Gartner’s senior research analyst Sam Olyaei speaks to Pipeline Magazine’s Nadia Saleem about the company’s new research on security investment and insight into the Middle East oil and gas industry security risks
Security services will continue to be the fastest growing segment in line with global trends, especially IT outsourcing, consulting, and implementation services, Gartner said in a new research. The growth for security services will be driven by ongoing skills shortages in the information security domain as well as increased awareness of threats.
In a region where oil and gas industry is critical to many local economies, convergence of operational technology (OT), Internet of Things (IoT), and IT is pushing many organisations to start considering how to handle the potential new security vulnerabilities created. This will result in additional interest to invest in security products and services to mitigate these new risks that traditional information security practices are not accustomed to, Gartner said.
What is Middle East’s portion of the global spend on cyber security investment in 2017? What is driving the growth?
MENA has spent US$1.8 billion in 2017 on security, seeing an 11 percent increase over the year before. Worldwide, there will be a total $86.4 billion spent on IT security in 2017. In MENA, we expect another double-digit per cent growth in the next two years, with risks driving the spending.
IT security risks are a primary driver of security spending in a majority of organisations, especially due to two main factors: an increased awareness of threats, and an ongoing skills shortage in information security. While organisations cannot control the threats, they can control the security risks to their own environment.
As a result, Middle East organisations need to implement a risk-based security program – especially addressing basic security and risk processes. Leaders need to invest in patch management, vulnerability scanning, centralised log management, internal network segmentation, backups, and systems hardening.
Meanwhile, security outsourcing is becoming the largest security service market in 2020, as companies, especially for SMEs that have smaller recruiting budgets and talent pools. The main cause of security outsourcing is that there is a massive talent shortage in security – leading to gaps in implementing security programs, gaps in coverage, stalled projects, and increased risk of breaches. To address the talent need, organisations will need to adopt new recruiting processes. However, with emerging technologies such as the Internet of Things requiring skills that do not exist yet, many organisations are turning to innovations such as advanced analytics, business algorithms, and machine learning to ramp up security processes.
In the convergence of IT and OT with the Internet of Things, and the Industrial Internet of Things, we are seeing both privacy and safety implications. For example, an incident in an oil and gas firm’s IT environment could cause the loss of some data records and potentially a fine. But an incident in the OT environment could potentially cause loss of life or a safety hazard.
What is the breakdown for the oil and gas sector specifically?
We don’t publish a figure for this breakdown. Middle East oil and gas companies are investing in cyber security solutions at a higher rate compared to the global average of oil and gas firms.
In oil and gas, where are most of the spending focused?
Most of the oil and gas spend is focused on protecting critical infrastructure, securing the convergence of IT/OT/IOT, incidents that if successful can force plant shutdowns, utility interruptions, monetary loss and even human hazard at its extreme.
However spend is mostly focused on perimeter security technologies. There isn’t enough investment in detection/response techniques nor is there in people and process.
Where are the vulnerabilities yet to be addressed?
Attackers are using exploits to gain access to critical infrastructure and sensitive data and most of these exploits are either commonly identified or released, or are have been known by the organisation for at least a year. Again the biggest vulnerabilities right now for oil and gas is in its critical infrastructure and OT environment.
What is the risk scenario - is it increasing, or becoming more sophisticated?
Threats are always on the rise. In the Middle East we see a combination of monetised and weaponised malware that spreads mainly through phishing and social engineering. The motivation behind these threats can be grouped into either Nation State Attacks/Entities associated with nation states that intend to destruct, or individuals that are looking for monetary value or ransom.
However, it’s important to note that the risk scenario is less about the external threats and more about the specific risks that an organisation itself faces. All enterprises should treat state threats as part of the usual advanced threats. While certain verticals and industries need more focused actions, much of being prepared for state-sponsored threats and ransomware comes down to best-practice level safeguards.
Ransomware can also be prevented across basics such as system patching; EPP updates, configurations, and extensions; endpoint detection and response solutions; network perimeter and segmentation; administrative and system protection; and backups.
At what level is awareness for cyber risks and how does the Middle East tend to approach it?
Awareness of cybersecurity risks/attacks is becoming better but the region still lags behind North America and Europe. Cybersecurity is still not a priority for executives/board members and is being treated as a function of IT when in reality it should be a business function.
Similarly, we are not spending enough on people and process. In this region specifically, we try to solve every problem with a technology or a product. We need to educate our people/employees, provide them with the right tools to succeed and formalise processes around these tools. Often times, it is not the lack of spend, but rather the lack of process that causes an incident to wreak havoc.
Tarek El Molla, Egypt’s Minister of Petroleum and Mineral Resources speaks to Pipeline Magazine ahead of the Egypt Petroleum Show in February about the country’s new oil and gas investment opportunities and new petroleum projects that will meet domestic needs as wells as make it an exporter and a regional energy hub
Can you summarise Egypt’s new petroleum and gas strategy?
The Ministry of Petroleum adopted a new integrated strategy in the petroleum, gas and mineral resources domains, in which its primary targets are ensuring energy security, fulfilling local demand requirements, achieving value-added and optimal utilisation of Egypt’s natural resources, in addition to raising human resources qualifications and efficiency.
The strategy consists of several axis that aims at narrowing the gap between production and consumption throughout a five-year plan, supported by short and long term plans by reforming the subsidies and managing energy demand, plus encouraging and attracting new investments in exploration and development domains. Fast-tracking development of new gas discoveries, enhancing infrastructure, developing petrochemical industries, diversifying Egypt’s energy mix and increasing its efficiency, transforming Egypt into a regional hub for trading and exchanging gas and oil, restructuring the petroleum and gas sector in addition to developing mineral resources.
To ensure the success of the strategy’s goals, we are currently implementing the petroleum sector’s Modernisation Project, which aims at realising the petroleum sector’s full potential by 2021 as a sustainable development engine and a role model for the modern Egypt.
What are the factors behind the restoration of the oil and gas upstream agreements in Egypt? And what are the new opportunities in the domain that EGYPS 2018 participants should be aware of?
Signing of new agreements came to a protracted halt for three years due to the challenges the country experienced in the aftermath of the 30 June 2013 revolution. Recently, Egypt has witnessed the inflow of major investments from IOC’s operating in the country due to the political stability and solutions implemented by the petroleum sector to incentivise our partners into pumping more investments.
These solutions include a commitment to payments of IOC’s arrears as well as including investment-attracting clauses in new agreements that create stability for all parties.
Due to these solutions, the petroleum sector succeeded in concluding new petroleum upstream agreements and increasing investments in developing discovered fields which in turn led to achieving huge and promising discoveries in the Mediterranean.
We’ve signed 83 new upstream agreements during the recent period with investments valued at about US$15.5 billion.
There is no doubt that producing areas in Egypt have enormous and promising oil and gas potential. For example, the Mediterranean has witnessed consecutive success stories of natural gas exploration and production in offshore deep water.
We still aspire to achieve further gas discoveries in this region for its distinct potentials in different geological layers or in the onshore Nile Delta, Western Desert and Gulf of Suez areas, where we aim to intensify our exploratory activities in a way that leads to achieving new discoveries, which in turn will bolster the production of our petroleum resources.
We continue to review available areas at the Western and Eastern Deserts and the Suez Canal along with taking the needed procedures preluding to offering the areas in international bid rounds for investors interested to invest in oil and gas domains in Egypt.
The exclusive economic zone at the Red Sea will be of interest to investors in the exploration domain, where we intend to offer the first upstream bid–round in the Red Sea during 2018, based upon the results by specialised companies in aggregating geological data for that region.
Out of the Ministry’s interest in attracting more investments, the petroleum sector’s development and Modernisation Project includes a work programme with specific mechanisms dedicated to attracting more investments through the development of the bidding system in the exploration domain, simplification of procedures, and the shortening of timelines to create an attractive investment climate in the petroleum sector.
What is the significance of the refining and petrochemical sectors?
We believe the development of the refining industry will achieve some of Egypt’s vital objectives such as bolstering fuel supplies, meeting the growing domestic demand of petroleum products (gasoline, diesel, LPG) and reducing the pressure on foreign currency.
Developing the refineries is one of the main axis of the programme of transforming Egypt into a regional hub for trading and exchanging oil and gas. Therefore, we are currently implementing an ambitious work programme to develop and upgrade the efficiency of refineries, which includes the establishment of new refining projects and development of existing ones with investments of over $8.2 billion in Cairo, Suez, Alexandria, and Assiuot, in order to increase the efficiency of domestic refining capacities.
During 2018, the largest project in the refining industry, the Egyptian Refining Project in the Mostorod region in Cairo, will be completed with investments of over $3.7 billion, while the rest of the projects will be completed successively.
As for the petrochemical industry, it is the driving force of development that contributes to maximising the value added of petroleum resources, along with providing the products and materials on which complementary industries are based. It provides a wide domestic production of projects needed by the Egyptian market, as well as direct and indirect job opportunities.
Egypt possess all the factors needed for a distinct petrochemical industry at the Suez Canal in cooperation with the Japanese to set up the project in the economic zone of the axis of the development of the Suez Canal with investments exceeding $3 billion. It is the only complex being developed in the region in cooperation with EGPC and Tsu Shou, in the establishment of such major projects.
It is planned to complete the detailed feasibility study of the complex by the end of the first quarter 2018 and to be put on the production map by 2021, producing about 3.5 million tons per year of petrochemical products; propylene and ethylene derivatives.
Part of its production will be used to cover the needs of the domestic market, and export the rest to global markets, which will increase the State’s economic return from such a large project.
There are also projects under study and development namely propylene and its derivatives at the expansions of Sidpec Co, ammonia and its derivatives at ANRPC co., and formaldehyde and its derivatives production project. Furthermore, the second phase of the project will increase ethane extraction of the Western Desert Gas Complex.
What are your ambitions for the second edition of EGYPS?
