Norway has since the 1965 first licencing round had offshore upstream petroleum exploration and production activities. Commercial production started in the early 1970s. For several years, Norway has been a substantial producer of oil & gas. In total more than 8 billion standard cubic meter oil equivalents (Sm3 o.e.) has been produced. Oil production peaked in 2001 with 3,4 mboed. The total annual NCS production peaked in 2004 with 264,2 o.e.  Natural gas production may not yet have peaked but has not made up for the decline in liquids production. Remaining resources still to be produced are per 1 January 2023 estimated by the Norwegian Offshore Directorate (NOD) to be approx. 7,5 billion Sm3 o.e.

Norway is still a significant exporter of liquids with approx. 117 Sm³ o.e (crude oil, LPG and condensates) produced in 2023. The same year more than 117 BCM (billion standard cubic meter) of natural gas was produced and predominantly exported via large submarine pipelines to the European market, including the United Kingdom. A modest LNG production plant is located on the mainland north of the Arctic Circle. Very small volumes of mostly imported hydrocarbon products primarily for the transportation sector are consumed. Only two small refineries operate. Domestic market use of natural gas represents only about 1.5% of annual natural gas production.

Norway exercises jurisdiction over significant petroleum resources located in the seabed of the Norwegian continental shelf (NCS). Exploration and production activities related to these resources are governed by the 1996 Petroleum Act, supplemented by regulations (Royal Decrees, Ministry or Directorate decisions outlining generally applicable rules) and a dedicated gradually developed concessionary regime that has been in place since 1965. The standardised production licence is the core petroleum rights documents awarded pursuant to public administrative law and is not a contract. The conditions for award and the procedure implemented for competitive bidding prior to an award of production licences are consistent with Norway’s EEA obligations and compliant with EU internal market rules including the 1994 EU Hydrocarbons Licencing Directive. The production licence requires licensees to enter into mandatory standardised joint operating agreement and accounting agreement establishing an unincorporated joint venture for each production licence.

Petroleum resources in the subsoil of on mainland Norway and any associated activities are regulated by the 1973 Land Petroleum Act. As most of the Norwegian mainland is without sedimentary rocks no activities have to date been conducted on the Norwegian mainland. Any activities related to petroleum within the territory of Spitsbergen is regulated by Norwegian law and jurisdiction expressed primarily through a 1925 Royal Decree – Bergverksordningen, established pursuant to the 1920 Svalbard treaty (entry into force in 1925). Very strict environmental regulations apply for most economic activity due to the sensitive Arctic environment. Only limited exploration activities have been undertaken at Svalbard and no commercial production.

The production licences extend exclusive right to licenses to perform exploration drilling and subject to approval of a development plan the production of petroleum. The production licences are therefore by far the most important of the licences awarded by the authorities. Production licences are either awarded for predefined areas (APA-Rounds) on an annual basis or by numbered licencing rounds, lately appearing regularly and bi-annually. The numbered bid rounds include acreage covering unexplored acreage or acreage limited previous activity.

The production licence contains standardised terms and conditions of which normally only the identification of licensees with their respective participating interest and the appointed operator vary. They have been rather uniform since their introduction in 1965, with a fundamental shift in 1972 when Norway introduced state participation. Their content is not negotiated and the production licence itself usually do not extend beyond 5-7 pages. Production licences are awarded initially for up to 10 years, normally for around 8 years and may be extended for commercial discoveries for up to 50 years, normally up to 30 years. At Government’s discretion, direct state participation managed by Petoro AS (a wholly State-owned licence portfolio manager) may be included in production licences.

Each production licence may also vary with regard to acreage specific limitation to activities due to environmental considerations and for APA licences an accelerated decision-making procedure for licensees to retain acreage. Enclosed and forming an integral part of the production licence is the petroleum agreement.

A facilities licence may be awarded subject to application for the construction, placement use and operation of offshore facilities for the production of exploitation of offshore petroleum resources when such facilities are not comprised by a development plan for a commercial petroleum deposit. Facilities licences are normally used for large projects servicing several production licences such the large diameter natural gas and liquids submarine landing pipelines. A facilities licence may include state participation.

The 3-year non-exclusive exploration licence is awarded for allowing collection of data. The exploration licence entails shallow drilling for calibration purposes. An exploration licence does not give any preferential position or privileges in resolution to the award of a production licence. Exploration licences do not have state participation. If the authorities wish to collect data beyond what is received from licensees, they do so independently pursuant to the material provisions of the law. For data collection by the authorities no exploration licence is issued, but any contract, entered into will be on standard terms comparable with exploration licence operative terms. The authorities do not make use of commercial companies to promote acreage or sell data collected.

