ENERGYWORLD.CO.ID – COVID-19 and oil (trade) war became main reasons that oil price collapsed to the lowest level for 18 years on Sunday, March 30th 2020. Several oil and gas giant projects have recently been postponed and threatened to die. The companies also started implementing cost optimization approach to running projects by applying digitalization and cutting unnecessary workforce. Besides, depletion of conventional petroleum reserves requires industry to set high standard for engineers. Furthermore, global tendency to energy transition due to climate change has stimulated the oil and gas companies to make diversification. All these phenomena further narrow the job opportunity for Petroleum students and PE graduates today. On the other hand, a decade before, jobs in petroleum industry remained highly promising. Hundreds and thousands of people around the world found their places in this industry. Then what is actually happening now? Is the oil and gas industry still prospective? What qualities does PE current generation need to prepare to answer future challenges?
In response to that questions, IPCREE collaborated with OISAA and Gubkin SPE student chapter, held a Webinar series “World Energy” vol. 1 titled : Current Condition and Future Prediction of Petroleum, “Does Petroleum still Look Attractive in the World Eyes?”. The webinar was broadcast live on Friday, May 1st, 2020, at 8:00 PM Jakarta Time (GMT+7) on PPI TV youTube channel at the following this link https://www.youtube.com/watch?v=71UO0-Rx_hg. There were four speakers present. The first was Dr. Ardian Nengkoda, Project leader in Saudi Aramco. The second was Prof. Anatoliy Zolotukhin, Vice-President of WPC 2008-2014, Professor at the Gubkin State University of Oil and Gas, Russia. The third was Mr. Auli Kusuma, Board of Director of Society of Indonesian Energy Professional (SIEPH), Principal Project Advisor, BHP. The last was Prof. Tutuka Ariadji, 2015-2018 Head of Society of Indonesian Petroleum Engineers (IATMI), Professor at the Bandung Institute of Technology.
Current Condition & Future Prediction of Oil Industry (Middle East & North Africa)
What we have seen today is not something new. “Oil price itself is like a cycle, ups and down, supply and demand, it is trigger by the price. If the supply of oil less than the demand, typically the price is getting down. If the supply is quite constant and the demand is high, then the oil price will increase” said Mr. Ardian. Oil price has reached more than 120 USD/barrels around 2012-2013, so the oil price at that time is quite high. In 2015, supply of the crude oil were higher than the demand itself, in term of the cooperation. Because of the high supply, there is a gap around 1-2 million barrels/day. There is a situation where the demand of oil increased higher than the supply. That was driving the crude oil price to around 100-120 USD/barrel. in 2017, Demand quite stagnant. Suddenly, in the end of 2019 demand of the world consumption are little bit slow and declined, because of the COVID-19 pandemic. “For about 3-4 weeks ago, we have seen very clearly that oil price declined. It is explaining that for the past 5-6 years, the world productions of the oil are quite increase while the world consumption are quite stagnant and then decline very sharp over the past few months.” said Mr. Ardian. Typically, crude oil price driving by the supply and demand as a majority. Nowadays, we have seen that the pandemic issue can knock out the supply-demand can drive the oil price become decline. The bent crude spot prices for the past 4 months have been declined very sharp and the impact global challenge also goes to the stock oil market. COVID-19 and oil prices collapsing. “for the majority of the oil producer country in the Middle East and north Africa got some more less income. for other country, which typically they are importing rather than exporting, like Tunisia, Djibouti, Morocco, Yemen, Lebanon, and Jordan they are at least enjoying some benefits because of the low oil price.” explained Mr. Ardian.
Some industry around Middle East and North Africa little bit slowdown. WHO organization ranks Middle East and North Africa typically has some relatively high among the world’s 191 health systems. It is likely that lower oil prices will directly hurt oil exporters and indirectly hurt importers (which will see reduced foreign direct investment, remittances, and grants from the exporters). Private-sector development and broader economic reformation is needed for future. Report from capital economics, ADBC and KT research, there are 3 key factor affecting. First, coronavirus; second, declining oil prices; and last, lower crude oil production. The most impacted for non-oil sectors are any sector that related to tourism, trade, hospitality, logistics, and retail, for the forecast in Oil GDP likely to shrink in 2020. Middle east to clock 0,5-2% lower than forecast GDP. Mr. Ardian explained that there is a lot of uncertainty future demand. Future demand is not only driving by the pandemic, but also depend on how countries like China, India and the rest of importing country are moving fast to the industry of economics activity. The other uncertainty over here, basically is about climate change, about the environmental issue. In this regard, oil price will be not more look like than 30-40 USD/barrel. This is historical brent price, and then mention by some analyst from Bank of America, Citi, Morgan Stanley, S&P. Some analyst said that because of this slow recovery of the demand, the oil price look like will be stagnant in between 30-40 USD/barrel. The best idea so far is OPEC and plus members already a great to cut their oil productions around 9.7 million barrel/day to match the demand. There are some aspect we can learn from this pandemic. First, there is an area getting adverse effects. For example tourism, aviation and maritime industry, automotives, manufacturing and real estate, financial bank. Oil and gas industry are in between potential losers and potential winners, because a lot people are still depend on the oil price, transportation still depend on hydrocarbon. The other promising aspect in potential winners are agriculture, e-commerce, medical supply and services, food processing and retail.
