Oil Review Middle East 3 2013

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Vol 16 Issue Three 2013

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UK ÂŁ10, USA $16.50

Setting training standards in Iraq SABIC seeks to capitalise on shale gas boom Bahrain - how much can downstream deliver?

Oman’s production surge continues

The importance of being automated Regional rig count up as demand tightens Effective insulation of subsea structures How to verify pipeline quality

see us at the show

Without real-time data response teams are in the dark when it comes to cleaning up after any incident.

Gulf operators are backed up by various levels of Tiered Response Centres that can supply this information promptly.

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Contents Editor’s note

Columns

OMAN’S OIL and gas production has enjoyed something of a renaissance in recent years. And it’s no accident either. After a period of stagnation, and then decline, officials took the decision to do whatever was necessary to reverse the trend. That meant maximising the potential of the nation’s comparatively limited hydrocarbon reserves through new and advanced extraction techniques. Oman has since carved out a name for itself as something of a leader in enhanced oil and gas recovery (EOR) within the Gulf. And the benefits are there to see. Oil production increased in 2012 by a further four per cent, including condensates, to an average of 918,000 barrels per day (bpd).

PDO has started work on a unique chemical injection trial at Habhab, which could lead to increased yields from complex heavy oil and tight reservoirs. The field, discovered in 1982, has an estimated 2.4 billion barrels of oil but the heavy nature of the crude has been an impediment to production thus far. But now, with growing EOR experience under its belt, dealing with technical challenges like this is becoming almost routine for PDO. Elsewhere in this issue, our special correspondent reports on the obstacles that need to be overcome by the government of newly-democratic Libya. The country has an opportunity to break with the past, modernise infrastructure and promote inclusive growth by developing a vibrant, private-sector driven economy.

Industry news and executives’ calendar

6

Analysis 8

Rig Market There are signs that the regional rig count is on the way up. But more units will be needed if the Middle East is to exploit new and alternative sources.

12

Interview

Pierre Leretz, president and region division manager, Process Automation, at ABB in India, Middle East and Africa, discusses the benefits of automation technology.

16

Bahrain Why Bahrain’s hydrocarbon sector future rests with its downstream operations.

Exploration & Production 20

Developments The latest exploration and production news from around the region.

Gas 28

Analysis SABIC is hoping to capitalise on the shale gas boom in North America.

Exhibition Preview 34

Petchem Arabia This key downstream event is expected to be the largest gathering of downstream professionals anywhere in the Kingdom this year.

Country Profiles 39

Oman Has any other oil producer been as successful as Oman when it comes to enhanced oil recovery?

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48

Libya Managing Editor: David Clancy

Why Libya could be the ultimate emerging market for multinationals.

Editorial and Design team: Bob Adams, Hiriyti Bairu, Lizzie Carroll, Andrew Croft, Ranganath GS, Kasturi Gupta, Prashant AP, Genaro Santos, Zsa Tebbit, Nicky Valsamakis, and Ben Watts

Cover Image courtsey of: PDO/Mohammed Mahrazy

Publisher: Nick Fordham

Advertising Sales Director: Pallavi Pandey

Magazine Sales Manager: Camilla Capece Tel: +971 4 448 9260, Fax: +971 4 448 9261, Email: camilla.capece@alaincharles.com For country contacts, see Arabic contents Head Office: Middle East Regional Office: Alain Charles Publishing Ltd Alain Charles Middle East FZ-LLC University House Office 215, Loft 2A 11-13 Lower Grosvenor Place P.O. Box 502207 London SW1W 0EX, United Kingdom Dubai Media City, UAE Telephone: +44 (0) 20 7834 7676 Telephone: +971 4 448 9260 Fax: +44 (0) 20 7973 0076 Fax: +971 4 448 9261 Production: Donatella Moranelli, Nathanielle Kumar, Nick Salt, and Sophia White Email: production@alaincharles.com

Technical Focus Introducing the latest technology for the oil and gas sector.

68

Pipelines How to accurately verify the quality of CRA-lined pipes.

72

Flow Assurance Why challenging subsea applications need robust and reliable products.

Oil Spill Management

76

Without real-time data, response teams are in the dark when it comes to cleaning up after an incident.

Arabic Section News Analysis

Subscriptions: Email: circulation@alaincharles.com Chairman: Derek Fordham Printed by: Emirates Printing Press, Dubai

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Innovations

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© Oil Review Middle East ISSN: 1464-9314 Serving the world of business

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Oil Review Middle East Issue Three 2013 3

News

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Occidental says Oman assets contribute to growth OCCIDENTAL PETROLEUM CORP (Oxy) has said that its growth will be strongly impacted by the success of development plans for its Permian and California assets in the US, assets in Oman and the Al Hosn gas project in Abu Dhabi, where it continues to deploy significant capital.

Oxy, one of the largest US oil and gas companies, is currently the second largest oil producer in the sultanate after PDO. In a recently released annual report, Stephen Chazen, president and CEO of Oxy, said the company's share of production from Oman was approximately 76,000 barrels of oil equivalent (BOE) per day in 2012.

He said, “During more than 30 years of operations in Oman, Oxy has continuously increased production and reserves, and today is the country’s second-largest oil producer. We expect Oman to be an ongoing growth driver for the company. At the Mukhaizna field (Block 53) in south-central Oman, where we are implementing a major steam flood project, the 2012 average gross daily production was approximately 120,000 BOE per day - more than 15 times the production rate in September 2005 when Oxy assumed operations.”

In Oman, Occidental is the operator of Block 9 and Block 27, with a 65 per cent working interest in each block; Block 53, with a 45-per cent working interest; and Block 62, with a 48-per cent interest.

Oxy signed a 30-year production sharing contract for the Mukhaizna field with the Oman government in 2005, pursuant to which it assumed operation of the field. By the end of 2012, the company had drilled almost 1,800 new wells and continued implementation of a major steam-flood project in Oman.

“Oxy’s growth will be most strongly affected by the success of the development plans for our Permian, California and Oman assets and the Al Hosn gas project in UAE,” Chazen said.

UAE has ‘zero’ pipeline leakages - expert THE UAE HAS managed to control oil leakages from its field pipelines by implementing protection plans bringing such incidents to zero levels, an industry expert said. But Yves Gunaltun, a corrosion expert at Total UAE, admitted that there are leakage problems in the Gulf and other oil producing countries of the Middle East.

“Authorities in the UAE apply a ‘zero leak policy’ and operators have put important pipeline integrity programmes in place,” he said in an interview with Iris Media after a corrosion conference in Abu Dhabi. “Yet, there are important pipeline corrosion problems in the Gulf,” he added.

Gunaltun said the problem in the Gulf, which controls over 40 per cent of the world’s recoverable oil deposits, is more severe for some small diameter pipes as no chemical treatment has been done.

Asked about the costs of repair or replacement of damaged pipelines, he said they ‘significantly’ depend on the environment (onshore or offshore), pipe diameter, pipe length and production loss during maintenance or replacement.

“For example, for offshore repairs the cost would be as much as a few million dollars. For replacement of important large diameter/long pipelines, we are talking about tens of millions of dollars. Generally the operator pays for the replacement and repairs,” he said.

“For old oilfields with hundreds of pipelines it is not unusual to have four to five leaks a year. This is the case in all regions around the world and also in the Middle East. However, there has been no catastrophic failure causing major damages to environment,” he added. According to Gunalton, the oil industry has developed reliable pipeline corrosion control systems that have been used for several decades, adding that the important issue is the selection of the right corrosion control system.

Annual drilling expenditure offshore MENA to top US$17 billion by 2016 AN INCREASE IN offshore discoveries is prompting a surge in exploration activity across MENA and driving up the amount spent on drilling, states the latest report form business intelligence firm GBI Research. The company’s oil and gas report* forecasts offshore A surge in activity drilling expenditure across the region to climb is predicted steadily from US$13.56 billion in 2012 to US$17.03bn in 2016. Cumulatively, the total expected spend for this five year period is US$77.3bn, which represents an increase of approximately 22 per cent over 2007-2011 total of US$63.5bn. Drilling outlay is expected to grow across all major nations in the region, with those in West Africa leading in terms of exploration activity. Escalating activity in countries relatively new to the offshore drilling industry, such as Sierra Leone and Liberia, may prove to be future competition for the more

established nations of West Africa. Ghana is expected to emerge as one of the most prominent countries in West Africa for the exploration of oil and gas, with 16 offshore discoveries made between 2008 and 2012 – second only to Angola, where 22 discoveries were made during the same period. In terms of drilling expenditure. GBI Research expects drilling expenditure in Angola to continue climbing in the near future, hitting US$6.67bn in 2016.

Nigeria and Egypt are forecast to place second and third, with totals of US$2.26bn and US$1.52 bn, respectively.

* Offshore Drilling Industry in Middle East and Africa to 2016 – Pre-Salt Potential in West Africa and Significant Gas Finds Off the East African Coast Driving Exploration Activity.

Setting training standards in Iraq FOLLOWING A LANDMARK agreement with the Iraqi Ministry for Oil in 2011, OPITO International has now been awarded a contract with Shell to support the development of training for workers on the Majnoon project and to improve vocational training centres in Basra.

The oil and gas industry body which sets training standards that improve safety will ensure that these centres train Iraqis to industry expectations and OPITO standards.

In addition, OPITO is working with all the international oil companies in Iraq to design a framework for delivering suitably qualified Iraqi oil and gas workers to help the country fully exploit its emerging oil industry and transform the economy of the war torn country.

This contract is one of a series of workforce development initiatives OPITO is undertaking in several oil and gas provinces around the world.

To bolster its new role as the trusted

4 Oil Review Middle East Issue Three 2013

adviser to governments, international and national oil companies in their quest to develop indigenous oil and gas workforces, OPITO has created the new role of director of international workforce development. Former director of the Scottish Qualifications Authority (SQA), John McDonald, has been appointed to lead the work with Shell and build future agreements with governments and industry, which are currently in the pipeline,

www.opito.com

in places as far-ranging as Oman and East Timor.

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Global Experience – Local Presence Our advanced coatings provide protection for Oil & Gas Industry projects worldwide

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S01 ORME 3 2013 Start_Layout 1 23/04/2013 15:21 Page 7

MAY 2013 6-9

OTC

HOUSTON

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19-21

Petrochem Arabia 2013

DHAHRAN

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16-18

POGEE

KARACHI

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5-7

Oil & Gas Asia

KUALA LUMPUR

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10-13

EAGE Conference & Expo

LONDON

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11-13

Gas & Oil Expo

CALGARY

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JUNE 2013

SEPTEMBER 2013 2-5

Erbil Oil & Gas

ERBIL

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Offshore Europe

ABERDEEN

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29-2 Oct

MEPEC 2013

MANAMA

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OCTOBER 2013 6-8

Arab Oil & Gas

DUBAI

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7-9

M.E. Drilling Conference & Expo

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8-10

Kuwait Oil and Gas Show

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Adipec 2013

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SAOGE

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Readers should verify dates and location with sponsoring organisations, as this information is sometimes subject to change.

Nakilat and Sonatrach agree to work together on gas transportation QATAR GAS TRANSPORT (known as Nakilat) and Algeria’s state-run energy company Sonatrach will work together on a number of areas of common interest related to the marine transportation of hydrocarbons under a memorandum of understanding (MoU) signed recently.

Potential areas of collaboration include

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the co-ownership of gas carriers, for which discussions are in progress regarding two liquefied natural gas (LNG) vessels, each with a capacity of 177,000 sq m.

Collaboration for vessel dry-docking, and construction of vessels in both countries are also possible areas of co-operation.

Nakilat and Sonatrach, which is Africa’s

largest oil and gas company, have agreed upon transportation collaboration for liquid petroleum gas (LPG).

The two companies have also discussed the sharing of technical information and experience as well as collaboration with regards to the logistical support of their fleets.

Oil Review Middle East Issue Three 2013 7

Industry News & Events

Executives Calendar 2013

Analysis

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There are signs that the Middle East rig count is on the way up. But a whole load more drilling units may well be required in the years to come if the region is to start to exploit new, alternative hydrocarbon sources, in addition to its conventional oil and gas wealth.

Rig contractors can expect to be busy this year

Rig count up as demand starts

to tighten A

LREADY, THERE ARE signs of a gentle tightening in the region’s offshore rig market. IHS Petrodata’s Weekly Rig Count shows offshore rig supply in Middle Eastern waters hovering around the 135 mark, some way up on last year’s average of 121.

And there are other signs that demand for rigs is on the up too, with fleet utilisation rates for the region averaging around 85 per cent thus far in 2013 - above the world average, and behind only West Africa and the Europe/Mediterranean region.

This is some way up on last year’s 81.8 per cent average fleet utilisation rate for the Middle East zone.

It means the vast majority of rigs in the area are now actively working and under contract, with few sitting idle. And that’s just offshore.

Onshore, where much of the Gulf’s existing production is located, an area which draws on even more rigs, it is a similar story, especially in Iraq, which is now steadily raising output through sustained and intensive drilling work.

The fact that drillers are getting busy is no more evident than in the region’s biggest oil producer, Saudi Arabia.

Rising demand Here, state-owned Saudi Aramco intends to use a record number of rigs during 2013 as it targets unconventional gas reservoirs, as well as continuing to exploit the kingdom’s oil wealth.

The company is to deploy an additional 30 rigs this year, taking its total to over 170, industry

8 Oil Review Middle East Issue Three 2013

sources told Reuters in late January, as the search for gas to meet rapidly rising domestic demand accelerates.

At the same time, Aramco is keen to maintain the nation’s oil production capacity at 12.5mn barrels per day (bpd) as mature fields decline.

The numbers are more or less in keeping with earlier figures released by oilfield services giant Schlumberger which said in mid-January that Saudi Arabia's rig count could rise by about 25 rigs this year to around 160.

If nothing else, it is plain and simple economics that suggests continuing strong demand for rigs in the Gulf Although Aramco has yet to comment on its 2013 rig plans, it is believed the extra units are to be deployed mostly in northwestern parts of the country where there are plans to explore for unconventional gas, as well as drill deep offshore in the Red Sea, and develop new oil prospects.

Some of the additional rigs will be used for maintenance, or drilling for water to re-inject into oilfields to boost or sustain production levels.

The aim is not to grow overall crude oil production capacity though.

"They want to have the ability to produce more

[oil] rather than producing more," one of the sources was quoted as saying by Reuters.

Since completing a huge oil capacity expansion project three years ago, Aramco has largely focused on raising gas output, although it is acutely aware of the need to maintain its oil production cushion as OPEC’s so-called ‘swing producer’.

The Kingdom cut oil production in the latter months of 2012 creating more breathing space and spare capacity should the market require it.

However, there is the reality that Saudi’s maturing fields will still mop up greater rig resources, as technical issues force the company to continue to drill in order to simply sustain output levels.

Mixed fortunes Sadad al-Husseini, a former Aramco executive, said: "If Saudi production continues at its current high levels of output or rises further, the rig count will continue to go up based on technical factors, as has been the case in many other oil and gas basins in the world.”

And if the Kingdom is to genuinely target unconventional gas reservoirs in a big way then this is going to squeeze demand for rig services even more acutely.

According to some industry experts, the Middle East needs to double the number of onshore and offshore rigs from the current level of around 360.

Chris Faulkner, chief executive of US-based Breitling Oil and Gas, was quoted as saying in The

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Analysis

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National newspaper recently that for unconventional projects such as fracking that require many wells, the regional fleet would have to expand by a factor of five to 10.

It’s unlikely that the rigs market is currently preparing for such an eventuality.

And for the region’s rig builders there have been mixed fortunes despite the apparent uptick in demand for their services.

The fact that drillers are getting busy is no more evident than in the region’s biggest oil producer, Saudi Arabia Core strengths While there is plenty of business in the pipeline for Lamprell, the UAE-based company has faced huge financial challenges and management upheaval during the past year.

This includes an investigation by the UK Financial Services Authority for its handling of inside information; the company is listed on the London stock market.

At the end of 2012, chairman John Kennedy, confirmed that his company will refocus this year on its core strengths, predominantly new-build jack-up rigs and rig refurbishment.

“In the short-to-medium term, the group's order book of secured contracts is expected to support the business' recovery through to the end of 2013,” he told investors last November.

“Longer-term, we are encouraged by the strong bidding activity across the business with the pipeline totalling more than US$4bn.”

It delivered its first jack-up of 2013, the Greatdrill Chaaya, to its customer, Greatship Global Energy Services, in mid-January.

Kennedy’s business outlook is also supported by greater access to the booming Saudi market.

Last September, Lamprell joined Shoaibi Group and Al Yusr Townsend and Bottum L.L.C to set up a joint venture for new-build fabrication, refurbishment

There have been mixed fortunes for the region’s rig builders

and repair of land drilling rigs in the kingdom.

If nothing else, it is plain and simple economics that suggests continuing strong demand for rigs in the Gulf.

Opportunity While Saudi is not looking to raise its own oil production capacity - and yet it is still looking to utilise a record number of rigs this year - there are plenty of other countries that are.

Kuwait, Abu Dhabi, Qatar and Oman are all looking to expand their own oil production capacity, as well as grow the gas sector quickly and substantially to feed local demand And then there is Iraq, the region’s emerging producer which could dominate business for services companies for years to come, sucking in more and more land-based rigs along the way.

The overhaul of the country’s big oilfields, which is already now yielding greater production, will entail drilling possibly thousands of new wells in the years ahead.

It has opened up opportunity for local players such as the Iraq Drilling Company (IDC) which has partnered with Schlumberger for the work drilling the super-giant Rumaila field.

And last year, for the first time since 1990, Baker Hughes included Iraq in its regular international rig count.

The company reported that Iraq had 79 rigs out of a June international rig count of 1,285 (a figure that excludes rigs in North America).

Barring any major new industry setback - such as another war in the Gulf, or a collapse in oil prices - rig contractors can brace themselves for a busy period ahead. ■

Oilfield services industry to top US$200 billion by 2017 BOOMING EXPLORATION AND Production (E&P) expenditure will see the global oil field services industry climb significantly in value in the near future, according to business intelligence company GBI Research.

According to the firm’s latest report*, the global oil field service industry (typically defined as any activity or service related to the finding, evaluation, development, production and abandonment of oil and gas resources) is forecast to jump in value by a massive 72 per cent in just five years, from US$152bn in 2012 to US$213bn in 2017.

Despite the global economic turndown, demand for oil and gas has continued to grow, due primarily to the emerging economies of Asia and South America. Additionally, the increase in crude oil and natural gas prices has warranted high E&P costs for areas where access is more difficult, such as offshore deep and ultra-deep locations.

Innovative hydrocarbon recovery techniques such as Enhanced Oil Recovery (EOR) are also driving oil companies around the world to

10 Oil Review Middle East Issue Three 2013

return to depleted or mature reservoirs – further contributing to total E&P expenditure.

Of the three segments that make up the oilfield services industry – exploration and evaluation, drilling, and completion and production – it is the latter that garners the most substantial income. GBI Research forecasts the completion and production services portion of the industry to create US$148bn in revenue during 2017, climbing from revenue of US$105bn in 2012.

GBI Research is a market-leading provider of business intelligence reports, offering actionable data and forecasts based on the insights of key industry leaders to ensure you stay up-to-date with the latest emerging trends in your markets.

* Oilfield Services Industry to 2017 – Technological Developments Expected to Propel Oilfield Investments by E&P Players www.oilreview.me

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Analysis

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Today, industries in the Middle East expect to examine and monitor the status of even the most remote outpost at the push of a button. And, as Pierre Leretz of ABB tells Oil Review Middle East, expertise and technology offered by companies like his is helping them do exactly that.

The importance of

being automated Oil and gas operators in the region are increasingly concerned about energy efficiency and safety. So it’s not surprising that companies like ABB are finding a market for their technologies

“M

OST OF THE conversations that we have with our customers today are related to process optimisation. Both upstream and downstream, companies in the region are looking to ensure that they improve efficiencies. The Middle East markets today offer tremendous opportunities for new investments and deployment of state-ofthe-art technologies.”

Benefits that include improved asset productivity and energy savings are clearly excellent selling points in a market constrained by falling oil prices and rising exploration costs. Of course Pierre Leretz, President and Region Division Manager, Process Automation at ABB in India, Middle East and Africa, is in a good position to comment on this.

ABB, founded in 1883, is today one of the world’ s biggest names in power and automation technologies. In the oil and gas market specifically it provides number of solutions for applications to help increase output in upstream, midstream and

12 Oil Review Middle East Issue Three 2013

downstream oil and gas processes.

It’s not surprising that companies like ABB are finding a market for their technologies in Middle East oil and gas. While significant finds continue to be announced, reaching such reserves will be a challenge in the future. That challenge, however, will pave the way for the implementation of new technologies.

In the field of oil and gas transportation, ABB was the main electrical vendor for a major pipeline project in the region Big concern At the same time oil and gas operators in the region are increasingly concerned about energy efficiency and safety. According to Leretz, it’s a scenario that ABB is already geared up for.

“Security for automation and control systems has gained a lot of attention in the last few years, along with operator effectiveness, which is another crucial area because of its significant contribution to overall plant safety and reliability,” he explains.

He adds, “What we also observe is that the market has significantly moved into ICSS (integrated control and safety systems).”

Many of ABB’s oil and gas customers in the region and across the globe are implementing large oil and gas projects that include captive power plants. At the same time they are increasingly looking for integrated instrumentation, control, and electrical solutions to reduce overall cost and implementation time and to increase operational efficiency.

Of course a big concern, and an opportunity for ABB and similar businesses, is risk management.

