Sep 9, 2011|
Oil Industry: IOCs and NOCs
Though Crude Oil has been known for its use since ancient times, the commercial production of Crude Oil can be traced back to latter part of the 19th century (1860s) in the USA. This was in Pennsylvania where the Crude was found just 70 feet under the ground. The production was 3 million barrels / day (b/d) in 1863 and the use of Oil was for illumination. Presently, Oil is the most important fuel without which life can come to a standstill. It is therefore not surprising that the global production of Crude Oil now exceeds 80 million b/d.
The companies that own this resource can be largely categorized as International Oil Companies (IOCs) and National Oil Companies (NOCs)
IOCs are those companies that have their operations in multiple countries and are not nationally owned. This basically means that IOCs are large private companies. Some of the biggest names include Shell, BP, Royal Dutch, Exxon-Mobil, and Chevron among others. Most of these companies are extremely large in size and have a long history (more than 50 years) of existence.
NOCs are those companies that are owned by the governments of the resource rich countries. The list in this case includes countries like Iran, Iraq, Kuwait, Saudi Arabia, Venezeula, Nigeria, and Libya. As the dependence on Oil increased over the years, these countries nationalized their Oil assets. More than 40% of the total world crude oil production now comes from the Middle Eastern countries. These NOCs and therefore the countries controlling them have become extremely influential in today's globalized world.
IOCs vs NOCs
Before 1970s, major middle-east countries allowed the IOCs to have exploration and production (E&P) rights. IOCs invested in E&P activities and found huge amount of oil. The benefits were shared by IOCs in the form of royalty payments to the respective countries. However, as the price and importance of oil increased in the world economy, the Middle Eastern countries (like Saudi Arabia, Iran, Venezeula, Iraq and Mexico) abruptly nationalized their oil reserves and transferred the assets to the NOCs. With this, IOCs lost E&P control over these assets in Middle Eastern countries.
In 1960s, the power had shifted from IOCs to NOCs and few large NOCs colluded to establish the Organisation of Petroleum Exporting Countries (OPEC). OPEC was established to co-ordinate and unify the petroleum policies for member nations. In the next article, we will discuss OPEC in further detail.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 24, 2017
Kelly, Mattis, McMaster, Cohn, and Mnuchin are in charge. But these Pentagon bureaucrats and Wall Street hustlers may be worse than a loose-cannon president.
Aug 23, 2017
Mr Market lured investors into believing they'd bitten into a crash. Did you take the bait?
Aug 23, 2017
Nowhere was the darkness deeper than in the nation's capital. There, no light shone. No flicker of awareness...observation...learning...or reflection appeared.
Aug 22, 2017
It's surprising Warren Buffett hasn't warned investors about the expensive stock market? Let us know why.
More Views on News
Aug 17, 2017
A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.
Aug 21, 2017
Most Indians who cannot find jobs, look at becoming self-employed.
Aug 16, 2017
The IT Sector could be in an uptrend till February 2019. Are you prepared to ride the trend?
Aug 16, 2017
Ensure your financial Independence, and pledge to start the journey towards financial freedom today!
Aug 22, 2017
Post demonetisation, a cut in bank savings deposits rates was in the offing.
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407