relevance of norwegian model for developing countriesfaroukal-kasim

8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim

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Petroteam a.s

NORAD SEMINAR : OLJE FOR UTVIKLING

THE RELEVANCE OF THENORWEGIAN MODEL TO

DEVELOPING COUNTRIES

By

Farouk Al-Kasim

THE RELEVANCE OF THENORWEGIAN MODEL TO

DEVELOPING COUNTRIES

By

Farouk Al-Kasim

TK1



Slide 1

TK1 Trond Kubberud, 01/26/2006



Petroteam a.s

THE MAIN MESSAGE

MANY ASPECTS OF THE NORWEGIAN

EXPERIENCE CAN BE HELPFUL TO

DEVELOPING COUNTRIES;

BUT ONLY IF CAREFULLY ADAPTED TO

LOCAL CONDITIONS AND ASPIRATIONS

MANY ASPECTS OF THE NORWEGIAN

EXPERIENCE CAN BE HELPFUL TO

DEVELOPING COUNTRIES;

BUT ONLY IF CAREFULLY ADAPTED TO

LOCAL CONDITIONS AND ASPIRATIONS



Petroteam a.s

NORWAY BEFORE THE OIL ERA

NORWAYS SUCCESS MUST BE SEEN IN THE CONTEXT OF A

UNIQUE STARTING POSITION INCLUDING:

• We l l -d e v e l o p e d s y s t e m o f Go v e r n a n c e .

• Hi g h l y e f f i c i en t c i v i l s e r v i c e s y s t e m.

• We l l -e s t a b l i s h e d j u d i c i a l s y s t e m.

• S t r o n g t r a d i t i o n s i n i n t e r n a ti o n a l l a w an d h u m a n r i g h t s .

• T r a d i t i o n s f o r s t a t e p a r t i c i p a t i o n i n i n d u s t r i a l d e v e lo p m e n t .

• Ri c h h y d r o p o we r r e s o u r c e s – L E S S DE P E NDE NCE ON OI L

• S t r o n g p o s i t i o n i n t h e We s t e r n wo r l d .

• P r o x i mi t y t o t h e E u r o p e a n Ga s Ma r k et .

• B r o a d a n d we l l - d ev e l o p e d e d u c a t io n s y s t e m.

• Ma r i t i me t r a d i t i o n s .

• A d v a n c e d t e c h n o l o g i c a l e n v i r o n me n t .

• We l l -d e v e l o p e d s c i e n t i f i c a n d i n d u s t r i a l r e s ea r c h i n s t i t u t i o n s .

• ...etc.

NORWAYS SUCCESS MUST BE SEEN IN THE CONTEXT OF A

UNIQUE STARTING POSITION INCLUDING:

• We l l -d e v e l o p e d s y s t e m o f Go v e r n a n c e .

• Hi g h l y e f f i c i en t c i v i l s e r v i c e s y s t e m.

• We l l -e s t a b l i s h e d j u d i c i a l s y s t e m.

• S t r o n g t r a d i t i o n s i n i n t e r n a ti o n a l l a w an d h u m a n r i g h t s .

• T r a d i t i o n s f o r s t a t e p a r t i c i p a t i o n i n i n d u s t r i a l d e v e lo p me n t .

• Ri c h h y d r o p o we r r e s o u r c e s – L E S S DE P E NDE NCE ON OI L

• S t r o n g p o s i t i o n i n t h e We s t e r n wo r l d .

• P r o x i mi t y t o t h e E u r o p e a n Ga s Ma r k et .

• B r o a d a n d we l l - d ev e l o p e d e d u c a t io n s y s t e m.

• Ma r i t i me t r a d i t i o n s .

• A d v a n c e d t e c h n o l o g i c a l e n v i r o n me n t .

• We l l -d e v e l o p e d s c i e n t i f i c a n d i n d u s t r i a l r e s ea r c h i n s t i t u t i o n s .

• ...etc.



Petroteam a.s

RELEVANT FEATURES OF THE NORWEGIAN MODEL

A. SECTOR ORGANISATION AND RESULTS ATTAINED• CO-OPERATION BETWEEN LICENSEES AND AUTHORTIES

• DIVERSITY AMONG LICENSEES• EFFICIENT PETROLEUM ADMINISTRATION

• TRANSPARENCY

• PLANNED LICENSING

• IOR/EOR• GAS OPTIMISATION

B. MANAGING THE IMPACT OF PETROLEUM ACTIVITIES• SOCIAL AND ECONOMIC IMPACT

• REVENUE UTILISATION

C. PETROLEUM POLICY• LEGISLATION

• NATIONAL STEERING

• NATIONAL PARTICIPATION

A. SECTOR ORGANISATION AND RESULTS ATTAINED• CO-OPERATION BETWEEN LICENSEES AND AUTHORTIES

• DIVERSITY AMONG LICENSEES• EFFICIENT PETROLEUM ADMINISTRATION

• TRANSPARENCY

• PLANNED LICENSING

•

IOR/EOR• GAS OPTIMISATION

B. MANAGING THE IMPACT OF PETROLEUM ACTIVITIES• SOCIAL AND ECONOMIC IMPACT

• REVENUE UTILISATION

C. PETROLEUM POLICY• LEGISLATION

• NATIONAL STEERING

• NATIONAL PARTICIPATION



Petroteam a.s

A.

