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Operating companies and service

companies
The global oil and gas industry is made up
of thousands of firms with an abundance
of terminology.
The following will classify clarify the names
and identities.

International Oil Companies vs

National Oil Companies Strategic
Interests and competitive advantage

Independent
Oil and gas producers
National Oil Companies NOC
Integrated Oil Company IOC
Profit orieneted organisations: Controlled by national governments
BP, Chevron, ConocoPhillips, ExxonMobil, Shell and Total
Four decades ago, our attention would, most
Also ENI and Marathon
likely, be focused on multinational oil
International Oil Company IOC
companies, notably the so-called Seven
Competes across borders, i.e. the large companies
above Sisters.
Junior However, the early 70s witnessed the birth of
Small producers of 500 10,000 bblsd a stronger, high performance NOCs we know
today.

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NOC
Many NOCs such as Gazprom, Petrobras and
Sinopec are majority owned by the state and
partially by private investors Oil Majors
They are usually formed by the governments Often interchangeable with IOCs
such as the ministry of petroleum or ministry of
oil and gas. Supermajors
Some operate nationally (Pemex). BP, Chevron, ConocoPhillips, ExxonMobil,
Others, internationally (Gazprom, Petrobras and Shell and Total
Statoil, CNOOC)
NOCs control90% of the worlds oil

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Strategic goals of IOCs and NOCs

Largest Energy Firms
The
Majors

ENI Petrobras

Shareholder Value Goal

TOTAL Statoil

Gazprom
Sinopec
PetroChina
Rosneft
Aramco
Petronas
Nigeria
Iranian
Pemex
PDVSA
Public Policy Goal

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Largest Upstream O & G

Midstream Companies

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OPEC AND THE FUTURE ROLE

Oilfield Services
OF A CARTEL
The development of a world energy
market, is hardly a free market or one that
is likely to remain free of non-competitive
influences and disruptions to the current
market structure.

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2

The creation, survival, and effectiveness of
the (OPEC) have long demonstrated the
market power of key suppliers of crude
oil.
Over its history of almost half a century,
OPEC has been one of the most effective
cartels in any major market in the world.
OPEC first brought the world the oil shock,
price spike, and long gas lines of the 1970s,
and today OPEC appears to be meeting with
great success as crude oil is currently priced
well about $100 per barrel.
OPEC manages supply to manage price
OPEC has not fundamentally increased its supply
capacity in any meaningful way for more than a
decade.
Not surprisingly, restricting capacity aids OPEC
members in respecting its self-imposed production
targets.
In addition, OPEC sometimes cuts production to
support higher prices, such as in 2006 and 2007.
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Exhibit 2.5 OPEC and the Future
of the Worlds Supply of Oil
Edward Morse and Amy Jaffe
summarize the situation:
OPEC is a success story because, despite
persistent forecasts that it is doomed to fail, it
has not simply managed to survive but can
be credited with succeeding in its basic
objectives:
defending and supporting the income and
revenue aims of its members, and forcing any
burden of adjustment to higher oil prices on other
countries.
The low prices witnessed at the end of
2008 led to a revision in investment plans.
This, in turn, is a reflection of the lesson
that low oil prices can sow the seeds of
higher ones, and that security of supply is
improved by security of demand.
3

Thus, OPEC would like high and stable
demand and a high and stable price, but
this gives rise to a tension between price
maintenance and expanding production.
OPECs joint desires for maximum
revenues for its oil and its long term aim to
attain energy security of demand are at
odds with each other.
The prospect of a market disruption that
might weaken the role of OPEC:
1. If shale gas develops as fully as some
believe, and
2. if LNG becomes as robust a transport
mechanism as many hope.
During the 60s, OPEC spent a lot of time
examining the role of the then weak
NOCs, to help them coordinate their
activities in the international oil market and
undertake appropriate programmes of
action.
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Most predictions see expanding demand
for oil over the next decades,
OPECs share of the market remaining
steady
The future of oil and gas and the resultant
challenges and opportunities for NOCs
Four decades ago, our attention would, most
likely, be focused on multinational oil
companies, notably the so-called Seven
Sisters.
However, the early 70s witnessed the birth of
a stronger, high performance NOCs we know
today.
The fact that this occurred about a decade
after the birth of OPEC is no coincidence.
A Landmark declaration by OPEC in 1968,
include that:
Member Countries should be in a position
to undertake themselves directly the
exploitation of their hydrocarbon
resources.
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THE RISE OF NATIONAL OIL COMPANIES

AND BILATERAL CONTRACTS
The Seven Sisters
During the 70s, many producing countries nationalized their oil From the end of World War II into the late 1970s, seven
industry, reaffirming sovereignty over their natural resources.
By 2005, NOCs controlled 77 per cent of global proven oil
of the larger international oil companiesthe so-called
reserves. Seven Sisterscollectively controlled 85 percent of
Today, 14 of the top 20 oil producers are NOCs or newly known world oil reserves.
privatized NOCs. This includes:
1. Anglo-Persian Oil Company (now BP);
1. Saudi Aramco,
2. National Iranian Oil Company, 2. Gulf Oil,
3. INOC of Iraq, 3. Standard Oil of California (SoCal) and
4. PDVSA, 4. Texaco (now Chevron);
5. Sonatrach and
6. NNPC from OPEC Member Countries. 5. Royal Dutch Shell; and
6. Standard Oil of New Jersey (Esso) and
7. Standard Oil Company of New York (Socony) (now
ExxonMobil).

Big Five
Today, nationally owned oil companies (NOCs) control
over 90 percent of world oil reserves.
Excluding production of the OPEC nations, the
countries formerly constituting the Soviet Union
account for 25 percent of the balance
The Big Five produce 20 percent,
The next 20 largest U.S. firms accounting for only 4
percent of non-OPEC production.
Chinese firms contribute 8 percent, and
Mexicos Pemex 7 percent.

Key National Oil Companies (NOCs) (includes

Exhibit 2.6 Major Oil Companies of the nationally owned firms focused mainly on natural gas)
World Abu Dhabi
Algeria
Abu Dhabi National Oil Company
Sonatrach
Brazil Petrobras
China China National Offshore Oil Company (CNOOC)
BP United Kingdom China China National Petroleum Corporation (CNPC)
China Sinopec
ChevronTexaco United States Iran National Iranian Oil Company (NIOC)
Iraq Oil Ministry
Conoco Phillips United States India ONGC
Indonesia Pertamina
ExxonMobil United States Kazakhstan Kazmunaigaz
Kuwait Kuwait Petroleum Company
Royal Dutch Shell Netherlands and United Libya Libya National Oil Company
Malaysia Petronas
Kingdom Mexico Pemex
Nigeria Nigerian National Petroleum Corporation (NNPC)
Norway Statoil
Qatar Qatar General Petroleum Corporation
Russia Gasprom
Russia Rosneft
Saudi Arabia Saudi Aramco
Venezuela Petroleos de Venezuela, S. A. (PDVSA)