Oil and gas in Norway - an introduction - 2026

Oil & Gas in Norway an introduction

Advokatfirmaet BAHR AS March 2026 1

Table of Contents 1

Introduction ....................................................................................................................... 3

2

Recent developments and key events on the NCS ......................................................... 4

3

The regulatory framework ............................................................................................. 13

4

The main regulatory bodies and Norwegian State participation in petroleum activities ........................................................................................................................... 13

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Petroleum activity requires a production licence ........................................................ 14

6

Licensing rounds .............................................................................................................. 14

7

Plans for Development and Operation (PDO) .............................................................. 15

8

Joint Operating Agreements .......................................................................................... 15

9

Licensees are required to provide a Parent Company Guarantee............................... 16

10 Decommissioning liability .............................................................................................. 16 11 The Norwegian Petroleum Tax System ......................................................................... 17 12 Transactions and change of ownership ......................................................................... 18 13 The government’s current approach to companies exiting the NCS ......................... 19

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1

Introduction

The petroleum industry is Norway's largest industry measured in terms of value creation, government revenues, investments and export value and a cornerstone for Norwegian social and economic development for the last decades. Norway is a small player in the global crude market with production covering about 2% of the global demand. However, Norway is the third largest exporter of natural gas in the world and Norway supplies more than 33% of the gas demand of the European Union (the “EU”). In 2022, Norway replaced Russia as the EU’s leading natural gas supplier. Nearly all oil and gas produced on the Norwegian Continental Shelf (the “NCS”) is exported, and combined, oil and gas equal about half of the total value of Norwegian export of goods. For this reason, oil and gas represent the most important export commodities for the Norwegian economy. Government income is secured by taxation and direct participation in petroleum activities.

Macroeconomic indicators for the petroleum sector, 1971-2026:

Source: https://www.norskpetroleum.no/en/framework/norways-petroleum-history/

Since production started in 1971, oil and gas have been produced from a total of 129 fields on the NCS. At the end of 2025, 97 fields were in production: 69 in the North Sea, 25 in the Norwegian Sea and 3 in the Barents Sea. In 2025, 3 new fields were set in production. At the year-end of 2025, 19 development projects were ongoing on the NCS. Many of the producing fields are ageing, but some of them still have substantial remaining reserves. Moreover, the resource base in these fields increases when small discoveries in the area are tied into existing infrastructure. Petroleum resources on the NCS have been estimated to 15.6 billion standard cubic metres of oil equivalents. Around 56% of the total discovered and estimated undiscovered petroleum resources have so far been produced and sold.

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2

Recent developments and key events on the NCS

2.1

Energy security on the global agenda

Following Russia’s full-scale invasion of Ukraine on 24 February 2022, the EU launched RePowerEU, a plan to make Europe independent from Russian fossil fuels by 2027. Before the war, the EU relied on Russia for approximately 40% of its natural gas and 27% of its oil consumption. Through a combination of increased LNG imports and reduced gas consumption across the EU, this dependency has been significantly reduced, with Russian gas accounting for only 13% of EU imports by 2025.

In January 2026, the European Council adopted a regulation banning Russian LNG and pipeline gas imports from 18 March 2026, with transition periods for existing contracts and a full prohibition in place by end of 2027.

Norway and the U.S. have become the EU’s largest gas suppliers, providing 31% and 25% of EU gas imports respectively in 2025.

The importance of energy security has been a key topic on the global agenda for the last years, including due to increased global uncertainty, such as the Russian invasion of Ukraine, changes to US foreign policy and US and European relations, as well as the recent outbreak of war in the Middle East leading to spikes in oil and gas prices. The energy prices rose dramatically in 2022, where the price of natural gas in Europe hit an all-time high in 2022 and remained high in 2023, 2024 and 2025. As Norway already is a large supplier of oil and gas, and the demand for fossil fuels is increasing, Norway will be important in securing energy supply to Europe also going forward.

Historical and expected production in Norway, 1970-2030:

Source: https://www.norskpetroleum.no/en/production-and-exports/production-forecasts/

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2.2

High activity level in 2025

Gas production from the NCS remained at a high level in 2025. A total of 120 billion standard cubic metres (Sm3) was sold. The high production in 2024 was caused by high regularity on the fields and increased capacity following upgrades in 2023. Production is expected to remain at a stable high level in the coming years.

In 2025, overall production reached about 238 million standard cubic metres of oil equivalents (MSm3 o.e.). Oil production reached its highest level since 2009, while gas production saw a minor decrease from the record-high 2024. Production from the Troll and Johan Sverdrup fields in the North Sea contributes about 33% of overall petroleum production on the NCS. In 2025, a Plan for Development and Operations ("PDO") for the Fram Sør field, located in the northern part of the North Sea, was approved by the Ministry of Energy ("MoE"). Three new fields also came into production in 2025: Halten Øst and Verdande in the Norwegian Sea, and Johan Castberg in the Barents Sea. In February 2026, PDOs were also submitted to the MoE for three previously closed fields, Albuskjell, Vest Ekofisk and Tommeliten Gamma, in connection with their possible reopening.

This sustained level of activity on the NCS builds on the momentum generated by the temporary tax regime adopted in 2020, which intended to stimulate activity and to preserve the Norwegian service industry, which employs a significant number of persons. The temporary tax regime was limited to projects approved by the authorities by the end of 2022. In 2022, 13 PDOs were delivered to the MoE, as well as several plans for projects where the aim was to increase production close to existing fields or to extend their lifetime. These plans were approved in 2023, followed by the approval of PDOs for the Eirin and Bestla fields in 2024.

The temporary tax regime has been criticized as being too favorable, considering the normalized to high petroleum prices in recent years. Considering the high activity, the temporary tax regime can be said to have been successful and worked as intended in ensuring continued activity in the service industry spanning the Norwegian coastline and providing a substantial number of jobs.

