Oil for Asia

Briefing Paper
John Mitchell and Glada Lahn, March 2007

Growing oil demand in Asian importing countries is not matched by domestic supply and, over the last decade, Asian national oil companies (ANOCs) have been rapidly acquiring stakes in exploration and production projects abroad.
These trends are commercially driven, although they offer the potential for important political and economic gains both to the Asian governments and to those of host oil-exporting countries.
ANOC investment is challenging the conventional private international oil company (IOC) business model. ANOCs' advantages over IOCs include their willingness to engage in downstream projects, probable lower costs of capital and risk, and the strong diplomatic and economic support they receive from their governments.
The effect of these investments on the global balance of energy security is marginal, and may even be positive. Control of the resources remains with the exporting-country governments.
Some ANOCs and their governments do not carry the obligations on governance, human rights and social and environmental responsibility expected of IOCs and OECD governments. This raises questions about the impacts of their operations and development packages on host countries, especially in Africa.