Monday, October 20, 2008

Shakeup in the Oil Ranks

Shakeup in the Oil Ranks

Big Oil is still king, but its dominance is under siege. Around the world, oil multinationals, such as ExxonMobil (XOM), Royal Dutch Shell (RDS.A), and BP (BP), have never been so challenged. Even amid record profits from high oil prices, they're battling increased drilling costs, a serious shortage of skilled labor, and threats of higher taxes. And eclipsing all of these headaches is the muscle-flexing of such oil-rich countries as Russia, Venezuela, and Middle Eastern petro-states, which are increasingly shutting their doors to Big Oil to cultivate their own homegrown companies.

The multinationals remain industry leaders, but this year's rankings in Platts Top 250 Global Energy Companies, scheduled to be released on Oct. 20, highlight the declining power of U.S. and European heavyweights. (Platts, like BusinessWeek, is a unit of The McGraw-Hill Companies (MHP).) While Western oil companies occupy the top five spots, players from other regions are rapidly moving up the list.

Russia, not represented among the top 10 companies on last year's list, now holds two slots. State-controlled Rosneft has moved up to No. 6, from No. 16 last year; while natural gas behemoth Gazprom is No. 10, up from No. 17. (Private Lukoil has advanced to No. 11.) The Russian companies have benefited from a combination of high oil prices and Russian Prime Minister Vladimir Putin's consolidation of the country's oil assets into a handful of players.


Platts annually ranks the companies by assets, revenue, profit, and return on invested capital. Asian countries have added five more players to the top 100 over the past four years, while Eastern European countries have added the same number since 2005.

The steady shift of power is occurring beyond the realm of oil. The top half of the list also contains more U.S. electric utilities, which, after several tough years, are benefiting from higher prices, deregulation, and cost controls. Europe is also seeing a new generation of superutilities, spurred by privatizations of state-run businesses and new rules that encourage cross-border mergers.

The latest list also reflects a trend to public listings in previously opaque parts of the world, such as the Middle East. Abu Dhabi National Electric (234) and Saudi Electric (170) are the first gulf outfits to be ranked. With more players seeking to augment state support with investor capital, the list is sure to grow.

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