8 Employment, spin-off effects and research

The petroleum resources on the Norwegian Shelf have laid the foundation for a highly competent and internationally competitive oil and gas industry. Oil companies, in cooperation with the supply industry and research and educational institutions, have found solutions to challenging conditions offshore. Major development projects have stimulated new technological solutions. Favourable framework conditions for research and technology development have been an important precondition.

One of the goals in the Government’s petroleum policy is facilitating profitable production of oil and gas, which can also provide a foundation for profitable and attractive jobs onshore. The petroleum activity on the Norwegian Shelf generates jobs all over the country. The industry currently employs about 43 000 people, but over 200 000 jobs can be directly or indirectly linked to the demand from the activities on the shelf. This amounts to nearly eight per cent of overall employment in Norway.

Kilde: Ministry of Petroleum and Energy and Norwegian Petroleum Directorate.

The activity level on the Norwegian Shelf is at a very high level. It looks like this will continue in the coming years. A continued high activity level means that there is a considerable market for a petroleum-oriented supply industry and for other associated industry activity. However, small discoveries make it more challenging to achieve new, joint technology advances in the industry.

The activity level in the petroleum activities over time depends on how much of the remaining resources are utilised. If merely the current investment plans are implemented, the petroleum activity will quickly decline. Strong efforts in existing fields, new profitable field developments and exploration will provide the basis for a high and stable activity level in the future as well. In a time perspective beyond 2020, exploration in opened areas and access to new exploration area will be crucial as regards the activity level. Measures are necessary within all these areas to ensure the industry has new tasks. Therefore, the Government has decided to start an opening process for the sea areas around Jan Mayen and the part of the formerly disputed area west of the delimitation line in the Barents Sea South.

New discoveries provide the basis for new developments and associated spin-off effects. The greatest potential for making major, new discoveries is in the waters off Northern Norway. New activity and significant spin-off effects in the north are facilitated through expanded exploration activity. The development of Snøhvit, Goliat and Skarv illustrate that petroleum activity provides considerable value creation and employment, locally and regionally.

By utilising the resource potential on the Norwegian Shelf, the oil and gas industry will be able to create considerable activity in the country’s economy for decades to come Development and operation of fields will create knowledge-intensive jobs and other positive spin-off effects. Utilisation of the resource potential will contribute to research activity and development of expertise. Research and development are important to improve recovery of resources and ensure that the industry is internationally competitive. The industry is, and must continue to be, a driving force within research and development. The authorities play an important role as facilitator, and in certain areas where the industry’s efforts are not sufficient, there is a need for public funds.

8.1 Shelf and shore

A continued high level of demand from the activity on the Norwegian Shelf is crucial for the future of several companies and jobs across the country. This applies to both companies and jobs in oil companies, the petroleum-oriented supply industry and in other associated industry activity.

Norwegian companies are involved throughout the production chain. Various companies carry out e.g. offshore activity, exploration, development, modification, maintenance, operation and disposal. For these companies and associated employment, the total level of demand is not the only important factor. These companies are dependent on activity throughout the entire petroleum activity value chain.

Over the last decade, the investments and operating costs on the Norwegian Shelf have increased significantly. The activity level on the Norwegian Shelf is high, and indications are that this will continue in the coming five-year period, cf. Figure 8.2. A continued high activity level also entails that there will be a considerable market for a petroleum-oriented supply industry and other associated industry activity in the future.

Kilde: Ministry of Petroleum and Energy and Norwegian Petroleum Directorate.

The volume of assignments associated with operating fields is a core market for the Norwegian supply industry. Norwegian suppliers are particularly well-positioned to compete for assignments associated with operating fields because they are geographically close to the Norwegian Shelf and often have experience from previous assignments on the relevant fields.

If merely the approved investment plans are implemented, the Norwegian Shelf will experience a swift decline in production. Amplified efforts in improving the recovery rate from existing fields can curb the decline in production. This will provide great possibilities for new assignments as measures that increase the recovery of resources on fields often require considerable investments. It will also form the basis for more long-term operation of the fields. In this year alone, investment decisions are planned for new facilities, modification and wells on Ekofisk, Eldfisk, Åsgard, Snorre and Troll, each with investment frameworks exceeding NOK 10 billion. Measures to improve the recovery rate and lifetime are important for large parts of the supply industry’s volume of assignments in the medium term.

The number of new discoveries on the Norwegian Shelf is increasing in mature areas. The average size of discoveries is, however, significantly lower than in the 1970s and 80s.The size of discoveries is important for development solutions and the prevailing trend is fewer independent developments and more wells and satellites connected to existing infrastructure. Smaller discoveries, combined with a relatively high cost level compared with other petroleum provinces, mean that the industry is facing new technological and financial challenges in the coming years.

Large parts of the exploration area the industry currently has access to, are relatively well-explored. The promising deepwater areas in the Norwegian Sea have not yet met expectations. The recent Skrugard discovery is good news for exploration of the Barents Sea. The last time new area was opened for petroleum activity was in 1994. It takes a long time for discoveries to mature so they result in field development and production. For example, the years of discovery for Snøhvit, Gjøa and Skarv are 1984, 1989 and 1998, respectively. Snøhvit started production in 2007, Gjøa in 2011, while Skarv is still being developed. In the last ten years, the discoveries have been smaller than previously. This will play a role in which developments move ahead.

Access to new, prospective exploration area is important to facilitate new, larger projects that can harbour the future’s technological solutions. Therefore, the Government has decided to start an opening process for the sea areas around Jan Mayen and the part of the formerly disputed area west of the delimitation line in the Barents Sea South. The petroleum industry prioritises its resources where there are interesting business opportunities. In order for Norway to be a host country for an innovative and highly technological oil and gas industry, access to attractive exploration area is a prerequisite. Major discoveries in frontier areas often require larger basic investments in the form of independent developments and infrastructure. Such discoveries therefore provide a basis for larger assignments for the supply industry per field development than development of smaller discoveries in mature areas. Furthermore, new, independent developments provide the possibility for tasks for wider Chapters of the supply industry than smaller satellite fields. The industry must cooperate to find cost-effective solutions that enable realisation of resources both in new areas and mature areas.

In the long-term, it is crucial that sufficient new resources are proven to ensure regular and high activity on the shelf, and thus also new tasks for the industry. Continued new field developments require access to new area. Without access to area, the demand impulses toward the supply industry will wane in correlation with reduced activity level on the shelf, and thus weaken the basis for a Norway-based supply industry.

When production ceases, the facilities on the Norwegian Shelf must be removed. Currently, there are about 500 facilities on the Norwegian Shelf. There will be considerable work involved in phasing out fields that have been in production. The costs associated with handling the facilities on the Norwegian Shelf have been estimated at about NOK 160 billion1. This means that handling scrapped facilities will be a large market that can provide great industrial opportunities for onshore companies.

It is estimated that about 30 facilities on the Norwegian Shelf will be taken out of use on the Norwegian Shelf in the period 2010-2020. On the UK shelf, it is estimated that about 260 facilities will be taken out of use during the same period. This is a growing and interesting market for Norwegian removal players and receiving facilities. Currently, there are three facilities in Norway that can receive and process scrapped oil installations. The uncertainty associated with the prognoses is great since it is difficult to predict when a facility will be shut down. The shutdown time for the different fields and facilities depends on several factors, mainly oil price, expected production development, operation and maintenance costs and technical condition. Historically, the lifetime estimates have varied greatly and the current trend is for lifetimes to be continuously extended. The capacity of the above-mentioned facilities is expected to be sufficient to handle the volumes expected for scrapping towards 20202.

The Government will:

• Maintain an effective petroleum industry in Norway over time by facilitating profitable future activity on the Norwegian Shelf through development of discoveries, improved recovery, exploration in open areas and opening new areas.

8.2 The petroleum activity employs many people

Building a strong supply industry has been an objective since the petroleum activity started on the Norwegian Shelf. This has been successful and the supply industry currently consists of many competitive companies that deliver technologically advanced products and services to the Norwegian Shelf and to international markets. The industry is active within exploration activity, new developments, operation, maintenance, modifications and cessation of fields. Some focus on one of these markets, while others carry out activity in several parts of this value chain. Norwegian companies have become market leaders within seismic services, subsea production systems, drilling equipment, offshore service vessels, floating production and transport services.

In the aftermath of the development of a competitive supply industry in Norway, the import percentage in the petroleum sector has been reduced. This entails that the demand from the activity on the shelf has become more important for the activity level in the Norwegian economy. This also means that changes in the activity level on the shelf, and thus the demand from the industry in general, has a greater effect on employment in the country. Early in the 1970s, the import percentage was very high – nearly 100 per cent. As Norwegian industry has built up expertise within petroleum-related activity, the import percentage has now been calculated at between 20 and 30 per cent.

According to Statistics Norway’s (SSB’s) definition of the petroleum industries, they employ about 43 000 people3. About half of these are employed in the oil companies. This does not include all of the employees in the petroleum activities. If we include what Statistics Norway defines as petroleum-related industries, the number is higher. Using this definition, 63 000 people are employed in the industry, 65 per cent of which live in Rogaland and Hordaland. 424 of the country’s 430 municipalities have at least one citizen employed in what can be called the core activity and includes direct employment in the petroleum activity.

The effect of the overall demand from the petroleum industry is significantly greater. Several companies deliver goods and services to the petroleum activity or to companies in the industry groups mentioned above. This applies to e.g. seismic companies, engineering companies and shipyards.

The demand from the petroleum industry has been and is very significant for the activity in many companies across the country. Researchers from Statistics Norway have analysed the effects of this demand4 on e.g. employment in Norway. By taking a basis in direct and indirect deliveries to the petroleum activities, an estimate of the scope of employment that can be directly and indirectly connected to the deliveries to the petroleum industry has been carried out. The calculations – based on numbers from 2006, show an employment of 206 000 in 2009, c.f. Figure 8.3.

Kilde: Statistics Norway.

