Thursday, October 18, 2007

Lining up for Exploration: NOC's and IOC's

Some interesting news came across the Dow Jones Newswire and can be found on Rigzone about some offshore blocks off of Columbia.

The Libyan's are also have bidders line up for some blocks as well. The MMS just recently completed some bids for blocks over the past few months for the Gulf of Mexico (GOM).

As more and more National Oil Companies (NOC's) move further away from their homelands, they are treading into the waters of the Independent Oil Companies (IOC's) and gradually reshaping the way oil is being found.

New partnerships are being formed and as we are seeing what is being done in Venezuela and Russia (the nationalization of resource companies), these NOC's are now being seen as new powerhouses.

In the past, Norsk Hydro (or Hydro) of Norway, was one of the few NOC's that explored abroad, outside their own boundaries. Even in the Gulf States, Dubai, for example, has recently purchased some heavy oil land and companies in Canada.

So how does that affect us? National Oil Companies do not strictly operate on market principles alone. Because of their close relationship to their respective government, they may have other objectives, such as wealth distribution (Venezuela - PDVSA), job creation, economic development, and energy security. Whereas the IOC's are concerned with market values and returning a good share price for their investors.

Two different motivations.

In 2006, five of the top ten companies could be considered state-owned and operated. That seems to be a decent ratio of private to state - 50%.

An interesting paper was published by the Federation of American Scientists concerning this very topic.

Looking at it another way, based on reserves in 2006, the top ten producing companies would all be state-owned and includes the following:

  1. Saudi Aramco
  2. NIOC
  3. INOC
  4. KPC
  5. PDVSA
  6. Adnoc
  7. Libya NOC
  8. NNPC
  9. Lukoil
  10. QP

As with every company involved in E&P, their ability to be profitable for either their shareholders or the state-motivations, depends greatly on technology and where they are exploring.

In the article on Rigzone concerning the exploration bids for Offshore Columbia Blocks, one notices that several of the companies involved are state-owned and now working with the major independent's, such as BP.

By working with the independent for-profit companies and through production sharing-agreements (PSA's), it allows the state-owned oil companies to access new technology.

It will be interesting to see how the next few years plays out and the courtship between NOC's and IOC's continues.

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