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January 2011

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Issue 49

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Drilling in Deep Water

As an Independent Verification Body and Quality Surveillance Provider, GL Noble Denton has been supporting various Burullus development 11 projects since 2003

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Doubts and certainties of reserves dilemma

Oil reserves are defined as the quantities of crude oil estimated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. 18

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Wiki-leaking the oil and gas community

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Whether it’s Julian Assange or other partners, Wikileaks was just the bomb that dropped hard towards the end of this year. 22

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NOSPCO reveals its 2ndstage OAPEC sets 2011 budget at

of field development plan at the $7.28 million Mediterranean Sea The 85th session of the ministerial council of the Organization of The North Sinai Petroleum Company announced the start of the second development plan of its marine fields, which serves its plan to explore and develop more gas production. This plans targets the increase of natural gas off its concession areas; Tao, and Kamose, located 50 km and 60 km far from Romana Village respectively, in the governorate of North Sinai. “The plan includes the linking of subsea wells to ElWastani storage facility. Also, two offshore wells will be drilled at the Taw offshore platform, in addition to another two wells at the South West Tao, tanker… moreover, the plan aims at developing the Kamose field through the drilling of another two wells and the installation of a new offshore platform to be tied to the current offshore production line,” explained Eng. Abed Ezz ElRegal, President of NOSPCO. Besides, the company prepares for a new route for 12” pipelinesto tie the production of the deep El-Wastani wells and the production of the new Kamose offshore platform to the current Tao, offshore platform, added Ezz El-Regal. “The second stage of this project aims at maintaining the present production rate stable, which counts for 180 million cubic feet per day. This would help increasing the tanks’ production life span for another two years.”

Arab Petroleum Exporting Countries (OAPEC) approved its 2011-estimated OAPEC budget of $7.28 million, which is 4% up from that of the last year. The meeting was held in Cairo last month, during which participating ministers discussed several issues, concerning the bilateral cooperation between members. “The oil price and production, which depend on the supply and demand on the market, are outside the frame of meeting”, said Secretary General of OAPEC Abbas Ali Naqi following the closed meeting. The Egyptian Minister of Petroleum, Eng. Sameh Fahmy told reporters at a press conference after the closing meeting that Egypt is engaged in various oil and gas projects in cooperation with Kuwait, Libya, and the United Arab Emirates (UEA), like the Arab Gas Pipeline and the Sumed Pipeline. He highlighted the country’s support to strengthen ties among OAPEC members. Fahmy added that major Egyptian oil companies, such as Enppi and Petrojet, implemented numerous projects in 14 Arab countries, worth more than $5 billion. Fahmy seized the opportunity to shed light on the factors leading to soaring prices worldwide, such as the bad weather in Europe and the swinging energy demand and called for an “in-depth and careful study” to examine the oil prices during 2011. From his side, Mohammed bin Dha’en Al-Hamili, the United Arab Emirates (UAE) Energy Minister and Chairman of OAPEC 85th meeting, said there are investment opportunities in the Arab countries. “The bilateral cooperation among member countries is doing well, and the economic integration of Arab countries has bright future.” Established in Beirut, in 1968, by the oil exporting Arab countries, OAPEC aims to develop the petroleum industry by fostering cooperation among its members. It contributes to the effective use of the resources of member states through sponsoring joint ventures. Bahrain will preside over the next round as of January 2011.

ENG. ABED EZZ EL-REGAL :

Increasing the production is considered our main obstacle, adding to the reserves is considered the next obstacle. P14

ENG. MOSTAFA SHEHATA :

Our prime focus is to maintain the current production rate intact and fully implement our production strategy. P16

ICE Brent Price


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When the world has been exposed naked! Throughout the decades, the technological advancements have turned the globe into a really tiny village! If a catastrophic incident takes place in the Far East, you will know it the minute it happens while sitting at home browsing the Internet! There are no longer boundaries veiling the truth or hiding what is going around behind the closed doors. Despite the tighten measures taken to remain the confidential political arena hidden from the public, WikiLeaks blew it up and published thousands of confidential documents that have exposed the world naked! Around 250 thousand documents expected to be leaked soon for any Internet browser to read. The huge controversy resulted from these documents has led to a state of chaos, which dropped the masks of major powers (USA, Russia, Europe, Middle East…etc) and revealed the correlations that serve their own benefits. For instance, the continuous mutual spy between USA and Russia, Arab countries supporting the USA’s attack on Iran as Qatar…etc. The real effects of the WikiLeaks are still unknown. But, when talking about the petroleum industry, we found out that the Qatari and Iraqi oil ministers did not attend the last OPEC meeting that discussed this problem, while their Iranian counterpart

wanted to seize the chance to face them and question their support to the American sanctions exposed on Iran. In Egypt, the case was slight different. The mebers of the OAPEC seized the opportunity of their 85th meeting held in Cairo last month to discuss means to strengthen their mutual cooperation. During the Meeting, Eng. Sameh Fahmy, Minister of Petroleum, called for coordination between, the OAPEC Secretariat General & the Arab League, with regard to following-up the global financial crisis and its implications on the Arab countries’ economies. Maybe the year of 2010 was concluded with this WikiLeaks chaos, but I believe the real effects will be clearly shown in 2011, while waiting for more critically confidential documents to be posted online soon. Next month, Egypt Oil & Gas will be celebrating the 50th issue. I am inviting all our esteemed readers to share with us your comments, feedbacks, opinions… etc. to publish in our special February issue. Your contribution is highly appreciated. Celebrate with our team and send us your valuable comments to info@egyptoil-gas.com Editor-in-Chief

Editor-in-Chief Yomna Bassiouni

ybassiouni@egyptoil-gas.com

Managing Editor Tamer Abd El-aziz

tabdelaziz@egyptoil-gas.com

Senior Staff Writer Ahmed Morsy

amorsy@egyptoil-gas.com

Reporters Sama Ezz El-Din Shady Ahmed Freelance Editor Olivia Quinn Clarissa Pharr Media & Statistics Monitoring Webmaster Ayman Rady Photographer

Samy Waheeb Business Development Manager Laila Solaiman Business Development Officer Nourallah Khaled Customer Service Coordinator Passant Fadl Designer Ahmed Marzouk Omar Ghazal Cartoonist Ramy Ameen Administrative Assistant Basma Naguib IT Specialist Sameh Fattouh Production Advisor Mohamed Tantawy Accountant Abdallh Elgohary Mohmoud Khalil Legal Advisor Mohamed Ibrahim

Publisher

Mohamed Fouad This publication was founded by Omar Donia, Mohamed Sabbour and Mohamed Fouad All rights to editorial matters in the newspaper are reserved by Egypt Oil and Gas and no article may be reproduced or transmitted in whole or in part by any means without prior written permission from the publisher.

Contact Information: Tel: +202 25164776 +202 25192108 Fax: +202 25191487 E-mail: info@egyptoil-gas.com www.egyptoil-gas.com


January 2011 / Issue 49

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Egypt News

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NORPETCO kicks off 2011 plans

Azeri oil to be transported to Asian Countries through Egypt

North Bahariya Petroleum Company (NORPETCO) is preparing to conduct a new study during the new development plan of 20102011 in its acquisition area in the Western Desert. Egypt Oil and Gas newspaper learned that NORPETCO is viewing the possibility of carrying out a new study of Work Offer, in the company’s fields in the Western Desert. The study aims at continuing the previous study that showed negative results, and to transform it from the formation of Bahariya to Abo Rawash layer. The new study is estimated to cost $500,000. NORPETCO conducted a hydraulic hammering to two development wells in the past fiscal year of 2009-2010 with a cost of $1million. The company is also conducting some fixing work in its fields. Moreover, NORPETCO is planning to offer a bid to rent a new rig to carry out its new drilling plan of the current fiscal year of 20102011. The plan includes drilling three new wells in its acquisition area of North Bahariya in the Western Desert, as agreed with the foreign partner. The total cost of drilling the three wells will cost $12million. The company will drill two development wells and one exploratory well. In case of positive results from the seismic studies, four new wells will be drilled with new drilling investments. NORPETCO previously drilled two exploratory wells in the East Rawda field, with a production rate of 800 barrels of oil per day. In addition to one development well in the field of Ferdaus 12, which also produced 800 barrels of oil per day, but there was one exploratory well in the same field that didn’t produce yet. It is worth mentioning that NORPETCO is joint venture company between EGPC and Sahara Oil & Gas.

Circle: Al Ola-1X well placed on stream Circle Oil’s Al Ola-1X well has been placed on stream after the firm received official permission for a long-term production test. The Kareem Rahmi sand was perforated from 9,782 to 9,802 ft MD and is flowing at approximately 1,400 bopd on a 28/64inch choke. The overall production from the Geyad and Al Amir SE fields is currently averaging 8,500 bopd. It is worth mentioning that Circle Oil sales increasd due to the eight new oil wells explored. The exploring of eight new oil

wells in Egypt increased Circle Oil’s sales threefold, surpassing 2010 market projections, according to Reuters. Kris Green, company CEO, said that the company owns assets in Morocco, Namibia, Oman, Egypt and Tunisia with revenue ranging between $43-44 million. Production is to rise to 6000 barrels per day in 2011, compared to 3500-4000 in 2010, with a market value equal to $299.4 million. The company will start gas production in 2011, which will boost revenue intensively.

PetroShahd and PPC to join forces

PetroShahd Company has finalized a deal with Petroleum Pipelines Company (PPC) to transfer the crude oil produced by the company to the shipping area of PPC in Mostorod, official source told Egypt Oil & Gas. The total cost of the project reached $1million. The deal included receiving the excessive quantities of crude oil till the company ends the construction work of establishing a receiving station owned by the company with a total investment of $1million. Formerly, PetroShahd came across a new exploration of layer

that was found for the first time in the area of East Ras Qattara in the Diaa-1 field, last year. Diaa-1 was tested and proved an outcome of 1500 barrels per day, the company is working continuously to place that exploration on the production line through founding ceaseless production facilities for the field. It is worth mentioning that PetroShahd succeeded in many exploration till last March 2010, Shahd, El Zahraa field, Rana, and Diaa. PetroShahd is a joint venture company between EGPC and the Chilean firm Sipetrol.

Hellenic Petrol sells drilling rights Greece’s biggest refiner Hellenic Petroleum has sold rights to drill for hydrocarbons in Egypt as it focuses on its core downstream activities to cope with recession at home. Hellenic sold 70% of its exploration rights in Egypt’s West Obayed region to local operator Vegas Oil & Gas, the company announced in a statement. Hellenic will hold a 30% stake in a joint venture between the two companies. “Hellenic Petroleum decided to sell part of its rights in the framework of its portfolio management to create value and spread its ... risks,” the statement added.

The Egyptian Minister of Petroleum, Eng. Sameh discussed with the Azerbaijani Minister of Industry and Energy Natig Aliyev the possible means of cooperation between the two countries, during Aliyev’s visit to Cairo. Aliyev spoke about useful opportunities for increase of trade turnover and bilateral cooperation, including fuel and energy spheres, during the meeting with the Egyptian Prime Minister Ahmed Nazif. According to the Azerbaijani Embassy to Egypt, Aliyev discussed the technical opportunities of SUMED-Arab Petroleum Co., Enppi (Engineering for the Petroleum and Process Industries) and Petrojet and listened to presentations of companies’ experts. Egypt has great opportunities to deliver Azerbaijani oil to Southern-East Asia through Sea Ports in Mediterranean, Red Sea coasts, said Aliyev. The Azrabaijan Minister invited his counterpart to revisit his country and further study the possibility of implementing this suggested project.

Hellenic is trying to cut costs and focus on downstream operations to overcome recession in its home market Greece, where austerity measures have slashed motor fuel consumption. The company, which has refineries, gas stations or exploration rights in 10 countries in the eastern Mediterranean, did not disclose the value of the deal, which is subject to regulatory approval. Hellenic has so far conducted two test drills at West Obayed. The company said earlier last year it hit on “interesting hydrocar-

bon shows” but has since suspended the well, planning more tests. Hellenic also owns 30% of exploration rights in another block in Egypt, called Mesaha, in a joint venture with oil explorer Melrose Resources and KEC. Two years ago, Hellenic sold its 20% stake in six blocks in Libya to France’s GDF-Suez for 125 million euros. Vegas Oil & Gas has concessions to seek hydrocarbons in three regions in Egypt in joint ventures with Shell, GDF-Suez and Circle Oil.


