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Annual Report 2016EBN and transition

EBN - Annual Report 2016 page 2

1. Foreword 3

2. About EBN 82.1 Profile 8

2.2 Organisation chart 9

2.3 Businessmodel 11

2.4 Theoilandgaschain 15

3. Strategy 183.1 Trends 18

3.2 SWOTanddilemmas 20

3.3 Vision,missionandstrategy 23

3.4 Materialtopics 24

3.5 Trends,implications,risksandopportunities 26

4. Results for 2016 274.1 EBNgeneralobjectives 29

4.2 Ourstakeholders 29

4.3 Technicalresults 33

4.4 Economicandsocialresults 43

4.5 Prospects2017 47

5. Governance and Risk 535.1 Riskmanagement 53

5.2 Risks 58

5.3 Corporategovernance 64

6. Report by the Supervisory Board 726.1 Generalinformation 72

6.2 CompositionoftheSupervisoryBoard 73

6.3 CompositionoftheExecutiveBoard 73

6.4 MeetingsoftheSupervisoryBoard 74

6.5 ApprovalsbytheBoard 74

6.6 CooperationEZ-EBN 74

6.7 StrategyofEBN 74

6.8 Issuesdiscussed2016 74

6.9 EvaluationoftheExecutiveBoard

andself-evaluation 75

6.10MeetingsoftheAuditCommittee 75

6.11Meetingsoftheremunerationcommittee/

selectionandappointmentcommittee 76

6.12FinancialStatements 76

7. About this report 79

8. Financial Statements 84

9. Annexes 1309.1 Interactionwithourstakeholders 131

9.2 ThepeopleofEBN 135

9.3 Governancetable 137

9.4 Remunerationreport 139

9.5 GRIIndex2016 141

9.6 10-yearkeyfigures 150

9.7 Glossaryandreferencelist 151

9.8 Contactinformation 153

interviews Andre Faaij

Energy Academy Europe 16

Hanneke Brouwer and Ruud Cino

Ministry of Economic Affairs and

Ministry of Infrastructure and Environment 51

Ante Frens

NAM 70

Bernard Reith

Total E&P Nederland BV 77

Tableofcontents


By2050,theNetherlandswillbarelyemitgreenhousegases.ThatisthechallengefacingtheNetherlandsandwhichisexpressedintheEnergyAgendathatwaspresentedbytheMinistryofEconomicAffairsinearlyDecember2016.Inshort,togetherweallneedtosavemoreenergy,investmoreinrenewableenergyanduselessnaturalgasandotherfossilfuelstoenabletheNetherlandstocontributetotheParis2015climatetargets.

1.Foreword


Natural gas is seen by many in the Netherlands (and

beyond) as part of the climate problem. In fact, that is

alsothecase;naturalgasisthecleanestfossilfuelaround

butCO2isreleasedwhenburninggas.Inthatrespect,gas

hasamiddlepositionontheso-called‘Ladderof7’,asit

wasintroducedafewyearsago,indicatingthebestwayto

reduceCO2.Inorder:saveenergy,userenewablesources,

green gas, Dutch natural gas, imported natural gas, oil

andfinallycoal...

Throughtherecent‘customisedapproach’tonaturalgas,

the use of innovations and renewable gases and by a

clever interplay with other energy sources, the energy

supply as a whole can remain climate neutral but also

reliable and affordable. In this respect, gas undeniably

playsahugeroleintheenergytransition,alsobecauseit

isthecleanestofallfossilfuels.Itisuptous,EBN,and

theotherpartiesinthegassector,toconveythisproperly.

The Energy Agenda describes that role for gas in the

decadestocome.Makingthemostofsmallfieldsplaysan

important role–partlydue to adecrease inproduction

from the Groningen field. Despite the economic and

social headwinds, we still see sufficient possibilities.

Thereisestimatedtobe300billioncubicmetersofnatural

gasintheNorthSea.Weareconvincedthatalargepartof

this deposit can be extracted in a cost-effective and

responsible manner. Possibly, however, not in the

traditionalmanner. The timeswe live in require a far-

reaching form of cooperation, innovative power and

creativity.Workingtogether,inamoresustainableway,

andconsideringsocialinterests,andcomplementingand

reinforcingeachotherwherethatispossible.EBNwould

like to, and should, play an important role in this; we

wouldliketomakeourknowledgeandexpertiseavailable

togetthebestresult.

In 2016, there were earthquakes in Groningen. The

inhabitants of Groningen feel unsafe. In 2016, EBN

developedactivitiesinavarietyofwaystocontributetoa

saferandbetterproductionoftheGroningenfield,inline

withitsmissionandthepolicyoftheMinisterofEconomic

Affairs.

We started various studies aimed at contributing to a

betterunderstandingoftheprocesses inthesubsurface

around the quakes. This work complements the

investigationscarriedoutbyNAMandotherpartiessuch

asSodMandKNMI.

Wewill alsodoourutmost in the coming years for the

‘Decommissioning and re-use’ issue. Together with

NOGEPA, IRO and theMinistry of Economic Affairs we

designedtheMasterPlanDecommissioningandRe-use

lastyear,whichistoformthebasisforsafe,efficientand

sustainabledecommissioningandre-use.Thisyearthat


will take shape in the formof the launchof aNational

Platformincollaborationwithallstakeholders.EBNhas

takenthe leadingrole inthisproject,becausethissuits

ourroleaspartnerrepresentingthepublicinterestinall

gasfieldsontheDutchpartoftheNorthSea.

AnothertopicwhereEBNwasactiveinthepastyearisthe

supportoftheMinistryofEconomicAffairstospeedup

the development of geothermal energy and ultra deep

geothermal energy in the Netherlands. A broader

integration of geothermal heat in a future CO2 neutral

energymixisessentialtoreachingourclimategoals.EBN

is convinced that the Netherlands offers many

opportunities deep underground to further develop

geothermalenergy.EBNwantstocontributetothissocial

challenge with the knowledge we have accrued of

entrepreneurshipinthesubsurface.

Thisbringsmetotheresultsfor2016.After2015,thelast

yearinfinancialtermswasalsonotagoodyear.Ournet

profitdecreasedfurthertoEUR333million.Thisdecrease

hastodowiththelowgasprices,therelatedlowlevelof

investment but also the lower production from the

Groningenfieldanddecliningproductionfromthesmall

fields.Inafewyears,ourcontributiontothenaturalgas

revenuesdecreasedfromEUR6.9billion(2012)toEUR1.2

billion.

Thethemeofourannualreport is‘EBNandtransition’.

This is visible in different ways. To start with, the

appearanceofthereport.EBNispublishingonlineforthe

first timeandwehave setupa specialwebsite for that

purpose.Thethemeisreflectedintherecalibrationofour

strategy. In addition to our active and critical role as a

partner inthedevelopmentofoilandgasfields,weare

taking a more proactive role in the decommissioning

‘Wewilldoourutmostinthecomingyearsforthe‘Decommissioningandre-use’issue’


issue. We are also examining how our knowledge of

entrepreneurship in thesubsurfacecanbeused inultra

deepgeothermalenergyandCO2captureandstoragefor

example. Issueswherewe believe that EBN can have a

significantimpact.

Wehavediscussedthetheme“EBNandtransition”with

our stakeholders, which you can read about in the

interviews with four of them. Key players in our

environmentthatwithoutexceptionaredriventomake

theenergytransitionasuccess.

Finally: what is energy (and what is the difference to

electricity)? What is the challenge in the energy

transition? In the past year, EBN has created an

infographic that brings all information on energy

consumptionandenergyproductionclearlytogether.Not

only that, it encourages an informed and substantive

discussion on energy transition and opens schools of

thoughtonhowbesttogreenifyourenergysystem.We

arehappythatthisinfographichasbeenenthusiastically

received.Thishasencouragedustomakeayearlyupdate

so that we can continue to follow the progress of the

energy(R)evolution.Gotowww.ebn.nl/nederland-land-

energie/fortheinfographic.

In2017,wewanttocontinueonthesamepath.Inaddition

toourstatutorytaskofmakingoptimaluseoftheDutch

oilandgaswells,weareusingourknowledge,experience

and influence tomakea substantial contribution to the

accelerationoftheenergytransition.

Jan Willem van Hoogstraten

CEO From left to right: Berend Scheffers, Jan Boekelman, Jan Willem van Hoogstraten en Thijs Starink


Key figures 2016 2015

Number of joint operations 198 200

Of which exploration 46 48

Sales EBN part (bln Nm3) 20 21

Turnover 3,094 4,766

Net profit 333 450

Payments to the State 1,277 2,134

Investments 281 564

Depreciation and impairment 789 1,217

Social

Number of employees 81 80

Absenteeism 4.9% 3.8%

Environment

CO2-emissions 772kton

Methane emissions 6.0kton

Energy consumption 20.2PJ


2.1 Profile

EnergieBeheerNederland(EBN)isanorganisationthatinvestsintheexploration,extractionandstorageofgasandoilonbehalfoftheDutchState.OurobjectiveistogetvalueassafelyandeconomicallyresponsiblypossiblefromtheDutchsubsurface.EBNisapolicyparticipation.100%ofthesharesareheldbytheState.ThesharesaremanagedbytheDutchMinistryofEconomicAffairs.WepartiallyimplementtheenergypolicyoftheMinistryofEconomicAffairs.

2.AboutEBN


EBNisapartnerinjointoperationswithvariousoilandgas

companies.Theparticipationinthesejointoperationsasa

ruleamountsto40percent,insomecases,theparticipation

amounts to up to 50%. The joint operations are non-

operatedventures(NOVs):asapartnerweare involvedin

theprojectsinwhichweinvest,butarenotthepartythat

performs the daily work; that is the task of the relevant

operator,usuallyanoilandgascompany.Ourcoreactivities

are investing in non-operated ventures (NOV),managing

these NOVs and the development and application of

knowledgefortheseNOVs.Thisisfurtherexplainedinthe

businessmodelonpage10.

EBNalsohasholdings in infrastructure:offshorepipeline

systemsandgasstorage.Inaddition,wehavea40percent

interestinGasTerraB.V.,inwhichwehavepartneredwith

theState,ShellandExxonMobil.Wesellgas throughthis

gaswholesaler.

2.2 Organisation chart EnergyBeheerNederlandhas81employees,allofwhomare

working in Utrecht. We have an Executive Board and a

SupervisoryBoard.Thereisadivisionoftasksintofunctional

areas: General Management, Asset Management,

Technology and Finance. The CEO leads themanagement

teamandisthesolestatutorydirector.

CEO

Legal HR

Communicationsand Public Affairs

OfficeManagement

AssetGroups

GasTerra

AssetSupport

Production and Infrastructure

Exploration

Expertise

BusinessControl

Accounting& Reporting

Treasury

ICT

Director AssetManagement

DirectorTechnology

DirectorFinance

Commercial Department

Internal Audit

Roadmaps• Investing in new

knowledge, analyses and instruments

• Learning from operational activities

• Insight into opportuni-

ties for new develop-ment

FinancialSubstantial cash flows and capital

FinancialSubstantial cash flows and capital

ProducedProjects in exploration and production, co-owner of oil and gas infrastructure both onshore and offshore

ProducedProjects in exploration and production, co-owner of oil and gas infrastructure both onshore and offshore

IntellectualResearch for the explora-tion and production of oil and gas, datawarehouse Dutch E&P sector

IntellectualResearch for the explora-tion and production of oil and gas, datawarehouse Dutch E&P sector

HumanEmployees

HumanEmployees

SocialJoint operations, 40%-stake in GasTerra

NaturalOil and gas reserves

Sharing knowledge• Marketing new

opportunities• Innovation• Recommendation to

Ministry of Economic Affairs

NOV management• Collating technical,

commercial, legal and business information

• Managing participations• Advising• Exchanging knowledge

Knowledge Effects

Valuecreation

Economy• Profits/prosperity• Employment• Economic activity

Energy supply• Security of provision• Security of supply

Environment• Environmental impact• Greenhouse gas

emissions

Developingknowledge

Applyingknowledge Investing Results Social

impact

Core activityInput Output Impact

Developing recoverable oil and gas reserves

Studying drilled oil and gas reserves

Exploring possible oil and gas deposits

Investing in projects

Feedback

Optimising productionof oil and gas reserves

SocialJoint operations, 40%-stake in GasTerra

NaturalOil and gas reserves



2.3 Business modelInourbusinessmodel,weassumethesix‘capitals’from

the frameworkof the International IntegratedReporting

Council(IIRC):financialcapital,producedcapital,human

capital, intellectual capital, social/relational capital and

natural capital. These capitals are the input for our core

activitieswithwhichwecreateeconomicandsocialvalue.

2.3.1 The input: our six capitalsThe reserves of oil and gas resources in the Dutch

subsurface, as well as our knowledge and collaboration

withinthesectorarethemainelementsoftheinputfor

EBN.

See the figure on page 10.

2.3.2 Core activitiesThecoreofourbusinessmodelconsistsof threeactivities:

investing in our NOVs, managing our NOVs and the

developmentandapplicationofknowledgeforourNOVs.

Investing in our NOVs

Creating gas and (to a lesser extent) oil reserves is a

guiding principle in EBN’s investments. In actual

exploitation,wearepartnerinexploration.Weinvestin

makingthemostofexistingfields.Whereinfrastructure

(pipelines,platforms)hascometotheendofitslifecycle,

weinvestineffectivedecommissioningand/orre-use.We

have a leading role in the decommissioning and the

possiblere-useofplatforms.Weareadrivingforcebehind

improvingsustainabilityperformanceandhaveanactive

approachtoconsolidatingpublicbackingforouractivities.

Managing our NOVs

With knowledge and analyses, EBN can directly influence

operators in their choices and decisions. We encourage

operators,basedonourinsights,tocontinuetoinvestinthe

exploration and extraction of Dutch natural gas where

possible and track the performance of our participations

closely. This means we can make adjustments where

necessaryandpossible.

We use a bi-annual standardised analysis that includes

operationalcostsandrates,withwhichwemonitorhowthe

participations offshore and projects are performing

compared to other explorations and production. We

encouragethesharingofBestPracticeswherepossible,so

thatoperatorscanlearnfromeachother’sknowledgeand

analysis.

Knowledge development and application for our NOVs

ThebackboneinthebusinessmodelofEBNisknowledge

of resources in thesubsurface.Wegather this fromour

participationsintheexplorationandextractionprojects.

We also invest in our own studies and are involved in

studies of partners. We generate insights into

opportunitiesandpossibilitiesfornewdevelopments.We

createvaluebyusingourknowledgeintheentireDutch

oil and gas industry. We share the knowledge we gain

withpartiesinsideandoutsidethesector.Wealsoadvise

the Ministry of Economic Affairs. We also use our

knowledgetosupporttheexplorationoftheMinistryof

Economic Affairs into the possibilities of ultra deep

geothermalenergy.

2.3.3 The output: What is the result? To EBN, knowledge and economic value are the most

important elements of the output. Both are used as

investmenttosafeguardthecontinuityofgasproduction

intheNetherlands.

See the figure on page 10.

2.3.4 The impact: social effectsOur activities, and those of other parties in the chain,

haveanimpactonsociety-particularlyontheeconomy,

energy supply, the living environment and the

environment. The impact can be positive as well as

negative.

Positive impact

EBN shares operational and technological knowledge

withpartnersinthesector.Theeconomicvaluecreation

isthecashflowtotheDutchState:thenetearningsplus

levies and taxesflow to the treasury.Moreover, the oil

and gas industry is a powerful motor for the (local)

economy. The industry provides direct and indirect

employment.EBNsharesitsknowledgeofthesubsurface

to accelerate the energy transition, for example in the

fieldofgeothermalenergy.


Thepossessionofgashashadamajor influenceonthe

prosperity in the Netherlands. The extraction and the

stocks mean the Netherlands is still largely energy

independent.TheDutchcitizensandbusinessescanrely

on deliveries of gas, and at an acceptable price. The

NetherlandsplaysasignificantroleintheEuropeangas

sectorbecauseofthegasexportsandthegasinfrastructure,

whichhasdevelopedintoagashubfortheEuropeangas

market.

Negative impact

In Groningen, the extraction of natural gas affects the

local livingenvironment.Earthquakes result indamage

to buildings and infrastructure and lead to a feeling of

insecurityamongthepopulation.

Theextractionofoilandgasandalsotheconsumptionof

these fossil fuels cause emissions that harm the

environment and contribute to the greenhouse effect.

Thereisalsoa(verylimited)riskofdirectpollution,for

examplebyleaks.Theinfrastructureatoilandgasfields

(offshoreaswellasonshore)thatisapproachingtheend

ofitsusefullifeisalwaysapointofattention:platforms

mustbeclearedawayorgivenanotherfunction.Offshore

pipelines must be left behind clean and safe. In some

cases,theyneedtoberemoved.

UPSTREAM MIDSTREAM DOWNSTREAM

Treatmentand/or

compression

Nationalhigh pressure gas grid

Regionallow-pressure

gas grid

Quality control

Gas storage

Hortculture

Households/offices

Electricity generation

Industry

Refineries

Oil storage

Filling stations

Onshore and offshoregas and oil extraction

Gas

Oil

LPG

Condensate

Products for refining

Transport


exploration designdrilling drilling and construction production decommissioning

and re-use

exploration designdrilling drilling and construction

decommissioningand re-useproduction

Treatmentand/or

compression



gas grid

Quality control

Gas storage

Hortculture

Households/offices


Industry

Refineries

Oil storage

Filling stations


Gas

Oil

LPG

Condensate


Transport


The development of an oil or gas field (upstream)

The illustrationbelowshowshowthedevelopmentofa

gas field takes place, from finding oil or gas and then

explorationtorestorationoftheinfrastructure.

Exploration: EBN conducts studies into possible new

depositsofgasandoilbasedonregionalknowledgeand

seismicimages.

Start exploration: along with licence holders, we test

possiblegasoroilresourcesthroughtestdrilling.

Construction: together with our partners, we develop

economicallyreserves.

Gas production: the reserves are produced as long as

economicallyviable;atthisstage,theinvestmentsearn

themselvesback(asarule).Thegasfindsitswayinthe

chaintotheendusers.

Clean up:onceagasproductionhascometotheendofits

lifespan, the wells are permanently closed and the

infrastructureisdecommissioned.Thesurroundingsare

restoredtotheirformercondition.

StateSupervisionofMinesoverseesoilandgasdiscovery

and extraction. For more detailed information on the

developmentofanoilorgasfield,visit

www.hoewerktgaswinnen.nl.

Treatmentand/or

compression



gas grid

Quality control

Gas storage

Hortculture

Households/offices


Industry

Refineries

Oil storage

Filling stations


Gas

Oil

LPG

Condensate


Transport


2.4 The oil and gas chainBovenstaandeillustratiegeeftaanwatonzebetrokkenheid

isbijdewinningvanolieengas.IndeketenspeeltEBNop

onderdelen een rol. De keten is ingedeeld in drie

activiteitenstromen: upstream, midstream en down-

stream.

2.4.1 Upstream The upstream activities relate to the search for and

extractionofnaturalgasandpetroleum.Theseactivities

takeplacebothonshoreandoffshore.Alongwithoiland

gas companies that carry out the work, EBN invests in

searchingforandextractinggasandoil.Thisbelongsto

thecoreactivityofEBNanditspartners.Thedevelopment

of gas and oil resources is done in a number of steps.

These are reconnaissance, exploration, construction,

productionandthefinalcleanup(readmoreaboutthis

onpage 14). In the productionphase thenatural gas is

transportedtoprocessingplants,whereitispreparedfor

introduction into the national gas grid. Wholesale

companyGasTerra,whichEBNisco-shareholderof,buys

the gas from EBN. With two seats on the Supervisory

Board,EBNisinvolvedintheadministrationofGasTerra

B.V.EBNhasnoactiveroleinthestepsthatfollowafter

thesaleoftheowngas.

2.4.2 Midstream The production companies sell the natural gas and oil

mostly to wholesale companies, including GasTerra.

GasTerrasellsgas tovariousmiddlemenandendusers.

Thenaturalgasistransportedthroughpipelinestousers

intheNetherlandsandabroad.Producedpetroleumand

natural gas condensate is sometimes transported with

pipelines,butalsobyvessel(sea)ortransportedbylorry/

train.Because the timeofuseofnaturalgasmaydiffer

fromthetimeofproduction,storagecapacityisneeded.

The gas storage can be filled if supply is higher than

demand,usuallyinthesummer.Inwinterthereismore

demand for natural gas, the gas storage can then be

emptied.EBNisthejointowneroffourundergroundgas

storagefacilities.Asaresult,EBNhassomeinvolvement

inmidstreamactivities.

2.4.3 DownstreamIntheNetherlands,naturalgasfinds itswaytotheend

userviatheregionallow-pressuregasgrid.Naturalgasis

used as household fuel (for cooking and heating), in

electricity generation (central and decentral), for

industrial processes (high temperature) and as a raw

material(suchasartificialfertiliser).Oilisusedasaraw

material in industrial processes (e.g. manufacturing

plastic, nylon and rubber) and is refined into transport

fuels, such as petrol, diesel and kerosene. EBN has no

explicitroleindownstreamactivities.

_DSC8681

_DSC8692

_DSC8700


AndreFaaij,ScientificDirectoroftheEnergyAcademyinGroningenandUniversityProfessorofEnergySystemAnalysisattheUniversityofGroningen,speaksaboutESTRAC.InOctober2016,TNO,ECNandEnergyAcademyEurope(EAE)gavethestartingshotfortheEnergySystemsTransitionCentre,akaESTRAC.Gasunie,GasTerra,EBNandNAMareinvolvedasassociatepartners.

What is Estrac?

“ESTRACbringsenergyissues,research

and application together in an inter-

disciplinaryandopenendcollaboration.

Both companies and knowledge

institutions (TNO, ECN, University of

Groningen and Hanze University of

Applied Sciences at the start) are

participants. We started ESTRAC

becausetheenergytransitiondemands

amultidisciplinary approach and is an

arduousprocess.Wewantasocietywith

a sustainable energy supply, with a

much more diverse mix of more sus-

tainableenergysourcesandlarge-scale

CO2capture.Buthowdoyourealisethat

in the built-up environment? In the

industry?Inthetransportsector?Alot

willhavetochangetomeettheagreed

targets. ESTRAC approaches energy

issuesfromallpointsofview:economic,

technological,social,andpsychological.

Andwe do that at a regional, national

andinternationallevel”.

How does ESTRAC contribute to the

energy transition?

“ESTRAC makes connections between

leading institutes, provides a platform

formarket players. Issues that are too

big or too expensive for an individual

party can be dealt with via ESTRAC

together.Theenergytransitiononand

aroundtheNorthSea,ortheeconomic

implications of full conversion of the

energy system, or making industries

and production chains energy neutral

for example. Research is an integral

part of this. Research into consumer

acceptance when implementing new

technology, into future developments

in the energy market, into spatial

planning of biomass production, into

wind and solar parks and into various

options for renewable energy into the

energysystemforexample.Ultimately

this research provides practical

outcomesthathelpbothcompaniesand

governments make decisions about

sustainable energy plans. The latest

state of knowledge is used but

knowledge also advances, for example

due to better analysis methods and

models.

We are still at the beginning, but our

integratedapproachiscatchingon.The

first projects have started, as an

investigation into the North Sea as a

Interview

‘ We don’t want to miss opportunities’

Andre Faaij

ScientificDirectoroftheEnergy

AcademyinGroningen

_DSC8749

_DSC8727

_DSC8699


sourceofenergy.TheMinistryofSocial

AffairsandEmploymenthasalsoasked

us to think about the consequences of

thetransitiontoemployment.Wehave

attracted the attention of Stanford and

MITandweareexchangingresearchers

withNREL (NationalRenewableEnergy

Laboratory). Our network of chain

partnersisgrowingsteadily.Thatisalso

necessary.Weareheadingtowardssome

20partnersintheDutchenergysectorin

sixyears”.

How do you view the energy transition

in the Netherlands?

“We are only at the beginning of the

transition. We are at 6%, stumbling

towards 14% to 16% sustainable, and

everythingiscreaking.Therehastobea

fundamentalchange.Andsoon,because

we are missing opportunities. Look at

wind energy - Denmark has overtaken

theNetherlands.LookatGermany-as

you approach the German border a

different energy landscape looms. We

now seem to be mainly a country of

barriers,whereasweshouldbealandof

opportunities”.

What are some examples of how

innovation contributes to the energy

transition?

“Thereissomuchgoingoninsomany

placesintheworld.Welearnfromeach

other and technologies reinforce each

other. The learning curve is steep. The

offshoreindustryisinnovative.Japanis

installing floating wind turbines

offshore. Sustainable seems to be the

answertotheincreasingenergydemand

in India for hundreds of millions of

people who still do not have access to

electricity.SaudiArabiawantstobeless

dependentonoilrevenue,andismaking

major investments in sustainable, and

aimingat9,500megawattsolarandwind

energyfor2030.

Google in the Eemshaven is a fine

exampleclosertohome.Thedatacentre

runs entirely on sustainable energy,

supplied by a windfarm in Delfzijl.

Anothergiant,TataSteel,isworkingon

a new generation steel production

processwhichismoreefficient,canrun

onsustainablebiomassandcancapture

CO2.Thiscouldresultinasteelindustry

with negative emissions. And what

about the plans for reclassification of

Rijnmond, forexamplewithabiobased

chemicals industry. Look at our own

building,whichwas completed in early

December 2016.We are energy neutral

includingtheenergyuseinthebuilding

phase”.

What role can EBN play?

“EBNisaspecialplayer.Assemi-public

sector I see a key driving function for

EBNintheimplementationofasustai-

nable energy system. I am thinking of

CO2 capture and storage for example,

which requires national and inter-

nationalcoordinationandtheroll-outof

geothermalenergyandenergystorage.

The government must ensure stable

policyframeworks.Youcannotleavethe

transition up to themarket. Let’s take

Scandinaviaasanexample.Scandinavia

leads the way when it comes to sus-

tainability and has a thriving industry.

Why? The Government works closely

togetherwithindustry,butonthebasis

of clear choices and appropriate

legislation”.

How far will we have got with the

energy transition in 10 years’ time?

“Ifwelearnfrommodelsthatworkand

use opportunities it could be fast.Why

not use the gas hub for CO2? The off-

shoreinfrastructureforsustainable?Our

powerfulchemicalandagro-industryfor

biobased? Further develop geothermal

energy.Greenismoney.Ifwecanshow

that it is good for the wallet a lot can

happenin10years.

Incidentally,Istillseearolefornatural

gasasaback-upenergy.Thevalueofthe

gas still presentundergroundwill even

increase over time. It is therefore

importantthatwelookatthebestwayto

exploitgasreservesseenfromthebigger

picture.

Inshort,wearefacedwithamammoth

taskandwearegoingtohavetoinnovate

like hell, but I have faith. Provided we

have policy tools that accelerate

innovation. With the right tools and

data. Classical energy exploration is

nice,butnotenoughforthetaskthatwe

nowface.AgoodassignmentforESTRAC

would be: together with the Planning

Agenciesdevelopingthenecessarytools

that map out the route to sustainable

fromallangles”.


3.Strategy

3.1 Trends

Inrecentyears,thegasindustryhascomeunderpressure.Climatechangeisaglobaldevelopmentthathasamajorimpactonourglobalsocietyanditseffectontheimageofgas.EnergieBeheerNederlandhasalsoidentifiedthreetrendsthatinfluenceourdailyactivities:theenergytransition,thepublicbackingfortheoilandgasindustry,anddecliningproductionandprolongedlowprices.ThebusinessmodelofEBNisgreatlysubjecttochangeduetothesetrends.



The energy transition

TheMinistry of Economic Affairs published the Energy

Agendaattheendof2016,whichstatesthatourenergy

supplywillchangedramaticallyoverthecomingdecades.

In theParisClimateAgreement ithasbeen established

that global warming should be restricted to below two

degreesCelsius.Italsodescribesthatforthetransition,

reduction of the use of fossil energy is needed, energy

saving should be implemented and investments are

neededtoincreasetheshareofrenewableenergyinthe

energymix.

Oil and gas companies have to adapt to the changing

energy mix, for example by developing other energy

sources and looking for synergies between fossil and

non-fossilfuels.TheEnergyAgendadescribestheroleof

gas: “Also on the transition to the ambitions of the Paris

Climate Agreement, gas as the least polluting fossil fuel will

still play an important role in the transition for a long time”.

Public backing for the oil and gas industry

Inrecentyears,thereputationoftheoilandgasindustry

has deteriorated in theNetherlands and Europe. Issues

suchas‘safety’,‘environment’and‘oldfashionedfossil

industry’ are highlighted in the social debate. The

earthquakes in Groningen, which result in a feeling of

insecurity and uncertainty among residents of the

provinceofGroningen,havecausedpublicbackingforthe

extraction of gas to disintegrate strongly. At the same

time, the popularity and the production of sustainable

energy are growing, reducing the share of gas in the

energymix.Theinvestmentclimateforexplorationand

extractionofoilandgasislessfavourableasaresult.

Declining production & prolonged low prices

The availability of economically recoverable reserves

requires more complex exploration and extraction

techniques.Thismeanshighercostsfortheoperators.At

thesametime,oilandgaspriceswerehistoricallylowin

2016 and the development of remaining reserves is

becoming more unpredictable. Consequently, the

productionfromoursmallfieldsisdeclining.Inaddition,

thenumberofplatformsthatareattheendoftheirlife

spanandthatwillhavetobedecommissionedinthenext

fewyearsisgrowing.TheextractionfromtheGroningen

fieldhasbeengreatlyscaleddowntoensurethesafetyin

Groningen.

Allofthiscreatesfinancialpressureonresultsoftheoil

andgasindustry.ItisnecessarythatEBNanditspartners

investmoreinefficiencyandinnovation.Thistransition

resultsinuncertainty.

In short, the ‘environment’ of EBN has changed

tremendously in recentyears.Werespondedactively to

this in 2016 by reviewing our strategic priorities. It is

importantthatweunderstandtheimpactthatthetrends

and developments can have on our activities. If new

opportunities arise, we can make the most of that.

Potentialriskscanbecontrolledinatimelyandeffective

manner.

3.2 SWOT and dilemmasA SWOT analysis was drawn up to elaborate on the

strategy.

The SWOT provides insight into the strengths and

weaknessesofEBN.Partlyonthisbasis,wecanidentifya

numberofdilemmas:

1. Thegasparadox:naturalgasispartofboththeproblem

(CO2emissions)andthesolution(contributiontothe

energytransition).Thechallengehere istodealwith

thisascarefullyandbalancedaspossible.

2. Thelackofsupportdiscouragesactivitiesrelatedtogas

extraction. At the same time, EBN is in favour of

creatingeconomicandsocialvaluebymeansof,among

other things, this gas extraction. Tension exists

between them, which is why those concerned must

handlethisaswellaspossible.

3. In the North Sea, there is approximately 300 billion

cubic meters of extractable, often hard-to-access,

reserves. These reserves are still largely profitably

extractable. At the same time, there is a demand to

decrease the existing infrastructure. It is a tricky

balance between, on the one hand, not removing

important infrastructure too soon so that potential

extractionofgasresourcesremainpossibleand,onthe

other hand, heeding the call for space on the North

Sea.


Threats

• Long-termlowoilandgasprices,negative

investmentclimate

• ExacerbatedsupportforE&Pactivities

• EarthquakesinGroningenandotherdisasters

• Disappearinginfrastructure

• Long-termlowpricescreatetheriskofjoint

venturepartnersbeingunabletomeetrestoration

obligations

• DatatheftorunavailabilityofITsystems

Strengths

• Trustedpartnerintheindustry

• HelicopterviewintheE&Pindustry

• UniquedatapositionforE&Pactivities

• BoostingE&Pactivitiesthroughourownstudies

• Facilitatingknowledgesharingwithinand

outsidethesector

• Qualifiedpersonnel

• Positivecompanyculture(GreatPlacetoWork)

• Relativelysmallorganisationwithfinancial

strength

Weaknesses

• Notenoughisbeingdonetopropagatesuccess

• Workfocusisapointofattention

• ITsystemsarenotsufficientlyadaptedtothe

revisedstrategy

• Collaborationbetweendepartmentscouldbe

improvedwithinEBN

Opportunities

• Pioneeringroleindecommissioningandre-use

• Contributingtothedebateontheenergytransition

• BoostingefficiencyinE&Pactivities(low-cost

development)

• Contributingtoacceleratingthedevelopmentof(ultra-)

deepgeothermalenergyandCCSintheNetherlands

• Encouragingnewactivitiesinopenareas

• AttractingnewoperatorsfortheNetherlands

Declining production

& prolonged low prices

SWOT-analysis

Local gas transport

Geothermal energy

Integrating wind and gas

Gas storage Storage of CO2Exploration and production of oil and gas fields, both onshore and offshore

EBN is engaged in these activities EBN investigates these activities EBN is not engaged in these activities

National gas transport

Gas collection pipelines at sea



3.3 Vision, mission and strategy The changing environment was the reason for EBN to

actively review the focus of the current activities and

researchnewactivities.Moreover,anumberofpriorities

wereestablishedinthestrategywherewegivemeaning

tothemoreactiveroleweaspireto.

3.3.1 Vision and missionOurvisionis: ‘TheDutchgeologicalenergysourcesplay

animportantroleintheenergytransition’.

Ourmissionis:‘Realisingvaluefromgeologicalsourcesof

energyinasafe,sustainableandeconomicallyresponsible

manner’.

3.3.2 Strategic prioritiesThreestrategicprioritiesdetailourmission:

1) MakingthemostofDutchenergysources,

2)Takingaleadingroleinthedecommissioningissue,

3) Contributingtoacceleratingthedevelopmentof(ultra

deep)geothermalenergy.

ForthislastprioritytheMinistryofEconomicAffairsisat

thistimeonlycarryingoutanexploration.EBNandTNO

supportthisexploration.

Optimal use of Dutch energy sources

TheNetherlandsstillpossessesaconsiderablepotential

of gas resources, which can be optimally used for the

energytransition.Thestartingpointis‘CustomisedGas’,

whichmeans thatwewant touseDutchgasonly there

wheremore sustainable or cleaner forms of energy are

notavailable.Thismeansgasisthesupportandbackup

for renewable energy. Gas will continue to play an

importantroleuntilweareabletosetupourentireenergy

supply in a sustainablemanner.We referhere again to

theEnergyAgendaoftheMinistryofEconomicAffairs,in

whichtheroleofgasisdescribedasfollows:“Alsoonthe

transition path to the ambitions of the Paris Climate

Agreement,gasastheleastpollutingfossilfuelwillstill

playanimportantroleinthetransitionforalongtime”.

Pioneering role in decommissioning and re-use

In the next few years, the oil and gas industry faces a

majorchallengewithregardtothecleanup(orre-use)of

infrastructure in theNorthSea,but alsoonshore.More

andmorefieldsarereachingtheendoftheirservicelife,

whichmeansthatthecorrespondinginfrastructureisno

longerrequiredandthereforeneedstobecleanedup.EBN

wantstotakeapioneeringroleinthedecommissioning

issue,andhencealeadingposition.Incooperationwith

thesector,wehavedrawnupaMaster Plan Decommissioning

and Re-use.Wearestrivingtowardssafe,sustainableand

cost-efficient re-use, or decommissioning of existing

platformsandwells.

Strengthening role of geothermal energy

GeothermalenergycanmakeamajorcontributiontoCO2

neutral energymanagement. TheMinistry of Economic

Affairsiscurrentlyexploringthefurtherdevelopmentof

(ultra)deepgeothermalenergyintheNetherlands.EBN

andTNOsupporttheMinistryofEconomicAffairsinthis

process. It is expected that it will become clear in the

courseof2017howtheaccelerationofgeothermalenergy

intheNetherlandsisgoingtobeorganised.


Material topic: More information about this: Page

Manufactured 1.Effectiveexplorationandproductionofoilandgas2.Decomissioningandre-use

TechnicalresultsInteractionwithourstakeholders

332933

Intellectual 5.Innovation3.Collectingandbringingknowledge

TechnicalresultsInteractionwithourstakeholders

3329, 33

Human 9.Attractanddeveloptalent4.Effectiveadviceandinfluence

ThepeopleofEBNBusinessmodel

4310

Natural 6.Sustainabilityinthevaluechain7.Developmentnewenergy

EBNSustainabilityReport2015-2016GRIIndex2015

www.ebn.nlAnnex9.5

Financial 8.Creationofeconomicvalue Economicandsocialresults

paragraph4.4.4–4.4.6FinancialStatements

4384

Social/relationship 10.Supportforourwork

11.Externalsecurity12.Activecontributiontothedebateontheenergytransition

StrategyInteractionwithstakeholdersGroningenfieldRiskmanagementInteractionwithourstakeholdersProspects2017

13

40542947

3.4 Material topicsIn2016weputextraemphasison thedialoguewithour

key stakeholders. The goal was to determine the

importanceofthematerialtopicsandobtainalistofthe

aspectsthatwerehighontheagendabothforEBNandthe

stakeholders.

The materiality matrix here below shows how much

weightthevariousmaterialtopicsputonthescales-for

the relevant interested parties and for EBN. The chart

revealswheretheinterestsoverlap.Wehaveclassifiedour

material topics according to the structure from the

framework of the International Integrated Reporting

Council(IIRC).

Ourmaterialtopicsarebasedonfourvaluesthatforma

natural basis for us. These values are transparency,

integrity,collaborationandstayingcritical.


Materiality matrix

Imp

act

on

sta

keh

old

ers

Influence EBN

low

low

high

hig

h

average

average

6 10

11

9

4

8

7

12

213

5

1. Effectiveexplorationandproductionofoilandgas

2. Decomissioningandre-use

5. Innovation

3. Collectingandbringingknowledge

9. Attractanddeveloptalent

4. Effectiveadviceandinfluence

6. Sustainabilityinthevaluechain

7. Developmentnewenergy

8. Creationofeconomicvalue

10.Supportforourwork

11. Externalsecurity

12.Activecontributiontothedebateontheenergy

transition


Trends Opportunities and risks Strategic priorities

Opportunity:Lowpricesleadtomorefocusonefficiency,innovationandcollaboration.

Risk: Structurallylowoilandgaspricesorevenafurtherdeclineinoilandgaspricesaffecttheinvestmentclimateinanegativewaywhichleadstopostponingthemaintenanceofinstallationsandothernecessaryinvestments.

Risk: Thestructurallylowoilandgaspricescreatetheriskthatjointoperationpartnerscannotcomplywiththeirlong-termobligations,inparticularwithrespecttothedecommissioningofinstallations.

Opportunity:TransparencyaboutEBN’sstrategyandactivitiesensuresclarityandcredibility.Thisattracts(technical)talentandleadstomoreknowledgewithintheorganisation.

Risk:Earthquakesandotherdisastersmayoccurduringourpartners’operations.

Risk:ThereisariskthatinsufficientcoordinationandknowledgesharingfromEBNand/orbetweentheoperatorscanleadtoinefficienciesandlackofclarity.

Opportunity:Gascanbeusedasatransitionfuel.TodothisEBNisactivelyworkingtomakethemostoftheundergroundpotentialoftheNetherlands. Opportunity:EBNfocusesonthediscoveryanddevelopmentofrenewableenergysources. Risk:TheriskliesinthatEBNisnotabletoadapttheorganisationtothechangingenvironment.

Risk:TheriskisthattheactivitiesofEBNandpartnersmaybeaffectedinanegativeway.