Data collected under any petroleum licence must be shared with the Norwegian authorities for their internal use and publication of statistics at no cost to the authorities. After the expiry data confidentially pursuant to law, the authorities may share such data with the public or include such data in data packages.

To date there has not been awarded any licences related to unconventional oil or gas resources on the NCS or on the Norwegian mainland. The 1996 Petroleum Act and the 1973 Land Petroleum Act do not specifically address conventional resources. Some activities related to coal seam methane has been explored as Svalbard under the special Svalbard regime.

The Ministry of Energy (formerly named Ministry of Petroleum and Energy (MPE) until 1 January 2024) headed by a cabinet minister is the central upstream operations regulator in charge of petroleum resource management and upstream facilities operations. Its responsibility comprises resources, facilities and operations on the Norwegian Con­tinental Shelf (NCS) and on the Norwegian mainland. It also includes activities outside the NCS when consistent with public international law, such as in relation transboundary fields subject to treaties and the gas and liquids trunk export pipelines to the UK and the European continent. The Ministry of Energy is not in charge of Svalbard activities. The Ministry of Energy is the appeal body for any appeals lodged against decisions taken by the Norm Price Board stipulation of Norm Prices applied to the specific petroleum fiscal regime.

The Norwegian Offshore Directorate (NOD) (formerly named Norwegian Petroleum Directorate (NPD) until 1 January 2024) is the sector’s technical adviser and reports to the Ministry of Energy. The NOD conducts NCS-relevant petroleum sector analysis and data management. In co-operation with other authorities, the NOD ensures comprehensive follow-up of offshore and onshore petroleum operations and, subject to delegated power, develops secondary regulations and non-binding guidelines. The NOD is the registrar of the Petroleum Registry, in which exclusive petroleum rights (licences) must be registered, as well as any Ministry of Energy-approved mortgage or other security on petroleum facilities.

Effective from 1st July 2023, transferred from the Ministry of Labour and Social Inclusion (AID), the Ministry of Energy is in charge of working environment and petroleum operations safety (while coordinating security with the Ministry of Justice and Public Security and the Ministry of Defence). This regulatory responsibility comprises safety supervision, emergency preparedness (onshore and offshore facilities) and the working environment in both offshore and onshore petroleum operations, also beyond the Norwegian continental shelf subject to Norwegian law and jurisdiction.

The Norwegian Ocean Industry Authority (Havindustritilsynet, formerly named the Petroleum Safety Authority (PSA) until 1 January 2024) is a directorate reporting to the Ministry of Energy. The Norwegian Ocean Industry Authority monitors the health, safety and working environment aspects of the petroleum sector. It is authorised to issue regulations covering safety and working environment within its sector responsibility. It takes administrative decisions in the form of approvals, consents, makes orders (prohibitions and exemptions) and may issue administrative fines. The Norwegian Ocean Industry Authority may suspend or shut down petroleum operations. Its supervisory responsibility comprises all upstream oil and gas activities on the NCS (fixed, mobile, or floating) installations and vessels, all pipeline systems, including intermediary terminals and export pipelines for liquids and natural gas export to the EU and the UK, as well as associated onshore facilities. The Norwegian Ocean Industry Authority coordinates their activities with other Norwegian sector authorities with responsibilities for HSE regulation, like the Labour Inspection Authority, The Civil Protection Authority, the Norwegian Environment Agency.

The Norwegian Environment Authority reports to the Norwegian Ministry of Climate and Environment. It is responsible for issuing pollution control permits pursuant to the Pollution Control Act.

The Ministry of Transport (MT) is in charge of the government’s emergency response to acute pollution from petroleum operations and shipping. The National Coastal Administration (NCA) is the MT advisory and executive body. The NCA Department of Emergency Response is responsible for governmental emergency response measures against acute pollution. The Norwegian Maritime Authority (NMA) is the administrative and supervisory authority to MT in matters related to health and safety, material security and the environment on Norwegian flagged vessels and foreign ships in Norwegian waters. The NMA is responsible for ensuring the legal protection of Norwegian-registered ships and registered rights in those ships. The NMA is subordinate to the MTIF and the Ministry of Climate and Environment.

