New Seven Sisters

7/30/2019 New Seven Sisters

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THE NEW SEVEN SISTERS

Pressented By :

Group 3, SectionB

Abhishek Mukherjee

C Shyam GirishKaran Rai

Nipun Khullar

Tushar Sharma


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The New Seven Sisters: The World's

Most Powerful Oil Companies

Coined by Italian energy magnate Enrico Mattei, the term"Seven Sisters" referred to the seven international oilcompanies that dominated the world's oil production afterWorld War II.

Today, a whole new group of oil and gas companies havebecome today's Titans

The New Seven Sisters are ranked on the basis of resource

base, level of output, company's ambition, scale of theirdomestic market, and influence in the industry.They are SaudiAramco, Russia's Gazprom, CNPC of China, NIOC of Iran,Venezuela's PDVSA, Brazil's Petrobras and Petronas(Malaysia).


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The Imbalance


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The New Seven Sisters control about one-third of the world's oiland gas production and reserves

The International Energy Agency (IEA) calculates that over thenext 40 years, 90% of new supplies will come from developingcountries

Some of the New Seven Sisters have become little more thantheir home country's bottomless piggybank, funding politicallyexpedient social ventures

Hugo Chvez of Venezuela who spends two-thirds of PDVSA's

profits on his populist social programs

NIOC cannot boost its oil production or fix its refineries becauseits profits go toward keeping gas at 40 cents per gallon for Iranianconsumers


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Gazprom The largest extractor of natural gas in the world and the largest

Russian company

The oil industry has been the largest contributor in terms of revenueto Russia. Oil & Gas exports formed 17% of Russian GDP in 2009

1989-1992: Inception- In August, 1989, the ministry transformeditself into State Gas Concern Gazprom, which became the country'sfirst state-corporate enterprise

1993-1997: Privatization: Gazprom's political influence increasedmarkedly after the new Russian President Boris Yeltsin.

By 1994, 33% of the Gazprom's shares had been bought by 747,000members of the public, mostly in exchange for the vouchers. 15% of thestock was also purchased and allocated to Gazprom employees. The stateretained 40% of the shares, but the amount was gradually lowered to 38%.


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In June 2000 Vladimir Putin became the President of Russia.

2000-2003: He launched an attack against what he saw as

mismanagement and personal pillaging of state assets and

launched a campaign to establish state control in strategiccompanies.

Putin fired the Prime Minister and voted out the chairman of

the company's board and replaced them by men who had

previously worked with him.

In June 2005, Two subsidiaries of Gazprom, agreed to sell a

10.7399% share to the state-owned company Rosneftegaz for

$7 billion, at an undervalued price. The sale combined with

the 38% share of the State Property Committee, gave the

Russian government control over the company.


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Controversies Related to Gazprom

January 2006

The state-controlled Russian energy giant Gazpromcut off the supply of natural gas to Ukraine after theyfailed to resolve a dispute over pricing.

Gazprom's desire to move immediately to marketpricing and Ukraine's willingness to accept only aphased transition to the kind of prices paid in WesternEurope

But the standoff had a political backdrop and had far-reaching implications for Europe, which wasincreasingly dependent on Russia for natural gas.


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Controversies Related to Gazprom

Ukrainian officials said, The price hike was politically motivated

and was punishment for the pro-Western policies of Ukrainian

government NATO and EU

Russian government stated that there were fears that Ukraine,which received about one-third of its gas from Russia, could

siphon off supplies intended for customers farther west and

trigger energy crises in other countries

Russia launched a project to build a gas pipeline linking Russia

directly to Northern Germany across the Baltic Sea. Billed 'Nord

Stream', Critics pointed to attempts by Russia to bypass

Ukraine, Poland, the Czech Republic and Slovakia, which hadtense relations with Moscow.


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The January 2009 gas crisis

On 31 December 2008, Russia stopped supplying gas to

Ukraine over a payment dispute. Russia said Ukrainewas stealing natural gas destined for Europe for its ownneeds. Ukraine denied the charges, but said it needed"technical gas" to pump fuel through the pipeline

system. On 6 January, supplies to Romania, Bulgaria, Greece,

Macedonia, Serbia and Croatia were completely halted

On 17 January, at a Moscow 'summit' that was almost

boycotted by the EU .Russian Prime Minister VladimirPutin and his Ukrainian counterpart Yulia Timoshenkostruck a deal, saying the crisis was over.

On 20 January, supplies to Europe began to flow again


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Latest Developments

As the main route for Russian gas into Europe, Ukraine is vital to

both European and Russian energy security. The European Union(EU) seeks to secure gas supplies through Ukraine by integrating

its eastern neighbour into the European energy market.

