NOCs are broadening their scope of investment. Petrobras, for example, which has long

NOCs are increasing international acreage. (Images courtesy of IHS)
pushed the boundaries of deepwater E&P, began some time ago to push outside its national borders. The company has significant holdings in several South American countries as well as the Gulf of Mexico, not to mention its investments in Africa, Europe and Asia.

One of Petrobras’ partnerships, made public in December 2007, is an agreement with Total to evaluate opportunities to develop and produce oil extracted from oil shale deposits in specific regions in Africa and the Middle East.

Around the same time, Colombia’s Ecopetrol joined forces with Shell to explore in the deepwater Garden Banks blocks 777 and 778 in the Gulf of Mexico as part of Ecopetrol’s strategy to expand internationally to diversify its holdings.

Also in December, Shell signed a framework cooperation agreement with China’s state-owned CNPC to persue joint efforts in the oil and gas sector.

Meanwhile, a host of other NOCs in Southeast Asia, including CNOOC, Sinopec, Petronas, and ONGC, have invested significant sums outside their own countries.

A world analysis
The Japan Petroleum Energy Center and the James A. Baker III institute for public policy issued an interesting report in November 2007. According to the report, titled, “The International Oil Companies,” many of the world’s NOCs are reevaluating and adjusting their business strategies, a process that will have interesting consequences for international oil and gas markets. “Several NOCs have increasingly been jockeying for strategic resources in the Middle East, Eurasia and Africa,” the report says. “At home, these emerging NOCs fulfill important social and economic functions that compete for capital budgets that might otherwise be spent on more commercial reserve replacement and production activities.”
In other words, the NOCs are both backed by and hobbled by their own governments and are unlikely to bring huge reserves into production unless they receive outside assistance. In short, many NOCs need the cash and technology IOCs can supply to succeed.

Cashing in
Though the largest reserves — most estimates are about 77% — are in the hands of NOCs, the IOCs are still the biggest producers, in great part because the IOCs have developed the technology to get the reserves out of the ground.

With NOCs holding enormous reserves and IOCs holding the key to getting those reserves to market, NOC/IOC partnerships appear to be the way of the future.

In fact, the number of partnerships between NOCs and IOCs is growing, and they are blurring the NOC/IOC lines, according to Bob Fryklund, vice president, industry relations at IHS. Fryklund believes cooperative agreements will be increasingly more common. “Collaboration among resource holders, NOCs, and IOCs, is needed to provide investments and technologies to meet local and global energy and socio-economic objectives,” he said.
Certainly, the data Fryklund has gathered on the subject support his claims. “We are in a new age of energy that constitutes a global scramble for resources,” Fryklund said, but that does not mean the IOCs are going to be left out in the cold. And it doesn’t mean that most NOCs are going to make it difficult to do business. Though there has been a recent hue and cry about the NOCs holding enormous reserves, the situation is not new, Fryklund said.

The fact is that NOCs can’t capitalize on reserves that they can’t produce. So the fear that the NOCs of the world will keep their reserves to themselves seems rather groundless.
And in any case, US $100 oil is considerable incentive for cooperation.

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