Background

Petroleum production on the Norwegian continental shelf requires a production licence from the authorities. The licence confers an exclusive right to engage in exploration, exploration drilling and recovery of petroleum deposits in the areas covered by the licence. The companies that have been awarded a licence (licensees) will be the owner of the petroleum produced. As a rule, production licences are awarded in licensing rounds. A total of 20 numbered licensing rounds have been held for the Norwegian continental shelf from 1965 until 2009.

There have been a number of adaptations and changes to the system for awarding production licences since 1965. In order to ensure greater predictability and more even access to areas for the industry, a system of annual awards in pre-defined areas on the Norwegian continental shelf (the TFO system) was established in 2003. This system involves the industry being given access to a pre-defined area that includes all mature areas on the continental shelf, i.e. areas with known geology, minor technological challenges and well-developed or planned infrastructure. The TFO area is extended as new areas are deemed to be mature, and it cannot be reduced.

Objective

The goal of the investigation was to examine the extent to which administrative practice in connection with the awarding of production licences in the petroleum sector is in accordance with the decisions and intentions of the Storting as expressed in the Act relating to Petroleum Activities and the Petroleum Regulations. Administrative practice has also been evaluated in relation to general requirements for satisfactory case processing and the principles of good administrative practice.

Results

The investigation shows that the environmental and fisheries authorities find the TFO system problematic in relation to the balancing of environmental and fisheries considerations that is required in connection with the announcement of areas. Reference is made, among other things, to the fact that the TFO area can only be extended, not reduced, and it is pointed out that it should be possible to withdraw areas from the TFO system if new and improved knowledge about environmental and fisheries conditions so indicates. In this context, reference is also made to the precondition that the system was not supposed to include the most sensitive areas on the continental shelf in terms of environmental impact and fisheries.

The investigation shows that the assessments and decisions that form the basis for the authorities’ proposal for awarding production licences are consistently based on the award criteria set out in the act and regulations and presented in announcement texts. The companies' professional expertise forms the basis for and has a decisive influence on decisions to award production licences. Geological understanding and technical expertise (including HSE) are the deciding criteria.

The investigation also shows how internal working methods, procedures and guidelines contribute to applications and companies being evaluated in relation to the announced award criteria in a thorough, uniform and systematic manner. It also shows that systems have been established for quality assurance of key assessments.

The investigation shows that the Petroleum Directorate’s assessments are well documented in the Directorate's recommendations to the Ministry of Petroleum and Energy. It also shows that traceability has improved over time, in that the recommendations now contain more detailed information about evaluations, and thereby better reflect the evaluation work actually carried out in the Directorate. The investigation shows that the Petroleum Safety Authority Norway’s evaluation of the companies’ HSE expertise is satisfactorily documented in its recommendations to the Ministry of Labour and Social Inclusion.

The Ministry of Petroleum and Energy prepares a summary memo for each round after the award decision has been made. The investigation shows that these memos meet the documentation and traceability requirement as regards the importance attached to the expert advice of the Petroleum Directorate and the Ministry of Labour and Social Inclusion (Petroleum Safety Authority Norway) as well as the Ministry's own overall assessments. The investigation also shows that the summary memos have been developed over time and have now found a satisfactory form.
The authorities acquire sensitive information about the companies during the processing of applications for production licences. The investigation shows that the petroleum authorities have not considered disqualification periods or ordering personnel to abstain from dealing with certain matters when they move to jobs in petroleum-related commercial activities outside the government administration, cf. ‘Retningslinjer for karantene og saksforbud ved overgang til ny stilling mv. utenfor statsforvaltningen’ (’Guidelines for disqualification and abstaining from dealing with certain matters when moving to a new position outside the government administration’ – in Norwegian only).

The overall conclusion of the investigation is that administrative practice in connection with the awarding of production licences in the petroleum sector consistently meets the requirements that can reasonably be set on the basis of general requirements for satisfactory case processing and the principles of good administrative practice. In this context, there is particular reason to emphasise that the documentation and traceability of material assessments and decisions made during the awarding process have improved over time.