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The global oil industry experienced some shifts during the third quarter of 2012, as seen in the quarterly reports from major oil firms. Both European and American companies reported a decrease in production due to weak demand and the falling price of natural gas. Meanwhile, emerging market oil companies have been expanding their overseas operations while simultaneously developing domestic oil and gas fields.
Fifty years ago, European and American enterprises controlled over 80% of the world's oil and gas resources. Today, that number has plummeted to below 20%. If the pace of technology transfer to emerging nations continues to accelerate, we can expect European and American energy giants' influence to diminish even further in the near future.
Rosneft, Russia's largest oil company, saw its production rise by 5% year-over-year in the third quarter, thanks largely to increased output from the Siberian region. This growth pushed Rosneft past Chevron in the U.S., placing it fifth globally. If the acquisition of TNK-BP, which holds an average daily production of 47,200 barrels, goes through, Rosneft’s total output in the third quarter would surpass ExxonMobil of the U.S.
In emerging markets, China National Petroleum Corporation (CNPC) also posted a 4% production increase, reaching 3.29 million barrels per day, outpacing BP of the UK. Petrobras, despite seeing a 2% year-on-year drop in production, still managed to produce around 2.5 million barrels per day, matching Chevron’s output.
On the contrary, European and American oil giants experienced a production decline. Companies like Royal Dutch Shell and ExxonMobil scaled back their operations due to temporary shutdowns of North Sea oil fields and lower natural gas prices in North America. Shell’s CFO, Simon Henry, admitted that the company had been impacted by the global economic slowdown. ExxonMobil’s production fell 8% year-over-year to 3.96 million barrels per day, its lowest in three years. Chevron also saw a 3% drop, partly due to routine maintenance at key oil fields and strategic asset sales by BP.
Emerging market oil companies have used their growing production to strengthen their financial positions, allowing them to invest heavily in research and development and expand internationally. With vast untapped reserves, these countries have significant potential for future production increases.
In the third quarter, Rosneft’s cash flow hit 53 billion rubles (approximately $1.679 billion USD), doubling from the previous quarter. This influx of funds enabled the company to make a $55 billion bid for TNK-BP. Similarly, in July, PetroChina secured 40% of the oil exploration rights for the fourth block off the coast of Suez in Qatar.
While state-owned oil companies in Russia and China have matched or even surpassed Western firms in terms of production capacity, there remains a substantial gap in technological expertise. They still depend on European and American companies for certain critical technologies. For instance, Rosneft’s Arctic Ocean projects involve partnerships with ExxonMobil and Norway’s national oil company, where deep-sea drilling expertise is crucial. Chinese energy companies face similar challenges when venturing into complex offshore projects.
Despite these limitations, emerging market energy giants aim to enhance their technological capabilities through collaboration with Western firms. A decade ago, CNPC spent less than half of what ExxonMobil did on R&D. By 2011, however, CNPC’s spending had doubled that of ExxonMobil. Petrobras, too, allocates more resources to research and development than both ExxonMobil and Shell.
In summary, while emerging economies are rapidly catching up, they must continue investing in innovation to close the gap with established players. The global energy landscape is evolving, and these countries are positioning themselves to play a larger role in shaping it.