The largest single player in the oil market is OPEC, controlling 73 percent of the world’s oil reserves. As of 2012, OPEC maintained its output level of 30 million barrels a day, helping to fix the price of oil for consumers around the world. Member nations have been quite compliant in sticking to the agreed-on output levels over the last few years, but as the price of oil has increased, compliance dropped from 83 to 80 percent. Analysts expect member nations to violate their agreements and produce more oil than agreed on, thus tempering the price appreciation of a barrel of oil. The top five OPEC nations in order of oil reserves are (1) Venezuela, (2) Saudi Arabia, (3) Iran, (4) Iraq, and (5) Kuwait. Venezuela controls approximately 25 percent of OPEC’s oil, whereas Saudi Arabia controls 22 percent. All other nations control less than 13 percent each.
The USA leads the world with 125 of the world’s 655 refineries, but the trend is toward fewer but larger refineries as a result of competition and the economies of scale the larger refineries offer. In 1981, considered the peak of the refining business, there were 324 refineries in the USA. This downstream product is less profitable than upstream operations, so many firms including Exxon are attempting to reduce their exposure to this market.
In South America, everybody knows about Venezuela with Hugo Chavez and the country’s Orinoco Valley. Many people also know about the numerous discoveries during the past five years in Brazil’s prolific deepwater Santos Basin. However, Argentina is South America’s largest natural gas producer and its oil production registers something less than 750,000 barrels per day (or about a third of Venezuela’s output). ExxonMobil and Chevron of late have been excitedly pursuing shale-drilling opportunities in Argentina’s Neuquen Basin. The Basin’s Vaca Muerta (dead cow) shale is fast gaining worldwide attention. Including Vaca Muerta’s 23 billion BOE, Argentina likely holds the world’s third-largest deposits of shale gas, behind only the USA and China.
Of all the energy companies involved in Argentina, Apache is the largest with that company owning about 3.7 million acres and being active in the country’s four primary producing basins: Neuquen, Austral, Cuyo, and Noroeste. But in late 2012, Chevron reached an agreement with Argentina’s nationalized oil company YPF to form a $1 billion partnership to develop shale oil reserves in the Vaca Muerta. YPF is also holding talks with Norway’s Statoil for the development of Argentinean properties.
ExxonMobil just acquired Plano, Texas-based Denbury Resources’ Bakken Shale assets in North Dakota and Montana for $1.3 billion, along with property in Wyoming and Texas. The company now controls 50 percent of the Bakken Shale region.
A number of analysts contend that Exxon should spin-off its refining business because the refining and production business are at odds with each other; oil-refining companies look to buy oil at the lowest possible cost while production companies look to sell oil at the highest possible cost. ConocoPhillips and Marathon Oil Corp. (MRO) recently separated their refining operations into separate companies.
Exxon is trying to sell its stake in the giant southern oilfield in Iraq after clashing with the central government in Baghdad over exploration contracts it had signed with the autonomous Kurdistan region in the north. The CNPC unit of Petrochina is currently negotiating for Exxon’s 60 percent in the $50 billion West Qurna-1 project. Iraq has the world’s fourth-largest oil reserves and wants to at least double its production in the next few years, and ultimately challenge Russia and Saudi Arabia as the world’s biggest oil nation. Exxon’s departure would all but wipe out the U.S. presence in Iraq’s southern oilfields. Occidental Petroleum has a small stake in the Zubair oilfield development project.