The other players: Independents and National Oil Companies

The resource ownership map has changed dramatically to the benefit of National Oil Companies (NOCs) and International Oil Companies (IOCs), speakers at the Daegu 2013 Congress said on 15 October.

NOCs now control approximately 90% of the world’s oil reserves and 75% of production as well as many of the major infrastructure systems. In addition, an estimated 60% of the world’s undiscovered reserves lie in countries where NOCs have privileged access to reserves.

A variety of factors have driven the changing market. The role of Independents has increased as technology has improved and capital has become more widely available, said moderator Tom Choi, Natural Gas Market Leader for Deloitte MarketPoint LLC. NOCs, meanwhile, have increasingly ventured beyond their borders, acquiring assets in other countries.

Four factors contributed to the success of Independents in the past decade, said Tony Hayward, the Executive Director & CEO of Genel Energy and former Group CEO of BP. High gas prices gave Independents the momentum to attract capital, the companies had the clever technology know-how to tap into North America’s shale gas, and many had an entrepreneurial spirit, seeing a necessity in taking risks in order to survive. Additionally, the “Supermajors,” or the world’s largest oil companies, were sluggish in addressing rising commodity prices in the past decade. That gave Independents the space to jump in and find solutions. Independents have also gone beyond the North American shale oil and gas boom, leading the way in East and West Africa, Brazil, and Kurdistan. “That’s an extraordinary set of successes,” he said.

The discussants also explored the role of NOCs in the global marketplace, plotting their international expansion. China stands out. The country’s state-owned enterprises (SOEs) have the political backing and drive to take risks in overseas markets. Yet despite talk of NOCs going international, the majority lingers on their home turf, restricted by the political considerations of their governments. Many NOCs have another strength: they’re often repositories of unique technical expertise to work in their own regional and environmental conditions. Brazil’s Petrobras, for example, is strong in deep water subsalt projects, Hayward said.

This news story is based on the session Bottom Line, “The rise of NOCs and Independents: More of the same or changing the game?” at 2013 World Energy Congress.