Better reserves data will enhance decision-making by energy market stakeholders

A transformation is taking place as Middle East producers open up decades of historically guarded statistics on their energy reserves and production. This new transparency will enhance the decision-making process for energy-market stakeholders around the world and help with the region’s goal of becoming a leading energy hub aligned to its leading producer status.

Data access is vital for global energy risk management and efficiency. It provides transparency into the world’s supply-demand balance and encourages investors to support energy infrastructure projects and trading ecosystems and is especially important given continued forecasts of strong demand.

The challenge to boost data transparency is twofold. First, encouraging the growth and quality of data collection and, second, learning how best to apply the knowledge generated by billions of data points every day. Creating workflow analytics enables energy stakeholders to digest the usefulness of data. Essentially, these numbers help create comprehensive forecasts that minimise risk and aid in hedging against price volatility.

The financial support required for some energy infrastructure projects, such as refineries and pipelines, can stretch into the decades and extensive data access gives project financiers a clearer long-term outlook. It also reduces the rate of energy stakeholders’ and investors’ knee-jerk reactions to shifts in market dynamics, such as geopolitical uncertainty and sharp price movements.

The Paris-based International Energy Agency said that spending at oil and gasfields fell by 25 per cent in 2015 to US$583 billion, with another 24 per cent decline expected in 2016. Spending cuts were inevitable because of lower oil prices since mid-2014 but would such cuts have been as steep if the industry had better insight into countries' energy production, consumption and reserves data?

The push to unwind decades of opacity and improve data transparency took a big step forward when the Joint Organisations Data Initiative (Jodi) was agreed in 2002. Jodi gathers data from about 100 countries on key indicators for oil supply and demand and from around 80 countries on gas supply and demand. The data is collated and disseminated through the Jodi-Oil and Jodi-Gas World Databases, which are hosted by the International Energy Forum.

This continues to be a laudable effort but there is more work to be done. Worldwide, the gap between countries that punctually submit their data and those that lag behind remains wide.

Many also need to improve their data-gathering processes to reduce the volume of numerical discrepancies, as opaque or inaccurate statistics hamper stakeholders’ confidence that the rest of the data is useful. Should all countries’ data submissions include condensates in their crude figures, for example? The rapid growth of digital data and the Internet of Things – when network connectivity for everyday objects enables them to send and receive data with each other – can reduce the human cost of manual data reporting and improve the efficiency of historical and comparative data sets. Boundaries to protect stakeholders’ intellectual property will also have to be determined.

To complement the Middle East’s efforts to improve the transparency of local supply-demand flows, S&P Global Platts began publishing on October 3 independent prices for the region’s petrol, middle distillates including diesel and jet fuel, and fuel oil. The assessments are normalised to loadings in the Port of Fujairah, which recently appointed S&P Global Platts to publish the port’s weekly inventory data on an aggregate basis for the major categories of refined oil products, including fuel oil, diesel and petrol.

The new assessments and the Fujairah inventory data will generate important data points that will help heighten the global energy market’s understanding of key developments in the Middle East. Such understanding is integral to investors’ plans considering that the region produces one third of the world’s oil exports. These efforts reflect the UAE’s progressive attitude to data transparency, as per the country’s National Vision 2021, with calls from energy stakeholders to unite the seven emirates’ data to create a centralised hub gaining momentum.

Stuart Wood is S&P Global Platts’ vice president of product development.

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