Abstract
In
Norway Statoil has been a shining example of state regulation
and participation in industrial and economic activities. The company
was established as a operative and fully state owned company,
and it soon entered into competition with the large international
oil companies, the foremost symbol of international capitalism.
From a pro-state perspective, Statoil�s role in the Norwegian
petroleum sector was a success story during the seventies. As
pointed out in the chapter the external (and internal) conditions
were favourable during this decade. The paper then goes on to
discuss why and how this state regulatory model was challenged
from the early eighties and onwards. The challenges can all be
related to different aspects of �globalisation�: spread of political
ideology, volatility of commodity prices, the role of international
organisation, and the changing structure of international industries
and multinational companies. Although Statoil was partly privatised
in 2001, the core elements of the model regulating the Norwegian
oil sector are intact. The model has been reformed, but it still
provides the state with a dominant role both in regulating and
operating the Norwegian oil sector. The narrative provided is
thus in need of explaining stability as much as change.
It should be remembered that oil is not an ordinary commodity
like tea or coffee. Oil is a strategic commodity
too important to
be left to the market Sheik Ahmed Zaki Yamani
The concept of globalisation
This
concept of globalisation has many meanings. Laxer (1995) defines
it as: �the norms, institutions, and laws that supports global
capital accumulation along neo-liberal principles.� Key indicators
are: open financial and capital accounts, removal of foreign exchange
restrictions, cut in public expenditures, balanced budgets and
lower corporate taxes, deregulation of businesses, encourage foreign
investments inflow, and disposal of public enterprises. It is
often conceived of as an '�American'� model and thought of in
terms akin to an overarching ideology of governance. Globalism
challenge democratic assumptions about the sovereignty of states
and national citizenry. Under globalism, states are: oriented
less to internal demands, focused on maximizing exports, freeing
the flow of capital and enshrining transnational corporate rights
as �national treatment�, and locked into neo-liberal principles
� by international agreements and institutions (Clarkson 1999).
As Michael Mann (1997:473) points out, even though
globalisation enthusiasts agree on very little, they agree on
one point, that �contemporary changes are weakening the nation-state.�
However, the deteriorating role of the state might have been overstated
in the globalisation literature. Furthermore, the state might
be able to adapt to new environments and external threats. It
might also be that there is no contradiction between capitalism
and state sovereignty: �effective state intervention is now assumed
to be an integral part of successful capitalist development� (Rueschemeyer
and Evans 1985:44). For the purpose of this paper we need not
conclude this debate. Rather the question is what balance between
forces of globalisation and demands for state control, ie. commdification
vs. de-commodification, can explain the changed structure of the
Norwegian oil sector and role of the Norwegian State Oil Company
� Statoil.
As
other industries the oil industry goes through phases of structural
change. In the 1950s and 1960s the so-called �seven sisters�
[1]
controlled more than 90 percent of the worlds
oil reserves and production. The role of state owned companies,
upstream or downstream, was minimal, although the oil industry
was strongly regulated in several countries. During the early
seventies the control of the sister slipped, and the role of state
companies increased both in producing and consuming countries.
With the increased price oil was considered a matter of highest
national concern. On the international political scene this gave
the role of OPEC paramount security connotations in the eyes of
the US government. Domestically in the consuming countries state
involvement increased to ensure security of supply for consumers
and industries. In the producing countries the rapidly increased
revenues following the price rise increased the political attention
and state involvement. There are many motives for state interventions
in this sector: secure state revenue through taxation, control
access to resource and distribution of private revenues through
the disbursement of concession, and ensure and enforce safety
and health regulations through various legislative and regulatory
measures. In addition, the sate might prefer a more direct participation
through an operative state owned company. When the oil price fell
back in the mid-1980s, oil was increasingly perceived as just
another commodity,
[2]
and thus more easily left to private business
actors. This coincided with a more general tend of privatisation
and liberalisation, and in Europe, a focus on the European Communities
launch of the Internal Market project. This trend now goes under
the name �globalisation�.
One key feature of today�s globalisation, that
geographical location is reduced as a parameter for economic activity,
is thus not new to the oil industry. However, the political changes
of the end of the cold war, significantly increased the number
of areas open for exploration and production by Western oil companies.
Today, almost all oil provinces are open to the international
oil companies. The oil price fall of 1998 triggered a new round
of concentration among the international oil companies. In Europe,
state involvement in the energy sector was generally reduced as
part of the internal energy market project inside the EU. This
coincided with a hype in the value of Internet- and �new technology-�companies
on the stock exchanges world-wide. The relative
value of traditional industries as oil was severely weakened.
The low oil price and the relative weakness of return on investments
in the financial markets caused the oil companies to cut costs
and engage in a new round of mergers. Big international oil became
even bigger. The level of concentration among the companies that
was reduced in the early seventies returned in the late nineties.
Given
the variations over time in the intensity of globalisation in
the international oil industry. One should thus expect that the
climate for state oil companies rapidly improved in the early
seventies, but deteriorated from the early eighties and onwards.
