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Property, plant and equipment | 12 Months Ended
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Dec. 31, 2020
Property, plant and equipment [abstract] |
Disclosure of property, plant and equipment [text block] | 10 Property, p lant and equipment
(in USD million) | Machinery, equipment and transportation equipment | Production plants and oil and gas assets | Refining and manufacturing plants | Buildings and land | Assets under development | Right of use assets4) | Total
Cost at 31 December 2019 | 2,818 | 179,063 | 8,920 | 909 | 10,371 | 5,339 | 207,422
Additions and transfers | 68 | 6,849 | 110 | 27 | 2,417 | 968 | 10,438
Disposals at cost | (28) | (243) | (7) | (0) | (5) | (13) | (295)
Assets reclassified to held for sale | (66) | (9,095) | 0 | (15) | (159) | 0 | (9,335)
Foreign currency translation effects | 13 | 3,781 | 214 | 7 | 429 | 75 | 4,520
Cost at 31 December 2020 | 2,806 | 180,355 | 9,238 | 929 | 13,053 | 6,370 | 212,751
Accumulated depreciation and impairment losses at 31 December 2019 | (2,395) | (125,327) | (7,051) | (475) | (892) | (1,329) | (137,469)
Depreciation | (102) | (8,240) | (248) | (23) | 0 | (874) | (9,488)
Impairment losses | (201) | (4,667) | (516) | (36) | (445) | (25) | (5,889)
Reversal of impairment losses | 0 | 218 | 0 | 0 | 0 | 0 | 218
Transfers | 18 | (68) | (1) | (0) | 41 | 0 | (10)
Accumulated depreciation and impairment on disposed assets | 27 | 231 | 7 | 0 | 1 | 11 | 278
Accumulated depreciation and impairment assets classified as held for sale | 65 | 8,373 | 0 | 12 | 75 | 0 | 8,525
Foreign currency translation effects | (9) | (2,947) | (196) | (3) | (56) | (35) | (3,244)
Accumulated depreciation and impairment losses at 31 December 2020 | (2,596) | (132,427) | (8,005) | (524) | (1,275) | (2,251) | (147,079)
Carrying amount at 31 December 2020 | 209 | 47,928 | 1,232 | 405 | 11,778 | 4,119 | 65,672
Estimated useful lives (years) | 3 - 20 | UoP1) | 15 - 20 | 20 - 332) |  | 1 - 193) |
(in USD million) | Machinery, equipment and transportation equipment | Production plants and oil and gas assets | Refining and manufacturing plants | Buildings and land | Assets under development | Right of use assets4) | Total
Cost at 31 December 2018 | 3,596 | 166,766 | 8,660 | 932 | 14,961 | 0 | 194,916
Implementation of IFRS 16 Leases | (813) | (184) | 0 | 0 | 0 | 4,989 | 3,992
Cost at 1 January 2019 | 2,783 | 166,582 | 8,660 | 932 | 14,961 | 4,989 | 198,908
Additions through business combinations | 1 | 1,706 | 5 | 0 | 381 | 0 | 2,093
Additions and transfers | 44 | 16,023 | 300 | (16) | (4,448) | 426 | 12,330
Disposals at cost | (7) | (4,911) | (0) | (7) | (59) | (35) | (5,020)
Effect of changes in foreign exchange | (2) | (337) | (44) | (0) | (464) | (41) | (888)
Cost at 31 December 2019 | 2,818 | 179,063 | 8,920 | 909 | 10,371 | 5,339 | 207,422
Accumulated depreciation and impairment losses at 31 December 2018 | (2,802) | (119,589) | (6,613) | (465) | (185) | 0 | (129,654)
Implementation of IFRS 16 Leases | 511 | 106 | 0 | 0 | 0 | (617) | 0
Accumulated depreciation and impairment losses at 1 January 2019 | (2,291) | (119,483) | (6,613) | (465) | (185) | (617) | (129,654)
Depreciation | (120) | (8,555) | (298) | (25) | 0 | (752) | (9,750)
Impairment losses | (6) | (2,430) | (178) | (3) | (707) | (26) | (3,350)
