Oil & Gas - May 2010 by oeronline emagazine

FROM THE EDITOR’S DESK

No 10

May-June, 2010

INTERVIEW 2011 SPE President Alain Labastie

EVENT REPORT OGWA 2010

INTERVIEW Vinod Shah, MD Mott MacDonald & Co.

May-June, 2010

CREATING WORLD CLASS ASSETS An exclusive interview with H.E Maqbool Ali Sultan, Minister of Commerce and Industry and Chairman of Oman Oil Company

Damage Control! Despite high safety standards in the oil and gas industry, the nature of the job always poses safety challenges. The explosion on the Deepwater Horizon offshore drilling rig, operating in the Gulf of Mexico off the coast of Louisiana, on April 20, 2010, has been rightly described by US President Barack Obama as a “potentially unprecedented” environmental disaster.

CONCEPT & CONTENT Akshay Bhatnagar Sunil Fernandes Sushmita Sarkhel DESIGN Art Directors Sandesh S. Rangnekar Minaal G Pednekar Senior Designer Shameer Moideen Senior Photographer Rajesh Burman Photographer Sathya Das

The resulting explosion not only saw eleven rig workers missing, but has also resulted in a massive oil spill, which is causing an environmental disaster.

Production Manager Govindaraj Ramesh MARKETING Business Head - Strategic Media Unit Kush Gupta Marketing Team Sanjeev Rana CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy Vice President Ravi Raman Senior Business Support Executive Radha Kumar Distribution United Media Services LLC Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel: (968) 24700896, Fax: (968) 24707939 Email: publish@umsoman.com All rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. OER accepts no responsibility for advertising content. Copyright © 2010 United Press & Publishing LLC Printed by Oriental Printing Press Correspondence should be sent to: Oil & Gas Review United Media Services PO Box 3305, Ruwi 112, Sultanate of Oman Fax: (968)24707939 Email: akshay@umsoman.com

The oil spill, originating from a deepwater oil well, is estimated to be discharging more than 5000 barrels of crude oil daily. Experts fear that it will result in an environmental catastrophe as the oil from the well site reaches the Gulf Coast, damaging the Gulf of Mexico fishing industry, tourism industry, and habitat of hundreds of bird species. BP was principal developer of the oil field and leased the oil rig from Transocean Ltd. BP has swung into action to control the damage. OGR has done a pictorial review of the oil behemoth’s response to the incident, since it has been blamed by the US Government, being the principal developer of the field. Despite the nature of the incident, what is heartening however is the response from the industry to mitigate the potential damage of such a spill. ExxonMobil has offered the use of drilling rigs as a staging base, two supply vessels, an underwater vehicle and support vessel and has provided experts to respond to BP’s request for technical advice on blowout prevents, dispersant injection, well construction and containment options. Other oil and gas majors including national oil companies have also offered assistance. Moving on, OGR features an exclusive interview with HE Maqbool Ali Sultan, Oman’s Minister for Commerce and Industry and Chairman of Oman oil Company. The interview highlights the giant steps Oman Oil Company is taking in creating world-class assets. Also featured are many more interesting and informative articles. Do enjoy reading the edition and forward your feedback. Sunil Fernandes sunilf@umsoman.com STANDING TALL 2

Presentation

Read the E-Mag: Follow us on www.oeronline.com twitter.com/oilandgasreview

CONTENT Cover Story Creating World Class Assets

H. E. Maqbool Ali Sultan, Minister of Commerce & Industry, and Chairman of Oman Oil Company in an exclusive interview

Achieving a lowcarbon future

Copenhagen underlined that climate change is an economic, developmental and environmental issue

Insets:

INDUSTRY SCAN

BP’S RESPONSE IN PICTURES

A complete news round-up on the latest in Oman’s oil and gas industry

BP responds on a war-footing to an oil slick in the Gulf of Mexico

A class apart

An interview with Vinod Shah of Mott McDonald

20 OGWA 2010

A round-up on the recently concluded OGWA 2010

REGIONAL ROUND-UP A round-up of the latest from the region’s oil and gas industry

Nov-Dec, 2009

A novel way

OGR talks to Pieter Hoff, CEO of Groasis

CONTENT Country Report

A report on the US Governmentâ&#x20AC;&#x2122;s decision to expand offshore oil and gas exploration

44 42

Disseminating knowledge

Interview with 2011 SPE President, Alain Labastie

Insets: oil data and statistics

42 GLOBAL OIL RESERVES

Data on global oil reserves and production

Need to curb volatility Excerpts from a speech by OPEC Secretary General, HE Abdalla Salem El-Badri

job postings

GLOBAL ROUND-UP

EVENTS CALENDAR

May-June, 2010

Job opportunities for the industry professionals from around the globe

Brief update on the news and developments from the global oil and gas industry

A calendar of the forthcoming events from the oil and gas industry

Market round-up

A round-up of the oil and gas industry

industry scan

and competencies of Omani cadres to take up highly esteemed positions within Shell at a regional and global level as well.

Omani-Dutch joint water project for Sohar A joint Omani- Dutch project on water availability management for Sohar region was launched on the sidelines of the Ninth Gulf Water Conference, held recently. HE Stefan van Wersch, Ambassador of Netherlands to the Sultanate, said that his country’s contribution would focus on experience-sharing as well as giving the required expertise in the area to the Sultanate. He said that there were many commonalities between Oman and the Netherlands as the two countries were partners in many such projects. During an interaction by the Dutch business delegation with the media, Professor Ruud Schotting, holder of the Sultan Qaboos Chair for Quantitative Water Management at the Roosevelt Academy of the University of Utrecht, said that the Netherlands had been working on the issue in the region for many years now. “We have similar water relatedproblems. Oman and the Netherlands will work on a 50-50 partnership in the joint project in Sohar.”

May-June, 2010

Shell appoints the second Omani to hold a senior position in the Middle East Shell International EP appointed recently Irshad Al Lawati as Shell Country Chair in Iran. This is the second appointment for an Omani citizen to hold a senior position in the company after appointing Intisar Al Kindi as Shell Country Chair in Jordan two years ago. Such a move demonstrates the capabilities

Irshad studied in University of Bon and Wuppertal University in Germany from 1979 to 1982 specialising in Electrical Engineering. He obtained his Masters in Strategic Management from Henely College of Management, UK in 1994. Irshad began work in the Sultanate since the early 80’s, where he worked in a number of well reputed private and government establishments, including the banking sector. Irshad commented by saying that he is extremely happy and pleased on being appointed as Shell Country Chair in Iran. He added that since the beginning of his career in Shell, he has been witnessing how Shell takes its staff development seriously, especially local talent. “For that reason such interest and trust definitely contributes in boosting our morale and responsibility level to put more effort and dedication towards performing better in our jobs he said.”

Omanoil marks key retail milestones With a reoccurring number of 10 million customers who frequented Ahlain and convenience stores during the last year, Oman Oil Marketing Company (omanoil) has marked an essential milestone in its retail operations with an unprecedented number

of loyal customers at its vast nation-wide network. For the past six years, the one-stopshop convenience stores have truly become a trusted Omani house-hold name and a genuine testament to its fine retail offerings. The achievement coincides with omanoil’s

announcement of the opening of two filling stations in Al Breik in Wilayat Al Khaborah and Saham Industrial, making the company’s vast network of filling stations 114, in addition to the re-branding of its 62nd convenience store to Ahlain in Wadi Al Bahais.

Intilaaqah Oman contributes to success of global youth enterprise programme

helped over 4200 businesses to start up.” Intilaaqah has been recognised by various government organisations as a pioneer in promoting entrepreneurship and guiding aspiring entrepreneurs towards the right path. Apart from face to face training courses and guidance services, Intillaqah is moving online to reach out to more potential entrepreneurs. Within the last six months alone, Intilaaqah’s site received over one million hits.

CROSCO mobilises additional workover rigs to Oman

Intilaaqah has contributed to the success of a leading international youth enterprise programme that has provided over 1 million young people globally with information, advice and support to consider starting their own businesses during 2009. Since its inception in 1982, over 6.5 million young people have had contact with LiveWIRE programmes internationally. Intilaaqah is a member of the Shell LiveWIRE global network, one of Shell’s social investment programmes which operates in over 20 countries and links 104,000 young entrepreneurs around the world through its online social network. Abdullah Al Jufaili, Director of Intilaaqah says, “In addition to its contribution to the success of the international programme, Intilaaqah is making a real difference to young people in Oman. Since 1995, Intilaaqah has helped over 7205 young people to explore the option of starting a business, and has

One of the many young entrepreneurs to have benefited from the Intilaaqah programme is Musalem Al Rahbi from Muscat Geo Systems, a startup company based in The Knowledge Mine business incubator programme in Kowledge Oasis Muscat. It provides Geographic Information Systems (GIS) solution to individuals, corporate and public sector organisations. Musallam Al Rahbi says, “Without Intilaaqah support, my business would not be where it is today. It’s fantastic that Intilaaqah is helping so many people in Oman and around the world to achieve a brighter future.”

CROSCO Integrated Drilling & Well Services Co., has mobilised two additional workover rigs, CROSCO Cardwell 9 and CROSCO Cardwell 10 to Oman. Both workover rigs will be made available to CROSCO’s joint venture company in Oman (MIDWESCO) for workover and field maintenance services. Currently, MIDWESCO is providing workover and field maintenance services with four CROSCO workover rigs (Skytop 4, National 1, Cardwell 11 and Cardwell 13) as well as slickline services with two CROSCO highly mobile wireline crane units. Drazen Herak, Midwesco’s General Manager explained, “With the arrival of the two CROSCO workover rigs, Midwesco currently has available in Oman two CROSCO workover rigs and three CROSCO slickline units. We are prepared to commence work with the available workover rigs and slickline units. In Oman, we have a well equipped maintenance base and excellent maintenance staff and personnel.”

May-June, 2010

industry scan

Omantel holds seminar for Oil and Gas sector Omantel conducted a seminar that highlights its corporate business solutions for the oil and gas sector in the Sultanate of Oman, one of its fastest growing and most innovative areas of business. Representatives from leading oil and gas companies across Oman attended the seminar that outlined the comprehensive range of specialised solutions that have been

developed by Omantel’s Corporate Business Unit to ensure companies stay connected and get closer together both inside and outside Oman. The broad ranging and highly flexible fixed, mobile and internet solutions are ideal for the oil and gas sector in Oman as they have very specific requirements in terms of both their fixed and mobile connectivity. “Often these companies work in very remote

PDO supports environmental initiatives Petroleum Development Oman (PDO) is to support two important environmental initiatives by the Ministry of Environment and Climate Affairs (MECA) to plant new mangroves and replace harmful trees in Wilayat Al-Jazir. A Memorandum of Understanding (MoU) under which PDO will fund the two MECA projects was signed by Ali bin Amer AlKuyumi, Director General of Nature Conservation at the Ministry of Environment and Climate Affairs and Mundhir bin Salem Al-Barwani, PDO Human Resources Director. Under the terms of the MoU, PDO will

May-June, 2010

financially support MECA’s plans to plant mangrove trees in Wilayat Al-Jazir. PDO is also supporting a parallel project to remove the harmful Psosopis juliflora tree and replace it with native species “This is an important environmental initiative by MECA that PDO is proud to support,” Mundhir Al-Barwani said. “This comes in translation of PDO’s keenness to support initiatives aimed at environmental protection and preservation of the ecological balance between its various elements. By planting new mangroves and removal of non-native trees, we are restoring the traditional local habitat at the same time improving the environment.”

areas where there is little or no infrastructure which makes it more challenging for Omantel to utilise its comprehensive range of solutions to meet very specific needs and requirements. Omantel solutions allow head offices in Muscat for example to connect directly to oil rigs and other installations in highly remote locations ensuring business efficiency for the customer and connectivity for effective business operations,” an Omantel press release states.

SDO & OPAL to train graduates

Shell Development Oman (SDO) and the Omani Society for Petroleum Services (OPAL) have signed two separate agreements to train 35 young Omani high school graduates. The signing ceremony was attended by Hilal Al Mawali, External Affairs Manager of Shell Development Oman, and Nicholas Pattison, CEO of OPAL as well as Talal bin Abdul Aziz Al Araimi, Managing Director of Arabian Training Centre and Khalid M. Asad, Managing Director of Technical and Administrative Training Institute. The first agreement constitutes training 20 high school graduates in “Autocad” programme for a period of nine months. The second agreement is for the training of 15 high school graduates in a “cashier” programme for a period of seven months.

industry scan

omanoil announces continued good financial performance at annual general meeting Despite a financial year characterised by widespread caution and uncertainty as a result of the economic downturn, Oman Oil Marketing Company (omanoil), proved its solid financial track record in 2009 with a promising outlook for the current year at the recently held Annual General Meeting at the Crowne Plaza Hotel. The company’s revenue totalled 168.4 million Rials and after providing for corporate tax, the company’s net profit amounted to 5.4 million Rials, with earnings per share at 83 Baisa. At the Annual General Meeting, the proposed cash dividend of 35 Baisa per share for the

Abdullah Al Rawas, Chairman of Oman Oil Marketing Company. “Focused on effective asset management, operational improvements as well as development of a knowledgeable and skilled workforce, these initiatives were crucial in supporting the company’s various business portfolios to achieve respective sales targets and remain competitive in product distribution.” financial year ended December 31st 2009 was approved. “In facing this challenging year, we undertook various improvement and upgrading initiatives to ensure an efficient and reliable logistics support system,” said Sheikh Salim

Faisal Al-Hashar to move on

Faisal Al-Hashar, Managing Director of Shell Oman Marketing Company, has resigned. In a statement, John Blascos, Chairman of the Board of Directors, Shell Oman Marketing Company, informed: “Faisal has been with Shell for almost ten years and has served in various capacities, he has also been a board director since 2003 and the Managing Director since Sep 2007. During this time, Shell Oman Marketing Company has performed exceptionally well and delivered outstanding shareholders’ value. In his role as the Managing Director, Faisal has been instrumental in building a sustainable growth for the company to its current high-level of performance, especially during the global economic difficulties of 2008 and 2009. Today, Shell Oman Marketing Company emerges as a stronger contestant in the local fuel marketing business. The Board regrets Faisal’s decision but wish him a successful endeavour in his future private business ambitions. The Board recognises and appreciates the efforts and value that Faisal has added to the Board as both a non-executive and executive member. The Company is in the processes of recruiting Faisal’s successor and will be subject to a future announcement. Faisal will continue in his current role until such time.” 10

May-June, 2010

The highest ever in omanoil history, the Retail Business Unit contributed more than 69 per cent of the company’s sales with a nationwide network of 113 service stations across the Sultanate.

