This article reflects on The Framework Agreement which has paved the way for unprecedented co-operation between the UK and Norway on North Sea projects.
On 4 April 2005, the UK and Norway signed a Framework Agreement on cross-boundary petroleum co-operation. The agreement was a culmination of years of work by both governments and their respective industry working groups - Pilot and Kon-Kraft. In 2002, the joint UK-Norway industry working groups identified that a potential prize of up to $2 billion could be achieved through joint working in the adjacent North Sea territories in areas such as new field development, re-development of existing fields, operational synergies and de-commissioning. In reaching agreement, both countries have faced the challenge of consolidating their two quite different offshore systems. The UK had a mainly negotiated access regime whereas the Norwegian gas industry was a predominately regulated system.
The objective of the agreement is to create more predictability in relation to both governments' involvement in cross-boundary projects and thus facilitating the planning and execution of such projects. The agreement addresses various issues including:
- The development of new fields that straddle the maritime boundary between the UK and Norway;
- The use of installations on one continental shelf to exploit resources on the other side of the boundary; and
- The construction, laying and operation of a range of pipelines.
In the past, individual treaties for various projects often differed in their treatment of various issues such as jurisdictional and regulatory responsibilities for pipelines. Each treaty was usually subject to lengthy negotiations which had an inhibiting effect on developing marginal projects.
The Framework Agreement has paved the way for unprecedented co-operation between the UK and Norway on North Sea projects. Oil and Gas companies can now develop cross-boundary oil and gas deals on a much clearer and faster basis. This represents a significant change from the old system of individual project treaties. In addition, both Norway and the UK will benefit with the UK providing Norway with a substantial new market for its large Ormen Lange field and Norway providing an attractive source of gas to contribute to the UK's future diversity and security of energy supply. One of the major beneficiaries from the agreement will be the Langeled pipeline project which could supply up to 20% of UK's future gas needs.
Some of the benefits of the Framework Agreement have already taken place in the form of the Enoch and Blane fields. Both fields had remained undeveloped for years mainly due to their trans-boundary nature but have recently been granted approval by both governments to be developed. Further examples are the Langeled, Playfair, Boa, Statfjord Late Life and Tampen Link projects.
With the strengthening of the relationship between UK and Norway and the inception of the Framework Agreement, the UK and Norway can look forward to many years of fruitful co-operation ensuring that the North Sea will remain a competitive basin for many years to come.
The full text of the Framework Agreement can be found at: http://www.og.dti.gov.uk/upstream/infrastructure/nfa_2005.doc