1. Dr Gudni A Johannesson Director General
Hydrocarbon Exploration in Iceland Policy, plans and preparations for the 1st round of exclusive licenses
Dr Gudni A Johannesson
Director General
APPEX London 5-7 March 2008

2. Overview Policy Plans Preparations for 1st round Legal framework
Licensing terms
Plans
Location
Timeframe
Preparations for 1st round
Hydrocarbon potential
Strategic environmental assessment - SEA
Tax environment

3. Legal framework
EU legislation applies in many important areas, as Iceland belongs to the European Economic Area – like Norway
EU Directive 94/22/EC on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons has been transposed into Icelandic Parliamentary Act No.13/2001on Prospecting, Exploration and Production of Hydrocarbons
Other relevant EU legislation, e.g. on health, safety and environmental issues (HSE), has been transposed into Icelandic law
Iceland has ratified the OSPAR convention and the MARPOL protocol

4. Licensing terms
Open door policy for non-exclusive prospecting licenses
Exclusive licenses for the exploration and production of hydrocarbons in the Dreki area
Duration of exploration licenses 12 years, maximum 16 years
Priority for a production license for up to 30 years
Group applications (joint ventures) are welcome
Transferable licenses (subject to permission)
Licenses may cover one or more block(s) or parts of block(s) – reference grid with 15’N-Sx20’E-W blocks
Phased work programmes negotiable
Treaty with Norway on 30% of the area, where Norway may participate with up to 25% share

5. Northern Dreki Area Location
67°N to 68°30’N
6°20’W to 11°30’W
Area 42,700 km2
Norway may participate with 25% in 30% of the area
Water depth 1,000 to 2,000 m in 80% of the area
Bergrisi
Dreki
Gammur
Iceland GeoSurvey 2008
Northern Dreki
licensing round

6. Timeframe Tentative starting date of licensing round
15 January 2009
Tentative deadline for applications
15 April 2009
Assessment of applications and subsequent negotiations expected to last 2-3 months
Strategic environmental assessment (SEA) finished, no major obstacles identified
Programme of ongoing and planned further research on natural conditions based on SEA

7. Hydrocarbon potential
Two major sources for 2D seismic reflection data that have been put up for sale
Norwegian-Icelandic governmental surveys 1985 and 1988, available from NPD in Norway
InSeis speculative non-exclusive survey 2001 available from
Wavefield-InSeis
General conclusions
The Jan Mayen ridge is a sliver of a continental crust
Sedimentary rocks are of sufficient thickness and age
Sedimentary strata pre-dating the opening of the N-Atlantic
Potential source rocks similar to E-Greenland
Potential reservoir rocks, including submarine fans
Potential traps, both structural and stratigraphic
Seismic anomalies indicating that hydrocarbons may be present

8. The Jan Mayen microcontinent
Bott 1985

9. Gunnarsson, Sand & Gudlaugsson, 1989

10. Geology of the Dreki Area
Sheet of basalt intrusives
Wedge of lava flows
Listric fault complex
Transverse structural/
volcanic high
Sills above lavas
Normal fault
Reverse fault
From Åkermoen 1989
Iceland GeoSurvey2008

11. Example of a seismic profile
Bright reflections, gas?
Shale caprock ?
Sandstone reservoir ?
Wavefield Inseis 2006

12. Strategic environmental assessment - SEA
Licensing plan has passed a SEA process
State of knowledge on: Climate including sea-ice, waves, currents, marine biology, fish stocks, mammals and birds
No major obstacles identified
Frequent fogs during summer, some occurences of icing during winter
No sea-ice under present climatic conditions

13. Tax environment
General corporate income tax 15%, the second lowest in the OECD countries
Taxes on profits and/or production fees on oil operations are under consideration
Will be determined before the licensing round begins
Clear aim to be competitive with regard to neighbouring countries

14. Summary EU-like legal framework Licensing terms flexible
Norway may participate in a certain area
License round starting in January 2009
2D seismic data available from two sources
Indications: Hydrocarbons may be present
SEA process passed successfully
Very low corporate income tax, competitive petroleum taxation under consideration