Petroleum law Spring 2011 – development 1 · Ministry of Petroleum and Energy Plan for development and operation – decision process in the joint venture • The licensee decides

§Ministry of Petroleum and Energy

Petroleum law Spring 2011 – development 1

Mette Karine Gravdahl AgerupAssistant Director General

Ministry of Petroleum and Energy

Ministry of Petroleum and Energy

1onsdag 2. mars 2011


Resource management – most important instruments

• Petroleum resource management – PA Section 1-2• Award system – PA Chapter 3• Approval of Plan for development and operation of fields (PDO) –

PA Section 4-2 • Approval of Plan for contruction and operation of installations -

PA Section 4-3 (most practical: pipelines)• Unitisation – PA Section 4-7• Production permit – PA Section 4-4, para 3• Decision on decommissioning (disposal) – PA Chapter 5• Regulation of the use of infrastructure – PA Section 4-8



Creation of value requires good resource management and vice versa

• The oil companies create the values – the State must create the incentives – partnership:

• Long term petroleum policy

• Combine strong focus on national value creation and an active and open dialogue with the oil companies

• Predictable, non-discriminatory, objective and transparent decisions by authorities

• Highest standards for health, safety and environment (HSE) – consideration of natural environment

• Co-existence with other businesses and interests

• Involvement of other interested parties – public consultations



Plan for development and operation (PDO)

• The purpose of the PA requirements regarding development and operation: Ensure optimal exploitation of the petroleum resources

• PA Section 4-2: Development of fields and pipelines are subject to approval by MPE

• PR Section 20 onwards: Detailed provisions on contents of the plan

• The production licence renders the licensee the exclusive right to produce any oil and gas discovered

Only the licensee in a production licence has the right to submit a PDO to the Ministry for approval

Opening ofnew areas Award Field

developmentField

operation RemovalSeismic surveys



Plan for development and operation – decision process in the joint venture

• The licensee decides whether to develop a field – commercial decision

• JOA Chapter IV: The development process

• Art. 15: The joint venture makes a ”Decision on Continuation – DOC”– the voting rule applies– A licensee may be ”voted into” how the further progress of producing

a PDO is to be managed through all phases of the project from planning through to operation



Plan for development and operation – decision process in the joint venture

• JOA Chapter IV: The operator formulates the PDO on behalf of the joint venture – the voting rule applies– A licensee may be ”voted into” sharing the cost of producing a PDO

• PDO to be submitted to MPE for approval – the voting rule applies• A licensee may be ”voted into” submitting a PDO to the Ministry for

approval

• 3 months time limit to accede to the PDO – individual decision

• Accession of Petoro subject to approval of MPE – at the latest upon approval of the PDO



PDO – contents

• PA Section 4-2: The PDO shall include a description of:– Economic issues – Resource issues (technical issues regarding the reservoir)– Technical issues (development solution, exploitation

strategies)– Safety issues– Environmental issues – Relationship to other bussiness interests– Information relating to disposal of installation(s) to be placed

in the field– Information relating to installations for transportation or

exploitation comprised by PA Section §4-3 (most practical: gas pipelines, onshore gas processing plants)



PDO (PA Section 4-2)

• Phased development: Primarily one PDO

• Regional PDO: MPE may require one PDO for a larger area

• Exemption: MPE may, upon application from the licensee, waive the requirement for a PDO

• Substantial deviations from, or amendments to the PDO: Subject to approval by MPE

• In such case: MPE may require a new or amended PDO for approval

• Substantial contractual obligations before the PDO is approved: Subject to MPE approval (fairly common)



PDO – criteria for waiver

• PDO/PIO guidelines (list of criteria not exhaustive):

– The deposit is located near/above/below a deposit for which a PDO has already been approved

– The whole deposit may be drilled and produced from installations comprised by an approved PDO

– Modifications to installations must not imply increased risk to persons, the environment or material values

– A satisfactory solution for the gas is available (sale, reinjection, injection to enhance recovery)



PDO

• The PDO to be submitted to MPE and Ministry of Labour (early authority involvement important)

• Copies to NPD and the Petroleum Safety Authority

• Ministry of Environment and Ministry of Fisheries and Coastal Affairs with subordinate bodies shall be consulted

• The PDO guidelines: The PDO shall be so formulated as to cater for the needs of the environmental authorities in accordance with the Pollution Control Act (PCA) and Regulation (all potentially polluting activities are subject to a permit, cf. Pollution Control Act Section 11)



Impact assessment

• PR Section 20: PDO consists of a development plan and an impact assessment

• The impact assessment to be formulated on the basis of relevant EU directives on environmental impact assessments (directives 85/337 and 97/11)

• PR Sections 22, 22a, 22b og 22c1. Program for the assessment2. Impact assessment



Assessment program• Well in advance of submission of a PDO – draft assessment

program to MPE, containing:– A short description of the development– Relevant development solutions– Envisaged effects for other commercial activities and the

environment, including any transboundary environmental impacts

– Relationship to existing impact assessments• Public consultation:

– Interested parties– Minimum 6 weeks’ time limit

• MPE decides the impact assessment program on the basis of comments received

• The adopted program to be sent to those who have commented



Transboundary environmental effects• PR Section 22c): The development may have transboundary

environmental effects

• MPE to send the assessment program and information on the requirement for approval of the PDO to states that could be affected – also on request

