CONTENTS PART I. REPORT FROM THE CEO

Transcription

1 ANNUAL REPORT 2015

2 CONTENTS PART I. REPORT FROM THE CEO PART II. INTRODUCTION TO THE ORGANISATION AND KEY FIGURES 10 Supervision and directorate 10 Organisation 11 Key priorities in Resource use per performance target 12 Management parameters 13 Key figures from the annual financial statements 17 PART III. ACTIVITIES AND RESULTS IN Initiative areas and other guidelines from the letter of allocation Petroleum Safety Authority Norway (PSA) is responsible for carrying out monitoring to ensure that both the industry as a whole and individual players minimise the risk of major accidents and damage to the natural environment in the petroleum sector Management responsibility Barriers Fields, facilities and installations in late life The natural environment and the High North Safety and emergency preparedness linked to deliberate attacks and terrorism Overall results, effects and resource utilisation for performance target PSA is responsible for carrying out monitoring to ensure that both the industry as a whole and individual players promote an open, safe and flexible working life Monitoring of workers particularly exposed to risk in the petroleum industry Working environment, cold climates and the High North Unprofessionalism and social dumping Overall results, effects and resource utilisation for performance target Development of new knowledge concerning working environment, working conditions, occupational health and safety Overall results, effects and resource utilisation for performance target PSA is responsible for monitoring and further developing a holistic, risk-based set of regulations within its remit Overall results, effects and resource utilisation for performance target PSA is responsible for working to promote trust and credibility in the public administration, and for acting consistently with respect to enterprises PSA's assessment of its own competence and capacity to overcome the HSE-related challenges facing the industry Overall results, effects and resource utilisation for performance target PART IV. GOVERNANCE AND CONTROL WITHIN THE ORGANISATION 41 Internal control 41 Risk management within the authority 41 Administrative guidelines 42 PART V. OUTLOOK 44 PART VI. ANNUAL FINANCIAL STATEMENTS 47 The CEO's remarks 47 Appropriation report 48 Account report 51 Activity account 55 3

3 PART I. REPORT FROM THE CEO 2015 Efficiency gains and improving safety PART I Changes, challenges and accidents characterised the petroleum industry in Our key message has always been clear: The requirement for continuous improvement also applies in "challenging times", when the industry is undergoing change, with cutbacks in investments, cost-cutting and downsizing. The companies in the sector must seize the opportunity to look at HSE with fresh eyes, strengthen the focus on safety internally, simplify and improve procedures and clarify and reinforce the initiatives aimed at ensuring ever safer operations. The industry must tackle the economic challenges and become more efficient, while improving safety at the same time. Poor safety can never be acceptable. In 2015, the first fatal accident in the petroleum industry since 2009 occurred. The accommodation module of the COSLInnovator semi-submersible drilling rig was hit by a wave. As a result of the accident, one person died and a further four were injured. The rig was disconnected from the well at the time because of the bad weather. We are investigating the incident to determine what happened and to identify the lessons that can be learned in order to prevent such accidents from happening again. In 2015, there was a serious gas leak on the Gudrun facility. Our report concluded that the incident could have resulted in a major accident involving loss of life, substantial material damage and consequences for the marine environment. Under different circumstances, the MOB incident on Scarabeo 8 in February could have been a fatal accident. During the first quarter, we instigated no fewer than six investigations as a result of serious incidents. We investigated a total of ten incidents during Investigations are a key and pivotal part of our supervisory work. The aim is to determine the sequence of events and causal factors, and to develop knowledge which can help to prevent incidents and accidents in the future. Towards the end of 2015, another serious incident occurred when a drifting, unmanned barge entered the Norwegian sector. The barge was in the Dutch sector when it broke loose. The facilities in the Valhall field and the Eldfisk field which were at risk of being hit by the barge were shut down and evacuated. We are following up this incident not only in terms of emergency preparedness, but also in relation to other national and international authorities. We are also in contact with our partner authorities in Brazil and Mexico in order to learn from accidents which occurred on the continental shelves of these countries in In 2015, it was 35 years since the Alexander L Kielland disaster, the worst accident in Norway's oil history, when 123 people lost their lives. It was also five years since the Deepwater Horizon accident in the Gulf of Mexico, when 11 people died. We have much to learn from history as regards the need for a strong, continuous and longterm focus on health, safety and environment. In the Trends in risk level in the petroleum activity' (RNNP) project involving the relevant authorities, the industry, the trade unions and relevant research institutions, trends in the petroleum industry are being monitored through a broad range of indicators which are collated every year in an annual summary. RNNP is an objective indication of the level of risk in the industry and measures trends over time. RNNP figures from 2014 showed a positive development in many areas. The figures for 2015 are currently being collated and will be presented in April RNNP is often highlighted as a unique tool, a foundation for the parties in the industry. We are determined to ensure that RNNP retains this position and ensure that all parties use the results to identify initiatives and improvement projects. Through a common understanding of where the challenges lie, we can work together to maintain and further develop a high level as regards health, safety and environment. 4 5

4 In 2015, we presented the results of a study of groups particularly exposed to risk in the petroleum industry. This study showed that some groups are systematically exposed to higher risk than others. It also revealed the relationship between various HSE factors and self-reported occupational accidents involving personal injury, work-related sickness absence and work-related health complaints. The results also indicated that those who have been through reorganisation and downsizing processes may be at greater risk of occupational accidents involving personal injury. The industry should particularly focus on the relationships between groups particularly exposed to risk and change processes given that the industry is currently characterised by cutbacks and restructuring. In 2015, we carried out a series of audits aimed at players that have carried out major reorganisation processes, such as mergers and acquisitions. We believe that highlighting this type of study and monitoring in the form of audits involving a number of players helps to raise competence levels and direct attention at such problems within the companies. During 2015, we urged companies to make use of the restructuring phase to think innovatively, simplify their systems and rationalise their working methods. I refer in particular to risk analyses as an example where it can be possible to make both safety-related and financial gains. Among other things, we question whether the risk analyses that are being carried out are appropriate. Are the companies more concerned about ensuring that risk assessments are carried out than the actual results of those assessments? We believe that the Norwegian Oil and Gas Association's project entitled "Appropriate risk analyses" represents a good contribution to the efforts being made to improve risk analyses. Another example where it is possible to implement improvements and enhance safety levels at the same time is within the area of documentation. The quantity of documentation which is produced in connection with the development and operation of fields and facilities on the Norwegian shelf has increased dramatically in recent years. Much of this is the result not of regulatory requirements, but of the companies' own internal documentation requirements. For this reason, we have initiated a project aimed at challenging the industry as regards the amount of documentation that it produces. We believe that both risk analyses and all the documentation which is prepared must be made more appropriate. This will help to improve both safety and resource utilisation. PSA'S KEY PRIORITIES IN 2015 With regard to the annual performance targets in the letter of allocation, we have formulated key priorities which will challenge, give direction to and influence the industry in the work being carried out to bring about continuous improvements within HSE. Our key priorities are well-known and are generally considered to have had a positive effect within the industry and to contribute to both greater awareness and competence development. In 2015, our key priorities were as follows: Safe late life: A high and rising proportion of Norwegian petroleum activity is characterised by marginal profits because of production cutbacks and rising costs. As a result of this reduction in profitability, maintaining responsible activity can represent a challenge. The aim for the key priority is to help to ensure that fields, facilities and installations in late life are operated responsibly and in accordance with applicable HSE regulations. This key priority was launched in 2015 and the associated work has primarily been linked to the acquisition of information and the clarification of problems and challenges in late life. Management responsibility: Ongoing changes in framework conditions, including cost reductions in the industry, are resulting in a continuing focus on management processes and the management's responsibilities. Initiatives and decisions taken by the management impact on risks relating to major accidents and working environment. The management is responsible for ensuring that risks are identified and managed from both a short-term and a long-term perspective. The aim behind this key priority is to ensure that management teams in companies maintain and further develop a high level as regards health, safety and environment, even under altered framework conditions. This key priority has resulted in a stronger spotlight and greater commitment from management teams concerning risks relating to major accidents. Barriers: Failures and weaknesses in barriers are a common cause of incidents. We have focussed on ensuring that companies safeguard barriers in a holistic and consistent manner in order to minimise risks. We are monitoring the industry to ensure that it acquires a better understanding of the interaction between operational, organisational and technical elements in the barriers. In 2015, we placed particular emphasis on barriers linked to well integrity, hydrocarbon leaks, structures and marine system integrity. A number of activities have been initiated which have collectively contributed to new and improved knowledge concerning the role and function of barriers in preventing major accidents. Over a number of years, the work relating to this key priority has helped to raise competence levels and improve understanding within the industry, and contributed to the development of systems in companies for barrier management. The High North: We aim to ensure that petroleum activities in the northern territorial waters of the Norwegian continental shelf are carried out responsibly and safeguard the safety of people, the environment and economic values. We will help to ensure that the industry works towards a holistic and robust approach to the challenges in the High North. In partnership with the University of Tromsø, The Arctic University of Norway, we organised a three-day technical and scientific conference during 2015: Arctic Safety Summit. The aim of this conference was to review the opportunities that exist in the High North in the context of safety. The conference has had a direct impact in the form of greater attention, knowledge development, visibility and collaboration concerning the HSE challenges that are being faced in the High North. Collaboration concerning safety Dialogue and collaboration are taking place with the parties in the industry, both through the established tripartite arenas such as the Safety Forum and the Regulatory Forum organised and 6 7

5 led by PSA, and as a key aspect of our supervision. Important work is also being carried out within Working for Safety (SfS) and Competence in rules and regulations in the petroleum industry (RVK). The tripartite collaboration is often highlighted as being a prerequisite for safety in the Norwegian petroleum industry. During challenging periods, the interaction between the parties can be placed under pressure, and it then becomes particularly important to stand by the principles which underpin a good collaboration. The feedback we are getting indicates that the collaboration in the tripartite arenas is generally working well, even if there is some disagreement over certain matters. We believe that the collaborative challenges that exist primarily lie within the bipartite arenas (i.e. between employers and employees within companies), where a lack of worker participation is sometimes cited. One indication of this development is that we are seeing an increasing number of expressions of concern linked to working environment, among other things. The feedback from employees and trade unions concerns the impact on safety and working environment of further cutbacks, demands for greater efficiency and downsizing within the Norwegian oil and gas industry. At a time when oil prices are low, it is apparent that the regulations are being challenged. Examples of this include new concepts such as more basic facilities and simplified seabed developments. The interface between the petroleum regulations and the maritime regulations is also being challenged. Outlook The challenging economic times and the struggling economy have set the agenda in the petroleum industry over the past 12 months, and the industry is working hard to adapt to the situation. But what are the key challenges that the petroleum industry is facing both in 2016 and going forward? Has safety arrived at a crossroads? Is the ambition to be a world-leader within HSE being challenged? What about the fundamental principle in the regulations concerning continuous improvement? Our monitoring of the industry is risk-based, i.e. we target our initiatives at areas where we believe the risks are greatest. We will continue our key priorities of safe late life, the High North, management responsibility and barriers in These priorities will be sharpened further in order to tackle the challenges that the industry is currently facing and form the basis for our risk-based monitoring. We will also continue to investigate incidents and accidents in order to identify underlying causes and learn lessons in order to prevent them from happening again. It is sometimes clear what caused an accident or contributed to a negative development within the field of safety. However, on other occasions, it is difficult to identify the factors that are involved. We have so far been unable to identify any common underlying causes behind the incidents which we investigated in 2015, but we will place a spotlight on this in The regulations are continually being developed in a close partnership between the supervisory authority and the parties in the industry. The efforts being made to further develop this work will continue in 2016 in order to face any challenges that may arise in a proactive way. The restructuring that is under way within the industry will once again leave a clear imprint on all the discussions taking place in the oil and gas industry in I believe in the future. We must never forget that the industry has extensive knowledge and experience on which to build for the future. We have achieved a high level of health, safety and environment over many years. Thanks to clear regulatory requirements, the enforcement of these requirements and a responsible industry, we have firm foundations going forward. There is therefore good reason to be optimistic as regards further improvements to risk levels in Norway. The ambition for the Norwegian shelf to be a world-leader within HSE remains in place, and most definitely applies during economically challenging times too. Anne Myhrvold Director General, Petroleum Safety Authority Norway PART II 8 9

