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1Fix the driver behind crashes, sound loss and screen glitches2Repair Windows errors before they cause bigger problems3Scan for outdated or missing drivers - takes under a minuteOil companies assess political risk by combining country-level screening with project-specific due diligence—and revisiting both as a project develops. They examine the rules governing petroleum rights and revenues, the people and institutions involved, security and conflict conditions, local stakeholders, and the possibility that the project could cause or contribute to harm. Public guidance describes these questions, but it does not establish one standard company scorecard, set of weights, or investment cutoff.
What “political risk” means for an oil project
Political risk is broader than the chance that a government will fall or a country will become unstable. It includes whether laws and contracts are clear and enforceable; how public institutions work in practice; how licensing and revenue decisions are made; corruption exposure; conflict and security conditions; and the project’s effects on people and its relationships with them.
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“High-risk country” is a screening description, not a permanent or complete verdict on a project. Conditions can change, and national averages may conceal major differences between regions, communities, counterparties, and project stages. The OECD’s 2026 oil-and-gas due-diligence case study notes that the sector accounts for nearly one third of the world’s total energy supply, citing EIA data. That is context for the sector’s importance, not a measure of political risk.
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In practice, the assessment moves from broad context to the specific investment. Public guidance supports the issues below, but companies choose their own analytical methods and risk tolerances; the sources do not disclose a universal scoring formula.
1. Screen the political and governance context
Analysts look beyond formal institutions to how authority is exercised nationally, regionally, and locally. OECD extractive-sector stakeholder guidance identifies factors such as the independence and strength of civil society, trade unions, and democratic institutions; public attitudes toward corruption and criticism; administrative arrangements and decision-making; judicial integrity and rule of law; and competition among political parties.
For oil and gas, they also consider resource-nationalist policies and political dynamics in producing regions, including separatism or secessionism where relevant. These factors help identify where rules may be applied inconsistently, where expectations of state control may shift, or where engagement requires more than national-level analysis.
2. Test the petroleum rules, fiscal terms, and rights
The next question is what actually governs the proposed investment. A review covers petroleum laws and related regulations, the fiscal regime, the agencies responsible for administering and enforcing them, and the award process and terms for exploration and production rights. It identifies whether rights are granted through a concession, production-sharing contract, service contract, or another arrangement, then tests the stability and enforceability of the relevant license or agreement.
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The Extractive Industries Transparency Initiative (EITI) describes laws, fiscal arrangements, contract and license types, agency roles, and allocation procedures as information needed to understand extractive-sector governance. In a project review, published rules are a starting point: the investor also needs to understand whether they are implemented and enforced as written.
3. Map the state, owners, and business relationships
A host government may act at once as regulator, licensor, revenue recipient, and commercial participant. Companies therefore map relevant ministries and agencies, state-owned enterprises, joint-venture interests, beneficial owners, politically exposed persons, and intermediaries where relevant. They examine corruption exposure in licensing, contracting, revenue management, and state-owned enterprises.
OECD guidance identifies discretionary decisions, weak governance, revolving doors, campaign contributions, and opaque beneficial ownership among the sector’s corruption drivers. EITI disclosures—including information on payments, licenses, contracts, ownership, production, exports, and state-owned enterprises—can help identify questions for follow-up. They do not, by themselves, establish that corruption risk is low or that ownership and counterparties have been fully verified.
4. Assess conflict, security, and potential harm
Due diligence asks both how instability could affect the project and whether the company, its partners, or its business relationships could contribute to harm. In conflict-affected areas, armed groups may seize production or distribution infrastructure and use proceeds to fund operations. Companies operating near conflict zones or sourcing through intermediaries there can face heightened risks involving armed-group financing, humanitarian law, and sanctions.
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5. Understand local stakeholders and subnational politics
Companies identify affected communities and rights-holders, local authorities, workers, civil society, and other relevant groups. They establish which levels of government have authority and capacity, what local expectations and perceptions are, and whether meaningful engagement is possible. OECD guidance emphasizes that subnational politics in oil-producing areas and resource nationalism can shape stakeholder engagement.
