Norway has awarded licences 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, Lundin Petroleum and Det Norske were among companies that were awarded 10 licences in the country’s 23rd round, according to the petroleum and energy ministry. Other companies include Chevron and ConocoPhillips, as well as Russia’s Lukoil and the LetterOne-owned DEA.
“The Barents Sea offers great, new opportunities,” said the petroleum and energy minister Tord Lien said. “The industry’s interest in new acreage shows that the Norwegian continental shelf remains attractive. The potential is huge.”
The new licences include blocks in the Barents Sea South-east, 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 ageing 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 South-east as “probably the best acreage being offered in Norway since the 1990s.”
The first wells could be drilled next year, Mr Lien said.
Statoil will operate four of the new licences and Lundin three, while both were awarded stakes in five licences each. Statoil has committed to drill five wells in the new licences, four of which in the Barents Sea South-east and the first of those as soon as 2017, the company said.
“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 licences in the Barents Sea South-east have “billion-barrel prospectivity”, said the managing director in Norway.
The 10 new licences, 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 and opposition parties which argue drilling will occur too close to the polar ice cap.
Three of the licences were in waters that became accessible to exploration after a border deal with Russia.
The blocks are located in the biggest licence, PL 859, where the Statoil-led partnership has committed to drill three exploration wells, according to the ministry.
Environmentalists criticised the move, with Friends of the Earth Norway saying drilling for oil in the Arctic was incompatible with the goals of last year’s climate pact in Paris.
“With this offer the government is going full throttle toward a warmer world,” the group said, demanding that the licences be withdrawn.
As part of the Paris Agreement in December, Norway pledged to reduce its greenhouse gas emissions by 40 per cent by 2030, compared with 1990 levels.
The Norwegian prime minister Erna Solberg at the time said the deal should be a “turning point” in a global transition to “low-emission societies”.
Mr Lien said: “This will contribute to employment, growth and value creation in Norway.”
The environmental group Greenpeace also criticised the awards.
“It is with shock and anger we register that Norway is violating two recent environmental agreements, just to get their hands on Arctic oil,” said the Greenpeace Norway head Truls Gulowsen.
Mr Lien said the government “is pursuing a policy that has broad support in the Norwegian parliament”.
“If the companies can’t operate safely they can’t get permission to do business, that’s the same for the North Sea and the Barents Sea,” he said, adding the Arctic exploration was in line with existing legislation.
With production declining at its North Sea fields, Norway has encouraged exploration of ice-free waters in the Barents Sea, to continue oil and gas exports that have made it one of the richest countries in the world.
Companies that applied but were not awarded any licences include BP and Russia’s Rosneft. Royal Dutch Shell withdrew its application, saying the oil-price rout forced it to reconsider spending after its acquisition of BG Group.
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’s Goliat oil project.
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