< PreviousNEWS ANALYSIS 10 oilandgasmiddleeast.com FEBRUARY 2020 OMAN OIL & GAS AFTER SULTAN QABOOS Vinod Raghothamarao, director consulting for energy wide perspectives at IHS Markit, comments on the legacy of Sultan Qaboos, and the future for Oman’s oil and gas sector current restructuring of Oman’s Oil and Gas Sector Oman remains an attractive country for hydrocarbon exploration due to its political stability in comparison to the rest of region however signifi cant changes to the national oil sector are expected in 2020. The Oman government is planning to merge nine state-owned upstream and downstream companies under a new entity named “OQ”. The companies which will be merged under the new company include Oman Oil Company S.A.O.C (OOC), Oman Oil Refi neries & Petroleum Industries Company (Orpic), Oman Oil Company Exploration & Production (OOCEP), Oman Gas Company, Duqm Refi nery & Petrochemical Industries (DRPIC), Salalah Methanol, Oman Trading International (OTI), OXEA and Salalah Liquefi ed Petroleum Gas. State-owned Oman Oil Company (OOC) is also planning to list 20% to 25% of its shares in an initial public off ering by the end of 2020. OOC holds interests in 16 blocks/contracts in Oman and stakes in a number of midstream and downstream projects. Oman is planning to invest over USD 20 billion in downstream projects in the next fi ve years. The Oman Bid Round 2019, which included six onshore blocks (Block 58 (Qatbeet), Block 70 (Mafraq) and blocks 73, 74, 75 and 76) closed on 30 May 2019. No licences were awarded under the round in 2019 but awards are anticipated in 2020.For its off shore Block 52 (Juzor Al Hallaniyyat) licence, Eni Oman is planning to commence its much-anticipated off shore exploratory drilling campaign in February 2020. It has contracted the “Pacifi c Bora” drillship to drill the well. The Sultanate’s main players Petroleum Development Oman LLC (PDO), Occidental Petroleum (Oxy), and OOCEP will again continue with their established activities throughout the coming year. Gas production is expected to increase again this year as a result of the Phase 2 (Ghazeer) development at BP plc’s tight gas fi eld in Block 61 (Khazzan-Makarem). Oman’s liquids production remains relatively stable (approximately 970,000 b/d of liquids), declining oil production is being off set by steadily increasing condensate production and should continue at a similar level throughout 2020. Sultan Qaboos did have profound impact on the oil and gas sector by advocating series of reforms including envisioning Oman Strategy Vision and its impact on the oil and gas sector. Instrumental in the merger of upstream and downstream companies in Oman and also announcing US$ 20 bn of investment in downstream projects. Quick to adapt and restructure based on the changing market dynamics in the oil and gas sector with visionary reforms, Sultan Qaboos became known to his countrymen as “the renaissance”, investing billions of dollars of oil revenues in infrastructure The sultanate is making eff orts to sustain oil and gas production and increase hydrocarbons reserves. Oman’s estimated hydrocarbon reserves are considerably lower than most of its Gulf peers, so a persistent and well-structured oil and gas upstream exploration campaign is the only way it can continue surplus production and maintain energy suffi ciency. Haitham is one of the sponsors of Oman’s Vision 2040 social and economic reform initiative, which aims to diversify Oman’s economy away from its dependence on oil and gas exports, and open the country up to private sector investment. Thus the change in leadership will not have any major impact on the “OMAN’S ESTIMATED HYDROCARBON RESERVES ARE CONSIDERABLY LOWER THAN MOST OF ITS GULF PEERS, SO A PERSISTENT AND WELL-STRUCTURED OIL AND GAS UPSTREAM EXPLORATION CAMPAIGN IS THE ONLY WAY IT CAN CONTINUE SURPLUS PRODUCTION...”NEWS ANALYSIS 11 oilandgasmiddleeast.com FEBRUARY 2020 CRUDE OIL SUPPORTED BY TENSIONS AND OPEC+ CUTS Ole Hansen, head of commodity strategy at Saxo Bank, comments on recent events, the shift in “reaction behaviour”, and the global supply chain events would have triggered a longer and more sustained rally in crude oil prices. We see several reasons for this change. Increased non-OPEC production, primarily coming from the US, has lowered OPEC’s overall market share. It has also provided refi neries around the world with other alternatives to Middle East crude oil. China is now the biggest buyer of Middle East crude oil, and sanction-hit Iran has no interest in disrupting supply fl ows, thereby suff ering a further loss in terms of revenues. The US, IEA member countries, and soon also China, hold close to 90 days of imports in strategic reserves that can be released in the event that a prolonged disruption should occur. In addition to this, Saudi Arabia itself has, according to sources, more than 100 million barrels stored within its borders, as well as around the world. The dramatic rise in US shale oil production during the past decade has also raised the question of why the US still imports crude oil from the Middle East, and with current events in the region, also whether the US could step up to fi ll a potential supply gap during times of global shortages. The answer to the latter is no, simply because US shale oil is of a diff erent grade, being too light and not in a position to substitute heavier crude qualities from the