Approximately NOK 275 billion was invested on the NCS in 2025. The Norwegian Offshore Directorate expects investments of NOK 256 billion in 2026, reflecting a continued high level of activity on the shelf despite a modest reduction of 6.5 per cent compared to the previous year.

There has been substantial debate regarding the need for increased exploration activity on the NCS to keep production levels high. Exploration activity has also increased in recent years, with 2024 being a more active exploration year than 2023, and 2025 a more active exploration year than 2024. In 2025, 49 exploration wells were completed, of which 40 were wildcat wells, resulting in 21 new discoveries. The preliminary overall estimate for these discoveries is 67 million Sm3 of recoverable oil equivalents (compared to 38 million Sm3 of recoverable oil equivalents in 2024). In the 2025 Awards in Predefined Areas (“APA”) round awarded in January 2026, 19 companies were awarded a total of 57 licenses, compared to 53 in 2024, consisting of 31 in the North Sea, 21 in the Norwegian Sea and 5 in the Barents Sea. Concurrently with the APA awards, the MoE proposed to add 70 new blocks to the TFO round scheduled for award in January 2027.

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The Norwegian Offshore Directorate expects overall production from the NCS to decline in the late 2020’s. How steep this decline will depend on several factors. To slow this decline and to uphold production, more investments are required, both in fields, discoveries, infrastructure and technology, as well as maintaining exploration activity.

The NCS still contains large undiscovered oil and gas resources. These resources can provide a basis for high levels of production, export and value creation for many years to come. However, to maintain a high activity level, these resources first need to be found. Finding these resources will require more exploration, both in frontier areas and close to the infrastructure already in place.

2.3

Participants on the NCS

Following the introduction of several new policies in the first decade of 2000, the number of new participants to the NCS substantially increased and the combined number of active companies trended upwards. In the last 10 years, that trend has shifted, and the number of participants has been reduced from 53 in 2015 to 23 active exploration and production companies today. Over the past decade, several majors and utility companies have either exited the NCS or shifted to indirect ownership positions. This has laid the foundation for an active M&A market and the growth of several mid-sized companies, which have developed to be sizeable and important companies through acquisitions and organic growth. Mid-sized companies now hold a relatively larger share of production and are active within exploration, new developments and in the application and award of new production licences.

Numbers of companies on the Norwegian continental shelf 2000-2025, categorized by size:

Source: https://www.norskpetroleum.no/en/developments-and-operations/number-and-diversity-of-companies/

2.4

A new white paper addressing petroleum activities

In January 2026, the Norwegian Labour Party government announced the commencement of work on a comprehensive white paper addressing the country's petroleum activities, scheduled for presentation to the Norwegian Parliament early in 2027. The white paper will provide an assessment of the current status and future outlook for Norway's petroleum sector whilst 6

addressing critical strategic decisions that will shape production levels from the 2030s and onwards.

Prime Minister Jonas Gahr Støre emphasised the sector's continued importance to Norway, stating that the oil and gas industry is to be developed rather than dismantled. In the context of heightened geopolitical uncertainty, the government has underscored the strategic significance of Norwegian gas supplies to European energy security. With approximately 200,000 jobs linked to the petroleum industry and substantial contributions to the Norwegian welfare state, the sector remains a cornerstone of the national economy. The NCS is increasingly characterized by marginal and field proximate discoveries, creating an urgent need for accelerated development timelines. Sustaining a higher production curve and activity level will moreover require intensified exploration efforts in the years ahead.

The white paper initiative reflects the government's objective to establish broad parliamentary consensus on maintaining stable and predictable framework conditions for the industry. Energy Minister Terje Aasland highlighted that the decisions facing Norway represent a choice between gradual transition, enabling continued energy contributions to Europe, and abrupt, unpredictable decline. As the Norwegian Offshore Directorate anticipates falling production levels through the 2030s, the white paper is intended to provide the Norwegian Parliament with a robust decision-making foundation for long-term area access whilst aligning petroleum activities with Norway's transition to a low emission society and the global energy transition necessary to meet climate targets.

It has been more than a decade since the last white paper on petroleum activities. Due to the current political climate for petroleum activities, this white paper will likely be very important and should remain a key strategic focus for the industry going forward.

2.5

The “Transition Commission”

Following the September 2025 parliamentary election in Norway, Arbeiderpartiet (the Labour Party) governs alone in a minority government, having secured a majority for the left side. To pass budgets, Arbeiderpartiet is dependent on the support of four parties: Sosialistisk Venstreparti (the Socialist Left Party), Senterpartiet (the Centre Party), Rødt (the Red Party) and Miljøpartiet De Grønne (the Green Party), each of which brings distinct and at times conflicting policy priorities. Whilst Arbeiderpartiet and Senterpartiet favour developing rather than winding down the petroleum sector and oppose increases to the current tax level, the three remaining support parties broadly advocate the opposite. Unlike previous parliamentary terms, where political platforms were typically agreed at the outset, this constellation means that policy negotiations arise in connection with each annual budget, giving the support parties recurring leverage over government policy throughout the term. The first major test of this dynamic came with the autumn 2025 budget negotiations.

As part of the government's budget agreement, Norway is to establish a dedicated transition commission tasked with strengthening the broader Norwegian economy's capacity for restructuring, value creation and competitiveness. The commission's report is expected to be delivered in 2027 and seeks to provide a foundation for the broader economic transition ahead, as Norway looks to build on its industrial strengths in a future of evolving energy markets.

A central element of the commission's mandate is that the transition to a low emission society should be pursued collectively across all sectors of the Norwegian economy. The government has reaffirmed its climate commitments whilst emphasizing that the road ahead presents 7

considerable opportunity. Norwegian businesses have already demonstrated a strong capacity to deliver new technologies, innovative processes and skilled employment, and are well positioned to play a leading role in shaping Norway's economic future.

Whilst the petroleum white paper focuses specifically on the regulatory and strategic framework governing continued activity on the NCS, the Transition Commission operates with a broader economic mandate. Where the white paper addresses sector specific questions such as exploration acreage, production levels and industry framework conditions, the commission is charged with examining how the Norwegian economy as a whole can build resilience, diversify its industrial base and capture new opportunities in an evolving global energy landscape. Together, the two initiatives represent a comprehensive and forward-looking strategy for securing Norway's long-term prosperity.

