Trend: Countries with oil reserves are moving towards hoarding the oil, reducing the power and profitability of international oil companies.
Keith Kohl at Energy & Capital describes why the price of oil for countries without abundant reserves will increase in the long run. Excerpts below.
Link: Oil Wealth
Within the last few years, countries have been taking control of their oil reserves. And in order to secure a larger amount of their oil revenues, time and again countries have gone to great extent to tighten that grip.
I'm certain most of you remember when Russia pushed Shell out of their controlling stake in the Sakhalin Island. Of course, we can't forget when Chavez wrested control of Venezuela's oil projects back in 2007.
After the recent discovery of the Tupi field off the coast of Brazil, the government appears to be looking forward to those revenues. In order to get a larger piece of the revenue pie, Brazil's government will obviously make a move and grab more shares in the state-controlled company.
If you really want an idea of how serious these countries are to protect their oil wealth just look at the latest deal inked between Iraq and China.
Last week, the Iraqi government approved a contract between Iraq's state-owned oil company and the Chinese National Petroleum Company (CNPC). The deal was to let the Chinese develop the Ahdab oil field. The deal was originally signed back in 1997.
The real blow came when Iraq renegotiated the terms from a production sharing agreement to a set-fee service deal. Now, the CNPC will only get approximately $6 per barrel produced. The fee is cut in half once production hits its target of 115,000 barrels per day. No matter how high oil prices move in the future, the CNPC's profits are set in stone.
The reason is simple enough. Over the next few years, oil markets will continue to tighten, and you can bet these countries will protect their oil wealth at all costs, right down to the last drop.