Category: In Norway and the world: Norwegian continental shelf

The company got off to a good start when it was awarded interests at an early stage in particularly promising acreage and in proven petroleum reserves across Norway’s North Sea sector. Ever since 1969, the government had kept hold of a number of “key” blocks where seismic surveys, relevant exploration wells and enquiries from foreign companies indicated the possible presence of resources.

These blocks were allocated in the third licensing round over several years from 1973. First up were the “Norwegian Brent blocks” – 33/9 and 33/12 – which bordered on the boundary with the UK. The fight over these had begun even before Statoil was established and while Arve Johnsen, its first CEO, was still state secretary (junior minister) at the Ministry of Industry.

Brent discovered

The issue first arose in the summer of 1971 when Shell and partner Esso made a big oil discovery in the UK sector north-west of Shetland. Named Brent, it was kept secret by the licensees for a long time – with good reason.

Since the field was close to the boundary, Shell/Esso thought it might extend into Norwegian blocks 33/9 and 33/12. They wanted to secure control of this acreage, but had to act quickly in case the information leaked out and rivals tried to get in on the act.

The two companies approached the oil office at the Ministry of Industry, and informed the Norwegian authorities at a meeting on 4 February 1972 about the Brent discovery and why they thought it extended into Norwegian waters. They told the office that they intended to apply for a licence to explore and produce the two blocks.[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, 1992, Fra vantro til overmot?, Norsk Oljehistorie, vol 1, Leseselskapet, Oslo: 182.

Shell/Esso maintained they were the best guarantee for Norway securing the maximum return from the resources. The relevant acreage lay in deep and stormy waters, and the two companies emphasised to the ministry that they had long experience from the international oil industry. As operators, they were therefore fully capable of handling both the water depth and the weather. As compensation for awarding the production licence, the Norwegian state would receive a 12.5 per cent royalty and 30 per cent participation through a carried interest agreement.

As defined by the Norwegian government in the early 1970s, the latter gave one of the parties – in this case the Norwegian state – the option to participate with a specified percentage in a licence on a par with the other licensees if a commercial discovery was made. The state would not pay its share of the exploration costs until this field came on stream, thereby freeing it from the financial risk.[REMOVE]Fotnote: Report no 11 (1968-69) to the Storting, Undersøkelse og boring etter petroleumsforekomster på den norske kontinentalsokkel i Nordsjøen, Ministry of Industry: 6.

A formal application for a licence covering 33/9 and 33/12 – dubbed the “Norwegian Brent blocks” – was submitted to the ministry on 22 February 1972.[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, op.cit: 184.

Nils Gulnes, head of the oil office, consulted his colleagues – engineer Olav K Christiansen, geologist Fredrik Hagemann and legal specialist Karl-Edwin Manshaus. While the office wanted to tighten the terms a little by demanding 50 per cent state participation, it was otherwise ready to open negotiations and give Shell/Esso a production licence. In a memorandum of 3 March 1972, the minister was requested to approve a start to negotiations. Director general Knut Dæhlin at the ministry also supported the proposal for talks in a marginal note.[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, op.cit: 184.

Application rejected

However, the memorandum bears another marginal note. This was added by state secretary Johnsen, who had been consulted on the document before it got as far as minister Finn Lied. He disagreed strongly with its conclusions and wanted any allocation postponed. The relevant blocks were regarded as extremely attractive, and Johnsen envisioned that they could be very important in building up the state oil company he and Lied were planning.

He therefore wrote: “Conferred with Gulnes, Dæhlin, Christiansen, Hagemann, Manshaus. No supplementary award to be given. To be dealt with in connection with a general announcement.”[REMOVE]Fotnote: Johnsen, A, 2008, Norges evige rikdom oljen, gassen og petrokronene: 117.

The Labour Party, then in office, had long been working on plans to establish a state oil company. In Johnsen’s case, that involvement began when he chaired the party’s industry committee in 1970. In a memorandum dated that December, he had outlined an undertaking with a goal and tasks covering exploration, drilling, test production, landing output, refining and marketing – in other words, a fully integrated oil company wholly owned by the Norwegian state.[REMOVE]Fotnote: Johnsen, A, 2008, Norges evige rikdom oljen, gassen og petrokronene: 40.

When Labour came to power in the spring of 1971, Lied had taken over the industry ministry and chosen Johnsen as his state secretary. Their political approach was marked by a desire for national management and control, including the fight for an operational oil company with strategic ownership positions which allowed the state to benefit from the resources beneath the seabed. Both Lied and Johnsen were convinced that holdings in big oil fields would be the most efficient way of ensuring the highest possible resource rent for the planned oil company and thereby for the state. Giving away attractive blocks to foreign companies without national control was undesirable, and the duo were in a position to prevent it.[REMOVE]Fotnote: Ryggvik, H, 2009, Til siste dråpe om oljens politiske økonomi: 106. They got their way, and the final decision went against the original wishes of the oil office and the director general.

The ministry replied to Shell/Esso by letter on 27 March 1972: “After careful consideration of the opportunities for and consequences of supplementary blocks, the Ministry of Industry has come to the conclusion that it cannot make such an allocation such a short time before the general announcement. Regretfully, your application must therefore be rejected.”[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, op cit: 184.

So “such a short time before the general announcement” was used as the excuse for refusing the request. At that time, plans called for the long-planned third licensing round to be announced during 1972.

Awaiting a third round

After the discovery of Ekofisk became public knowledge in 1970, interest in exploring for oil on the NCS had increased markedly. The oil office was inundated with questions from the companies on when a new licencing round would be announced.

The first round on the NCS was opened in 1965, and included almost all the blocks south of the 62nd parallel (which marks the northern limit of the Norwegian North Sea). Twenty-two licences embracing 78 blocks were then awarded. Covering a more limited area, the second round in 1969 aimed to provide certain blocks to supplement acreage already handed out in the first allocations.

The ministry announced in 1971 that a third round was imminent, once again involving supplementary awards to licensees who had run out of work in order to dissuade foreign companies from abandoning the NCS. But those wanting to extend exploration into adjacent blocks could also be given awards.[REMOVE]Fotnote: Report no 76 (1970-71) to the Storting, Undersøkelse etter og utvinning av undersjøiske naturforekomster på den norske kontinentalsokkel m.m, Ministry of Industry. Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1970-71&paid=3&wid=c&psid=DIVL418. That autumn, the companies were urged to submit their prioritised applications.[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, op cit: 302. Eight responded – and they proved to have targeted well. Statfjord, Gullfaks, Snorre and Sleipner could all have gone to foreign operators had the plans been pursued.[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, op cit: 182. But the supplementary awards were cancelled, with no action taken on the applications. The authorities nevertheless acquired a good insight into company preferences.

Several considerations prompted a postponement of the round. Overall, however, a key factor was a shift in Norwegian oil policy towards greater national management and control as well as bigger state involvement.

State participation

Ekofisk had opened the eyes of Norwegian politicians. Now that the presence of oil on the NCS was proven, calls began to be made for these resources to serve national purposes. The second round had aimed to offer supplementary blocks to existing licences. At that point, in 1969, drilling results on the NCS had been disappointing, and the government feared that a number of oil companies would withdraw from Norway without the opportunity to explore more acreage. Further investigation of the NCS was something the government wanted, and that called for foreign capital and expertise. This gave the international companies strong cards in the negotiations and Norwegian oil policy was largely tailored to their demands.[REMOVE]Fotnote: Wentzel, T, 2008, Fra forsiktighet til fornorsking av oljevirksomheten. En studie av konsesjonstildelingene mellom 1965-1985: 34.

Report no 11 (1968-69) to the Storting, published in connection with the second round, raised the question of state ownership as a possibility but without making a direct demand for such participation.[REMOVE]Fotnote: Report no 11 (1968-69) to the Storting, Undersøkelse og boring etter petroleumsforekomster på den norske kontinentalsokkel i Nordsjøen, Ministry of Industry: 6. On the other hand, it was resolved that the oil office should raise the issue with the individual licensees and achieve state participation through negotiation. That was done, with involvement secured through two types of agreement – carried interest (see above) and net profit.

