– The board said yes where we should say no –...

On Tuesday, a number of former Equinor tops and oil ministers will run for parliament in the Storting. Among other things, they will try to get answers on how the oil giant could lose so much money in the US and what control the Ministry of Petroleum and Energy actually conducted.

Published:Updated: November 3, 2020 1:30 p.m., Published: November 3, 2020 12:15 PM

The case is being updated …

The debate has erupted about Equinor’s (formerly Statoil)’s investment in the USA and the large losses the company has had to bear on investments.

The debate has really flared up this year after Dagens Næringsliv not only summed up the loss, but also documented a lack of internal control and high costs.

On Tuesday, it was called in for a hearing and statement. It is not held by the Control and Constitution Committee, but by the Energy and Environment Committee.

– There was a discussion about whether the case should be sent to the control committee or the industry committee, which has all other state ownership, said Ketil Kjenseth (V), when he opened the hearing and pointed out that the energy committee does not have a secretariat set up to handle an investigation. or control matters.

He emphasized that the consultation will be about the state’s follow-up of the ownership in Equinor.

– This is not a control case about Equinor’s large losses on the mainland in the USA, where the gold card has been drawn. The state’s ownership is exercised at the general meeting, Kjenseth continued.

On Thursday last week, it was announced that the committee had decided that the hearing should be closed. One of the arguments for the hearing to be closed was that stock exchange-sensitive information could come out. The decision met with strong criticism.

On Monday, the committee turned around and decided that the hearing should be open to the public anyway.

– The board said yes where we should say no

Former chairman of the board Svein Rennemo explained in his post the reason why Equinor, then Statoil, wanted to land in the USA.

Rennemo was chairman of the board from 2008 to 2015 and pointed out that the fall in reserves on the Norwegian shelf beyond the 2000s made people look outside the country.

– We were concerned with profitable growth in reserves and production. Balance between international investment and the Norwegian continental shelf, and a competitive dividend, Rennemo said.

– The United States appeared to be the most important accessible area at the time, but the strategy was also broader than that. The direction was quite similar to other oil and gas companies in the world at the time, and also had broad support among shareholders.

Belief on the Norwegian shelf was weak and the willingness to invest was low, but demand for oil and gas was increasing, thanks in part to strong economic growth in Asia. In light of this, investors wanted growth in reserves and production, former CEO Helge Lund supplemented in his post and continued:

– In Equinor, the development went the opposite way and we had to take action

Subsequently, several major discoveries have been made on the Norwegian shelf, including the giant Johan Sverdrup field, which has changed this picture.

One of the major acquisitions that was made was Brigham Explorer, which engaged in shale extraction on land in the United States.

– The board said yes where we should say no, Rennemo said and added that the acquisition has “damaged the company”

Helge Lund pointed out that both good and bad acquisitions have been made over the years:

– We should not have made the acquisition of oil sands (in Canada, journ.anm.) In 2006, but the acquisition of Peregrino in Brazil gave us a basis for growth, Lund said and continued to say this about the investment in land in the USA:

– In retrospect, it is clear that we took too great a risk (…) but there is also a risk in sitting still. We have delivered shareholder returns that are top class in the industry.

The losses have increased to around 190 billion

The current chairman of the board, Jon Reinhardsen in Equinor, was the first to speak at the hearing.

He told about the way the company has a dialogue with the state on an equal footing with other owners, and that the state does not receive any more information than other owners.

Reinhardsen also pointed out that losses have increased compared to the 21.5 billion dollars reported in the PWC report from October.

The 21.5 billion dollars apply for the period 2009 to 2019. If you use the dollar exchange rate at the relevant times, the loss corresponds to around 161 billion kroner.

– It’s very serious. The loss in the US so far this year is 3.0 billion dollars, of which write-downs amount to 2.4 billion dollars, Reinhardsen said.

The loss is thus up to 24.5 billion dollars. If you take the original loss of NOK 161 billion and add on this year’s loss (at today’s krone exchange rate), the total loss thus increases to about NOK 190 billion.

PS! If you use the current dollar exchange rate on the entire historical US loss until today, you get a krone sum that increases from 205 to 234.1 billion dollars.

– It is clear that the investment in the US, especially on land, has not given the results that were planned, Reinhardsen said and pointed out that during the acquisitions far higher oil prices were expected in the entire oil industry than the result was.

Lars Haltbrekken (SV) asked if the company could be exposed to more losses abroad, given that it missed the oil price in the US acquisitions.

– Today we have no indications that we have such an exposure in other countries, Reinhardsen said and pointed out that Equinor has recently downgraded the oil price assumptions on which it is based.

He added that they both add a carbon price of 55 dollars per tonne and that they also test projects and assets against a greater variation in oil prices.

While Equinor has so far lost $ 24.5 billion in the US, Helge Lund pointed out that it has also had some gains:

– We sold assets for 23 billion dollars when the oil price was high, prices you could hardly get today. We recorded gains of $ 12 billion in these sales.

Equinor changed accounting policies

The hearing in the Storting on Tuesday comes after Minister of Petroleum and Energy Tina Bru’s report on the matter in the Storting in June.

Subsequently, Equinor has published an evaluation report prepared by PWC on the US investment. The recently resigned CEO Eldar Sætre did not hide the seriousness of the case when the report was presented:

– For me and us at Equinor, this report is tough and demanding reading, Sætre said at a press conference in October and continued:

– Even though most of what the report writes is familiar, it is still very unpleasant reading. It provides an overall account of a number of unfortunate circumstances and ill-founded business choices.

The company has long been criticized for not showing the figures from the US investment well enough, and has turned around this year. Finanstilsynet was also among those who thought Equinor should provide more detailed figures on the investment in the USA, since it made up such a large part of both the international investment and Equinor in general.

From this summer, the US operations will be separated as a separate segment in the accounts. Equinor also recently announced that from next year they will also report the renewable investment as a separate segment.