< Previous10 COMMENT oilandgasmiddleeast.com JANUARY 2021 What’s the difference in focus between IOCs and NOCs in terms of sustainability/energy transition? What are the reasons for their differ- ent approaches? The differentiated responses to the energy transition is determined by a number of factors including sharehold- er requirements, investor preferences, reserves to production ratio and corpo- rate strategy. While all companies aim to decarbonize operations and promote a low emission economy, there are two approaches that we observe. First, there are those that are aiming to acceler- ate a transition to renewable energy and evolving their portfolio. Secondly, others aim to sustain and prolong the sustainable and low emission use of oil and gas leveraging technologies such as carbon capture, hydrogen and crude to chemicals. Ultimately, the difference in nology side but more on bringing these technologies to scale and costs, leverag- ing existing infrastructure and sup- ply chains without major operational disruptions. What are the next steps for NOCs in the move towards a cleaner energy mix? The steps that energy companies take toward a cleaner energy mix must be coordinated, aligned with shareholder priorities and supported by adequate investment allocation. Regional energy companies are making firm commit- ments. As an example, Dr. Sultan Al Jaber, ADNOC’s CEO, committed to a reduction in carbon intensity by 25% by 2030. Firstly, must accelerate the adoption of advanced technologies to optimize the return on investments in existing monitoring technology and data sets. As an exemplar, Saudi Aramco is scaling use of AI to optimize carbon sequestration. Digital maturity is accelerating the transition by bring- ing together larger data sets with AI and machine learning. Secondly, they CLEAN ACT Shelly Trench, Managing Director and Partner, Boston Consulting Group, comments on the future of the energy transition in the region “THE MISSING LINK IS LESS ON THE TECHNOLOGY SIDE BUT MORE ON BRINGING THESE TECHNOLOGIES TO SCALE AND COSTS, LEVERAGING EXISTING INFRASTRUCTURE AND SUPPLY CHAINS WITHOUT MAJOR OPERATIONAL DISRUPTIONS.” approach is driven more by corporate priorities than whether the company is an IOC or NOC. What are the key technologies we’re seeing in the region contributing towards a cleaner energy industry? What is missing? There is no one formula that is be- ing pursued. We see companies in the region expanding into solar and wind while others building crude to chemical plants that significantly reduce emis- sions from petrochemical production and oil use. We note large scale interest in CO2 capture with some flagship pro- jects recently announced. The region is also active in reducing the amount of flaring and consequently emissions. Energy efficiency remains a key driver as well for a cleaner energy industry. The missing link is less on the tech-11 COMMENT oilandgasmiddleeast.com JANUARY 2021 25 percent of the CO2 emitted in a ve- hicle’s exhausts and the goal is to raise that capability to 50%. Besides captured CO2 being stored onboard vehicles for later collection and used in a variety of industrial and commercial applications, it could also power tomorrow’s heavy- duty vehicles and freight transport. At present, the technology has been successfully demonstrated in two pro- totypes – a pickup truck and a midsize passenger vehicle – and could have a revolutionary impact in terms of in- novation and sustainability in the years ahead. We’ve been hearing about crude to chemicals for some time—tell me about the real scope of this technol- ogy and its potential impact. What are the challenges? The conversation surrounding crude to chemicals continues to gain traction and become more frequent due the potential contributions to clean energy and sustainability. Because crude oil- to-chemicals eliminates several energy- intensive processes, creates high-value product streams, and generates fewer emissions, the scope of this technology is one of massive potential. It is also important to point out the abundance of low-cost hydrocarbon assets in the region, which can be pursued us- ing crude oil-to-chemicals. Crude to chemical has the potential to signifi- cantly increase efficiency and yield of production, transforming more than 50% of a crude barrel into chemicals products. can promote and pursue cleaner uses of hydrocarbons. Beyond the struc- tural advantage of housing the world’s lowest carbon assets, there are new processes, products and solutions that will fundamentally transform and lower the emission from the sector. Cleaner use of hydrocarbons is demonstrated in the leverage of crude to chemical technologies, blue hydrogen production and other proven methodologies. Fur- thermore, driving innovation through collaboration also represents a step towards a cleaner energy mix. National and industry transformation programs can be leveraged to implement new technologies outside of their areas of expertise and achieve success in this direction. One such collaboration is the agreement between