The Bureau of Minerals and Petroleum (BMP) invites applications for licences for exploration and exploitation of hydrocarbons in a designated area offshore West Greenland, between latitudes 63° N and 68° N (see BMP's letter of invitation).
Applications for licences must be received by BMP not later than 16 July 2002 at 4 pm local time (GMT minus 3 hours).
The area designated for licensing lies between latitudes 63° N and 68° N and is limited to the west by the borderline with Canada and to the east by the outer coastline of West Greenland. The border with Canada is defined in an agreement between the Government of the Kingdom of Denmark and the Government of Canada of 17 December 1973.
Outline of licence terms
Generally, licences will be granted for an exploration period of a maximum of 10 years with a right to a 30 year extension for areas where exploitation is initiated (section 11 of the Mineral Resources Act).
The main principles of the licence terms are listed below:
- The public owned company, Nunaoil A/S, will hold a 12.5% share of all licences, with a carried interest in the exploration phase.
- A three tier surplus royalty. The surplus royalty is calculated on a yearly basis of the pre-tax net cash flow, the first time being in the year in which the licensee requests extention of the licence for exploitation. Negative pre-tax cash flow is then carried forward to the following year with an uplift. The uplift is calculated by compounding 21.75%, 29.25% and 36.75% plus the average discount rate published by Nationalbanken (the Danish Central Bank), weighed by time, and set off against positive surplus royalty from the following year. The surplus royalty calculated in this way is taxable with 7.5%, 10% and 12.5%.
- An annual area fee of DKK 50 per km² per calendar year in subperiods without drilling commitments and DKK 250 per km² per calendar year in subperiods with drilling commitments. Such fee will be adjusted each year on the basis of the Danish Consumer Price index from January 2002 to January in the year in question.
- A fee of DKK 200,000 upon granting of an exploitation license.
- An annual fee of DKK 1,000,000 for each exploitation license.
- Reimbursement of DKK 75,000 annually for the training of the Greenlandic authorities (BMP).
The general license terms appear from the Model License.
Size of licence area
The size of a licence area will depend on present seismic coverage of the area. New licence area will normally cover areas up to 3,000 km². If an application is submitted for larger areas the reasons should be stated in the application. Relatively short subperiods may be a licence requirement in order to advance exploration. At the end of each subperiod 25% of the remaining area shall be relinquished.
In evaluation of applications for exploration and exploitation, emphasis will be placed on the following criteria:
- That the applicant has the necessary knowledge and adequate financial background.
- That the proposed work programme and the attendant documentation demonstrate the applicant's willingness and ability to explore thoroughly for hydrocarbons in the area comprising any licence awarded in the applied area.
In addition, importance will be attached to:
- How and to which extent the applicant is willing to secure opportunities for Greenlandic and Danish manpower to participate in the activities related to the licence.
- How and to which extent the applicant is willing to secure Greenlandic enterprises to participate in the activities related to the licence.
More details on the application procedure are found in BMP's letter of invitation.
Applications will be accepted from groups of companies as well as from individual companies. If overlapping applications are received, and it is not possible to adjust the areas to comply with them, the selection criteria's will be used to select between the applicants.
Applications will be processed by BMP and will be presented to the Joint Committee on Mineral Resources in Greenland. The Joint Committee will submit their recommendation to the Government of Greenland and the Danish Government who jointly will decide on the granting of licences. The Government of Greenland and the Danish Government plan to award licences ultimo 2002. The authorities may decide not to grant a licence on the basis of any application received.
New data – new possibilities
Modern regional seismic data are available which should enable interested oil companies to participate in the Licensing Round. Most of the data acquired in the nineties have been funded by the authorities or Nunaoil, but during the last couple of years the seismic industry has been active off West Greenland with new surveys. Fugro-Geoteam shot a 3126 km survey in 1998 and TGS-NOPEC acquired 2897 km in 1999 and approx. 6300 km in 2000 including 600 km regional lines between Greenland and Canada. The survey acquired in 2000 showed the presence of hitherto unknown, deep sedimentary basins. These new basins and their features are so interesting that a new seismic survey of 2800 km was acquired during summer 2001 (see GHEXIS Newsletter 20 and article in Offshore).
Several new studies of relevance for exploration have recently either been completed or initiated e.g. on the Paleocene (Chalmers et. al. 2001), geohazards, biostratigraphic correlation and Cretaceous source rocks (see GHEXIS Newsletter 20).
Standard documents prepared by BMP – West Greenland Licensing Round 2002