A global energy network?

The expansion and

integration of non-triad national oil companies

NANÁ DE GRAAFF

Department of Political Science, VU University, De Boelelaan 1081,

1081 HV Amsterdam, The Netherlands
n.a.de.graaff@vu.nl

Abstract It is widely perceived that the rising influence of state-owned energy

companies from outside the traditional triad (USA, EU, Japan) is transforming the
structure of the global energy market and generating a new wave of resource-
nationalism. There is, however, little empirical analysis of how this process has
unfolded. Addressing this empirical gap, in this article I employ a longitudinal social
network analysis of the changing corporate relations of five major non-triad state-
owned energy companies in the period 1997–2007. The findings indicate that, in
terms of corporate relations, alongside the global expansion of the non-triad state-
owned energy companies, there was also an increased integration between them and
the private energy companies during this decade. This implies that apart from the
resurgence of resource-nationalism – frequently highlighted in academia and politics
– this period also witnessed an increasing transnationalization of the global energy
market.

Keywords GLOBAL ENERGY MARKET, NATIONAL OIL COMPANIES, RESOURCE

NATIONALISM, GLOBAL VALUE CHAINS, SOCIAL NETWORK ANALYSIS, NON-TRIAD MNCS

There has been much recent discussion about the alleged rise of the state-owned
energy companies, the so-called national oil companies (Jaffe et al. 2007; Stevens
2008; Vivoda 2009; Wälde 2008). Empowered by a high oil price, depleting reserves
in the West and an exponentially growing demand, in particular from Asia, it seemed
that these state-owned energy majors, most often from net-exporting states, were
becoming increasingly powerful. Combined with a growing awareness of climate
change and a resurgence of resource nationalism, this development has heightened the
perception of vulnerability of supply on the part of the net-importers. It has also put
1
energy security centre stage of (geo-) political contestation, thereby firmly
reinforcing the role of the state in energy affairs (Correljé and van der Linde 2006;
Helm 2005; Hoogeveen and Perlot 2005; van der Linde 2005). In stark contrast with
the neoliberal trend of the 1990s –which saw the global energy sector increasingly
privatized and deregulated – influential analysts in the field hence predicted a return

Global Networks 11, 2 (2011) 262–283. ISSN 1470–2266. © 2011 The Author(s)
262 Journal compilation © 2011 Blackwell Publishing Ltd & Global Networks Partnership
 A global energy network?

to state-governed and increasingly nationalized energy sectors (Odell 2006). This

development has also led to a resurgence of academic and public interest in the
geopolitics of energy and so-called ‘resource wars’ (Klare 2001, 2004; see also Stokes
2007).
It is debatable, however, to what extent this development really constitutes a
fundamental shift. The state-owned energy majors have held about 80–90 per cent of
the world’s oil and gas reserves for decades (Wolf 2008). When oil prices are high
and the market is tight, this obviously gives more power to the ‘haves’ than to the
‘have-nots’. In other words, a high price shifts value to the net-producers from the
net-consumers and vice versa (Bridge 2008; Wilson 1987). Indeed, following the
summer of 2008, the plummeting oil price seemed to shift power back towards the
consumers and away from the producers, forcing OPEC to make drastic cuts in
supply. In addition, in terms of loss in market capitalization and cash flow, the global
economic crisis seems to have had a significantly greater impact on the national oil
companies than on the private oil majors (Hoyos 2009).
In fact, such shifts in the distribution of power between state-owned oil companies
and private oil majors are a recurring feature in the history of the global oil sector
(Yergin 1991). In the era of the so-called ‘Seven Sisters’ the Western international oil
2
majors dominated the global energy market. This domination lasted until the
nationalization wave, which started in the Middle East around the mid-1950s,
resulting in the oil-rich states recapturing their own resources and establishing OPEC
in 1960. In the following period, power in the global oil sector was distributed more
evenly between the private majors of the West, most commonly labelled as the
international oil companies (IOCs), and the OPEC-backed national oil companies
(NOCs). The neoliberal era – starting in the 1980s and spurred by the end of the cold
war – generated a new wave of liberalization and privatization of energy sectors, from
which the IOCs seemed to gain the upper hand. This situation lasted until the re-
nationalization wave that has become manifest since the beginning of this
millennium. This dynamic of a shifting distribution of power in the global oil sector
then raises the question of how we are to understand the current alleged rise of NOC
power. Is this a rerun of the 1960s and 1970s or a development of a different nature,
in which case different in what respect?
There are two important characteristics specific to the current era. First, the
growing influence of the NOCs takes place in a time and context of unprecedented
transnationalization of the global political economy. I understand transnationalization
to mean an increase of interactions and relations across national borders that cut
across the public–private divide and involve at least one non-state actor (Risse-
Kappen 1995). Transnationalization also involves political processes and structures
that constitute a social space transcending national borders (van Apeldoorn et al.
3
2007: 6–7). The second distinctive characteristic of this era is the rise of the BRICs,
which implies a geographical shift in economic and political power, an increasingly
multipolar world system, and a drastic increase in energy consumption and demand
for hydrocarbon resources. The rise of these new economic powers also generates
completely ‘new’ type of global corporate competitors, which in this article I label