Thus we would expect the Norwegian regulated model of the seventies
to have been put under considerable stress during the 1980s and
1990s. As this paper will show it has been a substantial pressure
on the model, but not unambiguously in a liberalising direction.
Along that dimension the model has been surprisingly robust.
During its thirty years existence, the Norwegian
State Oil Company � Statoil has held a position as a vertical
integrated operating company in competition with other companies,
while at the same time been a regulatory instrument on behalf
of the Norwegian government. The company has been the core of
what has been called the Norwegian model for balancing the power
of the international oil companies through state regulation and
participation. This chapter will show how the neo-mercantilist
model for regulating the Norwegian petroleum sector, developed
in the early seventies, have since the early eighties, been challenged
both from external and internal forces. In 1984 the Norwegian
oil sector was reorganised reducing the role of Statoil. In 1986
the oil price fall created a need for cost-cutting reforms inside
the company and in its role in the regulation of the oil sector.
In 1994 Norway signed the European Economic Area Agreement with
the EU, including Norway in the EU Internal Market. In 2001 Statoil
was partly privatised. Despite these changes, the state majority
ownership combined with the establishment of a new state company
(Petoro), the concession system and other regulations, implies
that the Norwegian oil sector remains a highly state regulated
sector.
The story of Statoil is thus a case of a changing
balance between commodification and de-commodification. However,
the development is not a case of straightforward increased commodification.
The aim of this study is to explain why
and how the Norwegian regulated model was challenged, and to what
extent and how it resisted the challenges?
All the challenges described represent different
ways �globalisation� influence national and domestic resource
management and public policy. In 1984 the challenge came from
the Conservative Party�s ideological attack on the State Company.
In 1986 it was simply a matter of exposure to volatility in the
price of the commodity - oil. In 1994 the challenge came from
Norwegian ties with an international organisation advocating free
trade and liberalisation. In 1998 the increased concentration
and restructuring of the international oil companies constituted
the challenge.
After presenting the initial construction of the
Norwegian model in section three, the challenges to the model
will be discussed chronologically in the sections three to six.
The Norwegian petroleum adventure started in 1962 when representatives of
Phillips Petroleum Company approached the Norwegian government
requesting �an oil and gas concession covering the lands lying
beneath the territorial waters of Norway plus that portion of
the continental shelf lying beneath the North Sea which may now
or in the future be under the jurisdiction of Norway.�
[3]
At first, the authorities perceived the existence
of such resources as unlikely. When the Norwegian Foreign Ministry
ensured Norwegian sovereignty over the Continental Shelf and negotiated
the Middle-line division of the North Sea with Denmark and Britain
the focus was on fisheries and the strategy would have been the
same with or without the prospect of petroleum resources. When
it came to the relationship to the international oil companies
the logic was different.
The governments� aim was a rapid exploration of large parts of the Shelf
in order to determine whether there were any commercially viable
oil resources or not. The government openly discouraged Norwegian
industrial and shipping interests that sought to enter the oil
industry at this time, due to the uncertainty and high risk of
loss of invested capital.
[4]
The capital, know-how and technical experience
was located in the international oil companies, which became the
key resource of information for the government and were also invited
to suggest legislative and management solutions. The companies
were used to define the rules of the bargaining game with local
or national political authorities. At the same time the Norwegian
authorities were unwilling to commit political or economic resources
to what was regarded as a high risk venture. This lead to the
development of a general legislative framework to ensure the government
control over the resources, but which provided for a dominant
role of foreign companies in exploration and operation at the
Continental Shelf. There was no nationalization of the Norwegian
oil industry at this time, nor was there a conflictious relationship
between the government and the international companies. This was
in line with the international situation regarding the relationship
between the international oil companies and the host countries.
These characteristics were to change dramatically at the moment
oil was discovered.
In the spring of 1969 traces of hydrocarbons was found in block 7/11, this
raised the optimism both among the companies and in the government.
At the same time the OPEC countries, in their negotiations with
the international oil companies, announced that they would include
a clause concerning state participation. The international climate
was changing. The producing countries were slowly gaining the
upper-hand in their relations with the international companies.
After the second licensing round was announced the government,
through negotiations with the companies, included a clause of
state participation with �carried interests� until commercial
discoveries were made. The Norwegian concession system only allowed
individual applications. Thus the foreign companies all submitted
competing analysis of the same fields. This was an effective way
of increasing the information and know-how in the Norwegian oil
bureaucracy (Andersen and Austvik 2000:35). Furthermore, the concession
increasingly included non-economic or technical conditions like:
encouraging Norwegian partners, placing orders with Norwegian
industry, creating jobs in Norway and so on (Noreng 1980:126).
In 1971 the so-called �ten oil commandments� were agreed in parliament.