Oil and gas companies need partners who can help mitigate their risk by offering the capability to execute large multi-scope projects with professional project management, a global presence and the ability to guarantee strict compliance to

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Analysis

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international industry standards. The aim is to ensure timely, high quality deliveries throughout all project phases, from concept to operation, with a firm focus on health, safety, security and the environment.

“In that regard companies with large projects now demand MAC (main automation contractor) and MEC (main electrical contractor) execution capabilities,” says Leretz.

It’s no coincidence that he should highlight this trend; ABB is already executing the largest MAC project in the world.

Pierre Leretz - “Companies with large projects now demand MAC and MEC capabilities”

Of course a big concern, and an opportunity for ABB and similar businesses, is risk management These days, in fact, automation is essential. As Leretz points out: “Today, industries in the Middle East expect to examine and monitor the status of even the most remote outpost at the push of a button. Networks make this possible”.

Networking technologies now enable the creation of richer and more powerful applications that allow organisations to achieve higher operational efficiency — but that’s not all.

“Cyber security, which is a key aspect of networking technologies, has also gained importance in the last few years,” Leretz points out.

“It is not viewed as a one-time activity, but as an integral and continuous part of the project life cycle, from early design and development, through testing and commissioning, to lifetime support service and future adaptations.”

All of which is both a challenge and an opportunity for ABB. “Our automation business units are constantly developing applications that allow plants or equipment to run at maximum output, consistently producing high-quality products,” Leretz says. “ Our industrial IT solutions integrate engineering, operations and maintenance activities on a common technology platform, thus improving overall plant efficiency and safety.”

business opportunities. There are many plants that are reaching that stage in the region.”

Leretz says this is an issue that ABB is already well aware of.

“The automation system must provide solid business value based on a combination of metrics such as enhanced asset availability, return on assets, and reduced life cycle cost. It is often seen that time and cost saving could make a vast difference to output, efficiency and profitability of the plant. Moreover capital deployment is reduced through planned upgrades for installed systems,” he explains.

Major projects Efficient The fact that ABB’s Asset Management and Performance Service solutions help to minimise downtime and to reduce variable costs such as labour, maintenance and consumables is important on at least two counts, he suggests.

“In this era of record energy consumption, our solutions for energy management help plant operators to reduce both cost and environmental impact.”

Automation is also relevant to life cycle management. Obsolescence of plant is a major concern in the Middle East; the oil and gas industry aims to be as efficient as possible, to get the maximum amount of resources out of the ground, and to utilise them as best they can for the lowest cost.

“Our customers want to increase the lifespan of their investment,” says Leretz, “so obsolescence mitigation is an essential element in assessing

14 Oil Review Middle East Issue Three 2013

As for what is occupying ABB in the region right now, the company has been involved in a number of major Middle East projects recently. They include the Sadara project in Saudi Arabia - the largest petrochemical plant in the world - for which ABB was selected as the project’ s Main Automation Contractor (MAC). ABB is also involved in a sulphur handling project elsewhere in the Gulf for which it will supply telecommunication systems for a sour gas processing plant.

In the field of oil and gas transportation, ABB was the main electrical vendor for a major pipeline project in the region, offering its comprehensive electrical and automation system to help the customer to get the maximum value out of its control system investment.

We have already touched on environmental concerns. Technical offerings that address these are also becoming a strong part of the ABB portfolio.

We see a lot of interest in what we’d term ‘green’ or environmentally friendly solutions,” Leretz says.

Among ABB offerings is one that cleans oily wastewater, by far the largest waste product in oil and gas production, “quickly, cost-effectively and energy-efficiently, ready for discharge with zero environmental impact,” as Leretz puts it.

Developed on behalf of a leading national oil and gas company, the solution is installed at three oil and gas fields in North Africa.

Developed and patented by ABB, the process has exceeded the customer’ s specifications for hydrocarbon content and suspended solid concentration in the outlet water by seven and 55 times respectively.

Other benefits of the solution Leretz highlights include a compact footprint, the use of chemicals that can easily be produced on site using inexpensive base ingredients, ease of installation (it is built on skids and then transported to the site for installation and commissioning), and ease of operation (it uses standard equipment and requires no complex skills or operator experience).

Any readers who were at the World Future Energy Summit in Abu Dhabi earlier this year will know that there’s been plenty of talk about developing ‘greener’, more environmentally friendly projects in the region.

It’s no surprise then that, as well as responding to the inevitable demand for the sort of efficiencies automation offers, companies like ABB are increasingly building a market for products that serve the environment as well as the customer. ■ www.oilreview.me

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Analysis

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Awali was the first oilfield discovered on the Arab side of the Gulf. Now known as the Bahrain field, it was also one of the first oilfields to suffer major decline. Can production from this field be improved? Are other sources of gas and oil available? Or should Bahrain focus on its downstream expertise as a more promising source of revenue? As independent oil analyst Samuel Ciszuk explains, there are no easy answers.

Bahrain: what can upstream offer? How much

can downstream deliver?

B

AHRAIN WAS TRYING to position itself as a regional financial hub decades before Dubai became a serious contender. However, it lost ground in the 1990s due to domestic strife and uncertainty as well as a more exposed financial situation. By contrast, the past decade has seen more success, though not enough for Bahrain to match the development speed of its richer neighbours.

Today even this modest advance is looking uncertain. The upheavals of early 2011 and the government crackdown that followed did little for investor confidence in Bahrain. The kingdom’s economy - and in particular its banking sector suffered as a consequence.

If Bahrain’s position as a banking hub is again under threat can it look to oil as a more reliable source of revenue? It’s true that the hydrocarbon resources of its neighbours long since overtook its own, much more limited supplies. In recent decades, therefore, Bahrain has traded on its proximity to the oil and industry powerhouse that is Saudi Arabia.

The Bahrain field’s oil and gas production had fallen to around 30,000 bpd of crude and 1.5 bcf/d of natural gas by 2007. In that year, however, the kingdom launched a project to

attract capable enhanced oil recovery (EOR) investors to participate in the redevelopment of the field and the targeting of new, deeper reservoir layers.

Given its limited upstream prospects, Bahrain has for a long time been trying to develop its downstream potential.

But sourcing feedstock amid the domestic decline has been a long-standing challenge Upstream opportunities Bahrain was one of the first countries to seriously try to diversify its industrial base. Admittedly it had little choice, but it has been one of the more successful in doing so. Apart from early ventures in shipbuilding and aluminium, the kingdom has long been a net exporter of refined products. Not that it can offer feedstock entirely on its own; its domestic production capacity has long been below its refining capacity. Therefore it has, for many years, sourced some of the feedstock needed by its 250,000 bpd Sitra refinery from its larger Saudi neighbour.

There are both oil and gas in Bahrain of course, but they have largely been sourced from its only onshore oilfield. The Awali field came onstream in 1932, making it the first oil discovery - and Bahrain the first oil producer - on the southern, Arab, side of the Gulf. Awali foreran - and in a way foretold - the upstream opportunities possible in Kuwait, Saudi Arabia, Qatar and Abu Dhabi. Ironically Awali, later renamed the Bahrain field, was also an early illustration of the mature decline that will inevitably face the oil and gas fields of its more prolific neighbours.

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Analysis

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Production has indeed risen since, but only modestly compare to targets of around 75,000 bpd of crude and some 25,000 bpd of NGLs and condensate. It is also hoped that gas production will rise - to over 2.7 bcf/d at full redevelopment.

Reaching these targets will take time, however.

The partnership redeveloping the field - a joint venture called Tatweer Petroleum - is aiming for a 2024 project completion. The JV partners are Occidental Petroleum, Abu Dhabi’s Mubadala Development and Bahrain’s National Oil and Gas Authority (NOGA).

Commercial reserves But are these targets achievable? After all, overall peak production at the field was 75,000 bpd of crude. A mix of much higher recovery rates enabled by the latest EOR techniques and targeting of new geological horizons might make such levels possible. Nevertheless, the prospects for gas seem slightly more favourable. Some deeper layers, like the Pre-Khuff zones, which have never been targeted before, are known to hold significant commercial reserves elsewhere in the region.

But there has been little else of potential to develop. Drilling in the waters surrounding Bahrain has so far not produced any discoveries of commercial interest. Much hope had been pinned on the formerly disputed waters between south-eastern Bahrain and Qatar, surrounding the Hawar Islands. Their proximity to Qatar’s main onshore oilfield, Dukhan, may have been a reason for such optimism. However, the waters were opened up to Bahraini exploration following a 2001 settlement between the two countries in the International Court of Justice in the Hague and, so far, different exploration ventures have not produced any success. Other exploration efforts, particularly in the kingdom’s two northern blocks, 1 and 2, close to Saudi producing fields and Qatar’s giant North Field gas deposit, have also failed to yield any commercial discoveries.

Limited prospects Bahrain does, however, receive half the production from Saudi Arabia’s 300,000 bpd Abu Safah offshore oilfield. This is based on a deal agreed some decades ago, under which Bahrain gave up its maritime claim against Saudi Arabia. The 150,000 bpd are a crucial backbone of the Bahraini economy and provide most of the feedstock for its Sitra refinery. The field is operated by Saudi Aramco. Its crude lands in Saudi Arabia and is then transported to Bahrain through a subsea pipeline with a 230,000 bpd capacity.

Given its limited upstream prospects, Bahrain has for a long time been trying to develop its downstream potential. It is, after all, located in a region with ready access to cheap feedstock.

Securing cheap volumes above those it receives from Saudi Arabia and the small trickle it produces itself has, however, proved difficult. This is hardly surprising; none of its neighbours are keen on the idea of long-term crude supply contracts that give them a lower export price than they can get in the global oil markets.

18 Oil Review Middle East Issue Three 2013

Plans to expand the 270,000 bpd Sitra refinery are being revived - again

That may be why long-standing and often delayed plans to increase imports from Saudi Arabia and to expand the 270,000 bpd Sitra refinery are being revived — yet again. As we have mentioned, Bahrain has for decades been forced to source a significant portion of the Sitra feedstock outside of the country. However, in the current political climate, with significant amounts of economic and political support extended to Bahrain from Saudi Arabia, there are hints of a favourable long-term contract. Talk is again of Preliminary Front End Engineering Design (pre-FEED) being completed and FEED plans underway. In fact Khalid Sabbagh, General Manager of the Bahrain Petroleum Co. (Bapco) told business news service Bloomberg in late January that FEED work should be completed

by June and construction on a 120,000 bpd pipeline expansion should begin in the second half of the year.

Bahrain was one of the first countries to seriously try to diversify its industrial base Expansion This pipeline expansion would be linked with refinery expansion, lifting capacity to 450,000 bpd. Bahraini Oil Minister Abdul Hussain Mirza unveiled the plans in May 2012. Bloomberg reported in its January article on Bahrain that plans had been concretised and that Bapco was in the process of asking HSBC and BNP Paribas to advise it on the process of raising around US$6bn of project finance.

This fits in with estimates for expansion of between US$6 and US$8bn; US$10bn is the entire upstream and downstream investment budget of the state company. The news agency also reported Bapco Chairman Adel Almolayyed as confirming the 2018 completion that had been scheduled.

Will these plans make a real difference?

Certainly Bahrain is resource poor compared to its

Gulf region peers. However, limited resource availability was an early driver for Bahrain to move not only into industrial and general economic diversification, but also to use its hydrocarbon know-how to export added-value hydrocarbon products. In line with that strategy, its petrochemical sector was also developed earlier than those of most of its neighbours.

But sourcing feedstock amid the domestic decline has been a long-standing challenge.

Securing the necessary investments to maintain a technical edge in a region investing heavily in its future refining capacity has been another challenge.

However, if the import pipeline and Sitra refinery expansion do finally get under way, the Bahraini economy would almost certainly benefit. At the very least these projects would help to make up for the slowdown in investment elsewhere in the economy due to the domestic political situation. The Sitra expansion project is also important given the significant youth unemployment problem, although it clearly won't turn things round on its own.

Competition There is, however, the question of terms. At a time when a large number of other export-oriented refineries and petrochemical facilities have come, or will soon come onstream - particularly in Saudi Arabia - the key for an enlarged Sitra will be the terms on which it is buying crude from Saudi Arabia, on top of its approximately 150,000 bpd Abu Safah allocation.

But international competition is going to make the downstream operating climate tough in the Gulf region as it has in so many other areas. The margins achieved will be the key to industrial growth - or even survival. Of course Bahrain still needs to get expansion under way, but an early indication of its prospects will be whether and on what terms it manages to secure project finance.

Whatever happens, realistically Bahrain’s hydrocarbon sector future rests with its downstream operations rather than upstream production. In the opinion of most observers, however, that has been the case for a very long time. ■ www.oilreview.me

S04 ORME 3 2013 E&P 01_Layout 1 22/04/2013 15:53 Page 19

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E&P

Saudi Aramco said the first phase production start-up at the Manifa field commenced recently.

Manifa starts first phase

of production A

CCORDING TO A statement from Saudi Aramco, the first phase of production at the Manifa field has begun three months ahead of schedule and well within the programme’s approved budget.

The Manifa field’s production capacity is expected to reach 500,000 bpd by July 2013, and is planned to reach its full design capacity of 900,000 bpd of Arabian Heavy crude oil by the end of 2014, while Saudi Aramco’s maximum sustained capacity will be maintained at the level preceding Manifa production.

Last October, Ali Al-Naimi, minister of Petroleum and Mineral Resources and Saudi Aramco’s chairman of the board of directors, led the board members on a review tour of the Manifa field production facilities and inaugurated reservoir water injection along the perimeter of the Manifa field.

The Manifa project is unique in many ways with its innovative engineering design to develop the field’s optimum production capacity, while caring for the environment and optimizing its budget.

The Manifa field includes dry-land rigs linked by a total of 41km of causeways with a number of elevated bridges designed to maintain natural water flow in the Manifa Bay and preserving natural marine nurseries.

Multiple successes Including a 420 MW heat and electricity plant, the project employed best in class technologies in infrastructure, drilling and production activities consuming more than 80mn man hours without a lost time injury, one of the best safety records in the industry, which qualified the project to receive the “Innovative Oil Project of the Year” award.

Speaking to Saudi Aramco’s leadership and

Khalid Al-Falih

The Manifa project is unique in many ways with its innovative engineering design to develop the field’s optimum production capacity employees, president and chief executive officer, Khalid A. Al-Falih, congratulated the Manifa Project team on their multiple successes by bringing Manifa on stream three months ahead of schedule in line with operational excellence, safety and environmental stewardship and reaching high level

of Saudization in operations, mainly attributable to Saudi Aramco’s investments in human resources, operations and infrastructure developments.

“The Manifa story will be a very bright and shining example in our corporate history,” he said.

“It really opens a new page in terms of overcoming various hurdles and complexities most notably through human and technological innovation,” said the CEO. It is a testimony to the company’s values, particularly citizenship, by caring for the environment, Saudization and relying on national vendors to the maximum extent.”

Al-Falih also praised training programmes offered by the company to its employees on the latest techniques in the design, construction, and operation of mega and advanced oil projects.

Manifa, discovered back in the 1950s, will not boost the kingdom’s sustainable production capacity beyond its stated 12.5mn bpd because Saudi Aramco plans to ease production at some of its mature reservoirs to increase their ultimate recovery rates in the long term, Falih has previously said.

Manifa will help the state-run company maintain export levels without running its older fields so hard, while supplying a new 400,000bpd refinery run by Aramco and France’s Total at Jubail on the OPEC heavyweight’s east coast with Arabian heavy crude.

“You will not see a change in export and production capacities,” a Saudi industry source said, adding “Production capacity will continue as 12.5 (mn bpd) for Saudi Arabia.”

The Manifa field will also be used to supply crude to an Aramco joint-venture refinery with China’s Sinopec in Yanbu, on the Red Sea coast. n

Views of Saudi Aramco’s Manifa field

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Valeura Energy awarded Thrace Basin licence CANADA-BASED OIL EXPLORATION firm Valeura Energy has announced that it has been awarded a new exploration licence, Banarli Licence 5104, on a 100 per cent working interest basis in the Thrace Basin of northwest Turkey.

The Banarli Licence 5104, which was awarded to Valeura by the General Directorate of Petroleum Affairs Turkey, has a four-year initial term and covers an area of more than 479 sq km spread over 185 sections located near the centre and deepest part of the Thrace Basin.

The company has said that the licence is ideally located to test for a potential basin-centre gas play and explore unconventional tight gas and shale gas in those areas where the Mezardere shale source rocks are at depths below 3,000 metres and may be at pressures

and temperatures sufficient to create an active ‘kitchen’ for hydrocarbon generation.

It added that the overlying Ergene, Danismen and Osmancik formations, which were also deeply buried across the licence, may also be prospective for conventional gas exploration.

Under the Banarli licence terms, a well will be required to be spud within the first year to keep the licence in good stead. Valeura Energy has plans to initially carry out a targeted 2D seismic program to complement the existing 2D seismic coverage on the licence.

The licence is unexplored with only two relatively shallow wells drilled, of which the latest, Karaca-1, was plugged and abandoned at a depth of 1,026 metres in November 2010.

Iraq increases reserves again IRAQ HAS RAISED its estimated crude oil reserves to 150bn barrels from 143bn barrels, with more oil discovered in oilfields being upgraded by oil companies and from a new oilfield in southern Iraq.

Iraqi oil minister Abdul Kareem Luaiby said, “The calculations that we have carried out indicate that our oil reserves have increased to 150bn barrels.”

Luaiby added that the new reserves come from Dima oil field, located in Missan province on the southeast of Baghdad, and from other fields. If the new added reserves are confirmed, Iraq, a member

22 Oil Review Middle East Issue Three 2013

of the Organisation of the Petroleum Exporting Countries, will rank third in global crude oil reserves after Saudi Arabia and Canada. Iraq’s proven oil reserves do not include those of the Kurdistan Region of Iraq, where many international oil companies are carrying out exploration and early development. Kurdish officials have estimated some 40bn barrels of oil in the region.

Luaiby also said Iraq is currently producing some 3.15mn barrels a day now and it is expected to add around 200,000 barrels a day by the end of this year

Iraq is also increasing its oil production

from fields such as Majnoon and Garraf which is being developed by consortia led by Royal Dutch Shell and Malaysia’s Petronas, respectively.

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New wells being drilled at South Pars IRAN HAS STARTED drilling four wells at the offshore section of the Phase 1 of the South Pars gas field in the Gulf. According to a report on IRNA, National Iranian Drilling Company official Mohammadreza Takaidi said that the South Pars Oil and Gas Company will drill the wells within 280 days.

The managing director of Pars Oil and Gas Company Mousa Souri had said in September 2012 that Iran will be able to earn US$8bn in revenue from every phase of the South Pars gas field. Souri had noted that the gas field accounted for eight per cent of the global gas reserves and that the development of each of the 24 phases could cause a one per cent growth in the national economy.

South Pars project manager Farhad Izadjou said, “The South Pars gas field phases 22-24 will produce around 12.5mn cu/m of natural gas once the phases become operational by May 2013. More than US$5.1bn will be invested to develop the three phases, which will hopefully produce 56.6 mn cu/m of sour gas, 75,000 barrels of gas condensates, 400 tonnes of sulphur and 870 tonnes of LPG.” Iran, which sits on the world’s second largest natural gas reserves after Russia, has been trying to enhance its gas production by increasing foreign and domestic investments, especially in the South Pars gas field.

The South Pars gas field covers an area of 9,700 sq-km, 3,700 sq-km of which are in Iran’s territorial waters in the Gulf. South Pars is the world's largest gas field, shared between Iran and Qatar.

According to the International Energy Agency (IEA), the field holds an estimated 1,800 trillion cubic feet (51 trillion cubic metres) of in-situ natural gas and some 50 billion barrels (7.9 billion cubic metres) of natural gas condensates.

Winstar registers production increase in Tunisia WINSTAR RESOURCES PROVIDED an update on its Tunisian production. The company's daily production is within its range of expectations. Winstar's daily production has ranged from 1,350 to 2,050 net barrels of oil equivalent per day (boepd). Variability in daily production is reflective of workover logistics and variations in natural gas nominations, at the Chouech Essaida Concession, from STEG (the Tunisian National Utilities Company). The company estimates its current stabilised production at 1,600 to 1,700 boepd.

This rate does not include incremental production expected from Chouech Essaida Triassic Well #11 ('CS #11') which is now expected to be completed before the end of April. The successful recompletion of CS #11 is anticipated to increase daily production to 1,800 to 1,900 boepd. Current production also does not include approxmately 80 boepd from the Sanrhar Concession, which remains shut-in due to its location and related logistical issues. There continues to be no estimated date, for the resumption of production at the Sanrhar Concession.

The installation of a surface pump at Chouech Essaida Silurian Well #10 ('CS Sil #10') was completed in early April 2013. To date, pumping activities have generated what is interpreted to be formation water which invaded the Triassic reservoir, with some traces of gas, which is consistent with the company's expectations.

Pumping is expected to continue for several weeks, if not more, to hopefully establish oil production from the virgin, or the not invaded, portion of the Triassic TAGI Formation.

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E&P

West Qurna protesters demand jobs HUNDREDS OF LOCAL protesters blocked a main entrance of Iraq’s giant southern West Qurna-2 oilfield, operated by Russia’s LUKOIL, demanding jobs in a sign of the growing challenges facing foreign firms operating in the south.

Local communities and tribes in Iraq, where foreign oil companies are developing the OPEC nation’s vast energy reserves, periodically protest to squeeze companies for jobs and other work benefits.

Around 500 angry protesters gathered at the

main entrance, demanding Lukoil supply jobs and compensation for land where it operates.

“We are protesting to get our rights. We have decided to block the entrance until field officials address our demands,” said Mizhir AlRwemi, a spokesman for protesters.

