Five minutes with: Abhay Bhargava, business head, industrial practice – MEA, Frost & Sullivan
This month we get the inside line on the state of the industry from Frost & Sullivan’s business head, industrial practice - MEA, Abhay Bhargava.
How do you assess the sentiment in the upstream sector right now in the Middle East region?
In our opinion, sentiment across the upstream sector is quite mixed. Operating companies have been seeing a positive response to their actions to date, in terms of oil prices, and they would be bullish in their outlook. However, most suppliers and service providers are now quite seasoned, having witnessed enough oil price cycles in the past. These stakeholders would probably still be wary and not overly optimistic as yet.
Where do you think the oil price is headed through the rest of the year?
Oil prices have seen an uptick this year, spurred by a depletion in strategic reserves globally, and the geopolitical events that have taken place in the course of the last year or so. On the face of it, the recent OPEC+ agreement decision to raise production would send a logical signal that prices would be controlled. However, we are of the opinion that the supply being increased by some members may not ultimately be adequate to compensate for the disruption in supply on account of others, and this would act as a driver for prices to further increase.
With rising oil and gas output set to make the US the world’s pre-eminent producer in the near future, how will this impact the Middle East’s hydrocarbon industry?
The production output from the US alone cannot be a sole influencer on the Middle East’s hydrocarbon industry. There is a much more complicated equation at play, involving factors like worldwide stocks, Iraq and Russia. What we can definitely expect is that the Middle East exporters would keep continuing on their path to capture more value from every barrel of oil by going downstream - taking the form of more investments in storage, refining and petrochemicals.
In your estimation, is ‘peak oil’ coming into view?
The peak oil theory was originally brought up to theorise on when reserves would reach a state of decline. Given that oil producers cut back on their production for a few years, the peak oil timeline has potentially been extended. Again, taking into account that demand for oil would witness a decline on account of renewables coming into the picture, it is logical to conclude peak oil will only be pushed further away than when it was originally envisaged.
Are renewables an increasing threat to the future reliance on oil and gas?
Ongoing investment in renewables would definitely result in a reduction in utilising hydrocarbons for power generation purposes. This will be driven by a need to diversify the energy mix, as well as a deliberate attempt to divert oil towards other downstream applications for value extraction. However, it would be incorrect to say that renewables would completely take over. There will still be a need for hydrocarbon based generation, especially where sources of renewable energy are simply inadequate or infeasible - which specifically is more a question of solar and wind availability.