbon energy solutions. NES aims to do this by combining Equinor’s oil and gas competence, project delivery capacities and ability to integrate technological solutions.

 

Technology, Projects & Drilling (TPD)

TPD is responsible for field development, well deliveries, technology development and procurement in Equinor. TPD aims to deliver safe, secure and efficient field development, including well construction, founded on world-class project execution and technology excellence. TPD utilises innovative technologies, digital solutions and carbon-efficient concepts to shape a competitive project portfolio at the forefront of the energy industry transformation. Sustainable value is being created together with suppliers through a simplified and standardised fit-for-purpose approach.

 

Exploration (EXP)

EXP manages Equinor’s worldwide exploration activities with the aim of positioning Equinor as one of the leading global exploration companies. This is achieved through accessing high potential new acreage in priority basins, globally prioritising and drilling more wells in growth and frontier basins, delivering near-field exploration on the NCS and other select areas, and achieving step-change improvements in performance.

 

Global Strategy & Business Development (GSB)

GSB develops the corporate strategy and manages business development and merger and acquisition activities for Equinor. The ambition of the GSB business area is to closely link corporate strategy, business development and merger and acquisition activities to actively drive Equinor's corporate development.

Presentation

In the following sections in the report, the operations are reported according to the reporting segment. Underlying activities or business clusters are presented according to how the reporting segment organises its operations. See note 3 Segments to the Consolidated financial statements for further details.

 

As required by the SEC, Equinor prepares its disclosures about oil and gas reserves and certain other supplementary oil and gas disclosures based on geographic areas. Equinor’s geographical areas are defined by country and continent and consist of Norway, Eurasia excluding Norway, Africa, US and Americas excluding US. For more information, see section 4.2 Supplementary oil and gas information (unaudited) in the Financial statements and supplements chapter.

 

 

Segment reporting

The business areas DPI and DPB are aggregated into the reporting segment Exploration & Production International (E&P International). The basis for this aggregation is similar economic characteristics, such as the assets’ long term and capital-intensive nature and exposure to volatile oil and gas commodity prices, the nature of products, service and production processes, the type and class of customers, the methods of distribution and regulatory environment. The reporting segments Exploration & Production Norway (E&P Norway) and MMP consists of the business areas DPN and MMP respectively. The business areas NES, GSB, TPD, EXP and corporate staffs and support functions are aggregated into the reporting segment “Other” due to the immateriality of these areas.

 

Most of the costs within the business areas GSB, TPD and EXP are allocated to the E&P International, E&P Norway and MMP reporting segments. Activities relating to the EXP business area are fully allocated to the relevant E&P reporting segments. Activities relating to the TPD, GSB business areas and corporate staffs and support functions are partly allocated to the relevant E&P and MMP reporting segments.

 

Internal transactions in oil and gas volumes occur between reporting segments before such volumes are sold in the market. Equinor has established a market-based transfer pricing methodology for the oil and natural gas intercompany sales and purchases that meets the requirements for applicable laws and regulations. For further information, see section 2.8 Operational performance under Production volumes and prices.

 

Equinor, Annual Report on Form 20-F 2019    23 


 

Equinor eliminates intercompany sales when combining the results of reporting segments. Intercompany sales include transactions recorded in connection with oil and natural gas production in the E&P Norway and the E&P International reporting segments, and in connection with the sale, transportation or refining of oil and natural gas production in the MMP reporting segment. Certain types of transportation costs are reported in both the MMP and the E&P International segments.

 

The E&P Norway segment produces oil and natural gas which is sold internally to the MMP segment. A large share of the oil produced by the E&P International segment is also sold through the MMP segment. The remaining oil and gas from the E&P International segment is sold directly in the market. In 2019, the average transfer price for natural gas for E&P Norway was USD 4.46 per mmbtu. The average transfer price was USD 5.65 per mmbtu in 2018. For the oil sold from the E&P Norway reporting segment to the MMP reporting segment, the transfer price is the applicable market-reflective price minus a cost recovery rate.

 

 

 

 

 

24   Equinor, Annual Report on Form 20-F 2019     


 

The following table shows certain financial information for the four reporting segments, including intercompany eliminations for the two-year period ending 31 December 2019.

For additional information, see note 3 Segments to the Consolidated financial statements.

 

Segment performance

 

 

 

 

 

 

 

  For the year ended 31 December

(in USD million)

2019

2018

 

 

 

 

Exploration & Production Norway

 

 

Total revenues and other income

18,832

22,475

Net operating income/(loss)

9,631

14,406

Non-current segment assets1)

33,795

30,762

 

 

 

 

Exploration & Production International

 

 

Total revenues and other income

10,325

12,399

Net operating income/(loss)

(800)

3,802

Non-current segment assets1)

37,558

38,672

 

 

 

 

Marketing, Midstream & Processing

 

 

Total revenues and other income

60,955

75,794

Net operating income/(loss)

1,004

1,906

Non-current segment assets1)

5,124

5,148

 

 

 

 

Other

 

 

Total revenues and other income

624

280

Net operating income/(loss)

92

(79)

Non-current segment assets1)

4,214

353

 

 

 

 

Eliminations2)

 

 

Total revenues and other income

(26,379)

(31,355)

Net operating income/(loss)

(629)

103

Non-current segment assets1)

-

-

 

 

 

 

Equinor group

 

 

Total revenues and other income

64,357

79,593

Net operating income/(loss)

9,299

20,137

Non-current segment assets1)

80,691

74,934

 

 

 

 

1)

Equity accounted investments, deferred tax assets, pension assets and non-current financial assets are not allocated to segments. Right of use assets according to IFRS16 are included in Other segment from 2019.

2)

Includes elimination of inter-segment sales and related unrealised profits, mainly from the sale of crude oil and products.

Inter-segment revenues are based upon estimated market prices.

 

 

 

Equinor, Annual Report on Form 20-F 2019    25 


 

The following tables show total revenues and other income by country.

 

2019 Total revenues and other income by country

Crude oil

Natural gas

Natural gas liquids

Refined

products

Other

Total

(in USD million)

 

 

 

 

 

 

 

Norway

25,106

9,525

4,674

6,334

611

46,250

US

7,120

1,353

1,132

1,697

229

11,532

Denmark

0

12

0

2,580

191

2,783

Brazil

1,099

19

0

0

560

1,678

Other

180

372

0

41

1,358

1,951

 

 

 

 

 

 

 

Total revenues and other income1)

33,505

11,281

5,807

10,652

2,949

64,194

 

 

 

 

 

 

 

1) Excluding net income (loss) from equity accounted investments

 

 

 

 

 

 

 

 

2018 Total revenues and other income by country

Crude oil

Natural gas

Natural gas liquids

Refined

products

Other

Total

(in USD million)

 

 

 

 

 

 

 

Norway

30,221

11,953

5,969

8,299

1,971

58,412

US

9,113

1,575

1,198

1,790

444

14,120

Denmark

0

0

0

2,533

22

2,556

United Kingdom

653

0

0

0

124

777

Other

962

543

0

502

1,430

3,436

 

 

 

 

 

 

 

Total revenues and other income1)

40,948

14,070

7,167

13,124

3,991

79,301

 

 

 

 

 

 

 

1) Excluding net income (loss) from equity accounted investments

 

 

 

 

 

 

 

Research and development

Technology and innovation are identified as enablers to deliver on Equinor’s strategy. We continually research, develop and implement innovative technologies to create opportunities and enhance the value of Equinor’s current and future assets.  

