Alahdal A. Hussein

Petroleum Engineer / Founder at Oil Industry Insight
Last Updated: February 1, 2017
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Career Development
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As the rally in oil prices continues to drive oil prices toward $60/bbl due to the support from OPEC and non-OPEC oil deal, many people may start to think that the good old days of high oil prices will be back soon. And that means, more spending, higher salaries, more jobs and less suffering. To those people I say, don't be excited, it may get worse before it gets better.

The last two years have been pivotal to the oil and gas industry. Many things were redefined; $50/bbl is the new $100/bbl, USA is the new swing producer in the making and it will play a critical role in keep oil prices low, competition for market share is no longer among conventional oil producers only, unconventional resource producers are now in the game and their presence will continue to grow with time. All these changes tell us something that is, the oil industry is evolving and what is after 2014 will never be the same as what was before 2014.

If the oil industry is changing in such a fast pace, how about you? Are you changing as well, or are you just staying the same and expecting old strategies to bring you better result in such a changing industry. Because if you are doing that, I promise you, you will be out of the oil industry before you even know it.

In this article, I will share with you three skills that you need in order to mitigate the current changes in the oil industry. These skills will help you overcome the challenges arising from the current low oil price reality and whatever bad events that might happen in the future.

1- Adaptability


One of the main reasons that resulted in many companies going out of business and filing for bankruptcy in the last two years is the fact that they could not adapt to the new reality of low oil prices.Whether youare a business owner,an employee, or someone who is planning to join the oil industry, you should understand that adaptability is an important factor for your survival and success in the oil industry. Why adaptability is important in the oil and gas industry? Here are two reasons;

1- The oil and gas industry is a fast-changing industry

The change in the oil industry is not only driven by rapid changes in technology, new types of resources and the new challenges associated with it, but it is also driven by unexpected events and changes in geopolitics which could turn the oil industry up-side-down just like what happened back in 2014. To survive in such an ever-changing industry, you need to be flexible and agile. You need to be able to accept changes, stay clam and confident, adapt, plan and respond fast to these changes.

2- Adaptability is key to survival and success in your career

Adaptability is an important quality that employers in fast-changing industries such as the oil industry seek to have in their employees. Take a look at the jobs' requirements of many oil and gas companies, you will find that adaptability is one of their top requirements. Schlumberger is one example. For other companies, even if it is not written there in their website, they expect you to have it.

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One of the job requirement as shown in Schlumberger's website

The nature of work in the oil industry requires you to be adaptable. You will work in different projects, with different teams and different challenges every time. Adding to these challenges, projects that you will be working on will have tight deadlines which makes it even more important to be able to adapt fast. To become successful in your career and to meet exceptions, you need to be open to new ideas, flexible to work in challenging issues, and you need to be able to cope when things don't go as planned.

2- Managing Change


Change management is the second most important skill after adaptability. Why? Because, for you to adapt, you need to change. In other words, you can't adapt to the changes around you if you don't change. But it seems that change is not easy. This is why we see many people are left behind when they are faced with difficulties and hardships. Most of the time, we all face the same problems and same challenges, so why do some people seem to be unable to change a simple thing in their life, while others seem to sail smoothly through the changes they face in their life?

The answer is very simple. Change itself is not hard, in fact, it is easy. What is hard is accepting the uncertainty associated with change. What makes the change hard is how we view it, how we manage it, and how we cope with its uncertainty. As human, what is most stressful and challenging for us is the uncertainty associated with the change not the change itself. And there is where we waste most of our time.

When a bad event takes place in our life, the cycle of our reactions goes as follows. We first go through the denial stage in which we deny what is happening. Then we enter the second stage which is the anger stage. In this stage our confidence is down and we feel angry because we keep thinking about the negative consequences of the change. After sometime, we enter the exploration stage where we try to explore new direction. Then comes the acceptance stage where we finally accept what happened and seek encouragement to move on and change.

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The Change Curve

Anyone who faces change as a result of bad events, he/she will go through the full curve of change above. The only difference between those who manage to change fast and adapt and those who are left behind is how long it takes them to go through each stage of the change curve. Many of us get stuck in the first or second stage of the change curve for a long time and there is where troubles happen and we become unable to adapt and therefore get left behind and fail.

For example, when the layoff wave took place in the past two years due to the downturn in the oil and gas industry, many of those who were laid off failed to react fast to the change they were facing. They didn't believe it at first, and many of them spent one and a half year waiting for things to get better, but it didn't. It only got worse. Many of those who were laid off didn't take the decision to move on, to learn new skills, to change their career path or even to work in other industries because they didn't believe what was happening. They kept waiting with a hope that things will change fast instead of changing themselves. And many ended up wasting their time and some still do.

How to manage change?

Being able to manage change effectively will prevent you from wasting your time on things you will regret later in life. It will help you to overcome difficult situtaions that you might face in the future. It will also help you to stay ahead of the competition and here is how you can do it:

1- Embrace change


How to embrace the change? Don't waste your time worrying about things that you can't change. Instead, spend that time thinking about the the things you can change and how you want to change them. It is hard to let go of worries, but ask yourself one question. What is the point of getting stressed over thing you can't change? Does your worry change anything? If it does not, then stop it.


