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

company activities Government activities 100 % 0 % exploration development and production Oil companies vs. the Government

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

 Total area: 1.4 mill km 2  Open for exploration drilling: 60%  Licensed: 16 % of open area The Norwegian Continental Shelf

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 AnnouncementApplicationAward Negotiation AnnouncementNomination 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 AnnouncementApplicationAward Negotiation AnnouncementNomination 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 ,-  Application deadline and time of award

The Norwegian licensing round Awards in Predefined Areas  Announced in January  Application deadline 1 October  Awards by the end of the year Barents Sea Norwegian Sea North Sea

The Norwegian licensing round AnnouncementApplicationAward Negotiation AnnouncementNomination 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 AnnouncementApplicationAward Negotiation AnnouncementNomination 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 AnnouncementApplicationAward Negotiation AnnouncementNomination 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: 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

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

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