Annual Report 2007 Investing for the future - EBN · 2020. 5. 14. · 2007 2006 Number of...

Annual Report 2007

Investing for the future

EB

N A

nnual Rep

ort 2007 - Investing for the future

2007 2006

Number of participations 141 116

of which exploration-related 26 17

Sales volume, EBN share (billion m³)¹ 27 28

Sales (from continuing operations) 6,090 6,264

Net profit from continuing operations 2,367 2,378

State income via EBN 4,975 5,350

Capital expenditure 819 896

Depreciation and amortization 494 403

Number of employees 61 52

¹ This includes the proportional part of sales from onshore production licenses in

which EBN has no equity share but is entitled to a proportional part of the revenues.

All quantities in this report are expressed in billion m³ of natural gas (35.17 Mj

at 0 degrees Centigrade) based on EBN’s participation percentage.

Key figures

EBN Utrecht EBN Heerlen

Moreelsepark 48 Het Overloon 1

3511 EP Utrecht 6411 TE Heerlen

P.O. Box 19063 P.O. Box 6500

3501 DB Utrecht 6401 JH Heerlen

T +31 (0)30 23 39 001 T +31 (0)45 57 87 222

F +31 (0)30 23 39 051 F +31 (0)45 57 87 171

E [email protected] E [email protected]

Copy

Tekst & Speech, Haren

Design and Layout

Bovil DDB, Eindhoven

Photography

Frank Tielemans Fotografie B.V., Eindhoven

With the exception of the images on page 2, 8, 14, 34, 40 & 44

Print

Strijbos Grafische Groep, Waalre

Coordination EBN

M.J.L. Caviet

© 2008 EBN

All rights reserved. Content publication or reproduction by print, photocopy,

microfilm or other means is prohibited without the prior written consent of EBN.

1EBN Annual Report 2007 - Investing for the future 1

Table of contents

Introduction 2 About EBN 2

Mission 3

Foreword 4

Report by the Supervisory Board 6

The world around EBN 8 Introduction 8

A historical overview 9

Small fields, large yields 10

Market development 11

EBN stakeholders 12

Report by the Executive Board: Investing for the future 14 Introduction 14

Strategy 15

Exploration and production 16

The Dutch gas market structure 24

The people of EBN 25

Risk management and internal control 30

Result 32

Outlook 33

Corporate Social Responsibility and Corporate Governance: Open and Transparent 34 Introduction 34

Corporate Social Responsibility 35

Corporate Governance 38

Financial Statements 44 General 44

Principles for the valuation of assets and liabilities and determination of profit 45

Income statement 52

Balance sheet 53

Statement of changes in shareholders’ equity 54

Cash-flow statement 55

Notes to the financial statements of Energie Beheer Nederland B.V. 56

Notes to the income statement 57

Notes to the balance sheet 59

Profit Distribution 72

Auditor’s Report 73

Key Figures 74

Introduction 2

The World around EBN 8

Report by the Executive Board: Investing for the future 14

Corporate Social Responsibility and Corporate Governance: Open and Transparent 34

Financial Statements 44

Chapter 1 Introduction

GasProductionFocusCooperationVision

Ben Obdam, Manager Support at EBN, will not easily forget

the year 2007. As project manager, he was responsible for

the successful renovation of, and relocation to, the new office

in Utrecht. “That was quite a job,” he sighs, “in addition to the

‘usual’ work that naturally also continued.” Nevertheless, he can

look back with satisfaction: in September 2007 the new office

was still threadbare and empty, but by December EBN was

able to have its Christmas party in a light and stylishly designed

office - all exactly according to plan. “Although on the morning

of the Christmas party, there were still workmen on the premises

applying the finishing touches,” laughs Ben Obdam.

Starting Anew The decision for EBN to open an office in Utrecht, in addition to

the Heerlen office, had already been taken in 2005. The transfer

was to take place gradually and so it was decided to first open

a relatively small office in the Central Station district of Utrecht.

At the same time, EBN took up an option on a larger floor some

200 meters away. At the beginning of 2007, the first steps in the

transfer to the new office were made: a package of requirements

was drawn up and the selection process for an architect was

initiated. “It was immediately clear that we could not take over the

office as it then was,” says Ben Obdam. “It consisted of a maze

of small, dark brown rooms. That was of no use to us. The office

was therefore delivered empty so we could completely redesign

the layout.” What requirements did the new office have to satisfy?

Ben Obdam: “Keywords were: light, open, warm, business-like,

stylish, representative and modern. The actual renovation only

started in September 2007. All those involved, both within and

outside of EBN, worked extremely hard to ensure that the office

was finished by the agreed time without any unreasonable extra

costs and in accordance with the package of requirements. To

achieve this was a truly excellent performance.”

Marvelous Mixture Since the beginning of January 2008, around 25 people have

been working at the new office, which has become a marvelous

mixture of open and enclosed working spaces. “It is still a bit

empty,” says Ben Obdam, “but eventually there will be 70

people working here. The office will gradually fill up. Many EBN

employees from Heerlen come here regularly for meetings, to

work for a day or so or as a stop-off on their way to Assen, The

Hague or Groningen, for example.” In the future, Ben Obdam

himself will also be enjoying the new office on a daily basis.

He and his wife are soon planning to move to Utrecht from the

south of the country. For Ben Obdam, therefore, the moving is

not over yet...

“ We’ve delivered a good performance”Interview with Ben Obdam

About EBN and Mission

About EBN Energie Beheer Nederland BV (EBN) is an independent

company with the Dutch state as its sole shareholder. The Dutch

Ministry of Economic Affairs fulfils the role of shareholder. EBN

maintains no financial reserves; the entire net profits are made

available to the State.

EBN plays a central role in the exploration, production and sale

of Dutch natural gas. EBN is also active in the exploration and

production of oil. The Netherlands (including the Dutch part of

the continental shelf) is rich in gas and, to a lesser extent, oil

reserves. By participating in a large number of joint ventures

with oil and gas companies EBN makes a contribution to

ensuring that gas and oil reserves are optimally explored and

produced in an economical manner.

Through its interest in the gas trading company GasTerra

EBN is also involved in the sale of gas. EBN also advises the

Minister for Economic Affairs on energy policy, particularly on

good management of Dutch mineral resources. EBN seeks to

actively promote the development of the Netherlands as a ‘gas

hub’, for example by contributing to the development of gas

storage facilities.

EBN has a central role in the national and European energy

and gas world. As a result the company, with offices in Heerlen

and Utrecht, offers diverse and challenging work.

EBN’s method of operation is based on, amongst other

things, its code of conduct in which respect for every individual,

integrity and professionalism are key elements. In its cooperation

with stakeholders, EBN acts as a non-discriminatory, transparent

company operating according to market-based principles.

EBN Annual Report 2007 - Investing for the future

2

3

EBN realizes for the Dutch society a profitable development of

energy resources and efficient use of the deep subsurface.

This means that EBN contributes to maximum oil and gas

production in the Netherlands with optimal returns for her

shareholder, the Dutch State. In consequence EBN is dedicated

to the development of an attractive investment climate for oil

companies so that as much oil and gas as possible can be

explored and produced from small Dutch fields. In doing so

optimal, timely and effective use is made of existing infrastructure.

EBN is studying the possibility of re-using empty gas fields and

existing infrastructure for gas or CO2 storage.

EBN is involved in:

• theexplorationandproductionofnaturalgasandoil;

• GasTerraBV;

• thesale,transport,storageandtreatmentofnaturalgasand

oil and other activities which support the exploration and

production of gas and oil;

• gasstoragefacilities.

Mission

Foreword

The year 2007 was an exciting one for EBN and it saw a great

many changes. We have taken some important steps on the

road to a prosperous future for our organization. We reviewed

the content of our work: what do we want to achieve in the

coming years with regard to good management and responsible

production of our national mineral resources? And what more can

we do with the subsurface potential? As a result of this, we had a

good look at our own organization: what would be the best way

to achieve our stated objectives?

Investing for the future: that is the motto of this annual report.

EBN has invested a great deal of time and energy in renewing

its organization; the next phase of the separation of DSM and

EBN has been put into effect. The strengthening and rejuvenation

of the organization which began in 2006 continued successfully

despite the strained employment market. At the end of the year,

23 people were working in Utrecht. At the end of 2007, these

people plus a number from Heerlen, in total 31 employees,

concluded an employment contract with EBN. For the first time

in its existence, from 1 January 2008 EBN has employees on its

own payroll. The coming three years will see the completion of

the transition from DSM to EBN: by the end of 2010, almost every

employee will be on the EBN payroll and everyone will be based

in Utrecht. We will then close our office in Heerlen.

The year 2007 also saw us invest in the modernization of

our accommodation. At the end of 2007, the renovation of our

new head office in Utrecht was completed. It is light, open and

transparent. These are exactly also the characteristics that we

want to imbue our organization with in the coming years. For

the duration of the transition period in which we now find

ourselves, it will remain a challenge to ensure that the two

locations, Utrecht and Heerlen, collaborate as efficiently as

possible with one another.

The year 2007 can once again be classified as a successful

production year for the small fields; production from these fields

amounted to 34 billion m3, 2% more than in 2006. However,

total production fell as a result of the warm weather. This was

at the expense of the Groningen production. During 2007, 11

new fields were brought into production, which in the coming

years will offset to some extend unavoidable decline in small field

production. Also of importance was EBN’s success in concluding

an agreement with NAM concerning the redevelopment of the

Schoonebeek oil field.

I notice that achieving our goals – sufficient exploration,

sufficient field developments – is becoming increasingly difficult.

We believe there is still enough to be found in the coming years but

this is requiring more effort and more money while the structures

are becoming smaller and often more complex. As a result, large

operators are losing interest. EBN therefore welcomes smaller

companies who can often work more cost-effectively. However,

these companies generally have more limited technical and

financial resources than larger organizations and that in turn

places a larger burden on the EBN organization.

Foreword

EBN Annual Report 2007 - Investing for the future 5

4

As a result, we are also investing in the renewal of our working

methods. Instead of being an organization that follows others,

we are working on becoming a company that takes initiatives,

pro-actively approaches companies and creates a distinct profile.

We aim to be actively involved in the creation of an attractive

investment climate for oil and gas production in the Netherlands.

However, we are also looking

further ahead. For example,

in 2007 we investigated the

possibilities of storing gas and

CO2 in empty fields and we are

sponsoring the students from

the Geotechnology department

at Delft University of Technology

to support the studies which are

so fundamentally important for

our industry. In the future, we will

also be looking at geothermal

energy with the aim of

contributing towards sustainable

energy management.

In future years we are faced with the enormous challenge of

finding and developing as many of the oil and gas fields in the

Netherlands as possible. In doing so we will have to invest in a

good investment climate and in our own organization. We did

just that in 2007 and we will do so again in 2008. As part of

this innovation process I want to challenge new, young people

to come and join us. We have much to offer: fascinating work

of great social relevance. We are a small organization which is

open to renewal and reinvigoration. We welcome innovative ideas

and enthusiasm.

In this annual report, we want to show how much EBN has

accomplished in 2007, how

we are designing our new

organization, and just how

much that has demanded from

our employees. I hope that you,

the reader, will recognize this.

Changes bring opportunities,

but are certainly not always easy

to deal with. I would like to thank

all employees for their marvelous

efforts in 2007. Together with

them, my fellow Board members

and our business partners, I look

forward to making 2008 another

successful year.

Jan Dirk Bokhoven

Chairman of the Executive Board

Report by the Supervisory Board

Financial Statements

The Supervisory Board has noted the contents of the annual

report, financial statements and the auditors’ report drawn up

by Ernst & Young. The Board agrees to the contents of these

documents and recommends that the general meeting of

shareholders therefore adopts the financial statements.

Supervisory Board’s Activities

The board meets the independence criteria and the profile as

approved by the shareholder on the basis of Article 12 Para.2 of

the Articles of Association.

The chairman of the Supervisory Board is the first point of

contact for EBN’s Executive Board. The entire Supervisory

Board bears collective responsibility. All members of the

Supervisory Board are also members of the Remuneration

and Audit Committees. The decision was taken to combine

the Remuneration Committee and the Nomination Committee

and to refer to both for simplicity’s sake as the Remuneration

Committee. Mr. Kramer became chairman of the Remuneration

Committee and Mr. Gratama van Andel chairman of the

Audit Committee.

The Supervisory Board met four times in 2007. At these

meetings - mainly as part of the induction programme - various

presentations were given covering such areas as EBN’s future

vision and activities concerning the underground storage of

gas. The members of the Supervisory Board were present at all

of the meetings.

The Supervisory Board gave its prior approval to resolutions

proposed by the Executive Board and covering such matters as

investment in the redevelopment of the Schoonebeek oil field and

the development of the E17-A, K5-F and A12-A gas fields.

The Supervisory Board discussed the revised Strategic Long

Term Plan drawn up by the Executive Board. It concurred with

the revised plan. This all led to a discussion about EBN’s long

term perspectives.

In addition, the board also discussed, within the framework of

the Budget and Strategic Long term Plan, the risks and the risk

management systems set up to address them. Furthermore, it

was decided to extend Ernst & Young’s auditing of the financial

statements by a further two years.

It was decided that the Dutch Corporate Governance Code

did not apply to EBN because EBN is not quoted on the

stock exchange. According to the shareholders policy, State-

owned companies must however observe the Code wherever

possible. EBN has decided to comply with the Code wherever

relevant. Elsewhere in this report, there is a “comply or explain”

paragraph which provides details of the areas of the Code that

have not been complied with or have only been complied with

in part.

In the absence of the Executive Board, the Supervisory

Board discussed both its own operation and that of the

Executive Board.

Report by the Supervisory Board


6

The Supervisory Board bade farewell to Mr Rob Atsma who

retired after leading EBN for 10 years. The Supervisory Board

expresses its gratitude to Mr Atsma for the very important role he

played for EBN.

Audit Committee’s Activities

The Audit Committee met twice in 2007 in the presence of

the Executive Board. The external auditor was present on one

occasion. During the meeting, the Audit Committee discussed

such matters as:

• theannualreport,thefinancialstatementsandtheauditforthe

year 2006;

• choiceofauditorfor2007and2008;

• financingplanandcreditfacilities.

Remuneration Committee’s Activities

In 2007, the Executive Board had no employment contract with

EBN. All members of the Executive Board had formal contracts

of employment with DSM – as a result of the management

agreement between the State, DSM and EBN. Directors and staff

were made available to EBN by DSM.

The company’s overall remuneration policy was discussed by

the Remuneration Committee. The basic principle was that EBN

must be able to attract and retain the knowledge and know-how

required for the execution of its tasks. Directors’ fees were also

discussed. In 2006, the members of the Executive Board held

contracts of employment with DSM. EBN paid DSM a total fee

of 1.1 million euros for the provision of four Board members (and

from 2 November 2007: three Board members), who all had a

contract of employment with DSM that year.

During the financial year, the Supervisory Board was

engaged with the remuneration policy for the Executive Board

to be approved by the General Meeting at the Supervisory

Board’s recommendation. The Supervisory Board presented

the remuneration policy to the shareholder for adoption. The

Supervisory Board expresses its concern that this policy has not

yet been adopted.

Supervisory Board, Heerlen, 18 April 2008

R.M.J. van der Meer (chairman)

A.H.P. Gratama van Andel

G-J. Kramer

H.M.C.M. van Oorschot


Chapter 2 The world around EBN

EBN is devoted to ensuring maximum production of Dutch

natural gas but it is also looking at other projects, for example in

the area of gas storage or oil production. “This makes working

at EBN increasingly exciting,” says Ben Teuben, manager of the

business line concerned with the onshore production of gas

and oil. In 2007, he devoted a great deal of time and energy

to participation in the Schoonebeek project, which NAM, as

operator, will carry out. “A project of great social importance in

which EBN, apart from a financial contribution, also delivered

clear added value with regard to content,” he says. How does

that work in practice?

Optimal Synergy “EBN is a matrix organization,” explains Ben Teuben.

“We work with 4 business lines in which specialists from the

various departments look after our interests in exploration

and production. As business line manager, I ensure, for

example, that during projects, the geo-physicist, the legal

expert and the economist contribute their expertise and

that optimal synergy is obtained. We have been working like this

since 2000; in 2006 the organization was further strengthened

and this way of working produced even better results.”

