National oil companies (NOCs) will continue to dominate upstream oil and gas investments if oil prices remain at current low levels, creating a new dynamic in the market, the head of the International Energy Agency (IEA) told Reuters.

NOCs, which include huge state-run firms Saudi Aramco, China's CNPC and Mexico's Pemex, have raised their share of upstream investments to a 40-year high of 44 percent, the IEA said.

International oil companies (IOCs), which include Anglo-Dutch Shell, U.S. heavyweight ExxonMobil and France's Total, have been forced to scale back investments as weak prices squeeze profit margins. NOCs have also made cuts but less severely than independent companies.

"NOCs, who own the bulk of the world's low-cost reserves, I would say their share will maintain if not become higher," the IEA's executive director, Fatih Birol, told Reuters in an interview.

IEA figures show more than $300 billion of upstream oil and gas money has been slashed in 2015 and 2016, an unprecedented amount.

The largest cost cuts came from North American independent companies Apache, Murphy Oil, Devon Energy and Marathon, which reduced spending by around 80 percent between 2014 and 2016, the IEA said.

NOCs in Saudi Arabia, the United Arab Emirates and Qatar have been able to raise capital for fresh investments via government bond issues that have allowed them to make up for lower oil revenue, the IEA said.

With NOCs gaining a larger share of investments in the sector, the oil market could enter a new dynamic in which production decisions are less driven by market fundamentals.

"There are some NOCs that take other factors into consideration when making decisions," Birol said, referring to internal economic or political issues as well as defence of market share.

"An oil industry dominated by the IOCs or NOCs (presents) two different pictures," he said. – Reuters