Reversal of impairment losses | 0 | 120 | 0 | 0 | 0 | 0 | 120
Transfers | 13 | (134) | (0) | 13 | 26 | 42 | (40)
Accumulated depreciation and impairment on disposed assets | 7 | 4,540 | 0 | 5 | 0 | 24 | 4,576
Effect of changes in foreign exchange | 1 | 616 | 38 | (0) | (26) | (1) | 628
Accumulated depreciation and impairment losses at 31 December 2019 | (2,395) | (125,327) | (7,051) | (475) | (892) | (1,329) | (137,469)
Carrying amount at 31 December 2019 | 423 | 53,736 | 1,870 | 434 | 9,479 | 4,011 | 69,953
Estimated useful lives (years) | 3 - 20 | UoP1) | 15 - 20 | 20 - 332) |  | 1 - 193) |
1)Depreciation according to unit of production method (UoP), see note 2 Significant accounting policies. 2)Land is not depreciated. 3)Depreciation linearly over contract period. 4)See note 22 Leases. T he carrying amount of assets transferred to Property, plant and equipment from Intangible assets in 20 20 and 201 9 amounted to USD 89 million and USD 213 million, respectively. For assets reclassified to held for sale, see note 4 Acquisitions and disposals. Net i mpairments/(reversal) of impairments
Full year | Property, plant and equipment | Intangible assets3) | Total
(in USD million) | 2020 | 2019 | 2018 | 2020 | 2019 | 2018 | 2020 | 2019 | 2018
Producing and development assets1) | 5,671 | 3,230 | (604) | 680 | 608 | 237 | 6,351 | 3,838 | (367)
Goodwill1) |  |  |  | 42 | 164 | 0 | 42 | 164 | 0
Other intangible assets1) |  |  |  | 8 | 41 | 0 | 8 | 41 | 0
Acquisition costs related to oil and gas prospects2) |  |  |  | 657 | 49 | 52 | 657 | 49 | 52
Total net impairment loss/(reversal) recognised | 5,671 | 3,230 | (604) | 1,386 | 863 | 289 | 7,057 | 4,093 | (315)
1)Producing and development assets, r efining and manufacturing plants, goodwill and other intangible assets are subject to impairment assessment under IAS 36. The total net impairment losses recognised under IAS 36 in 20 20 amount to USD 6,401 million, compared to 201 9 when the net impairment amounted to USD 4,043 million, including impairment of acquisition cost s - oil and gas prospects (intangible assets). 2)Acquisition costs related to exploration activities, subject to impairment assessment under the successful efforts method (IFRS 6). 3)See note 11 Intangible assets. For impairment purposes, the asset's carrying amount is compared to its recoverable amount. The recoverable amount is the higher of fair value less cost of disposal (FVLCOD) and estimated value in use (VIU). The base discount rate for VIU calculations is 5.0% (2019: 6%) real after tax. The discount rate is derived from Equinor's weighted average cost of capital. For projects, mainly within the NES segment, in periods with fixed low risk income a lower discount rate will be considered. A derived pre-tax di scount is in the range of 8-1 5% for E&P Norway, 5-10% for E&P International, 6-7% for E&P USA and 6-11% for MMP depending on asset specific characteristics, such as specific tax treatments, cash flow profiles and economic life. See note 2 Significant accou nting policies to the Consolidated financial statements for further information regarding impairment on property, plant and equipment. The table below describes per area the assets being impaired/(reversed) and the valuation method used to determine the r ecoverable amount; the net impairment/(reversal), and the carrying amount after impairment.
