Energy Information Administration
FedStats
Introduction
The United Kingdom
France
Italy
Canada
Spain
Norway
One of the largest energy privatization developments in terms of investment capital involves petroleum companies located in the OECD countries. This group of companies includes: British Petroleum, Elf Aquitaine (France), TOTAL (France), ENI (Italy), Petro Canada, Repsol (Spain), and Statoil (Norway).
These companies have been among the most active of the world's petroleum companies in responding to investment opportunities occasioned by privatizations beyond their home base political borders. Most of these petroleum companies are vertically integrated and most have substantial foreign operations. Among these companies are some of the world's largest publicly-traded companies and, in several cases, the largest industrial companies in their respective home nations. They are also increasingly owned by international investors, in particular, those located in the United States. As with the U.S. major petroleum companies, these companies are increasingly operating in regions recently opened up due to privatization efforts, and they are becoming major operators in regions such as Latin America, China, the Former Soviet Union, and Southeast Asia.
The histories of these companies vary considerably. In recent years, some of these companies have been fully privatized, some partly. In general, privatization of these petroleum companies has occurred in the context of a wide scale privatization of several state-owned industries.
However, some states have been reluctant to fully relinquish control and have continued to retain a 10-percent controlling interest, a "golden share" {see Endnote 11}. One of these companies, Statoil of Norway, remains entirely-state owned.
These companies are in many ways the most direct competitors of the major U.S. petroleum companies, in part due to the close interconnection of the European and North American petroleum industries. British Petroleum, for instance, is the largest producer of crude oil in the United States. British Petroleum is also the sixth largest U.S. refiner and is among the top ten branded marketers of gasoline in the United States. Other recently-privatized European companies, such as TOTAL and Elf Aquitaine of France, also have sizable U.S. petroleum investments.
Similarly, U.S. companies play a major role in European industry. Roughly 90 percent of European crude oil production comes from Norwegian and British territories in the North Sea {see Endnote 12}, and U.S.-based companies account for roughly one-fourth of North Sea production. The European presence of U.S. companies in downstream petroleum is also very strong. Exxon and Mobil alone account for one-fourth of Western European refining capacity. Chevron, Dupont, and Texaco also have a major presence in European downstream. Moreover, in 1996, British Petroleum and Mobil agreed to combine their European refining and marketing operations; the combined operation will control roughly 12 percent of the European fuel market {see Endnote 13}. Companies from the United States also play a major role in European crude oil and natural gas transmission and distribution as well as in retail gasoline marketing.
British Petroleum (BP) was founded as the Anglo-Persian Oil Company in 1909. In its early years, BP's primary producing properties were located in Iraq, Abu Dhabi, Kuwait and Qatar. Between 1914 and 1995, the British government maintained an interest in British Petroleum, and at times the government's holdings exceeded fifty percent. The privatization of BP began about 10 years ago when the British government sold about 32 percent of the company to the public. In 1995, the final 1.8 percent government share in BP was sold to the public, making BP a fully-privatized company. British Petroleum is the twelfth largest producer of crude oil in the world. BP is also Britain's largest industrial company. BP's downstream operations are also sizable. BP is the world's fifth largest refiner, with BP's downstream operations largely based in Europe and the United States.
Recent energy privatizations in several global regions has resulted in a substantial number of new investment opportunities for BP. In recent years, BP has continued to expand its retail networks in Eastern Europe and it has added nearly 100 service stations in eastern Germany, the Czech Republic, and Hungary. In recent years, BP has targeted new frontier petroleum areas for investment. The company has reached a $3.5-billion agreement with Sonatrach to develop gas fields in Algeria {see Endnote 14} . BP is also a major player in Colombia and Vietnam, and is pursuing exploration opportunities in Venezuela and Azerbaijan {see Endnote 15}. Since 1990, BP and Statoil, the Norwegian state oil company, have been working in close commercial cooperation in a number of areas. A program of joint research is underway, and the two companies are also undertaking joint exploration and development work in Azerbaijan, Kazakhstan, Vietnam, Angola, and Nigeria {see Endnote 16}.
