Oleh/By		:	DATO' SERI DR. 
			MAHATHIR BIN MOHAMAD 
Tempat/Venue 	: 	THE SHANGRI-LA HOTEL, 	
			KUALA LUMPUR 
Tarikh/Date 	: 	29/05/2000 
Tajuk/Title  	: 	THE ASIA OIL & GAS 
			CONFERENCE 2000 


  
  
  
  I  would like to thank the organisers of the Asia Oil  &
  Gas  Conference  2000 for the honour of addressing  this
  distinguished gathering. I am delighted to see  so  many
  professionals, policy-makers, strategists and  analysts,
  and  other  movers  and  shapers  of  the  oil  and  gas
  industry,   the   world's  biggest  and  most   critical
  industry, gathered here under one roof. Indeed, I  doubt
  I  can  say  anything that you don't already  know.   So
  please bear with me.
  
  2.    This  fifth annual conference, with the  theme  of
  `Market  Positioning in the New Age', is timely  in  the
  light  of recent trends and developments in the oil  and
   gas  industry  and  the  global economy  in  general.  I
  sincerely  hope  that  the conference  will  provide  an
  excellent  avenue for us, particularly  players  in  the
  Asian  region,  to pause and take stock of  the  lessons
  and  implications from these trends and developments  to
  come  up  with new ideas and programmes that would  help
  shape,  position and steer the oil and gas  industry  so
  as   to  be  beneficial  to  all  in  this  new  age  of
  globalisation,  liberalisation,  re-alignment,   mergers
  and so on.
  
  3.    In the last decade or so, we had witnessed various
  measures  adopted by oil and gas players  to  strengthen
  their  position  in  the  industry.  These  initiatives,
  mainly   in  the  form  of  changes  to  processes   and
  procedures   and  --  to  some  extent  --  to   company
  structures,  were  necessitated by the  need  to  remain
  profitable   in   the  face  of  volatile   prices   and
  uncertainties   experienced   by   the   world   economy
   including  the  rapid  and high  rise  in  the  cost  of
  exploration,  production and transportation.   For  many
  national   oil  companies  there  is  the   problem   of
  depleting resources and the search for future supplies.
  
  4.    However, more recently, a new trend has emerged in
  the  shape of mega mergers among the world's oil giants,
  a  trend  which will have far-reaching ramifications  on
  the  industry  and  the  order of  the  global  economic
  system.  Over the last three years, we have seen  a  few
  of  such  mega-mergers: BP and Amoco, Exxon  and  Mobil,
  Total  Fina  and Elf, and then BP Amoco  and  Arco.  The
  wave of mega-mergers has and will inevitably change  the
  structure  of  the business with a few of  these  newly-
  created giant entities dominating and dictating  to  the
  industry.  We have witnessed the same process happen  in
  several    other    capital   and   technology-intensive
  industries.  And  we  know  globalisation  will  further
  bolster this process in the oil industry.
   
  5.    In  the  face of the new alliances, and the  mega-
  mergers,  what  do players in Asia, mostly  made  up  of
  national oil companies (NOCs) with a primary role  as  a
  regulator    and   manager   of   national   hydrocarbon
  resources,  have  to do?  Would the  NOCs  still  remain
  relevant?  Would they be `gobbled' up by  the  new  more
  powerful  sisters  or  would  they  seek  alliances  and
  strategic  partners or can there be  niches  they  might
  build  for themselves?  If they choose any of these  how
  should  they  function  in  a system  where  production,
  prices,  policies,  technologies etc are  dominated  and
  dictated  by  the  powerful few?  These  are  very  real
  problems  for  the midgets of the world.  In  this  case
  the playing field is not even level.
  
  6.    National  Oil  Companies depend much  on  favoured
  treatment  in their own countries.  Indeed without  this
  privilege  they  would not exist at  all.   Some  merely
  collect  royalties  and share the profits  with  foreign
   investors   and  operators.   There  is  no   technology
  transfer  and know-how developed.  Some have learnt  the
  business  and have developed their own capacities.   But
  none  are big enough to take on the merged giants or  to
  qualify to be one of the new sisters.  And so they  need
  to hide behind their national boundaries.
  
  7.    But  now  comes  the  idea  of  globalisation,   a
  borderless  world. A borderless world means  nowhere  to
  hide,  no  place to seek protection.  In  the  meantime,
  the  merged companies are getting hugher and hugher  and
  whether  they  intend to or not, a cartel, an  oligopoly
  or even a monopoly will emerge.
  
