Oiling a better life

21/12/2006 A number of poor countries are rich in petroleum. New approaches to development assistance could help their inhabitants to share in the wealth offered by these resources, believes Erik Solheim, Norway’s minister for international development.

Text: Ina Gundersen. Photo: Alf Ove Hansen

 

This article was first published in Norwegian Continental Shelf no. 3-2006

This article was first published in Norwegian Continental Shelf no. 3-2006

The Oil for Development programme aims to apply Norwegian expertise to helping nations with oil and gas find solutions which secure good resource management and democratic government. Intended to ensure that the whole population benefits, this commitment is seen by Mr Solheim as a sign that the government has made petroleum management a priority area.

“A lot of countries with large oil and energy resources are unable to exploit them in a way which serves their own people,” he notes. “On the contrary, such nations are often corrupt, suffer from civil wars and governance problems, and can’t do the basic job of converting every drop of oil recovered into roads, health care and education.”

Norway’s petroleum sector has a world-beating organisation, he notes, with sound financial administration and clear government controls, while remaining attractive to private capital and investment.

Contribute
“Exploiting oil and energy in the right way is a major global problem,” says Mr Solheim. “Petroleum administration is probably one of the easiest areas where we can help internationally.” Openness by everyone concerned is fundamental for such a development, he notes.

“This is the surest guarantee that countries with large natural resources can exploit them properly. “It provides protection against corruption and gives the population
opportunities to see what is happening and thereby to make demands. We also have to be open. “Not only is Oil for Development a government commitment, but Norwegian oil and gas companies also have substantial financial interests in this area.” At a time of strong competition over labour, expertise represents a critical factor for the programme. Mr Solheim accordingly notes that anyone who wants to contribute is welcome.

He says they should contact Leiv Lunde at the Norwegian Agency for Development Cooperation (Norad), who is in charge of the project. “This programme is about experience
transfer and good governance. But we only have a limited number of people with the expertise need-ed, and must ensure that it is properly applied. “We won’t be exporting a cut-and-dried model to other countries around the world. That’ll never be any help to them.”

Benefit
“When we found oil off Norway, we could benefit from substantial technical expertise with hydropower and other industry, an honest bureaucracy and a stable democracy,” observes Mr Solheim.

“Several of these factors are missing in many countries with oil. They can’t copy us, but a number of historical aspects of the way we organise the business could still be useful to them.” As a case in point, he notes that 99 per cent of revenues in south Sudan derive from oil operations. Converting this income to roads and schools would give the region a solid foundation. “If government and industry instead become mired in a system of corruption and lack of openness, where nobody really knows what happens to the money, everyone would end up suspecting each other because they don’t know what’s happening. “In such a system, even those who aren’t corrupt will be suspected of it. That’s a guaranteed recipe for misery.”

Established in 2005, the Oil for Development programme builds on work pursued over many years. Mr Solheim notes that the NPD has had an important role where administration
is concerned.

“The agency will be a key strategic partner in the present programme,” he says. “It will continue to help build up expertise in countries where a collaboration has already been established. “This will be supplemented by new assignments in additional nations. More players will be drawn in, because we’re also giving weight to financial management and environmental considerations. “The new aspect is that we’re establishing a completely new organisation for this work, and making it a significant factor in Norwegian foreign policy.”

He envisages collaboration with such institutions as the World Bank, the UN Development Fund and the regional banks, as well as greater cooperation with other oil producers which are substantial participants in development assistance.

Many pitfalls
Because the Norwegian government is choosing to become involved in countries suffering from major problems of governance, Mr Solheim emphasises that it faces many pitfalls.

“This is a difficult area, where powerful interests are strongly involved – and many of them are by no means keen on openness. “After a while, we’ll almost certainly find that some countries have received help from us without any demonstrable effect. We must be prepared for that. “All the same, the effort will be one of the best things we can do. We can’t know in advance where we’re going to be successful.”

Asked how the Norwegian model can be applied in countries with very different conditions and tradi-tions, the minister concedes that cultural variations are wide.

“But petroleum is a global industry, and we live in a globa-lised world. Certain issues will be universal, such as seeing where the money goes. “This type of transparency means that a country’s inhabitants, media, voluntary organisations, other oil companies and other nations can observe how the revenues are spent.”

Experience transfer
On the question of whether the new programme represents a shift in assistance to countries which can benefit from Norwegian expertise, Mr Solheim notes that no big sums are involved.

“The most significant aspect is experience transfer, which costs considerably less than building roads and schools.
“But this is substantial in the sense that ministry’s political lead-ership will devote most of its time to it, and draw on expertise and experience from a number of other institutions. “Apart from our role as a peace broker, this is the programme which attracts the greatest international interest. It can clearly open doors for our oil companies.”
He admits that the government could be suspected of adopting Oil for Development to benefit the domestic petroleum sector, but denies that this is the motive.
“Countries can also feel obliged to award contracts to Norwegian companies. That type of conflict may naturally arise. We have no defence against this except absolute openness.”


 

Updated: 14/12/2009