Bloomberg

WHEN the going gets tough, the solvent get buying. That, roughly, was the philosophy of the titans of the oil industry last time the price of their product plummeted, in the late 1990s. Hunting for oil had become less profitable thanks to the falling price, whereas preying on rivals had become easier, thanks to plunging share prices. Thus Exxon Mobil, Chevron Texaco, BP Amoco and TotalFinaElf were born. So when Suncor and Petro-Canada, two big Canadian oil firms, announced a C$19.3 billion ($15.8 billion) merger on March 23rd, the industry's biggest since 2006, speculation mounted that another wave of deals might be imminent.

Suncor and Petro-Canada say the merger will help them withstand the trying times. The bosses of the two firms think they can save C$300m a year on operating costs and C$1 billion a year in capital expenditure. These savings are possible thanks chiefly to the two firms' complementary investments in Canada's tar sands, where oil is found in a particularly impure and viscous form, requiring a lot of expensive processing. The two firms plan to share pipelines and other infrastructure at existing facilities and future ones.

The two companies also hope their merger will help reduce inflation in the oil-sands region, which took off amid a mad rush to develop new projects when the oil price was high. Petro-Canada recently delayed a development called Fort Hills after the projected cost rose from C$14 billion to C$25 billion in just over a year. It believes the merger will help reduce the bill again by dampening competition for scarce labour and equipment.

Tar-sands operations are a natural focus for consolidation. They are expensive to run and so are more exposed to the falling oil price. At the very least, tar-sands firms will struggle to finance expansions with the oil price so low. But Canada's tar sands remain an attractive investment because they provide long-lived reserves in a stable country—a rarity in the oil business these days. That is why Total (as it is now known) recently offered to buy UTS Energy, a tiddler that is one of Petro-Canada's partners in the Fort Hills project.

Much the same logic applies to takeovers of coal-bed methane firms, which extract natural gas from coal deposits. BG, a British gas firm, has just succeeded in buying an Australian coal-bed methane firm, Pure Energy Resources, for A$1 billion ($729m). Last year it spent A$6 billion on another, Queensland Gas. ConocoPhillips and Royal Dutch Shell have also made recent investments in coal-bed methane.

Indeed, over 40% of takeovers in the oil and gas business last year involved “unconventional” resources such as tar sands and coal-bed methane, according to Chris Sheehan of IHS Herold, a research firm. He expects more such deals this year, as the industry's giants snap up unconventional reserves that their smaller, cash-strapped owners cannot afford to develop.

But Mr Sheehan does not expect the giants of the industry to snap one another up, as they did in the blockbusting deals of the 1990s. For one thing, they are already so big that further mergers would raise competition concerns. Moreover, with the exception of Exxon Mobil, which has tens of billions stashed away, they would struggle to raise the money. Instead, middling firms are likely to be the main targets. Rumours are rife, for example, of an imminent bid for Santos, an Australian firm with several liquefied natural gas projects in the works. And the Western oil majors are not the only buyers on the prowl: in recent years state-owned oil firms from countries such as China and India have become much more acquisitive.