First licensing terms specified
This decree can be summarised under four main headings: it was intended to ensure thorough exploration, a reasonable financial outcome for Norway, government control and acceptable exploitation of resources, and that the industry did not cause inconvenience to other activities or hinder acceptable technical safety.
Two considerations prompted the choice of a decree rather than an Act. The first was timing, since the legislative process would take too long. Second, nobody knew at that time whether oil and gas actually existed in the North Sea. Provisional regulations would be easier to amend and adapt to changing requirements. The regulations were extensive, with no less than 56 sections which outlined how the NCS was to be divided into blocks, how long a reconnaissance period should last, the level of fees, company obligations, royalties and the payment of ordinary income tax by the companies.
A key point in the decree was section 33, which specified that, if required in the national interest, the King could specify that produced petroleum products should be wholly or partly landed in Norway. This provision was to prove a challenge. Landing oil and gas in Norway was problematic because pipeline technology capable of crossing the deepwater Norwegian Trench had yet to be developed. Exemptions had to be granted from this rule for the first developments in the North Sea, on Ekofisk and Frigg. This decree established the framework for oil operations on the NCS together with two other enactments – the Tax Act of 11 June 1965, which determined the level of taxation, and the production licences awarded on 17 August 1965, which specified the rights and obligations of each licensee.UK-Norwegian boundary treatyEstablishing Norwegian subsidiaries