FORM 20-F

(Mark One)

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We are Equinor

We are an international energy company committed to long-term value creation in a low carbon future inspired by its vision of shaping the future of energy.

Our values​ are

Open​

Collaborative​

Courageous ​

Caring

We energize the lives of 170 million people. Every day.

Always safe, high value, low carbon

We continue to pursue our strategy of always safe, high value and low carbon through developing and maximising the value of our unique Norwegian continental shelf position, our international oil and gas business, our manufacturing and trading activities and our growing new energy business.

Below are some key figures related to 2019 presented.

2019 highlights

January:

Awarded 29 exploration licences on the NCS

February:

Danske Commodities, a trading company for power and gas, becomes a wholly owned subsidiary of Equinor

March:

Record-breaking offshore lift completes the Johan Sverdrup field centre on the NCS

April:

Formal opening of Arkona Windfarm, offshore Germany, awarded seven exploration licences in offshore Argentina, final investment decision (FID) on Azeri-Central-East, Azerbaijan

May:

Increased share in Caesar Tonga to 46%, US Gulf of Mexico, Huldra removal on the NCS, approved PDO for Johan Sverdrup phase 2

June:

Awarded five exploration licences on the UKCS, operatorship of Wisting in the Barents Sea was transferred from OMV to Equinor

July:

Trestakk onstream on the NCS, Lundin-transaction increasing Equinor’s direct share in Johan Sverdrup, Winner in the New York state’s first large-scale competitive offshore wind solicitation.

August:

Start-up of the heavy oil field Mariner, UKCS

September:  

Winning bid on Dogger Bank in the UK, launched USD 5 billion share buy-back programme, Statfjord field 40 years of production celebration, Utgard started production on the NCS and UKCS, Snefrid Nord onstream with record breaking 1,309 meters below sea-level

October:

Start-up of Johan Sverdrup on the NCS, FID for Hywind Tampen floating offshore wind park to supply the Gullfaks and Snorre fields with renewable electric power.

November:

Announced divestment of Eagle Ford onshore asset in the US

December:

Increased position in Scatec Solar ASA to 15,2%, final investment decision on North Komsomolskoye, Russia

About the report

This document constitutes the Annual report on Form 20-F in accordance with the US Securities Exchange Act of 1934 applicable to foreign private issuers, for Equinor ASA for the year ended 31 December 2019. A cross reference to the Form 20-F requirements are set out in section 5.10 in this report. The Annual report on Form 20-F and other related documents are filed with the US Securities and Exchange Commission (the SEC). The Annual report and Form 20-F are filed with the Norwegian Register of company accounts.

The Equinor annual report and Form 20-F may be downloaded from Equinor’s website at www.equinor.com/reports. References to this document or other documents on Equinor’s website are included as an aid to their location and are not incorporated by reference into this document. All SEC filings made available electronically by Equinor may be found at www.sec.gov.

Table of contents

Digital field worker, Kårstø, Norway.

Equinor’s business environment

Market overview

In 2019 the global economy grew at its weakest pace since the global financial crisis a decade ago. The global growth rate, estimated at 2.6%, reflects common challenges across countries as well as country-specific factors. Trade conflicts and uncertainty led to stagnation in trade, dragging down business sentiment and activity globally. Geopolitical tensions, Brexit and rising policy uncertainty have influenced investments and resulted in sluggish consumer demand and weaker industry production. Central banks have reacted to the weaker activity with loosened monetary policy that has averted a deeper slowdown.

The estimated growth rate for the US in 2019 is 2.3%. Business investment and the manufacturing sector represented significant drags on growth during the year, reflecting rising protectionism and elevated policy uncertainty. However, the private sector has shown resilience, supported by employment growth and persistently low interest rates. In China, uncertainty and escalating tariffs on export to the US had a negative effect on industry production and investment throughout the year. Estimated growth ended at 6.1% for 2019. It was a troublesome year for the Eurozone, with threats of increased tariffs on export to US and Brexit. Despite gaining some momentum towards year-end, the Eurozone growth rate for the year is estimated at 1.2%. 

Looking ahead, early signs of stabilization in manufacturing activity and trade could persist and reinforce the link between the resilient consumer sector and improved business spending. In addition, the effects of monetary easing across economies in 2019 are expected to continue working their way through the global economy in 2020. However, downside risk remains significant, including the potential for further worsening in the US-China relations, rising geopolitical tensions, as well as the effects of Covid-19 virus, keeping the global economic growth forecast modest. 

Oil prices and refining margins

The average price for Dated Brent in 2019 was USD 64.3 per barrel, 10% lower than USD 71.1 per barrel in 2018. Prices were less volatile than in 2018, staying mostly within the USD 60-70 range, despite multiple disruptions both to supply and demand throughout the year. The Organization of the Petroleum Exporting Countries and its allies (Opec+) continued attempts to balance an oversupplied market amidst weaker oil demand growth impacted by the US-China trade conflict.

Even though in December 2018 the Opec+ group agreed to renew the supply cuts, 2019 started with an oversupplied market. Nonetheless, prices recovered from around USD 50 per barrel at the end of December 2018 to around USD 62 per barrel by the end

of January 2019. The upward trend continued during the first quarter, supported by a new round of US sanctions on Venezuela and Iran, removing more supply from the market, on top of the agreed Opec+ cuts.

Dated Brent reached its highest in April and May at above USD 70 per barrel, driven by pressure on supply due to increased tensions in the Middle East, mainly in Saudi Arabia, following the US decision not to extend import waivers for Iranian oil.

