THE NEW SEVEN SISTERS

Pressented By : Group 3, Section B Abhishek Mukherjee C Shyam Girish Karan Rai Nipun Khullar Tushar Sharma

The New Seven Sisters: The World's Most Powerful Oil Companies
Coined by Italian energy magnate Enrico Mattei, the term "Seven Sisters" referred to the seven international oil companies that dominated the world's oil production after World War II. Today, a whole new group of oil and gas companies have become today's Titans The New Seven Sisters are ranked on the basis of resource base, level of output, company's ambition, scale of their domestic market, and influence in the industry.They are Saudi Aramco, Russia's Gazprom, CNPC of China, NIOC of Iran, Venezuela's PDVSA, Brazil's Petrobras and Petronas(Malaysia).

The Imbalance

 The New Seven Sisters control about one-third of the world's oil and gas production and reserves The International Energy Agency (IEA) calculates that over the next 40 years, 90% of new supplies will come from developing countries Some of the New Seven Sisters have become little more than their home country's bottomless piggybank, funding politically expedient social ventures Hugo Chvez of Venezuela who spends two-thirds of PDVSA's profits on his populist social programs NIOC cannot boost its oil production or fix its refineries because its profits go toward keeping gas at 40 cents per gallon for Iranian consumers

Gazprom
The largest extractor of natural gas in the world and the largest Russian company

The oil industry has been the largest contributor in terms of revenue to Russia. Oil & Gas exports formed 17% of Russian GDP in 2009
1989-1992: Inception- In August, 1989, the ministry transformed itself into State Gas Concern Gazprom, which became the country's first state-corporate enterprise 1993-1997: Privatization: Gazprom's political influence increased markedly after the new Russian President Boris Yeltsin.
By 1994, 33% of the Gazprom's shares had been bought by 747,000 members of the public, mostly in exchange for the vouchers. 15% of the stock was also purchased and allocated to Gazprom employees. The state retained 40% of the shares, but the amount was gradually lowered to 38%.

 In June 2000 Vladimir Putin became the President of Russia. 2000-2003: He launched an attack against what he saw as mismanagement and personal pillaging of state assets and launched a campaign to establish state control in strategic companies. Putin fired the Prime Minister and voted out the chairman of the company's board and replaced them by men who had previously worked with him. In June 2005, Two subsidiaries of Gazprom, agreed to sell a 10.7399% share to the state-owned company Rosneftegaz for $7 billion, at an undervalued price. The sale combined with the 38% share of the State Property Committee, gave the Russian government control over the company.

Controversies Related to Gazprom

January 2006
The state-controlled Russian energy giant Gazprom cut off the supply of natural gas to Ukraine after they failed to resolve a dispute over pricing. Gazprom's desire to move immediately to market pricing and Ukraine's willingness to accept only a phased transition to the kind of prices paid in Western Europe But the standoff had a political backdrop and had farreaching implications for Europe, which was increasingly dependent on Russia for natural gas.

Controversies Related to Gazprom

Ukrainian officials said, The price hike was politically motivated and was punishment for the pro-Western policies of Ukrainian government NATO and EU

Russian government stated that there were fears that Ukraine, which received about one-third of its gas from Russia, could siphon off supplies intended for customers farther west and trigger energy crises in other countries
Russia launched a project to build a gas pipeline linking Russia directly to Northern Germany across the Baltic Sea. Billed 'Nord Stream', Critics pointed to attempts by Russia to bypass Ukraine, Poland, the Czech Republic and Slovakia, which had tense relations with Moscow.

The January 2009 gas crisis

On 31 December 2008, Russia stopped supplying gas to Ukraine over a payment dispute. Russia said Ukraine was stealing natural gas destined for Europe for its own needs. Ukraine denied the charges, but said it needed "technical gas" to pump fuel through the pipeline system. On 6 January, supplies to Romania, Bulgaria, Greece, Macedonia, Serbia and Croatia were completely halted On 17 January, at a Moscow 'summit' that was almost boycotted by the EU .Russian Prime Minister Vladimir Putin and his Ukrainian counterpart Yulia Timoshenko struck a deal, saying the crisis was over. On 20 January, supplies to Europe began to flow again

Latest Developments
As the main route for Russian gas into Europe, Ukraine is vital to both European and Russian energy security. The European Union (EU) seeks to secure gas supplies through Ukraine by integrating its eastern neighbour into the European energy market.

