TRILLION DOLLAR BABY: How Norway beat the oil giants and won a lasting fortune

AUTHOR:  Paul Cleary is a prominent Australian journalist who has documented the politics and economics of resource extraction for more than a decade. He served as an advisor to the Government of East Timor on resource-sector governance and negotiations. He has a doctorate from the Australian National University.

PUBLISHED BY: Black Inc., an imprint of Schwartz Publishing Pty. Ltd. Carlton, Victoria, 3053, Australia. (2016)

REVIEWER: Brian Harrisson was formerly a Corporate Financial Executive, Public Accounting Practitioner, Mining Company Director and Business Strategist. He is a fellow of CPA Australia, is now retired and lives with his wife, in Melbourne. He originally graduated in Industrial Accounting later in Economics and Politics and later still in, Advanced Taxation Law. His website is at  .The site was developed to provide considered opinions on issues of community importance.


DATE: 16th November, 2016




The book tells the story of the ultimately successful development of Norway’s offshore oil wealth for the benefit of the Norwegian people. It began in the 1960’s and continues to this day. The book takes its readers through the key events and outlines the activities of some of the major players involved in the history of the period. The narrative is derived from a wide range of sources that include official documentation and interviews with major players in the saga, giving the book a high degree of authenticity. This perception is enhanced by the comprehensive nature of the ‘End Notes’, references, bibliography and the books index. The appendices include ‘Norway’s 10 commandments that guided government decision-making on the development of the resource, while the historical chronology included early in the book gives the reader an overview of the broader Norwegian history into which the period under consideration can be fitted.

The successful development of the resource is impressive when it is realized that developments in many resource rich countries including wealthy free market western democracies, have been less than auspicious where success in this context is measured by the extent to which the project’s objective is achieved. This was to obtain the major share of the value flowing from the resource exploitation for the Norwegian people, and its corollary, avoiding the ‘Resource Curse’, a term coined to describe the paradox whereby the economies of well-resourced countries, are commonly damaged in some way by the exploitation of the resource. The narrative does not directly address the question of ‘why’ Norway was so successful while its well resource-endowed free market democratic peers such as Canada, United Kingdom and Australia, were less so, but it does provide some hints.

The active role the Norwegian government played in the management and operation of the project provides one likely explanation. I labelled the system Norway used as, the Norwegian model (NM)[1]. This contrasts with its peers which followed the more ‘traditional’ Free market economic model (FMEM) to develop their projects. Under this model international and/or domestic private sector corporations are traditionally licenced to undertake the developments (essentially, on behalf of themselves), and accordingly gain much of the value from a project. Under this model, governments have in general also provide massive production subsidies[2] to carbon fuel companies and activities, making the returns achieved by these private entities, even greater.

It will be argued later that the Norwegian experience was significant, but before explaining why, each model is considered in more detail to provide a context for the explanation.


The Norwegian model (NM)

The critical nature of the government’s active involvement in the project has already been noted. A key administrative step of this involvement was taken in 1963 when, in response to the Phillips Petroleum offer to pay it $US163,000 per month to acquire exclusive rights over the Norwegian continental shelf, the government declared sovereignty over the shelf. This gave it the sole right to grant licences for the exploration and production of oil from the location. At that stage, no one had any idea about just haw vast the resources under the seabed, were.


Having set the scene, the government took control by developing the policies, strategies and plans to achieve its objective. It acquired the tools, institutions and skills that enabled it to manage the project as required. These included: (a) Taking a direct stake in the oil and gas producing areas through ‘Statoil’, its own corporation formed to act as both the holder of the equity stake and operator (head contractor) in the oilfields. (b) Seconding Norwegian engineers to work in the international oil corporations to gain experience in and knowledge about the petroleum industry and the way their international ‘partner corporations’ worked. (c) Making optimal use of existing resources: The educated, skilled, experienced and corruption free bureaucracy ensured that the development of the resources met the required rules. The bureaucracy had had experience in dealing with powerful foreign corporations during the period of the development of Norway’s Hydro-electric resources and put this experience to good effect. (d) Requiring that any onshore processing facilities planned, were established in Norway and that Norwegians were favoured for the jobs that became available.


As part of this, the government developed ‘Team Norway’[3] thereby ensuring that the Norwegian people were aware of and supported what the government was trying to achieve. ‘Norway’s ten commandments’, the rules applied to developments, were promulgated for all to see. Critically, the conservative opposition party supported the objective of the project and this prevented the foreign corporations using the ‘divide and rule strategy’ they have successfully used in other countries.


It established rigorous Taxation integrity rules:  These defined the principles of pricing the output from the project and its cost base. These were aimed to ‘drive a stake’ through the heart of the dubious taxation strategies global corporations commonly employ to avoid taxation in countries in which they earned profits. On the other hand, the government ensured that an adequate return on Investment was in prospect for its large corporate international partners, to maintain their interest in the project.