Inspiring In the spring of 2006, discussions began between the

NAM and EBN regarding EBN’s participation in oil production

at Schoonebeek. These discussions led to EBN’s actual

participation in that project. “Since January 2007, our business

line has been extremely busy evaluating the project,” says

Ben Teuben. “We created a special team which evaluated

the project in an excellent collaboration with the NAM and

achieved EBN’s participation as effectively as possible.”

EBN has a financial stake in Schoonebeek, but what has EBN

contributed to the project from a technical and contents-based

perspective? Ben Teuben: “There are excellent experts working

at the NAM but there are also some very knowledgeable people

at EBN. Consequently, we are able to assess various aspects of

projects: can some activities be carried out more economically?

Are we looking at certain risks properly? Thanks to its specialist

knowledge and years of experience, EBN provides considerable

added value.” Ben Teuben would like to work on another such

project. “I’d love to,” he enthuses. “It is very inspiring to work on a

project of such a size, of great commercial importance and which

also makes an important contribution to the national economy

and the regional job market!”

“Working at EBN is becoming ever more exciting”Interview with Ben Teuben

Introduction and A Historical Overview

Introduction For many years, EBN has been an important player in the Dutch

energy and gas world. This section provides an insight into the

world around EBN. From a brief description of the history of EBN,

the small-fields policy, the market developments and the various

EBN stakeholders, a picture emerges of the multidimensional

environment in which the company operates.


8

9

Commercial approach with government interest

The discovery of natural gas in Slochteren in 1959 appeared

to be of such great significance that the Dutch government in

the 1960s looked for a way in which the gas could be produced

in an economically viable and commercial manner, while Dutch

society would also simultaneously obtain maximum profit from

the discovery. An arrangement was developed as a result of

which the Dutch government would be involved in the production

and sale of this natural gas from the very beginning.

Because the government itself did not possess sufficient

knowledge and expertise in this area, the State Mines in Limburg

(later DSM) were appointed to act on behalf of the government

in the execution of the project. The Maatschap Groningen was

established in order to manage the production of the Groningen

natural gas. NAM has a 60% share in this venture and EBN 40%.

The NAM (a 50/50 subsidiary of Shell and Esso) manages the

actual production of the gas. N.V. Nederlandse Gasunie was

established to manage the purchasing, distribution and sale of

the gas. DSM had a 40% stake in the Nederlandse Gasunie,

in addition to Shell and Esso (25% each) and the State (10%).

After DSM went public, all interests in Dutch natural gas were

placed with EBN. However, the range of tasks and the working

relationship with DSM remained unchanged.

As of 1 January 2006, the management agreement between

the State, EBN and DSM changed. As a result, DSM’s managerial

responsibility for EBN came to an end. As of this date, EBN

became a company independent of DSM. EBN’s Executive

Board reports to the newly formed EBN Supervisory Board.

A Historical Overview

Small fields, large yields and Oil and Gas Market Development

Small-Field Policy: successful…

Since the 1970s, numerous gas fields have been discovered

in the Netherlands. Together they are almost as big as half the

Groningen field. The Small-Field Policy was developed In order

to ensure that as much gas as possible would be explored and

produced from these fields. The cornerstone of this policy is that

gas production from these fields takes priority over production

from the Groningen field. This is possible because gas from the

Groningen field can be produced in a flexible manner. The Gas

Act specifies that GasTerra – the trading company that demerged

from Gasunie in 2005 – is obliged to purchase gas from small

fields at market prices. The oil companies may also sell the gas

to other parties but will at all times be able to sell it to GasTerra at

market prices. GasTerra also carries the reserves risk. This makes

it an attractive proposition for companies to develop the gas

from small fields. The Small-Field Policy appears to have been

extremely successful. Many households and companies both

within and outside the Netherlands make use of the gas produced

from these fields. In addition, the Small-Field Policy also ensures

that we can profit longer from the very special Groningen field.

…in the future too

In this way, billions of cubic meters of natural gas have been

produced from small fields in previous decades. By participating

in a large number of partnerships with oil companies in exploration

and production, EBN has been able to make her contribution.

EBN also aims to actively dedicate itself to ensuring that as

much gas as possible is produced from the small fields in the

coming years. Due to changing circumstances this will require

even greater effort. Furthermore it needs to happen quickly:

the existing infrastructure is ageing and will have either to be

renovated or dismantled in the near future. This all means that

the role of EBN is changing. Making use of its overview of nearly

all licenses, EBN will act, more so than previously, as an initiator

of projects to explore and produce oil and gas from small fields.

EBN used the year 2007 to prepare itself for this role.

New technology, high oil and gas prices

Through the use of new technologies, it is now possible to extract

gas or oil from fields where it was previously too complex or costly to

do so. As an example, in 2007 Chevron – in close collaboration with

EBN – worked intensively for the whole year on making preparations

for the production of gas from the A12-A field which had already

been discovered in the 1980s. The first gas production began just

before the end of the year. In the past it was not feasible to extract

this gas which is located in shallow layers. Thanks to the use of the

latest technology and assisted by the higher gas prices it is now

profitable to do so.

Small fields, large yields


10

Throughout the world…

The strong growth in worldwide energy demand is continuing.

Combined with various other developments (slowdown in supply,

increasing tensions with Russia etc.), this growth is leading to

higher prices: in 2007, the oil price nearly doubled to just under

$100 per barrel. The costs of oil and gas production are also

rising due to a shortage of materials and people.

In Europe…

In Europe, the oil price increases were somewhat mitigated by

the weak dollar. Although, the price of gas is increasingly set on

the spot market, in important international contracts the gas price

is still linked to the oil price. There was a surplus of gas in North-

West Europe as a result of the mild winter and the completion of

a large number of new projects in 2007. Consequently, the spot

price was lower than the oil-linked price. In the United Kingdom

in particular the price on the National Balancing Point (NBP) came

under heavy pressure. The Dutch Title Transfer Facility (TTF)

showed a comparable development.

All in all, the European gas market is going through an irreversible

change. The European Commission will make further efforts to

remove barriers to inter-state trade and to develop markets. In

2007 the Commission announced a new package of measures

(‘Third Package’) for this purpose. The most important measure

is the obligation to unbundle networks and supply companies

(which has already happened in the Netherlands in 2005, with the

demerger of Gasunie and GasTerra).

Europe’s own gas production is declining, whereas the demand

for gas – the cleanest fossil fuel – is increasing worldwide. LNG is

assuming an increasingly prominent role in the supply of gas as

a result of which competition is emerging on a worldwide scale.

This influences regional markets. It is clear that it will eventually

lead to an integrated, liquid gas market. Only the pace at

which this will take place - and the development of the gasprice

- remain uncertain.

In the Netherlands…

Thanks to newly built transportation pipelines, European gas

markets are becoming increasingly inter-connected. For the

Netherlands and England, this is for example the case as a result

of the Balgzand Bacton Pipeline, which has allowed gas to be

transported from the Netherlands to England since December

2006. This connection has led to converging spot prices in the

Netherlands and England. Dutch customers increasingly see the

Dutch spot price as the gas price. During the course of 2007,

trade in gas on the hubs increased sharply. To traditional gas

suppliers such as GasTerra, this opens up opportunities for new

products and prices.

If the Netherlands wants to remain a leading country in the gas

world we will have to respond to these developments. This is

possible through active contributions, such as the development

of gas storage facilities. The Netherlands possesses many

empty gas fields which are suitable for gas storage, which will

increasingly be required because of the dependence for it gas

supplies from abroad. In the transition to an integrated European

gas market, GasTerra is becoming an even more European player

by selling an important share of the gas not only in the domestic

market but also in foreign markets.

Oil and Gas Market Development

EBN Stakeholders

Field of tension

EBN operates continuously at the interface between, on

the one hand, commercial activities and, on the other, public

interests. The exploration and production of oil and gas is an

expensive business but also one that is financially attractive. The

commercial interests in this sector are significant. However, the

production of mineral resources also has social consequences.

Gas and oil must be produced in a manner which causes as little

harm to the environment as possible. It must remain attractive for

oil companies to invest in the exploration and production of oil

and gas. At the same time, the State wants to receive its share of

the profit. Over the course of the years, EBN has acquired its own

very unique place within this field of tension. Which parties does

EBN deal with? A short overview of several important partners is

set out below.

Licensees

Licensees carry out the exploration and production activities.

In nearly all cases EBN has an agreement of cooperation with

these licensees. EBN and the licensee meet at least three times

a year in order to determine the joint policy regarding technical

and operational matters. In autumn, the work plan and

corresponding budget for the following year is approved for

each separate joint venture.

EBN Stakeholders

Who is the licencee? A licencee is a consortium of oil

companies. One of the companies is

designated as the ‘Operator’. That

company carries out all operational

activities on behalf of the licencee. The

Operator is also the most important point

of contact for EBN.

Exploration… Oil companies cannot just start

searching for gas and oil in the Netherlands

or the Dutch part of the continental shelf.

They must, in accordance with the Mining

Act, apply for an exploration licence from

the Ministry of Economic Affairs. The

Mining Act also states that EBN can, if

so requested by the licensee, participate

in exploration offshore. In such an event

EBN and the licensee will carry out

exploration work for their joint account.

This arrangement is regulated in more

detail by an Agreement of Cooperation

between EBN and the licensee, which

requires approval from the Minister of

Economic Affairs.

…and production If, during the tenure of an exploration

licence, natural resources (oil and gas) are

discovered and considered likely to be

economically recoverable, the licencee

can apply for a production licence from

the Ministry of Economic Affairs. The

Minister can prescribe State Partici-

pation in accordance with the Mining Act

and will ask EBN to carry out this task.

In addition EBN may also participate

in infrastructure (pipelines) and in other

activities which are necessary for the

production and sale of oil and gas.


12

Ministry of Economic Affairs

As shareholder and policymaker, the Ministry of Economic

Affairs is an important stakeholder for EBN. The Ministry is

responsible for policy, legislation and the award of licenses in

respect of energy. The most

important objectives of the policy

are:

• Thepromotionofanoptimum

structure and the optimum

operation of energy markets;

• The guarantee of supplies in

the short and long term;

• Sustainableenergy

management.

With specific reference to gas

production, the aim of the policy

is to ensure that conditions for

mining activities are created in

such a way that a maximum quantity of gas is produced in the

long term with optimum benefits for society. EBN contributes

towards the implementation of this policy in line with its

mission. The Ministry publishes an annual overview of activities

in the field of oil and gas exploration and production in the

Netherlands. These reports can be found at www.nlog.nl.

More information about the Ministry is available at www.ez.nl.

The Ministry and EBN frequently consult on an informal basis

and the management boards meet four times a year to attune

their policies. In addition, the

Ministry and EBN also meet twice

a year for strategic consultation.

TNO Bouw en Ondergrond

TNO Bouw en Ondergrond

(TNO B&O) and in particular

the oil and gas advisory group

has the task of advising the

Minister for Economic Affairs on

geological matters.

More information about TNO is

available at www.tno.nl

NOGEPA

The Dutch oil and gas exploration and production association

NOGEPA was formed in 1974 in order to safeguard the interests

of all oil companies with licences in the Netherlands to explore,

develop and produce oil and gas both onshore and offshore.

More information about NOGEPA is available at www.nogepa.nl


Chapter 3 Report by the Executive Board: Investing for the future

Joyce Luijten is a business advisor in EBN’s commercial

department. Additionally for the past two years she has been

chairman of the Staff Representation Committee (SRC) which

has promoted the interests of employees in Heerlen and Utrecht

since EBN’s ‘demerger’. This was a challenging combination in

2007. It was primarily the concentration of EBN’s activities in

Utrecht which kept the minds of the SRC extremely busy. “We

tried to ensure that the transfer to Utrecht would run as smoothly

and responsibly as possible for the employees,” says Joyce

Luijten, “and that has taken up a lot of time and energy.”

Changes in motion As a business advisor, Joyce Luijten is predominantly

concerned with developments in the area of short-term gas

sales through EBN’s participation in GasTerra. “We are trying

to advance EBN standpoints as clearly as possible within

GasTerra’s proposals explains Luijten. “The gas market is

changing rapidly. GasTerra is trading more and more on the

spot market, and must be able to respond in an increasingly

flexible way to the developments. EBN has considered

and advised on the matter. This process will continue further

in 2008.”

Difficult From GasTerra in Groningen to EBN in Heerlen: this variation

was typical of Joyce Luijten’s work in 2007. “At the end of

2006, it became clear that the Executive Board wanted to

concentrate all EBN activities in Utrecht. For many the news hit

hard. The SRC then set up an ad-hoc committee together with

the Works Council from the DSM Head Office which assessed

the Executive Board request for advice regarding the proposal.

We asked for a policy plan which would help the transfer to

Utrecht to take place as smoothly as possible. Once the plan

had been formulated, we offered neutral advice. We became

involved in drawing up the new package of EBN employment

thereafter. An external advisor negotiated on our behalf with the

Executive Board.” Is Joyce Luijten satisfied with the result that

she achieved with the SRC? “Yes and no,” she says. “On the one

hand, a good package of employment conditions emerged and,

in general, the interests of all employees were taken into account.

The SRC achieved everything that was possible, through good

consultation with the Executive Board. However, there remains

uncertainty in individual cases. We can’t always remove such

uncertainties. That’s what I find difficult.” Joyce Luijten herself is

remaining ‘loyal to Limburg’. In the coming years, she will take her

time to look for other work. “But,” she emphasizes, “I will continue

to feel involved in the development of EBN and its employees!”

Active from Heerlen to GroningenInterview with Joyce Luijten

Introduction and Strategy

Introduction The year 2007 was an intensive and hectic year for EBN.

On the one hand, a great deal of effort was put into setting

up a strong organization. An entirely new company had to be

developed after the demerger from DSM in 2006. Many of

the previously self-evident organizational matters had to be

reinvented and rearranged. The housing of EBN at two locations

some 200 km apart, and the relocation to a new office in Utrecht

also demanded a great deal of adjustment. All in all, these

organizational developments in 2007 required substantial effort

on the part of EBN’s Executive Board and employees. And at the

same time the world around EBN was changing quickly!

On the other hand, in order to ensure that as much as

possible of the remaining oil and gas reserves present in Dutch

subsurface is explored and produced in the coming years, EBN

has to make every possible effort. EBN must increasingly change

from a supportive and consultative organization into a company

that undertakes activities itself and does not just respond to

developments but actually initiates them. In other words, a

company that is active, innovative and flexible. EBN possesses

a great deal of knowledge and experience of exploring and

producing gas and oil. Furthermore, the company has a total

overview of all activities in this field in the Netherlands. In the

coming years, EBN wants to actively dedicate itself to oil and gas

production with the aim of ensuring maximum production and

optimum returns.

The Groningen field: production into the distant future...

The Netherlands wants to make use of the unique Groningen

field for as long as possible. Of the 3000 billion m3 of gas that was

once present, there remains at present around 1000 billion m3 to

be produced. Because the pressure in the field is declining NAM

must make ever greater efforts to be able to produce the gas. NAM

has ensured that the installations at the Groningen field are suitable

for the coming decades via the Groningen Long Term (GLT) project.

EBN has a 40% stake in this project, which will be completed in

2010. Thanks to the GLT project, it will now be possible to continue

producing gas from the Groningen field in the coming decades.


14

Opportunities and obstacles

The developments in the gas market have consequences

for the way in which EBN works, all the more so because the

Netherlands is slowly coming to the final phase of small fields oil

and gas production. The current high prices offer opportunities

for the profitable production of less easily productable, smaller

accumulations of gas. At the same time shortage of people and

means is an impediment. The current market developments,

the phase which oil and gas production in the Netherlands

is entering, and the fact that EBN has, in the meantime,

become an independent company, has led to EBN modifying

its strategy in 2007.

Proactive and a sharp focus

With the Minister of Economic Affairs’ energy policy as a

guideline, EBN continues to be dedicated to ensuring the

continuation of the small-field policy, the strategic management

of the Groningen field and a good and stable investment climate

for oil companies. EBN must, in order to achieve this, play a

proactive role and introduce a sharper focus into its activities

more than ever before. This is necessary if we and our partners

are to grasp the opportunities for exploration or (CO2) storage

that lie before us. Additionally EBN is contributing towards the

strengthening of the Netherlands’ present and future powerful

status as a gas-producing country. This is important to guarantee

supply, the good functioning of the gas market and for the Dutch

economy as a whole.