The deliveries to the petroleum activity come from many parts of Norwegian industry. The demand from the petroleum activities influences not only what we primarily think of as supply industries. It applies to a wide spectrum of industries, including building and construction, communication, trade in goods, banking/insurance and other parts of private services, cf. Figure 8.3.

Over the last decade, the supply industry has experienced considerable growth. The growth is not only reflected in increased employment, but also in turnover and value creation. Expertise from petroleum activity is also relevant to other types of assignments. Norwegian construction yards have received considerable contracts for production of jackets for offshore windmills. Similarly, Statoil’s expertise as an operator of oil and gas fields has had great significance for the development of full-scale floating windmills. In the same way as the knowledge and experience from shipping was important to the development of the supply industry, the current knowledge foundation provides a good basis for future activity within renewable energy as well.

8.2.1 The supply industry location

Menon Business Economics, IRIS and Ramm Energy Partner have carried out an analysis which shows e.g. location and employment in the Norwegian supply industry. The analysis shows that the Stavanger region is the economic region with decidedly the most full time equivalents connected with the supply industry. This region occupies a special position. Proximity to southern parts of the North Sea, where the petroleum activity started, is an important factor in this. Strong industry environments have gradually developed in the rest of the country. This includes strong environments within operation and maintenance in the Bergen region, for instance, subsea equipment in the Kongsberg/Asker region, shipowners and shipbuilding activity in Sunnmøre and Sunnhordaland and the NODE cluster in Southern Norway which is e.g. characterised by deliveries of drilling equipment, cf. Figure 8.4.

As the petroleum activity moved north, there has been onshore industry development further north as well. In recent years, there have been significant developments off Central Norway. This has created activity and employment in the region. Development and operation of Snøhvit has generated considerable spin-off effects for land-based activity in the north, particularly in Hammerfest, where several companies have experienced a boost as regards expertise, technology and capacity.

Supplier companies also give assignments outside their own local environment. Major supplier companies purchase from the entire country. In 2010, FMC Technologies purchased goods and services totalling more than NOK 3 billion distributed across 18 of the country’s counties5.

Kilde: Menon Business Economics, IRIS, Ramm Energy Partner.

8.3 Development of the industry

In 1959, the Groningen field in the Netherlands was discovered. This caught the attention of the major international oil companies, who requested access to carry out seismic surveys in the North Sea off the UK and Norwegian coasts. At this time, there was little expertise within exploration, production or refining petroleum in Norway. There was no education directed at petroleum activity, and no public agencies or institutions working with oil and gas.

In the first years with oil activity on the Norwegian Shelf, the authorities were therefore concerned with establishing a good framework for the activity. Important considerations included maintaining national control over the resources and ensuring positive effects in the event of development of these. Furthermore, they were concerned with attracting the large, international oil companies. These companies’ technical expertise and technical and financial capacity were key factors in ensuring a responsible start.

8.3.1 Industrial experience and culture

In the beginning, foreign suppliers dominated all areas. The newest technology and the best development solutions were imported. They were not necessarily adapted to the conditions in the North Sea. Therefore, there was room for improvement, which Norwegian industry quickly stepped in to fill. Initially, there was therefore a focus on learning to adapt solutions developed abroad.

Even though Norwegian companies possessed little expertise as regards petroleum activity, there were environments with industrial experience and industrial culture that could be utilised. For example, there were environments with experience from building large structures such as dams, bridges and ships.

The Norwegian contractor companies Selmer and Høyer-Ellefsen received the task of building a concrete storage tank for the Ekofisk field. Jåttåvågen outside Stavanger was chosen as the construction site. Using concrete was a French suggestion, and became a success and breakthrough for offshore concrete installations. The technology was developed further by several companies. The Norwegian contribution was named Condeep6. Norwegian Contractors was established by the companies Høyer-Ellefsen, Selmer and Furuholmen to build the first platform of this kind (for the Beryl field on the UK shelf). By the end of 1974, the companies had a total of six concrete platforms under construction in Jåttåvågen. Besides the Ekofisk tank, 18 concrete platforms were built in Norway, fifteen platforms in Stavanger, two in Åndalsnes and one in Hanøytangen.

Aker Solutions has continued the experiences within design, construction and installation of offshore concrete structures. Concrete has proven to be very suitable in Arctic regions and/or when encountering icebergs, drift ice and ice build-up. Aker Solutions still makes concrete platforms for rough weather areas in Canada and Russia.

The shipping knowledge Norwegians had gained over many generations, became a great advantage when oil exploration and production was starting. Many sailors who were used to working away from home for long periods were recruited to the oil industry. Experiences at sea and great adaptability were important in an international industry such as the oil activities. Norwegian shipowners had experience from operating internationally, and already had contacts in the oil industry. Many shipowners had strong capital and the shipowners were used to making major, and often risky, investments.

Norwegian companies quickly became important in e.g. further developing the seismic technology and adapting the technology to be used offshore. Norwegian factory trawlers were particularly suited for modification and were used as seismic vessels. Crews that previously manned fishing vessels joined the seismic vessels. Geophysicists and engineers received valuable knowledge about handling equipment from the fishing fleet. The synergy effect between fisheries and seismic has resulted in Norway playing a key role in this discipline. It started with the establishment of Computas and Geoteam, and continued with the development of Geco and PGS, which both became world-leading within seismology.

There were many large and small shipyards for new construction and ship repairs along the coast. These were not particularly involved with building platforms during the first years. After a decline in the oil price, and a collapse in the tank market and several discoveries on the Norwegian Shelf in the 1970s, many of the yards adapted to the needs of the oil industry. They did this through building drilling rigs, production platforms and supply and support vessels. The industry structure in Norway necessitated dividing large assignments into smaller units, as the yards were small and geographically spread. The work distribution between several yards enabled more rapid delivery and simultaneous utilisation of expertise in the individual local yards and workshops.

The first Norwegian platform was built in 1966. Rosenberg Mekaniske Verksted in Stavanger and Akers Mekaniske Verksted were also crucial in building the platform. Aker also developed a new type of drilling rig, the first of which started operations in 1974. The company’s concept has been further developed and several shipyards around the world have built rigs on license from Aker. The most recent generation of these rigs can drill in water depths of up to 3000 metres. Throughout the years, several special vessels, platforms and various modules for the petroleum activities have been built at Norwegian shipyards.

Long industry traditions, strong scientific and technological expertise and a strong engineering environment are important reasons why companies in the Kongsberg-Oslo area are world-leading as regards subsea equipment for the petroleum activities.

Boks 8.2 Subsea expertise

The subsea segment has become a business area where the Norwegian supply industry is a world leader within technology. Norwegian companies operate within all segments of the supply chain, main contractors, system operators, product suppliers and service companies are all in the chain. Companies such as FMC Technologies, Aker Solutions, GE Oil&Gas, Framo, ClampOn and Subsea 7 are examples of various cutting-edge expertise areas within this market. Norwegian-based suppliers have, for example, about 60 per cent of the world market for x-mas trees. The force behind the strong subsea environment in Norway includes demanding customers (oil companies) that have contributed capital for R&D and the willingness to test technology on the Norwegian Shelf. At the same time, the suppliers have been able to recruit competent work forces in cooperation with university and college environments, e.g. in Kongsberg and Bergen. The University of Bergen holds the status of a Norwegian Centre of Expertise (NCE) within subsea solutions.

Kilde: FMC.

8.3.2 Expertise

The authorities saw that the major oil companies possessed both the technological expertise and capital necessary to find and utilise potential petroleum resources. During the first years, Norway was therefore dependent on the multinational companies in order to utilise the resources. The State policy was based on attracting international oil companies and technology.

Several major fields were discovered in the 1970s and 1980s. The increased water depth and climatic conditions required considerable technological development before these fields could be developed. In connection with the fourth licensing round in 1979, technology agreements between the Norwegian state and the foreign oil companies were signed. The objective of the agreements was to stimulate Norwegian industry and increase Norwegian expertise. The foreign companies contributed the financial means and expertise to develop technology in Norway. The Norwegian research environments and companies thus received access to petroleum-related research. Through active policies from the authorities and great efforts on behalf of the companies, expertise and new activity within seismology, drilling, building supply ships, drilling platforms, production platforms, research and education were quickly built up.

The expertise within these areas has been important for the development of the Norwegian Shelf and Norwegian jobs. For example, new technology such as horizontal drilling, multilateral drilling, three and four dimensional seismic and many different injection technologies, have contributed to enabling development of new fields and have allowed many fields on the Norwegian Shelf to increase resource utilisation and thus extend their lifetimes. It was also important for the transition from large, integrated concrete platforms to subsea solutions tied in to existing platforms, new floating platforms, production vessels or simple, unmanned platforms. The development of solutions enabling both remote operation of platforms and wells at ever greater depths, has also been very important for this development.

Since 1980, activity has been ongoing to find solutions for transporting untreated wellstreams over long distances in the same pipeline, so-called multiphase transport. Active use of multiphase transport represented an important shift in the development, both on the Norwegian Shelf and internationally. The multiphase technology experienced a crucial breakthrough with the development of TOGI (Troll Oseberg Gas Injection). This also enabled the process part of the Troll A development to be established on land, through the establishment of the gas treatment facility at Kollsnes. Additional advances made the development solutions on Snøhvit and Ormen Lange possible.

The combination of new and challenging tasks within development and operation, strong university environments and competent supplier companies and oil companies, have been important factors in Norway’s success in these areas.

Boks 8.3 Well service – a key area for increased oil and gas production

Well service entails operations in connection with drilling new wells and operations in producing wells to optimise or maintain production of oil and gas. Traditionally, the major international companies Schlumberger, Halliburton and Baker Hughes have dominated this market. The authorities’ prioritisation of improved recovery and increased allocations to research institutions have contributed to a growth of steadily more specialised supplier companies in this market. Many have their origin in Norwegian research environments, for example IRIS in Stavanger. Currently, over 140 companies specialising in well service exist in Norway.

