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IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

Annual Report 2004

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IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

TRANSLATOR’S EXPLANATORY NOTE

Statutory accounts in Norway are required to be prepared and presented in accordance with the requirements of the

Norwegian Companies Act of 1997 and in accordance with accounting principles and practices generally followed

in Norway. The statutory accounts include by law the report of the Board of Directors. The accompanying translated

statements have not been reclassified or adjusted in any way to conform with accounting principles generally accepted

in countries other than Norway.

CONTENTS

3

KEY DATA 4

MESSAGE FROM THE MANAGING DIRECTOR 5

EXPLORATION 7

PRODUCTION AND OPERATIONS 8

IDEMITSU – 15 YEARS IN NORWAY 10

IDEMITSU GROUP 11

ANNUAL REPORT OF THE BOARD OF DIRECTORS 12

PROFIT AND LOSS STATEMENT 15

BALANCE SHEET 16

CASH FLOW STATEMENT 18

ACCOUNTING PRINCIPLES 19

NOTES TO THE ACCOUNTS 22

AUDIT REPORT 30

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

DAILY OIL PRODUCTION Average daily oil production, Idemitsu share

INVESTMENTS Offshore investments excl. production rights

CRUDE OIL RESERVES Probable, commercially recoverable resources

RETURN Annual profit + interest expense +/- unrealized forex loss/gain on loan

CAPITAL Share capital and interest-bearing loans at year end

DEFINITIONS

2004 2003 2002 2001 2000

Operating revenues, million NOK 4 234 3 136 2 787 3 103 3 000

Operating profit, million NOK 2 226 1 707 1 551 1 916 1 944

Profit after tax, million NOK 462 423 369 462 499

Crude oil sales, million barrels 15.6 14.3 13.2 13.4 11.4

Daily oil production, thousand barrels 40.2 39.3 36.5 37.2 31.2

Investments, million NOK 283 582 614 464 813

Equity in % of balance 46% 48% 49% 46% 55%

Cash flow before financing, million NOK 1 434 439 -28 945 1 304

Crude oil reserves, million Sm3 20.4 20.6 21.3 18.5 18.9

Return on capital 64% 61% 23% 34% 41%

4

KEY DATA

In 2004, Idemitsu Petroleum Norge AS (‘‘Idemitsu’’) could

celebrate its 15th anniversary in Norway. And we are pleased

to see that it was a record-breaking year for Idemitsu. For

the first time our production surpassed 15 MMSTB and total

sales exceeded 4 billion NOK. The continued high crude oil

price has had a significant and positive impact on the profit-

ability of the company.

As newly assigned Managing Director, it has been a pleasure

to enter into a well-functioning and dynamic company with

strong ambitions for further growth in Norway. From my last

assignment in Norway, I am familiar with the opportunities on

the Norwegian Continental Shelf, and I am looking forward

to further explore the possibilities for expansion of Idemitsu

in Norway.

The Idemitsu group is making strong efforts to achieve a best

possible HSE culture and record in all its activities. It was

therefore with much satisfaction that we received the report

from the Petroleum Safety Authority Norway (PSA), after the

audit they conducted in April 2004 of Idemitsu’s ability to

fulfill its HSE duties as a licensee. PSA issued a very positive

report, where it was concluded that HSE was an integrated

part of Idemitsu’s management system. Furthermore it was

concluded that Idemitsu is fulfilling its supervisory duty and

has a determined attitude to HSE in its partner role. This

report was a strong encouragement in our continuous work to

improve the HSE culture and contributions in Idemitsu.

Idemitsu has been pleased to see that attractive acreage is

being offered regularly in Norway’s licensing rounds. In 2004,

Idemitsu was awarded a share in PL318 in the 18th licens-

ing round. As the majority of companies on the Norwegian

Continental Shelf (NCS), Idemitsu will experience declining

production from existing fields. A strong focus on adding

reserves to our resource base is therefore needed. Idemitsu

is committed to be an active player in exploration activities,

and is aiming to make regular applications in license rounds,

either with partners or independently.

MESSAGE FROM THE MANAGING DIRECTOR

YASUHIRO HABAManaging Director

5

6

7

EXPLORATION

Idemitsu’s goal is to keep up the production level also past

2010 through further acquisition of assets and exploration.

The current portfolio of four licenses is not suffi cient to carry

out sustainable exploration. Accordingly licensing round

awards and farm-ins will be key to expand the portfolio. For

licensing rounds we see cooperation with other companies as

increasingly important.

2004 has been a year with a low number of NCS exploration

wells. Idemitsu has participated in one exploration well drilling

in 2004 (Epsilon West). A distinct upturn is expected in 2005;

the company has three exploration wells in the fi rm budgets.

The company intends to take part in the 19th licensing round

and the annual licensing in mature areas (APA2005). Farm-

ing into existing licenses is also in the plans.

In PL089 exploration is made timely according to possible

production to existing infrastructure. The activity often has the

character of step-out/ delineation drilling. In 2005 the target is

adjacent to the Vigdis fi eld.

PL090 is a license with high activity: Production on Fram

Vest, PDO for Fram Øst being submitted February 2005 and

exploration drilling. The prospects are commonly next to

or inbetween the existing discoveries. The 2005 drilling

target is a turbidite reservoir situated to the north of the Fram

Vest fi eld.

PL318 was awarded in the 18th licensing round and located

in the northernmost part of the North Sea.

Most of the Northern North Sea, where the current Idemitsu

licenses are located, is now made part of the so-called APA

licensing. APA is offering an annual regularity of evaluation,

applications and awards. In particular it is good that the area

is gradually being expanded as exploration is progressing.

Basically we are prepared to be a licensee in all parts of the

North Sea.

Idemitsu has been working Mid-Norway for licensing rounds

and farm-ins for a number of years focusing on the more

mature areas and is currently expanding the active area to

include some of the frontier-type acreage of the Norwegian

Sea. We will be working this region in the 19th licensing round

in 2005.

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

8

TAMPEN AREAThe Tampen Forum area cooperation continued in 2004 as an

extension of the “Tampen 2020” project which Statoil initiated

in 2003. This project covers the entire Tampen area with the

aim to improve recovery and to identify area synergies related

to utilization of infrastructure and operation. Although the area

synergies have not yet materialized as expected, IOR projects

have been identifi ed and initiated to improve the hydrocarbon

recovery from the area. This will not only extend the fi eld life

by perhaps as much as 10 years, but is also in line with the

overall strategy to improve resource utilization and increase

the overall recovery from the NCS as outlined by the MPE.

