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Last Updated: August 17, 2017
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WITH the scarcity of employment in the oil and gas industry, graduates with both soft skills and knowledge will have an edge in the competitive job market.

Tertiary students in this field are taking their own initiative to ready themselves for job recruitment upon graduation.

Felicity Valerie Karim, a 23-year-old final-year petroleum engineering student at Curtin University, said: “Fresh graduates are having difficulties in getting jobs. Be proactive and get involved in programmes in order to network and put yourself in the market,” she said.

Universiti Teknologi Malaysia final-year petroleum engineering student Boshkiran Segar, 22, has always strived to gain extra skills in addition to academic knowledge.

“Students learn theories at university. In terms of practical experience, we can only earn it outside the university, through programmes and internships. Exposure and on-the-job learning enhance theories,” he said.

Concerned about employability, Felicity and Boshkiran have joined the NrgEdge Ambassador Programme crafted for students and fresh graduates interested in the energy, oil and gas industry.

The initiative encourages participants to get a head start in the sector and their career journey by getting involved in industry events and learning networking skills.

As ambassadors, students will be the bridge connecting their university and peers with the industry and its latest developments to ensure that the future generations of energy professionals are well-equipped for the transition to professional life.

The programme has received more 150 applicants from various countries to date. However, at present, only Malaysian and Bruneian applicants are accepted.

NrgEdge co-founder Malina Raman said: “This programme was put together to spread the knowledge about what the industry has to offer. Participants network at our professional events and boost their confidence by learning to speak in public. NrgEdge ambassadors also get access to career mentors for guidance on the job market, resume writing as well as skills at an interview.”

Malina added that those employed in the fast growing renewable energy sector will have to update their skills constantly.

“In the long term, the fossil fuels industry will go into a transitionary phase. Undergraduates and young professionals must understand their new prospects in the jobs market of the future. Job opportunities will be different from a decade ago, as there will be more emphasis on the downstream and petrochemicals sector, and the development and production of cleaner fossil fuels such as natural gas.

“As the economies in Malaysia and across the world continue to grow, there will be a sustained need for more energy. The skills acquired by students and young professionals today through varied engineering and scientific disciplines can be applied in the fast growing renewable energy sector.”

At the NrgEdge Ambassador Boot Camp, the first training session of the programme, trainer Siti Rasidah Mohd Shihab coached 16 students in mind-challenging activities.

Siti Rasidah, who had worked with Petronas for 25 years, sees this programme as training participants to survive in a world with fewer job openings.

“Graduates are flooding the market. They have to work at getting employment these days. Given the tough job market, they have to buck up. Things are not how they used to be.

“Previously, graduates were easily employed as soon as they graduated. This is not the case today. They have to compete and be versatile.”

The first instalment of the programme will see 31 participants taking part in a series of events to be conducted across Malaysia.

One of the ambassadors, final-year petroleum engineering student Fatin Aina Zawani Jais, 21, said that this programme gives her the chance to network with people face-to-face, a practice which is getting rare in the digitalised world.

“It is important to meet people to share opportunities and knowledge to gain exposure to the industry. We talk about issues which we don’t get to express at university. We learn about the differences in the learning environment at different tertiary institutions and the syllabi,” she said.

NrgEdge regional strategic partnerships manager Mohd Anas Asalem, who is also a graduate of the oil and gas field, said that the programme creates multi-talented employees to fill the talent gap in the sector.

“When people in the industry retire, fresh graduates cannot fill the posts because of the downturn. This has been taking place for 20 years,” he added.

NrgEdge is trying to expand its programme to Brunei, Indonesia and Thailand. This year the programme received applicants from Malaysia (40 per cent), Indonesia (18), Singapore (12), India (nine) and other countries (21).