However, subsequently prices weakened again, hovering around USD 64 per barrel in June and July. The extension of the Opec+ cuts and continuous threats in the Middle East, including tanker attacks in the strait of Hormuz, did not balance out the perceived impact of the increase in global supply and the negative impact of the US-China trade war on oil demand growth.

One of the major events in 2019 was the September attack on Saudi Arabian oil processing plants that decreased temporarily global supply by around 5% (~5 mmboe per day). However, after a one-day surge to USD 68.2 per barrel, prices stabilized at around USD 60 per barrel by end of September. This underlined the sentiment of oversupply and concerns mostly focused on signs of weaker demand growth.

Nevertheless, as the trade talks between US and China started to show positive signals, prices started to rally in November, also supported by many refineries coming out of maintenance. Dated Brent in November averaged USD 63.0 per barrel.

2019 ended on an upward trend, with average Dated Brent price at USD 67.0 per barrel in December. Faced with further oversupply in 2020, the Opec+ alliance decided to extend and increase the cut agreement at the meeting in Vienna early in December. As the date for the US-China trade deal was announced, and expected in January, the market welcomed 2020 with a fresh wave of optimism towards oil demand growth. 

Recently, there has been price volatility, triggered, among other things by the changing dynamic among Opec+ members and the uncertainty regarding demand created by the Covid-19 pandemic. 

Refinery margins

For a standard upgraded refinery in North-West Europe, margins were slightly stronger than in 2018. Margins were weak in the first two months of 2019, but then gradually rose to a peak in October before dropping towards year-end. One distinct feature in 2019 was the preparation for producing IMO 2020 fuel, the low-sulphur bunker fuel for ships to be sold from year-end. This led to strong margins for low-sulphur fuel oil components already from July, due to purchases for storage. That again gave unusually strong margins for low complex refineries that ran on light, low-sulphur crudes.

Margins for the high-sulphur HSFO bunker fuel fell slowly until early October, when they collapsed. That gave weak margins for refineries running heavy, high-sulphur crude oils and having a substantial yield of HSFO.

Margins for naphtha were weak through the year. Being the main feedstock for the petrochemical industry, it was hurt by a low demand for petrochemical products, ascribed to the US-China trade conflict. Gasoline margins were depressed by high US stock levels early in the year but were normal through summer. Diesel margins were normal and on par with 2018. A peak in October was due to purchase for storage by those who believed that marine diesel would become the IMO 2020 fuel. Refinery margins are calculated as the relevant product prices against physical dated Brent crude oil. However, product prices are generally traded and set against the Brent prices in the paper market at the ICE exchange. Strength in dated Brent vs. ICE therefore tends to depress refinery margins, and vice versa. Specific strength in dated Brent depressed margins in June and in the last one and a half month of the year.    

Natural gas prices

Gas prices – Europe

The National Balancing Point (NBP) in the UK started 2019 at
7.5 USD/MMBtu, down 8% from December 2018. Abundant LNG availability, high pipeline flows as well as mild weather contributed to a decreasing trend in European prices during the first quarter. In addition, winter storage inventories remained well above the five-year average. In late March, Asian LNG prices dropped below NBP at 5.2 USD/MMBtu, increasing the incentive for LNG to go to Europe rather than Asia. European prices continued to decline during the second quarter and reached 3.5 USD/MMBtu in June. Record high temperatures and start of the maintenance season provided some support to NBP during July, but in August prices fell again. Despite another round of maintenance on Norwegian assets in September, prices lacked support and remained below 3.5 USD/MMBtu. NBP recovered towards the end of the year due to colder weather and uncertainty related to the Russia-Ukraine transit agreement, closing the year at 4.2 USD/MMBtu.

Gas prices – North America

The Henry Hub price showed a downward trend during 2019, averaging 2.5 USD/MMBtu for the year, compared to
3.1 USD/MMBtu in 2018. High dry gas production, driven by the addition of pipeline capacity in the Northeast and Texas put downward pressure on the price. Storage levels rose above the five-year average for the first time in two years. Demand gains have not been able to keep pace with supply growth, despite more than 20 Bcm of new LNG capacity entering service in 2019, as well as record demand in Mexican pipeline exports and the gas-to-power sector.

Global LNG prices

Asian LNG prices started the first quarter at 8.2 USD/MMBtu but fell steadily to 5.2 USD/MMBtu in March. Ample supply, as newly started LNG liquefaction trains ramped up to nameplate capacity, and lack of prompt demand have weighed on LNG prices. During the second and third quarters, the oversupply situation continued, forcing significant volumes of LNG into European storages. As a result, prices reached a low of
4.2 USD/MMBtu. In the fourth quarter, Asian LNG prices recovered with the start of the heating season. However, high nuclear availability in Japan and above-normal winter temperatures resulted in an average of 5.8 USD/MMBtu for the quarter, well below the fourth quarter average price of 9.9 USD/MMBtu in 2018.

European electricity and CO₂ prices

Western European (United Kingdom, France, Germany, Belgium, Netherlands, Spain and Italy) electricity prices averaged
43.9 EUR/MWh in 2019, which was 20% lower than in 2018. While 2019 began strong with prices around 61 EUR/MWh for January, milder weather, a quick decrease in the underlying fuel prices, better nuclear availability and a further increase in renewable capacity drove the electricity prices down. The average price was already at around 42 EUR/MWh in March and trended down to end the year at an average of 38 EUR/MWh in December.

