Investing in Energy: A Primer on the Economics of the Energy Industry

National Oil Companies

As one might expect, NOCs do not have the financial flexibility of IOCs. NOCs are not nearly as agile as IOCs for a plethora of reasons. In a low crude oil-price environment, NOCs’ economic contributions to their home countries are dramatically reduced. As such, painful decisions often have to be made. In most cases, revenue from NOCs directly funds domestic education, healthcare, and a wide variety of other non-energy essentials.

In a low crude oil-price environment, the tables often get turned whereby NOCs need the investment capabilities of IOCs as joint venture partners. NOCs simply need the investment capital to pursue marginal projects. In many cases, like at IOCs, lower margin projects get shelved until crude prices ...