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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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Slide 1
TK1 Trond Kubberud, 01/26/2006
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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.
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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Petroteam a.s
A.
SECTOR ORGANISATION AND
RESULTS ATTAINED
A.
SECTOR ORGANISATION AND
RESULTS ATTAINED
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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
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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Petroteam a.s
B.
MANAGING THE IMPACT OF
PETROLEUM OPERATIONS
B.
MANAGING THE IMPACT OF
PETROLEUM OPERATIONS
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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
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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
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Petroteam a.s
C.
PETROLEUM POLICY ASPECTS
C.
PETROLEUM POLICY ASPECTS
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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
8/12/2019 Relevance of Norwegian Model for Developing Countriesfaroukal-kasim
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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.