The European Union Emission Trading System (EU ETS) CO₂ price continued its strength in 2019, at an average of
24.9 EUR/tonne. Prices peaked in July, with the highest closing price at 29.8 EUR/tonne. Throughout the year, the CO₂ price suffered from volatility due to uncertainties surrounding Brexit and various energy policy announcements, such as the decision to phase out coal-fired power generation in Germany by 2038.

Although the high CO₂ price put pressure on the power generation costs, the bearish conditions such as above average temperatures, low gas prices and growth in renewables, more than offset this pressure. Nevertheless, the high CO₂ price helped to further accelerate the coal to gas switch in European power generation, consequently driving down CO₂-emissions from the sector.

Equinor’s corporate strategy

Equinor is an international energy company committed to long-term value creation in a low carbon future inspired by its vision of shaping the future of energy.

Equinor continues to pursue its strategy of always safe, high value and low carbon through developing and maximising the value of its unique Norwegian continental shelf position, its international oil and gas business, its manufacturing and trading activities and its growing new energy business.

The energy context is expected to remain volatile characterised by geopolitical shifts, challenges in liquids- and gas resource replenishments, market cyclicality, structural changes to costs and increasing momentum towards low carbon. Equinor expects volatility in energy prices. Equinor’s strategic response is focused on creating value by building a more resilient, diverse, and option-rich portfolio, delivered by an empowered organisation. To do so, Equinor will continue to concentrate its strategy realisation and development around the following areas:

·        Norwegian continental shelf – transform the NCS to deliver sustainable value for decades

·        International oil and gas – deepen core areas and develop growth options  

·        New energy solutions – value driven growth in renewables

·        Midstream and marketing – secure premium market access and grow value creation through economic cycles 

Equinor’s unique position at the Norwegian continental shelf has enabled the company to develop new technologies and scale them industrially. Equinor has today a strong set of industrial value drivers:

·        Operational excellence

·        World-class recovery

·        Leading project deliveries

·        Premium market access

·        Digital leadership

In sum, these drivers strengthen the company’s competitiveness. Internationally, Equinor is increasingly taking the role of operator, allowing the company to leverage its industrial value drivers. Across its business, Equinor is targeting opportunities that play to its strength.

Johan Sverdrup, NCS.

Equinor is actively shaping its future portfolio guided by the following strategic principles:

·        Cash generation capacity – generating positive cash flows from operations, even at low oil and gas prices, in order to sustain dividend and investment capacity through the economic cycles

·        Capex flexibility – having sufficient flexibility in organic capital expenditure to be able to respond to market downturns and avoid value destructive measures as well as ability to always prioritise projects expected to deliver greater value.

·        Capture value from cycles – ensuring the ability and capacity to act counter-cyclically to capture value through the cycles

·        Low-carbon advantage – maintaining competitive advantage as a leading company in carbon-efficient oil and gas production, while building a low-carbon business to capture new opportunities in the energy transition

To deliver on the strategy, Equinor has identified four key strategic enablers that will continue to support the business’s needs:

·        Safe and secure operations: The safety and security of its people and the integrity of its operations is Equinor’s top priority. In 2019 several strategic improvement initiatives were carried out guided by the corporate wide project “Safety beyond 2020”. The goal has been to further strengthen culture and drive performance through embedding safety and security thinking and proactive behaviour at all organisational levels. Equinor has continued its efforts to reinforce the security culture and capability through implementation of the 2020 Security Roadmap, and an Information Technology Strategy which aims at protecting people and assets against digital threats.

·        Technology and innovation: Equinor recognises technology and innovation as enablers for its strategy. Equinor’s technology strategy guides the company’s technology development and implementation activities, providing technologies to shape the future of energy. While Equinor conduct in-house R&D in areas that give us a competitive advantage, the majority of its activities are conducted in collaboration with partners to ensure that Equinor makes the best use of the external technology eco-system. Equinor continues to invest in digitalisation to unlock the value from its data. In 2019, USD 400 million (pre-tax) was delivered in cash flow impact from digital initiatives, which enabled a month earlier start-up of Johan Sverdrup by leveraging new digital solutions as well as increased uptime driven by Equinor’s integrated operations centre.

·        Empowered people: Equinor promotes a culture of collaboration, innovation, and safety, guided by its values. A diverse and inclusive Equinor continues to recruit and develop employees to deliver on the future-fit portfolio ambition.

·        Stakeholder engagement: Equinor engages with stakeholders to secure industrial legitimacy, its social contract, trust, and strategic support from stakeholders. This engagement extends to internal and external collaboration, partnerships, and other co-operation with suppliers, partners, governments, NGOs, and communities in which Equinor operates.

Equinor maintains its advantage as a leading company in carbon-efficient oil and gas production while building a low carbon business to capture new opportunities in the energy transition. Equinor believes a lower carbon footprint will make it more competitive in the future and sustainability is integrated in Equinor’s strategic work.

Equinor’s new climate roadmap presents a series of short-, mid- and long-term ambitions to reduce its own greenhouse gas emissions and to ensure a competitive and resilient business model in the energy transition, fit for long term value creation and in line with the Paris Agreement:

Peregrino FPSO, Brazil.

Equinor aims to:

·        reduce the net carbon intensity, from initial production to final consumption, of energy produced by at least 50% by 2050,

·        grow renewable energy capacity tenfold by 2026, developing as a global offshore wind major, and

·        strengthen its industry leading position on carbon efficient production, aiming to reach carbon neutral global operations by 2030.

