This presentation seeks to illustrate the significant rise of the “international national oil company” in the world’s exploration and production business and to highlight the challenges to the traditional international oil companies as state companies go global in their search for new oil and gas reserves. In doing so, it is hoped that some insight will be provided to the pipeline industry as its embraces the challenges of this new business environment.

Not since the early 1980s has the national resource holder had such a significant impact on the upstream oil and gas industry. The high oil and gas prices of the last three years and the resulting renewed enthusiasm for major investment in both production and exploration have moved the balance of power back to the supply side of the equation. Coupled with this is the paucity of quality upstream investment opportunities; an over-supply of funds generated from increased production revenues; political unrest or embargos in some major producing countries; a perception of tightening supply and demand balance and an ever increasing world demand for hydrocarbons. As if this is not sufficient to generate serious concerns in the board rooms of the world’s major oil and gas companies, there is also a recent trend of hydrocarbon nationalism in some of the key producing countries. Finally, a number of major hydrocarbon countries are seeing their reserves decline as their domestic demand rapidly rises, which is encouraging their state-owned oil companies to look to invest abroad to ensure their long-term survival and to build strategic energy supplies.

Perhaps the single biggest novelty in what could otherwise be considered yet another wave in the eternally cyclical oil business is the realisation by many producer countries that they are now able to feast at the same table as the traditional publicly traded major oil companies. The national oil and gas companies of many of these countries have developed the technical and commercial competence to leave the privileged safe haven of their home country to compete abroad. What is more, most if not all of these “international” national oil companies have understood the significant competitive advantage that can be had in using their government to promote their interests; in leveraging domestic assets to gain access to foreign assets; and in exploiting the empathy created from cultural ties and from their status of state-owned enterprise when partnering with their peers abroad.