Asian oil firms to resist giants

Asian oil firms to resist giants

Lawrence Yong, Reuters, Singapore

National oil companies in Southeast Asia are turning to each other for support to protect themselves from the financial clout of global super-majors competing in their increasingly liberalized domestic markets.

State firms are collaborating on everything from oil exploration to power and downstream petrochemical projects.

But regional industry experts said alliances will only go so far. Inter-government wrangling and stiff competition to supply regional markets will keep the rivalry bubbling.

"It's natural for these companies to get together for opportunities that cross boundary lines, but they remain competitors on other fronts," said Victor Shum of international energy consultants Purvin & Gertz in Singapore.

Downstream oil deregulation in the 1990s undermined the market position of many state firms and removed some monopolies. Meanwhile, Western oil firms undertook a massive consolidation, crossing borders and oceans to merge into powerful, integrated entities with worldwide reach and expertise.

Feeling vulnerable, Asian state firms are clubbing together.

Malaysia's Petronas, Vietnam's Petrolimex and Indonesia's Pertamina in January signed a tripartite pact to drill for hydrocarbons offshore Vietnam. The partners may extend the alliance to explore offshore Indonesia.

Philippines National Oil Company (PNOC) and Pertamina in November announced similar tie-ups, including the geothermal power sector, which could draw billion-dollar investment.

The slumbering ASEAN Council for Petroleum, which groups nine ASEAN state firms from Singapore, Cambodia, Vietnam, Thailand, Indonesia, Malaysia, the Philippines, Laos and Brunei, met last year and vowed to strengthen ties.

"In recent years, there is very active cooperation," said Guilermo Balce, director of the Jakarta-based ASEAN Center for Energy. "This is mainly because of the big project they are implementing, the Trans-ASEAN gas pipeline."

Analysts said intra-regional cooperation faces a rocky path despite the good will that has flourished as each state company meets constraints from diverse political and diplomatic interests.

"They are all governed by national interest and if ASEAN as a political entity does not always agree, why should ASEAN state oil companies agree at all?," asked Al Troner of Seattle-based Asia Pacific Energy Consulting (APPEC).

Troner said politics was one of the stumbling blocks in getting the $6 billion Trans-ASEAN gas pipeline project off the ground. A memorandum of understanding is due to be signed in July, six years after it was first proposed.

Some companies are due to be partly privatized and will have shareholders to consider in future strategies. Competition also is getting tougher -- Malaysia and Indonesia are head-to-head in the race to sell gas into Northeast Asia, while Thailand and Singapore are oil refining rivals.

Analyst Gordan Kwan said China had run a successful policy so far, partly selling off its three state firms -- PetroChina , CNOOC and Sinopec -- while encouraging cooperation with the major international oil firms to develop domestic resources.

"China has made a wise strategy to cooperate with the super majors who have vast financial wealth, technology and as well as a good war chest of experience," Kwan at HSBC Securities in Hong Kong told Reuters.

ExxonMobil, Royal Dutch/Shell and BP gained entry into the tightly controlled and fast-growing Chinese oil industry after spending about $2 billion to acquire stakes in the domestic firms.

Kwan said involvement of international oil firms had helped accelerate many of China's large projects in the exploration and production, petrochemical and gas pipeline sectors.

North Asia, which imports most of its energy requirements, also is looking at regional tie-ups for efficiency and security.

Taiwan, considered by China a renegade province, has offered to refine crude for PetroChina parent CNPC and the countries are discussing joint exploration in the Taiwan Strait.

South Korea will hold talks with China, Japan, Mongolia, North Korea and Russia in the first half of 2002 over linking power distribution networks and joint strategic storage of oil.