“Make it an epoch – not an episode!”
The quote is attributed to Finn Lied in 1971. A military researcher and Labour politician, he was Norway’s first minister of oil and chairman for ten years of state-owned operator Statoil (now Equinor).
Lied’s remark has, in effect, been Norway’s oil and gas industry mission statement ever since and is equally relevant to the country’s future as it seeks to transition to a low-carbon economy whilst remaining a strategically import source of oil and gas for perhaps another half-century.
Lied was clear that whatever petroleum resources existed on the Norwegian Continental Shelf, those resources were sovereign and should be developed to the benefit of the Scandinavian country’s entire society.
This was not to be a rip it out of the ground as fast as you can party for the few as in the UK. The strategy would be long-term yet organic.
National control and state participation, responsible resource management, building and fostering a Norwegian oil community including an indigenous where possible entrepreneurial supply chain, technology leadership and excellent skillsets would be the pillars.
And those same pillars today provide robust foundations on which to build Norway’s low carbon future.
How Norway set itself up for success
Norway was already an industrially developed nation when oil was discovered. That is frequently overlooked by outsiders including the UK where the perception was one of a poor fishing nation on the periphery of Europe.
It already had long maritime and engineering traditions and expertise that was able to adapt quickly to the opportunity.
Also, Norway hosted internationally competitive industries such as aluminium production, extensive and low-priced hydropower and deep fjords for establishing offshore engineering, manufacturing and services facilities.
A key principle for local content was the encouragement of local supply and service participation, though Norway was obliged to carry out a major reset when it signed up for membership of the European Economic Area (EEA) in 1992, going live in 1994.
That was hard given that, over the prior 20 years, Norway had built up its own world-class oil and gas supply chain.
Specific market protection measures then taken included the Oil Ministry setting up an office to monitor local content in 1973 (much like the UK with its Offshore Supplies Office).
A Norwegian Energy Partners/Henley Business School paper records:
- Oil companies had to present all tenders above one million kroner
- The Ministry was informed of the evaluations before contract award
- Oil companies had to present their tendering strategy twice a year
- Supply bases had to be located in Norway – not the UK
- Tendering information was released to the whole petroleum cluster
Local content rather than ‘Norwegian ownership’
Some 30 years have passed since Norwegians voted no to EU membership, but settled for signing up to the EEA agreement.
A new report on Norway in the EEA has reignited the debate about Norwegian EU membership; good idea or bad? Good for business or not? And workforce security?
Business has adapted to the EEA, which is seen as better and less restrictive for Norway than EU membership.
This is especially important in the energy context where Norwegian Energy Partners/Henley Business School point out that today’s supply chains are built with a focus on local content rather than ‘Norwegian ownership’:
- Norway successfully introduced policies to attract global competence
- Foreign ownership among Norwegian-based suppliers is today above 50%
- Many have made strategic acquisition of local enterprises
- Foreign players have not harmed the development of the national clusters
- Rather they have encouraged greater focus on competitiveness and technology
Norwegian oil and gas supply chain has been to hell and back
At the same time and like all of its North Sea neighbours, the Norwegian oil and gas supply chain has been to hell and back again at least three times since becoming an EEA member, with oil price crashes three and four still ringing in the industry’s collective ear today.
Among the biggest Norwegian offshore crises headline grabbers were the famed Aker and Kvaerner brands, which were forced into a merger in 2001, creating Aker Kvaerner, which was later demerged in 2011 , each brand once again going its own way!
Let’s dig a little deeper into who owns what, especially the State’s shares in resources and the supply chain.
First, the basic numbers.
State ownership is practised in key industrial and strategic sectors, such as the oil and gas industry, banking and telecommunications.
The petroleum sector accounts for 26% of Norway’s GDP and 73.4% of exports (2022 dataset).
As is well known, the Norwegian State deposits its revenue from petroleum into the Government Pension Fund of Norway, also known as the “Oil Fund”, which is the world’s largest sovereign wealth fund.
Unlike the UK, the Norwegian State owns a large number of business enterprises.
It controls some 35% of the total values on the Oslo Stock Exchange, and five of the seven largest listed companies are partially owned by the state, with stakes ranging 34-64% – Equinor, Kongsberg and Norsk Hydro included.
