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Last Updated: July 13, 2018
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Market Watch

Headline crude prices for the week beginning 9 July 2018 – Brent: US$78/b; WTI: US$73/b

  • Tensions over the looming sanctions on Iran – and the US appearing to take a hardline stance over waivers and exemptions – continue to keep crude prices high, supported by the outage in Canadian Syncrude production and falling Libyan production.
  • The trade spat between China and the US has now led to President Trump proposing tariffs on an additional US$200 billion worth of Chinese imports. China has threatened to retaliate, suggesting a 25% duty on US energy imports, a development that would rattle Trump’s key supporters.
  • South Korean and European refiners have already reduced their purchases to virtually zero, as Iran threatens to blockade the Strait of Hormuz in retaliation to US trade sanctions while the EU tries to save the Iranian nuclear deal.
  • As President Trump continues to complain over high oil prices on Twitter, publicly blaming OPEC and Saudi Arabia, Iran has taunted Trump by saying that his tweets have ‘added US$10 to oil prices’, requesting him to stop.
  • Libyan production is also fast becoming a concern, adding to OPEC’s headache with Venezuela and Iran, with output in Libya halving over the last five months to 527,000 b/d despite attempts to boost output.
  • The outage at the Syncrude plant in Alberta will continue through July, keeping the Brent-WTI differential narrow.
  • US drillers snapped two weeks of losses to add five rigs – all oil – to the active rig count, as drillers responded to stronger price signals.
  • Crude price outlook: The current range of factors keeping crude prices tight will continue, with some possible downward correction this week. We expect Brent to range in US$75-76/b and US$71-72/ for WTI.

Headlines of the week

Upstream

  • Chevron is looking to exit the UK Central North Sea, beginning the process of ‘marketing its assets’ including the Alba, Alder, Britannia, Captain, Elgin/Franklin, Erskine and Jade fields.
  • BP and its partners have sanctioned startup of the Shah Deniz 2 gas development in Azerbaijan, adding 16 bcm/y of capacity to total production.
  • BP will buy ConocoPhillips’ 16.5% stake in the UK North Sea Clair field, increasing its stake to 45.1%. In Alaska, BP has sold its 39.2% interest in the North Slope Greater Kuparuk Area to the Kuparuk Transportation Company.
  • China’s CNPC and Abu Dhabi’s ADNOC will be signing an agreement to cooperate on oil and gas exploration and refining projects later this month.
  • CNOOC has signed a new PSC for the Weizhou 10-3W oilfield and Block 22/04 in the South China Sea’s Beibu Gulf Basin with Roc Oil and Smart Oil.
  • In an effort to boost domestic output, Russia’s parliament is moving to approve a new profit-based taxation scheme for a select number of oilfields that could conceivably boost production by some 18,000 b/d.

Downstream

  • The Hovensa refinery in St. Croix, US Virgin Islands will be restarted, after being idled in 2012, in a US$1.4 billion plan to produce low-sulfur fuels and fill the growing hole in Caribbean refining created by PDVSA’s implosion.
  • Ineos has approved the first new ethane cracker in Europe for two decades, investing €2.7 billion in a cracker and PDH unit in Northern Europe to take advantage of US shale gas economics and support its olefins business.
  • With Egypt completing its natural gas revolution, the industry is moving further downstream as Carbon Holding is looking to start the US$10.9 billion Tahrir Petrochemicals Company complex in the Suez Canal Economic Zone.
  • The US$10 billion Dangote refinery being developed in Nigeria is now planning for an early-2020 start, with a capacity now planned for 650 kb/d.
  • Pemex has sold its 44.08% stake in chemical firm Petroquimica Mexicana de Vinilo to Mexichem for US$178.7 million.
  • Petronas has bought its first ever US cargo – 1 million barrels of Mars crude – to arrive at its Melaka refinery in September, replacing Middle Eastern crude.

Natural Gas/LNG

  • Gas production at Eni’s Sankofa field in Ghana’s Offshore Cape Three Points project has started, providing 180 mmscf/d for at least 15 years.
  • Eni has also started output at the Bahr Essalam Phase 2 project in Libya, which will raise production potential by 400 mmscf/d to 1.1 MMscf/d.
  • Vandalism has halted construction on ExxonMobil’s Angore gas pipeline connecting to the Hides gas plant in the Papua New Guinea highlands.
  • Japan’s JERA has purchased the LNG business of France’s EDF Trading, bulking out its energy trading unit in Asia and expanding into Europe.
  • The 65km, US$10 billion pipeline connecting Jordan with Israel’s Leviathan field is now set for completion at the end of 2019.
  • Equinor’s US$954.46 million plan to develop gas reserves in western Troll should support output at the field until about 2060, according to Norway.
  • Sonatrach has raised output at the Alrar gas field near Libya from 16 mcm/d to 24.7 mcm/d, the latest in an output expansion drive at existing fields.
  • Pertamina has decided to axe its planned land-based LNG receiving terminal in Bojonegara, near Jakarta, citing declining domestic gas consumption.