6 PART II. INTRODUCTION TO THE ORGANISATION AND KEY FIGURES Director General Petroleum Safety Authority Norway (PSA) is an independent government supervisory body and is responsible for safety, emergency preparedness and working environment within the petroleum industry. The authority was established through the Crown Prince Regent's Decree of 19 December The authority reports to the Ministry of Labour and Social Affairs. fired power station in Nyhamna. The supervision must be system-oriented and risk-based, and it must be in addition to, rather than instead of, internal monitoring conducted by the industry itself. A balance must be struck between the role of the authority as regards high-risk/technological supervision and work-related supervision. SUPERVISION Director of supervision PROFESSIONAL COMPETENCE Director of professional competance LEGAL AND REGULATORY AFFAIRS Director, legal and regulatory affairs INTERNAL SUPPORT AND DEVELOPMENT Director of internal support and development OPERATIONAL UNITS - LEGAL AFFAIRS, TECHNICAL AREAS AND ADMINISTRATIVE UNITS COMMUNICATION AND PUBLIC AFFAIRS Director, communication and public affairs SUPERVISION AND DIRECTORATE The supervision encompasses monitoring carried out by PSA in order to obtain a picture of the safety status of one or more players in the petroleum industry. As an authority, PSA is responsible for technical and operational safety, emergency preparedness, security and working environment throughout every phase of the activity. PSA is the delegated authority for reaching individual decisions in the form of consents, orders, coercive fines, the suspension of activities and exceptions. The objective is to influence players with the aim of improving safety levels, and ensure that players carry out their activities in accordance with regulatory requirements. The authority's remit encompasses petroleum activities on the Norwegian continental shelf, in addition to petroleum installations and associated pipeline systems at Melkøya, Tjeldbergodden, Nyhamna, Kollsnes, Mongstad, Sture, Kårstø and Slagentangen. The ministry has also decided that PSA is to be the supervisory authority for the planned gas-fired power stations at Hammerfest, Skogn and Grenland, and the associated pipelines, as well as the planned reserve gas- Petroleum Safety Authority Norway, Professor Olav Hanssens vei 10 In addition to being an authority, PSA is also a pivotal administrative body with a remit as a directorate. PSA acts as a technical advisor to the ministry and as a competent body with respect to the sector, other authorities and the general public. In recent years, we have witnessed an increase in the scope of the authority's remit as a directorate, partly as a result of developments within society in general and partly as a result of restructuring processes within the industry. This particularly applies to tasks linked to the provision of technical advice to the ministry, where PSA's role as a competent body for the sector is performed through the dissemination of facts and knowledge, among other things, and as an administrator of regulations. We expect the scope of directorate-related tasks to increase in the coming years. Provision will be made to ensure that this increase does not take place at the expense of performing our supervisory role. Within areas where it is not appropriate for PSA to possess specific expertise, agreements have been established concerning the provision of assistance by other authorities such as the Directorate for Civil Protection, the Civil Avi- ation Authority, the Meteorological Institute and the Maritime Authority. Collaboration agreements have also been established with the Labour Inspection Authority, the Environment Agency, the National Board of Health Supervision, the County Governor of Rogaland, the Petroleum Directorate and the Police. ORGANISATION PSA is organised into the following areas: Supervision, Professional competence, Legal and regulatory affairs, Internal support and development, and Communication and public affairs. See the organisation chart above. Senior management Anne Myhrvold is Director General of the PSA. In addition to the authority's director general, the senior management consists of six area directors. Supervision Six main groups monitor each sector or groups of players within the industry. Contacts have been designated for each group. These people act as fixed points of contact for the various players. Each supervisory group is led by a supervision coordinator, who has product responsibility and formal decision-making powers. Professional competence The PSA's HSE competence is divided into six disciplines, each of which has a discipline leader who is responsible for personnel and competence development. The six disciplines are: Drilling and well technology Process integrity Structural integrity Logistics and emergency preparedness Working environment HSE management Legal and regulatory affairs Our lawyers help to safeguard the legal quality of regulations, orders and other products where the formal basis must be clear and unambiguous. The unit's responsibilities include conducting investigations on behalf of the ministry, maintaining and further developing the regulations, and facilitating regulatory development within the authority. Communication and public affairs The unit is responsible for media relations, operating the authority's website and preparing printed publications. Internal support and development The unit is responsible for internal operations and organisational development and consists of key support functions within finance, HR, archive function and ICT, in addition to a designated technical library for staff. Staff At the end of 2015, PSA had 173 employees, of whom 172 were permanent, and one office apprentice. The combined resource base amounts to 168 full-time equivalents for fulfilling the objectives which have been established for responsible authority monitoring of the industry's compliance with applicable regulatory conditions. Of the employees, 47 percent are women and 53 percent are men. (The figures are taken from the personnel administration report for 2015) KEY PRIORITIES FOR 2015 In our annual activity planning, we take into account a series of factors which reflect the reality in which the authority exercises its role as a competent authority, and the requirements and expectations that are imposed on it by the Ministry of Labour and Social Affairs. To ensure the best possible utilisation of our resources, a num

7 ber of key priorities are established every year which form the basis for the supervisory activity. In 2015, our key priorities were as follows: Safe late life Management responsibility Barriers The High North These key priorities are considered to be strategic tools for giving signals both internally and externally to the industry concerning what the supervisory authority wishes to focus on during the activity year. Through such strategic signals, the industry will obtain an overview of what the supervisory authority considers to be key areas for further development and continuous improvement, and at the same time benefit from greater predictability in relation to important prioritised areas as a basis for further follow-up within the supervision. In addition to the activities linked to the key priorities, there are also other activities of importance to safety. These may be limited to a specific company or a specific type of activity. We endeavour to coordinate such tasks with other supervision which falls within the priority areas in order to utilise our resources optimally. The key priorities and the tasks which are planned under these priorities encompass activities across the performance targets set out in the letter of allocation and can thus contribute to achievement of the results for many of these. RESOURCE UTILISATION IN 2015 PSA has established systems for the internal management of resources within the authority. All employees record their resource use for Refundable Refunderbart work arbeid (inc. (inkl NORAD) NORAD) Other Annen externally utadrettet oriented aktivitetactivity Technical Fag- og kompetanseutvikling and competence development Internal administrasjon administration fixed categories of tasks on an hourly basis. The system is adapted to the authority's collective portfolio of tasks, as well as government schemes for time off in lieu and flexi-time arrangements. This gives us an overview of the total time spent on the various tasks that we perform. Our resource utilisation in 2015 is broken down into the following main areas: Refundable tasks: Including supervision and assistance tasks under the Norwegian Agency for Development Collaboration/Oil for Development. Other externally oriented activity: Including directorate-related tasks, the provision of advice and information dissemination. Technical and competence development: Including project work, technical investigations and competence development. Internal administration: Including management, strategic work, non-refundable planning, budgeting, organisational development and case processing linked to contracts and procurements, personnel/finance, ICT operation, building operation, internal security, document centre and library. RESOURCE USE PER MAIN AREA The diagram and table below show the resource utilisation broken down between specified main areas in a time series. 7% 15% 22% 56% Year Refundable tasks Other externally oriented activity % 20.0% 14.7% 32.4% 2013 *48.3% 14.6% *8.3% 28.8% % 13% 8% 24% 2015** 56% 15% 7% 22% *The introduction of the new refund regulations from 2013 resulted in a reduction in technical and competence development and an increase in refundable tasks. **We have included 12.9% (corresponding to the admin. share of the hourly rate) of resource utilisation Internal administration in Refundable work (including NORAD). This share of admin. hours goes to support our refundable use of time. REFUNDABLE WORK (including the Norwegian Agency for Development Collaboration (NORAD)/Oil for Development): This category includes all planning and implementation of the PSA's refundable tasks which were performed during Total resource utilisation amounted to 56% for 2015 (3,935 person-weeks). Activities under this category are described in more detail under the reports on the relevant performance targets. In connection with Norwegian aid work, we are contributors to the Norwegian Agency for Development Cooperation's Oil for Development programme. MANAGEMENT PARAMETERS The table below presents an overview of relevant management parameters over time, with a number of general remarks linked to the figures and their associated trends: Technical and competence development Audits/verifications: More audits were carried out in 2015 than in This is linked to our overall assessment of the risk picture in the planning of activities for Order notices/number of orders: Showed a downturn in The use of instruments is assessed in each individual case. We therefore believe that the downturn is a temporary fluctuation. We have particularly focused on the consistent use of instruments. Coercive fines/police reports and suspensions: We have traditionally not used the instruments coercive fines/police reports/suspensions. However, we do work closely with the police, particularly as regards serious incidents. Investigations: The number of investigations varies from year to year for different reasons, MANAGEMENT PARAMETERS Number of audits/verifications Number of order notices 6* Number of orders Number of coercive fines, police reports and suspensions Number of investigations Number of offshore days Number of consents issued Number of applications for Acknowledgements of Compliance (AoC) Number of Plans for Development and Operation (PDO) and Plans for Installation and Operation (PID) Internal admin. *number of order notices and orders were reported collectively for

8 and we saw an increase during However, there was no rise in the total number of incidents reported during The severity of an incident is the most important criterion, but other factors may also be decisive as regards whether we decide to conduct an investigation or whether we follow up the incident in some other way. So far, we have no basis for determining whether the increase in the number of investigations reflects an increase in risk, but we will monitor developments closely during Offshore days: In 2015, there was a slight rise in the number of offshore days, which is linked to the increase in the number of audits/ verifications which were carried out offshore. Consents issued: In 2015, the figures show a slight reduction in the number of consents issued. This is due to the fact that companies implemented cost-cutting measures during 2015, with the result that they either deferred activities or decided to cancel planned drilling operations. Acknowledgement of Compliance (AoC) applications: The number of AoC applications reflects the number of mobile facilities visiting the Norwegian shelf for the first time. During 2015, there was only a slight rise in the number of AoC applications. The number of mobile facilities on the Norwegian shelf fell over the same period. In 2016, we expect to see a rise in the number of AoC applications as a result of the completion of ongoing construction projects. Plans for Development and Operation/ Installation and Operation (PDO and PIO): In 2015, we saw an increase from The companies have strict criteria for approving new projects given the current price of oil, but projects are still being planned and carried out. OTHER EXTERNALLY ORIENTED ACTIV- ITY, INCLUDING DIRECTORATE TASKS AND INFORMATION DISSEMINATION: Directorate tasks largely consist of tasks linked to regulatory development, participation in standardisation work and the provision of advice to the ministry in the governance dialogue, as well as the facilitation of contact with national and international authorities. In 2015, this accounted for 15 percent (1,090 person-weeks) of the total resource use within the PSA. This category also includes case processing linked to police cases, appeal cases, consultations and requests for access to documents. NUMBER OF CASES FOR PROCESSING: Police cases Appeal cases Consultations Requests for document access

9 TECHNICAL AND COMPETENCE DEVELOPMENT, INCLUDING PROJECT WORK, TECHNICAL INVESTIGATIONS: In order to monitor technological and knowledge-related developments within the petroleum industry, the supervisory authority must also prioritise its own technical and competence development to ensure that it has an up-todate professional basis for its supervision. The work is carried out both through the provision of external support from R&D communities and consultants, and through internal technical investigations. Individual technical development is considered to be important for the organisation's own employees through internal and external training and development. Overall resource utilisation under technical and competence development (which is not covered by the sector tax scheme) was 7 percent during 2015 (470 person-weeks). INTERNAL ADMINISTRATION, INCLUDING: MANAGEMENT, STRATEGIC WORK, PLANNING, BUDGETING AND ORGANISATIONAL DEVELOPMENT: This category covers governance and management (which is not covered by the sector tax scheme) within the PSA, including strategic work, budgeting, management, technical and team meetings, organisational development activities, collaboration with the occupational safety service, internal collaboration and administrative support activities. Internal administration covers case processing linked to contracts and procurements, personnel, finance, document centre and library. Overall resource utilisation during 2015 was 22 percent (1,518 person-weeks). RESOURCE UTILISATION PER PERFORMANCE TARGET The diagram below shows a breakdown of resource utilisation which can be linked to the performance targets in the letter of allocation. Resource utilisation which cannot be directly linked to a performance target is not shown in the diagram. Many of the tasks also contribute to several performance targets. 9% 28% 10% 33% Resource utilisation per performance target in table form: As a result of the changes implemented by the ministry in 2013 and 2014 concerning the number of performance targets, content and sequence, the breakdown of resources cannot easily be compared. From 2015, the figures will again be presented in a single time series. The table below gives an overview of resource utilisation broken down between the individual performance targets in the letter of allocation. The breakdown is shown as a percentage and person-weeks for Compared with previous years, the breakdown is still largely coincident. KEY FIGURES FROM THE ANNUAL FINANCIAL STATEMENTS A presentation of selected key figures during the period is given below with associated explanations. Number of full-time equivalents: There was an increase of one full-time equivalent as at , equivalent to 0.4 percent. This increase is due to the reallocation of duties that had previously been outsourced to a permanent position. Combined allocation, items 01-29: The combined allocation to items is NOK 5.25 million less than in 2014 net. This is primarily due to the introduction of the net scheme for budgeting and accounting of value added in the State administration and a reduction of NOK 1.4 million in efficiency gains. Utilisation ratio for items 01-29: The utilisation ratio indicates the percentage of expenses under items of the allocation. This has decreased from 97.0 percent to 94.3 percent. A utilisation ratio of 94.3 percent will secure PSA sufficient financial freedom to enable us to take into account unforeseen expenses during the year and temporary projects. Operating expenses: PSA's net operating expenses amounted to NOK 9.8 million less than in 2014, representing a decrease of 3.4 percent. The decrease is largely due to the introduction of the net scheme for value added tax and efficiency gains made through reduced ICT expenses. Salary expenses as a proportion of operating expenses: The salary ratio rose by 5.0 percent from 2014 to This is primarily due to the introduction of the net scheme for value added tax and the efficiency gains, which primarily led to a cut in other operating expenses. Overall, this has resulted in an increase in salary expenses relative to the operating budget. Salary expenses per full-time equivalent: Average salary expenses per full-time equivalent rose by 3.5 percent, a figure which largely corresponds to the pay settlements agreed during % 3.1 fremmer Promote lav low risiko risk of for major storulykker accidents og skader and damage på ytre miljø to the external environment 3.2 fremmer Promote et an åpent, open, trygt secure og and fleksibelt flexible arbeidsliv working life 3.3 utvikling Development av ny kunnskap of new knowledge om arbeidsmiljø, concerning arbeidsforhold, working environment, arbeidshelse working og sikkerhet conditions, occupational health and safety 3.4 følge Follow-up opp og and videreutvikle further develop et helhetlig, holistic risikobasert risk-based regelverk regulations 3.5 tillit Trust og and troverdighet credibility i in offentligheten, the public administration, samt opptre enhetlig and act overfor consistently virksomhetene with respect to enterprises Key figures Number of FTEs Combined allocation to items ,594, ,113, ,860,500 Utilisation ratio, items Operating expenses 260,145, ,312, ,538,314 Salary expenses as proportion of operating expenses Salary expenses per FTE 1,056,404 1,125,233 1,164,695 PERFORMANCE TARGET Year % 10% 20% 9% 28% 1,710 person-weeks 535 person-weeks 1,017 person-weeks 465 person-weeks 1,464 person-weeks 16 17

10 Our area of responsibility CA 80 Fixed facilities/platforms 59 Rigs/facilities with AoC BARENTS SEA NORTHERN PART OF THE NORTH SEA NORWEGIAN SEA Approx. 300 Seabed facilities 8 Land installations CENTRAL PART OF THE NORTH SEA 25,000 People 15,400 km of subsea pipelines Southern part of the North Sea Central part of the North Sea Northern part of the North Sea Norwegian Sea Barents Sea Land installations SOUTHERN PART OF THE NORTH SEA Brynhild Blane Ekofisk Eldfisk Embla Gaupe Gyda Hod Oselvar Tambar Tambar Øst Trym Ula Valhall Atla Alvheim Balder Bøyla Edvard Grieg Enoch Grane Gudrun Gungne Heimdal Islay Jette Jotun Rev Ringhorne Øst Sigyn Skirne Sleipner Vest Sleipner Øst Svalin Vale Varg Vilje Volund Volve Brage Fram Fram H-Nord Gimle Gjøa Gullfaks Gullfaks Sør Knarr Kvitebjørn Oseberg Oseberg Sør Oseberg Øst Snorre Statfjord Statfjord Nord Statfjord Øst Sygna Tordis Troll Tune Valemon Vega Veslefrikk Vigdis Visund Visund Sør Alve Draugen Heidrun Hyme Kristin Marulk Mikkel Morvin Njord Norne Ormen Lange Skarv Skuld Tyrihans Urd Åsgard Snøhvit 1 Kårstø 2 Kollsnes 3 Sture 4 Mongstad 5 Nyhamna 6 Tjeldbergodden 7 Melkøya 8 Slagentangen 82 Fields in production as at

