Journal of World Energy Law and Business, 2018, 11, 89–91

doi: 10.1093/jwelb/jwx040
Advance Access Publication Date: 18 December 2017
Book Reviews

Jonathon W. Moses and Bjørn Letnes, Managing Resource Abundance and Wealth: The Norwegian
Experience. Oxford: Oxford University Press, 2017, ISBN: 978-0-19-878717-4, 321 pages, GBP 60.00

When oil was discovered on the Norwegian Continental Shelf in the late 1960s, Norway was already an
established democracy enjoying a modest level of wealth. Its government had long experience in promoting
economic development and infrastructure investment. With its competent bureaucracy, its tradition of public
control over natural resources, and its strong labour movement, Norway had a head start over many other
oil-exporting countries at the moment when their oil industries were born.
Nevertheless, Norway’s subsequent experience of managing its oil industry and the broader national econ-
omy contains lessons from which other oil producers could benefit. Norway was able to cushion the impacts
of its early oil boom on domestic prices, wages, currency value and employment in non-oil sectors: parame-
ters whose collective disruptions can cause serious economic damage, commonly referred to as the Resource
Curse, the Paradox of Plenty or the Dutch Disease.
Some of the mechanisms that tempered the impact were purely Norwegian, such as the relationship of
trust enabling the government to contain, temporarily, rising wage demands. The authors credit immigration
also for easing labour market pressures. An even more important step that minimized economic overheating
due to the new oil industry was a conscious government decision to restrict the pace of oil sector develop-
ment, at least through the first two decades following the initial discovery.
One of the most prominent elements in Norway’s management of oil revenue is its Government Pension
Fund, Global (GPFG), whose value currently exceeds $1 trillion. The Fund and its accompanying budgetary
rules (limiting the amount that can be transferred to the public budget each year and restricting its spending
to projects that enhance productivity) have helped enable the government to achieve macroeconomic balance
and retain international competitiveness. Yet, the authors discourage readers from exaggerating the role of
the Fund, despite its impressive value, and emphasize instead the importance of maintaining the size of the
labour force as key to ensuring sustainable fiscal policy.
The GPFG was not a factor in neutralizing the early economic impact of the oil sector. Oil revenues for
the first two decades or so were used primarily to retire the nation’s outstanding debt and to build the welfare
institutions of the state. The parliamentary act creating the Government Petroleum Fund (predecessor to the
GPFG) was passed only in 1990, and the first injection of capital occurred in 1996. The value of the Fund
expanded rapidly after 2003 with the steady rise in oil prices and revenues.
Of course, Norwegian government management of the petroleum sector has required far more than tem-
pering macroeconomic impacts. The authors praise the Tripartite Model of administration, which divides
responsibilities among independent, coordinated institutions: the Ministry of Petroleum and Energy (policy),
the Norwegian Petroleum Directorate (regulation) and the national oil company, Statoil (operations), at least
prior to Statoilo’s partial privatization in 2001. Other oil producing countries have adopted a similar tripartite
structure (e.g. Algeria).1
Government policies have necessarily evolved over time concerning the promotion of local content, assur-
ance of workers’ safety and protection of the environment. International trade rules (including TRIMS,

1 On the creation of Algeria’s regulatory body, Agence Nationale pour la Valorisation des Resources en Hydrocarbures (ALNAFT), in addition
to the Ministry of Energy and Mining and the NOC Sonatrach, see David G Victor, David R Hults and Mark Thurber (eds), Oil and
Governance (CUP 2012) 581–83.

C The Author(s) 2017. Published by Oxford University Press on behalf of the AIPN. All rights reserved.
V

 89
Downloaded from https://academic.oup.com/jwelb/article-abstract/11/1/89/4759447
by University of New England user
on 14 February 2018
 90  Book Reviews

TRIPS, GATS and the Global Procurement Agreement) as well as EU and other regional trade agreements,
today constrain host governments’ freedom in promoting local content. Host governments that tighten safety
and environmental regulations, like governments that change tax systems, may be accused of violating stabili-
zation clauses in contracts and may be subject to investor-state dispute resolution provisions of investment
treaties. Oil exporting countries today cannot emulate some of the Norwegian management mechanisms
used in the past.
The manner in which Norway adapted oil and revenue management over time, in response to changing
domestic and international circumstances, constitutes one of the most important lessons for others.
Successful resource and wealth management require constant attention, flexible policies and, above all, alert
managers and citizens. Such evolution, in turn, requires transparency, another important lesson from the
Norwegian experience.
Norwegian law requires all large oil, gas, mining and logging companies registered or listed in Norway to
publish the payments they make to governments, worldwide. Oslo is the seat of the Extractive Industries
Transparency Initiative (EITI). Statoil, still 67% government-owned, is far more transparent than many
NOCs2 and publishes its payments to governments. Norges Bank Investment Management (managers of
GPFG) provides detailed information to the general public.
Angela Cummine, in her recent global assessment of Sovereign Wealth Funds (SWFs) concludes: ‘the
GPFG is highly transparent’.3

Norges Bank presents quarterly financial reports to its government owner containing valuations and
measurements of returns, which are publicly released, with a full list of every single asset held by the
fund published yearly in the annual report . . . Norges Bank also provides extensive information on
assessment, measurement and reporting of investments, as per its obligations under its own regulations
and under the Santiago Principles [for SWFs]. From 2007 onwards it has published a full list of how it
voted on every issue in every company in which it invests where it has exercised its ownership rights.4

The authors of Managing Resource Abundance and Wealth: The Norwegian Experience save the most controver-
sial issues for their last substantive chapter, ‘The Ethics of Petroleum’, where the authors raise two important
and timely questions:

• Does corporate social responsibility (CSR) undermine good government by removing the
incentives for governments to enact laws and undertake actions that maximize social
welfare?
• If it is unlikely that the world can maintain its present level of petroleum production while
simultaneously pledging to limit global warming to 2  C, and if petroleum revenues in many
countries have failed to lift large segments of the population out of poverty, is it ethical for
states to exploit their petroleum resources?

The authors describe how the Norwegian state and its NOC approach these questions, but can only urge
other governments and companies to wrestle with such issues and ‘be prepared to defend their conclusions
in an open and honest fashion’.

2 In a recent unpublished survey of major energy company websites, W Kyle Beatty was unable to assess board diversity (age, gender,
nationality, independence) for most OPEC NOCs, a notable exception being Saudi Aramco.
3 Angela Cummine, Citizens’ Wealth: Why (and How) Sovereign Funds Should Be Managed By The People and For the People (Yale University
Press 2016) 123 (italics in original).
4 ibid.

Downloaded from https://academic.oup.com/jwelb/article-abstract/11/1/89/4759447

by University of New England user
on 14 February 2018
 Book Reviews  91

Overall, this book explores issues that must be confronted by company executives and government offi-
cials in countries dependent on resource exports. The text is well documented with extensive endnotes, a sub-
stantial bibliography and a thorough index.

John Gault
Member of the JWELB Executive Committee

Downloaded from https://academic.oup.com/jwelb/article-abstract/11/1/89/4759447

by University of New England user
on 14 February 2018