 

Our technology strategy sets the direction for technology development and implementation to meet Equinor’s ambitions. We prioritise and accelerate high-value technologies for broad implementation in existing and new value chains:

·        Optimise production from existing and near field resources 

·        Low carbon solutions for oil and gas 

·        Discover and develop prolific basins and deep-water areas

·        Unlock low recovery reservoirs

·        Develop renewable energy opportunities

 

We utilise a range of tools for the development of new technologies:  

 

·        In-house research and development 

·        Cooperation with academia, research institutes and suppliers 

·        Project-related development as part of field development activities 

·        Direct investment in technology start-up companies through Equinor Technology Venture’s investment activities 

·        Invitation to open innovation challenges as part of Equinor Innovate 

 

For additional information, see note 7 Other expenses to the Consolidated financial statements. 

 

26   Equinor, Annual Report on Form 20-F 2019     


 

Key figures

 

 

 

 

 

 

 

 

 

 

 

 

(in USD million, unless stated otherwise)

  For the year ended 31 December

2019

2018

2017

2016

2015

 

 

 

 

 

 

 

Financial information

 

 

 

 

 

Total revenues and other income

64,357

79,593

61,187

45,873

59,642

Operating expenses

(9,660)

(9,528)

(8,763)

(9,025)

(10,512)

Net operating income/(loss)

9,299

20,137

13,771

80

1,366

Net income/(loss)

1,851

7,538

4,598

(2,902)

(5,169)

Non-current finance debt

24,945

23,264

24,183

27,999

29,965

Net interest-bearing debt

16,429

11,130

15,437

18,372

13,852

Total assets

118,063

112,508

111,100

104,530

109,742

Total equity

41,159

42,990

39,885

35,099

40,307

Net debt to capital employed ratio1)

28.5%

20.6%

27.9%

34.4%

25.6%

Net debt to capital employed ratio adjusted1)

23.8%

22.2%

29.0%

35.6%

26.8%

ROACE2)

9.0%

12.0%

8.2%

-0.4%

4.1%

 

 

 

 

 

 

 

Operational data

 

 

 

 

 

Equity oil and gas production (mboe/day)

2,074

2,111

2,080

1,978

1,971

Proved oil and gas reserves (mmboe)

6,004

6,175

5,367

5,013

5,060

Reserve replacement ratio (annual)

0.75

2.13

1.50

0.93

0.55

Reserve replacement ratio (three-year average)

1.47

1.53

1.00

0.70

0.81

Production cost equity volumes (USD/boe)

5.3

5.2

4.8

5.0

5.9

Average Brent oil price (USD/bbl)

64.3

71.1

54.2

43.7

52.4

 

 

 

 

 

 

 

Share information3)

 

 

 

 

 

Diluted earnings per share (in USD)

0.55

2.27

1.40

(0.91)

(1.63)

Share price at OSE (Norway) on 31 December (in NOK)

175.50

183.75

175.20

158.40

123.70

Share price at NYSE (USA) on 31 December (in USD)

19.91

21.17

21.42

18.24

13.96

Dividend paid per share (in USD)4)

1.01

0.91

0.88

0.88

0.90

Weighted average number of ordinary shares outstanding (in millions)

3,326

3,326

3,268

3,195

3,179

 

 

 

 

 

 

 

1)

See section 5.2 Use and reconciliation of non-GAAP financial measures for net debt to capital employed ratio.

2)

See section 5.2 Use and reconciliation of non-GAAP financial measures for return on average capital employed (ROACE).

3)

See section 5.1 Shareholder information for a description of how dividends are determined and information on share repurchases.

4)

For 2019, dividend for the third and for the fourth quarter of 2018 and dividend for the first and second quarter of 2019 were paid. For 2018, dividends for the third and fourth quarter 2017 and the first and second quarter 2018 were paid. From and including the third quarter of 2015, dividends were declared in USD. Dividends in previous periods were declared in NOK. Figures for 2015 are presented using the Central Bank of Norway year end rates for NOK.

Equinor, Annual Report on Form 20-F 2019    27 


 

2.3

Exploration & Production Norway
(E&P Norway)

 

 

A boat sitting on top of a sandy beach next to the ocean

Description automatically generated

Johan Sverdrup, NCS.

 

Overview

The Exploration & Production Norway segment covers exploration, field development and operations on the NCS, which includes the North Sea, the Norwegian Sea and the Barents Sea. E&P Norway aims to ensure safe and efficient operations, maximising the value potential from the NCS.

 

For 2019, Equinor reports production on the NCS from 41 Equinor-operated fields, nine partner-operated fields, as well as equity-accounted production from Lundin Petroleum AB for the first eight months of the year.

 

Key events and portfolio developments in 2019 and early 2020:

·    Strengthening the position in the Norwegian Sea, Equinor on 5 December 2018 agreed with Faroe Petroleum on several swap transactions with no cash considerations, effective as of 1 January 2019. The transactions increase Equinor’s equity share of the prolific Njord area and reduce its share in non-core assets.

·    On 15 January 2019, Equinor was awarded 29 exploration licences (13 as operator) on the NCS in the Awards for predefined areas round 2018 for mature areas.

·    On 19 May, the Ministry of Petroleum and Energy approved the plan for development and operation of the second phase of the Johan Sverdrup field development. Around one fourth of the oil from the Johan Sverdrup full field will be produced in the second phase, expected to start production in late 2022.

·    On 30 August, Equinor completed the sales of a 16% stake in Lundin Petroleum AB for around USD 1.51 billion and the acquisition of a 2.6% stake in the Johan Sverdrup field for USD 910 million. Following the transactions, Equinor holds a 4.9% percent stake in Lundin Petroleum AB and a 42.6% direct interest in the Johan Sverdrup field. 

·    Trestakk achieved first oil on 15 July. The oil discovery in the Norwegian Sea has been developed as a subsea tie-back to Åsgard A.

·    Utgard achieved first gas on 16 September. The gas and condensate field in the North Sea spans the boundary between the Norwegian and UK continental shelves, and the subsea development includes two wells in a new subsea template. Gas and condensate are piped through a new 21-km pipeline to the Sleipner field for processing and onward transportation to market.

 

The giant Johan Sverdrup oil and gas field in the North Sea was brought on stream on 5 October. The field is expected to produce for more than 50 years. Powered by electricity from shore, the field has record-low CO2 emissions of 0.7kg per barrel.

28   Equinor, Annual Report on Form 20-F 2019     


 

 

Crude oil is exported to Mongstad through a 283-km designated pipeline, and gas is exported to the gas processing facility at Kårstø through a 156-km pipeline via a subsea connection to the Statpipe pipeline.  

·   The plans for development and operation of Hywind Tampen, an 88 MW floating offshore wind farm projected to provide wind power to the Snorre and Gullfaks installations in the Tampen area of the North Sea, were submitted to the Norwegian Ministry of Petroleum and Energy on 11 October.

 

Floating offshore wind from the pioneering Hywind Tampen development will reduce the carbon footprint from the Snorre and Gullfaks installations.