2.6

The EEA Agreement and the question of its territorial scope

Another recent development of potential significance for the Norwegian oil and gas industry concerns the territorial scope of EEA law. In a recent advisory opinion, E-6/25, Saga Subsea, the EFTA Court addressed the application of EEA rules to the Norwegian continental shelf, challenging Norway's longstanding position that the EEA Agreement does not extend beyond its territorial limits to cover the continental shelf. That position had been maintained notwithstanding Norway's earlier acceptance of Directive 94/22/EC on petroleum licences into the EEA Agreement, justified at the time on the basis that Norwegian law already complied with the Directive's requirements. It had subsequently been invoked to resist the incorporation of three EU acts: the Marine Strategy Directive (2008/56/EC), the Offshore Safety Directive (2013/30/EU), and the Offshore Helicopter Regulation (2016/1199).

If the Court's reasoning is applied consistently by Norwegian Courts and/or authorities, the Net Zero Industry Act (NZIA), Regulation (EU 2024/1735), may equally be deemed applicable to Norway's oil and gas sector, with potential consequences including an obligation for licence holders to contribute to the EU’s CO₂ injection capacity target based on their share of EU oil and gas production between 1 January 2020 and 31 December 2023.

It follows from the key premises of the EFTA Court’s advisory opinion that, in the EFTA Court’s view, the EEA Agreement applies to activities on the continental shelf to which Norway has exclusive rights under the Convention on the Law of the Sea and which are not excluded from the sectoral scope of the EEA Agreement.

This means that, according to the EFTA Court, it is not only petroleum activities on the continental shelf that are covered. Other activities, such as activities related to offshore wind farms and the exploitation of mineral resources, etc., may also be covered. With regard to support for offshore wind farms on the Norwegian continental shelf, ESA has in its practice applied the state aid rules of the EEA Agreement and assessed the measures on this basis (see, for example, Decision 194/23/COL on aid to Sørlige Nordsjø II, Decision 067/25/COL on aid to Utsira Nord, and Decision 195/25/COL on Enova's scheme for floating offshore wind power).

At the same time, Norway's legal obligations under the EEA Agreement are not directly binding on private parties. A distinction must also be made between the consequences for acts that have been incorporated into the EEA Agreement and the consequences for acts that have (incorrectly) not been incorporated into the EEA Agreement.

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The full implications of the Saga Subsea advisory opinion remain to be determined, but the ruling warrants close attention from industry participants operating on the NCS.

2.7

Implementation of the Petroleum Tax Act in the general tax acts

The Ministry of Finance has proposed to repeal the Petroleum Tax Act of 1975 (the “Petroleum Tax Act”) and implement the legislation in the General Tax Act of 1999 (the “General Tax Act”) and the Tax Payment Act of 2005 (“the Tax Payment Act”). The legislative revision is purely technical, and no substantive changes are proposed. A consultation paper outlining the revision was published 19 December 2025 and the deadline for submitting comments is 19 March 2026. The proposed effective date of the technical revision is 1 January 2027.

The Ministry of Finance has further notified that it aims to conduct a technical review of the regulations to the Petroleum Tax Act and implement the regulatory provisions to the Ministry of Finance's Consolidated Regulation to the Tax Act (FSFIN) of 1999. These proposals have currently not been published by the Ministry of Finance.

For an introduction to The Norwegian Petroleum Tax System, see section 11 below.

2.8

Climate litigation and the oil & gas sector

Judicial actions addressing climate change are on the rise before both domestic and international courts, frequently based on human rights arguments, and are increasingly influencing the framework of climate accountability. The industry should anticipate increased legal scrutiny concerning environmental impact assessments, governmental approvals, and compliance with international climate agreements.

In Norway, the most recent and consequential development is the Court of Appeal's ruling of November 2025, in which the court found the Norwegian State's approvals of PDOs for the Breidablikk, Yggdrasil, and Tyrving fields invalid due to procedural errors. The court found that the climate consequences of combustion emissions had been neither adequately assessed nor considered, in breach of the EU/EEA Project Directive and other international obligations, and held that assessments must be based on gross rather than net emissions. The court did not order activities to cease, but required the Norwegian State to reprocess the PDO applications.

Notably, the oil companies involved are not parties to the case, meaning the ruling directly impacts only the Norwegian State, leaving the PDOs valid in relation to the oil companies. The case has been appealed to the Supreme Court and will be heard by the Grand Chamber in 2026.

This ruling is the latest in a series of escalating legal challenges. In January 2024, the Oslo District Court had similarly invalidated the same PDO approvals on procedural grounds. The Norwegian State appealed, and in April 2025 the Supreme Court ruled that the Court of Appeal had applied an incorrect interpretation of the law in overturning a preliminary injunction. On 21 May 2025, the EFTA Court issued an advisory opinion concluding that combustion emissions must be subject to environmental impact assessment under the Project Directive.

These proceedings build on the Norwegian Supreme Court's landmark 2020 ruling, in which Greenpeace Nordic and Nature and Youth challenged the validity of exploration and production licences awarded in the Barents Sea in the 23rd licensing round. The Court rejected the claim in its entirety, finding no constitutional or human rights violations, and holding that the omission of Scope 3 emissions from the environmental impact assessment did not

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constitute a procedural error, as climate effects would in any event be assessed in connection with any future PDO application.

The 2020 ruling was subsequently reviewed by the European Court of Human Rights, which issued its judgment in October 2025. The Court found no violation of Article 8 of the ECHR, but emphasised that states must carry out timely, adequate, and comprehensive environmental impact assessments based on the best available scientific knowledge, including quantification of combustion emissions. The Court found the Norwegian system acceptable, noting that approval can be refused even at the PDO stage if it conflicts with climate and environmental considerations.

