Petroleum Accounting: Principles, Procedures & Issues, 6th edition

784 Pages·2007·58.49 MB·English

by  Brock

C H A P T E R
1 AN INTRODUCTION
TO THE
PETROLEUM INDUSTRY
Glossary Terms Key Concepts:
API gravity • Hydrocarbon chemistry and measurement
barrels (bbl)
• History of the U.S. petroleum industry
Bcf
BOE
• Emergence of a world market
British thermal units (Btu)
butane
cable-tool rig
condensate
crude oil
dry gas
ethane
exploratory wells
FERC
field
formations
horizontal drilling
hydrocarbon
intermediate crude
Mcf
MMBtu
MMcf
natural gas
natural gas liquids
natural gasolines
oil sands
petroleum
propane
reserves
reservoirs
residue gas
seismic
separator
sour crude oil
sour gas
sweet crude
Tcf
well
wellhead
wet gas
Chapter 1 An Introduction to the Petroleum Industry 
The word petroleum refers to the hydrocarbon compounds of crude oil
and natural gas that are found in underground rock formations. Reservoirs
are generally thousands of feet below the surface and are made up of the remains
of small marine plants and animals that lived millions of years ago. Petroleum
may also seep to the earth’s surface along fault lines and cracks in rocks where it
pools as tar, asphalt, or bitumen. Its name is derived from the Latin terms petra (rock) and
oleum (oil). In current usage, petroleum refers to both crude oil and natural gas.
Human use of petroleum is as old as recorded history. Ancient cultures used sticky
crude oil to bind objects and repel water. Five thousand years ago, the Sumerians used
asphalt to inlay mosaics in walls and floors. Mesopotamians used bitumen to line water
canals, seal joints in wooden boats, and build roads. Chariots were greased with pitch by
Egyptians, who also placed coatings of asphalt on mummies. The Chinese were the first to
discover underground deposits of oil and gas, and even transported those hydrocarbons
in bamboo pipelines.
Modern uses of petroleum and its byproducts include:
• Transportation fuels including gasoline, diesel fuel, jet fuel, and compressed
natural gas (CNG)
• Heating fuels such as propane, heating oil, and natural gas
• Electric generation fuels such as natural gas and fuel oil
• Manufactured products such as plastics and building materials
CHEMISTRY AND MEASUREMENT
Different mixtures of hydrocarbons have varying uses and economic values. It
is necessary to recognize the basic types of hydrocarbon mixtures to understand
portions of this book.
Crude oil refers to unrefined hydrocarbon mixtures produced from underground
reservoirs that are liquid at normal atmospheric pressure and temperature.
Crude ranges in color from almost clear to green, amber, brown, or black, and is
classified as light or heavy depending on the density of the mixture. Density is measured
in API gravity as explained in Chapter 11. Heavy crude oil has more of the longer,
larger hydrocarbon molecules and, thus, a greater density than light crude oil.
Heavy crude is difficult to produce and transport to market, and more expensive to
process into valuable products. Consequently, heavy crude oils weigh more, but sell for
much less.
Natural gas refers to hydrocarbon mixtures that are not liquid, but gaseous at normal
atmospheric pressure and temperature. Natural gas is largely methane, which is a clear,
odorless gas. It has the smallest natural hydrocarbon molecule consisting of one carbon
atom and four hydrogen atoms (CH ). Natural gas may also contain some of the larger
4
hydrocarbon molecules commonly found in nature:
• Ethane (C H ) • Propane (C H )
2 6 3 8
• Butane (C H ) • Natural gasolines (C H to C H )
4 10 5 12 10 22
 An Introduction to the Petroleum Industry Chapter 1
Ethane, propane, butane, and natural gasolines are collectively called natural gas
liquids (NGL), and are valuable feedstock for the petrochemical industry. When removed
from the natural gas mixture, these larger, heavier molecules become liquid under various
combinations of increased pressure and lower temperature. Liquefied petroleum gas (LPG)
usually refers to propane and butane, which are stored in a liquid state under pressure.
LPG is the fuel used in portable gas barbeque grills.
