RESISTANCE
Nº 45 - May 2004
OILWATCH  

This edition review how oil companies work, who
benefits and who promotes the petroleum model.

CONTENTS:

1. THE OIL INDUSTRIES INSTITUTIONAL ARQUITECTURE

- HOW THE OIL INDUSTRY WORKS
- REFINERIES
- NAVAL TRANSPORT COMPANIES
- STORAGE OF CRUDE OIL
- SERVICE COMPANIES
- OIL INFASTRUCTURE CONSTRUCTION INDUSTRIES
- THE PRIVATE BANKS
- EXPORT CREDIT AGENCIES (ECAs)
- OTHER COMPANIES LINKED TO THE OIL SECTOR

2. WHO PROMOTES THE OIL MODEL

- NACIONES UNIDAS
- CONSERVATION NGOs


1. THE OIL INDUSTRIES INSTITUTIONAL ARQUITECTURE

According to the analysis carried out by the oil industry itself, the
period when companies could count on large oil reserves concessioned by
national States is over. For this reason, oil companies have established
various strategies to survive the XXI century, among them technological
specialization.

In these recent years, technology has allowed the oil industry access to
oil and gas reserves which were previously not possible. One example of
this is extraction from deep oceans, technology initiated by Petrobras.
Currently, only considering Angola there have been 12 important oil
discoveries in deep water blocks, making Angola the 3rd oil producer in
Africa with possibilities of reaching first place.

Another innovation that has taken place in recent years is the
exploitation of heavy and ultraheavy crude oil. During the decade of the
1930`s, Shell carried out a process of intensive prospection in various
areas of the Ecuadorian Amazon. There it identified important reserves of
heavy crude but did not have the technology to exploit them.

Only decades later, has the technology to access these oil fields
developed and now these areas are either in the process of exploitation or
licitation. In Venezuela, Ameriven(ChevronTexaco, ConocoPhillips and
PdVSA) will exploit heavy crude oil from 250 -500 well in the so called
Orinoco Ridge.

In the oil sector there are some companies that have specialized in access
to set reserves that imply a certain level of risk. Some companies have
specialized in exploiting in areas of high political risk. Among these is
Unocal that exploits gas in the Yadana Sea of Birmania, whose government
faces international comdenation for violations against human rights and
attempting to construct a gas pipeline that crossed Afghanistan during the
Tabilan regime. They are also present in some conflict zones in
Indonesia. Others specialize in incursions into remote areas. Arco
(currently BP) is an example of this; it accepted concessions in Iran Jaya
and in the most remote areas of the Ecuadorian and Peruvian jungle and in
the Alaskan Artic. Russian companies have occupied the niche left by
other companies that fear damage to their reputation, for example the
presence of Slavenft in Sudan.

Developing strategies at a regional level is also important for the oil
industry. For example Occidental, United States bases company changed all
its interests in Southeast Asia with Shell, to concentrate in Latin
America, and later started to sell these to concentrate on the Middle
East. Repsol operates preferentially in Latin America, whilst French and
British industries concentrate on their ex-colonies.

Oil companies influence imposed State politics of restructural economic
programs, such as deregulation of labor laws and the privatization of
state companies hydrocarbon reserves. This has allowed companies to
reduce costs and not have any type of responsibility over labor as well as
having access to state reserves. In Latin America, the industry wishes in
invest in large companies such as PdVSA (Venezuela), Pemex (Mexico) and
Braspetro (Brasil), however it has been state companies from East Europe
that have claimed the greatest interest from oil transnationals in these
recent years, due to the violent processes of deregulation which they have
entered.

- HOW THE OIL INDUSTRY WORKS

An ever smaller group of transnational co operations invest in hydrocarbon
exploitation, of which the oil companies are the major beneficiaries.
However behind them exists many other companies or institutions such as
transport, insurance and financial companies among others.

The largest private oil companies are: ExxonMobile(United Status), Shell
(UK-NL), BP (UK), ChevronTexaco (United Status), AGIP (Italy),
TotalFinaElf (France) Respsol YPF (Spain).

These companies are the result of megamergers which they have had to
result to in order to survive the world energy market, for example, BP is
the result of the merger of Amoco and Arco.

At least 4 state oil companies compete with large private industries and
in some way act as transnational companies. The difference with the
first, apart from exploitation activities of hydrocarbon resources, is
that they have to act as regulators in the energy sector, and at least
theoretically their earnings are redistributed in society. These are:
ARAMCO (Saudia Arabia), Braspetro (Brasil), National Iranian Oil Co, PdVSA
(Venezuela) and PEMEX (Mexico).

The companies with the greatest participation in the market in 2001 where:
BP, ExxonMobil, National Iraina Oil, Royal Dutch/Shell and Saudi ARAMCO.

