Entry to China

This contract was one result of a visit paid to China in 1978 by Bjartmar Gjerde, Norway’s petroleum and energy minister.

The consultancy service involved the Norwegian Ministry of Petroleum and Energy advising on political and administrative aspects, while Statoil covered technology and business.[REMOVE]Fotnote: Borchgrevink, A, 2019, Giganten: Det norske oljeeventyret: Statoil–Equinor, Kagge Forlag, Oslo: 123. As a result of the engagement, the company acquired a permanent representative in China.

 Norwegian-Chinese relations

Norway had had a complicated relationship with China for many years. After the communist revolution and take-over in 1949, the Chinese ended up on the wrong side of the ideological divide from the Norwegian perspective. The two countries had little or no contact for more than two decades, even though Norway was among the nations which retained diplomatic ties with the People’s Republic.

During the 1970s, the ideological differences weakened and economic growth became increasingly important. China launched a veritable charm offensive towards Norway, which was visited in 1971 by a Chinese trade delegation headed by deputy foreign minister Chou Hua-min at the invitation of the Norwegian government.[REMOVE]Fotnote: Arbeiderbladet, “Handelsdelegasjon fra Kina på besøk”, 28 September 1971. This visit was interpreted as a sign of Beijing’s interest in expanding trade and other links with the Nordic countries.

Economic and political contacts increased, and foreign minister Dagfinn Vårvik went to China in 1973. The standing committee on foreign affairs in the Storting (parliament) and the trade minister followed suit the year after. But trade between the two countries remained modest.

Gates opened

It was only when Deng Xiaoping took power in 1976 that economic relations between China and Norway took off. He introduced a form of socialist market economy which opened the country to foreign influences from the late 1970s. Between 1978 and 1980, a stream of delegations encompassing politicians, civil servants and business people flowed between the two countries. Oil and hydropower were the prime topics. The idea was to swap experience and technology in areas where Norway had leading-edge expertise for orders to Norwegian industry.[REMOVE]Fotnote: Liland, Frode, Moral og realpolitikk. Norges forhold til Kina etter 1966. IFS Info 3/1996.

Gjerde was extremely pleased when he returned from his first China trip. “The result of the discussions we have had with the Chinese is far more concrete than I had hoped beforehand,” he reported.[REMOVE]Fotnote: Aftenposten, “Betydelige muligheter for norsk industriell innsats”, 25 November 1978. The Chinese were concerned with oil policy issues and wanted Norwegian help on contractual conditions, dividing acreage into blocks, geophysics, and exploring for oil in Po Hai and the South China Sea. They also wanted assistance in relation to supply services, developing offshore fields, pipelaying and building onshore terminals.

As noted above, Gjerde’s visit led to Arve Johnsen being sent the following year to Beijing. In the agreement he signed, Statoil undertook to provide help on technical, legal and financial issues. It was paid a fee for this support, but the deal did not extend to participation in oil exploration or production on the Chinese continental shelf.

Statoil opened a China office in June 1981 at the same time as its collaboration with the country’s oil industry was stepped up. It provided education and expertise transfer which included courses on finance, licence administration and exploration issues. A number of consultants were to provide guidance in collaboration with foreign oil companies and contractors during the offshore exploration phase. Courses were established on safety and emergency preparedness.[REMOVE]Fotnote: Status, Statoil house journal, no 19, 1980, “Statoil/Kina samarbeid trappes opp til neste år”. At the same time, Chinese oil workers came to Norway to learn how Statoil operated.

Flying on shorter wings

The Chinese continental shelf was opened to foreign companies in 1980, and 33 applicants were awarded interests in 18 blocks under strict conditions. But political constraints in Norway prevented Statoil from applying.

Article 10 of the company’s articles of association, which had applied since 1974, required it to submit all issues considered to be important matters of principle or of substantial political or social concern to the general meeting. This provision strengthened government control over Statoil and reduced its independence. An annual report was to be submitted to the Storting on developments in and plans for the company. When the 1983 document came up for consideration in the Storting, Statoil’s international plans were raised.

The board had commented to the minister of petroleum and industry that the company now had sufficient experience and capacity to undertake assignments in other counties. But the majority on the Storting’s standing committee for energy and industry – comprising the Conservatives and Christian Democrats – took a different view. They believed that, other than a limited involvement on the Dutch continental shelf and the consultancy work in China, Statoil should not become engaged internationally in exploration, production, processing or other industrial activity. The ministry should revert to this subject when a study on organising the petroleum sector was completed, they said.

For its part, the Labour Party had no objections to Statoil undertaking such assignments and raised the issue again that autumn.

Labour’s Guttorm Hansen put the matter to Kåre Kristiansen, the Christian Democrat minister of petroleum and energy, during a Storting question time in October 1983. He emphasised that China was a new and important market not only for Statoil but also for large parts of Norwegian industry.

“A giant is now starting to move, and is ready for collaboration with the outside world,” he observed.[REMOVE]Fotnote: Storting question time, 28 October 1983. Question from representative Hansen on the grounds for refusing to allow Statoil to try to become involved in oil operations on China’s continental shelf.

Great interest was being shown by oil companies worldwide in becoming involved in Chinese offshore activities.[REMOVE]Fotnote: Status, Statoil house journal, no 1, 1985, “Vi tolker: Kinesisk seismikk”. A number of foreign firms were already present at a big oil base constructed in the economic zone between Canton and Hong Kong. China was not an easy market for businesses to enter, but Statoil had already become familiar with the country and could thereby function as a door-opener for Norwegian industry – particularly the heavy engineering sector. Hansen himself had been in China and formed the impression that Statoil was very well regarded by the Chinese authorities.

Kristiansen stuck to his and the government’s policy, and maintained that Statoil’s international engagement would have to await the outcome of work currently under way on the company’s position. This restructuring process was known colloquially as “clipping Statoil’s wings”.

That issue came up in the Storting during the spring of 1984. The outcome was a compromise whereby Statoil was stripped of extensive assets on the Norwegian continental shelf, which passed into direct state ownership.

On the other hand, the company was given more freedom to take its own decisions. It would be able to work to a greater extent under similar terms and conditions as other companies – including more control over its own funds which had not been provided over government budgets. The most important consideration in this context was that Statoil would be allowed gradually to extend its exploration, development and production activities abroad. It was decided that such foreign involvements had to be organised as separate subsidiaries.[REMOVE]Fotnote: Ministry of Petroleum and Energy, 1984, On the organisation of state participation in the petroleum industry, vol no 73 (1983-84), Oslo. Accessed at https://www.stortinget.no/no/Saker-og-publikasjoner/Stortingsforhandlinger/Lesevisning/?p=1983-84&paid=3&wid=e&psid=DIVL389&pgid=e_0719.

Statoil was now ready to fly out into the world with rather shorter wings. Or perhaps, as the Centre Party press office put it: “Statoil’s wings have not been clipped. In the best case, the company has received a trim and combing.”[REMOVE]Fotnote: Status, Statoil house journal, no 8, 1984, “Statoils organisering”.