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Sofiyan Yahya, SEAMOG CEO


  1. You have held and currently hold many important roles in oil & gas organisations, being a founding member and former president of MOGSC, current VP of MOGEC, and CEO of SEAMOG Group Sdn Bhd, to name a few. Over the years, what has been your greatest achievement(s)?
    From the point of view of various associations such as MOGSC and MOGEC, I think my greatest achievement through these organisations is that I have contributed towards the creation of a platform for industry and stakeholders to discuss and collaborate in a sustainable way on issues related to the industry. In the past, it was very much driven in one direction but since the organisations were formed, there is a platform where all relevant parties can engage collaboratively. To me this is a significant development for the local industry, to be able to have their voices heard, and play a role in shaping the future of the industry. Furthermore, through these organizations, we have been able to create a sort of community for the industry.  A community where stakeholders, government and the industry players themselves, can gather through various working platforms, meetings, forums, conferences, and even social events such as dinners and sport events. We’re not just all work, we also play together.

    As CEO of SEAMOG Group, a 100% Malaysian, very much a home-grown company – I think it’s an achievement for a local player to be able to offer the range of services we have. We have done this based on our determination and commitment to offer our experience, technical capabilities and resources, which we can also export. We are also happy that we have been able to contribute to the nation as our presence means another local player has emerged from the industry.

  2. Are there challenges you faced that became a crucial learning point for you? How did you overcome them?
    There are challenges but there was no one specific challenge that was so outstanding. I always keep an open mind. The key thing is, as long as you’re determined and resourceful, and apply yourself with initiative, every challenge is surmountable. That’s the only way you can progress.  

  3. Did you always know what you wanted to do in your career? What did you do to prepare yourself before starting your first job? I understand that your first job was in Petronas as an engineer.
    I have always been a determined person, so I always knew what I wanted to be. There wasn’t a time when I didn’t know what I wanted. If you know what you want from the beginning, then the issue isn’t so much about Where to start. If that is an issue for you, then you’ll have a slower start, because you need to get over that question first. But if you believe in yourself, and know what you want to achieve, then these are only minor issues because you are already on your way to going for your goals and working towards achieving them.

  4. What do you think about the current workforce coming into industry? What skills do you think are most relevant or most in demand today?
    The range of skills needed have always been the same, the oil and gas industry still requires the same range of capabilities from welders, riggers, technicians, engineers to specialist experts. The skill disciplines required to run and operate the oil and gas industry are the same. The only thing is because of the downturn, the industry is more focused on downstream, so perhaps we need more people for these downstream activities. But then again, when we talk about the capabilities needed for offshore and onshore – if you’re an expert in pumps offshore, you can also use this expertise in the petrochemical plants onshore. The same goes if you’re a welder, you can work offshore and you can also work onshore.

    The other issue is growing new talents and expand the talent pool. For example, now there is a lot of focus in Sabah and Sarawak areas, as well as in Johor for Pengerang project. There is a huge opportunity for growing local talents to serve the industry there. And when we want to go overseas, we also require more talents to follow the businesses and perform projects won overseas.

  5. What do you think about this statement, “It’s not what you know, it’s who you know.” Do you agree with that? Has your professional network been helpful in your career progression?
    I think for oil and gas industry, that’s not accurate. In general, oil and gas requires a higher standard of specifications, behaviour and discipline. So, no matter who you know, if you cannot perform at that higher level of standards and expectations, then you will eventually fail as a business. The ‘who you know’ is not sustainable in the oil and gas industry and is very short term, if that is your planned route to success. What is more important in this industry is what do you know, what are you capable of and what is your deliverable?

  6. Recent news have reported that the market condition for the oil & gas industry is slowly recovering. At the moment, the oil prices seem to hover between $50 - $60 per barrel. Do you think the price will go any higher?
    I think in the short term or in the near future, it’s not going to go above $60. I do believe $50 - $60 is what the range will be.

