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Changes in the Operational Efficiency of National Oil Companies

Using data on 61 oil companies from 2001-09, we examine the evolution of revenue efficiency of National Oil Companies (NOCs) and shareholder-owned oil companies (SOCs). We find that NOCs generally are less efficient than SOCs, but their efficiency increased faster over the last decade. We also find evidence that partial privatizations increase operational efficiency, and (weaker) evidence that mergers and acquisitions during the decade tended to increase the efficiency of the merging firms. Finally, we find evidence that much of the inefficiency of NOCs is consistent with the hypothesis that government ownership leads to different firm objectives.

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Energy Specializations: Petroleum – Exploration and Production; Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation; Energy Investment and Finance – Corporate Strategy

JEL Codes:
D24 - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
D92 - Intertemporal Firm Choice: Investment, Capacity, and Financing

Keywords: National Oil Company, Government ownership, Revenue efficiency, Data envelopment, Stochastic Frontier

DOI: 10.5547/01956574.34.2.2

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Published in Volume 34, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.