The ambition on Snorre is to produce as much as 55% of the

hydrocarbons in place during the life of the fi eld.

SNORREThe Snorre reservoir is comprised of the Statfjord and Lunde

sandstone formations at depths of 2300 to 2700 m which

contain oil zones of varying recoverability. The fi eld has been

developed in two phases. In the fi rst phase, a tension leg

platform (Snorre A) and a subsea production facility were

installed. Production started on Snorre A from the Statfjord

formation in 1992. In 1993, production also started from the

Lunde formation via the subsea template. Partially stabili-

zed oil is exported to Statfjord A for fi nal processing and off-

shore loading. Gas not used for injection at the Snorre fi eld is

exported through the Gassled system to Kårstø.

The second phase comprises a semi-submersible fl oater

(Snorre B) located about 7 km north of Snorre A platform.

The platform was installed in 2001. Production is mainly from

the Lunde formation. Stabilized oil is exported to Statfjord B

platform for offshore loading. Gas not used for injection is

exported via Snorre A.

The production from the Snorre fi eld was below the 2004

production target due to several factors. Snorre B suffered

from a union strike and continued delays in the drilling pro-

gram. Snorre A suffered from increased sand production, the

union strike and a platform shut-down in December due to a

gas leak incident. Idemitsu’s share of the crude oil production

from the Snorre fi eld was 1.10 mill. Sm3 (6.9 MMSTB) in

2004, as compared to 1.29 mill. Sm3 (8.1 MMSTB) in 2003.

VIGDISThe Vigdis fi eld comprises Vigdis and Vigdis Extension. The

latter is a joint development of two discoveries, namely Vigdis

Øst and Borg Nordvest.

Vigdis fi eld is developed with three 4-slot templates, which

were tied back to a dedicated process facility on Snorre A in

1997. The Vigdis Extension comprises two templates and two

satellite structures which were tied in to the Vigdis production

system in late 2003.

Idemitsu’s share of the Vigdis and Vigdis Extension crude

oil production was 0.34 mill. Sm3 (2.2 MMSTB) in 2004, as

compared to 0.32 mill. Sm3 (2.0 MMSTB) in 2003.

PRODUCTION AND OPERATIONS

9

TORDISThe Tordis fi eld is a joint development of four discoveries,

namely Tordis, Tordis Øst, Tordis Sørøst and Borg. Production

from Tordis started in June 1994.

The seven Tordis satellite structures are tied to a common

manifold and a joint pipeline that transports the produced oil

to the Gullfaks C platform for processing and export. In addi-

tion, one 4-slot production and one 4-slot injection template,

both tied to the Tordis manifold, are installed for production

of Tordis Øst and Borg. Water is injected from the Gullfaks C

platform through the common manifold to the satellites and

templates.

Idemitsu’s share of the Tordis crude oil production was 0.35

mill. Sm3 (2.2 MMSTB) in 2004, as compared to 0.40 mill.

Sm3 (2.5 MMSTB) in 2003.

STATFJORD ØSTStatfjord Øst is a subsea satellite fi eld tied into the Statfjord

C platform. In Statfjord Øst Idemitsu’s share of crude oil

production was 0.07 mill. Sm3 (0.4 MMSTB) in 2004, as

compared to 0.10 mill. Sm3 (0.6 MMSTB) in 2003.

SYGNASygna is also a subsea satellite fi eld tied into the Statfjord

C platform. Idemitsu’s share of the Sygna fi eld’s crude oil

production was 0.05 mill. Sm3 (0.3 MMSTB) in 2004, as

compared to 0.07 mill. Sm3 (0.4 MMSTB) in 2003.

FRAM AREAIn 2002 Idemitsu purchased a 15% share in the PL090

license and parts of the surrounding area, and thereby

established a new core area for the company.

FRAM VEST The Fram Vest fi eld is located 20 kilometres north of the

Troll C platform. The wellstream is transported to the Troll C

platform for processing, and stabilised oil is transported to

Mongstad through the Troll oil pipeline, while the gas is

re-injected into the reservoir for pressure support. The Fram

Vest started production in October 2003.

Idemitsu’s share of the Fram Vest crude oil production in 2004

was 0.43 mill. Sm3 (2.7 MSTB), as compared to 0.1 mill. Sm3

(0.6 MSTB) in 2003.

FRAM AREA DEVELOPMENTSSeveral smaller discoveries in PL090 are currently being

matured for development.

Both the C-Vest Etive and the Sognefjord developments

(named Fram Øst) are working towards submission of a PDO

in 2005. The C-Vest Etive discovery is being considered for

development with a single subsea well tied back to the Fram

Vest production system, while the Sognefjord discovery will be

developed by a direct tie-back to the Troll C platform with two

subsea templates.

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

10

Idemitsu Petroleum Norge AS (‘‘Idemitsu’’) started its upstream

career in Norway in 1989 through the purchase of license

shares in Snorre Unit and PL089. At this point in time, only

the Snorre, Tordis and Statfjord Øst fi elds were discovered and

found commercial. The combined expected reserve number

from these three fi elds was on the order of 15 mill. Sm3 net

to Idemitsu.

Since 1989, exploration and appraisal activities within the

PL089 license have made additional discoveries such as

Sygna and proved up additional reserves in Vigdis and existing

fi elds. Today, the combined expected reserves from all fi elds

that Idemitsu participate in, is on the order of 41 mill. Sm3

net to Idemitsu. This includes 15% equity in the Fram fi eld

(PL090) which was purchased from SDFI in 2002.

The 2.7 times increase in Idemitsu reserves since entering

Norway in 1989 is partly due to discoveries and proving up

additional reserves. However, the largest contribution by far,

is in fact the reserve changes on the Snorre fi eld itself. This

fi eld alone has doubled its reserves from 121 to 242 mill. Sm3

since PDO in 1987. The increase is to a large extent due to

more advanced technologies, such as horizontal wells, WAG

and extended reach wells. In addition, there is an on-going

IOR project that will add incremental reserves. The ultimate

Snorre license “ambition” is to recover 55% of the total oil

in place.

Looking forward, the Idemitsu strategy is to increase reserves

through further optimization of existing fi elds, asset acquisi-

tion and new exploration activities.