For the development of the so-called Dutch gas roundabout

it means that various companies need to invest in new

infrastructure – new pipelines to the Netherlands, gas storage

and LNG terminals – and in the strengthening of trade in gas.

When EBN went forward as an independent organization in

2006, agreements were made with the Ministry of Economic

Affairs concerning the role and the tasks of EBN. In addition

to the ‘traditional’ tasks in the area of state participation in the

exploration and production of gas and oil and participation in

the gas market structure in the Netherlands, these agreements

also provide room for other activities, following approval from the

Minister of Economic Affairs if necessary.

The way in which EBN put this into practice during 2007 is

shown in the following paragraphs (‘exploration and production’

and ‘gas market structure’).

Second life for the Bergermeer gas field

EBN also wants to play an increasingly active role in gas

storage. That is why EBN, together with, amongst others, TAQA, is

investigating the possibility of building an underground gas storage

installation at the Bergermeer gas field near Alkmaar. This is a

unique reservoir and is highly suitable for the safe storage of gas.

Furthermore, it is also located close to the existing gas transport

network and is strategically situated in relation to the Randstad.

Consequently, a second life as a gas storage installation beckons

for this field following the end of gas production there. During 2007,

various studies were carried out to investigate the possibilities of

gas storage in this field. The economic aspects were also looked

at and the necessary Environmental Impact Assessment procedure

was initiated. A definitive decision concerning this investment is

expected in 2008.

Strategy

Exploration and Production

Introduction

The Netherlands is a ‘mature area’ for gas production: the

most interesting gas reserves have already been developed.

The number of fields still to be found – known as futures – is

falling, as is the average size of these fields. As a result of this

and also the increased costs, exploration activities are dropping

in the Netherlands. Particularly the large oil companies, which

place great demands worldwide on profitability and additions

to their reserves, are moving to areas in the world which offer

more opportunities in this regard. Nevertheless there are still

enough prospects and undeveloped fields in the Netherlands. It

is estimated that there are still approximately 150 billion m3 of

gas to be found. With new technologies it should certainly be

possible to extract the majority of this. If the gas is not produced

in the next 10 to 15 years, we might not be able to produce

these gasreserves and to make a considerable contribution to

gas revenues. The necessary pipelines and production platforms

are currently still available. In the coming years, these will age and

gradually be dismantled. It is expected that the number of active

platforms will fall by half in the next 8 to 10 years. Action has

therefore to be taken now, in order to explore and obtain as much

of the remaining gas as possible. To achieve this an average of 15

exploration wells need to be drilled each year.

Seeing value in small fields

Fortunately there are smaller operators who see value in pro-

ducing gas and oil from the small fields. For example, Northern

Petroleum is developing the Papekop field near Woerden. Smart

Energy Solutions is developing the Oosterwolde field, and Vermilion

from Harlingen has successfully drilled a well on a small structure

near De Blesse in Friesland. These are favourable developments

with a view to the production of gas and oil from very small fields.

Strong and stable

In order to ensure that as much of the remaining gas as

possible is produced, it is necessary that:

• Agoodinventoryismade,withaviewtotheremaininglifetime

of the existing infrastructure, covering those areas in which gas

should be explored and produced as a matter of priority. This

inventory was drawn up in 2007.

• The investment climate in the Netherlands for gas and oil

producers is and remains attractive.

• Licenseeswhodonotwanttodrillwellsincertainareasgive

their ‘dormant’ licenses back so that other companies who are

interested can get to work.

• NewplayersfindtheirwayeasilyontotheDutchmarket.

• TheGovernmentconductsastrongandstablepolicyinorder

to promote exploration and production.


Beam pumps again at Schoonebeek…? On 20 December 2007 the definitive

decision was taken to again start

producing oil at Schoonebeek. EBN has

a 40% stake in this new project operated

by NAM. This participation fits perfectly

into EBN’s mission to make as large a

contribution as possible to the maximum

production of Dutch hydrocarbons.

Schoonebeek is the largest onshore

oil field in North-West Europe. Following

its discovery in 1943, the NAM produced

around one quarter of the one billion

barrels of oil contained in the field

between the years 1948 and 1996. NAM

eventually stopped production because

it was no longer profitable to continue

producing the viscous oil with the very

low oil prices. With the advent of new,

innovative technology - such as horizontal

wells and low-pressure steam injection –

NAM believes it is possible to produce

100 to 120 million barrels of oil from part

of the field in the next 25 years or so.

This represents an increase in Dutch oil

reserves of 25%.

EBN worked hard throughout 2007

on the preparation of the project which

started immediately in 2008. All old oil

installations were already removed and

the respective sites cleaned up. A new,

clean oil-treatment installation and the

use of a cogeneration plant (combined

steam and electricity generation) ensure

that the oil can be produced without using

too much energy. All production- and

injection wells will be newly drilled. EBN

expects the project to be of great benefit

to Dutch society. Furthermore, the project

will have an important economic effect in

the region through the creation of new

employment opportunities.

For those who miss the smell of warm

oil and the old installations, the old,

faithful beam pumps will not return to

the landscape of Schoonebeek. Using

modern, low-noise high-yield pumps,

NAM expects to be producing oil in 2010.


16

Tackling sticking points

In 2007 EBN worked hard to bring these objectives closer,

resulting in a number of successes. For example, during the year

EBN carried out a project with the aim of enhancing the Small-

Field Policy. The final report appeared in December.

The Small-Field Policy must be improved

In 2007 EBN worked on drawing up an advisory report concern-

ing the improvement of the Small-Field Policy. On the basis of a

number of interviews with stakeholders, an inventory was drawn up

of exactly what the sticking points were in this Policy, and how they

could be resolved. Some of these points included the following:

• GTShasthepublictaskofguaranteeingthatgasfromthesmall

fields can be transported. Due to a lack of clarity in the existing

legislation, GTS cannot currently fulfill this task properly. In order

to create clarity in this respect, the Gas Act should be modified.

• The licensingprocess isso longandcomplicated that ithasa

delaying effect on development projects.

• The purchasing conditions for small gas fields could be

improved.

• Synergyandinformationexchangebetweenstakeholderscould

be improved.

EBN already actively went to work with a number of

recommendations during the preparation of the report. This led

to, amongst other things, GasTerra making positive amendments

to its gas purchasing conditions for 2007. The point regarding the

creation of clarity concerning the execution of GTS’s public task

was brought to the attention of the Ministry of Economic Affairs.

The necessary changes in legislation are now being investigated.

This also applies to the complexity of the licensing process.

EBN’s recommendation was that there should be a single office

for operators to deal with. The other points will be tackled at a

later stage.

Attractive climate

If the investment climate in the Netherlands is not attractive,

producers will choose to invest in other countries. We must

ensure that we have a favorable investment climate in order to

interest them in the small fields now. This can be achieved by,

for example, fiscal measures which are specifically aimed at the

exploration of and production from marginal fields. In 2006 EBN,

together with NOGEPA, was already working on formulating

proposals in this area. These proposals were further developed

in 2007. For example EBN created a model which shows under

what conditions and with what returns gas can be produced. The

model provides an easy, comprehensible representation of the

influence that changing conditions (e.g. fiscal measures) will have

on investment returns.

For there to be an attractive climate, it is also necessary that

interested companies can get to work. This makes it desirable

that prospects or fields in existing license areas are made

available where current licensees do not wish to drill or develop

these (‘dormant licenses’).

The efforts of EBN and others towards the creation of a better

mining climate are beginning to pay off. Minister Van der Hoeven

of the Ministry for Economic Affairs has announced that a bill

will be submitted for legislation which will make it possible to

partially, withdraw dormant licenses. She also wants to sign an

agreement in 2008 with the oil industry in order to encourage the

exploitation of small fields, for example through the voluntary

return of licenses or parts of licenses. In this regard, in 2008

she will strive to come up with a financial incentive for the

marginal fields in the North Sea.


EBN takes on a more pro-active role…

EBN increasingly wishes to portray itself as a ‘trail blazer’ for

existing and, above all, new parties in oil and gas production in the

Netherlands. As a result EBN, together with the Ministry of Economic

Affairs, TNO and the State Supervision of Mines, looked at how

efforts to assess new parties could be made more efficient. Agree-

ment has been reached to work more closely in this area in order

to avoid duplication of effort. In addition, EBN has been increasingly

active in ‘going on the road’ in order to present the Netherlands as an

attractive location for gas production. EBN has given presentations

and has entered into many discussions with new parties in order to

create enthusiasm for investment in the Netherlands. Commencing

in 2008 EBN will draw up an annual report which will provide not

only existing players but also potential investors with an insight into

the prospectivity for oil and gas production in the Netherlands. In

doing so EBN aims to profile itself as the point of best access to

E&P in the Netherlands.

Participations

In 2007 EBN was involved in 115 production joint ventures,

20 of which were onshore and 95 offshore. In addition EBN was

involved in 26 exploration licenses. EBN also has interests in 3

offshore gas gathering pipelines (including the extensions) and

in 3 gas storages. The number of EBN participations increased

sharply in 2007 as compared with previous years. Onshore

this was the specific consequence of the split of a number of

licenses. In 2008 the number of licenses is expected to increase,

with more than 20. The number of operators will also increase,

particularly smaller companies who do not operate worldwide.

These smaller companies usually work in a different way to the

large oil companies, and are organized differently both technically

and financially. The arrival of these new players is linked to the

diminishing interest of the larger players. The latter prefer to

invest in sizeable projects with a high ‘reward and risk’ ratio. In

the Netherlands the situation in coming years will mainly concern

marginal fields, which smaller operators will probably be able to

develop in a more cost-effective way.

First Wadden gas produced

In 2007 NAM began producing the first gas from the new

fields under the Wadden Sea at Moddergat in Friesland. This was

possible after many discussions with the community on the matter,

which took place over a period of several years, Gas production

is taking place ‘with the hand on the tap’, which means that

any subsidence due to production must remain within a

certain range that have been established in advance. The permits

specify that NAM must carry out a comprehensive measurement

and monitoring program, and report on this annually to the

appropriate authorities. If necessary, the ministers of Economic Affairs

and Agriculture will have the power to limit gas production or even

halt it completely. From 2008 and 2009 onward NAM will also

be extracting gas from the Vierhuizen and Lauwersoog sites in

Groningen. In total the fields under the Wadden Sea are

expected to contain more than 25 billion m3 of gas. This is

enough to provide the households of the four largest cities in the

Netherlands with gas for at least ten years. EBN is taking part

in the production of the Wadden gas, and is closely involved

in these projects.


18

Production LicenseExploration License


50

45

40

35

30

25

20

15

10

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

5

0

Aantal exploratieboringen

OnshoreOffshore

Drilling operations

In 2007 a total of 32 wells were completed in which EBN has

an interest. These include 8 exploration wells, 4 appraisal wells

and 20 development wells. In 2007 no wells were drilled in gas

storage fields. Of the total number of wells, 9 have been drilled

onshore and 23 offshore.

Reuse

In 2007 Gaz de France developed the K12-K platform in the

K12 block (discovered in 2005) by installing a satellite platform

(connected to the K12-B platform by an 11.3 km long pipeline for

further treatment and transport). The deck section originates from

the K12-A platform which was removed in 2006 and completely

renovated for re-use. Gaz de France and Wintershall are the most

active companies in the re-use of platforms. So far about half the

removed platforms have been re-used.

Exploration

A good measure of exploration activity is the number of

exploration and appraisal wells undertaken. As has been already

stated, in 2007 a total of 8 exploration and 4 appraisal wells have

been completed (i.e. the results were known) in which EBN holds

an interest. Of the exploration wells, 6 were drilled offshore. In

particular the decline in the number of offshore wells is worrisome.

Over the years fewer and fewer wells appear to be drilled, while

according to EBN in the coming ten to fifteen years at least 150

wells need to be completed.

Of the 6 offshore exploration wells, natural gas was found in 4 of

them, and the other 2 were unsuccessful. One of the discoveries

will be put into production already in 2008 and the development

of the others is still being evaluated. The expectation is that at

least 2 of the other discoveries will be developed further.

Number of Exploratory Drilling Operations


20

Onshore EBN participated in 2 exploration wells. Both

produced natural gas and one of the discoveries has already been

put into production. The other is expected to follow in 2008.

With 6 successful wells out of a total of 8, it has again been

demonstrated that there are still more than enough exploration

opportunities in the Netherlands. Although the results are still

being studied, it is expected that again about 1 billion m3 per

exploration well has been added to the reserves. This is in line

with previous years.

In 2007, 4 appraisal wells were carried out, 2 offshore and 2 on

land. All 4 produced natural gas, and the wells helped to better

delineate the reserves in the fields.

New players create growth in exploration

and production area

The Offshore exploration licenses have increased in 2007 by

about 40% to almost 6000 km2. This is a positive development.

The growth is tied to the increasing number of new participants in

the market, such as Cirrus, Grove, Ascent and Elko.

Cirrus for instance, a small independent Canadian player, has

energetically set out to develop the M1-A and M7-A fields. These

are marginal fields that could not be developed by various operators.

Cirrus’ development plans were approved in 2007 and construction

activities immediately started.

EBN advises on licenses

EBN advises the Ministry of Economic Affairs on production

licenses applications, and standardizing the requirement of

state participation in these. In 2007 advice was given for

production licenses E17/E16a and M1. These licenses have

since been awarded.

EBN also advised the Ministry on state participation in the

P9ab license. Formal state participation in the P9c was no

longer possible because at the time the State decided not

to participate when granting the license. However, EBN will

participate in the development of the existing natural gasfields

through an agreement with the licensees. This participation fits

in EBN’s mission.

EBN in Orca

On the boundary of the continental shelf, between The

Netherlands and England, lies the Orca gas field. This field has been

tested by two wells, one in the Netherlands and one in England.

Gaz de France is the operator on both sides and is examining

whether it is economically feasible to develop the field. Given the

field’s location, EBN started its own evaluation in 2008 EBN will

advise the Ministry of Economic Affairs on economic recoverability

and state participation.


1%1%3%

95%

Onshore KVNAM 2007

Onshore KV Vermilion 2007

Onshore KV Northern 2007

Onshore KV TAQA

Jaarproductie kleine velden op land1%

1%3%

95%

Onshore KVNAM 2007



Onshore KV TAQA

Jaarproductie kleine velden op land

1,3%0,2%0,1%

23,7%

20,1%

0,6% 3,1%

0,0%

19,0%

32,0%

Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Jaarproductie kleine velden offshore

Offshore KV NAM

Offshore KV Wintershall

Offshore KV Cirrus

Offshore KV EDP

Offshore KV TAQA

Offshore KV Petros-Canada Gas

Offshore KV GDF

Offshore KV Total

Offshore KV Chevron

Offshore KV ATP

Offshore KV Venture

1,3%0,2%0,1%

23,7%

20,1%

0,6% 3,1%

0,0%

19,0%

32,0%

Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Onshore KVNAM 2007



Onshore KV TAQA


Jaarproductie kleine velden offshore

Offshore KV NAM

Offshore KV Wintershall

Offshore KV Cirrus

Offshore KV EDP

Offshore KV TAQA

Offshore KV Petros-Canada Gas

Offshore KV GDF

Offshore KV Total

Offshore KV Chevron

Offshore KV ATP

Offshore KV Venture

NAMVermilionNorthernTAQA

NAMWintershallCirrusEDPTAQAPetro-Canada GasGDFTotalChevronATPVenture

Production

The production of gas from which EBN earned its revenues

amounted to 27 billion m3. Onshore 4 operators produced the

gas of which NAM operated the largest part.

Offshore 9 operators were active in production of which 4

contributed more or less equal shares.

In 2007, 11 new gas fields in which EBN participates were put

into production. NAM started producing from 6 onshore fields and

2 offshore fields, GDF 2 offshore fields and Chevron 1 offshore field.

In addition there are 19 more fields in development that will

be put on line in the near future.

Applications for 5 production licenses were made in 2007. In

all likelihood the activities from these licenses (A15a, E15b, P3c,

P10b and Andel III) will lead to new developments.

NAM develops L9

The most recent major project of NAM on the Dutch conti-

nental shelf is the development of two gas fields in the L9 block.