In contrast to its decided move into several frontier areas, and as a result of having undergone a substantial restructuring of operations in recent years, BP has generally reduced its level of investment in the company's historic markets. This restructuring has been most evident in downstream petroleum. Since 1991, BP has reduced its employment level in refining and marketing operations by 32 percent versus a 23-percent reduction in upstream employment {see Endnote 17} . BP has sold three of its U.S. refineries in recent years and has sold marketing operations in California and Florida. In 1995, BP announced plans to shut down or sell three refineries in the U.S. and Europe, cutting capacity by nearly a third {see Endnote 18}. In 1994, BP sold its Spanish retail network (excluding motorway sites) to Repsol and, in 1996, announced that it would close 250, or 17 percent of its retail gasoline outlets in Germany {see Endnote 19}.
One result of privatization has been the company's increased attraction to foreign investors, particularly those based in the United States--the largest capital market in the world. British Petroleum is currently 17 percent held by U.S. investors, up from 6 percent ownership as recently as 1991{see Endnote 20}. U.S.-based investors are now the largest owners of BP's shares, after investors from the United Kingdom, who have a 70-percent share.
Elf Aquitaine (Elf) was created in 1941 at the initiative of the French government, largely to exploit the Lacq oil and gas field in southwestern France. Elf is France's largest petroleum company. The French government initiated a privatization scheme in 1986 with the sale of 14 percent of Elf to the public. By 1995, the French government's share was reduced to 10 percent. Elf is predominantly an oil- and gas-producing company, and most of its production comes from former French colonies among the African countries surrounding the Bay of Guinea. Elf has refining operations in Europe and West Africa. Elf is the seventh largest refiner of crude oil in Europe and seventh largest producer of North Sea crude.
As with BP, global energy privatization has also had a substantial impact on Elf's activities. In upstream, Elf is carrying on operations in such frontier areas as China, Latin America, the Former Soviet Union, Eastern Europe, and Vietnam. Downstream, Elf purchased a refinery in eastern Germany. Elf has also invested in a joint venture (with Russia's recently privatized Lukoil) to expand and upgrade a refinery in eastern Germany. Elf had plans to build a $2.5-billion dollar refinery in China but later pulled out.
Like British Petroleum, Elf has also engaged in a recent restructuring. Since 1993, Elf has shed roughly 10 percent of its assets and has reduced employment from 94,300 in 1993 to 85,500 in 1995 {see Endnote 21}. Also as with British Petroleum, foreign investors have increased their ownership of Elf in recent years. Foreign investors held 35 percent of Elf's shares in 1995 versus 21 percent in 1992.
TOTAL is France's second largest petroleum company. TOTAL was founded in 1924 at the initiative of the French government. Initially, TOTAL consisted largely of Middle East petroleum production interests. The French government's ownership of TOTAL peaked at 34 percent but was reduced to 5 percent in 1992. The current French government's five percent interest, coupled with the ownership interests of several large French institutional investors who have long held a substantial stake in the company, would generally indicate a fairly undiluted and stable ownership structure. However, foreign interests (particularly from the United States and the United Kingdom), have increased their ownership from 23 percent in 1990 to 44 percent in 1994 {see Endnote 22}.
TOTAL is the world's 23rd largest petroleum producer and 17th largest refiner. The Middle East (particularly the U.A.E.) accounts for 55 percent of TOTAL's crude oil and natural gas production. Other large producing regions include the North Sea and Indonesia. TOTAL is also active in several frontier areas of petroleum activity. The company currently produces oil and gas in Algeria, Libya, Argentina, and it has a 15-percent interest in Colombia's Cuisiana field {see Endnote 23}. TOTAL also has upstream operations in Myanmar, Vietnam, Yemen, Nigeria, and Cambodia and has a production-sharing contract with Russia. Downstream, TOTAL is building a refinery in China and studying the construction of one in Vietnam. TOTAL has also opened service stations in Hungary and the Czech Republic.
In contrast to many of the other recently privatized companies, TOTAL's asset base has grown in recent years, by 9 percent since 1992, while employment has increased from 51,139 to 53,536 workers.
Italy's ENI was nationalized by Mussolini in the 1930's and is currently Italy's largest industrial company. ENI's privatization has only been very recent. The first 14.7 percent of ENI was sold to the public in 1995 for $4.1 billion. ENI has a refining capacity of 933,000 barrels per day and is Europe's third largest refiner. ENI's crude oil production comes primarily from Libya, Egypt, Nigeria, the Congo, the North Sea, and Angola. ENI produces smaller amounts of crude oil in Tunisia and in the United States. ENI's China production began in 1992, although it currently amounts to only 1 percent of ENI's total crude oil production. Downstream, ENI has recently obtained a 17-percent interest of a consortium (including Conoco, and Royal Dutch/Shell) to reconstruct two Chinese refineries for a total investment of $480 million. ENI has also signed an agreement with Russia's Lukoil to jointly develop an oil field in western Siberia. ENI has recently attempted to diversify its ownership overseas. As an example, a large portion of ENI's recent public offerings were dedicated to U.S. investors. ENI has also greatly reduced its payroll in recent years from 124,000 in 1993 to 91,000 in 1995 {see Endnote 24}.