Organising the second edition of EGYPS on Egyptian grounds is considered a significant and leading step for all major players in the oil and gas industry whether regionally or globally to participate in a unique industry gathering to discuss the future of the petroleum industry in Egypt, taking a closer look on available investment opportunities in all related activities of the industry, as well as a bonding platform for Egypt with its oil and gas resources development partners.
Personally, I aspire that the second edition of the Egypt Petroleum Show will deliver a rich and effective discussion opportunity that achieves aspired goals and to present successful models and experiences that serves the development of the petroleum and gas industry in Egypt as well as bolstering the efforts of modernising this vital sector.
Khalid Bin Hadi, senior executive vice president and head of Oil, Gas & Petrochemical, at Siemens Middle East speaks to Pipeline Magazine’s Nadia Saleem about the impact on the oil and gas industry through digitalisation
How important is digitalisation for Middle East oil and gas industry to drive efficiencies and sustainability?
Digitalisation is very important to oil and gas companies in the region, as it delivers tremendous benefits. Over the last ten years, Siemens has invested over US$8.5 billion to make digitalisation a core part of its own business transformation.
What role can digitalisation play in enhancing operations for oil and gas firms?
Siemens can provide customised solutions and services for the entire lifecycle of oil and gas companies’ operations. In the current oil price environment, driving CAPEX and OPEX down is keeping the industry awake at night. Customers need long-term solutions to maximise production from existing assets and develop new resources. Technological innovations and solutions for upstream, midstream and downstream applications, with modular solutions for both brownfield and greenfield projects, can significantly cut costs and substantially enhance quality and safety.
How efficient is investment in this direction amid volatile and low oil prices?
In a challenging oil price environment, the oil and gas industry players need to adjust to new realities. Innovative solutions and technologies are crucial to bolstering safety, increasing reliability, driving efficiency - and contributing to the Middle East’s energy development and socioeconomic growth. Oil and gas will remain the backbone of the global energy supply for decades to come. But to keep up demand and sustainable operations, adopting innovative technology is a must.
What tools/technology is Siemens working on to advance these efforts?
We are continuously developing new technologies and solutions to address our customers’ challenges. One exciting development in this area is ‘Marine Image Processing’. We know that a significant amount of the world’s gas reserves is located below the sea floor. Siemens has brought together image analysis technologies used in medicine, so they can be used to detect sources of oil and gas below the sea floor. The result is that the software can be better than the experts. This is new prototype software and it could soon make oil and gas exploration cheaper and more efficient. Considering that survey vessels can cost tens of thousands of euros per day to operate, using the new tool to search for oil and gas will not only be more efficient but will result in substantial savings. Another important digital potential for oil and gas companies is seamlessly integrating data to enhance operational efficiency and safety in offshore environments. We provide automated process analytics and software tools to collect and prepare data. This supports improved decision-making, helping reduce operational costs and expand the lifespan of equipment. These are only a few of the innovations that can be useful in the industry and we have many others.
What are the key challenges in regional oil and gas companies adopting digitalisation?
One of the main challenges, as companies adopt digitalisation and become more connected, is keeping their assets secure. At ADIPEC, Siemens will show its full portfolio of products and solutions aimed at keeping critical infrastructure safe from cyber security threats, taking customers on a journey which brings maturity to their cyber enterprise.
What role can ADIPEC play in informing and advancing this industrialisation shift?
ADIPEC is an important platform for regional and global oil and gas companies to discuss industry challenges as well as the opportunities presented by digitalisation. At ADIPEC, for example, Siemens will be demonstrating how digital technologies can address cost, efficiency and security challenges in the sector. With the right combination of solutions, services and products, companies can boost productivity and competitiveness and increase safety and reliability while cutting costs, even in an environment of low oil prices.
Philippe Crouzet, chairman of the management board at Valloureec, speaks to Pipeline Magazine’s Nadia Saleem about the company’s new direction in the Middle East
What is the significance of the Middle East market for Vallourec’s global business?
We are positioning the Middle East at the centre of our policy and strategy as well as investments because we consider the region to be committed to growing at a consistent level, which is important to us.
The policies of the governments in OPEC as well as NOCs in this region have shown more continuity and been much more consistent compared to others. They have continued drilling here, while many IOCs have reduced capex considerably.
We are talking about hundreds of million dollars in investments by the NOCs in the Middle East, this creates stability and continuity to grow our business here. We bring products from Europe, Brazil, and China and finish the production in the GCC because it is the centre of the most resilient oil market and the most committed to sustainable growth.
We are in close communication with NOCs in the GCC and we are developing long-term strategies with them. That is why we have decided to locate our Asia and Middle East regional offices in Dubai.
You’ve recently signed an agreement with Badr El Din Petroleum Company (BAPETCO). What other such opportunities are you pursuing?
Tendering activities by GCC operators are ongoing and there is more to come. Saudi Aramco has quarterly tendering with plans for mega-tenders for years to come. We respond to these tenders and are hopeful of success in the future.
Other opportunities here include ADNOC and Kuwait Oil Company’s multi-year tenders.
We believe we have the unique opportunity to supply for the whole chain.
Where in the Middle East do you see opportunity for growth in the current challenging market?
Gas is a top priority for all our customers and this leads them to look for tight gas as well as oil. We have a great experience there, being the leading supplier for tight oil and gas in North America. Offshore drilling for gas is as well one of our specialties – for our customers, this is new here and an opportunity for us.
It is a way for them to ramp up production and for us to increase our footprint.
Secondly, GCC customers are willing to manage their capital much more efficiently now. This was not a priority before when cash was abundant due to high oil prices. We can bring many solutions that we have developed globally for our customers to manage inventories and reduce bulk capex.
These arguments were sort of out of the picture in this region before, but even Saudi Arabia is raising debt financing and they are concerned about how to deploy capital.
Additionally, our customers want to keep growing their downstream business and be less of a raw product supplier. We see business growing in that area, with more demand for pipes and our distribution expertise.
What sets Vallourec apart from others? What is your core strength and advantage?
As Vallourec, we are able to bring more value to our customers. Firstly, we bring competitiveness. We have restructured our business to concentrate on the most valuable assets in Europe and we have added new capacity in China, precisely designed and dedicated for customers in the Middle East.
So it is Vallourec’s fully-owned Chinese products that support Middle East NOCs. This is supporting our regional offices in Dubai, Abu Dhabi and Dammam, Saudi Arabia, where products from Brazil and China are finished.
Our second advantage is product innovation, which itself has two aspects: we offer our customers a wide range of drilling products and we are capable of manufacturing those products in the region, where localisation is more important.
Thirdly, we plan to support our customers in the region by extending our services offering. This is new to GCC but growing rapidly in other regions. NOCs are considering refocusing their resources on the core business of production as well as downstream. We are increasingly offering a package that includes not only our products, but also services to manage their inventories. This is something our GCC customers are considering for more value extraction.
We are also trying to encourage front-end innovation to better understand on what customers are struggling and provide new solutions.
Are you having to specialise products for GCC customers?
We have industrialised products for Aramco in our Dammam facility on their request. These are products required for drilling under the city of Dammam.
These products were originally designed for United States shale, but we have expanded them to Indonesia and now the Middle East. This shows our production setup is world class.
There is higher demand for specific products from NOCs in GCC because they have higher technical requirements now in order to reach the same production level as before. Oil is not that easy here anymore and the maturing fields demand EOR as an example. Additionally, sands become more corrosive over time, so people here are more aware of the environment and corrosion rates.
Are you noticing new industry trends in terms of contracts/procurement?
Regional clients are increasingly looking at long-term contracts to facilitate an integrated and optimised full value chain.
Typically, NOCs would work on one-year frame agreements, but large inventories are a concern for them because they are looking to reduce blocked capital by shortening the supply chain.
We are working with NOCs to see how we can package the products and services to deliver them when they are really needed. This will provide better visibility and require less capital.
Also, our customers are looking to optimise their assets and pipes are an asset. This is in terms of design, cost, and use of assets. That is what we can bring to the table for our Middle East customers to integrate into their supply chain.
Rebecca Liebert, CEO of Honeywell UOP, spoke exclusively to Pipeline Magazine’s Julian Walker about the importance of building innovative technology and why they had such a strong 2017 in the Middle East with a series of project wins.
As the dust settles on 2017, Rebecca Liebert, who was on her fourth visit to the Middle East, can feel a sense of real achievement at Honeywell UOP, a licensor of refining and petrochemical process technology, could boast a string of wins right across the region from Saudi Arabia to Jordan and Kuwait throughout the year.
Rebecca took over as president and CEO of Honeywell UOP in April 2016 right in the middle of the oil industry’s downturn which only just started showing green shoots of recovery at the tail end of 2017.
Liebert said: “We really spent the time during the downturn thinking and building for the future. We built upon the Honeywell Connected Plant concept during the downturn with the launch of our Connect Plant Services (CPS) which is part of Honeywell UOP’s cloud-based services that anticipate operational complications and offer real-time solutions.”
She added: “It was a challenge sailing through the choppy low oil price environment. We tried to be really smart in how we were investing during the downturn so that we could come out of things stronger. We have been focused and believed that integrated refinery and petrochemical complex was going to be the way of the future.”
Honeywell UOP’s focus on innovative technologies that could enable greater integration is certainly paying off in the Middle East.
“This year we launched our energy efficient LD Parex™ aromatics complex, which dramatically lowers energy, CAPEX and OPEX versus other alternatives. This has been a big hit. We have just won the Kuwait Integrated Petroleum Industries Company (KIPIC) refinery deal that will have our LD Parex technology incorporated in it,” explained Liebert.
Honeywell UOP announced the KIPIC deal in November of 2017 which will see the Kuwait firm use a range of process technologies from Honeywell UOP for the expansion of its refining and petrochemical complex at Al-Zour, south of Kuwait City.
