ENERGY LAW

TH2: Regulating Petroleum Exploration and DevelopmentDr Tina Hunter

Reader in Energy Law, University of Aberdeen; andAssociate, Aberdeen University Centre for Energy LawJUS271A Energy LawOverview Overview of exploration and developmentField development plansTypes of licenses Unitization Case study Johan Sverup field

Lecture focusACCESS PETROLEUM EXPLOITATIONLCSEXPLORATION AND DEVELOPMENT(L2)or PRODUCTION: SAFETY IN EXPLORATION AND PRODUCTION (L3)PSCPRODUCTION: REGULATING WELLS IN EXPLORATION AND PRODUCTION (L4)(L1)PRODUCTION:ENVIRONMENTAL REGULATION IN EXPLORATION, PRODUCTION DECOMMISSIONING (L5)Stages of petroleum development

Upstream Petroleum chain

Regulatory structure - NorwayOffshore Australia Regulatory Structure Australia Regulatory structure - UKOverview of exploration and developmentWhat is exploration?Multiple stages Multiple actions Seismic surveyDrill wells - consentNPD and PSALook and see if there is any petroleum

Offshore Exploration Search for commercially viable hydrocarbons. This phase is also denoted by a heavy reliance on expensive specialist drilling rigs The focus on the geology of the region, including seismic survey, aerial tracking, etc. Base data often supplied by govt http://www.npd.no/en/Seismic/Temaartikler/NPD-seismic-data-acquisition-in-the-Norwegian-Sea-and-the-Barents-Sea/

What is appraisal?Assess data from seismicDetermine where to drill Is it economic?

Field DevelopmentOffshore Production - PhasesDevelopment declaration of the commercial viability of a field, and the subsequent planning process to commercially exploit the underlying hydrocarbons. When planning the commercial exploitation process, the developer has many facets to consider: environmental (wind, water depth, waves, likely storm activity, sea bed substrata, currents, distance from shore, cold), social/workforce (distance from shore, closest town, location on mainland, employee numbers and types, housing, feeding etc of employees, rostering of workforce), and economic (cost of exploration, production costs/bbl, tax concessions, taxation/royalties system, insurance, liability, cost of workforce).

Finding petroleum - AustraliaUpon discovery TH must notify authoritiesDiscovery and declaration of location to NOPTA details incl. graticular blocksConsideration by JA of Declaration of a LocationApplication for appropriate titleOtherwise removed from permit Title legislation http://www.nopta.gov.au/legislation/guidelines.html 16making a petroleum discovery, a titleholder is required to notify the relevant authorities to give details of the discovery. This fact sheet provides an overview of the steps that must be taken following a discovery. Discovery and Declaration of LocationA petroleum pool is defined as a naturally occurring, discrete accumulation of petroleum.Within 30 days of completing a well in which a petroleum discovery has been made, the titleholder must give written notification to the National Offshore Petroleum Titles Administrator (NOPTA) detailing information related to the discovery including the graticular block/s that contain the discovery. Notification of the discovery is the first step; the second step isconsideration by the Joint Authority of a request foraDeclaration of a Location. A location identifies theblock/s within the permit area that cover the discovery, from which the titleholder may select the block/s to form the basis ofanapplication for a production licence or a retentionlease. It also starts the clock on the timeframe within which a production licence or retention lease application must be lodged. A location is not a petroleum title; blocks within the location remain part of the exploration permit and are subject to the permit conditions. During the life of the location, exploration activity continues within the permit in accordance with the agreed work program (and may include exploration over the block/s covered in the location). As knowledge about the discovery improves, the titleholder may apply to add a block to the location or to revoke the location if the discovery is considered to benon-commercial. If a location is granted, a production licence or retention lease must be applied for within the requisite timeframe. If this does not occur, the block(s) within the location will be removed from the permit. Please contact NOPTA for further guidance on locations 16Licensing FrameworkNote declaration of a find 17Retention leaseThe grant of retention licences is for blocks in an offshore area;A retention lease authorizes the lessee to explore for petroleum and recover petroleum for appraisal purposes in the lease area;A retention lease over a block can be granted to The holder of an exploration permit over the block, orThe holder of a life-of-field production licence over the block.The criteria for granting a retention lease over a block are:The block contains petroleum, and The recover of petroleum is not currently viable, but is likely to become commercially viable within 15 years. Retention leases remain in force for 5 years, and upon the granting of a retention lease cancel a exploration permit ceases to be in force to the extent to which it relates to the blocks.

Production LicenceA production licence authorizes the licencee to carry out petroleum recovery operations in the licence area;There are three ways in which a production licence can be granted:Grant of a production licence as a result of an application made by an exploration permittee or a retention lessee;Grant of a production licence over a surrendered block or a similar block;Grant of a production licence over an individual block in exchange for another licence that was in force over the same block.A production licence is only granted subject to general conditions, requiring the licencee to:Explore the licence area with a view to determining the additional recoverability of petroleum in the licence area; andRecovery of the petroleum is commercially viable to do so.

Infrastructure and pipeline licencesThe grant of infrastructure licence continues indefinitely, and confers rights to the licencee to construct and operate infrastructure facilities in the licence areaAn infrastructure licence is granted upon a written application through an offer document, with the infrastructure licence terminated if there has been no operation for five years Application for a pipeline licence must be made to the Designated Authority for a grant by the Joint Authority, with the application including detailed design and construction plans, pipeline size and capacity, financing of the construction and operation, and accompanied by appropriate plans. If there has been no construction or use of the pipeline has occurred in five years, the pipeline licence will be terminated.

Development Norwayhttp://www.norskpetroleum.no/en/framework/petroleum-act/

PDO as part of suite of tools

Why PDO ?Ensure maximized value added for societyGet all can Ensure good qualitative government approval processEnsure efficient evaluation of development plan Allow strategic planning for all fields Needs basis TPA Control big oil companies Challenge to ensure good safetyIncrease government take by assisting companies to operate more effectively

Plan for installations and operations (PIO)

Field development control

Field development controlEkofisk

PDO review under prudent production s4-1

Unitisation

Johan Sverdrup Field

http://www.detnor.no/en/submitting-the-plan-for-development-and-operation-for-johan-sverdrup/ http://www.statoil.com/en/Johan-Sverdrup/Pages/Johan-Sverdrup-Field.aspx?redirectShortUrl=http%3a%2f%2fwww.statoil.com%2fjohansverdrup Ministry and unitisation The partnership, consisting of Statoil, Lundin Norway, Petoro, Det norske oljeselskap and Maersk Oil, has recommended Statoil as the operator for all phases of field development and operation. Det norske has not succeeded in reaching an agreement about the unitization with the other partners. Thus, the other partners have asked the Ministry of Petroleum and Energy to conclude on the final unitization of Johan Sverdrup. Until this conclusion is made, the Ministry has decided that Statoils recommendation be used as a basis: Statoil 40.0267 per cent, Lundin Norway 22.12 per cent, Petoro 17.84 per cent, Det norske oljeselskap 11.8933 per cent and Maersk Oil 8.12 per cent