Opinion
- Editorial- Commentary
Trinidad
Guardian :
Local content the case of Norway
Given the increase in the level of
activity in the T&T energy sector that is expected
in the next five years, it is important to look again
at the issue
of local content. In doing this it is important to
examine what has been done in other oil and gas rich
countries. Norway presents a good case study of an
oil rich country that implemented successful policies
that have increased local content and led to the emergence
of a globally competitive energy service sector.
Norway’s oil industry is much younger than
T&T’s. Oil was first discovered in Norway’s
North Sea in the late 1960s and production began
in 1971. Before it discovered oil, Norway’s
economy depended on fishing, agriculture and timber.
The period 1971 to the present day has seen Norway
transformed into one of the world’s richest
countries as well as one of its most competitive
economies. Norway’s citizens enjoy one of
the highest standards of living in the world comparable
only to its Scandinavian neighbours, Finland and
Sweden. Norway’s formula for success is often
held up as a model for developing countries that
are oil and gas endowed. Its success is often attributed
to prudent fiscal management and the management
of its now burgeoning petroleum fund.
While these factors have obviously
contributed to Norway’s robust macroeconomic
environment, attention must also be placed on
the fact that
the Norwegians leveraged their oil and gas industry
to establish a world-class energy service sector
that is today a global leader in offshore petroleum
technology. This was accomplished through a series
of policy and legislative interventions.
Starting in 1965, Norway’s
Petroleum Law called on the government to choose
international
oil companies that would work to maximise local
benefits. By 1967, government equity participation
in offshore development was also required.
In 1972, Article 54 of a Royal Decree mandated
the Norwegian government to pursue the goal of
insuring that Norwegian goods and services should
receive preferences as long as they were shown
to be competitive in terms of price, quality, schedule
and service. To further these goals the Norwegian
government established a preference policy for
Norwegian goods and services together with a policy
for knowledge transfer and research co-operation.
To enforce these policies, the
Norwegian Ministry of Industry established a
Goods and Services Office
as a watchdog agency to control and monitor international
oil companies’ contracting and procurement
procedures. This office was responsible for monitoring
the procurement practices and co-operating closely
with international oil companies to develop the
local energy service sector.
International oil companies operating
in Norway were required to announce their tender
schedule
and the list of companies to be invited. The Goods
and Services Office’s role in all this was
to ensure that qualified Norwegian companies were
included on the bidder’s list. They were
also responsible for stimulating the local supply
industry through joint ventures. The office was
also charged with encouraging R&D and technology
transfer. Targets were also set for local participation
that were monitored and reviewed.
The emphasis placed on “Norwegian content” made
it an essential factor for all international oil
companies operating in Norway. The policy was also
implemented so as to be transparent and predictable
in its enforcement. Cooperation between the authorities
and the international oil companies, and the Norwegian
service companies was also an essential success
factor. The success of Article 54 was also incumbent
on its enforcement which required biannual reporting
by upstream companies on upcoming tender invitations.
This information received in these biannual reports
was collated by the Norwegian Ministry of Petroleum
and distributed to Norwegian energy service companies.
Upstream companies were also required
to submit annual reports to the Ministry of Petroleum
that
gave details of their projects and the amount of
Norwegian content that was utilised. These data
were compiled and statistics were kept, allowing
the measurement of “Norwegian content” in
the wider Norwegian oil industry.
Article 54 remained in force until
Norway’s
entry into the European Economic Area (EEA) in
1994. By that time, however, it had achieved its
objective of allowing Norway to develop Statoil
and its indigenous energy service companies to
a point where they could compete globally (Statoil
recently submitted the lone bid for a block in
T&T’s Deep Atlantic bid round).
The issue of local content in resource
rich countries was recently discussed by the
IMF in a September
2007, working paper entitled, “Inter-sectoral
linkages and local content in extractive industries
and beyond –The case of São Tomé and
Príncipe.”
The IMF paper said that while the explanation
for the disappointing performance of resource rich
countries has focused on the macroeconomic imbalances
it is also important to examine resource dependence
from the angle of the inter-sectoral linkages of
oil and gas. Norway has clearly been able to establish
such linkages.
There are many important lessons
that can be learned from the Norwegian experience
with local content.
In summary these lessons are that government’s
role must go beyond simply drafting policy and
must include implementation, measurement and enforcement;
that there should be dissemination of information
to energy service companies and that collaboration
is needed between stakeholders.
If we are to strengthen and build
our own inter-sectoral linkages and increase
the “T&T content” in
the T&T energy sector there is a need to implement
the 2004 local content and local participation
policy. Implementation of this policy requires
putting in place an agency similar to the Norwegian
Goods and Service Office. Such an agency would
work on behalf of the Government of T&T to
ensure that targets for “T&T content” in
upstream and downstream projects are set, monitored
and measured.
While some successes have been registered in the
pursuit of local content, most significantly the
establishment a fabrication facility at La Brea,
there remains a lot more that can be done to support
our local energy service companies.
The
Trinidad Guardian is one of Trinidad &
Tobago news
daily.
Petroleumworld not necessarily share these
views.
Editor's
Note: This article was first publish in The
Trinidad Guardian,Thursday 25th October, 2007
. Petroleumworld reprint
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10/28/07
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