Industry Trend Analysis - Caution Prevails As Mature Acreage Favoured - MAR 2018

BMI View: The result s of the latest APA licensing round indicate that oil companies favour the lower-risk of more mature areas on the Norwegian Continental Shelf . T he return of oil majors suggest s that Norway will continue to be an attractive region for oil producers.

Although the Norwegian Continental Shelf is a relatively mature producing area, the results of the latest APA round (Award of Predefined Areas) indicate that Norwegian waters remain attractive to oil companies. The Norwegian Petroleum Directorate (NPD) awarded a record 75 offshore oil exploration licenses to 34 companies ranging from oil majors to smaller E&Ps, which represents the highest number of submitted applications recorded since 2003, when the country introduced the APA scheme.

The APA system offers blocks located in more mature regions, located close to existing infrastructure. The results of the latest round and the relatively poor interest in Norway's 24 th licensing round (new acreage) which saw just 11 companies submitting applications ( see ' Exploration To Rebound In 2018 '), suggest that oil companies favour lower-risk though potentially less prospective areas on the Norwegian Continental Shelf.

Increasing Interest In Mature Areas
APA Rounds Results [LHS] vs Licensing Rounds Results [RHS]
Source: Norwegian Petroleum Directorate

The authorities announced that of the 75 new licenses awarded, 45 are located in the North Sea, 22 in the Norwegian Sea and 8 remaining leases are concentrated in the Barents Sea. Following a gradual retreat of oil majors, the APA scheme has often been seen as an opportunity for smaller companies willing to build their portfolio with interesting prospects located near existing processing equipment and transportation systems. However, the latest APA round has also seen the return of oil majors, with ConocoPhillips and Shell being awarded seven and four blocks, respectively. This indicates that the Norwegian Continental Shelf remains an attractive area also for companies which traditionally have had a greater appetite for more risky and capital-intensive developments. From the latest round, we have identified several smaller companies which have been awarded operatorship rights despite their relatively limited experience on the Norwegian Continental Shelf.

Following the acquisition of Ithaca Petroleum Norge, Budapest-based MOL Group entered Norway in 2015. Following the 2016 APA round, the company expanded its portfolio adding four additional licenses to its asset fleet which currently comprises 25 blocks located mainly in the North Sea. In the latest APA round MOL was awarded 3 additional acreages, two of which will be operated by the Hungarian independent.

INEOS ' current asset portfolio is concentrated in the southern parts of the North Sea. Interestingly, the company was awarded one additional block in the Norwegian Sea which it will operate together with DEA and Petrolia. One of the partners, Petrolia NOCO, is a relatively new entrant, currently holding four blocks in the Norwegian Sea. Following the latest APA round, the company obtained four additional blocks, one of which it will operate in a partnership with Statoil.

Point Resources, a newly-formed specialist in late life asset management, was awarded 10 blocks. The company operates the mature Balder, Jotun and Ringhorne fields and holds non-operated interests in Snorre, Brage, Boyla and Hyme fields. Additional assets will substantially boost Point Resource's current portfolio and help develop a strong expertise in maximising oil and gas recovery from mature assets.

Wellesley Petroleum, is also a new entrant, focusing on hydrocarbon exploration in Norway. The company was formed in 2014 and is backed by a group of institutional investors led by Blue Water Energy, a London-based private equity firm. Following the latest APA round, Wellesley will be an operator of two licenses and will help develop five other blocks in a partnership with larger E&P companies, including Aker BP, Statoil and Maersk.