An official at the state-run South Oil Company said it was not the first such protest. “We are trying to deal discreetly with them,” the official said.

Iraqi oil police officials said security measures were tightened around the oilfield to prevent

protesters from getting inside where employees, including from Russia’s Lukoil, were working on developments operations.

OMV says Bina Bawi is commercial OMV HAS ANNOUNCED the completion of important milestones in the Kurdistan Region of Iraq. An extended well test (EWT) commenced production from the Bina Bawi-3 well on 20 March.

Furthermore, the contractor group has submitted a Declaration of Commerciality for the field to the Ministry of Natural Resources of the Kurdistan Regional Government (KRG).

The initial capacity of the EWT from Bina Bawi-3 is around 5,000 boe/d with the potential to expand beyond this level to approximately 10,000 boe/d, as future wells become available. The Bina Bawi field, located east of Erbil, is operated by OMV which holds

26 Oil Review Middle East Issue Three 2013

a 36 per cent stake, 44 per cent are held by Genel Energy and further 20 per cent by KRG. A further extensive testing programme will be planned on the Bina Bawi-4 and -5 wells during the course of Q2/13, and the contractor group will be moving ahead with the preparation of a Field Development Plan for submission to the Ministry of Natural Resources of the KRG in Q3/13.

Jaap Huijskes, OMV Executive Board Member responsible for Exploration and Production said: “We are very pleased with this result. The progress of the development of Bina Bawi as well as the Declaration of Commerciality are important

milestones to further expand our business in this region. In accordance with our partners, Genel and KRG, we will continue our work to fully appraise the potential of this promising field. OMV sees the Kurdistan Region of Iraq as an important area for growth and the progress on the Bina Bawi field underlines our ability to execute our strategy.”

Genel Energy acquired an additional 21 per cent interest in the Bina Bawi exploration block from Hawler Energy for US$240mn late last year. The Transaction was in addition to the company's acquisition of an initial 23 per cent interest in the Bina Bawi block.

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Gas

Saudi Basic Industries Corp. (SABIC) is planning to build a new cracker in the US to capitalise on the country’s growing shale gas sector.

SABIC looks to capitalise on

shale gas boom A

CCORDING TO MOHAMED Al-Mady, SABIC’s CEO, the firm is in talks with partners to invest in at least one or two projects in the US shale gas business to seize opportunities in the shale revolution.

“We are talking about a cracker, building a new cracker,” Reuters quoted Al-Mady as saying on the sidelines of a forum in south China.

“We are looking at least at one or two investments.”

He ruled out venture capital as a source of financing. Crackers are used to convert hydrocarbons into simpler molecules.

Asia is today’s global engine of growth and one of the world’s largest economic power houses. The continent’s sustainable development and growth was in focus during a discussion this week at the Boao Forum for Asia (BFA) Annual Conference in Hainan, China.

Mohamed Al-Mady, vice chairman and CEO, along with leaders from government, business and academia in Asia and other continents, were at the forum to share their vision and perspective on the most pressing issues in this region and the world at large.

With the goal of building and sustaining development and growth in mind, Al-Mady said: “The economic trends in Asia are not dissimilar to those found in Saudi Arabia and the rest of the Middle East. The success we both enjoy are a result of exports on a global scale translating into rapidly growing economies with a strong and expanding middle class. Higher wages and consumption are the natural outcome, which also bring about challenges for us to produce more, waste less, and insure a sustainable future for our environment and society.”

SABIC has become an integral part of the social and economic fabric of each country in which it operates and has shared ambition with local communities to enhance quality of living through delivery of material sustainability.

Central to its sustainability strategies, the corporation has clear and measurable objectives focused on reducing its carbon footprint and energy consumption through its management culture and practices globally; helping customers design products to enable positive contribution to world sustainability; and investing in new manufacturing processes that do more with less raw material, water, energy and produce lesser waste and emission.

“Our future growth and development is dependent on creating solutions for the major

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The shale gas business in the US offers numerous investment opportunities

To help spur innovation and tap local talent, SABIC has set up technology and innovation centers around the world issues facing society today and tomorrow — successful solutions that create value for society and in turn, growth for our business,” Al-Mady added.

One such solution is the emergence of shale gas as a viable natural gas source.

Speaking at the keynote roundtable on Shale gas: the changing landscape of energy security, AlMady touched on the potential for its development in Asia, and how it would create global shifts in economic power.

“Asia is SABIC’s largest market and we remain upbeat about the region’s economic growth in the years ahead — charted by positive forces spurring sustainable development and growth,” he said.

“China will continue to play a major role in enabling Asian economies growth and steering the global economy stability,” he added.

“Clearly reflected in the country’s 12th FiveYear Plan, it states an increasing focus on reducing

environmental impact, increasing its value addition through efficiency and technology while maximizing growth of its domestic consumption.

The rise of the Next-11 Asian economies will also lead to an expanded presence in terms of opportunities and growth, for example, in Indonesia given its major oil and gas resources and the sheer size of its market,” he said.

On SABIC’s firm commitment toward fostering environmental sustainability where its interest in shale gas is related to utilisation in manufacturing of petrochemicals, not exploration and exploitation, Al-Mady asserted: “We believe the answer lies in bringing sustainability and innovation together. To us, sustainability requires innovation, and innovation finds its value in sustainability. There is no sustainability without addressing the fundamental business challenges that we will face in the years to come. Novel concepts toward ‘additive manufacturing’ tightly connect innovation, manufacturing, supply chain, and commercialisation that have been pioneered by the chemicals industry will result in more efficiency and less waste. This creates a virtuous cycle that will benefit countries, people and the environment for future generations.”

In its commitment to Asia’s growth and development, SABIC stated and its journey started in 1976 when the Kingdom formed the company to

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Gas

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Al-Mady - looking at ‘one or two investments’ in North America

move from hydrocarbon extraction and low-value processing to high value manufacturing of specialty chemicals and engineering plastics.

Today SABIC materials are the building blocks of various industries, including automotive, construction, electrics and electronics, and packaging.

Across Asia, SABIC has built long term commitment and business relationships in the markets it operates in since the 1980s — creating local partnerships and investment to serve customers; hiring and training its workforce to develop innovative mindsets; transferring technologies and expertise; fostering environmental sustainability and contributing to social development in local communities to achieve winwin outcomes.

To help spur innovation and tap local talent, SABIC has set up technology and innovation centers around the world.

Today there are 18 research facilities globally, including four upcoming centers in Shanghai, Bangalore, and two in Saudi Arabia which should be ready this year.

These technology centers, are part of SABIC’s efforts at a country level to improve manufacturing processes, develop new and better products, and contribute to sustainable environment for the communities.

The development work being done aims to drive ingenuity forward to meet specific needs of customers as well as the wider society.

SABIC has become an integral part of the social and economic fabric of each country in which it operates In China, SABIC collaborates with educational institutions to bring academia and industry together such as with the Dalian Institute of Chemical Physics, and the Fudan University. Our close partnerships with the universities and institutions also put us near sources of fresh talent and ideas.

A supporter of BFA for the fourth consecutive year since 2009, SABIC is a platinum sponsor and Mohamed Al-Mady is a member of the board of BFA. The founding of the Boao Forum, which promotes regional economic integration and brings Asian countries even closer to their development goals, was driven by China and officially launched by 26 national states in 2001, with its first meeting held in 2002. n

Qatargas delivers first LNG cargo to Singapore QATARGAS HAS DELIVERED its first ever cargo of liquefied natural gas (LNG) to Singapore. The cargo was delivered on board the Q-Max LNG carrier ‘UMM SLAL’ to Singapore LNG Corporation Pte Ltd’s (SLNG) first LNG receiving terminal at Jurong Island. The UMM SLAL began her voyage from Ras Laffan Port on 17 March with approximately 200,000 cubic meters of LNG onboard and on 27 March, she safely berthed and commenced discharging her cargo at Jurong Island LNG terminal, marking the first delivery of LNG from Qatargas to Singapore. This delivery will further strengthen the relationship between Qatar and Singapore as well as between the two companies over the long-term.

The Singapore LNG Terminal is the second LNG terminal in South East Asia to procure commissioning cargo from Qatargas. In June 2011, Qatargas delivered a commissioning cargo to Thailand’s Map Ta Phut LNG Terminal. Qatargas has developed considerable expertise in supporting the commissioning of new LNG Terminals globally. To

The cargo is delivered

date, the company has provided commissioning cargoes to nine LNG terminals, with Singapore being the tenth such arrangement.

Kuwait sees opportunities to join the shale gas ‘revolution’ KUWAIT COULD LOOK to tap unconventional resources as it begins investigating the prospect of extracting shale gas, according to a report.

The oil-rich Middle Eastern nation is looking at the possibility of tapping into what could prove a reserves base in its northern fields, a local oil sector official told Reuters recently.

The official, speaking on condition of anonymity, told the news wire that the Opec nation could produce up to between 150 million to 200 million cubic feet per day of shale gas.

If Kuwait were to pursue shale gas production, it would look to work a company specialised in this field, the official told

30 Oil Review Middle East Issue Three 2013

Reuters. No time frame was given, however, and discussions on shale gas investigation are at an early stage.

As early as November 2010, East West Petroleum Corp sealed a deal with Kuwait Energy covering the use of its unconventional oil and gas technologies at the company's concessions across the Middle East, North Africa and Eurasia.

“The purpose of the agreement is to identify unconventional resource plays such as shale gas, shale oil and tight gas sands for future development,” East West said at the time.

The agreement covered a total of 13 exploration and production licenses across four countries in which Kuwait Energy holds

exploration and production interests.

Meanwhile, growing production from US shale deposits is not a threat to Kuwait due to its higher costs, the country's oil minister Hani Hussein said in recently published remarks.

"There is no effect on Gulf crudes from shale oil in the United States as it will take a long time for this crude to have an impact because of its high cost," Mr. Hussein said, according to the official Kuwait News Agency, or KUNA. "Gulf countries have huge reserves that can be produced at simple costs," he added.

Analysts have previously said that producing oil from US shale is estimated to cost around US$50-75 a barrel, while in the Gulf production costs are often less than US$20. www.oilreview.me

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A cost-effective alternative to flaring

www.oilreview.me

handle H2S in ways that simultaneously protect people, their commercial interests and the planet,” says Sheldon McKee, Director of Business and Product Development at AMGAS. “The SCOR process is truly a sustainable solution.

The SCOR process integrates processes, service and equipment with dependable technological innovations that meet AMGAS’s exacting standards. It is a cost effective way to manage risks to polluting emissions and other contaminations in sour oil and gas. To ensure the highest level of service AMGAS has partnered with Rutledge E&P Pte Ltd. that provides services for drilling and exploration. Rutledge is based in Singapore and has operations throughout the Middle East.

“Our goal is to take the best practices established over the years in Canada and make them a global standard,” says McKee. “It is a win-win situation for everyone.

Producers save money and time and there is protection for people and the environment.”

Gas

AMGAS SERVICES INC. (AMGAS) has launched its new Sour Crude Oil Recovery (SCOR) process, apparently in response to the increased development of sour oil and gas in the Middle East. Sour oil and gas well intervention is difficult to handle and treat due to lack of infrastructure, technology and experience in the Middle East, the company said in a statement. As a result, those crude resources, laden with hydrogen sulfide (H2S), have been routinely flared, leading to a loss of commercial goods as well as presenting environmental and safety hazards. AMGAS’ SCOR process provides multiple avenues for treating, storing, recovering or transporting sour crude oil.

The process fulfills the sustainability requirements of the triple bottom line in that it protects people, environment and investment, the company added.

“We have been handling and treating H2S in Canada for years. With sour crude oil now being produced in the Middle East we need to use our expertise and capabilities to

www.rutledgeh2s.com

The SCOR process allows recovery opportunities for extended well tests, which improve well/zone evaluation and drilling plans. Extended well tests are now possible because of the elimination of burning crude and the consequences associated with it.

Recovered sour crude oil is loaded, transported and treated safely in the SCOR Transport TankTM allowing commercial recovery of the oil. This also allows for extended testing parameters due to the cost savings of recovered crude oil.

Oil Review Middle East Issue Three 2013 31

Gas

S06 ORME 3 2013 Gas_Layout 1 22/04/2013 16:36 Page 32

Why gas processing is key for the energy industry GLOBAL MARKETS ARE preparing themselves for surges in gas supplies, as companies increasingly look to natural gas as the fuel of the future.

One of the major technological advances that has revolutionised the gas industry is Liquefied Natural Gas (LNG), as well as the potential costsaving benefits to consumers and operators of Floating LNG (FLNG).

Yet it is the processing segment of the natural gas industry that rarely receives public attention, despite its enormous importance to the entire supply chain. Since the early days of the energy industry in the 1800s, natural gas and gas liquids have supplied about one-half of total petroleum energy production in the US alone.

The light hydrocarbons industry plays a vital role in meeting the increasing energy consumption demands of the world.

It is an exciting time to be involved in the gas processing section of the energy industry – but one that comes with a multitude of challenges, according to John Sheffield, of the Gas Processors Association Europe (GPAE).

Sheffield said: “The gas market has grown beyond recognition in recent years and while a major part of that revolution has been LNG, it is clear that the dawn of FLNG will lead to new and exciting opportunities.

“Advances in technology have made the production previously economically unviable opportunities commercially attractive, and we are now seeing global majors investing heavily in the FLNG process.

Preparations for the world’s first FLNG projects are now well underway and it is critical that we as an industry take the time to understand the challenges presented by this great opportunity.”

Kingdom to drill shale gas wells SAUDI ARABIA WILL drill about seven test wells for shale gas this year. It will push ahead with exploratory drilling of shale and other unconventional gas reserves which could be twice the size of its conventional gas reserves, which total 286 trillion cubic feet, according to Minister of Petroleum and Mineral Resources Ali Al-Naimi.

“We know where the areas are,” Al-Naimi said at a conference in Hong Kong recently. “We have rough estimates of 600 trillion cubic feet of unconventional shale gas. The potential is very huge and we plan to exploit it,” he said during a Credit Suisse conference.

Al-Naimi said the Kingdom “will not stint” in ensuring that its customers’ oil needs are met.

The Kingdom may hold as much as 645 trillion cubic feet of Al Naimi - “rough estimates” technically recoverable shale gas, the world’s fifth-largest deposits behind China, US, Argentina and Mexico, according to estimates by Baker Hughes Inc. The Kingdom also has about 282.6 trillion cubic feet of proven conventional gas reserves, according to Aramco’s 2011 annual report. AlNaimi didn’t say how quickly Saudi Arabia might begin commercial production of shale gas or shale oil, or describe how it will supply the large amounts of water used in hydraulic fracturing, or ‘fracking’, the process used to extract oil and gas from shale.

Exxon, BHP plan world’s largest floating LNG plant EXXONMOBIL AND BHP Billiton are planning to build the world’s largest floating liquefied natural gas (LNG) processing and export plant off the northwestern shore of Australia, despite growing concerns about the cost competitiveness of the country’s LNG projects. At around half a kilometre long, the vessel would be nearly as long as five football fields laid end-to-end and would be the largest floating facility in the world. The plant would bump up Australia’s current LNG production by nearly 30 per cent, producing

But will it be cost competitive?

6mn to 7mn tonnes per annum (mtpa), enough to fuel the LNG needs of Japan, the world’s largest importer of the gas, for about a month. Exxon and BHP’s decision to

develop the Scarborough field using floating LNG is another vote of confidence in the as yet untried technology, which energy companies hope will help cut down on the ballooning costs of developing gas. Exxon, which detailed the plan in a filing with Australia’s environment department, did not give a cost estimate for the plant. Australia currently has US$190bn worth of LNG projects under way and is on track to replace Qatar as the world’s largest LNG exporter by the end of the decade.

PDO employs drone technology to monitor flaring PETROLEUM DEVELOPMENT OMAN (PDO) has employed an unmanned aerial vehicle (drone) to undertake its first ever live flare inspection at one of its interior oilfield locations, the company has announced.

According to a report in the Oman Daily Observer, the drone is designed to survey live flare emissions at the Petroleum Development Oman’s (PDO) facilities and is one of several achievements reported by the company last year.

According to the report, the aerial mission was part of PDO’s ongoing efforts to minimise its impact on the environment, production interruptions and HSE exposure.

‘Our innovative approach means PDO has continued to embrace new ways of thinking and working. Both in our coastal operation and in the interior, the latest

32 Oil Review Middle East Issue Three 2013

technology is being deployed to discover new reservoirs, improve recovery from unconventional wells, reduce energy consumption and increase collaboration,’ the newspaper quoted the company as saying.

The company also rolled out equipments last year including an innovation, known as Nibras, which is described as a web-based well monitoring tool developed in-house for well and reservoir management.

Equipped with ‘smart alarms’, this tool is useful in identifying the cause of an alarm. The biggest highlight of last year for the company was an ongoing pilot study involving the use of concentrated thermal energy from the sun to produce low-cost, low-emission steam to extract heavy oil, said the report. www.oilreview.me

S06 ORME 3 2013 Gas_Layout 1 22/04/2013 16:36 Page 33

S07 ORME 3 2013 Petrochem Arabia_Layout 1 23/04/2013 15:28 Page 34

TESCO to highlight capabilities TESCO is a joint venture company between foreign partners that includes Tharawat Foundry and Industrial Co (TFIC), Tharawat Development Company (TDC) and Zonke Engineering.

TESCO’s service and repair facility is situated in the heart of Jubail Industrial City and focuses on pump refurbishment, mechanical seal retrofitting for equipment not achieving desired (MTBF) targets, and maintenance and cleaning of vahterus plate and shell heat exchangers. With its trained and experienced technicians, TESCO’s goals are to provide the highest level of service to its clients in the industry.

The company’s workshop capabilities apparently include pump refurbishments, the maintenance and cleaning of Vahterus Plate and Shell Heat exchangers, mechanical seal refurbishments and testing, milling, turning (up to one metre), fabrication, arc welding and TIG welding, drilling, cutting, breakdown repairs, general maintenance.

TESCO’s Engineering department is also able to reverse engineer critical rotating equipment components to OEM specifications to avoid plant downtime.

These repairs ensure extended mean time between failures (MTBF) and help to reduce total cost of ownership.

The company also claims it can give new life to seal that is no longer performing in the field.

“Our quality control process produces a mechanical seal that is both precision tested and reliable,” said a spokesman.

He added that TESCO believes its repair facility is unique.

“We have made a commitment to repair all mechanical seal styles regardless of manufacturer. We repair to a like-new condition. If the seal is not repairable, we will quote a new Trem Engineering seal as replacement. We also offer a range of exchange programmes to suit the customer's needs.”

34 Oil Review Middle East Issue Three 2013

www.tharawatengineering.com

TESCO has designed the repair facility to combine state of-the-art engineering and manufacturing capabilities.

“We view this commitment as a necessity to properly service our end users in today's market. Each seal component is decontaminated and evaluated in detail: faces, secondary seals and bellows testing, metallurgical examination, and critical dimensions evaluation,” the spokesman said.

www.oilreview.me

S07 ORME 3 2013 Petrochem Arabia_Layout 1 24/04/2013 10:30 Page 35

A key downstream event is being held in Saudi Arabia’s Eastern Province in May – expected to be the largest gathering of downstream professionals anywhere in the Kingdom this year.

Key themes to be

discussed A

S THE GULF’S petrochemical ‘hub’ Saudi Arabia’s Eastern Province is now home to some of the world’s largest processing companies, operating in all sectors (listed briefly below) and accounting for more than one-half of the GCC region’s total petrochemicals output.

These key intermediates and finished products include the full range of olefins, aromatics and synthesis-gas products produced by this huge global industry today.

Major petrochemical-related products now emerging from the Eastern Province ‘cluster’ include ammonia/urea, methane, ethylene, propylene, benzene, butadiene and other by-products of the steam cracking process, products within the complex benzene/toluene/xylene (BTX) family, individual high-spec coolants used in internal combustion engines, polyesters, polymers and PVC. For an up-to-date analysis of the prospects of just one sector of this business, the ammonia-based industry – fertilizer-grade urea was one of the very first products to be produced on a really large scale within the Kingdom see Issue 8/2012 of Oil Review.

And propylene itself is of course the key building block for a wide range of acrylic polymers and epoxy resins used in manufacturing activities of most types – for which Saudi Arabia (with its overseas investors) is now a major global source.

Major petrochemical-related products are now emerging from the Eastern Province ‘cluster’ Saudi-produced benzene is also used to make adhesive resins along with polystyrene, polycarbonate, various polyurethanes, detergents and various synthetic fibres of which the best known is of course nylon.

The thriving industry represented in total by these exceedingly valuable products within the Kingdom as a whole (i.e. including the important West Coast facilities) now employs nearly 60,000, and rising, according to the regional industry association GPCA (Gulf Petrochemicals and Chemicals Association).

Supported by the Royal Commission for Jubail & Yanbu, the SAGIA Investment Authority, the authorities controlling the Industrial Clusters, and a host of individual industrial operators the two-yearly Petrochem Arabia technical/strategic conference and business exhibition has established itself as a major downstream forum, drawing attendance from all over the world.

More than one hundred exhibitors are expected at this year’s combined event which runs from 19-21 May (open until 1800 hrs daily, and much later on the first evening).

The venue is again the Dhahran International Exhibitions Center in Dammam. With over 160 delegates expected this year the conference at the heart of this event will be bringing together a wide range of professionals from the processing, refining and all-forms energy industries to discuss key issues and future plans, affecting the Kingdom in particular, but of interest to downstream professionals from all over MENA as well.

These include the impact of shale gas and other unconventional hydrocarbon resources, the topic of a special presentation at 1600 hrs on 13 May. The ammonia industry cited above, for example, is already being widely affected by this, as our correspondent emphasised in our end-2012 edition.