Russia is seeking to prevent EU-led reforms in Ukraine in order tosecure stable gas export incomes and continue exerting power

over its sphere of privileged interest.

Russia benefits from an opaque and uncompetitive gas market inUkraine. Having lost control of the pipelines, the Ukrainian

government will have no bargaining power over establishing

prices for imported gas, and will be deprived of this important

source of rent.


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Sphere of Influence


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China National Petroleum Corporation State-owned fuel-producing corporation

Largest integrated oil and gas company in the People'sRepublic of China

In 1949, the Chinese government formed the Fuel IndustryMinistry dedicated to the management of fuel which finally ledto the creation of CNPC on 17 September 1988

Government decided to disband the Ministry of Petroleum and

created a state owned company to handle all Petroleumactivities in China.

PetroChina was formed on November 5, 1999, as part of therestructuring of CNPC


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Petrochina

Established as a joint stock company

CNPC injected most of the assets and liabilities intoPetroChina, related to exploration and production,refining and marketing, chemicals and natural gas

businesses.

Government owns 88% of PetroChina and has controlover appointing the board of directors

No Western companies are yet allowed to explore inChina, and imported oil faces heavy tariffs, soPetroChina faces little competition from the supermajors


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Assets and revenues of Petrochina


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Petrochinas Business Sectors

Oil & Gas Operations

1. Upstream: Oil and gas exploration, developmentand production

2. Midstream: Construction of pipeline, storage andtransportation facilities, natural gas marketingand LNG projects

3. Downstream: Refining and marketing, crude oil

and oil products trading and transportation4. Chemicals: Base chemicals, petrochemicals,

fertilizer and specialties


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Field Services, Engineering & Construction

includes geophysical prospecting, well drilling,well logging, field surface engineering andpipeline construction.

Petroleum Equipment

includes the manufacturing and supply of oil andgas exploration equipment, drilling and

production equipment, storage andtransportation equipment, refining and chemicalequipment, and oilfield chemicals.


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Global Business

CNPC has 30 international exploration and production

projects worldwide


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In 2006, CNPC formed an international consortium with state-run Uzbekneftegaz, Petronas, and Korea National Oil

Corporation to explore and develop oil and gas fields in the Aral

Sea

Development of Ahdab oil field, thus becoming the first

significant foreign investors in Iraq

A contract to develop the Rumaila field with joint venture

partner British Petroleum

In August 2009, PetroChina and Exxon Mobil signed a deal in

which Exxon agreed to supply the Chinese energy company with

liquid natural gas(LNG) for the next 20 years.

PetroChina Investment in the development of Canadian oil

sands in September 2009


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The company spent nearly $7 billion in 2009 and early 2010

to buy refineries and reserves in Australia, Canada, Singapore

and Central Asia

In March 2010 PetroChina entered into an agreement

Petrobras, to assess viability of exporting Brazilian ethanol to

China.

In Syria, CNPC along with ONGC created a joint venture to

acquire minority stakes in several mature Syrian oil and

natural-gas properties.

Partnership with BP to assess a gigantic coal-bed methane

deposit in Xinjiang.

The crude oil pipeline linking China to Kazakhstan further

strengthen China's oil supply security by offering a land route.


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Controversies

Chemical spill:-

chemical plants exploded in Jilin, China, resulting in 100 tons

of benzene pouring into the Songhua River

Harbin city had to cut the water supply from almost 4 million

people, for 5 days

Environmental law too weak 1 million Yuan fine

Issuance of a public apology to Russia due to the incident.

The "Western Gas to the East" Pipeline Project

Constructing a pipeline across Tibet to Gansu province in Chinafrom Xinjiang to Shanghai

Threat to the environment affect wildlife in region

Chinas strategy to consolidate political control of the Western

Regions in China, including Tibet.


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PDVSA

Nationalized company-founded on 1 January 1976 in Venezuela

Latin America's third-largest company

Domestic Contribution-75% reserves in oil and

25%reserves in gas

Venezuela is the fifth largest oil exporting country

In 1990 Venezuela's largest employer

Accounts for about one-third of the countrys GDP and 80percent ofVenezuelas export earnings and 50% of govt.revenues.


