EMC Working Papers

There is a great hype about Brazil's pre-salt oil potential and the impact it will eventually have on the global oil market. Some sources say that it could vault Brazil to seventh place in the world rankings in terms of proven oil reserves behind Saudi Arabia, Venezuela, Iran, Iraq, Kuwait and United Arab Emirates. Others claim that Brazil could emerge as a major oil producer and exporter and that will certainly change the balance of oil distribution in the world with very important geopolitical implications for the United States' dependence on Middle East oil. Others, in contrast, see Brazil as an overstated high-risk oil province whose pre-salt oil is extremely challenging and very costly to produce. The reality, as always, is somewhere in between. Even with Brazil's growing oil reserves and accelerating production, the country could never become a major oil exporter as all the incremental oil production will be needed to fuel the country's economic growth. Brazil could only aspire to remain self-sufficient if its current economic growth continues its surge into the future. While Brazil's oil wealth will certainly accelerate the country's ascent into the top ranks of the world's economic powers, it will hardly make a dent in the global oil market and the price of oil.

The major premises of the resource-based view of the firm (RBV) are that firms are bundles of idiosyncratic resources and capabilities and that firms with valuable, rare, inimitable and nonsubstitutable resources and capabilities outperform in their industries (Barney, 2001; Dierickx and Cool, 1989; Wernerfelt, 1984, 1995). Drawing on Barney (1991), Miller and Shamsie (1996) define property-based resources as appropriable resources controlled by the corporation through property rights, and in contrast, knowledge-based resources are those "protected from imitation not by property rights but by knowledge barriers", and often include technical, creative or collaborative skills (1996: 522).

This paper uses the resource-based view framework to conduct a comparative analysis of the major European oil and gas companies. This study will look at six companies namely BP, Eni, Repsol, Shell, Statoil, and Total, and identify which resources are drivers and determinants of their competitive advantage and financial performance. Drawing on the framework of property-based and knowledge-based resources, the paper will analyse six resource categories of oil and gas companies namely annual capital expenditure, annual changes in liquids and gas reserves, annual replacement ratios, refinery distillation capacity and number of service stations, number of employees and net income per employee, and annual levels of drilling activity in exploration and development with a disaggregation of successful and unsuccessful wells drilled.

The ACEGES (Agent-based Computational Economics of the Global Energy System) 1.0 model is an agent-based model of conventional oil production for 93 countries. The model accounts for four key uncertainties, namely Estimated Ultimate Recovery (EUR), estimated growth in oil demand, estimated growth in oil production and assumed peak/decline point. This documentation provides an overview of the ACEGES model capabilities and an example of how it can be used for long-term (discrete and continuous) scenarios of conventional oil production.

Keywords:

Oil production, ACEGES, agent-based model, energy scenarios, oil forecasting