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National Oil Companies and Value Creation Volume I

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... After a longer period of liberalization and under the impression of high petroleum prices, this idea also gained popularity among the newly resource producing African nations. In particular the beginning years of the new millennium saw a stark increase in the number of NOCsoil and gas companies owned by the government (Tordo et al. 2011). ...
... Typically, NOCs promote economic and political goals that depart from profit maximization (Tordo et al. 2011). State companies' concerns regarding the employment of workers living within oil-extraction areas are an example. ...
... Mosley (2017), for example, describes how resource-abundant areas have profited from fiscal decentralization in Ghana (see also Cust and Rusli 2014). As shown by Tordo et al. (2011), NOCs of several African countries fund a variety of public goods in extractive regions, as they are usually the most competent managerial organization. Consequently, they often carry out public tasks with no immanent connection to the extractive sector. ...
... Local content policies (hereafter, LCPs) are recognised as important policy interventions for this purpose [2]. According to studies [2][3][4] LCPs have the potential to do the same for developing countries, especially in Africa where natural resources extraction activities and development are commonly mismatched. ...
... Ghana's upstream oil and gas operations are not different, since they are dominated by MOCs 3 and major upstream services companies (see footnote 2). The Petroleum Commission 4 and GNPC serve as agents to the Government of Ghana (GoG) respectively as the upstream regulator and the National Oil Company (NOC), and which together lead the upstream local content implementation agenda. LCPs in Ghana's upstream oil and gas laws include the law establishing the Ghana National Petroleum Corporation, PNDC 5 law 64, and the Petroleum Exploration and Production Acts 919 and 84. ...
... 3 MOCs such as Tullow, Kosmos, Anadarko, ENI, Aker, and ExxonMobil. 4 It is an approach combining qualitative and quantitative data collection and analysis in a sequence of phases. In the first phase, researchers collect qualitative data and then analyse the data, the results of which direct the next, quantitative phase, which could be a questionnaire, survey or some other form of quantitative data collection [12]. ...
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The need to develop and boost the potentials of Ghana’s upstream oil and gas activities has been advocated by policymakers, academics, and financial institutions since the discovery of oil and gas in commercial quantities. It has been argued that if well implemented, upstream activities have a trickledown effect on the local content policy linkages that apart from taxes, can lead to improved financial and social benefits. In this study, how Ghana can use local content policy in upstream oil and gas operations to maximum economic and social benefits for the good of the Ghana government, citizens, and the Multinational Oil Companies, is the main question to be answered? To address this question, comprehensive analysis of local content laws and policies and stakeholder consultations are conducted. The paper argues that an effective local content policy towards achieving sustainability in the upstream oil and gas industry demands balancing the needs of policymakers, local communities, Multinational Oil Companies, and regulators to succeed. The study recommends a local content implementation master plan; active participation of key stakeholders (government, citizens and Multinational Oil Companies); and integration of forward and backward linkages in the implementation of Ghana’s upstream local content laws and policies.
... For example, the overseas expansion of Chinese NOCs is a strategic move of Chinese government in order to secure foreign production of oil and gas (Ma and Andrews-Speed, 2006), which may significantly help the country in meeting its energy needs, particularly in case of domestic crisis. The importance of NOCs in a global economy is significant since 90% of the oil reserves and 75% of oil production are under the control of these national actors (Tordo et al., 2011). Also, the share price performance indicates the superiority of NOCs over IOCs; in the latter part of 2002, prices of NOC shares (12 selected NOCs) rose by 531% while those of the IOCs (major 5) increased by only 113% -compared to the share prices at the beginning of the year (Jaffe and Soligo, 2007). ...
... Nevertheless, among NOCs and IOCs, which model is more efficient than the other is an ongoing debate (Wolf, 2009). A large number of studies explore the specifics of oil businesses and the types of companies involved; however, researchers have not yet reached a consensus regarding the prevalence of an ownership model over the other, in terms of efficiency (Krasnopeev, 2016;Tordo et al., 2011). The question is unanswered primarily because of the difference in the settings, objectives and characteristics of NOCs and IOCs. ...
... Despite the fact that NOCs own most hydrocarbon resources, research on the decline of commercial productivity and efficiency show that, at present, NOCs are considered less efficient than the private counterparts (Bereznoy, 2018;Wolf, 2009); although the rate of efficiency improvement of NOCs is better than IOCs, the former is comparatively less efficient than the latter (Bereznoy, 2018;Hartley and Medlock III, 2013). Scholars believe that the observed inefficiencies of NOCs may be a result of the structure of the oil industry in which government policies and interests hold primary importance (Ayala and Luis, 2009;Tordo et al., 2011). While IOCs orient their performance towards market-specific and monetary goals, NOCs tend to prioritize policy-related objectives of government, such as subsidized oil prices, employment, and sometimes environmental concerns (Gong, 2018;Krasnopeev, 2016). ...
Article
The last two decades have seen a shift in market interest in favor of national oil companies (NOCs) to replace the dominance of international oil companies (IOCs). Since approximately 90% of the oil reserves and 75% of oil production is under the control of NOCs, it is imperative to analyze and understand their performance and efficiency in comparison to the successful business and governance model of IOCs in order to have enhanced forecasts in highly fluctuating market conditions. In the past, some studies attempted to understand the influence of different ownership models, i.e., public or private, but these studies are constrained by their assumptions and limitations. Moreover, the previous studies fail to reach a consensus with regards to the effectiveness of a given ownership model in comparison to the other. The present work is an effort to fill this gap by estimating the operational and financial efficiency differentials of NOCs and IOCs. A comprehensive literature review is carried out as a first step, which helped in identifying the relevant performance measures and the statistical methods that should be employed to obtain conclusive results. Overall, 10 indicators (3 financial and 7 operational) are used in this study to perform four analyses: (i) financial analysis; (ii) operational analysis; (iii) Stochastic Frontier Analysis (SFA); and (iv) Data Envelopment Analysis (DEA). The sample consists of 50 firms (composed of 16 NOCs and 34 IOCs), and our temporal interest is in fifteen years (2002–2016). The results suggest that, in general, IOCs perform better than NOCs but the role of privatization on the performance and efficiency of NOCs remains contentious since some NOCs perform as good as the best IOCs. Nevertheless, on average, it is safe to imply that privatization may lead to improved performance and efficiency since shareholder-owned firms, generally, perform better than the national players. For that matter, even some partially privatized firms show evidence of better performance in comparison to NOCs. However, since NOCs are mandated to fulfil the non-commercial objectives of the state as well, in addition to commercial obligations, it would be interesting to establish the comparison between NOCs and IOCs based on commercial and non-commercial performance.
... The traditional goal of a NOC has been to give strategic investors access to its home country's hydrocarbon resources as co-owners and service providers. NOCs are required by law to own and operate the whole oil and gas supply chain in their native country, from upstream to downstream (Tordo, S, 2011). Accordingly, National oil companies presently control over 90% of the world's oil reserves and 75% of production (similar figures apply to gas), as well as a large portion of the oil and gas infrastructure. ...
... They typically have the vertical integration, wealth redistribution, job creation, general economic development, and energy and economic security as their goals because of their close relations to the national government. Although the national government may deem these objectives desirable, they are not likely to share the same objectives as the stated objectives of the private international oil companies, which is to maximize shareholder value (Tordo, S, 2011). ...
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The medical representative is responsible for increasing product awareness, addressing any inquiries, providing expert advice, and introducing new products to the market. This job requires a high level of knowledge and expertise in the medical field. The purpose of this research is to examine the significance of medical representatives in marketing endeavors within the Kurdistan Region. The study conducted by using an online questionnaire form which consisted of four sections. A group of medical representatives from Kurdistan completed the questionnaire. The questionnaire has four parts. The first component collected participant sociodemographic data. Second, multiplechoice questions covered "The Vital Role of Medical Representatives in Enhancing Pharmaceutical Marketing and Healthcare Professional Engagement." Third, medical representative marketing effectiveness multiple-choice questions were asked. The fourth portion included open-ended questions concerning medical representatives' Kurdistan marketing strengths. The participants include 163 people who participated in the study was 76.7 % male and 23.3%female. The correlations between gender and the various aspects of medical representatives' role and effectiveness are weak, and age group exhibits mostly insignificant correlations. Education level shows mixed correlations with knowledge about the product portfolio and relevant therapeutic areas, but negative correlations with providing valuable feedback. The results show limited correlation with the role of medical representatives, especially in terms of building relationships with healthcare professionals. Assessing communication skills, knowledge of the product portfolio and relevant therapeutic areas, and effectiveness in promoting products among healthcare professionals, the results suggest that higher education might indeed contribute to improved communication skills, knowledge, and effectiveness. The purpose of this research is to examine the significance of medical representatives in marketing endeavors within the Kurdistan Region.
... Oil and gas is one of the key goods importing and exporting internationally. According to the World Bank, oil and gas products are the foremost items traded world wide, amounting to approximately USD 2 billion in daily trades (Tordo et al., 2011). The same paper reported that 90 percent of the world's oil and gas reserves and 75 percent of oil and gas production are controlled by national oil companies (NOCs). ...
... NOCs need to follow these policies and objectives as well as the global initiatives and guidelines. Sometimes the choice of which objectives and regulations to adhere to is based on the particular objectives that policymakers want to realize and their relative priorities (Tordo et al., 2011). ...
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The purpose of this article is to assess the quality of the sustainability reporting indicators used by oil and gas companies (OGCs) in Gulf Cooperation Council (GCC) countries. This study utilizes the International Petroleum Industry Environmental Conservation Association (IPIECA) guidance as a new robust methodology to assess the quality of sustainability reporting, which is considered a comprehensive benchmark that directly relates to the oil and gas sector. This study conducts a content analysis of the sustainability reports published by OGCs in GCC countries for the 2016–2018 period. The results reveal that the quality of the sustainability indicators disclosed by companies is largely unsuitable. The results also show that companies fail to report detailed information on environmental indicators as the most important category for OGCs. The findings demonstrate that most OGCs in Qatar pay more attention to sustainable reporting indicators than the OGCs in other GCC countries. This study successfully addresses many previously outstanding issues regarding the quality of the sustainability reporting indicators used by OGCs in GCC countries. Hence, the findings paint a clear picture of the situation so that regulators, policymakers, and managers can correct the existing shortcomings in the quality of sustainability reporting and promote sustainability reporting guidance best practices.
... 8 The IOC and the state-owned oil company as a government partner are represented equally in this committee. 9 The Joint Management Committee has a wide range of duties and authorities related to petroleum operations. 10 It also has a power to control technical, financial, and legal performance. ...
... 7 8 Technical Services Contract model, above n 4, art 13(1). 9 For example, under TSC for Rumaila field, the JMC consists of ten members, five of them including the chairman are representing the state-owned oil company, and the other five members including the deputy chairman and the secretary are representing the IOC(s). 10 Technical Services Contract model, above n 4, art 13(1). ...
