The Norwegian State as a Natural Gas Entrepreneur
The Impact of the EEA Agreement and EU Gas Market Liberalization

Dissseration for the degree of dr.philos
Faculty of Social Sciences, Department of Polical Science, University of Oslo.
Unipub series no 161 2009. ISSN 1504-3991.425 pages 

Published as: 

The Norwegian State as Oil and Gas Entrepreneur; The Impact of the EEA Agreement and EU Gas Market Liberalization
Saarbr?cken 2009: VDM Verlag 
This study focuses on how the European Economic Area (EEA) agreement and European Union (EU) natural gas market liberalization processes have challenged and changed the Norwegian state’s natural gas entrepreneurship since the 1990s. The point of departure is that the Norwegian petroleum industry was developed as a political entreprise by the Norwegian state from the early 1970s. As a political entrepreneur, the state was engaged in the industry as production entrepreneur, as well as being a political and economic risk-taker. As a political entrepreneur the state could define social goals for activities and use regulative, legal and political measures to reach goals that private entrepreneurs do not have at their disposal. As a political entrepreneur the Norwegian state did not limit itself to the regulation of activities on the Norwegian Continental Shelf (NCS), but instead took on the role of innovator and leader of economic change and development. 

Natural gas activities and their relations to the infantile, imperfect and international European gas market demanded additional political efforts compared to oil activities. The Norwegian state used several instruments in a combination to reach goals set up: regulations, direct participation and political interventions, and preferential treatment of Norwegian companies. Policies were developed with high ambitions with regard to national sovereignty and control of the industry, an optimal resource management, and to capture as much rent as possible. In addition to being the regulator, law and policymaker the state became itself an industrial actor, and in periods a substantial financial contributor to developments. Government policy and industrial structures changed as the industry matured, and markets, international affairs and technology changed. The state not only ensured the establishment of the industry, but maintained its role as a driving force looking after and contributing to change and evolution, to the intended benefit of the industry and the state itself.

When Norway entered the 1990s and EU integration processes were increasingly evident, her petroleum policy and natural gas strategy was under strong political control. The EEA agreement changed the legal framework for Norwegian domestic policy and economic activities in many areas, including the petroleum sector. In particular, it changed the institutional and regulative framework for natural gas production, transportation and sales, and the way the state could continue the control and innovation of her comprehensive gas model. Furthermore, the liberalization of downstream EU natural gas markets changed the external economic and political maneuvering room. However, the EU has not succeeded in fully liberalizing her natural gas markets. This study argues that markets for natural gas in the EU are and will remain largely imperfect and politicized for the foreseeable future, in which opportunities for adaptation, influencing developments and exercising entrepreneurship must be understood. The study therefore focuses on the effects on entrepreneurship, both from a perspective of a largely full liberalization, and from a perspective of de facto liberalization.

The final chapter includes a summary of empirical findings, along with an assessment of how the study may contribute to understanding Norwegian petroleum policy and the Norwegian - EU relationship, respectively. Some theoretical implications are addressed.

The study draws upon endogenous growth theory to understand the role of the Norwegian state as a political entrepreneur in the creation of her petroleum industry. Endogenous growth theory demonstrates that policy, entrepreneurship and innovation, and not only changes in exogenous factors, have an impact on the long-run growth of an industry, and more general on a national economy. To understand EU integration processes and their impact on national policy making, the disciplines of economics and political science are combined in a multidisciplinary manner within an International Political Economy (IPE) framework.  

Trial lecture chosen topic:       "The generally misguided long-term oil price forecasts: Price formation and policy implications."

Trial lecture prescribed topic: "Strengths and weaknesses related to various empirical methods in interdisciplinary fields like International Political Economy."

