The Rise of National Oil Companies and Peak Oil Amy Myers Jaffe James A. Baker III Institute for Public Policy, Rice University February 14, 2008

World Oil Reserves by Country "Worldwide Look at Reserves and Production,“ Oil & Gas Journal, December 22, 2003

Control of World Oil Reserves Majority of remaining oil resources are controlled by traditional state monopolies and emerging partially privatized firms.

The Largest Five IOCs represent 20 percent of non-OPEC Production with 9.7 million b/d and had $150 billion in operating cash flow in 2006 (compared to $50 billion for the next largest twenty American firms). Source: Baker Institute Working Paper: The International Oil Companies

The Largest Five IOCs spent 56 percent of operating cash flow in 2006 on stock buybacks and dividends. Source: Baker Institute Working Paper: The International Oil Companies

The Next Twenty American Firms are spending the same amount on exploration as the Largest Five IOCs. Source: Baker Institute Working Paper: The International Oil Companies

The Largest Five IOCs are struggling to replace reserves. Source: Baker Institute Working Paper: The International Oil Companies

IOC Profile In 2005, the Big five firms account for 56% of profits and reserves, 64% of output and 31% of expenditures on exploration of the 135 private (US and foreign) companies for which the Oil and Gas Journal collects data. The Big Five also dominate the US gasoline market, with roughly 62% of the retail market and 50% of refinery capacity. The exploration spending of the five largest IOCs has been flat to lower in the aftermath of OPEC’s reinvigorated effort to constrain market supply in Given the rise in costs of material, personnel, and equipment such as drilling rigs, the five largest IOCs have in effect cut spending levels in real terms over the past ten years. This trend appears, however, to be easing, with exploration spending by the five largest IOCs rising by 50 percent in 2006, from Instead of favoring exploration, the five largest IOCs have used (in 2006) fifty-six percent of their increased operating cash flow on share repurchases and dividends. They have also increased spending on developed resources, presumably to monetize these assets quickly while oil prices are high. Oil production for the Five largest oil companies fell from million barrels a day in 1996 to 9.45 million b/d in 2005 before rebounding to 9.7 million b/b in By contrast, for the next twenty American independent oil firms, their oil production has risen since 1996, from 1.55 million b/d in 1996 to about 2.13 million b/d in 2005 and The next 20 largest privately traded American oil firms have not followed a similar pattern. Instead, they have steadily been increasing exploration spending since 1998 and their exploration spending levels are now equal to that of the five largest IOCs. This differing pattern comes despite the fact that the five largest IOCs have access to operating cash flow that is three times the size of the next 20 largely traded American oil firms. This exploration spending trend would indicate that these 20 next largest privately traded American firms will control an increasing portion of non-OPEC oil production in the coming years.

IEA Base Case Reference Scenario: Increase in World Oil Supply, Under a business as usual scenario, world will increasingly rely on Persian Gulf and unconventional oil, including about 3.5 to 4 million b/d of Canadian tar sands production, 1.5 to 2 mb/d of upgraded heavy oil, 2.4 mb/d of gas to liquids and 1.7 mb/d of coal to liquids, oil shale, etc S.Arabia Iraq Iran Other OPEC conventionalNon-conventionalNon-OPEC conventional mb/d

OPEC capacity has fallen, not increased, since 1979 Opec can replace all Iraqi/Kuwait oil in 1990 Asian economic crisis leaves extra capacity in 1998 Demand bumps up against capacity Member Country Saudi Arabia Iran Iraq Kuwait UAE Qatar Venezuela Nigeria Indonesia Libya Algeria Total Call on OPEC Spare Capacity OPEC Production and Spare Capacity, (mmbbl/d)

Billion Barrels Available per Price Outlook Does Peak Oil Matter?

At Current Prices, Unconventional Oil is Economical as is Liquefying Coal

Projected Gas-to-Liquids Projects Source: Asia Pacific Consulting