Russia is seeking to prevent EU-led reforms in Ukraine in order to secure stable gas export incomes and continue exerting power over its sphere of privileged interest . Russia benefits from an opaque and uncompetitive gas market in Ukraine. Having lost control of the pipelines, the Ukrainian government will have no bargaining power over establishing prices for imported gas, and will be deprived of this important source of rent.

Sphere of Influence

China National Petroleum Corporation

State-owned fuel-producing corporation Largest integrated oil and gas company in the People's Republic of China In 1949, the Chinese government formed the Fuel Industry Ministry dedicated to the management of fuel which finally led to the creation of CNPC on 17 September 1988 Government decided to disband the Ministry of Petroleum and created a state owned company to handle all Petroleum activities in China. PetroChina was formed on November 5, 1999, as part of the restructuring of CNPC

Petrochina
Established as a joint stock company CNPC injected most of the assets and liabilities into PetroChina, related to exploration and production, refining and marketing, chemicals and natural gas businesses. Government owns 88% of PetroChina and has control over appointing the board of directors No Western companies are yet allowed to explore in China, and imported oil faces heavy tariffs, so PetroChina faces little competition from the super majors

Assets and revenues of Petrochina

Petrochinas Business Sectors

Oil & Gas Operations
1. Upstream: Oil and gas exploration, development and production 2. Midstream: Construction of pipeline, storage and transportation facilities, natural gas marketing and LNG projects 3. Downstream: Refining and marketing, crude oil and oil products trading and transportation 4. Chemicals: Base chemicals, petrochemicals, fertilizer and specialties

 Field Services, Engineering & Construction includes geophysical prospecting, well drilling, well logging, field surface engineering and pipeline construction.
Petroleum Equipment includes the manufacturing and supply of oil and gas exploration equipment, drilling and production equipment, storage and transportation equipment, refining and chemical equipment, and oilfield chemicals.

Global Business

CNPC has 30 international exploration and production projects worldwide

 In 2006, CNPC formed an international consortium with staterun Uzbekneftegaz, Petronas, and Korea National Oil Corporation to explore and develop oil and gas fields in the Aral Sea Development of Ahdab oil field, thus becoming the first significant foreign investors in Iraq A contract to develop the Rumaila field with joint venture partner British Petroleum In August 2009, PetroChina and Exxon Mobil signed a deal in which Exxon agreed to supply the Chinese energy company with liquid natural gas(LNG) for the next 20 years. PetroChina Investment in the development of Canadian oil sands in September 2009

 The company spent nearly $7 billion in 2009 and early 2010 to buy refineries and reserves in Australia, Canada, Singapore and Central Asia In March 2010 PetroChina entered into an agreement Petrobras, to assess viability of exporting Brazilian ethanol to China. In Syria, CNPC along with ONGC created a joint venture to acquire minority stakes in several mature Syrian oil and natural-gas properties. Partnership with BP to assess a gigantic coal-bed methane deposit in Xinjiang. The crude oil pipeline linking China to Kazakhstan further strengthen China's oil supply security by offering a land route.

Controversies
Chemical spill: chemical plants exploded in Jilin, China, resulting in 100 tons of benzene pouring into the Songhua River Harbin city had to cut the water supply from almost 4 million people, for 5 days Environmental law too weak 1 million Yuan fine Issuance of a public apology to Russia due to the incident. The "Western Gas to the East" Pipeline Project Constructing a pipeline across Tibet to Gansu province in China from Xinjiang to Shanghai Threat to the environment affect wildlife in region Chinas strategy to consolidate political control of the Western Regions in China, including Tibet.

PDVSA
Nationalized company-founded on 1 January 1976 in Venezuela

Latin America's third-largest company

Domestic Contribution-75% reserves in oil and 25%reserves in gas Venezuela is the fifth largest oil exporting country In 1990 Venezuela's largest employer Accounts for about one-third of the countrys GDP and 80 percent of Venezuelas export earnings and 50% of govt. revenues.

