The growth of NOCs

National oil companies have been making a big splash in the oil business. In our politicized world, 8 of the 10 largest oil companies are NOCs, and just one of them - Saudi Aramco - controls more than 25% of the global oil supply.

Don’t look now, but the reach of these state-controlled energy companies is expected to grow, says John Knight, senior vice president of business development and acquisitions for Norway’s Statoil ASA.

Speaking at Deloitte’s Oil & Gas Conference in Houston on Dec. 7, Knight noted that, since 2003, 50% of upstream acquisitions are by NOCs. This will continue to increase, he said.

Commenting on the historical willingness of developing nations to accept a secondary role to the super majors in exploiting petroleum reserves, Knight said, “This is not a battlefield where wealthy private interests will be allowed to fight over who will take the profits.” He added, “The historical role is history.”

Statoil, represented in 31 countries around the globe, reported a net income of $8.7 billion in the third quarter of 2005, putting it on a par with ExxonMobil, the largest of the super majors, which enjoyed its best-ever quarter with $9.9 billion in income.

However, all other companies pale in comparison with Saudi Aramco, the No. 1 oil company in the world for the 16th consecutive year. Saudi Aramco, 100% owned by the Saudi Arabian government, is No. 1 in crude oil reserves, No. 1 in crude oil production, first in crude oil exports, and first in the export of natural gas liquids. It has the world’s largest oil field (Ghawar), the largest offshore field (Safaniya), is No. 4 in gas reserves, and eighth in worldwide refinery capacity.

I could go on, but you get the idea.

Knight says that there are four true international national oil companies (IOCs) - Brazil’s Petrobras, Malaysia’s Petronas, Saudi Aramco, and Statoil. There will be more by 2015, he assures us.

Surprisingly, one of them could be Pemex, Mexico’s state oil monopoly. Already one of the world’s largest companies, Pemex recently revealed plans to participate in foreign natural gas E&P projects to obtain cheap gas for Mexico. Unlike in Mexico, there are no legal restrictions preventing Pemex from partnering with other firms in countries like Bolivia, Peru, Australia, and Qatar.

Mexico is especially interested in Peru’s Camisea natural gas project, which has estimated reserves of about 8.7 tcf. The Camisea upstream consortium currently is led by Argentina’s Pluspetrol. Other consortium members include Argentina’s Tecpetrol, Algeria’s Sonatrach, South Korea’s SK Corporation, and Dallas-based Hunt Oil.

Although Mexico has an estimated 15 bcf of gas reserves, the country currently imports about 20% of its domestic gas consumption from the US. The upswing in gas prices, which rose dramatically in the wake of hurricanes Katrina and Rita, has forced Mexico to consider diversifying its natural gas supply.

Don’t be surprised if Mexico finds foreign energy investment not only an attractive way to meet its needs, but a way to enrich its own treasury as well. If so, one of the next big international players may be found just south of our own border. $