KUALA LUMPUR: The growing partnership between newly empowered national oil companies could one day lead to mergers, says the chief executive of Petronas, the Malaysian state oil firm that blazed a trail overseas 15 years ago.
Armed with cash windfalls from a four-year oil price boom, backed by governments anxious to secure resources and able to get the technology they need from other companies, more national champions will find partners in another state oil firm, not international oil companies (IOCs) like BP or ExxonMobil.
“It’s something you can never put aside,” said Hassan Marican, chief executive and president of Petroliam Nasional Berhad, known as Petronas, when asked about the possibility of mergers between national oil companies.
Petronas is the biggest foreign investor in Russia’s Rosneft.
“I think this industry is full of surprises, and things will just have to evolve as relationships are built,” and as national firms begin to resemble international companies, Hassan, 54, told Reuters yesterday in a rare foreign media interview ahead of the Asia Oil and Gas Conference in Kuala Lumpur next week.
He made no mention of any plans by Petronas for any such action.
A lasting combination of state oil champions would have to overcome big issues of national security and pride, but its success would deal a blow to global majors, already struggling to replace their reserves amid heightened competition and the rise of governments eager to nationalise their resources.
“I think as we move along, as national oil companies develop capabilities and competencies, there is now a willingness... to be working together, sharing resources,” Hassan said during the interview on the 81st floor of the iconic Petronas Towers.
“Ten years ago there was a reluctance to work together, but that has changed.”
Petronas, which makes almost as much money as No 3 US oil firm ConocoPhillips and contributes nearly a third of Malaysia’s revenues, has been a leader among national oil companies (NOCs) since the 1990s, when Hassan’s overseas foray was shunned by more conservative state enterprises.
Time has proven him right. Now Asian firms such as China’s Sinopec and India’s Oil and Natural Gas are scrambling to catch up with the Malaysian giant, which derives a third of its production and revenues from overseas.
Some state oil firms have at times worked together amid efforts to contain competition that threatens to drive up asset prices. Sinopec and ONGC last year invested jointly in Colombia.
But Petronas has again stolen a march.
After several quiet years following its last large-scale asset acquisition, a $1.8bn Egyptian gas deal in 2003, Hassan put down $1.1bn to take a share in Russian oil giant Rosneft’s initial public offering last year, making it the top investor.
It also bought a tenth of Cairn India, the Indian arm of British explorer Cairn Energy, adding financial stakes to its portfolio of oil assets stretching from pipelines in Australia to oil fields in Chad.
Hassan, who joined the company as its top financial officer in 1989, said Petronas would not favour one type of investment over another in the coming years, evaluating each on its merit, but said the allure of buying resources directly had waned.
“The challenge is greater, and at this high price levels for assets it is not attractive to us to seek these kind of assets,” he said. “We have always been conservative in our valuations.”
He declined to give any forecasts on oil prices.
It has not shunned new projects, however. Petronas will make a decision this year on whether to move forward with an estimated $10bn Iranian liquefied natural gas (LNG) project and whether to help build a new refinery in Sudan.
Petronas, born a year after the 1973 Arab oil embargo as governments worldwide began retaking control over their oil resources, now pumps about 715,000 bpd of oil and is the world’s biggest producer of liquefied natural gas.
It has no plans to seek a public listing or issue any more bonds, which are a benchmark for Malaysia, Hassan said.
The rise of the NOC is partly of the international oil companies’ own making, says Hassan. As they cut back on investing in new technology to conquer the hurdles of hostile or deepwater oil production – their biggest selling point in an era of high prices – service firms have picked up the slack.
“If one takes the view that the technology can be sourced from service providers, national oil companies have the capability to undertake and operate major projects, then I see this trend of NOCs coming together will continue,” he said. – Reuters
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