ACTION must be taken to ensure medium-sized oil companies receive financing to maintain a balanced economy in the North Sea as the rise of state-owned oil companies changes power relations, warns Marcus Richards, chief executive of Korean-owned Dana Petroleum.
Dr Richards, who has run Aberdeen-based Dana since March 2011 after Korea National Oil Corporation's £1.9 billion acquisition of the explorer, said the industry is in a "time of change".
The oil majors who developed the North Sea are pulling back from the region, and in their place have come state-owned national oil companies (NOCs), such as China's Sinopec, many with deep pockets.
But Dr Richards said: "There is a need for a balanced economy. We need to create that balance."
This means considering appropriate tax incentives as well as ways to meet the financing needs of smaller firms, which are behind many of the discoveries maintaining activity in the North Sea.
"If you look at the North Sea going forward, what you will see is the progressive reduction in investment by the super-majors," Dr Richards said.
"Imagine [trade body] Oil & Gas UK in 20 years' time. Who is going to be sitting at the table?" he added. "These are the things we need to think through."
The interests of state-owned NOCs extends beyond simple oil and gas production to resource diplomacy, he said, posing challenges for the oil majors that have been dominant so long.
"How many leaders in the international oil companies are prepared for that?" he said. "That is at a level above them."
The former BP executive said: "International oil and gas companies have to reinvent themselves to compete on a global stage. That is a very different outlook to 30 years ago."
With many countries nationalising oil and gas assets, this leaves the oil majors having to focus on using innovative techniques to exploit more difficult hydrocarbon reserves in other regions.
Dr Richards was speaking at the London launch of research by Robert Gordon University showing that NOCs control 86% of global oil and 53% of gas reserves, and predicts their growth will continue.
The Leadership Voices report, which was based on interviews with 40 top oil executives, found they are increasingly confident about the prospects for the industry thanks to technological breakthroughs and new discoveries.
But executives expect major changes in the structures of the relationships in the industry, particularly in the power balance between the NOCs and the oil majors. Smaller, more agile and entrepreneurial players are expected to play a bigger role in the industry.
Report author Professor Rita Marcella, dean of Aberdeen Business School at Robert Gordon University, said there are major concerns in the industry about gaps in the supply chain, shortage of skills and access to equipment and infrastructure.
She warned there are fears of "hyperinflation" of service costs. She added: "We have all heard of the war for talent but there is also a war for materials and supply-chain participation."
Dr Richards said that one potential reform is for oil and gas companies to work together on their supply chains, for instance taking regular delivery of materials from a supply vessel rather than each flying in their own equipment at great expense.
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