·    Onshore power to offshore installations: Powered from shore, Johan Sverdrup is one of the world’s most carbon-efficient fields. In the second phase of the field development, a power hub will be installed, allowing for the Gina Krog, Ivar Aasen and Edvard Grieg fields, as well as Johan Sverdrup second phase, to be powered from the onshore grid. In October, Equinor announced that the area’s licence partners are working towards a partial electrification of the Sleipner field, as well as Gudrun and other tie-ins, maximising the utilisation of power from shore to the area. Power supply from the onshore grid will reduce the carbon footprint from these offshore installations and contribute to reaching the climate goal of the Paris agreement.

·   On 1 December, Equinor assumed the operatorship of Wisting  in the Barents Sea from OMV. Equinor is considering developing the Wisting oil discovery using an FPSO solution with subsea wells.

·   Equinor and its partners made 11 commercial discoveries on the NCS in 2019

·   On 9 January 2020, Equinor and the Statfjord  licence partners announced an extension towards 2040 of the production from the Statfjord field in the North Sea, enabled by a planned upgrade of the three platforms and maturation of new reserves for recovery.

·   On 14 January 2020, Equinor was awarded 23 licences
(14 as operator) on the NCS in the
Awards for predefined areas round 2019 for mature areas.

·   The gas processing capacity at Troll C was increased when a new compressor was brought on stream on 30 January 2020.  



A picture containing building, sitting, large, boat

Description automatically generated

 

Gudrun, NCS.

 

Equinor, Annual Report on Form 20-F 2019    29 


 

Major producing fields and field developments operated by Equinor and Equinor’s licence partners

 

 

 

30   Equinor, Annual Report on Form 20-F 2019     


 

Fields in production on the NCS

The table below shows E&P Norway's average daily entitlement production for the years ending 31 December 2019, 2018 and 2017. Production in 2019 decreased owing to natural decline, reduced ownership in some fields and a lower flexible gas production, partially offset by new fields in production.

 

Average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  For the year ended 31 December

 

2019

 

2018

 

2017

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

Area production

mbbl/day

mmcm/day

mboe/day

 

mbbl/day

mmcm/day

mboe/day

 

mbbl/day

mmcm/day

mboe/day

 

 

 

 

 

 

 

 

 

 

 

 

Equinor operated fields

 461  

 98  

 1,079  

 

 470  

 99  

 1,090  

 

 505  

 100  

 1,136  

Partner operated fields

 65  

 13  

 147  

 

 79  

 16  

 181  

 

 70  

 17  

 179  

Equity accounted production

 9  

 -    

 9  

 

 16  

 -    

 16  

 

 19  

 -    

 19  

 

 

 

 

 

 

 

 

 

 

 

 

Total

 535  

 111  

 1,235  

 

 565  

 115  

 1,288  

 

 594  

 118  

 1,334  



A crane over a city

Description automatically generated

Gina Krog, NCS.

 

Equinor, Annual Report on Form 20-F 2019    31 


 

The following tables show the NCS entitlement production by fields in which Equinor was participating during the year ended
31 December 2019.

 

Equinor operated fields, average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical area

Equinor's equity interest in %

 

On stream 

Licence expiry date

 

Average production in 2019 mboe/day

 

 

Field

 

 

 

 

 

 

 

 

 

Troll Phase 1 (Gas)

The North Sea

30.58

 

1996

2030

 

165

Gullfaks 

The North Sea

51.00

 

1986

2036

 

89

Oseberg

The North Sea

49.30

 

1988

2031

 

88

Åsgard 

The Norwegian Sea

34.57

 

1999

2027

 

79

Visund

The North Sea

53.20

 

1999

2034

 

73

Aasta Hansteen

The Norwegian Sea

51.00

 

2018

2041

 

58

Tyrihans

The Norwegian Sea

58.84

 

2009

2029

 

54

Snøhvit

The Barents Sea

36.79

 

2007

2035

 

48

Kvitebjørn

The North Sea

39.55

 

2004

2031

 

40

Grane

The North Sea

36.61

 

2003

2030

 

37

Sleipner Vest

The North Sea

58.35

 

1996

2028

 

34

Troll Phase 2 (Oil)

The North Sea

30.58

 

1995

2030

 

33

Gina Krog

The North Sea

58.70

 

2017

2032

 

31

Johan Sverdrup

The North Sea

42.63

 

2019

2036-2037

 

31

Statfjord Unit

The North Sea

44.34

 

1979

2026

 

24

Gudrun

The North Sea

36.00

 

2014

2028-2032

 

23

Fram 

The North Sea

45.00

 

2003

2024

 

20

Snorre 

The North Sea

33.28

 

1992

2040

 

18

Mikkel 

The Norwegian Sea

43.97

 

2003

2024

 

17

Valemon

The North Sea

53.78

 

2015

2031

 

15

Kristin

The Norwegian Sea

55.30

 

2005

2027-2033

 

11

Heidrun 

The Norwegian Sea

13.04

 

1995

2024-2025

 

10

Tordis area 

The North Sea

41.50

 

1994

2040

 

10

Alve

The Norwegian Sea

53.00

 

2009

2029

 

10

Morvin

The Norwegian Sea

64.00

 

2010

2027

 

10

Norne

The Norwegian Sea

60.00

 

1997

2026

 

8

Vigdis area 

The North Sea

41.50

 

1997

2040

 

8

Sleipner Øst

The North Sea

59.60

 

1993

2028

 

6

Trestakk

The Norwegian Sea

59.10

 

2019

2029

 

5

Urd

The Norwegian Sea

63.95

 

2005

2026

 

5

Utgard

The North Sea

38.441)

 

2019

2028

 

4

Gungne 

The North Sea

62.00

 

1996

2028

 

4

Byrding

The North Sea

70.00

 

2017

2024-2035

 

2

Sigyn

The North Sea

60.00

 

2002

2022

 

2

Statfjord Nord

The North Sea

21.88

 

1995

2026

 

2

Veslefrikk 

The North Sea

18.00

 

1989

2025-2031

 

1

Sygna 

The North Sea

30.71

 

2000

2026-2040

 

1

Statfjord Øst

The North Sea

31.69

 

1994

2026-2040

 

1

Gimle

The North Sea

65.13

 

2006

2023-2034

 

1

Tune

The North Sea

50.00

 

2002

2025-2032

 

1

Heimdal

The North Sea

29.44

 

1985

2021

 

0

 

 

 

 

 

 

 

 

Total Equinor operated fields

 

 

 

 

1,079

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

32   Equinor, Annual Report on Form 20-F 2019     


 

Partner operated fields, average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

Geographical area

Equinor's equity interest in %

Operator 

On stream 

Licence expiry date

 

Average production in 2019 mboe/day

 

 

Field

 

 

 

 

 

 

 

 

 

Ormen Lange

The Norwegian Sea

25.35

A/S Norske Shell

2007

2040-2041

 

58

Skarv

The Norwegian Sea

36.17

Aker BP ASA

2013

2029-2033

 

32

Ivar Aasen

The North Sea

41.47

Aker BP ASA

2016

2029-2036

 

25

Goliat

The Barents Sea

35.00

Vår Energi AS

2016

2042

 

14

Ekofisk area 

The North Sea

7.60

ConocoPhillips Skandinavia AS

1971

2028

 

13

Marulk

The Norwegian Sea

33.00

Vår Energi AS

2012

2025

 

3

Vilje

The North Sea

0.00

Aker BP ASA

2008

2021

 

1

Ringhorne Øst

The North Sea

0.00

Vår Energi AS

2006

2030

 

0

Enoch

The North Sea

11.78

Repsol Sinopec North Sea Ltd.

