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Editors Note:9jan08



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Turbulent times As we enter 2009, volatile commodity prices continue to dominate the agenda for the energy-rich Gulf region.


“Technology is only as good as the people who design and operate it. With capability, it is people who make the difference” - Andy Inglis, CEO of BP Exploration and Production (page 46)

“More and more of the major companies are specialising in looking to explore in unconventional places and there are clear challenges involved with this” - Patrick Pouyanne, SVP at Total (page 62)

“This is a turbulent time for the petroleum industry as a whole, given the widespread economic uncertainty and destruction of demand”

- Khalid G. Al-Buainain, SVP at Aramco (page 133)

hen energy prices descended rapidly and seemingly without warning in the latter part of last year the fragility of the Middle East energy sector was exposed for all to see. The dramatic turnaround – from a situation where demand easily outstripped supply and prices reached highs of US$148 a barrel to one where OPEC was forced to cut supplies to stimulate the market – was one few expected. However, the fact remains that the fate of the Middle East oil and gas sector is bound tightly to the state of the global economy. And oil, the very commodity that underpins the abundant wealth of the GCC, could become its greatest burden as Western financial markets struggle to return to form. The oil industry is one that is built on the principle of thinking long term – not one that reacts to the ebbs and flows of current market conditions. This is the only way that companies, which spend up to 10 years engaged in exploration activities at an oil field before they see a return on investment, can operate. Such an approach is a double-edged sword. On the one hand it means it is impossible for oil companies to predict their return on investment from an oil field or refinery. It also means however that these companies tend not to let temporary market conditions affect major long-term plans. This can be seen by reading our exclusive interview with Dr Shokri Ghanem, Libya’s top oil official and Chairman of the Libya’s National Oil Corporation. His country, like Iraq, holds vast untapped oil reserves and, regardless of current market conditions, is preparing the way for heavy investment by IOCs which will assure the economic prosperity of the country. In exchange for a share of the bounty, IOCs will provide Libya with financial resources and technical and management expertise. Ghanem’s optimism about the future of his country’s oil sector, and the eagerness with which IOCs are taking up their chance to join the black gold rush are proof of the forward-thinking approach of this industry and the fact that present day woes are not affecting the long term plans of oil producing nations. Similarly in Iraq, the country’s government has invited foreign companies to bid for lucrative contracts for 11 of its untapped oil fields in a move that could herald a new dawn of prosperity for the country. The long-term plans of these countries to awaken their sleeping oil giants through foreign investment mean hopes remain high across the region and on the part of IOCs for a resurgence in high global demand for oil. And it is only this that will assure that the hopes of Dr Ghanem and the Iraqi government will be realised.

Diana Milne Editor

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CONTENTS NGO&GMENA3 :jan09 15/01/2009 09:20 Page 11



Black gold rush O&G speaks exclusively to Libya’s top oil official Dr Shokri Ghanem about the opening of the country’s energy sector to foreign investment and why IOCs should cash in now

38 The end of an era As Abdallah S. Jum’ah prepares to stand down after 14 years as President and CEO of Saudi Aramco, he reflects on the challenges facing the oil and gas industry


46 Energy evolution With the days of ‘easy oil’ a thing of the past and crude prices plummeting, Andy Inglis, CEO of BP Exploration and Production discusses plugging the capability gap and energy security

34 Reversal of fortune As oil prices plunge to new lows we report on the impact this will have on MENA’s oil producers

CONTENTS NGO&GMENA3 :jan09 14/01/2009 16:00 Page 12





78 Paul Day, Petrowell Ltd 86 Annamaria Raviola, SELEX Communications 102 Mohammed Amin, EMC 112 David Neill, Proclad

ROUNDTABLES 88 Oilfields of the future – today, Rohde & Schwarz, BT Global Services and m:pro IT Consult 58 Digging Deep Laurence Lines, President of the Society of Exploration Geophysicists, on the challenges ahead for oil and gas companies

106 Conquering corrosion

60 The road ahead

110 The pipeline detectives

Patrick Pouyanne of Total reveals the company’s Middle East expansion plans and why skills shortages are hitting its operations hard

IPLOCA president Bruno de La Roussiére discusses pipeline integrity

69 Phoenix rising Kuwait Oil Company’s deputy head of exploration, Khaled Al-Sumaiti, describes the company’s remarkable recovery from the ravages of war

74 Drilling for glory Qatargas moves one step closer to realising its ambitious targets

Bob Herbert, President of NACE, outlines the pipeline corrosion challenges facing the industry

114 Pipe dreams Tom Sowerby of the PPSA on the latest technologies helping to win the war on pipeline corrosion



100 Consolidating HSE systems, Synergi Solutions 116 The right combination, Magnatech


76 Grand plans We report on why Dana Gas is forging ahead to become one of the Middle East’s leading gas producers

80 Mission critical How Total CIO Patrick Héreng is overhauling the company’s entire IT infrastructure

94 Producing smarter fields Why it pays to know what your wells are producing, with Shell’s Ron Cramer

INDUSTRY INSIGHT 51 Phil Grellier, Dow Corning 104 Benny Vogels, Fluke Networks 118 Dr Kirsten Oliver, Intertek 126 Gabriele Peri, GE Oil & Gas 148 Harun Özerdem, Geutebruck

44 Bennett West & David Traylor, Deloitte 68 Per Lund, Norse Cutting & Abandonment (NCA) 72 Jari Kirmanen, Metso Automation 98 Adam Segalés, Weidmüller 140 Alec Owen, Future Fibre Technologies 142 Jim Nixon, Varel International

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144 In the firing line Security expert Dr Mustafa Alani on why oil companies are still a target for terrorist groups


150 Safety in numbers O&G asks Justin Smith of the British Safety Council how his organisation is helping to fill health and safety officer vacancies in the Middle East oil and gas industry

154 Spreading the word on safety How the International Marine Contractors Association is helping companies to make safety a priority

158 Attracting top talent Mahesh Puducheri of Halliburton on building a long-term talent pipeline

HEAD TO HEAD 54 Data masters, Wavefield Inseis ASA, TGS 64 A model for success, Fugro-Jason and NORSAR Innovation

120 The heart of the matter

132 Future vision

The second part of our exclusive interview with Abdulkarim Al-Sayed, CEO of the Bahrain Petroleum Company (Bapco)

Saudi Aramco’s Khalid G. Al-Buainain offers O&G an insight into the challenges ahead in these difficult economic times

128 Joining forces

136 Safety first

President of SASREF, Abdulhakim Al-Gouhi, reveals how operations at the plant are being ramped up through a US$90million Instrumentation Master Plan

Charles Bowen, Head of the International Association of Oil and Gas Producers, reveals the real safety risks facing the industry

44 David Traylor, Deloitte

44 Bennett West, Deloitte

54 Rick Donoghue, Wavefield

FINAL WORD 160 Incorporating geophysics into geologic models How a new approach makes geophysical data available to engineers

88 Jens H Schroeder, m:pro

68 Per Lund, NCA

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CREDITS NGOG MENA:jan09 15/01/2009 08:36 Page 16

30 March – 1st April 2009 Le Méridien Al Aqah Beach Resort, Fujairah, United Arab Emirates

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Find Out More Contact NG Oil & Gas at 44 117 915 4755

Head of Production and Events ROBERT SIMMS Production Coordinators HANNAH DRIVER, HANNAH DUFFIE, JULIA FENTON Director of Business Development RICHARD OWEN Operations Director JASON GREEN Operations Manager PHILIPPA LUDIN Subscription Enquiries +44 117 9214000. General Enquiries (Please put the magazine name in the subject line)

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A NEW DAWN As Iraq invites international companies to bid for contracts to explore its fields, we report on the future of the country’s energy sector. DEMAND FOR OIL MAY BE FALLING WORLDWIDE but Iraq is still determined to push ahead with plans to double its oil output. In an effort to wake the country’s dormant energy industry, the country’s government has launched a process to qualify more international


energy companies to bid for contracts for 11 of its oil and gas fields. Two of the oil fields – Majnoon and West Qurna Phase II – are classed as super giant fields and have the potential to yield 1.2 million barrels a day when fully developed. The other gas fields have been named as Halfaya, Gharrafa, Qayara, Najmah, Badrah, Kifil/West, Kifil/Mirjan, the Siba gas field in Basra and a group in Diyala province. According to the Iraqi oil minister Hussain al-Shahristani, the 11 fields could increase Iraq’s production by up to 2.5 million barrels within three to four years of the contacts being completed. The latest announcement by the Iraqi government represents the second round of bids for foreign companies. During the first, in April 2008, a bidding round was announced for eight oil and gas fields and the oil min-




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istry published a list of 35 international oil companies, which were qualified to apply for the bids. While global economic conditions may not encourage foreign companies to bid – the long-term prospects for companies that choose to invest in Iraq’s oil and gas facilities are highly lucrative. The country has the world’s third largest supplies of untapped oil and gas reserves. But years of war and US sanctions have meant many have fallen into disrepair or have become unproductive. Billions of dollars in foreign investment are required to overhaul these facilities and the situation means Iraq has gone against the policy of other Gulf neighbours by allowing international firms to raise output at its fields. According to the oil ministry, the fields announced in the second round of bids could provide around another 1.5 million barrels per day in additional output. However estimates about the country’s oil potential are widely believed to be highly conservative. Officially, Iraq has 115 billion barrels of reserves but this figure has not been updated since 2001 and is based on 2D seismic surveys from three decades ago. Industry experts claim the real figure could be double that and say pumping the oil out of the ground is cheaper than anywhere else in the world. This potential has already succeeded in attracting hundreds of foreign oil companies – 120 IOCs applied for the first bidding round in April. However, those that do apply will enter into service contracts under which the Iraqi government owns the oil and the IOCs are paid for their work in extracting it. This could discourage some IOCs which traditionally have preferred production sharing deals in which they receive a share of the output. The government is expected to announce the winners of the first round by the middle of this year. Meanwhile, the winners of the second round will be announced by the end of 2009.



Pirates holding the crew of the Saudi supertanker Sirius Star off the coast of Somalia were reportedly paid US$3 million in cash. A package, thought to contain the ransom, was parachuted onto the deck of the tanker and the crew members were released unharmed after their two-month ordeal.

A view of a new underground oil storage facility in South Korea capable of containing 19 million barrels, built by Korea National Oil Corp.

ExxonMobil CEO Rex Tillerson is calling for US Congress to abandon its cap and trade plans for reducing CO2 emissions. He wants to see a “more transparent” carbon tax approach.

The row between Russia and Ukraine over unpaid gas bills prompted Moscow to switch off supplies, leaving much of Europe shivering in the sub-zero temperatures.




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UAE TO PUSH ON WITH OIL PLANS Plummeting oil prices will not affect the UAE’s plans to upgrade its oil industry, the country’s president His Highness Sheikh Khalifa Bin Zayed Al Nahyan has claimed. Sheikh Khalifa told the state news agency WAM that he believed the current crisis facing oil producers is temporary and that “producing countries must prepare for a time when the demand will rise in the future.” He went on to say that the UAE would be going ahead with its plans to boost its oil and gas production through the upgrading of its facilities. “We in the UAE are pressing ahead with the plans to upgrade our oil and gas industry and to increase capacity for production of crude, gas and petrochemicals in conjunction with our project finance capabilities,” he said.

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OMAN DROPS OIL PRICE FORECAST Falling oil prices have prompted Oman to reduce its assumed oil price for its 2009 budget by US$10 to US$45 a barrel. An Omani government source told the Reuters newswire: “The reduction in the forecast for the 2009 budget is to US$45, it was previously US$55. This is due to the unexpected fall of oil prices.” Oman is not a member of OPEC and has said it has no plans to reduce its output in order to stop the fall in prices. It only produces around 750,000 barrels a day. However, the price of its oil affects pricing benchmarks for the 12 million bpd imported from the Middle East to Asia.


QATAR SETS SKY-HIGH TARGETS Qatar Petroleum has announced ambitious plans to generate US$154 billion in total revenue by 2010. It has based its estimates on 2008 sales for the first nine months of the year, which were twice the amount originally forecast for the whole year.





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CHINA TO DEVELOP US$3 BILLION IRAQ OILFIELD Chinese oil engineers have started work on the development of a major oil field in Iraq as part of a US$3 billion contract. The China National Petroleum Company, in partnership with Zhenhua Oil, will develop the Al-Ahdab oil field in the Iraqi province of Wasit. A contract was first signed granting China rights to the oil field in 1997. BOOST FOR IRAN’S DOMESTIC GAS PRODUCTION A 360,000 bpd refinery in Iran is expected to be completed in the second half of 2010, a source revealed to the Reuters news agency. The source said that around 65% of the capacity produced at the US$2.5 billion refinery would be used to produce gasoline. Diesel and kerosene would make up the remaining output. According to the source, the new refinery will produce up to 40 million litres of gasoline a day and around 20 million litres of middle distillates. The refinery will help Iran to meet local demand for gasoline, which is presently met by importing huge amounts of costly gasoline from overseas.


DANA GAS MAKES MAJOR GAS FIND UAE-based Dana Gas has discovered a new natural hydrocarbon reserve in Egypt. It made the discovery while excavating the ElBasant-2 well. The new gas site was found at the Nile Delta Concession, 3050 metres below the well’s surface. Speaking about the discovery Dr Hany Elsharkawi, Dana Gas Country Director in Egypt, told the news service. “Combined with other discoveries this year, it shows that our 2008 drilling campaign was correctly conceived and implemented and therefore on the basis of this success we plan to continue with further drilling in this concession, where several prospects of similar nature have been identified.”


EXPORT DEAL BACK ON Iraq has resumed its oil exports to South Korea’s SK Energy company following a year during which services were suspended.The two countries fell into dispute over the oil exports after SK withdrew from a contract in Iraq’s Kurdish region. According to reports published by Reuters, Iraq now plans to export 65,000 barrels a day to SK Energy – down from 90,000 a day that it had exported before its exports were suspended in January 2008. It claims that the Korean firm had angered Iraq by signing a deal with the Kurdish regional government as a member of the consortium to develop the Bazian oilfield.