  7. What do you think is the future for oil & gas, especially with the emergence of Renewable energy?
    Renewable energy has been around for a while. The way I see it, it is an alternative. We still have coal for our power stations, and also hydroelectric power, so to me it is about co-existing alternatives. The world needs to look at the most efficient energy source and energy usage. I believe that renewable energy will co-exist with oil and gas, and that oil and gas will still be around for sometime because it has its niche where it is actually the most cost efficient use and application of energy. Of course if a time comes when renewable energy is much more efficient than anything else, then we should all move towards that – that’s a different scenario. For the moment, I believe that like with everything we have in this world today, we have alternatives. And having alternatives is always a good thing for the world.

  8. Do you foresee further consolidation in the supply side happening in the Malaysian oil industry in the near future?
    In the short term, the consolidation will happen because of the current situation. If we’re talking about the Malaysian scenario then of course it is dependent on how big is the Malaysian market. Now that it’s shrunk in certain areas, they will have to consolidate, otherwise they cannot survive. This will definitely have to happen in the near future and it is going to shape the industry. After that, we can’t say what will happen next. The crystal ball is very hard to see with clarity at the moment.

  9. What will be the critical success factors or qualities needed of entrepreneurs in the local oil and gas sector to sustain and even strive in the current competitive climate?
    Commitment to the business is important. A real entrepreneur who wants to go into a certain industry sector has to be really committed. By having this commitment and determination, you will find the solutions to be successful. It’s not so much about competitiveness – this is not the first time the industry climate has become very competitive. In fact, this is probably the third time in the span of 10-20 years that we are seeing this sort of business environment. During this time, businesses must persevere. When the going gets tough, the tough gets going. And it’s not just oil and gas, other industries go through downturns as well. So, if an entrepreneur wants to go into the local oil and gas industry, they must have that commitment and determination to see through their business plan and their services or products offerings. If you do not have that determination, I do not think you will succeed. Again, this applies to any business in any industry sector.

  10. Besides depending on PETRONAS for contracts, do you see more local players preparing to venture overseas for more work (eg. what SapuraEnergy has done to-date)? As Malaysia has a low-cost base and experienced workforce.
    The industry does not depend solely on PETRONAS for contracts. Yes, Malaysia does have relatively low-cost base, and we also have an experienced workforce. I think it’s very important to encourage Malaysians to work overseas. For regions such as the Middle East, despite their already diverse workforce, they welcome Malaysians for our experience, capability and professionalism. Perhaps because of our focus here in Malaysia has been maximising Malaysian content, Malaysians tend to focus on Malaysian work rather than go overseas. In this downturn however, more Malaysians have found work overseas. We spoke about consolidation earlier, and with more businesses offering wider range of services and capabilities, Malaysian players are becoming more attractive and relevant overseas.

  11. Do you have a motto or philosophy that you follow in life?
    Set your goals and be determined. Determination is the key ingredient in what I do. Never give up and be determined to see things through.

  12. And finally, what do you do to unwind after a stressful day at work? 
    I love getting into nature and photography. I guess they are activities that are completely opposite from what I do in my day-to-day business, hence the opportunity to unwind.

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OPEC+ Prevails, For Now

The week started off ominously. Qatar, a member of OPEC since 1960, quit the organisation. Its reasoning made logical sense – Qatar produces very little crude, so to have a say in a cartel focused on crude was not in its interests, which lie in LNG – but it hinted at deep-seated tensions in OPEC that could undermine Saudi Arabia’s attempts to corral members. Qatar, under a Saudi-led blockade, was allied with Iran – and Saudi Arabia and Iran were not friends, to say the least. This, and other simmering divisions, coloured the picture as OPEC went into its last meeting for the year in Vienna.