January 2011 / Issue 49

Fahmy: a priority for satisfying local gas needs In order to confront increasing demand on natural gas in Egypt, a decision has been taken for extending natural gas supplies to all governorates in a period of seven years. Top priority would be given to satisfying the local needs of gas in the various sectors. Minister of Petroleum Eng. Sameh Fahmy uncovered various positive figures during an expanded seminar held last month under the title of “oil and gas between a promising future and world changes” within the framework of Egypt’s international economic forum. He said in response to increasing local demand, Egypt’s natural gas exports declined last year to 29% of the total production. He said this ratio declined to 26% in the first quarter of the current year. The Minister expected a qualitative increase in the volume of oil and gas production in the coming few years after many giant foreign companies had agreed to invest $23 billion in the fields of prospection mainly in the deep water of the Mediterranean.

Moreover, Fahmy said that the past 10 years witnessed 490 oil finds in the field of petroleum and gas through 183 agreements signed with world companies. He said these agreements have saved $33.4 billion to Egypt through amending the item of the exclusive price of the produced gas in cooperation with the foreign partner. He said such amendment saved $7.5 billion to Egypt in the past year only and spared Egypt the risks of world oil prices increase in general. The Minister called on Egyptian oil companies to offer part of their shares and securities in the capital market in order to provide the funds, which are necessary for financing their activities. He said many Egyptian companies have been awarded contracts to work in 14 foreign countries, adding the value of projects carried out by these companies reached more than $5.1 billion. Fahmy described the gas pipeline in Upper Egypt as the most successful Egyptian strategic project, adding he has encouraged foreign companies to prospect oil in Upper Egypt, adding the results were promising.

Egypt gas deal overshadows Israel Tamar project Subsidiaries of conglomerate Israel Corp are to buy Egyptian natural gas in a 20-year deal worth between $5 billion and $10 billion that adds to uncertainty over the future of Israel’s own Tamar gas development. The total quantity covered in the contracts with East Mediterranean Gas (EMG) is 1.4 billion cubic meters (bcm) annually for 20 years with an option to the buyers to increase the amount up to 2.9 bcm annually, one of the shareholders in EMG said. EMG, which sells Egyptian gas to Israel, competes with gas produced off of Israeli shores in various groups led by Texas-based Noble Energy.

Eshpetco to start its new drilling plan Esh El Mallaha Petroleum Company (Eshpetco) offers a bid in order to rent a new rig to start conducting its drilling plan for the current fiscal year of 20102011 in its acquisition area of West Esh El Mallaha field in Hurghada. Eshpetco is aiming to boost its production of crude oil from the West Esh El Mallaha field to reach 9800 barrels per day (bpd) by the end of 2011. It is worth mentioning that Eshpetco’s current production rate is 9500 bpd, and it’s a joint venture company between EGPC and the Russian LUKOIL oil company.

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Al-Amal in business with Petrojet and Enppi

Al-Amal Petroleum Company assigned the implementation of developing Al-Amal field, located in Gulf of Suez, to the Petroleum Projects & Technical Consultations Co. (Petrojet) and the Engineering for the Petroleum & Process Industries (Enppi). The project total cost is expected to reach $245 million, and it is included in the fiscal plan of 2010-2011. The primal phase of the project, worth $135 million, consists of the expansion and development of the onshore processing plant and extending a 16 inch gas-supply pipeline of the production facilities to the gas processing station-104 owned by the EGPC. The company will conduct standard pressure procedures for its producing wells to monitor its performance and the reservoir tanks in its concession area in Gulf of Suez.

It is worth mentioning that Al-Amal is a joint venture between EGPC and Egyptian Pico.

Dana Petroleum makes discovery At Nefertiti Dana Petroleum announced a successful exploration well at the Nefertiti prospect in the South October production sharing contract area (Dana 65% and operator, Inpex 35%), in the Gulf of Suez. The highly deviated well was drilled from an onshore location to an offshore target in mid November 2010. The Nefertiti-1X well was drilled to a measured depth of 14,150 ft, targeting a prospect in the Asl sands. The well encountered 65ft TVD oil-bearing sands. As expected the reservoir was moderately

pressure depleted and the flow test was completed using an Electrical Submersible Pump (ESP). During the drill stem test, the well flowed at a maximum stabilized rate of 1,544 barrels of fluid per day with a BS&W of 13% and a Gas Oil Ratio of 279 scf/bbl. The maximum flow rate was constrained by the size of the ESP. The ESP has been left in the well and the well suspended for future use as a producer. Commerciality and possible development plans will be discussed with EGPC. Dana expects to secure 3.9-6.5 million barrels of resources from the well.

The National Petroleum Company (NPC), the upstream oil and gas Platform Company of Citadel Capital, the leading private equity firm in the Middle East and Africa, announced that it has increased its production by 1,700 barrels of oil per day (BOPD) in the Shukheir Bay Field located approximately 125 km north of Hurghada on the western coast of the Red Sea. This development is expected to increase NPC’s total daily oil production from its Shukheir Marine properties to 2800 BOPD. NPC’s concession operator, Offshore Shukheir Petroleum Co. Ltd (OSOCO), a joint venture company of NPC’s Petzed Investment and Project Management Ltd and the Egyptian General Petroleum Company (EGPC), successfully completed the drilling of the Shukheir Bay-6 well (SHB-6) to the Kareem reservoir in November 2010. Production tests of two intervals totaling 15 meters of perforations in the virgin reservoir pressured Kareem sandstone has resulted in flow rates of 1,700 BOPD at a 0.5-inch choke size of 41 API crude with GOR of 750 SCF/BO. The open hole logs indicated new potential within the Kareem formation with a total of 18 meters of net sand with an average porosity of 18% and water saturation of 26%. “Testing on the well, which was completed at the end of November, revealed an initial production rate of 1,700 BOPD of high-quality, sulfurfree 41 API crude,” said Mohamed Farid, Chief Executive Officer at NPC. “We are very encour-

aged by these positive results and will continue conducting tests to further delineate the size of the reservoir and reserve volumes.” Additional reservoir modeling has also been initiated to address the possible extension of the Kareem and the confirmation of additional upside in the primary Lower Rudeis reservoir. “If we continue to achieve positive results this may justify additional drilling to either or both horizons,” added Farid. NPC expects the SHB-6 well to continue to produce at an average rate of approximately 1,500 BOPD over the coming year. Production from SHB-6 will continue to be monitored over the coming period to confirm productivity and a potential increase in field reserves.

NPC increases the Shukheir oil production


Egypt News

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Kuwait Energy sells 20% of Burg El Arab concession Kuwait Energy Company, one of the fastest growing independent oil and gas exploration and production companies in the Middle East, announced it has sold a 20% participation interest from its contractor’s share in the Burg El Arab Concession to Calgary-based oil and gas company East West Petroleum Corporation. Kuwait Energy will remain the operator of the Burg El Arab concession with a 55% interest from the contractor’s share in addition to the operatorship. Gharib Oil Fields, partner in Burg El Arab, will retain its 25% participation interest. Kuwait Energy Company Deputy Chairman and CEO, Sara Akbar, said, “The agreement enables Kuwait Energy to align its portfolio with its long-term growth plans. We remain the operator of

the concession and are glad to begin our joint venture with East West Petroleum to realize the full potential of the asset.” East West Petroleum Corporation President and CEO, Greg Renwick, said, “East West Petroleum is extremely pleased to have entered an agreement with a leading Middle Eastern privatesector firm such as Kuwait Energy Company. We look forward to working closely with Kuwait Energy Company to bring unconventional hydrocarbon studies and technologies to the partnership to enhance the value of the Burg El Arab Concession Agreement Area.” The Burg El Arab concession is situated in the prolific Western Desert area of Egypt. The transaction is subject to customary regulatory approvals, including the endorsement of the Egyptian Government.

Beach to commence Abu Sennan Drilling

Beach Energy reported that a four well drilling program at Abu Sennan in Egypt will commence with the first well was scheduled for spudding mid to late December. Assignment documentation for both the Abu Sennan concession (Beach 22%) and Mesaha Graben concession (Beach 15%) is now with the regulatory authorities and the Minister for signing. All pre-emptive rights in relation

to both concessions have either expired or been waived. Numerous prospects with multiple target horizons have been identified on 3D seismic, which covers the Abu Sennan concession. A drilling rig has been mobilized to the concession and is currently rigging up to commence the planned four well drilling program. The first well will be an appraisal well on the GPZZ Oilfield and will be deepened to target oil

National Bank of Egypt and Tri-Ocean to join Ghanaian arena

The National Bank of Egypt and Tri-Ocean Oil company enter Ghana as Egyptian companies try to strengthen their investments in the oil-rich African country “National bank of Egypt and Tri-Ocean Oil Company are the newcomers to the Ghanaian market,” announced Vice Chairman of the General Authority for Investments and Free Trade zones (GAFI) Neveen El Shafei, during the opening of the Ghana-Egypt Trade and Investment Seminar. On his part, George Aboagye, Chief Executive Officer at the Ministry of Trade, said “Ghana is more and more becoming an investment friendly country. It`s becoming one of Africa’s most political stable country, with a total GDP of $44 billion, compared to 15 or 14 in the past, and inflation rates are shrinking”. He added, “There is a lot of investment opportunities for Egypt in Ghana. We wish that you consider them seriously”. He also pointed to the main sectors of investment in Ghana; “Oil

and Gas services are of a first priority. In the second place comes energy sector especially electricity. There is also infrastructure such as roads and public housing, noting that we have a deficit of $7.5 billion and a shortage of 500,000 units in this sector.”

exploration potential in the Jurassic. The Mesaha Graben concession is one of the largest concession areas in Egypt at 57,000km2 and has the potential to host large oil fields in excess of 100 million barrels of oil. Analysis of recently acquired 2D seismic data was encouraging and, as a result, infill 2D seismic will be acquired in the first half of 2011 to identify potential drilling targets for 2012.

“Hellenic Petroleum decided to sell part of its rights in the framework of its portfolio management to create value and spread its risks” Hellenic Petroleum statement, on Hellenic Petrol sells drilling rights in Egypt “During the visit to Egypt, Aliyev will discuss specific agreements on cooperation in these spheres” Azerbaijani Minister of Industry and Energy Natig Aliyev to discuss oil and gas cooperation with Egypt “We face brutal challenges in the natural gas field and do our best to overcome them. Some of which are the declining of gas prices compared to the crude oil, the swinging foreign currency exchange rates to the Egyptian pound and the high cost of drilling or developing the discoveries in the deepwater of the Mediterranean Sea.” “Since we began to export natural gas in 2000, our production has been increased by 275% so far. I need to explain that exporting the natural gas is not a goal in itself, but it is only a mean for escalating the Egyptian foreign currency in addition to provide the necessary funding to meet the needs of the domestic market of diesel and butane gas imported from abroad. Besides, it is a mean to meet the payment obligations of our foreign partners and finally to achieve a strategic goal which is boosting Egypt’s confirmed reserves of natural gas in the shortest period possible in order to ensure energy sources.” Eng. Sameh Fahmy, Egyptian Minister of Petroleum, said in his speech in Energizing the Egyptian Future “The agreement enables Kuwait Energy to align its portfolio with its long-term growth plans. We remain the operator of the concession and are glad to begin our joint venture with East West Petroleum to realize the full potential of the asset.” Sara Akbar, Kuwait Energy Company Deputy Chairman and CEO, on Kuwait Energy sells 20% of Burg El Arab concession in Egypt to East West Petroleum “ National bank of Egypt and Tri-Ocean Oil Company are the new comers in Ghanaian market” Neveen El Shafei, Vice Chairman of General Authority for Investments and free trade zones (GAFI) “We are very encouraged by these positive results and will continue conducting tests to further delineate the size of the reservoir and reserve volumes… this may justify additional drilling to either or both horizons” Mohamed Farid, NPC CEO, announced oil production increase in the Shukheir Bay Field


January 2011 / Issue 49

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Africa News BP to delay Libya offshore drilling

BP PLC said it would delay its plans to drill offshore Libya, citing a decision not to use its original drill rig for “operational reasons.” “We are changing the rig,” a company spokeswoman told Dow Jones Newswires. “Current plans are to begin drilling onshore and offshore in 2011.” Libya’s top oil official previously said BP was expected to begin drilling in last November 2010. BP is due to drill at least five wells in the Gulf of Sirte, at depths greater than the Macondo well in the Gulf of Mexico, which has raised worries about a similar ecological disaster. The company is changing rigs from one owned by Noble Corp. (NE) to a new one, currently being prepared in the Gulf of Mexico, which is owned by Pride International Inc. (PDE). “We have been using what we learnt in the Gulf of Mexico to ensure operations are safe and sometimes delays can happen,” the company said. BP declined to provide further details on why it is changing rig providers. Noble in September said it initiated arbitration proceedings in connection with the Noble Homer Ferrington rig, which is the one BP originally planned to use offshore Libya and was previously used by Exxon Mobil Corp. (XOM). The rig provider said in a filing the proceedings were due to a “dispute with our customer.” Libya is already a major oil producer, but the bulk comes from onshore or shallow-water facilities.

