Petroleum Institutions

11. Industry view

The oil companies, before their decision to invest in a resource rich country, they would investigate and search for a general understanding on the sector which can be obtained by the countries licencing legislations and regulations as well as organizational structure of its petroleum administration and other institutional arrangements. However, at the beginning of the resource development, most governments would lack the required expertise and institutions, resulting in an asymmetrical bargaining position in negotiations with international oil companies, but also making it difficult for the industry to understand the risks and barriers they may face, such as in obtaining rights, clearances and permissions after the license is awarded. Often consultancy from international experts are sought by the host state but in the long run (for instance for the entirety of an upstream project which can easily be up to and above 30 years), direct communications between the industry and the decision makers in the government needs to be build based on principles of mutual understanding and trust, and continued communications to be maintained for a win-win situation for the industry and the government.

The Norwegian Model

Norway started petroleum activities in 1965, and at the time dispute there were no separate Ministry of Petroleum and Energy, there were no executive agency nor a national oil company as in today. The prominent petroleum institutions in Norway evolved with the government obtaining state participation rights after 1970. Today the Ministry of Petroleum and Energy is responsible for legislation, policy and planning of petroleum operations. Norway’s NOC, Statoil was establish in 2007 by a merger of Statoil with the oil and gas division of Norsk Hydro. The state holds 67% of the shares and rest is public stock. Through the ministry’s management of ownership, the government ensures national control but the ministry reports annually to the parliament. The Norwegian Petroleum Directorate (NPD is the executive agency, regulator and technical advisor of the ministry, and is responsible for management of the petroleum resources. Another agency, the Petroleum Safety Authority is a specialised institution for health and safety related matters. Both of these government agencies safeguard Norwegian commercial and public interest.