webcast series covid-19 - pwc...apr 21, 2020 · by repurposing refining, expanding petrochemicals...

COVID-19xHealth

PwC Middle East 21 April 2020

Middle East Updates Webcast series

Our focus for today

Welcome

Stephen AndersonStrategy & Markets Leader,PwC Middle East

Economic update

Richard BoxshallChief Economist, PwC Middle East

New Oil Planning Scenarios as a result of the Dual ShockNeil O’Keeffe Energy, Utilities & Resources Leader, PwC Middle East

James ThomasEnergy, Chemicals & Utilities Partner,Strategy& Middle East

Q&AWorkforce implicationsAnir ChatterjiImmigration & Employment Leader, PwC Middle East

PwC Middle East - COVID-19 Webcast - 21 April 2020 3

COVID-19 checklist and digital resources available

http://pwc.com/us/covid-19-navigator

Considerations checklist, prior webcasts and resourceswww.pwc.com/me/covid-19

https://digitaltrust-me.pwc.com/assess/COVID

Digital Trust Manager Our COVID-19 response module identifies any gaps in your organisation's pandemic response approach. Available in both English and Arabic, the assessment focuses on business resilience, and provides detailed recommendations on the steps to take to improve your ability to respond and recover.

COVID-19 - NavigatorNavigator is an online, interactive tool to help organisations better understand where they are on their path toward COVID-19 preparedness and response across six focus areas.

**New** Digital Fitness for the WorldPwC’s upskilling contribution to the world in response to COVID-19. Access our free Digital Fitness App available from the Apple App store and Google Play store.

If registering with your personal email, use invite code (LRNALL) to access today

http://pwc.com/us/covid-19-navigator

http://pwc.com/me/covid-19

https://digitaltrust-me.pwc.com/assess/COVID

Quick poll

1New Oil Planning Scenarios as a result of the Dual Shock

Neil O’Keeffe - James Thomas


Oil & Gas markets are going through a period that could shape the industry for decades to come

The industry is experiencing a ‘dual shock’

1• Supply-demand imbalance from collapse of OPEC+

agreement and substantial drop in demand • Oil price collapse pressuring finances • COVID-19 bringing major operational challenges

It has mobilized in response2

• Rush to assure operations and rein-in spend• OPEC+ has agreed to cut supply by 9.7mmbpd…• ...but it’s likely not enough

While the global context hasn’t changed

3• Sustainability and energy transition remains• Timing and height of Peak Oil demand are debatable• Do constraints or economics drive supply

Oil planning scenarioscould be widening

PwC Middle East - COVID-19 Webcast - 21 April 2020

There is significant uncertainty as to the shape of the recovery from COVID-19 and its potential impact on oil demand

‘L-scenario’

• Prolonged COVID19 restrictions change consumption patterns forever

• Some post-COVID19 recovery in demand, some permanently removed from market

• Energy transition remains unchanged• Peak demand brought forward

• Shock impact on the global economy as a whole, followed by swift recovery

• Impact largely temporary and limited to 1 year, followed by resumption of pre-COVID19 assumptions

• Limited impact of on peak demand (~2030)

‘V-scenario’

Oil Demand

• Sustained global recession caused by prolonged impact of COVID19 on consumption

• Impacted finances reduce appetite to invest, delaying ‘energy transition’

• Peak demand pushed back

‘U-scenario’

Global Oil Demand Scenarios

7


Similarly, on the supply side, will production constraints or economics balance the market equilibrium?Global Oil Supply Scenarios

• Major producing nations quota production irrespective of cost of their barrels

• Spare capacity acts as a buffer to smooth supply and demand shocks

• Price is influenced in response to producing nations’ actions

OPEC(+) constrain productionProduction based on marginal cost

• Producers produce at their full capacity

• Demand met by cheapest available barrel first, surplus barrels drop out of market

• Price is set by the cost of the marginal barrel

8


Putting these together, we see three new oil planning scenarios that could influence the path taken beyond COVID19New Oil Planning Scenarios

DemandSupply Global Peak Oil Demand Brought Forward Global Peak Oil Demand Pushed Back

Sustained OPEC+ agreement to constrain production

Repower - NOCs lead and re-energise the domestic energy transition and maximise the remaining value of oil hydrocarbon reserves by repurposing refining, expanding petrochemicals and diversifying downstream to capture more value from the molecule in-country

Retrench - rephase capital expenditure, slow operational expenditure and halt all discretionary activity, ride out the storm and wait for the oil market fundamentals to return

Production of oil resources based on their marginal cost

Rethink - take a new look at localisation of manpower and supply chains, accelerate digitisation to improve resilience and efficiency, and reprioritise portfolios; NOCs accelerate development of economically-viable resources; IOCs/Independents drive aggressive cost reduction in their operating model for low-price and activity cycles, and prudent management of their cash flow, dividend and balance sheets

9

2 Economic update

Richard Boxshall


Notes:

Scenarios WEo pp16

Based on a ‘V-shaped’ recovery, the IMF project global GDP will shrink by 3% in 2020

● Pandemic fades in H2● Containment gradually lifted

● $31.6 in 2020● $37.9 in 2021

*average of UK Brent, Dubai Fateh and WTI

Notes:

Scenarios WEo pp16

Global

GCC

-3.0

-2.7

5.8

3.3

KSA

UAE

-2.3

-3.5

2.9

3.3

20212020

GDP projection(% change)

-10.4

-12.6

-8.1

-9.0

-11.1 -7.1

20212020

Government balance(% change)Forecast assumptions

Source: IMF World Economic Outlook, April 2020


What does the path to the new normal look like?

Phase 1 Phase 2 Phase 3

COVID-19 measures severely restrict economic activities Business activities and

processes are normalizedResumption of most activities

Restriction measures are gradually lifted

The ultimate scenario will depend on the level and duration of restrictions and associated response

Respond GrowStabilise

Situation: New normal Situation: Containment gradually lifted Situation: Maximum containment

Key priorities:

• Support the economy - avoid layoffs

and bankruptcies

• Ensure financial system stability

Key priorities:

• Stimulate the economy

• Plan for growth

Key priorities:

• Rebuild strategic sectors

• Tackle underlying structural

problems


What will the new normal look like?

Will we want to carry on working from home or will we be desperate to get back to the office?

1

13

Will the crisis change our attitude to international travel, both for work and leisure?

2Will we go back to previous patterns of spending once restaurants and shops re-open or will this period lead to long-term changes in what we spend our money on, whether we shop in store or online etc?

3How will government’s close the fiscal deficit?

4....

‘...’

3 Workforce

Anir Chatterji


Employment & Immigration updatesKey COVID-19 trends in GCC

Automatic visa renewals / taxation considerations

Introduction of online services Furlough provisions

Paid & unpaid leave options Waiver of overstay penalties/fines Salary changes

Travel restrictions Reduction in government levies/fees Redundancy/termination measures

Ajeer system / Virtual Labour Market


Stephen Anderson ME Strategy and Markets Leader

PwC Middle [email protected]

Anir ChatterjiImmigration & Employment Leader


Contact us

Richard BoxshallChief Economist


Neil O’KeeffeEnergy, Utilities and Resources Leader


James Thomas Partner, Energy, Chemicals and Utilities

Strategy& Middle [email protected]

pwc.com/me

Thank you

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.Established in the Middle East for 40 years, PwC has 22 offices across 12 countries in the region with around 5,600 people. (www.pwc.com/me).PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

© 2020 PwC. All rights reserved

webcast series covid-19 - pwc...apr 21, 2020 · by repurposing refining, expanding petrochemicals...

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