Impact of Oil Price Fluctuations on Russia
The oil and gas crisis caused by the pandemic is another good opportunity to carefully evaluate the place and role of hydrocarbon resources in the development of global energy and the economy as a whole. Unfortunately, in recent years, the industry has been subjected to very serious and unreasonable attacks, as a result of which its potential is weakened. There is an interesting pattern: any statement forms at least three different opinions that divide society into relevant groups. One vote in support of the thesis, opinion or idea, the other against, and the third is the basis of the abstention camp. This pattern always appears without exception, but the size of the groups formed in this case depends on the importance of the topic or its scope. In turn, climate change (more precisely, ambient temperature) depends on the following three parameters : The eccentricity of the Earth’s orbit around the Sun, The angle of inclination of the orbit, and Precession (the motion of the Earth’s axis of rotation). This 3 effects different cycles. The eccentricity approximately 92.000 years, the inclination up to 41.000 years, and precession approximately 26.000 years. putting these together they made chaotic change in amount solar heat that coming to earth and make seasonal climate changes in planets. “It was founded by Milutin Milankovich, the Serbian astrophysicist who formulated a theory according to which seasonal and latitudinal variations in solar radiation affect the Earth differently and at different times and have the greatest impact on climate change on the planet. But unfortunately public doesn’t know about this theory. For recently, the mind of people intensifies significantly. The fears of politicians for the future made indifferent to their climate problem.” Said Prof. Anatoliy Zolotukhin. In October 2019, climate scientist experts in climatology, anthropology and ecology, sign a petition to UN asking to organizing int venue for the debate of at various point of view will be able to present their views of issue of climate. There is no climate emergency in the world therefore there is no reason to panic and anxiety. we strongly opposedly harmful 0 carbon policy for 2050. The goal for international should be to inform reliable and affordable sources to around the world.
Prof. Anatoliy explained that according to estimates by the Russian Federation, Ministry of Natural Resources the oil reserves of the Russian Arctic amount to 7.3 billion tons, condensate 2.7 billion tons and natural gas reserves 55 trillion m3. About 41% of the region’s oil and gas resources are located on the shelf, about 43.5% of the initial total resources of the Arctic zone are in the Yamal-Nenets Autonomous Okrug. Production: Oil (22% growth by 2030, 25% by 2035), gas (Share of Natural gas should increase from 82.7% to 92% 3), LNG (by 2030 up to 73.5 mtpa, by 2035 up to 120 mtpa). Traffic along the NSR (flexible for arctic development) : by 2030 up to 120 million ton, by 2035 up to 160 million ton. Despite the negative reaction of environmentalists to oil and gas exploration in the untouched regions of the Arctic, companies continue to search for hydrocarbon resources beyond the Arctic Circle. Reserves of undiscovered but recoverable oil on the North Slope of Alaska are estimated at 3.5-4.0 billion barrels (450 – 515 million tons). In Russia Gazprom, Rosneft, NOVATEK, and LUKOIL are engaged in searches. In Norway – Equinor, as well as Aker BP and ConocoPhillips are involved in exploration. At the same time, one and the other face particular problems in obtaining the maximum return on Arctic oil and gas resources. For example, Gazprom and Rosneft, even with tax breaks, find it difficult to work in the Arctic due to US sanctions. Russian companies are increasingly focusing on developing their own solutions for replacing sanctioned equipment and on developing their own production technologies. There are several oil and gas industry perspectives and advices to petroleum engineering students including : joining in joint Russian-Norwegian master program; participating in summer or winter school; participating in International student conference for example WPC youth forum.
