Arve, Where Are My Billions? State ownership of Statoil during the Mongstad Development Project 1980-1989

Abstract

The Norwegian State’s Oil Company: Statoil AS, upgraded the oil-refinery at Mongstad in 1984. In 1987, a serious cost overrun was made public by the press. The consequences of this scandalous overrun led to the firing of Statoil’s CEO Arve Johnsen, and the resignation of Statoil’s Board. This thesis deals with the character of the Norwegian State’s ownership of Statoil during the project. The question this thesis asks is the following: How did the overrun affect the governance structure in general, and the role of the Norwegian State in particular? The Norwegian State has owned several commercial enterprises based on the stock-company model since 1946. Several parliamentary and expert-led committees have tried to solve the main political debate points of this relation. That is, on the one hand, the desire to achieve corporate governance and control by parliamentary authorities, and on the other hand; to have state owned enterprises (SOEs) that also could be independent and profitable. These issues were not solved when Statoil was created in 1972, and remained latent when the decision to expand the Mongstad refinery was taken by the Norwegian Parliament in 1984. After examining Statoil’s own archives and correspondence with the Ministry of Petroleum and Energy, this thesis makes the claim that the character of ownership during the period 1984-1989 was influenced by significant differences in knowledge between Statoil and the Ministry of Petroleum and Energy. These differences, reflected in the decision to expand the refinery, the project follow-up by the authorities, and the cost overrun, led to a process of change in the way the Norwegian Government administered its ownership of Statoil. Partial privatization was a tentative solution to potential problems of control and governance, although no concrete steps towards this were taken. This thesis argues that the organizational reforms between the Ministry and Statoil in 1988, did not solve the challenges of state ownership of a commercial company.