Lower oil prices hurt state-owned oil and gas companies
Oil dependent countries and their state-owned petroleum companies are finding the continued lower price of crude comes with a corresponding lessening of power. Over the last several years, when the price of oil was at historic highs during an extended bull market, a number of oil-rich nations used price induced power to hammer at the independent supermajors.
Russia’s state-owned gas company, Gazprom, took over two projects from foreign-owned supermajors, while Venezuela’s Hugo Chavez forced foreign supermajors to turn operations over to the state-owned Petroleos de Venezuela (PDVSA). Today Venezuela is seeking oil investment from both foreign governments – particularly Japan, China and Iran – and the very supermajors Chavez booted out of the country a couple of years ago. Russia is also accepting oil and gas investment dollars from China.
According to Raoul LeBlanc, senior director of financial advisory for PFC Energy in Houston, it’s clear the oil-dependent nations acted in haste when the price of oil was riding high. “Everyone else who thought they could do this on their own can’t,” he says. “The question is, can they last through low prices until economic stability and demand comes back? Venezuela, Iran, Russia, Nigeria – they need high prices.”
Here’s an observation by Gary Adams, vice chairman of Deloitte’s oil and gas group, from a Houston Chronicle article:
Deloitte’s Adams noted that even if national oil companies make overtures, internationals likely will approach with caution countries like Venezuela and Russia that squeezed them when prices were high, and may try it again when the global economy rebounds.
“I would be very tentative if I were an IOC structuring a deal going forward,” Adams said.
Interestingly, oil and gas supermajors typically do not like very high petroleum prices because, among other skills and assets, these companies bring efficiency to petroleum projects. When the price of light, sweet crude is very high efficiency isn’t necessary to maintain profitability.
Published Thursday, April 23rd, 2009 at 9:28 am and filed under Industry News.