I.C.T& Value Migration In
Arab Oil
By
Fareed R. ELNaggar; Ph. D.
Professor & Consultant
24 April 2005
(1)
I.C.T& Value Migration In
Arab Oil
By
Fareed R. ELNaggar, Ph. D.
An Abstract
Arab oil value added had been migrating to other countries (19391973). The 10th of Ramadan war has switched the oil equation when
Arab States to redirect value creation of oil to Arab. Economies. Since
then (1973), Multinational oil companies started to change directions
of oil value added from Arab countries to foreign countries through :
(a) Mergers (b) Acquisitions (c) higher salaries of spatriated (d)
training budgets (e) consultancy fees (f) Oil & Gaz exploration (g)
Pressures on oil prices & production levels and (h) Oil Wars.
This paper is exploring energy models and proposing V.M.O
modeling for future strategy and planning.
(2)
List of Contents
1.Typical energy issues in the 21th century.
2. Some Oil Models in Action :
•Oil Demand Forecasting.
•Oil Market Share Analysis.
•Energy Replacement Market Behavior.
•Oil & gas Supply – Economic Methodology.
3.a. Environmental Impact of Energy consumption.
b. Environmental Control Cycle.
4. TERA Model.
5. V.M.O. Percentages.
6. The Process of Oil Value Migration.
7. The Mechanism of Oil Value Migration.
8. New Oil sources of Economic Discontinuity.
9. Reengineering of Arab Oil Companies.
(3)
1- Typical Energy Policy Issues in the 21th century
(4)
1.Wellhead Price Controls.
2.Off – Shore Leasing Policies.
3.Depletion allowances.
4.Power plant sitting.
5.Thermal pollution.
6.Air pollution controls.
7.Rate of return Regulations.
8.Export regulations.
9.End use controls.
10.Strip mining.
11.Off-shore oil spills.
12.Oil wars.
13.Oil games.
14.Oil negotiation (OAPEC/ OPEC-OIC).
2- Some Oil Models
E = F ( P , I , Q1 , Q2 )
Where :
E = Energy consumption.
P
= Index of energy prices.
I
= Vector Defining factors affecting energy consumption.
Q1 = Function defining policy constraints
Q2 = Function defining supply constraints.
(5)
MSi =
Ui
j Uj
Where : Ui = Utility of fuel i
Msi = Market share of fuel i
Example :
Ui = 0 + 1 P1 + I I + 
Where : Pi

,

=
=
=
=
cost of fuel i to user
rector of other factors affecting fuel choice
derived constraints
elasticity of the market share with prices of
individual fuels
Conversion Pollution
to heat
Cost
Prices of Oil
(6)
Cost Per
Utility of
each fuel
Technology
MKT Fuel “utility”
= Total utility
Share
Mart
Share
Per
Fuel
3- Energy Replacement Market Behavior
GAS
Users
Solar
Energy
Electricity
Users
(7)
Oil
Users
Major Transitions
Minor Transitions
4- Energy Market Share Analysis
** Cross Sectional Analysis **
Solar
Oil
Gas
Energy
Fuel
Electricity
Solar
Energy
Oil
Gas
Electricity
** Uses of Fuel in The industrial Sector **
Lighting
Electricity
(8)
Solar
Oil
Gaz
Space
Heating
Raw
Materials
X
Process
Process Mechanical
Energy
Energy
X
X
X
X
X
X
X
X
X
X
Selection of Specific Fuel Uses
Industry
Growth
Forecast
Market
Share
Model
Database
Industry
Growth
Forecast
Trend
Analysis
Technological
Changes
Industry
Demand By
Fuel Type
(9)
(10)
Oil & Gas Supply – Economic Methodology
Oil Supply
Economics
Finding Rate
Bard / Foot
Feed Drilled
Oil
Secondary &
Tertiary
Reserve Adds
Oil
Reserve
Additions
Existing Oil
Reserves
Oil
Reserves
% Reserves
Produced
Annually
Oil
Production
Gas
Reserves
% Reserves
Produced
Annually
Gas
Production
Gas Supply
Existing Gas
Reserves
Finding Rate
Per Food
Gas
Reserve Additions
Feed Drilled
(Gas)
1. Net fixed
Assets.
2. Investment
Royalties.