In the wake of the 1974 world oil crisis, the Canadian government took measures deemed to strengthen the security of Canada' s energy needs. Petro-Canada was started in 1975 as an instrument of Canada's National Energy Policy, which was designed to encourage domestic ownership of Canadian petroleum resources. According to the plan, Petro-Canada was to provide Canadian policy makers with a better control and understanding of energy developments, or in the parlance of the time to act as a "window" on the world's energy industry. For several years, Petro-Canada enjoyed a privileged position in Canadian energy, being heavily subsidized by the federal government and having exclusive exploration rights to certain Canadian properties. Shortly after its creation, Petro-Canada embarked on an aggressive expansion, acquiring many of the Canadian assets of foreign companies.
After a change in government in 1984, Canada started privatizing Petro-Canada, which had by that time become widely regarded as inefficient, oversized, and laden with debt. After privatization, Petro-Canada began a significant restructuring involving large reductions in operating costs and employment. Since 1990, Petro-Canada has reduced its assets by roughly 10 percent, while employment has fallen from 9,806 workers in 1990 to 5,646 in 1995 {see Endnote 25}. In 1995, the government's share in Petro-Canada was reduced to 20 percent, which may be sold off in the future. Also, in 1995 Petro-Canada shares were listed on the New York Stock Exchange {see Endnote 26} .
Petro-Canada is the world's 41st largest producer of crude oil. Petro-Canada is Canada's second largest refiner and has a 17-percent share of Canada's refined product market. Petro-Canada is almost exclusively a domestic company, with its natural gas production coming primarily from western regions and its liquids production being largely produced in the east. Petro-Canada has 25-percent interest in the $12-billion Hibernia field project, along with with Mobil (33 percent), Chevron (27 percent), Murphy Oil (6 percent), and the Canadian government.
While operating primarily in Canada, in 1996, Petro-Canada also started producing oil in Algeria. Petro-Canada holds a 70-percent interest in a 1994 discovery of 40-45 million barrels of oil in a field located north of Algiers {see Endnote 27}.
Spain's Repsol was founded in 1987, when the Spanish government consolidated various domestic upstream and downstream holdings into a single company. The government sold a 24-percent stake in the company in 1987. The government sold off additional shares in later years, reducing the state's stake to 10 percent in 1996.
Repsol is primarily a downstream company and is Europe's sixth largest refiner. Repsol operates 3,308 exploration and production operations in Dubai, Egypt, and Indonesia. Sixty-one percent of Repsol's production comes from the Near and Middle East, 12 percent from the Far East, and 9 percent from Latin America.
An example of where privatization efforts on two separate continents have converged is Repsol. In 1996, in its largest foray abroad, the company purchased a 38-percent stake in the Argentine company Astra for $360 million. Astra is Argentina's fifth largest energy company and is fully vertically integrated with petroleum exploration, production, transportation, and refining operations {see Endnote 28}. Repsol has also recently purchased refining assets in Peru {see Endnote 29}. Repsol also has recently attempted to encourage greater foreign ownership. In its most recent sell-off of shares, a portion of the shares were reserved for U.S. investors {see Endnote 30} .
Norway's Statoil is the one major OECD-based European petroleum company to remain entirely state-owned. Statoil's genesis is closely tied to the exploitation of North Sea petroleum; it was founded shortly after the discovery of crude oil and natural gas in the North Sea. In recent years, however, Statoil's focus has shifted beyond the North Sea. As a result of recent privatizations, Statoil is currently pursuing exploration and development efforts in China, Azerbaijan, Kazakhstan, Namibia, Nigeria, and Vietnam {see Endnote 31}. Statoil has recently expanded its retail gasoline efforts into such new markets as Estonia, Latvia, Lithuania, Poland, and eastern Germany. Statoil has also taken a 15-percent stake in a refinery in Malaysia, with the Malaysian state oil company, Petronas, as its partner.