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.
Photo: Zuma Press
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.”
“Exploration will generate activity in the short term” with the first wells planned as soon as next year, Lien said in a phone interview from Hammerfest in northern Norway. The awards are also crucial to maintain activity both for oil companies and their Norway-based suppliers beyond 2025, he 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.
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.
“We cannot risk a Deepwater Horizon in the Barents Sea,” said Truls Gulowsen, head of Greenpeace Norway. “In Paris five months ago, Norway signed up to do their part to keep the global temperature rise below 1.5 degrees. In such a scenario there is no room for Arctic oil exploration.”