[CAT® OIL & GAS] The View from the Middle East: The Oil & Gas Industry Today and Tomorrow

Sergio Tigera: Welcome to the Cat Power Podcast, where we deliver powerful insights into the world of Caterpillar Oil and Gas. Showcasing the latest in technological advancements and highlighting the stories of the industry's most dynamic leaders. I'm your host Sergio Tigera. Now let's get ready to power up with the Cat Power Podcast. And welcome to the Cat Power Podcast. My name is Sergio, and you can catch this in every episode on your favorite podcast channel, whether it be Apple Podcasts, Google Podcasts, Spotify, or YouTube, make sure to hit subscribe, to stay up with the latest and greatest views that's coming out of the world of Cat Marine Oil and Gas. And today we have a very special guest coming to us all the way from Dubai is Mr. Esteban, Esteban Perez. He's a territory manager for Cat Oil and Gas out there in Dubai. Welcome my friend.

Esteban Perez: Thank you. Thank you, Sergio. Good afternoon. How are you?

Sergio Tigera: Doing fantastic. Fantastic. So this morning time here, it's evening there, and we're going to be talking about the oil and gas industry out there in the Middle East and the ADIPEC conference. So I understand the ADIPEC conference is one of the world's largest oil and gas conventions after Houston. Tell us a little bit more about the event that's coming up and who attends and what happens there.

Esteban Perez: Yeah, absolutely, Sergio. Yeah. So the Abu Dhabi International Petroleum Exhibition Conference, ADIPEC, is one of the world's most influential events for the oil and gas industry. It's taking place from the 15th to the 18th of November and it attracts more than 2000 exhibiting companies, several NOCs, which are national oil companies. And with more than 26 country pavilions and thousands of visitors from around the world.

Sergio Tigera: Wow.

Esteban Perez: So yeah, exhibiting companies and visitors are typically from the oil and gas sectors, whether it is upstream, midstream, downstream, you name it drilling offshore and offshore well service, fracking, gas compression, et cetera. And by putting together buyers and seller professionals that take the opportunity to do business and grow. So there are also strategic and technical conferences taking place during the four days and decision makers and influencers will debate about the latest developments and shape the future of the oil and gas industry.

Sergio Tigera: Wow. So there's a lot going on right there in that space, not only at the conference, but in the space right now. What are the hottest topics that are going to be on the floor?

Esteban Perez: There will be several topics, but I'm thinking one of them is going to be decarbonisation and clean energy solutions. As we are all well aware and nowadays you can see almost every day on the news, there is a big focus on reducing carbon related emissions and to ensure a cleaner and better world, right?. So then companies will promote their latest efforts and results on making their products more environmentally friendly and showing their contributions to the industry, to accelerate the agenda for energy transition and decarbonisation. So I believe decarbonisation and clean energy solutions is going to be certainly one of those topics. Another one most likely will be Rig Automation and Optimization. In the oil and gas industry, rig automation and performance is very, very critical and it will drive a lot of focus. On the post COVID era and please bear with me, I'm mentioning, I'm saying post COVID era. COVID-

Sergio Tigera: Yeah, yeah.

Esteban Perez: ...is not over, but we are far better than what we used to be in the last couple of years. So today things are moving forward and we are all getting reminded of the importance of driving and lean and very efficient business organizations. With digitalization as an enabler, rig automation and optimization will help companies increase their operational efficiencies and by increasing productivity and reducing costs. So ADIPEC is bringing together the technology and the energy companies in the same platform and providing them the opportunity to showcase the latest solutions and advancements in rig optimizations. I'm also thinking smart manufacturing. The impact of smart technologies is changing the way manufacturing companies operate. So today we must focus on creating more agile, adaptive, and intelligent processes. Enabling us to adapt the constantly changing conditions and making manufacturing smarter and greener. So a clear example of these is the current challenges that we see on the supply chain, where combination of circumstances are creating shortages on consumer goods and retail products, as well as materials. So as a consequence of this, we can see freight prices are increasing. Demand forecast has become more difficult, material's prices have also increased and supply delays are commonly seen across multiple industries these days. Yeah. So I'm thinking those will be certainly hot topics.

Sergio Tigera: Now, Caterpillar isn't going to have a booth this year, but you guys are still planning on participating in some way, right?

Esteban Perez: Yeah, absolutely. So, at Caterpillar, we really see high volume participating at the ADIPEC conference. We do it every year, right. Unfortunately last year the event was canceled. Actually it moved from in person event to a visual event due to the pandemic. And this year at Caterpillar, we have decided not to exhibit, just to make sure we limit the risk of the spread of the disease of COVID- 19 and to avoid also employee risks. So anyway, we are still committed to support the event and a clear example of this is our senior oil and gas management that will come from Houston to the region to take part on key conferences, as well as meeting with our customers, meeting with our suppliers and other energy industry players. So we are also hosting reception event where we are inviting our Caterpillar dealer partners, sorry, and customers to meeting a business casual environment. This will facilitate the business discussions to build relationship and enhance partnership. And we are looking for business opportunities that will allow us to also understand how to better support our customer needs. So yeah, absolutely we are supporting and we are participating in ADIPEC this year.

