Question: Who's As Seductive As Gazprom? Answer: Schlumberger

What is Big Oil’s default answer to periods of trouble? Merge. It happened during the $10-a-barrel oil phases of the 1980s, and again in the 1990s. That’s why we’ve got Exxon Mobil, Chevron Texaco, ConocoPhillips and BP-Amoco-Arco.

So why would it happen now, with oil around $100 a barrel? Because that price camouflages the industry’s deep, long-term crisis. Majority state-owned companies like Gazprom, Aramco and Venezuela's Pdvsa own between 80% and 90% of the world’s known energy reserves, and are quite content to develop them themselves. For the Big Oil companies, there's no visible, long-term growth under the current business model.

Think Detroit.

That leaves Big Oil the traditional option of merging itself into the future. Two of the likeliest courtship targets I see are Russia’s natural gas giant Gazprom; and Schlumberger, one of the only long-term growth bets in the oil industry. Business Week features a long, thought-provoking piece by Stanley Reed this week on Schlumberger.

The Big Oil companies are vastly enlarging their natural gas component. That’s where Exxon’s growth is, for example -- in the Qatari natural gas fields. So a merger with Gazprom would be a natural, providing any company instant access to the world’s largest gas reserves. For Gazprom, merger with a Big Oil giant would provide instant fulfillment of its ambitions to be accepted in the West, and to be both an oil and gas company.

Both Big Oil and Russia are notoriously egotistical. Could either get down to a serious discussion, or are we talking Ali and Frazier? One wonders. But the likeliest partnership would be between Gazprom and Italy’s Eni, which have a deep and close relationship in various strategic pipelines.

As for Schlumberger, here’s a company that’s profiting from Big Oil's decision in the 1980s and 1990s to slim down by jettisoning its talented geologists, its drilling operations, and much of its research function. Schlumberger took that trend the opposite direction by bulking up with these very same capabilities.

Now, with the national oil companies disinterested in partnering but only in using western oil giants' technology, it’s companies like Schlumberger that are welcome in all these countries. So if a Big Oil company actually owned Schlumberger, that would be a good foot in the door.

Who would merge with Schlumberger is anyone’s guess -- Shell, BP, Exxon, Total, Chevron?

And what about a merger of the giants themselves – Schlumberger and Gazprom? The Business Week story says that Schlumberger’s Russia business is growing gangbusters, and that it expects Russia to be as important to its bottom line as its biggest current venue of work, the U.S.

Let's watch.

Photo: Miguel Vieira
Rights: Creative Commons