THE NORWEGIAN SHELF COST ANALYSIS

This section deals with the Norwegian Oil and Gas Cost Analysis which where finalized in mid February 1980. However, the Committee also known as the "Moe Committee" after its chairman Dr. professor Johannes Moe, did not publish their official report before end of April |980.

In the meantime the sabotage against "Kielland" on March 27th 1980 called for additional expenditure on stronger plattforms and increased life support systems.


As part of their work the "Moe committee" had engaged outside expertise to assist in their investigation. One of the senior consultants involved was FALK Internationals President Ole Ostlund.

The report; Cost Report

Mr. Ostlund sumarized his work for the Committee in his letter of 18.February.1980.

In the summary is also listed development of fields outside the Norwegian Continental Shelf where norwegian goods and services has been involved at the time, such as Beryl A, Brent B (&D), Frigg.

Mr Ostlund took a heavy responsibility in the design and construction of the mechanical outfitting of the first Condeep plattforms to be installed, this included steel deck layouts, development of ballast and oil system, and maritim operations, i.e. air cushion system for floating the substructure out of dry dock to deepwater construction site, ballasting operations and towing for deck mounting, and submergence of the Condeep at production site.

As part of his work for the Cost Committee Mr Ostlund prepared report on the construction of the first Condeep to be installed for Mobil on the Beryl field "Beryl A" and a report on the parallel construction of the first Condeep for Shell/Esso on the Brent field "Brent B". The initial part of the "Brent B" report is subject to review: Brent B front page , Brent B report Contents , Introduction , Precontract Phase , Minutes of meeting 07.02.1973 front page , page 01 , Development project org. , report page 08 , report page 09

Added on July 6th 2004:The Cost Analysis came about as result of the Consevatives (Hoyre) strong criticism against the present labour Government for Statoils uncontrolled expenditures on the Statfjord Field Development. Labours Minister of Energy at the time Mr. Bjartmar Gjerde defected the criticism by suggesting a cost study to be carried out for all field developments on the Norwegian Continental Shelf. Mr. Ostlund had earlier in the fall of 1978 resigned from his position as Division Manager for Brownaker Offshore A/S . Brownaker a 50/50 joint venture between Brown & Root Inc of Houston and Aker of Oslo was at the time the largest construction operator on the Norwegian Continetal Shelf with construction work undertaken on Ekofisk and Statfjord. The creation of Brownaker Offshore A/S was highly political influenced as result of the crises in the mid 70-ties within Norwegian shipbuilding caused by the situation in the Midle East. Brown & Root who had been contracted for performong hook up work on Ekofisk and Statfjord was told by Norwegian Authorities to Norwegianize their opreation and at the same time Aker with its private major shearholder Fred Olsen was told to cooperate with a foreign Company experienced in the field. As such Brownaker Offshore A/S came about as a joint venture between two initial competitors. Mr. Ostlund was at the time Engineering Manager with Aker Offshore Conracting A/S. He had recently completed the successful start up of Aker offshore Contracting hook worh on Brent D on the British Continental Shelf. Mr. Ostlund was assigned to Brownaker Offshore A/S as Division Manager for Business Development and Contracts. His assignment to Brownaker commenced in spring 1977 until he resigned from Aker and Brownaker in fall 1978.

Mr Ostlund fully supported the critiscm brought forward in the Parliament against the operation and overexpenditures on the Statfjord Field. As an insider he had experienced what today should be characterized as bad political handwork and mismanagement. With experience from the developments in the North Sea since 1972 when Oil Companies were pressing hard to get platforms into operation, ref construction of Beryl A and Brent B, the situation from 1975 with increased byreacracy, harder to get decissions, larger influence from incompetent politicians caused great frustration among those who experienced the time before summer 1975.

Going out on his own Mr. Ostlunds Business Plan was to offer competent and cost effective Project Management Consulting Services. He took great interest in the Parliamnets discussion about the cost overexpenditure and as such he offered his service to assist in the Cost Analysis, ref letter to the Departement of Oil and Energy dated Des. 15.th 1978. Mr Ostlund was later engaged by the Cost Committee headed up by Managing Director of Sintef, Prof. Dr. Johannes Moe. During his work for the Commitee Mr. Ostlund was given the oportunity to in hearings with operators, engineeing and construction companies, politicians and others, to broaden his view from his years in the field. Sudden he realized that his Business Plan of offering cost efficient Project Management Services on a competitive basis never would work under the ruling political incentives in Norway.

The lack of incentives for beiing cost effective was obvious, tax regime, Statoil's dominating role, labour unions desire for increased manhour spending, contracts beiing let on manhours basis. It became more and more obvious that the Parliaments introduction of the Petroleum Revenue tax in July 1975 with retroactive effect also on previous lisenses, had a tremendious effect on the incentives. From a Labour Union point of view the situation seemed to be a coop, as they under the ruling situation with increased unemployment due to the tanker crises welcomed increased manhour expenditure within oil field development and construction. In the long run, however, this could become devastating for Norwegian ecconomy in general and as such become a boomerang creating greater loss of working places within Norwegian based international competing industries.

During his work for the Committee Mr. Ostlund late 1979 informed Committee Chairman about what seemed to be corruption involving Statoil, Kværner and Brow & Root for letting the Engineering Management Contract on Statfjord B to the joint venture NPC/B&R.

As a result of the Cost Committee work Mr Ostlund had foreseen a major political debate in the press and Parliament about how organization and incentives within the Norwegian Oil Industry should be altered to the best interest for Norway and the Norwegian people in the years to come, comprising tax regime and Statoils dominating role. This debate never took place. The Conservatives criticism in the Parliament from fall 1978 collapsed with "Kielland" on March 27 1980, demanding for increased expenditures to be made on safety and stronger platforms.


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