• 5 hours Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 6 hours Oil Gains Spur Growth In Canada’s Oil Cities
  • 7 hours China To Take 5% Of Rosneft’s Output In New Deal
  • 7 hours UAE Oil Giant Seeks Partnership For Possible IPO
  • 8 hours Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 9 hours VW Fails To Secure Critical Commodity For EVs
  • 10 hours Enbridge Pipeline Expansion Finally Approved
  • 11 hours Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 12 hours OPEC Oil Deal Compliance Falls To 86%
  • 1 day U.S. Oil Production To Increase in November As Rig Count Falls
  • 1 day Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 1 day Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 1 day EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 1 day Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 1 day Aramco Says No Plans To Shelve IPO
  • 4 days Trump Passes Iran Nuclear Deal Back to Congress
  • 4 days Texas Shutters More Coal-Fired Plants
  • 4 days Oil Trading Firm Expects Unprecedented U.S. Crude Exports
  • 4 days UK’s FCA Met With Aramco Prior To Proposing Listing Rule Change
  • 4 days Chevron Quits Australian Deepwater Oil Exploration
  • 5 days Europe Braces For End Of Iran Nuclear Deal
  • 5 days Renewable Energy Startup Powering Native American Protest Camp
  • 5 days Husky Energy Set To Restart Pipeline
  • 5 days Russia, Morocco Sign String Of Energy And Military Deals
  • 5 days Norway Looks To Cut Some Of Its Generous Tax Breaks For EVs
  • 5 days China Set To Continue Crude Oil Buying Spree, IEA Says
  • 5 days India Needs Help To Boost Oil Production
  • 5 days Shell Buys One Of Europe’s Largest EV Charging Networks
  • 5 days Oil Throwback: BP Is Bringing Back The Amoco Brand
  • 5 days Libyan Oil Output Covers 25% Of 2017 Budget Needs
  • 5 days District Judge Rules Dakota Access Can Continue Operating
  • 6 days Surprise Oil Inventory Build Shocks Markets
  • 6 days France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects
  • 6 days Syria’s Kurds Aim To Control Oil-Rich Areas
  • 6 days Chinese Teapots Create $5B JV To Compete With State Firms
  • 6 days Oil M&A Deals Set To Rise
  • 6 days South Sudan Tightens Oil Industry Security
  • 7 days Over 1 Million Bpd Remain Offline In Gulf Of Mexico
  • 7 days Turkmenistan To Spend $93-Billion On Oil And Gas Sector
  • 7 days Indian Hydrocarbon Projects Get $300 Billion Boost Over 10 Years
Alt Text

Footloose Iraq Cannibalizes Saudi Market Share

OPEC’s de-facto leader Saudi Arabia…

Alt Text

Oil Markets Brace For Another Hurricane

Oil prices drew back this…

Alt Text

With A World Awash In Oil, Kazakhstan Faces Fuel Crisis

Kazakhstan is struggling with a…

John Manfreda

John Manfreda

John majored in Pre-Law at Frosburg State Universtiy and received his MBA at Trinity University. He has co-authored The Petro Profit report and dividend stock…

More Info

Who Is The Biggest Player In Energy?

Who Is The Biggest Player In Energy?

PetroChina (NYSE: PTR) just surpassed Exxon Mobil (NYSE: XOM) to become the largest energy company in the world, on a market cap basis.

PetroChina was able to accomplish this despite Exxon’s growth of 1.5 billion barrels of oil equivalent (BOE) in reserves. These new reserves are located at the Permian Basin in West Texas and the Kearl Oil Sands project in Canada.

PetroChina’s primary operations are located in China. This may not seem like a major oil hub to the average investor, but China is actually the 5th largest oil producing country in the world.

Now the question becomes: can PetroChina retain its status as the world’s largest energy company?

