Norway Opens Arctic Oil Exploration in Russian Border Area

(Bloomberg) - Norway awarded licenses to 13 oil companies as it expands into an entirely new part of the Arctic Barents Sea in an area previously disputed with Russia in a bid to stimulate exploration at a time of low crude prices.

Statoil ASA, Lundin Petroleum AB and Det Norske Oljeselskap ASA were among companies that were awarded 10 licenses in the country’s 23rd round, according to a statement from the Petroleum and Energy Ministry. Other companies include Chevron Corp. and ConocoPhillips, as well as Russia’s Lukoil PJSC and LetterOne-owned DEA.

“The Barents Sea offers great, new opportunities,” Petroleum and Energy Minister Tord Lien said in the statement. “The industry’s interest in new acreage shows that the Norwegian continental shelf remains attractive. The potential is huge.”

The new licenses include blocks in the Barents Sea Southeast, an area bordering Russian waters that is the first virgin acreage to be opened to oil exploration in Norway since 1994. Western Europe’s biggest oil producer is expanding activity in the largely unexplored Barents Sea to make up for falling production from aging fields in the North Sea. Norway’s output has halved since 2000.

The awards come as the collapse of oil prices has led companies to cut investments, with authorities expecting exploration spending to fall by a third this year. The government is betting it can lure explorers impatient to search in untapped blocks after they had their driest drilling spell in almost a decade last year. Lundin, Norway’s most active explorer last year after state-controlled Statoil, has described the new blocks in the Barents Sea Southeast as “probably the best acreage being offered in Norway since the 1990s.”

The first wells could be drilled next year, Lien said.

Statoil will operate four of the new licenses and Lundin three, while both were awarded stakes in five licenses each. Statoil has committed to drill five wells in the new licenses, four of which in the Barents Sea Southeast and the first of those as soon as 2017, the company said in a separate statement.

“If we make a discovery, it may involve considerable resources,” said Jez Averty, Statoil’s head of production in Norway. “Exploring in such areas and making substantial discoveries are vital if the NCS is to maintain its production.”

Lundin’s two licenses in the Barents Sea Southeast have “billion-barrel prospectivity,” Managing Director in Norway, Kristin Faeroevik, said in another statement.

Northernmost Blocks

The 10 new licenses, which span 40 of the 57 geographical blocks that companies could apply for, also include the northernmost acreage ever awarded in Norway -- a move that ignored protests from environmental groups such as Greenpeace and opposition parties which argue drilling will occur too close to the polar ice cap.

Those blocks are located in the biggest license, PL 859, where the Statoil-led partnership has committed to drill three exploration wells, according to the ministry.

Companies that applied but weren’t awarded any licenses include BP Plc and Russia’s OAO Rosneft. Royal Dutch Shell Plc withdrew its application, saying the oil-price rout forced it to reconsider spending after its acquisition of BG Group Plc.

The Barents Sea is thought to hold almost half of Norway’s undiscovered 18 billion barrels of oil and gas, according to the Norwegian Petroleum Directorate. While less hostile than other parts of the Arctic thanks to the Gulf Stream, the Barents Sea remains a remote area with little infrastructure and only two fields in production to date: Statoil’s Snoehvit gas field and Eni SpA’s Goliat oil project.

To contact the reporter on this story: Mikael Holter in Oslo at mholter2@bloomberg.net To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net Stephen Treloar, Jonas Bergman

Copyright 2016 Bloomberg News.

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