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Historically, the large international oil companies (IOCs) such as BP, Total and ExxonMobil - all of which are have very high credit ratings - may have had the upper hand in global oil as a result of their expertise, technology and financial resources.
However, many of today's national oil companies (NOCs) have become equally formidable players, putting both very much on an equal playing field.
That's Moody's view of the sector, and we find this is particularly true of the NOCs in the Middle East: Saudi Aramco and Qatar Petroleum, to name just two.
Currently, we apply a rating to only one NOC in the Middle East, namely Qatar Petroleum (rated Aa3), with the remaining giants still unrated, largely as a result of there being no immediate external funding requirements, as well as some resistance by NOCs towards disclosing what is often sensitive information about a country's oil and gas reserves.
However, in future, we expect a growing number of NOCs to tap the international capital markets, with credit ratings, as funding requirements into monetising new resources grow.
The total proved oil reserves of the large IOCs (namely ExxonMobil, BP, Shell and Chevron) in 2006 represented a mere 15 per cent of the reserves estimated to be held by Saudi Aramco alone, with the combined oil production of the four international majors still less than that of Saudi Aramco.
Others, such as Qatar Petroleum, are focusing their attention (and indeed their financial resources) more on gas, with Qatar's North Field known as the largest single gas field in the world, and an increasingly vital source of future gas for Europe as the country's liquefied natural gas projects unfold.
Reserves
Whilst the likes of Saudi Aramco, Qatar Petroleum and Abu Dhabi National Oil Company (Adnoc) find themselves with an abundance of reserves and even greater upside potential from historically under-explored territories, the large IOCs are running low, with reserve replacement rates in steady decline. In addition, the NOCs are increasingly competing with the IOCs for reserves, and are often willing to pay more in order to secure the deal.
At the same time, high oil and gas prices have resulted in massive financial resources that cannot purely be absorbed by pension funds. In our view, the co-operation between IOCs and NOCs is likely to increase, as demonstrated only recently by BP's large exploration venture in Libya, a country with significant potential due to its years of under-exploration.
In addition, high oil and gas prices and increased competition for reserves have led to industry-wide cost inflation, some project delays and a growing skill shortage in the industry, which is particularly pronounced in parts of the Middle East. This, combined with reserve replacement issues, may lead to a continuation and even acceleration of the industry consolidation amongst the IOCs, and greater co-operation at national level.
- The writer is vice-president and senior credit officer at Moody's Investor Services, Dubai.
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