Print this pageExploration and Production Trends and the Emergence of the
National Oil Companies*
By
Jack L. Kerfoot1
Search and Discovery Article #70027 (2006)
Posted December 10, 2006
*Adapted from oral presentation at AAPG International Conference and Exhibition, Perth, Australia, November 5-8, 2006.
Click to view presentation in PDF format ( ~9.5mb; Right Click, "save target as" for offline viewing).
1Senior Exploration Manager, Murphy Malaysia ([email protected])
Global market forces have created a dynamic, even volatile business environment for the oil and gas industry. As a result, the oil and gas industry has undergone numerous periods of expansion and contraction, which has not always been associated with the price of the commodity.
Historically, the oil and gas industry can be classified into three distinct periods, “Private Sector Growth – 1880 to 1935”, “National Oil Company Growth – 1936 to 1985” and “Private Sector Consolidation – 1986 to Present”.
Each period can be characterized by distinct economic drivers which resulted in unique outcomes for the oil and gas industry. As an example, the current “Private Sector Consolidation Period” marks the precipitous decline of the private sector major operators and the emergence of the national oil companies as the leaders of the global energy industry. The rise to prominence of the national oil companies has already resulted in dramatic changes to the global exploration and production trends and energy.
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Private Sector—No government financial or corporate control Supermajor >USD 100 Billion market capitalization Major USD 30-100 Billion market capitalization Independent <USD 30 Billion market capitalization
National Oil Company (NOC)—Government control Financial Strategic
(Figure 1)
What were the economic drivers for the private sector? Industrial revolution created demand for oil. Proliferation of US companies due to easy land access. European companies exploited colonies’ resources. What were the outcomes from this period? Organic growth. Explosion in new technology. Human resource development.
National Oil Company Growth Period (Figures 2, 3, 4, 5, 6, and 7)
What were the economic drivers for the NOCs? Manage strategic petroleum resources. Develop energy company capabilities. Expertise and experience. Human resources. New technology. What were the outcomes from this period? NOCs developed energy company capabilities. Majors lost production dominance. NOCs focused on organic growth. NOCs dominate global energy industry.
Private Sector Consolidation Period (Figures 8, 9, 10, 11, 12, 13, and 14)
What are the economic realities for the majors? Increasing NOC competition. Declining production and increasing cost. No sustainable growth program. Underperforming share price. What is the impact of this period? What is the impact on the majors? Majors lose exploration expertise. Independents drive global exploration (Figure 13). Service companies drive new technology (Figure 14). Independents lead in new technology application.
The sun is setting on the majors. Declining production. No sustainable organic growth. Increasing cost structure. Intense NOC competition. The future is bright for: The top tier NOCs. Nimble and innovative independents. Sustainable and profitable growth business. Profitable regardless of energy price. Fast moving and cost effective. Politically and culturally astute.
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