The latter gave the state, in addition to the fixed statutory taxes and fees, a certain percentage of the net profit earned by the licensees. Such agreements gave the government no influence on operations, and cannot therefore be characterised as state participation in the strict sense.[REMOVE]Fotnote: Report no 76 (1970-71) to the Storting, Undersøkelse etter og utvinning av undersjøiske naturforekomster på den norske kontinentalsokkel m.m, Ministry of Industry: 3. Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1970-71&paid=3&wid=c&psid=DIVL418.

Key blocks

Control over key and boundary blocks was to be next step towards increased national management and control. The key block concept was employed as early as Report no 95 (1969-70) to the Storting from the non-socialist Borten government. It referred to geologically interesting areas held back because they bordered on areas where discoveries had either been made or were highly likely.[REMOVE]Fotnote: Report no 95 (1969-70) to the Storting, Undersøkelse etter og utvinning av undersjøiske naturforekomster på den norske kontinentalsokkel m. m, Ministry of Industry: 14. With Ekofisk discovered, the ministry could reasonably expect rapid progress on the NCS. Report no 95 accordingly promised a supplementary White Paper but, before this reached the Storting, the Borten government and industry minister Sverre Walter Rostoft resigned. Trygve Bratteli and Labour took over on 17 March 1971.

Lied was accordingly the minister responsible for presenting Report no 76 (1970-71) to the Storting a month after the change of government.[REMOVE]Fotnote: Report no 76 (1970-71) to the Storting, Undersøkelse etter og utvinning av undersjøiske naturforekomster på den norske kontinentalsokkel m.m, Ministry of Industry. Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1970-71&paid=3&wid=c&psid=DIVL418.

This White Paper did not deviate much from the one presented the year before, but nevertheless contained some important changes. It also attracted considerably greater interest. The most important adjustment was a decision by the ministry that the retained key blocks specified earlier should by and large be allocated to a state-owned oil company. Since this had yet to be established, no blocks would be awarded until it was in place. The upshot was a further postponement.

On 14 June 1972, the Storting unanimously voted to establish Den norske stats oljeselskap a.s, and the third licensing-round process could thereby resume.

Soon afterwards, on 20 June 1972, prime minister Bratteli held a press conference where he reported on plans to announce a number of blocks across Norway’s whole North Sea sector. However, the area between the 59th and 62nd parallels – from Stavanger northwards – would be given priority.[REMOVE]Fotnote: Stavanger Aftenblad, “Oljeaktiviteten trekker nordover”, 21 June 1972. This reflected a government desire to learn more about conditions further north, since it felt that a good overview of geology in the southernmost part of the NCS had already been obtained.

Bratteli made it clear that the government would allocate a relatively limited number of blocks, and that these would only lie south of the 59th parallel in special cases. State participation on carried interest terms would be demanded with all acreage to be awarded.

Under no circumstance would production licences be given for the key blocks which the government had reserved, and which were widely distributed both geologically and geographically. According to the prime minister, these were not necessarily the best blocks but their geographical spread meant the government would always have one close to any new discovery.[REMOVE]Fotnote: Stavanger Aftenblad, “Oljeaktiviteten trekker nordover”, 21 June 1972. From a negotiating perspective, the government now occupied a more comfortable position than in earlier licensing rounds. After Ekofisk, the oil industry on the NCS was in a revitalised and optimistic mood.

Under the Labour government, the industry ministry worked towards announcing a third round on 15 October 1972. But the Bratteli administration had to resign before that date, forcing a fresh postponement.

The dominant political discussion that summer had not been about oil policy or licensing, but possible Norwegian membership of the European Community (now the EU). On 25 September 1972, Norwegians voted in a referendum on EC membership after the country’s largest and bitterest controversy since 1945. Both sides maintained that the consequences for Norway would be disastrous if the other won.

This battle changed Norway’s political landscape, and demands for national self-determination – including over the oil – were strengthened. Norwegian resources were to be kept under domestic control. That must be seen as a gift to the newly created state oil company. The level of engagement with the EC issue had been very high among both politicians and ordinary voters, and it succeeded in felling two governments. Per Borten had dissolved his non-socialist coalition government of the Centre, Christian Democrat, Conservative and Liberal parties in March 1971 over leaks and a collapse in collaboration, and Labour took over.

That party’s leadership was committed to EC membership, and Bratteli proclaimed before the referendum that a Labour voter should vote “yes” to joining Europe. In August, he made the referendum a vote of confidence in his government by stating that it would resign if a majority rejected membership.[REMOVE]Fotnote: Bratteli, T, “Speech at an open meeting after a Cabinet meeting on 23 August 1970, Gjøvik”, in Bratteli, T, Finne, H, Auensen, E, Graff, F and Engstad, P, 1985, Trygve Bratteli har ordet: Utvalg av taler, Tiden, Oslo: 107.

The result went against the government, with 53.5 per cent of voters rejecting EC membership, and it had to leave office.

Christian Democrat leader Lars Korvald was given the task of forming a minority coalition of parties supporting the “no” vote, which also included the Centre and Liberal parties. This group had only 47 of the 150 members of the Storting, and ranked as the government with the weakest parliamentary mandate since 1945.[REMOVE]Fotnote: It held that position until Erna Solberg’s government in 2020.

Where oil policy and Statoil were concerned, the change of government meant further delays in announcing new blocks on the NCS. Progress quite simply ceased.

In parallel with the political drama which played out in Norway that autumn, Shell/Esso went public with Brent. Studies made it clear that this was the biggest discovery so far in the North Sea basin. And parts of it could belong to Norway. The revelation of the giant find did not make the nearby Norwegian blocks any less attractive.

It was now a matter of urgency for the government to speed up the award of this acreage. In early December, the government resolved that an exception could be made to the general rule that production licences were awarded after announcing a licensing round. The ministry could then accept applications and make an award without a round being announced.[REMOVE]Fotnote: Section 12 of the royal decree of 8 December 1972 relating to exploration for and exploitation of petroleum in the seabed and substrata on the NCS: “Prior to granting production licences, the ministry shall make a public announcement as provided in section 13 hereof, such announcement shall specify the areas to which applications for production licences can be made. The ministry may, under special circumstances, accept an application for, and grant a production licence without such prior announcement being made”.

New blocks would nevertheless be announced immediately after New Year, Korvald said. Interest shot sky-high, and the oil office now received enquiries from not only oil companies but also embassies, newspapers and journalists who wanted to know what this meant.[REMOVE]Fotnote: Hanisch, T, Nerheim, G and the Norwegian Petroleum Society, op.cit: 302.

Shell/Esso eagerly took advantage of this opportunity to secure the “Brent” blocks outside a regular round, and once again contacted the oil office. They could now point to specific production plans for the Brent field in UK block 211/29.

In early March, the government said that it would consider this application without waiting for the next formal round. If Shell/Esso brought the British field on stream before the Norwegians had clarified whether it extended into their sector, the prospect existed that possible oil belonging to Norway might be produced from the British side. In other words, clarifying any such extension was a matter of urgency so that possible negotiations over a division of any production could begin.

What Statoil wanted

Matters were also starting to get urgent for the new state oil company if it wanted to secure control of Norway’s “Brent” blocks, which was a key goal. Statoil was still small, with only 14 employees and little experience. It nevertheless launched a vigorous offensive.

Johnsen, who had taken over as CEO on 1 December 1972, would have preferred his company to acquire production licences on its own – particularly for blocks 33/7 and 33/12. He failed to win the board’s agreement for this, but its support for a rapid build-up into an operational oil company was unquestionable.

At a board meeting on 9 March 1973, Statoil’s attitude to the Norwegian “Brent” blocks was discussed. The government wanted to move fast in clarifying their utilisation, given developments on the UK side. It feared substantial losses for Norway if its oil was drawn off by the British licensees. Statoil’s board resolved to take the initiative and to be prepared to take the step towards an operative company.

The most effective way the state could secure the resource rent was to hold interests in big oil fields – either directly or through Statoil. That now applied to the two blocks directly opposite Brent. The board outlined three scenarios in which Statoil was a key player:

1. Shell/Esso, as Brent partners on the UK side, secured the production licence with Statoil as a 50 per cent partner
2. the state oil company received the licence alone
3. a sustainable Norwegian constellation was created, with Statoil holding 50 or 51 per cent while Norsk Hydro – part state-owned – and wholly private Saga Petroleum shared the remainder.