“The KIPIC deal really heated up in the 6 months before it was signed. They had a tight schedule and we made sure that we delivered on time to meet all the schedules.
We know it was tough competition and we are honoured to be partners with KIPIC and work on this big project. We were thrilled towin all three blocks. We think by delivering all three packages, we will be able to givethem all the efficiencies and economies they are looking for,” said Liebert.
She added: “We also spent a lot of time focusing on propane dehydrogenation (PDH) units and our own Oleflex™ technology. We, in fact, launched our next generation Oleflex technology, which will be incorporated in the KIPIC refinery.”
Strong year in the Middle East Honeywell UOP’s series of wins last year in the region are proof that its focus on innovative technology has paid off.
“I think we have had a strong track record this year in the Middle East. At the start of the year we signed up AL WAHA Petrochemicals Company with PDH Unit at its plant in Jubail that will use our IIoT- based CPS. We also signed a deal with Kuwait Paraxylene Production Co. (KPPC) to use our Connected Plant Services to improve the performance of its aromatics complex,” Liebert noted.
According to Liebert both projects are moving forward nicely.
“On top of that in May we signed an MoU with Saudi Aramco for the Honeywell Connected Plant in conjunction with the In-Kingdom Total Value Add (IKTVA) program. This is a Honeywell wide initiative. We are looking at the Honeywell Connected offering In-Kingdom to be targeted and fit for purpose,” she added.
In May, Honeywell UOP also won the Jordan Petroleum Refinery Company (JPRC) contract. Then in July, Farabi Petrochemicals Co. in Saudi Arabia announced that is going to go forward with a LAB complex in Yanbu to expand its production of biodegradable detergents.
In the UAE, Takreer (now ADNOC Refining) have a PDH unit that Honeywell UOP sold a couple of years ago that is now getting ready to start up and Honeywell UOP is doing a lot of service and training, including supplying the catalyst etc.
Liebert was impressed how quickly the Middle East region has come back as the market was fairly quiet.
“2017 has been focused on getting new technologies out and ensuring our customers understood the value of these technologies in the marketplace today. We will never stop that next-generation technology development,” Liebert insisted.
She added: “As I look to next year the Honeywell Connected Plant is going to continue to be a big part of what we are doing. We have built it out as we started with the core UOP process technology and building out solutions for those platforming units. Now it is time to go to the full complex with things like crude distillation units and sulphur units. These aren’t technologies we normally supply ourselves. So we are partnering to bring in those non-UOP licensed technologies into our solution.”
Looking to next year and beyond, Liebert said that a big part of what Honeywell UOP will be doing is continuing to build up people training and service as customers are asking more and more for that.
“With the growth we are seeing in the region, there isn’t the human capital trained to run these plants yet. In Dubai, we have a dedicated training group that runs a series of training programmes.”
An area that Honeywell UOP wants to continue to innovate in 2018 is how they help project execution in the region.
“Actually a part of the KIPIC win was to integrate FEED into our license and schedule development so we are going to deliver a FEED package plus a process technology package. We expect to see more and more of this modular package route. We can typically cut significant time off the schedule as we have designed the units before. Wehave a lot of economies of scale and we can drive the modular solution at a much more rapid time frame. We think this can be a real innovator for the region to help speed up projects build time,” she said.
Bullish outlook for petrochemicals
Liebert is very positive on the outlook for the petrochemical industry.
“I don’t see any slowdown in petrochemicals in the foreseeable future. We are planning for peak oil demand to go into refined products in 2030’s. We think a lot of it will be taken up by petrochemicals and see huge potential for more integration of refineries.”
One area that will see a lot of activity in the interim that is going to drive refineries are clean fuels.
“We launched our ISOALKY, a new alkylation technology last year. It uses Ionic liquids alkylation as an alternative to traditional technologies that use hydrofluoric or sulfuric acids as a liquid alkylation catalyst. This technique will grow as more companies look to become greener. Honeywell UOP launched this technology in conjunction with Chevron, who is building a plant in the U.S. that should be up and running in a couple of years.
Turbine Services & Solutions (TS&S) was among the companies feeling the breeze of confidence arguably returning to the energy business - and the halls of ADIPEC.
The company added to that with news that it had delivered the first full life overhaul 50,000-hour service on a Siemens Industrial Trent gas (SGT-A65TR) turbine. This establishes TS&S as a world renowned centre for skilled turbine repair services in the UAE and broader Middle East.
TS&S was accredited last year as the first independently owned, specialised and independent MRO provider with the capability to support both the Industrial Trent WLE and DLE variants for Siemens, becoming the first non-OEM Trent MRO provider globally with this capability.
“We are proud we did the first overhaul of the Trent 60 Industrial globally. We are the only organisation outside the network of Siemens, authorised by Siemens. There are currently more Trents undergoing overhauls in our shop,” said General Manager Ali Alhosani.
Siemens and TS&S have cultivated strong ties since establishing a partnership in 2007 to build the full life overhaul capability on the Industrial Trent gas turbine. TS&S achieved this with the help of Siemens skilled engineers and technical support and training teams, headquartered in UK, over the last 12 months. TS&S engineers and technicians are now qualified to perform independently for future repair and overhaul services.
“We are building within the group synergies between Mubadala companies,” said Alhosani. “We don’t need to duplicate capabilities and equipment; this synergy building gives us a high advantage.” The GM also says TS&S has benefitted from the cost savings by operators in various verticals within industry choosing to repair rather than renew.
With much of the talk in the ADIPEC’s many panel sessions suggesting the price crisis has made companies work smarter, that repair scenario is set to continue.
“Everybody is cost cutting and this makes us benefit on maintenance, repair and overhaul - we are having an increase in our business and revenue.
“We feel optimistic this year. The business is growing at a steady pace. We have challenges; however we believe that we are going in the right direction.”
Ali Alhosani added: “TS&S is providing comprehensive integrated solutions. We are not only working on the gas turbine – it is our core business along with the rotating equipment – but we are going beyond that with our partners.
“We are working with our customers and providing customised solutions for them.”
The TS&S boss was confident ADIPEC could also bear further fruit for the company.
“ADIPEC is one of the right venues for us; meeting all the experts for new, innovative ideas, for serving our customers. We can see the OEMs, the customers and suppliers working together to overcome the situation.”
Alhosani said being part of Mubadala has greatly assisted TS&S towards positive results, with more to follow.
“Mubadala is a pioneering investor that is accelerating the UAE’s economic growth with an innovative approach to strategic investment.
Khalifa Al Suwaidi, executive director, Refining and Petrochemicals, Mubadala Investment Company talks about driving expansion in the petrochemical sector
Following the merger how has the rest of 2017 been for Mubadala?
As a company, we have had a very exciting start to business as a new company. We have already been engaged with some substantial investments and we have healthy global portfolio.
Our global refining and petrochemical portfolio spans the petrochemicals supply value chain from the US, to Europe, through the Middle-East to Japan. The value of the portfolio is over US$41 billion and comprises 32.7 per cent of the Mubadala Investment Company.
In petrochemicals, we are one of the top five producers in the global polyolefins market and companies in our portfolio include the 4th largest ethylene producer in the US. The E&P operations produce 500,000 barrels per day.
We are the leading global producer of LAB - linear alkyl benzene (LAB) - the most common raw material in the production of biodegradable detergents (Cepsa).
Overall, I think the market is buoyant. Between 2007 and 2017, 212 new petrochemicals producers entered the industry, this is a 20 per cent increase, which is surprisingly high. The growth in the petrochemicals market is set to outstrip the growth in global GDP. We see a lot of diversification and change and there will be many investment opportunities.
How is Mubadala approaching the need to integrate its business and what are other companies doing?
For Mubadala, the main challenges around integration vary across the petroleum and petrochemicals platform and depend on the markets in which we operate. If we look to Japan, it is a mature market, which means that the focus is on diversification of products and applications while improving performance at plant level.
If you look to other parts of South East Asia, they are developing markets, so the focus is on supplying enough base chemicals to support their economic growth.
Thinking strategically, we are very clear that business sustainability and profitability will come from integration across the whole value chain.
The producers are focusing on going further downstream and working closely with their customers to make the applications and compounds they require. Future growth will come from companies who build partnerships based on scale, petrochemical experience and technology.
What are your thoughts on market expansion?
China and India will continue as significant drivers of demand across the industry. Pakistan is also a very interesting market, where our own asset Parco is expanding their midstream and refining business.
As a market, Europe is a mature market. Companies are seeking to expand their portfolio by considering more speciality chemicals. In North America, the expansion of shale gas is creating new opportunities based on competitive feedstock, and all the indicators are that it will continue to be an interesting market. We will see these trends emerging in other regions as they grow and mature.
We are very focused on applying our learnings from developed markets to developing markets, and this knowledge sharing is at the core of our business.
What is driving the change in partnerships between IOCs and NOCs?
The change in the relationship between IOC and NOC activity has been very interesting to watch. Over the last two decades, we have seen an increase joint venture activity between the two. Traditionally I think the NOCS have been slower to move downstream and diversify.
Today, this mentality is changing. NOCS are starting to understand that moving downstream helps them capture more value. It also enables them to sustain business through periods of price volatility and creates a natural hedge to their business.
When crude was high above $80, $90 or even $100, perhaps there was not much need or focus for diversifying portfolios. Some NOCS did not see or understand the market potential in petrochemicals. Now we see NOCS working with IOCS to develop technology and access new markets; this is a significant change in market dynamics.
Looking ahead what are the things that petrochemicals companies need to focus on to grow?
Two things spring to mind: the first is the investment in R&D and adapting rapidly to change. Investment in innovation is important because over the last decade producers have been very focused on chasing the demand for base chemicals in the Chinese market, and not enough capital has gone into R&D. This is an industry trend and we need to drive innovation to create the new applications and sophisticated products required by the market, in partnership with our customers. As an industry, we need to move quickly. I sense a disruption is coming to the petrochemicals market.
