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Draga Claudia MARIN

31 st USAEE/IAEE North American Conference Sheraton Austin, Texas 4-7 November 2012. THE STRATEGIES OF BRICS’ NATIONAL OIL COMPANIES FOR ENERGY SECURITY : JOINT VENTURES BARGAINING AND VERTICAL INTEGRATION. Draga Claudia MARIN. Agenda.

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Draga Claudia MARIN

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  1. 31st USAEE/IAEE North American Conference Sheraton Austin, Texas 4-7 November 2012 THE STRATEGIES OF BRICS’ NATIONAL OIL COMPANIES FOR ENERGY SECURITY : JOINT VENTURES BARGAINING AND VERTICAL INTEGRATION Draga Claudia MARIN

  2. Agenda • Introduction : BRICs and NOCs, how do they ensure their continuing growth on the energy market ? • Vertical integration for an enhanced oil supply security. China and India examples • The influence of vertical integration on oil supply security : construction of an econometrical model

  3. I. Introduction : BRICs and NOCs, how do they ensure their continuing growth on the energy market ? • Brazil : pre-salt reserves discovered in 2006 • Russia : 2nd crude oil producer after Saudi Arabia • China : R/P ratio law (9.9) compared to the one of the world (54.2) • India : 4thmost important consumer of oil in 2011

  4. I. Introduction : BRICs and NOCs, how do they ensure their continuing growth on the energy market ? Figure 2. Main NOCs in BRICs PRODUCERS CONSUMERS

  5. I. Introduction : BRICs and NOCs, how do they ensure their continuing growth on the energy market ?  We analyze the strategy of NOCs from BRICs to enhance oil supply security in their countries  Econometrical model showing the influence of vertical integration on oil supply security Joint ventures bargaining Vertical integration Oilsupplysecurity China and India - NOCsstartedactivities in the upstream -Integration in downstream to ensureaccess to oilproducts and more efficiency Brazil and Russia - NOCsdon’t have the neededtechnology for upstream - Government and IOCs have different objectives, sometimesconflicting

  6. II. Vertical integration for an enhanced oil supply security. China and India examples Figure 3. Advantages and disadvantages of vertical integration Sources : Deschamps and Méritet (2000), Godard and Lipczynski (2005), Harrigan (1984), Mitchell (1976)

  7. II. Vertical integration for an enhanced oil supply security. China and India examples • China : net importer since 1993 • Chinese NOCs are searching for overseas assets • Ex: Singapore Petroleum Company acquisition by PetroChina • India : target is to become self-sufficient • ONGC plan of vertical integration by the increasing of the refining capacity • Ex: MRPL acquisition by ONGC

  8. III. The influence of vertical integration on oil supply security : construction of an econometrical model Construction of oil supply indicators • Based on Arkel, Boots and Jansen’s (2004) report • 4 indicators : • The diversity index • Diversity of supply regions subject to , • Diversity of supply regions and socio-politic stability subject to , • Resources depletion subject to , , • Oil supplysecurity index

  9. III. The influence of vertical integration on oil supply security : construction of an econometrical model Vertical integration measurement • Based on Harrigan (1986) work • 4 dimensions : • Degree : measured at BU level, represents the % of a certain semi-finished product transferred to downstream BU (or the % of needs of a certain product bought to upstream units). • Number of stages of processing : index constructed as the sum of the number of steps multiplied by the value added for each step. We’ll compare NOCs with other private oil companies. • Breath of activities : number of activities in which the firm has engaged in (at a stage of production)/number of activities in which it was possible to engage in. • The form of ownership : % of participation in each strategic BU.

  10. III. The influence of vertical integration on oil supply security : construction of an econometrical model Regressionmodel • = indicator of oil supply security = average • i = 2000…2011 • = unknown parameters • = indicator of degree of vertical integration = average (degree of upstream integration; degree of downstream integration) • = indicator of number of stages of processing • = indicator of breadth of activities • = indicator of ownership form • = error term

  11. III. The influence of vertical integration on oil supply security : construction of an econometrical model • The model is in a conceptualshape • Data missing : For China and India (for the period 2000-2011) : Crudeoil production abroad in each country Crudeoil imports fromeach source Crudeoil production in some provinces of China For ONGC (for the period 2000-2011) : self-supplyfrom E&P

  12. Concluding thoughts

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