Adipec 2016: New working relationship the focus of high-level oil meeting on eve of industry gathering in Abu Dhabi

The rare high-level gathering was briefly attended by Sheikh Mohamed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.

Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, centre, greets Mark Garrett, chief executive of Borealis, during roundtable discussions held by Adnoc ahead of Adipec. At right is Sultan Al Jaber, the Minister of State and chief executive of Adnoc. Mohammed Al Hammadi / Crown Prince Court – Abu Dhabi
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The heads of four top regional national oil companies and more than a dozen chiefs of the world’s biggest international oil companies held closed-door talks in Abu Dhabi yesterday to discuss the need for new working terms to address the challenges of a changing energy landscape and the economic transformation of oil-dependent economies.

The rare high-level gathering, which came ahead of today’s opening of this year’s Abu Dhabi International Petroleum Exhibition and Conference (Adipec), was briefly attended by Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, who blessed their efforts to look for new ways of investing together on major projects.

The talks were chaired by Sultan Al Jaber, UAE Minister of State and the chief executive of Adnoc, and among the top private company chiefs there were Bob Dudley, the chief executive of BP, Rex Tillerson, ExxonMobil’s chief, and Patrick Pouyanne, the head of the French major Total.

Amin Al Nasser, the chief of Saudi Aramco, Nizar Al Adsani, the head of Kuwait Petroleum, and Saad Al Kaabi, head of Qatar Petroleum, also took part in the round-table talks.

“It was really a unique gathering,” said Daniel Yergin, the vice chairman of IHS Markit, who moderated.

“It was a very lively discussion and a lot of it was about how the traditional model for the business relationships between national oil companies [NOCs] and international oil companies [IOCs] will have to evolve as the national companies are very different than they were 10 or 20 years ago, and on the need for job creation and value added in the region where the oil and gas is produced,” Mr ­Yergin said.

The subject of contractual relationships between oil majors and the oil producers of the Arabian Gulf has been periodically contentious through their decades of history doing business, but the professionalisation of the NOCs in recent years and the urgency to diversify and modernise Gulf economies have given it new currency.

“This [summit] really laid the basis for a continued discussion about the sharing of value creation, the need by NOCs for job creation and IOCs for solid long-term investments,” Mr Yergin said, adding that “there was a particular focus on partnerships to capture the value in downstream, particularly in plastics, which are growing at a much faster rate than oil demand”.

The group did not spend much time on the current oil market, Mr Yergin said, other than that “it was pointed out that there are four wars in the greater Middle East but that is not reflected in the oil market”.

Oil prices have fallen by nearly 14 per cent this month – with North Sea Brent futures ending last week at about US$44 per barrel – as it has become apparent that efforts agreed by Opec in Algiers in September to get an output-curbing deal ahead of their next ministerial meeting in Vienna at the end of this month are proving difficult.

The oil company heads discussed the nature of the current downturn in the cycle, in which prices have collapsed from about $115 per barrel more than two years ago, and what its duration might be. While there was no consensus on that, they did agree “that [the] two parties have to work together to retain the cost savings as we come out of the downturn”, said Mr Yergin.

The talks also focused on the broad transformation of the energy landscape and how that would affect the industry. The oil chiefs expect that “peak demand” for oil, given developments in transport, the emergence of middle classes in India and Africa as well as other factors, would be seen some time in the 2030s.

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