2007

2024

 

0

 

 

 

 

 

 

 

 

Total partner operated fields

 

 

 

 

147

 

 

 

 

 

 

 

 

Equity accounted production

 

 

 

 

 

 

 

Lundin Petroleum AB

 

4.902)

Lundin Petroleum AB

 

 

 

9

 

 

 

 

 

 

 

 

Total E&P Norway including share of equity accounted production

 

 

1,235

 

1)   The Utgard field in the North Sea spans the boundary between the Norwegian and UK continental shelves. The volumes pertain to the Equinor 38.44% share of Utgard on the NCS. (For the volumes pertaining to the Equinor 38% share of Utgard on the UKCS, please see section 2.4 E&P International)

2)   On 7 July, Equinor divested a 16 percent shareholding in Lundin for a direct interest of 2.6 percent in the Johan Sverdrup field and a cash consideration, and the last transaction was concluded on 30 August. The volumes therefore pertain to the first eight months of the year

 

 

 

Main producing fields on the NCS


Equinor-operated fields

Johan Sverdrup (Equinor 42.63%)  is a major oil field with associated gas in the North Sea, developed with four platforms: a processing platform, a drilling platform, a riser platform and a living quarter platform. Crude oil is exported to Mongstad through a 283-km designated pipeline, and gas is exported to the gas processing facility at Kårstø through a 156-km pipeline via a subsea connection to the Statpipe pipeline.

 

A record-breaking lift completed the Johan Sverdrup field centre in March. The processing platform of nearly 26 000 tonnes is the heaviest lift ever performed offshore. First oil was achieved in October 2019.

 

The second phase of the Johan Sverdrup field is under development and includes a new processing platform linked to the field centre, and five new subsea templates.

 

Troll (Equinor 30.58%) in the North Sea is the largest gas field on the NCS and a major oil field. The Troll field regions are connected to the Troll A, B and C platforms. Troll gas is produced mainly at Troll A, and oil mainly at Troll B and C. Fram, Fram H Nord and Byrding are tie-ins to Troll C.

 

New compressors have increased the gas processing capacity: one compressor was brought on stream at Troll B in September 2018, and one at Troll C in January 2020. The third phase of the Troll field is under development.

The Gullfaks  (Equinor 51%)  oil and gas field in the North Sea is developed with three platforms. Since production started on Gullfaks in 1986, several satellite fields have been developed with subsea wells which are remotely controlled from the Gullfaks A and C platforms.

Equinor, Annual Report on Form 20-F 2019    33 


 

 

The Oseberg  area (Equinor 49.30%) in the North Sea produces oil and gas. The development includes the Oseberg field centre, Oseberg C, Oseberg East and Oseberg South production platforms. Oil and gas from the satellites are transported to the Oseberg field centre for processing and transportation. Oseberg Vestflanken 2 came on stream in October 2018 and is Norway’s first unmanned platform, remotely controlled from the Oseberg field centre.

 

The Åsgard  (Equinor 34.57%) gas and condensate field in the Norwegian Sea is developed with the Åsgard A production and storage ship for oil, the Åsgard B semi-submersible floating production platform for gas and condensate, and the Åsgard C storage vessel for oil and condensate. Åsgard C is also storage for oil produced at Kristin and Tyrihans. In 2015 Equinor started the world’s first subsea gas compression train on Åsgard. Trestakk, a tie-in to Åsgard, came on stream in July.

 

Visund (Equinor 53.2%, operator) oil and gas field in the North Sea is developed with Visund A semi-submersible integrated living quarter, drilling and processing unit, and a subsea installation in the northern part of the field. Visund North improved oil recovery, a subsea development with two new wells in a new subsea template, was brought on stream in September 2018.

 

The Aasta Hansteen (Equinor 51%, operator) gas and condensate field in the Norwegian Sea is developed with a floating spar platform and two subsea templates.

 

With the Snefrid North well at 1309 metres beneath the ocean’s surface, the field development is the deepest ever on the NCS.

 

First gas was achieved in December 2018. In September 2019, the Snefrid North gas field was brought on stream, a subsea development with one well tied back to Aasta Hansteen.

 

The Tyrihans  (Equinor 58.84%, operator) oil and gas field in the Norwegian Sea is developed with five subsea templates tied back to Kristin.

 

The Snøhvit  (Equinor 36.79%, operator) gas and condensate field is developed with several subsea templates. Snøhvit was the first field development in the Barents Sea and is connected ta to the liquefied natural gas processing facilities at Melkøya near Hammerfest through a 160-km long pipeline. Askeladd phase 1, the next plateau extender of Snøhvit, is under development.

 

Partner-operated fields

Ormen Lange (Equinor 25.35%, operated by A/S Norske Shell) is a deepwater gas field in the Norwegian Sea. The well stream is transported to an onshore processing and export plant at Nyhamna. Gassco became operator of Nyhamna from
1 October 2017, with Shell as technical service provider.

 

Skarv (Equinor 36.17%, operated by Aker BP ASA) is an oil and gas field in the Norwegian Sea. The field development includes a floating production, storage and offloading vessel and five subsea multi-well installations.

 

Ivar Aasen (Equinor 41.47%, operated by Aker BP ASA) is an oil and gas field in the North Sea. The development includes a fixed steel jacket with partial processing and living quarters tied in as a satellite to Edvard Grieg for further processing and export.

 

Goliat (Equinor 35%, operated by Vår Energi AS, formerly Eni Norge AS)  is the first oil field developed in the Barents Sea. The field consists of subsea wells tied back to a circular floating production, storage and offloading vessel. The oil is offloaded to shuttle tankers.

 

Ekofisk area (Equinor 7.60%, operated by ConocoPhillips Skandinavia AS) consists of the Ekofisk, Tor, Eldfisk and Embla fields.  

 

Marulk (Equinor 33%, operated by Vår Energi AS, formerly Eni Norge AS) is a gas and condensate field developed as a tie-back to the Norne FPSO.

 

Exploration on the NCS

Equinor holds exploration acreage and actively explores for new resources in all three regions on the NCS, the Norwegian Sea, the North Sea and the Barents Sea.

Equinor was awarded 23 licenses (14 as operator) in the Awards for predefined areas (APA) round 2019 for mature areas and completed several farm-in transactions with other companies. 

 

There has been high activity on NCS in 2019, and Equinor and its partners have completed 26 exploratory wells and made 11 commercial and three non-commercial discoveries. 

 

34   Equinor, Annual Report on Form 20-F 2019     


 

Exploratory wells drilled1)

 

 

 

 

 

 

 

 

  For the year ended 31 December

 

2019

2018

2017

 

 

 

 

North Sea

 

 

 

Equinor operated

10

5

7

Partner operated

2

2

0

Norwegian Sea

 

 

 

Equinor operated

4

4

4

Partner operated

6

4

0

Barents Sea

 

 

 

Equinor operated

4

2

5

Partner operated

0

1

1

Total (gross)

26

18

17

 

1) Wells completed during the year, including appraisals of earlier discoveries.