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Many international oil companies are currently investing in the Iraqi oil industry under the Technical Services Contracts (TSC) for 20-25 years. These oil contracts require contractors to allocate, as a minimum, an annual amount of USD 5 million to the Training, Technology, and Scholarship Fund. This is important in building capacity and expertise for Iraqi workers. However, there is evidence that the full amounts have not been spent nor has it led to the upskilling and recruitment of greater numbers of Iraqi workers. This research discusses the legal and governance weakness that leads to insufficient implementation of training requirements. It argues that Training in the oil industry of Iraq should be subject to sound management to achieve general sustainable development. On this basis, the study provides an advanced framework and recommendations for training programs to maximise economic and social benefits from the oil industry in Iraq. To effectively address training challenges in the oil industry, the large amount of the Training Fund could be partially reallocated to support the development of other sectors, contribute to general education development and be subject to a sound monitoring policy. In this way, oil investment will increase the general development in the country rather than developing the oil industry only.
... NOCs are arguably more complex than their privatized, multinational counterparts or International Oil Companies (IOCs). While IOCs concentrate on the maximization of profit and shareholder value within the constraints of long-term enterprise survival, CNOCs have to serve a comprehensive set of objectives, and are therefore a hybrid of corporate governance, public administration, and societal regulation (Tordo et al., 2011. This dispels the illusion of some western observers that these SOEs are fully governmental institutions operating under the explicit control of a political strategy designed by the state leadership in Beijing. ...
... 38 Although NOCs have been around for decades, they have developed new transnational characteristics and are engaging with IOCs that are transnational veterans. To some extent, NOC-IOC relationships can be understood by applying the concepts complementarity and competitiveness (Doran 2003, see also Houser 2008Jiang & Sinton 2011;Tordo, Tracy & Arfaa 2011;De Graaff 2012). ...
... with the IOCs, then the contracts should at least include the right to future revisions. In the 1970s, a number of forced equity participation and outright nationalizations in OPEC member countries occurred. "The development of the oil industry in OPEC states was part of a wider, global trend towards national emancipation in a post-colonial world" (Tordo et. al, 2011). There is no doubt that the present high income status of many of the OPEC member states such as Qatar, Saudi Arabia, United Arab Emirates, Kuwait, etc., is because these countries are able to now reap considerable amounts of revenue (about 70% or more of total government revenues) from their extractive resource endowments, due to the s ...
... Indeed, the ownership interests in oil production held by GNPC are way below international standards. National oil companies (NOCs) control around 75 percent of world's oil production (Tordo et al., 2011). The role played by the size of ownership interests held by an oil-endowed nation in revenue generation, particularly under concessionary arrangements, cannot be overemphasized. ...
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The government of Ghana has implemented extensive tax and non-tax policy and administration reforms over the years. Starting from 1983, these reforms have largely been carried out under the auspices of the IMF and the World Bank. However, using a sample of 35 countries in the developing world, we find in this paper that, relative to GDP, Ghana's total public sector revenue has performed very poorly, compared with those of its peers, confirming findings of other studies. The government of Ghana has often blamed the country's poor revenue performance on the difficulty in taxing the large informal sector, the generous tax exemption system, and the weak real property taxation. However, credible estimates of untapped revenues from the informal sector and the tax exemption system fall far short of the identified gaps in the total revenue to GDP ratios between Ghana and its peers. Additionally, we show in this paper that the country's weak real property taxation is not a major cause of the gaps. After analyzing the government of Ghana's (1) revenue from the entire extractive sector and comparing it with those of a sample of 21 economies in the developing world, and (2) revenues from the oil and mining subsectors and comparing them with the government of Nigeria's revenue from the oil subsector and the government of Botswana's revenue from the mining subsector respectively as case studies, we find the following: (a) the government of Ghana's revenues from the extractive sector are extremely low, compared with those of its peers, and (b) the extractive sector is the main source of the country's comparatively poor total revenue performance, which has led to the large gaps between Ghana and the peer countries in terms of total revenue to GDP ratio. Therefore, to be able to raise its total revenue to GDP ratio to the level of the peer countries and thus significantly cut down the rate of borrowing, reduce the huge debt service cost and create a sizable fiscal space to fund developmental projects, Ghana needs to sharply increase its revenue generation from the extractive sector to match the peer countries. We have provided a number of recommendations as to how this can be achieved, after identifying the main causes of the incredibly poor performance of the country's extractive sector revenue.
... Some stages utilize more locally produced goods and services whereas others require imported inputs. The main determinant of the capacity to produce such goods depends on a country's level of industrialization and development (Tordo et al., 2011). ...
... The state might choose to adopt a more liberal method to encourage foreign firms, which could emanate from its understanding of the prevailing constraints in finance, legislation, institutional framework or a simple decision to use such an approach. Under this structure, there prevails no explicit local content requirements and private firms are left to decide the mechanisms they consider appropriate in their operations (Tordo, Tracy, and Arfaa, 2011). The logic behind such a move is that by operating in unrestricted and encouraging business environment, foreign actors would be encouraged to expand their operations and the spillover effects would be appropriate for the growth of a country's economy. ...
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The energy sector is a crucial enabler to economic growth in many countries. Consequently, there are a number of private firms, governments and development partners who are heavily investing huge amounts of money on energy projects. Due to the nature of these projects, few foreign firms have the requisite resources and technical capacity to handle mega energy investments. In most cases, local firms lack capacity to undertake the projects. Additionally, as countries exploit resources they have, they are mindful of the gains the local communities would accrue from energy projects in terms of skills and technology transfer, employment and building capacity for local firms. This necessitates the development of local content policies and enactment of legislation requiring foreign firms to build capacity to locals. The local policies differ across countries that practice them depending on the level of development. Nonetheless, the prerequisite for effective local content policies include effective legal and institutional framework; local infrastructure; local capacity; investment climate; good governance and political will; and effective monitoring of the local content policies. Energy projects present numerous opportunities and challenges for local content. In addition, there are various emerging technologies that could be transferred to firms. Despite various legislations that necessitate achievement of local content in Kenya, such as enactment of the Energy Act 2019 and Petroleum Act 2019, it is important to have a policy that necessitates achievement of local content in all the energy sub-sectors.
... The international diversification literature distinguishes four main motivations for foreign direct investment: natural resource seeking, efficiency seeking, market seeking, and strategic asset seeking (Buckley et al., 2007;Dunning, 1998;Makino, Lau, & Yeh, 2002). Drawing on the extractive industries literature (Cameron & Stanley, 2017;Tordo, Tracy, & Arfaa, 2011), we argue that these different motivations will each result in EIMs locating a different activity abroad. Natural resource seeking will lead to EIMs internationally diversifying their extraction activities (Ramasamy, Yeung, & Laforet, 2012). ...
... Foreign activity type Guided by industry classifications in the relevant literature (Cameron & Stanley, 2017;Tordo et al., 2011), one of the authors and a research assistant with expertise in the extractive industries developed our variable coding system that classified EIMs' operations into three main types: (a) extraction; (b) processing; and (c) marketing, sales, and distribution. We began by randomly selecting 5% of our sample (20 firms) and used an iterative process of reading and coding the applicable sections of the annual reports; meeting to discuss coding agreements, disagreements, and difficulties; and modifying the coding system. ...
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Research Summary This article examines how different international diversification strategies impact the legitimacy challenges multinationals face and the way they manage their corporate and social responsibilities. Analyzing these questions in a sample of companies in extractive industries, we find that those who pursue resource‐seeking investments that involve locating extraction operations overseas respond with the largest improvement in their corporate‐level social performance (CSP). Those pursuing efficiency‐seeking by establishing processing subsidiaries abroad increase their CSP less, with the smallest increase for those pursuing market‐seeking through marketing and sales operations overseas. For each type of activity established overseas, the increase in CSP becomes greater the more developed the company's home country and the larger its international footprint, but is not dependent on the host country's level of development. These findings suggest that, in today's globalized world, the legitimacy challenges that result from subsidiaries' activities increasingly need to be managed at a global, corporate level. Managerial Summary This article investigates the relationships between different international diversification strategies, the different legitimacy challenges they create, and corporate‐level social performance (CSP) responses. For multinationals operating in the extractive industries, we find important legitimacy spillovers from different types of subsidiary activities on the corporation, but these also vary, leading it to respond with differential increases in global CSP. These increases are greatest for resource‐seeking diversification, involving the location of extractive activities abroad, moderate for efficiency‐seeking diversification, involving the location of processing activities and least for market‐seeking diversification, involving the location of marketing and sales activities. For each type of subsidiary activity, we also find that the increases in CSP are larger the more developed the company's home country and the larger its international footprint, but are not dependent on the host country's level of development. We show how these results extend existing theory and draw implications for management practice.
... Local Content Policies (hereafter, LCPs) are being viewed as important policy interventions to that purpose [26]. LCPs have the potential to do the same for developing countries, and that there is a mismatch between African countries' development and their natural resources extraction activities [34,20,26]. ...
... LCPs are heralded because of their ability to bind Multinational Oil Companies (MOCs) to a commitment to developing the host country's economy, instead of simply pursuing pro t maximization [20]. Since MOCs are mostly pro t driven, LCPs are the best way to promote the economic wellbeing of local communities [34]. Therefore, linking local content to upstream oil and gas activities can serve as a means of generating social value for the host government and the MOCs. ...
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Upstream oil and gas activities dominates the debate on local content policies in Ghana. If well implemented, upstream activities have a trickledown effect on the local content policy linkages. However, local content policies alone do not assure success. In this paper narrative analysis and stakeholder consultations lead to in-depth discussions of how Ghana can use local content policy in upstream oil and gas operations to maximum benefit. The paper argues that, as is not the case for the Multinational Oil Companies (MOCs), the high risks and the huge financial commitments are a major challenge to the participation of indigenous Ghanaian companies. Balancing the needs of indigenous companies, local communities, and MOCs is critical; without it, efforts of policymakers to benefit from the oil sector will be futile.
... NOCs are arguably more complex than their privatized, multinational counterparts or International Oil Companies (IOCs). While IOCs concentrate on the maximization of profit and shareholder value within the constraints of long-term enterprise survival, CNOCs have to serve a comprehensive set of objectives, and are therefore a hybrid of corporate governance, public administration, and societal regulation (Tordo et al., 2011. This dispels the illusion of some western observers that these SOEs are fully governmental institutions operating under the explicit control of a political strategy designed by the state leadership in Beijing. ...
... 38 Although NOCs have been around for decades, they have developed new transnational characteristics and are engaging with IOCs that are transnational veterans. To some extent, NOC-IOC relationships can be understood by applying the concepts complementarity and competitiveness (Doran 2003, see also Houser 2008Jiang & Sinton 2011;Tordo, Tracy & Arfaa 2011;De Graaff 2012). ...