Construction work was carried out in 2007: 2 platforms and a

pipeline have been installed. In 2008 NAM will drill the production

wells and also 2 appraisal wells in untested fault blocks. EBN is

participating in this project. The intention is to start production in

2008.

Yearly production from small offshore fields

Yearly production from small onshore fields


22

13%

6%

81% Onshore KV NAM 2007



Reserves verdeling EBN deelnames

13%

6%

81% Onshore KVNAM 2007



Reserves verdeling EBN deelnames

Groningen

Onshore (without Groningen)

Offshore

Reserves

Natural gas reserves of fields in which EBN participates amount

to (on 100% field basis) 1265 billion m³ Groningen equivalent

as per 31 December 2007 (EBN’s (in)direct share is 513 billion

m3). This is a decline of 57 billion m³ compared with 1 January

2007. About 65 billion m³ was produced from fields in which

EBN participates, while about 15 billion m³ of reserves were

added and 8 billion m³ were written off. The oil reserves of fields

in which EBN participates amount to 24 million m³. (EBN’s (in)

direct share is 9.7 million m³). These have increased through the

addition of Schoonbeek. In determining its reserves EBN follows

the definitions as established in 2007 by SPE, WPC, AAPG and

SPEE in the Petroleum Resources Management System.

The apportionment of natural gas reserves is as follows:

De Ruyter: investment already recovered

In September 2006 Petro Canada put the De Ruyter oil field into

production. This was the first project in which EBN participated in oil

production. 2007 was the first full year of oil production for this field.

The investment in this field payed out in just over a year, due to the

high oil prices.

Abandonment

EBN expected that a few platforms in 2007 would have to be

dismantled. Due to the high oil and gas prices, the production

of the nearly depleted fields could be continued in 2007, and

therefore no fields were shut in. In consequence no fields needed

to be abandoned.

Apportionment of reserves to EBN participations

The Dutch gas market structure and The people of EBN

Main pillars

EBN holds a 40% interest in the so called “Maatschap

Groningen”, which with NAM as operator is responsible

for the production of gas from the Groningen field and two

underground gas storage facilities. In addition, EBN also has a

40% share in GasTerra, the largest seller of Dutch natural gas.

The Maatschap Groningen and GasTerra together are known

as the ‘Gasgebouw’.

To preserve the balancing role of the Groningen field for as

long as possible, the Minister for Economic Affairs has limited the

maximum amount of gas per annum which may be produced

from the Groningen field. Up to and including 2015 the upper limit

is set at an average 42.5 billion m3 per annum. In 2007, 30 billion

m3 of natural gas was produced from the Groningen field.

The ‘Gasgebouw’ in 2007

Changes in the gasmarket have major consequences for the

‘Gasgebouw’. A Northwest European market is developing, where

price forming processes are increasingly controlled by trade

on the NBP, TTF and other trading markets. In the Netherlands,

competition is certainly undergoing steady growth. The traditional

distinction between inland and export markets therefore had to

be abandoned. On the European market GasTerra has to react

faster and respond more flexible to changes in supply and

demand and customer expectations. The year 2007 produced

weak sales as a result of a very mild winter and low spot prices

due to relatively high supply.

The Dutch gas market structure


24

Investing in people

‘Investing for the future’ is the main thread throughout this

annual report. EBN seeks to challenge gas and oil producers

to invest in the Netherlands. To achieve this, EBN also needs

to invest in its organization. Decreasing exploration requires a

new, more active role for EBN. EBN wishes to optimally develop

this role. This calls for an organization that stands out, that

has knowledge and experience and at the same time is open

to innovation. An organization that combines digging deep into

complex technological developments with commercial expertise,

knowledge of the decision making processes and a feel for

politics. That is quite a challenge for a relatively small company

that, in addition, is still building its own independent organization

away from DSM. A few significant milestones have been

achieved: EBN has set up its own HR department, standard

conditions of employment have been developed and the first

employees have signed EBN employment contracts. These are

important steps towards the mature, innovative and challenging

organization EBN wants to become.

Keeping people by captivating them

Early in 2007 the preparations for an EBN employment

conditions package were completed. After intensive consultation

on various levels, the package was submitted to the Staff

Representation Committee. As agreed, they approved the

package before 1 July, taking into account the start date of 1

January 2008. The package offers a good, up-to-date set of

employment conditions, tailored to EBN. The essence of HR

policy is that EBN wants to keep people by captivating them. EBN

offers varied and often challenging jobs in a ‘flat’ organization,

with opportunities for personal development and flexibility in

working hours and rewards. Employees are evaluated on their

output and the development of their competences. Leadership,

teamwork and result orientation are core competences for EBN.

Clear communication

The new employment conditions have changed considerably

compared to the ‘old’ ones. In particular, greater flexibility in working

hours and remuneration is new. It is essential to communicate these

aspects clearly. EBN informed its employees on the new package

extensively, by means of discussions and information meetings.

Information meetings were also organized for the pension scheme,

which passed from the DSM into the hands of ABP.

First EBN employment contracts

After approval the new employment conditions were applied

to individual positions. Employees who were interested were

offered a proposal for an employment contract at EBN. By the

end of 2007, 31 employees had entered into such a contract. The

contracts came into force on 1 January 2008.

The people of EBN

The people of EBN

Towards one location

As already stated, EBN operates from two locations: Heerlen

and Utrecht. Heerlen is the historic office from which EBN

operated, as a unit of DSM. At the end of 2005, in view of the

demerger of EBN a second location was opened in Utrecht. In

2006 the decision was made to eventually close Heerlen and

to concentrate all activities in Utrecht. The underlying idea was

that the central position of Utrecht would ultimately benefit EBN

through improvement in the distance to our business contacts

and the labour market.

The decision to leave Heerlen is a major one for the organization

and for many employees. At the end of 2010 the location in

Heerlen will close down. For many this moment is drawing nearer.

Some of the people working in Heerlen will retire. Others will

move to Utrecht. A final group of people will stay in Limburg.

These people will look for new jobs, either at DSM or elsewhere.

In 2007 EBN paid much attention to this and it will continue

to play a major part in the years to come. In the interest of the

organization and its employees, EBN is committed to carrying

out the relocation of the company with great care and attention.

Starting again…

In 2007 a significant amount of time was devoted to building

the internal EBN organization. For nearly all organizational and

practical matters, EBN was in the past able to rely on the large

DSM organization. So a new company had to be built. In the end

this required a great deal more effort than was initially expected.

Apart from the employment conditions package previously

mentioned, and the resulting employment contracts, thanks to

the efforts of many the following issues were tackled:

• AnewICTnetworkhasbeensetup.

• EBN established its own HR department that coordinates

recruitment, selection and competence management - and

from which salary records and a collective health insurance are

managed.

• A new system has been developed for document

management.

• Projectmanagementandworkschedulingimprovementshave

been integrated.

• EBN’s own policy for the appraisal and development of

employees has been introduced.


26

EBN: a new, fresh image

It was not just the internal organization that took shape. In

2007 EBN also invested in its ‘profile’. EBN wants to show that it

is a professional organization and an attractive employer. Creating

a place where people are open to change, ready for a new, active

position in the Dutch gas and energy policy. First a new office was

refurbished that would fit in with a modern and open atmosphere.

This turned out really well; at the end of 2007 EBN moved into the

business premises ‘Hoog Overborch’ in the Central Station area

of Utrecht. The office has a light and open atmosphere, entirely

in tune with the philosophy of the new EBN. The staff opened

the new office on 21 December during a Christmas party. Our

business relations were invited early 2008. On other fronts EBN

also worked hard on a new ‘image’. A new house style has been

developed, applied in this annual report, and the website has

been styled.

Change in The Executive Board

Within the Executive Board of EBN also a few things changed

in 2007. After leading EBN for almost ten years Rob Atsma retired

from the organization He formally took leave on 2 November. On

that day Jan Dirk Bokhoven took over as Chairman of the Executive

Board. The EBN Executive Board now consists of 3 members:

Jan Dirk Bokhoven, Joost Haenen and Dick Roest.

The people of EBN

20042005

20062007

Onshore

Offshore

Aantal medewerkers

70

60

50

30

40

20 31

14

30

15

39

18

43

18

10

0

20042005

20062007

Onshore

Offshore

Aantal medewerkers

70

60

50

30

40

20 31

14

30

15

39

18

43

18

10

0

70

60

50

30

40

20

10

02004

20052006

2007

MBOHBOAcademisch Aantal medewerkers

20

9

16

21

10

14

30

10

17

34

10

17

7%

6%

5%

3%

4%

2%

1%

02004

20052006

2007

Ziekteverzuim

6,7%

2,1%

2,3%1,5%

70

60

50

30

40

20

10

02004

20052006

2007

MBOHBOAcademisch Aantal medewerkers

20

9

16

21

10

14

30

10

17

34

10

17

2004men2005men

2004women2005women 2006men 2006women 2007men 2007women

2018

16

14

12

10

8

6

4

2

0

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

Leeftijdsopbouw Mannen/Vrouwen

2004man2005man

2004vrouw2005vrouw 2006man 2006vrouw 2007man 2007vrouw

2018

16

14

12

10

8

6

4

2

0

25 - 29

30 - 34

35 - 39

40 - 44

45 - 49

50 - 54

55 - 59

60 - 64

Leeftijdsopbouw Mannen/Vrouwen

Female

Male

Intermediate vocational training

Higher vocational training

Academic training

Staff

At the end of 2007, 61 people were employed at EBN, 55.25

full-time equivalent (fte). Additionally there were 5 part-time

employees. The appointment of new staff in 2007 was specifically

connected with the demerger from DSM and the strong growth

in the number of participations. The average age of the workforce

was 47 years in 2007, which is comparable with 2006. Absence

through illness was 2.3%. Absence through illness was slightly

higher in 2007 than in previous years, because a few employees

were absent as a result of long-term sickness in the second part

of the year.

More than half the staff at EBN has academic education. The

others are trained to intermediate and higher vocational levels.

At the moment 19 women are employed, one of whom is on the

management team. EBN strives to employ more women.

The age distribution still shows an alarming picture: the

number of employees aged 55 and older is 22, far more than any

other age group. The aim is to achieve more balance in the age

distribution when filling vacancies.

Number of employees

Training

Absence through illness

Ages Men/Women


28

CommercialDepartment

Support

Human Resources

Technical Department

Legal Department

Finance &Economics

Treasury

ICT

Chairman and Managing Director Jan Dirk Bokhoven

Shareholder State

Supervisory Board

Financial DirectorDick Roest

Commercial DirectorJoost Haenen

From Staff Representation Committee to

Works Council

Since 1 January 2006 EBN has had, in addition to the Works

Council of DSM, a Staff Representation Committee (SRC). In

this consultative body, staff in the offices at Heerlen and Utrecht

represent the interests of the EBN workforce in meetings with

the Executive Board. Four meetings took place in 2007 between

the SRC and the Executive Board in a constructive atmosphere.

Some important matters covered during the meetings were:

the ‘request for opinion’ regarding the concentration of EBN

in Utrecht, and the approval by the SRC of the employment

conditions package. In the course of 2007 the formation of an

independent EBN Works Council was prepared. In December the

first elections were held. There were seven candidates and the

turnout in Utrecht and Heerlen was high. This demonstrated a

high interest in the Works Council’s activities. Five people were

elected as members of the Works Council that officially set to

work on 1 January 2008.

Organization chart The participations of EBN are organized in Business Lines.

Business Line Managers manage the operations and report

directly to the Executive Board. In managing the participations the

Business Line Manager is responsible for the functional input.

Risk Management and Internal Controls in the framework of corporate governance

Great Responsibility

EBN manages over 140 participations which achieved total

sales of a little more than € 6 billion in 2007 and a net profit for

EBN of € 2.4 billion. Of the total revenue stream from natural

gas and oil received by the State of the Netherlands, in 2007

almost € 5 billion was received through EBN. EBN is aware of the

high responsibility and social importance of the tasks, which the

relatively small staff carries out. Therefore it implements stringent

requirements for the performance of its operations and financial

management. The Executive Board is responsible for this

management and the organization’s efficiency and effectiveness.

Internal streamlining

The demerger of EBN and the further implementation of

the matrix organization also have, of course, considerable

consequences for the risk management and control systems.

Prior to its demerger EBN conducted an analysis of potential

business risks. The conclusion from this analysis was among

other things that in the light of its demerger, extra attention would

have to be paid to:

• Vulnerability in retaining knowledge and experience in a

relatively small organization.

• Organizationandmanagementofinformationsystems.

• OptimizingfinancialmanagementofEBNparticipations.

EBN actively set to work with these findings. As a continuation

of the activities of 2006, this was elaborated further in 2007.

Retaining knowledge and transfer of knowledge

EBN has recruited many new employees to achieve the

necessary transfer of knowledge. In view of the new organization

model and the new staff, we have also focused particularly on

improving the work processes and analyzing the information

flows within our company, in order to streamline these better

and more efficiently. Employee accountability is more transparent

and activities are traceable. As a result business line managers

were given a more central role in the management of EBN’s joint

ventures.

Information systems

In 2007 EBN set up its own ICT infrastructure and security

system. Also in 2007, preparations were made to better mobilize

our management information. In the future we shall look to

improve documentation of basic data, and achieve uniform

reporting of control information. For that purpose in 2007 we

assessed the base structure for storage of information, contracts

and correspondence, how to make them accessible and the way

internal information should flow. This electronic system will be

implemented in 2008.

Improving the management of joint ventures

Having the internal organization in order, and ensuring

knowledge is preserved and information systems are

organized and managed well, is not the only thing of great

importance. In close connection with this EBN also scrutinizes

its external processes.

Risk Management and Internal Controls in the framework of corporate governance


30

For instance, the number of EBN participations has risen sharply

in the last few years. Given this expansion EBN, with a view

to optimizing its financial management, has started improving

accounting procedures with operators. The goal is, among other

things, simplification of procedures, streamlining of contact

management, acquisition of information and reports required,

increasing transparency and compatibility and, through these

elements, stimulation of a proactive approach to our interest in

joint ventures. We also made a start with the control system for

financial reporting of joint ventures in combination with a stricter

and more specific audit management. Business line managers

were given a steering role to help achieving this.

True and fair view

The Executive Board confirms that the internal financial

reporting control system offers a reasonable guarantee that the

financial report does not contain any material inaccuracies and

states that the internal control system operated satisfactory in

2007. The operation and implementation of this system require

constant attention in order to achieve an optimum level of

operation.

The financial statements provide a true and fair view of the

company’s financial situation and the results of its activities and

contain all of the requisite information. It should be mentioned

here that the above does not imply that these systems and

procedures offer an absolute guarantee of the achievement of the

company’s strategic and operational targets or that they are able

to prevent completely any incorrect information, inaccuracies,

errors, cases of fraud or unlawful or improper action.

In view of the above, the Executive Board feels it is complying

with best practice clause II.1.4. of the Dutch Corporate

Governance Code (taking into account the recommendations

on the application thereof made by the Corporate Governance

Monitoring Committee).

Result and Outlook

General review

Despite lower sales owing to a relatively mild winter and slightly

lower average market prices EBN’s net profit in 2007 remained

practically equal to that in 2006. As in other years the profits have

been paid in full to the shareholder.

Sales

Net sales in 2007 from ordinary activities totaled 6,090 million

euro. Compared with 2006 this is a decrease of 174 million euro

(-3%), caused by lower gas volume sales against lower average

natural gas selling prices on the one hand offset to some extend

by higher oil volume sales against higher average oil selling prices

on the other.

Operating costs

Total operating costs were down from 2,950 million euro in

2006 to 2,918 million euro in 2007, a decrease of 1%.

Operating profit

Operating profit totaled 3,172 million euro, which is 4% less

than in 2006.

Result

Net profit from continuing operations

Net profit in 2007 totaled 2,367 million euro, which is 11 million

euro less than in 2006.

Sensitivity to external factors

The sale of gas fluctuates depending on the ambient

temperature, with sales peaking in the colder winter months.

Due to the mild winter of early 2007 the sales volume of gas

was therefore lower than in previous colder winters. In sales

contracts, gas prices are often linked to the price of oil with a

time lag affecting the price of gas several months later. As the

price of oil is quoted in dollars, the gasprices are also affected by

exchange rate between the dollar and the euro. Sales contracts

based on spot transactions depend on the price achieved at the

time of sale on the market.

