Licensing system in Norway

Steinar Nj 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 % company activities 0%

Government activities 0%
exploration development and production

100 %

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

t me n e s a B

Total area: 1.4 mill km2

JAN MAYEN RIDGE
ic c r us t

Open for exploration drilling: 60%

70

Oc ean

BARENTS SEA
70

Licensed: 16 % of open area

NORWEGIAN SEA

Ba

se

nt e m

60

Not opened for exploration activity Not opened for exploration drilling
60

NORTH SEA
10

Opened for expl. drilling on special conditions Opened for exploration drilling
20 30

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

Awards in Predefined Areas

Announced in January Application deadline 1 October Awards by the end of the year
Barents Sea Norwegian Sea

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 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

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 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

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 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: Statoils interest

JOINT OPERATION AGREEMENT ACCOUNTING AGREEMENT

The Norwegian licensing round NPDs 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