The Norwegian Oil Experience: A toolbox for managing resources

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The following preface and introduction are taken from a report, The Norwegian Oil Experience: A toolbox for managing resources?, which is being published in English here for the first time.

Translator’s Preface
The discovery of oil and gas, like other mineral resources, is often a curse rather than a blessing. For many societies around the world it has meant rising inequality, massive state corruption and often external intervention: weak states where the energy multinationals can write their own rules, officially or unofficially. By contrast, Norway is often seen as one of the most positive examples of how to manage oil and gas resources for the benefit of the whole society, a good example of how to assert collective interests against private gain, and a model from which other countries can learn.

Dr Helge Ryggvik (University of Oslo, Centre for Technology, Innovation and Culture) produced this report in November 2010 for Norwegian ATTAC, as a background document for trade unions, NGOs and social movements from majority world countries facing the challenge of dealing with the multinational energy companies, who want to know what can be learned from the Norwegian case. It is of course immediately relevant to Ireland, where oil and gas reserves are being discovered in a number of offshore locations and which is facing an unprecedented economic and financial crisis. This is its first Irish publication.

Like Ireland, Norway’s 1970s entry into the world of oil and gas extraction started from scratch, but has managed over the past 40 years to develop one of the world’s largest funds from oil and gas revenues, to transform Norwegian society on this basis and to develop what is now a world-leading oil and gas industry – now, of course, present in Ireland at Rossport. In Ireland, by contrast, the argument of dependence on multinational companies has been used at every turn to divest the state (and Irish society) of these same resources and their economic benefits, and to put the state’s resources, including the police force and navy, at the service of Shell and Statoil.

Dr Ryggvik is Norway’s leading critical specialist on the petroleum industry and the author of several works on oil-related issues, including the widely-discussed Til siste dråpe (2009) about the political economy of oil, controversial in Norway for raising the issue of peak oil with relation to North Sea resources. He has also worked on various projects focussed on health and safety (most recently “Robust regulation”) and on the Norwegian Petroleum Museum’s history of oil divers. He has visited oil and gas projects around the world, and was part of a 2006 Norwegian trade union delegation to Rossport which met with local community members, Irish trade unionists and politicians, including the President of the Labour Party Michael D. Higgins.

His 2005 report on the choices facing Norwegian oil policy, written with Ole Andreas Engen for the energy workers’ trade union SAFE, highlighted the conflict between Statoil’s development as a multinational energy company, investing in readily extractable resources overseas and abandoning no longer profitable Norwegian plants, and the alternative possibility of a “soft landing” for the industry in Norway, slowing down the rate of extraction, using the existing skill base in a more sustainable way and becoming a leader in the environmentally safe decommissioning of oil and gas plant (an English translation is available on request from laurence.cox AT nuim.ie).

The present report, The Norwegian oil experience: a toolbox for managing resources? is a detailed and lucid account of Norway’s encounter with the oil and gas industry, from the initial tendency to allow the energy companies to set the terms of engagement, through the challenging process of asserting the ownership of natural resources and using this to ensure the development of national expertise and eventually Statoil and the vast Norwegian oil fund, up to Statoil’s part-privatisation and its present role in countries like Ireland.

Chapter 1 discusses the economic, legal and political issues around the ownership of oil and gas. Chapter 2 outlines the state’s struggle to secure ownership and control of these resources in the 1970s and the goal of using them for a “qualitatively better society”. Chapter 3 explores the technological and institutional challenges faced when Norway developed its own independent capacity to exploit petroleum resources. Chapter 4 discusses the associated prospecting and contractor industries. Chapter 5 covers industrial conflicts within the offshore oil industry and the struggle for effective regulation in this extremely dangerous working environment. Chapter 6 highlights the intensification of production rates from the mid-1980s, leading to near-exhaustion of Norway’s oil reserves. Finally, chapter 7 discusses the neo-liberal part-privatisation of Statoil and its shift to a global strategy. The conclusion draws up a balance sheet of the Norwegian experience.

The report is a fascinating read in its own right and immediately relevant to the Irish situation, not only in respect of the 11-year-old conflict over the Corrib gas field but even more widely in terms of the estimated extent of offshore energy reserves on the Irish continental shelf and the economic and social crisis we are now facing. It raises the question of what, if anything, Ireland can learn from the Norwegian experience.

Dr Laurence Cox, Dept. of Sociology, NUI Maynooth (translator)

Table of Contents

Introduction

    1. Oil: the state’s property, the people’s property
    2. A Radical, National Oil Policy
    3. Good Intentions and Harsh Reality
    4. The Norwegian Contractors
    5. Struggles and Hazards
    6. From “a moderate pace” to the World Leaders in Quick Extraction
    7. A Ruined Model?

Concluding Remarks

Introduction

It was December 2004. I was in the largest concert hall in Caracas, together with activists and trade unionists from across Latin America. Hugo Chávez was giving one of his charismatic speeches. While he was reading out the list of foreign guests he read out my name and then paused: “Terje Nustad, the leader of OFS, the Norwegian oil workers’ union. Norwegian oil workers! Terje – where are you, Terje? Stand up!” The applause went on for a long time.

There was no doubt what the applause expressed: respect for the Norwegian oil experience. To the radical movements of 21st century Latin America, Norwegian oil policy and Statoil have appeared to be the only successful example of a country which has been able to secure a national direction and control of oil activities and to ensure that the profits were channelled towards the majority of the population. On the podium, Evo Morales was sitting with Chávez. He was introduced as Bolivia’s next president.