Equinor expects to meet the net carbon intensity ambition primarily through significant growth in renewables and changes in the scale and composition of its oil and gas portfolio. In addition, operational efficiency and further development of new businesses such as carbon capture, utilisation and storage (CCUS) and hydrogen are expected to be important. Equinor may also use recognised offset mechanisms and natural sinks as a supplement. To reach carbon neutral global operations, the main priority will be to reduce GHG emissions from Equinor’s own operations. Remaining emissions are expected to be compensated either through quota trading systems, such as the European Union Emissions Trading System (EU ETS), or high-quality offset mechanisms. Further information can be found in section 2.12 Safety, security and sustainability.

Norwegian continental shelf – Transforming the NCS for continued high value creation and low carbon emissions for the coming decades

For more than 40 years, Equinor has explored, developed, and produced oil and gas from the NCS. It represents approximately 60% of Equinor’s equity production at 1.235 million boe per day in 2019. NCS cash generation capacity will continue to be substantial going forward, even at lower oil- and gas prices.

At the same time, Equinor aims to continue to improve the efficiency, reliability, carbon emissions, and lifespan of fields already in production. During 2019, Equinor updated the climate ambitions for Norway. Driven by a large remaining resource potential on the NCS, Equinor aims to reduce the absolute greenhouse gas emissions from its operated offshore installations and onshore plants in Norway with 40% by 2030, 70% by 2040, and towards near zero by 2050, compared to 2005. The 2030 ambition alone is expected to require investments of around NOK 20 billion Equinor share, in projects within energy efficiency, electrification, infrastructure consolidation, digitalization, and new value chains, such as CCS and Hydrogen.

Equinor has decided to create a new unit for its late life assets on the NCS. The purpose of the new unit is to realise the full potential of its late life fields, by realising additional subsurface potential, lean operations, cost efficient lifetime extensions, and decommissioning cost reductions.

Equinor continues to add highly profitable barrels through increased oil and gas recovery and Equinor is making progress towards the ambition of 60% oil recovery and 85% gas recovery for operated fields.

In July, Equinor agreed with Lundin Petroleum AB to divest a 16% shareholding in Lundin Petroleum for a direct interest of 2.6% in the Johan Sverdrup field and a cash consideration. In October, the Johan Sverdrup field came on stream, ahead of schedule and below cost, and with a world class ramp-up, the field is already producing more than 350 mboe per day (100%). In the next few years, Equinor aims to bring several large projects on stream including Johan Sverdrup phase 2, Troll phase 3, Johan Castberg, and Martin Linge, and the refurbished Njord, in addition to a large number of subsea tiebacks. Strong overall volume growth is expected towards a potential historically high production level in 2026. More information on assets in operations and projects under development in Norway is provided in section 2.3 E&P Norway – Exploration & Production Norway.

International oil and gas – Deepen core areas and develop growth options

Equinor has been growing its international portfolio for over 25 years. International oil and gas production represented approximately 40% of Equinor’s equity production at 0.839 million boe per day in 2019. In 2019, Equinor made significant progress in growing and de-risking its international oil and gas portfolio: successful start-ups of both Mariner and Utgard in the UK; high value license extensions in Angola Blocks 15 and 17; access to new acreage both onshore and offshore in Argentina, on the UK Continental shelf, offshore Canada, and in US GoM; ACE development sanction in Azerbaijan; investment decision on the first stage of the North Komsomolskoye full field development in Russia. Key projects in Equinor’s international project portfolio include Bay du Nord, Rosebank, Vito, Peregrino phase 2, Bacalhau (formerly Carcará), BM-C-33, North Komsomolskoye, North Platte, and Block 17 satellites in Angola.

In Argentina Equinor is building a broad energy company – onshore production in Vaca Muerta, 8 new oil & gas leases across various basins offshore, and within onshore wind and solar.

In the United States, Equinor high-graded its onshore portfolio through the divestment of Eagle Ford and increased its equity share in Caesar Tonga in the Gulf of Mexico. Equinor continues to focus on increasing and sustaining the profitability of existing portfolio. With drone technology, Equinor has significantly reduced methane emissions from onshore operations.

In Brazil, Equinor is sustaining and growing a competitive portfolio of high-quality assets in all development phases, including a promising exploration portfolio. The Bacalhau field FPSO concept is an example of project optimization, while reducing carbon emissions.

Equinor is set up for growing with quality and expects its international business to grow steadily for a long time, with an organic cash flow contribution of USD 7 billion after tax and investments over the next 4 years at 65 USD per bbl. Equinor is focused on continuing to deliver improvements on cost, cashflow, and earnings to increase competitiveness across its international portfolio. Equinor aims at reducing carbon intensity across the operated international portfolio, to ambition level of <10kg CO2 per boe by 2025. More information on assets in operation and projects under development internationally is provided in section 2.4 E&P International – Exploration & Production International.

New energy solutions – Develop a high value renewable business

The renewable market is changing and growing at unprecedented pace, presenting opportunities for decades of growth. Equinor has a strong renewable portfolio in production and is leveraging its core competencies in managing complex oil and gas projects when growing in offshore wind. By 2026 Equinor expects to increase installed capacity from renewable projects to between 4 and 6 GW^[4], Equinor share, mainly based on the current project portfolio. This is around 10 times higher than today’s capacity, implying an annual average growth rate of more than 30% in electricity production. Towards 2035, Equinor expects to increase installed renewables capacity further to between 12 and 16 GW, depending on availability of attractive project opportunities. Equinor expects to spend USD 0.5-1 billion in 2020-2021 and USD 2-3 billion in 2022-2023 (Annual gross capex before project financing, Equinor share, organic net capex 2022-2023 below USD 1.5 billion on average annually).

