Introduction

The Energy Agency is expected to launch the seventh licensing round for oil and gas exploration and production licences in the North Sea before the end of 2013. The licensing round will cover the areas to the west of 6°15' east longitude.

The licensing round will be carried out by a public call for tenders in accordance with the Subsoil Act (960/2011). The invitation and terms and conditions of the licensing round will be published in the Official Journal of the European Union at least 90 days before the deadline for submitting tenders.

Earlier licensing rounds and potential production

The first offshore oil exploration well was drilled in 1966 under the AP Møller Sole Concession, resulting in the first oil discovery in the North Sea.

In 1983 the first competitive licensing rounds were introduced, with a total of 15 licences awarded to seven groups comprising 23 companies. The second round followed in 1984, the third round in 1989, the fourth round in 1995 and the fifth round in 1998. Under the sixth round in 2006, 14 licences were issued.

Exploration and appraisal drilling during the first six rounds (ie, from 1984 to 2011) has successfully found oil and gas reserves of between 0.75 billion and 1 billion barrels of oil equivalent (excluding the AP Møller Sole Concession).

There are currently 19 producing fields of varying size in the Danish part of the North Sea, with three operators responsible for production from the fields. A total of 11 companies participate in production.

Legal framework

The Subsoil Act lays down the basic framework for oil and gas exploitation and production. The act regulates exploitation and recovery activities concerning raw materials (specifically hydrocarbons) in the Danish subsoil and on the Danish continental shelf.

Under the act, a licence to explore and produce one or more raw materials may be granted only to applicants that:

• are deemed to have the necessary expertise and financial resources; and
• can be expected to carry out the activities in a manner so as to ensure that society gains maximum insight into and benefit from the activities.

Pre-investigations (eg, seismic surveys) and drilling operations are subject to approval by the Energy Agency.

Exploration licences are granted for a term of up to six years. Licence terms may be extended by up to two years at a time for the purposes of further exploration, where warranted by special circumstances.

The act further stipulates that exploration and production must be carried out in a safe and appropriate manner that prevents the waste of raw materials. A plan for production activities – including the organisation of production, and the layout of production installations and any pipelines – must be approved by the authorities before exploration and production are initiated.

In addition to the Subsoil Act, relevant acts include:

• the Offshore Safety Act (520/2013);
• the Act on the Environmental Assessment of Plans and Programmes (939/2013);
• the Act on the Establishment and Use of a Pipeline for Transport of Crude Oil and Condensate (957/2011);
• the Hydrocarbon Tax Act (971/2011); and
• the Act on Assessment and Collection (966/2011).

A number of executive orders, regulations and guidelines have also been issued under the acts.

Timeline

With the invitation and terms expected to be published before the end of 2013, the deadline for the submission of tenders is likely to be April or May 2014, with the final award of licences taking place in early Autumn 2014. However, there is still considerable uncertainty as to the final timeline, since the call for tenders must be presented to and considered by the Parliamentary Committee for Climate, Energy and Building before it can be launched.

This article was originally published in the Energy & Natural Resources Newsletter of the International Law Office - www.internationallawoffice.com.

For further information on this topic please contact Nicolaj Kleist or Morten Ruben Brage at Bruun & Hjejle by telephone (+45 33 34 50 00), fax (+45 33 34 50 50) or email nkl@bruunhjejle.dk or mrb@bruunhjejle.dk. The Bruun & Hjejle website can be accessed at www.bruunhjejle.com.