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Last Updated: September 7, 2016
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Oil & Gas Giants Call for Industry Collaboration ahead of Flagship 
Abu Dhabi Energy Event

Fossil Fuels to Account for 80% of Total Energy Supplies in 2035: Industry Report

Abu Dhabi, UAE – 07 September 2016 – Oil and gas giants are calling for greater industry collaboration and an increased focus on operational efficiency, as global energy leaders prepare to gather in the UAE capital for the upcoming Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC 2016) in November.

The future of the industry depends on its ability to embrace the new energy landscape and drive efficiency, say experts. Speaking ahead of his participation in the ADIPEC Global Business Leaders’ panel, where international CEOs will be gathering to address the challenges and opportunities facing the petroleum sector, Patrick Pouyanné, Chairman and CEO of Total, said industry stakeholders must work in unison towards the common goal of achieving a sustainable energy future.

“The global energy landscape is witnessing a rapid change, influenced by economic challenges and efforts to reduce carbon emissions, which can be addressed by the emerging role of natural gas and renewables. All of this makes it crucial that industry players operate not only more efficiently, but also more closely, in a spirit of cooperation,” Pouyanné said.  

“Technology, innovation, research – they all play an instrumental role not only in managing this transitional period, but also in leveraging the many opportunities that it presents. This is what makes ADIPEC an invaluable event for the oil and gas community, because it offers a global platform for stakeholders to collaborate and collectively address not only the imminent challenges in the energy sector, but the longer term picture that is starting to take shape. As CEO of Total, which aims to become the responsible energy major, ADIPEC is an event I would not want to miss,” Pouyanné added.

Confirmed senior-level speakers at ADIPEC include Dr. Sultan Ahmed Al Jaber, UAE Minister of State and CEO of the ADNOC Group of Companies, who will be presenting the Opening Ceremony keynote; Rex W. Tillerson, Chairman and CEO of Exxon Mobil Corporation, Patrick Pouyanné, Chairman and CEO of Total; Bob Dudley, CEO of BP; Alexander Medvedev, Deputy Chairman, Management Committee, Gazprom; Vicki A. Hollub, President and CEO of Occidental Petroleum Corporation, Jeff Miller, President of Halliburton; and Paal Kibsgaard, Chairman and CEO of Schlumberger (complete list of Opening Ceremony and Global Business Leaders speakers below).

Moderating the Global Business Leaders sessions will be celebrated journalist John Simpson, BBC World Affairs editor, broadcaster, author and columnist, as well as oil guru Dr. Daniel Yergin, Vice Chairman of the industry consulting group IHS Markit.

According to BP’s latest Energy Outlook report, fossil fuels will remain the dominant form of energy powering global expansion for the next two decades, supplying around 60% of the growth in energy demand, and accounting for almost 80% of total energy supplies in 2035. The same report indicates that the fuel mix will witness a significant change, with gas emerging as a major energy resource.

Developing resilient strategies has become a top priority for industry leaders, who are increasingly looking at redefining their business approach in an effort to continue meeting the growth in demand while adapting to the evolving supply mix.

Jeff Miller, President of Halliburton, said: “Hydrocarbons are, by far, the most affordable and abundant resource available for advancing the progress of human life and play an integral part in meeting the world’s growing demand for energy.  Our industry is fuelled by continued investment in technology and innovation as we make better tools to increase barrels produced and decrease cost.  At Halliburton, we collaborate and engineer solutions that maximise asset value for our customers.  For us, collaboration is a way of life.”  

“We listen to our customers, understand their drivers, and respond to their needs to deliver solutions that sustainably lower the cost per BOE.  We look forward to discussing the many opportunities ahead for our industry at the ADIPEC 2016 Global Business Leader sessions and learning from other industry participants,” Miller added.

Billed as the premier knowledge-sharing platform for movers and shakers in the oil and gas industry, ADIPEC’s distinguished Conference Programme will bring together Ministers, CEOs, decision makers, world renowned luminaries, and experts to address challenges and opportunities across both technical and non-technical aspects of the industry.

The programme will feature a high-level Opening Ceremony and three Global Business Leaders panel sessions, offering a world outlook for the oil industry, shedding light on the developing role of gas and LNG, and providing insights on implementing effective leadership strategies.

Vicki Hollub, President and CEO of the Occidental Petroleum Corporation, said: “ADIPEC is one of the premier oil and gas conferences, bringing energy leaders together from around the world. I am honoured to be participating at this year’s event and look forward to sharing ideas on how to address the most important challenges before our industry.”

ADIPEC’s anticipated Conference Program also features 2 Ministerial Sessions, 8 Executive Panel Sessions, 8 Offshore & Marine Sessions, 8 Women in Energy Sessions, and 106 Technical Sessions.

Established as the world’s most influential exhibition and conference for the oil and gas industry, ADIPEC has a longstanding track record of bringing together globally celebrated luminaries and experts to discuss challenges and opportunities in the energy sector. The annual four-day event will take place from 7-10 November 2016 at ADNEC.

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May, 20 2022
High Oil Prices and Indonesia’s Ban on Oil Palm Exports

Supply chains are currently in crisis. They have been for a long time now, ever since the start of the Covid-19 pandemic reshaped the way the world works. Stressed shipping networks and operational blockages – coupled with China’s insistence on a Covid-zero policy – means that cargo tanker rates are at an all-time high and that there just aren’t enough of them. McDonalds and KFCs in Asia are running out of French fries to sell, not because there aren’t enough potatoes in Idaho, but because there aren’t enough ships to deliver them to Japan or to Singapore from Los Angeles. The war in Ukraine has placed a particular emphasis on food supply chains by disrupting global wheat and sunflower oil supply chains and kicking off distressingly high levels of food price inflation across North Africa, the Middle East and Asia. It was against this backdrop that Indonesia announced a complete ban on palm oil exports. That nuclear option shocked the markets, set off a potential new supply chain crisis and has particular implications on future of crude oil pricing and biofuels in Asia.  

