Author: Kristin Øye Gjerde

The idea that the government should secure a majority shareholding in Hydro, which was primarily involved in chemicals and metals and was a big oil consumer, originated with CEO Torvild Aakvaag. In a November 1970 memorandum, he formulated the group’s ambitions very clearly – it was to become the government’s instrument in developing the Norwegian oil industry.[REMOVE]Fotnote: Johannesen, Finn Erhard, Rønning, Asle and Sandvik, Pål Thonstad, Nasjonal kontroll og industriell fornyelse, Hydro 1945–1977, (2005): 319.

A national instrument

Hydro was the Norwegian company most heavily involved from the start in North Sea petroleum operations. As a participant since 1965 in the Petronord group together with seven French companies, it had interests in exploration and development licences covering 12 offshore blocks.

To spread their risk, the Petronord partners had entered into a swap agreement in 1967 with the Phillips group. Each side obtained a 20 per cent share of the other’s licences. This deal proved gilt-edged for Hydro after the Ekofisk discovery. It had secured a 6.7 per cent interest in this field, which represented very good start-up capital as an oil company.

Proposals to use Hydro as a political instrument faced the drawback that it had a majority of private – and to some extent French – shareholders. The Norwegian state already held 47.72 per cent of the shares, with private domestic interests owning 25 per cent, French investors holding 23 per cent and four per cent registered in other countries – including Switzerland. That brought the total private shareholding to just over 52 per cent.[REMOVE]Fotnote: Ibid: 323.

If Hydro was to become a national tool on the Norwegian continental shelf, the state holding would need to be increased. On 9 October 1970, Borten and industry minister Sverre Walter Rostoft wrote to Hambros Bank in London as follows:

With reference to the conversation with managing director Otto Norland at my office on 9 October this year, I hereby confirm that I am interested in increasing the Norwegian state’s proportion of the shares in Norsk Hydro A/S from 47.72 to at least 51 per cent.[REMOVE]Fotnote: Proposition no 63 to the Storting on the purchase of shares in Norsk Hydro A/S: 3.

The acquisition had to occur quickly and in secret to prevent rumours spreading and causing the price to go through the roof. Borten therefore dispatched Norland on a tour of Europe by chartered plane, visiting a number of centres in France, Austria, Switzerland and West Germany. The banker bought Hydro shares on his own account and subsequently transferred them to the Norwegian state. His mission was a success, and Hydro was thereby available to become the government’s oil-policy agent.[REMOVE]Fotnote: Johannesen et al (2005): 323.

Change of government and approach

The share acquisition became known when the Storting considered it in January 1971. But how far Hydro would become the national instrument in the petroleum sector nevertheless remained politically uncertain. Creation of a wholly state-owned oil company still had its adherents, including on the non-socialist side. In reality, the Borten government also had only a short time left, with the four coalition parties deeply divided over Norway’s relationship with Europe. Its handling of the issue of European Community membership led to a vote of no confidence in the Storting. Internal dissension within the government was so great that it could not continue.

On 17 March 1971, the Ap’s Trygve Bratteli took over as prime minister.[REMOVE]Fotnote: Hanisch, Nerheim, G., & Norsk petroleumsforening. (1992). Fra vantro til overmot? (Vol. 1, p. 523). Leseselskapet.: 165-169. This change prepared the ground for a different model matured by the new governing party. A new oil company was to be built up, and would be wholly owned by the state.

Although the Ap government lacked a majority in the Storting, the state oil company model was promoted over the following year by industry minister Finn Lied. He was perhaps the party’s most influential industrial policy-maker in the years following 1945, head of the Norwegian Defence Research Establishment for many years and a respected scientist. Lied picked Arve Johnsen, who had earlier authored a draft Norwegian oil policy, as his state secretary (junior minister). Together, they proved highly influential.

Lied commented later in an interview:

We wanted the state to be intimately involved operationally in the sector. That would allow us to learn from the ground up. We wanted a wholly state-owned arrangement. This was the nation’s wealth. We didn’t have that form of control over Hydro, which was a limited company subject to the ordinary legislation governing such enterprises. That did not make it appropriate as the government’s instrument. The only possibility for securing an instrument was to have full ownership.[REMOVE]Fotnote: Finn Lied, interviewed by the Norwegian Broadcasting Corporation (NRK) in its My Life series.