Financing

In 2007 three long-term loans were taken up at a total value of

376 million euro.


32

One thing is clear: the end of oil and natural gas production in

the Netherlands is on the horizon. Until that time EBN remains

dedicated to exploring and producing these natural resources, for

the benefit of Dutch society.

In respect of this, in 2007 EBN formulated important policy

statements:

• EBN actively strives to continue to interest oil and gas

companies in Dutch exploration and production.

• EBNisadaptingitsorganizationtofulfillthisrolewithverveover

the coming years and to manage its numerous participations in

a professional and efficient manner.

• EBNseekstobeanattractiveemployer.

These are policies for the long term. EBN will continue to

build on them in 2008. In the coming year we will dedicate

ourselves to achieving maximum production of gas and oil in the

Netherlands, and simultaneously realizing an optimal profit.

The year 2008 started with a colder winter compared to 2007,

which added positively to gas sales. Prices in 2008 to date are

far higher then last year, and for this reason it is expected

that the net profit in 2008 will be higher than that of 2007. We

will contribute more and more to the development of a natural

gas market in Northwest Europe. We will pay attention to

activities looking at the feasibility of natural gas storage. In this

way EBN is seeking to actively contribute to making the

Netherlands the natural gas hub of Europe.

We continue to invest in our organization. In the coming three

years we will pay continue to attention to the concentration of our

activities in Utrecht and the careful winding up of the activities

in Heerlen. We will devote particular care and attention to the

employees who be affected most because they either will, or will

not, be moving to Utrecht.

We will also actively try to attract new employees. We will

introduce EBN at universities and conferences to demonstrate

that we are eager to have new people who on the basis of

professionalism wish to work for EBN and who want to work

together with us on the production of our natural resources in

a responsible manner and on making our energy management

more sustainable.

To conclude: the coming ten to fifteen years call for increased

efforts in the exploration and production of oil and gas in the

Netherlands. We hope to bring across the message of this

‘sense of urgency’. However, time won’t stand still. What does

EBN, apart from production in Groningen, want to be in ten to

fifteen years? That is difficult to say at this point in time. However,

EBN will certainly set to work in the coming years to answer

that question.

Outlook

Signed at Utrecht, 8 April 2008

Executive Board

J.D. Bokhoven

Chairman

J.W.P.M. Haenen

Commercial Director

D.G. Roest

Financial Director

Chapter 4Corporate Social Responsibility and Corporate Governance: Open and transparent


When she started work at EBN in March 2006 she was one

of the first people at our office in Utrecht. “I really saw this place

fill up,” smiles Christel Hartkamp, production geologist in the

Technical Department. Her switch from consultancy to EBN

has been a good one: “The great thing about EBN is that I can

apply my technical knowledge really quite broadly because I have

to work closely with lawyers and economists. For me that is a

new way of practicing geology.” In 2007 she was a member of

EBN’s Staff Representation Committee (SRC) and starting from 1

January 2008 she will be chair of the Works Council that the SRC

will replace.

A great result As production geologist, Christel Hartkamp supports various

business lines within EBN. “My main job is to research the

subsurface,” she says. “A great project that I worked on in 2007,

for example, was an integrated study into the development of

the F3-A field. For this study I had to work closely with some

junior staff from various disciplines. They did their job under

the supervision of seniors. That worked really well. We were

able to take an integrated look at various elements, such as

the subsurface structure and the properties of the rock strata,

and from that we constructed a dynamic simulation model. Our

study was a good basis for assessing the field development plan.

So it’s a great result!”

Tough In 2007, Christel Hartkamp found that the combination of her

technical job and her membership in the SRC was sometimes

quite tough. “In the SRC we were presented some major issues,”

she says.

“Changes in the Executive Board, the move to Utrecht and the

proposed closure of our office in Heerlen.” Hartkamp looks back

on the way the SRC dealt with these sometimes difficult issues:

“In particular the closure of Heerlen affects people very personally,

even within the SRC. Nonetheless we handled these issues with

integrity and the general interest always prevailed over personal

interests.” Because an independent EBN requires an official

Works Council the SRC on 1 January 2008 will be converted

into a Council. Christel Hartkamp: “We worked hard on that in

2007: drafted statute, prepared and called elections. There were

seven candidates in the election in December for five seats on

the Council, and many people voted.” That gives the chairperson

of the new Council a good feeling: “People feel a great sense of

involvement with the work of the Council. I feel that people have

really supported me!”

Applying knowledge broadlyInterview with Christel Hartkamp

Introduction and Corporate Social Responsibility

EBN seeks to be an open and transparent company that

conducts its business in a socially responsible way. Generally

speaking EBN wants to give aspects of Corporate Social

Responsibility a more structural place in its policy in the coming

years. Work on this started in 2007. A short description of the

aspects of Corporate Social Responsibility arising from the way

EBN works is set out below. This is followed by an overview of the

corporate structure of EBN.

Introduction


34

People

EBN makes an ongoing effort to provide a safe, social and

stimulating work environment for its employees. Safe also in

the literal sense of the word through, for example, HSE (Health

Safety, and Environment) and Occupational Health inspections. In

2007 there were no lost workday incidents at EBN.

Furthermore, in 2007 an organization was gradually built in

which employees can develop, in which they are empowered, and

in which they feel responsible. A lot of effort went into managing

the two – different – cultures at the Heerlen and Utrecht sites.

The staff in Heerlen have generally worked at the company for a

long time and are familiar with DSM’s way of working and culture.

They possess valuable knowledge and experience. In Utrecht

there are generally young people who have only recently started

working for the company. They bring in fresh new ideas without

being ‘constrained’ in any way by the history or traditions of the

company. The input of both groups is of great value to EBN;

they complement each other really well. However it is sometimes

difficult to align the two cultures, with the large physical distance

as interfering factor. EBN continuously tries nevertheless to bridge

that distance. For example, board meetings are held by weekly

turn in Utrecht and Heerlen.

Corporate Social Responsibility

Corporate Social Responsibility

Planet

EBN is a company with the State as sole shareholder and has

a public task. As a result Corporate Social Responsibility (CSR) is

by definition ‘integrated’ in the organization. Good management

and responsible production of our natural resources is of great

social value. In accordance with the ‘Small Field Policy’ that EBN

actively promotes, as much as possible of the reserves in the

Netherlands are produced. The profits from this are for the benefit

of our society. Additionally gas is the cleanest fossil fuel and will

be of high importance on our way towards a sustainable energy

society. From the nature of its business EBN is continuously

involved with the effects of its own activities on society and the

environment.

Profit

The State receives a significant part of natural gas revenues

via EBN. It has been agreed that EBN will not retain any financial

reserves. Its entire net profit is made available to the State. The

State uses this income partly to finance the Economic Structure

Enhancement Fund. By means of this fund, projects can be

financed that contribute to the reinforcement of the (knowledge)

infrastructure in the Netherlands.

In short: EBN in its day-to-day activities is continuously looking

for a good balance between ‘people, planet and profit’. As its

organization gains shape EBN intends to give aspects of CSR

a more structured place in its management policy. In 2007

preparations were made for this. EBN intends to perform a ‘quick

scan’ in 2008 to see where it stands on CSR aspects. This can

be used to build upon further.

Safety, health and environment… …are of paramount importance

at EBN. EBN itself does not perform

any operational activities, but it does

participate in many activities in which

operators must be able to work in

a safe, healthy and environmentally

friendly manner. EBN wants to set a

good example for others by working

on a safe environment within its

own organization. In this context,

in 2007 much was invested in a

safe and healthy start for the new

office. Furthermore safety, health and

environment are always on the agenda

in EBN’s contacts with operators.

EBN closely follows the policy of its

participations, to ensure that operations

take place in accordance with the

required SHE standards. SHE activities

are included in an annual SHE plan

and are evaluated in the annual SHE

report. In 2007 there were no lost time

incidents at EBN and no workdays were

lost among construction workers during

the office renovation activities.


36

CSR in participations

Corporate Social Responsibility does not stop at the

boundaries of one’s own organization. On the contrary. For EBN

it means that aspects of CSR are also of importance for the joint

ventures in which EBN has an interest. In the participations one

of the partners, the operator, carries out the work on behalf of

the other partners. Operators cannot start work until they have

been granted a license by the Minister of Economic Affairs. These

operators are important partners for EBN. Generally operators are

large oil/gas companies that comply with international standards.

EBN is able to exert influence over the content of the work plan

and budgets that they draw up. In accordance with European

directives, EBN does not, however, have any involvement in

the selection of specific suppliers of goods and services by the

operator. EBN participates in projects but is not itself directly

involved in carrying out the work. EBN therefore has limited direct

influence over “chain management.”

EBN nonetheless holds periodic discussions with its operators

and other partners on the effects operations are having on both

people and the environment. Gas production, processing and

transport operations must have as little effect on the environment

as possible. The relevant standards are in the first instance set

through environmental permits which must be obtained by the

operators for the performance of these operations. EBN also

actively discusses the social aspects of the operations (such as

safety) within its joint ventures. Operators must, as a minimum

standard, treat their staff in accordance with current legislation

and regulations.

EBN is continuously expanding its activities to contribute

more to, for example, reducing CO2 emissions, securing long

term supply and using of its knowledge of the subsurface for

preservation of energy. EBN is involved in projects aimed at

reusing depleted gas fields by using them to store gas or CO2.

EBN also promotes the re-use of redundant platforms in other

developments. EBN sponsors the Delft Geothermal Energy

Project of the Delft University of Technology, with the aim of

helping students to gather more knowledge on this subject.

Corporate Governance

Introduction

EBN is not listed on the stock exchange. EBN has,

however, elected to comply wherever relevant listed with the

Dutch Corporate Governance Code issued by the Corporate

Governance Committee. EBN endorses the Code’s principle that

transparency towards stakeholders is of utmost importance. The

company observes the principles and best practice guidelines

set out in the Code. Extensive consultation has taken place on

the application of the Code with the Ministry of Economic Affairs

as the representative of EBN’s shareholder. EBN studied the

recommendations of the Frijns Committee. This Committee will

also propose adaptations to the Corporate Governance Code.

EBN has decided to evaluate the possible formal adjustments of

the Code for compliance.

EBN’s 2006 annual report was the first to include an account

of the way in which the company complies with the principles

of Corporate Governance and the best practices arising from

the Code. This year will therefore be the second time.

The structure of the Dutch gas market is such that, under the

Dutch Corporate Governance Code, conflicts of interest would

arise (in a formal sense) for the Executive Board in transactions

between EBN and GasTerra B.V., because the Chairman of the

EBN Board is member of the Supervisory Board of GasTerra

B.V. Given the nature of the mutual relations between EBN and

GasTerra, EBN therefore does not apply the Code (II.3.2 and

II.3.3) to transactions between EBN and GasTerra B.V.



38

Structure of EBN

Since 1 January 2006 EBN has been functioning as an

independent company. An important principle of the ‘demerger’

from DSM was that EBN should maintain its industrial character.

This is an important prerequisite for maintaining EBN’s positive,

active contribution to the efficient production of mineral resources

in the Netherlands.

EBN is a limited company under Dutch law. EBN is not a two-

tier board company prescribed by law. Its aim is to continue to

engage in activities aimed at implementing the energy policy of

the Minister of Economic Affairs, in particular where it involves the

responsible handling of the Dutch natural resources and the deep

subsurface.

Shareholders

EBN’s Executive Board and the Chairman of the Supervisory

Board hold periodic strategic discussions with representatives

from the Ministry of Economic Affairs. If the policy pursued by

EBN is inconsistent with energy policy, the Minister of Economic

Affairs, as both shareholder and policymaker, is able to issue

EBN with an instruction. EBN’s Articles of Association state

that its shares can only be held by the State of the Netherlands

(directly or indirectly).

The shareholder appoints the external auditor. The auditor’s

performance is evaluated periodically. The auditor is invited to

attend discussions on the financial statements. 2006 was the

first time the financial statements have been drawn up on the

basis of IFRS. The financial statements of 2007 are a continuation

of this.

Comply or explain

EBN does not comply with the Dutch Corporate Governance

Code in the following respects:

• II.1.1: appointment for a 4-year period is inconsistent with

directors’ contracts of employment and is not recommanded

in the interest of maintaining continuity.

• II.2.6:thereisnoregister.IthasbeenagreedthattheExecutive

Board does not trade in any stock exchange transactions with

companies in the oil and gas industry with which EBN has

active relations.

• II.2.7: there is no maximum payment for members of the

Executive Board when they are required to step down; this

would not be compatible with the company/director relationship

under labour law.

• II.2.11: the main elements of Directors’ contracts of

employment cannot be disclosed until after 1 January 2008

when a contract of employment is concluded between

the company and the Executive Board.

• III.7.3: Transactions involving securities held bymembers of

the Supervisory Board are not recorded due to the distance

and the limited influence exerted by the Supervisory Board.

EBN has not published certain information on the internet.

For the moment EBN places this information only on the intranet

(see II.1.3 and II.2.13).

Not applicable

A large number of the provisions (namely II.2.1 to 2.5, 2.14,

III.6.4, III.7.1 and 7.2, III.8.1 to 8.4, IV.1.2, IV.2.1. to 2.8, IV.3.1

to 3.4, IV 3.7, IV.4.1 to 4.3, V.3.1) cannot apply to EBN because

EBN is not listed on the stock exchange.


Executive Board

In 2007 a change took place in the EBN Executive Board.

On 2 November, Rob Atsma stepped down as Chairman of the

Executive Board. On that same date he was succeeded by Jan

Dirk Bokhoven. Rob Atsma began his career at AKZO Nobel in

1972 and moved to DSM in 1988 as Manager, Economic Affairs.

In 1990, he joined the managing board of DSM’s Chemicals &

Fertilizers division as Director of Finance. From 1995 to 1998,

he was Director of the DSM Sales Offices. On 1 January 1998,

he was appointed Director of EBN. He became Chairman of the

Executive Board on 1 January 2006. After 10 years of passionate

leadership he decided to retire. At the same time the Executive

Board changed from four to three members. In addition to Jan

Dirk Bokhoven the Executive Board consists of Joost Haenen and

Dick Roest. The appointment of the Chairman of the Executive

Board was approved by the Minister of Economic Affairs.

The Executive Board manages the company and determines

policy. The Board meets in principle once a week to discuss

operational issues, approve proposals and take decisions. In

line with agreements made, relevant resolutions are put to the

Supervisory Board and/or the shareholder. The Executive Board

makes the requisite information available to the Supervisory

Board and the Ministry of Economic Affairs in a timely manner.

Any important matters deliberated by the Executive Board are

discussed with managers during management consultations.

The company must be represented by at least two members of

the Executive Board. The Executive Board has drawn up a set of

management rules which are endorced by the Supervisory Board.

Dick Roest, Jan Dirk Bokhoven, Joost Haenen


40

Jan Dirk Bokhoven (1957)

… is Chairman of the Executive Board and responsible for

technical and legal departments. He studied at Delft University

of Technology, graduating in Petroleum Engineering in 1983.

From 1982 to 1996, he held various positions at Conoco and

Veba Oil. In 1997, he joined Clyde as Exploitation Manager

and later Commercial Manager. In this latter post, he was

responsible for commercial and legal affairs, business planning

and economic analyses. In 2001, he joined EBN as Technical

Manager. He became Operations Director on 1 January

2006. Since 2 November 2007 he has been Chairman of the

Executive Board and Supervisory Board member of GasTerra.

Joost Haenen (1952)

… is director for commercial and Human Resources

Departments. He obtained a Master’s Degree in Econometrics

at the Erasmus University in Rotterdam in 1979. After holding a

number of posts at the Ministry of Education and Science and the

Ministry of Economic Affairs, he turned to energy policy in 1996.

At the Ministry of Economic Affairs, he became deputy director of

Oil and Gas and head of the Gas Policy department. In 2000, he

became deputy director of Energy Production at the Ministry of

Economic Affairs with specific areas of responsibility: deregulation

of the gas market, mining and the GasTerra shareholding. He was

appointed on the EBN Board on 1 January 2006.

