State-owned oil and giants such as Saudi Aramco, China’s CNPC and Mexico’s Pemex have raised their share of upstream investments to a 40-year high of 44 per cent, according to the head of the International Energy Agency (IEA)

The national oil companies (NOCs) are expected to continue to dominate upstream oil and gas investments if oil prices remain at current low levels, which is likely to create a new dynamic in the market.

“NOCs, who own the bulk of the world’s low-cost reserves, I would say their share will maintain if not become higher,” the IEA’s executive director, Fatih Birol, was quoted as saying by news agency Reuters.

International oil companies (IOCs), which include Anglo-Dutch Shell, the US heavyweight ExxonMobil and France’s Total, have scaled back investments as weak prices squeeze profit margins. NOCs have made less severe cuts.

IEA figures show that more than $300bn of upstream oil and gas money has been slashed in 2015 and 2016, an unprecedented amount. The largest cost cuts came from North American independent companies Apache, Murphy Oil, Devon Energy and Marathon, which reduced spending by about 80 per cent between 2014 and 2016, the IEA said.

However, NOCs in Saudi Arabia, the UAE and Qatar have managed to secure funding for new investments through local and foreign currency government bonds, which have allowed them to make up for squeezed revenue from the sale of hydrocarbons, the IEA said.

With NOCs increasing their share of investments, the oil market could enter a new dynamic, in which production decisions could be less driven by market fundamentals.

“There are some NOCs that take other factors into consideration when making decisions,” Birol said, referring to internal economic or political issues as well as defence of market share.

“An oil industry dominated by the IOCs or NOCs [presents] two different pictures,” he said.