The report from the Knudsen commission, which had assessed how state involvement should be organised inside and outside the Ministry of Industry, was presented on 24 March 1971 and marked an important preliminary to the decision on establishing a state oil company. This was a week after the government which commissioned the inquiry had resigned. The question then was whether its recommendations remained politically feasible after the change in administration.

Brazil and Norway have had wholly state-owned oil companies –Petrobras and Statoil respectively. The first of these dates back to 1953, when it produced on land. Unlike its Norwegian counterpart, which was founded in 1972, Petrobras had a monopoly of all domestic petroleum output. Although that ended in 1997, it retains a leading position in its home market. The company was part-privatised in 2000 – a year before Statoil.

Interesting offshore discoveries were made in both countries during the 1960s. While Norway is known for its Ekofisk find in 1969, the first oil field on the Brazilian continental shelf was proven the year before. The two nations made big offshore discoveries in deep water over the subsequent decade.

Initial subsea contacts

Brazil has been a pioneer with production ships and floating platforms tied back to subsea wells, with Petrobras testing a converted tanker for production as early as 1978. A floater solution was more flexible than fixed platforms. These ideas were picked up and further developed by Norway in the 1980s, when Norwegian oil companies also adopted them fully.[REMOVE]Fotnote: Gjerde, Kristin Øye and Nergaard, Arnfinn I, Getting down to it. 50 years of subsea success in Norway, 2019: 172

Along with their suppliers, Norway’s oil companies observed the boldness, inquisitiveness and willingness to pursue new technology displayed by Petrobras with great interest. A good relationship developed between Norwegian and Brazilian subsea specialists, and they learnt from each other.

When Statoil planned to utilise seabed wells on the Tommeliten field and its Gullfaks satellites in the North Sea during the mid-1980s, it hired two Brazilian subsea specialists from Braspetro – the international arm of Petrobras. Vincente de Silva and Mauro de Fauras contributed valuable operating experience to solutions for both fields. Statoil’s management was subsequently keen to continue the Petrobras collaboration, with Martin Bekkeheien – head of exploration and production activities at the time – taking the lead.[REMOVE]Fotnote: Hans Jørgen Lindland, e-mail to Kristin Øye Gjerde, 13 December 2021

Statoil drilling manager Idar Johnsen and Hans Jørgen Lindland, operations manager for Tommeliten, were dispatched to Brazil in 1987 to check the status of and interest for closer collaboration at Petrobras. They were very well received. The Norwegian company could offer collaboration on multiphase flow technology – in other words, transporting a mix of oil, gas and water in a controlled manner through a single pipeline with the use of chemical additives and pressure to prevent problems on the way to the processing plant. Much research underpinned this technology, which was highly profitable for the oil companies using it.[REMOVE]Fotnote: Gjerde and Nergaard, op.ci

Arrangements were made for an official delegation to visit Brazil a week after Johnsen and Lindland had returned home. The plan was to formalise a collaboration between Norway and Brazil on offshore and subsea technology.[REMOVE]Fotnote: Hans Jørgen Lindland, e-mail to Kristin Øye Gjerde, 13 December 2021

This group was headed by Reidar Due from the Centre Party, who was chair of the standing committee on energy and industry in the Storting (parliament). He managed to offend the host of a dinner hosted by the Brazilian government so greatly that all forms of cooperation were put on ice.[REMOVE]Fotnote: This story has been confirmed by Hans Jørgen Lindland, 13 December 2021 After this incident, a number of years passed with very little contact between Statoil’s subsea technology department and Petrobras.

Diverless methods

Subsea specialists in both Brazil and Norway wanted to ensure that work underwater could be done in a safer way. That including finding alternatives to using divers for making seabed connections.

The Brazilians made efforts to place Xmas trees – valve assemblies installed on wells to control production – under atmospheric pressure in a sealed chamber or habitat on the seabed. Unlike simply installing a tree in the open sea, this ensured that it stood in a dry environment. Instead of an operator having to dive down under pressure in order to open or close the valves, they could be lowered in a bell to the habitat, connect on, enter a dry space and breath normal air while doing the work. Brazil tested such solutions offshore.[REMOVE]Fotnote: Gjerde and Nergaard, op.cit: 301.

