Will 'Big Oil' get bigger?

Are the two energy giants BP and Shell about to get together?

Tony Hayward, the new boss of BP, says no but he may mean 'not yet' rather than 'never'. For the International Oil Companies (IOCs) are having trouble replacing their reserves in the face of resurgent resource nationalism and the increasing power and size of the National Oil Companies (NOCs).

See who owns the world's oil and gas reserves.

A realistic response to this strategic challenge is consolidation. A merger among the oil majors would present major implementation and regulatory challenges but the imperative to replace reserves appears sufficiently strong to make one or more such mergers a distinct possibility.

Hayward's immediate task may be to sort out BP's operational problems, but the strategic challenges are not likely to diminish over time. Tie-ups loom.