Sep 16-17, Beijing – Oil & Gas Council China Assembly 2015 was held in Ritz Carlton Hotel Beijing. Angel Ngai, Vice President of Sino Oil and Gas Holdings (00702.HK) was invited to the summit.
Ms Angel Ngai said: “The oil price has continued to slump for a year, in such a depressed market environment, the summit has provided an important guidelines for the current value and position, future prospects and investment trend of China oil and gas industry.”
What was it talking about?
The summit invited the Asia head of global oil and gas companies and investment institutions to deliver speeches, including ConocoPhillips, Shell, Total, People's Bank of China, HSBC, JP Morgan, McKinsey & Company, Nomura Securities, and over 400 industry participants attended to communicate and exchange ideas.
The summit focused on how to deal with the pressure from the decrease of oil and gas prices currently as well as oil and gas reform. It discussed about under the market environment of low oil price, China oil and gas companies how to grab the opportunities come from the change of global oil and gas industry landscape and attain profit. It is important to the domestic and foreign oil and gas companies and investment institutions to grab the investment opportunities, develop new business streams and get insights of the new market trends.
Summit details include:
1. The future of China within the global oil and gas landscape; government energy policy, regulation, economic growth and the oil and gas industry
2. Successful growth strategy, business model and joint venture: where do foreign companies see new growth in China?
3. The pioneers unlocking china’s unconventional gas potential
4. Chinese deal flow, deal makers and avenues for corporate development – nationally and internationally
5. The China’s influence on Global LNG: new buyers, new suppliers, new pricing, new investment opportunities and new market participants
6. International perspectives and macro-themes influencing energy supply, demand, pricing and the future global oil and gas landscape
7. Our current situation and what we learnt from the big drop of oil price
8. New investment opportunities in North America: the economics, the outlook, the lessons learned and applications in china
Among all the topics, “how to treat the new landscape of global oil and gas” and “how to understand the unconventional oil and gas development in China under the impact from the US shale oil and gas reform” became the key discussion topics.
The summary of key topics:
Topic one: New trend of future oil and gas landscape?
Following the oil and gas demand reduced in Europe, Asia has become an important growth area for global oil and gas demand. The new oil and gas landscape formed -- the three pillars of North America, Europe and Asia.
For the future development landscape of oil and gas development, there were in-depth discussion and exchanges on upstream exploration and development, oil and gas infrastructure, oil and gas development trend and business stream during the summit. Chairman of the China-Africa Development Fund, Chief Expert of SINOPEC and Chief Energy Researcher, CNOOC Energy Economics Institute also shared their views and made prospective prediction on the future development of oil and gas.
The expert said, the current oil and gas development showed a new landscape, the development in Africa is unsatisfactory and not a good investment choice. The shale oil and gas reform leads to overcapacity in North America. European markets also show a weak demand. Thereby, the Asia market has become a battleground of seller due to its strong demand and sustainability development trend.
In terms of oil price trend, all experts agreed that, in short term, the international oil price will remain low, but it will gradually increase and alleviate the current downward pressure in long term.
“Through the summit, we have more professional insights to the future oil and gas landscape and energy price. It is beneficial to the oil and gas enterprises seize the market trend, investment direction and project development opportunity in a macro view.” Ms Angel Ngai said.
Topic 2: How to face the development pressure of unconventional oil and gas?
It is worth mentioning that, facing the impact of US shale oil and gas reform, how to excavate the development potential of the China unconventional oil and gas also became one of the most important topics in the summit.
Currently, shale oil and gas revolution in North America has driven self-sufficiency rate of oil and gas in North America which is one of the major reasons of the continued drop of oil price. On the other hand, global economic growth slowdown also causes the oil and gas supply far excess the demand. The changes in oil demand-supply relationships leads to overcapacity which directly stimulated the drop of oil price. Apart from the above, the political wrangling between countries and economic policies changes also increased the downward pressure on oil prices indirectly.
Under such an international market environment, China's oil and gas industry is facing severe challenges and the pressures from oil and gas reform. Especially under the pressure of US shale oil and gas reform, the development of unconventional oil and gas in China is very difficult. Experts believed that in China's unconventional oil and gas development, government optimising the project approval process and increase technology investment are both needed.
On the one hand, the government should actively strengthen the support to unconventional oil and gas companies and speed up the reform of China's transparent natural gas price. At this stage, the development of unconventional oil and gas in China is still difficult, complex PSC contract and cumbersome project approval process are the important causes of why the target of Twelfth Five-Year Plan cannot be reached. Therefore, the experts appealed, the China government should optimise the project approval process and increase the subsidies. During the Thirteen Five-Year Plan, unconventional oil and gas industry development target should be better implemented; project approval procedure should be optimised; government subsidies should be increased; also, the reform of transparent natural gas prices should be promoted.
On the other hand, for the technology innovation, the experts said, given China's complex geological conditions, US shale oil and gas technology is not suitable for direct application to the development of unconventional oil and gas in China. Since there is no breakthrough in technology development, a serious impediment appeared in the development of China's unconventional oil and gas industry. Therefore, the experts stressed, the government should consider the local conditions, increase the investments in technology to overcome the technical challenges and risks in the development process and push the market to move forward.
Ms Angel Ngai said, “Under the impact of US shale oil and gas reform, our country’s unconventional oil and gas industry is facing a huge pressure. To alleviate the plight of unconventional oil and gas development, the communications between industry peers should be strengthened, including cooperating more in technological innovation, project approval and PSC contract optimisation; learning from each other regarding investment mode, capital sources and financial models; working together on the common challenges and jointly exploring the road of sustainable development of unconventional oil and gas industry.”
Although oil prices have been downturn for a year, how to face the current market environment, looking for business opportunities in the fierce competition, optimising the investment portfolio, looking for opportunities in the challenge are still the key focuses of oil and gas developers and investment institutions. 2015 Oil and Gas Assembly came to a perfect ending, but on the road to sustainable development in the exploration of oil and gas, they are stilling moving on.