Participants in Ekofisk
So it is more appropriate to ask which companies hold and have held rights from the state to explore for and exploit the natural resources in Ekofisk.
More specifically, that relates to interests in production licence (PL) 018. This was awarded in the first licensing round on the NCS in 1965.
The Phillips name has always been included among the licensees. But that is the only constant presence in the list of participants.
This article addresses how the licence composition has altered and how far these changes have been affected by developments in the oil industry generally and on the NCS in particular.
First licensing round, 1965
A single company, A P Møller, was given a sole concession in 1962 to explore for and produce oil on the Danish continental shelf for 50 years.
It is unlikely that anything similar could have happened in Norway, even though America’s Phillips Petroleum Company applied to the Norwegian government in 1962 for a similar licence.
In exchange, it offered to carry out seismic surveys worth NOK 1 million on the NCS. However, consideration of this request was put on hold.
The experience gained by the Norwegian authorities from giving hydropower concessions to domestic and foreign companies since the early 20th century meant nobody was going to get a sole licence.
Instead, the government announced a first licensing round on the NCS on 9 April 1965. The outcome on 17 August was that nine of 11 applicant groups were awarded a total of 74 blocks.
Norwegian industrial interests were then kept at arm’s length from the expensive and risky business of oil exploration, with two exceptions.
One was Norsk Hydro, which participated in the French-led Petronord group, and the other was the Norwegian Oil Consortium (Noco) in the Amoco-Noco team.
The Phillips group comprised the US company (51.74 per cent) with Fina Production Licenses AS (30 per cent) and Norsk Agip (18.26 per cent). It applied for and secured PLs 016, 017 and 018.
Exploring for oil was initially a very uncertain and expensive business. In addition to seismic surveys, the Phillips group had to charter a drilling rig.
That was required for a certain number of wells which the partners were committed to drill under the licence terms. They also had to pay the government an annual fee of NOK 50 000.
But the group had little idea that it had hit the jackpot. PL 018 covered blocks 1/5, where nothing has admittedly been found, 2/4 containing Ekofisk, 2/7 with Eldfisk, and 7/11 holding Cod.
A production licence on the NCS gives its holders the exclusive right to conduct exploration drilling for and production of petroleum deposits within a specified area. A production licence on the NCS gives its holders the exclusive right to conduct exploration drilling for and production of petroleum deposits within a specified area. Such licences are awarded by the Ministry of Petroleum and Energy to sets of licensees. These are comprise oil companies, with one designated as the operator to conduct operations on behalf of each group. Each licensee owns its proportionate share of the petroleum produced from the licence area. If a commercial discovery is made in the licence area, it can be developed by the licensees. This must be done on the basis of an approved plan for development and operation (PDO), which has been drawn up in accordance with the provisions of Norway’s Petroleum Act. Oil and gas which have not been produced remain the property of the Norwegian state.
The Phillips group pursued talks in 1967 with the Petronord group on a closer collaboration aimed at spreading risk more widely on the NCS.
These negotiation were initiated after other companies had drilled dry wells and spent a lot of money without seeming to have anything to show for it.
The outcome in 1968 was a swap of licence interests – a fairly common practice in the international oil industry. Phillips and Agip transferred 20 per cent of their holdings to Petronord in exchange for a similar proportion of the latter’s licences.
At the same time, agreement was reached that the two groups would share the cost of the Ocean Viking drilling rig and use it turn and turn about.
This brought a number of new licensees to PL 018 – Elf Norge AS (7.1 per cent), Total Norge (5.325 per cent), Aquitaine Norge AS (3.55 per cent) and Norsk Hydro Produksjon AS (2.5 per cent).
In addition, the minor French companies Eurafrep Norge AS, Coparex Norge AS and Cofranord AS each held a tiny fraction.
Fina retained 30 per cent, while Phillips reduced its share from 51.74 per cent to 36.96 per cent and Norsk Agip was cut from 18.26 to 13.04 per cent.
Rumours of a big discovery began to circulate in the autumn of 1969, with 25 October taken as the date when the geologists were sure a major find had been made in block 2/4. But Phillips did not officially report it to the government until 23 December.
This success was a good start for everyone who now held a stake in the licence, including Hydro. However, the interests Petronord passed to the Phillips group never yielded anything – which nobody could have predicted when the swap was made.
A press release on the Ekofisk discovery was finally issued on 2 June 1970. Meanwhile, the Norwegian government was seeking to secure a stronger involvement in NCS operations.
