Helge Lund, the former long-time chief executive of Norway’s state oil company Statoil (now Equinor), is finally speaking out about the huge losses the company suffered in the US on his watch. He now admits that he and his management team invested too much, spent too much, and should have done things differently.
The 57-year-old Lund, now the chairman of BP in London, remains one of the most powerful men in the oil industry. He has maintained a low profile since leaving Statoil in 2014, however, and has consistently dodged reporters and their questions, not least after Norway’s major financial daily Dagens Næringsliv (DN) exposed how the former Statoil has lost around NOK 200 billion (USD 20 billion) on its US operations.
Lund ultimately agreed to meet DN on Thursday at what the newspaper called “a discreet hotel” in a sweltering downtown Oslo. He clearly took the heat inside as well, as he finally offered his account of how Statoil and later Equinor managed to lose so much money over so many years. The losses have shaken Parliament and are setting off various investigations.
A book on the company by journalist and author Aage Borchegrevink, called Giganten (The Giant) and published last year in connection with the company’s 50th anniversary, revealed power struggles, projects out of control and accumulated losses on international operations of around NOK 140 billion. Neither securities analysts, journalists or even the company’s government owners were aware, however, of the extent of the US losses alone, or how internal auditors sounded the alarms several months before Lund left in 2014 to accept a highly paid if short-lived job as head of British Gas.
The Norwegian state partially privatized Statoil in the early 2000s but continues to hold 67 percent of Statoil/Equinor’s stock and ranks as the company’s largest shareholder. Both Prime Minister Erna Solberg and Oil Minister Tina Bru have publicly scolded Statoil/Equinor for failing to account for their huge losses earlier, and for what’s been described as lavish spending and a wild company culture at the company’s Houston-based US operations.
“A big company like Equinor, with its ownership structure, must and shall have the public spotlight on it,” Lund conceded to DN on Thursday. “We must tolerate criticism. I must tolerate criticism, as leader of the company for 10 years.” He said that one of the reasons he decided to finally speak out was to try to offer “a bit broader picture of the industry, and my evaluations of the leadership aspects of all this.”
He claimed the entire international oil industry “struggled” with access to new oil deposits, and prices rose. Supply was falling and demand was rising, leading to record high oil prices of more than USD 100 a barrel.
“We had to take some steps, and the strategy was for more growth both in Norway and internationally,” Lund told DN, who also has defended his aggressive international expansion campaign earlier. He also stressed that Statoil kept exploring for more oil on the Norwegian Continental Shelf as well.
The search for new oil resources led Statoil to invest not only in controversial oil sands projects in Canada but also in land-based shale oil in the US. Statoil controversially bought up Texas-based Brigham Exploration for USD 4.4 billion in 2011, at a time when Lund and his colleagues thought oil prices would stay above USD 100.
That didn’t happen. Oil prices collapsed in 2014, forcing Statoil to take huge writeoffs on its US projects. In a letter to the editor of DN that Lund also has written, he admitted things didn’t go the way he and Statoil had planned: “Everything that happened then was my responsibility, including the company culture, values, strategy, investments, internal control and our choice of leaders. We did a lot well, but there were of things we should have done better, or shouldn’t have done at all. I especially feel a responsibility for what didn’t go well. That’s one of the reasons I’m now commenting on these issues.”
‘Very thorough analysis’ backfired
Lund also suggested that it’s easier to see now that “Statoil and the rest of the industry invested too much and paid too much during the years up to 2014.” He still claims Statoil had conducted “a very thorough analysis” of the land-based oil investments it made in the US, an area where analysts and commentators have said an offshore company like Statoil/Equinor lacked experience. He admitted that he regrets, and is “irritated,” that “we didn’t see internal control challenges (in Houston) earlier. Then we could have reacted much harder.”
Asked whether the company was open about its problems in the US, Lund responded that “I think we have been open internally about the challenges all along.” Asked to clarify how the huge losses could have gone unnoticed externally for so long, he contends that internal audits known as “red reports” are “not written for the public,” but rather for management personnel so they “can make improvements.” Since Lund left Statoil abruptly when he was offered the lucrative position in London, that job was left to his successor at Statoil, Eldar Sætre, who also has defended his role in what’s been called Norway’s biggest industrial scandal ever.
Lund also spoke with Norwegian Broadcasting (NRK) on Thursday and subjected himself to a grilling live on NRK’s nightly national TV newscast Dagsrevyen. Commentators said later that Lund seemed driven more by a lust for growth than profitability abroad, and that he shouldn’t be blaming the brunt of the losses on the fall in oil prices, which have never been known for stability.
The former McKinsey consultant was also criticized for not appearing more remorseful over all the trouble caused by his push for international expansion. Asked if he had any message for the Norwegian people, who ultimately own Statoil/Equinor, he pointed to the company’s profits over the years and the role it has played in making Norway a wealthy oil nation. He repeated to NRK that he was irritated with himself, though, “that we didn’t see (the trouble) earlier.”
Equinor is now the target of several investigations both internally and externally, with the State Auditor General also looking into how the government monitored its huge stake in the company. A long series of oil ministers from both the Center- and Progress parties over the past 15 years claim they were unaware of the losses and troubles in Houston, or failed to follow the company closely enough and ask enough questions.
Lund also told NRK that he takes responsibility for the decisions he made as Statoil’s CEO. “I have pointed to areas where I think we should have done better, even though there were many things the organization did very well,” he repeated to NRK and several hundred thousand Norwegian viewers. “We have acknowledged that, I have aknowledged that, and strong measures were put in place.”
‘Trying to save his own reputation’
Kari Elisabeth Kaski, a Member of Parliament for the Socialist Left party (SV), claimed after listening to Lund on NRK that “he’s trying to write off responsibility,” and trying to put a positive spin on poor management in an attempt to save his own reputation.
“Helge Lund invested in the dirtiest of dirty oil, and it has cost Statoil and also Norway dearly,” Kaski told NRK. She noted that the investments were controversial at the time as well, and employee organizations in Norway warned against them.
“That’s important to remember when Lund tries to paint a picture of what the market and the debate was at the time,” Kaski said. “There’s no doubt these were not wise decisions by Helge Lund, and it’s good that he sees the light now. He should have 15 years ago.”
Geir Pollestad, an MP for the Center Party, said he thinks all leaders with the type of position and high income Lund held must accept being judged also in the light of hindsight. “The questions remain how they could have lost so much money and allow such a business culture to develop for as long as they did without anyone stepping in,” Pollestad told NRK.
Pollestad’s own party, however, held political control of the Oil Ministry from 2005 until 2013, through all the years when Lund was CEO at Statoil. Pollestad may be advised to direct his questions to his party fellow, Center’s former oil minister Ola Borten Moe, who later went into the oil business himself and traveled with Lund when he was minister. Moe has also been in frequent trouble himself over the years, not least in connection with the sexual harassment of former Center Party leader Liv Signe Navarsete.