The Ministry of Trade, Industry and Fisheries (MTIF) is in charge of and man­ages the state’s participation (SDFI) in production- and facilities licences, the SDFI upstream interest management company Petoro AS. Petoro AS is a management company and cannot be appointed operator. Gassco AS is a gas pipeline system-operator. MTIF also looks after the state’s interest as shareholder in Equinor ASA, a partly privatised and listed operative oil company.

The Minister of Energy represents the state as the sole owner of the gas pipeline system operator Gassco AS. Ownership control is exercised as shareholder through general meeting, the company’s ultimate body. For description of Gassco AS, see question 15 below.

Objective prequalification criteria apply for those entities wishing to become production licensees or operators for a production licence. A pre-qualification procedure has been established. Facilities licences and operators may be individually assessed dependent on the application for the facilities licence. Only Gassco AS may be the Operator of Gassled the export landing natural gas submarine pipeline system. Other pipelines operating under a facilities licence, including all liquids pipelines, will normally have one of the operators of a production licence making use of the pipeline, appointed as pipeline operator when such an individual pipeline or other facility is not part of Gassled.

Norway implements sanctions and embargoes imposed by the UN. Norway has to date also implemented most EU sanctions for the Russian invasion of Ukraine (2014 and 2022) related to investments (outward and inward) imposed against Russia, the operations of Russian owned or controlled entities and sectioned persons.

The 1996 Petroleum Act and 1997 Petroleum Regulations regulate facilities and petroleum activities related to offshore petroleum resources and comprise a suite of special rules governing liability for pollution damage and compensation to Norwegian fishermen. The Petroleum Act (Chapter 9) include principles and rules specific to safety.

Five HSE specific regulations are adopted pursuant to the 1996 Petroleum Act, the Working Environment Act, as well as the Pollution Control act (among others). These regulations are not prescriptive in nature, but stipulate risk- and performance-based requirements. Requirements are not listed with regard to a certain activity, method or equipment, but rather as a description of required performance of results with reference to established standards to attain requirements stipulated by law. There are non-binding guidelines issued by the safety authority assisting industry in ways or approaches among alternative methods, tools, procedures or solutions to comply with regulatory requirements. The rules also demand systematic monitoring and follow-up by industry ensuring documented systematic improvements in performance. This regulatory approach compels and enables industry to take advantage of experience gained and technical development, applying the best available technology (BAT) at any given time. The regulatory approach assists the system in self-improvement and reducing the risk of industry having to comply with out-dated methods or solutions.

The regulations address important aspects of HSE in an integrated manner. HSE requirements apply to petroleum activities and facilities subject to Norwegian law and jurisdiction. That jurisdiction extends to the Norwegian Continental Shelf (NCS) and to several onshore terminals and processing facilities located onshore in Norway and abroad. Jurisdiction over terminals abroad is established as concurrent jurisdiction through bilateral treaties.

In addition to health, safety and working environment aspects, regulations also address requirements for the protection of the natural environment, including biodiversity. Regulation requires systematic monitoring of environmental parameters, in the water column and on the seabed, comprise limitations on discharges to sea and emissions to air, as well as waste handling.

The Pollution Control Act applies to all upstream petroleum activities (on- and offshore). The act requires licensees to obtain specific discharge permits prior to commencement of exploration drilling, commencement of production (extraction from reservoirs) or processing (on land terminals) etc. A discharge permit will inter alia include discharge limits for specific components (and overall), waste handling procedures, etc.

These Regulations are enforced by the Norwegian Ocean Industry Authority, the Environment Agency, the Norwegian Directorate of Health and the Norwegian Offshore Directorate. There are also several general HSE regulations pursuant to the Working Environment Act and the Fire and Explosion Protection Act that are made applicable to the offshore petroleum activities.

Prior to submission of development plans, plans for installation and operation of facilities (facility license application) and decommissioning plans the 1996 Petroleum Act requires that licensee(s) conduct comprehensive impact assessments, undertake an assessment and mitigation measure presented in a report, which has to be publicly circulated for comments prior to submission for approval of the development- or decommissioning plan. The EIA covering environmental aspects, societal and communal matters including the impact on other commercial activities in the area such as fishing and consequences for existing infrastructure. This comes on top of a comprehensive strategic environmental impact assessment (SEIA) conducted by the state prior to submitting to Stortinget a proposal to open new areas for petroleum activities. SEIA requirements and the procedure for opening new areas for petroleum activities are stipulated in petroleum legislation.

In addition to the general ban on flaring, venting (save for during commissioning of facilities or for reasons of emergency) and discharge of effluents to sea and soil, fiscal disincentives are applied. These disincentives aim at penalising and thus reduce those discharges and emissions permitted. The fiscal disincentives are predominantly in the form of charges and taxes on greenhouse gas emissions e.g., the CO2 and NOx, as well as limitation on emissions to air of volatile components.

