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LESSONSFROMTHE
NORWEGIANEXPERIENCE
By FaroukAlKasim
NEW ZEALAND PETROLEUM CONFERENCESeptember - 010
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1.
INTRODUCTION
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TotalRecoverableResources = 81.1BBOE
Remaining byendof2009 = 51.0BBOE
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1.57billionbblequiv./year4,000,000bbl/day
PROJ
ECTED
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Norwaysmanagementofthepetroleumsector
hasbeen
admired
mainly
because
it:
1.
Masteredtheoffshorechallenges.
2.
Managedtoprotecttheenvironment.
3.
AvoidedtheOILCURSE.
4. Maintained
growth
in
non
oil
sectors
of
the
economy
5.
Developedworldclassoffshoreindustry.
6.
Improvedoilrecovery(30%to45%).
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Some major factors behind the
success: Richhydropowerresources.
Norwaywaswelldevelopedbeforeoil.It
had: Efficientgovernance.
Socialdemocratic
culture.
Homogeneoussociety.
Welldevelopedinstitutions.
Highlevel
education
and
research.
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2. SALIENTFEATURESINTHE
NORWEGIANAPPROACH
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1. ConsensusonNationalSteering
2. GovernmentLicenseePartnership
3.
LicensingPolicy
4. CompetitionandDiversityamonglicensees
5. StatePetroleumAdministration
6.
Development
of
National
Expertise
7. NationalParticipationandLocalContent
8. HSEMonitoringSystem
9. DataManagement
10.ImprovedResourceEfficiency
11.RevenueManagement
12.SUMMARY
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Earlypoliticalconsensusonfullnational
controlonthetempoanddirectionof
petroleumactivities:
Objective:
AVOID
THE
OILCURSE.
Politicalparties
agreed
to
keep
Oil
out
of
electioncampaigns.Theyhavekepttheir
word.Sofar.
Slowlicensingin70stoprotectnonoil
enterprises.
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PartnershipbetweenIndustryandStateisatraditionin
Norway.
NorthSeachallengesemphasisedneedforpartnership
Indesigningthefiscalterms,governmentwaskeento
provideinvestorswith:
Securerecoveryofinvestment,plus:
Adequaterewardsreflectinginvestmentrisk.
Governmentretainedmostofthewindfallprofitwhen
prices
went
up.
High
state
participation
and
taxationmakesgovernmentbeartherisk.
TotalGovernmentTakeincludingprofitonstate
participationreaches
up
to
80%.
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Thestateplaysaproactiveroleinpromotingexploration.
Licensingisbaseduponopenandcompetitivebidding.
There
are
no
bonuses
in
Norway
because: Bonusesareoftendeductiblefromincome.Theyarevirtuallyloans
thatreducefundsavailableforexplorationandfielddevelopment.
ExcessivebonusescanalsodilutetheGovernmentsmoralauthorityastheregulator.
Thefrequencyandresourcecontentoflicensingroundsregulatethetempoandthegeographicspreadofactivities.
Gradual expansionofexplorationareashelpsimprovelicensing
terms
and
discovery
rates
in
subsequent
licence
rounds.
Fewblocksatatime.Notalleggsinonebasket..
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Competitionhelpsimprovelicensingtermsinanyroundand
alsotheefficiencyofoperationsingeneral.
EachLicence
Group
contains
3to
5co
licensees.
ColicenseesandoperatorareselectedbytheMinistry.
Rigorousscreeningeliminatesnonqualifiedapplicants.
Diversityhelpsovercometechnologicalchallengesandalso
assiststheREGULATORbyhavingmostrelevantoptions
investigatedbyvariouscolicenseeswithinlicensegroups.
In1985theParliamentreducedStatoilsdominanceinorder
torestorebalancetovotingrightsthusprotectingdiversity.
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MINISTRY
DIRECTORATE
IOC -1 IOC - 2
NOC
IOC - 3 IOC - 4
POLICY
REGULATOR
Statoil: 67%ownedbytheStatePetoro:
100%ownedbytheState
Gasco:
100%ownedbytheState
ADMINISTRATIVESEPARATIONADMINISTRATIVESEPARATION
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Whyisthemodelsuccessful?
Separationofadministrativetasksfrom
commercialinterestsofgovernmentis
essentialfor
ensuring:
a)
Dedicated,unbiasedandprofessionalregulator.
b)
Equalandfairtreatmentofallstakeholdersincludingnationals.
c)
Effectivecooperationbetweengovernmentandcompanies.
d)
Effectivecooperationbetweennationalandinternationalfirms.
e)
Accountabilityforallplayers.
