Environmental Engineering Reference
In-Depth Information
Is there a future for IOCs?
Are the IOCs obsolete?
This is a reasonable question. For in recent years
there has been a technical “hollowing out” of some IOCs, which increasingly
rely upon oil-service subcontractors in order to cut staff overhead costs
and increase labour flexibility. BP is a good example. It used to have a big
scientific research division and considerable in-house engineering capability.
The science laboratories have gone, and BP now contracts out a very
large amount of its engineering to the oil service companies. Some would
argue that the industrial accidents and leaks at BP operations in Texas and
Alaska in the last decade are the price BP has paid for such labour flexibility
and outsourcing. Shell has gone some of the way down the same road
as BP, though Exxon still retains capabilities across the oil field spectrum.
Meanwhile, the oil service companies, especially the two big ones of
Halliburton and Schlumberger, have steadily expanded, to the point that they
can satisfy all the technical needs of the NOCs.
Might the oil service companies supplant the IOCs?
No. They already
have, in terms of their work with NOCs in developing countries. Yet the oil
service companies don't seem to want go head to head in competition with
the IOC oil majors. “I will not bid against our customers among the IOCs”, the
chief executive of a major oil service provider has protested, explaining why
he and other service providers leave it to oil companies proper - whether IOC
or NOC - to bid for main contracts or leases of oil and gas fields. “I won't take
reservoir or pollution risk [the risk of not finding enough oil or accidentally
spilling too much] because I don't have the balance sheet to do so.”
So is there still a role for IOCs?
Yes. In project management and systems
integration, the Western oil majors still have the skills that the service
providers do not aspire to, and which most NOCs are not yet capable of. In
finance, the Western oil majors have balance sheets that are bigger than
those of the oil service companies and more flexible than those of the
NOCs. So they still have a part to play in the riskier aspects of the industry
(exploration), the more specialized jobs (liquefying natural gas into tankers)
and the tougher locations (the Arctic). It's a shame, however, that these skills
are not being put to more use in renewable energy. There are some big
offshore wind power projects that would greatly benefit from the oil majors'
prime contracting skills and offshore oil experience. But if anything the IOCs
are now pulling out of renewable energy. They are either moving to easier
projects - Shell, for instance, pulled out of the London Array wind farm in the
Thames estuary to invest in onshore wind farms in the US - or scaling down
their renewable investment in general, as BP has done. Why? Because, despite
their green PR, many oil majors have decided they would rather stick to their
highly profitable hydrocarbon business, and leave low-carbon energy largely
to utility companies. It is the latter which may one day render the oil majors
obsolete.
