National oil companies | Oil’s dark secret

National oil companies | Oil’s dark secret |
Iran, which has more oil and gas than all other countries save Saudi Arabia and Russia, pumps less today than it did in 1979, when the new Islamic government threw foreigners out. The current expansion of Russia’s NOCs is proving equally ill fated: costs have risen and output has grown more slowly at Yuganskneftegaz, the former production arm of Yukos, a Russian oil company, since its takeover by state-controlled Rosneft, according to Andrei Illarionov, a former adviser to the Russian government. Over the past 20 years, he points out, income per head has grown in countries with private oil industries, but has shrunk in those with nationalised ones.

Saad Rahim, of PFC Energy, argues that weak institutions lie at the root of this disappointing performance. Most countries with national firms used their oil wealth to develop the authority of the state, rather than the other way around. So NOCs sprang up before their countries had institutions strong enough to regulate them, or to manage the money they generate—a recipe for inefficiency and corruption.

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