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Oil Titans; National Oil Companies in the Middle East



Ninety percent of the world's oil reserves are entrusted to state-owned companies. Originally created as political instruments, these so-called national oil companies (NOCs) face new demands amid today's dwindling oil reserves and simmering social pressures. Increasingly, state-owned oil firms—particularly in the Middle East—are having to balance the political demands of their governments with the need to be commercially competitive. In this ground-breaking new volume, Valerie Marcel draws on unprecedented access to the politicians, engineers; and businessmen directing five Middle Eastern state oil companies to shed light on one of the most secretive segments of the international oil industry. The author tells the stories of Saudi Aramco, Kuwait Petroleum Corp., the National Iranian Oil Co., Sonatrach of Algeria, and the Abu Dhabi National Oil Co.—oil titans which together produce one quarter of the world's oil and hold half of the world's known oil and gas reserves. Dr. Marcel explains the complex bond between each state and its oil company, tracing the relationship's evolution from the politically charged days of foreign concessions to today's world of profit-driven decisionmaking. Drawn from over 120 interviews with company executives, middle managers, and oil-ministry officials, the author identifies a number of surprising new trends in these companies' strategy, and she paints a picture of their nascent sense of corporate identity. The book provides rare, up-to-date insight into how state-owned companies are striking a balance between their national mission and their commercial needs. The book also provides an insider's guide to these companies' unique culture. Executives and researchers in the region—both inside and outside the oil industry—will find it a valuable tool for understanding business in the Middle East.
In most important oil-producing regions of the world, the oil industry has
been nationalized. Ninety percent of the world’s oil reserves are entrusted to
state-owned companies. The five national oil companies (NOCs) that are the
focus of this book together produce one quarter of the world’s oil and hold
one half of the world’s oil and gas reserves.What do we know about these oil
titans? Do we understand how they operate and what drives them? Do they
emphasize politics over profits? Do they have the technical and business skills
to develop responsibly the immense petroleum resources entrusted to them?
In spite of the dependence of importing countries’ economic fortunes on
the performance of the NOCs of the Middle East and North Africa, outsiders
know very little about these organizations. Their opacity has discouraged
most analysis so far.However, after explaining my project, I was invited to the
meet with the managers of Saudi Aramco, the Kuwait Petroleum Corporation
(KPC), the National Iranian Oil Company (NIOC), Sonatrach (Algeria) and
the Abu Dhabi National Oil Company (ADNOC). They allowed extensive
interviews to be conducted, demonstrating their interest in discussing both
their past accomplishments and future challenges. These were fascinating dis-
cussions, and this book will tell those companies’ stories.
From the oil industry’s perspective, it is an important time to be studying
NOCs. Many of them are emerging on the international scene, no longer con-
fined to filling the shoes of the oil majors, which left when the host countries
nationalized their oil sector. NOCs have grand ambitions:they are competing
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with the majors on their turf by developing new oil reserves overseas and
investing in international refining and retail activities. National oil companies
from China, India and Malaysia are in the spotlight, signing deals in Saudi
Arabia, Iran and Sudan for instance. Some NOCs are being partially priva-
tized, to encourage their competitiveness, while other countries are reassert-
ing national control over their oil sector. In a move that startled the industry
in the summer of 2005, the China National Offshore Oil Corporation
(CNOOC), a Chinese state oil company listed on the New York Stock Ex-
change, bid to buy out a Western international oil company, Unocal—this
bid presaged growing ambitions on the part of the new players. Meanwhile,
Russia, which is seen as the new frontier for the private international oil com-
panies, appears to be reasserting the role of the state in the oil and gas sector
by dismantling the most successful private Russian company,Yukos, and dis-
couraging new foreign investment. The industry is in flux.
Two years ago, when I began this research on national oil companies and
to discuss them with peers, I received mostly negative comments about their
inefficiency.But now,the tone has changed. People are starting to take notice
of NOCs. And NOCs themselves are embolded by this change.
On the home front, national oil companies are often torn between
national expectations that they should carry the flag and their own ambi-
tions for commercial success, which might mean a degree of emancipation
from the confines of a national agenda. They are not “just companies,” how-
ever. Within their borders, they enjoy an unparalleled standing with the pub-
lic. NOCs are often the best employer. They train young people to the high-
est standard, develop local technological capability, create opportunities for
the private sector and develop the country’s infrastructure. But more funda-
mentally, the historical context of their country’s struggle for independence
has made national oil companies politically sacred entities. As the former
Secretary-General of OPEC stated: “Although several decades have passed
since the era of nationalisation, our national oil companies continue to pos-
sess a rather unique political status in the eyes of their respective nations.
They are still regarded as the symbol of national sovereignty that controls the
most important and the most valuable resource endowment in our coun-
tries” (Subroto, 1994: 20).
