Accelerating the pace of change

The subject of many papers, the national oil company (NOC) has recently become a prominent figure. In fact, it is difficult to attend an industry symposium where NOCs are not a major topic. This newfound eminence is somewhat ironic as NOCs have been important players throughout the oil and gas industry’s history.

The new spin on NOCs is their changing role in global oil and gas. Clearly, today’s oil and gas industry presents NOCs the potential to significantly and globally expand their businesses. Advisors working with many NOC executives know that, to the person, these executives understand both the scope and the urgency of this opportunity. It is now, not in the future. An old Chinese proverb says, “Don’t be as concerned about moving slowly as fear not moving.” 

For decades, NOCs have been industry leaders, developing the infrastructure required to fuel global energy thirst. The intense spotlight now being placed on them focuses attention on both the needs of a changing industry and on NOCs’ new global role. It is no longer a question of simply ensuring the continuity and availability of domestic resources; rather, the complex equation is forming global alliances to advance supply and demand needs in a synchronised manner while establishing the proper exchanges of knowledge and technology.

NOCs must start tactically and systematically addressing this radical change in their business. Certainly, these tactical solutions are not a one-size-fits-all. Even the IOC super-majors have significantly different business strategies that, to a great extent, all seek identical objectives. The reality is that, within 10 years, the oil and gas industry will look drastically different and the paths taken by NOCs will be as numerous as the number of NOCs. The time is clearly now for NOCs to start walking down new, unique paths offering more promise for growth than in the past 100 years of the oil and gas industry.

Deloitte member firms have undertaken several initiatives to provide the tactical and actionable advice needed by the NOC executives as they chart the new courses for their companies.

• The Risk Intelligent enterprise: It is undisputed that the oil and gas industry is incredibly complex. Embarking upon a dynamic business strategy takes NOCs into global acquisitions fraught with risks: to name but a few, there are the risks of strategic alignment, regulatory compliance and financial reporting, project planning, technology advancements, and market influences. Risk is not bad. Risk is how we optimise the economic and social returns on our businesses. Through Risk Intelligent Enterprise, Deloitte member firms are assisting NOCs to implement structured business strategy decision-making capabilities that identify, monitor and react to external and internal influences, enabling NOCs to efficiently and effectively adjust their dynamic business strategies.

• Seizing Opportunities: A New Era for National Oil Companies: A series addressing specific tactical solutions to NOC opportunities to be released over the next 18 months is being authored by senior executives from the oil and gas teams at Deloitte member firms. Based on their extensive work in the oil sector across the world, Deloitte member firms have identified six tactical challenges (and hence opportunities to secure competitive advantage) that are high on the agendas of many NOC executives: risk management, reporting and governance; human capital development and retention; relationships with IOCs; managing finances and international tax planning; supervision of remote operations; and climate change and the environment. The first paper in the series is to be released during February 2008.

• Sharing experiences: This fall, Deloitte is sponsoring an intimate gathering of top NOC executives hosted by a world-renowned university. While NOCs will choose unique paths, there are lessons to be learned across the diversity of geography, national policies and strategies. Deloitte is sponsoring this exchange of ideas, experiences and development of relationships among NOC executives.

Deloitte member firms are participants in a most exciting moment in oil and gas industry’s evolution, perhaps even the most exciting time in its history. Success will depend on starting the journey now, acknowledging that strategies will change over the course, and not making any costly mistakes. Deloitte has committed resources globally to assist NOCs with their successful journey – starting now.

About Deloitte
Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms have any liability for each other’s acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte & Touche,” “Deloitte Touche Tohmatsu,” or other related names. Services are provided by the member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsu Verein. © 2008 Deloitte Touche Tohmatsu. All rights reserved.

About David Taylor
David Traylor specialises in the development and execution of business strategies, asset optimisation and risk management for the oil and gas industry. He is a registered professional engineer with 30 years’ experience in the upstream, midstream and downstream sectors of the oil and gas industry.