Think of all the innovators and inventors who are working today to design the next wave of smart products and the devices required for the growth of the automotive, infrastructure, medical, and other industries. The petrochemicals industry is vital to creating the applications that will make these inventions a reality.
Arab Development Establishment (ARDECO) is one the UAE’s foremost diversified business enterprises with operations spanning a broad range of industries.
Established in 1980. ARDECO initially concentrated on the oil and gas and the power and water sectors. Subsequently, it diversified into a variety of other fields including petrochemicals, real estate, contracting, manufacturing and services.
In the oil, gas and petrochemical sector, the group is active in mechanical, engineering, construction, electrical.
The group has consistently experienced significant growth in its operations through active representation and joint venture tie-ups with foreign companies, internal growth, establishment of independent operations, and acquisition of other UAE business.
Through emphasising on quality in its operations and a policy of Partners for Success with its principals and other business partners, ARDECO has positioned itself prominently in every field in which it has chosen to operate.
ARDECO Chairman Yousef Mohammed Ali Al Nowais in an interview at ADIPEC said the show was an unprecedented success for the company. “The high turnover of people, the huge level of interest to build the oil, gas and petrochemical industry is tremendous,” Al Nowais said.
Abu Dhabi National Oil Company (ADNOC) has been a great support for the development of small and private oil and gas companies in Abu Dhabi, Al Nowais said, while its growing transparency, interaction and willingness to cooperate is a positive indicator for the development of Abu Dhabi’s economy.
“If we continue in this rhythm, we will see great growth in Abu Dhabi in general and particularly in the oil and gas sector. ADNOC is the economic driver for Abu Dhabi - if they move forward, we see everything move ahead in the industry. This will enhance the industry and encourage entrepreneurs to invest in order to enrich the private sector and this is what we need for increasing recruitment of young Emiratis,” he said.
ARDECO’s Chairman believes that despite the oil industry having suffered through a sharp drop in oil prices between June 2014 and Feb 2016 that wiped out half the value, the government has a clear plan for the economy and it is placing the private sector at the forefront of being a driver for growth. “Sometimes you need to slowdown, reorganise and think about how you will relaunch in an industry that has seen oil prices decrease by more than 50 per cent. But we have seen positive indicators. Abu Dhabi has a mind-set that the private sector should move the economy in Abu Dhabi forward,” he said.
“We look at the public sector to have a better and fruitful dialogue with private sector. Because both need to work together and be able to move the economy forward,” he said.
He stressed on the need of cooperation with the private sector to take risks and employee young Emirati nationals to move the economy forward.
Al Nowais said that he is looking forward to work on more ADNOC projects as they are tendered to enhance the economic growth of Abu Dhabi.
Manufacturing will be an important aspect of oil and gas industry’s growth, Al Nowais said, adding that if business plans are stable, then manufacturing industry will fuel the growth.
“Manufacturing should be the industry to feed the oil industry, petrochemical or any other area in Abu Dhabi. Concentrating in the industry with sustainable projects will definitely be important,” he said.
Alexander Medvedev, Deputy Chairman, Management Committee, Gazprom spoke to Pipeline Magazine’s Julian Walker about his company’s cooperation with Saudi Aramco, further global expansion plans and the future LNG market
Can you share with us, in terms of your future Middle Eastern strategy, how important was your recent Memorandum of Understanding with Saudi Aramco? And are you looking to expand your Middle Eastern operations?
Middle East promises to become one of the main drivers of the global gas demand growth. Gazprom as a leader of the gas industry, of course, is interested in developing the business in this region. The Memorandum of Understanding that we have signed with Saudi Aramco is one of the important steps towards implementation of this strategy.
Is the MoU indicative of a wider move across the industry towards large firms forging partnerships?
Today’s market brings new challenges to the producers. New market environment requires new approaches. Cooperation of the industry leaders could bring new synergy to the projects boosting their further development. Gazprom is always open for partnership with other industry players. We believe that joint efforts can help us all create new opportunities for business success.
How is Gazprom adapting to the new energy landscape? And how are you looking to drive growth in the coming years?
Gazprom always tries to meet the needs of our customers adapting to the changing market conditions regarding existing contract terms, as well as in creating brand new models of cooperation. I think our recent business results, especially record gas sales in Europe, speak for themselves. We are looking to the future with optimism.
You have signed a contract with Ghana National Petroleum Company to supply gas. Which other countries will you be looking to as new markets?
Gazprom is closely monitoring the market development around the world. We consider markets of South-East Asia, Middle East and Latin America as the most promising for LNG supplies.
What is your strategy to compete with the potential over-supply of LNG in the coming years?
Many analysts already speak about the glut of LNG on the global market. But even in these conditions, our trading arm Gazprom Marketing & Trading signs new interesting contracts with promising consumers. That’s why I would avoid speaking of any critical impact of the current situation on our LNG trading activities. As far as the influence of LNG glut on Gazprom’s pipeline supplies to Europe is concerned, there is no such impact at all. Our export pipelines are fully loaded and European regasification terminals are used just for one third of their capacity. Speaking about Gazprom’s strategy, Gazprom does not intend to rush into any price wars. For Gazprom, the ultimate goal is to maximise revenues for our shareholders including Russian State.
Pipeline Magazine spoke exclusively with Salem Bin Ashoor, General Manager and Chief Representative, BP UAE about the significance of BP winning a stake in Abu Dhabi’s lucrative onshore concession
Can you give an overview of BP’s presence in UAE and of the company activities in 2016?
We have shareholdings in the country’s operating companies including joint venture partnerships with Abu Dhabi National Oil Company (ADNOC) and shareholdings in Abu Dhabi Company for Onshore Petroleum Operations Ltd (ADCO) (BP share 10 per cent), Abu Dhabi Marine Operating Company (now called ADNOC Offshore) (BP share 14.67 per cent), Abu Dhabi Gas Liquefaction Company (now called ADNOC LNG) (BP share 10 per cent), and the National Gas Shipping Company (now called ADNOC Logistics & Services) (BP share 10 per cent). We remain committed to make important contributions to Abu Dhabi’s operating companies, bringing BP’s global scale, expertise and technology that make us the right partner for the long term and continue playing a key role in Abu Dhabi’ oil industry for many years to come. Abu Dhabi is important for BP. Our current production from Abu Dhabi is around 260,000 barrels of oil per day, which is a good contribution to BP’s overall portfolio. Abu Dhabi is also an important investor in BP with the Abu Dhabi Government holding a 2 per cent stake in BP.
At the end of last year BP secured an innovatively structured deal to gain access to Abu Dhabi’s lucrative onshore concession. How was this conceived and to what extent will these types of structures come to dominate the sector?
First of all, I’d like to say how pleased I am that the renewal of our partnership in the ADCO concession continues BP’s long relationship with Abu Dhabi that stretches back to the 1930s. It marks a new phase in our relationship both with Abu Dhabi and in particular with ADNOC as long-term “strategic” partners.
We understand the responsibility and value the trust placed in BP by ADNOC, and the leadership of the Abu Dhabi government in awarding part of this concession to us. In terms of its structure, I see it as a win-win for both parties. BP has chosen to be a partner and an asset lead for very material and cost-competitive oil resources, while ADNOC has become an important strategic shareholder in BP. I believe this is an innovative and historically significant deal that benefits both companies.
A big portion of BP’s reserves are situated in the Middle East (as of last year, 47.3 per cent). Considering that, how important a role does the UAE play in BP’s regional portfolio?
BP is the top International Oil Company (IOC) investor in the Middle East & North Africa, according to an important Wood Mackenzie report in 2016. BP is also managing over 5.5 million barrels per day in the Middle East with our oil company partners, and we are on a journey to producing over 1.5 billion cubic feet of gas per day in Oman. Our shareholdings in the country’s operating companies include joint venture partnerships with ADNOC, ADCO (now called ADNOC Onshore), ADMA (now called ADNOC Offshore), ADGAS (now called ADNOC LNG) and NGSCO (now called ADNOC Logistics & Services).
What does BP bring to the National Oil Companies and how is BP working to maximise recovery from assets here in the UAE?
Technology and innovation is a key player in the oil and gas industry, particularly here in Abu Dhabi, with a target to achieve recovery factors of 70 per cent from its world-class oil fields. We are working in partnerships with ADNOC and our Joint Ventures to maximise resource discovery and recovery through the application of our global expertise and upstream technology.
This includes the need for smart and tailored technology to maintain the plateau production rate in giant fields, such as enhanced oil recovery (EOR) techniques and technologies. This will be required to achieve the stated goal, coupled with the right expertise and experience to execute these technologies efficiently and in a commercially viable way. We can see the opportunity in the long term to raise recovery rates from oilfields in Abu Dhabi to 60-70 per cent from current levels of around 30-40 per cent.
BP is a leader in deploying EOR schemes and has developed several proprietary technologies, such as low salinity water injection (LoSal), to help recover more oil from reservoirs. Additionally, BP is a leader in water flood technology, a type of enhanced oil recovery (EOR). We are maximising recovery from some of the world’s largest reservoirs and from maturing fields such as in Azerbaijan, Iraq, Russia and the US.
Anatol Feygin, executive vice president and chief commercial officer, Cheniere talks exclusively to Pipeline Magazine about the future of the LNG industry and why Asia will continue to be a key growth engine for the industry
The global gas and LNG markets have been going through an enormous transformation. In 2016, Cheniere started long-term LNG exports from the lower 48 states, something that was unthinkable just 10 years ago, and completely changed market dynamics, trends and business deals.
The US has many LNG projects that aim to reach final investment decision (FID) and are trying to get underway by 2020. In your opinion, over the next 5 years how many projects do you see reaching FID and how do you see the global market evolving?
The US currently has 17 LNG export project proposals filed with FERC or MARAD, representing a total capacity of over 200 million tonnes per annum (mtpa).