Among these were ambitions to ensure (i) national governance and
control over all activities at the Continental Shelf, (ii) that
the petroleum resources contribute to the development of new industrial
activities in Norway, (iii) that oil and gas should be to piped
to Norway, (v) that the state engage in all aspects of the petroleum
activities where it seems appropriate, and (vi) that a state oil
company was to be established. In 1972 the administrative structure
was split into three parts: the Ministry of Industry handled principles,
legislation, and concessions; the Oil Directorate handled daily
administration, exploration, and control; and a state oil company
was in charge of the government�s commercial interests.
After Statoil was established in 1972, the state
participation agreements with the international companies were
amended to include a 50 per cent direct share to be granted to
Statoil in every block, in addition to the carried interest clause.
Statoil would thus be exempted from incurring expenses during
the exploration phase. From 1974 a new �sliding scale� was devised
which enabled Statoil to claim an additional share of 30 per cent,
up to a maximum share of 80 per cent of a given field after profitable
discoveries were made. At the Gullfaks field Statoil was awarded
an 85 percent share. The carried interest concept enabled the
state to combine a risk-averse posture with a very high direct
state ownership share. Since the voting rights were based on a
company's ownership share, Statoil had veto power over all production
leases and field development decisions that were made after 1973.
With regard to the Gullfaks field, Statoil could take all these
decisions alone. In addition Statoil was given the right to acquire
the operator responsibility at the large Statfjord field from
Mobil within ten years. The company could use expertise and information
acquired by the private companies, select its own partners in
a handful of promising concessions, and exercise a role as key
adviser to the ministry. By 1980 Statoil�s annual investments
had reached about 2.5 bill. Norwegian kroner, and the staff above
1000 employees.
The preferential rights granted Statoil ensured
the company a dominant position in the petroleum sector with ownership
of the largest resource base on the Norwegian continental shelf.
This enabled the company to control a very large and growing share
of the total Norwegian oil and gas production.
[5]
During the mid-seventies the Norwegian petroleum
sector goes into a smooth phase of development, lead by Statoil.
Internationally
the early seventies saw a change in the relationship between the
producing countries and the international oil companies. While
some countries, like Iraq, nationalised the company operating
in Iraq, others, like Saudi Arabia, followed a more moderate strategy
and negotiated an agreement of state participation. The regulations
put in place by the Norwegian government amounts to a legislative
framework giving the state the ultimate control over the resources,
a politically governed concession system, and a strong element
of direct state participation through the state oil company �
Statoil. The Norwegian model had certain peculiarities, but was
fundamentally in line with the international trend. It followed
from the preferences given to the Norwegian companies in general,
and the Norwegian state company in particular, that the bargaining
position of the international companies was reduced. In the first
half of the seventies the importance of democratic control over
important aspects of the petroleum policy was emphasised. Statoil
was set to be the key institution for implementing the authorities�
petroleum policy.
[6]
The long-term perspective was that the international
oil companies� role on the Norwegian Shelf should become mainly
one of consultants, entrepreneurs, and possibly minority shareholders.
[7]
With
the rapid price increase due to the Iranian revolution and the
outbreak of the Iran-Iraq war, the value of Norwegian petroleum
resources increased dramatically around 1980. As the Norwegian oil income
increased, so did the importance of the question of political
governance of the oil sector. The petroleum sector�s share of
GDP increased from 6.8 percent in 1978 to 16 percent in 1981. In the same period
the sector�s contribution to the state income increased from 10.78
billion to 57.63 billion in 1996 NOK. The Norwegian economy changed
into an oil-based economy. Statoil accumulated a substantial part
of the revenue.
The potential for a tremendous accumulation of
the income from the petroleum activity in one company raised important
questions about the division of the economic rent between the
company and the public treasury. The company had a strong incentive
to increase its activity levels as much as possible, in order
to prevent capital from leaving it (Richardson 1981:44). The larger
the share of capital that the company could retain, the higher
was its growth potential. The comprehensive nature of the preferences
granted Statoil would make the state an important risk-taker.
Statoil's high capitalization would also enable the company to
build close links or ties to Norwegian industrial actors involved
in the spin-offs from oil and gas activities.
[8]
Richardson notes that �Statoil's relationship
to the rest of Norwegian industry could provide it with a degree
of autonomy not envisaged by central policy-makers� (Richardson
1981:45). As an example of institutional breadth, the regulations
in the state participation agreements that guided the use of Norwegian
goods and services clearly favoured Statoil and therefore facilitated
the development of such close Statoil-industry links. The high
degree of administrative discretion in the concession system enabled
the government to select, in its granting of exploration permits
and production leases, those oil companies that favoured the use
of Norwegian goods and services.
[9]
Thus, the discretionary nature of the
concession system also served to benefit Statoil. The elimination
of Statoil's preferences would represent a challenge to the links
between Statoil and various industry actors. But since Statoil
was so strongly integrated into the overall regulatory structure,
a severing of the links between Statoil and Norwegian industry
interests necessitated changes also in the concession system.
