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The Hydrocarbon Age

Oil is, first and foremost, the raw material of the age of mobility – an essential condition for the internal combustion engine. A few simple facts underline this fact. From 1949 to 1972, the demand for oil increased by five and a half times in the US, by 15 times in Western Europe and by 137 times in Japan.

The hydrocarbon society was born and developed through the 1950s, 1960s and 1970s. At the same time, the world’s oil industry was given a national ‘prefix’. The countries that owned the oil took over production and the entire oil economy. National oil companies were established both in the Middle East and in Europe. It is an interesting historical fact that it was at this time that Norway started to look around for ‘oil political solutions’. The Ekofisk field was discovered in December 1969, and Norway was an owner on the shelf.

A Lack of Expertise

When major natural resources were to be exploited in Norway – from hydroelectric power to fisheries and the smelting industry – the state had traditionally been involved. However, oil activities were a major challenge. They required enormous amounts of money and technical know-how, which Norway did not have. It had no geologists, petroleum economists or lawyers specialising in petroleum issues. Norway had only transported oil across the world’s oceans. Within oil prospecting, production and refining, Norway had virtually no knowledge to build on.

In the rest of the world, the oil producing countries were becoming stronger. In 1971, OPEC was established. Two years later came the world’s first oil boycott, as part of the so-called Yom Kippur War between Israel and Egypt in October 1973. The signal to the world was a clear one. Oil was cast into power politics and it is still there as a global power in itself.

The oil crisis in 1973 sent prices soaring and was the start of Norway’s oil adventure. Norway, the new member of the exclusive international club of oil producing countries, set up a Norwegian management model for its petroleum reserves. A ministry for the formulation of oil policies was established, and oil legislation was formulated in the national assembly. A national oil company was built up, and the Norwegian Petroleum Directorate – whose job was to procure the necessary professional competence – was established.

Norway took the helm in the development of its oil industry, but not everyone liked what they saw, thinking that ‘oil means trouble’. However, Norway doubtless had reason to believe that it had entered a higher industrial division. Suddenly, through the 1970s and 1980s, enormous new finds of oil and gas were made – finds that were among the biggest in the world.

Oilfields were developed with the aid of a sophisticated technology made possible by the high oil prices of the 1970s, and this continued, right up to the collapse in 1986. Norway, however – through its national management model – took control of its own oil and gas operations. It has always encouraged participation from overseas oil and gas companies. The world’s biggest oil companies operate today on the Norwegian shelf. In this way, Norway procures the widest possible professional basis for the extraction of its oil reserves. It can therefore be said that the development of Norway’s oil and gas fields has consisted of a grand- scale ‘clubbing together’ between the owner country and the world’s biggest oil companies.

Today, the situation on the Norwegian shelf has entered a new phase – a ‘ripening phase’, it might be termed. The era of the gigantic oil finds is over. Norway’s petroleum bank consists of a number of small and medium-sized finds that must be developed with the aid of new, simple and environment-friendly technology. Around 100 oil and gas finds are awaiting development during the next 25 years, and the expected investments during this period will be as great as those that have been made so far.

The Storting (Norway’s parliament) has decided that oil and gas are to be extracted on a long-term perspective. The oil and gas riches are to be converted into financial riches in the shape of an oil fund to ensure the welfare of future generations. Norway also has ambitious environmental policy goals for the development of its energy. Its goal is to be a major producer of energy but a front line country in environmental issues. The authorities and the oil industry are working together on the development of new, environment-friendly technology for petroleum activities. As is the case for most industrial enterprises, market and price are the determining factors in the management of resources.

Norway has a clearly defined goal: to continually simplify technology so that Norwegian oil and gas are competitive even when oil prices are low. Norway is a member of the International Energy Agency (IEA) but not of OPEC. The Norwegian economy and its petroleum exports face westwards towards the Organisation for Economic Co-operation and Development (OECD) area. Nevertheless, Norway, as the world’s second biggest exporter of oil, has a pragmatic relationship with OPEC. Through reductions in its oil production, it contributes towards keeping oil prices on what is termed a reasonable level in recognition of the energy strategic and national strategic value of oil for both the rich and poor countries of the world.

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