 

Fields and projects under development on the NCS

Equinor’s major development projects on the NCS as of
31 December 2019
[7] :

 

Askeladd (Equinor 36.79%, operator) is the next plateau extender of the Snøhvit gas field in the Barents Sea. The development includes two subsea templates, a 42-km tie-back to Snøhvit  and drilling of three gas producers. The project was sanctioned in March 2018. First gas is expected in late 2020.

 

Hywind Tampen (Equinor 33.28% (Snorre) and 51% (Gullfaks), operator) The plans for development and operation of the  
88 MW floating offshore wind farm to provide wind power to the Snorre and Gullfaks installations in the Tampen area of the North Sea,
were submitted to the Ministry of Petroleum and Energy on 11 October. The planned eleven wind turbines, based on the Hywind technology developed by Equinor, is expected to meet around 35% of the annual power need of the five offshore platforms Snorre A, B and C and Gullfaks A and B. The wind park is expected to be brought on stream in late 2022.

 

Johan Castberg (Equinor 50%, operator) is the development of the three oil discoveries Skrugard, Havis and Drivis, located some 240 kilometres northwest of Hammerfest in the Barents Sea. The development includes a production vessel and a subsea development with 30 wells, ten subsea templates and two satellite structures. On 28 June 2018, the Ministry of Petroleum and Energy approved the Plan for development and operation of the field. First oil is expected in late 2022.

 

Johan Sverdrup, second phase  (Equinor 42.6%, operator)  is an oil and gas discovery in the North Sea. he plan for development and operation for the second phase of the Johan Sverdrup field was approved by the Ministry of Petroleum and Energy on
19 May 2019.
The development includes a new processing platform linked to the field centre, five new subsea templates and 28 wells. Around one fourth of the oil from the Johan Sverdrup full field will be produced in the second phase. First oil is expected in late 2022

 

Martin Linge  (Equinor 70%, operator) is an oil and gas field near the British sector of the North Sea. The reservoir is complex with gas under high pressure and high temperatures. Effective as of January 1, 2018, Equinor acquired Total’s interest and assumed the operatorship. The development includes a fixed steel jacket platform with processing and export facilities, with electric power to be supplied from Kollsnes. The Martin Linge hook-up and completion scope is large and complex, and first oil is expected in late 2020.

 

Njord future (Equinor 20%, operator) is a development to enable safe, reliable and efficient exploitation of the Njord and Hyme oil discoveries through to 2040. The development includes an upgrade of the Njord A floating platform, an optimal oil export solution and drilling of ten new wells. As part of the upgrade, the platform will be prepared to bring the nearby fields Bauge and Fenja on stream. On 20 June 2017, the Ministry of Petroleum and Energy approved the plan for development and operation of the field. Oil production is expected to start in late 2020.

 

Snorre expansion (Equinor 33.28%, operator) is expected to increase oil recovery from the Snorre field and extend field life beyond 2040. The Ministry of Petroleum and Energy approved the plan for development and operation on 5 July 2018. The concept consists


[7] Recently, there has been considerable uncertainty created by the Covid-19 pandemic as well as the changing dynamics among Opec+ members. We are unable to predict the impact of these events.

Equinor, Annual Report on Form 20-F 2019    35 


 

of six subsea templates, with four well slots each. Each slot will have the possibility for either production or injection. 24 wells will be drilled, twelve production wells and twelve injection wells. Oil production is expected to start in 2021.

 

Troll phase 3 (Equinor 30.58%, operator) is expected to increase gas recovery from the Troll field and extend field life beyond 2050. The Ministry of Petroleum and Energy approved the plan for development and operation on 7 December 2018. The subsea development includes two subsea templates, eight production wells, a 36-inch export pipeline and a new process module on the Troll A platform. First gas from Phase 3 is expected in 2021.

 

Ærfugl (Equinor 36.17%, operated by Aker BP) is the development of the gas and condensate discoveries Ærfugl and Snadd Outer fields in the Norwegian Sea, near the Skarv field, some 200 km west of Sandnessjøen. The field is being developed in two phases and includes six new production wells which will be tied into the Skarv floating production, storage and offloading vessel for processing and storage. On 6 April 2018, the Ministry of Petroleum and Energy approved the plan for development and operation of the field. The operator plans for first gas in late 2020.

 

Decommissioning on the NCS

Under the Petroleum Act, the Norwegian government has imposed strict procedures for removal and disposal of offshore oil and gas installations. The convention for the protection of the marine environment of the Northeast Atlantic (OSPAR) stipulates similar procedures.

 

Huldra (Equinor 19.87%, operator) ceased production in September 2014, after 13 years in production. The permanent plugging and abandonment of wells was finalised in 2017, and the heavy-lift vessel, Thialf removed the platform in May. The demolition and recycling of the platform take place at Vats on the Norwegian coast.

 

Ekofisk (Equinor 7.6%, operated by ConocoPhillips Skandinavia AS): In the third removal campaign, some installations were removed in 2019.

 

For further information about decommissioning, see note 2 Significant accounting policies to the Consolidated financial statements.

 

36   Equinor, Annual Report on Form 20-F 2019     


 

2.4

Exploration & Production International

(E&P International)

 

 

Overview

Equinor is present in several of the most important oil and gas provinces in the world. The E&P International segment covers exploration, development and production of oil and gas outside the Norwegian continental shelf (NCS).

E&P International is present in nearly 25 countries and had production in 12 countries in 2019. E&P International produced around 40% of Equinor’s total equity production of oil and gas in 2019, compared to 39% in 2018. For information about proved reserves development see section 2.8 Operational Performance under Proved oil and gas reserves.

 

A picture containing yellow, building, man, boat

Description automatically generated

 

Peregrino Phase 2 hook up, Brazil.

 

 

Key events and portfolio developments in 2019 and early 2020:

·        On 16 April, Equinor was awarded seven new licences in the 1st offshore licensing round in Argentina, five as operator and two as partner

·        On 19 April, Equinor and its partners sanctioned the development of Azeri Central East (ACE) platform in the Azeri Chirag Gunashli (ACG)  oilfield in Caspian Sea

·        On 24 April, a significant discovery at the Blacktip  prospect in the deepwater U.S. Gulf of Mexico was announced by Shell Offshore Inc. Equinor holds a 19.1% working interest in the licence

·        On 30 May, the acquisition of Barra Energia do Brasil Petróleo e Gás Ltda’s 10% interest and subsequent assignment of 3.5% and 3% interests, respectively to ExxonMobil and Petrogal, in the BM-S-8 block in Brazil's Santos basin were approved by authorities. These transactions had been agreed in July 2018. After the transaction, Equinor owns a 40% operated interest in the neighbouring BM-S-8 and Bachalau North blocks

·        On 4 June, Equinor was awarded five new licences in the 31st offshore licensing round on the UK continental shelf, four as operator and one as partner

·        On 12 August, Equinor completed the acquisition of 22.45% interest in the Caesar Tonga oil field from Shell Offshore Inc. Equinor’s interest in the field is now 46%. The effective date of the transaction is 1 January 2019

 

Equinor, Annual Report on Form 20-F 2019    37 


 