Impact of Oil Price Fluctuations on United State
Mr. Auli Kusuma said before we discuss further about the impact of oil price fluctuation in United States (US) he explained of road map crude oil price from beginning years until now. That is the beginning of the years the crude oil was starting as 61 USD/barrel, but not long after that the corona outbreak china impact on the global demand, it makes oil price drop to 50 USD/barrel for brent type oil. March 5th, OPEC was trying facilitate Having the Summit in Vienna with Rusia between Saudi Arabia, but apperently the aggrement didn’t reach, it makes the oil price drop again from 50 USD/barrel going to 30 USD/barrel. Few days after that WHO announced that covid as the world pandemic and following that USA declaring the national emergency and make it drop again oil price. The oil price picking up a little bit when OPEC reached the aggrement with Rusia between Saudi Arabia for cutting production in May and June, but the different market respond and the condition over supply and not enough demand at the time and WTI oil types going down to -27 USD/barrel. There are two factors that , two factors are not balance supply & demand, amd out of stock storage capacity.
The impact of this situation with project capital globally, they are very adapt and quick react with all the price fluctuation in the world. Many oil and gas company in the USA started slashing cost for capex calender year 2020. The impact of this situation to conventional or uncoventional project are decrease of several activites like as equipment utilization, employment hour until 50%. Texas is the major contributorof the crude oil for the US, the contribute is 40% of US (2019), it’s around five million barrels per day in texas. The impact of this situation on texas is in the last 5 weeks at least 7000 workers has been layoffs and it on the weekly average there are around 2500-3000 people has been layoffs due to this fluctuation of the oil and gas price. USA policy for oil and gas based on the free market principle, it’s means that each individu has power on regulation to each producer on the permitting and it self will safety and environmental regulation. And in short term policy US it’s basically survival of the fittest the market will dictate, in the middle terms policy US is proratipn must be approved then state, but for to get approved from the state isn’t easy, it takes more than 150 days to pass and enact the bill from states legislature to federal congress. So in long term US has always been back to free market principles.
Impact of oil price fluctuation will be the next Opportunity for the business or the investor, it would be obvious that there will be small and or medium company that’s because struggling oil companies, this is another opportunity that create it in the US. It’s that stuggling of investment and a company that cannot survive will be forced to sell some of assets. So after this impact how long this oil price will bounce back into normal situation around 50-60 USD/barrel or more higher. “it’s different risks from what we have in 2016, so I would assume it will take at least the need six month for to rebound” said Mr. Auli Kusuma. The other opportunity and challanges for the world of education in the oil indusrty, that still has considerable opportunity in the US and other countries. The petroleum major is also still one of the biggest salary with amon other majors. Of course, you must be adaptable and flexible because the petroleum industry is unpredictable and it’s accompanied by always updating soft skill and hard skill such as data analytical and seismic modelling.
The New Petroleum Industry and education on the Impact of Oil Price Fluctuations and COVID-19 on Indonesia
Indonesia became one of the countries affected by the COVID-19, and COVID-19 is predicted to end based on theory in Indonesia in early June. However consumption and production are still very big gap in the middle this pancdemic. Even though consumption is declining due ti restrictions on travelling but in term of production it also difficult to incerase because oil price is fluctuating. It has impact on two biggest prodution fields, there are minas field declining 45% and duri field declining 37%. If combined the two constitute 50 percent of oil production in this country. Indonesia have 12 onstream projects in quartal 1-2021, and 4 project have been completed and under going, there are Buntal-5 field, Power Plant Sembakung project, Randgunting field, and Grati Pressure Low Projects, and because of the impact of Oil Price Fluctuations and COVID-19 will be delayed. “And current progress the first quater of this year there are : drilling development, wells 19 %, workover project 20% and well service project 25%, this number is from SKK migas” said Prof. Tutuka Ariadji.