Air Products, ACWA power and NEOM who are col- laborating to develop a five billion USD production facility in NEOM that will be powered by renewable energy for production and export of green hydro- gen to global markets. Tell me about the potential for Direct Air Capture in the region and inter- nationally (we don’t have to mention Aramco). The invaluable potential of Direct Air Capture (DAC) that could have a transformative impact regionally and internationally is already being demon- strated. As a technology that captures CO2 from the atmosphere, the C02 can be used, among other things, for the production of fuels. CO2 levels are increasing rapidly around the globe and the need to bring them under control and mitigate the adverse effects of climate change is becoming ever more imperative. From a regional standpoint, multi- ple innovative efforts are underway to utilize DAC to reimagine the internal combustion engine of tomorrow. Given population increase projections across the region, coupled with the effects of vehicles on the environment, DAC could have a central role in sustainabil- ity agendas. Already, DAC can capture PARTNERSHIP - HSE 12 oilandgasmiddleeast.com JANUARY 2021 employees are the real heroes, they had to come to work every day, they did not have the option of working from home.” Ordinarily, working in a fabrication yard presents inherent, physical risks which require strict safety regulations and procedures. “In the yard, we go back to basics,” Hannam says. “It takes a lot of consciousness and consistency in compliance to the work methods we have set in place.” An October 2020 survey by the International Association of Oil & Gas Producers (IOGP) revealed that companies in the oil and gas sector reported 703 lost work day cases in 2019, the vast majority of which (551) involved contractors. Companies participating in the survey lost a combined 21,899 days of work due to injuries. Avoiding & pre-empting LTIs requires more than a thorough set of rules and procedures. Hannam describes it as a collaborative process, with dedicated HSES teams in each fabrication yard to supervise & work with team leaders. “It was evident that leadership had to step up,” says Tareq Kawash, senior vice president, EMEA, at McDermott. “We went to a lot more effort and spent more time working with supervisory staff and employees to make sure we were collaborating and that they had as much information as possible. This never ends, and we must be committed and support as leaders to this every day.” “Through the pandemic summer months, our leadership team met with the supervisors every week,” Hannam adds. “We would listen to their questions and concerns, and we would respond. Interaction and collaboration between leaders and the workforce shows genuine Safety has always been a major concern for the oil and gas industry, but the onset of the pandemic has made it vastly more complex. With project delays and office workers at home, managing health and safety has taken on a different meaning. Despite these challenges, EPC firm McDermott International recently hit 90 million work hours without a lost time incident (LTI) at its Jebel Ali facility in the UAE. “With a lot of people working from home during the height of the pandemic, their mental well-being and ability to perform their work was a huge concern,” says Shaun Hannam, senior director of QHSES (quality, health, safety, environment and security) for EMEA at McDermott. “The fabrication yard Key leaders at McDermott comment on building a culture of safety, managing HSE during a crisis, and how safety informs efficiency YARD RULES McDermott celebrates its safety record at the Jebel Ali fabrication yardPARTNERSHIP - HSE 13 oilandgasmiddleeast.com JANUARY 2021 “It was our “Taking the Lead” initiative that meant Asia Pacific was prepared to deal with the COVID-19 pandemic,” says Ian Prescott, senior vice president, Asia Pacific, at McDermott. “With QMW, Asia Pacific operations were the first crisis management team to be initiated globally in McDermott and led the initial COVID-19 response plan which was essential as the virus spread around the globe. Despite many of our peers in Asia Pacific needing to close fabrication facilities, McDermott’s robust management of the situation including the use of temperature screening, quarantining, contact tracing and social distancing has enabled our yards at Batam [in Indonesia] and QMW to remain operational 24/7 throughout the pandemic.” QMW reached 12 million work hours without a recordable incident, and Batam achieved more than 76 million work hours with no LTIs. Prescott adds that Asia Pacific has a total recordable incident rate (TRIR) of 0.03 so far in 2020—TRIR is a measure of the injuries per million hours worked and according to a report by the IOGP, the TRIR average among the company’s peers in 2019 was 0.19. “The dedication to safety in our yards through employee engagement, training, tool box talks and campaigns is what helps deliver these results along with the dedication and commitment of our people. Having