A study by the Natural Resource Governance Institute (NRGI) showed that National Oil Companies (NOCs) could invest $1.9 trillion over the next ten years. However, the report warned that $400 billion or more than one-fifth of those investments could turn to a loss unless the oil price stayed above $40/barrel. Major oil companies like BP, Total, and Shell have slashed their long term price estimates to around $50-60/barrel. However, some analysts expected even lower prices depending on the energy transition scenario.
According to the report, Middle Eastern producers, such as Saudi Arabia, would be less affected due to their low break-even levels. On the other side, producers in Africa and Latin America would have more trouble. For instance, Mexico’s Pemex and Angola’s Sonangol have already a heavy debt burden. Azerbaijan’s SOCAR and Nigeria’s NNPC are among NOCs with risky investments, the report said. It also stated that investments in Algeria, China, Russia, India, Mozambique, Venezuela, Colombia, and Suriname needed to be reviewed.
David Manley, a senior economic analyst at NRGI, said that NOCs’ expenditures are a highly uncertain gamble. This massive investment could pay off but also may trigger economic crises across the emerging and developing world, he added. Governments might be forced to bail out these companies that cost the taxpayers dearly. This could result in more severe inequalities as this fund could have been better spent on healthcare, education, or diversifying the economy.
