The final redetermination, 1995 – 98

person How Håkon Lavik (former Statoil employee) experienced this process
Redetermining interests in an oil field is a struggle over positions and power, with prestige and money naturally lurking in the background. Each company adopts the standpoint it feels will give it the best return. Keeping its cards close to its chest is also important, because the process can have different outcomes.
— Statfjord field overview (photo from 1995). Photo: Equinor
© Norsk Oljemuseum

The Statfjord unitisation agreement prescribes that the operator, Statoil, will present its assessment of the division of interests between Norway and the UK within three months of the data cut-off date. It specifies that all the partners will participate in this work, and that a dedicated committee will be established with technical sub-committees which hold a number of working
meetings. But it is obvious that when one grouping – in this case the three British licensees – wanted an increase in the UK share and the other – the Norwegian licensees – did not wish to surrender any part of its holding, achieving a good collaboration would be difficult. In addition to their official efforts, both groups worked unofficially to generate information and arguments which supported the aim of a change – or no change – in their favour.


historie, forsidebilde, Hjemmebrent, Den siste redetermineringsprosessen
Exploration map over Statfjord A and Brent. Illustration: Mobil Exploration Norway Inc./Norwegian Petroleum Museum

Chevron UK Ltd submitted a request on 28 April 1995 for a new redetermination of equity interests in Statfjord. The background was that, when this field was proven in 1974, it quickly became clear that the reservoirs extended across the dividing line between the Norwegian and British continental shelves. How the reserves are distributed between the two countries is crucial for determining the share of production which belongs to each nation and each licensee. Statfjord is one of the largest oil fields in the world, and even minor changes in the distribution of its resources would have huge financial consequences.Once the field had been mapped, it was unitised in 1976 – that is to say, agreement was reached between the two countries on jointly developing and producing the reserves. The Statfjord Unit was created, with the Norwegian and British licensees agreeing to produce the field as a single entity. The two licensee groups had their original licence interests adjusted by the percentage division between the two countries to determine their holdings in the unitised field. Norway was estimated in 1976 to have 88.88 per cent of Statfjord, with the UK’s share at 11.12 per cent.


Fixing such a division between the two countries is no simple matter. The reserves lie in reservoirs 2 500-2 900 metres beneath the seabed. How these formations are structured and how the oil and gas are distributed within and between them is
carefully assessed, but nobody knows the exact answer. Reservoir evaluation is at best advanced guesswork, and the answers obtained can differ widely. Conclusions depend on the eyes which see and the desired results. It was quite clear that the preliminary allocation of 88.88 per cent to Norway in 1976 would be altered, and the unitisation agreement for Statfjord contains detailed provisions for a redetermination – in other words, a new assessment of how the reserves are distributed. It was
decided in 1976 that the first such process would take place before production began on Statfjord and subsequently at certain specified times.

To appreciate why such a division assumes such importance, it must be borne in mind that all investment in platforms and equipment is allocated in accordance with the proportionate holding of each licensee, while revenues from oil and gas are similarly shared out. The larger the Norwegian share in the field, the larger the earnings for the Norwegian licensees and for the government, which taxes the profit. Similarly, an increased UK share means that bigger revenues fall to the British licensees and government.

Since it is impossible to obtain a mathematically “correct” and unambiguous answer, such divisions of interests are always a source of substantial conflict. The various Statfjord licensees have displayed great creativity at times over the definition of the reservoirs and their properties in an attempt to secure the share they want.

To understand the value involved here, it needs to be appreciated that a one per cent change in the division of interests is worth NOK 3.5 billion at the 1995 oil price and dollar/krone exchange rate. So the figures after the decimal point also meant a lot. The UK licensees estimated a change in their share of the field from about 14.5 per cent to roughly 17 per cent. That represented a change of NOK 9 billion in 1995 money in their favour. It is also important to realise that, in the event of any change, all investments and revenues would be readjusted back to day zero, so that the licensees would secure the “right” expenses and revenues in relation to their percentage holding in the field.

To know more about the final redetermination click on the  pdf and read more!

Published November 11, 2019   •   Updated February 12, 2020
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