The main statute providing the legal framework relevant for petroleum activities on the NCS is the Petroleum Act, regulating subsea activities and onshore activities that form an integrated part of the offshore petroleum production. Detailed rules and adaptations are set out in the appurtenant Petroleum Regulations of 27 June 1997 No. 653. Access to third-party infrastructure is also subject to other governmental regulations (see question 10). To date, no onshore exploration and production activities have been conducted in Norway.
Petroleum activities on the NCS are regulated by a licensing system administered by the MPE and the Norwegian Petroleum Directorate, and there are two distinct licences that may be granted by the MPE: exploration licences and production licences. In addition, a specific licence to install and operate pipelines is also granted by the MPE. The exploration licence is not exclusive, and does not give a preferential right if a subsequent production licence is granted. A production licence is, on the other hand, exclusive, meaning licensees are given a sole right to conduct surveys, exploration and production within the geographical area defined by the production licence.
The award of a production licence is, pursuant to the Hydrocarbons Licensing Directive (94/22/EC), made on impartial, objective and non-discriminatory criteria whereby the applicant’s technical expertise, financial strength, geological understanding and experience on the NCS, or similar areas, will be weighted.
Exploration and production licences are awarded separately, and an exploration licence will not necessarily be awarded prior to a production licence. Exploration licences are granted for a period of three calendar years, unless otherwise specifically stipulated in the licence. Production licences are granted for an initial period of up to 10 years, and if the licence is granted for a shorter period of time, the MPE may subsequently extend the licence period within the 10-year limit. When licensees have fulfilled the mandatory work obligations set out in a production licence, the production licence may be further extended. The possible extension period is, as a general rule, up to 30 years, but may under specific circumstances be up to 50 years.
Offshore areas regarded as mature parts of the NCS are subject to a simplified annual licensing round termed awards in predefined areas. Areas not regarded as mature, on the other hand, are subject to ordinary licensing rounds, which traditionally have been held every second year. Applicants that are prequalified as upstream petroleum companies can apply individually or as a group. Companies being awarded a production licence are obliged to enter into a joint venture, which is normally established through a decision made by the MPE on the date that the production licence is awarded.
The joint venture is governed by a standard joint operating agreement (JOA) and accounting agreement stipulating detailed rules pertaining to, inter alia, the role of the management committee and the operator, and the licensees’ rights and obligations. The award of a production licence is conditional upon the companies’ signature to the JOA and the accounting agreement.
If the licensees decide to develop the petroleum deposit, a plan for the development and production (PDO) must be submitted to the MPE for approval, as provided under section 4-2 of the Petroleum Act. The MPE shall also approve the production schedule stipulated by the licensees.
In addition to ordinary awards, licences on the NCS can also be obtained through a transfer of assets. Such transactions require the consent of both the MPE and the Ministry of Finance (MoF) (section 10-12 of the Petroleum Act and section 10 of the Petroleum Taxation Act of 13 June 1975 No. 35).
The MPE, the MoF, the Ministry of Labour and Social Affairs, the Ministry of Climate and Environment and the Ministry of Trade, Industry and Fisheries, are the main governmental bodies responsible for petroleum activities on the NCS.
The MoF has overall responsibility for ensuring that the state collects taxes and fees (corporate tax, special tax, carbon dioxide tax and nitrogen oxide tax) from the petroleum activities. The Petroleum Taxation Office is part of the Norwegian Tax Administration, and reports to the MoF. Its primary task is to ensure correct levying and payment of taxes and fees adopted by the parliament.
Other important authorities include the Petroleum Safety Authority, which sits under the Ministry of Labour and Social Affairs and has the regulatory responsibility for technical and operational safety, including emergency preparedness and a safe working environment for petroleum activities. The Norwegian Environment Agency is the administrative body responsible for all environmental issues related to petroleum activities, including granting requested permissions to pollute. Finally, the Norwegian Coastal Administration, which sits under the Ministry of Transport and Communications, is responsible for the state’s emergency preparedness in the event of pollution (spill of oil).
Decisions of subordinate bodies may be appealed to the relevant ministry in charge. Further, decisions made by the ministries as a first instance may be appealed to the King in Council (ie, the government). Administrative decisions may also, to the extent all administrative rights of appeal have been exhausted, be appealed to ordinary courts. In such case, the court may normally only assess the procedure and application of law, and not the administrative authority’s application of discretion.
The regulator has various legal tools to ensure compliance with its decisions, which include the following.
- In the event of non-compliance with regulator decisions, an order may be issued in or pursuant to the Petroleum Act, and the specific regulator that has issued the order may stipulate a current fine for each day that passes after expiry of the time limit set for implementation of the order, until it has been complied with. Notice of a fine shall be given by registered letter or by another equally reliable method. An order to pay a fine is regarded as grounds for enforcement of distraint.
- In the event of serious or repeated violations of the Petroleum Act, regulations issued pursuant hereto, stipulated conditions or orders issued, the government may revoke a licence granted pursuant to the said Act.
- Wilful or negligent violation of provisions or decisions issued in or pursuant to the Petroleum Act shall be punishable by fines or imprisonment for up to three months. In particularly aggravating circumstances, imprisonment for up to two years may be imposed. These provisions shall not apply if the violation is subject to a more severe penalty under any other statutory provision.
- As part of the overall assessments when awarding a production licence, the authorities may take into account whether the applicant has shown any form of inadequate efficiency or inadequate responsibility as a licensee. Although not a sanction, the awareness that a potential non-compliance with the authorities’ decisions may be decisive when competing for an award of a production licence is also likely to contribute to the high degree of compliance with the authorities’ decisions.
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