In the first part of our two-blog series, highlighting the key takeaways from a week spent in London, we wrote about a roundtable discussion in which we participated hosted by the King Abdullah Petroleum Studies and Research Center (Kapsarc).
The rest of our time was spent at International Petroleum (IP) Week, the annual conference drawing a large cross-section of the world’s senior leadership in the industry.
My colleague Daniel Baruch and I also gave a presentation, titled, "Solving the Mystery of Supply and Demand Using Satellite Radar."
It was an opportunity to educate the audience on synthetic aperture radar (SAR), its applications, and some of the high-level insights we're seeing from our crude inventory measurements.
As for the other speakers, here are some of the memorable things we heard:
Amin H. Nasser, President and Chief Executive Officer, Saudi Aramco
We have a maximum sustained capacity of 12 million barrels per day. That is enough spare capacity to stabilize the market. We currently produce around 10 million bpd
Saudi Arabia has 260 million barrels of oil reserves “confirmed, audited by a third party.”
If we stopped exploring today, there would be enough production to sustain us for 60-70 years.
We intend to be a global leader in natural gas.
Another area of focus is trading. We want to be a top-3 oil trader. Today we trade around 4 million bpd and want that figure to rise to 6 million bpd.
Bob Dudley, Group Chief Executive Officer, BP
“The US is only country in the world that completely responds to price signals. It’s like a market without a brain. It just responds to price signals.”
The high rate of natural declines in shale fields requires reinvestment. “The treadmill runs very fast.”
“The bigger question is whether those shale fields keep going up or level off because the nature of the field is that it declines quickly and whether [shale] is a 5-25 year phenomena.”
“A $50-$75 [per barrel] world can work” for producers and consumers. You get outside that and you have all sorts of unintended consequences.”
Andy Brown, Upstream Director, Dutch Shell
Technology is needed to improve operational efficiency. We use drones for visual inspections of pipelines.
Aramco CEO Amin Nasser addresses the IP Week audience
Peg Mackey, Senior Oil Market Analyst, International Energy Agency
“2019 began with a position of abundance. The story of 2018 was the spectacular growth in the US, Saudi Arabia, Russia and Iraq.” That wave of supply more than made up for the declines in Venezuela and Iran.
There is evidence that the OPEC/non-OPEC coordinated supply cut agreement (effective Jan 1) is working.
We’ll keep a close watch on weakening economic conditions in a number of countries and the impact of trade disputes.
China and India account for one-half of oil demand growth.
The conventional wisdom is there won’t be a demand for the rising supply of shale (light tight oil) because many refineries require heavy sour. “We don’t think that’s the case. We see a need for LTO supply.”
Jason Bordoff, Director, Center on Global Energy Policy, Columbia University
China would be an investor in US LNG projects had it not been for the trade war.
Even with exports, the significant amount of cheap natural gas will keep petrochemical margins high and appealing for many years.
“Trump climate policies have hurt global ambitions for addressing climate change.”
What do the polls say?
Attendees were asked to vote on a few questions of utmost interest to the oil market.
Q: What will be the average price of Brent crude oil in 2019?
A: In the $60s (53%), $70s (33%), $50s (8%), $80s or above (5%) and $40s or lower (1%).
Q: What level of compliance do you expect the OPEC+ alliance to achieve?
A: 90% compliance (30%), 100% compliance (29%), 120% compliance (22%), 80% or below (18%), 150% compliance or below (1%)
Q: China GDP growth rates will continue to decline?
A: Agree (63%), Disagree (38%)
Alan McCrae, UK Oil & Gas Leader, PwC
Coal consumption is currently on the rise in Europe.
How do we change residential heating infrastructure from oil to electric in the EU? That’s a big problem no one is talking about.
Isabelle Muller, Director General, French Union of Petroleum Industries
France lost 40% of refining capacity in the last few years. Down to 7 refineries from 12.
By 2040, there will be a ban on oil & gas production in France by 2040 and only electric vehicles will be sold.
There is a goal to decrease oil consumption by 35% by 2030.
Demetris Fessas, Acting General Manager, Cyprus Hydrocarbons Company
We are the newest National Oil Company on the block. At the start of the exploration phase.
We are facilitating regional collaboration. We pipe gas to Egypt which turns the gas to LNG for export. And collaborate with Israel on gas discoveries.
Dr. Zhen Wang, Deputy Director-General, Policy Research, CNPC
The countries that are part of the Belt & Road Initiative represent the following percentages of Chinese imports: Oil (66%), natural gas (85%) and coal (60%).
There are still more needs for energy infrastructure in the BRI countries, though the geopolitical challenges are tough.
China’s dependence on oil imports rose from 30% in 2000 to more than 70% in 2018.
China’s energy demand growth won’t stop until 2035.