As mentioned, Johnsen supported option 2, but the board concluded that the company should pursue the third option. On its own, Statoil would not be able to manage an operator role as early as 1973.[REMOVE]Fotnote: Board documents, digital archive. The challenge was the time aspect, with the government keen to get going fast with exploration and possible development.

Ideological conflict

The government and the ministry were concerned about the big financial burden which would fall on the state if its young oil company was allocated the block along. Questions were also raised about its ability to take on such a task. Creating a solo Norwegian grouping also had its weaknesses. The government feared that this option would not get moving quickly enough, with the ministry maintaining that exploration needed to begin as early as the summer of 1973.

A clash also began to develop between the minority government and the Conservatives on one hand and Labour plus Statoil on the other. Although the latter had been established by a unanimous Storting, it remained unclear how large the company should become, how much power it was to be given, and how the Storting should control it.

The non-socialists maintained that the state company was still small and inexperienced, and that the tasks it could take on were limited. But Statoil received massive support from Labour. Unlike the year before, however, political interest in oil policy had now blossomed. Debates had become more heated and these issues were red-hot. The two sides were strongly entrenched, with Labour brutally critical of the government’s approach – particularly over the issues affecting Statoil.

A sharp exchange occurred in the Storting’s question time on 21 March 1973 between Ingvald Ulveseth, the Labour chair of the standing committee on industry, and Ola Skjåk Bræk, the Christian Democrat who was industry minister.

Ulveseth had heard through the press that the government would not necessarily reserve the “Brent” blocks for Statoil, and that the ministry might licence this acreage behind the scenes to private companies.[REMOVE]Fotnote: Storting question time 21 March 1973, item 3: 2228/Storting proceedings for the 117 regular Storting 1972-73: 2222-2225, https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1972-73&paid=7&wid=a&psid=DIVL411&pgid=b_0884. Report no 51 (1972-73) to the Storting, approved by the Council of State on 6 March, noted that the ministry had received an application from Shell/Esso for a production licence covering blocks 33/9 and 33/12, and that it would consider this in relation to section 12 of the royal decree of 8 December 1972 (see note 21).[REMOVE]Fotnote: Report 51 (1972-73) to the Storting, Ilandføring av petroleum fra Ekofisk-området: 39, Ministry of Industry. Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1972-73&paid=3&wid=c&psid=DIVL460.

Was it the case that the government would no longer reserve these blocks for the state oil company being built up, Ulveseth asked. Was it the case that foreign companies would be given a free hand? At the same time, he expressed his conviction that Statoil would be able to conduct exploration drilling on the acreage in question together, for example, with Hydro and Saga.

Ulveseth’s point was that the blocks should not be handed to Shell/Esso, but be placed in the same category as the key blocks and transferred to Statoil in line with the view of the majority on the industry committee. The latter had made it clear that key and boundary blocks should be reserved for the state’s own oil company. It was Ulveseth’s understanding that the Storting had already decided that the boundary blocks should go to Statoil.[REMOVE]Fotnote: Storting question time 21 March 1973, op.cit: 2228.

Skjåk Bræk could confirm that the Shell/Esso application was under consideration, and took the view that this pair were among the few companies with sufficient technical expertise, experience and resources to drill under such difficult conditions. But he was not equally convinced of Statoil’s ability to pursue such operations. He argued that the company was being built up and lacked any practical experience in the area. It had already been given a lot to do, including pipelines and not least rights to state participation in 31 blocks negotiated by the government and transferred to it. Moreover, a financial risk was associated with exploration activity which would cost the state dear if nothing were found. Regardless of the outcome, the government would nevertheless ensure a high level of state involvement.

Ulveseth was not satisfied with this answer, and asked for the issue to be brought before the Storting. In his view, this was where the decision should be taken.

Storting settles the matter

The industry committee was thereby requested to prepare a recommendation for the full house. Presented in April 1973, this proposed giving Statoil wide powers.[REMOVE]Fotnote: Recommendation no 279 (1972-73) to the Storting from the industry committee on the exercise of the state option to participate in production licence no 024 for petroleum (Frigg field), and the transfer to Den norske stats oljeselskap a.s of agreements on state participation in production licences, etc (proposition no 78 to the Storting). Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1972-73&paid=6&wid=a&psid=DIVL2086.

Future state participation should be transferred to it, and the company would participate in each production licence on an equal footing with the other licensees. It would take part actively and have direct influence on the management of operations in all phases.

The committee majority also proposed that awards should be confined for the moment to the key and boundary blocks and that these were reserved for Statoil.

A minority consisting of two Conservatives disagreed. They maintained that no regulations existed for exerting authority over the state company, and feared that the Storting would lose its control.

Skjåk Bræk and Dæhlin expressed their dissatisfaction in a letter to the industry committee, where they pointed out that reserving the key and boundary acreage for the state oil company would amount to no less than 100 blocks. That would give it far too much power over oil policy.[REMOVE]Fotnote: Storting debate. Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1972-73&paid=7&wid=a&psid=DIVL411&pgid=c_0209.

A fresh debate was staged in the Storting on 23 May 1973, with new conflicts looming. Concerns were being expressed by a growing number of non-socialist representatives at a trend towards giving Statoil ever greater responsibility for national resources without the Storting acquiring corresponding influence over the company.

Conservative Olaf Knudson described Statoil as a “cuckoo in the nest” – growing steadily bigger at the expense of the parents feeding it. He was fearful of a company which would control significant proportions of the country’s oil revenues without the Storting in control.

The letter from the minister was sharply criticised in the Storting but, as the lowest common denominator, agreement was reached that the announcement of blocks – particularly the key and boundary ones – would be made in consultation with Statoil.

Where the “Brent” blocks were concerned, however, Skjåk Bræk made his position clear. They had been announced, and with a very short deadline, in accordance with the exception provided under section 12 of the royal decree. Negotiations were already under way with about 20 companies. The announcement of what were known at the time as the “golden blocks” had been made on the assumption that they would be open to competition rather than being reserved for Statoil.

The industry committee’s recommendation was approved against the votes of 23 of the 29 Conservative representatives. This decision indicated a clear change of course in licensing policy towards Norwegianisation and a clear prioritisation of the state’s own oil company.

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

Sleipner West was discovered as early as 1974 with Esso as the operator and declared commercial in 1984. After a plan for development and operation (PDO) was submitted to the government in 1992, it came on stream in 1996. But something had to be done about the high CO₂ content in the field’s output in order to meet the specifications in the gas sales contract.

While natural gas primarily comprises methane (CH₄), it also contains varying amounts of undesirable substances such as hydrogen sulphide (H₂S), nitrogen and carbon dioxide (CO₂). Many fire extinguishers contain pure CO₂ because it displaces the oxygen needed to sustain combustion. This is also why a high CO₂ content is undesirable in natural gas for use with ovens and the like – it will not burn so well. As a result, gas sales contracts will often specify a maximum quantity of undesirable substances permitted on delivery in order to ensure combustion quality.

Scrubbed clean and stored

The gas in Sleipner West comes from 3 450 metres beneath the seabed and contains about nine per cent CO₂. That exceeds the ceiling specified in the Troll gas sales agreements, which is 2.5 per cent for this component. As a result, the excess CO₂ must be removed before exporting the gas. This is done in two ways – by blending the Sleipner West gas with gas from Sleipner East and other fields with low CO₂ content. To further reduce the CO₂ content in the exported Sleipner West gas, CO₂ is removed from it. This is done by adding amines – organic bases containing a nitrogen atom which bind to the CO₂ ­– on the separate Sleipner T gas treatment platform tied back to the concrete Sleipner A installation.

After being removed from the gas flow, the CO₂-rich amines are heated to separate the mix into its component parts again – a process called scrubbing. That allows the amine to be reused and leaves the CO₂ to be disposed of. This technology was not off-the-shelf, and had some problems and was costly. Countless modifications had to be made. One favorable factor for Statoil as operator was that the technology used was from the French company Total. Total was also a partner in the license, and hence did not cause much commotion when there was trouble with the technology. [REMOVE]Fotnote: Kyrre Nese in e-mail 8. august 2022.

