Page 6 - AfrOil Week 11 2022

AfrOil COMMENTARY AfrOil

This analysis is relevant because it contributes to implemented, since with the entry of private
the debate on a frequently ignored perspective: partners in the shareholding structure, it is guar-
the activity of NOCs. Its creation and devel- anteed that the decisions taken by the board of
opment depend on political decisions by gov- directors are based on profitability, development
ernments. But, at the same time, its evolution and commercial expansion of the company.
conditions the forms and degree of control of These decisions would allow NOCs to start
the national players (governments and NOCs) their productive functions and strengthen par-
in the control of oil resources. ticipation in exports, increasing direct oil rev-
State-owned oil companies were created enues and its participation in the entire value
as depositories of legal rights over the existing chain of the oil industry, from exploration, pro-
hydrocarbons in the subsoil that belong to the duction, processing and transformation, trans-
State. This power is exclusive when the laws deny portation and marketing of the final product in
foreign companies the possibility of accessing national and international markets.
ownership of those resources. Based on this It is not by chance that Saudi Aramco, the
legal definition, the difference between the state oil company of Saudi Arabia – the most
NOCs derives from their different capacities to profitable company in the world, the giant that
take charge of the exploitation of these resources produces about 10% of world’s crude oil and
and the specific functions attributed to them that registered in 2018 a net profit of $111bn,
by the State. The inability of the NOCs to have which exceeds the combined earnings of Apple,
the equipment, techniques, organisation and Facebook and Microsoft, according to Moody’s
financial resources with which to exploit their Investors Service – has opted for a partial issu-
resources means that all or most of the effective ance of bonds by the company to go public and
control over the exploratory, productive and attract private investors. During the last 20 years,
largely exporting cycle falls to the IOCs that do we have seen the rise of independent oil compa-
have those capabilities. This situation has lasted nies (including but not limited to Pioneer Natu-
indefinitely in most oil-producing countries in ral Resources, Apache, Trident Energy, Kosmos
Africa, as they continue to lack the technology, Energy and Oranto Oil) that are doing a great
managerial experience and financial resources job and a great service to the oil and gas industry
to make the large investments that oil and gas community and are operating in many parts of
activity requires. the world. At the same time African NOCs with
much more resources and power at their dis-
Proposed changes posal have been gradually losing their relevance
However, the government can induce various in the international arena.
changes that do not directly depend on its col- Moving in the direction of partial priva-
lection capacity, although they are favored by tisation, in the course of time may lead to the
the existence of better international prices and national players (governments and African
by greater collection of income by the State. The NOCs) reaching a position of empowerment
purpose of these changes is for the NOC to start over their resources – that is, majority or
developing productive activities through four total control of the oil cycle. The fundamental
possible complementary measures: requirement is the technological, organisational
• negotiate its position within the JV so that and financial capacity of the NOC to take charge
the NOC carries out extractive tasks that facili- of the activities involved in the oil cycle.
tate the assimilation of technology In other words, having reached this position
• acquire imported equipment that can be of empowerment, NOCs have substantially
used by the NOCs altered their central function, ceasing to be a
• hire highly trained national and foreign mere collector of the share received from the
technical personnel with clearly defined objec- IOCs, as is currently the case in most oil-pro-
tives and functions to work with NOCs and ducing countries in Africa, to becoming the
facilitate the training of company technicians majority or exclusive producer and exporter of
• partial privatisation of NOCs, thus open- oil extracted in the country and becoming a true
ing them to national and foreign private capital actor and promoter of change and comprehen-
so that their management style becomes rigor- sive economic development. (Reprinted cour-
ous and to guarantee that points 1, 2 and 3 are tesy of African Energy Chamber) ™

PIPELINES & TRANSPORT
Oil Crescent residents threaten blockade

LIBYA RESIDENTS of the Libyan coastal region At the weekend, they threatened to halt ter-
known as the Oil Crescent have reportedly minal operations if the UN Support Mission
threatened to halt crude exports in an attempt in Libya (UNSMIL) did not stop backing the
to break the impasse between rival factions. interim Government of National Unity (GNU).

P6 www. NEWSBASE .com Week 11 16•March•2022