NEW YORK - The oil resource nationalism trend seen over the past six years may be scaled back or reversed as producer countries are forced to seek greater foreign investment to counter lower crude prices and shrinking budgets.
Big oil producing nations from Russia to Venezuela, emboldened by a seven-fold surge in crude prices from 2002 to over $147 a barrel in July 2008, have raised royalty terms for independent energy companies operating in their countries.
The global economic crisis has since slammed demand and sent prices tumbling $100 a barrel, shrinking budgets and pressuring governments to sweeten terms for foreign oil firms to help get projects developed.
"The producers had the upper hand in the relationship when prices were increasing, but the pendulum is swinging the other way," said Societe Generale analyst Mike Wittner in London.
"Over time, the people who own the resources are going to have to make it more attractive for oil companies to come in or else the resources are going to sit in the ground unexploited," he said, adding in some cases changes could take a year or two for producer nations to their shift terms.
Some have been more quick to act, however, while others are already seeing foreign company interest in new projects wane with the oil price slide.
In November, Canada's province of Alberta said it would offer oil firms lower royalties for new oil and natural gas wells over the next five years, after announcing in late 2007 it was raising rates.
Other countries have seen promising acreage passed over or underbid as oil companies reassess projects in the lower price environment.
Algerian officials said over the weekend the OPEC nation removed the promising Ahnet basin from an oil licensing round after foreign companies failed to offer suitable bids in the first bidding round under a new law giving the state energy conglomerate a mandatory majority in all permits.
"The failure to attract investment into Ahnet is likely to have significant repercussions on Algeria's upstream development, forcing some kind of rethink in the longer run, as tightening fiscal terms seem finally to have put international oil companies off investing as oil prices have plummeted," IHS Global Insight said in a research note.
CASH AND EXPERIENCE
Analysts said the easing of terms by producers to entice back big oil companies -- with their big wallets and expertise -- follows the boom and bust cycle of the industry.
Surging demand from China and other emerging economies stretched supplies and ignited the latest oil boom before demand started to slump.
"This kind of economic and price environment I think does play to our strength," Exxon Mobil Senior Vice President Mark Albers said earlier this month in Malaysia.
"As the new development gets more and more challenging, there is a greater need for technology and project execution capability and that is one of the things that we can bring to the host governments," said Albers.
Despite the economic pressures, experts said some countries which have stronger ideological ties to resource nationalism, including Venezuela, may hold out against changing terms.
The OPEC nation, led by socialist President Hugo Chavez, was at the fore of the charge to raise royalties on international oil companies (IOCs) over the past six years.
"I think there are some other countries, such as Russia and Venezuela, which kicked the IOCs out for other reasons," said Sarah Emerson, director of Energy Security Analysis Inc. "That is not going to be reversed anytime soon unless there is a change in government."
Big oil producing nations from Russia to Venezuela, emboldened by a seven-fold surge in crude prices from 2002 to over $147 a barrel in July 2008, have raised royalty terms for independent energy companies operating in their countries.
The global economic crisis has since slammed demand and sent prices tumbling $100 a barrel, shrinking budgets and pressuring governments to sweeten terms for foreign oil firms to help get projects developed.
"The producers had the upper hand in the relationship when prices were increasing, but the pendulum is swinging the other way," said Societe Generale analyst Mike Wittner in London.
"Over time, the people who own the resources are going to have to make it more attractive for oil companies to come in or else the resources are going to sit in the ground unexploited," he said, adding in some cases changes could take a year or two for producer nations to their shift terms.
Some have been more quick to act, however, while others are already seeing foreign company interest in new projects wane with the oil price slide.
In November, Canada's province of Alberta said it would offer oil firms lower royalties for new oil and natural gas wells over the next five years, after announcing in late 2007 it was raising rates.
Other countries have seen promising acreage passed over or underbid as oil companies reassess projects in the lower price environment.
Algerian officials said over the weekend the OPEC nation removed the promising Ahnet basin from an oil licensing round after foreign companies failed to offer suitable bids in the first bidding round under a new law giving the state energy conglomerate a mandatory majority in all permits.
"The failure to attract investment into Ahnet is likely to have significant repercussions on Algeria's upstream development, forcing some kind of rethink in the longer run, as tightening fiscal terms seem finally to have put international oil companies off investing as oil prices have plummeted," IHS Global Insight said in a research note.
CASH AND EXPERIENCE
Analysts said the easing of terms by producers to entice back big oil companies -- with their big wallets and expertise -- follows the boom and bust cycle of the industry.
Surging demand from China and other emerging economies stretched supplies and ignited the latest oil boom before demand started to slump.
"This kind of economic and price environment I think does play to our strength," Exxon Mobil Senior Vice President Mark Albers said earlier this month in Malaysia.
"As the new development gets more and more challenging, there is a greater need for technology and project execution capability and that is one of the things that we can bring to the host governments," said Albers.
Despite the economic pressures, experts said some countries which have stronger ideological ties to resource nationalism, including Venezuela, may hold out against changing terms.
The OPEC nation, led by socialist President Hugo Chavez, was at the fore of the charge to raise royalties on international oil companies (IOCs) over the past six years.
"I think there are some other countries, such as Russia and Venezuela, which kicked the IOCs out for other reasons," said Sarah Emerson, director of Energy Security Analysis Inc. "That is not going to be reversed anytime soon unless there is a change in government."