On 15 August, Equinor started production from the Mariner  oil field, the group’s first operated development in the UK North Sea. The field is expected to produce oil for more than 30 years and support more than 700 long-term jobs. Mariner is a digital frontrunner, applying automated drilling and a digital copy of the platform, to deliver safe and efficient operations

 

·        On 20 August, a waterflood project was sanctioned in the St. Malo field in the US Gulf of Mexico including two new production wells, three new injector wells, and topsides injection equipment

·        On 21 August, Equinor signed an agreement with Yacimientos Petroliferos Fiscales S.A. (YPF) to acquire a 50% interest in and to jointly explore the CAN 100 offshore block, located in the northern Argentina Basin

·        On 16 September, Equinor started production from the Utgard  gas and condensate field, which spans the boundary between the Norwegian and UK continental shelves. Gas and condensate is piped to the Sleipner field on the Norwegian side for processing and onward transportation to market

·        On 10 October, Equinor was awarded exploration acreage in the North Carnarvon Basin offshore western Australia as operator

·        On 29 November, Equinor and Rosneft have taken an investment decision on the first stage of the North Komsomolskoye full field development. The licence is owned by SevKomNeftegaz LLC in which Equinor owns 33.33% of the shares

·        On 6 December, Equinor completed the divestment of its 63% interest in, and operatorship of, the onshore business in the Eagle Ford shale play in the US state of Texas to Repsol. The effective date of the transaction is 1 October 2019

 

For more information about the transactions included above see note 4 Acquisitions and disposals to the Consolidated financial statements.

International production

Entitlement production differs from equity production where operations are performed under production sharing agreements (PSAs) (see section 5.6 Terms and abbreviations) and in the US where entitlement production is expressed net of royalty interests. For all other countries, royalties paid in-cash are included in entitlement production and royalties payable in-kind are excluded.

 

Equity production represents volumes that correspond to Equinor’s percentage ownership in a particular field and is larger than Equinor’s entitlement production if the field is governed by a PSA or royalties are excluded from entitlement production.

 

Equinor's equity production outside Norway was around 40% of Equinor's total equity production of oil and gas in 2019. Equinor's entitlement production outside Norway was 35% of Equinor's total entitlement production in 2019.

 

The following table shows E&P International's average daily entitlement production of liquids and natural gas for the years ending 31 December 2019, 2018 and 2017.

 

Average daily entitlement production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the year ended 31 December

 

2019

 

2018

 

2017

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

 

Oil and NGL

Natural gas

 

Production area

mboe/day

mmcm/day

mboe/day

 

mboe/day

mmcm/day

mboe/day

 

mboe/day

mmcm/day

mboe/day

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 279  

 29  

 461  

 

 245  

 25  

 403  

 

 186  

 19  

 304  

Africa

 137  

 4  

 165  

 

 168  

 6  

 209  

 

 197  

 6  

 233  

Eurasia

 29  

 3  

 45  

 

 21  

 3  

 40  

 

 26  

 3  

 46  

Equity accounted production

 3  

 0  

 4  

 

 0  

 -    

 0  

 

 5  

 -    

 5  

Total

 447  

 36  

 676  

 

 434  

 35  

 652  

 

 415  

 27  

 588  

38   Equinor, Annual Report on Form 20-F 2019     


 

The table below provides information about the fields that contributed to production in 2019, including average equity production per field.

 

Average daily equity production

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Field

Country

Equinor's equity interest in %

Operator 

On stream 

 

Licence expiry date

Average daily equity production in 2019 mboe/day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas

 

 

  

 

 

 

526

 

Appalachian (APB)1) 3)

US

Varies

Equinor/others4)

2008

 

HBP7)

200

 

Bakken1)

US

Varies

Equinor/others5)

2011

 

HBP7)

69

 

Roncador

Brazil

25.00

Petróleo Brasileiro S.A.

2018

 

2025

45

 

Eagle Ford1)

US

Varies2)

Equinor/others6)

2010

 

HPB7)

40

 

Peregrino

Brazil

60.00

Equinor Brasil Energia Ltda.

2011

 

20348)

37

 

Tahiti

US

25.00

Chevron USA Inc.

2009

 

HBP7)

29

 

Caesar Tonga

US

46.00

Anadarko U.S. Offshore LLC

2012

 

HBP7)

21

 

St. Malo

US

21.50

Chevron USA Inc.

2014

 

HBP7)

21

 

Julia

US

50.00

ExxonMobil Corporation

2016

 

HBP7)

14

 

Jack

US

25.00

Chevron USA Inc.

2014

 

HBP7)

12

 

Hebron

Canada

9.01

ExxonMobil Canada Properties

2017

 

HBP7)

10

 

Stampede

US

25.00

Hess Corporation

2018

 

HBP7)

8

 

Hibernia/Hibernia Southern Extension9)

Canada

Varies

Hibernia Management and Development Corporation Ltd.

1997

 

HBP7)

7

 

Big Foot

US

27.50

Chevron USA Inc.

2018

 

HBP7)

5

 

Terra Nova

Canada

15.00

Suncor Energy Inc.

2002

 

HBP7)

5

 

Titan

US

100.00

Equinor USA E&P Inc.

2018

 

HBP7)

3

 

Heidelberg

US

12.00

Anadarko U.S. Offshore LLC

2016

 

HBP7)

2

 

 

 

 

 

 

 

 

 

 

 

Africa

 

 

  

  

 

  

235

 

Block 17

Angola

23.33

Total E&P Angola Block 17

2001

 

2022-3410)

97

 

In Salah

Algeria

31.85

Sonatrach11)

2004

 

2027

39

 

 

 

 

 

BP Exploration (El Djazair) Limited

 

 

 

 

 

 

 

 

 

Equinor In Salah AS

 

 

 

 

 

Agbami

Nigeria

20.21

Star Deep Water Petroleum Limited

(an affiliate of Chevron in Nigeria)

2008

 

2024

36

 

Block 15

Angola

13.3312)

Esso Exploration Angola Block 15

2004

 

2026-3212)

29

 

In Amenas

Algeria

45.90

Sonatrach11)

2006

 

2027

16

 

 

 

 

 

BP Amoco Exploration (In Amenas) Limited

 

 

 

 

 

 

 

 

 

Equinor In Amenas AS

 

 

 

 

 

Block 31

Angola

13.33

BP Exploration Angola

2012

 

2031

10

 

Murzuq

Libya

10.00

Akakus Oil Operations

2003

 

2035

8

 

 

 

 

 

 

 

 

 

 

 

Field

Country

Equinor's equity interest in %

Operator 

On stream 

 

Licence expiry date

Average daily equity production in 2019 mboe/day

 
 
 

 

 

 

 

 

 

 

 

 

 

Eurasia

 

 

 

 

 

 

73

 

ACG

Azerbaijan

7.27

BP Exploration (Caspian Sea) Limited

1997

 

2049

39

 

Corrib

Ireland

36.50

Vermilion Exploration and Production Ireland Limited

2015

 

2031

15

 

Kharyaga

Russia

30.00

Zarubezhneft-Production Kharyaga LLC

1999

 

2031

10

 

Utgard13)

UK

38.00

Equinor Energy AS

2019

 

HBP7)

5

 

Mariner

UK

65.11

Equinor UK Limited

2019

 

HBP7)

5

 

Barnacle14)

UK

44.34

Equinor UK Limited

2019

 

HBP7)

0

 

 

 

 

 

 

 

 

 

 

 

Total E&P International

 

 

 

835

 

 

 

 

 

 

 

 

 

 

 

Equity accounted production

 

 

 

 

 

 

 

 

North Komsomolskoye

Russia

33.33

SevKomNeftegaz LLC

2018

 

2112

4

 

 

 

 

 

 

 

 

 

 

 

Total E&P International including share of equity accounted production

 

 

839

 

 

 

 

 

 

 

 

 

 

 

1)

Equinor’s actual equity interest varies depending on wells and area.

