Transcript Environmental dimensions of petroleum sector governance

Oil for Development – OfD
Stanford
March 13, 2009
Petter Nore
www.norad.no\ofd
Januar 2008
Overview
• Description ”Oil for Development”
• Lessons learnt from the program
• Issues for further discussion :
•
Security of supply and OfD
Introduction
• Norway with petroleum assistance from mid 1980s
Vietnam\Mozambique\Angola
• Oil for Development (OfD) founded in 2005. Aim to
strengthen environmental, governance and financial
aspects of assistance
• Operates in 10 core countries plus regional programs
and 15 ”light” assistance countries.
• Close links with ”Clean Energy for Development” (A
new Norwegian program promoting clean energy
solutions in cooperating countries)
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OfD – main objectives
• Help cooperating countries to
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Generate sustainable
eonomic growth
Promote the welfare of the
whole population
Be environmentally benign
• Combat the ”resource curse”
Core countries
How we work
• Along the integrated petroleum chain
Limited downstream activities
• Demand driven
• No export of the ”Norwegian model”;
• Share experiences
• Enter where ”we can make a difference” and
where there is a clear demand
•
OfD – who we cooperate with
• National governments
• Civil Society (both Norwegian and international)
• World Bank\ African Dev. Bank\ IMF\ UNDP\ EITI
• Norwegian ministries
• Norwegian and international oil and service
companies; where appropriate
OfD and civil society
• Civil society (incl. media) plays a crucial role in
preventing the resource curse
• OfD cooperates with Norwegian and international
NGOs
 Aim is to build capacity among civil society
organisations in the South
• 6 Norwegian NGOs and one international NGO have
received funding for 2008 (20 mill NOK)
OfD – our foundation
OfD is built around three integrated
themes:
1. Resource management
2. Environmental protection
3. Revenue management
Principles of good governance, transparency and accountability are a
fundamental part of the three themes
Resource management
• Strengthening of local institutions (ministries &
directorates)
• Development/assessment of petroleum legal
frameworks
• Framework for exploration and production of
petroleum
• Resource databases
• Strategies for transparent licensing and tendering
processes
• Policies to stimulate technology development and
the involvement of local industry
Environmental management
• Build environmental management capacity within the
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sector
Basic legislation, rules and regulations covering
environmental dimensions of the petroleum sector
Minimise discharges from activities
Environmental impact assessments
Manage gas flaring and other national/global climate
challenges that are directly related to the petroleum
industry
Revenue management
• Design, management and
control of tax regime for the
extraction of oil and gas
(Government take)
• Transparency and
accountability around
payments by oil companies
(EITI)
• Planning and execution of
government budgets
• Management of the financial
savings (oil fund)
Transparency, anti-corruption
• Open bid and tendering processes
• Transparency about licenses and contracts
• Transparancy about payments by oil companies
• Extractive Industries Transparency Initiative (EITI)
• IMFs Guide on Resource Revenue Transparency
Ofd activities, NOK million (1USD=5NOK)
Core activities, percent
Afghanistan; a case-study
• OfD engaged in a number of complicated states
(Sudan\Iraq\Palestine\Afghanistan)
• Afghanistan a case study of what is feasable in such
situations\what are the key uncertainties
Afghanistan
• OfD has worked in Afghanistan for two years
A combination of anti-poverty\development and
foreign policy considerations
• Has helped to create a legal petroleum framework
• A new Petroleum Law enacted
• Draft regulations accepted by the government
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Afghanistan (2)
• Has given advice to Afghan authorities how to
organize first concession round for three blocks in
Northern Afghanistan
• OfD is helping in capacity building for government
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Data management and environmental issues
Afghanistan (3)
• Uncertainty 1: The market for gas
Gas for power\export; Who will guarantee the
demand?
• Uncertainty 2: Which companies to bid in today’s
financial situation?
• Uncertainty 3: The actual implementation of the legal
and regulatory system
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Lessons learnt from OfD
program
Ten Lessons Learnt
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Heavy demand for the program
-Rapid growth in environmental and financial advice
-Less demand for governance\ anti corruption; but
increasing
Presents options; not solutions
-Can’t force countries to implement policies
Ensure independence of advice from commercial sector
-But part of Norwegian foreign policy agenda
Keep a Long run (5-10 year) perspective
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Capacity building\Institution building takes time
Ten Lessons Learnt
5.
6.
Keep a short term capacity to react
Civil society and transparency; necessary but not
sufficient factors for success
7. Concentrate number of countries\programs
-25 countries and regional program far too many
8. Anchoring in the South
-Too many experts from the North fly in\out
-South\South cooperation\ capacity building must be
strenghtened
9. Better coordination between donors a must
Ten Lessons Learnt
10. Norway; a relatively easy ”brand” to sell
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Reasonably successful resource rich country
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Non-imperialist past
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OfD part of Norwegian foreign policy
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A balance between interests of state and companies
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But; Norwegian society\politics\economy differs
fundamentally from situation in other commodity rich
countries
Security of Supply and OfD
Security of Supply
 There are suffient physical hydrocarbons in the world
Problem is political: To produce and deliver
resources. We have seen the end of cheap oil NOT of
oil itself
 Top of the international agenda
 Europe\Ntl gas imports from Russia
 US: Crude imports\energy independence
Security of Supply
History
 Churchill WWI\Persia\English navy
 1973 oil embargo
 Ukraine cutoffs of Russian gas
 Two Gulf Wars
Two aspects of Security of Supply
with limited relevance for OfD
Physical cut-off of energy
 Temporary damage?
 The producers need to sell their products in the
end
Security of Demand
 Key concept in the gas business used especially
by Russia
Third factor; OfD can play a role in
encouraging long run supplies
Foster increased willingness to invest by IOCs
 Higher risk means less investment. Risk premiums
in excess of 10% pluss do not encourage
investments (e.g. Sudan)
 IOCs don’t want weak petro states
 IOCs want stable legal and regulatory frameworks ;
political predictability and stability
 These are also the aims of OfD
World supply less than potential
 ”Resource nationalism” due to unbalanced
historical record. Little spinoffs\limited transfer of
technology\weak capacity building ?Bolivia, Iran,
Russia?
 Weak state capacity ?Iraq, Afghanistan?
 Consequences of the ”resource curse” (weak
bureaucracy\internal strife) holds back further
expansion ?Nigeria, Sudan?
OfD can encourage”win\win” situations between
resource states and Western technology
Summary Security of Supply
 Link between ”resource curse” and security of supply
 OfD can encourage”win\win” situations between
resource states and Western technology
 OfD can foster increased willingness to invest by
IOCs