worked on this for decades, it really is part of our McDermott DNA,” Hannam says. care and builds trust - without trust and care, leadership is not very effective.” Safety does not exist in a vacuum. McDermott, like all companies in the oil and gas sector, is striving for efficiency against the backdrop of the pandemic and slowly stabilising oil prices. “McDermott is working on transforming Altamira [in Mexico] into a digital yard. This initiative improves automation and efficiency and enables us to smart track asset availability and utilization – all resulting in a more efficient project execution and construction process,” says Mark Coscio, senior vice president for North, Central and South America. “We have remained consistent in our focus on delivering fabrication to our customers safely and on schedule even through this year’s pandemic, all while safely executing more than eight million work hours.” Digital technology is one piece of the efficiency puzzle, but safety is also key. “The challenges to maintain and improve on our performance are significant,” says Guy McLear, McDermott’s Global Vice President, QHSES. “There are many aspects that combine to help us achieve this. In no small part, this starts with our people and establishing a strong safety culture across the organization where everyone works together to achieve a safe and efficient workplace. This alone, however, will not necessarily be successful without establishing global standards, systems and processes. Underpinning this are our Operational and Core Values, that help us to message and reinforce our safety culture and expectations globally.” As a company that operates globally, those safety standards have to be implemented across a large span of work sites, and were put to the test by the pandemic. McDermott’s joint venture yard, QMW, is based in Qingdao, China, and was very quickly faced with the realities of the coronavirus pandemic. “…INTERACTION AND COLLABORATION BUILDS TRUST, WHICH EVENTUALLY BUILDS UP TO LEADERSHIP. HAVING WORKED ON THIS OVER THE DECADES, IT’S NOW PART OF OUR DNA.” –SHAUN HANNAM The Batam yard in Indonesia remained operational throughout the pandemic Altamira in Mexico is going to be turned into a digital yard The Batam yard in Indonesia remained operational throughout the pandemic14 COVER STORY oilandgasmiddleeast.com JANUARY 2021 OQ One year after OQ was formed, upstream CEO Adil Toubia discusses how its integration was right on time to help it cope with the pandemic, the company’s plans for growth and how digital technology is enhancing its operations The theme of the oil and gas industry is change— major movements to become smarter, more efficient and to boost growth. One recent example is Oman’s OQ, formed in 2019 through the integration of nine companies. “Integration has created opportunities for synergies between OQ’s upstream, downstream and commercial verticals, in which the organisation has achieved quick wins of almost $500 million,” says Adil Toubia, upstream CEO at OQ. “Project delivery and execution have now been centralised via a projects function, ensuring cost optimisation, engineering and executional excellence and improved performance.” OQ is a significant producer of oil and gas in the country, owns and operates its refineries, and exclusively owns and operates most of its gas transportation system, so integrating the companies will place all of those operations more easily within reach. Centralisation has strong benefits for any oil producer, and Toubia says that it creates “a platform for a holistic view of the end-to-end operations, from oil exploration to sale of refined products, under one roof.” Overall, OQ contributes 4.4% to Oman’s nominal GDP (as of 2019), making it a key contributor to the national economy. Its upstream unit comprises exploration & production and its gas network. The exploration & production unit is divided into two parts, one focusing on operated assets, with three operated blocks in Oman. The other segment focuses on joint ventures, with 11 non-operated upstream ventures in partnership with foreign oil and gas companies for assets in Oman and one in Kazakhstan. Like most regional oil producers, OQ is leveraging the power of international partnerships to bring more expertise, collaboration, and investment into the nation. OQ works with major oil & gas companies such as Occidental, Eni, BP, Shell, Total, Petrogas and Medco, with OQ holding participating interests ranging from 20% to 45%. OQ owns and operates almost all of Oman’s gas transportation network comprising 4,000 km of gas pipelines. OQ’s upstream unit typically contributes more than 60% of the Group’s EBITDA, and the company plans to grow this segment, with an aim to increase production from 145,000 barrels ON CUE15 COVER STORY oilandgasmiddleeast.com JANUARY 2021 15 COVER STORY oilandgasmiddleeast.com JANUARY 202116 COVER STORY oilandgasmiddleeast.com JANUARY 2021 of oil equivalent per day (boed) to 300,000boed in 2030. “This will require us to make distinct portfolio decisions, in which we will