SAUDI OIL PRICES SET TO PLUNGE Oil prices in Saudi Arabia could drop by as much as 41%, a report by the investment bank Jadwa Investment has claimed. The report, cited by Reuters newswire, claims that if this were to happen, Saudi Arabia’s economic growth in 2009 would be 1.5% – the lowest since 2002. Average daily production in Saudi Arabia is expected to shrink by 8.7% to 8.4 million bpd in 2009. This compares to an average of 9.2 million bpd in 2008. Saudi Arabia is currently the world’s largest oil exporter. SAUDI FIRM LANDS LUCRATIVE CONTRACT A construction contract to build a US$12 billion refining facility in Saudi Arabia has been awarded to a contractor based in the Kingdom. Contracting and Construction Enterprise Ltd will develop the facility, which is a joint venture between Saudi Aramco and Total. It is expected to be completed by the end of 2010 and commercial operations will start in March 2013. Experts have predicted that many oil companies will be forced to delay or cancel joint state and rival ventures in refining, petrochemical or the power industries as costs rise and securing finance becomes more difficult.







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COMPANY SPOTLIGHT SIEMENS HAS WON a US$209 billion contract from the Iraqi government to supply it with 16 gas turbines. The deal will see Siemens supply the turbines for power plants with a capacity of 3150 megawatts in Rumaila-Basra, Taza-Kirkuk, Dibis-Kirbuk, Baiji and Sadder-Baghdad. This represents one of the biggest Middle East orders that Siemens has received to date. Last year the Iraqi government announced it had signed deals worth billons of dollars with Siemens and General Electric, which would enable it to double electricity generation capacity in the country. The power plants that Siemens is supplying will start operating in 2010 and 2011. Describing the significance of the deal, energy sector CEO at Siemens, Wolfgang Dehen, said: “When these new power plants go on line in 2010 and 2011, they will make an essential contribution to improving the country’s power supply situation, which is currently affected by daily power outages. “At this same time this order outlines the very encouraging development of our product business, which is set to further expand its share of our overall business volume.”

THE VALUE OF KNOWLEDGE IN THE REFINING INDUSTRY WHILE THE GLOBAL DEMAND for refined products is expected to exceed 110 million barrels per day (MBPD) by the year 2020, the characteristics of crude, product slates and crude processing have changed. More investment in more conversion units with more complex refinery operations will require a higher level of knowledge management. The lower cost production will bring about more advantage over products differentiation. Increased yields of valuable products and reduced cost of production are keys to profitability. Both can be practically controlled by the automation system. Integrated automation systems can improve value creation and knowledge-based management. Such integration will directly contribute to the financial bottom line of refineries by increasing the total value of ownership of these systems. Simultaneously, the integrated automation systems reduce the total cost of ownership over its lifecycle, through reduced cost of engineering and the lifespan support. Yokogawa has been a leader in total automa-

tion solutions for the refining industries. Yokogawa’s solutions have been recently strengthened with the introduction of the evolutionary CENTUM VP DCS and ProSafe RS SIS and their integration. The additional plans ahead are for an integrated database within the CENTUM VP, which will allow refiners to deal with a common environment of production and asset-related data. The realisation of this integrated database will offer users a new competitive advantage. To be able to focus more on exploitation of plant data than on data management is a distinct benefit. In addition, to be able to maintain one automation system database drastically decreases total cost of ownership. Lastly, if you combine the above with the high reliability and extended lifespan of Yokogawa solutions, you can obtain higher capabilities of knowledgebased management and decision-making. Yokogawa’s commitment to automation solutions for running safe and stable plants is a mission and a passion of its global organisation.

WORLD MARKETED ENERGY CONSUMPTION (2005-2030) Quadrillion Btu (British thermal unit) Non-OECD OECD











Sources: Energy Information Administration (EIA), Internatinal Energy Annual 2005. Projections: EIA, World Energy Projections Plus (2008).







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FRONTLINE ENGINEERING COMPANY CONTINUES TO TRANSFORM GLOBAL REFINERIES AS AMBITECH ENGINEERING CORPORATION (Ambitech) enters 2009 the firm continues its steady expansion in numerous international markets and domestic industrial sectors. As a recognised world leader in solving some of the most complex technical and logistical challenges posed by large-scale, fast-track refinery upgrades and modernisations, Ambitech’s office in Jeddah, Saudi Arabia, significantly enhances the firm’s ability to pursue similar project opportunities throughout the Middle East and Western Asia. Capitalising on the company’s highly successful track-record delivering long-term benefits

to clients in South America, United Oil Products retained Ambitech for the revamp of a Fluid Catalytic Cracking Process Unit at Petroindustrial’s refinery in Esmeraldes, Ecuador. The current revamp of the facility, originally built in 1973, is Ambitech’s first project in this South American country and will include a new reactor stripper vessel and reactor riser. Rounding out some additional international project opportunities, Eximnefteproduct in the Ukraine plans to rely on Ambitech for a modernisation programme of one of the country’s refineries. This large-scale, high profile national project will help the country significantly expand its refining capacity. Ambitech has also recently completed

VALVE COMPANY ACQUISITION PROMPTS FRESH APPOINTMENTS VALVECARE ENGINEERING, a valve management and repair company based in Aberdeen and Lincolnshire, was recently acquired by Denholm Oilfield Services. Following the acquisition, Graham Puntis, formerly of Technor Valves and Automation in Norway, was appointed Managing Director. He brings with him considerable engineering and management experience, gained both in the valve service industry and previously with Rolls Royce. Roy Wood continues as Director and General Manager of the Valvecare Aberdeen office overseeing all operations north of the border. Since joining, Puntis has strengthened the team at Valvecare further by recruiting Bijan Abolghassem, formerly of Wood Group and Bob Gallagher formerly of Safety Systems UK. In addition, Mick Beavers has been appointed as Control Valve Business Manager to support and raise the profile of our Control

Valve activities. Their extensive knowledge and experience significantly enhances the services we are now offering to our customers. PSN recently awarded Valvecare their contract for the provision of valve technicians for specialist inspection, repair, refurbishment and test services for onshore and offshore. Valvecare has also been selected by a North Sea operator to act as consultants on the repair of a riser valve. In other areas, our Buckle Pin Relief Valves continue to exceed expectations and we are now undertaking a design study for KCA Deutag to customise a buckle pin valve for drilling mud pump protection. We are also pleased to announce the introduction of our Full Lift 6000 psi Safety Relief Valve Test Rig. Designed in house to complement our Buckle Pin Valve & Farris Safety Valve programmes the test rig provides a reliable and data rich environment for valve recertification.

project work in China and is ready to embark upon additional work in that country. In other markets, in addition to refining, Ambitech continues to focus on US power opportunities in the country’s Northeast Region as well as further expanding its already large presence in the Midwest and Northern Tier of States. Recent activity not only includes design support for power generation, but also opportunities in the environmental arena of the power generation market. Ambitech’s expertise in arc flash studies and SOx and NOx removal has also experienced increased interest from clients and they strive to maintain consistent throughput by addressing these facility issues.




Barrels per day is the amount world oil demand fell by in 2008 according to the United States Energy Information Administration


200 billion cubic feet: Volume that will be added to the Dana Gas reserves following its recent discoveries of gas in Egypt


Amount Iran said it will cut output by in line with OPEC’s decision to reduce production

250: Jobs to be created in Bahrain by MTQ Corporation Limited Group (MTQ), an engineering services company for the energy sector that is setting up operations there






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ADVANCED DIAGNOSTICS FOR PLANT AVAILABILITY INCREASE TODAY THE FIELDBUS is a recogAdvanced diagnostics is used to nised and widely accepted technolverify the quality of the fieldbus ogy for the transfer of process data physics. Typically, power supply, sigand diagnostic information. On the nal levels, symmetry, noise, jitter and part of the user the requirement is stability of the communication are for a very high availability of the monitored. Alarm levels are defined plant. And the prerequisuch that they also lie within site is that the fieldthe specification, so that “If the bus physical layer they are far enough physics are poor, must satisfy away from the origithe result can be the very high qualinal measured value loss of communication, ty requireto avoid nuisance the loss of individual ments. In alarms. So even in devices, or even of a simple language: the case of changes complete segment” if the physics are to the physics sufficient poor, the result can be coverage is still available. the loss of communication, Information on possible causes of the loss of individual devices, or the fault is provided in clear text and even of a complete segment. Only a reports can be generated. In this way ‘clean’ physical layer ensures perthe time for commissioning and for fect communication and the avoidany eventual fault search is reduced. ance of problems. For more information visit

COUNTRY FOCUS: QATAR QATAR IS RESTRUCTURING its power and energy sector and encouraging foreign investment to expand these sectors. Here are some facts about the country:

1 2 3 4 5

Qatar holds the world’s third largest natural gas reserves and is the single largest supplier of liquefied natural gas. Qatar is also a member of OPEC and exports considerable amounts of oil. Qatar is the smallest oil producer in OPEC, though it remains an important supplier to world oil markets. Qatar’s North Field holds more than 900 trillion cubic feet of natural gas reserves making it the largest non-associated natural gas field in the world. In 2006, Qatar surpassed Indonesia to become the largest natural gas exporter in the world. In February 2007, ExxonMobil cancelled its planned 154,000-bbl/d Palm GTL project in Qatar, which would have been the largest GTL facility in the world if completed.

A GLOBAL PERSPECTIVE Vast quantities of potential oil and gas resources in the US are off-limits, much to the frustration of those who want to reduce the country’s reliance on foreign imports. In the US version of O&G Bud Albright, Under Secretary for Energy at the US Department of Energy, spoke exclusively about the situation and what needs to be done. To read more go to

THE EVOLUTION OF SAFETY MANAGEMENT FOR 150 YEARS SAFETY MANAGEMENT has been undergoing a process of change. It was not that long ago that managing safety emerged as a formal concern for organisations and became a specific concern for managers. Safety management has been evolving since. Prior to this, there was no formal interest in it. There may have been individuals who were concerned for the safety of their workers, but it was a personal characteristic of that particular individual. When safety management became a formal concern of organisations and managers, the first approach to it was reactive. Extraordinary progress was made with this approach which was dominant up to the 1950s. However the progress was all paid for in blood. You must have something to react to. The next big evolutionary step was to adopt a preventative approach. It was in this phase that safety management emerged as a profession. When you look carefully, the underlying paradigm of both is to avoid what you don’t want. Our next evolutionary leap is to shift to creating what we do want versus reacting or preventing what we don’t. And it will require new perspectives, skills and approaches. For more information go to JMJ Associates at





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JARGON BUSTER: BELLHOLE AN EXCAVATION in a local area to permit a survey, inspection, maintenance, repair or replacement of a pipe section.

RESEARCHERS IN NORWAY HAVE Low-yield oil wells seawater into chalk-based oil REPORTED that injecting a special may help boost oil wells, oil extraction was boosted extractions by as dramatically. type of sea water called ‘smart much as water’ into certain low-yield oil However, scientists have yet wells may help to boost oil extracto discover whether the method tion by as much as 60 percent. works for oil wells composed of During the study, by Tor limestone, a material which is Austad, researchers found that by injecting known for its low oil-recovery rates.


COMPANY INDEX Q4 2008 Companies in this issue are indexed to the first page of the article in which each is mentioned. 155 Abermed 23, 131 Ambitech 34, 38, 46 Aramco 150 Bahrain Training Institute 120 BAPCO 26, 46, 110 BP 150 British Safety Council 6, 88, 89 BT Global Services 26, 110 Cheron 150 ComplyWise 145 CompuIT 34, 74 ConocoPhillips 76 Crescent Petroleum 137 Crowcon 34 Damac 76 Dana Gas 17 Danfoss 151, 159 Darchem Engineering 44, 45 Deloitte 51, 52, 108, OBC Dow Corning 34 Emaar 121 Emerson IFC, 102 EMC 26 Eni

129 Ensys Energy 26 ExxonMobil 75 Flexitallic 104, 105 Fluke Networks 64, 67, 160, IBC Furgo-Jason Future Fibre Technologies 140, 141 46 Gazprom 126, 127 GE Oil & Gas 71 Geoservices 148, 149 Geutebruck 34 Goldman Sachs 144 Gulf Research Centre 158 Halliburton 83 Hawke International 153 Ho Cheng Enterprises 40 Honeywell 134 Honeywell UOP 63 HOT Engineering 69 Hyundai heavy Industries Co. 154 IMCA 96 Inmarsat International Assoc. of O&G 126 Producers International Energy Agency 34, 38

34 International Monetary Fund 118, 119 Intertek 110 IPLOCA 24, 139 JMJ Associates 69 Kuwait Oil Company 69 Kuwait Petroleum Corp. 88, 93 m:pro IT Consult 116, 117 Magnatech 61 Marine Biotechnology 34 Merrill Lynch 15, 72, 73 Metso Automation 74 Mitsui 106 NACE International 26 National Oil Corp. 4,68 NCA 120 NOGA 2, 64, 65 NORSAR Innovation 26 Occidental 13, 33 Oleon 24, 125 Pepperl+Fuchs 46 Petrobras 78, 79 Petrowell 59 Polarcus 114 PPSA

112 Proclad 74 Qatar Gas 62 Qatar Petroleum 88, 91 Rhode & Schwarz 74 Royal Dutch Shell 157 Safeguard Technology 128 SASREF 58 SEG 86, 87 SELEX Communications 94, 128 Shell 62 SNOCC 123 Sparrows Offshore Services 110 Stroytransgaz 100, 101 Synergi Solutions AS 10, 54, 57 TGS 49 Thompson Valves 85 Thrane & Thrane 62, 80 Total 23, 42 Valvecare 142, 143 Varel International 54, 55 Wavefield 98, 99 Weidmüller 8, 22 Yokogawa





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The scrapping of its nuclear weapons programme and the subsequent lifting of sanctions has seen international oil companies (IOCs) clamoring for a slice of Libya’s most precious resources – oil and natural gas. Julian Rogers speaks exclusively with Dr Shokri Ghanem, Libya’s top oil official and Chairman of the country’s state-controlled major National Oil Corp. (NOC), about why his country’s energy sector is set to become a giant on the world stage.


he “mad dog of the Middle East” was how former US President Ronald Reagan once famously described Libyan leader Col. Muammar Gaddafi. His choice of illustrate just how strained relations between the shunned North African country and the West became back in the 1980s. Shackled by crippling sanctions amid accusations of state-sponsored terrorism, Libya was outcast as a pariah state and the bedrock of its economy – the oil and gas industry – suffered the consequences as massive foreign investments dried up. But that was then and this is now; Libya has abandoned its weapons of mass destruction (WMD) programme, sanctions have been axed and Gaddafi has made efforts to normalise ties with the EU and the US. He has even welcomed western leaders to his infamous tent outside the capital Tripoli for tea and a chat.





