You present a report on the exploration and production strategies for private Middle East companies at the congress. What are the peculiarities of the Middle East oil companies?
Abdulla Al-Qadi: Oil & Gas companies in the Middle East have traditionally been owned and controlled by the state (such as ARAMCO, KOC, and ADNOC), with the exception of the involvement of some of the major IOCs. Crescent Petroleum is in fact the region's oldest indigenous privately owned independent upstream oil and gas company, and has been operating throughout the region for over 35 years now.
Since the recent paradigm shift in energy prices, we have witnessed a significant increase in private sector ambitions (local as well as international) to take part in the all important petroleum industry here, and as a result numerous new players have entered the market all fishing for similar opportunities. Of course, as with any other regions in the world, local "know-how", expertise and experience is crucial to ensure successful and sustainable business and because of this we have naturally positioned ourselves as an ideal partner of choice in the region.
Is it profitable for the Emirates to develop the private oil business?
Abdulla Al-Qadi: The latest report issued last summer by APICORP forecasts required energy investments in the MENA Region of $345 billion in the next five years alone. I personally believe that private sector participation is in the region is crucial if these levels of investments are to be realized.
As our Chairman, Mr Hamid Jafar, recently stated in a speech he gave at the recent MEGAS conference in Doha, the the Region is undergoing one major positive phenomenon while facing a quite separate serious challenge, and that these two factors considered together are leading to a major change to the Region.
The major positive phenomenon we are experiencing is the new paradigm shift in global energy prices. This new oil boom has led to massive oil revenue increases for many regional governments amounting to hundreds of billions of dollars. The difference this time, though, is a more prudent management and investment of these revenues, with more of an emphasis on capital formation and capacity-building at home, and significantly more intra-regional trade and investment than was seen in the past, not to mention a huge growth in the size and depth of the Region's capital markets driven by the private sector.
However, the one serious and major challenge facing the Region is job creation. Unlike Europe or Japan, who contend with shrinking and ageing populations, the Middle East faces quite the opposite problem: growing and ever-younger populations, necessitating the creation of hundreds of millions of jobs in the coming few decades, or else risking serious social instability and a massive strain on government budgets. In Saudi Arabia alone, for example, over 160,000 new jobs need to be created annually, and the State Sector, until now the main employer, has been struggling to maintain its historic absorption of new jobs. Nor would that be efficient economically, if it did. In total, the Arab world will have to create 100 million new jobs in the next 20 years. It is simply not sustainable, nor indeed desirable, for this increase in the labour force to be absorbed by the State Sector. Encouragement of a robust and growing private sector is therefore critical to the Region's socio-economic well-being, not to mention for the sake of its global competitiveness.
It is this policy driver more than any other, that has led to the growing support across the Region for an increased role of the local private sector in practically all aspects of the economy, including the energy sector. Economic reform, privatisation, and market liberalisation are the watch-words of the day all across the Region, from Algeria and Egypt to Jordan, Lebanon and Syria, and across into Saudi Arabia, the Gulf States, and even Iran. And of course, most significantly Iraq, which is in the process of finalizing a commendable modern and ground-breaking oil and gas law that emphasizes the need for private sector involvement in the country's upstream development, including (significantly) encouraging the participation of the Iraqi private sector.
The natural gas business in particular is very conducive to the active participation of the local private sector. The gas business is in many ways less politically sensitive than oil, and is not bogged down in such issues as OPEC quotas and the international politics of oil supply policy. The natural gas business has close linkages to gas-utilisation industries such as power generation and petrochemicals, which have already experienced a major trend of private sector involvement throughout the Region.
Historically, the main constraints on such participation were access to technology and capital, but the years when these were held only by IOC's are long gone, and it's time that we all realize this. With very few exceptions, technology in our industry is readily available and more often provided by service companies accessible to everyone, and raising capital for energy projects is not an issue, particularly in this Region.
For instance, one company Crescent Petroleum founded in 2005, in recognition of the trends mentioned above, as the Region's largest private sector and public natural gas company, Dana Gas, launched a regional IPO that was oversubscribed by 144 times, raising US$78 billion in barely ten days, and this example is by no means unique.
Is it possible for foreign oil players to work on the Emirates' oil market?
Abdulla Al-Qadi: As mentioned, I believe that private sector involvement, local as well as foreign, will have a role to play in the development of the region's industries going forward, including the petroleum industry and a particular focus on natural gas.
With regard to oil specifically, in Abu Dhabi only ADNOC and its international major shareholders in the operating companies like ADCO, ADMA, and ZADCO are operating currently and I do not see that changing, however the Northern Emirates is a different story and there already exists a small number of foreign companies with operations there. We at Crescent have always welcomed participation of respected foreign oil and gas companies in our projects and over the years have partnered on projects locally with companies from Japan, China, the U.S., the United Kindom, Finland, France and others.
What do you think about the current tendency towards nationalization of the energy resources in a number of countries, and the transnational state companies occupy the top position? Is there any risk for the private companies in the field?
Abdulla Al-Qadi: Actually what we are witnessing in the Middle East is an increased role for the private companies, both international and local, for new projects - in Saudi Arabia, Iran, UAE and so on.What is interesting though is the growing international role of major companies from Russia, India, China and other countries and their high level of interest in the Middle East as well. It is not just the old western majors (Shell, BP, Exxon, Total) anymore. This is a positive development - the world economy is more global than ever, and with oil prices at $65 and high levels of investment required, having more companies participating is a very positive development in my opinion - there is plenty of room for all companies.
How does your company solve the environmental problems emerging during the development of the oil projects? Do you have your own innovations in the field?
Abdulla Al-Qadi: As a responsible petroleum company that has been successfully operating projects over 35 years all over the world including Argentina, Canada, Egypt, Yemen, Pakistan and of course the UAE, we have strict HSE policies that we adhere to and are monitored closely by HSE officials within the company. We are constantly improving environmental operational initiatives based on new technologies developed externally and we are in regular contact with experts in this field to ensure we are current.
Could you forecast the global oil demand growth and crude oil prices in the future? Are the geopolitical risks considered by setting that price? (For instance, possible war between Iraq and the Western world). What is the fair price for the crude today?
Abdulla Al-Qadi: Anybody who thinks they can accurately forecast future oil price is of course wrong! It depends on so many aspects, and more than ever it is driven now by the demand from high-growth countries such as China, more than events in producing countries. I do think it is clear that we will be in a world of higher prices than before of course, for the reason that the world and its economic growth has accepted higher prices.
As for a fair price, it is whatever the market price is - the market is decided by world supply and demand and the market is never wrong, as they say!
Does your company plan to collaborate with the Russian oil companies; is it possible to have with Russia the joint development of the oil and gas projects, or in such fields as Human Resources, Services, Safety, Crisis Management, and Environment? Do you see any prospects for the Russian companies in the Middle East?
Abdulla Al-Qadi: Our company welcomes any positive collaboration with respectable Russian oil companies with regard to development of oil & gas fields, as well as depending on Russian service companies to provide oil and gas related services in our local and regional projects.
We are very aware of the rapid growth the petroleum industry in Russia has experienced over the past few years, and we certainly encourage building economic and political bridges through regional participation of Russian companies in projects in our region and vice versa.