The success of these processes was both tangible and significant for the Norwegian people and their businesses. Norway has the highest standard of living in the world, a growing economy with a thriving business sector and has balanced this with a wide-ranging system of social justice that includes universal free access to a first-class education and health care facilities. Importantly, the development avoided the extreme movement of income and wealth in favour of the top 10% of the population, that is common in western democracies that operate under the FMEM.

The ultimate economic success of the development is reflected in comparative ‘balance sheets’ of the country. In 1970 the country had net foreign liabilities, equivalent to 40% of GDP. By 2016 this had been transformed into net foreign assets, equivalent to 185% of GDP. Most of the money is held in the Norwegian Sovereign Wealth Fund which currently totals $US 870b. This astute move not only provided a pool of savings to help Norway deal with future challenges. The accumulation and investment of the funds overseas helped avoid potentially destructive currency driven rises in export prices that would otherwise have occurred, thus avoiding one of the typical ‘Resource curse effects’.

The success reflected in the 2016 balance sheet, should not obscure the fact that problems were encountered during the journey to that point. Oversen[4] indicated that during the 1970’s the world was adversely affected by the breakdown of the Bretton Woods system in 1971 and the oil price shock following the YOM Kippur war in 1973. The counter cyclical policies that the government introduced to deal with the resulting global economic downturn, triggered a surge in wages and costs that spilled over into its tradable sector causing the economy to overheat, causing inflation and crowding out of the non-oil trading sector. In the 1980’s a credit liberalization caused another overheating with near fatal consequences when the oil price collapsed in 1986. Up to the mid 1990’s the country had spent most of its oil revenues, a large part of which had been reinvested in the petroleum sector. Lessons from these apparent excesses accentuated by the lack of adequate savings from the project begun to lead to remedies. One of these came in the form of the Norwegian Petroleum Fund which was established in 1990. The first financial allocations were made to it in 1996. In 2001 government renamed the fund, Government Pension Fund-Global (GPFG) and introduced a framework for the sound and sustainable management of petroleum revenues.

Another unfortunate outcome between 1967 and 2016 was that there were over 300 lives lost during the developmental journey. As well, some environmentalists expressed dissatisfaction with the country’s trajectory. They considered that the increasing oil production was worsening the already problematic anthropogenic driven, warming of the planet and criticized ‘Statoil’s’ plans to drill in the pristine arctic region. This criticism was accentuated by the earlier 23rd, and the more recent 24th licensing rounds, which permit oil companies to explore for the significant fossil fuel resources believed to exist in the Norwegian sector of the Barents Sea[5].

A government ‘white paper’[6] prepared in 2013, covering the long-term perspectives on the Norwegian economy, showed that it is aware of the criticisms and has put strategies in place to mitigate some of the criticisms. This included a requirement that the Sovereign Fund dispose of any investments in coal companies that it held. The country has had a record of generating a large proportion of its power needs from clean renewable hydro-electric facilities and invests in clean energy research.

In the planning and development of its non-renewable resources, the Norwegian government made choices in this increasingly complex world to address the many challenges it confronted. It seemed to have tried to balance, the needs of its people with a range of other challenges. These include demands arising from the warming of the planet, the world’s strategic need for fuel and the less than enthusiastic response of the international community to commit to binding emissions targets that aim to mitigate the rate of global warming. In the end a reader’s judgement about of the country’s trajectory will be governed by his/her own set of values. These may lead people to compare Norway’s actions with those of other oil rich countries which have also developed their resources in the face of the global warming challenges. They might also think about just how tardy and inadequate the international community have been in their responses to pressures for binding emissions targets. People might also think about the potential strategic risks this small country might have faced in this less than ideal and fraught world, had it not undertaken the development of its vast oil resources.



The Free market economic model (FMEM)

In most liberal ‘free market’ western democracies, this model is used to manage and guide their political economies. The model has political and economic dimensions each of which exerts a powerful and reinforcing influence on the other. The political dimension is often described as Neoliberal politics while the economic dimension of the model is invariably represented by the principles of the ‘Neo-classical economic paradigm’ otherwise called the ‘Neoliberal economic model’ or simply the ‘Orthodox or mainstream economic model’, for which selected main attributes are outlined below[7].  The US government has had a strategic interest in this model since the end of the second world war. It is no coincidence that there was a resurgence of interest in the model during the cold war. Communism was a threat and the political notion of freedom and its corollary, the ideology of free markets, was at the disposal of the US government. The USA as leader of the western world used the notions of freedom and free markets to devastating effect against its communist opponents. The public contrast was between the free, affluent, glamorous West Berlin and the enslaved, poor, dull communist East Berlin. Most anti-communist countries were deemed to have free market economies and so had the same neo-liberal characteristics as the dominant military power, the United States, whose economy was inaccurately portrayed as the unfettered operation of market forces with a limited role for government. The Pentagon backed Rand Corporation and the US Air-force funded research by the big eight universities in the USA into mathematical economics as a tool of national defence and provided the opportunities for conventional economics to push other economic versions out of the way. Brain[8] has argued that the cold war was one of the primary causes of the corruption of neoliberal mainstream economic thought.

