OBG talks to Mohammed bin Saleh Al Sada, Minister of Energy & Industry

Mohammed bin Saleh Al Sada, Minister of Energy & Industry

Interview: Mohammed bin Saleh Al Sada

To what extent is there a need to balance increasing fossil fuel production with a lower growth outlook for economic development?

MOHAMMED BIN SALEH AL SADA: The main driver for energy demand is economic activity, followed by government policies, new efficiency technologies and population growth, among others. By 2035, nearly 90% of this growth in demand will be in non-OECD countries, with a net increase in oil demand coming from the transport sector. Similarly, more natural gas will be needed to meet expanding power generation and industrial activity, as well as for residential consumption.

Fossil fuels will remain the centrepiece of the energy equation for several decades to come. However, we must also bear in mind global economic uncertainty in the energy equation. Indeed, a recent IMF forecast has revised world economic growth down to around 3.3%. This is likely to have some serious ramifications for the large-scale investment needed in fossil fuels.

Nonetheless, we must keep in mind that energy projects are capital intensive and have a long lead time. The scenario must be avoided when the demand growth re-emerges and we are faced with a tight supply condition. Deferring projects today will undermine future oil supply growth. According to the International Energy Agency, the cumulative investment needed in the oil and gas supply infrastructure alone is estimated at $19trn over the next 25 years. Of this amount, more than 60% is projected to take place in the non-OECD world. Natural gas is expected to receive a share of investment equal to that of the oil industry, demonstrating its increasing role in the energy equation.

What are the main challenges in upgrading existing fields and modernising recovery techniques?

AL SADA: Significant upside potential exists for Qatar Petroleum (QP) to redevelop existing fields using advanced hydrocarbons recovery techniques. However, it is important that these activities provide opportunities for value creation, sustainability and natural resource conservation. These activities present key obstacles to overcome technically, commercially and from a resourcing perspective. While some of these, such as market price, may be perceived as outside our control, these activities must present a real economic return. Additional challenges facing QP include:

• Worldwide competition for highly qualified technical staff and managers. Recent trends show a shortage of upstream technical professionals.

• Aging infrastructure, facilities and wells. Despite effective maintenance and periodic upgrading, the suitability of these facilities for future field redevelopments remains a challenge. Upgrade costs could exceed those of a new-build installation.

• Industry knowledge losses as technical experts retire from the sector. Growing reliance on software for decision making does not adequately replace this loss and can lead to heightened risks.

• Need to apply technically complex recovery mechanisms to increase field recovery. Successful application of enhanced oil recovery mechanisms demands expensive surface facilities.

In light of the GCC interconnection grid project, what strategies are in place to unify electricity standards to achieve a cohesive energy exchange?

AL SADA: The central strategy behind the initiative is to develop improved security of power supply and better economic efficiency among the GCC countries. Its primary use is for reserve sharing and emergency support between the GCC countries, and allows bilateral energy trade between member states.

The north and south grids have been completed and made operative. This greater interconnectivity has established and strengthened operational standards across the GCC, transforming the region’s power sector into a major energy trading market. The GCC grid project could also allow for interconnection with other networks, such as the Maghreb Arab Grid, thereby enabling energy interchange at times of peak demand.

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Mohammed bin Saleh Al Sada

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The Report: Qatar 2012

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