Volumes that explain revenues
In explaining revenues and changes in revenues, we report lifted entitlement volumes. This is because we can only recognise income from volumes to which we have legal title, and such title typically arises upon lifting (i.e. loading onto a vessel) of the volumes. Under a Production Sharing Agreement (PSA), we are only entitled to receive and sell certain parts of the volumes produced, and we therefore refer to entitlement volumes for revenue recognition purposes. The difference between equity and entitlement volumes is described in more detail below.
Volumes of lifted liquids (crude oil, condensate and natural gas liquids) and natural gas correlate with production over time, but they may be higher or lower than entitlement production for the period due to operational factors that affect the timing of when Statoil-chartered vessels lift the liquids from the fields. Volumes of natural gas produced on the NCS are deemed to be equal to lifted volumes of natural gas from the NCS.
Volumes of lifted liquids and natural gas may be sold or put into storage. The volumes that give rise to revenues from the sale of liquids and natural gas in the period are therefore equal to lifted volumes plus changes in inventories of liquids and natural gas.
Volumes that explain operating expenses
In explaining operating expenses, in total and production cost per barrel of oil equivalents, we believe that produced (equity) volumes are a better indicator of activity levels than lifted volumes. Moreover, we believe that equity volumes are a better indicator of the activity level under PSAs than entitlement volumes, since our capital expenditure and operating expenses under such contracts are linked to equity volumes produced rather than to entitlement volumes received.
Equity volumes represent produced volumes that correspond to Statoil's percentage ownership interest in a particular field. Entitlement volumes, on the other hand, represent Statoil's share of the volumes distributed under a PSA to the partners in the field, which are subject to deductions for, among other things, royalties and the host government's share of profit oil. Under the terms of a PSA, the amount of profit oil deducted from equity volumes will normally increase with the cumulative return on investment to the partners and/or production from the licence. The distinction between equity and entitlement is relevant to most PSA regimes. The main countries in which we operate under PSAs are Algeria, Angola, Azerbaijan, Libya, Nigeria and Russia.
Volumes of proved reserves
Proved reserves are entitlement volumes recognised as reserves in accordance with SEC Rule 4-10 (a) and relevant guidance. They represent volumes that with reasonable certainty will be produced and to which we will have entitlement in the future. See section 3.9 Operational review - Proved oil and gas reserves and note 35 - Supplementary oil and gas information in the Consolidated Financial Statements in this report, for details about how we measure and report on proved reserves.