General

Key commercial aspects

Describe, in general terms, the key commercial aspects of the oil sector in your country.

Greenland is the world’s largest island. Its land area is 2.2 million km2, of which the Greenland ice sheet covers 1.8 million km2. Greenland’s northernmost extremity is Cape Morris Jessup, which is also the northernmost land area in the world, situated less than 730km from the North Pole. In March 2020, Greenland had a population of 56,745.

Greenland is an autonomous part of Denmark (the Community of the Realm), which comprises Denmark proper, Greenland and the Faroe Islands.

Greenland had home rule from 1979 to 21 June 2009 when it obtained self-government after a referendum and negotiations with the Danish government. The Danish Act No. 473 of 19 May 2009 on Greenland Self-Government entered into force on 21 June 2009. Greenland has extensive self-government under the Act, which for most areas of government either transferred or provides for the transfer of the legislative power from the Danish parliament to the Greenland parliament and the executive power from the Danish government to the Greenland government.

As part of self-government, Greenland owns and has the right of disposal of all mineral resources, including oil and gas, in its land, territorial sea and continental shelf areas. Under the Greenland Self-Government Act, it may be decided that all legislative and executive powers in the mineral resources area including oil and natural gas shall be transferred from the Danish state to Greenland’s self-governing authorities. The transfer was decided by the Greenland parliament on 23 October 2009 and became effective on 1 January 2010. In connection with the transfer of powers, the former Danish Act on Mineral Resources in Greenland, which regulated prospecting, exploration and exploitation of oil, gas and minerals, was repealed and replaced by the present Greenland Parliament Act No. 7 of 7 December 2009 on Mineral Resources and Activities of Importance Thereto (the Mineral Resources Act). The main provisions on oil and gas licences in the Mineral Resources Act are based on, and correspond to, the provisions on such licences in the formerly applicable Danish Mineral Resources Act. All prospecting, exploration and exploitation licences granted under the former Danish Act are still effective but are now governed by the present Greenland Act. Exploration for oil and gas began in the early 1970s in offshore areas of West Greenland. Comprehensive seismic surveys were carried out, and almost 21,000 kilometres’ worth of reflection seismic data were acquired. In 1976 and 1977, five exploratory wells were drilled. Exploration was discontinued in late 1978. All wells were declared dry by the operators.

In 1997, the Geological Survey of Denmark and Greenland (GEUS) began to reinvestigate the well data and found that they suggested a hydrocarbon discovery in the Kângamiut-1 well.

A licensing round for offshore areas of West Greenland was held from 1992 to 1993. Because no applications were submitted, an open-door licensing policy was introduced in 1994 that covered both onshore and offshore areas south of 70°30’ N in West Greenland and Jameson Land in East Greenland.

Subsequent investigations were carried out by Nunaoil A/S (Nunaoil), a company then owned jointly by Greenland’s home rule authorities and the Danish state, and now owned by the Government of Greenland. The investigations confirmed the existence of cross-cutting reflectors. Based on these discoveries, a licence was awarded in 1996 to a consortium consisting of Statoil, Phillips Petroleum, DONG and Nunaoil. In 1998, a new licence was awarded to the same participants.

Licensing rounds were held in 2001, 2002, 2004, 2006 and 2007. In April 2008, an open-door licensing procedure was launched, which covered offshore areas in West Greenland and around Cape Farewell, the southernmost extent of Greenland. On 1 January 2010, this was succeeded by an open-door licensing procedure under the present Greenland Mineral Resources Act. The 2010 open-door licensing procedure covers offshore areas in the southern part of West Greenland and around Cape Farewell and onshore areas in Jameson Land in East Greenland.

In October 2009, the Greenland government issued an invitation to apply for licences for exploration and exploitation of hydrocarbons (oil and natural gas) in two licensing rounds.

  • The Baffin Bay Licensing Round 2010 covered offshore areas of 151,358km2 off West Greenland. The areas are three times the area of Denmark proper. The areas were divided into 14 blocks of between 8,000km2 and 15,000km2. By the application deadline on 1 May 2010, Mineral and Licence Safety Authority (formerly the Bureau of Minerals and Petroleum) had received 17 applications from 12 international oil companies, including some of the world’s major oil companies.
  • The Greenland Sea Licensing Round 2012 to 2013 covered offshore areas of 50,000km2 off East Greenland. Companies that are members of the Kanumas Group could submit applications for licences in a special pre-round, which ended on 15 December 2012. The pre-round covered areas of 30,000km2 designated by the Greenland government in the ordinary round area of 50,000km2. Subsequently, any company could submit applications for licences in the remaining parts of the ordinary round areas in a subsequent ordinary licence round.