Henri Madelin has explained the ideology of resource nationalism, which
took hold of North Africa in the 1970s, as one which combines with a “revo-
lutionary fervour directed towards removing all vestiges of the former sub-
servience. It assumes a socialist color in order to be better designed to signify
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collective rights to interests accused of the three vices of being foreign, capi-
talist and private” (Madelin, 1975: 66). There remains a deep emotional
attachment to sovereign control over natural resources among many Middle
Eastern societies, as is also the case in Latin America. It follows from this that
resisting foreign attempts to control oil is a tune that has more resonance in
these countries than increasing the performance of the hydrocarbon sector.
This might explain why no more in-depth analysis of these key actors has
appeared in the Middle East than in consuming countries. People in produc-
ing countries should be debating, “Why have an NOC?” The answers would
help to establish the priorities of the company—to maximize revenue,to pro-
mote national pride or to optimize the development of resources? This ques-
tion is raised only rhetorically by those in consuming countries who want to
see oil in the Middle East privatized. They favor a privatization of the oil and
gas sector there because it would allow foreign oil companies to develop more
oil for the world’s consumers and market forces to overtake OPEC. In the
consuming countries, few people ask, “Why not rely on NOCs to supply
energy to markets?”
From the producing countries’perspective, a high-competence NOC with
good governance processes may be preferable to a privatization of the indus-
try that improves access to resources for foreign oil companies. NOCs are by
statute, organization and often affinity more responsive to the needs of soci-
ety and the interests of the state. Under optimal financial management, they
can generate more revenue for the state than private companies, which have
their shareholders to pay. In fact, in some cases they achieve this despite inef-
ficiencies because the royalties, taxes and dividends they pay to the state are
so high. They may also serve the state’s foreign policy interests by supplying
specific markets, and they are more willing than international oil companies
to develop spare capacity in order to balance the world oil markets. Moreover,
a number of their community investments have been designed to serve the
long-term interests of society.This is the case of programmes to train nation-
als and to develop capacity in the local private sector. However, a key chal-
lenge is to establish good governance processes within the NOC and between
it and the state that will allow it to develop its competence and to serve
national interests efficiently. Finally, some degree of competition from other
companies can be a valuable means of stimulating the performance of
national oil companies—though it may run into opposition from society.
In spite of the highly politicized national and international environment
in which oil is produced and traded,the most relevant and pressing pressures
Introduction 3
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on NOCs are economic and industrial rather than political. In fact, NOC
managers are, for the most part, noticeably apolitical, perhaps with the excep-
tion of Iran. Their priorities are the allocation of resources for the industry,
their operational autonomy and national economic challenges. Indeed, as
companies operating primarily at home, they are preoccupied with the diffi-
culty of meeting the needs of society and government as well as investment
challenges to the industry. Contrary to a premise that guided my first steps in
this research, I found that politics forms only a backdrop to the operating
environment of NOCs. This observation pointed to a complex relationship
between NOCs, their society and their government that is essential to under-
standing national oil companies.
There are numerous divergences in perspective and interests between soci-
ety, government and the national oil company. Events in the oil and gas
industry carry a political significance for the societies of producing states.
Popular political views will shape attitudes to, most notably, foreign invest-
ment. Nationals of the major exporting states will also expect oil export rev-
enues to finance a number of public services. This public opinion pressure
tends to be exerted on government and to reach the NOC only indirectly.
Government is the interface between society and NOC. It is government’s
role to develop policies to achieve long-term goals, but it deals with contrary
interests along the way and responds to short-term threats to political stabil-
ity.This political process can lead governments to have incoherent goals—for
instance, seeking greater revenue from the oil industry while asking the NOC
to carry out social programmes that hamper its operations and increase its
costs. NOCs are instruments of the state and help government achieve a
number of policy objectives. But NOCs’ managements seek the freedom to
manage the industry so as to mobilize the country’s oil wealth without gov-
ernment intrusions that would cripple their economic and technical capacity.
There is, in this respect, a constant institutional struggle between government
and NOC.
This struggle is compounded by power asymmetries. The NOC is power-
ful because of its knowledge. It has technical and business expertise: it knows
the fields, understands how the business works and what it costs. Govern-
ment, for its part, sets the rules of the game: it determines the targets for the
sector and decides whether to introduce competition and invite foreign
investment. Society seeks information regarding the NOC’s activities and
influence over the government’s decisions concerning the sector.
