Decline of the Western Oil Majors


"Western oil majors at competitive disadvantage in emerging markets."

The Chinese response, or lack thereof, to the U.S. request to embargo Sudanese crude oil continues to point out the challenges that major oil companies based in the EU and the U.S. have competing against Chinese, Indian and other Asian oil companies. In general, the Asian oil companies do not follow the same political or environmental rules as the major Western oil companies. What effect could this have on the Western oil majors over the next 10 years? Will the Western oil majors remain independent? Will they merge with national oil companies? Or, will they merge with their Asian competitors?

Maintaining growth is challenging for major oil companies based in the EU and U.S. because the domestic European and North American markets are mature. In some cases, such as the ban on offshore drilling in the U.S., exploring new opportunities is even restricted. Conversely, Chinese, Indian and other Asian oil companies are less sensitive to politics or to the environment, which enables them to dominate emerging markets. Because of the competitive disadvantage in emerging markets, the long-term outlook for the Western oil majors is uncertain.

The Chinese government has taken an economic interest in Sudan, despite the Darfur conflict. Sudan is currently producing 400,000 barrels of oil per day (bopd) and has the potential to produce over a million bopd. But, the Western oil majors are not able to compete in this emerging market because of political pressure from the EU and the U.S. governments.

In Brazil, China and India, government regulations control the expanding oil products markets. Even though they are slowly evolving toward market-based pricing, Western oil companies cannot compete profitably in these markets because of the government subsidies and the price controls.

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