Book
This book volume, to which thirteen researchers have contributed, is the result of the second phase of the joint research program between the Institute of West Asia & African Studies of the Chinese Academy of Social Sciences and the Energy Program Asia of the International Institute for Asian Studies. As directors of this program and editors of and contributors to the volume presented here, we are grateful to the Royal Netherlands Academy of Arts and Sciences (KNAW), Amsterdam, as well as Chinese Academy of Social Sciences (CASS), Beijing, for providing us with the opportunity to publish the second part of the results of our joint research program. China’s transition to an urban-industrial society relies, first of all, on its abundant domestic coal supplies, and secondly, on an increase in oil—and gas imports. For this reason, China’s strategic investments in the oil and gas industries of resource-rich, energy-exporting countries have vastly increased. Because of high levels of import-dependency, the domestic power-wealth structures of both China (and the EU) rely on interrupted supplies from beyond state borders. To ensure supply security, import-dependent major actors have two options. One is to reduce dependency by, for instance, increasing energy efficiency. Another option is to increase the security of energy imports. This requires improving supply security from resource-rich oil—and gas exporting countries—and regions. This part of the research provides an analysis of the strategies and practices of China’s three oil majors—the China National Petroleum Corporation (CNPC), China Petroleum and Chemical Corporation (Sinopec), and the China National Offshore Oil Corporation (CNOOC). Their complex relations with host-governments and with local communities and other stakeholders lie at the center of the research program. The resource-rich countries under study are Ghana, Nigeria, Kenya Venezuela, Ecuador, Brazil, Saudi-Arabia, Iraq, Iran, Kazakhstan, Turkmenistan, and, Russia. After analyzing the involvement of Chinese National Oil Companies (NOCs) in these countries, we found that package deals dominate China’s access strategy. As part of this strategy, the oil trade and investments in both the upstream and downstream parts of the industry are combined with political and financial support for wider strategic economic cooperation. We consider the growing international and transnational activities of China’s State-Owned Enterprises (SOE) to be part and parcel of economic globalization processes (Marcel 2006; Xu, 2007; Harris 2009; Jiang, J. & Sinton 2011). In establishing energy-supply security, state-led economic activities have the potential advantage of including long–term policy objectives, such as energy security, in the energy supply process. However, given man’s limited ability to control the future, the question remains of to what extent China (and the EU) will be able to create trade-offs between these contradictory objectives and the demands of domestic and international actors. Fossil fuel imports also supply the largest share of the European Union’s energy demand. Developing clean sources of energy and securing energy supplies are therefore important long-term development goals of the EU. Currently, member-states are still in control of the external policy of energy security, and decide on their domestic energy-mix themselves. However, the EU-regulations on domestic energy policies do constrain the external energy security policies viable in member states. Furthermore, energy-security policies touch upon a wider set of objectives, such as climate change, energy efficiency, and the development of renewable energy. As far as the EU and China are concerned, their growing share in renewable energy has not been accompanied by a reduction in the fossil fuels imported. On the contrary, import reliance has increased throughout the last two decades. This has partly been induced by the relatively low prices of some imported fuels, in particular coal and oil. Import levels are expected to increase even higher in the upcoming decades. According to expert opinion, the development of shale gas and tight oil will not substantially reduce the EU’s import dependency. This research explores the challenges to the Union’s energy security in general, and to fossil fuel supplies in particular. The focus in this part is on non-Russian suppliers, namely the Middle East, North Africa, and the Caspian Region. In three parts, the volume describes and analyzes the following, interconnected themes: (a) China’s energy policies, with a focus on the cross-border activities of China’s NOCs in selected resource-rich countries, namely: Kazakhstan, Turkmenistan, Russia, Iran, Iraq, Saudi Arabia, Brazil, Uruguay, Venezuela, and Ghana. (b) China’s dilemma in expanding fossil fuel production and consumption (mainly coal and oil) to meet the energy needs of its massive urbanizing, developing society, and at the same time reducing the level of pollution in major cities and reaching agreement with its partners on international efforts to limit climate change accompanied by possibilities for the development and implementation of alternative and renewable energy resources. (c) The energy security challenges of the European Union, and its energy security policies in countries and regions of supply, in particular the Middle East, North Africa, and the Caspian Region. The member states of the European Union (EU) simultaneously face the need to fuel their high-income economies—each with a high level of per capita energy consumption—and to secure energy supply security and sustainability. As this volume will clarify, both China and EU, the world’s largest energy importers, are cooperating to escape the fossil fuel trap by developing clean sources of energy.
... One of the major covenants was disinvestment of 20% of the government stake in ONGC, but by this time, the government had only disinvested 4%. There were also cases of cross holding by other SOEs in ONGC (Tordo et al., 2011). Government-appointed independent directors, on the board of SOEs, were also not truly independent given the nature of their government service (Tordo et al., 2011). ...
... There were also cases of cross holding by other SOEs in ONGC (Tordo et al., 2011). Government-appointed independent directors, on the board of SOEs, were also not truly independent given the nature of their government service (Tordo et al., 2011). A possible reason for the government slacking in the way it responded to ADB covenants could be that the impact of the 1991 economic crisis had subsided by this time (i.e., 1995), and hence, the urgency associated with bringing about the change may not have been there anymore. ...
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The institutional change literature has predominantly focused on successful changes and sparsely on failed changes, but the idea of institutional fields reverting to their pre-change or near pre-change state, after change attempts, remains underexplored. Although recent studies have explored similar phenomenon from the perspective of actors resisting change and trying to restore status quo, a field-level understanding of the processes and the dynamics associated with it remains underexamined. The present study, using the case of reforms in the field of petroleum exploration and production in India, examines an institutional change where the institution, once modified, gradually reverted near to its prechange state. We suggest the concept of institutional elasticity to explain such reverting of institutions, and elaborate on three boundary conditions—scope of change, pace of change, and field-level actor constellations—which have implications for the relationship between institutional elasticity and reverting of institutions.
... Varios autores critican la gestión ineficiente de las noc en comparación con las petroleras privadas debido a los altos gastos en personal y en reservas por cada dólar ingresado (Wolf, 2009;Eller et al., 2011). También se denuncian que su existencia limita la competencia en un sector ya de por sí con fuertes barreras a la entrada, potencia el rentismo y la corrupción (McPherson y MacSearraigh, 2007;Valarini y Pohlmann, 2019), y genera conflictos entre el gobierno y la propia noc debido a las asimetrías de información (Tordo et al., 2011;Manley et al., 2019). ...
Article
La matriz energética argentina depende en gran medida de los hidrocarburos, pero la producción nacional ha sido incapaz de abastecer el mercado interno, lo que se ha traducido en déficits comerciales y salidas permanentes de divisas. Bajo este contexto, los gobiernos de los Kirchner realizaron varias reformas económicas entre cuyos ejes se situó la recuperación del rol rector del Estado para alcanzar la soberanía energética. Esta corriente de reformas fue modificada ante la llegada a la presidencia del liberal Mauricio Macri, pero fue parcialmente retomada por el Ejecutivo de Alberto Fernández desde 2020. Este trabajo pretende analizar si los sucesivos gobiernos han mitigado la subinversión y la dependencia externa del sector energético argentino, así como las limitaciones de dichas políticas. Se concluye que las diferentes políticas petroleras aplicadas no habían logrado revertir la subinversión y la dependencia exterior del sector hidrocarburífero argentino.
... Changes span the entire O&G sector value chain, from upstream exploration to downstream supply (Tordo et al., 2011). ...
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This study offers an in-depth review of specific facets of the oil and gas industry, emphasizing the role of Floating Production, Storage, and Offloading (FPSO) vessels. It delves into diverse topics, highlighting potential opportunities, a solid research methodology for emissions quantification, and the pivotal challenge of reducing GHG emissions. Among the multitude of opportunities analyzed within the industry's value chain, the upstream sector - encompassing both exploration and production of oil and natural gas - receives considerable focus. This sector can be further divided into key segments characterized by high energy consumption and consequent significant emissions. Notably, the combustion of natural gas for power generation stands out, contributing a substantial 68% of CO2 emissions at related facilities. This process is a primary target for mitigation and energy efficiency enhancements. The intricate interplay between energy generation and CO2 emissions stands at the forefront of current research, emphasizing the need for improving vessel energy efficiency. This paper employs a case-based methodology, evaluating the effectiveness of energy efficiency measures within an FPSO setting and their resulting impact on GHG emissions. Central to this inquiry is a detailed examination of the FPSO Fluminense, strategically located within Brazil's Campos Basin, with the study meticulously examining the relationship between advancements in energy efficiency and emission reductions. While translating these insights into practical applications poses challenges, the momentum generated by rigorous research, combined with policy recommendations addressing GHG emissions in the oil sector, can indeed chart a path toward a more robust, sustainable, and integrated energy future.
... As indicated by Jafar (2008) and Cameron (2010), though originally, IOCs were reluctant to use PSA, it however offers a lot of advantages: it creates its own legal regime, especially in countries where international legal regimes for international energy investment are not robust or unsettled. This, according to the authors (Klein, 1999;;Wolf 2008;Tordo, 2011), was axiomatic in the 1990s of nations who were transitioning from communist states to market oriented economies in Eastern Europe and Central Asia. Besides, under the PSA, the HC retains the ownership of the petroleum which can defuse passions that may arise in some HCs, allowing for a relationship of cooperation between the HC and the IOC. ...
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The paper presents a discourse analysis of the various International Petroleum Agreements. It highlights the main features and clauses of these IPAs. This literature review paper seeks to evaluate and compare different types of IPAs in different countries. It concludes that most developed oil-producing countries prefer the concession while less developed oil-producing countries favour the Petroleum Sharing Agreement. The study also found that there is no one generally accepted method used to evaluate and compare different types of contracts in different countries. The attractiveness of the fiscal terms in a country does not depend on the fiscal regime or its specific provisions but a combined effect of its fiscal terms. From the evaluation, it was concluded that there is a lacuna between discounted and non-discounted calculations and simulations. This means that the project itself is on the red line and the host country can get more revenue by imposing taxes, bonuses and other fees on the contractor, including where the contractor is almost running into negative figures. To overcome the defect of this indicator to reflect the combination of the fiscal terms realistically based on the evaluation and proportion of the host country's take, front-loading index of the contractor can be used to reflect the effect of the time sequence differences of the host country on the project and the contractor's profit.The study is the first of its kind and the lessons are expected to guide the way forward in achieving balanced benefits to host countries and investors in the petroleum sector.
... The emergence of new hydrocarbon producers in sub-Saharan Africa, which was part of the 'Africa rising' narrative was deemed as an avenue for such countries to exert both political and economic control over the resources (Vivoda, 2009) and this included processes of negotiating production contracts (Tordo, 2011). Vernon (1971) emphasised the role of economic dynamics in oil and gas governance, driven mainly by price volatility of hydrocarbons. ...
Chapter
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This chapter surveys the literature on the political economy of oil and gas governance by focusing on the exploration, production, and sharing of revenues in the hydrocarbon sector. Emphasis is placed on the extent to which oil and gas governance is shaped by geopolitics and inter-party politics. We argue that the interests and ideas of key actors like multinational companies and political elites and the power dynamics among these actors are central to understanding the nature and performance of institutions governing the oil and gas sectors of emerging and developing countries, including how hydrocarbon revenues are shared.
... The emergence of new hydrocarbon producers in sub-Saharan Africa, which was part of the 'Africa rising' narrative was deemed as an avenue for such countries to exert both political and economic control over the resources (Vivoda, 2009) and this included processes of negotiating production contracts (Tordo, 2011). Vernon (1971) emphasised the role of economic dynamics in oil and gas governance, driven mainly by price volatility of hydrocarbons. ...
