State-run oil giants will make or break the energy transition

CLIMATE activists love to vilify ExxonMobil and Shell. These and other private-sector energy companies have been on the receiving end of proxy battles, legal challenges and other forms of pressure to force them to dump oil and gas in favour of renewable energy and other green technologies. The supermajors certainly make for an attractive target: they have ubiquitous distribution networks, well-known brands susceptible to consumer boycotts. Such pressure is often welcome - in the fight against global warming every little counts. But in the oil market the private sector counts for less than you might think. Whether the energy transition can succeed will depend in large part on the behaviour of the world’s state-led oil behemoths.

If the supermajors are big oil then national oil companies (NOCs in industry lingo) are enormous oil. Together they produce three-fifths of the world’s crude and half its natural gas, compared with just over a tenth for large international oil firms (the rest is pumped by smaller independent companies). They sit on roughly two-thirds of the remaining reserves of discovered oil and gas globally. Four - ADNOC of the United Arab Emirates (UAE), Saudi Aramco, PDVSA of Venezuela and QatarEnergy - possess enough hydrocarbons to continue producing at current rates for over 4 decades.

If you thought that private-sector oilmen were making out like bandits of late from crude prices of US$100 or more a barrel, as the latest quarterly earnings of Exxon and other supermajors are expected to confirm later this week, their haul pales beside that of their state-sponsored counterparts.