Arctic opportunities on the Norwegian Continental Shelf
Penelope Warne
Aberdeen Press and Journal
August 6, 2012
"The Barents Sea is now a sea of opportunities," the Norwegian Minister for Petroleum and Energy, Ola Borten Moe, stated in the announcement of the 22nd licensing round on June 26.
One of the most topical issues relating to the Norwegian oil and gas industry focuses upon growing exploration, development and production opportunities for petroleum companies in the Arctic sector of the Norwegian Continental Shelf.
These growing opportunities may be attributed in part to the opening up and development of new petroleum provinces within the region, and in particular the Arctic waters of the Barents Sea, becoming available through Norway's current 22nd licensing round.
Also, following the Rosneft/Statoil agreement to enter the prequalification rounds jointly, and with Lukoil among those likely to bid, this 22nd licensing round could see two Russian oil companies enter the NCS for the very first time.
In January 2012, the Ministry of Petroleum and Energy opened the round with a total of 228 blocks and parts of blocks that had been nominated by a total of 37 companies to be included in the 22nd licensing round.
Some 107 of these were nominated by two or more companies, and the highest-ever number of blocks, no less than 181, were nominated in the Barents Sea.
Following evaluation of the proposed blocks, the ministry announced the offer of new production licenses in 86 blocks, or parts of blocks, to be awarded before summer 2013. Some 72 blocks are located in the Barents Sea and 14 are in the Norwegian Sea.
This is the largest number of blocks or parts of blocks offered in the Barents Sea since offshore licensing began, and marks an increase from the total of 51 blocks offered in the Barents Sea in the 21st licensing round. The selection of these 86 blocks highlights the Norwegian Government's desire to maintain the recent high levels of exploration in immature parts of the Norwegian Continental Shelf, while it at the same time establishes the groundwork for new, long-term activity and value creation.
One reason for such increased interest in the region may be attributed to the signing of a maritime delimitation and cooperation treaty between Norway and Russia on September 15, 2010, after 40 years of negotiations.
The treaty signifies a significant step forward in terms of ending conflict between Norway and Russia which has restricted exploration and exploitation activities in the Barents Sea and the treaty has opened up new prospective areas for exploration in eastern parts of the Norwegian Barents Sea.
The treaty includes the agreement of a final maritime delimitation line between Norway and Russia and contains provisions relating to the co-ordinated exploitation of trans-boundary hydrocarbon reserves in the Barents Sea and the Arctic Ocean.
Another reason for such increased interest in the region can be attributed to two high-impact discoveries of hydrocarbons made by Statoil in the Barents Sea over the past year - the Skrugard and Havis prospects which together have estimated recoverable reserves of some 400-600million barrels.
In addition, Statoil has identified a further four areas for exploration which it aims to pursue late this year with a view to completing in spring/early summer 2013.
The oil industry is central to the Norwegian economy, with the country being the 14th largest producer in 2011. Therefore, the 22nd licensing round is important in facilitating continued economic growth.
This round will lead to improved work on existing fields, development of discoveries, the opening of new areas and further exploration as well, as boosting the economy and securing jobs across Norway.
In terms of the current world economic climate, this is an enviable position to be in. Yet, the Norwegian Government is not approaching the new licensing round from a purely national perspective, their focus is also international.
So what does the future hold for the Norwegian Continental Shelf?
According to the US Geological Survey, as much as 13% of the world's undiscovered conventional oil and 30% of its undiscovered natural gas is held in the Arctic. The figures all point to great potential for exploration and production on the NCS.
However, it is vital that all parties involved continue to focus on prudent resource management as part of a sustainable development of the Arctic. The Arctic has hosted petroleum activities for many decades and if the current level of co-operation involving the sharing of experience is maintained, the future looks promising. We can hope to see many more high profile discoveries in the years to come.
Finally, let us consider the Arctic in general.
The region takes on a greater financial importance as new commercial opportunities, including drilling for oil and gas, are emerging in line with the ice cap reduction.
The Arctic coastal states (USA, Canada, Russia, Norway and Denmark representing Greenland) have all developed and issued national security strategies and accompanying documents that describe their national security interests and the political intentions these states wish to pursue and defend.
Probably an even more important consideration is the environmental concerns leaving the Arctic Council (comprised of Iceland, Sweden and Finland in addition to the abovementioned coastal states) with an increasing influence on Arctic matters. At a meeting last year an agreement on "Cooperation on Aeronautical and Maritime Search and Rescue in the Arctic" was signed by the Council.
This was the first legally binding agreement negotiated under the auspices of the Arctic Council. Said Council is further aiming at concluding an oil-spill prevention agreement in 2013.
Penelope Warne is head of energy at international law firm CMS Cameron-McKenna
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