When
the non-socialist parties won the election in 1981, the Conservative
party formed a minority government supported by the Centre Party
and the Christian People's Party. In 1982 the three parties formed
a Conservative-Centre coalition government. One concern of the
new government was to reduce the power and growth of Statoil.
In 1982 to conservative government appointed a commission to recommend
changes in the organisation of state participation in the petroleum
sector. In the commission�s report the need to reduce the future
growth of Statoil was emphasised. Such growth was inevitable,
due to the corporation's role as a rent collector for the public
treasury. The Commission intended to ensure that the division
of funds between Statoil and the public treasury would correspond
with the split between the company�s operative tasks and the state's
tax and other incomes which accrued to the corporation as a rent
collector for the state. Further, the Commission noted that the
wide range of preferences granted the company gave it wide leverage
to influence the actions of all business actors in the petroleum
sector.
[10]
����������� The first and most important recommendation
was to devise a split between the state's direct share of a field
and that of Statoil in order to ensure that a certain portion
of the economic rent was channelled directly to the public treasury.
In the "historical Statoil compromise" that was struck
between the Conservative-Centre government and the main opposition
Labour party in 1984, and after the proposal had been tabled in
the Storting, it was agreed that the split would not apply to
the huge Statfjord field. This would ensure Statoil of a very
large source of income in many years to come.
[11]
The SD�E (The state's direct share of
the economic involvement) consisted mainly of fields that had
not yet been developed. This, however, must be viewed as part
of a much wider programme of government reorganisation, part of
which would generate a clearer delineation between state and societal
actors.
March
and Olsen (1989:100) note that: �While the main tendency in Norway
since 1945 has been to integrate organized interests, and thus
social conflicts, into the administrative apparatus, the key argument
of the conservative-center program was that the state, in order
to govern, needed a certain distance and independence from the
various interests.�
As part of this programme of reducing the role
of established corporatist arrangements and delineating more sharply
between the public and private sectors, were measures to decentralize
power from centralized governmental agencies and to ensure strengthened
political control over central state administrative and economic
agencies. The chosen model in the petroleum sector, with a direct
state share of field ownership in addition to the share of the
state oil company, was a Norwegian innovation. The new Conservative
government was clearly inspired by the new liberal ideologies
presented by Thatcher and Reagan. In its general economic policy
it liberalised the financial market, abandoned regulations in
the housing market, and pursued a market-oriented industrial policy.
The reorganisation of Statoil was, however, not a case of liberalisation,
as we would define it today. The policy of constraining Statoil
was rather an attempt to increase the direct role of the state
in the oil sector. As the then prime minister, Kaare Willoch,
later reflected over in his memoirs �The aim was to prevent Statoil
from growing beyond reasonable limits and exercise disproportionate
influence� (Willoch 1990:289). The challenge to the existing model
was thus not a matter of liberalisation in the meaning of privatisation.
Rather it was a matter of changing the balance between two government
entities, the state oil company and the Ministry of oil and energy
in favour of the ministry. Since Statoil was to continue the operative
responsibility for the shares held directly by the Ministry, the
new model precluded privatisation. International developments
soon toppled the financial aim of the reform. With the reform,
the state became directly exposed to changes in the returns from
the fields with direct state participation. The state�s share of new investments in the fields
had to be financed out of the public treasury, either as direct
outlays or as foregone revenues. Two years after the reform the
oil price collapsed, turning the prospected net benefit from a
large part of Norwegian oil production into losses. Thus, until
1994 the net cash flow from SD�E negative or just barely positive.
Statoil, on the other hand, could use the returns from the large
Statfjord field to finance its share of future field developments.
The reorganisation also gave Statoil a somewhat increased freedom
of operation, not least regarding involvement in international
oil prospects.
During the first half of the
1980s the oil price had a downward trend. Furthermore, the oil
producers� income from oil exports was propped up by the increase
in the dollar exchange rate in the first half of the eighties.
From 1980 to 1985 the oil price increased when measured in Norwegian
kroner and decreased in US dollars. When the oil price and the dollar fell simultaneously
in 1985�1986, the oil price measured in Norwegian kroner was halved
(Claes 2001:327-29). Thus, the market situation dramatically changed
the Norwegian income from the oil sector from December 1985 to
May 1986. There was no sign of increase in oil consumption. With
the oil price collapse in spring 1986, the Norwegian economy was
severely weakened. The value of the exports of oil and natural
gas fell by 32.3 billion NOK from 1985 to 1986. Paid taxes from the oil sector fell from 71 bill. NOK
in 1985 to 16 bill. NOK in 1988 (all 2001-NOK figures).
