The Financial Times recently covered the ongoing changes in the Chinese oil industry, with PetroChina acquiring a licence for offshore exploration in the South China Sea. Everyone seems to be talking about the rapid growth of China's oil consumption, but I haven't heard much about the implications for the international energy industry. It's easy to forget that the main global competitors today, the Supermajors and their smaller kin, grew to dominance through a combination of successful oil exploration and large, growing downstream markets in their home countries. The growth of China could well create one or two new global competitors for the same reasons.
A few years ago the conventional wisdom saw the biggest threat to the incumbant major oil companies coming from the national oil companies of the producing countries, both OPEC and non-OPEC. In an era in which PDVSA, the Venezuelan state oil company, had bought Citgo in the US, and Kuwait had purchased the European refining and marketing assets of Gulf, that seemed a realistic development. But the OPEC state oil companies haven't transitioned into true global competitors, for a variety of reasons including the domestic needs of their shareholder governments. The Chinese companies could go down a similar path, but that doesn't seem consistent with other trends in China. Instead, isn't it likelier that they'll learn as much as possible from their foreign joint venture partners and translate that knowledge into the competence to compete in a wider arena?
Today's international oil companies have tremendous advantages in technology, market access, brand identity, and capital, but in the globalizing economy none of these is permanent. Legacies can be eroded, and new competitors become remarkably effective in less time than previously, if not exactly in "internet time." If we try to imagine the top 10 international oil companies in 2020, who is willing to bet that a third of the list won't be Chinese or Russian?