The problems raise several linked questions in the minds of experts: is this a taste of the future for the majors such as Exxon, Shell and BP? More provocatively, is there a future for these companies as we know them? Or will they have to change what they do dramatically - even merge, as Shell and BP are rumoured to be considering, to create super-giant companies?

International oil companies have good reason to feel battered. Last week both BP's chief executive, Lord Browne, and Shell's Jeroen Van der Veer announced third-quarter results. Browne pointed to problems with production that had led to a downbeat set of figures. Shell's were better, marginally up on operating levels over a year ago, but still down in headline terms. The outstanding performer was the largest, Exxon, which managed to increase production and profits. But for BP, Shell and Exxon - along with other US, French, Norwegian, Spanish and Brazilian international oil companies - concerns over raising quarterly production figures and comparing myriad earnings measures year on year seem pettifogging when set against the long-term challenges they face.

The warning signs are emerging already. In the past year, multinationals have found national authorities from Bolivia to Russia throwing them out, or questioning agreements they are banking on to keep their long-term profits, production, and reserves from collapsing. Attempts to find toe-holds in other producing regions, such as the Middle East (Iraq, Iran), remain blocked.

This presents a number of problems. Multinationals have historically been valued in large part on their reserves - where they are, how easy they are to extraact and how good the companies are at extracting them. If the fashion for nationalism continues, all these measures could deteriorate dramatically.

Fatih Birol, chief economist at the International Energy Agency in Paris, says: 'The future of the international oil companies is the key issue for the industry. If companies with the existing reserves don't find ways to access more in future in key resource producers, which seems very difficult for legal and geopolitical reasons - if they do not change their structures to reflect this - they may become just niche players in the global oil market.'

As things stand, the multinationals actually produce more oil and gas than some entire countries (see table). Exxon and BP, for example, produce more oil than Kuwait or Iraq. Shell and BP each produce more gas than either Iran or Saudi Arabia.

In the short term, these levels are likely to remain secure. The past decade has seen huge consolidation among super-majors. As Morgan Stanley analysts note, in 2001 there were five companies in four countries worth more than $50bn (£26bn), now there are 14 in nine.

With consolidation has come massive expansion of individual company reserves. But, as Morgan Stanley states: 'It is unclear how they will continue to expand their portfolios to provide themselves with longer-term sustainable production levels.'

The root cause is that access to the world's remaining oil and gas will only become harder. Roughly 20 per cent of global reserves are held by the multinationals, while 80 per cent are held by national oil companies, mainly state-owned in asset-rich countries, such as Saudi Aramco or the National Iranian Oil Company. The reserve position of the multinationals is much weaker than their production (total reserves are based on proven quantities that can reasonably be expected to be recovered, and therefore under estimate the amount of oil left in the world). This means that unless they can improve their reserves, production will fall dramatically. Recent experience does not bode well. Morgan Stanley says that in 1997, oil majors replaced 140 per cent of their reserves; in 2005, it was 75 per cent. In short, the companies are shrinking.

Morgan Stanley says that the difficulties are caused by the 'migration of energy into emerging markets from developed markets' - from the OECD to Russia, Latin America, Africa and the Middle East. Aside from frequent political instability, these markets are emerging on the back of a rising oil price, and are reluctant to lose control of the major engine of their development. Recent experience in Bolivia, where Petrobras of Brazil, the UK's BP and BG, Repsol YPF of Spain and Total of France all had their assets nationalised, as have developments in Russia, proved the point.

Fadel Gheit, an industry analyst at Oppenheimer Inc in New York says the future will be little better: 'The only way that they can get access is when they can demonstrate they are way beyond the [national companies] in what they can deliver technologically.'

This is the basis for the historical relationship between the quoted oil companies, rich in capital and expertise, and resource-holding nations. Gheit points to the deal between Exxon and Qatar to develop liquid petroleum gas for export. But with oil and gas prices reaching record levels in the past five years - they have fallen off since the summer, but remain high by historic standards - the motivation for inviting companies in has receded. The Russian government felt happy to sign production-sharing agreements with multinationals in the mid-Nineties (allowing them revenues from projects until their costs are paid off, when income is split) when the oil price was low and the national coffers empty, but it is now unhappy with the deals and is exerting pressure on a number of projects - to the detriment of Shell, Exxon and Total.

Meanwhile, it feels confident enough to allow Gazprom to go it alone at Shtokman, the world's third-largest gas field, snubbing Chevron and ConocoPhillips of the US, Statoil and NorskHydro of Norway, and Total.

As long as prices remain high, the power resides with the resource-rich. Kremlin insiders and others are clearly confident that demand from developing nations will keep prices high. For their part, the companies believe that prices - which averaged $66 in the first half of the year and stood at about $57 last week - have further to fall. Browne said last week that he believed above $40 was about right in the 'medium term'. But there is also the question of the value companies can get out of whatever access they achieve.

As Browne said, taxes have gone up around the world with the rising oil price. And there is the question of cost. Last week, Shell announced it was buying out a subsidiary venture involved in extracting oil from sand in Canada, a stable, OECD country. The problem that this demonstrates is, as Gheit puts it: 'The easy oil has already been found and developed.'