The model received the ultimate impetus in the early 1980’s when the Reagan administration in the USA and the Thatcher administration in the UK, defined ‘government’ as the primary source of their economic problems. This decidedly antagonistic and hypocritical political view expressed by those governments was absorbed by the orthodox economic system and has exerted a powerful influence on both economic theory and policy to this day. In the USA and the UK, the new model was supported by the administrations that followed the Reagan and Thatcher administrations thereby embedding those ideas in the political economies of the US and UK and by association those in the western world from then on. These ideas became the conventional economic wisdom internationally. This was indicated by the behaviour of several of the significant international institutions. The World Bank (WB) made new appointments to the positions of President and Chief Economist in the early 1980’s, after which both the WB and the International Monetary Fund (IMF) became free-market missionaries[9]. Reflecting the new dominance of the free market ideas, their previous policies of eliminating poverty using governments to improve markets in developing countries was revised to one that saw government as the problem, with free market economics providing solutions to all problems. These ideological solutions, which involved the same economic strategy for every country, were collectively described as, the ‘Washington Consensus’, a consensus between the WB, the IMF and the US Treasury about the so called ‘right’ policies for developing countries. (A cynic might also observe that the ‘consensus’ appeared to benefit the international financial institutions significantly.)  The policies included granting loans that were made conditional on the borrowing countries implementing the so call Washington consensus policies. The free market oriented institutions also include the World Trade Organization (WTO). Trade agreements it sponsors, such as the Trans Pacific Partnership agreement (TPP), typically contain dispute resolution procedures which can effectively be used to override, the laws of the land of participant parties even if those laws are passed to protect its people from reprehensible corporate behaviour[10]. Hearings of WTO tribunals set up to hear disputes are held in camera so that rulings of the tribunals can hardly be called transparently arrived at.

The free trade mantras preached and applied by developed countries and their international institutions referred to, typically worsen the distribution of income and wealth in favour small powerful minorities within countries. This problem is accentuated by the fact that the ‘Conventional or neoclassical economic model’ which is a major driver of that outcome, is the only system of economic thought taught in the main universities in the USA and elsewhere in the western world thus effectively mediating a monopoly on economic ideas within western academia and hence within the domain of the west. Notwithstanding the somewhat dubious assertions of its academic and professional supporters, that the neo-classical economic model is a science, the model is based on value judgements and thus has an ideological dimension[11] making such an assertion spurious. This spurious behaviour can be at least partially explained by one seemingly inevitable and common outcome in all countries that use the FMEM. It typically produces large skewed maldistributions of income and wealth, that favour a small group of powerful and wealthy people within a country in which it operates. This no doubt explains why the model still has such widespread support throughout the halls of power in western world.

Selected theoretical attributes of the Free market model can be described as follows: (a) Markets: Are typically free and populated with many buyers and sellers who are rational and perfectly informed (b) Minimal government: Markets should be free and subject to a minimum of government interference. (c) Competition: This mediates prices which vary with supply and demand. No one competitor can control prices. (d) Efficiency: Competitors competing in free markets will produce the most efficient economic outcomes. (e) Taxation: Taxation should be low. The model does not recognize the role that power plays in the distribution of income and wealth within a country in which the model operates




A simplified comparison of key aspects of each model is shown below:



Government set primary objective Planning interferes in the operation of the free market which achieves the most efficient outcomes.
Government managed project towards objectives Governments should leave those activities to the private sector which does them best.
Government facilitated national cooperation Cooperation is incompatible with competition which achieves efficient outcomes.
Taxation used to maximize government’s share of projects value Taxation should be minimized
Government ensured that corporate partners earned an adequate Return on investment (ROI) Adequate ROI consistent with a project’s risk profile is a prerequisite of private investment.