Both natural gas and crude oil can contain contaminants, such as sulfur compounds
and carbon dioxide (CO ), which must be substantially removed before marketing
2
them. The contaminant hydrogen sulfide (H S) is poisonous and, when dissolved
2
in water, is corrosive to metals. Natural gas and crude oil that are high in sulfur
compounds are called sour gas and sour crude oil. Two additional types of crude
oil are known as sweet crude, which contains minimal sulphur compounds, and
intermediate crude, which is between sour and sweet. Some crude oils contain small
amounts of metals that require special equipment during the refining process.
In the U.S., natural gas is measured in two ways, and both are important in
petroleum accounting:
• By the amount of energy or heating value when burned; this quantity is
expressed in million British thermal units (MMBtu)
• By volume, which is expressed in:
 Mcf (thousand cubic feet)
 MMcf (million cubic feet)
 Bcf (billion cubic feet)
 Tcf (trillion cubic feet)
Gas volumes are necessarily measured at a standard pressure and temperature, typically
at an atmospheric pressure base of 14.65 to 15.025 pounds per square inch absolute (or
psia) and a temperature of 60 degrees Fahrenheit.
The ratio of MMBtu (energy) to Mcf (volume) varies from approximately 1:1 to 1.3:1. The
more NGL there are in the gas mixture, the higher the ratio, the greater the energy, and the
“richer” or “wetter” the gas.
Wet gas is produced to the surface and sent through a mechanical separator
near the well. Some natural gasolines within the gas condense into a liquid classified
as a light crude oil, and are called condensate. To create pipeline quality natural
gas, the wet gas is sent from the wellhead by pipeline to a gas processing plant for
removal of substantially all of the NGL, which are sold to petrochemical plants or
refineries. The remaining gas mixture—called residue gas or dry gas—is more than 90
percent methane. It is the natural gas burned for home heating, electric generation, and
industrial uses.
Crude oil is measured in the U.S. by volume expressed as barrels (bbl). A barrel
equates to 42 U.S. gallons. However, for comparison purposes, hydrocarbons may
be expressed in barrels of oil equivalent (BOE) whereby gas volumes in Mcf are
converted to barrels on the basis of energy content or sales value. Approximately 5.6
Mcf of dry gas has the same MMBtu energy content (5.8 MMBtu) as one average U.S.
barrel of oil. In addition, equivalency can be expressed based on price. For example,
if one Mcf of gas is selling for $6.00 when oil is selling for $60 per barrel, then 10
Chapter 1 An Introduction to the Petroleum Industry 
Mcf equate to one barrel of oil based on the given sales prices. For one million BOE of gas,
the corresponding Mcf is shown for the conversion ratios provided.
Conversion Basis Assumed Ratio BOE Mcf
Energy 5.6 to 1 1,000,000 5,600,000
Value 10 to 1 1,000,000 10,000,000
Many companies use an energy conversion ratio of six Mcf per barrel, which is the required
ratio for certain income tax rules in Internal Revenue Code (IRC) Section 613A(c)(4).
In countries using the metric system, crude oil is measured by weight in metric
tons, or by volume expressed in kiloliters (equivalent to 6.29 barrels). A metric ton of
crude oil approximates 7.33 barrels of crude oil, but the ratio varies since some crude
oil mixtures are heavier per barrel than others. Gas volumes are measured in cubic
meters (kiloliters) and energy is measured in gigajoules. A kiloliter (or cubic meter)
approximates 1.31 cubic yards and 35.3 cubic feet. A gigajoule (or a billion joules)
approximates 0.95 MMBtu.
HISTORY OF THE U.S. PETROLEUM INDUSTRY
To understand the ramifications of financial accounting and reporting in the
petroleum industry, it is important to know how the business of oil and gas has
developed over time. This text’s emphasis is on U.S. operations, and how exploration and
production (E&P) companies have adapted to the emerging global marketplace.
The U.S. petroleum industry began in the early 1800s when dwindling supplies of whale
oil were supplanted by illuminating oils called kerosene or coal oil. Kerosene was extracted
from coal, asphalt, and surface crude seepage (known as rock oil). At the same time,
settlers drilling for salt brine occasionally found crude oil mixed in.
In 1856, George Bissell, an investor in the Pennsylvania Rock Oil Company,
surmised that a similar type of well could be used to produce crude oil for making
kerosene. While there is mention of an oil discovery in Ontario, Canada, a year earlier, it
is generally accepted that Bissell’s company was the first commercial oil drilling venture.
Drilling began in 1859 near Titusville, Pennsylvania, under the supervision of Colonel
Edwin L. Drake, a retired railroad conductor.