Article
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This chapter surveys the literature on the political-economy of oil and gas governance by focusing on the exploration, production and revenue sharing in the hydrocarbon sector. Emphasis is placed on the extent to which oil and gas governance is shaped by geopolitics and interparty-party politics. We argue that the interests and ideas relative to the power of key stakeholders, such as political actors, multinational companies, the citizens and the state are relevant to the understanding of the form and shape of the emergence and performance of the institutions governing the oil and gas sectors of emerging and developing countries.
... Several attempts have been made to evaluate the activities of NOCs because of their significant effects on the oil and gas industry [21], [22]. In 1991, Mommer pointed out the political role of NOCs in major hydrocarbon exporters. ...
Article
The oil and gas industry has played a dominant role in developed and developing economies. In particular, the rise of national oil companies (NOCs) in recent decades has led to significant changes in this industry. With the control of most of the world's oil reserves, NOCs sit at the epicenter of the country's economy and impact other political and social spheres. Moreover, the performance of NOCs affects the global oil and gas markets. To evaluate this performance, this study implements a global-scale multicriteria ranking process. The considered criteria include production, operational efficiency, financial performance, and home country attributes. To achieve this goal, a novel simulation-based integrated approach was presented in this study. This approach uses the best-worst method and its nonlinear model to determine the optimal weights of the criteria. In the next stage, a simulation-based TODIM method was applied to rank the NOCs. The simulation results found threshold values of the loss attenuation coefficient, where the rank of the alternatives is disturbed. This finding helped to group NOCs based on rank and response to the psychological behavior of decision makers.
... The risk of gaming is amplified by a second concern: the evaluation and classification of a mining and petroleum firm's reserves is an elite process controlled by a small epistemic community with vested interests in expanded production for commercial gain. This concern is particularly acute in countries with nationally-owned fossil fuel producers, such as the national oil companies (NOCs) that control the majority of global oil reserves (Tordo, Tracy, and Arfaa 2011). Evaluation and classification practices in unlisted, state-owned fossil fuel firms are controlled by the firms themselves, and, like many decisions by such firms, tend to be opaque to third parties other than relevant commercial partners (Manley and Heller 10 Petroleum Reserves Definitions [1997 Archive], <https://www.spe.org/en/industry/petroleumreserves-definitions/>. ...
Article
For decades, the object of international climate governance has been greenhouse gases. The inadequacy of decarbonization based on this system has prompted calls to expand climate governance to include restrictions on fossil fuel supply. Such initiatives could rely on accountability frameworks based on fossil fuel reserves, production, or infrastructure, yet there has been little consideration of the different implications of these options. We inform such discussions by undertaking a sociotechnical analysis of existing schemes for the monitoring, reporting and verification of fossil fuels. We identify serious risks from anchoring climate governance in fossil fuel reserves. More promising directions for supply-side governance lie in accountability frameworks based on a combination of fossil fuel production volumes and infrastructure, since these are more transparent to multiple actors. This transparency would provide much-needed opportunities for democratic oversight of the data underpinning climate governance, opening new channels for holding states accountable for their climate performance.
... They are the dominant industry players. In 2010, these companies concentrated 90 per cent of global oil and gas proven reserves and 75 per cent of production, in addition to holding most undiscovered resources to be developed (Tordo 2011). Their national governments created them to become a key fiscal source from the economic rents obtained from the extraction of natural resources, as well as a vehicle of massive economic development and positive spillovers that include job creation, technology transfer and development and increased productivity. ...
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The energy sector is the single largest source of CO2 emissions and reducing its carbon intensity is critical to effectively tackling climate change. A great and yet largely untapped potential to reduce its emissions lies with oil and gas companies. Cognizant of this potential, in recent years several international oil companies (IOCs), publicly traded organizations with large capital access and wide geographical reach, have looked to effectively reduce their carbon intensity by shifting their operations to non-core low- carbon energy development. In addition to bringing about positive climate-driven outcomes, the IOCs that have embraced this energy transition strive to leverage business opportunities presented by political and social environments which are progressively more aware of the energy sector’s contributions to climate change. As much as this paradigm shift has sparked great interest by an increasing number of stakeholders in the energy sector, most national oil companies (NOCs) are notoriously absent. In comparison to IOCs, not only do NOCs dominate the global oil and gas industry, but they typically enjoy more favourable industry conditions, as they benefit from improved capital access and governmental support. This is because their overall value proposition, business strategies and budgets are interlinked with, or heavily influenced by, government policies. Under a mutable business environment which favours the development of energy resources with low- or zero-carbon content, it is reasonable to anticipate that national governments will become more determined to join the energy transition through their NOCs for two main reasons: meeting their national targets under global emissions reductions commitments while sustaining shareholder value. Moreover, given the complex efforts and resources in carrying out decarbonization at a pace and scale that effectively helps mitigate climate change, it is more likely that the world will enter a stronger decarbonization pathway if the largest economies and their NOCs fully embrace such an initiative. The implementation of this initiative at a truly deep scale would eventually allow NOCs in these economies to transform themselves into no-carbon NOCs (No-C NOCs) that would strive for socially accountable sustainable growth, higher economic value and meaningful contributions in the global fight against climate change. This paper analyzes these issues and advances a proposal for the G20, which combines some of the largest oil and gas producer and consumer economies.
... Therefore, movement of technology from developed to developing oil producing countries is inevitable. Technology comprises four constituents, namely; techno-ware (such as machinery and material tools); human ware (such as intellect, experience, expertise); info-ware (such as facts, books and journals) and organ ware (such as administration, networking, advertising, inclusion, exploitation) (Tordo Tracy, & Arfaa, 2011). These four constituents aid the conversion of natural reserves, commodities and services into desires output in the upstream sector (Nouara, 2015). ...
Thesis
The thesis title is; Multinationals’ Dominance and Operational Performance of Indigenous Firms in the Upstream Sector of the Nigerian Petroleum Industry. This study was motivated by the undercurrents in the petroleum industry and the ongoing divergence in the global energy demand patterns with the attendant ripple effects on the Nigerian economy. The study investigated the prevalent market dominance of the Nigerian upstream sector by multinational oil corporations and the effects of such dominance on the operational competence of indigenous petroleum marketing firms in Nigeria – from the sustainability angle i.e. what happens in the Nigerian Post-Oil economy when the oil multinationals have fully divested from the upstream sector. Observably, the Nigerian economy is heavily reliant on the upstream sector of the petroleum industry, with multinational oil corporations exerting great influence on the sector, which has resulted in unsustainable dependence on foreign firms for crude oil production, at the expense of indigenous petroleum firms. Specifically, the study analysed the effect of technology dominance, human resource dominance, institutional dominance and partnership dominance on asset management and human resource management competencies of indigenous petroleum marketing companies in Nigeria.
... First, it can use a ME as a revenue source and either reduce direct taxes or increase provision of government services. Of course this logic applies to some degree to fully state-owned enterprises as well, and this is one reason why state-owned oil companies have become so large (Wolf and Pollitt, 2009;Tordo et al., 2011). However, SOEs have the disadvantage that they are more obviously part of the governmental state apparatus and therefore it is harder to maintain the illusion. ...
Chapter
The chapter presents a definition of a local mixed enterprise (ME), classifies local MEs into three distinct forms and discusses each form: the classic form, the public‒private partnership form and the complex form. This classification and discussion are important precursors to theory development. Our theory examines the extent to which a particular organisational form affects social welfare, that is, in terms of the net benefit that accrues to society as whole. There are three major sets of actors in a local ME: government owners, private sector owners and the managers of the organisation. Although the goals of government owners and private sector owners will generally differ, a local ME with both sets of owners may achieve the ‘best of both worlds’, that is, provide more social welfare than either a pure private organisation or a pure public organisation. However, in another local ME, goal conflicts between owners, or between owners and managers, may reduce organisational efficiency. This organisation may be the ‘worst of both worlds’, that is, have lower social welfare than either a pure private organisation or a pure public organisation. In the third situation, public and private owners collude and maximise profit at the expense of consumers. We first provide the intuition behind these different models and then offer graphical explanations. The graphical explanations consider a local ME that is a monopolist provider of a local good or service, such as a school or a wastewater treatment plant.
... In Africa, like in most countries endowed, petroleum resources are managed as national wealth and controlled by the government. In a multitude of resource rich countries like Tordo, notes, national oil companies control approximately 90% of the world's oil and gas reserves and 75% of global production [39]. In countries like Algeria, the entire petroleum chain has no foreign oil company as a player with the National Oil Company SONATRAC being the largest employer in the country. ...
Article
Energy is indispensable to global economic development and human development. Through the course of history, different energy sources have been used to fuel economic growth and better human life. The fossil economy fuelled unprecedented economic growth that was not possible with previous energy epochs. The development brought about by fossil fuels has not been beneficial for all and this paper argues that fossil fuel energy sources; specifically oil and gas have had more of negative political and socio-cultural implications for Africa. Using secondary data sources from books, articles and reports, the study finds out that oil resources have helped is sustaining dictatorships and socioeconomic hardship in oil producing countries in Africa.
... According to existing literature [25][26][27], industry evidence, and expert opinions, a structure for oil industry businesses is presented at three levels in Figure 2. Three-level structure for value chain of oil industry businesses ...
Article
Designing a business portfolio is one of the key decisions in developing corporate strategy. Most of the previous models are either non-quantitative or financial with an emphasis on optimizing a portfolio of investments or projects. This research represents a multi-objective optimization model that firstly, employs quantitative methods in strategic decision-making, and secondly, quantifies and considers non-financial, strategic variables in problem modeling. In this regard, links between businesses within a portfolio have been classified into four groups of market synergy, capabilities synergy, parenting costs, and sharing benefits, and have been structured as a conceptual model. Although the conceptual model can be applied to various industries, it is formulated for designing the portfolio of multi-business companies in Iran oil industry. The model has been solved for three cases by NSGA-II algorithm and strategic insights have been explored for different corporate types.
... States decided when, where and what investments were needed. They also owned and operated the energy facilities once the investments had been made (Toninelli, 2000;Wolf, 2009;Tordo et al., 2011). State-owned energy companies continue to be the norm in most states even though the global trend of market liberalization as decreased the role of the state as the incumbent (Haney and Pollitt, 2013). ...
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The global flows of foreign investment are increasingly curtailed by tightening investment screening policies. Several states, including Australia, Germany, Japan and the United States, have recently updated their investment screening legislation to cover new industries, transactions and buyers in order to protect sectors deemed sensitive to national or public security. In this article, we analyze the implications of the evolving investment screening landscape for the energy sector. Based on the comparative appraisal of regulatory and administrative developments primarily in the United States and the European Union, we identify the most significant policy changes and their likely outcomes for the energy sector. By analyzing law, policy and individual screening decisions, we demonstrate how investment screening increasingly encroaches on new segments of the energy value chain and poses new challenges for international energy investments. Most importantly, the changing investment screening practices are likely to affect cross-border transactions in energy infrastructures, energy technologies and data-intensive technologies, including the digitalization of the energy sector and concerns over the protection of personal data. We further suggest that the new types of security issues addressed in investment screening legislation and policy push the boundaries of the traditional notions of energy security.