Africa Oil signs Ethiopia block study agreement

Africa Oil Corp. signed a definitive agreement with the Government of Ethiopia to jointly study the Rift Valley Block. The Block is located north of the Company’s South Omo Block and encompasses the remainder of the Tertiary age East Africa Rift Trend in Ethiopia. The Company has committed to carry out an airborne geophysical survey over the Block, which spans 42,519 square kilometers. Africa Oil will also work closely with seconded members of the Ethiopian Ministry of Mines to support local capacity building. The Joint Study Agreement has an 18 month term, following which Africa Oil will have the exclusive right to enter into negotiations for a production sharing agreement for all or part of the Rift Valley Block. The Company plans to carry out the airborne geophysical survey, together with reconnaissance field geology, in 2011. The Company also announced that it has closed the Ethiopian portion of the previously announced five-block farmout transaction with Tullow Oil plc. As a result of the completion of the South Omo Block portion of the transaction, Tullow now has a 50% operated position in the block, with Africa Oil holding a 30% interest and Agriterra Limited holding the remaining 20%. Tullow has paid $1.3 million to Africa Oil, in consideration of back costs, and is obligated to fund the next $23.75 million of Africa Oil’s future costs in the blocks. The closing of the Tullow transactions on the additional four blocks, being Blocks 10A, 10BB, 12A and 13T, all locat-

ed in Kenya, remains subject to the conclusion of the Interstate Petroleum Ltd. court proceedings. Keith Hill, Africa Oil’s President and Chief Executive Officer, commented, “I am pleased to announce this latest addition to our growing position in the East African Rift Trend. There has been no previous exploration activity in this vast block, but it is clearly positioned along the northerly continuation of the prospective trend. The Joint Study vehicle allows Africa Oil to perform the initial exploratory work under minimal commitments and capital exposure with the exclusive option to move into a full production sharing agreement if our results are positive. The partial closing of the Tullow deal is also positive and we look forward to completing the rest of that transaction in the near future.”

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Kosmos resolves “issues” with Ghana

Texas-based Kosmos Energy said it signed an agreement with the government of Ghana and Ghana National Petroleum Company (GNPC) to “amicably resolve” several issues between them. Kosmos said the issues included matters related to its debt facility and corporate structure. It added that it had also agreed to a solution with the Ministry of Science, Environment and Technology in regard to accidental mud discharges offshore Ghana earlier in the year, where the company would support the Ministry’s efforts to build capacity in the environmental sector.

Earlier last year, Kosmos announced plans to sell its interests in Ghana, which was followed by a failed $4 billion bid by ExxonMo- b i l in August 2010. In October, GNPC and China National Offshore Oil Corporation made a $5 billion joint bid, which was axed w h e n Kosmos shelved plans to sell the assets in last Novem-

ber. “With first oil from the Jubilee Field flowing and these issues behind us, the government, GNPC and Kosmos have reaffirmed their positive and forward-looking relationship,” said Kosmos chief operating officer, Brian F Maxted. “We anticipate significant ongoing capital investment in Ghana as we seek to expand and develop our oil and gas discoveries on the West Cape Three Points and Deepwater Tano licenses.” Kosmos Energy holds a 23.491% in interest in the Jubilee field, 30.875% interest in West Cape Three Points and an 18% stake in the Deepwater Tano Block.

BG Group hits second Tanzanian gas discovery BG Group announced that its second Tanzanian exploration well, Chewa-1, has also discovered gas. The well, located in Block 4 approximately 80 kilometers offshore southern Tanzania in a water depth of around 1 300 meters, is some eight kilometres north-west of BG Group’s Pweza-1 gas discovery announced in last October. Chewa-1, operated by Ophir Energy plc (40%), is the second of a three-well initial work program planned for Blocks 1, 3 and 4 offshore southern Tanzania. The initial work program also includes the acquisition of 4 000 square kilometers of 3D seismic data. BG Group (60%) has the option to assume operatorship of all three Blocks upon completion of the initial work program. “This is an encouraging start to our campaign in Tanzania. We have a large acreage position to explore and an extensive exploration program will be needed to assess the full potential of this new play,” said BG Group Chief Executive Frank Chapman.

TPAO announces Oil Discovery in Murzuq Basin TPAO reported a new oil discovery in the Murzuq Basin (Fizan Desert), Libya. Turkish Petroleum Overseas Company (TPOC), a wholly-owned subsidiary of Turkiye Petrolleri Anonim Ortakligi (TPAO) is the 100% holder and operator in the Area 147/3-4, Murzuq basin, Libya. TPOC was awarded the concession in the EPSA IV Bid Round II in 2005. Out of 10 exploration wells drilled in the concession, seven wells (A1-, B1-, C1-, D1-, E1-, F1-, I1-147/3) have resulted as oil discoveries.


International News

January 2011 / Issue 49

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Iraqi Oil Ministry: Anbar Gas Fields under major progress Negotiations between the Iraqi Oil Ministry and the local government in West Iraq’s Anbar Province, regarding the contracts to develop the gas fields in the province, has achieved a “major progress,” according to a leading Oil Ministry spokesman. “The Oil Ministry has discussed with Anbar Province and its Council, the contracts that had been scored by the Korean COGAS and the Kazakh MONAI GAS Companies, to develop the gas fields in Anbar,” said Assem Jihad said, adding that “a major progress had been achieved in the dialogues about the achievement of those contracts.”

Anbar’s Council had rejected the export of Anbar’s Ukaz Gas, estimate to reach 2.1 trillion cubic feet (tcf), unless after its manufacturing inside the Province, threatening to suspend the works if the central government would not respond to the Council’s demands. Jihad said, “the Oil Ministry has laid a condition on the said international companies to depend on the Iraqi national cadre, with a percentage exceeding 85%,” pointing out that “Anbar Province would have additional revenues through this step, as well as Iraq in general, along with the encouragement of investment in the Province, being a significant

step to serve projects in the whole of Iraq.” “The Oil Ministry is looking forward towards national investments of the said fields and their revenues that would serve the interest of the Province in particular and the whole of Iraq in general,” Jihad said, adding that there are important projects in Anbar in the field of electric power. Noteworthy is that Iraq’s Third Licenses Session of the Iraqi gas fields has ended with granting the Ukaz Gas Field in Anbar Province to the Korean COGAS and the Kazakh MONAI GAS Companies, 50-50.

Saipem wins $1.2 billion Middle Tehran seals $6.5 billion gas East contracts deals Saipem has been awarded new onshore contracts with a total value in excess of $1.2 billion. Kharafi National awarded Saipem the EPC contract for the Early Production Facility Project for the Jurassic field, located in the North of Kuwait, approximately 50 kilometers north-west of Kuwait City. The contract encompasses the engineering, procurement, construction and commissioning of the Early Production Facilities, which will have an oil and gas treatment capacity of 150 thousand barrels per day in this first phase of development, and of the gathering system and pipelines, next to a sulphur granulation plant. The works will be completed in the second quarter of 2013. In Syria, Dijla Petroleum Company has awarded Saipem the lump sum turn-

key contract for the Central Processing Facility to be installed at the Khurbet East oil field, on Block 26. Saipem will carry out the engineering, procurement and construction of a plant (Central Processing Facility) with the capacity to process 50,000 barrels of fluids per day. The works will be completed in 20 months.

Iran signed new contracts in the gas sector worth $6.5 billion; a senior official was quoted. Precise details were not immediately available, but industry watchers have voiced doubts over the deals, saying they were “mainly propaganda”. In a statement designed to show Iran’s gas sector was not hampered by international sanctions, Javad Oji, Head of the National Iranian Gas Company (NIGC) claimed several big pipeline and refinery deals had been signed in recent weeks. “In the past week, the contract on the construction of two main Iranian pipelines taking Iranian gas to Europe and Pakistan was signed,” Oji was quoted as saying by the semi-official Mehr News Agency. He put the total value of the contract at $2.5 billion, but did not say whom the contract was with.

“Recently, the agreement on the partnership of Saderat Bank in the construction of Bidboland gas refinery and Parsian refinery geared to the production of ethane at a value of $4 billion was signed,” he said. Saderat, one of Iran’s five major stateowned banks, will have an 80% stake in the two projects, and NIGC will hold the rest. Iran said it needs around $25 billion a year in oil and gas industry investment. Meanwhile, state news agency IRNA reported an official of the state Pars Oil & Gas Company as saying Iran planned to invest $40 billion in the giant South Pars gas field in the Gulf in the course of the next five years. Hossein Nosratzadeh said the total volume of the investment in the gas field, jointly held with Qatar, stands at some $30 billion.


Downstream

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Methanex to start production EHC starts work on Suez Complex in Egypt in 2011 “This project is a significant step for Carbon HoldEgypt Hydrocarbon Corporation (EHC), an affili-

Methanex could start up its new 1.3-million tons per year methanol facility at Damietta in Egypt in the first quarter of 2011, an industry source told Arabianoilandgas.com on the sidelines of the Gulf Petrochemicals and Chemicals Association (GPCA) conference held recently in Dubai. The source added, “They expect the start of commercial production during the first quarter 2011. They also signed several contracts including a three-year contract with one client located in Europe.” The plant is a joint venture with Methanex holding 60% shares, Egyptian Petrochemical Holding Company (Echem) owning 12%, Egyptian Nat-

ural Gas Holding Company (EGAS) holding 12%, Egyptian National Gas Company (GASCO) owning 9% and Arab Petroleum Investments Corp (APICORP) holding the remaining 7% share. Methanex plans to build a dimethyl ether (DME) facility adjacent to the methanol plant. The new plant would have a production capacity of 200,000 tons per year of DME and would consume approximately 300,000 tons per year of methanol. Canada based Methanex is considered to be the world’s largest producer of methanol.

Technip wins $908 million Algerian refinery contract

Sonatrach, the Algerian National Oil Company awarded a contract for the refurbishment and revamping of the Algiers refinery to Technip. This lump sum turnkey contract, worth approximately $908 million, at an exchange rate, will last 38 months and cover the execution of the complete scope of works, including the design, supply of equipment and bulk material, construction and start-up. The revamp of the existing instal-

lations will enable refining capacity to be increased from 2.7 to 3.6 million tons per year. The new units will allow the refinery to produce gasoline at specifications similar to those in force in Europe. This project will be carried out by Technip’s operating center in Paris, France. It confirms the Group’s leadership in the refining market and is part of Sonatrach’s vast program to renovate and refurbish the country’s oil refining installations.

ate of Carbon Holdings, announced they have concluded financing and have begun work on a worldscale chemical complex in the Suez region of Egypt. The complex includes both nitric acid and ammonium nitrate facilities. The announcement was made by Basil El-Baz, Chairman and CEO of Carbon Holdings, at a signing ceremony for the $298 million loan facility held in Cairo, Egypt. The Initial Mandated Lead Arrangers for the loan facility are Ahli United Bank (Egypt) and Ahli United Bank (Bahrain) who are the Bookrunners, Banque Misr who is the Security Agent, and Commercial International Bank (Egypt) who is the Facility Agent. The Engineering, Procurement and Construction contract and Technology Licenses have been executed with Uhde Gmbh, a wholly owned subsidiary of ThyssenKrupp AG.

ings and EHC in our plan to execute three major projects over the next five years. As a private company, we have the ability to efficiently evaluate market dynamics and implement projects in a timely manner, and this project is the result of that capability,” said El-Baz. The complex converts ammonia feedstock to 925 metric tons per day of nitric acid, which is further processed to produce 1,060 metric tons per day of low density ammonium nitrate. Start-up of the facility is estimated in 2013. Carbon Holdings is implementing new downstream oil and gas infrastructure in Egypt at the Industrial Zone of the Ain Sokhna industrial area. Carbon Holdings is implementing in addition to the Ammonium Nitrate Complex, a Greenfield Olefins Project, and a Greenfield Methanol and Ammonia Project.

