One example is the way in which national oil companies (NOCs) are beginning to take an interest in upstream activities, and acquiring the kinds of technical expertise they used to rely on internationals (IOCs) to provide. Now we also know that the NOCs are outstripping the IOCs in capital spending, thanks to a new piece of research from Evaluate Energy.
According to the report, which surveyed over 50 NOCs and the top seven major IOCs, capital spending by NOCs has grown by 131 per cent from 2005 to 2009, while that by the IOCs has increased only 59 per cent in that time.
The NOCs are ramping up to spend more, too. Over the last six months, they have raised $108bn in the money markets. That figure is dominated by Petrobras and its mammoth share issue, but others have also been busy. South Korea’s KNOC raised $700m in a bond sale in November, while Saudi Aramco, along with Total, arranged an $8.5bn finance deal earlier this year for its Jubail refinery.
This last deal gives us a clue to the way forward for IOCs. Rather than try and take on the increasing power of state-backed oil groups, they might be better cooperating and offering assistance when they are able to be more swift-footed than NOCs.
Which is obviously the thinking behind the deal just announced between Shell and Gazprom, which outlines the bases on which the two will work together, especially on upstream projects. Alexey Miller, Gazprom’s chairman, said:
This agreement is a vivid example of the mutually beneficial development of strategic partnership between the world’s largest energy companies. Ahead of us, we have new large-scale projects and growing joint presence in new markets.
Interestingly, industry executives also argue that these sorts of partnerships are actually a reason for remaining integrated – in other words having both refining and marketing and exploration and production arms. An IOC is interesting to an NOC precisely because they are represented along the whole value chain, from exploratoin to production to refining.