No economic terms are negotiated for the award of petroleum licences. There is no signature or other cash bonuses.

The largest portion of Government revenue from upstream petroleum activities is derived from its direct investment called State Direct Financial Interest (SDFI) in non-carried participating interest is production licences and facilities licences. SDFI is not a legal entity separate from the state, but the SDFI petroleum licence interest and associated petroleum activities is managed by Petoro AS a State wholly owned company acting as licensee on behalf of the State. The SDFI participating interest is determined on a discretionary basis by the government in each round of production licence awards or when granting individual facilities licences.

A company that is resident for tax purposes in Norway is subject to corporate income tax and capital gains tax under the General Taxation Act (GTA) on its worldwide income, including income derived from upstream petroleum activities subject to Norwegian tax jurisdiction. The GTA also applies to tax resident companies. Non-resident companies are not subject to tax pursuant to the GTA for petroleum activities on the NCS. The GTA corporate income tax rate and the capital gains tax rate is 22%.

Licensees may be incorporated and headquartered within the EEA but will still have to be tax resident to be awarded a petroleum production licence or a facilities licence. All licensees are subject to requirements of a certain representation in Norway to remain directly accountable under applicable law for the management of its interests and follow up its HSE and other obligations in upstream petroleum activities. These requirements apply regardless of place of incorporation or principal place of business of the licensee or the ultimate beneficial owner of interests in exclusive petroleum rights. Suppliers of goods and services do not necessarily have to be tax resident.

The 1975 Petroleum Taxation Act (PTA) is applicable to those having a participating interest in production or exploitation of petroleum resources subject to Norwegian jurisdiction. The geographical scope of the PTA include income generated by these companies on the NCS (and in certain cases beyond pursuant to public international law and treaties) associated with or arising out of petroleum production and certain exploitation related activities. The PTA applies to extraction, processing and pipeline transportation (such as inter-field and landing- or export submarine pipelines), in addition to certain onshore terminals. The PTA contains special rules relating to cost allocations, deductions, depreciations, etc. The PTA also establishes the statutory basis for collection of resource rent associated with production of petroleum (petroleum special tax). The petroleum special tax rate is 56% and is added on top of the 22% ordinary income tax rate under the GTA. The marginal tax rate applicable to entities holding exclusive petroleum rights is thus 78%.

Petroleum operations costs, including exploration costs, are tax deductible when incurred. A system was implemented in 2005 whereby a licensee may claim a cash refund of the tax value of NCS-related explorations direct and indirect costs (financial costs excluded). The system was abolished subsequent to a major shift in the fiscal regime made by Stortinget on 17 June 2022. The amendment is effective for the 2022 tax year, but only applies the petroleum special tax regime. The new special tax regime is a cash flow-based tax system, allowing immediate deductions against income subject to petroleum special tax for investments when incurred. (See description of the permanent and the interim amendments in the PTA below, under questions 18 and 19).

A proposal for rather comprehensive amendments to the PTA has been circulated by government for public consultation. (See a brief description of the proposal in question 18 below).

For fiscal purposes, a norm price system is stipulated on crude oil-related transactions that are not conducted between independent parties in an open and transparent market.

Royalty on gas was abolished in the 1990s and on crude oil (all liquids at atmospheric conditions) finally early 2000s.

There is an area fee for acreage held in production licences, but this has no revenue generation purpose or economic result. The fee is instituted to penalise companies holding on to acreage that is not actively explored or comprised by a production project.

Applications fees are imposed for certain comprehensive applications such as the award of a production licence. Entities may be charged also for costs associated with HSE monitoring and control. These charges have no revenue generating purpose or effect. Rates are limited and imposed to abate the cost for the authorities to process such substantial documents.

Through Norway’s membership in the European Economic Area (EEA) EU internal market rules, including the four freedoms, the prohibition of quantitative export restrictions and competition law applies to petroleum marketing and sales. Licensees are in free to export all petroleum produced. Domestic supply obligations are unlikely to be imposed due to Norwegian production and the domestic consumption level, combined with State Direct Financial Interest (SDFI) entitlement to volumes produced pursuant to its participating interest managed by Petoro AS on its behalf. Supply of petroleum in cases of emergency to cover national requirements regulated by the 1996 Petroleum Act may apply but are non-discriminatory and volumes shall be taken at market prices.

