Oil companies, Oil-Services companies and Oil-Rich countries. Another twist in the ongoing "ironical consequences of outsourcing" saga.

Oil-services companies such as Schlumberger, the world's largest, closely followed by the likes of Halliburton, Baker Hughes, Weatherford International and Smith International, undertake much of the actual boots-on-the ground exploration and production engineering and maintenance work that provide oil companies (and by extension society at large) around the world with their life-blood. At administrative and management levels, other service companies are contracted to provide everything an oil company needs from project design and management through accountancy and legal services, marketing, supply and of course customer relations requirements (the infamous help-desk in Bangalore and similar). The oil company itself is on course to be transformed into little more than a hard, extremely wealthy core providing finance and strategic management to the aforesaid exploration and production projects. Everything else can be outsourced.

One ironic consequence of this is that oil-rich countries and other title-holders to potential underground petroleum and gas resources find they too can turn to the same outsourced-services providers as the oil companies, in the process cutting out the oil companies themselves, and their take, as middlemen. Nils Pratley's Viewpoint "The growing fly in Big Oil's ointment" in the financial pages of the Guardian, 1 Feb 2008, puts it this way: "Oil-rich nations no longer feel the need to ring a member of the Big Oil club when they want to exploit their natural resources." Such national oil majors as Aramco of Saudi Arabia and others across Asia, Africa and Latin America, as well as Norway and, effectively, Russia come to mind as model alternatives quite independent of mostly G7-based Big Oil but highly dependent on the flotilla of services companies attending them.

Another rather ironic but, it is to be hoped, healthy consequence could be summed up in the nicely Orwellian-sounding phrase: "Small business good; Big business bad."

Consider this: This division of labour, as it were, amongst a plethora of much smaller services companies (the largest, Schlumberger itself, is but a quarter of the size of Exxon) opens up the field of services provision to the kinds of open competition, manouverability and innovation only smaller businesses can provide. Such flexibility and diversity is surely both ecologically and economically more sound than the monolithic-titanic model Big Oil may have been more accustomed to up to now, and will undoubtedly thrive to the point of eventually rendering the Big companies themselves obsolete.

Always within limits set by effective regulation, such breaking-down of large and very-large corporations into leaner, more efficient and competitive relative tiddlers able to react quickly to such changing conditions and requirements as, for example, new energy projects would appear to be both natual and intelligent at this point in history and should be encouraged and applied in all areas of a healthy economy.

The Exxons and Wal-Marts of this world need to be broken up and cut down to size. The liberation of creative economic energy this would release is what will be needed if we're to power the next wave of economic evolution heading into what will clearly now be a fragile and potentially fractious future.

· ecologicando

http://ecologicando.blogspot.com/2008/02/oil-companies-oil-services-companies.html

notes:
Philadelphia Oil Service Index (^OSX)