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Gig Job: The Future of Oil & Gas Industry?

‘Nine to five plus a single employer’ is no longer an equation that the current workforce operates on. This traditional marketplace has been disrupted with the advent of new technology that has heralded gig or on-demand economy. Players like Uber, Airbnb, & Deliveroo offer a classic example of how these innovators have leveraged on this concept of gig economy and have shaken up the traditional setup. Millions of people today, prefer flexible work timings, multiple employers, interest-based projects and multiple revenue streams, the working style we commonly refer to as gig economy.

CIPD describes the gig economy as a new way of working that is based on the temporary jobs or projects, which is paid on the project or hourly basis. It is also referred to as the ‘sharing economy’ or ‘collaborative economy’

The gig economy: pros and cons in the context of the Oil & Gas Industry        

The Oil and Gas industry is considered traditional when it comes to adapting to new technology or concepts. However, the notion is changing now with 30% of its workforce comprising of gig workers and the trend is expected to rise in coming years. Instead of depending on the recruitment agencies, companies are now focussing on targeted industry digital platforms to search, shortlist, verify and hire the gig contractors or freelancers. However, like everything else, there are pros and cons of hiring freelancers or gig employees:

Pros:

Reduced Overhead cost

The cost of hiring an in-house employee is immense because apart from salary it also includes costs of insurance, perks, benefits, training, leaves, and cost associated with providing the facilities like internet, sitting arrangements, refreshments, canteen, electricity, and so on. All the extra cost apart from salary gets waived off when it comes to hiring gig employees or also known as “freelancers” in the market. Thus reducing the huge chunk of overhead cost for the employing company.

Low Financial Risk

 In the case of full-time employees, the company needs to pay even during “down-times” when the work is low, or the productivity standards are not met. However, in the case of temporary staff or freelancers, the company only pays for the work accomplished as per the specified standard. Thereby lowering the financial risk.

Bigger and better pool of talent

The energy sector is a highly specialized sector and hence requires employees with a specific skill set. Specially for an on-site project, location is the biggest constraint. What if you do not find the right talent at your location? Then you are left with two options: either to hire a new employee and provide training or offload and distribute the work to the current employees. Both this scenario is risky. That’s when the gig employees are a real life-saver. The boundaries are no barrier, you can gain access to any person sitting in any part of the world. You do not even have to compromise on the skills and invest in training.

Innovation and knowledge-sharing

The company spends a substantial amount on strategizing and talent development. However, when you opt for a freelancer, you gain access to knowledge that the employee brings in by working with other organizations. So, in the oil and gas sector, a new employee can bring an innovation in the process or methodology by his experience and observation with different clients.

Round the clock functioning

Sometimes, the gig employee operates from different time zone which means that you can get your work running even while you have closed down at your part of the world. Additionally, you can reach out to freelancers for revisions, urgent works, even after the fixed working hours and during weekends, which is a great relief during tight-deadline projects.

Cons

Lack of supervision and discipline

Most gig workers operate remotely, and you cannot monitor their work physically which means that you can never be sure whether the hourly rates that the employee billed you for, is actually spent on work or for leisure. However, now there are numerous monitoring sites like Hubstaff that tracks the productivity level of the employee. Also, working in oil and gas sector involves potential hazards that can lead to serious injuries and even death. In case of remote workers, managing and monitoring all safety measures pertaining to explosions and fires, equipment safety, machine hazards and so on is a daunting task.

Unpredictable work 

Until you gain mutual trust, there is a lot at the stake. For example: if you hire a temporary staff or freelancer to work on a project, you cannot be certain if the person will be able to deliver his/her duties. The risk of losing time, money, and energy is high. If all turns well, you can enjoy the perks however if it didn’t go your way then you suffer a loss on multiple levels. To avoid this scenario, it is advisable to ask for previous work references and keep reviewing the work periodically so that you are aware of the direction things are shaping in.