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TODAY IN ENERGY: Drop in petroleum demand led to rise in crude oil inventories and low refinery utilization

The U.S. Energy Information Administration’s (EIA) latest Petroleum Supply Monthly shows the significant changes in petroleum markets that occurred in April, when most of the United States was under stay-at-home orders to limit the spread of coronavirus. In April, commercial crude oil inventories increased by 46.7 million barrels (10%)—the largest monthly increase in EIA data going back to 1920. U.S. refineries operated at 70% of their capacity, the lowest utilization rate in EIA’s monthly data series dating back to 1985. Demand for finished petroleum products fell to 11.7 million barrels per day (b/d), the lowest level since at least 1981.

April’s crude oil inventory increase is a result of refinery runs falling more quickly than crude oil supply, which is determined by domestic production and imports. U.S. crude oil production in April averaged 12.1 million b/d, a decrease of 669,000 b/d (5%) from March. This decrease represents the largest month-over-month decline since September 2008, when Hurricanes Ike and Gustav hit the U.S. Gulf Coast. U.S. crude oil imports fell by 776,000 b/d (12%) from March to April, further decreasing crude oil supply in the United States.

The combined drop in production and imports was smaller than the decline in gross inputs to refineries, resulting in record increases in crude oil inventories. Based on estimates in EIA’s Weekly Petroleum Status Report, commercial crude oil inventories reached a record high of 541 million barrels in the week ending June 19 and have fallen slightly in the weeks since then.

U.S. product supplied of gasoline, distillate, and jet fuel

Source: U.S. Energy Information Administration, Petroleum Supply Monthly

Changes in travel patterns resulted in the lowest levels of U.S. demand for finished petroleum products (as measured by product supplied) in decades. Transportation fuels have been affected differently by changes in travel: demand for jet fuel and motor gasoline fell much more than distillate fuel, which is primarily consumed as diesel. From March to April, product supplied of finished motor gasoline decreased a record 1.9 million b/d (25%) to 5.9 million b/d, the lowest monthly value since the mid-1970s.

In the span of two months, U.S. demand for jet fuel fell by more than half, from 1.6 million b/d in February to 691,000 b/d in April. Before April, U.S. jet fuel demand had not been less than 700,000 b/d since the mid-1970s.

Distillate demand fell by 408,000 b/d, or about 10%, from March to April. Although the change in distillate demand was less drastic than the changes in motor gasoline and jet fuel demand, distillate consumption in April 2020 was the lowest in more than a decade.

July, 10 2020
U.S. natural gas exports to Mexico set to rise with completion of the Wahalajara system

Exports of natural gas to Mexico by pipeline are the largest component of U.S. natural gas trade, accounting for 40% of all U.S. gross natural gas exports in 2019. EIA expects these exports to increase with the completion of the southern-most segment of the Wahalajara system, the Villa de Reyes-Aguascalientes-Guadalajara (VAG) pipeline. VAG began operations in June 2020, connecting new demand markets in Mexico to U.S. natural gas pipeline exports.

The Wahalajara system is a group of new pipelines that connects the Waha hub in western Texas, a major supply hub for Permian Basin natural gas producers, to Guadalajara and other population centers in west-central Mexico. The Wahalajara system provides U.S. natural gas to meet growing demand from Mexico’s electric power and industrial sectors. With the 0.89 billion cubic feet per day (Bcf/d) VAG pipeline entering service, EIA expects utilization of the Wahalajara system to quickly ramp up, resulting in increased U.S. natural gas exports to Mexico out of western Texas and additional takeaway capacity out of the Permian Basin.

Since 2016, Mexico has been expanding its natural gas pipeline system, which has supported continual growth in U.S. natural gas exports. Most of this growth has been in U.S. natural gas exports from southern Texas after the existing U.S. pipeline infrastructure was expanded and the Los Ramones Phase II pipeline in central Mexico was completed.

Since the Sur de Texas-Tuxpan pipeline was completed in September 2019, U.S. natural gas exports to Mexico reached a record 5.5 Bcf/d in October 2019. U.S. natural gas exports from the border at Brownsville, Texas, to the southeastern state of Veracruz in Mexico averaged 0.6 Bcf/d during the last quarter of 2019, or about 20% of the pipeline’s capacity.