It is sometimes necessary to enter the wells to carry out maintenance or other technical operations, such as replacing pipes, monitoring production and logging pressure, flow and temperature. This is called well intervention. Aker Well Service, along with Statoil, has developed a so-called well tractor (pictured). This is a device of approx. five metres which can push equipment as far as ten kilometres along the horizontal parts of a well. A well tractor makes it possible to recover even small production volumes of oil. Statoil alone estimates that the well tractor will result in improved recovery with a value of NOK 300 million annually. In addition, Statoil estimates a cost savings of about NOK 500 million per year by using a well tractor instead of traditional coiled tubing or pressure pipe operations. Because a well tractor is relatively easy to handle, it also offers HSE benefits.

Kilde: Statoil.

8.3.3 Regional development

Over a period of 35 years, Norway has built up a supply industry which is at the global forefront in several fields. During this period, specialised enterprises have been established and a knowledgeable work force has been developed. Particularly in the marine sector, investment environments have developed that have been visionary and willing to take risks, but several investors have become more willing to gamble on development of technology-driven enterprises over time.

For a great deal of activity in the supply industry, it is beneficial to be located near the development and operation activity. With the gradual advance to the north on the Norwegian Shelf, it can be expected that the same geographical development of employment in the supply industry will take place. This is also the case.

The Rogaland and Stavanger region is the largest region measured in the number of employees, but its position has over time been reduced due to significant growth in Southern Norway, in the “subsea corridor” Oslo-Kongsberg and with shipowners and shipyards from Flekkefjord to Rissa. Central Norway has also been included in the activities, while Northern Norway lacks larger dynamic growth enterprises outside the Hammerfest area.

Geographical proximity is, however, not sufficient. The growth of the industry has also settled in a regional division of labour where different regions have utilised their own advantages to establish new activity. Regional specialisation can be observed. The dynamics in the industry are strongest in the Stavanger region. The growth in the subsea environment in Kongsberg or the shipowner and ship building activities in Sunnmøre are other examples.

Boks 8.4 Innovative industry with a starting point in Agder

Hardly any other oil and gas environment has experienced such considerable growth as the so-called Southern Norway cluster in recent years. The oil and gas environment in Southern Norway has formalised a cooperation through the NODE secretariat (Norwegian Offshore & Drilling Engineering), which also facilitates cooperation between industry and educational and research environments in the region. In 2009, NODE became a Norwegian Centre of Expertise and includes around 50 companies and about 6200 people. Drilling equipment, loading/offloading and anchoring systems as well as wave-compensating cranes are the most important products. Through close cooperation with demanding customers, targeted R&D work, particularly within mechatronics (mechanics and electronics), and cooperation across the cluster, the companies have developed innovative solutions that have proven most cost-effective.

The largest suppliers of drilling equipment include Aker Solutions, National Oilwell Varco, TTS Energy and Nymo. APL and Aker Solutions have specialised in anchoring and loading/offloading technology. The NODE companies make up a strong and important industrial environment in the Agder region, with a turnover of NOK 40 billion in 2009.

Kilde: NODE.

A common denominator for all of these environments is that they were not built from scratch, but developed from already existing environments for mechanical construction, machine production, shipping or seagoing fisheries. At the same time, the Norwegian Shelf and various oil companies on the Norwegian Shelf have offered many challenges that have required creativity and knowledge development. The merger of unique, highly specialised expertise has been important in order to achieve this and close regional environments contribute to this. Areas with many small enterprises with relatively weak resources have seen weaker effects than other regions with other qualifications.

8.4 Great possibilities in the north

The Government wants, and will facilitate, profitable offshore activity to also provide a basis for spin-off effects on the mainland. Creating spin-off effects on land when new offshore activity is established is also important for the population’s support of the activity.

New discoveries provide a basis for new developments and associated spin-off effects. The waters off Northern Norway are the most interesting as regards making new, large discoveries. These areas have been important in the last numbered licensing rounds.

Environments across the country have experienced positive industry development in light of the petroleum activities. Central regions in Western Norway have experienced the strongest growth. The number of people employed in petroleum-oriented activity in Rogaland increased from the early 1970s from 2000 to 30 000 employed over a 15-year period. In the 1990s, Møre og Romsdal County experienced an increase in employment in the same industry from about 1000 to 5000. The basis for the development is complicated, but proximity to resources and existing expertise have been important preconditions.

It must be possible for Northern Norwegian industry to participate as competitive suppliers to the activity. The starting point for Northern Norwegian petroleum activity differs from the situation in the North Sea 40 years ago. The same fundamental drivers for development which increased activity entails are, however, present. The high exploration activity in the North Sea forms a basis for proving new resources and thus positive spin-off effects.

The development in the northern areas and the Arctic provides challenges and opportunities. The northern areas are the Government’s most important strategic focus area in foreign policy and will contribute to a positive development in the northernmost areas. The overall goal of the Government’s policy is to ensure peace and stability in the region. Furthermore, the target is to ensure a sustainable and environmentally responsible management and utilisation of resources for the future. This entails paving the way so that people in the north can build an existence in viable local communities, with future-oriented jobs, good health and educational opportunities and diverse nature and cultural experiences. The northern area policy also deals with utilising the possibilities for increased international cooperation on resource utilisation, environmental management and research through closer contact with our Russian neighbour and our partners in Europe and North America. Safeguarding Norwegian interests in the northern areas mainly concerns a strengthened presence and increased activity along multiple political dimensions, both national and international.

The current basic industries are an important foundation for further development, but they will not be able to create the desired growth by themselves. The region therefore also needs other growth impulses. The petroleum activity can provide such a contribution. This is contingent upon exploration for resources in existing and new areas to increase the likelihood of making new and large discoveries. The Government will facilitate further development of the petroleum activity in the Barents Sea and ensure that the activity will have significance for Norwegian and Northern Norwegian expertise development, as well as local and regional industry development.

A high percentage of the deliveries to the oil and gas activities on the Norwegian Shelf come from Norwegian industry. The positive spin-off effects of the petroleum activity in the north have not been as significant as in the rest of the country. In the areas where activity is taking place, the spin-off effects are considerable. The expertise, industrial experience and culture possessed by an area are crucial as regards how large the spin-off effects will be. During the summer of 2009, Petro Arctic in Hammerfest carried out a survey which showed that companies in Finnmark had deliveries to the oil and gas industry totalling NOK 1.9 billion. The corresponding number for Nordland was NOK 1.6 billion and NOK 430 million for Troms.

Consequential research analyses show that petroleum activity results in considerable spin-off effects in the form of increased employment, a broader industry base and more expertise jobs. The petroleum activity thus represents an opportunity, both for Norwegian industry and local communities/regions in the province.

Spin-off effects from the petroleum sector are the result of both decisions regarding establishment and structure, as well as the ability of existing industry to compete to offer their goods and services in the value chain. It is desirable for companies in the province to have the opportunity to compete for relevant contracts.

In the work with ensuring spin-off effects from the oil and gas activity in the north, it is very important that companies in Northern Norway participate in more, and increasingly specialised areas. Sufficient expertise and market networks must be built in order to compete with an already well-established southern Norwegian or foreign industry. Northern Norwegian supplier networks and industry associations play an important role in strengthening the local industry’s ability to prequalify for coming tender processes. The daily operation of the supplier network is financed by annual contributions from the oil companies and through membership fees. In order for the industry in Northern Norway to be able to benefit from the petroleum activities, the oil companies must also qualify competitive northern Norwegian companies. Through conscious strategies that do not hinder local purchases, regional effects of the petroleum activity can be strengthened.

The Sami people have a special status pursuant to international and national law, including the right to be consulted in matters that could have a direct impact on them. An agreement has been signed between the State and the Sami Parliament regarding how consultations will take place. The consultation procedures apply to all types of cases, such as in the work with laws or administrative measures that could directly impact Sami interests. This also applies in connection with the petroleum activity.

8.4.1 Spin-off effects from developments

One objective of the Government’s petroleum policy includes facilitating profitable production of oil and gas, which can also provide a basis for profitable regional spin-off effects by contributing to development of industry and workplaces. In order to achieve this, the societal consequences of a development are an important topic when new development plans are highlighted. This ensures attention to this important area from both involved companies and local and regional authorities. The experiences from recent years’ developments in the north show that new, large developments result in local and regional effects.

It is important that the petroleum policy is designed such that the northern areas become attractive and are prioritised in the companies’ portfolio. This is contingent upon promising exploration areas being made available and that profitable and large discoveries are made. The increased access to interesting exploration areas that the Government has planned through the management plan for the Barents Sea – Lofoten, as well as the new discovery of Skrugard will contribute to achieving this.

The experiences from Skarv, Snøhvit and the studies from Goliat show that new, large developments provide spin-off effects in the north, regardless of development solution.

Snøhvit

The development of the Snøhvit field in 2002 was a milestone for the development of the Barents Sea as a petroleum province. It is the first gas development in the Barents Sea and the first facility for liquid natural gas in Norway. At its peak, 2500 people were employed during the construction activity until production started in 2007. Operation, maintenance, modification and support services for Snøhvit have created 400 jobs, where three-fourths of the employees have been recruited from Northern Norway. Nearly NOK 3 billion of the overall deliveries to the field come from companies registered in Northern Norway.

Consequential research analyses show that Snøhvit has reversed a negative population and employment trend in Hammerfest. New companies are being established in the city, and the region now has a shortage of labour. There has been a significant expansion in residential construction. There have also been considerable investments in upgrading school buildings, infrastructure, and development of cultural activities in Hammerfest. The development has created expertise building in the region, which also has a positive effect on other industries.

Goliat

The Goliat field located 85 km northwest of Hammerfest is the first oil field to be developed in the Barents Sea. Goliat is one of the biggest industry projects ever carried out in Northern Norway. Through this development, the industry in the region has continued to evolve. Goliat continues to build upon and strengthen the activity that was established in connection with Snøhvit.

