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.
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