Political risk in the oil and gas industry in emerging markets : a comparative study of Nigeria and Mexico

Somers-Cox, Tamara Joy (2014-04)

Thesis (MA)-- Stellenbosch University, 2014.

ENGLISH ABSTRACT: The interplay between political risk and emerging markets is current and dynamic. As global interest shifts, investors cannot ignore emerging market behaviour and their influence. However, with great potential and opportunities, too comes great political risk. This research study begins with the point raised by the Eurasia Group that emerging market risk differs to that of developed market risk, and that risk in some instances can be ‗unbounded‘. Subsequently, the Eurasia Group deems emerging markets a top risk for 2013. Focussing on the oil and gas industry in emerging markets, Nigeria and Mexico offer valuable case studies. This research study offers a comparative study of these two countries in order to determine a generic list of political risk factors that are facing the oil and gas industries in emerging markets. In an increasingly volatile world, with a growing global demand for energy sources, and greater uncertainty surrounding investments and potential returns, political risk analysis is an invaluable decision-making tool for Transnational Oil Corporations (TNOCs) in order for their assets and interests to be protected. The central research question concerns the main political risk factors facing investors who want to participate in the oil and gas industry in emerging markets. The aim of the research study is to answer the central research question through the help of supplementary questions. The first of these ask what the main political risk factors for TNOCs operating in the Niger Delta are. The second question asks what the main political risk factors for TNOCs operating in the Gulf of Mexico are. So as to complete the political risk picture, the last question asks how political risk in the oil and gas industry can be mitigated. This research study will contribute to existing research, and will assist investors with risk identification, analysis and mitigation. By utilising the generic list of essential political risk factors, TNOCs are made aware of the most salient political risks in the oil and gas industry in emerging markets, and therefore are better placed to make rational and informed decisions when it comes to foreign investment.

AFRIKAANSE OPSOMMING: Die wisselwerking tussen politieke risiko en opkomende markte is intyd en dinamies. Soos globale belange verskuif, kan beleggers nie die opkomende markte se gedrag en invloed ignoreer nie, alhoewel met groot potensiaal en geleenthede kom daar ook groot politieke risiko. Die navorsingstudie het begin met die Eurasia Groep wat uitgelig het dat opkomende markrisiko verskil van die van ‘n ontwikkelde mark en dat die risiko in sekere gevalle ―ongebonde‖ kan wees. Gevolglik is opkomende markte as ‘n top risiko vir 2013 geklassifiseer. Met ‘n fokus op die olie- en gasindustrie in opkomende markte, bied Nigerië en Mexiko waardevolle gevallestudies. Die navorsingstuk bied ‘n vergelykende studie van dié twee lande met die doel om ‘n generiese lys van politieke risikofaktore wat die olie- en gasindustrie in opkomende markte in die gesig staar, vas te stel. In ‘n toenemende onstabiele wêreld met ‘n toenemende globale aanvraag vir energiebronne en groter onsekerheid rakende beleggings en potensiële opbrengs, is politieke risiko-analise ‘n waardevolle besluitnemings-meganisme vir Trans-Nasionale Oliekorporasies (TNOKs) om hul bates en belange te beskerm. Die sentrale navorsingsvraag fokus op die hoof politieke risikofaktore vir beleggers wat in die olie- en gasindustrie van opkomende markte wil belê. Die doel van die navorsingstudie is om die sentrale navorsingsvraag te beantwoord met behulp van aanvullende vrae. Die eerste vraag raak die hoof politieke risikofaktore vir TNOKs aan wat in die Niger-Delta opereer. Die tweede vraag handel oor die hoof politieke risikofaktore vir TNOKs wat in die Golf van Mexiko opereer. Die laaste vraag voltooi die politiese risiko profiel deur te vra hoe die politieke risiko in die olie- en gasindustrie verminder kan word. Die navorsingstudie sal bestaande navorsing aanvul en beleggers help om risiko‘s te identifiseer, analiseer en verminder. Deur ‘n generiese lys van politieke risikofaktore te gebruik, word TNOKs bewus gemaak van die mees prominente politieke risiko‘s in die olie- en gasindustrie van opkomende markte, wat hulle in staat stel om rasionele en ingeligte besluite te neem wanneer dit by internasionale beleggings kom.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/86335
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