Producers losing sway over feedstock nations
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