http://www.economist.com/node/21534794BUSINESS could scarcely be better for the supermajors, as the world’s biggest listed international oil companies are known. A barrel of Brent crude has changed hands for $100 or more for most of the year and cash is gushing in. On October 25th BP announced quarterly profits of $5.1 billion. Two days later Shell reported profits of $7 billion and Exxon Mobil of $10.3 billion. But the tide of the oil business is turning.
Half a century ago life was simple for the world’s oil giants. Countries with lots of oil often lacked the technology, capital and management skills to find and extract it. Western oil firms supplied all of the above, and did rather well out of it. But then OPEC was born, and petrostates started their own state-backed national oil companies to take charge of their reserves.
State-backed firms now dominate the business. Exxon may be the world’s biggest listed company by market capitalisation, but it is a tiddler beside the National Iranian Oil Company or Saudi Aramco (see chart). Measured by the reserves it controls, it is only the 11th-largest oil and gas firm in the world. Shell and BP scrape into the top 20. State-backed firms control around 80% of the world’s oil.
Obviously, private oil companies have to work with the national giants. But the state firms are often unreliable partners. If the government suddenly turns nasty, as in Venezuela, contracts can be torn up and private oil firms sent packing. In some other cases, the state oil firm is simply incompetent—many are expected to provide sinecures for politicians’ useless nephews. After the huge Kashagan oilfield was discovered in 2000 in Kazakhstan, Exxon, Shell, Total, Eni and ConocoPhillips all jumped at the chance of working with the Kazakh state oil company. Billions of dollars later, the field has produced delays and arguments but no oil.
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