From Ghana to Timor-Leste, many new or prospective oil producers are establishing or reforming national oil companies (NOCs). Their governments are looking at the experience of existing producers to choose an institutional design that can effectively manage their NOCs and foreign oil companies while minimizing governance risks. However, research on NOC governance has focused almost exclusively on large, well-established oil producers such as Saudi Arabia and Norway, which have geological prospects and institutional capacity levels that may make them difficult for the world’s new oil hotspots to emulate. The context is substantially different in most new or prospective producers, where administrative, human and oil-sector capacity are generally low. These governments face daunting challenges in light of their capacity constraints. This paper offers five research propositions on the connections between country capacity and effective oil-sector institutional design to allow governments to more effectively structure their decisions about how to manage petroleum resources.

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Revenue Watch Institute