It is not only in Venezuela that I have had this experience. Among unionised oil workers in Colombia (a medium-sized oil producer), among environmental defenders and rain forest activists in Ecuador, among oil workers and the middle class of Azerbaijan, or in Angola among those members of the elite who are interested in the oil question and not completely swallowed up by corruption, there is great respect for the way Norway entered the world of oil. Many other Norwegians who have travelled in oil-producing countries can confirm this.

It was March 2010. I was in New Orleans. On the other side of the table Troy Trosclair, the leader of the offshore inspectors working for the American regulators, the Mineral and Mining Service (MMS), in the Gulf of Mexico, was waving his hands. Trosclair also respected the Norwegian oil experience, but he was rather sceptical about the way in which Norway’s experience was used within his own institution as an argument for reducing the number of inspections in the Gulf of Mexico. Only three weeks later, disaster struck.

We should not overestimate this positive perception of the Norwegian oil experience. Even among those sections of the middle class or particularly well-informed trade union members in oil-producing countries who are aware of the Norwegian oil experience, knowledge as to what that experience is, is limited. Depending on who you talk to, two images predominate. People who work in the petroleum industry in one way or another are most interested in the technological aspect: that Norway has developed an industry which can master all the challenges involved in producing oil under the difficult conditions of the North Sea.

For people standing a little bit outside the oil industry, what predominates is the understanding that Norway has managed to find oil but nevertheless remains an egalitarian welfare state. In both of these groups, Norway also scores points because the country is still experienced as being different from the USA and the old colonial powers, the home countries of the big oil companies. Today, in a USA which is still in shock following the largest environmental disaster in the superpower’s history, it is precisely Norway’s apparent ability to master the safety and environmental challenges that people notice.
Does Norway deserve this respect? Do others really have anything to learn from the Norwegian oil experience? And, most importantly: what exactly does the Norwegian oil experience consist of?

On the Shoulders of Activism in the Global South
The first thing to be said must be that we started with a good dose of luck. Moreover, Norway’s oil experience cannot be separated from developments in Southern oil-producing countries, what was then often called the Third World. There was already a long history of conflict: from Mexico’s nationalisation of its oil reserves in 1938, through Mosaddegh and Iran’s attempt to do the same in 1951, up to the creation of OPEC, an organisation which seriously flexed its muscles at the same time as Norway started its oil adventures. In these conflicts, the balance of strength between the oil companies and producer nations had gradually been altered in favour of nation-states. From this point of view, the discovery of the gigantic Ekofisk field in the middle of the North Sea in the autumn of 1969, could not have come at a better time for Norway. Not only could Norwegian oil activities start in a participatory democracy with a developed industrial sector, but we could also stand on the shoulders of a movement where many of the most important battles had already been fought in the global South.

To understand the Norwegian oil experience, it is not enough to understand it in the light of developments in the rest of the oil world. What must also be understood is that oil has changed Norway. If many people in the global South have seen Norway as a model, this is not least because – by contrast with the home countries of big multinational oil companies like BP, Total, ExxonMobil and Chevron – we do not have strong imperial traditions. However, Norway in the early 1970s and Norway in 2010 are two different societies. In 2010, oil is easily Norway’s most important industry. Its largest companies have centred their strategies for many years around securing contracts and petroleum reserves in other parts of the world. Thus Norway now has an economy whose main actors have the same underlying interests as those companies which early Norwegian oil policy aimed to protect the country from. This development sometimes affects how the Norwegian oil experience is represented.
But despite all these reservations the Norwegian oil experience is rich in real history: in other words, events where individuals, social groups and political forces mobilised, intervened and so changed the course of developments. Which lessons can be learnt from this depends of course on the prior conditions in one’s own country. There are great differences between small island states like Trinidad and Tobago, where there is no basis for developing an independent industry that could master all the many key aspects of the oil business, an Ecuador, Uganda or Greenland, where oil is found in vulnerable environments and there are good arguments for leaving it underground, and a Russia or Venezuela, which have enormous oil reserves and a good basis for establishing a skilled and independent oil industry.

The range of problems and conflicts associated with the phenomenon of oil and gas is so wide that we cannot consider all of them in depth. For more than 100 years, oil has been easily the world’s most important strategic military resource. For most of this same period, it has been by far the most widely sold commodity. Over the last decade, the gradual acknowledgement that we are reaching a period where we can no longer maintain the same level of production, despite increasing demand (peak oil), has contributed to a further sharpening of the lines of conflict. This presentation does not aim to give an exhaustive presentation of oil history. Its goal is to highlight the decisive conditions and events in order to understand why Norway was successful, from many points of view. However, in the final sections we also want to highlight situations where mistakes were made or where the underlying developmental logic of oil production has created difficult moral, political and economic dilemmas.
Nevertheless, if understood correctly, the Norwegian oil history is rich in experiences which are universally valuable. Since the underlying political economy is to a large extent the same, many of these experiences are also relevant for managing other energy resources.

Helge Ryggvik

Centre for Technology, Innovation and Culture (TIK-Centre)
University of Oslo

© Helge Ryggvik 2010
Translated by Laurence Cox

The full report can be obtained in PDF form by clicking on this link and selecting Save As.

Alternatively, the full report can be read in the embedded reader below.

Photo courtesy of Johnsmyth.ie

 

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