Support of oil & gas industry

Energy transition

Rising costs and falling prices

Optimal use of Dutch gas resources1

Taking control in the decommissioning issue2

Strengthening, improving and developing geothermal energy

3

3.5 Trends, implications, risks and opportunitiesThechartbelowshowswhatopportunitiestheidentifiedtrendsoffer,whatriskstheseopportunitiesentailforus

andhowtheyarelinkedtoourstrategy.


4.Resultsfor2016

Toimplementthecoreactivities(investinourjointoperations,managethejointoperationsanddevelopandapplyknowledgeforthejointoperations),

1) wemaintainclosecontactwiththeoperatorsandourotherstakeholders

2) weconductourowntechnicalstudiesand

3) wecreateeconomicandsocialvalue.

Forabird’s-eyeviewoftheresultsobtainedbyEBNin2016werefertothekeyfiguresonpage7.


Subject Explanation Objective Realisation

EBN’s profit EBN’sprofitdisplayedinmillionEUR ≥339 333

Administration costs EBN’scostsforstaff,hiringexpertise,office,etc.showninmillionEUR ≤15.8 15.5

Opex/m3 Theoperationalcostsoftheextractionofgas(includingcondensate)intheNetherlandsinEURperm3 ≤6.72 5.82

Reserves maturation small fields Thenetsupplementation(maturation)ofgasreservesintheNetherlandsinGNm3 ≥9.7 9.27

Exploration drills Thenumberofexplorationdrillsinnewlocationsoffshoreoronshore. ≥3 3

Score transparency benchmark Thetransparencybenchmarkisanannualstudyintothecontentandqualityofsocialreporting (max.200points)

≥148 172

Completion of recalibration of EBN’s strategy

EBNcompletesthereviewofthestrategicpriorities Ja Ja


4.1 EBN general objectives For2016theExecutiveBoardalongwiththesupervisory

board has determined a number of objectives for EBN.

Theseobjectives,andtheresultsobtained,areshownon

page28.

Notes on the objectives

The profit of EBN was pressured by the low gas price,

resulting impairment losses and costs of repairing

earthquake damage in Groningen. Because of this, the

realisation of the profit target was behind by EUR 6

millionofthestatedgoalofEUR339million.Adminisration

costswerelessthanthetargetamountofEUR15.8million

thanks to lower costs for travel, automation costs, and

communication and sponsorship costs. The operational

costsfortheextractionofgas(includingcondensate) in

theNetherlandswereestimatedat6.72EUR/m3. Through

targeted efforts - both by operators and by EBN - to

reduceoperatingcosts,theobjectivewasamplyachieved

(5.82EUR/m3).

There were three exploration drillsmeaning the target

wasachieved.Thescoreonthetransparencybenchmark

waspositivelysurprising; intheareaofcohesionofthe

report, comprehension of the core activities and

interaction with stakeholders EBN made progress and

achieved a score of 172 points. In 2016, the review of

EBN’sstrategicprioritieswasalsocompleted.

4.2 Our stakeholders Energie Beheer Nederland wants transparent reporting

on our stakeholders: who they are, how we shape our

interactionandwhatissuesarediscussed.Forinterested

partiesweusethedefinitionoftheword‘stakeholders’in

theGlobalReportingInitiative,roughlymeaning:onthe

one hand stakeholders are entities or individuals who


may experience significant effects from our activities,

productsandservices;ontheotherhand,theactionsof

stakeholders may affect achieving the strategies and

objectivesofEBN.

Interaction with stakeholders in 2016Wehaveincludedatableintheannex9.1thatdescribes

whoourstakeholdersare,whatformtheinteractionwith

thesepartieshas,andwhatthediscussionissueswerein

2016.

Interaction within the framework of strategic themes in 2016Strategy dialogue

Wehave explicitly involvedour stakeholders in 2016 in

the review of our strategy. We have had dialogue with

policy makers, organisations in the entire sector,

knowledgeinstitutionsandsocialorganisations.Wehave

donethisintheformofinterviewsandroundtables.EBN

employeeswereabletoactivelyparticipateinthisandthe

ExecutiveBoardandmembersof theSupervisoryBoard

were closely involved. To get to an integrated strategy

from the input of stakeholders and employees theEBN

strategy team, consisting of Executive Board members

and staff, were supervised by a consultant during a

workshop,withtheSupervisoryBoardandtheDGEnergy,

Telecommunications and Competition on behalf of the

MinistryofEconomicAffairs.Ultimatelyafinalstrategy

wasformulated,whichprovidesforamoreactiveroleby

‘Wecreateeconomic andsocialvalue’


EBN in making the most of Dutch energy sources, a

pioneerroleforEBNintheareaofdecommissioningand

re-use and a contribution by EBN to accelerating (ultra

deep)geothermalenergyintheNetherlands.Thestrategy

wasdiscussedwiththeMinisterofEconomicAffairs,who

agreedtothecoursetaken.(Formoreinformationonthe

elaborationofthestrategy,seepage18).

Interaction in: Optimal use of Dutch energy sourcesWithinourstrategicthemesOptimal use of the Dutch energy

sources the following activities have taken place with

stakeholders:

GILDE

Within the joint venture GILDE (Gas In a Long-term

Sustainable Energy Management) in 2016 we worked on

possibletransitionpathsforgas.Inaddition,ajointstrategic

agenda was set up. In this agenda each of the parties

commitstotheemergenceofinitiativesthatcontributeto

therealisationofaCO2neutralenergysupplyin2050.

Energy dialogue

FollowingtheEnergy Report 2015: Transition to sustainable

theMinistryofEconomicAffairshastakentheinitiative

for an energy dialogue. Organisations themselves were

invited to organisemeetings about pressingmatters in

this dialogue. EBN collaborated in the organisation of

threeroundtablemeetingsattheKVGN(RoyalAssociation

of Gas Producers in the Netherlands). Here the sector

discussedthefutureroleofnaturalgaswithvarioussocial

organisations at management level. The input of the

stakeholderswastakenintoaccountinthedraftingofa

KVGN vision Customised gas. This vision describes how

maximum CO2 reduction can be realised with gas. The

visionissharedwiththeMinistryofEconomicAffairs.

Expert meeting Drilling in the Subsurface

FollowingthedraftStructuralVisionSubsurface(STRONG)

issuedinNovember2016attherequestoftheMinistryof

EconomicAffairs,togetherwiththeMinistryofEconomic

AffairsandtheVEWIN(AssociationforWaterExtraction

Companies),EBNorganisedanExpertmeetingDrillingin

theSubsurface.Thepurposeofthemeeting:exchangeof

informationonthedifferentactivitiesinthesubsurface.

Thirty experts from the government, inspection, water

companies, consultancy firms, saltmining, oil and gas

andgeothermalenergytookpart.Themeetingwillhavea

sequelin2017.

Interaction in: Taking the lead in the decommissioning issueInterviews for the “Netherlands Master Plan

Decommissioning and Re-use”

Therecalibrationofthestrategyhasledtotheinitiative

foraMasterPlanDecommissioningandRe-use.Thisplan

cameaboutin2016inclosecooperationwithoperators,

suppliers and the Ministry of Economic Affairs. Social

organisations provided input via interviews. The plan

describes,amongotherthings,theinitiativeforaNational

Platform Decommissioning and a Decommissioning

Database.Oneofthethemesintheplanistheinteraction

withstakeholders.Theywillhaveanimportantroleinthe

implementation of the plan. At the end of November

2016,wepresentedtheplantotheMinistryofEconomic

Affairs.



Interaction in: Strengthening and improving the development of geothermal energyWorkshops geothermal energy

IncooperationwiththeMinistryofEconomicAffairsand

TNOweorganisedthreeworkshopsaroundthethemeof

ultradeepgeothermalenergy(UDG).Theworkshopswere

dedicated to exploring the possibilities for UDG in the

Netherlands.Thefocuswasondevelopingconcretepilot

projects. The first workshop was designed for a wide

rangeofstakeholderswithaninterestinUDG.Thesecond

workshop focused more on potential operators, heat

detectorsandinvestorswithUDGconcreteinitiatives.At

the third meeting, EBN’s evaluation of the project

initiatives was shared with representatives of these

initiatives.Theexplorationofthepossibilitiestodevelop

UDGintheNetherlandswillbecontinuedin2017.

4.3 Technical results In2016,EBN focusedon the following technical issues:

Exploration, Mature Fields, Tight Reservoirs, Infra-

structure & Decommissioning and Re-use, Earthquakes

GroningenandGeothermalEnergy.

Thechartbelowreflectsthetechnicalobjectivesforthe

year2016.

Below,theresearchandotheractivitiesthattookplacein

2016aredescribed.

ExplorationThepurposeof thestudies in thefieldofexploration is

twofold: 1) identifying possible new gas reserves and

makingthemostofknownpotentialgasreservesinthe

subsurfaceof theNetherlandsand2)activelyretrieving

andbringingknowledgeintoandoutsideoftheDutchgas

sector.

4.3.1 Identifying possible gas reservesWedoourownstudyworktoidentifypossiblenewgasand

oil resources. EBN takes part in a large number of

collaborationsandJointIndustryProjects.

Thestudiesfocusmainlyonareasonthecontinentalshelf

wherecurrentlynoexplorationorextractionlicenseshave

beenissued.In2016,thefocusofworkwasinthenorthern


Subject Objects Result in 2016 More information

Publication of Focus on Dutch

Oil and Gas

EBNpublishesthereportFocusonDutchOilandGas,in

whichthecourseofaffairsintheE&Psectorisreflected.

ThereportwaspublishedinMay2016. Seewww.ebn.nl

BOON benchmark Bi-annuallyEBNconductstheBOONbenchmark,inwhich

EBNinvestigatestheoperationalcostsofactivitiesinthe

NorthSeaattherequestofNOGEPA.

TheBOONbenchmarkwasexecutedin2015andisplan-

nedagainfor2017.

Seepage62ofthe

annualreport

Decommissioning and Re-use EBNtakesaleadingroleinthefieldofDecommissioning

andRe-useandisdevelopingamasterplan.

Themasterplanwasdevelopedincooperationwiththe

sectorbyEBNandpresentedon30November2016.

Seepage35ofthe

annualreport

Exploration of geothermal

energy

EBNcontributestotheexplorationoftheMinistryofEco-

nomicAffairsofhow(ultra)deepgeothermalenergycan

makeacontributiontotheDutchheatsupply.

In2016,EBNcontributedtotheexplorationoftheMinistry

andwillcontinuethiscontributionin2017.

Seepage33;37ofthe

annualreport

Contributing to Synergy EBNcontributestostudiesintothesynergiesbetweenoil,

gas,geothermalenergyandwind.

In2016EBNcontributedtostudiesintothesynergiesbet-

weenoil,gasandgeothermalenergy.EBNalsocontribu-

tedtostudiesintothesynergybetweengasandwind.

Seepage35ofthe

annualreport

EBN investigations EBNconductsstudiesforthetopicsofexploration,infra-

structure,tightreservoirs,earthquakesGroningenand

maturefields.

In2016EBNcarriedoutitsownresearchonthethemes

and/orcontributedtothird-partyresearch.

Seepage33ofthe

annualreport


partoftheNorthSea,(theD,E,F,AandBblocks),andon

twospecificplays.Ourworkin2016ledtoconcreteresults:

exploration permits were requested and/or granted this

year in several areas in which EBN carried out and

promotedexplorationstudiesinrecentyears.

4.3.2 Actively collecting and bringing knowledgeWe share knowledge with interested parties through

various platforms. In 2016 EBN organised the Dutch

ExplorationDay for thefirst time.Awidedelegationof

operators active in the Netherlands was present. EBN

presented its own studies and offered consultants the

chance to present studies into the Dutch subsurface.

Thanks to presentations at the conferences Palaeozoic

Plays of NW Europe and Mesozoic Resource Potential in the

Southern Permian BasinandtheProspexfairinLondonwe

also reached operators who are not yet active in the

Netherlands.Asaresultoftheaboveactivitiesmultiple

operatorsexpressedinterestinourstudiesandtheresults

weresharedwithinterestedparties.Adatabasewasmade

operationalin2016,whichallowsoperatorstoefficiently

generateanoverviewofGeo-drillingEvents.Geo-drilling

Eventsareincidentswithageologicalcausethathaveled

toadelayinthedrillingprocessandwhichcouldpossibly

have resulted in a dangerous situation (Geo hazard).

Examplesare formationswithahighdrillingresistance

or rock with abnormally high pore pressure. A good

overviewofGeo-drillingEventshelpsindesigninganew

well.TheGeoDrillingEventsdatabasewaspresentedto

anoperatorforthefirsttimeon25November2016.The

databasewas verywell received. In 2017, this database

willalsobemadeavailabletootheroperators.

Mature Fields

EBN takes part in the operation of approximately 240

smallfields,allgasfieldsintheNetherlandsaswellasthe

Groningenfield.Ofthesefieldsnowmorethan90percent

is in themature phase or in the tail-end phase of the

extraction,whichmeansthatmorethan50percentofthe

volume has been extracted and that the production is

further decreasing. EBN’s target for this portfolio is to

maximise economic extractability and extend economic

life where possible. For this purpose, the operating

expenses(OPEX)shouldbeminimisedandtheproceeds

should be optimised. It is important to have a good

knowledgeexchangebetweenoperators.

EBN conducts studies for increasing the yields in the

mature fields. Analyses are performed on the entire

portfoliotogetmoreinsightintotheproductionbehaviour

of theDutch reservoirs ingeneral. Specificfields result

from this analysis that require more attention. In

addition,EBNsupportsandcontributestoresearchunder

the banner of the Top Consortium for Knowledge and

Innovation (TKI) for gas, where we work together with

differentindustrialpartnersandknowledgeinstitutions.

Tight Reservoirs

For several years,EBNhashad special attention forgas

fieldswhosepermeabilityissolowthattheextractionis

limitedwithoutspecialmeasures,orthatarenotevenput

into development (so-called stranded fields). A new

inventoryofthesegasfieldsshowedthatunderthecurrent

circumstancestheextractionofabout29billionm3natural

gasisatstake:18billionm3inexistingfieldsand11billion

m3 inprospectswherethepresumptionisthattheseare

fieldswithlowpermeability.Weareinvestigatingwhythe

permeabilityofsomefieldsissolowandarealsolooking

atthedistributionofthesefieldsintheNetherlands.This

meanswecanbetterpredictthepropertiesoftheDutch

reserves.Wehavealsocarriedoutstudiesin2016,which

werefocusedondifferentformsofreservoirstimulation.

Infrastructure, Decommissioning and Re-use

Becauseofthesharpfallingaspricesduringthelasttwo

years decommissioning of infrastructure, consisting of

platforms, production wells and pipelines onshore and

offshore is approaching faster than expected. It is

importantthatthecurrentinfrastructurecontributesas

wellaspossibletotheenergytransition.Thismeansthat

infrastructure is not removed prematurely, so that the

marginalDutchgasreservescanstillbeextractedinsofar

aspossibleandinfrastructurethroughanyotheruse(e.g.

energy storage and conversion, CO2 storage) may have

significance in the energy transition. We are working

togetherwith TNO and several industrial parties in the

TKIprojectSystemIntegrationOffshoreEnergy.Herewe

lookforopportunitiesonsynergybetweentheE&Psector

andthewindmillsector.EBNactivelycontributestothis

project with knowledge. No platforms were

decommissionedintheyear2016.

Thedecommissioningofinfrastructureisatopicofstudy

in the Master Plan Decommissioning and Re-use that

came about in 2016. The Master Plan describes among

other things the initiative for a future National

Decommissioning Platform and a Decommissioning

Database. Other initiatives focus on developing new

technologies, standardisation, international best

practices and clarity with regard to regulation of

decommissioningandre-useoftheinfrastructureofoil

and gas extraction. More info on the Master Plan is

availableonwww.ebn.nl/masterplan.

Earthquakes in Groningen

TherewerealsoearthquakesinGroningenin2016;theworst

wason25February2016atFroomboschwithaforceof2.4on

the Richter scale. At 13, the number of quakes with a

strengthof1.5orhigher in2016wassignificantly lower



than in 2015 when there were 21 quakes. The relative

shareoftheheavier(strength2andhigher)quakesalso

has declined. Stakeholders, including the State

Supervision of Mines (SodM) and NAM, are convinced

thatthedeclineinthenumbersofquakesisaresultofthe

reduced production. However, to make more accurate

predictionsofseismicactivityinthenextfewyearsmore

studyisneeded.

On1April,NAMfiledthenewextractionplan2016forthe

Groningen field. The government, partly based on

opinionsofSodMandvariousotherparties,agreedtoit.

This sets themaximumannual production for thenext

fiveyearsat24billionm3peryearwithanannualpointof

timefor‘recalibration’.Severallawsuitshavebeenfiled

against NAM, EBN and/or the State for liability for

materialandimmaterialdamage.

EBNdevelopedactivities in2016 inavarietyofways to

contribute to a safer and better production of the

Groningenfield,inlinewithitsmissionandthepolicyof

the Minister of Economic Affairs. We started various

studiesthatshouldcontributetobetterunderstandingof

theprocessesinthesubsurfacearoundthequakes.This

work is complementary to the investigations thatwere

carried out by NAM or other parties under NAM’s

management, but also investigations of other parties

suchasSodMandKNMI.TheresultsofEBN’stechnical

studiesaresharedwiththeseparties.

Exploration of Ultra deep geothermal energy development and possible role EBNThe Ministry of Economic Affairs is examining how

geothermalenergyintheNetherlandscancontributeto

the heat supply in the Netherlands. The Ministry has

asked EBN and TNO together with market parties to

explorehowultradeepgeothermalenergy(UDG)canbe

unlocked in the Netherlands. UDG means geothermal

energythatcanproducehotwateronalargescaleofmore

than 120 degrees with wells deeper than 4 kilometres.

Industrialprocessescanbemademoresustainablewith

water of such temperatures or higher. The exploration

hasstartedwithtwoworkshopsinwhichvariousongoing

project initiatives were identified and those requesting

heatandpotentialoperatorswereinvolved.TheMinistry,

EBN, TNO and market parties will continue this

exploration in 2017. For this development, but also for

ordinary geothermal energy (between 2 to 4 kilometres

depth)theMinistryisexaminingifthereisaroleforEBN

to strengthen and accelerate the development of

geothermalenergywithitsknowledgeoftheresourcesin

the Dutch subsurface. The results of this research are

expectedtobeannouncedbytheMinistryin2017.


4.3.3 Joint operations for exploration and production

Asat31December2016,EBNparticipatesinatotalof198

jointoperations(31December2015:200).Thisconcerns

188 joint operations in exploration or production

activities. We are also participating in five pipelines

(including gas purification facilities), four gas storage

facilitiesandthegaswholesalerGasTerraB.V.Thetotal

number of partnerships dropped slightly compared to

last year. Four new partnerships in exploration and

extractionactivitieswereenteredinto.Sixcollaborations

inexplorationorextractionactivitieswerediscontinued

becausetheenddateofonelicencepassed,threelicenses

were relinquished and two exploration permits were

convertedintoextractionpermits.

4.3.4 DrillingInthejointoperationstheplanwastoperform21drillsin

2016. Eventually sixteen were realised: six exploration

and evaluation drills and ten production wells. The

activitylevelwaslowlastyearbecauseofthelowoiland

gasprices.Thesixteenexecuteddrillsprovidedtechnically

extractablegasintwelvecases.Nothingwasfoundfrom

onedrill.At another two, therewere only traces of gas

present.Onedrillfailedfortechnicalreasons.Itconcerned

twelvedrillsoffshoreandfouronshore.

4.3.5 ProductionIn response to the earthquakes in the province of

Groningen, the Minister of Economic Affairs in 2015

decidedtofurtherdecreasetheproductionceilingforthe

gasextractionfromtheGroningenfield.Asaresult,the

productionfellfrom28.1billionNm3in2015to27.6billion

Nm3 in2016.ThesmallfieldsinwhichEBNparticipates

produced20.6billionNm³(2015:22.4billionNm³).

Thegasstocks,whichareproducedfromtheunderground

gas storages Norg, Grijpskerk and Alkmaar during the

wintermonths,arenormallyinjectedintothestoragesin

the summer months. At this time there is a minor

imbalanceofalmost0.4billionNm³betweenGrijpskerk

(positive)andNorg(negative).

Thetotalgasproductionfor2016isjustunder48.2billion

Nm³ (excluding the imbalance from the gas storages).

The EBN share in the gas production in 2016 was 19.9

billionNm³(2015:21.8billion).Theoilproductiontotalled

0.26millionSm3(Standardcubicmeter)comparedto0.42

millionSm3in2015.Theproductionfromsmallfieldsin

2016wasslightlylowerthanbudgeted.In2015,production

fell by6.5per cent, in2016by8per cent.The shareof

smallfieldsinthetotalgasproductiondecreasedslightly

comparedto2015(43%comparedto45%in2015).

Schoonebeek

In 2015, oil production in Schoonebeek was stopped

becauseofaleakinawatertransportline.On25February

2016,operatorNAMstarted the repairof a45-km-long

pipeline.Theyoptedforaso-calledPipe-in-Piperepair

method, inwhich an 8-inchpipe is pulled through the

existing18-inchpipe.Therepairwassuccessfulandthe

projectwas completedwellwithin schedule andwithin

budget.On17August,oilproductioncouldberestarted.

However,thereweremanyquestionsfromtheprovince,

municipalitiesandresidentsatthattime.NAM,therefore,

delayed the start of production until all questionswere

answered.Schoonebeekoilfield restartedproductionon

17September.

120109

36 33

12 12

3334

109

90

60

2015

Jointoperationsoffshoreproduction Jointoperationsonshoreproduction

Total number of joint operations

Jointoperationsoffshoreexploration Jointoperationsonshoreexploration

2016

30

0


4.3.6 ReservesIn 2016, the (estimated) gas reserve in the Dutch soil

declinedby94billionNm3to746billionNm3.EBN’sshare

inthis(estimated)gasstockamountsto301.3billionNm3.

4.3.7 Oil and gas portfolioTheNetherlandshas considerablepotential in small oil

and gas fields offshore but also onshore. In total, EBN

participates in the production of gas (and to a lesser

extentofoil)fromapproximately240smallDutchfields.

In2016,fivenewfieldswereputintoproduction.Oranje

Nassau Energie B.V. put two offshore fields into use,

NAM one offshore field and one onshore field and

Vermilionputoneonshorefieldintouse.

4.3.8 Seismic surveysNoseismicshootingswereperformedin2016.

Newfields2016

Abandonnedwells2016

Drills2016


The cooperation concerning the Groningen field In 1959, the so-called Groningen field was discovered

under the Groningen farmlands, one of the largest gas

fields in the world. The field is approximately nine

hundred square kilometres, representing a third of the

total area of the province of Groningen.

TheGroningenfieldwasdiscoveredbytheNederlandse

AardolieMaatschappij(NAM)andNAMappliedfora

‘concessionfortheexploitationofpetroleumandnatural

gas’intheprovinceofGroningen.Thatapplicationwas

grantedon30May1963,inwhichtheDutchstateinthe

interestoftheDutcheconomyattachedasaconditionto

theconcessionthatNAM,itsshareholdersatthetime

B.P.M.(nowShell)andJersey(nowExxonMobil)andDe

StaatsMijneninLimburg(predecessorofwhatisnow

DSM),hadtoworktogetherverycloselyintheareasof

production,transportandsalesofextractednaturalgas.

Inordertoenforcethisrequirementanagreementof

cooperationwasconcludedbetweenthesepartiesin

whichtheyrecordedhowtheywoulddetailtheoperation

oftheGroningenfield.Thisagreementalsoincorporated

theN.V.NederlandseGasunie,whichwastotakecareof

purchasing,transportationandsaleoftheGroningen

gas.Staatsmijnenreceived40%ofthesharesinGasunie.

Thisagreementofcooperationwassignedin1963and

wasapprovedbytheMinisterofEconomicAffairs.The

branchofDSMthatmanagedtheGroningenfieldand

thestakeinGasuniebecameaseparateB.V.in1989cal-

ledEnergieBeheerNederland(EBN),withtheStateas

soleshareholder.Until2006DSMconductedthe

managementofEBN.Asof1January2006,theExecutive

BoardofEBNreportstoaSupervisoryBoardappointed

bytheMinisterofEconomicAffairs.

Maatschap Groningen

‘PERSONELE UNIE’

GasTerra

Board of Trustees Partnership (CBM)EBN: two membersNAM: two membersEZ: a listener, as a government representative

Board of Delegated Commissioners (CvG)EBN: two membersShell: one memberEsso: one memberEZ: one member

Supervisory Board (SB)EBN: CvG members and one additional memberShell: CvG members and one additional memberEsso: CvG members and one additional memberEZ: CvG member


Themanagementofthepartnership,whichNAMand

EBNenteredintobasedontheagreementofcooperation,

waschargedtoaManagementBoardPartnership(CBM).

Onthisboard,therearetwomembersofEBNandtwo

membersofNAM.Agovernmentrepresentativefrom

theMinistryofEconomicAffairsalsoattendsthemeet-

ings.IntheManagementBoardPartnershipissuessuch

astheextractionoftheGroningengasandthestorageof

gasintheundergroundgasstoragesbuiltlaterinGrijps-

kerkandNorgarediscussed.

ThegasextractedinGroningenissoldtowholesalecom-

panyGasTerraB.V.,thetradingarmofGasuniethat

brokeoffin2005.EBNis40%shareholderofGasTerra.

GasTerraalsobuysgasfromsmallDutchgasfieldsand

fromNorwayandRussiaaswellasGroningengasand

sellsittocustomersathomeandabroad.TheExecutive

BoardofGasTerrareportstoasupervisoryboardandto

theBoardofDelegatedSupervisoryDirectors.ThisBoard

isintensivelyinvolvedinthemanagementandsupervi-

sionofGasTerra.Asdeterminedintheagreementof

cooperationtherearethesamefivepeopleonthisboard

asthoseinvolvedintheManagementBoardPartnership,

thisiscalledthepersonnelunion.

AtEBNtheorganisationofourshareintheGroningen

fieldandinGasTerraisinvestedwithinthe‘Groningen

team’.ThisisateamledbythedirectorofAsset

Managementandconsistsofabusinesscontroller,a

commercialadviserandalawyer.Theyspendabout

thirtypercentoftheirtimeonworkforthisteam.On

behalfofEBN,theCEOandchairmanoftheManage-

mentBoardPartnershipareontheManagementBoard

Partnership.Theyreceiveinformationandinputfrom

theGroningenteaminpreparationfortheirdecisi-

on-making.

Everyyear,therearefourmeetingsoftheManagement

BoardPartnership.TheBoardofDelegatedSupervisory

Directorsmeetseighttimeseachyear.TheEBNGronin-

genteammeetsonceamonth.Inthesemeetings,

severalissuesarediscussed,includingtheproductionof

theGroningengas,capacityissuesanddevelopmentsof

salesoftheGroningengas.


Operational performance indicators up until 20151 2015 2014

Energy consumption 20.2PJ 20.2PJ

Energy-efficiency improvements (result vs. target) 10.5vs15.1% 9.52vs15.1%

Energy consumption as a percentage of the energetic carbon production 2.8% 2.3%

CO2-emission 772kton 814kton

Methane emissions 6.0kton 5.7kton

Fatal accidents 0 0

Industrial accidents that led to absenteeism 27 22

Industrial accidents that did not lead to absenteeism 22 24

1) Operational performance indicators are reported based on statements by operators and consolidated by the Netherlands Enterprise Agency. 2) 2011-2014 figures are adjusted in 2015/2016 Sustainability Report in relation to corrections implemented by operators.


4.4 Economic and social results

4.4.1 Sustainability Within the oil and gas industry there is still a lot of

opportunities for making the sector more sustainable.

Together with our partners we are assessing the

possibilities for progress. By 2016 we had defined the

mainoutlinesofoursustainabilitypolicy,inwhichwithin

ourpolicyframeworksweconcretisethecontributionto

theenergytransitionandmakeouractivitiessustainable.

Inordertoprovideinsightintooursustainabilitypolicy,

we published the Sustainability Report 2015/2016. We

also report on our operational performance indicators,

i.e. our own sustainability performance and that of the

sector.The2015/2016SustainabilityReportcanbefound

at https://www.ebn.nl/publications/?lang=en.

In 2016 we have defined the main outlines of our

sustainabilitystrategy.Basedonthisstrategy,in2017we

willfurtherdetailmeasuresthatcontributetotheenergy

transitionandthesustainabilityofouractivities.

In 2017, we report the progress in the Sustainability

Report2016/2017.Wewanttoinvolveourstakeholdersby

ensuring thatEBN’s sustainabilitypolicy is in linewith

theexpectationsofourstakeholders.

Thesustainabilityreportwillbepublishedinthesummer.

WereportaccordingtoGRIguidelines.

ForanoverviewofthemostimportantissuesforEBNand

its chain partners and the relevant GRI indicators, we

refertotheGRIindexinannex9.5.

4.4.2 The people of EBNBi-annuallyEBNparticipatesinanemployeesatisfaction

surveyconductedbyGreatPlacetoWork.EBNisproudto

onceagainhavereceivedthe‘GreatWorkplace’certificate

in2016.Weusetheresultsofthesatisfactionsurveyas

input for our Executive Board and management for

improvementsinbusinessoperations.

Thereare81employeesatEBN.In2016,EBNinvestedin

developing the knowledge and skills of our employees.

Weencouragethemtofollowappropriatetrainingcourses

and programmes; however, the situation in the E&P

sectoraffectedthecourseofspecialist training, itcould

oftennottakeplaceduetolackofregistrations.Thehours

that employees spent in training and development

(training, seminars, courses, conferences) compared to

2015 thereforedropped from54 to45 traininghourson

averageperemployee.

In addition to knowledge development, EBN invests in

coaching and training for personal development, for

example,communicationskillsandpersonalleadership.

In addition, we invest in professional development by

having employees carry out assignments at one of our

partners for several months. In 2016, three employees

carriedoutsuchanexternalassignmentatOranje-Nassau

EnergieB.V.,SodMandtheMinistryofEconomicAffairs.

All EBN employees are appraised once a year by their

supervisorandalsohaveacareerdevelopmentinterview

eachyearinwhichtheirshortandlong-termobjectives

in the area of (career) development are discussed. A

360-degree feedbackprogrammewas started in2016at

EBN for all layers of the organisation. Employees and

managers and possibly external contacts can give

feedback on a colleague if requested. This includes

qualitativeandquantitativeinputonskillsimportantto

EBN. The results help the employees in their own

developmentandpersonalleadership.

Theaverageagewas43.2in2015,in2016itwas43.7.EBN

invests in the development of young talent. We are

committed to the development of a new generation of

ambitious young people who consciously choose a

(technical)roleintheE&Psector,atanorganisationthat

supports the public interest. We offer a traineeship to

young people. These trainees develop knowledge and

personalskillsintheircontractperiodofthreeyearsand

canthenmakesubstantivecontributionstothesector.

Last year, the number of FTEs at EBN was virtually

unchanged,in2015itwas74.5FTEsandin201674.8FTEs.

Female employees are 33% of the workforce. Female

employeesareemployedatalllevels,frommanagement

to the Supervisory Board with the exception of the

management team. Twenty percent of the managerial

and/orprofessionalrolesarefilledbyfemaleemployees.

2016 was a less positive year for EBN as regards the

percentageofabsenteeism.This increasedfrom3.8%to

4.9%. The increase ismainly due to the increase in the

percentage of long-term absenteeism (from 2.8% to

3.7%). Short and medium-long term absenteeism

together slightly increased from 1.1% to 1.2%. EBN

supervises sick employees by personal contact from

management and colleagues as well as providing

coaching, stress prevention, bringing in expertise

agencies and externalmultidisciplinary assistance with

reintegrationprojects.


Subject Objective Result in 2016

Total absenteeism (short-term,

medium-term, long-term)

EBNstrivesforatotalabsenteeismrate(short-term,medium-term,long-term)ofless

than 3%.

Theabsenteeismratewas4.9%

Short-term and medium-term

absenteeism

Theshort-termandmedium-termabsenteeismrateislessthan2.5%. Theshort-termandmedium-termabsen-

teeismratewas1.2%.

Staff turnover EBNisaimingtoachieveastaffturnoverrateoflessthan10%. Theturnoverratewas8.64%.

Career guidance Allemployeeshaveanannualperformanceanddevelopmentappraisalmeeting. In2016,allemployeeshadaperformance

anddevelopmentappraisalmeeting

Diversity EBNstrivestohaveagender-balancedworkforce.EBNcontinuestoendeavourtowards

amale-femalebalanceofatleast65/35%

33.3%oftheworkforceisfemale


4.4.3 Employee participation In2016,theWorksCouncilheldformalconsultationsfour

times with the director. A member of the Supervisory

Board was also present at two of these meetings. An

importantissueinthefirstquarterwasthearrivalofour

new director Jan-Willem van Hoogstraten and the

transfer of the administrative duties. In April the first

consultation with the new CEO took place. Topics of

conversationincludedtherecalibrationstrategyandthe

futureofEBNinachangingenergymarket.Thestrategy

was further discussed in June during the second

consultation with the director and in the presence of

Supervisory board member Jan Willem Weck. The

investigation into a possible role of EBN in geothermal

energywasalsoaddressed.Furthermore,therenewedjob

descriptions and the 360° feedback to be implemented

wereontheagenda.InSeptemberthethirdconsultation

took place. The credit rating of EBN and the low

investment ratio of operators in the Netherlands,

Groningen and EBN’s restoration obligation and the

operators for platforms and pipelines were discussed

here. Supervisory board member Arnold Gratama van

Andelwas present at the lastmeeting of the year. The

calibrationoftheannualreviewsandaone-timechange

in themethodology for salary adjustmentswere on the

agenda.Furthermore,thefirstresultsinthefieldofthe

implementationofthenewstrategyweresharedwiththe

WorksCouncil.

4.4.4 InvestmentsThe investments in the extraction and storage licences

havedecreasedby 50per cent fromEUR 564million in

2015 to EUR281million in 2016. This development is a

causeforconcern:itisimportanttocontinuedeveloping

fieldsandaddingnewreservestomaintainproductionat

a reasonable level. Without sufficient investment, gas

productionfromsmallfieldswilldiminishconsiderably.

A relatively low level of investment is also expected in

2017.

4.4.5 Sales Gas and gas storage capacity

Duetothemildwintersofrecentyearsandtheoversupply

ofgasontheworldmarketthegaspricesin2016cameout

atnolessthan28percentlowerthanin2015:14.1EUR/

MWhonaverage.ThepricesontheTitleTransferFacility

(TTF),oneofthemostliquidvirtualtradingplacesforgas

inNorthwesternEurope peaked inDecember at around

19.3EUR/MWh,butinthesummergaswassoldunder11.0

EUR/MWh.

TheweightedaverageyieldratefortheEBNgasportfolio,

inlinewiththemarket,is32percentlowerthanin2015:

13.7EUR/MWh.Totalsalesfellby5%toalmost20billion


Nm3. This was mainly the result of further production

limitation of the Groningen field and the expected

decliningproductionfromsmallfields.

Gas storage capacity from the underground storage

Bergermeer was auctioned again in June 2016. The

auctionedvolumeamountedto2TWh(0.2billionNm3).

Forthisauctionedvolumeasalespriceofaround2.7EUR/

MWhwasestablished.

Oil, condensate and LPG

ThepriceforcrudeoilexperiencedadipinJanuary(EUR

24perbarrel),andthenduringtheyearrosetotheyear

maximumofEUR53perbarrel.Thiswasmainlyduetothe

oversupply on the world market and the response by

OPECandotheroilexportingcountries.Theaverageprice

forabarrelofDatedBrentwasEUR40in2016,about15%

lessthanthepreviousyear.

Theweightedaveragesalespricefortheoilandcondensate

portfolioofEBNcametooverEUR37perbarrel,whichis

16percentlessthanin2015.Thedifferencewiththeprice

of a barrel of Dated Brent is due to a high share of

condensateinthetotalsales.Thisproductisusuallysold

at a reduced price. Total sales of oil and condensate in

2016 came to over 2.7million barrels, 36% less than in

2015.Asexpectedtheoffshoreoilfieldsareapproaching

theendoftheireconomiclifebutalsosomecondensate

rich gasfields fell practically still aftermaintenance in

the summer. The production from the Schoonebeek

oilfieldontheotherhandhasresumedbutthatdidnot

makeupforthedecline.

4.4.6 Financial result The revenue in 2016 dropped by 35 percent to EUR 3.1

billion,comparedtoEUR4.8billionin2015.Thedecreasein

turnover was mainly caused by both lower realised gas

prices(32percent)andlesserrealisedsalesofnaturalgas(5

percent). The realised salesprices for oil and condensate

werealso lowerthan in2015.Thenetprofitamountedto

EUR 333million. The operational costs amounted to EUR

982million (2015: EUR 1.4 billion). The depreciation and

amortisation, including impairment losses, amounted to

EUR0.8billion(2015:1.2billion).Thetotalcontributionsto

the Dutch state, including taxes, amounted to EUR 1.3

billion(2015:2.1billion).

In the past, financial resultswere paid out in full to the

shareholder. This resulted in a numerically low solvency

rate.On theotherhand, there are significant and robust

positivecashflowsfrombusinessactivitiesthatarehigher

thantheinvestmentexpenditures.Asaresult,everyyear

EBNhasgeneratedasignificantfreecashflow,resultingin

our solvency being considered excellent. This is also

expectedtobethecasein2017.

5000

4100

2735

1545

848 760525

13996

2327

1614

450333

3750

2500

2015 2014 2013

Corporateincometax Levies Netprofit

Payments to the Dutch State

2016

1250

0


Starting from the financial year 2016, of the annual net

earnings remaining after payment of the special profit

distributions,60%isaddedtoequityand40%ispaidoutas

dividendtotheshareholder.Thisadditiontoequitytakes

placeinprincipleuntilEBNhasreached10%solvency.

EBN’s good solvency is also reflected in the long-term

creditratings,beingAaaatMoody’sandAAatStandard&

Poor’s.

Thepositionofthecashandcashequivalentsattheendof

2016wasEUR1,566million(2015:EUR661million).Because

ofthispositionandduetothesignificantannualfreecash

flows that are also expected for 2017, EBN is able to

comfortably meet its outstanding current financial

obligations.Of the long-term loans, inNovember 2017 a

loanof10,000millionJPY(EUR81million)mustberepaid.

Thisisincludedundercurrentliabilities.Thisrepaymentis

expected to be met entirely from the cash without

refinancingwithanewlong-termloanbeingnecessaryin

2017.

EBNhasacommercialpaperprogrammeofEUR2billion.

EBNalsohasacommittedrevolvingcreditlinewiththree

renownedbanks,whichallowsEBNtowithdrawuptoEUR

400millionforgeneralbusinesspurposes.Thiscreditline

runsuntilAugust 2021.Neither facilityhadbeenused at

year-end 2016. Because of this, the liquidity position is

excellent,whichisalsoexpressedintheshort-termcredit

ratings, being P-1 at Moody’s and A-1+ at Standard &

Poor’s.

4.5 Prospects 2017

Technical plansExploration and ProductionIn2017,particularattentionwillbegiventoencouraging

new exploration, attracting new investment and the

developmentandapplicationofnewtechnologiesinthe

productionphase. Seven explorationwells are expected

tobecompletedin2017andsevenproductionwellswill

bedrilledandcompleted.

