The oil majors are facing increased competition from the national oil companies (NOCs) that are growing bigger and stronger and are now flush with cash, according to a new study by Little Falls, New Jersey.-based energy-consulting and market-research firm Kline & Co.

"The NOCs have been around for years, but they have recently become more ambitious," says Geeta Agashe, director of the petroleum and energy practice for Kline's research division. "In the past, they were content to have a good market share in their own country; now they're moving outside their borders to compete on a global scale."

Historically, the top three oil companies' behavior could be predictors of how the others would behave, because they were all motivated by profit, Agashe says. "But the NOCs are driven by other factors, including political objectives, public perception and a desire to reduce dependence on foreign oil. It's a different paradigm than what the multinationals are accustomed to."

Bill Downey, vice president and head of Kline's petroleum and energy practice, adds, "In order to grow profitably, the multinationals need to have a deep understanding of the NOCs' positions and choose where they compete." (For more on NOCs' buying power, see "Asian NOCs," Oil and Gas Investor, August 2006.)

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