Baker Hughes’ SOx-reduction technology launched

Baker Hughes has developed additives specially designed to reduce sulphur oxide (SOx) emissions from refinery flaring operations. Baker Petrolite SULFIX additives reduce SOx air pollution that is created when hazardous hydrogen sulphide (H2s) is burned. The company said that this helps US refiners meet the Environmental Protection Agency’s New Source Performance Standards (NSPS) for Petroleum Refineries, Subparts J and Ja, 40

Statoil, Siemens sign technology development agreement

Statoil and Siemens signed a technology development cooperation agreement, which will initially embrace wind power, subsea technology, electrical engineering technology and energy efficiency measures. This cooperation would facilitate the development of future path-breaking technology. “This is a strategically important agreement for Statoil,” said Halfdan Knudsen, Senior Vice President for Process and Refining Technology in Statoil. Siemens is an important Statoil supplier within several areas, and the two companies already cooperate in the technology development area. An umbrella agreement has therefore now been developed, structuring the framework of the technology partnership within R&D and technology development and facilitating the start-up of new cooperation projects. Knudsen finds it highly important that the customer and supplier cooperate in the technology development area. “As users, we get to define adequate requirements for functionality and describe the conditions under which the equipment will operate. The supplier often possesses extensive skills within product design,

CFR 60.100, which limits the permissible H2S in gas burned in a flare to 160 parts per million (ppm) on a rolling three-hour average. Refineries produce SOx emissions when H2s-laden gases are flared. This combustion process converts H2s to SOx. According to Baker Hughes refineries will be able to quickly reduce SOx emissions by treating the flare gas with Baker Petrolite SULFIX additives to reduce the amount of H2s it contains

and avoid noncompliance issues without major capital investment. “Baker Hughes has successfully applied SULFIX additives and helped refinery customers reduce SOX emissions to comply with environmental regulations,” noted Jerry Basconi, vice president and general manager, industrial services of Baker Hughes. “SULFIX products for flare gas reduce air pollution from SOx and H2s, improving air quality and environmental compliance.”

fabrication and commercialising of the specific technology,” Knudsen said. The cooperation agreement contains guidelines for the rights of use of the results. Working closely with the various suppliers regarding technology development is part of Statoil’s strategy. Statoil has already signed technology cooperation agreements with five other companies.

European offshore wind development center gets €40m from EU

The proposed European Wind Deployment Centre (EOWDC) in Scotland has been awarded a grant of up to €40 million from the EU through the European Economic Recovery Plan. The offshore wind center will be able to accommodate up to 11 offshore wind turbines, and the aim of the center is to prove next generation technology in a real-time, offshore environment. The center, a joint venture partnership between Vattenfall, Technip and Aberdenn Renewable Energy Group, is planned to be located offshore in Aberdeen Bay, Scotland. The EU grant will support the development and capital costs associated with the offshore wind center. David Hodkinson, Director and Head of Development of Vattenfall Wind Power in the UK, said, “We very much welcome the news from the European Union which confirms the considerable financial support being awarded and underlines the strategic importance of the EOWDC and a move towards a vibrant UK offshore wind industry – which will attract jobs and inward investment.” The Crown Estate has already awarded the offshore wind center and exclusivity agreement as an offshore wind demonstration site. A full application for planning consent to construct the project will be submitted to Marin Scotland in early 2011.


Engineering

Drilling in Deep Water

As an Independent Verification Body and Quality Surveillance Provider, GL Noble Denton has been supporting various Burullus development projects since 2003

GL Noble Denton Expert

Hisham El-Grawany Country Manager Egypt

Some 90 kilometers from the Nile Delta shoreline, in water depth of 250 to 1.250 meters, lies West Delta Deep Marine (WDDM) , Egypt’s largest gas ABSTRACT • GL Noble Denton has provided technical assurance services to the Burullus projects since 2003 • GL Noble Denton is in charge of independent verification and quality inspections

field development area. The region and its geological horizons for natural gas came to attention in 1990, when researchers discovered rich, high –quality gas deposits in late Tertiary sands 2 to 5 million years old, mainly in the Pliocene horizons, in the Nile Delta. These horizons extend far into the deep waters of the Mediterranean Sea to the north and north-West of the Delta and the Western Desert, including the offshore north of Sinai Peninsula. Meanwhile , geologists believe the Delta and its adjacent offshore area analogous to other gas and petroleum rich deltas, such as those in Indonesia, the Niger River Delta in West Africa and Gulf of Mexico.

Ambitious Aims for all participants

West Delta Deep Marine is owned by the Burullus Gas Company consortium, a joint-venture company comprising the Egyptian General Petroleum Corporation (EGPC), Egypt’s national oil company, British Gas (BG) and Petronas. Successful exploration and appraisal wells since 1997 have resulted in the discovery of nine gas fields: Scarab/ Saffron, Simian, Sienna, Sapphire, Serpent, Saurus, Sequoia, Solar and Sienna Up. The first WDDM fields – Scarab/ Saffron in 600 to 800 meters of wa-

ter – started production in March 2003. The daily contract quantity is 633 million standard cubic feet per day (mmscfd) over a period of at least 17 years. In 2005 the Simian, Sienna and Sapphire fields were added to increase production to the Liquefied Natural Gas (LNG) plant at Idku on the Egyptian coast. Both of these fields set records for the longest direct-to-beach tie-backs, with Simian being 123 kilometers in length. The Simian/Sienna offshore facilities consist of eight subsea wells tied into the existing WDDM gas gathering network. In addition there is a shallow water control platform. Independent verification services for the development projects were placed into the hands of GL Noble Denton. The next development phases of the West Delta Deep Marine area, called phases IV, comprised eight additional wells, five of them in the Scarab/Saffron area, two in the Serpent field and one in the Sinbad field.

Subsea Equipment

With two manifolds already in place and flowline termination (PLET) and umbilical termination (UTA) points for each of the eight existing wells located close to the respective manifolds, the area is congested. The closest possible location for the new northern manifold is more than 50 meters away from either existing tie-in hub. The subsea equipment for WDDM IV includes eight horizontal subsea trees, two manifold with subsea control modules with 20-inch future connection, and four tie-in spool bases (TSBs) with hubs for 23 jumpers and a 66-kilometers, 10-inch diameter flowline. Each Scarab/Saffron manifolds contains a 20-inch connection hub for the tie-in of further wells. 68 kilometers of installed umbilicals deliver power, low and high-pressure hydraulic oil and communications services to the subsea facilities. Furthermore, the equipment for WDDM IV includes one new subsea distribution assembly, right wet gas flowmeters and at least 18 flying leads. Well drilling was completed in 2007 and gas has been flowing ever since.

Case study

January 2011 / Issue 49

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THE WEST DELTA DEEP MARINE (“WDDM”) Concession, located approximately off the north-western margin of the Nile Delta, is being developed progressively to maintain current and future gas supplies to the Egyptian domestic and export markets. WDDM phase VIII completion during 2011, 2013 and 2015 respectively Authority (IVA) and Quality Surveillance (QS) services. The challenge: INDEPENDENT VERIFICATION AUTHORITY The scope of verification scheme includes design, fabrication, manufacture, offshore installation and commissioning. It will be applied to all offshore facilitys SCEs (Safety Critical Elements) associated with the WDDM Concession development projects, such as subsea production trees, pipelines, jumpers, subsea manifolds and structures, control system and umbilical incl. leads. QUALITY SURVEILLANCE (INSPECTION): • Provision of all quality disciplines • Quality Co-coordinator • Senior Quality Surveyors at vendors and manufacturers of subsea production tres, pipelines, bends, umbilicals, control, valves, welding, NDT, coating, AUT. • Quality audits / surveillance programme, including Quality Surveillance HSE Expediting. CLIENT REPERESENTATIVES GL Noble Denton can mobilize Vessel / Barge Rep’s during the installation of equipment such as subsea production trees, pipelines umbilicals, control system and sub-sea structures, as well as surveys and pre-commissioning.


Infocus

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By : Tamer Abdelaziz, Shady Ahmed

Owing to their crucial importance regarding the extraction of oil and gas, services companies have a great concern within the petroleum sector. As a result of the fact that they are many inside the sector and the competition among them became intensified, it caused turmoil in the service market due to the lack of adequate organizing laws, according to the sector’s figures. These missing laws, if existed, should ensure the continuation of start-ups and small companies in the service market. Moreover, the demanded regulations are also essential in the light of the presence of state-owned companies that crowd out the private companies, trying to grab portions of their market share. Nevertheless, these state-owned companies have no previous experience. Tanima being one of the most important state owned companies in this field snapped up some important projects in the last period, either through direct order or through tenders. In spite of the companies’ competition in the provision of providing their advanced technology to reach the quality standards required by the exploration and production companies in Egypt, but those companies always hit the obsession of prices, which has become dominant on the market of services in Egypt away from the grasp of the quality standards. Hence, experts and service providers in the sector urge that there should be an obligatory and standardized law to be implemented among the Egyptian service companies. For them, these regulated laws will limit down the linkups and connections which spread on the scene nowadays, which in accordance may destroy the market, either technically or materialistically. From their side, the functioning companies requested more transparency in dealings. It is not reasonable that when a tender-winning company is declared, the reasons behind eliminating the other companies are always hidden and mysterious. They also highlighted that those eliminated companies from the

tenders have to know the shortcomings of their loss in order to avoid or compensate them in other tenders. Some of the services companies raised objections on the existence of Tanmia in the local market without having sufficient expertise or even equipments which are necessary for the competition. In addition, they believe that its role maybe beneficial for the sector only if it provides those services which are offered by major services companies operating in the market. On the other hand, the officials within Tanmia responded to these accusations by announcing that the primary goal of the company, upon which it was created for, is to reduce the cost-recovery and expenses of the foreign partners, which is considered as an inherent right of the country. Thus, the role of Tanmia is regarded to be a national one. In addition to that, Tanmia’s officials added, it penetrates the services market in legitimate ways. While the companies that deal with it have the right to reject its services especially because that companies have a foreign partner in their board of directors. “The Ministry of Petroleum tries to ensure equal opportunities between governmental and private companies alike,” an official source within the Ministry of Petroleum told Egypt Oil & Gas (EOG). “It is not reasonable for the Ministry to dismiss the private companies for its favour. However, it is the time that there will be more of a national services company working in the local market,” the source emphasized. “The Ministry had the door fully opened in front of either the private or state-owned companies to operate in the local market. “As a result, it attracted over the past years a huge number of companies specializing in this field due to the plan initiated by the Ministry to expand in the implementation of integrated strategies for petroleum services by the investments and experiences of Egyptian companies and with the cooperation of

international ones in fresh fields to meet the growing needs of the activities, services and drilling rigs to explore for oil and natural gas and develop the discovered fields, especially after the success of the petroleum Ministry in the signing of several agreements that will increase the Egyptian oil and gas reserves.” Additionally, Eng. Hazem El-Shafie, MI SWACO Country Manager, stressed to that the services companies play a crucial role in the oil industry. “Away from the vital part of the services companies, there must be a permanent development for them in order to match with the recent requirements and reflect the latest technologies used globally in order to increase the value added to the industry,” El-Shafie demanded during his exclusive statements to EOG. He also pointed out that the service market in Egypt misses many vital principles. “The local service market has many flaws. In the forefront of them comes the preference of service with the lowest price on the expense of the highlycost ones. Although the latter aims at increasing the production and then working to increase strategic reserves of oil and gas in the long run,” ElShafie explained. As for the cheap services, they always have negative consequences in the short term, he added. Besides, ElShafie tackled the fact that the higher cost services are always preferred by the leading E&P companies. “The major E&P companies, which have a long history in this field, constantly prefer the costly services compared to their counterparts of low-cost ones because of their experience that proved the positivity of the Arabic colloquial proverb ‘Expensiveness worth every penny’, which must be followed by all companies in Egypt because of its positive impact on the sector,” he advised. MI SWACO’s Country Manager also included that what is taken against the Egyptian market is that after the end of any tender, companies lossing the tender should be told about their technical

and financial evaluation to be able to compensate or develop them in other tenders, which will be reflected in the status of the Egyptian market and consequently the competition will serve the sector. “In reality, the service market in Egypt is completely different from what is mentioned above. After the oil sector was one of the largest sectors in terms of the income per person, it comes late nowadays in ranking compared to other sectors such as financial institutes. Although the oil sector has the assets needed to make it at the forefront of those sectors, the case is different now than it was 20 years ago,” El-Shafie added. He, furthermore, warned of taking centraldecisions within the service market in Egypt which leads to bureaucracy, which is considered as a scourge of the labor market in Egypt. For him, It should disappear completely from the oil sector, because it cost the companies huge amounts of money due to delays in those decisions and its centrality. Regarding the presence of emerging governmental services companies which jostle the major companies in the services market, El-Shafie said: “there is no problem at all from the presence of state-owned companies such as Tanmia in the Egyptian services market but some conditions have to be existed. They should have organizational rules, adequate equipments and tools required to make it one of the largest companies within the sector.” “This will only come true when they have partners from the major companies operating in the sector in first. Then, they can be separated afterwards after they meet these previous conditions,” he necessitated. He believes that the current role played by Tanmia can be described as a “double edged sword”. From one side, it is working to resolve all the problems that correspond to the companies dealing with them easily and without the wasting time. From the other side, it is


