Adoption of New Technologies Can Boost Regional Oil & Gas Sector in Face of Global Competition
Crescent Petroleum CEO shares insights on the impact of technology on the region’s energy sector at INSEAD Leaders Forum
Adoption of new technologies can boost the region’s energy sector in output and competitiveness at a time of reduced oil prices and global competition from new suppliers, according to a regional energy executive. Delivering the keynote address at the closing of the INSEAD Leaders Forum in Dubai on Wednesday, September 21, Majid Jafar, CEO of Crescent Petroleum and Vice-Chairman of the Crescent Group, highlighted the challenges from lower oil prices on company operating models and regional budgets, as well as the need for keeping up with global trends in the face of competing supplies from US shale oil and other regions. He also described the impact of new technologies such as electric cars and energy efficiencies, and alternative energy sources which are emerging in the region. According to Jafar, who is also the Founder of the Centre for Economic Growth (CEG) at INSEAD Abu Dhabi, the Middle East region holds 48% and 43% of global oil and gas proved reserves respectively – almost half, though production is only 32% for oil and 18% for gas – about one third and one sixth of global supply, implying much greater potential than has been realised to date. Commenting on these numbers, Jafar said: “The widespread adoption of new technologies is therefore critical to maximize recovery rates, maintain cost advantage, extend resource life and ensure security of supply to global and regional consumers.” Turning to the impact of technology on supply, he noted that the oil and gas upstream industry is going through a challenging time as low oil prices are challenging the operating model of oil and gas companies across the world. The effects of these dramatic technological improvements in efficiency have however been slowed by weak economic incentives for consumers in many markets including the Middle East. “Low fuel prices, or even outright fuel subsidies, don't encourage take-up of new energy efficient options or private sector investment in the best energy technology or infrastructure, nor innovations in energy technology specific to the requirements of the region itself: for example, reducing air cooling costs for homes. Only by removing such pricing distortions will the Middle East region make material gains in energy use,” Jafar added. Talking about the impact of digital technology on the energy sector, Jafar stated that the drumbeat of technological change in the energy industry is widely misunderstood, with the focus too often falling on ‘trendy’ innovations rather than the much larger and more significant incremental improvements in efficiency, design and capability of established sectors. The INSEAD Leaders Forum was held for the first time in the UAE on Wednesday at the Dubai Chamber of Commerce. With a focus on digitisation and disruptive innovation, the forum brought together over 200 alumni from top business schools, key government officials and prominent business leaders. INSEAD was ranked the number one business school in the world in 2016 by the Financial Times and has campuses in France, Singapore and Abu Dhabi, UAE. INSEAD is committed to developing business education and advanced managerial ideas, and Global INSEAD Day provides an opportunity to alumni to celebrate their INSEAD experience. Alumni Associations have been formed across 46 countries around the world, and the event in Dubai followed similar celebrations in Lebanon, Peru, Portugal, Delhi, France, Columbia, Hong Kong, Washington DC, Australia, New Zealand, South Africa, Brussels and Japan to commemorate Global INSEAD Day.