Dealing with Multinational Oil Companies: Issues, Experiences and Lessons for the Arab Oil Countries

Many oil state-owned enterprises in the Arab region are increasingly having to adapt in order to survive in a changing hydrocarbon sector. Old oil fields are maturing and becoming more difficult and expensive to exploit, and the importance of natural gas and non-traditional sources, e.g. shale, is growing rapidly. In order to remain as players in the sector, and to continue to generate revenues for home governments, SOEs are having to acquire new skills to continue producing at home, and also improve their ability to operate abroad in a competitive international market. In this environment, the role of contractual arrangements between SOEs and IOCs, and, particularly, the potential for SOEs to acquire technology and skills from IOCs, has become vital. So, too, home governments’ political constraints on SOEs are now, in fact, determining factors of whether an SOE is able to move abroad and compete internationally. This paper will explore SOEs and contracts in the Arab world in the context of this changing environment, and will critically assess the role of contracts and host government political processes in the ability of SOEs to remain relevant and competitive in the coming years. Two Arab countries will be used as case studies: Oman and Algeria.