Explanation of performance ranking

In this appendix we classify the overall performance of the fifteen NOCs in our sample into four categories – high, upper middle, lower middle, and low. The assessments are based on the detailed case studies presented in Chapters 5–19. This classification is then used in other parts of this book, such as the Chapter 3, on how national governments attempt to govern NOCs, as well as the Conclusion that summarizes what we have learned about the factors that explain performance (Chapter 20). As we describe below, characterizing performance at the level of the individual firm – especially for firms that are often secretive and designed to perform many functions – is a necessarily qualitative and subjective process. Nonetheless, any study that aims to explain performance must make an effort to measure its quarry. This Appendix explains what we mean by “performance” and explains our scoring for each case in the spirit of transparency and debate.

For the purposes of comparing NOCs (and NOCs with IOCs), we initially sought quantitative metrics. The Introduction (Chapter 1) summarizes some of the existing quantitative research. Within the realm of what can be measured quantitatively, existing studies show that state ownership does in fact have a noticeable effect on standard performance metrics such as output efficiency, per-barrel operating cost, investment cost, and net present asset values. However, this kind of research is difficult to implement because there are no universally applicable benchmarks for performance comparison between individual companies; the variables that are most interesting to measure are usually the hardest to quantify.