Renaissance holds its 14th AGM Renaissance Services shareholders have approved the company’s financial statements, dividend distribution and other agenda matters discussed at the 14th Annual General Meeting, including the corporate social responsibility fund which accounts for 1 per cent of the 2009 profit for the company. The directors’ recommendation for a dividend payout of 12 per cent amounted to Rial 3.4 million (US$ 8.84 million), up from Rial 2.5 million (US$ 6.5 million) last year. Stephen Thomas, Renaissance CEO said, “Even in the midst of a significant investment programme that is securing sustainable growth for the company we are still able to deliver an increased cash dividend of 12 per cent to our shareholders whilst retaining the bulk of profit for new investment.” The company is mapping an investment programme of up to US$ 1.4 billion to support the expansion and new assets in its core oil and gas services businesses over the next three years. The 2009 performance reflects the company’s balanced business model, long-term income base and sustainable growth in all economic cycles.

Two Decades of Safe Operations with Petroleum Development Oman

industry scan

Oil & Gas Review, Oman’s 1st & only magazine on oil and gas sector participates in OGWA 2010 Oil & Gas Review (OGR) was presented a memento for its participation as a media partner in the recent Oil & Gas West Asia 2010 (OGWA), Exhibition and Conference. OGR which had a stall at the exhibition received overwhelming response from visitors and saw increased level of subscriptions. Readers also had positive feedback and comments to offer for OGR. “Your magazine is very informative and helps us stay in sync with the latest in the sector,” said Ghalib from a leading oil services company. OGR had earlier partnered in industry events such as Gas Arabia, Petchem Arabia, Middle East Petroleum and Gas Week etc. Oil & Gas Review is the Sultanate’s only magazine dedicated to the oil and gas sector in Oman. Since its launch in November 2008, the magazine has generated good response from readers not only in the Sultanate, but the entire region.

Oman Association for the Disabled holds 15th year anniversary In support of social integration for individuals with special needs, Oman Oil Marketing Company (omanoil) joined hands with the Oman Association for the Disabled to celebrate the ‘Gulf Week of the Disabled’ and ‘Arab Deaf Week’ during the Association’s 15-year anniversary. The event was held recently under the patronage of Sheikh Salim Abdullah Al Rawas, Chairman of omanoil.

May-June, 2010

Hi-Tech Services and Supplies and KBL celebrate partnership

Hi-Tech Services and Supplies LLC (Hi-Tech), part of Trading SBU (Oman) of Al Hassan Group and Kirloskar Brothers Limited (KBL), its long time partner, celebrated their partnership and KBL’s 120 years of existence at the Crowne Plaza Hotel, Muscat. Hi-Tech is the supplier of mechanical equipment in the Sultanate of Oman for the projects sector. and caters to the oil & gas, petrochemicals, water & wastewater, industrial and commercial sectors.

omanoil signs agreement with Matrix Marine

Following its acquisition of a license from Sohar Industrial Port Company (SIPC) to provide the Port with marine bunkering fuel services in January 2010, Oman Oil Marketing Company (omanoil) signed an exclusive agreement with Matrix Marine to establish omanoil Matrix Marine Services LLC. The new company is a strategic joint venture that will

“Kirloskar Brothers (KBL), one of the world’s top leader in pumps which was created in 1890, has many reasons to celebrate. Not only does it turn 120 years old this year, KBL also recently completed the Majis CCWS Project which included engineering, procurement & construction (EPC) as well as Operations and Maintenance (O&M). In addition to these landmark achievements in Oman, KBL is celebrating the inception of its Kirloskarwadi Plant 100 years ago,” a release from Al Hassan states.

enhance the efficiency of bunkering services at one of the world’s largest port development projects. Eng. Omar Ahmed Qatan, CEO of omanoil stated, “As Sohar continues to solidify its position as the business and industrial hub of the Sultanate, we welcome the opportunity to meet the needs of the deep-water Port with its expanding terminals along the vital international trade route to and from the Straits of Hurmuz. We are confident that our strategic partnership with Matrix Marine will undoubtedly add substantial value to the vast maritime development through our broad experience in the bunkering business.” He went on to say that omanoil reaffirms its commitment to being the engine behind the economic development of the nation under the wise leadership of His Majesty as they continue to apply the best HSSE international practices and fulfill their social responsibility towards environment protection by minimising oil marine pollution.

EVENT ANALYSIS

BP’s response in pictures

Picture courtesy: BP

The sinking of the Deepwater Horizon rig on April 20, in the Gulf of Mexico, not only saw 11 oil workers disappearing in the US Gulf of Mexico, but the oil slick continues to cause marine and environmental havoc. US President Barack Obama described the sprawling oil slick in the Gulf of Mexico as a “potentially unprecedented” environmental disaster. The Transocean Drilling Rig Deepwater Horizon was engaged in drilling activity on behalf of BP at Mississippi Canyon Block 252, about 52 miles southeast of Venice, LA, USA. Ever since the incident Oil behemoth BP has been doing its utmost to control the disaster. OGR brings you the company’s response in pictures

Booms laid for protection at Breton National Wildlife Refuge, near Venice, LA 14

May-June, 2010

Picture courtesy: BP Joint Incident Command Staff observe a moment of silence

USES workers load boom into workshops

BP Group CEO Tony Hayward discusses the operation with US Coast Guard

Workers setting hard boom and absorbent boom materials

Flotiila of loaded vessels weave through the Mississipi River May-June, 2010

ENVIRONMENT

AchievING a LowCarbon Future

While it is easy to highlight the unmet – and perhaps unrealistic – expectations for the climate talks in Copenhagen last December, true failure would be to use the outcome to place blame or as an excuse to abandon the effort says Nobuo Tanaka and Bjorn Stigson

s executives with the International Energy Agency (IEA) and the World Business Council for Sustainable Development (WBCSD), we remain optimistic that the

Nobuo Tanaka, Executive Director, IEA 16

May-June, 2010

world will meet the climate challenge. Copenhagen underlined that climate change is an economic, developmental and environmental issue for all governments. The world’s population will grow to 9 billion, the majority urbanised, and all

demanding food, water and housing. Access to energy will be essential to live productive lives. This requires a push for resource efficiency and a drive for reduced pollution. The future world will be resource and carbon-constrained. Cleaner, more efficient technologies are required; the “green race” has begun to become the leading supplier of these solutions. Our work all around the world convinces us that government and business leaders understand that adopting new, more efficient technologies is essential for continued international competitiveness and long-term growth prospects. Looking forward, the first priority should be to launch a concerted effort to increase the efficiency of energy production and use. We have the means and ability to do this now at relatively low or no cost. The IEA’s recommendations, if implemented globally, could reduce global CO2 emissions by more than 8 billion tonnes per year by 2030 – equivalent to one and a half times the annual CO2 emissions of the United States. Greater efficiency not only reduces greenhouse gas emissions, but makes sense for economic and energy security reasons. It reduces dependence on imported fossil fuels, creates jobs and enhances competitiveness. Governments and industry need to re-double their efficiency efforts at all levels without delay. Second, global demand for energy is growing rapidly, especially for electricity. Power generation accounts for more than 40

ENVIRONMENT

The IEA’s recommendations, could reduce global CO2 emissions by more than eight billion tonnes per year by 2030

per cent of industry based greenhouse gas emissions. Reliance on existing technologies will result in unacceptable increases in emissions. By 2050, we need to achieve a 6-fold increase in renewable energy, a 3- to 4-fold increase in nuclear power and an expansion of carbon capture and storage from the five successful large-scale projects today to over three thousand projects. Third, the transport sector must also be far along the path to decarbonisation by 2050. This entails rapid replacement of conventional vehicles by hybrid and electric vehicles, combined with sustainable biofuels, and programmes to expand use of mass transit and other cleaner mobility options. Achieving these goals will require rapid changes in the way we produce, use and even think about energy. We believe we can – and must – begin the evolution toward a more efficient, low-carbon energy system today. The longer we wait, the more inefficient and high-carbon technologies will become “locked in” and the higher the ultimate price tag of cutting emissions. IEA analysis estimates that every year of delay adds US $500 billion to the investment needed worldwide between 2010 and 2030 in the energy sector. We cannot afford to postpone action. Although government investment in low-carbon 18

May-June, 2010

Bjorn Stigson, President, World Business Council for Sustainable Development

technologies increased in 2008-2009 for the first time since the 1970s, it is still not enough. We need to sustain increases and triple public investment in clean energy research, development and deployment. The private sector is ready to take on greater risk in low-carbon technologies if it sees a positive return on its investment. But the rules and operating framework need to be certain. Our organisations are working to bring government and industry together to develop global low-carbon energy technology roadmaps that plot the course to more efficient energy systems that will help achieve our climate goals over the next decades. We will publish improved data on public and private sector investment in clean energy, together with “best practice” policies for accelerating technology innovation, to track international progress and hasten the learning process. We will help scale up low-carbon technology deployment in emerging economies. And we will support increased technology coordination worldwide through a lowcarbon energy technology platform. The world is moving on from Copenhagen.

Negotiations must continue, but action need not await their outcome. (Nobuo Tanaka is the Executive Director of IEA, while Bjorn Stigson is President of the World Business Council for Sustainable Development)

Oman’s First Green AwardS

5 June 2010 (World Environment Day) www.oeronline.com/greenawards

Event report

Disseminating Information; creating awareness

OGWA 2010, one of the biggest events for the regionâ&#x20AC;&#x2122;s oil & gas industry, was successfully held on April 11-13 and attracted the participation of hundreds of industry professionals and more than 250 companies from over 35 countries worldwide. OGR reports

His Excellency Nasser bin Khamis Ali Al Jashmi, Under Secretary, Ministry of Oil and Gas opening OGWA 2010

May-June, 2010

OGWA 2010, the threeday oil and gas exhibition and conference saw an overwhelming response from guests and speakers, making it one of the largest oil and gas exhibitions in the region. Organised by Omanexpo, the event was formally inaugurated by His Excellency Nasser bin Khamis Al Jashmi, Undersecretary of the Ministry of Oil & Gas, in the presence of VVIPs and other dignitaries, ministry officials, ambassadors, the top management of participating companies, and other distinguished guests. “Let me tell you on the exhibition side we have more than 250 companies, showcasing their products and knowhow. If we have more space we could add another 250 companies. On the conference side we have 400 delegates representing 92 companies from 51 different countries. We have received around 250 papers and out of these, we could accommodate only 60 papers,” said Dr Zaid Khamis Al Siyabi, Chairman of the Conference and Director General of Exploration and Production, Ministry of Oil and Gas, Oman. The OGWA 2010 Exhibition featured the stands of national oil & gas companies from the GCC, international oil & gas majors, leading local companies, service providers, equipment suppliers and other companies directly serving the industry’s growing requirements. Held under the patronage of the Ministry of Oil & Gas, this 2010 event was the biggest ever and set records in the number of participating companies, countries represented, the total exhibition space covered (over 4,000 square meters), and number of visitors (8,232). The accompanying SPE EOR Conference at OGWA, which was organised by the Society of Petroleum Engineers, was also the biggest ever conference in the Middle East that focused on

From R to L: His Excellency Stefan van Wersch, Netherlands Ambassador to Oman, along with Dr Zaid Khamis Al Siyabi, DG E&P, Ministry of Oil and Gas; Suleiman Al Mantheri, External Affairs and Communications Manager PDO and Suleiman Zakhwani, Chairman of SPE, Oman Chapter

enhanced oil recovery (EOR) methods and technologies. Held at the Golden Tulip Hotel, right next to the Oman International Exhibition Centre, the conference attracted hundreds of delegates from all the world and featured 14 technical sessions under the theme “EOR Challenges, Experiences and Opportunities in the Middle East.” “OGWA 2010 prominently highlighted the continued growth of the vibrant oil & gas industry in Oman and the wider region, providing industry professionals the opportunity to inspect the equipment and technologies required in exploration and production activities while discussing new developments that can shape the

future of the industry,” said Nasser Diab, General Manager of Omanexpo, the pioneer exhibition management company in Oman and the leading organiser of world-class trade shows in the Sultanate. He stressed that the strong local and international participation in OGWA 2010 clearly reflected the massive potential and opportunities in Oman’s oil & gas industry and it also indicated the vibrancy of the regional market as all countries in the Middle East continue to boost their upstream, midstream and downstream operations. Diab added that by getting together industry professionals from within the region and other parts of the world, OGWA 2010 effectively

OGWA 2010, the three-day oil and gas exhibition and conference saw an overwhelming response from guests and speakers, making it one of the largest oil and gas exhibitions in the region

