The main three reasons why international oil companies (IOCs) are interested in partnerships with oil-rich countries are reserves, reserves and reserves.
This is no secret or wonder, as IOCs control less than 10 per cent of the world’s reserves and scour the globe in the hopes of booking reserves to push up their reserves replacement ratio (RRR). According to a recent report produced jointly by Oil Change International, Greenpeace and Platform, at least four of the largest six IOCs are dependent on the expensive and hard-to-process tar sands reserves to boost RRR rates. Tar sands account for up to 71 per cent of their total liquids additions.
This is why Mexico’s recent announcement to change the constitution to allow outside participation in the oil industry and the possibility to book reserves has been welcomed with joy by IOCs.
On the other hand, the state's choice of oil partners, whether IOCs or international national oil companies (INOCs), is not straightforward. For oil-rich governments, the capability of oil partners to manage and share risk is a major factor that can tip the pendulum in favour of one partner against another.
Today, the size and scope of states’ national oil companies (NOCs) rival those of any IOC. NOCs’ oil partner options, whether through production-sharing, profit-sharing or concession contracts, are almost unlimited. NOCs’ access to and use of capital markets to finance projects have improved considerably.
Moreover, the development of oil trading markets has eliminated the risk of market availability. More importantly, the vast majority of the world’s oil reserves are in the hands of NOCs. This situation has caused a major change in the industry’s power structure – NOCs have the upper hand in oil deals with IOCs.
In its partnerships with oil companies, the state looks for benefits that go beyond the mere task of exploring for oil and finding markets for it. It looks for opportunities to do business with partners that can help it to obtain technology, develop unconventional reserves, train the local workforce and enhance the country's economic performance.
Many view oil partnerships through the prism of risk, the magnitude of risk involved in exploring and developing reserves and the state’s capability to take that risk. The state with a capable NOC does not need to partner with IOCs to develop proven and mature oil reservoirs where the geology is certain and development risks are low.
These low-risk reserves are cash cows used as incentives to attract capable oil partners to jointly develop frontier resources that are technologically and geologically riskier. A considerable amount of weight is given to partners’ ability to unlock the full potential of the country’s oil and gas reserves.
According to some estimates, unconventional reserves – such as heavy oil, shale oil and gas, and tight oil – represent about two thirds of the world’s total reserves and only 5 per cent of the current production. However, it is expected that the production from unconventional reserves will reach about 13 per cent by 2035. Clearly, companies with innovative technologies have a competitive advantage in negotiating oil partnerships with host governments with ambitions to develop their untapped unconventional reserves.
Additionally, in their negotiation with potential oil partners, the resource-rich governments factor in the ageing fields where primary and secondary recovery methods such as gas and water injection are becoming less effective. These declining fields require tertiary recovery methods such as carbon dioxide injection, technology that many host governments have not mastered or obtained yet.
Many states look for partners that can offer a package of benefits not restricted only to one area of the hydrocarbons industry – those that put forward offers that add value through the entire industry value chain, from reserves exploration and development to refinery construction and operation.
Since most major NOCs and IOCs are vertically integrated, a partnership contract in one part of the industry could offer business opportunities in other parts. This integrated approach has been seen in the region where NOCs and IOCs agree to jointly develop reserves and jointly build exporting and distribution facilities. This way oil-rich governments offer exploration blocks and receive access to markets in return.
The challenge for IOCs is to be able to listen and respond to the host government’s aspirations for the hydrocarbons industry and the country as a whole. They should also demonstrate their ability to add value, provide technical expertise and transfer technology – not only on paper, but more importantly on the ground. It is also the responsibility of the state to ensure that it takes full of advantage of its agreement terms and that the IOCs deliver on their promises.
The state can use previous experiences to assess the ability of potential partners to deliver. This is particularly true when long-term oil contracts are due to end and there is a possibility to choose between old and new partners.
The aforementioned are factors considered by rational states making rational decisions. However, there are those that choose to make oil partnerships based entirely on politics, to the detriment of their economy and people.
Ebrahim Hashem is a senior adviser in business strategy and corporate governance at an Abu Dhabi-based company. Contact him via twitter @EbrahimHashem
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
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UAE currency: the story behind the money in your pockets
Disability on screen
Empire — neuromuscular disease myasthenia gravis; bipolar disorder; post-traumatic stress disorder (PTSD)
Rosewood and Transparent — heart issues
24: Legacy — PTSD;
Superstore and NCIS: New Orleans — wheelchair-bound
Taken and This Is Us — cancer
Trial & Error — cognitive disorder prosopagnosia (facial blindness and dyslexia)
Grey’s Anatomy — prosthetic leg
Scorpion — obsessive compulsive disorder and anxiety
Switched at Birth — deafness
One Mississippi, Wentworth and Transparent — double mastectomy
Dragons — double amputee
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
The burning issue
The internal combustion engine is facing a watershed moment – major manufacturer Volvo is to stop producing petroleum-powered vehicles by 2021 and countries in Europe, including the UK, have vowed to ban their sale before 2040. The National takes a look at the story of one of the most successful technologies of the last 100 years and how it has impacted life in the UAE.
Read part four: an affection for classic cars lives on
Read part three: the age of the electric vehicle begins
Read part one: how cars came to the UAE
NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
THE SPECS
Engine: Four-cylinder 2.5-litre
Transmission: Seven-speed auto
Power: 165hp
Torque: 241Nm
Price: Dh99,900 to Dh134,000
On sale: now
Our Time Has Come
Alyssa Ayres, Oxford University Press
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Sustainable Development Goals
1. End poverty in all its forms everywhere
2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture
3. Ensure healthy lives and promote well-being for all at all ages
4. Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
5. Achieve gender equality and empower all women and girls
6. Ensure availability and sustainable management of water and sanitation for all
7. Ensure access to affordable, reliable, sustainable and modern energy for all
8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
9. Build resilient infrastructure, promote inclusive and sustainable industrialisation and foster innovation
10. Reduce inequality within and among countries
11. Make cities and human settlements inclusive, safe, resilient and sustainable
12. Ensure sustainable consumption and production patterns
13. Take urgent action to combat climate change and its effects
14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development
15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
17. Strengthen the means of implementation and revitalise the global partnership for sustainable development
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