Norway Awards 24 Oil/Gas Licenses in Barents Push

Source: Reuters 4/15/2011, Location: Europe

Norway awarded 24 oil and gas production licenses in its 21st offshore round, with an unprecedented focus on exploration in northern areas including the Barents Sea region near a big new oil discovery. Half of the licenses are in the Norwegian Sea and half in the Barents, where this month Norwegian energy champion Statoil announced the biggest oil find off Norway in a decade. Statoil's Skrugard discovery, which could hold up to 500 million barrels of oil, has rekindled industry hopes for more big finds in the Arctic Barents after years of mostly disappointing drilling results.

The awards confirmed Norway's northwards push as output from its North Sea oilfields declines, despite safety and environmental concerns after BP's deepwater well blowout in the Gulf of Mexico in April 2010. "The 21st licensing round will lay a foundation for further exploration of our least explored areas in the Barents Sea and deep-water areas in the Norwegian Sea," Petroleum and Energy Minister Ola Borten Moe said in a statement. "There is unprecedented interest in our northernmost seas," Moe said. "The present level of activity in the Barents Sea is high and increasing." Twenty-nine companies have been awarded a participating interest. Of these, 13 companies have been offered operatorships. Norway's Statoil ASA was given the most with eight, followed by GDF Suez with three and Suncor Energy and BASF's Wintershall, both with two.

Norway's powerful oil industry lobby, OLF, said it was pleased by the increase in the number of awarded licenses compared with previous rounds and that blocks around the Skrugard discovery were made available. But the fact that only a few majors took part -- Exxon Mobil, ConocoPhillips and Chevron each gained just one operatorship license -- as well as a low number of "firm well" guarantees underscored Norway's transformation into a mature oil and gas area, OLF's licensing policy head Erling Kvadsheim said.

"Norway has had a significant drop in oil production, so it's good to have more access," Kvadsheim said. "But there are few IOCs (majors) and few firm well commitments up front, signaling that this is seen as a maturing area and that the industry's belief is not as high as in past years." Statoil, by far the biggest operator offshore Norway, said it was "very pleased" with the round.

GREEN RIFT

In the first licensing round since BP's Gulf of Mexico spill, Norway said it had introduced additional requirements for deepwater, high-pressure and high-temperature reservoirs. "Under these licenses, there must be at least one competent partner in addition to the operator," the ministry said. "The partner must have drilled at least one well as an operator on the Norwegian Continental Shelf, or have similar relevant experience from another offshore petroleum province." But Norway's environmental activists were not impressed.

"We are seeing a real Arctic oil race. Norway is definitely leading in the number of proposed wells," said Truls Gulowsen of Greenpeace. He said the Norwegian government seemed to be giving in to all the oil companies' demands after handing them a rare setback earlier this year by refusing to open areas off the scenic Lofoten islands to drilling until 2013 at the earliest. He said that many of the planned licenses were in areas advised against by the Norwegian Polar Institute and the local Norwegian authorities on the Arctic archipelago of Svalbard since they were rich grounds for seabirds and fish. "The risk is that pollution will drift to the ice front. It is an extremely challenging area for ice, currents, waves and darkness," he said.


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