Seismic surveysIn addition, there are expected tobe two seismic surveys

offshore and there are plans to also acquire seismics

onshorein2017.Thelatter,however,dependsstronglyon

thedurationofthenecessaryauthorisationprocesses.EBN

is also examining how the acquisition of seismics can

supportthedevelopmentofgeothermalenergy.


Decommissioning and re-useThefollowingstepwillbetakenintheframeworkofthe

MasterPlanDecommissioningenRe-use.Togetherwith

EBN’spartnersahundreddayplanwillfirstbeexecuted.

Focalpointsare:

•ThecreationofaNationalDecommissioningPlatform

•SettingupaNationalDecommissioningDatabase

•In consultation with the regulators promoting

effectiveandefficientregulation

•Recordingwaysinwhichbestpracticeswithrespect

to optimisation of costs and performance can be

shared.

In the secondhalf of the year, the results of the above

topicswill be implementedanda startwill bemadeon

additionaltopics.

GroningenOnthesubjectofGroningenEarthquakesEBNcontinues

to conduct research and, on the other hand, closely

follows researchofothers. In2017,EBN isalsoactively

involvedintheprogressandqualitycontrolofthestudies

performedontheminingplanfortheGroningenfield.

Geothermal energy and CCSEBN supports the Ministry of Economic Affairs in

acceleratingthedevelopmentof(ultra)deepgeothermal

energyinordertopilotdrillingforultradeepgeothermal

energy with industry partners. Besides (ultra) deep

geothermal energy, EBN is investigating how a broad

roll-outofgeothermalenergyprojectsbasedonthenon-

operatedventure-modelcanbemadepossible.EBNwill

alsoprovidesupport indevelopingtheroadmapforCO2

captureandstorage(CCS),whichtheMinistryofEconomic

Affairsisworkingon.

ICTIn 2017, a new information plan and optimal ICT

architecture will be further worked on, so that EBN’s

uniquedatapositionandtheensuingknowledgecanbe

optimally used for portfolio-wide analyses. Our

knowledgeisalsomadeavailableforthedevelopmentof

geothermalenergyandCCS.

Investment climateIn the Energy Report, theMinister of Economic Affairs

stressedtheimportanceoftheuseoftheremaininggas

reserves.In2017,itwillbecomeclearwhetherthecurrent

conditionalinvestmentcreditof25%willbereplacedbya

genericinvestmentcreditof40%topromoteinvestment

in small fields (for more information, see Investment

Climate section: tax incentives on page 31). It will also

become clear in 2017 how licence holders will furnish

financialsecurityforthecompliancewiththeirrestoration

obligations(seealsoFinancialguaranteedecommissioning

andre-usesectiononpage31).

SustainabilityIn2017,wewillfurtherdetailmeasureswetakeasaresult

ofoursustainabilitystrategy.Theprogressofthiswillbe

reportedintheSustainabilityReport2016/2017.EBNhas

setatargetofimplementingtheshort-termactionsthat

ensuefromthesustainabilitystrategyin2017.

StrategyThetrends‘prolongedlowpricesandhighercosts’,‘the

energytransition’and‘publicbackingfortheactivitiesof

theoilandgasindustry’wereidentifiedin2016.Thisled

toarecalibrationofthestrategy.TheExecutiveBoardof

EBN expects the trends identified will also determine

EBN’ssurroundingsin2017.TheExecutiveBoardexpects

to anticipate these trends adequatelywith the changed

strategic priorities. The implementation of the strategy

will be further pursued in 2017. To empower the

organisation adequately for the implementation of the

strategy a more thematically designed organisational

modelisbeingsoughtwiththehelpofaconsultancyfirm.

The Executive Board would like to work towards more

focus,flexibilityandresult-orientedwork.For2017,the

Executive Board has set both EBN objectives and

management objectives. The EBN objectives are key

indicatorsof theperformanceofEBNandare therefore

also the starting point for remuneration, for more

information,see9.4.

In2016,theoperationalcostsperm3ofextractinggasin

theNetherlandswerestillanobjective.Thisobjectiveis

no longer set for 2017. In 2016, EBN formulated an

objective in the field of exploration drilling in new

locations.For2017atargetwasformulatedforalldrills

(exploration and production drilling). This was chosen

because all drills contribute to the result and at a time

whereinvestmentisatalowlevelalldrillscanbeseenas

a positive contribution to the Dutch gas sector. EBN’s

strategy was recalibrated in 2016 and this resulted in

modified strategic priorities. In follow-up to the

recalibrationofthestrategy,EBNhaschosentoincludea

contribution to the acceleration of the development of

(ultra) deep geothermal energy in theNetherlands as a

goalfor2017.


To achieve the EBN objectives the Supervisory Board

formulates management objectives. The management

objectivescontainmoreconcreteprojects,whichshould

contributetotheachievementoftheEBNobjectives.The

followingmanagementobjectivesweresetfor2017.

During theyear theprogressof theseobjectiveswill be

monitoredandreportedonintheannualreportfor2017.

Subject Explanation Objective

EBN’s profit EBN’sprofitdisplayedinmillionEUR ≥161

Administration costs EBN’scostsforstaff,hiringexpertise,office,etc.showninmillion

EUR

≤15.8

Reserves maturation

small fields

Thenetsupplementation(maturation)ofgasreservesinthe

NetherlandsinGNm3GE.

≥9.7

Drilling Thenumberofdrillsoffshoreoronshore. ≥13

Score transparency

benchmark

Thetransparencybenchmarkisanannualstudyintothecontent

andqualityofsocialreporting.

≥170

Contribution

geothermal energy

EBNcontributestotheexplorationoftheMinistryofEconomic

AffairstodevelopgeothermalenergyintheNetherlands.

Yes


Objects Explanation

Setting Up “Best Practices Forum” EBNwantstosetupa‘BestPracticesForum’fortheoptimalexplorationandproductionfromsmallfieldsintheNetherlands.

Health, Safety and Environment (HSE) benchmark In2017,EBNwouldliketosetupandusetheHSEbenchmark.Thismakesitpossibletomaketheperformanceintheareasofhealth,safetyandtheenvironmentofindividualproductionsitesandoilandgascompaniescomprehensible,andtoworktowardsoptimalresults.

Implementation 2017-sustainability policy actions EBNformulatesactionsforthefirstyearofimplementationinthesustainabilitypolicy.In2017EBNwantstoimplementallplannedfirst-yearactionsfromthepolicy.

Organising Exploration Day In2017EBNwillorganisetheExploration Dayagain,adayonwhichthesharingofknowledgeandstudiesbetweenEBN,operatorsandsuppliersiskey.

At least three exploration licences will be applied for

EBNaimsatatleastthreeexplorationlicensesbeingappliedforbyoperatorsin2017.

Organising Prospex stand EBNistakingpartintheProspexfairin2017.Thefairaimstobringpossibleoilandgasfields(prospects)totheattentionofoilandgascompanies.

Launch of National Platform for Decommissio-ning and Re-use

In2017,EBNwantstolaunchaNationalPlatformfordecommissioningandre-usealongwithindustrypartners.

Organise decommissioning and re-use conference EBNintendstoorganiseaconferencein2017onthethemeofdecommissioningandre-use.

Setting Up North Sea Decommissioning Forum (NL, UK, DK, NO)

In2017,EBNwantstosetupaforumfordecommissioningandre-useinwhichtheneighbouringcountries,UnitedKingdom,DenmarkandNorway,areactivelyinvolved.

Study of underground energy storage in the Netherlands

In2017,EBNwillconductastudyintothepossibilitiesofundergroundenergystorageintheNetherlands.

Website www.hoewerktaardwarmte.nl In2017,EBNwilllaunchthewebsitewww.hoewerktaardwarmte.nlincollaboration,makinginformationaboutgeothermalenergyavailable.EBNwillmakeknowledgeandexpertiseavailable.

Set up of TKI programme energy transition offshore

In2017,EBNwillcontributetosettingupaTKIprogrammefortheoffshoreenergytransition.

Partner day with the Ministry of Economic Affairs EBNwantstoorganiseapartnerdayagainin2017withtheshareholder.

FOCUS on Geo-Energy In2017,EBNwillpublishthereportFocusonGeo-Energy(formerlyFocusonDutchOil&Gas)

Update energy infographic 2017 In2017,EBNwantstoupdatetheinfographic‘TheNetherlands,landofenergy’tothesituationintheyear2017.

Determine virtual CO2 price for investment proposals

EBNwantstodetermineavirtualCO2priceforinvestmentproposalsin2017.

Implementation of organisation proposal revised strategic priorities

In2017,EBNwantstoadjusttheorganisationtothenewstrategicprioritiesbyimplementinganeworganisationproposal.Amorethematicallydesignedorganisationalmodelwillbeused.

Benchmark Great Place to Work EBNalsowantstoparticipateintheemployeesatisfactionbenchmarkGreatPlacetoWorkin2017.

Development training and development policy EBNaimstoformulatearevisedtraininganddevelopmentpolicyforemployeesin2017.


Until31December2016HannekeBrouwerwasDeputyMTmemberresponsibleforMiningattheMinistryofEconomicAffairs.Per1January2017,sheswitchedpositionswithRuudCino-untilthen,headoftheWaterandSoilDirectorateattheMinistryofInfrastructureandtheEnviron-ment.Therefore,aninterviewwithbothofthem.‘Thegovernmenthasafacilitatingandadrivingfunction’.

As policymakers how do you view the

energy transition?

Hanneke:“Wehavetakenanimportant

stepwiththeEnergyAgenda.Certainly

becauseitalsocameaboutindialogue.

For the Ministry of Economic Affairs

thatisnotcommonbecausewepromote

a clear and unambiguous interest. We

normally close ranks internally first

beforesteppingout.Nowwehavemade

ourselves vulnerable and we started

dialogue early with a broad represen-

tationfromthesector,includingprivate

parties.

Four transition paths are named in the

agenda: electricity and light, high

temperatureheat, low temperatureheat

and transport. The coming period, in

which the transition paths are worked

out,willbeverydecisive.Inparticularthe

wayinwhichgovernanceissetup.Andof

coursewewillbegettinganewcabinet.

Asapolicymakerandpersonally,Ibelieve

it’simportanttoapproachthetransition

realistically. It’s about the complete

picture.Gasisanunavoidablepartofit.”

How do you see the role of the

government in the transition?

Ruud:“Thegovernmenthasafacilitating

and driving function and at the same

timeisalsoresponsibleforthedelivery

certainty.Thatmaysoundsimple,butit

most certainly is not. Where is the

balancebetweenfacilitatinginnovation

andtopdownregulations?Inmyview,

as a government, we must create

frameworksiftheyareneeded.Oreven

better:ifmarketpartiesandsocietyask

forthem.Thatisonlypossibleifthereis

constructive cooperation and trans-

parency.TheEnergyAgendaestablished

throughdialogueisaniceresult.Butit

stillonlyexistsonpaper.Nowthetime

has come that we have to prove with

eachotherthatwecanactuallydoit”.

Is the urgency of the transition

experienced adequately enough?

Hanneke:“At theMinistryofEconomic

Affairstheurgencyiscertainlyfelt,and

support from other departments is

welcome. We are struggling with the

decentralised organisation, while the

transitioninpartalsorequiresacentral

Interview

‘ The energy transition requires a broad view and connection’

Hanneke Brouwer

Until31December2016DeputyMTmember

responsibleforMiningattheMinistryofEconomic

Affairs.

Ruud Cino

SuccessorofHannekeBrouwersince1January2017


approach. The development of the

NationalEnvironmentalVisioncouldbe

an opportunity to include the energy

transition”. “Sure”, continues Ruud:

“Energy and spatial planning are

intertwined as a result of the increa-

singly decentralised generation of

energy. Decentralisedenergy facilities

such as windmills and PV panels have

anincreasingeffectonthespatiallayout

oftheNetherlands.Thisrequirescentral

regulations,tointerpretthepossibilities

andimpossibilities.

Ruud: “Incidentally I experience only a

limiteddegreeofurgencyfromsociety.

The Central Planning Bureau has

surveyedthattheenergytransitiononly

sayssomethingto2%ofthepopulation.

Peopleneedtofeelthattheyaregaining

something; comfort, savings. That

triggers. Examples are needed. Exam-

ples of smart, innovative applications.

Suchasthoseappsthatallowyoutosee

livehowmuchyouaresavingwiththe

solarpanelsonyourroof”.

How energy efficient are your own

lives?

Hanneke: “I have solar panels on my

roof. Thatmeans I save onmy energy

bill and it makes you feel good. In

addition,Idonotleavelightsandthings

like that on unnecessarily. Obviously,

youtakeyourworkhomewithyou”.The

samegoesforRuud,butnosolarpanels

for him: “In an apartment you don’t

make your own decisions and our

owners’association isnot that faryet.

AlsointhosetalksIrealised:itallstarts

with comfort. From that approach,we

havegreatlyimprovedtheenergylabel

ofthecomplexthankstonewwindows,

insulation,etc.Ifyoulookatsmalland

medium-sizedenterprisesthanyousee

that corporate social responsibility is

also a good motive. Companies that

chooseenergy-neutralbusinessopera-

tions or an energy efficient transport

planarefineexamples”.

What contribution can EBN make to

the transition?

Hanneke:“ThenewEBNmissionfitsin

wellwiththetaskweface.Andthefirst

resultisalreadythere:theMasterPlan

DecommissioningandRe-use.Thenext

fewmonths are critical to its success.

The commitment cautiously given by

the E&P industry must now be

concretised.EBNplaysakeyrolehereas

the partywhich, on the basis of trust,

gets to see the company-specific data

from the operators. It is a large and

costly operation where as the

governmentwealsoneedtoensurethat

itiswellregulated”.

Ruud:“IalsoseeEBNasthepartythatis

pre-eminently able to realise a

connection.Connectionbetweendisci-

plines, connection between industry

and government. I found the meeting

that EBN organised at the end of 2016

with Vewin, NOGEPA, the Ministry of

Economic Affairs and the Ministry of

Infrastructure and Environment a fine

example. Cross-discipline, focused on

knowledgesharingandconnection.

EBN also plays an important role in

initiating, facilitating and publicising

research and sample projects. EBN

could play a broader role as far as I’m

concernedwhenitcomestoperception

ofnaturalgasandthetransition.Notas

a transmitter, but as the party that

sharesknowledgeandinformationand

allowsittobeshared”.

‘Togetherwehavetoprovewecanactuallydoit’


5.1 Risk management ThechangingenvironmentforEBNledtoreviewingEBN’sstrategyaswellastheriskmanagementsystem.Wehaveadjustedanumberofkeyelements:

•Thedeterminationofnewstrategicrisksasaresultofthechangedexternalenvironment;

•Theestimateofthespeedatwhichtheriskscouldoccur;

•TheassessmentofEBN’sriskappetite;

•Thedeterminationandimplementationofadditionalcontrolactivitiesonthemodifiedriskprofile.

5.Governance andRisk



Risksandopportunities

Vision, mission

andstrategy

ControlEffectivenessassurance

Strategic Risk Analysis

Operational Risk Analysis

Defined work processes

Planning & control cycle/ performance measurement

Policy, regulations, codes

EBN strategy

Annual Work Program & Budget

Self evaluations

Internal audits

Joint operations audits

In control statements

External audit

Follow up internal and external audits

EBN Framework with major elements for each individual pillar for risk management


EBN’sriskmanagementsystemconsistsoffourseparate

pillars,withinwhichwehavedesignatedvariousactivities

thatarecarriedoutincohesion.

Identifying, assessing and controlling risks helps us to

achievegoalsinaresponsiblemanner,complywithlaws

and regulations and continuously actively monitor the

managementof the risksand,wherenecessary, change

andimprovethem.

We develop different activities in order to manage risks

effectively. During annual sessions strategic risks are

discussed in themanagement team, which results in the

Strategic Risk Analysis (SRA). With the departments

strategic risks are annually linked to departmental

objectives, where an Operational Risk Analysis (ORA) is

drawnup.Duringallthesesessionsaselfassessmentofthe

designandoperatingeffectivenessoftheidentifiedcontrol

activitiestakesplace,onthebasisofwhichactionholders

are designatedwithin the departments and departmental

objectives and KPIs are adjusted. Risk management is

thereforeanintegralpartofthebusinessoperationsofEBN.

The management of risks also continually takes place

basedontheplanningandcontrolcycle,basedondefined

policies,workprocessesandbylinkingindividualgoalsto

managingrisks.

Employeesarethemostimportantsuccessfactorforan

effective risk management system. To enhance risk

awareness,weinvolveemployeesfromalllevelsinORA

sessions. This also contributes to reinforcing a

professional criticism at EBN. We strive for the right

balancebetweenstructuralelementsandculturalaspects

such as unwritten rules, behaviour, togetherness and

perceptionwithintheorganisation.

EBNusesasystemforperformancemeasurementwithin

the planning and control cycle. This was introduced in

2013 and recalibrated in 2016.Weworkwith reports in

which,basedonestablishedperformanceindicators,we

effectively follow the performance of the partnerships,

theinternaltechnicalactivityplansandthedepartments

periodically.Thismeanswealsomeasuretheprogressof

planned activities in these areas. The Executive Board

follows the performance of EBN as a whole based on

monthlyreportingandadjustswhereneeded.Thevarious

reportsare regularlydiscussedandpublished internally

inthevariousdepartments.


Low

Reasonable

Little Limited Significant Critical

1. Low oil and gas prices

Clear

High

Lik

elih

oo

d

Effect

Risks taking into account current administrative measures

Speed of risks arising

High, within 1-3 years

Medium, within 3-5 years

Low, after 5 years or later

2. Cash flow operators = NEW

6. Change management = NEW

4. Support from sector

5. Collaboration and knowledge sharing

3. Impact of earthquakes or disasters

The figure above shows the net risks (taking into consideration the effectiveness of the current administrative controls).


5.2 Risks InidentifyingtoprisksEBNtakesitsstrategicobjectives

asastartingpoint.Herebelowwelinktheidentifiedrisks

tothestrategicthemes.

5.2.1 Risk appetite Wehavedeterminedourriskappetiteperstrategictheme.

Thisriskappetiteappliestoallrisksthatareassociated

with the relevant theme. The extent to which EBN is

willingtorunrisksinachievingitsobjectivesisdifferent

for each strategic theme. The established risk appetite

appliestoallrisksthatareattachedtoatheme.Therisk

appetiteofEBNisriskneutralinprinciple.Becauserisks

are associated with multiple strategic themes, we will

explainifadifferentriskappetiteappliestospecificrisks.

AnimportanttaskofEBNistoencourageoperatorstouse

theundergroundpotentialoftheNetherlandsoptimally.

E&P activities have relatively high inherent technical

risks.Inaddition,inrecentyearsthenon-technicalrisks

havegrown.Non-technicalrisksarerisksthatarisefrom

interaction with the environment and stakeholders.

Weighingall the risksanddealingwith these risks ina

responsiblemannerisinherenttothistask.Wetakeinto

account the safety, health and the environment.

DependingonthesituationEBNismoreorlesswillingto

take risks. NOV management activities and portfolio

approachplayanimportantrole.Forthesereasons,the

risk appetite of EBN on this theme lies between risk

neutralandrisk-taking.Forrisk‘3.Impactofearthquakes

or emergencies’ linked to this theme a different risk

appetite applies, for this risk EBN takes a risk-averse

attitude.

Because of an increasing number of decommissioning

obligationsontheNorthSeainthecomingyearsEBNwill

takeapioneeringrolehere.Becauseoftheemergingbut

urgentnatureoftheissuetheriskappetiteisrisk-neutral

withtheaimofreducingtherisksinthefuture.

EBN also plays a role in the dialogue on the energy

transition: it is apolicyparticipationandhasextensive

knowledge of and experience in doing business in the

subsurface. Contributing towards strengthening,

improving and developing new energy sources such as

geothermalenergyisanewstrategicpriorityofEBN.This

makes the risk appetite provisionally risk-neutral with

theaimtobemorerisk-takingifthisfitswithinthepolicy

that the government is developing around the energy

transition.

We choose to explain ourmain, strategic, risks in this

chapter.Financialrisksareincludedinthechapter‘Policy

forfinancialriskmanagementonpage105’.Operational

risksandcompliancerisksareincludedinourOperational

RiskAssessment (ORA) thatEBN runsperiodically. The

riskappetiteforfinancialandoperationalrisksisneutral

torisk-takinginaccordancewiththepracticeintheoil&

gasindustry.Forcompliancerisksitisrisk-averse.Optimal use of Dutch gas resources

Averse Moderate Open

1

Taking control in the decommissioning issue2


3

Risk appetite


Dutch geological resources play an

important role in the energy transition

Vision

Mission Realising value from geological resources in a safe, sustainable

and economically responsible manner

Taking control in the decommissioning issue

2. Cashflow operators and JV partners

Optimal use of Dutch

gas resources

1. Low oil and gas prices


4. Support for the E&P sector’s activities


6. Change management


Risk has increased

Risk has decreased

Risk is newly identified


Risk What is the risk? How does EBN control the risk?

1. Low oil and gas prices Theriskisthatstructurallylowoilandgaspricesor

evenafurtherdeclineinoilandgaspricesaffecttheinvestmentclimateinanegativeway.Investmentsand/ormaintenanceworkwillbedelayedwhichmeansthattheDutchsubsurfacepotentialwillnotbeexploitedfullyandtheinfrastructurewillagefaster.Lowpricesanduncertaintyaboutwhenpriceswillriseagain,canbothdiscouragethecurrentoperatorsandpotentialnewpartiestoinvestintheNetherlands. Ultimately,thismayresultinlowersalesforEBN, lessrevenueforthestateanditmayevenleadtoimpairments.

•In2016,EBNadvisedtheDutchMinistryofEconomicAffairsonfiscalmeasures.Wealsoencourageknowledgesharing,forexamplethroughorganisingworkshopsonlowcostdevelopment,wedeployourNOVmanagementtoinfluenceoperatorsandwepublishtheOPEXOffshorebenchmark.

•EBNconductsstudiesthatcontributetotheoptimaluseoftheDutchsubsurface.Thestudiesarecarriedoutinsixdifferentareas:Exploration,TightGas,MatureFields,DecommissioningandRe-use,InfrastructureandGeothermalEnergy.Amulti-annualobjectiveandactionplanhavebeen establishedforallareas.EBNthuscontributestothesustainabilityofoperators.

2. Cashflow operators Thestructurallylowoilandgaspricescreatetherisk

thatjointoperationpartnerscannotcomplywiththeirlong-termobligations.Inparticular,theavaila-bilityofcashflowtoactuallypayforcommitmentsrelatingtothedecommissioningofoldinfrastructureisunderpressure. Thiscreatestheriskofsuboptimalimplementation oftheclearingobligation,bothtechnicallyandfinan-cially.

•EBNcontinuouslyassessesthecreditworthinessofitsjointoperationpartners.Thisprovidesagoodinsightintothefinancialcapacityofthepartners.In2016,thiscontributedtoanincreasedunder-standingandearlydetection.

•EBNhasaleadingroleinthedecommissioningandre-useofplatforms.ThefirststeptakeninthisistheMasterPlanDecommissioningenRe-use.Thecooperationfrequencywithoperators,StateSupervisionofMines(SodM)andtheMinistryofEconomicAffairs(EZ)hasbeenintensifiedto continuouslydiscusstheprogressoftheexecutionofthemasterplanandimplementpossibleimprovements.In2016,thefirststepsweretakentostructurethedecommissioningandre-useof infrastructure.

5.2.2 Explanation of risks and controlThis chapter explains the key strategic risks of EBN.

Financial risks are included in the chapter ‘Policy for

financialriskmanagement’onpage105.Operationalrisks

andcompliancerisksareincludedintheotherchapters.




Earthquakesandotherdisastersmayoccurduringourpartners’operations.Otherdisastersincludeleaksandsecurityincidents.Theriskmayresultinmaterialandimmaterialdamage.Thisriskalsoincreasesthesocialresistancetoouractivitiesandnegativelyaffectsthesector’sreputation.

•ThequakesinGroningenhavelettoarestrictionofproduction.Thisrestrictionofproductionhasbeentranslatedintoaproductionprofilewhichdefineswhen,whereandhowmuchgascanbe produced.EBN’sTechnicalProjectTeamGroningencarriesoutstudies,amongotherthings,onthelong-termmitigationofthisrisk.ThesestudiesarepublishedaspartofawholerangeofstudiesbyNAM,KNMI,SodM,TNO,andothers.Ultimately,thesestudiescontributetoabalancedproductionlevel.

•EBNhasputtogetheratechnicalstudyteamthatcarriesoutresearchintothelong-termmitigationoftheeffectsofearthquakes.Thisteamsharestheresultsoftheinvestigationswithinthesector,whichcontributestoincreasingtheknowledgetoreduce(theimpactof)thequakesinGroningen.Thiscontributestothelong-termvisionongasextractionandthesupportforthis.

•Thecommunicationsurroundingearthquakesanddisastersisanessentialpartofriskmitigation.Tobeastransparentaspossiblefromthestartofadisaster,wehaveacommunicationandactionplanthatlistswhichproceduresmustbefollowed.In2016,thisledtoimprovedtransparencyinthisarea.

4. Support from sector Thesharpincreaseinattentionforclimatechange

andtherecentearthquakeproblemshavethreatenedtheE&Psector’sreputationintheNetherlands.TheriskaffectsEBN’sactivitiesandthoseofourpartnersbecauseproductionrestrictionsareintroduced, permitprocedureshavealongleadtime,stricterlegislationhasbeenintroducedandtheactivitiesregardingproductionandabandonmentcomeunderstrictersupervision.

•TherevisionofourstrategyisdonewithactiveparticipationandclosecooperationbetweenEBNandabroadrangeofstakeholders,bothinternallyandexternally.Thisincreasesthesupport.

•EBNtakesaproactiveroletowardstheoperatorssothattheyasnon-operatorsalsohaveinfluenceinthesector.Duringtherevisionofthestrategy,therehasbeenintensivecollaborationand participationbetweenEBNanditsstakeholders.ThereviewalsodevelopedtheimplementationoftheMasterPlanDecommissioningenRe-use.InconsultationwiththeMinistryofEconomicAffairs,EBNinvestigatesoptionstoacceleratethestrategic“geothermalenergy”pillar.ThesemeasuresincreaseEBN’sinfluenceinthesector.

•Toprovidetransparencyabouttheactivitiesoftheindustry,wereportaboutourownactivitiesandthoseofourpartnersinourannualreport,the“FocusonDutchOilandGas”annualreportandonourwebsite.In2016,thiscontributestoincreasedtransparency.




Intimesofrisingcostsandfallingpricestheoilandgasindustryneedscollaborationandknowledge sharingintheareasofcostsavings,decommissioningandenergytransition. ThereisariskthatinsufficientcoordinationandknowledgesharingfromEBNand/orbetweentheoperatorscanleadtoinefficienciesandlackofclarity.

•EBNparticipatesactivelyinconferencesandlecturesathomeandabroad,inJointIndustryProjectsandTKIs,thematicworkshopswithoperatorsandstakeholders,EnergyAcademyEuropeand sustainabilityprojectssuchas“GasmeetsWind”.

•EBNhasconductedstudiesinmultipleareasandestablishedamulti-annualobjectiveandactionplan.EBNalsoproducestheBOONreport(OPEXOffshoreNLbenchmark),theMasterPlan DecommissioningenRe-use,asustainabilityreportandtheHSEbenchmark.ACAPEXbenchmarkisalsoused.

•EBNalsohasfrequentconsultationswithNOGEPAanditsmembers,itparticipatesactivelyinKVGNandGildeandtherearegoodcontactswiththeuniversities(includingthoseofDelft,UtrechtandGroningen).

•In2017,anappwillbedevelopedforstrongandtransparentcommunicationabouttheenergy transition,EBNwillreviewitswebsiteandaninformativewebsite(hoewerktgaswinnen.nl)was launchedin2016.

•Theseadministrativemeasureswilltogethercontributetobetterknowledgesharingwithinthe sector.

6. Change management EBNfacesachallengetofindtherightbalance

betweennewthemesintheenergysectorandtheperformanceofitsstatutoryduties.Stricterlawsandregulationsasaresultofclimatechangeandthe decommissioningwaveofexistinginstallations producenewissues.TheriskliesinthatEBNis insufficientlyabletoadapttheorganisationtothechangingenvironment.

•EBNhaslaunchedaninvestigationintothe“fitforpurpose”organisationwiththerevisedstrategy.AstreamlinedandimprovedtrainingpolicyforEBNstaff,whichincludestheenergytransition, isbeingdeveloped.Internally,wefocusonstrengtheningaprofessionalcriticalattitudetowardsoneanother.Wearehiringnewemployeeswithspecifictechnicalknowledgeinareaswhereour knowledgestilllagsbehind.

•PreparingtheEBNorganisationmustleadtoastrongandclearroleintheindustrysothattheimplementationofnewprocessessuchastheMasterPlanDecommissioningenRe-useandthedevelopmentofgeothermalenergycanbeshapedeffectively.

•Wehaveintensifiedtheinternalcommunicationaboutourroleintheindustryandtherevised strategy.Inthisway,weensurethatourentireorganisationhasthesamevisioninmindandwecreateinternalawarenessaboutthechangescomingtotheindustryandtous.Torealisethis, wehavedevelopedacommunicationsprogramme.

•TheseadministrativemeasureswilltogethercontributetoEBN’ssustainability.


Other risks 2015

Inthe2015annualreportwementionedanumberofrisks

thatarenolongernamedassuchinourcurrentanalysis.

In the table belowwe indicate howwe deal with these

risks.

5.2.3 Reviews and auditsIn2016,variousinternalauditswerecarriedoutbasedon

ourauditannualplan.Theseareaimedatassessingthe

quality and effectiveness of important work processes

and on a number of specific themeswithin thesework

processes.

Itconcernsauditsonthecashmanagementprocess,on

the legal risk reportingprocess and theprocess for the

establishmentofnewsalesandbalancingagreementsat

EBN.Basedonthefindings,wehaveestablishedactions

thatareassignedtoowners.Thefindingsarepresented

andexplainedtotheExecutiveBoard.Themostimportant

onesarealsodiscussedwiththeAuditCommitteeofthe

Supervisory Board. The Executive Board monitors the

implementationoftheactionsonaquarterlybasis.

In addition to the internal audits EBN also performed

so-called ‘jointventureaudits’,afinancialauditonthe

costschargedontoourorganisationintheframeworkof

the various joint operations. The findings of the joint

venture audits were discussed with the partners.

Adjustmentsaremadewherenecessary.

Thereisalsoanannualexternalreviewoftheprocessfor

the determination of the oil and gas reserves and

resources.Adetailedreviewisperformedonninefields

thathaveundergonematerialchangesand/orarematerial

in the portfolio of EBN. The recommendations of the

review are implemented and followed to guarantee a

continuousimprovementofthisprocess.

5.2.4 In-Control statementTheExecutiveBoardisresponsibleforadequateinternal

riskmanagementsystemsandtoassessitseffectiveness.

The actual company performances are periodically

compared with the approved plans and budgets in the

financialyearanddiscussedduring theExecutiveBoard

meeting.TheExecutiveBoarddeclaresthatthesystems

for the financial reporting risks functioned properly

during the year under review and have provided a

reasonabledegreeofcertaintythatthefinancialreporting

containsnomaterialinaccuracies.

Risk Assessment

Too few potential

resources, and

disappearance of

infrastructure

Thechanceexistedthatthisriskwouldarise.However,recentyearshaveshown

thatthisriskisstructural,whichhasledtoitbecomingoneofthedriversbehind

EBN’sstrategyreview.ThisriskthereforecomesbackinthetrendEnergy

Transition,describedonpage20.

Unfavourable

competitive position gas

Thechanceexistedthatthisriskwouldarise.However,recentyearshaveshown

thatthisriskisstructural,whichhadledtoitbecomingoneofthedriversbehind

EBN’sstrategyreview.ThisriskthereforecomesbackinthetrendEnergy

Transition,describedonpage20.

Use and security of IT

systems

Forthisrisk,controlactivitieshavebeenimplementedin2015and2016meaning

thenetriskisnolongerconsideredsignificant.Thesecuritypolicyforthisrisk

wasthoroughlyupdatedandinternalcommunicationaboutawarenessonIT

securityandcybercrimewasstrengthened.

Insufficient knowledge

and experience of staff

Thisriskisassessedasnotsignificantinthecurrentanalysis.Inareaswhere

EBNbelievedithadinsufficientknowledgeandexperience,staffhavefollowed

targetedtrainingornewemployeeswerehired.Theseareasaregeothermal

energy,drillingandabandoninginfrastructure.Thelabourmarketfortechnical

staffisalsomuchlesstensethansomeyearsago,sothatanyrecruitmentofother

newemployeesiseasier.

Other risks 2015


5.3 Corporate governance

ShareholderGeneral

EBNisaprivatecompanywiththeDutchstateasthesole

shareholder.Managementofthesharesisinthehandsof

theMinistryofEconomicAffairs.EBN isapolicyparti-

cipation.Shareholderstatusandtheroleofpolicymaker

arevestedinthesameministry.

EBN’sauthorisedcapitalisEUR128,137,500andisdivided

into284,750ordinaryshareswithanominalvalueofEUR

450pershare.

Theshareholderappointsthedirectorandthesupervisory

directors of EBN. The Supervisory Board makes a

recommendationfor theappointmentof thedirector to

theshareholder.TheMinisterofEconomicAffairshasto

approvethatrecommendationbeforehand.

The shareholder appoints a supervisory director on the

recommendation of the Supervisory Board. The

shareholder appoints a chairman from themembers of

theSupervisoryBoard.

EBN’s articles of association state that the director

requiresthepriorapprovaloftheSupervisoryBoardorof

theshareholderforcertainacts.Concerningtheapproval

of the Supervisory Board, please refer to page 76. The

shareholder’sapprovalisrequiredforthefollowing:

•enteringintoorterminatinganysustainablecollaboration

orinvestmentwithavalueexceedingEUR200million;

•closingthebusiness,orwindingupthecompanyora

subsidiaryorimportantdivisionofthebusiness;

•decisionsbytheExecutiveBoardaboutamajorchange

totheidentityorcharacterofthecompany, including

acquisitionordivestmentofasubstantialparticipation

in thecapitalofanothercompanyandthetransferof

thebusinesstoathirdparty;

Shareholders’ meetingInApril2016theannualshareholders’meetingwasheld.

ThechairmanoftheExecutiveBoard,theFinanceDirector

andthefullSupervisoryBoardattendedthisshareholders’

meeting.

At least the following topics are on the agenda of the

annualshareholders’meeting:

•Review of thewritten annual report by the Executive

Board on issues concerning the company and its


management;

•Adoptionofthefinancialstatementsanddetermination

oftheprofitappropriation;

•DischargingtheExecutiveBoardofitsresponsibilityfor

itsmanagementoverthepastfinancialyear;

•DischargingtheSupervisoryBoardofitsresponsibility

forsupervisionoverthepastfinancialyear.

Thefinancialstatementsfor2015wereadoptedandthe

Executive Board and the Supervisory Board were

dischargedoftheirresponsibility.

Informal consultation

In addition to the generalmeeting of shareholders the

shareholder representatives of the Ministry and the

Director Finance of EBN had regular informal

consultations: in2016, four times.Theobjectiveof this

informalconsultationistoprovidetheshareholderwith

all the relevant financial information the shareholder

needs to exercise his authority. Providing relevant

informationisoneoftheExecutiveBoard’sobligations.

Wealsoconductinformalconsultationsonaregularbasis

withthepolicymaker.Therearefixedconsultationtimes,

such as the strategic consultation, the executive

consultation and the mining and gas production

consultation. In these fixed consultation meetings,

information is exchanged on developments within the

twoorganisations,anychangestotheenergypolicyand

relevantdevelopments inEBN’s tasks and activities. In

addition to members of the management team, other

EBNemployeesalsoattendthesemeetings.Thechairman

of the Supervisory Board is present at the strategic

consultation.

Supervisory BoardTheSupervisoryBoardisresponsibleforsupervisingthe

(social) policy of the Executive Board and the general

courseofaffairsatEBNandadvisestheExecutiveBoard

where necessary and advisable. In turn, the Executive

BoardprovidestheSupervisoryBoardwithallnecessary

andrelevantinformationtoenableittoexecuteitstasks

and responsibilities. EBN’s Articles of Association also

statethattheExecutiveBoardrequirespriorapprovalby

the Supervisory Board or the shareholder for certain

decisions,forexamplewhen:

•Establishing and amending the operating budget and

theinvestmentandfinancingplan;

•Appointingproxyholders;

•Makinginvestmentsand/ordisinvestments;

•Conducting other legal transactions to the value of

morethanEUR50million.

Balanced distribution of the seats on the Supervisory

Board

ThecompositionoftheSupervisoryBoardwaschangedin

2016bytheappointmentofMrsKneppers-Heijnertand

MrHuijskesper1January2016.Withtheappointmentof

Mrs Kneppers-Heijnert, the percentage of female

commissioners is 20%. The report by the Supervisory

Boardcanbefoundonpage72ofthisannualreport.

Executive BoardThe Executive Board of EBN consists of one statutory

director. TheExecutiveBoard is responsible for general

policy and strategy with the company’s associated risk

profile. The Executive Board is also responsible for

achievingthecompany’sobjectives,theresultsachieved

and the social aspects of business relevant to the

company.Wherenecessary,theExecutiveBoardsubmits

decisionstotheshareholderortheSupervisoryBoardfor

approval. It also ensures the proper functioning of the

internalriskmanagementandcontrolsystem.

Management Team

The Executive Board is assisted by three non-statutory

directorswho,togetherwiththestatutorydirectorform

themanagementteam.Thestatutorydirectorischairman

ofthemanagementteam.Thecurrentmanagementteam

consists of the statutory director Jan Willem van

Hoogstraten (CEO)aswell as the followingpersons:Mr

Starink (Director Asset Management), Mr Scheffers

(Director Technology) and Mr Boekelman (Director

Finance).Theorganisationchartisshownonpage9.

Per1March2016attheproposalofthesupervisoryboard

MrVanHoogstratenwasappointedbytheshareholderas

CEO. From 1 November 2015 to 1 March 2016, Mr

Boekelman, in addition to his position as Director

Finance,fulfilledthepositionofadinterimCEO.

Theboardregulationsstatehowthetasksaredistributed

within the management team. The management team

functionsbasedonjointresponsibility.Withinthatjoint

responsibility,thetasksaredividedintofunctionalareas.

Thisspecifictaskdivisionissetdowninwriting.Thetask

divisionwastemporarilymodifiedbytheappointmentof

MrBoekelman as ad interimCEO (in the period from 1

November2015to1March2016).Thedivisionoftaskswas

updated in the course of 2016 and this updated version

wasalsodiscussedwiththeSupervisoryBoard.

Each member of the management team has the

responsibility for the preparation of policy issues and

decisions within his own working area. After decision

makingwithin themanagement team, themembers of

themanagementteamensurethepromptimplementation



of the decisions made. In principle, the management

teammeetseverysecondweek.

In the annual report the Executive Board provides a

descriptionoftheprincipalrisksthatarerelatedtoEBN’s

strategyandthedesignandoperationoftheinternalrisk

managementandcontrolsystemsinrelationtothemain

risksrelatedtoEBN’sstrategy.TheExecutiveBoardalso

indicates what significant changes were implemented

andwhat significant improvementswereproposed. For

thisdescription,seepage53.