May-June, 2010

Event report

Clockwise from top left: Oxy Oman, PDO, Vanguard and MB Petroleum Services stands at OGWA 2010

served as a vital forum for assessing the current state of the industry and charting its course for the future. Just like in previous editions of the event, leading the list of exhibitors at OGWA 2010 were national oil & gas companies from the GCC, namely Petroleum Development Oman (PDO), the Abu Dhabi National Oil Company (ADNOC), the Bahrain Petroleum Company (BAPCO), and Qatar Petroleum (QP). Other key exhibitors included Oman Gas Company, Oman LNG, Oman Refineries and Petrochemicals Co., Occidental Oman, Total S.A.-Muscat Branch, MB Holding Company, Technical Supplies International, the Al Sulaimi Group, Abraj Energy, Seven Seas Petroleum,

May-June, 2010

Oman Oilfield Supply Centre, Abu Ilyas Trading, The Shaksy Group, Towell Engineering, Vanguard Engineering & Oilfield Services, Falcon Oilfield Services, PTTEP Oman Co. Ltd., International Business Development Co., Gulf International Pipe Industry, Pioneer Oilfield Enterprises, the Al Hassan Group and Hi-Tech Supplies & Services. A large number of international oil & gas firms also had a strong showing at the OGWA 2010 exhibition with the presence of companies like Arabian Pipes Company, Emarat, Kuwait Pipe Industries, Kudu Industries, Lloydâ&#x20AC;&#x2122;s Register, Lufkin Industries, Mott MacDonald, Norris Production Solutions, Pall Corporation, Partex Oil

& Gas, Schlumberger, Sichuan Honghua Petroleum Equipment Co. Ltd., Tecnicas Reunidas, and Weatherford. The over 35 countries represented at OGWA 2010 included Australia, Austria, Bahrain, Belgium, Brazil, Canada, China, Denmark, Egypt, France, Germany, India, Indonesia, Italy, Korea, Kuwait, Malaysia, the Netherlands, Norway, Portugal, Qatar, Russia, Saudi Arabia, Singapore, Spain, Switzerland, Thailand, Turkey, the UAE, UK and the US. The OGWA 2010 exhibition was officially supported by Petroleum Development Oman (PDO) and the Oman Chamber of Commerce & Industry (OCCI). The platinum sponsor

of the exhibition was the Oman International Bank, the gold sponsor was ADNOC, while the bronze sponsors were International Business Development (IBD) Co. LLC, and the Oman International Exhibition Centre. InterContinental Muscat was the official hotel, while the official logistics partner was Yusuf Bin Ahmed Kanoo & Co. The conference sponsors, on the other hand, included Occidental Oman as the titanium sponsor, while Weatherford and Oman Oil Company Exploration & Production LLC were the platinum sponsors. The gold sponsors were Shell Technology Oman, Daleel Petroleum and Consolidated Contractors Energy Development, while PDO was the silver sponsor and regional student paper contest sponsor. The delegate bags sponsor was BG Oman, and Saudi Aramco was the coffee break sponsors.

His Excellency Al Jashmi visiting the exhibition

Protective Coatings Aker H-6 the world’s largest drilling rig

Kashagan – Caspian Sea the world’s largest offshore oilfield

Jotun protects the world’s major structures combining innovation, expertise and reliability

Jotun A/S P.O.Box 2021, N-3248 Sandefjord, Norway tel: +47 33 45 70 00 fax: +47 33 45 79 00

Afsin-Elbistan – the world’s major power plant

In the Sultanate Of Oman, contact: Jotun Paints Co. LLC., PO Box 672, CPO, Postal Code 111, Sultanate Of Oman tel: +968 2444 6100 fax: +968 2444 6105 email: jotun@omantel.net.om

For more information see www.jotun.com/me 51550 Oil Review.indd 1

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COMPANY REPORT

A Class Apart

Mott MacDonald and Company LLC (MMC) has moved from strength to strength since its inception over forty years ago. Today, as it stands at the pinnacle of success, Sushmita Sarkhel catches-up with Vinod Shah, Managing Director, to talk about the company’s achievements and its plans for the future When did MMC first begin its operations in Oman? How has it changed over the years? MMC’s first project in Oman was back in 1968 when we started working with PDO. Initially we would operate from Dubai, and then set up our office in Muscat in1978. Today our service offering incorporates all aspects of project and programme management, management consultancy and construction economics. As a multi sector professional services provider, our planning, advisory, technical and management activities also encompass the social and institutional dimensions of development, including health and education. We are skilled in specialist fields including, but not limited to, low carbon technologies, aviation strategy, land use planning, coastal management, nuclear engineering and organisational reform. What are the various industries that MMC serves? In Oman, we predominantly serve the Oil & Gas, Water and Power sectors, with major clients such as PDO, OGC, ORPC, OXY, OPWPC, PAEW, MEDC, OETC, RAECO, various Ministries and EPC 24

May-June, 2010

Contractors in Oman. We are furthering our strengths from across the group into town planning and infrastructure, railways and education sectors and hope to achieve a good amount of success. Specifically, what are the kind of services does MMC provide to the Oil & Gas sector? We have been providing services to oversee every aspect of projects from its initial concept to techno-economic studies, front-end and detailed design, upgrades and optimisation plans, Lenders’/Owners’ engineering, hazard and risk analysis, procurement, project management, and site supervision. Reinforcing our vast technical base is our leading expertise in strategic, environmental and safety issues as well as research and development capability. What are your organisations inherent strengths? Staying closely attuned to our customers’ varying needs and aspirations, we strive through our commitment to continuous improvement and customer care to add maximum value on every assignment. We take pride in every commission, no

matter the size. And our drive for top quality service is apparent in everything we do, whether we’re helping restructure a national industry, plan a transportation network, introduce new business practices or restore a wildlife habitat. We’re the only engineering company in Oman with all the four certifications ISO 9001, ISO 14001, OHSAS 18001 and ISO/TS 29001. Above all, MMC has a great work environment. We are a very forward thinking company. We are a staff owned organisation which, I believe, makes us very strong.

Mott MacDonald’s Vinod Shah

How are you utilising local talent here in Oman? MMC places a great emphasis on recruiting and developing the fresh engineering graduates here in Oman. We ensure that we provide adequate training to local resources and we put in a lot of time and effort into it. Our plan is to move our Omanisation rate to 30 per cent by the end of this year. We have a strong HR department with a unique recruitment procedure to ensure we recruit the best graduates from the various universities.

What will MMC be concentrating on in 2010 and what challenges do you foresee this year? In 2010 we will mainly be focusing on our continued good performance in all our ongoing projects. Our Business Plan is already in place which is up and running. We would concentrate on serving and enhancing our business with our existing clients and also expand on our present clients’ base. As for challenges, I believe that the era of ‘easy oil’ is over and the emphasis is on recovering more

oil out of existing oilfields, as well as developing heavy crude oil. Looking ahead, we see a formidable set of challenges. The execution of EOR projects, the expansion of gas production and the implementation of new ways of working means that technically as well as socially and environmentally, Oman will remain in the forefront of the region’s oil & gas business.

www.mottmac.com May-June, 2010

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Creating World Class Assets

Through participation in energy and energy related projects, Oman Oil Company SAOC (OOC) has been playing an important role in creating world-class assets, even while facilitating industrialisation of the country. H. E. Maqbool Ali Sultan, Minister of Commerce & Industry, and Chairman of Oman Oil Company speaks to Sunil Fernandes on the company’s thrust areas, investments and more. Here are excerpts: Could you elaborate a little on the Oman Oil Company? Oman Oil Company S.A.O.C. (OOC) is a commercial company, wholly owned by the Government of the Sultanate of Oman. The Company was incorporated to pursue investment opportunities in the energy sector both inside and outside Oman. Through participation in energy and energy related projects, the Company plays an important role in the Sultanate’s efforts to diversify the Omani economy and promote Omani and foreign private sector investment. 26

May-June, 2010

In the initial years, OOC concentrated only on the oil and gas sector. However, we gradually diversified into energy related business. OOC’s present portfolio of investments include (i) exploration & production projects, namely: Mukhaizana concession, Oman Offshore concessions 18 and 41, Abraj Energy Services, Kareem Small Fields, Rima Small Fields, Dunga Concession (Kazakhstan), and Caspian Offshore Concession (Kazakhstan). (ii) Petrochemical companies namely: Oman India Fertilizer Company, Oman

H.E. Maqbool Ali Sultan, Minister of Commerce & Industry, and chairman of Oman Oil Company

May-June, 2010

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Polypropylene Company, Aromatics Oman LLC, Takamul Investment Company, Salalah Methanol Company, La Seda Barcelona (Spain), Qingdao Lidong Chemical Co. (China) (iii) refining and marketing companies namely: Oman Refineries and Petrochemical Co., Bharat Oman Refineries Limited (India), MOL (Hungary), Oman Trading International (UAE), and Oman Oil Marketing Company (iv) energy infrastructure companies namely: Oman Gas Company, Oiltanking Odjfell

2009 particularly may have been a good year to acquire strategic assets, as valuations were attractive due to the global recession? In 2009, OOC continued to evaluate opportunities both inside and outside Oman and was successful in concluding certain prudent investments, adding significant value to OOC. These investments include Bharat Oman Refineries Limited (BORL) in India where we have increased our equity

Terminals & Co., Compania Logistica de Hidrocaburos (Spain), Enagas (Spain), Planta de Regasification de Sagunto (Spain), China Gas Holding (China), Qingdao Lixing Terminals (China), (v) shipping companies namely: Oman Shipping Company, Gulf Energy Maritime (UAE), (vi) power companies namely: GS Power (Korea); Orient Power Company (Pakistan) (vii) a metal project namely in Sohar Aluminium. What is the ratio of investments within the Sultanate and outside? Presently, OOC’s investments are balanced between Oman and abroad. Will the ratio be maintained? Investment decisions cannot be restricted. For example, if we have an attractive proposition, either in Oman or abroad we are going to pursue such opportunity. 28

May-June, 2010

interest to 26 percent; acquisition of 5 per cent equity stake in Spain’s leading natural gas transportation, re-gasification, and storage company namely, ENAGAS; signing of a Farm Out and Joint Operating Agreement with Reliance Exploration and Production under which Oman Oil Company Exploration and Production acquired stake of 30 per cent and 25 per cent in blocks 18 and 41 offshore Oman respectively. We have also finalised the major terms on a Greenfield project in Uzbekistan, apart from initiating and/or advancing significant investment opportunities within the Sultanate. What’s your focus for 2010 in terms of markets and sectors? In 2010, we are focusing on new opportunities related to our business such as mining, upstream, logistics/storage, pipeline, power and petrochemicals.

Picture courtesy: Enagas

In 2010, we are focusing on new opportunities related to our business such as mining, upstream, logistics/storage, pipeline, power and petrochemicals

Also, we are assessing the possibilities to optimise, improve assets efficiency, and expand our existing assets such as, Oman India Fertilizer Co, Sohar Aluminium Co, Oman Refineries and Petrochemicals Company. As to the markets, Oman enjoys excellent relationship with all countries around the globe. Hence, if we find any opportunities across the world, meeting

Oman Oil Company signed an agreement with Gas Natural last year to acquire its entire 5 per cent interest in Enagas, Spainâ&#x20AC;&#x2122;s leading natural gas transportation, regasification, and storage company

with our investment criteria, we are ready to pursue it. Actually, there are no constraints on markets and sectors. Has there been a change in the management of companies where Oman Oil Company acquires a stake? OOC plays the management role through Board representation in the investee

companies both inside and outside Oman. While exercising this role, we try to optimise the interest of the investee company which entails increasing benefit to the shareholders. What is OOCâ&#x20AC;&#x2122;s outlook in relation to taking some of the subsidiary companies into IPO?

We have Oman Oil Marketing Company SAOG listed on the Muscat Securities Market. In the next five years, we might look at some of our companies launching initial public offerings and subsequently getting listed. Facilitating industrialisation of the Sultanate and growing assets through strategic investments remains our objective. May-June, 2010

cover story

An IPO would mean that you could dilute your stake? It is not a matter of diluting the stake; instead it is about providing the public with an opportunity to participate in our business activities. In today’s business environment, it is not a matter of control but making a successful business case is more important.

government’s interest is assigned to OOC, which is one of the investment arms of the government. We are thankful for the confidence reposed in OOC by the Government. OOCEP has been created with the objective of managing the existing upstream assets and to pursue new investment opportunities in the E&P sector both inside and outside Oman.

Are there any examples where you have sold your stake completely or partially? Being an investment company, from time to time, we buy and sell assets. However, I must point out that our objective is long term investments.

The Ministry of Oil and Gas has been talking of granting as many as 11 concessions this year. Would Oman Oil Company take any stake in the company’s planning such blocks? We will study each opportunity and take decisions accordingly.

What would be the kind of budgets you receive for acquiring assets? Oman Oil Company is funded though its internal resources by means of return earning and by the direct funding from the Government and so far we haven’t encountered any difficulties for investing in viable projects. Last year you formed the Oman Oil Company E&P. What was the objective? As an international practice, when governments grant oil and gas concessions, the government’s interest in the project is assigned to a government vehicle. In Oman as well, when MOG grants any concessions the 30

May-June, 2010

You talked of downstream; would that mean that you would be interested in projects like the Duqm Refinery? As a matter of fact Oman Oil Company along with International Petroleum Investment Company of Abu Dhabi

Picture courtesy: Abraj Energy Services

What is the current value of the holdings of Oman Oil Company? It will always be difficult to quantify the exact value of holdings on daily basis. For example, the equity shares of listed companies would change with the fluctuation in share prices. All indications lead to the fact that the market value of our assets is satisfactory to our shareholders.