Against all odds, OPEC and its NOPEC allies managed to come to an agreement. After a nervy start to the conference – where it looked like no consensus could be reached – OPEC+ announced that they would cut 1.2 mmb/d of crude oil production beginning January. Split between 800,000 b/d from OPEC members and 400,000 b/d from NOPEC, the supply deal contained a little bit of everything. It was sizable enough to placate the market (market analysts had predicted only a 800,000 b/d cut). It was not country-specific (beyond a casual mention by the Saudi Oil Minister that the Kingdom was aiming for a 500,000 b/d cut), a sly way of building in Iran’s natural decline in crude exports from American sanctions into the deal without having individual member commitments. And since the baseline for the output was October production levels, it represents pre-sanction Iranian volumes, which were 3.3 mmb/d according to OPEC – making the mathematics of the deal simpler.

Crude oil markets rallied in response. Brent climbed by 5%, breaking a long losing streak, as the market reacted to the move. But the deal doesn’t so much as solve the problem as it does kick the can further down the road. A review is scheduled for April; coincidentally (or not), American waivers granted to eight countries on the import of Iranian crude expire in May. By April, it should be clear whether those will continue, allowing OPEC+ to monitor the situation and the direction of Washington’s policy against Iran in a new American political environment post-midterm elections. If the waivers continue, then the deal might stick. If they don’t, then OPEC+ has time to react.

There are caveats as well. OPEC members, who are shouldering the bigger part of the burden, said there would be ‘special considerations’ for its members. Libya and Venezuela -  both facing challenging production environments – received official exemptions from the new group-level quota. Nigeria, exempted in the last round, did not. Iran claims to have been given an exemption but OPEC says that Iran had agreed to a ‘symbolic cut’ – a situation of splitting hairs over language that ultimately have the same result. But more important will be adherence. The supply deals of the last 18 months have been unusual in the high adherence by OPEC members. Can it happen again this time? Russia – which is rumoured to be targeting a 228,000 b/d cut – has already said that it would take the country ‘months’ to get its production level down to the requested level. There might be similar inertia in other members of OPEC+. Meanwhile, American crude output is surging and there is a risk to OPEC+ that they will be displaced out of their established markets. For now, OPEC remains powerful enough to sway the market. How long it will remain that way?

Infographic: OPEC+ December Supply Deal

  • OPEC – 800,000 b/d cut from Oct 2018 levels, Saudi Arabia to cut 500,000 b/d
  • Non-OPEC – 400,000 b/d cut from Oct 2018, Russia to cut 228,000 b/d
  • Total – 1.2 mmb/d cut from Oct 2018, Saudi Arabia and Russia to cut 728,000 b/d
December, 15 2018
Your Weekly Update: 10 - 14 December 2018

Market Watch

Headline crude prices for the week beginning 10 December 2018 – Brent: US$62/b; WTI: US$52/b

  • Crude prices strengthened at the start of this week, with OPEC delivering an agreement that will see production across the OPEC+ alliance decline by 1.2 mmb/d beginning January 2019
  • Two-thirds or 800,000 b/d of the cut will be borne by OPEC – with most of it taken up by Saudi Arabia – while the non-OPEC group will take up a cut of 400,000 b/d, most of which will be taken up by Russia
  • Skepticism has reigned before the supply deal was reached, as the first day of the OPEC meeting in Vienna closed without consensus and the threads holding OPEC together showed some stress when Qatar decided to quit the group
  • Crude prices were also boosted by Libya declaring force majeure at its largest oil field at El Sharara over arm protests, while Canada’s Alberta province announced plans to pare back some 325,000 b/d of output to ease a huge glut
  • The coordinated supply deal by OPEC ‘was not easy’ according to UAE Minister of Energy and Industry, with Iran in particular balking at being asked to sign up to a symbolic cut; this might not augur well for future supply deals that might be necessary given current trends
  • However, the supply cut will only last until April 2019, when the terms are due for a review, which would give OPEC+ enough time to consider and deal with the expiration of American waivers for eight countries over continued import of Iranian crude in May
  • Meanwhile, America became a net oil exporter for the first time in almost 75 years, as the unprecedented boom in US crude oil fuelled by the shale revolution powers on, a development that could dilute OPEC+’s attempt to support global crude prices
  • The recent weakening of WTI prices saw the US lose 10 active oil rigs last week, however, the addition of 9 new gas rigs led to a net loss of only 1 in the Baker Hughes active US rig count
  • Crude price outlook: OPEC+’s decision might have provided some relief, but may not be enough to keep crude oil prices trending upwards. Expect prices to moderate to US$60-61/b for Brent and US$50-51/b for WTI

