Time of the essence in Venezuela
"It's a challenge for our company and all the international oil companies because of the size and scope of our investments. It's important for us to have those discussions," Mulva said Thursday, shortly before he gave a speech at Rice University about working with national oil companies.
Earlier this week, Chavez was widely reported as saying that he had decreed that Petroleos de Venezuela, or PDVSA, would take majority control of foreign-run oil production projects in the country's Orinoco River basin by May 1.
"May 1, obviously there's not a lot of time," Mulva said.
PDVSA, Venezuela's government-controlled oil company, is a minority partner in such projects run by ConocoPhillips and several other companies, including Exxon Mobil Corp., BP and Chevron Corp.
Exxon Mobil, BP and Chevron all declined comment this week about Chavez's comments. On Thursday, Mulva declined to speculate on the timing or outcome of such talks with PDVSA and the Venezuelan government.
But he said the projects were "very large" and technologically challenging in terms of operation, and "we have to understand what this means to our projects."
Mulva's speech kicked off a two-day conference highlighting a massive study released by Rice's James A. Baker III Institute for Public Policy and the Institute of Energy Economics in Japan. In the study, researchers led by Rice energy analyst Amy Jaffe examined the roles of national oil companies in the international energy spectrum. Companies studied ranged from those like PDVSA that are completely under government control to others that are partially or wholly privatized, such as Lukoil, Russia's largest oil company.
The study found that national oil companies control the vast majority of the world's oil and natural gas reserves. They also have surpassed international oil companies like Exxon Mobil, Royal Dutch Shell, BP and Chevron as the world's dominant producers.
"This is a really dramatic change in the structure of the industry," Jaffe said.
And the International Energy Agency has projected that in the next three decades, $2.2 trillion in new investments will be needed to meet world demand for oil.
Mulva didn't specifically mention the Chavez controversy in his speech. But he said there was "no question" that the oil industry's success hinges on continued cooperation and collaboration between national oil companies and publicly held international oil companies.
Mulva said national oil companies are "in a stronger position to bankroll big projects on their own as well as make acquisitions," and international oil companies also no longer necessarily have a lock on technological expertise.
So international oil companies need to understand their countries' geopolitical issues and tailor strategies for building relationships to each national oil company "to give us an entree if not direct access," Mulva said.
He said the key to collaboration is to share cost and risk, maintain good relationships with oil company leaders, and "a commitment to uphold the sanctity of contractual agreements."
ConocoPhillips has 35-year contracts that give the Houston company a majority stake in two Orinoco projects in which PDVSA has a minority interest.
Also, Mulva said energy policy needs to be more open to allowing national oil companies to invest in the United States, sending a "clear signal" that their contributions are vital.
Victor Zhikai Gao, general counsel of China National Offshore Oil Corp., or CNOOC, China's state-owned offshore oil and natural gas producer, said in a later speech that the company has moved on from its failed 2005 bid to buy Unocal.
CNOOC bid $18.5 billion, but faced a storm of political opposition to a Chinese company gaining that foothold on energy supply. Chevron bought Unocal for $18 billion.
"I really do believe CNOOC's offer was a better deal," he said. "It did not go the way we wished, not for commercial reasons, but for other reasons." Chron
Most oil in hands of governments
National giants' priorities may keep crude in the ground, Rice study says
National oil companies control the vast majority of the world's oil and natural gas reserves, but that doesn't mean bringing it to the surface is the host government's top priority, according to a massive study to be released today by Rice University.
Some state-controlled companies have other obligations, such as creating jobs, providing affordable fuel to citizens or supporting other industries.
And the actions of some indicate that they don't want foreign oil companies to control current production operations on their turf, much less that of future discoveries. Last December, OAO Gazprom, Russia's state-controlled natural gas monopoly, took control of Shell's liquefied natural gas project on the Pacific island of Sakhalin.
And according to news reports earlier this week, Venezuelan President Hugo Chavez said he had decreed a law that Petroleos de Venezuela, or PDVSA, would take majority control of projects in the country's oil-rich Orinoco River basin by May 1.
PDVSA has long been a minority partner in such projects run by Exxon Mobil Corp., ConocoPhillips, Chevron Corp., BP, France's Total and Norway's state-owned oil company, Statoil.
The United States will have to accept the existence of national oil companies as a fact of life, "but should encourage steps to make their activities more businesslike, transparent and — to the extent possible — free of onerous government interference," a 20-page summary of the study said.
It said that the problem is not that the companies "have complex and competing priorities. The problem is whether those priorities stand in the way of timely resource development."
The study, by Rice's James A. Baker III Institute of Public Policy and the Institute of Energy Economics in Japan, will be the centerpiece of a two-day conference beginning today at the university.
ConocoPhillips CEO James Mulva is among speakers scheduled to discuss "challenges and benefits" of international oil companies like his own being partners with national oil companies. Government leaders and industry and academic specialists are slated to speak about the study's findings as well.
Saad Rahim, an analyst with energy consultancy PFC Energy who was not involved in the study, said Wednesday that national oil companies have risen in prominence as oil prices rose in decades past. When prices fell, their importance dissipated as well.
But he said those companies are unlikely to fade from view if prices fall again because they have become important players in the world's energy spectrum, with some that are increasingly tools of state management.
"We've seen some of this before, but never to this degree," said Rahim, who plans to attend the conference.
The summary said that large, undeveloped oil fields exist throughout the Persian Gulf, Africa, Latin America and Russia as well as Iraq's western desert. But private-sector companies with cash needed for risky and long-term finding and development investments often lack access to such regions.
"This raises the question of whether timely development of the vast resources under the control of national oil companies can take place given the constraints of domestic political influences and geopolitical factors," the summary said.
The study examined national oil companies in Saudi Arabia, Nigeria, India, Russia, Malaysia, Indonesia, Iraq, China and Kazakhstan. It also examined PDVSA, Statoil and Russian privately held firm Lukoil. Chron
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