Oman Oil Company has a 100 per cent stake in Abraj Energy Services

(IPIC) is doing a detailed feasibility study on the plans for the proposed refinery and petrochemical complex at Duqm. The way forward will depend on the findings of that study which include a market study as well. What is going to be the role of Oman Oil Company in the development of Duqm? Oman Oil Company is mostly in the energy sector through stakes in companies that are engaged in downstream projects, upstream projects, power projects or simply storage tank companies. I personally believe that Duqm would have many opportunities for Oman Oil Company as well as to others and OOC is seriously looking at opportunities there. Duqm will be a key port not only for Oman but also for the region. With a gradual transformation into an integrated city with all necessary infrastructure like an airport, I am bullish on Duqm. Recently, there were a few MOU signed with different countries. Could you kindly elaborate? We have had MOUs with several neighbouring and friendly countries in other parts of the world and we continue to pursue already identified and/or new business opportunities in those countries. A lot of cooperation has taken place between India and Oman. Could you elaborate? We have excellent relationship with the Republic of India and that has resulted in identification and successful implementation of major joint venture projects like Oman India Fertilizer in Oman, Bharat Oman Refineries in India etc. We are also pursuing several investment opportunities with our counterparts in India.

PARTNERS IN SUCCESS

www.tamkeen-oman.org

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GOING GREEN

A novel way!

Pieter Hoff, CEO, Groasis

May-June, 2010

Green initiatives have been at the forefront of corporate social responsibilities for the oil and gas sector for some time now. An intelligent water incubator developed by Dutch company Groasis might just propel these initiatives. Sunil Fernandes talks to Pieter Hoff, CEO of Groasis, on the attributes of the novel product and its planting results

lanting in the desert or in hot weather conditions always poses a challenge. Rapid evaporation is a concern, while continuous irrigation is a necessity. Groasis, a Dutch company now seems to have the answers to these challenges. The company has developed the Groasis Waterboxx, which is the size of a motorcycle tyre with an opening in the center, that surrounds a sapling or seed that is planted in the soil. It makes it possible to plant trees or bushes on rocks, on mountains, in gardens, in ashes of recently burned woods, eroded areas or deserts or any other place, without the help of irrigation with a 100 per cent planting result. In moderate climates the Groasis waterboxx causes 15 to 30 per cent faster growth and thus more biomass. The Groasis Waterboxx is an ‘intelligent water incubator’ that produces and captures water from the air through condensation and rain. The condensation is caused by artificial stimulation and the water is captured because of the design of the device, without using energy. This water is than distributed uniformly throughout the year. The Groasis Waterboxx uses conclusive mechanisms and natural ways to propel plant growth. Here are a few ways on how the novel product helps. Using rain water Almost every place on Earth has rain. Even in the middle of the Sahara it is 50 mm per year. That is 50 liters per m²! “In the desert and in arid lands, the reality is that rain might fall for two days and may evaporate within a week. So the problem

is not a lack of water but the capture and distribution of the water over a longer period. The Groasis Waterboxx captures this rainwater and distributes it via an ingenious standalone system over an entire year,” says Pieter Hoff, CEO of Groasis. Capillary Soil has capillary water and as soon as the sun shines on the soil, the capillary dries up. The Groasis Waterboxx prevents this. Condensation Condensation happens everywhere in the world where there is a minimum of relative humidity and surfaces are able to get colder than the air temperature. “The Groasis waterbox ensures that during night the temperature of the surface is able to drop lower than the surrounding air due to radiation. Due to the temperature difference between the surface of the Groasis waterbox and the air, the air is locally cooled down below its dew point. Now the air condensates at the surface of the Groasis waterbox and it gets wet. Because of its design which stimulates the production and collection of the condensation, the Groasis Waterboxx produces condensation daily. So the Groasis Waterboxx does not only collect dew, but also enhances the generation of it,” adds Hoff. To conclude,

the Groasis Waterboxx produces on an artificial basis condensation that develops against its cold surface. Dew is the condensation of air humidity that develops when warm air is crimping. Distribution The produced and collected water is distributed in small daily dosages throughout the year or even for a longer period to the plant that grow’s in the open center of the box. Avoiding evaporation The biggest loss of water is evaporation, which is why irrigation via tubes or sprinklers is so ineffective. The Groasis Waterboxx covers the place where the tree is planted and therefore the capillary cannot evaporate and neither can the distributed water. This means that the Groasis Waterboxx stimulates a 100 per cent effective use of the added water. Compare this to irrigation: only between 10 to 20 per cent of the added water is really used, the rest evaporates. The evaporation also causes that each year the soil gets saltier so that after 20 to 40 years even growing with the help of irrigation becomes impossible. Use of Capillary The Groasis Waterboxx follows nature. In

The Groasis Waterboxx covers the place where the tree is planted and therefore the capillary cannot evaporate and neither can the distributed water

May-June, 2010

GOING GREEN

nature seed is spread by grazing animals and birds and the seeds are sown on top of the soil. The manure pastes the seed to the soil and in this way the capillary makes the seed humid, stimulating it to put a small root directly into the soil, thus giving it direct access to the available capillary humidity and allowing it to grow. The Groasis Waterboxx copies this process: it does not disturb the soil and therefore maintains the existing capillary structure of the soil. Without capillary the soil would dry out and erode. Temperature balancing The buffer of water in the Groasis Waterboxx functions as an equalizer of the soil temperature. Avoiding extreme temperatures stimulates growth.

May-June, 2010

Well received Despite the advantages the moot question is: Has the Groasis Waterboxx a proven track record? â&#x20AC;&#x153;The product has been well received. Experiments are already on in eight countries. This year, 20,000 boxes have been sold in many countries like USA, Kenya, Morocco, Pakistan, Egypt, France, Spain, Ecuador etc. Almost every week we have a subscription for a new project. Where participants load their information onto the website and people can thus follow each project. The Groasis Waterboxx has been tested for 4 years in the Sahara desert by the Mohammed I University of Oujda in

The Groasis Waterboxx is an instrument that supports plants and trees in order to survive in difficult circumstances without using any groundwater or electricity. The instrument collects water from rain and also produces water from condensation. It subsequently distributes this water over a longer period. Furthermore it stimulates the capillary processing and the prevention of evaporation of groundwater, steadies the temperature around the roots, fights competitive weeds near the planted tree, as well as prevents the damage by rodents. In this way the Groasis Waterboxx stimulates an optimal growth of the planted tree.

Morocco, with convincing results. Trees that were planted during the Summer with the Groasis Waterboxx survived well. The trees planted were measured and showed an average growth of more than 90 per cent in length within the first year, â&#x20AC;? adds Hoff. www.groasis.com

INTERVIEW

Disseminating knowledge to industry professionals

The Society of Petroleum Engineers is a non-profit organisation that collects, disseminates, and exchanges technical knowledge concerning the exploration, development and production of oil and gas resources. 2011 SPE President Alain Labastie spends time talking to Sunil Fernandes on the organisationâ&#x20AC;&#x2122;s role, objective and achievements

hat is the present membership of the Society of Petroleum Engineers? Presently, we have more than 92,000 members. It is also pertinent to note, that out of these 55 per cent are outside North America, which means that SPE has a diversified membership from around the globe. I must reveal that anywhere in the world where hydrocarbons are produced we have members. In fact, we recently opened a chapter in Surinam. Even though a country like Surinam has small hydrocarbon production, we have a centre there, which goes to show our ability to expand. It is not we, but our members that have enabled this. What about membership from around the Middle East? 36

May-June, 2010

The membership has been growing enormously from the Middle East region. In fact, I must state that the membership has been the fastest growing in the Middle East region, with the growth around 25 per cent. What about Oman? Oman is the second largest section in the Middle East and here too our membership has been growing rapidly. Oman is a very active section for us.

In Oman, there are monthly conferences arranged by the SPE Oman chapter. Are similar monthly conferences held around the Globe? I am not sure if every country chapter of the SPE holds monthly conferences, especially the countries with smaller members. But definitely, the countries with a large membership have monthly conferences. In addition, we also arrange internationally

Membership to the Society of Petroleum Engineers has been growing rapidly in the Middle East, with membership growth rate of as much as 25 per cent

2011 SPE President Alain Labastie

May-June, 2010

INTERVIEW

renowned speakers to visit a country as guest lecturers. This is free of charge for the section as it is funded by SPE. How does SPE fund its activities? To begin with, SPE is a non-profit organisation. We raise money through conferences and exhibition. We utilise this money for programmes for our members and students. Again, I must mention that we are using the money we raise for our members and to further our activities. Is OGWA 2010 the first conference for SPE on EOR? We have done EOR conferences before. Of course, we have diversified themes from time to time and within the Gulf region SPE is very active in holding a number of conferences. SPE has a lot of research papers and studies. Could you throw a little light on the number and the nature? We have an electronic library, which I believe is a reference to the industry. One can download more than 80,000 papers. Our library is also open to other societies and organisations, where there are some legacy papers and some exciting research papers. The petro library is accessible to the public by paying a very modest fee. www.spe.org

About SPE The history of the Society of Petroleum Engineers (SPE) began well before its actual establishment. During the decade after the 1901 discovery of the Spindletop field, the American Institute of Mining Engineers (AIME) saw a growing need for a forum in the booming new field of petroleum engineering. As a result, AIME formed a standing committee on oil and gas in 1913. In 1922, the committee was expanded to become one of AIMEâ&#x20AC;&#x2122;s 10 professional divisions. The Petroleum Division of AIME

May-June, 2010

continued to grow throughout the next three decades. By 1950, the Petroleum Division had become one of three separate branches of AIME, and in 1957 the Petroleum Branch of AIME was expanded once again to form a professional society. The first SPE Board of Directors meeting was held 6 October 1957, making 2007 the 50th anniversary year for SPE as a professional society. For more than 50 years, SPE has been the technical and professional home for those engaged in all aspects of the upstream oil and gas industry. Whether itâ&#x20AC;&#x2122;s learning

about a new directional drilling technique in a workshop in Prague, mentoring a recent graduate in Argentina, or offering an idea in an online technical community, the common bond of SPE members is the sharing of knowledge that keeps the E&P industry sustainable. Worldwide, more than 92,000 engineers, scientists, managers, and academicians in 100+ countries have joined the memberrun Society. All have access to the breadth of member benefits – many online and all unique to SPE.

Not just for engineers Although engineers are the core of SPE’s membership, not all SPE members are engineers. Solving the industry’s challenges requires a multidisciplinary effort, and SPE is a place for all of today’s industry professionals, regardless of experience or course of study. Facilities, management, information technology, environmental, and safety issues are all part of the resources needed to expand and deliver the supply of oil and natural gas the world needs. All those who work in these areas will find a home in SPE.

May-June, 2010

INTERVIEW

Bullish on oil prices 40

May-June, 2010

Bank Sarasin is a leading Swiss private bank, acting as an investment advisor and asset manager for private and institutional clients. Dr Burkhard P. Varnholt, Chief Investment Officer talks to Sunil Fernandes on oil prices, commodities and more

o you believe that oil prices would rise from the current levels of around $85 per barrel? I have a high conviction that food, power and water, will be hitting a real bottleneck. Resource availability in these categories becomes limiting in the sense that there would be simply no more. One number that in my opinion is consistently underestimated and not factored into oil prices is depletion. At some point, supply would not be going up, no matter how deep you dig in offshore Brazil or America. At that point prices will sky-rocket not only for oil and gas, but also for food. However, we recently had the energy Minister of one of the GCC countries saying that supplies are more than adequate? We have always heard that argument, but oil prices continue to go up. You have heard that countries here have invested billions of dollars in the past. In one particular case, a large producing country has invested mammoth sums, but despite that we have not seen a substantial increase in output from that particular country. I believe that depletion may be one of the reasons. On the supply side, one would see a lot of Oil coming from Iraq, which could see downward pressure on prices? This supply should happen in three years time at the very earliest and my forecast is what happens between now and the next three years. Do not forget

that oil consumption will also increase tremendously, by the time the Iraq oil output hits the market. Of course, Iraq has good reserves and the oil is also easy to extract. I believe Iraq is the best untapped potential as far as oil is concerned. Where do you see oil prices by the end of the year? I believe oil prices would be $100 by the end of the year. At $ 100 the alternative energy picture also becomes attractive. Will that affect oil prices? Most certainly. The best argument for oil prices going down once again could also be that argument. Do you believe that the present levels of oil are based more on fundamentals and less on speculation? Speculation is much lower than they were during the pre-crisis era. Equity markets have rallied sharply over the last few months. Are valuations now looking stretched? My view is that the equity market recovery is lasting longer than many would have thought. We have begun to take away money from emerging markets like Brazil, China and India, as they have turned expensive. Our decision has been prompted by very high valuation in these markets and some monetary tightening that is already happening in countries like China. Within emerging markets are favourite destination remains the Gulf region.

What are the reasons for being bullish on the Gulf markets? There are two reasons for the same: firstly, they lagged global emerging markets in 2009. Secondly, our forecast for hydrocarbon prices remains very upbeat and hydrocarbons are the bulwark of these economies. We also believe that financial parameters like price to book values and price to earnings growth make these markets an attractive buy. In fact, we had less exposure to the Gulf region, but are now betting big on the region. Would liquidity in these markets remain an issue? The GCC markets are best suited for patient investors. A patient investor would not depend much on liquidity like a speculator would. If you have the patience and the time horizon, things would move in your favour. What I can see in the region is a deeper and broader economic integration. As that happens, stock markets would be increasingly deregulated and hence we will see more investment from global investors. With global commodity prices rising, there are fears of inflation and with it a threat of rising interest rates. What are you views on the same? My view is very clear that interest rates are going to be lower for longer. And, of course, zero is the bottom. Dollar interest rates will be lower for longer and that would be true for at least another three years. I have no desire to hold US treasury bonds, when they yield next to nothing. May-June, 2010

Oil

GLOBAL OIL RESERVES

Proved reserves At end 1988 Thousand million barrels

US Canada Mexico Total North America Argentina Brazil Colombia Ecuador Peru Trinidad & Tobago Venezuela Other S. & Cent. America Total S. & Cent. America Azerbaijan Denmark Italy Kazakhstan Norway Romania Russian Federation Turkmenistan United Kingdom Uzbekistan Other Europe & Eurasia Total Europe & Eurasia Iran Iraq Kuwait Oman Qatar Saudi Arabia Syria United Arab Emirates Yemen Other Middle East Total Middle East Algeria Angola Chad Republic of Congo (Brazzaville) Egypt Equatorial Guinea Gabon Libya Nigeria Sudan Tunisia Other Africa Total Africa Australia Brunei China India Indonesia Malaysia Thailand Vietnam Other Asia Pacific Total Asia Pacific Total World of which: European Union OECD OPEC Non-OPEC‡ Former Soviet Union Canadian oil sands • Proved reserves and oil sands * More than 100 years.