Fortunately gas is not the key feedstock for most other petrochemicals

www.oilreview.me

www.petrochem-arabia.com

produced within the Kingdom, but the importance of other unconventionals is almost certainly on the way up.

Key themes being discussed this year are as follows; much fuller details with individual presentation timings and the credentials of speakers can be found on the website under various categories within the ‘Conference’ pages: 6 Industry outlook - Impacts of global developments, gaining a competitive advantage through strategic growth; the procedures and activities of the Royal Commission Proven/emerging technologies/processes – Sipchem’s PAD Center; SHEMS development and implementation; optimising existing assets/developing new production processes 6 Catalysts – Using developments to improve output; evaluating innovations; process improvements Feedstocks, availability and alternatives – Impact of shale gas and unconventionals; generating highest value in output terms 6 Industry expansion via collaboration – Various aspects of joint venturing Increasing efficiency through strategic/operational improvements – Planning; a local case study 6 Specialty products and their conversion – Creating value chains; consumer market insights; sustainable ’green’ solutions for production of plastics; value/employment creation in general.

Key speakers at this year’s Petrochem Arabia conference include the Secretary-General of OAPEC, HE Abbas Ali Al-Naqi, the GM (Polymers) of Saudi Kayam Petrochemical Co, Essam A Al-Muwallad, and a representative of the Board of Zamil ChemPlast, Eng Osama Abdulaziz Al Zamil.

Oil Review is delighted to have again been selected as an official media partner for this major regional event. ■ www.petrochem-arabia.com for all details or info@diec.com.sa (venue) or info@bme-global.com (both exhibition and conference) Oil Review Middle East Issue Three 2013 35

S07 ORME 3 2013 Petrochem Arabia_Layout 1 23/04/2013 15:28 Page 36

Shell awards John Crane a five-year deal JOHN CRANE ANNOUNCED recently that Shell has awarded it a five-year enterprise framework agreement (EFA) to supply products and services for Shell’s upstream, midstream and downstream oil and gas operations worldwide. Under the global agreement, John Crane will be a key supplier of mechanical seals and seal support systems used for new projects and associated aftermarket services in existing facilities.

Additional products that may come under the agreement include couplings, bearings and specialty filters.

Duncan Gillis, President and CEO of John Crane, said: "As a supplier of critical components used in the energy sector, it is important that we work closely with global customers like Shell to address the growing demand for energy. Through our global footprint of more than 235 locations, we can deliver responsive local service anywhere Shell operates. This, coupled with our 95 years of expertise in engineering technology, positions us to fulfill the agreement requirements and meet the needs of Shell’s mission-critical operations."

John Crane currently serves the upstream, midstream and downstream segments of the oil and gas industry. Fulfilling this agreement will, trhe company believes, accelerate John Crane’s growth across all market segments.

John Crane says it is a global leader in the design and manufacture of mechanical seals, couplings, hydro-dynamic bearings, seal support systems, and filtration systems. The company serves a variety of markets including the oil and gas, chemical, pharmaceutical, pulp and paper, and mining industries.

John Crane employs more than 7,000 people and has operations in over 50 countries.

A wide range of protective coatings HEMPEL IS A leading coatings supplier for the decorative, protective, marine, container and yacht markets. From windmills and bridges to hospitals, ships, power stations and homes, Hempel coatings protect man-made structures from the corrosive forces of nature.

With a focus on R&D, advanced production techniques and professional coating advice, the company works around the globe to help keep its customers’ investments safe and longer lasting.

Hempel works with many of Saudi Arabia’s leading companies, including Saudi Aramco, SABIC, SCECO and SWCC. The company works closely with each customer to develop the best solutions for each project - and www.hempel.sa Hempel’s customers have access to a worldwide network of coating advisors, consulting engineers and contractors. From oil refineries and chemical plants to pipelines, Hempel’s coatings protect many structures around the Kingdom.

Many of Hempel’s products help shipowners increase the fuel efficiency, and reduce the environmental impact, of their vessels. In Saudi Arabia, Hempel’s marine customers include the Royal Saudi Navy, the National Shipping Corporation of Saudi Arabia and Saudi Aramco.

Secure systems eliminate cargo damage

Custom-made wooden pallets

DO YOU SHIP your chemicals in 55 gallon drums, super sacks (big bags), 25kg bags and/or IBCs? Cordstrap claims to have a safe and cost effective cargo securing system for you.

Cordstrap manufactures a wide range of dunnage bags, strapping systems and lashing straps for the chemical industry. Indeed, the company has been offering cargo securing systems to the chemical and petrochemical industry for over 45 years.

Variables such as nature and weight of the product, as well as the mode of transportation determine the right solution for you. In consultation with the customer, Cordstrap will decide on a cargo securing system specifically designed for the safe and damage free transportation of your www.cordstrap.net chemical and petrochemical products.

To provide its customers in the Middle East with a quality service, the company recently opened a manufacturing facility in Dubai.

Manufacturing its products in the Middle East allows Cordstrap to provide its customers in this region with a product of consistent quality including very short delivery times.

Cordstrap experts are available in almost every country in the Middle East. This enables the company to offer personal advice, deliver solutions to any cargo securing problem, assist and train its customers.

INMA PALLETS IS one of the leading suppliers of industrial wooden pallets in Saudi Arabia. The company provides a wide range of hardwood and softwood pallets for industry and export use. In addition, Inma Pallets produces custom-made pallets to meet clients’ specific requirements

36 Oil Review Middle East Issue Three 2013

www.inmapallets.com

Inma Pallets is proud of its reputation for reliability, which it claims is founded on an uncompromising commitment to quality. For example, the company insists on the finest materials, and the hardwoods and softwoods used are specially selected and purchased by different sources.

Operating from factories in Jubail and Yanbu, and with a well-trained and highly skilled workforce, Inma Pallets provides clients throughout the Kingdom with proven and reliable products at competitive prices, and the highest level of service.

Clients include such prestigious companies as Sabic, Saudi Aramco, Tasnee, Advanced, Obeikan and Petro Rabigh.

The company was established in 1985 as a wholly-owned subsidiary of Khalid Ali Alturki & Sons Company (‘Alturki’), which is a leading Saudi family owned investment and development company. Alturki’s subsidiaries and joint venture companies are involved in contracting, trading, manufacturing, and consulting focused specifically on the construction, energy, petrochemicals, water, and power sectors as well as telecommunications, environment, and real estate primarily in Saudi Arabia.

By leveraging its extensive experience, deep sector specific expertise, and expansive regional and international network, Alturki takes a proactive and strategic approach in developing new businesses either independently or in partnership with local or multinational best-in-class industry leaders.

www.oilreview.me

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S08 ORME 3 2013 PDO_Layout 1 22/04/2013 16:55 Page 39

Oman’s production is on the increase, but operators are not finished yet as new technology continues to squeeze more oil and gas from the nation’s reservoirs.

Oman

Oil and gas production

surge continues O

MAN’S OIL AND gas production has enjoyed something of a renaissance in recent years. And it’s no accident either. After a period of stagnation, and then decline, officials took the decision to do whatever was necessary to reverse the trend.

That meant maximising the potential of the nation’s comparatively limited hydrocarbon reserves through new and advanced extraction techniques. Oman has since carved out a name for itself as something of a leader in enhanced oil and gas recovery (EOR) within the Gulf.

And the benefits are there to see. Oil production increased in 2012 by a further four per cent, including condensates, to an average of 918,000 barrels per day (bpd), Nasser al-Jashmi, Undersecretary at the Ministry of Oil and Gas, said in March.

Figures vary, of course, but according to BP’s Statistical Review of World Energy, Oman’s oil production in 2011, with condensates, tallied 891,000 bpd.

It therefore represents a fifth successive year of production growth for the country, a huge turnaround from a low point in 2007, when production sunk to 715,000 bpd.

Current production levels also begin to close in on historical highs for the country. In 2001, Oman’s production stood at 960,000 bpd, according to BP’s records. The government’s aim is to challenge the one million bpd mark for liquids, although this still seems some way off.

Nonetheless, the trend is most definitely positive.

It has been made possible through an all-round sustained and intensive industry effort, al-Jashmi added, with a number of new oil discoveries and extensive drilling throughout the past year.

During 2012, al-Jashmi estimates that some 41 exploratory wells were drilled, while more than 1,000 other wells (workovers, appraisal, development) were drilled, underlining ongoing investment appetite. He also underscored the importance of EOR projects in this revival.

And it has all had a huge and positive impact on the economy, with the sector’s contribution to gross domestic product (GDP) rising from 30 per cent in 2011 to 55 per cent last year.

Much of this upstream activity is led by national oil champion Petroleum Development Oman (PDO) which still dominates the sector, accounting for about 70 per cent of the Sultanate’s oil output, and nearly half of its gas production.

Other local operators are playing an important role too though, reflecting the diversity of www.oilreview.me

PDO has played an integral role in expanding the nation’s reserves through the years

Perhaps one of the most exciting projects due up this year is BP’s proposed Khazzan gas project investment in Oman’s energy sector. Omani upstream firm Petrogas, notched up record production of 56,000 bpd last year, for instance, up slightly on the year before (54,000 bpd).

However, foreign firms continue to show great interest too, which bodes well for the future.

Foreign majors include British oil giant BP, as well as Shell and Total, both co-shareholders in the PDO venture, alongside the government.

All of these companies, and others, remain highly active in the field.

Significantly, Oman has been successful in attracting smaller players to the table too, which underlines the general healthy nature of the E&P sector.

The latest new entrant is US independent PetroTel, which recently signed a three-year agreement for Blocks 39 and 67 in Dhofar.

It joins a long line of smaller firms that have successfully carved out a niche in Oman, a place that - unlike so many other locations in the Gulf continues to offer opportunity to companies other than the very largest multinationals that tend to dominate in the big OPEC states.

Among the more established smaller players in the Sultanate is Tethys Oil which holds an equity share in three separate blocks, 3, 4 - where its partners include Mitsui and CC Energy Development - and block 15.

Oil Review Middle East Issue Three 2013 39

Oman

S08 ORME 3 2013 PDO_Layout 1 22/04/2013 16:55 Page 40

Its net share of production from the first two blocks, before government take, averaged 4,005 bpd in February 2013; total average production from the two blocks amounted to 13,349 bpd, a small but important contribution to the national figures. US independent Occidental Petroleum (Oxy), which is presently the second largest hydrocarbon producer in the Sultanate after PDO, is set to be extra busy this year.

According to the company’s local chief, Isam alZadjali, Oxy Oman’s campaign for this year will include the drilling of hundreds of new wells, seismic acquisition, appraisal work, and the formulation of field development plans.

The company holds four blocks: 9, 27 and 62 in North Oman, and Block 53 in central Oman where heavy oil is produced from the Mukhaizna field using EOR-based steam injection.

According to al-Zadjali, cited in March by the Oman Observer, around 536 wells are to be drilled in 2013, slightly up on the year before.

Oxy has already delivered in the field, especially in Block 9, where output has soared from less than 5,000 bpd of oil when the area was acquired in 1984, to 135,000 barrels of oil equivalent per day (boepd) today; this includes around 90,000 bpd of oil.

Al-Zadjali says Block 9 contains “the crown jewel” of the pack, the Safah field, which is still yielding new finds after almost 30 years in operation. “This has prompted us to shoot seismic in the southern and eastern parts of the block. The seismic project began last year in Block 27, and will continue in Block 9 this year,” said al-Zadjali.

One of the greatest challenges Oman faces going forward - and a key test for all operators - is its limited reserves profile, certainly in comparison to other regional peer states.

Though it may be unfair to compare Oman’s 5.5bn barrels of reserves to Saudi Arabia (265bn barrels), it still seems very much shortchanged compared to the likes of Kuwait (101bn barrels) and Abu Dhabi (97bn barrels).

Oil production in Oman increased by four per cent last year

40 Oil Review Middle East Issue Three 2013

The ability to attract investment, therefore, both from large and small players, is a real testament to the appeal of Oman, and its benign business climate.

It is also vital if the Sultanate is to push its reserves up in the years to come.

PDO has naturally played an integral role in expanding the nation’s reserves through the years; about 20 years ago, Oman’s national reserves were estimated at about 4.3bn barrels.

Replenishing oil and gas volumes remains a top priority for all operators, especially with production levels surging. Reserves replacement was high on the agenda for PDO last and year and will be again in 2013.

Significantly, Oman has been successful in attracting smaller players to the table too Luckily, the benefits of new technology extend not only to a greater ability in producing oil and gas, but also in identifying potential new reservoirs and verifying them.

And Oman is also pushing forward with the same far-sighted aggression on the gas side too.

In 2012, natural gas production increased 3.3 per cent to 98.2 million cubic metres per day over the previous year.

And this year started well too with a significant gas find made in the northern part of PDO’s concession area.

Mabrouk Deep, some 40km west of Saih Rawl, Oman’s main gas field, has estimated in-place reserves of 2.9 trillion cubic feet (tcf) of gas and 115mn barrels of condensate.

PDO is already calling it ‘one of the most significant gas finds in PDO history’.

Exploratory drilling at the site took place last year at depths of up to 5,000 metres.

And gas from the area is already making an

impact after the Barik and Miqrat reservoirs at Mabrouk-32 were hydraulically fractured and tested in late 2012.

The well is now hooked up and producing through existing facilities at Mabrouk, with plans to fast track the project to full field development taking shape.

Perhaps one of the most exciting projects due up this year is BP’s proposed Khazzan gas project.

This US$15bn mega project will target a series of deep tight gas reservoirs in Block 61, in the northern part of Oman.

The proposed tight gas project will include between 300 and 400 wells, plus export infrastructure and 600km of flowlines and gathering systems.

A final investment decision on this mega project is anticipated this year although BP has already started to let early contracts, most recently seeking transportation services from local companies to carry workers to the remote site.

If the scheme gets the final go ahead, which now seems likely, it will be a massive boost for the nation’s fast emerging gas industry.

Much of Oman’s renaissance can be pinned on the deployment of new technology.

BP’s Khazzan project, for example, and Oxy’s enduring success, highlight how well Oman has been able to reward companies for utilising new and complex - and costly technologies in the field.

Oxy’s Mukhaizna field in Block 53, which has more than two billion barrels of oil, and was first discovered in 1975, is a good example.

It injects close to 600,000 bpd of steam to produce 124,000 bpd of oil from the field.

And such detailed analysis of the field’s makeup has led to new things.

“One interesting thing about Mukhaizna is it never ceases to amaze you,” said Oxy chief alZadjali. “Two years ago, we found a shallow formation called Khamah, which is an interesting find. We found it basically because we scrutinised it carefully, leaving no stone unturned, and lo and behold, we found hundreds of millions of barrels of oil in place in Khamah.”

Trials targeting the Khamah reservoir began last year. There are plans to drill 11 wells during 2013 to extend the size of the reservoir, with the aim of submitting a development plan by the end of the year.

There are also plans to test the deep exploration potential of the Mukhaizna either this year or in 2014.

PDO’s involvement in maximising production through new technology is also evident.

There was extensive appraisal drilling and testing on its Khulud tight gas fields - among the deepest tight gas developments in the world - including horizontal wells and hydraulic fracturing operations.

At present, EOR accounts for three per cent of the group’s portfolio although this is expected to hit 16 per cent by 2016 and 27 per cent by 2021 as conventional supplies diminish.

The company currently has a total of six EOR trials in operation or in engineering execution. www.oilreview.me

S08 ORME 3 2013 PDO_Layout 1 22/04/2013 16:55 Page 41

Oman

S08 ORME 3 2013 PDO_Layout 1 22/04/2013 16:55 Page 42

In 2012, two major EOR projects came on stream: at Qarn Alam and Harweel (2AB).

At Qarn Alam, PDO is using a thermally assisted gas oil gravity drainage recovery mechanism, the first time this has been attempted in a carbonate field anywhere in the world.

The Harweel (2AB) miscible gas injection project, another world-scale EOR scheme, came on stream with first year production well ahead of schedule at some 25,000 bpd, increasing through the year into 2013.

More recently, in December, the Amal West Solar Steam Generation Pilot started producing first steam.

The aim is to use concentrated thermal energy from the sun - using specially designed, lightweight reflective mirrors - to produce low-cost, emissionfree steam to be fed directly into PDO’s existing steam distribution network and used as a thermal EOR method to extract heavy oil.

Integrating into the existing Amal West steam facilities, the pilot has now started a one-year performance monitoring period.

Allowing the benefits of the sector to flow more freely through the economy is another challenge being taken on by the government, via the Omanisation programme.

This has become extra important in the wake of heightened sensitivities following the popular uprisings of the so-called Arab Spring.

As the leading producer, PDO has again been called upon to lead by example.

Last year, it created an estimated 4,100 jobs for skilled Omanis, bringing the total to more than 8,000 since the National Objectives Programme was launched in 2011 to boost local employment.

In addition, contracts worth US$2.3 billion were awarded to locally registered companies during 2012.

Major projects were awarded to local entities such as Al Haditha Petroleum Services, which is working on a major flowline replacement programme across the whole of the North concession area, starting in Yibal.

Oman is pushing ahead with ambitious plans for its gas sector.

Another award went to Benon Oil Services which is 90 per cent staffed by locals - which bagged a contract to carry out cementing services in the Southern concession area of PDO. And part of Oman’s broad energy sector thrust includes expanding the downstream sector.

PDO’s involvement in maximising production through new technology is also evident.

As well as the well-established Oman LNG facility, the country has widened the use of gas in the economy, and is keen to explore the potential for further downstream industries in refining and petrochemicals.

State-owned Oman Oil Refineries and Petroleum Industries Co. (Orpic) said earlier this

year that it is seeking private financing to expand a crude processing unit and a possible debt reshuffle.

Despite the raft of downstream projects underway in the region, it makes Oman the first Middle Eastern producer this year to seek financing to expand a refinery, with up to US$2bn being sought.

The company wants as much as US$1bn to enlarge a processing plant at the port of Sohar, and may refinance another US$1bn it borrowed in 2007 to pay for an earlier expansion at the facility.

Orpic is majority-owned by the the country's Ministry of Finance, with Oman Oil Company (OOC), a separate, government-owned energy investment company, holding a 25 per cent stake.

Further ahead, Oman is lining up another important downstream project at the new industrial hub of Duqm, on the coast.

Here, there are plans for a US$6bn refinery, and partners Oman Oil and Abu Dhabi's IPIC may also be seeking financial advisers for this project during the year.

One of Oman’s forward strategies is to shift the focus of oil export capacity away from the congested waterways of the Gulf.

The recently-formed Oman Tank Terminal Company plans to build, own and operate a huge storage facility - capable of holding as much as 200mn barrels, long-term - positioned along the Sultanate’s eastern coast, as part of this initiative.

OOC said in January it had teamed up with the Takamul Investment Co. to establish a firm that will construct and take charge of the new Ras Markaz storage facility, 70km south of the oil and petrochemicals hub currently under development at Duqm. It will be developed alongside a new export terminal as part of a general plan for Oman to carve a niche for itself as a regional oil storage hub.

The first stage of the phased project could be operational by 2017, according to OOC, though Oman faces competition for storage business from other states with Fujairah in the UAE looking to establish itself as an alternative route for oil, bypassing the narrow Strait of Hormuz. n

Leading from the front PETROLEUM DEVELOPMENT OMAN (PDO) is leading the revival of the country’s energy sector from the front.

In 2012, it broke its own production record, explored and tested new unconventional oil and tight gas opportunities, and delivered strong reserves additions, PDO managing director Raoul Restucci said in a recent media briefing.

PDO production averaged 1.24 million barrels of oil equivalent (boepd) of oil, gas and condensates combined in 2012, outstripping its previous record of 1.21mn boepd in 2001.

Daily oil production stood at 566,305 bpd, above the company’s long-term plateau

42 Oil Review Middle East Issue Three 2013

target of 550,000-plus bpd.

Daily production of non-associated and associated gas stood at 582,500 boepd with condensates at 92,500 bpd.

“The combined yield meant it was the fifth successive year that PDO had increased its aggregate production figures,” Restucci said.

Improved economics are also helping, and that doesn’t just mean higher oil prices.

PDO reported that the cost of drilling a well dropped last year as a result of increased operational efficiencies.

The average cost of oil development wells, for instance, fell from US$930 per metre in 2011 to US$910 per metre in 2012.

This is especially important at a time when PDO, like others in Oman, is drawing on ever more complex and challenging - and costly technologies to find and produce oil.

On the EOR side, PDO has started work on a unique chemical injection trial at Habhab, which could lead to increased yields from complex heavy oil and tight reservoirs.

The field, discovered in 1982, has an estimated 2.4bn barrels of oil but the heavy nature of the crude has been an impediment to production thus far.

But now, with growing EOR experience under its belt, dealing with technical challenges like this is becoming almost routine for PDO like all others in Oman.

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S08 ORME 3 2013 PDO_Layout 1 22/04/2013 16:55 Page 43

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S08 ORME 3 2013 PDO_Layout 1 22/04/2013 16:55 Page 44

Oman

A focus on nurturing and developing talent MOTT MACDONALD, OMAN, has allotted US$1.2mn for an initiative to train and develop talent and integrate them into the business to achieve longterm goals and generate more employment in the Sultanate. Vinod Shah, managing director of oil and gas engineering service provider Mott MacDonald, recently spoke to Oil Review on the subject of training and talent development in Oman. “We have started the year on a very positive note and we are bullish about prospects in the coming months,” claimed Shah, who is a mechanical engineer working with the company in Oman since 1991. He is currently managing a 500-member team in the Sultanate.

