The IOCs in the oil industry - Essay Example

Download file to see previous pages... Most of the International Oil Companies have been started as national corporations operating only on the domestic market. In general, the history of the IOCs goes back to 1850s when domestic oil industry development was marked by significant growth (Mohr, 1976), and many companies like Marathon Oil began to penetrate into other markets given a start to International Oil Corporations (Marathon Oil corporation History, 2005).
The international expansion of International Oil Companies began at the beginning of the XX century when substantial oil fields were discovered in Asia. For instance, explorations of oil in India had been started in 1875, and after that time some International Oil companies sterted their activity in the Assam region. According to the historical data production of oil was about 0.30 million tones at the end of the XIX century.
The main problem of national oil industry of many less developed countries was that the oil fields discovered by the public sector were literally gifted to the private sector without recovering the direct costs, let alone the sunk costs, written off over the years, for futile exploration activities in other parts of the country and abroad. The oil reserves were underestimated by design or ignorance about the speculative nature of oil reserves estimation. It is well known that oil reserves generally increase with time, as more and more data is made available during production from these fields.
The private sector was given the international prices, which had been denied to the public sector for exploitation of these fields discovered by the public sector oil companies. Some minor explorations by national companies took place in Asia, but as experts suppose "production from these fields was uneconomical as the administered price given to the two national oil companies was very low as compared to international crude oil price" (Yeomans, 2004).
National companies addressed their governments for international crude oil price for economic exploitation of these discoveries but neither of them got any response. So, it is evident that during the fist stage of global expansion IOCs received greater possibilities and opportunities than national companies in less developed countries, and for this reason the first successful steps on the international arena resulted in rapid growth of IOCs.
The next stage of IOCs development was closely connected with political and legislation changes. At the beginning of the XX century the "landlord was able to lease his land with its mineral rights to a lessee who gained rights in petroleum Exploration and Production" (Mohr, 1976). So, the system of leasing supported the start and development of International Oil business. During this period of time most IOCs were represented by joint-ventures, like Anglo-Persian Oil which in 1938 was developing oil fields in Iran, and Kuwait (Kuwait: Oil Fields, Gas Fields, 1993). During this period there were a variety of arrangements for joint developments and alliances. Some were very formalised inter-organisational relationships; at the other extreme there were very loose arrangements of co-operation between organisations, with no shareholding or ...Download file to see next pagesRead More