APA 2016: Clouds with a silver lining

January 18, 2017

Norway's latest licensing round has seen the fewest companies awarded licenses in the Norwegian Awards in Predefined (APA) areas in a decade. 

But, the number of licenses offered remains high - the most since 2013, in fact, creating an opportunity. Ed Shires, Senior Consultant at StrategicFit looks at the positives and negatives from yesterday's 2016 APA announcement

Just 29 companies were awarded licenses in the 2016 APA round, the lowest since 2006, at 33, continuing a downward trend seen since a peak in applications and awardees in APA 2013 (48 awardees, 50 applicants), says StrategicFit. 

There were also just 32* license applicants, 11 fewer than at any point in the past decade. Only three companies who applied didn’t receive licences. These were North E&P, Origo Exploration and Grail North Sea – which would have been a new entrant. 

Some “usual suspects” are also missing from this year’s applicants. Tullow Oil, Lime, Dong and Bayerngas all didn’t apply, despite participating in APA 2014 and 2015.

Other big winners from the past received many fewer licences this time round. DEA* won just two licenses, compared with 12 in APA 2014. HiTecvision backed Point, which had big success last year, when they applied as three separate entities (Pure, Core and Spike – 11 licenses), received just five licenses. Of the 32* awardees in APA 2015, 20 received fewer or no licenses in this round.

This year's APA hasn’t seen any complete new entrants. M Vest did receive their first license, through a bid-round, but they were formed from management of Atlantic Petroleum, and took on Atlantic’s licenses, so already had a foothold on the Shelf. 

Only three licenses were awarded in the Barents Sea. This is marginally down on past years, despite 32 new Barents blocks being added to the offered acreage for this round. It could be argued the 23rd Round earlier in 2016 focussed on the Barents Sea (10 licenses awarded) lowering the interest in APA acreage. Though, difficulty to monetise exploration, both from low market values and long lead times to first oil, surely plays its part.

But there are opportunities

The total number of license awards is not down on previous years. And 36 licenses are awarded in the North Sea, the most since 2013. One purpose of APA is to encourage rejuvenation of acreage, and this shows companies are looking to return to mature areas with new technology, data or ideas.

Wellesley deserves a mention as being particularly successful. The firm picked up eight licences, including three as operator. This is the second most of any company (excl. Statoil and Petoro) and is especially impressive given they entered Norway completely organically through last year’s APA round.

Aker BP received 21 licenses, more than double any other company. To put this in context, over the past three APA rounds, no company has received more than 12 licenses (excl. Petoro and Statoil). Aker BP formed when Det Norske and BP Norway merged to form the largest Norwegian independent oil and gas producer.

Two majors have stepped up their position in this time round.  Shell (seven licenses) and ConocoPhillips (six) both receive four more licences than in the last APA round. This is despite a new report released on the eve of the awards suggesting Majors may look to leave Norway in 2017 because of potential fiscal instability.

LOTOS take a step up and receive their highest ever number of APA awards (five). Previously they have been awarded just one or two licenses a year, and have focussed on growing inorganically through acquisitions of licences packages including development and production (from Centrica in 2013, and ExxonMobil in 2015).

A group of companies retain a consistent interest, which hasn’t been damped by the external environment. These include Capricorn, Centrica, Concedo, Eni, Faroe, Fortis, VNG and Wintershall. Most of these focus their business predominantly, if not exclusively, in Norway.

*Factoring in company consolidations /acquisitions: Det Norske and BP Norway form Aker BP, DEA acquires E.On, Point Resources formed as merger between Core Energy, Spike Exploration and Pure E&P (this happened in 2015). 

Read more

StrategicFit gives its views on APA 2015

Barents Sea license round analysis by StrategicFit

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