Lagniappe

 

 

Don G. Briggs : Gulf is attractive
in wake of 'resource nationalism'

Nationalism defined in terms of the oil industry is a country's political policy to own and control the country's oil and gas resources. I suppose you could call it "resource nationalism."

You may have recently read or seen in the news this past week where Venezuela's' president Hugo Chavez was having a spat with Exxon Mobil Corporation.

Chavez threatened to cut oil shipments to the United States because Exxon won a decision from the U.S. and U.K. courts to freeze $12 billion in Petroleos De Venzuela (PDVSA) assets in U.S. while the two fight over compensation from contracts that Chavez nationalized this past year.

In May 2007, Chavez stripped some of the world's largest oil companies of their control of the massive Orinoco Belt crude oil fields in Venezuela. The Orinoco Belt has a value of $30 billion with production of 600,000 barrels per day of heavy crude.
The U.S. companies ConocoPhillips, Chevron, Exxon, Britain's BP, and France's Total agreed to the transfer of control. The oilfields were the last of the privately owned fields in Venezuela.

Chavez said during his weekly Sunday broadcast, "That is a sacrosanct legal authority of Venezuela, go to hell gringos! Go home! Go Home!" At this point I must remind you, PDVSA's U.S. subsidiary, Citgo, is the largest retail marketer of gasoline in the United States.

Countries nationalizing their oil fields and expropriating the assets of privately owned Western oil companies is nothing new. Mexico nationalized its oil fields in the 1930s, followed by Saudi Arabia, Iran, Iraq, Russia, Bolivia, etc.

Because of the trend of "resource nationalism," only about 5 percent of the world's untapped known crude oil reserves are open to private companies for exploration. The remaining untapped known crude oil reserves are owned by national oil companies. A national oil company is a state or country owned company such as PDVSA Venezuela.

In 1972, national oil companies owned 8 percent of the worldwide crude production. Fifteen years later, 1997, national oil companies owned 50 percent. Exxon's world crude share was 11 percent in 1972 and 2 percent in 1997. The operating environment for Western oil companies around the world has become more difficult and has been exacerbated by higher oil prices.

The development of oil and gas resources is often found in remote, harsh and politically sensitive environments, making it difficult and risky to develop.

Because of the growing difficulty and risk in developing resources in foreign countries, Western oil companies are looking to the Gulf of Mexico for future exploration. The Gulf of Mexico, though one of the most expensive areas in the world to explore for oil and gas, provides a safe haven, free from "resource nationalism."

 

Don Briggs is president of the Louisiana Oil and Gas Association. His column appears twice a month in The Advertiser. He can be reached at don@loga.la.Petroleumworld does not necessarily share these views

Editor's Note: This commentary was originally published by The Advertiser, on 02/22/2007. Petroleumworld reprint this article in the interest of our readers.

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Petroleumworld News 02/25/08

Copyright© 2008 Don Briggs. All rights reserved.

 

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