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A national dataset cannot substitute for understanding the project’s location. Local political and social conditions can influence acceptance, opposition, security arrangements, and the practical ability to resolve disputes.
What public information can—and cannot—show
Public sources can help build and challenge an assessment, but none of the frameworks below should be mistaken for a complete project rating.
| Information source | Useful for | What it does not establish on its own |
|---|---|---|
| EITI country reports and systematic disclosures | Reviewing legal and institutional frameworks; contracts and licenses; beneficial ownership; exploration and production; exports; revenue management; environmental and social impacts; and government and company payments. | That disclosed rules are enforced as written, that all relevant ownership or counterparties are known, or that political risk is low. Data limitations and higher-risk settings call for corroboration. |
| EITI validation scorecards and reports | Understanding a country’s adherence to the EITI Standard, disclosure gaps, and recommendations for governance improvement. | A comprehensive political-risk rating or a project-level investment decision. |
| OECD due-diligence and stakeholder guidance | Structuring inquiries into governance context, corruption, stakeholder engagement, and actual or potential adverse impacts. | A prescribed company checklist, scoring model, or investment threshold. |
| Project-specific review | Testing implementation and enforcement, counterparties and beneficial owners, security arrangements, local conditions, and changing exposure as the project advances. | A guarantee that future political decisions, conflict conditions, or stakeholder responses can be predicted. |
EITI describes due diligence as “a process by which companies identify and manage actual or potential adverse impacts linked to their operations, sourcing decisions or business relationships.” That process requires checking relationships and conditions around the project, not just collecting country indicators.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why the assessment changes over a project’s life
Exposure is not static. The World Bank’s discussion of extractive-project stages says: “Security, political and regulatory risks all increase at the production stage.” It explains the mechanism: fixed assets need protection, impacts become more visible, communities may oppose operations, and a host government may seek to renegotiate a license once the company begins earning returns. This is a durable account of how exposure can change, not a current assessment of any particular country.
| Project stage | What the assessment needs to track |
|---|---|
| Exploration and award | Political and institutional context; petroleum law and fiscal terms; how rights are awarded; government and state-owned-enterprise roles; ownership and corruption exposure; and local conditions around the proposed area. |
| Development and construction | Whether approvals and agreements are being implemented; how security is provided; how project impacts and stakeholder expectations are developing; and whether counterparties or local conditions have changed. |
| Production | Protection of fixed assets; more visible impacts and community responses; continued enforceability of the license and fiscal terms; and exposure to regulatory or contractual changes, including renegotiation pressure. |
The shift matters to investment decisions: companies assessing very large, long-lived projects may look for well-crafted petroleum laws, reasonable prospects of political stability, and manageable security risk, as the World Bank discussion describes. It does not follow that any one project will use a particular threshold or respond in the same way.
How to compare two countries or projects
A useful comparison keeps like with like: compare the actual locations, rights, counterparties, and stages involved rather than treating national labels as a ranking. OECD, EITI, and World Bank materials support the following comparison axes; they do not publish universal weights for them.
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- Institutions and transparency: Compare institutional performance, corruption controls, disclosure gaps, and beneficial-ownership transparency.
- Political and security conditions: Compare national stability alongside subnational conflict and security exposure in the project area.
- State and commercial counterparties: Compare the government agencies, state-owned enterprises, partners, owners, and intermediaries connected to each project.
- Stakeholders and impacts: Compare affected rights-holders, local expectations, engagement conditions, and potential human-rights impacts.
- Change over time and mitigation: Compare how each risk may shift by stage and whether the company can identify and manage the related impacts.
What the public framework cannot tell you
The public guidance helps define questions and evidence to examine; it does not reveal how any particular oil company weights those questions, what risk appetite it applies, or where it sets an investment cutoff. Nor can an EITI report or a country-level indicator settle whether a specific agreement will be honored, security will remain adequate, or local impacts will be managed effectively. Those conclusions depend on project-specific evidence and can change as the political, regulatory, security, and stakeholder context changes.
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