Norway's latest awards in predefined areas (APA) round was announced today, with some 56 licenses offered to oil firms. Duncan John, Partner at consultancy StrategicFit, offers his views.
This APA round has shown that appetite for exploration in Norway has been resilient to low oil prices.
The APA rounds are a mechanism to ensure no stone is left unturned before infrastructure becomes uneconomic. The low oil price makes this more urgent. But <US$60/b oil doesn’t seem to have dampened the appetite for APA licenses: the authorities have awarded 56 licenses in this round vs 54 last year.
APA was intended as a key route for new players to get into the Norwegian Continental Shelf (NCS). It’s still working. In 2014 there were no new companies awarded licenses but this year three genuinely new names appear on the list.
So despite the oil price, Norwegian exploration remains an attractive proposition as a potential growth area. One of these is MOL, who acquired UK-based player Ithaca Energy's Norwegian assets. Two others have started completely organically - Wellesley and Origo (Pure is essentially a rebrand of Rocksource, so we don’t count them as new).
This year there’s been a decrease in the number of companies who have won licenses to 36 – in 2014 it was 43, and in 2013 it was 48 (excluding Petoro). Have the authorities raised the bar? Ten companies that won licenses in 2014 are absent from the list this year, ignoring companies that have disappeared through acquisition. Five of these companies applied, but failed to win a license. The other five chose not to apply this year: BG, ExxonMobil, Idemitsu, Maersk and Lotos.
HitecVision announced this week that three companies that they fund on the NCS (Pure, Core and Spike) will be joining under a single umbrella. These three together will constitute the entity with the equal largest number of awards won (not including Statoil and Petoro and joint with Det Norske and Premier combined) – perhaps a tempting entry vehicle for a player looking to enter Norway.
MOL has done well building on their acquisition of Ithaca in 2015. They have picked up two operatorships and three other licenses, focused on the Norwegian North Sea.
MOL are following in the footsteps of Tullow, who entered by acquiring Spring in 2013. Tullow have been able to sustain a high rate of winning APA licenses since then. This year they are 3rd highest (not including Statoil and Petoro) with eight licenses and three operatorships, behind Point and Det Norske.
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