BP oil spill may benefit Middle East and North Africa

27 July 2010

Opportunities for national oil companies as BP sells off $30bn of assets to offset Impact of disaster

UK energy major BP has been instrumental in shaping the Middle East and North Africa (Mena) over the past century. After a disastrous oil spill off the US coast, it could be the region’s turn to decide the company’s future.

Since the formation of the Anglo-Persian Oil Company in 1908, BP has played a key role in developing the hydrocarbons reserves that have turned many Mena states into the thriving economies they are today.

Under the guises of the Production Development Trucial States and Iraq Petroleum Company, it developed the oil reserves of Iraq, Kuwait, Oman and the UAE as part of a coalition of five international oil firms.

In North Africa, it remains the single largest investor in Algeria and Egypt, where it has helped produce 40 per cent of the country’s oil and gas output to date.

Following the formation of the cartel Opec in 1960, and the subsequent nationalisation of oil resources in the region, the presence of international oil companies (IOCs) such as BP in the region has shrunk.

Since then, the tables have been slowly turning with the IOCs casting their net ever wider in the search for new reserves as oil-rich sovereign states reap the benefit of their own natural resources.

An explosion at the ultra-deep water drilling rig Deepwater Horizon at the BP-operated Macondo field in the Gulf of Mexico in April has shifted the balance of power even further.

On 27 July, BP announced it was selling $30bn of assets to offset the spill’s financial impact. As a result, the firm recorded the biggest quarterly loss in UK corporate history, of $17bn.

This represents an opportunity for the region’s national oil companies and sovereign funds to buy up the company’s assets, turning themselves into IOCs and helping keep BP afloat. In another century, they may control the industry in the way that companies such as BP did 100 years ago.

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