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annual report
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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
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
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.
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.