More positive news for Greenland's oil industry as Minister for Industry and Mineral Resources describes pre-qualification interest in 2010 Baffin Bay oil licensing round as "overwhelming"

The announcement that there is to be an oil licensing round in Baffin Bay (located in the north west area of Greenland) in 2010 closely follows recent changes to the Greenland Government (formerly known as the Greenland Homerule) on 21st June 2009 whereby Greenland took a step closer to independence and, in turn, control of its vast natural resources following 300 years of Danish rule over the territory.

Following a recommendation made by a Joint Committee consisting of members of the Danish and Greenlandic Parliament, the Government approved the 2010 oil licensing round, with the Danish Government giving its seal of approval on September 22nd 2009. The tender area in Baffin Bay covers about 151,000km² and has been divided into 14 blocks varying in size from between about 8,000km² to 15,000km².

A tender prequalification round for the Baffin Bay blocks ended on 1st October 2009. This required all companies wishing to become operators in the area to satisfy certain requirements based upon an extensive environmental impact assessment of the region undertaken by the Danish National Environmental Research Institute and the Greenland Institute of Natural Resources.

Operator requirements included:

  • whether the company has the necessary experience in exploration and exploitation of oil and gas in difficult areas;
  • evidence that the company has developed a contingency planning system to manage oil activities in the area in respect of health, safety and environmental aspects; and
  • evidence that the company has the necessary financial resources to implement comprehensive oil exploration, development and decommissioning programmes.

The above criteria were carefully selected in order to protect the environment, fish stocks and the birds, mammals and other life in the area.

The Greenland Government reported that 13 international oil companies had applied for prequalification as operators. Greenland's minister for Industry and Mineral Resources described this interest as "overwhelming" and a convincing sign that the international oil industry shares the belief that there is oil potential in Greenland.

In addition to the Baffin Bay licensing round, Greenland continues to make progress towards achieving legislative as well as administrative self-governance over its emerging oil industry. On 2nd October 2009, Greenland's Parliament voted on the decision to take over lawmaking competence regarding mineral resources from Denmark, with a second vote due to take place on October 23rd 2009. Subject to a positive outcome, it is understood that a proposal for a new Act on Mineral Resources will be presented to the Greenland Parliament for consideration and voting, however this has not yet been timetabled for legislative review. At this stage, it is understood that a change of legislation will not impact the validity of Licenses issued and existing under the current Mineral Resources Act 1991 (as amended), which is governed by Danish Law.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

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The original publication date for this article was 14/10/2009.