In the broader European context, the ECtHR's earlier judgment in Verein KlimaSeniorinnen Schweiz and Others v. Switzerland found that Switzerland had violated Article 8 of the ECHR by failing to provide adequate protection against the effects of climate change. The decision has had implications for Norway and other European states, underscoring the importance of an appropriate regulatory framework and the pursuit of emissions reduction targets.

Similar developments have unfolded in the United Kingdom, where the Supreme Court in Finch v Surrey County Council held that an assessment of combustion emissions is required before oil and gas projects may be approved. This was reinforced by the Scottish Court of Session on 30 January 2025, which invalidated permits for the Rosebank and Jackdaw fields due to inadequate consideration of Scope 3 emissions.

Taken together, these developments demonstrate a clear and accelerating trend towards more stringent climate accountability and a growing requirement to assess combustion emissions in environmental impact assessments for oil and gas projects.

2.9

Energy transition and new industries

The global transition to a more carbon neutral society has implications across all industries and fuels the development of new industries, including on the Norwegian continental shelf.

Key areas include CO₂ capture and storage, electrification of offshore installations, and offshore wind energy. Each of these sectors reflects the broader ambition of decarbonising the energy sector whilst leveraging existing expertise, infrastructure and natural resources.

Carbon Capture and Storage To succeed with the goal of a carbon neutral society, the capture and storage of CO₂ ("CCS") is required. The theoretical storage capacity on the NCS exceeds 80 billion tonnes of CO₂, the equivalent of about 2,000 years of Norwegian CO₂ emissions at current levels.

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Source: Illustration CCUS, Gassnova, www.norskpetroleum.no

An important initiative that has paved the way to progress CCS was the approval of funding for "Longship" in 2020, being a full-chain carbon capture, transportation, and storage project encompassing the capture of CO₂ at the Brevik cement factory in Telemark and the Klemetsrud waste-to-energy plant in Oslo, its transportation by ship to and its permanent storage beneath the seabed in the Aurora reservoir, operated by Northern Lights at Øygarden outside Bergen.

In June 2025, the Longship project became fully operational as an integrated, full-scale CCS chain, with CO₂ from the Brevik facility now being transported to and stored in the Aurora reservoir. The Brevik facility had achieved mechanical completion in December 2024 and reached a significant operational milestone in May 2025, when CO₂ was captured for the first time at the site. In August 2025, it was confirmed that the first CO₂ originating from Brevik, which had been held in interim storage at Øygarden, had been successfully injected and permanently stored beneath the seabed. Towards the end of 2025, Northern Lights issued its first storage certificates, documenting the quantities of CO₂ transported to and permanently stored in the Aurora reservoir.

The Klemetsrud waste-to-energy plant in Oslo, which also forms part of the Longship framework, remains under construction, with completion estimated towards the third quarter of 2029. Additional CO₂ volumes are expected to be delivered to the Northern Lights facility during 2026 from shippers in Denmark and the Netherlands.

In light of this operational progress, Northern Lights has taken an investment decision to substantially expand the facility's transport and storage capacity, from 1.5 million tonnes of CO₂ per year to a minimum of 5 million tonnes of CO₂ per year. This expansion follows the conclusion of a commercial agreement with Stockholm Exergi and is part-funded through a grant under the Connecting Europe Facility for Energy (CEF Energy) programme.

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There is growing interest across a broad range of operators in exploring and developing subsea formations on the NCS for the purpose of CO₂ storage. Prior to 2024, the MoE had awarded 7 permits for injection and storage of CO₂ on the NCS. Four additional licences were awarded in 2024, all located in the North Sea. In 2025, one licensing round was held, with the announcement in March and the award in June. One licence was also relinquished to the authorities during the same year.

In total, 13 licences have been awarded to 13 companies; 1 exploitation licence and 12 exploration licences.

The abovementioned licensing activity reflects the Norwegian government's sustained commitment to developing CO₂ storage as a commercially viable and scalable industry. As operational experience accumulates and infrastructure capacity expands, Norway is well positioned to serve as a key provider of cross-border CO₂ storage within Europe.

Electrification Today, many fields on the NCS are electrified. Electrification of oil and gas installations has become an increasingly debated topic as domestic electricity prices onshore rose sharply during 2022, and a deficit in domestic renewable electricity production is expected within the next few years.

In December 2022, the MoE received plans for increased gas production from Snøhvit and electrification of Hammerfest LNG facility at Melkøya from Equinor ASA, Petoro AS, TotalEnergies EP Norge AS, Neptune Energy Norge AS and Wintershall Dea Norge AS, which is called the “Snøhvit Future” project. Since gaining approval from the MoE to proceed, the project has been subject of considerable public and political debate, particularly regarding the electrification component. Extensive discussions have led to numerous proposals, culminating on May 6, 2025, in a narrowly decided vote in the Norwegian Parliament, 85 in favor versus 84 against, to proceed with the electrification process. More recently, in early 2026, it appeared that a parliamentary majority was forming in favour of revoking Equinor's power allocation at Melkøya. However, following a change of position by the Socialist Left Party, the proposal was ultimately defeated in the Norwegian Parliament on 5 February 2026, leaving the electrification process intact. The electrification of the facility is planned for completion by 2030.

Offshore Wind Offshore wind energy is advancing on the Norwegian continental shelf. Following the opening of the areas Utsira Nord and Sørlige Nordsjø II, the government announced the rules for award of acreage for one 1.5 GW capacity project on Sørlige Nordsjø II and a qualitative award process for the award of three projects up to 1.5 GW (in aggregate) on the Utsira Nord area. The rules were subsequently updated in October 2023.

