Changes in the Investment Environment of Major Resource Producing Countries

Persistently higher oil prices and perceptions of scarcity are prompting the major oil and gas resource holders to fundamentally reshape their investment environments. They are actively crafting new policies which are designed to remain permanently in place. These are not part of some crafty negotiating ploy or an attempt to gouge a greater share of the rents.

The policies emerging in the major producing countries are aimed at creating permanent local institutions which control the oil and gas sector; creating deeper linkages between the oil and gas sector and the rest of the economy and through both means, furthering the development of the country.

PFC Energy’s Markets and Country Strategies Group has long observed and studied the policies and investment environment of the major resource holders. Since the late 1980s, the Markets and Country Strategies Group has been assessing what options resource-owning countries have and what is the likely path they will take to achieve their objectives.

Combining its understanding of oil markets and the constraints and options major resource holders face, the Markets and Country Strategies Group has developed long-term scenarios for all major resource-holding countries. The scenarios explore the sustainability of producer-country investment strategies and what direction they may take in next several years.

Given these scenarios, the department helps government policy makers, national oil companies, international oil companies, service companies and banks with appropriate strategies to maximize their strategic business and development objectives in these major resource holding countries.

Increasingly, major resource holders want to build effective national oil companies with the capacity to not only exploit their resources but also to create energy sectors that provide economic opportunities for the rest of their economy. They also expect their national oil companies to help train a management cadre that can be deployed through out the country. They also understand that these national oil and gas companies must be given the appropriate level of operational autonomy, and strategic autonomy to carry out more and more complex tasks. As a result, governments do not only want to manage the assets that the IOCs or Communist era public enterprises had developed. Governments of the major resource holding countries want to create complex organizations that can both internally and in joint ventures with foreign companies (national or private) meet an array of commercial and economic objectives of their state.

Key Conclusions

Governments of major resource holding countries want to exploit their oil bonanza in new ways.

They want to create new national oil companies that can carry out complex tasks, which expand the capacity of the state.

They want these companies and other actors in the oil and gas sector to create oil and gas sectors that directly contribute to the growth of their economies.

Governments of major resource holding countries are interested in foreign investment and joint ventures as long as these developmental objectives are met.

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Dave Larson is a Director in the Markets and Country Strategies practice, which houses PFC Energy's expertise in country risk and petroleum sector policy. For further information on this article contact Enews_dlarson@pfcenergy.com.