Hybrid NOCs


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Presentation on three hybrid national oil companies: Petrobras (Brazil), Petronas (Malaysia), and Statoil (Norway)

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  • Hybrid NOCs

    1. 1. The Way of the Hybrid NOC Michael T. Jones The Fletcher School EIB B234
    2. 2. Presentation Outline <ul><li>Overview of National Oil Companies </li></ul><ul><li>The Hybrids </li></ul><ul><ul><li>Petronas </li></ul></ul><ul><ul><li>Petrobras </li></ul></ul><ul><ul><li>Statoil </li></ul></ul><ul><li>Future Outlook </li></ul>
    3. 3. Times are a Changin’
    4. 4. Oil Prices, Nationalizations, and Privatizations Government Takeovers Government Divestitures $137 b in divestitures $6 trillion to go!
    5. 5. NOCs in the Global 500 Source: Fortune Magazine
    6. 6. Ratio Comparisons Source: PIW Profit margin employee/profit ratio (m) NOCs 12% 23 IOCs 18% 5 Hybrids 16% 6
    7. 7. Why have a NOC? <ul><li>To reduce dependence on IOCs </li></ul><ul><ul><li>Diminish perception of being dominated by Western companies </li></ul></ul><ul><ul><li>Control balance of payments and tax policies </li></ul></ul><ul><ul><li>Acquire technology </li></ul></ul><ul><ul><li>Enhance international prestige </li></ul></ul><ul><li>To have a “window” into the industry </li></ul><ul><ul><li>What were the IOCs up to? </li></ul></ul><ul><ul><li>Data on the oil industry </li></ul></ul><ul><li>To ensure inexpensive and reliable supplies </li></ul><ul><ul><li>NOCs could alter allocation of supplies </li></ul></ul><ul><ul><li>NOCs could gain preferential access to OPEC crude </li></ul></ul><ul><ul><li>NOCs could supplement the IOCs’ production </li></ul></ul><ul><ul><li>NOCs could use a “social” hurdle rate v. a “corporate” rate </li></ul></ul>
    8. 8. NOC Stereotypes <ul><li>Inefficient </li></ul><ul><li>Corrupt </li></ul><ul><li>Fulfill social and political goals </li></ul><ul><li>Lacking technology and know-how </li></ul><ul><li>Inflexible </li></ul>
    9. 9. Types of National Oil Companies <ul><li>CNPC </li></ul><ul><li>CNOOC </li></ul><ul><li>Sinopec </li></ul><ul><li>ONGC </li></ul><ul><li>KOGAS </li></ul><ul><li>KNOC </li></ul><ul><li>Japex </li></ul><ul><li>JOGMEC </li></ul><ul><li>Petronas </li></ul><ul><li>Pertamina </li></ul><ul><li>Saudi Aramco </li></ul><ul><li>Sonatrach </li></ul><ul><li>ADNOC </li></ul><ul><li>KPC </li></ul><ul><li>Petrobras </li></ul><ul><li>PDVSA </li></ul><ul><li>Gazprom </li></ul><ul><li>Rosneft </li></ul><ul><li>Statoil </li></ul><ul><li>CNOOC </li></ul><ul><li>ONGC </li></ul><ul><li>KOGAS </li></ul><ul><li>KNOC </li></ul><ul><li>INPEX </li></ul><ul><li>Petronas </li></ul><ul><li>Pertamina </li></ul><ul><li>Sonatrach </li></ul><ul><li>Petrobras </li></ul><ul><li>Statoil </li></ul>commercializing competitive <ul><li>Petronas </li></ul><ul><li>Petrobras </li></ul><ul><li>Statoil </li></ul>International partial-privatization <ul><li>Petrobras </li></ul><ul><li>Statoil </li></ul>Asia Middle East Latin America Europe Petronas is commercially competitive without being even partially private!
