A great number of oil companies would like to explore the waters located on the easternmost end of the Norwegian shelf, in the immediate vicinity to the Russian border.(Photo: Npd.no)
A major number of oil companies are signaling interest in Norwegian Arctic waters adjacent to the Russian border. However, spiraling investment costs, as well as sensitive political considerations, could stagger project developers.
A total of 40 energy companies have nominated 160 blocks for the upcoming 23rd Norwegian License Round. Among the nominations are 140 blocks in the Barents Sea, a major share of them in areas close to the Russian border, information from the Norwegian Ministry of Energy and Petroelum reads. The interest comes as seimic studies confirm the prospective qualities of the border area. Until 2011, the waters were part of a Norwegian-Russian disputed zone.
The nominations submitted by the companies will now be assessed by the authorities and a key part of the proposed blocks are subsequenlty likely to be included in the new lisence round.
In case a major discovery is made in the area, field developments could start soon after year 2020, the Ministry maintains. Oil Minister Tord Lien in a press release underlines that his Progress Party can “guarantee continued shelf exploration” and that the major interest from the companies is positive and important.
However, the rapid development of the waters adjacent to Russia will not come easy. Costs on the Norwegian shelf have over the last years skyrocketed making it increasingly hard for the companies to make profits. According to the Norwegian Petroluem Directorate, costs for operators have more than doubled since 2005. The companies are now taking a second look at even some of their most profitable planned projects, Upstreamonline.com reports. In addition come major infrastructure challenges in the area and the potential risks linked with exploration in areas located along the Russian border. In case of discoveries, a process of intricate interaction with Russian authorities will have to be initiated.
The Norwegian government still appears confident in its course. Recently, the Petroluem Directorate upgraded its total undiscovered resource estimate for the Barents Sea by 33 percent to eight billion barelse of oil equivalents. In addition, in a bid to make field developments more profitable the oil-friendly new government is considering to abolish an oil tax imposed by the former cabinet, newspaper Dagens Næringsliv reports.