The Cost of an Emerging National Oil Company

 

  • The fall in oil prices since mid-2014 has profoundly changed the prospects for national oil companies (NOCs). If, as seems likely, prices remain low for a number of years, investors will be far more cautious, international oil companies will see reduced cash flows, and many exploration projects will be put on hold or cancelled. NOCs, and the oil and gas industry as a whole, must reconsider their strategies.
  • This will have an impact on the ambitious plans that some emerging producers had nurtured for national participation in the petroleum sector, forcing them to refocus on an affordable strategy for developing upstream capabilities.
  • Governments of emerging and prospective producer countries, and their NOCs, need to understand the cost of various NOC roles, and how these can be financed at different stages of developing the resource base. This will enable them to formulate clear and appropriate strategies for the future.
  • The current environment offers an opportunity for governments to refocus their efforts on defining a mandate that supports their national vision and priorities. This requires an evaluation of the resource base, national capabilities (including those of the NOC) and possible revenue streams, so that the NOC can be tasked with a role it can execute and the state can afford.
  • Governments must approve clear revenue streams for NOCs.
  • NOCs should focus on costs, as well as on strong accounting and reporting standards.
  • Governments and NOCs should be strategic about capacity-building, so that efforts and scarce resources are dedicated to building the right skills and using them on the job.

The report is available to download at the link below.

Enhancing the Performance of African National Oil Companies

Countries endowed with oil and gas hope these resources will lift their economies. They create national oil companies (NOCs) to act as vehicles for national participation in the oil and gas sector, to capture a greater share of the resource rents and act as catalysts for the implementation of broader development goals. The fulfilment of these aspirations depends on the technical and commercial ability of the NOCs, as well as the operational environment provided by their governments. The ability of NOCs to carry out their mandate should therefore be assessed, as should the inducements offered by their government. This study proposes a methodology to evaluate and benchmark the performance of African NOCs, taking into account the regulatory and policy environment in which they operate. It also offers pathways for enhancing their processes and capabilities.

This report was drafted for the African Development Bank. The below document is the authors’ manuscript completed in January 2020. Publication by the AfDB is forthcoming in 2021.

Africa’s New Oil and Gas Producers Must Prepare for More Disappointment in the Post-Coronavirus Era

 

The crash in oil and gas prices, triggered by the coronavirus pandemic and the slump in economic activity, has dealt a blow to the plans and public finances of major oil and gas producing countries. But a group of countries in sub-Saharan Africa once designated as “prospective producers” are facing a different challenge. For new producers in the pandemic era, some licensing rounds are likely to be cancelled, and production is being pushed back once more. Debt is becoming an even greater issue. Yet some investors – like Total in Uganda – still show signs of interest. To clarify this mixed picture, we have reviewed our analysis of the experience of the 12 sub-Saharan African countries that made their first major discoveries during the period from 2001 to 2014.

A link to the original article is available below.

Annual Meeting 2016

 

The fourth Discussion Group meeting which was held in Naivasha, Kenya from 2 –4 March was the second meeting of the Group outside of London. It was hosted by the National Oil Corporation of Kenya. The central theme for this meeting was the importance of a clear vision for petroleum sector development and the role of National Oil Companies, especially taking into cognisance the cyclicality of the industry and the potential impact of such disruptive technologies as shale oil/gas. Senior officials from petroleum or energy ministries and national oil companies in new and experienced producer countries participated at this meeting. These included Barbados, Belize, Cote d’Ivoire, the Democratic Republic of Congo, Ghana, Guinea, Guyana,Jamaica, Kenya, Liberia, Namibia, Sierra Leone, and Uganda.

A summary of the Annual Meeting is available at the link below.