Dick Roest (1948)

… is director of Finance & Economics and ICT. He graduated in

quantitative business economics from the University of Groningen

in 1974. He started his career at DSM in the Corporate Treasury

Group and later transferred to the Polymers & Hydrocarbons

division as controller. In 1988, he became Head of Investor

Relations, responsible for the marketing side of DSM’s flotation

on the stock market and the development of relations with the

investment world. In 1994, he became Director of Finance at

the DSM Fibre Intermediates business group. In 2004 he started

working for EBN as head of Finance and ICT. He was appointed

on the EBN Board on 1 January 2006.

Who is who on the Executive Board?


Supervisory Board

Since 1 January 2006 EBN has a Supervisory Board

periodically eligible for limited re-election. The shareholder

appoints the Supervisory Board and the Chairman. The

Supervisory Board exercises supervision over company policy as

determined by the Executive Board and over the general running

of the company and the business. Responsibility rests with the

Board in its entirety. All the members of the Supervisory Board

perform their duties without a mandate from and independently

of any company, body or organization. The Board has drawn up

a set of internal rules and a profile that has been approved by the

shareholder. It is responsible for the quality of its own performance

and periodic evaluation thereof.

Supervisory Board Committees

The Audit Committee and the Remuneration Committee carry

out their duties in accordance with the rules laid down by the

Supervisory Board on the basis of the provisions of the Dutch

Corporate Governance Code.

Hein van Oorschot, Arnold Gratama van Andel, Rudy van der Meer, Gert-Jan Kramer


42

All the members of the Supervisory Board are member of the

Audit Committee, which is chaired by Mr. Gratama van Andel.

The Audit Committee’s tasks are to advise the Supervisory Board

on the financial statements, supervise internal risk management

systems, and handle supervision of the financial information

supply, financing and the use of ICT and information systems.

All the members of the Supervisory Board are member of the

Remuneration Committee, which is chaired by Mr. Kramer. The

Remuneration Committee’s task is to draw up a report on the

remuneration policy for the members of the Executive Board. The

Committee makes proposals for remuneration of the Executive

Board on the basis of the remuneration policy approved by the

shareholder. For efficiency reasons, the Remuneration Committee

also acts as the Selection and Nomination committee.

Who is who in the Supervisory Board? Rudy van der Meer (1945)

… is chairman of the Supervisory Board. He holds Dutch

nationality. His first term of office ends at the General Meeting of

Shareholders in 2009.

• ChairmanoftheSupervisoryBoardofImtechN.V.

• MemberoftheSupervisoryBoardofINGBankNederlandN.V.

and ING Verzekeringen N.V.

• ChairmanoftheSupervisoryBoardofGazelleHoldingB.V.

• MemberoftheSupervisoryBoardofJamesHardie

Industries N.V.

• FormermemberoftheExecutiveBoardofAkzoNobelN.V.

Gert-Jan Kramer (1942)

… is member of the Supervisory Board and chairman of

the Remuneration Committee. He holds Dutch nationality. His

first term of office ends at the General Meeting of Shareholders

in 2010.

• ChairmanoftheSupervisoryBoardofDamen

Shipyards Groep

• MemberoftheSupervisoryBoardofABNAMRON.V.

• ChairmanoftheSupervisoryBoardofDelta

Hydrocarbons B.V.

• MemberoftheSupervisoryBoardofFugroN.V.

• MemberoftheSupervisoryBoardofTrajectumB.V.

• ChairmanoftheSupervisoryBoardofTechnicalUniversityDelft

• MemberoftheSupervisoryBoardofTNO[Dutchorganization

for applied scientific research]

• FormerChairmanoftheExecutiveBoardofFugroN.V.

Arnold Gratama van Andel (1946)

… is a member of the Supervisory Board and chairman of the

Audit Committee. He holds Dutch nationality. His first term of

office ends at the General Meeting of Shareholders in 2009.

• ChairmanoftheSupervisoryBoardofAZLVastgoed

Kantoren B.V.

• Chairmanof theSupervisoryBoardofUniversiteitMaastricht

Holding B.V.

• MemberoftheSupervisoryBoardINGDutchResidentialFund

• FormerCorporateVicePresidentFinance&Economics

DSM N.V.

• FormerManagingDirectorofEBNB.V.

Hein van Oorschot (1952)

… is a member of the Supervisory Board. He holds Dutch

nationality. His first term of office ends at the General Meeting of

Shareholders in 2010.

• PresidentoftheExecutiveBoardTilburgUniversity

• MemberoftheSupervisoryBoardofLysiasAdviesB.V.

• MemberoftheSupervisoryBoardE.ONBeneluxB.V.

• MemberoftheSupervisoryBoardofLegermuseumDelft

• ChairmanoftheSupervisoryBoardofWoningbouwcorporatie

Vitalis Amersfoort

Chapter 5 Financial Statements


When business economist and chartered accountant Wouter

den Dulk transferred to the Accounting department of EBN in

August 2006 after a long career at DSM, he was surprised by the

hectic pace of the various change processes. “It is fascinating to

see how EBN changes in role and character and to be able to

use my expertise to contribute to this,” he says. In 2007, because

of the upcoming ‘de-merger’ from DSM, work in his department

was all about change.

Accentuate A lot of time had to be devoted to accentuate EBN’s audit and

control function. “We have a special responsibility, as ‘controller’

of the state participation in large-scale projects,” says Wouter

den Dulk. “We must fulfill this task as effectively as possible,

with maximum results for the State. That is why in 2007 we

started our audits of our participations earlier. By using interim

reports during the year, you can work a lot more effectively

than when audits are only carried out afterwards.” In addition

to this, there has been more interaction with accountants.

Wouter den Dulk: “Together with the business line managers,

we selected topics for specific attention so you can be more

efficient with time and money. This is necessary when you

realize that the number of EBN’s participations has doubled in

the past 10 years.” In addition, EBN started modernizing the

accounting procedures that are agreed with operators:

“For example, the procedure for one large operator dated

back to the 1980s. Then it’s logical that we re-evaluated.”

Team spirit In 2007 the treasury function was also evaluated and the

transition to the more transparent IFRS accounting system was

finalized. “This last aspect meant that, among other things, we

had to alter our depreciation and amortization practices. This

was a major change our staff successfully implemented. I’m

proud of that!” In the coming years a lot still remains to be done.

Wouter den Dulk: “In general the people here in the Accounting

Department want to stay in Limburg. This means that after 2009

EBN in Utrecht will set to work with new people. In order to be

able to use our current expertise and experience as much as

possible, in 2007 we have documented our work processes in

detail.” All these changes required a lot of effort from employees.

“Luckily the team spirit here is good”, says Den Dulk, “people are

always ready to help each other, and as a result they can get a lot

of work done.”

2007: year of changeInterview with Wouter den Dulk

General and Principles for the valuation of assets and liabilities and determination of profit

The financial statements of Energie Beheer Nederland BV

(EBN) for the financial year 2007 were drawn up by the Executive

Board on the basis of a resolution passed by the Board on 8 April

2008. The financial statements were then made available to the

Supervisory Board for approval and signature. The Supervisory

Board is also required by Article 20.2 of the Articles of Association

to provide the shareholder with a preliminary report. The financial

statements will then be put to the general meeting of shareholders

on 5 June 2008. Publication in the manner required by law will

follow the adoption of the financial statements.

EBN’s financial statements for the financial year 2007 were

drawn up in accordance with the International Financial Reporting

Standards (IFRS) as adopted for use within the European Union.

EBN’s financial statements mainly relate to EBN’s participations

in joint ventures in the area of gas and oil production in the

Netherlands and on the continental shelf. More specifically

this represents EBN’s share in the assets and liabilities of joint

ventures and in the revenue and costs of such joint ventures.

EBN also is a shareholder in several companies.

The joint ventures mostly are contractual agreements between

EBN and other parties through which EBN engages in certain

activities jointly with those parties. The assets used in these joint

ventures are mostly jointly controlled by EBN and its partners.

GeneralThese joint assets and related obligations, costs and revenue are

included in EBN’s financial statements on a pro rata basis. The

most important joint venture involves the so called Maatschap

Groningen.

The joint ventures cover participation in 20 on shore production

ventures, 95 off shore production ventures, 26 exploration

ventures, the Emmen gas processing plant, 3 facilities for

underground gasstorage, the K13-Den Helder gas processing

plant and the K13-Den Helder, K13-Extension and F3/A6

Extension pipelines. The level of participation in the above joint

ventures varies between 40% and 50%.

EBN has a 40% share in GasTerra BV, a 45% share in NOGAT

BV and a 12% share in the NGT-Extension. These interests are

treated as associates.

EBN is 100% shareholder in K13 Extensie Beheer BV and

F3/A6 Extensie BV covering participation in the K13-Extension

and F3/A6 Extension pipelines. Both are of negligible financial

interest to EBN and have not therefore been consolidated. In

effect, EBN’s financial statements reflect both the company’s

consolidated position and the company’s position.

EBN’s registered offices moved from Heerlen to Utrecht on

31 January 2008.


44

Foreign currency translation

EBN uses the Euro for both operational and presentation

purposes. This applies also to the joint ventures. Commercial

transactions and borrowings denominated in foreign currencies

are converted at the applicable spot rates on the transaction

date. Monetary balance sheet items denominated in foreign

currencies are translated at the spot rate on the balance sheet

date. Exchange rate differences arising from the settlement of

these transactions and from the translation of monetary balance

sheet items are included in the income statement.

Current assets and current liabilities

An asset is shown as a current asset if it is expected to be

realized within 12 months of the balance sheet date. A liability is

shown as a current liability if it is to be met within 12 months of

the balance sheet date.

Property, plant and equipment

Exploration wells

Costs incurred for an exploration well are capitalized (wells

under construction). If an exploration well appears to be dry,

the costs involved are taken to the profit and loss account as

expenditure. Successful gas or oil exploration wells are being

depreciated from the moment of start-up of the production.

Principles for the valuation of assets and liabilities and determination of profit

Costs incurred in connection with exploration wells older than

12 months are taken to the profit and loss account, unless:

(i) they are located in an area where significant investments are

required before the production start-up and

(ii) commercially recoverable quantities have been discovered

and

(iii) further exploration or appraisal activities are taking place, that

is to say, additional exploratory wells are being drilled or a

concrete programme exist for the near future.

The management regularly assesses whether capitalization

of exploration drilling expenses still meets the above criteria and

should be continued. For exploration wells older than 12 months

an additional evaluation takes place to determine whether

circumstances have changed and whether the above conditions

still apply.

Reimbursements

Costs incurred in connection with reimbursements paid –

principally exploration costs and interest payments relating to

proven reserves – are capitalized and depreciated on the basis

of the ratio between production and the total projected reserves

under the relevant license (unit-of-production method).


Property, plant and equipment used for production purposes

Property, plant and equipment used for gas and oil production

and other equipment is valued at cost less accumulated

depreciation and any impairment losses.

Financial charges arising from the procurement and construction

of property, plant and equipment are taken to the profit and loss

account. Expenses incurred after initial acquisition are included

in the carrying amount of the asset or capitalized separately if it

is likely that the future financial benefits of the asset will accrue

to the company and the costs of the asset can be determined in

a reliable manner. Repairs and maintenance costs are entered in

the income statement during the period in which they arise.

Estimated costs for decommissioning, dismantling and removing

platforms and other installations are capitalized. These costs are

capitalized as part of the cost price of the relevant asset.

Property, plant and equipment used for gas and oil

production are depreciated on the basis of the ratio between

production and the expected reserves for the relevant field.

Other property, plant and equipment are depreciated on

a straight-line basis over its estimated useful life. As a basic

principle, a period of 20 years is used for main transport pipelines

and underground gas storage (UGS) facilities. A useful life of 10

years is used for buildings. Land is not depreciated.

The estimated remaining useful life of these assets is examined

each year, taking into account commercial and technological

obsolescence and normal wear and tear.

Property, plant and equipment is no longer recognized in the

balance sheet, if it is disposed of, or, if no future benefits are

expected from continued use, or from a return of the license or a

sale of the asset. Any gains or losses arising from de-recognition

of an asset are shown in the income statement.

Financial fixed assets

An associate is an interest in an entity over which EBN has

influence but no control can be exerted.

Associates are valued on the basis of the equity method

which means that EBN’s share of the profits or losses

of the associate are shown in the income statement. EBN’s interest

in associates is calculated on the basis of the company’s share in

their net assets less any accumulated impairment losses.

If EBN’s share of an associate’s losses exceeds the associate’s

carrying amount – including any other receivables – , the carrying

amount is reduced to zero. No further losses are shown unless

EBN has taken over any of the associate’s liabilities on the basis

of a guarantee or other commitment.

47

46


Unrealized profits and losses from transactions with

associates are written off in proportion to EBN’s share in

these entities.

Impairment losses

On each balance sheet date, the company decides whether

there are any indications that the carrying amount of a non-

current asset (property, plant, equipment or financial fixed asset)

is more than the relevant recoverable amount (value in use or net

realizable value whichever is higher) and examines the need for

an impairment loss. In the case of an asset that does not by and

large generate an influx of cash independently, the recoverable

amount is determined for the cash generating unit to which the

asset belongs. In terms of property, plant and equipment, a field

represents a cash generating unit for EBN. When determining

value in use, estimated future cash flows are discounted at a

discount rate before tax based on the market rate plus a mark-up

for the asset’s specific risks.

If the recoverable amount (direct realizable value) of an asset is

less than the carrying amount, the carrying amount is written

down to the recoverable amount. An impairment loss is reversed,

possibly in part, if there is any change in the estimate used to

determine the recoverable amount.

Impairment losses are entered as a separate item in the

income statement.

Inventories

Inventories of materials are valued at average purchase price

or lower net realizable value. Inventories of condensate and

oil above ground are valued at their net realizable value at the

year end.

Receivables

Receivables are stated at face value less any allowance for

doubtful debts. The parties involved (mainly GasTerra BV) are

high-quality debtors with a contractually agreed payment plan

(< 45 days).

Cash and cash equivalents

Cash and cash equivalents covers cash in hand and at banks

and bank deposits with a residual term of less than 3 months.

Bank overdrafts are entered under current liabilities. Cash and

cash equivalents are stated at face value.

Shareholders’ equity

The dividend payable to the State of the Netherlands

(sole shareholder) is entered as a liability during the period for

which it is due to the shareholder in line with the management

agreement with the State. This excludes the proposed final

dividend which becomes a liability following approval by the

General Meeting of Shareholders.


Provisions

Provisions are recognized in the balance sheet if the following

requirements are met:

1) there is a legal or actual commitment arising from a past

event and

2) it is likely that funds will be withdrawn from the company in

order to meet the commitment and

3) a reliable estimate can be made of the amount of

the commitment.

If the effect of time value of money is material, provisions are

determined by discounting projected cash flows at an interest

rate before tax.

If a present value is calculated, the increase in the provision

over the course of time is treated as an interest expense.

Provisions for deferred taxes are entered at face value.

49

48


Provisions for abandonment costs covers estimated

decommissioning, dismantling and site restoration costs

forecast at the start of production based on current

requirements, technology and price levels. Revised estimates

in respect of these provisions give rise to a commensurate

adjustment in the cost price of the relevant property, plant

or equipment.

Provisions for subsidence covers specific incidental

commitments arising during the production phase.

Liabilities

Borrowings are initially shown at cost. This is the fair value

of the amounts received after deduction of transaction costs.

Borrowings are subsequently entered at the amortized cost

using the effective interest method. The amortized cost is

calculated by taking into account any discount or premium.

Interest expenses are entered in the income statement for the

period to which they relate.

Other current liabilities are also entered at amortized cost,

which is usually the same as the face value.

Contingent assets and liabilities

Contingent assets and liabilities are not recognized in the

balance sheet.

Emission rights

As a result of its involvement in joint ventures, EBN is subject

to legislation aimed at promoting the reduction of greenhouse

gas emissions. Emission rights are negotiated by the operator on

behalf of the partners in the joint ventures.


Emission rights are retained by the operator in order to meet

delivery commitments and are not recognized in the balance

sheet. A gain is recognized if EBN’s share of surplus emission

rights is sold by the operator. If the operator must purchase

additional emission rights, EBN recognizes a loss in respect

of its share.

Net sales

The net revenue arising from the sale of gas, oil, condensate

and services (underground gas storage, gas treatment and

transport) is recognized at the moment of delivery. This is the

moment ownership and risks in respect of the goods and

services supplied pass(es) to the purchaser. Revenue from

gas and oil production using assets in which EBN has a joint

share with other producers is recognized on the basis of

EBN’s relative interest therein.