January 2011 / Issue 49 working according to the sub-contracting strategy and therefore it may harm competition in case if there were no organizational rules to systematize the whole process. Moreover, he praised the idea of establishing service companies similar to Tanmia, but warned of the error in the application. El-Shafie explained for example the existence of the sponsor strategy as was the case in the Gulf companies, headed by ESNAD, the Emirati services company which is one of Abu Dhabi National Oil Company’s companies (ADNOC). ESNAD’s volume of investments is estimated to be billions of dollars and then it can provide good quality services to the market alone or even with the participation of other companies. However, ESNAD’s situation can’t be matched with current situation of Tanmia. “The existence of a separate organization within the service market in Egypt became a necessity nowadays than before,” El-Shafie stressed. “Such organization will give more stability and security for service companies, whether small or large, which in accordance will achieve a growth in production rates and reserves alike,” he included. Likewise, he urged that during the next phase the service market’s motto should be “more of transparency” in all the decisions that seek to regulate the market’s mechanisms in the future. Consequently, it will have a great positive impact on the service companies in particular, and the sector in general. In addition, Tarek Mounir, Halliburton’s Accounting Manager, believes that the service market in Egypt needs to have more structured rules, pointing out that international companies operating in Egypt have all the tools that work in abroad. “In Egypt, the service companies own the same advanced tools and services which are used abroad. However, the advanced technologies used in the local sector depends only on the needs of the E&P companies,” Mounir stated. “The quality required by the costumer is what elevates the service market in Egypt. There are companies which turn to alternative services in order to save expenses, which is detrimental to the service market. “While the leading E&P companies cooperate with the major service companies in order to provide the best quality in drilleing several wells that require superior quality.” Regarding the most important obstacles facing the service companies in the sector, Mounir said: “Currently, collecting delayed payments is considered the most important problem facing the

services companies, while the contract obliges companies to pay their dues within 30 days of the contract, but the process takes up to about six months, which overwhelms companies financially in the light of their huge obligations towards their employees.” “The E&P companies delay in payment due to the lack of real financial liquidity,” Mounir justified. He also called for solving such dilemma at the earliest time in order not to urge the services companies from escaping outside. Above and beyond, he noted that the administrative problems also represent another obstacle for service companies in terms of the entry of equipments to the sites of the fields. And he pointed out that there are equipments exempted from customs duties in accordance with the law, but when they go out from Egypt and come back again, we obliged to pay customs and taxes which are costly to the owners of companies operating in the service market. “The entry of state-owned services companies with direct order, away from the bidding system which we lead, will result in erasing the currently used rules and principles. “Tanmia was established for the development of idle wells and then began working in the field of services, which weakens the chances of competition between companies,” Mounir added. He demanded that regulations should be existing to organize the market in order to support the small companies before the major ones, to bring about stability in the market of services s to meet the needs of the Egyptian market which is growing rapidly in a current period. Elsewhere, an official within Baker Hughes said that the role of services companies became no longer limited only to perform their assigned duties in the projects but extended to do what is beyond that by providing some tips and guidelines for the advancement of the oil sector, as the renaissance of the sector will benefit those companies. “There must be more transparency in decision-making rules in order to be binding on all companies alike. Hence, it will regulate the services market which contains many of other embedded industries,” Baker Hughes’ official added. In a different place, an official source in a joint-venture company stressed to EOG that many of the oil companies called for reducing the prices of services of oil production, especially because some companies are currently thinking of directing to the services companies

abroad to work with them under the low prices compared with high prices that are in Egypt. “The service companies abroad work to achieve an integrated petroleum industry through advanced technical studies in drilling and the recovery of all types of oil wells, whether exploratory or development,” the source emphasized. He added that the companies are calling for high quality of services, but with reasonable prices, as there are companies that burn rates in order to ensure its presence in the market to compensate that loss in other services in which it is impossible to cut prices. From his part, Eng. Ezz El-Din Mohamed, Chairman of Wadi El Sahl Petroleum Company (WASPETCO), focused on the importance of developing a link between the oil companies and services providers to reveal more new explorations in the coming years. “The services provided by major companies are good but expensive and not commensurate with today’s price of natural gas and crude oil,” Mohamed told EOG. Afterwards, he praised the cooperation of Egypt and China in an attempt

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of the Petroleum Ministry for enhancing the Chinese investment in the oil sector in Egypt, which is an important step to provide many investment opportunities, which contribute effectively to attract major investments of Chinese companies to work in Egypt and the implementation of joint projects between them. According to reports issued by the services market in Egypt, “Schlumberger”, “Halliburton”, “Baker Hughes” and “MI SWACO” accounts for the largest share of services market in Egypt because of the financial strength enjoyed by these companies as well as their considerable experience in addition to the contentious development of their services. Besides, they establish research centers and always held workshops and fund their research centres although they do not follow the same companies. In addition, they also organize ongoing training for their employees to raise their level of professionalism and technical support other than the ability to immediate response to up-andcoming incidents from the different processes related to the petroleum sector, making them the top services companies in Egypt.


Interview

14

What is NOSPCO’s new strategy?

What is the current daily rental cost of such rigs in the market?

One thing you must know is that the company operates on behalf of the shareholders, whether the EGPC or EGAS or the foreign partner (the French Prenco). Before we start executing any of our plans, we must take the approval of the members of the general assembly and this leads us to set a challenging plan. The new plan included signing three new development contracts of Tao, Kamose and Seti Plio fields. The primal stage of development included only Tao field, which was not formally developed. The upcoming stage consists of the full development of Kamose and Seti Plio fields, in addition to more studies of the deeper layers, which revealed positive results through the seismic and geological studies that were conducted.

It averages from $109 to $169 thousand per day. What is the total cost of drilling those wells? It depends on the nature of the rig, whether land or marine rigs. The deep drilling operations are more costly than the land drilling; sometimes it costs from $250 million and reaches up to $500 million. The deeper you drill, the more you pay.

What are the commitments of foreign partner in the drilling operations?

What is the number of wells drilled so far?

Up to now, there were four wells drilled in the Tao field.

What is the total amount of gas produced by NOSPCO?

Our current production rate stands at 180 million cubic feet of gas per day. We are working hard to sustain this rate and to increase the reserves, which is considered a major challenge for us. We have been working on our tanks reserves since we started producing, as any increase would cause an augment in the water produced from the well. We faced this problem before and we had to suspend the layer producing water and we worked on a new layer.

What are the foremost obstacles facing NOSPCO?

As I mentioned, increasing the production is considered our main obstacle, adding to the reserves is considered the next obstacle. Through various studies conducted, similar to the ones done in Seti Plio field and showed high positive results, we take fully advantage of the production facilities offered by the ministry whether the facilities owned by our company or the nearest ones possessed by other companies.

What are NOSPCO total investments?

The total amount that was invested by the foreign partner is $409 million. Initially, the field production was held by AMOCO, which was the original partner before the shares of fields were sold to French Prenco. Hence, this number of investments is limited to the development stage solely, and not including the acquisitions or drilling operations.

Do you plan to increase your investments in the coming period?

Actually, we adopted the new fiscal plan for the next year, which will cost $180 million. In addition, we agreed to some amendments to the previous timetable of operations episodes set in the last general assembly meeting, in early December 2009. We are adding new points to the development contracts for the next stage. The new rig will arrive in next June to start operating by mid August 2011.

What is NOSPCO rank in the list of gas producers?

If the production of Rashid and Burullus companies are combined, then NOSPCO will be ranked the 7th between the gas producing companies. In my opinion, I believe this is a good position because the companies ahead of us are major companies that started operations long time ago. Moreover, our production is derived from one acquisition area only and this is the production rate we planned for, if not more. We went beyond our actual capabilities to reach this production level. This is can be considered as a challenge to keep a steady production rates as we had a problem of utilizing a specific gas compression equipment that needed regular maintenance and caused a production postponement for a quite time.

What is the rig used in the drilling operations?

The rig used in drilling is El Qahir-2, owned by EGAS and GANOPE. It is a type of Jackup rigs, used for the first time in the area of North Sinai. We are in the middle of some negotiations to limit the daily rental price of the rig.

Do EGAS or EGPC impose a specific rig on the foreign partner?

There are no obligations done by EGAS or EGPC, but there are rules to rent a rig through the conduction of bid rounds. Our new rig is classified as one of the top in terms of technological advancements. A representative from NOSPCO went to Singapore to check it and make sure that the selected rig will give the company the best results. This representative already wrote a report to inform us with all the specifications of the rig.

NOSPCO conquers the lands of Sinai

Considered as one of the pioneering companies in the area of North Sinai, the North Sinai Petroleum Co (NOSPCO) has engraved its production achievements in this remote area from deep waters of its acquisition area of the eastern side of Nile Delta and the Mediterranean Sea. Eng. Abed Ezz El-Regal, the third recently appointed President of NOSPCO, reveals the company’s new fiscal plan, obstacles challenging its implementation and shares the E&P strategy By Shady Ahmed - Tamer Abdel Aziz

The contract with the foreign partner includes the drilling of six wells in addition to establishing a new platform. The foreign partner is obligated to pay specific amount of cash for the operations. Also, the contract includes conventions incase the foreign partner did not fulfill its commitments.

They say that the gas is the future of energy, how is that working with NOSPCO?

We have our production rate that we are obligated to reach and to add to it too, and this combines with the policy of the ministry of seeing that gas is the future to the energy in Egypt. We are conducting lost of studies to keep our production rates and to increase it too.

Is it difficult to produce gas from deep waters?

I believe that the geological nature of deep waters is the main challenge facing any gas production process in these areas.

Which service companies do you work with?

We pick companies through bid rounds and we chose the ones that will help us reaching our goal to keep a steady production rate and even work to increase it. There is a priority given to the Sinai Service Company that operates in the area of Sinai. This specific choice follows the guideline of the Minister of Petroleum Eng. Sameh Fahmy, who has attributed special attention to the area of Sinai.

What are your responsibilities towards the Sinai community?

We try to help the Sinai district as much as we can, so we hire most of the workers and engineers from the Sinai district. Also, the foreign partner did lots of social activities for the Sinai district.

How do you see the services market in Egypt?

Following the global crisis, the market witnessed huge competitive struggles. But the companies, which provide the high-quality service at the most reasonable prices, meaning quality and fixed prices, will always win the struggle.

What is your opinion about companies using “the under-table concept” to secure bid winning?

I do not think that our oil and gas sector has such a thing! There are rules and I believe our companies follow these rules. But how do you see that some companies offer good bids, but still others win? It all stands on the need of each well; the ministry always picks the right service company to meet the needs of each well drilled.

Do you see more foreign partners joining the Egyptian market?

We can surely notice the interest of more foreign companies to join the Egyptian market. As a matter of fact, Egypt has maintained an attractive investment atmosphere.

Does attracting foreign partners depend on the global gas prices?

Till now, there was no fixed prices for the gas worldwide, and do not forget that gas contracts are considered long-term deals.

Do you think that Wikileaks cables will affect the oil and gas market?

The Middle East is considered as a major role player in the oil and gas market, so whatever affects this player then it will affect the prices whether on the long or short terms.

What are your hopes and expectations for the coming period?

I am hoping the best for the petroleum sector in Egypt, and for my company NOSPCO. I hope that NOSPCO will be able to maintain its rates of production and keep increasing it.