IDEMITSU– 15 YEARS IN NORWAY (1989-2004)

11

IDEMITSU KOSAN CO., LTD.Idemitsu Kosan was founded in 1911 by Sazo Idemitsu. For

over nine decades the company has adhered to a manage-

ment philosophy rooted in “Wa”, the traditional Japanese

concept of harmonious relationships. Today still, the company

has put into practice the concept of respect for human dignity

in the conduct of business and to seek to be a company that

deserves the high expectations and trust of society.

Idemitsu has achieved remarkable business growth and

become one of the largest independent energy companies

in Japan. Its activities now extends to not only oil-oriented

business for stable supply of energies but also compound

energy businesses such as onsite fuel cell/gaseous energy, oil

exploration, highly value-added production of petrochemicals

and lubricant, electronic materials and new biotechnology

business.

Already at the time of the completion of our fi rst refi nery in

1957, the company gave strict priority to environmental safety

and security, establishing a «green belt» around the refi nery

and setting up advanced equipment for pollution protection.

Ever since all group companies have adopted the concept

of environmental safety and security into their business. Our

headquarters, refi neries, lubricant plants and other business

areas have all been given ISO14001 certifi cation for environ-

mental management and the company continues to promote

activities focused on the protection of the environment.

IDEMITSU OIL & GAS CO., LTD. (IOG)IOG was established in August 1989, as a subsidiary of

Idemitsu Kosan in order to expand E&P business activities.

E&P business was originally initiated in 1971 to develop an

integrated value chain in oil business from upstream to down-

stream. Since the successful discovery of the fi rst oil fi eld off-

shore Japan in 1972, we have produced oil and gas for more

than 30 years. Norway has been a core area since our share

in the Snorre area was purchased in 1989.

The E&P section is currently set as a strategic business area

in the Idemitsu Group, and IOG is expected to expand their

business furthermore. In addition to exploration and produc-

tion activities in Norway, IOG promotes several exploration

projects mainly in the South East Asia region (Vietnam, Cam-

bodia and Thailand). In parallel with the exploration activities,

we are looking for opportunities of asset acquisition in order to

establish another core area outside Norway.

IDEMITSU GROUP

IDEMITSU KEY FIGURES(Consolidated group figures for the year ended 31 March 2004.)

Sales 2 451 billion JPYBalance 2 274 billion JPYEmployees 6 304Refineries 4Tankers 89 for domestic use 10 for international useGas stations 5 508

ANNUAL REPORT OF THE BOARD OF DIRECTORS

12 BUSINESS AREAIdemitsu Petroleum Norge AS (‘‘Idemitsu’’) is engaged in

exploration for, development and production of crude oil

and natural gas on the Norwegian Continental Shelf (NCS).

Idemitsu was founded on 25 September 1989. On 2 October

1989, a 9.6% interest in the production licenses 057 and

089 was acquired from Statoil. These production licenses are

located in the Tampen area in the Northern North Sea, and

comprise the Snorre, Tordis, Statfjord Øst, Sygna, Vigdis and

Borg fields.

In February 2002, Idemitsu’s bid for one of the Fram pack-

ages of SDFI was accepted by the Norwegian state. The Fram

package included a 15% share in PL090. Within PL090,

Fram Vest started production in October 2003 while Fram Øst

is currently being developed.

Idemitsu is part of the Japanese Idemitsu Kosan group.

Idemitsu Snorre Oil Development Co., Ltd., a Japanese

company registered in Tokyo, owns all the shares.

OPERATIONSThe total production from Idemitsu’s producing fields in 2004

was the highest in the company’s history. However, Snorre A

production suffered from significant problems in 2004 due to

sand production and the gas leak incident in late November.

In Fram Vest, production has been lower than planned due to

gas capacity constraints.

Preparations for a PDO on Fram Øst have been carried out

in 2004. The PDO was submitted in February 2005 and

production start is planned in October 2006.

GAS SALESAll gas from the Tampen fields is sold to Statoil on a long term

contract. In order to efficiently transport the gas to the delivery

point, Idemitsu has entered into a contract with one of the

larger gas producers on the NCS for dispatching and booking

services in the Gassled system.

NGL products which are extracted from the rich gas entering

the Kårstø terminal are sold exit Kårstø.

EXPLORATIONIdemitsu submitted an application in the 18th licensing

round, and received a 20% share in PL318 in the Northern

North Sea. PL318 is operated by Norsk Hydro.The Board of

Directors regards the potential on the NCS as being good.

Idemitsu intends to actively take part in coming license rounds

and seek further investment opportunities on the NCS.

FINANCIAL RESULT(1) Profit and loss statement

Total sales income has increased by 35% compared

to 2003. The increase is mainly due to higher crude

oil price. The total sales volume of crude oil increased

to the highest level in the company’s history, with a

total sales of 15.6 million barrels. The main reason for the

increase was the new production in Fram Vest and Vigdis

Extension, which started production in late 2003. The

volumes from Idemitsu’s other fields have been fairly stable

compared to 2003, except for Snorre A where production

was stopped from late November to the end of the year due

to the gas leak incident.

Operating expenses have been quite steady. As part of

the sales agreement for PL089 and PL057, Idemitsu must

pay to the seller 50% of sales value of petroleum above a

certain threshold level of the crude oil price. For 2004, this

premium amounted to 57.5 million USD.

Total investment in productions facilities in 2004 was 283

million NOK .

(2) Balance, liquidity and cash flow

Idemitsu currently has no long term loans. The previous long

term loan was repaid in 2003. Proposed dividend for 2004

is 353 million NOK. Idemitsu has a comfortable liquidity

situation, with 1446 million NOK in bank deposits at the end

of the year. Equity represents 45.8% of total assets.

Most of the USD to NOK currency exchange risk was covered

by short term foreign exchange contracts. Risk reductions

by using the mentioned financial instruments will never

exceed the actual risk position.The 2004 financial statement

is given under the going concern assumption.

WORKING ENVIRONMENTAt the end of the year, the company had 21 employees.

The Board of Directors regards the working environment

as good. Total sick leave in 2004 was 634 hours, equaling

1.5% of total working time. There have been no accidents or

damage incidents. Operators Hydro and Statoil report

the working environment, sick leave and accidents in

Idemitsu’s licenses. Idemitsu has a practice of equal oppor-

tunity for both genders. The number of women in the Board of

Directors has been 1 (20%) in 2004.

