But having pondered whether we will finally see the long-tipped sale or spin-off of BHP Petroleum, The Slug discovered an even more interesting analysis of what happens when a company gets too big for its own good – or the good of the country which it calls home.

Last week, while everyone else was watching the BHP/Rio tussle two extremely highly-regarded researchers at Rice University in the home of oil, Houston, Texas, released a major study questioning the success of, you guessed it, Big Oil.

According to the report, simply headed The International Oil Companies, (and available at http://www.rice.edu/energy/publications/docs/NOCs/Papers/IOCs_Jaffe-Soligo.pdf) the mega mergers of the 1990s that led to the creation of giants such as ExxonMobil and ConocoPhillips, have simply not worked.

Amy Myers Jaffe and Ronald Soligo found that the big five oil companies are:

• spending less on exploration in real terms despite a four-fold rise in real cash flow;

• use 56% of their increasing cash to buy back shares and pay high dividends;

• have effectively given over exploration leadership to smaller explorers;

• rapidly being replaced by national oil companies in oil-rich states; and

• have an identity crisis.

For careful followers of the oil patch (and readers of Slugcatcher) there is nothing new in this. But what makes the Rice University study so important is that it’s coming from people close to heart of American business, politics and public opinion.

Jaffe and Soligo are from the James A Baker Institute, an academic study group founded by a former treasury secretary, and secretary of state, to US president, Ronald Reagan.

What they think, and say, carries somewhat more weight that a simple Australian scribbler’s opnions.

It is interesting that people at the centre of US public policy are starting to point their fingers at big oil and say, in no uncertain terms, “you are not working in the best interests of the American people”.

Jaffe and Soligo even go as far as to canvas, and then reject, a notion that America consider the establishment of a national oil company to rival those in countries such as Iraq and Saudi Arabia.

“The handwriting is on the wall,” Jaffe and Soligo say.

“The oil majors are not replacing reserves. It’s as if they are slowly liquidating their long-term asset base. They see a declining rate of production over time and eventually that is bad news for both their shareholders and consumers”.

According to the academic paper, state-owned oil companies are the top 10 oil reserve holders. ExxonMobil, BP, Chevron and Shell rank 14th, 17th, 19th and 25th respectively.

Where the criticism gets really interesting is when the researchers turn to the question of mergers. In an interview after the release of the report, Jaffe said a primary rationale for the big oil merges of the 1990s was that bigger companies “could better seek and develop major new fields” but this hasn’t happened.

“Since this has not been the ultimate outcome of the mergers, US policy should address whether additional mergers are in the best interest of the country.”

Ouch!

That is a comment which goes to the heart of the logic behind mega-mergers, and the future of the entire oil industry.

Critics will point to the academic nature of the study and say that academics don’t understand the real world.

The problem for the critics is that even someone as non-academic as The Slug can see that Jaffe and Soligo are scoring points, speaking with unusual common sense (for academics) and could find a willing audience in the law makers (and motorists) of the US.