Oil Business: Volume To Value

LONDON, Feb. 16, 2017 /PRNewswire/ — National oil companies (NOCs) are under pressure to evolve from a volume to value business model in a lasting low oil price environment, according to the EY report plaquenil manufacturer concordia From volume to value: the transformation of National Oil Companies. This is a dramatic shift in the oil and gas industry as NOCs account for 58% of global reserves and 56% of production.

Paul Navratil, EY Global Oil & Gas Emerging Markets Leader, says:

 “The NOC model of the past is no longer fit for the future. Emerging economies dependent on oil revenue were – and continue to be – hard hit by the fall in oil price. This has had far-reaching implications on government budgets, sovereign investment, economic deployment incentives and, critically, subsidy support and social welfare programs. NOCs now find themselves in a period of transformation towards a new National Company model that embraces economic diversity.”
The report finds that many governments around the world are now reducing subsidies on fuel and energy prices, reducing salaries for government employees across all levels, cutting capex programs, maximizing oil and gas production volumes and considering partial privatization of their NOC in response to oil price volatility.

Countries taking action to reduce deficit, raise capital or to attract new investment include Mexico, Brazil, Nigeria, Egypt, Tanzania, Angola, Kuwait, United Arab Emirates, Iran, Oman, Russia, Saudi Arabia and Indonesia.

Andy Brogan, EY Global Oil & Gas Transactions Leader, says:

“Traditional NOCs understand that to maintain the critical role they play in their countries, they must make changes to improve margins and increase capital efficiency. Generating value must take priority over generating volume.”
The report outlines how, for a NOC to be able to maximize the quality of its earnings and contribution to their country, it must undergo a transformation that addresses the autonomy of the NOC and role capital plays in: diversifying revenue streams; balancing national versus commercial objectives; internationalization; funding operations; capabilities and skills development; enabling technology; and vertical integration.

Brogan says: “NOC success depends on the ability to build capital and operational excellence into a new culture fit for a lower-for-longer price. Only then will NOCs maximize their potential enterprise value and, as a result, the contribution to their country.”

Notes to Editors

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The oil and gas sector is constantly changing. Increasingly uncertain energy policies, geopolitical complexities, cost management and climate change all present significant challenges. EY’s Global Oil & Gas Sector supports a global network of more than 10,000 oil and gas professionals with extensive experience in providing assurance, tax, transaction and advisory services across the upstream, midstream, downstream and oil field subsectors. The Sector team works to anticipate market trends, execute the mobility of our global resources and articulate points of view on relevant sector issues. With our deep sector focus, we can help your organization drive down costs and compete more effectively.

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Sarah Shields
EY Global Media Relations
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