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Inthemid70soilcompanieswereaskedtocontributetothe
developmentof
national
expertise.
Not
only
within
oil.
Oilcompanieshelpedacceleratetechnologicaldevelopment.
Qualityresearch
at
low
cost
impressed
the
oil
companies.
Norwegianacademicandindustrialinstitutionsweresoon
operatingat
the
forefront
of
petroleum
technologies.
Today,theoffshoreindustryprovideshighexportrevenues.
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Objectivesof
national
participation
are:
1.
EnhancenationalcontrolwithinLicenceGroups
2. Increasethenationalshareofprofits.3.
SpendingofcapitalandoperationalcostsinNorway
maximisesbenefit.
4.
Supportemploymentandindustrialdevelopment.
5.
Stimulatetechnologicaldevelopmentandknowhow.
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PARTICIPATIONASINVESTOR
From1970,
national
participation
at
aminimum
of
50%.
3nationalcompaniesownedover33%ofthelicenceshares.Statoil
hastodayadominantrolebut23%ofitssharesareprivate.
Petorois100%governmentowned.Itholdsthestatesdirect
participationsharesandsendsprofitsdirectlytotheTreasury.
LOCALCONTENT
Norwayencouraged
the
development
of
acompetent
local
content.
Theultimateaimof70%ofdeliverieswaspartlymetinearly80s.
Astateoftheartoffshoreindustrywasthusdevelopedwithin10yrs
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The"InternalControlprinciplemeansthatthelicensees
areresponsible
for
maintaining
the
governments
standards
forHSEbydevelopingtheirowncodesandprocedures.
Theauthorities'
role
is
therefore
to
ensure
that:
a)
Operators'codesandproceduresareadequateformeetingthe
objectivessetoutbygovernment,and
b)
Auditsconductedbytheregulatoryauthorityensurethatoperators
adheretotheirsowncodesandprocedures.
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Throughpositivepartnershiptheoilcompaniesandtheauthoritieshaveworkedtogetherto: Achieve
ahigh
discovery
rate. >
RESOURCES
Increasedevelopmentofdiscoveredresources. >RESERVES Increaserecoveryfromproducingreservoirs. >IOR
Averageoilrecoverywasincreasedfromworldaverageof
30%to
45
%.
This
implies
improvement
in
both
production
profilesandultimaterecovery.
Licensee/governmentcooperationalsocoveredjointresearchprojects,pilotproductionschemesandcontinual
consultationson
improved
recovery.
Jointresearchprojectswerealsoconductedonotherimportantpioneeringprojects.
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HowdidNorwaymanagetoavoidthe OILCURSE? White
Paper
No.25
of
1974
warned
the
nation
against
the
Oil
Curse.
Slowlicensinginthe70sallowedtheeconomytoadjustgradually.
From1990,theOilFund(NowcalledthePensionFund)insulatedoil
revenuefrom
national
spending.
The
Fund
can
only
invest
abroad.
TheFundalsoprovidesacushionagainstsuddendropinoilprices.
LocalcontentdevelopmentledtotheexportofNorwegianOffshore
Servicesand
Equipment
on
asustainable
basis.
Governmentmonetarypoliciessucceededinmaintaininggrowthin
nonoilsectorsoftheeconomy.
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1.
Wouldpoliticalconsensusonfundamentalaspectsofpetroleum
policyhelpgainthelongtermconfidenceofinvestors?Isitpossible?
2.
Howdowecreateamodeofproactivecollaborationbetweengovernmentandinvestorsinexplorationandfielddevelopment?
3.
Isdiversityoflicenseesapracticethatneedstobeconsidered?
4.
HasNewZealandtriedorganisingextensiveseismicsurveysin
selectedbasinsjointlywithoilcompanies?Or,alternatively
speculativeSurveys.
5.
Isthegovernmentwillingtoparticipateinthegassectorinorderto
providelongtermconfidenceamonginvestors?
6.
Doesgovernmenttaketheleadindevelopingthegasinfrastructure
andinoptimisingitsutilisation.WhataboutfacilitatingThird
Party
Access?
7. Has
a
common
data
bank
been
established
that
would
facilitate
communicationandexperiencesharingamongallstakeholders?
8.
IsthereascopeforIOR?Isthereastrategyforachievingthe
objectives?
9. Is
there
a
clear
policy
for
the
utilisation
of
petroleum
revenue that
secureslonglastingbenefitforthenation?
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