For oil companies, the good old (bad old) days are over

ROME — It used to be so easy. A North American or European energy company eager to ramp up foreign production would traipse into a bankrupt, yet oil-rich, country – anywhere in North or West Africa would do – make nice with the local strongmen, promise jobs, technology and export sales, and walk away with oil and gas concessions that made shareholders weep with joy. Reserves and production went up, costs were relatively low, and environmental regulations were the very palest shade of green.

Those were the good old days. Now look at what’s happening. Economic nationalism is on the rise. Poor countries that once begged foreign oil companies to develop resources buried in deserts and jungles are now kicking these same companies out. Development, revenue and tax laws are being furiously rewritten to favour domestic interests.
It’s happening everywhere and, if it keeps up, your favourite oil company will have an increasingly tough time replacing waning reserves and production.

Just a few days ago, Repsol, the Spanish oil giant that considers Algeria its backyard, was given its marching orders by Sonatrach, the Algerian national oil and gas company. It and Gas Natural, a company related to Repsol, were booted out of a $6.8-billion (U.S.) gas production and liquefied natural gas development in the eastern part of the country. Repsol and Natural Gas said Sonatrach was “illegally appropriating” the project.

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Resource nationalism didn’t just hit last year. It’s been coming, not coincidentally, since oil prices began their relentless rise from about $25 a barrel early in the decade to three times that now. Resource-rich countries, thanks to the commodities boom, are no longer in financial crisis and are therefore less keen to court foreign investment.

The Globe and Mail