... mining and energy sector from seven sub-Saharan countries. Extractive industries may also indirectly contribute to local economic well-being by providing transportation, power, water-based infrastructure, education, or medical assistance from which local populations may benefit (Tordo, Tracy, and Arfaa 2011;Adewuyi and Oyejide 2012). The quantitative evidence on whether extractive industries contribute to better livelihoods of local communities is mixed (cf. ...
Article
The quantitative evidence on whether extractive industries generate economic wealth at the local level is far from conclusive. In line with recent studies highlighting the moderating role of institutions and governance structures in the resource–development nexus, we argue that the effect of mining on local economic well-being is largely driven by different control rights regimes. We claim that domestic mineral production stimulates local income more than internationally controlled extraction, since national mining companies promote more backward economic linkages and have higher incentives to engage in local capacity building. To test our micro-level arguments, we combine information on districts’ economic well-being as well as individual's assessments of their personal economic situation with our own dataset on the control rights of copper, gold, and diamond mines. Relying on these data, we perform district- and individual-level analyses of sub-Saharan Africa covering the period from 1997 to 2015. Our instrumental variable estimations and fixed effects models show that the presence of domestic mining companies is associated with increased local wealth. Multinational firms, by contrast, are linked to increased regional unemployment. They largely fail to promote subnational economic well-being.
... Saudi Arabia has the world's second largest oil reserves. Contrary to assertions made by Tordo, et. al. (2011) that the size of the endowment will limit the country's ability to create public value, Saudi Arabia has done just this through its LCRs. Saudi Aramco, which is the main SOE in the oil and gas industry of Saudi Arabia, is at the centre of the country's LCR agenda. In 2015, Kingdom Total Value Add (IKTVA) was established as an enhanced v ...
Article
This paper introduces a collection of manuscripts compiled for a special section of The Extractive Industries and Society on local content. Our introduction paper situates these pieces in the wider literature and policy debates on local content in the extractive industries in developing economies. Local content requirements (LCRs), which seek to create value locally, tend to be driven by state-owned enterprises (SOEs) and other agencies that work alongside multinational companies (MNCs), civil society organizations and international institutions in the mining and oil and gas sectors. For states, the establishment of SOEs and other government bodies needed to implement local content is a key to building a robust indigenous technical base for, and developing domestic linkages to, the extractive industries. The article concludes by prescribing recommendations on how to develop LCRs that create public value for a diverse group of stakeholders linked to the extractive industries.
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Government-owned National Oil Companies (NOCs) play a critical role in the current oil and gas industry. There is a common perception that NOCs tend to exhibit lower efficiency when compared to privately owned International Oil Companies (IOCs) because NOCs should pursue non-commercial objectives concurrently with commercial ones, whereas IOCs prioritize profits without such constraints. Previous studies typically assessed the efficiency of NOCs using a traditional one-stage DEA model, either incorporating multiple output variables simultaneously or focusing on one aspect. However, given the unique characteristics of NOCs, a different approach is required for evaluating their efficiency. Thus, this study investigated the operational and competitive efficiency of 27 NOCs using a two-stage network DEA model, where oil and gas production, and revenue are sequentially employed as outputs. Subsequently, the investigation assessed whether these two efficiencies exhibited independent distributions and analyzed the variations in the computed DEA scores concerning region, business type, and ownership structure. The results indicate that operational and competitive efficiency follow independent distributions. It is also revealed that NOCs’ operational and competitive efficiency vary according to regional locations, business type, and ownership structure. These findings offer valuable insights for practitioners and policymakers seeking ways to enhance NOCs’ performance from diverse perspectives.
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Globally, greater attention is being paid to sustainable logistics practices due to the increasing negative impact of urban freight logistics on the environment. Urban logistics stakeholders are faced with the challenge to adopting measures to mitigate the negative impacts of freight logistics operations. This study evaluates the acceptability of sustainable logistics measures. This study adopted a cross-sectional and quantitative survey design. According to Creswell (2014), quantitative research involves the analysis of numerical data using statistical methods. This study used a purposive sampling technique for the distribution of 300 structured questionnaires to stakeholders in the oil industry including other road users in Lagos, Nigeria. The results from the analysis show that respondents accepted (are in support) all the sustainable freight logistics measures. The measures with the highest acceptability (strongest support) are the measures for traffic control, followed by the measures for traffic diversion, and lastly measures for traffic reduction)
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We provide a quantitative assessment of the political connections of top entrepreneurs in the resource sector of the Russian economy. The study applies the methodology of New Political Economy. Top entrepreneurs are considered as economic actors pursuing their interests not only on economic but on political markets as well. Political actors, represented by political and administrative decision-making persons, are motivated both by “public” and “private” goals when interacting with the representatives of “big business”. Common practice shows that running any serious business in the resource sector without political connections is almost impossible. This is about maximizing current commercial results as well as increasing the value of assets in the long term. We reveal various forms that political connections take in the countries with different institutional environments, along with the mechanisms through which firms benefit from them. Political connections matter not only in low- and lower-middle-income economies, but also in high-income countries. Our analysis involves data on private entrepreneurs from ferrous and non-ferrous metallurgy, oil and gas production, chemical industry, woodworking and coal mining. The results indicate that although political connections have a positive effect on asset value, but this effect does not differ across industries. In other words, there is no reason to assert that they play a greater role in the resource sector than in the non-resource sector. This result can be explained with the fact that in Russia the running of any big business is impossible without political connections. The crucial factor is the size of the business and not its industry affiliation.
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The aim of this chapter is to shed light on the industry-politics nexus in resource-rich Algeria with emphasis on the connection between hydrocarbon processing industry and the economic-political goals of the Algerian state. The chapter involves a historical and political inquiry by focusing on the change in economic and technological capacity of the industry over the years, drawing attention to the relevant developments in domestic and foreign policy, as well as their reflections in Algeria's energy policy. The development of the Algerian hydrocarbon industry within a period of 70 years is investigated in terms of anti-colonialism, nationalism, and rentier relations between the state and interest groups (i.e., elites, foreign states, and international companies).
Article
This paper explores the vertical integration of oil-producing countries. Attempts at vertical integration were prominent among oil-producing countries throughout most of the twentieth century, but particularly following the surge of resource nationalism in the 1970s. Vertical integration attempts have largely been regarded as a sideshow in the history of global oil. This article argues that vertical integration was a crucial aspect of producer country strategies into the 1970s and 1980s, and that it affected the organization of national oil industries in important ways. It does so by exploring the Norwegian case. The article demonstrates the importance of vertical integration to the long-term development of the Norwegian oil industry. It discusses the implications of these findings for the study of vertical integration in other oil-producing countries.
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Short version (150): Foreign investments by state-owned enterprises (SOEs) in the oil and gas sector began a dramatic climb in the late 1990s amid rising oil prices. These investments are widely perceived to be politically driven, raising concerns about resource mercantilism and asymmetric interdependence. The book begins with the premise that the investments are commercial ventures by ambitious SOEs seeking to become global players. Applying the principal agent model, the book argues that the realization of their global ambitions depends on two domestic structural factors. First, democracies can limit investments with questionable viability, as it can be politically costly for elected leaders to endorse SOE decisions that prove unprofitable for the state. Second, bureaucratic structures overseeing the SOEs can help prevent counterproductive behavior, conditional upon a clear line of authority among bureaucratic principals on matters pertaining to SOE operations. The argument differs from previous approaches by exploring a range of institutional alternatives to privatization for solutions to problems of oil sector governance. Long version (240): In a resurgence of state capitalism, foreign investments by stateowned enterprises (SOEs) in the oil and gas sector called national oil companies (NOCs) began a dramatic climb in the late 1990s amid rising oil prices. These investments are widely perceived to be politically driven, raising concerns about resource mercantilism and asymmetric interdependence. The book begins with the premise that the investments are also commercial ventures by ambitious NOCs seeking to become global players. Applying the principal agent model, the book argues that the realization of NOCs’ global ambitions depends on two domestic structural factors. First, democracies can limit investments with questionable viability, as it can be politically costly for elected leaders to endorse NOC decisions that prove unprofitable for the state. Second, bureaucratic structures overseeing the NOCs can help prevent counterproductive behavior, conditional upon a clear line of authority among bureaucratic principals on matters pertaining to NOC operations. By considering a wider set of institutional alternatives to privatization in managing NOCs, this book contributes to the resource curse literature. It demonstrates its argument through a statistical analysis of NOC outward investments over the years 2000–2013 and case studies of China, India, Brazil, Norway, and Russia. Based on the experience of NOC global expansion, the book concludes that to achieve decarbonization that not only helps governments meet their political objectives, but also helps NOCs ensure their longer commercial viability via a managed transition to renewables, the role of bureaucratic institutions will be even more crucial.
Article
As reformas liberalizantes ocorridas nos países da Organização para a Cooperação e Desenvolvimento Econômico (OCDE) e nos países emergentes a partir da década de 1990 no setor de energia reduziram a participação do Estado como proprietário, mas não nas funções de regulação, coordenação e planejamento. Destaca-se também que a transição para uma economia de baixo carbono, impondo-se de forma inequívoca no século XXI, ampliou a agenda do Estado nesse setor, em particular no alcance do Objetivo de Desenvolvimento Sustentável (ODS) 7: energia acessível e limpa. De forma geral, o Estado ainda permanece como um ator fundamental no setor de energia, na busca da segurança energética, da eficiência e da sustentabilidade. Em um primeiro momento, este trabalho define a racionalidade, a participação e a diversidade da atuação do Estado no setor de energia; ao mesmo tempo, sugere que a participação estatal pode e deve coexistir com o setor privado de forma harmônica e complementar, aumentando a eficiência. Em um segundo momento, explora-se a base de dados da OCDE Indicators of Product Market Regulation (PMR) para o setor de energia. Esses indicadores são analisados à luz das reformas liberalizantes e das estruturas de governança de países selecionados, estabelecendo, assim, uma comparação entre o Brasil e os países da OCDE em termos de propriedade estatal, aspectos regulatórios e liberalização.
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The Sustainable Development Goals (SDGs) constitute a set of ambitious steps adopted to transform our world. They comprehensively outline action plans for social inclusion, environmental sustainability, and economic development. Achieving the SDGs by 2030 requires an unusual combination of action and partnership between various governmental and non-governmental organizations, development partners, the private sector, and civil society. While decision-makers are responsible for prioritizing and implementing strategies to ensure the various strategies embedded in the SDGs come to fruition, the private sector and civil society also play leading roles in implementing national plans. Local content policies (LCPs) are strategic policy frameworks focusing on diversification and technologically-led transformation in resourcerich economies. They are generally expressed through laws compelling stakeholders to procure services, create jobs within the host nation, and transfer technology. This paper stipulates that LCPs must be linked to the SDGs as this will help resource-rich countries fully benefit from their natural resources.
