1NORWAYE & P Policy OF OIL & GAS

SUBMITTED BY:ABHISHEK RAJVANSHI

2SOME AMAZING FACTS ABOUT NORWAY

98-99% of its electricity from hydroelectric power, more than any other country 

 World’s deepest underwater tunnel at 287 meters deep. One of the wealthiest countries in the world. Most peaceful country, (Global Peace Index). Food stores cannot be open on Sundays. If you need groceries

then, you have to get them at the local gas station. All prisoners in Norway have internet in their cells. Highest gasoline prices in the world at US$6.33 per gallon, even

though Norway is one the biggest exporters of oil in the world.

3Norway & its Oil Industry One of the leading petroleum exporters in the world. Gas Production were third‐largest, after Russia and Saudi

Arabia & Oil production were 8th largest in the world. Its gas exports, at 100 billion cubic metres (bcm) per

year, were the second‐highest in the world The petroleum sector is the backbone of the Norwegian

economy. In 2009, the sector generated 22% of GDP and 47% of exports

4 Where we stand! TOTAL RESOURCES

The Norwegian Petroleum Directorate's (NPD) estimate for total discovered and undiscovered petroleum resources is about 14.2 billion standard cubic metres of oil equivalents (Sm3 o.e.).

47 per cent of this has been sold and delivered. Undiscovered resources account for about 38 % of total remaining resources. World 3rd largest gas exporter after Russia & Qatar.

Source - http://www.norskpetroleum.no/en/petroleum-resources/resource-accounts-for-the-norwegian-shelf/

5What is an 'Exploration & Production - E&P'

Involves the high-risk/high-reward area

of:

finding augmenting, producing merchandising

of different types of oil and gas.

6BREAKING DOWN 'Exploration & Production - E&P'

E&P

Exploration Well Development Production Abandonment

7Ex

plor

atio

nSearch for hydrocarbons beneath the

ground

Seismologyanalysis of respondent force at the surface to

identify layers of rock that trap reservoirs of oil and natural gas.

8W

ell

Deve

lopm

ent determine the number of wells

needed to meet production requirements and the method of

extraction.

Platform construction costs are estimated with regard to the site, offshore or onshore, and designs

9Pr

oduc

tion

Liquid hydrocarbons extracted are separated from the non-saleable components such as

water and solid residuals.

Natural gas is often processed onsite while oil is piped to a refinery before being offered for

sale. 

10

Aban

donm

ent

Attempt to restore the Unproductive exploratory sites to

environmental states

11Proven Reserve

1980 1985 1990 1995 2000 2005 2010 20150

2

4

6

8

10

12

3.95

5.9

8.63

10.811.37

9.69

6.8

8

Proven Reserve

Source: BP Statistical Review 2016

(Tho

usan

d M

illion

Bar

rel)

12Production

1980 1985 1990 1995 2000 2005 2010 20150

500

1000

1500

2000

2500

3000

3500

528 823

1716

2903

33462961

2136 1948

Production

ProductionSource: BP Statistical Review 2016

(Tho

usan

d Ba

rrel D

aily

)

13Consumption & Refinery output

1980 1985 1990 1995 2000 2005 2010 20150

50

100

150

200

250

300

199 195 202 204 202224 235 234

143 151

256 251285 289

259293

Chart Title

Consumption Refinery Output

Source: BP Statistical Review 2016

(Tho

usan

d Ba

rrel D

aily

)

14Oil Vs Gas

Source:- Norwegian Petroleum Directorate

15

16

LAW & PRACTICE

17General Structure of Petroleum Ownership and Regulation

System of Petroleum Ownership

Oil and gas assets ‘owned’ by means of a licensing system.

The guiding principle, as stated in Petroleum Act : Oil and gas assets on the Norwegian Continental Shelf

(“NCS”) belong to the state.

18Regulatory BodiesNorwegian authorities regulating petroleum activities are all governmental

(no agencies with solely local powers).

The Storting (Parliament): Sets the regulatory framework for the petroleum activities.

The Government: Executive authority over the petroleum policy and

activity. Assisted by several Ministries, and underlying

Directorates

19Ministry of Petroleum and

Energy (“MPE”)

overall responsibility for managing the petroleum

resources.

The MPE ensures activities are carried out in

accordance with the policy set by the Storting

and the government

20 The Norwegian Petroleum Directorate:

Organised under the Ministry of Petroleum and Energy .

Advisory Body for the MPE. Administrative authority exploration and

production of petroleum deposits.

The Petroleum Safety Authority: Responsible for technical and operational safety as well as

for the working environment of the industry.

21The organisation of the petroleum sector also includes:

Petoro AS: State-owned company which manages the State’s Direct

Financial Interest (“SDFI”) on behalf of the State.

Gassco AS: State-owned company responsible for gas transportation from the Norwegian Continental

Shelf (NCS)

Statoil ASA, in which the state, through the MPE, has a

67% ownership stake.