11 PART III. ACTIVITIES AND RESULTS FOR THE YEAR PART III III INITIATIVE AREAS AND OTHER GUIDELINES FROM THE LETTER OF ALLOCATION In accordance with the letter of allocation, PSA must present a collective and overarching assessment of the organisation's results in 2015, including a general description of the status and trends within the industry, as well as any consequences for the authority's assessments and priorities. This part primarily contains a qualitative assessment linked to the individual performance targets. Figures have also been included where relevant. The level of safety in the Norwegian petroleum industry is essentially high. However, this high level will not be maintained by itself. Continuous efforts are needed to prevent the level of safety from declining over time and to ensure continuous improvement. In the 'Trends in risk level in the petroleum activity' (RNNP) project involving the relevant authorities, the industry, the trade unions and relevant research institutions, trends in the industry are being monitored through a broad range of indicators which are collated each year in an annual summary. The results of this project indicate that there has been a positive development over the most recent ten-year period. As at March 2016, it is not possible to draw any clear conclusions from developments during 2015 because the data processing has not yet been completed for all variables. Based on a number of key indicators relating to potential major accidents, the picture is complex. For example, there were ten hydrocarbon leaks exceeding 0.1 kg/s during 2015, compared with seven in Similarly, 15 well control incidents occurred in 2015, compared with 17 in There were 46 incidents/near-misses with the potential to lead to a major accident in 2015, compared with 36 in The RNNP figures for 2015 are currently being assessed and will not be presented in their entirety until April During 2015, PSA carried out more investigations than in previous years, which has resulted in more employees spending more of their time on investigations. We investigated a total of ten incidents during The number of investigations varies from year to year for different reasons. The severity of the incident is the most important criterion for the initiation of an investigation. However, other factors may also be decisive as regards whether we decide to conduct an investigation or whether we follow up the incident in some other way. An important factor which is considered is the potential for lessons which can be learned from the incident. The primary objective of an investigation is to learn lessons and pass on experience to the industry. Investigations are an important aspect of our supervisory activity. In the event of a serious incident which could escalate, PSA will normally staff the emergency preparedness centre. This is done not only to monitor the players' own handling of an incident, but also to contribute information to the company concerned, to other authorities and to the outside world. During 2015, we mobilised the emergency preparedness centre on four occasions as a result of the following incidents: Slagentangen LPG leak in connection with filling of tanker, Statfjord A Acute discharge in connection with buoy loading, COSLInnovator Big wave Fatality and personal injuries, Unmanned barge drifting towards Hod and Valhall, During the activity year, PSA was also assigned special tasks by the Ministry of Labour and Social Affairs. These tasks include two key investigations which were carried out to clarify problems relating to the 'Relocation of mobile facilities in and out of the Norwegian shelf' and our involvement in the ministry's project entitled 'Analyses of assumed consequences, costs and benefits from HSE requirements and measures within the petroleum industry'. These investigations have been completed and presented to the ministry. The results of investigations and assignments for the ministry are presented under the relevant performance targets. Under each of the performance targets and secondary targets, we have assessed the current status and looked at developments within the area and our approach. By way of conclusion, the account under each performance target presents an overall assessment of results, effects and resource utilisation for each of the performance targets with their subpoints. 3.1 Petroleum Safety Authority Norway (PSA) is responsible for carrying out monitoring to ensure that both the industry as a whole and individual players minimise the risk of major accidents and damage to the natural environment in the petroleum sector. PSA places great emphasis on being a driving 20 21

12 force to ensure that both the industry as a whole and individual players promote low risk as regards major accidents and damage to the external environment. In 2015, through various audits aimed at individual players and the industry generally, we helped to ensure that the petroleum industry itself continues to prioritise this work Management responsibility We have prioritised the follow-up of the management's role and the management of changes as an important activity in order to help ensure that the players themselves can influence the risk of major accidents. In this context, PSA carried out supervisory tasks to monitor the capacity and willingness of companies to adapt to framework conditions for HSE within their organisation, e.g. by monitoring how the companies organise their risk-mitigation work through management and governance. Initiatives and decisions taken by the management will often impact on and define conditions which are of considerable importance for the prevention of major accident risk. We have had a long-term focus on the management's responsibility for monitoring and maintaining control over the work to reduce major accident risk through the key priority "Management responsibility". In 2015, we placed the spotlight on four pivotal areas through this priority: The management has an overview and demands and receives information. Framework conditions Tripartite collaboration and worker participation Cost reductions and changes It is important that the information that the companies' management teams have at their disposal concerning risk in order to reach decisions is as accurate as possible. One of the challenges faced by management teams is to identify, establish and reprocess all data sources for information which is of relevance for decisions. This is a complex issue and subject to uncertainty. The restructuring programmes under way within the industry are increasing the level of complexity and uncertainty and challenging management teams as regards what is relevant to maintain an overview of and obtain information of significance to safety and working environment. Within the authority, we can see that the companies have management systems in place for their own follow-up and continuous improvement, and that the managers at various levels within the companies are both initiating and involved in the planning and implementation of the companies' follow-up activities. On the other hand, we can also see that management targets concerning efficiency gains are often not viewed in a clear context with objectives concerning continuous improvements to working environment and safety. Through our activities, we have helped to place this more clearly on the agenda. In 2015, we carried out various activities to follow up the framework conditions within the petroleum industry. In connection with this, we define "framework conditions" as circumstances which impact on the practical opportunities open to an organisation, organisational unit, group or individual to keep major accident and working environment risks under control. We have learned a lot about how framework conditions, and framework conditions which are incorporated into contracts in particular, can impact on risk. In many audits, including those targeted at insulation, scaffolding and surface treatment (ISO) and drilling and wells, we have observed that framework conditions have had negative consequences as regards safety and working environment and that operators have not adequately considered the consequences. Changes are being made to decision-making processes relating to the establishment and follow-up of contracts which could result in less flexibility and adaptability in operations. It is therefore important to follow up framework conditions in the interface between operators and contractors. We are in the process of systematising knowledge which has been acquired through supervision targeted at framework conditions in contracts and of importance for HSE. Worker participation is also a pivotal issue in change processes, and we can see that the formal involvement of employees in the follow-up activities and improvement work of companies varies. The principal challenges in this area appear to be systematics and structure for involvement in cases of importance for HSE, as well as the framework for real participation, such as early involvement, sufficient time, the involvement of employee representatives at the outer extremities of an organisation, etc. Through many audits, our findings have helped to improve the companies' provision for worker participation in change processes. Employee involvement from a more general perspective is covered as a topic in section Barriers Barrier management has been a key priority since 2009, as well as a priority topic for the authority's monitoring, for many years. Common guidance concerning 'Principles for barrier management within the petroleum industry' were published in This document attracted considerable attention amongst the players in the industry, and the supervisory authority has prioritised the utilisation of resources to monitor the industry through supervision. Supervision and investigations have shown that companies have done relatively little to identify the contribution of people towards barriers, and only imposed performance requirements for operational and organisational barrier elements. In January 2015, a specific project was initiated to strengthen the authority's monitoring of holistic barrier management which also includes the human contribution to barriers. The aim was to increase the level of knowledge and insight both internally within PSA and externally within the industry. Barriers relating to well control, hydrocarbon leaks, maritime incidents and emergency preparedness have been particularly pivotal to this work. The authority will also help to clarify the regulatory requirements concerning how the interaction between technical, operational and organisational barrier elements in barriers can be planned for and monitored over time. "Who does what and with what equipment in the event of fault, dangerous and accident situations" has been developed as an educational phrase for clarifying the interaction between organisational, operational and technical barrier elements. Collectively, these activities form a cornerstone for updating of the document "Principles for barrier management within the petroleum industry" in Fields, facilities and installations in late life We launched Safe late life as a new key priority in The aim is to help to ensure that fields, facilities and installations in late life are operated responsibly and in accordance with applicable HSE regulations. Facilities and associated infrastructure on the Norwegian shelf are normally designed and constructed with an intended life of around 15 to 25 years. If we use such a time frame as a basis, around half of the facilities on the Norwegian shelf will be either at or approaching this age. The oldest facility on the Norwegian shelf is now nearly 40 years old. The use of facilities and infrastructure beyond their original intended life requires attention to many factors. It is important that operators ensure that technical integrity is maintained and safeguarded as facilities and infrastructure age. Changes in use as a result of new or altered operating solutions, changes in reservoir or drilling and well conditions and the use of new technology are all key factors which must be addressed. In 2015, we acquired new knowledge and further developed our understanding of how companies plan and manage in order to meet the challenges that arise during late life. The combination of new and old equipment and systems often represents a challenge. When modifications and changes are carried out, this can result in a loss of overview and understanding of the functions of important safety barriers and how they are linked together. Many incidents in recent years have causes which can be attributed to poor maintenance and an inadequate understanding of the interaction between old and new. Another challenge which has been identified is that the planning process to ensure a safe late life is not started at a sufficiently early stage. However, PSA believes that there is a common understanding amongst companies that equipment integrity is important for safety and that it must be safeguarded throughout the entire life of a facility. We have seen evidence to suggest that decisions concerning risk-mitigation measures and the implementation of such measures are increasingly being deferred in late life. The falling price of oil and cost-reducing initiatives are reinforcing this trend. We can for example see that companies' plans for technical upgrades are not always adequately followed up. During the past five years, the industry has found more cost-effective methods for the plugging and abandonment of wells (PPA) and has largely succeeded in developing and introducing 22 23

13 alternative techniques and materials for PPA. However, we are aware that the industry is facing challenges in documenting the adequacy of the new methods within PPA, i.e. substantiating sufficient tightness throughout the life of the well, including the period during which the well is abandoned. Companies appear to be maintaining facilities in good technical condition and with a high level of integrity provided there is potential for investment. It is particularly important to be able to cite figures for high production efficiency in order to be an attractive candidate for the phasing in of additional resources. This is largely considered to coincide with a high level of HSE. The initiation of late life depends on milestones and decisions concerning future use. In the work to define the term 'late life', we have prepared overviews and models for use in communication both internally and with the industry. No specific definition of 'late life' has been developed, but the term is considered to be a function of various factors which can move the facilities closer to or further away from conditions which are characteristic of late life The natural environment and the High North Natural environment and RNNP - Acute discharges (AU) PSA will help to ensure that players in the petroleum industry prioritise the prevention of accidents, incidents and conditions which could result in acute pollution and thus harm the external environment. Since 2010, the RNNP-AU report has used the data that is collected by the petroleum industry to monitor trends in incidents which either have or could have resulted in acute discharges into the marine environment. It is largely the same barriers which must be effective in order to prevent incidents, give warnings of danger signals and hinder the development of incidents into accidents, regardless of their consequences. It is therefore important to learn from all types of incidents and to monitor all barrier functions. PSA uses the RNNP-AU results together with results from audits, investigations and studies. The aim is to determine the problems that should be followed up within the supervision, in tripartite forums and in collaboration with other authorities. Based on the most recent report published in 2015, there are three areas in particular which are considered to be relevant for further work: Effectiveness of barriers involved in acute discharges of crude oil. Safety function of barriers involved in acute discharges of chemicals. Prevention of acute discharges into the Barents Sea. Ongoing work is also under way to improve the RNNP-AU process, with particular emphasis on the utilisation of the available data and information, the dissemination of RNNP-AU results, and the follow-up of results within the authority and the holding of the players concerned to account. The High North As a key aspect of our preparations for, and follow-up of, the potentially major challenge in the southeastern part of the Barents Sea compared with previously opened areas, we decided to prioritise the acquisition of knowledge concerning these challenges in We have for example continued the key priority 'The High North'. As part of our initiative relating to the Barents Sea, we arranged a three-day technical and scientific conference in collaboration with the University of Tromsø, The Arctic University of Norway: Arctic Safety Summit. The aim of this conference was to explore the opportunities in the region in the context of safety. Key topics for the conference were to determine status and to think forward. During the conference, the importance of interaction between the authorities and the industry in order to bring about good solutions was highlighted. In 2015, the Arctic Offshore Regulators Forum (AORF) was established. The first ordinary of the forum meeting was held in Tromsø, with Norway (PSA) as host. PSA was also awarded funding by both the Ministry of Foreign Affairs and the Ministry of Labour and Social Affairs in 2015 to acquire knowledge concerning the HSE challenges being faced in the High North. This work is now well under way. PSA is also participating in the Marine Environment Group under the Joint Norwegian-Russian Commission on Environmental Protection. The work being carried out within the Marine Environment Group is partly aimed at petroleum activities in Arctic waters, and in 2015, a seminar was held in Moscow at which we gave presentations concerning the prevention of discharges into the marine environment from petroleum activity. See also performance target 3.3: Development of new knowledge concerning working environment, working conditions, occupational health and safety in the High North

