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UPDATE 2-Oil firms keen to explore off Norway despite higher costs

Tue, 21st Jan 2014 16:04

* Record 48 firms awarded stakes in mature area licensinground

* Some 40 firms apply to explore in Norway's Arctic

* First rounds since last year's oil tax hike

* Norway's oil output fell to 25-year low in 2013

By Gwladys Fouche and Henrik Stolen

SANDEFJORD, Norway, Jan 21 (Reuters) - Norway awarded arecord 65 oil and gas production licences in a mature arealicensing round on Tuesday and attracted high interest from oilfirms in exploring its Arctic, despite an oil tax hike andincreased industry costs.

A record 48 companies were awarded stakes to explore inmature areas - licences that are already opened for exploration- and 40 oil firms expressed interest in exploring in Norway'sBarents and Norwegian Seas as part of the Nordic country's 23rdlicensing round for new areas.

Norwegian authorities hope the interest will prolongproduction, after the world's seventh-biggest crude oil exportersaw its oil output fall to a 25-year low in 2013.

"Exploring in new and mature areas is the key to creatingvalue for the industry," Norway's oil and energy minister TordLien told an audience of oil and gas executives.

The licensing rounds were the first after the previouscentre-left government, which left power in October, introducedan oil tax hike opposed by oil and gas companies.

The tax increase, together with sharply higher costs andlower oil prices, has led to delays in the development offlagship Arctic projects as well as of smaller oilfields furthersouth.

Reflecting this cautious optimism, industry executives haveforecast tighter monitoring of capital expenditure this year,according to a report released on Monday by Norway's DNV, a toptechnical adviser to the oil industry.

The survey indicated that Norway has fallen to 9th place onthe list of most attractive investment destinations for theindustry from 4th place two years ago, mostly because of ashortage of skilled professionals and competition frominternational rivals.

"This is causing professionals to focus spending on theprojects that will provide the greatest return on investment,"said the report.

Despite these concerns, the results of the licensing roundsshowed that oil firms remained keen to continue exploring offNorway.

MATURE AREAS

In the mature licensing round, the biggest winners wereStatoil with 7 operatorships in 10 licences, Sweden'sLundin Petroleum with 4 operatorships in 9 licences,Wintershall, a unit of German chemical giant BASF,with 5 operatorships in 8 licences, and Tullow Oil with4 operatorships also in 8 licences.

Among the majors, Total, Shell,ConocoPhillips were awarded operatorships, whileExxonMobil and Chevron were awarded licences. BP did not apply.

Two companies that applied for licences were leftempty-handed: RWE Dea and Iceland's Eykon Energy.

"It has do with the quality of their applications," Lientold Reuters, without elaborating further on the reasons.

Out of 65 production licences awarded, 38 are located in theNorth Sea, 19 in the Norwegian Sea and 8 in the Barents Sea.

GO NORTH

In the new areas' licensing round, some 40 companiesnominated 160 blocks they would like to explore with 140 ofthese in the Barents Sea and the rest in the Norwegian Sea.

Among the majors, Shell, ConocoPhillips, Chevron, BP namedareas they would like to explore. ExxonMobil did not apply.

Among the other companies, Statoil, Tullow Oil, Wintershalland Russia's Lukoil applied for licences.

This licensing round will include for the first timelicences in an offshore zone the size of Switzerland thatborders Russia, where some 1.9 billion barrels of oil equivalentcould lay buried under the seabed.

"We are very interested in this area," Tor Arnesen, managingdirector of Shell in Norway told Reuters.

The results of this licensing round will be announced laterthis year.

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