|  | At 31 December 2020 | At 31 December 2019 |
(in USD million) | Valuation method | Carrying amount after impairment | Net impairment loss/ (reversal) | Carrying amount after impairment | Net impairment loss/ (reversal) |
Exploration & Production Norway | VIU | 7,042 | 1,219 | 4,406 | 1,119 |
Exploration & Production USA - onshore1) | VIU | 4,676 | (19) | 7,509 | 1,631 |
| FVLCOD | 1,122 | 2,331 | 0 | 610 |
Exploration & Production USA - offshore Gulf of Mexico2) | VIU | 2,808 | 305 | 1,079 | 292 |
North America - offshore other areas3) | VIU | 53 | 146 | 0 | 0 |
Europe and Asia | VIU | 3,687 | 1,280 | 645 | (18) |
Marketing, Midstream & Processing | VIU | 1,297 | 824 | 65 | 178 |
| FVLCOD | 668 | 228 | 0 | 0 |
Right of use assets/Other | VIU | 265 | 36 | 0 | 26 |
Total |  | 21,619 | 6,351 | 13,704 | 3,838 |
1) Formerly named as North America - unconventional |
2) Formerly named as North America - conventional offshore US Gulf of Mexico |
3) Formerly named as North America - conventional other areas |
Exploration & Production Norway In 2020 the impairments were USD 1,219 million, mainly because of reduction in future price estimates. Negative reserve revisions and increased cost estimates added to the impairment losses. In 2019 impairment losses of USD 1,119 million were recognised. The impairments were triggered by cost increases and decreased price assumptions. The impairment amount was impacted by how tax uplift is to be included in the pre-tax net present value estima te. Exploration & Production USA - onshore In 2020 the net impairment was USD 2,31 3 million of which USD 680 million was classified as exploration expenses. The impairment losses of USD 2,547 million of which USD 7 43 million classified as exploration expenses, were caused by decreased price assumptions and a change to fair value less cost of disposal valuation in relation to held for sale classification. The impairment reversal s of USD 234 million were caused by improved production profile. In 2019 impairm ent losses of USD 2,241 million of which USD 608 million was classified as exploration expenses were recognised mainly caused by reduced long-term price assumptions and reduced fair value of one asset. Exploration & Production USA - offshore Gulf of Mexico In 2020 the impairments were USD 305 million caused by decreased price assumptions. In 2019 net impairment loss of USD 292 million was recognised due to reduced reserve estimates. Total impairments in Exploration & Production USA in the period 2007 till 2020 is USD 1 6.5 billion including impairment of goodwill of USD 1.2 billion and exploration assets USD 1.3 billion. Exploration & Production International – North America offshore other areas In 2020 the impairmen t was USD 146 million due to operational issues. Exploration & Production International – Europe and Asia In 2020 the impairments were USD 1,280 million due to decreased price assumptions and negative reserve revisions. Marketing, Midstream & Processing In 2020 the impairment losses were USD 1,0 52 million mainly due to reduced refinery margin estimates and increased cost estimates. Reduced volume-estimates from processing added to the impairment loss. In 2019 impairment loss of USD 178 million was recognised related to the South Riding Point oil terminal as a result of the damages caused by the hurricane Dorian on Bahamas. Accounting assumptions Management’s future commodity price assumptions and foreign currency assumptions are used for value-in-use impairment testing. The same assumptions are also used for evaluating investment opportunities, together with other relevant criteria, including among others robustness targets (value creation in lower commodity price scenarios). While there are inherent uncertainties in the assumptions, the commodity price assumptions as well as foreign currency assumptions reflect management’s best estimate of the price and foreign currency development over the life of the Group’s assets based on its view of relevant current circumstances and the likely future development of such circumstances, including energy demand development, energy and cl imate change policies as well as the speed of the energy transition, population and economic growth, geopolitical risks, technology and cost development, and other factors. Management’s best estimate also takes into consideration a range of external foreca sts. Following the ongoing Covid-19 pandemic, Equinor has performed a thorough and broad analysis and gained more insight into the expected development in drivers for the different commodity markets and exchange rates in which Equinor operates. Significa nt uncertainty continues to exist regarding future commodity price development due to the potential long-term impact on demand resulting from the ongoing Covid-19 pandemic and the measures taken to contain it, energy investments in the transition to a lowe r carbon economy and future supply actions by OPEC+ and other factors. The management’s analysis of the expected development in drivers for the different commodity markets and exchange rates resulted in changes in the long-term price assumptions as from th e third quarter of 2020. T he following price assumptions