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Study: Future Oil Production Dependent on State-Owned Oil Companies


A study released Thursday by Rice University's Baker Institute for Public Policy in Houston shows that most of the needed increase in world oil production in coming years will come from state-owned oil companies in developing countries. The report says international privately-owned oil companies, which have been the main producers in the past will play an important role working with the national oil companies to improve their efficiency. VOA's Greg Flakus has more from Houston.

As the price of energy has increased in the past few years, much attention has been focused on the profits of large international oil companies, which are sometimes referred to collectively as big oil. But the Baker Institute report, titled Changing Role of National Oil Companies in International Energy Markets makes clear that the real players now in worldwide energy production are companies owned, in part or in whole, by governments.

In the past 30 years, industrialized nations have produced 40 percent of the increase in worldwide production, mostly through investment by private companies. But the Baker Institute's Amy Jaffe, who helped prepare the report, says state-owned companies in developing nations will now take the lead.

"But as we look out over the next 30-year period, 90 percent of what we are going to need, the rise we are going to need in oil capacity, is going to be coming from developing countries," she said.

The report notes that 77 percent of world oil reserves are in the hands of national oil companies and that the major international oil companies now control less than 10 percent of the world's oil and natural gas resource base, with the remaining part of reserves controlled by partnerships between national oil companies and international companies.

The report also makes clear that the private companies are far more efficient than the state-owned companies. According to the report, national companies that are from countries belonging to the Organization of Petroleum Exporting Countries, or OPEC, are only 35 percent as efficient as a privately-owned oil company.

James Mulva, Chairman of the Board and CEO of the Houston-based Conoco-Phillips company tells VOA that there are many ways for state-owned and private companies to work together to increase production.

"National oil companies certainly have the access and ownership of the resources. They have tremendous capability and expertise. What we ned to be doing, as international oil companies like Conoco-Phillipps, is look at how can we collaboratively work together in a way that is different from the past," he said.

The idea of cooperation was also underscored by another participant in the conference at Rice University where the report was presented, Victor Zhikai Gao, Vice President of China's National Offshore Oil Corporation.

"China Offshore has been open, ever since 1987 and we have close to about 200 petroleum contracts with so many foreign companies. Greater openness and greater cooperation between one country and another is in the fundamental interests of all the countries, all the consumers concerned," he said.

But while some national oil companies are open to cooperative arrangements, others are closed or extremely limited by national laws or policies. Authors of the Baker Institute report say that some nations draw money from national oil company profits for social programs or other uses. The report makes no judgment on whether this is good or bad, noting only that, in these cases, the oil companies are often left without sufficient capital to invest in increased production.

But experts say world energy use is growing rapidly and that, over the next three decades, more than two trillion dollars in new investments will be needed to meet demand. National oil companies that cannot reinvest sufficient profits or partner with private companies will be hard pressed to increase their output. The Baker Institute report says there are large undeveloped oil fields in the Persian Gulf, Latin America, Africa and Russia that remain off limits to the private sector firms with the technology and investment capital necessary to exploit them.