Sunday, November 1, 2015

Notes for APOGCE 2015

Asia Pacific Oil & Gas Conference and Exhibition (APOGCE) 2015, an annual event jointly organized by Society of Petroleum Engineers (SPE) and the Society of Indonesian Petroleum Engineers (IATMI), has been conducted in Bali – the tourism hot spot – on October 20-22, 2015. APOGCE has established itself as the premier upstream technical event in the Asia Pacific region, covering a broad range of technical disciplines and process management involved in exploration and production of oil and gas. 

Asia Pacific is the most active region in the world in terms of economic activities. It is the epicenter of global economy that makes capital and finance flow to the region. The region has become investment, production and market bases for financial and industrial sectors. Over decades, the oil and gas industry has been playing a dominant role in the region’s economic growth – in both producing and consumption sides. The oil and gas industry has also gone through a number of cycles and changes that have required the industry to adapt and evolve.

This year is marked with the slump of oil price from the level of USD 100 per barrel in third quarter 2014 down to the level of USD 45 per barrel nowadays, bringing to an end a four-year period of relatively price stability. The drop of oil price is sharp but not unprecedented. According to World Bank, over the last 30 years it was observed at least five episodes of price declines in excess of 30 percent. Rising supply in non-OPEC producers, failure of OPEC to agree on supply cuts despite sharply low prices and some geopolitical issues are believed to be a critical role in recent developments.

Asia Pacific is quite unique since both producers and consumers are in the region. According to BP Statistical Review of World Energy 2015, the region (excluding Middle East) holds production level of 8.3 million barrel of oil per day (9.4% of global oil production), 42.7 billion barrel of oil reserve (2.5% of global oil reserve), and consumes 30.8 million barrel of oil per day (34% of global oil consumption). For gas, the region holds production level of 51.4 billion cubic feet per day (15.3% of global gas production), 540 trillion cubic feet of reserve (8.2% of global gas reserve), and 66 billion cubic feet per day of consumption (20% of global gas consumption). It means the gap between production and consumption is very wide. It is really expected that this gap will not be getting too wider. In supply side, the region must do its best efforts to find and extract new potential hydrocarbon resources; while in consumption side, the region must be efficient, conservative and energy diversified. Intensifying renewable energy to decrease fossil fuel dependency will be a future trend around the globe.

Exploitation of unconventional hydrocarbon in some parts of the region has shown very significant progress. Tight oil in China will be an important supplement to its petroleum industry.  Australia, after first drop of CBM-to-LNG Gladstone Project in Queensland last September, will become a next major gas supplier in the region. While in Indonesia itself:
  • Oil & gas still plays vital role as source of revenue, energy supply and engine of economic growth.  It is facing natural production decline, decreasing reserves and aging facilities just like on many parts of the world. Its current production levels are 800 thousand barrel of oil per day and 8 billion cubic feet of gas per day. Indonesia needs more wells to drill, more EOR application, more surface facilities projects, more retrofit production facilities and massive exploration. With its current oil consumption of 1.6 million barrel per day and more portion of gas allocated for domestic consumption, soon oil and gas will not be treated as a commodity anymore, but instead will be dedicated as an input capital to energize economic growth and development.
  • The upstream activities are moving towards east part of Indonesia, more offshore, more remote and deeper sea water. Hydrocarbon basins on east part and unconventional resources (CBM and shale hydrocarbon) are some of promising prospects.
  • Prospects in downstream are oil refineries (including mini refineries) and gas infrastructure (including gas fired power plant); while prospect in supporting industry is to build more domestic manufacturing facilities to increase local content.
  • Exploration and production are tried to be speed up by ways of (i) establishment of National Exploration Committee, (ii) simplification and streamlining of permitting and approval process, (iii) more engagement with stakeholders, and (iv) better corporate governance.
  • A mutual cooperation with overseas parties in the sectors of upstream, downstream, as well as supporting industry is still wide open.
The slump of oil price of course has caused a slowdown in exploration and production activities, and consequently has given negative impacts to many other sectors in global economy, bringing the world into a crisis situation. Most E&P companies have been forced by the situation to restructure their spending. A number of projects are being cancelled or put on hold, rig counts have fallen, investment plans are being revised, costs are being cut and squeezed, number of employees is cut and new hiring is cancelled. It is in fact a challenging time for the industry. It is very important to realize that the oil business has been dealing with change and uncertainty since its very early days. We cannot avoid cyclical events, when prices rise and fall. It is the nature of the market. There are of course opportunities too. For companies that have strong financial back-up, it is actually good time to invest now, since the prices of supporting goods and services are at the very low level.

APOGCE theme this year “Sustain and Gain: Bending the Curve” is very relevant with the current oil and gas situation. Hopefully the three-day event would provide a road map and action plan for the region to really bend the curve: from declined curve to inclined curve. Bear in mind that nobody loves crisis, and therefore everybody wants to get rid of crisis. We all expect this downturn won’t be too long. Some experts and observers are of the opinion that this tough situation will come to a better shape within next two years, but it won’t bring back the price of oil at the level of USD 100 per barrel. USD 70 levels are more reasonable once the situation hits a new equilibrium. So let’s gain more production, more reserves, more investment and more growth in a sustainable manner. Mutual cooperation within the region must be elevated. The countries which are already advance in exploitation of unconventional resources should share their knowledge and expertise to others in the region.

No comments: