AGCC states to invest in refinery and hydrocarbon industries

Oct 30, 2001 01:00 AM

While other natural resources vital to the effective functioning of global trade have been affected, crude oil and oil products, which are of central importance to the world economy, have successfully withstood the latest crisis, a senior Bahraini official said underlining that the AGCC states will be, in the next few years, spending around $ 20 bn on further developing their refining and hydrocarbon processing industries.
Bahraini Minister for Labour and Social Affairs, Abdulnabi Al Sho'ala, who delivered a keynote address at the opening of the third Middle East Refining and Petrochemicals Exhibition and Conference (Petrotech 2001), further noted that there has been heightened concern in recent months about the possibility of global recession and about the impact this crisis might have on oil and refined oil products.
"Many of the world's economies have weakened, and there even have been worries about the health of the economy of the United States itself, particularly because of the volatility of its financial markets as a result of the September 11 terrorists attacks on New York and Washington," he pointed out.

Addressing the session that had attracted industry professionals from across the world and regional decision makers, Abdulaziz Al Hokail, executive vice-president of Saudi Aramco, noted that in the coming decades "change" will be the only certainty that we can all count on. In such a world, businesses must be capable of dealing with a highly-challenging business environment, and this applies particularly to the refining and petrochemical industries owing to their unique nature, he said.
He said that he believed that "three ingredients will play an important role in helping companies to succeed in such environment. These are: Foresight, operational excellence -- leading to effective execution of strategies, and above all people who are a source of sustained competitive advantage."
However, he asserted that "the best foresight in the world will not do much good to companies unless it led to development of astute strategies and was accompanied by operational excellence and effective execution."

Delivering a keynote address at the conference, Dr Daniel Yergin, chairman of Cambridge Energy Research Associates (CERA), said that "the economic slowdown around the world will be putting great pressure on the world oil market in the months ahead, but the long-term growth prospects for oil industry will be restored later in 2002 or early 2003." The oil and gas industry is by its nature a long-term industry, he said.
There are very different sets of preoccupations. Certainly, the world is focused on conflict, "but hanging over the entire oil and gas industry is the weakness of the global economy," he said. He emphasised that the oil and gas industry does not "operate in a vacuum.
It is very much affected by what happens to the overall economy, and the world was heading into a synchronised global downturn prior to September 11 for a variety of reasons from the over-investment in telecommunications and the Internet bubble in the US to the continuing weakness of the Japanese economy."

He further noted that September 11 accentuated the downturn in this highly-connected world economy. Sectors that have been particularly hard hit include airlines, tourism, hotels and the financial sector. Citing the effects on the world economy, Dr Yergin said that CERA expects "world oil demand in the fourth quarter of this year to be 300,000 bpd lower than the same quarter last year, and by 700,000 bpd lower in the first quarter of 2002 compared to the first quarter of 2001."
This is the first consecutive two quarters of demand decline since the Gulf Crisis a decade ago, he said noting that the CERA also expects a build-up of 1 mm bpd of additional supply from non-OPEC counties, led by Russia. However, "all of this will mean downward pressure on prices for six to nine months."

Source: Khaleej Times
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