The statement by PWC Essay
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The statement by PWC reflects the current trend of oil and gas sector. The oil and gas sector witnessed a tremendous increase in the demand for its products in the year 2007 and 2008. For example, the price of crude oil reached a historic high of around $147 per barrel which created havoc in the international market and allowed Oil marketing companies and refineries to enjoy magnificent increase in their profits. The substantial increase in the demand for energy came mainly from countries like China and India which witnessed tremendous growth rates of around 6 percent or more for five years.
Unfortunately, the increase in demand for energy was not matched by enough excess supply which resulted in a shortage and caused the price of energy to increase rapidly. While discussing the demand and supply of energy it is worth mentioning the role of National oil companies. The national oil companies as the name suggests are state owned oil companies which are governed and administered by their respective governments.
The national oil companies control around 90 percent of the worlds proven oil and gas reserves which leave a very little margin of 10 percent to be controlled by private entities.
However, the national oil companies have now realized the fact that they need to increase their supply in order to match the demand of energy and thereby increase their absolute profits. The only way forward for these national oil companies is to have deregulation of their organization and to have mergers and acquisitions with other national oil companies so as to target new markets. Fortunately, the national oil companies have realized this fact and have started to change their perspective and the way they conduct their business in order to increase their supply.
The international oil companies on the other hand have also realized the fact that competition is increasing for them because of aggressive stance of national oil companies. Therefore, the international oil companies are now exploring new markets and new supply sides so as to compete head on with national oil companies. In order to effectively venture into new markets and stay alive in cut throat competition the international oil companies are seeking strategic Alliances, and mergers and acquisitions (M&A) which will give them enough liquidity so as to expand into new markets.