[12]
When the economic situation changed so radically,
the pressure for drastic political action increased. The Norwegian
government introduced harsh measures in the country�s macroeconomic
policy. The Norwegian krone was devalued by 12 percent. The fall
in oil prices created a current account deficit of 33 billion
NOK in 1986. After the devaluation, the Central
Bank advocated increased interest rate and a fixed exchange rate
in order to finance the current account deficit through the private
sector. This policy, implemented in 1987, fundamentally changed
the Norwegian economic policy, which since 1976 had been characterised
by governmental support of the Norwegian export industry through
technical or explicit devaluation of the Norwegian krone (Tran�y
1993:238�239). The governmental expenditure was reduced by the
equivalent of 4 percent of GNP. On top of this, the high interest
rates reduced aggregate demand by about the same amount (Sk�nland
1988:9).
����������� In this dramatic economic situation the state owned company
Statoil was suffering from a severe crisis of mismanagement of
its investments in the Mongstad refinery. In January 1988, as a result of the huge cost-overruns
associated with the Mongstad refinery scandal.
[13]
The leader from the time of Statoil's
founding, Arve Johnsen, resigned and was replaced by Harald Norvik.
This leadership change also signified a reorientation in the company�s
role, as the new leader, Harald Norvik, stressed the need for
a more efficient business strategy and a corporate restructuring.
[14]
This may be viewed as a combined result
of the changed economic climate associated with a weakened oil
price and the Mongstad scandal which caused a great political
uproar. Over time, international oil market developments seemed
more effective in shaping the company's behaviour than were the
political authorities in the early 1980s. But it should also be
kept in mind that the initial reorganization may have altered
the political setting sufficiently to facilitate future changes
in the same direction. Such changes could occur as the result
of conscious actions by political decision makers or they could
be part of a - slow or rapid - process of adaptation to an altered
political environment by NOC managers.
����������� By the end of the 1980s the international
oil market situation changed once again. After the end of the
Cold War new areas was opened for exploration by the international
oil companies. In contrast to the situation when the companies
approached the Norwegian government in the sixties they now had
several alternatives to exploration in the North Sea. This created
a new situation for the Norwegian oil policy. It now was necessary
to use political instruments to make the Norwegian Continental
Shelf attractive in a global competition among oil provinces.
The organisational model came under pressure. Taxes was eased,
the sliding scale abandoned, and the provision ensuring the state
(and Statoil) a fifty-percent share was lifted. The argument was
that with these provisions exploration that is valuable to the
society might not be profitable to the companies and thus not
conducted, and that the profitability of the different fields
might vary, implying the need for flexible state involvement.
Finally, it was argued that laws, contracts and the concession-system
provided adequate instruments for political governance of the
petroleum sector.
[15]
The Minister of Oil and Energy, Finn Kristensen
stated that the overall level of state participation was not to
be reduced, and that the state would continue to participate in
all licenses.
[16]
The changes were welcomed both by the international
companies and by Statoil. The new and more business-oriented leadership
in Statoil saw the obligation to be part of all licenses as a
liability. The need for concentration of limited personnel and
financial resources implied that the company should be able to
prioritise among fields based on its own considerations, not the
ones of the government.
The
oil price fall of 1986 is important in its own right because it
turn the perspective of the oil industry from something creating
excessive amount of income to a normal business with normal margins
of profit, or in fact in the mid-1980s partly an industry loosing
money fast. Thus it was no longer in need of special regulation
by the government in order to secure excessive revenues on behalf
of the state and the Norwegian society. The previous provisions
in the concession system and the key role of Statoil could be
viewed as a kind of �infant-industry� policy, where national industry
is protected in the early stages. By the early nineties this phase
was definitely over in the case of the Norwegian petroleum industry.
Neither was there much to protect, since the idea of a resource
rent to be collected by society had disappeared with the oil price
fall of 1986. The picture was thus a more normal business, but
an internationally competitive one. This was the attitude of the
new director of Statoil, Harald Norvik: �Presently the Norwegian
companies are internationally competitive. We have shown that
we are competitive outside [the Norwegian Shelf] and have nothing
to fear. We should rather, take this as an opportunity for further
improvement.�
[17]
Also the conditions for foreign companies at
the Norwegian Shelf was regarded as adequate given these changes.
The interest for licenses by the international oil companies was
satisfying.
[18]
Thus the perception among key participants
in the Norwegian oil industry was changing. The previous attitude
emphasising the need for protection, the state as a counterpart
to the international oil companies, and Statoil as a instrument
of political governance, gave way to the perspective of the Norwegian
oil industry as a competitive part of the larger international
oil industry. The new relations to the EU and the emerging internal
energy market would further add to this change of perception.
Under
the EEA-agreement with the EU in 1994, Norway implemented the
regulations of free movement of goods, capital, labour and services,
and thus provided Norwegian enterprises with equal opportunities
as EU enterprises inside the Internal Market.
[19]
The agreement implies a one-sided adaptation
by the EFTA-participants to the EU legislation. Although the agreement
provides the EFTA-partners with an option to reject EU legislation,
Norway has so far never exercised this right. About 70% of Norwegian
exports and about 67% of Norwegian imports are with the EU. Being
subject to the same regulation is thus important for a substantial
part of Norwegian trade interests. Two directives in particular
have caused concerns for the Norwegian governance of the petroleum
sector in general and the role of Statoil in particular.
