Keith Lieberthal
NOCs are government or quasi-government entities like Saudi Aramco, Petróleos de Venezuela SA and Gazprom, that control sovereign states' oil industries. They face the opposite problem of IOCs -- they are oil rich and know-how poor. NOCs own 90% of world oil reserves, but their technological and management competence extends little beyond operating fields developed by IOCs years ago. Most are unable to undertake sophisticated exploration and development and few possess significant independent refining capacity.
As a result, increasing future upstream production will require the application of IOC skills and technology to NOC reserves. However, that prospect is imperiled by the consequences of nationalization and violence in producer states.Nationalization and Insecurity
Over the past three years, a wave of oil industry nationalization has swept across South America and Central Asia. Like the Middle Eastern wave in the 1970's, governments across these regions are disavowing long-term royalty contracts, called "concessions," to IOCs and forcing them to relinquish their controlling interests in national reserves. In Venezuela last week, President Hugo Chávez's government seized control of the country's last private oil field, culminating his campaign to nationalize all of Venezuela's oil resources. President Evo Morales of Bolivia has pursued the same strategy, nationalizing all oil and gas resources in May 2006. Ecuador soon followed, seizing Occidental Petroleum's(OXY Quote - Cramer on OXY - Stock Picks) Amazon fields later that month.
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