This is equivalent to just over 75 percent of the total LNG trade in 2016. So it is clear that not all of these projects will progress. We believe that the advantage lies with the expansion projects, with existing tanksand marine infrastructure providing a cost advantage over green-field developments.
Also the existing projects already have a trade relationship with the buyers and in our case we have already proven ourselves in terms of project delivery and ongoing operation at our Sabine Pass LNG project. This is both in terms of the LNG plant being built on-time and on budget and in terms of sourcing the gas supply for the plant. So we would contend that few of the new US projects are likely to reach FID over the next 5 years, but obviously the market will decide.
We see the global market evolving rapidly at present and that speed of change only looks set to increase as US volumes ramp-up over the next few years. The destination-free LNG volumes from the US will drive an increase in liquidity in the LNG trade that will help it become more resilient to market shocks and more responsive to buyers’ needs. However, I also think we are still quite a way from being a fully commoditised product, like crude oil for example.
When will the second wave of LNG reach the market? And how much more competitive can the sector be?
There has been a well reported slowdown in contracting from buyers in the last couple of years as they ‘digest’ the large amount of volume coming to market at present. However, market balances suggest new volumes will be required to meet ongoing demand growth early next decade. Buyers with a need for new volumes will need to take account of the four to five year lead time to commercialise and construct new LNG export capacity when they time their new commitments. This means that we should start to see some new commitments in the next year or two.
We believe the US, and Cheniere in particular with already permitted expansion capacity, can be very competitive in terms of both cost and speed to market. But that doesn’t mean that we, the suppliers, shouldn’t continue to make every effort to become even more competitive, so that we can firmly underpin our message to buyers and policy makers that gas is available, affordable and secure. This is something Cheniere continues to do as we review the potential of mid-scale trains for our current two sites.
The US and China have strengthened their relations and Cheniere recently opened an office in China. How much more demand do you see coming from China in the next 3-5 years? And do you believe we will see an increase in LNG imports from Asia?
We were very pleased to announce that Cheniere opened an office in Beijing in July.
Chinese LNG demand has grown rapidly over the past decade and this looks to be a very prospective market in terms of future growth. From first imports in 2006 it looks set to become the second largest LNG importer after Japan in the next year or two. It has been growing at around 2.5 mtpa on average over the past decade. We see that growth rate increasing, possibly more than doubling, over the next 3 to 5 years and probably well beyond that as China’s economy continues to grow, as it continues to urbanise and as it aims to improve urban air quality and control carbon emissions.
Asia currently accounts for just over 70 percent of all LNG imports. We believe it will continue to maintain this majority share as the overall industry grows. So Asia is not only set to continue to increase, but will continue to be a key growth engine for the industry.
Tell us about your stand?
Our stand represents the connection between Samsung Engineering services and contributions on the business side with ambition to bring a brighter and better future for clients, society and environment in our operating regions. We want to give emphasis on the importance which corporate social responsibly plays in our world. Therefore, we presented our business portfolio integrated with our efforts to bring a better future to society. At our stand, you can give back and bring knowledge to the children by donating books in your name. I would be honoured if the visitors gain interest in our efforts both on social and business side. With Samsung Engineering UAE
(SEUAE) as a major MENA hub, SEUAE plays a crucial strategic role in overseeing projects spanning North Africa to the Gulf Cooperation Council (GCC).
Therefore, we are looking to enhance our competitive edge by maximising the interactions between our global operation centres. Each centre has a distinctive role and a responsibility to increase the efficiency of project executions. In this respect, SEUAE plays a vital role as a middle office, managing risks, controlling profits and responsible for business developments.
Furthermore, Samsung Engineering is focused on our clients’ expectations and requirements, and we pride ourselves on building solutions in direct response to their needs. This is what makes us different, and what gives us a competitive edge. For instance, Abu Dhabi has set ambitious targets for its sour gas reserves. We can make a particular contribution given our expertise in sour gas processing. We always put our utmost efforts to introduce innovate techniques in our projects.
Orbital Automatic Welding machines for example have been applied to designated sites. These machines improve the production efficiency of pipeline larger than 30” and further reduce the risks of accident at site, through the automation process. We have already proven our capabilities with a number of flagship gas handling projects in the Middle East, such as the Shah Gas Development Package, a new, largescale green field gas project in Abu Dhabi for Al Hosn Gas, as well as the CO2 Capture & Injection Project and the Shaybah CPF Expansion GOSP Project for Saudi Aramco.
Our success in gas plant projects can be attributed to our process design and our analysis technology, which reduce the costs with high fidelity predictive modelling. Samsung Engineering also has special internal expertise allowing us to reduce replenishment costs and minimise energy use in gas processing.
Choong Heum Park President & CEO speaks exclusively to Pipeline Magazine about its focus at ADIPEC and why it is such an important show for the South Korean conglomerate
What are your aims at this year’s ADIPEC?
Samsung Engineering is pledged to bring growth to its partners with perpetual support, especially valuing and heavily supporting clients by participating in events such as ADIPEC. It is irrefutable that
ADIPEC is a great platform for knowledge sharing, innovation and showcasing our company’s capabilities across the globe. With growth and co-prosperity always a major goal to provide for our clients, we further want to show at this year’s ADIPEC that we are one of the leading and entrusted global EPC & PM companies operating in the Middle East on the one hand, but additionally bring sustainable development for the UAE and the Middle East region overall through several CSR programs on the other hand, which we have initiated and executed for our clients over the years. We have been an essential exhibitor at ADIPEC for several years and have been sponsoring this great event a couple of times, this year as a “Silver Sponsor”. Samsung Engineering is an ADIPEC veteran and belongs to this event and will stay actively involved as much as possible in every way.
Where are your key markets?
As mentioned before Samsung Engineering provides a wide range of services from EPC turnkey projects to FEED developments in this reason for major clients such as ADNOC.
The Middle East represents a large number of our projects globally. Samsung Engineering has tried to strengthen its relationship with existing customers there in order to win repeated business. Our major core market has been traditionally GCC counties such as UAE, Saudi Arabia, and extended to Kuwait and Oman. This is still very much the case with the vast majority of the firm’s backlog being in these two countries. The expansion of the Ruwais refinery is at the heart of Abu Dhabi’s plan to diversify its economy away from upstream extraction. Regarding FEED projects, we conducted the FEED development for the Borouge 4 project (a joint venture between ADNOC and the Austrian Borealis) based on the successful Borouge 3 expansion project, the largest integrated polyolefin site in the world, for which Samsung Engineering acted as an EPC contractor.
Britain and the UAE have a long and successful history in oil and gas and can look forward to a positive future, says UK ambassador to the Emirates, Philip Parham
How closely do the two countries’ oil and gas sectors work together?
The oil and gas sector in the UAE is now quite mature, and UK companies have been operating here since oil was first discovered in the 1930s. One of the original partners to the discovery was the forerunner of BP, and their tenure, 82 years later, has continued through their participation in the ADCO (now ADNOC Onshore) onshore concession - due to last a further 37 years. Partners in a maturing oil field will need to invest in the best new technologies and techniques in enhance oil recovery, an area in which the UK excels. It is our ambition to assist the UAE in maximising the recovery of incremental oil and to leverage our experience in exemplary HSE to help nurture and protect the natural environment of the Emirates.
What framework is in place for UK companies who want to expand into the UAE energy market?
Our Department for International Trade advises companies on international markets, introduces them to potential business partners and supports them with visit programmes, launch receptions, exhibition support and so on. We take a very much “whole of government” approach. Our embassy staff, across all our government departments represented in the UAE, are dedicated to working collectively to meet and exceed our global export target of £1 trillion a year by 2020.
We have a specific team in the embassy working for our Department for International Trade on oil and gas, nuclear, renewable and clean energy. They are on hand to provide advice to British companies operating in the market or wishing to enter it.
We also work with UAE-based importers, to find out what products and services they need to make their businesses more successful, with the aim to help them find UK partners and innovative, cost saving, effective, value-enhancing UK solutions. We have a free and anonymous online platform for sourcing from the UK called “Exporting is GREAT”.
We work to promote UK expertise through events in the UAE such as ADIPEC, the World Future Energy Summit, Abu Dhabi Sustainability Week and the IAEA Ministerial Conference on Nuclear Energy, which was held in Abu Dhabi for the first time last month.
What do you consider as the main energy opportunities available in the UAE to UK business?
Oil and gas is the foundation on which our energy trade is built. The UK will continue to be a dedicated long-term partner. The UAE’s enthusiastic adoption and development of clean energy, and its efforts to protect the natural environment, are very impressive. The UAE and UK can build real synergies in this area too. The UK of course enjoys rather less sunshine than the UAE, but we have researchers doing exciting things with nanoparticles and protective solar coatings.
We are developing commercial waste to energy technologies. And we have a strong record of advanced nuclear research, built on our experience of several decades of civil nuclear power in the UK. Masdar is already a leading partner in UK offshore wind installation with a current capacity of 5,355MW, bringing our total wind generation to 16,370MW - enough for nearly 11 million homes.
How important is ADIPEC to the UK’s energy industry?
ADIPEC is now widely acknowledged to be the largest oil and gas trade show in the world by most metrics, and is still growing year-on-year. Again this year, we have two pavilions for companies from the UK, each with around 60 companies - one managed by The Energy Industries Council (EIC) and one by Scottish Development International, who won Best International Pavilion at last year’s ADIPEC.
For the second year running, the Welsh Government will also be participating alongside the EIC. Some other British companies are here under their own auspices. In total around 200 British companies are participating – nearly 10 per cent of all the exhibitors. So, there’s no doubt how valuable ADIPEC is to the UK’s energy industry.
What can the UK’s businesses bring to the UAE’s oil and gas sector?
I have mentioned a number of areas where UK expertise, technology and manufacturing excellence already make major contributions to the UAE’s oil and gas sector. But a key focus is enhanced oil recovery techniques, to manage and optimise ageing fields as efficiently as possible. On the UK continental shelf, end-of-life field recovery is projected at an average of 46 per cent.
