Siemens expects oil and gas business to grow 5% in 2019

Exclusive: German industrial giant also remains confident over merger of its rail entity with Alstom despite European regulatory obstacles

Lisa Davis will head the' gas and power unit, in which Siemens will give up its majority stake. Reem Mohammed/The National

German industrial giant Siemens expects growth of around 5 per cent in the oil and gas business in 2019 following momentum seen in the sector due to the pickup in crude prices last year, according to a senior official.

"We did see an increase last year in terms of oil and gas spend by customers and in terms of new projects and refurbishing existing equipment and activities," Lisa Davis, chief executive, energy and member of the firm's managing board said in an interview with The National in the capital during Abu Dhabi Sustainability Week.

"We do expect an increase in 2019 as well and probably around 5 per cent, so the business continues to grow and probably a little bit more than GDP, so that’s encouraging to see it coming back, but coming back in a cautious way,” she added.

Oil prices rebounded in 2018 to average $70 per barrel for Brent for much of the year, hitting a three-year high of $86 in November, following a three-year slump, which saw prices plunge to as low as $26 in 2016, denting investor confidence in the industry. Oil and gas accounts for 15 per cent of Siemens overall portfolio, a segment where it anticipates continued growth in the Middle East.

"If you look at it from a revenue perspective, for the company in total, our financials in total [in 2018], I believe it was €86 billion [Dh359.85bn], so about 15 per cent of that - €7bn to €10bn I would say,” said Ms Davis.

"We do see growth through projects being sanctioned, through oil companies, whether [they be] the international or national oil companies starting to develop fields more,” she added.

Global spending on upstream development was expected to grow 5 per cent in 2018, following a 2 per cent increase in 2017, according to consultancy Wood Mackenzie. The Edinburgh-headquartered firm added that an increase in spending by around 20 per cent was required to meet future demand growth and sustain production over the coming decade.

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State-owned producers in the Arabian Gulf such as Abu Dhabi National Oil Company (Adnoc) as well as entities in Sharjah and Ras Al Khaimah have launched licensing rounds to invite the interest of foreign companies in developing the region’s relatively low-cost hydrocarbon resource base.

Last week, Adnoc awarded a consortium of Italy's Eni and Thailand's PTT Exploration and Production the rights to develop two blocks offshore the emirate - the first awards in the ongoing concession round.

"The oil and gas business is a big portion of our Middle East portfolio for Siemens. For oil and gas and power generation and energy in general, [it] is a very important geography for Siemens,” said Ms Davis.

In Iraq, where Siemens presented a roadmap last year for the rehabilitation of the country’s power infrastructure, she said "discussions are ongoing”.

The firm had suggested development of 11GW power capacity for Iraq - a level Ms Davis said was still required for additional electricity generation.

"We’re working on their timeline and within their structure to getting there as effectively as they can to bringing the projects to reality as they need,” she added.

In Europe, Ms Davis remained optimistic that Siemens’ merger of its rail entity with France’s Alstom, which has run into trouble with European regulators, is still a good move for the company.

“We’re very, very confident that this is the right thing not only for the industry but consumers as well in order to bring a better offer to the market place so we’ll wait to hear the outcome of the process,” she added.