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non-triad multinationals (NTMNCs) (following Nölke et al. 2008). NTMNCs refer to

multinational corporations from outside the traditional triad (North America, Europe
and Japan). The rising power of NTMNCs has only recently attracted academic
interest, so it is still empirically and theoretically under researched. These multi-
national companies are, however, in the midst of a global expansion that is bound to
change the global political economy fundamentally from how it existed in the last
quarter of the twentieth century (BCG 2007; WIR 2007).
The growing interest in energy security and geopolitical contestation has sparked
an increasing number of studies on the role of national oil companies. These include
in-depth case studies (Jaffe et. al 2007; Marcel 2006; Xu 2007), assessments of
performance and efficiency (Wolf 2008), policy and governance analyses (Hoogeveen
and Perlot 2005; van der Linde 2000, 2005), and general overviews of their rising
influence (BCG 2007; Paik et al. 2007; WIR 2007). See Stevens (2004) for an
extensive overview of the academic literature on NOCs. However, no consistent
empirical mapping so far exists of relations between national and international oil
companies, and of how these have been changing since the turn of the millennium.
Existing studies often structure power in the global energy market as a game of ‘IOCs
vs NOCs’, or for that matter ‘net-importers vs net-exporters’. In other words, one
group of actors is pitched against the other, and when a shift in power takes place,
IOCs are perceived to lose power to the NOCs, or to the exporting states, and vice
versa (Jaffe et al 2007; Stevens 2008; Vivoda 2009; Wälde 2008; Wilson 1987). In
this study, by contrast, I look at the relations between these groups of actors.
The benefit of such a ‘relational perspective’ is that instead of comparing
companies’ individual properties and aggregate measures, it incorporates the shared
properties of these actors and the interdependencies between them. Such an approach
will generate a different picture of the power distribution between NOCs and IOCs
and the changes that happened in this respect during the period between 1997 and
2007. An underpinning explanatory argument to this approach is that all important
changes that impact on the global oil sector – such as price fluctuations, geopolitical
tensions, changes in supply and demand, and financial crises – are mediated by the
underlying relations of its main actors. The proposition is that the most significant
shift of the decade 1997–2007 is in these underlying relations. Hence, the main aim of
this article is to provide a better understanding of how the rise of non-triad national
oil companies since the mid-1990s has been taking place in terms of changing
corporate relations and strategies.
In this article, I shall show that alongside the global expansion of the NOCs, and
the concurrent dimension of renationalization that is frequently highlighted in
academia and politics, the period 1997–2007 also saw an increased integration
between state-owned and private energy companies in terms of corporate relations.
This implies both a closer integration between triad and non-triad actors and an
increase in the transnational dimension. More empirical insight into how these
underlying relations configure will enhance our understanding of the impact of
conjunctural changes – such as price fluctuations and geopolitical tensions – on the
global contest over energy resources.

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I structure the remainder of this article as follows: in the next section, I aim to
conceptualize contestation and a relational approach to power in the global energy
sector; in the section after that, I address how the rise of non-triad NOCs took place in
terms of changing corporate relations between 1997 and 2007. To do this I employ a
longitudinal social network analysis focused on a selection of the major non-triad
NOCs. In the last section, I discuss the main findings and their implications, and
formulate a future research agenda.

Power and contestation in the global oil market

The production process in the global oil market usually divides into three phases –
upstream, midstream and downstream. Upstream includes the exploration, drilling
and production of oil. Midstream includes transportation and trading to refineries.
Downstream includes refining, storage, distribution and marketing to wholesalers and
retailers. A crucial part of value creation takes place in the upstream part of the chain.
This has to do with the significant character of the extractive industry in general,
namely that it provides a way to create and capture value through the enclosure and
commodification of ‘non-produced goods’ – material for which production occurred
prior to human intervention (Bridge 2008: 16). Much of the contestation over
hydrocarbon resources therefore takes place in the upstream sector and concerns
access to or control over those resources and the capture of rent from reserves with
high quality and low costs (Bridge 2008: 14).
Ground rent points directly to the crucial role that states play in the oil industry.
Whereas some have conceptualized the structure of the oil industry as a ‘trilateral
oligopoly’ of producers, consumers and companies (Roncaglia 1985), the conflicting
and interdependent relationship between states and multinational oil companies is a
key component of the structure of the oil industry. States are crucial not only to the
state-owned energy companies, but also to the private oil majors and to multinational
companies (MNCs) in general. States need MNCs, for instance, for capital accumu-
lation and job generation; MNCs need states to provide them with, for example,
physical and social infrastructure, and diplomatic protection (Dicken 2007). States
and national borders also provide two fundamentals for MNCs’ operations – access to
markets and resources, and regulation. Whereas regulatory mechanisms considerably
constrain MNC behaviour, MNCs need regulation to operate, or at least to guarantee
the basic conditions of accumulation. MNCs, however, not only operate across
borders but they also incorporate parts of the host national economy into their organ-
izational boundaries, which is likely to create tensions and conflict.
In the case of hydrocarbon production, the latter becomes even more intricate since,
in most cases, the state owns the subsurface soil and thus the minerals it contains.
Conversely, in many cases the energy MNC is state owned, which raises suspicions on
the part of the host country of political motives behind commercial operations. There
are, however, two myths to dismantle here: the first is that IOCs are non-political and
NOCs are political; the second is that IOCs abide only by market rules and NOCs are
purely instruments of the state. In fact, both IOCs and NOCs are inherently political

