mena vs. the world · 2019-10-15 · 55% of lost capacity after saudi abqaiq attacks expected to...

MENA VS. THE WORLDTHE ENERGY TRANSFORMATION

© QAMAR ENERGY 2019 | qamarenergy.com | [email protected]

ROBIN MILLS | 09.10.2019

CURRENT GEOPOLITICAL OUTLOOK

CRUDE SUPPLY DISRUPTIONS ARE CONTINUING, BUT OVERALL ENVIRONMENT REMAINS STABLE

Source: Qamar Energy

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Iran Libya Nigeria Iraq Kuwait Saudi Arabia Non-OPEC Brent

55% OF LOST CAPACITY AFTER SAUDI ABQAIQ ATTACKS EXPECTED TO REBOUND BY OCTOBER


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Sto

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(mil

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Pro

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Saudi production deficit Stocks

• A prolonged outage of four weeks or more would see Brent crude trading close to $80/bbl• Oil price increases muted from expectation it will be short-lived • Concern about the global economy

• Now there are increased trade routes, increased supply outside OPEC, high inventory stocks and emergency stocks, and SPR releases

GEOPOLITICS OF THE MIDDLE EAST DON’T DISRUPT OIL PRICES ANY LONGER

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WTI Brent

Prices rose in 2011 due to the Arab Revolution and in 2012 due to Iran sanctions

Began falling in 2014 due to weak economic news, oversupply, plus OPEC inaction

Modest price gain due to OPEC cuts, Iran sanctions, and Libya uncertainty

But seasonality in oil prices more or less unaffected by MENA geopolitics; drone attacks on Saudi + US tankers,

seizing of UK and Iranian tankers


THE ENERGY TRANSFORMATION

IN PAST ENERGY TRANSITIONS, EARLIER SOURCES OF ENERGY HAVE NEITHER DISAPPEARED NOR SHRUNK

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En

ergy

Co

nsu

mp

tio

n (

EJ)

Biomass Coal Oil Gas Hydro Nuclear Solar Wind Other renewables Biofuels


ENERGY TRANSITION MAKES ONLY LIMITED PROGRESS TILL 2030 WORLDWIDE

Source: DNV

FINAL ENERGY DEMAND

PRIMARY ENERGY DEMAND

PEAK OIL DEMAND: ON THE WAY?


• The exact date of peak demand is less important for oil- and gas-producers than the level and the trajectory post-peak

• The main forecasts yield about a 40% increase in primary energy demand by 2050, or about 1% per year from now on

• Most of the attention on peak oil demand has concentrated on EVs; transport is a significant sector for oil

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EIA Reference Case

EIA (Low Oil Price)

EIA (High Oil Price)

Wood Mackenzie (2016)

RethinX (BAU)

Rethinx (TaaS disruption)

ExxonMobil

BP

BP (EFT)

BP (ICE Ban)

Greenpeace (Reference)

Greenpeace (Revolution)

Greenpeace (Advanced Energy)

Statoil (Reform)

Statoil (Renewal)

Statoil (Rivalry)

OPEC

IEA (Current Policies)

IEA (New Policies)

IEA (450)

MIDDLE EAST AT THE EPICENTRE OF ENERGY GLOBALISATION…


THE LNG MARKET IS GLOBALISING – NEW EXPORTERS, IMPORTERS, AND INTERMEDIARIES


• LNG markets now more liquid, faster, shorter-term and complicated• Asia leading in new markets• Russia supplies Europe; MENA remains major exporting region even though overall exports don’t rise

much

THREE VISIONS OF GAS


VISION DRIVERS

DEAD END

• A renewable future

• Shift from coal direct to cost-competitive renewables

• Strong climate action• High cost of LNG

BRIDGE FUEL

• Gas to 2040 before renewables take over

• Flexible interim back-up to renewables

• Need for gas in industry, transport• Failure of widespread gas CCS

DESTINATION FUEL

• A large part of the energy mix indefinitely

• Success of gas CCS• Massive cheap unconventional

resources • Difficulty in balancing renewable-

only grids

DISRUPTIVE TECHNOLOGIES HAVE EMERGED ACROSS EVERY SECTOR OF ENERGY –SOME, BUT NOT ALL, ADDRESSING CLIMATE


RISE OF ELECTRIC VEHICLES IS A MAJOR GLOBAL SHIFT…


OPEC increased its forecast for EV adoption, anticipating 266 million cars by 2040 instead of the 46 million

• EVS have only a small share of the market today, but are improving in price and range• Several countries, including China, India, France, the UK and Norway, have announced longer-term targets

to phase out the use of non-electric/hybrid vehicles• Electrification of transport depends on advances in batteries rather than changes in electricity

generation

TRANSITIONING TO A 1.5°/2°C FUTURE WILL NEED ACTION FROM TRADITIONAL HYDROCARBON PRODUCERS


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2017 2030 2050

Oil

co

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mp

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Mb

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Oil Demand in 1.5° C Scenarios

1 2 3 4

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2017 2030 2050

Gas

co

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Gas Demand in 1.5° C Scenarios