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Libya’s return from the cold of international isolation has meant that the country’s oil chiefs have had the chance to get their hands on the muchneeded technology and expertise the international oil companies (IOCs) have at their disposal. For the likes of US super-majors ExxonMobil, Chevron and Occidental it has meant a ticket back into a country that provided an oil bonanza back in the 1950s and 1960s until Libya nationalised its reserves in 1970. Already since 2003 some US$10 billion in foreign investment has poured into the oil industry and extensive 2D and 3D seismic surveys have been undertaken. With its high oil quality, cheap extraction costs (as low as US1$ a barrel in some places) and the fact that vast swathes of the country are still unexplored (just 25-30 percent is covered by exploration agreements), it’s not difficult to see why Libya’s hydrocarbons are a coveted prize for foreign investors. It also occupies a strategic proximity to lucrative European markets – a position that gives it the upper hand over rival producers in the Middle East. In fact, this is something Dr Shokri Ghanem is very keen to encourage. “The role of the IOCs is very important so we are inviting them because of their massive financial ability which allows them to take risks with exploration,” he tells O&G at the headquarters of Libya’s governmentcontrolled National Oil Corp. near Tripoli’s international airport. “We also need them for their technology, good management practices and capital.” These agreements will help to unlock untapped fields that the country boasts.

Indeed, Libya has Africa’s largest proven oil and gas reserves and is ninth on the world league table. Officially, 41.5 billion barrels of crude exist but this is probably well short of the true figure lying beneath Libya’s dusty terrain. About 80 percent of Libya’s reserves are located in the Sirte Basin, an area that accounts for 90 percent of the country’s oil output. But despite being blessed with an abundance of hydrocarbons, it still languishes in third spot behind Nigeria and Angola on the continent’s league table of producers. This could all change, however, if ambitious targets to lift production to over three million barrels per day (bpd) by 2013 becomes a reality. Output currently stands at just over 1.8 million bpd, up from 1.3 million in 2003. Despite raised eyebrows as to whether these goals can be achieved, Ghanem is quick to highlight his country’s production pedigree when the issue is broached. “We are very close to two million barrels at the moment but three million barrels is not a farfetched goal because back in 1970 we used to produce 3.7 million a day,” the 68-year-old asserts. “It later dropped because of political embargos and lack of investment and this made it very difficult for us to get access to technology and investment.” Ghanem’s reference to the past revisits a boom period for Libyan oil, bankrolled by an abundant supply of US dollars in exploration projects. The global recession and subsequent embargoes brought an abrupt end to the party and sent daily output spiralling into decline. Nevertheless, Ghanem is buoyant about his county’s potential and waxes lyrical when quizzed on the subject: “There is much opportunity here because so many areas have not been explored Cyrenica Platform and there are so many discovered fields that have not been exploited. Mature fields, too, need EOR (enhanced oil recovery) and IOR (improved oil recovery) and we have a lot of small fields that were discovered back in the sixties, seventies and eighties. However, they were Sirte Basin not commercial back then because they were either too far from the coast or too far from the pipeline or the price of oil was not high enough to make the fields economically viable.”


Mediterranean Sea Tunisia ✷ Tripoli

Pelagian Basin

Algeria Ghadames Basin


LIBYA Tripoli Murzuq Basin

Question marks Kufra Basin





While Libya’s enormous potential is attracting the IOCs like a magnet, they do have to contend with lengthy delays and fight through bureaucratic red tape in order to take their place in the country’s energy sector. And not everyone is as optimistic as Ghanem when it comes to the country’s target to lift production to three million bpd; Samuel Ciszuk, Chief Middle East Analyst for Global Insight, is one such sceptic. “When the target was first pub-




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lished it wasn’t that unrealistic but it would have meant beating the problems that have been plaguing Libya for a very long time – the slow-moving, opaque nature to organisations,” he says. Although the NOC is not very transparent, by Libyan standards it is still probably the most well-organised and quick-footed institution in the country, that still takes a long time to make decisions. You could wait ages just to get the clearance for a road or landing strip near a facility, for instance.” Despite Libya’s “very top-heavy, decision-making structure”, as Ciszuk describes it, there have been some major agreements signed in the past 18 months. Perhaps the most significant has been the historic US$1.25 billion deal with BP in 2007 – the largest single award of acreage in the country. The UK giant has recently begun a huge seismic acquisition survey in the Gulf of Sirte as it looks to exploit the undeveloped offshore resources there. Ghanem, who signed the deal with BP CEO Tony Hayward in Tripoli, is credited as being instrumental in the opening up of the energy sector to foreign investment when he served as the country’s Prime Minister between 2003 and 2006. Getting the overseas energy companies here has been his mission. “Since the lifting of the embargo we have invited IOCs to participate in transparent bidding rounds,” Ghanem notes. “Hundreds of companies applied and 40 new ones came to the country (under production sharing agreements or PSAs) for a massive work programme to be spent on exploration. We think this will lead to not only an increase in production, but reserves too.” The IOCs that offered NOC the greatest share of their profits

“We have re-negotiated the contracts of the companies working here, improved the terms of the agreements and allowed them to do more work in the areas assigned to them”

from exploration work were the ones most likely to be awarded licences. Under the terms of the PSAs, the foreign firms take on all of the costs and NOC retains ownership of the oilfields. “Some of them have already discovered oil and some are drilling. We have re-negotiated the contracts of the companies working here, improved the terms of the agreements and allowed them to do more work in the areas assigned to them.” Libya has already welcomed an international mix of companies, all on a hunt for the country’s cornucopia of hydrocarbons. “By opening the door we now have companies from all parts of the world entering Libya – American, European, Asian, Russian and Brazilian,” Ghanem explains. “We even have companies from mainland China and Taiwan working here. In fact, all of the big and medium-sized companies are very much interested because they know there is a great potential in Libya.” This battle for a slice of the pie has nudged up costs being incurred by the IOCs, says Ciszuk. “The very competitive climate between the IOCs bidding for acreage has pushed up the government’s take and lowered the rates of return, which makes it not a cheap place to work and investments come at a high price.” The largest foreign firm operating in the country is Italy’s Eni which has earmarked US$14 billion of investment over the next 10 years for oil and





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LIBYA’S TOP OIL CHIEF Dr Shokri Ghanem has been Chairman of National Oil Corporation since 2006 and is Libya’s official representative at OPEC. US-educated, he was appointed the country’s Prime Minister in 2003 but left in 2006 after controversial attempts at free market reform. He has previously served at the Ministry of Economy as Deputy Director of Foreign Trade and in various roles within the Ministry of Petroleum. Ghanem was also the Chief Economist and Director of Energy Studies at the Arab Development Institute in Tripoli, Libya. He is married with three daughters and a son.

gas projects. Eni was the first company to discover Libya’s Elephant field, which now churns our 150,000 bpd. Libya itself has expressed an interest in taking a stake in Eni, making it the company’s largest stakeholder after the Italian government. But that’s not all; media reports have surfaced recently that NOC will join forces with an IOC in the next decade, which would be a huge coup for whoever lands the deal. NOC, which produces about 50 percent of Libya’s oil along with its smaller subsidiary companies, earned almost US$40 billion in oil revenues in 2007. It’s an industry that props up the Gaddafi regime and provides practically all of the country’s exports earnings, thought to be as much as 95 percent. With such a reliance upon oil and gas it’s not difficult to see how much US and UN sanctions hurt the country. “The sanctions were damaging, especially technology wise,” suggests Ciszuk. “This lack of technology has been one of the main impediments to reaching the three million barrels a day target. The PSAs with the big players in 2007 and 2008 require a high level of investment in infrastructure and technology because Libya has been over-reliant on elephant fields in a climate of under-investment.”


With all this talk about oil it’s easy to forget the country’s natural gas potential; it’s enormous, with estimates banded about that as much as 100 trillion cubic feet (TCF) may exist. The official figure stands at around 51 (TCF). The country already exports almost eight billion cubic metres of natural gas a year through pipelines to Europe, thanks in part to the US$6.6 billion, 370-mile underwater ‘Greenstream’ gas pipeline to Italy that opened in 2004. And gas exports to Europe are set to rise over the next few years following a number of discoveries recently. Libya is also revamping its infrastructure to export liquefied natural gas (LNG) all over the globe. “The world demand for gas is increasing, and politics plays a part in that,” says Ghanem. “There is a great interest in Libya to increase our gas production. Similar to the oil, the potential is big. A lot of money is earmarked for gas exploration here and in the coming years this country will be far more important in terms of gas production than it is now.” Libya is looking to use natural gas more for power generation domestically which will free up more of the oil to be exported.


95% 54% 60% of export earnings

of GDP

of public sector wages

Volatility But whether discussing oil or gas there is no getting away from the impact that volatile commodity prices are having on the industry lately. These are uncertain times for Libya and fellow producers following a rollercoaster ride for crude prices – spiking at US$148 a barrel last July before nose-diving to US$35 a barrel as the global economy slipped into recession. Some analysts are predicting that if China suffers a recession oil could tumble further to just US$25 a barrel. Either way, sustained low prices could mean the plug being pulled on projects in the Middle East, including Libya, warns Ghanem. “Many developments in many countries will be scrapped because people will be afraid that they will not be able to pay for the costs they are incurring. These prices create an atmosphere of uncertainty and many companies will be thinking twice before committing huge investments.” Ghanem says

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LIBYA’S OIL EXPORTS, BY DESTINATION production slash was a move that Ghanem had been calling for in the public arena since prices fell. OPEC cut production three months ago but this had little impact on the market and since the latest cut Libya has been calling for even further cuts. When crude prices went through the roof consumers were asking how investors speculating on the energy futures markets could have such an influence on a crucial commodity like oil. It seemed that the fundamentals of supply and demand were irrelevant as prices surged. Of course, a weak US dollar and geopolitical tensions in oil hot spots played a role too. “It is not just the fundamentals that decide the price of oil, but rather the paper markets,” Ghanem notes, “More than 15 times the physical oil traded is traded on paper oil – a virtual market that is not real. The instability in the futures markets creates a lot of fluctuations.” He also argues that because speculators have the power to create seismic shifts in prices, the oil futures markets need addiGERMANY tional regulations. “As well as the speculators there are many factors af19% ITALY fecting the price,” says Ghanem, “You have geopolitics, instability in the 38% Middle East and the situation in Iraq and with Iran, the financial crisis, the weather and so on. It’s not just supply and demand anymore and with these *Includes Netherlands, Austria, United Kingdom, Portugal, factors the picture of the situation becomes a mosaic, which makes it diffiIndonesia, South Africa, Brazil, Czech Republic, Canada, Sweden cult to predict the behaviour of the market.” Source: Official trade data as reported to Global Trade Atlas As well as speculation, Ghanem also freely admits that he worries about conflicts in the Middle East and the potential consequences of the distinctthere is plenty of opportunity out there but it means more investment. “And ly frosty relationship between the US and Iran. “The Middle East is the most more capital means that oil prices have to be higher,” he asserts. Given important area in the world for supplying oil and gas so it should be treated today’s economic concerns he says that the as if it is a holy land and handled with care. national oil companies (NOCs) are bound to Wars and conflicts should be left away from be hesitant, too. here because you are playing with fire. The reBut while prices have plummeted, the gion could be engulfed and conflicts could costs of exploring and producing oil and gas spill over and ignite other countries and parts have not followed a similar path. Technology, of the world.” Libya’s top oilman has also materials and labour costs remain high. “The made no secret of the fact that he believes the price of oil goes up so the cost of production ‘Peak Oil’ scenario is imminent. So does he goes up,” Ghanem remarks. “When the price still feel that the world’s fuel gauge is lurching goes down, production costs don’t follow towards the dreaded ‘E’? “Yes, I believe that suit. Then we have the problem of non-availthe days the cheap oil are over,” he anability of trained staff, not only in Libya but all nounces defiantly, “because the costs are over the world; we are employing foreigners getting higher and no one will produce low here but the costs are increasing.” cost energy. Peak oil is looming but now there The oil and gas companies find themis a period of adjustment because of the selves gambling on whether or not they will quick increase in price and the crash in the fisee a good return on a development that nancial markets and the price of oil. Once the could take 10 years or more before the first financial crisis settles down we will see anhydrocarbons are extracted. This lack of inother increase in crude prices.” vestment could send prices back up because After speaking with Ghanem and asLibyan leader Col. Muammar Gaddafi has opened the oil firms will not be able to meet a future sessing the situation there is no denying his country up to foreign investment rise in demand. “That will lead to a price Libya’s potential. The true figure for oil reshock in two or three years,” Ghanem says. serves is based on a lot of guess work with OPEC, which pumps more than 40 percent of the world’s output, some insiders suggesting it could be as much as 120 billion barrels, putting slashed production by two million barrels last month (December) in a bid it ahead of Iraq’s official 115 billion barrels. Whatever the true assessment to kick-start a rise in crude prices. This appeared to have little effect but is, however, Libya can’t get to where it wants to be in terms of oil and gas prices have climbed slightly in recent weeks on the back of OPEC’s anproduction without the help and investment of the IOCs. It’s going to be an nounced reduction and tensions over Israel’s military offensive in Gaza. The interesting few years ahead for Libya so watch this space. 