 In August 1971, under the presidency of Rafael Caldera, a law was passed that nationalized the country's natural gas industry Venezuela was already well on its way to nationalization by 1972. The country officially nationalized its oil industry on 1 January 1976 PDVSA controls activity involving oil and natural gas in Venezuela 1973 Oil Embargo - OPEC Persian Gulf states members decided to raise their prices by 70 percent and to place an embargo on countries friendly to Israel (US and Holland) Middle East and the oil producing countries of the Persian Gulf no longer exported to the United States and oil prices rose steeply.

 Venezuela experienced a significant increase in oil production profits. Between 1972 and 1974, the Venezuelan government revenues had quadrupled
1977-1997 - Years of Decline Brief period of economic prosperity for Venezuela was relatively short lived 1980s oil glut - OPEC member countries were not strictly adhering to their assigned quotas, and once again oil prices plummeted Between 1990 and 1999, Venezuela's industrial production declined from 50 percent to 24%

Chvez and PDVSA : 1998 presidential election brought Chavez to power

Chvez reinstated quotas, 10% of PDVSAs annual investment budget was spent on social programs. He also changed tax policies and the oil revenue collection process.
2002, PDVSA officially went on strike creating a near-complete halt on oil production in Venezuela

Government ended up firing 19,000 PDVSA employees and replacing them with workers loyal to the Chvez government
ILO launched an independent investigation into allegations of detention and torture, surrounding the strike

Chavez and USA : Long-standing close diplomatic relationship between Venezuela and the United States progressively worsened Chvez's public friendship and significant trade relationship with Cuba and Fidel Castro undermined the U.S. policy of isolating Cuba Raised the price of oil for the United States The U.S. had called Chvez a "negative force" in the region, and tried to gain support from Venezuela's neighbours in isolating Chvez Wants China to buy more Venezuelan oil so his country can become more independent of the United States

The US takes some 65 percent of its oil exports.

Diversification of business:
In 2005, PDVSA opened its first office in China announced plans to nearly triple its fleet of oil tankers in that region

In 2007, Chavez also struck a deal with Brazilian oil company Petrobras - to build an oil refinery in north eastern Brazil
As of March 2010, PDVSAs current strategic plan forecasts more production

NIOC
It is a government-owned corporation under the direction of the Ministry of Petroleum of Iran, an oil and natural gas producer and distributor headquartered in Tehran. It was established in 1948. NIOC exports its surplus production according to commercial considerations in the framework of OPEC and at the prices prevalent in the international markets Signs some long term contracts on "buy-back" basis with foreign companies It provides nearly half of the Iranian government's revenues. Earnings from oil exports account for about 80 percent of the country's total export revenues

 In 1954, The Iranian Oil Participants (IOP), an eightmember consortium, was established Shareholding was in the hands of the major Western oil majors BP held 40 percent, Shell 14 percent, Chevron 8 percent, Exxon 8 percent, Gulf 8 percent, Mobil 8 percent, Texaco 8 percent, and Compagnie Franaise de Ptroles 6 percent. NIOC was recognized as the owner of Iran's oil deposits and of all installed assets of the Iranian oil industry, but actual control over the industry was placed firmly in the hands of the consortium members In 1979, NIOC came under the control of the newly formed Ministry of Petroleum

 In 1979, the second oil crisis occurred in the wake of the Iranian Revolution. The Shah of Iran, Mohammad Reza Pahlavi, fled his country in early 1979 and the Ayatollah Khomeini soon became the new leader of Iran Iran was the second largest oil producer in OPEC nations. Its reduced oil production caused the spike of oil price. In 1980, following the Iraqi invasion of Iran, oil production in Iran nearly stopped, and Iraq's oil production was severely cut as well. The Jimmy Carter administration began a phased deregulation of oil prices on April 5, 1979, when the average price of crude oil was US$15.85 per barrel . Over the next 12 months the price of crude oil rose to $39.50 per barrel

Controversies
In April 2010, Washington's push for new US and international sanctions against Iran over its nuclear program

Iran has since the 1990s looked to Asia as a market for its hydrocarbon commodities and for partners in an industry with its interest in forging deeper strategic relationships with rising Asian powers namely China and India

Iran China Relations

Attempts to woo China stem from a commercial desire to attract investment China's major national energy companies - China National Petroleum Company (CNPC), China National Petrochemical Company (Sinopec) and China National Offshore Oil Company (CNOOC) laid the groundwork for the eventual development of upstream equity positions in Iran In January 2009, CNPC signed a buyback contract with NIOC to take the lead in developing the North Azadegan oil field in two phases

