< Previous10 PEOPLE oilandgasmiddleeast.com JULY/AUGUST 2020 The GCC energy transition By Simon Redmond, Senior Director, S&P Global Ratings Simon Redmond, Senior Director, S&P Global Ratings The hydrocarbon-exporting econo- mies of the GCC will remain reliant on oil and gas as it will continue to be the primary source of economic activity well into the next decade. As inves- tors across the world get to grips with the implications of climate change for their portfolios, they are likely to reappraise their appetite for investment in sectors and re- gions they perceive as most at risk from de- carbonization initiatives.The economic and political incentives for large hydrocarbon importers to find a sustainable substitute for oil has never been greater. Since 2012, GCC economies have made some progress in diversifying away from oil. Despite the challenges of measuring oil versus non-oil GDP, we estimate that the nonoil private sector’s share in Gulf economies’ real GDP will reach an average of 36.8% by 2022, up from 29.2% in 2012. This represents an increase of 7.6 percent- age points (ppt), or 0.8ppt per year on average. Partly, the percentage increase in nonhydrocarbon private sector economic activity reflects lower oil prices. In terms of ESG risks and opportunities, oil and gas companies are among the most exposed to energy transition. Oil and gas prices and refining margins are extremely sensitive to medium- and long-term demand expectations. Current long-term industry projections still show fossil-based fuels account for the lion’s share of global primary energy demand, supported by its vital role in the global economy and mobil- ity. That said, the speed of the transition away from carbon-based fuels is uncertain but is beginning to accelerate. For the exploration and production indus- try, S&P Global Ratings sees the environ- mental risks as above average. The first risk stems from inherent material exposure to greenhouse gas emissions. The second type concerns lower probability but potentially high-impact risks for individual companies from pollution because of well head and transport spills and leaks, and increas- ingly water use and contamination risks. The most significant risk is the pace of the energy transition away from carbon-based fuels; this could result in stronger devia- tions from the industry demand forecasts outlined below. It will likely be strongly in- fluenced by long-term government policies for renewable energy, as well as the pace of electric vehicle usage growth. Whereas, in the refining and marketing sector the environmental risks are well above average because of the refining process itself is an important source of carbon dioxide emissions and produces carbon-based fuels and products, demand for which will be influenced by the energy transition. The sector has material exposure to regulations on greenhouse gas emissions and carbon taxes, as well as to pollution, transport spills, and contamination risks. Hydrocarbon fuels are flammable and frequently produced near and distributed through populated areas. Most countries have stringent operating and safety re- quirements for refiners and marketers of oil products. The costs of remaining compliant with these requirements can be material and may be one differentiator between companies’ competitive positions and prof- itability in different countries and regions. In terms of social risks, the oil and gas sector equally is above average based on its exposure to safety management, social cohesion, and ultimately consumer behav- iour risks, which may lead to substitution of products. These factors that can influence producers’ profitability, as well as substitu- tion risks ultimately driven by consumer choices. Safety management is a key risk given drilling activities and sometimes harsh environmental conditions, especially offshore. Companies in the sector typi- cally track and manage incidents and have specific programs to educate workforces. The costs to ensure adequate safety and compliance with local regulations can be material, for example, in instances where crew time offshore is limited. Social risks in the refining and market- ing sector are above average and weighted toward exposure to safety, social, and consumer behaviour. Safety management is critical and generally routine given that oil products are combustible and pollutants. Companies in the sector typically track and manage incidents and have specific programs to educate workforces While governance is best measured at the company level, we believe the E&P sector has above-average exposure. This results from the strong compliance and oversight needed because of the sensi- tivities around bidding for and corruption relating to natural resources, particularly in emerging markets. Government ownership can exacerbate the sector’s lack of trans- parency. Furthermore, the high severity of safety incidents also means board oversight and understanding of risk management and company culture have high importance. Although GCC governments’ diversifica- tion efforts have picked up pace, a move towards green transition takes time. Creat- ing new industries and educating a suitable workforce requires decades to implement. Further moves into industries that build on the GCC’s comparative advantage will likely yield benefits faster and with more certainty than the creation of new ones, and we do not expect this equation to structur- ally change. SPOTLIGHT: • A virtual