Middle East. This diff erentiation is probably also one of the main reasons why the US continues to import crude oil from the Middle East despite its growing crude production levels, albeit in much lower quantities than previously. Brent crude oil is likely to remain stuck in the $60 per barrel range throughout the fi rst half of 2020 before moving higher in the second half of the year. The December 6 decision by OPEC and its allies (collectively OPEC+) to maintain and deepen production cuts throughout the fi rst quarter of the year is likely to off -set any potential growth concerns, or renewed US-China trade worries. The mid-September attack on the world’s biggest processing plant in Saudi Arabia, the confl ict in war-torn Libya, and the early January standoff between the US and Iran all demonstrate just how vulnerable the global supply chain can be. However, with the ample availability of strategic reserves in the US, China, Saudi Arabia, and IEA countries, the fallout from a disruption should be limited and relatively short-lived. While we see Brent crude oil potentially climbing back towards $75 per barrel by the end of the year as infl ation picks up and the dollar weakens, any short-term weakness, perhaps from speculators’ exciting speculative long positions, is likely to be limited. Given the continued threats to supply from the Middle East and Libya, the market is likely to keep a risk premium present in the price for the foreseeable future. The reaction behavior to Middle East tensions has seen a major change during the past ten years. In the past, similar “THE REACTION BEHAVIOR TO MIDDLE EAST TENSIONS HAS SEEN A MAJOR CHANGE DURING THE PAST TEN YEARS. IN THE PAST, SIMILAR EVENTS WOULD HAVE TRIGGERED A LONGER AND MORE SUSTAINED RALLY IN CRUDE OIL PRICES. ”12 FACE TO FACE oilandgasmiddleeast.com FEBRUARY 2020 Briefly tell me about DNV GL’s energy transition outlook. For the last three years DNV GL has produced an Energy Transition Outlook. Our Outlook comprises a main report, where we detail our forecast for the global energy system through to 2050. We also produce supplementary reports looking at the implications of our energy forecast on three of the core industries we serve: Oil & Gas, Maritime and Power & Renewables. Building a model of the world’s energy system encompassing demand and supply of energy globally, and the use and exchange of energy between and within 10 world regions … is a complex task. To do this work, we have created an Energy Transition research unit. Our researchers collaborate with over 100 experts in our operating units. Those are colleagues tasked with verifying, assessing and advising our custom- ers who are building and installing the oil, gas, power, renewables assets. In other words, the infrastructure that will deliver world’s energy system in the coming decades. Our research team also interacts with sustainable products and services, and novel business models. Enabling technologies in the digital transformation include cloud comput- ing and platforms including DNV GL’s platform VERACITY, data acquisition and security, artificial intelligence and automation, and digital twins. Some of the ways in which digital solutions can help the oil and gas indus- try maintain sharp focus on business optimization for safer, more reliable and more efficient operations, to remain competitive in the energy transition, include enabling de-manning, therefore reducing the need to transport people and supplies and reducing the associ- ated carbon footprint. It can also help by enabling new manufacturing solutions, such as additive manufacturing, that can reduce the GHGs associated with delivering parts and structures. What sustainability gains, if any, have we seen in the region due to uptake of digital technology? What gains can we expect? Middle East energy companies are in- vesting heavily in renewables and energy efficiency. Digital technologies sup- port development of smart power grids for improved electricity transmission, reduced peak demand, and renewables integration. EXPO 2020 in Dubai will likely increase focus on implementing Energy in transition Liv Hovem, CEO of DNV GL – Oil & Gas, comments on the outlook for oil and gas in a low-carbon future, and how digital technology can help to create a cleaner industry. INTERVIEW MIDDLE EAST ENERGY COMPANIES ARE INVESTING HEAVILY IN RENEWABLES AND ENERGY EFFICIENCY. dozens of leading experts in businesses and academia worldwide. The Energy Transition Outlook is a single fore- cast – not a new scenario. It is our best estimate of what lies ahead. What are the biggest opportunities for oil and gas companies looking to lever- age digital technology? The industry faces an unprecedented combination of market forces, regula- tion, societal pressure over climate change, and challenges to integrate with other sectors like power and renewa- bles. Oil and Gas companies need digital technology to provide the long-term efficiency and productivity gains needed to stay competitive. DNV GL’s Technol- ogy Outlook 2030 highlights the impact on the industry as the acceleration of digitalization takes place with the emer- gence of a digital oil and gas value chain run by machines and software algo- rithms. We also see operators in Middle East taking increasing advantage of operational cost savings by implement- ing predictive analytics to improve their operations and maintenance