National Oil Companies and Value Creation

Silvana Tordo

Description

National Oil Companies (NOCs) directly or indirectly control the majority of oil and gas reserves. As such, they are of great consequence to their country's economy, to importing countries' energy security, and to the stability of oil and gas markets. The paper analyzes the available evidence on the objectives, governance and performance of 20 NOCs from both net importing and net exporting countries, and draws conclusions about the design of policies and measures that are more likely to lead to social value creation.
NOCs differ from private companies on a number of very important variables, including the level of competition in the market in which they operate, their business profile along the sector value chain, and their degree of commercial orientation and internationalization. Most share some core characteristics: they are usually tied to the 'national purpose' and serve political and economic goals other than maximizing the firm's profits. This paper introduces a conceptual model to analyze value creation by NOCs that takes into consideration their complex objective function. Our analysis aims to answer the following questions: Are certain corporate governance arrangements more suited than others to promote value creation? Is good geology a pre-condition for NOC value creation? Are there benefits from exposing the NOC to competition from private oil companies? Does the development of forward and backward linkages hamper NOC value creation?

Sujets

• National oil company
• Energy
• Governance

Informations

• Publié par: world-bank-publications
• Publié le: 13 juillet 2011
• Nombre de lectures: 45
• EAN13: 9780821388327
• Langue: English
• Poids de l'ouvrage: 1 Mo

Extrait

WORLD BANK WORKING PAPER NO. 218
National Oil Companies
and Value Creation
Silvana Tordo
with Brandon S. Tracy
and Noora ArfaaW O R L D B A N K W O R K I N G P A P E R N o . 2 1 8
National Oil Companies
and Value Creation
Silvana Tordo
with
Brandon S. Tracy and Noora Arfaa© 2011
The International Bank for Reconstruction and Development/The World Bank
1818 H Street NW
Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
All rights reserved
1 2 3 4  14 13 12 11
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ISBN: 978-0-8213-8831-0
eISBN: 978-0-8213-8832-7
ISSN: 1726-5878
DOI: 10.1596/978-0-8213-8831-0
Library of Congress Cataloging-in-Publication Data has been requested.
Tordo, Silvana.
National oil companies and value creation / Silvana Tordo with Brandon S. Tracy and Noora Arfaa.
p. cm. — (World Bank working paper ; no. 218)
Includes bibliographical references and index.
ISBN 978-0-8213-8831-0 (alk. paper) — ISBN 978-0-8213-8832-7 (electronic)
1. Petroleum industry and trade. 2. Business enterprises. I. Tracy, Brandon S., 1973- II. Arfaa, Noora.
III. Title.
HD9560.5.T647 2011
338.2’7282—dc23
2011020570Contents
Acknowledgments ..................................................................................................................vii
Abbreviations and Acronyms ................................................................................................ix
Executive Summary......xi
1. The Petroleum Sector Value Chain .................................................................................... 1
1.1 Overview of the Value Chain ..................................................................................... 1
1.2 Policy Decisions Afecting Value Creation ............................................................... 3
1.1.1 Industry Participation ........................................................................................ 4
1.1.2 Licensing and Petroleum Contracts ................................................................ 4
1.1.3 Taxation ............................................................................................................... 5
1.1.4 Depletion Policy .................................................................................................. 5
1.3 Value Creation Through Integration ......................................................................... 7
1.4 Local Content Policies and Value Creation ............................................................... 8
1.5 Conclusion ................................................................................................................... 11
2. The Establishment of a No C: Advantages and Issues ................................................15
2.1 A Brief History of NOCs ........................................................................................... 15
2.1.1 Industry Participation ..................................................................................... 15
2.1.2 The Emergence of NOCs ................................................................................. 16
2.1.3 OPEC Revolution and Post-Colonial World ................................................. 17
2.1.4 The Reaction of Consumer States .................................................................. 19
2.1.5 A New Agenda: Liberalization and Privatization ...................................... 19
2.1.6 The End of History? ......................................................................................... 20
2.1.7 Developments Since 2000 ................................................................................ 21
2.2 Arguments in Favor of NOCs ...................................................................................22
2.2.1 Historical Context ............................................................................................22
2.2.2 The Importance of the Petroleum Sector .....................................................22
2.2.3 Political Gains from State Control ................................................................. 23
2.2.4 Efciency and Monitoring of Operations .................................................... 23
2.2.5 Petroleum Rent Maximization ...................................................................... 23
2.2.6 Socioeconomic Issues and Priorities ............................................................. 24
2.3 Practical Difculties and Setbacks with N OCs ..................................................... 24
2.3.1 Historical Context and Ideology .................................................................... 24
2.3.2 Economic Cost of Political Control ................................................................ 25
2.3.3 Operational Inefciencies ............................................................................... 25
2.3.4 Lack of Competition ........................................................................................ 26
iiiiv World Bank Working Paper
2.3.5 Subsidies and Noncommercial Objectives................................................... 26
2.3.6 Weak Corporate Governance ......................................................................... 27
2.3.7 Funding Strategy and Requirements ............................................................ 27
2.3.8 Confict of Interests and Balance of Control ................................................ 28
2.4 Conclusion ................................................................................................................... 29
3. The Performance and Value Creation of No Cs: A Conceptual Model ....................38
3.1 A Conceptual Model of Value Creation .................................................................. 38
3.2 Measuring the Performance of NOCs: The Value Creation Index ...................... 39
3.2.1 Proxy Measures Used in VCI ......................................................................... 40
3.2.2 Determination of VCI ......................................................................................44
3.3 The Value Drivers .......................................................................................................44
3.3.1 Selection of Proxy Variables ........................................................................... 45
3.4 Conclusion ................................................................................................................... 47
4. Case Studies and Lessons Learned ..................................................................................50
4.1 Exploratory Analysis of Value Drivers .................................................................... 50
4.1.1 Selection of Proxy Variables 50
4.1.2 Indications from the Statistical Analysis...................................................... 52
4.2 Case Studies ................................................................................................................ 53
4.3 The Corporate Governance of NOCs ......................................................................54
4.3.1 Context Variables and NOC Corporate Governance ..................................54
4.3.1.1 External Governance ............................................................................. 67
4.3.1.2 Internal Governanc