1. Oil for Development – OfD Stanford March 13, 2009 Petter Nore www.norad.no\ofd Januar 2008

2. Overview Description ”Oil for Development” Lessons learnt from the program Issues for further discussion : Security of supply and OfD

3. Introduction Norway with petroleum assistance from mid 1980s Vietnam\Mozambique\Angola Oil for Development (OfD) founded in 2005. Aim to strengthen environmental, governance and financial aspects of assistance Operates in 10 core countries plus regional programs and 15 ”light” assistance countries. Close links with ”Clean Energy for Development” (A new Norwegian program promoting clean energy solutions in cooperating countries)

4. OfD – main objectives Help cooperating countries to Generate sustainable eonomic growth Promote the welfare of the whole population Be environmentally benign Combat the ”resource curse”

5. Core countries

6. How we work Along the integrated petroleum chain Limited downstream activities Demand driven No export of the ”Norwegian model”; Share experiences Enter where ”we can make a difference” and where there is a clear demand

7. OfD – who we cooperate with National governments Civil Society (both Norwegian and international) World Bank\ African Dev. Bank\ IMF\ UNDP\ EITI Norwegian ministries Norwegian and international oil and service companies; where appropriate

8. OfD and civil society Civil society (incl. media) plays a crucial role in preventing the resource curse OfD cooperates with Norwegian and international NGOs Aim is to build capacity among civil society organisations in the South 6 Norwegian NGOs and one international NGO have received funding for 2008 (20 mill NOK)

9. OfD – our foundation OfD is built around three integrated themes: 1.Resource management 2.Environmental protection 3.Revenue management Principles of good governance, transparency and accountability are a fundamental part of the three themes

10. Resource management Strengthening of local institutions (ministries & directorates) Development/assessment of petroleum legal frameworks Framework for exploration and production of petroleum Resource databases Strategies for transparent licensing and tendering processes Policies to stimulate technology development and the involvement of local industry

11. Environmental management Build environmental management capacity within the sector Basic legislation, rules and regulations covering environmental dimensions of the petroleum sector Minimise discharges from activities Environmental impact assessments Manage gas flaring and other national/global climate challenges that are directly related to the petroleum industry

12. Revenue management Design, management and control of tax regime for the extraction of oil and gas (Government take) Transparency and accountability around payments by oil companies (EITI) Planning and execution of government budgets Management of the financial savings (oil fund)

13. Transparency, anti-corruption Open bid and tendering processes Transparency about licenses and contracts Transparancy about payments by oil companies Extractive Industries Transparency Initiative (EITI) IMFs Guide on Resource Revenue Transparency

14. Ofd activities, NOK million (1USD=5NOK)

15. Core activities, percent

16. Afghanistan; a case-study OfD engaged in a number of complicated states (Sudan\Iraq\Palestine\Afghanistan) Afghanistan a case study of what is feasable in such situations\what are the key uncertainties

18. Afghanistan OfD has worked in Afghanistan for two years A combination of anti-poverty\development and foreign policy considerations Has helped to create a legal petroleum framework A new Petroleum Law enacted Draft regulations accepted by the government

19. Afghanistan (2) Has given advice to Afghan authorities how to organize first concession round for three blocks in Northern Afghanistan OfD is helping in capacity building for government Data management and environmental issues

20. Afghanistan (3) Uncertainty 1: The market for gas Gas for power\export; Who will guarantee the demand? Uncertainty 2: Which companies to bid in today’s financial situation? Uncertainty 3: The actual implementation of the legal and regulatory system

21. Lessons learnt from OfD program

22. Ten Lessons Learnt 1. Heavy demand for the program -Rapid growth in environmental and financial advice -Less demand for governance\ anti corruption; but increasing 2. Presents options; not solutions -Can’t force countries to implement policies 3. Ensure independence of advice from commercial sector -But part of Norwegian foreign policy agenda 4. Keep a Long run (5-10 year) perspective  Capacity building\Institution building takes time

23. Ten Lessons Learnt 5. Keep a short term capacity to react 6. Civil society and transparency; necessary but not sufficient factors for success 7. Concentrate number of countries\programs -25 countries and regional program far too many 8. Anchoring in the South -Too many experts from the North fly in\out -South\South cooperation\ capacity building must be strenghtened 9. Better coordination between donors a must

24. Ten Lessons Learnt 10. Norway; a relatively easy ”brand” to sell Reasonably successful resource rich country Non-imperialist past OfD part of Norwegian foreign policy A balance between interests of state and companies But; Norwegian society\politics\economy differs fundamentally from situation in other commodity rich countries

25. Security of Supply and OfD

26. Security of Supply  There are suffient physical hydrocarbons in the world Problem is political: To produce and deliver resources. We have seen the end of cheap oil NOT of oil itself  Top of the international agenda  Europe\Ntl gas imports from Russia  US: Crude imports\energy independence

27. Security of Supply History  Churchill WWI\Persia\English navy  1973 oil embargo  Ukraine cutoffs of Russian gas  Two Gulf Wars

28. Two aspects of Security of Supply with limited relevance for OfD Physical cut-off of energy  Temporary damage?  The producers need to sell their products in the end Security of Demand  Key concept in the gas business used especially by Russia

29. Third factor; OfD can play a role in encouraging long run supplies Foster increased willingness to invest by IOCs  Higher risk means less investment. Risk premiums in excess of 10% pluss do not encourage investments (e.g. Sudan)  IOCs don’t want weak petro states  IOCs want stable legal and regulatory frameworks ; political predictability and stability  These are also the aims of OfD

30. World supply less than potential  ”Resource nationalism” due to unbalanced historical record. Little spinoffs\limited transfer of technology\weak capacity building ?Bolivia, Iran, Russia?  Weak state capacity ?Iraq, Afghanistan?  Consequences of the ”resource curse” (weak bureaucracy\internal strife) holds back further expansion ?Nigeria, Sudan? OfD can encourage”win\win” situations between resource states and Western technology

31. Summary Security of Supply  Link between ”resource curse” and security of supply  OfD can encourage”win\win” situations between resource states and Western technology  OfD can foster increased willingness to invest by IOCs