National oil firms need to improve

04 July 2008
With oil revenues higher than ever, there is little incentive for state oil giants to improve their performance.

The Middle East’s national oil companies (NOCs) might be enjoying the most lucrative period in their history, but there is still much room for improvement, according to MEED’s second annual survey of the oil firms.

Despite earning billions of dollars a day in revenue, almost half of respondents who have worked with the NOCs say that key parts of their performance are poor. The two greatest areas of weakness are transparency and independence from state control.

This desire for greater openness comes as no surprise. With two-thirds of the world’s oil reserves in the Middle East and North Africa, and most of that in the hands of NOCs, the private sector companies want NOCs to boost production faster and be more open about the reserves they hold.

Unfortunately, there is little reason to expect much improvement. In the late 1990s and early 2000s, when oil prices were low, many NOCs began to look at reform and some did make limited progress, by investing more in proprietary technology while developing their human resources and downstream infrastructure.

But despite occasional murmurings from some governments about giving their NOC a greater say in its own future - Algiers’ attempted commercialisation of Sonatrach, for example - there has been little change to the structure of the state oil companies themselves. Now, with oil revenues higher than ever, what little incentive there was to reform is waning fast.

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