A few weeks ago news broke that Chevron had bought US independent Anadarko for $33bn, the largest oil and gas acquisition since Shell bought BG in 2016, bigger than Total’s acquisition of Maersk Oil in April 2017. The acquisition is obviously done to boost Chevron’s US shale and LNG production, so it’s very much a US-centered affair. It is this passage I want to focus on:
Chevron, Exxon, Royal Dutch Shell Plc and BP Plc largely missed out on the first phase of the shale bonanza, when more nimble independent producers such as Anadarko pioneered shale drilling technology and leased Permian acreage on the cheap.
One of the things which surprises me is how slowly the oil majors are reacting to cataclysmic changes in the oil and gas industry. But their lumbering clumsily about in the US shale plays while nimbler outfits cleaned up is really just a sideshow. The real change is in how the oil majors will do business in future. Gone are the days when a supermajor would turn up in a stone-age society, bung the local chiefs some shiny trinkets, and bring in a battalion of palefaces to exploit the reservoir for the next 25 years. Nowadays national governments control pretty much every sizeable oil and gas prospect regardless of which foreign company holds the licence, and nothing is going to get developed in future without the full cooperation of the government or their proxy in the form of a national oil company. This has been the case for some time now, and the past decade or so has seen a rapid increase in local capabilities, whittling away the added value foreigners bring.
In short, oil companies are becoming less owners of an oilfield than service contractors to the real owners, the government. This is an entirely different business model requiring a flatter organisation with strong local subsidiaries who are able to make decisions and do business according to the peculiarities of the region. Thus far, none of the majors have shown much interest in restructuring along these lines, instead growing ever larger and centralising power with a handful of decision-makers cooped up in a gargantuan HQ back in the home country. I expect it is the mind-boggling revenues still being generated from legacy fields which gives them the luxury of ignoring how the industry is changing.