National Oil Companies (NOCs)


11. Civil society and NOCs

Inevitably, due to their nature, resource projects are usually the subject of civil society and community actions and disputes.

Due to NOCs’ status as: resource developers in their own right, as joint venture partners with IOCs under contracts like PSAs, or as regulatory agents of the government, NOCs often find themselves on opposing sides with civil society on resource development projects.

Common areas for civil society action include:

The environment

For instance, it has been noted that a major reason for the minimal uptake of shale oil & gas in Europe is the community and NGO protests against its development. This can be contrasted with the exponential growth of shale oil & gas in the U.S. Stakeholder engagement during environmental impact assessments (EIAs) is a regular point of entry for NGOs and other groups opposed to extractives projects.

There is a major difference of shale gas in the U.S. and elsewhere. The private ownership of land and the underlying hydrocarbons in the U.S (in contrast to state confiscation elsewhere) has made such a difference to the respective developments as it offered small and medium sized natural gas firms to lease land at low prices and obtain return for their early technology investments.

The environmental discussion, as it relates to NOCs is going to become much more complicated in the future as a result of the Paris Agreement on Climate Change, which was signed by 195 countries and the EU in December 2015, and ratified by 115 countries in October 2016. This is discussed in greater detail below.

Community relations and rights of indigenous communities

These are mostly related to the “social licence to operate”. They include community engagement, labour and local content. They have been a major cause of tensions between IOCs and NOCs on the one hand, and local communities and NGOs on the other hand in regions like the oil-rich Niger Delta in Nigeria.

Explore the Community Development Topic Overview for a wider review of community relations.

Human rights

Human rights in the EI sector has gained even more prominence with the development of the Guiding Principles for Business and Human Rights, commonly known as the Ruggie Principles in 2008. The Ruggie Principles are a framework on corporate social responsibility and human rights, developed by UN Special Representative John Ruggie, and which are based on 3 pillars:

NOCs have increasingly needed to manage human rights obligations both as regulators/state agencies (under the state’s duty to protect against human rights abuses by third parties, including business), and as commercial entities (under the corporate social responsibility to respect human rights).

 

Corruption and revenue management

These are issues that are central to concerns in both emerging and established petroleum countries and have led to initiatives like Publish What You Pay (PWYP) and the Extractive Industries Transparency Initiative (EITI).

The EITI is a voluntary country-membership initiative, focused on transparency over payments and revenues to governments in the EI sector. Members include the U.S., UK and OECD countries, and most oil and gas producing countries in Africa. The EITI Standard is based on EITI principles agreed by stakeholders in 2003. Countries have to adhere to certain requirements in order to be members and continue to be members of the EITI.

Aside from international “peer pressure” to join transparency initiatives, there has been, and will continue to be pressure on states and NOCs by NGOs and the civil society for greater transparency of payments, and also of the resource contract making process. For instance, Tunisia joined the EITI in February 2016, after having had a history of protests calling for greater EI sector payment transparency, most notably, violent protests in 2013.

Explore the Transparency and Anti-corruption topic overview for a more comprehensive review of this subject.

The Dodd-Frank Legislation

NOCs are also affected by the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Legislation). Although primarily focused on Wall Street reforms following the U.S. 2008 financial crisis, the Dodd-Frank Legislation amended the SEC 1504 of the Securities Exchange Act 1934, by requiring extractives resources issuers to disclose payments made to governments.

The Dodd-Frank Legislation would affect NOCs which have joint operations (for instance, under PSAs) with international IOCs listed in the U.S., NOCs in so far as they act as revenue collection agents for governments, and international NOCs which are listed in stock exchanges in the U.S. (such as China’s CNOOC, which is listed in the New York Stock Exchange).