January 2011 / Issue 49

15


Interview

What are the OSOSCO main projects over the last period of time?

We achieved several discoveries over the past few years, on top of which comes the Upper Rudeis Sandstone discovery, from the Shukheir Bay-5 in August 2006. The well was put on stream; with daily production rates averaged 1200 barrels of crude oil. In addition, the company completed the 3D seismic surveys for the Shukheir Bay and Gamma fields in June 2007. The implementation and analysis of these studies contributed to the attainment of more discoveries, such as the successful completion of drilling the Shukheir Bay-6 well (SHB-6) to the Kareem reservoir in November 2010. Production tests of two intervals totaling 15m of perforations in the virgin reservoir pressured Kareem sandstone has resulted in flow rates of 1,700 BOPD at a 0.5-inch choke size of 41 API crude with GOR of 750 SCF/BO.

What is your strategy to increase production rates?

Various assessments were conducted to evaluate the production capacities of the Gamma field and Shukheir Bay, as an attempt to study the volume of oil reservoirs. Depending on the previously held 3D seismic surveys, we are studying the possible drilling depths to penetrate the layers containing whether oil, natural gas and water in order to determine the wells to be developed and repaired and the other new wells that can be drilled in this area.

What plan?

is

OSOCO’s

2010-2011

Our prime focus is to maintain the current production rate intact and fully implement our production strategy. Moreover, we will probably drill a development well

16

in the Shukheir Bay and another exploratory well in the Gamma field. The execution and timing of both wells drilling depend on the findings of studies that will be conducted to evaluate this plan.

What is the current production volume?

Presently, OSOSCO produces 1700 barrels of oil per day in addition to 3 million cubic feet of gas. Operating in the Gulf of Cities is full of challenges. How do you overcome these challenges? First of all, we have to admit that there are several positive aspects of operating in the Gulf of Suez. For instance, we can receive the needed services on time, as there are many companies operating in this area and the wheel of E&P is ongoing. On the other side, the negative aspect can be represented in the difficulties of marine navigation due to the wind speed and high waves during several periods of time throughout the year, which slow down our offshore operations. We work hard to overcome this obstacle through the utilization of specific equipped ships.

What is the budget share allocated for developing the production facilities?

There is an ongoing study to define techniques to develop the production facilities of the Shukheir Bay, which match the environmental requirements in this area and the production rates. As a matter of fact, there are annual maintenance programs and throughout the past 20 years, OSOSCO conducted a large number of maintenances that led to considerable production increases. Last year, we completed a rehabilitation plan for production facilities, worth $500 thousand, however,

this year, the spending increased to $1.2 million. In 2011, we are planning to spend another $500 thousand for fields’ rehabilitation, yet the budget is subject to the formal approval of the EGPC. In the context of the 2010 budget, a total of $500 thousand were spent for the Shukheir Bay field and another $750 thousand will be paid to replace the current diesel engines to be run by the gas produced from wells, which would cut down the operating costs. Throughout the past five years, all land and offshore facilities were tested and evaluated and succeeded to receive credits from reputable organizations, such as Zeta. Can you tell us more about the company’s concessions? All our concessions are located in the Gulf of Suez. The first, Gamma, includes six wells, only one out of which produces at a rate of 100 barrels. The second area, Shukheir Bay, holds as well six wells, three out of which have an average production rate of 1600 barrels. The three producing wells are Shukheir-1, Shukheir-5 and Shukheir-6.

What is the volume of OSOCO’s investments?

This year, the total investments counted for $16 million, which is $1 million higher compared to last year’s. What is the actual cost for well drilling? As commonly known, the drilling of offshore wells is way costly compared to the land one. For our company, the total cost of drilling offshore wells totals $15 million, while the drilling of land wells is one-third this sum as it costs around $5 million. Are you releasing any bid round soon?

The bid rounds are an elementary factor in the petroleum industry, through which we can select the high quality offers, whether technically or financially. There is a bid for supplying spare parts of specific equipments, however, we are still in the negotiations phase.

What are the main service companies you are dealing with?

We are not limiting our business to a precise service company. Actually, we deal with numerous service companies, which can ensure the supply of high-quality services at the finest prices.

What are the rigs utilized in your operations?

Most of the rigs we utilized have an average 1500 HP, at a daily renting cost of $14 thousand. Among the rigs we rent, we can list EDC, ECDC, NAFTA, Mercury, Bennivis…etc.

What are your QHSE precautions applied by OSOCO?

We finalized a complete scheme of fire fighting in the oil and gas separation station in the Gamma field, in addition to the implementation of latest technologies. Also, we awarded the tasks of getting rid of the drilling left overs to Green Valley Company. Besides, HSE trainings are given to all our employees in order to ensure their safety during the daily working routines and certify that they can deal in the best way during any type of emergencies.

What are OSOCO’s main goals in 2011?

Discovering new reservoirs, developing the current existing ones and boosting production top the list of our priorities over the coming period of time.


Technology

January 2011 / Issue 49

17

SKF The Knowledge Engineering Company ®

For over 100 years SKF has been and still is the world leader in anti-friction bearings. Over the last 40 years SKF Reliability Services division has developed a portfolio of services, products and solutions to help our customers improve performance of their assets and facilities as well as decrease running cost and improve reliability. SKF Reliability Services division has been present in the Egyptian market for the past 20 years offering a range of services solutions and products to our industrial customers in all industrial segments. The range of services and products offered are: • Mechanical services and redesign • PdM and machine condition detection and analysis services and products. • Asset management services (maintenance strategy development and optimization) • Inventory management • Culture change management • Process management and workflow development and optimization. Case Study: Refinery Our customer, a large refinery in North America faced a problem with maintenance optimization and overall cost of maintenance as benchmarked with similar refineries world wide (Solomon). The report showed that overall maintenance cost was 40% higher than the benchmark Inventory levels were also 30% higher than necessary. Our customer requested a reliability gap analysis which was conducted to cover, asset performance and maintenance, personnel behavior and predominant culture within the facility, production trends, management tools and KPI effectiveness, Inventory levels, and work flows. The Gap Analysis confirmed the findings of the initial report and found the following gaps: • Maintenance activities were highly reactive and predominantly time based (pre-

ventive maintenance) • Inventory ordering process needed revision and the ordering was done in an adhoc manner. • Planning and scheduling of maintenance work needed revisiting as there was little adherence to work plans and not enough or no value added work orders were the most common within the data bases. • Though Key Performance Indicators (KPIs) were utilized, the quantity and purpose (usefulness) needed revision. • A culture change program was required to change the focus of personnel into more ownership of the performed work and added motivation to work well and efficiently. To address the findings of the gap analysis and bridge the gaps: a full program was established and implemented; the program considered all aspects of the findings and was implemented over 5 years. The program consisted of: Maintenance strategy review and developing a new maintenance strategy for all assets within the facility (over 60,000 assets). The maintenance strategy development process utilized tools such as RCM, FMEA, PM Optimization and RBI. The new maintenance strategy was more PdM focused and more proactive, reducing maintenance cost significantly in terms of maintenance down time, labor cost and spares utilization optimization. A process for inventory requisition was developed which requires the provision of an FMEA analysis and a cost benefit analysis based on risk for the order of parts above a certain value. This reduced the value of the held inventory significantly over a relatively short period of time. The planning process was revised and the planning division structure was modified to allow for the planners more autonomy. This in

turn allowed for better schedule compliance. A KPI review was conducted and a new set of Tactical and strategic KPIs for maintenance were selected to better reflect the performance and requirements of the facility also a full review of the workflow system within the EAM system were conducted and the workflows were optimized leading to a more efficient process with a minimal number of steps and approvals. Finally a culture change and training program were conducted; this effort was done in conjunction with the customer HR department in accordance to specific requirements of each individual by skill and competence level (600 employees). Following the implementation of the program the following results were achieved: Our customer is one of the most profitable refineries in North America today, the maintenance and inventory issues were completely resolved; machine availability is at 98%, maintenance inventory and maintenance cost are at benchmark levels. Customer personnel are completely bought in to the new programs and personnel performance has gone from an average of 35% wrench time to 55%. The customer also established an in house reliability department that oversees the implementation of the program. This department is constantly tracking performance and finding opportunities for improvement within the facility with the aim to further improve uptime of the facility. Total customer approved savings: 130 million dollars. Current values (As % Replacement Asset Value (RAV): Inventory Value: 1.3% Maintenance cost: less than 0.5 % PM / PdM: 28%/72% (Based on total maintenance time)


InReview

November 2010 / Issue 47

18

Doubts and certainties of reserves dilemma

Oil reserves are defined as the quantities of crude oil estimated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves are further categorized by the level of certainty associated with the estimates. This is contrasted with contingent resources, which are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied projects are not yet considered mature enough for commercial development because of one or more contingencies By Mostafa Mabrouk, Vice Chairman Assistant for Economic Affairs, Ganope

manipulated for political reasons. Reserves are those quantities of petroleum claimed to be commercially recoverable by application of development projects to known accumulations under defined conditions. Reserves must satisfy four criteria: discovered through one or more exploratory well, recovered using existing technology, commercially viable and remained in the ground. All reserve estimates involve uncertainty, depending on the amount of reliable geologic and engineering data available and the interpretation of those data. The relative degree of uncertainty can be expressed by dividing reserves into two principal classifications proved and unproved. Unproved reserves can further be divided into two subcategories probable and possible to indicate the relative degree of uncertainty about their existence. Recent increases in oil reserves in Iraq, Iran and Venezuela are “good Countries where largest natural gas reserves lie news,” but it remains unclear whether they Proven reserves Country Date will contribute to fu(TCM³) ture supply. In one Russia 47,570 JAN 2009 est. hand, holding more Iran 29,610 JAN 2010 est. reserves is certainly Qatar 25,260 JAN 2009 est. good news, because Turkmenistan 7,940 JAN 2009 est. it gives us a more Saudi Arabia 7,319 JAN 2009 est. precise prediction of United States 6,731 JAN 2009 est. costs and necessary United Arab Emirates 6,071 JAN 2009 est. investments. But, on the other hand, Nigeria 5,215 JAN 2009 est. the issue is how Venezuela 4,840 JAN 2009 est. much investments Algeria 4,502 JAN 2009 est. are needed to deIraq 3,170 JAN 2009 est. velop these reserves Indonesia 3,001 JAN 2009 est. and how this will Kazakhstan 2,407 JAN 2009 est. increase production Malaysia 2,350 JAN 2009 est. capacity. Iraq draNorway 2,313 JAN 2009 est. matically increased China 2,265 JAN 2009 est. the estimate of its Uzbekistan 1,841 JAN 2009 est. proven oil reserves

The total estimated amount of oil in an oil reservoir, including both producible and non-producible, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is only this producible fraction that is considered to be reserves. The ratio of producible oil reserves to total oil in place for a given field is often referred to as the recovery factor. These factors vary greatly among oil fields and may change over time based on operating history and in response to changes in technology and economics. Many oil-producing nations do not reveal their reservoir engineering field data and instead provide unaudited claims for their oil reserves. The numbers disclosed by some national governments are suspected of being

