Worldwide: Norwegian Oil And Gas Technology And Know-How Driving Deep Water Activity

Introduction

The Norwegian oil and gas industry has lasted for almost five decades, and the activity has established the petroleum sector as the most important industry in Norway, counting for more than 23% of the total value creation in 2012. The petroleum production on the shelf has added more than NOK 9000 billion to the country's GDP over the about 40 last years1. The value creation in the sector positions Norway in the top world ranking due to the significant trade surplus2.

Today 76 fields are in production and produced in 2012 about 1,9 mill barrels of oil per day and about 111 bill standard cubic meters (SM3) gas. Norway is ranked as the seventh largest oil exporter and the fourteenth largest oil producer in the world. In 2011 Norway was the third largest gas exporter and the sixth largest gas producer in the world.3

Yesterday Created Today

When they gave their opinion in connection with the UN Geneva conference concerning a law for the oceans in 1958, Norwegian geologists were quite clear that they did not believe that there would be oil or gas on the Norwegian continental shelf. Nevertheless, following a successful survey in Holland, US oil companies got permission to conduct geological surveys in 1962. At this stage Phillips Petroleum applied for exclusive rights to search for oil and gas in the Norwegian continental shelf. Instead Norway, following a declaration of the rights given in the Geneva convention in 1958, formed the Act of 21 June 1963 No. 12, which declared "The right to submarine natural resources is vested in the State" and that "The King may grant Norwegian or foreign persons ... to explore or exploit the natural resources." Following this law Norway divided the continental shelf in blocks and invited companies to apply for licenses.

In 1966 the first rig began drilling activities for Esso, but it was not before 23rd December 1969 that Phillips Petroleum discovered Ekofisk, the largest oil field ever found and in 1971 the first oil was produced. The field also contained gas, which later were piped to the continent.

In 1971 the Norwegian Parliament (Stortinget) prepared principles for the oil and gas industry, later referred to as the "10 oil commandments"4, which formed the basis for the future Norwegian politics on the sector:

  1. National supervision and control must be ensured for all operations on the Norwegian continental shelf (NCS).
  2. Petroleum discoveries must be exploited in a way which makes Norway as independent as possible of others for its supplies of crude oil.
  3. New industry will be developed on the basis of petroleum.
  4. The development of an oil industry must take necessary account of existing industrial activities and the protection of nature and the environment.
  5. Flaring of exploitable gas on the NCS must not be accepted except during brief periods of testing.
  6. Petroleum from the NCS must as a general rule be landed in Norway, except in those cases where socio-political considerations dictate a different solution.
  7. The state must become involved at all appropriate levels and contribute to a coordination of Norwegian interests in Norway's petroleum industry as well as the creation of an integrated oil community, which set its sights both nationally and internationally.
  8. A state oil company will be established which can look after the government's commercial interests and pursue appropriate collaboration with domestic and foreign oil interests.
  9. A pattern of activities must be selected north of the 62nd parallel, which reflects the special socio-political conditions prevailing in that part of the country.
  10. Large Norwegian petroleum discoveries could present new tasks for Norway's foreign policy.

In 1972 Den norske stats oljeselskap a.s (Statoil), the state-owned oil company, and the industry-regulating organization, the Norwegian Petroleum Directorate (NPD), were established. The latter was later divided into Norwegian Petroleum Directorate and Energy and the Petroleum Safety Authority Norway (PSA). PSA is organized under the Ministry of Labour (NPD under the Ministry of Petroleum and Energy) and has the responsibility for health, safety and working environment on the continental shelf.

In the beginning the state owned 50 per cent in each production license. Later Stortinget decided that this proportion could be increased or reduced in each case.

Statfjord was founded in 1974—one of the world's largest offshore oil discoveries.

Midgard, part of Åsgard off mid-Norway, was discovered in 1981, and Snøhvit gas field in the Barents Sea was discovered in 1984. [Snøhvit later ranks as the world's northernmost producing field, and utilizes the longest multiphase flow transport system (unprocessed gas, water and lighter hydrocarbons are sent together through the same pipeline) on the planet.] In this year it was also decided to take a proportion of Statoil's holdings in a number of fields transferred to a special account—later to become a part of the oil fund.

In 1986 the Sleipner East and Troll field developments were initiated, making it possible for Norway to become one of the most important energy exporters to the European market.

In 1992 the installation of the Haltenpipe gas line between Heidrun and Tjeldbergodden in Mid-Norway (245 km long) was approved and completed in 1996.

In 1997 Ormen Lange was discovered and came on stream in 2007. This field is positioned in deep water, 850 – 1100m, which initiated new development solutions.

Norway has always imposed strict environmental regulations on the petroleum industry; for example, permanent gas flaring was prohibited on the oil fields from the beginning and later Norway introduced carbon tax which made the industry take a number of steps to reduce the greenhouse gas emissions.  The Ekofisk Bravo platform had the first uncontrolled blowout in 1977 and this incident initiated strict safety and environmental regulations on the Norwegian continental shelf. The Alexander L Kielland disaster in 1980, which killed 123 people, necessitated steps, which in turn has made Norway into a world leader for safety. 5

Footnotes

1. NPD's website, Publications, "Fakta 2013",  The petroleum sector – Norway's largest industry

2. Ernst & Young, "The NCS – a bundle of opportunities", ONS Norway August 19th 2013

3. NPD's website, Publications, "Fakta 2013", The petroleum sector – Norway's largest industry

4. Regjeringen.no, White paper no. 28 (2010 – 2011), "An industry for the future – Norway's petroleum activities", Chapter 1 (unofficial translation of chapter 1)

5. NPD website, Publications, "Facts 2013", Norwegian Petroleum History, The Norwegian Oil and Gas Association's website, Facts, "Petroleum History"

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