Guest Editorial: The Winds of Change: Resource Nationalism Shifts the Balance of Power to National Oil Companies
- Pete Stark (IHS Inc.)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- January 2007
- Document Type
- Journal Paper
- 34 - 36
- 2007. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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The oil and gas industry is in the midst of a critical transition driven by a series of factors, including the Asian energy-demand crunch of 2004, the 2005 hurricanes in the Gulf of Mexico, and recent low discovery rates. These factors, coupled with political uncertainties, threats to petroleum infrastructure, production disruption resulting from civil unrest, and limited access by international oil companies (IOCs) to giant resources in the Middle East and the former Soviet Union, have ushered in what has been referred to as the “Age of Energy Supply Anxiety.”
In addition, higher oil prices and mounting political pressures, combined with a bit of anti-Americanism and rapidly growing demand for energy in the Asian market (particularly in China), are stimulating producing countries to increase control of their oil and gas resources and move toward resource nationalism. The resulting global scramble by both IOCs and national oil companies (NOCs) to secure hydrocarbon resources has altered the industry’s competitive landscape significantly, which in turn has caused a major shift in the balance of power favoring the NOCs, mandating new perspectives on negotiations and partnerships.
No longer are NOCs managing only state-owned hydrocarbon resources to their nation’s long-term benefit, they are also expanding internationally to secure the additional energy resources necessary for sustainable economic growth for their countries. In other words, NOCs are becoming international exploration companies, competing with IOCs at home and in the world marketplace.
The Effect of a Paradigm Shift
Considering that governments and NOCs control more than 80% of the world’s remaining oil reserves, are expanding and upgrading refineries and infrastructure, and are developing gas resources, the effect is considerable. But that has not always been the case. In the past, when oil prices were low, investments in exploration dropped, and governments were eager to create incentives to attract investments—including reducing tax rates and state participation, or providing royalty relief.
All that changed in 2003 when oil prices began to soar. Many countries—primarily those with immense resources such as Russia, Nigeria, Libya, Angola, and Venezuela—reversed gears and raised taxes and/or increased state participation in hydrocarbon licenses. In Latin America, where the public’s perception was that oil and gas companies made excessive profits at their expense, energy policies have become highly regulated.
Increases in state-take range from 2% in Angola to 24% in Nigeria and 43% in Argentina. In Algeria—formerly known for being one of the most welcoming countries for foreign energy investors—a new government decree was enacted at the beginning of September 2006. Arguing that this decree safeguards the role of Sonatrach, Algeria’s NOC, it specifies that Sonatrach will be given a 51% stake in all upstream development projects as well as midstream pipeline and refinery projects.
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