Read the full story from the Brookings Institution.
National oil companies (NOCs) are in the headlines a lot of late. In preparation for a $15 billion bond offer, Saudi Aramco disclosed its financial statements for the first time, showing that it is the world’s most profitable company. On the other side of the scales, amidst the chaos that has engulfed Venezuela, the dueling camps of Nicolás Maduro and Juan Guaidó are battling over how to handle the tens of billions of dollars in debt facing the state-owned oil and natural gas company PDVSA, and for control of its U.S. subsidiary.
Away from the attention of the international media, discussions rage about how to manage prominent NOCs in other countries as well. Ghana’s parliament and the Ghana National Petroleum Corporation (GNPC) are locked in intense debate about GNPC’s budget, including its ambitious social spending and plans to build a refinery, with important implications for the company’s growth agenda and the national economy. In the wake of its election, Indonesia faces challenging decisions around how to manage the ambitions and incentives of NOC Pertamina. And in Kazakhstan, the state has pushed back plans to begin to offer shares of KazMunayGaz to the public in an initial public offering, citing economic uncertainty.
Decisions about how to manage NOCs matter a lot; economies in resource rich countries can rise or fall based on what these companies do and how they are governed. Some NOCs—including Colombia’s Ecopetrol and Norway’s Equinor—have delivered strong returns on public investment and are generally well regarded by their peers across the oil industry. Yet in too many places these companies have struggled to develop into commercially efficient actors or to increase the long-term benefits their countries derive from exploration and production. And in extreme cases, they have actively contributed to large-scale corruption.