Operating costs

Operating costs are calculated on a historical cost basis.

These costs cover the proportionate share in the costs incurred

by the joint ventures and administration costs. Work

subcontracted and other external costs includes the

payments due to the State.

Financial income and expense

Interest income and interest expense are recognized on a

time-proportion basis using the effective interest method.

Also entered under this heading are interest charges arising in

connection with the interest accrued on provisions.

Share of the profit of associates

The share of the profit of associates represents EBN’s

share in the latter’s profits for the financial year less the

relevant taxes.

Taxes

Income tax is calculated using the ‘balance sheet method’.

Tax expenses are entered in the income statement

except where they relate to an item entered directly under

shareholders’ equity.

Current tax expense is the anticipated amount of tax payable

on the taxable profit for the year based on the income tax rates in

place on the balance sheet date and any adjustments in the tax

payable for previous years.

Deferred tax liabilities are entered on the basis of the anticipated

consequences for tax purposes of temporary differences between

the carrying amount of assets and liabilities for tax purposes

and that for commercial purposes. Deferred tax liabilities are

calculated on the basis of the income tax rates and tax laws in

place or determined on the balance sheet date and expected to

be applicable when the deferred tax liabilities are met.

Financial derivatives

Financial derivatives are initially recognized in the balance sheet

at their fair value and are subsequently valued at their current fair

value on each balance sheet date. Gains and losses arising there

from are entered in the income statement. EBN does not use

hedge accounting.

51

50


IFRS

The consequences of the following standards have been

included in these financial statements:

IFRS 7, Financial Instruments – Disclosures

IAS 1 (Amendment), Presentation of Financial Statements –

Capital Disclosure

Their introduction has given rise to a number of additional reports.

The following amendments to standards and new inter-

pretations have been in place since 1 January 2006 but do not

affect the company’s financial statements for 2007:

(ii) IAS 21 (Amendment), Net Investment in a Foreign Operation

(iii) IAS 39 (Amendment), Cash Flow Hedge Accounting of

Forecast Intragroup Transactions

(iv) IAS 39 (Amendment), The Fair Value Option

(v) IAS 39 & IFRS 4 (Amendment), Financial Guarantee Contracts

(vi) IFRIC 4, Determining whether an Arrangement contains

a Lease

(vii) IFRIC 5, Rights to Interests arising from Decommissioning,

Restoration and Environmental Rehabilitation Funds

(viii) IFRIC 6, Liabilities arising from Participating in a Specific

Market – Waste Electrical and Electronic Equipment

EBN has not opted for early introduction of the following

new standards, amendments to standards and new IFRIC

interpretations which must be used for financial years

commencing on or after 1 January 2008 or later years:

(ix) IFRS 8, Operating Segments

(x) IFRIC 7, Applying the Restatement Approach under IAS 29,

Financial Reporting in Hyperinflationary Economies

(xi) IFRIC 8, Scope of IFRS 2

(xii) IFRIC 9, Reassessment of Embedded Derivatives

EBN anticipates that application of these new standards,

amendments to standards and new IFRIC interpretations will

not in future financial years have any significant effect on the

company’s financial statements.

Income statement and Balance sheet

Note 2007 2006*

Net sales 2 6,090 6,264

Levies 3 1,827 2,012

Other work subcontracted and other external costs 4 597 535

Depreciation and amortization 5 494 403

Operating expenses 2,918 2,950

Operating profit 3,172 3,313

Financial income 6 7 22

Financial expense 6 - 82 - 45

Share of the profit of associates 7 51 48

Pre-tax profit 3,148 3,338

Taxes 8 - 781 - 960

Net profit from continuing operations 9 2,367 2,378

Net profit 2,367 2,378

* In contrast to 2007, the amounts for 2006 have been rounded; this means that the (sub)totals shown here may differ from the totals

obtained by adding up the rounded figures.

Income statement in € million

53

52


Assets Year-end

Year-end

Note 2007 2006

Non-current assets

Property, plant and equipment 10 3,266 2,949

Associates 11 113 113

3,379 3,062

Current assets

Inventories 12 15 8

Receivables 13 1,414 1,112

Cash & cash equivalents 18 11

1,447 1,130

Total 4,826 4,192

Liabilities Year-end

Year-end

Note 2007 2006

Shareholders’ equity 14

Share capital 128 128

Retained earnings 34 162

162 290

Non-current liabilities

Provisions 15 1,270 1,110

Deferred tax liabilities* 8 79 83

Borrowings 16 1,161 812

Other 17 17 17

2,527 2,022

Current liabilities

Borrowings 16 895 896

Derivatives 20 55 39

Tax 289 150

Other 18 898 794

2,137 1,879

Total 4,826 4,192

Balance sheetin € million

* Deferred taxation on both the assets side and the liabilities side is now shown as one amount. This has led to a small adjustment to the 2006 year-end figure.

Statement of changes in shareholders’ equity and Cash-flow statement

Share

capital

Retained

earnings

Total

equity

Balance at 1 January 2006 129 108 237


Final dividend 2005 - 22 - 22

Adjustment of share capital - 1 - 1

Interim dividend - 2,301 - 2,301

Balance at 31 December 2006 128 162 290


Final dividend 2006 - 162 - 162


Balance at 31 December 2007 128 34 162

Retained earnings of € 34 million represent the proposed final dividend. The dividend for 2007 (including the proposed

dividend) totaled € 8,314 per share, slightly down on the figure for 2006 (€ 8,350 per share).

Statement of changes in shareholders’ equityin € million

55

54


2007 2006

Operating activities


Conversion to net cash provided by operating activities

Income from participations - 51 - 48

Dividend received 51 48


Change in working capital * - 214 - 132

Change in provisions 17 55

Interest on profit 74 24

received 7 10

paid - 38 - 27

Taxes on profit 781 960

received 18 14

paid - 728 - 933

Transfers 9 2

420 376

Net cash provided by operating activities 2,787 2,753

Investing activities

Property, plant and equipment - 608 - 623

Financial fixed assets - 0

Adjustment of share capital - - 1

Discontinuation of operations - -

Net cash used in investing activities - 608 - 624

Financing activities

Profit distribution - 2,495 - 2,241

Loans taken up 349 288

Repayment of loans

Change in debts to credit institutions - 26 - 167

Net cash provided by financing activities - 2,172 - 2,120

Change in cash & cash equivalents 7 9

Balance cash & cash equivalents at 1 January 11 2

Balance cash & cash equivalents at 31 December 18 11

* Change in working capital

Inventories - 7 0

Receivables - 302 - 65

- Current liabilities (excluding loans, debts to credit institutions and profit distribution) 95 - 67

- 214 - 132

Cash-flow statementIn € million

Notes to the financial statements of Energie Beheer Nederland B.V. and Notes to the income statement

(1) General informationUnless otherwise stated, all amounts quoted in these notes are

in € million.

When preparing the financial statements, estimates and

assessments must be made that affect the amounts reported

for assets and liabilities, income and expenditure and related

reporting of contingent assets and liabilities on the date of the

financial statements. The principles which, in the management’s

view, are not only the most relevant to reporting on the company’s

financial position and results but also place the highest demands

on the management’s ability to assess and evaluate matters

that are intrinsically uncertain are discussed in the notes to the

results that are affected by such evaluations and assessments.

The item provisions for abandonment costs is to a large extent

based on information about anticipated abandonment costs

provided by operators. In principle, EBN uses the information

about production and proven and probable gas and oil reserves

provided by operators.

Management would like to emphasize that future events

may differ from forecasts and that estimates regularly need

to be adjusted.

Notes to the financial statements of Energie Beheer Nederland B.V.

57

56


(2) Net sales

EBN only engages in one major activity, namely the exploration

and production of natural gas and petroleum. Other activities such

as storage and transport are considered subsidiary to the main

activity. EBN has therefore decided not to provide segmented

information in the notes to the annual figures for 2007. All sales

were achieved in the Netherlands.

In 2007, net sales from ordinary activities totaled € 6,090 million,

down € 174 million (-3%) on the figure for 2006. This drop

was caused by a 3% reduction in the average price of gas. In

2007, the average selling price of oil was 17% up on the figure

for 2006 although the average selling price of gas was 4% down.

The volume component is unimportant as lower gas sales were

offset by higher oil sales.

(3 & 4) Levies, other work subcontracted and other external costs

2007 2006

Levies 1,827 2,012

Other work subcontracted and other external costs 597 535

Levies deducted on behalf of the State were € 185 million less

than in 2006 due in particular to reduced Groningen production

in 2007.

Other work subcontracted and other external costs includes

production and transport costs.

At the end of 2007, the company did not employ any staff.

This means that the costs for the staff seconded to EBN by

DSM are also included under external costs.

(5) Depreciation and amortization

2007 2006

Depreciation of property, plant and equipment 405 316

Depreciation of property, plant and equipment by reason of abandonment 89 87

Impairments - -

Total 494 403

In 2007, depreciation and amortization rose by € 91 million

(+23%) due to the commissioning of extensive production

facilities.

(6) Financial income and expenses

2007 2006

Interest income 6 7

Other financial income 1 15

Total financial income 7 22

Interest expense - 38 - 30

Interest expense on discounted provisions - 21 - 13

Other financial expenses - 23 - 2

Total financial expenses - 82 - 45

Net financing costs - 75 - 23

The balance of financial income and expenses totaled

- € 75 million (2006: - € 23 million). This was caused by a

higher average cash shortfall in 2007 of € 682 million (2006:

€ 326 million) and higher average interest on commercial

papers, higher interest charges on long-term loans of € 9 million

arising from the take-up of new loans in 2007, an increase in

interest expense on discounted provisions due to extensions

and high unfavorable fair value results.

Notes to the income statement

Notes to the income statement and Notes to the balance sheet

(7) Share of the profit of associates

This covers: 2007 2006

GasTerra B.V. 14 14

NOGAT B.V. 29 27

NGT-Extension 8 7

Total 51 48

(8) Taxes

Tax on the profit from continuing operations totaled

€ 781 million and is broken down as follows:

2007 2006

Current tax expense

Current year 786 979

Adjustment for previous year - 9 -

Deferred tax expense

Arising from temporary differences 4 - 19

Total 781 960

At 24.8%, the effective tax rate in 2007 was lower than in

2006 (28.8%). In 2007, the nominal rate of corporation tax in the

Netherlands was 25.5% (2006: 29.6%).

The 0.7% difference between the effective tax rate and

the nominal tax rate is due in particular to the net profit of

associates and adjustments for the previous year. The difference

between deferred tax assets and deferred tax liabilities fell by

€ 4 million as a result of the following changes:

2007 2006

Balance at 1 January

Deferred tax assets 30 10

Deferred tax liabilities - 113 - 74

Total - 83 - 64

Changes in 2007

Tangible assets - 4 - 57

Participations 3 0

Provisions 7 24

Derivatives - 2 1

Change of rate - 13

Balance at 31 December - 79 - 83

Of which:

Deferred tax assets 34 30

Deferred tax liabilities - 113 - 113

Deferred tax assets and liabilities cover future tax assets and

liabilities arising from amongst other things temporary differences

between equity calculated on the basis of economic principles

and equity calculated on the basis of tax principles.

(9) Net profit from continuing operations

In 2007, net profit from continuing operations totaled € 2,367

million, down € 11 million (0.5%) on 2006.

59

58


Notes to the balance sheet

(10) Property, plant and equipment

The table below provides a breakdown of this item and details of any movements:

in € million

Total Production,transport and

storage facilities

Wells Reimburse-ments

Capitalizationof abandon-ment costs

Capital expenditure

& wells underconstruction

Balance at 01-01-2007

Cost 8,849 4,948 1,906 1,224 505 266

Depreciation and amortization 5,900 3,531 1,167 1,094 108 -

Carrying amount 2,949 1,417 739 130 397 266

Changes in 2007

Cost:

Capital expenditure 682 95 86 171 - 330

Put into operation - 119 108 - 2 - - 224

Capitalization of abandonment costs 137 - - - 137 -

Decommissioned - 21 - 21 - - - -

Other changes - 9 - - - - - 9

Depreciation and amortization:

Depreciation and amortization - 494 - 243 - 140 - 22 - 89 -

Decommissioned 21 21 - - - -

Other changes - - - - - -

317 - 29 54 147 48 97

Balance at year-end 2007

Cost 9,638 5,141 2,100 1,393 642 363

Depreciation and amortization 6,372 3,753 1,307 1,116 197 -

Carrying amount 3,266 1,388 793 277 445 363

Notes on capital expenditure

In 2007, capital expenditure totaled € 682 million, down 9%

on 2006 (€ 624 million). Of this, € 277 million related to onshore

activities and € 405 million to offshore activities.

Capitalization of estimated costs for abandonment of installations

totaled € 137 million (2006: € 273 million).


(11) Associates

Associates covers the company’s 40% share in GasTerra

BV of Groningen, its 45% share in NOGAT BV and a number

of smaller participating interests including its 12% interest in the

NGT-Extension. This latter interest is included under Other.

Movements for the balance sheet item Associates are as

follows:

GasTerraBV

NOGATBV

Other 2007Total

GasTerraBV

NOGATBV

Other 2006Total

Balance at 1 January 86 13 14 113 86 12 14 113

Share of profits 14 29 8 51 14 27 7 48

Dividend received - 14 - 29 - 8 - 51 - 14 - 27 - 7 - 48

Balance at 31 December 86 13 14 113 86 13 14 113

(12) Inventories

2007 2006

Materials 9 7

Condensate and oil 6 1

Total 15 8

(13) Receivables

These are broken down as follows:

2007 2006

Accounts receivable from associates 1,310 1,025

Other trade accounts receivable 100 80

Total trade accounts receivable 1,410 1,105

Other receivables and deferred items 4 7

Total 1,414 1,112

At € 302 million (+27%), receivables increased primarily due

to higher gas sales at the end of 2007.

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60


(14) Shareholders’ equity

2007 2006

Balance at 1 January 290 237


Final dividend for previous year - 162 - 22

Change in share capital - - 1


Balance at 31 December 162 290

Each month, EBN transfers the distributable profit to the State.

This profit is not therefore a source of funding for the company.

Current agreements with the shareholder on distribution of

profit determine to a large extent the company’s balance

sheet structure. The monthly transfers mean that EBN has a

relatively limited shareholders’ equity. On the other hand, cash

flow is excellent throughout the year. EBN’s financing policy is

based on unrestricted access to the capital market. A rating

for EBN is therefore held at Moody’s and Standard & Poors.

EBN’s current rating is a stable triple-A .

Issued and fully paid-up share capital totaled € 128 million in

2007 (2006: € 128 million) and consisted of 284,750 shares

with a nominal value of € 450.00 each.

The proposed final dividend of € 34 million will be paid once

the financial statements have been adopted by the General

Meeting of Shareholders. This amount is the balance of net profit

of € 2,367 million and the interim dividend of € 2,333 million

already paid out. The proposed final dividend has not been

deducted from the shareholders’ equity.

(15) Provisions

Provisions for abandonment costs covers commitments with a

term of 5 to 30 years.

Provisions for subsidence covers commitments with a term of

10 to 30 years.

Total provisions increased by € 160 million. This is the balance of

the following changes:

Abandonment costs

Subsi-dence

Total

Balance at 1 January 2007 1,056 55 1,100

Additions 0 3 3

Used - 7 - 2 - 9

Extensions 144 - 144

Interest 21 - 21

Balance at 31 December 2007 1,214 56 1,270

Extensions to the item abandonment costs relate to a

combination of an increase in activities, changes in estimated

abandonment costs and changes in end of production dates.

The discount rate used is 2% (real interest method) as in 2006.


(16) Short-term and long-term borrowings

2007 2006

TotalOf which

short-term TotalOf which

short-term

Debenture loans 1,071 - 778 -

Private loans 90 - 32 -

Commercial papers taken up 895 895 896 896

Total 2,056 895 1,708 896

No security has been provided in connection with outstanding

loans with a total remaining debt at the end of 2007 of € 2,056

million. The agreements for these loans contain clauses restricting

the provision of security.