Most recently, in December 2025, two project areas on Utsira Nord were allocated following a competitive process based on qualitative criteria. It had originally been planned that three project areas would be awarded through this process, with each project being awarded its preferred area in order of ranking. However, only two applications were received by the Ministry before the deadline in September 2025, and as both applicant groups met the qualification requirements, each was awarded one project area. The applicant groups are (i) Equinor Utsira Nord AS and Vårgrønn Utsira Nord AS, and (ii) Harald Hårfagre AS (Deep Wind Offshore Norway AS and EDF Renouvelables International SAS). Following the allocation of

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project areas, the companies may submit proposals for project-specific impact assessment programmes, conduct assessments and apply for licences, which must be submitted within two years of the approval of the impact assessment programme. Companies that submit licence applications will also be entitled to participate in the competition for state aid. If both groups apply, one will receive support based on requiring the least state aid to develop its project, with the maximum level of support being NOK 35 billion (2025 value).

The allocation process for Sørlige Nordsjø II was concluded at an earlier stage. In March 2024, it was announced that Ventyr SN II AS won the auction for the allocation of a project area, with a winning bid of 115 øre/kWh. Ventyr SN II AS is owned by Parkwind (Belgian) and Ingka (the Ikea group's investment company). The contract between the Norwegian state and Ventyr SN II AS was signed in April 2024.

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The regulatory framework

The Norwegian Petroleum Act of 1996 (the “Petroleum Act”) sets out the main regulatory framework for petroleum activities on the NCS. The Petroleum Act is based on the principle that all petroleum deposits on the NCS are owned by the Norwegian State, and that the Norwegian State can grant production licences allowing others to explore for and produce petroleum. Governmental control is further exercised through the requirement of approvals in all phases of petroleum activities, from gathering of seismic data and exploration drilling, to development, operation and decommissioning of oil installations, as well as approval for the transfer of already granted production licences. The Petroleum Act is supplemented by other legislations specifically relating to petroleum activities, such as the Petroleum Tax Act of 1975, as well as general legislation relevant to petroleum activities such as the Working Environment Act of 2005 and the Pollution and Waste Act of 1981.

In addition, there is a significant volume of secondary regulations concerning different aspects for petroleum activities.

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The main regulatory bodies and Norwegian State participation in petroleum activities

The main regulatory body is the MoE, which has authority over most parts of the Petroleum Act including ownership regulations and licensing rounds. Some of these functions are delegated to the Norwegian Offshore Directorate. Major development projects and issues of fundamental importance must be approved by the Norwegian Parliament. The Ministry of Finance has authority in petroleum tax matters. The Norwegian Ocean Industry Authority is responsible for safety and HSE matters.

The Norwegian State has substantial holdings in production licences on the NCS through the Norwegian State’s Direct Financial Interest (“SDFI”). The formal licensee for the SDFI assets is Petoro AS, a company wholly owned by the Norwegian State. In addition, the Norwegian State participates through its ownership interests in Equinor ASA and Gassco AS. The latter is a company wholly owned by the Norwegian State which is the operator of the comprehensive gas transportation system on the NCS. The responsibility for managing the Norwegian State’s direct and indirect participation in the petroleum activities through SDFI/Petoro and Equinor lies with the Ministry of Trade, Industry and Fisheries – who also manage the Norwegian State’s ownership interest in other entities such as DNB, Norsk Hydro and Yara.

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5

Petroleum activity requires a production licence

Companies wishing to produce petroleum on the NCS must hold a production licence, providing certain exclusive rights to perform petroleum activities within the geographical area defined by the production licence.

Production licences can be awarded to existing oil companies on the NCS, or to new entrants that are prequalified to hold such licences. The general policy is that petroleum activities must be carried out by entities that are able to contribute to the Norwegian petroleum industry beyond just financial participation, and that the activities are carried out in an efficient, competent, and responsible manner. Therefore, licence awards and pre-qualification require that the company can demonstrate sufficient technical, financial and Health, Safety and Environment (“HSE”) skills and resources. The prequalification procedure for new entrants typically takes up to half a year. Guidelines for pre-qualification are found on the web page of the Norwegian Offshore Directorate.

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Licensing rounds

Production licences are awarded through licensing rounds. There are two different kinds of licensing rounds on the NCS. There is an annual system of Awards in Predefined Areas (“APA”) in mature parts of the NCS. The APA rounds were originally intended to ensure that areas close to existing and planned infrastructure are available to the industry before existing infrastructure shuts down. Over time, the APA area has been expanded and today the APA area comprises most of the open, accessible exploration area on the Norwegian continental shelf. In addition to the APA system, ordinary licensing rounds are held, normally every two years. The current government has, however, stated that no such round will be initiated this year, as the 26th licensing round has been postponed to at the earliest following the publication of the new white paper on petroleum activities, expected in 2027. The ordinary rounds focus on frontier areas that are less explored and where less existing infrastructure has been built.

The MoE awards production licences based on the applications submitted. Relevant, objective, non-discriminatory and announced criteria form the basis for these awards. Applicants can apply individually or as a group.

New production licences are awarded to a group of companies that each will hold a participating interest in the licence. The licence grants the participants exclusive rights to surveys, exploration drilling and production of petroleum within the geographical area covered by the licence. The licensees become the owners of the petroleum that is produced, with each licensee being entitled to a portion of the petroleum corresponding to their participating interest in the licence.

Production licences are valid for an initial period (exploration period) that can last for up to ten years. During this period, the work program determined by the licence must be carried out, typically consisting of geological/geophysical surveys or reprocessing, exploration drilling and/or submittal of a PDO. If all the licensees agree, the production licence can be relinquished when the work commitment has been fulfilled. Licensees having satisfied the work commitment can demand that the production licence is extended for a period which typically is 30 years but may be up to 50 years in special circumstances.

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The production licences are registered in the Petroleum Registry which is an official and publicly available register that among other records ownership and encumbrances. Production licences can be mortgaged upon application and approval from the MoE.

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Plans for Development and Operation (PDO)

If the licensees determine that it is commercially viable to develop a discovered field, the development shall be performed in a prudent manner. The licensees are responsible for the development of new projects, but the development is subject to approval from the authorities.

The approval is provided on the background of a PDO submitted to the MoE for approval.