The operator, Eni, is developing the field with a floating facility. The oil will be loaded onto tankers and transported to the market. Possible gas transport to Melkøya (Snøhvit) will be studied. A regional office for the Barents Sea with operational functions for the field, as well as a helicopter and supply base, are being built in the Hammerfest area. This will contribute to a total of about 150-200 jobs over the operational period.

The operator will facilitate further spin-off effects, including adapting the contract strategy on maintenance and operations contracts, cooperating with regional supplier networks, establishing auditing schemes for local companies in their own organisation, as well as ensuring that suppliers that win central contracts within maintenance and modification are present in Finnmark. They will also cooperate with upper secondary schools and higher education and research environments in Finnmark, to contribute to building local and regional petroleum expertise. With an expected operational phase of at least 15 years, local companies will be able to build expertise and capacity and become important suppliers to the petroleum industry in the north.

Norne and Skarv/Idun

The Norne field is an oil and gas field located in the Norwegian Sea off Helgeland. The field started producing in 1997. The Helgeland base in Sandnessjøen supports the oil fields off the cost of Helgeland, where the Norne field is the largest. About 50 people are employed at the Helgeland base, 30 employees in the base company and an additional 20 employees in associated activities in the base area. Furthermore, Statoil has established offices in Harstad.

For nearly 25 years, the Helgeland base in Sandnessjøen has delivered goods and equipment to the drilling activity off the Helgeland coast. The activity on the base purchased goods and services from companies in Nordland totalling about NOK 280 million in 2007. The same year, the base had nearly 390 ship calls.

Skarv/Idun is an oil and gas field under development in the Norwegian Sea. They will have an operation base in Sandnessjøen and a helicopter base in Brønnøysund. Production is expected to start in 2011. The Helgeland base in Sandnessjøen will be the supply base for Skarv/Idun. The operator, BP, has emphasised utilising the local and regional supplier network7. Sandnessjøen doubled its petroleum-related turnover from 2005 to 2008. This can indicate that the proximity to Norne, Skarv and Idun, stimulates growth in the region.8

The above examples show that new independent developments provide regional and local spin-off effects, both during development and in the operation phase. Field developments generate positive spin-off effects for the region, regardless of chosen solution.

8.4.2 Future developments

Apart from Goliat, there are currently no profitable discoveries in the region that are ready for a development decision. The further development of Melkøya is a concrete project that is being discussed. The new Skrugard discovery could result in a new, independent development sometime in the future.

Exploration in awarded area, annual licensing rounds in mature areas, as well as regular licensing rounds, usually every two years, in frontier areas is crucial as regards making new discoveries. The most prospective parts of the continental shelf that are not opened for petroleum activity are located off Northern Norway. In these areas, the potential for making new discoveries is greatest. Making discoveries large enough to warrant new infrastructure is important for a further development of the petroleum activity in Northern Norway.

The Government therefore wants to award further production licenses off Northern Norway. This will be in addition to the considerable number of licenses awarded in the present and previous years. In coming rounds, the Ministry will offer area in a belt off the Finnmark coast and parts of Troms, as well as by the so-called Eggakanten in the Barents Sea. New licenses have not been awarded in these areas in more than ten years.

An opening process will start for the southern part of the formerly disputed area vis-à-vis Russia in the Barents Sea. In the northeastern Norwegian Sea, an opening process will not be started during this Storting period; however, the Ministry will carry out knowledge acquisition in the area, cf. Storting White Paper No. 10 (2010-2011).

When new, profitable discoveries are made in the future on the Norwegian Shelf, the Ministry will follow-up the development plans with the objective of promoting profitable production of resources and simultaneously ensuring that local and regional industry are given the possibility to participate as competitive suppliers to the petroleum activities. It is important that the operator facilitates local industry receiving the possibility to compete for the assignments from a development.

Early contact between the operator and local/regional industry and relevant authorities is important so that the industry receives good information about the business opportunities the new activity in areas will entail. Relevant societal factors must be studied in connection with development plans, including regional and local spin-off effects from the development. It is important that these elements receive early focus from the developer in order to achieve good solutions.

When a field is being developed, and as operations start, it is important that involvement of competent industry in the region is facilitated. It is important, for instance, to facilitate qualification of relevant local/regional suppliers, and that tender processes are established that enable participation from companies in the province. It is also important to ensure an efficient base and operation structure, which contributes to local and regional industry and expertise development.

8.4.3 Analysis of spin-off effects in the region

Asplan Viak, in cooperation with the Nordland Research Institute, has carried out a study examining possible spin-off effects associated with potential expanded petroleum activity in the Barents Sea and the northeastern Norwegian Sea9. This study shows what spin-off effects various field sizes and development solutions could entail in the north.

The analysis is based on a resource scenario developed by the Norwegian Petroleum Directorate, cf. Figure 8.8. The resource scenario includes the sea area from the coastal zone in the Norwegian Sea up to and including opened areas in the southern part of the Barents Sea. The study has been planned so that it provides a basis for roughly assessing spin-off effects with different resource outcomes. The calculations in the study show estimates for the size of employment effects to be expected when developing fields of varying sizes, with alternative location choices and alternative development solutions. The size of the spin-off effects to be expected depends on how large the discoveries actually are and whether they are commercially viable.

Kilde: Norwegian Petroleum Directorate.

The 2009 prognosis was established to help illustrate what petroleum activity could mean for the area. The study shows the effects of a single field with a unique location, size and development. It contains 18 different fields with an overall resource estimate of nearly 600 million scm o.e. The study shows that development of these fields can provide increased employment in Northern Norway of between 4000 and 6000 full-time equivalents over a period of 30 years.

The expected recoverable resources in the northeastern part of the Norwegian Sea and the Barents Sea are considerably larger than what has been used as a basis in the 2009 prognosis. The NPD’s expected value for the entire area is 1 090 million scm o.e. This estimate is uncertain; the resource base could be much larger, but also smaller. The fact that the expected value of the resource estimate is higher than what was used as a basis in the spin-off effect analysis indicates there might be larger spin-off effects.

The petroleum activity is already creating positive spin-off effects in the north. If this is to increase in scope, the industry must establish and develop itself in Northern Norway. New field developments will largely contribute to this, but in the long-term, the activity will be contingent upon more exploration and opening more new areas. A lasting petroleum industry in the north will not only increase employment, but also prevent depopulation. Depending on physical establishment of supplier companies in the region, this will also contribute to increasing expertise and building professional networks. This forms the basis for building a petroleum industry in Northern Norway.

8.4.4 Challenges associated with increased spin-off effects

The number of employees in petroleum-related industries amounts to about 63 000 people in the entire country. In 2008, about 2000 of these were employed in the three northernmost counties. In addition, the activity results in spin-off effects for several adjacent industries. The figures do not include this.

The petroleum industry is a difficult business to become established in, due to strong competition from existing players. There are certain factors that speak for a positive regional development in Northern Norway. The geographical proximity to new fields provides a cost advantage that is particularly important for players that compete for less technologically-advanced assignments. This provides a platform for further development. In order to achieve this, it is important to strengthen educational institutions and technological research environments located in Northern Norway. These must have close ties to other national and global knowledge suppliers. The establishment of oil companies and global service suppliers in the region is important as it facilitates improved contact with and knowledge regarding local industry with central purchasers.

When you look at possible local and regional industry and employment effects of increased petroleum activity, the industrial experience and culture, as well as the competence of the work force in the area, will be important. In Asplan Viak and the Nordland Research Institute’s regional spin-off effect analysis, prepared in connection with updating the management plan for the Barents Sea – Lofoten, these elements are assessed for Nordland/Sør-Troms/Midt-Troms and Finnmark/Nord-Troms, respectively.

Industrial experience and culture

The two industrial environments best suited to qualify for and receive larger deliveries are the support industries that are related to the power-intensive process industry in Northern Norway, as well as the maritime industries.

There are substantial differences between these two regions, also as regards utilising opportunities to deliver goods and services to the petroleum sector. The southernmost region has more than twice as many inhabitants as the northernmost. A mapping of the number of employees in companies with head offices in Northern Norway and that deliver to or are in a position to deliver to the petroleum activity, shows that there are 118 companies with a total of 4 500 employees currently in Nordland/Sør-Troms/Midt-Troms. The corresponding numbers in the northernmost region are 36 and barely 500. These numbers include businesses that are currently mainly geared towards other sectors, but that have possibilities for delivering goods/services to the petroleum sector.

Nordland, Sør-Troms and Midt-Troms thus have a broader set of industries and more robust companies than Finnmark and Nord-Troms. The industry in the southernmost region therefore has greater qualifications in order to come into a delivery position in a competitive sector, which is the case here. There are also several strong industry environments that include educational and research institutions in Nordland, Sør-Troms and Midt-Troms which primarily revolve around the larger cities. These environments mean that larger spin-off effects can be expected in the southernmost region.

Companies in several industries are now emphasising expertise building and capacity development in order to position themselves as suppliers. This includes both development of cooperation relationships with the oil companies and company development. Supplier network initiatives have worked well. The initiatives are supported by the policy instrument systems of Innovation Norway, SIVA, and the Research Council of Norway.

Proximity is another important factor in the analyses. Finnmark and Nord-Troms have good locations as regards the activity in the Barents Sea, and can achieve employment connected to the oil and gas sector’s operative core activity, as well as to some extent within transport and other related industries. This will mainly be newly established activity that is set up by players who are headquartered elsewhere in Norway, or outside the country’s borders.

Another survey carried out in 200710 shows the same scenario. It concluded that growth of a specialised supply industry had started in Northern Norway as well. Many of these were established by players further south or bought by these. Northern Norwegian industry consists of small enterprises. During the decades with petroleum activity in Norway, they have not been able to establish themselves as volume producers or specialists in the business. There is little reason, with some notable exceptions, to believe that such local units will succeed solely because the activities move north. In addition, the market is already characterised by highly specialised enterprises that would likely move north with the activities that depend on proximity to the fields. It is also in this segment that the local industry in the north has its biggest chance. There are some small, but successful players in the north that could gain a better foothold due to increased activity in the north. Over time, you can then expect to see increased participation in the supply industry in the north. However, many of the heavy, established environments in the south will still be key in order to further develop the Norwegian supply industry in relation to increased activity in the north.

