Norway. Following government negotiations at Jeløya which began after the New Year, the party leaders of Høyre, the Progress Party (FRP) and Venstre agreed to form a new government. For the past four years, the government has consisted of only the Right and populist FRP but ruled with the help of the Venstre and Christian People’s Party (KRF). After the September 11, 2017 election, however, KRF announced that it would leave the formal cooperation with the government.
In mid-January, the new government was introduced, which meant that five new ministers were appointed while four were allowed to go. According to Countryaah.com, Oslo is the capital city of Norway, a country located in Northern Europe. Erna Solberg (Right) continued as prime minister, as did Siv Jensen (FRP), who remained as finance minister. Also in attendance were Ine Eriksen Søreide (Right) as Foreign Minister and Frank Bakke-Jensen (Right) as Minister of Defense. Åse Michaelsen (FRP) was appointed the country’s first minister of seniority, and the leader of Venstre Trine Skei Grande was appointed new Minister of Culture. Høyre’s Marit Berger Røsland was allowed to leave the post of Minister of Europe, while Sylvi Listhaug (FRP), in addition to the post of Minister of Immigration, also became Minister of Justice.
However, Listhaug quickly got into the hot air after a Facebook post in March stating that “The Labor Party believes that the rights of terrorists are more important than the security of the nation.” This prompted Prime Minister Solberg to go out and publicly apologize for the statement. The entire government, including Listhaug, was said to be behind the apology. But that wasn’t enough. The Labor Party, Socialist Left Party, Center Party, Red and the Environment Party The Greens demanded a declaration of confidence in Listhaug. KRF did not have confidence in Listhaug, but doubted a distrust. Before a vote of no confidence, Sylvi Listhaug resigned March 20. A lack of confidence could have led to the resignation of Prime Minister Erna Solberg’s government.
A new crisis came in the autumn. As part of reversing declining figures, KRF’s party leader Knut Arild Hareide wanted to leave the collaboration with the government and instead join the red-green bloc. KRF has been a support party for the government since 2013 and leaving this cooperation could be a blow to the government. But at the national meeting in early November, members chose the blue option before the red one. Hareide had threatened to resign at a loss but did not. One of KRF’s profile issues is abortion legislation, and as a consequence of the debacle – and to appease the party – Prime Minister Solberg promised to review the legislation and tighten it in KRF’s spirit.
In May, 1,700 employees in the public service company NRK went on strike after negotiations between the trade union Norsk Journalistlag and the employer organization Spekter broke down. TV and radio broadcasts were down for eight days (even over the May 17 celebration). On May 23, a salary increase for journalists of 2.8% was agreed, skills development and short-term workers should be able to receive the same salary as permanent employees.
In June, the Storting voted in favor of a ban on burka and niqab or other clothing covering the face in teaching situations. This should apply to both teachers and pupils. The ban is introduced not only at pre-schools, schools and universities, but also at introductory courses for new arrivals. According to Minister of Knowledge and Integration Jan Tore Sanner (Høyre), this will “ensure open communication with children, pupils, students and newly arrived immigrants”.
In June, the Norwegian state sold its remaining 37.8 million SAS shares, representing almost 10% of the airline. The sale was made at a price of SEK 17.25 per share and was part of the Norwegian state’s attitude that you do not consider yourself a long-term owner of the airline. Sales brought in SEK 652 million – a small consolation given the SEK 15 billion that flows out of the country each year in connection with the Swedish border trade, especially since Norway at the turn of the year increased the sugar tax by 83%.
A strong supplier industry
Long before Statoil emerged as a major industrial operator in most areas of the oil business on its own in the late 1980s, the company played a crucial role in the development of the Norwegian offshore supply industry.
Compared to oil-producing countries in the south, Norway had relatively good conditions for building an independent supplier industry. Norway had an extensive shipping industry, and Norwegian maritime expertise came in handy when floating exploration platforms and other installations were to be set up and operated at sea.
Shortly after the Ekofisk discovery, Norwegian shipowners had established themselves as dominant owners of exploration rigs. Aker made great success when the company early constructed the so-called Aker H3 rig that was produced at Norwegian shipyards. However, most of the construction of the many installations that soon constituted a small offshore town on the Ekofisk field was carried out abroad. Norwegian companies were able to build steel and concrete installations on their own quite quickly. But Norway lacked the more advanced expertise needed to find and extract oil and gas.
Business was divided into what strategy to use to develop the relevant technology. Companies such as Aker and Kvaerner pushed for Norway to introduce protective measures. In a royal decree of December 8, 1972, section 54 stated that Norwegian companies should be preferred “[…] in cases where Norwegian goods and services were competitive, both in terms of quality, service, delivery time and price […]”. Norwegian shipowners and the Ministry of Commerce were opposed to this section. They felt that Norway could be punished by being excluded from international markets.
The paragraph did not matter in the first place. But from 1974, rising unemployment as a result of the oil crisis forced the British to introduce protectionist measures to protect their industry. Norway followed a similar policy to more actively promote the development of local suppliers.
