National Oil Companies (NOCs)


9. NOC and regulator relations

When it comes to regulator relations, a NOC usually either:

 

In the past, most NOCs performed the dual role of being both a regulator and a concessionaire (competitor with IOCs). There is consensus that this created a conflict of interest in the NOCs’ roles.

It is common for NOCs to take on dual roles especially during the exploration phase, especially in relation to data collection and data sales. Data sales generate significant revenues when there is exploration interest, and managing data also helps NOCs build their technical and geological capacity. This corporate strategy is then re-considered in the production phase.

Advantages of having NOCs act as regulator

Advantages have been noted with having a NOC take on the role of a regulator, including:

  • Building sector capacity
  • Faster and more effective national control of resources;
  • Training and training and benefits packages to attract and retain talent;
  • Simplification of the resource governance system, and limiting decision-making constraints due to involvement of different state agencies.

However, such an approach would still require a proper consideration of the NOC’s autonomy and an inevitable transfer of the regulatory functions to a different agency at some stage in development.

The most common regulatory reform strategy taken up by countries is the so called “trinity” or “Norwegian model”, where licensing and regulatory powers are transferred from the NOC to a separate government or independent body and the corporate strategy is left to the NOC.

However, even where the NOC is not a regulator, there is always a risk of government backed monopoly control or preferential treatment vis a vis IOCs. The justification for privileges has often been to offset non-commercial obligations imposed on NOCs, or to promote local content policies.

The regulator role status of some of the emerging NOCs

Depending on the country’s stage in development, the ideal would be pure competition. The NOC should apply for, and obtain, licenses in the same manner as other companies and should be subject to the same licensing conditions as private companies with all regulatory activities being undertaken by government regulatory offices.

A list of the regulator role status of some emerging NOCs is available here.