case study: statoil - wordpress.com · •langeled pipeline: transports norwegian natural gas to...
TRANSCRIPT
Katherine Wong
Guiding Research Questions
• What is the corporate structure of Statoil in relation to the Norwegian government?
• How has Norway’s oil industry changed over time?
• What are the actors involved beyond Statoil? How do they relate?
• Has Norway managed to avoid the “resource curse” of other countries– and if so, how?
• How has Norway’s culture and political structure shaped its energy policy?
Context: History of Oil in Norway • 1959: Oil discovered at
Groningen
– Potential for oil in the North Sea?
• 1962: Phillips Petroleum applies to explore
– Application rejected
• 1963: Norway’s government creates legal and regulatory framework
– proclaims sovereignty over NCS
• 1965: Government clarifies how to divide NCS with Denmark and Great Britain
• Clarification leads to giving licenses to drill to companies
•1970s: Exploration initially confined to area south of the 62nd parallel
• Shelf eventually opens • IOC allows for initial transfer of human capital to take place which lowers costs for government
• 1972: Statoil created – Timing allowed for govt to avoid
geological risk
• 1985: State participation in oil reorganized by conservative party – Statoil now has to compete for
reserves; lost right from 50% to 12% of any field developed
– (1) Linked to company – (2) Part of State’s Direct Financial
Interests
• 1990s: Expand internationally to Ireland, China, Angola
• 2001: 21.5% of SDFI’s assets sold – Statoil listed on NYSE and Oslo SE
Geography
Logistics
• Initially oil was loaded into tankers • Vulnerable to weather
•Today, web of submarine pipelines •8100 km natural gas pipeline
•Owned: Gassled •Operated :Gassco •Tech Service Provider: Statoil
•Langeled Pipeline: transports Norwegian natural gas to the UK
•One of the longest subsea pipelines (725 mi) •Built in 2004
Statoil
• Operates in 36 countries
• Involved in exploration, drilling, transport, refining, and marketing
• 13th largest oil and gas company; largest company in Nordic region by revenue and profit
• 80% of Norway’s oil and gas production
• Alliance with BP
– Coordinate start-up costs leading to new discoveries
Merger: Norsk Hydro
•Aluminum, renewable energy, oil, and gas •State: 43.8% ownership •Oil and gas operations merged with Statoil in 2007– Why? •Two companies owned by government competing for same acreage; inefficient
Corporate Structure
1972: private limited company owned by Norway – Shares not offered to general public
– Direct participation by Norwegian state
– 50% state participation in each production license
– Storting (Parliament) can evaluate whether state participation should be higher or lower based on circumstances
– Wanted to build up Norwegian competency in petroleum industry
Corporate Structure
• Gradually privatized over time – 1985 restructured by conservative
party
– Lost monopoly over reserves from 50% to 12%
• 2001: Public limited company – Listed on stock exchange to public;
Oslo SE and NYSE
– 21.5% of SDFI’s assets sold
– 15% sold to Statoil; transition to privatization; 6.5% sold to other licensees
Government Relationship
• State is largest shareholder with 67% of shares
– Ownership managed by MPE
• “Structured petroleum policy in a manner that serves the economy as a whole rather than the interests of a limited number of individuals”
• Allowed domestic competition from IOC and domestic firms like Saga
– Led to more efficiency
• Power struggle between labor and conservative impacts power and role of Statoil
– Today, in the center
Petoro & SDFI
• State’s Direct Financial Interest: created in 1985 – portfolio of the Norwegian
government’s directly owned exploration and production licenses for oil and gas in NCS
• Petoro: state-owned company – Manages portfolio SDFI
• Manages government holdings in ventures
• Monitor Statoil’s sale of petroleum from SDFI
Gassco & Gassled • Gassled: partnership of oil
and gas companies that owns the offshore NG infrastructure in NCS
• Gassco: established 2001 by MPE – Under direction of Gassled – State owned company that
operates gas pipes that transport NG from NCS to Continental Europe
– Administration and operation of 15% of European NG pipelines
Petroleum & Norway’s Economy • In 2005, 25% of GDP and 52%