This book seeks to explain the complex relationship between the state,
society and the NOC, and traces the industrial evolution of NOCs in order to
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identify new trends in their strategy and identity. National oil companies are
evolving, seeking an elusive balance between their national and commercial
Scope and Definitions
It is not my intention to set the national oil companies of the Middle East and
North Africa apart from their peers. In terms of the historical importance of
oil and the challenges faced by the NOCs in their industrial consolidation, the
stories of these NOCs could be told alongside those of the Venezuelan, Mex-
ican, Malaysian or Brazilian NOCs, for instance. NOCs worldwide share a
common concern regarding their relations with the state. The geographic
focus of this book is an attempt at comparing NOCs who are producers
within a regional system. In itself, the focus on the Middle East and North
Africa is an interesting one: the analysis will show that for all their common
cultural, historical and political references, each NOC in this study is quite
unique. It follows that it is not useful to create categories of NOC. Instead,
this book examines the way in which each company is unique and highlights
differences between them.
The book focuses on companies with upstream activities because these are
the revenue-generating activities that make them so important to their coun-
try, as opposed to the “downstream” or refining business, which historically
has not been very profitable. Most Middle Eastern producers have very low
production costs: some $2 for each barrel of crude oil that fetched around
$50 per barrel in 2005 on the international markets. On the other hand,
exploring for new reserves is an expensive and risky activity, though a neces-
sary first step in producing oil. The upstream business is also highly charged
politically: it is a central battleground of resource nationalism, which seeks to
protect hydrocarbons from foreign hands. By contrast, the downstream busi-
ness is not.
Moreover, in the minimalist definition
NOCs are not restricted to those
companies owned entirely by government and in possession of exclusive
rights over the mineral domain. A number of NOCs have evolved beyond the
attributes that initially defined them and, to some extent,protected them.An
increasing number of NOCs coexist and cooperate with foreign private com-
panies on national soil. This is the case for ADNOC, Sonatrach, the National
1. I use a minimalist definition of an NOC: it is a company with at least 51 percent state
ownership that is active in the exploration and production of hydrocarbons—in other words
the “upstream.
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Oil Corporation of Libya, Petronas of Malaysia, Petrobras in Brazil, Pertam-
ina in Indonesia, NNPC (the Nigerian National Petroleum Corporation), the
Qatar National Gas Company and PDVSA (Petróleos de Venezuela SA). Oth-
ers have the structure of a private-sector company but with a majority of gov-
ernment shares at the voting level—this is the case for Petrobras of Brazil and
Statoil of Norway. The configuration of the industry in Russia and China is
still evolving but it includes both state and private-sector enterprises. With
the growing commercial focus of most NOCs and the increasingly liberal
agenda of governments legislating on these matters, there is more flexibility
than in the past regarding the status of NOCs. In this more liberal view, they
need not be exclusively state-owned operators of the national hydrocarbons
sector. But there are forces within NOCs, state institutions and societies that
resist this evolution.
A look at the history of the national oil companies in the Middle East and
North Africa will help us to understand what they are now, how their pres-
ent-day challenges have taken shape and how they perceive foreign investors
and consumers. This history does not define these companies, nor does it
determine their behavior; but it is in the background, a part of the produc-
ers’ collective memory with which an observer of the region must be famil-
iar so as better to understand conversations about the industry today. Chap-
ter 1 therefore examines the history of oil concessions in the region and the
subsequent nationalizations. Chapter 2 discusses current attitudes to this
history and investigates how it has shaped national oil companies in the
Middle East and North Africa. Chapter 3 introduces five national oil com-
panies, the key characters of this book,by looking at their corporate culture,
identity and processes.
The story shows that national oil company employees are proud of what
has been accomplished since nationalization. But this is no longer a sufficient
driver for success. NOCs seek to develop a strong commercial culture, and
this permeates the aspirations of most managers. Saudi Aramco, for example,
refers to the state as its “shareholder.” The current trend in the Middle East
and North Africa is one of emancipation from the model of NOCs as instru-
ments of the state. There is a drive to adopt the business practices of private
oil companies.Although these are clearly national companies with state own-
ership of capital, special status in the mineral domain, obligations to the
national market and a common history, they say they want to operate like
01-7473-6 Introduction 1/30/06 5:45 PM Page 6
international oil companies (IOCs), and even talk about partial privatization.
We will see, however, that the term “privatization” does not carry the same
meaning everywhere. In the West, it usually refers to the process of engaging
the private sector to provide services or facilities that are regarded as public-
sector responsibilities or to shifting from publicly to privately produced
goods and services.
In the Middle East and North Africa, this term has dif-
ferent meanings, both in different countries and in different sectors of activ-
ity. Moreover, even though many people in the industry showed interest in
the management practices of private companies, the transition to a commer-
cial culture is not fully implemented in most companies in the region. Many
employees want to retain the community engagement that has historically
defined their company.
NOCs operate in two very different settings: one is national, laden with
obligations and constraints, but it is also where they draw their strength
thanks to (sometimes exclusive) access to low-cost reserves; the other is the
industry environment, which exists outside the rules of the national setting
and in which they must be skilful to succeed. Chapters 4 to 7 look at how
national oil companies manage the contending demands of these operating
Chapter 4 focuses on the national setting, and examines the quality of the
NOC–state relationship. Are the decision-making processes clear? Are the
two parties’ roles and responsibilities clearly demarcated? Is there political
interference in companies’ operational decisions?
