UPDATE 2-Oil firms keen to explore off Norway despite higher costs

Tue Jan 21, 2014 11:04am EST

* Record 48 firms awarded stakes in mature area licensing round

* Some 40 firms apply to explore in Norway's Arctic

* First rounds since last year's oil tax hike

* Norway's oil output fell to 25-year low in 2013

By Gwladys Fouche and Henrik Stolen

SANDEFJORD, Norway, Jan 21 (Reuters) - Norway awarded a record 65 oil and gas production licences in a mature area licensing round on Tuesday and attracted high interest from oil firms in exploring its Arctic, despite an oil tax hike and increased industry costs.

A record 48 companies were awarded stakes to explore in mature areas - licences that are already opened for exploration - and 40 oil firms expressed interest in exploring in Norway's Barents and Norwegian Seas as part of the Nordic country's 23rd licensing round for new areas.

Norwegian authorities hope the interest will prolong production, after the world's seventh-biggest crude oil exporter saw its oil output fall to a 25-year low in 2013.

"Exploring in new and mature areas is the key to creating value for the industry," Norway's oil and energy minister Tord Lien told an audience of oil and gas executives.

The licensing rounds were the first after the previous centre-left government, which left power in October, introduced an oil tax hike opposed by oil and gas companies.

The tax increase, together with sharply higher costs and lower oil prices, has led to delays in the development of flagship Arctic projects as well as of smaller oilfields further south.

Reflecting this cautious optimism, industry executives have forecast tighter monitoring of capital expenditure this year, according to a report released on Monday by Norway's DNV, a top technical adviser to the oil industry.

The survey indicated that Norway has fallen to 9th place on the list of most attractive investment destinations for the industry from 4th place two years ago, mostly because of a shortage of skilled professionals and competition from international rivals.

"This is causing professionals to focus spending on the projects that will provide the greatest return on investment," said the report.

Despite these concerns, the results of the licensing rounds showed that oil firms remained keen to continue exploring off Norway.

MATURE AREAS

In the mature licensing round, the biggest winners were Statoil with 7 operatorships in 10 licences, Sweden's Lundin Petroleum with 4 operatorships in 9 licences, Wintershall, a unit of German chemical giant BASF, with 5 operatorships in 8 licences, and Tullow Oil with 4 operatorships also in 8 licences.

Among the majors, Total, Shell, ConocoPhillips were awarded operatorships, while ExxonMobil and Chevron were awarded licences. BP did not apply.

Two companies that applied for licences were left empty-handed: RWE Dea and Iceland's Eykon Energy.

"It has do with the quality of their applications," Lien told Reuters, without elaborating further on the reasons.

Out of 65 production licences awarded, 38 are located in the North Sea, 19 in the Norwegian Sea and 8 in the Barents Sea.

GO NORTH

In the new areas' licensing round, some 40 companies nominated 160 blocks they would like to explore with 140 of these in the Barents Sea and the rest in the Norwegian Sea.

Among the majors, Shell, ConocoPhillips, Chevron, BP named areas they would like to explore. ExxonMobil did not apply.

Among the other companies, Statoil, Tullow Oil, Wintershall and Russia's Lukoil applied for licences.

This licensing round will include for the first time licences in an offshore zone the size of Switzerland that borders Russia, where some 1.9 billion barrels of oil equivalent could lay buried under the seabed.

"We are very interested in this area," Tor Arnesen, managing director of Shell in Norway told Reuters.

The results of this licensing round will be announced later this year.

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