CO₂ is re-injected

Since the latter has no commercial value, the simplest – and cheapest – way of dealing with this gas would be to release it to the air. That might have been done on Sleipner West, too, but the introduction of a Norwegian carbon tax for petroleum operations on the NCS meant it would be very expensive. So operator Statoil opted for a different approach, which involved pumping the CO₂­ back underground. Since returning the gas to the reservoir of origin would simply increase its content in future production, the geologists had to find somewhere else to put it.

A number of conditions must be in place for CO₂ to be stored in the sub-surface. The relevant formation must have sufficiently porous and permeable rocks, be saturated with saline water, be deep enough (more than 800 metres below sea level) to ensure that the CO₂ has the desired properties, have an impermeable cap rock to prevent the gas leaking out, and cover a sufficiently large area with a big enough volume.[REMOVE]Fotnote: https://bellona.org/assets/sites/3/Case_Study_on_the_Sleipner_Gas_Field_in_Norway.pdf

The Utsira formation, which overlaps the Sleipner reservoirs at a different depth, meets these criteria and represents an ideal location for disposing of CO₂. It lies about 800 metres beneath the seabed, while the main Sleipner East reservoir is roughly 1 700 metres further down.

Using a single well drilled from the concrete Sleipner A platform, an annual injection rate of about a million tonnes means some 20 million tonnes of CO₂ have been deposited in the Utsira formation since 1996.

Regular investigations of the sub-surface have been conducted using seismic surveying to ensure that no CO₂ is leaking from the structure to the seabed. These studies show that the injected gas is occupying an ever-expanding area of the formation and that no threat of leaks exists.

CO₂ injection from Sleipner West was a pioneering project on the NCS and has been a success. Since 2019, CO₂ from Utgard – which comprises no less than 16 per cent of this field’s output – has also been separated out on Sleipner T and injected into the Utsira formation.[REMOVE]Fotnote: Annual report Utgard 2019, AU-UTG-00002, Equinor.

The Snøhvit gas produced in Norway’s Barents Sea sector contains five-eight per cent CO₂. This is separated out in the same way as on Sleipner, but at the Melkøya processing plant on land rather than on an offshore platform. Separated CO₂ is piped back to the field in a compressed liquid phase and injected into the subsurface. Although injection problems have arisen, studies indicate that no gas is leaking out. A similar CCS process was pursued on the Salah gas field in Algeria, but terminated in 2011 because of capacity limitations in the geological structures.[REMOVE]Fotnote: https://uit.no/om/enhet/aktuelt/nyhet?p_document_id=552337&p_dimension_id=88137 and https://www.equinor.com/energy/carbon-capture-utilisation-and-storage 

CCS on Sleipner has been under way longer than any comparable project, and the data and experience this has yielded will be important for future schemes of this kind. In 2019, Equinor and its partners in the field released information on CO₂ injection and monitoring as a contribution to innovation for and development of storing greenhouse gases.[REMOVE]Fotnote: https://www.equinor.com/news/archive/2019-06-12-sleipner-co2-storage-data

Frugal style

The head of the American Petroleum Institute (API) – which represents the whole US oil and gas sector – visited Statoil in 1975. CEO Arve Johnsen was host to this highly influential executive, and provided a briefing on Statoil’s business. That included explaining how it was becoming an interesting oil seller. One point raised by the API president was whether Norway had ambitions to join the Organisation of the Petroleum Exporting Countries – Opec. Johnsen could affirm that it did not.

Following their meeting, the pair strolled over the road to the KNA Hotel in Stavanger for lunch. Johnsen asked his guest whether he would like something to drink with his food. The American smiled broadly, and perhaps expected a glass of wine. His surprise can be imagined when the frugal Norwegian went on: “How about a glass of milk?” Without any change of expression, the API man expressed his thanks and drank milk in good Norwegian style together with Johnsen.[REMOVE]Fotnote: Related by Håkon Lavik, former information office at Statoil, 2 July 2020.

Formal versus informal

International banks were queuing up in 1976-77 to lend Statoil money for its share of the Statfjord development. A Japanese bank delegation announced it was arriving in Stavanger on a Sunday evening and requested a meeting with Statoil’s finance team. This encounter was scheduled for Monday morning at 08.30. Information officer Håkon Lavik was assigned to fetch the visitors from the city’s best hotel – the Atlantic – at 08.00.

He met four vice presidents, very correctly dressed in pin-stripe suits and ties. They insisted on leaving at once to avoid being late. A taxi was ordered and the group arrived at about 08.15 at Statoil’s international department, which was then based at Flintgaten 2 in the Hillevåg district.

The only Norwegian present then who was due to attend the meeting was Jørn Larsen, a burly type from the Jæren farming district south of Stavanger wearing jeans and a pullover.

Tor Espedal, the chief financial officer, arrived soon afterwards. He always started his working day with a swim and still had wet hair, as well as being sweaty and open-collared (his tie was in his pocket) after cycling to the office.

Then came a very correctly dressed Eivind Brekkelund, an economist, followed by Jan Erik Langangen – a later Statoil chair – in jogging gear. His suit was in the changing room.

Svein Andersen, head of the company’s internal audit function, turned up next. He was also on a bike, wearing trainers and an anorak.

Finally came Thor Inge Willumsen, later Statoil’s CFO, in a pullover and without a tie, and munching on a carrot which marked the end of his breakfast.

Only a few minutes passed before everyone was ready for the meeting, and Statoil was loaned billions of kroner. But the Japanese visitors were undoubtedly taken a little aback at Norwegian culture of informality.

Despite their relaxed style, the Statoil team was no gang of small fry. All those mentioned later become senior vice presidents in Statoil, while Brekkelund went to Mobil and then to Shell.[REMOVE]Fotnote: Ibid.

Anti-aircraft guns on Statfjord

The Statoil management received an important visit from the Supreme Soviet one September day in 1976. After the conventional introductions by chair Finn Lied and CEO Johnsen, the latter gave a briefing on the company’s operations. That included a review of the current construction of the Statfjord A platform, with particular emphasis on building concrete gravity base structures. This was long before the computer age, and engineers commissioned detailed models of such installations to help their design work.

The model of Statfjord A stood in the corridor outside the meeting room in Lagårdsveien 78, which functioned as Statoil’s head office at the time. During the presentation, with associated slides, a discussion began with and between the visitors about whether the Soviet Union had any such structures. The delegation claimed it had, and even some that were larger.

After the meeting, the group assembled around the model. This was very detailed, and visitors noticed that water monitors were installed around and about the topsides in case of fire. But the Soviet delegates through they were anti-aircraft guns – because that was something they really knew about. From their perspective, this felt to be was essential. Fire-fighting was an unnecessary precaution. The visitors were otherwise very grateful for Statoil’s openness, which they much appreciated. It only emerged later how distinguished this visit had been.

When the next session of the Supreme Soviet opened a few weeks later, and the event was shown on the TV news, three of the delegates were seen seated in the first row on the podium. They were immediately behind Communist Party head Leonid Brezhnev, who gave the opening speech. The visitors had been really top politicians with great influence in the Soviet Union.[REMOVE]Fotnote: Ibid.

Statoil was not unfamiliar with the Dutch continental shelf. It had interests in two licences inherited from the Norwegian government after the Storting (parliament) gave its blessing for the company to exercise the state’s option for them in 1982 – with the rights and obligations that this involved.[REMOVE]Fotnote: Ministry of Petroleum and Energy, Proposition no 102 (1981-1982) to the Storting, Om utøvelse av Statoils opsjon til å delta i lisensen K/18-L/16 på nederlandsk kontinentalsokkel m.m.

The assumption was that all revenues generated within the licences were to be transferred to Norway. In addition, the Ministry of Petroleum and Energy felt it was appropriate for Statoil to establish a dedicated subsidiary if the options were exercised.

As a result, the Dutch sector of the North Sea became the first of many foreign continental shelves where Statoil made a commitment. But the international dream there proved relatively short-lived. After eight years, the company sold off everything and left the country.

