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Exxon, BP, Shell Investors Lose in Best Year for Oil Prices




Exxon, BP, Shell Investors Lose in Best Year for Oil Prices 

By Fred Pals and Eduard Gismatullin

June 30 (Bloomberg) — Exxon Mobil Plc, Royal Dutch Shell Plc and BP Plcinvestors are losing money in the best year for oil prices as they cede control of production to state-owned energy companies.

Exxon, the world’s biggest company by market value, fell 7.6 percent this year in New York trading after Venezuela forced the Irving, Texas-based producer out of the Orinoco Belt, South America’s largest oil fields. Shell lost 4.6 percent in London trading as Russia seized control of the $22 billion Sakhalin-2 venture. BP dropped 8.1 percent this year after the Russian government said it intends to take over the Kovykta gas deposit in Siberia owned by BP’s Russian venture, TNK-BP.

Oil company shares are suffering even as crude rallied 46 percent to a record $142.99 a barrel and natural gas appreciated 76 percent in New York on rising demand from emerging economies. OPEC members from Saudi Arabia to Venezuela will earn more than $1 trillion this year from oil exports, the U.S. Energy Department estimates.

“The oil companies are competing with each other and with national oil companies as well for access” to reserves, said Ivor Pether, who helps oversee about $17 billion at Royal London Asset Management, in a phone interview from London. “It’s a lot tougher for BP and Shell to win development rights,” because state-owned companies have access to cash and better technology, he said.

The struggle for new fields contributed to record oil prices by restraining supplies from nations outside of the Organization of Petroleum Exporting Countries at a time of increasing demand. Last year, production declined at Exxon and Shell, the world’s two largest oil companies, and BP, Europe’s second-largest oil company, after a decade of expansion.

Political Barriers

Exxon Chairman Rex Tillerson, Saudi Arabian oil minister Ali al-Naimi and his Qatari counterpart Abdullah bin Hamad al-Attiyah are among almost 600 speakers who will discuss reserves, prices and strategy during this week’s World Petroleum Congress in Madrid. The four-day conference, which takes place every three years, starts today.

“What you need is access,” BP Chief Executive Officer Tony Hayward said June 11 in London. “Political factors, barriers to entry, and high taxes all play a role.” The barriers to pumping more oil and gas “are above ground, not below it,” he said, calling them “not geological, but political.” BP is based in London.

Russia, Nigeria and Venezuela are putting domestic companies ahead of international rivals when granting access to reserves. State-controlled oil companies hold about 80 percent of the world’s total 1.2 trillion barrels of proved oil reserves, according to BP estimates.

Venezuela Takeover

Shell CEO Jeroen van der Veer said in January that new projects are delayed because governments “negotiate longer than in the past.” Shell suffered a setback last year when Russian state-run gas company OAO Gazprom bought a majority stake in the Sakhalin-2 venture, cutting Shell’s holding in half, to 27.5 percent.

Exxon lost 425 million barrels of proved reserves when Venezuela gained control of four heavy-crude oil ventures operated by foreign companies, including Exxon’s Cerro Negro project. Gazprom is trying to buy TNK-BP’s 63 percent stake in the Kovykta natural gas field, large enough to supply Asia for five years.

Crude oil prices doubled in the past year, reaching a record last week, partly on concern that production will fail to keep pace with surging demand in countries such as China and India. Finance ministers from the Group of Eight nations said on June 14 that surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy.

Saudi Increase

The Paris-based International Energy Agency will issue supply and demand forecasts today for the next five years or more. A year ago the group said the world faces a “supply crunch” after 2010 as conventional crude oil production from nations outside of OPEC reached a “plateau.”

Saudi Arabia, the world’s biggest oil exporter, plans to raise output for a third straight month in July, al-Naimi said at a June 22 summit of 35 producing and consuming countries in the Saudi port city of Jeddah.

At the Jeddah meeting, U.K. Prime Minister Gordon Brown proposed on behalf of the 27-nation European Union a “new deal” with oil nations, offering them investment opportunities in the West in return for greater access to untapped reserves. So far, no breakthroughs came from that initiative.

While Exxon, The Hague-based Shell and BP face restrictions, state-controlled energy companies oppose efforts by Western nations to bar investment in pipelines and retail markets.

“We are facing problems, which don’t have any relation to production or real business,” Alexei Miller, the chief executive officer at Russia’s Gazprom, said this month. “I’m talking about the resistance to Gazprom participation in projects on the European Union territory.”

To contact the reporter on this story: Fred Pals in Madrid at[email protected]Eduard Gismatullin in Madrid at[email protected]

Last Updated: June 29, 2008 19:01 EDT and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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