top of page


Norsk gass, naturgass, gassdirektiv, EU, Europeiske Union, regulering, regulator, transmisjon, liberalisering, liberalisme, energiskatter, avgifter, Gassforhandlingsutvalget, GFU, Forsyningsutvalget, FU, Naturlig monopol, Oljedirektoratet, OD, Olje- og energidepartementet, OED, Ministry of Petroleum and energy, MPE, Statoil, Norsk Hydro, Petoro, Gassco, GasLed, Norge, Russland, Tyskland, Ruhrgas, Gaz de France, E?S, leveringssikkerhet, ressursrente, grunnrente, naturgass, monopolrente, rente, ?konomisk teori, reguleringsteori, regulerings?konomi, ikke-fornybare ressurser.  Abbreviations: ATC  Average total cost BCM  Billion cubic metres BG   British Gas BNOK  Billion Norwegian kroner BP   British Petroleum CAP  Common Agricultural Policy CPI   Consumer Price Index CC   Common Carriage CEGB  Central Electricity Generating Board (U.K.) CHP  Combined heat and power CIS   Commonwealth of Independent States CME  Coordinated market economies Coreper  Committee of Permanent Representatives (EU) DG   Directorate General (EU) DOE  Department of Energy (U.S.) DOP  Deliver or pay EC   European Community ECB  European Central Bank ECSC  European Coal and Steel Community EEA  European Economic Area EEC  European Economic Community EFTA  European Free Trade Association EIA   Energy Information Agency (DOE statistical division) EIP   Entrepreneurship Indicators Project ESA  EFTA Surveillance Authority EU    European Union EU-6  Belgium, France Germany, Italy, Luxembourg and  the Netherlands EU-10  Cyprus, Czech Republic, Estland, Hungary, Latvia, Litauen, Malta, Poland, Slovakia and Slovenia EU-12   EU-10 + Romania and Bulgaria EU-15  EU-6 + Austria, Denmark, Finland, Greece, Ireland, Portugal, Spain, Sweden and the  U.K. EU-25  EU-15 + EU-10 EU-27  EU-15 + EU-12 FERC  Federal Energy Regulatory Commission (U.S.) FIN   Ministry of Finance (Norway) FPC  Federal Power Commission (U.S.) FTA  Free Trade Area FU   Forsyningsutvalget (Gas Supply Committee) GATT  General Agreement on Trade and Tariffs GDP  Gross domestic product GEMA  Gas and Electricity Markets Authority (U.K.) GFU  Gassforhandlingsutvalget (Gas Negotiation Committee) IEA   International Energy Agency INTSOK Internasjonalisering av norsk sokkel (”Norwegian oil and gas partners”) IPE   International political economy LDC  Local Distribution Company LME  Liberal market economies LNG  Liquified Natural Gas LPG  Liquified Petroleum Gases LRMC  Long run marginal cost MBD  Million barrels per day MC   Marginal cost MFA  Ministry of Foreign Affairs (Norway) MFN  Most favoured nation MMBTU Million British termal units MMC  Monopolies and Mergers Commission (U.K.) MOA  Mandatory Open Access (IEA) MPE  Ministry of Peteroleum and Energy (Norway) MITI  Ministry of Industry and Trade (Japan) MTOE  Million tons of oil equivalents NATO  North Atlantic Treaty Organization NBIM   Norges Bank Investment Management NCA  Norwegian Competition Authority (Konkurransetilsynet) NCS  Norwegian Continental Shelf) NGA  Natural Gas Act (U.S.) NGF  The “Norwegian Gas Factory” NGPA  Natural Gas Policy Act (U.S.) NGL  Natural Gas Liquids NGU  Norges geologiske unders?keler (Norwegian Geological Survey) NOK  Norwegian Krone NORSOK Norsk sokkels konkurranseposisjon      (Norwegian shelf competitive position) NPD  Norwegian Petroleum Directorate (Oljedirektoratet) NPM  New Public Management OECD  Organization for Economic Cooperation and Development OFFER  Office of Electricity Regulation (U.K.) OFGAS  Office of Gas Supply (U.K.) OFGEM Office of Gas and Electricity Markets (U.K.) OPEC  Organization of Petroleum Exporting Countries OA   Open Access PSA  Production Sharing Agreements PV   Present value QMV  Qualified majority voting SDC  Shtokman Developing Company SDFI  State Direct Financial Interests (Norwegian: SD?E) SD?E  Statens direkte ?konomiske engasjement, see SDFI SGR  Strategic Gas Reserves SMP  Special Market Programs (U.S.) SO   Statement of Objections (EU) SPR  Strategic Petroleum Reserves SRMC  Short run marginal cost SWF  Sovereign Wealth Funds TOP  Take-or-pay (contracts) TPA  Third Party Access TSO  Transmission System Operator USD  U.S. Dollar VAT  Value Added Tax WTO  World Trade Organization WTP  Willingness to pay WWI  World War I WWII  World War II Liberalisation