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National Oil Companies: The New Globetrotters?

In a world of "internationalizing" national oil companies (NOCs), the terms "major" and "super major" are quickly losing their meanings.

In fact, eight of the 10 largest companies in the oil and gas sector are NOCs. And BP, for instance, a super major in anyone's book, is only the 10th largest company in the sector when NOCs are included. John Knight, senior vice president, business development and acquisitions for Statoil USA says that the era of the internationalizing NOC or (INOC) is upon the industry, and it will give companies like BP, Shell, and ExxonMobil some things to think about.

"I really don't like the labels 'super major' and 'national oil company.' I think they are labels that are 30 years old. I don't think they tell us very much about the last five years. I think they tell us almost nothing about the next 10 years. They're out of date, and I think we need to find a new way of labeling each other," Knight told attendees at Deloitte's 2005 Oil & Gas Conference in Houston Wednesday.

Knight says that right now there are four companies he would count as internationalizing national oil companies: Norway's Statoil, Brazil's Petrobras, Saudi Aramco, and Malaysia's Petronas. There will be several more in the coming years as national oil companies grow their roles on the international stage.

Knight said to look for several characteristics that distinguish an INOC. For one, a significant amount of its production is outside of its home country. Also, a significant portion of its management team has international origins. Third, INOCs often have larger technology positions than the super majors. And also, while they market their products internationally, they also take international positions in the marketing infrastructure. Examples of the last characteristic are Gazprom, Statoil and Sonatrach.

The evolution of these international national oil companies will present the rest of the industry -- namely the majors and super majors -- with some interesting questions, Knight says. For instance, in a highly politicized world, is it enough for the majors and super majors to merely bring technology and product management expertise to the national oil companies in order to win them over as business partners? To what extent will the NOCs make a distinction between the super majors and oilfield services companies (e.g. Schlumberger and Halliburton) when it comes to technology decisions? And finally, "Can you in Houston envision a time when internationalizing NOCs will have a more competitive and compelling offering to each other, and if so, what are you going to do about it?"

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