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Financial Times: Oil services companies tap into rich seam

By Ed Crooks in London
Published: March 13 2007 02:00 | Last updated: March 13 2007 02:00

In the gold rush of today’s energy business, companies such as Halliburton are the modern equivalents of Levi Strauss and Wells Fargo.

Providing services to oil companies has been an even better business than finding and producing oil in recent years. Since the start of 2003, ExxonMobil’s shares have roughly doubled; those of Royal Dutch Shell, now the runner-up among Western oil majors, have risen about 40 per cent.

But shares in Halliburton and Schlumberger, the world market leader for oil services, have more than tripled.

Scarcity of equipment and skilled personnel at a time of bumper investment in oil exploration and production have sent the costs of oil services soaring. BP estimated its cost inflation was 14 per cent last year, and oil services companies were among the beneficiaries.

The other big advantage for the services companies is that unlike the oil majors, they can operate in countries with a dominant state-controlled national oil company. In many of those countries, which account for about 80 per cent of the world’s oil and gas reserves, it is hard for foreign companies to operate, and has become more difficult in recent years.

Oil services companies count national oil companies not as rivals, but as some of their most important customers. Halliburton signed two big contracts in Russia in the fourth quarter of last year: a feat that none of the oil majors could emulate.

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