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and both types of companies are subject to global market mechanisms and
imperatives, as well as state interests, objectives and strategies. This is the case
because of, first, the centrality of energy to the global political economy; and second,
the characteristic of oil as a ‘strategic commodity’. We move and consume about 86
million barrels of oil around the globe every day; moreover, fossil fuels are the
lifeblood of the global transportation and physical mobility infrastructure: virtually all
movement of products and people, as well as any military apparatus, depend on it.
Adding to the complexity of the oil industry structure, a wide range of non-state
actors, such as energy service companies, international lawyers, banks and financial
speculators, have an increasing impact on how contestation over hydrocarbon
resources is organized. Despite this complexity, one can identify three main
categories of actors – states, NOCs and IOCs – between which it is generally assumed
4
that the contestation over hydrocarbon resources to takes place. Whereas the focus of
this article will be on NOCs and IOCs, states are inherently part of the picture, not
least because the state is the ultimate owner of the NOCs.

A relational approach
Most of the existing studies, as well as the vast amount of commercial energy
literature, focuses on economic performance and economic power of the firm, and
assesses the power balance between NOCs and IOCs by comparing the properties and
aggregate measures of individual companies. In this article, while not discarding the
notion of economic power, I start from the idea that it is possible to derive power and
influence from particular relations and positions of firms. Looking at changes in
ownership structures between companies, for example, will give a different insight
into the distribution of power between them than comparing the total amount of
production or number of reserves. Taking relations between actors, rather than the
properties of individual companies, as the ‘unit of analysis’, will allow for an analysis
of shared properties and interdependencies between these actors. Such a ‘relational’
approach to power between NOCs and IOCs, it is argued, will generate a better
understanding of the changes that have been taking place in the last ten years and,
crucially, reveal more about the transnationalization trend.
Since agency both constructs and shapes relations, I chose a network approach,
which incorporates the relational aspects at the level of agency with the structural
aspects driving change in the global political economy. As Dicken et al. (2001: 105)
put it: ‘networks are both social structures and ongoing processes, which are
constituted, transformed and reproduced through asymmetrical and evolving power
relations by intentional social actors and their intermediaries.’ This study, in that
respect, builds further upon a long tradition of network studies of (corporate) power
and influence within an increasingly transnational global economy (for example
Carroll 2009; Carroll and Carson 2003; Carroll and Fennema 2002; Fennema 1982).
While these have provided rigorous empirical accounts of a global corporate network
and the concept of a transnational capitalist class vis-à-vis national capitalist classes,
no one has yet applied network analysis to the energy sector. In addition, the existing

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 A global energy network?

network studies have not incorporated the rise of the non-triad economies and their
MNCs, which Carroll and Carson (2003) still identify as the (semi) periphery. In both
these respects, this study has an important contribution to make. Before turning to the
network analysis, however, I shall outline the position of the non-triad NOCs vis-à-vis
the IOCs in a more traditional manner.
To position the changing relations of the non-triad NOCs within the global energy
market, I first need to identify the key players of that market. The top 50 of the
Petroleum Intelligence Weekly (PIW) annual ranking (Energy Intelligence Group
2008) was taken as the point of departure; it is widely recognized and based on
operational data from more than 130 firms. The PIW ranking uses six individual
rankings (oil reserves, oil production, natural gas reserves, natural gas output, refinery
capacity, and product sales volumes), which are then added together to determine a
cumulative, overall position of the firms. This allows for meaningful comparisons
with all types of companies, including state-owned firms. As a result, the PIW top 50
contains an even mix of IOCs and NOCs, which together can reasonably be assumed
to make up the core of the global energy market.
5
Figure 1a depicts the longitudinal development (1987–2007) of NOCs and IOCs
in the upper half of the PIW top 50. It shows that CNPC, Gazprom, Qatar Petroleum,
Petrobras and Petronas have risen significantly in comparison with other companies.
It also shows some NOCs losing position (Pertamina, Libya NOC, INOC). Most
importantly, we find that some of these non-triad NOCs (Saudi Aramco, NIOC,
PDVSA) have actually been in the top five since 1987, with Saudi Aramco holding a
steady number one position.

Figure 1a: PIW ranking selected non-triad NOCs 1987–2007

Source: Energy Intelligence Group (1997, 2002, 2008)

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In general, Figure 1a shows that, according to the composite measure of the PIW, a
significant group of NOCs have held positions in the upper half of this ranking for the
last two decades.
The longitudinal development of the IOCs, depicted in Figure 1b, displays similar
variation: although there are fewer examples of a steep rise, a group of IOCs has held
6
top positions since 1987.

