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PETROMAKS2-Stort program petroleum

Effects of Petroleum Investments in the Arctic Frontier

Alternative title: Effekt av investeringer i petroleumssektoren i Nordområdene

Awarded: NOK 6.4 mill.

From the very beginning in the late 1960s and early 1970s, the management of the petroleum resources on the Norwegian continental shelf has had a major impact of the development of industrial activities and employment in a wide range of sectors. This has led to remarkable wealth creation, nationally and most visibly in particular regions in western Norway. As the petroleum provinces develops in the Barents region it is a political ambition and a local/regional expectation that communities, industry and service industries will benefit. This phenomenon is what is called ripple effects in economic terms. The project aim is to increase authorities, developers and contractors knowledge of local and regional dynamic ripple effects of petroleum, and will improve insight and give more precise and robust instruments for creating and estimating local ripple effects and enhanced economic and social development. The petroleum industry in Norway has evolved into a very specialized industry where the skills demanded are within (amongst others) geotechnical services, automation, flow assurance and advanced financial services. A skillset that is matched by industries that has a tendency to agglomerate in the large cities and in the western part of Norway. This may have a considerable impact on how the ripple effects materialize when one moves outside the core regions and it is necessary to take into account how deliveries relates to the local industries and the local labour market. Thus, effort has been on compiling and facilitating existing data from previous surveys of supplier effects in Møre and Romsdal region and the Snøhvit and the Goliat developments in the High North. A multi-regional demand-driven model is established based on an Input-Output kernel. The model takes particular account of local wage formation and labour supply. Tests indicate that the model yields realistic results and that a standard Input-Output model (for comparison) tends to somewhat overestimate the ripple effects of the petroleum activity. The data required to run the model is updated annually by Statistics Norway and is available free of charge. The model is sector-independent and will e.g. be used to calculate ripple effects of investments within bio-based industries. Microdata/individual data from Statistics Norway has been used for labour market, competence, recruitment analyses, etc. The focus is on education, educational choices and employee adaptations and how employees move between enterprises (eg from existing local business to new enterprises in the petroleum sector) and geographic mobility with, among other things, moving back. This is important with regard to the dynamics of the regional labour markets, also with regard to development and access to relevant expertise for different enterprises/sectors. A study on wage effects based on microdata for 2008-2013 has also been carried out. It is shown that the oil and gas industry brings wage spillovers to other sectors. There is a link to geographical proximity and to occupational / business affiliation, while there is no significant link to education. Thus, the study demonstrates that the petroleum sector has a bearing on wages in regional labour markets. The effects are persistent, but weaker than during the establishment of the oil industry through the 1970s. Particularly non-traded industries are exposed to wage spillovers, while traded industries are affected to a much lesser degree. A survey has been conducted, addressing the effects of the oil-price collapse that took place during spring 2014 as the oil price plummeted from 110 US dollar per barrel down to 30 dollar about one and a half year later. This caused a major down turn in the Norwegian oil industry. Topics raised are: How do companies assess the current situation and how do they adapt to the reduced demand? To what extent does this affect the competitiveness of the local supplier industry? How do companies adapt to the new market situation what about the degree of reorientation among local suppliers and is local ownership of importance? Due to shrinking markets and economic losses, respondents have been reserved. Work on analysis will continue. The project has focused on the importance of competent industrial / service clusters being present in the coastal areas of Troms and Finnmark and what political and industrial measures can enhance the desired development. Two publications offer insights. One investigates bottlenecks for developments in the petroleum sector, the construction industry and the wind power sector, demonstrating major differences in regional strategies and public policies between the sectors and discusses the significance of these differences. The second publication draws on oil and gas cases (Norway) and hydropower (Iceland) and demonstrates how national economic policy affects the value creation / effects of regional affairs, power relations and links to global production networks.

The management of the resources on the Norwegian continental shelf has from the beginning had a major impact of the development of industrial activities and employment in a wide range of sectors. Giving rise to significant wealth creation, nationally and most visibly in particular regions and communities. As the petroleum provinces moves northwards it is expected that local/regional industry and service industries will benefit. However, the potential suppliers are sparsely located and in a different stag e in the life cycle than suppliers further south, and the infrastructure framework is different. Thus succeeding in creating new economic activity is dependent of a new knowledge base: What actions support the desired development, and how is the dynamics of this development? Is the underlying logistical cost base a challenge to the commercial actors that can be eased through policy interventions, and in that case which? The project aim is to increase authorities, developers and contractors knowledge of local and regional dynamic ripple effects of petroleum activity and management in new provinces, and will improve insight and give more precise and robust instruments for creating local ripple effects and enhanced economic and social development. Invest igation of requirements for local deliveries from the perspective of the oil companies will be performed (building on earlier studies), with a focus on how technology choices will influence the ripple effect potential. The dynamic of local labour and educ ation markets under the influence of petroleum activities plays an important role in this picture, and will be addressed scientifically. From this we will develop new and improved methodology and assessment prototype models to increase the ability to pre dict realistic ripple effects related to the investment and operations. The project will contribute to improved management, by both public and private actors of the petroleum sector as it moves northwards.

Funding scheme:

PETROMAKS2-Stort program petroleum

Thematic Areas and Topics

NordområdeneArktisPortefølje Klima- og polarforskningPolitikk- og forvaltningsområderOlje og gass - Politikk og forvaltningPolarLTP2 Et kunnskapsintensivt næringsliv i hele landetPortefølje Demokrati, styring og fornyelsePortefølje Humaniora og samfunnsvitenskapFornyelse og innovasjon i offentlig sektorInnovasjonsprosjekter og prosjekter med forpliktende brukermedvirkningEnergiNordområdeneEnergi, petroleum og mineralressurserPolitikk- og forvaltningsområderOffentlig administrasjon og forvaltningEnergiStorulykker og arbeidsmiljøPolarSvalbardNordområdeneGeopolitikk, internasjonal sikkerhet og folkerettPolitikk- og forvaltningsområderNæring og handelNordområdeneSamfunnsutvikling i nordområdenePortefølje PetroleumBransjer og næringerLTP2 Fagmiljøer og talenterNordområdeneSvalbardGrunnforskningLTP2 Global utvikling, ulikhet og demokratibyggingPolitikk- og forvaltningsområderFiskeri og kystLTP2 HavGlobale utfordringerLTP2 Innovasjon i stat og kommuneLTP2 Petroleum og mineralerLTP2 Styrket konkurransekraft og innovasjonsevneInnovasjon i offentlig sektor (utgår 2014)Innovasjoner i virksomheter innenfor offentlig forvaltning og tjenesteyting (utgår 2014)Innovasjon i offentlig sektor (utgår 2014)PolarArktisNordområdeneInnovasjon i offentlig sektor (utgår 2014)Brukeres, frivillige organisasjoners og sivilsamfunnets innovasjoner i og for offentlig forvaltningPolitikk- og forvaltningsområderUtenrikspolitikkTjenesterettet FoUPortefølje Global utvikling og internasjonale relasjonerFornyelse og innovasjon i offentlig sektorPolitikk- og forvaltningsområderBransjer og næringerOlje, gassAnvendt forskningPolitikk- og forvaltningsområderKommunal-, distrikt- og regionalforvaltningLTP2 Samfunnssikkerhet og samhørighetLTP2 Utvikle fagmiljøer av fremragende kvalitet