NOCs Need Public Support to Overcome Market Challenges
“All about money,” sings Meja. Being nice and caring are also about money, claimed experts gathered on Wednesday at the National Oil Companies Congress in London.
In the backdrop of the on-going decline in output from mature fields on a global scale, the only way to get over difficulties is indeed a sensible cooperation between authorities, companies, investors and local communities. Partners are crucial for economic success.
That is particularly the case for National Oil Companies (NOC), which are called to set realistic targets through a collaborative approach with all stakeholders and, eventually, a close relationship with International Oil Companies (IOC). In this sense, despite forecasts of “two tough years ahead,” market consolidation and cooperation among industry participants can mitigate the effects of cost escalation and increased competition for funding, according to the managers of oil and gas companies speaking at the conference on Monday.
“We have two tough years ahead of us… The world is moving from the North-South divide to the East-West world, where the West is drilling thousand of shale gas wells and the East has many other interesting challenges. I believe the story in the Eastern side is more exciting,” said Steve Wilson, General Manager Business Development at Chevron, adding that the area stretching from Middle East to Sub-Sahara Africa is likely to cooperate with Asian countries and especially China.
THE WARNING: CLEAR PARTNERSHIPS TO AVOID COMPLICATIONS
At the same time, the panellists sent a clear warning to governments and companies: the rules of the game have to be clear from the beginning in order to allow commercial partners to be considerate and, in this way, earn the "Licence to Operate". That’s why companies have to set up fair partnerships in the early phases of the explorations to avoid eventual confrontation.
“When the stakes are high, it is not the moment to create a relationship,” Wilson commented.
Jim Demarest, VP Global Frontier & New Venture Exploration of Noble Energy, agreed with the message. He explained that cooperation has to be defined before eventual discoveries, before high interest might lead to legal fights between companies.
Other panellists confirmed the importance of playing according to the rules.
“Terms and conditions are sacred,” Manuel Ferreira De Oliveira, CEO of Galp Energia, said during the first day of conference taking place in London on Wednesday and Thursday.
But that is not enough to save financial indicators. The changed market conditions do indeed require companies to carefully take into account the needs of local communities. And this is not an act of simple kindness, but rather a rational decision in line with economic and financial reasons.
“There are very few places where we can honestly say that nations have been better off because we were there… I think that to have a sustainable industry we have to have a positive impact on the country that we do business in. Our reputation is on the line,” said Demarest.
That is why National Oil Corporations, and more generally oil and gas companies, are now called to put the right foot forwards. In order to overcome difficulties, firms need the support of the population. And, again, it has nothing to do with a well-meaning rhetoric. It is all about money.
Sergio Matalucci