In December 2013, the government announced that it had decided to grant exclusive exploration and exploitation licences to three consortia in four blocks in the Greenland Sea, based on applications from the 2012 to 2013 Licensing Round.

In 2014, licensing rounds were held regarding Jameson Land and south-west Greenland. In 2015, two exclusive onshore exploration and exploitation licences were granted on Jameson Land, covering an area of more than 4,200km2. No licensing rounds were held in 2015.

In 2014, the government published its Oil and Mineral Strategy for 2014-18. In accordance with the strategy, a licensing round for the onshore areas of Disko Island and Nuussuaq Peninsula, West Greenland, was held in 2016. In 2016, the government announced a new open-door procedure for the onshore areas on Disko Island and in Nuussuaq Peninsula in West Greenland. The open-door procedure was carried out during 2017-18 with the application deadline of 31 December 2018. Applicants would be granted exclusive licences for exploration and exploitation of hydrocarbons for the offered areas under the procedure. Since February 2019, no further news about the open-door procedure has been published.

Furthermore, a licensing round for offshore areas in Baffin Bay was held in 2017. Since March 2020, information about any applications regarding the area in Baffin Bay remains to be published. In late 2018, a licensing round for offshore areas in Davis Strait was carried out. The application deadline was 15 December 2018. Since March 2020, no information on the licensing round has been published. The Davis Strait licensing area covers almost 90,000km2 and parts of this area were previously up for bidding during the 2004 and 2006 licensing rounds. Currently, eight offshore wells have been drilled in the area.

So far, the exploration activities have led to no licensee initiating any exploitation (production) activities. Many parts of the Greenland continental shelf area are still relatively unexplored. However, exploration for oil and gas has increased considerably in recent years, and a large number of licences for exploration and exploitation of oil and gas have been granted.

As of March 2020, there are four exploration and exploitation licences for hydrocarbons.

Participants in the exploration and exploitation licences are:

  • Greenland Gas and Oil A/S and Nunaoil (three licences)
  • Panoceanic Energy Limited and Nunaoil (one licence)

There are also seven prospecting licences. Participants in the prospecting licences are:

  • EMGS ASA (one licence)
  • CASP (one licence)
  • GX Technology Corporation (GXT) (one licence)
  • TGS-Nopex Geophysical Company ASA (three licences)
  • Petroleum Geo-Services (one licence)

International oil companies from Europe, the United States and Canada have been granted offshore oil and gas licences in Greenland. These companies are interested in oil and gas exploration and exploitation in Greenland for a number of reasons, one of them probably being the assessments of the petroleum potential in both west and East Greenland made by the US Geological Survey (USGS). For example, one assessment was issued in 2007 (Fact Sheet 2007-3077, August 2007) when the USGS completed an assessment of the potential for undiscovered, technically recoverable oil and gas resources in the East Greenland Rift Basins province. The USGS estimated the mean undiscovered, conventional petroleum resources in that province to be approximately 31.4 billion barrels of oil equivalent of oil, gas and natural gas liquids. Until now, it has been too expensive and troublesome to exploit the oil in Greenland due to environmental conditions. However, the government has now decided to attract foreign and domestic oil companies to explore and exploit especially the northeastern parts of Greenland by decreasing the total government royalty on new licences.

Energy mix

What percentage of your country’s energy needs is covered, directly or indirectly, by oil or gas as opposed to nuclear or non-conventional sources? What percentage of the petroleum product needs of your country is supplied with domestic production?

In 2016, Greenland consumed 8,556 terajoules (TJ) of energy. Approximately 17.9 per cent of the consumed energy was domestically produced sustainable energy, mainly from hydropower and waste incineration plants. A fourth hydropower plant located in Sisimiut begun operations in 2010. The numbers had not been officially updated as of March 2020.

From 2015-16, the consumption of petroleum-based fuels, such as petrol, diesel and other fuel oils, increased by approximately 0.3 per cent from 7,048TJ to 7,066TJ. This means that approximately 82.5 per cent of Greenland’s energy requirements were covered by petroleum-based fuels.