PHYSICAL ENVIRONMENTIdemitsu is committed, as a license partner, to monitor and

enhance safety and protection of the external environment in

our licenses. The objective is to avoid accidents and provide

a safe work environment for everybody working on installa-

tions where Idemitsu is a partner. Safety and environmental

matters arising from the activities in our licenses are

reported to the authorities by operators Hydro and Statoil. The

company’s office activities have not caused pollution to the

external environment.

OUTLOOKIdemitsu’s annual results are closely linked to the crude oil

price and exchange rates. These elements, especially the

crude oil price, are difficult to estimate. Idemitsu expects

the crude oil price to remain high also in 2005. A 1 $/barrel

movement in the crude oil price changes Idemitsu’s annual

result by about 25 million NOK (after tax).

The crude oil production and sales levels also affect the

annual results. The 2005 production is expected to be lower

than in 2004, due to the problems at Snorre A.

The Board is not aware of any significant matters not already

presented in this report or in the financial statements.

ALLOCATION OF THE ANNUAL PROFITThe profit for the year of NOK 461 876 204 is proposed

allocated as follows:

Dividends 353 000 000

Retained earnings 108 876 204

Total allocated 461 876 204

All of the Retained earnings are available for dividends.

19 April 2005

13

YASUHITO FUKUDACATHRINE HAMBRO

SHOGO HIRAHARAYASUHIRO HABAManaging Director

TROND STANGChairman

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

14

ACCOUNTS2004

NOTE 2004 2003

OPERATING REVENUE

Sales of crude oil 1, 12 4 016 626 654 2 928 854 767

Sales of NGL 1 96 677 905 96 653 027

Sales of dry gas 1 89 302 005 78 604 464

Tariff income and other revenue 1 31 809 963 32 360 389

Total operating revenues 4 234 416 527 3 136 472 646

OPERATING EXPENSES

Production cost, processing tariff, CO2 464 822 711 458 075 277

Gas and transportation costs 117 481 130 122 912 963

Statoil premium 7 352 977 200 38 370 507

Changes in inventory and over-/underlift 9 195 215 156 12 677 228

Exploration costs 35 739 186 55 620 395

Abandonment accrual expense 10 49 140 000 47 160 000

Salaries, social security, pension payments 2, 3 43 722 227 42 310 477

Other operating and administrative costs 3 36 385 031 36 215 171

Ordinary depreciation 4, 5 636 872 509 563 968 637

Ordinary depreciation of production rights 5, 7 81 946 955 56 927 517

Capitalized administration costs - 5 860 381 - 4 807 204

Total operating expenses 2 008 441 723 1 429 430 968

Operating profit 2 225 974 804 1 707 041 678

FINANCIAL INCOME AND EXPENSES

Interest income 14 338 804 11 717 829

Foreign exchange gain 11, 12 201 188 210 149 900 597

Interest expense 4 909 796 10 708 834

Capitalized interest 0 3 855 979

Foreign exchange loss 11, 12 251 915 399 115 541 596

Other financial expenses 69 505 12 314 729

Net financial items - 41 367 685 26 909 246

Profit before taxes 2 184 607 119 1 733 950 924

Taxes on ordinary result 6 1 722 730 915 1 311 395 505

PROFIT FOR THE YEAR 461 876 204 422 555 419

Proposed dividend 353 000 000 614 400 000

Allocated to retained earnings 108 876 204 - 191 844 581

Total allocated 461 876 204 422 555 419

PROFIT AND LOSS STATEMENT

15

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

NOTE 31.12.2004 31.12.2003

FIXED ASSETS

INTANGIBLE FIXED ASSETS

Production rights 5, 7 777 613 865 859 560 820

Total intangible fixed assets 777 613 865 859 560 820

TANGIBLE FIXED ASSETS

Successful efforts exploration wells 5 26 253 866 29 069 963

Production facilities in operation 5, 8 2 890 784 447 3 247 051 605

Production facilities under development 5 8 476 485 0

Furniture and fixtures and cars 5 5 292 056 4 782 884

Total tangible fixed assets 2 930 806 854 3 280 904 452

FINANCIAL FIXED ASSETS

Employee long term receivables 408 000 460 500

Other long term receivables 2 221 695 1 949 950

Total financial fixed assets 2 629 695 2 410 450

TOTAL FIXED ASSETS 3 711 050 413 4 142 875 722

CURRENT ASSETS

STOCKS

Inventory, gas banking and underlift 9 48 241 823 39 143 037

DEBTORS

Accounts receivable 10 363 118 22 781 069

Receivables from group companies 327 087 688 328 604 143

Other current assets 103 931 066 34 100 294

Total debtors 441 381 872 385 485 506

BANK

Bank and cash 1 446 948 732 627 095 177

TOTAL CURRENT ASSETS 1 936 572 428 1 051 723 719

TOTAL ASSETS 5 647 622 841 5 194 599 441

BALANCE SHEET

16

17

BALANCE SHEET

NOTE 31.12.2004 31.12.2003

EQUITY

Paid-in share capital 13 727 900 000 727 900 000

Retained earnings 13 1 858 678 149 1 749 801 945

TOTAL EQUITY 2 586 578 149 2 477 701 945

LIABILITIES

PROVISIONS

Pension liabilities 2 773 146 637 219

Deferred tax 6 947 989 742 1 024 472 375

Abandonment accrual 10 230 720 000 181 580 000

Total provisions 1 179 482 888 1 206 689 594

CURRENT LIABILITIES

Suppliers payable 28 979 644 46 883 259

Payables group companies 1 862 912 2 145 353

Accrued payroll taxes, VAT, etc. 8 007 889 7 909 966

Taxes payable 6 844 789 983 729 681 837

Other current liabilities and overlift 9, 14 997 921 377 723 587 487

Total current liabilities 1 881 561 805 1 510 207 903

TOTAL LIABILITIES 3 061 044 693 2 716 897 497

TOTAL EQUITY AND LIABILITIES 5 647 622 841 5 194 599 441

YASUHITO FUKUDACATHRINE HAMBRO

SHOGO HIRAHARAYASUHIRO HABAManaging Director

TROND STANGChairman

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

18

CASH FLOW STATEMENT

2004 2003

CASH GENERATED FROM / USED IN

OPERATING ACTIVITIES

Profit / (loss) before taxes for the year 2 184 607 119 1 733 950 924

Taxes paid -1 684 105 402 -1 259 440 606

Ordinary depreciation 718 819 464 620 896 154

Accrual for abandonment cost 49 140 000 47 160 000

Pension accrual 135 927 13 212

Unrealized forex (gain) / loss on loan 0 8 267 148

(Gain) / loss on sale of fixed assets - 299 221 - 56 206

Generated from the year’s operations 1 268 297 887 1 150 790 626

Change in inventory and short term

assets and liabilities (excl. dividend payment) 452 650 603 - 125 118 835

Net cash flow from operations A 1 720 948 490 1 025 671 790

CASH FLOW USED FOR INVESTMENTS

Investment in furniture and fixtures and cars - 3 486 211 - 2 831 253

Proceeds from sales of fixtures and cars 314 160 220 000

Investment in production rights 0 0

