International oil companies like Total (TOT) and Royal Dutch Shell (RDS-B) may be pulling out of Iran, but there are plenty of other deals to be had in other Middle Eastern countries. Just ask ConocoPhillips (COP).
In an effort to diversify further into natural gas and to expand its global holdings, ConocoPhillips recently inked an agreement with the Abu Dhabi National Oil Company. The plan is for ConocoPhillips to share in the development of the Shah Gas Field. The Motley Fool reports on the details of the deal:
Photo: kevin (lapetus), Creative Commons, Flickr
Conoco and ADNOC will share the front-end engineering costs for the facility, which will be located about 180 kilometers southwest of Abu Dhabi. Plans for the new project include construction of a billion-cubic-feet-per-day natural-gas processing plant, natural gas and liquid pipelines, and sulfur-exporting facilities at Ruwais in the United Arab Emirates. ADNOC and Conoco will split interests in the project 60%-40%, respectively.
The move should help COP expand its upstream operations. This is becoming increasingly important in a climate that is promoting gains in the upstream end of energy production, while at the same time eroding margins in the downstream end.
Indeed, worries about downstream profitability are forcing many Big Oil companies to re-evaluate their operations. Exxon (XOM) recently announced that it will sell off most of the gas stations it operates in an attempt to slow losses on the downstream end.
COP isn’t the only Big Oil company expanding into other areas of energy, either. Natural gas is certainly becoming popular among Big Oil companies. However, it would be nice, from the standpoint of increased diversification and energy efficiency, to see Big Oil companies diversifying into alternative energy as well.
Big Oil companies have shown that they are not afraid to become "oil and gas" companies. Now, if only they could make the transition from "oil and gas" companies to "energy" companies.
Disclosure: I do not own any Big Oil stock.
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