All petroleum-based fuels used in Greenland are at present supplied by foreign sources.

Government policy

Does your country have an overarching policy regarding oil-related activities or a general energy policy?

The Greenland government and the Mineral Licence and Safety Authority (MLSA) apply some general policy principles for activities concerning hydrocarbon (oil and gas) and mineral resources. The main objectives of the policy are to establish and maintain an attractive environment for prospecting, exploration and exploitation activities concerning hydrocarbon and other mineral resources in Greenland. Interests of oil and mineral companies are catered for in various ways and respects.

The government has decided to restructure the governmental authorities responsible for the administration of mineral resources. As a result, there are now four governmental authorities responsible for mineral administration, with the Ministry of Mineral Resources and the underlying MLSA being responsible for licence administration. The Ministry of Industry, Labour and Trade is responsible for issues relating to social impact assessments and impact benefit agreements. The Environment Agency for Mineral Resources is still the appropriate authority for all mineral resources’ environmental issues. Despite the new structure, applicants must still submit their licence applications to the MLSA.

A proper, effective and stable hydrocarbon regulation - to some extent similar to the Danish regulation - is established by the Mineral Resources Act and the model terms for hydrocarbon licences.

The general policy principles governing prospecting, exploration and exploitation of mineral resources, including oil, are stated in the Mineral Resources Act. The purpose of the act is to ensure appropriate exploitation of mineral resources and use of the subsoil for storage or purposes relating to mineral resource activities. The act shall also ensure an appropriate regulation of matters of importance to mineral resource activities and subsoil activities. The act further aims to ensure that activities under the act are performed properly as regards:

  • safety;
  • health;
  • the environment;
  • resource exploitation;
  • social sustainability; and
  • appropriate best international practices under similar conditions.

The government and the MLSA are responsible for the main legal and administrative matters concerning prospecting, exploration and exploitation of mineral resources, including hydrocarbon (oil and gas). This ‘one-stop shop’ administration is user-friendly for oil companies and supports an administration based on overall and integrated assessments, decisions and actions.

In 2014, the government published its Oil and Mineral Strategy for 2014-18. The strategy included a licensing round for the offshore areas in the Davis Strait, which was held in 2018. In the beginning of 2020, the government published a new Oil and Mineral strategy for the years 2020-2024. The strategy aims towards increasing oil exploration and exploitation activities in order to make Greenland an oil-producing country. 

In order to achieve the ultimate goal of an increase in oil production over the coming years, the Greenland government plans to decrease the government take and offer new licences, especially around western Greenland (the Nuussuaq Pennisula, Disko West, Baffin Bay and Davis Strait). Moreover, it is estimated that the northeastern parts of Greenland potentially have around 31.4 billion barrels of oil in the ground, and therefore the government plans a licence round in July 2021. The central parts of northeastern Greenland are currently under evaluation,  to be finished by January 2022 and followed by a new licensing round for exploration licences.

Registering a licence

Is there an official, publicly available register for licences and licensees? Is there a register setting out oilfield ownership or operatorship, etc?

There is no official licence register in Greenland. However, the MLSA publishes a list of licences and licensees on their applications portal, which is available to the public without cost. The list is updated twice a month, except for July and August. The list of mineral and petroleum licences in Greenland is prepared by the MLSA on the first and 16th day of every month. It contains information about both prospecting and exploration licences for hydrocarbons in force, including the licensees to each licence. Additionally, section I of the list gives an overview of applications for mineral and petroleum exploration and prospecting licences that are presently being processed by the authorities.

Legal system

Describe the general legal system in your country.

The legal system in Greenland is a civil-law system based on legislation created and adopted by parliament and is also influenced by court practice. Under Greenland law, private property of land and resources is generally not recognised because of historical reasons. Contractual and property rights are protected by the Constitution and the Law of Expropriation.

Domestic judgments can be enforced through the Greenland Enforcement Court. Regulation (EU) No. 1215/2012 (Brussels I) does not apply to Greenland, and the Greenland Act on Civil Law does not regulate the recognition or the enforceability of foreign judgments.

Foreign arbitral awards are recognised in Greenland if recognition of the award is not evidently incompatible with the Greenland legal system. Arbitral awards in commercial disputes are recognised in Greenland if the ruling of the award has been given in a country that has adopted the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). If an arbitral award is recognised in Greenland, it can be enforced through the Greenland Enforcement Court.