Investment in production facilities - 283 303 639 - 582 464 066

Investment in successful exploration wells 0 0

Change in other long term assets - 219 245 - 1 923 450

Net cash flow to investments B - 286 694 934 - 586 998 769

CASH FLOW USED FOR FINANCING

Share capital increases / (decreases) 0 0

Paid dividend - 614 400 000 - 426 000 000

New loans 0 0

Loan repayments 0 -344 146 236

Net cash flow to financing C - 614 400 000 - 770 146 236

Net movement in bank and cash A+B+C 819 853 555 - 331 473 215Bank and cash at 1 January 627 095 177 958 568 393

BANK AND CASH AT 31 DECEMBER 1 446 948 732 627 095 177

Bank and cash: MNOK MNOK

restricted funds for employee withholding tax 4,6 4,5

19

SHARES IN JOINT VENTURESThe company’s shares in joint ventures on the Norwegian

Continental Shelf are booked under the respective lines in

the profit and loss statement and the balance sheet.

REVENUESRevenues are recognized according to the Sales method as

opposed to the Entitlement method.

DEFERRED TAXES/TAX EXPENSETax expense comprises payable tax and deferred tax. The

deferred tax asset or liability is calculated based upon net tem-

porary differences between assets and liabilities recognized in

the financial statements and their bases for tax purposes after

offsetting for tax loss carry-forwards, special tax deductions and

uplift. The full liability method is followed and the asset or liabil-

ity is not discounted to a net present value. Current tax rates are

used when calculating deferred tax.

Uplift reduces the special petroleum tax paid by oil com-

panies under the current tax regime. The uplift related to

investments will therefore also reduce the deferred special

petroleum tax liability. The full effect of uplift is recorded in

the accounts when the investment is made.

DEVELOPMENT COSTS AND DEPRECIATION AND WRITE-DOWNAll offshore development costs are capitalized from the

time when a discovery is deemed to give future commercial

production. Development costs are depreciated using the

Unit of Production (U.O.P.) method. Under this method, the

annual depreciation charge is based on the percentage of

the remaining estimated produceable reserves of an oil-field

actually extracted in a given year. Certain future investments

are required to produce the remaining estimated produce-

able reserves. These future investments are included in the

depreciation base.

For tax purposes, offshore development costs are depreci-

ated straight line over 6 years. If the net recorded value after

deduction of accumulated depreciation for a field exceeds its

value of future net cash flows, an extraordinary write-down is

made.

CAPITALIZED INTEREST COSTSAll interest costs associated with the development of pro-

duction fields are capitalized up to production start and are

thereafter depreciated using the U.O.P. method.

CAPITALIZED GENERAL AND ADMINISTRATIVE COSTSAll general and administrative costs associated with the

development of petroleum fields are capitalized according

to man-hours spent on each field up to production start and

are thereafter depreciated using the U.O.P. method.

PRODUCTION RIGHTSProduction rights represent the excess of the price paid over

the cost of assets acquired by the company. Production

rights are depreciated using the U.O.P. method.

FURNITURE, FIXTURES AND CARSFixed assets are recorded in the balance sheet at cost less

total ordinary depreciation. Ordinary depreciation is based

on cost and is calculated on a straight line basis over the

estimated economic life of the asset, which is 3 or 5 years.

EXPLORATION COSTSExploration costs are accounted for in accordance with the

“Successful efforts” method. Under this method, all costs

associated with the exploration of licenses are expensed as

incurred, with the exception of drilling and testing costs of

exploration wells where a commercial discovery is made.

Such expenses are capitalized under ‘Tangible fixed assets’

and depreciated using the U.O.P. method together with

the producing asset the discovery gave rise to. Exploration

wells where the status of a discovery is pending are initially

capitalized, and written off fully if the discovery is later

assessed not to be commercial.

ACCOUNTING PRINCIPLES

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

20

ACCOUNTING PRINCIPLES

ABANDONMENT COSTSAnnual provisions are made for the future costs of well

closure and removal of offshore installations. Provisions are

calculated using the U.O.P. method on nominal figures.

SALARY PRESENTATION IN PROFIT AND LOSS STATEMENTSThe Accounting Act § 6-1 requires salaries to be presented

separately in the profit and loss statement. Such detailed

information is not available in the license accounts, and

salaries from the license accounts are therefore included in

the respective lines in the income statement.

PENSION COSTSThe company finances a collective defined benefit retire-

ment plan which covers all its local employees. This plan is

administered by a Norwegian insurance company. In

accordance with actuarial calculations the net present value

of the future pension obligations are estimated and compared

with the value of all funds paid and previously saved. The

difference is shown in the balance sheet under ‘Other long

term liabilities’. Paid pension premiums and changes in net

liability are recorded under ‘Salaries, social security, pension

payments’ in the profit and loss statement.

FOREIGN CURRENCY TRANSACTIONSTransactions in foreign currencies are translated at the

exchange rates prevailing at the time of the transaction.

Unrealized gains and losses arising from the individual

revaluation of long term assets and liabilities at Norges

Bank year-end rates are recognized through the profit and

loss statement. Unrealized gains are not recognized for tax

purpose except to the extent that they represent a reversal of

a previously recorded loss. Short term assets and liabilities

are revalued individually at Norges Bank year-end rates, and

unrealized gains and losses are recognized through the profit

and loss statement.

FINANCIAL INSTRUMENTSShort term forward currency exchange contracts outstanding

at the end of the year are revalued to market value. All other

gains and losses are recognized at the time of realization.