Becoming a global offshore wind major 

The last year has been transformational for Equinor’s offshore wind portfolio. With the recent additions of Dogger Bank (UK) and Empire Wind (US), Equinor is on the path to becoming a global offshore wind major. Dogger Bank is expected to be the world’s largest offshore wind farm development with an installed capacity of 3.6GW and a total potential of more than 20GW - enough to supply one third of UK electricity demand. Empire Wind will provide renewable electricity to one of the busiest cities in the world: New York City. With a capacity of 816MW, it is expected to deliver power to the equivalent of one million homes.

Equinor has a decade of operating experience from floating offshore wind. Up to 80% of the world’s offshore wind potential will likely require floating solutions and Equinor is well positioned to industrialise floating wind. Equinor’s ambition is to bring floating wind towards commerciality by 2030.

Opportunities in onshore renewables  

Equinor believes in diversifying its offshore wind business and pursuing additional growth options. Having a flexible portfolio gives Equinor the ability to provide power from numerous renewable energy sources including offshore wind, solar, and onshore wind. Over time Equinor expects to build profitable onshore positions in select power markets.

In December 2019, Equinor acquired 6.500.000 shares in Scatec Solar, corresponding to 5.2% of the shares and votes. Following the transaction Equinor owns a total of 18.965.400 shares of Scatec Solar, raising its total shareholding to 15.2% of the shares and votes. Equinor is present in two solar projects in South America (Brazil and Argentina). More information on new energy assets in operation and projects under development is provided in section 2.6 Other group.

Midstream and marketing – Secure premium market access and grow value creation through economic cycles

The main objective for Equinor’s Midstream, Marketing & Processing unit’s (MMP) mid- and downstream activities is to process and transport Equinor’s oil and gas production (including the Norwegian State’s petroleum) competitively to premium markets, realising maximum value. In addition, MMP is expanding its marketing of a growing electricity portfolio. Focus in 2019 has been on:

·        Safe, secure, and efficient operations

·        Securing flow assurance and premium market access for Equinor’s equity production and the Norwegian State’s direct financial interest volumes

·        Building and maintaining resilience through asset backed trading, value chain positioning, and counter-cyclical actions

·        Reducing carbon emissions and carbon intensity from its operations

·        Optimising regional piped gas value chains and pursuing selective trading positions in liquefied natural gas (LNG)

·        Renewing the contracted shipping portfolio with ships that are more efficient and have less emissions.

Since Equinor’s closing of the acquisition of Danske Commodities (DC) on 1 February 2019, Equinor and DC have realised several synergies, including positioning DC as Equinor’s route-to-market for renewables. In early fall, DC entered the American power market and building on this successful market entry, Equinor and DC are looking at entering additional power markets. More information on mid- and downstream activities is provided in section 2.5 MMP – Marketing, Midstream & Processing.

Group outlook

Equinor’s plans address the current business environment while continuing to invest in high-quality projects. Equinor continues to reiterate its efforts and commitment to deliver on its strategy.

·         Organic capital expenditures^[5] are estimated at an annual average of USD 10-11 billion for 2020-2021 and around
USD 12 billion annual average for 2022-2023

·         Equinor intends to continue to mature its large portfolio of exploration assets and estimates a total exploration activity level of around USD 1.4 billion for 2020, excluding signature bonuses and field development costs

·         Equinor’s ambition is to keep the unit of production cost in the top quartile of its peer group

·         For the period 2019 – 2026, production growth^[6] is expected to come from new projects resulting in around 3% CAGR (Compound Annual Growth Rate)

·         Production⁶ for 2020 is estimated to be around 7% above 2019 level

·         Scheduled maintenance activity is estimated to reduce the quarterly production by approximately 20 mboe per day in the first quarter of 2020. In total, maintenance is estimated to reduce equity production by around 45 mboe per day for the full year of 2020

·         Renewable equity generation capacity in 2026 is expected to be between 4 and 6 GW (this includes 15.2% share of Scatec Solar ASA)

These forward-looking statements reflect current views about future events and are, by their nature, subject to significant risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Deferral of production to create future value, gas off-take, timing of new capacity coming on stream, operational regularity, impact of Covid-19, activity level in the US onshore, as well as uncertainty around the closing of the announced transactions represent the most significant risks related to the foregoing production guidance. In particular, recently there has been considerable uncertainty created by the Covid-19 pandemic as well as the changing dynamics among Opec+ members. We are unable to predict the impact of these events. For further information, see section 5.7 Forward-looking statements.

History in brief

18 September 1972   

Equinor, formerly Statoil, was formed by a decision of the Norwegian parliament and incorporated as a limited liability company under the name Den norske stats oljeselskap AS. At the time owned 100% by the Norwegian State, Equinor's initial role was to be the government's commercial instrument in the development of the oil and gas industry in Norway. Growing in parallel with the Norwegian oil and gas industry, Equinor’s operations were primarily focused on exploration, development and production of oil

and gas on the Norwegian continental shelf (NCS).

