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PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE - page 27 / 30

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on the panel regression model, privatised NOCs over a period of seven years around

the privatisation date improve their return on sales by 3.6 percentage points, increase

total output by 40%, output per employee by 30% and capital expenditure by 47%,

and decrease their employment intensity (relative to assets) by a total of 35%. In the

run-up to the share sale the NOCs also manage to reduce unit operating costs by 11%

and cut employment by 8%, but both trends are reversed immediately after the

privatisation date as growth dominates further cost reductions in absolute terms.

A thought experiment might put these performance improvements into a broader

perspective. Amongst the 50 largest oil and gas companies in the world in 2006 there

were 18 which are fully state-owned, with a combined oil and gas output of 47 million

barrels of oil equivalent per day, 18 million barrels per day of refining capacity, and

estimated revenues of one trillion US Dollars (PIW 2007). If those companies were to

experience comparable performance improvements in a privatisation, global oil and

gas production could increase by 2.7 million boe/d alone in the first year, which is

more than all of France’s current oil and gas consumption. The overall increase in

output over the six yearly periods could amount to 19 million boe/d, almost 15% of

current global production (and consumption) of oil and gas.24 Based on the

improvement in return on sales, one could expect combined annual profits to rise by

US$33 billion over the period25, even without taking into account the increasing

volume sales – this post-tax profit could be used by governments for social

infrastructure projects to compensate for any changes in the companies’ objective

function. Whilst these are hypothetical numbers they illustrate the magnitude of the

24 47 million boe/d x 40% total output growth over six yearly periods = 19.0 million boe/d, which is 15% of the 2006 global oil and gas production of 128 million boe/d (BP 2007).

25 PIW has revenue data (or estimates) for 16 of the 18 fully state-owned NOCs. Their combined revenues of US$916 billion x 3.6% points improvement in RoS = US$33 billion

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