2- Plan to change the things you can and do it fast

Once you let go of your worries and stress over things you can't change, then start planning to change the things you can change. Be realistic, and stop worrying about uncertainty. It is only fear in our minds, it does not exist. Plan your change and do it fast.

3- Marketing and branding yourself


The recent changes in the oil industry has resulted in many oil and gas companies cutting their spending to weather the effects of low oil prices. One way to achieve that is by reducing the number of their workforce through layoffs and slowing down recruitment activities. That means, there is a high demand for jobs, but the supply is too low and this in turn created a downturn in recruitment activities and the consequence is a high competition for less jobs. In such an environment, the question is always about how to stand out of the crowd and secure the job you want or keep the one you have and avoid being laid off.

There are many things you can do to stand out of the crowd such as writing irresistible CV and cover-letter, educating yourself and staying up-to-date with the industry events, developments and new technologies, connecting with people in the industry, building relationships, having professional memberships and volunteering in activities and events to gain experience. All these things will add value to you and help you stand out, but what is the point of doing all these things if you can't show them to your potential employers. It is like having a great product and the worst marketing strategy, you end up selling nothing.

What is the point of doing all these things if you don't use them to sell yourself, market your skills and competencies and create a brand for yourself. By marketing and branding here, I don't mean doing that on CV, because no matter how good is your CV, you only send it to few companies and due to the high number of applications as a result of the high rate of unemployment, the chances of your CV getting noticed is too low. What I am talking about here is the online marketing and branding.

For me, online marketing and branding is the best type of branding, because you only have to work hard on it for one time and it will continue to promote you even when you are sleeping. It will even promote you to companies you never knew and others whom you never thought of sending your application over to them. That is the power of online marketing and branding.

How to market and brand yourself?

1- The first steps

The first steps are the initial steps that you should go through in order to develop a strong personal brand. These steps involve defining youroverall aspirations, conducting research, defining your brand attributes, assessing your current state and creating your branding plan.These are the initial steps that you should go through to get you started. Here is agreat article by Lisa Quast on Forbes which will walk you through these steps in more details.

2- Select a platform

Once you are done with the first steps, it is time to find the platform where you will be doing all the branding. To brand yourself, you need a platform, and since you are in the oil industry, you need a platform that is fully dedicated for oil and gas professionals. One of the choices you have is NrgEdge. It is a new oil and gas professional platform, dedicated to oil and gas professionals, and it has many features to help you brand yourself. Other platforms such as LinkedIn, Twitter, and other social media platforms are also a good place to start. In the coming days, I will share an article explaining how to brand yourself in social media based on my personal experience, stay tuned.

3- Continue to Improve

Marketing and branding is not a one time job. Things change and improve, and you too. You will cultivate new skills and gain new experiences. When that happens, you need to update your online profiles. Allocate a time every month to check your online profiles for improvement and updates. As you grow and improve, you will find things to improve.

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In 2018, the United States consumed more energy than ever before

U.S. total energy consumption

Source: U.S. Energy Information Administration, Monthly Energy Review

Primary energy consumption in the United States reached a record high of 101.3 quadrillion British thermal units (Btu) in 2018, up 4% from 2017 and 0.3% above the previous record set in 2007. The increase in 2018 was the largest increase in energy consumption, in both absolute and percentage terms, since 2010.

Consumption of fossil fuels—petroleum, natural gas, and coal—grew by 4% in 2018 and accounted for 80% of U.S. total energy consumption. Natural gas consumption reached a record high, rising by 10% from 2017. This increase in natural gas, along with relatively smaller increases in the consumption of petroleum fuels, renewable energy, and nuclear electric power, more than offset a 4% decline in coal consumption.

U.S. total energy consumption

Source: U.S. Energy Information Administration, Monthly Energy Review

Petroleum consumption in the United States increased to 20.5 million barrels per day (b/d), or 37 quadrillion Btu in 2018, up nearly 500,000 b/d from 2017 and the highest level since 2007. Growth was driven primarily by increased use in the industrial sector, which grew by about 200,000 b/d in 2018. The transportation sector grew by about 140,000 b/d in 2018 as a result of increased demand for fuels such as petroleum diesel and jet fuel.

Natural gas consumption in the United States reached a record high 83.1 billion cubic feet/day (Bcf/d), the equivalent of 31 quadrillion Btu, in 2018. Natural gas use rose across all sectors in 2018, primarily driven by weather-related factors that increased demand for space heating during the winter and for air conditioning during the summer. As more natural gas-fired power plants came online and existing natural gas-fired power plants were used more often, natural gas consumption in the electric power sector increased 15% from 2017 levels to 29.1 Bcf/d. Natural gas consumption also grew in the residential, commercial, and industrial sectors in 2018, increasing 13%, 10%, and 4% compared with 2017 levels, respectively.