Chapter 5 discusses the impact of demographic trends on national expec-
tations regarding the oil sector and the revenues it generates for the state.
National cultures are changing with the new generations, notably in respect
of the work ethic and the degree of support that nationals expect from the
state. Although societies in the region are changing, there are still enduring
popular expectations that the state should provide essential services and
employment to the population. Interestingly, this is not a matter of public
discussion within the major Middle East and North African exporting coun-
tries. Nevertheless, this is to some extent part of the national political pact.
The legitimacy of the political structure is tied to its oil policy and manage-
ment of hydrocarbons, but even more directly to its distribution of oil rev-
enues. Public attitudes and the political role of oil specific to each country
inform oil policy in terms of exports, investments and the redistribution of
2. This definition is taken from Gordy Higgins, “A Review of Privatization Definitions,
Options, and Capabilities,
Introduction 7
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The stability of these political systems depends on the capacity of the state
to continue to generate sufficient oil rent to satisfy the needs of the popula-
tion. It is in their critical role as wealth-generators that states depend on their
national oil companies. (The weight of this political reliance on the growth of
the oil rent is discussed in a special contribution by John V. Mitchell at the
end of this volume.) In many oil- and gas-producing countries of the region,
such as Saudi Arabia, Iran and Algeria, the needs of the population are grow-
ing faster than the oil rent. This analysis shows that these countries will need
to expand oil and gas production in order to increase revenues but that even
under relatively favorable oil revenue scenarios, the hydrocarbon sector will
no longer be able to give the same degree of support to the rest of the econ-
omy for more than a few years.Governments will need to begin to show suc-
cess in economic reforms, which have begun in most countries, in order to
diversify their economies and reduce the dependence of the rest of the econ-
omy on the public sector and of the public sector on hydrocarbon revenues.
The national oil companies’ mission will be to take on a share of respon-
sibility for the welfare of the economy (by supporting the private sector, for
instance), although success there depends on much wider diversification
efforts. Chapter 6 addresses how the growing pressure on government to pro-
vide for the population is likely to affect its relationship with the NOC. We
examine the evolving mission of the NOCs and how they are responding to
growing needs by supporting the diversification of the economy while keep-
ing an eye on their bottom line. Clarifying and improving the financial rela-
tionship between the state and the national oil company is important too.
This relationship must cause the NOC to reduce costs but leave it sufficient
funds to carry out programmes of capital expenditure (NOCs’ budgets are
sometimes exposed to the short-term needs of government).
The NOCs were initially created as instruments of government policy,
whose aim was primarily to assert sovereign rights over national resources. In
a context of resource nationalism, they were to give the state control over the
pace of exploitation and the pricing of its finite resources. NOCs also ensured
that the state received an equitable share of profits.Since then, new challenges
have periodically prompted changes in their structure and strategy. These
challenges have stemmed from both the domestic environment (the national
economy and the state’s budget, in addition to the political aspirations of the
country and leadership as discussed above) and from the external (industrial
and geopolitical) environment. Chapter 7 considers the external challenges
that make up the NOCs’ international operating environment. These chal-
lenges include establishing new markets, keeping up with technological
01-7473-6 Introduction 1/30/06 5:45 PM Page 8
trends and responding to new environmental regulations. These are chal-
lenges common to all companies in the industry. The question is whether
their national operating environment improves or reduces the national oil
companies’ capacity to respond to these external challenges.
Chapters 8 and 9 examine how the interplay between national constraints
and industry drivers translates into the national oil companies’ strategy. We
will see that the NOCs have different strategic ambitions, both domestically
and internationally. Chapter 10 focuses on the prospects for foreign invest-
ment in the region and the potential for partnerships. Just as NOCs are
increasingly trying to penetrate international markets through upstream and
downstream investment, so they often have to deal with increasing penetra-
tion of their own national market by international players. Internationaliza-
tion and, conversely, the opening up of domestic markets to competition are
changing the landscape of corporate oil. Chapters 9 and 10 give a glimpse of
emerging trends, which point to an increasing blurring of the categories
“IOC” and “NOC.”
Although NOCs play a central role in the economies of the Middle East and
North Africa, it is quite striking that there is little scholarly interest in the
mechanics and forces animating the oil industry. A survey of sources avail-
able in Arabic demonstrated a weak scientific and academic interest in the
region’s oil and gas industry.
