As Dan Yergin’s “The Prize” might better summarize:
In the Beginning (post WWI), there were those mindless borders, drawn at the Treaty of Paris. Then (1930s) came the wildcatters – Standard Oil, British Petroleum, 5% Gulbenkian, leading (largely colonialist) outsiders into Kuwait and Saudi Arabia and Persia and Iraq. I love the tale where SoCal (Standard Oil of California) employees got the telegram to abandon their unsuccessful Saudi efforts, just as the Big One came in. During/after World War II deals between FDR and a succession of US Presidents promised military security for petroleum. There was that nasty CIA-supported revolution in Iran which restored and supported the Shah in return for… yup, more oil. And, perhaps, more than a few meddlings in Venezuela on similar terms. The West got its oil, and the Regions Rulers their security and leisure.
And then a loose band of producers, with little in common except their resource, combined for form OPEC (early 1960s), and Saudi Arabia expropriated IOC (Exxon, Mobil, Texaco) ownership of Aramco around 1970, “but those military guarantees continued,” even as US support of Israel continued to complicate matters for all.
Over the last forty years, most viewed the primary value of oil partners as “supply chain management,” technology, and customer/markets. However, as Middle Eastern enterprise developed its own downstream capabilities (refining, petrochemicals), imported Chinese services, and production partners/investors, this too eroded. Then, since 9/11 and the inconsistent US policies thereafter (Iran, Iraq, Saudi, Israel, Libya, and Syria), the regions leaders have found that Western/US support and partnerships just aren’t worth much anymore. Finally, the ongoing Arab Spring has brought, if not Democracy, further distance between regional and historic external interests.
This week, the end of one of the West’s longest standing energy partnerships came to light. The UAE will let a 75 year production partnership expire, leaving BP, ExxonMobil, Total, Royal Dutch without a presence in country. The West does not offer sufficient geopolitical security, technology, cash, or distribution, to justify, et ceteris paribus, even the simplest, lowest return production partnerships. And, having in general met with less than mixed results in unconventional ventures, now what’s to become of the IOCs?