    10. 10. Drivers of Commercialization Technology Resources Source: PFC CNOOC Sinopec ONGC CNPC S. Aramco Gazprom/Rosneft National Asset Holders NNPC Finance and Security Seekers PEMEX Pertamina Petronas Statoil Petrobras Entrepreneurial NOCs LNOC Technology Seekers PDVSA KPC Ecopetrol EGPC Declining NOCs PTT Sonangol NIOC Sonatrach QP Market Seekers More adept Less adept Diminishing Production Expanding Production
    11. 11. Political events caused IOCs to look beyond OPEC for supplies… Yom Kippur War Iranian Revolution <ul><li>Non-OPEC </li></ul><ul><li>Norway </li></ul><ul><li>USA </li></ul><ul><li>China </li></ul><ul><li>Brazil </li></ul><ul><li>Russia </li></ul><ul><li>Malaysia </li></ul><ul><li>Nigeria </li></ul><ul><li>Mexico </li></ul><ul><li>OPEC </li></ul><ul><li>Saudi Arabia </li></ul><ul><li>Iran </li></ul><ul><li>Iraq </li></ul><ul><li>Kuwait </li></ul><ul><li>Qatar </li></ul><ul><li>UAE </li></ul><ul><li>Indonesia </li></ul><ul><li>Venezuela </li></ul>
    12. 12. Contracts <ul><li>Malaysia </li></ul><ul><ul><li>Production-Sharing Agreements </li></ul></ul><ul><ul><ul><li>Royalty on gross production </li></ul></ul></ul><ul><ul><ul><li>Cost oil (% pre-determined) </li></ul></ul></ul><ul><ul><ul><li>Profit oil (% split pre-determined) </li></ul></ul></ul><ul><ul><ul><li>Tax on profit oil </li></ul></ul></ul><ul><li>Norway </li></ul><ul><ul><li>Royalty & Tax </li></ul></ul><ul><ul><li>“ back-in” rights </li></ul></ul><ul><li>Brazil </li></ul><ul><ul><li>Risk Service Contract </li></ul></ul><ul><ul><li>Concessions </li></ul></ul>Avoided “killing the goose that lays the golden egg” and the “sleeping partner” syndrome
    13. 13. Hybrid NOC’s Competitive Advantages Saudi Aramco’s Oil Supply Planning and Scheduling Dept.
    14. 14. Petrobras: Deepwater Drilling <ul><li>Technology unbundling -> Advancement-> Partnerships </li></ul><ul><li>Petrobras has held records for deep-water drilling more often than any other company since the 1970s. </li></ul><ul><li>However, their new subsalt discovery in the Santos Basin (5-8 billion barrels), Petrobras would have to push the limits of the industries technology by drilling up to 10,000 ft to the sea floor, and an additional 16,000 feet below the floor. </li></ul>Source: Petrobras … another 20,000 ft to go
    15. 15. Pre-Salt Challenge
    16. 16. Statoil: Subsea & IOR
    17. 17. Petronas: LNG & Shipping <ul><li>LNG carriers 27 </li></ul><ul><li>Petroleum tankers 45 </li></ul><ul><li>Chemical tankers 13 </li></ul>
    18. 18. Ownership & Governance <ul><li>Petronas </li></ul><ul><ul><li>Ownership: 100% </li></ul></ul><ul><ul><li>Voting: 100% </li></ul></ul><ul><li>Petrobras </li></ul><ul><ul><li>Ownership: 30% </li></ul></ul><ul><ul><li>Voting: 56% </li></ul></ul><ul><li>StatoilHydro </li></ul><ul><ul><li>Ownership: 63% </li></ul></ul><ul><ul><li>Voting: 63% (“one share, one vote”) </li></ul></ul>
    19. 19. Malaysia: Petronas
    20. 20. Government Relations: Petronas Petroleum Product Pricing Downstream Regulators Subsidies Dividends Energy Policy Upstream Regulator Natural Gas Pricing PM is also Minister of Finance
    21. 21. Petronas: Important Events <ul><li>1948 – Communists Insurgency </li></ul><ul><li>1969 – Race Riots </li></ul><ul><li>1970 – New Economic Policy (Bumiputra, affirmative action) </li></ul><ul><li>1974 – Petroleum Development Act (Petronas est.) </li></ul><ul><li>1981 – PM Mohammad Mahathir </li></ul><ul><li>2003 – PM Abdullah Badawi </li></ul>Oil