Breakdown of Norweigan state-owned firms
The flag-bearer is of course Equinor which is responsible for some 70% of domestic hydrocarbons output and is also heavily invested in North Sea offshore wind.
Turning briefly to the SDFI (State Direct Financial Interest), this has since 2001 been managed by Petoro on behalf of the State; meanwhile the
Ministry of Energy has total control over the entities Gassco, Gassnova and Statnett.
Among key companies in the Ministry of Trade, Industry and Fisheries portfolio and which are involved in oil, gas and renewables are:
- Akastor – oil and gas services investment – 12.08%
- Aker Solutions – energy services group – 611%
- DNB Bank ASA – Norway’s largest bank – 34% – strong position in energy and shipping investment.
- Eksportfinans ASA – 15% – a vehicle of DNB (40%) and other Nordic banks.
- Equinor – 67%
- Innovation Norway –51% – assisting Norwegian innovators to bring high and low carbon tech to market.
- Investinor – investment company – 100% – targets innovators to turn their firms into world leading businesses.
- Kongsberg Gruppen – 50.004% – from the oceans to space technology. 50 years supporting offshore energy. Its top 20 stakeholders are exclusively Nordic.
- Norsk Hydro (34.6%) – Oslo-listed. Broad range of market segments, including energy, renewables and batteries. One-time oil & gas player.
- Petoro – 100% – manages the State’s portfolio — (State’s Direct Financial Interest) – oil and gas E&P licences on the NCS
- Statkraft – 100% Global co. Europe’s largest renewable energy generator.
‘Norway has shown before its ability to adapt to a changing context’
Currently, most of Norway’s gas networks are owned by the Gassled partnership created in 2002. Gassled owns gas pipelines connecting Norway to the UK and EU.
The Norwegian Government has an authority ratio of 46.7% through the Petoro company, which is wholly owned by the Norwegian Government, and up to 5% through Equinor.
Checking out power generation, municipal, county and central authorities own about 80% of Norway’s electricity production capacity. Local municipalities and counties have large investments in powergen and, together with central authorities, own about 80% of Norway’s generating capacity.
On the surface, everything seems ordered and under control. But it is argued that there are dark clouds on the horizon that must be dealt with.
Notably, the Institution for Innovation and Public Purpose – University College London, warns that Norway must avoid becoming the ‘Fossil Ogre’ of Europe.
The claim is made despite the country having the highest percentage by far of renewables-based power generation, possibly worldwide.
And the key lever for change is the Oil Fund, claims the institute.
“The oil wealth can serve as an insurance for the current and future wellbeing of Norwegians only if it is invested into funding the productive assets of the future, not of the past,” it says.
In other words, green energy in which, ironically, Norway is already a world leader.
The institute goes on to say in a report published in 2021: “The lessons of Norway’s historic approach to industrial development may prove valuable. Norway has shown before its ability to adapt to a changing context.
“At defining points in history, the Norwegian state has taken on an entrepreneurial role and set a new direction of growth, through the development of hydropower 100 years ago and a petroleum industry 50 years ago.”
‘The green transition could be Norway’s third industrial turning point’
At both of these inflection points the State fostered inclusive growth by watershed decisions, such as placing conditionalities on investors regarding resource ownership and local industrial development, attaining technological sovereignty by investing in science and innovation, supplying industries with patient capital and utilising state ownership to confront the grand challenges of that day, and age.
“Today, the green transition could be Norway’s third industrial turning point, defining the country’s prospects for inclusive growth and sustainable prosperity for decades to come. A turn from the export of fossil fuels to the export of green technologies would be a sea change in Norway’s role in the global climate effort.
“Putting its industrial capacity and financial strength to use in the green transition could turn the ‘Fossil Ogre’ of Western Europe into the ‘Green Giant’.”
That green transition was already under way when the institute’s report was published three years ago, with Equinor ranked among the absolute leaders in Europe and its well-equipped and funded oil and gas and maritime engineering sectors leading the way.
So perhaps Finn Lied’s 1971 dream of creating an energy epoch in Norway will indeed be realised and perpetuated.
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