Statoil in test case for industry as Canada extends seabed territories

OSLO: Norway’s Statoil risks millions of dollars in extra costs in Canada – a test case that could spell problems for other oil firms too as coastal states extend their seabed territories far into resource-rich ocean depths.

Coastal nations are using UN laws to extend and define new limits to their seabed territories, pushing beyond a previously established 370 kilometres zone for drilling and mining as technology opens new frontiers in finding deepwater oil and gas.

But that extended territory comes with a bill to pay a percentage of future revenues to the UN body that monitors the international seabed – something governments are seeking to pass on to oil and mining firms.

The rules – articles of the UN Convention on the Law of the Sea – have thus far been irrelevant because the regions beyond the previous limit are so remote they would have cost too much to develop.

But industry advances have lately opened up huge deepsea possibilities f rom the Arctic Ocean to the Pacific: specialist firm Transocean drilled a well in a record 3,174 metres of water off India last year.

Dozens of states have made submissions to the UN Commission looking at seabed rights.

However all eyes are on Canada’s extended territories as the test case for oil companies because Statoil has found potential new fields there.

Assuming oil production goes ahead, Canada and Statoil will be the first to become liable to Article 82 – the part of UN law that lays out the terms of the payments to the International Seabed Authority (ISA).

The payments start at one per cent of revenues i n the sixth year of production and rise by one percentage point a year to a maximum of seven per cent from the 12th year. — Reuters