    22. 22. Petronas: Management <ul><li>Petroleum Development Act, 1974: </li></ul><ul><ul><li>PETRONAS is &quot;subject to the control and direction of the Prime Minister…and direction issued by him shall be binding on the Corporation“ </li></ul></ul><ul><ul><li>Prime Minister has a right to appoint the directors and to terminate such appointments </li></ul></ul>
    23. 23. Petronas: Finance & the State <ul><li>Financial Autonomy </li></ul><ul><ul><li>Does not report financials to MoF </li></ul></ul><ul><ul><li>Abides by “normal” corporate procedures </li></ul></ul><ul><ul><ul><li>Transparency (aggregated financial statements) </li></ul></ul></ul><ul><ul><ul><li>Annual Auditing </li></ul></ul></ul><ul><ul><ul><ul><li>Auditors are appointed by Prime Minister </li></ul></ul></ul></ul>
    24. 24. Petronas: Global Investments
    25. 25. Petronas as a leader <ul><li>Interests in 30+ countries </li></ul><ul><li>62 ventures </li></ul><ul><ul><li>30 as operator </li></ul></ul><ul><ul><li>13 as joint operator </li></ul></ul><ul><ul><li>23 as active partner </li></ul></ul>
    26. 26. Corruption & Misuse <ul><li>Investments/Involvement in Non-Oil & Gas Sector </li></ul><ul><ul><li>Twin Towers (Real Estate) </li></ul></ul><ul><ul><li>Proton (Auto Manufacturer) </li></ul></ul><ul><ul><li>Putrajaya Holdings (Property Development) </li></ul></ul><ul><ul><li>Bumiputra (Bank) </li></ul></ul><ul><li>Geopolitics </li></ul><ul><ul><li>Iran </li></ul></ul><ul><ul><li>Sudan </li></ul></ul><ul><ul><li>Burma </li></ul></ul>
    27. 27. Brazil: Petrobras
    28. 28. Government Relations: Petrobras Regulator: issues E&P licenses
    29. 29. Petrobras: Important Events <ul><li>1934 – Constitution </li></ul><ul><ul><li>Subsoil exploitation rights granted only to Brazilian citizens or companies </li></ul></ul><ul><li>1953 – Petrobras established </li></ul><ul><li>1990 – President Collor </li></ul><ul><ul><li>Brazilian Privatization Program </li></ul></ul><ul><li>1995 – President Cardoso </li></ul><ul><ul><li>Focused on “strategic” sector </li></ul></ul><ul><li>1997 – Oil Law (constitutional amendment) </li></ul><ul><ul><li>Took away regulatory powers from Petrobras and gave them to National Petroleum Agency (ANP) </li></ul></ul><ul><ul><li>Allowed private oil companies to bid on oil fields </li></ul></ul><ul><ul><li>Petrobras as “just another oil company” </li></ul></ul><ul><li>2000 – Petrobras Privatization (1 st offering) </li></ul><ul><ul><li>Guarantee Fund for Workers’ Time of Service </li></ul></ul><ul><li>2001 – Petrobras Privatization (2 nd offering) </li></ul><ul><ul><li>81% of shares purchased from abroad </li></ul></ul><ul><li>2003 – President Lula </li></ul>Oil Gas
    30. 30. Petrobras: Global Investments
    31. 31. Petrobras: Corruption and Misuse <ul><li>1980s – Petrobras financed the government with funds the company borrowed from the financial markets. </li></ul><ul><li>Several oil spills </li></ul><ul><li>Botched offshore operations during privatization </li></ul>
    32. 32. When technology outpaces skill…
    33. 33. Norway: Statoil
    34. 34. Government Relations: Statoil Source: Norwegian Ministry of Petroleum and Energy Consultant Government Investor NOC Pension Manager ($280 b) Policymaker Administrator/ Regulator
