Oil Companies are Split on Push by Nations for More Profits

Oil-producing nations demanding contract concessions or seeking outright expropriations have created a split in the petroleum industry, with some companies insisting a contract is a contract and others saying they are willing to renegotiate some terms to reflect higher oil prices.

Oil companies have pushed back as developing countries have asked for a bigger share of what they regard as windfall profits from contracts negotiated during the days of $10-to-$20-a-barrel oil in the late 1990s. But senior executives of Chevron Corp. and France’s Total SA last week publicly said that they are ready to consider giving more of the profits to the countries.

Royal Dutch Shell PLC and Exxon Mobil Corp. are among the companies still adhering to the tough public posture toward changes in contract terms. They are rejecting suggestions by Moscow that they alter early 1990s contracts under which they obtained rights to natural-gas fields in Russia’s Far East. This week, Russia raised the pressure by revoking an environmental permit for Shell, threatening to halt the project.

It isn’t clear whether the tough-guy or nice-guy approach will prevail, though both present significant risks. Ripping up agreements to give a bigger cut to oil-producing nations will hurt companies’ bottom lines. But if oil companies don’t comply and get booted out of oil fields, the impact could be bigger still.

Dow Jones Newswire