The value of the SDFI has been estimated to 834.8 billion kroner

The final value of the State’s Direct Financial Interest (SDFI) as at 1 January 2008 has been estimated to NKr 834.8 billion. This is the result of a valuation of the SDFI portfolio undertaken by Wood Mackenzie on behalf of the Ministry of Petroleum and Energy.

-This report illustrates the enormous values that the SDFI portfolio represents to the Norwegian State. Together with the tax revenues from the petroleum sector, the annual cash flows from the SDFI are important to Norway’s economy and constitute a major contribution to the Government Pension Fund-Global, says Minister for Petroleum and Energy Terje Riis-Johansen.

-The valuation shows that since the start of 2006, the value of the SDFI portfolio has increased by NKr 42.4 billion. The increase is mainly due to high oil and gas prices. At the same time, the Norwegian Continental Shelf has been characterised by increasing costs. This development illustrates how important it is to continue our commitment to reduce costs, increase oil recovery and ensure the future value-creation from the Norwegian Continental Shelf, says Minister Terje Riis-Johansen.

By comparing the change in value of the SDFI portfolio from the start of 2006 to the end of 2007, the valuation shows an increased value of NKr 42.4 billion in 2008 terms. This result comes after the 2006 and 2007 actual cash flows have been realised.

The general increase in price assumptions and costs on the Norwegian Continental Shelf has had a major impact on the development of the portfolio’s value. Wood Mackenzie has illustrated this by running the end 2007 dataset using start 2006 oil and gas price assumptions, in order to isolate the impact of changes arising from different oil and gas price assumptions. As a result of this, the portfolio shows a decrease in value of NKr 177.1 billion.  Key reasons for this decrease in value include the impact of a combination of both new costs, i.e. some new investment decisions may not have been made if commodity prices had remained constant over the valuation period, higher costs and a near term fall in production.

The valuation of the assets has been undertaken with the price scenarios used in the 2006 National Budget submission and in the Revised National Budget submission 2008.

The valuation of the SDFI-portfolio is part of the Ministry of Petroleum and Energy’s follow-up of the SDFI and Petoro AS. Petoro manages the SDFI on behalf of the government.

Wood Mackenzie’s report in pdf.