A brief recap. Like most of Asia, Indonesia has been grappling with food price inflation as consequence of Covid-19. Like most of Asia, Indonesia has been attempting to control this through a combination of shielding its most vulnerable citizens through continued subsidies while attempting to optimise supply chains. Like most of Asia, Indonesia hasn’t been to control the market at all, because uncoordinated attempts across a wide spectrum of countries to achieve a similar level of individual protectionism is self-defeating.

Cooking oil is a major product of sensitive importance in Indonesia, and one that it is self-sufficient in as a result of its status as the world’s largest palm oil producer. So large is Indonesia in that regard that its excess palm oil production has been directed to increasingly higher biodiesel mandates, with a B40 mandate – diesel containing 40% of palm material – originally schedule for full implementation this year. But as palm oil prices started rising to all-time highs at the beginning of January, cooking oil started becoming scarcer in Indonesia. The government blamed hoarding and – wary of the Ramadan period and domestic unrest – implemented a Domestic Market Obligation on palm oil refineries, directing them to devote 20% of projected exports for domestic use. Increasingly stricter terms for the DMO continued over February and March, only for an abrupt U-turn in mid-March that removed the DMO completely. But as the war in Ukraine drove prices even further, Indonesia shocked the market by announcing an total ban on palm oil exports in late April. Chaotically, the ban was first clarified to be palm olein only (straight refining cooking oil), but then flip-flopped into a total ban of crude palm oil as well. Markets went haywire, prices jumped to historical highs and Indonesia’s trading partners reacted with alarm.

Joko Widodo has said that the ban will be indefinite until domestic cooking oil prices ‘moderate’. With the global situation as it is, ‘moderate’ is unlikely to be achieved until the end of 2022 at least, if ‘moderate’ is taken to be the previous level of palm oil prices – roughly half of current pricing. Logistically, Indonesia cannot hold out on the ban for more than two months. Only a third of Indonesia’s monthly palm oil production is consumed domestically; the rest is exported. An indefinite ban means that not only fill storage tanks up beyond capacity and estates forced to let fruit rot, but Indonesia will be missing out on crucial revenue from its crude palm oil export tax. Which is used to fund its biodiesel subsidies.

And that’s where the implications on oil come in. Indonesia’s ham-fisted attempt at protectionism has dire implications on biofuels policies in Asia. Palm oil prices within Indonesia might sink as long as surplus volumes can’t make it beyond the borders, but international palm oil prices will remain high as consuming countries pivot to producers like Malaysia, Thailand, Papua New Guinea, West Africa and Latin America. That in turn, threatens the biodiesel mandates in Thailand and Malaysia. The Thai government has already expressed concern over palm-led food price inflation and associated pressure on its (subsidised) biodiesel programme, launching efforts to mitigate the worst effects. Malaysia – which has a more direct approach to subsidised fuels – is also feeling the pinch. Thailand’s move to B10 and Malaysia’s move to B20 is now in jeopardy; in fact, Thailand has regressed its national mandate from B7 to B5. And the reason is that the differential between the bio- and the diesel portion of the biodiesel is now so disparate that subsidy regimes break down. It would be far cheaper – for the government, the tax-payers and consumers – to use straight diesel instead of biodiesel, as evidenced by Thailand’s reversal in mandates.

That, in turn, has implications on crude pricing. While OPEC+ is stubbornly sticking to its gentle approach to managing global crude supply, the stunning rebound in Asian demand has already kept the consumption side tight to match that supply. Crude prices above US$100/b are a recipe for demand destruction, and Asian economies have been preparing for this by looking at alternatives; biofuels for example. In the past four years, Indonesia has converted some of its oil refineries into biodiesel plants; in China, stricter crude import quotas are paving the way for China to clamp down on its status of a fuels exporter in favour of self-sustainability. But what happens when crude prices are high, but the prices of alternatives are higher? That is the case for palm oil now, where the gasoil-palm spread is now triple the previous average.

Part of this situation is due to market dynamics. Part of it is due to geopolitical effects. But part of it is also due to Indonesia’s knee-jerk reaction. Supply disruption at the level of a blanket ban is always seismic and kicks off a chain of unintended consequences; see the OPEC oil shocks of the 70s. Indonesia’s palm oil export ban is almost at that level. ‘Indefinite’ is a vague term and offers no consolation to markets looking for direction. Damage will be done, even if the ban lasts a month. But the longer it lasts – Indonesian general elections are due in February 2024 – the more serious the consequences could be. And the more the oil and refining industry in Asia will have to think about their preconceived notions of the future of oil in the region.

End of Article

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Market Outlook:

  • Crude price trading range: Brent – US$110-1113/b, WTI – US$105-110/b
  • As the war in Ukraine becomes increasingly entrenched, the pressure on global crude prices as Russian energy exports remain curtailed; OPEC+ is offering little hope to consumers of displaced Russian crude, with no indication that it is ready to drastically increase supply beyond its current gentle approach
  • In the US, the so-called NOPEC bill is moving ahead, paving the way for the US to sue the OPEC+ group under antitrust rules for market manipulation, setting up a tense next few months as international geopolitics and trade relations are re-evaluated

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