35.1 11.9 53.0 100.0 2.3 2.8 2.1 1.5 0.9 0.6 58.5 0.6 69.2 n/a 0.5 0.8 n/a 7.3 1.2 n/a n/a 4.3 n/a 63.2 77.3 92.9 100.0 94.5 4.1 4.5 255.0 1.8 98.1 2.0 0.1 653.0 9.2 2.0 – 0.8 4.3 – 0.9 22.8 16.0 0.3 1.8 1.0 59.0 3.4 1.2 17.3 4.5 9.0 3.4 0.1 0.1 1.0 39.9 998.4 8.3 118.3 764.0 173.5 60.9 n/a n/a

At end 1998 Thousand million barrels

28.6 15.1 21.6 65.3 2.8 7.4 2.5 4.1 0.9 0.7 76.1 1.1 95.6 n/a 0.9 0.8 n/a 11.7 1.2 n/a n/a 5.1 n/a 2.1 104.9 93.7 112.5 96.5 5.4 12.5 261.5 2.3 97.8 1.9 0.2 684.3 11.3 4.0 – 1.7 3.8 0.6 2.6 29.5 22.5 0.3 0.3 0.7 77.2 4.1 1.0 17.4 5.4 5.1 4.7 0.4 1.9 1.3 41.3 1068.5 8.9 89.2 827.2 157.6 83.8 n/a n/a

At end 2007 Thousand million barrels

30.5 28.6 12.2 71.3 2.6 12.6 1.5 4.0 1.1 0.9 99.4 1.4 123.5 7.0 1.1 0.9 39.8 8.2 0.5 80.4 0.6 3.4 0.6 2.1 144.6 138.2 115.0 101.5 5.6 27.4 264.2 2.5 97.8 2.7 0.1 755.0 12.2 13.5 0.9 1.9 4.1 1.7 3.2 43.7 36.2 6.7 0.6 0.6 125.3 4.2 1.1 16.1 5.5 4.0 5.5 0.5 3.4 1.1 41.3 1261.0 6.7 90.3 957.1 174.7 129.2 150.7 1411.7

Thousand million tonnes

3.7 4.4 1.6 9.7 0.4 1.7 0.2 0.5 0.2 0.1 14.3 0.2 17.6 1.0 0.1 0.1 5.3 0.9 0.1 10.8 0.1 0.5 0.1 0.3 19.2 18.9 15.5 14.0 0.8 2.9 36.3 0.3 13.0 0.3 † 102.0 1.5 1.8 0.1 0.3 0.6 0.2 0.4 5.7 4.9 0.9 0.1 0.1 16.6 0.5 0.1 2.1 0.8 0.5 0.7 0.1 0.6 0.1 5.6 170.8 0.8 12.0 129.8 23.6 17.4 24.5 195.3

At end 2008 Thousand million Share barrels of total

30.5 28.6 11.9 70.9 2.6 12.6 1.4 3.8 1.1 0.8 99.4 1.4 123.2 7.0 0.8 0.8 39.8 7.5 0.5 79.0 0.6 3.4 0.6 2.1 142.2 137.6 115.0 101.5 5.6 27.3 264.1 2.5 97.8 2.7 0.1 754.1 12.2 13.5 0.9 1.9 4.3 1.7 3.2 43.7 36.2 6.7 0.6 0.6 125.6 4.2 1.1 15.5 5.8 3.7 5.5 0.5 4.7 1.1 42.0 1258.0 6.3 88.9 955.8 174.4 127.8 150.7 1408.7

R/P ratio

2.4% 2.3% 0.9% 5.6% 0.2% 1.0% 0.1% 0.3% 0.1% 0.1% 7.9% 0.1% 9.8% 0.6% 0.1% 0.1% 3.2% 0.6% X

6.3% X

0.3% X

0.2% 11.3% 10.9% 9.1% 8.1% 0.4% 2.2% 21.0% 0.2% 7.8% 0.2% X

59.9% 1.0% 1.1% 0.1% 0.2% 0.3% 0.1% 0.3% 3.5% 2.9% 0.5% X X

10.0% 0.3% 0.1% 1.2% 0.5% 0.3% 0.4% X

0.4% 0.1% 3.3% 100.0% 0.5% 7.1% 76.0% 13.9% 10.2%

12.4 24.1 10.3 14.8 10.5 18.2 6.0 20.3 25.5 15.2 * 27.7 50.3 20.9 7.7 21.1 70.0 8.3 13.3 21.8 8.0 6.0 14.6 13.4 22.1 86.9 * 99.6 20.9 54.1 66.5 17.2 89.7 23.9 10.6 78.6 16.7 19.7 19.4 21.3 16.4 12.9 37.0 64.6 45.6 38.1 18.5 12.0 33.4 20.4 16.9 11.1 20.7 10.2 19.8 3.9 40.8 12.8 14.5 42.0 7.7 13.2 71.1 14.8 27.2

†Less than 0.05. XLess than 0.05%. ‡Excludes Former Soviet Union. • ‘Remaining established reserves’, less reserves ’under active development’. Notes: Proved reserves of oil – Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can b e recovered in the future from known reservoirs under existing economic and operating conditions. Reserves-to-production (R/P) ratio – If the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate. Source of data – The estimates in this table have been compiled using a combination of primary official sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas Journal and an independent estimate of Russian reserves based on information in the public domain. Canadian proved reserves include an official estimate of 22.0 billion barrels for oil sands ‘under active development’. Reserves include gas condensate and natural gas liquids (NGLs) as well as crude oil. Annual changes and shares of total are calculated using thousand million barrels figures.

GLOBAL OIL PRODUCTION Production * Thousand barrels daily

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

US Canada Mexico Total North America Argentina Brazil Colombia Ecuador Peru Trinidad & Tobago Venezuela Other S. & Cent. America Total S. & Cent. America Azerbaijan Denmark Italy Kazakhstan Norway Romania Russian Federation Turkmenistan United Kingdom Uzbekistan Other Europe & Eurasia Total Europe & Eurasia Iran Iraq Kuwait Oman Qatar Saudi Arabia Syria United Arab Emirates Yemen Other Middle East Total Middle East Algeria Angola Cameroon Chad Republic of Congo (Brazzaville) Egypt Equatorial Guinea Gabon Libya Nigeria Sudan Tunisia Other Africa Total Africa Australia Brunei China India Indonesia Malaysia Thailand Vietnam Other Asia Pacifi c Total Asia Pacifi c Total World of which: European Union OECD OPEC Non-OPEC‡ Former Soviet Union

8011 2672 3499 14182 890 1003 775 385 116 134 3480 125 6908 231 238 117 537 3138 137 6169 129 2807 191 506 14199 3855 2121 2232 905 701 9502 576 2643 380 49 22964 1461 731 105 – 264 857 83 337 1480 2167 12 85 63 7644 644 157 3212 737 1520 779 130 245 217 7641 73538 3553 21500 32277 33870 7391

7731 2604 3343 13678 847 1133 838 383 107 141 3126 124 6699 279 299 104 631 3139 133 6178 143 2909 191 474 14480 3603 2610 2085 911 723 8853 579 2511 405 48 22328 1515 745 95 – 266 827 100 340 1425 2066 63 84 56 7583 625 182 3213 736 1408 737 140 296 218 7556 72325 3684 21103 31054 33719 7552

7733 2721 3450 13904 819 1268 711 409 100 138 3239 130 6813 282 363 95 744 3346 131 6536 144 2667 177 465 14950 3818 2614 2206 959 757 9491 548 2626 450 48 23516 1578 746 88 – 254 781 91 327 1475 2155 174 78 56 7804 809 193 3252 726 1456 735 176 328 200 7874 74861 3493 21521 32569 34278 8014

7669 2677 3560 13906 830 1337 627 416 98 135 3142 137 6722 301 348 86 836 3418 130 7056 162 2476 171 465 15450 3794 2523 2148 961 754 9209 581 2534 455 47 23006 1562 742 81 – 234 758 177 301 1427 2274 217 71 53 7897 733 203 3306 727 1389 719 191 350 195 7813 74794 3285 21303 31914 34220 8660

7626 2858 3585 14069 818 1499 601 401 98 155 2895 152 6619 311 371 115 1018 3333 127 7698 182 2463 171 501 16289 3543 2116 1995 900 764 8928 548 2324 457 48 21623 1680 905 72 – 231 751 204 295 1375 2103 241 74 63 7994 730 210 3346 753 1289 757 204 354 193 7836 74431 3339 21430 30318 34580 9533

7400 3004 3789 14193 806 1555 564 427 92 164 2554 153 6314 313 368 116 1111 3264 123 8544 202 2257 166 509 16973 4183 1344 2329 824 879 10164 527 2611 448 48 23357 1852 862 67 24 215 749 242 240 1485 2263 265 68 71 8402 624 214 3401 756 1183 776 236 364 195 7750 76990 3128 21165 32136 34355 10499

7228 3085 3824 14137 754 1542 551 535 94 152 2907 144 6680 315 390 113 1297 3189 119 9287 193 2028 152 496 17579 4248 2030 2475 785 992 10638 495 2656 420 48 24788 1946 976 89 168 216 721 345 235 1624 2502 301 71 75 9268 582 210 3481 773 1129 793 223 427 186 7804 80256 2902 20766 34658 34191 11407

6895 3041 3760 13696 725 1716 554 541 111 171 2937 143 6899 452 377 127 1356 2969 114 9552 192 1809 126 468 17541 4233 1833 2618 782 1028 11114 450 2753 416 34 25262 2015 1246 82 173 246 696 373 234 1751 2580 305 73 72 9846 580 206 3627 738 1087 744 265 398 201 7845 81089 2659 19861 35736 33513 11839

6841 3208 3683 13732 716 1809 559 545 116 174 2808 141 6866 654 342 120 1426 2779 105 9769 186 1636 125 457 17598 4282 1999 2690 747 1110 10853 435 2971 380 32 25499 2003 1421 87 153 262 697 358 235 1834 2474 331 70 66 9992 554 221 3684 762 1017 717 286 367 203 7810 81497 2422 19458 36007 33171 12318

6847 3320 3471 13638 699 1833 561 520 114 154 2613 143 6636 869 311 122 1484 2556 99 9978 198 1638 114 451 17819 4322 2144 2636 701 1197 10449 415 2925 345 35 25168 2016 1720 82 144 222 710 368 230 1848 2356 468 97 59 10320 567 194 3743 770 969 743 309 337 229 7862 81443 2388 19148 35714 32930 12799

Change 2008 over 2008 2007

6736 3238 3157 13131 682 1899 618 514 120 149 2566 138 6685 914 287 108 1554 2455 99 9886 205 1544 111 427 17591 4325 2423 2784 728 1378 10846 398 2980 305 33 26200 1993 1875 84 127 249 722 361 235 1846 2170 480 89 54 10285 556 175 3795 766 1004 754 325 317 237 7928 81820 2239 18400 36705 32295 12821

2008 share of total

-1.8% 7.8% -2.0% 4.0% -9.1% 4.0% -3.8% 15.8% -2.6% 0.9% 3.6% 2.4% 10.3% 0.8% -1.2% 0.7% 4.0% 0.1% -5.0% 0.2% -1.9% 3.4% -2.7% 0.2% 0.6% 8.5% 4.2% 1.1% -7.7% 0.4% -10.9% 0.1% 5.1% 1.8% -4.1% 2.9% -0.4% 0.1% -0.8% 12.4% 3.8% 0.3% -6.3% 1.8% -2.7% 0.1% -5.3% 0.5% 21.7% -1.3% -0.2% 5.3% 13.0% 3.0% 5.3% 3.5% 3.7% 0.9% 13.2% 1.5% 4.0% 13.1% -4.1% 0.5% 2.0% 3.6% -11.6% 0.4% X -5.7% 4.0% 31.9% -1.3% 2.2% 9.1% 2.3% 2.3% 0.1% -11.5% 0.2% 12.3% 0.3% 1.3% 0.9% -2.1% 0.5% 2.2% 0.3% -0.1% 2.2% -8.0% 2.7% 2.6% 0.6% -8.9% 0.1% -8.5% 0.1% 12.4% -0.4% -1.5% 0.6% -10.1% 0.2% 1.4% 4.8% -0.5% 0.9% 3.2% 1.2% 1.8% 0.9% 5.5% 0.3% -6.0% 0.4% 3.1% 0.3% 0.9% 9.7% 0.4% 100.0% -6.6% 2.7% -4.0% 22.0% 2.7% 44.8% -2.0% 39.3% 0.2% 16.0%

* Includes c rude oil, shale oil, oil sands and NGLs (the liquid content of natural gas where this is recovered separately). Excludes liquid fuels from other sources such as biomass and coal derivatives. ‡Excludes Former Soviet Union. XLess than 0.05%. Notes: Annual changes and shares of total are calculated using million tonnes per annum figures. Growth rates are adjusted for leap years.