Figure 1b: PIW ranking selected triad IOCs 1987–2007

Source: Energy Intelligence Group (1997, 2002, 2008)

Whereas these data are illustrative of the NOCs and IOCs changing positions vis-à-vis
each other according to the PIW top 50 ranking, they tell us nothing about the
relations between the companies. Moreover, these data show little drastic change in
the distribution of power between IOCs and NOCs: except for some individual
examples, these graphs do not point to a general ‘rise’ of the NOCs over the past ten
years.
My proposition in this article, however, is that a whole dimension of change
remains hidden by just comparing the properties and performance measures of the
individual companies. Examples of these include changes in the kind of relations that
might exist between companies (for example with whom they work together),
changes in the kind of investments along the value chain (for example downstream,
upstream or service-related), changes in the geographical distribution of those invest-
ments and changes in ownership structures. All this might imply changes in the power
relations between, and strategies of, key actors in the global energy sector that stretch
beyond changes in the properties of individual companies.

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 A global energy network?

Methods and data

Below I provide an in-depth mapping of the corporate relations of five top non-triad
NOCs from the most important regions in terms of hydrocarbon resources and
geopolitical impact. These five are Saudi Aramco (Saudi Arabia, 100 per cent state
owned), National Iranian Oil Company (NIOC) (Iran, 100 per cent state owned),
Gazprom (Russia, 50 per cent state owned), China National Petroleum Company
(China, 100 per cent state owned) and PDVSA (Venezuela, 100 per cent state
7
owned). In 2007 all these companies were ranked in the top 10 of the PIW, apart
from Gazprom, which was ranked twelfth. To capture what rise these NOCs might
have experienced since the turn of the millennium, I compare the networks at two
moments in time, 1997 and 2007.
I employed social network analysis (SNA). Its distinctive feature is that instead of
focusing on the units of the system and comparing their attributes, it focuses on the
(social) relations among those units (Scott 1991; Wasserman and Faust 1994). It
facilitates an analysis of how individual or collective agency is both embedded in and
at the same time constructs social structure. I used the UCINET software programme
(Borgatti et al. 2002) to perform the analyses.
I first collected data from the companies’ annual reports, which I later cross
checked and extended with data from the companies’ websites. The latter provide
an increasingly rich and reliable source for energy resource data (see Arnott
8
2004). Other data came from company data bases (like Hoover’s and
BusinessWeek); the energy statistical databases of the US government’s Energy
Information Administration (EIA), the International Energy Agency (IEA) and
OPEC; UN World Investment Reports (WIR 2007); the Boston Consultancy Group
(BGC 2007); and Energy Intelligence Group reports (Energy Intelligence Group
1997, 2002, 2008).
I mapped all the ‘ego networks’ of Saudi Aramco, NIOC, PDVSA, CNPC and
Gazprom, which in this case means that I charted all these companies’ external
corporate relations. These were joint ventures (domestic and abroad), wholly owned
subsidiaries (abroad), consortia (domestic and abroad), equity interests/alliances
(domestic and abroad), different forms of operating and service contract agreements,
9
and other relations such as lease contracts and memoranda of understandings. When
applicable, I included the ownership structures of these relations in terms of the
percentage of the different participating actors’ stake in the relation.
When mapping the relations of the top five non-triad NOCs, I distinguished
between relations involving an affiliation with a company belonging to the PIW 50
core of the global energy market, and relations involving an affiliation with
companies outside the PIW 50 core. Furthermore, apart from the distinction
between fully state-owned companies (NOCs) and fully private companies (IOCs), I
distinguished a third category – the ‘hybrid’ companies. These are partly state
owned and they range from minority to majority owned. In sum, this gives five
different main types of actors – NOCs, IOCs, hybrids, state outsiders and private
outsiders.

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Mapping the non-triad NOCs network: expansion and integration

The first step of the analysis is to examine the aggregated numbers of all the
different forms of corporate relations of the five top non-triad NOCs together, and
compare the networks this generated in 1997 and 2007 respectively. The absolute
increase in terms of corporate relations, on the part of the five top non-triad NOCs, is
shown in Figure 2.

Figure 2: Corporate relations of five top non-triad NOCs 1997 and 2007

Source: data collection by author, see method and data section

Although Gazprom (Russia) has the most corporate relations in absolute numbers, the
increase in corporate relations over this particular period is most spectacular for
CNPC (China) and NIOC (Iran). PDVSA (Venezuela) and Saudi Aramco (Saudi
Arabia) have also seen a significant increase in corporate relations. What Figure 2
fails to show, however, is how this increase of corporate relations of the five non-triad
NOCs relates to other core companies in the global energy sector.
Graphs 1a and 1b show the networks of corporate relations of these top five non-
triad NOCs with actors both within and outside the PIW top 50 core, in 1997 and
2007. The size of the nodes expresses the ‘degree’, that is: the total number, of
relations each company has with any other company through joint ventures, equity
10
alliances and contract relations. Since each pair can have several relations, this is
different from Figure 2. The total number of affiliations between each pair of
companies is reflected by the strength of the tie.

