The ongoing turmoil in the energy-rich Middle East and North Africa, its long-term impact on oil markets, the challenge of meeting future energy demands, the issue of environmental responsibility, the role of research and development and the need to push natural gas and some other alternatives, as greener alternative to coal and oil, all underwent intense deliberations, the entire week.
And indeed Daniel Yergin, author of “The Prize”, currently heading the IHS-CERA, and his wonderful team, painstakingly assembled real stars. Delegates had the honor to rub shoulders and hear, from wheelers and shakers of the energy world, including none else than Henry Kissinger, former Presidents Bill Clinton and George W. Bush.
Although the session attended by the two presidents’ was closed, streak streaming out of the hall reconfirmed that oil will be essential for fueling the US (as indeed the world) for decades to come, but low-emission natural gas and improved efficiency will bridge the transition to cleaner alternative fuels. Former President George W. Bush told the packed ballroom at the Hilton Americas, that while the US has a vision of new technologies to ‘power our homes and to propel our cars, the nation needs to be prosperous to afford them.’ And that prosperity, Bush said, is tied to oil and gas. He also touted the idea of developing nuclear and shale gas. President Clinton in a lighter mood said the audience might be surprised to hear that he agreed with Bush’s energy outline.
With popular uprising in parts of the energy rich region, conference focus on Middle East oil and its geopolitical repercussions was unavoidable. Discussing the emerging scenario, panelists agreed that the recent uprisings in the Middle East and North Africa (MENA) have four features in common: young populations, citizens’ political disenfranchisement and frustration, access to modern communications, and the minor role of militants in the protests.
Panelist, at the elite conference, also underlined Saudi Arabia’s ability and intention to increase production to compensate for supply disruptions from Libya, saying it was a testament to the Kingdom’s desire to limit the unrest’s impact and prevent it from becoming a crisis for the world.
They also indicated that while Riyadh was faced with the challenge of relations with Yemen and Bahrain, the likelihood of domestic unrest in the Kingdom was very low. Saudi Arabia is well-endowed enough financially to be able to placate any unrest preemptively. The need for long-term job creation in the country is vital, however, given the young and fast-growing population, the panelists argued.
As far as Libya was concerned, speakers agreed on the need for the United States to maintain a neutral role in dealing with the situation and that any interference will have to come from the world community.
On the future Iraqi role in the energy world, Sara Akbar, CEO of Kuwait Energy Company, highlighted the promising developments in Iraq both politically and within the oil sector. She stated that contracts with international oil companies provide for the development of approximately 12 million barrels a day in capacity by 2017, although delays are highly likely. If the full amount of new capacity should come on stream by then, however, the world market and refining capacity would be challenged to absorb it all.
Now this was a very pertinent and interesting comment and needs to be noted, for this indicates the real state of the energy industry today.
Algeria came under the hammer too and analysts highlighted that in an attempt to defuse the uprising, the Algerian government has lifted the 19-year state of emergency. Brad Bourland, chief economist of Jadwa investment had an interesting comment to make. ‘Even during the ten-year civil war in the 1990s, there was no disruption to the country’s energy sector.’ People behind the ongoing movement in the region seem fully aware how important it was for their respective countries to keep the wheels of the energy industry moving, one could say with some hindsight now. Thank you Bourland!
And on Wednesday, Special Focus Session on the Middle East and North Africa, Ambassador (Ret) Ryan Crocker, dean of The Bush School of Government and Public Service, Texas A&M University, who had served as the US envoy in Baghdad while Islamabad was his last posting, discussed how the wave of change in the Middle East and North Africa has been driven largely by urban populations’ dissatisfaction with their lack of economic opportunities and political representation.
And as CERAWeeK got into motion, Goldman Sachs in a report raised questions about the global spare capacity and its implications. Indeed this remained a subject of intense discussions on the sidelines too. There were people, and indeed credible ones, from the industry who appeared confident about the overall state. Christophe de Margerie, Chairman and Chief Executive Officer of Total, underlined; he was “not pessimistic- I’m more optimistic than ever.”
The industry is facing a demand problem, explained De Margerie. “Demand for energy-particularly from the developing world is growing, and we need to find more oil and gas to meet it. Oil supply may not rise above 95 million barrels per day; it’s not a question of reserves, but of what can be brought to the market.” And this brings to fore; resource availability does not appear to be the issue today. The issue remains, bringing those resources on stream. He also argued that OPEC is the best protection for oil market stability. “Today there is no concern about access to oil; OPEC is doing its job,” he said.
Farouk Al-Zanki, CEO of Kuwait Petroleum Corp., and John Hess, CEO of Hess Corp. both argued the global oil supply was plentiful and any Libyan supply shortfalls can be covered. “Any shortfall can be mitigated in the short run,” Farouk said. “Give it time to work its way through the system,” Hess emphasized.
Algeria’s Energy Minister Youcef Yousfi too added that there is no need for OPEC to hold an emergency meeting right now because there is no shortage of crude supplies in the market. “We don’t see any physical shortage of oil in the market, and we don’t see any need for OPEC to meet today unless there is a change,” Yousfi said. In fact oil fell from the highest level since September 2008 after the statement from the Kuwaiti Oil Minister Sheikh Ahmad Al-Abdullah Al-Sabah that OPEC members are discussing whether to hold an “urgent meeting.” Oil slipped 0.6 percent the next day again after supplies surged at Cushing, Oklahoma, the delivery point for the New York contract.
And while there seems a growing chatter within the energy fraternity on the issue of widening heavy-light spreads, Khalid Al Buainain, Senior Vice President, Downstream, Saudi Aramco, referred to the tremendous refining capacity growth in the Middle East and parts of Asia and the desire of crude-producing countries, such as Saudi Arabia, to extract more value from their resources by refining crude domestically. Indeed the additional capacity would also be able to handle the heavy crude.
Hilton Americas — Houston has definitely emitted positive signals — so needed at this hour of turmoil indeed. Thank you Yergin!