There are very few books published on this
subject. This is partly because articles are the preferred publication format of
the region’s academics; and in this format, oil is treated more often as a sub-
ject of political commentary than of industry analysis. The main concerns
are geopolitics and geostrategy, war and US interests. There is little analysis
in Arabic on (non-political) industry concerns. In English and French, the
focus has also been on geopolitics and geostrategy since the Gulf War of
1991, which brought oil back into public view. The American and British
invasion of Iraq in 2003 reignited the interest of French researchers and
journalists in the geopolitical angle of oil, bringing their output closer to the
Arab approach.
3. A survey was carried out for the purpose of this book by Dr Karam Karam at the
libraries of the Maison Méditerranéenne des Sciences de l’Homme and l’Institut de
Recherches et d’Etudes sur le Monde Arabe et Musulman. Publications at the Center for Arab
Unity Studies were reviewed as well. Internet resources in French and Arabic were consulted
too. Please refer to the bibliography in this volume for full details.
Introduction 9
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Whatever the language, there has been little interest in studying national
oil companies, whose activities generate most of the regional governments’
revenues—not to mention a large share of the world’s oil production. NOCs
work mostly behind the scenes. The aim of this book is to shed some light on
the drivers, goals and challenges that they face and to point out some emerg-
ing trends of consequence for countries importing and exporting hydrocar-
bons. The lack of available data on national oil companies and the impor-
tance of understanding the producers’ perspective prompted me to seek
interviews with the national oil companies. These interviews are the book’s
primary source of information.
There are methodological limitations to relying on interviews. Facts and
analysis vary from one interviewee to the next. To minimize the risk of giving
too much weight to one interview, precautions were taken in analysing the
data. Consideration was given to the specific expertise of the interviewee—I
would give different weight to the relevance of a refiner and a petroleum engi-
neer talking about the upstream business, for example. Also,a large number of
interviews were conducted in each company—between 14 and 36. Con-
tentious statements reproduced in these pages, for instance a critical comment
about the company, were confirmed by at least one other interviewee in the
company. When diverging stories have been told, I reproduce both versions
and constrast them in order to highlight the complexity of perceptions.
In addition, all companies were given an opportunity to respond to drafts
of this text. Saudi Aramco, NIOC and Sonatrach offered comments on the
analysis, many of which were incorporated in the book, and corrections of
inaccuracies, which were carefully noted. The companies did not agree with
all the statements made by their employees, but they did not object to the
study being published on the understanding that these statements are not
fact but perceptions of facts. This is also how the reader should consider what
For all these methodological limitations and caveats, the interviews are an
extraordinarily rich source of information. The picture one gets is nuanced
and complex, which was particularly useful for this study given that much of
the current information on NOCs in the Middle East and North Africa is
incomplete or skewed ideologically. In fact,I had not initially planned to base
this study so extensively on interviews, but this changed when I realized the
eagerness of the national oil companies to tell their stories. I was surprised at
their willingness to reveal as much as they did about their internal function-
ing and their perceptions of their environment. As a result, it seemed impor-
tant to convey as much as possible of this new insight.
10 Introduction
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Indeed, in view of the reputed inaccessibility of NOCs in the Middle East,
it came as a surprise that my requests for interviews with the companies and
governments of Algeria, Saudi Arabia, Kuwait, Abu Dhabi and Iran were all
greeted very favorably. I was given extensive access to all levels of manage-
ment after an initial stage of explaining the study’s purpose and that inter-
views would not be attributable. The significance of this access became
apparent once I learned more about the NOCs: they are all engaged in a
process of redefining themselves and attempting to find an appropriate bal-
ance in their relations with the state. This study was therefore timely, and
many people in governments and the companies felt that the research would
be a valuable external and independent contribution to an existing national
debate on these issues. In both Iran and Algeria, for instance, controversial
bills were recently introduced to their parliaments whose purpose is to rede-
fine the relations between state and NOC.
Another reason for the receptiveness of the five NOCs to the study was
their desire to be benchmarked. In this regard, they showed a great deal of in-
terest in and curiosity about NOCs outside the region, notably Petronas
(Malaysia), Statoil (Norway) and Petrobras (Brazil). As a result, additional
interviews were conducted with the management of those NOCs. A number
of respondents in the five NOCs also felt that they knew very little about how
other NOCs operated and how they dealt with common challenges.
