Extracting, processing and transporting this wealth of raw and other materials has led to a growing market for Norway’s processing industry, which is represented by about 750 companies accounting for roughly 55% of the country’s non-petroleum exports.
Oil and gas need pipes and pumps and ships for transport, pulp and paper products demand a range of technologies to transform them into everything from newsprint to biofuels, while emerging markets such as recycling demand sophisticated electronic equipment to help with collecting and sorting of different wastes. At the same time, while serving existing markets, Norway’s processing industries are investing in developing new ideas, to serve the markets of tomorrow.
Andrew Young, Vice President for Corporate Communications at Tomra, a company that started out selling reverse vending systems in the 1970s, says his firm, like many others in Norway, has had to have a global view in order to grow. “We saw pretty early on that we would have to look outside our core markets to meet our growth aspirations,” he says. Through technology development and acquisitions, Tomra is now a NOK 3.5 billion company operating in 45 countries, producing automated material collection centres, material transport and processing, waste recognition and sorting systems for recycling, and material compaction and baling equipment.
Dutch Disease & Catching Slugs
Every business student learns about the dreaded “Dutch Disease,” so-called because the phenomenon was first observed in Holland in the 1960s after the development of North Sea gas pushed the value of the country’s currency sky high. These higher prices made Dutch manufactured goods less competitive, which decreased exports and ultimately led to deindustrialization in that country.
With its enormous petroleum exports, you’d think that Norway would be at risk of the same fate, but it hasn’t happened. In fact, economic researchers have found exactly the opposite, according to the Organisation for Economic Co-operation and Development in its 2007 evaluation of the Norwegian economy. The reason? The highly technical nature of drilling for oil in the deepths of the North Sea drives manufacturing innovation, the OECD reports, rather than depressing it.
“Manufacturing output may has actually benefited from both energy discoveries and higher oil prices,” the report says, adding that “the offshore oil industry is a high-technology and capital-intensive sector, likely to deliver the sort of positive spillover effects that other manufacturing activities, such as automotive or aircraft industries, have had in other countries.”
Companies such as Kongsberg Maritime AS would probably agree with that assessment. The company has a variety of process-related products and services that help keep North Sea oil and gas flowing safely and dependably. One of the most cutting-edge areas of development for the group has been in dynamic process simulation, used in the development and operation of oil and gas fields, LNG plants, transportation pipelines, chemicals and refining. Kongsberg acquired Fantoft Process Technologies AS in 2006 as a part of its effort to become a world leader in this field.
Kongsberg was one of many companies whose work made possible StatoilHydro’s Snøhvit natural gas field, the first to be developed in the Barents Sea. The gas field has remotely operated subsea installations in 250 to 345 metres of water, with a 143-kilometre long pipeline delivering gas to the island of Melkøya for processing and shipping. With a price tag topping NOK 34 billion, Snøhvit put all cooperating companies to the test to get things right. Kongsberg Maritime was able to help with its integrated D-SPICE and OLGA dynamic simulator model for subsea fields and onshore LNG plant, which enabled the simulation of everything from flowlines to multiphase pipeline slug catchers and LNG off-loading.
Pipes, Hoses & Ships
Ask any market analyst – or the Norwegian Petroleum Directorate, for that matter – about the oil reserves on the Norwegian Continental Shelf, and you’re likely to hear that the fields are maturing, which makes continued high production more technologically challenging.
Companies such as READ Well Services play a role in improving production by offering core expertise in seismic and cased hole services (data acquisition and data processing), permanent downhole instrumentation and HETS solid expandable tubulars, which enable repairs of casing leaks. By repairing casings using HETS tubulars, a company can avoid having to redrill a problem well.
TESS, a company based in Drammen with an annual turnover in 2006 of NOK 1.6 billion, manufactures hoses and hose fittings for onshore and offshore industrial applications from more than 90 locations throughout Norway. The company supplies a number of oil companies, including Shell, StatoilHydro, Conoco-Phillipsand Exxon, and has even developed a hose management system in which microchips are used for identification.
Nexans Norway AS also supplies equipment necessary to bring oil and gas to market, with its advanced copper and optical fibre cable solutions, some of which are engineered to operate in water depths greater than 2,300 metres. The company has supplied umbilical cables to StatoilHydro’s immense Ormen Langen project on the Norwegian Continental Shelf as well as to Snøhvit in the Barents Sea.
Aker Reinertsen AS delivers engineering services as well as prefabrication of piping and steel structures for offshore installations. At the end of 2007 the company was awarded an NOK 240 million contract fromStatoilHydro to work on the Morvin development project, a satellite field to the Åsgard B platform.
