At least part of the difference in British and Norwegian oil profits has to do with the companies producing the oil. One of the major companies extracting oil from the North Sea is Statoil, which is 67% owned by the Norwegian government. Countries can certainly profit from oil reserves, but companies have historically profited much more. 50-50 profit sharing between companies and nations was considered a major victory for oil-producing states in the 1950s, because the companies had benefited so much more in the early history of oil extraction. (Terms have continued in the direction of favoring countries in many places since then, but owning 67% of the company doing the extraction is non-trivial.)

Until the discovery of oil in the North Sea, Britain was far more concerned with securing a supply of oil for reasonable prices than with profiting from oil. The transition from coal- to oil-powered naval ships prior to WWI was controversial because, while Britain had plentiful coal, it didn't have oil (at least, not that had been discovered and developed yet). Since naval power was such a major concern for British politicians, their main concern in supporting oil companies was securing a cheap supply of oil for British consumption, not profiting from production. Thus, while Britain supported its major oil companies diplomatically - the most notable of which are BP and Shell (which started out with different names and in different contexts) - it did so in order to secure cheap oil supply, not to profit from the companies. It worked for their success, but not as an investor.

There was also a difference in how the companies themselves used their oil money - BP and Shell expanded their operations internationally and became supermajor oil producers, whereas Statoil's profits seem to have gone into the national fund you mentioned. I don't think it's a significant international competitor, and it's certainly not on the level of BP and Shell.

This is only part of the answer - I know something about international oil production, especially in the US and the Middle East, but not enough about North Sea production specifically to know how much money Britain derives from drilling rights and what it's done with that. Still, the different philosophies exhibited by the British and Norwegian governments - securing cheap oil for the consumer (which happened to be the government itself) as opposed to profiting from oil reserves as a producer - goes at least part of the way towards answering the question.

EDIT - I just had a graduate course on the history of oil with David Painter, so my main sources are his Oil and the American Century, Yergin's The Prize, and A History of Royal Dutch Shell, Volume 1, by Jonker and van Zanden. Painter emphasizes early British and American concern over securing oil supplies abroad as a necessity for military operations.

I think a better question would be, why has Norway invested so much in a sovereign wealth fund while no other country has so successfully? The UAE, Saudia Arabia, and Kuwait all have large sovereign funds. China, and Russia do as well. Norway is exceptional though in that the size of its sovereign wealth fund relative to its population.

How has Norway accomplished this? I don't know anything about Norwegian politics so I can't say. I would think that it would require a consensus across the political spectrum of the importance of the fund since its inception. Perhaps there is something institutionally or culturally that has made this possible? Maybe we could learn from this. Today, most Western democracies seem to pay no mind to long-term cost-benefit analysis.

I'll speak about the Alaska perspective, which may have some bearing on your question.

Alaska had its large oil strike one year before Norway but did not establish its sovereign wealth fund until 1976. (The trans-Alaska oil pipeline was not completed until 1977, but the state produced oil from southern Alaska for almost two decades before that.)

From 1969 (the date of Alaska's first Prudhoe Bay oil lease sale) to today, immense debates rage about what to do with the state's share of oil revenue.

As in Britain, there is no government-owned oil company. Production is carried out by a handful of multinational corporations, which together own a subsidiary (Alyeska Oil Services Corp.) that operates the trans-Alaska oil pipeline.

While the state has no share of the oil fields, it does receive royalty oil as part of its tax structure. A share of the oil produced in Alaska belongs to Alaskans.

Rather than sell this oil below market rate (in an effort to reduce Alaskan gasoline and heating oil prices), the state decided to sell its oil at market price and invest the proceeds into the Alaska Permanent Fund.

Each year since 1982, a portion of that fund is distributed to Alaska residents who have been in the state since Jan. 1 of the previous year. The amount varies based on a rolling average of the fund's investment success and oil prices. Since the dividends began, about $20 billion has been given to Alaska residents.

That fund is today 1/17th the size of Norway's, and Alaska has about 1/7th the population of Norway.

I imagine that the difference between the funds relates to Norway's tax structure and self-ownership of its oil company.

Though this gets into the 20-year danger zone, I'd add that the Alaska Legislature is now considering a 20-25 percent investment in the new trans-Alaska gas pipeline. That would be an investment similar to Norway's move, as described by /u/boborj.

It is quite difficult to disentangle the effects of oil on the British economy. It is evident, however, that around 1980 Britain went from being the economic "sick man of Europe" to the fastest growing major European economy.

Some of that was probably due to North Sea Oil. (Some might have been due to other things, such as Thatcher's de-nationalisation of industry and other economic policies.)

In any event, from 1980 to 2008 Britain was the only major European economy to grow faster than the USA.

Here is a look at GDP per capita compared to the USA (USA = 1.000) from 1980 to 2008.

UK: 1980 - .688, 1994 - .705, 2008 - .765

Germany: 1980 - .803, 1994 - .812, 2008 - .763

France: 1980 - .780, 1994 - .730, 2008 - .713

Italy: 1980 - .756, 1994 - .754, 2008 - .675

(Source: www.themoneyillusion.com/?p=5164)

So, British GDP per capita has been improving relative to the US between 1980 and 2008. Meanwhile, the other main European Economies were slipping relative to the US.

