Guyana’s pending decision regarding the formation of a national oil company brings back memories of unsuccessful attempts to do the same in the US in the 1970s.
The most serious attempt at forming a national oil company in the US was a 1975 Senate bill to establish the Federal Oil and Gas Corporation or FOGCO. (Oddly, the bill’s sponsors weren’t troubled by that acronym.) FOGCO was proposed at a time when natural gas supplies didn’t satisfy demand, and that was the primary impetus behind the legislation. (Supply issues went away when price controls were lifted.)
Concerns about a FOGCO then and now:
- The political pressures under which a national oil company operates are not conducive to sound, expeditious decisionmaking. (Unfortunately, some current industry execs seem overly responsive to pressure from governments and activist organizations, which is not always in the best interest of the company and its shareholders).
- Would limit competition and private investment.
- Would delay or prevent innovation:
- The shale revolution was driven by nimble private companies operating on private land in supportive states. Why is there Marcellus shale development in PA, WV, and OH, and none in NY? (Hint: It’s not the absence of resources.) Why could the US shale experience not be replicated in Europe?
- Innovative deepwater development projects were driven by private companies and the supportive public policies of the 1990s.
- A national oil company could be the first step in the process of nationalizing the petroleum industry.
Guyana is far different from the US and should do what is perceived to be in their best interest. Best wishes to the people of Guyana as they weight their options.
Bud's Offshore Energy (BOE) 