PDOs for large and/or particularly important projects are presented to the Norwegian Parliament before the MoE’s approval. An important part of the PDO is an impact assessment which is submitted for consultation to various bodies that could be affected by the specific development. The impact assessment shall assess how the development is expected to affect the environment, fisheries, and society in general. The processing of this assessment and the PDO itself is intended to ensure that the projects are prudent in terms of resource management, and that the consequences for other public interests are acceptable. The impact assessment is compulsory unless the licensees can document that the PDO is covered by a relevant existing impact assessment. The MoE has expressed that the impact assessment shall include an assessment of the financial climate risks associated with the development. This entails an assessment of the economic profitability of the development based on future oil prices in a market/revised policy scenario compliant with the goals of the Paris Agreement.

Furthermore, following up on the Supreme Court ruling in 2020 in the “climate lawsuit”, the MoE will as part of its approval process include an assessment of the climate effect of emissions from both production and the use of petroleum produced from the field (Scope 3 emissions).

The adequacy of this procedural change is presently subject to judicial review, see the above section on climate litigation.

The petroleum activities shall be conducted in a prudent manner to ensure that a high level of HSE can be maintained and developed throughout all phases, in line with the continuous technological and organisational development. The licensees are responsible for pollution without regard for fault. This is referred to as strict liability.

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Joint Operating Agreements

The licensees form a joint venture that is responsible for the petroleum activities within the licence area. The licensees are required to enter into a Joint Operating Agreement (“JOA”) which regulates the rights and obligations for the joint venture within the specific licence. The JOAs are standardized by a format that the MoE requires all licensees to use. The MoE nominates one of the participants in the licence as the operator, which will be responsible for the operational activities authorised by the licence. Major decisions are made by the management committee where all licensees are represented and have voting rights according to voting rules set out in the agreement for petroleum activities. Normally, a decision is made by the management committee when at least two of the participants that jointly represent at least 50% of the participating interest vote in favour of a proposal. The participants in the licence have joint and several liability for the obligations and liabilities arising out of the licence.

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Licensees are required to provide a Parent Company Guarantee

The Petroleum Act section 10-7 gives the MoE the right, at any time, to demand adequate security for holders of production licences on the NCS. The authority pursuant to section 10-7 is quite wide with regard to timing and the nature of the security that can be required. However, in practice the MoE requires licensees to provide an unlimited Parent Company Guarantee (“PCG”) for the benefit of the Norwegian State to secure all obligations in relation to the petroleum activities. The format and wording of the parent company guarantee is based on a standard template. This standard form is non-negotiable and is kept in a brief format. So far there have been no instances where the guarantee has been used in practice, and there are therefore several issues where the interpretation is unclear. For instance, it is debated whether other participants in a licence can draw on the guarantee if another partner in the licence defaults on its obligations.

The main policy is that the MoE will require that the parent company guarantee is provided by the ultimate parent company of the licensee. A company is considered a parent company if the company, directly and/or indirectly, owns or controls more than 50% of the licensee. Thus, a company owning and/or controlling less than 50% will normally not be required to issue a PCG. There are examples where the parent company guarantee has been issued by entities within a group that is not the ultimate parent company. For corporate transactions, the current policy of the MoE is to return parent company guarantees if a shareholder ceases to have more than 50% of the shares in the licensee.

10 Decommissioning liability

Investment

Production

Decommissioning

As a main rule, the Petroleum Act requires licensees to submit a cessation plan to the MoE two to five years before the licence expires or is relinquished, or before the use of a facility ceases.

The cessation plan must have two main parts: an impact assessment and a disposal section.

The impact assessment provides an overview of the expected consequences of the disposal for the environment and other factors. The disposal part must include proposals for how cessation of petroleum activities in a field can be accomplished. In addition to the Petroleum Act, the Oslo Paris Convention for the protection of the marine environment of the North- East Atlantic (OSPAR) also governs disposal of facilities. As a general principle under the OSPAR convention, facilities cannot be abandoned on-site.

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It follows from the Petroleum Act that a seller of a participating interest in a production licence will remain secondarily liable for decommissioning costs. The secondary liability applies to the seller’s share of installations existing at the time of the transaction and is a financial obligation to pay the (after tax) cost of the decommissioning if the buyer of the participating interest fails to meet its obligations. To protect the seller from such liability it is not uncommon to enter into decommissioning security agreements between the buyer and the seller, depending on the financial solidity of the parties and the amount of decommissioning obligations. In a corporate transaction structured as a sale of a controlling interest in a Norwegian E&P entity, practice has now been established whereby the MoE generally require that the ultimate selling parent company issue a parent company guarantee to the Norwegian State establishing a comparable secondary liability for decommissioning obligations of the target entity – see more on this under heading “The government’s current approach to companies exiting the NCS” below.

There is currently no practice or requirement for general decommissioning security arrangements internally between the partners in a licence.

11 The Norwegian Petroleum Tax System The petroleum resources belong to the Norwegian State, and the Norwegian State secures its revenues through taxation, direct participation in the licences through Petoro and as a majority shareholder in Equinor. Norway has no additional production sharing or royalty schemes but imposes fees on emission of CO2 and NOX. Companies participating in production and pipeline transportation of petroleum on the NCS, are subject to a special petroleum tax regime with a combined effective tax rate of 78% (the effective tax rate is actually 78.004% but is referred to herein as 78%).

The petroleum tax consists of both the ordinary corporate tax, where the formal corporate tax rate is 22%, and the special petroleum tax, where the rate is 71.8%. However, since a calculated corporate tax may be deducted in the special tax base, the effective corporate tax is only 6.2%.

The petroleum tax applies to a company’s net profit from all petroleum activities subject to the special tax, i.e. not on a ring-fenced basis for each petroleum field. However, losses generated by activities not subject to the special petroleum tax may as a general rule not be deducted from the special tax base, and there are limitations on the right to set off such non-petroleum losses against the ordinary corporate tax base of the petroleum tax. Thus, the petroleum tax is to a large extent ring-fenced to petroleum activities.

