The Licensing System
Norway’s offshore licensing system regulates petroleum operations and is rooted in the Petroleum Activities Act. The Ministry of Petroleum and Energy is responsible for awarding licences.
Exploration licences are non-exclusive and do not confer the right to drill. They are awarded for a specific area, covering about 500 square kilometres.
Production licences are awarded to companies which respond to an invitation to apply, and relate either to “immature” areas in a licensing round or to awards in [mature] predefined areas (APA).
A key criterion when awarding a licence is the work programme an applicant undertakes to implement. Another is the geological understanding it can document.
A production licence confers the right to prospect, drill and produce in the specified area. Applicants must document technical expertise and the financial strength to implement the work programme and possible subsequent activities.
These licences are usually awarded to groups of companies, either put together by the ministry or formed for the purpose of filing an application.
They usually run for six years, with the right to extend them for 30 years over 50 per cent of the original area – providing the work programme has been fulfilled.
The Storting has opened most of the NCS in the North and Norwegian Seas and in Barents Sea South to petroleum operations.
Instituted in 2003, the APA scheme covers all the mature areas of the NCS and its awards are made on a fixed annual cycle.
The areas regarded as immature today are primarily large parts of the Barents Sea, the deepwater areas and the northernmost regions of the Norwegian Sea.
Acreage in these regions is awarded through licensing rounds held in practice every other year, although the government is under no obligation to make awards at that interval.
The rules for the industry and for production licences are specified in the Petroleum Activities Act no 72 of 29 November 1996, regulations issued under its authority and licence terms.
Read more about the government’s exploration policy at the Ministry of Petroleum and Energy’s website.
Committee For Licensing Policy
The Norwegian Oil and Gas Association’s committee for licensing policy is intended to protect the common interests of member companies with regard to exploration, resource development and access to acreage.
The committee’s work is entrenched in the Norwegian Oil and Gas Association’s by-laws, strategy and principal responsibilities, and will be goal- and result-oriented.
It will work to secure increased access to resources and cost-effective licence terms which ensure a high and stable level of activity.
The committee will:
- work to ensure access for the industry to new and attractive exploration acreage through regular and predictable allocation schemes
- maintain a good overview of Norwegian oil and gas resources in order to assess and argue for exploration policies tailored at all times to the maturity of the NCS
- pursue a coordinatory role towards the authorities in connection with licensing rounds and regulations related to the exploration phase
- contribute actively to keeping exploration costs as low as possible through improved coordination between the individual licensees within and across licences, between licensees and the government, and between licensees and suppliers
- take the initiative on and serve as the prime mover for improvement processes, including coordination of exploration activities, collaboration within non-competitive areas of exploration operations, and by establishing a platform for benchmarking
- take the initiative and serve as the prime mover on health, safety and environmental issues related to exploration activities, and particularly seismic surveys and early environmental studies
- serve as the prime mover in promoting increased exchange of data between companies, licences and the government
- communicate clear industry views on key issues.
Through active cross-disciplinary collaboration with other committees and in close cooperation with the administration, the committee will take the following action in the specified areas:
- initiate, implement and follow up collective views and strategies
- raise shared issues with the government and other industry organisations.
Each of the member companies in the oil company branch and up to five from the supplier branch can appoint representative to the committee.
The Norwegian petroleum sector faces substantial challenges. A dramatic fall in oil production and the corresponding decline in revenues for both industry and government must be met on a number of fronts. That makes improved recovery a key area.
Norway’s oil industry and research communities have put the country in the front rank internationally through innovation and testing of ideas.
The Norwegian continental shelf is characterised by good area solutions, early water and gas injection in reservoirs, keen understanding of geology and formations, and good well design and drilling technology.
That has made Norway a world leader for recovery from offshore discoveries, with an average factor of 46 per cent. But much can still be done to extract the substantial resources which currently remain unproduced.
Time is running out for many of these measures. The industry wants to help realise the recovery potential, but this is a question not only of technical constraints but also of major and demanding political decisions.