Source: Statfjord (From the exhibition “Oiling the Economy” at the Norwegian Petroleum Museum)
Developing an effective oil sector in any of the Sub-Saharan Africa states has so far proved to be a futile task. To ensure that Uganda is not going to repeat the mistakes of Nigeria, the country’s leaders have requested Norway’s assistance in preparing Uganda’s oil sector for the upcoming production phase.
In noting down key lessons from Norway’s approach to the exploration of oil, Uganda has to look back to the 1960s and a key moment in Norwegian history.
Phillips Petroleum approached the Norwegian government in October 1962 to begin an offshore exploration program. Norway, at the time, had no expectation that there was oil, no regulatory system to grant oil concessions and no established maritime borders with its neighbours. They told Phillips they would have to wait.
Even after clear border boundaries were negotiated in 1965, it would have been easier to follow the lead of their Danish neighbours and grant exploration rights to a single foreign company, with a royalty system if any oil was found. When the discovery of the massive Ekofisk field in 1969, Norway decided they would chart a far more challenging course.
Norway was in no rush to develop their oil resources and determined that it would only be on their own terms with a clear benefit to Norwegians. That was how the idea of the parliamentary white paper “10 commandments” for oil development was born.
Iraq-born Norwegian geologist and petroleum engineer Farouk Al Kasim played a key role in developing his country’s petroleum sector. As Norway was starting oil production, he formulated what are famously known as the Ten Commandments of Oil Production. The “Ten commandments” outlined ten areas of importance for the Norwegian government in the exploitation of their petroleum resources. This article gives an overview of those set rules.
- National supervision and control must be ensured for all operations on the NCS.
- Petroleum discoveries must be exploited in a way which makes Norway as independent as possible of others for its supplies of crude oil.
- New industry will be developed on the basis of petroleum.
- The development of an oil industry must take necessary account of existing industrial activities and the protection of nature and the environment.
- Flaring of exploitable gas on the NCS must not be accepted except during brief periods of testing.
- Petroleum from the NCS must as a general rule be landed in Norway, except in those cases where socio-political considerations dictate a different solution.
- The state must become involved at all appropriate levels and contribute to a coordination of Norwegian interests in Norway’s petroleum industry as well as the creation of an integrated oil community which sets its sights both nationally and internationally.
- A state oil company will be established which can look after the government’s commercial interests and pursue appropriate collaboration with domestic and foreign oil interests.
- A pattern of activities must be selected north of the 62nd parallel which reflects the special socio-political conditions prevailing in that part of the country.
- Large Norwegian petroleum discoveries could present new tasks for Norway’s foreign policy.
In a nutshell, the key entailments are: avoid harm to livelihoods, assuming that the petroleum activities impact the environment, society and the economy; establish new livelihoods on the basis of oil, that is, use it to develop other industries such as petrol chemicals and producing fertilisers; and use the proceeds from oil to develop other sectors, say tourism or fisheries. The objective is right from the start of oil production to free yourself from total dependence on it and be determined to achieve this goal.
Uganda needs to set up policies and frameworks for national supervision and control of all operations related to the oil and gas sector. This is in progress and a good first step. The country must ensure independence from oil proceeds and learn to survive even in the absence of the revenues. An oil and gas industry must be birthed. The environment needs to be protected and Uganda must keep this thought at the forefront of its oil production activities.
There is so much to be borrowed from the Norwegian commandments for the oil industry; this write-up only seeks to float a few ideas. It is even more heart-warming that Norway is a success story for this puts an utmost level of trust in the ideas inherent in the rules formulated so many years ago. Our only hope is that Uganda can be open-minded and keen to ensure that it creates an industry that can stand the tides of time, and one that can prove to be a blessing rather than a curse.