UK/Norway Treaty Heralds New Era of North Sea Co-Operation

UK Energy Minister Mike O'Brien today met with his Norwegian counterpart Thorhild Widvey to mark the conclusion of detailed negotiations on the UK/Norway Framework Treaty, paving the way for unprecedented co-operation on North Sea projects between the two States.

Today's announcement from Sanderstolen, Norway, is the result of extensive bi-lateral discussions between the two Governments and effectively 'freezes' the text of the new treaty ahead of the formal signature ceremony later this year.

Mike O'Brien said:

"Today marks a real milestone in the relationship between the two States. Two years of hard work and amicable and constructive negotiation has laid the foundation for decades of mutually beneficial trade and exploitation of North Sea reserves between our two countries.

"The UK will not only benefit from the new Langeled pipeline project which can supply up to 20% of our future gas needs but Norway can be confident that it has a stable, long-term partner and outlet for its gas.

"Oil and gas companies in both the UK and Norway can now develop further lucrative cross-boundary oil and gas deals on a much clearer and faster basis.

"This is a win-win outcome for all parties.

"Today's announcement helps ensure that the huge potential that still remains for the economic recovery of hydrocarbons in the North Sea is realised. I would urge the oil and gas industry in both the UK and Norway to use this landmark announcement as the springboard on which to bring forward new projects, they need not wait for the formal signing of the Agreement.

"Indeed there is already tangible evidence that the process of co-operation is working; the dynamic approach adopted by the two Governments and the commercial participants recently enabled the development of two small oil fields, Playfair in the UK and Boa in Norway, to proceed.

"With the benefit of the Treaty we will now be able to tackle more ambitious developments and the UK and Norwegian Governments are already working hard to deliver on this. In addition, other initiatives, including cross-border Mentoring and Share fairs together with a unification of the prequalification process, are set to bring added prosperity to the Supply Chain in both countries."

In August 2002 a joint UK/Norway Pilot-Konkraft industry work group published its report 'Unlocking Value Through Working Together'. The report contained a recommendation to Government to negotiate a new framework oil and gas treaty to remove the need to negotiate a time consuming treaty each time a cross-boundary project was in prospect. The aim was to facilitate a genuine free-flow of oil and gas across the breadth of the North Sea and ensure optimal use of existing infrastructure in the North Sea, particularly since many of the areas of the North Sea are now mature provinces. Both Governments endorsed the report. The new framework treaty is one of the UK Government's commitments in its Energy White Paper published in February last year.

Both States have to abide by EU law - Norway as an EEA member and the UK as a EU member State. The challenge has been to intermesh two quite different offshore systems - the UK's mainly negotiated access regime with the Norwegian predominantly regulated system. The process was to look at 'win-win' scenarios for both States and to encapsulate these into key principles to form the basis of the new Agreement. That thinking was embraced in the 'Statement of Ministerial Key Principles' announced on 2 October 2003 in Oslo before the negotiations on the detail began.

With the conclusion of the negotiations, the English text has now been effectively 'frozen'. A Norwegian translation as an 'equally authoritative text' is being prepared and will need to be agreed between the two States. A formal signing ceremony for both these texts will then follow. Both versions will then be laid before the respective Parliaments in the usual way.

Both DTI and the Norwegian Ministry of Petroleum and Energy have made clear that industry does not have to wait for the formal conclusion of the new Agreement before bringing forward new projects. For example the Langeled South Pipeline is part of this new Agreement and in late Summer both Governments agreed a pragmatic solution for the development of two fields (Playfair and Boa - the latter field part of a bigger Norwegian Alvheim development) which had very minor extensions onto the other State's continental shelf.