Study on National Oil Companies and Value Creation Progress and Preliminary Findings

Transcription

1 Study on National Oil Companies and Value Creation Progress and Preliminary Findings Silvana Tordo Oil, Gas and Mining Policy Division, The World Bank Michelle Michot Foss Center for Energy Economic, The University of Texas at Austin Extractive Industries Week Washington, DC, March 5, 2009

2 The economic relevance of oil and gas Specific challenges of NOCs Objectives of the study Progress to date Next steps Conclusion

3 The growing importance of NOCs NOCs control access to the majority of resources for future oil/gas production. Russian companies 6% IOCs 6% Access to reserves through NOCs 11% Proven Oil and Gas Reserves Source: PFC Energy NOCs exclusive control 77% Their importance has been steadily growing

4 The role of NOCs in creating value Vary widely and may include one or more of the following: Maximizing national hydrocarbon wealth Promoting economic development Promoting the political interests of the state abroad.

5 To improve the understanding of the petroleum sector value chain and of the policy options that are best suited to maximize the benefits to the government at each link of the chain. To this end, the Study will: Objectives of the Study seek to determine the factors that influence the creation of value by a NOC, and assess their relative importance develop a reference framework for the creation and the effective and efficient management and oversight of a NOC (experience of existing NOCs, advances in SOEs governance, benchmarking,..) Expected completion: June 2010.

6 Outline of the Study The petroleum sector s value chain. Overview of the political and economic arguments in favor of and against the establishment of an NOC. Overview of advances in SOEs governance around the world. Case studies on a sample of NOCs. Lessons learnt: policy options for the management and oversight of the petroleum sector. Reference framework for the creation and the effective and efficient management and oversight of an NOC.

7 Progress to date A Citizen s Guide to National Oil Companies (World Bank and CEE UT) comprehensive database of 49 NOCs technical report containing a preliminary analysis and possible interpretation of the data Background papers: The Most Salient Advances in the Research on NOCs A Methodology for Assessing the Performance of NOCs

8 NOCs Analyzed in the Guide Sudapet PETROSA NNPC ENH GNPC GEPetrol SNPC SHT SNH Sonangol PetroBangla ADNOC ETAP SPC Saudi Aramco QP LNOC KPC NIOC EGPC Sonatrach PDVSA PetroPeru PEMEX PetroEcuador YPFB Belarusneft Uzbekneftegaz Transneft Kazmunaigas SOCAR PetroVietnam Petronas Pertamina PetroCI Enarsa Rosneft OGDCL PetroChina Average NOC ONGC ECOPETROL GDF Sinopec Sub Saharan Africa Latin America and Caribbean South Asia Europe and Central Asia Middle East and North Africa East Asia and Pacific Average PDO PETROBRAS StatoilHydro Gazprom PTT CNOOC % Private Ownership

9 m3 National Oil Companies and Value Creation Primary Dimensions of Analysis Value Creation: Operating Performance Financial Performance Other Factors Public sector governance Oil dependency Fiscal regime Resource endowment Operating conditions Access to reserves Business integration International presence Commercialization Integration Non commercial objectives Corporate Governance Structure Ownership structure and its organization Composition, appointment/replacement of the Board of Directors Role of the Board of Directors Recruitment and replacement of key executives Decision making processes Objectives Mission Level of budgetary autonomy Sources of capital Disclosure and transparency policy Skill base Incentives and career management

10 Slide 9 m3 Do we want to imply extensive consultation with NOCs? Isn't that more for the next phase? mferrell, 02/12/2009

11 The Citizen s Guide: General Observations Limited reporting and quality of reporting Best for NOCs with some public shares (domestic and/or international listings) Cost structures vary widely across NOCs Large fiscal contributions to sovereign governments; some NOCs have to borrow Affects NOC s reserve replacement and production May create disincentives to commercialization Even NOCs with some public shares carry large numbers of employees Part of their social mission

12 Reporting Varies Widely Among NOCs Some of the major NOCs around the world do not publish financial reports Public listings of debt and/or equity encourage NOCs to adopt best practices with regard to reporting, credible auditing, and public access to information The uneven quality and quantity of information makes it difficult to analyze and compare NOCs performance. More importantly, it may be a disincentive to good performance (benchmarks vs. publicly disclosed benchmarks)

13 m6 m7 m13 National Oil Companies and Value Creation Cost Structures Vary Widely Among NOCs Sudapet PETROSA NNPC ENH GNPC GEPetrol PetroCI SNPC SHT SNH Sonangol OGDCL ONGC PetroBangla ADNOC SPC Saudi Aramco QP LNOC KPC NIOC EGPC Sonatrach PDVSA PetroPeru PetroEcuador Enarsa Uzbekneftegaz Gazprom Transneft YPFB Kazmunaigas GDF PetroVietnam PTT Petronas Pertamina PDO PEMEX Rosneft SOCAR ETAP ECOPETROL PETROBRAS Belarusneft PetroChina Sinopec Sub Saharan Africa South Asia Middle East and North Africa StatoilHydro Latin America and Caribbean Europe and Central Asia East Asia and Pacific Date labels in RED are NOCs with some private ownership CNOOC $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 Avg Upstream Expenses (USD$/BOE)