Remuneration

Theshareholdersetsthepolicyfortheremunerationofthe

Executive Board. The Supervisory Board determines the

actual remuneration of the individual members of the

Executive Board within the framework of that policy,

including thevariable remuneration. In the remuneration

report of the Supervisory Board the remuneration of the

ExecutiveBoardisexplained.

Governance table

The governance table in annex 9.3 contains the following

datafortheExecutiveBoardandtheSupervisoryBoard:age,

otherpositions,terms,profiles/specificknowledgeandtask

withinEBN.

Conflicts of interestEBN endorses the principle II.3 of the Corporate

Governance Code (see here below ‘Application of

Corporate Governance Code’) that any type and

appearanceofconflictsofinterestbetweenthecompany

andtheExecutiveBoardshouldbeavoided.TheArticles

of Association and the Executive Board Regulations

include a regulation concerning (potential) conflicts of

interestbetweentheExecutiveBoardandthecompany.


Any (potential) conflicting interest of material

significance must be reported immediately to the

chairmanof theSupervisoryBoard.No incidenceswere

reportedbytheExecutiveBoardin2016.

External accountantThe shareholder appoints the external auditor, with the

supervisoryboardbeingabletomakearecommendation.

OntherecommendationoftheSupervisoryBoardin2015

the shareholder appointed PwC as auditor for the years

2016,2017and2018(withapossibilityforrenewalfor2019).

Application of the Dutch Corporate Governance CodeEBN attaches great importance to good corporate

governance.Forthisreason,EBNvoluntarilysubjectsitself

totheprinciplesandbestpracticeprovisionsoftheDutch

Corporate Governance Code (insofar as these apply to

EBN).EBNthusfollowsthepolicyofthegovernmentwith

regard to state participations and the Code. The Dutch

CorporateGovernanceCodeandinformationonitcanbe

found on: http://commissiecorporategovernance.nl. An

EBNreportoutlinesforeachprincipleandbestpractice

provisionhowitimplementsthese.Thisimplementation

report is available at: www.ebn.nl/ebn-over/corporate-

governance/.

TheSupervisoryBoardhasdiscussedtheimplementation

reportin2016andfoundthatitdoesnotyetcomplywith

allprovisions.Anumberofprovisionsarerelatedtothe

rulesofprocedureoftheSupervisoryBoard.Therulesof

procedurewere adjusted in September 2016 so that the

corporategovernancecodecompliancewasimproved.

5.3.1 IntegrityCode of Conduct, complaints board and confidant

Where externally we find transparency and clarity

important, that also applies within the walls of our

organisation. Integrity is one of EBN’s sustainability

themes.TheareasoffocusthatEBNdistinguishesforthe

integrity themeare:humanrights,non-discrimination,

anti-corruption,competitionandtransparency.EBNalso

detailsitseffortstoactwithintegrityandinaresponsible

mannerthroughitsCodeofConduct.TheCodeofConduct

is applicable to all the employees and accessible to all.

Thisprovidesaguidelineformakingpersonalchoicesand

individualdecisions.WealsousetheCodeofConductto

testtheactualconductofourcompanyandouremployees.

In2016EBNheldaninternalanti-corruptiontrainingto

raise staff awareness about this. 91% of our employees

hasactuallyfollowedthistraining.TheCodeofConduct

was extended on this part. Training sessions are given


regularlytoensurecompliancewithcompetitionlaw.

Ifinternalemployeeshavecomplaints,theycanspeakto

a confidant or the complaints board. In 2016, the

complaints board did not receive or deal with any

complaints. The confidant had discussions with two

employees in2016.TheCodeofConduct isavailableat:

www.ebn.nl/ebn-over/corporate-governance.

EBNhasevaluatedandreviseditsprocurementpolicyin

2016.ThegeneralobjectivesofEBN’sprocurementpolicy

arethereductionofpurchasingcosts,decreasingsupply

risks, increasing product and vendor quality and

improving the procurement function. The procurement

policy is based on the following purchase vision: ‘EBN

dealswith procurement and suppliers in a professional

manner. EBNpurchases at the right price/quality ratio,

under controlled risks in a transparent manner. EBN

wants to be a reliable and careful partner for suppliers

and potential suppliers, offering fair and equal

opportunities.’Purchasingiscoordinatedbyapurchasing

managerandapurchasetableappliesforthepurchases

dependingonthefinancialvalue.Aspartofthepurchasing

policyEBNhasGeneralPurchasingTermsandConditions.

Thesearedeclaredapplicableasmuchaspossibletothe

goodsorservicesthatEBNpurchasesitself.TheseGeneral

Purchasing Terms and Conditions can be found on the

websiteathttps://www.ebn.nl/ebn-publicities/juridisch/.

IfasupplierdoesnotactinaccordancewiththeseGeneral

Purchasing Terms and Conditions, he will be called to

accountaboutthis.

Regulations protecting whistleblowers

Onthebasisoftheregulationsprotectingwhistleblowers,

employeescanreportanyallegedabusetotheExecutive

BoardortheSupervisoryBoard.Noallegedincidencesof

abuse were reported in 2016. The current regulations

protectingwhistleblowerscanbefoundat:www.ebn.nl/

ebn-over/corporate-governance/.

International conventions and guidelines

EBN as a policy participation obviously adheres to

conventionsandguidelinesthattheDutchstateendorses,

including the OECD guidelines for international

companies and the UN Guiding Principles on Business

andHumanRights.


AnteFrensisDeputyDirectoratNAMandresponsibleforthecorporatestrategyincludingtheenergytransition.“Energyisamatteroflifeanddeath.Youcannotjustleaveituptotheindustry.Weneedthegovern-menttoprovideframeworks”.

How do you see NAM’s role in the

energy transition?

“Theenergytransitionisataskthatwe

arefacingtogether.Togetherwehaveto

get from A to B with less CO2. Energy

savingandadifferentenergymixwith

lessCO2arecrucial.Whatthatmixwill

looklikeisnotyetclear,butnaturalgas

playsanessentialroleintheroutefrom

AtoB.AsNAMwehavealreadytakena

leadroleinatransition.Thenfromcoal

tonaturalgas.Nowwearetransforming

toasustainableenergysystemIalsosee

animportantroleforus.Wearepartof

thesolution”.

In what ways is NAM part of the

solution?

“As natural gas producer along with

other natural gas producerswe ensure

that lifegoesonduring the transition.

In addition, we also contribute in that

roletoreducingtheemissionofCO2by

improving the energy efficiency of our

activities.OntheNorthSeaandonshore

there are plenty of chances to work

moreenergy-efficiently.Wealreadyuse

some of them. A part is still in

development.Buttake,forexample,the

numberofhelicopterflights.Byusinga

workvesselwehavegreatlyreducedthe

numberofflights.In2009wehadseven

helicopters in the air, now only two.

Simplification of the work on the

platforms results in significant energy

savings.Wearewellonourwaytoour

goal of working thirty per cent more

energy-efficiently in2020.Savingmay

notsoundasexcitingorinnovative,but

contributesspecificallytothereduction

ofCO2.

Inaddition,wearecontinuallyexploring

newopportunities;newtechniquesand

systems,whicharenecessaryinorderto

reachB,alsothroughinnovativeuseof

existingopportunities.Suchasinjecting

CO2 or generating hydrogen and

Interview

‘ We are part of the solution’

Ante Frens

DeputyDirectoratNAM


methane by wind power, and storing

greengasinemptiedgasfieldsonshore

andsea.Orplacingsolarpanelsonthe

locations where we produce gas. The

space is there, the connection to the

electricitygridtooandthereisalreadya

fence around the area so that no

accidents can occur. Think of elec-

trification of platforms. With more

offshorewind farms it iscosteffective

toconnectplatformsviapowercablesto

wind farms. The consumption of the

Dutch platforms corresponds to about

five per cent of the total electricity

consumption in the Netherlands. That

addsup.Anotherexampleisgeothermal

energy.NAMisnotcurrentlyextracting

any geothermal energy, but we are

involved in research projects by

providing up to date geological infor-

mation.Sowecontributetoapromising

renewableenergysource.

Successful innovation requires experi-

mentation,butonthebasisofasound

businesscase.SustainableAmelandisa

goodexample.Allthemoresobecause

itisnotonlyaperfecttestinggroundfor

techies, but also because on Ameland

youexperiencetheimportanceofpublic

backing.Togetherwiththemunicipality

of Ameland and a number of other

companiesandknowledgeinstituteswe

are combining new and existing

techniques and systems to realise a

largely sustainable energy supply by

2020. The business sector and the

islandersaredevelopinginitiativesand

eco-tourism is getting a boost. Those

arethemostbeautifulwin-wins”.

From A to B with less CO2. How do you

see the role of the Government?

“Thegovernmentmustprovideframe-

worksfortheroutefromAtoB.These

includemeasures that ensure that the

route is cost effective, that there is

publicsupportforthechangesandthat

thereissupplysecurity.Inaddition,itis

alsoapoliticaltasktodetermineifand

whom we want to be dependent on

foreignenergyfor.Energyisamatterof

lifeanddeath.Youcannotleaveitupto

theindustry”.

Does EBN play a role when it comes to

sustainability of the sector?

“Absolutely!Theextentofthechallenge

wefaceisenormous.Weneedtodevelop

alternatives with each other to reduce

CO2andkeepthelighton.Butifwego

from A to B all of a sudden, then the

Netherlands is bankrupt. According to

McKinsey theDutch economydepends

foraround11%onfossilfuels.Weneed

toreinventoureconomyandoursociety.

If we tell this story as NAM, there is

always room for suspicion. There is a

needforapartythatoperatesbetween

the government and industry and is

impartial in the sector. A party that

makes connections. EBN has the

required qualifications to fulfil that

role: much and broad knowledge and

experience,sufficientcapacityandable

to participate in innovative projects

thatcontributetoreductionofCO2.The

state interest of keeping an eye on

knowledge of affairs and helping to

breakdownbarriers.Inordertooperate

low CO2 as a country by 2050, brains,

knowledge and understanding are

needed,becausewecanonlyachievethe

challenges we face with each other by

workingtogether”.

‘Succesfulinnovationrequiresexperimentation’


6.1 General information

TheSupervisoryBoard(theBoard)fulfilstheroleofemployertothedirectorandhasthetaskofmonitoringthepolicyoftheExecutiveBoardandthegeneralcourseofaffairsatEBN.Inthisreport,theSupervisoryBoardexplainshowithasimplementeditsmethodsofsupervisionandadvisedtheExecutiveBoard.

6.ReportbytheSupervisoryBoard


In accordance with the Central Government Holdings

PolicyMemo2013,EBNappliestheCorporateGovernance

Code. The section on Corporate Governance and Risk

Management in this annual report addresses the

application of the Corporate Governance Code inmore

detail. A revised Corporate Governance Code was

publishedinDecember2016.EBNwillreportintheannual

reporton2017ontheapplicationbyEBNofthisrevised

Code Corporate Governance (assuming the Code is

enshrinedintheCivilCodebythegovernmentin2017).

6.2 Composition of the Supervisory BoardAnumber of changesweremade to the composition of

theSupervisoryBoardin2016.

•OntherecommendationoftheBoard,thegeneral

meetingofshareholdersappointedMrsKneppers-

HeijnertandMrHuijskesassupervisorydirectors

witheffectof1January2016.

MrsKneppers-HeijnertisProfessorofBusiness

AdministrationattheUniversityofGroningenand

wasamemberoftheSenatefortheVVD.Mrs

Kneppers-Heijnertwasnominatedforthe

‘communication/HRM’profile.

MrHuijskeshasworkedatShell,andOMV,anoiland

gascompanywithAustriaasahomebase.Mr

Huijskeswasnominatedforthe‘knowledgeoftheoil

andgasindustry’profile.Bothsupervisorydirectors

havebeenappointedforaperiodoffouryears.

•Witheffectfrom1March2017,MrDeVrieswas

appointedassupervisorydirectorforaperiodoffour

years.MrDeVrieswasnominatedforthe‘financial-

economic’profile.MrDeVriesworkedatShellin

variousfinancialandmanagementpositions.MrDe

VriesreplacesMrGratamavanAndelwhowillstep

downattheshareholders’meetingof30March2017.

TheBoardthankedMrGratamavanAndelforhis

prolongedandintensiveinvolvementinEBNas

supervisorydirector,wherehisknowledgeaboutthe

historyofEBNinDSMrespectwasindispensable.

ForallvacanciesontheBoardtheprofilesasapprovedby

the generalmeeting of shareholders in June 2015 were

used.TheprofileisalsopublishedontheEBNwebsite:

https://www.ebn.nl/about-ebn/supervisory-board/?lang=en.

The profile indicates what features the members

individually and the Board jointly should have. The

SupervisoryBoardmustbecomposedinsuchawaythat

thememberscanoperateindependentlyandcriticallyin

relation to each other, the Executive Board and each

partial interest. The compositionof theBoardwill take

into account the nature of the activities of EBN, its

mission and objectives, the tasks of the Board and

expertiseoftheothermembersoftheBoard.

ThechairmanoftheBoard,MrVanOorschot,isthefirst

pointofcontactfortheExecutiveBoardofEBN.Theentire

Supervisory Board has a joint responsibility. All the

membersoftheBoardaremembersoftheauditcommittee

and the remuneration committee/selection and

appointment committee (hereinafter: the remuneration

committee). The governance table (annex 7.4) shows

membership and chairmanship of the Board and the

committees. One supervisory director did not attend a

conferencecallonce.Allsupervisorydirectorsintheyear

2016attendedtheothermeetingsoftheBoard.

ThemembersoftheBoardmaintainednootherbusiness

relationshipswith the company.TheSupervisoryBoard

has not noted any conflict of interest between the

companyandthemembersoftheSupervisoryBoard.The

Supervisory Board meets the independence criteria as

referredtointheCorporateGovernanceCode.

Theparticulars,theactualotherpositionsofthemembers

oftheBoardandtheresignationschedulearepublished

onthecompany’swebsiteunderCorporateGovernance-

Supervisory Board https://www.ebn.nl/about-ebn/

supervisory-board/?lang=en). Personal details, other

positions,tasksatEBN,appointmenttermsandagecan

befoundinthegovernancetableannex9.4.

6.3 Composition of the Executive BoardPer 1 March 2016, Mr Van Hoogstraten was appointed as

director by the general meeting of shareholders. The

preceding nomination procedure was carried out by the

BoardinconsultationwiththeshareholderandtheWorks

Councilwasinvolvedinthisprocedure.Simultaneouslywith

the appointment of Mr Van Hoogstraten the shareholder

establishedtheremunerationpolicyforthedirector.With

regardtotheremunerationpolicy,theBoardhasestablished

the remuneration and further terms and conditions of

employmentofMrVanHoogstraten.TheWorksCouncilhas

givenitsopinionontheremunerationpolicy.

From 1 November 2015 to 1 March 2016 the Board

appointed Mr Boekelman as temporary CEO and the

management team in this period consisted of three

people.TheBoardthankedMrBoekelmanforhisefforts

inthisperiod.Somepartsoftheboardregulationswere

temporarily revised because of the resignation of the

formerboardchairman.WiththeappointmentofMrVan

Hoogstraten,thesetemporarychangesended.


The composition and division of tasks of the Executive

Boardwillbeaddressed inmoredetail in theCorporate

Governancesectionofthisannualreport.

6.4 Meetings of the Supervisory BoardTheSupervisoryBoardmetfivetimesin2016.Therewas

a conference call; three meetings took place at EBN’s

office in Utrecht; onemeeting was held at an external

location because of a subsequent working visit at the

mininglocationSchoonebeek.

InadditiontothemembersoftheBoardthemembersof

the EBN management team were present at these

meetings. The external auditorwas present at the first

meeting of 2016 in which the annual accounts and the

annualreportoftheexternalauditorontheadministrative

organisation and internal control are discussed. At the

requestoftheBoard,EBNemployeesattendedanumber

ofmeetingstoclarifywhichprojectstheseemployeesare

involvedin.TheBoardgetstoknowtheorganisationof

EBNbetterasaresult.

In2016,theBoardattendedtwoconsultationmeetingsof

theExecutiveBoardandtheWorksCouncil.Inadditionto

theseconsultationmeetingstherewerevariouscontacts

withtheWorksCouncil,interalia,abouttheappointment

ofMrVanHoogstraten.

6.5 Approvals by the Board In March, the Supervisory Board accepted the positive

advicefromtheAuditCommitteeaboutthe2015financial

statement,andadvisedtheshareholdertoacceptthe2015

financial statement and to grant discharge to the

ExecutiveBoard for thepolicy and the supervision that

wasconducted.

6.6 Cooperation between EBN and the Ministry of Economic Affairs

EBN and the Ministry of Economic Affairs have

consultations with each other on a regular basis. A

distinction is made between subjects that concern the

shareholdingandpolicyenergyissues.EBNinformsthe

Boardaboutbothcontacts.Shareholders’topics in2016

included agreement on the dividend policy and a

correspondingamendmenttothearticlesofassociation,

whichtookplaceinearlyFebruary2017.

In 2016 the chairman of the Board and the Executive

Boardchairmanhadso-calledstrategicdiscussionsatthe

Ministry of Economic Affairs twice with the Director-

GeneralforEnergy,TelecomandCompetitionandother

employees of the Ministry. The strategic discussions

focused on exchanging and aligning information about

strategicissuesanddevelopmentsinthefieldofenergy

policyingeneral.The(policy)goalsandprioritiesofthe

MinistryandEBNforthecomingyearwerealsodiscussed

at this meeting. The Supervisory Board attaches great

value to a good relationshipwith theMinistry, and the

visitstotheMinistryareimportanttomaintainingagood

relationship.

ThefirststrategicdiscussionwaswithMrDierikx,former

Director-General. The second strategic discussion was

conductedwithMrGaastrawhotookofficeasDirector-

GeneralinSeptember2016.

6.7 Strategy of EBNAt the end of 2015 the Executive Board discussed the

long-termstrategywiththeBoard.Anumberofworking

sessions on this were held in the first half of 2016.

Members of the Board participated in these working

sessionswhereexternalstakeholderswerealsopresent.

TheBoardapprovedtheamendedstrategy.Employeesof

the Ministry of Economic Affairs were involved at all

stagesofthereviewofthestrategy.Thechairmanofthe

BoardandthechairmanoftheExecutiveBoardinformed

theMinister andSecretaryGeneral about tighteningup

thestrategicpriorities.TheBoardreferstopage13forthe

currentstrategy.

6.8 Issues discussed 2016TheExecutiveBoard informed theBoardabout relevant

developmentsatEBNbasedonquarterly reports.These

quarterly reports are distributed in advance of the

quarterlymeetings. In thesemeetings, the Supervisory

Boardpaysattentiontoatleastsocialdevelopments,the

production of gas, oil and condensate in the relevant

quarter, the recent price developments and the

development of the turnover and net profits. In its

quarterly reports, EBN also gives an overview of

investment levels. The quarterly reports also deal with

thedevelopmentsinEBN’sjointoperations.


6.8.1 Earthquakes in GroningenThe Boardwas informed at allmeetings in 2016 of the

developments in Groningen, including recent quakes,

damage notifications and settlement by NAM and the

preparationsfortheextractionplan2016.Theassentof

the Minister for the extraction plan Groningen from 1

September 2016 was also addressed. EBN informed the

BoardaboutanumberoflegalproceedingsinwhichNAM

is involved, some of which EBN is also involved in, to

compensatedamageduetoearthquakesinGroningen.

TheBoardspokewithMrAldersasnationalcoordinatorof

Groningen in 2016. The national coordinator gave an

explanation of the long-term programme aimed at an

earthquakeresistantandpromisingGroningen.

MrDessens,thechairmanoftheSupervisoryBoardand

also chairman of the Board of delegated supervisory

directors at GasTerra and member of EBN in the

ManagementBoardofMaatschap Groningenwaspresentat

themeetingsofDecember2016.GasTerra’sbusinessplan

for2017wasdiscussedatthismeeting.Inthismeeting,

Mr Dessens gave a detailed explanation and answered

questionsfromtheSupervisoryBoard.

6.8.2 SchoonebeekThe Board was informed about the problems with the

drainage and injection of water from Schoonebeek in

othergasfields.Theleakagesthatoccurredwererepaired

by NAM in 2016. A provisional solution was opted for

(pipeinpipe).DuringthisworktheBoardpaidaworking

visit to NAM and also visited a location where these

activities were actually performed. After completion of

thiswork,NAMresumedproductioninSeptember.

NAMhadasurveycarriedoutintoanumberofpossible

alternativesin2016forthedischargeofproductionwater

fromSchoonebeek.Atthebeginningof2017,theMinistry

ofEconomicAffairsmadeachoicefromthesealternatives.

6.8.3 Decommissioning and Re-useAt several meetings EBN informed the Board about

removing infrastructure and the master plan that had

arisen in co-operationwithNOGEPA and other parties.

TheBoard refers topage 31; 35of theannual report for

furtherinformation.

6.8.4 Geothermal energyTheMinistryofEconomicAffairshasinitiatedexploration

into a possible role for EBN in the acceleration of the

development of geothermal energy as a sustainable

energysource.EBNandtheMinistryofEconomicAffairs

organised a number of workshops. The Board refers to

page33oftheannualreportforfurtherinformation.

6.9 Evaluation of the Executive Board and self-evaluation

In 2016 the Board discussed the functioning of the

ExecutiveBoardintheabsenceoftheExecutiveBoard.At

least once a year and without the presence of EBN’s

ExecutiveBoard,theSupervisoryBoarddiscussesitsown

functioning,therelationshiptotheExecutiveBoardand

thecompositionandassessmentoftheExecutiveBoard.

In thismeeting, the training of new commissioners as

wellasthetrainingneedofthecurrentcommissionersis

discussed. This self-evaluation is planned for the first

halfof2017andwillbecarriedoutbasedonanonymous

questionnaires.

6.10 Meetings of the Audit CommitteeThe tasks andoperationof the audit committee are set

out in the ‘Regulations of the Audit Committee of the

SupervisoryBoard’.TheAuditCommittee’stasksinclude

supervising,auditingandadvisingtheExecutiveBoardon

thefunctioningofinternalriskmanagementandcontrol

systemsandsupervisingthecompany’sdisclosure.

Theauditcommitteemetthreetimesin2016.Inaddition

tothemembersoftheauditcommitteethechairmanof

theExecutiveBoard,thefinancedirectorandthesecretary

werepresentatthesemeetings.

The audit committee in thefirstmeeting, amongother

things, devoted attention to the annual report, the

financial statementsand theaudit for theyear2015. In

connectionwiththeauditfortheyear2015,theexternal

auditor (EY) and Mrs Malecki, accounting & reporting

manager,alsoattendedthismeeting.PwC,assuccessive

external auditor, was present at this meeting as an

observer. The auditor’s report was discussed at length

withtheauditor.Afterdiscussingthefinancialstatements

andtheannualreport,theAuditCommitteeadvisedthe

SupervisoryBoardtoapprovetheannualreportfor2015.

Inaddition,theinternalauditplanfor2016wasdiscussed.

In2016, the followingauditswereperformed:salesand

balancing agreements, legal risk reporting and cash

management.Anauditwasalsocarriedoutintothefollow

upofthefindingsfrominternalauditsattherequestof

theauditcommittee.

In august, a second meeting (by telephone) of the

supervisory board and audit committee took place, in

whichhalfyearresultswerediscussed.


In the thirdmeeting of 2016, the audit committee paid

attentiontothefollowingissues:thetransitionfromEY

toPwC, thedividendpolicy, the recapitalisationofEBN

Capital B.V. and the Weighted Average Cost of Capital

(WACC). For determining the economic value of

investmentprojects,EBNusesareturnrequirementthat

isbasedontheWACC.TheWACCisdeterminedannually

and the result thereof is discussed with the Audit

Committee.

PwC as new auditor

The general meeting of shareholders in 2015 engaged

PricewaterhouseCoopersAccountantsN.V.toperformthe

auditofthefinancialstatementsofEBNforthefinancial

years2016-2018witharenewaloptionforaperiodofone

year.PwC’sworkstartedin2016.

EBN’s Credit rating

EBNinformedtheBoardin2016aboutthecreditratingof

EBN by Moody’s and Standard & Poor’s. Moody’s set

EBN’s credit rating at Aaa/P-1 on 6 June 2016, and

Standard&Poor’satAA+/A-1on24June2016,bothwith

a‘stable’outlook.

Declaration of the Executive Board

The Board has asked the Executive Board to give a

declarationtotheBoardfor2016insupportoftheusual

reports to the Executive Board. The Executive Board

issuedthatdeclaration,whichservestosupportprovision

III.1.8of theCorporateGovernanceCode. Inaccordance

withthisprovision,theSupervisoryBoarddiscussedthe

followingissueswiththeExecutiveBoard:thecompany’s

strategyandprimaryrisksandtheresultsoftheExecutive

Board’sevaluationofthestructureandfunctioningofthe

internalriskmanagementandcontrolsystems.Thisissue

is discussed in more detail in the section Corporate

GovernanceandRiskManagement.

6.11 Meetings of the remuneration committee/selection and appointment committee

Thetasksandoperationoftheremunerationcommittee/

selectionandappointmentcommitteearesetoutinthe

‘Regulations of the Remuneration Committee/Selection

andAppointmentCommitteeoftheSupervisoryBoard’.

This committee’s tasks includepresentingproposals to

theSupervisoryBoardfortheremunerationpolicytobe

implemented by the Executive Board, proposing the

remuneration of the Executive Board and compiling a

remunerationreport.

Theremunerationcommittee/selectionandappointment

committeemetfourtimesin2016inthepresenceofthe

ExecutiveBoard, the Secretary and theHRmanager. In

2016,thecommitteeengagedinthedraftingofthenew

remuneration policy, determining the objectives to be

achievedforEBNandforthemanagementteamfor2017,

therealisationoftheobjectivesover2016forEBNandthe

managementteam,updatingthedistributionoftasksof

themanagementteamandtherecruitmentandselection

ofanewsupervisorydirector.

The General Meeting of Shareholders adopted the

remuneration policy for the Executive Board

simultaneously with the appointment of Mr Van

Hoogstraten.Theremunerationreportfurtherdiscusses

theremunerationpolicy.

6.12 Financial StatementsTheBoardhastakennoteoftheannualreport,theannual

accounts and the statement andmanagement letter of

theauditorPwC.TheSupervisoryBoardcanacceptthese

andrecommendsthattheGeneralMeetingofShareholders

should adopt the financial statements accordingly. The

SupervisoryBoardadvisestheAnnualGeneralMeetingof

Shareholders to discharge the Executive Board of

responsibilityinrespectofthepolicyithasimplemented

andtheSupervisoryBoardofresponsibilityinrespectof

itssupervision.

Supervisory Board, Utrecht, 13 March 2017

MrH.M.C.M.vanOorschot(chairman)

MrA.H.P.GratamavanAndel(untilMarch30th,2017)

MrJ.Huijskes

MrsE.M.Kneppers-Heijnert

MrW.S.deVries(fromMarch1st,2017)

MrJ.W.Weck


BernardReithisOperationsManageratTotalE&PNederlandBVandinvolvedintheMasterPlanDecommissioningandRe-useonbehalfofNOGEPA.ThisplandescribeshowtheoffshoreinfrastructureoftheDutchoilandgasextractioncanbedecommissionedinasafe,efficientandeffectivewayand,wherepossible,canbere-used.TheMasterPlanisaninitiativeofEBN,andcameaboutinclosecooperationwithNOGEPA,IROandstakeholders.

Why a Master Plan Decommissioning

en Re-use?

“ProductionontheDutchNorthSea is

still in full swing, but these activities

are finite; The Energy Agenda focuses

onthetransitiontoasustainableenergy

supply. Thus, we are faced with the

question: what do we do with the

approximately155rigsintheDutchpart

of the North Sea? Already there are

platforms that no longer produce and

over the next two decades these will

onlyincrease.Decommissioningispart

ofthelifecycleofaplatform,butincurs

hefty costs. At the same time, non-

producing platforms also cost a lot of

money (maintenance etc). Under-

standingthesizeandtimeperiodofthe

decommissioning task is necessary.

Whenisittimetodecommissionwhich

platform?Whenandonwhatcriteriait

isdecidedthatfundsarecutoff?When

do you proceed to decommissioning?

Aretherepossibilitiesforre-use?Ifnot,

how and by whom is the decommis-

sioningperformed?Howdoweachieve

thisascost-effectivelyaspossible?Just

afewquestionsthatindicatethataclear

strategy and support are necessary.

That is why it is good that there is a

master plan inwhich stakeholders are

involvedfromtheoutset”.

What does the plan look like?

What stage are we at?

“The plan is realised under the

management of EBN in close collabo-

rationwithNOGEPAand IRO.Wehave

involvedalargenumberofstakeholders

including operators and NGOs at an

earlystage.Supportiscrucial.Findingit

broadlyandinvolvingitingoodtimeis

the startingpoint. Theplan includes a

numberofphases.Thefirstphasesets

upaNationalPlatformtofacilitateand

coordinate decommissioning. A data-

base is also built so that there is an

integratedviewof theextentand time

linesof the route.Or atwhat timeare

the funds cut for which well. Each

Interview

‘ We must adapt to new reality’

Bernard Reith

OperationsManagerTotalE&P

NederlandBV


operatorhasitsownstrategicplanning

and business drivers, that information

isnotshred.EBNistheonlypartywith

insightintocompany-specificdataand

overview. If there was no party with

EBN’sstatusitwouldbeverydifficultto

drawupsuchadatabase.

Inthefirstphaseanapproachwillalso

be determined to achieve an effective

and efficient regulation, and tools

developed to share experiences and

optimiseworkingmethods.

Here too,EBNalsoplays an important

role by structuring international and

national best practices and making

themaccessible.

The following phases focus on further

cooperation, standardisation and

support. Now at the beginning of the

firstphase,weexaminethepossibilities

ofre-use.Veryinteresting.Justimagine

what the North Sea will look like in

about30years”.

30 years is a long time, what do you

think the North Sea will look like in 10

years time?

“Wewillbecleaningupoldinstallations,

but alsoworking on the integration of

traditional gas production platforms

andnewsystems.Suchasthestorageof

naturalgasorCO2andcombinationsof

wind and gas for the electrification of

platforms. Power to Gas, Gas to Wire;

thereisarangeofinnovativesolutions.

The steel from non-reusable plants

mightalsoberecycled.

Thesustainabilityofourenergysupply

is forcingparties to lookat theirplans

differently. Also for me personally it

means a change of mindset. In my

professional life, the focuswas always

on the exploration and production of

naturalgas.Inadditiontotheeconomic

productionofagasfield foras longas

possible,wearenowalsolookingatthe

balancebetweenemptyingandshutting

downanddecommissioningontimeas

partofanintegrationofsystemsonthe

North Sea. We are still searching for

naturalgasandifeconomicextractability

is demonstrable there is still the

possibilityofproceedingtoproduction.

Naturalgasasthecleanestfossilenergy

doesplayan importantroleduringthe

energytransitionafterall.

As an organisation, we must adapt to

thenewreality.Learnfromotherareas

such as the Gulf of Mexico where

platforms are already being decom-

missionedandpartlyalsore-usedona

large scale. The Dutch North Sea is

shallow and that makes decommis-

sioning relatively simple technically.

Wedohavetodevelopotherskills.And

createnewopportunities.

Decommissioning is an area where

much innovation is possible. A lot of

money is involved so technological

developments to perform projects

fasterandcheaperareeagerlyawaited.

Ifwedothiscarefullyandwellthenthe

Netherlands will belong to the

frontrunners.Forexample,wecanput

ourselvesontheinternationalmapasa

supplier of innovative applications in

the offshore industry, maintaining

employmentandhelping speedup the

energy transition. The E&P sector has

traditionally been pragmatic and

focussed on opportunity. The master

plan provides support and a clear

strategy”.

‘Justimagine whattheNorthSeawilllooklikeinabout30years’


7.Aboutthisreport

Inthisannualreportforthefinancialyear2016,EBNgivesaccountofitsfinancialandnon-financialperformance.Thereportisintendedforallstakeholdersthataredirectlyorindirectlyinvolvedinouractivities.IntheStakeholderssectiononpage29,wediscussinmoredepthwhomweconsideramongourstakeholders,andinwhichwaywediscussrelevantissueswiththem.


Reporting policy EBN reportson itsfinancialperformance in accordance

withIFRSandonitssocialandsustainabilityperformance

inaccordancewiththeapplicableguidelinesoftheGlobal

Reporting Initiative (GRI) annually. This enables us to

alsooffer the transparencyour shareholderdesiresand

clarifyoursocialrole.TocontinuecomplyingwiththeGRI

guidelines,EBNbasesitsreportingsincethe2014report

ontheGRIG4guidelinesattheCoreapplicationlevel.We

alsomakeuseoftheOilandGasSectorSupplement.

Theannualreportissetupasanintegralreport,inwhich

wepointoutthatwearegoingthroughadevelopmenton

thispoint.Intheannualreportfor2015,avaluecreation

modelwasincludedforthefirsttime,basedonsixcapitals

from the IR framework of the International Integrated

Reporting Council. This model enables us to show the

coherencyofour strategy, risks,environmental factors,

results and the resulting social impact. In the annual

report for 2016 we have added an overview of the link

betweenthetrendsthatweidentifyinourenvironment,

the opportunities and risks they offer and how we are

respondingtothiswithourstrategy.

Reporting procesThereportingprocessisstructuredasfollows:

✔Strategicreview -ExecutiveBoard

✔Riskanalysis -departments

✔Materialityanalysis -internalandexternal

stakeholders

✔Determiningmaterial

issues -ExecutiveBoardandemployees

✔Determining

management

framework -ExecutiveBoard

✔Checkonvalidity

process/data -internalaudit

✔Datacollection -subjectowners/departments

✔Drawingupsynopsis -annualreportcommittee

✔Staticpartofreport -annualreportcommittee

✔Dynamicpartof

report -annualreportcommittee

✔Assurance -externalauditor

Creation of Executive Board report The process regarding the non-financial part of the

annualreportisasfollows.Akick-offmeetingwasheld

at the beginning of October 2016. EBN’s annual report

committee informed the Executive Board about the

theme,themannerofpublicationandthetimetable. In

thatmonthemployeesinvolvedwerealsoinformedabout

thetimetableofthereport,therequiredinformationand

the theme.After this,datawas collectedby sendingan

internal request. Employees involved were asked to

provideinformationforthereport.Atthesametime,the

themeoftheannualreportwasworkedoutintheformof

four interviews with representatives from various

organisations. This year the annual report comprises a

staticpart(forwhichnoyear-enddataisrequired)anda

dynamicpart(forwhichyear-enddatawasneeded).An

internal request took place for both the static and the

dynamic part. The annual report was written by the

annual report committee. The Executive Board and the

shareholder were able to view the texts on several

occasionsandrespondtothem.Eventually,thestaticand

dynamicpartsoftheannualreportweremergedintoone

completereport.Thenon-financialmaterialissuesinthe

annualreportwerereviewedforAssurancebyanexternal

auditor.Thefinancialstatementsreceivedanunqualified

auditreport.Theannualreportwasthensubmittedtothe

Supervisory Board. Finally, during the General

Shareholders’ Meeting the report (financial and non-

financialpart)wasadopteddefinitely.


Materiality analysisIn both the IR framework and the G4 guidelines the

materiality principle is the key element. Materiality

accordingtoIRframeworkhasabroadercontextthanjust

the annual report, it is also about control of the

organisationonsubjectsthathaveanimpact.Emphasis

onthematerial topicsaccordingtothe<IR>framework

should improve internal and external decision-making.

The GRI-guidelines require an organisation to find out

which(material)aspectsaremostimportanttoreporton

fromasocialpointofview.Forthisprocess,GRIexpressly

requeststhatthereportingorganisationconsiderwhere

inthechaincertainaspectsoccurandwhat influence it

has on them. For EBN, this means looking at the

materialityofaspectsforourownorganisation,butalso

at our role and influence with regard to operators and

customers.

Inthebusinessmodelonpage10weprovideadescription

ofEBN’scoreactivitiesandourplace in theoilandgas

chain. In annex 9.1 based on a chart we show which

stakeholderswearedealingwithandonwhichmaterial

aspectsEBNhasadirectorindirectinfluence.

BecauseEBNparticipatesfinanciallyforasignificantpart

inoilandgasactivitiesandthetradingofhydrocarbons,

the material aspects of these activities should have a

placeinEBN’sreporting.WedoaddthatEBNisnotthe

operatingpartyintheoilandgasextraction;thosearethe

oilandgascompaniesthatweworkwith.

Internal reviewThefollowingstepsweretakenfortheinternalanalysis

underlying the materiality analysis in this report, in

whichouremployeeswerespecificallyinvolved:

✔✓Identificationoflong-listofpossibleissues;

✔✓Invitationtoemployeestomakeashort-listoutofthe

long-list;more thanfifteenemployeeswere involved

in this

✔✓Discussion with the management to get from the

short-list to the material topics. This was done by

assessingeachaspectfor:

-ThedegreeofinfluenceEBNhasontheaspect

-ThedegreetowhichtheaspectisrelevanttoEBN’s

success.

✔✓Ranking by the Executive Board; thematerial topics

werereviewed

Thiswas done based on knowledge of the sector, input

from our stakeholders and the G4-guidelines and the

sectorsupplementfortheoilandgasindustry.

Theresultsareshowninthematerialitymatrixonpage

24and25.Theimportanceofanytopicforstakeholders

andforEBNisweighedupinthematrix.

External testingOurstakeholderswerecloselyinvolvedintheprocessof

determiningourstrategy,whichtookplacein2016.Their

inputwastakenintoaccountindraftingthelong-listof

issues,fromwhichlaterthematerialtopicsweredistilled.

More information about the dialoguewith stakeholders

aboutourstrategycanbefoundonpage29.

At theendof2016ourstakeholderswere thenaskedto

assess the material topics. Discussions were held with

some stakeholders about the assessment in order to

betterunderstand their choices.Stakeholderswerealso

askedtoprovideanymissingmaterialissues.Noneofour

stakeholdersmadeuseofthispossibility.

Choice of topicsIn this report we deal with the issues that have high

priority for both stakeholders and EBN. By 2016 we

completely revised ourmaterialitymatrix to allow it to

connect to the revised strategic priorities of the EBN

strategy.

Wethenselectedanumberofnewtopicsforourmatrix,a

number of topics is no longer listed. Some issues have

beenreformulated(seealsothetabledefinitionsmaterial

topicsbelow).Thechoiceoftopicsfortheannualreport

2016isdescribedintheGRI-indexinannex9.5.


Thematerialitymatrixcontainstopicsthatrelatetothe

activitiesoftheoperatorsandwhichEBNcannotoronly

partly influence. We report on most social and

environmental aspects in the separate publication EBN

SustainabilityReportthatwepublishonourwebsite.

Transparency benchmarkEBNparticipatesannuallyinthetransparencybenchmark,

an annual study into the content and quality of social

reporting. In 2016 (for the annual report 2015) EBN

obtainedascoreof172pointsoutofthepossible200.

Roles and responsibilities By2016wehadmadeastartinensuringresponsibilities

forG4-requiredaspects,indicatorsandtargetswithinour

organisation. The Executive Board bears the ultimate

responsibility for all material aspects that impact the

strategyandEBN’ssocialpolicy.TheExecutiveBoardhas

allocatedtheresponsibilityfortheimplementationofthe

policy and the data collection for each topic to various

departments. This process will be completed at the

beginningof2017.

