Norway

General Situation of Norway:

By: Tim Kraski

Norway’s first oil field Ekofisk was discovered in 1969 and Norway started to become one of the major oil-producers in the 1970s and 1980s. In recent years, production has declined and today, Norway accounts for about 3% of global production and is the world’s eleventh largest oil producer. At current levels of production and given that the estimation of reserves is correct, Norway’s proven reserves of crude oil will last for about eight more years. Norway claims part of the Arctic and the Barents Sea and according to expert’s estimates, these regions hold one fourth to one third of the world’s remaining undiscovered oil and gas. However, Norway and Russia have yet to agree their border in the Barents Sea and in summer 2007, Russia claimed a part of the Arctic Ocean the size of Western Europe.

In June 2007, the Norwegian Parliament approved the proposed merger of the Norwegian petroleum company Statoil, for which the Norwegian state still holds majority ownership, and Norsk Hydro, an oil, energy and aluminium company. If the merger goes through, the company will be the biggest offshore oil and gas company in the world.

In-depth analysis:

Norway’s emergence as a major oil and gas producer in the mid-1970s led to complete transformation of its economy. The country developed from one of the poorer western-european countries, whose economy was characterized by shipping, fishing, agriculture and forestry, into a country with the second highest GDPs per capita in the world (after Luxemburg) and a continuous government budget surplus. In the Human Development Index of the United Nations Development Programme, Norway occupies the first place: it is the country with the highest standard of living in the world.

In the transition of Norway’s economy, a “classical” of western industrialization was skipped and today, oil industry and services, which account for more than 50% of Norway’s GDP, are the most important sectors. Oil revenues smoothed this transition process and still today, oil exports are an important source of revenue. As the country consumes little of the oil it produces and as power supply is primarily from hydroelectric power plants, Norway is one of the world’s largest oil and gas exporters.

As explanation for today’s situation, the Norwegian historian Francis Sejersted states a reason-lead political culture whose development was favoured by several factors, such as the small size of the country and its location on the edge of Europe as well as the lack of an aristocracy – a fact that, compared to other countries, made the development of democratic structures easier. Due to the healthy state finances, it is to be expected that the government will invest in coming years. In the mid term, especially the construction sector and infrastructure development offer opportunities for FDI.

However, future economic prosperity will also depend on the pace of technology-driven innovation and R&D intensity, which at present remain low compared to other benchmark countries. Another drop of bitterness is Norway’s extremely high power consumption: calculated per capita, it is one of the highest worldwide.

Apart from the sustained economic growth, an effective bureaucracy, a high government capacity for reforms and an open-mindedness for new technologies are positive features which cast a positive light on Norway’s transition to the beyond oil age.

 Beyond oil preparations: