1 00:00:00,280 --> 00:00:03,240 Speaker 1: This is Dana Perkins and you're listening to Switched on 2 00:00:03,520 --> 00:00:06,440 Speaker 1: the B and EF podcast. Just over a week ago, 3 00:00:06,600 --> 00:00:09,559 Speaker 1: I was in Dubai on the ground at COP twenty eight, 4 00:00:09,840 --> 00:00:14,040 Speaker 1: which concluded with a landmark agreement including wording that the 5 00:00:14,080 --> 00:00:17,840 Speaker 1: world needs to transition away from fossil fuels and energy 6 00:00:17,840 --> 00:00:21,880 Speaker 1: systems now. Each year headed into COP, bn EF creates 7 00:00:21,920 --> 00:00:25,479 Speaker 1: a scorecard regarding what we think will happen across ten 8 00:00:25,640 --> 00:00:29,520 Speaker 1: key areas, and then once the negotiations have concluded, we 9 00:00:29,640 --> 00:00:32,800 Speaker 1: do it again. In the fossil fuel phase down category. 10 00:00:33,080 --> 00:00:35,600 Speaker 1: We actually gave it a score of four out of ten, 11 00:00:36,040 --> 00:00:38,920 Speaker 1: but following the meetings, well that went up to six 12 00:00:38,960 --> 00:00:43,120 Speaker 1: point five. Certainly that's a much rosier outlook, but according 13 00:00:43,159 --> 00:00:46,960 Speaker 1: to BNF analysis, this pledge could have been more ambitious, 14 00:00:47,120 --> 00:00:50,440 Speaker 1: and despite being included in earlier drafts, the omission of 15 00:00:50,479 --> 00:00:53,760 Speaker 1: the terms phase out or phase down has meant that 16 00:00:53,800 --> 00:00:57,320 Speaker 1: the final wording could be interpreted as being less urgent, 17 00:00:57,600 --> 00:01:01,840 Speaker 1: with the phrasing transition away from being more open to interpretation. 18 00:01:02,280 --> 00:01:05,399 Speaker 1: Adding to this, there was also a last minute inclusion 19 00:01:05,520 --> 00:01:09,080 Speaker 1: of a potential role for transition fuels, which could allow 20 00:01:09,160 --> 00:01:11,639 Speaker 1: for countries to lobby for the use of more carbon 21 00:01:11,680 --> 00:01:16,200 Speaker 1: efficient but still emissions intensive technologies, for example switching out 22 00:01:16,280 --> 00:01:19,319 Speaker 1: coal for natural gas. Now. If you'd like to look 23 00:01:19,360 --> 00:01:23,240 Speaker 1: at further BNF analysis on these final COP agreements, you 24 00:01:23,280 --> 00:01:25,920 Speaker 1: can check out the report not Quite a cop Out 25 00:01:25,920 --> 00:01:28,600 Speaker 1: in Dubai and if you'd like to have a look 26 00:01:28,680 --> 00:01:31,520 Speaker 1: more closely at what this means for the fossil fuel sector, 27 00:01:31,720 --> 00:01:34,840 Speaker 1: check out the research note titled Devils in the Details 28 00:01:34,920 --> 00:01:38,680 Speaker 1: of landmark COP twenty eight Fossil Fuel Pledge. You may 29 00:01:38,760 --> 00:01:41,240 Speaker 1: also want to have a listen to our sister Bloomberg 30 00:01:41,280 --> 00:01:45,800 Speaker 1: podcast Zero, hosted by Akshatrathi. He has a recent episode 31 00:01:45,880 --> 00:01:49,760 Speaker 1: that goes through the final agreements at COP in detail now. 32 00:01:49,800 --> 00:01:53,680 Speaker 1: While groups such as the United Nations, UK, European Union 33 00:01:53,840 --> 00:01:57,279 Speaker 1: and Australia were in favor of phase out or phase 34 00:01:57,320 --> 00:02:00,880 Speaker 1: down as the wording in the end, other namesations including 35 00:02:00,920 --> 00:02:04,200 Speaker 1: OPEC countries like Kuwait and Saudi Arabia one out with 36 00:02:04,280 --> 00:02:08,200 Speaker 1: the phrasing that was redrafted to include transition away from 37 00:02:08,320 --> 00:02:10,840 Speaker 1: Of the nations that push back against the phase down 38 00:02:10,880 --> 00:02:14,360 Speaker 1: and phase out ording, many were Middle Eastern energy producers 39 00:02:14,520 --> 00:02:17,960 Speaker 1: and with fifty four percent of global proven oil reserves, 40 00:02:18,120 --> 00:02:23,040 Speaker 1: held across five countries, including Saudi Arabia, the UAE, Kuwait, 41 00:02:23,280 --> 00:02:26,480 Speaker 1: Iran and Iraq. It's not hard to see why. So 42 00:02:26,840 --> 00:02:29,919 Speaker 1: what are the current clean energy plans and policies of 43 00:02:29,960 --> 00:02:32,840 Speaker 1: the fossil fuel rich Middle Eastern nations and do they 44 00:02:32,840 --> 00:02:36,600 Speaker 1: have alternative business plans to offset their potential losses of 45 00:02:36,639 --> 00:02:40,160 Speaker 1: petroleum exports as we reach peak oil demand. To help 46 00:02:40,240 --> 00:02:43,280 Speaker 1: us understand the region better, on today's show, I speak 47 00:02:43,320 --> 00:02:46,000 Speaker 1: with a member of BNF's oil team who has been 48 00:02:46,040 --> 00:02:49,840 Speaker 1: looking at the Middle East in detail. That's analyst Philip Gertz. 