A steam-powered, cable-tool rig with a wooden derrick was used to drill the
69-foot well, which produced approximately five barrels of crude oil per day for the
Pennsylvania Rock Oil Company. Additional drilling and production in the Titusville area
dramatically increased the supply and caused a decline in the price of crude oil from $10
per barrel in January 1860 to about 10 cents a barrel two years later. Shortly thereafter, a
number of refineries began distilling valuable kerosene from crude oil.
Nearly four decades later in 1897, the first offshore well in the U.S. was drilled near the
coast of Southern California. H.L. Williams designed a wharf and erected a drilling rig on
top of it. At 300 feet in depth, the well was successful in producing oil.
 An Introduction to the Petroleum Industry Chapter 1
THE INDUSTRIAL REVOLUTION AND THE GROWTH OF BIG OIL
At the start of the Civil War, approximately 200 wells were producing more than
500,000 barrels annually. The introduction of petroleum-based lamp fuel was the first
of an increasing variety of uses for crude oil and its refined products. The Industrial
Revolution and wartime manufacturing created a demand for lubricants to replace
turpentine. By 1870, annual production of crude oil exceeded 25 million barrels.
Transportation was a challenge from the earliest days of oil production. The coopers’
union constructed wooden barrels (with capacities of 42 to 50 gallons) that were filled
with oil and hauled by teamsters on horse-drawn wagons to railroad spurs or river
barge docks. At railroad spurs, the oil was emptied into large wooden tanks placed
on flatbed railroad cars. The quantity of oil that could be moved by this method
was clearly limited. However, the industry’s attempts to construct pipelines were
thwarted by railroad companies and unions that stood to lose this lucrative business.
The first pipeline, built during the 1860s, was made of wood and measured less than a
thousand feet long.
In 1870, John D. Rockefeller moved to the forefront of the burgeoning petroleum
industry when his firm merged with four other companies to form Standard
Oil Company. The goal was to be the industry leader in petroleum refining,
transporting, and marketing. However, shortly after the merger, the company also moved
into oil production.1
During the 1880s, Standard Oil controlled approximately 90 percent of the
refining industry in the U.S., and it dominated the global petroleum industry as well.
Standard Oil’s control of refineries, as well as its ownership of railroads, pipelines, and
marketing outlets, forced most petroleum customers in the U.S. to purchase products
from the company.2
Standard Oil’s dominance drew the attention of federal and state regulators.
After discovery of the Spindletop field near Beaumont, Texas, in 1901, the Texas
legislature passed laws preventing Standard Oil from becoming involved in the field.
As a result of the more open market, other companies were organized. Some evolved into
vertically integrated companies such as Texaco, which was founded in 1901. Between
1911 and 1915, federal antitrust laws forced the break-up of Standard Oil into several
companies.
THE 1920s AND 1930s: DEMAND, SUPPLY, AND REGULATION
The 1920s witnessed increased competition in the oil industry as more
companies formed and demand was spurred by economic growth and the proliferation of
automobiles. Production increased to meet demand, but the industry experienced price
fluctuations and regulatory change.
American companies began to search for foreign oil beginning in the early 1920s.
This outbound investment was encouraged by U.S. policymakers who feared a
domestic oil shortage might occur. By the mid-1920s, approximately 35 companies had
invested more than $1 billion in exploring for and developing reserves in the Middle East,
South America, Africa, and the Far East.
The 1930 discovery of the giant East Texas Oil Field resulted in a world surplus of
oil. Abundant East Texas oil and the prevailing economic depression combined to
temporarily reduce oil prices by 90 percent.
Chapter 1 An Introduction to the Petroleum Industry 
Offshore production added a new dynamic to the oil and gas market. While some shallow
offshore drilling occurred as early as the late 1800s, it was not until the late 1930s that
wells were drilled from structures resembling the offshore drilling platforms in use today.
From the earliest years of active exploration and production, states began to monitor
environmental impact. For example, the Texas legislature in 1933 recognized the
need for conservation measures to avoid waste and rampant overproduction of fields.
Enforcement and oversight duties were given to an existing state agency, the Texas
Railroad Commission. Over time, other oil-producing states created similar agencies or
commissions to regulate the development and production of reserves.