In Norway, opportunities for utilising a habitat of this kind were discussed for the Statfjord satellites. But Statoil decided against that approach, and it was never adopted either on the satellites or elsewhere on the Norwegian continental shelf (NCS). Diverless solutions were developed instead to eliminate the use of people completely in conducting subsea operations. Since remotely operated vehicles (ROVs) could carry out much of the work involved, divers were largely phased out on the NCS during the 1990s.[REMOVE]Fotnote: Ibid: 123

Contact re-established and extended

The Society of Petroleum Engineers held its first subsea forum in 1993 at Seefeld in Austria. Both Petrobras and Statoil attended, and were each very advanced in terms of the new projects and underwater technology they could present.

Statoil could point to a world distance record for multiphase flow transport from the Statfjord North satellite. The way this had been accomplished attracted considerable interest from the other participants.[REMOVE]Fotnote: Hans Jørgen Lindland, e-mail to Kristin Øye Gjerde, 13 December 2021. For its part, Petrobras could report records for deepwater operations. The Brazilians had made discoveries in water depths close to 2 000 metres.[REMOVE]Fotnote: Gjerde and Nergaard, op.cit: 301. Petrobras set a record in 1997 for the deepest subsea well to date of 1 709 metres on the Marlim field, and followed up in 1999 with a well in 1 855 metres on the Roncador field.

At this meeting, Lindland and the other members of Statoil’s subsea technology department got to know Orland Ribeiro at Petrobras. Good professional contacts subsequently developed between the underwater specialists at the two companies. A technology collaboration, also involving BP, was agreed a little later. This yielded a number of important results:

Petrobras supplied Statoil with operational data on production regularity from subsea fields, along with the design basis for the Brazilian company’s latest floating deepwater platform.

In return, Petrobras secured detailed information on drilling horizontal wells and results from Statoil’s research on multiphase flow.[REMOVE]Fotnote: Hans Jørgen Lindland, e-mail to Kristin Øye Gjerde, 13 December 2021 The Norwegian group was very innovative in terms of new patents, which made it an attractive partner for the Brazilians.[REMOVE]Fotnote: Bichara, Miguel, Technological innovation in Brazil and in Petrobras – the need of a systems approach to a complex problem

As early as the mid-1990s, Statoil was recognised as a world leader in the design and operation of fields at depths down to 500 metres. The collaboration with Petrobras also gave the Norwegian group access to expertise on deep and eventually ultra-deep waters – in other words, 3 000 metres and beyond.[REMOVE]Fotnote: Hans Jørgen Lindland, e-mail to Kristin Øye Gjerde, 13 December 2021 This strategic partnership opened the way to securing a number of deepwater licences off Brazil and other countries.

Suppliers actively involved

Statoil’s establishment of such a close technology collaboration with Petrobras was also highly significant for Norway’s supplier industry in the petroleum sector and its market access in Brazil.

An example was the subsea connections with control systems developed by Kværner. Their installation could be assisted by ROVs, which helped to make it possible to utilise underwater technology in depths beyond the reach of diver assistance. That in turn made oil production feasible in deeper waters. Kværner established a presence in Brazil in 1996, followed by Kongsberg Offshore Subsea, Aker Solutions and others.

These companies received good support from collaboration bodies established by the Norwegian authorities.[REMOVE]Fotnote: Gjerde and Nergaard, op.cit: 302. The Norwegian-Brazilian Chamber of Commerce, for example, was established in 1995 to promote trade, good relations and joint financial and professional interests between the two countries.

Rio de Janeiro was the centre for Norway’s commitment in Brazil, with Intsok[REMOVE]Fotnote: Intsok (short for International Continental Shelf) was created in 1997 as a Norwegian non-profit foundation by the Ministries of Petroleum and Energy, Industry and Trade, and Foreign Affairs as well as the Confederation of Norwegian Enterprise (NHO), the Norwegian Shipowners Association and the Norwegian Oil Industry Association (OLF), plus oil companies Statoil, Saga Petroleum and Norsk Hydro, the embassy and the consulate general holding seminars where Norwegian suppliers presented themselves. The government entered into trade agreements and the establishment of Norwegian subsidiaries was facilitated. The Innovation Norway trade promotion body not least established Innovation House in Rio in 2007.

The most recent addition to this set of organisations is Norwegian Energy Partners (Norwep), created in 2017 by merging Intsok with Norwegian Renewable Energy Partners (Intpow). The latter represented a relatively recent commitment in the renewables sector.[REMOVE]Fotnote: Gjerde and Nergaard, op.cit: 302-303

Collaboration of this kind between foreign and Norwegian oil companies and Norway’s supplier industry, with good backing from the government, helped to elevate a number of Norwegian companies into world leaders for subsea technology during the 2000s. The exchange of information and expertise with Brazil has been a crucial precondition for/driving force in this development.

