Mahathir warns against threat of oil oligopolies

Malaysia, Indonesia said to be considering partnerships in pipeline, offshore developments

by The Associated Press

Prime Minister Mahathir Mohamad said May 29 that mergers among the world’s petroleum giants were creating oil oligopolies which threatened to “gobble up” small national oil companies.

“The wave of mega-mergers has and will inevitably change the structure of business with a few of these newly created giant entities dominating and dictating to the industry,” Mahathir said in a speech to industry experts gathered in Kuala Lumpur for a regional meeting.

Mahathir questioned whether national oil companies in Asia will remain relevant among the powerful ones being formed by recent mergers such as Exxon and Mobil, British Petroleum and Amoco and Total Fina and Elf.

“In this case, the playing field isn’t level,” Mahathir said. “None (of Asia’s state-owned oil companies) is big enough to take on the merged giants.”

Mahathir said national oil companies will have to form alliances and find strategic partners to build industry niches for themselves.

He told reporters after his speech that Malaysia would consider forming an alliance with Indonesia’s state-owned Pertamina, if Jakarta was ready for such a partnership.

He didn’t elaborate on the nature of such an alliance between Asia’s two largest oil exporters.But Pertamina’s chief Baihaki Hakim told reporters he was offering Malaysia’s state-owned Petronas a $800 million pipeline project.

Baihaki, quoted by the national Bernama news agency, said Pertamina would also offer Petronas offshore production projects.

Mahathir said May 29 that oil remained “the most powerful political weapon in the world.”

“Preventing an oil-rich country from producing is equal to laying siege to a city, the favorite means to bring a nation down on its knees in the old days,” Mahathir said.

In a thinly-veiled reference to U.N. sanctions against oil producer Iraq, Mahathir said: “It is primitive to bring people to their knees by impoverishing them.”

“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.”

“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,” Mahathir told the conference.

The prime minister noted that oil price volatility had not had a heavy impact on Malaysia because the country “doesn’t produce that much oil and we don’t use more than we produce.”

When asked whether Malaysia would consider joining OPEC, Mahathir said, “We’ve survived pretty well without being a member of OPEC. They get the blame and we get the money.”