Diversity and competition

An overarching goal of the petroleum policy is to facilitate efficient and profitable exploitation of the oil and gas resources in a long-term perspective. Strong competition and a diversity of players in all parts of the value chain are important for good resource utilisation and to ensure sufficient interest in the opportunities that are found on the shelf.

Production licences are normally awarded to a group of companies, led by an operator. Through the cooperation in the production licence, the various companies will check and challenge the operator’s assessments so that the best possible decisions are made, while at the same time allowing less experienced companies to build more expertise.

Since 2000, there has been a considerable increase in the number and diversity of companies operating on the Norwegian shelf. Before this, a small number of large Norwegian and international companies dominated. As parts of the continental shelf have matured and different challenges have arisen, the Norwegian authorities have considered it important to make adjustments to ensure effective exploration, development of discoveries and production on fields that are on stream.

Three adjustments in the framework conditions have been particularly important in stimulating competition and increasing the diversity of companies on the shelf:

1. The prequalification system was established to give companies an opportunity to secure an evaluation of their suitability for participation on the Norwegian continental shelf before they devote resources to assessing concrete business opportunities. There has been very significant interest in prequalification since the system was introduced, and there continues to be a steady stream of companies who want to secure such an advance assessment.
2. The APA scheme, together with adjustments in how work programmes are designed, give the companies steady access to exploration acreage and ensures continuous exploration activity. In this way, the system also facilitates efficient use of resources in the oil companies and ensures that acreage previously relinquished by other companies becomes available to companies with new ideas. This means that previously awarded acreage will also be subject to new assessments.
3. The exploration reimbursement scheme was introduced to ensure equal tax treatment of exploration costs for companies both inside and outside tax position. This will thus reduce entry barriers for new players and facilitate profitable exploration. Through the exploration reimbursement scheme, the companies can choose whether they want to receive a refund of the tax value (78 per cent) of the exploration costs in subsequent years, or whether they prefer to deduct the exploration costs from the tax basis. Established companies in tax position can deduct exploration costs on a continuous basis and thus reduce their tax payments. Companies that are not in tax position can either offset the tax value of the exploration costs or alternatively carry the loss forward with interest compensation (and possibly receive a refund of the tax value of the loss in the event they cease activity on the Norwegian shelf). For small companies that are not yet in tax position, the reimbursement scheme provides lower tied-up capital, and thus an improved cash flow.

The companies that have entered the Norwegian continental shelf since 2006 have contributed to a number of discoveries. Several of these companies have also made the transition from exploration activity into the development and operations phase. Larger resources, and a different type of resources, are required for companies that are developing fields as compared with companies that are only active within exploration activity.

At year-end 2023, there were 27 exploration and production companies active on the Norwegian shelf, 20 of which were operators. This is a smaller number compared with a few years ago, and is the result of factors including consolidation among the companies. While some companies have opted to leave the shelf, in whole or in part, others have reinforced their activity.

No other players can match Equinor (former Statoil) when it comes to broad-based expertise and knowledge about the Norwegian shelf. The company also plays a key role as operator for many of the large, older fields on the shelf. It is extremely important for overall value creation that the company continues an active, effective and long-term commitment on the Norwegian continental shelf.

Today, there are many large and medium-sized companies with an active commitment on the Norwegian shelf, and there is still a combination of experienced and active large and medium-sized companies, more pure exploration companies and new companies within both exploration and production. This diversity and competition among the players in all parts of the value chain contributes to good resource utilisation and ensures continued interest in the opportunities that are found on the Norwegian shelf.