The non-commercial objectives of national oil companies

Date

2015-12

Authors

McGroary, Lin

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Abstract

National oil companies (NOCs) play an important role in the international oil and gas industry; collectively NOCs control approximately 90% of worldwide oil reserves. NOC are either wholly or partially owned by their country’s government, and as such can be used as a tool to meet the government’s aims. An NOC can maximize profits, which maximizes revenues to the government, or the government can use the NOC to fulfill its non-commercial goals. This paper focuses on how non-commercial goals affect profitability and make a national oil company more susceptible to corruption. I argue that NOCs that follow non-commercial goals are less likely to be successful commercially; however there are different non-commercial goals that affect commerciality differently. NOCs that follow specific non-commercial goals, such as economic development, are also more susceptible to corruption, this is because these goals lend themselves to governments that are trying to establish political legitimacy. I look at case studies of six different countries (Saudi Arabia, China, Norway, Venezuela, Nigeria and Russia), and their associated NOCs, to establish how non-commercial goals affect the NOCs. Other factors also affect the commerciality of NOCs; factors such as the legal framework of the country, and whether regulations are well established. I conclude by comparing the national oil companies and their non-commercial objectives and exploring the differences between the companies.

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