The players

The player picture

A variety of participants plays a key role in achieving the highest possible value creation for society from petroleum operations on the NCS. It is important that the player picture reflects the challenges facing the industry in both mature and frontier areas, and that the companies play an active role.

Oil prices were around USD 10 per barrel in the late 1990s, prompting a substantial consolidation of the oil sector. Mergers internationally involved such companies as Conoco and Phillips, BP, Amoco and Arco, Total, Fina and Elf, Chevron and Texaco, and Exxon and Mobil. In Norway, Hydro and Saga were among those to merge.

This consolidation had direct consequences for the player picture, with the international companies becoming fewer and larger. That coincided with the development of the NCS, and the North Sea in particular, into a more mature petroleum province where the declining size of discoveries presented different challenges than before. Opportunities in the mature areas of the NCS were of limited interest to several of the existing players.

The Norwegian government accordingly implemented several measures to boost value creation from mature areas (see fact box, Chapter 2). A key change was to permit more companies to become licensees and to introduce the prequalification scheme. Small and medium-sized oil and gas companies and foreign energy and downstream enterprises became established on the NCS. So did a number of new Norwegian companies. See figure 3.1. This almost doubled the number of participants on the NCS in 2002-07, and led to a more diversified player picture.

 

Companies on the NCS in 1990-2012 by company type.

Figure 3.1 Companies on the NCS in 1990-2012 by company type.

 

Various company types
The NPD has divided players on the NCS from 1965 to 31 December 2012 into five types: large Norwegian companies, integrated international oil companies, medium-sized companies, European gas/power companies and small companies. Table 3.1 presents the breakdown of players active as licensees on the NCS today. Petoro is defined as a large Norwegian company, even though it is not an oil company in the usual sense but acts as the licensee on behalf of the government. Allocation to the various groups is based on a combination of size, nationality and phase (strategy). Size is defined by the enterprise’s market value on the stock exchange. Medium-sized companies lie in the USD 1 000-5 000 million range and small ones in USD 0-1 000 million. The transfer of companies between different categories has been preserved historically, since they mainly change type as a result of mergers. Over the past 15 years, only Det Norske has changed company type on the basis of discoveries which have altered its market value on the stock exchange
   
Large Norwegian companies
Statoil, Petoro
Integrated international oil companies
BP, Chevron, ConocoPhillips, Eni, ExxonMobil, Shell, Total
European gas/power companies
Bayerngas , Centrica, DONG, E.ON, Edison, GDF Suez, PGNiG, RWE Dea, VNG
Medium-sized companies
BG , Cairn, Det norske, Hess, Idemitsu, Lotos, Lundin, Maersk, Marathon, OMV, Premier, Repsol, Suncor, Talisman, Wintershall
Small companies
Bridge, Concedo, Core, Dana, Emergy, Explora, Faroe, Fortis, Noreco, Norske AEDC, North, Petrolia, Rocksource, Skagen44, Skeie, Spring, Svenska, Valiant

Table 3.1 Companies on the NCS in 1990-2012 by company type.

 

Reserves and resources Large Norwegian companies owned about 65 per cent of remaining NCS reserves at 31 December 2012 (see the fact box in Chapter 1 for an explanation of the terms used), while integrated international oil companies held roughly 24 per cent. Collectively, these companies possessed almost 90 per cent of the remaining reserves. The rest of the remaining reserves were held by European gas/ power companies (about six per cent), medium-sized companies (five per cent) and small companies (0.3 per cent). See figure 3.2

 

Remaining reserves and resources in discoveries on the NCS at 31 December 2012

Figure 3.2 Remaining reserves and resources in discoveries on the NCS at 31 December 2012.

 

About 42 per cent of resources in discoveries (resource categories 4F, 5F and 7F) are held by large Norwegian companies, and 32 per cent by medium-sized companies. The remainder is divided between integrated international oil companies (14 per cent), European gas/power companies (six per cent) and small companies (six per cent).

 

Production licences

In addition to owning the largest proportion of reserves and resources in discoveries, large Norwegian companies hold the greatest number of production licences. See figure 3.3.

 

Share of production licences by company type on the NCS in 1998 and at 15 March 2013

Figure 3.3 Share of production licences by company type on the NCS in 1998 and at 15 March 2013.

 

Holdings of production licences by companies are the result of applications in licensing rounds, farm-ins/outs and swops of interests in such licences, and company acquisitions. The breakdown of production licences between the various company types has altered from 1998 to 2013 as a result of the political changes described in chapter 2.

At 15 March 2013, large Norwegian companies held 31 per cent of the production licences on the NCS, compared with 53 per cent in 1998. So the proportion of licences possessed by such enterprises declined. The integrated international oil companies have also seen their share of production licences reduced, from roughly 23 per cent in 1998 to 15 per cent in 2013. Collectively, these two categories of companies hold roughly 46 per cent of the production licences on the NCS today, down from about 76 per cent in 1998.

The category with the second largest share of production licences today is medium-sized companies, which has grown from some 16 per cent in 1998 to roughly 27 per cent in 2013. European gas/ power companies and small companies collectively hold 27 per cent of production licences.