In 1938, the U.S. Congress passed the Natural Gas Act which extended the
jurisdiction of the Federal Power Commission to wholesale sales and transportation of
natural gas. Federal regulation of the interstate movement of gas continues today under
the Federal Energy Regulatory Commission (FERC).
WORLD WAR II: PETROLEUM FOR DEFENSE
Economic recovery from the Great Depression accelerated in the U.S. with the onset
of World War II in 1939. Significant numbers of airplanes, automotive equipment, and
ships were powered by petroleum. The industry easily met the Allied Forces’ demands for
petroleum at the start of the war; however, as the conflict progressed, the U.S. and British
governments feared an eventual shortage of crude oil. As a preventive measure, huge
capital investments were made to develop the enormous reserves in the Persian Gulf.
AFTER WORLD WAR II: GROWTH OF THE NATURAL GAS
AND PETROCHEMICAL INDUSTRIES
At the end of World War II, two events spurred tremendous growth in the natural
gas industry: the advent of longline pipe and the birth of the petrochemical industry.
Large quantities of natural gas had been discovered in Texas, Louisiana, and other
southwestern states. However, without reliable longline pipelines, gas transportation
proved challenging. New techniques for welding large pipe joints were developed that
allowed gas supplies to reach the heavily populated Midwestern and eastern regions
of the country. War Emergency Pipelines, initially constructed to move crude oil from
Texas to the East Coast, were sold to private enterprises and converted to natural
gas transportation.
The need for synthetic rubber and chemicals for explosives during World War
II prompted the development of a highly specialized petrochemical industry. With
readily available feedstock, petrochemical plants flourished in tandem with broader
industry growth. By the 1960s, this specialized industry segment and the range of
petroleum-derived products offered to consumers grew considerably.
THE 1950s AND 1960s: IMPORTED OIL AND THE FORMATION OF OPEC
During the 1950s and 1960s, there was ample world oil production. Prices remained
stable at an average of $3.00 per barrel. However, the U.S. began to rely more heavily on
imported crude oil and refined products. In 1950, 10 percent of the oil used in the United
States was supplied by imported oil and refined products; by 1970, imported products
represented 23 percent of supplies.
In 1960, a world oil cartel, the Organization of Petroleum Exporting Countries (OPEC),
was formed by Saudi Arabia, Kuwait, Iran, Iraq, and Venezuela. Later, eight other
countries joined OPEC: the United Arab Emirates and Qatar from the Middle East;
 An Introduction to the Petroleum Industry Chapter 1
the African countries of Algeria, Gabon, Libya, and Nigeria; Indonesia; and Ecuador.
(Ecuador withdrew from the cartel in late 1992.) By 1973, OPEC members produced
80 percent of the world oil exports and member countries began to nationalize oil
production within their borders.
THE 1970s: EMBARGO AND PRICE CONTROLS
Beginning in October 1973, OPEC members cut off all oil exports to the U.S. This action
was in response to the U.S.-proposed $2.2 billion Israeli military aid package. Israel
had suffered recent surprise attacks from Egypt and Syria. Saudi Arabian oil prices rose
from $1.80 per barrel in 1971 to $11.65 in December 1973. World crude oil prices slowly
increased until the 1979 Iranian Revolution caused prices to escalate rapidly again and
peak at $42 per barrel for some U.S. crude oil.
Because of the 1973 embargo, a large portion of U.S. oil imports was cut-off
for several months. In response, the federal government created the Federal Energy
Administration (predecessor to the U.S. Department of Energy) in 1973 with the power to
control prices of crude oil.
Price regulations were complex: a two-tier oil pricing structure was established
with a low price for “old” or “lower-tier oil” and a higher price for “new” or “upper-tier
oil.” Lower-tier oil generally came from properties that were producing prior to 1973,
while upper-tier oil came from properties that began producing after 1972. Producers
often had both kinds of properties and therefore sold some oil at less than half the price
of other oil of the same quality. By 1979, the U.S. allowed free market prices for U.S.
oil from newly drilled properties or properties producing less than 10 barrels per day per well.
The Strategic Petroleum Reserve (SPR) was officially established in December 1975 by
President Gerald Ford. The first crude oil was delivered to the SPR in July 1977, and was
stored at the West Hackberry site near Lake Charles, Louisiana. Other major storage sites
include Bryan Mound and Big Hill in Texas and Bayou Choctaw, the St. James Terminal,
in Louisiana. Total storage capacity of the SPR is 700 million barrels, although there are
plans to expand this to one billion barrels.
