Licensing system in Norway

Licensing system in Norway Steinar Njå Norwegian Petroleum Directorate

Licensing system in Norway Discretionary system • The Government invites companies to apply for exclusive rights to petroleum activities in designated blocks • Based on applications production licences are awarded • Production licence contains an exclusive right to exploration, drilling and production of petroleum within the license area • The licensee is the owner of his proportionate share of the petroleum produced

Licensing system in Norway Oil companies vs. the Government 100 % 0 % company activities Government activities 0 % 100 % development and production exploration

Licensing system in Norway Opening of new areas for exploration • Areas not opened for exploration (NPD) • Geological and geophysical data acquisition by NPD • Scientific data acquisition • Areas opened for reconnaissance (oil companies, contractors) • Seismic data, sea bed samples etc. • Impact assessment (MPE) • Environment, trade and industry, risk of pollution, economic and social effects • Ministry proposes opening of areas for licensing • Overall consideration of resource potential and impact on society • White paper to the Parliament • The Parliament opens new areas for licensing

The Norwegian Continental Shelf -30° -20° -10° 0° 10° 20° 30° 40° 50° 80° Basement JAN MAYEN RIDGE 70° Oceanic crust BARENTS SEA 70° Basement NORWEGIAN SEA Not opened for exploration activity 60° Not opened for exploration drilling 60° Opened for expl. drilling on special conditions NORTH SEA Opened for exploration drilling 10° 20° 30° RL9803006 • Total area: 1.4 mill km2 • Open for exploration drilling: 60% • Licensed: 16 % of open area

Licensing system in Norway Licensing process • Licensing strategy • Consultation • NPD • Industry • Other authorities • Nomination • Oil companies suggest blocks for licensing • Ministry announces blocks available for application • Companies apply • Pre 1999: Only single applications • Present: Groups and/or single applications • New licenses awarded by the Government

The Norwegian licensing round Announcement Nomination Announcement Application Award Negotiation NPD performs own evaluations of announced areas. This forms an important basis for the evaluation of applications.

The Norwegian licensing round Nomination • Selection of blocks in a licensing round is based on • Strategic fit • Commercial potential • Value of information • Industry interest and focus • Industry may influence the selection • Pre-nomination consultation • Nomination of specific blocks and areas • Ministry receive nominations of blocks from the companies • Ministry and NPD cooperate on evaluating the proposals • Ministry design the licensing round

The Norwegian licensing round Announcement Nomination Announcement Application Award Negotiation NPD performs own evaluations of nominated areas. This forms an important basis for the evaluation of applications.

The Norwegian licensing round Announcement of blocks and areas • Who can apply • List of blocks and areas • Conditions for the award • Negotiation issues • Award criteria • Documentation requirements • Fee for handling of an application: NOK 60 000,- • Application deadline and time of award

The Norwegian licensing round North Sea Norwegian Sea Barents Sea Awards in Predefined Areas • Announced in January • Application deadline1 October • Awards by the end of the year

The Norwegian licensing round The application • The blocks applied for • Priority • Participating interest • Operatorship ? • Exploration work obligation • Duration of initial period and extension period • Geological evaluation of the blocks applied for • Technical and economic evaluation of the blocks • Company information • Company structure • Technical expertise • Safety and working environment issues

The Norwegian licensing round Negotiation issues • Extent and content for the work commitment • Seismic • Number of wells • Duration of the initial period • Main rule: 6 (up to 10) years • Duration of the license period beyond the initial period • Main rule: 30 years after the initial period • Extent and point of time for relinquishment • Main rule: 50 % after the initial period • Geographical extent of the licence • One block • Several blocks • Part of block • Dependent on the structures

The Norwegian licensing round Award criteria • Technical expertise • Financial strength • Geological understanding • Experience • NCS or other similar areas • Other activities • If group application: composition of the group, recommended operator and collective competence

The Norwegian licensing round • The Award – single application – pre 1999 • The operator • The participating companies and their equity • The State Direct Financial Interest (SDFI) • Earlier: Statoil’s interest JOINT OPERATION AGREEMENT ACCOUNTING AGREEMENT

The Norwegian licensing round NPD’s role in the application process • Evaluation of the blocks and areas • Mapping • Prospect evaluation • Handling of the technical parts of the applications • Review geological, technical and economic evaluations • Consider companies’ technical expertise, resource management • From PSA: safety record and working environment record • Rank companies according to award criteria • Consider appropriate exploration work obligations • Input to the award process in the Ministry

License terms • License period • Work commitments • Restrictions • Partial relinquishments • State participation • Shift of operatorship

Work commitment • Seismic acquisition • Drilling of wells • Contingent wells

Summary • Exploration in phases • High authority control and participation in early phases • Discretionary system • Awards based on technical competence and financial strength • Work commitments

Licensing system in Norway