Another Norwegian company that has tapped into the worldwide oil industry is Aker Floating Production, which purchases Suezmax tankers and converts them into Floating Production Storage and Offloading ships. The company had a significant commercial breakthrough in May 2007 when it was awarded a major contract to equip and operate the FPSO Aker Smart 1 at India’s MA field in the Bay of Bengal. “Aker Smart FPSOs are designed for developing offshore fields using a flexible, cost-effective production facility, which can be rapidly deployed to accelerate the delivery of first oil,” says the company’s President and CEO Svein Olsen.
Norwegian Wood – & Beyond
With nearly 40% of Norway covered in forest, you might guess that the forest industry would have a strong foothold in the country – and you’d be right. The leader by far is Norsk Skog of Lysaker, which owns 18 paper mills across the globe that produce fully 10% of the world’s newsprint and 5% of magazine paper. The group’s operating revenue in 2006 was approximately NOK 29 billion.
In spite of its strong standing in the world market, however, Norsk Skog faces a future market that is being strongly altered by the Internet. Just 10 years ago, one out of 50 people got their news from the Internet – but now that’s number has climbed to one out of three, says Judy Muller, at the University of Southern California’s Annenberg School for Communication. Those numbers mean that the demand for newsprint is shrinking nearly as fast as the drop in newspaper circulation numbers worldwide.
Companies like Norsk Skog are responding to this shift by finding new markets for wood chips. In mid-June 2008 Norsk Skog joined Viken Skog, Allskog, Mjøsen Skog and Statskog to create Xynergo, a company that will produce diesel from woody biomass. The company will first build a prototype plant at Norske Skog Follum. The diesel this plant produces will be virtually CO2 neutral, and because the fuel production will be based on woody biomass, its raw materials will not compete or conflict with food production.
“We are now entering an exciting and demanding phase for production of second generation biofuels. Concept development and the interplay between industrial biofuel production and sustainable forestry is our main focus,” says Klaus Schöffel, Norsk Skog’s managing director. The company hopes to have a full-scale facility operating by 2015.
The Peterson Group, composed of Peterson Linerboard and Peterson Packaging, also relies on wood as its raw material, but the Moss-based company makes packaging and liner board, with a combined turnover of roughly NOK 3.3 billion. While the materials may be conventional, the products are anything but. The company won four World Star 2007 packaging awards for its innovative designs for food, electronic equipment and furniture packaging. Company designers have also developed corrugated cardboard packaging that protects electronic equipment from static electricity, while other cardboard packaging is treated to be corrosion resistant.
Specialty Chemicals & Functional Foods
Borregaard’s roots are also in cellulose and paper production – its first mill was established in 1889 Sarpsborg – but the company soon began to manufacture chemicals and to use timber as the raw material for a variety of chemical products. The company is now a part of the Orkla Group, and has specialized in a number of niche markets related to the production of wood-based chemicals. For example, Borregaard’s Specialty Chemicals businesses (Borregaard ChemCell and Borregaard LignoTech) use wood components to produce speciality cellulose, lignin-based binding and dispersing agents, yeast and yeast extracts, and ethanol.
Wood is also the basis for Borregaard’s production of vanillin, but the company has also branched out into the production of omega-3 oils for use in functional foods, dietary supplements, pet nutrition and clinical nutrition. The company also makes specialty yeast products based on wood and has a Fine Chemicals-Pharma branch, which supplies specialised products to the pharmaceutical industry. The company predicts sales in 2007 will top NOK 5 billion.
StatoilHydro may be best known for its main products – oil and gas – but the company has also taken similar approach to the wood products industry in processing raw materials into useful products. One of the strongest examples of this is found at Tjeldbergodden, a 10-year-old processing facility that transforms gas from StatoilHydro’s Heidrun field in the North Sea into methanol. Tjeldbergodden is now Europe’s largest supplier of methanol, which is used in the chemical industry.
It wasn’t always clear that this move into alternative uses of gas was going to succeed. In fact, when the Norwegian Parliament approved the plan in 1992, many sceptics predicted the effort would cost more to implement than it would make in revenue. But the numbers have proved otherwise: NOK 6 billion was invested in the plant’s infrastructure, but the plant has sold NOK 12 billion worth of methanol, and has paid NOK 557 million in taxes. “The numbers speak for themselves,” says Arve Rennemo, Director of the Tjeldbergodden plant. “Tjeldbergodden is a success story.”