Historically, petroleum investments were capitalised and depreciated on a straight-line basis for six years. In addition, the petroleum companies were entitled to an extra investment deduction for specific investments in the special tax base (uplift).

Effective from 1 January 2022, the special petroleum tax was changed to a cash flow-based model. In the special tax base, investments in pipeline and production facilities are fully deductible in the year of investment. In the corporate tax basis, investments in pipeline and production facilities are capitalised and depreciated under the traditional straight-line method at a rate of 16 2/3% annually, i.e., depreciation over 6 years. The depreciation may start as soon as the investment cost has been incurred.

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The tax value of any losses in the special tax regime will be settled as a tax refund from the Norwegian State as part of the annual tax assessment. The tax value of losses in the corporate tax must be carried forward (in nominal values without any interest compensation).

All costs related to petroleum activities are in principle deductible in the petroleum tax bases.

Financial costs are fully deductible in the corporate tax base of the petroleum tax. Some of the financial costs may also be allocated to the special tax base pursuant to a specific formula based on remaining tax values of fixed assets in the special tax basis. However, due to the introduction of the cash flow-based tax in 2022, the tax value of fixed assets in the special tax basis will be minimal. Thus, the allocation of financial costs to the special tax base is in practice more or less phased out.

Norm prices can be imposed when calculating taxable income from the sale of produced petroleum. The government appointed Petroleum Price Council (PPR) determines the norm price. PPR receives information from and meets with companies before setting the final norm price. This norm price system applies to certain grades of crude oil and NGL. For other petroleum products such as gas, the actual sales price is used when calculating the taxable income. Related party transactions may be adjusted by the tax authorities based on ordinary transfer pricing rules if the non-norm price regulated product prices are not in line with the arm’s length principle, i.e. based on fair market value.

In 2020, provisional tax changes were made to stimulate investments in the petroleum sector, due to the Covid-19 pandemic. Such tax treatment will also comprise investments made pursuant to (i) a PDO/PIO filed before 1 January 2023 and (ii) approved by the government after 12 May 2020, but before 1 January 2024 (but not investments made after the year of planned “first oil” as defined in the approved PDO/PIO). The main benefit of being subject to the temporary rules, is the right to calculate an uplift which is deductible in the special tax basis.

The uplift is currently 12.4% of the investment. Thus, if an investment of 100 is made, the taxpayer is allowed to reduce the special tax basis with a total of 112.4, equal to a tax value of 80.7 (112.4 x 71.8%).

Investments comprised by the provisional tax changes are capitalised and depreciated over 6 years in the corporate tax base, as under the ordinary petroleum tax rules. No uplift is applied to the corporate tax base.

12 Transactions and change of ownership Participating interests in Norwegian petroleum licences are transferrable. The participating interests (except for some of the older licences) can be sold without the consent of the other licence partners, provided that the compulsory work obligation set out in the licence has been fulfilled. Prior to fulfilment of the work obligation the management committee of the licence must give its consent to an assignment. There are normally no pre-emption rights for the other private licence partners pursuant to the JOAs, except in some of the older licences. The Norwegian State/Petoro has a general right of pre-emption, but so far this has to our knowledge not been used in practice. In a scenario with increased focus on securing energy supply to Europe, this provision should be assessed in relation to each individual transaction.

Direct transfer of participating interests is subject to approval by the MoE pursuant to the Petroleum Act. The same applies for share transactions which according to law “may provide decisive control of a licensee possessing a participating interest in a licence”.

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The MoE have stated that the wording shall be interpreted broadly, and that approval may be required for transactions where the buyer does not even achieve negative control. Further, it is stipulated that any uncertainty with respect to the applicability of the requirement must be discussed with the MoE. Approval by the Ministry of Finance is also required for the same transactions for tax purposes.

If the transaction is based on standard terms as regulated in the Regulation to the Petroleum Tax Act Section 10, a notification to the Ministry of Finance is sufficient. The main principle is that transactions should be tax neutral. Hence, in asset transactions (direct transfer of participating interests) the tax basis of depreciation and uplift related to the assets are transferred to the buyer (tax continuity). Further, the consideration is not taxed as income for the seller and is, correspondingly, not deductible for the buyer. Losses and unused uplift carried forward will as a rule remain with the seller. Share transactions will normally not trigger Norwegian tax under the Norwegian participation exemption.

Transactions can also trigger other regulatory approvals, such as approval from the MoE for change of operatorship or approval to create pledges over the licence interests. The Norwegian Ocean Industry Authority can also require that new applications are made with regard to HSE related permits if the transaction changes the basis for existing permits. Further, for certain transactions, an approval under the Norwegian National Security Act may be required.

It is a general principle that all petroleum activities within a group are conducted through one single legal entity. Therefore, if an existing company buys the shares of another company, the MoE will require that the businesses are combined into one single legal entity. If the two companies are participants in the same licences, the MoE may also require that the voting rules are amended.

If a contemplated transaction leads to a company acquiring 100% ownership in a production licence, the MoE has in relation to certain transactions set as a requirement for its approval that the acquiring company divests a part of its participating interest in the relevant licence.

13 The government’s current approach to companies exiting the NCS Up until late 2017, it was possible to achieve a clean exit from the NCS by selling shares in a subsidiary that holds production licences. For share transactions there was no secondary liability for decommissioning, since a share transaction does not imply a change of the legal entity holding the production licence. It was also the government’s policy to return the parent company guarantee when the shares were sold.

As many of the international majors have already exited the NCS, a concern for the government has been whether the new entrants will be able to meet future decommissioning costs. This prompted the government to revisit the policy of granting companies a clean exit.

As from late 2017, the MoE’s policy has however been that they will consider imposing as a condition to approve the new owner that the selling shareholder undertakes to issue a new parent company guarantee where the seller remains secondary liable for existing decommissioning obligations.

