The National Energy Authority of Iceland announced the First Oil and Gas Licensing Round in Icelandic Waters today, Jan. 22, 2009. Applications for hydrocarbon exploration and production licenses on the Dreki area are now being accepted.
In the Atlantic Ocean, the Dreki area, translated "Dragon" area, is northeast of Iceland on the Jan Mayen Ridge, between Iceland and the island of Jan Mayen. With water depths ranging from 3,280 to 6,562 feet (1,000 to 2,000 meters), the area up for bids covers more than 10.5 million acres (42,700 square kilometers). In December 2007, the Icelandic government approved a proposal to offer exploration and production licenses offshore Iceland in the Dreki area.
Each block will measure approximately 96,000 acres (390 square kilometers) each, and the licenses may cover more than one block or sections of blocks. Applications for licenses can cover one or more blocks, up to five in total, covering an area no larger than 200,000 acres (800 square kilometers). The exploration and production licenses included in the round are:
The terms of the licensing include an initial 12-year exploration permit, with a potential 4-year extension; and once a field has been discovered and appraised, production licenses are available for 30 years.
Two major 2D seismic surveys have been put up for sale on the area. One is the Norwegian-Icelandic governmental survey from 1985 and 1988. The other is an InSeis speculative non-exclusive survey from 2001, which is available through Wavefield InSeis.
With recent advancements in drilling and production technologies and successes in environmentally unfriendly locations, exploration and production opportunities have become a realization in Iceland. Geophysical evidence and seismic surveys predict that the Dreki area should prove hydrocarbon-rich and is geographically similar to other productive areas. In fact, the Dreki area is one of three potential locations on the Icelandic Continental Shelf that is believed to contain commercial deposits of oil and gas, but only drilling can confirm that the Dreki area contains hydrocarbons.
"There is no assurance that producible quantities of oil and gas will be found in the Dreki area, but it is clear that considerable oil and gas discoveries could have vigorous impact on Iceland's economy," said the Icelandic Minister of Industry, Energy and Tourism Ossur Skarphendinsson about the licensing round. "The gross domestic product could increase considerably when construction and production are at their peak, and the State Treasury's revenues would similarly increase. This would therefore strengthen the nation's economic foundations; in addition, oil production would reinforce settlement in Northeast Iceland."
Iceland signed a treaty with Norway on the northernmost 30% of the area available, and on those blocks, Norway has the opportunity to acquire up to 25% interest in the license.
The licensing round closes on May 15, 2009 at 16:00 GMT.
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