However, the most important instrument for achieving this was not § 54, but Statoil’s role as the dominant owner in the new large field development projects. Statoil pressed for Norwegian Mobil to choose Norwegian suppliers in the Statfjord field. On the Gullfaks field, the next major development project where Statoil itself was an operator, the company was free to choose suppliers.
Throughout the 1980s, Norwegian companies developed technological know-how that made it possible to master more and more of the technological challenges in the North Sea. Norwegian companies had an advantage, but had to compete among themselves.
At the same time as the establishment of Statoil on June 12, 1972, the Storting decided to establish an oil directorate in Stavanger. The Norwegian Petroleum Directorate continued preparatory work in connection with concession announcements and allocations that were previously carried out by the Ministry of Industry. The Norwegian Petroleum Directorate’s first leader, Fredrik Hagemann, himself came from the Ministry of Industry. Hagemann was leader until 1996.
Under the Royal Resolution of April 9, 1965, the companies were required to submit core samples from all wells drilled. With these tests and with access to the oil companies’ assessments in connection with license applications, the Norwegian Petroleum Directorate was able to build up a unique insight into the geology of the Norwegian continental shelf. To gain knowledge of areas where it has not yet been drilled, the Directorate also ordered seismic investigations on its own. Since the Norwegian Petroleum Directorate’s planning department played an important role in connection with concession awards, it was immediately given a strong position vis-à-vis the oil companies.
It took longer to develop an authority vis-à-vis the oil industry on safety regulation. Norway had a regulatory framework for drilling operations as early as 1967, but it was not followed by effective inspection activities. How to draft regulations and follow up on these remained unsolved in the first years after the Norwegian Petroleum Directorate was established. It was difficult to control activities that were so far out in the North Sea, and inspection missions at the installations required extensive logistics. The problem with a traditional approach to security, in which the state designed regulations and companies related to this, was that technological developments went so fast and were so complex that it was difficult to follow up on relevant rules. When something went wrong, the companies could conceal that it was the state that had failed because the regulations were defective.
The security challenges associated with the first exploration and subsequent development phase on the Norwegian continental shelf were considerable. Between 1965 and 1978, 82 workers were killed in connection with the activities on the Norwegian continental shelf. Only during the development of the Ekofisk field, between 1971 and 1977, 45 workers perished; 16 of them were killed in helicopter crashes. The accident that received the most international attention was the uncontrolled blowout from the Bravo platform on Ekofisk. The Bravo accident did not result in any serious injuries, but a discharge of about 9,000 tonnes of oil.
The high number of people killed until the late 1970s was primarily due to work accidents where one or two workers lost their lives. On March 27, 1980, Norwegian oil business was hit by a disaster when the housing platform Alexander L. Kielland crashed into the Ekofisk field and killed 123 people.
The many accidents affected the Petroleum Directorate’s approach to safety. In the summer of 1974, the director of the directorate’s security department withdrew in protest against what he believed was a defective control apparatus. In the years that followed, the number of posts in the Norwegian Petroleum Directorate increased. The foreign oil companies wanted as little public regulation as possible, but the Norwegian shipping industry wanted a system similar to shipping, with a certification scheme in which the private company Det Norske Veritas carried out inspections.
The regulatory philosophy that was used in the safety work in the oil business was called internal control. It was stated unequivocally that it was the responsible operator who was responsible for the safety at all times. The concept of goal management was introduced, which meant that, in addition to complying with existing regulations, the companies should ensure that accidents should not occur. The companies were obliged to develop internal security systems (hence the term internal control) which provided this. Where no regulations existed by the authorities, the companies would have to introduce their own procedures.
The role of the Norwegian Petroleum Directorate should be to check that the companies had well-functioning safety systems, not to carry out detailed checks on the oil installations. The Directorate was mandated to intervene directly with the industry if deemed necessary. Compared to other public regulatory institutions, the Norwegian Petroleum Directorate had a unique instrument: Oil companies that did not conform to the requirements risked being penalized in connection with concession awards.
The Norwegian Petroleum Directorate’s safety philosophy had an impact on all offshore operations, because all oil companies that were operators had to adhere to the internal control system. Operators were also put in charge of what hired companies did. Internal control was introduced as a principle in the form of regulations from 1981. From 1985, the principle of internal control became part of the Petroleum Act. However, regulation of offshore safety was characterized by a two-tier distribution until the 1990s, as floating exploration rigs, supply boats and diving activities were subject to a maritime regime where the working environment law did not apply. The Norwegian Petroleum Directorate’s authority was strengthened from 1 January 1993 when the Working Environment Act became applicable to all offshore activities.
Efforts to improve security on the Norwegian continental shelf produced results. From the Kielland accident in 1980 to 1990, 13 people were killed in connection with activities in the North Sea. Seven of the 13 were divers, a group that failed to solve their security problems before companies switched to using underwater robots (ROVs). In the time after 1990, many years went by without a single death. In relation to the number of hours worked, the number of accidents was only a small fraction of what it had been in the first years.
On January 1, 2004, the Norwegian Petroleum Directorate’s security department was separated as an independent institution under the name Petroleum Safety Authority Norway. The resource department continued under the old name of the Norwegian Petroleum Directorate.