1 2 3 4

SCENARIO 1 Ongoing low energy demand, no CCUS, low nuclear

SCENARIO 2 Balanced mix of sustainability and low-carbon innovation, EVs

SCENARIO 3 Improvements in energy production and use, strong use of CCUS

SCENARIO 4High-energy ‘over-shooting’ scenario: CO2 goes above target levels before being brought down by massive use of CCS

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Inst

all

ed

So

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W)

UAE

Qatar

Oman

Kuwait

Jordan

Israel

Iraq

Iran

Saudi Arabia

Yemen

Syria

Palestine

Lebanon

Egypt

Bahrain

SOLAR SET FOR STRONG GROWTH, DRIVEN BY FALLING COSTS, NEW BUSINESS MODELS, AND SUBSIDY REFORM


• World record low bids for solar power concentrated in MENA • Early adopters of large-scale PV will become exporters to other countries/regions• New markets such as Iraq can offer higher margins for short periods• Strong overall growth from 0.26 GW in 2011 to 122 GW in 2030

CCUS, BATTERIES, HYDROGEN HAVE STRONG POTENTIAL FOR MAJOR TAKE OFF IN THE REGION

Source: Qamar Energy; IEA; BNEF

• EOR and industrial use can absorb ~50% of captured CO2

• Hydrogen potential can also grow – opportunity to future proof energy industryo Hydrogen as energy storage (for solar), export industry (like LNG), transport fuel (shipping,

aviation): Existing infrastructure will need to be upgraded to handle hydrogen • Need for battery storage will grow rapidly as solar PV and wind adopted• Battery storage will offer opportunities for new market models, if utilities allow

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CO

2ca

ptu

red

, Mt/

ye

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Saudi Arabia UAE Qatar Oman Kuwait Bahrain

Note: Chart depicts maximum feasible potential for CCUS deployment

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Li-

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Falls in Li-ion Battery Costs

IOCs & NOCs TRANSITION

AS NEW ENERGIES & MOBILITY APPROACH TIPPING POINT, WHAT STRATEGIES WILL THE INCUMBENTS ADOPT?


Strategy Example IOCs/NOCs

Strategy 1 • Stick to legacy business: production, processing and sale of oil and gas

• Integrate technologies, keeping costs low while expanding resource base and exploiting new commercial opportunities

• CCUS can expand EOR and keep production environmentally acceptable

• Create new oil and gas markets by geography and sector

• Downstream focus: Integrating refineries with petrochemical plants

• Internationalisation (JVs with refineries, petrochemical plants, storage terminals)

Strategy 2 • Integrate renewable generation and EOR, synthetic fuels, direct CO2 capture, electricity marketing to battery vehicles into core business

• ‘Planned transformation strategy’: managed divestment of hydrocarbon assets

Strategy 3 • Invest through SWFs

ARE MENA OIL & GAS PRODUCERS PREPARED?


IRAQ (STRATEGY 1)

1. Gas to reduce flaring and increase power generation2. Solar power introduction starting3. Strong oil sector growth4. Very heavy dependence on crude oil exports for

government budget, exports – little progress in diversification

UAE (STRATEGY 1 + 2 + 3)UAE strategy: Embrace rather than challenge

1. Gas self-sufficiency through more difficult resources2. LNG bunkering3. Oil production, refining and petrochem expansion4. Initiate new low-carbon – nuclear, CCUS, renewable

desalination, hydrogen5. Major progress in low-cost solar power (PV and CSP)6. Masdar investments into battery technologies and

establishing regional Electrical Energy Storage Solutions Hub (EESSH)

7. New energy investments internationally8. Progress on export and budget revenue diversification

SAUDI ARABIA (STRATEGY 1 + 3)

1. Domestic and international gas and downstream – refining and petrochems

2. Oil & gas tech investment for demand defence

3. Starting progress in domestic solar, wind & nuclear

4. Energy price reform, IPOs and privatisation5. Still very dependent on oil revenues for

budget and exports

CONCLUSIONS


OIL & GAS RESOURCES REMAIN A SOURCE AND VICTIM OF GEOPOLITICAL CONFLICT

THE ENERGY TRANSITION IS NOT JUST ABOUT RENEWABLES OR CARBON

GAS INCREASINGLY SEEN AS THE BRIDGE FUEL TO A LOW-CARBON FUTURE

MENA GOVERNMENTS FOCUSSING ON TECHNOLOGY, STRATEGIC INVESTMENTS AND INTERNATIONALISATION TO ADAPT TO ENERGY TRANSFORMATION

BUT ENERGY TRANSFORMATION TAKES TIME – 2030 IS TOMORROW!

CONTACT

Jumeirah Lake TowersCluster M, HDS Business Centre

33 | 32, DubaiUnited Arab Emirates

[email protected]+971 4 364 1232

© QAMAR ENERGY 2019 | qamarenergy.com | [email protected]

mena vs. the world · 2019-10-15 · 55% of lost capacity after saudi abqaiq attacks expected to...

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