1979 – 1981

The Statfjord field was discovered in the North Sea

and commenced production. In 1981 Equinor was the first Norwegian company to be given operatorship

for a field, at Gullfaks in the North Sea.

1980s and 1990s

Equinor grew substantially through the development of the NCS (Statfjord, Gullfaks, Oseberg, Troll and others). Equinor also became a major player in the European gas market by entering into large sales contracts for the development and operation of gas transport systems and terminals. During these decades, Equinor was also involved in manufacturing and marketing in Scandinavia and established a comprehensive network of service stations. This line of business was fully divested in 2012.

2001

Equinor was listed on the Oslo and New York stock exchanges and became a public limited company under the name Statoil ASA, now Equinor ASA, with a 67% majority stake owned by the Norwegian State.

2007 - 2018

Equinor’s ability to fully realise the potential of the NCS and grow internationally was strengthened through the merger with Norsk Hydro's oil and gas division on 1 October 2007. Equinor’s business grew as a result of substantial investments on the NCS and internationally. Equinor delivered the world’s longest multiphase pipelines on the Ormen Lange and Snøhvit gas fields, and the giant Ormen Lange development project was completed in 2007. Equinor also expanded into Algeria, Angola, Azerbaijan, Brazil, Nigeria, UK, and the US Gulf of Mexico, among others. Equinor’s US onshore operations represents its largest international production outside Norway, and with the Peregrino field, Equinor is the largest international operator in Brazil.

2018

Statoil ASA changed its name to Equinor ASA following approval of the name change by the company’s annual general meeting on 15 May 2018. The name supports the company’s strategy and development as a broad energy company in addition to reflecting Equinor’s evolution and identity as a company for the generations to come.

2019 and present

Equinor’s access to crude oil in the form of equity, governmental and third-party volumes makes Equinor a large seller of crude oil, and Equinor is the second-largest supplier of natural gas to the European market. Processing, refining, offshore wind and carbon capture and storage are also part of our operations.

In recent years, Equinor has utilised its expertise to design and manage operations in various environments to grow upstream activities outside the traditional area of offshore production. This includes the development of shale oil and gas projects.

As part of Equinor’s strategy, the company is investing actively in new energy, such as offshore wind, and solar energy, in order to expand energy production, strengthen energy security and combat climate change.

Equinor operates in more than 30 countries and as of 31 December 2019 employs 21,412 people worldwide.

Equinor’s registered office is at Forusbeen 50, 4035 Stavanger, Norway. The telephone number of its registered office is +47 51 99 00 00.

Equinor’s competitive position

Key factors affecting competition in the oil and gas industry are oil and gas supply and demand, exploration and production costs, global production levels, alternative fuels, and environmental and governmental regulations. When acquiring assets and licences for exploration, development and production and in refining, marketing and trading of crude oil, natural gas and related products, Equinor competes with other integrated oil and gas companies.

Equinor continues to explore new business opportunities in offshore wind, solar, hydrogen and carbon capture, usage and storage (CCUS). Improvements in cost and technology for renewables have rapidly changed the landscape. Equinor is a player within the renewables business.

Equinor's ability to remain competitive will depend, among other things, on continuous focus on reducing costs and improving efficiency. It will also depend on technological innovation to maintain long-term growth in reserves and production, and the ability to seize opportunities in new areas and utilise new opportunities for digitalisation.

The information about Equinor's competitive position in the strategic report is based on a number of sources such as investment analyst reports, independent market studies, and internal assessments of market share based on publicly available information about the financial results and performance of market players.

Equinor’s value chain

Corporate structure

Equinor is a broad international energy company, its value chain includes most phases from exploration of hydrocarbons through developing, production and manufacturing, marketing and trading, and a growing renewables business. Equinor’s operations are managed through eight business areas: Development & Production Norway (DPN), Development & Production International (DPI), Development & Production Brazil (DPB), Marketing, Midstream & Processing (MMP), New Energy Solutions (NES), Technology, Projects & Drilling (TPD), Exploration (EXP) and Global Strategy & Business Development (GSB). The business areas are aggregated into four reporting segments; E&P Norway, E&P International, MMP and Other. For more information, see Segment reporting later in this chapter.

On 28 April 2018, Equinor announced changes in its business area structure to strengthen its ability to deliver on Equinor’s always safe, high value and low carbon strategy as Equinor develops as a broad energy company. DPB was established as a separate business area representing a new core geographic area, holding promising offshore oil and gas basins with a significant resource base. Equinor’s US operations were integrated in DPI as US operations have been maturing over the last few years. Equinor is pursuing unconventional onshore business opportunities globally and sees synergies in having US onshore operations which are organised within DPI.

Development & Production Norway (DPN)

Managing Equinor’s upstream activities on the NCS, DPN explores for and extracts crude oil, natural gas and natural gas liquids in the North Sea, the Norwegian Sea and the Barents Sea. DPN aims to ensure safe and efficient operations and transform the NCS to deliver sustainable value for many decades. DPN is shaping the future of the NCS with a digital transformation and solutions to achieve a lower carbon footprint and high recovery rates.

Development & Production International (DPI)

DPI manages Equinor’s worldwide upstream activities in all countries outside Norway and Brazil. DPI operates across six continents covering offshore and onshore exploration and extraction of crude oil, natural gas and natural gas liquids; and implementing rigorous safety standards, technological innovations and environmental awareness. DPI's intent is to build and grow a competitive international portfolio - always safe, high value and low carbon.