Cessation of petroleum activities, decommissioning and potential disposal of facilities are regulated by provisions in the 1996 Petroleum Act and the 1997 Petroleum Regulations. Norwegian decommissioning legislation is considered to be compliant with requirements of public international law including UNCLOS, the London Anti-dumping Convention and the OSPAR Convention, all ratified by Norway.

A description of plans for future decommissioning is required included in plans for development and operations (PDO) of production projects and plans for the installation and operation of facilities (PIO) for facilities not comprised by an approved PDO. The licensee or the owner of a facility is obliged to submit a decommissioning plan no earlier than five years and no later than two years prior to planned cessation of petroleum activities or use of a facility. A decommissioning plan may comprise one of more facilities in one or more licences, fields or areas.

If licensees or owner(s) fail to submit a decommissioning plan or implement an approved decommissioning plan, the authorities may cause a third party to undertake the preparation of the plan or implement an approved plan at the risk, liability and cost of the licensee or owner.

Facilities licences for offshore oil (all liquids) or gas pipelines are awarded as a result of the government approving a plan for the installation and operation of facilities (PIO), regulated by the 1996 Petroleum Act. Licensees to a facilities licence form an unincorporated joint venture. Facility licences typically comprise installations or pipelines serving several production projects under different production licences.

The right of third-party access, tariffs and other terms and conditions for use of transportation facilities are regulated by the 1996 Petroleum Act and separate regulations for third party access to facilities (for i.a. oil pipelines) and the tariff regulations for certain gas transportation facilities. For description of the specific gas transmission pipeline regulatory regime, see question 15.

Investment in downstream activities or infrastructure, except for natural gas transmission and distribution pipelines and natural gas storage, is guided by the same regulatory regime generally applicable to large-scale industrial projects and activities that regularly involve the construction, operation of use of infrastructure. Investment in construction, ownership, operation and use of downstream, natural gas transmission and distribution pipelines, certain small-scale LNG- and regasification and storage facilities is subject to the 2002 Natural Gas Act and the Natural Gas Regulations. These rules are consistent with the EU third internal market natural gas regulatory package, implemented in Norwegian law as part of Norway’s EEA obligation.

LNG facilities that form an integral part of the upstream production are subject to approval by the authorities of a Plan for development and operation of the facilities. Other permits for construction, operation and decommissioning are also required based on other laws.

The only LNG production facility in Norway is the Snøhvit LNG project, which was constructed to exploit the resources of three gas fields in the Barents Sea: Snøhvit, Albatross and Askeladd. There are a few small-scale LNG production facilities in the south of Norway serving the local market consumption.

Storage of natural gas is regulated by the Act on common rules for the internal market in natural gas of 2002 (Natural Gas Act 2002 – NGA 2002). All storage facilities in Norway are subject to law compliant with the rules of the EU’s third energy package. However, if the storage facilities are part of an upstream development, the Petroleum Act of 1996 will apply also for the storage.

Except for some minor onshore LNG gas storage facilities, there are no large-scale onshore natural gas storage facilities. There are no regasification facilities in Norway. The use of natural gas is mainly for export or reinjected in reservoirs for pressure maintenance or as temporary storage. Such reinjection forms a core component of the Norwegian resource management philosophy and enables improved or enhanced oil recovery.

There is a gas transmission system on the Norwegian Continental Shelf through pipelines from the various production fields to onshore facilities. “Wet gas” and NGLs are conveyed by pipelines to onshore intermediate or final receiving terminals. Dry gas is exported to markets in UK and continental Europe, mostly by direct landing submarine pipelines.

Gassco AS (Gassco) is the system operator of Gassled, the gas landing and export pipeline system. Gassco is wholly owned by the State. Gassco’s operator and system functions are regulated by law, including conditions for access to the system, reservation of capacity, booking of volumes and tariffs. Gassco’s tasks also include developing new infrastructure, managing the gas transport system’s capacity coordinating and managing the gas volumes through the pipeline network and to markets.

Gassled is a regulated unincorporated joint venture that owns the majority of the gas export facilities on the Norwegian Continental Shelf such as submarine pipelines, onshore intermediate processing facilities and ultimate receiving terminals in the UK and on the European Continent. Anyone with a need to transport Norwegian gas may use the infrastructure. Gassled has no employees and is organised through various joint venture committees.

