ITP MEDIA GROUP / BUSINESS APRIL 2020 • VOL. 16, ISSUE 04 As Bahrain tries to ramp up offshore exploration, oil minister Sheikh Mohamed Al Khalifa comments on the nation’s ambitious plans with oil at $30 per barrel RISING TIDEAsset Performance Management 4.0 linkedin.com/company/avevalinkedin.com/company/avevalinkedin.com/company/aveva @avevagroup@avevagroup@avevagroup aveva.comaveva.com Drive measurable and immediate results to your bottom line with a trusted and reliable APM solution. Visit aveva.com to find out how our APM portfolio helps you turn opportunity into business value. Asset Utilization +30% Unplanned Downtime -25% Asset Availability +20%APRIL 2020 / Volume 16 Issue 04 24 Cover: Bahrain oil minister This month’s cover features the minister of oil for Bahrain, who comments on the nation’s ambitious plans, and the impact of current market conditions. 32 Yibal Khuff Sudair field We explore the details of PDO’s Yibal Khuff Sudair field development project, with everything you need to know about its scope, finance, and timeline. 22 Shortlist revealed We reveal the five shortlisted companies, projects, and people for each category at the 2020 Middle East Energy Awards, set for 30 June 2020 in Abu Dhabi. 10 News update A look at the latest developments in the regional upstream sector, with the most important news of the month from around the GCC. Highlights in this issue: ONE MINUTE WITH: Olof Arnman, general manager of KSA operations for EPC firm McDermott, comments on the company’s new fabrication yard in the kingdom. 24 COVER STORY 3 IN THIS ISSUE oilandgasmiddleeast.com APRIL 20204 IN THIS ISSUE oilandgasmiddleeast.com APRIL 2020 06 Editor’s choice: • Revealed: The 50 most powerful people in the upstream sector • China loses its appetite: Impact of coronavirus • Video: What is prescriptive maintenance? • Saudi Aramco to sustain higher output for “coming months” DOWNLOAD IT TODAY ON YOUR iOS, ANDROID OR KINDLE Also inside: App 32 42 05 / Editor’s letter Carla Sertin with her thoughts on the industry 08 / News update The latest upstream news from around the region 20 / Industry outlook An overview of the upstream segment in Egypt 12 / News analysis Analysts comment on the oil price crash, coronavirus, and the future for oil and gas 42/ One minute with Olof Arnman, general manager of KSA operations for McDermott 24 / On the cover: Bahrain oil minister Bahrain’s oil minister discusses the nation’s upstream projects, and the impact of low oil prices 32/ Project focus Everything you need to know about Oman’s Yibal Khuff Sudair field development 06 / In numbers Rystad Energy sees a gloomy future for the oil market www.oilandgasmiddleeast.com 16 12 22 08 KEEP UP-TO-DATE For all the latest news, check out www. oilandgasmiddleeast .com 16 / Face to face SNOC CEO Hatem El Mosa comments on the company’s historic gas find 22 / Awards coverage We reveal the shortlisted candidates for the 2020 Middle East Energy Awards 24 Online5 oilandgasmiddleeast.com APRIL 2020 EDITOR’S LETTER Well, the OPEC+ meeting certainly did not go as expected. Instead of striking an agreement, Russia refused further production cuts, and Saudi Arabia responded by slashing its own crude prices and increasing its production. I will not speculate about the long term impact of these decisions (you can read more from analysts on page 12), but it has added more turbulence to an already bumpy market, and some analysts say that the circumstances leading up to the 2014 price crash are being replicated today. Still, there have been several notable upstream developments in the past few months, and in this issue, we speak with Bahrain Oil Minister Sheikh Mohammed bin Khalifa bin Ahmed (page 26) about its fullstream expansion and whether it could eventually sell a stake in its assets. We also learn from Sharjah National Oil Company CEO Hatem El Mosa about the emirate’s first gas discovery in three decades (page 16), and the impact of coronavirus on Sharjah. Meanwhile, as the novel coronavirus spreads, please make sure you are following best practices to maintain your own health and that of your community; you can learn more on the World Health Organisation website. Carla Sertin Editor Oil & Gas Middle East OPEC+ is in disarray, with supply unleashed and demand diminishing, yet there is still positive news for oil and gas. Oops, they did it again! SUBSCRIBETo subscribe to Oil & Gas Middle East, or other ITP Business titles, go to: www.itp.com/subscriptions. 