The impact of this situation to be effect to several field will be delayed and shut down. Fields will be delayed there are Jambaran Tiung Biru field and Tangguh train III and fields will be shut down there are Banyu Urip Fields and Tangguh Fields. The otther impact are drilling, workover and well services in Malacca Starit Field will be delay and goverment revenur will drop from 32 billion USD/barrel to 19 billion USD/barrel. so delayed projects further suffered has lost 37.21 billion USD/barrel as equal 65 MBOPD and 3.484 BSCFD. So this impact in upstream there are reduce capital expenditures, tighten the budget for projects and postponed exploration drilling because there is no investment. This impact in downstream there are reduce the operational capacity, stop Balikpapan field refinery, fuel dosmetic selling drops drastically (diesel 34%, and Avtur 60%, period January to February, and open opportunity to export avtur. General impact of Oil Price Fluctuations and COVID-19 on Indonesia in short term is layoff employee, the middle terms are decreasing investments and production decline more severe, and the last long term is decreasing reserves. These are some of the goverment’s strategies to control this situation : cost efficiency, close coordination with oil company include logistics and procurement and the goverment give stimulus or incentives to player oil and gas. Pertamina has planning to buy 10 million barrel of crude oil , 9.3 million gasoline (RON 92) and LPG 5×44,000 MT) for aiming security supply in indonesia, explained Prof. Tutuka Ariadji.
Prof. Tutuka Ariadji said “ with technology is the key, we can to find low cost and environmental friendly”. Technology can make enhanced oil recovery (EOR) a low cost and environemental friendly chemicals. Technology also can implementation to robotation and automatization in smart field and other fossil energy like as coal liquefaction. And the new normal petroelum indusrty , not only oil companies will be exixst but there will be a big companies of new renewable energy. Companies will implementation robotazation and automatization technology in smart field for manage the field. And the last low cost and environmental friendly technology. The new normal petroleum of education, any related with the industri. Petroleum education will reoreintation of the curriculum content include robotazation and automatization technology, add broaden the student view about fossil energy and renewable energy. The communicatiom include content delivery to student will be little bit use online courses.
In the last section of webinar, it opened several questions for the speakers. we took several question from participants in live chat Youtube. The question from Muhammad Wijanarko, the question is Learning from the oil crisis, what should we do for gas production and it’s market and waht’s the future of natural gas? The first question will be answer by Dr. Adrian Nengkoda. Dr. Adrian Nengkoda explained “that about the question is basically the oil prices is crash and then the gas it self we take a look on the learning from the US when the oil price is down and then the oil production also down basically there’s a demand for the gas, but their is lack of the gas because the gas typically are coming as a assocoated gas from the oil but the gas compared with under energy especially compared with the oils. the gas is more environemental friendly because in term on the emissions and so on as all so the future of the gas is bright and then the petrochemical industry which is depending on the gas also quite very demand. And the future of the gas is driving by the emission by the people life style driving by the environmental regulation and the gas has benefit compared with the other hydrocarbon sources like oil, coal and other type of renewable, renew able can be competition with the gas but bear in mind that we currently with the situation oil price is low and nature of energy deman also loads is quite also impacting to the to the a renewable enegy. At this the moment to need realize that the deman is driving by the tansportation and the industry”. The first question will be answer by Mr. Auli Kusuma. Mr. Auli Kusuma explained “so my personal opinion is again come back intothe there’s no doubt you know LNG is cleaner saver and it’s deman about but we need to look back on capital spend that each operator has at this moment. They need to open their strategy and then see whether you know they could relly enhancet their LNG project or they should shift it to other project. We need also to consider that because the process of gas isn’t as simple as the oil. When processing of the lean gas and then what gas and everthing else it come to be moe complicated in the process”. The next question came from Della R and was shown to Prof. The question is How it could help indonesia oil sector considering majority indonesia oil are product from mature field ? what is your take on this? Do you think this technologiy can have future in indonesia? Especially considering today’s low oil price. Prof. Tutuka answer the question is there is a technic what the main idea of CCSU ( Carbon Capture Storage and Utilization ), so CO2 injected end of you can be used for you are if the CO2 Infected into the reservoirs, the costs more but if the infrastucture is there like in the US then the cost will be low and CO2 is free in Indonesia, maybe more than 1000 MSCFD , so that you canuse it. And for the proble is inthe infrastructure so if the goverment companies would like to join and foster profit then should be solved. To this is very cheap and the successful of the projects size is bigger than any other methods. So we have that resources, we have that fits this just a matter of you know how to mean if and in a way that the price so economic’s
Summary of the Webinar series “World Energy” vol. 1 titled : Current Condition and Future Prediction of Petroleum, “Does Petroleum still Look Attractive in the World Eyes?”written together by 2 students. The first is Clarinta Mourenza, Bachelor of oil and gas engineering at Irkutsk National Research Technical University, Russian; Secretary of the International Petroleum Community of Russia and Eastern-European Chapter (IPCREE). The second is Sami Aji, Bachelor of International Business Management at Sichuan University, China; Energy Commission Member of the Official Account of the Overseas Indonesian Students’ Association Alliance (OISAA).