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Oil is one of the biggest casualties of the global economic downturn with prices crashing from US$148 a barrel in July 2008 to less then $50 today. We report on the impact this will have on MENA oil and gas producers and their economies.


FORTUNE ix months ago few could have predicted that oil producers would suffer such a dramatic turnaround of events. Oil had reached an all-time high of US$147 a barrel providing abundant liquidity to fund recordbreaking infrastructure projects across the Gulf. So optimistic were analysts about the future global demand for oil that Goldman Sachs predicted prices could reach up to US$200 a barrel in 2009. This year however, as the global financial crisis deepened, the first drop in oil demand for 25 years caused prices to plummet.

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The extent to which Goldman Sachs later changed its estimate illustrates just how unpredictable the situation has been. In December it dramatically slashed its prediction for the price of oil in 2009 to just US$45. It also stated that OPEC should introduce a more “severe” reduction in oil output in order to stimulate the market. OPEC did reduce output – announcing plans to cut 2.2 million barrels daily starting on January 1st. However, news of the cut did nothing to curb the relentless plummeting of oil prices. Shortly after the announcement, Goldman Sachs’ prediction was realised

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earlier than expected – oil tumbled to below US$40 a barrel with US light crude for January delivery falling to just US$39.64 a barrel. Even gloomier predictions have been made by US bank Merrill Lynch which claims that oil could reach a low of US$25 a barrel before it recovers. A research report published by the bank in December stated: “With demand vanishing across all key oil consuming regions, benchmark crude oil prices continue to plummet. In the short-run, market participants will focus on both OPEC and perhaps even non-OPEC producer responses to balance the market. A temporary drop below US$25 is possible if the global recession extends to China and significant nonOPEC production.”

Crude is expected to fall by an average of 1.4 million barrels a day with the first half of the year seeing an even steeper decline OPEC itself has released gloomy predictions for the levels of oil demand – and how these will dictate prices. In its monthly oil market report published in December it stated that demand for its crude is expected to fall by an average of 1.4 million barrels a day (bpd) with the first half of the year seeing an even steeper decline: “Given negative growth in world oil demand and positive growth in non-OPEC supply, the demand for OPEC crude is projected to decline sharply in 2009, falling 1.4million bpd to average 30.2 million bpd,” the report stated. “Moreover, in the first quarter of 2009, the demand for OPEC crude is expected to see a sharp drop of 2.3 million bpd from the same quarter in the previous year.” The reliance of the Gulf countries on oil wealth to fund their economic growth means the impact of these price drops could be potentially catastrophic – particularly for those that were relying on high oil prices to fund ambitious infrastructure projects. The World Bank’s 2009 Global Economic Prospects report predicts that growth in the Middle East region will slow to less than four percent in 2009 – 3.9 percent compared to 5.8 percent in 2008. It stated that while a rise in oil and natural gas revenues to US$200 billion in 2008 funded economic growth – the same would not be true for 2009. The decline in investment in the region would create the biggest impact, the report warned, which claimed this could decline to 3.4 percent in 2009 compared to a high of 13 percent in 2007. The reality on the ground of these changing conditions is that Gulf business and political leaders have been forced to re-think projects and economic growth targets. The hardest hit country, according to the International Monetary Fund (IMF), could be Saudi Arabia. It claimed in October that if oil prices dropped below US$49 a barrel, the country’s budget would be in the red. The most likely projects to be affected by the lowering of oil prices are those associated with the energy sector. Already Saudi Aramco has tightened its belt, having cancelled a project to re-start production from the Dammam oil field which would have generated an extra 75,000 barrels of crude oil per day. It has also delayed bidding for the Yanbu

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refinery, due to generate 400,000 barrels per day, in partnership with ConocoPhillips. This was due to take place from the fourth quarter of 2008 but will start in the second quarter q of 2009 instead. Meanwhile in Qatar the count country’s oil minister warned in December that if oil prices stay under US$70 several of the projects which were launched e la to boost the country’s energy sector se ector could be delayed. d Speaking to a petrochemical conference con nference in Dubai Dubai, he said: “My concern is that the oil price will go lower and an many projects will be delayed.” He went on n to say that this could lead to supply shortages in the long term when w the demand picks up again. The fact th that hat many of the G Gulf countries’ infrastructure projects were funded through thr oil wealth means these too could be affected. Although the IMF claims that the UAE will not post an account deficit until the price of oil drops to US$23 a barrel, it is particularly vulnerable to the effects of price falls given the scale of the infrastructure projects it has invested in. The UAE’s economic growth is predicted to drop to six percent this year, down from seven percent last year according to the IMF and there are already signs that infrastructure projects are being scaled down. Nakheel, the master developer behind the Palm Jumeirah and The World islands has announced plans to scale back activity around some of its projects and has made 500 of its staff redundant. Meanwhile, developers Emaar Properties and Damac have both announced job cuts. The Saudi government has claimed that its planned infrastructure and real estate developments will remain on schedule. However, as the country with some of the most ambitious projects in the region – including King Abdullah Economic City which is being built near Jeddah

at a cost of US$120 billion – its modernisation plans could be hit hard if oil prices slide further. Kuwait has been the most open about the effects that falling oil prices could have on its infrastructure projects. According to Citigroup, Kuwait would be the only country in the GCC to still have a budget surplus if oil averages US$50 a barrel. However, the country’s government has stated publicly that it is scaling down its growth plans because of the price drop. Experts are still unable to predict the full extent of the global financial crisis and just how far demand for oil will fall. Some have suggested that oil prices could pick up again later this year and even return to July 2008 levels – by 2010-2011. Speaking at a conference in Warsaw late last year, the Chief Economist of the International Energy Agency (IEA), Fatih Birol said, “We can see almost every day that projects are being cancelled (due to the financial crisis) and this is bad news as supply is being withdrawn, but demand will eventually rebound in 2010-2011. We may see prices going even higher than we saw this summer,” she went on to say. A research report by Merrill Lynch claimed prices could start to climb again next year once economic recovery begins. “In our view oil prices could find a trough at the end of Q1 2009 or early Q2 2009 with the seasonal slowdown in demand. Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009.” While these claims will go some way to reassuring oil producers, the instability of the world economy means it is impossible to predict the recovery of oil prices with any certainty. The repercussions of falling prices for GCC countries prove the fragility of economies that rely so heavily on the energy sector – and the need for them to develop sources of wealth beyond oil. „

We need speculation in any market; we all speculate, but these speculators are those financial players that have no intention whating, the biggest drop in history. The market is soever in owning the physical commodity. confused because of all these changes that Excessive speculation is harmful and exaggerare happening very rapidly, the prices are not ates movement in the price of commodities, reflecting supply and demand fundamentals. forcing companies into making decisions that are not good in the long term. When oil prices Up or down? “Many companies were US$148, many There is tremenmade decisions dous speculation companies made decithat they will live to in the marketplace. regret a year or two sions that they will live Most investors have from now” to regret a year or two no place to go, so year from now because they are bidding oil prices are not susout commodities and oils. You can see the tainable at US$148. We are going to see the indecision, the confusion, the chaos, the lack impact of high oil prices on consumer spending of leadership, the little faith in government and inflation. It also hardens the position of the decision and officials, and all these things are national oil companies, which is why we have factors that will have a long-term impact on limited access to resources – because most of the whole industry. the companies that own the resources are in no

THE TROUBLE WITH OIL Fadel Gheit, Senior Oil and Gas Analyst at Oppenheimer, gives his take on the turmoil in crude prices and accuses some producers of making some ill-judged decisions oday, everybody is extremely worried


about banks and financial institutions; nobody is concerned about oil companies.

Oil companies have always been in very strong financial shape. They have never had low work debt on their balance sheet as they have now, but the future is uncertain. It is a double-edged sword. They have record earnings, but yet most of their stocks are trading, or at least sustain-


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Talking Heads What the experts have to say about the oil price drops

“We are in a crisis. The price of oil has reached levels that OPEC members want to see improve” OPEC President Jose Maria Botelho de Vasconcelos

“Today’s price levels are wreaking havoc on the US industry and are threatening current and planned investments” Saudi Oil Minister Ali al-Naimi

“Below US$70 it will be non-economical to invest in the hydrocarbon sector” Qatar’s Energy Minister Abdullah Bin Hamad Al Attiyah

hurry to open access as there is no compelling reason for them to allow foreign oil companies access. These companies make a great deal more money by producing less oil than if they were to allow oil companies to come and develop and increase output. We are seeing that happening with BP in Russia; we’re seeing that happen in Venezuela. Having been in the business more than 25 years I am no longer surprised to see anything happen in the oil market. People don’t realise that the oil markets are not free markets. They are far from free, because more than half of oil supply in the world is coming from OPEC and Russia. By definition when you have a cartel controlling more than 25 percent of a commodity, there is no free market. On the other hand, the demand for petroleum product is also not free. Why? Because of taxation. On the supply side, it is distorted by a cartel; on the demand side, it is distorted by taxation and subsidies.

Government greed It seems like too much of a good thing is a bad thing. And now people are thinking that maybe we should put additional taxes on oil and gas companies. In Russia, oil companies were losing money when oil was US$100 but they were making money when oil prices were US$35. Why? Because Russia has a US$35 per barrel tariff that is flat. The owners imposed this tariff a few months ago, and by the time you incorporate the production and transportation costs, as well as the very high effective tax rate, and then hit them with US$35 tariff, at the end of the day they actually lose money. Now, Russia wants to cut this tariff in half to get them decent profits of around US$5 or US$6 per barrel. This is because government greed increased significantly with the rise in oil prices. This is happening all over the world. On one hand, the government of both the consuming nation and exporting nation blame

oil companies, but they are also causing the problem because the consuming nations are putting huge taxes on motorists using gasoline and diesel, and taking a huge amount of

“Oil has been and will continue to be used as a political weapon” profit away from oil companies in the form of taxation and royalties, and the exporting countries are milking oil companies to the last drop they can get their hands on. Oil has been and will continue to be used as a political weapon. It is not a free market, it does not reflect supply and demand fundamentals, and basically it is creating a lot of mess around what is happening in Russia, Venezuela, Nigeria and Iraq; if it were not for oil, we would not be in Iraq. We have no interest in Afghanistan because it doesn’t have oil, but we are more interested in Iraq because Iraq does. „

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After 14 years as head of the world’s biggest oil company, Abdallah S. Jum’ah has handed over the reins to his successor, Khalid Al-Falih. Here he reflects on his time in charge and his predictions for the future of Saudi Aramco and the world energy sector.


hese past few weeks have been a time for me to reflect on the past, to take stock of the present, and to consider the future prospects for my company, for my industry, and indeed for the world around me. I would like to share some of my thoughts and perspectives on oil and energy and their linkage with future economic prosperity. These are issues that are of significance not only to people within our industry. Rather, petroleum matters to everyone on the planet, because it is present in every facet of our societies and our economies. It allows us to transport people and materials, it helps us grow our food, heal the sick, manufacture goods, and make our surroundings safer, more vibrant and more comfortable. Energy and economic activity are inextricably linked, and because petroleum empowers just about every other industry on Earth, it fuels the growth and development of our economies, powers the prosperity of our societies, and helps raise the living standards of billions of our fellow human beings. In today’s world, there is very little that doesn’t work, function or move without petroleum, and oil is truly the lifeblood of our modern civilisation. That’s one reason why it is vital to remember that for all the talk about the rise of alternative fuels and the much-heralded “end of oil,” the International Energy Agency predicts that fossil fuels will continue to meet four-fifths of the world’s total energy needs in 2030. The IEA also forecasts an average one percent annual increase in demand for oil over the next twenty-odd years, with total global oil consumption growing from roughly 85 million barrels per day (bpd) last year to 106 million bpd in 2030. It’s worth noting that the OECD’s share of


