Big oil becoming big gas?

The oil majors are increasingly becoming the gas majors as they lose their dominance in world oil reserves and face challenges in refining and marketing. In an interview with Fortune late last year the President of Shell Oil Company, Marvin Odum, said that Shell will produce more gas than oil by 2012. This may be a sign of a major strategic shift occurring by “Big Oil”. For a century companies like Shell have been synonymous with oil, from the well to the service station selling gasoline and diesel. However upstream oil reserves are now dominated by the national oil companies, who also dominate downstream refining and marketing in the fastest growing markets like China. Accordingly the growth options for the majors in oil are limited. Gas however has more upside, being globally plentiful and with growing demand. As a result we have seen a “gas rush” by the majors into shale gas, coal bed methane and LNG, notwithstanding low current US gas prices and a looming short-term surplus of LNG. This is changing the dynamics of local and regional natural gas markets as the majors move in.