The Gassled system is a natural monopoly subject to detailed regulations consistent with EU internal energy market rules. To promote sound resource management, the transportation tariffs are set to permit utility rate of return on investments in the transportation system, but such that any excess returns from oil and gas production are derived from the fields. The gas owners or shippers have access to capacity in the system based on the need for gas transport. Capacity rights can be transferred between shippers.

Natural gas does not constitute a significant share of the energy mix in Norway. Subject to material and procedural rules pursuant to law for obtaining and operating downstream transmission, distribution, regasification or storage facilities, there are no limitations on who may engage in the downstream natural gas market. Some natural gas wholly owned by regional authorities are vertically integrated. To all undertakings, vertical unbundling principles are enforced towards gas suppliers that operate in the market as transmission system operators providing natural gas to end customers.

The downstream gas market is regulated by the Act on common rules for the internal market in natural gas of 2002 (NGA 2002). The NGA 2002 is applicable for all activities related to natural gas unless the Petroleum Act of 1996 applies. For the downstream gas market, the NGA 2002 will serve as the regulatory framework also after the implementation of EU’s third internal energy market package, effective from November 1, 2019.

The regulatory regime under the NGA 2002 is based on a system where the Ministry of Energy appoints transmission, distribution, storage and LNF operators based on an individual decision. Each undertaking that owns a transmission system shall act as a system operator under the NGA 2002. The Ministry of Energy may issue regulations regarding access for natural gas enterprises and customers to such systems on objective and non-discriminating terms.

An enterprise that operates or have direct or indirect control over a unit that produce or supply natural gas to the market, may not own or run a transmission system or have any control over or have any rights in an entity that owns a transmission system.

Interim changes to the Petroleum Taxation Act (PTA) as part of the COVID-19 “compensation package” was made. The government has also developed comprehensive “policies” relating to emission of greenhouse gases from upstream oil and gas production. See answers to questions 19 and 20 below.

A major shift in the Norwegian fiscal regime applicable to the petroleum special tax was adopted by Stortinget on the 17 June 2022. The new tax regime under the PTA was made effective immediately. The new petroleum special tax regime is a cash flow-based tax system, allowing immediate deductions for investments as and when incurred against income subject to petroleum special tax. The uplift, accelerated linear depreciation, loss carry forward with interest, annual tax value cash back of exploration costs and refund of deficit at exit from Norwegian upstream petroleum activities have been abolished.

As described under question 15 above, the upstream gas pipeline network, Gassled, plays a key role in the Norwegian state’s objective to facilitate for long term profitable petroleum production. On May 2, 2023, the Ministry of Energy announced its intention to take over large parts of the infrastructure currently owned by Gassled. The Norwegian state has the right of reversion at the end of license periods. License periods for substantial parts of the Gassled infrastructure expire in 2028. Other parts of the gas transport system have longer license periods or no explicit license period.

The Ministry of Energy explained in its press release part of its rationale for the planned reversion, referring to one of its long serving resource management principles:

“…the resource rent shall be realised in exploration and production and not the transportation system. The tariffs for use of the transport system shall reflect the socio-economic cost of transport and treatment of gas in the system”.

The Ministry of Energy has started discussions with relevant licensees on the reversion process and any required compensation.

The main features of the Gassled regulation are expected to continue after 2028, meaning that Gassco will continue as system operator, cooperating with technical service providers. Investments in new gas infrastructure is still expected to be driven by the commercial players partaking in the NCS petroleum activities and their need for gas transport.

Although the aim of a predictable petroleum industry policy and framework remains, the political climate is changing rapidly, with repetitive and intense debate on the future of the oil and gas industry in Norway. Parties on the left and environmental parties have for several years demanded that award of new licences to explore for petroleum is drastically reduced or abolished altogether. Cut off dates for the entire industry has been proposed, although rejected by the majority of the political parties. The current minority Labour and Centre Party coalition government has indicated some changes to petroleum policy, while award for exploration and production rights should continue.

The government continues to emphasise that the primary policy objective for the oil and gas industry is to maintain a predictable policy and for the industry to cater for long-term profitable production of oil and gas.

New technology, including extensive digitalization initiatives and increase in remote monitoring shall improve general industry efficiency and safety. The government expects that the industry focus on maintenance, competence building and recruitment through process changes and innovations remain important tools.

The trend of recent years of oil majors, US- and UK- based independents and affiliates of European downstream companies exiting the NCS continues. There is still significant interest in the licensing regular numbered and annual rounds in predefined areas (APA rounds). APA rounds include acreage in more “mature” areas and regularly located close to existing facilities. For several years, these areas have proven on a regular basis commercially viable discoveries. Frontier areas and the Arctic still appear to be attractive, but interest has abated somewhat, not least due to lack of recent significant discoveries combined with a potential higher cost of development and production, particularly of natural gas.

