The Norwegian Continental Shelf, an oil rich area, recently witnessed a surge in applications for new acreages. The Norwegian Ministry of Petroleum and Energy received applications from 39 oil companies, the highest since the Awards in Predefined Areas (“APA”) commenced in 2003.
The number of applications is around 20% more than the previous highest in 2014 and almost 50% more than last year. It shows that exploration and production companies believe that the oil market, which is still crawling out of the low oil price environment and looking for stability, will recover in due course.
Norway's annual licensing round, APA, gives companies permission to work on the matured areas of the Norwegian Continental Shelf. It was introduced to increase efficiency in exploration. In the areas under APA licensing scheme, mostly small sized discoveries of oil are expected, which makes independent development inefficient. Through effective resource and capital management, APA helps companies to profit from these discoveries. With more geological knowledge, the area under APA has increased over the years.
Companies that sought permission to work on the matured Norwegian Continental Shelf include ConocoPhillips (COP - Free Report) , Eni S.p.A. (E - Free Report) , ExxonMobil Corp. (XOM - Free Report) , Repsol, S.A. (REPYY - Free Report) , Statoil ASA , Suncor Energy Inc. (SU - Free Report) and Total S.A. (TOT - Free Report) . For some of the companies on the list, this will be their first Norwegian venture.
Statoil being a Norwegian company, with the government being a major shareholder, has an advantage over its competitors. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
This year, the Norweigan government has extended the area under APA in both the Norwegian Sea and the Barents Sea. This has increased the possibility of finding oil and attracted more companies. The APA-2017 includes 34 Norwegian Sea blocks and 53 Barents Sea blocks.
The authority will announce name of the companies eligible for production licenses in early 2018.
The increase in the number of applications shows that oil exploration and production in the Norwegian Continental Shelf is attractive even in a low oil price environment. The government of Norway believes this will play a vital part in the country's employment scenario and boost revenues in the coming years. It also proves that the government’s petroleum policy, which focused on oil related improvements in the country, has worked pretty well so far.
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