The World’s State-Owned Oil Companies

There are very few global instances where an industry analysis can be made with so much public and contrasting information available; furthermore, an instance where meaningful comparative analysis between state and private sector performance.

There is not much point in debating which arrangement, on the average, makes more economic sense for society, privately owned and managed oil companies versus state-owned and managed ones. We all are well aware that private structures, on the balance, tend to outperform government ones; structural incentives to run a company well tend to be higher and more effective in the private sector than in the governmental. However, it is very important to recognize some exceptional cases of well-managed state oil companies, like Norway’s StatOil [STO], Brazil’s Petrobras [PBR], and more recently Colombia’s Ecopetrol [EC]. The legal and management structures set up by the governments behind these three companies are praiseworthy. The results obtained, on the average, have been excelled in adding value to society.

The state-owned oil company cases can be classified in several groups, related to their performance levels. It is not the purpose nor the reach of this post to delve into too much detail and depth in this fascinating topic; in fact, only the top twenty oil producing nations were considered in this analysis. The purpose is to provide a general perspective on the subject.

Source: Computations based on GLOBALIZATION, Opportunities and Implications, The ABCs to a Global Social Revolution, Martin Marmolejo. Market prices obtained from

The top of the performance list is formed by the group of the three cases already mentioned. Those three companies have a lot in common. In addition of being government owned and operated, they are very well managed companies, with shares listed in the NYSE as well as in their respective countries of origin; these three outstanding companies have independent management –from their governments– with a meaningful number of independent board members. The table below summarizes some relevant financial information about them.

Brazil’s PBR has worldwide recognition for its deep-water operations, with several world records set along the way. Norway’s STO has generated such a surplus in the past two decades, that the autonomous fund established in 1990 for this purpose, had accumulated about $557 billion USD by the end of 2010, two times Norway’s GDP! Colombia’s EC, the youngest of them, was listed on September of 2008 in the NYSE, and evidently has modeled itself after STO and PBR, with excellent performance both in increasing reserves and oil production in recent years.

Listed in a separate category, the oil companies of Saudi Arabia, UAE, Kuwait and, Qatar, all of them with strong interactions and joint-ventures with the big oil multinationals. Although transparency and accountability can be substantially improved in all four cases, some well-invested surpluses, in well-taught efforts to diversify from hydrocarbons, are a clear, if indirect, testimony of a reasonable level of proper management practices and performance.

China must be placed in a special category because: a) Its gigantic size (world’s second largest economy); b) PTR is by far, the world’s largest market cap among state-owned oil companies; c) Despite having its two largest oil companies listed in the NYSE, when dealing with China, the level of transparency and accountability must be taken with a grain of salt, until proven otherwise.

In a fourth category are countries like Russia, Iran, Venezuela, Iraq, Nigeria, Algeria, Angola, and Libya. These countries share two basic similarities, very closely interrelated between them: a) Very poor level of transparency and extremely poor accountability –if any at all. b) To different degrees, oil revenues are considered a personal right –somehow shared with the inner circle of power– by the rulers of those countries.

Finally, Mexico, and Kazakhstan belong to a fifth category, of stated-owned oil companies that seem to be transitioning away from the fourth previous category. Mexican government has been struggling in the past decades –essentially since 1988– to open-up that industry to private investment, with limited success so far; Pemex is still a very poorly run operation. Kazakhstan is more advanced in that topic, since january 2001, it established a sovereign oil fund with its surpluses modeled after Norway’s experience, currently worth over US$20 billion.

Both the energy and the oil markets are very dynamic. There is a lot of change in progress in many countries in those areas. The coming years might present a very different energy landscape, with more evolved management structures, where the global private sector continues to increase its participation in numerous joint-ventures –if not outright ownership– in many projects all over the world. The increasing availability and development of alternative energy sources is also enriching the possibilities and additional supply of that precious resource.

Beyond the ownership and management of any company, there is something non-negotiable: transparency and accountability, effective checks and balances systems in place. There is no substitute for that. When that basic principle is appropriately observed, at the end of the day the ownership and management issue is not necessarily that relevant. The private sector has also had plenty of sour experiences in the corporate arena all over the globe: the Enrons, the Tycos, the Parmalats, the Lehman Brothers, the AIGs, the Olympuses of the world, just very disgraceful recent cases.

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