Exclusive: Petronas regional director says NOCs must collaborate to face shared challenges

Abd Malik Jaffar, regional director of PETRONAS Subsidiaries Middle East, PETRONAS, says national oil companies from the East and West must collaborate to face shared challenges

NOCs, Petronas, Energy security, International energy agency, Renewables, Solar power, Digitalisation
Abd Malik Jaffar, regional director PETRONAS Subsidiaries Middle East
Abd Malik Jaffar, regional director PETRONAS Subsidiaries Middle East

National oil companies (NOCs) in the Middle East, Asia and beyond face similar issues: ensuring energy security amid tighter budgets, green targets, growing populations and rising energy demand. In the Middle East alone, BP Outlook expects energy consumption to rise by 54% by 2040. Success will be hard-won, especially in a world of $60 per barrel (/bl) oil. As guardians of their economies, NOCs must reach out for strategic helping hands to stay on their toes.

Price volatility is a key pressure point, from which no NOC is immune. Such volatility has seen oil prices reach $86/bl in early October from $67/bl at the beginning of this year, then slide again recently by 30% to $57/bl. But there is a silver lining to this lingering cloud of guesswork. Dated Brent averaged $72/bl as of the 7 December this year, versus an average of $54/bl in 2017 – a 33% annual increase. Of course, there could be more twists and turns ahead, such as the US’ renewed sanctions on Iran. This alone could remove between 1 million barrels a day (b/d) to 1.5m b/d of oil from the market. As more ‘what ifs’ dominate NOCs’ boardroom conversations, partnerships are pivotal to staying afloat in the sea of ambiguity.

As NOCs face the same uncertainty, we should work together towards our united goal: affordable, low-carbon energy security. Working together will enable the expertise of others to plug your weaker spots and vice versa, therefore picking up the pace for all involved.  Collaborative sweet spots abound for NOCs and other energy entities on both sides of the Indian Ocean—for example, Middle East NOCs with ageing oilfields can leverage the expertise of their Asian counterparts in enhanced oil recovery. More East-West collaborations today will lead to profitable wins in the early 2020s.

The same applies to renewables. The International Energy Agency (IEA) expects Asia to be home to two of the three countries – China, US, India – that will account for two thirds of the global renewable expansion up to 2022. Renewables are an integral thread in the energy strategies of most Gulf countries’ National Visions. The UAE, long an advocate of solar power, launched the world’s largest Concentrated Solar Power (CSP) project last year, for example. Regulatory shifts also provide opportunities for NOCs in the Middle East and Asia to unleash their collaborative spirit, such as the International Maritime Organization’s (IMO) new sulfur ruling. From the 1 January, 2020, the sulfur bunker limit will be 0.5%, down from today’s 3.5.%. Liquified natural gas (LNG) is an increasingly popular bunkering option to complement the new fuel mix post-2020, though questions linger over affordable and logistically-viable storage options. With the UAE’s Port of Fujairah serving as the world’s second largest bunkering hub, there are plenty of opportunities for partnership with companies growing their FLNG presence.

Before NOCs in the Middle East and Asia embark on joint projects, each NOC must strengthen its internal alignment. This means identifying quantifiable goals – both commercial and corporate social responsibility (CSR) – and enhancing human and technological resources. Internal confusions bleed into partnerships, delaying projects and spiraling costs. Equally, NOCs must understand the ethos and goals of their potential partners. This is especially pertinent as the global energy transition is diversifying their traditional remit into a rainbow of interests, including renewables and nuclear power. 

Threading digitalisation into partnerships is crucial; the future is digital. The tool box under the umbrella of the 4th Industrial Revolution encompasses predictive analytics, artificial intelligence, automation, blockchain and much, much more. Learning this new 21st century language will sharpen NOCs’ competitive edge, both individually and in partnerships. Nearly a quarter (24%) of respondents to a GIQ Industry Survey expect alignment between NOCs and companies from Silicon Valley to emerge as the most popular partnership in the 2020s.

Market pressures are too great and the clock is ticking too loudly for NOCs to operate in siloes. Seeking and extending alliances in this era of troubleshooting is not a sign of weakness, but economic maturation. Together, national guardians can stand tall and proud.

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Oil & Gas Middle East - March 2019

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