The Role of Politics and Economics in International Exploration and Production: Future Implications1
Michael Economides, George E. Kronman, 2000. "The Role of Politics and Economics in International Exploration and Production: Future Implications", International Oil and Gas Ventures: A Business Perspective, George E. Kronman, Don B. Felio, Thomas E. O’Connor, Mindy S. Kronman
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Throughout the twentieth century, there has been an intense international friction between governments of major powers and national oil companies (NOCs) for the right to search for and control oil resources. Decolonization and the drive toward independence following World War II gave rise to NOCs, especially in the developing world. Most of the major producing countries (Saudi Arabia, Venezuela, Iran, Iraq, etc.) formed NOCs in the 1970s following a wave of petroleum production nationalization by host countries. Many of these larger NOCs have had an exclusionary, and at times confrontational, relationship with Western countries.
Following the oil price shocks of the 1970s, the consuming world has enjoyed low and relatively stable petroleum prices. Production in the U.S. has continued to decline, although production from the Alaskan North Slope has extended the decline curve. Rig rates in the U.S. and the world have remained stable.
From 1973 to 1999, world reserves have more than doubled, although production from about this same time period has gone up about 50%. To meet future world oil and gas demand, assuming natural reservoir decline (10% annually) and oil demand increase (1.5% annually), it is estimated that the worldwide petroleum investment needed over the next decade could exceed $1 trillion. Most of the investment will be made by large multinational companies and this has been an important reason for the recent wave of oil company megamergers. Nationalizations of the 1970s are likely to be reversed in the not too distant future because of the necessary reintroduction of the largest multinationals into the sphere of operation of the largest NOCs.
We believe that global gas demand will grow at a much faster rate than previously predicted and may comprise as much as 47% of the total worldwide energy demand. Future oil demand will most likely be met by production from major producing countries and the deep water. Assuming current reserves and reduced oil consumption, we estimate oil usage for at least three more centuries.
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A “one-stop” business view on how to succeed in international exploration and production. Success in the international upstream arena requires more than the technical ability to find oil and gas. Relationships with governments and people, mutually beneficial contracts, workable strategies, and implementation plans are necessary to build strong, mutually beneficial, and profitable ventures. Key components that drive exploration and production in the global environment are examined. Specific topics include negotiating for success, contracts, the role of technology in international strategies, cross-cultural relationships, alliances, and international upstream financing. Authors from around the world, representing industry, governments, national oil companies, consultants, and academia, contributed their perspectives. Views are provided from both sides of the negotiating table, the corporate boardroom, the resident manager, the explorationist, the businessman, and the theoretician. Geoscientists, engineers, and negotiators, who are, or would like to be, involved in the global energy business will find this collection an important reference.