Courtesy: BP Statistical Review: 2009

May-June, 2010

COUNTRY REPORT

May-June, 2010

Offshore Drilling: Is US Really Serious? Close on the heels of a tumultuous passage of a health care bill, US President Barack Obama is now going through another phase of trials and tribulations after lifting a long-standing ban on most offshore drilling in the United States. Saji P. Moolan reports

n a strategic announcement on March 31, Obama said, “Today we’re announcing the expansion of offshore oil and gas exploration, but in ways that balance the need to harness domestic energy resources and the need to protect America’s natural resources.” The hangar at Andrews Air Force Base, the venue of his speech, seemed a conscious choice of his to convey that he meant business. The new proposal calls for developing oil and gas resources in new areas such as the Eastern Gulf of Mexico, more than 125 miles from Florida’s coast. It aims at increasing oil and gas exploration in frontier areas like the Arctic Ocean and the Mid and South Atlantic Ocean.

However, no drilling will be allowed in Alaska’s Bristol Bay to protect this environmentally sensitive area. “In our quest to secure our energy future, we must not lose the places and values that set our nation apart,” said Secretary of the Interior, Ken Salazar, who joined the President at the Base in Maryland. If the industry is interested, and oil and gas exploration can be done in an environmentally responsible manner, the administration will hold two lease sales – one 50 miles off the coast of Virginia and one in the Cook Inlet in Alaska by 2012. In addition to this, after extensive studies, large tracts in the Chukchi Sea and Beaufort Sea in the Arctic Ocean north of Alaska that spans nearly 130 million acres would be declared eligible for oil and May-June, 2010

COUNTRY REPORT

According to the US Energy Department, the country’s annual oil imports from OPEC nations is about 2 billion barrels and the natural gas imports from all sources is expected to be 2.7 trillion cubic feet this year

gas exploration. There will be expanded development and production throughout the Gulf of Mexico, including resourcerich areas of the Eastern Gulf of Mexico that are currently under Congressional moratorium and closed to development. The revocation of ban, which was warmly welcomed by the oil industry, faced criticism within the President’s Democratic Party. Environmental groups spurned the idea lest the impact of increased drilling and spills would harm the environment. Michael Brune, Executive Director of Sierra Club, the oldest environmental group in the US, said in a statement: “Drilling our coasts will do nothing to lower gas prices or create energy independence. It will only jeopardise beaches, marine life, and coastal tourist economies, all so the oil industry can make a short-term profit.” To clear any misgivings, Obama

assured that the revocation did not mean drilling everywhere all the time. His administration will take utmost care to protect nature. “We will employ new technologies that reduce the impact of oil exploration. We will protect areas that are vital to tourism, the environment, and our national security. And we’ll be guided not by political ideology, but by scientific evidence.” Despite concerted efforts to show how serious the White House is about the plan, many view the proposal as a carefully-crafted balancing act to win bipartisan support. Political pundits and media reports that followed the announcement billed the offshore drilling plan a ploy to woo legislators needed to pass a climate bill before mid-term elections in November. As of now, no concrete data is available as to how much recoverable oil and gas lie on

the US Outer Continental Shelf (OCS). However, according to Department of the Interior’s Minerals Management Service (MMS), 39-63 billion barrels of economically recoverable oil and 168294 trillion cubic feet of natural gas are economically recoverable from the eight planning areas under consideration for leasing under the 2012-2017 programme. That represents as much as 80 per cent of the undiscovered economically recoverable oil and gas on the OCS. The MMS estimates that the Gulf of Mexico alone contains 36-41.5 billion barrels of undiscovered, economically recoverable oil and 161-207 trillion cubic feet of undiscovered, economically recoverable natural gas resources. In comparison, according to the US Energy Department, the country’s annual oil imports from OPEC nations is about 2 billion barrels and the natural gas imports from all sources is expected to be 2.7 trillion cubic feet this year. Offshore drilling has always been on Republican agenda. They nurtured the idea to expand domestic drilling and oil exploration over two decades. However, they believe the new decision is not up to their expectation. Republican leaders called Obama’s proposal “a step in the right direction”, but prefer to believe that the President did not go far enough. Moratorium on offshore drilling has a longstanding history. In 1981, offshore drilling for oil and gas was banned by US Congress following public outcries caused by pollution from accidents and spills. President George W. Bush issued in 1990 executive orders supporting the ban. In 2008, as the Congressional prohibition expired and as skyrocketing gasoline prices became an issue in the presidential race, Bush Jr. rescinded the orders. But, he could not gain Congressional support to pass the key legislation to enable the action, thanks to the pressures from environmentalists and even from some law makers. At his campaign rallies in

May-June, 2010

2008, Republican presidential candidate Senator John McCain took up the issue with a refrain “Drill, baby, drill” It is not that Obama embraced offshore drilling all of a sudden. Even during the presidential campaigns, Obama supported limited offshore drilling which he made clear in the second presidential debate: “I believe in the need for increased oil production. We’re going to have to explore new ways to get more oil, and that includes offshore drilling.” It seems, Obama waited, weighing the pros and cons of offshore drilling in the country that has less than two per cent of the world’s oil reserves, but consumes more than 20 per cent of the world’s oil, before going public. The new decision ends two major federal bans that have prevented offshore energy exploration and drilling – an Executive Moratorium and a Congressional Moratorium that requires renewal every year. After having accomplished one of the items in their wish-list, an ecstatic oil and natural gas industry will soon be able to access the vast areas of OCS for drilling. That is why Exxon Mobil, the biggest US oil company, called the announcement a “meaningful, potential opening” to more energy production. The biggest players in offshore oil production in the US are BP, Royal Dutch Shell and Chevron Corp. While, the biggest natural gas producers are Shell, Anadarko Petroleum and Apache Corp. If Obama walks his talks, these oil and natural gas majors will have bigger roles to play in US oil production. Meanwhile, a recent report by the market research agency, Datamonitor, says that conditions are favourable for offshore drilling in 2010. The report predicts that offshore drilling activity worldwide should stabilise this year following a steep decline in 2009. A return to growth, however, is unlikely before 2011. Despite this euphoria with

drilling, the Obama administration cannot fully be optimistic. It risks strong opposition from environmental groups, governors of coastal states and some legislators. Critics of offshore drilling point out that the oil gains in comparison to the environmental hazards drilling could create are negligible. They argue, when more countries are investing in clean energy sources, why an economic power should continue to invest in traditional energy sources when it has other options. “We can achieve

real energy independence and economic vitality by investing in clean energy like wind and solar and efficiency,” argues Brune. Offshore drilling is a short-term solution to a long-term energy problem. It is not going to end in the nearest future a perennial energy need. Even the President is aware of that. That is why he said: “In the short term, as we transition to cleaner energy sources, we’ve still got to make some tough decisions about opening new offshore areas for oil and gas development in ways that protect communities and protect coastlines.” May-June, 2010

REGIONAL ROUND-UP

Dana Gas announces two gas discoveries in Egypt

The second discovery, ‘South Faraskour-1’, also in the West El Manzala Concession encountered 20 metres of net pay in the Abu Madi formation and 1.4 metres in the

Total starts second train of Yemen LNG plant Total’s second train of the Yemen LNG natural gas liquefaction plant has started production. Together with the LNG production from the first train, this will enable the Yemen LNG plant to reach full capacity. The Yemen LNG project is a $4.5 billion investment and total production capacity reaches 6.7 million tonnes of LNG per year. “The commissioning of the second Yemen LNG train ahead of schedule represents another major step in the history of our partnership in Yemen, where we have been present for over twenty years” said Yves-Louis Darricarrère, President of Total Exploration & Production. “I would like to thank our project teams for their commitment, hard work and constant attention to industrial safety. Thanks to them, the first liquefaction train had reached its plateau production very quickly. This start-up will cement Total’s position as a top-tier global LNG producer,” he added.

May-June, 2010

Picture courtesy: Dana Gas

Dana Gas PJSC, has announced two gas discoveries in the Nile Delta, Egypt. The first discovery was at ‘El Panseiya-1’ in the West El Manzala Concession, which encountered 11 metres of net pay in the Kafr El Sheikh formation and produced 10 million standard cubic feet per day (mmscfpd) of dry gas. The preliminary estimate of the recoverable reserves is from 8-13 billion cubic feet (bcf) of gas.

Kafr El Sheikh formation. The well tested 16.3 mmscfpd of gas with condensate. The preliminary estimate of the recoverable reserves is 27-57 bcf of gas with associated condensate.

Both the El Panseiya-1 and South Faraskour-1 discoveries are expected to be tied in to the company’s nearby El Wastani gas processing plant by the end of 2010. Ahmed Al Arbeed, Dana Gas CEO said, “Our team in Egypt continues to deliver tremendous results. We are delighted that these two exploration wells have been successful. They build upon Dana Gas Egypt’s outstanding 2009 achievement of eight discoveries from twelve exploration wells, which resulted in a 40 per cent increase in proved plus probable (2P) reserves to 132 million barrels of oil equivalent at the end of the 2009.”

Partners award $500m Rumaila oil drilling contracts in Iraq UK oil major BP has awarded a series of new contracts for drilling work at the Rumaila oilfield in Iraq. The contracts are worth a combined $500m and cover the drilling of 49 wells at the field, Reuters reports. Chinese drilling firm Daging Oil Field Company and a joint venture of the US’ Schlumberger and state-owned Iraq Drilling Company will each drill 21 new wells. The US’ Weatherford was awarded the contract to drill the remaining seven wells. A contract to drill six more wells will be tendered at a later date if the initial contractors are successful. BP and its consortium partner, Chinese National Petroleum Corporation (CNPC) signed a 20-year development contract for the 17-billion-barrel field in the Basrah province in June 2009 in Iraq’s first post-war oilfield bid round. The two companies plan to invest $15bn over the duration of the contract.

SASREF launches ultra-low sulfur diesel unit Saudi Aramco Shell Refinery Co. (SASREF) have inaugurated the Ultra-Low Sulfur Diesel Unit at the refinery in Jubail. The new line has started commercial production of about 100,000 barrels per day of low-sulfur diesel fuel with less than 10 parts per million sulfur content.

Qatar to be world’s second largest Helium producer

“The start of the Ultra-Low Sulfur Diesel Unit reinforces our strategy to keep pace with future trends and comply with environmental and marketing requirements, which will help SASREF to maintain its competitiveness as one of the leading refineries in the Middle East and Asia,” said SASREF President Abdulhakim A. Al-Gouhi, adding that the new unit reduces sulfur emissions for a cleaner environment and also meets the high-standard diesel specifications of Europe. Joining Al-Gouhi were Saudi Aramco President and CEO Khalid A. Al-Falih, and Saudi Aramco Senior Vice Presidents Khalid G. Al-Buainain and Abdulrahman F. Al-Wuhaib. Shell International Downstream Executive Director Mark Williams also attended.

His Excellency Abdullah Bin Hamad Al Attiyah, Deputy Prime Minister, Minister of Energy and Industry of Qatar and Chairman of Qatargas, announced major agreements for the Qatar Helium 2 Project, which will make Qatar the world’s second largest helium producer and operator of the world’s largest helium production facility.

The 28-month project required 11.5 million work hours, and at the peak involved 2,800 on-site workers. It included the revamp of two crude units and an existing diesel hydrodesulfurizer unit as well as the construction of a new, high-pressure diesel hydrodesulfurizer. Inline blending and amine treatment facilities also were included in the work, which required 336 tie-ins including 18 hot taps. SASREF is a joint venture export refinery owned 50-50 by Saudi Aramco and Shell.

OHSAS implementation project in KNPC in final phase Kuwait National Petroleum Co. (KNPC) is gearing up its efforts towards OHSAS implementation project and is currently passing through the final phase of its readiness for certification process. All this is made possible within the targeted time because of the coordinated and dedicated efforts of employees at all levels.

H.E. Al Attiyah’s announcement was made at a ceremony held at the Ritz Carlton Doha. Helium is essential to a number of applications such as MRI scanners for the medical profession; in industrial applications for electronics, fiber optics, photo voltaics, leak detection and welding; and in the retail and entertainment industries for balloons. H.E. Al Attiyah highlighted the project’s significance for the country and stated that, “The Qatar Helium 2 project represents another important milestone under the vision of His Highness the Emir, Sheikh Hamad Bin Khalifa Al Thani, to ensure the optimal utilisation of Qatar’s enormous resources by creating development opportunities for the welfare and prosperity of Qatar, and for future generations.”

