With oil price rises fuelled by a politically unstable climate, NOCs have gained a strong foothold in oil and gas exploration and production. According to Deloitte's Graham Shiels, NOCs have access to about 80% of known and 60% of future reserves around the world.
That's a big advantage over the once-dominant IOCs, which have been left with control over only a small part of reserves. As a result IOCs must work to replenish known reserves, leading to exploration in more technically challenging regions, such as the arctic and Canada's oil sands.
A report complied by KPMG entitled Key Issues for rising NOCs, concludes that national oil companies will, in the next decade, be "faced with opportunities to increase their strength and cement their leading position in the oil and gas markets>" And according to Shiels there is definitely a "shift" in the balance of power.
In a study by Deloitte's energy and resources division, A new era for national oil companies, the rise of NOCs is attributed partly to the 'tightening of spare capacity in the oil supply and associated increases in crude prices'.
The role of oil services companies
In July this year, US-based oil services giant Halliburton posted record revenue and announced that prospects looked good for the remainder of 2008. With technological expertise at the heart of companies such as Halliburton, Schlumberger and Aker Solutions, what else lies behind the success of services companies?
Service providers have formed strong relationships with NOCs, aiding their rise by sharing know-how and the ability to tackle large projects. Shiels believes that 'an evolution in the methods of engagement between NOCs and service providers has ensured that NOCs get better skills and technology'.
"There's a big trend for NOCs contracting with service providers. They need technical capabilities and skilled labour. It's not strictly a customer-supplier relationship," says Shiels.
KPMG puts the growing importance of service companies down to high oil prices 'facilitating their rise and ultimately changing the political landscape'. Talking to KPMG, Milton Costa of Petrobras explained: "There are very few service companies and they are in a good position. Costs are high, services are limited and they make good money."
Often operating in the background, service companies are able to keep a low profile on foreign investment in the oil sector. For example, Gazprom has turned to oil services companies to work on the massive Sakhalin Island's fields.
Overall service companies are pushing ahead of the majors in terms of technology and development. In its report KPMG found that while most majors spent less than 1% of revenues on research last year, Schlumberger spent about 3%.
And the future continues to look bright for the services industry, which, according to Shiels, will experience strong growth and bigger order books in the next few years.
The end for international oil companies?
Where does this leave IOCs? Dominant for so long in the global oil game and possessing most of the world's large fields, they must now compete with national oil companies, which have differing political and financial interests. While this may mean IOCs are less powerful now than they were a few years ago, they have not been forced out of the game. Companies including BP, Shell and Total hold valuable reserves, not to mention many years of exploration experience.
In a uncertain world affected largely by a fragile political climate – particularly in parts of Africa and the Middle East – risk taking is surely an area in which IOCs excel and will probably continue to do so. This ensures that IOCs, particularly supermajors such as ExxonMobil, BP and Shell, hold a key position in the market.
Cited in KPMG's report, executive vice-president of Saudi Aramco Khalid Al-Falih explains why taking risks in global exploration will ensure IOCs stay around for a long time.
"Now there are project cost risks and political risks that service companies are not willing to take."