Norway considers joining a Chinese company looking for oil in the Arctic region despite a political dispute.
Norway has to make a decision whether to use its right, granted by a 1981 treaty, to take a 25 per cent stake in an oil exploration license awarded to the Chinese company CNOOC by Icelandic authorities earlier this year.
The license entitles CNOOC to look for oil in the waters between Iceland and Norway’s island Jan Mayen. Since Iceland has started awarding oil exploration licences in January this year, Norway's government has already exercised its right twice, entering into partnerships with London-listed Faroe Petroleum and Canada's Ithaca Energy.
However, diplomatic relations between Norway and China have been strained since 2010 when the Nobel Peace Prize was awarded to Chinese dissident Liu Xiaobo.
"We expect an answer from the Norwegian authorities in the last week of November," said Gudni Johannesson, director-general of Iceland's National Energy Authority, emphasising that there had been no diplomatic tensions over the issue.
"It has been a quite normal administrative process," he told Reuters.
US Geological Survey believes there might be up to 90 billion barrels of oil equivalent in the Arctic region. China, eager to explore the resources, signed a free trade deal with Iceland earlier this year, abolishing tariffs between the two, in a bid to facilitate the process.
Iceland, still recovering from the 2008 financial crisis that brought the country to its knees, is keen to develop its natural resources to help spur its economy.
There are no estimates how much oil and gas the area covered by the licences could hold. However, according to this year’s survey conducted by the Norwegian Petroleum Directorate, the geologically similar area off the coast of Norway’s Jan Mayen island could hold up to 566 million barrels of oil equivalent – similarly to a sizeable North Sea oil-field.