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ENERGY GENERAL Again, developments in supply and demand, and political tensions, mainly in Nigeria and the Middle East, caused a further rise in oil prices. In the last week of December, in a tight and stressed market, the Brent oil price reached a peak of more than $ 95.00 per barrel. The average Brent oil price rose by almost 10%, from $ 65.75 per barrel in 2006 to $ 72.45 per barrel in 2007, after having already risen by 20% in 2006 compared to 2005. As a result of the appreciation of the euro against the US dollar, the average Brent oil price in euros rose only to a small extent, and arrived at € 52.90 per barrel compared to € 52.20 per barrel in 2006. Owing to higher oil prices and increased production, the energy sector was able to surpass its previous record revenue of € 235 million, with a new record of € 241 million, compared to € 229 million in 2006. PRODUCTION The sector's oil and gas production amounted to 5.4 million barrels of oil equivalent ('MMBOE') during the year under review, which is 8% higher than in 2006. This was the result of the production start of the Buzzard oil field, situated on the British part of the continental shelf, which mitigated the natural decline in production of the majority of the producing fields. Oil accounted for 77% of production (in 2006: 75%). The contribution from the fields on the British part of the continental shelf accounted for 77% of total production (in 2006: 70%). Buzzard accounted for the largest portion of the total produced volume with 26% (1.4 MMBOE), followed by the Elgin and Franklin oil and gas fields, also situated on the British part of the continental shelf, with a contribution to production of 25% (1.3 MMBOE). ACQUISITIONS AND DISPOSALS An agreement was reached on the acquisition of all the Gabonese oil and gas assets of the US oil company Devon Energy for an amount of $ 206 million. These assets are situated on the Gabon continental shelf. The transaction is subject to approval from the Gabonese authorities, which is expected to be obtained in the course of this year. Another success was achieved in the field of disposals. On favourable terms agreement was reached to sell half of our interest of 18.2% in the producing Janice oil field. The field is situated on the British part of the continental shelf. As this transaction was completed at the beginning of 2008, the results of this sale will be accounted for in the current financial year. FINANCIAL With a net profit contribution of € 62 million, the energy sector achieved an excellent result. In 2006 the contribution amounted to € 83 million in which amount the result of € 10 million from the sale of several non-strategic oil and gas assets was included. Furthermore, depreciation charges increased from € 42 million in 2006 to € 51 million in 2007, as a result of, among other factors, higher production from fields with relatively higher book values. Due to higher cost levels and increased production, exploitation costs rose as well, from € 35 million in 2006 to € 44 million in 2007. Cash flow, defined as net profit plus depreciation, amounted to € 113 million compared with € 125 million in 2006. Due to different phasing of activities, mainly with regard to the development of the fields in its portfolio, exploration and development investments in 2007 were on a slightly lower level than in 2006. In 2007 these amounted to € 28 million compared to € 31 million in 2006. OPERATIONS The main developments in the Group's joint ventures were as follows: NETHERLANDS Partly due to higher operational reliability, the Hanze oil field, operated by Petro-Canada, produced 3.1 MMBOE, almost 30% more than the budgeted volume. The Hanze field seems to be developing into one of the best chalk reservoir fields in the North Sea, with a recoverability factor of more than 50%. Production capacity remained stable in the NAM-operated F3-FB oil and gas field, with production totalling 1.8 MMBOE. The gas field complex in the NAM-operated Joint Development Area, produced considerably more than expected. In 2007, total production amounted to 24.6 MMBOE, which was 14% higher than in 2006. With 1.5 MMBOE, production from the gas fields in block P15, operated by BP, also exceeded the production of 2006. UNITED KINGDOM Further work was undertaken in 2007 to optimise production facilities on the onshore Wytch Farm oil field, operated by BP. This optimisation limited the natural decline to 9%. Production came to 8.5 MMBOE compared to 9.4 MMBOE in 2006. Production from the Elgin and Franklin oil and gas fields operated by Total declined further in 2007 because of the natural pressure drop in the reservoirs. However, by taking a new well in the Franklin field into production and repairing the well in the West Franklin field, the production decline was limited to 13% compared to 2006. In 2007 61.6 MMBOE was produced against 70.4 MMBOE in 2006. Operations were undertaken to drill a second well in the West Franklin field. This well will be the deepest and longest well in the Elgin/Franklin field complex. In the Shell-operated Pierce oil field, production amounted to 5.6 MMBOE. Due to higher than expected production from the North Pierce reservoir, total production in 2007 exceeded that of 2006. Due to some technical and operational problems with the production installations on the Maersk-operated Janice oil field, production was shut in for a large part of the year. As a result production was limited to 1.3 MMBOE. The operator expects to run again the production installations during 2008. The Shell-operated Cook oil field also had to cope with some technical problems, causing total annual production to fall short of expectations with 1.5 MMBOE against 2.9 MMBOE in 2006. The development of the Nexen-operated Buzzard oil field went according to plan. At the beginning of the year the field was taken into production. At the end of the year the field capacity hit 215,000 barrels a day which resulted in a total annual production of 54.3 MMBOE. In addition to the larger production capacity, newly drilled wells proved that the quality of the reservoir is better and the field's extension is bigger than originally assumed. One of the two exploration wells in which we participated yielded attractive commercial oil and gas discoveries on the British part of the continental shelf. The development of this field, named Golden Eagle, is being studied. |
ENERGY INTERESTS AT 31 DECEMBER 2007 | |||
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| Country - licence | Type | Operator | Interest |
| Netherlands | |||
| F2a | production | Petro-Canada | 20,0% |
| -Hanze | |||
| -F3-FB | NAM | 12,5% | |
| K8 | production | NAM | NPI* |
| K11 | production | NAM | 6,0% |
| L12a | production | NAM | NPI* |
| L13 | production | NAM | NPI* |
| P15a,b (olie) | production | BP | 23,7% |
| P15a,b (gas) | production | BP | 14,2% |
| P15c | production | BP | 11,7% |
| United Kingdom | |||
| Onshore | |||
| PL089 | production | BP | 7,5% |
| -Wytch Farm | |||
| PEDL048 | production | Egdon | 7,5% |
Offshore |
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| P534 (98/6a,7a) | production | BP | 7,5% |
| -Wytch Farm | |||
| P188 (part 22/30b) | production | Total | 2,2% |
| P362 (29/5b) | production | Total | 2,2% |
| P666 (22/30c, 29/5c) | production | Total | 2,2% |
| -Elgin, Franklin | |||
| P804 (103/1) | exploration | Marathon | 5,9% |
| P185 (21/20a) | production | Shell | 20,0% |
| -Cook | |||
| P185 (21/20d) | exploration | Venture | 20% |
| P032 (30/17a) | production | Maersk | 18,2% |
| -Janice, James | |||
| P295 (30/16t) | exploration | Maersk | 18,2% |
| P111 (23/22a) | production | Shell | 3,7% |
| -Pierce | |||
| P928N (20/1N) | exploration | Nexen | 2,5% |
| -Golden Eagle | |||
| P986 (19/10 & 20/6) | production | Nexen | 2,6% |
| P928S (19/5a & 20/1S) | production | Nexen | 2,6% |
| -Buzzard | Nexen | 2,6% | |
| P133 (53/3a) | exploration | BG | 2,5% |
| * net profit interest | |||
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