Despite energy-producing countries' rising dominance over global hydrocarbons reserves, multinational companies likely will maintain a niche as financiers and project managers of major developments.

State-controlled oil companies are playing an increasingly aggressive role in countries such as Russia or Venezuela, where, emboldened by high oil prices and easier access to technology, they're either pushing for bigger stakes in projects operated by an integrated major or completely forgoing foreign investment. But the world's perceived energy demand growth - estimated at a 30% rise by 2030 - will demand gargantuan investments and technological breakthroughs that international oil companies can handle better than their state-owned counterparts, which are dogged by competing domestic concerns.

Collaboration - especially in frontier areas such as the deepwater offshore, high-acid natural gas or liquefied natural gas - "will continue, because the challenge is really huge," Ali Al Jarwan, general manager of Abu Dhabi Marine Operating Co., said at the Offshore Technology Conference here.

But the balance has clearly tilted in favor of state giants that actually own reserves in the ground. For international companies, the time has come "to ask not what the NOC (national oil company) can do for you, but what you can do for the NOC," said Mark Greene, a consultant with Accenture.

A Difficult Relationship

The rise of national oil companies, after decades of dependence on international giants, has been marked with conflict. Indian and Chinese state giants are outbidding Western majors in Africa, while Russia's OAO Gazprom shunned foreign help in its Arctic Shtokman liquefied natural gas project and took a majority stake in Royal Dutch Shell PLC's (RDSA) Sakhalin-2 project in Siberia.

On May 1, state-owned Petroleos de Venezuela S.A. gained operatorship of four heavy oil crude projects in the Orinoco belt, previously operated by Chevron Corp. (CVX), ConocoPhillips (COP), Statoil ASA (STO) and Total S.A. (TOT).

By taking these steps, national oil companies "want to feel they're part of the whole value chain" of energy production and marketing, said Sonangol Vice President Syanga Abilio.

But some Western executives remain confident that their companies are needed. While NOCs control 60% of the world's reserves and over half of the hydrocarbon production, they only contribute 23% of the capital spent by the global oil industry, said Jean-Marie Guillermou, Total's senior vice president for exploration and production operations. "The role of IOCs is still there," Guillermou said. "It's clear that most of the time these business opportunities mean entering into cooperation with national oil companies."

While resource-rich national oil companies' primary concern is to provide government revenue, international companies benefit from good access to financing needed for huge investments and the ability to handle major projects. "There's room for everybody, and we better work together," said Olivier Lazare, Shell's vice president for new business development.

But in order to work in the new NOC-dominated environment, international oil companies must be willing to engage in more ambitious social programs and endure the occasional contract revisions, such as the ones that occurred in Venezuela.

International oil companies "don't want changes in contracts, but they're ready to discuss," said Total's Guillermou. "There's no way an IOC can neglect a contract with Venezuela, and we will be there in the long term."

At the same time, national oil companies are aware of the benefits of collaboration. Angola's entry into the LNG market wouldn't occur without the presence of multinationals, said Sonangol's Abilio.

NOCs seek "not to crush the margins of IOCs, but to push down these margins," Abilio said. "If the gas comes from my country, I like to know what you're gaining."

Copyright (c) 2007 Dow Jones & Company, Inc.