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petroleum demand will decrease significantly over that period, from 57 to 43 percent, largely as a result of strong demand growth in emerging markets rather than a decrease in consumption in developed economies. Most of the talk about peak oil has died down in the wake of the prevailing financial and economic crisis and the oil prices falling by over twothirds from the peak of nearly US$150 a barrel not too long ago. Suddenly, instead of oil resource and supply shortages, we hear the talk of a glut; such is the cyclical nature of the oil industry. However, I think we’ve all heard quite enough about the current global economic downturn, so I want to focus on the long-term trends in the oil and gas industry rather than the short-term doom and gloom. Oil is here to stay. But far from preserving the status quo or resting on our laurels as an industry, growth in oil demand over the long-term coupled with depletion of fields already in production – especially in non-OPEC

countries – will require substantial and sustained investments in the years and decades ahead. In fact, it is estimated that the oil industry will require some six trillion dollars of investment between now and 2030 in order to meet forecast demand. Fully 80 percent of that US$6 trillion total will need to go to the upstream exploration and production sector, with the IEA estimating that a total of 64 million bpd of capacity will need to be developed by 2030 to meet demand growth while offsetting declines in existing fields. I would note that the issue of the sizable investments essential to offset the natural decline in oil fields through new production capacity usually receives scant attention, as it is demand growth which attracts greater interest, but in reality both these aspects are equally important. The current shift toward national oil companies as upstream powerhouses will continue, with NOCs supplying four out of every five additional barrels of oil the global economy will require, in keeping with their larger reserve portfolios and their younger fields. At the same time, non-conven-

tional oil and natural gas liquids will make increasingly large contributions to the world’s total supply of oil – a trend which is set to continue and which I believe will both allay fears of shortages and further consolidate oil’s place in the global energy mix. Of course, there is also a need for timely and focused investments elsewhere along the petroleum value chain, particularly in the areas of refining, shipping and transportation. Unfortunately, it looks like the swings between boom and bust and overcapacity usually followed by under-investment in certain sectors of the oil industry that we’ve seen in the past will also be present in the future, resulting in continued cyclicality.The need for financial outlays is pretty obvious, and in some ways they are relatively straightforward – notwithstanding the extreme price volatility we’ve witnessed this year, the current level of uncertainty in the global economy, and the demand destruction in some major markets. However, we must not forget the need for sustained investment in three other equally important areas, which are essential success drivers for our business, and without which our industry’s ability to remain the foremost suppliers of energy to the wider world would be jeopardised. The first area requiring investment is research and technology development. I believe that technological advancements in upstream applications and operations will enable us to find and produce more oil more efficiently, and to effectively prolong the productive life of our reservoirs even as they open up new frontiers for exploration and development. However, technology also has enormous potential to boost other aspects of our companies’ activities, whether in the midstream and downstream segments of the business, or in enhancing our reliability through the more effective monitoring and maintenance of plants and equipment. Such technological advances— whether revolutionary step-changes or incremental improvements—are hard-won and require continued efforts. However, I believe the wider world needs to understand the degree to which we are investing in R&D as an industry and its importance, because this aspect of our business may not be readily apparent. Even more important are our investments in our people, whether cultivating a new generation of petroleum engineers and professionals, or ensuring that our existing workforces have the skills and knowledge to thrive in an increasingly complex operating and business environment. The popular image of the petroleum business is largely comprised of “big iron”: drilling rigs, pipelines, refineries, supertankers and the like, and they certainly are an important part of what we do. But we as an industry, often prefer to stress the technological sophistication of our operations. For me, petroleum is still primarily about people: the dedicated men and women who plan, build, operate and maintain that massive infrastructure, who develop and deploy the high-tech tools, and whose talents and dedication are essential to providing energy to the world. Our industry is currently facing a number of human resource challenges, however, and many companies find themselves caught between a retirement bulge which will see the departure of many of their most experienced personnel and a very young workforce that is not yet sufficiently experienced.


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This results in a critical shortage of people in the middle experience group, who have gained adequate know-how to get the job done and will be with us over the coming decades. Add in the need for employees who are technologically savvy, committed to self-development and life-long learning, and open to innovative ideas and rapid change, and the need for investments in our people is equally clear. The third area where we need to invest time, effort and resources is environmental stewardship and the protection of natural ecosystems wherever we operate. Efforts in this area can often be integrated with other investments: for example, conducting environmental impact assessments before building new facilities and designing those plants and installations to be environmentally sound, configuring new refining capacity to produce cleaner and greener petroleum products, and encouraging care and concern for the environment among our employees. However, there are also important investments to be made in specific areas like the desulfurisation of whole crudes and products, cleaner burning fuels, and next-generation internal combustion engines, including new fuel formulations consistent with the needs of such new engine technologies — most of which we are pursuing at Saudi Aramco. There is also a need to ensure that as an industry we have both the specialised equipment and trained personnel available to respond to any environmental incidents, including marine oil spills. Then there is the entire subject of climate change and what the oil industry can do to help in this regard. While there are numerous end-use areas of oil, transportation represents the largest and the one with the most growth. My view is that since oil-based transportation technologies will be with us for the foreseeable future, the most pragmatic strategy to address the climate change issue as applicable to this sector is to sharply focus our R&D efforts on minimising the carbon footprint of petroleum-based transportation technologies.

I believe the most practical path in this direction depends on more efficient and smaller engines and vehicles – including hybrids – that can quickly cut carbon dioxide emissions from transportation by half or more for the same number of miles driven. In short, because petroleum will continue to satisfy so much of the world’s demand for primary energy, it is critical that we minimise the environmental impact of both our operations and our products, and thereby fulfill our responsibilities to our planet and its people. No country on earth – including Saudi Arabia – is now or will be ‘energy independent’ and it is important to recognise that we all function within the same interconnected worldwide energy system. Leaving aside the issues of cross-border investments and financing, technology transfer, and the sourcing of goods, equipment and expertise, crude oil itself is a fungible commodity traded in global markets – and as we have seen over the last year, petroleum price volatility and its economic impact respect no national boundaries. So producer or consumer, NOC (national oil company) or IOC (international oil company), small nation or large, developed economy or emerging market, we all sail in the same boat when it comes to our collective energy future. Therefore it is essential that we tackle the petroleum challenges I’ve outlined by adopting a collaborative approach based on mutual benefit and the complementary use of our respective strengths. Based on my four decades in the petroleum business, the lessons I have learned at the helm of the world’s largest oil producer, and my interactions with industry leaders of all stripes, I have no doubt that encouraging cooperative efforts to ensure a reliable supply of petroleum is the surest route to long-term energy security. 

ABDALLAH S. JUM’AH ON LEADERSHIP “Early in the years I became President, I was asked what I wanted to be known for at the time of my retirement, and my answer was, ‘I want to be known as the one who let the genie out of the bottle’. That meant encouraging and capturing the ideas and initiatives of our people, and then applying them to our work and our operations.” “To my mind, principle in business comes down to simply this: Identify your responsibilities as an organisation or a company and make only those commitments that you are confident you can keep in an ethical manner. The issue of defining your organisation’s responsibilities is one that fascinates me and that has played an important role in my time as head of Saudi Aramco.” “If innovation is the motor that keeps an organisation moving forward through both choppy seas and still, then insight is the ability to look all around and make sense of those waters, charting dangerous rocks and reefs and identifying where the passage will be smoothest.”


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World-class procurement O&G sits down with Deloitte Consulting LLP’s Bennett West and Deloitte Touche Tohmatsu’s David Traylor to get the know-how on the ways national and international oil companies (NOCs and IOCs respectively) are tackling procurement in this climate of volatile oil prices. ty to create world-class supplier relationships will be key to the NOCs’ ability to create competitive advantage vis a vis the IOC competition, or in some cases allow for successful IOC joint venture relationships.

O&G. You have worked directly with multiple National Oil Companies (NOCs). From an NOC perspective, what is happening in the marketplace and how is this an opportunity to create value in the supply chain? Deloitte. The marketplace is very dynamic right now. While we have seen a momentary dip in oil prices, the long-term price trends are quite high by historic standards. There is a need to be very nimble across the supply chain to help accelerate access to reserves and to deliver product to market. This will require more collaboration across the supply chain both internally and with supplier partners. O&G. What does this mean for NOCs specifically? Deloitte. Leading NOCs are evolving their operating models to feel more like the super-major IOCs. That means leveraging industry best practices across a variety of areas to compete more internationally. While most NOCs will still have a unique domestic agenda, they will compete in a growing number of international markets. One of the supply chain related opportunities we see as a real value creator for NOCs is procurement. This abili-


O&G. What is different about the NOC situation that would create an opportunity in procurement? Wouldn’t IOCs have the same opportunity? Deloitte. Most, if not all of what we usually consider IOCs, have undergone global multi-year procurement transformation programmes. These programmes have typically involved procure-to-pay process improvements, strategic sourcing and training, and up-skilling staff, among other things. It is safe to say, based on our experience, that IOCs have made some effort to move themselves to the upper quartile in procurement capability. With some limited exceptions, we have not seen this in NOCs. O&G. How would you characterise the procurement environment at a typical NOC? Deloitte. While it’s difficult to make sweeping generalisations about a diverse group of oil companies, it is fair to say that our teams have observed some similar challenges across multiple NOCs. There is a general bias toward price versus total value, for example. There is a minimum technical hurdle that, once reached, qualifies the supplier for a commercial bid and then drives selection of the lowest price bidder. This type of process can leave value on the table from a total cost of ownership (TCO) perspective. Deloitte Consulting LLP’s procurement maturity model would not rate that type of activity a top quartile procurement best practice. O&G. Are there any other challenges? Deloitte. The procure-to-pay process itself can impede project delivery. Many times there appears to be very complex governance and approval

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processes associated with making a commitment in the marketplace. This will be visible to the potential supplier community in the form of lengthy and opaque contracting procedures around delivery of projects or key services that often lead to a missed opportunity. Procurement systems that support this process tend to be very manual, which adds to the efficiency challenge. Many IOCs have implemented eProcurement and eSourcing tools that greatly increase the ability to analyse and share data across suppliers as well as within the buying organisation.

“IOCs have made some effort to move themselves to the upper quartile in procurement capability. With some limited exceptions, we have not seen this in NOCs” O&G. How would you describe the relationships that you see with the suppliers and NOCs and IOCs? Are they similar? Deloitte. Clearly in any given procurement event IOCs can behave in a transactional fashion. But as part of their procurement transformation programmes, many IOCs have sought to evolve their relationship with key suppliers. This involves the identification of critical supplier partners and then forging strong relationships with these suppliers to create mutual value over the long term – not just for a one-off transaction. This would involve techniques such as value analysis or early supplier involvement. With some of the rigid procurement processes we have seen at the NOCs, it is likely that this type of relationship has only been developed on a very limited basis. Buying organisations in industries such as the automotive sector have created tremendous value by creating mutual objectives across the supply chain. This is a big opportunity in the NOC space. O&G. Given your experience, how would you suggest NOCs go about capturing this opportunity? Clearly the ability to drive procurement transformation within an NOC environment is going to be more challenging than in the IOC environment for a whole host of reasons. Deloitte. You make a very valid point. Being governmental or quasi-governmental bodies with a very real domestic agenda makes implementation of procurement transformation all the more challenging. For example, it may

be difficult or nearly impossible to streamline the procurement governance or approval process due to constitutional or legal requirements. That said, it doesn’t mean NOCs can’t progress significantly toward a best practice procurement process and organisation. O&G. Given these challenges, what areas would you go after first to create value in this space? Deloitte. Clearly much can be done in the area of the offer to the marketplace. For historical and other reasons, many NOCs operate in very separate business units. There is an opportunity for these organisations to come to the market with a very sizeable category spend at the holding company level. Some of these NOCs may be near the top of the market in spend volume in certain categories. There is a real opportunity for automation across the procure-to-pay process. From a degree of change perspective, this is also a good place to start to create quick wins without major disruption. O&G. How long and how difficult are these types of procurement transformation efforts to execute? Deloitte. In some ways many NOC procurement organisations are at a point in time where the IOCs were a few years ago. Based on our experience, these organisations were able create major value and process efficiency in a 12 to 18-month timeframe. n

David Traylor is the National Oil Company Market Leader for Deloitte Touche Tohmatsu and also serves as a partner at Deloitte & Touche LLP (United States), specialising in the development and execution of business strategies, asset optimisation, and risk management for the oil and gas industry. He is a registered professional engineer with 30 years’ experience in the upstream, midstream and downstream sectors of the oil and gas industry. Contact him in Dubai at +97(4)369 8999 or email

Bennett West is a Principal at Deloitte Consulting LLP (United States) and leads the US Energy Supply Chain and Downstream Oil and Gas practices, having completed a significant portfolio of projects in both the US and the UK in refining and marketing. His experience includes projects with many global oil and gas organisations, including several national oil companies. Contact him in Chicago at +1 312 486 3461 or email


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Energy evolution With the days of ‘easy oil’ long gone and crude prices plummeting, oil and gas companies are facing myriad challenges. Andy Inglis, CEO of BP Exploration and Production, outlines how the oil giant plans to plug the capability gap and why beating the talent crisis will be key for our future energy security.


n our industry, strategic challenges come and go and we usually conquer them in the end. That is what we do: we manage risks, whether they be technical, geological, commercial or political. And today, near the top of that list is capability. The really big strategic issue for all oil and gas companies is matching the earth’s resource endowment on the one hand, with the capability – technology, skills and know-how – required to bring those resources to market on the other. The days of ‘easy oil’ are well behind us. For international oil companies (IOCs), and increasingly national oil companies (NOCs) too, new resources are harder to reach and tougher to produce. Resources are now found in reservoirs that lie at greater water depths, at higher temperatures and pressures and require complex drilling and completion designs. Bringing them into production is going to be difficult. It will require that capability gap to be filled.

The global context Recent developments in financial and commodity markets are just the latest reminder that we are definitely living in interesting and changing times. In the current chaos, it is easy to focus on the short term, but I want to maintain a longer-term perspective. Despite recent falls, the oil price remains high and volatile by historical standards, and prices are not being driven by a lack of resource because there is plenty of oil and gas around. In fact, prices are being driven by a confluence of factors. The first of these is the recent period of exceptional worldwide economic growth. Although the short-term outlook for worldwide economic growth is evidently deteriorating, the fundamental drivers of longterm growth in demand for energy remain in place. We have entered a new phase in global industrialisation, led by China and India. When Europe industrialised, it involved 50-100 million people moving from a rural to an urban way of life. The US industrialisation involved 150-200 million people. And those changes took centuries. But in the next decade, in China and India alone, over one billion people will be moving from a rural to an urban way of life. This will result in a dramatic increase in energy consumption to provide light, heat and mobility. According to the IEA, by 2030, world energy demand will be 50 percent higher than today and non-OECD countries are expected to contribute 85 percent of the total world energy demand growth between 2005 and 2030.

Contrary to what you may hear from some quarters, there are more than enough resources to meet that demand. At the end of 2007, total remaining proved oil reserves stood at around 2.3 trillion barrels of oil equivalent. At today’s consumption rates, we believe we have around 40 years of proven oil reserves, 60 years of natural gas and 130 years of coal. And let us not forget that enhanced capability would improve that resource-to-production ratio further. For instance, the worldwide average recovery factor for conventional oil reservoirs is around 35 percent of oil in place. If, as an industry, we can raise that by just five percent, it would add around 170 billion barrels to world reserves – enough for five years supply. The task facing the industry is to ensure supply rises adequately to meet demand by bringing this oil and gas endowment to market. These resources are found in increasingly challenging environments – in the deserts of the Middle East and North Africa; in the deepest waters of the Gulf of Mexico, West Africa and Brazil; and in the Alaskan and Russian Arctic.