 

2)

On 6 December 2019 Equinor completed the divestment of its 63% interest in, and operatorship of, Eagle Ford to Repsol.

 

3)

Appalachian basin contains Marcellus and Utica formations.

 

4)

Operators are Equinor USA Onshore Properties Inc, Chesapeake Operating INC., Southwestern Energy, Alta Resources Development LLC, Chief Oil & Gas LLC and several other operators.

 

5)

Operators are Equinor Energy LP, Continental Resources INC, Oasis Petroleum North America LLC, Hess Corporation, EOG Resources INC and several other operators.

 

6)

Operators are Equinor Texas Onshore Properties LLC and several other operators.

 

7)

Held by Production (HBP): A company’s right to own and operate an oil and gas lease beyond its original primary term.

 

8)

Licence BMC-7 expires in 2034, and licence BMC-47 related to the second phase of the development, expires in 2040.

 

9)

Equinor's equity interests are 5.0% in Hibernia and 9.26% in Hibernia Southern Extension.

 

10)

Licence expiry varies by field.

 

11)

The complete name for Sonatrach is Société nationale de transport et de commercialisation d’hydrocarbures.

 

12)

License extension to 2032 for all fields and change in ownership share to 12% was ratified on 27 January 2020 with effective date 1 October 2019.

 

13)

The Utgard field spans the boundary between the Norwegian and UK continental shelves. In this section we report only volumes pertaining to the Equinor 38% share in UKCS.

 

14)

Production started in December 2019. Equinor share of average daily equity production is only 0.21 mboe/day in 2019.

 

Equinor, Annual Report on Form 20-F 2019    39 


 

 

40   Equinor, Annual Report on Form 20-F 2019     


 

Americas

US – Offshore Gulf of Mexico

The Titan oil field is an Equinor-operated asset located in the Mississippi Canyon and is producing through a floating spar facility.

 

The Tahiti, Heidelberg, Caesar Tonga and Stampede oil fields are partner-operated assets located in the Green Canyon area. The Tahiti and Heidelberg oil fields are producing through floating spar facilities. On 12 August, Equinor completed the acquisition of an additional 22.45% non-operated interest in the Caesar Tonga deep water asset in the US Gulf of Mexico from Anadarko Petroleum Corporation, with an effective date of
1 January 2019.The
Caesar Tonga oil field is tied back to the Anadarko-operated Constitution spar host. The Stampede  oil field is producing through a tension-leg platform with downhole gas lift.

 

The Jack, St. Malo, Julia and Big Foot oil fields are partner-operated assets located in the Walker Ridge area. The Jack, St. Malo and Julia oil fields are subsea tie-backs to the Chevron-operated Walker Ridge regional host facility. In August 2019, Equinor agreed to participate in a Paleogene water injection project which is expected to increase the estimated ultimate recovery factor in St Malo. The Big Foot oil field is producing through a dry tree tension-leg platform with a drilling rig.

 

US – Onshore

Since its entry into US shale in 2008, Equinor has continued to optimise its portfolio through acreage acquisitions and divestments. On 6 December 2019, Equinor closed a transaction to divest its entire ownership interest in the Eagle Ford shale play. With this transaction, Equinor aims to high-grade its US onshore portfolio.

 

Equinor has an ownership interest in the Marcellus shale gas play, located in the Appalachian region in north east US. The position is mostly partner-operated through Chesapeake Energy Corporation in Pennsylvania and Southwestern Energy in West Virginia and southern Pennsylvania. Since 2012, Equinor has also been an operator in the Appalachian region in the state of Ohio, developing Marcellus and Utica formations.

 

Equinor has an ownership interest in the Bakken tight oil play, developing the Bakken and Three Forks formations. The majority of Equinor’s acreage position in the Bakken shale is operated by Equinor with an average working interest of approximately 70%.

 

In addition to the operated oil and gas producing assets, Equinor participates in gathering and facilities for initial processing of oil and gas in the Bakken and Appalachian basin assets in the US. This includes crude and natural gas gathering systems, fresh water supply systems, salt water gathering and disposal wells, oil and gas treatment and processing facilities to provide flow assurance for Equinor’s upstream production.

 

Brazil

The Peregrino field is an Equinor-operated heavy oil asset, located in the offshore Campos basin. The oil is produced from two wellhead platforms with drilling capability, processed on the FPSO Peregrino and offloaded to shuttle tankers.

 

Production from Peregrino started in 2011. As part of the second phase of the Peregrino field development, a third wellhead platform was constructed and installation activities are being conducted, which are expected to be completed by the end of 2020, extending the field life.

 

Equinor has interests in the Roncador field, which is operated by Petrobras, located in the offshore Campos basin. The field has been in production since 1999. The hydrocarbon is produced from two semi-submersibles and two FPSOs. The oil is offloaded to shuttle tankers, and the gas is drained out through pipelines to shore.

 

Canada    

Equinor has interests in the Jeanne d'Arc basin offshore the province of Newfoundland and Labrador in the partner-operated producing oil fields Terra Nova, Hebron, Hibernia and Hibernia Southern Extension.

 

Africa

Angola

The deep-water blocks 17, 15 and 31 contributed 24% of Equinor’s equity liquid production outside Norway in 2019. Each block is governed by a PSA which sets out the rights and obligations of the participants, including mechanisms for sharing of the production with the Angolan state oil company Sonangol.

 

Block 17 has production from four FPSOs; CLOV, Dalia, Girassol and Pazflor. New projects on Dalia, CLOV and Pazflor are being developed to stem decline. In December 2019, the production sharing agreement was extended to 2045 by partnership and the regulator, pending ratification. As part of the extension agreement, the national oil company Sonangol will obtain a 5% interest in the block from 2020 and an additional 5% interest from 2036.

 

Equinor, Annual Report on Form 20-F 2019    41 


 

Block 15 has production from four FPSOs: Kizomba A, Kizomba B, Kizomba C-Mondo, and Kizomba C-Saxi Batuque. In 2019, the production sharing agreement was extended to 2032, and ratified on 27 January 2020 with effective date 1 October 2019. As part of the extension agreement, the national oil company Sonangol will obtain a 10% interest in the block.

 

Block 31 has production from one FPSO producing from the PSVM fields.

 

The FPSOs serve as production hubs and each receives oil from more than one field through multiple wells.

  

Nigeria

Equinor has a 20.2% interest in the Agbami deep water field, which is governed by PSA and is located 110 km off the coast of the Central Niger Delta region. The field is developed with subsea wells connected to an FPSO. The Agbami field straddles the two licences OML 127 and OML 128 and is operated by Chevron under a Unit Agreement. Equinor has a 53.85% interest in OML 128.

