Asia Pacific Energy Assembly 2021: Day 1 Takeaways

The Energy Council’s Asia Pacific Energy Assembly gathered many of the industry’s leading figures within a wide virtual tent, to discuss the pressing issues, risks and opportunities facing the regional energy market. These questions were of stark concern as the sector felt the effects of the pandemic downturn and the task to engage in the energy transition became even more pressing. Through the organisation’s extensive network, the Asia Pacific Energy Assembly attracted speakers and attendees from; regional NOCs, the IOCs and major independents, prominent global investment funds and financial institutions, digitalization pioneers and premier professional services firms.

Day One saw speakers from the likes of: Rystad Energy, Advisian, CNIC Corporation Limited, PETRONAS, ConocoPhillips, Pertamina, ANPM (National Authority of Petroleum and Minerals), Naftogaz Group, Amazon Web Services, DNV, Reflex Marine, Storegga Geotechnologies, Equinor, ENGIE South East Asia, Ocean Reach Advisory, Freshfields Bruckhaus Deringer, Harbour Energy, Neptune Energy, MedcoEnergi, CNPC International Ltd., PetroBroad Investment Ltd, Jefferies Investment Bank, United Energy Group Ltd, Mercuria Energy Trading, Dentons, CNOOC Economy Research Institute, McKinsey & Company, Moody’s Investors Service, Kerogen Capital, Akin Gump Strauss Hauer & Feld LLP, Kongsberg Digital, Vedanta Resources Plc, OMV, Microsoft, and the notably, the Ministry of Natural Resources, P. R. China.

Day one saw the talks focus on the status quo and the strategies going forward for those operating within the APAC region.

• Opening Industry Keynote – Global Upstream Outlook: Where Does Asia Fit in?
  • Jon Fredrik Muller · Rystad Energy

Jon Frederik Muller, Partner & Head of Consulting Asia-Pacific, at Rystad Energy, a data-driven energy advisory, opened the presentations looking at the state-of-play within the Asian Upstream industry. Asian economic growth is expected to remain amongst the strongest across the globe, with expansions in population leading to energy demand growth. However, the region is conscious of the need to make an effort toward mitigating their climate impact. As a result, the expectation is for there to be a shift in away from oil and coal, and increase the demand for natural gas.

However, this comes with a myriad of complexities, notwithstanding the Western constrictions on oil and gas financing. Will the demand for gas thaw tensions between the US and China? Will the demand for fossil fuels hinder the progress of_______________

• Adapting To A Changing World: Exploring The Growth Strategies Of Regional NOCs, SOEs & IOCs; Where Do The Greatest Challenges And Opportunities Now Lie?
  • Craig Henderson · Advisian
  • Kevin Sit · CNIC Corporation Limited
  • Azman Aziz · PETRONAS
  • Richard Thomas · ConocoPhillips
  • Daniel Purba · Pertamina
  • Florentino Soares Ferreira · ANPM (National Authority of Petroleum and Minerals

As one of our most hotly anticipated and attended panel discussions – the role of NOCs in the Asia Pacific region and their influence both internally and externally, is crucial to determining how many of the sector’s actors approach their business plans. The NOCs control the lion’s share of oil and gas production across the region, their role to ensure affordability for their population and to maximize profits for government through exports.

NOCs are seeking to expand their ownership of regional assets, as the IOCs and Majors seek to reduce their exposure to emissions in far-off basins. This has triggered an uptick in regional M&A activity that may continue as the oil and gas prices maintain their rebound. Watch on demand for a brilliant discussion!

• Ministerial Keynote – New Opportunities for Gas Exploration & Production in Ukraine
  • Maksym Vityk – Naftogaz Group

The Ministerial Keynote was presented by Maksym Vityk, Head of Strategic Projects at Naftogaz – the largest of Ukraine’s national oil companies. Here Maksym outlined the depth and variety of gas projects on the horizon for the country, seeking to maximize its position and resources by becoming a primary supplier of natural gas to Europe (currently 4^th).

