Iceland Mag

12 Reykjavik

Iceland Mag


Oil exploration in Icelandic waters comes to an end: Too expensive and too risky

By Staff

  • Dreki oil exploration area The area is part of the North Atlantic Ridge between Iceland and Jan Mayen by Stöð 2

It looks like hopes for an Icelandic oil industry have been been put on hold after the the Chinese oil company CNOOC and the Norwegian state owned Petoro both pulled out of oil exploration in Icelandic waters. This is the latest setback for Icelandic oil exploration. 

Read more: Report: Oil exploration stopped in part of the Icelandic shelf, but prospectors haven’t given up

The Icelandic company Eykon Energy, which had been working with the two foreign companies on exploration in the Dreki region between NE Iceland and Jan Mayen, is determined to push forward, but the National Energy Authority has said that the exploration permit will have to be cancelled as Eykon lacks the financial or technical capacity to continue exploration on its own. The Chinese CNOOC owned a 60% stake in the project, Petoro a 25% stake and Eykon Energy 15%.

The foundar and chairman of Eykon Energy, Heiðar Guðjónsson, told the local TV station Stöð 2 that he was disappointed in the decision. He claims that there are signs of significant oil deposits in the area and hopes that his company will be able to continue exploration.  

Heiðar Guðjónsson

Heiðar Guðjónsson The Chairman of the board of Eykon Energy is still hoping for an Icelandic oil-boom. Photo/Björn Siguðrsson

Too expensive and risky
CNOOC Iceland and Petoro Iceland relinquished their licenses for oil and gas exploration in the last remaining section of the Dreki area. The 12 year license was issued in April 2012. All data acquired during the exploration has been turned over to the National Energy Authority in accordance with the original agreement. 

According to the Energy Authority the decision was made based on an assessment of the cost of drilling and extraction of any potential deposits, and the risks involved. The National Energy Authority has stated that Eykon Energy, which is the last remaining company to hold rights to hydrocarbon exploration in Icelandic waters, does no longer meet the requirements of its licenses.

Heiðar Guðjónsson told Stöð 2 that he suspected the decision was "political". The Minister of the Environment, Guðmundur Ingi Guðbrandsson, of the Left Green Movement, has said that he opposes oil exploration in Icelandic waters. The permits for oil and gas exploration were originally issued by a the Social Democratic - Left Green coalition government which was in power 2009-2012. Since then the Left Greens have come out in firm opposition against any oil or gas exploration in Icelandic territorial waters.

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