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International Oil Companies - PDF

   

Added on  2020-01-28

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International oil companiesName:Institution:Course:Date:Introduction

2INTERNATIONAL OIL COMPANIESThe relationship between National Oil Companies (NOC) and International OilCompanies (IOC) has been dynamic for the past twenty years. This has been so sinceNOCs has widened their activities. The activities they seek to control includes greatinfluence on the management of the nation’s resources, their participation in the LNGprojects and decision on the selection of which IOCs can participate. To meet thedemands placed by NOC, IOCs has had to refocus so as to fulfill those conditionsplaced by NOCs. There has been the development of the traditional model whichIOCs controlled the whole chain of LNG utilizing their human and financialresources. Since the NOCs have gained enough experienced there is a drive to controlthe projects which lead to the replacement of the IOCs in the LNG chain. Since moreinvolvement of the NOC, there have been greater risks incurred. How the IOC relationship has changed Traditionally, IOCs better access to funds, technology, and buyers compared to NOCswho are perceived as oil dinosaurs. The NOCs points out that the IOCs went tonations and exploited the reserves and made of a lot of returns especially during theestablishment of first projects. Present most reserves are located in nations that havemore mature NOCs which need less support of IOC or incentives. Reserves are alsolocated in nations with instability, and this means that these international oilcompanies need to partner with who may not be preferred. According to NOCs, IOCsonly have short term goals in comparison to NOCs long term goals. The NOCs are atthe advantage of political guidance and constitutional rules. In the traditional model, with respect to LND development, the IOCs got involved in

3INTERNATIONAL OIL COMPANIESjoint ventures in which they sold the LNG to consumers on an ex-ship basis. Anexample of such case happened in Malaysia LNG, Nigeria LNG and the Australia’sNorth West Shelf LNG project. Under this business model, IOCs earned their revenuefrom dividends created for the LNG Company is joint-venture. Due to the change inthe stance of the NOCs, the IOCS had to develop other ways of survival. Suchsurvival tactics have been to take positions using their own names if various parts othe LNG value chain. Formation of newer structures helped the IOCs buying andbranding their own LNG and selling to consumers thereby taking part in the supplychain. Such cases have been witnessed in Trinidad and Egypt. The speed in which the NOC/IOC relationship is changing is dynamic by countrydespite this the trend has been divergent in which the NOCs are seeking to beindependence for the growth and development of LNG projects. They seek to do thisthrough gaining majority equity in these projects. Despite NOCs seeking moreindependence and control, they still need help with human resources and expertise atthat level. Due to the decreasing opportunities to invest and increased IOCs in themarket, NOCs are keen choosing the best potential dealing partners although thisdepends on the already established relationships. The Objectives and Roles of Commercial Relationship Between

4INTERNATIONAL OIL COMPANIESCompanies and Organizations in the upstream oil and gas Supply chain There various actors in the upstream oil and gas supply chain which includes nationaloil companies (NOCs), International oil companies (IOCs), and independent andoilfield service companies (OFSCs). National Oil Companies are those organizations that have the largest share of valueand are owned by the state governments. Most of these organizations operated bothupstream and downstream business operations. In the recent past, the objectives ofsuch companies have been business on their local nations instead of workinginternationally. Examples of National Oil Companies include Saudi Aramco which isthe largest integrated oil and gas firm globally, Kuwait Petroleum Corporation,Petronas, PetroChina, and Malaysian NOC among others. NOCs are usuallyformulated to further the interest of the country, and they usually pay revenue, taxesand royalties to their home country. They usually protected by the government andtherefore take political and social responsibilities which entail theprovision ofwelfare, creation, and retention of employment. They are also required to provideservices not related to energy such as financing and contraction of social amenitiesand other political activities of the country. Due to increased demand for energy, somecompanies has tried to increase their scope operations through mergers andacquisition. NOCs have changed their scope of operations by from just being acountry based on encouraging various collaborative business models. Theserelationships include partnerships between IOCs and NOCs, NOCs-NOCsrelationships and consortia and operation firms led by NOCs.

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