Development & Production Brazil (DPB)

DPB manages the development and production of oil and gas resources in Brazil, which Equinor considers to be a core area for long-term growth. Equinor has a diverse portfolio in Brazil with activities in all development stages from exploration to production. Most of Brazil licences are in deep-water areas, some of them more than 2,900 metres deep. Equinor has been producing in Brazil since 2011 with the Peregrino field, in the Campos Basin. DPB intends to grow a competitive portfolio creating value by increasing capacity and increasing recovery from mature fields, while reducing emissions and focusing on safety as priority.

Marketing, Midstream & Processing (MMP)

MMP works to maximise value creation in Equinor’s global midstream and downstream positions. MMP is responsible for global marketing and trading of crude, petroleum products, natural gas and electricity, including marketing of the Norwegian State’s natural gas and crude on the Norwegian continental shelf. MMP is also responsible for onshore plants and transportation in addition to the development of value chains to ensure flow assurance for Equinor’s upstream production and to maximise value creation.

New Energy Solutions (NES)

NES reflects Equinor’s long-term goal to complement Equinor’s oil and gas portfolio with profitable renewable energy and other low-carbon energy solutions. NES is responsible for wind farms and carbon capture and storage as well as other renewable energy and low-carbon energy solutions. NES aims to do this by combining Equinor’s oil and gas competence, project delivery capacities and ability to integrate technological solutions.

Technology, Projects & Drilling (TPD)

TPD is responsible for field development, well deliveries, technology development and procurement in Equinor. TPD aims to deliver safe, secure and efficient field development, including well construction, founded on world-class project execution and technology excellence. TPD utilises innovative technologies, digital solutions and carbon-efficient concepts to shape a competitive project portfolio at the forefront of the energy industry transformation. Sustainable value is being created together with suppliers through a simplified and standardised fit-for-purpose approach.

Exploration (EXP)

EXP manages Equinor’s worldwide exploration activities with the aim of positioning Equinor as one of the leading global exploration companies. This is achieved through accessing high potential new acreage in priority basins, globally prioritising and drilling more wells in growth and frontier basins, delivering near-field exploration on the NCS and other select areas, and achieving step-change improvements in performance.

Global Strategy & Business Development (GSB)

GSB develops the corporate strategy and manages business development and merger and acquisition activities for Equinor. The ambition of the GSB business area is to closely link corporate strategy, business development and merger and acquisition activities to actively drive Equinor's corporate development.

Presentation

In the following sections in the report, the operations are reported according to the reporting segment. Underlying activities or business clusters are presented according to how the reporting segment organises its operations. See note 3 Segments to the Consolidated financial statements for further details.

As required by the SEC, Equinor prepares its disclosures about oil and gas reserves and certain other supplementary oil and gas disclosures based on geographic areas. Equinor’s geographical areas are defined by country and continent and consist of Norway, Eurasia excluding Norway, Africa, US and Americas excluding US. For more information, see section 4.2 Supplementary oil and gas information (unaudited) in the Financial statements and supplements chapter.

Segment reporting

The business areas DPI and DPB are aggregated into the reporting segment Exploration & Production International (E&P International). The basis for this aggregation is similar economic characteristics, such as the assets’ long term and capital-intensive nature and exposure to volatile oil and gas commodity prices, the nature of products, service and production processes, the type and class of customers, the methods of distribution and regulatory environment. The reporting segments Exploration & Production Norway (E&P Norway) and MMP consists of the business areas DPN and MMP respectively. The business areas NES, GSB, TPD, EXP and corporate staffs and support functions are aggregated into the reporting segment “Other” due to the immateriality of these areas.

Most of the costs within the business areas GSB, TPD and EXP are allocated to the E&P International, E&P Norway and MMP reporting segments. Activities relating to the EXP business area are fully allocated to the relevant E&P reporting segments. Activities relating to the TPD, GSB business areas and corporate staffs and support functions are partly allocated to the relevant E&P and MMP reporting segments.

Internal transactions in oil and gas volumes occur between reporting segments before such volumes are sold in the market. Equinor has established a market-based transfer pricing methodology for the oil and natural gas intercompany sales and purchases that meets the requirements for applicable laws and regulations. For further information, see section 2.8 Operational performance under Production volumes and prices.

Equinor eliminates intercompany sales when combining the results of reporting segments. Intercompany sales include transactions recorded in connection with oil and natural gas production in the E&P Norway and the E&P International reporting segments, and in connection with the sale, transportation or refining of oil and natural gas production in the MMP reporting segment. Certain types of transportation costs are reported in both the MMP and the E&P International segments.

The E&P Norway segment produces oil and natural gas which is sold internally to the MMP segment. A large share of the oil produced by the E&P International segment is also sold through the MMP segment. The remaining oil and gas from the E&P International segment is sold directly in the market. In 2019, the average transfer price for natural gas for E&P Norway was USD 4.46 per mmbtu. The average transfer price was USD 5.65 per mmbtu in 2018. For the oil sold from the E&P Norway reporting segment to the MMP reporting segment, the transfer price is the applicable market-reflective price minus a cost recovery rate.

The following table shows certain financial information for the four reporting segments, including intercompany eliminations for the two-year period ending 31 December 2019.

For additional information, see note 3 Segments to the Consolidated financial statements.

The following tables show total revenues and other income by country.

Research and development

Technology and innovation are identified as enablers to deliver on Equinor’s strategy. We continually research, develop and implement innovative technologies to create opportunities and enhance the value of Equinor’s current and future assets.  