Loyalty and company ethics 

Because, each company has its own set of principles and working guidelines which forms the culture of the company, it is challenging for the freelancer to operate as per the company’s code of conduct or policies. Furthermore, they work for multiple clients at a time, their loyalty may be questionable.

Training and development issue

Every company works and operates differently though key process remains the same. The complete onboarding of the remote worker is not possible as in the case of a full-time employee where the company’s working style becomes their second nature. Additionally, the effort to organize a training program for the gig worker is tricky because of the location and time bound issues.

Thus, for a dynamic industry like oil and gas, gig employees can be an asset if they can bring in the required expertise, skill set and attitude to outperform your expectation. You can find the right talent by using dedicated oil & gas professional networking platforms that bring talents and employers together. Use it to your advantage and you are good to go.

August, 18 2018
Oil and Gas Salary In Malaysia: What to Expect?

Malaysia has the fourth largest oil and gas reserve in Southeast Asia and produces a whopping 30,000 megawatts of energy per year. The country continues to be hopeful about the prospects of its oil & gas industry and expects it to contribute meaningfully towards the growth of its economy. But then again, what does it mean for the employees who are working in the industry or plan to enter it? Is it a profitable industry in terms of salary growth and expectations? Let’s figure out what the industry holds for its employees and job seekers of oil and gas jobs in Malaysia.

What does the number say?

The best way to analyze the oil and gas job sector is to look at the recent studies and research conducted, which can give a substantial view into the future of the industry. As per the statistics department, Malaysia saw 8.1% growth in the salary in 2017 amounting to RM 2880 as compared to 2016, in which the average salary recorded was RM 2657. Additionally, the chief statistician of the department, Datuk Seri Dr Mohd Uzir Mahidin, said that an increase in the mean monthly salary and also the wages are in sync with the country’s economic performance. Even the exports indicated to grow by 20.3% which amounts to RM935.5bil. He made these observations based on the results of Salaries and Wages Survey 2017 of oil and gas professionals and entry-level oil and gas job seekers.

What the number means for prospects of oil and gas salary in Malaysia

If the above data is viewed on a sectoral basis, then the mining and quarrying sector indicated the highest monthly salaries as well as wages, which amounted to a mean of RM5,709 and a median of RM3,700.

Datuk Seri Dr Mohd Uzir Mahidin, further added that capital-intensive industries like the oil and gas, which is a major part of mining and quarrying sector, employs professionals, who are highly skilled and hence a bigger paycheck and higher mean and median salary.

The observation made by the chief statistician gets further backing by an online job site’s employment index. Although, it shows a decrease of 11% in May 2018 for the hiring activities in comparison to the previous year. However, it pointed towards a steep growth in the Oil & Gas sector. The hiring activity went up by 14% year-on-year in May 2018.

What can be the salary expectations for energy professionals?

The above studies and research indicate a positive outlook for both upstream and downstream players of this sector. However, it is important to note that a lot of factors help to determine your salary potential, which includes: education, years of experience, expertise, work ethics, job location, skill set and so on.

As per payscale.com, a Petroleum Engineer can earn on an average RM 104,343 per year. Which means an average salary of RM 99,803 with an estimated average bonus of RM 22,500 and profit sharing of RM 5120. Your experience and education play a major role in determining your salary. Similarly, in oil and gas industry, the average salary of a mechanical engineer amounts to RM 72,000 whereas the average salary of Account is RM 82,248 and for Project Engineer is RM 57,000 while a sales manager has the potential of RM 120,000.

Since the industry prefers professionals with high-level skills in the respective areas, it is advisable to enhance your overall employability factors to enjoy higher compensation and perks. And also use oil and gas professional networks to your advantage in getting the desired contacts and opportunities.

August, 17 2018
Your Weekly Update: 13 - 17 August 2018

Market Watch

Headline crude prices for the week beginning 13 August 2018 – Brent: US$72/b; WTI: US$67/b