49 00:02:50,240 --> 00:02:52,800 Speaker 1: We discussed the outlook for peak oil demand and the 50 00:02:52,840 --> 00:02:56,960 Speaker 1: differences between bnef's view, that of the IEA and the 51 00:02:57,000 --> 00:03:01,079 Speaker 1: contrasting view held by OPEK. We also discussed Saudi Arabia 52 00:03:01,360 --> 00:03:05,000 Speaker 1: and what recent cuts to supply have meant for oil prices, 53 00:03:05,160 --> 00:03:08,680 Speaker 1: as well as the OPEC plus countries. And finally, we 54 00:03:08,720 --> 00:03:11,400 Speaker 1: take a look at hydrogen and compare it directly to 55 00:03:11,480 --> 00:03:14,720 Speaker 1: the current oil and gas businesses held by a number 56 00:03:14,760 --> 00:03:17,880 Speaker 1: of oil companies in the region and what this means 57 00:03:18,080 --> 00:03:20,720 Speaker 1: for their business in terms of scale and outlook. If 58 00:03:20,720 --> 00:03:23,960 Speaker 1: Middle Eastern nations want to harness their ability to create 59 00:03:24,000 --> 00:03:26,959 Speaker 1: green hydrogen. We also discussed where they intend to get 60 00:03:27,000 --> 00:03:30,680 Speaker 1: the required water from. If you like this podcast, if 61 00:03:30,720 --> 00:03:33,120 Speaker 1: you subscribe, you'll receive an update when we publish a 62 00:03:33,160 --> 00:03:36,080 Speaker 1: future episode, and if you give us a review, it'll 63 00:03:36,080 --> 00:03:38,760 Speaker 1: make us more discoverable by others. But right now, let's 64 00:03:38,840 --> 00:03:41,840 Speaker 1: jump into our conversation about the Middle East and fossil 65 00:03:41,840 --> 00:03:56,360 Speaker 1: fuel industry with Philip. Philip, thank you for joining us today. 66 00:03:56,720 --> 00:03:58,120 Speaker 2: Thank you for having me, Dana. 67 00:03:58,400 --> 00:04:01,040 Speaker 1: The theme of today's show is to be about oil 68 00:04:01,080 --> 00:04:04,600 Speaker 1: and gas in the Middle East and pathways to decarbonization. Now, 69 00:04:04,640 --> 00:04:07,920 Speaker 1: before we can even really think about where this is 70 00:04:07,960 --> 00:04:10,600 Speaker 1: all going in the future, let's take a step back 71 00:04:10,720 --> 00:04:14,000 Speaker 1: and talk about what's happening, well, really right now and 72 00:04:14,040 --> 00:04:16,520 Speaker 1: what the state of play is in the Middle East. Now, 73 00:04:16,600 --> 00:04:19,120 Speaker 1: within the Middle East, you have five countries that control 74 00:04:19,240 --> 00:04:22,840 Speaker 1: over half of known oil reserves. So this is certainly 75 00:04:23,120 --> 00:04:25,720 Speaker 1: the right place in the world to really be thinking 76 00:04:25,760 --> 00:04:28,400 Speaker 1: about what the future of oil and gas really looks like. 77 00:04:28,720 --> 00:04:31,400 Speaker 1: So prior to cop Saudi Arabia had been making some 78 00:04:31,600 --> 00:04:36,400 Speaker 1: headlines about cutting the production along with other OPEC nations, 79 00:04:36,640 --> 00:04:39,919 Speaker 1: and I want to better understand what the market impact 80 00:04:40,240 --> 00:04:43,840 Speaker 1: was of that and really what the motivation was. 81 00:04:43,800 --> 00:04:47,360 Speaker 2: For it, all right, So Dosto questions are intimately tied 82 00:04:47,400 --> 00:04:50,040 Speaker 2: to one another, all centered around the theme off keeping 83 00:04:50,120 --> 00:04:53,359 Speaker 2: prizes within a reasonable range. You don't want prices to 84 00:04:53,400 --> 00:04:55,920 Speaker 2: be high because in that case demand will drop, and 85 00:04:55,960 --> 00:04:58,240 Speaker 2: you don't want prizes to be low because your revenues 86 00:04:58,279 --> 00:05:01,320 Speaker 2: will decline. So talk to goal of OPEC is to 87 00:05:01,400 --> 00:05:04,640 Speaker 2: coordinate oil supply in such a fashion and tying that 88 00:05:04,839 --> 00:05:07,400 Speaker 2: to how they think oil demand will develop in the 89 00:05:07,440 --> 00:05:10,120 Speaker 2: foreseeable future, in the next quarters, in the next year, 90 00:05:10,240 --> 00:05:13,080 Speaker 2: and then arranging supply in such a way that well, 91 00:05:13,120 --> 00:05:16,920 Speaker 2: oil prices are kept within a reasonable range, which right 92 00:05:16,960 --> 00:05:20,040 Speaker 2: now would mean anything between let's say seventy and one 93 00:05:20,160 --> 00:05:23,679 Speaker 2: hundreds dollar per barrel, which also ties into what's often 94 00:05:23,720 --> 00:05:26,440 Speaker 2: cited the fiscal break even point, which for Saudi Arabia, 95 00:05:26,480 --> 00:05:29,920 Speaker 2: for example, if we include all new renewable energy aspirations 96 00:05:29,920 --> 00:05:32,880 Speaker 2: such as NEO, would be roughly one hundredes dollar per barrel, 97 00:05:33,000 --> 00:05:36,040 Speaker 2: so significantly higher than the average has been over the 98 00:05:36,080 --> 00:05:39,039 Speaker 2: past months. So, getting back to your question, oil cuts 99 00:05:39,240 --> 00:05:43,119 Speaker 2: mainly intended because OPEK saw that demand development was fairly 100 00:05:43,160 --> 00:05:46,640 Speaker 2: lukewarm in some regions China for example, on the US 101 00:05:46,720 --> 00:05:50,600 Speaker 2: OECD front, you still had pretty lukewarm economic growth or rebound. 102 00:05:50,800 --> 00:05:54,000 Speaker 2: So the decision was that we need to cut supply 103 00:05:54,200 --> 00:05:56,799 Speaker 2: to keep oil prices within a reasonable range. 