3. ROI
Revenue
Required
Average
Oil Price
Average
Gas Price
3.a Environmental Impact Of Energy Consumption
Million Tons Per Year
Sector
Transportation
Industrial
Electric Power
Generation
Space heating
Refuse Burning
Total
(11)
Sulfur
Oxides
Nitroge
n
Oxides
Hydro
carbonates
Carbon
Monoxide
Particulates
Total
3.b Environmental Control Cycle
Increasing
Energy
Demand
Fuel Use
Patterns
Increasing
Energy
Demand
(12)
1
Pollution 2
3
Level
4
5
Fuel Use
Patterns
4. TERA Model
( The Total Energy Resource Analysis )
Demand
Forecasting
Tera
Database
Regulations
& Policies
Supply
Forecasting
Energy
Market Share
Price
Structure
Evaluation
Of Outputs
(13)
Supply
Demand
Interaction
Gas Industry
Models
‫‪5. V.M.O. Percentages in Arab countries‬‬
‫‪100%‬‬
‫التنقيب‬
‫صناعة‬
‫التكرير‬
‫‪75%‬‬
‫اإلنتاج‬
‫‪90%‬‬
‫التسويق‬
‫‪50%‬‬
‫التوزيع‬
‫اإلستهالك‬
‫النهائى‬
‫‪100%‬‬
‫العمليات التحويلية‬
‫التصنيع‬
‫البتروكيماويات‬
‫‪80%‬‬
‫اللوجستيات‬
‫النقل‪/‬المناولة‪/‬التخزين‬
‫‪75%‬‬
‫إدارة سالسل‬
‫التوريد ‪SCM‬‬
‫‪60%‬‬
‫الصيانة‬
‫اإلحالل‬
‫االعتمادية‬
‫‪80%‬‬
‫)‪(14‬‬
‫السالمة‬
‫المهنية‬
‫اإلستهالك الوسيط‬
‫‪70%‬‬
‫مراقبة التلوث‬
‫‪75%‬‬
‫التدريـــب‬
6. The Phase of Oil Value Migration
1- Value Outflow :
Foreign oil companies started to absorb value
from Arab oil companies.
2- Competitiveness :
Foreign oil companies started to create values out
Of designs, technologies and competitive
Advantages.
3- Value Switching :
Values started to more away from local oil companies
To foreign companies via acquisition and mergers.
(15)
Oil Value Migration
(16)
From
To
Revenue
Profit
Share of Market
Share of Market
Value
Product Power
Customer Power
Technology
Business Design
7. The Mechanism of Oil Value Migration
(MOVM)
Wealth
Profit Migration
Global
Oil
Companies
Strategies
Controlling
Designs,
R&D
And Technologies
New
Priorities
Changing
Arab Oil
Positions
Concept Of
Absorbing
Capacities
-Lowering Prices.
-Maximizing Output.
-Increasing Cost.
-Technologies.
-High Dependence.
Oil Value Migration driven by
Technology or by new Designs.
Lack of economic Power.
(17)
8. New Oil Sources Of Economic
Discontinuity
1- Inferior Logistics & Execution.
2- Inferior IT & Telecom.
3- High Cost Production.
4- High – cost distribution.
5- Lock of SCM.
6- Slow Product Development.
7- Lack of People Satisfaction
(Internal & External Clients).
(18)
All Call for Value Migration
(19)
9. Reengineering of Arab Oil companies
From
Traditional
Oil companies
1- Product – Focused
2- rigid System
3- Backward integration
4- Scale Derive Value
5- The is Only one way
to do business
6- Monopoly
7- quality control
8- Traditional Oil
Company
9- Trial & Error
10- Loosing Values
To
Modern
Oil companies
Customer – Focused
Flexible
Specialization
Design Create Value
Invocative Improvement
Is Possible
Time competition
TQM
Digital Oil Company
Optimal Model
Value Recapture
L.E.
Stable Market
High Growth
High
Profitalaility
Share &
Stable Margins
Talent,
Resources
Leare at an
Accelerating
Rate
Oil
Value
Inflow
Stability
Oil
Value
Outflow
Time
(20)
Oil Value Creation Distribution
Arab Oil Design Process
Economics
Changing Strategy
Technology
What are the new assumptions & economics
What is Important to Arab States
How Can Value be Created
What dimensions matter the most
What are the future choices
Which ones are the best ?
Are the best choices integrated ?
What is the best oil design ?
How lone will the design be valid ?
(21)
How can we prepare for future designs
(22)
‫المراجع‬
1. M. Coult, (2003) , Energy Conservation Through The
Use of Gas Technology, Shell Centre, London, UK.
2. B. Indyk & R. Wiolson, (2003) , Energy Saving by
New Concepts in the Design of Equipment, Univ. Of
Strathclyde Glasgow, UK.
3. J. Broder, (2002), Energy consumption & Efficiency
in the USA, University of Georgia, Athens, GA, USA.
4. D. Limaya, (2001), Advanced Energy Technologies;
Synergetic
Resources
Inc.,
Philadelphice,
Pennsylvania.
‫ إدارة شركات البترول‬، )2004( ، )‫ فريد النجار (المحرر‬.5
0‫ القاهرة‬، ‫ بيت اإلدارة‬، ‫والطاقة‬