Mobil Exploration Norway Inc establishedMedley becomes Meni boss

Statfjord blocks awarded

person Norwegian Petroleum Museum
Development of the Brent field on the UK continental shelf had begun without any clarification of which companies were to secure the adjacent Norwegian blocks. Nor was it clear whether Brent extended into Norway’s North Sea sector.
— Production license number 037 is outlined in green. Map: Norwegian Petroleum Directorate
© Norsk Oljemuseum

Awarding this acreage now became a matter of urgency for the Norwegian government. If part of Brent actually lay on Norway’s side of the boundary, a real danger existed that the British would extract the Norwegian oil as well as their own. A quick clarification was accordingly needed to ensure that Norway did not lose potentially substantial revenues.

US oil company Chevron negotiated with the government on becoming the operator, but would not accept the Norwegian terms on such issues as changing the operator, a 50 per cent state interest in the licence and the drilling of eight exploration wells. The government passed the offer to the next relevant candidate, and Mobil accepted the terms offered. It obtained the operatorship with a 15 per cent holding, while Statoil secured an option to take over as operator 10 years after a possible discovery had been declared commercial.

Conoco, Esso and Shell secured 10 per cent each, while the Amoco group squeezed in at the last minute with five per cent. As a partner in the latter combine, Norway’s Saga Petroleum secured 1.875 per cent. The other participants in the Amoco group were Amoco Norway AS, Amerada Hess Norwegian Exploration AS and Texas Eastern Norway AS, which each obtained 1.042 per cent. As operator, Mobil undertook to drill at least eight exploration wells and, if any discovery proved commercial, to develop it as rapidly as possible.

Blocks 33/9 and 33/12 – encompassing the Statfjord field – were awarded on 10 August 1973 as production licence 037. It became clear at an early stage that Statoil would have a large interest in the licence, but the state company would have preferred to be the sole licensee and operator.  That was not to be. The ministry preferred a solid and competent foreign player as operator, who could transfer knowledge and experience to the newly established Statoil through an active learning programme.

PL 037 was the first licence where Statoil received a holding as high as 50 per cent, along with a condition that it was to participate in operations in a way which enhanced its expertise. The terms achieved in the negotiations over this award represented a breakthrough for Norwegian state participation in the offshore sector.

The principle was established that Statoil would have the right to a 50 per cent interest without risk in all new licences. Its holding was based on an option which could be exercised up to a year after a discovery had been declared commercial. Until then, Statoil would not pay any of the costs incurred by the licence, which meant that the other licensees had to meet double the share of expenses warranted by their own holding.

If no commercial discovery was made, Statoil could declare that it would exit from the participation agreement. This solution, where exploration costs are borne by the other partners, is known as a “carried interest” deal. The partners could recover costs they incurred until the option was exercised from revenues generated by the licence.

Sources
Krohn, M. (1977). Norsk petroleumsutvinning i rettslig belysning. Oslo: Sjørettsfondet.
Lerøen, B., Gooderham, R., & Statoil. (2002). Drops of black gold : Statoil 1972-2002. Stavanger: Statoil., pp 144-145
Stavanger Aftenblad, 10 August 1973. Fire prøvehull i hver av de to Brent-blokkene.
Wentzel, T. (2008). Fra Forsiktighet Til Fornorsking Av Oljevirksomheten. En Studie Av Konsesjonstildelingene Mellom 1965-1985, pp 47-52.

Mobil Exploration Norway Inc establishedMedley becomes Meni boss
Published December 4, 2019   •   Updated December 10, 2019
© Norsk Oljemuseum
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