  8.    The  story  of the oil industry is  the  story  of
  attempts at monopolising the industry.  We all know  the
  story  of  John D. Rockefeller and his South Improvement
  Company.   Avaricious and pitiless  in  the  extreme  he
  either  bought  up  all his rivals or  just  kill  their
  businesses.   Such was his power to dictate  the  prices
   of   oil  and  therefore  his  profits  that  even   the
  capitalist Government of the United States had to put  a
  stop  to  his  almost complete monopoly of the  business
  through  the 1890 Sherman Anti-trust Act.  The  Standard
  Oil  Company belonging to Rockefeller was broken up into
  several smaller entities.  An oligopoly was formed  with
  each  of  the companies as able to dominate as  was  the
  original company.
  
  9.    These  offsprings of Standard Oil became  dominant
  members  of the so-called oil majors, the Seven Sisters.
  They     monopolised    the    worldwide    exploration,
  productions, refining and marketing of oil.   They  paid
  a   pittance  to  the  poor  oil-rich  countries,  which
  remained undeveloped and had to literally submit to  the
  rule  and  politics of these Seven Sisters operating  as
  monopolies in different countries.
  
  10.    Then  following  the  Arab-Israel  war  the   oil
  producing countries themselves decided to form a  cartel
   of  their  own.  OPEC became a world power,  pushing  up
  oil  prices so as to enrich themselves.  They  succeeded
  in  doing  this  but in the process they  increased  the
  profits of the Seven Sisters also.  The only people  who
  really  suffered  were the poor in  the  poor  countries
  where  there was no oil.  The price of oil was  so  high
  that   they  could  not  afford  even  electricity   for
  themselves.
  
  11.   And it looked like the price of oil would keep  on
  going  up  and up.  Fortunately the OPEC countries  were
  not  too  united  and they too became avaricious.   Each
  member tried to produce more than its quota.  There  was
  a  glut  and oil prices fell even though the demand  had
  increased considerably.
  
  12.   It seems that oil producing countries would  never
  again  enjoy  the halcyon days of the OPEC cartel.   Oil
  prices  were  so  low recently that they  were  actually
  unable to meet their budgetary needs.
  
  13.   Then  they once again got their act  together  and
   cut  back on their production.  It is obvious that  they
  can  actually earn more by producing less  and  this  is
  what  they  did.  The prices shot up again and  threaten
  to  undermine the prosperity of the powerful.  As  usual
  the  powerful  issued threats of all kinds  of  economic
  sanctions  unless  more  oil is produced.   Between  the
  threats  and the bad faith of some members of  the  OPEC
  cartel,  oil production increased again and prices  went
  down.
  
  14.   Perhaps  it  is market forces, but  more  probably
  because of fear of the powerful, the prices of oil  will
  not  become unreasonable due to OPEC.  But ominously  we
  are  seeing  the  reemergence of the  oligopolies.   The
  offsprings  of  the  Rockefeller  monopoly  are   coming
  together  again.  They are in fact teaming up  with  the
  other  oil  majors,  to form an even tighter  oligopoly.
  Together  they  can  control the  production,  refining,
  marketing  and  also  the relatively new  petro-chemical
   industries.
  
  15.   Malaysia has worked with these oil majors  and  we
  must  admit  that we have benefited.  There was  a  time
  when  they  wouldn't even talk with us.  They tended  to
  lay  the  terms for any cooperation with us.   But  they
  are  more  reasonable  now.  But  if  they  become  very
  powerful  can little countries like Malaysia,  producing
  only  650,000 barrels a day, ensure future  supplies  by
  venturing in the oil industries in other countries?   We
  know  that  the oil companies may want to cooperate  for
  profits  but their Governments might not allow them  to.
  And  oil  production  and processing need  sophisticated
  equipment,   parts   and   components,   which   certain
  countries control.  For these big powers who regard  oil
  as  a  legitimate  weapon of foreign policy,  preventing
  the  recalcitrant  countries  from  enjoying  their  oil
  wealth  in  order  to bring them to  heel  is  perfectly
  alright.  Change your leader or we starve all of you  to
   death  is  perfectly legitimate if an  oil-rich  country
  happens  to  have an unpleasant leader.   Human  Rights.
  Well  Human  Rights  is  for  people  who  have  leaders
  willing to submit to the will of the powerful.
  
  16.   This  is  not a political forum.  So I  will  stop
  there.  But seeing rich people beggared is not our  idea
  of  conducting international politics.  It is  primitive
  to  bring  people to their knees by impoverishing  them.
  It  is  not  their fault if they have a  leader  who  is
  disliked by some people.
  
