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The Ministry of Oil holds a virtual seminar in cooperation with the Organization of Petroleum Exporting Countries (OAPEC)

07-06-2021

The Public Relations Department of the Ministry of Oil organized a virtual seminar (today, Monday) on the impact of the decline in oil prices due to the (Covid-19) pandemic on the field of exploration and production in the petroleum industry, in which the oil, exploration and production expert at the Organization of Arab Petroleum Exporting Countries (OAPEC) lectured. Eng. Turki Hassan Hamash, and a large number of specialists in technical and economic affairs in the Ministry of Oil and the Kuwait Institute for Scientific Research and the media participated in it. Eng. Turki Hassan Hamash said during the panel discussion that during the past years, oil prices have been subjected to frequent fluctuations, as they reached the limits of 147 dollars per barrel in 2008, then fell to 34 dollars per barrel under great pressure from the negative repercussions of the global financial crisis, and then in In 2010, prices witnessed signs of receding from the global financial crisis, and in 2014 oil prices tumbled since the middle of the year, reaching about $44 a barrel in 2016. Oil prices have witnessed negative repercussions as a result of the spread of the Corona pandemic in 2020, but they have improved significantly recently. . He stated that the budgets of companies and exploration operations during the Corona pandemic decreased in 2020 by nearly 30% from the investments in 2019, and exploration and production investments approached 382 billion dollars in 2020, expecting that spending will recover to the pre-pandemic level of about 530 billion dollars if the oil price rises to About 65 dollars a barrel, which is what the market is witnessing now, if oil was traded at more than 70 dollars a barrel during the past days. Eng. Turki Hassan Hamash touched on the relationship between global demand and oil prices, pointing out that the rise in oil prices was often accompanied by a subsequent decrease in consumption, in addition to the changing demand conditions, especially in the short term, playing an important role in price fluctuations. On the relationship between oil prices and the number and volume of explorations, he said that the assumption that there is a direct and immediate relationship between oil prices and the number or volume of discoveries remains unclear, and that the decline in prices often requires a period of time until its actual reflection on the exploration operations appears, as the decline in prices accompanies it. The risk factor rises, and thus the expected returns become less, and international companies resort to reducing exploration budgets and directing work to areas with less risk and cost. He stated that raising the exploration budget does not necessarily mean obtaining new discoveries, but rather it means that there are greater opportunities to find these discoveries, and this means that high oil prices mean the possibility of developing exploration and exploration plans in difficult places, but the result of exploration operations may not appear until after a few years, perhaps During that time, oil prices may have changed. He said that global supply and demand patterns during the Corona crisis witnessed significant declines in oil consumption since the beginning of the year 2020 until the end of May that exceeded the rates of decline in production, and also witnessed an increase in global oil stocks. While, as of June of the year 2020, the oil markets witnessed the easing of restrictions on travel, movement and movement, the reduction of oil production by the (OPEC +) alliance, and the decline in production rates in the United States of America, and then the markets witnessed a rise in consumption rates and high prices. Historical (OPEC +) decisions In addition, Eng. Turki Hamash addressed the historical decisions of the Organization of Petroleum Exporting Countries (OPEC +) where he said that the organization and its allies responded on April 9, 2020 to the decline in demand and prices, and with a historical decision taken, oil production was reduced by 10 million barrels per day, as the reference production approved for the reduction was the production rate In October 2018, except for Saudi Arabia and Russia, where the production reference for each is 11 million barrels per day. Regarding the impact of the Corona pandemic on drilling operations, he indicated that the number of drilled wells globally decreased from 74.5 thousand wells in 2019 to 55,3 thousand wells in 2020, with a decline rate of 26%, and the number of rigs in the OAPEC countries decreased in 2020 by about 47% during the period Between January (412 excavators) and December 2020, about 217 excavators, and in the case of the State of Kuwait, it witnessed only one excavator exit during 2020. He said that the Technical Affairs Department of OAPEC tracked data that showed that 38 discoveries were made during the first half of 2020, compared to 51 discoveries in the second half of the year, and the discoveries in the submerged areas accounted for more than 45% of the total discoveries in terms of number and about 75% in terms of volume. shale oil And about the effects of the Corona crisis and the drop in oil prices on shale oil (shale oil) in the United States of America, he said that American oil production decreased in total by more than one million barrels per day, including 330,000 barrels per day of shale oil, reaching 7 million barrels per day, and cases of bankruptcy declarations increased. Companies in shale oil, with about 32 cases that have filed for bankruptcy, have a total debt of $40 billion, and 25 petroleum services companies have filed for bankruptcy. Regarding the effects on the current assets of renewable energy sources, he mentioned that, unlike the projects under construction, the operating power plants are protected from low demand for electricity and low prices, as many power plants operating on renewable energy have fixed-price contracts and prioritize access to the network, so they may face Little or no production cutback. And he indicated