In the process of liberalising the
EU energy sector, the Commission noted that oil producing countries
had developed a strong national or state control over the exploration
of hydrocarbon resources. To open-up the downstream segments of
the product-chain to competition and at the same time leave the
upstream production in the hands of national monopolies, seemed
a contradiction. Thus as part of the Internal Energy Market the
Commission in 1992 proposed a directive ensuring non-discriminatory
and transparent procedures for granting of licenses for prospection,
exploration and extraction of hydrocarbons.
[20]
One of the biggest challenges to the
Norwegian regulaytory regime was the consequences of the directive
for the role of Statoil. As discussed above the privileged role
of Statoil had been a cornerstone in Norwegian petroleum policy
since the company was established in 1972. Statoil�s 50 per cent
share, the �carried interest� and the so-called �sliding scale�
were obviously violating the non-discriminatory clauses of the
directive. The changes in 1993 discussed in section 4, although
primarily necessitated by the price fall, also served as a pre-emptive
move in the upcoming EU membership negotiations in general and
as abidance with the licensing directive in particular.
The other major problem for Norway
was the gas directive proposed by the Commission in 1991 aimed
at establishing common rules for the transmission, distribution,
supply and storage of natural gas.
[21]
For Statoil the problem has been its role as leader of the Norwegian gas
selling committee (GFU).
[22]
In the mid 1980s the Norwegian government argued that: �given the strong
concentration and co-ordination on the buyer side, Norwegian gas
exports must be co-ordinated and all main negotiations lead by
one entity.�
[23]
The reasons for excluding foreign companies in this co-ordination was
that they had substantial downstream interests and thus might
be on both sides of the table if included in the GFU. Subsequently,
the GFU rather explicitly contradicted fundamental rules of the
Internal Market regarding discrimination due to nationality. �When
it comes to the central coordination of the marketing of gas that
takes place through the GFU, there can be scarcely any doubt that
this will be negatively affected by the competition rules. � To
refuse foreign companies participation solely on the basis of
their nationality will undoubtedly be in contravention of the
EEA Agreement article 4� (Arnesen 1992:470). In the spring of
1993 gas field operators were included as participants in the
sales negotiations, but not in the GFU itself.
[24]
Although not discriminatory, the system of co-ordinated gas sales could
still be regarded as reducing competition in the gas market. This
was conspicuously demonstrated when one of the GFU partners, Saga
Petroleum, tried to sell gas to the German company Wingas in 1995.
[25]
When Saga Petroleum applied
to GFU to purchase Norwegian gas for sale to Wingas, the two other
GFU companies, Statoil and Norsk Hydro, refused to sell gas to
Saga.
[26]
GFU was clearly revealed
as a trade-hindering organ. The German Bundeskartellamt placed
the Saga-Wingas affair before the EU Commission.
[27]
In 1996 the EFTA Surveillance
Agency (ESA) at the request of the Commission, conducted an inspection
in the offices of the Norwegian companies as well as the Ministry
of Petroleum and Energy. Two investigations were then initiated.
One was based on the possible GFU violation of EEA-agreement article
53.
[28]
That concerns unlawful fixing
of prices, sales volumes and other aspects of cartel behavior.
This was directed towards Statoil, Norsk Hydro and Saga Petroleum.
It was pursued by the Commission because the co-operation among
the GFU companies had potential market-distorting effects in the
EU. The other investigation was pursued by ESA on the basis of
EEA-agreement article 59,
[29]
which considers the extent
to which the GFU should be regarded as a public undertaking, which� performs tasks of �general economic interest�,
and thus should be exempted from the competition rules of the
agreement. In 1997 the latter investigation triggered a response
from the Norwegian Ministry of Petroleum and Energy to ESA in
the form of a memorandum concerning the GFU.
[30]
Here the GFU is regarded
as an integrated part of the Norwegian resource management system
and thus the Ministry �does not consider the EEA-agreement applicable
to the establishment and functioning of the GFU.�
The investigations by ESA were later put on hold since it wanted to
see the effects of the implementation of the gas directive.
[31]
In the Commission investigation,
there was not much progress until 2001. In June 2001 the Commission
issued a statement of objections to Statoil and Norsk Hydro warning
that �the joint sales of Norwegian gas through the GFU infringe
article 81(1) of the EC treaty and Article 53(1) of the European
Economic Area (EEA) Agreement.�
[32]
Such infringement procedures
could ultimately lead to large fines for the companies involved.
A week earlier the Norwegian government had abolished the GFU.
[33]
The Commission argued, however,
that existing gas contracts negotiated by the GFU would continue
to have detrimental effects in the European gas market and thus
pursued the case against the companies even though the GFU had
been abolished. The Norwegian government is regarded only as an
affected third party in this case despite the fact that the companies'
behavior in the GFU was based on formal legislation by the Norwegian
government.
[34]
In February 2002 the government
formally proposed to parliament that Norway adopted the gas directive.