Reporting on EBN’s non-financial performance will

continue in 2017.We classify the significant indicators

thatwereselectedwiththematerialityanalysisundera

numberofthemes.Subsequently,foreachthemewewill

formulate relevant goals that will steer the various

indicators, in part generically and in part specifically.

This all will result in a sustainability strategy which is

prepared in close consultation with the industry. It

remainsourgoaltocreateclaritywithourpartnersabout

theimportanceofreportinginaccordancewiththeGRI-

G4guidelines.

Effective oil and gas exploration and extraction

Workingtowardstheeffectivedetectionandextractionofoilandgas(includingoptimisationofinfrastructure)throughdeploymentofNOVmanagementandowninvestigations.

Decommissioning and Re-use

Facilitatingandencouragingeffectivedecommissioningandre-useofexisting companyinfrastructure,includingthroughthedevelopmentandimplementationofamasterplan.

Collecting and bringing knowledge

Theactivesharingofknowledgeinpartnershipsandknowledgenetworks,includingbystudiessuchasBOONandFocusonDutchOil&Gas;retrievingknowledgefromchainpartnersthroughpartnershipsandknowledgenetworks.

Developing effective advisers and influencers

EncouragingemployeestoinfluencetheoperatorsthroughNOVmanagementandotherstakeholdersthroughdialogueandadvice.

Innovation Thesmarterandmoredurabledevelopmentofexistingandnewpotential,byprivateresearchandbyworkingwithpartnersandresearchinstitutions.

Sustainability in the value chain

Workingtowardsthemanagementofenvironmentalimpactofgas,including emissionsandleaks.

Development new energy

Exploringopportunitiesforthedevelopmentofnewenergyandstoragethereof,suchasgeothermalenergy,CCSandCAES.

Creation of economic value

Optimisingfinancialresults,suchasnetincome,naturalgasincome,sales, investmentanddepreciation.

Attract and develop talent

Findingandhiringtalentedemployees,offeringthemgooddevelopment opportunitiesandinspiringthematEBN.

Public backing for our work

Workingonsupportforourwork,includingbyenvironmentalmanagement,projectswithinandoutsidethegassector;promotingEBN’scorporatesocialresponsibility.

External security Promotingagoodsafetyculture,meaningsafetyriskssuchasearthquakes,spillsandexplosionsarelimited.

Active contribution

to the debate on the

energy transition

Activelydiscussingtheenergytransition,bothwiththeshareholderaswellaswithotherstakeholdersintheindustry,knowledgeinstitutionsandNGOs.


Scope and boundary EBNonlyhasactivitiesintheNetherlands.The(indirect)

economic performances concern EBN and its share in

participations.WeaccountforthisintheResultsfor2016

section and in the Financial Statements. The social

performanceprimarilyconcernsEBN.Theseperformances

aredescribed inmoredetail in the section entitledThe

peopleofEBN.

The environmental performance on emissions, energy

consumption,waste,dischargesandcompliancemainly

relate to our participations (the environmental

performances of EBN given the small size of our

organisation are not material); they are related to the

performanceoftheentiresectorthatisactiveonDutch

territory. The environmental reports by the individual

operators, formulated annually in the context of the

Ministry of Economic Affairs’ Declaration of Intent,

ExecutionofEnvironmentalPolicyOilandGasProducing

Industryconstituteaguideline.TheDutchoperatorsadd

the environmental and energy performances to the

electronic Environmental Annual Report. These data

formthebasisfortheperformance,aspresentedinthis

reportandtheEBNSustainabilityReport2015-2016.This

report is prepared annually by EBN. The operational

performance indicatorsprocessed in it aredrawnupby

the Netherlands Enterprise Agency (RVO) on EBN’s

instructions.

Frameworks, measuring methods and definitionsAll described performances follow specific frameworks.

Therelationshipofcertainindicatorswiththeannualgas

and oil production is evident and, for a number of

indicators, the relationshipwith thenumberofdrills is

obvious.However, frameworks are alsodefinedby laws

and regulations. These frameworks are described in

further detail where relevant. The results provide an

overviewofEBN’s share (unlessotherwise specified) in

the performances of the entire oil and gas production

industry.

TheDutchproductionofgas,oilandcondensateconcerns

thefiscally reportedgas,oil andcondensateproduction

figures of the operators. The injection and production

volumes of gas in the gas storage facility are seen as

internal companyactivities. Thegas is reportedfiscally

themomentitisdeliveredtothirdparties.

Theenergyuseofdrillingactivities isnot included; the

CO2andCH4emissionsfromdrillingactivitiesare.

The EBN part is calculated as a percentage of the gas,

condensate and oil production of EBN against the total

Dutch gas, condensate and oil production in the

environmentalandeconomicperformance.Forthesocial

performances that specifically concern the activities of

operators,theshareoftheentireindustry(100percent)is

presented,as it is irrelevant tomentionEBN’sshare in

these.

Therehavebeennochangesintheyearunderreviewin

measurement methods and definitions. For more

information we refer to the EBN Sustainability Report

2015-2016, which was published on our website www.

ebn.nl/publicatiesinJuly2016.

DisclaimerIn this report we report on efforts and achievement of

targetsin2016.Wealsopresentourplansandvisionfor

the future. This future-oriented information is

characterised by words such as continue, want, aim,

predict, expect, target, objective, vision, planning,

ambition, scenario, resolutionand forecast. Inherent to

futureexpectationsisthattheoutcomeissubjecttorisks

anduncertaintiesandtheirachievementisthereforenot

assured.

Assurance of non-financial informationEBN has requested PwC to assess the non-financial

information in the sections Foreword, About EBN and

Report of the Executive Board in the annual report for

2016toissueanassurance-reportwithalimitedlevelof

certainty.Youcanfindtheassurancereportonpage127.

GRI-indexYouwillfindtheGRI-indexinannex9.5.


8.Financial Statements


General information

EBNB.V.(“EBN”)withitsregisteredofficeandprincipal

place of business in Utrecht, the Netherlands, was

incorporatedon2January1973inMaastricht.Allshares

inEBNareheldbytheDutchState.

EBNfocusesontheparticipationinoilandgasexploration

and production activities in the Netherlands and the

Dutch part of the continental shelf. In addition, EBN

participatesinundergroundgasstoragesandintransport

andgasprocessingfacilities.

The consolidated financial statements of EBN over the

year 2016 are prepared and approved by the Executive

Board according to its resolution of 13March 2017. The

financialstatementsweresubsequentlysubmittedtothe

SupervisoryBoard.PursuanttoArticle19.2oftheArticles

of Association, the Supervisory Board also provides a

preliminaryrecommendationtotheshareholders.

TheconsolidatedfinancialstatementsofEBNhavebeen

prepared inaccordancewith the InternationalFinancial

Reporting Standards (IFRS) and interpretations of the

International Financial Reporting Interpretations

Committee(IFRIC)asapplicableon31December2016and

asendorsedbytheEuropeanUnionandwithPart9,Book

2oftheDutchCivilCode.

EBN’scompanyprofitand lossaccount isprepared ina

simplifiedmannerinaccordancewitharticle402Title9

Book2oftheDutchCivilCode.

Basis for consolidation EBN’sfiguresandthefiguresoftheentitiesitcontrolsare

included in the consolidated financial statements. EBN

hascontrolofasubsidiaryifbasedonitsinvolvementin

theentity,itisexposedto,orentitledto,variableresults

andhastheabilitytoinfluencethoseresultsonthebasis

of its control over the entity. The subsidiary’sfinancial

statementsarepreparedbasedonthesameprinciplesas

EBN’s. All transactions, balances, assets and liabilities

within the group are eliminated on consolidation. The

resultsofsubsidiariesacquiredordisposedofduringthe

year are included in the consolidated statement of

comprehensive income included as of the date of

acquisitionofcontrolrespectivelythedateofdisposal,as

appropriate.

EBNCapitalB.V.(‘EBNCapital’)isthesolesubsidiaryof

EBN.

Joint arrangementsEBNconductsitsactivitiesthroughpartnershipsthatare

set out in contractual arrangements (agreements of

cooperation or Joint Operating Agreements). EBN has

assessedthecontrol,votingrights,dutiesandobligations

thatarisefromtheseagreements.Theconclusionisthat,

exceptforNGT-Extensie,EBNhasjointcontrolwithone

ormorepartnersintheagreementsanddefinestheseas

joint operations. Togetherwith the otherparties in the

jointagreement,EBNisentitledtotheassetsandisliable

for the debts relating to the agreements. In EBN’s

financial statements, EBN’s interest in the joint

operations is recorded in the financial statements by

includingtheassets, liabilities, incomeandexpenditure

foritsshare.

For the NGT-Extensie joint venture EBN has no joint

controlwithinthemeaningofIFRS11,asaresultofwhich

its interest is recognised in accordance with IAS 28.

Becausefactsandcircumstances(includingvotingrights

for decisions making) lead to the conclusion that EBN

exerts significant influence on NGT-Extensie, NGT-

Extensie is processed and presented according to the

equitymethodasassociate.


Themostimportantjointoperationsbasedonthecarrying

valueofthetangiblefixedassetsat31December2016are

asfollows:

AssociatesEBNhasa40%shareinGasTerraB.V.(‘GasTerra’)based

in Groningen andwithmain activity trading in natural

gas.

Inaddition,EBNhasaparticipationof45%inNOGATB.V.

(‘NOGAT’)locatedinZoetermeerandwithmainactivity

naturalgastransportfromtheNorthSea.

In accordancewith IFRS 11 and IAS28 the 12% stake of

EBN in the NGT-Extensie partnership is accounted for

using the equity method and presented as associate.

NGT-ExtensieisbasedinZoetermeeranditsmainactivity

isthetransportofnaturalgasfromtheNorthSea.

Key accounting estimates and judgementsForthepreparationofthefinancialstatementsestimates

andjudgementsaremade.Thesehaveconsequencesfor

the amounts reported for assets and liabilities, income

and expenditure items and the related reporting of

contingentassetsandliabilitiesatthedateofthefinancial

statements.Resultscanbeinfluencedbysuchestimates

and judgements. The paragraphs below give an

explanation of thematters thatmanagement considers

mostimportantandwhich,duetointrinsicuncertainties,

are often themost difficult to estimate. In additionwe

refer to the section ‘Impairment’ which also includes

information about assumptions and estimation

uncertainties underlying the recoverable amount of a

fixedasset.

Decommissioning and restoration costs

Theprovisionsforrestorationcostsandtheactivationof

restoration costs on the balance sheet is based on

information from operators. EBN evaluates this

informationbasedonitsownknowledgeandexperience

Name Interest Operator Operator’s place of business

Groningen 40% NAM Assen

NORG 40% NAM Assen

Schoonebeek 40% NAM Assen

Noord Friesland 40% NAM Assen

JDA Unit 40% NAM Assen

L05a 40% Engie Zoetermeer

K04b/K05a 50% Total TheHague

Gasopslag Bergermeer 40% TAQA Alkmaar

K04a 50% Total TheHague

K18b 40% Wintershall Rijswijk

A&B Unit 47% Petrogas Rijswijk

A18a 40% Petrogas Rijswijk

L09 50% NAM Assen

K05b 50% Total TheHague

M7 50% ONE Amsterdam


and amends it where necessary. The ultimate

decommissioningandrestorationcostsareuncertainand

costestimationscanvaryasaresultofnumerousfactors,

such as market prices, changes in legal requirements,

new decommissioning techniques or experience. The

anticipatedtimingandscopeofthecostscanchangeasa

resultof,forexample,changesingasandoilreservesand

changes to legal and regulatory requirements and their

interpretation.Significantestimatesandjudgementsare

made when establishing the provision for

decommissioning and restoration costs. Substantial

revisionsoftheprovisioncanthereforeinfluencefuture

results.Formoredetailsonthecourseofthisprovision

werefertonote16.

Reserves

The Unit of Production (UOP) depreciation is based on

EBN’sestimatesofthegasandoilreservesandproduction

profiles. EBN determines the gas and oil reserves in

accordancewiththedefinitionslaiddownbytheSociety

ofPetroleumEngineers (SPE),WorldPetroleumCouncil

(WPC), American Association of Petroleum Geologists

(AAPG) and Society of Petroleum Evaluation Engineers

(SPEE)inthePetroleumResourcesManagementSystem

2007 (PRMS) and the new guidelines from 2011. The

reserves used for the depreciation are based on EBN’s

current estimations of proven and probable developed

reserves(PRMScategory1)andtheassociatedproduction

profiles. Estimations of reserves are, by definition,

inaccurate and based on interpretations that can, over

time,change,onthebasisofnewinformationobtained

fromdrillingnewwells, reservoir productionbehaviour

and changes in economic factors (such as price

expectations). This can result in upward or downward

revisions to the reserves. Changes in reserves have an

effect on the future depreciation and the recoverable

amount of production assets (see also notes to the

principlesof‘Property,Plantandequipment’).

Earthquake-related costs

Theprovisionforcostsasaresultofearthquakesinthe

provinceofGroningenisbasedoninformationfromthe

operator,publicinformationandprivateinformationand

insights.Thisprovisionrelatesmainlytodamagerepair,

architecturalreinforcementsofbuildings,strengthening

the infrastructure and compensation measures. The

assumptionsusedfortheestimatesfortheprovisionare

also based on payments already made and experience.

Theultimateamountofthecostsdependsamongother

things on the extent of the damage and advice and/or

valuation by experts and can therefore differ from the

currentexpectedcost(seealsonote16).

Recoverable value

Thecalculationoftherecoverablevalueofassetsispartly

based on estimates of reserves, production profiles,

future selling prices, operating costs, exploration

potential,expectedfutureinvestmentsandthediscount

rate. Future events can have an impact on these

predictionsandestimatesmeaningtherecoverablevalues

canchange.

Summary of significant accounting policies

The financial statements have been prepared in

accordancewiththehistoricalcostconvention,andona

‘goingconcern’basis,unlessstatedotherwise.

Conversion of foreign currenciesThe functional currency and presentation currency of

EBNistheeuro.Commercialtransactionsandborrowings

inforeigncurrenciesareconvertedatthespotexchange

rates as applicable on the transaction dates. Balance

sheet items denominated in foreign currencies are

converted at the spot exchange rates applying on the

balance sheet date. Differences in exchange rates

resulting from settlement of these transactions and

conversion of balance sheet items are charged to the

profitfortheyear.

Distinction between assets and obligation and for instalmentsAn asset is classified as current if it is expected to be

realisedwithin12monthsafterthebalancesheetdate.A

liabilityordebtisclassifiedascurrentifitwillbesettled

within 12 months of the balance sheet date. If an

unconditional right topostponepayment forat least 12

monthsexiststhereisalong-termdebt.

Property, plant and equipmentProperty, plant and equipment are valued at the

acquisition cost less depreciation and any impairment

losses. Replacement investments are capitalised in

accordancewiththeIAS16generalcapitalisationcriteria.

The estimated costs of the decommissioning and

restoration of platforms and other installations are


capitalisedaspartof thepurchasevalueof thetangible

assetinquestion.

Property, plant and equipment is no longer included in

thebalancesheetwhenitisdisposedoforwhennofuture

economicbenefitsareexpectedfromitsfurtheruse,orin

casethelicenceisrelinquishedorsold.Anyprofitorloss

ensuingfromtheassetthatisnolongerincludedinthe

balancesheetisincorporatedintotheresult.

Exploration and evaluation assets

Expenditureforthefollowingactivitiesarecapitalisedas

part of the exploration and evaluation assets under

construction: acquisition of exploration licences,

explorationdrillingincludingtest,samplingandactivities

inrelationtoevaluationofthetechnicalandcommercial

possibilityofextractinghydrocarbons.Ifitturnsoutthat

anexplorationwellisdrythencostsincurredarecharged

totheconsolidatedstatementofcomprehensiveincome

and disclosed under write-downs in the operating

expenses(note4).

The following costs are not capitalised: topographical,

geological,geochemicalandgeophysicalsurveys(unless

theyarerelatedtoexistingandprovenreserves).

Explorationandevaluationcoststhatareonthebalance

sheet for more than 12 months are charged to the

consolidatedstatementofcomprehensiveincome(under

write-downinnote4)unless:

•theyareinanareawheresubstantialinvestments

arerequiredbeforeproductioncanstart,or

•commerciallyrecoverablequantitieshavebeen

found,or

•furtherexplorationorevaluationactivitiestake

place,thatis,additionalexplorationwellsaredrilled

orfirmplanstodosointhenearfutureexist.

EBNregularlyassesswhetheractivationoftheexpenditure

forexplorationdrillingstillmeetsthecriterialistedabove

and whether the drilling activities can continue.

Explorationwellsthathavebeenonthebalancesheetfor

more than 12 months are re-evaluated to determine

whether any facts or circumstances have changed and

whethertheabovecriteriastillapply.

Explorationandevaluationcostsunderconstructionand

investments under construction are categorised to

drilling or production, transport and storage facilities

fromthestartofproductionorcommissioning.

‘EBN’s reimbursements’

EBN reimbursements -‘farm in’ costs in exploration

licences - are capitalised and depreciated based on the

UnitofProduction(UOP)method.

Depreciation

Property,plantandequipmentforgasandoildrillingare

depreciatedbasedontheUnitofProductionmethod.This

method is based on EBN’s estimations of the proven

developed reserves (PRMS category 1) and production

profiles inaccordancewiththedefinitions laiddownby

the Society of Petroleum Engineers (SPE), World

Petroleum Council (WPC), American Association of

Petroleum Geologists (AAPG) and Society of Petroleum

EvaluationEngineers(SPEE)inthePetroleumResources

Management System 2007 (PRMS) and its new 2011

guidelines.

The UOP rates for the financial year indicate the ratio

betweentheproductionovertheyearandtheprovenand

probably developed reserves (PRMS category 1) at the

beginningoftheyear.Thesereservesaredeterminedby

increasing the reservesasestablishedat theendof the

financialyearwiththeproductionfortheyear.

Theotherproperty,plantandequipmentaredepreciated

over the estimated useful life on a straight-line basis.

Twenty years is taken as the initial basis for main

transport pipelines and thirty years for facilities for

undergroundstorageofnaturalgas.Aten-yearusefullife

appliestoindustrialbuildings.Landsarenotdepreciated.

The estimated remaining useful life of property, plant

andequipmentisreviewedeachyearbasedonpatternof

futureuse.Ifchangesoccur,thedepreciationmethodis

adjustedinordertoreflecttheadjustedusefullifeandthe

associated future usage pattern. The effect thereof is

incorporated in the consolidated statement of

comprehensive income of the current and/or future

periods(prospective).

Borrowing costs

Financing costs of projects are capitalised. The interest

rate used for thefinancial year is based on the average

interest rateapplicable toconcurrentborrowings in the

pastfinancialyear.


AssociatesAnassociateisaninterestinanentityonwhichEBNcan

exert significant influence, but over which it cannot

exercisedecisivecontrol.

Associates are processed on the basis of the equity

method.ThismeansthatEBN’sshare inanassociate is

recognisedasEBN’sshareinthenetassetsofthisentity,

lessanyimpairment.

EBN’sshareintheprofitorlossofanassociateisincluded

intheconsolidatedstatementofcomprehensiveincome.

WhenEBN’sshareinthelossofanassociateexceedsthe

carryingamountof thatassociate- includinganyother

long-termreceivablesthatarepartofthenetinvestment

-thecarryingamountisreducedtonil.Nofurtherlosses

areaccountedforunlessEBNhasassumedresponsibility

for the associate through a guarantee or other

commitments. Unrealised gains and losses on

transactionswithassociateareeliminatedinproportion

toEBN’sshareintheseassociates.

ImpairmentAnassessmentismadeannuallyatbalancesheetdateas

towhether the carrying amount of anon-current asset

(property,plantandequipmentorassociates)exceedsits

recoverableamount(higheroffairvaluelesscosttosell

and value in use). In that case, an analysis to identify

possibleimpairmentrequirementsiscarriedout.

Whenanassetdoesnotgeneratesufficientindependent

cash flows, the recoverable amount (see also section

‘Estimatesand judgements’) isdeterminedfor thecash

flow generating unit to which the asset belongs. In

general,EBN’scash-generatingunitisasalescontract.In

addition, ‘hubs’ (main platform and satellites) can be

usedasacashgeneratingunit.Forvalueinuse,estimated

future cashflows are discounted at a rate before taxes,

basedonthemarketinterestrateplusamark-upforthe

risksspecifictotheasset.EBNusestheWACC(Weighted

AverageCostofCapital)forthiscalculation.Thisis6%for

midstream activities (2015: 6%) and 8% for exploration

andproductionactivities(2015:8%),aftertax.Adiscount

rate before tax is also determined, on the basis of an

iterativemethod.

Whentherecoverableamountofanassetislessthanthe

carryingamount,thecarryingamountiswrittendownto

the recoverable amount. Impairment can be reversed,

eitherwhollyorpartially,intheeventofachangeinthe

estimate that is of significance for determining the

recoverable amount. Impairment is presented as a

separate item in the consolidated statement of

comprehensiveincome.

Formoredetailabouttheassumptions,uncertainties in

estimates and a sensitivity analysis with respect to

impairmentlosseswerefertonote5.

StockUnderground gas stocks and supplies of materials are

valued at the average purchase prices or lower net

realisablevalue.The stockof above-groundcondensate

andoilisvaluedattheaveragepurchasepricesorlower

netrealisablevalue.

ReceivablesReceivables are recognised at amortised cost less any

adjustment for bad and doubtful debts. On first

recognition,receivablesarepresentedatfairvalue.

Cash and cash equivalentsCashandcashequivalentsarecashinhand,bankbalances

andshort-termmoneymarketinstrumentswhichcanbe

convertedintocashatshortnotice,ofwhichtheamount

isknownandthatbearnomaterialriskofchangeinvalue.

Shareholder’s equityEBN’sequityconsistsofsharecapital,retainedearnings

andanydividenddeclared.TheDutchStateisEBN’ssole

shareholder.Interimdividendpayabletotheshareholder

isincludedasanobligationintheperiodoverwhichitis

due,inaccordancewiththeEBN’sArticlesofAssociation.

Theexceptiontothisistheproposedfinaldividend.That

isonlyrecognisedasanobligationafteradoptionbythe

GeneralMeetingofShareholders.


ProvisionsProvisions are recognised in the balance sheet if the

followingconditionsaresatisfied:

•thereisalegalorconstructiveobligationasaresult

ofapastevent,and

•itislikelythatcashoutflowwillberequiredtosettle

thepresentobligation,and

•areliableestimateoftheamountoftheobligation

canbemade.

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

provisions are determined by calculating the present

valueoftheforecastcashflowsatadiscountratebefore

tax.

Oncethepresentvaluehasbeencalculated,anyincrease

inprovisionsasaresultofthepassingoftimeispresented

asinterestexpense.

Theprovisionfordecommissioningandrestorationcosts

is designed to cover the estimated costs of

decommissioning and restoration based on the current

requirements,technologyandcostestimates.Theamount

of this provision is based on information from the

operator, and any changes in estimates will, after EBN

hasmadeitsownassessment,resultinacorresponding

change in the capitalised decommissioning and

restoration costs of the relevant property, plant and

equipment.

Theprovisionforgroundsubsidenceisdesignedtocover

certainadditionalliabilitiesarisingduringtheproduction

phase.


provinceofGroningenrefersprimarilytodamagerepair,


of infrastructure and compensation measures. The

amount of this provision is based on information from

theoperator,publicinformationandEBN’sinformation

andinsights.

LiabilitiesLoans are recorded at amortised cost price. On first

recognition, such items are presented at fair value less

costs.Borrowings inforeigncurrenciesareconvertedat

theexchangeratesapplicableonthebalancesheetdate.

Interestexpenseischargedtotheresultintheperiodto

whichitpertains,usingtheeffectiveinterestratemethod.

PensionsThepensionobligationsofEBNarehousedatthepension

fund:StichtingPensioenfondsABP(‘ABP’).

InlinewithIFRSthisarrangementcanbeclassifiedasa

definedcontributionplanformultipleemployers.Thisis

becausethepensionfund isnotable tobreakdownthe

shareofEBNintheunderlyingpensionobligation,plan

assetsandcostoftheschemeinaconsistentandreliable

manner.

The pension premium owed is a percentage of the

premium base. The premium base is the pensionable

incomeminusafranchise.Thepremiumsaredetermined

by ABP in accordance with the relevant applicable

regulations inthewayasdescribed intheActuarialand

OperatingMemorandum(“ABTN”)andatacost-covering

level.

IfABPhasacoverageratiopolicylowerthan128%,then

there is a shortage. In this case,ABPmustprepareand

submitarecoveryplantothesupervisor(DeNederlandse

Bank). This recoveryplanmust show that thefinancial

positionwillimprovewithinamaximumof12yearswith

the coverage level back above 128%.Any adjustment of

pensionpremiums(surcharge)asaresultofthisrecovery

plan is applied prospectively and within a certain

bandwidth.

The coverage ofABP as at 31December 2016was91.7%

(2015: 97.2%). Based on the recovery plan and the

premiumdecision(inlate2015),apremiumsurchargeof

1% was proposed for 2016. This premium surcharge is

validforfiveyearsinprinciple.

Contingent assets and liabilitiesContingentassetsand liabilitiesarenot included in the

balancesheet.

SalesSalesfromthesaleofgas,oilandcondensateisrecognised

attimeofdelivery.Thatisthetimewhenownershipand

therisksassociatedwiththedeliveredgoodspasstothe

customer.

Revenues from oil and gas production generated from

assetsinwhichEBNparticipateswithotherproducersare

accountedforinproportiontoEBN’srelativeinterestin

theseassets.

Financial income and expenditureInterest incomeandexpenseare recordedbasedon the

effectiveinterestmethod.Interestexpensealsoincludes

interestaccruedonprovisions.


Share of profit from associatesTheshare in theprofit fromassociates is recognisedas

the share of the profit for the year under review

corresponding with EBN’s interest, after deduction of

taxes.

TaxesTaxes is determined according to the ‘balance sheet

method’.Taxliabilitiesarespecifiedintheconsolidated

statementofcomprehensiveincomeexceptiftheyrelate

toanitemincludedinothercomprehensiveincome.

Current tax expenses are taxes that are expected to be

payableonthetaxableprofitfortheyear,basedonthetax

rates applying on the balance sheet date, net of any

adjustments for taxes payable in respect of previous

years.

Deferredtaxassetsandliabilitiesarerecordedbasedon

theexpectedtaxconsequencesoftemporarydifferences

between the tax and the commercial carrying value of

assets and liabilities relating to the ground subsidence

andrestorationcosts.Deferred taxassetsand liabilities

are calculated on the basis of the tax rates that are

applicableormateriallydeterminedonthebalancesheet

date,andinaccordancewiththetaxregulationsexpected

toapplywhenthespecificdeferredassetsandliabilities

aresettled.

Financial derivatives Derivative financial instruments are recognised at fair

valueon initial recognitionand thenat the current fair

valueprevailingoneachsubsequentbalancesheetdate.

The current fair value is calculated with the appraisal

modelofReuters,usingyieldsfromReuters.Anyresultant

gainsorlossesarechargedtocomprehensiveincome.

For further information on the conclusion of the fair

valuesseenote20(‘Fairvalueoffinancialinstruments’).

Derivativeswhichservetohedgelong-terminstruments

(and thus themselves are also long-term) are classified

underthefixedfinancialassetsorlong-termliabilities.

International Financial Reporting Standards (IFRS) New and amended IFRS standards and IFRIC

interpretations that came into force as of the financial

year2016havebeenincorporated:

•AnnualImprovementstoIFRS-2010-2012Cycle

•AnnualImprovementstoIFRS-2011-2013Cycle

•AnnualImprovementstoIFRS-2014Cycle

•AmendmenttoIFRS11Jointarrangements-

AccountingforAcquisitionsofInterestsinJoint

Operations

•AmendmentstoIAS16Property,Plantand

EquipmentandIAS38IntangibleAssets–

ClarificationofAcceptableMethodsofDepreciation

andAmortisation

•AmendmentstoIAS27SeparateFinancial

Statements–EquityMethodinSeparateFinancial

Statements

•AmendmentstoIAS1PresentationofFinancial

Statements–DisclosureInitiative

•AmendmentstoIAS19EmployeeBenefits–Defined

BenefitPlans:EmployeeContributions

Theimplementationofthesestandardshasnosignificant

effectonthefinancialstatements.

The followingstandards,amendments tostandardsand

interpretationsthathavenotyetcomeintoforceorhave

not been endorsed by the European Union are not yet

appliedbyEBN:

•IFRS9FinancialInstruments

•AmendmentstoIFRS10andIAS28–Investment

Entities:ApplyingtheConsolidationException

•IFRS15RevenuefromContractswithCustomers,

includingamendmentstoIFRS15

•IFRS16Leases

•AmendmentstoIFRS7StatementofCashFlows–

DisclosureInitiative

•AmendmentstoIAS12IncomeTaxes–Recognition

ofDeferredTaxAssetsforUnrealisedLosses

EBNisinvestigatingtheconsequencesofthesestandards,

amendmentstostandardsandtheseinterpretations.

On the basis of the provisional results, EBN does not

expect the application of these new standards,

amendmentstostandardsornewIFRICinterpretationsto

have any material consequences for the company’s

financialstatementsinfuturefinancialyears.


Consolidated statement of comprehensive income

in EUR million

note 2016 2015

sales 2 3,094 4,766

levies 3 848 1,545

operationalcosts 4 982 1,420

impairments 5 299 660

depreciations 5 490 557

operatingexpenses 2,619 4,182

operatingprofit 475 584

financialincome 6 24 239

financialexpense 6 -105 -271

shareofprofitfromassociates 7 35 37

pre-taxprofit 429 589

taxes 8 -96 -139

net profit 9 333 450

othercomprehensiveincome - -

total comprehensive income 333 450


Consolidated balance sheet

in EUR million

assets noteyear end

2016year end

2015liabilities note

year end 2016

year end 2015

non-current assets shareholder’s equity 15

property,plantandequipment 10 3,292 3,860 sharecapital 128 128

associates 11 108 109 retainedearnings 50 56

deferredtaxasset 8 11 - 178 184

derivatives 20 188 206

3,599 4,175

non-current liabilities

provisions 16 3,238 3,174

borrowings 17 1,173 1,239

deferredtaxliabilities - 44

other 18 - 17

4,411 4,474

current assets current liabilities

inventories 12 27 33 borrowings 17 369 888

receivables 13 422 860 taxpayable 19 54 1

taxreceivables - 69 tradeaccountspayable 19 67 88

derivatives 20 22 30 other 19 557 193

cashandcashequivalents 14 1,566 661

2,037 1,653 1,047 1,170

total 5,636 5,828 total 5,636 5,828


Consolidated statement of changes in shareholder’s equity

in EUR million

share capital

retained earnings

totalequity

balance at 1 January 2015 128 71 199

netprofit - 450 450

othercomprehensiveincome - - -

totalcomprehensiveincome - 450 450

finaldividend2014 - -71 -71

interimdividend - -394 -394

balance at 31 December 2015 128 56 184

netprofit - 333 333

othercomprehensiveincome - - -

totalcomprehensiveincome - 333 333

finaldividend2015 - -56 -56

interimdividend - -283 -283

balance at 31 December 2016 128 50 178


Consolidated cash flow statement

in EUR millionnote 2016 2015

Operating activitiesnetprofitfromcontinuingactivities 333 450conversiontonetcash:-incomefromparticipations 7 -35 -37-depreciationsandimpairment 5 789 1,217-write-off 10 64 115-changesinprovisions(additions,revisionsandinterestaccrued) 16 175 417-changefairvalueCCIRS 20 26 -165-revaluationsofborrowings 17 15 171-otherfinancialincomeandexpense -chargedtocomprehensiveincome 12 23 -taxes -chargedtocomprehensiveincome 8 96 139 -changeinworkingcapital -inventories 12 6 -11

-receivables 13 -15 590-otherliabilities(excludingloans,debtstocreditinstitutionsandprofitdistribution) 19 61 -332

-withdrawalfromprovisions 16 -111 -96-interest -received 3 21

-paid -14 -50-taxes -received 69 428 -paid -104 -674

1,037 1,756Net cash from operating activities 1,370 2,206

Investing activitiesproperty,plantandequipment 10 -281 -564dividendreceived 11 36 38Net cash used in investing activities -245 -526

Financing activitiesprofitdistribution 13,15en19 397 -1,048repaymentforstockdividend 18 -17 -changeindebtstocreditinstitutions 17 -601 -96settlementfeepayment - -1Net cash from financing activities -221 -1,145Changeincashandcashequivalents 905 535

Balancecashandcashequivalentsat1January 661 126Balancecashandcashequivalentsat31December 1,566 661

For 2016 substantiation, see substantiation of cash flow statement


Notes to the consolidated financial statements

(1) General information

Allamountsintheseexplanatorynotesareinmillionsof

eurosunlessotherwisestated.

Notes to the consolidated statement of comprehensive income

(2) Sales

EBNexercisesonemainactivity,namelytheexploration

andproductionofnaturalgasandoil.Allsalesarerealised

intheNetherlands.TheassetsinwhichEBNparticipates

arealso located in theNetherlands. Informationon the

maindebtorscanbefoundinnote23.

The 2016 revenue from business operations was EUR

3,094million.Comparedto2015thisisadecreaseofEUR

1,672million(-35%).Thisdecreaseinrevenuewasmainly

causedbylowerpricesandlowerproduction.

(3) Levies

LeviesamountedtoEUR848million(2015:1,545million)

45% less than in 2015. This itemmainly comprises the

specialpaymentsmade to theDutchState in respectof

productionfromtheGroningenfieldin2016,i.e.theMOR

(yieldincreaseregulations)payments,amountingtoEUR

806millionandtheState’sshareofEUR37million.The

decreaseinpaymentsin2016resultedfromlowerprices

applicableforGroningen.

(4) Operational costs

inEURmillion 2016 2015

G&Gcosts 15 20

write-downs(unsuccessfulwells) 64 115

otheroperationalcosts 903 1,285

total 982 1,420

Geological and geophysical (G & G) costs comprise the

costsofgeological,geochemicalandgeophysicalsurveys

(includingseismicstudies).

The remaining operational costs mainly concern

productionandtransportcosts.

InotheroperatingcostsEUR173million (2015:EUR515

million)isincludedforcostsandadditiontotheprovision

related toearthquakes in theprovinceofGroningen. In

addition, EUR 58 million is included for costs and

allocationtoprovisionastheresultofareorganisationat

anoperator.

Totalsalarycostsaspresentedunderoperationalcostsare

asfollows:


grosssalaries 8 8

socialsecurities 1 1

pensioncosts 1 1

otheroperationalcosts 1 1

total 11 11

The average number of FTEs in 2016 was 74.54 (2015:

74.84)

Asat thebalancesheetdate, thecompanydidnothave

anycontractualobligations-otherthanthepossibilityof

highercontributionsinfuture-topayadditionalamounts

intheeventofthepensionfundbeingindeficit.

(5) Impairments and amortisation

BecauseofthelowgasandoilpricesEBNhasperformed

analysestoidentifyapossibleimpairmentofsomeofits

upstreamandmidstreamassets.Therecoverableamount

isdeterminedforthecashflowgeneratingunittowhich

theassetbelongs.InthecaseofEBNacashflowgenerating

unitingeneralcorrespondstoasalescontract.Inaddition,

‘hubs’ (main platform and satellites) can be used as a

cashgeneratingunit.Therecoverableamountisbasedon

thehighestofthedirectandindirectnetrealisablevalue.

Futurecashflowsareestimatedonthebasisofthemost

recent budgets and price scenarios. For periods beyond

the available projections, cash flows are extrapolated

basedoninflation.

For the indirect income method, the estimated future

cash flows are converted into cash at a discount rate

beforetaxes,basedontheWACC(WeightedAverageCost

ofCapital).Thisis6%formidstreamactivities(2015:6%)

and 8% for exploration and production activities (2015:

8%),aftertax.Adiscountratebeforetaxisdeterminedon

thebasisofaniterativemethod.

For11upstreamgasand1midstreamcashflowgenerating

unitsthecarryingvalueat31December2016(1,129million

EUR)iswrittendowntoitsrecoverableamount(intotal

EUR830million). Thismakes the impairmentEUR299

million in 2016. In 2015, the impairment was EUR 660


millionfor10cashflowgeneratingunitsinupstreamoil,

upstreamgasandmidstream.

Thegraphbelowshowsthesensitivity,i.e.theimpairment

charge in changes in assumptions that management

considersimportant(price,volume,anddiscountrate):

(6) Financial income and expense


interestincomefromcashandcashequivalents

- -

interestincomeonderivatives 19 19

revaluationincomeonderivatives 4 213

revaluationincomeonotherfinancialinstruments

- -

otherfinancialincome 1 7

total financial income 24 239

interestexpensesonborrowings -19 -19

interestexpensesonderivatives -26 -28

revaluationexpensesonderivatives - -1

revaluationexpensesonotherfinancialinstruments

-14 -171

interestexpensesondiscountedprovisions

-43 -51

otherfinancialexpense -3 -1

total financial expense -105 -271

net financing costs -81 -32

The interest rate charges on derivatives were EUR 2

millionlowerthanin2015duetorepaymentsandlower

interestrates.

Thebalanceoftherevaluationsonderivativesandother

financialinstrumentsprimarycomprisestherevaluation

results on the non-current borrowings and the directly

relatedderivatives.In2016,onbalance,thisisanegative

resultofEUR10million(2015:EUR41millionpositive),of

which EUR 4million revaluation income on derivatives

and EUR 14 million revaluation expenses on other

Price(+4ctperm3/-2ctperm3)

Volume(+5%/-10%)

Discountrate(-/+1%)

150 450300

ImpairmentlossinEURmillion

600

High

Low

0


financial instruments. The balance of the result on the

revaluationofloansandassociatedderivativesismainly

theresultofdevelopmentsintheyieldcurvesoftheCHF

andJPYcomparedtotheEUR.

(7) Result for associates


GasTerraB.V. 14 14

NOGATB.V. 15 16

NGT-Extensie 6 7

total 35 37

(8) Tax


currenttaxexpensescurrentyear 120 170

adjustmentpreviousyear -2 1

deferredtaxexpensesarisingfromtemporarydifferences

-22 -32

total 96 139

Theeffective tax rate for 2016 amounts to 24.4% (2015:

25.2%).Thedecreaseintheeffectivetaxrateistheresult

ofacorrectiononthepreviousyear.In2016,thenominal

corporation tax rate in theNetherlandswas 25% (2015:

25%).


Totaltaxes 96 139

pre-tax profit 429 589

Incomefromparticipations 35 37

totaal 24.4% 25.2%

Thebalanceofdeferredtaxassetsandliabilitiesdeclined

byEUR55millionasaresultofthefollowingchanges:


balance at 1 January

deferredtaxassets 149 110

deferredtaxliabilities -193 -186

total -44 -76

movementsasaresultof:

-correctiontotthe2015return(valuationofprovisions)

33 -

-differencesbetweencommercialandfiscalvaluationofproperty,plantandequipment2016

73 -7

-differencesbetweencommercialandfiscalvaluationofprovisions2016

-51 39

balance at 31 December 11 -44

ofwhich:

-deferredtaxassets 131 149

-deferredtaxliabilities -120 -193

movementinassets -18 39

movementinliabilities 73 -7

Deferred tax assets and liabilities include future tax

creditsandliabilitiesarisingfromtemporarydifferences

between theamountscalculated inaccordancewith the

commercialprinciplesandthosecalculatedinaccordance

withfiscalstandards.

