• 2 days Iraq Begins To Rebuild Largest Refinery
  • 2 days Canadian Producers Struggle To Find Transport Oil Cargo
  • 2 days Venezuela’s PDVSA Makes $539M Interest Payments On Bonds
  • 2 days China's CNPC Considers Taking Over South Pars Gas Field
  • 2 days BP To Invest $200 Million In Solar
  • 2 days Tesla Opens New Showroom In NYC
  • 2 days Petrobras CEO Hints At New Partner In Oil-Rich Campos Basin
  • 2 days Venezuela Sells Oil Refinery Stake To Cuba
  • 3 days Tesla Is “Headed For A Brick Wall”
  • 3 days Norwegian Pension Fund Set to Divest From Oil Sands and Coal Ventures
  • 3 days IEA: “2018 Might Not Be Quite So Happy For OPEC Producers”
  • 3 days Goldman Bullish On Oil Markets
  • 3 days OPEC Member Nigeria To Issue Africa’s First Sovereign Green Bond
  • 3 days Nigeria To Spend $1B Of Oil Money Fighting Boko Haram
  • 3 days Syria Aims To Begin Offshore Gas Exploration In 2019
  • 3 days Australian Watchdog Blocks BP Fuel Station Acquisition
  • 4 days Colombia Boosts Oil & Gas Investment
  • 4 days Environmentalists Rev Up Anti-Keystone XL Angst Amongst Landowners
  • 4 days Venezuelan Default Swap Bonds At 19.25 Cents On The Dollar
  • 4 days Aramco On The Hunt For IPO Global Coordinators
  • 4 days ADNOC Distribution Jumps 16% At Market Debut In UAE
  • 4 days India Feels the Pinch As Oil Prices Rise
  • 4 days Aramco Announces $40 Billion Investment Program
  • 4 days Top Insurer Axa To Exit Oil Sands
  • 5 days API Reports Huge Crude Draw
  • 5 days Venezuela “Can’t Even Write A Check For $21.5M Dollars.”
  • 5 days EIA Lowers 2018 Oil Demand Growth Estimates By 40,000 Bpd
  • 5 days Trump Set To Open Atlantic Coast To Oil, Gas Drilling
  • 5 days Norway’s Oil And Gas Investment To Drop For Fourth Consecutive Year
  • 5 days Saudis Plan To Hike Gasoline Prices By 80% In January
  • 5 days Exxon To Start Reporting On Climate Change Effect
  • 6 days US Geological Survey To Reevaluate Bakken Oil Reserves
  • 6 days Brazil Cuts Local Content Requirements to Attract Oil Investors
  • 6 days Forties Pipeline Could Remain Shuttered For Weeks
  • 6 days Desjardins Ends Energy Loan Moratorium
  • 6 days ADNOC Distribution IPO Valuation Could Be Lesson For Aramco
  • 6 days Russia May Turn To Cryptocurrencies For Oil Trade
  • 6 days Iraq-Iran Oil Swap Deal To Run For 1 Year
  • 9 days Venezuelan Crude Exports To U.S. Fall To 15-year Lows
  • 9 days Mexico Blames Brazil For Failing Auction

Breaking News:

Iraq Begins To Rebuild Largest Refinery

Alt Text

Key Pipeline Closure Amplifies OPEC’s Efforts

The closure of the Forties…

Alt Text

Goldman: These Are The Hottest Commodities In 2018

Investment bank Goldman Sachs remains…

Alt Text

Huge WTI-Brent Spread Boosts U.S. Crude Exports

The extreme gap between WTI…

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