Players on the NCS
Activity on the NCS was dominated by large companies until 2000. Since then, different measures have opened the doors to various types of players and have greatly increased their number. A player picture which reflects the challenges facing the industry is positive in helping to realise the potential for resources and value on the Norwegian continental shelf (NCS).
Many of the new players are seeking other kinds of business opportunities than the big international oil companies – through exploration for smaller deposits in more challenging areas, for example. Players with different perspectives strengthen preconditions for value creation in both mature and less explored areas of the NCS.
The biggest changes in the player picture occurred in 2002-07, when the number involved almost doubled. Participation has been more stable over the past decade. Nevertheless, market conditions appear to have influenced developments. High oil prices and considerable activity steadily attracted new companies in 2010-13. This increase has reversed to some extent in recent years.
As in earlier periods with big price falls, the present downturn appears to have resulted in some company consolidation. While 55 licensees held interest in active production licences in 2013, that number was down to 46 by 31 December 2016. With the exception of large Norwegian companies, this decline has affected all company categories during the period.
The classification of company types is presented below, with operators for producing fields in boldface. Allocation to the various categories is based on a combination of size, nationality and phase (strategy). Size is defined by the enterprise’s market value on the stock exchange. The transfer of companies between different categories has been preserved historically, since they mainly change type as a result of mergers.
- Large Norwegian companies: Statoil, Petoro
- Large foreign companies: Total, Eni, ConocoPhillips, ExxonMobil, Shell, Chevron
- Medium-sized companies: Lundin, Wintershall, Repsol, Aker BP, Hess, Idemitsu, Maersk, Tullow, Suncor, OMV, Lotos, Capricorn, DEA, MOL, Lukoil, Rosneft
- Small companies: Faroe, Fortis, Concedo, Skagen44, Lime, Origo, Kufpec, Atlantic, Wellesley, CapeOmega, North E&P, Point Resources, OKEA, Petrolia, Production Energy Company
- European gas/power companies: Centrica, Engie, Dong, Bayerngas, PGNIG, VNG, Edison
Operator companies for fields on stream
Substantial growth has also taken place with companies operating fields on stream. This increase occurred primarily in 2010-13. Several of the companies became production operators by developing discoveries they operated, as when Eni took Marulk through to start-up in 2012. Others acquired operator status by farming into fields on stream. Examples include Wintershall, which took over Statoil’s operatorship of Brage in 2013, and Faroe Petroleum through its acquisition of the Trym and Oselvar operatorships in 2016. Most of the rise in the number of operators reflected an increase in medium-sized and European gas/power Companies.
After a period of substantial growth, the overall trend for the composition of production operators has been one of limited change over the past couple of years. A slight reduction in the number of operators for fields on stream nevertheless occurred in 2016, which supports the impression that some consolidation of companies in the production phase is under way. Examples were seen when Shell acquired BG and when Det Norske and BP merged to form Aker BP. Despite the relative stability in the number of production operators, constant revisions are taking place in the composition of company types. The purchase of ExxonMobil’s operated interests by Point Resources provides a recent example of a player picture in constant change. This transaction is currently under consideration by the government
Production by company category
Although a number of new players have entered the NCS, the big companies still account for the bulk of output. However, production is breaking down ever more evenly between the various company categories. The share of medium-sized companies, in particularly, has increased sharply over the past decade.
Players in the exploration phase
The growth in new companies has been particularly marked in the exploration phase. This has yielded a high level of activity, increased competition and a greater diversity of ideas. The 2016 resource report for exploration shows that the new players have generated activity, competition and different ideas, and thereby contributed to new discoveries and substantial value for society. This development emerges clearly when resources in the discovery portfolio are broken down by the various company categories:
- the large companies accounted for 84 per cent of the portfolio in 2006
- that share was reduced to 56 per cent by 31 December 2016.
Medium-sized companies hold about a third of the resources in today’s discovery portfolio. In light of that development, a further increase in their share of output is likely as more discoveries are matured to Production.
Company resources in discoveries
The overview below is based on company interests in operated and partner-operated production licences.
In addition to Statoil and Petoro, licensees with the biggest interests in resources in discoveries include Aker BP, Eni, Total and Lundin
New players created added value
As new players account for a steadily growing share of activity on the NCS, it is important that they show the ability and willingness to develop projects which secure long-term value creation. Many cases exist of new players who succeed in maturing development projects to production.
- Wintershall submitted its first plan for operation and development (PDO) in 2015 as operator for Maria.
- Centrica is pursuing its first development as an operator on the NCS after submitting a PDO for Oda in 2016.
- DEA submitted its first PDO as an operator for Dvalin in 2016
Maria, Oda and Dvalin are examples which demonstrate that new field operators are important contributors to value creation on the NCS.
Plans call for the Maria field to be tied back to the Kristin production platform and several other facilities via two subsea templates. (Photo: Statoil/Marit Hommedal)
Oda is being tied back to the Ula production platform, with onward transport to Ekofisk. (Photo: Centrica)
Davlin is being tied back to the Heidrun platform. (Photo: DEA)
Players learn from each other
As further companies enter the NCS, experience transfer between the players becomes steadily more important. New players can learn from companies with a long history in Norway’s petroleum sector, while many are also able to contribute valuable experience and expertise from other oil and gas provinces.
The NPD’s role as a driving force and supervisor establishes parameters for contributing to experience transfer between players. Close follow-up provides insights which can also be utilised in the dialogue with others.
Measures encouraging diversity
Background for the growth in new companies
An array of measures adopted in the early 2000s form the background for the growth in new companies. Oil prices in the late 1990s were around USD 10 per barrel. This slump prompted a substantial consolidation, creating fewer but larger enterprises. The maturation of the NCS also meant lower expectations for discovery size, with the big oil companies showing limited interest in exploring mature areas.
Action taken by the Norwegian government around 2000 to boost value creation from mature areas included several measures which increased player diversity. Among these were:
- prequalification of new players
- annual licensing rounds with awards in predefined areas (APA)
- the tax reimbursement system for Exploration COSTs.
Prequalification offers companies an advance opportunity to be evaluated by the Norwegian government. The aim is to establish whether they can be considered suitable to participate on the NCS before possibly devoting resources to assessing specific business opportunities.
With its annual rounds, the APA scheme provides regular and predictable access to exploration acreage and ensures that relinquished areas are made available to companies with new ideas.
The reimbursement system ensures equal tax treatment of companies whether or not they are liable for tax. That helps to lower the entry barrier for new players.