[35]
The
EU adaptation implies a new set of constrains on the Norwegian
governance of the oil sector. In the longer run this might lead
to increased liberalisation and application of a more competitive
model in regulating the sector. So far it has more been a matter
of changing procedures and transfer of authority from one political
body to another, and an increased juridical framing on behalf
of political compromises and striking of bargains. The states
role as sovereign owner of the resources, the amount of state
ownership in the Norwegian companies, and the state role as granter
of concessions have not been undermined by the EU.
From 1999 to 2001 the organisation
of the Norwegian petroleum sector changed once again. In April
1999 the development of the �sgard-field suffered substantial
shortfall from the budget. Although �sgard still was one of the
most profitable fields developed on the Norwegian Continental
Shelf its complicated geological structure and introduction of
new technologies in the development caused the costs to increase
dramatically compared to the budget.
[36]
This caused the Minister of Oil and Energy
acting as the general assembly to replace the entire board of
the company, triggering the resignation of the president of the
company. The following month Norsk Hydro launched a take-over
bid on the third Norwegian oil company Saga Petroleum. Saga was
a private owned upstream company. It was entirely based on the
Norwegian Shelf, until it in 1996 bought the British Company Santa
Fe, largely due to the logic described above, that oil companies
have strong incentives to invest their income from the Norwegian
sector in order to avoid taxation. The take-over of Santa Fe weakened
Saga�s financial ability to cope with the price fall of 1998.
Hydro took advantage of this and the fact that Statoil was suffering
internal turmoil, and launched its take-over bid on Saga. In the
end Statoil joined Hydro in taking over Saga, but the fundamental
credo that Norway should have three oil companies one state owned
(Statoil), a semi-state owned (Norsk Hydro) and one private (Saga
Petroleum) was abolished. The politicians did not have any control
over this process. As late as in May 1998 the Minister of oil
and Energy, Marit Arnstad, stated that the opinion of the government
was that there also in the future should be three Norwegian oil
companies.
[37]
����������� At the same time the then outgoing president of Statoil,
Harald Norvik launched a discussion of the fruitfulness of state
ownership in Statoil. His perception was that the total state
ownership was a liability when Statoil was seeking access into
other petroleum regions around the world. Investments in the �new�
petroleum areas, as Latin-America, South-East Asia, West-Africa
and The Caspian Sea demanded larger capital resources than Statoil
could handle by itself. In order to participate in such areas,
alliances and partnership with other international oil companies
seemed the only feasible strategy. Such alliances and partnership
was made more difficult, when no shares in Statoil were available
to buy. The argument put forward was thus that Statoil should
be partly privatised and given the opportunity to engage in more
formal long-term or strategic alliances with private international
companies. The proposal to partly privatise Statoil triggered
political opposition, both inside the governing Labour Party,
and among the political parties represented in Parliament. However,
a majority in parliament decided that up until one third of the
shares in Statoil could be sold to private interests. In June
2001 slightly above 20 percent was sold when Statoil entered the
Oslo and New York stock exchanges, leaving about 12 percent for
Statoil to use in a possible future strategic alliance. Of the
state direct ownership (SD�E) 15 percent was sold to Statoil and
6,5 percent to Norsk Hydro and foreign companies. With Statoil
as a private company, its role as manager of the SD�E in the fields
was impossible to sustain. A new state owned company, Petoro,
was thus set up in order to manage the states� interests in the
Norwegian oil and gas fields. This company is a holding company
and Statoil will continue to operate the sales of Petoro�s physical
oil and gas reserves.
The state still owns two-third
of Statoil and 78.5 percent of what used to be SD�E. Together
this still implies a substantial state ownership on the Norwegian
Continental Shelf. The value of Statoil is estimated to be about
120 bill. NOK and SD�E 660 bill. NOK (Andersen 2001:335). Th oil
sector continues to constitute the dominant economic sector in
Norway, with a share of 22 percent of GNP, almost 50 percent of
export and a quarter of total government income in 2000. However,
the government has during the last years been able to save a substantial
portion of the oil income. The Petroleum Fund is by 2002 approaching
600 bill. NOK, placed in foreign equities, bonds and stocks. This
puts the Norwegian state in a favourable financial position, and
creates a buffer between the oil price changes and the government
income. This also reduces the government�s dependency on Statoil,
since the dividend from the company nevertheless would be a fraction
of the overall tax income and the direct take from SD�E. It can
hardly be concluded that the Norwegian state along these dimensions
is loosing out to global private capital forces or actors. The
flow of money is tightly controlled by the state. The ownership
and the organisational model of the oil sector, with the partly
privatised Statoil still in its key position is still a model
ensuring state dominance and control, although the model has been
somewhat reformed.