TAQA announces ratings change by Moody’s The Abu Dhabi National Energy Company PJSC (TAQA), a publicly listed company on the Abu Dhabi Securities Exchange has said that Moody’s Investors Service has downgraded its corporate credit rating of TAQA from Aa2 (review for downgrade) to A3 (stable). The support for TAQA from the Government of Abu Dhabi on which the Moody’s credit rating has always been based remains unchanged. Moody’s have changed their ratings criteria that apply to government related issuers as a whole and have accordingly downgraded the ratings for

all Abu Dhabi government related issuers, including TAQA. The only TAQA obligations that could be specifically affected as result of the ratings change relate to arrangements under which TAQA Bratani Limited is required to provide security for the decommissioning costs associated with its UK platforms in the Northern North Sea. Since their acquisition in December 2008, the estimated future decommissioning costs of these platforms have been provided for in TAQA’s financial

statements. Carl Sheldon, TAQA General Manager said: “The fundamentals of our business and our strong relationship with the Abu Dhabi Government remain unchanged following Moody’s action. Our business model and financial position are strong and robust. At A3, our rating remains a solid investment grade and we expect to continue to enjoy ready access to financial markets in the future. We have the financial flexibility to satisfy our capital requirements and remain well positioned for long term future growth.” May-June, 2010

OPINION

Need to curb price volatility

May-June, 2010

In an industry of long-lead times and high capital costs, excessive speculation and price volatility makes for unsuitable investment conditions, says OPEC Secretary General, HE Abdalla Salem El-Badri. Excerpts from his speech at the 12th IEF Ministerial Meeting in Mexico

il prices have swung dramatically; demand dropped off in both 2008 and 2009; a number of investments have been put on hold, although some of these are now being revisited; and of course, jobs have been lost. More importantly, confidence has been shaken and the future blurred with uncertainties. The important initiative of OPEC member country, the Kingdom of Saudi Arabia, to hold the ad hoc energy meeting in Jeddah helped catalyze the synergies of producing and consuming countries to work together in order to better understand the factors underlying market instability; and then, take the appropriate actions to ensure that volatility and uncertainty do not return to the same extent. This can be viewed in the recommendations agreed at this meeting; for an enhanced IEF framework that further supports the producer-consumer dialogue; proposals to explore ways and means to help mitigate energy market volatility; and for specific areas of cooperation between the IEF, the IEA and OPEC. It is my hope that the large price swings and the extreme volatility that we have witnessed in 2008 and 2009 are consigned to the past. These types of events are detrimental to both producers and consumers. While markets have been more stable in recent times, it is essential we do not forget the price extremes that were witnessed only a short time ago. The price swings in oil markets saw days when the price of crude oil fluctuated by as much as $16/b. This cannot be justified by fundamentals. It was obvious and clear that it was speculative activity, as the regulatory proposals and measures underway in

financial markets today suggest. In an industry of long-lead times and high capital costs, such excessive speculation and price volatility makes for unsuitable investment conditions. It undermines the ability of the industry and its investors to adjust to market changes. Addressing this concern has been to the fore of OPEC’s thinking. This has not only been reflected in its discussions with the IEF and the IEA, but in other fora, such as OPEC’s joint workshops with the EU on financial markets last year that called for an urgent response to the challenges posed by today’s financial markets.

committed to furthering this project. These types of initiatives are essential, as we all know the oil industry will play a major role in the world’s energy future. In OPEC’s reference case projections, energy use increases by 42 per cent from 2007-to2030. And oil will continue to play the leading role to 2030. It is also evident that there are enough resources to meet future demand. Improved technology, successful exploration and enhanced recovery have enabled the world to increase its resource base to levels well above past expectations. And this will continue in the future. Resources are clearly plentiful.

I appreciate we cannot eliminate volatility altogether. It will always be part of the market. But we need to lessen the magnitude of the swings and I feel that there is now a common understanding that a price that is neither too high nor too low is favourable to all. More stability generates more certainty, for the benefit of consumers and producers alike. It is also essential to underscore the importance of transparency. OPEC has played a significant part in the development of JODI, which in a short space of time has evolved into an internationally-respected initiative that enhances the transparency, scope, quality and timeliness of data and information flow. And we remain

Moreover, non-crude oil supply is, in fact, going to play a major role in satisfying future increases in demand. The key issue is not related to availability, but to deliverability and sustainability, as well as the uncertainties surrounding the extent to which increases in demand for crude will actually materialise. At this juncture, let me stress that OPEC remains committed to supporting market order and stability; as it has been in the first 50 years of its existence. This is enshrined in its Statute, its three Heads of State Solemn Declarations and in its Long-Term Strategy. Today, current spare capacity in Member Countries already exceeds 6 mb/d. This represents a huge level of

The price swings in oil markets saw days when the price of crude oil fluctuated by as much as $16/b. This cannot be justified by fundamentals. It was obvious and clear that it was speculative activity

May-June, 2010

OPINION

investment. And clearly demonstrates the seriousness the Organization attaches to the need for adequate production capacity to be in place, not only to meet the demand for its oil, but also to offer sufficient spare capacity. This largely answers the security of supply concerns of consuming countries. But energy security is reciprocal. It is a two-way street. Security of demand is as important to producers as security of supply is to consumers. The two need to go hand-in-hand. From the demand perspective, consuming countries must be clearer about the impact of their policies on future oil consumption levels and overall energy demand. There is a need for consistency with credible and reliable signals: one cannot ask for more crude oil investments, while at the same time advocating the need to reduce its use, increasing subsidies for alternatives, and calling for less oil imports from specific regions. We all want to make sure there is enough oil made available to meet future demand, but it is important to appreciate that unclear or unrealistic policies and decisions can send the wrong signals to producers and investors. And this is true for both the upstream and downstream. These issues, alongside the current fears surrounding the pace of the global economic recovery, translate into an uncertainty gap for upstream investments in OPEC Member Countries. By 2020, the gap reaches $250 billion in real terms. And even to 2013, which represents a timeframe over which investments are effectively locked in, requirements could be as low as $70 billion or as high as $170 billion. There is a very real possibility of wasting financial resources on unneeded capacity. Then there is the environment. Our member countries are continuing to work hard to increase the efficiency and environmental credentials of petroleum. In this respect, carbon capture and storage (CCS) has enormous potential and offers a real win-win solution. OPEC is proud to 52

May-June, 2010

be at the heart of the new way forward, but we cannot, nor should we be expected to act alone. CCS needs to be commercialized quickly â&#x20AC;&#x201C; developed countries should take the lead in this respect and in the greenhouse gas mitigation effort generally, given their historical responsibility and technological and financial capabilities. And no one should forget the very first UN Millennium Development Goal: poverty eradication. Every six seconds a child dies because of hunger and related causes, and over 1 billion people do not have enough to eat â&#x20AC;&#x201C; more than the populations of the US and the EU combined. A catalyst

in helping alleviate poverty is access to modern energy services. In the developing world, 1.5 billion people have no access to electricity and 2.5 billion do not have adequate energy services. Thus, it is critical that the world community makes sure everyone has access to reliable, affordable, economically viable, socially acceptable and environmentally sound energy services. This issue needs the urgent and critical attention of world leaders, much as the attention given to climate change. www.opec.org

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May-June, 2010

MARKET ROUND-UP

Getting Stronger! 56

May-June, 2010

A steady stream of positive macroeconomic indicators has lifted sentiment about world economic prospects, and with it the price of oil

The OPEC Reference Basket rose $4.22 in March to average $77.21/b, the highest since the onset of the financial crisis in September 2008. Volatility was lower with the basket fluctuating between $75.51/b and $78.70/b. The rise in the OPEC Basket was driven by the bullish sentiment of the market, supported by improving expectations about global economic growth and US dollar weakness against the euro as concerns over Greeceâ&#x20AC;&#x2122;s fiscal problems temporarily eased. Futures hit an 18month high on 6 April with Nymex WTI front-month settling at $86.89/b, in the week when speculators pushed net long positions on the Nymex to a new record high. Prices have eased in recent days and the OPEC Reference Basket stood at $81.52/b on April 13. The world economy continues to improve and is now expected to grow by 3.5 per cent in 2010. The OECD is forecast to grow by 1.9 per cent in 2010 compared to the previous forecast of 1.7 per cent. The US is expected to contribute the most within the OECD with growth of 2.6 per cent. Japan is forecast to grow by 1.5 per cent and the Euro-zone by 0.7 per cent. China and India are forecast to contribute significantly to global growth

expanding at 9.5 per cent and 7.1 per cent respectively. Challenges to this benign outlook include concerns about the level of public debt in many OECD countries, continued high unemployment levels and the risk of a correction in China if government efforts to avoid overheating misfire. World oil demand is estimated to have contracted by 1.4 mb/d in 2009, broadly unchanged from the previous report. In 2010, global consumption is projected to increase by 0.9 mb/d, in line with the previous forecast. Economic activities in the US are playing the wild card for the world oil demand growth. All the expected growth in oil demand this year is projected to come from the nonOECD region led by Asia. Overall, most growth will come from transport and petrochemical sectors worldwide. Non-OPEC oil supply is expected to increase by 0.5 mb/d over 2009 to average 51.5 mb/d in 2010, an upward revision of 0.1 mb/d from last month. The adjustment was supported mainly by healthy production during the first few months of the year. Anticipated growth continues to be driven by Brazil, US, Russia, Colombia, Kazakhstan, and Azerbaijan, partially offset by declines in Norway, Mexico, and UK. OPEC NGLs and non-conventional oils are forecast to increase by 0.52 mb/d in

With completion of maintenance in the Atlantic basin in May as well as a lack of robust demand for major products, product market sentiment is not expected to strengthen further

May-June, 2010

MARKET ROUND-UP

2010 to average 4.9 mb/d. In March, total OPEC crude production averaged 29.26 mb/d, a decline of 28 tb/d over the previous month. A combination of prolonged winter with refinery maintenance and a continuation of discretionary run cuts by refiners have provided support for product markets and refining margins across the board. With completion of maintenance in the Atlantic basin in May as well as a lack of robust demand for major products, product market sentiment is not expected to strengthen further in the future to encourage refiners to change their current low run strategy. This situation would not provide sufficient support for crude market fundamentals in the coming months. OPEC spot fixtures increased in March by 2.36 mb/d to average 12.8 mb/d, while sailings from OPEC were steady with a minor decline of 23 tb/d. The tanker market for crude oil showed a mixed pattern with rates for VLCCs remaining

total oil inventories fell slightly in March, but still remained about 30 mb above the seasonal average. Japanâ&#x20AC;&#x2122;s commercial oil stocks dropped in February, but then reversed the trend in March. Inventories still show a deficit with the historical norm. The demand for OPEC crude in 2009 is estimated at 28.9 mb/d, following a downward revision of 54 tb/d from the previous report. This represents a decline of 2.3 mb/d compared to the previous year. In 2010, demand for OPEC crude is expected to average 28.8 mb/d, representing a downward adjustment of 135 tb/d from the previous assessment and a decline of 0.1 mb/d from the previous year. Economic optimism driving oil price momentum Recently, a steady stream of positive macroeconomic indicators has lifted sentiment about world economic prospects. The latest data shows that manufacturing continues to pick up in the US. Services have also been improving,

The demand for OPEC crude in 2009 is estimated at 28.9 mb/d, following a downward revision of 54 tb/d from the previous report. This represents a decline of 2.3 mb/d compared to the previous year

flat due to balanced tonnage demand. In contrast, Suezmax and Aframax tankers displayed modest growth, on the back of open arbitrage. For the clean market, freight rates decreased on all reported routes, except from the Caribbean. US commercial stocks rose 5.3 mb in March driven by a build in crude which outpaced a draw in products. Inventories now stand at around 82 mb above the five-year average. EU 15 plus Norway 58

May-June, 2010

although this has been more gradual. Similar trends can be seen throughout the developed and developing world. Within OECD, positive signals include the employment situation in the US in March, as payrolls rose especially in the private sector, as well as improving consumer sentiment, which has been reflected in retail sales. The Bank of Japan is becoming more optimistic about the recovery on signs that exports are replacing stimulus measures as the

main driver of growth. However, most of the activity is in emerging markets, particularly in China, which is seen to account for around one third of global growth this year, thanks to a massive fiscal stimulus package spread over two years. Amid this optimistic outlook, it is important not to overlook lingering concerns. Foremost among the downside risks to the outlook in the OECD is the managing of exit policies and looming fiscal imbalances. Within the OECD, the Euro-zone is still facing challenges in addition to sovereign debt issues. After positive growth in the third quarter, the Euro-zone economy slipped back to zero growth in the fourth. Additionally, unemployment is still rising and retail sales have fallen. In emerging markets, signs of inflation have become more evident. In India, food inflation has reached high levels and the government raised the reverse repurchase rate in March for the first time in almost two years. Inflation is also rising in China, where strong growth fuelled by the huge fiscal stimulus is leading to a general overheating of the economy. In light of the uncertainty in the macroeconomic environment and its potential impact on oil demand, OPEC Ministers agreed to leave production levels unchanged at the recent Meeting of the Conference in Vienna. Excess OPEC crude oil spare capacity of more than 6 mb/d in combination with higher inventories was seen as sufficient to accommodate any rise in demand. Ministers will hold their next Meeting to review the oil market in October. In the meantime, the recent IEF meeting in Cancun, Mexico, underlined the consensus among consumers and producers that prices around $70-80/b are essential to promote adequate investment without hindering the economic recovery. Current conditions in the world

Volatility continued to decline. The OPEC Reference Basket oscillated around $3.19/b in March, between $75.51 and $78.70/b compared with $7.28 in February and $9.28 in January. At $77.21/b, the OPEC Reference Basket is almost 70 per cent higher than a year ago. The upward trend was attributed to the bullish sentiment in the oil market which continued to be driven by rising positive expectations about global economic growth as well as the recovery in the value of the euro against the dollar as concerns over Greeceâ&#x20AC;&#x2122;s fiscal problems temporarily eased. However, while the OPEC Reference Basket rose by 5.8 per cent in March, the gain among the components varied between 3.2 per cent and 7.4 per cent. Brent-related crudes were the main beneficiaries with a rise of around 7 per cent, which corresponds to the increase in dated Brent in March, which was higher than the gain posted by WTI. The surge in Brentcrude and African Brent-related crude was significant in the first half of March, supported by stronger demand for gasolinerich crude, which pushed the gasoline crack spread higher. Brent-related crudes were also supported by Asian buying tenders.

economy and the very comfortable outlook for oil market fundamentals are likely to remain supportive for prices to continue to move within this range over the coming months.

OPEC Reference Basket The OPEC Reference Basket increased $4.22 in March to average $77.21/b, the highest monthly average since the onset of the financial crisis in September 2008.

