Alaska Oil| What I am learning from Norway (update for Day 6)

Earlier this month I wrote and published here a commentary on Why I am going to Norway.  This is the week that the Institute of the North policy tour is in the country.  Nils Andreassen, the Managing Director of the Institute, is posting daily notes on the meetings underway as part of the tour.  A link to those notes and the initial draft of the trip report is available here.

For my small part, I will post daily updates on the important points I am taking away  (in 140 characters or less) here, at my Facebook page and at the Perkins Coie Alaska Oil & Gas page .  At the end of the tour, I will gather my notes into a commentary on “What I learned from Norway.”  For the moment, however, please read below or click on either source to follow what, to me, are the important daily points of learning.

Day 1 (Briefings:  U.S. Ambassador, Ministry of Foreign Affairs, Ministry of Petroleum and Energy):  Three important take aways to me. 1. Norway doesn’t use a royalty system because it hampers investment. 2. Government entities (Statoil, Petoro) invest alongside industry in the development of Norway’s oil & gas resources. 3. Oil field services is Norway’s second largest export.

Day 2 (Briefings:  Statoil, Norwegian Petroleum Directorate, Norway Petroleum Safety Authority): My top three take aways. 1. Lack of lease bonus and royalty requirement offsets Norway’s otherwise high tax rate (no similar offset in Alaska to Alaska’s comparably high rates). 2. Statoil has shut in fields similar to Pt. Thomson (e.g., Nigeria). Not all gas meets economic test. 3. Basically, Norwegian regulations based on consensus; US on adversarial process.

Day 3 (Briefings: Ministry of Finance (Department of Taxes and Department of Asset Management), Ministry of Fisheries and Coastal Affairs, Norwegian Agency for Development Cooperation):   My top take aways. 1. Norway eliminated royalty in 1990’s because it worked as an investment disincentive. 2. Norway’s marginal production tax rate is as high as Alaska but producers continue to invest; significant structural differences (no lease bonus, royalty and State invests alongside industry), however, reduce upfront risk, develop alignment between government and industry and are important to the explanation.

Day 4 (Briefings:  University of Tromso, Statoil Snohvit Project):  My top take aways. 1. Snohvit was built to supply LNG to the US. With the rise of US shale gas, now looking for alternate markets in Asia and, along with nearby Russian Shtokman project, will likely drive development of Northeast Arctic passage. 2. Development of Snohvit required reductions from Norway’s usual tax structure.

Day 5 (Briefings:  Statkraft):  My top take aways. 1. Renewables are real and important. Key to reducing cost is wide implementation. 2. Norway didn’t choose hydro over gas. Hydro predated gas discoveries and was in place when gas became available. 3. Alaska is far away from major company operations and unique (e.g.,silted streams). Does not make a good test site.

Day 6 (Briefings:  Norwegian Folk Museum):  My top take away on the day. Norway’s cultural emphasis on collaboration and consensus has contributed significantly to its commercial success in oil. The emphasis on achieving alignment between all participants — government, interested parties and industry — enables a shared focus on achieving results.