Coal consumption in the United States fell to 688 million short tons (13 quadrillion Btu) in 2018, the fifth consecutive year of decline. Almost all of the reduction came from the electric power sector, which fell 4% from 2017 levels. Coal-fired power plants continued to be displaced by newer, more efficient natural gas and renewable power generation sources. In 2018, 12.9 gigawatts (GW) of coal-fired capacity were retired, while 14.6 GW of net natural gas-fired capacity were added.

U.S. fossil fuel energy consumption by sector

Source: U.S. Energy Information Administration, Monthly Energy Review

Renewable energy consumption in the United States reached a record high 11.5 quadrillion Btu in 2018, rising 3% from 2017, largely driven by the addition of new wind and solar power plants. Wind electricity consumption increased by 8% while solar consumption rose 22%. Biomass consumption, primarily in the form of transportation fuels such as fuel ethanol and biodiesel, accounted for 45% of all renewable consumption in 2018, up 1% from 2017 levels. Increases in wind, solar, and biomass consumption were partially offset by a 3% decrease in hydroelectricity consumption.

U.S. energy consumption of selected fuels

Source: U.S. Energy Information Administration, Monthly Energy Review

Nuclear consumption in the United States increased less than 1% compared with 2017 levels but still set a record for electricity generation in 2018. The number of total operable nuclear generating units decreased to 98 in September 2018 when the Oyster Creek Nuclear Generating Station in New Jersey was retired. Annual average nuclear capacity factors, which reflect the use of power plants, were slightly higher at 92.6% in 2018 compared with 92.2% in 2017.

More information about total energy consumption, production, trade, and emissions is available in EIA’s Monthly Energy Review.

April, 17 2019
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April, 17 2019
A New Frontier for LNG Pricing and Contracts

How’s this for a first? As the world’s demand for LNG continues to grow, the world’s largest LNG supplier (Shell) has inked an innovative new deal with one of the world’s largest LNG buyers (Tokyo Gas), including a coal pricing formula link for the first time in a large-scale LNG contract. It’s a notable change in an industry that has long depended on pricing gas off crude, but could this be a sign of new things to come?

Both parties have named the deal an ‘innovative solution’, with Tokyo Gas hailing it as a ‘further diversification of price indexation’ and Shell calling it a ‘tailored solutions including flexible contract terms under a variety of pricing indices.’ Beneath the rhetoric, the actual nuts and bolts is slightly more mundane. The pricing formula link to coal indexation will only be used for part of the supply, with the remainder priced off the conventional oil & gas-linked indexation ie. Brent and Henry Hub pricing. This makes sense, since Tokyo Gas will be sourcing LNG from Shell’s global portfolio – which includes upcoming projects in Canada and the US Gulf Coast. Neither party provided the split of volumes under each pricing method, meaning that the coal-linked portion could be small, acting as a hedge.

However, it is likely that the push for this came from Tokyo Gas. As one of the world’s largest LNG buyers, Tokyo Gas has been at the forefront of redefining the strict traditions of LNG contracts. Reading between the lines, this deal most likely does not include any destination restriction clauses, a change that Tokyo Gas has been particularly pushing for. With the trajectory for Brent crude prices uncertain – owing to a difficult-to-predict balance between OPEC+ and US shale – creating a third link in the pricing formula might be a good move. Particularly since in Japan, LNG faces off directly with coal in power generation. With the general retreat from nuclear power in the country, the coal-LNG battle will intensify.

What does this mean for the rest of the industry? Could coal-linked contracts become the norm? The industry has been discussing new innovations in LNG contracts at the recent LNG2019 conference in Shanghai, while the influx of new American LNG players hungry to seal deals has unleashed a new sense of flexibility. But will there be takers?

I am not a pricing expert but the answer is maybe. While Tokyo Gas predominantly uses natural gas as its power generation fuel (hence the name), it is competing with other players using cheaper coal-based generation. So in Japan, LNG and coal are direct competitors. This is also true in South Korea and much of Southeast Asia. In the two rising Asian LNG powerhouses, however, the situation is different. In China – on track to become the world’s largest LNG buyer in the next two decades – LNG is rarely used in power generation, consumed instead by residential heating. In India – where LNG imports are also rising sharply – LNG is primarily aimed at petrochemicals and fertiliser. LNG based power generation in China and India could see a surge, of course, but that will take plenty of infrastructure, and time, to build. It is far more likely that their contracts will be based off existing LNG or natural gas benchmarks, several of which are being developed in Asia alone.

If it takes off  the coal-link LNG formula is likely to remain a Asian-based development. But with the huge volumes demanded by countries in this region, that’s still a very big niche. Enough perhaps for the innovation to slowly gain traction elsewhere, next stop -  Europe?

The Shell-Tokyo Gas Deal:

Contract – April 2020-March 2030 (10 Years)

Volume – 500,000 metric tons per year

Source – Shell global portfolio

Pricing – Formula based on coal and oil & gas-linked indexes

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April, 15 2019