The adoption of suitable technology could result in up to six billion extra barrels being recovered from the North Sea, on top of the recoverable reserves of 20 billion barrels which are currently estimated to remain - which would mean the life of many North Sea fi elds being extended by an extra 10 years. This is the type of expertise which we can also bring to bear in the UAE with Emirati partners.
In the future, we are looking at spending AED 177 billion on decommissioning in the North Sea. This will stimulate corresponding supply chain development, which will be easily translatable to the Emirates when decommissioning is required here.
Dawood Al Qassabi, Head of New Technology Implementation, Petroleum Development Oman (PDO) spoke exclusively to Pipeline Magazine’s Julian Walker about the importance of technology for Oman’s national oil company
How important is technology for PDO?
Technology implementation is a key enabler in the company’s journey of cost control and unlocking production opportunities. Advances in technology mainly contribute to making things more efficient, and consequently faster and cheaper. Over 60 new technologies are being matured by the New Technology team with a trial success rate of over 90 per cent. Deploying new technologies after successful trials is being seamlessly progressed and achieving greater efficiency in PDO operations.
What areas are you most focused on?
Produced water management, flared gas recovery, energy efficiency and enhanced oil recovery (EOR) are the main focus areas of PDO.
On average, nine barrels of water are produced for every barrel of oil and so the disposal, treatment and back injection of this water are key challenges to manage and resolve. Therefore, PDO is actively working on executing a“3R-Pillar” strategy: Reduce, Reuse and Relocate. New technology is playing a vital role in realising this strategy. Water shut-off technologies (chemical or mechanical) at reservoir level are key to achieve the “Reduce” pillar, whereas treating the water for land disposal, steam generation and back-injection to the reservoir and for agricultural use is an essential requirement to make the “Reuse” pillar a success. The produced water quality and quantity vary across fields within PDO’s concession area and so it is important to map out and accordingly relocate the water based on each field’s requirements, as part of the efforts on the Relocate pillar.
As part of World Bank “Zero Routine Flaring by 2030” initiative, which PDO endorsed in January 2017, we are aiming to implement economically viable solutions to eliminate routine flaring as soon as possible and ahead of the 2030 target. This ties in with PDO’s commitment towards gas conservation and environmental sustainability, in general, to reduce our environmental footprint and impact.
Most of the energy PDO is consuming is for water handling and the operation of artificial lift systems. In this regard, PDO is executing a number of technologies/tools/ initiatives to reduce power consumption and therefore to save gas. Permanent Magnetic Motors (PMMs) have been installed on artificial lift pumps and energy efficiency monitoring tools are now part of some production stations in PDO.
PDO has come a long way in maturing its 132 producing fields and has already passed the “easy oil” primary recovery stage. We are now at the secondary or even tertiary recovery stage in some fields. Most fields are under water flood and some are under thermal, chemical and/or miscible gas injection, which means higher unit development costs to operate, and this is where new technology can add great value in reducing cost and maximising recovery. Steam, polymer, alkaline surfactant polymer (ASP) and miscible gas are being injected in some PDO fields either on a full-field or pilot scale.
What are the most important technology innovations coming out for the oil and gas industry?
Some examples of key innovative technologies which PDO is using are: Pipeline inspection and tank cleaning using robotics, rig-less artificial lift systems, multilateral well stimulation, geared turbines for hard rock drilling, pit-less drilling to reduce environmental footprints, micro turbines for flare gas recovery, assisted evaporation for reject water management and de-oiling polymer-contaminated produced water as part of water management.
What technology will you be showcasing at ADIPEC?
PDO aims to address key business challenges. ADIPEC presents us with a valuable opportunity to network with start-ups and leading technology providers and professionals in the oil and gas industry who can address these challenges through new technology solutions. So, for example, we will highlight energy efficiency, well productivity and water management issues.
We will also be showcasing our Miraah solar energy plant, which we are currently building with our partners GlassPoint Solar in Amal. The 1,021 megawatt facility will produce steam for thermal EOR by harnessing the power of sun to heat water in a huge greenhouse complex. Once complete, it will save 5.6 trillion British Thermal Units (BTUs) of gas a year.
Another energy-saving technology we will spotlight is our multi award-winning Nimr Reed Beds project, which has enabled the company to treat massive volumes of oilfield produced water from our Nimr field efficiently and effectively. By avoiding the conventional, energy-intensive disposal method of pumping water into deep aquifers under high pressure, the scheme is forecast to save around 24 billion cubic feet of gas over 10 years – a 98 per cent saving.
Djamel Idri, GeoMarket manager, Eastern Middle East speaks exclusively to Pipeline Magazine’s Julian Walker about proving Schlumberger’s drilling technology and integration capabilities
What is your outlook for the oil and gas sector?
With OPEC cutting production and global demand continuing to strengthen, we had hoped an international recovery was in sight. However, the complexity of the supply side where there are different dynamics across various producers and regions has come into play. Unfortunately, this is creating further oil price instability and is resulting in a stagnating global business environment. Our goal is to defy the gravity of the industry.
How have you fared in 2017?
As with most years, 2017 has had both opportunities and challenges. In terms of opportunities, we are fortunate here in the Middle East–with an area of tremendous proven oil reserves coupled with the ambition of our host countries.
We have found plenty of ways to prove to our customers the value of our technology and integration capabilities. The challenge comes down to how to economically develop the needed oil and gas resources. We are working closely with our customers to develop business models that allow us to increase efficiency but still reduce the cost of service delivery, for example, through remote operations and multi-skilling.
How do you feel you have adapted to the new energy landscape?
We are fortunate to have deep and long-standing relationships with our customers. Across the region we are seeing a move towards higher levels of integration as customers recognise the benefits–including lower HSE exposure and significantly reduced well delivery times. For example, in Iraq, we have entered into multi-well, multi-year Lump Sum Turn Key contracts, which give our customers certainty on their well costs, while providing the opportunity to deploy our integrated solutions to deliver the wells.
How important is the Middle East’s drilling market to Schlumberger?
The Middle East forms a vital part of our overall business. We can trace our presence in the region back almost 80 years. In terms of drilling, the Middle East remains active–most countries have increased their rig count over the past two to three years, which is in stark contrast to what happened in other parts of the world. Our customers appreciate that we have always been receptive to new technologies. For example, with one of our customers in the GCC region, the PowerDrive vorteX Max* high-powered rotary steerable system, along with our cutting mud motor modelling technology, enabled us to increase ROP by 25 percent– the best performance to date for an integrated drilling service project.
Are you seeing the Middle East market picking up?
As mentioned previously, a number of Middle Eastern countries are increasing their drilling activity, driven primarily by conventional activity. In the region we are also seeing increased focus on unconventional activity and this will be a significant source of growth in the coming years.
What new technologies have you brought to the market? How much focus do you put on R&D?
In 2016, Schlumberger spent US$1 billion on R&D. In September, we launched the DELFI* cognitive E&P environment at the SIS Global Forum. The DELFI environment leverages digital technologies including security, analytics and machine learning, high performance computing (HPC),and Internet of Things (IoT) to improve operational efficiency and deliver optimised production at the lowest cost per barrel.
The DELFI environment will provide a new way of working for asset teams by strengthening integration between geophysics, geology, reservoir engineering, drilling, and production domains.
Minimising environmental impact and the risks associated with our operations is at the heart of all our R&D activities. For example, we have developed the HiWAY* flow-channel fracturing technique that can lower water usage by 25 per cent, and can reduce proppant requirements by 40 per cent, while delivering greater production for our customers.
What are the wider energy challenges that the Middle East is facing? How is Schlumberger helping meet these challenges?
Within the region there is a major push towards increasing gas production. We are working with our customers on a wide range of projects from deep offshore gas projects in high pressure, high temperature (HPHT) environments to sour gas projects with high hydrogen sulphide (H2S) and carbon dioxide levels. We can contribute significantly by providing drilling and reservoir characterisation technologies that can function in a multitude of environments. At the same time our domain experts are working closely with our customers to build reservoir models using complex geomechanics essential for exploring unconventional plays.
This year’s theme is “Forging Ties’ and ‘Driving Growth’ how much does this reflects your industry strategy?
Customer engagement is vital to driving growth. However, as well as forging ties externally, it’s important that we do the same within our organisation. Collaboration sparks innovation, enabling us to offer a multitude of services and integrated technologies, ultimately benefiting our customers.
How does ADIPEC help you maintain and build new strategic partnerships?
We are proud to have a longstanding association with ADIPEC dating back to the very first exhibition and conference. While we are continually engaging with our customers, conferences like ADIPEC help us, in a very concentrated format, to show our customers our latest and greatest. We can also highlight how our technology and integration capabilities can lower their cost per barrel and deliver hydrocarbons to the pipeline. ADIPEC is very successful at attracting the next generation of engineers and geophysicists to our industry. This provides an exciting opportunity for us to engage and inspire top talent and again this year we have been delighted to host the Young ADIPEC program at some of our key facilities.
What are you intending to showcase at ADIPEC this year?
We are excited to be bringing the new DELFI cognitive E&P environment to ADIPEC. Taking a look downhole, we will also be launching a new resistivity- and imaging-while-drilling service that provides 360-degrees electrical images and laterolog resistivity measurements in conductive mud environments.
*Mark of Schlumberger
This interview first appeared in the November issue of Pipeline Magazine
Guy Tennant, Area Vice President, Southern Gulf Region, Halliburton spoke exclusively to Pipeline Magazine about the strategic importance of the region and how it is differentiating itself
How important is the Middle East market to Halliburton?
Halliburton has established long-term relationships across the Middle East and North Africa
(MENA) region for more than 75 years. The Middle East is a strategic market that will produce hydrocarbons for many future generations and the region is critical to our success.
How is Halliburton adapting to the new lower priced energy landscape?
