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The oil and gas industry is one of the truly global industries. Oil and gas products are required in every country which has a competitive economy and reserves are found in nearly every corner of the globe. The supply chain which has evolved to cater for this complex global industry is broadly split into the following areas:

  • Upstream – relating to the identification and quantification of reserves in addition to the procurement of equipment and the development and commercial production of those reserves
  • Downstream – Covering transport, trading of crude oil and natural gas as well as refining and distribution



OIL & GAS: VALUE CHAIN

Stricly Private & Confidential

 

Key Drivers of Activity in the E&P Industry

Between 2007 and 2012 the traditional demand and supply dynamics of energy markets were changed by the accelerated industrialisation of developing countries, especially those in Asia as well as Russia, Brazil and Turkey. On the supply side, the majority of ‘supergiant’ discoveries have been made offshore with an increasing number of large fields in deep and ultra-deep waters and harsh environments. High-impact discoveries onshore have largely been limited to ‘unconventional’ oil sands and tight oil plays in addition to conventional finds in previously underexplored areas such as Iraqi Kurdistan, Venezuela, Colombia, East Africa and Eastern Siberia.

The 2008/09 financial crisis brought Brent crude oil prices down to USD30 per barrel (“/bbl”) from USD147/bbl in 6 months. During the financial crisis energy companies were drilling fewer oil and gas wells and cutting back spending on refineries, pipelines, and power stations. Many on-going capital expenditure projects slowed and a number of planned projects were postponed or cancelled due to an adjusted profitability expectation. Between October 2008 and April 2009, about 20 planned large-scale upstream oil and gas projects (with total value of USD170 billion and involving around 2 million barrels per day (“mbpd”) of oil production capacity and 1 billion cubic feet per day (“bcfpd”) of gas capacity) were cancelled. However, as the price depression lasted for a relatively short period, very few fields were shut down for a prolonged period.

From the low point of the financial crisis, energy markets have recovered with current Brent crude oil prices exceeding USD110/bbl. However the fear of recession in the West and a hard landing in China continues to threaten the global recovery. This has been mixed with an increase in geopolitical instability which is still prevalent across many of the major oil producing regions especially the Middle East. In commodity markets, although volatile, a double dip recession has not materialised although certain warnings such as sovereign debt concerns as well as a number of natural and environmental events have been very noticeable during the last 18 months. The Fukushima earthquake in April 2011 has contributed to enhanced demand for natural gas as Asian and European economies in particular look to replace nuclear power with natural gas and liquefied natural gas (“LNG”).

As Western economies have been recovering from the depths of recession seen during the financial crisis, the recovery especially in the G8 countries continues to be a fragile one, particularly in the Eurozone. Business confidence remains low and as such there has been little willingness to invest in labour and boost output. In the USA, the story is somewhat different where the economic recovery, which was previously labelled as ‘jobless’ is beginning to gather strength.

For more information, please refer to Chapter 5 of Sona Petroleum’s Prospectus.

The industry continues to work within the volatile and changing environment, and must continue to strive to meet the expected increase in world demand going forward.

Global O&G Market & Highlights

 Key driver of activity within the O&G industry

  • Brent oil price is expected to trade within a USD100/bbl=120/bbl range in 2013. This range is high enough to support new supply being placed into the market, but not too high to add drag to the economic recovery.

  • Whilst it is possible that Brent price may decline below the trading range of between USD100/bbl and USD120/bbl, any reduction below the USD90/bbl floor will only be sustained over short periods of time as low prices will likely spur supply response from oil producing countries.

  • In contrast, a period of sustained high prices exceeding USD120/bbl will likely meet with demand responses.

  • The drivers of long-run oil price momentum are likely to remain firmly rooted over the next decade. Oil production is mobbing into increasingly expensive forms such as deepwater, arctic, shale oil and heavy oil. The momentum is expected to be sustainable.

  • The drivers of long-run oil price momentum are likely to remain firmly rooted over the next decade. Oil production is mobbing into increasingly expensive forms such as deepwater, arctic, shale oil and heavy oil. The momentum is expected to be sustainable.

 

 

 

 

 

Sona Petroleum
Sona Petroleum Berhad was formed by
a group of experienced senior professionals
who are passionate about and are active in
the oil and gas industry.

Sona Petroleum Berhad
(formerly known as Titanium Windfall Sdn Bhd)
Level 24, Menara 3 PETRONAS,
Persiaran KLCC, Kuala Lumpur City Centre,
50088 Kuala Lumpur, Malaysia
Tel: +6 03 2164 3318
Fax: +6 03 2164 3691

©2014 Sona Petroleum Berhad (Company No. 945626-P)