(Source :Oil & Gas Journal, Jan. 1,2010)

earlier in Oct. 2010. Following the increase, Iran and Venezuela--both rivals for a share of total production within OPEC-said they were raising their own reserves estimates. Some experts, however, expressed skepticism that Iraq had undertaken sufficient exploration to justify the new estimate, which has not been independently reviewed. According to the IEA, “depending on the current numbers, if the economy growth comes back as robust as 4% to 5% globally to 2015, then we may have a tighter market, in the short term, we have a good supply, but in the midterm the market is getting tighter again, so we need more investments. But we haven’t seen it yet”. Reserves: doubts and certainties There are doubts about the reliability of official OPEC reserves estimates, which are not provided with any form of audit or verification that meet external reporting standards. Since a system of country production quotas was introduced in the 1980s, partly based on reserves levels, there have been exaggerated increases in reported reserves among OPEC producers. In 1983, Kuwait increased its proven reserves from 67 to 92 billion barrels. In 1985–86, the UAE almost tripled its reserves from 33 to 97 billion barrels. Saudi Arabia raised its reported reserve number in 1988 by 50%. In 2001–20002, Iran raised its proven reserves by some 30% to 130 billion barrel, which advanced it to second place in reserves and ahead of Iraq. Iran denied accusations of a political motive behind the readjustment, attributing the increase instead to a combination of new discoveries and improved re-

covery. The sudden revisions in OPEC reserves, totaling nearly 300 billion barrels, have been much debated. Some of it is defended partly by the shift in ownership of reserves away from international oil companies, some of whom were obliged to report reserves under conservative U.S. Securities and Exchange Commission rules. The most prominent explanation of the revisions is prompted by a change in OPEC rules, which set production quotas (partly) on reserves. In any event, the revisions in official data had little to do with the actual discovery of new reserves. Total reserves in many OPEC countries hardly changed in the 1990s. Official reserves in Kuwait, for example, were unchanged at 96.5 billion barrels (including its share of the Neutral Zone) from 1991 to 2002, even though the country produced more than 8 billion barrels and did not make any important new discoveries during that period. The case of Saudi Arabia is also striking, with proven reserves estimated at between 260 and 264 billion barrels in the past 18 years, a variation of less than 2%, while extracting approximately 60 billion barrels during this period. O&G reserves rise and investment declines According to the IHS Herold’s report 2010 “Global Upstream Performance Review”, the total global hydrocarbon reserves increased for the first time since 2005 despite a decline in worldwide upstream investment and development spending. Worldwide upstream investment declined by 23 % to $378 billion in 2009 among 224 oil and gas companies surveyed, but total global hydrocarbon reserves had a 3% growth rate. Production also increased


January 2011 / Issue 49 1%, driven by 2,2% increase in natural gas output. Development spending declined by nearly 20%, the first decline in a decade. After a two-year decline, oil reserves rose 3% to 164 billion barrels, mostly due to extensions and discoveries in the Canadian oil sands that added 8.6 billion barrels in positive

reserve additions. A record 7.9 billion barrels also was added in the South and Central American regions. Natural gas reserves climbed 3.7 % despite a record 11.4 Tcf in negative reserve revisions, as development of unconventional plays in North America and liquefied natural gas resources in Asia accelerated. The decline in capital spending resulted Countries where largest oil reserves lie from a 40% reducMost of the world’s oil reserves concentrate in the Middle East region. tion by exploration Production and production comReserve BBL Country BBL/d panies, while the inSaudi Arabia 264 9.7 tegrated oil companies cut investment Canada 180 3.5 by just 9 %. ExIran 150 3.9 ploration spending Iraq 143 2.4 was most resilient, Kuwait 104 2.6 dropping just 12 % Venezuela 99 2.9 to $62.7 billion. UnUnited Arab Emirates 98 3 proved acquisition Russia 60 10 costs were down 71 Libya 44 1.7 %, and 2% down in Nigeria 37 2.4 proved acquisition Kazakhstan 30 1.4 outlays would have fallen 50 % were it United States 21 7.5 not for the $20 bilChina 16 4 lion Suncor/PetroQatar 15 1 Canada merger. Algeria 12 2.2 Lower capital Brazil 12 2.3 spending and higher Mexico

12

3.5

(Source :Oil & Gas Journal, Jan. 1,2010)

reserves resulted in a near 50% decrease in reserve replacement costs to $11.41/barrel of oil equivalent (BOE) and lowered finding and development costs to $12.23/BOE. Strong natural gas reserve additions led reserve replacement rates to the highest levels in five years. Revenues declined 36% in 2009 to $122.3 billion and after-tax profits dropped 97% to $1.3 billion in 2009. The 36% revenue decline was price-driven, as combined oil and gas production rose 7% in 2009. Integrated oil and gas companies posted after-tax profits of $11.5 billion, while the large independents and independents had losses of $4.2 billion and $6.0 billion respectively. Revenues declined 36% in 2009 to $122.3 billion and after-tax profits dropped 97% to $1.3 billion in 2009. The 36% revenue decline was price-driven, as combined oil and gas production rose 7% in 2009. Integrated oil and gas companies posted aftertax profits of $11.5 billion, while the large independents and independents had losses of $4.2 billion and $6.0 billion respectively. On the contrary, IMF surprisingly, attributes improved economic prospects in the Gulf Cooperation Council economies to the outstanding growth level

19

of Qatari economy. The Qatari GDP is projected to grow by 18.5% in 2010 and 14.3% in 2011. Undoubtedly, this is an exceptional achievement, similar to performance of few economies like those of China and India. Amongst other things, the extraordinary development of Qatari economy is testimony of the sustained expansion of gas sector. In fact, Qatar continues to consolidate its position as the largest exporter of liquefied natural gas (LNG). Latest available statistics put output at 54 million tons, up from 38 million tons a year only three years ago. Yet, nonstop efforts are being exerted to reach the goal of producing 77 million tons a year of LNG by 2012. The IHS Herold report found dividends rose modestly to another record level, which it noted “is remarkable” given the turmoil in the financial markets and the generally miserable results in the industry’s downstream operations. Dividends exceeded $100 billion, but common share repurchases were 23% lower, falling for the first time since 2004. Capital constraints brought about by reduced revenue and rising costs have almost completely eliminated share buybacks as a viable use of funds.


Events

20

Energizing Egypt’s Future The one-day seminar, entitled “Energizing Egypt’s Future: The Outlook for Oil & Gas”, dedicated to the Egyptian petroleum sector, was a chance for Eng. Sameh Fahmy, the Egyptian Minister of Petroleum, to give an overview of the domestic oil and gas industry, being the distinguished speaker of the seminar By Ahmed Morsy

The seminar, organized by Egypt’s International Economic Forum and headed by Mohamed Shafik Gabr, was held last month, in Sky Resort in New Cairo. The Minister of Petroleum tackled most of the crucial issues of the sector and explained his vision to the forum’s members who were figures and officials from the giant Egyptian as well as the foreign companies operating in Egypt related to the oil and gas sector. In his speech, which followed the welcoming speech of Gabr, Chairman of Egypt’s International Economic Forum, Fahmy highlighted the challenges hindering the national petroleum sector, which in fact concentrated on the natural gas industry. “We face brutal challenges in the natural gas field and do our best to overcome them,” Fahmy stated in his speech. “Some of the challenges are the declin-

ing gas prices compared to the crude oil’s, the swinging foreign currency exchange rates compared to the Egyptian pound and the high cost of drilling and developing the discoveries in the deep water of the Mediterranean Sea.” “Hence, we approached a new economical petroleum agreement form for encouraging the international petroleum company to invest more in the local market without neglecting the benefits of both sides. I think we are going on the right path as we achieved 63 new oil and gas discoveries during the 2009/2010 fiscal year,” added the Minister. In addition, Fahmy gave another proof of the successful strategy implemented by the Ministry of Petroleum that in 2009, the members of the Organization of Arab Petroleum Exporting Countries (OAPEC) reached 44 new petroleum discoveries while

Keep an eye on

Shutdowns and Corrosion Management

IQPC held two parallel events: Corrosion Management Egypt 2010 and Shutdowns and Turnarounds Egypt, that concluded the company’s busy schedule of 2010. Egypt Oil & Gas was the media partner of both events. In the first event, the workshop was led by Prof. A.S. Khanna, a fulltime professor Corrosion science and Engineering in IIT Bombay since 1990. Khanna explained the basics of corrosion management and how to control it in addition to the root causes of corrosion. Besides, he focused on the pitting corrosion and said that the liquid film on surface receives ions from metal. “The oxide layer protects surface but allows electrons to flow to oxygen. Whilst, the oxygen-deficient anodic region near bottom of corrosion

Egypt alone had 64 discoveries. Commenting on the critical voices assuming that the Egyptian reservoir of natural gas is declining due to the contentious exporting, Fahmy said, “Our reservoir during the current century rose from 11.8 to 18.4 billion equivalent barrels of oil and gas; 78.1 trillion cubic feet of natural gas and 4.47 billion barrels of oil.” Along with the increase of the reservoirs, the daily production amplified to approximately 2 million equivalent barrels per day in the current fiscal year after it was 1.1 million, according to Fahmy. “Since we began to export the natural gas in 2000, our production has been increased by 275% so far. I need to explain that exporting natural gas is not a goal in itself, but it is only a mean for escalating the Egyptian foreign currency in addition to provide the necessary funding to meet the needs of the domestic market of diesel and butane gas imported from abroad. Besides, it is also a mean to meet the payment obligations of our foreign partners and finally to achieve a strategic goal which is boosting Egypt’s confirmed reserves of natural gas in the shortest period possible in order to ensure energy sources,” he explained “As a result of the growing demand of the domestic market for natural gas and also the shortage in produced electricity,

pit,” Khanna elaborated. Afterwards, he walked us through the effective monitoring and inspection techniques. In addition, Khanna gave details on how a coating protects the steel from corrosion. Regarding the other pre-conference workshop of “Shutdowns and Turnarounds”, it included the best practice and procedures during unplanned shutdowns, and was directed by Trinath Sahoo, Senior Manager at Indian Oil Corporation. Sahoo provided the opportunity for the workshop attendees to recognize how to follow best practices during an unplanned shutdown. Moreover, the presentation aimed at improving the personnel’s understanding of how to manage the unplanned shutdown and also to improve the personnel’s awareness of the different phases of the unplanned shutdown process. Sahoo started his presentation by explaining the definition of the shutdown/ turnaround / outage. “Outage maybe planned or unplanned but the plant is taken out of services. There are four types of outages: planned turnaround, planned shutdown, unplanned shutdown and emergency shutdown,” he clarified. “Planned refinery turnarounds are major maintenance or overhaul activities. The frequency varies from 3 to 5 years. “The planned shutdowns are planned targeted shutdowns of smaller scope than a full turnaround. The outage may last from 5 to 15 days. As for the unplanned shutdowns, they are unexpected but don’t require immediate emergency actions. They might result from sign of abnormal or deteriorating process operation. In such situation, the plant condition indi-

we planned to decrease the percentage of the exporting quantity of gas to be 29% of the total production. In the period between April and June of 2010, we successfully made it 26% only of the overall production to pump it in the domestic market.” It is is known that the total Egyptian production of natural gas is divided into three quantities; one third for the domestic market, another third to be exported while the last one is reserved for the coming generations. Regarding the third, which is dedicated to the domestic consumption, Fahmy said that the Electricity Sector alone consumes 56% of it, while the Industrial sector utilizes 30%. “Moreover, another obstacle that blocks the way upon the prosperity of the sector is the outdated infrastructure, which needs to be maintained and updated from time to time. Nevertheless, unfortunately, there was no planned strategy to implement maintenance works on regular basis before its expiration.” He further added, “Meanwhile, we invest money and time to update it in order to raise its efficiency although it can’t be done right away since the restoring or updating process takes time. Nonetheless, I believe that the future of the Egyptian petroleum sector is promising and the coming generation will feel and consider my belief.”

cates the affected unit can continue operating perhaps few weeks.” The Emergency shutdown, Sahoo added, occurs when a unit or a plant brought down without warning. While the unplanned shutdown, it occurs when unit or critical equipment shows deteriorating condition. “Sometimes when a processing unit is brought down for planned maintenance, other problems are discovered that may extend the time. Additionally, when planned turnaround and shutdown activities are complete, restarting a unit can be difficult than anticipated resulting in unplanned outage time. Sometimes, the unit may have to brought down several times before it is able to run steadily at full operation,” Sahoo added. Following to his definition and explanations, he shed the light on why shutdown/ turnaround management is important. “It costs normally comprise over 30% of maintenance budgets and a delay in start-up can cause a loss of operating profit that exceeds the cost of the shutdown,” he emphasized. Sahoo also stated that the unplanned shutdown needs to be professionally managed since its cost normally is much higher as well as the need of efficient shutdown budget control and effective safety, health and environment management. Besides, he mentioned the importance of reducing the scope by risk based inspection and leak free start-up. He concluded that the success of plant shutdowns and turnarounds lies not in just developing information. Meanwhile, it takes more than equipment, materials and labor to execute efficient and successful shutdowns.