14 Slide 12 m6 m7 m13 Michelle This is essentially a 3 year reserve replacement cost plus ave. annual production costs (incl. upstream G&A, DDA) right? Picky point but I wouldn't call them "upstream expenses" on the bottom of the graph it implys something expensed on an annual basis which RRC isn't (it works its way into the annual expense via DDA). I'd say "upstream costs". mferrell, 02/12/2009 I don't think the $18.38 is the comparable number. Rather it should be 2006 direct lifting costs (which don't include production taxes) of $5.96 plus 3 yr RRC of $17.23 for $ The EIA numbers also exclude from RRC acquisitions of proved reserves where the NOC numbers include them. mferrell, 02/12/2009 Might want to show a separate chart on RRC to make the point that many NOCs are pretty good producers/exploiters but there is substantial variation when it comes to the exploration metrics (RRC and reserve replacement rate). mferrell, 02/12/2009

15 m8 National Oil Companies and Value Creation Fiscal Contribution to the State Note: Sum of all tax and nontax disbursements to state relative to revenue

16 Slide 13 m8 I'd get rid of the obvious outliers to avoid some of the distracting discussion we had at the annual meeting. Also add notes explaining what this is: Total taxes, royalties, dividends, sign. bonuses, direct social/eco. expend., estimated price subsidies as percentage of total revenue. mferrell, 02/12/2009

17 m9 National Oil Companies and Value Creation NOCs Have Relatively Large Work Forces Sudapet PETROSA NNPC ENH GNPC GEPetrol PetroCI SNPC SHT SNH Sonangol OGDCL ONGC PetroBangla ETAP SPC QP PDO KPC PetroPeru PetroEcuador ECOPETROL PETROBRAS YPFB Enarsa Belarusneft Uzbekneftegaz StatoilHydro Transneft Rosneft Kazmunaigas GDF SOCAR PetroVietnam PTT Petronas Pertamina CNOOC ADNOC Saudi Aramco Sonatrach PDVSA NIOC PEMEX Sub Saharan Africa Gazprom South Asia Middle East and North Africa Latin America and Caribbean Europe and Central Asia Sinopec East Asia and Pacific Date labels in RED are NOCs with some private ownership LNOC EGPC PetroChina 0 50, , , , , , , , , ,000 Number of Employees

18 Slide 14 m9 Same outliers issue. Also I have seen numbers in a couple of places out there that Gazprom has more than 400,000. DV is confident of his number. Why the discrepancy? Are they counting something we are excluding? J. Stern raised this point too. mferrell, 02/12/2009

19 Fiscal Regime and Corporate Governance Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa SOCAR Saudi Aramco OGDCL QP CNOOC Petronas Rosneft Sonatrach PETROBRAS Sinopec KPC ONGC Kazmunaigas ECOPETROL PetroChina ETAP StatoilHydro Gazprom ENH PTT GDF Average NOC Fiscal Regimes 50 GePetrol SPC PetroVietnam Uzbekneftegaz LNOC PetroCI NIOC EGPC Enarsa PDVSA Sonangol PetroPeru Sudapet SNPC PEMEX Transneft PetroEcuador Pertamina PetroBangla 25 ADNOC SHT GNPC YPFB SNH BelarusNeft NNPC PETROSA PDO Corporate Governance Better Fiscal Regime goes hand in hand with better and more predictable Corporate Governance

20 Corporate Governance and Oil Dependency 100 SPC BelarusNeft Uzbekneftegaz PetroPeru Petronas PetroChina YPFB PEMEX Enarsa PETROBRAS PetroCI PetroBangla CNOOC EGPC Pertamina NNPC ONGC OGDCL Sinopec PetroVietnam ECOPETROL ENH ETAP GDF GNPC SNH PetroEcuador Rosneft Transneft Gazprom StatoilHydro Sudapet 75 NIOC Average NOC PDVSA PETROSA Kazmunaigas Oil Dependency SNPC ADNOC LNOC SOCAR Sonangol Saudi Aramco PDO Sonatrach QP KPC Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa GePetrol 0 SHT Corporate Governance PTT Strong performing NOCs can be found in a range of circumstances!

21 Corporate Governance and Sector/Trade Openness Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa PDO ONGC PETROBRAS OGDCL ECOPETROL StatoilHydro PTT GDF Sector and Trade Openness GePetrol SPC GNPC SNPC NIOC PetroVietnam YPFB EGPC Enarsa PetroEcuador PEMEX ADNOC Sudapet LNOC SNH SHT NNPC PetroCI Pertamina PetroBangla PetroPeru Uzbekneftegaz PETROSA SOCAR PDVSA Sonangol Average NOC Saudi Aramco Petronas QP Sonatrach CNOOC PetroChina Rosneft Kazmunaigas Sinopec KPC ENH Gazprom ETAP BelarusNeft Transneft Corporate Governance More competition improves NOCs governance