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In August 1971, under the presidency of Rafael Caldera, a law

was passed that nationalized the country's natural gas

industry

Venezuela was already well on its way to nationalization by1972. The country officially nationalized its oil industry on 1

January 1976

PDVSA controls activity involving oil and natural gas in

Venezuela

1973 Oil Embargo - OPEC Persian Gulf states members

decided to raise their prices by 70 percent and to place an

embargo on countries friendly to Israel (US and Holland)

Middle East and the oil producing countries of the Persian

Gulf no longer exported to the United States and oil prices

rose steeply.


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Venezuela experienced a significant increase inoil production profits. Between 1972 and 1974,the Venezuelan government revenues had

quadrupled

1977-1997 - Years of Decline

Brief period of economic prosperity forVenezuela was relatively short lived

1980s oil glut - OPEC member countries were not

strictly adhering to their assigned quotas, andonce again oil prices plummeted

Between 1990 and 1999, Venezuela's industrialproduction declined from 50 percent to 24%


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Chvez and PDVSA :

1998 presidential election brought Chavez to power

Chvez reinstated quotas, 10% of PDVSAs annual investmentbudget was spent on social programs. He also changed taxpolicies and the oil revenue collection process.

2002, PDVSA officially went on strike creating a near-completehalt on oil production in Venezuela

Government ended up firing 19,000 PDVSA employees and

replacing them with workers loyal to the Chvez government

ILO launched an independent investigation into allegations ofdetention and torture, surrounding the strike


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Chavez and USA :

Long-standing close diplomatic relationship between Venezuelaand the United States progressively worsened

Chvez's public friendship and significant trade relationship withCuba and Fidel Castro undermined the U.S. policy of isolating Cuba

Raised the price of oil for the United States

The U.S. had called Chvez a "negative force" in the region, andtried to gain support from Venezuela's neighbours in isolatingChvez

Wants China to buy more Venezuelan oil so his country canbecome more independent of the United States

The US takes some 65 percent of its oil exports.


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Diversification of business:

In 2005, PDVSA opened its first office in China -announced plans to nearly triple its fleet of oiltankers in that region

In 2007, Chavez also struck a deal with Brazilian oilcompany Petrobras - to build an oil refinery in north

eastern Brazil

As of March 2010, PDVSAs current strategic planforecasts more production


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NIOC It is a government-owned corporation under the direction of

the Ministry of Petroleum of Iran, an oil and natural gasproducer and distributor headquartered in Tehran.

It was established in 1948.

NIOC exports its surplus production according to commercial

considerations in the framework of OPEC and at the prices

prevalent in the international markets

Signs some long term contracts on "buy-back" basis with

foreign companies

It provides nearly half of the Iranian government's revenues.

Earnings from oil exports account for about 80 percent of the

country's total export revenues


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In 1954, The Iranian Oil Participants (IOP), an eight-

member consortium, was established

Shareholding was in the hands of the major Western oilmajors

BP held 40 percent, Shell 14 percent, Chevron 8 percent,

Exxon 8 percent, Gulf 8 percent, Mobil 8 percent, Texaco 8

percent, and Compagnie Franaise de Ptroles 6 percent.

NIOC was recognized as the owner of Iran's oil deposits

and of all installed assets of the Iranian oil industry, but

actual control over the industry was placed firmly in the

hands of the consortium members

In 1979, NIOC came under the control of the newly

formed Ministry of Petroleum


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In 1979, the second oil crisis occurred in the wake of the

Iranian Revolution.

The Shah of Iran, Mohammad Reza Pahlavi, fled his country

in early 1979 and the Ayatollah Khomeini soon became thenew leader of Iran

Iran was the second largest oil producer in OPEC nations.

Its reduced oil production caused the spike of oil price.

In 1980, following the Iraqi invasion of Iran, oil production

in Iran nearly stopped, and Iraq's oil production was

severely cut as well.

The Jimmy Carter administration began a phasedderegulation of oil prices on April 5, 1979, when the

average price of crude oil was US$15.85 per barrel . Over

the next 12 months the price of crude oil rose to $39.50

per barrel


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Controversies

In April 2010, Washington's push for new USand international sanctions against Iran overits nuclear program

Iran has since the 1990s looked to Asia as amarket for its hydrocarbon commodities and

for partners in an industry with its interest inforging deeper strategic relationships withrising Asian powers namely China and India


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Iran China Relations

Attempts to woo China stem from a commercialdesire to attract investment

China's major national energy companies - China

National Petroleum Company (CNPC), China NationalPetrochemical Company (Sinopec) and China NationalOffshore Oil Company (CNOOC) laid the groundwork forthe eventual development of upstream equitypositions in Iran

In January 2009, CNPC signed a buyback contract withNIOC to take the lead in developing the North Azadeganoil field in two phases


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Contd.. CNPC this year finalized a deal to develop

phase eleven of Iran's South Pars gas field. Itdisplaces Total, which had originally beenslated to oversee both upstream

development and downstream exploitation --primarily through the Pars LNG project

Iran is attractive to China as one of the fewplaces in the Gulf where foreign companiescan access upstream resources directly


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Iran- India Relations

India, which has lost out to China in other

overseas projects, is attracted by Iran's vast

investment needs -- amounting to an estimated

160 billion dollars during the next decade Iran-India energy trade has increased

considerably, reportedly reaching 13 billion

dollars in 2009 Iran also agreed last year to sell 6 million tonnes

per year of liquefied natural gas to India.