of exports – 30,000 employees
– >1% of total employment
– Statoil employs 12,000
• Recent declines in Norwegian oil output offset by rising natural gas production
• 2nd largest NG exporter
• 6th largest oil exporter
• Statoil participates in majority of oil and gas fields in NCS
Petroleum & Economy • Norway is not in EU and
OPEC – Keep own energy prices in
line with world market – But is a part of European
Economic Area
• Critics point out that Norway is dependent on natural resources that are vulnerable to fluctuations in demand – Norway starting to
encourage new, high-tech industry
Energy production and consumption
• Oil: – Produces 2.134M bbl/day – Consumes 221,300 bbl/day
• 6th largest producer of natural gas and hydroelectricity
• Biggest consumer of hydro (95.7%) in 2009
• Biggest trading partners: – UK 26.7% – Netherlands 12.1% – Germany 11.4% – Sweden 7% – France 6.6% – US 5%
Electricity and Energy Comparison
• MTOE: Million tons of oil equivalent (107 kcal)
• Norway exports most energy
• Much lower CO2 emissions
• Consumes much more energy
Region Pop GDP
(2000
USD)
Energy
Prod
(MTOE)
Net
Imports
(MTOE)
CO2
emissions
(Mt of Co2)
CO2/pop
(t
CO2/capita)
Elec
cons./pop.
(kWh/capita)
Norway 4.83 M 195.96B 213.64 -185.51 37.31 7.73 23,558
US 307.48 M 11357.07B 1686.4 559.01 5195.02 16.9 12,884
Statoil CSR and Environmental Impact
• How to deal with poor governance, inequality, and poverty in areas of investment? – Human rights, anti-corruption
• “We believe that ethical conduct is a necessary condition for a sustainable business.”
• Carbon capture and storage
• Investments in Canadian tar sands – Shareholders voted to continue
– Reaction by Greenpeace and WWF
Norway’s Current Oil Situation • North Sea wells have drying up
– Companies have to explore further north for new reserves
– Oil production has fallen by 48% from 2000 peak
• Oil wealth has protected Norway from 2008 recession – “Kept wheels of country’s
economy turning”
• Skrugard: Arctic find – Possible yield of 500 million
barrels – Relief to investors
• Increasing natural gas production
Anticipating Resource Curse • Minister Trygve Bratteli of Labor Party
(1974) – Warned Norway’s undersea blessing
could become a curse; oil must be handled judiciously
– Do not let petroleum displace traditional export industries like shipbuilding and forestry and leave Norway vulnerable to fluctuations in demand for energy
• Oil Minister Ingwald Ulveseth (1974): – “It is not our aim that every Norwegian
have big automobiles. This is not the Norwegian way.”
• Dutch disease: high revenue from oil industry creates inflationary pressures that stile economic development in other sectors
Ways Norway has avoided Resource Curse
• Policy focus on long-term wealth management – Awareness of resource curse
– Successful transition from infant industry
• Limited non-commercial policy interference in Statoil’s operations – Manage to keep Statoil free from political
entanglements
– Statoil is relatively professional
• Allows for some competition to add efficiency
• Government recognized evolution of Statoil in changing energy sector – Recognizes eventual declines in oil
and gas production
– Saves state revenue from petroleum in wealth fund valued at $500B
• Norway’s culture – Patience, self-discipline, efficiency,
pragmatic socialism
• Government has tried to protect Norway from energy bubble – Virtually no employment and high
wages
– But strong currency which weakens competitiveness
• 5.432 KOR to 1 USD
Shareholders
Government (MPE)
SDFI
International Competition
Norwegian Political Culture
Movements & NGOs
Consumers
Citizens (Taxpayers)
merged
portfolio of govt shares of Statoil
owns monitors
Licenses for oil in NCS
Directs through Gassled
Operates NG pipes
IO’s (OPEC, EEA, EU)
Concluding Questions
• Given that Norway has for the most part avoided the resource curse, will it be able to make a successful transition away from oil?
• How can other countries model Norway’s economic success?
• What will Norway’s future economy look like (NG, renewables, etc.)?
• As Statoil expands internationally, how it will respond to increased scrutiny from international non-profits and other organizations? How it will fare economically and otherwise against BP, Exxon, and others?