TITLE:
DEA Analysis of National Oil Companies
AUTHORS:
Keven Braulio de Jesus Roque Ngeti, Blessed Shinga Mafukidze
KEYWORDS:
DEA Analysis, National Oil Companies, Energy Resources
JOURNAL NAME:
Open Access Library Journal,
Vol.11 No.12,
December
20,
2024
ABSTRACT: National Oil Companies (NOCs) have significant control over the world’s energy resources, holding about 80% of oil reserves and 70% of oil production, with similar figures for natural gas, both the economies of their home nations and the larger global energy market depend on these businesses. However, they perform in a wide range of ways, and a number of factors, such as labor costs, environmental regulations, corporate size, and financial stability, affect how efficient they are. This paper utilizes Data Envelopment Analysis (DEA) to assess the efficiency of European NOCs, examining both importing and exporting nations. The results suggest that the average efficiency of NOCs is relatively low (0.27) and has been decreasing over the period 2010 - 2020. Notably, larger firms, particularly those with turnovers in the top 90% of the distribution, exhibit higher efficiency, implying the presence of scale economies. However, very small NOCs also show strong performance, likely due to niche competitive advantages, the study also finds that rising employee costs negatively impact the efficiency of smaller firms but not the largest firms, which benefit from greater economies of scale. The paper also discusses limitations in the DEA approach, such as its sensitivity to outliers and the need for robust data. It suggests that despite its utility, DEA should be complemented with other performance evaluation methods to provide a more comprehensive analysis of NOC efficiency. Finally, the study offers recommendations for NOCs to improve their performance by focusing on cost control, optimizing labor expenses, and leveraging economies of scale.