National oil companies (NOCs) will henceforth dictate the rules of global energy business--EJIOFOR ALIKE (Businessdayonline)

Olufisoye Delano, managing director, Nigerian Petroleum Development Company (NPDC) said NOCs were similar to other commercial companies but focus on delivering energy to their host countries.

This according to him has gone a long way in helping those countries increase economic growth.

"We don’t expect international oil companies (IOCs) to do that as they have a different agenda.

They will be committed to the Gross Domestic Products (GDPs) of their own countries."Delano said NPDC had seen different markets emerged, such as the Middle East and the Far East, when 30 years ago Nigeria dealt primarily with the West. The managing director pointed out that a key challenge for NOCs would be meeting domestic supply needs that would compete with exports as customers were now driven by market issues and security of supply.

The delegates agreed that the roles of the NOCs had greatly changed over the past 10 years.

According to them, NOCs hold the majority of the world’s energy resources and are increasingly exerting control over which foreign companies help them to develop these resources and on what terms.

However, 15 percent of delegates said IOCs would determine the future rules of doing business in energy, with 12 percent voting for those with break-through technologies, and three percent asserting it would be owners of assets, rigs, and large vessels. The delegates also identified the two main trends facing NOCs, which were shaping the way they do business.

Their governments see them as cash cows to gain revenues to invest in other social programmes; they focus on control of the reserves and prohibit others from coming in to develop them.

Jesús Reyes-Heroles, director general, Petroleos Mexicanos, a Mexico’s state owned oil company, said the challenge facing NOCs was developing the financial resources to meet opportunities within the market. Reyes-Heroles said there was now mature and diverse discussion within Mexico’s congress about how Pemex should evolve that wasn’t possible 10 years ago, adding that the future of Pemex would become clearer in 2013 once the current administration ends its term. Mexico’s constitution does not allow foreign ownership of its oil and gas resources.

Pemex also paid high taxes equal to 60.8 percent of total sales to the government, which crippled its ability to invest in expanding exploration and production of its most promising - but costly to develop-structures, maintain its infrastructure, and reduce its debt. The government has now adjusted the tax regime to tax profits rather than its revenue as in the past. "We don’t anticipate in the short term to have any private E & P companies come in, but there could be interesting opportunities in the downstream in the future," Reyes-Heroles said.

Mexico is producing 2.1-million barrels per day (bpd) of oil and expects to expand its refining capacity within the next few years. "There is very little that can be done.

"We import a third of our (petroleum products) and in Mexico the reduction of imports when our new refining capacity comes on-stream will ease up supply elsewhere in the market," Reyes-Heroles said.

With IOCs being increasingly pushed towards just managing reservoir risk, it is likely that they will no longer have operator roles in projects. This will be transferred instead to service companies as NOCs have access to the reserves, asserted Peter Goode, executive chairman, Aibel Group. "Service companies will continue to encroach on IOCs — they carry the burden of technical development, responsible for capital investment in equipment and operations personnel. Consolidation will accelerate within the services sector."