that the closure measures led to a decrease in the weekly demand for electricity by 10-35% across the affected regions in Europe, and this allowed an increase in the share of renewable energy sources from the demand, and as a result of the decrease in demand for electricity and the additional capacities that were added to the network in the first quarter of 2020 rose Nutrition quotas from renewable energy sources in many regions of the world. In other words, renewable energy has benefited from the decrease in demand for electricity to occupy a larger space in the network, as it is the result of government support and has priority for transmission on the network. He said that the Corona crisis reflected on the movement of cars globally and witnessed during the first four months of the year 2020 significant restrictions represented in the prevention of travel, and thus the demand for oil witnessed a decrease of 5%, and among the main reasons for this was the decrease in the movement of cars, as the movement on the roads declined globally in The second half of March 2020 increased by more than 53% compared to the same period in 2019. As for the impact on the aviation sector and the movement of international airports, he said that the demand for jet fuel amounted to 25% until March 2020, and the number of flights decreased by 41% between the beginning of 2020 until the last two weeks of March, and the average number of flights in April 2020 was about 26% only From the average number of flights for the same period in 2019. He pointed out that the easing of the ban and travel procedures in the second half of 2020 reflected positively on the number of flights, as the average number of flights in December 2020 was about 64% of the average for the same period in 2019. It is noted that air traffic during the months of January and February of 2021 declined as a result of the spread of the virus. The second wave of the epidemic, which caused a return to closures and the suspension of travel between countries. future perspective Regarding the future outlook for energy, he said that expectations differ on the one hand, as energy consumption in the world is not homogeneously distributed, as 5 countries alone consume more than half of the world’s energy, with China consuming 24.3%, the United States 16.2%, India 5.8%, Russia 5.1% and Japan 3.2% Therefore, the International Energy Agency's perspective on global oil demand indicates that consumption may reach 99.9 million barrels per day in 2025 and about 103.2 million barrels per day in 2030. As for OPEC, its forecasts indicate that global demand for oil will reach 103.7 million barrels in 2025 and will reach 107.2 million barrels by 2030. He reviewed a number of conclusions that focused on the fact that the decline in oil prices could limit plans for new exploration operations, as companies tend to reduce their budgets in this area and focus on areas with high hope in an attempt to reduce potential losses, and the decline in production in 2020 does not mean that In any case, the world's oil production has reached its peak, as most of the quantities of oil that came out of the market are quantities that exist in the form of production capacities that can be pumped again when the markets improve, which is a sign that looms on the near horizon and this refutes what is rumored that the world has reached peak oil production in the year 2020. He stated that the decline in oil prices leads to a reduction in production operations, but government companies are able to produce at low profit margins, and that oil production declined in 2020 by a total rate of approximately 6.7%, or about 6.6 million barrels per day, and most of this decline was practically caused by the reduction in production, which The (OPEC +) countries committed to it, in addition to the decline in shale oil production by about 370 thousand barrels per day, and Russia reduced its production by about 930 thousand barrels per day. He said that the use of oil and gas is not limited to the land transport market (cars) only, as air transport has not yet found any alternative to oil derivatives, and it is not expected that this alternative will exist in the near future, and it is expected that the demand for energy will grow until 2040 at a rate ranging between 25 -28% of demand values in 2019, and the changes that swept the oil markets in 2020 may have a role in creating a competitive environment that motivates countries with oil economies to diversify sources of income to face price fluctuations. Oil Ministry seminars For her part, Director of Public Relations at the Ministry of Oil, Sheikha Tamader Khaled Al-Ahmad Al-Sabah, said in her intervention during the panel discussion entitled (Retreat in oil prices due to the Covid-19 pandemic), that the ministry is keen to organize many oil seminars and seminars with the aim of enhancing communication between specialists and ministry employees. And the media, noting that the series of virtual seminars that the ministry has been organizing during the past period has established a platform for direct communication and access to the latest local, regional and global oil events. Sheikha Tamader Khaled Al-Ahmad Al-Sabah stated that the Ministry of Oil is keen to implement its media plan that it has set, which includes holding educational virtual seminars on the oil industry and other various social, health and development seminars with the participation of officials and experts in the oil and gas sector with the aim of spreading culture and awareness within the country and supporting research work. In addition, Sheikha Tamader Khaled Al-Ahmad Al-Sabah praised the historic decisions taken by the Organization of Petroleum Exporting Countries and non-OPEC producing countries (OPEC +), which contributed to improving the balance of oil supply and demand in line with the prevailing global conditions resulting from the repercussions of the Corona pandemic, expressing her optimism about the situation Markets during the coming period, in conjunction with the expansion of countries in the distribution of the anti-Coronavirus vaccine and the start of the gradual return to normal life in many countries of the world.