Award of licence blocks in Baffin Bay

At a meeting on Friday 26 November 2010, the Greenland Government decided on the allocation of the individual licence blocks in the Greenland part of the Baffin Bay.
A total of seven exclusive licences for exploration and exploitation of oil and gas were awarded to the following companies:
ConocoPhillips, Shell, Statoil, GDF SUEZ, Cairn Energy, Maersk Oil, DONG Energy and NUNAOIL.

By the application deadline on 1 May 2010, the Bureau of Minerals and Petroleum under the Greenland Government had received 17 block applications from 12 international oil companies.
The applications concentrated on specific licence blocks. Competition for the most attractive licence blocks has therefore been fierce.
Award of the oil blocks took place according to award criteria published prior to the licensing round.
These criteria emphasise in particular
a) the companies’ systems for managing safety, health and the environment and their practical experience in oil activities;
b) the companies’ financial strength; and
c) the exploration programmes offered.

“The result of the licensing round is an important step towards achieving a sustainable economy for Greenland.
The companies that have been awarded a licence were selected according to a thorough evaluation of, for example, their financial and technical strengths, and their experience in managing safety, health and environmental issues.
I am therefore very confident that the licence holders will help explore Greenland’s oil potential in a safe and appropriate manner.
The safety has top priority and I shall be looking forward to following the results of their work,” said Ove Karl Berthelsen, Minister for Industry and Mineral Resources.

All together the blocks granted cover an area of 70,768 km2, which means the total area of oil/gas exclusive licences in Greenland today covers approx. 200,000 km2.
With the addition of the new licensees, the list of companies with exclusive licences for oil/gas exploration in Greenland now comprises:
Exxon, Chevron, Husky, EnCana, PA Resources, Cairn Energy PLC, ConocoPhillips, Shell, Statoil, GDF SUEZ, Maersk Oil, DONG Energy and NUNAOIL A/S.

The licences have been awarded as follows:

Background
The licensing round was approved in autumn 2009 by the Greenland Home Rule Government and the Danish government and is the result of several years’ preparation.

Comprehensive development activities have been carried out over the last few years in Greenland’s north-western and north-eastern offshore areas, i.e. Baffin Bay offshore from north-west Greenland and the Greenland Sea offshore from north-east Greenland.

These include:
• a comprehensive strategic environmental impact assessment of the areas offshore north-west and north-east Greenland carried out in collaboration between the Bureau of Minerals and Petroleum, the National Environmental Research Institute (NERI) and the Greenland Institute of Natural Resources;
• a comprehensive analysis and assessment of all geodata from the Baffin Bay region carried out in collaboration between the Bureau of Minerals and Petroleum and Geological Survey of Denmark and Greenland (GEUS);
• comprehensive surveys of the changes in the region’s ice conditions carried out in collaboration between the Bureau of Minerals and Petroleum, the Danish Meteorological Institute and the Technical University of Denmark;
• an assessment of competitive models of government take (taxation and fees) in the oil sector in Greenland compared with a number of other countries, carried out with the internationally recognised consultancy IHS Energy;
• an updated assessment of the oil and gas potential in the sea offshore northwest and north-east Greenland carried out by the U.S. Geology Survey (USGS).

The strategic environmental assessment which was part of the decision basis for approval of the licensing round was subject to a comprehensive hearing in autumn 2009.
In order to be able to submit an application for an exploration licence in the Baffin Bay licensing round, a prerequisite was that a company in the application group had been pre-qualified as an operator.
This means that the Bureau of Minerals and Petroleum, the Danish National Environmental Research Institute (NERI), the Geological Survey of Denmark and Greenland (GEUS) and others had already assessed the relevant companies’ suitability to carry out oil exploration in Greenlandic waters in autumn 2009 in connection with applications for pre-qualification.
At this time the authorities focused on the companies’ emergency response procedures and safety, health and environmental profiles, their previous experience in oil activities in logistically difficult areas, and their financial robustness.

Where several consortia applied for the same licence block, the following selection criteria were applied in a comparative evaluation of the applicants:
(a) The applicant’s technical know-how, including:
• the applicant’s previous experience in hydrocarbon exploration and exploitation, and
• the applicant’s previous experience in hydrocarbon exploration and
exploitation in areas with similar conditions.
(b) The applicant’s financial robustness.
(c) How the applicant intends to carry out exploration and commence exploitation in the area covered by the application, including:
• the applicant’s systems and procedures relating to safety, health and the environment,
• the applicant’s willingness and competence to carry out thorough and efficient hydrocarbon exploration in the area covered by the application, as substantiated in the quality and scope of the applicant’s exploration activities (work programme) and any documentation associated with this.

Information on the Baffin Bay licence holders

ConocoPhillips has more than 40 years’ experience in oil exploration in the Arctic, for example in the Norwegian Barents Sea, Beaufort Sea, the Chukchi Sea, the Canadian Arctic, the Russian Arctic and the Davis Strait. The company has around 29,900 employees worldwide and operates in more than 30 countries.

DONG Energy has been involved in Greenland exploration activities since 1996 and is presently operator of Licence 2007/26 in the Disko West area. DONG was founded in 1972 as the Danish state-owned company Naturgas A/S. DONG’s activities are concentrated in northern Europe and the group has around 6,000 employees.

Shell is one of the world’s largest oil companies, with over 50 years experience in the Arctic and sub-Arctic areas such as Alaska (the Beaufort and Chukchi Seas), Canada, Norway (Ormen Lange), Russia (Sakhalin II) and Kazakhstan (Kashagan).
The Shell group has around 101,000 employees and operates in more than 90 countries.

Statoil is an international energy company headquartered in Norway, with more than 35 years of experience from oil and gas production on the Norwegian continental shelf.
Statoil is also operator in prospects offshore Newfoundland, and is engaged in the fields Terra Nova, Hibernia and Hebron Ben Nevis. Statoil is active in 34 countries and has 20,000 employees worldwide.

GDF SUEZ has more than 30 years’ experience with offshore hydrocarbon exploration in the North Sea and the Barents Sea, where the company has been involved in fields such as Snøhvit, Njord, Gjøa, Fram and Gudrun. GDF SUEZ operates in 14 countries and the Group employs around 200,600.

Maersk Oil has hydrocarbon activities in Denmark, Qatar, the UK, Algeria, Kazakhstan, Angola, Brazil, Norway, Oman, and the U.S. Gulf of Mexico.
The company has decades of experience in developing challenging fields through technological innovation, Maersk Oil is a fully-owned subsidiary of the A.P. Moller – Maersk Group.

Cairn Energy has the majority of its hydrocarbon activities in southern Asia and is listed on the London Stock Exchange.
Capricorn Greenland Exploration 1 Ltd. has a share in two exclusive licences in the Disko West area, two exclusive licences offshore Nuuk, and four exclusive licences in south-west Greenland. In 2010, the company carried out three exploration drillings in Greenland, the first exploration drilling in Greenland in ten years.

NUNAOIL is Greenland’s publicly owned oil company.
The company was founded in 1985 and has a share in all oil and gas exploration licences in Greenland. NUNAOIL is working in particular on creating interest in, and promoting further exploration of, oil and gas in Greenland.
In this connection, NUNAOIL has been responsible for the collection of seismic data offshore north-east and north-west Greenland.