In deepest secrecy, the government bought up shares in Hydro on 9-15 December 1970 which ensured a majority state holding in the company.
This acquisition was officially approved by the Council of State on 22 January 1971, and gave the state a small stake in Ekofisk.[REMOVE]Fotnote: Hanisch, Tore Jørgen and Nerheim, Gunnar, Fra vantro til overmot?, Norsk oljehistorie, volume 1, Oslo, 1992: 165-166.
The Petronord deal had given Hydro an option to acquire 12 or 24 per cent of the group’s interest in a discovery.[REMOVE]Fotnote: Ibid. Holdings in PL 018 were therefore redivided again on 1 January 1971.
While the Phillips group retained its previous shares, Norsk Hydro Produksjon AS purchased interests from its Petronord partners which left it with 6.7 per cent of PL 018.[REMOVE]Fotnote: Elf Norge AS went down to 5.396 per cent, Total Norge to 4.047 per cent, Aquitaine Norge AS to 2.698 per cent, Eurafrep Norge AS to 0.456 per cent, Coparex Norge AS to 0.399 per cent and Cofranord AS to 0.304 per cent.
The next change in licensee composition occurred on 1 July 1977, when Elf and Aquitaine merged to form Elf Aquitaine Norge AS and thereby had an 8.094 per cent holding.
Statoil in and out
After the creation of Statoil in 1972, Norway’s state oil company built up a dominant position on the NCS with the right to a 50 per cent interest in new licences.
But many years were to pass before it secured a foothold in PL 018. That did not occur until 1988, when both international politics and major economic interests were involved.
The Troll gas sales agreement with a European consortium was the spark. Swapping licence interests between Statoil and France’s Elf and Total could provide the basis for this deal.
Estimated to contain 60 per cent of Norway’s gas reserves, Troll was proven in 1981 and declared commercial two years later. Nailbiting sales talks with continental gas buyers in 1985 were essential for developing the field.
These negotiations made slow progress, with the French particularly lukewarm. Something had to be done to persuade them to take a more positive view.
Elf and Total wanted licence interests in Troll and the Sleipner gas field. Could that be achieved, it might make the authorities in France more receptive to an agreement.
Statoil was therefore ready to enter into a swap which gave the French companies holdings in the two gas fields in exchange for a one per cent stake in Ekofisk.
Since it was difficult to estimate the value of this exchange, a net profit deal was also agreed – if revenues from one field exceeded a set value, the other party would be compensated.
The NOK 800 billion Troll gas sales agreement was entered into in May 1986, with the swap of licence interests coming into force on 1 April 1988.
This deal was considered important for securing French government approval of the sales agreement with Gaz de France, which was needed for a Troll go-ahead.[REMOVE]Fotnote: Reported by Ole-Johan Lydersen, a participant in negotiating the agreement, on 20 August 2019.
The advantage for Statoil of securing an interest in Ekofisk was the right this conferred to attend management committee meetings, providing it better insight into licence developments.
It gave the company control over the whole transport chain for gas exports, something which had concerned it ever since the Norpipe link from Ekofisk to Emden was installed in the 1970s.
During the 1980s, the Ekofisk Complex represented an important hub for Norwegian gas exports. The Ekofisk 2/4 S riser platform, operational from 1985, tied the Statoil-operated Statpipe transport system into Norpipe.
This installation was owned by Statoil but operated by Phillips. In 1998, the Statpipe-Norpipe line was relaid to bypass the Ekofisk Complex.
Another but less important reason why the state oil company wanted to know what was going on in PL 018 was the relationship between Tommeliten and Edda.
The former was a condensate field operated by Statoil which produced to the Phillips-operated Edda oil and gas field 12 kilometres away.
Following the oil price slump in 1985-86, Phillips – which had a 25 per cent interest in Tommeliten – became sceptical about developing it and withdrew from the project.
Statoil nevertheless secured acceptance in 1986 for a cheaper development solution based on subsea templates – which gave it useful experience with underwater technology.
Although Phillips had pulled out, it still wanted the Tommeliten wellstream to flow to Edda – not least because this field had proved half the size originally estimated.
That provided spare gas processing capacity. Moreover, the Tommeliten gas could be injected into the Edda reservoir to increase oil production.
The tie-in to Edda was implemented. According to Statoil, however, negotiating tariff terms between the Tommeliten and Ekofisk licences proved difficult.[REMOVE]Fotnote: Reported by Håkon Lavik, 15 August 2019.
