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Wood Mackenzie: Asian Oil Companies Need to Strive Towards Internationalization

Posted on Apr 19th, 2012

The overall production outlook for Asian companies is relatively robust in the near-term but looking towards the longer-term, a continued shift by major Asian companies towards internationalisation and higher-risk resource themes will be crucial to production growth.

Norman Valentine, Senior Corporate Analyst for Wood Mackenzie says, “Asian company portfolio value remains heavily inclined towards maturing conventional assets and, despite recent progress, they are under-exposed to international growth resource themes like oil sands, unconventionals, LNG and deep-water assets. They remain underweight in net present value terms and have weaker production growth prospects compared with international Majors in these areas. “

By 2030, global oil demand will reach approximately 110 million barrels per day (b/d), mainly driven by Asia. Wood Mackenzie says that growth resource themes are important as the resulting production could account for up to 50 million b/d of global supply by 2030. But conventional assets in Asia currently make up 70% of Asian company portfolios and will still make up 60% of their portfolio value by 2017. In contrast, the international Majors already have a majority 55% of current portfolio value focused on international growth resource themes and this will increase to 65% by 2017.

Large Asian companies like the national oil companies (NOCs) have started to employ a multi-faceted approach to global portfolio development. Mr. Valentine explains, “They have started to undertake M&A, discovered resource opportunity access, exploration, joint ventures and strategic partnerships. In the near-term, M&A activity will remain at the forefront of international expansion. Several of the major Asian players are well placed financially with net cash on their balance sheets.”

Wood Mackenzie says however that exploration activity will play an...