Sergio Tigera: That's fantastic. Cause you're being safe, but you're also building relationships and partnerships in a way that's very meaningful. So the Middle East has always been the center of the oil and gas industry. What are some of the things that are on the minds of the leaders in that space?

Esteban Perez: Yeah. Yeah. I'm thinking to answer your question, I'm thinking what the major NOCs, right. The National Oil Companies. And the country rulers are doing nowadays in terms of initiatives, but also, what they do nowadays, but also what they do today to prepare for the future of the oil and gas industry. And to put you into context, let me share some details that comes to my mind, right. One third of the world's oil is produced in the Middle East, so in this part of the world.

Sergio Tigera: Wow.

Esteban Perez: 48% of the world's oil, known reserves. The reserves that we are, today that exist are in the Middle East as well. And 58% of the natural gas reserves. If you count only Saudi Arabia, which is the world's largest oil producer, and accounts for roughly 15% of the global output. One, five, 15%.

Sergio Tigera: With one country. That's incredible.

Esteban Perez: One country. Absolutely. Absolutely. And the oil and gas, it's an integral part, I would say of the Middle Eastern economies with countries sometimes GDP depends on some cases up to more than actually, more than 80% of the oil and gas exports. So GDP entirely or hugely related to the oil and gas exports. So, oil and gas, it's a very important in the Middle East. Maybe getting back to the question, Global oil and gas markets are a stretch between kind of two competitive drivers. It's rising pressure for decarbonisation, but at the same time, increasing demand for energy in developing economies. So we have decarbonisation and increase amount of energy. Which is kind of contradicting or challenging kind of each other. The Middle East is certainly not an exception to this. So same situation is happening here. Leaders are looking for new ways to maintain competitiveness and growth. You can find lots of companies today, announcing strategic partnerships, alliances, mergers, or acquisitions that position them to be more competitive. And at Caterpillar, we are continuously working in line with these and multiple strategic initiatives are taking place to ensure that we better serve our customers.

Sergio Tigera: Yeah. Here in the States, reducing carbon emissions and meeting these challenging ESG goals are absolutely top of mind for oil and gas companies as they are over there as well. Right. We're asking to do more and do it more efficiently at that.

Esteban Perez: Absolutely.

Sergio Tigera: What's Caterpillar's presence in the region in, and like how does Cat and dealers, how are they supporting this oil and gas operation out there?

Esteban Perez: Yeah. No, thanks for this question, Sergio because I'm really excited to let our audience know more about what we're doing in the region to support our customers. So to start with, let me tell you that we are located in a district office here in Dubai, Jebel Ali Free Zone. We are more than 130 employees working out from this location and dedicated team also supporting the oil and gas industry. Right. So, I'm part of this team dedicated to the oil and gas. So at the same location, we have our parts distribution center that serves our customers in Africa and the Middle East mainly. The facility extends for more than 500, 000 square feet and it's all under roof. So it's not open air, its under roof and more than 96,000 parts in stock. So you can look at those numbers, yeah.

Sergio Tigera: That's a huge operation.

Esteban Perez: Absolutely, absolutely. Not only there, but we also have fluid analysis laboratory. So, one of the most effective ways to analyze the health of the equipment and avoid premature failures is by performing fluid analysis. So in Dubai, in our facility today, we are currently able to perform oil coolant and fuel analysis. Our team of analysts and interpreters, they look at the analysis results and provide corrective actions, recommendations, and as needed based on those results. So by this system, we are just able to detect in a very cost effective way, potential failures before they actually happen on the equipment, on the engines or other equipment and allow customers to take action to avoid equipment downturn. So if you consider that only through our Dubai lab, we process more than 60,000 fluid samples per year, that will help you understand the magnitude of those operations.

Sergio Tigera: Wow.

Esteban Perez: Yeah, Yeah.

Sergio Tigera: It's a tremendous operation there.

Esteban Perez: Yeah. And not only there, I was thinking also to mention about our training center. We have learning centers distributed around the world and we have one here in Dubai. It's a qualified team of service training instructors. The facilities is also very large facility with six classrooms. We have a lot of engines that can be loaded by means of load bunks or Dino, depending on the application. And that the technicians can learn and practice and utilize those engines for a repair, maintenance, troubleshooting, tuning procedures, et cetera. So, and we don't only cover the oil and gas industrial. We also cover electric power, marine, industrial, retail, other industries.

