Author: trude

The Storting had resolved that the largest possible state participation through Statoil was desirable. At the same time, the industry ministry was fully aware that any development needed an experienced operator. That was particularly true for the Norwegian blocks close to Britain’s big Brent field. Giving this role to Statoil was out of the question. Production plans being pursued for Brent made it clear that mapping the Norwegian acreage was a matter of urgency, and the state oil company was not sufficiently mature for such a demanding job.

Responsibility for negotiating licence terms to cover these high-priority blocks fell to veteran civil servant Karl-Edwin Manshaus. He had worked as a legal expert in the industry ministry’s oil office on framing legislation for the petroleum sector, and also played a key role in establishing Statoil and the Norwegian Petroleum Directorate.

Negotiations over the “Brent” blocks in 1973 lasted for several weeks, with many considerations needing to be taken into account. Manshaus wanted to get Norwegian participants into the licences and to ensure spin-offs for domestic industry. That meant Statoil should receive a big stake and have its share of exploration costs carried by the other licensees. At the same time, an experienced and well-capitalised operator was sought. But neither it not other private foreign companies could be allowed an overly dominant role.[REMOVE]Fotnote: Borchgrevink, A, 2020, Giganten: Fra Statoil til Equinor: Historien om selskapet som forandret Norge, Kagge Forlag, Oslo: 61. Manshaus was also to ensure that Statoil emerged well from the negotiations with the forthcoming operator.

Shell and Esso, respectively operator of and partner in the Brent field, were no longer relevant as operator for the Norwegian blocks, and their dream of control on both sides of the UK-Norway boundary evaporated. The threat that the two companies might rig the division of the oil between the two sectors in order to avoid Norwegian taxes was considered too great. Concern was expressed that oil could be drained from Norway’s side of the boundary to the British unless the Norwegian authorities kept a close watch.

Manshaus offered Shell and Esso 10 per cent each in the licence.

US oil company Chevron was envisaged as the operator at an early stage of the talks, and offered a 15 per cent stake. However, it was not satisfied with the terms offered by the government. The ministry’s reaction provided a clear expression of its privileged negotiating position. Rather than continuing to negotiate with Chevron, it quite simply offered the job to the next relevant candidate.

Instead of having to accept the multinational oil companies’ rules, as in earlier licensing rounds, the ministry could now in reality play them off against each other as a result of the substantially greater interest generated by Ekofisk. Those who refused to accept Norway’s terms soon found themselves excluded. Mobil ended up accepting the conditions Chevron had rejected and took on the operatorship. The requirements set for the US major included transferring knowledge and expertise to Statoil through active training.

Final negotiations with Mobil were conducted at the end of June 1973, with CEO Arve Johnsen also present on behalf of the state oil company.

In addition to the existing terms, Manshaus now presented yet another condition. Statoil was to have an option to take over the operatorship 10 years after a possible commercial discovery had been made. Once its first shock had subsided, Mobil yielded. Blocks 33/9 and 33/12 were too attractive to lose. In its innermost thoughts, too, the US company undoubtedly did not believe Statoil would be in a position to become the operator after just 10 years.

The outcome was that Statoil received 50 per cent of the licence, Mobil 15 per cent and the operatorship, and Esso, Shell and Conoco 10 per cent each. Four other companies also received small stakes[REMOVE]Fotnote: Saga Petroleum 1.875 per cent, and Texas Eastern Norwegian Inc, Amoco Norway and Amerada Hess Norway 1.0416 per cent each.

Third licensing round results

A third licensing round on the Norwegian continental shelf had been initiated in parallel with the negotiations over Norway’s “Brent” blocks. Advertised in the summer of 1973, this round extended in reality all the way until 1977. Thirty-two blocks were put on offer, while nine “key” blocks were held back in part until Statoil produced a plan on how these should best be utilised. The conditions negotiated when awarding the Statfjord acreage were established as the norm and, in many respects, represented the new rules of the game. Whether state participation was attainable through awarding interests to Statoil was no longer the question – only how large that involvement should be.

White Paper no 30 (1973-74) enlarged on the political goals of state participation. The object was said to be twofold. First, such involvement opened for additional government revenues beyond merely taxing the industry. Second, it provided an opportunity to influence licensee decisions once a licence was allocated.

In total, therefore, 12 production licences covering 20 blocks were awarded in the third round. Statoil – as it had been officially known since 1974 – received at least 50 per cent in each. Some of the licences also introduced a sliding scale which could potentially give the company a holding of up to 80 per cent.

Most of the licences also contained a provision which allowed Statoil to take over as operator after eight years, while its share of exploration costs was to be carried by the other licensees.

The pracsise giving the state company a clearly preferential status with an interest of 50 per cent or more, continued after 1973. By 1977, it was the turn of the “golden” block – 34/10. Johnsen and Statoil reached one of their absolute pinnacles there by securing a share of no less than 85 per cent and the operatorship. With this award, the company manifested its privileged position.

When their partnership began in 1991, the two companies became involved in the Democratic republic of the Congo as well as Angola and Nigeria, but withdrew from the first of these areas in the same year. A venture in Equatorial Guinea, operated from Nigeria, was also short-lived.[REMOVE]Fotnote: Ryggvik, Helge. (2009). Til siste dråpe. Oslo: Aschehoug: 238.