CURRENT ASSETS AND LIABILITIESCurrent assets and liabilities include items falling due within

one year. ‘Bank and cash’ includes short term time deposits

in banks. Current assets are recorded at face value. No losses

are anticipated.

INVENTORIES AND OVER-/UNDERLIFT OF PETROLEUM PRODUCTSLiabilities arising from lifting more than the company’s share

of the joint venture’s petroleum production (overlifting)

are valued at the higher of gross market value and

production cost, and booked under ‘Other current liabilities and

overlift’. Inventories and underlifting are valued at the lower of

production or acquisition cost and net market value,

and booked under ‘Current assets’. Full production cost

including indirect cost is used for crude oil. For natural gas

liquids and dry gas, full production cost after separation from

crude oil is included according to the economic carrying

ability principle.

GAS BANKINGGas banking inventories are valued at the lower of production

cost (see above) and net market values.

RESEARCH AND DEVELOPMENTThe company’s own research and development costs, which

are immaterial amounts, are expensed as incurred.

MAINTENANCEMaintenance costs are expensed as incurred. No accrual is

made for periodic maintenance.

CASH FLOW MODELThe indirect model is used. ‘Cash and bank’ includes bank

deposits available for use at year-end, except as noted for

restricted funds.

21

NOTES TO THE ACCOUNTS

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

22

NOTE 1 - SALESCRUDE OIL:All of the company’s crude oil production is sold to the ultimate parent company, Idemitsu Kosan Co., Ltd. The crude oil is

sold on a FOB (Free On Board) basis. Idemitsu Kosan Co., Ltd. sells this oil directly to Statoil on a long term sales agreement.

Idemitsu Petroleum Norge AS receives the norm price linked price paid by Statoil less a margin for Idemitsu Kosan Co., Ltd.

This margin covers all sales and transportation and shipping activities as well as swapping arrangements to secure crude oil

supply to Japan. In 2004, a total of 15.55 million barrels were sold.

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

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

DRY GAS:All dry gas is sold to Statoil on a long term contract.

TARIFF INCOME:Vigdis well stream is processed at the Snorre TLP. Idemitsu has a 9.6% share of both fields. The processing tariff revenue and

cost, which are booked under ‘Tariff income’ and ‘Production cost and Process Tariff’ respectively, have no net profit impact on

the company’s accounts.

NOTE 2 - PENSIONS

Pension rights for Japanese employees are covered in Japan by group companies. Idemitsu has a group pension insurance

with Vital for the non-Japanese employees. Net pension obligations are recorded under ‘Provisions’ in the Balance sheet. The

annual change in net obligation is recorded as expense under ‘Other operating and administrative expenses’ in the Profit and

loss statement.

Amounts in NOK Below 12G Above 12G

2004 2004

Service cost 738 753 572 021

Interest cost 303 401 408 804

Return on pension plan assets -292 997 -173 907

Amortization 52 439 174 026

Administration 42 454 34 384

Net pension cost 844 050 1 015 328

NOTES TO THE ACCOUNTS

23

Below 12G Above 12G

31.12.04 31.12.03 31.12.04 31.12.03

Earned pension obligations 4 244 148 298 368 3 801 446 2 103 105

Estimated effect of future salary increase 1 613 525 3 902 238 4 028 082 3 004 618

Estimated pension obligations 5 857 673 4 200 606 7 829 528 5 107 723

Pension plan assets (market value) 5 372 726 4 307 830 3 128 944 2 461 566

Unrecognized effects of change of plan 0 0 644 850 703 473

Unrecognized effects of estimate deviations 1 470 548 574 635 2 296 987 623 605

Net benefit obligations -985 601 -681 859 1 758 747 1 319 079

Economical assumptions:

Discount rate 6%

Expected compensation increase 4.5%

Expected return on pension plan assets 6%

Adjustments in National Insurance base rate 2.5%

Adjustments in pensions 2.5%

NOTE 3 - ADMINISTRATION COSTSNon-employed Directors have each received NOK 10 000 as remuneration. Employed Directors have not received remune-

ration for their work as members of the Board. Total compensation to Managing Director was 3.6 million NOK. No employee

has options, profit-sharings or “golden parachutes”. There are no loans or pledges of security to the Managing Director or board

members. The company had 21 employees in 2004.

Total booked compensation to auditor PricewaterhouseCoopers AS is NOK 338 573, of which NOK 308 929 for statutory audit.

Split of payroll expenses: 2004 2003

Wages and salaries 34 635 600 33 769 783

Social security tax 6 873 151 7 156 642

Pensions including pension liability 1 693 860 1 545 495

Allowances 428 255 453 837

NOTE 4 - DEPRECIATION AND RESERVESThe reserve numbers shown below are the estimated total producable reserves. The depletion of the reserves requires

substantial future investments. These future investments are included in the depreciation base. The resulting depreciation

charge is estimated to be equal to the depreciation of current investments over the reserves exploitable from the current invest-

ments. Production rights are depreciated using the U.O.P. method based on the total production from the area in question.

Idemitsu only accounts for reserves of crude oil (except for Fram), as reserves of natural gas liquids and dry gas have very little

net economic value for the company.

The Idemitsu net remaining reserves (P50) at the end of 2004 are broken down as follows:

mill. Sm3 MMSTB

Snorre 12.1 (76)

Tordis Area 1.9 (12)

Vigdis 2.0 (12)

Statfjord Øst & Sygna 0.4 (3)

Fram Area (O.E.) 4.0 (25)

Total (31.12.04) 20.4 (128)

24

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

The net remaining reserves at the beginning of 2004 were 20.6 mill. Sm3 (130 MMSTB). During 2004, 2.3 mill.

Sm3 (15 MMSTB) of net crude was produced while maintaining the remaining reserves almost unchanged. This reserve

replacement was mainly due to reserve upgrades in Tordis and the Fram Area.

NOTE 5 - FIXED ASSETS (1 000 NOK)a) Petroleum fields under development

Cost Additions Disposals Book value Capitalized

01.01.04 in 2004 in 2004 31.12.04 interest

Fram Øst - 8 476 - 8 476 -

Total - 8 476 - 8 476 -

b) Petroleum fields in operation

Accum. Accum.

Cost Additions Disposals Cost depr. Depr. depr. Book value Capitalized

01.01.04 in 2004 in 2004 31.12.04 01.01.04 in 2004 31.12.04 31.12.04 interest

Snorre 3 437 638 116 329 - 3 553 967 -2 383 402 -174 976 -2 558 378 995 589 325 327

Snorre B 1 487 557 47 257 - 1 534 814 -298 086 -185 564 -483 650 1 051 163 130 017

Statfjord Øst 273 865 3 575 - 277 440 -242 655 -11 935 -254 590 22 850 15 814

Tordis 754 583 22 296 - 776 879 -610 170 -59 035 -669 205 107 674 24 706

Vigdis 874 570 75 923 - 950 493 -559 612 -86 979 -646 591 303 903 39 587

Sygna 89 481 581 - 90 062 -61 127 -10 520 -71 647 18 415 2 939

Fram Vest 499 417 8 866 - 508 283 -15 005 -102 086 -117 091 391 192 16 546

Total 7 417 111 274 826 - 7 691 937 -4 170 057 -631 094 -4 801 152 2 890 785 554 936

c) Production rights - See Note 7

Accum. Accum.

depr. Depr. depr. Book value Capitalized

Cost 01.01.04 in 2004 31.12.04 31.12.04 interest

Prod.rights Snorre -598 256 -46 854 -645 110 373 991 21 879

Prod.rights Fram -12 284 -35 093 -47 377 403 623 0

Total 1 470 101 -610 540 -81 947 -692 487 777 614 21 879

d) Successful efforts exploration wells

Accum.

Cost Additions Disposals Cost depr. Book value Capitalized

01.01.04 in 2004 in 2004 31.12.04 31.12.04 31.12.04 interest

34/7-25S (STUJ) 7 338 - - 7 338 -3 297 4 041 -

34/7-29S (H-North) 10 798 - - 10 798 0 10 798 -

34/7-31A (Borg N) 13 796 - - 13 796 -2 381 11 415 -

Total 31 932 - - 31 932 -5 678 26 254 -

25

e) Other fixed assets

Accum. Depr. Accum.

Cost Additions Disposals Cost depr. Depr. disposals depr. Book value

01.01.04 in 2004 in 2004 31.12.04 01.01.04 in 2004 in 2004 31.12.04 31.12.04

Furniture & fixtures 18 796 3 486 -1 061 21 222 -14 013 -2 962 1 045 -15 930 5 292

f) Additions of fixed assets (million NOK)

Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Petroleum fields 382 691 856 640 374 306 286 285 165 225 734 813 464 614 582 283

Furniture & fixtures 1 1 1 0 0 1 3 2 1 3 4 3 3 2 3 3

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

NOTE 6 - TAXES (NOK)Difference between profit before tax and tax basis 2004 2003

Profit before tax 2 184 607 119 1 733 950 924

Permanent differences 89 408 221 51 601 732

Movement temporary differences

- fixed assets 49 943 786 15 474 410

- other temporary differences 95 288 919 55 429 332

Tax basis - company tax (28%) 2 419 248 044 1 856 456 398

-uplift -175 014 624 -171 393 941

Tax basis - special tax (50%) 2 244 233 420 1 685 062 457

Tax cost of the year

Payable tax 1 799 506 162 1 370 181 837

Correction prior years payable tax -292 614 -2 387 169

Change deferred tax -76 482 633 -56 399 162

Total tax cost 1 722 730 915 1 311 395 505

Deferred tax liability related to temporary differences 31.12

Fixed assets 1 669 138 024 1 727 507 567

Other temporary differences -217 682 003 -122 393 084

Basis for company tax 1 451 456 021 1 605 114 483

-uplift, to be received -368 291 909 -455 033 842

Basis for special tax 1 083 164 112 1 150 080 641

Deferred company tax 28% 406 407 686 449 432 055

Deferred special tax 50% 541 582 056 575 040 320

Total deferred tax 947 989 742 1 024 472 375

26

NOTE 7 - §10-RULINGSThe Petroleum Tax Act §10 states that transfer of interests in production licenses is subject to approval by the Norwegian govern-

ment, and that the government can set certain conditions for approval related to the tax treatment of the transfer of interest.

In connection with Idemitsu’s 1989 acquisition of a 9.6% interest in the production licenses 057 and 089 from Statoil, such a

§10-ruling was made. This ruling states that:

Cash payment to Statoil shall be treated as follows: NOK

Cash payment for 9.6% of PL 057 and PL 089 1 100 000 000

Interest 21 879 151

Total 1 121 879 151

Allocated to Development cost Snorre -102 778 360 - 1)

Remainder - Production rights 1 019 100 791 - 2)

1) Tax deductible over 5 years straight line. Uplift is given.

2) Never tax deductible for company tax or special petroleum tax purposes. No uplift given.

In the Assignment Agreement for purchase of the 9.6% shares in PL057 and PL089, Idemitsu and Statoil agreed that Statoil

shall receive 50% of the excess monthly value of petroleum production from these fields if the norm price exceeds USD 20/bbl,

inflation-adjusted from 1989. There is a cap on the total amount. In 2004, the norm price exceeded this level in all months.

An accrual of 57.6 million USD has been made in the 2004 accounts for the payment of such premium. The liability is valued

at the USD/NOK rate of 31.12.04.

In connection with Idemitsu’s acquisition in 2002 of shares in licenses 090, 174 and 191 from SDFI, another §10 ruling was

made. This ruling states that the consideration to SDFI shall be non-deductible for Idemitsu. The consideration is classified as

‘Production rights’ in Idemitsu’s Balance sheet, and the depreciation according to the U.O.P. method is not deducted for tax

purpose.

NOTE 8 - INTERESTS IN NORWEGIAN PRODUCTION LICENSESProduction license Block Expiry year Fields Operator Interest

057 34/4 2015 Snorre Statoil 9.6%

089 34/7 2024 Snorre, Tordis area, Vigdis area Statoil 9.6%

Statfjord Øst Statoil 4.8% 1)

Sygna Statoil 4.32% 2)

090 35/11 2024 Fram Vest N. Hydro 15%

318 35/2 2010 N. Hydro 20%

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

2) According to first and final unitization agreement between PL089 and PL037.