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PETROBRAS The company was founded on October 3 in 1953, by the then

Brazilian President Getlio Vargas.

Its installation was completed in 1954 when it inherited two

refineries the Mararipe (state of Bahia) and the Cubatao (state

of Sao Paula).

Petrobras is a world leader in development of advanced

technology of deep-water and ultra-deep water oil production

Petrobras controls significant oil and energy assets in 18

countries in Africa, North America, South America, Europe and

Asia

The Brazilian government owns 55 7% of Petrobras' common


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The Brazilian government owns 55.7% of Petrobras common

shares with voting rights. The privately held shares are traded on

BM&F Bovespa, where they are part of the Ibovespa index.

A controversial Link report came out in 1961 which was

pessimistic about the on shore basins. The conclusions drawn

were on the basis of the technological state of geophysics, which

if improved could change the scenario

In 1973 the company's short period of growth was met by the

first oil crisis. The crisis affected the country as a whole, as the

"Brazilian miracle came to a halt

The OPEC countries rose the international oil prices substantially.

Petrobras being an important customer of OPECs national oil

companies was able to keep Brazilian market supplied.


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To overcome, Brazil shifted to the use of Ethanol and increased

domestic production to be less dependent upon imports.

The 1973 oil crisis started in October 1973, when the members ofOAPEC (consisting of the Arab members of OPEC, plus Egypt, Syria

and Tunisia) proclaimed an oil embargo

It was in response to the U.S. decision to re-supply the Israelimilitary during the Yom Kippur war, it lasted until March 1974.

Petrobras started producing lubricating oils and supporting its

own needs, the first product was named as lubrax MG1 forgasoline engines.

In 1974 the biggest oil province in Brazil the Campos Basin was

located off the North Coast of the state of Rio De Janeiro.


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In 1979 Petrobras was affected by second oil crisis, but theeffect was not as strong as it had been in the crisis of 1973.

The 1979 (or second) oil crisis in the United States occurred inthe wake of the Iranian Revolution

Petrobras is also recognized as the largest sponsor of arts,culture, and environmental protection in Brazil.

Marine bio diversity - Projects like Tamar (marine turtles) andhumpback and whales, the spinner dolphin

In 1997 the government approved Law N. 9.478, allowingcompetitors to develop the country's oil fields. The companyexecuted agreements with other Latin American governmentsand began operations outside of Brazilian domains.

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In 2003 it acquired Argentina's largest oil company PerezCompanc Energa (PECOM Energa S.A.), and its operationalbases in Bolivia, Peru and Paraguay

Petrobras recorded its highest earnings ever in 2007, with morethan US$13 billion of profit.

On June 4, 2007 Petrobras got participating interest inexploration blocks of ONGC in India and ONGC, in turn got toparticipate in oil blocks explored by Petrobras in Brazil

It is planning to buy Eni s 33 per cent stake in Galp, the

Portuguese oil company.

Petrobrass exploration and development of enormous pre-saltfields, so-called because they lie under a layer of salt up to 2km

thick on the floor of the Atlantic Ocean $224billion investment


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PetronasSetting up a state company: 1970

Several factors converged in the early 1970s to prompt theMalaysian government into setting up a state oil and gascompany, as first proposed in its Five Year Plan published in1971.

Former Chief Minister of Sarawak, Tun Abdul RahmanYa'kub was one of the people who proposed the idea ofMalaysia setting up their own oil company

The oil crisis of 197374 made the government even moreaware of Malaysia's dependence on foreign oil and foreigncapital in general.

A final and crucial factor in the creation of Petronas, and itscontinuation in much the same form since, has been thepolitical stability of Malaysia.