Acquiring the licences

The Norwegian government secured access as early as 1970 to four licences on the Dutch continental shelf as the result of a swop deal involving Norwegian Gulf Oil Company. When the latter was allowed to transfer its rights in two blocks off Norway to Norske Conoco, one of the conditions was that Conoco’s then US parent, Continental Oil Company, would give the Norwegian state a right to at least 10 per cent in a Conoco licence in a country other than Norway.[REMOVE]Fotnote: The two blocks in the Norwegian North Sea represented two-thirds of production licences 019 (Ula and Gyda) and 020.

The result was that the state acquired 10 per cent of the Continental Netherlands Oil Company (ConNed) holdings in blocks F/7, F/9, K/18 and L/16 in the Dutch sector, which amounted to 7.5 per cent of this acreage.

These blocks were transferred in 1973 to Statoil along with other agreements on state participation which the government had secured at that point.[REMOVE]Fotnote: Proposition no 78 (1972-1973) to the Storting, Utøvelse av statens opsjon på deltakelse i utvinningstillatelse for petroleum (Frigg-feltet), og overføring til Den norske stats oljeselskap A/S av avtaler om statsdeltakelse i utvinningstillatelser m.v.

The decision to transfer all such agreements left the company with options for four Dutch blocks.

Several of the prospects were later assessed by operator Conoco as uninteresting, with F/7 and F/9 as well as half the acreage in K/18 and L/16 being relinquished to the Dutch government.[REMOVE]Fotnote: Proposition no 102, op.cit.

Oil discovered in the remaining area of K/18 in 1980 was declared commercial the following year. Under the agreement originally entered into with the Norwegian state, Statoil then had seven months to decide whether to exercise its option.

While the company was free to decide that it wanted to pull out, any decision on participating in development and operation would be taken by the Storting. When the matter came up for debate there in June 1982, there was no discussion – Statoil was to participate for the first time in oil production on another country’s continental shelf.

With a green light from the Storting, the company opted to participate in developing K/18 in accordance with the plans drawn up by Conoco.[REMOVE]Fotnote: Annual report and accounts 1982, Den norske stats oljeselskap a.s, Stavanger.

Subsidiary

In line with the Storting’s wishes, Statoil established a subsidiary and permanent office in the Netherlands. It also regarded the model of a wholly owned daughter company as the most appropriate way to organise foreign operations.

The advantage of this approach was that subsidiaries abroad could draw on parent company expertise in a flexible and straightforward manner. They were charged for such services at the hourly rates normally applied between oil companies.

Since these foreign arms were Statoil’s own limited companies, they had to comply with the laws of the country they operated in. That in turn meant they had to keep full accounts for their own activities, which had to be confirmed and approved by auditors in the subsidiary’s own country and in Statoil.

K/18, or the Kotter field, came on stream on 22 September 1984, and Statoil began earning revenues from a foreign engagement for the first time. Production from the Logger field in L/16 began a year later.[REMOVE]Fotnote: Status, Statoil house journal, no 8, 1985, “Logger-feltet i produksjon”.

Looking for more

Statoil was keen to participate when new blocks were put on offer in the Dutch sector during 1984. Its board raised the issue of such involvement with the general meeting (the minister of petroleum and energy). Statoil’s preference was to be an operator.

The Dutch authorities had an express desire to develop collaboration with Norway in the oil sector in order to reduce the influence of the big multinational companies.[REMOVE]Fotnote: Status, Statoil house journal, no 16, 1984, “Operatøroppgave i Nederland?”.

Statoil applied for the operatorship of three blocks in this fifth licensing round, and reinforced staffing at the Dutch subsidiary by eight people.

The company secured 60 per cent of block F/14a. According to the Dutch government, it had the best geological interpretation and a good work programme. An award to Statoil would also fit well in a broader energy-policy context. To judge from the number of applications, the blocks sought by the company were the best in the round.

Drilled by American jack-up Zapata Scotian, the initial wildcat on F/14a was Statoil’s first well as operator outside Norwegian waters and was spudded on 8 August 1986.

Oil was encountered in the licence,[REMOVE]Fotnote: Status, Statoil house journal, no 10, 1986, “Oljefunn på nederlandsk sokkel”. but not much. Small oil deposits were also discovered in the neighbouring block, along with gas assumed to be commercial. F/14a proved a disappointment, since the oil found was much less than the company had hoped for.

Statoil nevertheless did not give up, and applied for further licences – securing three operatorships in 1987 and two more in 1989. That meant the company had six operatorships plus participation in the producing Kotter and Logger fields.[REMOVE]Fotnote: Status, Statoil house journal, no 19, 1989.

An end and a new beginning

While Statoil was celebrating its 20th anniversary in 1992, its Dutch involvement terminated. The company sold its remaining exploration licences and the subsidiary there.

It wanted to concentrate its international involvement by making a full commitment to the collaboration project with BP in the former Soviet Union, south-east Asia and west Africa.[REMOVE]Fotnote: Stavanger Aftenblad, 8 April 1993 “Statoil selger i Nederland”.

Singapore was and is an important hub for east-west trade. This modern city state houses more people than Norway in an area of about 800 square kilometres. A cultural melting pot, the former British colony with a predominantly Asian population handles contacts between two continents both linguistically and culturally.

15.00 Singapore/09.00/Stavanger/03.00 New York

In the 1990s, Singapore ranked as the world’s third largest oil refining centre and had a growing petrochemical industry. Tankers and dry cargo ships lay in the roads under an equatorial sun and daily afternoon downpours while waiting to berth for loading and unloading.

Statoil’s first office there opened with five employees and lay in the busy Orchard Road shopping street. During a visit in 1992, CEO Harald Norvik stressed the importance of close contacts with the market. “We have 1.1 million barrels for sale every day. This big volume makes us one of the most central players in the market for North Sea oil.”[REMOVE]Fotnote: Statoil Magazine (print edition), no 1, vol 14, 1992.

He noted that Statoil would be able to benefit in the future from the “sunrise effect” when selling oil – the world’s most traded commodity. Thanks to the time differences between the company’s sales offices, it could market crude oil, gas and refined products 24 hours a day. When the Singapore office closed for the night, it was morning in Stavanger and London. Afternoon in Europe heralded the start of a new day in New York.

Since access to information on oil trades was just as fast during the 1990s in Stavanger and Singapore, no technical barriers prevented all trading taking place in Norway. But the oil industry was also people-based – cultivating contacts was important for winning contracts. That called for a physical presence in Singapore and other leading oil-trade centres.[REMOVE]Fotnote: Ibid.

Traders – an important role

In 2012, two decades after it opened, staffing at the Singapore office had risen to 45 people. That included 10 traders, out of the 100 overall in the Statoil organisation who accounted for a dizzying NOK 1.1 billion in daily sales.

Oil was not the only commodity traded in Singapore. Asia had become perhaps the most important Statoil market for liquefied petroleum gases (LPG). Comprising propane and butane, this product was primarily purchased in the Middle East and sold on. A cargo of LPG could change both its route and its owner six-seven times before reaching port – hopefully ending with the buyer willing to pay the highest price.

Each trader usually specialised in a single product. They had to pay close attention, be familiar with market conditions and know what drove prices.

Their first job when arriving at work each morning was to secure an overview of the market. Product prices depended on the outlook for global oil demand. Had there been unrest or incidents during the night which affected crude prices? How large was the total supply of oil from the North Sea, the Middle East and – more recently – the USA? If oil stocks, particularly in America, were filling up, it indicated that available supplies were too large and that the price would fall.[REMOVE]Fotnote: Henrik Sommerfelt, head of Norway, CMC Markets, 19 April 2020. Was production at Statoil’s refineries running normally? Which products were available for the traders to sell, and in what quantities? When were the products to be delivered? Since all these factors could change rapidly, traders had to be able to interpret the information and take quick decisions, with a fairly large slice of personal responsibility.

Most contracts in Singapore were fixed at around 17.00-18.00. The working day for a trader there was not over until 19.00, which allowed for an overlap with their counterparts at Statoil’s Forus office in Stavanger, who would have just completed their lunch break.[REMOVE]Fotnote: Stavanger Aftenblad, 8 January 2012, “The energy market never closes”.