  17.    Oil  and  gas  will  always  remain  a  political
  instrument  and  the powerful countries and  their  mega
  oil  companies  will  always avail  themselves  of  this
  potent weapon.
  
  18.   Malaysia  is well aware that it is a tiny  country
  whose wealth is smaller than the oil majors.  Now it  is
  even  poorer  by  comparison to the mega  multinationals
  resulting from the mega mergers.  But we feel a need  to
  sound   a  warning  regarding  new  ideas  and  concepts
   because  we  know Man has never been able to materialise
  the  good things their ideas and concepts promise.   How
  many  times  have  we been proven wrong  about  systems,
  ideologies  and concepts, which appeared totally  right,
  just  and  infallible  when  they  were  introduced  but
  turned   so   sour  that  we  have  to   discard   them.
  Republicanism,  Socialism,  Communism,  Capitalism   and
  variations  of  these have been espoused  and  practised
  only  to  be  dumped because instead of  prosperity  and
  equitability  they  only  brought  misery  to  the  very
  people they are meant to benefit.
  
  19.    Now   we   are  being  told  that  globalisation,
  liberalisation,  deregulation, market  forces  are  good
  for  us.  The poor countries are supposed to reap  great
  wealth if they embrace all these inevitable ideas  whose
  time  has  come.  Market forces, according to  the  sage
  Soros, is supposed to discipline Governments, make  them
  more transparent, accountable and clean.
   
  20.   Pardon us if we seem sceptical.  At first  we  did
  believe  that  free  flows of  capital  was  good.   The
  multinationals  came in to set up manufactories  and  to
  buy  our  shares.   We  thought  our  growth  would   be
  forever.   Then  suddenly  they  decided  that  we   are
  corrupt  and  given to helping cronies and  they  pulled
  out  their  capital  and short-sold our  money.   Within
  weeks  the  Tiger  economies of Asia  were  begging  for
  help,  willing  to sell their family heirlooms  to  save
  themselves from bankruptcy.
  
  21.   If  we are corrupt and we practise cronyism,  this
  could  not  be just in July 1997 when they  pulled  out.
  We  must  have  been corrupt ever since our independence
  several  decades ago.  Yet they came in to  invest  year
  in  and year out.  No it was not corruption or cronyism.
  It  was  just a chance to make money by bankrupting  us.
  We  lost  hundreds of billions of Dollars  so  they  can
  make  a  few billions only for themselves.  It  was  not
   even  a zero-sum game.  It was a minus-sum game for they
  destroyed  what  we  had built over decades  to  make  a
  relatively small profit for themselves.
  
  22.   Our experience of this price of globalisation  has
  lead  us  to  question the promises of a  world  without
  borders,  of free flows of capital and goods etc.   What
  we  are  seeing is a frenzied preparation to  invade  us
  when  we  open  up.  Giant corporations are  merging  to
  form  even  bigger giants.  Rich and powerful banks  are
  merging  to  form  even  more powerful  and  financially
  invincible   banks.    And  behind   them   stand   rich
  Governments ready to bail them out if they should fail.
  
  23.   Against  all  the giants our own corporations  and
  banks  will  be easy meat.  When they lose  out  in  the
  free  competition, they would be swallowed up.   In  the
  end  the  economy  will belong to  the  foreign  giants.
  Once  that  happens politics too will be manipulated  by
  them.   In other words globalisation and the opening  up
   of  markets can lead to loss of independence and a world
  ruled   by   enormously  rich  capitalists   and   their
  countries.
  
  24.   The oil business had seen oligopolies earlier than
  in  other  industries.   We see a return  of  oligopoly,
  only  the oil companies are many, many times bigger  and
  richer  than before.  Will we be gobbled up?   Will  the
  oil  companies  dominate or the oil producing  countries
  dictate  terms  in  this business?   Will  the  powerful
  economies of the world somehow dictate to the world?
  
  25.   Oil is the most powerful political weapon  in  the
  world.   Simply  by  producing more  or  producing  less
  political  objectives  can be achieved.   Preventing  an
  oil-rich  country  from producing  is  equal  to  laying
  siege  of a city, the favourite means to bring a  nation
  down  on  its  knees  in  the old  days.   That  people,
  innocent  people,  old people, babies  and  women  would
  sicken  and  die is unfortunate but is not a reason  for
   not  using  the  oil weapon.  It is an effective  weapon
  and it must be used to achieve the objective.
  