Excerpts of an interview with him: What has been your contribution towards the development of oil and gas sector in Oman?

Mott MacDonald began operations in the Sultanate of Oman in 1968 and has worked in close partnership with Petroleum Development Oman (PDO) and other operators, including Occidental of Oman, Occidental Mukhaizna, Oman Gas Company, Oman Oil Refineries & Petroleum Industries Company, Daleel Petroleum and PTTEP Middle East. The consultancy has been involved in oil and gas development projects including pipelines, power and infrastructure for PDO, as well as oil recovery projects at Mukhaizna, Marmul and Qarn Alam.

Mott MacDonald has also provided construction and project management consultancy services, including engineering design works for major clients in the power and water sectors.

Vinod Shah - “We believe in job creation...”

How you are making a difference to the national human talent in the Sultanate?

Mott MacDonald is committed to generating in-country value by employing local graduates in any region or market we operate in. We believe in job creation for Omanis. At the senior level, we want to integrate a higher number of Omanis in our core team. At present, we have positions available for 20-30 young engineering graduates or diploma holders. Recruitment can be challenging however, as many suitable candidates prefer to be employed by a government organisation. Our focus, especially in the last year, has been to identify Omani talent, bringing them on board, training them properly and retaining them with long-term commitment. We have a budget of over US$1.2mn dedicated to staff learning and development in Oman. Training sessions are available to staff from various departments to develop their skills sets and enable them to become experts in their respective fields.

Tell us about your current projects in the oil & gas sector in Oman.

What is unique about the kind of value you are bringing for your clients?

In Oman, we predominantly serve the oil and gas, water and power sectors.

But recently, we have expanded our operations, drawing from the group’s strengths in town planning and infrastructure, railways and education. We have been successful on two of PDO’s Off-Plot Delivery contracts (ODC), winning both the ODC North and South contracts. On ODC South, we are working with local exploration, production and construction contractor Al Turki Enterprises while in the North we are working in partnership with the Turkeybased construction company Attila Dogan Construction & Installation. We also have a major corporate manpower services four-year contract with PDO. We are providing general engineering services for Occidental Oman, covering all small to medium-sized projects. We have a dedicated office for Oxy and team working on the contract. We are also executing the general engineering contract with Oxy and many other projects for other clients such as Oman Oil, ORPIC, OGC and all the major EPC contractors. Our work also includes enhanced oil recovery, which has increased production and extended the life of existing oilfields. We’ve contributed to major safety advances too.

Which new technologies have you brought to Oman in the last few years, especially in the enhanced oil recovery (EOR) space?

Our first involvement with an EOR project started on the Mukhaizna Facilities Development Project with Dodsal which was developed by Occidental Oman

44 Oil Review Middle East Issue Three 2013

in Mukhaizna. Following the success of the Mukhaizna project, we were awarded the Qarn Alam Steam Injection Project with Dodsal. The Qarn Alam field is a fractured carbonate reservoir with highly viscous oil. Very little recovery is feasible by conventional oil extraction technologies. But, with EOR techniques such as “Thermally Assisted Gas Oil Gravity Drainage” (TAGOGD) being deployed here, it is possible to enhance the recoveries. Steam is injected directly into the fractures through a battery of steam injection wells, to heat the reservoir and lower the viscosity of the oil, making it flow easily into the reservoirs. We also provided detailed engineering design for the Marmul Polymer Flooding Project.

With expansion of oil and gas sector what are the new opportunities that are emerging for you in Oman?

If the Sultanate chooses to develop unconventional reserves, then there will be new opportunities for Mott MacDonald. We have the experience to support such operations. In North America, our group has been already collaborating on several shale developments on gas distribution systems. The entry of new companies in the exploration, production and downstream development will increase our opportunities.

How you are building on your success in rest of the industries?

We will continue to focus all our ongoing projects in the ‘traditional’ oil and gas, power and water sectors. We will be bringing in further sector capabilities as and when required to add value to our clients’ projects. We are concentrating on serving and enhancing our business with our existing clients and also expanding our present client’s base. As for the challenges lying ahead, I believe that the era of ‘easy oil’ is over and the emphasis is on enhancing recovery rates from existing oilfields, as well as developing heavy crude oil. Despite the huge challenges ahead, Oman will remain in the forefront of the region’s oil and gas business.

What steps you are taking or are put in place to ensure that you achieve the highest safety record in the market?

We’re the only engineering company in Oman with all the four certifications ISO 9001, ISO 14001, OHSAS 18001 and ISO/TS 29001 and we are currently working to bring all our offices into compliance with ISO 10006:2003. This last offers a structured approach for the optimisation of all processes involved in project management.

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Oman

PDO continues to go from strength to strength PETROLEUM DEVELOPMENT OMAN (PDO) is Oman’s largest oil and gas company and is the operator of the country’s largest concession area, Block 6. Oil Review recently spoke to the company’s managing director, Raoul Restucci.

In recent years, PDO has outlined ambitious production targets. Are these achievable?

The Board has mapped out a series of strategic objectives including the delivery of a sustained 10year production plateau of 550,000 barrels of oil a day. Even though we have an ageing asset base and declining fields, we have adjusted to the challenge through world class well and reservoir management (WRM), the implementation of state-of-the-art enhanced oil recovery techniques and the development of exciting new unconventional opportunities. This is underpinned by the great talent, work ethos and innovative spirit we have, our adoption of cutting edge technology and increasing integration with the local supply chain.

PDO achieved the highest rate of production in its history last year - what are the key reasons for this?

Despite Oman’s geological complexity and the demise of ‘easy’ oil, there continues to be a strong focus on our core business objective of sustainable hydrocarbon production. We have a truly talented workforce who are immensely proud of being part of PDO and contributing to the national effort. Their expertise is now rightly recognised both in and out of Oman with, for example, the win of the Best Middle East and North Africa Oil and Gas Field Management Strategy Award for Well and Reservoir Management at ADIPEC last November.

What is your outlook for the gas industry in Oman - what are the most exciting developments coming up in this sector?

There are an increasing number of operators entering the field because the country remains highly prospective with several conventional and tight gas plays. There are also possibilities in the unconventional domains. Currently, key developments are under discussion between the Ministry of Oil and Gas and a number of existing and new operators. From our own perspective, notwithstanding 40 years of exploration, we are still identifying significant opportunities such as at Mabrouk Deep last year with estimates of in-place volumes amounting to 2.9 trillion cubic feet of gas and 115mn barrels of condensate.

How can PDO maintain this momentum in the future?

We have the talent, shareholder support and pioneering will to succeed and we will continue to set leading benchmarks and industry firsts. We have just started a chemical enhanced oil recovery trial at Habhab which uses a special solvent for the first time ever and we have many EOR projects and trials in operation or in planning. We’ve also started a pilot producing steam for thermal EOR

46 Oil Review Middle East Issue Three 2013

Raoul Restucci - “safety is an overarching priority for PDO”

using only the sun at Amal West and the enduring excellence of our team at the Nimr Reed Beds Project – which uses reeds to naturally absorb oil and other contaminants from produced water – continues to break new ground. We are now treating up to some 630,000 barrels of produced water a day at the site at a fraction of the cost and energy intensity of conventional deep water disposal and are now recovering an average of 120,000 barrels of oil per annum.

What technologies will play a key role in PDO’s production development?

Technology is a key enabler for us on the surface and subsurface, across every facet of our business, from improving seismic data acquisition, which paves the way for significant improvements in subsurface imaging, to the processing of special solvents in complex oil recovery. Real-time data is key and we are also continuing our extensive rollout of collaborative work environments – openplan offices with the latest audio-visual and software communication tools. These will enable us to address the challenges of working across multiple locations, the need to use new technologies and the desire to implement standard business processes that encourage increased collaboration and productivity. It’s important that we continuously embed research and development in local entities to maintain our long-term competitive edge and sustainability.

Would you say that PDO is a regional leader in EOR? I would go further and say that PDO is a global leader in EOR. The nature of our portfolio and the complexity, depths, temperatures and pressures of our reservoirs mean we have had to test and embark on new methods to extract hydrocarbons.

Other operators across the world are paying close attention to what we are doing because it could have major repercussions for the way in which heavy, tight oil is extracted.

How important are your close partnerships with IOCs in the Sultanate?

We actively work with IOCs and NOCs and engage to share best practice and not just in the Sultanate.

Just recently, we had teams in Saudi Arabia and Abu Dhabi to review learnings in exploration, safety, production and other themes.

Why is HSE such an important focus at PDO? Safety is an overarching priority and a core value for us. No result counts unless all those who contributed can share their success stories with their loved ones at the end of every day. A safe company is a leading company in all other aspects of its business. Safety requires leadership, discipline, compliance and intervention day in, day out. Last year, we were able to match our best ever lost time injury frequency of 0.29 and our total recordable case frequency of 1.17 was also the lowest ever.

However, these achievements were marred by two contractor work-related fatalities in incidents that could and should have been avoided. These deaths are a tragedy and we must learn from them by exercising constant caution and vigilance and abiding by our life-saving rules.

What are your plans to achieve and sustain world class performance in safety and security?

We will continue to conduct regular forums with contractor CEOs, LTI reviews and Behavioural Based Safety Management. At the same time, we will continue to improve our compliance and assurance programme and disseminate learnings from incidents and experiences.

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S08A ORME 3 2013 Libya_Layout 1 22/04/2013 17:01 Page 47

S08A ORME 3 2013 Libya_Layout 1 22/04/2013 17:01 Page 48

Libya

Libya needs to adopt comprehensive and sustained reforms to achieve its potential, as Moin Siddiqi explains.

Significant challenges

ahead T

HE NEW DEMOCRATIC Libya, the holder of the world’s eighth-biggest oil reserves, faces ongoing challenges of socioeconomic reconstruction and development, on a scale and with probable costs unprecedented in its history.

However, Libya is not a ‘pariah’ post-conflict state. This country of more than six million people and a per capita GDP of about US$15,000 – thus making it the highest-income African state - has the means to pay for rebuilding a productive diverse economy with a stronger infrastructures and eventually becoming a model-state for the Middle East & North Africa (MENA) region.

The International Monetary Fund (IMF) remarked: ‘Libya has an opportunity to break with the past, modernise the infrastructure and promote inclusive growth by developing a vibrant, privatesector driven economy. Bolstered by its sizeable natural resource wealth and the recovery of the hydrocarbon sector, a post-revolution revival in the country’s economic activity should be rapid once the security situation normalises. But Libya will also need a sustained commitment to comprehensive reforms to achieve its potential.’

Despite its ample natural and financial resources, physical infrastructure remains in a dire state, with power generation, internal transportation, telecoms, water and sewerage systems in poor condition by regional standards of MENA countries.

Even its hydrocarbons sector, the jewel of industrial base, is almost obsolete, reflecting decades of under-investment during the Gaddafi regime.

Global businesses of all sizes are now gearing up to compete for lucrative multi-billion dollar contracts as the authorities steer the economy back to normality and close the ‘infrastructure gap’, thereby removing barriers to sustainable development.

“As the momentum starts building up, Libya could be another Iraq, there’s going to be huge infrastructure projects, over the next three to four years it will be anywhere between US$6bn and US$10bn in revenue for our company,” said Nabil Habayeb, Regional President of General Electric.

The UK Trade & Investment estimates price tag for nation building at US$200bn over the mediumterm. Emergency repairs are needed to restore electricity and sanitation systems, as well as building mass social housing, roads/bridges, schools and hospitals. Some work will be subcontracted to regional firms. All of this requires far more investment than Libya has had in decades, both public and private capital to alleviate ‘supplyside’ bottlenecks to growth.

48 Oil Review Middle East Issue Three 2013

Despite many challenges, the new Libya boasts the financing capacity for a national reconstruction programme – affecting every sector of the economy.

The country’s rapid growth and transition to a full market economy, with the support of international partners, should lead to rising foreign direct investment (FDI) flows over the mediumterm. The national economy is steadily recovering from 2011 civil strife and 2012 hasn't seen much new foreign investments.

Based on UNCTAD figures, net FDI flows to Libya over 2005-10 were US$18.36bn and FDI inward stock for 2011 was reported at US$16.33bn.

The key attractions of post-conflict Libya are: Its strategic geographical location – situated in the centre of a triangle formed by Europe, Africa and the Middle East. Libya is the main trading and investment gateway between Southern Europe and emerging markets of sub-Saharan Africa.

Opening up and liberalisation policies that favour private enterprise and foreign investment should help to revitalise and lead to a more vibrant economy.

The authorities acknowledge the need to improve the business environment and are preparing to review the legislative framework to encourage development of the private sector.

According to World Economic Forum Global Competitiveness Report, 2012-13, Libya was ranked 113 out of 144 countries, below Egypt at 43.

The force of private consumption and investment in rebuilding projects will increase substantially from 2013 onwards. With a gross domestic product of more than US$93bn, the country’s annual per capita income is high for its six million citizens at US$15,000 - on a par with many Central Eastern European countries. Libya’s economic output is expected to double in the medium-term. Driven by reconstruction expenditure and private demand, non-hydrocarbon growth is

Table 1: LIBYA'S EMERGING ECONOMY IN PERSPECTIVE 2009

2010

2011

Est. 2012

Projections 2013 2014

Domestic Economy Nominal Gross Domestic Product (GDP) at market prices (US$ billions) Real GDP Growth (annual % chg) of which: Non-Hydrocarbons GDP

63.6 -0.8 5.1

74.8 5.0 6.1

34.7 -62.1 -52.5

81.7 104.5 43.7

93.5 20.2 24.5

98.6 10.1 19.5

Oil Production (mn bpd) Oil GDP (annual % chg)

1.62 -7.1

1.69 4.0

0.49 -72.0

1.51 211.4

1.70 16.7

1.87 2.0

Consumer Price Inflation (year average) 2.0 General Govt Fiscal Balance (% of GDP) -2.2 Official Exchange Rate (LD: US$1) period avg 1.25

3.3 8.9 1.27

26.6 -18.7 1.22

-3.7 24.0 1.26

6.9 19.1 1.26

3.8 12.9 1.26

Gross Capital Formation (% of GDP) Gross National Savings (% of GDP) Savings-Investment Balance (%)

36.0 50.7 14.7

39.6 59.1 19.5

20.1 29.2 9.1

16.6 52.4 35.8

21.4 48.1 26.7

23.8 42.4 18.6

External Sector, (US$ billions) Exports Total of which: Hydrocarbons Crude Oil Price (US$/barrel) Imports Import-Coverage (months)

37.1 35.7 61.7 22.0 39.0

46.8 45.4 79.0 24.6 78.3

19.1 18.7 104.0 11.2 41.6

62.2 61.0 110.5 25.7 39.1

64.8 63.2 102.7 30.5 39.7

63.2 61.3 98.5 34.3 37.3

Current Account Balance As (%) of GDP

9.4 14.7

14.6 19.5

3.2 9.2

29.2 35.7

24.9 26.6

18.4 18.6

Total Foreign Assets, incl. LIA Portfolios of which: Gross Official Reserves

138.3

171.5 101.8

176.9 111.6

190.3 124.5

208.4 142.3

221.4 155.0

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S08A ORME 3 2013 Libya_Layout 1 23/04/2013 12:50 Page 49

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S08A ORME 3 2013 Libya_Layout 1 22/04/2013 17:01 Page 50

Libya

Libya's Crude Oil Exports by Destination, 2010 (in percent)

Others 14%

Italy 27%

US 3% UK 4% Greece 5%

Germany 10%

France 16%

Spain 10%

projected to average 15.3 per cent during 2013–18, according to the IMF. A dynamic demography: between 2007 and 2015, the population is projected to increase by more than one million and will exceed seven million. Another grace for Libya will be its modest but well-educated nationals. The educational standards are also comparable to emerging economies such as Malaysia.

Libya is a popular ‘hot spot’ for upstream and downstream investments in North Africa thanks to bountiful reserves of ‘sweet’ crude oil, which requires little refinement. As such, it is a high quality oil (low-sulphur content) sought by European refineries, which are not equipped to refine lower quality ‘sour’ crudes. European and US markets are heavily reliant on light, sweet crudes, thus puts Libya in a comparative advantage (compared to Middle East Gulf producers). Libyan oil commands higher prices – on a par with North Sea Brent.

The industrial sector – based on oil refinery, petrochemicals and iron & steel benefits from cheap feedstock and very low energy costs.

Opportunities to invest in the Free Trade Zones and within the authorised sectors (industry, health, tourism, services and agriculture), majority equity holdings in local companies are permitted.

Foreigners can buy landed property, but they should have an agent in the country.

Guarantees against nationalisations; free repatriation of capital and earned profits; and exemption from custom duties and tax on reinvested earnings.

Higher FDI flows are key to diversifying the economy, which is over-reliant on the hydrocarbons sector. But private investment is still suffering from a ‘wait-and-see’ attitude among some investors, which reflects security concerns.

The petroleum industry: Industry consultants Wood Mackenzie, noted: ‘Libya remains highly unexplored and has excellent potential for more oil discoveries.’ Foreign energy majors are eager to expand operations in Libya – among the few ‘under-

50 Oil Review Middle East Issue Three 2013

China 11% explored’ hydrocarbon provinces in the world – with extremely attractive low cost of oil recovery and superior quality reserves. So far, only one-quarter of Libya’s vast territory has been explored for oil. The International Energy Agency (IEA) reckons ‘fully explored’ Libya could yield a further 100bn barrels of oil equivalent (boe) – making it among the top-five investment destinations for oil majors.

Oil production has defied expectations and has already regained pre-conflict levels of 1.6mn barrels per day (bpd), which according to US’ Energy Information Administration (EIA) is an impressive pace of recovery ‘when juxtaposed against the challenges faced by authorities and operators, the initial scepticism of most outside analysts, and other countries' past experience with restoring production after a significant disruption.’

In the near-term, raising output beyond pre-crisis capacity of 1.8mn bpd requires major investments in new field development, reservoir management, drilling, and enhanced oil recovery/improved oil recovery techniques, production/pressure maintenance technology and stream injecting, transformers/transmission equipment. Moreover, boosting production to between two and three million barrels per day would require additional pipeline capacity for exports.

With more than 9,500km of pipeline already built-in, a market exists for the supply of maintenance services, corrosion prevention, pigging and instrumentation.

Refining: Libya has five domestic refineries, with a combined nameplate capacity of 350,000 bpd, of which the largest is Ras Lanuf situated on the Gulf

Table 2. LIBYA'S Hydrocarbons Endowments at a Glance PROVED OIL & GAS RESERVES

Crude oil [billions barrels] As per cent of: Africa's Total * OPEC Total Natural gas [trillion cm] As per cent of Africa Total # PRODUCTION Oil (mn bpd), incl. NGLs As per cent of: Africa's Total OPEC Total Natural gas [billions cm] As per cent of Africa's Total

2002 36.0

2004 39.1

2006 41.5

R/P ratio 2008 2010 43.7 47.1

2012 47.1

2012 // 100 +

35.4 4.1

34.3 4.3

35.4 4.4

34.8 4.5

35.5 4.0

35.6 4.0

41.2 avg 91.5 avg

1.31 9.5

1.49 10.4

1.32 9.3

1.54 10.5

1.50 10.3

1.50 10.3

100 + 71.7 avg

1.37

1.62

1.83

1.82

1.66

1.35

17.2 4.5

17.5 4.7

18.3 5.1

17.7 5.0

16.4 4.8

13.2 4.3

5.9 4.3

8.1 5.2

13.2 6.8

15.9 7.5

16.8 7.8

// Reserves-to-production ration, measured by years of exploration & production (E&P). * The largest proved reserves in Africa. # Libya ranks fourth in terms of gas reserves, after Nigeria, Algeria and Egypt in Africa.

Source: BP Statistical Review of World Energy and OPEC databases.

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S08A ORME 3 2013 Libya_Layout 1 22/04/2013 17:01 Page 51

Libya Oil Production (000'bpd) 3500

Libya

3000

2500

2000

1500

1000

500

0 2005

2006

2007

2008

2009

2010

2011

2012

2013 F

2015 F

2020 F

F= Forecast Sources: BP, OPEC and Official Projections of Sirte. Refineries require sophisticated equipment to reduce higher sulphur content in refined products (gasoline, kerosene and lubricants) and to comply with international environmental standards.

Currently, Libya imports more than 75 per cent of its gasoline. Libya's refining capacity was severely impacted by UN sanctions (until mid-2000s), specifically UN Resolution 883 of 11 November 1993, which banned exports of refinery equipment and replacement parts.

Gas sector: this remains severely ‘underexploited’ with output averaging 12.6bn cubic metres (bcm) over 2004-11, according to BP. However, natural gas reserves are considerable at between 53 and 70 trillion cubic feet (tcf). Thus, increased exploration and production of those untapped reserves will provide cheap feedstock for power stations and petrochemicals industry, while expanding existing piped and liquefied natural gas (LNG) exports.

Libya plans to boost natural gas output for exports to 40–50bn cm annually within ten years and to upgrade the country’s only LNG complex, which is limited to one liquefaction train at Marsa El-Brega with a nameplate design capacity of 3.2mn tonnes per year, according to PFC Energy.

One reason for sustained low capacity is that the plant lacks requisite technology to separate natural gas liquids (NGLs) from the LNG stream, which also limits the number of receiving terminals that can process it. Shell was contracted to upgrade LNG plant at Brega – build in early 1970s.

Transportation sector: is crucial for connecting a vast country like Libya. Growing opportunities exist in the construction of roads, highways, subways and railroads, as well as upgrading and operation of seaports, which include oil and natural gas terminals. Regional airports – at Sabha, Ghadames, Tobruk and Alabrek – also require substantial improvements to air traffic control and surveillance facilities to cope with future tariff. The national

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carrier, Afriqiyah Airways has ordered four new Airbus A350 planes.