Article
It has long been recognised that national oil companies (NOCs) offer the means for funding and delivering fuel subsidies as a politically valuable good. But what happens when the oil begins to run out? Fiscal pressures will clearly increase, but there is also evidence that net importers with NOCs are still more likely to have subsidies than those without. A key question about countries moving through this transition is therefore whether and how the role of NOCs in the subsidy regime changes as the classic logic erodes. We examine these issues in a detailed case study of Indonesia, which became a net oil importer in the early 2000s. A series of partial reforms of FFS has followed, but subsidies remain and the NOC still plays a central role in their delivery. We find that certain functions of the NOC, such as obfuscating the fiscal cost of subsidies, have eroded. But increasing fiscal pressure has not so far overcome the political lock-in of subsidies and institutional inertia in the role of the NOC. Fundamental reform remains unlikely in the short term, but separating the upstream and downstream businesses of the NOC and changing its governance could help support that reform.
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Efforts such as the Glasgow United Nations Climate Change Conference of the Parties 26, the Paris Agreement (Paris agreement, United Nations, Paris, 2015) and the United Nations Sustainable Development Goals are supporting the drive to protect the planet from global warming by ensuring sustainable development. The oil and gas industry, as key contributor to greenhouse gas emissions, must transition to more sustainable energy solutions and play their part in reducing these emissions. Currently, oil and gas companies are implementing technical solutions to achieve net zero carbon emissions. The energy transition from fossil fuel reliance has also happened by exploiting alternative renewable energy sources to meet global energy demand such as wind, solar, biogas and bioderived feedstocks. This net zero energy transition will require a fair and just transition for all in society, and to implement this, it is crucial for those working in the oil and gas industry to understand the technologies needed, the importance of carbon policies and their roles. This research presents a modified Delphi study of employees in Malaysia's national oil and gas company to understand their perceptions towards a net-zero carbon future. The paper briefly reviews Malaysia's low-carbon policy plans, its current carbon dioxide accounting balance, and identifies potential technologies for decarbonisation to set the scene for the modified Delphi study. The results indicated that the national oil and gas company has both the capabilities and the financial resources to significantly contribute towards Malaysia transitioning to a carbon neutral nation. This can be achieved by implementing advanced technologies complementing with nature-based solutions to realise net zero carbon emissions. This study also portrays the confidence that the portfolio of solutions should be executed through a coordinated effort to maximise the outcome and minimise the financial impact in terms of economical sustainability. Implementation of activities towards this energy transition will require significant social commitment, and hence, gauging their perception towards this journey is key objective of this paper. Graphical abstract
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This paper explores the intersections and overlaps between state capitalism and global production networks. A key feature of the so-called new state capitalism is the combination of state ownership and corporatisation, which creates a system that can be characterised as a hybrid of public–private governance in both corporate and network terms. Moreover, the internationalisation of state hybrids adds an extraterritorial dimension to the state, which can influence the configuration and governance of global production networks. This paper develops a conceptual framework (H–E–N) that foregrounds the relationships between hybrid governance (H), extraterritoriality (E) and global production network configurations (N), thereby promoting an integrated analysis of the implications of the new state capitalism for global production networks. This framework is mobilised to explain how state capitalism in Singapore has influenced the development of the city-state's position in upstream, midstream and downstream oil global production networks over the 1959–2019 period. The study demonstrates that hybrid governance, as part of a wider strategy of state capitalism, has been critical in the development of Singapore's position in oil global production networks. The hybrid nature of the institutional forms associated with state ownership – for instance state-owned enterprises and sovereign wealth funds – goes beyond market facilitation to encompass active state participation in markets. Hybrid governance not only allows the state to influence domestic outcomes but – through the extraterritorial strategies of hybrid entities – can also influence global production network configurations beyond its borders.
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งานศึกษานี้มีวัตถุประสงค์เพื่อศึกษาและวิเคราะห์ความจา เป็นและความเหมาะสมทางเศรษฐศาสตร์ในการจัดตั้งบรรษัทพลังงานแห่งชาติในประเทศไทยภายใต้กรอบแนวคิดความล้มเหลวของตลาด ความล้มเหลวของรัฐ และเศรษฐศาสตร์สถาบันแนวใหม่ โดยใช้วิธีการศึกษาเชิงคุณภาพแบบนัยนิยม และการวิเคราะห์เปรียบเทียบกรณีศึกษาเชิงคุณภาพ เก็บรวบรวมข้อมูลทุติยภูมิทั้งในและต่างประเทศ ร่วมกับข้อมูลปฐมภูมิจากการสัมภาษณ์แบบ Semi-structured interviews โดยใช้ชุดคา ถามแบบเปิ ดและสุ่มตัวอย่างแบบ Non-probability sampling รวมไปถึงการจัดประชุมกลุ่มย่อย เพื่อนา ข้อมูลมาสังเคราะห์และทดสอบ หลักเกณฑ์ทางเศรษฐศาสตร์จำนวน 11 หลักเกณฑ์ ผลการศึกษาพบว่า ไม่จา เป็นต้องจัดตั้งบรรษัทพลังงานแห่งชาติขึ้นใหม่ในประเทศไทย แต่ควรพัฒนาสถาบันที่มีอยู่เดิมให้มีประสิทธิภาพมากยิ่งขึ้น รวมไปถึงการพัฒนาระบบและกลไกต่างๆในการสร้างรายได้ กระจายความมั่งคั่ง ส่งเสริมธรรมาภิบาลในกิจการปิโตรเลียม คำสาคัญ: บรรษัทพลังงานแห่งชาติ บรรษัทน้ำมันแห่งชาติ ปิโตรเลียม 1
Chapter
Over the last four decades a number of state-owned enterprises (SOEs) have been declining dramatically in most industries. However, state-owned national oil companies (NOCs) continue to secure dominant positions in most energy-producing countries. In some instances, energy-exporting countries conducted full nationalisation of their resources, while in other cases partial nationalisation took place with governments tightening control over privately owned firms. This chapter begins with general questions on why countries choose to have state-owned enterprises and why countries prefer to nationalize their oil and gas industries. Next, we explore a case of nationalization policies in Kazakhstan’s oil industry in the post-Soviet period. Although there was no full nationalization of the energy sector, the government’s intervention in the industry had become more pervasive. As a result, multinationals in major oil and gas projects were forced to form partnerships with the domestic national oil company (NOC), KazMunaiGas. We then further explore the role of KazMunaiGas NOC in the country’s hydrocarbon sector as the government was determined to ensure more active participation of the domestic NOC in a bigscale energy projects. Despite a special status and a preferential treatment conditions created for the company, KazMunaiGas has to deal with similar challenges that many NOCs face globally. These challenges include improving technological capabilities, access to capital and financial independence, as well as strategic human resource management.
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Resource abundance does not always bring sustained economic growth and development. Moreover, the mining sector generally provides little direct employment in the regions where extraction occurs. In an attempt to derive greater benefits from their resource endowments, and increase linkages with other parts of the economy, some minerals-rich countries have instituted local content and procurement policies (LCPs). The benefits sought include employment generation, supply chain development and technological and knowledge transfers. Measures that aim to increase local content and procurement in the extractive industries are common, including in many OECD countries. This study examines local content policies in 10 minerals-rich countries and provides some observations about their efficacy and the desirability of their use. A wide range of measures are examined, from industry-wide, mandatory quantitative targets to voluntary initiatives undertaken at the firm level, encompassing diverse policy objectives and implementation strategies. The range of countries covered is broad including OECD countries, developing countries and least developed countries. The study does not recommend a “one size fits all” policy mix but guards against the distortions created by overly prescriptive, mandatory local content requirements.
Article
Central Asia is emerging as an important pole of global economic and political power, thanks to its unique location at the heart of Eurasia and its abundance in energy reserves. This study explores the social power change in Central Asia from the perspective of cross-border mergers and acquisitions (M&A) by using the social network method. The main results are as follows: (1) The complexity of the energy M&A network has significantly decreased after the financial crisis in 2008. In the meantime, energy M&A became an important way to enhance energy power for buyer countries. Betweenness centrality is becoming the most significant factor affecting energy power, yet the effect of out-degree is weakening. (2) The community underwent multifaceted restructuring, which reflected the shift of energy power in Central Asia. Kazakhstan is the most powerful country in the energy sector in Central Asia. In addition, East Asian countries/regions, represented by China, are actively enhancing their energy power. (3) Different M&A modes reflect various M&A motivations of countries in the energy sector. In the future, more efforts should be made to promote the establishment of a pragmatic and efficient multilateral energy cooperation mechanism and strength the cooperation of the economy and energy finance when China participates in the energy market in Central Asia.
Chapter
Several factors have ramifications on the development of adequate and efficient local content policies. Factors affecting local content design differ in developing countries compared to developed countries. The variation in factors leading to local content success has led to debates and development of several constructs within different theoretical and conceptual frameworks. Nevertheless, local content is an interdisciplinary phenomenon that navigates through different socio-legal and socio-economic schools of thought. The interdisciplinary nature of local content policies is what creates the ambiguity in local content implementation. This chapter addresses the theoretical debate, as well as clarity aspects of local content policy implementation. Though national content policies have been the primary typology of local content policies adopted by several oil and gas rich countries. This chapter argues the bottlenecks of different typologies of local content policies as well as makes suggestions on what type of local content policy best addresses the enclave nature of the oil and gas industry in developing countries.
Conference Paper
While the industry is actively looking to increase efficiency, mitigate and remediate outcomes of extractive practices, there is a shift in requirement for the license to operate – from sustainability (balancing harm) to regeneration (giving more than taking). The sustainability phase continuum can be described as making moves from recycling to sustainability to regeneration. Movement through the phases may be thought of in terms of doing less harm to the planet (everything in it and on it) to giving more than taking from the planet. By mapping activities to specific phases, a representative picture of key current and potential areas/technologies for regenerative industry practice could provide mechanisms and strategies for evolving sustainability/regenerative enterprise strategies. The key takeaway: Improving resource efficiency efforts through nature-based solutions and regeneration of social and environmental conditions will materially increase positive impacts including lower carbon footprints.
Chapter
In Sub-Saharan Africa, local content policies have been implemented since the 1970 s, but these policies have not been able to transplant the intentions of the policymakers into practice. Though in the last decade there has been a proliferation of local content policies; the policies have not yielded similar results in developing countries such as Angola and Nigeria compared to other oil and gas countries such as Norway and Brazil. This chapter is an examination of how local content policies have been approached in Norway and Brazil, and what lessons can be drawn for emerging oil and gas producers like Kenya, Tanzania and Uganda. The chapter undertakes a comparative case study approach between Norway and Brazil, analyzing the nature of the oil and gas industry and the local content model adopted. The case-study intends to find out what is the common denominator for local content policy success in any oil and gas industry. As much, countries like Kenya, Uganda and Tanzania do not have the pre-existing faculties to develop efficient local content policies. The chapter constructs mean for novel channels of creating local content policies that are not mere transplantation of policies from mature developed economies to emerging developing economies but the development of policies while taking into account the peculiar conditions and realities of an emerging oil and gas producer like Kenya, Tanzania and Uganda. The chapter also highlights the future of local content policies in the energy transition era.