However, Brent-related crudes started to weaken in the second half of the month on the back of increasing supplies and lower demand from refiners, particularly in Europe, who started to look for cheaper alternative crudes such as North Sea grades with heavier West African grades being the most affected. The pressure on Brentrelated crudes came also from the release of some barrels from storage. Middle Eastern crudes saw relatively smaller gains compared to Brent-related crudes due to abundant supplies of sour crude in the market and limited demand for fuel oil. Gains oscillated between 4.7 per cent for Qatar Marine and 6.8 per cent for Basrah Light.

Courtesy: OPEC Report May-June, 2010

GLOBAL NEWS

Repsol, Petronor and BBK reach an agreement on CLH

Repsol, Petronor and BBK have signed an agreement through which BBK acquires 5 per cent of Compañia Logistica de Hidrocarburos (CLH) held by Petronor. The holding was sold for 145 million euros, representing a net capital gain for the Repsol Group, once taxes and minority shareholdings are excluded, of 107 million euros. With this transaction, Repsol has reduced its holding in CLH to 10 per cent and aims to cut its stake in the transport company by an additional 5 per cent, with Citigroup acting as advisor. As part of the transaction, Petronor has transferred to Repsol in the same conditions the remaining 0.33 per cent it owned in CLH. By acquiring this 5 per cent, BBK takes a position in a company that, by its positioning in the logistics services sector for storage, transport and distribution of hydrocarbons, is strategic for the economy and the industrial activity of the country. CLH is also a company with low leverage and is financially sound, due to growth and recurrent flows. Following this transaction, both BBK and Repsol wish to express their full support of CLH’s strategy and management, and Repsol reaffirms its intention to remain as shareholder and first industrial client of the logistics company.CLH provides service to the majority of operators in Spain. It has one of the largest and most efficient hydrocarbons logistical networks in the world, with more than 3,800 kilometres of oil transport pipelines, 37 storage centres with a total capacity of more than 7 million cubic metres and 29 airport storage centres. In 2009, the company’s revenue was 592 million euros with an EBITDA of 302 million euros.

Angola: Second oil discovery on deep offshore Block 17/06

Total’s subsidiary, TEPA (Block 17/06) Limited, and Sociedade Nacional de Combustíveis de Angola (Sonangol E.P.), have discovered hydrocarbons in the north-eastern area of the deep offshore block 17/06. The Begonia-1 well is the second successful exploration well on Block 17/06, after the Gardenia-1 well. Drilled in a water depth of 453 meters, the well discovered hydrocarbons in reservoir of Miocene age and produced more than 6,000 barrels per day of high quality oil during a production test. Sociedade Nacional de Combustíveis de Angola (Sonangol) is the concessionaire of the Block 17/06. TEPA Limited is the operator of the Block 17/06 with a 30 per cent stake. Total’s partners in the block are Sonangol Pesquisa e Produção S.A. (30 per cent), Sonangol Sinopec International (SSI) Seventeen Limited (27.5 per cent), ACREP Bloco 17 S.A. (5 per cent), Falcon Oil Holding Angola S.A. (5 per cent) and PARTEX Oil and Gas (Holdings) Corporation (2.5 per cent).

Yemen LNG starts second natural gas liquefaction train

Total’s second train of the Yemen LNG natural gas liquefaction plant has started production. Combined with liquefied natural gas (LNG) production from the first train, commissioned on October 15, 2009, it will enable the Yemen LNG plant to reach its full capacity. “The commissioning of the second Yemen LNG train ahead of schedule represents another major step in the history of our partnership in Yemen, where we have been present for over twenty years,” said Yves-Louis Darricarrère, President of Total Exploration & Production. Picture courtesy: Repsol

“I would like to thank our project teams for their commitment, hard work and constant attention to industrial safety. Thanks to them, the first liquefaction train had reached its plateau production very quickly. This start-up will cement Total’s position as a top-tier global LNG producer.” 62

May-June, 2010

Statoil and ExxonMobil join forces in Tanzania Statoil has signed an agreement with an affiliate of ExxonMobil to transfer 35 per cent of its interest in Statoil operated Block 2 in Tanzania. Statoil now holds 65 per cent interest in the 11,099 square kilometres block. “Statoil is looking forward to working with ExxonMobil in our frontier acreage offshore Tanzania. This is a deepwater environment and both companies have extensive deepwater experience,” says Tim Dodson, Senior Vice President Exploration. The agreement, executed between Statoil Tanzania AS and ExxonMobil Exploration and Production Tanzania Limited, was approved by the Tanzania government recently.

PIC Courtesy: statoil Kjell Arne Abrahamsen

Statoil signed a production sharing agreement on April 2007 with the government of the United Republic of Tanzania and the Tanzania Petroleum Development Corporation (TPDC). Offshore Tanzania is considered a frontier exploration area. A phase of 2D seismic acquisition was completed in 2008 and the acquisition of a 3D seismic survey was completed in February this year.

BP Solar completes manufacturing restructuring with closure of Frederick, MD factory BP Solar has taken another significant step to provide its customers with cost competitive solar energy products and services by shifting its remaining in-house manufacturing to its low cost joint ventures and regional supply partners. As a result of this decision, the company has ceased silicon casting, wafering, and cell manufacturing at its Frederick, MD facility. Approximately 320 positions will be eliminated out of 430 positions at the Frederick location. BP Solar will maintain its US

presence in sales and marketing, research and technology, project development, as well as key business support activities. “This was a difficult decision and we deeply regret the impact it will have on our employees and the community. We have a long history in Frederick and I am thankful for the support of all our colleagues, the community and local, state and federal officials,” said Reyad Fezzani, CEO of BP Solar.

ConocoPhillips intensifies climate focus

ConocoPhillips will not be renewing its membership in the U.S. Climate Action Partnership (USCAP). This action enables the company to better focus its efforts on ensuring fair and equitable treatment of the transportation sector and its consumers and on expanding opportunities for greater near-term GHG reductions through increased use of natural gas. “As an active member of USCAP, we owe a great deal of credit to our colleagues, both companies and non-government organizations alike,” said Jim Mulva, ConocoPhillips Chairman and Chief Executive Officer. “USCAP’s diverse membership and high-level commitment have made it a true pioneer in the climate change debate, and we have highly valued our involvement.” “House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalised versus international competition, and ignored the critical role that natural gas can play in reducing GHG emissions,” Mulva continued. “We believe greater attention and resources need to be dedicated to reversing these missed opportunities, and our actions today are part of that effort. Addressing these issues will save thousands of American jobs, as well as create new ones.” ConocoPhillips is one of the nation’s largest producers of natural gas and refiners of transportation fuels, the latter already regulated under a federal GHG reduction regime through the Renewable Fuels Act of 2007 and the CAFE II motor vehicle fuel efficiency requirements of 2009. The company maintains a strong commitment to a federal legislative solution for mandatory reduction of GHG emissions and encourages Congress and the Administration to work together to that end.

May-June, 2010

GLOBAL NEWS

Chevron tests emerging solar technologies in Central California

Chevron Corporation has started Project Brightfield, a demonstration of nextgeneration solar energy technologies in Bakersfield, California. The project, created on the site of a former Chevron refinery, will evaluate seven emerging photovoltaic technologies to help determine the potential application of renewable power at other company-owned facilities. The former refinery site has been repurposed to test the performance of six emerging thin-film technologies and one emerging crystallinesilicon photovoltaic technology, which were provided by independent solar companies.

ConocoPhillips makes new appointment

ConocoPhillips announced that TrondErik Johansen, currently President of its Southeast Asia Exploration and Production organisation, will become President of its Alaska operations effective April 1. He replaces long-time ConocoPhillips Alaska President Jim Bowles, who died while snow machining on the Kenai Peninsula Feb. 13. Johansen, a native of Norway, joined ConocoPhillips in 1986 in Stavanger, Norway. He has held a variety of petroleum engineering, project engineering and operations leadership positions in Stavanger, Aberdeen, New Orleans, Houston and Jakarta. In 2008 he was named to his current position based in Singapore. Johansen has master’s degrees in petroleum engineering from the Norwegian Institute of Technology and in business administration from the Massachusetts Institute of Technology.

May-June, 2010

BP enters deepwater Brazil portfolio In a broad-ranging deal, BP will pay Devon Energy $7 billion in cash for assets in Brazil, Azerbaijan and the US deepwater Gulf of Mexico. These include interests in ten exploration blocks in Brazil, including seven in the prolific Campos basin; a major portfolio of deepwater exploration acreage and prospects in the US Gulf of Mexico; and an interest in the BP-operated Azeri-ChiragGunashli (ACG) development in the Caspian Sea, Azerbaijan. In addition, BP will sell to Devon Energy a 50 per cent stake in BP’s Kirby oil sands interests in Alberta, Canada, for $500 million. The parties have agreed to form a 50/50

joint venture, operated by Devon, to pursue the development of the interest. Devon will commit to fund an additional $150 million of capital costs on BP’s behalf. Completion of certain transfers will be subject to regulatory approvals and other third party consents. “This strategic opportunity fits well with BP’s operating strengths and key interests around the world, offering us significant additional long-term growth potential with an emphasis on high-margin oil,” said BP group Chief Executive Tony Hayward.

Shell starts production at Perdido - world’s deepest offshore drilling and production facility Shell has produced its first oil and natural gas from the Perdido Development, the world’s deepest offshore drilling and production facility. Located in an isolated, ultra-deep sector of the Gulf of Mexico, Perdido marks a new era in innovation and safely unlocks domestic sources of energy for US consumers. The facility sits in approximately 2,450 metres (8,000 feet) of water, which is roughly equivalent to six Empire State Buildings stacked one atop the other, and will access reservoirs deep beneath the ocean floor. Perdido smashes the world water depth record for an offshore platform by more than 50 per cent. “Perdido is an impressive project in a strong Gulf of Mexico portfolio that continues to grow,” said Marvin Odum, Upstream Americas Director, Shell Energy Resources Company. “Perdido presented technical challenges unlike we’ve ever seen in the Gulf of Mexico. Shell’s team used its expertise to open this new frontier and confront complex reservoir characteristics, extreme marine conditions, and record water depth pressures. Perdido demonstrates what companies like Shell can do when US federal lands and waters are opened to responsible energy exploration and production.” From the first lease purchase to current production, the Perdido Development required an industry workforce of approximately 12,000 people, including employees and contractors. Shell designed, and operates, the Perdido host spar, a floating production facility, which is jointly owned by Shell (35 per cent), Chevron (37.5 per cent), and BP (27.5 per cent).

ExxonMobil providing Shell agrees sale assistance in the Gulf of Mexico of New Zealand Picture courtesy: ExxonMobil

downstream assets

ExxonMobil is providing assistance in the form of personnel and equipment to support efforts in the Gulf of Mexico. “We are all reminded of the need to be ever vigilant in the area of safety and environmental protection as a result of this tragic incident,” said Rex W. Tillerson, Chairman and Chief Executive Officer. “Our thoughts go out to the workers and their families and to people in the impacted areas. We will work with industry and government to help mitigate the impacts of this incident. We stand ready to support efforts to determine how such an incident can be prevented from happening again.” ExxonMobil has offered the use of a drilling rig as a staging base, two

supply vessels, an underwater vehicle and support vessel and has provided experts to respond to BP’s request for technical advice on blowout preventers, dispersant injection, well construction and containment options. The company also continues to support the work of Tier 3 spill response and cleanup cooperatives, such as Marine Spill Response Corporation, Clean Gulf, and Oil Spill Response Ltd., to provide personnel and equipment, such as dispersants, fire boom and radios. ExxonMobil is also identifying, procuring and manufacturing additional supplies of dispersant for potential use.

Royal Dutch Shell plc (Shell) has signed a sale and purchase agreement to sell its downstream business in New Zealand to a consortium of Infratil and the Guardians of New Zealand Superannuation. The deal includes all of Shell’s downstream assets in New Zealand, but does not include the company’s upstream activities in the country. As part of the agreement, Shell will sell its 17.1 per cent shareholding in the 104,000-barrel per day refinery at Marsden Point and also its network of more than 220 retail stations. The business will be sold to the consortium as a going concern and Shell will receive a cash payment of NZ$696.5 million together with a working capital adjustment. In addition, the companies have signed an agreement for Shell to continue to provide crude oil and refined products. The parties have also entered into a trademark licensing agreement which entitles the consortium to operate retail service stations under the Shell brand.

First major contracts awarded for Rumaila rehabilitation BP, on behalf of its partners in the Rumaila Technical Services Contract, announced the first major contracts to support the rehabilitation of the Rumaila field in Southern Iraq. Formal contracts will be signed in due course. Three contractor groups were selected for drilling wells, worth around $500 million in total and will provide seven additional drilling rigs from the second half of 2010. The contracts will be awarded to: Schlumberger in partnership with the Iraqi Drilling Company has been awarded contracts for three rigs; Daqing Drilling has also been awarded contracts for three rigs; Weatherford has been awarded a contract for one rig. These contracts supplement drilling contracts already in place in Rumaila provided by the Iraqi Drilling Company and Weatherford. BP expects around 70 wells to be drilled in Rumaila this year.

Two two-year contracts, worth a total of around $100 million, have been awarded for the supply and installation of electrical submersible pumps (ESPs) and associated services to Centrilift, Al-Khorayef Petroleum. Cameron will supply the associated trees and wellheads. The contractors were selected after a competitive bidding process and the awards endorsed on March 24th in Basra by the members of the Rumaila Joint Management Committee comprising BP, CNPC, the Iraqi State Oil Marketing Organisation and the South Oil Company. “We are pleased to announce these contracts at competitive market rates and meeting the highest technical specifications,” said Michael Townshend, President, BP Iraq. ‘We are confident that all of the companies will bring the operational and safety standards which will help us achieve our production targets in Iraq for 2010 and beyond. May-June, 2010

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