Wider activities

Equinor’s sales and marketing office in Singapore was located at Marina View in 2021, overlooking the busy pleasure-boat traffic. It was no longer confined to sales, but also had responsibility for refining operations elsewhere in Asia. The office has increased in importance, since other parts of Equinor’s business development in the Asian region are run from there.

Statoil had a relatively long history in South America. It had been producing heavy crude in Colombia’s neighbour, Venezuela, since the late 1990s, and was also heavily involved in both oil and gas production off Brazil.

Legal and illegal

Oil has been Colombia’s most important legal export commodity, primarily to the USA. Traditionally, its economy has been based on agriculture – including the export of coffee and bananas. A more questionable side of the country is that it ranks as a major producer and exporter of cocaine.[REMOVE]Fotnote: https://www.fn.no/Land/colombia. That activity has contributed to 50 years of armed conflict between guerrilla groups, the army, right-wing paramilitaries and drug cartels. Negotiations began in 2010 between president Juan Manuel Santos and the Farc guerrillas, and a peace agreement was signed in September 2016.

Santos, who held the presidency from 2010 to 2018, was awarded the Nobel Peace Prize in 2016 for his work on this peace deal, where he had been assisted by Norwegian diplomats.[REMOVE]Fotnote: https://en.wikipedia.org/wiki/Juan_Manuel_Santos Unfortunately, the agreement failed to win ratification in a referendum.

Foreign investment increased after the Colombian government took steps during the 2000s to improve security in the towns. Free trade agreements were signed with the USA, the EU and China.[REMOVE]Fotnote: https://www.fn.no/Land/colombia.

Statoil explores offshore

Ecopetrol, owned 80 per cent by the Colombian state with private investors holding the rest, was the dominant oil company in the country. All its directors were appointed by the president, and he decided in reality which companies should be awarded production licences.

So it is likely that Santos himself was involved in allowing Statoil to farm into licences in the country.

Like a number of the exploration targets where the company was involved internationally, the deepwater areas off Colombia were almost virgin territory. “We are gaining access to a vast underexplored frontier area through early access at scale, which is in line with Statoil’s exploration strategy,” Nick Maden, senior vice president for exploration activities in the western hemisphere, observed in a press release when a first licence was secured in Colombia.[REMOVE]Fotnote:  E-24, 24 July 2014, “Duket for Statoil-debut i Colombia”.

Awarded in July 2014, this holding was in deepwater licence COL4. Spain’s Repsol was the operator, while Statoil had a 33.33 per cent interest.

Two months later, the company could announce that it had farmed into two more licences by buying holdings from Repsol. This involved 10 per cent of the Tayrona licence operated by Brazil’s Petrobras and 20 per cent in Guajira Offshore 1, where Repsol was the operator (see map).

All these licences committed the companies to acquire seismic data, but they were not obliged to drill. All the transactions otherwise had to be approved by the National Hydrocarbons Agency of Colombia (ANH).[REMOVE]Fotnote: E-24, 24 July 2014, “Statoil sikrer nytt leteareal i Colombia”.

Statoil established a separate subsidiary in the Netherlands to run the involvement in Colombia. This paid tax to the country and invested a good deal in exploration during 2016-17.

Pulling back

In 2020, the exploration work which Statoil/Equinor had committed to was nearing completion. The subsidiary responsible for this activity no longer had any personnel. No results worth continuing with had been achieved. The subsidiary’s equity was negative at USD 121 million, which represented the funds it had devoted to exploration.[REMOVE]Fotnote: Annual report, 2020, Equinor: 308. It was time to withdraw. This fitted with Equinor’s revised exploration strategy, which replaced a broad commitment and working in many countries simultaneously with concentrating on fewer core areas. Colombia no longer featured on that list in South and Central America. Instead, the company chose to concentrate on Brazil and withdrew from Venezuela, Uruguay, Nicaragua and to some extent Argentina as well as Colombia. From being involved in about 30 countries around the world in 2014, Equinor remained active in roughly 15 by 2021.

The Asian economy expanded in 1995 by 7.5 per cent – compared with a growth rate of three per cent for the world as a whole.[REMOVE]Fotnote: Stavanger Aftenblad, ”Milliard-satsing for Statoil i Asia”, 7 April 1995, National Library of Norway. Since Asia was – and is – the world’s most populous region,[REMOVE]Fotnote: Solerød, Hans and Tønnessen, Marianne, ”Verdens befolkning”, Store norske leksikon, https://snl.no/verdens_befolkning, accessed 16 March 2022. that naturally also attracted attention elsewhere.

Norway’s Labour government under Gro Harlem Brundtland had cast its eye on Asia’s rapidly growing economy, and pursued an “Asia commitment” in 1995-96. That included members of the government, with representatives of the Norwegian business community, travelling to – almost touring – selected countries in the region.

Petroleum, environmental technology, hydropower, ship’s gear and communication systems were identified as particular areas where Norway could acquire a slice of the growing cake.[REMOVE]Fotnote: Bergens Tidende, ”Statoil investerer i Malaysia”, 7 April 1995, National Library of Norway. Statoil was one of the companies keen to secure a helping.

Melaka refinery

A rapidly growing economy plus a big population equals a region which needs oil and oil products. Statoil characterised Asia in 1995 as the world’s most expansive oil market.[REMOVE]Fotnote: Aftenposten, ”Statoil inn i Asia-raffineri”, 7 February 1995, National Library of Norway. The company was already then negotiating to acquire 15 per cent of the Melaka facility, and this purchase was approved by its board on 31 March 1995.[REMOVE]Fotnote: Board minutes, Statoil, 31 March 1995. Its partners were American company Conoco and Malaysia’s Petronas. An expansion phase under way at the refinery was intended to increase its daily capacity to 100 000 barrels oil when completed in 1998.[REMOVE]Fotnote: Aftenposten, “Olje fra Nordsjøen gir Statoil gevinst i Asia”, 4 November 1996, National Library of Norway.

Statoil could use its share of the refinery to produce oil products for the Asian market. In the longer term, it also wanted to refine feedstock from its own sources in Asia – such as the Lufeng field off China.[REMOVE]Fotnote: Ibid.

The company emphasised that this commitment would be commercially profitable and was not being subsidised by other parts of the business. In particular, it pointed out that a shortage of refining capacity in Asia meant owning a facility made better financial sense than leasing one expensively.[REMOVE]Fotnote: Ibid. Statoil was pleased to have the chance to cooperate with its partners in Melaka, whom it regarded as experienced in the refinery business.[REMOVE]Fotnote: Stavanger Aftenblad, ”Milliard-satsing for Statoil i Asia”, 7 April 1995, National Library of Norway.

Profits from refining had been rising in Asia since the 1980s, and were now higher than in Europe. [REMOVE]Fotnote: Annual report, 1995, Statoil: 27.

But the question is how sensible it actually was for the comany’s reputation to become involved in Melaka.

Compensation claims

Expanding this facility had led to conflicts with the local population. Of the 300 families displaced to make way for heavy industry, 67 were still not satisfied in 1997 with the compensation awarded and had taken legal action. So had 300 fishermen who could no longer work in the waters off the refinery because of new quays and an expanded security zone.

Worst of all, perhaps, the expansion had led to the demolition of two mosques and left two cemeteries inside the refinery site – making it difficult for relatives to visit the graves.[REMOVE]Fotnote: Dagbladet, ”Opprør mot Statoil-satsing”, 30 January 1997, National Library of Norway.

The criticism was covered in several newspaper articles and also expressed by Norwegian environmental organisation The Future in Our Hands (FIVH). Statoil denied that it had any involvement in the issue because permission for the expansion was given before it acquired its stake. The company’s response was therefore that it would raise the matter with Petronas and Conoco and, after doing so, that it had received satisfactory answers.[REMOVE]Fotnote: Leer-Salvesen, Tarjei, 1998, I gode hender? FIVH, Oslo: 30.