In June 2020, Stortinget (the Norwegian national assembly) enacted temporary changes in the petroleum tax act to mitigate negative economic effects of the COVID-19 pandemic, low oil prices, and stimulate investments in the upstream oil and gas industry. The amendments temporary changed rules for depreciation and uplift as well as the treatment of tax losses.   With regard to the tax regime in place, see comments in questions 9 and 18.

Several upstream projects were sanctioned, pushed forward, submitted for approval and approved by the Ministry of Energy as an immediate effect of the tax “compensation package”. Thus, investments in the upstream petroleum sector have increased significantly in 2023 and is forecasted to stay at a high level for several years.

Due to the military aggression by Russia against Ukraine and the increased demand for non-Russian gas, the Norwegian Government for the first time adjusted production permits for a small number of projects during the spring of 2022. The amended permits allowing an increase in natural gas production, but with the result that this would deliberately leave liquids in the ground. This is the first time since the introduction of the resource management principles in 1971 that government has deviated from what has colloquially been referred to as “the 10 oil commandments”, banning flaring, not allowing waste of petroleum or reservoir pressure depletion preventing optimal recovery of all petroleum in the ground.

Norway implements international sanctions and embargoes imposed by the UN and EU (see question 7 above).

Russia’s war against Ukraine has led to increased focus on the security threat to the petroleum sector, energy security in Europe and the importance of secure operation on the NCS. Because of the energy supply and security situation due to the Russian -Ukrainian war, the Nord-Stream pipelines attack and the observation of several unidentified drones close to onshore and offshore petroleum facilities, there is an increased focus on security in the petroleum activities. The government has initiated measures to strengthen critical infrastructure emergency preparedness. Ministers and the Norwegian Ocean Industry Authority has urged increased vigilance by all operators and vessel owners on the NCS.

The increased security focus led to a decision by the Government back in 2022 that Norwegian upstream petroleum production and natural gas transportation to Europe and the UK constitute activities “of vital importance to fundamental national functions”, a criterion determining that the National Security Act should apply to these commercial activities and undertakings. Simultaneously, Equinor and Gassco were categorised as undertakings subject to Security Act regulation. Currently, no other petroleum sector undertakings have been declared as being of such “vital importance”.

Regulations relating quotas and trade in quota for emission of greenhouse gas together with CO2-tax remains the main regulatory instruments to enforce strict environmental requirements. The CO2-tax rate as well as NOx tax rate continue to rise. Additionally, the functional HSE and natural environment regulatory requirements impose obligation on licensees systematically to improve performance by use of best available technology. Recent development within carbon capture and storage is identified by the industry as technically possible and achievable contribution to reduced emission of climate gas.

In relation to parliamentary debate in June 2020 on the enactment of amendments of the Petroleum Tax Act related to the COVID-19 industry “compensation” package, the Stortinget (Norwegian Parliament) instructed government to propose further plans for the reduction of NCS activities related emissions. The targeted reduction was set at 50 % by 2030 (from 2005 levels) incl. “electrification” of existing and new fields. “Electrification” in this context means substitution of greenhouse gas emitting turbines on production facilities with electricity generated by onshore hydropower projects supplied through subsea cables, or potentially from other “green” offshore power sources such as wind power (e.g. the Hywind Tampen floating offshore wind farm project). Increasing CO₂ prices in the EU carbon quotas trading system and a steadily rising Norwegian CO₂ tax means that the cost of emissions are shifting the balance in favour of electrification. At the beginning of 2024 the combined levels of ETS and CO₂ tax will be about NOK 1900 (Approximately 170 Euros) per tonne. In 2020, the government predicted or aimed at a 2030 levels of NOK 2,000 (175 Euros) per ton.

Several NCS production projects receive power from the Norwegian power grid generated by hydropower and more have been decided or are in the pipeline. The latest projects approved by the Ministry of Energy late 2023 was electrification of the Draugen and Njord fields in the Norwegian Sea. More than 45% of NCS production is already supplied by renewable energy in 2023, cutting almost 5 million tonnes of CO2 emissions. The recent surges in Norwegian electricity prices caused a vigorous political and public debate on whether hydropower from shore used for the electrification of offshore petroleum facilities has significant environmental effects and is the best way of utilising limited onshore renewable energy sources needed to underpin Norway’s continued energy transition. In this context is important to take note that for decades the Norwegian energy supply system is for close to 90% supplied by regulated hydropower. Fossil fuels are only a major contributor to the energy supply (and emissions) in the transportation sectors (air, sea and land) and for offshore petroleum production and export. The Minister of Energy recently indicated that it will be more difficult for licensees to decide on and get authority approval of projects with power from shore in the future – partly because they may have undesirable consequences for the onshore power system.