Article
The discovery of vast deposits of petroleum resources in any state can arguably lead to many positive outcomes for the country, but for this favourable outcome to be actualised individual players have to perform some significant roles in achieving this goal. It has been proven that some economic development can be achieved through petroleum resources. Some studies have shown the vital roles governments, and national oil companies play in their domestic petroleum sector and even in the global petroleum sector. Recently, the national oil company model of managing petroleum resources has come under scrutiny and has been viewed as a medium of waste and corruption. This paper identifies that the national oil company model can lead to some positive outcomes for the economy of Guyana. Also, this paper identifies and analyses the critical roles a government and a national oil company play in the successful petroleum resource governance and the positive outcomes that can come from transparent and effective management of these resources. Furthermore, this paper argues the case for the presence of a national oil company in Guyana, considering that they are today considered to be a petroleum-rich state due to the sizeable recent petroleum discovery in the country.
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In its endeavour to attract foreign investment inflows and realise the diversity and security of its energy supply, Vietnam has set out short, medium and long term strategies which have been articulated in a number of legal instruments. These developments include the drive and acceleration of divestment and liberalisation of the energy market and ensuring healthy competition therein. This article provides a critical analysis of the current divestment of state-owned enterprises (SOEs) in Vietnam’s oil and gas sectors. In doing so, it also assesses current state of affairs against the key principles and objectives of competition law. After providing a brief summary of the milestones in the oil and gas sector, the article explains the equitisation in and privatization of SOEs and critiques the implications of these practices against the benchmarks of competition law provisions. After identifying the current problems and future challenges that lie ahead, it provides a number of constructive recommendations for policy development and legal reform.
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National oil companies (NOCs) appear resurgent in the global energy markets and now control a sizeable majority of the world’s oil and gas reserves. Their performance therefore plays a key role in these markets and has implications for the supply of oil and gas resources. This paper analyzes available macro-level data on oil and gas companies in order to quantitatively compare the performance of NOCs with international oil companies (IOCs) including the global majors. Due to performance shortcomings or government-dictated strategies that differ from those of purely profit-maximizing enterprises, NOCs are seen to extract resources far less efficiently than IOCs. Much of the oil and gas reserves in NOC hands are thus effectively “dead.” At the same time, NOC performance is far from monolithic – some national oil companies are able to perform at or near the level of the global majors, while others fall significantly short.
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On the basis of application of both data envelopment analysis and stochastic frontier estimation applied to a panel of 78 firms, we present empirical evidence on the revenue efficiency of National Oil Companies (NOCs) and private international oil companies (IOCs). We find that with few exceptions, NOCs are less efficient than IOCs. In addition, much of the inefficiency can be explained by differences in the structural and institutional features of the firms, which may arise due to different firms’ objectives. KeywordsNational Oil Companies–Data envelopment–Stochastic frontier
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We present a model of the exploration and development activities of a National Oil Company (NOC), which uses similar technology to a private firm to extract a depletable resource. However, unlike the private firm, the NOC may have a wider range of objectives than maximizing the present value of profits. Specifically, we assume an objective function that balances firm profitability against a political desire to favor domestic consumer surplus and domestic employment. We find that the non-commercial objectives faced by a NOC tend to reinforce each other in their effects on profitability, the timing of cash flows and employment.
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Our theory of costly contracts emphasizes that contractual rights can be of two types: specific rights and residual rights. When it is costly to list all specific rights over assets in the contract, it may be optimal to let one party purchase all residual rights. Ownership is the purchase of these residual rights. When residual rights are purchased by one party, they are lost by a second party, and this inevitably creates distortions. Firm 1 purchases firm 2 when firm 1's control increases the productivity of its management more than the loss of control decreases the productivity of firm 2's management.
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Overseas Chinese entrepreneurs in East Asia have achieved notable success in a number of traditional, slow growth industries. This success has been ascribed to distinctive aspects of Chinese business culture that favor alacrity, adaptability, networking, and close control of firm operations. Recently, some have suggested that the same characteristics that have promoted these firms' success in slower growth sectors may hinder firm success in faster growth sectors of the economy. To explore this proposition, we conducted in-depth interviews with forty-one entrepreneurs, venture capitalists, and government officials all working with fast growth entrepreneurial firms in East Asia. The results suggest that, in general, Overseas Chinese entrepreneurial firms also follow many of the traditional business practices associated with Overseas Chinese firms. Most venture capitalists and government officials in the sample expressed concern that these practices are hindering the building of firms that can be taken public and experience the high growth consistent with vibrant entrepreneurial firms. The results also showed that the Overseas Chinese entrepreneurs sampled are aware that some of these characteristics may be creating constraints to faster growth and, at the behest of venture capitalists and government officials, are sometimes making the changes thought necessary to create faster growth firms.
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This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
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This paper integrates elements from the theory of agency, the theory of property rights and the theory of finance to develop a theory of the ownership structure of the firm. We define the concept of agency costs, show its relationship to the 'separation and control' issue, investigate the nature of the agency costs generated by the existence of debt and outside equity, demonstrate who bears the costs and why, and investigate the Pareto optimality of their existence. We also provide a new definition of the firm, and show how our analysis of the factors influencing the creation and issuance of debt and equity claims is a special case of the supply side of the completeness of markets problem.
Chapter
This book explores the factors behind the underperformance of resource-abundant developing countries compared to resource-deficient countries. Drawing on research from various subfields within economics literature, it argues that since the 1960s, the natural resource endowment of a developing country has strongly affected its capital utilisation efficiency and the nature of its long-term development trajectory. The book is divided into four parts. Part I presents an introduction to the volume. Part II examines the relationship between natural resource endowment and the four main types of capital: produced, natural, human, and social. Part III integrates findings from Part II, and tests the degree to which the relationship between natural resources and development is deterministic. Part IV applies the analytical framework developed in the previous parts to case studies of developmental trajectories since the 1960s. Part V discusses policy implications for the reform of resource-abundant economies that have experienced a growth collapse.
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This chapter examines the main differences between the development of Malaysia and that of other small resource-abundant countries that did not achieve competitive industrialisation. It discusses the high growth of Malaysian investment, public sector contribution to total investment, Malaysia's open trade regime, industrial policy that fostered competitive industrialisation, and the accumulation of human capital. It reviews Malaysia's capacity to manage external and internal shocks without experiencing a growth collapse.
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1980 after 15 years in journalism. During his time in Statoil Willy H. Olsen held a number of positions, including Senior Vice President Government Affairs, Managing Director Statoil UK, Senior Vice President E&P International with responsibility for the countries in the former Soviet Union and Senior Vice President Corporate Strategy. He also worked in the BP/Statoil alliance 1993-94 and represented Statoil in the PSA negotiations in Azerbaijan. Willy H. Olsen has an in-depth knowledge of Statoil's development as a national oil company from its role as an instrument for the government to its listing in New York and Oslo in 2001. He is a member of various advisory boards on Caspian and Russia, and a member of the Board of Oxford Energy Institute. In preparing this speech, Mr. Olsen has actively used the work done in Statoil's group for Corporate Social Responsibilities and papers given by the head of the group, Mr. Geir Westgaard.
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Members of organizations spend considerable time, effort, and ingenuity attempting to influence decision makers. Such influence activities may bring benefits to the organization, but they also involve real costs. This essay offers an economic rationale for such influence activity as representing rational, self-interested behavior in the presence of informational asymmetries and an analysis of how the design of the organization's structure and polices should respond to the incentives for attempting influence. It is posited that information valuable for the organization's decision making is directly available only to members of the organization who have some personal stake in the decisions. These individuals may then have an incentive to try to manipulate the information they develop and provide in order to influence the resulting decision to their benefits. This can be costly both in degrading the quality of decision making and in diverting the attention and effort of the organization's members from more productive activities. The organization has three different methods it can employ to discourage excessive influence activities and to encourage more directly productive uses of time and effort. It can limit access to decision makers and participation in decision making; it can alter its decision-making criteria to favor those performing well in productive activities; and it can provide direct financial incentives to encourage the desired allocation of effort. It is shown that an efficiently deisgned organization will use such financial incentives only as a last resort. Instead, it will always first alter its decision-participation polices and decision-making criteria.
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The performance of the oil‐exporters’ resource‐based industry (RBI) was determined by sectoral mix, type of enterprise and macroeconomic policy. RBI strategies tended to be overambitious and overdependent on one sector, especially in the bigger countries. Wholly state‐owned enterprises (SOEs) experienced more problems than joint‐ventures. Macroeconomic mismanagement shrank domestic markets and denied competitive exchange rates for viable exports. The dismal Nigerian and Venezuelan RBI performances reflect weak macroeconomic policy and the dominance of SOE steel. Results are better in the soundly‐managed Asian economies which also benefited from greater use of joint‐ventures with multinational corporations. The anomaly of Saudi Arabia's initial under‐performance reflects strategy flaws.
Book
A higher level of industrialization distinguishes Norway and Mexico from the OPEC exporters. Increased petroleum output has had a different impact on their economic development because high-absorber countries, which could adjust their expenditures to match revenues, have generally failed to do so. They have experienced increasing economic instability, followed by political instability, as a result. The two case studies examine each country's overall economy and the constraints on their absorptive capacity. Stability for both will be a diversification to reduce dependence on oil revenues. 185 references, 11 figures, 44 tables. (DCK)
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Restructuring among the international oil majors during 1980–92 involved simultaneous, system-wide changes in strategies and structures dictated by the demands of a more competitive, unstable business environment, but triggered by declining profitability and motivated by the desire to increase shareholder returns. Restructuring involved transition from one strategy-structure configuration, the ‘administrative planning model’, to another, the ‘market responsiveness model’. The multiple strategic and structural changes were linked by a unifying theme: the quest for efficiency in a turbulent environment. This quest presented the companies with a strategic dilemma - reconciling economies of scale and scope with the benefits of flexibility; and a structural dilemma - reconciling decentralization with coordination. This paper draws upon the experiences of the world's eight largest international oil majors.
Article
This paper sets out an analytical framework for assessing the performance and value creation of National Oil Companies (NOCs). NOCs differ greatly in their institutional environments, their corporate objectives and operations, and their domestic and international socio-economic linkages, which makes a comparative assessment of NOCs’ value creation far from trivial. But because the petroleum sector is of significant importance to many countries around the world, the attempt of identifying, measuring, benchmarking and improving NOC value creation is vital for the broader effort of improving standards of living in these countries. The aims of the framework are thus: (1) to provide a conceptual model of the different ways in which value can be created within a national petroleum sector; (2) to propose a quantitative measure of NOC value creation that facilitates the benchmarking of NOC performance; and (3) to suggest different approaches to rank and/or quantify the importance of various drivers of value creation.A central contribution of this framework is the proposal of the 'NOC Value Creation Index', a composite indicator that attempts to integrate measurement of NOC operational performance, financial performance and delivery on the national mission.This is a draft version of Chapter 4 of the Study on “National Oil Companies and Value Creation”, undertaken by the Oil, Gas and Mining Policy Division of the World Bank. This draft has been published to inform the public on progress and invite dialogue. A revised version of this paper will be included in the Study which is expected to be completed by June 2010.The paper was written by Christian O. H. Wolf (Consultant), with contributions from the Task Leader of the Study, Silvana Tordo (Lead Energy Economist, Oil, Gas and Mining Division of the World Bank), and Robert W. Bacon (Consultant).