104 00:05:57,040 --> 00:06:00,320 Speaker 1: When we talk about removing one million barrels of oil 105 00:06:00,360 --> 00:06:03,039 Speaker 1: per day, it sounds like a pretty big amount from 106 00:06:03,200 --> 00:06:05,560 Speaker 1: my standpoint, But I want to know how big is 107 00:06:05,600 --> 00:06:08,919 Speaker 1: this really and essentially, is that a big gap that 108 00:06:08,920 --> 00:06:10,880 Speaker 1: they're leaving in the market or is it a drop 109 00:06:10,880 --> 00:06:11,400 Speaker 1: in the bucket. 110 00:06:11,680 --> 00:06:14,679 Speaker 2: That's a great question. Let's start from the basics. Oil 111 00:06:14,720 --> 00:06:17,440 Speaker 2: market at large right now, as of twenty twenty three, 112 00:06:17,560 --> 00:06:20,520 Speaker 2: we're talking about an overall demand of roughly one hundred 113 00:06:20,560 --> 00:06:22,560 Speaker 2: million barrels per day one hundred and one maybe that 114 00:06:22,680 --> 00:06:25,839 Speaker 2: includes all types of liquids. So you have crude oil, 115 00:06:25,960 --> 00:06:29,320 Speaker 2: you have what's called natural gas liquids, and you have biofuels, 116 00:06:29,360 --> 00:06:32,919 Speaker 2: and you have even what's called refinery processing gains. Coming 117 00:06:32,920 --> 00:06:34,719 Speaker 2: back to the essens, you throw them all together, you 118 00:06:34,760 --> 00:06:37,039 Speaker 2: have roughly one hundred million barrels per day, So one 119 00:06:37,320 --> 00:06:39,520 Speaker 2: million barrel per day would be roughly one percent of 120 00:06:39,560 --> 00:06:43,039 Speaker 2: the market. Now, cutting the market supply by one percent 121 00:06:43,200 --> 00:06:46,920 Speaker 2: does not sound like an enormous difference. And it's not groundbreaking, 122 00:06:47,200 --> 00:06:49,680 Speaker 2: but it's also not negligible. It does have an impact 123 00:06:49,760 --> 00:06:50,279 Speaker 2: on the price. 124 00:06:50,760 --> 00:06:54,159 Speaker 1: And what is the production capacity of Saudi Arabia when 125 00:06:54,160 --> 00:06:57,000 Speaker 1: we look at it in light of the national companies 126 00:06:57,160 --> 00:06:58,760 Speaker 1: and the independent oil companies. 127 00:06:59,200 --> 00:07:02,400 Speaker 2: So Aramco is the only operator in Saudi Arabia, meaning 128 00:07:02,400 --> 00:07:05,320 Speaker 2: that the company's production capacity is equal to that of 129 00:07:05,320 --> 00:07:08,159 Speaker 2: Saudi Arabia at large. And it's very interesting to put 130 00:07:08,320 --> 00:07:11,640 Speaker 2: the production capacity of Aramco two dose next to dose 131 00:07:11,680 --> 00:07:14,400 Speaker 2: of let's say, what we consider to be big oil 132 00:07:14,480 --> 00:07:17,840 Speaker 2: so Exxon Shell to Tile Energies, BP, et cetera. Simply 133 00:07:17,880 --> 00:07:21,280 Speaker 2: because it's almost an order of magnitude difference. Aramco, if 134 00:07:21,320 --> 00:07:24,080 Speaker 2: you talk about crude oil, only has a production capacity 135 00:07:24,160 --> 00:07:26,600 Speaker 2: of twelve milion barrels per day, or that's the typical 136 00:07:26,600 --> 00:07:30,040 Speaker 2: industry estimate. Including natural gas liquids, that would actually go 137 00:07:30,120 --> 00:07:32,600 Speaker 2: up to about thirteen point five malonbaros per day. Now 138 00:07:32,600 --> 00:07:35,760 Speaker 2: we can compare that to the largest of our Western 139 00:07:35,800 --> 00:07:38,560 Speaker 2: oil companies, which would be Exon Mobile, which as of 140 00:07:38,600 --> 00:07:42,000 Speaker 2: twenty twenty two had a production capacity of two point 141 00:07:42,040 --> 00:07:44,840 Speaker 2: four million barrels per day, the largest out of dose. Right, 142 00:07:44,920 --> 00:07:47,840 Speaker 2: then you take Shell total that's about one point five 143 00:07:47,880 --> 00:07:49,800 Speaker 2: malion barrels per day. You have a couple of other 144 00:07:50,080 --> 00:07:53,240 Speaker 2: national oil companies, meaning oil companies in which a government 145 00:07:53,280 --> 00:07:56,920 Speaker 2: has a majority stake, such as Covide Petroleum Corporation. Those 146 00:07:57,000 --> 00:08:00,560 Speaker 2: typically tend to also be on the larger sides. Provide 147 00:08:00,560 --> 00:08:04,080 Speaker 2: Petroleum Corporation has about two point seven million barrels per day. 148 00:08:04,160 --> 00:08:07,440 Speaker 2: Ottrosnifft from Russia has about three point eight bottom line 149 00:08:07,440 --> 00:08:10,160 Speaker 2: being still, you can compare those against Saudi Aramco ord 150 00:08:10,200 --> 00:08:12,760 Speaker 2: of magnet difference twelve to thirteen million barrels per day 151 00:08:12,760 --> 00:08:15,360 Speaker 2: compared to what's usually a range of about one point 152 00:08:15,400 --> 00:08:17,800 Speaker 2: five to three. And those are already the really large 153 00:08:17,840 --> 00:08:19,840 Speaker 2: companies right as one point five to three, But then 154 00:08:19,880 --> 00:08:22,360 Speaker 2: you have Aramco as pretty much an absolute outlier on 155 00:08:22,400 --> 00:08:22,840 Speaker 2: that front. 156 00:08:23,320 --> 00:08:26,280 Speaker 1: So in the background of COP twenty eight, the OPEC 157 00:08:26,360 --> 00:08:30,800 Speaker 1: member nations, we're having discussions around this wording round fossil 158 00:08:30,800 --> 00:08:34,240 Speaker 1: fuels and what should and shouldn't be included, And without 159 00:08:34,280 --> 00:08:37,720 Speaker 1: actually discussing the cop negotiations in any detail, I want 160 00:08:37,720 --> 00:08:41,360 Speaker 1: to better understand how the OPEC countries. So they're thirteen 161 00:08:41,440 --> 00:08:46,120 Speaker 1: of those and another OPEK plus ten, so twenty three 162 00:08:46,160 --> 00:08:50,400 Speaker 1: in total. How often they tend to move together when 163 00:08:50,440 --> 00:08:53,400 Speaker 1: it comes to commitments regarding well, I mean really what 164 00:08:53,440 --> 00:08:56,680 Speaker 1: they're designed to cooperate with each other on, which is output. 165 00:08:57,080 --> 00:09:01,120 Speaker 2: As an organization with lots of different entity naturally there 166 00:09:01,120 --> 00:09:04,080 Speaker 2: will be disagreements or there will be divergences in the 167 00:09:04,120 --> 00:09:06,880 Speaker 2: priorities it goes with an OPEK goes within the EU. 168 00:09:07,240 --> 00:09:12,599 Speaker 2: That said, typically in most cases there is quite some adherents. 169 00:09:12,640 --> 00:09:15,120 Speaker 2: Now I'm speaking in very general terms here simply because 170 00:09:15,120 --> 00:09:18,840 Speaker 2: it can differ a lot by period. Historically speaking, for example, 171 00:09:19,000 --> 00:09:21,160 Speaker 2: there have been a lot of cases in which quotas 172 00:09:21,160 --> 00:09:25,040 Speaker 2: were implemented and subsequently countries actually produced more than the 173 00:09:25,120 --> 00:09:27,880 Speaker 2: quota that was implemented. So those things do happen, but 174 00:09:27,960 --> 00:09:31,080 Speaker 2: across the board there is a lot of compliance to 175 00:09:31,160 --> 00:09:34,800 Speaker 2: those quota. So getting back to your question about, well, 176 00:09:35,080 --> 00:09:38,480 Speaker 2: how much internal agreement there is, I think in terms 177 00:09:38,480 --> 00:09:41,680 Speaker 2: of overall priorities, each state of course determines what's best 178 00:09:41,679 --> 00:09:43,840 Speaker 2: for themselves, but quite often it could also just be 179 00:09:43,960 --> 00:09:47,319 Speaker 2: staying in line with what OPEK, which principally is Saudi 180 00:09:47,320 --> 00:09:49,960 Speaker 2: Arabia now also Russia because they to get our account 181 00:09:50,000 --> 00:09:52,760 Speaker 2: for more than half a production capacity of your organization 182 00:09:52,880 --> 00:09:54,480 Speaker 2: what those two countries dictate. 183 00:09:54,920 --> 00:09:57,080 Speaker 1: We're sitting here at the end of twenty twenty three 184 00:09:57,200 --> 00:09:59,400 Speaker 1: and really talking about well a lot of things that 185 00:09:59,440 --> 00:10:02,080 Speaker 1: have actually come to pass in this year, but we're 186 00:10:02,080 --> 00:10:04,720 Speaker 1: already looking ahead to next year. Do you think that 187 00:10:04,760 --> 00:10:07,880 Speaker 1: we'll continue to see cuts in twenty twenty four or 188 00:10:07,960 --> 00:10:10,360 Speaker 1: is it more than likely that there will be a 189 00:10:10,400 --> 00:10:12,880 Speaker 1: reinstatement of previous output levels. 190 00:10:13,160 --> 00:10:15,960 Speaker 2: As things are standing right now, oil demand in twenty 191 00:10:16,000 --> 00:10:18,800 Speaker 2: twenty four is supposed and by suppose, I mean if 192 00:10:18,840 --> 00:10:21,560 Speaker 2: you look at the forecast of institutes such as the 193 00:10:21,640 --> 00:10:25,360 Speaker 2: IA of Opek itself, twenty twenty four oil demand grove 194 00:10:25,600 --> 00:10:28,640 Speaker 2: is supposed to be or is likely to be, significantly 195 00:10:28,679 --> 00:10:31,400 Speaker 2: lower than what we've seen in twenty twenty three. At 196 00:10:31,400 --> 00:10:33,800 Speaker 2: the same time, twenty twenty three grove has also been 197 00:10:34,000 --> 00:10:37,000 Speaker 2: more lukewarm than what was anticipated in twenty twenty two. 198 00:10:37,080 --> 00:10:40,400 Speaker 2: It's taking this line of argumentation and also considering that 199 00:10:40,559 --> 00:10:43,680 Speaker 2: quite a lot of supply editions, specifically in Latin America 200 00:10:43,800 --> 00:10:47,760 Speaker 2: so Guyana, Brazil, are supposed to come online. US also 201 00:10:47,800 --> 00:10:51,160 Speaker 2: continues to grow at chill production, albeit at a slower rate. 202 00:10:51,280 --> 00:10:53,600 Speaker 2: Taking all of those things together, one could make the 203 00:10:53,720 --> 00:10:58,800 Speaker 2: argument that supply is relatively abundant. Still, Accordingly, one could 204 00:10:58,800 --> 00:11:02,000 Speaker 2: make the argument that Toki prices within a reasonable range, 205 00:11:02,200 --> 00:11:04,959 Speaker 2: that Opek will continue its cuts. 206 00:11:05,320 --> 00:11:08,720 Speaker 1: And this all boils down to profitability and wanting to 207 00:11:08,920 --> 00:11:13,400 Speaker 1: make money. National oil companies are, in and of themselves companies. Oftentimes, 208 00:11:13,400 --> 00:11:15,680 Speaker 1: when we're talking about the decarbonization of the oil and 209 00:11:15,720 --> 00:11:19,800 Speaker 1: gas industry, we talk about hydrogen as a potential option 210 00:11:20,000 --> 00:11:22,640 Speaker 1: and a pivot for these businesses. What I want to 211 00:11:22,679 --> 00:11:27,800 Speaker 1: better understand is is hydrogen when compared with oil a 212 00:11:27,960 --> 00:11:29,760 Speaker 1: really enticing prospect? 