Headlines of the week

Upstream

  • ExxonMobil’s winning streak in Guyana continues, as it announces its 10th offshore discovery at the Pluma-1 well, boosting estimated recoverable resources in the Stabroek block by almost 1 mmb/d to over 5 mmb/d
  • Apache has initiated production at the Garten field in the UK North Sea, with an output rate of 13,700 b/d and 15.7 bcf/d of natural gas
  • Chevron has raised its capital expenditure for the first time since 2014 into US$20 billion, with a major focus on expanding operations in the Permian Basin as well as on the Tengiz megaproject in Kazakhstan
  • Canada’s Alberta province, weighed down by a supply glut caused by pipeline bottlenecks, has announced moves to reduce the region’s output by 325,000 b/d
  • Equinor and Faroe Petroleum have agreed to trade a number of assets in the Norwegian Sea and the Norwegian Continental Shelf North Sea, encompassing the Njord, Bauge Hyme, Vilje Ringhome, Marulk and Alve fields, with the deal described as a ‘balanced swap’ in terms of value with no cash consideration

Downstream

  • CNPC’s US$9.53 billion joint venture integrated 400 kb/d petrochemicals/refinery project with PDVSA in Jieyang, China has been reactivated, and is now expected to begin operations in late 2021
  • French president Emmanuel Macron has backtracked and suspended a planned fuel-tax hike, after weeks of violent riots by the so-called Yellow Vests grassroot groups of up to 300,000 protestors
  • Limetree Bay Ventures has secured US$1.25 billion in financing that paves the way for the Limetree Bay refinery in the US Virgin Islands to restart after being idled for years, partnering with BP Products North America on the project

Natural Gas/LNG

  • Equinor has received permission from the Norwegian government to proceed with the development of Troll Phase 3, delivering an additional 2.2 billion boe/d of natural gas with a planned start-up timeframe of 1H2021
  • Shell has completed the construction of Gibraltar’s first LNG regasification facility, a small-scale project that will feed a new power plant in the territory
  • Trinidad and Tobago has agreed to allow BP and Shell to extend the operational life of the Atlantic LNG Train 1 in Point Fortin by five years, with the country receiving the ability to sell LNG cargoes through its state gas firm
  • Tokyo Gas and the Philippines’ First Gen Corporation have signed a joint development agreement to build and operate an LNG receiving terminal, as the three-horse race narrows over the country’s first LNG import facility
  • American LNG player Tellurian has agreed to supply trader Vitol with some 1.5 mtpa of LNG over 15 years from its 27.6 mtpa Driftwood LNG export terminal currently being developed in Calcasiue River, Louisiana
  • Tanzania is opening talks with Equinor and ExxonMobil to launch the East African nation’s first LNG project, likely to derive gas from the Equinor-operated offshore Block 2
  • Shell is expecting to produce its first cargo of LNG from its Prelude FLNG facility in Australia before the end of 2018
December, 14 2018
Permian’s Pipeline Lifeline

The Permian is in desperate need of pipelines. That much is true. There is so much shale liquids sloshing underneath the Permian formation in Texas and New Mexico, that even though it has already upended global crude market and turned the USA into the world’s largest crude producer, there is still so much of it trapped inland, unable to make the 800km journey to the Gulf Coast that would take them to the big wider world.