• The assessment program to be sent to other states at the latest when the draft program is submitted for public consultation

• Afftected states may participate in the impact assessment process

• MPE to send the impact assessment to affected states at the latest when the assessment is submitted for public consultation



Impact assessment (IA) (PR Section 22a, cf. the EU directives)

• The impact assessment to be adapted to:– The size of the development– The extent to which the development is comprised by a

regional IA

• Regional IA: Several fields to be developed in the same area/ region

• Joint IA: The IA is required in accordance with several different acts

• Excemption from the IA requirement: The area is comprised by an existing IA



IA – contents• An impact assessment shall describe the envisaged effects of the development as regards commercial and environmental, including any measures to prevent and remedy such effects

• Contens (inter alia):– Development solutions, the reasoning behind technical solutions and

chices made, philosophy regarding operation and maintanance– Needs for tie-in, unitisation etc– Aims and visions for HSE– Proposed production rate– Natural environment that could be affected: Discgharges, monuments

of cultural heritage, environmental effects of the solutions chosen, measures to remedy/prevent environmental effects

– Possibilities for disposal of installations– Needs for other installations in accordance with PA Section 4-3

(pipelines/tie-ins/onshore facilities/cables for electricity supply)– Technical measures for emergency contingency– Proposed environmental monitoring



Impact assessment (IA) (PR Sections 22a onwards, cf. the EU-

• The licensee to submit the IA for public consultation (the National Gazette, ministries, directorates, other affected and interested parties)

• Transboundary environmental effects – PR Section § 22c• Time limit for comments: At least 6 weeks – normally 3 months• MPE may require aditional assessment – new time limit for

comments: At least 2 weeks• Exemption (PR Section 22b):

– Small developments only (4000 barrels a day)– Must be notified to ESA (EFTA Surveillance Authority)– Is not applied in practice

• Upon fulfillment of duty to carry out an impact assesment: Written confirmation by MPE



Plan for development and operation (PDO)

• Formally, MPE approves the PDO (conditions for the approval may be stipulated), cf. PA Section 4-2

• Cost of development < 10 billion NOK – Government consents

• Cost of development > 10 billion NOK – Storting (parliament) consents

Opening ofnew areas Award Field

developmentField

operation RemovalSeismic surveys



PDO – approval process

PDO(Plan for development and operation)

Impact assessment

Techicalelements

Public consultation

Technicalevaluationss MPE:

Evaluation ofall issues

in total

King in Councilor

the Storting

Comments from interested

parties

Consists of tw

o parts

Evaluartion by NPD and PSA

Proposed development solution for

consideration in:



PDO – sole risk (JOA Article 19)

• Sole risk development: in case one/more licensees(s) do not accede to the PDO

• Proposal for sole risk from licensee who has acceded• To all others who have acceded the PDO• 3 months’ time limit for new accession to the PDO • Petoro’s accession subject to approval by MPE – no later than

time of approval of PDO • PDO adopted when 100 % participation• Licensees choose new operator, as appropriate, subject to MPE

approval, cf. PA Section 3-7• No subsequent right for non-participating licensees to join or buy

into the development



Regional/local ripple effects

• Experience shows that development of oil and gas fields result in large ripple efects, both regionally and locally

• During development of the Snøhvit gas field (onshore facility in Hammerfest – the first LNG-field in Europe: All 450 municipalities in Norway represented, except one

• Ripple effects important to public acceptance – politically important

• Relationship to the EEA Agreement



Conditions – PA Section 10-18 second paragraph

• In connection with individual administrative decisions, other conditions than those mentioned in this Act may be stipulated, to the extent they are naturally linked to the measures or the activities to which the individual administrative decision relates

• MPE may stipulate conditions for the approval

• Legal norms relating to the stipulation of conditions (reasonable, proportionate, non-discriminatory, objective, transparent)

• Conditions to reflect decisions made by the Storting (parliament)/ Government

• Conditions normally apply to issues like infrastructure, enhanced oil recovery and measures to reduce discharges to sea and air

• Conditions must be proportionate and relate to the matter at hand – i.e. petroleum activities

• Subsequent permits relate primarily to HSE/natural environment, driling, production levels



Operation• PA Section 4-1: Prudent exploitation

• As much as possible of the petroleum in place in each individual petroleum deposit, or in several deposits in combination, shall be produced

• The exploitation shall take place in accordance with prudent technical and sound economic principles and in such a manner that waste of petroleum or reservoir energy is avoided

• The licensee shall continuously evaluate his production strategies and technical solutions and shall take any necessary measures to achieve this



Operation• PA Section 4-4

• MPE approves the production rates upon approval of the PDO – the relationship to Section 4-1

• Burning of petroleum in excess of the quantities needed for normal operational safety is not be allowed unless approved by the Ministry

• Production permits:– Oil: Annually– Gas: Longer periods – concrete consideration

• Regulation of production rates – Royal Decree


Documents

Petroleum law Spring 2011 – development 1 · Ministry of Petroleum and Energy Plan for development and operation – decision process in the joint venture • The licensee decides