1

The Norwegian Model

Atle MidttunNorwegian School of Management

Presentation at the FFU-SWP workshop Berlin, February 2-3, 2006

2

The Norwegian Model

Tax regime to appropriate ground rent

Regulartoryframework to

control ground rent

Negotiationframework to

MaximiseNorwegian take

Nationalchampion

policy

InnovationSystem for

Techn& supplyInd. Devt.

Petroleum tax office

Govt. Petroleum/pension fund

Ministries of environment and labour and social affairs and fisheries

3

The Norwegian ModelIntegrated politico-economic strategy for resource exploitation

Regulatory framework to appropriate the ground/cartel rentThe build-up of a national champion – partly privatisedThe gas negotiation and supply committees to strengthen collective bargaining with buyers – now substituted with TPA Active policy for Norwegian supply industry

Open system of innovationStrong innovation incentivesCollective innovation projectsMultiplier effects

Recent developmentPart-privatisation, TPA orientation, Internationalisation

4

Regulatory framework to appropriate the ground/cartel rent

Concession policyAllotment of concessions through a discretionary system

Competence, financial strength, contribution to strengthen Norwegian economy

From licensing round 3 and onwards, operations were dominated by Norwegian companies, This has changed more recently to the advantage of foreign companies

Tax regimeCorporate tax plays a moderate roleSpecialised ground rent taxation and royalty fees plays a major roleCareful balancing between maintaining state revenue and securingfuture investments in further offshore petroleum exploration

Petroleum/pension fundRevenues building up to the world’s II largest fundover 1,000,000,000,000 NOK

5

The Build-up of a National Champion

Statoil established 1972Clearly favoured in assignment of blocks in an early phaseUntil 85: 50% of blocksNorsk Hydro was already there as a semi public companyConservative scepticism and establishment of state direct financial involvement in 1985Strong Statoil position in North Sea pipelines

6

The Norwegian Gas Sales Model

73-86 Strong Statoil influence on Norwegian sideEkkofisk and Frigg fields: Statoil monopolised negotiations with continental buyersThe Gas negotiation and supply committees

Negotiated unilaterally with potential buyers on behalf of all active companiesProvided stronger bargaining power for Norwegian actors

7

De-regulation and fundamental revision of the Norwegian model

Privatisation of Statoil (2001): State ownership decreased to about 80%, now 70%Petoro established to take care of the State’s direct financial interestGassco created and split out from Statoil (2001/2002)Pipeline Ownership aggregated in GassledDismantling the Gas negotiation and supply committees.

8

Gassco was established by the Ministry of Petroleum and Energy on 14 May 2001 as a wholly state-owned limited company. It took over the operatorship for all gas transport from the Norwegian continental shelf on 1 January 2002.Before that date, gas transport was provided by a number of companies. The creation of Gassco forms part of an extensive reorganisation of the Norwegian oil and gas sector since 2001. Establishing this company has satisfied the requirements for gas transport operations in the European gas market specified in the European Union’s gas directive.Transport and processing facilities must serve all gas producers, and that Gassco must be neutral in its dealings with all users of the transport system.

9

10

From Statoil

The Norwegian Continental Shelf as an arena for technology development

Special fields: Deep water drilling, geological exploration, clean production, arctic conditions

11

Norwegian petroleum sector: a system of open innovation

12

Govt. Initiated ProgrammesDemo 2000: a broad technology-oriented project development programme between leading industrial and research groups in Norway. OG21, a collective strategy plan for the Norwegian petroleum sector based on an initiative from the Norwegian Ministry of Petroleum and Energy. Petromaks: Exploration and increased recovery focusPetropol: Extended social science knowledgeThe actors involved in collaborative research projects are dominantly Norwegian and include the two petroleum companies, Statoil and Hydro, as well as the major research universities and institutes. However, foreign oil companies are also extensively engaged, with Shell and Connoco Philips being the most important players.

13

Statoil’s Innovation

system

ABB’s Innovation

system

AkerKværner’s Innovation

system

Kongsberg’s Innovation

system

Control systems

Instrumen-tation

Motors & drivers

Robotics

Other Supplier’sInnovation

systems

Industrysolutions

Low, medium, highVoltage prod’s

Oil & gasRefining&chemicals

Pharmaceut.& biotech

mining& metals

Shipbuild.

power

Merchant marine

Anti-shipmissiles

Offshore/subsea

Yatching &fishery

MilitaryCommunic.

Weaponsontr. syst

Competency potential in parts of Statoil’s value system

14

Statoil’s Innovation

system

ABB’s Innovation

system

AkerKværner’s Innovation

system

Kongsberg’s Innovation

system

Control systems

Instrumen-tation

Motors & drivers

RoboticsIndustrysolutions

Low, medium, highVoltage prod’s

Oil & gasRefining&chemicals

Pharmaceut.& biotech

power

mining& metals

Shipbuild.Merchant marine

Anti-shipmissiles

Offshore/subsea

Yatching &fishery

Ifremer’sInnovation

system

Anti-shipmissiles

Yatching &fishery

MilitaryCommunic.

Weaponsontr. syst

Edinb.Systems LabInnovation

system

Artificialintelligence

IndustrialControl

Traditionalengineeing

Cybernetix’Innovation

systemMilitarycommunication

Nuclear &Telerobotics

MeterologyOptics, vision

Picking-Sorting-Logistics

offshore

HitcFramnæs’Innovation

system

ROV/ subseaControl systs.

Design ofOffshore prod.s

Plant design &modification

Flexibleexpansionof the system:

Development of advancedsubseavehicle

15

Intelligent field

16

Statoil’s Innovation

system

Haliburton’sInnovation

system

Schlumberger’sInnovation

system

Drillingcompletion

maintenance

Software

GeoquestSoftware’sInnovation

system

NPSi’sInnovation

system

Baker HughesInnovation

systemProductionmanagement

Completionservices

Enterprisesolutions

LandmarkGraphic’sInnovation

system

Traditionalsuppliers

OtherPetroleum

Majors

WesternGeco’s

Innovationsystem

Drilling & formation evaluationGeneral

Oilfield services

Data & consult.services

Drilling & formation evaluation

Engineering

Services

Consultingservices

Softwareproducts

WITSMLrelated products

Computer toolsFor drilling ec.

InformationMgmt.

Knowledgemgmt Data processing

Land Seismic

Marinesemismic

Reservoirservices

Flexibleexpansionof the system:

Intelligentfields

17

Advantages of innovation in external networks

Complementary competencies can be maintained at a high levelFlexible recombination of competenciesRisk sharingExploitation of positive externalities

18

Internationalisation: the coming challenge(from http://www.statoil.com/) www.statoil.com/statoils_world