Petro-States: $4 Trillion Dollars in Change

Steve Weisman has a strong piece in today's New York Times on the spending habits of the world's new and long-time petro-states. According to his reporting, they have $4 trillion dollars on hand.

The oil-rich states, including Saudi Arabia, the UAE, Russia and Kazakhstan, are looking to invest the money wisely. But they are also wary of the type of political backlash that Dubai suffered last year in the attempted purchase of U.S. ports by D.P. World, Weisman writes. So they are spreading the property purchases into Europe although the U.S. is still their leading investment, he says.

Chip Cummins and Rick Carew, my former colleagues at The Wall Street Journal, have an extremely detailed piece on the same topic.

As a leading example, both pieces point out the Abu Dhabi Investment Authority's $7.5 billion purchase of a large slice of Citigroup's shares.

Officials in Russia and Kazakhstan have both said they intend to invest the proceeds of their oil wealth in western properties. In most of the cases, we are simply talking about investment. But Russia seems always to provoke concerns about a possible political agenda, and the coming buying spree will heighten them.

Photo: Realmiamibeach
Rights: Creative Commons

The Old Game is the New Game in Big Oil

Russell Gold, my former colleague at The Wall Street Journal, has an interesting piece today describing how, as contrarian as it can possibly appear, the Middle East is open for business to the oil majors. The upshot: Russia and the Caspian states have a lot of leverage, but not wholesale negotiating power with the western oil companies, which do have options in terms of replenishing their reserve base.

The first paragraph of Russell's piece: Since the 1970s, major oil companies have been shut out of oil production in much of the Middle East. Now, the doors to foreign investment are opening again, this time for natural gas. Read rest of story

Steve's comment: Russia in particular but also Kazakhstan have been wringing concessions from the western oil companies, which have fewer and fewer places to go around the world for new reserves as national oil companies and ministries take control of their own energy supplies.

Though the big-earning companies will deservedly generate little public sympathy, they have been on the front lines of the combat under way at the intersection of geopolitics and commerce.

But the willingness of countries like Qatar and the UAE to grant equity shares in their natural gas fields to western majors is a poke in the eye of the former Soviet petro-states.

Why after making such a fuss over their economic independence are the Middle Eastern countries willing to go back into an equity relationship with the previously expeled majors? In an e-mail exchange, Russell says the majors are "very wary" of Russia now, along with Venezuela, while in their view the Middle East offers some welcome stability.

Russell goes on: "Most of the natural gas projects open to western investment are technically challenging, including Abu Dhabi's $10 billion sour gas project and BP's work in Oman. The Saudi exploration isn't so much technically challenging, but offers the Saudis an opportunity to cement ties with a number of companies from powerful nations, including Shell (UK/Netherlands), Lukoil (Russia), Sinopec (China), Eni (Italy). Add in the big export refinery projects under consideration and you have ties with Total (France) and ConocoPhillips (the U.S.). That's most of the permanent members of the U.N. Security Council."