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Petroleum activities should be followed up more closely to ensure recovery of profitable reserves

Oil deposits in existing fields and nearby discoveries constitute resources that can provide society with great value.  – The Ministry of Petroleum and Energy and the Norwegian Petroleum Directorate (NPD) should vigilantly follow up operations, further development and coordination of activity in fields and new discoveries to ensure optimum resource utilisation, says Auditor General Per-Kristian Foss.

Published 4/15/2015 2:00 PM

Document 3:6 (2014–2015) The Office of the Auditor General's investigation of the authorities' efforts to improve oil recovery from mature areas on the Norwegian continental shelf was submitted to the Storting on 15 April 2015.

Infrastructure in existing fields eventually becomes technically unsuitable or unprofitable, and new discoveries near fields in operation often depend on being developed while the infrastructure is in place. The Office of the Auditor General's (OAG's) audit concludes that there is a risk that socio-economically profitable petroleum resources will therefore not be recovered in time. The NPD does not have sufficient impact in the follow-up of such projects, and the Ministry of Petroleum and Energy makes limited use of the instruments that are available to ensure improved recovery in mature areas.

In assessing projects, oil companies usually require higher rates of return than the authorities; they may have a more short-term approach and weigh projects that can provide improved recovery against other projects on the Norwegian continental shelf and abroad. – Even though improved recovery is profitable for Norway, such projects may then be assigned lower priority by the oil companies, says Foss.

– The NPD actively promotes sound petroleum resource management. However, in some cases, dialogue with the licensees is not enough to ensure sufficient progress in further field development. There is also a need for closer follow-up to ensure unitisation of fields and coordination of developments and operations, he says.

The OAG recommends that the Ministry of Petroleum and Energy assess how the NPD's follow up can be made more efficient - including more systematic review of operations and further development of fields, and in some cases, more exercise of authority. Furthermore, consideration should be given to stipulating clearer requirements concerning coordinated petroleum activities where this is appropriate, and to the NPD regarding area plans that facilitate greater cooperation.

– Petoro's capacity can limit the company's ability to maximise value creation for the State's Direct Financial Interest, so the Ministry of Petroleum and Energy should consider how Petoro can make an even better contribution in this regard, says Foss.

In his response, the Minister of Petroleum and Energy notes that the Ministry continuously assesses whether the right balance has been struck between framework governance and use of direct instructions and terms. The OAG's assessments and recommendations will be included in the ongoing work of managing oil and gas resources so as to facilitate profitable production in the long term, writes the Minister.

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