Overall, U.S. natural gas exports from this region have only increased by 0.2 Bcf/d from 2016 to 2019 because of delays in pipeline construction in Mexico. In particular, two regional pipelines were completed in 2017 but have not been used near their capacity:

  • The 1.1 Bcf/d Comanche Trail pipeline, which delivers natural gas to Mexico from San Elizaro, Texas
  • The 1.4 Bcf/d Trans-Pecos pipeline, which crosses the border at Presidio, Texas 

U.S. monthly natural gas exports to Mexico by region

Source: U.S. Energy Information Administration, Natural Gas Monthly

The Comanche Trail pipeline has been delivering an average of 0.1 Bcf/d of natural gas to Mexico since the San Isidro-Samalayuca pipeline entered service in June 2017. Pipeline operators do not expect flows to rise until the 0.47 Bcf/d Samalayuca-Sásabe pipeline is completed in either late 2020 or early 2021 in Mexico.

The Trans-Pecos pipeline, the U.S. segment of the Wahalajara system, did not transport significant volumes of natural gas until October 2018; it is currently only operating at 10% to 15% of its total capacity. Most of the demand centers are in southern Mexico, waiting to be connected to the VAG pipeline. Three of the project’s four pipelines in Mexico that are currently in-service include

  • Ojinga-El Encino: 1.4 Bcf/d, entered service in June 2017
  • El Encino-La Laguna: 1.5 Bcf/d, entered service in January 2018
  • La Laguna-Aguascalientes: 1.2 Bcf/d, entered service in December 2019

Before the economic impacts and uncertainty associated with COVID-19 mitigation efforts and declining crude oil prices, S&P Global Platts expected U.S. natural gas exports to Mexico to increase immediately by 0.3 Bcf/d to 0.4 Bcf/d on the Wahalajara system. However, given the decreased demand for natural gas in Mexico in response to the economic impact of COVID-19 mitigation efforts, growth is likely to be slower than expected. Beyond these volumes, additional export volumes will be limited by how quickly customers in Mexico can be connected to the pipeline system.

These connections include new natural gas-fired combined-cycle generators and the scheduled 2020 completion of the 0.89 Bcf/d Tula-Villa de Reyes pipeline, which will deliver natural gas to central Mexico. Deliveries from the Wahalajara network are likely to partially displace higher-cost liquefied natural gas (LNG) imports into Mexico’s Manzanillo terminal, which serves markets in Guadalajara and Mexico City.

As U.S. natural gas exports on the Wahalajara system rise and crude oil prices remain low, EIA expects the price at the Waha hub in the Permian Basin, which had been steeply discounted to the Henry Hub national benchmark, to continue to strengthen.

July, 07 2020
The Oil World’s Ongoing Impairments

Officially, we are past the half point of 2020 and with that the end of the second quarter. And what a quarter it has been. WTI prices plunged into negative territory (as low as -US$37/b) then recovered to US$40/b as OPEC+ moved from infighting to coordinating the largest crude production cut in history. In between, the Covid-19 pandemic wreaked havoc with the global economy, setting off a chain reaction within the oil world whose full impact is still unknown.

Opinions on a post-Covid oil world are divided. Some voices, the more optimistic ones, think that oil demand could recover to pre-Covid levels within a year or two. The more pessimistic ones think that this will never happen, that Covid-19 has hastened the trend away from fossil fuels to sustainable energy against the backdrop of climate change. Either way, this has thrown a spanner in the works of the giant, multi-billion oil and gas projects that were announced over the past two years as the energy world began to wake up from its post-2015 price crash investment hibernation. Those projects were made at a time when oil prices were at US$50-60/b. Since oil prices are now only at US$40/b, the current value and the future worth of these assets have now declined. Energy companies account for this by adjusting the value of their portfolios in accordance to the projected value of crude: an upward adjustment is known as a revaluation, and a negative one is known as an impairment.