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A renewed interest in the spatial clustering or agglomeration of economic activity is evident within economic geography and related fields. This paper considers processes of change within ‘mature’ regional clusters, developing a conceptual framework which links firm-level strategies to development scenarios at the cluster level through a set of intervening mechanisms. Whange, enabling the cluster to sustain its prosperity, and adjustment which is associated with stagnation and gradual decline. This conceptual framework is applied to an analysis of one key mechanism of change, diversification, as pursued by small and medium-sized enterprises (SMEs) in the Aberdeen oil cluster. Our analysis indicates that some diversification is occurring, with the implications for the cluster lying midway between adjustment and renewal. In conclusion, we emphasize the need to assess and ‘unpack’ the clusters concept and suggest that research should focus on the relationships between proximity, learning and evolution.
Book
More then just a textbook, A Theory of Incentives in Procurement and Regulation will guide economists' research on regulation for years to come. It makes a difficult and large literature of the new regulatory economics accessible to the average graduate student, while offering insights into the theoretical ideas and stratagems not available elsewhere. Based on their pathbreaking work in the application of principal-agent theory to questions of regulation, Laffont and Tirole develop a synthetic approach, with a particular, though not exclusive, focus on the regulation of natural monopolies such as military contractors, utility companies, and transportation authorities. The book's clear and logical organization begins with an introduction that summarizes regulatory practices, recounts the history of thought that led to the emergence of the new regulatory economics, sets up the basic structure of the model, and previews the economic questions tackled in the next seventeen chapters. The structure of the model developed in the introductory chapter remains the same throughout subsequent chapters, ensuring both stability and consistency. The concluding chapter discusses important areas for future work in regulatory economics. Each chapter opens with a discussion of the economic issues, an informal description of the applicable model, and an overview of the results and intuition. It then develops the formal analysis, including sufficient explanations for those with little training in information economics or game theory. Bibliographic notes provide a historical perspective of developments in the area and a description of complementary research. Detailed proofs are given of all major conclusions, making the book valuable as a source of modern research techniques. There is a large set of review problems at the end of the book.
Article
This study adds to the empirical evidence that privatization improves the performance of divested firms and offers preliminary evidence as to why these performance improvements occur. Using a sample of 129 share-issue privatizations from 23 developed (OECD) countries, we first document significant increases in profitability, efficiency, output, and capital expenditure following privatization. Our data indicate that ownership (both private and foreign), degree of economic freedom, and level of capital market development significantly affect post-privatization performance. A comparison to the findings of Boubakri et al. (2005) [Boubakri, N., Cosset, J., Guedmani, O., 2005. Liberalization, corporate governance, and the performance of newly privatized firms. Journal of Corporate Finance (this issue)] suggests that several determinants of post-privatization performance improvements differ between developed and developing countries.
Article
The petroleum industry of the United Kingdom Continental Shelf (UKCS) has been subject to various degrees of regulation. Self-sufficiency, security of supply and developing offshore supply industry triggered government regulations that were seen as interventionary and protectionist. This paper tests the extent to which regulations targeting involvement of British offshore supply industry in the UKCS activity created inefficiencies. Data envelopment analysis (DEA), stochastic frontier analysis (SFA), Malmquist Indices, and standard regression analysis are used to measure the amount and address the source of inefficiencies. We will show that such inefficiencies could not be ruled out. The results provide an important insight into the UKCS production techniques and, more generally, into governments’ abilities to influence private sector behaviour through contracts and tendering.
Article
This paper seeks to provide an answer to the following question: when and how does privatization work? Using a sample of 230 firms headquartered in 32 developing countries, we document a significant increase in profitability, efficiency, investment and output. Our analysis shows that the changes in performance vary with the extent of macro-economic reforms and environment, and the effectiveness of corporate governance. In particular, economic growth is associated with higher profitability and efficiency gains, trade liberalization is associated with higher levels of investment and output, while financial liberalization is associated with higher output changes. Further, control relinquishment by the government is a key determinant of profitability, efficiency gains and output increases. Finally, we find higher improvements in efficiency for firms in countries in which stock markets are more developed and where property rights are better protected and enforced. These results for a sample of developing countries differ from those reported in a contemporaneous study by D'Souza et al. [D'Souza, J., Megginson, W.L., Nash, R.C., 2001. Why do privatized firms improve performance? Evidence from developed countries. Unpublished working paper. University of Oklahoma] which focuses on developed countries. These diverging findings suggest that privatization in developing countries indeed obeys to particular constraints and has a dynamic of its own.
Article
This paper examines an important reform program in China concerning State Owned Enterprises (SOEs), namely, corporatization without privatization. It finds that corporatization has had a significantly positive impact on SOE performance. It further shows that the sources of efficiency engendered by corporatization can be traced to the reform of the internal governance structure of these firms. The results indicate that, even without privatization, corporate governance reform is potentially an effective way of improving the performance of SOEs; such reforms represent a policy alternative for countries seeking to restructure SOEs without massive privatization. The results also suggest that it may be optimal for governments to carry out corporatization of SOEs before eventual privatization.
Article
Thesis--Carnegie Institute of Technology. Bibliography: p. 174-182.
Article
Following the 1997-Asian crisis, a number of crisis-hit countries were committed to the rapid transformation of the corporate governance system to one that is modeled after the Anglo-American system. This, as the article argues, is based on a false premise, that what may have worked in the United States/United Kingdom can also be applied in East Asia. In this regard, the convergence at the firm level is seen to be more in “form” rather than in “substance”. This study assesses Singapore's corporate system in terms of its recognition of the merits of the Western model. It then details the corporate governance style of Temasek Holdings Limited (THL), a state- owned enterprise (SOE) in charge of monitoring government investments in companies. The choice of THL as a case study is based on the premise that THL operates very much like a private sector corporation. In addition, it has the ability to influence the standard of corporate governance of Singaporean SOEs. Because the SOEs are large players in their respective industries, the corporate governance of SOEs establish the standards and expectations for monitoring in non-SOEs. There are indications to suggest that the THL has taken into consideration certain aspects of corporate governance practices that may not necessarily be in line with those advocated by the Singapore government. The article argues that selective adaptation such as the style adopted in the THL more realistically portrays the corporate governance practices of East Asian corporations.
Article
This volume contains the output of country research undertaken in Slovenia in 2000-2001 by a team directed by Andreja Bohm and Marko Simoneti under the international comparative project "Secondary Privatization: the Evolution of Ownership Structures of Privatized Enterprises". The project was supported by the European Union's Phare ACE* Programme 1997 (project P97-8201 R) and was coordinated by Barbara Blaszczyk from the Center for Social and Economic Research (CASE) in Warsaw, Poland. The Slovenian research was additionally co-financed by the research grant received by Central and Eastern European Privatization Network from the Ministry of Science and Technology, Republic of Slovenia (V5-9140-98). The support of the ACE Programme made it possible to organize the cooperation of an international group of scholars (from the Czech Republic, France, Poland, Slovenia and the U.K.). The entire project was devoted to the investigation of secondary ownership changes in enterprises privatized in special privatization schemes (i.e., mass privatization schemes and MEBOs**) in three Central European countries - the Czech Republic, Poland and Slovenia. Through a combination of different research methods, such as secondary analysis of previous research, analysis of legal and other regulatory instruments, original field research, statistical data base research and econometric analysis of individual enterprise data, the project aimed to investigate the scope, pace and trends in secondary ownership changes, the factors and barriers affecting them and the degree of ownership concentration resulting from them. In presenting a clear picture of secondary privatization trends in Slovenia, the authors of this volume tried to evaluate the effectiveness of various privatization schemes in terms of their open-endedness (i.e., the degree to which they foster flexibility in adjustments of ownership structures) and in terms of achieving good corporate governance. Additionally, they fo
Article
In this paper, the choice between public and private provision of goods and services is considered. In practice, both modes of operation involve significant delegation of authority, and thus appear quite similar in some respects. The argument here is that the main difference between the two mod- concerns the transactions cats faced by the government when attempting to intervene in the delegated production activities. Such intervention is generally less costly under public ownership than under private ownership. The greater ease of intervention under public ownership can have its advantages; but the fact that a promise not to intervene is more credible under private production can also have beneficial incentive effects, The Fundamental Privatization Theorem (analogous to The Fundamental Theorem of Welfare Economics) is presented, providing conditions under which government production cannot improve upon private production. The restrictiveness of these conditions is evaluated.
Article
How are Asia's business networks responding to the growing integration of the region into the global economy? To address the question the paper identifies two distinct types of Asian business network originating in two different institutional contexts. It is argued that these original contexts have imprinted upon dominant firms' governance structures and influence their preferred networking mode. Consequently, the renewal of business networks reflects the pressures of globalization and the governance structures of the dominant organizational forms in the networks. Two types of network (global commodity chains and family business groups) are described and the global pressures for change bearing upon them outlined. Copyright Springer Science + Business Media, Inc. 2005
Article
This paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992. We use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures. Both unadjusted and market-adjusted results show significant increases in profitability, operating efficiency, capital investment spending, output, employment level, and dividends. We also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios. Our results are generally robust when we partition our data into various subsamples.
Article
This study compares the pre- and postprivatization financial and operating performance of sixty-one companies from eighteen countries and thirty-two industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. The authors' results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, the authors document significant changes in the size and composition of corporate boards of directors after privatization. Copyright 1994 by American Finance Association.
Article
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement, and the European CVAR Approach to Macroeconometrics” contrasting two different perspectives in Europe and the US that are currently dominating empirical macroeconometric modeling and delves deeper into their methodological/philosophical underpinnings. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
Article
The primary aim of the paper is to place current methodological discussions in macroeconometric modeling contrasting the ‘theory first’ versus the ‘data first’ perspectives in the context of a broader methodological framework with a view to constructively appraise them. In particular, the paper focuses on Colander’s argument in his paper “Economists, Incentives, Judgement, and the European CVAR Approach to Macroeconometrics” contrasting two different perspectives in Europe and the US that are currently dominating empirical macroeconometric modeling and delves deeper into their methodological/philosophical underpinnings. It is argued that the key to establishing a constructive dialogue between them is provided by a better understanding of the role of data in modern statistical inference, and how that relates to the centuries old issue of the realisticness of economic theories.
Article
Privatization shifts residual income and control to private investors, restricting redistribution and improving incentives; thus rapid privatization should be desirable. Empirically, however, the transfer of ownership, as opposed to control, is very gradual. The author offers an explanation based on investors' concerns about future interference. A government averse to redistribution retains a passive stake in the firm; the willingness to bear residual risk signals commitment. When a large government stake conflicts with the transfer of control, underpricing may be necessary for separation. Finally, when the required discount is large, a committed government may prefer not to signal, gaining credibility over time. Copyright 1995 by American Economic Association.