The Future of Oil, Gas & LNG in Asia-Pacific

25 January 2017

Last week we welcomed 650 energy executives to Singapore to discuss the future of oil, gas and LNG in Asia-Pacific. After two days of meetings, debate and discussion I wanted to share with you my key takeaways and reflections.

  • THE WORST IS NOW BEHIND US = 2016 was a terrible year for most oil and gas professionals and if you worked in Asia-Pacific the odds were higher than average. The consensus from the assembled wounded but walking is that the worst is now over. There is a floor to tomorrow’s price and a ceiling to tomorrow’s downside. We can’t rest yet, there is much still to be done, but we can afford to breathe again.
     
  • BEWARE THE RE-EMERGENCE OF COAL = most of the world is moving away from coal but with plummeting prices coal is once again figuring significantly in some countries’ future energy agendas, including India. It is simply too cheap for them to ignore. Make no mistake about it, oil and gas are in competition with coal for future demand and in markets where we are chasing (and even relying on) new growth. It is a fight our industry needs to win.
     
  • BECOME AN ADVOCATE FOR GAS = Whether it be for competition against coal (and ‘clean’ coal), promoting LNG as the fuel of choice for transportation and maritime, or developing gas-related energy policies, we all need to become advocates for gas. Privately. Publicly. Individually. Collectively. Unless we shout about it, don’t expect everyone to talk about it.
     
  • THE FUTURE OF GAS AND LNG IS BRIGHT = Gas and LNG remain fantastic long-term plays but future supply competition, as well as, demand distribution will be fierce. China’s LNG receiving capacity will reach 200 mmtpa by 2030, four times today’s capacity but much of this increase being filled by the private sector (ENN, Huadian, Beijing Gas, Guanghui, Jovo). Foreign companies need to ensure their positioning is perfect to access future customers and future opportunities.
     
  • IOC RETRENCHMENT OUT OF ASIA CONTINUES = Aside from existing mega gas/LNG projects, IOC divestment plans in Asia continue as more large-scale opportunities outside of Asia attract their attention and petro-dollars (Mexico, GoM, Alaska, Iran, Offshore Africa). IOCs will need acquisitions to grow post-2017 but most now see that opportunity (far) away from Asia-Pacific.
     
  • A NEW NORM FOR SOUTH EAST ASIA = IOCs and large-caps are retreating, SE Asian NOCs are rationalising their portfolios and smaller players are mostly immobile and financially distressed. There exists many niche plays across SE Asia but these will only be capitalised upon by nimble, proactive and innovative energy companies who can quickly and effectively optimize capital, the M&A markets and share both capex and operational risks with new partners.
     
  • COMMODITY TRADERS ARE HERE TO STAY AND IN A MUCH BIGGER WAY = Trading houses are significantly increasing their asset footprints. They are not interested primarily in the arbitrage. Present them with an opportunity to add value and reap reward across the energy chain (the molecule itself, logistics, efficiency and/or operations) and they could be the business partner you need to grow your company in Asia-Pacific. We’ve been waiting for private equity to be our industry’s white knight, we might have been looking in the wrong place.
     
  • INNOVATION IS THE ANSWER, NOT TECHNOLOGY NOR DIGITAL = Innovation is not new but its pace is accelerating and frighteningly so. Each new technological and digital frontier presents us with another catalyst for evolution, ammunition for change, but none of them stand alone as a silver bullet for transforming our industry. We have to work collaboratively with all and with each other to ensure this.
     
  • FROM TO BRAIN DRAIN TO BRAIN DESTRUCTION = Talent, leadership, potential and experience is being lost in vast quantities; it is hard to keep track. The unwanted and unneeded are looking elsewhere for opportunity and as LinkedIn job announcements proclaim, many are leaving or have left our industry, with little chance they will return. We all have to reinvest more in talent or our industry has a very challenging future.
     
  • FOCUS ON COST, NOT PRICE = My final thoughts mirror those of industry guru Martin Houston who spoke at the event. “Cost of supply matters. Price is a derivative, not an aspiration waiting to back into a convenient pricing formula”. Focus on the former and the latter will work for you regardless.
     

Thank you for your time in reading these thoughts.

By Ross Stewart Campbell, CEO, Guanxi Energy and Non-Executive Chairman, Oil & Gas Council, rsc@guanxienergy.com

= For more information on Guanxi Energy please visit: www.guanxienergy.com

= For more information on Oil & Gas Council please visit: www.oilandgascouncil.com

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