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Battling oil depletion: the late 1980s

A way to postpone depletion was to develop sources of oil,and of its substitute, natural gas, outside Malaysia. Late in1989, the governments of Vietnam and Myanmar (Burma)invited Petronas Carigali to take part in joint ventures toexplore for oil in their coastal waters. Thus beganPetronas's first oil exploration outside Malaysia

Another new venture in 1990 was in ship-owning, sincePetronas's existing arrangements with MISC and withNigeria's state oil company would be inadequate totransport the additional exports of LNG due to start in1994, under the contract with Saibu Gas

Expanding globally: the 1990s and


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Expanding globally: the 1990s and

beyond

During the mid- to late 1990s, international exploration,development, and production remained key components inPetronas's strategy along with diversification

In 1996, Petronas entered the aromatics market by way of a joint

venture that created Aromatics Malaysia Sdn Bhd

Formed a contract with China National Offshore Oil Corporationand Chevron Overseas Petroleum Ltd. to begin exploration of block02/31 of the Liaodong Bay area in China.

Forged deals for two new exploration plots in Pakistan and beganconstruction on the Chad-Cameroon Integrated Oil Developmentand Pipeline Project


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Saudi AramcoHistory

Saudi Aramco is 100% state-owned national oil company of Saudi Arabia

Earlier companies like Standard Oil of California and Texaco had holdingin Aramco

Casoc only which changed its name to Aramco in 1944

In 1950 King Abdul Aziz Ibn Saud threatened to nationalise Aramco andgained 50-50 profit sharing arrangement

In 1973 Saudi government acquired 25% of shares in Aramco

Finally in 1980 gained full control of the company and changed its nameto Saudi Aramco in 1988.


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There were both economic and political forces behind thismove. Domestic reserves were never of the class of those inIndonesia or the Middle East and declined in spite ofconservation programs.

In 2004, the Prime Ministers Office reported that petroleumreserves would be exhausted in about 18 years and naturalgas in 35 years. Petronas leadership thus considered itessential to develop exploration and production abroad

Petronas saw opportunities in places where Westerncompanies had difficulties operating because of issuespertaining to their own governments foreign policies or non-governmental critics of these regimes.


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SaudiUS relationship

Saudi-US relationship has consistently been described as anexchange of oil for security

Saudi Arabia has used a large part of the US$1.3 trillion it earnedfrom oil to develop its economy

Military cooperation is yet another area of extensive relations,

arranged for the purchase of huge arms systems including F-15s, F-16s, AWACS, tanks, and missiles

Aramco sells its oil in the United States and in the process subsidizesUS purchases by over one US dollar per barrel on the 1.5 mbd it sells

to US firms

During the Cold War, the United States and Saudi Arabia foundadditional common ground.

f


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Entry of Saudi Arabia in WTO

Entry of Saudi Arabia in WTO in 2005 also helpedAramco especially in petro chemical business

Saudi Arabia succeeded in negotiating with theexisting member countries to allow the kingdom tomaintain a low price in domestically

Europe opposed on anticompetitive terms

US backed its entry in WTO


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Overseas Expansion

Mostly devoted towards the Asian market

emerging markets

Motiva is the JV between Shell US and Aramco

in Texas

Joint ventures and subsidiary offices in China,

Egypt, Japan, Netherlands, Republic of Korea,

India, Singapore, United Arab Emirates, UnitedKingdom and United States

l d h il


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Controversy related to the oil

Deposits in Saudi

The US fears that Saudi Arabia, the world's

largest crude oil exporter, may not have

enough reserves to prevent oil prices

escalating, confidential cables from itsembassy in Riyadh show. It is feared that the

oil reserves have been overstated by as much

as 40% or 300bn barrels

P di hif i il li i


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Paradigm shift in oil geopolitics Saudi supplies that used to go to Europe and the United

States are now headed for Asia

Deterioration in relations with US after 9/11

growth in relations with China signalling the growing power

and market potential of China

Another facet of Saudi Aramco's engagement with China ishigher education

Aramco sold its storage depots in the Caribbean, a signal thatit was abandoning the East Coast market, according toanalysts

India is also courting Saudi attention

C l i


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Conclusion

With Oil & Gas being the new weapon of power andinfluence, these new seven sisters truely commanddominance over the rest of the world. Overwhelminglystate-owned, they control almost one-third of the worldsoil and gas production and more than one-third of its total

oil and gas reserves. In contrast, the old seven sisters which shrank to four in the industry consolidation of the1990s produce about 10 per cent of the worlds oil andgas and hold just 3 per cent of reserves. The oil industry notonly has the economic influence but also the political

influence, over the world. In future, for sure China andMiddle East have a critical geostrategic role to play in theworlds economy and power distribution, considering oilbeing the most important economic driver.


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Thankyou .

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New Seven Sisters