14 3.1.5 Safety and emergency preparedness linked to deliberate attacks and terrorism Following the delegation of responsibility for follow-up of Section 9-3 of the Petroleum Act concerning Emergency preparedness in return for specific grants from the Ministry of Labour and Social Affairs in 2013, PSA has prioritised the internal development of competence in order to meet the ministry's expectations concerning a more highly prioritised follow-up and initiative relating to security. We have conducted a series of dialogue meetings and audits relating to the companies' compliance with Section 9-3. In these audits, we focused on the entire logistics chain, including supply bases, helicopter transport and offshore installations. We also carried out audits of the companies' information security, including the securing of management systems. We have also carried out a number of competence-boosting initiatives both internally and in partnership with the industry, including a thematic day on security which focussed on knowledge sharing and experience transfer. In 2015, an internal project group was set up, tasked with assessing and, where appropriate, drawing up a technical and strategic basis for aligning the petroleum regulations more closely with security considerations under Section 9-3 of the Petroleum Act. During the year, we also worked to further develop collaborations with other authorities, including the National Security Authority (NSM) and the Norwegian Police Security Service (PST) Overall results, effects and resource utilisation for performance target 3.1 An assessment of the effects of our initiatives must be viewed in the light of pivotal guidelines which have been established as a basis for the authority's monitoring of the activity. In connection with this, reference is made to risk-based regulations which hold players accountable, risk-based supervision which is in addition to the players' own monitoring and effective bipartite and tripartite collaboration. There is no unambiguous way of measuring the overall effect of our initiative within safety and working environment within the activity. We obtain a good indication of trends through the RNNP figures and an overview of personal injuries and other incidents. Such indicators have consistently shown a positive trend over time. There is reason to believe that our work has played and is continuing to play an important role in the improvements that have been achieved, and in maintaining and further developing safety within the activity. We present a qualitative assessment of the effects that have been achieved through our initiative in 2015 under each performance target. We believe that the greatest effect will be achieved through a systematic initiative over a number of years and that this is not solely an effect of the authority's efforts. At an overarching level, we can see that the effect of our work under performance target 3.1 is that the priorities of the authorities and PSA and the follow-up thereof, through challenging the industry itself within improvement areas, are attracting considerable attention within the industry, and providing guidance concerning the priorities of individual players relating to major accident risk. As regards the key priority Barriers, the activities that we have carried out have achieved the following effects: Knowledge development within the industry concerning barriers. As a follow-up to the barrier memorandum, the industry has itself initiated the further development of internal documents in accordance with the applicable requirements in the regulations and clarifications in the barrier memorandum. Knowledge development internally within PSA concerning barriers and the importance/ role of barriers. Dissemination of competence concerning, among other things, the preparation of an article on the interaction between technical, organisational and operational barrier elements. Further development of the regulations based on experiences gained through barrier supervision. Within the area of Fields, facilities and installations in late life, the activities we have carried out have achieved the following effects: Greater awareness and attention linked to challenges relating to late life. Acquisition of new knowledge and further development of our understanding of how companies plan and manage in order to meet the challenges that arise during late life. Internal and external competence development concerning late life challenges. Overviews and models have been prepared for use in internal communication and communication within the industry concerning late life. As regards the key priority Management responsibility, the activities that we have carried out have achieved the following effects: Greater awareness amongst company management teams regarding their own role and responsibilities. A stronger focus on major accident risk and engagement within the industry. A clear communicated expectation on the industry regarding continuous improvement within the field of HSE, even in challenging times. Positive effect on self-evaluation and self-monitoring and the role of the management. Greater knowledge and awareness concerning the importance of framework conditions in the HSE work. Better provision for worker participation in change processes. Within the area of External environment and the High North, the activities we have carried out have achieved the following effects: Greater awareness and better use of RNNP- AU results. Knowledge development concerning the safety aspects and challenges associated with activities in the High North. Within the area of Safety and emergency preparedness linked to deliberate attacks and terrorism, the activities that we have carried out have achieved the following effects: Greater awareness concerning the work relating to security as a result of the security authorities' increasing focus on this work. The industry has generally seen greater emphasis being placed on security measures, barrier management and the preparation of plans over time. 3.2 PSA is responsible for carrying out monitoring to ensure that both the industry as a whole and individual players promote an open, safe and flexible working life. We place considerable emphasis on following up and ensuring that both individual players and the industry as a whole promote a professional, secure and inclusive working life. This is ensured through supervision and joint competence-boosting events with the active involvement of both the parties and the industry. Collaboration and worker participation also represent key aspects of the achievement of the objectives set for this work Monitoring of workers particularly exposed to risk in the petroleum industry Groups particularly exposed to risk were one of our key priorities from 2007 up to and including This perspective has helped us to understand how working environment risk is unevenly distributed between groups of employees in the petroleum industry and how framework conditions can impact on this risk. 'Groups particularly exposed to risk' has become an established concept in the industry and many companies have established new routines and practice as a result of our initiative. In 2015, we placed particular emphasis on groups particularly exposed to risk on mobile facilities in our follow-up based on experience gained through activities during 2013 and This experience indicates that there are still weaknesses in the ability of companies to carry out qualified mapping reviews and risk assessments as an essential basis for risk-mitigation measures. These weaknesses are most apparent amongst subcontractors/third party companies. We have also found that operators are not contributing sufficiently to effective working environment management across the players, and are not always aware that the conditions that they impose on contractors are important as regards their ability to fulfil their responsibilities. The activities carried out in 2015 indicate that there is limited collaboration between companies, including both operators and contractors, as regards the development of best practice in this area, e.g. there is little exchange of the results 26 27

15 of mapping reviews and little consideration is given to the development of methods which are appropriate for the specific challenges presented by mobile facilities. During 2015, we placed the spotlight on a number of defined working environment issues; see the work relating to the follow-up of benzene exposure. Health risks linked to benzene exposure has been a topic in a number of audits, and weaknesses have been observed in the companies' understanding of real exposure to benzene. On the basis of new knowledge concerning benzene exposure and cancer risk, we have for example organised a workshop involving experts from companies and key researchers in the field. This workshop was attended by leading international figures and will act as a key reference point for the industry's improvement work. The monitoring of benzene exposure will again be important for PSA in 2016, partly through audits on facilities and installations. Worker participation In 2015, audits were carried out relating to worker participation where provision for such participation was a topic, with an emphasis on safety representatives and working environment committees. These audits were targeted at both new projects and operating organisations. The quality of the provision varies. In the case of some projects, we have observed good provision for the work of safety representatives and working environment committees, while in other cases the arrangements have been inadequate. The results of the activities carried out in 2015 show that there are challenges amongst the players. These include: Poor safety representative courses and training. Understanding and competence to carry out systematic HSE work. Role understanding (knowledge and awareness of rights and obligations) amongst safety representatives and working environment committee members which could adversely affect the quality of HSE-related decisions. Inappropriate composition of working environment committees. Working environment committees only acting as information bodies which are not involved in HSE-related planning to any significant extent. Based on supervision, enquiries and other information collated over the last ten years, we are preparing a combined report on provision for worker participation within the petroleum industry. Noise In 2015, we prioritised supervision relating to the players' own work to prevent noise damage in line with the long-term strategy for noise monitoring in the industry. We have conducted audits involving the monitoring of noise and the prevention of noise damage in the early phase of development projects. There is considerable scope to exert an influence during this phase to ensure that good solutions are implemented in operations. Noise is also closely monitored during the operating phase by placing a focus on technical measures which have been identified by the companies. In connection with life extension applications, we follow up the companies' plans for technical improvements, e.g. in order to improve noise conditions. The monitoring of noise and noise prevention by players within the industry is also a topic that is covered in the supervision of groups particularly exposed to risk. In this regard, investigations are carried out to determine the exposure to which employees are subjected and the work that is being carried out in order to improve conditions for groups particularly exposed to risk, as well as the measures that the companies are implementing. In 2015, as part of the RNNP work, we conducted a methodological review of working environment indicators relating to noise, ergonomics and chemistry. Proposals for changes, revisions and simplifications will be anchored in the relevant RNNP bodies. The plan for 2016 is for these three working environment indicators to be developed further to ensure that they have the same approach and format, and better correspond with the other RNNP indicators. We are in the process of drawing up proposals for new models and will consult with specialists in the industry to pursue a dialogue concerning the development of the indicators in Chemistry In 2015, we stepped up the initiative relating to better documentation and prevention relating to chemicals. We are working with many organisations, including the Environment Agency, the Labour Inspection Authority, the Food Safety Authority and the Directorate for Civil Protection regarding the documentation and prevention of chemicals, particularly through the work to implement the EU's regulations relating to chemicals (REACH and CLP). Specific collaboration agreements have been established between the relevant authorities with supervisory responsibility within each of the regulatory areas. We are also participating in various forums where we exchange experiences concerning chemical exposure, e.g. in the Collaboration Forum for Offshore Chemicals (SKIM), which consists of representatives from companies in the industry and relevant authorities (PSA and the Environment Agency). We are also involved in the further development of an EXPO database in collaboration with the Labour Inspection Authority and the National Institute of Occupational Health, and in the organisation of an annual conference concerning REACH and exposure scenarios (ES). In 2015, we carried out a series of activities linked to regulatory development and regulatory work relating to the follow-up of the chemical regulations REACH and CLP. We have also acquired knowledge, established risk pictures relating to chemicals and chemical exposure, and shared experiences within this field with the industry Working environment, cold climates and the High North Through our key priority 'The High North', we are focussing on the industry's monitoring of working environment in cold climates. The working environment is being challenged in the High North in other ways as a result of factors such as climate, polar low pressure, drifting ice, snow, large distances, emergency preparedness and emergency evacuation. During 2015, we began work to collate knowledge concerning working environments in the High North. In 2015, we also stepped up the collaboration with the National Institute of Occupational Health concerning knowledge linked to the effects of working in a cold climate. Activities have been carried out and knowledge has been acquired concerning working environments and human factors in the High North Unprofessionalism and social dumping During 2015, we followed up the development and use of hired labour as part of the monitoring of groups particularly exposed to risk. Through the supervision and monitoring of contractors, we have placed a spotlight on contractors who use hired and foreign labour in connection with major construction and modification projects. Emphasis has been placed on involving employees from the various players on the facility/ installation under authority supervision. This provides good information concerning factors which should be monitored, particularly those linked to employment conditions and rights. A spotlight has also been placed on projects during high-activity periods, where many companies are working on the same facility/installation at the same time. As regards the supervision of groups particularly exposed to risk and framework conditions, a number of challenges have become apparent linked to training and the monitoring of hired labour, among other things. In meetings, the Labour Inspection Authority has given feedback which indicates that they have become aware of social dumping within PSA's remit. Accordingly, supervisory activity 28 29

16 has been initiated on land installations concerning social dumping. This supervision was carried out by representatives of the Labour Inspection Authority, PSA, the Police and the Tax Administration. This supervision must be viewed in the context of the Government's initiative aimed at employment crime, including the objectives to combat social dumping Overall results, effects and resource utilisation for performance target 3.2 The holistic HSE regulations and the six common working environment regulations for shelf - land form the basis for the supervision of working environment conditions. PSA will contribute to the holistic monitoring of major accident and working environment risk. The activities carried out within the field of major accidents and working environments often form an integral part of the holistic monitoring. It can therefore be difficult to separate out the effects of the supervision that specifically relate to the working environment. This section presents a combined review of the results achieved and a qualitative assessment of the effects of our work in Effects are achieved through systematic initiatives over many years. As regards our work related to Groups particularly exposed to risk, the activities we have carried out have achieved the following effects: Greater attention and further development of systems linked to groups particularly exposed to risk amongst contractors. Knowledge acquisition and experience exchange in the context of supervision linked to health risks associated with exposure to benzene, noise and chemicals. As regards our work related to Worker participation, the activities we have carried out have achieved the following effects: Greater awareness and knowledge both internally and within the industry linked to worker participation, working environment committees, safety representatives and their roles and responsibilities. Identified non-conformities in the context of supervision have been rectified. As regards our work related to Working environment and cold climates, the activities we have carried out have achieved the following effects: Greater understanding and knowledge concerning potential working environment risks linked to working in a cold climate. As regards our work related to Unprofessionalism and social dumping, the activities that we have carried out have achieved the following effects: Greater awareness linked to unprofessionalism and social dumping. The supervisory activity linked to this as a topic had an informative and preventative effect. Competence development for PSA as regards understanding of the regulations and the framework for the authority's supervisory activities within the area. Competence development for PSA itself through working with the Labour Inspection Authority, the Police, the Tax Administration, the Labour and Welfare Organisation and the centre for the combating of working environment crime. 3.3 Development of new knowledge concerning working environment, working conditions, occupational health and safety This section summarises the work to obtain the necessary overview and knowledge concerning working environment, working conditions, occupational health and safety. We have begun work to identify and investigate operational uncertainty and risk factors associated with petroleum activity in the southeastern Barents Sea, as part of the follow-up to Storting Report 41 ( ) and Storting Report 36 ( ) "Opening of the southeastern Barents Sea to petroleum activity". We have also contributed to the development of knowledge concerning the High North through the follow-up of relevant activities being carried out within the industry, and through discussing relevant topics in the tripartite collaboration and in international collaboration. A number of internal projects were carried out during 2015 in order to acquire knowledge of the High North as a pivotal aspect of the key priority 'The High North'. We have received funding from the Ministry of Foreign Affairs and the Ministry of Labour and Social Affairs for the acquisition of knowledge concerning occurrences of icebergs, growlers, small blocks of ice, snowfall and icing which could threaten operations north of 73oN. Obtaining this knowledge is essential if provision is to be made for the further development of safe petroleum activities in the High North. In 2015, SINTEF was awarded a contract to carry out the feasibility project 'Human performance when working in the High North'. This is a knowledge summary of working environment risks linked to exposure to cold, daylight/darkness, isolation and solitude, organisation of the work, etc. Through the work carried out by TFOPP (Task Force Oil Pollution Prevention) during 2015, we established a directory of measures and technical solutions which can help to prevent discharges of hydrocarbons into the marine environment in the Arctic. In connection with activity in the High North, we need to look at the suitability, challenges, uncertainties and risk aspects associated with different installations, as well as risk-mitigating measures linked to structural integrity. We are working actively with international and national authorities and players in the petroleum industry in order to obtain a better understanding of the High North. In order to share experiences and the work to promote a holistic approach across the Arctic nations, we have initiated the Arctic Offshore Regulators Forum (AORF) for key HSE authorities in the countries around the Arctic. We are also participating in the Marine Environment Group under the Norwegian-Russian Environmental Commission, which is referred to in more detail in section External environment and the High North. In 2015, the project aimed at HSE indicators in the petroleum industry was continued. The principal aim has been to contribute to the development of knowledge concerning relevant indicators in the industry. The report which was prepared summarises information from studies and research linked to three topics: Documentation of the relationships between indicators and major accident risk (Indicator validity). Effects of using indicators. Factors in the surroundings or context which impact on the reliability of an indicator. Ergonomics Through training and the acquisition of knowledge linked to ergonomics, we have increased our understanding of ergonomic factors within the organisation, in order to further develop our supervision relating to ergonomics/ergonomic working environment factors. The training was planned and carried out in collaboration with the Labour Inspection Authority and the National Institute of Occupational Health. Working time In 2015, an audit was carried out with the aim of determining the status of trends over time concerning working time and shift arrangements for employees at land installations and offshore. In connection with this, relationships between working time arrangements, health and safety were assessed for various employee groups. The aim was to identify groups particularly exposed to risk and established targeted measures. The work was based on analyses of RNNP data, literature reviews and participation at relevant national and international conferences, collaboration with the Labour Inspection Authority and participation in the reference group for the PETROMAKS HMS-funded research project entitled "Working time and health" being carried out by SINTEF. New risk concept In 2015, we incorporated a clarification of the concept of 'risk' in the regulations. This clarification does not entail any new requirements, but by making it clear that risk is a consequence of the activity and the associated uncertainty, we 30 31

