Institutional Design in Low-Capacity Oil Hotspot

This paper focuses on low-capacity countries courted by investors seeking access to petroleum resources during the exploration boom. In emerging oil hotspots, there has been growing interest in promoting national participation, largely by securing stakes in projects for national oil companies (NOCs). Some of these countries are new producers or remain in the exploration phase without having made any significant commercial discoveries, while others are established producers on a relatively modest scale and are now attracting renewed interest. The key question that emerges in all cases is how to organize and manage the petroleum sector in order to maximize the public benefit derived from oil and gas resources. In particular, what role should the NOC and other governing bodies have? This paper addresses the relationship among institutional structure and the goals of economic development and political accountability. It also examines the argument that oil producers are most likely to succeed when they separate commercial, policymaking and regulatory functions across distinct public bodies and restrict NOCs from performing any regulatory duties. Following on existing literature, this paper argues that the capacity level of a country at the time it seeks to establish an institutional structure has a major impact on which sorts of arrangements are most likely to succeed.

The report is available to download at the link below.

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.

Left Stranded? Extractives-Led Growth in a Carbon Constrained World


  • Throughout the commodities boom of the last decade, multilateral banks, donor agencies and investors joined hands in promoting or supporting ‘extractives-led growth’. Their approach assumes that low-income countries with fossil fuel, mineral or metal reserves will be able to deploy them for economic development. The resulting assistance and policy advice has generally had little or no connection to parties’ broader commitment to low-carbon development.
  • Two global factors now seriously challenge the extractives-led growth model. The first is the recent fall in oil prices and the longer-running downward trend in mined commodities prices. With most exporters now facing a period of rising deficits and debt, newer producers such as Ghana and Mozambique must revise their expectations for growth. The second is climate change and the longer-term risks to export markets from action to reduce greenhouse gas emissions.
  • The concept of fossil fuels as ‘unburnable carbon’ or ‘stranded assets’ has little traction in low- to middle-income countries, especially when set against urgent poverty alleviation and infrastructure needs. Yet emissions regulation, fuel subsidy reforms and new technologies, particularly across Western and Asian markets, will affect the prospects for new and prospective exporters.
  • Most countries banking on extractives-led growth have also committed to national visions for green growth and sustainable development. Their 2015 ‘intended nationally determined contributions’ (INDCs) demonstrate ambition to create a range of social goods through climate resilience and emissions management measures. Without careful handling, the political and investment emphasis on extractive-sector development could derail implementation.
  • In contrast to prevailing pressures to develop reserves quickly, donors and advisers should help put back on the table the full range of options available to a country. This includes choices to ‘go slow’, in tandem with boosting local capacity to benefit from investments, business and job opportunities; to integrate extractives development into sustainable economic diversification plans from the outset; and the choice not to extract or expand the sector.
  • To make responsible policy choices, new and prospective producers need better information. This applies not only to their own resources and the full costs of producing them (including social and environmental impacts), but also to deciding whether and how to use resources at home, and to understanding the future risks to export markets for their products given evolving energy and carbon policies globally.
  • Practical conversations regarding low-carbon development aims for extractives-rich low-income countries might best be framed in terms of national goals for sustainable economic diversification. They should place strong emphasis on energy policy and pricing, industrial planning, investment in efficient, resilient infrastructure and the development of skills such as the management of carbon within national oil companies.

The report is available to download at the link below.

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.

How Did Africa’s Prospective Petroleum Producers Fall Victim to the Presource Curse


This paper reviews resource sector developments in 12 countries in Sub-Saharan Africa that made their first (major) petroleum discoveries during the most recent commodity boom. The analysis, which goes back to 2001, looks at sector forecasts of international organizations, governments, and companies and compares them with the results that emerged. The paper finds that a third of the countries did not make any commercially viable discoveries. Among those that potentially had commercial finds, the latest timelines from discovery to production are 73 percent longer on average than initially expected. In the six countries for which there are comparable data, revenue collected thus far or the most recent revenue projections for countries yet to reach production are 63 percent lower on average than the initial forecasts. All 12 countries experienced a disappointment in at least one of the three dimensions analyzed—and these disappointments are likely to be exacerbated by the recent price crash. The paper also documents the various policies adopted in response to the discoveries and — with the benefit of hindsight — finds that, in some cases, this over optimism contributed to the ‘presource curse’: suboptimal policymaking that did not align with the new realities. Some recommendations are provided on how better to navigate the inherent uncertainties in developing the sector.

The paper is available at the link below.