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Graph 1a: Global non-triad NOC Network (actor affiliation) 1997

Graph 1b: Global non-triad NOC Network (actor affiliation) 2007

Key:
Black Circles: NOCs Nodes right upper hand: Isolates
Grey Circles: IOCs Node degree: Total number relations with other actors
White Circles: Hybrids Tie strength: Total number affiliations between each pair

Source: data collection by author, see method and data section

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Naná De Graaff

These graphs show that the non-triad NOC network has not only expanded in
terms of corporate relations, but has also become more integrated into the core of the
global energy sector (the PIW top 50). The nodes (circles) on the right side of the
graph represent the companies of the PIW top 50 core to which the five major non-
triad NOCs are not connected; the colour represents the type of company (black is
state owned, white is hybrid, grey is private). The shape of the node indicates whether
11
the company is inside (circle) or outside (square) the top 50.
A comparison of Graphs 1a and 1b shows that in 1997, 30 of the 45 PIW top 50
companies were not yet connected to the non-triad NOCs, whereas only ten were
connected to them. In 2007, however, only 14 of the PIW top 50 companies were not
connected to five top non-triad NOCs. The important finding here is that, whereas the
largest non-triad NOCs have been part of the PIW top 50 core for decades, they have
become significantly more interrelated with the other PIW top 50 companies during
this ten-year period.
In order to obtain a more quantitative measure of integration the cohesion of the
network can be analysed. A measure often used in SNA in this respect is the
‘geodesic distance’ – the number of relations involved in the shortest possible path of
one actor to another (a direct connection is one path, a connection via another actor is
two paths and so on). From the geodesic distance, one can calculate that the average
distance in the non-triad NOC network was less than three paths (2.8) in 2007,
compared with almost three and a half paths (3.3) in 1997. The distance-based
cohesion (‘compactness’) increased from 0.169 to 0.328; the range is from 0 to 1,
where larger values indicate greater cohesiveness. Another common way of assessing
the distance of a network is to look at the diameter, which is given by the largest
geodesic distance in the connected network (Hanneman and Riddle 2005); this
measure tells us how many steps are necessary ‘to get from one side to the other’. In
1997, the diameter was seven, whereas in 2007 it was four, which means that the
distance between actors in the connected network decreased significantly over time.
In sum, it can be concluded from these findings that the networks of the five top
non-triad NOCs seem not only to have expanded over the measured period, but also to
have integrated significantly into the core of the PIW top 50. The question remains of
how they have expanded and how they have integrated. What kind of strategies can one
detect behind this process of expansion and integration and what does it say about the
distribution of power between them? It is therefore necessary to qualify these relations,
which I shall do in the following section. First, looking at strategy, I examine how the
expansion took place geographically and to what extent vertical integration increased
along the value chain. Second, looking at the distribution of power through ownership
structures and at the changes that have been taking place in that respect, I assess to what
extent an increase in NOC-dominated ownership structures has actually taken place.

Strategies of geographical expansion

While the global expansion of non-triad NOCs is often referred to in the literature,
there is less empirical evidence of how exactly this global expansion is geographically

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configured, and what kind of corporate relations it entails. The particular configur-
ation of such a geographical expansion strategy might, however, not only provide
indications of the motives behind the expansion, but moreover, has important
implications for the distribution of power in the global energy sector and the pattern
of conflict and cooperation emerging from it.
To provide such an overview, I mapped and then aggregated into regions the home
states of each of the corporate relations of the five top non-triad NOCs measured
earlier. Graphs 2a and 2b show the regional distribution of the corporate networks of
the five non-triad NOCs in 1997 and 2007. The size of the squared nodes (the
regions) expresses the total number of corporate relations of the five non-triad NOCs
within this region. The tie strength expresses the number of affiliations between each
12
non-triad NOC and this particular region.
A comparison between the networks of 1997 and 2007 confirms the expectation of
a remarkable expansion. The comparison also reveals that, again, this expansion of
the non-triad NOCs has taken place, in part, through integration with the PIW top 50
companies, indicated by the decrease in isolates – the small nodes in the left upper
corner of the graphs. Those isolates are the companies of the PIW top 50 core that
have no affiliation with the NOCs and, as expected, they have become significantly
fewer over time – from 30 in 1997 to 14 in 2007. Since I only mapped the non-triad
NOCs’ relations, the integration of these companies into the expanding NOCs’
network implies that this has taken place through joined relations with NOCs. In
terms of strategy this means that, in general, the expansive strategy of the largest non-
triad NOCs is not exclusively unilateral or bilateral, as it is often depicted in the
literature and in political rhetoric but, in fact, involves an increasing number of joined
relations with other companies from the PIW top 50. This integration, importantly,
then also implies a transnationalization of the network. Despite this general finding,
there are, however, also significant differences in the individual companies’ geo-
13
graphical strategies, which one can see by comparing the tie strengths.
CNPC (China), for instance, displays a strategy of both geographical diversifi-
cation and substantive intensification. The most remarkable expansion of CNPC is
towards Africa (from 2 to 30 affiliations), Central Asia (1 to 20), and Asia (1 to 15),
but the CNPC has also increased its activities in the Middle East (1 to 10) and Latin
America (4 to 10). Gazprom’s (Russia) strategy – by contrast – is regional rather than
global, focusing on the European region and the former Soviet Union (Russia and
Central Asia). This is partly because gas, which is Gazprom’s primary product, is
more regionally bounded than oil. With respect to Europe, in particular, the ten years
witnessed a drastic increase of Gazprom’s relations – from 37 affiliations in 1997 to
66 in 2007. An interesting detail when looking at Saudi Aramco’s (Saudi Arabia)
strategy is the relative high and increasing number of affiliations with the Asian
region (from 9 to 13), which implies that this Middle Eastern giant is increasing its
cooperation with Asia. Comparing the regional affiliations of the PDVSA over time
reveals a vast increase in its affiliations with Latin America (from 4 to 36). This shift
results from the renationalization that started with the restructuring of PDVSA
in 1997, and culminated in a massive renegotiating of exploration and production

