Noc Reform Collins

8/12/2019 Noc Reform Collins

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NATIONAL OIL COMPANIESCurrent Roles and Future Prospects

NOC REFORM:Restructuring, Commercialization and Privatization

Tom CollinsMay 27, 2003


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2AGENDA

Who Are We and What Do We Do

Where We Have Worked

Overall Trends Identified

Specific Country Experiences

Some Conclusions

Challenges to NOC Reform Implementation:


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3SAME ROLE, DIFFERENT NAMES

Coopers & Lybrand

PricewaterhouseCoopers

PricewaterhouseCoopers Consulting

IBM Business Consulting Services

Industry Restructuring enhancing the countrys economic engine of growth Policy Development Advice Fiscal, Economic, Legal and Regulatory Assistance Capacity Building Implementation

Corporate Restructuring improvement of the NOC Strategic Assistance Operational and Efficiency Reviews Privatization Initiatives

In 1990 we formed a unit in Calgary, Canada, dedicated to assisting National OilCompanies or Ministries of Energy in resource developing nations:


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4OVER THE LAST THIRTEEN YEARS -

Cameroon , Congo, Equatorial Guinea, Gabon , Mozambique, Senegal, South Africa

Abu Dhabi, Algeria, Kuwait, Qatar, Saudi Arabia , Yemen

Bangladesh, China, Indonesia , Kazakstan, Pakistan , Papua New Guinea, Thailand, Vietnam

Bolivia, Colombia, Costa Rica, Mexico , Trinidad, Peru

Funding split almost equally between IFIs and the host country


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5THE IMPORTANCE OF NOCs

In 2001, the worlds oil reserves were still under the control of governments:

10%

90%NOCs

IOCs1 National Iranian Oil Iran2 ExxonMobil USA3 Royal Dutch/Shell Netherlands4 BP UK 5 Pertamina Indonesia6 Sonatrach Algeria7 Saudi Aramco Saudi Arabia8 Pemex Mexico9 ChevronTexaco USA

10 Petronas Malaysia

Ranked by 2001 Gas Production


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6THE OIL AND GAS VALUE CHAIN

Optimum efficiency requires collaboration along the chain

Removal of cross-subsidy distortions

Awardand/orNegotiateMineralRights& JVs

MarketandDistributeWholesaleProducts

SellRetailProducts

Supply,MarketandTransport

ProduceCrude,Gas andNGLs

RefineandProcessFeedstock

ExploreandDevelopReserves

Upstream Midstream Downstream

Previously the sole responsibility of the NOC, this is changing now:


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7WORLD-WIDE TRENDS AND APPROACHES

Around the world, certain trends and approaches are apparent, as resourcenations with energy monopolies transition to private sector partnerships:

Transformation of National Oil Companies

Instigation of Regulatory Roles and Responsibilities

Emergence of the Natural Gas Sector

Changing Contractual Options for Foreign Investment


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8SPECIFIC COUNTRY EXPERIENCES

Eight examples: Indonesia, Cameroon, Gabon, Kuwait, Qatar, Saudi Arabia,Pakistan and Mexico

Issues and challenges faced by the NOC/sector

Structure and strength of the petroleum sector players

Brief description of our role

Remedies and reform strategies suggested/implemented

Comments mainly limited to the upstream and midstream


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9INDONESIA

Commercial efficiency, non-commercial objectives, governance, conflict of interest

Powerful NOC, weak Ministry, no Regulator, many IOCs working under PSCs

Comprehensive operational and commercial audit of Pertamina for Ministry of Finance,followed by implementation planning for the restructuring of the company

Take Regulation away from Pertamina, restructure and make it compete commercially withIOCs, update contractual arrangements with IOCs, strengthen the Ministry

Issues and Challenges

Structure and Strength

Project

Remedies and Reform Strategies


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10CAMEROON

Commercial efficiency, 20 year history of declining production, conflict of interest

Weak NOC non-operator, weak Ministry, few IOCs working in country

Two diagnostics of the petroleum sector and two operational and financial performanceassessments of SNH, in preparation for restructuring

Nothing changed in 10 years, not so attractive as other areas, overhaul fiscal system to attract private sector participation, strengthen SNH, but do not let it operate. Separate ownership andfrom regulation



Project



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11GABON

Lack of exploration success, recent declining production, governance of sector

No NOC, no Regulator, weak Petroleum Ministry, Treasury runs State interests with few IOCs

Comprehensive diagnostic of the petroleum sector, implementation of new petroleumlegislation, followed by many years conducting audits as stand in for the Regulator

Overhaul program of bidding rounds, strengthen the petroleum Department of the Ministry



Project



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12KUWAIT

The Constitution, cash requirements, technology shortfall, non-commercial objectives

Strong NOC, strong Minister/weak Ministry, no Regulator, no IOCs, new National Assembly

Introduction of foreign investment, design and development of new style of contractualarrangements for private sector participation. Models of how to turn KOC into a profit center

Introduction of Service Contracts, update Petroleum Laws and Regulations



Project



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13QATAR

Change from oil to gas-based revenues, commercial efficiency, governance, conflict of interest

Competent NOC, strong Minister/weak Ministry, no Regulator, several IOCs participate

Restructuring of NOC and re-introduction of private sector participation, particularly in LNG

Commercialization of NOC, JVs in LNG, TSCs in NOC, PSCs for offshore oil



Project



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14SAUDI ARABIA

Rapid expansion of gas sector, cash requirements, differences between two Ministries

Strong SPC, strong Foreign Affairs Minister, strong NOC, strong Petroleum Minister/weakMinistry, no Regulator, no IOCs

Project and process management of the Saudi Natural Gas Initiative. Provision of advice to theelectricity and desalination sectors

Private sector participation in very large, integrated upstream, midstream and downstream projects



Project



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15PAKISTAN

Commercial efficiency, non-commercial objectives, governance, five different governments

Strong Ministry, weak NOC, new Regulator, several IOCs participating in PSCs

Eight year program to strengthen the sector to produce self sufficiency

Sale of NOC assets, privatization of gas utility sector, introduction of Regulator, improvementof PSC terms, strengthening of the Ministry



Project



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16MEXICO

The Constitution, cash requirements, commercial efficiency, non-commercial objectives

Powerful NOC, weak Ministry, average regulator, no IOCs

Opening of natural gas sector to foreign investment

Introduction of Multiple Service Contracts, commercialization of Pemex, update of PetroleumRegulations



Project



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17AN IDEAL FRAMEWORK

The Ministry of Petroleum/EnergyOverall Hydrocarbon Policy DevelopmentSetting Legal/Policy Framework for Foreign InvestmentHigh Level Definition of Investment Projects

International Promotion The Ministry of Finance

Collection of Royalties, Payments and Taxes

The National Oil CompanyDisconnection from Government budget

Forced into Efficiencies by Competition from Foreign Operators The Regulator

Independent Role in Economic/Infrastructure Regulation

As transitions occur in any given country, including the introduction of foreigninvestment, the ideal roles of the various players should be:


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18CONCLUSIONS FROM THE TRENCHES

Depending on the country context:

Isolate the National Oil Company, keep it in state hands, but improve it bysome divestiture or asset sale

Instigate better governance and internal management controls Make it compete for acreage Separate ownership, operation and regulation

Strengthen the Ministries of Energy/Petroleum

Improve independent regulation

Update the contractual systems to attract more foreign investments


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19THANK YOU

[email protected]

403 509 7359

Tom CollinsIndependent ConsultantCalgary, Canada

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Noc Reform Collins