National Oil Companies (NOCs)

6. Access to capital

Most NOCs rely on governments for their budgetary requirements, especially in the initial stages of operations and prior to oil and gas discoveries. Even after discoveries, NOCs often continue to rely on the government for their operational costs, in addition to revenues from discoveries or from data sales. The financial autonomy of NOCs is an important consideration in determining a NOCs efficiency and market and sector strategy. Autonomy among most NOCs has be categorised into 3 broad terms:

1. Low level of budgetary and financial autonomy – where all NOC revenues are transferred to the government and NOC funding of operations comes from the government;

2. A level of budgetary and financial autonomy – where the NOC can use its revenues to a certain maximum amount, beyond which government approval is required; and

3. High level of budgetary and financial autonomy – where there is minimum government intervention and the NOC makes decisions on revenue allocation through its board.

NOCs as market players

Most NOCs have objectives that include a requirement to act in a commercial manner, even if the way in which that is defined and its relationship to other goals vary considerably from one case to the next. In a small number of cases in the past, NOCs in the petroleum industry have been expected to emulate, and have been successful in emulating, their privately owned counterparts in terms of commercial efficiency and the generation of profits. These NOCs have been successful in operating as a counter-balance to the traditional influence of IOCs. In a limited number of cases, these NOCs have been able to replace IOCs completely.

The most efficient NOCs are those which have budgetary autonomy, have been subject to full market competition, and gain no advantageous treatment from their own governments compared with privately owned companies. NOCs should be subject to the same fiscal regimes, tax assessments, auditing procedures, and tax payments of a privately-held company.

Like a private company, the NOC should be subject to strong market discipline. It would be ideal for the NOC to raise capital in the private marketplace and set up and maintain a strong balance sheet. Several NOCs are quoted on domestic and international stock exchanges, including Ecopetrol, KMG, Petrobras, Petrochina, and Statoil) and some are only quoted domestically, including ONGC, PTT.