  • Turbulence continues to buffet crude oil prices, which are being caught in between short- and long-term supply concerns and external turmoil.
  • This week, the Turkish lira went into meltdown, with the contagion spreading over to other emerging currencies, including India and Indonesia; conversely, the dollar is also strengthening, placing pressure on barrels.
  • With a full month of data after the OPEC+ resolution in June, OPEC crude production for July rose by 41,000 b/d to 32.32 mmb/d, despite declines in Libya, Iran and Saudi Arabia. That’s below its 1 mmb/d increase target, and with Iranian sanctions looming, meeting that target could be challenging.
  • On the Iran situation, the US appears to have accepted that it will not be able to reduce Iranian crude exports ‘to zero’. Instead, the Trump administration is now aiming to cut Iranian volumes by half, which would be in the 700,000 kb/d to 1 mmb/d range.
  • The Trump administration is also walking back on its previous hardline stance, announcing that it would consider partial exemption from oil sanctions against Iran for some countries, which could see Total not giving up its cherished stake in the South Pars 11 project to CNPC.
  • Meanwhile in China, the new Shanghai crude futures launched in March seems to be marching to the beat of its own drum, advancing almost 5% over the first half of August against declines in Brent and WTI, the possible result of speculative activity that could diminish its potential to be a benchmark.
  • In the US, a weak trend in prices did not dissuade American drillers from adding 10 new oil rigs and 3 new gas rigs – the single largest jump in the weekly active rig count since May. The EIA is also reporting increase output at major shale plays, expecting output to rise to 7.52 mmb/d in September and bringing the US closer to the 12 mmb/d mark.
  • Crude price outlook: The persistence of a strong dollar is likely to mitigate any upward rise in oil prices, although uncertainty over trade, tariffs and Turkey could pull prices up. We expect Brent to trade at US$70-72/b and WTI at US$64-66/b.

Headlines of the week

Upstream

  • India’s Ministry of Petroleum and Natural Gas has launched its DSF Bid Round II, with 60 discoveries clubbed into 26 new contract areas located in ‘large, commercially-producing basins’.
  • Quadrant Energy and Carnarvon Petroleum has announced a major onshore oil find in Western Australia (WA), describing the Dorado as a ‘truly incredible’ reservoir that could hold some 150 million barrels of oil – which would make it the largest oil find in WA over the last 20 years.
  • Pakistan is teasing a ‘big cache’ of oil discovered by ExxonMobil and Eni in the offshore Block G, located off the Indus Delta.
  • Mozambique has finally handed out contracts for oil concessions that were awarded in 2015, allowing companies like Statoil, Eni, ExxonMobil and Sasol to begin exploring in the oil-rich Northern Zambezi basin.

Downstream

  • Vietnam’s second refinery, the 200 kb/d Nghi Son site, expects to reach full capacity in September as it begins to apply for export permits to trim down Vietnam’s existing high levels of (imported) oil products.
  • Faced with rising inflation, the Energy Ministry of the Philippines has asked oil companies to switch back to selling cheaper Euro II-standard diesel, backtracking from the Euro II standards implemented in 2016.
  • Mexico’s largest oil refinery, Pemex’s 330 kb/d Salina Cruz site, managed to restart operations two days after a power outage halted production.
  • The ambitious 650 kb/d Dangote refinery planned in Nigeria by Africa’s richest man is likely to miss its target start date of 2020, with sources stating that operations could only begin in 2022 at the earliest.
  • A major fire broke out at BPCL’s 120 kb/d Maharashtra refinery, forcing the shutdown of a hydrocracker as 40 people were injured.
  • India is aiming to save up to US$1.7 billion in oil imports by 2022 and reduce its carbon emissions through increased usage of biofuels, announcing plans to build 12 bio-refineries that will run on crop, plant waste and municipal waste.

Natural Gas/LNG

  • Exports from Yamal LNG’s second train have begun with the first shipment leaving the port of Sabetta, doubling the project’s capacity to 11 mtpa.
  • Cheniere and CPC have signed a 25-year long term deal where the Taiwanese firm will take 2 million tpa of LNG beginning 2021.
  • American LNG firm Tellurian confirmed that it is on track to begin construction of its US$27.5 billion Driftwood LNG terminal in Louisiana in 1H19, with operations planned for a 2023 start.
  • Santos is reporting a ‘significant gas field’ at its Barikewa-3 well onshore in Papua New Guinea, in the prodigious Toro and Hedinia reservoirs.
  • Tanzania is planning to build a natural gas pipeline that would run through Uganda, delivering gas harvesting from offshore Tanzania through Dar es Salaam and Tanga, then crossing over to Uganda via Lake Victoria.

Corporate

  • Apache and Kayne Anderson Acquisition Corp are forming Altus Midstream, a US$3.5 billion pipeline joint venture focusing on the Permian.
  • Kosmos Energy has acquired Deep Gulf Energy for US$1.23 bn, expanding its presence in the Gulf of Mexico and doubling output to 70,000 boe/d.
August, 16 2018