213 00:11:30,440 --> 00:11:32,840 Speaker 2: Right maybe taking a step back first and looking at 214 00:11:32,880 --> 00:11:36,200 Speaker 2: the hydrogen market at large compared to the fossil fuel markets, 215 00:11:36,320 --> 00:11:38,600 Speaker 2: you first want to look at the market, where does 216 00:11:38,640 --> 00:11:41,720 Speaker 2: demand come from and how is demand likely to develop? 217 00:11:41,800 --> 00:11:45,360 Speaker 2: So right now we're talking about demand principally for oil refining, 218 00:11:45,480 --> 00:11:48,000 Speaker 2: which is about forty five percent of hygen demand, and 219 00:11:48,040 --> 00:11:51,280 Speaker 2: then the remainder is mainly just for ammonia and methanol, 220 00:11:51,400 --> 00:11:54,600 Speaker 2: and we're talking about a total of about ninety five 221 00:11:54,679 --> 00:11:57,400 Speaker 2: million tons of hydrogen used per year. Now, if you 222 00:11:57,440 --> 00:12:00,720 Speaker 2: convert that into barrels per day of oil equivalent, just 223 00:12:00,760 --> 00:12:03,000 Speaker 2: to be able to compare it to the size of 224 00:12:03,000 --> 00:12:06,080 Speaker 2: the fossil fuel market, we would be talking about roughly 225 00:12:06,320 --> 00:12:09,120 Speaker 2: five million barrels per day of oil equivalent, which compares 226 00:12:09,440 --> 00:12:12,760 Speaker 2: to one hundred sixty six million barrels of oil equivalent 227 00:12:12,800 --> 00:12:15,240 Speaker 2: per day of oil and gas. So we're talking about 228 00:12:15,360 --> 00:12:17,640 Speaker 2: two point five to three percent of the phosphe market 229 00:12:17,720 --> 00:12:20,760 Speaker 2: right now, and most of it is also used internally 230 00:12:20,840 --> 00:12:25,520 Speaker 2: within refinery, so it's within the confines after oil companies themselves. 231 00:12:25,600 --> 00:12:27,640 Speaker 2: If we then look at a net zero scenario and 232 00:12:27,679 --> 00:12:31,000 Speaker 2: a decarbonizing world b inf or we in our net 233 00:12:31,120 --> 00:12:34,920 Speaker 2: in our new energy outlook, we expect hydrogen demand clean 234 00:12:34,960 --> 00:12:38,040 Speaker 2: hygen demand to go to five hundred two million tons 235 00:12:38,040 --> 00:12:41,400 Speaker 2: per year by twenty fifty, so it's practically five times 236 00:12:41,400 --> 00:12:44,120 Speaker 2: as much, which means we would be hovering around twenty 237 00:12:44,160 --> 00:12:46,920 Speaker 2: five to thirty million barrels of oil equivalent per day 238 00:12:46,920 --> 00:12:49,520 Speaker 2: in terms of oval energy content, which is still just 239 00:12:49,720 --> 00:12:53,679 Speaker 2: one fifth to one sixth of the entire phosphuel market 240 00:12:53,880 --> 00:12:57,239 Speaker 2: as we see right now. So in a very simplified 241 00:12:57,280 --> 00:12:59,959 Speaker 2: line of argumentation, one could see that the oval market 242 00:13:00,080 --> 00:13:02,760 Speaker 2: potential market, even in an at zero world for hydrogen, 243 00:13:02,880 --> 00:13:05,760 Speaker 2: is significantly smaller than what we have for phosphuels right now. 244 00:13:05,800 --> 00:13:09,760 Speaker 2: Accordingly in terms of overall geopolitical cloud first and foremost, 245 00:13:09,760 --> 00:13:13,319 Speaker 2: but also in terms of overall potential profitability and debt 246 00:13:13,320 --> 00:13:16,360 Speaker 2: would depend on demand and supply mechanics. It's arguably a 247 00:13:16,360 --> 00:13:19,640 Speaker 2: lot less sizeable than what the phosphuel industry offers right now. 248 00:13:21,120 --> 00:13:24,960 Speaker 1: Using oil price is the backdrop of really why production 249 00:13:25,120 --> 00:13:29,160 Speaker 1: is being cut or increased. Let's talk about demand rather 250 00:13:29,240 --> 00:13:31,920 Speaker 1: than the supply side for oil demand in the future. 251 00:13:32,400 --> 00:13:35,280 Speaker 1: Bn EF as a view on when we may be 252 00:13:35,440 --> 00:13:38,600 Speaker 1: reaching peak oil demand, as does the IA, and actually 253 00:13:38,640 --> 00:13:41,240 Speaker 1: as does OPEK. Would you be able to shine some 254 00:13:41,320 --> 00:13:46,319 Speaker 1: light on how those maybe three different forwardlooking scenarios differ. 