SECTOR ORGANISATION AND

RESULTS ATTAINED

A.

SECTOR ORGANISATION AND

RESULTS ATTAINED



Petroteam a.s

LICENSEE - GOVERNMENT CO-OPERATION

• Perhaps the most relevant

feature to developing countries.

• Government involvement as co-

investor provided insight into the

challenges faced by licensees.

• Joint efforts opened the way to

win-win solutions.

• Major achievements in selected

areas of mutual interest.

• Open and competent dialogue is

the key to successful co-

operation.

• Asymmetry in competence is a

serious obstacle to positive co-

operation. Needs improvement.

• Clear and flexible frame

conditions help promote co-

operation.

• Guidance by example needed.

• Observing models of co-

operation in action provides

useful inspiration.

NORWAY D.Cs



Petroteam a.s

DIVERSITY IN LICENSEES

• Diversity in licensees - national

and international - helped meet

the varied challenges of the

offshore.

• Licensees in a Group

complement each other ’s

capabilities.• Diversity facilitates bench-

marking of performance and

improves efficiency.

• Diversity enhances transparency

and accountability.

• Diversity eases government

supervision.

• Ensuring quality licensees must

be a major objective.

• Dominance of very few

companies should be avoided.

•

Should seek competitivediversity.

• Big risk of attracting speculative

companies only.

• Competitive rounds should be

encouraged where feasible, i.a. to

enhance transparency.

NORWAY D.Cs



Petroteam a.s

POLICY

REGULATORY BUSINESS

POLICY

REGULATORY BUSINESS

MINISTRY

NATIONAL OIL

COMPANYDIRECTORATE

IOC -1

IOC -2

IOC -n

• Administrative separation

• Fairness

• Integrity

• Transparency

PETROLEUM ADMINISTRATIONIN NORWAY



Petroteam a.s

PETROLEUM ADMINISTRATIONIN DEVELOPING COUNTRIES

POLICY

REGULATORY BUSINESS

POLICY

REGULATORY BUSINESS

NATIONAL OIL COMPNY

Covering all 3 Functions

MINISTRY

IOC -1

IOC -2

IOC -n

.

POLICY

REGULATORY BUSINESS

POLICY

REGULATORY BUSINESS

NATIONAL OIL COMPNY

Covering 2 Functions

MINISTRY

IOC -1

IOC -2

IOC -n

POLICY

REGULATORY BUSINESS

POLICY

REGULATORY BUSINESS

M I N I S T R

Y

N A T I O N A L

O I L

C O M P A

N Y

IOC -1

IOC -2

IOC -n

POLICY

REGULATORY BUSINESS

POLICY

REGULATORY BUSINESS

MINISTRY

IOC -1

IOC -2

IOC -n



Petroteam a.s

TRANSPARENCY

• Democracy demands

transparency. Very few secrets in

the sector.

• Strict and clear rules for civil

servants.

• The role of the press enhancestransparency

• Although choice of licensees is

discretionary licensees can

appeal the decisions of

government.

• Stakeholders are included in

planning and hearing rounds.

• Transparency needs

improvement.

• Decisions are often made by few

people. Processes are vague.

• Integrity is highly essential but

often difficult to take for granted.

• Hidden agendas exist in various

quarters.

• Transparency must be reflected

in the process of governance.

NORWAY D.Cs



Petroteam a.s

PLANNED LICENSING ROUNDS

• Gradual and planned

licensing rounds.

• Rounds are used to control

the tempo of operations.

• Rounds promote

transparency and

predictability.

• Licensing is based on

geometrical blocks.

• Discretionary allocation.

• Concessionary system based

on JVAs

• Often ad-hoc or open door.

• Planning is often considered

unnecessary or a luxury.

• Tempo of operations is not of

great concern.• Size of the areas offered

Varies. Often very large

license areas.

• Transparency is often

lacking.

• Mostly based on PSAs.

NORWAY D.Cs



Petroteam a.s

IMPROVED OIL RECOVERY (IOR/EOR)

• Norway managed to increase

recovery from 25% to 42%.

• Co-operation between Licensees

and government is the key to

success.

• Proactive encouragement have

led to excellent research

environment.

• Maintained the momentum

despite low oil prices.

• Sub-optimal extraction is still a

serious threat in a world thirsty

for petroleum production.

• IOR costs are much less than in

Norway. Upside potential should

be higher.

• Badly need competence and

experience to achieve IOR/EOR

results.

• Need to establish positive co-

operation with licensees.