“Technology is only as good as the people who design and operate it. With capability, it is people who make the difference”


Furthermore, many of these resources are controlled by NOCs that do not always have the same capability at their disposal as IOCs. Our industry needs the smartest engineers and geoscientists. Increased computing power and better technology will also make a huge contribution, but they are not a magic bullet. State-of-the-art software programs and seabed monitors are fantastic – but I’m not expecting them to walk into my office with a solution to the problem. Technology is only as good as the people who design and operate it. With capability, it is people who make the difference.

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Turning these resources into reserves and then production is going to require leadership, ingenuity and innovation as well as technology. That is the capability challenge.

The capability challenge The first point to consider is the demographic pressures of our industry. Looking specifically at averages, the average employee working for a major operator or service company is 46-49 years old. However, this is a problem we have been aware of for several years and which we have been addressing. The good news is that we see an increase in the 20-34 year old bracket – reflecting more intensive recruiting in the last 10 years. The fall in the percentage of 35-49 year olds reflects a lack of recruiting during the years of lower prices, when the industry saw the main strategic challenge to be increasing efficiency through consolidation and mergers as opposed to building organisational capability. I’m approaching 50 myself, so I am in that age group. And in some ways my own experiences are typical. I joined BP in 1980, and in 1990 was told that Mechanical Engineering was not considered core to BP’s strate-

gy, and that we would follow a track of outsourcing and use of the contracting industry. This caused me to broaden into other disciplines and areas. I’m happy to be now back in the core of E&P. I have kept my technical roots, I’m a chartered engineer, very proud of it, and very passionate about ensuring we do not repeat the mistakes of 20 years ago. The second point is that despite our best efforts, we have to admit that we are not attracting enough graduates from traditional recruiting areas such as the US and Europe. Even when people enroll on engineering degree courses intending to join the engineering ranks, this does not mean they will follow through. One recent study found that of the 90 percent of students who originally aspire to work in the sector when they began their degrees, only 65 percent actually do so. The overall impact of these pressures has been estimated by CERA as a potential 10-15 percent ‘people deficit’ by 2010, compared with the estimated number of staff needed to deliver projects. This is being felt across the industry – in oil and service companies alike. The issue is leading to project delays or deferral. Goldman Sachs study of the top industry projects shows that more than 40 percent have experienced a delay of a year or more.

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In Azerbaijan, development of local talent has been achieved through a number of BP initiatives: Special entrance and development programmes for graduate recruits: This is through the Challenge initiative; 50 Azeri graduates completed the course last year The Caspian Technical Training Centre: A US$12 million world-class training centre dedicated to training technicians to work in BP’s Caspian operations – to date it has trained over 1000 technicians, with a steady rate now of 100 per year Professional development of national staff: In 2007, more than 100 employees were supported by BP in their professional education, whether attaining chartership accreditation, or advanced degrees at UK and US universities Overseas assignment in other BP operations: Where Azeri staff can learn best practices from other operations to bring back to Azerbaijan


I believe the oil and gas industry is suffering from a number of what I would regard as misconceptions. Some of these misconceptions were once true, but are now outdated. The industry suffered a boom and bust in the 1980s and early 1990s that left many with an impression of instability and a sense that there was no prospect here of a ‘career for life’. My earlier story regarding the outsourcing of engineering is evidence of that. The industry is also perceived as low-tech and out of date when set against other hi-tech areas such as IT, media and pharmaceuticals. Nothing could be further from the truth. Historically, this was also a very white and very male industry so it has been perceived as lacking in diversity. As an industry we must address and correct these unhelpful and old-fashioned misconceptions, so that we can be competitive with the other opportunities graduates have in consulting, pharmaceuticals and the media.

Attracting and retaining talent First we need to retain the talent of our experienced employees. People are working later in life today – certainly later than the traditional industry retirement age of 55 – but this cadre of employees also demands more flexibility. At BP we have a scheme in place to access the skills of our retired staff for specific challenges and projects of interest to them. We offer flexi-hours and part-time working to encourage individuals to work beyond the statutory retirement age. We have to be accommodating to continue to access this talent. Then, looking at the other end of the age spectrum, we also need to be sensitive to the aspirations of people in their mid-20s – often described as Generation Y. From our own interviews with new graduate entrants, we know that their top motivations are quite distinctive and in many ways different from past generations. For example, there is much less emphasis on having a job for life and much more on the quality of experiences and the chance to make a difference. To attract and retain the top graduate talent, BP offers a development program called the Challenge Program. This began in 1993 with 30 people from the UK and US. Today the program has graduated over 3200 people and we currently have 1200 Challengers from all over the world in the program. Challenge is about building deep petrotechnical skills through a combination of onthe-job work experience, dedicated mentoring from experienced employees, clearly defined

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training and course curriculum, and field and operational experience. Graduation and intermediate reviews are based on competency assessment. This creates self-standing individuals, carefully placed into the right next roles with access to further learning offerings such as accelerated development programs. We also need to get closer to talented students, earlier, as they make their way through university. That’s the time at which we need to be there to correct misapprehensions and ensure the full attractions of a career in energy are made clear. We do that through partnerships with major academic institutions, but also by raising our profile on campus. To be honest, I think we have more work to do here. Secondly, we need to correct some of those outdated misconceptions by continuing to diversify our workforce and celebrating that process. After all, that is simply a reflection of globalisation in action. By 2020, over 50 percent of BP’s operated production will come from non-OECD countries, giving us much more geographical breadth and depth than in the past. Many governments want to see greater local participation in the development of their country’s resources and we fully support their aims. Over the last decade or so our operations have grown rapidly in countries such as Angola, Colombia, Egypt and Trinidad. In all of these countries, and many others, we have made an early priority of developing local leaders as well as local frontline workers. We adopted an approach of developing local talent, using the global capabilities of the firm.

Improved efficiency through technology Thirdly, let me move to technology as a means to plug the capability gap. Technology improves productivity by enabling us to perform tasks faster and with greater effectiveness and efficiency. Let’s start with the basics in my own business. Historically our production engineers have spent up to 40 percent of their time looking for data. A quick win for us was to create a web-based information management system that allows our PEs to quickly access the data they need to do their jobs. Piloted in Alaska and now available across our operations, this tool has allowed us to reduce the amount of time spent on accessing data to less than 10 percent of the time, releasing our PEs to spend more time managing our wellstock and operations, increasing their ‘wrench time’. Go back not too many years and our reservoir engineers would spend a week doing one history match; it may have taken six months to run 25 cases to find the one deterministic answer that matched. Now, with improved workflows and computing power, we can do well over 1000 history matches a week, a huge step change in efficiency, and importantly allowing multiple solutions to be found – which in turn has greatly improved our understanding of risk and uncertainty. Remote monitoring is another technique that enables us to achieve better performance with less labour-intensive processes. For instance, we are using remote monitoring on a number of our turbines in the Gulf of Mexico. Our vendor, who is located in California, monitors the operations 24 hours a day. Through remote monitoring, we have been able to increase the intervals between service shutdowns and push the operational limits of the machines. Benefits include real-time troubleshooting


of the equipment by internal and external subject matter experts from around the world; production loss avoidance due to sustained equipment uptime; and deferred costs by extending the equipment lifetime through increased monitoring. In the past, one individual was able to monitor 40 engines. Today that person can monitor 4000 – a 100-fold increase – because the system works by exception, flagging up potential problems, rather than by constant surveillance of all the equipment. As an industry we are beginning to understand the full potential of predictive analysis as the next evolution of this technology. Anticipating events and hazards ahead of time, creating intelligent software to advise of, and in some cases make, corrective actions and adjustments. These are early days for many of these technologies and we are learning more all the time, finding ways to increase further the productivity of our scarce human capability.

Learning partnerships The fourth part of our strategy is to underpin the development of our staff with a world-class learning offer for all levels and ages of our organisation. I talked earlier about one aspect of this, our Challenge entry program for graduates, and our goal is to provide the same learning opportunity at every stage of a career. To deliver this strategy we have chosen to partner with the best educational institutions in the world. We all benefit from these partnerships. BP gets to teach the ‘BP Way’, in partnership with world-class educators. Our staff get the chance to develop as individuals. And I hope our academic partners benefit too. At BP we are addressing this challenge in four ways: Attracting and retaining talent; developing a diverse workforce; leveraging technology to increase the efficiency of our organisation; and offering a powerful learning culture, notably through partnerships with some of the world’s leading academic institutions. There is always more to do, but we know that building organisational capability goes right to the heart of our competitive advantage. n


Close contact Failure of stainless steel threaded connections can have massive knock-on consequences. Dow Corning’s Phil Grellier tells O&G how these failures can be reduced by simply choosing the right anti-seize paste. hen engineers at an oil drilling company started experiencing unacceptable failure rates in stainless steel threaded connections on its massive oil drilling equipment, the situation created some serious problems. Each time the stainless drill components had to be removed from service for repair at a specialty machine shop offsite, the firm not only incurred the expense of extra labour, shipping and refacing the damaged threads, but it also lost the critical sections for up to a week of field service. Steerable rotary drilling systems are comprised of multiple segments, with critical sections made of stainless steel. Each stainless component is secured with 4-1/2” or 6-5/8” API threaded connections, tightened to standard torque values of 32,000 and 62,000 lbs- ft or 43,400 and 84,100 Newton metres (Nm) respectively. As this company moved toward commercialising its newest generation of rotary steerable drilling systems, one of its design teams consulted with Dow Corning to investigate a possible reason for the thread damage: a traditional anti-seize paste appeared to be failing under the immense torque required to assemble the components. The investigation revealed the traditional anti-seize pastes contained a number of different metal-based lubricating solids, including chromium, copper, nickel and molybdenum. Stainless steel also contains molybdenum, chromium and nickel, which do not readily react with oxygen; therefore, only very thin metal-oxide layers are formed. Once the oxide layer is damaged by abrasion the oxide-free metal seizes under extreme pressure. Additionally, the solid lubricants found in the traditional paste re-form oxide layers, which are again removed during abrasion. This cycle continues in a manner where oxide layers and particles build up, clogging thread clearances so the metal components cannot be disassembled. Also, traditional pastes contain sulfur, phosphorous, zinc and lead-based


compounds that can cause stress corrosion cracking and embrittlement. Both lead to grainboundary cracks which propagate until bolt fracture occurs. According to this company’s records, failure rate was around 25 percent.

Finding a solution Dow Corning and engineers of this drilling company worked together to develop a list of criteria for the application. They knew they would need an anti-seize compound formulated to provide adhesion to the stainless steel connections that could create and maintain an effective lubricating film despite the extreme loads, contaminants and temperatures of an oil drilling environment. Further, the formulation should have low sulfur and halogen content, with a minimum of phosphorous, zinc,

Phil Grellier is Global Strategic Marketing Manager for Dow Corning and based in Europe for the MRO Markets, where oil and gas is one focus segment. He is a trained industrial chemist with specific experience in electro-coating metallurgy and corrosion protection and has spent 28 years with Dow Corning working within engineering or maintenance applications of Dow Corning and Molykote products. He has also worked in technical sales, commercial management, strategic marketing and solutions/service development.

lead and other metals that can contribute to stress cracking or embrittlement. The replacement material selected was Molykote P-37 Paste that forms a continuous lubricating film with high contact adhesion that withstands extreme forces of drilling applications, contributing to excellent sealing and facilitating disassembly without thread deformation. In fact, the formulation has proven so successful that the drilling equipment manufacturer reports an immediate drop in thread-related failures of more than 50 percent. Molykote P-37 achieves excellent loadcarrying capacity and temperature range of -40°F to 2550°F (-40°C to 1400°C) by containing a synergistic blend of metal-free solid lubricants delivering outstanding seize protection, even under severe operating conditions. Molykote P-37 is approved for use on threaded connections by power plant turbine and steam valve manufacturers. Molykote P-37 Anti-Seize Paste delivers outstanding purity for critical applications, containing less than 200 ppm total halogen content (including chlorine, fluorine and bromine) and less than 500 ppm sulfur content (sulfur contributes to stress corrosion cracking). The odourless, grey metal-free paste is extremely stable under difficult service conditions, giving it excellent durability. It is not classified as hazardous waste upon disposal, and poses no known health or environmental risks from transportation or use. The result is that Molykote P-37 Anti-Seize Paste has proven its ability to form a durable lubricating film in threaded connections requiring 32,000 and 62,000 lbs- ft or 43,400 and 84,100 Newton meters (Nm) of torque. Drilling engineers have found that the lubricant adheres tenaciously to the stainless steel components, facilitating easy disassembly when required and helping to reduce failures. „ For further information please call +49 (0)611 237 778 (English), +49 (0)611 237 779 (German), +49 (0)611 237 773 (French) or visit

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Acquiring accurate seismic data is the name of the game for companies looking to fully exploit potential reservoirs. But this task can be made all the more difficult when you throw deepwater surveying into the mix. O&G sought the views of two industry experts –TGS’ Robert Hobbs and Rick Donoghue of Wavefield Inseis ASA – to get a clearer image of this subject.

O&G. What are the critical challenges that the industry faces when it comes to marine seismic data acquisition? Robert Hobbs. Reserves replacement continues to be a major thrust for TGS customers. This is becoming more difficult as the industry moves into more frontier and/or structurally complex geologic environments. As our customers are required to test these more difficult traps, our challenge is to identify and apply the technologies that are fit-for-purpose for the imaging problems that are required in the basins we operate in.