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THIS ISSUE: We speak with Bahrain’s oil minister about the nation’s plans for growth in current market conditions (p26)Global oil & gas prices are expected to fall short of earlier forecasts as the coronavirus continues to spread As China’s coronavirus epidemic continues to expand and more countries are affected, the slowdown in global oil and gas consumption this year will hit suppliers who will see average prices fall below previous expectations, according to Rys- tad Energy’s revised forecasts. Brent crude oil prices, which Rystad Energy earlier expected to average nearly $60 per barrel in 2020, are now forecast to slump to about $56 per barrel for the year following revisions to our Janu- ary forecasts. Another negative revision might be around the corner due to the increasing downside risk. Brent has come under renewed down- wards pressure this week, trading below $55 per barrel as news of rising numbers of coronavirus cases across the world have spooked market participants. Rystad Energy’s latest crude oil market balances suggest that the epidemic’s net impact on oil demand could create almost the same amount of surplus crude barrels during the second quarter of 2020 as it will in first quarter of the year. The surplus may amount to nearly 1.8 million barrels per day without any additional production cuts in the market, assuming Libya’s production returns to normal during the second quarter. Rystad Energy therefore sees additional down- side risk to crude prices from today’s $55 levels during the second quarter, unless at least 1 million barrels per day are removed from the quarter’s market balances. Gas prices in Europe for 2020 are now forecast to fall more than previously expected, to below $4 per million Brit- ish thermal units (MMBtu) on average, according to revisions to our January forecasts. Forecasts for TTF prices in par- ticular are cut to $3.95 per MMBtu, a drop of $1.61 or 29% from our January forecast. Similarly, our price forecast for Asian Spot prices has been revised down to OIL & GAS PRICES TO FALL IN 2020 6 IN NUMBERS oilandgasmiddleeast.com APRIL 2020$4.63 per MMBtu for 2020, which rep- resents a drop of $1.69 per MMBtu from our previous forecast. We also see US Henry Hub gas prices remaining below $2.5 per MMBtu for a protracted period as production contin- ues to increase and infrastructure devel- opments lag. Our estimate for 2020 is now revised down to $2.26 per MMBtu, a reduction of $0.29. The low gas prices are a result both of the coronavirus-affected demand and of an oversupply of liquefied natural gas (LNG) this year. But what will happen with all this cheap gas? The low prices represent a major economic incentive to switch from coal-to-power generation to gas-fired electricity production. In Europe and in Asia, gas prices are at record low levels – significantly strengthening the economic argument for switching from coal to gas. Rystad Energy expects gas-for-power demand in North- west Europe* to increase around 6% this year from 2019. There are limitations, though, says Car- los Torres-Diaz, Rystad Energy’s Head of Gas and Power Markets: “Europe is reaching a limit on how large additional gas volumes it can take, as Russian volumes remain high, storages are full, and temperatures stay mild. Asian buyers should take advantage of the price slump to import higher volumes of a cheaper and less carbon-intensive fuel than coal,“ Torres-Diaz says. 7 IN NUMBERS oilandgasmiddleeast.com APRIL 20208 NEWS UPDATE oilandgasmiddleeast.com APRIL 2020 E&P BUDGETS PLUMMET Total capital and operational expenditure of E&Ps is now likely to be cut by $100 billion in 2020 and another $150 billion in 2021 if oil prices remain on a $30 level. PLAY/PAUSE: Who’s moving up in the oil and gas world this month, and who’s falling away? “...We are in a position to supply the market with over 4 mbpd in April. In addition, we will accelerate our planned 5 mbpd capacity target.” -Dr. Sultan