    35. 35. Statoil: Important Events <ul><li>1971 – Statoil Established </li></ul><ul><ul><li>Statoil as regulator (guaranteed 50% stake) </li></ul></ul><ul><ul><li>Arve Johnsen as CEO </li></ul></ul><ul><li>1985 – SDFI Established (NOC swap) </li></ul><ul><ul><li>Reserves reduced from 50% to12% </li></ul></ul><ul><ul><li>Statoil no longer guaranteed “back in” rights </li></ul></ul><ul><ul><li>Reduced Statoil’s importance </li></ul></ul><ul><li>1987 – Arve Johnsen scandal (cost overruns) </li></ul><ul><li>1990 – BP Alliance </li></ul><ul><li>1999 – Aasgard field (cost overruns) </li></ul><ul><li>2001– Statoil goes public (70% state) </li></ul><ul><ul><li>State sells 15% of SDFI’s stakes as a sweetener </li></ul></ul><ul><ul><li>Petoro established (replaced SDFI) </li></ul></ul><ul><li>2006 – Statoil-Norsk Hydro merger (63% state) </li></ul>Oil Gas
    36. 36. Home Reserves & Commercialization Process Protection Competition Partial Privatization Internationalization Reserves Domestic Political Power International Political Power
    37. 37. Statoil: Global Investments
    38. 38. Comparisons: Strengths-Weaknesses Strengths Weaknesses
    39. 39. Ingredients for an efficient NOC: Clear separation of powers/regulator X X No Financial and managerial autonomy X X ? Timely injection of competition X X ? Desperation (diminishing reserves) ? X X Technological innovation X X X Educated workforce X X ?
    40. 40. Future Outlook State Market ?
    41. 41. <ul><li>Statoil </li></ul><ul><ul><li>How to differentiate itself from an IOC </li></ul></ul><ul><ul><li>Rationale for NOC in question </li></ul></ul><ul><ul><li>Role of Petoro? </li></ul></ul><ul><li>Petrobras </li></ul><ul><ul><li>Growing reserves and production </li></ul></ul><ul><ul><li>Growing nationalist sentiment in government </li></ul></ul><ul><li>Petronas </li></ul><ul><ul><li>No plans for privatization (“best of both worlds”) </li></ul></ul><ul><ul><li>Strains may come from subsidies </li></ul></ul><ul><ul><li>Unskilled/young work force may strain int’l expansion </li></ul></ul>Future Outlook
    42. 42. Tamed Mercantilism <ul><li>Japan </li></ul><ul><ul><li>Currently rely on IOC for most of their oil supply </li></ul></ul><ul><ul><li>New National Energy Strategy (2006) </li></ul></ul><ul><ul><li>“ Hinomaru” Oil (40%) </li></ul></ul><ul><ul><li>Legal changes to ODA charter (conflict with OECD norms?) </li></ul></ul><ul><ul><ul><li>Tied Aid </li></ul></ul></ul><ul><ul><ul><li>Extended preferential loans (UAE, Venezuela) </li></ul></ul></ul><ul><li>Korea </li></ul><ul><ul><li>Commercial SPR System </li></ul></ul><ul><ul><li>Resource Diplomacy </li></ul></ul><ul><ul><li>Equity Oil (15%) </li></ul></ul>
    43. 43. Thank you!
    44. 44. Who Are the NOCs? (cont.) Source: PwC Norway Azerbaijan China Mexico Brazil Malaysia India Egypt Angola Oman Indonesia Libya Nigeria Venezuela Kuwait Iran Saudi Arabia Russia Algeria Qatar UAE Iraq Kazakhstan Uzbekistan Turkmenistan Under Development PSCs Available International NOCs Restricted Access Gas to Markets BOE Reserves BOE Production
    45. 45. Brazil is soon to become a net exporter of oil… Missing their production targets!
    46. 46. Oil Money: Malaysia <ul><li>Malaysia's federal government received 52 billion RM from petroleum taxes and royalties in 2006, five times more than it received from income taxes </li></ul><ul><li>In 2006 the government spent about 27 billion RM on fuel subsidies, three times the amount it spent on education and health combined. </li></ul>