NORWAY D.Cs



Petroteam a.s

GAS UTILISATION

• Gas forms 60% of petroleum

resources in Norway.

• Gas burning is prohibited.

• Gas utilisation is a pre-requisite

for developing oilfields with

associated gas.

• Government had to facilitate

optimal solutions including

development of infrastructure

• Competence in alternative

utilisation of gas is essential.

• Different challenges but

government involvement is often

essential.

• Some countries have only gas.

• No international market for gas.

Local utilisation requires

government support.

• Governments must proactively

facilitate gas utilisation.

• Financing gas projects will

ultimately involve governments.

NORWAY D.Cs



Petroteam a.s

B.

MANAGING THE IMPACT OF

PETROLEUM OPERATIONS

B.

MANAGING THE IMPACT OF

PETROLEUM OPERATIONS



Petroteam a.s

MANAGING THE SOCIO-ECONOMIC IMPACT

• Managed the sector ’s growth to

mitigate harmful impact on

economy and social life.

• Planning was the key to

harmonised development.

• Monitoring the impact to avoid

the Dutch disease.

• Proactive pursuit of lasting

benefits to the society through

planning.

• Desperately need economic

growth.

• Managing a positive Impact

should be a high priority.

• The need for socio-economic

harmonisation is oftenoverlooked.

• Eagerness to grow underlines

(not lessens) the need for

planned integration.

NORWAY

CAREFUL ADAPTATION OF THE APPROACH IS ESSENTIAL

D.Cs



Petroteam a.s

MANAGING PETROLEUM REVENUE

• Norway’s objective was to avoid

heating the economy.

• The Petroleum Fund (now

Pension Fund) was the means of

mitigating harmful impact on the

economy.

• Gradual growth was a consistent

principle in petroleum policy to

ensure growth in other sectors.

• DCs need the revenue now.

• The challenge is to achieve

orderly growth.

• Emphasis should be on creating

lasting values in harmony with

other sectors of the economy andsocial life.

• Mitigation of leakage and

wasteful spending should be a

major objective.

NORWAY

THE OBJECTIVE SHOULD BE

INTEGRATION INTO SOCIO-ECONOMIC PLANS FOR DEVELOPMENT

D.Cs



Petroteam a.s

C.

PETROLEUM POLICY ASPECTS

C.

PETROLEUM POLICY ASPECTS



Petroteam a.s

LEGISLATION

• Gradual; when needed and

implications fully understood.

• First law of one page in 1963.

• Supplemented since by royal

decrees, regulations and

guidelines

• First comprehensive law was

enacted in 1985.

• First revision in was made in

1998.

• Objective judiciary system.

• Full clarity in the law is required

from the start.

• Supplementary regulations often

needed early, guidelines may

wait.

• Should avoid revisions except

when fully justified.

• Objective judiciary often lacking.

NORWAY D.Cs

OBJECTIVE: PREDICTABILITY + FLEXIBILITYOBJECTIVE: PREDICTABILITY + FLEXIBILITY



Petroteam a.s

NATIONAL STEERING

• A prominent feature of the

Norwegian approach.

• Gradual approach to growth in

the sector was backed by low

dependence on oil imports.

• System of governance madesteering by government effective.

• A competent civil service made

steering fair, transparent and

reliable.

• Desirable but practically limited

by the need for rapid income.

• Competence is often a challenge.

• Efficient institutions are hard to

develop.

• Steering by incentive is oftenmore practical.

• Nevertheless, a positive and

balanced national steering is

required.

NORWAY D.Cs

OBJECTIVE:

TO INTEGRATE PETROLEUM INTO AN OVERALL PLAN

OBJECTIVE:

TO INTEGRATE PETROLEUM INTO AN OVERALL PLAN



Petroteam a.s

NATIONAL PARTICIPATION

• High level of commercial

participation by government.

• Private national participation

reasonably high.

• High local content.

• Rapid technology transfer was

predictably possible.

• The research environment is

highly qualified to contribute

• Commercial participation by

Government is not always

prudent.

• Private sector less developed to

participate efficiently.

• Local content is often limited but

should be optimised.

• Technology transfer likely to take

time. Can be enhanced.

• Education and research institutes

need improvement.

NORWAY D.Cs

OBJECTIVE:

USE PETROLEUM TO IMPROVE LOCAL COMPETENCE

OBJECTIVE:

USE PETROLEUM TO IMPROVE LOCAL COMPETENCE



Petroteam a.s

CONCLUSION

• Developing countries can benefit from the

Norwegian experience.

• Differences in objectives and realities require

careful adaptation to the local scene.

• Understanding the global scene is an important

part of the adaptation.

• Developing countries can benefit from the

Norwegian experience.

• Differences in objectives and realities require

careful adaptation to the local scene.

• Understanding the global scene is an important

part of the adaptation.

relevance of norwegian model for developing countriesfaroukal-kasim

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