17 want to ensure that important decisions are taken on an adequate basis. In 2015, we prepared a memorandum concerning the new concept of risk, which will be published on our website in February We are in the process of preparing a memorandum concerning the application of the principles for risk management, with the aim of steering the industry towards more appropriate processes. Market surveillance We have followed up the harmonised EEA product regulations in collaboration with other national authorities and in Europe, both bilaterally and in network groups. We have focussed on developing an appropriate model for market surveillance and have acquired experience, partly through market surveillance focussing on drilling equipment in particular. We have chaired a working group under ADCO (Administrative Cooperation) within the area of machinery, which completed the work to provide the European Commission with input during In addition, we have chaired a working group under ADCO which is drawing up guidance concerning market surveillance covering products under EEA product law, with the exception of REACH. In collaboration with the Directorate for Civil Protection and the Labour Inspection Authority, we have also incorporated the new directives concerning equipment and safety systems for use in potentially explosive atmospheres and pressurised equipment. Documentation project The quantity of documentation which is produced in connection with the development and operation of fields and facilities on the Norwegian shelf has increased dramatically over the past ten years. Much of this is the result not of regulatory requirements, but of the companies' own internal documentation requirements. Accordingly, we initiated a specific documentation project in 2015 with the aim of helping to direct a critical view of the volume of documentation being produced within the industry. As a result of this, PSA arranged a thematic day concerning the documentation requirements of the industry during We consider the considerable quantity of documentation to constitute a possible safety risk, as important information which is essential for the safe, responsible and efficient operation of facilities could be drowned in the volume of documentation that is prepared. Through our audits, we have also observed inadequate updating of safety-critical documentation. The aim of the project was to conduct a series of review meetings with selected companies in order to identify challenges, the background to these challenges and any appropriate measures. The results of the reviews will be presented in a report with common recommendations for measures in early Sector guidance/socio-economic impact analyses Increasing attention has been given to ensuring that decisions taken by the authorities are transparent and made visible, partly through stricter requirements for identifying the socio-economic consequences associated with decisions. For the petroleum industry, this is reflected in the work to establish common sector guidance as part of the Ministry of Petroleum and Energy and the Ministry of Labour and Social Affair's work relating to socio-economic analyses linked to safety. During 2015, we developed processes for decisions which take into account the benefits and needs from the surroundings concerning the broad preparation and transparency of information used in decision-making. We have identified a need to develop the work processes so that they provide a sounder basis for decisions, including the use of socio-economic analyses in order to test information used as a basis for decisions. A number of internal workshops have been held in order to improve our understanding of socio-economic analyses within the organisation Overall results, effects and resource utilisation for performance target 3.3 Our role also entails acting as a resource organisation externally with respect to the sector, other authorities and the general public. We have an important role to play in disseminating experiences and knowledge based on our own audits and investigations of incidents, experiences from the continental shelves of other countries and general knowledge development within the industry. This section presents a combined review of the results achieved, along with a qualitative assessment of the effects of our work in 2015 under performance target 3.3. We believe that the greatest effect will be achieved through systematic initiatives over many years. In the work relating to the development of new knowledge concerning petroleum activity in the High North, the activities that we have carried out have achieved the following effects: Competence development concerning conditions in the High North linked to working environment, working conditions, occupational health and safety. Greater awareness of safety in the High North. Increased dialogue and experience transfer between the industry and the authorities concerning safety-related challenges in the High North. The establishment of AORF and information concerning discharge prevention is contributing to the dissemination of knowledge. In the work relating to the further development of collaboration concerning relevant research and studies regarding knowledge sharing with the Labour Inspection Authority and the National Institute of Occupational Health, the following effects have been achieved: A good platform for further collaboration between the Labour Inspection Authority, PSA and the National Institute of Occupational Health relating to topics such as ergonomics and working hours. Learning effect amongst companies as a result of better risk assessments. More collaboration across companies concerning joint projects. In the work to reinforce the initiative to promote better documentation and prevention concerning chemicals, we can see effects in the form of: Improved knowledge and competence relating to chemicals. A stronger collaboration with other authorities concerning common challenges. The work concerning HSE Indicators has produced effects in the form of: Dissemination of new knowledge concerning HSE indicators through a publication which will be placed on our website, and an article presented at a Society of Petroleum Engineering conference. In the preparation of a new risk concept, we can see effects in the form of: Greater awareness linked to the uncertainty dimension. Increased dialogue and development of new knowledge in collaboration with other authorities, the industry and academia. The work relating to the project concerning market surveillance has had the following effects: Influencing the development of a market surveillance model and associated guidance. In the documentation project, we can see effects in the form of our initiative with respect to the industry to promote: Greater dialogue between the parties in the industry concerning common challenges. Collaboration across companies. In the work to develop sector guidance for socio-economic impact analyses, we can see effects in the form of: Knowledge development concerning the use of socio-economic analyses in order to improve the basis for decisions. Better understanding of the use of various methodological approaches as regards socio-economic analyses in order to improve the basis for decisions within the area of safety and working environment. We are partly attempting to exert an influence in this area through participation in a reference group and working group as part of the Ministry of Petroleum and Energy's work concerning sector guidance. Competence development through participation in international standardisation work within areas such as Asset Management and Value Management. 3.4 PSA is responsible for monitoring and further developing a holistic, risk-based set of regulations within its remit According to the Crown Prince Regent's Decree and the letter of allocation, PSA is responsible for further developing a risk-based, holistic set of regulations for the petroleum industry. This has been a fundamental principle behind the work to develop the HSE regulations within the petroleum industry. In this regard, the involvement of the parties through the Regulatory Forum is a fundamental prerequisite. Compliance and the further development of the regulations is discussed in the Regulatory Forum in a way which provides us with important information concerning applicable framework conditions amongst the players in the industry. In 2015, five meetings of the Regulatory Forum were held, one more than during the previous year as a result of the lifeboat project. Our proposals for regulatory changes largely follow from lessons learned from incidents. In December 2014, the parties in the Regulatory Forum were invited to provide input regarding the further development of the regulations within the respective remits of the Environment Agency, the health authorities and PSA. This input, together with internal contributions, formed the basis for the changes which were distributed for consultation, and, following the implementation of a number of adjustments, adopted by the Environment Agency and PSA with effect from 1 January Approval of the Environment 32 33

18 Agency's changes to the framework regulation by the Council of State is awaited. Two ongoing cases from the previous year concerning the regulation of rescue and evacuation means and relief well drilling were concluded during 2015: The deadline for comments concerning PSA's proposed changes relating to rescue and evacuation means expired on 1 October The process with the parties was continued during 2015, until clarification was obtained from the Ministry of Labour and Social Affairs that no changes would be made to the existing regulations concerning rescue and evacuation means. Opportunities and limitations concerning the planning of relief well drilling are regulated by Section 86 of the Activity Regulations in Changes have also been proposed to the HSE regulations regarding CO2 handling which are still being considered by the relevant ministries. STANDARDISATION During 2015, we prioritised the follow-up of relevant national and international standardisation work. In 2015, we began work to revise the strategy for standardisation. This partly stems from the changes that have occurred in the industry's economic framework conditions, our experiences relating to the standardisation work and the industry's own strategy and priorities. The standardisation strategy will form the basis for the authority's further work and priorities within the area. SCOPE AND PRACTICE CONCERNING APPLICATIONS FOR EXCEPTIONS The table presents an overview of both temporary and long-term (permanent) exceptions granted in each year. Exceptions granted for mobile facilities with an Acknowledgement of Compliance (AoC) are not included. This is because it is possible to use maritime regulations (the Maritime Directorate's regulations) as a basis for such facilities in certain areas; see Section 3 of the Framework Regulations. Temporary exceptions are granted provided that the non-conformity is corrected by the set deadline and that exceptions are only granted in extraordinary circumstances and if it is considered responsible to operate with the non-conformity. The figures in the table show annual fluctuations as regards exceptions. There may be different reasons behind these fluctuations, e.g. the processing of applications for consent for life extensions. The increase from 2014 to 2015 is linked to the consents for life extensions issued for the Eldfisk and Tor facilities Overall results, effects and resource utilisation for performance target 3.4 To ensure that the petroleum industry maintains a high level as regards health, safety and environment, it is important that holistic regulations are further developed as knowledge within the industry develops, and that the regulations are developed in collaboration with the unions and employers' organisations and partner authorities. In our work concerning regulatory development, the authority has continued to place emphasis on the formulation of regulations which are appropriate to the petroleum industry, which support the authorities' monitoring and which give the players in the petroleum sector the freedom to choose solutions at detailed level wherever possible. Emphasis is also placed on clear responsibilities and rights. This section presents a combined review of the results achieved, along with a qualitative assessment of the effects of our work in 2015 under performance target 3.4. We believe that the greatest effect will be achieved through systematic initiatives over many years in a constructive collaboration within the Regulatory Forum. In 2015, the effects of this work included the following: The regulatory collaboration between the HSE authorities in the petroleum industry has had effects in the form of more holistic requirements for the management of activities, partial coordination of reporting requirements, coordination of application processes and audits, and highlighting of the interfaces between the areas of health, safety and environment. This holistic follow-up has also had effects on the preventa Long-term Temporary

19 tive work of companies and on the authority's situation understanding, and has resulted in cost-effective solutions for both companies and authorities alike. Greater attention on regulatory changes. The amendment to Section 86 of the Activity Regulations, for example, has resulted in more attention being devoted to the challenges associated with drilling multiple relief wells, and the operators are expressing a need for more relevant and detailed assessments of technical and operational feasibility, as well as location-, operation- and well-specific risk assessments for the chosen method, than was previously the case. It has become clearer to the operators which requirements are being imposed as regards capacity and competence within each company in order to carry out relief drilling with more boreholes. Ongoing attention and work relating to the regulations is also helping to raise the general level of knowledge and awareness concerning the regulations, partly through the work of the Regulatory Forum. The drawing up of proposals for changes concerning rescue and evacuation has helped to raise awareness and improve understanding concerning the development work which has been carried out over many years, and the need to implement measures to bring about improvements. 3.5 PSA is responsible for working to promote trust and credibility in the public administration, and for acting consistently with respect to enterprises. PSA is dependent on society, the industry and the parties having confidence in the supervision that is carried out. It is for example important that the players have confidence in the supervisory authority processing information that they have provided in a responsible manner, and demonstrating equal treatment and predictability in its case processing. For this purpose, we have developed procedures and routines in our case processing, including legal quality controls and requirements concerning legal capacity. To safeguard the trust of the general public, we ensure that internal circumstances within the organisation do not come into conflict with the authority's social remit. During the first half of 2015, the Ministry of Labour and Social Affairs noted that the ministry's instructions for PSA entail a complete ban on employees owning shares in enterprises on which the organisation carries out audits. This clarification means that the ministry's instructions extend beyond the requirements of the Public Administration Act as regards legal capacity. As a result of this clarification, an application was submitted for an exemption from the instruction in respect of eight of our employees. The ministry approved the application for two of the employees who exclusively performed administrative duties, but rejected the application for the other six employees. We are following up the matter in line with the ministry's decision. Another important aspect of our work is to be clear and correct in the use of instruments with respect to the enterprises on which audits are carried out. An internal document sets out the instruments that we have at our disposal and how they are to be used in accordance with the requirements laid down in the Public Administration Act. During 2015, the internal document was revised as a result of regulatory changes, recent experience and practice. Based on the authority's information policy, our website ptil.no is used strategically to disseminate information and knowledge to the industry. The website map presents an overview of links to regulations, supervision, including all reports from audits and verifications, acknowledgements of compliance, investigations, consents, orders and other similar letters. The website also discusses key topics such as HSE governance and management, major accidents, working environment and other relevant information concerning PSA. Our annual key priorities are given a central place on the website. These priorities were also communicated directly to the industry through an open meeting attended by the parties in the industry together with PSA's management and specialists, with the media being given an opportunity to ask questions about relevant issues. In recent years, we have published an annual report entitled 'Safety - Status and Signals' in both Norwegian and English. This publication can be considered to be our annual summary for the industry and other stakeholders in the public sector. It is published as a magazine in a paper version and can also be downloaded as a digital version. The publication has been in great demand within the industry. In addition to publishing the report on the ongoing work relating to surveillance and monitoring of 'Trends in risk level in the petroleum activity' (RNNP), we also publish an additional periodical concerning safety entitled 'Dialogue'. The purpose of this periodical is to promote a debate concerning topical problems and challenges that the industry faces relating to safety. The work to develop online solutions and the publication of information is an ongoing task which we believe to be vital in order to safeguard the need for transparency and predictability in the authority's work. New solutions have also been adapted to meet new needs within the public sector, e.g. through PSA's presence on Facebook, Twitter and LinkedIn. The level of interest in our activity within the public sector is reflected through the number of requests for access to documents. The number of such requests has been increasing for a number of years. In 2015, we considered 3836 requests for access. To promote the exchange of knowledge concerning health, safety and the environment and disseminate information concerning our role as an authority and our activities and priorities, we believe it is important to give lectures and presentations at strategic pivotal arenas where conferences, courses and other information dissemination take place. This is an important aspect of our work to disseminate knowledge and transfer experience. In 2015, we arranged ten specialist seminars/ thematic days and conferences in collaboration with the Labour Inspection Authority, the Environment Agency, SINTEF, the University of Tromsø - The Arctic University of Norway and others, with the aim of facilitating the exchange of information and experience. Specialist conferences organised by PSA Hired workers - Resource or challenge? Cost-cutting An environmental risk? Thematic day concerning security Subsea gas release risks Thematic day concerning structural integrity Senior excecutive conference on Arctic Safety Arctic Safety Summit Expert meeting concerning benzene Thematic day concerning industry documentation requirements Safety Forum annual conference In 2015, PSA also published five specialist reports on our website as part of the work relating to information and experience exchange. Electric power from land, auxiliary power and emergency power How much will a firewall withstand? Fire load in connection with drilling over a facility in 'cantilever mode' Fire and explosion risk in confined spaces Prevention of pollution in the Arctic Many of our managers, specialists and other key persons are also in great demand as lecturers, as meeting chairpersons and as participants on many course and conference committees both in Norway and abroad