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Graph 2a. Geographical Distribution non-triad NOC Network 1997

Graph 2b: Geographical Distribution non-triad NOC Network 2007

Key:
Black Circles: NOCs and hybrids
White Circles: IOCs
Grey Squares: Regions
Source: data collection by author, see method and data section

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 A global energy network?

contracts (E&P) within Venezuela. However, that there are still extensive ties to both
the USA and Europe (11 and 12 respectively) indicates that a considerable shared
interest remains between these different powers, and that (re)nationalization does not
necessarily take place at the expense of transnationalization.
The most important finding from looking at the geographical configuration of the
expansion is that it went hand in hand with increased transnationalization, namely an
increase of relations across borders and between state and non-state actors. I
addressed the conflict-ridden and interdependent relation between states and MNCs
earlier. Corporate relations and MNC activities outside the borders of their home
states have an important (geo) political dimension, especially when they concern a
strategic sector such as the petroleum industry or involve state-owned MNCs. The
above analysis of the individual companies’ corporate strategies hence casts light on
potential (geo) political conflict areas and/or alliances.

Strategies of vertical integration and diversification

Increasing vertical integration, or expansion along the global hydrocarbon value
chain, to increase their share of the value capture and make them less dependent on
IOCs for technological service and knowhow, is another aspect of the NOCs’
expansionist strategies that existing research highlights. A different way to achieve
the latter is diversification into non-core activities. To assess if this indeed has been
the case, I categorized the types of investments along the hydrocarbon value chain of
the selected non-triad NOCs, using the common division of upstream (exploration,
drilling and production of oil); midstream (supply and transport); and downstream
(trading, refining, storage, distribution, marketing to wholesalers and retailers). In
addition, to be able to assess their diversification strategies, I added the categories
upstream-to-downstream support services, financial and other services, and non-core
activities such as banking and media.
Figure 3 shows that, whereas downstream integration has certainly increased for
the five top non-triad NOCs, it has not increased relative to the increase in upstream
expansion. This seems to imply that the strategy of vertical integration of these five
non-triad NOCs is not primarily a downstream integration, but even more so an
upstream integration. The increase in services and non-core activities, which is an
indication of their increasing independence from IOCs in terms of, for example,
technological knowhow and services, confirms the expectation of a diversification
strategy of the non-triad NOCs.

Changing ownership structures

Ownership structures are another way of assessing how power is distributed and what
changes have been taking place in this respect. The following analysis is focused on
cooperative agreements. A distinction is made between joint ventures and equity
alliances/interest (abroad and domestic), wholly owned subsidiaries abroad, and
different forms of contracts (operating contracts, lease contracts, services contracts).14
Results for the five top non-triad NOCs together are shown in Figure 4.

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Naná De Graaff

Figure 3: Kind of Investments five top non-triad NOCs 1997 and 2007

Source: data collection by author, see method and data section

Figure 4: Ownership structures five top non-triad NOCs 1997 and 2007

Source: data collection by author, see method and data section

276 © 2011 The Author(s)

 A global energy network?

The expansion over the period 1997 to 2007 took place in the first instance through
joint ventures abroad, but also through joint ventures within the home states of the
five top non-triad NOCs, which have increased markedly. A great deal of the
expansion also took place through the increase in equity alliances/ interests abroad
and wholly owned subsidiaries abroad, whereas the number of equity alliances at
home, as well as the number of operating contracts, have remained roughly similar.
An interesting finding is the rise in the service contracts of the selected non-triad
NOCs from virtual non-existence in 1997. This, again, confirms the expectation of an
increasing vertical integration and diversification strategy on the part of the non-triad
NOCs, and indicates a shift in power in terms of the NOCs becoming less dependent
on the technological knowhow of the IOCs. This suggests that non-triad NOCs are
starting to compete with the IOCs in a domain in which the latter had previously
enjoyed a unique competitive advantage.
Do the combined findings above imply that the power balance is indeed tipping
towards the NOCs? Have the resource-rich non-triad states increasingly nationalized
their energy sectors and thrown out the private majors? Have resource-seeking non-
triad states sent their state-owned majors abroad to capture whatever value they can?
Are we witnessing the emergence of a NOC-dominated global energy market, as
some influential analysts in the field have been predicting? Figure 5 shows changes in
the ownership relations of the five top non-triad NOCs with other companies of the
PIW top 50 core.

