Big Oil – Why NOC’s Will Always Be Biggest
Exxon Mobile (XOM), Royal Dutch Shell (RDS.A), Chevron (CVX) and of course, British Petroleum (BP) are the big names in oil today, but in looking for the absolute biggest, none of these companies even come close.
To find the companies that are dividing up the world’s fossil fuels, and dictating the Earth’s energy policies for years to come, look no further than the NOC’s, National Oil Companies, who are by far the bigger than any of their publicly traded siblings.
To compare, Exxon Mobile boosts 12 billion gallons of oil reserves. Saudi Aramco has reserves of around 260 billion barrels, that’s enough to provide all the oil the United States needs for over 36 years, at the current US consumption rate of 19 million barrels a day. Its also enough to make Saudi Aramco the largest oil corporation in the world.
In the aftermath of BP’s oil spill, its the NOCs, companies like Aramco, China’s Cnooc and Sinopec that circle BP’s carcass greedily, snapping up assets as BP is forced to bail out investments to cover damages. Disaster for publicly traded companies like BP, Shell and Exxon mean people have to look elsewhere for oil, and the NOCs have always counted on answering that call.
During the gulf disaster, BP’s Tony Hayward met with Saudi Arabia, China’s Cnooc company, and Russia’s energy minister Igor Sechin. We know some of the resulting details that Tony struck. China’s Cnoac seems likely to have acquired BP’s 60% static in Pan American Energy in Argentina. BP also has new partner in redeveloping Iraq’s Rumaila oil field, none other than China’s larger oil company, CNPC.
Saudi Aramco Chief Executive Khalid Al-Falih, announced at a conference in Texas, $90 billion in additional oil and gas projects before 2015. He says no matter how fast alternatives are ramped up, the world will depend on oil for decades to come. The investment seems excessive to many, considering Aramco is pulling 8 million barrels a day out of the ground, yet their top processing capacity is 12 million.
Al-Falih explained that “our 4 million barrels, in time, will prove to be a very good investment.” He added that “every time we have invested in spare capacity we eventually have recovered our investment.”
Of U.S. consumption, Al-Falih says, “The trend is definitely China. The U.S. has plateaued or certainly will not be growing at the same rate. But the U.S. will remain the largest market for oil for decades to come,” he says.
Al-falih also has words of caution for reliance on green energy. Wind, solar and biofuels have no foothold in the market and need trillions of investment.
“If alternatives over-promise and under-deliver we will see the creation of green bubbles,” he said, “no matter how fast alternative energy sources grow, in 20 years the world will still get 80% of its energy from fossil fuels.”