The stakes are high. Even though the US is poised to reach some 12 mmb/d of crude oil production next year – more than half of that coming from shale oil formations – it could be producing a lot more. This has already caused the Brent-WTI spread to widen to a constant US$10/b since mid-2018 – when the Permian’s pipeline bottlenecks first became critical – from an average of US$4/b prior to that. It is even more dramatic in the Permian itself, where crude is selling at a US$10-16/b discount to Houston WTI, with trends pointing to the spread going as wide as US$20/b soon. Estimates suggest that a record 3,722 wells were drilled in the Permian this year but never opened because the oil could not be brought to market. This is part of the reason why the US active rig count hasn’t increased as much as would have been expected when crude prices were trending towards US$80/b – there’s no point in drilling if you can’t sell.

Assistance is on the way. Between now and 2020, estimates suggest that some 2.6 mmb/d of pipeline capacity across several projects will come onstream, with an additional 1 mmb/d in the planning stages. Add this to the existing 3.1 mmb/d of takeaway capacity (and 300,000 b/d of local refining) and Permian shale oil output currently dammed away by a wall of fixed capacity could double in size when freed to make it to market.

And more pipelines keep getting announced. In the last two weeks, Jupiter Energy Group announced a 90-day open season seeking binding commitments for a planned 1 mmb/d, 1050km long Jupiter Pipeline – which could connect the Permian to all three of Texas’ deepwater ports, Houston, Corpus Christi and Brownsville. Plains All American is launching its 500,000 b/d Sunrise Pipeline, connecting the Permian to Cushing, Oklahoma. Wolf Midstream has also launched an open season, seeking interest for its 120,000 b/d Red Wolf Crude Connector branch, connecting to its existing terminal and infrastructure in Colorado City.

Current estimates suggest that Permian output numbered around 3.5 mmb/d in October. At maximum capacity, that’s still about 100,000 b/d of shale oil trapped inland. As planned pipelines come online over the next two years, that trickle could turn into a flood. Consider this. Even at the current maxing out of Permian infrastructure, the US is already on the cusp on 12 mmb/d crude production. By 2021, it could go as high as 15 mmb/d – crude prices, permitting, of course.

As recently reported in the WSJ; “For years, the companies behind the U.S. oil-and-gas boom, including Noble Energy Inc. and Whiting Petroleum Corp. have promised shareholders they have thousands of prospective wells they can drill profitably even at $40 a barrel. Some have even said they can generate returns on investment of 30%. But most shale drillers haven’t made much, if any, money at those prices. From 2012 to 2017, the 30 biggest shale producers lost more than $50 billion. Last year, when oil prices averaged about $50 a barrel, the group as a whole was barely in the black, with profits of about $1.7 billion, or roughly 1.3% of revenue, according to FactSet.”

The immense growth experienced in the Permian has consequences for the entire oil supply chain, from refining balances – shale oil is more suitable for lighter ends like gasoline, but the world is heading for a gasoline glut and is more interested in cracking gasoil for the IMO’s strict marine fuels sulphur levels coming up in 2020 – to geopolitics, by diminishing OPEC’s power and particularly Saudi Arabia’s role as a swing producer. For now, the walls keeping a Permian flood in are still standing. In two years, they won’t, with new pipeline infrastructure in place. And so the oil world has two years to prepare for the coming tsunami, but only if crude prices stay on course.

Recent Announced Permian Pipeline Projects

  • September 2018 – EPIC Midstream Holdings – 675,000 b/d, 1125km, 24-30’ diameter, 4Q19 target opening
  • November 2018, Wolf Midstream Partners – 500,000 b/d, 65km, 16’ diameter, 2H2019 target opening
  • November 2018, Jupiter Energy – 1 mmb/d, 1050km, 36’ diameter, 2020 target opening
  • December 2018, Plains All American Pipeline – 575,000 b/d, 830km, 26’ diameter, 3Q19 target opening
December, 04 2018