UNCTAD?s latest World Investment Report 2007 highlights a profound historic shift that has taken place in the global oil & gas industry. The seven sisters who controlled the industry after World War II?which later morphed into ExxonMobil, Chevron, Royal Dutch Shell and British Petroleum?have given way to a new order comprising state-owned national oil companies (NOCs) who control the bulk of the world?s oil & gas reserves and one-third of production. The old seven sisters hold just 3% of reserves and produce around 10% of the total.
These NOCs include the likes of Saudi Aramco?the main possessor of spare crude capacity in the world?China?s PetroChina, Russia?s Gazprom, National Iran Oil Company, Brazil?s Petrobas and India?s ONGC. These NOCs, a legacy of the 1970s? nationalisation wave and emergence of Opec, have also begun to displace the seven sisters from their leading positions on the world?s stock exchanges: PetroChina thus bids fair to surpass ExxonMobil as the world?s most valuable business after it lists on the Shanghai stock exchange next month.
Serving the energy security objectives of their respective governments, these NOCs have become aggressive TNCs in search of oil & gas. China?s CNPC, which controls PetroChina, is active in 23 countries. ONGC?s subsidiary OVL has 25 properties in 15 countries. The International Energy Agency projects that 90% of the world?s new hydrocarbon supplies will come from the developing world. By contrast, 40% of new production came from industrialised nations during the last three decades, according to a report by Rice University?s James A. Baker III Institute of Public Policy.
Indian and Chinese NOC forays into Africa, for instance, have been motivated by their desire to secure access to oil for their rapidly growing economies. India?s ONGC has been heavily involved in oil exploration in civil-strife-torn Sudan. So, too, has CNPC that has invested $8 billion in that country?s oil sector, complete with armed protection.
The rise to global dominance in oil & gas entails a dilemma as to whether or not to invest in conflict-ridden countries. The way out is to participate in initiatives such as the UN?s Global Compact and Extractive Industries Transparency Initiative that set standards for corporate governance in such places.