Nationalization of oil supplies
"[2] According to consulting firm PFC Energy, only 7% of the world's estimated oil and gas reserves are in countries that allow private international companies free rein.
The PFC study implies political groups unfavorable to capitalism in some countries tend to limit oil production increases in Mexico, Venezuela, Iran, Iraq, Kuwait and Russia.
[5] Five of the companies were American (Chevron, Exxon, Gulf, Mobil, and Texaco), one was British (BP), and one was Anglo-Dutch (Royal Dutch Shell).
Although undeveloped nations originally welcomed concession agreements, some nationalists began to argue that the oil companies were exploiting them.
[7] Due to political and commercial pressure, it did not take long before the United States secured an entry into Middle Eastern oil supplies.
[7] Prior to 1970, there were ten countries that nationalized oil production: the Soviet Union in 1918, Bolivia in 1937 and 1969, Mexico in 1938, Iran in 1951, Iraq in 1961, Burma and Egypt in 1962, Argentina in 1963, Indonesia in 1963, and Peru in 1968.
Rising nationalism and the emergence of shared group consciousness among developing countries accompanied the end of the formal colonial relationships in the 1950s and 1960s.
The industry became integrated into a local economy that required strategic control by the host country over pricing and the rate of production.
Stephen J. Kobrin states that “By 1976 virtually every other major producer in the mid-East, Africa, Asia, and Latin America had followed nationalizing at least some of its producers to gain either a share of participation or to take over the entire industry and employ the international companies on a contractual basis.”[8]Due to the overall instability of supply, oil became an instrument of foreign policy for oil-exporting countries.
In addition, relations between producing countries of the Persian Gulf and previous concessionary companies induced an “artificial” vertical integration.
[1] The increase in oil prices of the 70s attracted non-OPEC producers—Norway, Mexico, Great Britain, Egypt, and some African and Asian countries—to explore within their country.
The development of many free markets impacted OPEC in two different ways: Currently, Algeria is one of the largest natural gas producers in what is known as the Arab World behind Qatar and Saudi Arabia.
In particular, the election of President Rafael Correa, on a resource-nationalism platform, prompted increases in government control and the approval of a windfall profits tax.
Formally the nationalization remained effective, but in practice a consortium of oil companies was allowed in under a by then standard 50/50 profit-sharing deal.
To meet popular demands for cheaper food during the inflationary period just after the civil war, government created a new state corporation, the National Nigerian Supply Company (NNSC).
[14] The local communities responded with protests and successful efforts to stop oil production in the area if they did not receive any benefit.
The illegal oil economy in such a circumstance may continue to exist for a long time, albeit in curtailed and small scales.
Because of favorable geological conditions and the close proximity of oil fields to the coast, Saudi Arabia operations were low cost.
The joint concessionary company, ARAMCO, agreed to the government's demand to use the introduced posted price as a way to calculate profits.
[11] On 29 August 1975, during the tenure of President Carlos Andrés Pérez, "Law that Reserves the Hydrocarbon Industry to the State" was enacted and the state-owned company Petróleos de Venezuela (PDVSA) was created to control all oil businesses in the Venezuelan territory.
Oil and gas production subsequently weakened while demand increased, and in 2011 Argentina recorded the first energy trade deficit since 1987.
[21] Investment in exploration at YPF as a percentage of profits had been far below those in most other Repsol subsidiaries,[22] and declines in output at the firm represented 54% of the nation's lost oil production and 97% in the case of natural gas.
[24][25][26] YPF increased its estimates of oil reserves in Argentina in 2012, but warned that government policies would have to change to allow investment in new production.
Petro-Canada put forth national goals including, increased domestic ownership of the industry, development of reserves not located in the western provinces, that is to say, the promotion of the Canada Lands in the north and offshore, better information about the petroleum industry, security of supply, decrease dependence on the large multinational oil corporations, especially the Big Four, and increase revenues flowing to the federal treasury from the oil and gas sector.
Important reserve additions in the 1970s allowed a significant increase in production and exports, financed by the high oil prices.
The lack of financial autonomy has limited Pemex's own investment capacity, inducing the company to become highly indebted and to use an out of budget mechanism of deferred payment of projects (PIDIREGAS) to finance the expansion of production.
[11] Some feel that the state oil company Pemex does not have the capacity to develop deep water assets by itself, but needs to do so if it is to stem the decline in the country's crude production.
[37] In Russia, Vladimir Putin's government has pressured Royal Dutch Shell to hand over control of one major project on Sakhalin Island, to the publicly traded company Gazprom in December.
[39] Russia has taken notice of their increasing foreign oil investment improving politics with other countries, especially former states of the Soviet Union.
With the collapse of the USSR, Russia has lost the rich Caspian Basin off-shore and on-shore oil fields in the Central Asian states and Azerbaijan.