Sergio Tigera: Yeah. And these demonstration and learning centers are absolutely in amazing. If you haven't been to one of them, you got to check them out. I've been to the one in Malaga and Panama. I haven't been out in Dubai, but being a global company, that's what this allows you to do, right. Is have these resources all over the world to support these global operations, these oil and gas companies.

Esteban Perez: Yeah. And by the way, you mentioned Malaga, the training center. I am actually... I joined Caterpillar 14 years ago in our training center in Malaga. So I'm very well familiar with that facility. Yeah, absolutely.

Sergio Tigera: Yeah, absolutely. And so in addition to some of the other solutions that Cat's offering these oil and gas companies to help them work more efficiently and more sustainably. What else is cat doing in terms of customer value agreements, for example?

Esteban Perez: Yeah. So, we have several solutions available in the emissions reduction space and on the rig operation optimization to mention couple. You mentioned CBAs. So CBAs are on solutions from the service space, right. So we don't only offer those product application solutions, but in this service space, we have this customer value agreements. This completely customizable agreements that adapt to the customer needs around three level approach. A level one includes parts and labor. The level two will include preventive maintenance and level three includes also maintenance and repair. Okay. What's unique about CBAs is that the customer leveraging our dealer service expertise will have hassle free equipment ownership and maintenance, security of expert dealer support and peace of mind for equipment health management that will contribute to lower their operation and maintenance cost. So, this is very advanced solution that we offer on the service space. And it's very, being very successful globally. We have several cases where customers are already leveraging completely their equipment fleet, the service and maintenance to our dealer network.

Sergio Tigera: Yeah. As an operator, downtime is my biggest enemy, right. Because it's all about production, production, production. It's got to be 24x7 and having a solution like that, that guarantees you some peace of mind and gets that off of that person's desk and not have to worry about it is a huge value add to that customer.

Esteban Perez: Absolutely. Absolutely.

Sergio Tigera: Well, fantastic. So ADIPEC is coming up. What other final thoughts, other things that you wanted to mention about the show, about Cat, about what's going on out there in Dubai? Can you tell us?

Esteban Perez: Yeah. Yeah. Maybe, we will be also... Even though we are not exhibiting, as I mentioned. We will be promoting other type of solutions, not only on the service space, but also on the product and application solutions. We're currently spending our hydrogen power solutions to customers, but it was announced by Caterpillar dating September, the first, this year. Caterpillar will begun offering generator sets capable of operating on 100% hydrogen. Okay. Including fully renewable green hydrogen on a design to order basis for now on, I mean for now in 2021 at the end of this year. So immediately we're starting offer under designed to order basis, but more immediately as well, we are launching commercially available power generation solutions that can configure to operate on natural gas blended with up to 25% hydrogen. So, those are some developments on the hydrogen solution space. We have other developments on the land drilling technology space that will be talking about in ADIPEC. One of those solutions is Smart Engine Management System, what we call SEMS, is a generator control system that is developed exclusively for land electric drill rigs to efficiently manage the number of engines required to be online, to meet rig power demand. So basically the system, the control system will be looking at the engine load versus the rig power demand and will be controlling and switching on and off the engines. So I don't want to get too much technical here, but you can quickly relate our SEMS solution, Smart Engine Management System to the benefits that it generates by reducing the number of hours of the engines will be in operation, reducing maintenance and operating cost and of course, reducing fuel consumption, which also reduces emission. So it's a very advanced solution that we are also promoting at ADIPEC.

Sergio Tigera: That's one of the things that always comes to mind when we're talking about caterpillar and all these technological advances is that we're talking about small, but very powerful changes that make a big difference when they add up over time. And it's just like a formula one team, right? You're shaving off seconds. You're shaving off leaders, little by little, but it adds up in a huge way. That's going to pay dividends and that's what you look for in a partner like caterpillar.

Esteban Perez: Yes, absolutely. Absolutely. And we are very excited about not only promoting our solutions during ADIPEC, but anyway, the audience here, if they want to get any additional information, we have connectivity solutions. We have offshore energy saving solutions as well. So we have multitude of solutions that we are either currently available today, or we are working to develop tomorrow and they can request any of these information directly to us or through our dealer network.

Sergio Tigera: That's fantastic. I mean, it doesn't hurt to ask there. You never know what you don't know, because there's developments are happening so quick these days and advancements that it's important to ask your partners there in the industry. So all right, Esteban. Thank you so much for being on the Cat Power Podcast, my friend, and hopefully we'll get some more customers and clients out there to see you guys here this soon.

Esteban Perez: Thank you so much to you, Sergio.

Sergio Tigera: Thank you so much for listening. If you enjoyed this episode, please follow and rate us, and be sure to share it with a friend so that you can power up their life and their career.