Al Jaber, ADNOC CEO “2019 was an exceptional year for Saudi Aramco. Through a variety of circumstances – some planned and some not – the world was offered unprecedented insight into Saudi Aramco’s agility and resilience.” -Amin Nasser, Saudi Aramco CEO “I’ve given directives to continue with all approved capital expenditure and development projects in the emirate, and to take further measures to preserve Abu Dhabi’s economic gains, prioritising startups and SMEs.” -Sheikh Mohamed bin Zayed, crown prince of Abu Dhabi IN QUOTES INDUSTRY DEALS DROP Oil & gas industry deals for January 2020 worth $9.68bn were made, a decrease of 74.9% over the previous month and a drop of 74.3% with the last 12-month average of $37.66bn. SDX MAKES GAS FIND SDX Energy said it has located commercial quantities at its new Morocco well. The BMK-1 well encountered commercial quantities of gas in both target horizons. NEUTRAL ZONE RESTARTS Exports of oil from the neutral zone fields shared by Kuwait and Saudi Arabia are expected to resume in April. KPC told customers that pro- duction has started at Khafji field. Saudi Aramco announced in a Tadawul filing that it will increase its maximum sustainable capacity (MSC) to 13 million barrels per day. “Saudi Aramco announces that it received a directive from the Minis- try of Energy to increase its maximum sus- tainable capacity (MSC) from 12 million barrels per day (MMBD) to 13 MMBD,” it wrote. The note explained that the MSC is determined by the state. Saudi Arabia, the de facto leader of OPEC, has spearheaded production cuts for years, and earlier in March proposed further cuts of 1.5 million barrels per day in response to dwindling demand due to the coronavirus outbreak. Russia refused the deal, and Saudi Arabia slashed its own crude prices and removed limits on its output in response. raq and Kuwait have decided to cut prices for April crude sales, following Saudi Arabia’s Energy ministry instructs Aramco to increase capacity to 13mbpd in April Saudi Arabia switched courses after Russia refused to agree to further output cuts lead following unsuccessful OPEC+ meet- ings. The UAE also made a minor reduc- tion in pricing. Crude oil spiralled to the $30 range after the OPEC+ meeting, where Russia refused to comply with additional cuts, and Saudi Arabia responded by slashing its oil prices, and will increase its maximum sustain- able capacity to 13 million barrels per day in April, at the request of the ministry of energy. Iraq cut the price of Basrah Light crude for customers in Asia by $5 per barrel, while Saudi Aramco cut $6 per barrel for its Arab Medium grade, and Kuwait also cut $6 per barrel of its crude. Meanwhile, the UAE dropped the cost of its crude for February by $1.36 per barrel from January- -it is the only major producer that sets prices retroactively. Get the latest upstream news and analysis on our website, oilandgasmiddleeast.com, daily newsletter, and social media.9 NEWS UPDATE oilandgasmiddleeast.com APRIL 2020 SAUDI ARABIA IRAQ UAE KUWAIT OMAN BAHRAIN Saudi Aramco reported $88.2 billion net income for 2019, down from $111.1 billion in 2018. It attributed the decrease to lower crude oil prices and production volumes, and declining refining and chemical margins. Iraq has cut the price of Basrah Light crude for customers in Asia by $5 per barrel, following the decision by Saudi Aramco to cut $6 per barrel for its Arab Medium grade. In a series of tweets, Suhail Al Mazrouei expressed disappointment at the failure to come to an agreement, and said that the UAE has “ample production capacity that will be quickly brought online”. Kuwait Oil Company Hospital, also called Al-Ahmadi Hospital, has turned a full ward into a quarantine section for patients diagnosed with the novel coronavirus, the Kuwait News Agency reported. Oman’s crude oil production dropped by 3.4% for December 2019, with 306.8 million barrels, while condensates production rose by 20.1% to 47.57 million barrels. Bahrain could consider selling off some oil and gas assets, as it mulls moving some assets into a state-run fund and selling shares to inves- tors, as the kingdom seeks to balance its budget. AROUND THE REGION Latest developments across the region REGIONNext >