Clearly, wide-azimuth (WAZ) and its varients, such as rich azimuth (RAZ) acquisition has made the most recent significant impact since the first survey was acquired in the deepwater Gulf of Mexico in 2003. In some structurally complex areas, WAZ has provided a step-change in imaging improvement. Acquisition of these very large surveys is so complex and the resulting data volumes so immense, that the industry is just now interpreting the final processed volumes from some of these surveys. WAZ acquisition is not just limited to the deepwater towed-streamer environment, but it is also critical to identifying remaining subtle traps around existing production infrastructure where towed-streamer activity is not possible. TGS has been able to leverage the full-wave benefits provided by multi-component ocean bottom cable technology in the search for deep complex traps in these settings. WAZ technology will surely have application in many basins, such as in West Africa where many of the same geologic problems exist.

“Many developments have been made to improve acquisition equipment so that high quality pressure and shear waver data are accurately recorded”

Rick Donoghue. If you are using seismic data as an exploration tool one key factor is to have seismic data of sufficient quality that will allow you to image potential reservoirs that may be in very deep water or in areas where specific rock properties significantly degrade seismic images. So, collecting high quality seismic data tuned to specific exploration environments is a major challenge. When seismic data is used to provide snap-shots, or time lapse images of a producing field over time (known as 4D analysis), then apart from high quality data you also want a highly repeatable acquisition technique so that differences in the seismic images are the effect of changes in the reservoir and not due to ‘camera shake’ to use a photographic analogy. In other words, the challenge is to have the seismic receivers and sources in the same places each time the data is collected.

Rick Donoghue

O&G. How have techniques and technologies evolved so that the industry has accurate and reliable geophysical data at its disposal? RH. The discipline of geophysics has proven itself to constantly adapt to solve industry’s challenges. There is no other subsurface technology that has advanced more over the past several decades.


RD. Many developments have been made to improve acquisition equipment so that high quality pressure

and shear waver data are accurately recorded. Pressure waves propagate in both solids and fluids whereas shear waves only propagate in solids. This makes combining both data types very useful in interpreting structures and rock properties but also means that they cannot be recorded in the same way. In order to collect both types of data so-called ‘multi-component’ acquisition systems have been developed that incorporate different sensor types. O&G. Can you explain about some of your more complex projects in the past and what lessons you learned? RH. It is difficult to cite one specific project, but TGS is finding a continued need and significant value in the integration of various data types

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Robert Hobbs joined TGS in 2008 as Chief Operating Officer. He has more than 20 years of experience in the oil and gas industry. In previous appointments at Exxon, Union Texas Petroleum, Veritas DGC and Marathon, Robert has served in a wide range of technical and leadership roles from Geophysicist, to President and Managing Director. Robert holds a M.Sc. degree in Geology from the University of Southern California.

RH. Seismic data acquisition R&D should be focused on reducing the time it takes to ac-

quire both wide-azimuth acquisition and 4D seismic. One way of accomplishing this is to enable simultaneous shooting with multiple sources. Simultaneous shooting can also increase the source density of the data which provides for a better signal to noise ratio. Also, the development of wireless seismic sensors are critical for 4D seismic. With inRick Donoghue, VP Marketing and Sales for Wavefield creased demand for higher recovery rates in Inseis ASA, has 30 years of experience within the existing oil and gas reservoirs, 4D seismic will geophysical services industry with Schlumberger, be used more in the future to understand resWesternGeco, Multiwave Geophysical and CGGVeritas. ervoir changes by using time-lapsed, elastic During his career he has had a variety of roles inversions of the reservoir properties. in offshore management, data processing, land With computer technology advances acquisition, marine operations, international sales and in the last few years, the industry has used marketing. He holds a B.Sc. in Physical Geology from computation-intensive, two-way acoustic Exeter University in the UK. wave equation (or reverse time migration) to improve the seismic image. The next step is full elastic wave processing. Full elastic wave in the basins in which we operate. Whether it is electro-magnetic data inversion or processing (P-wave, S-wave and density) will be used in the in the North Sea or near-surface core data and multi-beam informafuture for providing better parameters for reservoir characterisation. Full tion in Southeast Asia, the complex problems that TGS is facing with wave data (3-component) acquisition will provide the data needed for its clients require a broader toolbox of technologies. TGS has learned elastic wave processing. from these experiences and fully evaluates all types of geoscientific data that may help a customer resolve these RD. We have just turned a major corner and the complex situations. new technology for the future of seismic is now available. The Optowave permanent seismic RD. Wavefield Inseis was created in early 2006 system from Wavefield Inseis is comprised so we are relatively new. However, we have a of four component (4C) seismic stations that great deal of experience within the managecontain optical sensors. This allows shear wave ment team and we are using this career-long data to also be collected which greatly enexperience to steer the technology advances hances reservoir imaging, leading to improved within the company. Over the last six years reservoir monitoring and management. The we have, as a management team, been very system also uses fibre optic lead-in cables and involved in emerging permanent seismic monia laser interrogation instrumentation system toring technologies and techniques. We have, placed at the surface. for example, worked closely with permanent The subsea components of the system are seismic system equipment providers to bury completely passive in that they have no elecsome of the first ever permanent seismic sentronic components whatsoever and so no power sors into the seafloor in some very challenging is required. The passive nature of fibre-optic marine environments. sensors embedded into 4C receiver stations is During that period we concluded, along an advantage over traditional electrical systems with the whole industry, that a completely new since the in-sea sensor equipment is not prone technology was needed that would meet the reliability and cost criteria to electrical noise, leakage or short-circuit. for a system that could be installed into the seafloor to collect seismic An additional and very important factor is that the fibre-optic redata for the entire life of a field. Electrical systems that incorporated ceiver cables are less expensive to manufacture than the traditional standard sensors were just not the best technology to use for this type of electrical receiver systems. All of these advantages make the fibre-optic seismic application. sensor technology perfectly suited to be utilised in ocean bottom receiver cables in connection with life-of-field seismic projects. In October this O&G. What technologies or developments are around the corner to help year Wavefield Inseis was awarded a contract to install the first of these exploit clients’ reservoirs? systems over the Ekofisk field in the North Sea. A new era has begun. „

“With computer technology advances in the last few years, the industry has used computation-intensive, two-way acoustic wave equation (or reverse time migration) to improve the seismic image” Robert Hobbs


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Digging deep After taking over presidency of the Society of Exploration Geophysicists Laurence Lines tells O&G how he thinks energy companies will source new oil in the next decade.

O&G. What do you hope to achieve as President of SEG and how do you plan to achieve it? Laurence Lines. I believe that the SEG’s top priority should be to reach every member with its publications (online or hard copy), continuing education, website services and regional meetings. We plan to achieve the first three goals through coordination of SEG Online, publications and continuing education departments. Our regional meetings are effectively planned through the collaborative efforts of our Tulsa staff and the SEG committees. O&G. Maximising the potential of existing oil fields is as much of a challenge as discovering new sources of oil. How can seismic surveying techniques be used to drive more efficient extraction? LL. I believe that the secret lies in the integration of time-lapse, or 4-D seismology with petrophysics and reservoir simulation. Time-lapse seismology must address the issues of survey repeatability in producing oil fields in order to detect subtle reservoir changes during production. O&G. In your opinion, what role does geophysical technology have to play in improving exploration risk rates and reducing costs within unconventional resources, such as oil shale? LL. We must first understand the detectability and resolution of unconventional resource anomalies through rock physics and modeling. Then, we must design our seismic surveys to delineate targets. Finally we must carefully process and interpret these seismic surveys. In addition to seismic surveys, there may be promise from controlled-source electromagnetic methods (CSEM) for fluid detection. O&G. Drilling in remote and hostile environments presents many challenges throughout an operation. What are the particular challenges of seismic surveying in these environments? And, how are these challenges best tackled? LL. The seismic contractors continue to invent ingenious methods of deploying sources and receivers for remote and hostile environments. It would seem that portable sources and cableless receiver systems will play a big role in areas where access by conventional systems is limited. O&G. Which technologies do you believe have the potential to revolutionise geophysics within the oil and gas industry? And which technologies are you most excited about? LL. In seismic recording, we see the advancement of light, inexpensive, portable cableless receiver systems. Additionally, CSEM may provide


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methods for fluid detection which can nicely complement time-lapse seismology. Improvements in high-resolution magnetics and airborne gravity may allow for reconnaissance of basins. I am personally excited about the possibilities of parallel computer architectures for depth imaging with the complete wave equation. O&G. What do you think the industry will be capable of, in say five and 10 years? LL. I believe that we will see the development of complete petroleum reservoir characterisation – which will include the integration of geological, geophysical and reservoir production data. This will provide the key to enhanced oil recovery. „

ABOUT LAURENCE LINES: Research interests: • Seismic imaging and inversion, reservoir characterisation

Teaching involvement and membership associations: • Analysis and integration of geophysical and geological data; qualitative and quantitative interpretation • Chair in Applied Seismology at Memorial University of Newfoundland from 1993-1997 • Associate Director of the Consortium for Research in Elastic Wave Exploration Seismology (CREWES) • SEG Distinguished Lecturer in 1991 and Editor of Geophysics 19971999 and CSEG Journal 1995-1997 • Honorary Member of SEG and CSEG

The Society of Exploration Geophysicists is a not-for-profit organisation that promotes the science of geophysics and the education of applied geophysicists. SEG, founded in 1930, fosters the expert and ethical practice of geophysics in the exploration and development of natural resources, in characterising the near surface, and in mitigating earth hazards. The society, which has more than 29, 000 members in 129 countries, fulfills its mission through its publications, conferences, forums, websites, and educational opportunities.

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THE ROAD AHEAD O&G put Patrick Pouyanne Senior Vice President, Strategy Business Development, Engineering R&D at Total, in the hotseat to find out where the company plans to invest in the Middle East and the exploration challenges it is facing. O&G. Total has formed a number of strategic partnerships with national oil producers around the world, including Qatar Petroleum in Mauritania. What is the significance of these partnerships and what further partnerships are you planning? Patrick Pouyanne. There are different types of companies that Total is currently forming partnerships with across the world. In particular we are looking at forming strategic partnerships with national companies from oil producing countries. What we are observing is that many national companies are wanting to expand their own production internationally and using the experience and installations we have, we can enable them to do that. For Total these sorts of partnerships are a good strategy. For example we have proposed to partner with Qatar Petroleum in Mauritania. We sold a 20 percent stake in the Taoudenni Ta7 and Ta8 permits in Mauritania to Qatar Petroleum in August proving that we are committed to establishing strategic partnerships with national oil companies both inside and outside


their respective countries. Total has been active in Qatar since 1936 and has helped to develop the country’s oil industry from the outset. O&G. How does partnering with these companies increase Total’s and the national oil companies’ competitive advantage? PP. It is better for Total to work with these companies than to compete with them. This is with a view to one day having access to their reserves. And if these companies want to expand then it’s better for them to partner with us than with our competitors. We are also working with organisations from oil consuming countries such as CNOOC. They are looking to expand outside their own countries and gain access to other reserves. They need access to oil and gas to support their own economic growth and we can help them to do this. We see this happening in Africa in particular. These countries are going to become potentially our competition so we must know them well and partner with them.

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All these national companies are looking more and more competitive. We have some technical expertise, such as in project management. And we need to use these strengths to partner with them. These partnerships are very important and they are at the heart of Total’s strategy. O&G. What are the biggest exploration challenges that oil companies are currently faced with? PP. In terms of the technological challenges, more and more of the major companies are specialising in looking to explore in unconventional places and there are clear challenges involved with this. One example could be the challenge of extracting oil from remote parts of Canada. The challenges involved in these remote exploration activities are technical and environmental. During the process we have to be very careful to minimise our use of water and to minimise carbon emissions. We must be aware in this process of CO2 emissions and cost challenges. O&G. What challenges does the industry face from the shortages of skilled oil and gas professionals? PP. There is intense exploration activity going on at present. And there are also HR challenges associated with this. Two or three years ago, if for instance a compressor broke down at a plant it could get replaced in two weeks or even two days. Today it would take us one month because of the shortage of professionals available to fix it.

O&G. What new technologies are oil and gas companies currently using to overcome these challenges? PP. Some technology in particular has been developed to address these challenges. There has been a lot of R&D activity around chemical EOR, particularly into the use of polymers. With new fields, the issue is how to access deeply buried reserves. We have a history of oil exploration up to 5000 metres in depth. Today we are developing tools that would allow us to drill up to 8000 to 9000 metres in depth. This would enable us to encounter some new horizons. We have started this in the Gulf of Mexico and it has been very successful so far. We face a lot of challenges from the high pressure engineering and new equipment that is developed needs to be able to tackle this. O&G. What is Total doing to maximise the potential of its existing fields? PP. We have a lot of licences which we are revisiting where we can see potential to drill down to deeply buried reserves. In Brunei we were successful with that this year. We hope to do this with other licenses that we have already. O&G. What international expansion plans does Total have? PP. Of course the core area is to be able to expand in the Middle East and the key areas for us are Qatar, Abu Dhabi, Iraq and Iran. Then there is of course Russia. We managed to achieve great success in 2007 with Shtokman. Total owns 25 per cent of the joint venture while Gazprom will retain the rest. Before that deal was signed we had failed several times to sign agreements with Russia. Our ambition now is to fund further development in Russia. This will have to be done in partnership with national Russian oil companies – Gazprom in particular. We are also looking at expanding in Canada and in Northern America and Europe as well as Australia.

“More and more of the major companies are specialising in looking to explore in unconventional places and there are clear challenges involved with this” It’s not because we are less efficient. But there is much more intense activity going on across the industry and there is a scarcity of HR to meet the new demand. Because the capacity of contractors is stretched, companies have been obliged to hire less experienced people and less welltrained people so that really is a challenge facing the whole industry. O&G. How much pressure are companies under to maximise the potential of existing oil fields? PP. Increasing the recovery factors of existing oil fields is the biggest challenge that oil and gas companies face. On a world scale the average recovery factor on existing fields is about 30 percent. That is not very high. So one of the big technical challenges is to be able to increase that global recovery factor. This is being done through EOR technology using gas and chemical products. And this is a real challenge for the whole industry. If you could increase the average recovery factor by five percent that would represent something like 10 years worth of oil consumption. So any technology such as EOR technology that can enable oil companies to maximise their current assets, has great value.


