Reflections

NCS APA 2016 – Considerable interest in further exploration?

18.01.17
This article was originally published on the OE Digital website. Read it here.

The latest licence awards in Norway, 2016’s Awards in Predefined Areas (APA), have been announced. The Ministry of Petroleum and Energy published the results with the title “considerable interest in further exploration”. We ask if this is the case, and take a look at some key insights;

“Just 29 companies are awarded licences in this round. This is the lowest in the past decade”

A sustained low oil price leads to less interest from some…

  • Just 29 companies are awarded licences in this round. This is the lowest in the past decade (previous low 33, APA 2006) and continues a downward trend seen since a peak in applications and awardees in APA 2013 (48 awardees, 50 applicants).
  • There were also just 32* licence applicants, 11 fewer than at any point in the past decade. Only three companies who did apply didn’t receive licences. These were North E&P, Origo Exploration and Grail North Sea – who would have been a new entrant.
  • Some “usual suspects” are missing from this year’s applicants. Tullow, Lime, Dong and Bayerngas all didn’t apply, despite participating in APA ’14 and ’15. Other big winners from the past receive many fewer licences this time round. DEA* won just 2 licences, compared with 12 in APA ’14. HiTec vision backed Point, who had big success last year when they applied as three separate entities (Pure, Core and Spike – 11 licences) received just 5 licences. Of the 32* awardees in APA 2015, 20 received fewer or no licences in this round.
  • This year APA hasn’t seen any complete new entrants. M Vest did receive their first licence through a bid-round, but they were formed from management of Atlantic Petroleum, and took on Atlantic’s licences, so already had a foothold on the Shelf.
  • Only three licences were awarded in the Barents Sea. This is marginally down on past years despite 32 new Barents blocks being added to the offered acreage for this round. It could be argued the 23rd Round earlier in 2016 focussed on the Barents Sea (10 licences awarded) lowering the interest in APA acreage. Though difficulty to monetise exploration, both from low market values and long lead times to first oil, surely plays its part.

…But this gives an opportunity for others to step up

  • The total number of licence awards is not down on previous years. And 36 licences are awarded in the North Sea, the most since 2013. One purpose of APA is to encourage rejuvenation of acreage, and this shows companies are looking to return to mature areas with new technology, data or ideas.

“companies are looking to return to mature areas with new technology, data or ideas”

  • Wellesley deserves a mention as being particularly successful. They pick up 8 licences, including 3 as operator. This is the second most of any company (excl. Statoil and Petoro) and is especially impressive given they entered Norway completely organically through last year’s APA round.
  • Aker BP received 21 licences, more than double any other company. To put this in context over the past three APA rounds no company has received more than 12 licences (excl. Petoro and Statoil). Aker BP formed when Det Norske and BP Norway merged to form the largest Norwegian independent oil and gas producer.
  • Two majors have stepped up their position in this time round. Shell (7 licences) and ConocoPhillips (6) both receive 4 more licences than in the last APA round. This is despite a new report released on the eve of the awards suggesting Majors may look to leave Norway in 2017 because of potential fiscal instability.
  • LOTOS take a step up and receive their highest ever number of APA awards (5). Previously they have been awarded just 1 or 2 licences a year, and have focussed on growing inorganically through acquisitions of licences packages including development and production (from Centrica in 2013, and ExxonMobil in 2015).
  • A group of companies retain a consistent interest, which hasn’t been damped by the external environment. These include Capricorn, Centrica, Concedo, Eni, Faroe, Fortis, VNG and Wintershall. Most of these focus their business predominantly, if not exclusively, in Norway.

*Factoring in company consolidations /acquisitions: Det Norske and BP Norway form Aker BP, DEA acquires E.On, Point Resources formed as merger between Core Energy, Spike Exploration and Pure E&P (this happened in 2015)

Please contact Duncan John, djohn@strategicfit.co.uk, www.strategicfit.com, for further information.