Ukraine is looking to put behind them a troubled decade and emerge as a key operator in the energy transition. With proven gas resources of over 1058 bcm, of which Naftogaz has developed 254 bcm of 2P reserves. And with the greatest fleet of onshore rigs anywhere in Europe, the country is geared to make use of their valuable energy transition resource.

Naftogaz is looking for partners to help develop and operate these assets, with the intention of supplying 100% of local demand by 2030, while boosting gas exports to the EU. With the energy transition in mind, Naftogaz has committed to net-neutrality by 2040 together with developing hydrogen and biofuels to supplement their supply options.

• The Upstream Industry Is One of The Greatest Potential Innovators For The Energy Transition
  • Franz Deimbacher · Amazon Web Services
  • Brice Le Gallo · DNV
  • Sandra Antonovic · Reflex Marine
  • Nick Cooper · Storegga Geotechnologies
  • Magne Andre Hovden · Equinor
  • Wandrille Doucerain · ENGIE South East Asia

A core concern with the energy transition is how to reduce the impact of high-emissions, hard-to-abate industrial sectors. Central to these concerns are the oil and gas upstream sector that carries a burden for the use of scope 1 and 2 emissions, with scope 3 emissions likely to be included in the near future.

Yet one feature of the O&G upstream sector is their incredible capacity to research, develop and utilize modern technologies to drive efficiency and lower overheads. Many ESG impact investors believe in the importance of investing in high-emissions sectors to influence emissions reductions, and in this light, there has been a convergence of climate-conscious investors driving the use of technologies internally to bring about change.

With the capital, the engineering elite and the requirement to change – all at their feet, the upstream sector can be key to funding and developing important technologies. In this space we have already seen EOR and CCUS become central to the transition, these actors should be encouraged to use this position and may reform the perception of energy companies in the transition.

• Ministerial Keynote China – The Opening up of China’s Oil & Gas Upstream Markets and Opening the Door to International Investment: Long-Term Structural Reforms, Improving Liquidity and Generating Competitive Upstream Markets
  • Yinghong Zhang · Ministry of Natural Resources, P. R. China

The second Ministerial Keynote was delivered by Yinghong Zhang, Deputy Director General of the Ministry of Natural Resources in the People’s Republic of China. The central role of China in the energy sector is of significant interest to trade partners and energy exporters, with the state expected to double it’s gas demand over the next two decades – ensuring a strong demand for gas imports.

Mr. Zhang focused on three aspects in relation to China; global and energy mineral development, the status quo and trends of the Chinese energy and mineral development, and the future development direction of Chinese energy minerals. Linking these issues is the manner in which acceleration of the energy transition as a result of Covid’s market dislocations.

In order to facilitate this demand, China is seeking to undergo a number of structural reforms that will encourage more favourable conditions for international investors and producers alike, while considering the need to incorporate a greater share of “green and clean” energy sources. While gas imports will be the big winner, we can expect China to diversify itss energy supply and make moves toward their 2060 net-zero deadline

• Upstream M&A: The Current Market Conditions Open a Window of Opportunity For International Players
  • Austen Fresson · Ocean Reach Advisory
  • Philip Morgan · Freshfields Bruckhaus Deringer
  • Stuart Cooper · Harbour Energy
  • David Hemmings · Neptune Energy
  • Roberto Lorato · MedcoEnergi
  • Zewu (Frank) Lai · CNPC International Ltd.

Assets on the international oil and gas market have been thrust into the spotlight with some post-Covid M&A machinations at play. The convergence of market forces as a result of Covid, ESG demands from the energy transition and the oil price collapse, has ensured a collective reconsideration of producer’s assets.

Of the IOCs, NOCs, Majors and Independents, each E&P player has differences in their priorities and objectives. IOCs are having to make significant reductions in emissions, adhere to ESG demands and maintain their commitment to shareholders. They will seek to sell-off high-exposure assets, but are careful to not sell themselves short, just because of market disruptions.

NOCs remain focused on affordability, with many in Asia Pacific keen to obtain more local assets that had been held by the IOCs and Majors who are looking to withdraw from far-flung destinations. The Majors and Independents see opportunity to pick up IOC and NOC brownfield assets that can still be exploited, especially through the use of more modern production processes.