Power-generation and distribution systems: Libya plans to triple power generation capacity to 20 gigawatts by 2020 from 6.2 GW in 2010 in order to cope with robust future industrial and residential demand. The state-owned GECOL, General Electricity Company’s biggest current project is expanding the network of power substations, concentrated mainly in Benghazi and Tripoli. Markets exists for manufacturers of cables, switchgear, gas turbines, pumps, and desalination plants. Libya may allow private investments structured on Build, Own and Operate; Build Own Transfer; and Build, Own, Operate and Transfer models, which are popular in the Gulf countries. In December 2012, GECOL signed contracts with France’s Alstom and Germany’s Siemens to help improve and expand the country’s national power system.

Retail banking services: the financial infrastructure lags behind peer upper middleincome economies. Prior to 2011, the Central Bank of Libya embarked upon a much-needed task of modernising the National Payments System (NPS) and foreign consultancies received contracts to supervise the development of: Core banking system (CBS): to install technologies that enables businesses and banks to benefit from the NPS and improve their global relations.

Real time gross settlement (RTGS): whereby interbank clearings are settled in CBL’s funds and data on each banks’ net credit worth are available online.

Automated clearing house (ACH): where banks settle their accounts and transactions with their clients before reaching the RTGS. Automated checks processing (ACP): an interbank electronic system to oversee the clearing of cheque and settling their values.

Points of sales (POS): an electronic system

enabling businesses and customers to execute electronic payments at points of sales.

Investment banking: Libya offers a lucrative market in areas of project finance, advisory work and mandates to manage foreign assets of the Libyan Investment Authority (LIA), whose gross assets are tentatively estimated at US$66bn. Pinning creditworthiness even further is Libya’s large ‘twin’ surpluses – the budget and current account (see Table 1) and it remains debt free. On the contrary, Libya is a net creditor to the international banking system, with net assets of US$61.57bn as of end September 2012, according to the Bank for International Settlements (BIS).

In addition to substantial forex reserves, the central bank holds an estimated 144 tonnes of gold bullion.

What’s more, Libya over the years made significant outward portfolio investments in Europe (including Russia) and the US in prime companies such as Citigroup, Standard Chartered, ENI, BP, Shell, Vodafone, Siemens, General Electric, Pearson, the media group, Unicredit SPA, MMC Norilsk Nickel, and United Company Rusal, as well as a string of luxury hotels in European capitals. With global markets slowly recovering, such equity investments should generate healthy interest, profits and dividends (IPDs) to the Libyan government. Many Western banks and fund managers are only too keen to work with the LIA. Public services: thanks to years of ‘stagnation’ under the previous regime, Libya has enormous needs for affordable housing, water desalination plants, wastewater purification & drainage and Waste recycling factories. A market exists for suppliers of health, safety and environment services and equipment. Furthermore, new hospitals, healthcare clinics and laboratories will need surgical instruments, medical appliances, and medicinal and pharmaceutical products in the aftermath of civil war.

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Libya

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In 2010, health spending in Libya comprised 3.9 per cent of GDP, according to the World Bank.

ICT sector: is critical for Libya to catch-up with the developed world – hence requiring the expansion of wireless and Internet connectivity.

According to the World Bank, fixed line and mobile phones were 19 and 172, respectively, (per 100 persons) in 2010. There are major challenges with fixed line and broadband services – the later reflects limited availability of fiber optic infrastructure.

Due to regulatory barriers, the mobile market has yet to reach full potential. Late 2012, Al-Madar, one of Libya’s two cell-phone operators, reached a deal with France’s Alcatel-Lucent and Sweden’s Ericsson to upgrade its network.

Tourism & leisure: offers tangible possibilities given the hundreds of miles of pristine Mediterranean coastline, relatively a short distance from Europe and Libya’s rich archeological sites – which have yet to be exploited. Tunisia, Egypt and Morocco have been able to market themselves as desirable tourist destinations to the West, attracting large inflows of visitors annually; and there is no reason why Libya should not do the same. There will be openings to build hotels, tourist resorts, and tourist villages once Libya regains full stability.

Agriculture: is a major priority area for rehabilitation due to the thousands of square miles of arable land (presently undeveloped). Libya needs to reduce its reliance on imported foodstuffs, and improve food security by producing more of the products consumed locally – hence the opportunity for agro business. Significant market exists for trailers, tractors, irrigation pumps, water purification equipment, shallow tube-wells, agricultural chemicals (fertilizers, herbicides and pesticides) and food processing and packaging equipment.

Nuri Berruien, chairman of the National Oil Company (NOC), explained: “In our new Libya we are looking forward to building a new oil and gas industry built on trust. NOC’s primary objectives are now to develop and maintain hydrocarbon reserves and deploy new enhanced recovery techniques in the upstream. The country would also upgrade its

refining and petrochemical industries.”

Longer-term, Libya offers tremendous scope for reserves and output growth within both petroleum and gas sectors, thus making it Europe’s vital energy supplier. Nonetheless, technological transfers and higher investment are needed for joining the ranks of world’s leading producers. The under-utilised oil/gas industry is the engine of future growth. But for Libya to maximise its oil potential – hence its economic potential, “the state must, as a matter of some urgency, develop initiatives to foster commercial confidence, within a stable environment supported by strong regulatory and legal frameworks,” advised the IMF. However, years of reservoir mismanagement and severe damages to mature fields require technical assistance of international oil companies (IOCs). The annual ‘natural’ decline rate is estimated at seven to 10 per cent. A greater use of enhanced oil recovery (EOR) and improved oil recovery (IOR) techniques will help to mitigate ongoing depletion of ageing fields, notably Deffa, Messla, Nafora, Sarir and Deffa and could add another seven to 10bn to Libya’s provable reserves of 47bn barrels according to NOC. Libya has long boosted the goal of reaching sustainable productive capacity of 3mn bpd (from currently 1.85mn bpd), making it Africa’s largest producer. Tripoli reportedly needs about 40 oil rigs over the next few years to support exploration and development (E&D) programmes of IOCs. Before the revolution, NOC and partners had pledged to share a US$46bn investment commitment over a five to seven-year period.

Prior to 2011, the NOC announced plans for large increases in natural gas output, which in turn, would facilitate a greater use of natgas in the power sector, thus freeing more oil for exports, while also maintaining and expanding existing pipelines and LNG exports. However, like all prospective oil/gas plans in Libya, greater development of the natgas sector depends upon government support, foreign capital and expertise, new favourable contract terms, and industry oversight. Libya (like most oil-exporters)

neglected its gas sector.

Given new investments and expertise of oil majors, the country’s ‘black gold’ should shine and provide increased revenues in the post-Gaddafi era. Existing bottlenecks offers growing opportunities for engineering, procurement construction (EPC) contractors in upstream, mid-and-downstream sectors.

‘We are very positive on the long-term prospects for [Libya's] economy given its strong fundamentals such as GDP per capita, its youthful population and significant natural resources. We believe that the interim government will be able to leverage these fundamentals to make important strides in its reconstruction efforts and are confident that the country will be able to capture significant growth and stability in the coming years,’ noted Arqaam Capital, a Dubai-based investment bank specialising in emerging markets.

Besides rehabilitating physical assets, Libya needs ‘productivity enhancing investments’ in higher education, particuarly science/technology and vocational training, as well as efficient healthcare facilities, which are vital for nurturing a knowledge-economy, capable of adopting to new technologies and supporting export diversification by climbing up the ‘value-added’ production chains.

Thus, like other major energy producers, Libya should pursue an industrial diversification strategy in order to avoid the ‘resource curse’. Thus only a diversified economy can underpin financial stability.

Its plentiful gas resources can support the development of downstream industries, such as an aluminium smelter, petrochemicals, steel making and cement during this decade.

Unlike few other post-conflict states, Libya’s future creditworthiness is more secured, reflecting vast (untapped) hydrocarbons resources, fertile agrarian lands, skilled/educated work force and, by regional standards, technical sophistication. In past, politics [not lack of natural prospectivity] hindered Libya. Infrastructure development is crucial in restoring the country, fostering economic opportunities and attracting strategic foreign investors. The business community is looking forward

Table 3: Projects Planned or Underway in Libya, in US$ millions Project name Development Ghadames Basin (Area 47) Azzawiya refinery expansion Medina tower

Upgrade of lube oil blending & gas turbine plant at Azzawiya Mabruk field Dahra & Garian reservoirs (phase-1) Swani hospital project Upgrade of Abu Kammash chemical facility Block NC 186 oil field development Structure A (offshore) platform & (onshore) gas production upgrades Zueitina to Brega pipeline

Project owners Medco Engeri/Libyan Investment Authority/Verenex Energy National Oil Corp (NOC) Mediterranean Investments Holding/International Hotel Investments/Al-Enmaa for Economic Development & Real Estate Invest Co. of Libya Azzawiya Oil Refining Co.

Sub-sector Upstream oil

Est. Cost 800

Status FS

Refining Construction

700 367

FS Construction

Construction

300

Construction

Mabruk Oil Operations

Upstream oil

300

Economic & Social Develop. Fund General Co. for Chemical Industries Repsol YPF Mellitah Oil & Gas

Construction Petrochemicals Upstream oil Upstream & Downstream gas Midstream oil

204 200 160 150

Main contract PQ PQ. Construction FS FS FS

140

Construction

Zueitina Oil Co.

FS= Feasibility study; PQ= Prequalification. Source: MEED Projects.

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Innovations

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Quality at your feet SAUDI LEATHER INDUSTRIES Company (SLIC) produces a variety of footwear, including safety, military and casual shoes, all of which have been awarded quality certification.

New products from SLIC include a women’s safety shoe, which has a composite toecap and conforms to the EN 345 standard, and a security www.saudileather.com belt. The company also offers puncture resistant footwear with a steel midsole, conforming to the international standard EN 345 S3 and protecting against sharp metallic objects. SLIC’s custom-made products include the six-inch foundry boot with metatarsal guard; the 12-inch boot for molten metal operations; the caster boot for casting operations; electrical footwear for 18 KV; and work shoes for airline crew, security guards and the hospitality industries. The company became a member of the UKbased SATRA footwear testing centre in 2000, while its quality management system has been accredited to the ISO 9001 certificate since 1996. It is also affiliated with the FDDI (Footwear Design and Development Institute).

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Safety footwear WORKING IN THE toughest conditions and in specific environments without the right equipment can compromise well-being and work output.

Jallatte®’s technical expertise and technological know-how is the result of more than 60 years of experience gained by a R&D team with a brand name that claims to have set a benchmark for the entire European market, and further afield.

Jallatte®’s best technologies have been used for its oil & gas specific boots range, to reach the highest levels of reliability and comfort.

The company says its Jalaska boot is a worldwide best seller, with the exclusive top quality AP 23 full grain leather, it is oil and waterrepellent and 10- 15 per cent thicker than most leathers used for safety footwear.

The range also includes metal free boots, (Jalhaka boot) equipped with a composite 200 J toecap and anti-perforation composite midsole.

Jallatte offers also a full range of safety shoes equipped with GORE-TEX® membrane, these are apparently 100 per cent waterproof and breathable ensuring comfort and protection at all times and in any condition.

For further information on Jallatte® safety footwear collection, please visit: www.jallatte.com and contact: info-me@jal-group.com

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Innovations

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Pall venture will drive advances in filtration PALL CORPORATION, A leader in filtration, separation and purification technologies, has teamed with the King Abdullah University of Science and Technology (KAUST) in Saudi Arabia to drive advances in water treatment, alternative fuels, and other areas of critical importance to communities and businesses. As part of the KAUST Industry Collaboration Program (KICP), Pall will participate in research relating to filtration, separations, and purification technologies.

KICP is a membership-based program aimed at fostering strong and productive partnerships with industry. As an integral component of KAUST

Economic Development (ED), KICP maximises the effectiveness of industrial collaboration within the Kingdom of Saudi Arabia and internationally by engaging key partners.

“Pall has been a technology leader in filtration and separation for decades,” said Dr. Brian Muellers, senior vice president of Industrial R&D at Pall. “By becoming part of this collaboration, we can match our deep technical and commercial knowledge with the research capabilities at KAUST and its partners to help further efforts in high-growth areas that will only become more critical in the coming years.”

Pall expects to collaborate with multiple research centers and other industrial partners in a wide variety of research initiatives. Pall will complement the extensive and well-equipped laboratory facilities at KAUST with applications expertise, separations materials and pilot scale systems to develop wellfocused and commercially sustainable solutions to challenging separations problems.

“The Middle East is an important growth market for Pall,” said Ruby Chandy, president, Pall Industrial.

“Our sales in the Middle East have more than doubled in the last four years.”

Enerpac authorises AFI to set up service centre in Saudi Arabia SAUDI ARABIAN EQUIPMENT and machinery firm AFI has set up a centre for servicing and repairing of US manufacturing firm Enerpac’s products in Saudi Arabia. The service centre will cover all type of repair work related to Enerpac hydraulic cylinders, pumps, torque wrenches and other products. AFI quality team, Enerpac product manager and the management of both the firms have worked together to set up the centre. Enerpac audit team, headed by the company’s technical engineer, Ibrahim Hassan visited AFI in March 2013t o audit the procedures of service and repair. Eventually, the company approved AFI as the authorised service centre to function in Saudi Arabia.

The facility will have a testing capacity of up to 500 tonnes of hydraulic cylinders and also a test bench for hand pumps and small hydraulic cylinders.

www.afi.com.sa

A statement from AFI claimed that the company has qualified and skilled technicians to perform the job for testing and repair requirements.

It added that with this development, AFI will be able to provide a positive result in terms of customer satisfaction and a reliable source of service and supply of Enerpac products.

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Innovations

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A new era in gas detection

Elite metals manufacturers acquired

SAFETY SPECIALIST, DRAEGER Safety UK Ltd has unveiled a new product which it claims marks a major step forward for fixed gas detection.

Dräger unveiled its new Polytron 8000 flammable or toxic gas detector series recently. Designed specifically to measure gases using a uniform operating principle this new innovation will make the entire process of fixed gas detection much easier from an operator point of view.

The development comes at an important time for the oil and gas sector.

Demand is rising, forcing the need to search out gas and oil reserves in increasingly inaccessible and hostile environments.

As well as the new Polytron 8000, Dräger is keen to make readers aware of the Polytron 5000 which launched earlier last year and the existing Polytron 3000 and 7000 range.

THE WATERMILL GROUP, a strategy-driven private investment firm, announced the acquisition of two manufacturers specializing in high-precision metal tubing – Fine Tubes Ltd. in Plymouth, United Kingdom, and Superior Tube Company Inc. in Collegeville, Pa. – from Superior Group Inc., a privately owned industrial holding company.

Watermill will help the two specialized metals companies combine forces to create a global leader in high-performance metal tubing.

“Watermill was attracted to the unique, high quality and highly technical capabilities of these companies,” said Steven E. Karol, Founder and Managing Partner at The Watermill Group.

“Our vision is to capitalize on the complementary strategic, technical and market strengths at each company to develop a thriving industry leader that can scale its production and grow alongside its customers.”

In bringing Fine Tubes and Superior Tube together, Watermill will pursue a focused strategy of improving manufacturing operations at both companies to increase production capacity and enhance service levels – all the while preserving the world-class product quality on which both firms have built their long-standing customer relationships.

Fine Tubes and Superior Tube will also work closely on implementing new operational efficiencies, enhancing manufacturing practices and expanding distribution channels worldwide.

Both Fine Tubes and Superior Tube manufacture high-performance metal tubing for blue-chip customers in industries requiring flawless performance under extreme operating conditions.

For example, the companies supply high-pressure metal tubes used in critical equipment for the energy industry; lightweight, ultra-strong tubes capable of withstanding temperature extremes.

www.draeger.co.uk

All devices in the Polytron range feature durable sensors, short response times, high sensitivity and accuracy, apparently ensuring highly reliable gas detection.

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Innovations

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Multiple dataset inspection tool

Swellpackers for Doha

T.D. WILLIAMSON (TDW), a world leader in pipeline services and equipment, announced that it has added a new 24-inch diameter inline inspection tool to its existing fleet of Multiple DataSet (MDS) tools. MDS technology allows geometry, metal loss, seam assessment, mechanical damage prioritization, bending strain, and more, all in a single inspection.

The new 24-inch tool – which i n c l u d e s deformation (DEF), axial Magnetic Flux Leakage (MFL), SpirALL™ MFL (SMFL), Low Field MFL (LFM), and XYZ Mapping – features more than 1,000 sensors but is less than 14 ft (4.27 m) long.

“Multiple runs have Preparations are made to launch the new tool been executed with this particular tool since its inaugural run in July,” said Eric Rogers, TDW director of strategy and business development for its Pipeline Integrity Solutions division.

“The tool has performed as expected in every instance, and our customers are particularly excited that this much-requested tool diameter is now part of our MDS fleet.”

A THREE-YEAR CONTRACT to provide swellable packers for up to 50 wells in Qatar has been secured by Tendeka, the provider of completions and reservoir monitoring products and services to the upstream oil and gas industry.

The scope of work will see Tendeka supply packers to one of the major international independent oil and gas companies. The packers will be used to achieve zonal isolation at a field in Qatar.

The initial contract term is three years with two further optional one-year extensions. The contract award compliments existing long term agreements for Tendeka’s swellable products in the Middle East and builds on its successes to date. It further highlights the company’s commitment to providing innovative and high performance products to the operators in the region.

Derren Simpson, Tendeka’s vice president for Middle East North Africa said: “Swellable packers are a cost effective way of achieving zonal isolation in well.

They can be deployed without additional trips in hole and once in situ they swell to seal the available space following liquid contact.

“This latest contract win further cements Tendeka’s presence in the Middle East. Tendeka’s MENA base is in Dubai and several projects have already been delivered for Middle East based operators. As well as winning a three-year contract, with options to extend for a further two years, with a major international oil and gas company in Qatar for open hole isolation packers, Tendeka is also providing its FloQuest rapid data visualisation and interpretation software for an operator in Qatar and Oman. FloQuest will assist down hole visualisation in determining future drilling interventions. “ In addition, Tendeka has secured contracts for the use of its innovative fibre optic DTS (distributed temperature sensing) technology in a number of wells in the UAE and Qatar, while its patented swellable packers range has been deployed successfully on several projects in Oman and Iraq.

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Innovations

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AGR developing drilling solution

SONAR production testing INTERNATIONAL WELL FLOW management company Expro has secured a contract for production testing for Eni in Iraq utilising its clamp-on SONAR meters.

Expro will provide completely non-intrusive multiphase production testing to Eni for oil wells in the Zubair field, which Eni Iraq, B.V. operates in co-operation with Iraq's state-owned South Oil Company (SOC).

Expro will utilise its SONAR metering technology to measure production from the wells. The clampon SONAR technology enables well production surveillance with small crews and minimal equipment footprint. It also eliminates any potential environmental risks and increases the safety of the production testing operation.

Expro Meters product line director, Patrick Curry, said: "This major contract win with a leading international oil company validates the value proposition we offer to our customers. We believe

www.exprogroup.com

SONAR is a game-changing technology for production testing and this contract is an excellent example of the value we can deliver to our customers. Our small footprint, portable production surveillance offering is ideally suited to these types of fields."

Optimised for continuous flow verification ENGINEERS IN SEARCH of a low-cost flow verification solution for process analyzer sampling systems that is suitable for hazardous plant environments might be pleased to learn that the advanced Model FS10A Analyzer Flow Switch/Monitor from Fluid Components International (FCI) has received FM and FMc (Canadian) approvals.

With FM and FMc approvals, the FS10A Analyzer Flow Switch/Monitor is suitable for continuous flow verification applications that support process analyzer sampling systems operating in hazardous plant areas in the US, Canada and elsewhere worldwide. The FM and FMc www.fluidcomponents.com approvals specify design criteria for flow meters and other electrically-powered instruments for use in areas where combustible gases may be present.

These approvals assure the instrument has been designed and tested to operate safely in these hazardous conditions.

FCI say the new product represents the next-generation, lowest-cost solution for continuously verifying flows within liquid or gas process analyzer sampling systems. It is a small, lightweight instrument featuring superior low flow sensitivity, a relay alarm trip point, an analogue output and an RS232 interface.

AGR HAS JOINED forces with Statoil to develop a new generation of Managed Pressure Drilling (MPD) solution for floating rigs. This phase of the project is worth US$5.1mn.

The development project will build on two technologies. The first is AGR’s EC-Drill® system, which has been used successfully on two deep-water wells in the Gulf of Mexico since its introduction earlier this year. A shallow-water version of EC-Drill® has been used previously off Brazil, Egypt and in the Caspian Sea. EC-Drill® is apparently a stepchange solution, solving a challenge commonly encountered in deepwater wells: drilling close to the fracture pressure. This is achieved by manipulating the bottom-hole pressure by changing the level of drilling mud in the riser.

The second technology is the Low Riser Return System™ (LRRS™) developed by Ocean Riser Systems.

David Hine, EVP at EDS-ORS, part of AGR, said: “EC-Drill® gives our clients a far greater degree of control, enhances safety and enables them to cost-effectively hit deep targets that are simply impractical to reach with more traditional techniques.

“We are delighted to be working with Statoil on providing a new MPD solution for floaters as we move towards the forefront of the marketplace.”

Both EC-Drill® and LRRS™ were nominated in last year’s ONS Innovation Awards in Norway.

The union of Norwegian companies Ocean Riser Systems (ORS) and Enhanced Drilling Solutions (EDS), part of AGR, to form EDS-ORS, took place in July last year.

