Exploration for oil and gas in Icelandic waters is regulated by Act No. 13/2001 on prospecting, exploration and production of hydrocarbons (Hydrocarbons Act). Accompanying the Act are Regulation No. 884/2011, Regulation No. 39/2009. The Act applies to the Icelandic territorial sea and exclusive economic zone and the Icelandic continental shelf. Petroleum activities are subject to general Icelandic laws and regulations on taxation, environmental protection, health and safety. In addition to the corporate income tax of 20%, Act No.109/2011 applies to the taxation of hydrocarbon extraction.
In addition, the Agreement of 22 October 1981 between Norway and Iceland on the Continental Shelf Between Iceland and Jan Mayen, the Agreement of 3 November 2008 between Norway and Iceland concerning transboundary hydrocarbon deposits and the Agreed Minutes of 3 November 2008, concerning the Right of Participation pursuant to Articles 5 and 6 of the Agreement from 1981, apply to the relevant parts of the Continental Shelf between Iceland and Norway.
Hydrocarbon accumulations are owned by the Icelandic State and a licence from Orkustofnun (the National Energy Authority of Iceland) is required for prospecting, exploration and production of hydrocarbons.
Orkustofnu is also responsible for monitoring hydrocarbon prospecting, exploration and production activities and archiving the data generated by such activities. Orkustofnun coordinates the response of Icelandic authorities to requests from oil companies for information regarding petroleum activities.
Iceland is a member of the European Economic Area. The European Union directive on the conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons (Directive 94/22/EC), and other relevant EU legislation, therefore applies to petroleum activities in Icelandic waters.