The United Nations Convention against Corruption 2003 does not apply to Greenland. However, the Greenland Criminal Law criminalises bribery, fraud and embezzlement. In addition, the Danish Administrative Law applies in Greenland. Consequently, the principles of good administrative behaviour must be complied with by any Greenland officials acting on behalf of the central administration. Subsequently, Greenland officials must not, whether directly or indirectly, accept gifts or other benefits that constitute or may be perceived to constitute an attempt to influence the case administration.

The government has recently published a zero-tolerance policy on corruption. The Ministry of Mineral Resources wants to forestall potential corruption risks by implementing a proactive anti-corruption policy. The anti-corruption policy provides guidance to employees of the Ministry of Mineral Resources and its subordinate institutions on how to respond when encountering corruption.

Regulation overview

Legal framework for oil regulation

Describe the key laws and regulations that make up the principal legal framework regulating oil and gas activities.

Oil activities are governed by the Mineral Resources Act, licences and the joint operating agreements (JOAs) between the oil operating parties. The Greenland Regulatory Regime for Oil Activities, including, in particular, the Mineral Resources Act, covers Greenland’s land, territorial sea and continental shelf areas.

Oil exploration and exploitation activities may be conducted both onshore and offshore. Some minor areas in Greenland are off-limits for oil activities because of environmental or military considerations.

The main statutory rules regarding prospecting, exploration and exploitation of oil are laid down in the Mineral Resources Act. Its Part 4 contains general rules on prospecting, and Part 5 contains general rules on exploration and exploitation (production). Part 6 of the Act contains special rules on exploration and exploitation of hydrocarbons.

In 2012, the parliament of Greenland passed an act on building and construction works relating to large-scale projects (the Large-Scale Act). The Large-Scale Act applies, inter alia, to projects concerning licences granted pursuant to the Mineral Resources Act with a cost of construction above 5 billion Danish kroner. The act stipulates a requirement for an environmental impact assessment and lays down minimum requirements with respect to foreign labour in large-scale projects.

Other main parts of the regulation concerning prospecting, exploration and exploitation of natural gas are set out in the government’s licence terms. Model documents are published on the website of the Mineral Licence and Safety Authority (MLSA) in connection with each licensing round. Currently, the following Model Licences are available:

standard terms for prospecting licences:

  • hydrocarbons (March 2009);

Model Licence for Exploration and Exploitation of Hydrocarbons:

  • open-door areas onshore of Disko Island Nuussuaq (February 2020)
  • open-door offshore Baffin Bay (2020)
  • open-door for the Davis Strait (2020)
  • open-door for Disko Island West (2020)
  • Northeast Greenland (2021)
  • Central East Greenland (2022) 

Companies that are co-licensees - members of a licence group - must make and use a JOA, which is subject to the approval of the MLSA. The Greenland government has issued a model JOA in connection with each area, which generally must be used with only minor amendments.

The standard terms for prospecting licences, the model exploration and exploitation licences and the model JOA are all available at the website of the MLSA.

Prospecting, exploration and exploitation of hydrocarbons in Greenland may only be carried out under licences granted by the government. Any Greenland or foreign person or company may perform oil prospecting or exploration activities under a prospecting licence or an exploration licence, respectively, if the requirements for licensees and operators under such licences are met.

According to the Mineral Resources Act, an exploitation licence may only be granted to a public limited company that only carries out activities under licences granted pursuant to the act. The company must, as a general rule, be domiciled in Greenland. The company must have the necessary (adequate) technical capability and experience and financial capability.

Prospecting, exploration and exploitation licences are generally granted as hydrocarbon licences that cover both oil and natural gas. Prospecting licences are non-exclusive. Exploration and exploitation licences are exclusive.

The general selection criteria for granting exploration and exploitation licences are the company’s technical capability and experience, financial capability and intended exploration and exploitation activities, including its environmental protection practices and procedures.

In the beginning of 2020, the Greenland government published a new oil strategy for 2020-2024, in which the government revealed plans to modernise the current legislation, making the Mineral Resources Act into a Subsoil Act. The focus will be on simplifying the rules and licensing procedures without reduce the quality of the environment, safety and health. The government also plans to go into dialogue with the market regarding cost levels.

