Knowledge, expertise, and vision at the Norwegian Petroleum Directorate
Updated: Nov 14, 2018
Since the beginning of the Norwegian oil and gas sector, the National Assembly has been developing its strategy to manage the roles of policy making, resource management, public administration, and business. In 1972, the Norwegian Petroleum Directorate and Statoil were established. The Ministry of Petroleum and Energy was, and still is, the policy maker and resource manager, the Norwegian Petroleum Directorate became the entity for public administration, and Statoil was established as an oil company owned by the state to work as a business entity.
Norway used the advantages of a concessionary system to lean on international companies with considerable oil and gas competence to develop the resources and player modules for the Norwegian entities. Furthermore, Norway stated that the resources belong to the people of Norway and, during these 50 years of oil and gas activities, the overall aim has been to deliver the highest possible profits and benefits to the society and to maximize economic value.
In order to show the current priorities of the Norwegian Petroleum Directorate that are aimed at supporting the positive evolution of the Norwegian oil and gas industry, it is necessary to look at the activities performed in the sector. Starting with exploration, the main goal of the Norwegian Petroleum Directorate is to make new discoveries that increase field development and production possibilities. “Our contribution is to help the Ministry when they are awarding licenses to companies,” says Kjell Agnar Dragvik, Director of Analysis and Framework at the Norwegian Petroleum Directorate. “We receive the applications on behalf of the Ministry. We read, evaluate, and give our advice in both the APA and numbered rounds,” he adds. The Ministry of Petroleum and Energy has recently offered 12 new production licenses in the 24th licensing round.
The Norwegian Petroleum Directorate has noticed that field development and operation activities have picked up during the last year. “After oil prices dropped, oil companies started rethinking their production and investments when it comes to field development. The level of activity in field development is rising,” says K. A. Dragvik. The Norwegian Petroleum Directorate works to ensure that plans for new field developments are in accordance with the requirement of reasonable and sound resource management and prioritizes information sharing. “Our Fact Pages on NPD.no consist of comprehensive databases, they were created for the benefit of companies and include geological and technical information. We also inform the public on what is happening in the oil and gas industry,” says K. A. Dragvik.
Moreover, the entity follows closely the digitization trends in the industry since this transformation has a high priority in the agenda of both the industry and the Norwegian Petroleum Directorate. In the present, companies and the NPD are searching for areas to unlock the benefits of digitization. The Directorate provides databases where companies are storing their data and utilizing the data flow themselves. “When you work in an oil company, you often work in a specific field, be it small or big,” says K. A. Dragvik. “When you work with the NPD, you are involved more with the shelf itself, you are able to look at the problems and conditions from different angles because you have more information. It is a comprehensive view of the complete market and the opportunities,” he adds. To ensure that these activities are performed successfully, the staff of the NPD consists of legal and geology experts, reservoir professionals, facility engineers, and economists.
In order to ensure the optimal exploitation of Norway’s oil and gas resources, the Norwegian Petroleum Directorate provides the Ministry of Petroleum and Energy with key information. “It is extremely important for the licenses to be awarded based on solid information,” says K. A. Dragvik. The Norwegian system divides power and responsibilities between authorities and companies that both base their decisions on the information in the NPD’s fact database.
While the decision to be awarded a license is made by the government, the advice given by the Norwegian Petroleum Directorate and the entity’s negotiations with the Ministry are an important basis for the government’s decision to award them. “These awards have to take into consideration a lot of technical work and objective and transparent criteria,” says K. A. Dragvik. The authorities have to consider the pros and cons of opening new areas. During this process, there might be a need to balance between different interests, such as those of fisheries, and consider environmental issues. “It is important to bear in mind that the last time the authorities opened a new area for exploration was in 2016 when they opened the South East of the Barents Sea,” comments K. A. Dragvik. Roughly, 20 years passed since a new area had been opened for petroleum activities.
Companies must fulfill certain requirements to be awarded a license; they must be capable of performing the activities for which they are applying for. “Companies need to have geologists and software experts when it comes to geological interpretation, they need to have technical staff, HSE related plans and standards. These are the kinds of criteria they have to meet,” says K. A. Dragvik. When awarding specific licenses, companies compete on geological understanding and on the license development. The pre-qualification system gives companies the opportunity to make sure that they meet the minimum requirements to be in compliance with the standards of the Norwegian Continental Shelf.
Business opportunities are necessary to make the Norwegian Continental Shelf attractive for investors. In Norway, rules and regulations give the Norwegian Petroleum Directorate and authorities the right to inspect the companies’ plans for development. Before starting a project, the Directorate may request companies to perform further research or analysis if it deems it necessary. “It is important to have solid facts and base the decisions in the oil and gas sector on them. If we think we should push the companies a little bit, the framework and regulations give us the opportunity to do so,” says K. A. Dragvik. “We are trying to find the best balance between the interests of companies and the society,” he adds. Because companies are aware of the rules and regulations, the involvement of the Norwegian Petroleum Directorate does not come as a surprise. The Director believes that the stable and predictable framework in Norway is a competitive advantage of the Norwegian Continental Shelf.
In addition to its current responsibilities, in the coming years, the Norwegian Petroleum Directorate also sees opportunities in decommissioning activities. The oil and gas industry is focused on IOR in the existing reservoirs and concentrated on making new discoveries in the vicinity of existing infrastructure. “Our attitude is not to decommission before it has been made clear that nothing can be produced from the wells anymore,” says K. A. Dragvik. “Our main focus is the producing wells, not the wells that should be decommissioned. Nevertheless, it is an important issue to bear in mind for the coming years,” adds K. A. Dragvik.
As an example, the Director quoted Arne Sigve Nylund from Statoil who stated that the company will reopen 5000 old wells to produce 550 million standard cubic meters. The Norwegian system has rules and regulations regarding decommissioning, and the NPD expects it to be gradual. “There are 84 fields currently producing on the Shelf and we think that 5-10 will close down in five years’ time, but not the biggest ones,” says K. A. Dragvik. “In the Norwegian system, the use of hearings is extensive; therefore, interested parties will always have the opportunity to present the changes they want to make and have their voice heard,” concludes K. A. Dragvik.
The main topic in petroleum politics has been the Paris Agreement and the three largest political parties in Parliament are in favor of current policies. The strong reputation and robust structure of the Norwegian oil and gas sector is the result of the work of the government and companies, communication, and cooperation among them aimed at providing maximum benefits to the Norwegian society.
The strong reputation and robust structure of the Norwegian oil and gas sector has been a result of the work of the government and the companies. The communication and cooperation among them has played a crucial role to provide the maximum oil and gas benefits to the Norwegian society