The study compares the industry in Northern Norway with the industry in Sogn og Fjordane. As is generally known, players in this county have not been as successful as the neighbouring counties in the south and north in acquiring positions in the supply industry that have contributed to employment and value creation in the county.

Expertise

When activity is established to meet demands arising from development and operation of a field, a large share of the local jobs created will require employees with a high level of expertise. The increased activity expected in the northern areas/arctic regions in the years to come will also demand expertise. Northern Norway faces considerable challenges in developing training and education schemes to meet the oil and gas industry’s need for expertise.

In order for these jobs to benefit people from or with ties to the local community, the people must possess the right expertise and competence. Oil companies that are active in Northern Norway and the supply industry will face a growing need for personnel with vocational training from the upper secondary school system, as well as engineers. This currently poses a challenge. Moreover, there is no satisfactory program for students who want to pursue higher education within science and engineering subjects in Finnmark county. However, a partial engineering degree can be taken in Alta. The Nordkapp Maritime vocational school offers education in electrical disciplines as well as a maritime vocational school and safety training approved by Veritas.

EnergiCampus Nord – which is collaboration between NTNU (the Norwegian University of Science and Technology), the University of Tromsø, the University of Stavanger and the University Colleges in Finnmark, Narvik and Tromsø – represents an innovative collaboration between various educational institutions, the authorities, and the business and industry community. The objective is to develop technological education in Finnmark county, and thereby facilitate spin-off effects from petroleum development. Another objective is to contribute to utilising the growth stimulus from the petroleum activities to also develop adjacent industries and the public sector. This will take place through a gradual build-up of a course portfolio that can be worked into the curriculum of other institutions, and thus form a foundation for both national and international cooperation.

There is a need for special knowledge and expertise in the increased activity expected in the northern areas and arctic regions in the years to come. Many of the challenges require more research, development and expertise. There is a need for improved geological understanding that can form the basis for new and improved play models. Installation and operation in dark and cold conditions in a unique natural environment place different demands on technological and operative solutions. The same is true of development and production with potentially long distances to land and in areas where there could be drift ice during parts of the year. This is important knowledge acquisition for a long-term development in the Barents Sea and Northern Norway.

Therefore, the Ministry wants to focus on building up expertise and research communities linked to petroleum activity in arctic regions. In this connection, the Ministry will consider establishing a research centre for this purpose, cf. Chapter 8.7. Such a centre could contribute to developing expertise, e.g. through a Master degree program, as well as PhD and post-doctoral fellowships. This expertise will be important for the industry and the research sector, which will need to recruit new researchers and highly competent labour.

We must spark the interest of children and young people in science subjects in order to inspire them to pursue studies in oil and gas subjects. Therefore, a real commitment to science subjects is needed in the primary, lower secondary and upper secondary schools. As part of this effort, companies must also visit schools and inform the pupils about what they do and the opportunities they represent. As regards recruiting, the Ministry also works with the Norwegian Centre for Science Education to boost interest for energy and petroleum among young people in the so-called Energy School Project. Alta and Hammerfest upper secondary schools in Finnmark county are represented in this project.

In 1976, the Storting endorsed the establishment of a Norwegian Petroleum Directorate office in Harstad. The office was subsequently established in 1980 with the purpose of following up production licenses north of 69 degrees, and to conduct HSE supervision in relation to developments and operating fields in the northern areas. As of May 2011, there are ten employees assigned to the Harstad office. These personnel are closely integrated with the organisation at the NPD’s office in Stavanger to ensure the best possible utilisation of the Directorate’s professional capacity. The office has a solid staff of geological experts and the employees primarily work with production licenses associated with the Barents Sea and the Norwegian Sea. The NPD’s goal is to gradually increase capacity at the Harstad office from May 2011, in line with the general growth in the industry.

The Government will:

• Facilitate additional discoveries outside Northern Norway by:

  • Implementing annual APA licensing rounds in mature areas.

  • Implement numbered licensing rounds; normally every other year.

  • Initiate an impact assessment pursuant to the Petroleum Act with the objective of awarding production licenses in the previously disputed area west of the delimitation line in the Barents Sea South, when the agreement with Russia on maritime delimitation and cooperation in the Barents Sea and the Arctic Ocean enters into force.

  • Initiate data acquisition in the previously disputed area west of the delimitation line in the Barents Sea South, when the agreement with Russia on maritime delimitation and cooperation in the Barents Sea and the Arctic Ocean enters into force.

  • Facilitate new petroleum activity in the area from 35–50 km from the baseline along the coast from Troms II to the border with Russia and in Eggakanten by including these areas in future licensing rounds.

• When large new commercial discoveries are made on the Norwegian Shelf:

  • Ensure that new discoveries create the greatest possible values for society, and facilitate positive local and regional spin-off effects.

  • Ensure early contact between the operator and local/regional business and industry and the authorities.

  • Stipulate requirements for assessment of societal aspects in connection with plans for development and operation, including regional and local spin-off effects.

  • Facilitate qualification of relevant local/regional suppliers in the development and operations phase.

  • Facilitate establishment of tendering processes in connection with new developments that allow participation by companies from the region where the development will take place.

  • Ensure an efficient base and operations structure, which contributes to local and regional development of business and expertise.

  • No later than two years after the field starts producing, operators of new independent developments must conduct an analysis of regional and local spin-off effects from the development.

• Consider establishing a research centre devoted to challenges faced by petroleum activities in arctic regions, based on open competition.

• Gradually build up capacity at the Norwegian Petroleum Directorate’s office in Harstad.

8.5 International success for the industry

The internationalisation of the Norwegian supply industry has accelerated over the last decade. The strong international position achieved by some Norwegian supply communities is a direct result of the need to develop and apply new technology on the Norwegian Shelf. The interaction between the oil companies on the Norwegian Shelf, the Norwegian and international supply industry and the research communities has yielded good results.

A high and stabile activity level on the Norwegian Shelf is important to ensure that international oil companies and supplier firms retain a presence in Norway. This is important because these companies need goods and services from supplier firms and research communities in Norway. They contribute capital and knowledge for research and development of technology. At the same time, it is important for the Norwegian supply industry to be able to serve international markets. Through internationalisation, Norwegian companies will acquire new experience and knowledge from other petroleum provinces, which in turn provides a basis for innovation and more efficient oil and gas production on the Norwegian Continental Shelf. For many companies, access to markets in other countries provides an opportunity to grow and diversify commercial risk.

The Norwegian supply industry is primarily oriented towards the offshore markets, but also has deliveries to petroleum activities on land, particularly in the Middle East. From 1995 to 2009, the Norwegian supply industry has more than quintupled its international sales. In recent years, growth has been greatest in China, Southeast Asia and Australia. Currently, the fastest-growing market is in Brazil.

Norwegian companies serve the international markets both through exports and dedicated establishment of businesses abroad. The 2009 exports of petroleum-related goods and services amounted to about NOK 80 billion, while sales through foreign subsidiaries abroad were NOK 38 billion, which yields total foreign sales of NOK 118 billion11.

The Norwegian Shelf will be among the largest offshore markets in the years to come. Together with the United Kingdom, the North Sea Basin is still a power centre for the oil and gas industry. This provides a good starting point for maintaining an internationally competitive supply industry in Norway.

A number of countries are attempting to develop a national industry. Several of them have not entered into binding agreements on international trade and investment, which means that Norwegian suppliers encounter demands regarding local content. This entails that the industry must compete under terms that favour domestic industry, or firms from places where bilateral trade and investment agreements exist. Therefore, it is important to work to ensure that the Norwegian oil and gas industry can compete for market access under predictable and equal terms with their competitors. This is done in part through WTO, as well as entering into free trade agreements with key trade partners.

8.5.1 INTSOK

INTSOK is a foundation established by the authorities and the industry in 1997. INTSOK’s goal is to strengthen the long-term basis for value creation and employment in the Norwegian petroleum industry through focused international activity. INTSOK markets the Norwegian oil and gas industry in selected areas. The main markets are Australia, Brazil, China, Russia, the UK and the US sector of the Gulf of Mexico. INTSOK also directs its efforts to areas of technology where the Norwegian petroleum sector has cutting-edge expertise. Two of the main commitment areas are enhanced oil recovery and technology to reduce environmental and climate effects of oil and gas production.

Analyses show that internationalisation has been important for regional industry development and employment, and INTSOK makes an active contribution to this. Small and medium-sized companies derive particular benefit from interaction with larger companies, research communities and the authorities when they are working to gain a foothold in new markets abroad. Of INTSOK’s approximately 200 member companies, 80 per cent are small and medium-sized businesses. INTSOK has 13 local advisors in the most important markets for the industry. INTSOK cooperates with Innovation Norway and the various outposts.

National oil companies control a large percentage of the world’s oil and gas resources. These companies have increasingly opted to cooperate with the international supply industry to optimise resource utilisation. Previously, the major international oil companies were the preferred partners. This means that the Norwegian supply industry to a greater extent than previously has customers whose decision processes may be political in nature. The interaction with Norwegian authorities and INTSOK has thus become even more important in order to achieve access to relevant decision-makers.

The Government will:

• Together with INTSOK, contribute to Norwegian-based enterprises winning work and contracts also outside the Norwegian Shelf.

• Work to strengthen the Norwegian oil and gas industry’s access to international markets, and ensure that the industry can compete on equal terms with its competitors.

8.5.2 Northern Russia – a new opportunity for Norwegian business and industry

It is expected that a significant portion of the world’s undiscovered oil and gas resources will be found in the Arctic regions. Russia has defined Norway as its strategic petroleum partner in the north, and Norway can become an important mainstay as a supplier of expertise to the petroleum activities in the northern areas, and as a teammate in joint projects.

One of the clear objectives of the Government’s strategy for the northern areas has been to find a solution to the border issue with Russia. In September 2010, Norway and Russia signed an agreement regarding delimitation and cooperation in the Barents Sea and the Arctic Sea, following 40 years of negotiations.

