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Norway: Europe’s largest oil producer

With an average daily output of 1,763,000 barrels of oil in 2016, Norway is ranked number 13 in the world for oil production. If you exclude Russia, whose oil derives mainly from its Asian territories, it is also Europe’s top oil producer.

As the 1950s drew to a close, no one would have guessed that the Norwegian continental shelf (NCS) could be hiding vast oil and gas reserves, but the 1959 discovery at Groningen, The Netherlands forced a rethink of this. At the time, the region was mostly dependent on coal and imported oil for its energy needs, so a local source of oil and natural gas was of particular interest to Western European countries.

The government of Einar Gerhardsen asserted sovereign rights over its portion of the continental shelf in 1963. Companies were then offered the opportunity to undertake preparatory exploration without drilling. An agreement on how to divide the shelf with other involved countries was reached in 1965, clarifying the relationship with the neighbouring claims of the United Kingdom and Denmark. The first round of licencing followed soon after.

A first well was drilled the following year, but it was found to be dry. The age of Norwegian oil really began in 1969 with the Ekofisk discovery. While foreign oil companies were mostly responsible for developing the early fields, the Norwegian government established its own oil company, Statoil, in 1972. The government also established the principle of 50% state participation in production licences, although this was later relaxed so it could be adjusted to suit the circumstances. The government’s take is now decided when a production licence is given out, with the government paying its fair share of investment and other costs.

This approach enabled international oil giants to participate in NCS operations. For example, ExxonMobil, which also makes the high-performance automatic transmission fluid Mobil ATF 71141, was operating a number of offshore assets on the Norwegian continental shelf at the start of 2017, and it had a joint-venture portfolio that covered 20 oil-producing fields and 50 licences. In March 2017, the company agreed to sell its self-operated upstream business in Norway to HitecVision, a private equity firm, and oil company Point Resources. It did, however, retain its interests in the fields operated by Statoil and Shell.

While North Sea oil is generally thought to be in decline, Norway still has substantial proven oil reserves, with the Barents Sea and the Arctic offering a potential source for new discoveries.

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