This is not the first time Halliburton has encountered dynamic shifts in market pricing and it most likely will not be the last. One of our strategic mainstays is “Listen and Respond,” an approach that ensures we understand and adapt to our customers’ needs. Halliburton’s core value proposition is to collaborate and engineer solutions to help our customers maximise their asset value and ultimately lower their cost per BOE.
The theme of ADIPEC this year is forging ties and driving growth – how is Halliburton helping to forge ties in the Gulf region?
We position ourselves strategically with customers and constantly work to find ways to help lower their costs and increase their production. This strategy has contributed to how we win contracts and grow our business lines throughout the region. Ultimately, our business comes down to execution and we have a demonstrated track record of earning our customers trust and delivering the right solution at the right time. How important is ADIEPC to Halliburton?
Halliburton was one of the original participating service companies since the inception of ADIPEC. Through the years it has proven to be one of the most significant events in the entire industry. For Halliburton it’s an important way to showcase the company’s technologies, how we interact with customers and how we view the Middle East market. As ADIPEC has grown over the years so has Halliburton’s presence in the MENA region and this is only underscored by ADIPEC’s theme – “forging ties and driving growth.”
How is Halliburton planning to drive growth in the Middle East?
In MENA, we have seen the business environment change as customers address new market challenges. With the NOC and IOC ever changing business models, Halliburton has differentiated itself through improved operational efficiencies, technology development and collaboration. The vehicle that delivers this differentiation is our #1 market position globally, and within the MENA region, in unconventionals and integrated project management (IPM).
In MENA, Halliburton is the preferred provider for IPM services and our business models can vary from lump sum turn-key to integrated drilling solutions. Within both models, we successfully deploy new technologies that help reduce non-productive time and optimise drilling performance.
Our unconventional focus is supported by proven North American technologies such as our CYPHER Seismic-to-Stimulation workflow. We have a strong track record where we’ve deployed this workflow that integrates geophysics and geology with drilling operations to help lower our customers’ cost per BOE.
How much emphasis do you put on collaboration?
Halliburton’s value proposition is to collaborate and engineer solutions to maximise asset value for customers, so it’s in our DNA. Each of our divisions and their product service lines has specific strategies for their area of expertise, operations and customer requirements. Halliburton aligns with our customer challenges to ensure we maximise efficiencies to enhance their return on investment.
Are you seeing increased competition with mergers and other industry players?
Previous downturns have seen consolidation in the market through mergers and acquisition, however we adapt quickly to these markets by remaining focused on our strategy.
Competition is healthy for our industry and consolidation may change the names of companies and how they operate, but it will not change how we execute and drive industry leading returns.
What is your outlook for the oil service sector in the region?
The Middle East is a very diverse market. We see NOCs and IOCs expanding into unconventional reservoirs across the region and trying to enhance the performance of existing mature fields. Both of these align well with Halliburton’s strengths which were built upon successful operations across North America. As mature fi elds account for more than 80 per cent of MENA reservoirs they present a great opportunity to drive further growth and for us to help lower the cost per BOE. Halliburton remains bullish and will continue to invest in long-term strategies throughout the region.
How much focus is Halliburton putting on innovation in technology?
Innovation is the key to sustainable success in the oil and gas industry. Our ability to access data and integrate it throughout Halliburton’s product lines and services to digitally transform our operations will result in greater efficiencies and productivity. One example is Halliburton’s Voice of the Oilfield and iEnergy platform that helps operators deploy digital transformation programs across exploration and production processes.
What do you intend to showcase at ADIPEC this year?
Halliburton will showcase several innovative technologies and our ability to access data faster through real-time digital platforms. We plan to introduce JetPulse, a new high-speed telemetry service that transmits downhole data to surface up to four times faster than conventional telemetry systems. This helps operators make faster decisions to optimise well placement and improve well control while increasing drilling efficiency. We are also showcasing SPECTRUM FUSION, a service that powers a variety of diagnostic tools without the need for a downhole battery and is deployed through hybrid and fibre electric cable conveyed by coiled tubing. This helps eliminate multiple trips and creates flexible complementary diagnostic services access with unprecedented data quality.
Pipeline Magazine’s Julian Walker spoke exclusively with Wintershall CEO Mario Mehren on extending its engagement in the Middle East
How is Wintershall evolving its strategy to meet the new energy landscape of lower oil prices?
First of all, our investment decisions and activities are always based on a long term view of the oil and gas prices. In our industry it can take around ten years from the discovery of a reservoir until production starts. However, in today’s low-price environment, we evaluate our investment and exploration projects even more carefully. For us “operational excellence” means working better, more efficiently and more profitably. Our diversified portfolio is an important part of this approach: At Wintershall, we produce oil and gas that generates profits.
How important is the Middle East region to Wintershall’s upstream strategy?
About 50 per cent of the worldwide oil and gas reserves can be found in the Middle East region. That’s why Wintershall as Germany’s largest oil and gas producer is just at the right spot in Abu Dhabi. Being a mid-size company with more than 80 years of experience in exploration and production I’m confident that Wintershall will add value to Abu Dhabi’s energy strategy. We’re already engaged in successful local projects. And we’re planning to extend our engagement here. As CEO, I want the region to play an increasingly important role in our diversified upstream portfolio.
Are you looking to increase your involvement in the Middle East?
One thing is for sure: We want to be a long-term partner in the Middle East region. Therefore we always have the future and potential new projects set in our sights. It all started with opening our own office in Abu Dhabi in 2010. And it continued with the technical evaluation agreement we signed with ADNOC and OMV in 2012 to appraise the Shuwaihat field in the Western region. Regarding our current project in Shuwaihat we will now have to decide on further steps – together with our partners. We are prepared to invest in Abu Dhabi on an ongoing basis.
What is the latest status of the Shuwaihat field?
We are proud that the Shuwaihat-6 drilling has been successfully completed earlier this year. Following our experience with Shuwaihat-5, we learned a lot about the local geography. For Shuwaihat-6, our first offshore well in Abu Dhabi, we even built our own logistic support base in the local port of Mugharraq. In the first place we did that to save time and money during the operations but also to contribute modern infrastructure to the Western region. Having a great team of experts and having done detailed planning ahead, this way we exceeded our expectations. In the last couple of months we analysed the collected data and handed-in an evaluation report. Now it is up to our partner ADNOC how to proceed with the field. We’re looking forward to our future cooperation.
Can you provide any update on the MoU you signed with Iran? Do you see Iran as a potential big market for Wintershall?
As you correctly said, in 2016, we signed a memorandum of understanding with the National Iranian Oil Company about a potential future cooperation. All details of the memorandum of understanding are subject to confidentiality. I hope you understand that.
This year’s theme of ADIPEC is “forging ties, driving growth” – how is Wintershall forging ties in the region and driving growth?
Talking about growth, we have our feet firmly on the ground, but we also know what we are capable of. In Abu Dhabi we combine the assets of a medium sized and future-oriented E&P company with three qualities that are valuable for local partners: We score with decades of technological know-how, especially for reservoirs that are difficult to develop. For new solutions we can rely on our parent company BASF, one of the largest chemical companies in the world. Finally, everything we do incorporates the “made in Germany” seal of quality. Taking advantage of these capabilities we want to find smart solutions for the most challenging tasks in Abu Dhabi together with our partner ADNOC.
How important is ADIPEC for Wintershall? What will you be showcasing at ADIPEC this year?
ADIPEC has a special flair. Being the most important meeting point in the region, my team and I are looking forward to meeting business partners and friends.
Personally, I have the pleasure to take part in ADIPEC for the third time this year and for the second time in the international CEO-panel discussions. I am looking forward to that. But even more, I like the mentality in Abu Dhabi: having a coffee with partners, friends and high ranking decision makers right in the middle of the hotspot of the oil and gas world. That’s a special and unique experience one should not leave out.
What do you hope to achieve at this year’s show?
This year we will focus on Wintershall’s offshore expertise at the exhibition. At our stand in Hall 6 we offer a unique insight into our latest offshore solutions and we will let visitors travel “underwater”. By sharing our worldwide experience, we will show how we managed to develop cutting edge underwater technology at Wintershall to handle today’s challenges.
This interview appeared in the November issue of Pipeline Magazine
LUKOIL’s President Vagit Alekperov talks exclusively to Pipeline Magazine’s Julian Walker about the latest update on its projects in Iraq and why the market has now stabilised.
Last year the company celebrated its 25th anniversary. What were its original goals and how far have they been achieved?
In 1991, after consolidation of the three oil-producing companies in Western Siberia, we could hardly predict what LUKOIL would be like in 25 years. Though even at that time, we already had an idea of establishing a strong, publicly traded international company that will honourably represent Russia on the global energy market.
Today LUKOIL operates in more than 30 countries on four continents. We control 1 per cent of proven oil reserves and 2 per cent of oil production in the world. Of course, there is a lot of work ahead. We plan to create value for our shareholders by enhancing operations efficiency, strengthening our expertise, developing existing projects and diversifying both geography and types of our business.
How important is the Middle East to LUKOIL’s operations?
More than half of the global hydrocarbons reserves are in the Middle East and in the next decade this region will not only keep its role as a major supplier of oil and gas, but will also become an important energy consumer. We all see how quickly refi ning and petrochemical industries are growing here. The same is with the renewables. Middle East is becoming a global hub where energy and technology meet. LUKOIL, as many other companies, considers Middle East as a major region for expansion.
We are already one of the largest investors in Iraq, where we have been working since 1997. LUKOIL is developing one of the largest oil fi elds in the world – West Qurna-2, with daily production of about 400 thousand barrels. ‘Block 10’ is another important project in Iraq. In 2017 after testing the fi rst exploration well (Eridu-1), we evaluated the reserves of this block as significant. According to preliminary estimates, it’s the biggest oil discovery in Iraq in the last 20 years.
What is the latest developments at West Qurna-2?
