Transcript Local Content The Norwegian Experience Grata Law Firm Seminar

Reflection on the Norwegian Experience
within the Oil and Gas sector
Grata Law Firm Seminar
Almaty, 23 April 2010
Odd Instefjord
General Director, Statoil North Caspian as
Norway is admired for its management of
petroleum resources because:
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It conquered the challenges of the North Sea.
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It formed world class Norwegian offshore industry.
It avoided the OIL CURSE.
It created growth in non oil sectors.
It formed robust national oil companies side by side with
international oil companies.
It nearly doubled oil recovery from 25 to 45%.
National organization of the petroleum sector
Petroleum Policy – Main Principles
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The right to sub sea petroleum deposits is vested
in the State
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The petroleum deposits shall be administered for
the benefit of the Norwegian society as a whole
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Due regard for the environment and high HSE
standards
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Effective government take
Goal: Maximize value creation:
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legal / licensing system
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State participation and Tax system
resource management
R&D and industrial development
So how could Norway succeed ?
•Richness in Hydro power which allowed Norwegian to develop their
oil resources at a moderate pace.
•Norway was also highly developed before the oil age:
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Highly efficient system of governance
Social democratic culture enhancing collective effort.
Homogeneous society. Solidarity. Cohesion…etc.
Well developed institutions.
High level education and R&D competence and capacity.
…….etc
Industry Development
- based on our capabilities and competitive strengths
A good starting point:
–Developed and diversified economy
–Significant maritime nation
–Relatively high level of education
–Political consensus
The important majors
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Transferred skills and competence
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Created necessary competition
• In joint teams with Norwegian
companies
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Statoil given a central role
• Participation in training courses
• Operatorship to learn the
business
Government Leadership from the start..
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Preference for local content
- on a competitive basis
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Make international oil companies
maximize local benefits
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Build local competence
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Ownership less important
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Avoid creating unsustainable
jobs
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Avoid cost pressure
Work and value creation to be carried out in Norway!
Control and monitoring
Operators
Suppliers
R&D
Transparency -
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Monitoring of contracting
and procurement practices
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Mandatory announced
tender-schedules
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Mandatory lists of invited
companies
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Ensure qualified Norwegian
companies on bidders list
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Stimulate Joint Ventures
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Encourage R&D
Predictability - Stability
SALIENT FEATURES OF THE NORWEGIAN APPROACH?
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National steering of the direction and pace of petroleum operations.
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Direct participation by national companies alongside IOCs.
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Good governance (Govt. Petroleum Administration).
Constructive competition among the oil companies.
Variety among the licensees to master challenges and enhance
efficiency.
Encouraging the local content in deliveries to petroleum operations.
Maintaining balance between national and international oil companies.
Co-operation between the authorities and the oil companies.
Focus on high oil recovery.
Focus on Health, Safety and Environmental protection.
Technical innovation to cope with petroleum operations in rough seas.
Source: Petroteam
Summing up the Norwegian Experience
Coherence – local content part of overall policy
Local content policies aimed at…
• Increasing value added > not deter investments
• Balancing industry and government needs
• Building on existing capabilities
• Encouraging JVs with international players
 Local content policies should be temporary
Thank you
Reflections on the Norwegian Experience within the Oil and Gas sector
Odd Instefjord
General Director
www.statoil.com
Back-up
Why is this organization successful ?
Separation of the commercial interests of government from its administrative tasks
has proved essential for :
–Dedicated, unbiased and professional monitoring.
–Equal and fair treatment of the various stakeholders.
–Effective co-operation between national and international oil companies.
–Transparency in promoting national objectives while upholding commercial
interests.
–Effective co-operation between Government and companies.
WHAT WERE THE OBJECTIVES OF NATIONAL PARTICIPATION ?
1.
Enhance national control.
2.
Increase the national share of the petroleum profit
(revenue).
3.
Maximise the national share of funds spent on oil
operations.
4.
Stimulate industrial activity on the basis of petroleum, thus
securing employment and industrial development.
5.
Stimulate the development of general know-how in Norway
PREPARATIONS FOR ENHANCING THE LOCAL CONTENT
In the period from 1965 to early 70s
Norway had a well developed technical basis from the start.
Local content grew largely through co-operation with reputable international firms.
Government encouraged use of local deliveries if competitive.
In 1969 the principle was included in licence documents.
In 1972 the principle was included in Royal Decree of 8t Dec.
Norway declared its target of 70% local content in deliveries to petroleum operations.
STEPS TO ENCOURAGE THE DEVELOPMENT OF TECHNOLOGY
1978:
Government required oil companies to spend 50% of R & D budget on field development in Norway.
Oil companies were satisfied with both the quality and the price of Norwegian research work.
Many "Good-will Agreements" were then voluntarily signed between oil companies and Norwegian
institutions.
The objective of 70% local content was partly achieved.
DEVELOPMENT OF THE LOCAL CONTENT
From the 80s the status can be summarized as follows:
Within a decade Norway had managed to create a vibrant national offshore industry.
The policy of slow licensing had given the local industry time to catch up with international levels and to even
take the lead in some fields of offshore construction and installation.
By 2006
Norwegian export of offshore goods and services formed 3% of the total GNP and 20% of the total Norwegian
exports.