[advancedatheist]

It looks like the oil companies know they can't really make the remaining oil pie bigger, so they want to try to push the smaller slices together: Financial Times
$this->bbcode_second_pass_quote('', '[')b]Oil sector mergers hit $160bn last year By Carola Hoyos in London, Updated: 8:14 p.m. ET March 27, 2006:
Mergers and acquisitions in the oil and gas industry tripled in value last year to $160bn - the highest level since the boom year of 1998 when Exxon and Mobil merged, BP took over Amoco, and Total bought PetroFina.

Deals by Chinese oil and natural gas companies, meanwhile, are expected to have grown sixfold to $6bn in 2005 as they became big international players, buying assets from Ecuador to Sudan and Syria, according to an authoritative industry study.

The report, released tomorrow, suggests oil industry executives and government leaders have been on a frantic global buying spree, under rising pressure to secure the oil and gas needed to fuel economic expansion.

The study by Harrison Lovegrove, the UK-based corporate advisers, and John S Herold, the US research firm, is widely regarded by the industry as the most comprehensive report on M&A activity in the sector. It is expected to show that last year oil companies were willing to pay 54 per cent more for acquisitions in North America as executives bet that high oil prices were here to stay. Acquisition prices in the rest of the world shot up 350 per cent.

[pup55]

M and A activity is a cheap way to find reserves. A small exploration company finds some reserves, it is certainty, it gets bought out by one of the big development companies. A small exploration company does not find any reserves, it goes broke, and does not show up on the books of the big development company. So, the winners are rewarded, and the losers go away.

But there are system costs: namely, the bankruptcy of the losers. These costs are incurred by the banks and investors who financed these operations to get them off the ground. So, this strategy shifts the risk away from the big oil companies, and disperses it throughout the system.

Maybe this is a more efficient way because these small operations have lower overhead costs, etc. kind of like outsourcing.

The system will break down when it gets to be so risky to find reserves, no matter how big the potential reward, the little guys will not do it anymore. Example: wildcatting next to some rebel encampment in Nigeria.
At some point, the big oil companies will be the only ones capable of doing it on a big scale.

[whereagles]

Well.. aren't mergers rather a sign of monopolization?

[Shadizar]

More importantly even with all of the aquisitions by major oil companies their year on year production is still declining (exept for BP).

Source

-Shadizar

[rockdoc123]

$this->bbcode_second_pass_quote('', 'M')ore importantly even with all of the aquisitions by major oil companies their year on year production is still declining (exept for BP).

[Shadizar]

So, to clarify your response... Much of the oil left to be discovered in the world is controlled by countries that the major western oil companies do not have access (or are too dangerous to operate in)?

The large western oil companies (BP, Chevron, Exxon-Mobil, Shell) can't be bothered to explore for more oil in areas that they do have access to because it is not economically sound. In an attempt to keep up production and satifsy their shareholders they therefore resort to aquiring smaller companies. Is that right?

It would follow that great efforts are being made by the oil industry to secure access to these areas.

Well, thats pretty much what I was thinking...Its a good thing companies that already operate in eastern and middle eastern countries are still making discoveries. China and India will need the energy.

-Shadizar