continue to expand our operating capability and technical know-how to extract value from all assets, pursue selective and opportunistic international acquisitions and focus on becoming a gas player in Oman,” Toubia says. “We will also continue to develop and seek new partnerships and be a partner of choice for other leaders in the industry seeking opportunities.” But integrating nine companies is no easy feat, and although the process started in 2018, they had an eye on the future. “We realised that the energy landscape and the way we will do business in the future would be very different from that of the past decade, so OQ has established Alternative Energy and retail as emerging businesses,” he says. “As the world pivots from the current hydrocarbon energy mix to more sustainable sources of energy, OQ is committed to sustainability and growth that meet environmental, social and corporate governance criteria.” Yet no one could have predicted the coronavirus pandemic and ensuing market crisis that would unfold. Toubia says that because of the integration, having closer interaction, optimisation and aligned objectives across business verticals strengthened the company’s position and resilience, “preserving capital with minimal impact on our operations and day to day activities.” Despite market conditions, as the operator of Block 60, OQ was able to make operational improvements which increased the block’s oil production by 50%. Additionally, majority stakeholder and Block 61 operator BP and its partners (including OQ) in October 2020 were able to commission a major project, the Ghazeer field. Block 61 is an important part of the country’s plans, as it could satisfy approximately 35% of Oman’s total gas demand. The upstream segment in general is a key part of OQ’s growth strategy, as Toubia notes that it is “set to grow and contribute significantly to fund OQ’s strategic long-term shift towards the energy transition.” But a lower-carbon future is not the only strategic goal for the company— aside from becoming an integrated energy company, it is also embracing digital transformation, with several projects lined up, including smart fields and artificial intelligence. “Digitalisation is reshaping the global oil and gas industry and new digital technologies that are being deployed WE REALISED THAT THE ENERGY LANDSCAPE AND THE WAY WE WILL DO BUSINESS IN THE FUTURE WOULD BE VERY DIFFERENT FROM THAT OF THE PAST DECADE. Musandam Gas Plant processes well fluids from the offshore West Bukha field, part of Block 8 In 2020, as the operator of Block 60, OQ introduced improvements which increased the block’s oil production by 50%17 COVER STORY oilandgasmiddleeast.com JANUARY 2021 will drive operational efficiency and streamline processes, triggering changes in competitiveness,” Toubia says. The company’s smart field concept includes a centralised control room housing real time data from wells, which it says will reduce operating costs and enhance production. Among newer technologies, OQ has started building infrastructure to enable digital twins technology for its gas network. Digital twins provide a virtual copy of real assets in the field, allowing operators to visualise what is happening in real time. Common applications for the technology include THIS PANDEMIC HAS BEEN A CATALYST FOR CHANGE IN THE INDUSTRY. IT HAS ACCELERATED THE RESPONSE FOR ENERGY TRANSITION, INNOVATION, DIGITALISATION AND A DRIVER TO STRENGTHEN BALANCE SHEETS. data collection and visualisation, inspection, maintenance and training. “The digital twin will improve the exchange of information between different functions,” Toubia says. “It will also allow us to use artificial intelligence and machine learning applications to maximise our physical asset lifecycle and performance while allowing us to monitor live leading KPIs for optimum decisions as a continuous improvement process.” But he does not shy away from the challenges of the year, noting the “supply glut and demand disruption due to the COVID-19 pandemic.” While emphasising worker safety, Toubia says that OQ was also able to ensure that its essential assets continued to operate. As with most operators, continuing business also meant deferring or cutting costs. Although many already started the transformation process before this year, the pandemic has undoubtedly presented an opportunity to oil and gas companies. “This pandemic has been a catalyst for change in the industry,” Toubia concludes. “It has accelerated the response for energy transition, innovation, digitalisation and is a driver to strengthen balance sheets.” Production started at the Ghazeer natural gas field in October 2020, four months ahead of schedule OQ has leveraged international partnerships, bringing foreign investment into the nation through projects like Mukhaizna oil field (pictured) Offshore Block 8 is home to Bukha and West Bukha fields18 COMMENT oilandgasmiddleeast.com JANUARY 2021 The human impact of the PANDEMIC Rob Thissen, energy industry leader for the Middle East at Mercer, comments on the human impact of the pandemic for the oil and gas industry What were the key findings from your spot poll? The 2021 priorities here in the region are not surprisingly focused on efficien- cies and cost control particularly. The regional cut from our spot poll cap- tures downstream, but the majority of companies are in upstream and oil and gas services, so they’re still impacted by a relatively low oil price and are still adjusting to that. This is in line with our global observations. The big NOCs - some of which mention it as part of their vision - can’t control the price of oil, but they can control our own costs. 