Norway Awards Arctic Oil Exploration Licences

on Jun 13, 2013

Norway awarded 24 oil and gas exploration licences, mostly in the Arctic Barents Sea, Reuters reported yesterday, June 12. The Nordic state granted licences to 29 companies, including local energy giant Statoil SA (OSL:STL, NYSE:STO), and international oil majors such as UK’s BP Plc (LON:BP, NYSE:BP). Statoil’s share price was little changed in early trading in Oslo on Thursday. BP’s share price was marginally down in London.

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**29 Companies Awarded 24 Norway Oil Licences**
As Reuters reported, Norway granted 24 licences in total to 29 companies in hopes of reviving oil production which was on track to fall to a 25-year low in 2013. Most of the licences are in the Arctic Barents Sea with the government having estimated that the region, including the eastern edge along Norway’s border with Russia, holds 7.9 billion barrels of oil equivalent in undiscovered oil and gas. Harsh weather conditions and a lack of existing infrastructure however make development difficult and costly.

Statoil was among the biggest winners, walking away with seven Norway oil licences, with three of them being Statoil-operated. “There was strong and wide competition in this licensing round with participation of international oil majors in addition to smaller companies,” Gro Gunleiksrud Haatvedt, Statoil’s senior vice president for exploration, said in a company statement.

As Reuters reported, Italy’s Eni SpA (BIT:ENI) would also operate three licences. Russia’s Rosneft (MCX:ROSN) and Lukoil are among the newcomers, and are to be the first Russian companies to hold stakes in Norway. BP received stakes in two licences and no operatorship.
**Tax Regime Concerns**
Norway’s Arctic oil push however is seen as held back by the country’s new tax regime. Last month, Norway’s government announced plans to raise the special petroleum tax by one percentage point to 51 percent, and cut special discounts on four-year operations of the companies from 30 percent to 22 percent. The tax changes recently prompted Statoil to delay plans for the development of the Johan

Castberg project in the Barents Sea.
Reuters however quoted Norway’s Oil Minister Ola Borten Moe as saying yesterday that the country’s tax regime was stable and supportive, noting that Norway had “a predictable investment-friendly tax framework” whereas the tax hike was “just an adjustment”.
The newswire however also quoted analysts as noting that the tax increase could have a wider impact and that the awards of licences did not automatically mean that development would proceed.

!m[Statoil SA (OSL:STL, NYSE:STO)](/uploads/story/3023/thumbs/pic1_inline.png)
“The Johan Castberg discovery initially attracted a lot of positive attention, now it turns out that even such a big oil find is not profitable to develop,” Reuters quoted Anne Gjoeen, and oil sector analyst at Handelsbanken Capital Markets, as saying.
**Statoil’s share price was 0.79 percent down in Oslo at 126.20 NOK as of 08:34 BST on 13 June 2013. BP’s share price was 0.31 percent down at 453.30p. Eni’s share price was 0.36 percent lower at €16.70 on the Milan Stock Exchange. Rosneft’s share price was 0.92 percent down at 206.43 RUB in Moscow.**


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