Law and policy frameworks for local content in the development of petroleum resources: Norwegian and Australian perspectives on cross-sectoral linkages and economic diversification

Abstract

The establishment of cross-sectoral linkages is vital to ensure economic diversification of an economy where natural resource production dominates. This paper examines the use of legal instruments in implementing economic diversification. It focuses on the use of policy, statute, and conditions attached to the grant of petroleum licenses by the State as legal tools to achieve economic diversification. Examining Norwegian economic diversification in the period 1970–1994, this paper concludes that the use of consistent and decisive government policy of building Norwegian industrial competency, implemented through statutes and licensing conditions, has successfully established cross-sectoral linkages built on the principles of economic diversification. Conversely, Australia has left economic diversification to market forces, which has resulted in minimal cross-sectoral linkages, and a decline in the industrial sector. Where government intervention has occurred, such as in the development of the Australian Marine Complex in Western Australia, successful cross-sectoral linkages have been developed.

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Notes

  1. 1.

    The ‘seven sisters’ was a term coined by the head of the Italian State oil company Eni, Enrico Mattei, to describe the seven major oil companies which dominated the global petroleum industries from the mid 1940s (post WWII) until the mid 1970s.

  2. 2.

    The author has defined production cost spending as the expenditure by oil companies on costs associated with the exploration, development and production of oil, and includes both goods and services.

  3. 3.

    See for example Per Heum, (2008); Amir Sasson and Atle Blomgren, (2011); and Olivia Leskinen, et. Al., (2012) Norway Oil and Gas Cluster: A story of achieving success through supplier development, Harvard Business School.

  4. 4.

    For example the development of steel and concrete technologies in Norway by companies such as Aker Solutions.

  5. 5.

    Economic diversification is generally taken as the process in which a growing range of economic outputs is produced. It can also refer to the diversification of markets for exports or the diversification of income sources. See United Nations Framework Convention on Climate Change (UNFCCC) http://unfccc.int/adaptation/sbsta_agenda_item_adaptation/items/3994.php at 17 March 2009.

  6. 6.

    An excellent example of this is the creation and development of the Norwegian diving industry, as outlined in Olav Wicken, The Layers of National Innovation Systems: The Historical Evolution of a National Innovation System in Norway TIK Working Paper on Innovation Studies No. 20070601, 57. For an excellent discussion on cross-sectoral linkages, refer to M R Morris, R Kaplinsky and D. E. Kaplan, ‘Commodities and Linkages: Industrialisation in Sub-Saharan Africa. MMCP Discussion Paper 13, The Open University and the University of Cape Town http://commodities.open.ac.uk/discussionpapers.

  7. 7.

    For an excellent account of the effects of petroleum revenue on political stability and instability, refer to Macartan Humphries, Jeffrey D Sachs and Joseph E Stiglitz (eds), Escaping the Resource Curse (2007).

  8. 8.

    Defined in the case of Thomas v Mowbray (2007) 237 ALR 194 [80] per Crennan and Gummow JJ.

  9. 9.

    See in particular commandments 1, 7 and 8.

  10. 10.

    See in particular commandment 2.

  11. 11.

    See in particular commandments 3, 4, 5, 6, 7 and 9.

  12. 12.

    See in particular commandments 3 and 4.

  13. 13.

    The double dissolution of the parliament is authorized under s57 of the Australian Constitution, where there is an irrevocable disagreement between the two Houses of Parliament.

  14. 14.

    This third round occurred in 1974, therefore it was the first official implementation of the procurement policy from the 1972 Decree. However, there had been some development of local industry prior to this official decree.

  15. 15.

    ‘Competitive’ in this context meant that if tenders from Norwegian companies were up to 10 % above international companies, they were to be favoured. For a discussion on the economic diversification policies in Norway during the 1970s, see Brent F Nelsen, The State Offshore: Petroleum, Politics and State Intervention on the British and Norwegian Continental Shelves (1991), 71.

  16. 16.

    The WPB method of allocation of licence refers to the allocation of a licence to an applicant based on the highest bidder of a ‘work program’, which includes the costing of a stipulated amount of seismic survey and exploration wells, amongst other thing.

  17. 17.

    AMC is a marine industrial hub located south of Perth. It serves as a maritime training institute, common use business facility for marine and industrial projects, centre of technological excellence, shipbuilding centre, as well as providing support industries. See Australian Marine Complex, Overview of Henderson http://www.australianmarinecomplex.com.au/facilprec/precsup/precsupoverview.

  18. 18.

    For this commitment, see the Australian petroleum policy in Department of Industry, Science and Resources, Australian Offshore Petroleum Strategy: A Strategy to Promote Petroleum Exploration and Development in Australian Offshore Areas (1999), as well as a discussion on the commitment to industry in House of Representatives Standing Committee on Industry, Science and Resources, The Northwest Shelf: A Sea of Lost Opportunities (1989).

  19. 19.

    Internationalisation in this context refers to the Norwegian Oil industry, (including Statoil Hydro, suppliers and associated industries) seeking to participate in petroleum activities in areas aside from the Norwegian Continental Shelf.

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Hunter, T. Law and policy frameworks for local content in the development of petroleum resources: Norwegian and Australian perspectives on cross-sectoral linkages and economic diversification. Miner Econ 27, 115–126 (2014). https://doi.org/10.1007/s13563-014-0051-y

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Keywords

  • Cross-sectoral linkages
  • Economic diversification
  • Procurement policy
  • Resource curse
  • Local content provisions
  • Petroleum law
  • Legal frameworks
  • Resource regulation
  • Policy
  • Statute
  • Licensing and concession systems