Long-term borrowings

At the end of 2007, borrowings totaling € 889 million had

a residual term of more than 5 years. In November 2007,

the following three loans were taken up: CHF 400 million

(€ 239 million), CHF 125 million (€ 75 million) and JPY 10 billion

(€ 61 million). The following repayments are to be made on non-

current liabilities:

2010 272

2011 -

after 2011 889

Total 1,161

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62


The balance sheet item long-term borrowings is broken down as follows:

2007 2006

CHF 100 million 2.315 % public loan 2004/2010 60 62

JPY 5,000 million 1.59 % private loan 2004/2014 30 32




CHF 400 million 3.00 % public loan 2007/2014 241 -

CHF 125 million 3.00 % public loan 2007/2014 75 -

JPY 10,000 million 1.775 % private loan 2007/2017 60 -

1,161 810

Loans in foreign currencies have been converted into loans

in euros via swaps. All loans are fixed-interest loans. The

average interest rate for all non-current liabilities was 3.6%,

up 10% on 2006.

At the end of 2007, no repayments due had been entered

under current liabilities.

Short-term borrowings

This relates to short-term borrowings of € 895 million from

credit institutions and covers Commercial Papers.

EBN’s policy with regard to the management of financial

risks is set out in note 20 (financial derivatives).


(17) Other non-current liabilities

This relates to a debt of € 17 million to the State by reason of

the GasTerra BV stock dividend.

(18) Other current liabilities

This item is broken down as follows:

2007 2006

Trade accounts payable 207 207

Interest payments 12 11

Levies 363 190

Other liabilities 316 387

Total 898 794

(19) Commitments not shown in the balance sheet

Cooperation Agreements have been concluded within the

scope of the joint ventures referred to under Accounting principles

and determination of profit, resulting in long-term rights and

commitments (incl. capital expenditure).

65

64


(20) Financial derivatives

Policy in regard to financial risks

General

The most significant risks to which EBN is exposed are liquidity

risk and market risk (covering an interest rate risk and a currency

risk). In the short term, EBN’s financial policy aims to limit the

effects of exchange rate and interest rate fluctuations on profit

and in the long term to follow market exchange rates and market

interest rates. EBN uses financial derivatives to manage the

financial risks associated with its operations. The company does

not take up speculative positions with financial derivatives.

Liquidity risk

EBN had a commercial paper programme for € 2,000 million

as in 2006.

Debtor risk

Virtually all income from gas – based on contract dates – comes

from GasTerra. GasTerra is a high-quality debtor.

Interest rate risk

The company’s policy in regard to interest rate risk aims to limit

the interest rate risks arising from financing of the company and

thereby also optimize net interest expense. A maximum of 60% of

long-term loans (including any amounts repayable within a year)

will remain variable interest.

The table below gives a summary of variable-interest and

fixed-interest borrowings, ranked on the basis of maturity date.

Borrowings excluding debts to credit institutions are shown in

the summary below taking into account associated interest-rate

derivatives allocated for hedging purposes.

2007 2006

Fixed-interest

borrowings

Variable-interest

borrowings Total

Fixed-interest

borrowings

Variable-interest

borrowings Total

Within 1 year - - - - - -

Within 1 to 2 years - - - - - -

Within 2 to 3 years 272 - 272 - - -

Within 3 to 4 years - - - 280 - 280

Within 4 to 5 years 211 - 211 - - -

After 5 years 678 - 678 530 - 530

Total 1,161 - 1,161 810 - 810


The analysis of the sensitivity of borrowings and associated

financial derivatives to interest rate movements set out below

assumes an immediate 1% increase or reduction in interest rates

for all foreign currencies and maturity periods compared with levels

on 31 December 2007, keeping all other variables constant. A 1%

reduction in interest rates would result in an estimated reduction in

net financing expenses of € 9 million based on the composition of

the financial instruments at 31 December 2007. A 1% increase in

interest rates would result in an estimated increase in net financing

expenses of € 9 million. The sensitivity of the market value of

financial instruments at 31 December 2007 to changes in interest

rates is shown in the table below:

Carryingamount

Marketvalue

Change inmarket

value +1%

Change inmarket

value -1%

Cash & cash equivalents 18 18 - -

Short-term borrowings - 895 - 886 1 - 1

Long-term borrowings - 1,161 - 1,130 51 - 54

Cross currency swaps used for long-term borrowings - 45 - 45 - 1 1

Forward-exchange contracts used for short-term borrowings - 10 - 10 - -

Forward-exchange contracts used for hedging - - - -

In 2006, overall sensitivity to interest rate changes in terms of

the market value of the financial instruments lay between + € 38

million (1% increase in interest rates) and - € 41 million (1% cut in

interest rates).

67

66


Currency risk

EBN’s policy is to cover the currency risks arising from buying

and selling in full the moment the accounts receivable or accounts

payable manifest themselves.

In 2007, EBN covered USD 110 million of its estimated net

cash flow (investments) in USD, in 2006 USD 190 million.

The following analysis of the sensitivity of net debt (including

financial derivatives) to fluctuations in exchange rates compared

with the euro assumes a 10% increase or reduction in all exchange

rates vis-à-vis the euro compared with levels on 31 December

2007, keeping all other variables constant. A 10% increase results

in the foreign currencies becoming stronger compared with the

euro. A 10% reduction results in a weakening in foreign currency

exchange rates compared with the euro. In 2006, sensitivity to

changes in exchange rates that might affect profit lay between +

€ 16 million (10% increase in all exchange rates) and - € 14 million

(10% cut in all exchange rates).

Carryingamount

Market value

Change in value

+ 10%

Change in value

- 10%

Cash & cash equivalents 18 18 - -

Short-term borrowings - 895 - 886 - 54 44

Long-term borrowings - 1,161 - 1,130 - 121 99

Cross currency swaps used for long-term borrowings - 45 - 45 127 - 104

Forward-exchange contracts used for short-term borrowings - 10 - 10 54 - 44

Forward-exchange contracts used for hedging - - 8 - 7

Credit risk

EBN limits the credit risk by setting credit limits for each financial

institution and by only doing business with financial institutions

with a high credit rating. On the balance sheet date, there were

no significant credit risk concentrations.

With regard to treasury activities, the company ensures

that financial transactions are only effected with parties with a

Moody’s credit rating of P1 (for short-term instruments) or A2 (for

long-term instruments).

The maximum credit risk to which EBN is exposed coincides

with the carrying amount for the financial assets shown in the

balance sheet, including financial instruments with a positive

market value. On the reporting date, there were no significant

agreements or financial instruments available that might reduce

the maximum credit risk to which the company is exposed.


Market value of financial instruments

The table below gives a summary of the carrying amount and estimated

market value of financial instruments:

31 december 2007 31 december 2006

Carryingamount

Market value

Carryingamount

Market value

Assets

Financial derivatives 4 4 - -

Cash & cash equivalents 18 18 11 11

Liabilities

Long-term borrowings 1,161 1,130 810 791

Other long-term liabilities - - - -

Short-term borrowings 895 886 896 890

Financial derivatives 59 59 39 39

The market value of financial instruments is determined on the basis

of the following methods and starting points: cash & cash equivalents

and short-term receivables are entered at their carrying amount. Given

the short maturity period of these instruments, this is virtually the market

value. The market value of borrowings and financial derivatives is based

on calculations, market price quotations or price information obtained

from intermediaries.

69

68


The table below gives a summary of the carrying amount of

financial derivatives broken down by type and purpose:

Current assets

Current liabilities Total

Interest rate swaps - - -

Currency swaps - - 39 - 39

Total financial derivatives in relation to borrowings - - 39 - 39

Forward-exchange contracts - - -

Currency options

Balance at 31 December 2006 - - 39 - 39

Interest rate swaps - - -

Currency swaps 4 - 59 - 55

Total financial derivatives in relation to borrowings

4 - 59 - 55

Forward-exchange contracts - - -

Currency options - - -

Balance at 31 December 2007 4 - 59 - 55


(21) Net debt

2007 2006

Borrowings

Long-term borrowings 1,161 810

Short-term borrowings 895 896

Total borrowings 2,056 1,706

Cash & cash equivalents - 18 - 11

Financial derivatives, assets (where applicable, see also

note 20)

- 4 0

Financial derivatives, liabilities (see also note 22)

59 39

Net debt 2,093 1,734

Gearing ratio 93% 86%

(22) Notes on the Cash-Flow Statement

The indirect method was used to prepare the Cash-Flow

Statement and a comparison was made between the opening

balance sheet and the closing balance sheet. Those changes that

did not lead to a cash flow, such as exchange differences, value

adjustments and transfers between balance sheet accounts,

were subsequently eliminated.

The financial flows of the Joint Ventures are fully consolidated.

The changes in the Cash-Flow Statement can largely be

derived from the statements of changes in the relevant balance

sheet items.

71

70


(23) Related parties

GasTerra BV and EBN are associates on the basis of the Gas

Act. Acting with its partners, EBN has concluded 78 contracts

with GasTerra BV in which EBN’s interest per contract totals at

least € 5 million.

As shareholder, the State must also be regarded as a

related party.

Heerlen, 8 April 2008

Executive Board

J.D. Bokhoven

J.W.P.M. Haenen

D.G. Roest

(24) Director remuneration

In 2007, all members of the Executive Board had a contract of

employment with DSM. DSM has made the Executive Board and

staff available to EBN. For the provision of 4 Board members, EBN

paid DSM a total of € 1.1 million (2006: € 1.3 million). Changes to

the Executive Board can be found in the annual report.

In 2007, the members of the Supervisory Board were paid

€ 0.1 million (2006: € 0.1 million).

Supervisory Board

R.M.J. van der Meer

A.H.P. Gratama van Andel

G-J. Kramer

H.M.C.M. van Oorschot

Profit appropriation and Auditors’ report

Profit appropriation

Profit appropriation takes place in accordance with the

provisions of Article 21 of the company’s Articles of Association:

• Of the profit, an amount of € 3million shall be paid to the

shareholder each year;

• Oftheremainder,partshallbepaidouteachyearbywayofa

special profit distribution;

• Theremaindershallthenbepaidtotheshareholder.

73

72


Report on the financial statements

We have audited the accompanying financial statements 2007

of Energie Beheer Nederland B.V., Utrecht, which comprise the

balance sheet as at December 31, 2007, the income statement,

statement of changes in equity and cash flow statement for the

year then ended and a summary of significant accounting policies

and other explanatory notes.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation and

fair presentation of the financial statements in accordance with

International Financial Reporting Standards as adopted by the

European Union and with Part 9 of Book 2 of the Netherlands

Civil Code, and for the preparation of the report of the Board of

Directors in accordance with Part 9 of Book 2 of the Netherlands

Civil Code. This responsibility includes: designing, implementing

and maintaining internal control relevant to the preparation and fair

presentation of the financial statements that are free from material

misstatement, whether due to fraud or error; selecting and applying

appropriate accounting policies; and making accounting estimates

that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on the financial

statements based on our audit. We conducted our audit in

accordance with Dutch law. This law requires that we comply

with ethical requirements and plan and perform the audit to obtain

reasonable assurance whether the financial statements are free

from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the financial

Auditors’ report

To the General Meeting of Shareholders of Energie Beheer Nederland B.V.

statements. The procedures selected depend on the auditor’s

judgment, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud

or error. In making those risk assessments, the auditor considers

internal control relevant to the entity’s preparation and fair

presentation of the financial statements in order to design audit

procedures that are appropriate in the circumstances, but not

for the purpose of expressing an opinion on the effectiveness of

the entity’s internal control. An audit also includes evaluating

the appropriateness of accounting policies used and the

reasonableness of accounting estimates made by the Board

of Directors, as well as evaluating the overall presentation of the

financial statements.

We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair

view of the financial position of Energie Beheer Nederland B.V. as

at December 31, 2007, and of its result and its cash flows for

the year then ended in accordance with International Financial

Reporting Standards as adopted by the European Union and

with Part 9 of Book 2 of the Netherlands Civil Code.

Report on other legal and regulatory requirements

Pursuant to the legal requirement under 2:393 sub 5 part e of the

Netherlands Civil Code, we report, to the extent of our competence,

that the report of the Board of Directors is consistent with the

financial statements as required by 2:391 sub 4 of the Netherlands

Civil Code.

Roermond, 8 April 2008

Ernst & Young Accountants

Signed by

P.L.C.M. Janssen

Summary

EBN ten-year SummaryAmounts in millions of euros

IFRS2007

IFRS2006

IFRS2005 2005 2004 2003 2002 2001 2000 1999 1998

No. of EBN participations in:

production onshore 20 14 14 14 14 14 14 14 14 14 14

production offshore 95 85 85 85 77 77 70 66 63 59 58

exploration 26 17 19 19 22 26 31 40 3

Sales (billion m³, 100%) 64 66 67 67 72 63 64 66 60 62 66

from Groningen (billion m³, EBN share) 12 13 13 13 13 11 10 10 8 8 9

from small fields (billion m³, EBN share) 15 15 15 15 18 15 17 19 18 19 19

Total sales (billion m³, EBN share) 27 28 28 28 30 26 27 28 26 26 28

Percentage change compared with previous year (100%)

- 3 - 1 - 7 - 7 + 15 - 4 - 4 + 10 - 3 - 6 - 6

Average selling price of gas (€ cents per m³, 35.17 MJ/m³)

20.67 21.52 16.46 16.46 13.17 13.88 12.55 13.93 11.33 7.39 8.99

Sales from:

continuing operations 6,090 6,264 4,883 4,883 4,230 3,782 3,633 4,146 3,144 2,122 2,610

discontinued operations 3,384 3,384

Total sales 6,090 6,264 8,267 8,267 4,230 3,782 3,633 4,146 3,144 2,122 2,610

Percentage change in sales from continuing operations compared with previous year

- 3 + 28 + 15 + 15 + 9 + 7 - 12 + 32 + 48 - 19 - 12

Net profit from:

continuing operations 2,367 2,378 1,673 1,637 1,534 1,380 1,296 1,590 1,184 711 874

discontinued operations 2,154 2,154 163

Total net profit 2,367 2,378 3,827 3,791 1,534 1,380 1,296 1,590 1,184 874 874

Net profit from continuing operations as a % of sales

39 38 34 34 36 36 36 38 38 34 33

Property, plant and equipment:

Capital expenditure onshore 277 146 121 121 143 138 125 80 62 93 100

Capital expenditure offshore 405 478 446 446 207 316 325 225 246 145 264

Abandonment 137 273 149

Total capital expenditure 819 896 716 567 350 454 450 305 308 238 364

Depreciation and amortization 494 403 374 376 337 344 334 342 347 324 319

Shareholders’ equity* 162 290 237 437 348 329 280 129 129 129 129

Gearing ratio (%) 93 86

Outside capital 4,664 3,902 3,437 2,977 2,730 2,592 2,746 2,728 2,775 2,757 2,692

*Changed with effect from 2002: incl. proposed dividend, since 2005 IFRS: excl. proposed dividend December

Key figures

2007 2006

Number of participations 141 116

of which exploration-related 26 17

Sales volume, EBN share (billion m³)¹ 27 28

Sales (from continuing operations) 6,090 6,264


State income via EBN 4,975 5,350

Capital expenditure 819 896


Number of employees 61 52

¹ This includes the proportional part of sales from onshore production licenses in

which EBN has no equity share but is entitled to a proportional part of the revenues.

All quantities in this report are expressed in billion m³ of natural gas (35.17 Mj

at 0 degrees Centigrade) based on EBN’s participation percentage.

Key figures

EBN Utrecht EBN Heerlen

Moreelsepark 48 Het Overloon 1

3511 EP Utrecht 6411 TE Heerlen

P.O. Box 19063 P.O. Box 6500

3501 DB Utrecht 6401 JH Heerlen

T +31 (0)30 23 39 001 T +31 (0)45 57 87 222

F +31 (0)30 23 39 051 F +31 (0)45 57 87 171

E [email protected] E [email protected]

Copy

Tekst & Speech, Haren

Design and Layout

Bovil DDB, Eindhoven

Photography

Frank Tielemans Fotografie B.V., Eindhoven

With the exception of the images on page 2, 8, 14, 34, 40 & 44

Print

Strijbos Grafische Groep, Waalre

Coordination EBN

M.J.L. Caviet

© 2008 EBN

All rights reserved. Content publication or reproduction by print, photocopy,

microfilm or other means is prohibited without the prior written consent of EBN.

Annual Report 2007

Investing for the future

EB

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