Does Ownership Matter? The Performance and Efficiency of State Oil vs. Private Oil (1987-2006)

Abstract

This paper investigates the existence of ownership effects in the global oil and gas industry, i.e. whether there are systematic performance and efficiency differentials between National Oil Companies (NOCs) and privately-owned International Oil Companies (IOCs). After discussing key issues of comparing 'State Oil' and 'Private Oil', I summarise important trends emerging from the dataset, which covers 1,001 firm observation years over the period 1987 to 2006. Using panel-data regression analysis it is shown that NOCs produce a significantly lower annual percentage of upstream reserves, but this cannot serve as an indication of firm efficiency. Because NOCs also significantly underperform the private sector in terms of output efficiency and profitability, this paper nevertheless suggests that a political preference for State Oil usually comes at an economic cost.

Keywords: ownership, performance, efficiency, National Oil Company (NOC), International Oil Company (IOC), OPEC, energy policy

JEL Classification: C21, G32, L20, L33, L71, M21, Q40