The drop in oil prices represents a crucial threat to the execution of many mega projects worldwide, Kuwait Petroleum Corporation CEO Nizar Al-Adsani said on Sunday.
The falling oil prices meant that the overall liquidity and cash revenues have shrunk by the extent of declining prices, Al-Adsani explained during the inauguration of the 3rd Kuwait Enterprise Risk Management Conference, held here during the period March 29-31.
He noted that risks are an integral part of business activities, which vary from volatile prices to increased health, safety and environmental pressures.
Demand for energy will continue to expand driven largely by improving living standards for humans around the world, but technological advancement has pushed unconventional resources especially shale oil forward to actively change the global energy map dynamics greatly and cause further volatility and weaken markets, he stated.
The boundaries of vulnerability and risks have expanded and stretched with the industry facing more challenge that add to the uncertainty, with the shortage of experts’ resources and the cyber attacks’ threats, he said.
Management of information is one of challenges facing oil industry, he said, adding timely access to all relevant vital information is crucial whenever an incident takes place and an action is required.
He noted that managing capital projects, especially in an uncertain world environment, increases risks and leads to take difficult decisions.
“We are in a transforming world, events are developing on a rapid pace affecting various aspects of the industry, and now the only key to face future challenges and promote opportunities is actually cooperation and collaborations,” he said.
He added: “We expect the Enterprise Risk Management to support our efforts to create systematic value and achieve comprehensive value chain optimization, among other targets, in line with the KPC ERM 2030 Strategy to build our capabilities in the areas of governance, processes, people and technology.” Al-Adsani hoped that the conference would provide an opportunity to share expertise and improve performance.
He said: “We believe the future winners in the oil and gas industry are those who understand their risk profile better, and we see KPC and its subsidiary are in that successful seat in the industry.” For his part, Bakheet Al-Rashidi, President of Kuwait Petroleum International (KPI), hailed the KPC for supporting Risk Management’s initiatives, especially during the current dynamic situation across the global oil industry.
He underlined the significance of the conference as the Kuwait oil sector is currently embarking upon development of several multibillion mega projects of strategic importance and promoting investments in various fields, to ensure alignment with its long term strategy.
“Defining macroeconomic uncertainty as the volatility in global industrial growth, we need to understand how changes in this uncertainty affect the economy,” he said.
He noted there are different types of uncertainty affect individual sectors of the economy differently and these also have various degrees of life cycle.
He explained that macroeconomic uncertainty over oil supply causes volatility in oil prices, which is a key factor that controls industrial production like; power, steel, consumables and electronic goods, and impacts transportation costs. Al-Rashidi said the world is constantly changing, thus “we have to be ready to respond to these changes”, adding the recent reduction in oil prices over the past few months since September 2014 is certainly a major news in the world economy today, which is similar to a recent situation in August 2008.
The price adjustments, he expected, may not last for long and may soon see a steady rise in crude prices as the demand for oil picks up gradually in near future.
Despite the downward trend of crude oil prices reaching a six-years low, global oil product demand growth is forecast to increase during 2015, at 1.0% growth rate by additional consumption of 0.9 million b/d to 93.3 million b/d, compared to 0.07% growth registered during 2014, for a demand of 92.4 million b/d, he noted.
In these changing times, where market is adjusting itself, the KPI operates two refineries in Netherlands and Italy and offers an entire spectrum of supply chain, retail marketing, aviation, lubricants and other customer services across Europe, he made clear.