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Luq Niazi is Global Managing Director, Petroleum and Chemical Industries at IBM and is responsible for industry strategy, solutions, offerings, alliances, center of excellence, eminence and senior talent for the global team serving its major clients and key geographies across all IBM lines of business. Luq’s current focus is helping clients achieve improved business performance through Digital Reinvention including Interactive Experience (iX), Cognitive & Analytics (AI), Internet of Things (IoT), Blockchain and As a Service transformation. The following is an excerpt from Future Energy Asia’s interview with him.

speech_balloon_question.pngWhat do you think is the medium-term outlook for the global hydrocarbons industry?

It is necessary to look at the long-term macroeconomic environment for the industry, and there are three main aspects.The first is that, by 2035, we will reach peak demand and that has an impact on what we want to get from hydrocarbons, what is a realistic price for hydrocarbons, and what it means to drive efficiency.There are many macroeconomic forces behind peak hydrocarbons demand. There are shifts from West to East and from North to South. Demand is growing in markets such as India, China and the Asia-Pacific region, and we also see the demand moving to the southern hemisphere in Africa. There is also a broad “clean” versus “less-clean” dynamic across the entire energy chain.

The second aspect is the change in the nature of the energy environment. There will be a significant increase in electrification and in different sources of electrification, such as solar energy. But the proportion of alternative energy is still a small proportion of the macro-energy picture, about 4% of global supply. It is bound to increase substantially, but it is not going to massively change the picture.

The third aspect is economic policy. I do believe that, although we see constraints on OPEC production, combined macroeconomic dynamics mean that we will not see a near-term return to the $100/barrel scenario.

speech_balloon_question.pngWhat is the impact of these three aspects on the hydrocarbons industry?

Taking these economic forces into account and analyzing their impact over the running of businesses, what we observe is an increased need for specialization, for high levels of performance and operational efficiency, the ability to get more out of existing reserves and to find new reserves more economically, and the ability to deal with all of this in an environment where knowledge and experience of the industry was dissipated over the past 5-6 years because of the loss of skills and labor that occurred as prices plunged from $100/barrel to below $40/barrel.

We need to drive more efficiencies, get more for less, and increase margins.

speech_balloon_question.pngHow can digital technologies drive the growth of Asia’s gas markets?

When it comes to gas and particularly LNG, we see investments finally coming on stream – Gorgon and Wheatstone in Australia for instance – plants that have been a long time in the making. The availability of these new, cleaner resources and the ability to transport it in the region on considerable distances provides alternatives for the coal-heavy environment that is still pregnant in China and India. If prices remain at current levels, there will be further opportunities for more LNG investment in the region. You can see a number of international companies building their gas value chains, from extraction to liquefaction, transportation to transmission and distribution for electricity or manufacturing.

speech_balloon_question.pngHow do you see the industry moving forward to?

One thing that is important for the AsiaPacific region is that you must have a clear view across all three segments of the value chain. You have to drive sufficient exploration to be able to serve the market effectively. 

Then you need to realize that there will be a change in the fuels mix, and you need not to lose sight of the other aspects of the downstream environment: there is increasing demand for chemicals in the world and in the region; we expect strongchemical growth.

We also should not lose sight of the changing nature of consumers consumption, with greater electrification. We cannot talk about energy in the Asia-Pacific region without having a big conversation on the three elements of the value chain. 

With gas and LNG, there is an opportunity to provide a cleaner source of energy to the market place; and with new plants coming on stream, it will become more prevalent and inspire new investments in gas.