Tailor-made stainless steel pipes SURAJ, AN ISO-9001, 14001, BS OHSAS 18001 certified company, manufactures and exports stainless steel seamless and welded pipes; tubes and ‘U’ tubes; and large diameter welded pipes to meet customer specifications.

The pipes, which are manufactured to be up to 30 metres in length, are available in a range of materials including austenitic, ferritic, duplex and super duplex stainless steel and are specified according to ASTM,

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ASME, DIN, NFA and JIS standards.

In terms of outside diameter, welded pipes are available from 6.0mm to 1,016mm and from 0.6mm to 25mm in thickness, while seamless pipes are available from 6.0mm to 323.9mm and from 0.8mm to 25mm thickness.

Designed for a range of specialisations, the pipes can be used for heat exchangers, heating elements, surface condensers, evaporators, digestors, instrumentation

tubing and fluid piping within the refinery, petrochemical, food, pharma, fertiliser, oil and gas, breweries, sugar and ship building industries.

The company, which serves more than 70 countries across Europe, the Middle East, the South East, USA and Latin America, also has its own lab to examine various tests such as hydro test, eddy current, PMI, IGC, UT, RT, spectro analysis and mechanical properties. www.oilreview.me

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Subsea 7 completes record bundle contracts SONARDYNE INTERNATIONAL LTD’S acoustic positioning technology has been used by Subsea 7 during the tow-out and installation of of more than 40km of pipeline bundle for multiple contracts. Subsea 7 was awarded multiple EPIC (Engineering, Procurement, Installation and Commissioning) contracts resulting in the fabrication and installation of eight bundles including the longest bundle to date – a 28-km pipeline, delivered as four seven kilometre bundles. Each pipeline bundle was assembled at Subsea 7’s onshore facility in Scotland then transported to site using the company’s pioneering method of Controlled Depth Tow www.subsea7.com Method (CDTM). Here bundle configurations are suspended between two tow vessels at a controlled depth below the surface, a technique that requires real-time acoustic positioning and data telemetry monitoring of the pipeline down its entire length. To achieve this, Sonardyne Compatt 6 transponders were installed along each bundle at intervals of 700900 metres whilst the company’s Lodestar Attitude Heading and Reference Systems (AHRS) were used to monitor the bundle tails.

Alderley completes Phase Two expansion ALDERLEY FZE, OFFICIALLY opened their new office building on the 13th March 2013. The ceremony was conducted by Tony Shepherd, chairman of Alderley plc, and marks the completion of Phase 2 of their facilities and production expansion at its 10,000m² plot in Jebel Ali Free Zone, Dubai.

The construction of the modern two storey office building of more than 1300m², has increased the potential workspace capacity by 75 per cent. As part of the upgrade the new office building now includes dedicated training facilities, additional meeting rooms, upgrade to the IT infrastructure and all associated facilities. The new building also includes a number of sustainable design strategies which will be submitted to the Leadership in Energy and Environmental Design (LEED) committee for certification.

Phase 3 of the facilities and production expansion has now commenced with the demolishing of the old building. The project is due to be completed at the end of May 2013 and will increase in-house production capacity by 40 per cent.

Mike Shepherd, general manager of Alderley FZE, says, “Our new larger offices will allow the company the expansion capacity to respond to the continued growth and success we have experienced in the region.”

Chris McGeehan, CEO of Alderley, comments “Alderley are dedicated to providing a world engineering facility to both our clients and employees and this investment by Alderley plc demonstrates our commitment to the development of the Middle East and beyond” Alderley FZE is part of the Alderley Group and is the firm’s largest operating company overseas. Alderley FZE provides the full range of services for engineering, supply and operation of bespoke metering and produced water treatment solutions to the oil and gas industry.

Honghua Golden Coast Equipment FZE introduction Honghua Golden Coast Equipment FZE (Honghua Dubai), registered in Jebel Ali Free Zone in Nov of 2006, is one of the sole corporations of Honghua Group in China(listed in Hongkong stock market in 2008). The total area of the workshop for Honghua Dubai is about 21,000m2, including 2800m2 workshop (owning lathe, boring machine, milling machine, plate shearing machine, welding machine and other equipments), 500m2 warehouse and a 17,000m2 commissioning yard.

Honghua Dubai will be the assembly, maintenance, refurbishment, spare parts supply, equipment leasing, after sales service and marketing center of Honghua Group in Middle East and Africa. In addition, new technology and new products of Honghua Group will be displayed here.

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Honghua Golden Coast Equipment FZE. (Branch Company of Sichuan Honghua Petroleum Equipment Co., Ltd) P.O.Box. 261868 Jebel Ali Dubai-U.A.E. Tel: +009714 8807066 Fax:+009714 8807061 Website : www.hhcp.com.cn www.hh-gltd.com

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Redline to handle Oman wireless network REDLINE COMMUNICATIONS GROUP Inc., a leading provider of broadband wireless solutions for machine-to-machine (M2M) communications, announced a significant contract with a leading American oil and gas company for a high-capacity wireless network for communications between wells, other assets, and drilling rigs in the oilfield, and their centralised control offices.

This oil company customer, already using Redline’s system in other parts of the world, is expanding its operations to Oman and has turned to Redline once again to meet their exacting communications requirements.

Delivery of products and services associated with the contract, which is expected to represent approximately 10 per cent of Redline’s annual revenue for 2012, begins immediately with full deployment of the network expected to take up to 18 months.

Redline’s advanced wireless broadband system, which leads the industry in reliability, distance, capacity and low-latency, allows personnel to monitor and control oil field production – including the ability to capture data in real-time from thousands of M2M sensors at remote sites.

The Virtual Fiber™ network will be built using Redline’s RDL-3000 and ELTE-MT systems, rugged and reliable wireless broadband equipment designed by Redline for harsh environments, and engineered and built to the exacting standards required by the energy sector. Redline’s Virtual Fiber network system offers the ability to instantly adjust to the living oil field as a whole - from individual well production, to drilling rigs, to the pressure of a part or all of the reserve itself.

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Innovations

Tebodin aids ADCO TEBODIN WAS RECENTLY awarded a three- year contract to provide Project Management Consulting (PMC) services to ADCO’s Engineering and Projects Department.

The contract, that comprises several oil fields in Abu Dhabi, has an optional extension to five years. Abu Dhabi Company for Onshore Oil Operations (ADCO) operates onshore of the Emirate of Abu Dhabi. ADCO acts on behalf of its shareholders to www.tebodin.com explore, develop and produce hydrocarbons within its area of operations. ADCO’s objectives are to achieve sustainable capacity in its oilfields and the enhancement of its facilities by the most efficient and economical means available.

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Web selection - Innovations from www.oilreview.me A selection of recent products and service developments for the oil and gas sector.

Full information can be found on www oilreview.me

Schneider’s information management solution for pipelines SCHNEIDER ELECTRIC ANNOUNCED that it was selected by China Petroleum Materials Corporation, subsidiary of China National Petroleum Corporation (CNPC), to provide the enterprise control and monitoring technology for its new Sino-Myanmar oil and gas pipeline.

Full details can be found at www.oilreview.me

Real-time asset intelligence OPTASENSE IS TO protect a strategic asset under high threat of terrorism and theft in a new Under protection contract, worth six million dollars. The project will bring the total amount of pipelines in the Middle East and North Africa under protection from OptaSense to 1,000 km. This comes at a time when security issues and the need for asset integrity in the oil and gas industry are extremely high.

ABB technology scoops OTC award ABB ANNOUNCED THAT its Onboard DC Grid received a Spotlight on New Technology Award at the Offshore Technology Conference (OTC) held recently in Houston. The Onboard DC Grid is an apparently highly efficient Award-winner from ABB power distribution, automation and electric propulsion system that ABB claims significantly reduces fuel consumption and emissions.

Full details can be found at www.oilreview.me

Paradigm makes imaging more accessible PARADIGM™ IS EXPANDING its service offering for its proprietary EarthStudy 360® technology in order to make the industry’s only fullazimuth seismic imaging and characterization solution more accessible to the global oil and gas industry.

Full details can be found at www.oilreview.me

Full details can be found at www.oilreview.me

Quality at your feet SAUDI LEATHER INDUSTRIES Company (SLIC) produces a variety of footwear, including safety, military and casual shoes, all of which have been awarded quality certification.

BP awards inspection services deal

PERMASENSE PROVIDED AN insight into the benefits of continuous monitoring for upstream applications, and demonstrated how its corrosion monitoring system works at the recent OTC event in Houston.

GL NOBLE DENTON has signed a new agreement with BP in a move that will see the independent technical advisor become a preferred supplier of vendor inspection services across BP’s global portfolio of upstream assets.

Full details can be found at www.oilreview.me

Full details can be found at www.oilreview.me

Full details can be found at www.oilreview.me

Corrosion monitoring system

Pekka Paasivaara, member of the GL Group executive board, and Craig Simpson, BP's director of procurement execution, sign a new agreement that will see GL Noble Denton become a preferred supplier of vendor inspection services across BP’s global upstream portfolio of assets.

Functionality for flow assurance engineers

Downhole reservoir testing system

Kongsberg Oil & Gas Technologies AS (KOGT) announce the latest release of LedaFlow® (1.3), the new transient multiphase simulator for wells and pipelines.

SCHLUMBERGER ANNOUNCED THE launch of the QuartetHT* high-performance downhole reservoir testing system. This latest addition to the Schlumberger portfolio of reservoir The Quartet-HT* characterization services apparently delivers high-quality measurements and reservoir-representative fluid samples with increased safety and efficiency.

Full details can be found at www.oilreview.me

This release of LedaFlow contains many improvements

Full details can be found at www.oilreview.me

66 Oil Review Middle East Issue Three 2013

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Pipelines

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Hugh Davies, director of client solutions at Optical Metrology Services (OMS), discusses how the latest high precision laser profile measurement tools and video inspection equipment are helping companies to verify the quality of CRA-lined pipes by detecting the presence of wrinkles or buckling.

Have you checked your

wrinkles lately?

F

OR DEEPWATER OFFSHORE pipelines, risers and flowlines, as well as pipes for onshore applications in oil, gas and petrochemicals, the demand for corrosion-resistant alloy (CRA) clad pipes is expected to grow, with more than 80 per cent of developing oil and gas fields demonstrating corrosive properties.

CRA clad pipes are protected from the production fluid by a liner that is mechanically bonded to the inside of the pipe. Production fluids (oil and gas) often contain a high sulphur or CO² content that requires the use of materials that are suitable for corrosive environments. When the sulphur and CO² content are too high for the corrosion resistance properties of standard carbonsteel pipes, a CRA liner is often employed.

Sophisticated Once oil and gas pipes have been manufactured and lined, they are often subjected to bending or reeling trials in order to verify whether the CRA liner is likely to buckle or wrinkle (and the extent of this) due to the high bending stresses involved.

These trials normally take place during the bending process itself after the pipes have been lined. This simulates the pipe being continuously bent and straightened whilst reeled and unreeled from the spool onboard an ocean pipelaying vessel.

By inspecting the inside profile of these pipes, companies can verify whether the liner has wrinkled or buckled during the bending trials (and the extent of this), or whether the liner is likely to wrinkle under repeat bending and straightening aboard the pipelaying vessel.

Traditionally, inspecting the inside of lined pipes has been done manually or by projecting a laser ring around the inside of the pipe and then estimating measurements based on a camera view of the ring. These systems are relatively crude and much more sophisticated, reliable measurement systems are now available.

For example, OMS has developed various systems for inspecting the inside profile of CRA lined pipe. Since 2002, OMS has been performing pipe bending trial measurement surveys for the likes of BP, Technip, Subsea 7 and Exxon Mobil.

These surveys range from relatively simple ovality measurements of pipes, through to much more detailed 3D profile surveys.

OMS’ system for pipe bending trials – the Automatic Pipe Checker™ system – uses a high precision laser profile measurement probe, which is part of a fully calibrated measurement module,

68 Oil Review Middle East Issue Three 2013

An OMS laser/video measurement tool inspecting the inside of a CRA-lined pipe

which in turn is mounted to a rotary arm. The system uses a precision linear slide, which moves down the inside of the pipe, stopping at regular intervals to measure the circular profiles (inside diameter cross-sections). In this way, entire sections of pipe can be profiled within a consistent coordinate frame.

System accuracy varies from 0.5mm to 0.05mm, depending on the pipe and customer requirements.

The Automatic Pipe Checker™ system is fully calibrated and measurements are traceable to National Standards Bending trials The internally-calibrated laser profile measurement module is able to record up to 2,048 measurements per ID cross-section (which are typically smoothed out and reduced to 600 points). Smoothing of data points is critical, since this will remove any outliers caused by features such as debris inside the pipe.

Any unwanted features can also be manually edited such as debris on the wall of the pipe.

For typical bending trials, pipe sizes range from 125mm up to 1,200mm. Often, measurements are confined to a small area of the

pipe, but at other times, these can include the complete length of a pipe.

Each profile takes about 15 seconds to measure.

It takes another 15 to 30 seconds to review the profile and move on to the next measuring position.

For example, full measurement of an eight metre long pipe at 20mm intervals will require 400 separate measurements. These will take 400 x 45 seconds to complete or around five hours of continuous work. Accounting for breaks and data calibration checks, one eight metre long pipe normally takes one day to arrive, set up and measure.

These overlapping profile measurements enable pipe sections to be ‘stitched together’ or mapped in the Automatic Pipe Checker software to form a consistent 3D model of the interior of the pipe.

Comprehensive suveying of the internal profile of pipes can be carried out every one millimetre through the pipe - at every stage of a project if the customer requires. Measured data can then be mapped into accurate 3D CAD models in a format (e.g. SolidWorks) that the customer requires in order to drive further analysis, for example, Finite Element Modelling. This, in turn, can facilitate part of a life prediction for the pipe.

Inspection techniques The Automatic Pipe Checker™ system is fully calibrated and measurements are traceable to National Standards. OMS staff carrying out the

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Pipelines

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inspections will typically be responsible for all stages of the measurement survey: setting the tool, calibrating the tool, measuring the pipes, verifying the tool (calibration checks), and then checking the measurement data itself.

In addition to laser profile measurement tools, OMS also uses other inspection techniques to supplement this. Video inspection tools can be used to visually inspect the internal profile of pipes. This equipment typically comprises a tractor and camera systems, together with LED lighting (end and side

By inspecting the inside profile of these pipes, companies can verify whether the liner has wrinkled or buckled during the bending trials lighting) and digital video recording capability.

Using several techniques to inspect the lined pipes enables OMS to supply sophisticated geometrical analysis of the measurement data, including detection of features, analysis of wrinkles or buckling of the liner, 3D modelling of features, and differential analysis (i.e. comparisons between different measurement surveys). Colour visualisations of radial deviation can also be provided.

Optical Metrology Services Ltd (OMS) is a specialist technology company that supplies pipe measurement products and services to the global oil and gas industry.

In onshore and offshore oil and gas

www.omsmeasure.com

installations, the accurate dimensional measurement of pipes is critical to pipe manufacturing, welding and construction. OMS offers a comprehensive, innovative range of internal and external dimensional measurement tools and services that help oil and gas companies reduce their pipe welding, fit up and laying costs, helping

to minimise project risk.

As well as oil and gas, OMS works closely with other industries including pipe mills, nuclear, aerospace and defence, utilities, process manufacturing, academic institutions, legal, pharmaceuticals, and other industries in which the dimensional measurement of pipe or similar tubular

Bentec enjoys regional success GERMAN DRILLING COMPONENT manufacturer, Bentec GmbH Drilling & Oilfield Systems is a manufacturer of drilling rig systems and drilling rig components. The firm’s facilities in Germany extend more than 110,000 m² and include 13,000 m² of fully equipped covered workshops - enough to commission and test rigs for complete turnkey projects. Bentec’s ongoing investment in manufacturing facilities along with personnel training and staff development help the company maintain manufacturing, repair and service capabilities at the highest level. The company holds many licenses, authorisation permits and official certificates and is therefore qualified to provide American Petroleum Institute authorised inspections, modifications, refurbishments, reconditioning and repairs on any kind of oil and gas field equipment. With a focus on health, safety and the environment the company claims to deliver high quality, cost-effective and durable drilling and

70 Oil Review Middle East Issue Three 2013

oilfield systems for harsh and hostile environments. Additional production and service workshops in Russia and the Middle East guarantee its service support all over the world.

Located in the Ghala industrial area in Muscat, Oman, is Bentec’s Middle East maintenance and repair partner, International Drilling Technology Co LLC (IDTEC). As a subsidiary company of Bentec, IDTEC specialises in maintenance, repair and recertification of any kind of drilling rig and oilfield equipment.

Established in 2005 as a joint venture of Bentec, IDTEC has been growing steadily benefiting from Bentec’s international reputation and experience. IDTEC’s fully equipped workshop facility and a nearby additional structural yard can apparently cater to all oilfield repair needs offering a round the clock service to customers in the Middle East. In 2012, Bentec sold 14 Top Drive Systems to Algerian company Entreprise Nationale des Travaux aux Puits

(ENTP). This was the largest single sale of Bentec Top Drives in the company’s history.

Citing superior price, quality and operational performance over international competitors for the contract success, the company has identified Algeria as a major growth market with various Bentec rigs and top drives already in operation there.

As well as continuing services in Algeria and a commitment to support the local drilling industry and foster a prosperous relationship with ENTP, Bentec is also focused on spending time with agents in Oman, the UAE, Saudi Arabia and Iraq. The company foresees massive potential for its products and services in these four countries.

In Oman the company has identified the potential to sell complete rigs as well as aftersales services. Drilling contractors in the region claim they lack service companies and Bentec hopes to plug the gap in the market by delivering all services and spare parts to clients.

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Flow Assurance

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With the offshore industry continuing to move towards even more challenging subsea applications, the need for high performance, robust and reliable products, has never been greater. *Grethe Hartviksen, innovation & technology manager, Trelleborg Offshore explains.

Going with

the flow O

NE AREA IN particular, subsea thermal insulation, has an important role to play to ensure the smooth running of a facility and as such, is a key element of many offshore drilling projects. However, as budgets get leaner, fluids get warmer and water depths get deeper, can the sector keep up? I would say 'yes' and argue that innovative synthetic rubber-based solutions not only address these concerns and provide a reliable alternative, but are the only true choice for subsea thermal insulation.

The offshore oil and gas industry is notorious for continuously pushing the limits. The exploration of offshore gas/oil has been moving to more and more deepwater fields and demanding that wells be drilled deeper and reach further in order to provide more cost-effective and safe well completions. In addition, the requirement to extract more oil and gas than ever before, and exploit ever harsher reservoir environments in new locations around the world, adds a further challenge.

As the water depth becomes greater and the reservoir is located deeper underneath the seafloor, additional pressure is put on the performance of oil and gas products which must now be able to cope with much higher pressures and temperatures than shallow reservoir products.

As such, particularly in this difficult economic climate, customers require solutions which are not only superior when it comes to performance, but more cost-effective, focusing more on price and longer lifetime. Not long ago customers required products that could last 20 years; now it’s often up to 40 years.

When it comes to material selection to handle these challenges, rubber-based materials are, not surprisingly, becoming a more popular solution within the offshore industry as rubber is an extremely flexible and durable material. Compared to alternative materials, such as steel and fiberglass, rubber has an extensive temperature range and exceptionally high pressure resistance, it is a flexible material that can damp, seal and protect, and most of all, has an extremely long lifetime.

So, as exploration and drilling go deeper, the need for reliable and efficient thermal insulation increases; flow assurance is a critical element of deepwater developments. Effective insulation of subsea structures helps maintain flow rates, optimize productivity and reduce processing costs.

It also provides optimum defense against wax and hydrate formations.

As part of the drilling process, hot oil or gas composition flows up at the wellhead and is

Grethe Hartviksen

then transported through a combination of XMTs, manifolds, various critical instruments, spools and flowlines before the riser finally brings it to the surface.

Insulation is a necessary part of this process in order to avoid formation of hydrate plugs and wax build-up (paraffin). The formation of wax and hydrates occurs when the oil or gas composition is depressurized and exposed to the low seawater temperature at the seabed.

A hydrate is formed when crystalline water is stabilized and light hydrocarbon molecules are captured in the crystal lattice. Hydrates can be formed at high pressures and at temperatures around +68°F to 77°F (+20°C to +25°C). Without insulation the cold seawater would rapidly cool the oil, allowing the oil to create hydrate and wax formations, and making it impossible for a safe flow of oil and gas.

Hydrate and wax, if sufficiently built up over time, can partially or totally block oil production to uneconomical levels requiring shutdowns and/or corrective treatments; this will in turn cause unnecessary downtime and cost.

Thermal insulation materials are applied in order to prevent formation of hydrate and wax during a shutdown scenario. During shutdown, the extra insulation gives sufficient time for inspection of the pipe and equipment, so engineers can have time to solve production problems and for methanol or glycol injection.

Enhanced performance

Trelleborg’s Vikotherm II subsea insulation is applied onto a pipe by the extruding process.

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The increasing challenges faced by the offshore industry have spurred manufacturers to consistently push to develop products that can keep up with the demands of the offshore engineer.

However, it’s not always about finding completely new solutions. If they are to stay ahead of the game, manufacturers must continuously look at their current product portfolios to find new ways to make existing products work even harder than they already do.

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Flow Assurance

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As the industry moves towards ever more demanding subsea applications, the need for high-performance, durable and reliable products has never been greater.

As such, some leading manufacturers are reassessing subsea thermal insulation materials, which have been successfully installed throughout the subsea oil and gas industry for many years, to see how best to enhance their performance in line with these growing demands.