Foreign oil continued to be imported (at prices exceeding domestic oil prices) to meet
the growth in domestic demand. By 1977, approximately 47 percent of the country’s
needs were met by imported oil.
ALASKAN NORTH SLOPE OIL
Prudhoe Bay, the largest U.S. oil field, was discovered in 1968 on the North Slope
of Alaska bordering the Arctic Ocean. A year later, the giant Kuparuk field adjacent
to Prudhoe Bay was discovered. Prior to the Prudhoe Bay discovery by Atlantic
Richfield Company (ARCO), seven very expensive, but unsuccessful, exploratory wells
had been drilled in the area. Even after discovery, development of the reservoir was stalled
until the 1973 Arab oil embargo prompted Congress to allow construction of the Trans
Alaska Pipeline System (or TAPS). Finally in 1977, Prudhoe Bay and Kuparuk crude oils
were produced and marketed.
The North Slope fields are immense with estimated ultimate oil production of
15.8 billion barrels. However, the 32 trillion cubic feet (Tcf) of recoverable natural gas
reserves from these fields cannot yet be transported economically to the lower 48
states. Advances in converting gas to liquids (GTL) offer enhanced prospects for
transportation and marketing. Alternatively, the gas may be shipped as LNG to Asia’s
Pacific Rim in the future.
Chapter 1 An Introduction to the Petroleum Industry 
THE 1980s: BOOM AND BUST
Global market factors, coupled with U.S. regulatory actions, set the stage for a
U.S. petroleum industry boom in 1981-1982, which culminated in a bust by the
decade’s end.
• World oil price increases in 1973 and 1979 improved exploration economics
and created an expectation of substantial price increases in the future.
• Expropriations of U.S. interests in Libya and elsewhere in the 1970s encouraged
U.S. companies to explore within domestic borders.
• The Natural Gas Policy Act of 1978 created incentive pricing mechanisms to
stimulate the discovery and development of domestic natural gas reserves.
• U.S. price controls on crude oil were removed in 1981, which gave producers
additional cash to reinvest.
• In 1981, U.S. tax laws reduced the highest individual income tax rate from 70
percent to 50 percent, and reduced windfall profit taxes on new oil fields.
Consequently, in 1981 and 1982 U.S. individuals invested billions of tax-advantaged
dollars in limited partnerships for petroleum exploration and production.
All of these factors brought about a U.S. drilling boom—a total of $65 billion
was spent in 1984 on exploration and production activities. When Saudi Arabia
refused to further reduce its market share in 1986, world oil prices fell by 50 percent.
With the 1986 oil price collapse, global and U.S. exploration and development activity
substantially decreased, and oil prices hovered at $15 to $18 per barrel for the
remainder of the 1980s.
THE 1990s AND ADVENT OF THE MODERN MARKET
The 1990s were marked by five trends:
1. Use of oil and gas futures
2. Growth in natural gas demand, production, and value in the U.S.
3. Continued restructuring of the U.S. gas industry
4. Increased focus by U.S. companies on foreign E&P investments
5. Continued success with offshore deepwater drilling and improvements in
technological and operational efficiencies
Fluctuating Crude Oil Market. The early 1990s brought increased price
volatility. Oil prices briefly spiked upward after Iraq’s invasion of Kuwait, but quickly fell
after the liberation of Kuwait.
In response to weakening demand in Asia and other factors, oil prices declined briefly
in late 1998 to around $11 per barrel accompanied by fears of a prolonged price decline.
Several major producing countries agreed to production cuts in early 1999 and oil prices
more than doubled.
The new millennium brought about further price fluctuations in crude oil. February 2000
marked the $30 per barrel mark for crude oil. Prices declined to the teens and twenties in
2001, but returned to the $30+ range by the end of 2002.
 An Introduction to the Petroleum Industry Chapter 1
Price increases that few could have predicted occurred in 2004. The ongoing war
in Iraq, coupled with a fierce hurricane season in the U.S., resulted in the highest
crude oil prices ever experienced in the domestic market. With Iraq’s production
disrupted and the weather playing havoc with offshore production, crude prices climbed
over the $55 per barrel mark by late October 2004. Prices continued to increase throughout
2005 and 2006, reaching nearly $71 per barrel by early June 2006, before dropping in
January 2007 to around $55 per barrel. See Figure 1-1 for an example of West Texas
Intermediate crude prices for the past 22 years.
