One key measure of the structural shift towards the growing dominance of the National Oil Companies (NOC’s) – the level of Capital Spending – suggests the pace of change may be accelerating. Capital spending by the NOC’s1 has soared recently. It has grown by a staggering 131% from 2005 to 2009. In comparison, the major International Oil Companies2 (IOC’s), have only seen a 59% growth in their spending over the same period, according to Evaluate Energy’s New NOC Service (See graph below). This trend looks set to continue. Capital spending by the major IOC’s for the first 9 months of 2010 was flat while spending by the NOC’s appears to be on the increase, judging by the level of financing activity.
Reflecting this increase in capital spending, the NOC’s have raised US$108 billion in the money markets over the last 6 months to spend on their ambitious expansion projects (See graph below). Petrobras (not shown in the graph) dominates this borrowing. Their recent share issue resulted in a US$78 billion cash injection for the company. It also brought about an increase in the state’s stake in the company, which rose from 32% to 65%. The recent upsurge of borrowing has been partially fuelled by the availability of cheap money in countries such as the US and has been coupled with the NOC’s enthusiasm to expand.
South Korea’s KNOC are in the market for more deals as the company works to towards the government’s target of being a world class company with 300,000 b/d production and reserves of 2 billion barrels by 2012. They raised a bond for $700 million in November, indicating a desire for further acquisitions.
As part of Saudi Aramco’s plan to supply a growing demand for transportation fuels and petrochemicals, especially in Asia and the Middle-East, they, along with their joint venture partner Total SA, agreed in June to raise US$8.5 billion through financing to build the 400,000 b/d Jubail Refinery. The Jubail Refinery has an estimated total cost of US$12 billion. As part of this plan they intend to sell Islamic bonds valued at $1 billion this year. This finance deal is one of the many coming out of the Gulf where specific project finance is popular.
Asian governments are keen to…
