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National groups bear brunt of change in fortunes

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By Carola Hoyos

Published: January 26 2009 02:00 | Last updated: January 26 2009 02:00

Little more than a year ago PetroChina, the oil company largely owned by the Chinese government, surpassed ExxonMobil to become the world’s biggest listed energy group. It was the first time in oil’s history that a national oil company had boasted the industry’s largest market capitalisation.

Months later, Alexei Miller, chief executive of Gazprom, confidently asserted that within a decade the Kremlin-controlled gas monopoly he headed would be the world’s largest energy company.

What a difference a credit crisis makes. By the end of last year, after oil prices had fallen dramatically, ExxonMobil again found itself on the top rung as international oil companies started to see opportunities that had not existed a year ago. Every international energy group in the top 10 of a study to be published today by PFC Energy, the Washington-based consulting group – ExxonMobil, Royal Dutch Shell, Chevron, BP, and Total – gained in ranking.

In contrast, PetroChina, Petrobras, Gazprom and Sinopec all tumbled, with the last two companies slipping out of the top 10 altogether.

Their swift change in fortune increases the risk that some of the world’s biggest oil and gas projects will be delayed as technological requirements mount and funding becomes more difficult and expensive to secure. This leaves some national oil companies’ customers worrying there will be too little oil and gas available in the middle of the next decade.

Gazprom controls 25 per cent of the world’s gas reserves. This includes the frigid and remote Yamal peninsula. But Gazprom’s debt burden and the far higher cost of credit could delay necessary investments, analysts said. All this means Europe, Russia’s biggest customer, will have to brace itself for gas shortages far more entrenched than gaps caused by the pricing dispute between Gazprom and Ukraine, analysts and European diplomats warn.

Oswald Clint, analyst at Sanford Bernstein, said possible two-year delays at Yamal were material enough to “tip the supply/demand dynamics across Russia and more importantly Europe firmly into a deficit position”.

Meanwhile, on the other side of the globe, Petrobras recently discovered the world’s most promising new oil deposits buried under thick layers of salt in the deep waters off its south-eastern coast. After months of delays, Petrobras last week came out with its strategic review that paints an optimistic picture of the company’s ability to tap its riches. But some oil company executives are less sure and note that much will depend on the legal framework still being debated that will govern the field’s development. Further exacerbating the issue is the downturn in the oil services sector. Shares of Schlumberger, the world’s biggest oil services company, have fallen 57 per cent.

Such a dramatic reversal in fortunes brings with it the potential of new opportunities for the relatively robust international oil companies. Until recently, oil-rich countries aggressively rewrote their contracts with international oil companies ending their majority ownership, squeezing them out of leadership positions, reducing their profit share and denying them new opportunities. The countries turned instead to national oil companies and oil services groups, leaving international oil companies struggling to expand their production.

In Libya, that attitude appears not to have changed, with Muammer Gaddafi last week raising the possibility of nationalising the country’s oil sector. But other countries, including Venezuela, once the most aggressive oil-rich nation, have begun to approach international oil company executives for new deals.

Ironically, the success of national energy groups, such as Gazprom and Petrobras, lie largely in how quickly they realise the tide has turned against them. Whether the world has enough oil and gas to fuel its economic recovery could rest on their willingness to embrace technology and foreign expertise. and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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