Norway to Award Oil & Gas Drilling Licenses
The Norwegian government has announced that it will be awarding 57 new oil and gas drilling licences for the Norwegian Shelf in order to encourage oil exploration during a difficult time for the oil and gas industry. 57 licence blocks will be awarded in total, 34 of which will be in the south-eastern Barents Sea, an area which has been disputed heavily for more than forty years with Russia. The two countries resolved to split the 175,000 square kilometre area in 2009. A further 20 licences will be in other parts of the Barents Sea, and the final three licence blocks will be awarded in the Norwegian Sea. The Norwegian Ministry of Petroleum and Energy aims to award the new production licences in the first six months of 2016.
Tord Lien, Norwegian minister of petroleum and energy, said that the move will create value for Norwegian society, boost the domestic oil and gas industry and generate many employment opportunities for northern Norway as a new area of the Norwegian Shelf is opened up for the first time since 1994.
Move to Counter Fall in Brent Crude Price
Experts believe that the Norwegian government has awarded the licence blocks to combat the recent dramatic fall in the price of Brent crude oil to 49 US dollars per barrel. The drop of 55 per cent has impacted heavily on the Norwegian oil industry, affecting the profitability of all Norway’s high-cost offshore projects, many of which have already been put on hold.
By opening the Barents Sea to oil exploration, the Norwegian government hopes to ensure that the Norwegian Shelf will remain an exciting proposition for investors and that oil drilling will continue in the long term around the Norwegian coast.
The oil industry is vital to Norway’s economy, and the new licences will permit companies to set up on the Norwegian Shelf and operate in the south-eastern region of the Barents Sea.
Milestone for Norwegian Oil and Gas Industry
Tord Lien expressed his excitement about the granting of the new licences, saying that it represented a milestone in the Norwegian petroleum business.
Some of the Norwegian projects currently located in the Arctic Sea are no longer profitable at current oil prices. Rystad Energy has said that oil needs to be at least 80 US dollars a barrel if its field is to make a profit. Statoil has delayed its exploration of the Johan Castberg field in the Barents Sea because of high costs. The field is estimated to hold around 600 million barrels of oil.
The CEO of Norwegian Oil and Gas, Gro Braekken, said that it is essential the Norwegian Shelf is able to attract investors, and that this will only be possible if potential investors are able to see the area as a predictable supplier of oil and gas with a long-term future.