AFP

Despite rocketing prices, outlook is bleak for oil majors

By Delphine DechauxAFP – Sunday, July 6 06:08 pm

MADRID (AFP) – Despite record crude prices, the major oil companies are struggling to access resources that are being jealously guarded by national companies with whom they are forced to establish partnerships.

Of course, with a barrel of oil at more than 140 dollars, they are seeing major profits, but the future has never seemed so uncertain.

The problem is access to reserves. The oil majors now control less than 10 percent of world resources of gas and oil, against 70 percent in the 1970s, according to figures released by the office of Ernst and Young at the World Petroleum Congress in Madrid.

As a result they are being forced to explore in increasingly extreme conditions.

“Oil in deep water or in regions that are difficult to access (such the Arctic) are what are left for international companies,” said Christophe de Margerie, the head of French group Total.

The majors are also competing with the national oil companies, which are not content to just enjoy direct access to the resources of their respective countries but are making inroads elsewhere.

“National hydrocarbon companies are no longer confined to within their borders,” OPEC president Chekib Khelil said, citing the examples of China’s Sinoc and CNPC, Malaysia’s Petronas or Algeria’s Sonatrach.

“A lot of international companies were previously national companies, such as BP and Total,” said Khelil.

“It’s more and more difficult now to know which are national companies and which are majors because the majority of the nationals are becoming internationals,” said Linda Cook, head of gas and electricity at Anglo-Dutch Shell.

Even their superior technology is not enough, as national oil companies can can appeal to service firms such as Schlumberger or Technip.

Of course, some like Saudi Aramco, have no problems in that respect. The Saudi company is developing “nanorobots” with a diameter of less than the size of a human hair to look for deep resources in rocks.

But the majors still hold some aces, such as their expertise in more ambitious projects or their financial bases.

“The increasingly massive size of oil and gas projects and their complexity ensure that oil companies continue to play a key role,” as they have the advantage over service industries of being the sole representative throughout the project, Ernst and Young said.

“In most of the cases, we (Shell) will continue establishing alliances with state companies, in their and our countries, specially with gas, which needs big investments,” said Linda Cook.

But the majors can longer appear to be preying on the countries where they are operating.

“We can do a lot of things more than our regular work, such as education and training,” said de Margerie. “It is essential for Total to go beyond its traditional role.”

http://uk.news.yahoo.com/afp/20080706/tbs-oil-energy-commodities-5268574.html