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Norway licensing round confirms lure of the mature

A record number of licenses were awarded, in keeping with a rise in exploration activity across the North Sea, though firm work commitments fell

The results of Norway's 24th licensing round, announced on 15 January, suggest that interest in mature areas of North Sea oil is holding up amid lower developments costs and improved seismic data.

The so-called awards in predefined areas (APA 2018) is the largest ever award in one round on the Norwegian continental shelf (NCS), with 83 licenses offered. Of these 37 are in the North Sea, 32 in the Norwegian Sea and 14 in the Barents Sea. They went to groups involving 33 different oil companies of varying sizes.

"The number of awards shows that the companies believe that more resources remain to be found in areas with known geology and near existing infrastructure," Torgeir Stordal, the Norwegian Petroleum Directorate's exploration director said on announcing the awards.

He said that interest reflected that even small discoveries could now be developed profitably if these are close to existing infrastructure such as platforms and pipelines.

"One reason why the companies still find it attractive to explore in mature areas could be that large parts of the shelf are now covered by new and improved seismic data, which, together with new technology, enable the companies to identify new exploration targets," he added.

Regional activity growth

Interest in the licensing round underscores sustained activity in Norway and the rest of the North Sea. For Norway, more than 40 wells are forecast to be drilled, compared to 26 in 2018, according to consultancy Wood Mackenzie. For the North Sea oil province as a whole-embracing Norway, the UK, Denmark and the Netherlands-some 60 exploration wells are planned, 25% higher than 2018.

"We are returning to around 2014 levels of exploration activity this year across the North Sea, so the outlook is generally very positive. In Norway, producing assets are trading at more of a premium, so growth through exploration is becoming more attractive," says Jamie Thompson, a European upstream analyst at consultancy Wood Mackenzie.

"However, it would help if exploration results are slightly better than those seen recently, as there have been a lot of dry wells," he adds.

Firm drill pledges dip

Despite the interest in the Norwegian round, firm work commitments to drill exploratory wells on areas awarded are slightly lower than in last year's round, falling to three from five. The three are block 986 in the North Sea, operated by Aker BP, and adjacent blocks 1008 and 1009 in the Norwegian Sea, operated by Aker BP and ConocoPhillips, respectively.

This may be the product of reduced competition for individual licences, which would mean companies felt less need to include firm work commitments in their proposals. "But that could simply be due to the higher number of license areas on offer, rather than a lack of enthusiasm," Thompson says.

Predictably, the Barents Sea licences were dominated by some of the deeper-pocketed Norway-focused players. Among them, Lundin Petroleum and Aker BP were awarded four operatorships each. Equinor is a partner in six awarded areas in the Barents.

DNO has solidified its position as a player keen to grow through exploration, as well as acquisition, taking stakes in 18 of the areas on offer on the NCS and assuming operatorship of five of them. The Norwegian firm is in the process of acquiring Faroe Petroleum following a hostile takeover. So, it is likely to be able to add the eight areas Faroe was awarded-four of those with operatorship-to its own haul.

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