Avoid fixating on oil prices and develop business resilience: Aufi

Muscat, Dec 8 – The Under-Secretary of Oman’s Ministry of Oil & Gas has urged the country’s vital hydrocarbon industry to eschew any fixation with global oil prices, which have been the subject of wild swings in recent weeks, but to focus instead on developing a strong sector resilient to future oil price shocks.
Salim bin Nasser al Aufi made the plea during a panel discussion marking the conclusion of the three-day OPAL Oil & Gas Conference 2018 at the Oman Convention & Exhibition Centre last Wednesday. Also taking part in the panel discussions were CEOs of leading operators in the Sultanate, notably Raoul Restucci — Managing Director, Petroleum Development Oman (PDO); Steve Kelly — President and General Manager, Occidental of Oman; John Malcolm — Executive Managing Director, Oman Oil Company Exploration & Production (OOCEP); Lorenzo Casati — Managing Director, Eni Oman BV; and Walter Simpson — Managing Director, CC Energy Development SAL (CCED). Moderating the deliberations was Sean Evers — Managing Partner, Gulf Intelligence.
Opening the discussion, Al Aufi said: “My message to everyone is: Don’t look at the prices. Continue to do all the good work you’ve done as though the prices are at $40 per barrel or $30 per barrel. And if it’s $70 per barrel, it’s good — (after all) let’s not lose these opportunities particularly in the short term; but let’s not get hung-up on prices, because they can flip to $60 one week and rise to $80 in the next week.”
He further added: “So to continue following prices on a daily or weekly basis could drive all of us crazy. The sanity in this business is to stay completely out of it, while making sure your business is resilient at low oil prices, and also making sure you don’t lose out when the good prices are coming. You need to put in place a solid business plan and programme at low oil prices.”
The Under-Secretary’s comments came ahead of Friday’s announcement by the Opec / Non-Opec coalition of producing countries to cut their aggregate output by 1.2 million barrels per day for the first six months of 2019. The announcement helped lift international oil prices, which have suffered intense volatility over the past three weeks, falling by as much as 30 per cent during this period. Omani crude, which had climbed to four-year highs of nearly $80 per barrel just before the latest slump, plummeted to around $58 per barrel at its lowest point.
Non-Opec Oman, which is on the joint Opec/non-Opec Monitoring Committee of leading producers, stands committed to any mutually agreed effort to stabilise the oil market, stressed Al Aufi. “Oman’s view is very clear, which is to continue to collaborate with Opec members to try and balance the market as much as possible. (The goal) is not so much a cut in production, as to really get to a point where the prices are fair to everyone — consumers as well as producers.”
The official welcomed the rally in international oil prices during 2018 which, despite the most recent downturn, is expected to end up averaging around $70 per barrel for the year. “(The higher oil price trend) was good because the Ministry of Finance needed a bit of a breather,” he said, referring in this regard to the ministry’s recent announcement indicating that buoyant oil prices had helped reduce Oman’s fiscal deficit by 36 per cent. “There is still a deficit — they would need at least $76 per barrel to balance the books,” he noted.
Emphasising the need for the Oil & Gas industry to remain efficient regardless of oil price trends, the Under-Secretary added: “We have achieved a great deal over the last 3 -4 years in terms of eliminating waste, and pruning some of the unnecessary activities and redundancies in the way we execute the business, which have helped bring down the cost a bit and create efficiencies as well. We should hold on to these gains and never let them go even if oil prices get healthier than what they were.”