Business Restructuring in International Oil Companies (IOCs) - Increasing Focus on Upstream Business With Spin-Offs and Divestitures in Downstream Operations

Integrated Oil Companies Evolve to Ensure Future Profits


London, England -- (SBWIRE) -- 06/20/2012 -- Integrated Oil Companies (IOCs) are turning towards more challenging opportunitites for oil production, such as onshore unconventional reserves and conventional resources in deepsea areas, according to research conducted by oil and gas experts GlobalData.

The new report* shows that several integrated oil companies (IOCs) decided to restructure business segments in 2011, directing their focus on upstream activities for the next five years. This follows a steady decrease in oil and gas discoveries since 2010 and a global depletion of conventional reserves, which has made the use of advanced technologies to drill in deep sea regions far more appealing.

A large number of deepsea reserves have been successfully detected, increasing the need for high capital expenditure in the upstream sector. IOCs are being prompted to increase capital expenditure in their upstream businesses to enable expansion of their E&P activities in conventional as well as unconventional resources.

GlobalData analysis indicates that increased capital expenditure is required for IOCs to remain competitive with their pure-play E&P counterparts. Reserve Replacement Ratios (RRRs) represent the amount of new reserves found in comparison to the amount of oil produced over a set amount of time.

The RRR helps in deciding the future prospects of a company and the number of years it will be able to sustain its current production levels with its current reserves. IOCs have, on average, seen relatively lower RRRs than those of upstream pure-play companies during the period 2007-2011, suggesting that pure-play companies have been more competitive in increasing new reserves, and further highlighting the need for IOCs to step up their focus on upstream activities in order to survive competition in the future.

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Many IOCs have also restructured their downstream operations, due to the various environmental regulations on refining units utilized in certain developed countries. Refining capacities are now only expected to be added in markets with looser environmental regulations, and a considerable decline in planned refinery construction and capacity expansions in North America and Europe is being countered by huge refining capacity expansions planned for Asia-Pacific, the Middle East, Africa, and South and Central America.

This report provides information about the key divestments in the downstream sector undertaken by integrated companies in order to raise the capital needed to focus on upstream activities. Information about divestments of downstream assets and plans for growth in the upstream sector by major integrated oil companies also features in the report.

This report was built using data and information sourced from company reports, primary and secondary research, and in-house analysis by GlobalData’s team of industry experts.

GlobalData is a leading global business intelligence provider offering advanced analytics to help clients make better, more informed decisions every day. Our research and analysis is based on the expert knowledge of over 700 qualified business analysts and 25,000 interviews conducted with industry insiders every year, enabling us to offer the most relevant, reliable and actionable strategic business intelligence available for a wide range of industries.

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