With newspapers, televisions and radios blitzing the senses with news of the global financial meltdown it is hard to escape the fact that fiscal doom and gloom is very much in vogue.
Reporters, analysts and even government heads have been giving us their dour best for months now, and words like rescue, bailout and freeze all contribute to the general malaise that is the order of the day.
However, in compiling the latest issue of Oil & Gas Middle East, I’ve had the opportunity to speak with leading industry figures that remain optimistic, upbeat and enthused about the year ahead.
October’s drop in oil prices did somewhat damper some conversations, but it only the ‘golden times’ hyperbole that’s gone. As 2008 winds down, upstream players everywhere are among the contented few.
The drying up of cheap and easy capital will, inevitably, hurt a few. Maybe more than a few. But the leading lights are viewing the credit crunch through a rose tinted prism. For NOCs and IOCs, oilfield service firms, and the multitude of companies associated with their extended fabrication needs, a drop in global demand for key commodities will actually ease the strain on supply chains, and may indeed make life easier and more profitable.
Through the entire spectrum of upstream assets, manufacturers and suppliers have been competing with global forces of growth so huge that raw material costs and commodities entered a super-cycle in 2008.
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Construction in Asia, particularly India and China, coupled with a fiscal boom in the consumer markets of Europe and the US has meant steel and machine tools have had some of the longest lead times in living memory. A drop in demand from competing industries will see upstream companies propelled to the front of what have become very long queues.
In times of tight credit the speculative buyers who drive prices skywards drop off the scene, and core customers start to get the treatment they deserve. The supply of materials and delivery schedules from manufacturers will improve, and companies with cash to pay will no doubt find the coming ‘meltdown’ a pretty satisfactory experience. All good so far.
Of course, there will be casualties, and I’m not making light of what is a dire situation outside the oil and gas business. I’d like to draw your attention to the financial focus features dedicated to this topic in this special ADIPEC 2008 issue.
Interviews and features covering what the fallout of the fiscal crisis means for the jack-up market, the opportunities it holds for Abu Dhabi’s major investment vehicles and a five-year forecast for the Middle East oilfield service sector all contribute to provide exclusive insight into these troubled times.
The message is that storm clouds may be gathering, but each has a silver lining.
Daniel Canty is the editor of Oil & Gas Middle East.
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