Some companies were more willing to open their doors than others.Alge-
ria and Kuwait were quickly receptive to this research and to the idea of inter-
views within their ranks. One of their first concerns was how to benefit com-
mercially from the findings of the study. Kuwait Petroleum Corporation’s
culture is one of open debate and self-examination. Algeria’s Sonatrach is
developing internationally and seeks greater exposure through specialized
publications. Saudi Aramco, the National Iranian Oil Company and the Abu
Dhabi National Oil Company took longer to convince. It is entirely justified
that commercial entities should be cautious about accepting an outsider’s
request to collect data on their strategy and outlook. However, as I became
more familiar with these companies, it became apparent that the initial reti-
cence to participate in the study was due a specific corporate culture. This is
changing, and these companies are communicating more and more with the
NIOC and ADNOC have a more domestic focus than the other NOCs
studied. For Iran, the national market is quite significant. Moreover, NIOC
has not been exposed to international forums to the same degree as the oth-
ers because it is operating under a US-imposed embargo. ADNOC operates
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a complex system of consortia with private-sector international oil compa-
nies, mainly the original concessionaires, but the focus is on the technical
challenges of developing the oil and gas. For Saudi Aramco, 2004 was a chal-
lenging year, because its estimates of reserves and production capacity were
questioned by commentators outside the region. The company responded
with new disclosures of data and an unusually bullish public relations effort.
There is change under way within the company. Previously, it had built its
reputation on concrete actions rather than words, in a strategy reminiscent of
ExxonMobil’s, and it also tended to leave public relations to the Ministry of
Petroleum and Mineral Resources. But a number of its executives have been
pushing for effective communication strategies, and the company has taken
some courageous steps in that direction.
Interviews were conducted with approximately 120 people in 2004, pri-
marily in the national oil companies of Saudi Arabia, Algeria, Kuwait, Abu
Dhabi and Iran but also with the ministries of energy, planning and interna-
tional affairs of these countries and with four regional banks. I met as well not
only with managers from Petronas, Petrobras and Statoil,as noted above, but
also with managers of Russia’s Gazexport and executives at the private oil
majors Total, BP, Shell, ChevronTexaco and ExxonMobil. Interviews were
conducted under the “Chatham House rule”: I could use the information I
gathered but could not attribute it to a source. They were semi-directive in
character: as the interviewer,I would guide the discussion with a planned set
of questions (though the selection and sequence of question would adapt to
the discussion) but would allow the interviewee to answer freely. (The ques-
tionnaire is reproduced in Appendix 1.) Those interviewed in the companies
included the chief executive and his senior and mid-level deputies in such
functions as corporate planning, marketing, refining, international affairs,
distribution, petrochemicals, production, finance, exploration, new business
development, research and development,human resources and public affairs.
(The structure of each company is illustrated in Appendix 2.) In interviewing
employees from the most senior officer to the more junior manager, my
intention was to gather a full range of perspectives from various generations
and levels of seniority. Further, I spoke with four of the five oil ministers and
with several ministry officials in each country.
The data from the interviews is supplemented by John Mitchell’s macro-
economic analysis of the role of the petroleum sector in each national econ-
omy. This analysis is designed to emphasize in rough terms the dependence
of the non-petroleum sector on the petroleum sector. A set of simulations of
production, revenues and foreign exchange balances shows in broadbrush
12 Introduction
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terms how long, and how far, these dependences can be sustained under var-
ious combinations of oil prices, production policies and adjustments in the
non-petroleum economy.
Though past trends will be discussed in the first chapters, the objective of
the book, as suggested by the chief executive officer of one of the NOCs, is to
look forward and give a glimpse of future trends. Our forays into the past will
therefore be limited; and throughout, they are designed to offer the historical
context for emerging trends. As we shall see, new trends are carried by the
post-oil boom generations, innovative industry partnerships, forward-look-
ing strategies and policies and the ambitions of national oil companies.
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... OPEC encouraged a wave of oil industry nationalization in different nations, eroding the international petroleum cartel power over production decisions [17]. The first oil crisis in 1973 weakened the Seven Sisters [18]. Through continuous resource mergers and reorganization, IOCs' ability to control oil and gas reserves collapsed in the late 1970s [19]. ...
... In addition, different colors represent different areas, namely North America (orange), Oceania (yellow), Southeast Asia (pink), East Asia (red), Africa (brown), South America (green), South Asia (gray), Europe (purple), West Asia (blue), and Central Asia -Russia (syan). Transaction frequencies of initiated M&As in 0, [1][2][3][4][5][6][7][8][9][10], [11][12][13][14][15][16][17][18][19][20], [21][22][23][24][25][26][27][28][29][30][31][32][33][34][35][36][37][38][39][40], [41][42][43][44][45][46][47][48][49][50][51][52][53][54][55][56][57][58][59][60], [61][62][63][64][65][66][67][68][69][70][71][72][73][74][75][76][77][78][79][80], and [80,∞) correspond to levels 1-7 of the nodes, respectively. Transaction monetary volume (the EUR) in (0, 1 × 10 4 ], (1 × 10 4 , 1 × 10 5 ], (1 × 10 5 , 1 × 10 6 ], (1 × 10 6 , 1 × 10 7 ], (1 × 10 7 , ∞), correspond to level 1-5 of the edges, respectively. ...