20 3.5.1 PSA's assessment of its own competence and capacity to overcome the HSE-related challenges facing the industry Rapid changes and economic fluctuations also present challenges linked to the way in which the authorities should further develop competence in order to monitor technological and complex industrial activity undergoing constant change. The industry is undergoing a period of several years of cost cutting and redundancies. We need a broad spectrum of expertise within a variety of disciplines and are also dependent on employees possessing and developing the necessary authority competence and role comprehension. To fulfil our responsibility as a public administration, we have further developed competence internally as a strategic initiative area. The aim is to develop and build competence in order to face long-term trends and developments within the industry. Petroleum operations in the High North and the effect of restructuring are two key areas where we are enhancing our competence. As regards internal competence development, we have our own resource centre, which is responsible for organising courses and training initiatives. In 2015, our resource centre offered 24 courses with varied thematic content and a total of 346 participants. Of these, 236 were from the PSA and partner authorities, with the remaining 110 coming from the Norwegian Petroleum Directorate. The overview below shows the courses which are being offered and which are helping to boost internal competence in order to face the HSE-related challenges being faced by the industry: Courses organised by the resource centre in 2015: Human Factor English course Outlook - Course on how to administer and streamline incoming The audit day Personal financial advice First-aid course Maintenance management Senior planning Lync course Introductory course for new employees Petroleum economics for non-economists Supervision methodology The history of a field Introductory course for new employees Breakfast seminar concerning administrative law/ the Public Administration Act Mini-workshop on creative interview techniques Excel course The investigation day Presentation techniques The Public Administration Act How to create good and appropriate PPT presentations Drilling course for non-drilling engineers Regulatory course Process course for non-process engineers We are also working with the University of Stavanger (UiS) and other R&D organisations to further develop competence-oriented initiatives, such as the experience-based Master's degree in risk and safety management. Sixteen employees took part on the UiS course in Overall results, effects and resource utilisation for performance target 3.5 In order to perform its duties, it is vital that the authority has employees who possess specialist competence and who know the industry and have experience of it. This is helping to improve the quality of the work and engender trust in PSA's work. It is also important that employees who conduct audits on enterprises have no affiliation to the objects that are covered by the audit which could lead to justifiable concerns over their impartiality. We believe that the greatest effect will be achieved through systematic initiatives over many years. As regards the work to engender trust and credibility and to act consistently within the public administration, we can see effects in the form of: Greater attention and awareness linked to procedures and guidelines concerning equal treatment, legal capacity, access to documents, the use of instruments and quality assurance. Visibility and transparency, e.g. through the use of social media and courses, conferences and thematic days, are contributing to trust and credibility. As regards the work relating to PSA's own assessment of competence and capacity to overcome the HSE challenges facing the industry, we can see effects in the form of: Greater awareness internally within PSA concerning its own competence and capacity to overcome HSE challenges. Participation on courses and training initiatives is having effects in the form of increased competence development, experience exchange and relationship building

21 PART IV. GOVERNANCE AND CONTROL WITHIN THE ORGANISATION PART IV INTERNAL CONTROL In accordance with the Regulation on systematic control of health, environment and safety at work in enterprises (the Internal Control Regulations), enterprises are required to ensure the systematic follow-up of the requirements laid down in applicable HSE regulations. We have a well-developed HSE system, where employees, managers and teams are all systematically developed in accordance with the authority's stated ambitions for personnel and organisational development and systems for the evaluation and follow-up of HSE. We are a member of the Inclusive Working Life scheme and also have many health and well-being schemes in place such as keep-fit during working hours, a mentor scheme for new employees and initiatives relating to older employees to ensure a high level of HSE internally within the organisation. We have established a working environment committee which meets regularly, along with a safety service. We are continuing to strive for a stronger focus on internal efficiency gains, competence development and quality, and we are also aiming to maintain the good working environment that already exists within the authority. Through our governing documents, we have a robust system which safeguards the primary duties of the authority and helps to ensure the execution of core activities with the necessary quality. The governance dialogue and the letter of allocation provide us with the guidelines we need to fulfil our remit, which is to set the agenda and follow up to ensure that players in the petroleum industry maintain a high level of health, safety and environment and emergency preparedness. Performance targets and requirements concerning the achievement of results are set out in the annual letter of allocation. The requirements concerning results will also be clarified and specified through the internal planning process. The results are monitored quarterly and evaluated through the governance dialogue, which results in further quality assurance of the processes. We develop strategies from a multiannual and long-term perspective. The strategic work is adjusted in relation to the guidelines laid down in the Storting reports and by the ministry. The milestones in the governance dialogue and the internal planning process are firmly anchored in our plan and governance calendar. The internal planning process leads to the combined activity plan and is documented in our 'annual wheel'. RISK MANAGEMENT WITHIN THE AUTHORITY Every year, we prepare a risk report, which is sent to the ministry. The aim of this update is to give an account of the key risk factors which could prevent us from achieving our results, along with associated outlined initiatives. The key risk factors which we identified during 2015 and have focussed on are as follows: Changes in the petroleum industry's economic framework conditions, such as economic fluctuations, the price of oil and level of activity. Major accidents, near-accidents, incidents and deliberate attacks Inadequate knowledge development/acquisition of new knowledge concerning working environment, employment conditions, occupational health, safety and security, etc. Risks linked to the authority's remit such as: tripartite collaboration, regulatory development, trust and quality. Risks linked to internal operations/administrative circumstances, including: assessment of future competence and capacity to overcome the industry's HSE challenges, and a safe and stable internal operating environment

22 ADMINISTRATIVE GUIDELINES Common guidelines - 'time thieves' During the 2015 activity year, we registered user-oriented time thieves within our own organisation in the Agency for Public Management and Government's (Difi) reporting solution. In a dialogue with the ministry, the authority will identify time thieves which it can do something about itself and instigate measures to reduce or eliminate them. As part of the efforts being made to reduce/ eliminate user-oriented time thieves, PSA initiated two projects during 2015: 1. Reporting solution for the industry: We initiated a specific project to look at new and more effective solutions for reporting data from the industry. We believe that such a solution should be user-friendly, reliable and flexible and reduce workloads, and represent a cost-effective solution in a longer time perspective. This project will be continued in 2016 and will be viewed in the context of the Ministry of Labour and Social Affair's initiative to promote a common solution for reporting data linked to occupational accidents and illness. 2. Streamlining of the process associated with requests for access to documents: We have made changes to the routines for processing access cases, partly by looking at the distribution of work between the document centre and the case officer. The results to date show reduced processing times and better utilisation of internal resources. This work will continue during In addition to the work relating to user-oriented time thieves, we are also working to identify and reduce/eliminate internal time thieves. This forms part of the ongoing organisational development process, which is aimed at mapping, assessing and revising internal work processes in order to perform administrative tasks in the most effective way. SOCIETAL SECURITY AND EMERGENCY PREPAREDNESS Using a risk-based approach, we have prepared an overview of risks, vulnerability and emergency preparedness in the sector for our own organisation. As a result of this, in 2014, we instigated an audit of our internal management of security risks. Among other things, an evaluation was carried out in order to map values and the consequences of security incidents. This work was intensified in 2015 and will continue in During 2015, the authority took part in monthly meetings with NorCERT and The Norwegian Police Security Service (PST) in order to obtain an update to the strategic threat picture, and gain access to classified information. We also participated as both an authority body and an observer during the planning of Norwegian Defence's Gemini exercise. Reference is also made to performance target for more information concerning safety and emergency preparedness linked to deliberate attacks and terrorism. In 2015, as part of our supervisory work, we took part as an observer during a number of preparedness exercises carried out by the players, covering themes such as security incidents and criminal actions. A joint exercise known as Myndex was also carried out involving PSA, the Environment Agency and the Coastal Administration. The respective ministries were also involved in this exercise. The letter of allocation asks the organisation to give an account of its own follow-up to the Office of the Auditor General of Norway's remarks in their annual report to the Storting (Document 1) and in connection with any administrative audits. The Office of the Auditor General had no significant remarks linked to the financial statements or concerning the implementation of the budget for PART V 42 43

23 PART V. OUTLOOK Low oil prices, the implementation of efficiency measures in the form of redundancies in order to cut costs and serious incidents and accidents characterised both 2015 and the transition from 2015 to 2016 in the Norwegian petroleum industry. We believe it is important to maintain and further develop a high level of HSE, while at the same time streamlining, cutting costs and adapting to the changes that are taking place in the market. During 2016, we will continue our key priorities of Safe late life, the High North, Management responsibility and Barriers. The key priorities were chosen based on our knowledge and experience of the petroleum industry, and are firmly anchored in the risk picture. The priorities will be sharpened further in 2016 in order to tackle the challenges that the industry is currently facing and establish the basis for our activities going forward. The regulations form the very foundations of the petroleum industry. These regulations have been developed over many years through a collaboration between the parties within the industry and are generally well-received, both nationally and internationally. We believe that these regulations have been a vital prerequisite for, and have contributed to, the good developments that the players are able to cite within HSE in the Norwegian petroleum industry. It is unlikely that this positive development would have been possible had the legal approach not been adopted as a basis. Some examples of this are the enterprise-specific regulations which underpin the authority's monitoring and give the players concerned as much freedom as possible as regards detailed solutions, the clear delegation of responsibility and "ownership" through the tripartite collaboration that takes place through the Regulatory Forum. The focus being placed on more cost-effective operations, simpler operating solutions and new technology represents a challenge to both the regulations in general and the scope provisions in particular. We will work to further develop the regulations in line with the guidelines that have been used as a basis in this work. We will also work to ensure that the regulations do not contribute to barriers to technological development within a responsible framework. Functional regulation requires the extensive use of standards and industrial norms. We will focus on making appropriate contributions to standardisation forums in line with the preconditions concerning functional regulation. The developments that have taken place within the industry over the past 15 years have resulted in a large number of new players on the Norwegian shelf and the use of contractors and suppliers. The restructuring processes taking place within the industry are impacting on these players in different ways and will once again leave a clear mark on developments within the oil and gas industry both in 2016 and in the years that follow. Key challenges can among other things be linked to the loss of important experience and competence as a result of downsizing, new constellations and changes in the balance of power between players and contractual conditions and the importance of this for the safeguarding of HSE. Downward pressure on costs could lead to cost-cutting measures which can have an adverse impact on safety unless thorough evaluations and analyses are used as a basis for decisions. The measures that are implemented in order to improve efficiency and enhance the competitiveness of the industry can be utilised in a way which also safeguards HSE improvements on the Norwegian shelf. Examples of such measures include the efforts of companies to improve planning processes, efficiency and technological development. The monitoring of restructuring and efficiency processes will continue to form a priority area for the authority over the coming years. In spite of savings, many new projects are being planned or implemented within the industry. We are in contact with new projects from the early phase to ensure that HSE requirements are fulfilled throughout the entire project cycle. We will also focus on investigating accidents and incidents in order to identify underlying causes and contribute to lessons to prevent them from happening again. When the RNNP figures from 2015 become available in April 2016, these results, combined with experience gained through audits and investigations, will form the basis for an assessment of developments and the identification of possible measures. The tripartite collaboration is often highlighted as a prerequisite for safety in the Norwegian petroleum industry. Both the Regulatory Forum and the Safety Forum are cited as arenas which make a positive contribution to the exchange of information and the building of trust between the parties. The petroleum industry has achieved a high level of health, safety and environment over many years. This is the result of clear regulatory requirements, the enforcement of requirements and the responsible attitude of the industry. As regards collaboration at company level, we find that although the formal arrangements are largely in place, the implementation can be inadequate. There may be many challenges, e.g. competence requirements and provision for training, participation in interaction between land and offshore organisations, participation where there are many links in executive chains, and time to carry out safety work and downsizing within the industry which also affects the safety representatives. Feedback from employee organisations concerns the adverse effect of efficiency measures and staff cutbacks on safety and the working environment within the company. We believe it is important to monitor these developments going forward. In 2016, we will continue the investigations which were commenced in Measures in the wake of the report entitled "Relocation of mobile facilities" will be initiated in consultation with the Ministry of Labour and Social Affairs. We have also begun an investigation into "the use of so-called multipurpose vessels on the Norwegian shelf" and, together with the Ministry of Labour and Social Affairs, we are contributing to the work to draw up sector guidance for the petroleum sector concerning socio-economic analyses. We must help and enable companies to introduce new technology within responsible limits and assess companies' plans to cut costs. As an authority, we will challenge both the sector as a whole and individual companies going forward. It would not be appropriate to accept a trend which could lead to the petroleum industry not continually implementing improvements within the field of safety and working environment

24 PART VI. ANNUAL FINANCIAL STATEMENTS PART VI PURPOSE Petroleum Safety Authority Norway (PSA) is responsible for setting the agenda and carrying out monitoring to ensure that players in the petroleum industry maintain a high level of health, safety and environment, in order to reduce the risk of major accidents, incidents and occupational injuries and illnesses. The authority responsibility covers petroleum activity on the Norwegian continental shelf and at certain land installations, gas-fired power stations, CO 2 capture facilities and transport installations. Through its own supervisory activities and in collaboration with other authorities, PSA shall help to ensure that petroleum and other associated activities are monitored in a holistic manner as regards HSE. PSA shall also place great emphasis on disseminating knowledge concerning risks and carrying out monitoring to ensure that activities are carried out responsibly and in accordance with applicable regulations. PSA is based in Stavanger and had 173 employees at the end of 2015 (168 full-time equivalents). Accounting policies PSA is a gross-funded organisation and the activity account is prepared as an accrued account in accordance with the State accounting standards (updated as of August 2015). PSA also reports to the the State accounts in accordance with the cash principle. REMARKS FROM THE MANAGEMENT Revenues Total operating revenues in 2015 amounted to NOK million, a reduction of 3.4% compared with Income from appropriations showed an increase of 3.4%, primarily as a result of charge authorisations from the Ministry of Foreign Affairs totalling NOK 5.3 million for activities linked to the High North, among other things. Of the nominal value of the charge authorisations, a total of NOK 3.4 million was utilised and recognised as income. Revenues from fee and sector activity fell by 9.9% to NOK million in The level of activity in 2015, including the investigation of ten incidents, largely corresponds to the planned level. Expenses Total operating expenses in 2015 amounted to NOK million, a reduction of 3.4% compared with Cost of goods, i.e. purchases of goods and services for re-invoicing, fell by NOK 12.4 million compared with Purchases of external consultancy services accounted for much of the decrease. Total salary expenses rose by 3.9% due to general trends in salaries and corresponds to the pay rise settlements agreed in Other operating expenses show a drop of 5.5%. This is primarily due to the introduction of the net recognition scheme for the budgeting and accounting of value added tax in the public administration, according to which value added tax on expense items under the scheme is not expensed in PSA's accounts. In 2015, an efficiency gain was also introduced as a result of savings achieved through cuts in expenditure within ICT. The level of activity in 2015 largely corresponds to the planned level. The annual financial statements were prepared in accordance with the provisions concerning financial management within the public sector, the circular from the Ministry of Finance and instructions from the competent ministry, and in my opinion present a true and fair picture of PSA's financial situation in PSA is audited as a public administration by the Office of the Auditor General. The audit report is expected to be available during the second quarter of Petroleum Safety Authority Norway, 2 March 2106 Anne Myhrvold Director General, Petroleum Safety Authority Norway 46 47