Since the water depth on Tommeliten is about 80 metres, divers did the subsea work. A template was placed on Gamma to speed up the development. The protective structure and manifold were manufactured at the Rosenberg yard in Stavanger while drilling was under way.

Shoelace creates problems

The decision was taken to send Per Moi down in a Mantis manned submersible. As soon as he reached the seabed, however, the control room heard him yelling “get me up, get me up”. Three subsea monitoring systems were available during the installation of Tommeliten, but both the remotely operated vehicles (ROVs) were out of operation during commissioning.

This sounded strange to the American supervisor, because the vehicle had only just reached bottom. But Moi had got his shoelace stuck in the Mantis hatch, which was enough to allow water intrusion.

Loose screws and bending pipes

A number of other accidents occurred. The screws used to attach the handles to the valves on the operation panel for each well eroded. Normal unbrako screws had been used, but their sockets had vanished. Divers were used to replace them all with the right metal and external slots.

When the template was inspected before production began, a number of bolts turned out to be missing from the flange holes and were lying on the seabed. Two diving support ships, including Seaway Pelican, spent four weeks replacing all the bolts in the pipe flanges on the template, on the pipeline and beneath Edda. That delayed start-up.

Statoil laid three underwater pipelines to tie Tommeliten back to the Edda platform – two production lines and one for testing. Output from the field then entered the Ekofisk system for onward transport to Emden.

After allowing them to warm up, the pipelines were inspected. Specialists had conducted a long discussion over whether the trenched pipes should be covered with gravel or left for nature to do that job. The heated pipelines were meant to curve between the trench sides rather than escape from it. Those who favoured covering were dubious about this, since friction would differ from place to place.

Inspection showed that the pipelines had escaped from the trench in several places. The worst case of this “upheaval buckling” was about 30 metres long and 5.5 metres high. It looked as if the pipelines had come to life. Measures were needed to stabilise them.

The decision was taken to attach cement supports cast in situ. Specially manufactured plastic “tents” with attached straps were made fast to the pipelines by divers and reached down to the seabed. Each chute had several pockets which were filled with cement through a hose from a ship, starting at the bottom and moving gradually up as each pocket made contact with the pipe.Gravel was subsequently dumped at six upheaval points in an optimum manner which dispersed it both under and over the pipelines. Dumping alone was used for the smallest cases. It took a boatload totalling 8000 cubic metres of gravel to ensure that the transport lines were securely pinned down and could be overtrawled.[REMOVE]Fotnote: This article is mostly based on an interview by Hans Birger Hansen, Olav Bruset and Jarle Aksnes conducted by Kristin Øye Gjerde, 01.12.2015.

The first step was to put a board of directors in place. It had been decided that the company’s general meeting, comprising the responsible government minister, would appoint its members. In June 1972, that person was Finn Lied from the Labour Party.

He was accordingly present as promoter at the statutory general meeting of the company on 18 September 1972, along with his state secretary Arve Johnsen (later to become CEO). Also attending from the Ministry of Industry were secretary general O C Müller, director general Knut Dæhli, division heads Harald A Sommernes and Karl-E Manshaus from the ministry’s oil office, and consultant Nils Heilemann. Furthermore, representatives from the Auditor General’s office were present along with supreme court attorney Jens Christian Hauge as chair-designate of the board.[REMOVE]Fotnote: Minutes of the statutory general meeting of Den norske stats oljeselskap a.s. SAST/A-101656/0001/A/Aa/Aaa/L0001. Accessed at https://www.digitalarkivet.no/oe10511205100002.

Together with Johnsen, Lied had clarified at an early stage who he wanted as chair of the company. The government approved his proposal to give the job to Hauge, his close friend and ally.[REMOVE]Fotnote: Njølstad, O, Jens Chr. Hauge: Fullt og helt, Aschehoug, 2008, Oslo: 630. Both had been active in the resistance to the German occupiers during the Second World War and were members of Labour’s inner circle. During the 1960s, they had helped to frame the party’s programme.[REMOVE]Fotnote: Wicken, Olav, “Finn Lied”, Norsk biografisk leksikon, snl.no, 12 October 2014. Accessed 26 June 2020 from https://nbl.snl.no/Finn_Lied.

Hauge was a lawyer and politician. Following his wartime role as a leader of Milorg, the main Norwegian resistance organisation, he became defence minister in 1945 at the age of 30. After stepping down as defence minister in 1952, a new post at the Labour Party offices gave him an active role in shaping Norwegian industry policy.