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

27

NOTE 9 - INVENTORY Crude oil Inventory Inventory

Field in barrels value NOK

Sygna 2 418 128 860

Fram 5 018 385 428

Value recorded as asset 31.12 A 514 289

Overlift

Field in barrels Net liability NOK

Snorre 594 778 145 029 875

Statfjord Øst 12 873 3 138 935

Tordis 49 490 12 067 507

Vigdis 183 039 44 631 898

Value recorded as ‘Other current liabilities and overlift 31.12’ 204 868 215

Inventory

Natural gasoline value NOK

Value recorded as asset 31.12 B 1 241 362

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

Inventory

Ethane value NOK

Value recorded as asset 31.12 C 215 583

Net liability NOK

Value recorded as ‘Other current liabilities and overlift 31.12’ 476 024

Gas banking

As a participant in Statfjord Øst, Idemitsu has stored gas at Statfjord.

The stored volumes are valued at the lower of production cost and net market value.

Value recorded as asset at 31.12 D NOK 6 820 007

Stock of spare parts etc. held by operators E NOK 39 450 582

Total inventory value A+B+C+D+E NOK 48 241 823

NOTE 10 - ABANDONMENT COSTSThe Norwegian government may, at the termination of production or expiration of a license, require Idemitsu to remove offshore

installations. Given reserve estimates at license expiry, Idemitsu finds it unlikely that the Norwegian government will exercise its

option to take over the installations. With current and expected future fishery and environmental concerns, it is likely that the

Norwegian government or international institutions and legislation will require the installations to be removed. It is also necessary

to close down all production and injection wells as their use is completed. Well closure and removal cost accrual is recorded

gross before tax. Tax deduction is claimed for well closure cost accrual. Tax deduction is not claimed for removal cost accrual,

but a deferred tax asset is recorded on the temporary difference.

Idemitsu records accruals for future removal and well closure cost according to the Unit of Production method for nominal

numbers, retrospectively from each field’s start of production. Each year, the accrual is based upon updated information, and

the accumulated accrual includes accrual for 2004 production, and changes in accruals for prior periods due to updated

information.

28

There are significant uncertainties inherent in the calculations of abandonment costs, which is highly dependent upon future

technology levels and the degree of removal required. Idemitsu obtains abandonment cost estimates from the operators. The

removal estimates are based upon complete removal and onshore disposal of any installations not below the seabed. Pipelines

will be cleaned and left buried. Well closure cost includes cleaning wells and installing cement plugs in the permeable zones

and upper part of the well.

(million NOK) Full field Full field IPN net IPN net IPN well clo- removal IPN Reservoir well clo- removal totalField sure cost cost share produced sure cost cost accrual

Snorre 768 772 9.6% 57% 42.89 43.08 85.97

Snorre B 912 436 9.6% 25% 22.49 10.74 33.23

Tordis 336 116 9.6% 69% 22.65 7.79 30.44

Vigdis 684 139 9.6% 60% 40.00 8.10 48.10

Statfjord Øst 264 199 4.8% 82% 10.58 7.97 18.55

Sygna 120 30 4.32% 71% 3.73 0.93 4.66

Fram Vest 225 86 15% 21% 7.07 2.70 9.77

149.41 81.31 230.72

Previously recorded 125.90 55.68 181.58

This year’s expense 23.51 25.63 49.14

Idemitsu’s through-put based share of pipeline/transportation system removal is immaterial. There is currently no legislation for

onshore installation of pipelines on foreign territories. No accrual is made.

NOTE 11 - FINANCIAL INSTRUMENTSRevenues are largely denominated in USD, while investments and operating costs generally accrue in NOK. Idemitsu uses

forward exchange contracts to minimize this NOK exposure. All foreign exchange contracts entered into are short term.

Idemitsu had a number of forward exchange contracts outstanding as of 31.12.04. All outstanding contracts have been

revaluated to market value at 31.12.04.

The annual requirement to exchange currencies from USD to NOK is approximately 250 - 350 million NOK for operations.

In addition, all tax payments must be made in NOK. For investment in petroleum fields, the exchange requirement varies.

The credit risk of these foreign exchange contracts is negligible as the counterparties are financially strong banks. The foreign

exchange contracts are linked to the real foreign exchange requirement so there is no liquidity risk.

NOTE 12 - FINANCIAL RISKWith the exception of some short term foreign exchange contracts being entered into, Idemitsu is fully exposed to fluctuations

in the USD / NOK exchange rate.

In 2004, the company was fully exposed to oil price fluctuation risk.

At year-end, Idemitsu had no long term assets or liabilities in foreign currency.

IDEMITSU PETROLEUM NORGE AS | ANNUAL REPORT 2004

29

NOTE 13 - EQUITYThe share capital consists of 7 279 shares of NOK 100 000, all fully paid. All shares are owned by Idemitsu Snorre Oil

Development Co. Ltd., Japan.

Changes in equity:

Retained earnings 31.12.03 1 749 801 945

Profit 2004 461 876 204

Dividends declared 353 000 000

Retained earnings 31.12.04 1 858 678 149

NOTE 14 - OTHER LIABILITIES AND COMMITMENTSIdemitsu, as all other oil companies operating on the Norwegian Continental Shelf, has unlimited liability for possible compensa-

tion claims arising from its offshore operations, including pollution. To cover these liabilities, Idemitsu has obtained insurance

covering such liabilities up to 1 065 million NOK for 100% share. The deductible is 30 million NOK. Liabilities arising from well

blow-outs are covered up to 1 916 million NOK for a 100% share, with a deductible of 30 million NOK. Liabilities arising from

transportation of crude oil are the responsibility of the buyer, Idemitsu Kosan Co., Ltd.

Offshore assets are insured at replacement value with third party insurance companies.

Idemitsu itself has not been a party to any legal disputes, but is a partner in partnerships which are involved in several legal

disputes. None of these legal disputes are assessed to have a material negative impact on Idemitsu’s financial position.

Through its license ownership interests, Idemitsu has certain obligations for future investments. There are also substantial

investments planned in fields where PDOs are not yet submitted to or approved by the government.

Idemitsu does not have any leasing agreements that can be defined as financial leases. Current leasing agreements are opera-

tional and the expenses are included under ‘Other operating and administrative costs’.

Idemitsu is committed to certain dry gas delivery, transportation, and processing obligations as an integral part of the license

activity. These obligations are not in excess of planned future production.

IDEMITSU PETROLEUM NORGE AS HAAKON VII’S GT. 6

POSTBOKS 1844 VIKA, 0123 OSLO, NORWAYTELEFON +47 23 23 85 00