have been the basis for the impairment calculations. All commodity prices are on a real 2020 basis, and comparables as per year-end 2019 and until the third quarter of 2020 are given in brackets. In 2025, the oil price assumption is 65 USD/bbl (78 USD/bbl), with a further increase towards 2030. Beyond 2030, we expect a gradual decline with an estimate of 64 USD/bbl in 2040 (82 USD/bbl), w hich approximates the average price level for the period 2021-2050. In 2050, the oil prices are expected to be below 60 USD/bbl. For natural gas in the UK (NBP), some volatility is expected, where the trend is a gradual increase in prices from today’s cu rrent prices up to 6.5 USD/mmBtu in 2030 (7.7 USD/mmBtu). From 2030, we expect prices at levels sufficient to incentivise the next LNG investment cycle and a flatter price-curve, with the price gradually increasing to 7.8 USD/mmBtu close to 2040 (7.7 USD/m mBtu). Beyond 2040, a declining price trend is foreseen as the energy transition is expected to impact the demand side. For 2050, the price has been set at the pre-2035 level. Henry Hub is expected to be 3.3 USD/mmBtu in 2030 (3.7 USD/mmBtu) and gradually increasing to 3.7 USD/mmBtu in 2040 (3.7 USD/mmBtu) before gradually declining through the 2040s. Equinor has performed analys i s of the foreign currency exchange rates between NOK and other currencies, which suggests that a return to a previously assumed long-term equilibrium is less likely. This conclusion is supported by the historical 5-year average and spot prices in the currency market, as well as an expected lower oil price and increased market uncertainty. Equinor has therefore im plemented new long-term exchange rates from 2023 onwards. The NOK/USD rate has been revised to 8.5 (previously 7.0), while the NOK/EUR rate has been revised to 10.0 (from previously 9.0). During the first nine months of 2020 there was a significant drop i n the risk-free interest rates. The stock market recovery after the initial Covid-19 impact in March indicat ed a lower market risk premium. The low interest rates combined with lack of good alternative investment opportunities, channel led more funds toward s the equity market resulting in investors accepting lower return on investments, resulting in a downward shift in the estimated equity risk premium. Taking this into account, Equinor adjusted the Weighted Average Cost of Capital (WACC) for accounting purp oses, real post-tax, down from 6% to 5%. Sensitivities Commodity prices have historically been volatile. Significant downward adjustments of Equinor’s commodity price assumptions would result in impairment losses on certain producing and development assets in Equinor’s portfolio including intangible assets that are subject to impairment assessment under IAS36, while an opposite adjustment could lead to impairment-reversals. If a decline in commodity price forecasts over the lifetime of the assets were 30%, considered to represent a reasonably possible change, the impairment amount to be recognised could illustratively be in the region of USD 11 billion before tax effects. A future change in the trajectory of how the world acts with regards to implementing actions in accordance w ith the goals in the Paris agreement could, depending on the detailed characteristics of such a trajectory, have a negative impact on the valuation of Equinor’s oil and gas assets. A calculation of a possible effect of using the prices in a sustainable dev elopment scenario as estimated by the International Energy Agency (IEA) could result in an impairment of around USD 6 billion before tax. Th ese illustrative impairment sensitivit ies, both based on a simplified method, assumes no changes to input factors other than prices; however, a price reduction of 30% or those representing the Sustainable Development Scenario is likely to result in changes in business plans as well as other factors used when estimating an asset’s recoverable amount. These associated changes reduce the stand-alone impact on commodity price sensitivity. Changes in such input factors would likely include a reduction in the cost level in the oil and gas industry as well as offsetting foreign currency effects, both of which have historically occurred following significant changes in commodity prices. The illustrative sensitivities are therefore not considered to represent a best estimate of an expected impairment impact, nor an estimated impact on revenues or operating income in such a scenario. In comparison, following the amended assumptions described above in the accounting assumptions section and the decli ne in commodity prices, the impairment impact recognised is considerably lower. A significant and prolonged reduction in oil and gas prices would also result in mitigating actions by Equinor and its licence partners, as a reduction of oil and gas prices wo uld impact drilling plans and production profiles for new and existing assets. Quantifying such impacts is considered impracticable, as it requires detailed technical, geological and economical evaluations based on hypothetical scenarios and not based on e xisting business or development plans.

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