Hydrocarbons continue to be the world’s most economical, prevalent and reliable energy source. However global tensions occur when the economic, social and environmental impact of exploration and production activities are combined with market, geopolitical and technical risks.
In fact, resource owners, Oil & Gas managers, regulators, investors, environmentalists and communities, frequently find themselves in opposing camps as they debate strategies to safeguard the reliable and sustainable supply of this fundamental resource (In previous analyses1 Arthur D. Little focused on the changing relationship between International Oil Companies (IOCs), National Oil Companies (NOCs) and host countries).
NOCs are rapidly becoming more sophisticated global players, representing the interests of their countries, investing internationally and competing for talent. IOCs are taking steps to nurture their competencies and technologies while improving their market value. In this environment of increased petronationalism a key challenge remains – how IOCs manage relationships with host countries while mitigating risks. In our view this challenge can be overcome by creating a new equilibrium built on greater cooperation and development.
The first step to building this equilibrium is recognizing that certain trends are here to stay.
Firstly, both NOCs have developed sufficient competencies to manage most of their resources themselves. By developing their R&D capabilities, partnering with Oil Service Companies (OSCs) and through global investments in exploration and production, they increasingly compete with IOCs, even for access to resources outside their own countries. However, they still rely on IOC’s combination of technology leadership and superior operational knowledge (in areas such as heavy oil or deep/ultra-deep offshore) to access and develop their most challenging resources.