The changing face of oil industry

A quick look at the Forbes list of the top 25 oil companies indicates that it is business as usual: Saudi Aramco continued its domination of the first ranking oil company in the world with its mammoth daily production of 12.5 million barrels per day (bpd).

Conventional majors such as Exxon/Mobil, BP and Royal Dutch Shell are there as well.

Moreover, national oil companies also continue to be visible. They include Russia's gas major Gazprom, National Iranian Oil Co and state-owned firms from Mexico, Kuwait, Qatar and Nigeria. In addition, there are emerging companies from China such as PetroChina and Sinopec. Petrochina occupies the fifth rank and Sinopec is in the 23rd position.

And here comes the creeping difference.

The Forbes list was compiled based on last year's figures. This year’s performance is pointing to a little different situation. According to this year's first quarter results of PetroChina, it produced 2.4 million per day, surpassing that of Exxon/Mobil by 100,000 bpd.

PetroChina like Exxon/Mobil is a publicly-traded oil company though the Chinese government controls it. And more significantly, it is only 13 years old, against more than one century of history for Exxon.

In the past few years, China moved to occupy the world's second largest economy and the world's second biggest energy consumer. It is on its way to occupy the world's largest economy as early as 2020 if prediction by PriceWaterhouse comes true.

To meet its growing energy demand and continue its economic growth, China needs to secure its oil and gas supplies. And to do that it opted for the option of takeovers and acquisition, which will allow it secure proven reserves immediately instead of waiting years for prospecting activities to fruit.

Given this interest, which is driven by what could be termed resource nationalism, where commercial considerations are eclipsed in favor of more strategic ones. One result is that new oil majors backed by governments are more willing to pay higher prices that may not be warranted by market calculations.

The new bid by the China National Offshore Oil Corp. (CNOOC) to buy out Canadian firm Nexen is a good point in the case.

CNOOC is offering $ 15.1 billion, which amounts to 61 percent premium over current market price.

Last year the same CNOOC paid $ 2.1 billion for another Canadian firm Opti, which carried a value of $ 11 a barrel in proven reserves and more important it gives China a foothold in Canada's burgeoning oil sands industry.

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