Statoil’s interest in PL 018 changed again on 1 January 1999, when the government secured a five per cent stake for the state’s direct financial interest (SDFI) on the NCS.
Part of the Ekofisk II agreement with the Phillips group, this gave Statoil 5.95 per cent[REMOVE]Fotnote: Norwegian Petroleum Directorate, Facts, 2000. and resulted in a corresponding reduction in the holdings of the other licensees.
For the first time since 1968, Phillips saw its share of the licence reduced – but only from 36.96 per cent to 35.112 per cent.
Several reforms related to Norwegian state ownership in the petroleum sector were under way at this time. Plans for part-privatising Statoil to achieve greater flexibility internationally were initiated in 1999 and approved in 2001.
Another change was that administration of the SDFI, which had lain with the state company since 1985, was transferred in 2001 to a separate company called Petoro.
The latter took over various Statoil holdings in fields. Where the Greater Ekofisk Area was concerned, it acquired five per cent in PL 018 on 10 May 2001. That left Statoil with 0.95 per cent.
Total becomes biggest licensee
Crude prices slumped to a record low at the end of the 1990s, leaving the oil companies with acute profitability problems. They responded with mass redundancies and restructurings.
Larger entities provided greater strength in the market, improved cost control and better positioning in relation to the competition for reserves.
The turmoil which followed in the wake of these restructurings also affected the purchase and sale of interests in the Ekofisk licence.
Saga Petroleum, which acquired Norminol’s holding on 1 January 1995, disappeared on 11 January 2001. Its stake was taken over by Norsk Hydro Produksjon, which thereby rose to 6.654 per cent.
The French interests were gradually consolidated, with Eurafrep, Coparex and Cofranord being acquired in 1990 by Elf Rep, Elf Rex and Norminol respectively.
Elf Rep and Elf Rex then merged in the summer of 1992, and this company was incorporated in 1997 in Elf Petroleum – which thereby acquired 8.449 per cent of PL 018. Elf was merged into TotalFinaElf in the summer of 2000.
Just before Christmas that year, Total and Fina’s licence interests were merged with Total Norge’s holdings and thereby amounted to 31.87 per cent.
When these shares were then incorporated with TotalFinaElf’s, the result was a combined holding of 39.896 per cent. From 6 May 2003, TotalFinaElf was renamed Total E&P Norge AS.
This company then ranked as the largest licensee in PL 018, with the operator – now ConocoPhillips Skandinavia AS following the 2002 merger – in second place with 35.112 per cent.
Since Conoco had no stake in Ekofisk from before, its union with Phillips Petroleum did not contribute to increasing the company’s combined holding.
In addition, Italy’s Eni Norge AS took over Agip’s interests in the Greater Ekofisk Area on 15 December 2003.
Statoil merges with Hydro
After Petoro had acquired the bulk of Statoil’s interest in PL 018, a new change occurred in 2007 when the state company merged with Hydro’s petroleum and energy division.
From 1 October that year, StatoilHydro ASA held 0.95 per cent of the licence while StatoilHydro Petroleum had a 6.654 per cent interest.
These holdings were combined from 1 January 2009 into a 7.604 per cent stake held by StatoilHydro Petroleum AS. The company was renamed Statoil Petroleum AS on 2 November 2009.
The final change of name for this licensee occurred on 16 May 2018, when Statoil became Equinor. This was intended to signal that it embraced not only fossil fuels but also renewable energy sources such as solar and wind power.
A similar concept underlies the new company formed on 10 December 2018 by Eni Norge and Point Resources under the name Vår Energi AS.
“Vår” has a double meaning in Norwegian, denoting not only “Our Energy” but also springtime as a season of youth, freshness and greening.
Licence interest in 2019
On the 50th anniversary of the Ekofisk discovery in 2019, ConocoPhillips Skandinavia is operator for the field with a 35.11 per cent holding.
The other licensees at this time are Total E&P Norge AS (39.90 per cent), Vår Energi AS (12.39 per cent), Equinor Energy AS (7.60 per cent) and Petoro AS (five per cent).[REMOVE]Fotnote: Norwegian Petroleum Directorate fact pages, 13 August 2019.
|Date of award||1 September 1965|
|Duration until||31 December 2028|
|Original area (square kilometres)||1 752.704|
|Current area (square kilometres)||851.767|