ADIPEC Day III: Oil demand, AI and robots

Day three of ADIPEC 2019 has just concluded here in Abu Dhabi, UAE and much was said about oil demand concerns. Morning discourse was coloured by the International Energy Agency's take that demand is set to plateau by 2030 due to a pick up in the use of electric vehicles around the world.

In its latest market projections, the IEA said overall demand for energy is set to increase by 1% every year until 2040, however headline demand will plateau ten years earlier than it had previously forecast.

Elsewhere in its World Energy Outlook report, the IEA said US shale output, which has made the country the world's biggest oil producer, is likely to stay higher for longer than previously projected, with the country accounting for 85% of the increase in global oil production by 2030, and for 30% of the increase in natural gas.

Meanwhile, switching tack to the coming 12 months, OPEC Secretary General Mohammed Barkindo said an uptick in demand for 2020 may be on the cards should the US-China trade stand-off end.

"We are confident that there will be a deal and the deal will be positive for the world economy and will remove the dark cloud that has engulfed the global economy because of the size of the countries," Barkindo said on the sidelines of ADIPEC.

Among the VIPs in town today was Sheikh Mohammed bin Rashid Al Maktoum, Prime Minister and Ruler of neighboring Dubai. Alongside his visit, came that of nearly 900 local school kids to learn more about the industry, its processes, careers and well to marvel – perhaps like the rest of us – at some of the innovative robots and kits on display here.

And then there's the launch of a new branch of local government focused on research and development as well as an artificial intelligence (AI) joint venture inked by the Abu Dhabi National Oil Company (ADNOC) to take in.

The new Abu Dhabi Research and Development Authority will be tasked with inventions that tackle Earth's most pressing challenges. Under auspices of the emirate's Department of Education and Knowledge (ADEK), five virtual research institutes will focus on biotechnology, food security, sustainability, artificial intelligence and high-performance computing, and advanced materials. The announcement came in step with ADNOC's agreement at ADIPEC with UAE-based AI company, Group 42, on a joint venture to develop AI products for the energy sector.

In sync with this hot topic, the Oilholic also participated in ADIPEC Middle East Petroleum Club's Leadership dialogue on Human and machine collaboration and the impact this has on current business transformation.

IIoT, big data, augmented reality and virtual reality premised solutions, and the changing nature of the workforce were all under a lively 90-minute discussion with Greg Cross, Co-founder of Soul Machines and AI pioneer (third from left) leading the talk. 

Finally, here is one's analysis for Rigzone on why BP and Shell's low carbon overtures and portfolio tweaking hold both oil majors in good stead despite a dire set of numbers. That's all for the moment folks, more from here on the final day at ADIPEC tomorrow. Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2019. Photo I: Day three of exhibition at ADIPEC 2019. Photo II: Industry robot at Total's stand. Photo III: AI pioneer Greg Cross speaks at ADIPEC Middle East Petroleum Club, Abu Dhabi, November 2019 © Gaurav Sharma 2019. 

IEA Belatedly Joins the “Peak Oil” Debate

As 2009 drew to a close, the International Energy Agency (IEA) finally and formally admitted that projections on the timing of oil production reaching its peak were no laughing matter and seriously joined the debate. Previously, the IEA, which advises 28 OECD nations on energy issues, had never really been specific about when it thought conventional sources of oil would peak.

I personally recollect having met someone from the IEA in September 2008 on the back of an OPEC summit that year, who talked at length about the matter in private, but refused to discuss the issue on-record. Over the years, some observers have even alleged that the agency was fudging oil production projections.

This clamour, which had always been lurking in the background, gained traction following a report by Dr. Robert L. Hirsch for the U.S. Department of Energy in which he analysed the possible effects of Peak Oil (Viz. Peaking of world oil production: impacts, mitigation, & risk management). A truncated version of his thoughts was later published by the Atlantic Council of U.S.

Hirsch noted: "The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."

In the four years that followed the Hirsch report, many stories in the popular press ran along the lines that all the easy oil and gas in the world had pretty much been found and that tougher times lay ahead. It is an argument which is not hard to dismiss in its entirety. Curiously enough, as an advisory agency to 28 leading economies, the IEA was somehow was not all that keen on discussing it.

All of that was laid to rest over a dramatic few weeks last month. On December 9th, the agency’s eagerly awaited World Energy Outlook 2009 (WEO) noted that conventional oil, from straight-forward to extract sources, is “projected to reach a plateau before” 2030. In the publication, the IEA is seen to have conducted a serious supply-side analysis including the largest oil fields, their rate of production and decline in its research.

Published material suggests that the IEA sees a decline of 7% in year over year terms over the coming years at these extraction site, nearly double the rate of earlier forecasts. Based on the projected rate of decline, the agency estimates that the world would need four new “Saudi Arabias”, a country which has 24% of the world’s proven crude reserves, by 2030 to meet demand. This too is based on the assumption that global demand remains flat at existing levels as does the rate of production decline.

However, quite frankly the agency still prima facie declined to say that the world has currently entered the era of peak oil. Furthermore, in order to perhaps soften its hard assessment, it pointed out that the first half of 2009 saw 10 billion barrels of new oil discoveries; an annual rate previously unheard of! It also said non-conventional sources such as the Athabasca Tar Sands (Canada) should not be discounted either.

Just as sceptics were rounding up on the agency, IEA Chief Economist Dr. Fatih Birol, set out to paint a more pragmatic picture. Having visited some 21 cities in the run-up the WEO’s release, Birol told several media outlets, most notably The Economist and The Guardian newspaper, that the crude production plateau which the agency mentions in the publication, could potentially arrive as early as 2020.

In a much more detailed conversation with The Economist, Birol also made another interesting observation. He said that a worldwide effort to restrict increase in global temperatures to 2 degree centigrade will restrict the increase in global demand for oil to 89 million barrels per day (bpd) in 2030 as opposed to 105 million bpd if no action is taken. That could, in theory, push back peak oil production scenarios as more time would be needed to produce lower-cost oil that remains to be developed.

Watch this space then - for next two decades that is! This argument is far from over. At least the IEA can now dodge accusations that it is not being realistic its assessments and shying away from debate.

© Gaurav Sharma 2010. Photo Courtesy: Martin Rhodes, Essex, England