by Frank Thomas
The Netherlands, April 12, 2010
Norway’s sovereign wealth fund – formerly named “The Petroleum Fund”and now named “The Government Pension Fund – Global” – is the 2nd largest sovereign wealth fund in the world after Abu Dhabi’s fund. Today, 30 years after oil started flowing ashore, Norway has created a national fund valued at ±$500 billion (vs. ±$900 billion for Abu Dhabi). Norway generates revenues for its sovereign wealth fund from three sources:
1. Taxes on oil and gas
2. Ownership of petroleum fields
3. Dividends from Norwegian government’s 62.5% ownership of Statoil – a merger between Norsk Hydro’s oil and gas division and Statoil, making Statoil the biggest offshore oil and gas company in the world.
All this means the Norwegian government (i.e., the Norwegian taxpayers) has effectively had a ±50% ownership share in offshore deep-water oil-gas cashflows over the past 3 decades! As noted, Statoil is a world pioneer in complex offshore projects where water conditions are very tough.
The sovereign wealth fund in which Norway saves its oil-gas income is invested internationally primarily in stocks, bonds, and, starting recently, real estate. The strict primary goal is to save for future generations, when hydrocarbons run out. Investing abroad also helps to avoid overheating the Norwegian economy. In 2009, the fund advanced 34% to recover most of the bubble losses.The fund now owns more than 1% of the world’s shares in over 8000 companies. It is Europe’s biggest equity investor. Strategically, the fund takes a 30 year investment horizon. Thus, not surprisingly,the fund is currently investing aggressively in green industries. Helped by the past 30 year petroleum revenues that have been well-invested, Norway has become the 2nd richest nation per capita.
Except in economic crisis times, only 4% of Norway’s $500 billion fund is used in the national budget for its 4.8 million people. An exception was made in 2009 to finance a stimulus package amounting to nearly 5% of the nation’s GDP of $450 billion. Imagine if our country could divert from a comparable sovereign fund a sum equal to a modest 1% of our GDP, or ±$150 billion annually for social-infrastructure investments and/or deficit reduction! I would even be content with half this, or a $75 billion annual contribution to our nation’s health. Wouldn’t you Mr. President?
Are there obvious lessons to be learned from Norway about how to become financially “more sovereign” in our offshore, deep-water hydrocarbon exploitation deals with oil firms?
Norway has given a simple answer: extremely scarce (offshore) natural hydrocarbon resources are national assets not there for the primary money benefit of multinational oil firms and their shareholder interests. Nor are they there for manipulation by local petty politicians doing small-time deals with quite willing oil firms to buy local votes for 1 cent on the dollar … as smugly engineered by the hypocritical federal-pork subsidy lover Sarah Palin. These are national assets that represent potentially huge cashflows which should be federally managed equitably in the long-term welfare interests of all U.S. citizens.
Norway presents lessons we had better learn quickly … like TOMORROW! … before we lose another opportunity – this time in the new world of the sovereign wealth fund builders – to come out of our Debt/Deficit spiral and become a financially “sovereign”and solvent nation.