2021 agenda for many companies, This is surprising because nor- mally, particularly if you look at mental health, this is a topic which is more top of mind in Europe and North America than here in the region. As Mercer we’ve received quite a lot of requests to look into well-being as a concept, as a topic that companies really want to take seriously going into 2021. On the other hand, if we then asked how many com- panies have actually done something about well-being policies and programs, it’s only 23% of the sample. And then there is a topic which is high on the Another focus area is employee engage- ment, because of the impact on the sec- tor, because of the pandemic, because of working from home. These trends have an impact on the engagement of employees. Another interesting aspect finding from our global as well as regional polls is the emphasis on well-being, particu- larly mental well-being. This is not a surprise because of increased stress, people being online 24/7, etcetera, even more so when everybody’s working from home. But it does surprise me a bit that this was the number two on the 19 COMMENT oilandgasmiddleeast.com JANUARY 2021 only 30% of companies mentioned this. Another interesting point was about base pay--can you elaborate on that? If we’re looking at salaries for next year, we do see a slightly larger proportion of companies here in the region say- ing that they will freeze the base pay compared to other regions of the world. One of the reasons may be that there’s quite a lot of the services segment com- panies participating in our survey here. On the topic of salaries, what about layoffs and reducing headcount? If you look at the companies, about 40% of companies in the region said they had workforce reductions and are planning further reductions. But again, about 50% of the sample here in the re- gion was from the services and drilling segment of the market. What’s the big takeaway for you from all of this data, looking at the region? This pandemic is a catalyst for wider change, which is not easy for compa- nies in our sector. Change typically requires investment, but we have less money to do so. You see companies try- ing to balance the drive for efficiency and cost control, and the need for investments in training, development, in other types of infrastructure, cul- tural changes, etcetera, in order to get ready for the new normal. That’s the main difficulty in the oil and gas sector globally, but has a larger emphasis here in the region as we’re still in “develop- ment modus”. agenda globally but a bit more down the pecking order here, which is D&I. So diversity and inclusion. Were any unexpected results or any- thing in specific that surprised you in the results? Yes, the other point and the second main focus of the poll is on flexibility and flexible working, specifically if companies expected this to be a long term priority area for organizations. When we talk to big organizations in the region, we find many are imple- menting long term change, but when we look at the wider scope for results, only 50% say that flexibility would be implemented on a greater scale than prior to the pandemic going forward; compared with 70% globally. Globally, for the oil and gas sector, the pandemic was the catalyst in order to make this change, because the sector was still quite traditional - flexible work was even in more developed markets or ma- ture markets uncommon. This was one of the one of the areas where the sector was lagging way behind the tech sector and other sectors. Why do think there is a relatively low acceptance of flexible working in the longer term? Globally and in the region, the re- sponses said that we think that our leaders and our managers don’t have the right attitude or the right skills to manage a flexible or remote work- ing population. That’s one of the top reasons why flexible working wouldn’t be implemented at a greater scale. But in the GCC, another point came up, and this is not so much seen globally. The number one reason mentioned by regional participants is that many roles are not conducive to flexible working. So basically these companies follow the rationale that because half our popula- tion, or even more, can’t work flexibly, nobody works in a flexible manner. 76% said that was one of the reasons for not implementing flexible working on a greater scale going forward. Globally, Rob Thissen, energy industry leader for the Middle East at MercerNext >