However, the source of power does not necessarily have to come from mainland Norway. Wind power has in recent years been considered for the electrification of several facilities on- and offshore Norway, including the Troll Wind project and the Ekofisk Wind project. Mainlycost hikes have seen these two projects postponed or abolished. Power production from the first NCS floating wind farm Hywind Tampen for electricity supply to offshore petroleum production started in November 2022 and was fully operating on all eleven turbines and officially opened in August 2023. The construction, operation and use of wind turbines connected to petroleum facilities is regulated by the petroleum regime, not the offshore renewable energy act.

Answering Stortinget’s request for an emission reduction plan, the government in June 2021 released the White Paper, “Putting Energy to Work”. The report describes a policy for long-term value creation from Norwegian energy resources. It sets out how Norway may use its energy resources to create continued economic growth and new jobs. The report elaborates on how the sector with its knowledge, competence and technology, is an instrument and should be an important contributor, not only of future oil and gas activities, but also the emergence of new technologies and industries. The report emphasises three emerging industries; Offshore Wind, Carbon Capture and Storage (CCS) and Hydrogen.

The NCS has seen a major upturn in “green” projects. Oil companies and oil service companies are significant contributors to planned projects, regularly in consortia formed with other energy industry participants, such as onshore electricity producers (wind) or with power grid infrastructure owners. The principal legal framework for offshore wind for supply to the national grid has been in place for some time. The HSE framework is not yet in place, but proposals from the Norwegian Offshore Industry Authority are currently circulated for public consultation and final adoption of these regulations expected before summer 2024. Two areas have been opened and announced for offshore wind licensing. Seven consortia and companies applied for pre-qualification for the first phase of Sørlige Nordsjø II auction, planned to be held during Q1 2024.  The Utsira Nord area first application process has been put on hold by the Ministry of Energy and updated application deadlines will be announced.

Public funding through “contracts for difference” is included in the framework applicable to the offshore wind concession to be awarded for the Sørlige Nordsjø 2 area. This way, the state shares in or takes price risk of a project and guarantees a stabilised investor income over time. However, there is still debate about whether these offshore wind projects will be economically viable.

In connection with the adoption of the interim “petroleum tax package”, Parliament also requested the government to expedite investment decisions on CCS projects as a measure to enhance investments during the COVID-19 pandemic. Projects identified included projects where pilots had already been ongoing for some time. One of these projects, the Longship project, was adopted by the government and Stortinget in October 2020. The “Longship” project, when full-scale, combines carbon capture at Norcem’s cement factory in Brevik with Hafslund Oslo Celsio’s project at the Klemetsrud waste incineration facility in Oslo. As a result of cost estimate hike, construction of the latter carbon capture facility has been put on hold. “Longship” is one of the first industrial CCS projects to develop an open access infrastructure with the intent and capacity to store significant volumes of CO₂ from across the European continent.

CCS in Norway is regulated by two separate (but similar) legal frameworks. Any CCS activities (capture, transport and storage of CO₂) conducted in association with petroleum production are regulated by the upstream petroleum regulatory regime, principally the 1997 Petroleum Activities Regulations pursuant to the 1996 Petroleum Act. Non-petroleum activity related CCS operations (surveying and exploration for subsea reservoirs, as well as exploitation, transportation and storage of CO₂), are regulated by the separate CCS regulations pursuant to the 1963 Act on scientific research and exploration for and exploitation of subsea natural resources other than petroleum and mineral resources.

CO₂ from petroleum production at the Sleipner and Snøhvit fields have been re-injected into petroleum reservoirs for many years. These projects are integrated into and part of petroleum production. Emerging CCS projects other than “Longship” are also otherwise connected to oil and gas investments in a number of ways. Significantly, acreage relinquished by the upstream industry containing depleted petroleum deposits suitable for a CCS project may be utilised for storage of CO₂ captured from non-petroleum related industrial activities. Oil and gas companies are looking to invest in CCS projects, either as stand-alone CCS projects or as part of other industry activities associated with their petroleum activities. So far, the government has awarded seven CCS licences (one exploitation licence to Northern Lights and six exploration licenses).