Is Norway’s oil wealth stifling innovation?

 By Nicholas Newman

Norway is the world’s third-largest natural gas exporter, eighth largest exporter of crude and Europe’s largest petroleum liquids producer. Oil and gas have made the 5.3 million citizens of Norway part of one of the wealthiest countries on earth, with a gross domestic product reaching $75,000 per person…

Government revenues from oil and gas have been channelled into the Norwegian Government Pension Fund Global. Fondly called “the Oil Fund,” it is worth around $880 billion. With withdrawals from the fund limited to four percent a year, it can support government spending of $524,423 over the lifetime of each citizen. Norwegians are therefore secure in the knowledge that, even when the oil runs out, “the return on the fund will continue to benefit the Norwegian people.”

Norway’s place in Innovation rankings

Is there any price to be paid for this comfortable cushion of prosperity? Has it impaired Norwegians’ appetite for innovation? According to the Global Innovation Index (GII) 2016, Norway ranks below both neighboring Sweden and the UK and lies in 22nd place out of 128 countries across 82 measures of innovation. In comparison with countries that are equally resource dependent, Australia ranked 19th, just beats Norway. However, Norway is much more innovative than other leading petro-economies such as Kuwait in 67th place, Saudi Arabia in 49th place and the UAE ranked at 41.

As for innovative cities, Oslo is rated at just 28, behind Barcelona in the Innovation Cities™ Index 2015: Europe. This low ranking is partly explained by the tendency of startups, when they reach a certain stage, to migrate to major European innovation centers such as London, Vienna and Amsterdam, in order to take advantage of innovation synergies. But perhaps these rankings are not the whole picture?
When North Sea oil was discovered, lots of local firms and research organizations in low-tech industries including shipbuilding, mechanical services and textiles sectors as well as high- tech research in nuclear energy and automation, diversified into oil and gas. As the oil industry expanded, demand for engineers and individuals with skills in technology and software was met by the Norwegian University of Science and Technology. High pay, good conditions and the prestige of this home-grown industry attracted Norway’s innovation community to concentrate on meeting the needs of the oil and gas industry.

Norway’s engineers and scientists have contributed to many petroleum and maritime sector innovations, such as Imenco corrosion protection for maritime structures and SINTEF smart wear. Others have advanced computer software for analyzing and visualizing oil reservoirs, notes Arvid Hallén, Director General at the Research Council of Norway.
Moreover, Statoil, Norway’s state oil company is an acknowledged world leader in the use of automated subsea drilling technologies. Per Melchior Koch, special advisor at Innovation Norway adds, “there is a tendency for [Norway’s] innovation to be process-related which often makes them not very visible. A case in point is the “financially extremely important innovation of the horizontal multi-flow perspective leading to combined oil and gas pipelines and improved subsea constructions, saving the petroleum industry costs estimated at more than a billion every year.”

Impacts on innovation

Whether the oil “security blanket” is hindering Norway’s ability to innovate outside the hydrocarbon industry is open to debate. One prominent expert view comes from Norwegian Professor Magnus Gulbrandsen from the Centre for Technology, Innovation and Culture, at the University of Oslo. He explains, “I don’t think I agree with the premise that there is a relationship between oil wealth (however that is conceptualized) and innovation.” Per Melchior Koch is keen to assert, “Norwegian innovation may not be as visible abroad as compared to i.e. Sweden, but that is partly because Norwegian industry is dominated by goods and services targeting other companies, more than business to customer.” However, the recognition that the oil will run out (and the experience of a downturn in profitability) highlights the need to diversify into new industries and services. As Professor Gulbrandsen succinctly put it, “Now Norway faces the opposite problem. With lower oil and gas investments they need to innovate to diversify out of oil and gas again. Diversification is and will be difficult because innovation itself is very difficult. However, I don’t think it is relevant to say that the oil wealth (and the gold-plating of solutions in the petroleum industry) necessarily makes the process more difficult.” Already, in response to economic change, new sectors are generating innovations, such as cancer medicine. Arvid Hallén points out the valuable example of “the Oslo cancer cluster which developed such cancer medicines as photocure.”