Our relationship with Russia, as neighbour and the nation with which we share the Barents Sea, is key in our northern areas policy. Several of the challenges in the northern areas, including as regards the environment and resource management, cannot be solved without Russian involvement and Norwegian-Russian cooperation. The Government assumes that Norwegian policies vis-à-vis Russia must be pragmatic and based on common interests and cooperation.

Norway has a good energy dialogue with Russia, and the dialogue regarding the northern areas is the mainstay in our energy cooperation. Ensuring political stability and sustainable development are the Government’s primary goals for its northern area policy, and it is important that Norway exhibits a single, unified policy: presence and enforcement.

Development of the petroleum resources on the Russian side of the Barents Sea, and the role Norwegian enterprises can play in the offshore development in Northwest Russia could be significant for vitalisation of Northern Norwegian business and industry. Norwegian suppliers are well-regarded, with their high-tech expertise and broad-based experience from demanding conditions on the Norwegian Shelf. A petroleum industry with strong expertise in Northern Norway, proximity to the Russian market, along with experience and well-adapted technology, will represent a competitive advantage for Norwegian suppliers.

The work done by the supplier networks and industry associations to reinforce the ability of local companies to prequalify for participation in complex tender processes is important in order to promote participation by Norwegian companies in Russian petroleum activities. Statoil is already involved in the Shtokman development in the Barents Sea. Participation in the project could give Statoil a good foundation for further commitments in arctic regions, and entails a substantial opportunity for northern Norwegian business and industry.

In 2006, the Government launched the Barents 2020 grant scheme. The purpose of the scheme, managed by the Ministry of Foreign Affairs, is to realise the Government’s northern areas strategy (2006) and the action plan ”New building stones in the north” (2009) by stimulating increased activity, knowledge and presence in the north. Grants have already been provided to a number of projects that produce knowledge in, on and for the northern areas. Barents 2020 will also stimulate the establishment of arenas for cooperation with Norwegian and foreign groups with northern area expertise in relevant disciplines such as Norwegian-Russian energy cooperation.

The Government will:

• Conduct an active energy dialogue with Russia

• Stimulate increased cooperation with Russia as a consequence of the agreement on maritime delimitation and cooperation in the Barents Sea and the Arctic Sea.

• Facilitate partnerships between Russian and Norwegian companies, e.g. through INTSOK and Innovation Norway.

8.6 Industrial use of gas in Norway – framework and possibilities

Norway has a good starting point for developing gas-based industry. We have significant oil and gas resources on the Norwegian Shelf, and most of this gas is brought to land for processing prior to export. Therefore, there are large volumes of gas available for petrochemical activities in Norway. Furthermore, we have a well-established petrochemical industry, mainly at Rafnes and on the Herøya peninsula in Telemark county, as well as at Tjeldbergodden.

Industrial application of gas in the domestic market must be viewed in context with international development trends for the petrochemical industry. The sector has undergone significant consolidation in the last ten years, and the producers have moved production closer to the customer (mainly Asia), or where inexpensive raw materials have been available (mainly the Middle East). While the trend shows that many major new petrochemical plants will be built in the Middle East and Asia in the years to come, a very large percentage of the global petrochemical activity will still be in Europe. Substantial sums have been invested in the capacity that has been built up in Europe. Management of these assets comprises enormous values. Steadily increasing competition from other parts of the world means that Norwegian and European activities must continue to ensure efficient operation and continuously evaluate various upgrades and improvements that are necessary to address the global competition.

Division between dry gas and natural gas liquids

There is an important division between dry gas (methane) and natural gas liquids (ethane, propane, butane). Norwegian pipeline exports to Europe mainly consist of dry gas, but also contain heavier components. The lightest part of the gas; methane, is mainly used for energy for heating, or for power plants, but also functions as a raw material for production of methanol and ammonia. The price of gas for dry gas-based industry is in direct competition with alternative application of the dry gas, either through pipeline export, LNG or conversion technology as gas-to-liquid (GTL) or other domestic use.

Ethane is the most important raw material for NGL-based industry. Ethane that is not sold with the dry gas is mainly used as a raw material in the petrochemical industry, primarily in the production of ethylene. Ethane must be separated from the gas produced in the oil and gas fields, which requires significant investments in separation plants. These plants require large volumes of gas in order to produce the amount of ethane necessary for a modern processing plant (a so-called “cracker”). All gas exported as LNG or via pipelines will contain some ethane, as this is necessary for maintaining properties such as calorific value and ignition quality.

Generally speaking, ethane transport by ship only takes place in Norway and the North Sea. Ethane is processed at the separation site (where the ethane is separated from the rich gas) at all other petrochemical plants. The end price of ethane at various locations will be a function of many factors, the most important of which are the degree to which ethane is actually available in sufficient amounts over time, how much gas is exported and to which destinations, as well as whether the seller of ethane is willing to subsidise the price to ensure petrochemical investments.

8.6.1 Natural gas liquids (NGLs)

Required ethane needs for establishing NGL-based industry

Ethane-based petrochemical industry requires large volumes of gas. For example, Ineos’ ethylene plant at Rafnes uses around 500 000 tonnes of ethane per year. An annual gas production of more than 10 billion scmis necessary to cover such a need for ethane12. This is approximately equivalent to the annual gas volume transported in the Åsgard transport pipeline, or around 10 per cent of Norway’s total gas export in 2010. Modern new ethylene plants are constructed with double the production capacity, and that need twice as much ethane as the Rafnes plant.

Potential for ethane production on the Norwegian Continental Shelf

In Norway, ethane is only produced at Kårstø, where the annual production amounts to approx. 0.9 million tonnes. The amount of ethane exported in Norwegian natural gas amounts to a significantly higher volume. Around 100 billion scm of dry gas was exported in the 2009 calendar year. This gas contained about 7.7 million tonnes of ethane, of which 4 million tonnes has been onshore at either Kårstø or Kollsnes.

More ethane can be separated from Norwegian gas than is currently done. Assuming that all dry gas from the Norwegian Shelf must, on average, contain some (around 2.5 mol per cent) ethane for export, and assuming current gas export volumes, there is still a theoretical opportunity to separate around 4.4 million tonnes of ethane from the gas each year13. For example, it could be possible to separate 1.3 million tonnes of ethane per year from Europipe II at Kårstø, assuming that about 3.0 mol per cent ethane is retained in the gas to be exported.

Unless new, very large rich gas fields are discovered on the Norwegian Shelf, this means that assessments of new or expanded ethane production should be based on utilising ethane from the existing receiving terminals at Kårstø and Kollsnes. The potential for ethane production at Nyhamna appears to be limited. The volumes at Tjeldbergodden are negligible.

Today’s ethane production takes place at Kårstø. Gassco has estimated expected future ethane production from the facility, cf. Figure 8.9. The estimate is divided between base case volume (volumes from fields that are currently producing, or where a development decision has been made) and scenario volume (volumes that are under development, but where no development decision has been made). The estimate shows that expected ethane production will fall rapidly if new gas volumes are not added. The current production level cannot be maintained for longer than a period of ten-twelve years, unless new ethane-rich gas is supplied to the Kårstø plant. Profitable long-term production of oil and gas will therefore be important in order to maintain stabile ethane production at Kårstø.

Kilde: Gassco.

8.6.2 Dry gas

Around 75 per cent of the gas exported from the shelf is brought to land in Norway, at Kårstø, Kollsnes and Tjeldbergodden, for treatment prior to export.

Industry based on dry gas uses little gas compared with the gas volumes that are exported. For example, the methanol plant at Tjeldbergodden, which is Europe’s largest methanol plant, uses a gas volume of about 0.7 billion scm per year. If Yara’s ammonia production in Grenland used exclusively dry gas, it would have an annual gas need estimated at 0.5 billion scm per year.

Norway has a well-developed gas infrastructure that enables export to the European gas market. The alternative value of the gas is to sell it in this market. Industrial use of gas in Norway must therefore be profitable with market-based gas purchase agreements. Profitability is a major challenge for dry gas-based activity in Norway.

8.6.3 Assessments

The Ministry is of the opinion that the greatest possibility of available dry gas volumes and natural gas liquids components such as ethane in the years to come can be found at the current gas processing locations in Norway. The value of this gas will be based on prices that Norwegian gas producers can achieve in the European market. Opportunities for other new types of gas-based industry that are related to existing industry, such as the mineral and metals industry, can be located where the gas is already brought to land.

Further development and upgrades of existing facilities generally yield better economy than new establishments, as one can benefit from existing infrastructure and expertise. A further development of the dry gas-based methanol production at Tjeldbergodden is not restricted by access to natural gas. For a further development of the petrochemical industry in Grenland, more ethane can be made available by investing in increased separation at some of the landing sites, or transporting the gas to Grenland and separating the ethane there.

Locations that have no existing gas processing capacity and industry infrastructure may seem attractive, as a potential lack of export alternatives can make the gas price more competitive in relation to other, more mature areas with developed export alternatives. However, industry activity based on NGL at completely new locations will be restricted by gas volumes, unless new gas fields are discovered that are much larger and richer in ethane than what the authorities currently believe is likely. The establishment of conventional dry gas-based industry will be demanding because the need for gas will not normally be great enough to warrant the development of new gas fields. New development and potential landing of gas will generally demand such huge gas volumes that an export solution would be necessary. With an available export solution, much of the reasoning for considering industrial development in other locations than where industrial production already takes place will disappear.

To ensure good framework conditions for further development of gas-based industry in Norway, the Government believes it is important to ensure the availability of sufficient gas over time at existing and/or new landing facilities in Norway. Long-term access to gas can best be achieved through proving and developing expected remaining gas resources, and ensuring that Norwegian processing plants are operated as efficiently as possible, so that they emerge as the best alternative when selecting future gas evacuation solutions.

