The Impact of the EEA Agreement and EU Gas Market Liberalization
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."
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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