National Oil Companies a Poor Substitute for Competent Energy Corporations

When Saudi Arabia and most of the other oil dictatorships threw out the multi-nationals and took over oil production themselves, the ability of the oil industry to react to surges in demand dropped precipitously. The competence is simply not there in nationalised oil and gas companies. Current skyrocketing oil prices are certain to create unpleasant blowback to Saudi Arabia's oil industry and the other incompetent nationalised oil industries. Still they try:

Saudi Arabia is planning to boost its oil production capacity by nearly 20 per cent in the next two years but its long-term target is to maximise its recoverable crude resources, according to the state-owned Saudi Aramco.

The Kingdom, which already controls nearly a quarter of the world’s extractable crude deposits, will focus on intelligent fields and other advanced oil production techniques to achieve that objective, said Amin Nasser, Exploration and Production Director at Saudi Aramco....

Mohammed Saggaf, Manager of Saudi Aramco’s Advanced Research Centre, put the Kingdom’s oil in place at 722 billion barrels, of which nearly 109 billion barrels have been produced since Aramco began pumping crude 75 years ago.....But he said the total amount of oil that can be produced with present technology is around 260 billion barrels....“Saudi Aramco’s long-term goal is two-fold, we want to increase total oil in place to 900 billion barrels by 2020 and to push the limits of recovery from around 50 per cent to 70 per cent in our major producing fields, using both improved conventional recovery and enhanced oil recovery,” he said.

“Globally, the average ratio of recoverable reserves to oil in place is mostly 30 to 40 per cent, with a level of 50 per cent. Saudi Aramco is already doing much better than the average. We intend to go further and push the limit to achieve recovery rates of 70 per cent.”
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The only way Saudi Arabia could meet such goals is to turn over much of its operation to international oil production companies and consulting corporations. National oil companies such as Saudi Arabia's suffer from a pronounced laxity in maintenance practise, as well as managerial and technical incompetence to meet the rapidly changing demands of the oil markets on individual companies and oil fields.

Oil production companies have to anticipate changes in demand and have "ready plans" in place for instant execution. Unfortunately for the oil companies of the Arab and Muslim world, as well as much of Latin America, the competence and trained manpower is simply not there.

As oil prices flirt with benchmarks of $120 a barrel and higher, the potential blowback to these totalitarian energy potentates is growing immense.