Our technology strategy sets the direction for technology development and implementation to meet Equinor’s ambitions. We prioritise and accelerate high-value technologies for broad implementation in existing and new value chains:

·        Optimise production from existing and near field resources 

·        Low carbon solutions for oil and gas 

·        Discover and develop prolific basins and deep-water areas

·        Unlock low recovery reservoirs

·        Develop renewable energy opportunities

We utilise a range of tools for the development of new technologies:  

·        In-house research and development 

·        Cooperation with academia, research institutes and suppliers 

·        Project-related development as part of field development activities 

·        Direct investment in technology start-up companies through Equinor Technology Venture’s investment activities 

·        Invitation to open innovation challenges as part of Equinor Innovate 

For additional information, see note 7 Other expenses to the Consolidated financial statements. 

Johan Sverdrup, NCS.

Overview

The Exploration & Production Norway segment covers exploration, field development and operations on the NCS, which includes the North Sea, the Norwegian Sea and the Barents Sea. E&P Norway aims to ensure safe and efficient operations, maximising the value potential from the NCS.

For 2019, Equinor reports production on the NCS from 41 Equinor-operated fields, nine partner-operated fields, as well as equity-accounted production from Lundin Petroleum AB for the first eight months of the year.

Key events and portfolio developments in 2019 and early 2020:

·    Strengthening the position in the Norwegian Sea, Equinor on 5 December 2018 agreed with Faroe Petroleum on several swap transactions with no cash considerations, effective as of 1 January 2019. The transactions increase Equinor’s equity share of the prolific Njord area and reduce its share in non-core assets.

·    On 15 January 2019, Equinor was awarded 29 exploration licences (13 as operator) on the NCS in the Awards for predefined areas round 2018 for mature areas.

·    On 19 May, the Ministry of Petroleum and Energy approved the plan for development and operation of the second phase of the Johan Sverdrup field development. Around one fourth of the oil from the Johan Sverdrup full field will be produced in the second phase, expected to start production in late 2022.

·    On 30 August, Equinor completed the sales of a 16% stake in Lundin Petroleum AB for around USD 1.51 billion and the acquisition of a 2.6% stake in the Johan Sverdrup field for USD 910 million. Following the transactions, Equinor holds a 4.9% percent stake in Lundin Petroleum AB and a 42.6% direct interest in the Johan Sverdrup field. 

·    Trestakk achieved first oil on 15 July. The oil discovery in the Norwegian Sea has been developed as a subsea tie-back to Åsgard A.

·    Utgard achieved first gas on 16 September. The gas and condensate field in the North Sea spans the boundary between the Norwegian and UK continental shelves, and the subsea development includes two wells in a new subsea template. Gas and condensate are piped through a new 21-km pipeline to the Sleipner field for processing and onward transportation to market.

The giant Johan Sverdrup oil and gas field in the North Sea was brought on stream on 5 October. The field is expected to produce for more than 50 years. Powered by electricity from shore, the field has record-low CO₂ emissions of 0.7kg per barrel.

Crude oil is exported to Mongstad through a 283-km designated pipeline, and gas is exported to the gas processing facility at Kårstø through a 156-km pipeline via a subsea connection to the Statpipe pipeline.  

·   The plans for development and operation of Hywind Tampen, an 88 MW floating offshore wind farm projected to provide wind power to the Snorre and Gullfaks installations in the Tampen area of the North Sea, were submitted to the Norwegian Ministry of Petroleum and Energy on 11 October.

Floating offshore wind from the pioneering Hywind Tampen development will reduce the carbon footprint from the Snorre and Gullfaks installations.

·    Onshore power to offshore installations: Powered from shore, Johan Sverdrup is one of the world’s most carbon-efficient fields. In the second phase of the field development, a power hub will be installed, allowing for the Gina Krog, Ivar Aasen and Edvard Grieg fields, as well as Johan Sverdrup second phase, to be powered from the onshore grid. In October, Equinor announced that the area’s licence partners are working towards a partial electrification of the Sleipner field, as well as Gudrun and other tie-ins, maximising the utilisation of power from shore to the area. Power supply from the onshore grid will reduce the carbon footprint from these offshore installations and contribute to reaching the climate goal of the Paris agreement.

·   On 1 December, Equinor assumed the operatorship of Wisting  in the Barents Sea from OMV. Equinor is considering developing the Wisting oil discovery using an FPSO solution with subsea wells.

·   Equinor and its partners made 11 commercial discoveries on the NCS in 2019. 

·   On 9 January 2020, Equinor and the Statfjord  licence partners announced an extension towards 2040 of the production from the Statfjord field in the North Sea, enabled by a planned upgrade of the three platforms and maturation of new reserves for recovery.

·   On 14 January 2020, Equinor was awarded 23 licences
(14 as operator) on the NCS in the Awards for predefined areas round 2019 for mature areas.

·   The gas processing capacity at Troll C was increased when a new compressor was brought on stream on 30 January 2020.  

Gudrun, NCS.

Major producing fields and field developments operated by Equinor and Equinor’s licence partners

Fields in production on the NCS

The table below shows E&P Norway's average daily entitlement production for the years ending 31 December 2019, 2018 and 2017. Production in 2019 decreased owing to natural decline, reduced ownership in some fields and a lower flexible gas production, partially offset by new fields in production.

Gina Krog, NCS.

The following tables show the NCS entitlement production by fields in which Equinor was participating during the year ended
31 December 2019.