I remain bullish about the prospects of the oil patch for several reasons. There is continued demand growth from developing nations such as India, China, and Brazil, and OPEC estimates that global oil consumption will increase 1.6% in 2007. In addition, there's a global scarcity of spare refining capacity, declining production rates in key regions such as the North Sea, Alaska, and Mexico's Cantarell field, and the uncertain political environment in many oil-producing nations such as Nigeria, Venezuela, Iraq, and Iran.

While there are many ways to play the continued strength in crude -- from buying supermajors like ExxonMobil (NYSE:XOM) to snapping up shares in special situations such as Motley Fool Global Gains pick Sasol (NYSE:SSL) -- I believe that one of the most effective ways to invest in the industry for the long haul is through ownership of state-owned oil companies that serve large, fast-growing emerging markets.

Two of my favorite plays are PetroChina (NYSE:PTR) and Petrobras (NYSE:PBR). Simply put, I like these companies because of their leadership positions in their protected markets, the sheer size and projected demand growth of these markets, and their above-average production-growth profiles and healthy dividends. Let's take a quick look at each, shall we?

PetroChina -- which I initially recommended back in September 2005 -- is the largest integrated oil company in China. The company produced 1.062 billion barrels of oil and equivalents (BOE) in 2006, has refining capacity of more than 2 million barrels per day, a distribution network of close to 19,000 gas stations, and an extensive natural gas pipeline system covering more than 7,000 miles. The size and diversity of PetroChina's operations in the nation's protected energy market bodes well for the company's future. Chinese demand for oil is expected to grow by 5% annually for the foreseeable future -- and 5.4% in 2007, according to a recent report by the International Energy Agency -- while natural gas demand is projected to expand at an ever-faster clip.

In light of that, it helps that PetroChina recently reported 5.2% growth in oil and gas production in 2006. Management further expects annual production increases of at least 5% through 2010. This growth in production -- which will primarily come through overseas acquisitions and increased domestic natural gas production -- should enable PetroChina to post above-average profit growth going forward, and generate enough cash flow to increase its already-healthy dividend payout, which currently yields more than 4%.

Petroleo Brasileiro, more commonly known as Petrobras, is the dominant energy provider in Brazil. The state-owned company controls all oil and natural gas production facilities in the country, producing an average 2.33 million BOE per day in 2006. Petrobras has 11 refineries throughout the nation, with a capacity of roughly 2.1 million barrel per day, representing roughly 98% of the country's refining capacity. It distributes its products through a network of more than 7,000 gas stations.

Even more so than PetroChina, Petrobras should benefit from its dominant position as Brazil's sole energy producer. The country's accelerating economy is expected to drive demand growth at a 4% annual clip through 2010.

Petrobras is well-prepared to satisfy this demand. It expects to increase annual production by an average 6% over the same period. Indeed, management forecasts that the company will actually become a net exporter in 2010, to the tune of 300,000 barrels a day. Given that Petrobras uses incredibly conservative numbers for its projections of future crude prices, I believe that the company's profits will likely exceed analyst expectations going forward, and that management will use excess cash flow to both pay down debt and increase its current 2.7% dividend yield.

All in all, I believe that shares of PetroChina and Petrobras are likely to outperform the Western majors over the long haul, and that investors with a multiyear horizon should consider adding to their positions in these emerging-market oil giants.

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Fool contributor Will Frankenhoff is enjoying his time writing for The Fool more than reading
The Financial Times, rooting for the Jints, or taking a nap. He welcomes your feedback. Will does not own shares in any of the companies mentioned above. The Fool has a disclosure policy.