The global energy merger and acquisition (M&A) network plays an important part in understanding worldwide oil companies and energy flows. Based on data for 26,705 M&As from 1997 to 2018, this paper establishes a global oil and gas M&A network, and conducts statistical and network analysis on the global oil and gas M&A behaviour of countries, industrial chains, and major companies from a geographical perspective. This paper finds as follows. (1) Oil and gas M&As follow the geographical proximity principle. Domestic M&As are the main form of global oil and gas M&As; cross-border M&As account for only a small proportion. (2) Europe and North America are the most active regions in oil and gas cross-border M&As. The most proactive participants include the United States and Canada in North America, as well as the United Kingdom, Netherlands, France, Switzerland, and Russia in Europe. Also, in Asia, such countries as China, India, and Singapore are active participants in global M&As, while some oil-producing countries in Africa and the Middle East are on the verge of M&A networks. (3) The acquisition of international oil companies (IOCs) is significantly more frequent than that of national oil companies (NOCs). NOCs’ global expansion and power to control global oil are far less than that of IOCs. Furthermore, the target areas for NOCs are highly limited. The aim of NOC M&As is to obtain natural resources, and thus, this type of M&A is more subject to other countries’ geopolitical considerations.
... Though countries are unique in how they gained influence from natural resources, they can be defined by factors explaining their differences and similarities. Even though national oil companies manage oil reserves in many countries, the governance of the companies is very different (maRcel, v. 2006). Their culture, strategy, relations with foreign companies, other states, and internal ethnic and economic parties are also different. ...
... There are similarities and differences in both economic and institutional implications. Although national oil companies (NOCs) are formed in nearly all countries, they have different sovereignty implications for their countries (maRcel, v. 2006). NOCs have different strategy, culture, and governance. ...
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This research paper examines the impact of financial technologies in the emerging countries, with a special focus on cross-country heterogeneity in terms of financial inclusion. Although the level of financial digitalisation and access to financial services are diverse in the emerging countries most of them experienced the recent trend of digitalization in the past decade. Financial inclusion has improved globally in recent years, but with large heterogeneity among regions, and sometimes within the same country as well. In order to assess the level of inclusion, two new indices have been developed: one for the traditional dimensions of financial inclusion, and one for digital advancements. The empirical contribution of the paper shows that improvement in digital financial solutions are significant primarily in countries where the traditional financial inclusion is better. Some countries, such as Kenya, Uganda, Iran and Mongolia outperform their peers, while other countries still have room for further expansion in financial technology.
... At least twenty-five contracts based on this method have been signed between the NIOC and IOCs for the development of Iranian oil and gas upstream projects, and some significant research has been completed. Marcel (2006) reviewed the terms of buyback contracts and compares their differences with production sharing agreements. Shiravi and Ebrahimi (2006) provided a comprehensive analysis of Iranian buyback contracts, including the history of service contracts in Iran from 1974, their main features, and the risks taken by IOCs. ...
Based on Iran's sixth development plan, the country's oil and gas industry requires an investment of about $200bn¹ in the next five years to increase production. The Iranian government, to attract and motivate international oil company investment in their oil and gas fields, has presented a new type of risk service contract: the Iranian Petroleum Contract (IPC). This paper summarizes the features of the IPC and presents mathematical models of its fiscal regime for the benefit and guidance of both the National Iranian Oil Company (NIOC) and the contractors. Next, adopting bargaining game theory provides a mathematical model for reaching a win-win situation between the NIOC and the contractor. Finally, a numerical example is given and a sensitivity analysis performed to illustrate the implementation of the proposed models. The contractor and the NIOC may use these models when preparing their proposal and in the course of actual negotiations to calculate their internal rate of return, remuneration fee, and net present value for developing the fields at different conditions of their bargaining power, and derive a logical bargain to protect their best possible interests.
... The Ricardian Rents Saudi Arabia captures from its oil industry are not just a function of nature's lottery: Saudi ARAMCO prioritized investment in employee education beginning in the 1950s, and at the same time encouraged its own employees (through subsidized credit) to leave the company to start private sector companies to provide the inputs into ARAMCO's production that were otherwise lacking in Saudi Arabia (Stevens, 2011, p. 180). Annual investments in human resource development run to the hundreds of millions of U.S. dollars (Marcel, 2006). ARAMCO invests heavily in research and development, such as through its dedicated Exploration and Petroleum Engineering Center. ...
