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Oil Industry

Page history last edited by Brian D Butler 13 years ago

Oil Industry

 

Oil majors are the very largest, fully integrated oil companies. These companies explore for and produce crude oil and natural gas; they transport it by pipeline and tanker; they refine crude oil into finished petroleum products; and they also market crude oil, natural gas, and refined petroleum products to industrial users and retail consumers. As oil prices rise, these companies' proven reserves increase in value; they can sell their product for more money on the open market and stand to benefit from higher revenues. Major companies include companies such as ExxonMobil Corp. (XOM), ChevronTexaco (CVX) and British Petroleum PLC (BP)

 

Independent Oil and Gas producers are partially, but not fully integrated oil companies. For example, an independent oil company might produce, transport, and refine but not market petroleum products to the end user. Or it may produce and transport without refining. These companies include companies such as China Petroleum & Chemical Corp. (SNP), an integrated oil company which also manufactures plastics and operates drive-thru McDonalds franchises in The People's Republic of China, or CNOOC Ltd. (CEO), a company which explores for and extracts oil from the South China Sea. As the price of oil goes up, these companies can sell oil at a higher price, increasing their revenues.

 

Oil and Gas Refining & Marketing companies purchase crude oil, process it and re-sell it to the end-user. Companies include Royal Dutch Shell (RDS.A) and Valero Energy Corp. (VLO). These companies sometimes benefit from higher oil prices, depending on whether the price they pay for oil from companies that extract it from the ground goes up as well. If rising oil prices are a result of limited refining capacity, these Oil and Gas Marketing companies will benefit from higher oil prices because their prices will tend to stay the same even as their revenues increase.

 

Oil and Gas Equipment and Services companies sell technology, equipment, and expertise to companies prospecting for oil. These companies benefit from higher oil prices because their most expensive technologies become cost-effective only when oil prices are high. Major players include Schlumberger (SLB) and Halliburton (HAL), and Patterson-UTI Energy (PTEN) . Smaller companies highly leveraged on oil include Parker Drilling Company (PKD)--the major players are often diversified outside of oilfield services.

 

Oil and Gas Pipeline companies build supply pipelines and stand to gain from increased construction when oil prices are high. They include Williams Companies (WMB) and Enbridge

 

 

Table of Contents:


 

 

 

Oil supply

 

Arabian Peninsula - Persian Gulf

 

"The geography of the Persian Gulf is extraordinary. It is a narrow body of water opening into a narrow channel through the Strait of Hormuz. Any diminution of the flow from any source in the region, let alone the complete closure of the Strait of Hormuz, would have profound implications for the global economy."  Stratfor.com , Japan the Persian Gulf and Energy, Mar 15, 2011

 

 

 

 

 

Oil Prices

see also our full discussion about Globotrends analysis of oil prices

before the crash of 2008...

 

http://upload.wikimedia.org/wikipedia/en/2/2f/Oil_Prices_Medium_Term.png

 

 

 

Industry structure

 

Refining oil close to markets is economically sound, since it is cheaper to ship crude (product tankers are much more expensive than crude carriers).

 

Oil pipelines:

 

As of 2005, oil industry and related services account for at least 40 per cent of the gross domestic product of Russia.

 

Oil pipelines in Europe

 

 

Natural gas pipelines in Europe

 

 

Global Supply and Demand

 

Venezuela is the 4th largest oil supplier to U.S. – after Canada , Mexico and Saudi Arabia – supplying of 12 percent of U.S. oil imports; 68 percent of Venezuela 's oil exports are destined for U.S.  

 

concerns of U.S. recession and global slowdown pushed oil prices lower in the last month.  However, yesterday oil prices (WTI) closed above $100 a barrel driven by expectations that supplies in the near future could be tighter.  Yet, slowing economies in the U.S. , Europe and Asia remain a threat for energy demand.  Markets do not expect supply increases at the OPEC meeting in two weeks;  instead,  OPEC might actually be consider tightening oil supply - some analysts think it is targeting a $80/barrel price floor.  Meanwhile long-term demand projections are heading up with limited new surplus capacity.  Read: “Is $80 a Barrel OPEC's New Target?” and “Oil Prices Swing Between Recession Fears, Supply Worries

 

Oil transportation choke points constitute a key vulnerability to oil supply – and an additional security surcharge for transit.  Crude oil exported through the Strait of Hormuz in the Gulf rose to 750 million tonnes in 2006; 27 percent of transits on oil tankers carry crude.  It is easy to imagine how any military action in the strait would cut off oil exports from OPEC's biggest producers and harm the booming economies of Gulf – and cause oil prices to spike.  Plans to circumvent the Strait are among investments planned by some of the UAE’s state investment agencies.  Take a look at: “Energy Supply and Transit Bottlenecks and Rachel Ziemba’s “Tracking State Holding Companies and Sovereign Investors of the UAE

 

Finally, national oil companies, who will control a growing share of oil reserves have tended to invest less in exploration and innovation than international majors.  That may now be changing as many companies are scaling up oil – and gas – projects to compensate for declining fields.  But costs too are rising.  Check out: “Are High Oil Prices Prompting Energy Investment? By Whom?

 

After ending oil trade in dollars last year, the government of Iran – the second largest OPEC producer – opened an exchange to trade petrochemicals and is planning to reduce the state's role in the country's energy industry.  Read: “Iran's Oil Bourse: What Effect on Energy Markets?

 

According to the latest McKinsey Quarterly, Petrodollars – public and private flows – are among the fastest growing investment source, accounting for higher outflows than Asia .  Read: “Where Are Petrodollars Now?

 

 

 

Petrodollars

 

see our discussion on Petrodollars

 

 

 

 

 

 

 

 

Companies of interest

 

 

bp "beyond petroleum" (British Petroleum)

 

 

 

 

More Energy Companies (external links)

Anadarko Petroleum • BP • ChevronTexaco • Arch Coal • Cameco • ConocoPhillips • Enbridge • Consolidated Edison • Entergy • Exelon • Exxon Mobil • Frontier Oil • GE • Halliburton • Philips • Massey Energy • Occidental Petroleum • PG&E • Peabody Energy • Shell • Sasol • Schlumberger • Sinopec • Suncor • Sunoco • SunPower • Suntech • Suzlon • Toshiba • Valero • Xcel

 

 

 

Oil - consumption This entry is the total oil consumed in barrels per day (bbl/day). The discrepancy between the amount of oil produced and/or imported and the amount consumed and/or exported is due to the omission of stock changes, refinery gains, and other complicating factors.
Oil - exports This entry is the total oil exported in barrels per day (bbl/day), including both crude oil and oil products.
Oil - imports This entry is the total oil imported in barrels per day (bbl/day), including both crude oil and oil products.
Oil - production This entry is the total oil produced in barrels per day (bbl/day). The discrepancy between the amount of oil produced and/or imported and the amount consumed and/or exported is due to the omission of stock changes, refinery gains, and other complicating factors.
Oil - proved reserves This entry is the stock of proved reserves of crude oil in barrels (bbl). Proved reserves are those quantities of petroleum which, by analysis of geological and engineering data, can be estimated with a high degree of confidence to be commercially recoverable from a given date forward, from known reservoirs and under current economic conditions.

Pipelines This entry gives the lengths and types of pipelines for transporting products like natural gas, crude oil, or petroleum products.

 

 

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