Oil workers in conflict and cooperation
The accidents were an indication that the first oil workers on the Norwegian continental shelf faced tough physical challenges. But these were also linked to the work regime the oil industry brought with them. The North Sea oil business was a continuation of offshore operations outside US states such as Louisiana, Alabama, Oklahoma and Texas. The dominant foreign companies brought with them a work culture that was foreign to many Norwegian workers, especially those with trade union background and experience from orderly conditions in the industry.
Some oil workers adapted and climbed in the job hierarchy of the foreign companies, several of whom got senior positions in Norwegian companies later. Common to most Norwegian oil workers was a background in which collective rights and protection against arbitrary abuses were highly valued. Several attempts were made to organize oil workers. Associations were established both inside and outside LO. All organizations had to deal with a general frustration over working conditions.
From the spring of 1978, dissatisfaction was expressed in a series of spontaneous strikes. Many of the demands were directed directly at the negative aspects of the prevailing work culture. But salary requirements were also set. The Norwegian authorities had introduced a wage and price halt to curb inflation and prevent the Norwegian cost level from remaining above competitors abroad. The oil workers’ wage demands thus became a challenge for the entire Norwegian income system. Foreign oil companies, which were otherwise negative to trade unions, on several occasions appeared willing to give in with large pay increases to secure working peace.
Immediately after the parliamentary elections in 1981, all foreign operating companies were called on the blanket of newly elected Prime Minister Kåre Willoch. There they were clearly told to adapt to the traditional Norwegian work regime. In practice, this meant joining Norwegian employers’ unions and accepting the Norwegian trade union movement as a counterparty.
The oil sector was also subject to strikes and unrest after this. There was some intense competition between the trade union OFS and the LO-affiliated NOPEF for the same members. When Norwegian oil companies became dominant employers from the late 1980s, several attempts were made to weaken OFS in favor of LO-linked NOPEF, which was considered the most cooperative of the two. From the 1990s, the oil business fell into a pattern of institutionalized interaction between companies, employees and the state, similar to that in other sectors of the Norwegian economy. Cooperation in the oil sector was especially developed when it came to safety and working environment issues.
Recovery and investment rate
According to Storting Report 25 of 1974, the oil riches were to be used to develop a “qualitatively better society”. But this would happen without it all ending as a rapid and uncontrolled growth in the use of material resources. In the first point of the report it was stated: “Based on the desire for long-term utilization of resources and after a comprehensive social assessment, the government has come to Norway to maintain a moderate pace in the extraction of petroleum resources.”
By maintaining a moderate pace, it was easier to make sure that the oil and gas you had decided to produce were recovered in a responsible manner. One would prevent the restructuring costs of adapting to a new industry too large. They also wanted resources to last longer.
Norway entered the oil age with good intentions for a better society, without being too dependent on the oil. However, there was disagreement on how to define a moderate oil tempo. The SV and the intermediate parties went for 50 and 70 million tonnes of oil equivalents annually. A winning coalition between the Labor Party and the Right put a limit on oil extraction of 90 million tonnes of oil equivalent.
The term “moderate oil tempo” again came up in Storting reports well into the 1980s. In 1988, when production finally approached the ceiling, the Storting instead adopted a ceiling on investments equivalent to NOK 25 billion annually.
A turning point
The period towards the end of the 1980s and the beginning of the 1990s marks a distinction in Norwegian oil policy. Norway maintained a strict tax regime and a goal for oil revenues to benefit the entire society. It was still important that Norway regulate working conditions, safety and the environment strictly and within the framework of cooperation between government and non-governmental institutions. In some areas, the institutional divide between various state institutions relevant to the business became even clearer.
But at a crucial point, such as regulating recovery and investment rates, and the strong prioritization of Norwegian companies and Norwegian industry that characterized the first period, there was now a marked change. Many protectionist measures were repealed. It should again be easier for foreign companies to escape. They also faced a gradual depoliticization of Statoil.
The new openness to foreign players was due to several factors. Oil prices had fallen significantly in the late 1980s, and there was a perception that opportunities for making new large discoveries were no longer as great. Thus, it appeared more reasonable to facilitate the conditions for foreign oil companies to take a greater part of the risk in exploration. The change was also partly a consequence of the success of the Norwegian oil industry. In addition to Statoil’s breakthrough as an operator at Statfjord and Gullfaks, Norsk Hydro started production in the Oseberg field in 1988. The third Norwegian oil company Saga Petroleum was preparing to start up the Snorre field. Many felt that the Norwegian supplier industry had become so competitive that it could stand on its own, without support measures.
However, the triggering cause for all formal protectionist measures to be abolished was the preparation for Norway’s association with the European Economic Area (EEA), which was negotiated from 1989 to 1992. The basic principle of the EEA agreements was free competition for the purchase of goods and services. The disputed section 54 of the Royal Decree of 1972, which was later incorporated into the Oil Act of 1985 in a rewritten form, was repealed. Requirements for companies to establish subsidiaries in Norway were also lifted. Workers with citizenship in countries that were part of the EEA agreement should be able to be hired on the same terms as Norwegian workers.