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PRIVATISING NATIONAL OIL COMPANIES: ASSESSING THE IMPACT ON FIRM PERFORMANCE - page 6 / 30

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Electricity Generating Board is positive, but that government and consumers lose out

in favour of large rent capture by producers and their shareholders.

Contrary to the great number of studies on privatisation in general, there is little

empirical research to be found on the impact of ownership in the oil and gas sector,

and none at all on the impact of privatisation. This is rather surprising given the

overall economic importance of the sector and the significant number of privatised

NOCs. Al-Obaidan and Scully (1991) investigate efficiency differences between 44

private and state-owned petroleum companies. Controlling for multinationality and

operational integration of the firms, they find that state-owned enterprises are, on

average, only 61% to 65% as technically efficient as private, for-profit firms. Eller et

al. (2007) use nonparametric Data Envelopment Analysis (DEA) as well as parametric

Stochastic Frontier Analysis (SFA) on a sample of 80 firms over the period 2002-

2004. Their average DEA technical efficiency score for NOCs is 0.27, compared to a

sample average of 0.40 and an average score for the five biggest private companies of

0.73. The SFA results are not strictly comparable but yield a similar picture. Adding

other structural features of the firm as explanatory variables, e.g. the degree of

government ownership and fuel subsidies in the domestic market, moves all firms

closer to the efficient frontier. Such structural features thus seem to explain some of

the inefficiencies of NOCs. Based on 2004 data covering 90 firms, Victor (2007)

analyses the relative efficiency of NOCs and private oil companies in converting

reserves into production and revenues, using a simple linear regression function. She

finds that the private oil majors are one-third better than NOCs at converting reserves

into actual output, and tend to generate significantly more revenue per unit of output.

Both Eller et al. (2007) and Victor (2007) make valuable additions to the

otherwise scarce literature on NOCs; our paper, however, differs on a number of

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