NOCs, Asian Demand Growth And Why America No Longer Controls Its Energy Future - SH [View All]

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In general, all of the big producers are seeing their oil consumption skyrocket far above global growth, with Saudi Arabia, Russia and Norway leading the way. So while rising Asia demands a lot more oil, the biggest sources have trouble boosting production.

What can the major oil companies do about any of this? Not as much as you think. Increasingly, it's the home-team NOCs that control the bulk of reserves. Today, these state-owned firms directly manage 40 percent of the world's known supply. By 2030, that percentage will rise to roughly three-quarters, meaning Exxon Mobil, BP and others will be squeezed out of new big projects as NOCs grow rich enough to finance these on their own. Already, a significant chunk of the majors' current production is locked into sharing agreements that favor the NOCs as prices rise.

As the NOCs grab more control over future production, the majors face more restricted access to existing oil fields, pushing them toward increasingly complex ventures to discover new supplies, ventures involving tougher geology, deeper sea beds and harsher arctic environments. Those tougher conditions drive up production costs just as a worldwide shortage of rigs and workers emerges. Toss in years of under-investing by everybody -- NOCs and majors alike -- in refining capacity, and this situation won't be remedied anytime soon. Do continuing violence and threats in the Middle East add a surcharge on top of all of this? Sure, although the real problem comes in instability or "rogue regimes" keeping certain countries essentially off-line from comprehensive exploration, something the NOCs increasingly accomplish even in stable nations.

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In sum, crude prices will remain relatively high for the long run as everybody involved ekes out maximum profits across the final decades of oil's supremacy. As for what comes next, watch Asia, because America's strictly in the backseat on this tumultuous ride.

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http://www.scrippsnews.com/node/29763