Norway based its resource development on an economic model that is different to the model adopted by most of its democratic peers. Although some might ask ‘So what?’, the fact is that the ideology of the FMEM was one of the glues that bound the western alliance together during the cold war and still does. It has also been a vehicle for delivering significant income and wealth to powerful private vested interests resulting in large maldistributions of income and wealth in their favour, both within and between countries. It has powerful support throughout the western world, albeit for less than altruistic reasons. By showing that there is an alternative model of resource development within the capitalist system, that avoids those inequities, while also being efficient, the Norwegian model directly challenges the free market model and its ideology. The Norwegian experience therefore gives rise to a paradox. On the one hand, the experience has provided a light on the hill for countries that are anxious to maximize their share of the value from their resource developments, for their people. On the other hand, in doing so it has challenged the private powerful interests that have benefited so significantly from such projects, and their governments that support them. These interested parties are therefore likely to perceive the Norwegian model of development as a looming threat to be dealt with. Thomas Piketty[12] has shown that vested interests have responded decisively when their sources of income and wealth are challenged. Although it is not clear what form these reactions might take in this modern fast-changing world with a new US President elect, there will surely be such reactions.




This book has not only provided a fine historical account of the development and exploitation of the massive oil resources within the territory of Norway, it can also be perceived as a ‘how to manual’ for resource endowed countries, which like Norway, want to reserve a greater share of resource development benefits for their people, however even if earnestly pursued, this outcome may not be as easily achievable in today’s world.


It may be validly argued that the Norwegian experience was a special case, because the country already had a lot going for it, which many other countries, especially developing countries, do not. This is partly because Norway does not have the extreme internal barriers that impede rational resource developments in other countries. These barriers include such phenomena as endemic corruption, ethnic and religious differences, and unstable political systems that enable international corporations to turn those barriers to their own advantage. The Norwegian experience can also be regarded as a special case partly because times have changed for the worse since the start of the development. There are at least two reasons for this. First since the start of the Norwegian development in the early 1960’s the country was an ally and part of the western alliance. At that stage the cold war was at a critical point and it is unlikely that Western powers and by extension, their associated vested interests, would have been prepared to initiate any acts, that would have upset Norway. The reason seems clear-enough. The potential strategic costs of an upset ally at the time would have been far greater than the potential value of any offsetting financial gain[13] that might have flowed to international corporations from a completely privatized development. The cold war is now over, so that reasoning may not now apply to new prospective resource developments. Second, the Norwegian development started, well before the early 1980’s, when the actions of the Reagan administration in the USA and the Thatcher administration in the UK made the term ‘government’, a dirty word, so the government driven Norwegian development was not necessarily an area of focus within the west. This ideological notion is in full flight today and is supported in the west by governments and interests with a driven attachment to the notion of the ‘free market’. This is likely to make them antipathetic towards the widespread democratization of future developments and make life more difficult for countries which seek to replicate the Norwegian experience. History viewed from a future perspective will inform us whether the Norwegian experience ultimately turns out to be a force for good, for the people in resource rich countries or whether the experience will be subsumed by the power of the free market, its ideology and the powerful vested interests that benefit from it.


Finally, as well as outlining an important period of history and providing a ‘how to’ handbook for countries which aspire to benefit from the Norwegian experience, it will be evident from this review that the book also provides a range of insights and valuable leads into important international challenges. For these reasons the book is highly recommended to the general reader, political and economic progressives and to people with an interest in the fields of international politics and economics.




Brian Harrisson






[1] A term the reviewer developed to encapsulate the systemic approach the Norwegian government followed in the development of its resource

[2] The Australian Broadcasting Commission (ABC) reported on 12/11/2015 that the G20 countries are paying fossil fuel companies $633b in subsidies every year. Available (consulted November 11 2016) at:

[3] This term does not appear in the book. It was created by the reviewer to capture a key strategy of the government.

[4] Oversen, V (2016) Insights, views and lessons from the Norwegian experiences with managing petroleum revenues, Asian Development Bank, Technical Assistance Consultant’s Report. Available (consulted November 11 2016) at:

[5] Hansen, James E, letter to Prime Minister Solberg dated 18th October, 2016. Available (consulted November 11 2016) at:

[6] Refer to white paper, The Norwegian Economy – Key Facts. Available (consulted November 11 2016) at:

[7] Interested readers can obtain more extensive details of the attributes of this model by typing any of the titles just referred to into a search engine.

[8] Brain P, (1999) BEYOND MELTDOWN: The global battle for sustained growth, P4, Scribe Publications Melbourne

[9] Stiglitz J (2002), P 13-16 Globalization and its discontents. London: Allen Lane the Penguin Press.

[10] An example is action taken against Australia under the WTO rules by the tobacco industry, for passing a law that requires cigarettes to have plain packaging. A summary of the issues involved is available (consulted November 11 2016) at:

[11] Look at and compare the comparative table below.

[12] The term ‘vested interests’ is intended to refer to the same interests Thomas Piketty, in his book CAPITAL in the 21st Century, (The Bel-knap Press of Harvard University Press, 2014) referred to as ‘forces of divergence’. The term refers to those interests which drive processes that lead to diverging equality within a country

[13] Wealth derives from power, so in any competition between the two, the latter will always prevail over the former.


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