Pro­duc­ers los­ing sway over feed­stock na­tions

The Weekend Australian - Travel - - University & Higher Education -

IN­TER­NA­TIONAL oil com­pa­nies must im­prove their tech­no­log­i­cal ex­per­tise to sur­vive a trend of in­creas­ing na­tion­al­ism among na­tions with en­ergy re­sources, says Eni SpA chief ex­ec­u­tive of­fi­cer Paolo Sca­roni.

‘‘ The bal­ance of power be­tween in­ter­na­tional en­ergy com­pa­nies and pro­duc­ing na­tions is chang­ing, and not in our favour,’’ Sca­roni said at the In­ter­na­tional En­ergy Fo­rum in­ter­view in Rome. ‘‘ The game is about tech­nol­ogy. We need to be needed.’’

Oil pro­duc­ing coun­tries are seek­ing a higher share of profit from crude as prices for the com­mod­ity have dou­bled in three years, touch­ing a record $116.97 a bar­rel last week. Nige­ria and Libya are rene­go­ti­at­ing con­tracts, while Eni and its part­ners had to cede a big­ger stake in Kaza­khstan’s Kasha­gan field to that coun­try’s gov­ern­ment last year.

The share of global crude re­serves held by in­ter­na­tional oil com­pa­nies has dropped to 6 per cent from 75 per cent in the 1970s, Sca­roni says. Gov­ern­ments in some pro­duc­ing na­tions are tak­ing close to 90 per cent of the profit from projects, he says. Even with oil prices near records, ‘‘ com­pa­nies’ prof­itabil­ity is de­creas­ing, in many cases be­low their cost of cap­i­tal,’’ he says.

The fu­ture vi­a­bil­ity of in­ter­na­tional oil com­pa­nies such as Eni, Exxon Mo­bil and Royal Dutch Shell de­pends on their abil­ity to de­velop com­plex fields in deep wa­ters, re­cover oil from ag­ing fields and build other ‘‘ chal­leng­ing projects’’ that state-run na­tional com­pa­nies can’t do alone, Sca­roni says.

‘‘ They need to pro­foundly re­think their busi­ness model in or­der to sur­vive and pros­per in the new oil and gas land­scape,’’ Sca­roni told a fo­rum, at­tended by min­is­ters and ex­ec­u­tives from Saudi Ara­bia, Venezuela, Iran and other mem­bers of the Or­gan­i­sa­tion of Pe­tro­leum Ex­port­ing Coun­tries.

‘‘ A long-term vi­sion is nec­es­sary, but it must be ef­fec­tively ‘ sold’ to the fi­nan­cial com­mu­nity,’’ which seeks im­me­di­ate re­turns, says Sca­roni, whose com­pany is the coun­try’s largest oil com­pany.

Ful­vio Conti, CEO of Enel SpA, Italy’s largest util­ity, says the Euro­pean Union should adopt a col­lec­tive approach to en­sure en­ergy sup­ply se­cu­rity, rather than have each of the 27 mem­bers act sep­a­rately.

‘‘ To avoid se­cu­rity of sup­ply be­ing jeop­ar­dised by short­ages and price in­creases, it is of paramount im­por­tance to es­tab­lish ef­fec­tive part­ner­ships be­tween pro­duc­ing and con­sum­ing coun­tries,’’ Conti told the con­fer­ence.

The EU, the sec­ond-largest en­ergy mar­ket be­hind the US, im­ports more than half its nat­u­ral gas, mainly from Rus­sia and Al­ge­ria, he says. More than 62 per cent of its en­ergy needs are bought from out­side the re­gion and the bloc’s de­pen­dency is grow­ing.

Qatar is divert­ing some liq­ue­fied nat­u­ral gas sup­plies that were des­tined for the US and Europe to China in­stead, be­cause the Asian coun­try pays more, Qatar’s oil min­is­ter says.

A new sup­ply agree­ment this month be­tween Qatar and China ‘‘ is a di­ver­sion’’ from Europe and the US, ‘‘ not new pro­duc­tion,’’ Ab­dul­lah bin Ha­mad alAt­tiyah says. ‘‘ We are not in the char­ity busi­ness. Whoever will give me the best price, I will fol­low him.’’

Qatar and Rome-based Eni have agreed to jointly seek projects in oil and gas pro­duc­tion, trans­port and re­fin­ing, At­tiyah and Sca­roni say.

Rus­sia has the world’s largest proven de­posits of gas, fol­lowed by Iran and Qatar. Qatar is the world’s largest sup­plier of LNG.

Iran’s Oil Min­is­ter Gho­lamhos­sein Nozari says he will talk to com­pa­nies about joint projects, adding that no new con­tracts are ex­pected to be signed dur­ing the fo­rum.

Sca­roni and Conti are among more than 40 com­pany chiefs and 90 en­ergy min­is­ters at­tend­ing the three-day bi­en­nial en­ergy con­fer­ence, where in­dus­try lead­ers dis­cussed in­vest­ment, re­source na­tion­al­ism and sus­tain­able de­vel­op­ment.

Ris­ing en­ergy costs are push­ing some con­sumers, such as air­lines, to bank­ruptcy.

OPEC of­fi­cials, in­clud­ing Saudi Ara­bian Oil Min­is­ter Ali al-Naimi, have re­buffed pre­vi­ous re­quests from US and Euro­pean politi­cians for more oil, say­ing sup­ply is suf­fi­cient and high prices are be­ing driven by in­vestors us­ing com­mod­ity mar­kets as a hedge against fall­ing cur­ren­cies.

Pres­sure from con­sumers to raise out­put is ‘‘ prob­a­bly po­lit­i­cally driven,’’ oil news­let­ter Argus re­ported, cit­ing al-Naimi. Bloomberg

Col­lec­tive call: Italy’s Ful­vio Conti

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