- REFINERIES

The country with the greatest capacity for refinery is the United States
(16.510 thousand barrels a day in 1999), followed by Japan (5.110 thousand
barrels a day in 1999), China (5.020 thousand barrels a day in 1999)
Germany (2240 thousand barrels a day in 1999).

Many insular States have a large refining capacity in relation to their
territorial area and their energy requirements. Singapore enters into
this group of countries. In the past, the two largest world refineries
were in Aruba and Curacao both Dutch colonies.

It has frequently been identified that the location of refineries has an
environmental racism characteristic, and it is for this reason that many
of the groups that work in the field of environmental justice dedicate
themselves to refineries.

The companies with the greatest earnings in the refinery sector are the
Japanese companies Cosmo Oil Company Ltd, Nippon Oil Corp, Showa Shell
Sekiku KK and Teon General Sekiku KK and the United States company Valero
Energy Corp.

- NAVAL TRANSPORT COMPANIES

Naval transport of crude oil is dominated by private owners, but there
exists a consolidation process of this sector in a few companies. In fact
currently, 25% of the world fleet is in the hands of 10 owners.

A strategy of the oil industry is to develop its own transport fleet. For
example BP has invested 3 thousand million dollars in the business of
crude oil transport. Other companies are following this example as in the
case of the Korean companies Hyundai, Samsung; and the Japanese Tsuneishi
and Mitsubishi, as well as Denme of Holland and NSSCO North American
company that operates in Alaska.

- STORAGE OF CRUDE OIL

The countries with the largest storage capacity in the world are Liberia
that concentrates 21% of world capacity followed by Panama, where 12% is
stored. These countries are important naval routes for large oil tankers.
Other large storage terminals are found in insular states of the third
world, transforming them in tank states. An example of this is the
Marshall Islands, the Bahamas and the Virgin Islands.

There is a growing concentration for the crude oil storage sector to be
held in few hands. In the United Kingdom, the storage of crude oil is in
the hands of three operators: Vopak, Simon Storage and ST Services and the
oil terminal of Simon belongs to Vopak, Simon Storage.

- SERVICE COMPANIES

Neoliberal fundadimentalism has forced countries to apply flexible labor
norms. That is why currently the majority of activities that were
previously carried out by traditional companies today are carried out by
service industries, who do this work in situ.

The importance that these service companies have acquired is so great that
last year we were witness to the first war carried out in favor of an oil
service company, who was the primary beneficiary in the invasion against
Iraq.

Some businesses such as Halliburton provide oil services as well as
military services, existing a close relationship between the two
sectors.

The companies with the greatest earnings are: Baker Hughes Incorporated,
FMC Corporation, Halliburton, Schlumberger and Weatherford International,
the majority of them United States based.

- OIL INFASTRUCTURE CONSTRUCTION INDUSTRIES

Behind every oil operation there exists a complicated infrastructure which
gives way to a market for construction companies.

Asian countries have emerged with dominate force in this sector,
especially Korean companies among them Hyundai.

Among the European companies are Aker McNulty and Amec Offshore Services
of the United Kingdom, Grootint of Holland, Aker Stord and Grootint of
Holand, Aker Strod and ABB of Norway, Belleli Offshore, Belgium
Bluewater.

Some companies that are in the oil construction business have diversified
to include engineering projects, construction of and installation of
infrastructure as well as civil engineering jobs.

- THE PRIVATE BANKS

The private bank has identified some elements in the oil industry to
extend its business such as the deregulation of the state energy sector,
mergers and acquisitions of oil companies and the development of new
oilfields, oil and gas pipelines, refineries, etc. There is a
specialization in the financial sector linked to the oil industry. The
banks act as advisers and design financial structural programs, the
"arrangers" collect funds for the operation. Added to this are the
insurance companies and commercial banks that sometimes act as lending
syndicates.

Some banks who have investments in the oil sector are US Ex - Im Bank,
FleetBoston Finantial, Citigroup of the United States. From spain BBVA
and Caja Madrid, from Germany WestLB and Dresdner Kleinwot Wasserstein,
form Italy Banca Nazionale del Lavoro and from England Barclays.

- EXPORT CREDIT AGENCIES (ECAs)

These are public agencies that provide refundable loans, guaranties and
insurance to its corporations that look to do foreign business (in
developing and emerging countries). The majority of industrialized
nations have at least one credit agency for exports. These back risky and
controversial projects in the mining, forestry, oil, gas and carbon
industry. A very high percentage of these energy projects are backed by
ECAs. As a result, these projects often affect the natural environment
and are a threat to the survival and integrity of the people in the
affected regions.

There participation is greatest in the World Bank in risky projects.