Business Plans: Exxon vs PetroChina

PetroChina’s business plan consists of strengthening its role in China, while expanding its global operations, so it can become a multinational company with significant influence. Related: 3 Ways Oil Companies Can Survive Low Prices

But PetroChina’s growth will have to come from abroad, as its domestic potential is nearing its limits. Large resources of domestic natural gas have been discovered off the South China Sea, but China will face geopolitical disputes over ownership of those resources from Vietnam. Leaving aside the high-costs of extraction, the territorial dispute will likely keep oil and gas from the South China Sea on the sidelines for quite a while. As a result, if PetroChina is to grow, it will have to expand its global foot print.

Low oil prices, however, present a challenge. Petrochina is currently looking to swap its high-cost Canadian assets with other international companies, in order to restructure itself in a leaner fashion. For now, PetroChina has not signaled any interest in acquiring other companies, suggesting the state-owned firm is pursuing efficiency rather than growth.

ExxonMobil, on the other hand, has been rumored to be eyeing a major takeover of BP. While merely speculation at this point, ExxonMobil would regain its title as the largest energy company in the world if the deal did in fact move forward. Currently, BP is the 6th largest company in the world.

But for ExxonMobil to acquire BP, it would have to clear a lot of hurdles, the most significant of which, would be a blessing from anti-trust regulators. ExxonMobil would also have to convince the UK government to approve such a deal, an uphill task given the fact that the British government has already stated that it would oppose any takeover attempt of BP. Moreover, ExxonMobil would also have to assume BP’s legal liabilities, which at this point, are unknown. Related: Here Is Why Predictions For Lower Oil Prices Are Wrong

Even if BP is too big for ExxonMobil to swallow, the Texas-based oil major is almost certainly looking to capitalize off of the current bear market by making a major acquisition. After recently raising $8 billion dollars in fresh capital, ExxonMobil is well-armed should it choose to pull the trigger.

Meanwhile, ExxonMobil plans to rely on its shale fields in Texas, Oklahoma, and North Dakota as a means to fund larger projects overseas, including a conventional oilfield in Indonesia, deep water projects in Nigeria and Angola, and oil sand projects in Alberta.

Exxon Vs PetroChina: who has the edge?

Based on the forward guidance of both companies, ExxonMobil looks like the clear favorite to retake its previously held position as the world’s largest energy company, on a market cap basis. An acquisition will help grow the company, while PetroChina’s asset swaps are a cost cutting measure, and not a growth plan. But before jumping to any conclusions, we must also understand the geopolitical factors that may come into play.

In a low priced environment, ExxonMobil has the advantage due to its large refinery assets, which benefit from low oil prices. Meanwhile, PetroChina is primarily a producer. ExxonMobil also has a history of making large acquisitions during a downturn. Exxon bought Mobil in 1998, and in 2008, it purchased XTO energy. Related: Saudi Arabia Continues To Turn Screws On U.S. Shale

On the other hand, if oil prices were to rise to the $100 level, I would have to favor PetroChina. With Chinese demand increasing by 4 percent on a year over year (YOY) basis, PetroChina would face pressure from the Chinese government to secure resources, in order to feed its population’s large appetite for oil. In 2012 when oil prices were high, PetroChina bought a large Alberta oil sands project, and then later that year, it took a 49 percent stake in Encana. If higher oil prices return, China’s interest in the Canadian oil sector will resurface, as these high cost Canadian projects become economic once again.

The last two wildcards relate to geopolitical outcomes in the U.S. and China, respectively. Currently, ExxonMobil is America’s largest natural gas producer, and the extent to which the U.S. government clears the way for natural gas exports, ExxonMobil’s gas business will benefit.

In China, there is a possibility that the three state owned energy companies undergo some sort of merger, under pressure from the central government. While far from certain, if two or more major Chinese firms merge to form a massive state-owned conglomerate, it would easily surpass ExxonMobil in terms of size.

In conclusion, ExxonMobil seems to have a better chance of retaking its crown as the world’s largest energy company, but a lot of factors must be considered, and PetroChina is still an emerging company. The likelihood is that these companies will be battling for the title world’s largest energy company for a long time.

By John Manfreda of Oilprice.com

More Top Reads From Oilprice.com:

Back to homepage

Leave a comment
  • ? on May 14 2015 said:
    "then later that year, it took a 49 percent stake in Encana."


Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News