What is innovation?

The word innovation is popular among business people and politicians. However, like sustainability, there does not seem to be a clearly defined and agreed upon definition of innovation. It can mean a new idea, device or method. Yet, it can also extend to the application of better solutions to meet new requirements, unarticulated needs or even existing market needs.

Three Examples:

Automation, in which robots replace humans is on the cusp of ‘take-off’ with around 1.3 million industrial robots projected to enter factories in 2018 making a global market worth around $32 billion, Robots will soon dominate construction, car manufacturing and even the energy sector, according to experts. Norwegian company Nlink has developed a Mobile Drilling Robot™ for use in the construction industry. Supervised by a human operator using a tablet computer, the robot can drill ceilings 5-10 times faster than humans. Equally important, according to NLink, its robot has reduced the incidence of Work-Related Musculoskeletal Disorders (WMSD) and Musculoskeletal conditions (MSC) in the construction workforce. The company was founded in 2009 by Konrad Fagertun, Halvor Gregusson, Håvard Halvorsen, Jørn Sandvik Nilsson and Jørgen Borgesen. They have offices in Oslo and Songdal, and were named the Nordic Start-up Awards’ Best Exponential Start-up at this year’s Start-up Extreme.

A Norwegian tech company called Meshcrafts is creating software for Smart transportation, smart city and e-mobility. Essentially Meshcrafts products, Smart Charge EV APP and the Smart Charge HUB, manage the supply and purchase of energy for electric vehicles. The former is a charging application (APP) which identifies and locates suitable e-charging stations in real-time for drivers. The Smart Charge HUB is a software system designed to manage all aspects of an e-charging station. The system allows and operates a dynamic pricing system depending on person, power and time. It is controlled online through dashboards and apps for private customers and operators. The potential market for electric vehicles and e-charging is huge. In Norway there is one charging point for every 100 people and is designed to serve 60,000 electric vehicles. Bloomberg, forecasts that there will be 41 million electric vehicles on the global highway by 2040, representing 35 percent of new light-duty vehicle sales. The company was founded by team of former graduate students from Norwegian University of Life Science, University of Oslo and Norwegian Business School.

Viva Labs
Viva Labs, founded in 2012 by Henrik Holen and Kyrre Wathne, has created connected “internet of things” software for use by utilities, telecommunications and white-goods manufacturers to deliver products and services for the smart home. “We make smart products that adapt to your family,” says Holen. The Labs’ smart home products work on an intelligent platform that combines sensor, GPS and weather data and learning algorithms. Essentially, Viva’s products learn how people live in their homes — what , when and how, they use their lights, heating, entertainment and communication devices. New products include a “learning” thermostat, smart controls for lights and devices, an energy monitoring system and GPS-based home security system.
What is being done to encourage innovation? Multiple direct approaches are being used to encourage innovations outside the hydrocarbon sector, including the classic policy tools of entrepreneurship support, R&D tax credits, subsidies for collaboration between research organizations and firms at home and abroad and the support of cluster organizations. “In addition, improvements in education including the introduction of entrepreneurship in curricula” have been introduced says Arvid Hallén. In addition, the Research Council of Norway has been set up to offer direct encouragement of innovation activity with public seed funds and venture capital. Referring to these initiatives, Gulbrandsen sums up Norway’s advantages: “[the country has] relatively low levels of public bureaucracy and corruption, well-functioning labor markets, highly skilled workforce with relatively low costs for top personnel, moderate tax levels etc.”


Knowledge and technology transfer from the oil industry into other sectors is one avenue for change in Norway, while another is the adoption of the new generic technologies developed elsewhere. “The country has a remarkable ability to adapt and innovate, based on existing resources. And existing skills and resources are, of course, the basis for future innovations,” says Gulbrandsen.

SEE MORE: Europe’s oil capital by Nicholas Newman

about the author
Nicholas Newman
Freelance energy journalist and copywriter who regularly writes for AFRELEC, Economist, Energy World, EER, Petroleum Review, PGJ, E&P, Oil Review Africa, Oil Review Middle East. Shale Gas Guide.