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
THANKINGYOU