Monday, April 21, 2008

Western Oil Majors' Control Of Global Oil & Gas Has Collapsed

Western Oil Majors' Control Of Global Oil & Gas Has Collapsed

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ROME: Consumer countries and international oil firms keen to gain greater access to the world's energy resources are likely to walk away empty-handed from talks with producer nations in Rome.

Record high oil, which struck $117 a barrel on Friday, has helped to drive up the profits of oil majors, but it has also increased the spending power of national oil companies and made them ever more reluctant to grant access to their resources.

"The relative positions of international energy companies and national energy companies are changing -- and not in our favour," Paolo Scaroni, chief executive of Italian oil and gas company Eni said in a speech at the opening of the International Energy Forum (IEF).

OPEC member Venezuela, under President Hugo Chavez, has spearheaded a global trend towards resource-holders seeking to maximise their returns from their energy wealth.

International firms have found themselves faced with tougher terms and shut out of the best energy territory.

During the 1970s, the international oil companies controlled nearly three-quarters of global oil reserves and 80 percent of production, Scaroni said.

Now, they control 6 percent of oil and 20 percent of gas reserves, and 24 percent of oil and 35 percent of gas production, he said. National oil companies hold the rest.

RESOURCE NATIONALISM HERE TO STAY

There is little sign the trend will reverse.

"When the prices went down in 1990s, we accepted to give them a higher share ... Now they have to accept a lower share, because they have a windfall profits," said Shokri Ghanem, head of Libya's National Oil Corporation.

National oil companies still have some need for cooperation with foreign investors as international and national firms alike battle with cost overruns, staff shortages and the difficulty of extracting oil and gas from more complex fields.

Producers are also keeping a nervous eye on the impact of high prices on demand and the development of alternative energy, although with fossil fuels expected to continue to make up more than 80 percent of the energy mix the threat to their revenues is minor.

The CEO of Royal Dutch Shell told the IEF the world would need all the energy it could get to keep pace with demand, which is projected to increase by more than 50 percent by 2030.

"Despite high prices, demand is not dropping, there is only slower growth. Easy oil and easy gas cannot supply all that surge in demand," Jeroen van der Veer told reporters.

"So it is not a matter of choice, do we do coal, or oil, or nuclear? The world will need everything, including biofuels. You name it."

In the immediate term, oil markets at least are well-supplied, members of the Organization of the Petroleum Exporting (OPEC) have said, making clear the IEF talks in Rome would not be the occasion to revise their output policy.

IEF meetings, which have taken place every two years since the forum was set up in response to the 1990-91 Gulf war when oil spiked briefly to $40 a barrel, have a reputation for being no more than talking shops.

But although they have largely failed to come up with broad, concrete steps, they can produce a rash of smaller deals.

Qatar Petroleum International and Eni signed an agreement on oil and gas cooperation on Sunday, although Iran, which has been in protracted negotiations with Shell and Total over its South Pars field said it did not expect to sign any deals during the talks from Sunday to Tuesday.

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