The MoE has developed a standard template for this secondary liability decommissioning guarantee. As a result of this approach, share transactions and asset transactions are now treated more equally in terms of decommissioning obligations. Several questions arise relating 19

to this approach which has yet to be resolved, inter alia whether a payment under the new guarantee should be calculated as an amount pre- or post-tax. *** Further information regarding Norwegian petroleum activities can be found here: https://www.norskpetroleum.no/en/

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“ BAHR has a large team of experts that continuously delivers high quality and timely legal advice to our business.

- Chambers Europe 2026

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Our services BAHR’s legal team has vast experience of working closely with a number of major players on the Norwegian Continental Shelf. We have a thorough understanding of the legal framework governing the industry. We advise in large transactions and represent companies in legal disputes. We also assist in connection with major development projects. Furthermore, we have comprehensive experience within the regulatory field including extensive government relations. BAHR also has expertise in petroleum taxation, appeals and litigation of tax disputes. We represent several large oil companies in complex tax disputes before the tax assessment administration and the courts.

Oil & Gas Tier 1

Oil & Gas Band 1

Oil & Gas Band 1

Energy Tier 1

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Certain matters within the oil and gas sector

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•

Assisting HitecVision with the sale of the Sval Energi group to DNO ASA.

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Assisting in a major expert determination process concerning a contingent payment mechanism in a SPA.

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Assisting Sval Energi AS with the sale of its interests in the Halten Øst field and the transfer of the operatorship in the Oda field.

•

Assisting Sval Energi AS with the sale of its interests and the operatorship in Trudvang CCS ANS to INPEX Idemitsu and Vår Energi.

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Assisting in relation to several substantial gas price review arbitration processes.

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Assisting Neptune Energy and its shareholders on the sale of Neptune Energy Norge AS to Vår Energi and the parallel transfer of the Neptune Energy group to Eni International B.V.

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Assisting Aker ASA and Aker BP ASA with the notable acquisition of and merger with Lundin Energy Norway AS.

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Assisting Sval Energi AS with several transforming transactions, including inter alia (i) the acquisition of Spirit Energy Norway AS’s key assets, (ii) the acquisition of Equinor Energy AS’ 19% participating interest in the Martin Linge Unit and Equinor’s entire participating interest in the Greater Ekofisk Area and (iii) the acquisition of and subsequent consolidation with Suncor Energy Norge AS.

•

Advising on contract strategy, contract development, negotiations, and project follow up for key contracts relevant for the E&P industry.

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Assisting several E&P companies with strategic advice in relation to the development of carbon capture and storage

Editorial committee For more information, please contact:

Stig K. Engelhart

Trond Lingaas

Adnan Vejzovic

PARTNER

SPECIALIST PARTNER

MANAGING ASSOCIATE

+47 470 11 112 skl@bahr.no

+47 920 44 674 troli@bahr.no

+47 905 55 064 advej@bahr.no

Julian Davidsen

Lars M. Braathen

Anne Sophie van Dijke

SENIOR ASSOCIATE

ASSOCIATE

ASSOCIATE

+47 976 19 125 judav@bahr.no

+47 959 41 774 labra@bahr.no

+47 977 71 015 annes@bahr.no

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BAHR’s Oil & Gas team M&A

Stig K. Engelhart

Jon Christian Thaulow

Thomas K. Svensen

Trond Lingaas

PARTNER

PARTNER

PARTNER

SPECIALIST PARTNER PARTNER

troli@bahr.no

sgs@bahr.no

Thomas K. Svensen

Jan B. Jansen

Jon Christian Thaulow

Amund B. Tørum

Eirik Høiby

PARTNER

PARTNER

PARTNER

PARTNER

SPECIALIST PARTNER

Thomas K. Svensen

Henrik Bjørnebye

Stig K. Engelhart

Jon Christian Thaulow

PARTNER

PARTNER

PARTNER

skl@bahr.no

jct@bahr.no

tks@bahr.no

Svein Gerhard Simonnæs

Litigation

tks@bahr.no

jbj@bahr.no

jct@bahr.no

abt@bahr.no

eirho@bahr.no

Regulatory

Trond Lingaas

SPECIALIST PARTNER PARTNER

troli@bahr.no

tks@bahr.no

heb@bahr.no

skl@bahr.no

jct@bahr.no

Contracts

Trond Lingaas

Thomas K. Svensen

SPECIALIST PARTNER PARTNER

troli@bahr.no

tks@bahr.no

Morten Smørdal

Inglin Sognnæs

PARTNER

SPECIALIST PARTNER SPECIALIST PARTNER

ingso@bahr.no

eirho@bahr.no

Nils F. Bull

Simen S. Søgaard

mps@bahr.no

Eirik Høiby

Tax

Joachim M. Bjerke

Jan B. Jansen

Knut Ekern

PARTNER

PARTNER

SPECIALIST PARTNER SPECIALIST PARTNER PARTNER

jmb@bahr.no

jbj@bahr.no

knuek@bahr.no

Employment

nfb@bahr.no

sss@bahr.no

Finance and restructuring

Tarjei Thorkildsen

Margrethe Meder

Tor Olav Carlsen

Magnus Tønseth

Richard Sjøqvist

PARTNER

PARTNER

PARTNER

PARTNER

PARTNER

tth@bahr.no

mme@bahr.no

toc@bahr.no

magto@bahr.no

ric@bahr.no

Competition

Beret Sundet

Helge Stemshaug

Olav Kolstad

PARTNER

PARTNER

PARTNER

bsu@bahr.no

hst@bahr.no

olk@bahr.no

Oil & Gas in Norway – an introduction 2026

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Disclaimer This publication is provided for general information purposes only and does not constitute legal advice. You should not rely upon it as a substitute for specific legal advice tailored to your particular circumstances. If you require legal advice on any matter addressed in this publication, please contact a BAHR partner.

BAHR accepts no responsibility for any information contained in this publication that may prove to be inaccurate, incomplete, outdated, or incorrect. BAHR excludes all liability (howsoever caused) to you or any third party for any loss or damage arising from the use of, or reliance upon, this publication. Any use of the information contained herein is entirely at your own risk.

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