Contd..
CNPC this year finalized a deal to develop phase eleven of Iran's South Pars gas field. It displaces Total, which had originally been slated to oversee both upstream development and downstream exploitation -primarily through the Pars LNG project

Iran is attractive to China as one of the few places in the Gulf where foreign companies can access upstream resources directly

Iran- India Relations

India, which has lost out to China in other overseas projects, is attracted by Iran's vast investment needs -- amounting to an estimated 160 billion dollars during the next decade Iran-India energy trade has increased considerably, reportedly reaching 13 billion dollars in 2009 Iran also agreed last year to sell 6 million tonnes per year of liquefied natural gas to India.

PETROBRAS
The company was founded on October 3 in 1953, by the then Brazilian President Getlio Vargas. Its installation was completed in 1954 when it inherited two refineries the Mararipe (state of Bahia) and the Cubatao (state of Sao Paula). Petrobras is a world leader in development of advanced technology of deep-water and ultra-deep water oil production Petrobras controls significant oil and energy assets in 18 countries in Africa, North America, South America, Europe and Asia

 The Brazilian government owns 55.7% of Petrobras' common shares with voting rights. The privately held shares are traded on BM&F Bovespa, where they are part of the Ibovespa index. A controversial Link report came out in 1961 which was pessimistic about the on shore basins. The conclusions drawn were on the basis of the technological state of geophysics, which if improved could change the scenario In 1973 the company's short period of growth was met by the first oil crisis. The crisis affected the country as a whole, as the "Brazilian miracle came to a halt The OPEC countries rose the international oil prices substantially. Petrobras being an important customer of OPECs national oil companies was able to keep Brazilian market supplied.

 To overcome, Brazil shifted to the use of Ethanol and increased domestic production to be less dependent upon imports. The 1973 oil crisis started in October 1973, when the members of OAPEC (consisting of the Arab members of OPEC, plus Egypt, Syria and Tunisia) proclaimed an oil embargo It was in response to the U.S. decision to re-supply the Israeli military during the Yom Kippur war, it lasted until March 1974. Petrobras started producing lubricating oils and supporting its own needs, the first product was named as lubrax MG1 for gasoline engines. In 1974 the biggest oil province in Brazil the Campos Basin was located off the North Coast of the state of Rio De Janeiro.

 In 1979 Petrobras was affected by second oil crisis, but the effect was not as strong as it had been in the crisis of 1973. The 1979 (or second) oil crisis in the United States occurred in the wake of the Iranian Revolution Petrobras is also recognized as the largest sponsor of arts, culture, and environmental protection in Brazil. Marine bio diversity - Projects like Tamar (marine turtles) and humpback and whales, the spinner dolphin In 1997 the government approved Law N. 9.478, allowing competitors to develop the country's oil fields. The company executed agreements with other Latin American governments and began operations outside of Brazilian domains.

 In 2003 it acquired Argentina's largest oil company Perez Companc Energa (PECOM Energa S.A.), and its operational bases in Bolivia, Peru and Paraguay Petrobras recorded its highest earnings ever in 2007, with more than US$13 billion of profit. On June 4, 2007 Petrobras got participating interest in exploration blocks of ONGC in India and ONGC, in turn got to participate in oil blocks explored by Petrobras in Brazil It is planning to buy Eni s 33 per cent stake in Galp, the Portuguese oil company. Petrobrass exploration and development of enormous pre-salt fields, so-called because they lie under a layer of salt up to 2km thick on the floor of the Atlantic Ocean $224billion investment

Petronas
Setting up a state company: 1970 Several factors converged in the early 1970s to prompt the Malaysian government into setting up a state oil and gas company, as first proposed in its Five Year Plan published in 1971. Former Chief Minister of Sarawak, Tun Abdul Rahman Ya'kub was one of the people who proposed the idea of Malaysia setting up their own oil company The oil crisis of 197374 made the government even more aware of Malaysia's dependence on foreign oil and foreign capital in general. A final and crucial factor in the creation of Petronas, and its continuation in much the same form since, has been the political stability of Malaysia.

