Uchenna Izundu
International Editor
LONDON, Sept. 5 -- Iceland, in its first licensing round, has invited operators to explore for oil and gas in the North Atlantic off northeast Iceland (OGJ, Jan. 7, 2008, Newsletter). The round will open in January 2009, and the closing date for applications is Apr. 15, 2009.
The nation is offering as many as 100 blocks in the northern part of the Dreki area, which is on the Jan Mayen ridge between Iceland and Jan Mayen Island. Operators will be able to explore 42,700 sq km of the Dreki area that is up for grabs. About 80% of it lies in 1,000-2,000 m of water.
Several international companies have already shown "keen interest," according to Iceland's ministry of industry and tourism.
If successful, operators will be granted exploration licenses, which would be valid for up to 12 years and extendable to 16 years. If hydrocarbons are found, operators could obtain a 30-year production license.
Speaking at the first exploration conference in Reykjavik, Ossur Skarpheoinsson, minister for industry and tourism, stressed that although Iceland's energy sources are 80% renewable, it is committed to developing potential oil resources because of high global demand.
However, the tax regime has yet to be clarified for interested applicants. A spokeswoman from Iceland's National Energy Authority told OGJ that it hoped Parliament would pass tax legislation in October. Officials have suggested that they will adopt a competitive approach to other prospective areas in the north Atlantic.
Dreki has geology similar to the areas where oil has been found in eastern Greenland and western Norway. "There have for quite a time been strong indications, based on extensive seismic soundings on the Jan Mayen ridge, that there is hydrocarbon to be found in the Dreki field," Skarpheoinsson added.
High oil prices and technological advances in deepwater drilling have encouraged the government to offer the licenses. Iceland also is hoping to reap the economic benefits if oil is discovered, and as the North Atlantic and Arctic are new exploration frontiers, the government is determined to lead in its resource development.
Skarpheoinsson said that in 1981, Iceland and Norway agreed on an oil and gas exploration zone on the Jan Mayen Ridge after dividing the continental shelf between Iceland and Jan Mayen.
Contact Uchenna Izundu at [email protected].