18th January

Simplistic model ensures Norwegians retain greatest percentage of ‘oil’ spoils

An Oireachtas all-party committee is to consider adopting Norway as a role model to follow in the development of oil and gas finds, after a senior expert from that country revealed that its success was founded on some simple basic values established at the start and which have hardly changed in almost fifty years.

Ms Mette Karine Gravdahl Agerup, Assistant Director General of Norway’s Ministry of Petroleum and Energy who was addressing the Joint Committee on Communications, Natural Resources and Agriculture (JCCNRA.

 Retaining ownership

“We established a basic law, only a few paragraphs long, allowing the government to permit oil companies to carry out oil and gas activities. And as we had no domestic expertise then we invited in foreign companies and decided we would do all we could to create our own oil and gas expertise.

“We set out simple basic aims for the sector in 1965 which remain the same today. Simply put, we wanted the oil companies to help us maximise the value created from our activities; we wanted to be at the forefront environmentally and regarding safety, and after we built up our expertise we wanted our industry to be international.”

She added that despite lacking experience with hydrocarbon exploration, the Norwegian authorities at the time nevertheless displayed considerable wisdom and foresight by not immediately signing away the rights to the resource, which today employs up to 200,000 people and is credited with providing Norway with a petroleum pension fund topping €600 billion, the largest in the world, and no foreign debt.

“In 1962 Phillips Petroleum offered Norway $1m for the exclusive rights to all oil and gas resources on the continental shelf for the following 40 years. Luckily some wise people in the Ministry of Foreign Affairs did not agree.

Good management
At the heart of the Norwegian model, according to Ms Gravdahl Agerup, is an adherence to good resource management and the belief that the country’s hydrocarbon reserves should be managed so as to benefit society as a whole.

“This has been the red thread in our activities and in the actions of our authorities since 1965. The international oil companies contribute with capital, competence and the most modern technology. In our experience this is important,” she said.

Another early key decision was a determination that Norway should retain control of all phases of the activities, including seismic data; drilling expression wells; developing oil and gas fields; shutting down fields and removing platforms and installations.

“Our law has been structured so that each important activity is subject to approval or consent by the authorities, in most cases the Minister of Petroleum and Energy. This has been the case since the beginning and is key to our success story.

“We’ve maintained the same system for 40 years without making many changes. We’ve also had political consensus throughout, on petroleum policy. We try to ensure competition between the oil companies when we award permits and we’ve tried to create a fiscal regime that ensures the State gets the biggest share of the revenue while leaving enough to attract companies to remain.”

Public particpation
Responding to a committee question as to whether the public has any involvement in the decision-making process she emphasised that they were “consulted all the time”. As for to the environmental impact of oil and gas extraction, she confirmed that despite being outside the EU, Norway was in fact subject to the same environmental directives as Ireland, and is obliged to carry out environmental impact assessments (EIAs) before areas of the continental shelf can be opened to petroleum activities. “We do this in a step-by-step manner to ensure that not too many areas are given over to this use at the same time.

We apply an EU directive from 2009 on plans and policies. We call it the Strategic Impact Assessment Directive, which must be applied before we open areas for activity. Directive 97/11/EC requires oil companies to carry out impact assessments before they develop pipelines, etc,” she added.

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