According to Wood Mackenzie, the costs of developing and producing oil from Canadian sand is $35 a barrel compared with $5 a barrel in the Arabian deserts for the likes of Saudi Aramco.

The logic of all this points to companies operating as high-technology contractors on reserve bases that will, over time, be owned to a greater extent than today by landlords other than themselves. Not only must the companies be able to offer technological solutions to these owners far ahead of those from the national oil companies, but they must be able to negotiate terms of access that ensure they get value from them that will stick over time. The arguments over the Sakhalin production agreements show how problematic this could be.

Within these constraints, if there are no finds outside national companies' territories (in the Falkland Islands, for example), there are hi-tech, high-value avenues to explore. Birol says: 'They will have to find access or look at other activities and niches - gas, LPG, biofuel - to make up the decline.' Investment by oil majors in alternative sources is currently a minute fraction of capital expenditure on oil and gas infrastructure. The other option is a mega-merger, such as between BP and Shell. This has become a major talking point. Gheit says: 'I believe that these companies are either thinking about, or actually discussing, the possibility of a merger.'

Shell has done 'scenario planning' on a tie-up. Last week, Browne offered a 'no comment' that was interpreted as anything but unequivocal. A deal would create the world's largest energy group, with oil production of 4.6 million barrels per day, 71 per cent higher than Exxon, and gas output 85 per cent higher. Reserves would swamp Exxon's. There would be massive synergy benefits, creating efficiencies that would see BP-Shell able to continue competing for many years.

Unlike others, Gheit believes that there would not be significant regulatory problems requiring major disposals: 'This would be the smartest thing to do if these companies are thinking of the future. That future is very clear - there are going to be two classes of company: either very small or very large. This combination would create a super-major of scale to survive.'

Such a move would be breathtaking, and would be unlikely to be the only one. Mergers would boost returns to shareholders - as those who invested in BP have found since its acquisition of Amoco, Arco and Burmah Castrol.

Browne announced the Amoco deal when the majors were facing the challenge of a $12 oil price. Prices have fallen recently, but a new wave of super-deals would surely reflect deeper and longer-term problems than that.

Alternative power? Fuel cells

Almost 170 years after the first fuel cell was invented, could 2007 see it finally make a commercial breakthrough?

Fuel cells convert chemical energy into electrical energy and differ from batteries in that the reacting chemicals can be replenished. There are plenty of companies - Ceres Power, Ceramic Fuel Cells, PolyFuel and Acta to name just a few of the British-quoted firms - claiming to be on the brink of introducing commercially available products for both portable devices, such as laptops, and domestic heating and power systems. And with the price of conventional power rising almost as quickly as legislation to encourage the search for greener energy, there is plenty of incentive.

That is undoubtedly the logic behind the tie-up between Centrica, parent of British Gas, and Ceres Power, one of the firms closest to producing a marketable cell for domestic homes. Chief executive Peter Bance's enthusiasm for the company's product, first devised 15 years ago by scientists at Imperial College, is infectious. If it works, it could be revolutionary.

Unlike most fuel cells, which need hydrogen - often in the form of methanol - Ceres cells can operate with natural gas, as well as propane . They are compact enough that a stack can supply all our domestic power needs and be put in a wall-mountable boiler the size of a conventional central heating plant. And while the boiler would cost £500-£1,000 more than existing types, the power savings mean that money will be recouped within a couple of years.

Ceres will be producing prototypes next year and is looking for a manufacturing site for a full product launch in 2008. It has some impressive partners: as well as British Gas, there's BOC, Rolls-Royce and Johnson Matthey, and two leading fuel cell firms.

'The FTSE 100 is in our sights,' Bance says. Given that Ceres is quoted on AIM and valued at £114m, or around one-twentieth of the market value needed to enter the Footsie, that is quite an ambition.

If the past is anything to go by, there is plenty of time for problems to arise. Six years ago, a fuel cell for vehicles produced by US group Ballard Power Systems was hailed as the future - and, indeed, there are London buses powered by such cells. But they cost more than £100,000 apiece - too expensive to be commercially viable.

One fuel cells analyst, who preferred not to be named, says the key thing in any company is links 'with the kind of companies that have the brand names and the resources to put behind the product'. Ceres scores on these, but others do too. Johnson Matthey, for example, has signed deals with a number of companies, while British Gas has had links with other alternative power companies, which were dropped when the technology was found wanting.

Robin Batchelor, co-manager of Merrill Lynch's New Energy Technology investment trust, prefers firms closer to commercial production. The fund's biggest fuel-cell holding is Medis Technologies, a US company selling fuel cell batteries for portable devices. It's a market that PolyFuels, a US company with an Aim listing, is also hoping to tap. But Batchelor's joint fund managers also question whether fuel cells will emerge as the alternative energy winners compared with solar, wind and wave technologies. Merrill's Poppy Allonby says: 'There are subsidy programmes for wind. But the relative costs are such that it does not need subsidy; fuel cells still have a long way to go.'