State-owned oil companies expanding internationally

Dec. 9, 2005
The oil industry can expect changing relationships between international companies and national oil companies (NOCs) within 36 months, said John Knight, Statoil ASA senior vice-president, business development and acquisitions.

Paula Dittrick
Senior Staff Writer

HOUSTON, Dec. 9 -- The oil industry can expect changing relationships between international companies and national oil companies (NOCs) within 36 months, said John Knight, Statoil ASA senior vice-president, business development and acquisitions.

"I think we are going to see major realignments," Knight said during Deloitte & Touche LLP's annual energy conference in Houston Dec. 7. "I'm not sure what these realignments will look like, but I have a sense that they are coming."

Eight of the 10 largest oil companies are NOCs, and the NOCS have accounted for 50% of the upstream acquisitions since 2003, he said.

"NOCs are not just in producing areas. They are entering importing regions," Knight said. "NOCS now are playing on an international field. The challenge is for majors and private companies to adapt to this reality."

INOCs
He said the term "NOC" is dated because state-owned energy companies are becoming international national oil companies (INOCs). State-owned companies are looking abroad not only for exploration and production assets but also for marketing positions and marketing infrastructure.

Knight listed four INOCs today: Statoil, Brazil's Petroleo Brasileiro SA, Saudi Aramco, and Malaysia's Petronas. He forecast 12 INOCs by 2015. Companies likely to figure among future INOCS are Chinese companies, OAO Gazprom, and Algeria's Sonatrach SA.

"We've got to get away from energy independence," Knight said. "We've got to start talking about energy interdependence."

Chinese companies have made it known that they are looking to expand worldwide. Chinese President Hu Jintao has visited Russia and Kazakhstan in search of access to oil and gas (OGJ, July 11, 2005, p. 25).

Earlier this year, CNOOC Ltd. withdrew an unsolicited offer for Unocal Corp., citing politics as the reason for ending a bidding contest between itself and Chevron Corp. (OGJ, Aug. 8, 2005, p. 29).

Unocal shareholders overwhelmingly accepted a cash-stock takeover bid from Chevron during a special meeting near Los Angeles. The transaction's final value, excluding debt, was $17.9 billion (OGJ Online, Aug. 1, 2005).

Super majors
Excluding state-owned companies, ExxonMobil is the world's largest energy company, pointed out Andy Swiger, executive vice-president, ExxonMobil Production Co.

ExxonMobil believes supermajors and the host countries in which they do business have reciprocal responsibilities.

He said the role of supermajors is to bring leadership via technology and financial capital. Swiger said the role of government is to provide industry with access to acreage and also to promote a favorable business environment.

"By helping our host nations help themselves, we help ourselves too," Swiger said. He noted that supermajors serve as enablers to encourage and promote economic development worldwide. The supermajors also have distinct corporate cultures.

North America
Lisa A. Stewart, president of production and nonregulated operations for El Paso Corp., expects many mergers and corporate acquisitions in the energy industry during the next 5-6 years.

"I think there is going to be incredible consolidation yet to come," Stewart said without elaborating.

El Paso has sold assets to reduce debt in a major restructuring focused on gas production, gas transmission, and the marketing of the company's own gas. The company has announced or closed $1.5 billion of its $1.2-1.6 billion assets sales goal.

The parent company has shed many of "20-some" businesses worldwide, Stewart said. El Paso's retained its integrated businesses in Brazil. This includes power plants, gas transmission systems, and gas exploration and production assets.

Contact Paula Dittrick at [email protected].