The political
and economic external environment in which the Norwegian model
for state participation and control in the oil sector was developed
in the seventies has changed dramatically. The international oil
companies have gone from being few and strong, to become many
and weaker, to become few and stronger again. The tendency for
state participation has increased during the seventies and then
decreased during the eighties and nineties. The oil price has
been volatile through the whole period, with some dramatic moves
in all three decades. The Norwegian net government income from
the sector increased during the first half of the eighties, fell
back and increased substantially again in the late half of the
nineties, creating a governmental budgetary surplus saved in the
Petroleum Fund. Furthermore, Norway has during the period in question
signed an agreement making Norway effectively a part of the EU
Internal Market.
����������� All these changes have caused changes
in the Norwegian oil sector. The organisational structure, the
state involvement, and most important for the theme of this paper,
the role of Statoil has changed. The company has lost its privileged
role of being handed a fifty percent share in all new fields,
having the foreign companies carry their costs until profitable
oil deposits were discovered, and having been reserved the most
lucrative fields. The company had to give the state a direct access
to ownership in the fields in 1984 and cut costs in order to sustain
the oil price fall of 1986. The government had to abandon the
preferential treatment of Statoil and let it compete on equal
terms with private companies in order to apply with EU directives
following the Norwegian entry into the Internal Market. Finally,
due to internal and external pressures the company was partly
privatised in 2001.
����������� Nevertheless, it is the conclusion
of this paper that the core of the Norwegian state-dominated model
is sustained. The company has a dominant ownership position on
the Norwegian Continental Shelf and it is still a majority state
owned company. It will for the foreseeable future be the key company
in most licenses on the Norwegian shelf. Through Petoro (former
SD�E) the sate will have a substantial direct participation in
the most fields on the Shelf. The fully state company, Petoro,
the majority state owned company Statoil and minority state owned
company, Norsk Hydro, will continue to be the principal advisors
for the government in the future restructuring of the Norwegian
petroleum sector.
����������� Relating to perspectives on the relationship
between globalisation and the nation-state the empirical assessments
made above puts the Statoil case in a need of explanation of stability
as much as change. Based on the character and force of the external
changes the domestic effects seem modest. The distinction made
by March and Olsen (1998:959) between efficient and inefficient
conceptions of history. �If history were efficient, political
practice would adjust immediately and uniquely to current, exogenously
determined desires and capabilities. We have argued that history
is not efficient in that sense; that, indeed, institutions are
relatively robust against environmental change and deliberate
reform and that desires and capabilities coevolve with the practices
that reflect them. As a result, history is path dependent in the
sense that the character of current institutions depends not only
on current conditions but also on the historical path of institutional
development.� Such a perspective seems to encompass the observation,
that though Statoil, and its role in the Norwegian model, has
changed due to external environmental pressures, the path dependency
following the characteristics of the establishment of the company
creates a strong element of stability and persistency.
����������� Regarding the future of Statoil, much
will be dependent how the company utilises its new freedom. That
is what strategies are developed, how are they pursued and what
will be the degree of success at the end of the day. The first
new challenge is how Statoil is going to use the shares devoted
to strategic alliances. Three different allies have been proposed:
a international oil company with upstream assets and activities
globally, a European gas transmission company with downstream
assets, operations and know-how, and finally, a merger with the
oil and gas division of the other Norwegian oil company - Norsk
Hydro.
The first strategy will intensify Statoil�s activities
in oil exploration internationally, an activity that so far has
not been very profitable. The profit might improve through such
an alliance, but regarding the role of the state two questions
will arise. First, would not any state ownership be a liability
for a company in international oil exploration and production
industry? Secondly, why should the state own any part of such
a company? The more Statoil engage in such activities, the less
will the resources on Norwegian Continental Shelf matter to the
company. This weakens the argument of using the ownership of Statoil
to control the management of the Norwegian resources. We foresee
a continuos pressure for further privatisation if Statoil joins
an international oil company.
The second strategy, to join with a European downstream
gas company, would make Statoil an interesting gas company in
Europe with unprecedented large physical reserves on its hands
compared to the other downstream companies. The main competitor
on the gas supply side - Gazprom, has followed a more active downstream
strategy than Statoil for years. On the state ownership side,
several gas transmission companies in Europe are still highly
state controlled and owned, so given choice of alliance partner
among these, the pressure for immediate increased privatisation
is less than in the gas of an alliance with an upstream oil company.
The third proposed alliance partner is the oil
and gas division of Norsk Hydro. This would mean a retraction
from the ambition of internationalisation, at least for a period
of time. Norsk Hydro is presently as heavily focused on the Norwegian
Continental Shelf as is Statoil. Together the two companies would
stand stronger in the international competition, but internationally
it would be more as starting from scratch that if Statoil joined
up with an existing larger international oil company. As for the
role of the state, a merger between Statoil and Hydro would leave
the new company far more state dominated than by the other strategies,
because the Norwegian State still owns 44 percent of Norsk Hydro.
As for the international oil industry, the structural
changes in the Norwegian oil industry is not over. The conclusion
that the changes so far have been less than could have been expected,
does not preclude more dramatic changes in the future.
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Notes