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Nicaragua – virgin and volatile

Nicaragua is thought to have one of the largest proportions of untouched oil reserves in the Americas. Hopes for a big potential helped to prompt Statoil’s entry into four exploration licences on the Nicaraguan continental shelf in 2015. But it nevertheless pulled out just six years later.
By Alexander Fossen Lange
- The logo of Empresa Nicaraguense del Petroleo (Petronic), Nicaragua’s state oil company.

An exploration well drilled on land about 40 kilometres south-west of the capital, Managua, in 1930 marked the start of Nicaragua’s oil industry. Although that means its petroleum story reaches back almost a century, the Central American country has never been a particularly big producer. This tale has been largely one of prospecting and inhospitable political conditions. The most active exploration period was in 1965-79, when Shell, Texaco and Chevron drilled 24 wells between them. While 10 proved promising, only one came on stream. In the following years, the oil industry was almost defunct. That reflected the political unrest after the Sandinistas, the local socialist party, came to power in 1979 and initiated a period marked by human rights abuses and violent resistance from the CIA-supported Contras.[REMOVE]Fotnote: Cabello, Mateo, Centeno, Uriel and Garcia, Martina, “End Review of the Oil for Development (OfD) Programme in Nicaragua”, Norad Collected Reviews 03/2015: 4-5. Norad, 2015. 

 Since then, Norwegian development assistance has been used in part to improve the infrastructure of Nicaragua’s oil industry.[REMOVE]Fotnote: Ibid. Although no commercial discoveries were made, hopes of finding substantial Nicaraguan petroleum resources remained. That laid the basis for Statoil’s arrival in 2015. 

 Six years of exploration

The company’s entry into Nicaragua took the form of four exploration licences awarded in the Sandino basin on the country’s Pacific continental shelf and covering 16 000 square kilometres.3 [REMOVE]Fotnote: Nicaragua, Equinor, Accessed 15 July 2021. These were held 85 per cent by Statoil, with the remaining interest going to state oil company Empresa Nicaraguense del Petroleo (Petronic).[REMOVE]Fotnote: “Statoil awarded licences offshore Nicaragua”, press release, Equinor, 29 May 2015. Accessed 15 July 2021. The two had entered into an agreement in the autumn of 2014, and Statoil secured the licence together with Britain’s Geoex.[REMOVE]Fotnote: TDN Finans, “Statoil vil lete i Nicaragua”, Dagens Næringsliv, 5 September 2014. Accessed 15 July 2021. According to Nick Maden, Statoil’s then deputy head of exploration in the western hemisphere, the project could – in line with the company’s exploration strategy – contribute substantial access to new acreage and greater freedom of choice in the international portfolio. This commitment offered a big potential as well as great uncertainty. Little previous exploration had been carried out in the area earlier.[REMOVE]Fotnote: “Statoil awarded licences offshore Nicaragua”, press release, Equinor, 29 May 2015.   

The potential was important for Statoil and subsequently for Equinor. Its annual report for 2018 noted that Nicaragua, along with Canada and Surinam, had the largest undeveloped net acreage in the Americas.[REMOVE]Fotnote: Equinor annual report, 2018: 60. Once again, however, political and economic uncertainty prevailed in the country. Petronic was one of those affected by US sanctions and trade restrictions imposed in 2018 and 2019.[REMOVE]Fotnote: Equinor annual report, 2018: 85; Munugía, Ivette, “Sanctions Against Rafael Ortega and Petronic, ‘Deep Blow’ to the Regime’s Finances”, Confidencial, 16 December 2019. Accessed 15 July 2021.

Equinor reduced its holding in the Sandino basin to 49.9 per cent in 2019 to give Britain’s Cairn Energy a 35.1 per cent stake.[REMOVE]Fotnote: “Cairn farms into Equinor’s blocks offshore Nicaragua”, Offshore Energy Today, 17 May 2021. Accessed 15 July 2021; Nicaragua, Equinor. Accessed 15 July 2021. According to executive vice president Al Cook at Equinor, the oil price slump in 2020 prompted a decision to reduce exposures in the international portfolio. That meant the end of the company’s brief involvement in Nicaragua. In June 2021, Cook announced that this commitment would be eliminated as part of a substantial cutback in Equinor’s international activities. The company would concentrate instead on fewer core areas – primarily offshore.[REMOVE]Fotnote: Lorentzen, Marius, “Equinor forlater Nicaragua og Mexico: Vil også selge i USA, Canada og Argentina”», E24, 15 June 2021. Accessed 9 July 2021.


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