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Regulation Amp Governance
Norway ‘burnt’ foreign investors
From the Financial Times of Sun, 14 Dec 2014 05:37:55 GMT
A photo taken on January 18, 2013 in Stavanger, Norway, shows the entrance of the headquarters of Norwegian partially state-owned oil group Statoil. The European Commission has carried out surprise inspections on May 14, 2013 at several major oil companies over possible price fixing in breach of EU anti-trust rules, without naming any of the companies involved in the raids but British energy giant BP, Shell and Norway's Statoil said that their offices had been visited. AFP PHOTO / NTB SCANPIX / Kent Skibstad +++ NORWAY OUT (Photo credit should read Kent Skibstad/AFP/Getty Images)©AFP

A large investor has accused the Norwegian government of intentionally “burning” foreign investors while protecting Statoil, the largely state-owned national oil company.

In December 2012, Oslo’s previous centre-left government unveiled a plan to slash the tariffs that Gassled, the country’s undersea gas pipeline network, can charge for transporting fuel, by up to 90 per cent from 2016.

The ruling came just 18 months after Statoil sold a large stake in the 7,975km pipeline network, one of a series of deals that resulted in control of the operation passing to a swath of institutional investors and energy companies from across Europe, North America and the Middle East.

The decision was ratified by the current centre-right government in December 2013. This prompted some investors in Gassled, who claim NKr120bn ($16bn) in combined revenue and investments are at risk, to sue the Norwegian government.

The episode has prompted some unusually strong criticism of Norway, generally viewed as among the most transparent and stable of countries.

“This was quite shocking to a lot of investors; 20 to 30 very large international investors signed a letter [to the ministry of petroleum and energy] in which they said that they thought this was an extremely troubling event,” one investor said.

“[It was a case of] let’s let the national champion get out first then we will flog it to a bunch of international investors and let them get burnt. I think the timing was pretty suspicious. The tariff regime had not changed for 40 years, then it changed a year and a half after Statoil exited its investment, so I think you have to draw your own conclusion.”

The Norwegian government said at the time that the tariff cut was designed to encourage gas exploration and development in the Norwegian Sea and south Barents Sea, while also ensuring a “reasonable” profit for investors in Gassled.

The network processes and transports 96 per cent of the gas extracted from the Norwegian continental shelf and provides 20 per cent of the gas consumed in the EU. As well as Norway it supplies gas to the UK, Germany, France and Belgium.

Statoil said at the time of the sale that it wanted to sharpen its focus on exploration and production, which generate the group’s highest returns on investment. It retained a 5 per cent stake in order to maintain some influence over the network.

Fellow oil majors ExxonMobil and Royal Dutch Shell also sold smaller stakes in the facility.

Gassled is the type of supposedly safe, reliable, long-term infrastructure asset increasingly targeted by large investors as they seek to diversify their portfolios and earn a higher yield than that available from investment-grade government bonds.

The investor added: “The situation changed overnight and that is not what we want from our infrastructure investments. It did not engender a huge amount of faith in Norwegian gas transparency or in terms of creating the right investment infrastructure for international investors.

“The fundamental risk of investing [in Norway] has changed [and] I am not sure the Norwegian government is bothered about it. They are saying ‘the projects are here, you need us more than we need you’.”

The court case is due to be heard by the Oslo District Court in April 2015. The Norwegian petroleum and energy ministry declined to comment, pending the legal proceedings.

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