 Battling oil depletion: the late 1980s A way to postpone depletion was to develop sources of oil, and of its substitute, natural gas, outside Malaysia. Late in 1989, the governments of Vietnam and Myanmar (Burma) invited Petronas Carigali to take part in joint ventures to explore for oil in their coastal waters. Thus began Petronas's first oil exploration outside Malaysia Another new venture in 1990 was in ship-owning, since Petronas's existing arrangements with MISC and with Nigeria's state oil company would be inadequate to transport the additional exports of LNG due to start in 1994, under the contract with Saibu Gas

Expanding globally: the 1990s and beyond

During the mid- to late 1990s, international exploration, development, and production remained key components in Petronas's strategy along with diversification In 1996, Petronas entered the aromatics market by way of a joint venture that created Aromatics Malaysia Sdn Bhd Formed a contract with China National Offshore Oil Corporation and Chevron Overseas Petroleum Ltd. to begin exploration of block 02/31 of the Liaodong Bay area in China.

Forged deals for two new exploration plots in Pakistan and began construction on the Chad-Cameroon Integrated Oil Development and Pipeline Project

Saudi Aramco
History
Saudi Aramco is 100% state-owned national oil company of Saudi Arabia Earlier companies like Standard Oil of California and Texaco had holding in Aramco Casoc only which changed its name to Aramco in 1944

In 1950 King Abdul Aziz Ibn Saud threatened to nationalise Aramco and gained 50-50 profit sharing arrangement In 1973 Saudi government acquired 25% of shares in Aramco

Finally in 1980 gained full control of the company and changed its name to Saudi Aramco in 1988.

There were both economic and political forces behind this move. Domestic reserves were never of the class of those in Indonesia or the Middle East and declined in spite of conservation programs. In 2004, the Prime Ministers Office reported that petroleum reserves would be exhausted in about 18 years and natural gas in 35 years. Petronas leadership thus considered it essential to develop exploration and production abroad

Petronas saw opportunities in places where Western companies had difficulties operating because of issues pertaining to their own governments foreign policies or nongovernmental critics of these regimes.

Saudi US relationship
Saudi-US relationship has consistently been described as an exchange of oil for security Saudi Arabia has used a large part of the US$1.3 trillion it earned from oil to develop its economy Military cooperation is yet another area of extensive relations, arranged for the purchase of huge arms systems including F-15s, F16s, AWACS, tanks, and missiles Aramco sells its oil in the United States and in the process subsidizes US purchases by over one US dollar per barrel on the 1.5 mbd it sells to US firms During the Cold War, the United States and Saudi Arabia found additional common ground.

Entry of Saudi Arabia in WTO

Entry of Saudi Arabia in WTO in 2005 also helped Aramco especially in petro chemical business Saudi Arabia succeeded in negotiating with the existing member countries to allow the kingdom to maintain a low price in domestically

Europe opposed on anticompetitive terms

US backed its entry in WTO

Overseas Expansion
Mostly devoted towards the Asian market emerging markets Motiva is the JV between Shell US and Aramco in Texas Joint ventures and subsidiary offices in China, Egypt, Japan, Netherlands, Republic of Korea, India, Singapore, United Arab Emirates, United Kingdom and United States

Controversy related to the oil Deposits in Saudi

The US fears that Saudi Arabia, the world's largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show. It is feared that the oil reserves have been overstated by as much as 40% or 300bn barrels

Paradigm shift in oil geopolitics

Saudi supplies that used to go to Europe and the United States are now headed for Asia Deterioration in relations with US after 9/11 growth in relations with China signalling the growing power and market potential of China Another facet of Saudi Aramco's engagement with China is higher education Aramco sold its storage depots in the Caribbean, a signal that it was abandoning the East Coast market, according to analysts India is also courting Saudi attention

Conclusion
With Oil & Gas being the new weapon of power and influence, these new seven sisters truely command dominance over the rest of the world. Overwhelmingly state-owned, they control almost one-third of the worlds oil and gas production and more than one-third of its total oil and gas reserves. In contrast, the old seven sisters which shrank to four in the industry consolidation of the 1990s produce about 10 per cent of the worlds oil and gas and hold just 3 per cent of reserves. The oil industry not only has the economic influence but also the political influence, over the world. In future, for sure China and Middle East have a critical geostrategic role to play in the worlds economy and power distribution, considering oil being the most important economic driver.

 Thankyou .