Events

January 2011 / Issue 49

21

Optimizing production is the only way out Production Optimization North Africa 2010 event was held last month from the 12th to the 15th of December in Cairo, and was organized by IQPC. The four-day event, in which Egypt Oil & Gas came as the official media partner, aimed at maximizing recovery of oil reservoirs through cost-effective production strategies and enhanced productivity. The event also tackled the fat that although North Africa holds the majority of Africa’s oil reserves, yet many fields have not been exploited to their full potential. The first day was a pre-conference workshop, while the second and third days were conferences. As for the fourth day, it was a post-conference workshop. The pre-conference workshop was headed by Roman Berenblyum, Senior Research Engineer in Field Studies and New Recovery Technology at International Research Institute of Stavanger (IRIS). Throughout the workshop, Berenblyum provided the opportunity for production and reservoir engineers to enhance the well flow and improve rates of productivity by examining different IOR methods and ways to enhance the efficiency. He analyzed the IOR applications in North African projects. “According to Shell, the smart wells should give $300-500 million as an added value per year, and a 25-35% improved life-cycle value,” Berenblyum said during his presentation. Regarding the “Smart” well–field technology, he added that there should be a 5% reduced well interventions (OpEx), 7% accelerated production

and 13% reduced well cost (CapEx). Besides, there will be 22% reduced surface facilities (CapEx) and finally 53% improved ultimate recovery. Berenblyum also explained the Snorre Foam Assisted WAG then directed to the bullhead injection by DPR emulsified gels. “Disproportionate permeability reduction reduces the water permeability more than the oil permeability,” he emphasized. He also focused on the air injection in light oil reservoirs, and said, “Extra oil is mobilized under air injection because a reservoir as its pores steam-cleaned ahead of the advancing high temperature front.” Moreover, Berenblyum shed the light on the carbon dioxide in-situ sequestration, IOR benefits: extraction of hydrocarbon components, interfacial tension reduction, oil swelling as well as oil

viscosity. He also added that it also results in increased water viscosity and permeability increase in carbonate rocks. Additionally, he presented the remote zone control – down hole chokes, so as to optimize the production with the down hole chokes. Besides, evaluation of potential for down hole equipment at early stages can be done. We can also understand the well behavior, he added, and also increase oil production side by side with reducing the water production. As for the first day of the conference, Eng. Mohamed El-Menyawy, the Operation General Manager of the Fanar Petroleum Company (FANPETCO), addressed his presentation, which highlighted how to overcome the production challenges in order to maximize recovery. It also concentrated on assessing the common use of production facilities as an approach for marginal field development. In addition, there were many petroleum figures addressed their presentations during the conference such as Abdel Nasser Ahmed Hamdy, NGOS Department Head at Gulf of Suez Petroleum Company (GUPCO), and Peter King, Professor of Petroleum Engineering at Imperial College (UK), as well as Eng. Mahmoud Naguib, Senior Petroleum Engineer at Melrose Resources Egypt. There was also Eng. Emad Saad from the Engineering Management at GUPCO. “Incremental production of 19 mbfpd will be added to the system as a result of converted to ESP completion. In addition extra topsides equipment required operating ESP’s and additional

weight should be added to the existing R6 top side facilities,” Saad said. “Study on the high temperature stream fluids on the setting pressure and temperature of the existing R6 complex. Moreover, we should evaluate the electrical generation power and distribution systems. We should also consider the additional requirement of fuel gas volumes need to feed the power generation and diesel generation,” he recommended. Real time monitoring should be considered to tie the wells’ automation data to GUPCO scada system, he added. Furthermore, Saad explained the reason behind drilling the horizontal wells. “Thin oil rim with active drive and big gas cap reservoir makes water and gas coning likely to happen. And also to avoid or minimize the water production and control gas production for reservoir energy conservation. “Possible reservoir compartmentalization, which increase the number of vertical wells needed to drain the reservoir in addition to the high degree of rock heterogeneity.” He concluded that the simulation study showed that if we drilled 6 horizontal wells and applied a gas re-injection project to the field, the oil recovery would increase from about 22% to about 38%. Finally, leading from the success of the Production Optimization conferences in Kuwait and Abu Dhabi, IQPC introduced Production Optimization North Africa 2010. This exclusive interactive forum offered a platform for industry leaders to discuss the latest challenges, strategies and solutions associated with maximizing petroleum extraction.


Political

22

Wiki-leaking the

oil and gas community Whether it’s Julian Assange or other partners, Wikileaks was just the bomb that dropped hard towards the end of this year. This year saw the BP gulf oil crisis in addition to some other problems and it would not handle a new hit to the oil and gas industry.

By Sama Ezz Eldin

“It will create such buzz that will maybe harm some relationships in the Middle East,” said Prof. Dr. Amin Mubarak, Professor of Energy and Mechanical Engineering at Cairo University and the member of the People’s Assembly, describing the aftermath of Wikileaks on the Middle East. “Some of the Wikileaks documents related to the higher authority of many countries, and this surely will affect many countries in the Middle East.” “All the deals in the oil and gas market done through a contractor are expected to get affected because now each contractor will fear getting his name mentioned in a Wikileaks document,” Mubarak added. Amr Kamal Hamouda, Head of the Fustat Centre for Studies and an oil expert, shares a comparable point of view about the buzz that Wikileaks caused. “The relation between the U.S and the Middle East will remain on the safe side, some humming would accrue, but I highly doubt that after all the work done between the two sides to reach a fine oil and gas relationship that anything would come up to spoil that harmony.” “Both the U.S and the countries of the Middle East share a trade relation, from which both sides obtain lots of benefits, so none of them would do anything to stop such sources whether it is oil or cash liquids,” Hamouda pointed out. “There are deals and contracts signed that will guarantee a long time good relation.” Hamouda also talked about the tensed relation between the U.S and Iran, “The relation is already stressed between those two oil chief countries.” Qatar, the Middle East gas superior country, was under the spotlights

lately due to the Wikileaks documents that showed it as a new enemy to the oil influential land of Iran. The documents confirmed that Qatar agreed to allow the U.S to use a base on Qatari soil to bomb Iran, according to a report in the newspaper Al-Arabiya, based on secret diplomatic cables published by the website Wikileaks. Looking at Qatar, as a major oil and gas power in the Middle East, made the experts question the reason behind all these fires targeting Qatar and its relations in the Middle East and who would be the one behind publishing all these hatred documents to ruin the conformity that is among the Middle East. “OPEC’s last meeting was conducted after those Wikileaks documents were published. It influenced the Qatari existence in the summit, the Qatari oil minister did not show up for the meeting and it was translated as not to bump into a clash with the Iranian oil minster.” “He only sent his vice minister, and the Iraqi fellow oil minister did the same, because both of them had documents published showing their approval to hit Iran. Going back to the theory of oil and gas trade business between the countries, Iran answered back by removing its Foreign Affairs minister, as he encouraged his country to hit back at Qatar, which shows that Iran is trying to maintain a calm oil and gas atmosphere in the Middle East,” added Hamouda. Moreover, there were other documents published about the relationship between Qatar and Israel, which Egypt always prohibited from happening according to Hamouda. He mentioned an old incident happened, “Egypt always fought for its right to be the oil and gas center of the Mid-

dle East, whether among the countries relations with each other or their relation with Europe.” “There was a project of gas exported from Qatar to Israel through Eilat and Jordan, and it was planned that Jordan would take a share and so the Israeli side and the rest would be exported to other Mediterranean countries. At that time Egypt answered back by decreasing the price of oil tanks passing through the Gulf of Suez to maintain its position as the oil center of the Middle East,” Hamouda noted. An official source, that refused to mention his name, said that Egypt is smart enough to know what to do after so many Wikileaks documents were published, “The first move was to strengthen the African relations through Ghana.” Lately, sources reported that Ghana’s first crude oil exports will be offered for sale on the spot market from early January as the West African country makes final preparations to join the region’s league of oil producers. And just before that was broadcasted, there was the news of “The National Bank of Egypt and Tri-Ocean Oil Company enters Ghana as Egyptian companies try to strengthen their investments in the oil-rich African country,” according to Al-Ahram. “National Bank of Egypt and TriOcean Oil Company are the newcomers to the Ghanaian market,” announced Vice Chairman of the General Authority for Investments and Free Trade zones (GAFI) Neveen El Shafei, during the opening of the GhanaEgypt Trade and Investment Seminar. Egypt also moved fast, after the Wikileaks documents were published, to secure its place with Asian countries,

“According to Azerbaijani Embassy to Egypt, N. Aliyev met with Egyptian Prime Minister Ahmed Nazif, Minister of Petroleum, Eng. Sameh Fahmy. At the same time, he met the technical opportunities of SUMED-Arab Petrolium Co., Enppi-Engineering for the Petroleum and Process Industries and Petrojet and listened to presentations of companies’ experts.” Therefore, the Azeri oil will be transported to Asia through Egypt. On the other hand, both Mubarak and Hamouda doubt that Wikileaks documents will affect the price of oil in the upcoming period. “The OPEC meeting was done under the lights of the Wikileaks documents and still neither the prices nor the quantities of production were affected,” said Hamouda. “It is a supply and demand relation that will not be distressed by the documents. The dollar price and the gold price do control the price of oil too,” added Mubarak. “Qatar does not have the history like Egypt, but has the money and the vision to become the Arab World leader,” a late report by Euronews said. Experts saw it as lots of countries tried before to take Egypt’s place among the Arab countries, but still Egypt maintained the ability to have good relations with its fellow Arab countries. As a final point, many experts said that lots of Wikileaks documents are expected to be out soon. The oil and gas community shall wait to see whether it can handle another explosion and if the solidity of the Middle East will be affected. Till now, there are no documents published that showed any bad side of the Egyptian relations with any country, and many hope it will remain the same.


Industry Statistics

January 2011 / Issue 49

23

Egypt Statistics

Source: Ministry of Petroleum Average Currency Exchange Rate against the Egyptian Pound (November 2010/ December 2010)

US Dollar 5.772

Euro 7.627

Sterling 9.038

Yen (100) 6.884

Stock Market Prices (November 2010/ December 2010) Company Alexandria Mineral Oils [AMOC.CA] Sidi Kerir Petrochamicals [SKPC.CA]

Table 1

High

Low

48.00

44.47

14.77

14.15

Wortld Crude Oil Production (Including Lease Condensate) (Thousand Barrels per Day) Libya

Sudan

Other

World

OPEC1

Table 2

Persian Gulf2

North Sea3

2010 January

1,650

500

2,418

73,161

31,069

20,571

3,689

February

1,650

510

2,438

73,588

31,163

20,650

3,600

March

1,650

515

2,457

73,553

31,074

20,581

3,682 May

1,650

521

2,390

73,583

31,149

20,707

3,622

May

1,650

525

2,407

73,496

31,208

20,825

3,485

June

1,650

510

2,414

73,239

31,449

21,004

2,945

July

1,650

510

2,401

73,443

31,367

20,934

3,153

August

1,650

515

2,387

73,285

31,418

20,969

2,902

1,650

515

2,376

73,596

31,348

20,955

3,069

1,650

513

2,409

73,436

31,250

20,800

3,348

September

2010 9-Month Average

1 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. 2 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Production from the Kuwait-Saudi Arabia Neutral Zone is included in Persian Gulf production. 3 North Sea includes the United Kingdom Offshore, Norway, Denmark, Netherlands Offshore, and Germany Offshore. Revised data are in bold italic font.

Persian Gulf3

OAPEC4

OPEC5

9,275

23,165

24,027

34,414

85,469

9,540

23,248

24,099

34,517

86,172

E

9,587

23,183

24,017

34,429

86,154

E

9,542

23,315

24,145

34,513

86,122

E

9,639

23,449

24,262

34,590

86,172

E

9,427

23,639

24,435

34,842

85,694

E

9,570

23,580

24,461

34,771

86,114

E

9,729

23,625

24,488

34,833

85,931

PE

9,764

23,619

24,473

34,772

86,196

PE

9,564

23,426

24,268

34,632

86,001

February

April

April

United States2 2010 January

March

June July August September 2010 9-Month Average

World Oil Supply1 (Thousand Barrels per Day) World

1ÂŤOil SupplyÂť is defined as the production of crude oil (including lease condensate), natural gas plant liquids, and other liquids, and refinery processing gain (loss). 2 U.S. geographic coverage is the 50 States and the District of Columbia. Beginning in 1993, includes fuel ethanol blended into finished motor gasoline and oxygenate production from merchant MTBE plants. For definitions of fuel ethanol, oxygenates, and merchant MTBE plants 3 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Production from the Kuwait-Saudi Arabia Neutral Zone is included in Persian Gulf production. 4 OAPEC: Organization of Arab Petroleum Exporting Countries: Algeria, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, and the United Arab Emirates. 5 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. E=Estimated data. RE=Revised estimated data. PE=Preliminary estimated data. Revised data are in bold italic font.


January 2011 / Issue 49

24


Eog newspaper january 2011 issue