regimes. How do digitalization and automation fit into the energy transition? I see the oil and gas industry exploit- ing new technologies and data-driven opportunities across the value chain to develop new, more efficient and more 13 FACE TO FACE oilandgasmiddleeast.com FEBRUARY 2020 renewable energy pilot projects and showcasing sustainable technologies in the UAE and the broader region. Innovations in hydrogen such as production through direct electrolysis of seawater, are attracting interest. By mid-century, power generation in the region is expected to come primarily from variable renewables like wind and solar complemented by gas. While oil and gas production will continue to play a significant role for decades to come, the shift to renewables will change the location of where energy is going to be produced, which in turn impacts on MENA’s economies and politics. To transform operations now and in the future, the global oil and gas industry will need to invest in digitally-enabled solutions, such as digital ecosystems, platforms and data strategies along- side 3D printing technologies, sensors, drones, and robotics, to support faster, leaner and more sustainable E&P. An interesting example of our work in the region was providing Petroleum De- velopment Oman and Occidental Oman with online monitoring of gas turbine emissions. Using a cost-effective solu- tion that meets international standards, the customers can continuously monitor and report air emissions from 44 gas tur- bine emissions sources to comply with Omani government regulations. Our digital solution is a predictive emissions-monitoring system, built for the specific gas turbine type and com- bustion system, and offers a completely new generation of advanced predic- tive analytics and reporting. Being able to monitor and report on emissions accurately is the first step in reducing emissions in the future. What are the next steps for regional oil and gas companies looking to lower their carbon footprint? The long-term, sustainable future of the oil and gas industry is dependent on its license to operate today. A sharp focus on safety and environmental perfor- mance is more crucial than ever. Public scrutiny over the oil and gas industry is increasing, as climate change continues to rise up society’s agenda. It is imperative that the oil and gas industry maintains the highest stand- ards of safety today to win the public support that it needs to decarbonize for tomorrow. The oil and gas industry must also continue to reduce its carbon footprint by curtailing methane emis- sions from its value chain. IPIECA, the global oil and gas industry association for advancing environmental and social performance, notes that the sector ac- counts 54% of total methane emissions. Tools for curtailing methane emissions include reducing flaring for exploration and production for example, which still holds considerable improvement poten- tial for some operators in the Middle East region. THE LONG-TERM, SUSTAINABLE FUTURE OF THE OIL AND GAS INDUSTRY IS DEPENDENT ON ITS LICENSE TO OPERATE TODAY. A SHARP FOCUS ON SAFETY AND ENVIRONMENTAL PERFORMANCE IS MORE CRUCIAL THAN EVER.oilandgasmiddleeast.com FEBRUARY 2020 POWER 50 1415 POWER 50 FEBRUARY 2020 oilandgasmiddleeast.com 50 THE POWER The past year has been truly historic for the Middle East oil and gas sector. Saudi Aramco listed shares on Tad- awul for $25.6bn, ADNOC made a series of partnerships and is preparing for its second international bidding round, and the industry proved its resilience against multiple attacks on oil infrastructure. Despite volatility in the past year, megaprojects are back on the menu, with contracts worth bil- lions doled out by the region’s major oil and gas companies. But it would be naïve to ignore the impact of volatility on the market—production out of Libya, Iraq, and Iran have been deeply impacted by their respective crises. While missile strikes on Saudi Aramco’s infrastructure did not impact supply, thanks to the company’s quick reaction time, it added a risk premium to the oil price. The oil price has continued to fluctu- ate despite OPEC’s efforts to maintain stability with deeper production cuts, and US production is hitting all-time highs, with no signs of slowing down; the US Energy Information Ad- ministration forecasts US production at 13.3mn barrels per day in 2020. Climate change activism and sustainability concerns have swelled with renewed force, with speakers like 17-year- old Greta Thunberg rallying people across the globe. As oil and gas executives juggle sustainability, optimising production, and their bottom line amid lower oil prices, the changes in the industry have never been clearer. These wider market shifts, as well as changing involvement from inter- national oil companies, have resulted in a shuffle among our list members, although familiar names remain among the top ranks of our list, occupied by members of the industry’s upper echelons. Flip through the following pages for a snapshot of 2019, and to see the superheroes who continue to push the industry forward and demand more even as the energy landscape shifts around them—there is surely more in store for 2020. In formulating this ranking, Oil & Gas Middle East’s editorial team scanned each list member’s major achievements, press releases, news announcements, and financial results. The list only takes into account information that