Norwegian parallel

“In some countries, not only in OPEC countries, but also in European countries, say, Norway, the oil and gas sector is almost completely monopolized by the state. There, Stat Oil and the second company are state-owned companies. We are not going down that path."

Vladimir Putin

Since President Putin is talking about complete monopolization in the Norwegian oil and gas sector, I would like to find out in more detail what Russia managed to avoid. This text is based on materials from Sergei Roginsky’s book “The State and the Oil and Gas Sector,” which two years ago was very popular on Old Square.

The father and architect of the Norwegian oil and gas sector management system is Jens Evensen. The principles he formulated at the dawn of oil production in the North Sea in the early 1970s can be briefly formulated as follows:

1. State administration and control over all activities on the continental shelf
2. Development of new industries based on oil
3. Development of the industry taking into account the interests of other industries
4. Ensuring environmental protection
5. Government participation must be implemented at all levels
6. Creation of a state oil company to protect state interests and for cooperation with Norwegian industry
7. Activities in the Norwegian North - above the 62nd parallel - should serve to solve the social problems of the region.

The fulfillment of these tasks was facilitated by the fact that the very development of the Norwegian oil industry coincided with the implementation of this concept. The distribution of continental shelf concessions to transnational corporations took place after the creation of the state oil company Statoil in 1972.

At the same time, a rule was formulated for all concessions and licenses - at least 50% participation of the state oil company. At the same time, it was through the Statoil company that the state began to rapidly increase investment in the industry - partly through borrowed funds (by the end of the 1970s, external financial debt became critical, but rising oil prices made it possible to correct the situation). In the mid-70s, the Norwegian government bought a network of gas stations from BP and transferred them to the state company Statoil

At the same time, under pressure from the government, a state-owned company was introduced into all international consortia operating on the Norwegian shelf. By the mid-1980s, Statoil had become the industry's largest investor. Another major investor was the state-owned company Norsk Hydro (founded as an energy company in 1905).

The mixed powers of the state oil company have raised fears that the company will begin to determine government policy in the industry and will replace the interests of the state with its own corporate interests. To avoid this, the state actually separated and institutionalized state property, which is managed directly by the state (the so-called “Direct State Financial Interests” - PGFI) and corporate property.

To manage the sector, in addition to the Ministry of Oil and Energy, the Petroleum Directorate, appointed by the government, was created - a kind of platform for coordinating the interests of the Ministry of Finance and the Ministry of Oil.

If the administrative activities of the state are concentrated in the Ministry of Petroleum and Energy, then tactical management and control are entrusted to the Petroleum Directorate. He also coordinates issues with the Ministry of Local Government and Regional Development.

Management of direct state interests is entrusted to the Ministry of Oil and Energy. Technical issues of oil production are resolved by the corporation itself - Statoil.

In order to better understand the rather unique situation in the Norwegian oil and gas sector, it must be said that powerful government subsidies are state property (PGFI).

In those projects that are carried out by the company, but at the expense of government subsidies, the technical management of the corporation remains. However, strategically control is exercised by the state. It is through profits from PGFI that the state receives a significant part of its revenues from the oil and gas sector, in addition to general taxation, which the government has the ability to flexibly manage.

PGFIs also serve as an auxiliary tool for the implementation of state strategy. It is thanks to PGFI that the state remains the largest owner in the industry. Income from the PFGI is accumulated in a special oil investment fund, which is spent, among other things, on government investments in industries servicing oil production.

A similar situation exists in the gas sector. Of course, the stated principles do not exhaust state participation in the management of the oil and gas sector. It would be necessary to talk separately about the state’s participation in the development of the second company with state participation, Norsk Hydro, in the development of the sales infrastructure and in the creation of the exporting and oil pipeline company PeterO and Gasko.

Also of interest is Norway’s balanced approach to issuing licenses, when areas with different development prospects are combined into one block, and a balanced approach to the participation of transnational corporations, providing Norwegian companies with access to the financial and technological capabilities of transnational corporations.

In addition, since 2002, a policy of privatization has been pursued with regard to state-owned companies while maintaining a controlling stake in the state. At all stages of the industry’s development, there was no talk of monopolizing oil production in the country, but only of ensuring state control over the development of the industry and of creating effective competitors from state corporations to transnational corporations and the locomotives of the national economy.

Thus, if we apply the Norwegian model to the Russian situation, it would be necessary to make up for the falling investments in the industry not from the budget, but from the funds the state receives from the income of its property in Gazprom and Rosneft.

At their expense, large national projects like the North European Gas Pipeline or the Eastern and Northern Transit pipelines should be implemented. But this is already a question of effective management of state property.

In any case, many points from Sergei Roginsky’s book show that the principles of management of the Norwegian oil and gas sector are apparently not fully mastered by those who read it on Old Square.