Hatem Al Mosa, CEO, Sharjah National Oil Corporation (SNOC)

On the long-term impacts of Covid-19 on the oil industry and its implications for green energy

How long do you expect production cuts across global energy markets to continue? 

HATEM AL MOSA: I think the cuts will be extended for as long as needed to stabilise oil prices. I hope that the authorities will not seek prices above $50 per barrel, because that would prompt shale producers to return too early to the market. Given the true cost of oil, this would not be healthy for the market. 

As the market starts to recover cuts should be gradually reduced to target pre-Covid-19 production levels, at which time it should respond naturally and allow shale production to come on-line. The cuts should not be so severe that the price recovers to an artificially high level. A healthy price range for June to October 2020 would be between $35 and $45 – up to $50 by mid-2021 – or higher, if demand continues to recover.

As global lockdown measures are eased, in what areas of the global economy do you expect to see energy demand pick up the quickest?

AL MOSA: In many parts of the world the transportation sector will be one of the first areas to recover in terms of oil demand – specifically due to the use of personal vehicles. The airline industry will recover later, and when it does, I do not think it is going to return to pre-Covid-19 levels. People are going to continue conducting online meetings, and I think many will avoid air travel altogether until the pandemic is over.

What are the main drivers of digitalisation currently under way at SNOC? 

AL MOSA: Harvesting big data is a key aspect of digitalisation. When we talk about digitalisation in the energy sector we are referring to the internet of things, big data and artificial intelligence. At SNOC we are concentrating on big data in order to consolidate our information library, which has been in books and binders until recently. We are converting those into digital libraries that are accessible online from anywhere in the world. We have been making these changes at both SNOC and the Petroleum Council – the government organisation that is tasked with overseeing SNOC and other oil companies in the emirate. 

In what way will businesses have a lasting effect on both consumers and global energy demand, and what will be the impact on green energy?

AL MOSA: Fossil energy prices declined by 50% and at one point by more than 75% as a result of the pandemic. These lower prices actually go against green energy. By the end of 2022, however, prices are likely to exceed pre-Covid-19 levels because of the high cuts that have taken place across the sector. When demand picks back up in 2021 or 2022, the industry may not recover quickly enough. We expect that prices will jump to over $50 by the end of 2021. They could in fact spike much higher for a certain period of time until the oil industry catches up.

However, for the longer term, it is only a matter of time before green energy will control the market; it has been increasing its supply at a much higher pace than the fossil fuel industry. Gas has not suffered as much as oil, while coal was the most severely affected. Eventually green energy will capture most of the market within the next two decades. 

I believe that by 2030 the price benchmark will be set by renewables – not by supply and demand – because they will be the main competition for oil and gas. It is already much cheaper to produce green energy, and it will only get cheaper with time. What we are seeing is a temporary setback for renewables and fossil energy. When demand resumes growing, renewables will grab the lion’s share.
 

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In UAE: Sharjah

New park in Sharjah to increase opportunities in food processing

New projects and investments related to food processing are strengthening Sharjah’s manufacturing sector and lending themselves to attempts to improve food security across the UAE.

In Economy

¿Cuál será el impacto de la reforma laboral de México?

México ha instaurado una nueva ley laboral, en un esfuerzo por racionalizar las disputas industriales y mejorar la protección de los trabajadores.

Latest

Covid-19 and Latin American agriculture: can innovation overcome the...

Although the coronavirus pandemic has created significant challenges for the Latin American agricultural sector, it has also created opportunities for innovation and the expansion of home-grown...