Furthermore, the Melaka refinery was criticised for refusing to allow its workers to choose their own union and making them join the Petronas “company” union. That was contrary to the principle of free association, according to the NorWatch monitoring project.[REMOVE]Fotnote: NorWatch was launched by the FIVH in 1995 to monitor Norwegian commercial projects abroad, with a particular concentration on the environment and human rights. It was wound up in October 2010, but the subject is still on the FIVH agenda. Statoil should either come clean and admit that it violated human rights or pull out of countries which did so, Morten Rønning at NorWatch told leading Oslo daily Aftenposten in February 2000. He maintained that this was a particular problem because the company was so concerned with such rights at home.[REMOVE]Fotnote: Aftenposten, “Anklager Statoil for dobbeltmoral”, 29 February 2000, National Library of Norway.

Despite the criticism, Statoil denied – in response to a direct question – that this was the reason why it sold its 15 per cent share in 2001 to Petronas and Conoco.[REMOVE]Fotnote: Aftenposten, “Statoil ut av problemraffineri”, 28 February 2001, National Library of Norway. Part of the reason for the sell-out was that the company’s plans in Malaysia and Asia had not developed as intended.

Unfulfilled ambitions

When Statoil bought into the Asian market, it did not regard refining as its only area of commitment and thought of Malaysia as the first step on the road.[REMOVE]Fotnote: Kuala Lumpur meeting, 11 August 1997, “Building a retail business in Malaysia”: 1.

Just as Norway and the rest of Scandinavia had been the entry point to the European service station market, the company believed such outlets in Malaysia would be followed by others in Vietnam, China and perhaps other Asian countries. The goal was for its brand to become known throughout Asia.[REMOVE]Fotnote: Ibid: 1.

Apart from Germany, where profits were too low, Statoil was building ever more service stations in Europe. The specialists who had been based in Germany were relocated to Malaysia, but this country failed to become the entry point to the Asian market.[REMOVE]Fotnote: Ibid: 3.

The explanation may be that it was difficult for a foreign company to open service stations in a country where the necessary licences were basically only available to Malaysians.[REMOVE]Fotnote: Ibid: 4. Or a decline in the Asian market could have been responsible.

Economic downturn

A research report in 1999 found that the Norwegian government’s Asia commitment had failed to provide the desired results, primarily because of an economic downturn in the region.[REMOVE]Fotnote: Aftenposten, “Mislykket Asia-satsing”, 22 April 1999, National Library of Norway.

In the mid-1990s, Asian oil demand was expected to be up by a million barrels per day to 1998. The reality in March of that year was a fall of 500 000 daily barrels and oil stores filling up.[REMOVE]Fotnote: Statoil magazine, no 1, vol 21, 1999. Statoil, Stavanger, National Library of Norway: 19.

The underlying downturn was dubbed the Asian crisis, because it derived from a burst property bubble and speculative borrowing in Bangkok.

This decline in demand had knock-on effects for global oil prices. These dropped by almost 50 per cent from the 1997 peak as a consequence of over-production.[REMOVE]Fotnote: Ibid.

Falling prices also affected the refinery sector. Despite an upturn in April 2000, the short time that Statoil had been a co-owner of the Melaka facility was primarily characterised by decline.[REMOVE]Fotnote: Dagens Næringsliv, ”Raffinert bonanza”, 11 April 2000; Bergens Tidende, ”Kan takke oljeprisen”, 22 February 2000, both National Library of Norway. But financial considerations were not the only reason for selling out.

Slimming down

Aftenposten reported in October 2000 that Statoil was already trying to dispose of its part of the Melaka refinery. This was allegedly part of a plan by CEO Olav Fjell to slim down the company ahead of a stock exchange listing.[REMOVE]Fotnote: Aftenposten, “Olav Fjell rydder videre”, 31 October 2000, National Library of Norway.

When the sale had been finalised, preparing for a listing and a desire to streamline the marketing and refining business were indeed cited as reasons.

Although Statoil had many other activities in Asia, such as oil production and crude oil sales, it was made clear that refining in this region would no longer be a core area.[REMOVE]Fotnote: Aftenposten, ”Statoil ut av problemraffineri”, 28 February 2001, National Library of Norway.

Statoil would sooner use the resources elsewhere.

While one with Esso involved learning about exploration, the other covered lessons from Mobil in developing the big Statfjord field in the North Sea.[REMOVE]Fotnote: The section on collaboration with Esso is based largely on Hanisch, T and Nerheim, G, 1992, Fra vantro til overmot?, vol 1, Norsk petroleumshistorie, Norwegian Petroleum Society, Leseselskapet, Oslo: 370-372. The section on collaboration with Esso is based largely on Moland, Elisabeth Ugland, 2011, Fra lærling til mester: Kunnskap og kompetansebygging i Statoil årene 1972–1986, master’s thesis, University of Agder, Kristiansand, accessed at https://uia.brage.unit.no/uia-xmlui/bitstream/handle/11250/139504/HI-500%202011%20Vsr%20Masteroppgave%20Elisabeth%20Ugland%20Moland.pdf?sequence=1&isAllowed=y.

Assistance with exploration and production

During the discussions in the Storting (parliament) on the award of key and boundary blocks in the Norwegian North Sea, doubts were raised about whether Statoil had the capabilities required to conduct drilling on its own account. So when Esso offered the company a technical assistance pact as part of its application for third-round licences, this was greeted with great interest. Such an agreement would allow Statoil to acquire the necessary expertise.

Providing the companies were awarded licences, the deal was that Statoil would be able to place personnel in Esso’s operational organisation to gain experience. The US partner would initially have day-to-day responsibility for Statoil’s trainees and provide them with further education. As these personnel became qualified, Statoil would take over operational responsibility.

In addition to training in exploration drilling, Esso offered assistance with operating the Ross Rig drilling unit which Statoil had recently chartered.

When the Ministry of Industry awarded new exploration and production licences in November 1974, Statoil was appointed operator of production licence 038 – covering blocks 15/11, 15/12 and 6/3 – with Esso as technical operator. The training could begin.

Statoil’s first well, 15/12-1, was drilled in what later became known as the Sleipner area during July 1975. Esso was officially the technical assistant, but undoubtedly did the job in reality. The Statoil personnel were apprentices.[REMOVE]Fotnote: Equinor.no, 4 July 2000. Accessed at https://www.equinor.com/no/news/archive/2000/07/04/DrillingFor25years.html. The well was dry, but the Norwegians secured the experience they needed to stand on their own feet and establish a technologically competent organisation.

The following year, Statoil took its qualifying test by drilling a first well on its own account. It was again drilled from Ross Rig, this time with success, in block 1/9 close to Ekofisk. The structure was named Tommeliten Alpha.

One goal had been reached. The company had the in-house expertise to serve as an exploration operator.

Collaboration over Statfjord

While Statoil was learning how to drill and operate its own exploration rig, another department of the company began a training programme in field development. This was based on a collaboration agreement with Mobil for production licence 037, which embraced the Norwegian share of the Statfjord discovery. Developing this field was to be crucial in building up sufficient expertise at Statoil for it to become a fully qualified operator on a producing field.

The licence terms specified that Statoil could take over the Statfjord operatorship after 10 years. It then had to become familiar with the field. Mobil undertook to transfer the necessary expertise, with Statoil involved in as many as possible of the processes and decisions relating to Statfjord.

As a result, the young company followed at close hand and participated actively in the development of one of the world’s largest offshore oil fields.

Statoil started building up a shadow organisation which was intended ultimately to take over completely. This expanded rapidly, from a couple of hundred staff to almost a thousand.

The company had “the right to have a reasonable number of its employees work with the operator to achieve appropriate training of Statoil’s personnel at different levels”.[REMOVE]Fotnote: Hanisch, T and Nerheim, G, op.cit: 370.

Initially, Mobil contributed the most important share of the labour force and the technology. But it was under way with training up Statoil employees from as early as 1973. A number of the latter were sent around the world to the US company’s various training facilities. The Dallas research centre was frequently used. During seismic surveys on Statfjord, Statoil was represented by a person who observed and worked with Mobil’s exploration group in London.

While many went abroad to train, several learning opportunities became available at home. Engineers from Statoil were seconded for long periods to Mobil’s internal organisation in Stavanger during the winter of 1974-75. Statoil requested that these personnel be given challenging assignments, and they were expected to have opportunities for to participate actively in all areas of the work.