The Government’s assessments are based on the industry developing in an environmentally friendly direction, and within the framework of Norwegian climate policy. This applies with regard to production in the most environmentally friendly manner possible, efficient logistics and eco-friendly products. Development of infrastructure may be necessary in order to increase industrial use of gas in Norway. Any such projects must be market-based and driven by commercial interests.

The Ministry has bolstered the independent operator Gassco’s mandate for evaluating comprehensive gas infrastructure solutions, which will now also include responsibility for informing relevant industry players at an early stage in the planning process. Furthermore, at the request of the Ministry, Gassco established an arena in 2009 where industry players with desires or plans to establish industrial activity linked to application of natural gas can consult with expert environments in the fields of gas transport, gas quality and gas availability in Norway.

The arena was formed on the basis of the current situation wherein, to a large extent, the same companies do not operate oil and gas activities (upstream activity) and industrial activity (downstream activity). In order for industrial companies to consider opportunities in Norway, it is important that access to information related to current gas production, gas composition, etc. is available. It is particularly important that the companies are informed about the development projects underway at any given time on the Norwegian Shelf. Opportunities and challenges related to industrial use of gas in Norway can be discussed in this arena. Two meetings were held in the industry arena context in 2009, and petrochemical analyses were a key topic in these meetings. In cooperation with gas and industry players in Norway, as well as IndustriEnergi (employee organisation) and Norsk Industri (employers’ organisation), petrochemical analyses were presented and debated. One meeting was held in 2010, focusing on the sector’s joint CO₂ challenges.

In 2011, Gassco’s plans include conducting a study of development scenarios for gas infrastructure in the northern areas, including opportunities for industrial use of gas. The study will be partially financed by the industry arena, with input from arena participants. Through the industry arena, Gassco believes it has succeeded in creating a meeting place that is relevant for both upstream and downstream players. Gassco reports good attendance at all meetings and positive feedback. The Ministry believes it is useful to have a forum where ideas, concepts and concrete projects can be identified, analysed and discussed in order to achieve the objective of continuing and hopefully increasing investments in Norwegian gas-based industry.

The Government will:

• Facilitate increased industrial use of gas in Norway, including contributing to the industry arena as a meeting place for industrial players and oil companies.

8.7 Technology, research and expertise

The Norwegian Shelf has been characterised by major investments in new field developments. Technological development was necessary in order to make production profitable and technically feasible. Innovation has taken place in stages as the operating companies have encountered new challenges. Technological breakthroughs from the concrete structures of the 1970s to floating production facilities and subsea solutions, to horizontal drilling and multiphase transport, have taken place in an interplay between oil companies, research institutions and the supply industry. Many factors have driven this technological development. Large discoveries with good profitability have given the companies the financial muscle to develop new solutions. Favourable framework conditions from the authorities have given the companies incentives to do drive research and development. Development and first use of technology on the Norwegian Shelf have been important in the development of a globally competitive supply industry.

New methods, knowledge and technology will be important in finding more resources in the frontier areas on the Norwegian Shelf. New and improved methods for geophysical acquisition, processing and interpretation will yield more efficient exploration and help uncover new resources. For example, being able to “see” what lies under volcanic basalt layers on the Vøring plateau in the central part of the Norwegian Shelf poses quite a challenge, as does the identification of deeper, more complex reservoirs. Improved geological knowledge and interpretation are important in the development of new play models. Development of discoveries far from infrastructure will require new concepts for subsea systems and multiphase transport over considerable distances. High rig rates also pose a challenge for the industry, and the development of new drilling concepts is an important factor in reducing exploration costs.

As regards the mature areas on the Norwegian Shelf, a substantial commitment is necessary in order to improve recovery from existing fields. With the current plans, about half of the oil will be left in the ground. This represents a huge value potential. A single percentage point increase in the recovery rate on the Norwegian Shelf for fields currently in operation would boost oil production by about 570 million barrels, or about one year’s production at today’s level. However, this is urgent – new technology must be in place well before the fields are shut down and the installations removed. Advanced injection methods must be refined and tested on the fields in order to improve recovery. Faster, better reservoir modelling tools can provide better understanding of the reservoirs, and thus better resource exploitation. Together with new geophysical methods, this can allow us to place wells more accurately and contribute to optimise production. New drilling and intervention methods can contribute to more cost-effective production, and constitute an important measure in increasing recovery.

The oil and gas resources must be developed and produced in a manner that is as clean and energy-efficient as possible. This requires development of methods and technology for maximum efficiency in energy use and reduced greenhouse gas emissions, with less flaring and power generation.

The driving forces for development of new technology are the same as previously when the major field developments helped finance a number of major technology development projects. Today’s situation with many small discoveries and developments makes financing new technology more demanding. Maintaining and reinforcing the impetus towards developing new technology is important if we are to achieve our petroleum policy objectives. The players on the Norwegian Shelf and the State as resource owner must therefore work together to find good solutions. A continued commitment to research, development and expertise is an important prerequisite for a competitive and future-oriented petroleum industry. The expertise developed in connection with petroleum activity can also be utilised in other areas, such as ICT and offshore wind power.

Oil companies and supplier firms are responsible for a significant research effort in Norway, but this research is largely aimed at short-term objectives and technologies. The public commitment contributes to promote cooperation, expertise and a long-term perspective in petroleum research, as well as to support high-risk projects.

8.7.1 Priorities within research and development

Good cooperation between industry and authorities has been important for research and development on the Norwegian Shelf. The industry is and must be an initiator, while the authorities play an important role by creating framework conditions and incentives that stimulate research and development (R&D) which will benefit the entire society. The public means are therefore directed at research and development in selected areas where the industry’s efforts are not sufficient. Publicly financed research and development will contribute to trigger socio-economically profitable projects that would not otherwise have been carried out.

The authorities are dependent on advice and input for the prioritisations of the means for research and development. The Ministry e.g. has a running dialogue with the Norwegian Petroleum Directorate, the Research Council of Norway, OG21 and several industry and research players regarding such priorities.

National R&D strategy for the sector and other priorities

OG21 – oil and gas for the 21st century, is a national R&D strategy for the petroleum sector. The work with the strategy started in 2001, and was revised in 2010. The board and technology groups under OG21 represent a network of over 100 experts from the oil companies, supply industry and research environments that prepare sub-strategies and action plans. This work uncovers knowledge gaps and maps challenges that will be faced by the sector in the future. The Ministry takes a basis in the OG21 strategy when new guidelines are made for the PETROMAKS and DEMO2000 programs in the Research Council of Norway.

The strategy points out that the authorities have a special responsibility to maintain financing of the long-term research, and that public support should be directed at education, basic research, expertise development and long-term technology development. Short-term challenges will to a greater extent be the industry’s responsibility.

The strategy has established so-called TTA groups (Technology Target Area) that are composed of a wide selection of experts and focuses on the following topics:

• Energy efficiency and environmentally-friendly, sustainable technology

• Exploration and improved recovery

• Cost-effective drilling and intervention

• Future technology production, processing and transport.

OG21 recommends that public financing of petroleum research should prioritise the following thematic areas:

• Energy-efficient technology to reduce emissions to air and discharges to sea. As regards emissions of greenhouse gases to air, this has been followed up through the agreement on the climate report between the coalition government parties and the Conservative Party, the Christian Democratic Party and the Liberal Party on 18 January 2008 (the Climate Compromise) which states that government-financed petroleum research must have a significant focus on climate issues. Through the Climate Compromise, starting from 2009, NOK 25 million per year will be earmarked for research aimed at energy efficiency and reducing greenhouse gas emissions linked with oil and gas production on the Norwegian Shelf.

• Improved oil recovery solutions and services designed to maximise the recovery rate from mature fields during the lifetime of the infrastructure. An important area will be developing drilling technology to reduce costs and environmental impact. The Åm Commission has also been mentioned, with its recommendation that public research programs in petroleum topics should prioritise improved recovery. The Commission particularly emphasises the need for further technological development within specific areas such as drilling and wells, reservoir mapping and advanced injection techniques. The Ministry has followed up these recommendations in its management of the Research Council of Norway through the 2011 allocation letter.

• Stimulate development of advanced subsea systems to maximise value creation at Norwegian offshore installations, as well as develop technology for subsea multiphase transport over considerable distances. New subsea technology can reduce the costs of new developments and contribute to developing resources located far from infrastructure, for example in the Arctic.

Cooperation with leading international research communities can help contribute to new knowledge and internationalisation of Norwegian technology. International cooperation is also important to ensure quality and strengthen Norwegian expert milieus in the international research arena. However, with the major technological challenges we face on the Norwegian Shelf today, it is essential that public funding goes to support projects that contribute to cost-effective and sustainable production of the petroleum resources on the Norwegian Shelf.

There will also be a need for a further commitment to HSE research in the petroleum activities in the years to come. It is also important that safety challenges are integrated and taken into account in connection with the strategic selection of future technology and development. OG21 will be a natural arena for this work.

Piloting

New technology and new solutions will be essential in maturing profitable new reserves and realising the considerable potential that lies in improved recovery on the Norwegian Shelf. The Norwegian State as resource owner plays an important role as initiator and facilitator to ensure optimal and efficient production of the petroleum resources on the Norwegian Shelf.

State co-funding of pilots can contribute to accelerating and realising more socio-economically profitable projects. There can often be significant transfer value from a pilot on one field to other fields. The owners of an individual field will not take this into account when they decide whether or not to implement a pilot. Substantial values are at stake here for the State as resource owner. If the market itself is not able to bring forth sufficient new technology or pilots, the authorities should initiate various measures.

Like the expert committee on improved recovery, cf. Chapter 4.5, OG21 recommends a greater commitment to piloting new technology. The strategy particularly highlights the need to ease risk and uncertainty for small and medium-sized companies. DEMO2000 will be an important policy instrument for the development of smaller prototypes and qualification of technology for the supplier firms, in cooperation with the oil companies.

Through FORCE, the NPD has taken the initiative to help bring forth more pilots on the Norwegian Shelf, as well as work to reinforce existing policy instruments such as DEMO2000. The Ministry also sees a need for mapping other potential measures, e.g. as proposed by the expert committee and OG21, to achieve more piloting on the Norwegian Shelf.

Petroleum research centres

The Research Council of Norway has established a number of Norwegian Centres of Excellence (COE) and Centres for Research-based Innovation (CRI), several of which are relevant for petroleum. NIFU (the Nordic Institute for Studies in Innovation, Research and Education) has evaluated the COE scheme as very positive, with particular mention that the centres have been especially successful in promoting recruiting and internationalisation. The scheme has also contributed to more national and international interdisciplinary cooperation.

A majority of the expert committee on improved recovery has suggested establishing a centre devoted to improved recovery. The committee points out that improved recovery measures will require more personnel and expertise, and that strong university and research communities are crucial in facilitating this effort. Such centers can also be important ways of gathering expertise and coordinating further research.

The Ministry will consider establishment of a research centre for improved recovery, but this must be viewed in context with other research centres in petroleum subjects. A significant portion of the remaining resources consist of immobile oil. A key challenge for such a centre could be researching and developing advanced recovery methods that enable profitable exploitation of the immobile oil on the Norwegian Shelf. Through such a research centre, we can build up and refine fundamental expertise and research in an important area.

The petroleum activity in the north will be demanding, requiring new knowledge and technology in connection with the activity we expect to see in the northern areas/arctic areas in the years to come. Installations and operations in dark and cold conditions in a unique natural environment place different demands on technological and operative solutions, as do development and production with potentially long distances to land and in areas where drift ice could be present during parts of the year. The potential for new discoveries in the northern areas is considerable, but the geological uncertainties are significant. Better geological models and understanding will be important for more accurate exploration. These challenges require particular attention from the public authorities. An assessment will therefore be made of whether a research and expertise centre should be established with focus on research challenges for petroleum activity in arctic areas.

8.7.2 Incentives and financing of research and development

The State mainly provides incentives to research and technology development through the regulatory framework and direct allocations to the Research Council of Norway. Oil companies and supplier companies use considerable means for research and technology development. The total level of both publicly and privately financed petroleum research in Norway was about NOK 4 billion in 2007 according to Statistics Norway and NIFU STEP. For comparison, the public allocations channelled through the Research Council of Norway amounted to NOK 410 million. In addition, the basic allocations and other long-term financing to universities, colleges and research institutions are important in order to maintain the research activity within petroleum in Norway. There are no overviews of how much of this is allocated to petroleum research. A considerable percentage of the funding for research and development within petroleum originates from the oil companies and supplier companies. The public funds must therefore prioritise research and development in certain areas where the industry’s own efforts are not sufficient.

The State assumes a great deal of risks and costs associated with large technology projects through a high tax rate and the SDFI ownership interests. Several large technology development projects are currently financed in the production licenses’ budgets, such as Ormen Lange gas compression. This project alone has a budget totalling NOK 4.5-5 billion.

Research and development through the production licenses’ accounting agreements is also facilitated. The majority of the oil companies’ R&D funds are triggered through the accounting agreements. The accounting agreements are part of the licensing scheme, and the operator charges R&D expenses over the production license’s accounts through these agreements. The expenses are covered over the production license’s joint account, and are determined by various percentages for exploration, development and operation costs with an upper limit14. It must be documented that the funds will be allocated to R&D relevant to the Norwegian Shelf.

The Tax Deduction Scheme also promotes petroleum research. The scheme was launched in 2002 and is an R&D effort in industry. The scheme applies to all companies liable for tax in Norway. It is administered by the Research Council of Norway in cooperation with Innovation Norway and the Norwegian Tax Administration. The tax deduction scheme had 381 active projects within the petroleum sector in 2010. The total budgeted volume was NOK 1 288 million and the expected tax deduction was NOK 211 million.

The publicly financed petroleum research over the State budget was about NOK 400 million in 2011. These allocations are followed up by the Research Council of Norway, e.g. through the PETROMAKS and DEMO2000 research programs. Each year, both programs contain a large amount of high-quality projects worthy of support. Due to limited available funds, a large number of projects that should receive support do not. For example, only 17 per cent of the projects received funding commitments from PETROMAKS in the announcement during the autumn of 2010. The Government therefore wants to ensure good conditions for the petroleum research, cf. Storting White Paper No. 30 (2008-2009) Research Climate (the Research White Paper).

8.7.3 Organisation of the public petroleum research

The authorities’ priorities and efforts within petroleum research are followed-up by the Research Council of Norway through several policy instruments.

PETROMAKS supports a wide spectrum of projects, from strategic basic research at the universities via expertise building at the institutes to innovation projects in the industry. The objective of the program is an optimal utilisation of petroleum resources and increased value creation for society through strengthened knowledge development, industry development and international competitiveness. Since 2003, about NOK 2 billion has been allocated to 335 projects. This has triggered NOK 2.1 billion in other financing, mainly from the industry. PETROMAKS is an important policy instrument to promote long-term research and expertise development. The program finances research-oriented education, and since its start in 2003, the program has financed 291 fellowships and 136 postdoctoral positions. This is a very high number compared with similar positions supported by the oil companies and shows the significance of the public funds for long-term and basic research.

DEMO2000 is an important policy tool to qualify new technology solutions in the petroleum industry. The program’ goal is to reduce costs and risks for the industry by providing support to pilot projects and demonstration. Since its start in 1999, DEMO2000 has supported 231 pilot projects. The total costs of these projects are NOK 2.7 billion, of which the authorities have contributed NOK 600 million. The program is directed at the supply industry, which does not have the same regulatory incentives to develop new technology as the oil companies. DEMO2000 also functions as a cooperative arena between oil companies, authorities and supplier companies.

PROOFNY – a subprogram under the Oceans and Coastal Areas R&D program, is directed at research on long-term effects on the sea from petroleum activities. The program’s main objective is to promote high quality research on the marine environment.

PETROSAM supports sociological petroleum research, and will further develop expertise regarding societal factors as a basis for strategy and policy planning by Norwegian authorities and industry. The technical objective is increased knowledge concerning the value and management of Norwegian petroleum resources, as well as development trends in other petroleum provinces.

Strategic petroleum research mainly goes to strategic university programs (SUPs). The goal for the funds is to contribute to educating researchers at Norwegian universities and expertise development within key topics in the petroleum area. Furthermore, support is provided to the seabird program SEAPOP, to the Integrated Ocean Drilling Program – an international, marine-geological research program, and for a strategic effort on technology subjects.

The Norwegian Centres of Excellence (CoE) and Centres for Research-based Innovation (CRI) within petroleum have been established by the Research Council of Norway. Several of these centres are relevant for the petroleum industry. Some examples include: CIPR (Center for integrated petroleum research) at the University of Bergen is a research centre within improved recovery. FACE at Sintef/IFE will develop better models for multiphase flow, while the IO Center at the Norwegian University of Science and Technology will develop expertise and better tools for integrated operations. The main objective of the Drilling and Well Technology for Improved Recovery centre at IRIS/Sintef is to improve drilling and well technology, as well as increase the expertise required for more cost-effective and safe drilling. The support for the centres is restricted as regards time, and several of the centres will be closed in a few years. There are also other centres operating within petroleum, but not as a main topic.

8.7.4 Expertise and recruitment of labour

Within the petroleum industry in Norway, there is a great need for access to qualified labour. Good cooperation between authorities, industry and educational institutions will be important in the coming years. The industry is cyclical, but employment has grown significantly since 2000, and can offer many jobs within many different disciplines.

The average age of petroleum industry employees in Norway is increasing, despite a slight increase in the number of employees in the youngest age group (15 – 29 years) in recent years15. There is a particular need for technologists and scientists. The recruitment is challenging in parts of the country and for certain professions. At certain universities, the number of students withdrawing from science studies is great and recruitment to geology and other studies relevant to the sector is low. Currently, Norway is among the countries in Europe with the smallest percentage of students from upper secondary schools that choose scientific and technological studies in universities and colleges.

Furthermore, there is a decline in the number of Norwegians completing master’s and doctorate degrees in petroleum-oriented studies at Norwegian universities and colleges. In the PETROMAKS program, about 50 per cent of the fellowships supported are from countries other than Norway. About half of the foreign students leave Norway after completing their doctoral degree according to a study by NIFU. A high percentage of students and fellowships from abroad create a basis for good international cooperation, but the fact that relatively few remain in the country is problematic as regards the further expertise development in Norway. It is therefore important that the authorities, the industry and academia work to keep the expertise in Norway, as well as increase the recruitment of Norwegian students.

There must also be targeted work with recruitment from primary school until higher education and for research. The Ministry is therefore working on mapping measures that can contribute to strengthening the recruitment to basic training and education that is relevant to the Ministry’s areas of responsibility. The Ministry cooperates with the Norwegian Centre for Science Education at the University of Oslo on establishing “energy schools”. The goal is for the energy schools to attract skilled students and contribute to increased recruitment to studies that are relevant for energy and petroleum at universities and colleges. In addition, the energy schools will show how scientific knowledge can be used for concrete societal challenges. This is carried out in a close cooperation between schools and companies. A model here will be the cooperation between ExxonMobil and St. Olav Upper Secondary school in Stavanger, see Box. 8.9.

The Ministry of Education and Research and the employer and employee groups have started work on a new “social contract” with the objective of e.g. increasing the number of apprenticeships. Statoil is the country’s largest apprentice company, and several companies within the petroleum industry annually take on many apprentices. The Government will encourage the companies to increase the number of apprentices they take on and consider whether they can increase the number of disciplines for apprentices.

The Government will:

• Ensure good conditions for the petroleum research.

• Prioritise research within improved recovery from existing fields on the Norwegian Shelf, including considering whether to establish a research centre within improved recovery, based on free competition.

• Consider establishing a research centre within challenges for petroleum activities in Arctic regions.

• Continue the work on qualifying and testing new technology.

• Contribute to strengthen the recruitment to scientific and technological studies in schools and higher education to ensure labour for the petroleum sector.