For example, between 1995 and 1999 the World Bank provided 5,95 thousand
million dollars in loans to the fossil fuel and mining sector, compared to
Credit Agencias which provided 40,5 thousand million dollars for
exploration.

MIGA (Multilateral Guaranty and Investment Agencies)

MIGA is a World Bank specialized agency that guarantees multilateral
investments. It offers guarantees for projects financed by the World Bank
that are considered politically risky for the investors and loaners,
through backing these countries receptors of retainer loans and
investment. The MIGA intervenes in the energy sector.

For example MIGA has provided a guarantee for 15 years to the company
Sasol of South Africa for $27 million to cover an investment of $30
million via Sasol Petroleum Temane Ltd ("SPT") in Mozambique and $45
million to cover a $50 million investment for the construction of an 850Km
gas pipeline that transports gas from Mozambique to South Africa.

MIGA guarantees risks related to expropriations, war, civil uprising among
others.

- OTHER COMPANIES LINKED TO THE OIL SECTOR

Apart from the credit sector, there are a series of advisor and financial
service companies that benefit from the oil industry. In the service
sector of legal consultancy and financial accounting for the oil industry,
a few firms dominate the world market. The fall of Enron produced various
changes in the oil financial sector, and increased the risk of the sector.
Some of the large banks could be involved in the Enron scandal.

The main job of the legal firms is to facilitate the company profits by
minimizing regulatory, legal or environmental impediments that still exist
in the energy sector.

2. WHO PROMOTES THE OIL MODEL

The prescribed oil model that favors above all transnational oil
companies, is promoted and sometimes imposed upon by some international
institutions that are at the service of the corporations, within these the
World Bank is highlighted, through financing and imposes its structural
adjustment programs. It backs countries (indebting them) so that they
implement fiscal programs to comply with IMF impositions in relation to
policies and OMC requirements in relation to energy.

The World Bank backs countries in design of adjustment policies. Among
the adjust policies are those that forces countries to overexploit their
oil resources.

More directly the World Bank finances development oil projects,
construction of oil pipelines, etc.

The International Monetary Fund imposes macro economic policies related to
the reduction of the role of the State and in public spending weakening
state industry. It forces countries to privatize its energy sector via
conseciones and deregulation of the oil sector. It promotes free
competition of the energy state sector with the private sector and forces
countries to do away with subsidies in the energy sector (electricity,
domestic gas, fuel)

The IMF was created to offer its members loans to overcome short term
difficulties in their balance payments; it later took on the role of
fiscalizer of countries and institutions in debt.

Its loans are destined to the payment of interest and political reforms.
The United States has 18% of the votes in the IMF, 5 countries control 40%
of the decisions.

With the deregulation policies on labor laws, via programs of structural
adjustment imposed by the IMF, oil companies can find a disposable work
force in the countries which they have access to without having to taken
on any form of labour responsibilities and at low costs.

Oil companies take advantage of privatization policies or privatization
covered up as concessions, tercerization of services, etc to have access
to the resources which were previously under state control.

- THE UNITED NATIONS

The United Nations programs for the environment, under the name of
sustainable development, is promoting the so called public private
associations that are societies between Northern and Southern governments,
businesses and NGO´s that has changed the way the United Nations
functions.

According to this scheme, States act as intermediaries so that
transnational businesses comply with the objectives set in the Plan of
Action, via Public - Private associations.

There already exists proposal for associations to intervene in renewable
energy, such as the GA renewable energies initiative, in with Shell
participates as leader in sustainable development.

Through Public Private Associations, the use of natural gas is promoted
and nuclear energy as sources of clean energy. Included are also highly
questionable projects such as the West African Pipeline.

- CONSERVATION NGO´s

Many non governmental conservation organizations function for the
interests of oil companies. These enter in various types of societies
with oil companies and they help them develop a green image. In some
cases they receive money to buy lands destined for conservation, whilst at
the same time they destroy other areas freely.

Part of this strategy involves the energy and biodiversity initiative or
EBI, in which the oil companies ChevronTexaco, BP, Shell and Statoil
participate. In the conservation sector there is Conservation
International, TNC, Smithsonian Institute, Flora and Fauna International
and UICN.

This tendency is strengthened by the XI session of the UNCTAD that took
place in mid June of 2004 in Sao Paulo, in which it an alliance between
oil companies and sustainable development programs was established. The
business partners are North American company Occidental Petroleum who
backs projects of biocomerce to Ecuadorian organizations that promote
exports. The project will take place within an area of 200.000 Ha
concessioned to the company where 28 indigenous communities live.

Source SAO PAULO, Jun 16 (IPS). An Unlikely Alliance to Pursue Biotrade.
Mario Osava. http://ipsnews.net/interna.asp?idnews=24229