To lead the actual development, Mobil established a separate project task force for each platform. This was where the largest number of Statoil personnel were seconded. While the task forces reported directly to Mobil, their members could be required by Statoil to provide the information it wanted. That meant the company could take care of all its interests – without being the operator.

Statoil established a separate department in 1975 to represent it in all matters relating to Statfjord. Led by Olav K Christiansen, this team worked closely with the company’s other units.

The collaboration with Mobil over developing Statfjord was crucial for Statoil’s build-up of expertise and for fitting it to take on larger assignments – such as the Gullfaks operatorship.

It is difficult to say exactly when the story of Mongstad begins. Purely chronologically, of course, the plant has a starting point. That was when Norway’s Norsk Hydro and then British Petroleum (BP) built a refinery at Mongstad north of Bergen in the 1970s, although the plans had existed long before that. Statoil subsequently secured a stake in Mongstad in 1976 and became increasingly influential until Hydro sold out in 1987. BP had disappeared long before.

But this is not the story about Mongstad I want to relate here, and which used to be repeated again and again at “family gatherings”. It merely represents the run-up to all the drama in the 1980s – when the politicians supported refinery expansion with varying degrees of enthusiasm, when Hydro had enough, when Statoil failed to call a halt, and when everyone got a shock – or more or less in that vein.

This is story of how a refinery could run horrifyingly over budget and how some became angry while muttering more or less loudly: “What did we say?”. Its subject is not what happened. Instead, I will seek to identify why this narrative has found a place in virtually all histories of Statoil as the slightly embarrassing anecdote which always gets dragged out at family parties – even if everyone has heard it before. This is a tale about politics, industrial rivalry, good sense and gut feelings, empire-building or not, the “Mongstad symptom” and whether admitting error is shameful. But, perhaps most importantly, it is a good story.

A dramatic account

While fixing the Mongstad tale in time can be difficult, it has a clear start and even clearer end in thematic terms and begins with plans to expand a refinery. The narrative continues with a fight for the right to implement the plan, and with a project execution which progresses while becoming more and more expensive. The conclusion is the resignation of Statoil CEO Arve Johnsen and the board, and a change of direction in the company’s history. Nobody writes anything about how the Mongstad refinery managed financially after the expansion had been completed and production was under way.

In addition to a beginning, a main section and an ending, the tale also involves well-defined characters – Statoil and Hydro, Johnsen and various Hydro executives, politicians on both right and left, and the state as parent. And in the background lurk the Statoil directors, initially in bit parts and then in roles which turn the drama around.

Because a drama this was. It had everything – intrigues, accusations of empire-building, and a state within the state. As spectators, we can choose who to support – the bold, slightly irresponsible Statoil, driven to an extent by gut feelings, or sober and (far too) sensible Hydro? These two resemble children competing for parental favour, for backing from right and left at the political level. Each parent has their favourite son, but external forces – by all means call them the voters – decide which of the siblings receive the greatest benefits.

Another important factor is that this drama was not cheap. It actually cost at least three times as much as the original budget.

The Mongstad narrative contains elements which appeal to the storyteller in people, but which are also sufficiently complex for something worth studying being always findable. Perhaps the most interesting feature of the tale is nevertheless that it can be positioned in a broader context and become a Statoil history.

Two tales, two histories

“Great prestige attached to the Mongstad project,” historian Gunnar Nerheim has observed.[REMOVE]Fotnote: Nerheim, Gunnar, 1996, En gassnasjon blir til, vol 2, Norsk oljehistorie, Leseselskapet: 249. That is undoubtedly correct. Statoil had big ambitions for the refinery, related in many ways to its aim of becoming an integrated oil company – one which not only explored for and produced oil, but also refined it and sold the resulting products. Johnsen and others had devoted much time to convincing the politicians that the time was now right to expand the Mongstad facility. This may also have reflected an unconscious desire to demonstrate that Statoil had become so mature that it could manage to execute such a large and demanding project.

Johnsen did not need to convince the Labour Party that this was a good idea. It had faith in Statoil. The centrist parties were more difficult to bring on board, but the concept was eventually accepted by Kåre Kristiansen – the centrist Christian Democrat who was minister for petroleum and energy in the non-socialist government. The Conservatives surrendered – very unwillingly, according to Kåre Willoch, their leader and prime minister. He claimed to have yielded to avoid a dispute which could sink the coalition.[REMOVE]Fotnote: Willoch, Kåre, 1990, Minner og meninger 3: Statsminister, Schibsted, Oslo: 304.

By the time the gigantic budget overrun had been run up, Willoch was no longer prime minister. But he may nevertheless have been among those who did not exactly make it easier for Johnsen to admit that things had gone wrong.[REMOVE]Fotnote: Nerheim, Gunnar, op.cit: 249. His position was perhaps a little like a youngster who has promised their parents to tackle a difficult job but must nevertheless phone home to ask for more money.

It is tempting to do a little embroidery with a story like this, to work on owning it. Both Johnsen and Willoch have written their own versions of what happened at Mongstad. And both have been accomplished gilders of their own reputations.

Johnsen has talked about inaccurate drawings, prices which were suddenly much higher than they had been, and bad timing – but never that the idea itself was bad. Statoil had become 15, he has commented. It could manage without him.[REMOVE]Fotnote: Interview with Arve Johnsen, https://tv.nrk.no/serie/mitt-liv/sesong/2/episode/3, 9 April 2021. The company might no longer have been a child, but perhaps it still possessed youthful boldness?

Willoch went further in his memoirs. He made it clear that, boldness or not, neither Mongstad nor Statoil was a good idea. This is what happens when the state runs a company. The former prime minister wrote this in 1990, and was outspoken in the chapter on Mongstad.[REMOVE]Fotnote: Aven, Håvard Brede, 2014, Høgres syn på statleg eigarskap i norsk oljeverksemd 1970–1984, University of Oslo: 17. He ought perhaps to have waited a few years before penning this story. Writing down narratives when they are fresh in one’s memory has advantages, but it could perhaps also be sensible to acquire some perspective on events so close at hand.

Historian Eivind Thomassen believes a lack of distance is one of the key reasons why so many versions of the Mongstad narrative exist. Many books about Norway’s oil history and Statoil were written in the 1990s, he notes, soon after the Mongstad affair had roared through the media. That was a time when covering the scandal was felt to be essential.[REMOVE]Fotnote: Thomassen, Eivind, 2020, The Crude Means to Mastery. Norwegian National Oil Company Statoil (Equinor) and the Norwegian State 1972-2001: 162.

Those who have written about Norwegian oil later have perhaps read these earlier accounts and found the Mongstad narrative to be still important. Perhaps it is not Mongstad’s fault that big sums of money are associated with its name, but that it constantly has bad timing?

The Mongstad “symptom”

A search for “Mongstad” in the National Library of Norway’s catalogue throws up roughly 5 000 hits for books and almost 100 000 newspaper references. This is our fifth article about Mongstad and we have still not reached what former premier Jens Stoltenberg called Norway’s “moon landing”, which also related to the facility.

I largely agree with Thomassen’s view that the reason for so many Mongstad tales is that many of the Statoil/oil histories were written soon after the scandal. Nor has Mongstad’s reputation been helped by the fact that both Johnsen and Willoch have written about their experiences in detail.

However, I do not believe this is the whole story. To explain why historians and others have kept returning to the Mongstad affair, I think it is important to acknowledge that this is good story which also offers constant opportunities for finding new depths and nuances.

At least as important, in my view, is the fact that the tale says a great deal about Statoil – or has, in any event, been used for that purpose. Johnsen wanted, with Mongstad, to establish an integrated oil company. The Conservatives, with Willoch in the lead, wanted to identify Mongstad as a “symptom” of what was wrong with Statoil. The refinery became a symbol for the company’s development and its darker side, a symbol and a symptom of challenges in Statoil, in the relationship between it and Hydro, and in the relationship between the company and the politicians on both left and right.

This Mongstad narrative can be read as a Statoil history in miniature. I also believe that many have recounted it precisely to ensure that their version remained standing, their Statoil history became known – because, after all, we all want to own the history which defines us.