255 00:13:46,720 --> 00:13:50,719 Speaker 2: Absolutely so. If you compare those three institutes, we can 256 00:13:50,800 --> 00:13:54,840 Speaker 2: roughly see dichotomy between BNF and the IA on one hand, 257 00:13:54,960 --> 00:13:57,800 Speaker 2: and OPEK on the other. Now, both BENIF and IA 258 00:13:57,960 --> 00:14:02,120 Speaker 2: work with multiple scenarios, whereas op only has the default forecast, 259 00:14:02,240 --> 00:14:06,360 Speaker 2: which means what Opek considers likely to manifest. But if 260 00:14:06,400 --> 00:14:08,959 Speaker 2: we take the same base case scenarios for b and 261 00:14:09,000 --> 00:14:12,080 Speaker 2: EF and the IA, we see that oil demand should 262 00:14:12,120 --> 00:14:15,840 Speaker 2: peak or is likely to peak this decade, principally driven 263 00:14:15,880 --> 00:14:18,960 Speaker 2: by actually a fall in road field demand, whereas for 264 00:14:19,040 --> 00:14:22,240 Speaker 2: OPEK there is not really any peak inside yet the 265 00:14:22,280 --> 00:14:25,480 Speaker 2: forecast goes until twenty forty five, but just shows a 266 00:14:25,480 --> 00:14:28,640 Speaker 2: steady increase, albeit at a certain point at a slower rate. 267 00:14:28,720 --> 00:14:30,840 Speaker 2: But it goes all the way up to one hundred 268 00:14:30,880 --> 00:14:33,200 Speaker 2: and sixteen million barrels per day in the twenty forties 269 00:14:33,240 --> 00:14:35,360 Speaker 2: compared to one hundred and one that we have now, 270 00:14:35,440 --> 00:14:37,800 Speaker 2: whereas for the IA and B and EF it goes 271 00:14:37,840 --> 00:14:40,840 Speaker 2: to about one hundred five one hundred six million barrels 272 00:14:40,840 --> 00:14:42,720 Speaker 2: per day toward the end of this decade. Then you 273 00:14:42,760 --> 00:14:46,600 Speaker 2: have multiple forces slowly pressing it down. So specifically, once 274 00:14:46,640 --> 00:14:51,080 Speaker 2: again roadfield demand, petrochemical demand goes up and keeps it 275 00:14:51,120 --> 00:14:53,360 Speaker 2: somewhat at bay, or keeps the fall at bay. But 276 00:14:53,400 --> 00:14:55,640 Speaker 2: across the board we need the fall in roadfield demand 277 00:14:55,720 --> 00:14:57,960 Speaker 2: would drive this fall in overall oil demand. 278 00:14:58,400 --> 00:15:01,480 Speaker 1: So pivoting a bit to them thinking about renewable energy 279 00:15:01,520 --> 00:15:04,080 Speaker 1: development in the Middle East, let's talk a little bit 280 00:15:04,080 --> 00:15:07,280 Speaker 1: about that, because that actually was another theme of this 281 00:15:07,440 --> 00:15:11,040 Speaker 1: most recent COP was the tripling of renewables by twenty 282 00:15:11,080 --> 00:15:14,000 Speaker 1: thirty of the different projects that are taking place in 283 00:15:14,040 --> 00:15:17,800 Speaker 1: the Middle East and then announced renewable energy plans, Are 284 00:15:17,840 --> 00:15:21,360 Speaker 1: there any developments of particular significance that we should be 285 00:15:21,400 --> 00:15:24,600 Speaker 1: thinking about, and do we think that existing targets for 286 00:15:24,800 --> 00:15:26,760 Speaker 1: renewables in the region will be met. 287 00:15:27,000 --> 00:15:30,240 Speaker 2: At this moment. If we take Saudi Arabia as a 288 00:15:30,280 --> 00:15:33,960 Speaker 2: case study, considering that in terms of overall installed electricty 289 00:15:34,000 --> 00:15:37,280 Speaker 2: capacity about ninety five gigle what, it's by and large 290 00:15:37,360 --> 00:15:39,560 Speaker 2: the biggest in the region. We take Saudi Arabia as 291 00:15:39,560 --> 00:15:43,080 Speaker 2: a case. In twenty sixteen, Saudi Arabia put forward as 292 00:15:43,080 --> 00:15:46,320 Speaker 2: a target to reach twenty seven gigo what by twenty 293 00:15:46,320 --> 00:15:49,680 Speaker 2: twenty three of renewable electricity and fifty eight giga what 294 00:15:49,760 --> 00:15:52,720 Speaker 2: by twenty thirty. As of now, we're only standing at 295 00:15:53,000 --> 00:15:55,760 Speaker 2: a fraction of about three to three point five percent, 296 00:15:56,160 --> 00:15:59,720 Speaker 2: indicative of Saudi Arabia currently not being on track. Now, 297 00:15:59,800 --> 00:16:01,520 Speaker 2: on the other hand, you do have a lot of 298 00:16:01,520 --> 00:16:04,560 Speaker 2: additional projects that are in the pipeline, are announced at 299 00:16:04,600 --> 00:16:06,520 Speaker 2: being planned for the years to come, which would be 300 00:16:06,640 --> 00:16:09,480 Speaker 2: roughly in the rage of somewhere between eight and ten 301 00:16:09,520 --> 00:16:11,880 Speaker 2: giggle wood. But still that's a far cry from the 302 00:16:11,920 --> 00:16:15,480 Speaker 2: target that was stipulated initially in twenty sixteen. Now, for 303 00:16:15,560 --> 00:16:18,920 Speaker 2: different countries, you have different targets different paces. The YOE 304 00:16:19,080 --> 00:16:23,120 Speaker 2: is more on track. Oman more broadly, also including hydrogens, 305 00:16:23,280 --> 00:16:26,640 Speaker 2: is quite a proliferation of renewable energy projects. But across 306 00:16:26,680 --> 00:16:29,120 Speaker 2: the board, if you look at the capacity at large 307 00:16:29,320 --> 00:16:32,240 Speaker 2: and where the Middle East or specifically the Gulf region 308 00:16:32,280 --> 00:16:35,560 Speaker 2: is heading, it's still a relatively small share. And with 309 00:16:35,680 --> 00:16:38,760 Speaker 2: Saudi Arabia accounting for the majority of installed capacity, and 310 00:16:38,800 --> 00:16:41,560 Speaker 2: Saudi Arabia are really legging its target, it's hard to 311 00:16:41,560 --> 00:16:44,320 Speaker 2: see how a boy twenty thirty a reasonable share of 312 00:16:44,360 --> 00:16:46,320 Speaker 2: electricity would actually be renewed l energy. 