State Oil Cos. Transcend Borders
Ernst & Young estimates in a report published yesterday that more than half of the state oil and gas companies in the world have already acquired assets beyond their national borders. They are faster to undertake risky investments, work together more successfully than private companies and are growing in value much faster than private companies. In a number of cases, however, the state itself interferes with its own expansion. The Russian government, for example, makes access to Asia easier and access to Europe harder. There are over 100 state oil and gas companies in the world.
In 2007, state gas and oil companies and sovereign funds invested more than $13 billion, or a third of their total investments, abroad, according to the consulting company John S. Herold, Inc. They compete with transnational companies and behave identically to them. State companies are given preference in many countries, however, because they can provide other benefits. The Chinese state CNPC promised investments in railroads and electricity when it bought PetroKazakhstan in 2005, for example. They are also more likely to work together, as the state oil companies of Iran and Venezuela.
Analysts have identified a number of problems looming in the future for state oil companies. The first is a conflict between the companies’ commercial interests and political missions. Another problem is politically motivated resistance in foreign companies they operate in, such as when the Chinese CNOOC was forced to abandon its efforts to buy the U.S. Unocal in 2005.
Konstantin Simonov, director of the Foundation for National Energy Security, says that a more meaningful division of companies is those that have reserves in the country where their shareholders are and those that do not. “Their overseas strategies are determined by what they do not have. Companies with no reserves try to obtain access to production assets at any cost, and those that have them try to obtain overseas assets in refining and access to the direct consumer,” he explained.
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All the Article in Russian as of June 25, 2008
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