is publically available.16 POWER 50 oilandgasmiddleeast.com FEBRUARY 2020 If there is one thing Saudi Aramco knows (beside the oil & gas sec- tor, that is), it’s how to go big. The company’s initial public offering on Tadawul became the world’s largest at $25.6bn. Its financials, revealed for the first time to the public, outed Saudi Aramco as the world’s most profitable company, raking in $111bn in profit in 2018. If that’s not enough, Saudi Ara- mco has international ambitions, with plans to go global. Beyond Saudi Aramco’s incompa- rable scale, Amin Nasser has earned the top spot on our ranking this year because of his work to improve the industry and to find new avenues for growth at Aramco. He has been out- spoken about the need for oil and gas to contribute to global sustainability measures, how energy policymakers should create reasonable goals that can be achieved, and the dire need to resolve the industry’s “crisis of percep- tion,” as he has termed it. The company literally rose from the ashes this year after attacks on its facilities set them ablaze, a testament to Saudi Aramco’s central position in the global oil & gas industry (and the global economy), & demonstrating the resilience of the oil & gas industry. AMIN NASSER CEO, SAUDI ARAMCO17 POWER 50 oilandgasmiddleeast.com FEBRUARY 2020 If Saudi Aramco can most easily be characterised by its size, then AD- NOC Group can be characterised by its agile and dynamic nature. As its CEO, Dr. Sultan Al Jaber has spearheaded the regional move- ment towards digitalisation, and has become an international symbol of industry transformation. The theme of the year for AD- NOC has been partnerships. Entities from China, Russia, Indonesia, Italy, Austria, India, Japan, and Korea, among others, have shared headlines with ADNOC this year. Al Jaber has become the man of a thousand handshakes, with deals signed for onshore and offshore concessions, contracts awarded for the world’s largest underground storage project, a landmark pipeline infrastructure investment agreement, and countless technology and research partnerships surrounding everything from data analytics, to artificial intelligence, drones, and carbon capture. It is no surprise, then, that AD- NOC’s valuation grew 29% since the previous year, making it the first UAE brand valued at over $10bn by Brand Finance. Knowing Al Jaber, he has his sights set even higher. SULTAN AL JABER CEO, ADNOC GROUP18 POWER 50 oilandgasmiddleeast.com FEBRUARY 2020 This will be Bob Dudley’s final appearance on our ranking, as he prepares to retire after a remarkable decade at the head of British Petroleum. Having seen the firm through the aftermath of the Deepwater Horizon tragedy and the oil price crash, he has guided the company through rough seas. In 2019, BP bought a 50% interest in Oman onshore block 77 and a 25% interest in Egypt’s Nour North Sinai offshore exploration concession. BP also plans to create five $1bn businesses focused on the circular economy, digital, and low-carbon technology, by 2025. Dudley has been outspoken about the need to address climate change, a trend that seems likely to continue with his successor, Bernard Looney. BOB DUDLEY GROUP CEO, BP ENI’s CEO Claudio Descalzi has earned his spot thanks to his relentless efforts to expand in the Middle East. The company has made many discoveries in the region, specifically in Egypt, but made headlines in 2019 for a spate of agreements. ENI won three of UAE emirate Sharjah’s onshore exploration concessions and offshore Block A in Ras Al Khaimah, closed its acquisition of a 20% equity interest in ADNOC Refining, signed an exploration MoU for Block 1 offshore Bahrain, an exploration and production sharing agreement for Oman’s onshore Block 47, won two more onshore explo- ration blocks in Egypt, and extended its collaboration with Tunisia and Algeria, among other deals... Busy, busy. CLAUDIO DESCALZI CEO, ENI19 POWER 50 oilandgasmiddleeast.com FEBRUARY 2020 French oil major Total has made a number of deals in the re- gion, including its acquisition of Marathon Oil Libya, which gave it a 16.33% stake in Libya’s Waha conces- sions, into which it will invest $650mn to increase production by 180,000bpd. The company also partnered with ADNOC to use its METIS drones for automated seismic acquisition, and has plans to start a digital factory with the aim of using artificial intelligence to cut upstream costs by hundreds of millions of dollars. Total signed a heads of agree- ment in Oman for the Block 12 explo- ration license, and is expected to drill its first exploratory well in Lebanon’s offshore Blocks 4 and 9 in 2020. PATRICK POUYANNÉ CHAIRMAN & CEO, TOTAL Petroleum Development Oman is in the middle of a transforma- tion. The company announced in August that it completed the second phase of its digital transforma- tion, improving its data and document management systems. PDO also started producing gas from the first sour wells at Rabab Harweel Integrated Project in July, two months ahead of schedule, which Raoul Restucci says will have “substantial” investment returns and will remain robust even at low oil prices. In June, it awarded a $75mn EPCM con- tract to Petrofac for the Mabrouk North East Line Pipe Procurement Project, as part of a 10-year framework agreement. The company has also continued to grow its local talent pool and supply chain. RAOUL RESTUCCI MANAGING DIRECTOR, PDONext >