National oil companies are increasingly in the headlines. That’s hardly surprising as they control more than 80% of known global oil&gas resources, yet much of the Western oil&gas supply chain is ignorant both of their scale and power.
The media are even worse; such is their lack of knowledge that some reporters seem to think NOCs are a new phenomenon. They are ignorant that even the largest Western player, ExxonMobil, is small when set against entities such as Saudi Aramco, which is also the linchpin producer of the Organisation of Petroleum Exporting Countries.
All the top 10 petroleum companies are state-owned enterprises. By comparison, ExxonMobil, BP, Chevron and Royal Dutch/Shell are ranked 14th, 17th, 19th and 25th, respectively, according to a study published late-2007 by the Baker Institute. Of the top 20 oil-producing companies in the world, 14 are NOCs (wholly state-owned and with a privatised element).
ExxonMobil is the world’s second largest market-listed company (PetroChina is number one) with a market capitalisation noted as being $511.9billion in the 2007 PFC Energy 50 listing. The super-major stated that it had 22.7billion barrels of proven reserves at the end of 2007, split fairly evenly between liquids and natural gas.
By way of comparison, Saudi Aramco claims in the order of 260billion bbls of oil alone, though this figure should be treated with care as other estimates place that resource figure nearer 150billion. Either way, the vast bulk of Saudi Arabia’s oil resources are in the hands of its NOC.
Regardless of the veracity of reserves estimates, the fact is that there is a slew of NOCs claiming a larger reserves base than ExxonMobil. That balance is expected to shift further in favour of the nationals over the coming decade. However, despite commanding the bulk of petroleum resources, not all NOCs are equal, which is one reason why companies from Russia, China and India have become competitors for assets outside their “home territory”. However, they appear to have roared back in 2008, with further big deals doubtless in the pipeline.
According to the IHS Herold/Harrison Lovegrove, NOCs and sovereign wealth funds based in Asia, the Middle East, Europe and Latin America accounted for a record high 15% of global open-market transaction value during the year, including six of the 10 largest asset deals.
NOCs have been the most active acquirers in Q1 2009, setting what looks set to be an important trend over the next year or two at least as they seek to ensure availability of oil&gas supplies to their parent nations wherever in the world such resources can be secured. You would have to be blind not to notice that energy is rocketing up the global agenda, driven by political tensions, the climate-change debate and persistently tight oil supplies, as output struggles to keep pace with rising demand, even with recession now gripping many nations.
While consumption is shrinking among a growing number of OECD nations, especially the US and Europe, oil demand is still growing vigorously in others, notably China, India and, largely overlooked, the Middle East itself, where economic diversification is now advancing rapidly. Basically, countries responsible for 37% of overall consumption of oil now account for about 80% of the growth in demand.
What differentiates China and India, especially, is the nature of their demand – it is structural. A couple of weeks ago, leading Indian industrialist Ratan Tata took the wraps off his 100,000-rupee (£1,360) bargain micro-car, the Nano. This is the mass-market family holdall of the future for India. The position is similar in China, except that its love affair with wheels is further advanced and focused mostly on mid-size and large vehicles.
The impact of this transportation revolution – let alone rapidly advancing industrialisation – on hydrocarbons consumption will be nothing short of staggering. Car sales in China, for example, jumped almost 22% (6.3million vehicles) in 2007, though the brakes were slammed on in 2008 with growth of just 6.7%, and a similar level is expected for 2009. There is a curve and, as economies grow, automobile ownership moves along it. Western economies are mostly well up that curve; China (population 1.3billion) is at the very bottom, and so, too, is India (population 1.1billion).
Factors such as these pose a massive challenge for the petroleum industry, not just in terms of increasing oil (and natural gas) production, but in finding the reserves required to underpin that output.
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