22 m10 National Oil Companies and Value Creation Corporate Governance and Local Contribution Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa YPFB PetroEcuador Uzbekneftegaz PetroPeru PETROBRAS Petronas Sinopec KPC Transneft CNOOC PetroChina Rosneft StatoilHydro PTT GDF Local Contribution GePetrol SPC PetroVietnam LNOC PEMEX Pertamina NIOC BelarusNeft NNPC GNPC ADNOC SNH PETROSA PetroCI EGPC SHT SOCAR Sudapet Enarsa SNPC PetroBangla ONGC PDVSA Average NOC Sonatrach QP ECOPETROL Saudi Aramco Sonangol PDO OGDCL Gazprom ENH ETAP Kazmunaigas 75 Corporate Governance Modern organizations act as corporate citizens

23 Slide 18 m10 What is "local contribution" on the y axis fiscal cont. to state as % of revenue or just the direct social/eco. expenditure? Say what it is. mferrell, 02/12/2009

24 m11 National Oil Companies and Value Creation Reserve Replacement Rate (BOE, %) 400% 350% 300% 250% 200% 150% 100% 50% PDVSA PEMEX Reserves Replacement Rate PTT Sinopec Average NOC PetroChina ONGC Sonatrach OGDCL PETROBRAS CNOOC Petronas StatoilHydro Gazprom Rosneft 0% QP KPC 45 PetroBangla Kazmun 60 ECOPETROL aigas 50% Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa GDF 100% Average All Scores Improvements in NOCs reserve replacement rate are supported by improvements in governance, more effective and stable alliances between NOCs and IOCs, sound competitive frameworks, and progressive fiscal regimes

25 Slide 19 m11 I'd get rid of the outlier (So. Africa) it distorts the scale so much that you can't see the RRR variation among the others. Also say what "average overall score" is I'm assuming it's the ave. overall CF score (the 8 groupings). Might want to say something about in next phase of work we will be looking at each CF more closely to see which ones have the strongest correlation with value creation. mferrell, 02/12/2009

26 Effective Tax Rate and Reserves Replacement Rate 500% 400% PetroBangla Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa Effective Tax Rate (%) 300% 200% Gazprom 100% PEMEX PDVSA ONGC Average NOC Rosneft Kazmunaigas Sinopec ECOPETROL StatoilHydro PetroChina QP PETROBRAS PTT Petronas CNOOC Sonatrach OGDCL 0% KPC GDF 100% 50% 0% 50% 100% 150% 200% 250% 300% 350% 400% 100% Reserve Replacement Rate (%) A more competitive fiscal structure for NOCs enables them to re invest in their core upstream businesses...

27 Effective Tax Rate and Value Creation 500% 400% PetroBangla Average East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Sub Saharan Africa Effective Tax Rate (%) 300% 200% 100% 0% ONGC Kazmunaigas OGDCL Sinopec GDF PTT KPC Rosneft PEMEX StatoilHydro PDVSA Average NOC PETROBRAS Gazprom PetroChina ECOPETROL Sonatrach Petronas CNOOC QP 100% Value Creation Indicator and enables them to create and optimize value from assets.

28 NOC Performance: Implications Tax regimes and debt levels may threaten financial sustainability Some of the domestic commercial frameworks enabling the performance of the publicly traded NOCs may serve as models for other NOCs Additional and/or new equity issuances by existing or new partially privatized NOCs Global credit and credit risk trends for new issues Impact of financial market turmoil plus falling commodity prices on NOC viability Implications for FDI and global oil supply and deliverability

29 Strategic Considerations Going Forward For NOCs engaged in outbound investment: How well do they perform? What issues do they face? NOC governance structures Organization of sovereign ownership and control Balancing sovereign/shareholder investors for partial offerings (or transition to public ownership) Establishing and asserting independent regulatory oversight

30 NOC Modernization A few observations: Reporting gains rewards in international credit markets Capacity building for more sophisticated reporting Governance structures to support new initiatives (NOC partnerships) Strategy for shedding non commercial obligations to other government functions Project management skill to implement new initiatives and oversee complex partnerships Improved image meaningful stakeholder engagement

31 Some of the Questions that We are Trying to Answer Are certain institutional and regulatory arrangements more suited than others for maximizing the social net present value of economic rent? Are NOCs effective in achieving the objective of the state s hydrocarbon and macro fiscal policy? What can the state do to promote NOCs effectiveness and sustainability? Is there a role for IFIs? Can good quality reporting improve NOCs performance?

32 possible incentive to modernization Will the current financial crises be a catalyst for a joint effort? Many NOCs are looking for ways to fund their operations (including JVs and alliances, risk management, improved efficiency, better governance and benchmarking to attract external capital); IOCs are interested in building more effective and "stable" alliances with NOCs; Governments in producing countries are interested in improving the efficiency of their NOCs, maximizing rent capture, while supporting sustainable development of the sector; and IFIs are keen to strengthen governance and the efficient use of resources.

33 Next Steps for Our Research Project Refine the methodology, particularly cross sectional analysis and benchmarking Select a representative group of NOCs for in depth analysis Propose policy options for the management and oversight of the petroleum sector building on findings from the case studies Develop a reference framework for creation, effective and efficient management and oversight of an NOC The success of the study, and its helpfulness to our member countries, depends crucially on the quality and availability of information.

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