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Exploration and production
Who holds the rights to oil and gas reserves in your jurisdiction?
The state owns all subsea and subsoil petroleum resources within the territory, the exclusive economic zone and on the Norwegian continental shelf.
Is there a distinction between surface and subsurface rights?
All Norwegian petroleum production is based on offshore subsea deposits. Pursuant to applicable law, the state has the sole proprietary right to all subsea petroleum deposits and all activities related to such resources are subject to its jurisdiction and exclusive right to resource management. Title to the petroleum passes from the state to the licensees when petroleum is extracted from the deposit. Regulation of conflicting rights of use of maritime space (eg, fisheries, petroleum and navigation) is regulated by the Maritime Act, the Petroleum Act and the Petroleum Regulations.
No petroleum deposits have yet been discovered on the Norwegian mainland. Conflicts between onshore property rights and specific petroleum subsurface rights have not materialised to date. Ownership and resource management of such petroleum resources is regulated by a separate law (Act 21, 4 May 1973) which secures the state similar proprietary rights as for onshore petroleum deposits. This law is not developed in detail, but delegates to the King in Council to regulate such activities.
What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?
Petroleum activities by others than the Norwegian state may be conducted only pursuant to a licence or permit awarded by Norwegian authorities.
Three different types of licence are used.
Exploration licence The exploration licence is a non-exclusive right to conduct exploration activities (including shallow drilling) in a pre-defined area awarded for three years. The exploration licence is granted by the Norwegian Petroleum Directorate. The holder of an exploration licence may sell the data collected through such activities, but all information must be submitted to the Norwegian Petroleum Directorate, which – after a regulated period – provides general public access to the data.
Production licence A production licence is an exclusive right to conduct exploration (including drilling exploration wells), development and production activities in a defined area, normally for a total period of 30 years, provided that the licensees fulfil the exploration work commitments.
The King in Council approves the award of a production licence after the concession award process conducted by the Ministry of Petroleum and Energy and the Petroleum Directorate has been completed.
In practice, a production licence is always awarded to a group of applicants. Based on applications submitted, the authorities decide the distribution of participating interests and appoint the operator (among the licensees). Group applications are allowed, but applicant groups may be split by government decision as a condition for final award. The production licence document is prepared by the ministry after call-back meetings with applicants, where the applications are reviewed and key components and conditions for the award of a licence are presented to the applicants. The applicants' preliminary acceptance of terms and conditions is required before the production licence can be formally awarded.
Licence for installation and operation of facilities The licence for installation and operation of facilities is a right to plan, design, construct and operate a facility for petroleum activities other than activities pursuant to a production licence (eg, processing, storage or transportation of petroleum in pipelines). This separate facility licence is awarded based on a submitted plan for installation and operation of facilities, and a similar joint venture structure as for production licences is established based on the Petroleum Agreement model contract. The facilities licence is granted by the Ministry of Petroleum and Energy, except in cases of substantial state participation or when a treaty is required for a cross-border project.
What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?
The applications are assessed based on publicly available criteria and the production licence is awarded principally based on the applicant's technical qualifications, relevant experience, financial strength, geological understanding, exploration work programme proposals and proposed participating interest and operatorship. Previous experience with the applicant may also be included in the assessment.
There are no general restrictions on the participation of foreign nationals or companies in a production licence, provided that international embargoes do not apply. However, in June 2016 a new paragraph four was introduced to Section 10 of the Petroleum Regulations, stating that:
Due to national security considerations, the Ministry may deny access to and the right to conduct petroleum activity if the applicant is de facto under control of a State outside EEA or by citizens from such State.
The ministry describes this amendment as a clarification of applicable law.
Additionally, there is a longstanding policy of awarding production licences only to competent oil companies. As a result, purely financial investors are unlikely to qualify directly.
It is common for applicants to enter into group application arrangements related to licence rounds. Such agreements may not stipulate terms that could affect the award or the regulation of the unincorporated joint venture to be established by the licensees, and will be submitted to the Ministry of Petroleum and Energy.
Are there any special legal provisions applicable to joint ventures?
It is a condition for the award of a production licence that the licensees enter into a licence-specific unincorporated joint venture. The joint venture is not governed by Norwegian company law, but by the Petroleum Agreement, which consists of the licence-specific special provisions and the attached joint operating agreement and accounting agreement. These documents are mandatory, non-negotiable and identical in format for all production licences. The special provisions are individualised with regard to work obligation, identification of licensees, participating interest, operator appointment and voting rules, among other things. Any other agreement between the licensees or amendment to the legal instruments is subject to Ministry of Petroleum and Energy approval. The production licence requires that all contracts related to activities under a production licence be subject to Norwegian law and contract tradition.
Can exploration and production rights be transferred to third parties?
A licensee may transfer a part of or its entire undivided participating interest in any licence.
Until the mandatory work commitments have been fulfilled, a participating interest in a production licence cannot be transferred to a non-affiliated third party without consent of the management committee of the joint operating agreement. The state has pre-emptive rights on the same terms and conditions as agreed between licensees. However, it is understood that such pre-emptive rights have not been used to date.
Any transfer of a licence or participating interest in a licence for petroleum activities is subject to Ministry of Petroleum and Energy consent, including direct or indirect transfers of interest or control over a licensee, such as transfer of shareholdings and other ownership rights which may provide decisive control of a licensee.
Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?
Hydraulic fracturing may be permitted pursuant to an approved development plan, but has not been used to date. There is no petroleum activity related to petroleum deposits in mainland Norway.
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