 

For information related to the Agbami  redetermination process and the dispute between the Nigerian National Petroleum Corporation and the partners in Oil Mining Lease (OML) 128 concerning certain terms of the OML 128 production sharing contract (PSC), see note 24 Other commitments, contingent liabilities and contingent assets to the Consolidated financial statements.

 

On 4 November 2019 the president of Nigeria introduced a new fiscal bill where Royalty would form part of the government take in the petroleum sector. The law passed the houses and was signed into law in January 2020 with retroactive application to
4 November2019. The royalty is paid in kind.

 

Algeria

The In Salah is an onshore gas development. The Northern fields have been operating since 2004. The Southern fields have been operating since 2016 and are tied back into the Northern fields existing facilities.

  

The In Amenas is an  onshore gas development which contains significant liquid volumes. The In Amenas infrastructure includes a gas processing plant with three trains. The production facility is connected to the Sonatrach distribution system. In 2017, Equinor and its partners secured a licence extension of five years beyond 2022.

 

Separate PSAs including mechanisms for revenue sharing, govern the rights and obligations of the Parties and establish joint operatorships between Sonatrach, BP and Equinor for In Salah and In Amenas.

 

 

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Description automatically generated

 

In Amenas, Algeria.

 

 

Eurasia

Azerbaijan

42   Equinor, Annual Report on Form 20-F 2019     


 

Equinor has a 7.27% interest in Azeri-Chirag-Gunashli (ACG) oil field offshore Azerbaijan. The crude oil is sent to Sangachal Terminal, where it is processed prior to export. Equinor holds 8.71 % in this pipeline. The development of Azeri Central East (ACE) platform in ACG field in Caspian Sea was sanctioned by the partners in April 2019. The new platform is expected to come on stream in 2023.

 

Ireland and Russia

Equinor has interest share in the Corrib gas field off Ireland’s northwest coast, and in the Kharyaga oil field onshore in the Timan-Pechora basin in northwestern Russia. The Kharyaga field is governed by a PSA.

 

United Kingdom

Mariner is an Equinor-operated heavy oil field in the North Sea, some 150 km east of Shetland, UK. The field includes a production, drilling and living quarter platform based on a steel jacket. Oil is exported by offshore loading from a floating storage unit. Production from the field started in August 2019, and Equinor holds 65.11% interest in the field.

 

Utgard is an Equinor-operated gas and condensate field, which spans the boundary between the Norwegian and UK continental shelves. Equinor has 38.44% interest in the Norwegian sector and 38% in the UK sector. Production from the field started in September 2019 and it is remotely operated from the Norwegian Sleipner field. For more information, please see section 2.3 Exploration and Production Norway.

 

Barnacle is an Equinor-operated oil field in the North Sea, some 2 km from the boundary between the Norwegian and UK continental shelves. Barnacle is part of a cross-border strategy to maximise Equinor’s competitive position across the North Sea and delivers value on both sides of the median line by unlocking otherwise stranded resources in the UK. Production from the field started in December 2019. Equinor holds 44.34% interest in the field.

 

 

International exploration

Equinor has increased exploration activity outside Norway compared with 2018 and drilled offshore wells in the US Gulf of Mexico, UK and Brazil in addition to onshore exploration wells in Argentina, Turkey, US and Russia. Continued focus on access has strengthened the exploration portfolio further.

 

Brazil is one of Equinor’s core exploration areas. In 2019 Equinor and partners completed two wells, and Equinor intends to increase this activity in 2020.

 

Equinor was awarded seven offshore exploration blocks, five as operator, in the 1st Offshore Licensing Round in Argentina. Equinor and Yacimientos Petroliferos Fiscales S.A. (YPF) also signed an agreement to jointly explore the CAN 100 offshore block, located in the northern Argentina Basin.

 

In the 31st Offshore licensing round on the UK continental shelf Equinor was awarded five licenses, four as operator and one as partner. These awards in the frontier licensing round enable us to add new opportunities to our exploration portfolio in a prolific basin, in line with our strategy.

 

Equinor was awarded new exploration acreage in the North Carnarvon Basin offshore western Australia as operator and thereby expanded our position with an exploration opportunity in a proven basin.

Equinor signed an agreement with Southwind Oil & Gas LLC, a subsidiary of Marathon Oil Company, to acquire a 25 % share across Southwind’s onshore Louisiana in Austin Chalk in US.

Equinor was awarded 26 leases in US Gulf of Mexico in 2019 and is strengthening its position in the area.

Equinor participates with 49% in a project exploring the cherty limestone Domanik formation near Samara in Russia. Three pilot wells have been drilled and two of them production tested. Additional wells will be needed to conclude on commerciality.

Equinor and its partners completed 16 exploratory wells and made seven commercial and two non-commercial discoveries internationally.

 

Exploratory wells drilled1)

 

 

 

 

 

 

 

 

  For the year ended 31 December

2019

2018

2017

 

 

 

 

Americas

 

 

 

Equinor operated

3

1

2

Partner operated

4

4

4

Africa

 

 

 

Equinor operated

0

1

0

Partner operated

0

0

0

Other regions

 

 

 

Equinor operated

5

0

4

Partner operated

4

0

1

Total (gross)

16

6

11

 

 

 

 

1) Wells completed during the year, including appraisals of earlier discoveries.

 

 

 

 

Equinor, Annual Report on Form 20-F 2019    43 


 

Fields under development internationally[8] 

Americas

US – Offshore Gulf of Mexico

Vito development project (Equinor 36.89%, operated by Shell) is a Miocene oil discovery located  in the Mississippi Canyon area. The development project consists of a light-weight semi-submersible platform with a single eight-well subsea manifold. The wells will have an approximate depth of 10,000 meters and will have downhole gas lift to assist production. The project was sanctioned for development in April 2018. Production is expected to start in second half of 2021.

Brazil

Peregrino phase 2 (Equinor 60%, operator) will develop the southwestern area of the Peregrino oil field in the Campos basin, 85 km off the coast of the state of Rio de Janeiro. Peregrino phase 1 was brought on stream in 2011, and the second phase of the development will prolong the field’s productive life. The licence period extends until 2040. Fifteen oil producers and seven water injectors will be drilled in the new area from a third wellhead platform, to be tied back to the existing floating production, storage and offloading vessel. The construction of the third Peregrino wellhead platform modules was completed during the autumn, and the field installation started in December.

 

The Peregrino field development in the prolific Campos basin is Equinor's largest international endeavour as an operator.  In mid-January 2020, the third Peregrino wellhead platform was in place at the field after installation by Sleipnir, the largest crane vessel in the world. The floatel Olympia  has connected to the platform, and in total 880 individuals will work offshore to prepare the platform for operations later this year. Once on stream, Peregrino C will provide 350 offshore and onshore jobs in Brazil.

 

Production is expected to start in late 2020.

 

Eurasia

Russia
North Komsomolskoye (Equinor 33.33%, operated by SevKomNeftegaz) is a complex viscous oil field in Western Siberia, Russia. In December 2018, Equinor Russia AS acquired shares in the JV company SevKomNeftegaz LLC which is the operator and holds the licence. Test production has been carried out during 2018 and 2019 to improve reservoir understanding and determine the potential for development. The decision for the first stage of full field development was taken at the end of 2019 and the asset is moving into project execution phase.