Two months ago the Iraqi delegation, headed by the Minister of Oil HH Jabbar Ali Al-Luaibi, visited LUKOIL’s Head Office in Moscow. We discussed possible renegotiation of the service contract for development of West Qurna-2. LUKOIL and Ministry of Oil agreed to revise the production plateau at WQ-2 to 0.8 million barrels of oil per day. Negotiations are still under way. As soon as we have a final decision, LUKOIL will proceed with the further project development.
What is the company hoping to achieve with its presence at ADIPEC?
LUKOIL is the biggest Russian private company participating in ADIPEC. We want to share our experience of implementing unique projects in the Caspian region, West Siberia, Central Asia and the Middle East. We also plan to discuss the current market situation and prospects of cooperation between investors and governments in different parts of the world.
What will you be speaking about during the panel discussion?
I will participate in the Global Business Leaders session, where we will discuss the issues of international partnership, investments strategies of state-run and private oil and gas companies, prospects of sustainable growth after two years of restructuring portfolios and CAPEX reduction. I am looking forward to sharing my ideas with other panelists and the audience.
What does LUKOIL feel is the immediate prospects for the industry?
The market is quite stable now. This is the result of recent agreements between OPEC, Russia and other oil producers regarding the production cuts. We are satisfied with this stability, which isan important factor of sustainable industry development in the future.
What areas would the company like to expand into?
LUKOIL will continue developing its business within the vertically integrated model, including international operations. However, the Russian market will remain our priority, as projects inside the country appear less influenced by high oil market volatility.
How important is ADIPEC to the oil and gas business?
ADIPEC is a major event in the oil and gas industry, where all market players come together to share their experience, meet existing and new partners and get the latest updates on the market development. It helps a lot in developing business and creating values for shareholders.
This interview first appeared in the November issue of Pipeline Magazine
In the Middle East, OMV’s operations are supported by its close connection with the Abu Dhabi-based Mubadala Investment Company (formerly IPIC), OMV’s second largest shareholder.
Mubadala has been a shareholder of OMV AG since 1994 and holds 24.9 per cent of shares.
“Our long-term partnership with Mubadala is an essential part of the fabric of our company, while the close collaboration with ADNOC on a range of projects from Upstream to Downstream including petrochemicals is a key factor in our Middle East strategy. Building up mutual trust and respect, exchanging experience and technologies, and working together for future growth opportunities – this is one of the most satisfying aspects of our business,” says OMV CEO Rainer Seele
Shuwaihat – applying expertise in sour gas fields
OMV’s first upstream venture in UAE was secured in 2012. A previous gas discovery around Shuwaihat Island is being appraised by OMV as a 50 per cent equal partner together with Wintershall. Both companies have a proven track record of sour gas field developments and operations with more than 40 years of safe production from sour gas fields (which have high levels of H2S and CO2). The first well was drilled in 2015; for the second appraisal well drilling commenced in 2016 and included an extended horizontal side-track. Production testing was performed on the side-track and the initial vertical pilot hole. The next steps are to evaluate the well results and establish potential development concepts.
Pioneering exploration in Abu Dhabi
In 2013 OMV signed an agreement with ADNOC to jointly explore the eastern onshore region of Abu Dhabi towards Oman. As an operator, OMV is in a pioneering role, as this is the first pure exploration contract in Abu Dhabi since the mid-1960s. A 3D and 2D seismic acquisition programme was successfully completed in 2015, with the 3D-survey covering about 3,000 km2 in predominantly desert environment. Drilling started on the first OMV-operated exploration well in December 2016, reaching a depth of 4,880m in March. A well-testing programme for gas is currently underway.
International collaboration to drive up domestic gas production: North West offshore
To manage UAE’s increasing domestic gas demand and to reach production targets, ADNOC is exploring new developments for additional oil and gas production. Together with Occidental, OMV is involved in evaluating a number of undeveloped gas, gas/condensate and oil fields in the North West offshore region of Abu Dhabi including the Ghasha and Hail areas, which contain the UAE’s largest undeveloped offshore reserves.
A Technical Evaluation Agreement was signed in March 2016 for conducting a four-year work programme with seismic and drilling operations and engineering work to plan for potential field developments and establish a new regional gas infrastructure. OMV’s contribution involves nine seconded personnel and providing technical expertise for the evaluation activities. OMV is also involved in procuring project management consultant services and front end engineering design studies for the planned Ghasha and Hail development, which is the main part of the overall project.
A Memorandum of Understanding between ADNOC and OMV signed in May 2017 is a key step in expanding OMV’s downstream business in the Middle East. The agreement explores potential opportunities to work together to support ADNOC’s downstream business and the company’s smart growth strategy. This offers the opportunity to expand the cooperation across the entire value chain– from upstream to downstream, including petrochemicals. OMV holds a share of 36 per cent in Borealis which is engaged in the petrochemicals joint venture Borouge, owned by Borealis and ADNOC.
By: Musabbeh Al Kaabi, CEO, Petroleum & Petrochemicals Mubadala Investment Company
Earlier this year hedge fund manager, Pierre Andurand, forecast that oil would return to US$100 a barrel. The prediction caught the attention of the market but ran against the conventional wisdom that to survive, the petroleum industry must prepare for prices to remain at half that level. It is a call that positions the French-born trader against some of the biggest trends that have come to dominate the oil market outlook, from the US shale oil revolution to the rise of electric cars, which has led most investors and analysts to believe oil prices will be capped between $55-$60 for the foreseeable future.
I am not going to get drawn into predicting where oil prices will end up. Inevitably, our projections of the future are rarely accurate and we will most likely see things evolve in a completely different direction.
A different indicator of the health of the industry is the level of investment and M&A activity. The first eight months of2017 almost set a new record, with over 600 deals worth a total of $195 billion. This was led by the US, where 250 transactions worth $114 billion were agreed upon. There has also been significant activity in Europe where Total bought Maersk Oil and Gas A/s for $7.45 billion. The volume and value of these transactions indicates a more realistic view from sellers about the valuation of their assets, something that was missing in the immediate aftermath of the price fall, when owners were maintaining prices in anticipation of a more rapid turn-around.
The past year has been full of discussion on the energy price, the impact of technology on the market and scenarios about the future.
When we consider peak oil, the consensus has changed over the last four years with institutions and companies such as the IEA, OPEC, Shell and Statoil predicting that demand will peak somewhere between 2030 and 2040. If true, it is not that far away!
Discussions about peak oil are important and interesting, but perhaps we spend too much time looking at these topics and we ignore the positive changes that technology and diversification can bring in a volatile market. We need to embrace the evolution and understand the new possibilities they bring to the market both today and in the future.
For example, from 2007 to 2017, 212 new petrochemicals producers entered the industry. This is an increase of 20 percent, which is surprisingly high given the barriers to entry in this capital-intensive market. In the next five years, based on capacity announcements, that number is expected to increase by around a further 50 companies. In recent years, the growth in demand for petrochemicals has been about 1.33 times that of GDP. We are also seeing the Middle East quickly becoming a leading hub for petrochemicals, especially focused on the growth markets of Asia, and driven by technology and NOCs embracing diversification. These are developments we find very exciting.
Elsewhere, one very interesting deal saw Shell buying one of Europe’s biggest electric vehicle charging companies, New Motion.
It is fascinating to see one of the world’s oldest and most enduring energy companies diversifying away from oil. I remember fifteen years ago when oil and gas companies started moving into renewables, many people said it would not work and it would not be profitable.
Yet only last month DONG, the Danish oil and gas company, completed the divestment of its upstream oil and gas business to INEOS to focus on renewables. This is real strategic change being driven by technology, which is creating a new energy landscape. The truth is that many companies have gained a competitive edge for being brave enough to embrace these technological changes and for diversifying their portfolio.
While renewables still face the challenge of intermittency and integration into our power delivery networks, a lot of money is being invested in research into storage and load management solution - who knows what progress can be made? The growth in diversification and the increasing success in using new technologies demand that we keep an open mind when looking for investment opportunities.
I believe we are at a very interesting point for the sector where we are seeing the integration of technology delivering significant change in the energy mix. Here in the Middle-East, energy demand is predicted to increase by 8 per cent year-on-year, so we need a diversified mix of energy sources to meet our growing needs. In addition, these changes will support countries in the region in their efforts to increase efficiency while decreasing energy intensity.
Of course, we must not forget the innovation that is happening in the electric vehicle industry. Companies like Tesla are bringing real change and revolutionising a100-year-old industry. The large manufacturers are following suit and China has announced its commitment to EVs and the phasing out of the combustion engine. Yet there are still challenges to be overcome, including the current limitations of the world’s power generation and distribution infrastructure. At present in the United States electric cars represent about 1 per cent of vehicles sold which amounts to 0.2 per cent of the total automobile fleet. They are not yet putting pressure on the electrical grid, but as adoption of EVs increases, careful management of power grids and significant additional charging infrastructure will be required.
Even with an acceleration in EV sales, transformation of the global vehicle will take time and, as a result, I believe the internal combustion engine will be with us for some time to come. Add to this that 27 per cent of the world’s electricity is currently generated from oil and gas (IEA 2017), I expect our industry will remain an important part of the global energy for several decades into the future.
At the same time, technology and innovation are having a significant place in our “traditional” industry. Big Data and Artificial Intelligence are driving efficiency and have a growing role in providing petroleum companies with a competitive edge. The reality remains that while oil and gas are the commodities, it is the technology that enables us to find and extract hydrocarbons more efficiently, and process them into products that the market desires.
The inertia of global energy systems can be very long. It is debatable when it will be feasible to phase out oil, but we are witnessing a transformation of the energy system. We need to embrace evolution and understand what is happening, and seek out the possibilities this offers to the market.
We need to take advantage of technology and data science, which is driving the changes in the energy mix. This is where the investment opportunities are today, which can maintain our leading position in the global energy market tomorrow.