Local Content-reflections on the Norwegian Experience

8/12/2019 Local Content-reflections on the Norwegian Experience

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Reflection on the Norwegian Experience

within the Oil and Gas sector

Grata Law Firm Seminar

Almaty, 23 April 2010

Odd Instefjord

General Director, Statoil North Caspian as


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Norway is admired for its management of

petroleum resources because:

It conquered the challenges of the North Sea.

It avoided the OIL CURSE.

It created growth in non oil sectors.

It formed robust national oil companies side by side withinternational oil companies.

It formed world class Norwegian offshore industry.

It nearly doubled oil recovery from 25 to 45%.


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National organization of the petroleum sector


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Petroleum Policy Main Principles

The right to sub sea petroleum deposits is vested in theState The petroleum deposits shall be administered for the

benefit of the Norwegian society as a whole

Due regard for the environment and high HSE standards Effective government take

Goal: Maximize value creation:

legal / licensing system

resource management

R&D and industrial development

State participation and Tax system


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Classification: Internal 2010-

The Production License

Exclusive right for licensees to gather seismic data,exploration drilling and production of petroleum within the

licence area

Licensees and participating interest

State participation

Duration up to 10 years + 30 years

Work obligation:

seismic data gathering and interpretation

drilling of exploration wells

Other conditions

The Joint Operating Agreement

The Accounting Agreement


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Part conclusion

The petroleum legislation:Predictable

Transparent

No hidden costs or sign-on bonuses

Highly competent and approachable public administration

A common goal: Maximizing the values of the petroleum resources on theNCS

Close dialogue between the authorities and the industry


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So how could Norway succeed ?

Richness in Hydro power which allowed Norwegian to develop their oilresources at a moderate pace.

Norway was also highly developed before the oil age:

Highly efficient system of governance

Social democratic culture enhancing collective effort. Homogeneous society. Solidarity. Cohesionetc.

Well developed institut ions.

High level education and R&D competence and capacity.

.etc


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Industry Development- based on our capabilities and competitive strengths

A good star ting point:

Developed and diversified economy

Significant maritime nation

Relatively high level of education

Political consensus


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The important majors

Transferred skills and competence

Created necessary competition

In joint teams with Norwegian

companies

Statoil given a central role

Participation in training courses

Operatorship to learn the business


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Government Leadership from the start..

Preference for local content

- on a competitive basis

Make international oil companies

maximize local benefits

Build local competence

Ownership less important

Avoid creating unsustainable

jobs

Avoid cost pressure

Work and value creation to be carried out in Norway!


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Control and monitoring

- Monitoring of contracting and

procurement practices

- Mandatory announced

tender-schedules

- Mandatory lists of invited

companies

- Ensure qualified Norwegian

companies on bidders list

- Stimulate Joint Ventures

- Encourage R&D

Operators

Suppliers R&D

Transparency - Predictabil ity - Stabil ity


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National steering of the direction and pace of petroleum operations.

Good governance (Govt. Petroleum Administration).

Constructive competition among the oil companies.

Variety among the licensees to master challenges and enhance efficiency.

Direct participation by national companies alongside IOCs. Encouraging the local content in deliveries to petroleum operations.

Maintaining balance between national and international oil companies.

Co-operation between the authorities and the oil companies.

Focus on high oil recovery.

Focus on Health, Safety and Environmental protection. Technical innovation to cope with petroleum operations in rough seas. Source: Petroteam

SALIENT FEATURES OF THE NORWEGIAN APPROACH?


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Summing up the Norwegian Experience

Coherence local content part of overall policy

Local content policies aimed at

Increasing value added > not deter investments

Balancing industry and government needs

Building on exist ing capabilities

Encouraging JVs wi th international players

Local content polic ies should be temporary


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Reflections on the Norwegian Experience within the Oil and Gas sector

Odd Instefjord

General Director

www.statoil.com

Thank you


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Back-up


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The RKK model from 1989: - still relevant today!

The good circle - 1989

Financesing

Innovation

Entrepreneurship

International perspectives

Regional development

ICT - tecnology

Development of schools

Post education Life Time

Learning

Networks

Projects

Competencies exchange

Export of competencises

Retraining of adults

Flexible education

Local industry

Local community

The schools

The RKK model from 1989 - still relevant

today!


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Why is this organization successful ?

Separation of the commercial interests of government from its administrative taskshas proved essential for :

Dedicated, unbiased and professional monitoring.

Equal and fair treatment of the various stakeholders.

Effective co-operation between national and international oil companies.

Transparency in promoting national objectives while uphold ing commercialinterests.

Effective co-operation between Government and companies.


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WHAT WERE THE OBJECTIVES OF NATIONAL PARTICIPATION ?

1. Enhance national control.

2. Increase the national share of the petroleum profit

(revenue).

3. Maximise the national share of funds spent on oil

operations.

4. Stimulate industrial activity on the basis of petroleum, thus

securing employment and industrial development.

5. Stimulate the development of general know-how in Norway


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PREPARATIONS FOR ENHANCING THE LOCAL CONTENT

In the period from 1965 to early 70s

Norway had a well developed techn ical basis f rom the start.

Local content grew largely through co-operation with reputable international firms.

Government encouraged use of local deliveries if competitive.

In 1969 the principle was included in licence documents.

In 1972 the principle was included in Royal Decree of 8t Dec.

Norway declared its target of 70% local content in deliveries to petroleum operations.


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STEPS TO ENCOURAGE THE DEVELOPMENT OF TECHNOLOGY

1978:

Government required o il companies to spend 50% of R & D budget on field development in Norway.

Oil companies were satisfied with both the quality and the price of Norwegian research work.

Many "Good-will Agreements" were then voluntarily signed between oil companies and Norwegian

institutions.

The objective of 70% local con tent was partly achieved.


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DEVELOPMENT OF THE LOCAL CONTENT

From the 80s the status can be summarized as follows:

Within a decade Norway had managed to create a vibrant national offshore industry.

The policy of slow licensing had given the local industry time to catch up with international levels and to even

take the lead in some fields of offshore construction and installation.

By 2006

Norwegian export of o ffshore goods and services formed 3% of the total GNP and 20% of the total Norwegian

exports.

Local Content-reflections on the Norwegian Experience

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