face-to-face video interview • The perfect platform for your senior region- al representative to address his professional peers in the region and articulate your organ- isations unique and distinct brand message at this vital time for the industry THE PANEL: • A virtual Roundtable • Elevate the size, scope and complexity of a key topic, or challenge the industry is facing and discuss the ‘best-of-class’ solutions that the industry should be making themselves aware of with a table of your professional peers WEBINAR: • Harnessing its industry leading reputation and market leading database, OGME will de- sign, manage and promote a compelling, in- sightful and truly engaging webinar • The perfect forum to deliver tangible, busi- ness critical information FOR MORE INFORMATION, CONTACT: Pankaj Sharma Senior Sales Manager M: +971 52 89 2913 E: pankaj.sharma@itp.com We are experiencing a signifi cant increase in traffi c and engage- ment across all our digital channels, so we are launching 3 new digital Special Features to help you connect with, engage with and inspire the largest audience of downstream professionals in the Middle East at this extremely important time. Digital Reach - 247,837 - Industry Professionals Every Month CONNECT | ENGAGE | INSPIRE oilandgasmiddleeast.com JULY/AUGUST 2020 COVER STORY 12 THE BUMPY RIDE ISN’T OVER YET, BUT DIGITAL COULD BE A SAVING GRACE FOR OIL AND GAS OPERATORSCOVER STORY JULY/AUGUST 2020 oilandgasmiddleeast.com 13 The oil and gas industry has been hit hard by the coro- navirus pandemic, which spiralled into an oil crisis. A few decades ago, operating fields unmanned would have seemed unlikely—operators would have needed many workers in the field. However, with the rising uptake of digital technology, it is becoming increasingly possible to monitor operations remotely, and many companies have made serious investments into digital technology, seeing its merit. Now, as the coronavirus pandemic has left many stuck in their houses, the ability to receive data remotely, and often in- stantaneously, is a huge benefit and helps keep business opera- tions regular. This is highly dependent upon the types of digi- tal investments operators have chosen, and how far along they are in their digital transformation. While digital technology has had an impact on smoothing out business in tough times, its role in the recovery effort remains to be seen. In the coming pages, a host of industry experts write about the role of digital technology during the pandemic, from ways it can be leveraged to shifts in cybercrime.NEWS ANALYSIS 14 oilandgasmiddleeast.com JULY/AUGUST 2020 DIGITAL HARDWARE Digital technology is quickly associated with software, but hardware is essential By: Howard Gould, Chief Executive of HMi Elements. State-of-the-art, bespoke hardware is playing a more important role than ever in helping companies deliver digital oilfi eld solutions and extract more oil and gas. Multinationals including BP, Shell, Chevron, Schlumberger, Halliburton and Baker Hughes have harnessed digital oilfi eld technologies for some time and are now increasing these signifi cantly. While the adoption of digital oilfi elds has gained impetus in the past 15 years due to technological soft ware advancements, hardware is equally vital. In essence, a digital oilfi eld aims to create a ‘digital twin’ – a replica based on data from sensors in the oilfi eld. Yet hardware is central to the use of robotics, automation, sensors, AI, connectivity, control systems and the Internet of Things. Hardware and soft ware go hand in glove with wider benefi ts resulting in signifi cant improvements to processes, workfl ow and productivity. Reliability is an essential part of digital oilfi eld technology. At HMi Elements, we spent fi ve years carrying out extensive research, development and testing for our new ground-breaking computer, the 1301-Z1. Some may query the length of time taken but we were aiming to achieve a number of global fi rsts including glass edge-to-edge touchscreen and in-built fi rmware to monitor the health of the asset. Relatively lightweight compared to all Zone 1 products that came before, easy access to the inside for easy maintenance, a futuristic appearance and multiple certifi cation to Class 1, Zone 1. You simply do not make IT hardware with ATEX, IECEx and AEx certifi cation quickly. From our experience – over 30 years as a specialist in the oil and gas sector – we know the amount of money and time we have dedicated to the 1301-Z1 is a wise investment and will pay dividends for customers because from this comes superior performance, quicker speeds, greater liability and product longevity. For example, HMi computers have been used for 15 years in some of the harshest and most hazardous environments in the world. They keep going and are incredibly reliable while at the same time easy to use and intuitive. A key consideration relating to digital oilfi eld solutions is reducing costs and improving effi ciencies so we have also taken measures to safeguard against any downtime by improving equipment diagnostics.The unique hinged-front enclosure of the 1301-Z1 means for the fi rst time computer hardware can be maintained in Zone 1 (a potential explosive gas atmosphere). Another key consideration in developing a digital oilfi eld environment is health and safety, something that is quite rightly always a primary concern and likely to see a more powerful spotlight shone on it as we emerge from the