Influence of US oil companies in global petroleum business is waning

by John Wilen in New York and Christopher S. Rugaber in Washington

Though the US is still the world's leading oil consumer, its might in the global petroleum business is dwindling. Developing countries are locking up a bigger share of the world's oil and gas resources to profit from high prices and fuel industrial growth.
Some experts view the shift as an emerging threat to the US economy, while others see benefits for consumers, saying an expanding list of suppliers diminishes the impact of any single disruption. Still others see the shift simply as a reflection of globalization, whereby emerging economies lean on rising financial strength and technological know-how to become tougher competitors.

New research by investment bank Goldman Sachs suggests four countries in particular -- Brazil, Russia, India and China, or the so-called BRIC countries -- are grabbing the most market share from American companies. The BRIC's share of the industry's market value has grown from virtually nothing 15 years ago to more than one third today, while American companies' stake has dwindled from more than half to less than a third.
The biggest factor, most analysts agree, is the growth of state-controlled national oil companies, including PetroChina, an arm of China National Petroleum Corp.; Russia's Gazprom, the world's biggest natural gas producer; and Brazil's Petroleo Brasileiro, or Petrobras. And the high price of oil -- crude futures finished close to $ 73 a barrel -- is playing a big role in their expansion plans.

CNPC acquired rights to search for oil in Canada. India's state-owned oil company, Oil and Natural Gas Corp. divulged plans in June to expand in Brazil. And in May the Venezuelan government took majority control of its last privately run oil projects, part of a resource nationalization strategy also being pursued by Russia.
Whether this trend is bad for America's long-term strategic interests is debated by analysts and executives. Daniel Yergin, author of “The Prize,” the Pulitzer Prize-winning history of the oil industry, said it's time to acknowledge what's been evolving for years: US oil companies simply don't have the clout they did a decade or two ago, and it's not necessarily a bad thing.
“A lot of our energy debate harkens back to a world when we were much more self sufficient and doesn't take into account the reality of how integrated we are into a much larger and complex global marketplace,” Yergin said.

ExxonMobil remains the world's largest publicly traded oil company, and its $ 39.5 bn profit in 2006 was a record for US companies. Yet the Irving, Texas-based company pumped just 3 % of the world's oil last year. National oil companies, which control almost 90 % of global oil reserves, produced the bulk of the world's supply.
ConocoPhillips Chairman Jim Mulva said the global petroleum hunt has become very competitive due in part to the rising influence of the BRIC countries, though he stopped short of calling them dominant. After all, America's daily oil consumption of about 21 mm barrels dwarfs that of the BRIC countries, whose combined daily use last year was about 15 mm barrels, according to the US Energy Department.

Still, Mulva credited China and India with creating energy policies focused on keeping their economies expanding -- something he believes the US sorely lacks.
“When energy prices increase, we tend to place blame and not address the real issue: that is, how are we going to develop a long-term energy plan that stresses conservation, additional resources, technology and diversification versus the unrealistic expectation of independence,” said Mulva, whose company operates in more than 40 countries and posted a record annual profit of $ 15.5 bn last year.

Jerry Taylor, an energy analyst at the Cato Institute, a free-market oriented think tank, said the trend documented in the Goldman Sachs report doesn't necessarily make the United States more vulnerable.
Governments have rarely used the so-called “oil weapon” by cutting off suppliesto other markets, he said. If they did they'd risk hurting themselves, due to lost revenue, more than they'd hurt the United States, he added.

Goldman Sachs cites several reasons for America's declining role, such as the growth of production outside of North America and Europe and consolidation, including BP's acquisitions of US companies Amoco and Arco.
At the end of the first Gulf War in 1991, slightly more than half of the 20 largest companies in the energy industry by market capitalization were American, while less than half were European, according to the Goldman Sachs' study. Now, BRIC countries and Europe account for more than two-thirds of the companies, while American countries make up less than a third.

Antoine Halff, head of energy research at Fimat USA, said the shift, driven mainly by the energy needs of the BRIC countries themselves, has its benefits. As more countries boost their production of oil and gas, hurricanes, terror attacks, pipeline accidents and other disruptions have less impact on the worldwide supply chain -- and on prices for consumers. But others see longer term risks to the US relying too much on energy resources other nations’ control.
“Energy is beginning to look like a political weapon, and countries that have access to resources are sitting very pretty,” said Fadel Gheit, an analyst at Oppenheimer & Co. Increasing fuel efficiency and developing alternative energy sources are ways the US could mitigate this disadvantage, Gheit said.