Norway Introduces New Licensing System

The Norwegian authorities have introduced new systems in connection with the annual awards in pre-defined areas (TFO). A new element is the demand for a progress plan for activities up to the submission of a plan for development and operation (PDO) within the framework of the initial period, shorter extensions of the production license and full disclosure concerning the work program in the production license.

With these demands, the authorities intend to achieve more rapid exploration and more circulation of awarded acreage in the mature areas on the shelf. The new policy instruments will also create greater transparency and predictability, while at the same time making it easier for new players who want to enter the Norwegian shelf. So far, the new system only applies to the annual awards in pre-defined areas in mature areas on the shelf, and not for the numbered licensing rounds.

On the Norwegian shelf, production licenses have normally been awarded for a period of six years, with an option for extension. The licensees in the respective license can apply to retain the license for up to four more years. After this, the period is extended by as much as 30 years for up to 50 per cent of the area, regardless of whether there are plans for development in the area. This has meant that large areas on the Norwegian shelf lie fallow, a situation which does not please the authorities.

The new arrangement, which will apply to the annual awards in mature areas, entails that the companies enter into an agreement with the authorities concerning work commitments during the course of an agreed period. If, within this period, the companies do not wish to prepare a plan for development and operation (PDO), the entire area must be relinquished. The relinquished area will then automatically become available for re-award in the next annual TFO.

The purpose of the new arrangement is to increase activity in mature areas. Some of the resources in mature areas are regarded as being time-critical. This means that the authorities believe that the resources must be proven and developed while existing infrastructure can still be used.

Another purpose is to increase the circulation of acreage on the shelf. It is often the case that an area that is relinquished by one group of companies could be interesting and attractive to other companies who look at the acreage with a new perspective.

There has long been a desire for a greater degree of openness concerning the work commitments connected with awards. Among other things, this will provide new players with insight into the demands made on companies who want to gain a place on the Norwegian shelf.

A total of 19 production licenses were awarded in TFO 2003.
Company: Norwegian Petroleum Directorate more info
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