The creation of nationally owned resource companies can be a key component in a country’s strategy to harness the development potential of its subsoil assets. Despite these opportunities, national companies can pose a risk to a country if assigned inappropriate roles and governed poorly.
Many countries create state-owned enterprises (SOEs) that focus on the extractive sector with hopes of building the country’s capacity to participate in the lucrative field of resource extraction, to increase the government’s revenue take, and to improve the government’s ability to monitor what other companies are doing in the country.
SOEs, often referred to as national oil companies (NOCs) in the oil and gas sector, play a variety of roles in different countries. These roles can include operating in the commercial sphere, regulatory responsibilities, creating policy, and financial expenditures.
While some SOEs are extremely successful companies, others have trouble being competitive with international companies and demonstrating strong benefit to the populations they serve.
While needs often vary from country to country, NRGI’s research has shown a few trends that lead to successful NOCs, including clarifying roles between the SOE and other government entities, developing a clear revenue retention model, investing in staff and practicing transparency.
Types of Revenue Flows To and From SOEs - State Participation