A summation of the World Petroleum Congress in South Africa

by Norman B. Ndaba

The dilemma faced by the global oil and gas industry in finding energy solutions that are both environmentally friendly and affordable, was at the top of the minds for delegates at this year’s World Petroleum Congress, held in Sandton, South Africa, from 25 to 29 September.
This year’s theme “Shaping the energy future: partners in sustainable solutions” came just months ahead of the implementation of clean fuels legislation in South Africa, which will see the phasing out of leaded fuel from 2006.

Furthermore, the conference came in the backdrop of soaring crude oil prices and insecurity around oil supply -- a development that has renewed fears that the global economic growth trajectory particularly in developing countries would be thrown in turmoil.
A number of critical issues came out of the conference, principal among them being security of supply, the importance of conserving the environment, merger and acquisitions activity, uncertainty of oil reserves, revenue transparency, and search for talent.

Security of supply
The global oil and gas industry is currently characterised by record high oil prices due to global demand outstripping supply of refined products. However the Organisation of the Petroleum Exporting Countries (OPEC) and the super-majors BP and Shell have dismissed these simmering concerns by reaffirming their commitment to ensure uninterrupted supplies.
The conference highlighted the need to urgently improve global refining capacity by providing investment for refining capital programmes.

Sustainable development
The issue lies in finding energy alternatives that are commercially viable to implement.
Solar and gas, for example, are adequate for catering to narrow energy needs, however the appropriate economies of scale are essential for these to replace oil and coal as a core energy source.

Increased merger and acquisition activity
The unprecedented surge in the price of crude oil has rendered many oil andgas companies cash-flush and in turn, fuelled merger and acquisition activity across the globe.

Revenue transparency
Of critical importance at the conference, particularly to oil producing countries in Africa and Eastern Europe, was whether revenues generated from oil production trickled down to the communities on whose land exploration and production is conducted.
There is little evidence to suggest that these communities are deriving substantive benefit from oil exploration activities on their land. Abject poverty and underdevelopment is still much a salient feature of many of these communities.

The search for talent is on
The sustainability challenge is also driving the industry to find better efficient technological solutions that would meet the ever-growing demand from global environmental groups for the discovery of emission-free sources of energy.
To that end, scientists from all disciplines are highly sought after.

Oil and gas industry challenge: risk management
The World Petroleum Conference, due to the factors listed above and others, highlighted risk management as a strategic imperative in the oil and gas industry in the decade to come.
The accounting scandal at Enron and Shell’s accounting for reserves debacle has not helped matters much either. The increasingly tough regulations are placing heavier burdens on oil and gas companies to initiate and integrate governance processes with environmental, financial and operational risk mitigation impacts.

Petroleum age on the move
The debate and interactive discussions at the congress could be summed up in one word -- convergence! The converging strategic, technological and operational businesses of oil, gas and power in the next 15 years will create a new wave of global innovation in the oil and gas industry.
Throughout, capital expansion programmes are fuelling oil and gas pipelines and power transmission lines cross border from Russia to the Middle East, Europe and Africa.

We are living in the petroleum age!

Ndaba is an Ernst & Young Energy, Chemicals and Utilities Partner.