Through various engagements, BP was already established in all three west African states when the alliance with Statoil began. However, the military regime in Nigeria had taken over the British oil major’s operations in the country during 1979 as part of a massive nationalisation wave. During the 1990s, the Nigerian mood shifted from nationalisation to internationalisation, and a more open attitude was adopted towards foreign companies. That change in climate created an opening for BP to return to the giant of Africa, this time accompanied by Statoil.

Repressive regimes, executions and environmental disasters

Statoil was to be responsible for the alliance’s joint operations in Nigeria, making this country its baptism of fire as an international oil company. A significant proportion of the staff intended to support these activities were located in Stavanger. But a number of BP personnel were included in this Norway-based Nigeria management from the start.[REMOVE]Fotnote: Ryggvik, Helge. (2009). Til siste dråpe. Oslo: Aschehoug: 231

Operational responsibility for the west African commitment was allocated to BP and its London head office. Only a minimal share of alliance personnel were permanently stationed in Africa. While 23 people, all BP employees, worked with Angola from London, only one was based full-time in Luanda. Thirty staff handled Nigeria in Stavanger, with a single person in the African country itself.

Nigeria remained an important priority area until the mid-1990s, and activity there expanded. The alliance succeeded with its strategy and established itself as a leading player in the deepwater areas off the Nigerian coast. That position was completely overturned in 1995, when political conditions in Nigeria deteriorated dramatically.

Ever greater dissatisfaction had spread among many of the people living around the Niger delta. They received little or no share of the big revenues generated by the oil resources in their region. In addition, a massive environmental disaster began to manifest itself in the delta area.

A coup in 1993 had introduced one of the most brutal and corrupt regimes in Nigeria’s history. The repressive government banned all political activity and opponents were jailed. That in turn unleashed extensive protests across much of the country. These increased from 1995 after the military regime executed nine activists from the oil-rich delta – including author and environmental activist Ken Saro-Wiwa.

These executions helped to create pressure from international public opinion. Foreign companies faced demands to pull out of Nigeria. The worst-affected was Shell, which had been producing oil for many years from a controversial part of the Nigeria delta. But organised campaigns were also conducted against Statoil in Norway. The company responded that it did not want to become involved in political processes and chose to accept the political burden of remaining in Nigeria. It argued that the human rights position would not improve if it and BP withdrew.

These developments were not particularly concerning for the alliance to begin with. It concentrated on offshore exploration, and was not involved with oil spills and dead fish in the delta. And, in the middle of the unrest on land, the alliance could raise a mighty cheer when oil was proven with its first wildcat – which also represented the first deepwater discovery off Nigeria. But the jubilation was short-lived, since the resources proved non-commercial. At the same time, the political conditions caught up with the partners.

Statoil had the most to lose by pulling out. Nigeria was where the company intended to demonstrate that it could serve as an operator, even under difficult conditions, outside the North Sea.

It now transpired that repressive regimes, executions and environmental disasters were not the only problems facing BP and Statoil. The financial difficulties were a more difficult challenge. Nor had the alliance succeeded in securing its own operatorships. And its interests in other fields had also failed to yield sufficient oil to justify the exploration costs. The accounts were looking critical.[REMOVE]Fotnote: Ryggvik, Helge. (2009). Til siste dråpe. Oslo: Aschehoug: 233.

No big breakthrough occurred on the exploration side. On 20 April 1998, Statoil and BP signed a contract with Nigerian company Allied Energy on the sale of the alliance’s 40 per cent interest in block 210 – the Oyo oil field. It afterwards transpired that neither Statoil nor BP received the sale price. In addition came a price reduction of about 30 per cent, which many have characterised as incomprehensible.[REMOVE]Fotnote: Keilen, Erlend. (2003. 3. november). E24. Statoil fikk aldri betalt for oljefelt i Nigeria

An investigation was conducted, and its report concluded in 2004 that: the fact that the statements obtained are ambiguous, combined with the fact that no written documentation exists about the decisions which must have been taken, provides some scope for speculation. On that basis, the investigation committee would recommend to Statoil that it conducts an internal inquiry to clarify the circumstances. The following day, Statoil declared itself not guilty of corruption at a press conference in Oslo.[REMOVE]Fotnote: E24. (2010. 1. mars). NTB. Hemmelig Statoil-gransking av priskutt i Nigeria.

Although the alliance itself withdrew from Nigeria, Statoil remained on an independent basis and had interests in 2020 in Agbami – the country’s largest deepwater field.

Chevron is the operator of the field with a 67.30 percent ownership interest and Prime 127 has the remaining 12.49 percent. Equinor also operates two exploration licenses – OML 128 and 129 – with a share of 53.85 per cent in both. Six wells have been drilled in both, with two discoveries made. None of the fields are planned developed.

On Equinor’s own website, the company describes that its success in Nigeria “is underpinned by our sustainability work, ensuring we are a responsible operator and are proactive in improving opportunities for the communities where we work.”[REMOVE]Fotnote: https://www.equinor.com/where-we-are/nigeria