Government Policies in the Development of the Norwegian Oil Supply Industry

Your Excellencies, ladies and gentlemen,
With Azerbaijan known as the "cradle of oil production" and still one of the most prosperous oil provinces in the world, it is truly a great honour for me as State Secretary in the Ministry of Petroleum and energy in Norway to participate in this seminar focusing on the revitalisation of the Azerbaijani oil supply industry.

Norway is a relatively young petroleum nation; at least compared to Azerbaijan, but in less than 30 years we have managed to build a competitive, world class petroleum industry. Some of the best representatives of our national petroleum industry are gathered here today to explain how their companies have managed to succeed in this industry, and also share some thoughts on how they think Azerbaijan best can revitalise their oil supply industry.

I will give a brief outline on the Norwegian policy related to the development of a national petroleum industry.

Thirty years ago when the petroleum era of Norway started, large international oil- and service companies were interested in taking part in the development of the Norwegian offshore industry, and in the first phase only foreign companies were awarded operatorships on our continental shelf.

We did, however, at an early stage in our petroleum history decide that we wanted to develop a fully competitive domestic oil industry to complement the international companies' expertise.

This has been achieved through a series of means, for example through close co-operation with the established international oil companies and stimulating the domestic supplier industry to develop competence often in partnership with international supplier industry. Forced marriages between small Norwegian companies and huge international companies were frequently used. In order to have successful implementation of such a policy, it was of course necessary to have a developed industrial base and a very competitive and educated workforce.

Norwegian maritime industry was already a mature industry and an important participant in the world market at the time when the oil adventure started in Norway. Norwegian owned companies were already among the largest oil transporting companies. The industry included ship-owners, shipbuilders and equipment manufacturers. The existence of this industry was a prerequisite for the development of the Norwegian offshore industry.

With our harsh climate and complex geology, it has always been a basic aim for Norway to secure the development of new technology and access to the best technology and experience from other petroleum provinces. Only in this manner will we be able to find and develop the petroleum resources on the Norwegian Continental Shelf in the best way and to the greatest possible rate of depletion. Our aim can best be achieved through the active participation from oil companies with experience that is relevant for the Norwegian Continental Shelf, and that can be further developed and enhanced here.

To achieve this goal, it is essential to ensure the participation of several different, but active companies for exploration, development and production. It is our experience that different companies will challenge each other through different geological ideas, and they can contribute with different evaluations of technical and commercial solutions. Accordingly, pluralism has been established from the beginning as one of the basic elements of our petroleum policy.

This pluralism is also being reached through the active participation of a mix of national and international companies, ensuring the continuos build up of Norwegian competence.

In the early phase we gave our national companies a number of privileges:

• They went through personnel training programmes with the international industry.
• The internationals were required to supply technical assistance to the national operators in complicated areas.
• National companies took over operatorship of developed fields according to conditions stipulated at a time the licence was awarded.
• Finally, national companies were given a number of operatorships in prolific blocs.

All these active measures enabled us in the 70s and early 80s to develop our national competence very quickly.

On the supply industry side we applied similar measures. At the time:

We required international companies to initiate research and development programs as part of our licensing policy.

We also had very strict control over actual supplies of goods and services to the development and production activities, securing Norwegian companies an active part in the competition for deliveries.

These policies effectively led to the development of a very impressive Norwegian know-how and competence in practically all phases of the petroleum supply industry.

So much about history. It is equally important that after having developed the national oil companies and national supply industry to a reasonable level, we took away the privileges and preferential treatment. For a number of years now, they have been fully exposed to international competition. Today the Norwegian supplier industry is internationally competitive, winning contracts for developments in all corners of the world – as here in Azerbaijan.

Companies represented here today - like Statoil, Kværner, Aker Maritime and Kongsberg Offshore, are today among the top class of international petroleum and supplier companies. I am certain we will all learn more about their activities and plans for further involvement in Azerbaijan during this seminar.

Policies adapted in Norway in the 70ties and 80ties were right for us at that time, but the challenges we are facing today are different – and require other policy measures. The Ministry is now focusing on the new challenges facing our petroleum industry. Among other issues we will discuss the state's participation in the petroleum activities. The government is evaluating a possible restructuring of the State's assets, including whether, and to what degree, Statoil should be partly privatised.

In Norway, the petroleum industry has contributed a lot both in an industrial and financial sense. Oil has made an important economic contribution to increasing revenues, both for the Norwegian State and for the industry. A new industry – centred in Norway – has emerged. Thus, a key challenge for the energy policy today is to develop further and to utilise elsewhere the skills and technologies we have developed in the North Sea.

The Foundation Intsok, The Norwegian Oil and Gas Partners, was established jointly by the Norwegian industry and the government in 1997 with the purpose to strengthen the Norwegian oil and gas industry in overseas markets. The idea of combining the efforts and strengthen the co-operation between industry and the authorities is the core mission of Intsok.

In my view this seminar is a good example as to how Intsok can contribute to the internationalisation of the Norwegian oil and gas industry by joining forces with partners elsewhere in the world, as here in Azerbaijan. I would like to take this opportunity to thank Intsok for being our host today.

We are together in the further development of an oil and gas industry in the Caspian Sea, in exchanging knowledge and experience. Through this business and governmental co-operation we are building ever-closer relations between our two countries. With different experience and different strengths, I know we have a lot to learn from each other.

Thank you for your attention.