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French Version

Oil majors need closer ties with state-owned firms

Western oil majors, struggling to find new reserves, should seek closer cooperation with state-owned companies in oil producing countries or embark on acquisitions to replace the crude they pump each year, analysts told an energy conference.

"The challenge for super majors to increase their reserve replacement ratio is daunting," said Jeffrey Waterous, nonexecutive chairman of oil and gas mergers and acquisitions consulting firm Scotia Waterous, adding: "They are under enormous pressure from shareholders and investors to find new reserves."

"Seven billion barrels have to be replaced this year. ... But we haven't seen any major new discoveries so far. In the remaining months we may see some acquisitions because the drills are not performing," Waterous told the conference.

Most international oil firms are finding it increasingly hard to make oil finds big enough to meet their goals to replace and increase production, putting their long-term health at risk.

The world's biggest reserves are controlled by Middle Eastern states that restrict access to their reserves and their own national oil companies, threatening the international majors' dominance of the oil industry.

Analysts said international firms had to be more creative in finding ways to gain access to reserves of national companies.

They said some African oil producing countries also hindered acquisition of assets there, while competition was growing from emerging new players in China and India.

"National oil firms and their governments in the Mideast, Africa and the Caspian region are in the driving seat today, not the super majors," said Waterous.

His firm, owned by Canada's Bank of Nova Scotia, advised on acquisitions and divestment programs worth $15 billion in the last three-and-a-half years.

"The majors are compelled to deal with the national oil firms to secure reserves and they have to run a very clever and creative policy in that respect," he said.

Beirut,09 05 2005
The Daily Star
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