Thecorrectiontothe2015returnreferstotheprovision

for costs as a result of earthquakes, which are not yet

entirelydeductible.

(9) Net profit

AnetresultfromcontinuingoperationsresultsinEUR333

millionin2016.ThatisEUR117million(26%)lessthanfor

2015.


Notes to the consolidated balance sheet

(10) Property, plant and equipment

totalproduction,

transport and storage facilities

drilling reimburse-ments

capitalisation of decommissio-

ning and resto-ration costs

exploration and evaluation

assets under construction

capital expenditure

and wells under construction

balance at 1 January 2015cumulativecosts 14,673 7,492 3,743 1,462 1,569 169 238cumulativedepreciationsandamortisation 10,349 5,553 2,721 1,266 809 - -carrying amount at 1 January 2015 4,324 1,939 1,022 196 760 169 238changes in 2015cost:-investments 564 99 115 - - 149 201-commissioning - 80 228 - - -93 -215-capitalisationofdecommissioningandstorage 304 - - - 304 - --decommissioning -2 -2 - --write-downs -115 - - - - -110 -5depreciation and amortisation-depreciations -557 -225 -201 -16 -115 - --impairments -660 -337 -150 -145 -22 - -6decommissioning 2 2 - - - - -balance at 31 December 2015cumulativecosts 15,424 7,669 4,086 1,462 1,873 115 219 cumulativedepreciationsandamortisation 11,564 6,113 3,072 1,427 946 - 6carrying amount at 31 December 2015 3,860 1,556 1,014 35 927 115 213 changes in 2016cost:-investments 281 67 67 - - 60 87-commissioning - 107 99 - - -17 -189-capitalisationofdecommissioningandstorage 4 - - - 4 - --decommissioning - - - - - - --write-downs -64 - - - - -48 -16depreciation and amortisation-depreciations -490 -188 -192 -9 -101 - --impairments -299 -159 -131 -11 -4 - 6decommissioning - - - - - - -balance at 31 December 2016cumulativecosts 15,645 7,843 4,252 1,462 1,877 110 101cumulativedepreciationsandamortisation 12,353 6,460 3,395 1,447 1,051 - -carrying amount at 31 December 2016 3,292 1,383 857 15 826 110 101


Investments in2016atEUR281millionwere50%lower

than in 2015 (EUR 564 million). Onshore investments

amounted to EUR 37 million (2015: EUR 102 million).

Offshore investments amounted to EUR 244 million

(2015:EUR462million).

Theincreaseinthecapitalisedrestorationcostofplants

amounted to EUR 4 million in 2016 (2015: EUR 304

million).Forfurtherexplanation,seenote16.

In 2016, an impairment loss was recorded of EUR 299

million (2015: EUR 660million). For more details with

regardtotheimpairment,seenote5.

The cumulative acquisition value of the assets that are

alreadyfullydepreciatedbutstillinuseamountstoEUR

1,118million(2015:EUR864million).

(11) Associates

EBN classifies as associates its 40% participation in

GasTerra, its 45% participation in NOGAT and the 12%

participationintheNGT-Extensie.

Theassociatesarerecognisedbasedontheequitymethod.

Theprofitsaredistributedannually.

inEURmillion GasTerra NOGATNGT-

Extensie2016total

GasTerra NOGATNGT-

Extensie2015total

balance at 1 January 86 13 10 109 86 13 11 110

profitshare 14 15 6 35 14 16 7 37

dividendreceived -14 -15 -7 -36 -14 -16 -8 -38

changeindeferredcorporatetaxassets

- - - - - - - -

balance at 31 December 86 13 9 108 86 13 10 109

The following table shows summarised financial

informationontheGasTerra,NOGATandNGT-Extensie

associatesona100%basis.


Extensie2016total

GasTerra NOGATNGT-

Extensie2015total

asssets current 1,976 39 - 2,015 2,326 39 - 2,365

non-current

19 49 75 143 27 48 83 158

liabilities current 1,779 37 - 1,816 2,137 36 - 2,173

non-current

- 23 - 23 - 23 - -

netinvestments(100%) 216 28 75 319 216 28 83 350

EBN’sshareinassociates 40.0% 45.0% 12.0% 40.0% 45.0% 12.0%

carryingamountoftheshareinassociates

86 13 9 108 86 13 10 109


Extensie2016 total

GasTerra NOGATNGT-

Extensie2015 total

netsales 9,865 44 75 9,984 14,740 47 89 14,876

netprofit(100%) 36 32 50 118 36 34 87 157

othercomprehensiveincome(100%)

totalcomprehensiveincome 36 32 50 118 36 34 87 157

EBN’sshareintotalcomprehensiveincome

14 15 6 35 14 15 10 40


(12) Inventories


materials 23 26

gas 1 1

condensateandoil 3 6

total 27 33

(13) Receivables


accountsreceivablefromassociates 112 124

othertradeaccountsreceivable 299 256

totaltradeaccountsreceivable 411 380

accountsreceivablesfromtheDutchState

- 453

otherreceivablesanddeferreditems

11 27

total 422 860

AccountsreceivablefromassociatesrefertoGasTerra,in

whichEBNhasa40%participation.

ThereceivableclaimagainsttheStatein2015referredto

asetoffonthemonthlyspecialprofitdistributionsthat

werepaidin2015.Thereceivableclaimwaspaidinfullin

2016.

Forinformationoncreditriskspleaserefertonote20.

(14) Cash and cash equivalents

Thecashandcashequivalents consistofbankbalances

EUR10million(2015:EUR112million),bankdepositsEUR

500 million (2015: EUR 389 million), investments in

money market funds EUR 260 million (2015: EUR 115

million) and commercial paper EUR 796 million (2015:

EUR45million).

(15) Shareholder’s equity


balance at 1 January 184 199

netprofit 333 450

finaldividendpreviousyear -56 -71

interimdividend -283 -394

balance at 31 December 178 184

Onthebasisofarticle20(2)ofEBN’sArticlesofAssociation

the net profit of EBN (after reduction by the statutory

reservesand the interimdividend to theState) ismade

freelyavailabletotheGeneralMeeting.Afterdeductionof

interimdividendofEUR283millionthenetprofitisEUR

50 million. The General Meeting resolves to add an

amountofEUR30milliontotheequityandtodistribute

anamountofEUR20milliontotheshareholder.

In2016,theauthorised,issuedandpaidupsharecapital

amountedtoEUR128million(2015:EUR128million)and

comprised 284,750 shares (2015: 284,750 shares), each

withanominalvalueofEUR450.

The declared dividend for the previous year per share

amountedtoEUR197pershare(2015:EUR249).

TheproposeddividendofEUR20million (2015:EUR56

million) will be paid out once the General Meeting of

Shareholdershasadoptedthefinancialstatements.

Thetotalresultfor2016wasEUR1,169pershare.Thatisa

decreaseof26%from2015.

(16) Provisions


coversobligationswitha termdependingon theuseful

lifeofthefields.Theprovisionforgroundsubsidencealso

includesliabilitieswithamaturitydependingonthelife

ofthefields.Thedurationoftheprovisionforcostsasa

result of earthquakes that take place up until balance

sheetdatedependsonthespeedofsubmittingtheclaims

and settlement of submitted claims. The provision for

earthquake-relatedcosts isexpectedtohaveamaturity

of1to5years.


isbasedoninformationfromtheoperatorsat31December

2016andownanalysesandisdeterminedbyestimating

the costs on thebasis of the currentprice level, taking

into account an inflation of 1%, and discounting at a

nominal interest rate of 0.97% (2015: 1.23%). The

equivalentoftheprovisionstatedatthepresentvalueis

recognised under property, plant and equipment and

depreciated on the basis of the UOP method. Nominal

interestisaddedtotheprovisionat1.23%(2015:1.97%).


provinceofGroningenrefersprimarilytodamagerepair,


of infrastructure and compensation measures. The

amount of this provision is based on information from


theoperator,publicinformationandEBN’sinformation

andinsights.

Theotherprovisionsaremainlyrestructuringcosts.

ThetotaloftheprovisionsisincreasedbyEUR64million.

Thisisthebalanceofthefollowingchanges:

TheadjustmentintheprovisionforrestorationofEUR6

million ismainly causedbyan increase in thecosts for

wellsandanadjustmentofthediscountrate.Additionally,

theestimatedcosts fordecommissioningand removing

installationshave beenupdated for the decrease in the

estimated costs and new insight regarding cut off

productiondates.

The provision earthquake is increased for the various

reinforcementprogrammesforbothbuildingsaswellas

infrastructure.Therevisionconcernsestimatesbasedon

improvedunderstandingofthenumberofreinforcement

programmesandloweraverageclaimamount.

The other provision increased by EUR 58 million for

reorganisationcostsbyjointoperations.Thewithdrawal

concernssettlementsalreadymade.

inEURmilliondecommis-sioning and restoration

subsidence earthquakes other total

balance at 1 January 2015 2,349 103 97 - 2,549

additions - 5 360 1 366

withdrawals -25 -2 -69 - -96

revision 304 - - - 304

interest 51 - - - 51

balance at 31 December 2015 2,679 106 388 1 3,174

additions 9 7 106 58 180

withdrawals -25 -0 -68 -18 -111

revision -6 -0 -43 1 -48

interest 43 -0 -0 -0 43

balance at 31 December 2016

2,700 113 383 42 3,238


(17) Current and non-current borrowings

In 2016 a bond of CHF 350millionwas repaid. No new

bondsorprivateloanswereissued.Nosecurityhasbeen

provided for the outstanding borrowings. Clauses are

includedintheagreementsforthedebentureandprivate

loansthatrestrictthesecuritythatcanbedemanded.

EBN has a commercial paper programme of EUR 2,000

million.Thisisunchangedcomparedto2015.Atyear-end

2016, no commercial paper is outstanding (neither at

year-end2015).

ThecashloansconcerndepositsGasTerrahasplacedwith

EBN. This is based on a Deposit and Loan Facility

Agreement which EBN and Nederlandse Aardolie

Maatschappij(NAM)enteredintowithGasTerrain2014.

Underthisagreement,GasTerracanproposetoEBNand

NAM (as joint parties) placing a deposit with EBN and

NAMforaperiodfrom3daysto3months.GasTerracan

alsorequestaloanfromEBNandNAM(asjointparties)

forasimilartermunderthisagreement.

Thecollateralonderivativesconcernscashdepositedby

banksforthedifferencebetweenthemarketvalueofthe

respectiveportfolioandthethresholdasagreedperbank.

Thisdepositedcollateralisinterestbearingandisnetted

undercashandcashequivalentsandwillnotbeusedfor

commercialpurposes.

Agreementsabouttheexchangeofcollateralarerecorded

in Credit Support Annexes (CSAs) as Annex to the

International Swaps andDerivatives Association (ISDA)

agreements with the respective banks. CSAs were

concludedwithallbanks,exceptforonebank,andwith

onebanknotallderivativesfallundertheCSA.

On18August2015,acommittedrevolvingcreditfacility

wasagreedwiththreebanks(INGBank,BNPParibasand

Rabobank)foraninitialperiodoffiveyears.Thisfacility

offersEBNthepossibilitytomakewithdrawalsuptoEUR

400millionincreditforgeneralbusinesspurposes.This

facilitywasnotused in2016.The interestexpenseover

anyusedpartofthecredit linedependsontherelevant

Euriborratethatappliesfortherespectivecreditperiod,

increasedwithamargin.Duetotheprovidedfacility,the

banks are owed an annual commitment fee over the

outstandingandunusedpartofthefacility.Nosecurityis

provided to the banks for this facility, andnofinancial

ratiocovenantsareincluded.Clausesarerecordedinthe

respective agreement that restrict the provision of

security.Thefacilityincludesanoptionnotcommittedby

thebanksforEBNtoextendthetermtwicebyoneyear.

Thisoptionwasusedin2016andthefacilitywasextended

by one year, until August 2021. The facility also has an

optionnotcommittedby thebanks forEBNto increase

the facility with a maximum of EUR 100 million. This

optionwasnotusedin2016.


totalnon-current

partcurrentpart total

non-currentpart

currentpart

debentureloans 1,173 1,173 - 1,486 1,163 323

privateloans 81 - 81 76 76 -

totalnon-currentborrowings 1,254 1,173 81 1,562 1,239 323

cashloans 200 - 200 446 - 446

collateralonderivatives 88 - 88 119 - 119

total 1,542 1,173 369 2,127 1,239 888


Non-current borrowings

Non-current borrowings, including those borrowings

withaduedatewithinoneyear,arecomposedasfollows:

inEURmillion

2016 2015

JPY 10,000mln 1.775% privateloan 2007/2017 81 76

CHF 325mln 2.125% debentureloan 2010/2020 303 300


CHF 350mln 0.75% debentureloan 2011/2016 - 323






1,254 1,562

InadditiontotherepaymentoftheCHF350millionbond

thereisadifferenceintheamountsofoutstandingnon-

currentborrowingsattheendof2016comparedto2015

becauseofexchangedifferences,whichareincorporated

intheprofitandlossaccountunderfinancialincomeand

expense.(seenote6).

Theprincipalsumsoftheseborrowingsandtheassociated

interestexpensesinforeigncurrencyarefullyconverted

toEurosviacrosscurrencyinterestrateswaps.Asaresult,

the rate effects on the non-current liabilities, such as

thosefromthetableappear,areneutralised.Theaverage

interest rateof all outstandingnon-currentborrowings

pertheendoftheyear,includingtheeffectsofthecross

currencyinterestrateswaps,is1.98%(2015:2.12%).This

decrease is due to the repayment of the CHF bond and

associatedderivativeswithhigherinterestratesandthe

resultofthelowermarketinterestratesin2016compared

to2015.Allcrosscurrencyinterestrateswapshavefixed

interest rates, except those associated with the JPY

2007/2017,CHF2014/2022andCHF2014/2026loans.At

year-end 2016, 28% (in 2015: 22%) of the financing

through the outstanding cross currency interest rate

swapshasvariableinterestrates.


Thefollowingtableliststheoutstandingdebentureloans

andprivateloansinorderoftheirmaturity.


within1year 81 323

within1to2years - 76

within2to3years 219 -

within3to4years 419 217

within4to5years - 415

after5years 535 531

total 1,254 1,562

More than 76% of the outstanding non-current

borrowings have remaining terms to maturity of more

thanthreeyears.Borrowingswithaduedatewithinone

yeararepresentedundercurrentliabilities.

(18) Other non-current liabilities

ThisconcernsadebtofinitiallyEUR17million(2015:EUR

17 million) to the State. This long-term debt was

completelyrepaidinthecourseof2016.

(19) Current liabilities

The tax liability of EUR 54million (2015: tax receivable

EUR 69million) consistsmainly of corporation income

tax.

TradeaccountspayableofEUR67million(2015:EUR88

million)arejointinterestbillingsofoperatorstobepaid

forthemonthofDecember.

Theotherdebtsconsistof:


paymentstotheState 283 -

interestpayments 20 22

levies 181 47

otherliabilities 73 124

total 557 193

Theincreaseintheleviesisduemainlytotheoutstanding

MORobligation.

Policy to control financial risks

(20) Risk management

General information

Next to thestrategic risks referred toonpage60 to62,

therearefinancialrisks.ThemainfinancialrisksforEBN

aretheliquidityand(re)financingrisk,creditrisk,interest

rate risk, currency risk and market price risk. EBN’s

financialpolicyfocusesonlimitingtheeffectsofcurrency

and interest rate fluctuations on assets and liabilities.

EBN uses financial derivatives to manage interest and

currencyrisks,specificallythoserelatingtothefunding

of its operations. The company does not take any

speculativepositionswithfinancialderivatives.

Liquidity and (re)financing risk

The liquidityand (re)financing risk is the risk thatEBN

doesnothaveorcannotraisesufficientfinancialresources

to meet its financial obligations. The objective is that

undernormalcircumstancesatalltimesEBNwillhaveat

itsdisposaltherequiredcashforoperationalprocesses.

In the selection of the (duration of) cashmanagement

andfinancinginstrumentsatalltimesitisensuredthat

sufficientimmediatelyretrievableliquidityispresentor

canbemadeavailabletomeetthefinancialobligations.

Hightrustbythecapitalandmoneymarketsandfinancial

institutions in EBN is crucial for optimal funding.

Importanttoolsforthisare:

•optimalmanagementofallfinancialstakeholders,

and

•maintainingEBN’shighlevelofcreditworthinessin

thelongandshortterm,amongothersbyafocused

creditratinganddividendpolicy,and

•continuouslymonitoringandcontrollingfinancial

creditratios.

EBN has a commercial paper programme of EUR 2,000

million.EBNalsohasacommittedrevolvingcreditfacility

at reputable and creditworthy banks for an amount of

EUR400million.Forfurtherinformationonthisplease

seenote17.Thisenablesquickandsufficientshort-term

fundingifnecessary.

Indetermining thedurationofnew long-termloansan

endeavour is made to prevent concentration of

redemptions in a certain year and so to spread the

maturityprofile.


Thefactthattheannualresultsarelargelypaidouttothe

shareholder, leads to an annual low numerical solvency

ratio. However, there are significant and robust annual

positive cash flows from operating activities, which are

higher than capital expenditures. Because of this, each

yearEBNgeneratesasignificantfreecashflow,resulting

inasolvencybeingconsideredexcellent.In2016thenet

debtturnedintoanetreceivable.


borrowings:

non-currentborrowings 1,173 1,239

currentborrowings 369 888

total borrowings 1,542 2,127

cashandcashequivalents -1,566 -661

financialderivatives -210 -236

net liabilities (A) -234 1,230

shareholder’sequity(B) 178 184

gearingratioA/(A+B)*100% 0% 87%

Thefollowingtableshowstheexpectedannualcontract-

based cash flows from the repayments and interest

payableontheborrowingsandtheassociatedderivatives:

2016

inEURmillionBorrowings

loans

Net interest loans and

derivatives

Payment at redemption

Cashflow derivatives

2016 Total

cash out

2015 Total

cash out

within1year 369 -21 -369 20 -370 -884

within1to2years - -21 - - -21 -81

within2to3years 219 -21 -219 23 -217 -21

within3to4years 419 -17 -419 103 -333 -217

within4to5years - -7 - - -7 -334

after5years 535 -16 -535 58 -493 -502

Total 1,542 -103 -1,542 204 -1,441 -2,039

2015

inEURmillionBorrowings

loans

Net interest loans and

derivatives

Payment at redemption

Cashflow derivatives

2015 Total cash out

2014 Total cash out

within1year 888 -28 -888 32 -884 -645

within1to2years 76 -21 -76 16 -81 -320

within2to3years - -21 - - -21 -83

within3to4years 217 -21 -217 21 -217 -22

within4to5years 415 -18 -415 99 -334 -218

after5years 531 -24 -531 53 -502 -837

Total 2,127 -133 -2,127 221 -2,039 -2,125

Inadditiontotheabovecashflowsfromborrowingsand

related derivatives there are cash flows from trade

creditorsandothercurrentliabilities.Theseexpirewithin

oneyear.


Credit risk on financial instruments

ThecreditriskistheriskforEBNthatacounterpartydoes

notfulfilitscontractualfinancialobligations.Asaresult

of cash management transactions credit risk at

counterpartiesoccurs.Thiscan relate tobankbalances,

deposits, bonds (including commercial paper), money

market funds and derivatives. By the sometimes high

liquidity position and market values of derivatives too

muchofaconcentrationoffundsatatoolimitednumber

ofpartieswouldmeanasignificantfinancialriskforEBN.

The policy is therefore focussed on reducing the

counterparty risk by only doing business with parties

withahighcreditratingtoaleveldeemedacceptablein

relation to the creditworthiness of the relevant

counterparty.

Theallowedlimitspercounterpartythatapplytothetotal

of balances on bank accounts, deposits and bonds

(including commercial paper) togetherwith themarket

valueofderivativesminusassociatedcollateral,depend

on the credit rating of the counterparty. To be able to

placefundsintheseinstrumentsatleastaP-1,A-1andF1

shorttermratingfromMoody’s,StandardandPoor’sand

Fitchrespectivelyandaminimumlong-termratingofA2

fromMoody’s and A from Standard & Poor’s and Fitch

applies.

FormoneymarketfundsaminimumcreditratingofAaa

fromMoody’sandAAAfromStandard&Poor’sandFitch

appliesandEBN’sparticipationpermoneymarketfundis

maximizedto5%ofthefund.

Ifderivativestransactionsarecarriedoutinthecontextof

long-termfinancingthisisonlydonewithacounterparty

withaminimumofA2Moody’sorAStandard&Poor’s

andFitch longtermratingwithwhichEBNhasentered

intoan‘InternationalSwapsandDerivativesAssociation’

(ISDA) agreement. New long-term derivatives are

concludedwith aCredit SupportAnnex (CSA). This is a

contract, where it is agreed with the counterparty to

depositcollateralifaderivativespositionhasasubstantial

value,toreducethecounterpartyrisk.

Withtheexceptionofonebank,CreditSupportAnnexes

(CSAs)areenteredintowithallbankswithwhichcurrent

derivativesareconcluded.EBNdidnotsufferanycredit

lossesin2016.

In respect of cross currency interest rate swaps with a

nominalvalueofEUR779million(CHF960million),CSAs

have been agreedwith the relevant counterparties. For

thatreason,attheendof2016onbalance,therewasEUR

88millioncollateralplacedatEBNbybanks(attheendof

2015: EUR 119 million). The collateral on derivatives

concernscashdepositedbybanks in theamountof the

difference between the market value of the respective

portfolioandthethresholdagreedintheCSA.Thispaid

collaterallargelybearsinterestandisnettedundercash

andcashequivalentsandwillnotbeusedforcommercial

purposes. The corresponding liability is included in

current liabilities as part of borrowings. Themaximum

creditriskontheoutstandingderivativesasatyear-end

2016 is EUR 122million (EUR 210millionmarket value

derivativesminusEUR88millioncollateral).

With thevaluationof thederivatives, thecredit riskon

counterpartiesistakenintoaccountincaseofapositive

marketvalueandthecreditriskofbanksonEBNincasea

negativemarketvalue.Ifthemarketvalueofthetotalof

derivatives per counterparty is positive, then a Credit

ValuationAdjustment(CVA)isincludedinthevaluation;

ifitisnegativethenaDebtValuationAdjustment(DVA)is

included (IFRS 13.48 portfolio exception). These

adjustments are based on Credit Default Swap (CDS)

spreadsassociatedwiththeweightedaverageremaining

term of the portfolio and the market value of the

derivatives for each counterparty. Consequently, the

valuation of the derivatives has decreased by EUR 3.5

millionattheendof2016(thedecreasein2015was:EUR

3.2million).

Credit risk on receivables

The credit risk on receivables from sales is low. EBN

mainlysells tocounterpartieswithahighcredit rating.

32% of the receivables is onGasTerra (long term credit

ratingStandard&Poor’sAA+)and60%ofthereceivables

onNAM(JointVentureShellcreditratingsS&PA,Moody’s

Aa1, FitchAA-andExxonMobil credit ratingsS&PAA+,

Moody’sAAA).In2015thiswas33%and64%respectively.

EBNmonitorsthecreditworthinessofallcustomersona

periodicbasisandappliescreditlimitspercustomer.

Interest rate risk

The interest rate risk is the risk of financial results or

changes in the balance sheet caused by fluctuations of

market interest rates. Next to achieving minimal net

interestcharges,thegoalofEBN’sinterestrateriskpolicy

istolimitinterestraterisksarisingfromthecompany’s

funding. A maximum of 60% of the non-current

borrowingsandfinancialderivativesshallhaveavariable

interest rate in accordance with internal guidelines. At

year-end2016,28%(2015:22%)ofthisnon-currentdebt

positionwasatavariableinterestrate.

Theanalysisofthesensitivityofborrowingsandrelated

financialderivativestointerestratemovementsisbased

onadirect changeof 1percentagepoint in the interest

ratescomparedto31December2016.Allothervariables


remainunchanged.Areductionof1percentagepointin

interest rates would result in an estimated decrease of

EUR 28 million in net financing costs, based on the

portfoliooffinancialinstrumentsat31December2016.

Thefollowingtableshowstheinterestratesensitivityof

thefinancialinstrumentsontheshareholders’equityand

theresult:

Anincreaseininterestratesby1percentagepointwould

result inanestimatedincreaseofnetfinancingcostsof

EUR26million.Themainreasonfortheseeffectsisthat

a change in the fairvalueofderivativesasa resultofa

change in interest rate is charged directly to the

consolidatedstatementofcomprehensiveincome.

2016 inEURmillion

carrying amount

fair value

effect of the change in

interest rate +1%


interest rate -1%

cashandcashequivalents

1,566 1,566 - -

receivables 422 422 - -

currentborrowings -369 -370 - -

othercurrentliabilities

-678 -678 - -

non-currentborrowings

-1,173 -1,259 - -

crosscurrencyswapspositiveusedfornon-currentborrowings

188 188 -26 28

crosscurrencyswapspositiveusedforcurrentborrowings

22 22 -1 1

total -22 -109 -27 29

2015 inEURmillion

carrying amount

fair value


interest rate +1%


interest rate -1%


661 661 - -


currentborrowings -888 -892 - -


-281 -281 - -


-1,239 -1,331 - -


206 206 -31 34


30 30 - -

total -651 -747 -31 34


Currency risk

Thecurrencyriskistheriskoffinancialresultsorchanges

inthebalancesheetcausedbyfluctuationsinacurrency

rate on the foreign exchange market. EBN aims to

eliminateorreducethesefluctuations.

The foreign currency risk management instruments

include spot, forward exchange transactions and cross

currencyinterestrateswaps.

EBN fully hedges currency risks arising from sales and

purchases at the time the trade receivables or trade

liabilitiesarise.Expectedtransactions thathavenotyet

takenplacearenothedged.Atyear-end2016,therewere

nocurrencyriskstobehedged(noneatyear-end2015).

Incaseofinvestmentsorfundinginforeigncurrency,the

currencyriskisimmediatelyhedged.Incaseoffundingin

foreigncurrency,boththecurrencyriskontheprincipal

andinterestobligationsarefullycovered.

Currencyrisksoncurrentborrowingsinforeigncurrencies

arehedgedwithforwardexchangecontracts.Atyear-end

2016therewerenoforwardexchangecontractsrelatingto

current borrowings issued in foreign currencies (year-

end2015:nil).

Currency risks on non-current borrowings in foreign

currency are hedged with cross currency interest rate

swaps(seenote17).

In the table below the sensitivity of the financial

instruments forexchange ratefluctuations is shownon

theshareholders’equityandtheresults.Itisbasedona

10%movement in all exchange rates in relation to the

eurocomparedtotheirlevelsat31December2016,with

all other variables remaining unchanged. A change of

+10% means that the euro weakens in relation to the

foreigncurrencies.Achangeof-10%meansthattheeuro

strengthensinrelationtotheforeigncurrencies.

2016 inEURmillion

carrying amount

fairvalue

effect movement

in exchange rate +10%

effect movement

in exchange rate -10%


1,566 1,566 - -


currentborrowings -369 -370 -9 7


-678 -678 - -


-1,173 -1,259 -141 115


188 188 141 -115


22 22 9 -7

total -22 -109 - -

2015 inEURmillion

carrying amount

fairvalue

effect movement

in exchange rate +10%

effect movement

in exchange rate -10%


661 661 - -


currentborrowings -888 -892 -36 30


-281 -281 - -


-1,239 -1,331 -150 122


206 206 150 -122


30 30 36 -30

total -651 -747 - -


Fair value of financial instruments

Derivativeswhichservetohedgelong-terminstruments

(and thus themselves are also long term) are classified

underthefixedassetsorlong-termliabilities.

The table below summarises the carrying amounts and

estimatedfairvaluesoffinancialinstruments:

Thepresentedvalueofderivativesisanetpresentationof

the value of the derivatives per bank, based on the

underlying ISDA agreements. At year-end 2016, all

derivativeshadapositivemarketvalue.Theunderlying

valuationofallderivativesseparatelywasintotalEUR210

million and there were no derivatives with a negative

marketvalue.Attheendof2015,thederivativesbasedon

thisnetpresentationhadapositivemarketvalueofEUR

236millionandtherewerenoderivativeswithanegative

marketvalue.

Fairvaluesoflistednon-currentborrowingsarebasedon

publishedrates(level1accordingtoIFRS).Theotherfair

values are calculated on the basis of available market

information, including interest rate and exchange rate

levels(level2accordingtoIFRS).Allfinancialassetsand

liabilitiesatfairvalueswithchangesinvaluerecognised

incomprehensiveincomeofprofitareclassifiedatlevel

2.Thesevaluationtechniquesareassessedannually.The

valuationtechniqueswerenotadjustedin2016.

Thefairvalueofthenon-currentborrowingsamountsto

EUR1,259millionasat31December2016(2015:EUR1,331

million). Of this EUR 1,259 million (2015: EUR 1,252

million) was valued in accordance with level 1 and no

borrowings (2015: EUR 79 million) in accordance with

level2.Thecarryingamountoftheaforementionednon-

currentborrowingsamountedtoEUR1,173million(2015:

1,240millionEUR).

The non-current borrowings in foreign currency are

recognizedattheECBreferencerates.Thecorresponding

derivativesarerecognizedatmarketvalue.Asaresultof

this, fluctuations in market interest rates in foreign

currenciesinrelationtoeachother(suchasbetweenthe

EUR and CHF interest) can cause temporary unrealised

resultsintheincomestatement.

Current receivables, cash and cash equivalents and

currentliabilitiesarerecognizedattheircarryingamount.

Inviewoftheshorttermtomaturityoftheseinstruments,

theseamountsapproximatetheirfairvalues.

31 December 2016 31 December 2015

inEURmillion carrying amount fair value carrying amount fair value

assets

currentreceivables 422 422 860 860

non-currentfinancialderivatives

188 188 206 206

currentfinancialderivatives 22 22 30 30

cashandcashequivalents 1,566 1,566 661 661

liabilities

listednon-currentborrowings 1,173 1,259 1,163 1,252

othernon-currentborrowings - - 76 79

listedcurrentborrowings - - 323 327

othercurrentborrowings 369 370 565 565

othercurrentliabilities 678 678 281 281


Thefollowingtablesummarisesthecarryingamountsof

financial derivatives, specified according to type and

objective::

inEURmillion assets liabilities total

crosscurrencyinterestrateswaps

236 - 236

forwardcurrencycontracts

- - -

totalfinancialderivativesinrelationtoborrowings

236 - 236

Balance at 31 December 2015

236 - 236

crosscurrencyinterestrateswaps

210 - 210

forwardcurrencycontracts

totalfinancialderivativesinrelationtoborrowings

210 - 210

Balance at 31 December 2016

210 - 210

Market price risk

EBN has the policy not to hedge against the risk of

fluctuations in oil and gas prices on the oil and gas

markets.Thesemarketpricefluctuationscansignificantly

affectEBN’sresults.However,sincetheserisksoriginate

directly from the core activities of EBN this risk is not

hedged.

Other notes

(21) Contingencies

As indicated in the summary of significant accounting

policiesEBNtakespartinamultipleofjointoperations.The

basisforthesejointoperationsislaiddowninagreements

ofcooperationorJointOperatingAgreements,fromwhich

multi-year financial rights and obligations arise. The

investmentobligationsatyear-end2016amounttoEUR328

millionandthemajorityoftheseobligationshasaduration

shorter than 1 year. At year-end 2015, the obligation

amountedto310million.

Moreover,EBN’s(in)directshareofprovenandprobablegas

reservesoffieldsinwhichEBNparticipatesat31December

2016is301billionNm3GE(2015:340billionNm3GE).

Asusual intheindustry, includingthroughtheassociated

participation GasTerra, continuous renegotiations take

place about the pricing of sales contracts. The results of

thesenegotiationscanhaveasignificantpositiveornegative

impactonEBN’sresults.Itisnotpossibletomakeareliable

estimateoftheoutcomesoftheserenegotiationsorrelated

arbitrationproceedings.

Asaresultofthegovernmentdecisionof17January2014on

thegasproductionfromGroningen,futureobligationshave

arisen.Theseobligationsprimarilyconcerndamagerepair,

preventive reinforcement of buildings and infrastructure

and compensation measures to improve the safety and

liveabilityoftheearthquakearea.

A provision is included on damage claims, a number of

structural reinforcements of buildings and infrastructure

andcompensationmeasures(seenote16).Thecostofthe

structural reinforcements of buildings and compensation

measurescannotalwaysbereliablyestimated,aprovisionis

therebyonlyincludedwhenconcreteagreementsareunder

negotiationorinthecaseofongoinglegalprocedureswhere

thechancethatEBNisorderedtopayearthquakecosts is

greaterthan50%.Thetotalscopeofthecostscouldtherefore

be higher. Based on its participation in the Groningen

licence,EBNwillcontribute40%ofthesecosts.

In addition, there is a rental obligationuntil 2026 for the

businessaddressofthecompanyatDaalsesingel1inUtrecht

ofEUR6.7million(2015:EUR7.4million).

(22) Notes on the statement of cash flows

Inthepreparationofthecashflowsstatementtheindirect

methodwasappliedwithacomparisonofopeningbalance

sheetandclosingbalancesheet.Movementsnotresulting

in an inflow or outflow of cash were subsequently

eliminated.Informationonmovementsinthestatement

ofcashflowscanlargelybederivedfromthestatements

ofmovementsintherelevantbalancesheetitems.

(23) Related parties

GasterraandEBNarerelatedparties.EBNhas69(2015:

68)gassalescontractswithGasTerra.Ofthenetsalesof

EUR3,094million,EUR1,001millionisrealisedthrough

GasTerra(2015:EUR4,766millionrespectively.EUR1,548

million). The receivables in 2016 include an amount of

EUR 112million (2015: EUR 124million) for supplies to

GasTerra.

Together with the Nederlandse Aardolie Maatschappij

B.V.(NAM)EBNenteredintoaDepositandLoanFacility

Agreement with GasTerra. Under this agreement,

GasTerracanproposetoEBNandNAM(asjointparties)

placingasumofmoneywithEBNandNAMforaperiodof

from3daysto3monthsasafixedtermdeposit.GasTerra

can also request a loan from EBN and NAM (as joint

parties) for a similar term under this agreement. For

furtherinformation,pleaserefertonote17.

The State as a shareholder is classed as an associated

party.Alllevies,corporationtaxesandnetprofitsarepaid

totheState.Moreinformationcanbefoundinnotes3,15

and19inthesefinancialstatements.


NOGAT and NGT-Extensie as associates are classed as

relatedparties.EBNpaystransportcoststoNOGATand

NGT-Extensie in the framework of its joint operations.

Thishappensinordinarycourseofbusinessandatmarket

conditions.

(24) Key management

The total charge for remuneration, pensions and other

salary costsof thekeymanagement (4membersof the

managementteamand5supervisorydirectors)amounted

to EUR 1.1 million in 2016 (2015: EUR 1.0 million; 4

members of the management team and 4 supervisory

directors).

The total salary costs of the executive board can be

specifiedasfollows:

inEUR 2016 2015

regularremunerations 975,663 852,331

pensions 53,292 49,417

total 1,028,954 901,728

Periodic remunerations as presented in the table above

include compensations for the capping on the pension

accrual.

During the year 2016 a settlement of EUR 330,729, in

accordancewiththelegaltransitionalcompensation,was

paidtotheformerCEOJ.D.Bokhovenforterminationof

employment.Thiswaswithdrawnfromtheprovision.In

addition, in the final settlement EUR 70,207 grosswas

paidforthe2014and2015variableremunerationandEUR

18,394ascorrectiontothecompensationforthecapping

oftheaccrualofpension.

The gross remuneration of the Supervisory Board

(excludingVAT)canbespecifiedasfollows:

inEUR 2016 2015

H.M.C.M.vanOorschot (from1January2006)

24,500 24,500

A.H.P.GratamavanAndel (from1January2006)

22,263 22,263

J.G.Huijskes (from1January2016)

20,000 -

E.M.Kneppers-Heijnert (from1January2016)

20,000 -

W.S.deVries (from1March2017)

- -

J.W.Weck (from2February2015)

20,000 18,214

R.G.M.Zwitserloot (until16April2015)

- 6,555

total 106,763 71,532

Inadditiontotheirgrosssalaryeachsupervisorydirector

receivesanexpenseallowanceofEUR2,400peryear.

Theaboveremunerationdoesnotincludetheemployer’s

shareofsocialpremiumandtaxamountingtoEUR6,583

(2015:EUR4,973).

(25) Events after the balance sheet date

There were no material events after the balance sheet

daterequiringfurtherdisclosure.

Utrecht,13March2017

Executive Board

J.W.vanHoogstraten

Supervisory Board

H.M.C.M.vanOorschot

A.H.P.GratamavanAndel(until30March2017)

J.G.Huijskes

E.M.Kneppers-Heijnert

W.S.deVries(from1March2017)

J.W.Weck


Company profit and loss account


incomefromparticipations 46 -85

otherincomeaftertax 287 535

total comprehensive income 333 450

Company balance sheet

Profitappropriation

in EUR million

assets noteyear end 2016

year end 2015

liabilities noteyear end 2016

year end 2015

non-current assets shareholder’s equity B

property,plantandequipment

10 3,167 3,731 sharecapital 128 128

associates A 395 383 retainedearnings 50 56

deferredtaxassets 6 - 178 184

3,568 4,114

provisions 16 3,188 3,122

non-current liabilities

borrowings 17 1,173 1,239

deferredtaxliabilities - 51

other 18 - 17

1,173 1,307

current assets current liabilities

inventories 12 26 32 borrowings 17 369 888

receivables 13 420 860 taxpayable 54 1

taxreceivables - 69 tradeaccountspayable 19 68 88

derivatives 20 22 30 other 19 533 176


14 1,527 661

1,995 1,652 1,024 1,153

total 5,563 5,766 total 5,563 5,766


Notes to the company financial statements

General informationEBN’s separate financial statements are prepared in

accordance with the principles for financial reporting

generally accepted in the Netherlands and the legal

stipulationsregardingthefinancialstatementsasdefined

inPart9,Book2oftheDutchCivilCode.

For the determination of the basis for the valuation of

assetsandliabilitiesanddeterminationofresultsofthe

separatefinancialstatementstheoptionprovidedforin

article 2:362(8) of the Dutch Civil Code is used. The

principles for the valuationof assets and liabilities and

determining the result of the separate financial

statementsare therefore thesameas thoseused in the

consolidated financial statements. Participationswhere

any significant influence is exerted on the commercial

and financial policy are valued on the basis of the net

assetvalue.

The consolidated financial statements are prepared in

compliance with International Financial Reporting

Standards (‘IFRS’) as adopted by the European Union

(EU-IFRS) andwith Part 9 of Book 2 of theDutchCivil

Code.Foradescriptionoftheprinciplesapplied,please

refertopages87to91.

Theseparateprofitandlossaccounthasbeenformulated

inaccordancewiththelimitationspermittedpursuantto

article2:402oftheDutchCivilCode.

A) Financial fixed assets

Financial fixed assets comprise participating interests

EUR 207 million and derivatives EUR 188 million. For

detailsofderivativespleaseseenote20.

Participatinginterestsareasfollows:

The loans have been used for the investments in the

Bergermeergasstorage.

B) Shareholder’s equity

The result after tax over 2016, after deduction of the

interimspecialprofitdistribution,isincludedintheitem

retained earningsof shareholder’s equity. For a further

explanationofshareholder’sequitywerefertonote15of

theconsolidatedfinancialstatements.