The UK economy has been doing better than the rest of Europe from 1980 to 2008. It was doing worse than the rest of Europe before 1980:

Here is GDP growth for Britain vs other European countries for the decades after WWII:

UK: 1950-60 - 2.7, 1960-73 - 2.3, 1973-79 - 1.6

US: 1950-60 - 3.3, 1960-73 - 4.2, 1973-79 - 2.7

Germany: 1950-60 - 8.0, 1960-73 - 4.4, 1973-79 - 2.4

France: 1950-60 - 4.6, 1960-73 - 5.6, 1973-79 - 3.1

Italy: 1950-60 - 5.5, 1960-73 - 5.3, 1973-79 - 2.6

(Source: http://www.rozenbergps.com/books/britain/kern.pdf)

By 2008, remarkably, Britain had become the leading major European economy in terms of GDP per capita. Ahead of Germany. (In 1980, Britain was in last place among the big 4 European economies in GDP per capita.) (Don't know what has happened since the 'great recession'). If some of this turnaround in the growth of the UK economy was due to North Sea oil, then it could be argued that the UK was investing oil revenue in current growth and wealth building, rather than (as Norway) investing in future wealth.

Norway's sovereign wealth fund is a tremendous success story, and I don't want to suggest it's anything different. But I don't think it's really fair to compare it to the UK.

Norway currently produces twice as much oil and about 4 times as much gas as the UK, and the UK's population is almost 13 times bigger. About half the petroleum in the North Sea is thought to be in Norway's sector, the rest is shared between the UK, the Netherlands, Germany, Denmark, France and Belgium.

As you point out in your question, $840 billion would still be a lot even for a big country like the UK. But unlike Norway, UK royalties from its oil industry were never enough to pay off all its bills and start investing in a sovereign wealth fund. And that's what's really necessary - what's the point in starting a sovereign wealth fund if your government is running a deficit? None that I see, it would be like an individual taking out a line of credit so he can buy stocks. In any case they didn't, so many of Britain's oil royalties were spent filling budget holes, rather than going into an investment fund that has steadily grown over several decades.

A lot of the answers here seem to suggest that Norway kept more of its oil in state hands than the UK. That may be true to some degree, but I don't think it's the main reason for the difference. I can't find the numbers, but I don't think UK royalty terms are that much more generous to producers in its sector than Norway's terms are in its. And yes, Statoil is 67% government owned, but BP was also largely government owned for much of its history (also note that BP is, and always was, much larger than Statoil). And it isn't as though Statoil has a monopoly on exploration in Norway's sector - any company that wins the concession can, as they can in the UK's sector. And indeed you'll find the same companies operating in both sectors (and elsewhere throughout the world).

Also note that the UK was self sufficient in oil between about 1980 and 2004. While it didn't produce enough extra to be a big exporter (like Norway), this saved the overall economy many billions of dollars. Compare it to the US, which at its greatest "oil deficit" was importing a net of about 12 million barrels a day - something like a billion dollars a day when oil spiked in the 2000s.

TLDR: The main difference between the oil industries in Norway and the UK was that Norway has far more oil and gas per capita than the UK does. This allowed Norway to pay off its debts early and start amassing the massive sovereign wealth fund we see today.

Hey everyone. I am not a history expert, however I am Norwegian and therefore know a bit about why Norway has done things with the oil as they have.

In Norway people at first didn't expect oil to be found. Siemens was allowed to search, on some pretty harsh conditions. Still, what they got when they found oil was a much leaner deal than everyone that came later. Due to Norway not being so reliant on getting oil to supply the country, we have some extreme taxing, and being allowed to drill for oil in the Norwegian territories is very rare (unless you are the mainly state owned Statoil (which means State Oil)) Taxes on profits are extremely high as well.

The reason why so much money is going to the fund, as investments in foreign companies, is because of what Norway learned from the Netherlands. They acquired oil earlier than Norway, and their economy experienced something known as "Dutch disease", where rapid inflation breaks the export industry, the country is crippled, and in getting back on its feet the massive wealth gained is partly lost.

Norwegians are a cautious people. And the people in power at the time of Norwegian oil findings were the labor party, with a tendency to "step carefully into unknown territory." The requirement for oil in Norway was not crucial at the time, and oil production was started mainly for securing money for the state. (remember it was a highly socialist government, Norway has little/no aristocracy roots, making people believe strongly in the state, which made it reasonable to let the values of the oil come back to the people as a whole)

Like /u/boborj mentioned, Britain was more concerned about securing the oil itself. Norway however, was focused on securing the money for the state, and storing it abroad for future generations. (to avoid massive inflation) Even with harsh conditions and an extreme tax rate, foreign companies would still come to Norway to acquire the oil. Because money earned is still money earned, the world needed more oil, and Norway is in a good position to supply oil to central europe and britain through pipelines.

In addition to taxing foreign companies heavily, the Norwegian government thought that doing this ourselves would secure even more wealth for the state. Therefore Statoil was created. NUST (the Norwegian University of Science and Technology) focused heavily on developing technology for offshore oil facilities, making it possible for Norway to not rely that much on foreign companies. That made it possible to secure even more wealth for the state. Today Norway is in the forefront of offshore oil production technology, and is focusing heavily on partly unmanned sub sea installations, and oil extraction even in far away lands, so we have gotten far.

sources: I am Norwegian. I am an engineer (master) in process engineering/fluid dynamics/computer simulation from NUST, and many of my friends are working in the oil business.

There's an economics phenomenon that you might want to look up called "Dutch Disease," and it has to do with the effects of expensive natural resources on the value of currency. Basically, Norway had once upon a time gotten ahold of a lot of oil wealth, and this drove its economy into the ground. To prevent this from happening again, Norway has made its oil wealth as inaccessible as possible through putting it into investments. England simply chose a different mechanism for preventing their oil wealth from destroying their economy.