Surging US output ‘a concern’ for OPEC

OPEC highlighted surging US output as a concern in its latest monthly update. (Reuters)
Updated 12 February 2018

Surging US output ‘a concern’ for OPEC

PARIS: Oil prices, long battered by a global glut in supply, have been rising recently as the market returns to balance on the back of a landmark deal between producers to throttle output, but surging shale production in the US could throw a spanner in the works, OPEC said on Monday.
Crude prices fell as low as $35 per barrel at the start of 2016, but they have been rising since, reaching a three-year high of more than $70 per barrel last month, “on signs that production adjustments by OPEC and non-OPEC participating countries are balancing the market,” OPEC wrote in its latest monthly market report.
Strong economic data — notably from the US and Germany — as well as geopolitical tensions in the Middle East have also helped support prices, the cartel said.
But it cautioned that “surging US production remained a concern.”
OPEC countries and other oil-producing countries, such as Russia, agreed at the end of 2016 to cut back production to combat the global glut in oil.
At a meeting in Vienna at the end of November, they agreed to extend that deal until the end of 2018.
But with crude prices on the rise, shale producers, particularly in the US — who are not party to the deal and whose overheads are lower than the oil majors — are ramping up output to cash in on the boom.
And that, in turn, could jeopardize the delicate balance that the market has now reached, OPEC said.
Shale production is controversial, because in order to extract oil and gas, a high-pressure mixture of water, sand and chemicals is blasted deep underground to release hydrocarbons trapped between layers of rock.
And environmentalists argue that the process — known as fracking, or hydraulic fracturing technology — may contaminate ground water and even cause small earthquakes.
Turning to the outlook for global oil demand, OPEC predicted that it would continue to grow this year as economic recovery gathers pace.
The cartel projected that global demand for oil would rise to 98.6 million barrels per day in 2018, from 97.01 million bpd last year.
That represented an upward revision from earlier forecasts and “mainly reflected the positive economic outlook,” OPEC said.
Transportation fuels — namely gasoline, jet fuel and diesel oil — were anticipated to provide the bulk of oil demand growth in 2018, propelled by steady vehicle sales in the US, China and India, the cartel said.
And another factor would be “capacity additions, as well as expansions in petrochemical sector projects... mainly in the US, and to a lesser extent in China.”
At the same time, a number of factors were also expected to weigh on oil demand, such as substitution with other fuels, a steady increase in efficiency gains, and a reduction in subsidies.
“Finally, the degree of digitalization and technological development in various sectors is also expected to relatively cap oil demand growth in 2018,” OPEC said.


Technology will not replace labor despite rapid digital transformation

Updated 28 January 2020

Technology will not replace labor despite rapid digital transformation

  • Hayman said he believes technology should help people and offer them support rather than replace them
  • The UAE is among the top performers in the Middle East in terms of digital transformation in industrial sectors

ABU DHABI: Digital technology will not replace labor; the aim of it is to improve areas of inefficiency in different industrial sectors, CEO of AVEVA Group plc Craig Hayman told Arab News.

Most sectors around the world from retail to financial services and telecommunication, have been digitized in some way, according to Hayman.

But while this widespread introduction of digital technology inevitably reduces costs and increases efficiencies in the workplace, it is also seen by many as the death knell for their jobs.

A 2019 report by the Organization for Economic Co-operation and Development (OECD) estimates that approximately 14 percent of workers globally will face a high risk of their jobs one day becoming automated and “32 percent face major changes in the tasks required in their job and, consequently, the skills they would need to do their job.”

Another 2017 McKinzy&Company report said up to 800 million workers around the world could be replaced by robots by 2030.

But Hayman said he believes technology should help people and offer them support rather than replace them.

“In the industries AVEVA serves, there are so many areas of inefficiency that we are delivering improvement for without any replacement of labor. It is more about giving the people more tools to effectively do their jobs,” he added.

For example, Hayman said, a worker who is doing maintenance repair is given the tools to know more about the correct isolation procedures around this repair.

OECD’s 2019 report said the effect of digitization on labor will not be evenly distributed nor happen at a steady pace. “It is most likely to be concentrated in certain jobs, selected sectors and particular geographical areas, and may move in fits and starts,” the report adds.

While digital technology around the world began to witness a transformation in the last decade across different industrial sectors, the Middle East has become a major contributor to this transformation.

The UAE is among the top performers in the Middle East in terms of digital transformation in industrial sectors, Hayman said.

A 2016 report by McKinzy&Company also said the UAE ranks the top in adopting digital technology and it matches the world’s digital leaders on several metrics.

Hayman said he believes there is a strong digital ambition in the region. “I think some of the digital projects in the Middle East are starting to yield good results. We have seen this with customers like Al-Marai and Abu Dhabi National Oil Company (ADNOC).”

In the UAE’s oil and gas sector for example, there is ADNOC’s Panorama Digital Command Centre which is a real-time data visualisation centre that offers insights and identifies new ways to improve performance. “The Panorama Digital Command Centre is known around the world; that was an eight-week project for us almost two years ago,” Hayman said.

Abu Dhabi's Crown Prince Sheikh Mohamed bin Zayed Al Nahyan inaugurated ADNOC's advanced Panorama Command Centre and Artificial Intelligence (AI) platform on Nov 12, 2017. (WAM)

Saudi Arabia’s Aramco has also established tech projects such as “the use of robots and self-guided autonomous devices in remote inspection and maintenance in plant areas, and the installation of smart sensors with advanced analytic capabilities,” according to a 2018 report by Aramco.

When asked how much companies spend to digitize their services in the oil and gas sector, Hayman said about $250 billion a year was spent in capital expenditure in the oil and gas sector.

Saudi Arabia has adopted a digital transformation strategy that began in 2019 and is expected to conclude in 2022. The strategy’s “main components are digital health, digital education, e-commerce, and smart cities,” a 2019 report by the Saudi National Platform said.

On health, the Kingdom launched a telemedicine technology in which in 2019 it saved a million lives out of which 10,000 were critical, the Kingdom’s Minister of Communication and Information Technology Abdullah bin Amer Al-Swaha said in a panel discussion held in Davos at this year’s World Economic Forum.

Telemedicine is a technology that provides electronic clinical services to patients without an in-person visit.

In the digital education sector, Saudi Arabia established the Saudi Digital Library (SDL), which is said to be the largest collection of academic information resources in the Arab world, according to the Kingdom’s Ministry of Education. “SDL includes over 310,000 scientific references covering the different academic disciplines. The content of the library is continuously updated, providing huge resources of knowledge in the long run.”

When asked about the opportunities and challenges the digital trend creates for entrepreneurs, Hayman said if an entrepreneur can deliver technology in the context of trust and partnership, he or she is definitely moving on the right track.

A 2019 report by the World Economic Forum said digital technology can help the government and private sectors to create initiatives that form “a holistic global entrepreneurial ecosystem that enables sharing, learning and access to resources at a mass scale and at low cost.”