This is a term that will crop up many times over 2020, as energy companies close their quarterly financial books and report their results to shareholders. The plunge in crude oil prices and the uncertain outlook for oil demand means that publicly-traded companies must account for this to their shareholders. Chevron was the first supermajor to book an impairment, in late 2019 when it took a US$10 billion hit to its oil and gas assets. It wasn’t the only one: firms all across the oil chain also reduced the value of their assets, from Repsol to Equinor.

Further impairments were made in April 2020 when the Q1 financial results were announced, mainly in response to the triggering of the OPEC+ price war (which saw crude prices halve from US$60/b to US$30/b) and the Covid-19 pandemic accelerating to a point where over half of the world’s population went into lockdown. But the major impact will come in Q2 2020, when the roil in the oil markets truly began to boil uncontrollably. BP has announced that it may take up to a US$17.5 billion impairment in its Q2 2020 financial results, while Shell has just admitted that it may have to shave US$22 billion from its asset value.

This has roots not just in the depressed demand for energy due to Covid-19, but also the ongoing conversation on climate change. Almost all supermajors have announced intentions to become carbon neutral by the 2050 timeframe. That may be good news for the planet, but it is bad news for the companies’ portfolio. Put simply, it means that some of the assets that they have invested billions in are now not only worth a lot less (due to Covid-19) but they may in fact be worth nothing at all, because climate change considerations mean that they will never be exploited. Challenging projects such as Total’s deepwater Brulpadda discovery in turbulent South African waters or Pertamina/ExxonMobil/Total/PTTEP’s beleaguered and complicated East Natuna sour gas asset in Indonesia may never be commercialised, either because of uneconomic prices or because they run counter to the goal of becoming carbon neutral. The Financial Times estimates that the amount of unviable or stranded hydrocarbon assets could reach as much as US$900 billion; that figure is pre-Covid, and could now become even higher.

There is one supermajor bucking the trend though. The biggest supermajor of all, in fact. Unlike its peers, ExxonMobil has not yet succumbed to impairments. If fact, it has not announced any negative revaluations at all over the past decade, even during the 2015 oil price crash. ExxonMobil claims that this is because it books the value of new assets ‘very conservatively’ and does not ‘adjust values to short-term price trends’, but critics say that it has an ongoing history of vastly overestimating its assets’ value. Along with Chevron, ExxonMobil does not disclose price assumptions in its financials. But unlike Chevron, ExxonMobil has not yielded to climate change through an official emissions target or asset revaluations.

On paper, that will make ExxonMobil look better than its supermajor brothers. But behind the scenes, this reluctance to admit that the future is less rosy than expected could be trouble waiting to be unleashed. Impairments are a necessary reality check: an admission by a company that things have changed and it is starting to adapt. Most have accepted that reality. ExxonMobil seems to be resisting. But even it is not immune. In pre-Q2 2020 results guidance that was just announced, ExxonMobil admitted that it expects to take a hit of some US$3.1 billion and slump to a second straight quarterly loss. In terms of Covid-19 impairments, that’s small. But it is, at least, a start.

Market Outlook:

  • Crude price trading range: Brent – US$40-44/b, WTI – US$38-42/b
  • A swathe of positive economic data is supporting oil prices within its current range, with US light crude settling above US$40/b for the first time in four months
  • The relaxation of Covid-19 restrictions has led to improvements in most economic indicators, but the risk of the situation reversing is also higher, given the accelerating cases being reported in part of the USA, South America and India
  • On the supply side, OPEC+ is making adherence a priority, with lagging members now bucking up and swing producer Saudi Arabia also keeping its promises by throttling crude exports in June to some 5.7 mmb/d

End of Article

In this time of COVID-19, we have had to relook at the way we approach workplace learning. We understand that businesses can’t afford to push the pause button on capability building, as employee safety comes in first and mistakes can be very costly. That’s why we have put together a series of Virtual Instructor Led Training or VILT to ensure that there is no disruption to your workplace learning and progression.

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July, 04 2020