25 NOTE REGARDING THE PRINCIPLES FOR APPROPRIATION AND ACCOUNT REPORTING PSA's annual financial statements were compiled in accordance with guidelines laid down in the provisions concerning financial management within the State ("the provisions"). The annual financial statements comply with the requirements in the provisions of article 3.4.1, provisions laid down in the Ministry of Finance's circular R-115 of November 2015 and any additional requirements established by the competent ministry. The appropriation and account reports were prepared based on the provisions of article the fundamental principles for the annual financial statements: a) The financial statements follow the calendar year. b) The financial statements contain all reported expenditure and revenues for the financial year. c) Expenses and revenues are recognised in the financial statements as gross amounts. d) The financial statements were prepared in accordance with the cash principle. The appropriation and account reports were prepared in accordance with the same principles, but grouped according to a different chart of accounts. The principles correspond to the requirements in the provisions of article 3.5 as regards how enterprises must submit reports to the State accounts. The total lines "Net amount reported to the appropriation account" are identical in both reports. PSA is affiliated to the State's corporate account scheme in Norges Bank in accordance with the requirements laid down in the provisions of article PSA is a gross-budgeted organisation and thus receives no liquidity during the year, but has an overdraft facility through its corporate account. The balance in the settlement account is reset at the year-end. The appropriation report The appropriation report consists of an upper part which contains the appropriation report, and a lower part which shows stocks with which PSA is listed in the capital account. The appropriation report shows accounting figures which PSA has reported to the State account. The entries are listed in accordance with the sections and items in the appropriation account that PSA has at its disposal. The column entitled "Total allocation" shows what PSA has been allocated in the letter of allocation for each State account (section/item). The report also presents all financial assets and commitments that PSA is listed with in the State capital account. Authorisations to charge another organisation's section/item (charge authorisations) that have been received are not shown in the total allocation column, but are explained in Note B to the appropriation statement. Expenses attributable to charge authorisations that have been received are posted and reported to the State account and shown in the column entitled "Account 2015". The account report The account report consists of an upper part which shows what has been reported to the State account in accordance with a standard chart of accounts for State enterprises and a lower part which shows assets and liabilities included in the outstanding account with the State Treasury. The account reports show accounting figures that PSA has reported to the State account in accordance with a standard chart of accounts for State enterprises. PSA's corporate account with Norges Bank has an overdraft facility. The appropriations are not recognised as income and are therefore not shown as income in the statement. PRESENTATION OF APPROPRIATION REPORT, Expense section Section name Item Item text Note Total allocation Account Petroleum Safety Authority Norway (see 3642) 01 Operating expenses A, B 224,487, ,640,627 7,846, Petroleum Safety Authority Norway (see 3642) 21 Special operating expenses A, B 26,276,000 24,870,725 1,405, Petroleum Safety Authority Norway (see 3642) 45 Major equipment purchases. A, B and maintenance 1,784, ,766 1,099, Ministry of Foreign Affairs, charge authorisation Operating expenses B 199, Ministry of Foreign Affairs, charge authorisation Operating expenses B 1,999, Ministry of Foreign Affairs, charge authorisation Operating expenses B 1,246, Net scheme, State paid VAT Operating expenses 6,403,017 Total expensed 252,547, ,044,763 Income Reduced income section Section name Item Item text Total allocation Account 2015 reduced income (-) 3642 Petroleum Safety Authority Norway (see 0642) 02 Assignment and collaborative activity 5,909,000 4,030,709-1,878, Petroleum Safety Authority Norway (see 0642) 03 Supervision fees 70,090,000 69,819, , Petroleum Safety Authority Norway (see 0642) 06 Refunds/misc. revenues 0 1,058,893 1,058, Petroleum Safety Authority Norway (see 0642) 07 Rental income, company cabin 0 28,600 28, Sector charge under the Ministry of Labour and Social Affairs 70 Petroleum Safety Authority Norway - sector charge 81,215,000 78,649,062-2,565, Misc. revenues 29 Misc. 218, National Insurance scheme income 72 National Insurance contributions 20,872,515 Total income recognised 157,214, ,677,537 Net amount reported to the appropriation account 77,367,226 Capital accounts Norges Bank Capital account deposits 157,313, Norges Bank Capital account payments -235,965, Change in outstanding account with the State Treasury 1,283,999 Total reported 0 Added expenses and reduced expenses Stocks reported to the capital account (31.12) Account Text Change Outstanding account with the State Treasury -7,475,810-8,759,809 1,283,

26 Note A Explanation of total allocation expenses Section and item Brought forward from last year Allocations for the year Total allocation ,266, ,221, ,487, ,276,000 26,276, ,000 1,500,000 1,784,000 Note B Explanation of utilised authorisations and calculation of possible amount for carryforward to next year Section and item Keyword Added expense (-)/reduced expense Expensed by others in accordance with issued charge authorisations Total added expenses(-)/reduced expenses in accordance with issued charge authorisations Added income/reduced income (-) in accordance with added income authorisation Reallocation from item 01 to 45 or to item 01/21 from next year's appropriation Savings Total basis for transfer Max. carryforward amount Possible carryforward amount calculated by the organisation can be carried forward 7,846,373 1,405,275 1,099, ,846,373 1,405,275 1,099,234 1,087,493-1,878,291 0 Not applicable Not applicable Not applicable Not applicable Not applicable Not applicable 8,933, ,016 1,099,234 Not applicable Not applicable 10,811,050 1,313,800 1,784,000 8,933, ,099,234 *The maximum amount that can be carried forward is 5% of the year's appropriation under operating items 01-29, with the exception of item 24 or the sum of the previous two years' appropriations for items with the keywords "can be carried forward". See annual circular R-2 for more detailed information concerning the carryforward of unutilised appropriations. Presentation of the account report, Operating revenues reported to the appropriation account Payments from fees 148,468, ,750,417 Sales and rental payments received 4,454,397 6,318,287 Other payments received 684,204 0 Total payments received from operations 153,606, ,068,704 Operating expenses reported to the appropriation account Payments to salary 166,903, ,060,027 Other payments to operations 77,432,651 96,203,206 Total payments to operations 244,336, ,263,234 Net reported operating expenses 90,729,632 97,194,530 Investment and financial income reported to the appropriation account Financial income received 183 3,326 Total investment and financial income 183 3,326 Investment and financial expenses reported to the appropriation account Payments for investments 1,324,370 3,365,649 Payment of financial expenses 1,335 37,890 Total investment and financial expenses 1,325,705 3,405,539 Net reported investment and financial expenses 1,325,522 3,400,213 Explanation concerning the utilisation of budget authorisations Charge authorisations received PSA has received a charge authorisation from the Ministry of Foreign Affairs for NOK 313,500 under section/item and has utilised NOK 199,352 of this charge authorisation. The Ministry of Foreign Affairs has also issued PSA with a charge authorisation of up to NOK 5,000,000 under section/item This charge authorisation is split, with NOK 2,000,000 being allocated to the project entitled Arctic Council Task Force on Oil Pollution - petroleum measure 1, and NOK 3,000,000 allocated to the project entitled Risk planning in the High North. PSA has utilised a total of NOK 3,246,275 of the charge authorisation's nominal value, split between NOK 1,999,991 and NOK 1,246,284. The keywords "can be carried forward" PSA's appropriation under section/item was issued with the keywords "can be carried forward". PSA allows the amount to be included as part of the possible carryfoward amount. Authority to exceed operating appropriations in return for corresponding added income PSA has authority to exceed the operating appropriation under section/item Operating expenses in return for corresponding added income under section/item Refunds/misc. income and Rental income from company cabin. The total added income amounts to NOK 1,087,493. The amount is included in the calculation of the possible carryforward amount to next year. PSA has authority to exceed the operating appropriation under section/item Special operating expenses in return for corresponding added income under section/item Assignment and collaborative activity. As the basis for carryforward of the appropriation is negative (reduced income under section/ item is less than the reduced expense under section/item ), the carryforward amount is calculated to be NOK 0. Possible carryforward amount PSA's unutilised appropriation under section/item amounts to NOK 7,846,373. PSA is authorised to carry forward up to 5% of the annual appropriation. As this amount is below the threshold, the entire amount may be carried forward to the next budget year. The amount under section/item can be carried forward in its entirety, as the keywords "can be carried forward" are linked to the section/item. It would not be appropriate to carry forward funds to next year from other expense items, as there are no funds remaining under these items. Possible carryforward to next year is a calculation, and PSA receives feedback from the competent ministry concerning the final amount to be carried forward to next year. The carryforward is limited to 5% of the appropriation for the entire item. Letter of allocation Budget authorisations 2015 for the Ministry of Labour and Social Affairs' underlying activities under item 5, provisions in the appropriation regulations and the annual circular concerning carryfoward appropriations (R-2). Debt collection and other transfers to the State Payment of taxes, charges, fees, etc. 0 0 Total debt collection and other transfers to the State 0 0 Grant administration and other transfers from the State Payment of grants and benefits 0 0 Total grant administration and other transfers from the State 0 0 Revenues and expenses reported under joint sections Group life insurance account 1985 (ref. section 5309, income) 218, ,677 National Insurance contributions account 1986 (ref. section 5700, income) 20,872,515 19,882,339 Net recognition scheme for value added tax account 1987 (ref. section 1633, expense) 6,403,017 0 Total net reported expenses under joint sections -14,687,929-20,092,016 Net amount reported to the appropriation account 77,367,226 80,502,726 Summary of outstanding account with the State Treasury Assets and liabilities Receivables from employees 264, ,855 Other current receivables 88,818 57,002 Tax deductions payable -7,601,831-8,133,513 Accrued public duties -35,378-41,753 Advance payments received 0-684,204 Other liabilities -192, ,196 Total outstanding account with the State Treasury -7,475,810-8,759,

27 POLICIES FOR PREPARATION OF THE ACTIVITY ACCOUNT The activity account was prepared in accordance with the State accounting standards (SRS) of August Changes to principles and comparative figures In accordance with SRS 3, Changes in Principles, Changes in Estimates and Correction of Errors, the figures for last year must be recalculated in order to be comparable. Matching Income from appropriations is also recognised in accordance with the matching principle at the year-end. This follows from changes to SRS 10 Inntekt fra bevilgninger (Income from appropriations). Previously, the entire appropriation was recognised as income at the year-end, regardless of whether or not it had been utilised. For the 2014 financial year, this change means that settlement with the State Treasury is reduced to NOK 0 and that income from appropriations is increased correspondingly. Last year's result and settlement with the State Treasury are presented as comparative figures in the new layout. State capital State capital has been created as a new section as a liability on the balance sheet. State financing of intangible assets and depreciable assets and settlements has been reclassified from debt to State capital. As a result of this change in policy, the comparative figures have been recalculated through the accounting lines for previously unrecognised appropriations linked to fixed assets and settlements being moved to the new section "State capital". Transaction-based income Income is recognised in the income statement as it accrues. Transactions are recognised at the value of the fee at the time of the transaction. Sales of services are recognised as income as the services are provided. Income from appropriations and income from grants and transfers Income from appropriations is recognised in the income statement as the activities which the incomes are expected to finance are carried out, i.e. during the period when the costs are accruing (matching). For the 2015 financial year, the matching principle is also applied at the yearend in accordance with SRS 10 of August Previously, the entire year's appropriation was recognised at the year-end. The share of income from appropriations, etc. that is used to purchase intangible assets and depreciable assets recognised in the balance sheet is not recognised at the time of purchase, but set aside in the balance sheet on the accounting line "State financing of intangible assets and depreciable assets". As the depreciation of intangible assets and depreciable assets is expensed, a corresponding amount from the provision for State financing of intangible assets and depreciable assets is recognised as income. The income recognised during the period from the provision is recognised in the income statement as income from appropriations. This means that expensed depreciation is included in the organisation's operating expenses without having any impact on the result. Expenses Expenses concerning transaction-based income are expensed during the same period as the associated income. Expenses financed through income from appropriations are expensed as the activities are carried out. Pensions SRS 25 Ytelser til ansatte (Benefits to employees) is based on a simplified accounting approach to pensions. No calculation or provision has therefore been made for any surplus/deficit in the pension scheme which corresponds to NRS 6. The year's pension expense therefore corresponds to the annual premium to the Norwegian Public Service Pension Fund (SPK). For PSA, which does not pay premiums to SPK (as these are covered by a combined appropriation from the State to SPK), a standard rate is used to calculate the pension premium. This is based on a best estimate for PSA. See also Note 2 for a more detailed description of the approach used. Classification and valuation of fixed assets Fixed assets are long-term, important assets which are at PSA's disposal. 'Long-term' means a useful life of three years or more. 'Important' means individual procurements (purchases) with a purchase cost of NOK 30,000 or more. Fixed assets are recognised in the balance sheet at their acquisition cost minus depreciation. Office and IT equipment (PCs, servers, etc.) with a useful life of three years or more are recognised in the balance sheet as separate groups. Classification and valuation of current assets and current liabilities Current assets and current liabilities include items which fall due for payment within one year after the acquisition date. Other items are classified as fixed assets/non-current liabilities. Current assets are valued at acquisition cost or fair value, whichever is lower. Current liabilities are recognised in the balance sheet at nominal amount at the time of take-up. Receivables Trade debtors and other receivables are recognised in the balance sheet at nominal value after the deduction of a provision for bad debts. A provision is set aside for losses based on individual assessments of receivables. State capital State capital consists of contributed capital, settlements and State financing of intangible assets and depreciable assets in accordance with the updated SRS 1 Oppstillingsplaner for resultatregnskap og balanse (Layout plans for income statements and balance sheets) of August The section shows the total State financing of PSA. This represents a change from previous practice, where settlements and State financing of intangible assets and depreciable assets were classified as a liability. Settlements For PSA, which is a gross-budgeted organisation, the net amount of all balance sheet items, with the exception of intangible assets and depreciable assets, are funded by the settlement with the State Treasury. PSA does not report the corporate accounts with Norges Bank as bank deposits. These corporate accounts are included in the settlement with the State Treasury. State financing of intangible assets and depreciable assets The capitalised value of intangible assets and depreciable assets has a counter-entry on the accounting line "State financing of intangible assets and depreciable assets". Cash flow analysis No cash flow analysis has been prepared. Virtually identical information is presented in the account report as part of the annual financial statements. State framework conditions The self-insurer principle The State operates as a self-insurer. No items have therefore been included in the balance sheet or income statement which attempt to reflect alternative net insurance costs or commitments. State corporate account scheme PSA is covered by the State's corporate account scheme. Under this scheme, all incoming and outgoing payments are settled against PSA's settlement accounts with Norges Bank on a daily basis. As a gross-budgeted organisation, PSA receives no liquidity during the year. PSA has an overdraft facility on its corporate account. For gross-budgeted organisations, the balance in the individual settlement account held with Norges Bank is reset upon transition to the new financial year

