Most oil is in the hands of governments

by Kristen Hays

National oil companies control the vast majority of the world's oil and natural gas reserves, but that doesn't mean bringing it to the surface is the host government's top priority, according to a massive study by Rice University.
Some state-controlled companies have other obligations, such as creating jobs, providing affordable fuel to citizens or supporting other industries. And the actions of some indicate that they don't want foreign oil companies to control current production operations on their turf, much less that of future discoveries. Last December, Gazprom, Russia's state-controlled natural gas monopoly, took control of Shell's liquefied natural gas project on the Pacific island of Sakhalin.

President Hugo Chavez said he had decreed a law that Petroleos de Venezuela, or PdVSA, would take majority control of projects in the country's oil-rich Orinoco River basin by May 1. PdVSA has long been a minority partner in such projects run by ExxonMobil, ConocoPhillips, Chevron, BP, France's Total and Norway's state-owned oil company, Statoil.
The United States will have to accept the existence of national oil companies as a fact of life, "but should encourage steps to make their activities more businesslike, transparent and -- to the extent possible -- free of onerous government interference," a 20-page summary of the study said. It said that the problem is not that the companies "have complex and competing priorities. The problem is whether those priorities stand in the way of timely resource development."

The study, by Rice's James A. Baker III Institute of Public Policy and the Institute of Energy Economics in Japan, will be the centrepiece of a two-day conference at the university.
ConocoPhillips CEO James Mulva is among speakers scheduled to discuss "challenges and benefits" of international oil companies like his own being partners with national oil companies. Government leaders and industry and academic specialists are slated to speak about the study's findings as well.

Saad Rahim, an analyst with energy consultancy PFC Energy who was not involved in the study, said that national oil companies have risen in prominence as oil prices rose in decades past. When prices fell, their importance dissipated as well. But he said those companies are unlikely to fade from view if prices fall again because they have become important players in the world's energy spectrum, with some that are increasingly tools of state management.
"We've seen some of this before, but never to this degree," said Rahim, who plans to attend the conference.

The summary said that large, undeveloped oil fields exist throughout the Persian Gulf, Africa, Latin America and Russia as well as Iraq's western desert. But private-sector companies with cash needed for risky and long-term finding and development investments often lack access to such regions.
"This raises the question of whether timely development of the vast resources under the control of national oil companies can take place given the constraints of domestic political influences and geopolitical factors," the summary said.

The study examined national oil companies in Saudi Arabia, Nigeria, India, Russia, Malaysia, Indonesia, Iraq, China and Kazakhstan.
It also examined PdVSA, Statoil and Russian privately held firm LUKoil.