Mapping out the NOC Landscape
Valerie Marcel & Paul Stevens Chatham House
Setting Up a National Oil Company in Timor Leste Dili, 28-29 May 2009
1 Different paths
Historic concessions Nationalisation & transition Non-Co- operative NO C/IOC
Different NO Cs Co- today operative NO C/IOC
NO C established as Ne w bridge to IOCs petroleum countries
2 Landscape of NOCs
NOCs change as capacity grows – Non-operating stake in JVs [NNPC, Libyan NOC] – Custodian of the sector – Operator in JV: [ADNOC, Sonangol, Ecopetrol] – Monopoly operator: Saudi Aramco, KPC, NIOC, Pemex, Pdvsa – Integrated operator (own marketing, refining, transport): Saudi Aramco, KPC, PDVSA, Pemex, Sonatrach, Petronas – Internationalization: non-operating stake in JV: Sonatrach, KPC, Sonangol – International operator: Petronas, CNOOC, Petrobras, StatoilHydro – Partial listing: CNOOC, Petrobras, StatoilHydro, KMG EP
3 The drivers of the evolution
Ideological Fashion Resource ?????? nationalism
The need for Managerial NOC a national Ambition mission
Looking for Need for A leading Revenues Development Strength and sector Strategy of Government
4 The importance of the national context
NA TIONA L CONTEX T HI GH LOW Centralisation of institutional power Public trust in state institutions Level of econom ic development National prosperity De pendence on petroleum Pressure of population Competence of NOC Do minance of ministry of petroleum State control of resources International obligations (OPEC, WTO) Clear & detailed legal framework Weight of history
5 Different relationships to government HIGH DEPENDENCE ON PETROLEUM
HIGH DIRECT LOW DIRECT STATE STATE CONTROL CONTROL
LOW DEPENDENCE ON PETROLEUM
6 NATIONAL CONTEXT NOCs
Mineral Rights Exclusive Saudi Aramco/oil, NIOC, Pemex, KPC Shared with IOCs Sonatrach, NNPC, Sonangol, PDVSA Marketability of Difficult crudes KPC, PDVSA production Large production Saudi Aramco
Easy crudes Saudi Aramco, ADNOC, Sonangol Reserves Large ADNOC, NIOC, Saudi Aramco, KPC Small or declining Petrobras, Statoil, Sonatrach, Petronas
7 Good governance of the national petroleum sector Valerie Marcel Associate Fellow, Chatham House
Setting Up a National Oil Company in Timor Leste Dili, 28-29 May 2009
8 Principles of good governance
1 Clarity of goals, roles and responsibilities
2 Sustainable development for the benefit of future generations
3 Enablement to carry out the role assigned
4 Accountability of decision-making and performance
5 Transparency and accuracy of information
Source: Chatham House Report on Good Governance 9 The roles of the principle actors Governance Functions
Actors Policy Regulation Strategy Operations
People/Society/ Parliament
State/ Government
Investor/ Operator
= executive authority = proposals & approvals = input & feedback
Source: Chatham House Report on Good Governance 10 Principles of good governance
1 Clarity of goals, roles and responsibilities
2 Sustainable development for the benefit of future generations
3 Enablement to carry out the role assigned
4 Accountability of decision-making and performance
5 Transparency and accuracy of information
Source: Chatham House Report on Good Governance 11 The importance of the national context
NA TIONA L CONTEX T HI GH LOW Centralisation of institutional power Public trust in state institutions Level of econom ic development National prosperity De pendence on petroleum Pressure of population Competence of NOC Do minance of ministry of petroleum State control of resources International obligations (OPEC, WTO) Clear & detailed legal framework Weight of history
12 Defining the NOC mission
Valerie Marcel & Paul Stevens Chatham House
Setting Up a National Oil Company in Timor Leste Dili, 28-29 May 2009
13 How do you define the NOC’s mission?
Do you want a narrow or wide mission? narrow • Explore and produce hydrocarbons • Optimise development of resources • Behave commercially • Maximise oil rent • HSE standards • Supply world markets • Supply domestic market (at socially acceptable prices) • Acquire technology • Employment and training for nationals • Promote national economy and favour local companies • Develop infrastructure wide
14 What is the purpose of the NOC
Maximi se revenues
National control Development policy Role Do mestic energy Social w elfare National pride
0 20 40 60 80 100 Importance of role (%)
15 Examples of changing NOC missions
Petronas Petrobras Saudi Aramco Sonatrach National Commercial mission mission KPC Adnoc
PDVSA
16 Saudi Aramco’s view
A balancing act between public service, profitability and (for OPEC) international market obligations Public Service ‘Golden Quadrant’
Public Profitability International Service Markets
Profit
17 Source – Aramco presentation Chatham House Nov 2004 Financial freedom
Valerie Marcel Chatham House
Setting Up a National Oil Company in Timor Leste Dili, 28-29 May 2009
18 Fiscal processes Seeking a fiscal structure that increases efficiency and rent transfer AND provides capital for investment
A) Formulas for state control: • NOC must request funds
Issues: - reduces NOC productivity, initiative - investment capital sacrificed to state’s short-term needs
B) Formulas for NOC budgetary autonomy: • NOC retains a share of profits (eg, after royalties, taxes and dividends)
Issue: - Possible rent absorption
19 Does the NOC retain earnings?
System with government control System with NOC autonomy
Crude oil sales Crude oil sales
Treasury Royalties to takes all revenues Treasury
NOC NOC NOC independent govt budget allocation takes remaining revenues investments pays its costs?
Taxes and dividends to Treasury 20