The Real Heavies in Crude
Chris Helman at Forbes recently updated his annual listing of the world’s largest oil and gas companies, based on data provided by Wood Mackenzie. In today’s column I want to build upon that list and discuss its implications.
It’s enlightening to see how international oil companies (IOCs) stack up against the world’s national oil companies (NOCs). In the U.S., we think of IOCs like ExxonMobil (NYSE: XOM) as “Big Oil,” but that’s a relative term. The majority of the world’s largest oil and gas companies are NOCs. Here are the 20 largest in the world based on 2014 production levels.
MMBOE/d refers to million “barrels of oil equivalent” produced each day. This is a conversion used to measure oil and gas production on a common basis. “Liquids” refers to the production of crude oil and natural gas condensate.
Note that the list is dominated by companies that are either entirely state-owned (e.g., Saudi Aramco, National Iranian Oil) or are more than 50% state-owned (e.g., Petrobras, Gazprom).
Only two of the companies on the list are primarily natural gas producers: Gazprom and Qatar Petroleum, while for 10 of the top 20 liquids accounted for at least 75% of production.
ExxonMobil was the fourth-largest oil and gas producer, but nearly half of its production was natural gas. If we look solely at the volume of oil produced, ExxonMobil barely stays in the top 10:
This chart also demonstrates a point I often make to people who think oil companies have much control over the price of oil. The IOCs on the list such as BP, ExxonMobil and Chevron control a very small percentage of the world’s oil supply. None of them could make a substantial enough cut in their crude oil production to have a significant effect on the global price of crude oil. For instance, if ExxonMobil tried to influence crude oil prices by cutting its output in half that would only amount to a bit more than 1% of the world’s oil production. Oil prices might respond a bit, but not nearly enough to compensate for ExxonMobil’s lost production.
Saudi Aramco is a different story altogether. Most people are unaware of the power Saudi Aramco holds over the global economy, but it’s the one oil company in the world that could unilaterally drive oil prices back above $100/bbl overnight. There is enough spare capacity in the system to make up for the loss of half of ExxonMobil’s production, but take half of Saudi Aramco’s production offline and oil prices would skyrocket.
Most of the world became aware during the oil embargo in 1973 that OPEC (Organization of Petroleum Exporting Countries) had the power to double or quadruple oil prices over a short period of time. In fact, with a third of the world’s oil production it still holds this power, but Saudi Arabia is the only country with the power to do so unilaterally.
That’s also why oil markets have been quickly spooked by events in neighboring Yemen. Oil prices initially spiked 5% last week on news that Saudi Arabia had launched airstrikes in Yemen. Many asked why violence in such a minor oil producer as Yemen should have had such an immediate impact on the price of oil. It’s because Yemen’s neighbor to the north is the most important oil producer in the world .
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