313 00:16:46,800 --> 00:16:48,760 Speaker 1: We've been talking about the Middle East as a region. 314 00:16:48,960 --> 00:16:51,360 Speaker 1: We have called out Saudi Arabia a few times, but 315 00:16:51,520 --> 00:16:54,600 Speaker 1: let's talk about a few other countries that you think 316 00:16:54,760 --> 00:16:57,480 Speaker 1: really stand out, first of all in setting the tone 317 00:16:57,600 --> 00:17:01,440 Speaker 1: or because they're maybe doing very interesting things. Which countries 318 00:17:01,840 --> 00:17:04,440 Speaker 1: in this region are you watching most closely? 319 00:17:05,359 --> 00:17:08,919 Speaker 2: So from an energy perspective, which is very heavily tied 320 00:17:08,960 --> 00:17:11,240 Speaker 2: to just how large is the country in terms of 321 00:17:11,400 --> 00:17:14,600 Speaker 2: economy and in terms of population, We would definitely need 322 00:17:14,640 --> 00:17:17,920 Speaker 2: to talk about Egypt. Iran, of course, with an oil 323 00:17:17,960 --> 00:17:20,560 Speaker 2: market's at large important player, but also when it comes 324 00:17:20,600 --> 00:17:24,320 Speaker 2: to emissions, it's a very large emitter, the sixth largest 325 00:17:24,320 --> 00:17:29,920 Speaker 2: demeter globally. Iraq awesome, fairly large country, very sizable oil producer, 326 00:17:30,040 --> 00:17:34,119 Speaker 2: and also very heavily demographically growing, but still economically of course, 327 00:17:34,240 --> 00:17:36,720 Speaker 2: being very much held back by the conflict that the 328 00:17:36,720 --> 00:17:39,040 Speaker 2: country has seen over the past two decades. So those 329 00:17:39,040 --> 00:17:42,639 Speaker 2: would really be the three countries that I would single out, Egypt, Iran, 330 00:17:42,760 --> 00:17:45,840 Speaker 2: and Iraq. And the reason well next to the ones 331 00:17:45,880 --> 00:17:47,680 Speaker 2: that I just mentioned, but the reason why I would 332 00:17:47,720 --> 00:17:50,760 Speaker 2: single them out when it comes to decarbonization looking forward 333 00:17:50,760 --> 00:17:54,680 Speaker 2: and actually looking at the decarbonization framework globally, so keeping 334 00:17:54,720 --> 00:17:57,320 Speaker 2: it under one point five degrees, we do also want 335 00:17:57,359 --> 00:17:59,840 Speaker 2: to consider that there are a lot of countries with 336 00:18:00,119 --> 00:18:02,159 Speaker 2: a lot of people that are still in the process 337 00:18:02,160 --> 00:18:04,480 Speaker 2: of developing and that have or that are trying to 338 00:18:04,520 --> 00:18:07,320 Speaker 2: strike a balance between developing as quickly and as much 339 00:18:07,320 --> 00:18:10,159 Speaker 2: as possible and doing so in a way that actually 340 00:18:10,200 --> 00:18:14,560 Speaker 2: minimizes the emissions. Consequently, I think Egypt especially is a 341 00:18:14,560 --> 00:18:17,400 Speaker 2: good country to watch because it's just very sizeable terms 342 00:18:17,400 --> 00:18:19,640 Speaker 2: of demography, talking about one hundred to one hundred five 343 00:18:19,680 --> 00:18:22,399 Speaker 2: million people here, still very heavily growing, but also on 344 00:18:22,520 --> 00:18:25,639 Speaker 2: the cusp of developing economically which could push up the 345 00:18:25,760 --> 00:18:29,440 Speaker 2: energy demands significantly, which, accordingly, if not actually being let 346 00:18:29,520 --> 00:18:32,199 Speaker 2: into the right trajectory, could also very heavily push up 347 00:18:32,240 --> 00:18:32,840 Speaker 2: the emissions. 348 00:18:33,240 --> 00:18:35,120 Speaker 1: Is there a country that you would call out as 349 00:18:35,200 --> 00:18:37,879 Speaker 1: a bright spot or perhaps a leader in the energy 350 00:18:37,920 --> 00:18:39,600 Speaker 1: transition for the Middle East? 351 00:18:39,960 --> 00:18:44,040 Speaker 2: Yeah, if we look at the Middle East, and specifically 352 00:18:44,160 --> 00:18:46,800 Speaker 2: would have in this case again to look at the GCC. 353 00:18:47,240 --> 00:18:52,080 Speaker 2: All things considered, the GCC does seem to prioritize development 354 00:18:52,240 --> 00:18:56,920 Speaker 2: or decarbonization the most. The UE and Oman specifically stand down. 355 00:18:57,000 --> 00:18:59,560 Speaker 2: So the UE takes a fairly wide spectrum or a 356 00:18:59,640 --> 00:19:02,560 Speaker 2: very whole holistic approach to the energy transition, also talking 357 00:19:02,560 --> 00:19:05,960 Speaker 2: about nuclear energy amongst others, but for renewable energy in 358 00:19:06,040 --> 00:19:09,439 Speaker 2: relative terms compared to