Figure 5: Type of Ownership-Relations five top non-triad NOCs 1997 and 2007

Source: data collection by author, see method and data section

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Naná De Graaff

Whereas relations between fully state-owned energy majors (NOC–NOC) have

increased significantly, those between fully state-owned energy companies and
private companies (NOC–IOC) have also more than doubled and still exceed NOC–
NOC relations. The relatively largest increase seems to have taken place between the
hybrid companies and the state-owned companies (HYBR–NOC). All of this clearly
demonstrates that the development during the 1997–2007 period is not only one of
‘NOC growth’, but also of increased cooperation between and hence integration of
state-owned companies and private/hybrid companies.
From the above analyses, one can identify some general developments during
the years between 1997 and 2007. The top five non-triad NOCs expanded globally
in terms of a significant increase in the number of their corporate relations. This
expansion took place primarily through an increase of joint ventures, equity
interests and subsidiaries abroad, and configured geographically as a significant
regional shift towards Asia, Africa and Central Asia, whereas relations with Europe,
the Middle East and Latin America intensified. This expansion has also led to more
integration of the non-triad actors into the global energy market. This was achieved,
first of all, through progressive vertical integration of the state-owned energy
corporations along the global hydrocarbon value chain with increased downstream
and upstream integration and the growth of service related activities, and second,
significantly, with an increase in shared ownership relations between NOCs, IOCs
and hybrids.

Conclusion
In this article, I attempted to understand how the rise of non-triad NOCs has unfolded
in terms of changes in their corporate relations and strategies between 1997 and 2007.
From the findings presented here, one can conclude that with respect to five top non-
triad NOCs, there was a remarkable expansion and a simultaneous integration with
the core of the PIW top 50 companies. This dual development – which contradicts the
commonly held view of simple ‘NOC growth’ – is bound to have important impli-
cations for the distribution of power in the global energy market and the way in which
the contestation over energy resources is configured. In the literature this power
distribution is often depicted as a ‘NOCs vs IOCs’ game, or ‘net-exporters vs net-
importers’, and the cyclical nature of power shifts between them is explained by the
price of oil and forces of demand and supply. I took a different approach by focusing
on the underlying relations between the different companies, which also generated a
different view of the distribution of power in the global energy market. The finding
that NOC expansion has taken place, in part, through increasing integration with
IOCs, implies that, though NOCs might have ‘gained’ power – a development that
high oil prices have indeed partly driven – and IOCs might have ‘lost’ power, they
have also increasingly joined forces. The implication here is that they have also
become increasingly interdependent. In other words, power in the global energy
market becomes less and less a zero-sum game.15
Put in a different way, these findings show that, alongside the resource

278 © 2011 The Author(s)

 A global energy network?

nationalism trend the high oil price fuelled, a transnationalization trend has taken
place that has significantly transformed the structure of the core of the global oil
sector. This growing transnational dimension might be the most important and
fundamental aspect of the recent period, compared with how the literature depicted
earlier power shifts in the global energy sector. Whereas competition for energy
resources could previously be framed as ‘OPEC vs the West’, or the ‘IOCs vs the
NOCs’, the distribution of power might now become increasingly diffused, for the
NOCs are progressively integrating into the global energy market. This new
underlying configuration of relations will also mediate the effects of conjunctural
forces, such as a plummeting or rising oil price, loss of revenues, financial crises,
changes in supply and demand, in a different manner than when the NOCs remained
outside – or counterbalanced – the global energy market. The focus in this article is
not on precisely how these conjunctural forces will or might affect the current
configuration, but rather on how these underlying relations have changed.
These findings set out an agenda for interesting future research. First, while the
focus of this analysis was on the relations of five major non-triad NOCs, a similar
analysis could be made of the major IOCs. It would greatly enhance our understand-
ing of the NOCs’ changes in corporate relations and strategies if we analysed them in
combination with those of the IOCs. Whereas it would be interesting to extend the
case selection, one could also generate fruitful findings by focusing on a smaller
selection of cases. Despite these companies’ common trajectories, there is, of course,
a great variety of strategies and interests, as demonstrated when looking at the
individual companies’ geopolitical strategies. One could obtain more in-depth
analysis of these differences by taking a closer look at these companies’ ‘ego
networks’.
An important aspect touched on in this article but not made explicit in the
empirical analysis is the role of the state. As addressed, the complex and inter-
dependent relationship between states and MNCs is particularly intricate in the realm
of energy because it is such a prime commodity in the global economy, as well as a
vital ‘strategic commodity’ and hence considered crucial to national security. One
could extend the analysis to include this state dimension. One way to do this would be
to include relations between those states most closely connected to the network,
including, for instance, long term-agreements, military alliances, financial aid and
trade. Another way to proceed would be to open up the black box of the corporations
and the state and analyse the relations of the actors inside them. Shifting the analysis
to the level of individual interlocks will open up a completely new area of research
about the social relations that underlie these power shifts and generate a range of
questions about what strategies and interests are guiding these actors.
A different research question pertains to how shifts in the composition of the
global energy network influence the governance of global energy markets. It is still
unclear in what direction this will proceed; the increased integration between actors
representing a more ‘statist’ governance regime (NOCs) and those representing a
‘market based’ governance regime (IOCs) could imply that the gradual development
of more hybrid forms of governance is taking place. To gain a better understanding of

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Naná De Graaff

the implications and meaning of these expected changes, we need to get inside these
social structures. Yet, one can only conduct a qualitative interpretation of the meaning
of these patterned relations after these patterns have become visible. I have provided
an empirical basis for these questions by offering an in-depth mapping of the shifting
power balance within the global contest over energy resources, which I operation-
alized in terms of changing corporate relations of non-triad NOCs with the main
corporate actors of the global energy market.

Acknowledgements
I would like to thank Bastiaan van Apeldoorn, Anna Leander, Henk Overbeek, Frank den
Hond, Arjan Vliegenthart, Eelke Heemskerk, Meindert Fennema, three anonymous reviewers
and the editors of Global Networks for their constructive comments and valuable input on
earlier versions of this article.

Notes
1. The general definition of energy security is the availability of energy at all times in various
forms, in sufficient quantities, and at reasonable and/or affordable prices.
2. The Seven Sisters were, actually, eight Western private oil companies – Exxon (Jersey),
Mobil (Socony-Vaccum), Chevron (Standard of California), Texaco, Gulf, Royal Dutch/
Shell, BP, CFP (See Yergin 1991).
3. This, by now well-known, acronym refers to the emerging economies of Brazil, Russia,
India and China.
4. One should note that using NOCs and IOCs as separate homogenous categories is highly
simplifying social and empirical reality. First, they are extremely heterogeneous categories
and, second, they are increasingly integrating categories. Yet, to analyse the changes taking
place within and between these categories, it is necessary to separate them into distinct
categories.
5. Data between 1993–94 and 1996–98 are missing, but I believe that the given data provide a
sufficiently reliable trend.
6. Most of these private majors have merged with other IOCs in this period. These graphs do
not depict the latter.
7. Despite its name, the term ‘National Oil Companies’ also includes other forms of hydro-
carbons such as gas, and therefore also refers to a company such as Gazprom. Although it
might be a bit confusing, I stick to this term because it is the most generally used term in
the literature to denote the majority state-owned energy companies.
8. Whereas previously NOCs were secretive, lacked transparency and denied access to their
data, the internet has contributed to a significant change in this respect. Most NOCs have an
English version of their website where they provide annual reports, financial statements,
organizational structures, historical developments and important events, subsidiaries and
board representations. (For an analysis of this transformation, see Arnott 2004.)
9. Wholly-owned subsidiaries abroad were included here even though they do not involve a
relation with another company. I included them because they have a relationship with
another actor, namely the (host) state. I excluded wholly owned domestic subsidiaries
because they do not directly involve relations with other companies or states. I also
excluded the subsidiaries of subsidiaries; while a more complete picture would emerge if
these were included, it would add to the level of complexity.

280 © 2011 The Author(s)

 A global energy network?

10. To make the network graphs more orderly, the original two-mode network, which
contained both the actors and the projects that connect them – in SNA parlance called
‘events’ – was transformed into a one-mode network, which shows only the relations
between the actors and not the connecting ‘events’. The ‘events’ in this case are joint
ventures, consortia or equity alliances. For example, in a joint venture between Saudi
Aramco and ExxonMobil, the latter are the ‘actors’ and the joint venture is the ‘event’.
11. The names of the affiliated companies could not be included in these graphs, since it would
render them unreadable.
12. Since I combine all relations within a particular region, this graph cannot show how the
different companies come together within a particular region. Looking at the different
companies’ ‘ego networks’, or focusing on one region at a time, could provide more
detailed insight into what kind of relations determine each company’s affiliation to each
region. Since I analyse a broader trend in this article, I refrain from this line of enquiry, yet
it might be an interesting avenue for further research.
13. Please note that, to avoid unnecessary clutter, the tie labels are not displayed in the graph,
but the exact strength is mentioned below when applicable.
14. Here, in the presentation of the graphs, I cluster these different forms of contracts for the
sake of clarity. One should note, however, that it differs considerably from the kind of
contract made (see for example Mommer 2002).
15. I would like to thank Anna Leander for making this point explicit in her comments on a
previous version of this article.

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