OPEC meeting in April to review production cuts

KUWAIT: CEO of Kuwait Petroleum Corporation (KPC) Hashem Hashem speaks during the fifth annual GCC Energy Strategy Forum yesterday. — Photo by Joseph Shagra

KUWAIT: Demand for energy is forecast to edge up by 33 percent in the coming two decades, anticipated CEO of Kuwait Petroleum Corporation (KPC) Hashem Hashem, citing recent OAPEC figures. Hashem made the remark in a speech he delivered on behalf of Minister of Oil and Minister of Electricity and Water Khaled Al-Fadhel during the fifth annual GCC Energy Strategy Forum, hosted by the KPC yesterday. He expected the share of the Organization of Petroleum Exporting Countries (OPEC) in global oil supplies to shoot up to 36 percent by 2040 from 34 percent in 2017. He noted that for the third year, global investment in energy dipped to $1.8 trillion in 2017.

Hashem revealed that a ministerial meeting of OPEC member states and producers will be held in April to review the performance of the production cut agreement in general. He noted that the world’s oil supply is facing the risk of continued decline in Venezuelan crude oil in 2019 at a faster pace than current projections. “The (US President Donald) Trump administration on Monday sanctioned Venezuela’s state-owned oil company, ratcheting up pressure on socialist President Nicolas Maduro to cede power to the US-backed opposition in the oil-rich nation in South America,” he said.
Hashem pointed out that the fears may lead to an atmosphere of stagnation of the global economy, which will increase the volatility of prices during 2019. “The industry outlook supports the growing demand for oil in the short term, compared to current crude oil prices and the price curve path,” he added.

He predicted that the current production cut agreement will rebalance the markets, as OPEC and non-OPEC producers agreed to cut production by 1.2 million barrels per day from January. “Despite the growth of the global economy in 2018, it is experiencing signs of a slowdown this year due to a combination of factors, including rising interest rates in the United States and the prospects of a US-China trade war, as well as volatility in equity markets.”

Meanwhile, Hashem reassured that the strategic plans of the Kuwaiti oil sector until 2040 cover the development of various activities and shore up the Kuwaiti economy by means of creating jobs, training young people and boosting their technical capabilities, and going ahead with financial diversification blueprints. KPC is eager to fulfill the international criteria of high-quality and environmentally friendly oil byproducts, while expanding refining operations so as to meet local demand for energy, the KPC’s CEO echoed.

24.7 million barrels a day
Secretary-General of the Organization of Arab Petroleum Exporting Countries (OAPEC) Abbas Al-Naqi addressed the event by saying that member states own roughly 705 billion barrels of oil, which make up 47.9 percent of the world’s oil reserves. The quota of the OAPEC’s Gulf member states constitute around 33.7 percent of global oil stocks, Naqi added.

OAPEC members produce 24.7 million barrels of oil per day, which make up roughly 28 percent of global output, while Gulf member states share about 21 percent of the world’s production, he remarked. The OAPEC chief predicted member states to boost their refining capacity by 1.9 million barrels per day following the setting up of new refiners in Kuwait, Saudi Arabia, Iraq, Algeria and UAE, not to mention refinery production expansions in Bahrain and Egypt.

At the event, global energy issues were addressed, discussing energy transformation, current and future developments in the petroleum industry in OAPEC member countries, regional market, global outlook, transformation of the petrochemical industry for a more sustainable era and new methods for financing energy projects and investment opportunities.

On the sidelines of the forum, Kuwait Times spoke with Richard Lucas, Resident Managing Director Holman Fenwick Willan (HFW) and a defense and infrastructure projects’ lawyer. Lucas moderated the discussion panel about ‘New Methods for Financing Energy Projects and Investment Opportunities’. “Our office in Kuwait, which was founded three years ago, gives advice to investors, contractors, sponsors, and governments here in Kuwait in the same way of our method in UAE or UK offices in industry sectors,” he said.

Attractive market
Lucas affirmed that the Kuwaiti market is attracting investors because of its friendly and secure environment. “We think it is important to grow our office here in Kuwait, and there are plans to cooperate with other lawyers to join us. We are involved more in the Kuwaiti market, where we are cooperating with both the public and private sectors.”

Lucas also provides counsel on a wide range of commercial contracts, including specialist purchase and supply agreements, service agreements and maintenance contracts, outsourcing and procurement agreements and IT contracts, where the clients range from government entities to global corporations, as well as large, medium and small corporations. He has decades of experience advising clients on defense contracting and complex infrastructure projects. He acts for many of the world’s major defense contractors on a wide range of international defense procurement where he is familiar with all the latest procurement techniques, ranging from outright acquisition to third-party financed transactions to the provision of services under detailed performance measurement systems. He has significant experience of offset, outsourcing, intellectual property and technology transfer.

Andy Brogan, Partner, Global Oil and Gas Transaction Advisory Services Leader at Ernst & Young (EY), said: “The company engages in helping clients to take the decisions where to spend money and help in the implementation of technology.” His company is a big player in this field, and helps clients deliver successful mergers, acquisitions and partnerships and to raise capital to support their ongoing growth and transformation.

Brogan has advised large and small firms as well as governments on corporate strategy, mergers and acquisitions, divestitures, valuations, deal structuring, bid negotiation, and financing. He has been with EY for over 25 years, during which he has worked on a wide range of acquisition, divestment and IPO projects across the energy and resources sectors. His clients have included Saudi Aramco, BP, Gazprom, BHP Billiton, Royal Dutch Shell, BG Group, SOCAR, RWE, ONGC, Carlyle International Energy partners, LetterOne, as well as the governments of China, Greece, Sri Lanka, Kazakhstan and the UAE.

By Faten Omar and KUNA