  26.   Oil produces more carbon dioxide and other noxious
  gases  than  any other fuel in the world simply  because
  it  is  the  fuel  of choice.  Try to exploit  competing
  fuels  and  the environmentalists from the oil-consuming
  countries will descend like a ton of bricks on you.
  
  27.   People will always need energy, more and more  all
  the  time.   If they cannot get it from one source  they
  will  get  it  from  another  source.   Invariably   the
  environment suffers.  Thus if people cannot pay for  oil
  or  gas, they would cut down trees and shrubs to burn as
  fuel.   In  time all the trees and shrubs will be  gone.
  Where once there was a green forest now there will be  a
  desert.
  
  28.   The  rivers can produce hydro-electric  power  but
  the   environmentalists  oppose  development  of  hydro-
  electric  plants  because  they  flood  huge  tracts  of
   forest where the few tribal people hunt for food.   Even
  resettling  these  people, giving them  good  jobs  with
  good  wages and food in plenty are unacceptable  to  the
  environmentalists.  The tribal people  must  have  their
  millions  of  acres to hunt for food while the  rest  of
  the  population  are denied clean renewable  energy  and
  power.
  
  29.   Atomic energy promised a cheap source of  electric
  power.   The  rich put up nuclear power plants  so  they
  may  not have to depend too much on thermal power, based
  on  oil  or gas.  Now we are finding that nuclear  power
  plants are not safe.  Any number of things can go  wrong
  and  people  near  and  far will suffer  from  radiation
  sicknesses, carried by the wind, by food contamination.
  
  30.   There  is  not a hope that solar,  wind  and  wave
  power can generate enough electricity for us to do  away
  with  thermal non-renewable power.  There will therefore
  always  be  a  demand for oil and gas,  growing  as  the
   population of the world grows, growing as the wealth  of
  people grows.
  
  31.   We  are  still finding new reservoirs of  oil  and
  gas.   So  far  we have been able to keep  up  with  the
  demand.   And  for a long time to come we will  probably
  be  able  to meet demands.  But there must come  a  time
  when  the world's population will be so big and so  rich
  that  there will be shortages of hydrocarbon supply  and
  reserves.   It may be a long time yet but it seems  that
  the  oil and gas industries must lead in the search  for
  alternative sources of energy.  If there is a  need  for
  the  oil companies of the world to come together to pool
  their  resources to finance the research and development
  of  an  alternative fuel, now is the right time to  meet
  that   need.   When  oil  prices  rose  to  unreasonable
  heights  during the first oil crisis there was  a  sense
  of  urgency  to  search and develop alternative  energy.
  Now  we have become more complacent.  New oil fields are
   being  found that will last hundreds of years.  So there
  is  no urgency.  Besides it can affect the profitability
  of the petroleum companies.
  
  32.   Perhaps the answer is for Governments to step  in,
  to   contribute  a  proportionate  percentage  of  their
  royalties   and   revenue  to  finance   the   necessary
  research.  It is going to be a long-drawn affair but  as
  the  wise Confucius said "a journey of a thousand  miles
  begins  with the first step".  It is never too early  to
  take that first step.
  
  33.   I  am sure you know more about oil and gas than  I
  do.   I am sure you will be discussing in depth all  the
  innumerable  aspects, ramifications, potentials  of  the
  industry.   In the Information Age, the applications  of
  I.T.  will  engage your attention.  Then  there  is  the
  Knowledge  Economy,  Globalisation,  the  interdependent
  world,  currency  fluctuations,  hedge  funds  and   the
  recalcitrance of some countries -- all these merit  your
  serious  attention, and you will discuss all of them  in
   depth.
  
  34.   But  I  do  hope  you will  spare  a  thought  for
  ordinary  people whose needs are really what  make  your
  industry  tick.   Without them oil would  be  worthless.
  When  the great hedge fund traders manipulate currencies
  they   see   only   figures  on  the   screen,   figures
  representing  the  units  of  currency  they  deal   in.
  People  are irrelevant.  That a zero point one per  cent
  drop  in value can kill hundreds of people, starve  them
  is  of  no  interest to these traders.  And so they  wax
  rich  on  the miseries of people, real flesh  and  blood
  people.
  
  35.   I  hope  that you who deal in oil  and  gas  would
  always  bear  in  mind the people whose life  and  death
  depends on you.
  
  36.   On  that  note,  it  gives me  great  pleasure  to
  declare this conference open.