28 Income statement Note Operating revenues Income from appropriations 1 127,122, ,912,329 Income from grants and transfers Income from fees and sector charges 1 139,614, ,916,190 Sales and rental income 1 6,319,045 6,518,249 Other operating income 1 1,483,541 0 Total operating income 274,539, ,346,768 Operating expenses Cost of goods 2 18,776,697 31,171,341 Salary expenses 3 195,319, ,913,847 Depreciation of depreciable assets and intangible assets 4, 5 3,809,264 5,317,302 Amortisation of depreciable assets and intangible assets 4, Other operating expenses 6 56,633,059 59,909,714 Total operating expenses 274,538, ,312,204 Operating profit 1,152 34,564 Financial income and financial expenses Finance income ,326 Financial expenses 7 1,335 37,890 Total financial income and financial expenses -1,152-34,564 Net income from the period's activities 0 0 Settlements and appropriations Settlement with the State Treasury (gross-budgeted) Total settlements and appropriations Debt collection and other transfers to the State Charges and fees directly to the State Treasury 0 0 Settlement with the State Treasury, debt collection 0 0 Total debt collection and other transfers to the State 0 0 Grant administration and other transfers from the State Payment of grants to others 0 0 Settlement with the State Treasury, grant administration 0 0 Total grant administration and other transfers from the State

29 Balance sheet ASSETS Note Balance sheet STATE CAPITAL AND LIABILITIES Note A. Fixed assets C. State capital I Intangible assets Software and similar rights 4 440, ,420 Total intangible assets 440, ,420 II Depreciable assets Plots, buildings and other real property 5 695, ,780 Machinery and transport Movables, fixtures and equipment, tools, etc. 5 10,936,622 15,770,563 Total depreciable assets 11,631,713 16,128,343 III Financial fixed assets Other receivables 9 34,692,412 33,994,317 Total financial fixed assets 34,692,412 33,994,317 Total fixed assets 46,765,124 50,693,080 B. Current assets I Stocks of goods and operating equipment Total stocks of goods and operating equipment 0 0 II Receivables Trade debtors 10 1,160,487 1,605,811 Other receivables 11 1,360,249 1,287,617 Earned, uninvoiced income 12 31,452,712 38,220,649 Total receivables 33,973,447 41,114,077 III Bank deposits, cash, etc. Total bank deposits, cash, etc. 0 0 Total current assets 33,973,447 41,114,077 Total assets 80,738,571 91,807,156 I Contributed capital Total contributed capital 0 0 II Settlements Settled with the State Treasury (gross-budgeted) 8 3,966,866 35,298,265 Total settlements 33,966,866 35,298,265 III State financing of intangible assets and depreciable assets State financing of intangible assets and depreciable assets 4, 5 12,072,712 16,698,763 Total State financing of intangible assets and depreciable assets 12,072,712 16,698,763 Total State capital 46,039,577 51,997,028 D. Liabilities I Provision for non-current commitments Provisions for non-current commitments 0 0 Total provision for non-current commitments 0 0 II Other non-current liabilities Other non-current liabilities 0 0 Total other non-current liabilities 0 0 III Current liabilities Trade creditors 160,537 2,250,654 Tax deductions payable 7,601,831 8,133,513 Accrued public duties 3,385,457 3,314,297 Provision for holiday pay 16,603,479 15,829,052 Other current liabilities 13 6,947,690 10,282,612 Total current liabilities 34,698,993 39,810,128 Total liabilities 34,698,993 39,810,128 Total State capital and liabilities 80,738,571 91,807,

30 Note 1 Operating income Income from appropriations Income from appropriation from competent ministry 94,370,296 99,387,803 Income from appropriation from other ministries, charge authorisation 3,446, ,460 - gross amount utilised for investments in intangible assets and depreciable assets -1,202,590-3,487,429 - unused appropriation for investment purposes (items 30-49) -1,099, ,489 + deferred income from provision linked to investments (depreciation) 3,809,264 5,317,302 + deferred income from provision linked to investments (book value of fixed assets disposed of) 645, income to cover pension expenses 27,850,509 26,746,782 - recognised operating appropriation linked to financial fixed assets -698,095-4,965,099 Total income from appropriations 127,122, ,912,329 Basis for recognition of expense appropriation Section Expense appropriation Income Reported Maximum calculated basis for income Appropriation recognised as and item (total allocation) appropriation income recognition income ,487, ,487,000 92,586, ,276,000 26,276, ,784,000 1,784,000 1,784, ,909,000 4,030,709-4,030, ,090,000 69,819,327-69,819, ,215,000 78,649,062-78,649, , , , ,000,000 5,000,000 3,246,275 Total 105,361,403 97,816,443 Income from grants and transfers Grants/transfers 0 0 Total income from grants and transfers 0 0 Income from fees Fees, etc. - refund-entitled 60,305,989 70,263,326 Sector charge - refund-entitled 79,308,661 84,652,864 Total income from fees and sector charges 139,614, ,916,190 Sales and rental income Safety Forum 282, ,599 Income from assignment and collaborative activity 5,612,369 6,002,518 Other income 423, ,133 Note 2 Cost of goods Consultancy services 9,111,508 18,379,555 Assistance from State enterprises 1,019,084 2,369,807 Travel expenses 8,529,624 9,671,559 Provision for accrued expenses -491,035-1,154,613 Other operating expenses 607,516 1,905,032 Total cost of goods 18,776,697 31,171,341 Total sales and rental income 6,319,045 6,518,249 Other operating income Gain from disposal of fixed assets 1,483,541 0 Total other operating income 1,483,541 0 Total operating income 274,539, ,346,

31 Note 3 Salary expenses Salary expenses 130,994, ,655,785 Holiday pay 16,685,808 16,094,921 National Insurance contributions 24,046,393 23,111,346 Pension expenses* 24,755,032 23,770,654 Sick-pay and other reimbursements (-) -2,567,314-3,873,527 Other benefits 1,405,068 2,154,667 Total salary expenses 195,319, ,913,847 Number of full-time equivalents: Average salaried full-time equivalents: * More information concerning pension expenses PSA does not pay pension premiums to the Norwegian Public Service Pension Fund (SPK) and premium expenses are also not covered by PSA's appropriation. The premiums are funded via a combined appropriation from the State to SPK. The financial statements are based on an estimated rate for the calculation of pension expenses. The premium rate for 2015 is estimated by SPK to be percent. The premium rate used for 2014 was percent. Pensions are expensed based on this rate multiplied by the accrued pension basis. See also Note 1 concerning the recognition of income to cover pension expenses (result-neutral solution). Note 5 Depreciable assets Buildings and Machinery and Movables, fixtures and Total other real property transport equipment, tools, etc. Acquisition cost ,413 93,236 36,858,093 37,330,742 Acquisitions in , ,195 1,054,715 Disposals, acquisition cost 2015 (-) ,223,863-14,223,863 From installations under construction to another group in 2015 Total acquisition cost ,933 93,236 23,317,426 24,161,595 Accumulated amortisation Amortisation in Accumulated depreciation ,633 93,236 21,087,530 21,202,399 Ordinary depreciation in , ,497,760 3,531,969 Accumulated depreciation ,204,486-12,204,486 disposals in 2015 (-) Balance sheet value , ,936,622 11,631,713 Depreciation rates (life) years 3-15 years linear 3-15 years linear decomposed linear Note 4 Intangible assets Software and similar rights Total Disposal of depreciable assets in 2015: Sale price upon disposal of fixed assets 0 0 2,961,204 2,961,204 - (Book value of fixed assets disposed of) 0 0-2,019,376-2,019,376 = Accounting profit/loss , ,828 Acquisition cost ,662,787 5,662,787 Acquisitions in , ,874 Disposals, acquisition cost 2015 (-) 0 0 From intangible assets under construction to other group in Total acquisition cost ,810,662 5,810,662 Accumulated amortisation Amortisation in Accumulated depreciation as at ,092,368 5,092,368 Ordinary depreciation in , ,296 Accumulated depreciation, disposals in 2015 (-) 0 0 Balance sheet value , ,998 Depreciation rates (life) 5 year / linear 60 61

32 Note 6 Other operating expenses Rent 22,834,477 22,952,353 Maintenance and alterations to leased premises 54,300 1,375 Other expenses for operation of property and premises 5,774,941 6,563,854 Hire of machinery, equipment, etc. 2,299,994 2,174,717 Minor equipment purchases 263, ,899 Repair and maintenance of machinery, equipment, etc. 432,588 1,609,896 Purchase of external services 12,891,327 13,956,052 Travel and subsistence 3,998,759 3,419,758 Other operating expenses 8,083,148 8,503,811 Total other operating expenses 56,633,059 59,909,714 Summary of annual rental amounts according to rental agreements* Duration between Duration over Total one and five years five years Rental agreements 22,834,000 22,834,000 Rental agreements linked to intangible assets 1,696,000 1,696,000 Rental agreements linked to depreciable assets 604, ,000 Other rental agreements 0 0 Total rental agreements 25,134,000 *Only important rental agreements are specified. Note 7 Financial income and financial expenses Financial income Interest income Current gains (agio) 0 2,899 Total financial income 183 3,326 Financial expenses Interest expense 1,335 7,450 Currency losses (disagio) 0 30,440 Total financial expenses 1,335 37,890 Note 8 Relationship between settled with the State Treasury and outstanding account with the State Treasury A) Settled with the State Treasury Intangible assets, depreciable assets and financing thereof Change Intangible assets 440, , ,421 Depreciable assets 11,631,713 16,128,343-4,496,630 State financing of intangible assets and depreciable assets -12,072,712-16,698,763 4,626,051 Total Financial fixed assets Other receivables 34,692,412 33,994, ,095 Total 34,692,412 33,994, ,095 Current assets Trade debtors 1,160,487 1,605, ,324 Earned, uninvoiced income 31,452,712 38,220,649-6,767,937 Other receivables 1,360,249 1,287,617 72,632 Total 33,973,447 41,114,077-7,140,629 Non-current commitments and liabilities Other non-current liabilities Total Current liabilities Trade creditors -160,537-2,250,654 2,090,117 Tax deductions payable -7,601,831-8,133, ,682 Accrued public duties -3,385,457-3,317,297-71,160 Provision for holiday pay -16,603,479-15,829, ,426 Advance payments received 0-2,961,204 2,961,204 Other current liabilities -6,947,690-7,321, ,718 Total -34,698,993-39,810,128 5,111,135 Settled with the State Treasury 33,966,866 35,298,265-1,331,399 Reconciliation of change in settled with the State Treasury (congruence non-conformity) Corporate account, outgoing payments -235,965,027 Corporate account, incoming payments 157,313,802 Net deduction from corporate account -78,651,225 + Recognised income from appropriation (sub-accounts 1991 and 1992) 96,717,209 - Group life/national Insurance contributions (sub-accounts 1985 and 1986) -21,090,947 + Net scheme, State paid value added tax (sub-account1987) 6,433,035 Reversed deferred income upon disposal of fixed assets, where the provision is not recognised in the income statement (sub-account 1996) -1,373,444 Correction of provision for holiday pay (employees who move to another State position) -5,134 Other reconciliation items (specified) -698,095 Difference between recognised and net deduction from corporate account 1,331,399 Net income from the period's activities before settlement with State Treasury 0 Change in settled with the State Treasury* 1,331,

33 B) Difference between settled with State Treasury and outstanding account with State Treasury Note 9 Financial fixed assets Specification of book Specification of reported Difference settlement with State Treasury outstanding account with State Treasury Intangible assets, depreciable assets and financing thereof Intangible assets 440, ,998 Depreciable assets 11,631, ,631,713 State financing of intangible assets and depreciable assets -12,072, ,072,712 Total Financial fixed assets Other receivables 34,692, ,692,412 Total 34,692, ,692,412 Current assets Trade debtors 1,160, ,160,487 Earned, uninvoiced income 31,452, ,452,712 Other receivables 1,360, ,757 1,006,492 Total 33,973, ,757 33,619,690 Financial fixed assets 34,692,412 33,994,317 Total 34,692,412 33,994,317 Under the agreement concerning the leasing of premises applicable from 1 January 2013, PSA is required to pay a value added tax surcharge ('the surcharge') to compensate the lessor for the reduction in its right to deduct value added tax for construction costs. The surcharge is also intended to cover interest from the date on which the deduction for value added tax could have been obtained through until the date on which the surcharge is paid. The surcharge is considered to form part of the rent paid by PSA and is financed via an appropriation during the years in which the surcharge is paid. In PSA's balance sheet, deposited amounts are classified as a non-current receivable in the form of prepaid rent which is accrued over a period of 20 years, corresponding to the term of the rental agreement. The matching principle (see SRS 10, article 5) is used in connection with this item and has a counter-entry on the accounting line "Settlement with State Treasury". The provision is dissolved in line with the expensing of prepaid rent at the rate of one twentieth share per year. The basis for the surcharge is currently being clarified with the lessor. The current basis amounts to NOK 56 million plus interest. As at , PSA has paid NOK 39,7 million and the outstanding VAT compensation amounts to NOK 24.1 million. Non-current commitments and liabilities Other non-current liabilities Total Current liabilities Trade creditors -160, ,537 Tax deductions payable -7,601,831-7,601,831 0 Accrued public duties -3,385,457-35,378-3,350,078 Provision for holiday pay -16,603, ,603,479 Other current liabilities -6,947, ,357-6,755,332 Total -34,698,993-7,829,567-26,869,427 Total 33,966,866-7,475,810 41,442,

34 Note 10 Trade debtors Trade debtors at nominal value 1,160,487 1,605,811 Provision for bad debts (-) 0 0 Total 1,160,487 1,605,811 Note 11 Other current receivables Travel advances 119,359 1,896 Personnel loans 147, ,855 Other pre-paid expenses 551, ,328 Other receivables 542, ,538 Total 1,360,249 1,287,617 Note 12 Earned, uninvoiced income Assignment and collaborative activities 1,817, ,709 Supervisory activity - fees 9,883,446 18,671,641 Supervisory activity - sector 19,751,428 19,271,299 Total 31,452,712 38,220,649 Assignment and collaborative activities and supervisory activities carried out in November or December 2015 will be invoiced at the start of the following financial year. Note 13 Other non-current liabilities Salaries payable 3,607,261 3,314,861 Other debts to employees 2,787,929 3,303,495 Accrued expenses 358, ,959 Advance payments received 0 2,961,204 Deferred income, Safety Forum 200, ,196 Other current liabilities -6,642 1,896 Total other current liabilities 6,947,690 10,282,