The most prominent inhibitor to M&A is the price at which assets will be sold as owners will see the remaining future value, while buyers are looking to pick-up cheap assets on the back of the Covid downturn. One thing for certain is that the money will be moving with assets changing hands.

• Examining Innovative Financing Mechanisms And Appetite For Private & Public Capital In The Asia Pacific Region
  • Sheng Ding · PetroBroad Investment Ltd
  • Hartley Clay · Jefferies Investment Bank
  • Leslie Zhang · United Energy Group Ltd
  • Iain Lawson · Mercuria Energy Trading
  • Kunal Kapoor · Dentons

From Green Bonds to Sustainable Link Bonds, the range of new mechanisms and products being introduced by the financial sector to the energy industry has injected innovation in a sector crying out for it. As the energy transition has progressed, the finance and investment sectors have come under intense pressure to reassess their relationship with fossil fuel producers and to use their influence to ignite change.

And that is just what they have done by reducing the volumes of traditional offerings, such as Reserve-Based Lending, and providing capital that is connected to ESG metrics and monitoring.

Western public funds have some reticence engaging in regions, such as Asia, where ESG policies are less prominent. This may open the door for regional funds to provide the sought after capital, and there is increasing talk of Western private equity moving to Asia where their capital, again, is not as constrained by ESG reporting. How the geopolitical concerns weigh-in on energy demand, will be an interesting factor to consider in the coming years.

• Energy Transition Keynote – The Future is Now: The Oil & Gas Roadmap to a Low-Carbon Economy
  • Jayanti Kar · McKinsey & Company

MCKinsey & Company have positioned themselves as consistently reliable partners in helping to transform the outcomes of a business. Jayanti Kar, a Partner in their London office, challenges the energy industry to consider what tough choices they will make as the energy transition matures. 

Jayanti delivered the dire context facing traditional energy players: a world moving towards electrification intersecting with a stabilizing energy demand. She continues by questioning how companies will make their core carbon businesses more resilient in a low carbon economy.  And if there is a particular model to surefire success. 

• Thriving in a Low Carbon Era: Oil & Gas Companies of the Future
  • Wang Zhen · CNOOC Economy Research Institute
  • Vikas Halan · Moody’s Investors Service
  • Anthony Mathias · MedcoEnergi
  • Ross Chiu · Kerogen Capital
  • Paul Greening · Akin Gump Strauss Hauer & Feld LLP

Oil and gas companies have long been keen to incorporate new technologies and methods into their production processes in order to achieve the maximum possible efficiency, and this endeavor has taken on new importance with the energy transition.

While many believe the industry should die a slow death, the reality is that society demands the industry continues to grow. It is therefore of key importance to see how the oil and gas companies can reform their approaches in order to “thrive in a low carbon era”.

Each and every possible emissions mitigation technology should be explored; from Enhanced Oil Recovery (EOR), to the electrification of rigs and transport, to carbon trading and CCUS. The onus is on the sector to improve, but the opportunities to create a low to net-zero carbon sector would deliver massive results for the energy transition.

• Digitalisation & AI: EOR, Driving Operational Efficiencies And Remaining Cost Competitive In Maturing Basins
  • Shane McArdle · Kongsberg Digital
  • Anand Laxshmivarahan R · Vedanta Resources Plc
  • Markus Berghofer · OMV
  • Srikant Kadambi · Microsoft

Digitalisation & AI are trendy buzzwords in some fields, but in the energy transition arena they are a crucial element in maximising efficiencies and minimising emissions. The digitalisation of rigs, refineries and accompanying processes has ignited a wave of investments by IOCs and the Majors as they seek to find the green, clean technologies that will allow them to maintain their core oil and gas production business.

Concepts such as the ‘digital twin' can run simulations of activities in real time, while AI can anticipate future shocks or production concerns prior to them rearing up. One technology that is proving essential to many E&P actors, is the use of Enhanced Oil Recovery (EOR) – a process that essentially removes the carbon at source and leaves it underground. 

This final panel of day 1 was an excellent topical discussion by some of the finest energy tech-evangelists around!