The Canadian Business Council (CBC) Abu Dhabi organized the first virtual meeting of the Communities of Interest (COI) – Oil and Gas Sector chaired by Dhia Hussain, Director and Head of Business Services in CBC Abu Dhabi with three invited panelists in the oil and gas field. The guests were Dr. Patrick Allman, CEO of DanaGas, Michael Mezei, Business Partnership Manager of Packers Plus, and Julian Lambert, General Manager of Copperleaf Technologies ME. The meeting held on 20 July 2020.
Mr. Hussain has introduced the panelists and the main discussion points on the agenda regarding recent and future oil prices, upstream production status, and oil refiner’s situation. He started the discussion with an announcement made by Wood Mackenzie Company saying that this year the money spent on upstream is decreased by $130 billion comparing to the pre-crash view outlook on investment and will cut further by 530 billion up to 2025. Besides, foreign direct investment is estimated to decrease by 50 billion because of project delay and cost-efficiency measures. Mr. Allman responded to Mr. Hussain's statement with the recent trend of the oil barrel price. In April the price of oil reached 20 dollars which is a two-third reduction in the actual price. Hence, such trends have had a big impact on the oil business; they were forced to adjust the capital expenditures of the year by 75 percent, delay projects, cut operating costs by 20 percent, and decrease manpower by a third to make up on some of the financial loss. Also, he emphasized that depending on the flexibility to get staff and supplies they may postpone upstream activities such as drilling even beyond 2021. Moreover, Mr. Mezei mentioned how travel restrictions have limited the field specialist to run their jobs which resulted in slow operations and unbalanced working hours for some of them.
On the other hand, Mr. Lambert expanded on the sustainability aspect of the oil business saying that “sustaining aging assets is about growing production on existing plants”, having capabilities of new technology and new security and enabling operators to optimize that space so they maximize the return on investment. He suggested that having a powerful software solution driving that space would provide benefits to manage unexpected crises such as the COVID-19. Mr. Hussain then started to discuss studies regarding the downstream saying that according to FG Energy jet fuel demand has fallen by 23 percent because of flight restrictions. “UAE alone accounts for more than 30 percent of jet fuel oil consumption” which is 2.5 percent of the global demand on refineries. Meanwhile, refineries are shifting to gas and diesel oil if this continues longer. Mr. Hussain asked the guest speakers on how to improve the refineries process. Mr. Allman focused on demand related issues since this was his field of expertise saying that the demand for jet fuel might not come back as it was last year much before 2024. Alternatively, the demand level might never return as it was in the last year since people got used to the remote meetings. Therefore, traveling for business purposes is going to decrease if people continue with remote methods which naturally going to reduce the demand on jet fuel almost permanently. However, traveling for tourism purposes is likely to make up on that reduction in fuel demand once a vaccine is approved and everyone is immune from the Coronavirus. In his opinion, gas and diesel have a fruitful future since currently people in China specifically prefer to take private vehicles-which consume gasoline- over public transportation. In addition, corresponding to Mr. Hussain after question about the future of renewable energy, Mr. Allman emphasized that the possible high demand on gas in the future is because of its low cost, however, the climate change debate is taken seriously by governments hence there is also a future with “stimulus for renewable energy supplies going forward”.
Mr. Hussain moves the discussion mentioning Organization of the Petroleum Exporting Countries (OPEC) trend with reducing its production since 2016 by 5.2 million barrels per day but also having the issue with supply excess in the market. He then asked the guest speakers on shale oil fundamental development based on these facts. Mr. Allman responded saying that shale manufacturing will not be stopped unless the price of oil goes lower than 50 dollars per barrel. Hence, once the price of oil started to decrease significantly this year the US shale production started to shut down. Yet, according to him shale oil production is controllable and will be back once the price of oil returns to at least 50 dollars per barrels. More importantly, he mentioned how the price of oil in the future is unpredictable and might continue fluctuating because of issues with breakeven cost per share versus fiscal breakeven cost for the major oil producers. Mr. Hussain continues the discussion by asking Mr. Lambert on how can oil suppliers service companies plan their budget to sustain their business. Mr. Lambert suggested developing the company value framework link strategy to quantifiable metrics whereas each metric enables them to value each project in a different dimension. For instance, a project might aim to reduce production risks and another project might reduce safety risks hence together these two add value for the company in different dimensions. However, there are some project constraints to consider such as money, people's availability, and shutdown times. More importantly, companies have to “apply powerful optimization algorithms to reduce the budget while still maximizing returns”.
The meeting was concluded with live Q&A from the participants.
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About the Canadian Business Council Abu Dhabi
The Canadian Business Council Abu Dhabi (CBC) promotes business relations, commerce and investment between Canada and the UAE with a particular focus on the Emirate of Abu Dhabi. We provide opportunities for Canadian business executives in the UAE to meet on a regular basis and to exchange information about business opportunities. As a link with organizations in Canada, CBC Abu Dhabi is dedicated to the development of trade and corporate investment between Canada and the UAE and assist Canadian companies and business people who are establishing or contemplating to establish a trading base in this country. www.cbcabudhabi.com
Maryam Almansoori, Intern, CBC Abu Dhabi