Interview: Pete Bartlett
What are some of the challenges associated with capital expenditure planning in a volatile oil market, and how can these be mitigated?
PETE BARTLETT: Capital investments are much more selective and scrutinised under multiple possible scenarios, including the worst-case business environment where only the most resilient projects survive. Once the projects are under way managing cash flow effectively is the greatest challenge in a volatile oil market. This calls for more disciplined budgeting, efficient operations and stricter financial control.
Multinational oil majors have for decades made active use of financial instruments, mitigating risk inherent in certain business environments, while also exploiting the potential that trading as a profit centre affords them. In recent years we have seen neighbouring national oil companies migrate away from their traditional business models.
Bapco also has a strategic commercialisation programme under way, which includes measures to develop infrastructure and skill sets in order to improve our competitiveness and extract greater value from our assets, location and flexibility.
To what extent have sector players consolidated in recent years, and how has this primed the industry as prices recover and stabilise?
BARTLETT: The duration and severity of the recent downturn in oil prices has changed the industry dramatically, with many companies cutting costs, adjusting their portfolios, restructuring and entering into joint ventures. Industry analysts report that the compound annual growth rate of new joint ventures formed in the downstream refining and chemicals industry has exceeded 20% per year since 2014.
In the upstream segment consolidation has significantly affected smaller independent companies in the US Permian Basin and other shale oil regions, where lower commodity prices have led to reduced sources of funding. Market analysts expect this financing squeeze to trigger a wave of mergers among these firms. This has also opened the door for oil majors to take up positions in shale oil, bringing more robust governance and financial discipline to the segment.
Overall, the oil industry is beginning to rethink its operating models with the future in mind. Responding to climate change is important for the sustainability of the sector, and requires strong leadership and collective action. With new capacity being streamed in the Middle East and Asia, there is evidence that the global refining industry is building resilience into its business models by diversifying its product offerings and growing increasingly complex. Industry experts predict that in the longer term, with the oil market tightening and remaining underinvested, oil prices will trend at acceptable levels to support the investment necessary to balance supply and demand.
How is the steadily diversifying nature of the region’s energy industry likely to affect hiring practices in the medium term?
BARTLETT: The global energy industry is challenged by its ability to attract suitable talent and retain its workforce to satisfy the requirements of an increasingly complex operating environment. This will be achieved by leveraging knowledge, skills and experience to add new competencies across the sector, assisted by the selective use of artificial intelligence.
The Bapco Modernisation Programme is the roadmap for the future of the company, but it is our workforce – more than 70% of which are Bahraini citizens – that will be instrumental in our expansion. In addition to training and development programmes, Bapco has recruited more than 500 new staff since 2016.
More strategically, four national initiatives are underway to train high school graduates interested in technical careers, and we have assessed 120 Bahraini nationals in an apprentice qualification programme.
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