Figure 1-1
MMonotnhtlhyl yF.fO.o..Bb.. WWTTII SSppoottC CruruddeeP Pricriecses
11998866--22000077
80
70
60
el
arr 50
b
er 40
p
S.
U. 30
$
20
10
0
6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7
8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0
9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0
1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2
Source: U.S. Energy Information Administration (January 2007)
Futures Market Emerges. With expectations of continued price volatility, petroleum
producers, processors, and end-users increased the use of commodity futures markets to
hedge prices. Oil and gas futures are publicly traded standardized contracts to buy or sell
specified quantities of crude oil or natural gas at set times in the future and at predetermined
prices. Futures can be used to hedge or speculate on crude oil and natural gas prices as
further explained in Chapter 33. Similar contracts have arisen for call (and put) options to
buy (and sell) specified quantities at certain prices until agreed-upon dates.
Growth of Natural Gas Market. In 1990, natural gas began trading on the NYMEX.
Worldwide demand for gas grew faster than crude oil. In 1993, for the first time in history,
the value of U.S. natural gas production exceeded the value of U.S. crude oil production.
The traditional attachment of natural gas reserves to gas pipelines under long-term
contracts was replaced by sales of gas at market prices to energy marketers and end-
users under short term (less than one year) contracts. Average U.S. gas prices became
seasonal—high in winter months when cold weather increases gas demand for space
heating and relatively low in warmer summer months.
As natural gas became a more popular fuel for electricity generators, summer
prices rose and year-round demand was created. Changes in federal regulation of interstate
gas pipelines in the 1990s required pipelines to become providers of gas transportation
and storage services only, rather than traditional first purchasers and resellers of natural
gas (as further explained in Chapter 12).
Chapter 1 An Introduction to the Petroleum Industry 10
Exploration Trends. In the late 1980s, the U.S. was viewed as a poor area of the
world for new discoveries. It had been heavily drilled by world standards, and its most
promising regions for new fields were in environmentally protected areas. However, in the
1990s, prospects were favorably reversed by technology advancements that substantially
reduced exploration and development risks and costs. Expenditures for domestic
petroleum exploration more than doubled from 1990 to 1999.
Offshore fields in deeper waters proved to be highly productive. As explained in Chapter
5, onshore and offshore exploration success was improved by the use of 3-D seismic to
identify likely reservoirs. Fewer exploratory wells became necessary. The well cost per
reserve volume declined with the advent of horizontal drilling, in which the well bore
starts down vertically and bends to become a horizontal shaft through wide reservoirs.
The industry also learned to economically extract substantial natural gas and
oil from non-traditional sources, including methane contained in underground
coalbeds, natural gas from continuous tight sands formations, and oil recovered from
mined oil sands, such as the vast oil sands of Alberta, Canada.
In the 1990s, U.S. petroleum companies doubled their exploration and
development expenditures outside the United States. Foreign E&P opportunities
emerged as a function of: (1) political restructurings within the former Soviet Union, and
(2) growing sophistication and interest by countries in attracting E&P investments from
around the world. By 1998, imported crude and refined products supplied over half of the
U.S. demand.
Mergers. Growing prosperity for oil and gas companies was eclipsed in 1997-1998
by both the Asian economic crisis and a sharp drop in oil prices. These conditions
precipitated a frenzy of cost-cutting and consolidation that led to the formation of
a group of global companies known as supermajors:
• BP p.l.c. (merger of British Petroleum and Amoco)
• Exxon Mobil Corporation (merger of Exxon and Mobil)
• Royal Dutch Shell plc
• TOTAL S.A. (mergers of TOTAL, Petrofina and Elf Aquitaine)
• Chevron Corporation (merger of Chevron and Texaco)
• ConocoPhillips
Additional merger activity involving French, Spanish, Belgian, Argentine, Russian,
and Ukrainian companies also marked the early 21st century. These are further
indicators of the increasingly global scale of the industry’s consolidated footprint.
Figure 1-2 lists the Oil & Gas Journal’s top U.S. petroleum companies in 2005.
“Reserve replacement
has been the
key objective driving deals with companies looking to
bring additional reserves into their company through
acquisitions rather than through the drill bit.”
– Oil & Gas Deals 2006 Annual Review, Pricewaterhouse Coopers April 2007