Norway's experiences: Are they relevant to Azerbaijan?

 Foreign Minister Eide based his presentation on the following points:
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Dear Deputy Foreign Minister Mr Araz Asimov,
Members of the diplomatic corps,
Students of the Azerbaijan Diplomatic Academy,

I am very pleased to be back, I was in Azerbaijan in 2011 with HRH Crown Prince Haakon Magnus.

It is a privilege to have the opportunity to address the Diplomatic Academy. Congratulations on your impressive new premises.

Foreign Minister Espen Barth Eide in Baku.
Foreign Minister Espen Barth Eide spoke about Norway at the Azerbaijan Diplomatic Academy in Baku 14 January. (Photo: Frode Overland Andersen, MFA)

 

I look forward to sharing with you some reflections on our two countries and societies; interested to hear your views.

Azerbaijan: an important partner

  • Azerbaijan is an increasingly important partner for Europe, and for Norway when it comes to
    • Global political affairs: Azerbaijan in UN Security Council.
  • Culture: The 2012 Eurovision Song Contest; in 2015 the first country to host a new kind of Olympic Games, namely the European Olympics. Congratulations!
  • Energy: Growing role as energy supplier to Europe. And it is here our interest really meet: Besides Russia, Norway and Azerbaijan are major gas suppliers. This gives us an important platform to discuss and learn from both countries’ experiences as energy producing countries. But also future challenges and opportunities.

 

Partnership in the energy sector

  • Azerbaijan has a long history as a petroleum producer. Pioneer. You have gained valuable insights through this long history that are well worth studying for other petroleum producing nations, including Norway.
  • I am pleased that Statoil has actively engaged in Azerbaijan since 1992. A mutually beneficial partnership. Hope will develop further. We can learn from each other, as energy producing countries.
  • Compared to you, Norway is a relatively “young” petroleum producer. Oil exploration started on the Norwegian continental shelf in 1966.  
  • Since then we have made valuable experiences, at various levels:
    • Technology/know-how;
    • Organisation/structure of industry, cooperation with international petroleum industry in its development – win/win.
    • Financial management of industry and revenues.
  • Throughout these years, and from the very beginning, our main challenge has been how to use oil and gas resources to build a prosperous and fair society, for the benefit of present and future generations.
  • The political choices that were made then are the foundations for the model of society we have today. The awareness was this: The natural resources we discovered then and still do belong to the people. And not just my parents, for me and my children, but for many generations to come.

Norway’s experience:

  • The first years: In Norway we knew almost nothing about oil exploration when it all started on the Norwegian continental shelf in 1966. Deemed important to secure national control over any resources and not leave this sector to the free forces of foreign capital.
  • Luck struck in 1969 with the discovery of the gigantic Ekofisk field, by US company Phillips. Soon clear that this field alone would make Norway a significant oil producer. Many other discoveries were made.
  • The Norwegian government and parliament took very important strategic decisions: To establish a national oil company (Statoil) in order to achieve two main things:
    1: To directly engage in income generating activities on behalf of the state (50 % in all licenses), and
    2: To build knowledge about oil industry, get real insight in all types of operations in order to compare and check what we were told by the major oil companies.
  • We established a National petroleum directorate. Technical issues and licensing separate from the state’s commercial activities and political decision making.
  • We asked foreign oil companies, and they saw it to be in their own interest, to support education and capacity building among Norwegian engineers, companies and managers. Orders for equipment were put to Norwegian shipyards and machine building industry, which soon transformed itself.
  • Discussion and cooperation between labour unions, employer unions and the government on aims and means to develop the energy sector and society.
  • In short, by the end of the 1970s we had an effective resource management system, with clear separation of functions. Stability, transparency and predictability. Also in our tax regime.

Management and spending of oil revenues

  • Norway is the world’s third largest energy exporter, after Russia and Saudi Arabia. Annual income, 60 bn USD in 2011.
  • Earlier, income was used directly in the State budget, in 1990 oil fund established in order to secure macroeconomic stability. Now 700 bn USD invested abroad. Ethical guidelines. Investments have been withdrawn (nuclear weapons, cluster munitions, human rights, environmental damage).
  • Spending rule (handlingsregelen): No more than average return (4%) to be spent in annual national budget.

 

Oil/gas and politics

  • Every step agreed with the parliament, and openly discussed in the public, public hearings.
  • Clear benefit to all layers of the Norwegian society
  • Important in foreign relations, but Norway has never used energy as a political instrument. Understand the importance of our export, but export strategy decided by companies based on their own commercial interests. Limited role for the government.
  • Level playing field for national and international companies; equal treatment of companies with state involvement and purely commercial enterprises, promoting competition, capacity building and increasing competitiveness of the Norwegian industry. Result: Norwegian offshore industry today in the forefront internationally.

Main conclusions

  • Energy resources can give enormous benefit to society as a whole, if properly managed.
  • Foreign oil companies must build capacity, do research, education and put orders in the country.
  • International cooperation; secures best practices and available technology.
  • National control can be achieved, not by “nationalistic” and monopolistic means, but by clear legislation, transparent and predictable management and tax system, dynamic and close relationship between national and foreign actors in the industry, competent specialists and control organs, and observant public, including media, NGOs, political parties.

Transparency and gender equality

  • Oil income, oil activities is only an instrument to reach the goals of the society. Essential feature of Norwegian society: high degree of trust in authorities, institutions. Underpinned by accountability and transparency. Freedom of Information Act giving anyone right of access to documents held by public authorities.
  • Relevant in the energy sector: maximum transparency e.g. about petroleum revenues. Azerbaijan and Norway are both EITI compliant; Azerbaijan was the first country in the world! Equally important: full transparency about use of revenues.
  • Expectation of social responsibility also applies to companies: Should be good “corporate citizens” – Corporate Social Responsibility. Includes zero tolerance for corruption. In this regard, Norwegian companies liable under Norwegian law even for operations abroad.
  • Norway is a society with relatively small social differences. Important for social cohesion, stability. All must contribute, incl. through taxation. Wealth distribution.
  • Norway is traditionally an egalitarian society. No nobility. Women’s right to vote was introduced 100 years ago, in 1913.
  • Gender equality: Important not only as principle and at level of individual; high rate of women’s employment been essential for Norway’s economic development. To many, Norwegian welfare is associated with our oil resources. Yes, we have the oil, but more important is women’s migration into the labour market over the last 30 years. If the employment rate of Norwegian women would be reduced over night to the OECD-average, this would – all other things equal – reduce our national wealth by approximately the equivalent of our total petroleum wealth, including The Government Pension Fund. Women are more profitable than oil!
  • How can we learn from each other? Dialogue, contact, cooperation with others. All channels important – political, business, civil society, people to people.
  • I look forward to hearing your views, reflections, questions.
  • Thank you.

 

 

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