 

Awards

Large Norwegian companies secured the biggest share of licence awards in 1965-97. How many licences the various companies obtain in licensing rounds depends both on the number of applications they submit and the extent to which they meet government criteria for such awards. Medium-sized companies have secured the largest proportion of awards over the past 15 years, closely followed by small companies and large Norwegian companies. Integrated international oil companies had the smallest share. See figure 3.4.

 

Awards by company category in 1965-97 and 1998-15 March 2013.

Figure 3.4 Awards by company category in 1965-97 and 1998-15 March 2013.

 

The number of licensing rounds and awards per round have increased over the past 15 years. See figure 3.5. That has made it possible for medium-sized, small and European gas/power companies to increase their share of production licences. These categories have been very successful in rounds since 2005, particularly the APA rounds in mature parts of the NCS. Awards to large Norwegian and integrated international oil companies have been fairly stable, although their share has declined.

 

Awards per round from the NSA of 1999 to the 2012 APA round, by company type. 

Figure 3.5 Awards per round from the NSA of 1999 to the 2012 APA round, by company type.

 

While medium-sized and small companies have secured almost half the licences awarded in the APA and NSA in mature areas in the period from 1999 to 15 May 2013, large Norwegian and integrated international oil companies obtained the largest proportion of awards in frontier areas from the numbered rounds in the same period. See figure 3.6.

 

Share of awards per company type by numbered rounds and APA/North Sea awards from the 1999 North Sea awards to the 2012 APA round.

Figure 3.6 Share of awards per company type by numbered rounds and APA/North Sea awards from the 1999 North Sea awards to the 2012 APA round.

 

Secondary market

The secondary market has expanded substantially over the past 15 years, in line with the increasing number of companies on the NCS, the growth in the number of production licences and the development of oil prices. See figure 3.7. Large Norwegian and integrated international oil companies were active buyers up to 2005, but have been relatively inactive with farm-ins since then. Mediumsized, small and European gas/power companies have been the most active buyers after 2005.

 

Farm-ins and swops to interests in production licences over the past 15 years

Figure 3.7 Farm-ins and swops to interests in production licences over the past 15 years.

 

Medium-sized companies have also been among the most active sellers in the secondary market over the past five years, along with small companies. Big integrated oil companies were very active sellers in 2003-07. See figure 3.8.

 

Farm-outs and swops from interests in production licences over the past 15 years.

Figure 3.8 Farm-outs and swops from interests in production licences over the past 15 years.

 

Exploration costs

Large Norwegian and medium-sized companies have secured the largest share of new acreage from licensing rounds over the past 15 years. These two groups collectively hold 50 per cent of production licences on the NCS. Where ownership of such licences is concerned, medium-sized companies appear to have taken over the position previously occupied by integrated international oil companies. Large Norwegian and medium-sized companies have also had the biggest exploration costs over the past six years. Such costs have been relatively stable for integrated international oil companies over the past 15 years, although their share of the total has declined. Exploration costs have risen sharply for European gas/power and small companies since 2007.

 

Exploration costs by company type over the past 15 years. The red curve shows the number of exploration wells spudded per annum.

Figure 3.9 Exploration costs by company type over the past 15 years. The red curve shows the number of exploration wells spudded per annum.


Resource growth

Large Norwegian and medium-sized companies invest the biggest sums in exploration. Together with the integrated international oil companies, they are also responsible for finding the most resources. See figure 3.10, where resource growth is attributed to the licence which has drilled the exploration well.

 

Resources in discoveries by company type over the past 15 years, by equity interests.

Figure 3.10 Resources in discoveries by company type over the past 15 years, by equity interests.

 

A comparison of resource growth per NOK 1 000 spent on exploration over the past five years shows that large Norwegian and medium- sized companies achieved the best return on their spending in this period. Resource growth per exploration krone for European gas/power and small companies was also positive, but lower than for the other company types. See figure 3.11.

 

Resource growth per NOK 1 000 spent on exploration by equity interest 2008-12, by company type

Figure 3.11 Resource growth per NOK 1 000 spent on exploration by equity interest 2008-12, by company type.

 

The conclusions drawn from such an analysis must not be exaggerated, since the analysis may undervalue the benefits which a diversified player picture can confer. A number of small companies, for example, have developed prospects which are later acquired by larger players – either by farming into production licences or by taking over whole companies. When these prospects are drilled and discoveries made, resource growth is attributed to the new owner. The analysis fails to pick up this value creation.

 

Diversity

The changes made by the Norwegian government to its exploration policy roughly a decade ago helped to almost double the number of participants on the NCS in 2002-07, and the player picture became more diversified. This has yielded good results, with greater exploration activity and more discoveries.

According to the NPD’s analysis of the contributions made by the players to the increase in exploration activity, all company categories have contributed positively to both exploration activity and results. A particular feature of the analysis is that mediumsized companies appear to have taken over the position held by integrated international oil companies on the NCS since activities began there almost 50 years ago in terms of number of production licences, licence awards and exploration. Together with large Norwegian companies, the medium-sized companies have made the biggest investment in exploration over the past 15 years. These company categories have also been responsible for the biggest resource growth.

More small and European gas/power companies have become participants on the NCS since the policy changes were made. They are also securing a growing proportion of licence awards and account for an increasing share of exploration investment. While their resource growth is lower than for the other company categories, it is on the increase. However, the NPD’s analysis may underestimate the value of the contribution made by small companies because these are often taken over, with possible resource growth then being attributed to their new owner.


02.07.2013