22Laws and Regulations

Objective is to have a predictable and transparent framework enabling the exploration

and production (E&P) companies to make commercial decisions.

23Petroleum Act of 29 November 1996 No 72

 The award of licences.

The exploration phase.

Field development and infrastructure.

Joint activity and unitisation of fields and discoveries within different licences.

Decommissioning and cessation of petroleum activities

Provides the overall regulations and requirements for :

24Regulations of 27 June 1997 No 653 (Petroleum Regulations)

 ’regulations specifically applicable to petroleum activities’

the use of facilities by others stipulation of tariffs for certain facilities; for determining the norm price compensation to fishermen for lost fishing time at the

location. Recording and bringing ashore of scrap Interest on repayment of overpaid amounts of CO2

tax Scientific research for natural resources on the NCS

25

Approvals and permits necessary are :

Awarding exploration and production licence. Acquisition of seismic data  Exploratory drilling Plans for development and operation (PDO) Plans for field cessation (PFC).

Nature of Oil and Gas Rights

26Types of permits1. The Exploration licence (Chapter 2 , Petroleum Act)

non-exclusive right to carry out oil and gas exploration only within a discrete area and for a limited period of time.

2. The Production licence (Chapter 3, Petroleum Act)

 Exclusive right both to explore and to produce oil and gas within a discrete area for a limited period of time.

3. The Transportation system licence (Chapter 4-3, Petroleum Act)

to build and operate infrastructure for the transportation of oil and gas to the market

27Lease/Licence/Concession TermA petroleum production licence gives the licensees in the licence period:

• The exclusive right to exploration, exploration drilling and production of petroleum deposits in areas covered by the licence.

• Ownership of the petroleum which is produced.

A licence is awarded for an initial period of up to ten years which can further be extended up to 30 years.

28How are such leases, licences or concessions awarded?

Ordinary rounds

typically take place every second year and concentrate on less mature areas

Awards in pre-defined areas (APA),

takes place annually and cover mature areas

where the geology and infrastructure

are known.

can be obtained by either:

•Acquiring a participating interest from a licensee.

•Applying and being awarded a participating interest in a petroleum production licence in a licensing round

29Transfer of Rights

 parties are free to agree to transfer the interest

 transaction is subject to approval from the Ministry of Petroleum and Energy (MPE) and the Ministry of Finance

30Tax RegimeNorwegian state's income : 

Taxes paid by companies

operating within the petroleum

industry.

The state's direct and

indirect participation in

petroleum activities

31Corporate Taxation!

Petroleum activities subject to the general

corporate taxation regime

in Norway

 special petroleum tax rate is 51%.

To shield normal returns an extra

deduction, UPLIFT, is

available. = 22% of the

investment (5.5% per year of four

years)

32Indirect Taxes

VATEnvironmental taxes,

including carbon dioxide tax.Area Tax

NOK34,000 per square kilometre during the first year

NOK68,000 the second year

NOK137,000 from the third year onwards.

1 NOK = 0.12 USD

33Third Party Access to Infrastructure

• Decided by Ministry of Petroleum and Energy (MPE)

• subject to the use of the asset by a third party

• Should not restrict the needs of the owner or infrastructure.

34Foreign Investment

be granted to a body corporate or to a physical person domiciled in an European Economic Area EEA state.

foreign applicant must inform the MPE of its representative in Norway.

35Environmental, Health and Safety (EHS) Regime

Petr

oleu

m A

ct • high level of safety in exploration activities with technological development.

Wor

king

Env

iron

men

t Ac

t

• employees to perform their work in a safe and prudent manner Sh

ip S

afet

y Ac

• Safety of the transportation procedures.

36Environmental impact assessments (EIAs)

impact of the petroleum activities on trade, industry and the environment

possible risks of pollution;

any economic and social effects resulting from the petroleum activities.

37Environmental permits• Burning of gas in flares beyond

necessity is not permittedCO2 emission

• granted by the Climate and Pollution Agency (Klif) NOX emission

• Oil and chemical discharges are regulated nationally through discharge permits granted by Klif 

Produced water discharge.

• Oil discharges to sea are only allowed if a discharge permit is granted by Klif 

Oil discharge

38Decommissioning

 Licensees provides a decommissioning plan to MPE before the petroleum activities end

MPE decides what happens to the installations, facilities and pipelines after the end of petroleum activities

Further use in petroleum activities.Other uses.Complete or partial removal.Abandonment.

39 Oil and Gas prices regulation

Oil and gas prices are not regulated in Norway.

Petroleum Price Board (PPB) sets tax reference prices, also known as norm prices

40Overview

•  Legal petroleum system in Norway is especially transparent.

• The relations between the stakeholders, such as E&P companies, suppliers, authorities, financial institutions and other decision makers are tight and unconcealed.

41

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