COVID-19 pandemic. Hardware is a prime consideration because of the very nature of where computers are used. These are mission critical products being used by humans so must be capable of operating in temperatures ranging from -40°C to +60°C (-40°F to +140°F) and in conditions that see severe vibration and dirty power supplies. Furthermore, all six sides must be waterproof and ingress protected to IP66/ NEMA 4X standard given the presence of gas. These are purely safety imperatives but the computer must be usable and serviceable with longevity providing spectacular return on investment. In the 1301-Z1 this means glove-friendly touchscreen controls, edge-to-edge glass, a high resolution 1,000 nit display so it can be used in the brightest of environments, a choice of operating voltages, have tailored input connections and portability. When all these factors are considered, the key to creating a truly sustainable digital oilfi eld strategy is combining the best available soft ware and hardware. Those who have adopted this approach are already seeing a signifi cant boost in production and fi nancial performance, improved effi ciency and enhanced health and safety. BRAND VOICE 15 oilandgasmiddleeast.com JULY/AUGUST 2020 AVEVA comments on the importance of removing unplanned downtime from oil and gas companies’ list of worries in difficult times industrial operations running. Maintenance is performed at regular intervals to reduce the probability of asset failure. However, in most cases, this approach oft en results in either over-maintenance or under- maintenance of assets due to diff erences in equipment ages, operating environment and unpredictable performance. It’s a practice that needs to stop. In fact, a zero-tolerance approach to unplanned downtime will become the norm as companies develop and invest in their industrial digital strategies, the foundation of which is asset performance management (APM). This means managing assets and machinery by implementing technologies that exist today. Factory failure is not an option Machine learning (ML), artifi cial intelligence (AI) and cloud technology are all being applied to enable predictive maintenance strategies that signifi cantly reduce unplanned downtime. Automation technologies connect operations acting as a data nerve system to enable experts to see what’s happening inside the facility in real time, while mobile tools can provide access to that data anywhere for improved collaboration across business units. This Industrial IoT is connecting data through a network, feeding analytics to experts to enable more strategic decision- making, a seamless connection to wider business KPIs and ensuring that failure in the factory becomes a thing of the past. This is why AVEVA off ers a comprehensive APM soft ware portfolio designed to overcome today’s industrial challenges by leveraging industrial big data, cloud, artifi cial intelligence, digital twin, and augmented reality technologies. With improved analysis, we are helping businesses eliminate ineffi ciencies, optimize operations, and improve profi tability. Ascend Performance Materials business which avoided potential plant shutdowns saved $2 million with APM 4.0 solutions from AVEVA. A zero-downtime future Understanding problems before they happen is the panacea for industrial operations - maximizing output and revenue while reducing impact to workers and the wider environment. What, on the surface, seems like a mutually exclusive option, is not only solved by APM, but its incorporation safeguards the future of the factory as we know it. And until a time when machines can fi x themselves or not break at all, it is in fact the only digital transformation worth considering if we are to deliver a future without downtime. The dawn of the new decade has not arrived quietly. Companies are navigating an unprecedented and challenging economic landscape. Enterprise industrial businesses are facing massive cost pressures and need to do more with fewer resources. This is placing a huge emphasis on technology as companies try to extract more production capacity out of existing legacy assets. Don’t be blindsided by unplanned downtime This movement, commonly known as Digital Industrial Transformation or Industry 4.0, is playing a key role in helping to increase productivity levels – and one important area of attack is unplanned downtime. This is an issue that costs the world’s top companies hundreds of millions of dollars in revenue every year and is oft en caused by; operator mistakes, poor maintenance and hardware or soft ware error, not to mention natural disasters. Industry analysts agree that unplanned downtime is disastrous for business. Clearly no business wants to be blindsided with unplanned downtime. The question organizations are asking is, ‘how can technology be applied to existing assets to expose a new competitive advantage?’ When it comes to preventative maintenance, it’s time for organizations to begin mapping their roadmaps to asset performance management and risk-based maintenance. Zero-tolerance of downtime Today, preventative maintenance, based on time or usage statistics, is one of the most commonly adopted approaches to keep AVOID DOWNTIME IN TRYING TIMESNEWS ANALYSIS 16 oilandgasmiddleeast.com JULY/AUGUST 2020 of digital transformation strategies, which off er a new chapter in human development, enabled by extraordinary technology advances that commensurate with those of the fi rst, second and third industrial revolutions. The speed, breadth and depth of this revolution is forcing all industries to rethink how organizations create value. “It’s a tipping point for the industry for a variety of reasons,” Sir Mark Moody-Stuart, a member of the Board of Saudi Aramco and the former Chairman of the Royal Dutch Shell PLC, said in the GIQ Study. “This is a point where oil transforms into a normal commodity, like iron, nickel and copper, where low-cost producers dominate in market share and the higher-cost producers fi ll in the tail end – this has been coming for some time, but Covid-19 accelerated it,” Sir Mark said. Global investment in the energy sector is expected to plunge 20% this year, or by almost $400 billion, compared to last year as the pandemic takes a beating on The economic demand destruction triggered by the Covid-19 pandemic should propel the Middle East energy industry to accelerate its adoption of the 4th Industrial Revolution digital toolbox and embed greater operational effi ciencies, a group of industry technology experts agreed in a new study by the energy think tank Gulf Intelligence. The global energy sector, and the Middle East in particular, have been slow adopters By Gulf Intelligence The coronavirus pandemic is pushing the oil and gas industry to grow its use of digital technology ENERGY AT A DIGITAL TIPPING POINT NEWS ANALYSISNEWS ANALYSIS 17 oilandgasmiddleeast.com JULY/AUGUST 2020 the energy sector, the International Energy Agency reported last week. Before the pandemic, the global energy investor sector was on track for growth of around 2%, which would have been its largest annual rise in spending in six years. Gulf Intelligence, a UAE-based strategic communications & research fi rm, today published a GIQ Study – Middle East Energy Technology Dialogues – on how the Covid-19 pandemic will impact the Middle East’s energy sector’s adoption of digital technologies, such as artifi cial intelligence and robotics. The Special Report profi les a series of contributions from 16 digital experts in leading energy technology companies such as ABB, BASF, Halliburton and Schneider Electric to name a few. “The adoption of the 4th Industrial Revolution digital toolbox in the oil and gas industry – globally, I think I would score 4IR adoption at about 7 or 8 out of 10. In the Middle East, I would say they are coming to 5 or 6 out of 10 because they are now getting more serious about it,” Dr. Satyam Priyadarshy, Technology Fellow & Chief Data Scientist, Halliburton, said in the report. Gulf oil producers have announced a series of austerity measures since crude prices have more than halved in value since the start of the year. In alignment with this the region’s national oil companies, including Abu Dhabi National Oil Company, have notifi ed contractors and suppliers that they will review existing deals to fi nd ways to cut costs due to the steep slide in oil prices. Digitalization is already improving the safety, productivity, accessibility and sustainability of energy systems. It is changing markets, businesses and employment. New business models are emerging, while some old models may be on their way out. “While the world is going to be very, very diff erent post-Covid-19, the only thing we don’t know is how diff erent it will be. I expect we will see a massive acceleration in the digitalization of the Middle East power sector, a huge improvement that will represent a step- change as we go forward,” said Paddy Padmanathan, CEO of ACWA Power. 18 COMMENT oilandgasmiddleeast.com JULY/AUGUST 2020 With investments in transformative agenda expected to peak over the next four to five years, over 2,000 technology leaders from across the Middle East and Africa came together online to discuss how technology can be best used to help organizations adapt to and grow in today’s economies during the region’s first Digital Innovation Day, organized by Schneider Electric, themed Resilient Digital Transformation. Experts from across the globe shared insights on how organizations can best use technology to survive disruption and create opportunities for growth. According to the latest predictions revealed by International Data Corporation (IDC), manufacturing is estimated to invest $6 billion in digital transformation by 2023, while government enterprise IT will top spending at $8 billion in 2021, and annual security spending will top $3.6 million by 2023 as digital trust becomes a priority. “What we are living through is changing how we approach technology,” said Ziad Youssef, VP Secure Power Middle East and Africa at Schneider. “Those organizations that will thrive have a clear understanding of technology innovation, an ability to develop a single, integrated strategy that is built around using IT to transform and have a clear understanding of the value of digital investments to employees, customers, and growth. We’ve often talked about what IT can do for business growth. Now, we’re seeing how companies with the best digital vision are pulling ahead and reshaping the business landscape.” Due to the accelerated shift towards digital driven by the COVID-19 pandemic, IT spending is forecast to increase. In fact, investments in digital transformation and innovation are estimated to account for 30% of all IT spending in the Middle East, Turkey, and Africa (META) by 2024. In Asia, governments are accelerating the development of new infrastructure, such as 5G networks, data centers, the Industrial Internet