Profit distribution proposal

The General Meeting has been proposed that the net

profit as referred to in article 21.2 of EBN’s Articles of

Associationisappropriatedasfollows:EUR30millionis

addedtotheshareholder’sequityandEUR20millionis

classedasproposeddividend.

Other notes

The financial fixed assets in the separate balance sheet

includethevaluationofthe100%participationEBNCapital

B.V.,which is consolidated in the consolidatedfinancial

statements. The differences in the other items between

theconsolidatedandseparatefinancialstatementsmainly

concernthebalancesheetpositionsofEBNCapital.

The primary balance sheet positionswithin EBN Capital

areproperty,plantandequipment(EUR124million)and

theprovision fordecommissioningand restorationcosts

(EUR49million).

Giventheminimaldifferencesbetweentheotherbalance

sheet items included in the consolidated financial

statements and the separate financial statements for

furtherinformation,pleaserefertotheexplanatorynotes

totheconsolidatedfinancialstatements.Thesearesetout

onpage96to112.

inEURmillionGroup

companyAssociates Loans

2016total

Groupcompany

Associates Loans2015total

balance at 1 January

-11 86 102 177 88 86 170 344

changes - - -2 -2 - - -68 -68

profitshare 32 14 - 46 -99 14 - -85

dividendpaid - -14 - -14 - -14 - -14

balance at 31 December

21 86 100 207 -11 86 102 177


Security

EBNhas issued a liability statement for EBNCapital in

compliancewithSection2:403oftheDutchCivilCode.

Fiscal unity

EBNformsafiscalunitywithEBNCapital forcorporate

income taxandvalueadded tax.EBNand its subsidiary

togetherarejointlyandseverallyresponsibleforthetaxes

payablebythefiscalunity.Inthefinancialstatementsof

EBNCapitalB.V.thetaxburdeniscalculatedonthebasis

of the commercial result obtained by EBN Capital B.V.

EBNB.V.settlesthistaxburdenwithEBNCapitalB.V.via

thecurrentaccount.

Events after the balance sheet date

Formore information, please refer to note 25 of these

financialstatements.

Fees paid to external auditors

The cost of external auditors, PricewaterhouseCoopers

Accountants N.V., for 2016 were EUR 766,613 for audit

services (statutoryand jointoperationsaudit) (2015:EY

EUR787,000) andEUR0 for other audit services (2015:

EUR104,000).

Directors’ remuneration

Theremunerationof thedirectorsof thecompany isas

follows:

Periodic remunerations as presented in the table above

include compensations for the capping on the pension

accrual.

The variable remuneration is based on achieving the

agreedobjectivesovertheyearsunderreview.

ThebonusforA.J.Boekelmancoversthe4-monthperiod

inwhichhewasadinterimdirector.

Duringtheyear2016afeeofEUR330,729,inaccordance

with the statutory transition compensation for

termination of employment was paid to the former

director J.D. Bokhoven. In the final settlement EUR

70,207grosswaspaid foras the2014and2015variable

remuneration and EUR 18,394 as correction to the

compensationforthecappingoftheaccrualofpension.

By 2016 the remuneration to the Supervisory Board

amountedtoEUR0.1million(2015:EUR0.1million).See

note24forfurtherdetailsabouttheremunerationofthe

individualsupervisorydirectors.

Utrecht,13March2017

Executive Board

J.W.vanHoogstraten

Supervisory Board

H.M.C.M.vanOorschot

A.H.P.GratamavanAndel(totenmet30maart2017)

J.G.Huijskes

E.M.Kneppers-Heijnert

W.S.deVries(vanaf1maart2017)

J.W.Weck

2016 2015

inEUR

from1March2016

J.W. van Hoogstraten

until29February2016A.J. Boekelman

until31October2015J.D. Bokhoven

from1November2015A.J.Boekelman

until31October2015J.D. Bokhoven

regularremunerations

209,303 29,204 18.394 27,685 252,883

variabelremunerations

30,800 3,896 70,207 3,857 -

gratuity - 23,810 - - -

compensationforterminationofemployment

- - 330,729 - -

pensions 13,323 2,220 - 1,941 14,485

total 253,425 59,130 419,330 33,483 267,368


Other information

Profit appropriation

Theprofitappropriationtakesplaceinaccordancewith

theprovisionslaiddowninarticle20(2)oftheArticlesof

AssociationoftheCompanyandinaccordancewith

currentagreementswiththeshareholder.

Totheshareholder:

•eachyear,oncethefinancialstatementshavebeen

adopted,aportionoftheprofitasfinalspecial

distributionofprofits,afterdeductionofprovisional

paymentsispaidout;

•theremainderofthenetprofitismadeavailableto

theshareholder.


Report on the financial statements 2016

Our opinionInouropinion:

•theaccompanyingconsolidatedfinancialstatements

giveatrueandfairviewofthefinancialpositionofEBN

B.V.asat31December2016andofitsresultandcash

flowsfortheyearthenendedinaccordancewith

InternationalFinancialReportingStandardsasadopted

bytheEuropeanUnion(EU-IFRS)andwithPart9of

Book2oftheDutchCivilCode;

•theaccompanyingcompanyfinancialstatementsgivea

trueandfairviewofthefinancialpositionofEBNB.V.

asat31December2016andofitsresultfortheyear

thenendedinaccordancewithPart9ofBook2ofthe

DutchCivilCode.

What we have auditedWehaveauditedtheaccompanyingfinancialstatements

2016ofEBNB.V.,Utrecht(‘thecompany’).Thefinancial

statementsincludetheconsolidatedfinancial

statementsofEBNB.V.anditssubsidiaries(together:

‘theGroup’)andthecompanyfinancialstatements.

Theconsolidatedfinancialstatementscomprise:

•theconsolidatedbalancesheetasat31December2016;

•thefollowingstatementsfor2016:theconsolidated

statementofcomprehensiveincome,changesin

shareholders’equityandcashflows;and

•thenotes,comprisingasummaryofsignificant

accountingpoliciesandotherexplanatoryinformation.

Thecompanyfinancialstatementscomprise:

•thecompanybalancesheetasat31December2016;

•thecompanyprofitandlossaccountfortheyearthen

ended;

•thenotes,comprisingasummaryoftheaccounting

policiesandotherexplanatoryinformation.

Thefinancialreportingframeworkthathasbeenapplied

inthepreparationofthefinancialstatementsisEU-IFRS

andtherelevantprovisionsofPart9ofBook2ofthe

DutchCivilCodefortheconsolidatedfinancial

statementsandPart9ofBook2oftheDutchCivilCode

forthecompanyfinancialstatements.

The basis for our opinion

WeconductedourauditinaccordancewithDutchlaw,

includingtheDutchStandardsonAuditing.Our

responsibilitiesunderthosestandardsarefurther

describedinthesection‘Ourresponsibilitiesforthe

auditofthefinancialstatements’ofourreport.

Independence

WeareindependentofEBNB.V.inaccordancewiththe

‘Verordeninginzakedeonafhankelijkheidvan

accountantsbijassuranceopdrachten’(ViO)andother

relevantindependencerequirementsintheNetherlands.

Furthermore,wehavecompliedwiththe‘Verordening

gedrags-enberoepsregelsaccountants’(VGBA).

Webelievethattheauditevidencewehaveobtainedis

sufficientandappropriatetoprovideabasisforour

opinion.

Independentauditor’sreportTo:thegeneralmeetingandsupervisoryboardofEBNB.V.


Our audit approach

Overview and contextAsstatedonpage8oftheannualreportisEBNB.V.a

companythatinvestsintheexploration,extractionand

storageofgasandoilonbehalfoftheDutchState.EBN

isapartnerinparticipationwithvariousoilandgas

companies.EBN’sshareinthesejointarrangementsis

generally40%,insomecases50%,andcomprisesnon-

operatesventures(NOV’s).AspartnerEBNisinvolvedin

projectsinwhichtheyinvest,howevertheoperatoris

responsibleforthedaytodayoperations.EBN’score

activitiesareinvestinginandmanagingNOV’sandthe

developmentandapplicationofknowledgeforthese

NOV’s.EBNalsohasholdingsininfrastructure:offshore

pipelinesystemsandgasstorage,aswellasa40%

interestinGasterraB.V.Viathisgaswholesalerthegas

productionofEBNissold.

EBNisdependentonthedevelopmentofoil-andgas

prices,asaresultofwhichvolatilityintheannualresults

canoccur.Inaddition,theresultsareimpactedby

impairmentsofproperty,plantandequipmentand

earthquakerelatedexpenses.Theseaspectshave

influencedthedeterminationofourmaterialityas

describedinthesection‘Materiality’ofthisaudit

opinion.Theindicateditemshavealsobeensubjectto

specificfocusinouraudit,referenceismadetothe

section‘Keyauditmatters’ofthisauditopinion.

Thegroupcomprisesoftwocomponents,EBNB.V.and

EBNCapitalB.V.,andthereforeweconsideredourgroup

auditscopeandapproachassetoutinthescopeofour

groupauditsection.

Wedesignedourauditbydeterminingmaterialityand

assessingtherisksofmaterialmisstatementinthe

financialstatements.Inparticular,welookedatwhere

managementmadesubjectivejudgements,forexample

inrespectofsignificantaccountingestimatesthat

involvedmakingassumptionsandconsideringfuture

eventsthatareinherentlyuncertain.Inparagraph2of

thefinancialstatementsthecompanydescribesthe

areasofjudgmentinapplyingaccountingpoliciesand

thekeysourcesofestimationuncertainty.Giventhe

significantestimationuncertaintyintheimpairment

assessmentofassetsandthedeterminationofthe

provisionfordecommissioningandrestoration,costsas

aresultofearthquakesandgroundsubsidence,we

consideredthesetobekeyauditmattersassetoutinthe

keyauditmattersectionofthisreport.Furthermore,we

identifiedthevaluationoffinancialinstrumentsaskey

auditmatter.

Asinallofouraudits,wealsoaddressedtheriskof

managementoverrideofinternalcontrols,including

evaluatingwhethertherewasevidenceofbiasby

managementthatmayrepresentariskofmaterial

misstatementduetofraud.

Weensuredthattheauditteamincludedtheappropriate

skillsandcompetenceswhichareneededfortheauditof

acompanyoperatingintheenergyindustrywithnon-

operatedventureinterests.Wethereforeincluded

specialistsintheareasoftheoil&gasindustry,

treasury,ITandtaxationinourteam.

Astheauditofthefinancialstatements2016isourfirst

yearasauditorsofEBNB.V.,wehaveperformed

proceduresrelatedtothistransitioninadditiontoour

regularauditprocedures.Theseprocedurescomprise,

amongstothers:

•procedurestogainsufficientandappropriateaudit

evidencewithrespecttotheopeningbalanceper1

January2016,includingcontactwiththepredecessor

auditorandafilereviewonthe2015auditfile;

•procedurestogainanunderstandingofthecompany

anditsenvironment,includinginternalcontrolandIT

systems.Basedontheseprocedureswehaveprepared

ourriskanalysesandauditplanandsharedthiswith

EBN.


Theoutlinesofourauditapproachwereasfollows:

Materiality•Overallmateriality:€63.000.000whichrepresents4%oftheaverageprofit

beforetaxoverthecurrentfinancialyearandthepast2years,adjustedfor

impairmentsonproperty,plantandequipmentandadditionstotheprovision

forcostsrelatedtoearthquakes.

Audit scope•WehaveperformedauditproceduresonbothEBNB.V.andEBNCapitalB.V.by

whichallgroupcompanieshavebeenincludedinthescopeofouraudit.

Key audit matters•Valuationofproperty,plantandequipmentandtheunderlyingtriggering

eventanalysisincludesignificantmanagementestimates

•Determinationoftheprovisionfordecommissioningandrestoration,costsas

aresultofearthquakesandgroundsubsidenceincludesignificant

managementestimates

•Fairvalueoffinancialinstruments

Materiality

Key audit matters

Audit scope

MaterialiteitThescopeofourauditisinfluencedbytheapplicationof

materialitywhichisfurtherexplainedinthesection‘Our

responsibilitiesfortheauditofthefinancial

statements’.

Wesetcertainquantitativethresholdsformateriality.

These,togetherwithqualitativeconsiderations,helped

ustodeterminethenature,timingandextentofour

auditproceduresontheindividualfinancialstatement

lineitemsanddisclosuresandtoevaluatetheeffectof

identifiedmisstatementsonouropinion.


Basedonourprofessionaljudgement,wedetermined

materialityforthefinancialstatementsasawholeas

follows:

Wealsotakemisstatementsand/orpossible

misstatementsintoaccountthat,inourjudgement,are

materialforqualitativereasons.

Weagreedthatwewouldreportmisstatements

identifiedduringourauditabove€3.000.000aswellas

misstatementsbelowthatamountthat,inourview,

warrantedreportingforqualitativereasons.

The scope of our group auditThefinancialinformationofthisgroupisincludedinthe

consolidatedfinancialstatementsofEBNB.V.One

componentisconsolidatedbyEBNB.V.,beingEBN

CapitalB.V.Basedonthestatutoryauditrequirementof

thiscomponent,anauditoftheircompletefinancial

informationisperformed.Theseauditprocedures,as

wellastheauditofthecompletesetoffinancial

informationofEBNB.V.,areperformedbythegroup

auditteam.

Byperformingtheproceduresabovewehaveobtained

sufficientandappropriateauditevidenceregardingthe

financialinformationofthegroupasawholetoprovide

abasisforouropinionontheconsolidatedfinancial

statements.

Key audit mattersKeyauditmattersarethosemattersthat,inour

professionaljudgement,wereofmostsignificanceinthe

auditofthefinancialstatements.Wehave

communicatedthekeyauditmatterstothesupervisory

board,buttheyarenotacomprehensivereflectionofall

mattersthatwereidentifiedbyourauditandthatwe

discussed.Wedescribedthekeyauditmattersand

includedasummaryoftheauditprocedureswe

performedonthosematters.

Thekeyauditmatterswereaddressedinthecontextof

ourauditofthefinancialstatementsasawhole,andin

formingouropinionthereon.Wedonotprovidea

separateopiniononthesemattersoronspecific

elementsofthefinancialstatements.Anycommentswe

makeontheresultsofourproceduresshouldbereadin

thiscontext.

Overall group materiality €63,000,000

How we determined it 4%oftheaverageprofitbeforetaxoverthecurrentfinancialyearandthepast2years,adjustedforimpairmentsonproperty,plantandequipmentandadditionstotheprovisionforcostsrelatedtoearthquakes.Theseitemshaveareincidentalbynatureandhaveaspecificauditfocus,referto‘Keyauditmatters’.

Rationale for benchmark applied

Wehaveappliedthisbenchmark,agenerallyacceptedauditingpractice,basedonouranalysisofthecommoninformationneedsofusersofthefinancialstatements.Onthisbasiswebelievethatprofitbeforetaxisanimportantmetricforthefinancialperformanceofthecompany.TheresultofEBNdeclinedoverthepastfewyears,mainlyduetoexternalfactorsasfluctuatingoil-andgasprices.Itemslikethenumberofparticipations,transactions,financingactivitiesandtheorganisationalstructurearepartofEBN’snormalcourseofbusinessandarenotdirectlyimpactedbypriceorproducedvolumes.WethereforedeemusinganaverageprofitasthebasisforourmaterialityassessmentappropriatefortheactivitylevelofEBN.

Component materiality ThefinancialsofEBNCapitalB.V.areauditedusingthematerialityallocatedtothiscomponent,whichislessthanouroverallgroupmateriality.


Key audit matter

Valuation of property, plant and equipment and the underlying triggering event analysis include significant management estimates

Duringtheannualreviewprocessofthevaluationofassets,management

identifiedanumberoftriggeringeventsforimpairments,likethelowoil-and

gasprices.Thevaluationofproperty,plantandequipmentisalsodependenton

theeconomicallyrecoverableoilandgasreserves.Theassessmentofthe

recoverabilityofoil-andgasreservesrequiremanagementestimates.Asa

resultofthesetriggeringevents,EBNperformedanalysestoidentifypotential

impairmentsforanumberofherupstreamandmidstreamassets.Eachanalysis

includesvariousvariablesthataresubjectto(significant)estimates,including

thepriceexpectations,availablereservesandproductionprofiles,expected

operationalexpensesandwhenapplicablecapitalexpendituresandthe

discountrate.Alsorefertonote5‘Depreciation’.

Theavailableoilandgasreservesincludeacertainamountofestimation

uncertainty.Inadditiontotheimpactontherecoverableamountoftheasset,

availablereservesalsoimpacttheUnitofProduction,thebasisfor

depreciations.Asincludedin‘Keyaccountingestimatesandjudgement’,

estimatesofreservesarebydefinitioninaccurateandbasedoninterpretations

thatcan,overtime,change,onthebasisofvariousfactors.Criticalassumptions

usedintheseestimatesarethedevelopmentofgaspricesandproduction

profiles.

Wehavemarkedthisareaaskeyauditmatterastheindicatedtriggeringevents

forimpairmentsareidentified.Asaresultofthematerialimportanceofthe

property,plantandequipment,apotentialimpairmentcanhaveasignificant

impactonthefinancialstatements.Giventheanalysisofpotential

impairmentsandtheassessmentofavailableoilandgasreservesrequire

significantestimates,wehaveidentifiedaheightenedriskonanoverstated

valuationoftherelevantproperty,plantandequipment.

How our audit addressed the matter

Inourauditwehavegivenattentiontomanagements’identificationof

triggeringeventsandwehaveanalysedtheprocessforestimatingreservesand

productionprofilesandhaveevaluatedwhethertheseareclassifiedin

accordancewithPetroleumResourcesManagementSystem.Weagreeonthe

existenceofmanagementsidentifiedtriggeringevents.

Wehaveperformedsubstantiveauditprocedurestoverifytheinformationused

bymanagementandhave,usinginternalvaluationexperts,discussedand

testedthereasonablenessofestimatesandassumptionsmadebymanagement.

Wehavereceivedsufficientappropriateauditevidencesupportingthese

assumptionsandestimates,suchasobtainingproductionandcostinformation

fromoperatorsfortestingthemostimportantassumptionsandresultingfuture

cashflowsandexternaloil-andgaspricingcurvesforverificationoftheused

priceassumptions.

Withregardstotheexpecteddevelopmentofgasprices,wehaveassessedthe

futurepricecurvesandreconciledthesetoexternalsources.Wehaveevaluated

thereasonablenessofbothshorttermandlongtermprices.Wehaveperformed

areconciliationbetweentheproductionexpensesandexpectedvolumes

regardingtheproductionprofiles.Testsdidnotresultinmaterialfindings.

Wehavere-performedmanagementcalculations,usinggenerallyaccepted

valuationtechniquesandassessedtheaccuracyandcompletenessof

disclosures.Testsdidnotresultinmaterialfindings.

Finallywehaveperformedproceduresontheaccuracyofdisclosures,including

thedisclosedsensitivityanalysis.Managementsvaluationofproperty,plant

andequipmentfallswithintheacceptablerangeofresults.


Key audit matter

Determination of the provision for decommissioning and restoration, costs as a result of earthquakes and ground subsidence include significant management estimates

Thevaluationofprovisionsfordecommissioningandrestoration,costsasa

resultofearthquakesandgroundsubsidenceiscomplex,resultinginvarious

businessandauditrisks.Provisionsrelatedtothesecostsare55%(EUR3.083

million)ofEBN’sbalancesheettotal.Significantestimatesandassumptionsof

managementareneededtodeterminetheseprovisions.Themainestimatesin

theprovisionfordecommissioningandrestorationaretheexpectedcostsper

individualassetandthetimingofthedecommissioningactivities;whichis

dependentontheexpectedenddateoftheproductionofthefieldtowhichthe

assetisrelated.

Estimatesandassumptionsforcostsasaresultofearthquakescomprisethe

totalnumberofexpectedclaims,thechanceonpaymentofcompensationfor

thedecreaseinvalueofrealestate,theexpectedamountthatneedstobepaid

forbuildingnew/strengtheningofschoolsandinfrastructureandtheexpected

amountthatneedstobepaidforstrengtheningofhouses.Expectedcostsasa

resultofearthquakesaredependentoncostestimationsfromvarioussources

andtheoutcomeofongoinglegalprocedures.

Referenceismadeto‘Keyaccountingestimatesandjudgement’.


Ourauditproceduresfortheprovisionfordecommissioningandrestoration

compriseamongstotherstheevaluationofestimatesandassumptionsof

management.Wehavedonethisbyreconcilingtheinformationusedby

managementtoinformationreceivedfromoperatorsforestimatedcosts,

comparingcostestimatesbetweenoperatorsandreconcilingtoinformation

withregardstooilandgasreserves.Wehaveassessedthereasonablenessofthe

useddiscountrateandhaveevaluatedmanagementsprocessforadjusting

operatorinformationandobtainedauditevidenceforadjustmentsmade.

Wehaveverifiedcostestimatesforearthquakedamages,basedontheoperator

information,butwheremanagementdeterminesherownposition,toexternal

availableinformationfromothersources,previouspaidclaimsandEBN’s

internaltechnicalstudies.Wehavere-performedmanagements’calculations

andassessedwhethertheseareperformedinaccordancewiththestandards

andconsistentwithpriorperiods.Wehaveassessedtheacceptabilityofthe

supportinginformationfromoperatorsanddeviationsmadebyEBN,wehave

notidentifiedanymaterialfindings.


Key audit matter

Fair value of financial instruments

Weconsiderthefairvalueofderivatives,asdescribedinnote20ofthefinancial

statementswithavalueof€210million,akeyauditmatter.Thisisbasedon

thenatureoftheportfolio.Thisincludeslongterm(collateralised)cross

currencyinterestrateswapsandsomecurrencyfutures.Thevaluationofthese

instrumentsissubjectiveandcomplex,giventhevaluedependsonagreat

numberofinputfactors.Thisincludesthecurrencybasisspreads,interest

curvesandthecreditriskofEBNandhercounterparties.


WehaveassessedtheaccuracyofthevaluationmethodusedbyEBN.Tothis

endwehaveperformedanindependentvaluationoftheentireportfolioofcross

currencyinterestrateswapsandcurrencyfutures.Wehavenotidentified

materialdifferencesbetweenourindependentvaluationandthevaluationby

EBN.


Report on the other information included in the annual report

Inadditiontothefinancialstatementsandourauditor’s

reportthereon,theannualreportcontainsother

informationthatconsistsof:

•theforeword;

•aboutEBN;

•thedirectors’report;

•thereportbythesupervisoryboard;

•theotherinformation;

•asustainabilityreport;

•acorporategovernancereport;

•aglossaryandreferencelist;

•contactinformation.

Basedontheproceduresperformedassetoutbelow,we

concludethattheotherinformation:

•isconsistentwiththefinancialstatementsanddoes

notcontainmaterialmisstatements;

•containsallinformationthatisrequiredbyPart9of

Book2oftheDutchCivilCode.

Wehavereadtheotherinformation.Basedonour

knowledgeandunderstandingobtainedinourauditof

thefinancialstatementsorotherwise,wehave

consideredwhethertheotherinformationcontains

materialmisstatements.

Byperformingourprocedures,wecomplywiththe

requirementsofPart9Book2oftheDutchCivilCode

andtheDutchStandard720.Thescopeofsuch

procedureswassubstantiallylessthanthescopeofthose

performedinourauditofthefinancialstatements.

Managementisresponsibleforthepreparationofthe

otherinformation,includingthedirectors’reportand

theotherinformationpursuanttoPart9Book2ofthe

DutchCivilCode.

Report on other legal and regulatory requirements

Our appointmentWewereappointedasauditorsofEBNB.V.on

16November2015bythesupervisoryboardfollowingthe

passingofaresolutionbytheshareholdersattheannual

meetingheldon16November2015.Fromthestartof

fiscalyear2016wearetheauditorsofthecompany.

Responsibilities for the financial statements and the audit

Responsibilities of management and the supervisory board for the financial statements

Managementisresponsiblefor:

•thepreparationandfairpresentationofthefinancial

statementsinaccordancewithEU-IFRSandwithPart9

ofBook2oftheDutchCivilCode;andfor

•suchinternalcontrolasmanagementdeterminesis

necessarytoenablethepreparationofthefinancial

statementsthatarefreefrommaterialmisstatement,

whetherduetofraudorerror.

Aspartofthepreparationofthefinancialstatements,

managementisresponsibleforassessingthecompany’s

abilitytocontinueasagoingconcern.Basedonthe

financialreportingframeworksmentioned,management

shouldpreparethefinancialstatementsusingthegoing-

concernbasisofaccountingunlessmanagementeither

intendstoliquidatethecompanyortoceaseoperations,

orhasnorealisticalternativebuttodoso.Management

shoulddiscloseeventsandcircumstancesthatmaycast

significantdoubtonthecompany’sabilitytocontinueas

agoingconcerninthefinancialstatements.

Thesupervisoryboardisresponsibleforoverseeingthe

company’sfinancialreportingprocess.

Our responsibilities for the audit of the financial statements

Ourresponsibilityistoplanandperformanaudit

engagementinamannerthatallowsustoobtain

sufficientandappropriateauditevidencetoprovidea

basisforouropinion.Ourauditopinionaimstoprovide

reasonableassuranceaboutwhetherthefinancial

statementsarefreefrommaterialmisstatement.

Reasonableassuranceisahighbutnotabsolutelevelof

assurancewhichmakesitpossiblethatwemaynot

detectallmisstatements.Misstatementsmayarisedue

tofraudorerror.Theyareconsideredtobematerialif,

individuallyorintheaggregate,theycouldreasonablybe

expectedtoinfluencetheeconomicdecisionsofusers

takenonthebasisofthefinancialstatements.

Materialityaffectsthenature,timingandextentofour

auditproceduresandtheevaluationoftheeffectof

identifiedmisstatementsonouropinion.


Amoredetaileddescriptionofourresponsibilitiesisset

outintheappendixtoourreport.

TheHague,13March2017

PricewaterhouseCoopersAccountantsN.V.

Originalsignedby

I.J.C.LefebureRA

Note: This independent auditor’s report is an

unofficial translation of the report issued with

the Dutch version of the Annual report 2016 of

EBN B.V. (“Jaarverslag 2016 EBN B.V.”).


Appendix to our auditor’s report on the financial statements 2016 of EBN B.V.

Inadditiontowhatisincludedinourauditor’sreportwe

havefurthersetoutinthisappendixourresponsibilities

fortheauditofthefinancialstatementsandexplained

whatanauditinvolves.

The auditor’s responsibilities for the audit of the financial statementsWehaveexercisedprofessionaljudgementandhave

maintainedprofessionalscepticismthroughouttheaudit

inaccordancewithDutchStandardsonAuditing,ethical

requirementsandindependencerequirements.Our

objectivesaretoobtainreasonableassuranceabout

whetherthefinancialstatementsasawholearefree

frommaterialmisstatement,whetherduetofraudor

error.Ourauditconsisted,amongotherthingsofthe

following:

•Identifyingandassessingtherisksofmaterial

misstatementofthefinancialstatements,whetherdue

tofraudorerror,designingandperformingaudit

proceduresresponsivetothoserisks,andobtaining

auditevidencethatissufficientandappropriateto

provideabasisforouropinion.Theriskofnotdetecting

amaterialmisstatementresultingfromfraudishigher

thanforoneresultingfromerror,asfraudmayinvolve

collusion,forgery,intentionalomissions,

misrepresentations,ortheintentionaloverrideof

internalcontrol.

•Obtaininganunderstandingofinternalcontrolrelevant

totheauditinordertodesignauditproceduresthatare

appropriateinthecircumstances,butnotforthe

purposeofexpressinganopinionontheeffectivenessof

thecompany’sinternalcontrol.

•Evaluatingtheappropriatenessofaccountingpolicies

usedandthereasonablenessofaccountingestimates

andrelateddisclosuresmadebymanagement.

•Concludingontheappropriatenessofmanagement’s

useofthegoingconcernbasisofaccounting,andbased

ontheauditevidenceobtained,concludingwhethera

materialuncertaintyexistsrelatedtoeventsand/or

conditionsthatmaycastsignificantdoubtonthe

company’sabilitytocontinueasagoingconcern.Ifwe

concludethatamaterialuncertaintyexists,weare

requiredtodrawattentioninourauditor’sreporttothe

relateddisclosuresinthefinancialstatementsor,if

suchdisclosuresareinadequate,tomodifyouropinion.

Ourconclusionsarebasedontheauditevidence

obtaineduptothedateofourauditor’sreportandare

madeinthecontextofouropiniononthefinancial

statementsasawhole.However,futureeventsor

conditionsmaycausethecompanytoceasetocontinue

asagoingconcern.

•Evaluatingtheoverallpresentation,structureand

contentofthefinancialstatements,includingthe

disclosures,andevaluatingwhetherthefinancial

statementsrepresenttheunderlyingtransactionsand

eventsinamannerthatachievesfairpresentation.

Consideringourultimateresponsibilityfortheopinion

onthecompany’sconsolidatedfinancialstatementswe

areresponsibleforthedirection,supervisionand

performanceofthegroupaudit.Inthiscontext,wehave

determinedthenatureandextentoftheauditprocedures

forcomponentsofthegrouptoensurethatweperformed

enoughworktobeabletogiveanopiniononthefinancial

statementsasawhole.Determiningfactorsarethe

geographicstructureofthegroup,thesignificanceand/or

riskprofileofgroupentitiesoractivities,theaccounting

processesandcontrols,andtheindustryinwhichthe

groupoperates.Onthisbasis,weselectedgroupentities

forwhichanauditorreviewoffinancialinformationor

specificbalanceswasconsiderednecessary.

Wecommunicatewiththesupervisoryboardregarding,

amongothermatters,theplannedscopeandtimingof

theauditandsignificantauditfindings,includingany

significantdeficienciesininternalcontrolthatwe

identifyduringouraudit.

Weprovidethesupervisoryboardwithastatementthat

wehavecompliedwithrelevantethicalrequirements

regardingindependence,andtocommunicatewiththem

allrelationshipsandothermattersthatmayreasonably

bethoughttobearonourindependence,andwhere

applicable,relatedsafeguards.

Fromthematterscommunicatedwiththesupervisory

board,wedeterminethosemattersthatwereofmost

significanceintheauditofthefinancialstatementsof

thecurrentperiodandarethereforethekeyaudit

matters.Wedescribethesemattersinourauditor’s

reportunlesslaworregulationprecludespublic

disclosureaboutthematterorwhen,inextremelyrare

circumstances,notcommunicatingthematterisinthe

publicinterest.


Assurance report on the sustainability information 2016

Our conclusionBasedonourreview,nothinghascometoourattention

thatcausesustobelievethatthesustainability

informationasincludedintheAnnualReport2016of

EBNB.V.doesnotpresent,inallmaterialrespects,a

reliableandadequateviewof:

•thepolicyandbusinessoperationswithregardto

sustainability;and

•theeventsandachievementsrelatedtheretoforthe

yearended31December2016

inaccordancewiththesustainabilityreporting

GuidelinesversionG4ofGRIandtheinternallyapplied

reportingcriteria.

What we have reviewedThesustainabilityinformationcontainsarepresentation

ofthepolicyandbusinessoperationsofEBNB.V.,

Utrecht(hereafter:“EBN”)regardingsustainabilityand

theeventsandachievementsrelatedtheretofor2016.

Wehavereviewedthesustainabilityinformationforthe

yearended31December2016,asincludedinthe

followingsectionsintheAnnualReport2016(hereafter:

“thesustainabilityinformation”):

•Foreword(page3-7)

•AboutEBN(page8-15)

•Strategy(page18-26),withtheexceptionofparagraph

‘3.2.SWOTanddilemmas’(page20and21)and‘3.5

Trends,implications,risksandopportunities’(page26)

•Resultsfor2016(page27-50)

Thesustainabilityinformationcontainsseveral

referencestoexternalsourcesorwebsitesandareno

partofthesustainabilityinformationassessedbyus.

Thereforewedonotprovideassuranceoverinformation

outsideofthesustainabilityinformation.

The basis for our conclusionWeconductedourreviewinaccordancewithDutchlaw,

includingDutchStandard3810N‘Assurance-opdrachten

inzakemaatschappelijkeverslagen’.Thisreview

engagementisaimedtoobtainlimitedassurance.Our

responsibilitiesunderthisstandardarefurtherdescribed

inthesection‘Ourresponsibilitiesforthereviewofthe

sustainabilityinformation’ofthisAssurancereport.

Independence and quality controlWeareindependentofEBNinaccordancewiththe

‘Verordeninginzakedeonafhankelijkheidvan

accountantsbijassurance-opdrachten’(ViO)andother

relevantindependencerequirementsintheNetherlands.

Furthermorewehavecompliedwiththe‘Verordening

gedrags-enberoepsregelsaccountants’(VGBA).

Weapplythe‘Naderevoorschriftenaccountants-

kantorenterzakevanassuranceopdrachten(RA/AA)’

andaccordinglymaintainacomprehensivesystemof

qualitycontrolincludingdocumentedpoliciesand

proceduresregardingcompliancewithethical

requirements,professionalstandardsandother

applicablelegalandregulatoryrequirements.

Webelievethattheassuranceinformationwehave

obtainedissufficientandappropriatetoprovideabasis

forourconclusion.

Reporting criteriaEBNdevelopeditsreportingcriteriaonthebasisofthe

sustainabilityreportingGuidelinesversionG4ofGRI,as

disclosedinsection“Aboutthisreport”(page79–83)of

theAnnualReport2016.Theinformationinthescopeof

thisassuranceengagementneedstobereadand

understoodinconjunctionwiththesereportingcriteria.

Theexecutiveboardisresponsibleforselectingand

applyingthesereportingcriteria.Theabsenceofa

significantbodyofestablishedpracticeonwhichto

draw,toevaluateandmeasurenon-financial

informationallowsfordifferent,butacceptable,

measurementtechniquesandcanaffectcomparability

betweenentitiesandovertime.

AssurancereportoftheindependentauditorTo:theexecutiveboardofEBNB.V.


Inherent limitationsThesustainabilityinformationincludesprospective

informationsuchasexpectationsonambitions,strategy,

plans,estimatesandriskassessmentsbasedon

assumptions.Inherently,theactualresultsarelikelyto

differfromtheseexpectations,duetochangesin

assumptions.Thesedifferencesmaybematerial.Wedo

notprovideanyassuranceontheassumptionsand

achievabilityofprospectiveinformationinthe

sustainabilityinformation.

Responsibilities for the sustainability reporting and the assurance engagement

Responsibilities of the executive boardTheexecutiveboardofEBNisresponsibleforthe

preparationofthesustainabilityreportinaccordancewith

thesustainabilityreportingGuidelinesversionG4ofGRI

andtheinternallyappliedreportingcriteriaasdisclosedon

page79-83oftheAnnualReport2016,includingthe

identificationofstakeholdersandthedefinitionofmaterial

subjects.Thechoicesmadebytheexecutiveboard

regardingthescopeofthesustainabilityinformationand

thereportingpolicyaresummarizedinsection“Aboutthis

report”(page79–83).Theexecutiveboardisresponsible

fordeterminingthattheapplicablereportingcriteriaare

acceptableinthecircumstances.

Theexecutiveboardisalsoresponsibleforsuchinternal

controlasitdeterminesisnecessarytoenablethe

preparationofthesustainabilityinformationthatisfree

frommaterialmisstatement,whetherduetofraudor

errors.

Our responsibilities for the review of the sustainability information Ourresponsibilityistoplanandperformthereview

engagementtoobtainsufficientandappropriate

assuranceinformationtoprovideabasisforour

conclusion.

Thisreviewengagementisaimedatobtaininglimited

assurance.Inobtainingalimitedlevelofassurance,the

performedproceduresareaimedatdeterminingthe

plausibilityofinformationandarelessextensivethan

thoseaimedatobtainingreasonableassuranceinan

auditengagement.Theperformedproceduresinthis

contextconsistedmainlyofgatheringinformationfrom

thecompany’semployeesandapplyinganalytical

proceduressetoutinrelationtotheinformationincluded

inthesustainabilityinformation.Theassuranceobtained

inreviewengagementsaimedatobtaininglimited

assuranceisthereforesignificantlylowerthanthe

assuranceobtainedinassuranceengagementsaimedat

obtainingreasonableassurance.

Misstatementsmayariseduetofraudorerrorandare

consideredtobematerialif,individuallyorinthe

aggregate,theycouldreasonablybeexpectedtoinfluence

thedecisionsofuserstakenonthebasisofthe

sustainabilityinformation.Thematerialityaffectsthe

nature,timingandextentofourreviewandthe

evaluationoftheeffectofidentifiedmisstatementson

ourconclusion.

Procedures performedWehaveexercisedprofessionaljudgementandhave

maintainedprofessionalscepticismthroughoutthe

assuranceengagement,inaccordancewiththeDutch

Standard3810N,ethicalrequirementsandindependence

requirements.

Ourmainproceduresinclude:

•Performinganexternalenvironmentanalysisand

obtaininginsightintorelevantsocialthemesand

issues,relevantlawsandregulationsandthe

characteristicsoftheorganization.

•Evaluatingtheappropriatenessofthereportingpolicy

anditsconsistentapplication,includingtheevaluation

oftheresultsofthestakeholders’dialogueandthe

reasonablenessofmanagement’sestimates.

•Evaluatingthedesignandimplementationofthe

reportingsystemsandprocessesrelatedtothe

informationinthesustainabilityinformation.

•Interviewingrelevantstaffresponsibleforthe

sustainabilitystrategyandpolicy.

•Interviewingrelevantstaffresponsibleforproviding

theinformationinthesustainabilityreport,carrying

outinternalcontrolproceduresonthedataand

consolidatingthedatainthesustainability

information.

•Ananalyticalreviewofthedataandtrendssubmitted

forconsolidationatcorporatelevel.

•Reviewinginternalandexternaldocumentationto

determinewhetherthesustainabilityinformation,

includingthedisclosure,presentationandassertions

madeinthesustainabilityinformation,issubstantiated

adequately;

•Reconciliationofthe‘Operationalperformance

indicatorsupuntil2015’onpage42withthereports

fromtheNetherlandsEnterpriseAgency,whocollect


andconsolidatethedatabasedonstatementsreceived

fromoperators.

•Assessingtheconsistencyofthesustainability

informationandtheinformationintheAnnualReport

2016notinscopeforthisassurancereport;

•Assessingwhetherthesustainabilityinformationhas

beenprepared‘inaccordance’withtheSustainability

ReportingGuidelinesversionG4ofGRI.

TheHague,13March2017

PricewaterhouseCoopersAccountantsN.V.

Originalsignedby

I.J.C.LefebureRA

Note: This assurance report by the independent

auditor is an unofficial translation of the report

issued with the Dutch version of the Annual report

2016 of EBN B.V. (“Jaarverslag 2016 EBN B.V.”)