the overall power capacity that it 359 00:19:09,480 --> 00:19:12,640 Speaker 2: has deployed, it's moving the quickest. Hydrogen goes for both 360 00:19:12,680 --> 00:19:15,280 Speaker 2: the YUE and even more so for Oman, very big 361 00:19:15,320 --> 00:19:18,600 Speaker 2: players or very big potential players. Lots of consortia, especially 362 00:19:18,640 --> 00:19:21,280 Speaker 2: in Oman once again having been established over the past 363 00:19:21,320 --> 00:19:24,520 Speaker 2: two years, lots of tenders having been handed out, so 364 00:19:24,640 --> 00:19:28,480 Speaker 2: would definitely single out those two. With the side note 365 00:19:28,520 --> 00:19:30,520 Speaker 2: that for the UE it seems to be more of 366 00:19:30,560 --> 00:19:33,360 Speaker 2: a holistic approach, whereas for Oman seems to be very 367 00:19:33,359 --> 00:19:36,080 Speaker 2: heavily tilted toward green hydrogen specifically. 368 00:19:36,480 --> 00:19:39,520 Speaker 1: So let's talk about something that seems like maybe it 369 00:19:39,560 --> 00:19:42,240 Speaker 1: isn't related, which is water in the region, but it 370 00:19:42,359 --> 00:19:44,520 Speaker 1: very much is, because in order for there to be 371 00:19:44,680 --> 00:19:48,440 Speaker 1: green hydrogen production, we're going to have some demand on water. 372 00:19:48,680 --> 00:19:51,920 Speaker 1: And well, many parts of the Middle East, although not all, 373 00:19:52,000 --> 00:19:56,119 Speaker 1: are indeed deserts without very much water, and there have 374 00:19:56,160 --> 00:19:58,560 Speaker 1: been pioneers in the region that have been actually looking 375 00:19:58,720 --> 00:20:01,879 Speaker 1: at desalination, UAE being one of them. Can you just 376 00:20:01,960 --> 00:20:05,800 Speaker 1: talk a little bit about desalination and really what's happening 377 00:20:05,800 --> 00:20:08,359 Speaker 1: there in terms of it as as a market and 378 00:20:08,560 --> 00:20:09,919 Speaker 1: how much it's being used. 379 00:20:10,560 --> 00:20:15,359 Speaker 2: Desalination very very pertinent topic when it comes to decarbonization 380 00:20:15,440 --> 00:20:19,480 Speaker 2: at large in the Persian Gulf, principally because the countries 381 00:20:19,840 --> 00:20:23,520 Speaker 2: in the region they lack freshwater, and that's been increasingly 382 00:20:23,520 --> 00:20:27,600 Speaker 2: the case over the past decade as inland reservoirs or 383 00:20:27,640 --> 00:20:31,880 Speaker 2: aquifers are actually being depleted. So the amount of desalination 384 00:20:31,960 --> 00:20:35,720 Speaker 2: capacity has been rising very significantly, and that's very much 385 00:20:35,760 --> 00:20:39,400 Speaker 2: set to continue over the next two decades, especially if 386 00:20:39,480 --> 00:20:42,760 Speaker 2: countries are going to move in a big fashion toward 387 00:20:43,160 --> 00:20:47,720 Speaker 2: hydrogen production or green hydrogen specifically. And another important side 388 00:20:47,720 --> 00:20:51,840 Speaker 2: note on this front is that desalination is very heavy 389 00:20:51,960 --> 00:20:56,720 Speaker 2: on electricity demands. So if desalination capacity further increases at 390 00:20:56,760 --> 00:20:59,439 Speaker 2: this rate, you also see a pretty huge spike in 391 00:20:59,560 --> 00:21:03,200 Speaker 2: terms of overall power supply needed. And at this rage, 392 00:21:03,240 --> 00:21:06,080 Speaker 2: like we talked about earlier, for Saudi Arabia, renewable energy 393 00:21:06,119 --> 00:21:09,480 Speaker 2: deployment is still pretty heavily lagging fossil fuels in terms 394 00:21:09,520 --> 00:21:12,320 Speaker 2: of power capacity. For Saudi Arabia, we'll be talking about 395 00:21:12,400 --> 00:21:16,000 Speaker 2: roughly forty five percent oil, fifty percent gas and then 396 00:21:16,080 --> 00:21:19,480 Speaker 2: remaining three person well actually less, it's one percent renewal energy, 397 00:21:19,520 --> 00:21:23,080 Speaker 2: but so predominantly really fossil fuels health oil, health gas 398 00:21:23,080 --> 00:21:25,520 Speaker 2: for Saudi Arabia. So for Saudi Arabia, would also mean 399 00:21:25,560 --> 00:21:29,600 Speaker 2: that if desalination capacity or needs increase at the pace 400 00:21:29,640 --> 00:21:33,040 Speaker 2: that are currently doing that, it pretty much actually outpaces 401 00:21:33,160 --> 00:21:37,560 Speaker 2: the deployment of renewable energy, pretty much negating any potential 402 00:21:37,600 --> 00:21:39,320 Speaker 2: gain you would get emission wise. 403 00:21:39,800 --> 00:21:42,639 Speaker 1: That is really interesting in a perspective that was not 404 00:21:43,119 --> 00:21:45,439 Speaker 1: readily obvious, at least to me. So thank you for 405 00:21:45,480 --> 00:21:45,920 Speaker 1: being here. 406 00:21:46,160 --> 00:21:48,480 Speaker 2: Thank you very much for having me. Dana appreciate it. 407 00:21:57,080 --> 00:22:00,160 Speaker 1: Bloomberg ne Ef is a service provided by Bloomberg Finances 408 00:22:00,240 --> 00:22:03,720 Speaker 1: LP in its affiliates. 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