and Edge computing as part of twin strategies to keep economies moving now whilst planning for future rapid growth. A number of global speakers at the event spoke about how organizations need to invest strategically in technology today to adapt to new economic realities. Schneider Electric’s Digital Innovation Day, featured discussions focused on real- world examples of how technologies are helping countries best deal with disruption and rapidly kick start economic growth. Daniel Joe-Jimenez, AVP at IDC, spoke about how to build a digitally resilient enterprise. He shared insights on how organizations can evolve their technologies through three key steps: assessing the maturity of their digital transformation plans and benchmark against peers; set up the right metrics across the organization and measure digital success, and invest in digital technologies and skills. Uptime Institute’s Lilia Severina shared examples of how technology innovation has already sped up. Globally and across the Middle East and Africa, telecommunications firms are ramping up 5G investments to bolster broadband capacity, which in turn is fueling the growth of new industries such as telemedicine and remote learning. She also spoke of an increase in businesses that are looking to fully automate their plants and warehouses, and how consumers are increasingly accepting of innovations such as augmented and virtual reality as their ability to interact and travel changes. In addition, Dr. Fahem Al Nuaimi, CEO, Ankabut shared how technology is underpinning the country’s vision to be able to offer smart classrooms and online learning that’s accessible 24 hours a day, seven days a week. Today, Ankabut, the United Arab Emirates’ Advanced National Research and Education Network, offers 16 services online for students and teachers in tertiary learning. Digital strategies to power MEA recovery Investment in digital transformation and innovation will account for 30% of all IT spending in Middle East, Turkey and Africa (META) by 2024CYBERCRIME 19 oilandgasmiddleeast.com JULY/AUGUST 2020 THE CHANGING FACE OF CYBERCRIME Trend Micro Incorporated, a global leader in cybersecurity solutions, released data on cybercriminal operations and patterns for buying and selling goods and services in the underground. Trust has eroded among criminal interactions, causing a switch to e-commerce platforms and communication using Discord, a chat service typically used among video game players, which both increase user anonymization. “This report highlights the threat intelligence we collect and analyze from global cybercriminal networks that enables us to alert, prepare and protect our corporate customers and partners,” said Dr. Moataz Binali, vice president for Trend Micro MENA. “This research helps us inform businesses early about emerging threats, such as Deepfake ransomware, AI bots, Access-as- a-Service and highly targeted SIM-swapping. A layered, risk-based response is vital for mitigating the risk posed by these and other increasingly popular threats.” The report reveals that determined eff orts by law enforcement appear to be having an impact on the cybercrime underground. Several forums have been taken down by global police entities, and remaining forums experience persistent DDoS attacks and log- in problems impacting their usefulness. Loss of trust led to the creation of a new site, called DarkNet Trust, created to verify vendors’ and increase user anonymity. Other underground markets have launched new security measures, such as direct buyer- to-vendor payments, multi-signatures for cryptocurrency transactions, encrypted messaging, and a ban on JavaScript. The report also reveals the changing market trends for cybercrime products and services since 2015. Commoditization has driven prices down for many items. For example, crypting services fell from $1,000 to just $20 per month, while the price of generic botnets dropped from $200 to $5 per day. Pricing for other items, including ransomware, Remote Access Trojans (RATs), online account credentials and spam services, remained stable, which indicates continued demand. However, Trend Micro Research has seen high demand for other services, such as IoT botnets, with undetected malware variants selling for as much as $5,000. Also popular are fake news and cyber-propaganda services, with voter databases selling for hundreds of dollars, and accounts for games like Fortnite can fetch around $1,000 on average. Other notable fi ndings include the emergence of markets for: Deepfake services to harass individuals as well as bypass photo verifi cation requirements on some sites; AI-based bots designed to predict patterns and crack complex Roblox CAPTCHA; Access- as-a-Service to hacked devices and corporate networks. Prices for Fortune 500 companies can reach up to US$10,000 and some services include access with read and write privileges; Wearable device accounts where access could enable cybercriminals to run warranty scams by requesting replacement devices. Trends in underground marketplaces will likely shift further in the months following the global COVID-19 pandemic, as attack opportunities evolve. To protect against the ever-changing threat landscape, Trend Micro recommends a multi-layered defense approach to protect against the latest threats and mitigate corporate security risk. Trend Micro details changing tactics and global demand for new malicious services like Deepfake ransomware and AI botsNext >