A METHODOLOGY FOR ASSESSING THE PERFORMANCE OF NATIONAL OIL COMPANIES
7 Conclusions Measuring NOC performance is difficult for three reasons. First, there is the problem of an NOC’s “national mission.” The definition of what the mission actually is varies across countries, and some of the components of the mission are extremely abstract and would be difficult to quantify in any meaningful sense. Second, many NOCs suffer from a lack of transparency. In some cases this is the result of deliberate policy by NOC management to deepen the information asymmetry that underlies the “principal-agent” relationship and allows rent seeking by the management. In some cases it is simply the result of the way in which the oil sector is organized. Finally, there is the “aggregation problem.” Thus, the performance measures present different metrics, which are difficult to combine. At the same time the relative weighting of the performance measures is a matter of subjective judgment. While this is true in the case of IOCs, it is overcome by the fact that the IOCs are listed on stock exchanges, where the market gives its overall verdict on performance by virtue of the share price and its movements. The fact that an increasing number of NOCs are being quoted on such exchanges assists this process of assessment. But there are metrics that can be used to assess the performance of an NOC. These should not in most cases include reserve figures, which are exercises in arithmetic rather than any reflection of effort on the part of the NOC. But other performance metrics face the problem of differing definitions although the increased number of NOCs listed on stock exchanges helps reduce this problem, as more NOCs are subject to producing data in the same format and on the same basis. But to manage an aggregation requires fewer metrics and those suggested in Tables 6.1, 6.2, and 6.3 probably need to be refined further to assess their importance. Further thought also needs to be given to how the metrics can be condensed into a single figure in the absence of a share price. One possible way forward, as suggested in box 6.1, is the use of the Delphi Method to assess performance.
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