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20 October 2014
In 2013 petroleum activities on the Norwegian Continental Shelf were exempted from the European Economic Area and EU rules on procurement included in the EU Utilities Directive. The rules contained a simplified procedure for procurement based on general principles that many found unclear and challenging to apply. The exemption implied an increased right to single source.
The procurement provisions of the mandatory standard Norwegian Continental Shelf Joint Operating Agreement also stipulate competitive bidding for Norwegian Continental Shelf joint ventures as the main rule. The purpose of these provisions is different from that of the directive, but the effect is much the same. In the case of single sourcing, a unanimous joint venture vote is required. The joint operating agreement prescribes no specific tendering procedure (this is also the case for the Utilities Directive).
Many oil companies on the Norwegian Continental Shelf are required to apply internal procurement guidelines prescribing competitive bidding. In practice, the guidelines of the joint venture operator were regularly applied to joint venture procurement, sometimes with adjustments following input from partners. Compliance with the joint operating agreement or the Utilities Directive has never been tested legally.
But how often have joint ventures on the Norwegian Continental Shelf used single sourcing since the exemption was granted? So far, quite rarely. The use of single sourcing seems to have been prevented partly by the joint operating agreement and also by the internal guidelines of the oil companies. Experience from tendering following the exemption, as well as input from industry professionals, indicates that the exemption has not affected the use of competitive tendering as the preferred procurement approach.
In general terms, the internal tendering procedures of the different oil companies seem to meet the joint operating agreement requirements, provided that the basic principles of competitive tendering are satisfied by an invitation to tender to at least two potential bidders that are:
For further information on this topic please contact Preben Willoch at Advokatfirmaet Simonsen Vogt Wiig by telephone (+47 21 95 55 00), fax (+47 21 95 55 01) or email (email@example.com). The Advokatfirmaet Simonsen Vogt Wiig website can be accessed at www.svw.no.
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