The latest generation of subsea insulation solutions, an example of this dedicated improvement from one leading manufacturer, have a k-value of 0.13 W/mK, can be used up to 9842ft (3000m) deep and utilized of liquid temperatures up to +311°F (155°C), as well as external temperatures as low as -31°F (-35°C).

In order to provide even more flexibility when it comes to design and logistics, it now also allows for mobile production and can be installed on-site, at a water depth of 9842ft (3000m).

These flexible insulation systems consist of a three-layer buildup. First, an inner layer for corrosion and/or Hydrogen Induced Stress Cracking (HISC) protection; this could be a Neoprene compound that is qualified up to +203°F (+95 °C), or an EPM compound that is qualified up to +311 °F1 (55 °C). Both compounds provide excellent corrosion or HISC protection, and have been extensively tested for adhesion, aging and cathodic disbondment.

The middle layer has been designed to provide the thermal insulation protection and various compounds are applicable depending on the specific requirements. The compounds provide a kvalue of 0.13 W/m2K up to 0.19 W/m2K. The

74 Oil Review Middle East Issue Three 2013

flexibility and stability of the rubber makes this an excellent choice with respect to thermal expansion.

The insulation layer is protected by the outer layer. This is a strong and robust layer that provides excellent seawater and mechanical protection and has a successful track record as far back as the early seventies in the North Sea. The insulative elastomer coating system used is a development based on ordinary rubber technology and consists of a rubber elastomer chemically modified to give a very high insulating property, while maintaining its inherent rubber properties in respect to sea-water resistance, pressure resistance, mechanical properties and temperature. By utilizing a solid rubber-based coating, these new products have very good thermal insulation properties while providing maximum corrosion protection.

With the lifetime of an oil field expected to be a minimum of 25 years and design temperatures of the field varying throughout (up to +392°F/ +200 °C), it is important that products can prove they stand the test of time. Continuous and extensive testing is the only way to remain at the forefront of material development and lies at the heart of material advances and product solutions.

Whether within laboratories, witness testing or ongoing research and development, testing is a major focal point for all leading manufacturers. Given the numerous considerations that need to be made when evaluating the suitability of a material, it is important that a number of testing programs are undertaken to ensure that the most appropriate material solution is chosen for any given application.

Application of Trelleborg’s Vikotherm II system

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S12 ORME 3 2013 Tech Focus 02_Layout 1 22/04/2013 16:50 Page 75

Valve insulated with Trelleborg’s Vikotherm II

This can include material characterisation where a wide range of laboratory scale testing is undertaken to determine the material properties and reaction at given simulated application and environmental conditions. Tests, which could include thermal conductivity and density, through to compressive strength and tensile properties, ensure that, in terms of material properties, the most appropriate material is selected for a given temperature and pressure combination.

Extensive test programming has been carried out on these next-generation insulation solutions to prove their integrity for the lifetime of the field. Shortterm testing was also developed to recreate as close as possible to the in-situ conditions for operations.

Following testing according to Exxon specification GP 65-08-01, they are designed to last the life of the subsea project (20 to 40 years), are maintenance free and will normally never be replaced.

Conclusion As the offshore oil and gas industry continues to push the limits when it comes to demanding subsea applications, the need for reliable and durable solutions that deliver proven performance for critical thermal insulation installations, has never been greater.

With the formation of hydrate plugs and wax build up (paraffin) a real risk during operation shut downs, solid rubber-based coatings provide a practically incompressible, seawater and impact-resistant solution that has very good thermal insulation properties and also provides maximum corrosion protection.

They are designed to last the life of the subsea project (20 to 40 years), are maintenance free and will normally never be replaced, giving peace of mind to the offshore industry. n

*Grethe Hartviksen has a Master of Science Degree in Chemistry from NTNU (Norwegian Science and Technology University) and has worked in the industry for more than 17 years.

She has spent the last eight years working at Trelleborg Offshore and is currently Innovation & Technology Manager. In the past Grethe has worked for companies including Draka Norsk Kabel and Bredero Shaw. www.oilreview.me

Oil Review Middle East Issue Three 2013 75

Oil Spill Management

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Without real-time data response teams are in the dark when it comes to cleaning up after any incident. Gulf operators are backed up by various levels of Tiered Response Centres that can supply this information promptly.

Effective response

requires information O

IL SPILL MANAGEMENT is the “response” phase of a two-stage process that starts with prevention in the first place. Effective management includes a full technical assessment followed by deployment of the equipment and procedures for cleaning up after an incident, including monitoring of progress followed by complete restoration of the environment. It applies to both marine and on-land events, and most operators in the Middle East and North Africa have plenty of experience of dealing with both.

Prevention is based on pre-planning of equipment, materials and procedures, training, inspection of items like blowout preventers, and contingency planning for control and/or timely shutdown of exploration or production operations.

Marine spills can also arise from accidents with crude carriers, offshore platforms and rigs. There is a long case history of incidents involving refined products, bunker fuel and the products of tank maintenance and cleaning, too.

Effective methods Clean-up is always difficult to plan for, dependent as it is on the type of product spilled, the temperature, depth and current of the water, and the profile of both the subsea surface and any adjacent coastline.

If burning in-situ is not feasible and the spill is not going to disperse naturally, effective methods of removal can include the use of appropriate microorganisms or biological agents, other chemical bonding solutions, colloid- or polymer-based dispersants, physical dredging, skimming or vacuum/centrifuge removal of dispersed particles, or solidifying with special polymers.

Oil spill response centres such as exist in their various ‘Tiered’ forms in the UAE, for example, usually hold stocks of all these products, along with – according to their status - the booms, skimmers, aircraft, response vessels and other equipment needed to use them promptly and effectively.

Both Gulf and North African waters are well equipped with most of these nowadays. The key to success is always to choose an appropriate strategy based on high-quality information available in real time, and then tackle the problem(s) in precisely the optimum place and the right order with the best equipment and materials that are available.

Fortunately there is plenty of information available about the various levels of success that have been achieved in the past with spills in widely differing parts of the world, including many

76 Oil Review Middle East Issue Three 2013

Methods of dispersal vary

incidents responded to in tropical and sub-tropical waters, some of which nourish living coral.

A very good entry point for this is access to the various publications of the International Petroleum Industry Environmental Conservation Association’s Oil Spill Working Group*. IPIECA serves as a key international industry forum to help oil spill contingency planning and response around the world.

The key to success is always to choose an appropriate strategy based on highquality information Vital Invariably spill management depends on the response team getting the information they need as soon as possible, which if appropriate automatic sensors are in place means in real time. Norway’s Aptomar AS, a leading practitioner in this field+, calls this “tactical oil spill management”.

Without this data the responders have great difficulty selecting the clean-up method, applying it in precisely the right place, evaluating the results and planning the next move, which may be

dependent on such hard-to-predict variables as current drift and wind speed.

The management schools’ useful ‘80/20 rule’ applies in the case of an oil spill: most of the unwanted hydrocarbons will be found in a small portion of the affected area, so it is vital to assess the relative thickness of the slick across its entire visible area. This is best done with an actively cooled infrared sensor that automatically detects, tracks and measures the spill so that countermeasures can then be undertaken most effectively, based on a reliable estimate of the volume involved. This information can then be shared with other responders. Aptomar offers a tactical user interface based on its own ‘SECurus’ sensor which works in association with radar to allow the team to choose the best clean-up method and monitor its progress.

Aptomar’s “tactical collaboration and management system brings together the tactical information from all the vessels, platforms, terminals and airborne support into the onshore or offshore operations room,” the company says in its useful online document Oil spill management – Are you prepared? SECurus is a key component of this. ■

* www.ipieca.org + www.aptomar.com www.oilreview.me

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AN OIL SPILL is naturally one of the biggest concerns for industry operators. There are signs that the industry has actively sought to address some of the key concerns raised by this spill. GL Noble Denton’s recent research, Seismic Shifts: The Outlook for the Oil and Gas Industry in 2013, found that 57 per cent of oil and gas operators say that they have taken lessons from the Deepwater Horizon spill and changed their operating practices as a result. At the same time, half of those polled for Seismic Shifts say that their organisation plans to increase spending on compliance and regulation during 2013, while four in ten (41 per cent) generally agree that spending on increased safety and environmental measures, as well as compliance, will rise.

Ensuring safety procedures are correctly observed is a key first line of defence, but broader technical assurance is also a key tenet of any successful spill prevention. GL Noble Denton published a new guideline for the certification of blow-out preventers (BOPs), with a view to establishing industry best practice in 2011.

The Deepwater Horizon event highlighted the need for operators to thoroughly inspect the reliability of this critical piece of safety equipment on a regular basis. BOPs are designed to prevent the kind of free-flowing well incident seen in the Gulf of

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Mexico. However, in that instance the BOP failed, demonstrating that more robust certification was required to ensure this is never repeated.

GL Noble Denton has been able to help respond to this by providing a standard for BOP certification that will help operators across the world to demonstrate their integrity and maintain the effective operation of this vital asset. The guideline clearly defines the process to be undertaken by independent third party certification bodies in certifying the integrity of the asset, which monitors and controls the flow of oil and gas wells.

Since the Macondo incident, the industry has placed increased emphasis on the inspection and testing of BOPs to ensure compliance with industry standards. The new guideline published by GL Noble Denton provides rules and procedures for certifying BOPs throughout their lifecycle, from the design and manufacture phase through to annual inspection during operation.

As new technologies are introduced, extraction from deeper subsea wells is becoming more commonplace and this is a trend that is likely to continue as previously inaccessible fields become economically viable. Seismic Shifts indicates that 37 per cent of respondents expect to increase their spending in research and development (R&D) and innovation in 2013, and stringent existing

guidelines must be applied to any new equipment to ensure the highest safety standards are still being adhered to. Any upgrade to the certification of the equipment itself should be implemented in tandem with a revised training programme to ensure the chances of human error are minimised as far as possible. Again, this is a measure that should be particularly thorough as new machinery and techniques are introduced across the industry.

Another indication of the industry response to the Deepwater Horizon incident can be seen in the recent launch of a new capping stack by a group of nine majors. A capping stack should always be seen as the absolute last resort in the event of a subsea spill, but the investment in these measures is an indication of industry willingness to address concerns about response capabilities.

Increasing focus on BOP assurance and the introduction of this capping equipment - combined with the publication of best-practice guidelines for safe operations - is bringing the industry ever closer to preventing and controlling offshore incidents more effectively in the future. As the industry moves to access ever more inaccessible reserves, confidence in the ability to prevent spills, and swiftly resolve any problems will be crucial in satisfying regional regulators, as well as the broader interested parties.

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Oil Spill Management

Recent research shows lessons have been learned

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Oil Spill Management

Vikoma launches oil recovery solution OIL POLLUTION AND environmental technology company, Vikoma International Limited, has unveiled the latest addition to its range of offshore oil pollution recovery systems.

The OPRS 300 (Oil Pollution Recovery System) is based upon patented oil-attracting discs which Vikoma says have been proven to collect up to 300 cu m per hour of oil and can work across oils with viscosities ranging from one to one million cSt. The OPRS 300

The OPRS 300 comprises of a floating skimmer head which utilises Vikoma’s tufted disc technology combined with both an on-board recovered oil discharge pump and thrusters for manoeuvrability. The unit is operated by a hand held remote control console.

Well capping equipment unveiled OIL SPILL RESPONSE Ltd (OSRL) recently unveiled well capping equipment that can be deployed around the world in the event of a subsea well control incident. It is available to oil and gas companies across the industry, marking what a company statement called ‘a major advancement for international oil spill response capability’. Norway’s Minister for Petroleum and Energy, Ola Borten Moe, attended an inauguration event at OSRL’s Base in Stavanger to commemorate the opening of this new facility where the equipment is stored.

OSRL’s Subsea Well Intervention Service (SWIS) provides for swift subsea incident response around the world. The integrated subsea well intervention system includes four capping stacks to shut-in an uncontrolled subsea well and two hardware kits to clear debris and apply subsea dispersant at a wellhead, creating safer surface working conditions and enhancing biodegradation.

The SWIS equipment is suitable for the majority of known subsea wells. It can be deployed in water depths up to 3,000m and control flow pressures up to 15kpsi.

The equipment will be stored in four international locations – Norway, Brazil, South Africa and Singapore – and maintained ready for immediate mobilisation and onward transportation by sea and/or air in the event of an incident.

The first equipment is now available for international use from OSRL’s Norway Base, and a further three devices will be delivered during Q2 and Q3 2013.

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Oil Review Middle East Issue Three 2013 79

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S14 ORME 3 2013 Arabic_Layout 1 22/04/2013 16:34 Page 83

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‫أراﻣﻜﻮ ُﺗﺆِﺟﺮ ﻣﺨﺰن‬ ‫وﻗﻮد ﻓﻲ اﻟُﻔﺠﻴﺮة‬

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S14 ORME 3 2013 Arabic_Layout 1 22/04/2013 16:34 Page 85

‫أﺧﺒﺎر‬ ∫ɢbh .»˘°VÉŸG Êɢã˘dG ø˘jô˘°ûJ/Ȫ˘aƒ˘f ô˘ ¡˘ °T ‘ ójóL ômμHp πm≤M ôjƒ£J Ö∏£àj{ :∑GòfGB ¿Ghô÷G Q’hO QÉ«∏e 15h äGQÉ«∏e 10 ÚH ìhGÎj GQɪãà°SG GPGE Gòg ,2019 ΩÉY ∫ƒ∏ëH ‹ÉªL’EG ‘ »μjôeGC .zÉ¡°SQóf »àdG ™jQÉ°ûŸG áaÉc ò«ØæàH Éfô°TÉH §˘Ø˘æ˘dG ≈˘∏˘Y Ö∏˘£˘dG ¿GC hó˘Ñ˘j{ :¿Ghô÷G ∫ɢbh k c ¿GCh ,Ék©ØJôe π¶j ±ƒ°S Ö∏£dGh ¢Vô©dG øe Ó ¤GE íª£J »àdG äÉcô°û∏d áÑ°ùæ˘dɢH ɢLô˘M π˘¶˘«˘°S ‘ §ØædG QÉ©°SGC âdGRÉeh .…ó«∏≤àdG êÉàf’EG ôjƒ£J ƒgh ,π«eÈ∏d Ék«˘μ˘jô˘eGC k GQ’hO 120 ¤GE 80 ¥É£˘f .Ö ' jô≤dG πÑ≤à°ùŸG ‘ Qɪãà°SÓd Éfkɪ°V ôaƒj Ée

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É«eƒj §ØædG øe π«eôH ÚjÓe áKÓK ÉÑjôb äGQÉe’EG èàæà°S

‫ﻣﺎرات اﻟﻨﻔﻄﻲ ﻋﻠﻰ اﻟﻄﺮﻳﻖ اﻟﺼﺤﻴﺢ‬O‫إﻧﺘﺎج ا‬ …hƒædG èeÉfÈdG ¿ÉCH ,ábÉ£dG IQGRh π«ch ,…OÉ«ædG óeÉM ô£e QƒàcódG GôNƒDe ìô°U ∫hGC 𫨰ûJ GCóÑj ±ƒ°Sh ,»æ˘eõ˘dG ∫hó˘é˘∏˘d ɢ≤k˘ah Ò°ùj Ió˘ë˘àŸG ᢫˘Hô˘©˘dG äGQɢeÓ E ˘d ÊóŸG ô“ƒDe ¢ûeÉg ≈∏Y ,Ú∏°SGôª∏d É°†jGC …OÉ«ædG ìô°Uh .2017 ΩÉY ‘ ádhó∏d …hƒf πYÉØe IóëàŸG á«Hô©dG äGQÉe’EG ¿ÉCH ,¿Éà°ùfɢª˘cô˘J ‘ Rɢ¨˘dGh §˘Ø˘æ˘dG ∫ƒ˘°UGC ¢Vô˘©˘d ó˘≤˘©˘fG ‹hO ,É«eƒj π«eô˘H ÚjÓ˘e 3 ≠∏ÑJ »àdGh áaó¡à°ùŸG §˘Ø˘æ˘dG êɢà˘fGE á˘bɢW ¤GE É'˘«˘jô˘b' π˘°üJ ±ƒ˘°S .É«eƒj π«eôH ¿ƒ«∏e 2^6 É«dÉM ádhódG êÉàfGE ≠∏Ñj ɪæ«H ,𫨰ûàdG Ωɶf ‘ Ú°ùëàdGh »˘æ˘eõ˘dG ∫hó˘é˘∏˘d ɢ≤k˘ah ∂dP º˘à˘j ±ƒ˘°S{ :Ó˘Fɢb ±É˘°VGCh .zøjôN’BG ∂HhGC ᪶æe AÉ°†YGC ™e äGQhÉ°ûŸG ó©H É°†jGCh É¡°ü°üM ™«°SƒàH ºà¡J IóëàŸG á«Hô©dG äGQÉe’EG ¿ÉCH …OÉ«ædG OÉaGC ,π°üØæe ƒmëf ≈∏Y Égô≤e »àdGh ,᫪æà∏d ádOÉÑe ácô°T ¿GCh ,¿Éà°ùfɪcôJ ‘ RɨdGh §ØædG ±É°ûμà°SG ´É£b ‘ …OÉ«ædG ±É°VGCh .¢Uƒ°üÿG Gòg ‘ á«fÉà°ùfɪcÎdG áeƒμ◊G ™e Öãcn øY πª©J ,»ÑXƒHGC äÉ¡L ™˘e äɢ°VhÉ˘ØŸG á˘∏˘Mô˘e ‘ iô˘N’CG ᢫˘∏ÙG äɢcô˘°ûdG ø˘e ó˘j󢩢dG ∑ɢæ˘g ¿GE Ó˘Fɢb .ádhódG ∂∏J ‘ Qɪãà°S’G ±ó¡H ¿Éà°ùfɪcôJ ‘ »©«Ñ£dG RɨdGh §ØædG

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‫اﻟﻘﺴﻢ اﻟﻌﺮﺑﻲ‬ 4

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‫ﻣﻠﺨﺺ ﻣﺤﺘﻮﻳﺎت اﻟﻘﺴﻢ اﻹﻧﺠﻠﻴﺰي‬ :á°UÉN ôjQÉ≤J .É«Ñ«d ,¿ÉªY §Øf ᫪æJ ácô°T/¿ÉªYo ......................................................................................................................................................................................................

:äÉYÓ£à°SG .∫É°ùŸG »©«Ñ£dG RɨdG ,§ØædG Üô°ùJ IQGOGE ,äÉjhɪ«chÎÑdGh ôjôμàdG ......................................................................................................................................................................................................

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:äÉeƒ∏©ŸG É«LƒdƒæμJh ä’É°üJ’G .äÉeƒ∏©ŸG øeGC ,ó©H øY áÑbGôŸG ......................................................................................................................................................................................................

:¢VQÉ©eh äGô“ƒDe .»Hô©dG §ØædG ¢Vô©e ADVERTISERS INDEX Company ......................................................Page A.Hak Drillcon ....................................................................17 AES Arabia Ltd. ..................................................................41 ALAA Industrial Equipment Factory ............................65 Alderley FZE ........................................................................69 BME Global (Petrochem Arabia 2013) ........................82 Bredero Shaw Middle East Ltd. ....................................13 Cansco Dubai LLC ............................................Cover wrap Castolin Eutectic Messer Switzerland S.A. ................22 CGGVeritas Services SA UAE ........................................23 CompAir Middle East ..........................................................3 DMG World Media Dubai Ltd. (ADIPEC 2013)..........73 Duferco..................................................................................87 Euroblast Middle East L.L.C...............................................7 Europoles Middle East LLC..............................................58 Expotim International Fair Org. Inc. (Iraq Oil & Gas 2013) ........................................................78 Global Pipe Company ......................................................26 GRACO BVBA......................................................................33 Hardbanding Solutions by Postle Industries ............63 Hi-Force Ltd. ........................................................................25

Honghua Golden Coast Equipment FZE......................64 Inova Geophysical Equipment Ltd. ..............................67 International Exhibition Services SRL (SAOGE 2013)......................................................................71 Jotun Paints U.A.E. Ltd. (LLC)............................................5 Kaeser Kompressoren FZE ................................................9 Kandla Energy & Chemicals Ltd. ..................................34 Magnetrol International N.V...........................................45 Magnum Technology Centre (MTC)..............................19 Marelli Motori SPA ..............................................................2 Metscco Heavy Steel Industries Co. Ltd.....................11 Miros AS ..............................................................................77 Mott MacDonald Ltd.........................................................37 Nexans ..................................................................................21 Oman Cement Company ................................................43 Orbcomm..............................................................................75 Prakash Steelage Limited ..............................................27 Qatar Expo (DIOGE 2013) ................................................84 Ras Laffan Industrial City ................................................59 Reed Exhibitions (Offshore Europe 2013) ..................81 Ritchie Bros Auctioneers Ltd..........................................54

Rockwell Automation ......................................................31 Sabin Metal Corporation..................................................15 Safety Technical Services Co. Ltd.................................38 Saga PCE Pte Ltd. ..............................................................29 Samson Controls FZE........................................................79 Schlumberger/MI Swaco ................................................17 Schlumberger Technical Services, Inc. ..........................6 SFL Industries Stopaq B.V. ..............................................53 Smit Lamnalco Netherlands b.v ....................................47 Society of Petroleum Engineers (Gas & Oil Expo 2013) ......................................................60 Suraj Limited ......................................................................25 T.D. Williamson SA............................................................57 Tenaris ..................................................................................55 TMK Middle East................................................................69 Trade House TMK ..............................................................61 Trans Asia Pipeline Services FZC..................................17 Tratos Cavi S.p.A.................................................................24 Ward Leonard Electric Company, Inc. ........................56

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S14 ORME 3 2013 Arabic_Layout 1 22/04/2013 16:34 Page 88