Courtesy of The Wall Street Journal, an interesting article on the latest ranking of global energy companies by market capitalization, which was dominated by state-backed national oil companies, or NOCs.   As the report notes:

“…PetroChina tops the PFC Energy 50, toppling usual leader Exxon Mobil in a rerun of 2007. PetroChina hit the top 10 in 2002, valued at $34.9 billion. Its market cap is 10 times that in the latest ranking.

NOCs owe their rise largely to two powerful trends. They often get preferential access to resources, as is the case with Petróleo Brasileiro. Many also dominate the fastest growing energy markets. Traditional majors, in contrast, often find their access blocked or, as in the recent Iraqi field auctions, offered at pitiful economics.

From an investor’s perspective, though, a “NOCs good, majors bad” reading is too simplistic. Looking at the two groups’ performance over the past decade, one difference stands out: volatility. NOCs, nowhere in 2001, constituted $1.55 trillion of market cap in the top 10 of PFC’s ranking in 2007, bigger than the majors’ collective $1.40 trillion. The following year, however, the number of NOCs in the top 10 had gone from four to two, and they were worth just $357 billion. The majors suffered also, but their collective value still topped $1 trillion in value.

The majors display relatively low correlation to oil prices; a big reason why investors’ dollars have flowed over the past decade to more leveraged stocks like NOCs and exploration-and-production companies. Yet stability shouldn’t be discounted out of hand. The five majors in 2009’s top 10 paid out more than half a trillion dollars in dividends and buybacks in the decade up to the end of 2008, according to Sanford C. Bernstein. Moreover, Exxon’s shareholders will sleep better if, say, bubbly property prices in China fall.

Majors “are repositories of value,” says PFC founder Robin West. The question for the NOCs is “will they be speculative or repositories of value?”

NOC stocks gyrate with appetite for risk and, by extension, emerging-markets stocks. On top of this, they enjoy, or suffer from, double exposure to oil prices. There is the usual impact on revenue. In addition, the top four NOCs—PetroChina, Petrobras, Sinopec and Gazprom—hail from countries that are either big commodities producers or, in China’s case, fast growing consumers of raw materials. Stock markets tend to move in tandem with global raw-materials prices in all of these countries.

Today, commodities prices look stretched relative to fundamentals and China is starting a potentially destabilizing round of monetary tightening. Their battle against Big Government might seem futile in the long term, but the majors look the safer option for now.”