Why Norway should be a model for our oil management

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OPINION

By Dr Eng. Kweronda Frank

In the year 1905, Norway was one of Europe’s impoverished countries. A hundred years later, this country is ranked as the richest in Europe with the best and highest standards of living.

The reason for this is that Norway made a master plan to utilise its resources, namely, Hydropower and oil, very well. How did it do it?

Many Norwegians believe that their natural resource wealth, first timber, then hydropower, now oil, transformed Norway in one short century from a destitute place to one of the most affluent countries of the world.

Norway, of course, always had its natural resources, but it was only with the advent of educated labour that it became possible for the Norwegians to harness those resources on a significant scale. Human capital accumulation was the primary force behind the economic transformation of Norway; natural capital was secondary. Norway’s oil and hydropower management regime used a sensible approach to oil and hydropower wealth management, using some of these key features:

• From the beginning, before the first drop of oil emerged, the oil and gas reserves within Norwegian jurisdiction were defined by law as common property resources, thereby clearly establishing the legal rights of the Norwegian people to the resource rents.
• On this legal basis, the government has absorbed about 80 percent of the resource rent over the years, having learnt the hard way in the 1970s to use a relatively small portion of the total to meet current fiscal needs. Most oil and hydropower revenue is set aside in the state petroleum fund, later renamed the pension fund to reflect its intended use.
• The government laid down economic as well as ethical principles (commandments) to guide the use and exploitation of the oil and hydropower for the benefit of current and future generations of Norwegians.
• The main political parties have, from the beginning, shared an understanding that the national economy needed to be shielded from an excessive influx of oil money to avoid overheating and waste.
• The Central Bank, which was granted increased independence from the government in 2001, manages Norway's oil fund, the Government Pension Fund Global,which  has a value of over $2 trillion as of late 2025, making it the world's largest sovereign wealth fund. This vast sum is generated from oil and gas revenues and is invested globally in assets like stocks, bonds, and real estate. This maintains a distance between politicians and the fund. The fund constitutes net government wealth as no offsetting government borrowing takes place.

For all these reasons, Norway was able to avoid rent seeking and related problems that have afflicted other oil and hydropower exporting countries – Iran, Libya, Mexico, Nigeria, Russia, Saudi Arabia, Sudan, Venezuela, etc. Clearly, what sets Norway apart from those other countries is that Norway was a well-functioning, full-fledged democracy long before its oil discoveries.

Democrats are less likely to try to grab resources to consolidate their political power. Oil and other forms of energy have become Norway’s main export in more ways than one as the state-owned Statoil Hydro is now present in some 40 countries around the world.

In this light, and also in view of Norway’s successful management of its substantial hydroelectric resources, also through state ownership, it is striking that Norway’s management of yet another important natural resource – fish – has left much to be desired, to put it mildly, as is the case in most other fisheries around Europe and the world with dwindling fish stocks, some on the verge of extinction due to overfishing and other forms of mismanagement.

Therefore, with the discovery of oil in Uganda and the presence of high hydropower potential, our country can try to use Norway’s experience in managing these two important resources.  This will put our country in a better position in Africa if not in the whole world. Citizens will also get better standards of living with increased GDP.

The writer is a Civil Engineer with Masters in Hydropower Development from Norway