I know this is a polemic topic, but when looking at the graphs below I can’t stop thinking that there must be a relationship between the openness of the O&G market and how much O&G exploration and production becomes healthy to a country.
Whereas in Brazil, 94% of the production is with the state owned Petrobras, in the North Sea the same 94% is distributed among 14 companies and in the Golf of Mexico, 19 companies. Not to mention that the top producers’ in the latter two regions are not state companies nor even companies originally from these countries. In the UK North Sea, top crude oil producer is CNOOC, a Chinese company and in the Golf of Mexico, Shell, a Dutch company.
Why does it seem to me that the models in the UK and US are healthier to a country and for the industry itself? My four main reasons:
- COMPETITION: More companies running for production means more competition and competition is necessary in any market. It drives efficiency, technology development and the creation of jobs.
- DIVERSITY: Different companies will bring different ideas to the industry and the regions they are at. New ideas will generate more opportunities that should have a positive impact in the economy.
- RISK MANAGEMENT: Most investors like to diversify their bets as it helps manage risk. A variety of companies means investments are coming from different sources, bringing money into the country and diluting the risk.
- POWER CONTROL: Energy can drive the economy of a country, prices of every single product can go up or down as consequence of O&G prices. It can be dangerous to leave all this power in the hands of one company (even if it’s a state owned one, or maybe worse if it is).