9. Appendices


9.1 Interaction with our stakeholders

Stakeholder Organisation Form of interaction Discussion points

National government

Shareholder:MinisterofEconomicAffairs/SecretaryGeneral

AnnualShareholdersMeetingInformalconsultationsBiennialcoordination&strategyupdate

Annualreport,results,dividendStrategyCorporategovernanceCurrentdevelopments

Policymaker:MinisterofEconomicAffairs/(Director-GeneralEnergy,TelecomandCompetition)

Regular:StrategicconsultationandExecutiveBoardconsultationMiningandgassupplysystemconsultationAd-hoc

InformationtoassessfeasibilitycomparedtoproposedenergypolicyCooperationJointarrangementsCurrentdevelopmentsDecommissioningandRe-use

Policymaker:MinisterofInfrastructureandtheEnvironment

WorkshopsInterviewAd-hoc

StructuralVisionSubsurfaceDecommissioningandRe-useMiningandwaterprotection

Local authorities Provincialandmunicipalofficials Ad-hoc ProvisionofinformationSTRONG

Regulator StateSupervisionofMines RegularmeetingsAd-hoc

Safety,efficientextraction,Decommissioningandre-use

AuthorityforConsumersandMarkets Ad-hoc Competition

Operators/licensees

OilandgascompaniesoperatingintheNetherlandsForeign(non-)operators

Regularmeetings(TCMs,OCMs)ProcessingofinvestmentproposalsStrategicmeetingsInformalcontactsWorkshopsConferences

ProjectsCooperationInvestmentsCostmanagementReservesDecommissioningandRe-useStrategyPublicsupportPromotionofexplorationpotentialintheNetherlands

BranchorganisationNOGEPA RegularmeetingsInformalcontactsReportsWorkshopsConferences

SamenwerkingKostenbeheersingOntmantelingenhergebruikStrategieMaatschappelijkdraagvlakRolvanaardgasEnergietransitieCommunicatie

Gasgebouw(NAM,GasTerra,Shell,Exxon) Regularmeetings(CVG,RVC,AGM,AC,CBM,BudgetCommission)ExpertmeetingInformalcontacts

CooperationInvestmentsCostmanagementRoleofnaturalgasEnergytransitionEarthquakes



Financial institutions

FinancersBanks/moneymarketfunds

Ad-hocAnnualmeetingVeryfrequentcontact

FinancingneedCreditconditions

Creditratingagencies AnnualreviewmeetingAd-hoc

FinancialdevelopmentsExpectation

Insurance Insurancebrokersandcompanies Ad-hoc DamageclaimsInspectionsofinstallations

Wholesale GasTerra(gasbuyer) Regularmeetings(CVG,RVC,AC,AGM)GILDE,KVGNAd-Hoc

SalespricesProcessingandtransportationLiabilityGuaranteesPublicbackingRoleofnaturalgasEnergytransition

Gas transport Gasunie/GTS RegularmeetingsGILDE,KVGNAd-Hoc

InputconditionsPublicbackingRoleofnaturalgasEnergytransition

Gas storage Taqa(Bergermeer) Regularmeetings(TCMs,OCMs)Ad-hoc

ProjectsCooperationInvestments

Gasgebouw(Norg,Grijpskerk,Alkmaar) Regularmeetings ProjectsCooperationInvestments

Buyers Olie/condensaat:Olie-engasmaatschappijen(mid-stream)

RegularmeetingsAd-Hoc

SalespricesProcessingandtransportationLiabilityGuarantees

GasEnergycompanies

Viawholesale(GasTerra) SalespricesProcessingandtransportationLiabilityGuarantees

Producers E&PservicecompaniesBranchorganisationIRO

Projectbasis(JointIndustryProjectsorJIPs)WorkshopsConferences

ProjectsCostmanagementDecommissioningandRe-use

Social organisations

NGOs Preliminary EBN’sroleandstrategyGasintheenergytransitionDecommissioningandRe-use

Drinkingwatercompanies Workshop Miningandwaterprotection



Residents LocalresidentparticipationsInterestgroups

Viaoperators ImpactonsurroundingsofdrillingandproductionsitesSafetyandpossibledamageUseandneedInvolvementindecisionmakingLocalconcessions

Knowledge and training centres

Knowledgecentres:CIEP,EAE,TNO

ManagementofTKI-GasSupervisoryCommittee(EAE)StrategicAdvisoryBoard(EAE)RegularmeetingsJIPs(TNO)Ad-Hoc

CooperationTKIprojects

Trainingcentres:UniversitiesTrainingcentresStudents

StudentconferenceMsc.InternshipsEBN3TechnicalUniversities,UU,VUA,RUG,Leeds,Durham)WorkshopsVeerstichting

EnergyTransition(EnergyTransitionScholarship)Socialtrade-offsaroundprojects(AllEnergyDay2016)CareeropportunitiesDecommissioningandRe-use

Employees HR:GPTW,InContext,

Arbobutler,

AWVN(branchorg.),lawyers,taxadvice,TrainingandeducationinstitutesBerenschot

Fourtimesayear,townhallSurveys360,teamdays,personalitytestsSicknessabsenteeismguidance,coaching,advice,PMO,workplaceresearchLabourmarketdevelopmentConsultationCoaching,guidance

Advice,projectguidance

SatisfactionWellbeing

Physicalandmentalwell-being,complaints.

Socialdevelopments

Trainingandcourses

Implementationstrategy

WorksCouncil SurveyAd-hocRegularmeetingswithdirector

EmployeefacilitiesRecalibrationofstrategyReportingStaffwelfareVacanciesandstaffturnover


EBN’s key stakeholders

Po

licy Dutch State

upstream

Knowledge and education institutions

Financial institutions

Wholesale

Gas transport

Gas storage

Buyers

EBN employees

Operators

Supply and services

Social organisations Local authoritiesLocal residents

Supervision

midstream

Politics

downstream

En

viron

men

tO

il and

gas chain


9.2 The people of EBN

74.84

Number of FTEs employed at EBN

(average 2016)

Percentage of women

employed at EBN

(end of 2016)

How many women are there in scale 9 or higher

and/or are in hierarchical management? (compared

to the total number of employees in management

and professional positions) (end of 2016)

20%

Average age

(end of 2016)

43.7

45.1 456.6

Percentage under the age of 45

(end of 2016)

Academic

(end of 2016)

HBO

(end of 2016)

MBO

(end of 2016)

53.10% 75% 7% 17%

Average training hours per year

(end of 2016)

Total number of training days

(end of 2016)

33%


4.86%

0.79%

1.15

0.38% 3.68%

Absenteeism

(for all of 2016)

Short-term absenteeism Medium term absenteeism Medium term absenteeism

Average notification frequency

Number of externals

(average FTE 2016)

Number of trainees/graduates

(during 2016)

Number of trainees/graduates

(average FTE 2016)

4.65 18 6.57


9.3 Governance table Governance table management

Name Age Profile/specific knowledge Task at EBN Appointment term

Other activities

J.W. van Hoogstraten

52 •Degree:MiningEngineering&PetroleumExtractionatTUDelft

•Workedintheenergysectorforvariousoilandgascompanies

•MDofTAQANederland•ChairmanNOGEPA,theumbrellaorganisationofoilandgasproducersintheNetherlands

CEO:JanWillemleadsthemanagementteamandmaintainscontactswiththeSupervisoryBoardandtheshareholder.HeisalsoresponsiblefortheHR,Legal,Communication&PublicAffairsandCommercialdepartments.

1March2016–1March2020

•MemberoftheSupervisoryBoardofGasTerraB.V.

•MemberoftheBoardofDelegatedSupervisoryDirectorsofGasTerraB.V.

•MemberoftheBoardofBeheerMaatschapGroningen

•MemberoftheAdvisoryBoardofClingen-daelInternationalEnergyProgramme

•MemberoftheSupervisoryCommitteeofEnergyAcademyEurope

•MemberStrategicAdvisoryBoardTNOEnergy

A.J. Boekelman

57 •Degree:EconometricsattheUniversityofAmsterdam

•1985-1988:variouspositionsatShellinRotterdamandabroad,includingCFOofShellSurinameandGroupControllerofPDOOman.

•2000-2009workedatNuonasGroupController.

•2009-2011workedinthenon-profitsectorasaDirectorHR&FinanceatSNVOntwikkelingsorganisatie.

Finance Director:JanandhisdepartmentareresponsibleforthefinancialmanagementofEBN.ThisincludesBusinessControl,Accounting&ReportingandTreasury.JanalsomanagestheITdepartment.

From2011 •ChairmanAuditCommitteeGasTerraB.V.•BoardmemberofWorldEnergyCouncil

B.C. Scheffers

53 •Degree:GeophysicsatUtrechtUniversity•1993:Doctorateintechnicalphysics(seismology)attheTUDelft.

•From1988:variouspositionsatTNO,includingasaGeophysicist,GroupLeaderandDirector.

•2006-2007ChiefInspectoratStateSupervisionofMines

•2007-2011TechnicalManageratEBN

Director of Technology:BerendleadsateamoftechnicalspecialistsinthedepartmentsExploration,AssetSupport,Production&InfrastructureandExpertise.

From2011 •MemberoftheBoardoftheTKIGasFoundation

•MemberoftheSupervisoryBoardofStichtingDelftAardwarmteProject

•MemberoftheSocialAdvisoryBoardofearthsciencesstudiesattheUtrechtUniversity

•MemberoftheStrategicAdvisoryBoardoftheEnergyAcademyEurope

•ChairmanpartnerresearchcouncilESTRAC

T.W. Starink 57 •Degree:OffshoreGeotechnicalEngineeringattheTUDelft

•From1985to2005,heworkedinvariouspositionsforAllseas,includingasaprojectmanagerandproposalmanager.

•2006-2011BusinessLineManageratEBN

Director Asset Management:ThijsisresponsibleformanagingtheassetsofEBN,investedwiththeAssetManagementDivision.Inaddition,ThijsheadstheteamthatlooksaftertheinterestsinGasTerraandEBN’sgassupplysystem.

From2011 •MemberoftheKVGNExecutiveBoard


Governance table Supervisory Board

Name Age Profile/specific knowledge

Task at EBN Year of appoint-ment

Reappoint-ments

End of term

Other activities

H.M.C.M. van Oorschot

64 •ChairmanSB ChairmanoftheSupervisoryBoard,memberoftheauditcommitteeandmemberoftheremunerationcommittee/selectionandappointmentcommittee

2006 First:2010Second:2014

2018 •ChairmanoftheExecutiveBoardofNHTVinBreda(mainposition)

•ChairmanoftheSupervisoryBoardofLysiasAdviesB.V.

•MemberoftheSupervisoryBoardofElisabethziekenhuisTilburg

A.H.P Gratama van Andel

71 •financial-economicprofile

MemberoftheSupervisoryBoard,chairmanoftheauditcommittee,memberoftheremunerationcommittee/selectionandappointmentcommittee

2009 First:2009Second:2013

2017 •MemberoftheSupervisoryBoardofINGDutchResidentialFund

•PresidentofFoundationAveRexChriste

J.G. Huijskes 52 •profileknowledgeoftheoilandgassector

MemberoftheSupervisoryBoard,memberoftheauditcommittee,memberoftheremunerationcommittee/selectionandappointmentcommittee

2016 - 2020 -

E.M. Kneppers-Heijnert

65 •profileCommunicationandHR


2016-2020

- 2020 •ProfessorofBusinessAdministration,inparticularthelegalaspects,UniversityofGroningen

•MemberoftheSupervisoryBoardofWoltersKluwerHoldingNederlandB.V.

•PresidentAdvisoryBoardfoundationStichtingInstituutGAK

•MemberoftheboardoffoundationFondsBijzondereVoorzieningenMartiniZiekenhuisGroningen

W.S. de Vries 63 •profilefinancial-economic,knowledgeoftheoilandgassector


1 March 2017

- 2021 -

J.W. Weck 69 •Profilepublicsectororganisations


2016 - 2019 •ChairmanoftheSupervisoryBoardofEconomischeImpulsZeelandN.V.

•MemberoftheAdvisoryBoardoftheNetherlandsInstituteforNewTechnology,EconomicandSocialStudies(Nintes)

•MemberoftheBoardofD&ICompany/StichtingOpportunityinBedrijf

•MemberoftheSupervisoryBoardofStichtingEnergyPort/MaritimeCampusNetherlands

•ChairmanoftheSupervisoryBoardofStichtingBuddyNetwork


9.4 Remuneration reportThisremunerationreportcontainsanexplanationofthe

remuneration policy in 2016 for the director and the

SupervisoryBoardofEBN.

ThefollowingpersonsweredirectorofEBNin2016:

position term

A.J.Boekelman CEO(interim) 1November2015-

1March2016

J.W.vanHoogstratenCEO from1March2016

The shareholder appointedMr VanHoogstraten as of 1

March 2016 for a period of four years, after which

reappointment is possible. Simultaneously with the

appointment of Mr Van Hoogstraten the shareholder

adopted the remuneration policy for the director. The

shareholder did this on the recommendation of the

Supervisory Board, where he took the advice of the

remunerationcommitteeintoaccount.TheWorksCouncil

wasalsogiventheopportunitytotakeapositiononthe

remunerationpolicy.Theremunerationpolicyadoptedin

2016bytheSupervisoryBoardwasusedtodeterminethe

remuneration and further terms and conditions of

employmentofthedirector.

In line with the remuneration policy for the director a

separateremunerationpolicywasdrawnupforthethree

directorswhoarenotstatutorydirector.Thisremuneration

report deals only with the remuneration policy for the

statutorydirector.

General informationTheremunerationpolicypursuedatEBNisbasedonthe

following principles of the participations policy of the

centralgovernment:

a)Theremunerationpolicyshouldallowtheparticipations

to attract qualified directors, however, this must be

doneinanausteremanner.

b)Thetotalamountoftheremunerationisdetermined

bylookingbothattheprivateandpublicmarket;to

this end, private and public reference groups are

established,aswellastheapplicableratioofprivate

andpublicactivitiesfortherelevantparticipation.

c)Thevariableremunerationsarecappedat20%ofthe

basicsalary.

OnthebasisoftheMiningAct,amongotherthings,EBN

participates indetectionandextractionactivities foroil

orgasdepositsoffshoreandonshore.Inadditiontothe

basicprinciplesitisimportantforEBNthatthedirector

hasspecificknowledgeandexperienceintheoilandgas

sector.

The Supervisory Board in determining the total

remunerationhastakenintoaccountthattheamountof

remunerationscanbeasensitiveissueinpublicdebate,

so thatanaustere interpretation is self-evident.At the

sametime,theSupervisoryBoardintheinterestofEBN

must ensure that EBN has a director with the required

qualitiesandexperience.

Construction of remuneration packageFortheremunerationofthedirectorsofthecompanyin

2016, please see page 140 of the financial statements,

where a distinction is made between the fixed salary,

variable remuneration and any other remuneration

components.

ForthefixedannualincomeappliesthattheSupervisory

Boarddeterminesthepossibleannualgrowthofthefixed

annual income. If the maximum of the fixed annual

incomeisreached,furthergrowthislimitedtoindexation

ofthefixedannualincome.

Anyindexationtakesplaceasof2016inaccordancewith

EBN’sworkingconditionsregulations(acombinationof

the derived Consumer Price Index, indexation in the

Dutch oil and gas industry and indexation at the

shareholder). Indexationmayvarybetween0%andnot

morethanthederivedCPIrate.

Variable income

The remuneration structure also has a variable

component.Thevariableremunerationelementsamount

to a maximum of 14% of the fixed annual income if

objectives have been fully achieved. In exceptional

circumstances, the Supervisory Board may grant an

additional variable remuneration of 6%, meaning the

variable remuneration is a maximum of 20%. This

maximumvariableremunerationpolicyisinlinewiththe

participationspolicyofthecentralgovernment.

The objectives of the variable remuneration are

determined annually by the Supervisory Board. The

objectivesincludeteam-relatedobjectives(fortheentire

Executive Board) and objectives for all of EBN. The

objectives are based on the company’s strategy. The

SupervisoryBoardmakestheobjectivesbothrealisticand

challenging. The objectives should be measurable and

influenceableandarelinkedtothestrategy.Theprogress

is discussedwith theSupervisoryBoardon thebasis of

quarterlyreports.


The objectives are discussed in the remuneration

committee in thefirstquarterof theyear following the

yearwhich theobjectives refer to.After thisdiscussion

theSupervisoryBoarddeterminestheextenttowhichthe

objectives of the variable remuneration are realised.

Paymentof the variable remuneration takesplace after

theAnnualGeneralMeetingofShareholdershasadopted

thefinancialstatements.

For 2016, the remuneration committee has set the

followingobjectivesforEBN:

Fortherealisationoftheobjectivesallobjectivesmustbe

equally taken into account; the partial achievement of

objectivesispossible.Theextenttowhichthatispossible

isdeterminedbeforehand.Theremunerationcommittee

isfurtherentitledtoadjusttheoverallscorepositivelyor

negatively.Objectives1to5aredeterminedonthebasis

oftheworkprogrammeandbudgetdrawnupinDecember

2015. Objective 6 is determined by the score from the

previousyearandalowerlimitof148points.Objective7

isspecificto2016.Associalresultsinanycaseobjective1

and4aredesignated,where thesocial resultscount for

twosevenths.

The team-related objectives are derived from the EBN

objectivesandthusderivedfromthestrategy.22projects

weredesignatedfor2016.

Pension

The director participates in a pension scheme of the

GeneralPensionFundforPublicEmployees,inaccordance

withthetermsforEBNemployees.

Other fringe benefits

EBNoffersapackageoffringebenefitsthatalsoapplies

tothedirector.Nooptionrightsorsharesareallocatedto

thedirector.Thecompanyhasalsonotgiventhedirector

anyloans,advancesorguarantees.

In addition to the fringe benefits, the director has an

expense allowance and use of a car (for business and

privateuse).EBNhastakenoutadirectors’andofficers’

liabilityinsurancepolicyforthedirector.

Other principles of the remuneration policy

Appointment term

On thedirector’s appointment anappointment termof

fouryearsapplies.Reappointmentcanalwaystakeplace

eachtimeforamaximumperiodoffouryears.

Period of notice

For the director a 3 month period of notice of the

employment contract applies and for EBN a 6 month

periodofnotice.

Subject Explanation Objective

1 EBN’s profit EBN’sprofitdisplayedinmillionEUR ≥339

2 Administration costs

EBN’scostsforstaff,hiringexpertise,office,etc.showninmillionEUR

≤15.8

3 OPEX/m3 Theoperationalcostsoftheextractionofgas(including condensate)intheNetherlandsinEUR/m3

≤6.72

4 Reserves maturation small fields

Thenetsupplementation(maturation)ofgasreservesintheNetherlandsinGNm3GE.

≥9.7

5 Drilling Thenumberofexplorationdrillsinnewlocationsoffshoreoronshore.

≥3

6 Score transparency benchmark

Thetransparencybenchmarkisanannualstudyintothecontentandqualityofsocialreporting.

≥148

7 Completion of recalibration of strategy

EBNcompletesthereviewofthestrategicpriorities Yes


Severance pay

Thedirectorisonlyawardedseverancepayintheeventof

involuntary dismissal. Unless there is manifest

unreasonablenessthepayforthedirectorisamaximum

of one fixed annual income, in accordance with the

CorporateGovernanceCode.Thesaidmaximumpayment

includesthetransitionallowanceinsofarasthisisowed

to thedirectorunder theWorkandSecurityAct (WWZ)

since1July2015.

Claw back and adjustment variable remuneration

The employment contract with the director contains a

clawback clause (CorporateGovernanceCodeprovision

II.2.11)andtheemploymentcontractcontainsaprovision

under which the Supervisory Board has the power to

amendanyvariableremuneration if this leads tounfair

outcomes because of exceptional circumstances within

the performance period (Corporate Governance Code

provisionII.2.10).

Including a claw back clause is in linewith the central

government’sholdingspolicy.

Balanced composition director

The director consists of one natural person, so that a

balanceddistributionoftheseatsoftheExecutiveBoard

cannotbeapplied.

Resigning directorsMrBokhovenresignedasdirectoron1November2015.In

connection with the termination of his employment

contract, Mr Bokhoven received a severance payment

based on the statutory transitional compensation. For

informationon the total severancepaymentgo topage

115.

Variable remuneration over 2016Theremunerationcommitteetooknoteofthepreliminary

realisationof theobjectives for2016 inDecember2016.

For the team-related objectives applies that these are

almost all realised, in particular the master plan

Decommissioning and Re-use and the revision of the

strategydeservemention.Therealisationofthegeneral

EBN objectives over 2016 is determined in mid March

2017.

Remuneration of the Supervisory BoardThe remuneration of the members of the Supervisory

Board is fixed and independent of the results of the

company.Theshareholderdeterminestheremuneration

ofthemembersoftheSupervisoryBoard,simultaneously

withtheappointment.TheremunerationoftheChairman

oftheSupervisoryBoardamountstoEUR24,500peryear.

TheremunerationoftheChairmanoftheAuditCommittee

amounts to EUR 22,263 per year. The other members

receive a remuneration of EUR 20,000 per year. All

members of the Supervisory Board are entitled to

reimbursement of expenses. The remuneration of the

ChairmanoftheSupervisoryBoardandtheChairmanof

theAuditCommitteediffersfromtheothermembersof

theSupervisoryBoardbecauseof theextra tasksof the

chairman.

Noloans,advancepaymentsorguaranteeswereprovided

tothemembersoftheSupervisoryBoardbythecompany.

Aliabilityinsurancewastakenoutforthemembersofthe

SupervisoryBoard.

ThetotalremunerationoftheSupervisoryBoardfor2016

isstatedonpage112underKeyManagement.

Utrecht,13March2017

9.5 GRI-index 2016PwC has performed an assurance assignment aimed at

obtaining a limited level of assurance about the

sustainability information inEBN’s2016annual report.

For thescopeof thisassuranceassignment,we refer to

theassurance-reportof the independentaccountanton

page127-129ofthisreport.


CORE General Standard Disclosures

G4 code Disclosure/Indicator Explanation Reference Page

Strategy and analysis

G4-1 CEOStatement Foreword 3

Profile

G4-3 Organisation’sname EnergieBeheerNederlandBV Profile 8

G4-4 Primarybrands,productsand/orservices ProfileBusinessmodel

810

G4-5 LocationHeadOffice Utrecht Profile 8

G4-6 Countrieswheretheorganisationisactive TheNetherlands Profile 8

G4-7 Ownershipstructureandlegalform CorporateGovernance 64

G4-8 Markets Profile 8

G4-9 Sizeoftheorganisation Keyfigures 7

G4-10 Informationaboutsizeandfeaturesofstaffbase Non-reported:a:accordingtotypeofemploymentandgender

b:Permanentemployees:fulltimeorparttimebygender

c:Permanentandtemporaryworkersbygender

d:RegionnotapplicablesincetheNetherlandsistheworkingareaandtheheadofficeislocatedinUtrecht

e:Self-employedworkersdonotapplytoEBN,onlyemploymentrelationships

f:SeasonalworkdoesnotapplytoEBN

KeyfiguresThepeopleofEBN

For a, b and c EBN examines whether subdivision is relevant and should be included in the annual report for 2017.

743

G4-11 PercentageofemployeesunderCAO No CAO applicable

G4-12 Descriptionofthesupplychain Oilandgaschain 15

G4-13 Significantchangesduringthereportingperiodconcerningorganisationsize,structure,ownershiprelationshiporsupplychain

Nosignificantchanges




G4-14 Precautionaryprinciple:whetherandhowthisisapplied Riskmanagement 53

G4-15 Externallydevelopedeconomic,environmentalandsocialcharters,principles,orotherinitiativesthattheorganisationapprovesandendorses

EBNasastateparticipationisboundbythecharters,principlesandotherinitiativesoftheDutchstate.

G4-16 Participationin(international)associations EBNparticipatesinKVGNintheformof:financial,inputintogovernanceandKVGNworkinggroups

GovernancetableInteractionwithstakeholdersSubstantial contribution is qualitatively expressed in the investment in knowledge and hours

137-13829-33

Materiality and scope

G4-17 Legalentitiesthatarepartofthefinancialreporting(scope) FinancialStatements 84-129

G4-18 Processcontentprovisionandhowthereportingprinciplesareapplied

Aboutthisreport 79-83

G4-19 Materialaspects MaterialaspectsAboutthisreport

24-2579-83

G4-20 Boundaryofmaterialaspectswithintheorganisation Aboutthisreport:choiceofissues,table

79-8381

G4-21 Boundaryofmaterialaspectsoutsidetheorganisation Aboutthisreport:choiceofissues,table

79-8381

G4-22 Restatementsofinformationcomparedtopreviousreports Norevisedinformation Aboutthisreport 79-83

G4-23 Changessignificantinscopeandboundarythatmayrestrictcomparabilitywithpreviousreports

Changesareexplainedinthetextorasafootnotetotable/chart

Stakeholder engagement

G4-24 Listofstakeholders OurstakeholdersAnnex9.1:TableInteractionwithourstakeholders

131-134

G4-25 Identificationandselectionofstakeholders Ourstakeholders 29-33

G4-26 Howdoestheorganisationinvolvestakeholders,bytype,andhowoften

Annex9.1:TableInteractionwithourstakeholders

131-134

G4-27 Themainsubjectsandissuesthathaveemergedthroughtheinvolvementofstakeholdersandhowtheorganisationhasresponded

Interactionwithourstakeholders,differentdialoguesperstrategicthemeAnnex9.1:TableInteractionwithourstakeholders

29-33

131-134




Reporting parameters

G4-28 Reportingperiod 1January2016-31December2016

G4-29 Dateofmostrecentreport Annualreport2015

G4-30 Reportingcycle Calendaryear

G4-31 Contactinformation Credits 153

G4-32 a.The‘inaccordance’optionthatischosenb.ReferencetoGRIContentIndexc.ReferencetoAssuranceReport

AccordingtotheGRI-G4guidelinesat

application-levelCORE

AssurancereportAboutthisReport

127-12979-83

G4-33 Assurancepolicy Aboutthisreport 79-83

Governance

G4-34 Governancestructure Corporategovernance 64-69

Ethics and integrity

G4-56 Internallydevelopedmissions,codesofconduct,declarationsof

principlerelevanttoeconomic,environmentalandsocial

performanceandthestatusofimplementation

Integrity 68-69


Specific Standard Disclosures

IndicatorDescription

Materiality + definition Demarcation*Reference, DMA and performance

Page

Economic

Economic performance EBN/O

DMAa.Statewhytheissueismaterialandtheimpactoftheissue.

b.Statehowtheorganisationhandlesthematerialissueandimpactofit.

c.Evaluationofthemanagementapproach

Creationofeconomicvalue StrategyBusinessmodelResultsRiskmanagementInteractionwithstakeholders

231127-5053-5729-33

G4-EC1Directeconomicvalue

CreationofeconomicvalueOptimisingfinancialresults,suchasnetincome,naturalgasincome,sales,investmentanddepreciation.

Economicandsocialresultsparagraph4.4.4–4.4.6FinancialStatementsSectorDisclosureOil&Gas:EBNonlymakespaymentstotheDutchstate.

43-46

45-4684-129

Reserves EBN/O




Effectiveoilandgasexplorationandextraction StrategyBusinessmodelResultsInteractionwithstakeholders

231127-4729-33

OG1Volumeandtypeoftheexpectedandprovenreservesandproduction

EffectiveoilandgasexplorationandextractionWorkingtowardstheeffectivedetectionandextractionofoilandgas(includingoptimisationofinfrastructure)throughdeploymentofNOVmanagementandowninvestigations.

Technicalresults 33-42





Page

Intellectual




InnovationCollectingandbringingknowledgeDevelopmentnewenergy

StrategyBusinessmodelResultsInteractionwithstakeholders

231127-4729-33

OG2Totalinvestedinrenewableenergy

InnovationThesmarterandmoredurabledevelopmentofexistingandnewpotential,byprivateresearchandbyworkingwithpartnersandresearchinstitutions.

EBN TechnicalresultsQualitatively expressed in the investment in knowledge and hours

33-42


CollectingandbringingknowledgeTheactivesharingofknowledgeinpartnershipsandknowledgenetworks,includingbystudiessuchasBOONandFocusonDutchOil&Gas;retrievingknowledgefromchainpartnersthroughpartnershipsandknowledgenetworks.

EBN/O TechnicalresultsQualitatively expressed in the investment in knowledge and hours

33-42


DevelopmentnewenergyExploringopportunitiesforthedevelopmentofnewenergyandstoragethereof,suchasgeothermalenergy,CCSandCAES.

EBN/O TechnicalresultsQualitatively expressed in the investment in knowledge and hours

33-42

Social: employer

Training and education




Attractanddeveloptalent BusinessmodelThepeopleofEBNInteractionwithstakeholders

1143-4529-33





Page

G4-LA9Averagenumberoftraininghoursperemployee.

AttractanddeveloptalentFindingandhiringtalentedemployees,offeringthemgooddevelopmentopportunitiesandinspiringthematEBN.

EBN ThepeopleofEBNPartially reported: not by gender or employees category. EBN examines whether subdivision is relevant and should be included in the annual report for 2017.

43-45;135

G4-LA11Percentageofemployeesthatregularlyhasaperformance/developmentappraisal.

EBN ThepeopleofEBNPartially reported: not by gender or employees category. Since the score is 100%, the subdivision is not relevant.

43-45;135




Effectiveadviceandinfluence BusinessmodelInteractionwithstakeholders

1129-33

Ownindicatorunderdevelopment EffectiveadviceandinfluenceEncouragingemployeestoinfluencetheoperatorsthroughNOVmanagementandotherstakeholdersthroughdialogueandadvice.

EBN Reason for omission: In connection with the review of the strategic priorities of EBN there is no quantitative indicator available. EBN is examining whether a meaningful indicator can be formulated.

Social: Society

Local community




ExternalsecurityPublicbackingforourwork

StrategyInteractionwithstakeholdersResults

1129-33





Page

OwnindicatorNumber and severity of the earthquakes

ExternalsecurityPromotingagoodsafetyculture,meaningsafetyriskssuchasearthquakes,spillsandexplosionsarelimited.

EBN/O Groningenfield

G4-SO2Activitieswithsignificantandpotentialnegativeimpactonthelocalcommunity.

SupportforourworkWorkingonsupportforourwork,includingbyenvironmentalmanagement,projectswithinandoutsidethegassector;promotingEBN’scorporatesocialresponsibility.

EBN/O StrategyBusinessmodelInteractionwithstakeholdersGroningenfieldRiskmanagement




Activecontributiontothedebateontheenergytransition StrategyInteractionwithstakeholdersBusinessmodelResults

Ownindicatorunderdevelopment ActivecontributiontothedebateontheenergytransitionActivelydiscussingtheenergytransition,withboththeshareholderaswellasotherstakeholdersintheindustry,knowledgeinstitutionsandNGOs.

EBN InteractionwithourstakeholdersProspects2017Reason for omission: In connection with the review of the strategic priorities of EBN there is no quantitative indicator available. EBN is examining whether a meaningful indicator can be formulated




Decommissioningandre-use StrategyTechnicalresultsResultsInteractionwithstakeholders

OG11Numberofsitesthathavebeendecommissionedorwheredecommissioninghascommenced.

Decommissioningandre-useFacilitatingandencouragingeffectivedecommissioningandre-useofexistingcompanyinfrastructure,includingthroughthedevelopmentandimplementationofamasterplan.

EBN/O Infrastructure,Decommissioningandre-useProspects2017





Page

Environment




Sustainabilityinthevaluechain SustainabilityinthevaluechainWorkingtowardstheenvironmentalimpactofgas,includingemissionsandleaks.

2329-33

1127-47

AllenvironmentalindicatorsasstatedintheEBNSustainabilityReport2015-2016*

SustainabilityinthevaluechainWorkingtowardstheenvironmentalimpactofgas,includingemissionsandleaks.

O EBNSustainabilityReport2015-2016GRIIndex2015

Demarcation

Ownorganisation=EBNOperators=O

* As indicated in the table the EBN Sustainability Report 2015-2016 that is published on the

website is referred to for a number of indicators. This report is not parallel to the financial

year. No assurance has been received on the EBN Sustainability Report 2015-2016.

https://www.ebn.nl/publicatie/duurzaamheidsrapport-20152016/


in EUR millionIFRS2016

IFRS2015

IFRS2014

IFRS2013

IFRS2012

IFRS2011

IFRS2010

IFRS2009

IFRS2008

IFRS2007

numberofEBNparticipationsinjointoperations:-productionlicencesonshore 33 33 31 29 27 24 23 22 21 20-productionlicencesoffshore 109 109 107 106 101 101 103 103 100 95-productionlicences 46 48 55 56 48 47 48 45 41 26

sales(blnm³,100%) 46 51 66 79 73 72 80 70 73 64changein%comparedtopreviousyear(100%) -10 -22 -17 8 1 -10 14 -5 +11 -3

-salesGroningen(blnm³,EBNshare) 11 12 17 21 19 18 20 15 15 12-salessmallfields(blnm³,EBNshare) 9 9 10 11 11 12 13 14 15 15totalsales(blnm³,EBNshare) 20 21 27 32 30 30 33 29 30 27

averagesellingpriceofgas(EUR-centsperm³,35.17MJ/m³) 13.68 20.26 22.23 25.52 26.76 22.63 18.58 20.72 26.91 20.67

salesfrom:-continuingoperations 3,094 4,766 6,598 8,809 8,528 7,103 6,486 6,387 8,698 6,090-discontinuedoperations - - - - - - - - - -totalsales 3,094 4,766 6,598 8,809 8,528 7,103 6,486 6,387 8,698 6,090

changefromcontinuingoperationsin%comparedtopreviousyear -35 -28 -25 3 20 10 2 -27 43 -3

netprofitfrom:-continuingoperations 333 450 1,614 2,327 2,360 2,131 2,076 2,211 3,269 2,367-discontinuedoperationstotalprofit 333 450 1,614 2,327 2,360 2,131 2,076 2,211 3,269 2,367

netprofitfromcontinuingactivitiesin%ofsales 11 9 24 26 28 30 32 35 38 39

property,plantandequipment:-capitalexpenditureonshore 37 102 290 275 202 228 224 238 129 277-capitalexpenditureoffshore 244 462 475 377 419 383 383 475 447 405-decommissioningandre-use 4 304 211 178 -126 675 57 -163 93 137totalcapitalexpenditure 285 868 976 830 495 1,286 664 550 669 819

depreciations 490 557 652 745 617 499 462 501 494impairments 299 660 -0 -0 -0 -0 -0 -0 -0 -0

shareholder’sequity 178 184 199 219 200 204 174 158 160 162

gearingratio(%) 0 87 90 87 88 91 91 93 91 93

outsidecapital 5,458 5,644 5,465 5,309 5,565 5,684 5,146 4,520 5,386 4,664

9.6 10-Year key figures


9.7 Glossary and reference list

Fuel mix

Ratioofdifferentfuelsleadingtoaquantityofgeneratedenergy.

CCS

CO2captureandstorage(carboncaptureandstorage).

Cluster

Locationwheremultiplewellscanbedrilled.

Corporate Governance Code (former)

CodeofConductforlistedcompanies.

Corporate Governance Code (new)

TheDutchCorporateGovernanceCodeoftheMonitoringCommittee

CorporateGovernanceCode.

COSO

TheCommitteeofSponsoringOrganisationsoftheTreadwayCommission.

Dashboard

Overviewofcompany-specificperformanceindicators.

Dinantian

TheoldesteraoftheCarboniferous.

Energy mix

RatioofenergyusedbytheNetherlandsfromdifferentenergysources.

End-of-field-life

Gasandoilfieldsinthefinalphaseofproduction.

E&P

ExplorationandProduction.

EZ

MinistryofEconomicAffairs.

Fallow Acreage Covenant

Covenanttopromotethedetectionandextractionofoilandgasreservesandthe

storageofmineralsintheDutchpartofthecontinentalshelf,asagreedbetween

theMinisterofEconomicAffairsandminingcompanieswithoperationsonthe

continentalshelf,assignedon31August2010.

Fracking

Processofinjectingliquidathighpressureintosubterraneanrockscontaininggas

to‘breakopen’therocksandextractthegas.

Gas supply system

Public-privatecooperationintheMaatschapGroningenandGasTerra.

Gas hub

Thephysicalnationalandinternationalgasinfrastructure.

Gas deposit

Undergroundaccumulationofgasthatcanbeextracted.

GE

Groningenequivalent(Nm3naturalgaswithcombustionvalueof35.17MJ

at0degreesCelsiusand101.325kPa).

Gearing

Ratioofacompany’sleveloflong-termdebtcomparedtoitsequitycapital.

Geothermal Energy

Terrestrialheat.

HR

HumanResources.

ICT

Informationandcommunicationtechnology.

IFRIC

InternationalFinancialReportingInterpretationCommittee.

IFRS

InternationalFinancialReportingStandards.

IMS

Integratedmanagementsystem.

JIP

JointIndustryProject.

Cushion gas

Gasthatmustbepresentinafieldorstoragetomaintainthepressure.

LNG

Liquefiednaturalgas.

Maatschap Groningen

PartnershiptomanagetheproductionoftheGroningenfield.

Mining Act

Dutchlawcontainingrulesaboutmining,extractionandstorageofmineral

resources.


MOR + SA

ExtraProfitSchemeGroningen+StateShare.

CSR

Corporatesocialresponsibility.

NAM

NederlandseAardolieMaatschappij.

Near-field exploration

Gasexplorationnearexistingextractionlocations.

Nm3

Thestandardunitusedtomeasurenaturalgas.

NOGEPA

NederlandseOlieenGasExploratieenProductieAssociatie.

NOV management

Non-operatedventuremanagement.

Operating partner

Seeoperator.

Operator

Partyintheextractionprocessthatcarriesoutactivitiesonbehalfofpartners.

Consultation platform Gas Hub

ForumoftheDutchgovernment,gasindustryandknowledgeinfrastructuresfor

newinitiativesandstrategicissuesaboutthephysicalnationalandinternational

gasinfrastructure.

OvS

AgreementofcooperationbetweenEBNandlicenceholders

Permeability Porousness.

Thedegreetowhichasolidsubstancecanbepermeatedbyothersubstances.

PRMS

Internationalclassificationsysteminwhichthestatusandamountofoilandgas

depositsisrecorded.

Radial drilling

Radialdrilling.

ROAD

RotterdamStorageandCapturingDemonstrationproject.

Scorecard

Overviewofdepartmental-specificperformanceindicators.

Shale gas

Gasthatisextractedfromshalegasreservoirswheregasflowsoutwithdifficulty

becauseoflesserpermeabilityoftherock.

Shallow gas

Gasthatisextractedfromrelativelyshallowreservoirs(<800metres).

Sm3

Standardcubicmetre

SodM

StateSupervisionofMines.

Spot market

Marketwheresurplusesaretradedanddeficitsarecovered.Deliveryandpayment

takeplaceaftertheconclusionoftheagreementintheshortterm.

State participation

ShareholdingbytheDutchstate.

Stranded reserves or fields

which,atanytime,fortechnicaloreconomicreasonsareconsideredasnon-

extractable.

Tight gas

Gasthatisextractedfromsandstonereservoirswheregasflowsoutwithdifficulty

becauseoflesserpermeability.

TNO

NetherlandsOrganisationforappliednaturalscienceresearch.

Treasury

Managementofthecompany’smoney.

Triassic

TheTriassicisageologicalperiodthatlastedfromabout252.2to201.3million

yearsago.

TWh

Terawatthour

VPB

Corporationtax

WACC

WeightedAverageCostofCapital

Zechstein

TheZechsteinortheZechsteingroupisaunitofsedimentaryrocklayersinthe

subsurfaceoflargepartsofWesternandCentralEurope.


9.8 Contact information Hasourannualreportgotyou

thinking,raisedquestionsorinspired

you?Youcanalwayscontactustoask

questionsortoexchangeviews.

Visiting and postal address

EBN B.V.

Daalsesingel1

3511SVUtrecht

Phone:+31(0)302339001

Fax:+31(0)302339051

Mail:[email protected]

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