Oil and Gas: A Relationship Game
- Kevin Donaldson (Ernst, Young Global Oil and Gas Center)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- January 2008
- Document Type
- Journal Paper
- 18 - 21
- 2008. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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Supermajors. Multinationals. Integrated oil companies. These are all terms used to describe the world’s largest energy companies. All inspire thoughts of market leadership, control, and power. For many years, that would have been a fair assessment of status. But are things changing?
A recent Financial Times article titled “The New Seven Sisters: Oil and Gas Giants Dwarf Western Rivals” sought to develop an industry consensus regarding the most influential energy companies outside of Organization for Economic Cooperation and Development (OECD) countries. Numerous industry executives were polled and their responses collated. The resulting list included Saudi Aramco, Gazprom, CNPC of China, the National Iranian Oil Company, Petróleos de Venezuela, Petrobras, and Petronas.
These companies are overwhelmingly state-owned and control almost one-third of the world’s oil and gas production and more than one-third of its total oil and gas reserves. And the old seven sisters—now four companies as a result of industry consolidation in the 1990s—produce about 10% of the world’s oil and gas and hold just 3% of reserves.
So if state-controlled oil companies have the power, does this mean that the international oil companies (IOCs) have had their day in the sun? Are these once-giants of industry now shadows of their former selves, facing a future of begging at the table of the mighty national oil companies (NOCs)? Sensationalists may suggest this to be the case, but not most well-informed industry commentators.
It is a fact, however, that NOCs are more influential today than ever before. Their control over the bulk of global supply, reserves, and projected demand growth inherently gives them economic and political power. But this is not the only reason for their increasing influence on the sector. They also have become much more active in the market.
This increase in activity has been driven by governments asking more of their NOCs as they strive to ensure national security and prosperity. NOCs are, as a result, required to leverage their advantageous energy positions to deliver the infrastructure development (both energy and nonenergy in nature), job creation, energy security, and secondary and tertiary industries their respective governments desire.
New Continues To Need Old
IOCs retain significant influence over the global energy arena, and they collectively represent some of the largest reserves holders, producers, and petrochemical manufacturers operating today. Perhaps more importantly, they are also the technology, intellectual-property, and project-management powerhouses of the industry. As such, IOCs bring a lot to the global oil and gas party. They are here to stay.
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