Expropriation of licensee interest

Are there any legislative provisions that allow for expropriation of a licensee’s interest and, if so, under what conditions?

There are no specific legislative provisions in the Mineral Resources Act that allow expropriation of a licensee’s interest.

However, it follows from the Mineral Resources Act that the Greenland government can expropriate in order to establish operations governed by the Mineral Resources Act. The terms and conditions of expropriation are set forth in the Greenland Act on Expropriation.

Revocation or amendment of licences

May the government revoke or amend a licensee’s interest?

According to the Mineral Resources Act and the 2020 Disko Nuussuaq Model Licence, the MLSA may, under certain circumstances, revoke a licence. A licence may for instance be revoked in the following cases:

  • if a licensee fails to fulfil the set-out exploration commitments;
  • if a licensee otherwise breaches the terms of the licence or the provisions laid down pursuant to the Mineral Resources Act;
  • if a licensee fraudulently misrepresents facts to the MLSA;
  • if the operator is not qualified to be the operator for the activities performed under the licence or does not meet the conditions, terms and requirements and approval as operator; or
  • if one or more of the licensees suspend their payments, request the opening of negotiations for a compulsory composition, are declared bankrupt, go into liquidation or are in a similar situation.

However, the licence shall not be revoked if the above-mentioned factors are due to force majeure or if the breach is remedied by the licensee within a reasonably time limit set by the MLSA.

Furthermore, if a licensee is declared bankrupt, goes into liquidation or is in a similar situation, the MLSA will be prepared to approve the transfer of the relevant party’s interest to one or more of the other parties holding shares in the licence, provided that the licensee continues to have the necessary expertise and financial resources for the activities performed and to be performed under the licence.

Regulators

Identify and describe the government regulatory and oversight bodies principally responsible for regulating oil exploration and production activities in your country. What sanctions for breach may be imposed by the regulatory and oversight bodies?

The Greenland government is generally responsible for all legal and administrative matters concerning prospecting, exploration and exploitation (production) of oil, storage of exploited oil and establishment and operation of oil pipelines for transportation of oil in connection with the said other activities governed by the Mineral Resources Act. All these activities are governed by the Mineral Resources Act.

Prospecting, exploration and exploitation licences may only be granted, amended and revoked by the government, which also must approve any direct or indirect transfer of a licence or a share of (participating interest in) a licence.

Administration of the Mineral Resources Act and all activities under it is generally carried out by the MLSA under the government.

The MLSA approves activities under prospecting, exploration and exploitation licences (to the extent approval is required), licensees’ provision of security for performance of their obligations and plans for exploitation and decommissioning. In cooperation with the Greenland Minister of Mineral Resources, the MLSA also approves appointments of operators. Further, the MLSA supervises and inspects activities under licences and other activities covered by the Mineral Resources Act.

The government is generally responsible for all legal and administrative matters, governed by the Mineral Resources Act, concerning:

  • prospecting;
  • exploration and exploitation of gas;
  • subsoil storage of gas; and
  • establishment and operation of gas pipelines for gas transportation.

The Mineral Resources Act was changed on 1 January 2013 with immediate effect. The administration of environmental protection in hydrocarbon projects was separated from the MLSA and placed with the Environment Agency for Mineral Resources.

The MLSA is a one-stop shop, however, and obtains the necessary approvals of, for instance, environmental impact assessment reports from the Environment Agency for Mineral Resources.

Administrative and regulatory decisions of the Mineral Licence and Safety Authority may be appealed to the Greenland Minister of Mineral Resources.

Administrative and regulatory decisions of the Minister of Mineral Resources cannot be appealed to any other public authority.

Decisions of the MLSA and the Minister may be brought before the Greenland courts, which may revoke or amend such decisions.

In the case of breach of the terms and provisions in the licence the MLSA may under certain circumstances revoke a licence.

Government statistics

What government body maintains oil production, export and import statistics?

The MLSA is responsible for compiling and keeping information provided by licensees in connection with prospecting, exploration, exploitation (production) and subsequent export of mineral resources, including oil.

In connection with this, the MLSA will also make and keep statistics regarding oil production and export.

Greenland Statistics maintains statistical records on oil import and energy consumption. Greenland Statistics is an independent institution falling under the Greenland Minister for Finance.

Law stated date

Correct on

Give the date on which the information above is accurate.

2 June 2020