He was responsible for establishing the Norwegian Defence Research Establishment in 1946, where Lied became head of research in 1957. The latter was moreover to be his successor as Statoil chair in 1974.

Vidkunn Hveding, an engineer and Conservative politician, was appointed deputy chair of the new company. His experience from various parts of the energy supply sector and the management expertise acquired in the same industry made him a professional expert. He also brought with him broad international experience through advisory and consultancy roles in such countries as Ethiopia, Brazil and Kuwait as well as a number of offices in industry and shipping.

The general meeting furthermore elected Aksel Fossen, a Storting representative from Labour who had served in the Norwegian merchant navy through six wartime years and was one of Norway’s most respected industry politicians. He was known as the “power socialist” from Odda near Stavanger.[REMOVE]Fotnote: Commemorative speech on former representative Aksel Fossen, Storting session of Thursday 22 October 2009 at 10.00.

In addition came the Conservative Party’s Per Mauritz Hanssen  from Kaarbøs Mekaniske Verksted in Harstad. Finally, senior lecturer Aage Solbakken in the department for industrial chemistry at the Norwegian Institute of Technology (NTH) was appointed an alternate director.

The composition of the board gave the impression of a political compromise between the two biggest parties of the day – two from Labour and two from the Conservatives. The common denominator of these directors was that their expertise from different fields, industries and political persuasions was relevant to Statoil’s business.

Although it was due to sit until the annual general meeting in 1975, the whole board actually stepped down abruptly a year early.

Personnel required

“National management and control” was the overall goal of Norwegian oil policy from the early 1970s. Where Statoil was concerned, this translated into technological control.

One way of achieving that was the rapid build-up of an organisation which mastered all the technical challenges faced when operating in the North Sea. That called in turn for recruiting the best team in terms of technological expertise.[REMOVE]Fotnote: Ryggvik, Helge, Til siste dråpe, 2009, Aschehoug, Oslo: 96.

As early as the day after the statutory general meeting of Den norske stats oljeselskap a.s, Hauge called the company’s first board meeting. That was held on 5 October 1972 at Drammensveien 40 in Oslo, and its most urgent priority was to put a management team in place.

The first step was to appoint a vigorous and visionary chief executive. This job was advertised, but Hauge quickly saw that the applicants were “pretty much of a disappointment”. In consultation with Lied and Müller, it was agreed to look around for other candidates.

Several were assessed, but the choice fell on Johnsen, who was leaving his post as state secretary at the industry ministry owing to a change of government.[REMOVE]Fotnote: Njølstad, O, op.cit: 631. With degrees in business economics and law, he had experience from the oil industry as well as the innermost circles of petroleum policy-making. According to the board minutes, he was “a person all the directors knew as an unusually able man and an outstanding leadership type”.[REMOVE]Fotnote: Minutes, board meeting, Den norske stats oljeselskap a.s, 5 October 1972. SAST, Pa 1339 – Statoil ASA, A/Ab/Aba/L0001: Styremøteprotokoller, 05.10.1972-14.12.1978, 1972-1978: 9 Hauge argued that no further candidates needed to be called in.

At the same meeting, the chair was given the board’s blessing to place job advertisements in a number of Norwegian newspapers and selected foreign oil journals.[REMOVE]Fotnote: Minutes, board meeting, Den norske stats oljeselskap a.s, 5 October 1972. Accessed at http://urn.digitalarkivet.no/URN:NBN:no-a1450-db60034661000003.jpg. These sought applications from “dynamic people” aged 30-50 with qualifications and practical experience in such areas as geology, geophysics, petroleum technology, petrochemical industry, international finance and economics, and administration. Putting a management team in place was the first priority.

Johnsen was appointed CEO in December 1972, and the first interviews could then be held with relevant applicants for other posts. No job descriptions were drawn up. Johnsen wanted decisive colleague with independent views and operational experience. Those looking for formal positions or titles were rejected.[REMOVE]Fotnote: Johnsen, A. (1988). Utfordringen: Statoil-år. Oslo: Gyldendal.s.26 “I was determined not to appoint people with such ideas,” Johnsen wrote in his first memoir.[REMOVE]Fotnote: Ibid: 26.

The company had few problems recruiting competent Norwegians for financial and administrative roles or general engineering posts. But petroleum expertise was less easy to find.