SOAS Research Online

Abstract

Most of the oil-exporting countries have now established state-owned companies to help exercise the ownership right of the state over oil and gas resources. This study is about three of these national oil companies, namely those of Iran (the National Iranian Oil Company), Kuwait (the Kuwait National Petroleum Company), and Saudi Arabia (General Petroleum and Mineral Organization). The combined oil production of these countries presently accounts for approximately one-third of the oil- production in the non-communist world, and nearly half of the production in OPEC. The fact that national oil companies are now in a position to influence the oil policies of their respective governments, gives these companies some importance in the world petroleum market. In this study, we discuss the emergence of national oil companies and the extent to which political considerations prompted the setting up of state oil companies and affected their structure and growth. National oil companies are placed at a junction of politics and economics where national economic decision intermingles with political design. Like private oil companies, state-owned ventures are aiming at the lowest possible production cost and profitable growth, but being the special instrument of the government for the oil policies, both at home and abroad, they have a public aspect. In this study we give particular attention to some of the consequences of this inherent conflict. State oil companies for many years now have tried to enter international markets. One major constraint is now to achieve this objective without causing a drop in price levels of crude oil which their governments have agreed upon in the Organization of Petroleum Exporting Countries. The commercial policies of these companies and the method by which they are formed is of particular interest to this work. The government sets general policies for the national- oil company with regard to prices and investment. But on the other hand, the state oil company, which has experience in marketing crude oil or petroleum products, plays an important role in formalizing government objectives with regard to oil and gas resources of the country. Taking into account the structure of these national oil companies and the nature of decision-making within each company we evaluate their likely role in the petroleum market. The aim is to look at the true place of national oil companies under study, both within their respective country, and in the international petroleum market.