The recent announcements of 3rd quarter financial results for major international oil companies produced bad results in comparison to last years bonanza results. All of the international oil companies (IOCs) are maximizing costـcuts to the limit. Most of them are also reducing their man power by cutting them by 10 percent and more. Shell is reducing their staff by 5000 and merging units.

Exxon Mobil, the world biggest oil company, reported last week that its profits fell by 68 percent in the 3rd quarter, while Chevron dropped by 51 percent, and Shell by 62 percent. Certainly not good news for IOC, but these are real facts. As oil prices dropped by more than 52 percent from its peak of 147 US dollar, this level is better than the $32 per barrel of December last year, which would have made the IOCs results much worst.

The overall opinion is that oil prices have reached their lowest; that $70 per barrel is the bottom line and everyone has to work around it. Despite the fact that demand for oil is increasing and that next years supply will be exceeding the demand, with new surplus reaching about 150,000 barrels per day (bpd), actual demand will be in the region of 30,000 bpd. This is figure is worrying to both oil producing countries and IOCs. Oil companies, however, are confident that they can manage their business.

Oil companies know that era of merger and acquisition is over and they have to come up with other ideas. Since the synergy is no longer there, if say BP to merge with Shell for example, no value will be created nor added to their base resources. The only valuable option is join forces with other growing oil companies that have the cash resources and strategic values in the East, with the likes of Petrochina, or Singopect or Vietnam Oil Company for example.

The best illustration is the Pertochina example, with BP in Iraq and the Rumillah field joint venture (JV). Or a better example is the recent JV between Kuwait Petroleum Corporation (KPC) and two Japanese companies and Vietnam for building a 150,000 bpd refinery in Vietnam, or the JV of Saudi Arabias Aramco with Total or ConocoPhillips.

Now the philosophy is changing with time and circumstances and mainly with the function of oil prices. Or because of the excessive power of IOCs of the fifties and the sixties. In the fifties, IOCs were controlling government; making and creating governments. They brought down the government regime in Iran and boycotted Iranian oil, opting to increase their oil supply from Saudi Arabia, Iraq and Kuwait and leaving Iran penniless. All of this led to the collapse of the Prime Minister Mosadeqs regime.

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