Direct and indirect taxes

In 2008, StatoilHydro paid NOK 139.6 billion in tax on income and NOK 32.8 billion in indirect taxes. Direct and indirect taxes paid in Norway amounted to NOK 134.3 billion. Direct and indirect taxes paid outside Norway totalled NOK 38.1 billion. In 2007, StatoilHydro paid NOK 102.4 in tax on income and NOK 29.5 billion in indirect taxes. The increase from 2007 to 2008 in taxes paid was a direct result of the increase in revenues in 2008 in relation to 2007. The countries with the biggest change in taxes paid in 2008 versus 2007 were Algeria with 48%, Angola 56%, Azerbaijan 40%, Sweden 109%, the United Kingdom 48% and the USA 91%.

In Norway, oil companies pay income tax in six instalments per year as of 2008. Three instalments are paid in the income year: 1 August, 1 October and 1 December. The remaining three instalments are paid in the following year 1 February, 1 April and 1 June. The instalments paid in the income year are based on 50% of the forecast income for the year, and the estimate is made in mid-June. Over-estimated and paid amounts are compensated at market interest rates, but cannot be changed until the 1 February payment the following year.

StatoilHydro's profit before tax in 2008 was NOK 164.6 billion in Norway and NOK 15.4 billion in other countries. The tax expense was NOK 126.7 billion in Norway and NOK 10.5 billion in other countries.

Our investments in other countries that generate production and revenues must pay taxes. Taxes paid to the authorities in these countries are expected to increase as our revenues do. Direct and indirect taxes will not normally accrue during the investment phase. Since a long time elapses from a discovery until production starts up, there will be many countries in the list of activities in which we have investments but in which we do not yet pay taxes.

Production sharing agreements (PSAs)

Under a PSA, the host government typically retains the right to the hydrocarbons in place. The contractor under a PSA normally receives a share of the oil produced to recover its costs, and it is also entitled to an agreed share of the oil as profit. The allocation of profit oil between the state and the contractors typically increases in favour of the state based upon agreed success factors. Examples of success factors include surpassing certain specified internal rates of return, production rates or accumulated production. Normally, the contractors carry the exploration costs and risk prior to a commercial discovery and are then entitled to recover those costs during the production phase. Fiscal provisions in a PSA contract are, to a large extent, negotiable and unique to each PSA. Contractors to a PSA are generally insulated from legislative changes to a country's general tax laws.

The value of the petroleum retained by host countries is estimated to be NOK 23.8 billion for 2008, and the countries involved are primarily Algeria, Angola and Azerbaijan.

Signature bonuses

Authorities in certain host countries demand payment in advance of exploration activities for the rights to develop an exploration area. This type of payment is called a signature bonus. The size of the signature bonus is based on the exploration licence's presumed recovery potential and value, and the market's interest in the rights. In 2008, StatoilHydro paid NOK 2.35 billion in signature bonuses divided between two countries and nine licences.

In 2008, StatoilHydro paid NOK 151 million in signature bonuses upon signing contracts for exploration licences for deep water exploration blocks in Brazil's ninth round.

In 2008, StatoilHydro paid NOK 2.2 billion in signature bonuses to the USA Minerals Management Service (MMS) upon being awarded licences in the GoM and Alaska.

In 2007, signature bonuses were paid to Egypt and Indonesia amounting to NOK 47 million and 38 million respectively.