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How are Quasi-rents different from Ricardian Rents? How do both differ from Market Power Rents? Do differences in institutions, rulers’ time horizons, and policies determine what type of rents predominate? Using the oil industry as a laboratory, this paper explicates the key differences between rent types and explores their causes and consequences. Sometimes, the state generates oil rents through appropriation (Quasi-rents); other times, several states engage in collusive behavior to reduce the global supply (Market Power Rents). Or, the underlying basis of oil rents may be a lack of the diffusion of technology or knowhow that therefore allows some firms or oil fields to monopolize a cost advantage that translates into consistently greater economic profits than its rivals (Ricardian Rents). Most simply, rents may bespeak immutable geological features (Ricardian Rents) and have nothing to do with engineering prowess (also Ricardian Rents) or opportunistic holdup by shortsighted state authorities (Quasi Rents). This is similar to when the state imposes price controls on any industry, making it impossible for economic actors to recover their long run costs. And this makes it more likely weak states will continue to appropriate Quasi-rents across economic sectors, fueling underdevelopment.
... Regardless many people and their benefit from working in such a field, the country will benefit first from the petrol that extracted from the land to their own transportations also don't forget all of the machines and factories that can't work without petrol or like materials, also the profit of the exported of this oil that can be a many profit and a friendship between countries that exchange the oil. Benefit not only for the country of having the oil also the countries that imported these oils can't work without this oil, so in that case cooperating of the countries is so important to high life continue [12,13]. Mentioning that before the process of extraction oil the world was depending on the Pisces oil that extract from the whales that found in the sea that need a lot of workers, fishers, and strong workforce to getting that Pisces oil from dangerous whales. ...
span>It’s so easy to know the accidents as it’s already happened and solving these accidents is immediately handled, but searching for a solution for these accidents, don’t deny the existence of reasons that made accidents happen. Knowing the source of accidents will help in avoiding them to occur in the future. It’s an important field in searching as some human lives depend on the safety of such a field, so it’s so important to use a powerful technique to define these reasons as the research point in spill accidents and predicting accidents and to predict the occurrence of the accident before its happening depending on its reasons that lead to that accident in past times so with similar conditions it might happen an accident but it needs a sufficient data and a powerful technique such as deep learning techniques that give very precise results and by using this tool an Intelligent Model will build to predict oil spilling. In this survey paper, related work will be discussed to enhance that work.</span
... 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). ...
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.
... Whereas NOCs have been owning 80-90% of the world oil reserves for decades (see e.g. Marcel, 2006;Wolf, 2009), the novelty is that since the mid-1990s the NOCs of major net-exporters (such as Venezuela and Russia) and major net-importers (such as China) are increasingly expanding beyond their national borders, directly penetrating markets that were previously Western dominated. This coincides with a general transformation of the geography of supply and demand due to the growth of the so-called BRICs (Asia in particular) and a decline of non-OPEC resources, leading to a tight market and high oil prices. ...
... Saudi ARAMCO prioritized investment in employee education beginning in the 1950s, and at the same time encouraged its own employees (through subsidized credit) to leave the company to start private sector companies to provide the inputs into ARAMCO's production that were otherwise lacking in Saudi Arabia (Stevens, 2011, p. 180). Annual investments in human resource development run to the hundreds of millions of U.S. dollars (Marcel, 2006). ARAMCO invests heavily in research and development, such as through its dedicated Exploration and Petroleum Engineering Center. ...
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Decades of research in political economy has argued that “rents” impact a variety of outcomes, including economic development, democracy, corruption, and conflict. Perhaps the most prominent strand, the Resource Curse literature, fingers unearned, abundant, and easy to capture rents as the cause of political and economic underdevelopment. While a competing literature gainsays this claim, attributing these pathologies to preexisting institutions, neither has really grappled with the fact that resource rents, like all rents, come in three different flavors: Market Power Rents, Ricardian Rents and Quasi Rents. Each is created through distinct microeconomic processes that depend on unique supply elasticities, market structures, how prices are determined, and differences between the short- and long-run. We demonstrate the economic and political dynamics of the different types of rents in both general terms and for the oil industry in particular. We use the Orbis dataset, which observes firms at the NAIC six-digit level, to illustrate relevant patterns. Insights from OPEC, Saudi Arabia, Mexico, and Venezuela help inform whether oil rents are or are not “earned”, how “abundant” they actually are, and their “appropriability.” Another contribution is to argue that, while all rents, including those derived from natural resources, are endogenous to institutions and policies, once they are generated and extracted they circumscribe governments’ actions, fueling both vicious and virtuous circles.
The changes and reforms in the Saudi education system in the first two decades of the twenty-first century have focused on the school education. The primary motive for reforming the school education was to prepare the school graduates for the competitive world that awaited them and ensure that they had the skills and temper to be able to attain professional education and find employment. The other motive was to reduce the influence of institutionalized clergy among the school graduates to make them less prone to radical ideas. The chapter discusses the finer nuances of the steps taken for the changes and reforms in Saudi school education, how they have improved the quality of school graduates, if at all, and how they have impacted the debate on the problem of the school curriculum fomenting radicalism or extremism. The chapter provides a detailed account of the various reform measures, such as Tatweer and Teachers’ Training, introduced over the first two decades of this century.
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