O&G. Why is the Middle East such a strategically important investment area for you? PP. Saudi Arabia is not open for investment in upstream but it’s very important for downstream so we plan to ramp up our investment there. I would say Qatar is also a very important area for us. Some of the world’s major oil companies have managed to sign contracts there. Everybody is trying to do that. There is a lot of potential to develop there. Abu Dhabi has a long-term partnership with Total and we are looking to renew some of our concessions there so that will be very important for us as well given the scale of activity going on there. O&G. What hopes does Total have for investing in Iraq? PP. All the oil and gas companies are waiting for Iraq. There are potentially billions of barrels of oil to be developed there. We are waiting to see what framework will be approved and what rules will be passed then we shall be planning our investments in the country. „

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MODEL FOR SUCCESS Reservoir modelling is a crucial tool in the hunt for those elusive hydrocarbons. But what are the best techniques and technologies for getting the most out of modelling from seismic data? O&G speaks to two experts to get their thoughts and advice on the key issues.

O&G. How are companies using 3D seismic data to improve reservoir modelling techniques? Graeme Eastwood. Traditionally, reservoir models have focused on well information, which has great vertical resolution but is poorly distributed in an areal sense. 3D seismic data adds measured geophysical data between wells that can be used, in combination with the well data through a process of geostatistical simulation and inversion to create more robust reservoir models. Mike Branston. In recent years, increased emphasis has been placed on the use of sophisticated 3D earth models in the decision process of the E&P cycle. However, the generation of such models relies heavily

on well data which will always be limited by its inherent lack of spatial coverage. Therefore, the integration of 3D seismic data into the model to obtain a more accurate representation of the reservoir properties between the wells will remain a key challenge. The development and application of geostatistical methods in this area has improved the interpolation of reservoir properties between the wells but the need to QC the model through the simulation of synthetic seismic will remain a key aspect of the quality assurance process. It is therefore vital that the simulation of synthetic seismic from the reservoir model is as realistic as possible as in the majority of scenarios this simulated seismic data is compared directly with the acquired surface seismic. Improving the accuracy of the seismic simulation therefore has direct results on improving the validity of your model.

Graeme Eastwood is Region Manager, Middle East with Fugro-Jason, a leading provider of seismic inversion and reservoir characterisation products and services. He joined the company in 2003 as Business Manager in Kuala Lumpur and has 16 years’ experience in the seismic and reservoir characterisation sectors of the industry with Fugro and Schlumberger.


O&G. 3D seismic data gathering and modelling can be expensive. How can intelligent analysis make sure that you get the most out of this resource? MB. The current cost of seismic acquisition certainly justiďŹ es the expense of routinely using seismic modelling to ensure the quality of the end product. Using seismic modelling to assess how the source and receiver conďŹ guration, azimuth contribution and known overburden is going to affect the overall quality of the seismic image, can help optimise the survey and avoid poor illumination issues and the additional

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expenses of re-shooting with revised survey parameters or indeed making poor decision on incomplete data. It is a way of accurately determining the value of the seismic survey before it is shot and is an effective way of reducing risk. GE. Using Fugro-Jason software, seismic data can be used to yield highly detailed and accurate models of physical rock and reservoir properties such as Vp, Vs, lithology, porosity, permeability, water saturations, etc. These result in improved reservoir characterisation, modelling, development planning and engineering simulation, thus ensuring the maximum return on the investment in obtaining seismic data. O&G. What are the on-going challenges for creating 3D modelling? How can technology solve these problems? GE. The ongoing challenge is reproducing geological complexities in realistic ways that can be used by development engineers and engineering simulation software. This means being able to build highly detailed models that honour all known data and being able to transfer such models between the vastly different gridding systems used by geoscientists and engineers without distorting or losing information. We have taken steps toward this with our tools to build complex geostatistical seismic inversion models (RockMod, StatMod MC) and incorporate the results of seismic inversion in geological modelling (RockScale, FastTracker). MB. The development and integration of rock physics has gone a long way towards representing data in the formats required to move from the geological domain through the elastic domain and into the reflectivity domain. However, to date, the seismic simulators used at the end of this process are limiting the effectiveness of the 3D Earth models in the E&P cycle because they are based around 1D convolution methods that do not take into consideration the effects of illumination and resolution caused by the survey and overburden. At NORSAR we believe that the inclusion of 3D illumination and resolution effects in synthetic seismic is vital for the accurate understanding of the reservoir. To achieve this we have developed a seismic simulator which is able to rapidly simulate local prestack depth migrated data that incorporates the 3D effect of overburden illumination as well as lateral and vertical resolution. This new technology is called SimPLI (simulated prestack local imaging) and has been built into a new software programme, SeisRoX, which integrates this with comprehensive rock physics modelling. O&G. How are your products and services assisting clients to create accurate and reliable models? MB. NORSAR is renowned for its Ray Tracing software. This has been primarily used for seismic modelling such as survey design, calculation of travel times and the generation of synthetic seismograms. However, with the launch of our new seismic simulator we are in an ideal place to bridge the gap between seismic and the reservoir. The ambition behind this project was to use our seismic modelling expertise to improve on the standard 1D convolution technique.


Dr Mike Branston is the Marketing and Sales Manager of NORSAR Innovation, which provides software and services in seismic survey planning, illumination analysis and reservoir characterisation. NORSAR has provided software solutions to the petroleum industry for over 25 years and currently supports its global client base from its offices in Oslo, Kuala Lumpur and Houston.

While 1D convolution ignores survey and overburden effects and hence assumes perfect illumination at the reservoir level, NORSAR software takes into account the overburden and survey effects that affect the seismic energy while it travels to and from the reservoir. As a result, we can accurately reproduce the lateral and vertical resolution effects seen in the acquired seismic. What is more, it is truly 3D giving a much better match to the real seismic data. Our technology provides a rapid, integrated modelling solution which allows the reservoir modeller to better simulate synthetic seismic from their model and thus improve the accuracy and reliability of that model. Not only does this impact decisions on the validity of the model but through the integration of the survey and overburden, the modeller can determine the value of future seismic surveys. GE. For many years, Fugro-Jason has been helping clients better understand their reservoirs by using our advanced seismic inversion algorithms to create the most reliable and predictive 3D models of the subsurface. This has enabled our clients to drill fewer poor wells and target areas of highest potential production first. We are now expanding the value of this technology from the seismic into the engineering world. Recent experiences show that integrating our inversion models directly into reservoir simulations results in faster engineering history matches and more accurate flow rate predictions without sacrificing the geologic consistency of the underlying model. „

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RECOVERY Per Lund of Norse Cutting & Abandonment (NCA) offers his thoughts on solutions to tackle the problem of declining production. O&G. NCA provides Conductor Slot Recovery services. Can you describe the concept in more detail? Per Lund. Conductor Slot Recovery is a cost efficient and simple way of enhancing production from existing infrastructure where you permanently plug and abandon (P&A) old non-producing wells and reuse the well slot for drilling a new one. In this way you can increase the lifetime of wellhead platforms and avoid having to take the cost and lead-time to fabricate and install a new one. Equally important is that you can do the whole P&A and conductor installation operation very cost efficiently from a lift boat with a lower day rate and then bring in the more expensive jackup drilling rig to drill the new well. O&G. Why do you think Conductor Slot Recovery is an applicable method for the Middle East market? PL. The Middle East is a mature oil and gas region with many fields developed in the 1970s and 1980s. Most of these are now facing a decline in production. The offshore production in the region is characterised by wellhead platforms at moderate water depths which make them ideal for Conductor Slot Recoveries. All the well slots are typically occupied and normal well servicing is not enough to keep up the production. The reservoirs are however not yet fully depleted and Conductor Slot Recoveries allows in-field drilling without adding costly infrastructure. O&G. What makes NCA’s Conductor Slot Recovery services unique to the industry? PL. NCA is known to be a world-leader for rigless plug and abandonment and decommis-


sioning services. Our services are founded on unique and proprietary equipment that allows the operation to be conducted safer and more cost efficiently, in a reliable manner and without surprises. Together with our extensive track record and P&A expertise we can offer a package to our clients that allow them to focus on their main task; drilling the new productive well. O&G. Many operators do their slot recoveries using downhole sidetracks. Why is Conductor Slot Recovery a better way of sidetracking a well? PL. A sidetrack at the seabed is less vulnerable to surprises than doing a sidetrack further downhole. Our experience is that downhole sidetracks very often result in time consuming complications in order to locate the whipstock where you really want it. Conductor Slot Recovery also gives you a full casing program from the surface which will make it possible to reach targets that cannot otherwise be

reached from the platform. Furthermore, it is possible to perform the Conductor Slot Recovery operation rigless, which means that you can reduce the rig work scope down to only the drilling of the new well. This gives you a new well to the target at a lower cost and with fewer operational complications. O&G. NCA has so far been known to the industry to offer services for well abandonment and decommissioning. Why now the focus on enhanced production? PL. Through its plug and abandonment (P&A) and decommissioning activities, NCA has developed a range of innovative and very cost efficient solutions for plugging and abandoning wells. Traditionally these services have been utilised in the decommissioning phase and not considered an investment as such. However, with the increasing focus on field rejuvenation we realized that cost efficient plugging and removal of wells can actually add a lot of value to our clients in terms of saved cost and new opportunities. O&G. How do you think that the Middle East market for Conductor Slot Recovery will develop? PL. We believe that this market will see a significant growth in the coming years. We have already secured the first contracts with some of the leading operators in the region, and see that others are monitoring our achievements. With the fluctuating oil prices we strongly believe that the Conductor Slot Recovery solution will offer a professional, low cost, simple solution for enhancing production. „

Per Lund, VP of business development and sales at Norse Cutting & Abandonment (NCA) holds a msc of naval architecture from university of Trondheim. he joined NCA in 1999 and has since had a number of key positions in the company. he has also played a key role in numerous subsea cutting, abandonment and decommissioning projects in the north sea, Africa and gulf of Mexico.

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Today Kuwait Oil Company is a giant on the global energy stage with plans to dramatically increase its output by 2020. Nineteen years ago however the company was on its knees following the burning of its oil fields during the 1990 Iraq invasion. Khaled Al-Sumaiti, exploration chief at KOC, describes what the future now holds for the company following its remarkable recovery.

EW can forget the dramatic images of burning oil fields in Kuwait when Iraq invaded the country in 1990. For the Kuwait Oil Company the effects of the war were devastating – hundreds of the country’s oil wells were set ablaze resulting in an economic and environmental catastrophe for the country. Nineteen years on however, having undergone a remarkable recovery, the company is going strong, with an ambitious strategy to fully unlock the potential of Kuwait’s hydrocarbon reserves by 2020. Khaled Al-Sumaiti, Deputy Managing Director for KOC’s Exploration and Production Development Directorate, reflects the company’s determination to succeed against all odds when he outlines these plans: “Our goal is to face new plays and prospects in deeper settings. We plan to identify and map stratigraphic and combination traps, and explore unconventional reserves. This will involve exploring super deep targets and pushing the limits of technology and logistics in order to achieve this.” KOC was formed in 1934 by the Anglo-Persian Oil Company, now known as the British Petroleum Company, and first found oil in commercial quantities in the Burgan field in 1938. It is state owned by the Kuwait Petroleum Corporation, which was established in 1980 to bring all state owned oil companies in Kuwait under one entity. The company received a major boost in 2005 when it discovered super light crude oil in the Sabriya field reflecting its successful exploration strategy and abilities. It now hopes to emulate this success through the discovery of new oil fields by speeding up the time cycle between the prospect and


production phases involved. Describing the company’s efforts to reach this goal, Al-Sumaiti says: “The Exploration Group has minimised the time cycle from prospect to production through a holistic approach of exploratory and delineation drilling and production facilities. It is using expertise and technology to identify, evaluate and drill new opportunities in complex geological targets.” This he says will be achieved by “undertaking integrated studies and creating static and dynamic models at exploration delineating stages to grip the uncertainties associated with new geological opportunities as well as preparing a sound platform for development of fields.” Continuous investment in the latest technology is also a keystone of the company’s exploration strategy, Al-Sumaiti went on to say. Like all oil and gas companies, KOC is using sophisticated 3D modeling and digital oil field techniques to increase its exploration abilities: “State of the art technologies in geological and geophysical data acquisition, interpretation and geomodeling are used on a routine basis,” says Al-Sumaiti. “Real-time data monitoring and execution, including mud logging and LWD, have been introduced for new exploration wells,” he went on to say. To boost export of the oil it discovers the company recently announced the start of its Oil Export Facilities Project, which aims to help increase KOC production and export capacity by up to three million barrels per day by the end of 2010. Carried out in conjunction with Hyundai Heavy Industries Company, the project will include constructing 19 tanks in south and north farms, laying down new gravity pipelines, supplying

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Oil fields burning in Kuwait

and installing new pumps and laying down four marine pipelines. Work on the project will take place in four phases and in the first phase five tanks will be operated in the north farm, which will increase the company’s storage capacity by 3.4 million barrels and export capacity by 0.32 million barrels per day. As well as identifying and exporting new sources of oil the company is also keen to increase its gas exploration activities. In 2005 gas was discovered in the deep Jurassic reservoirs at several fields across the country including Rahiya, Mutriba and Um Niga fulfilling the country’s goal of being self sufficient in gas for use in power generation. Al-Sumaiti says this discovery represented a major milestone for KOC “The discovery in SA-153 opened the avenues for exploring the North Kuwait Jurassic interval. A long-term testing of the well through EPF (early production facility) enabled us to assess production sustainability and reservoir behaviours. Subsequent wells confirmed the value of the test. Similarly UN-01 was the first commercial gas/condensate discovery in Kuwait within Jurassic formations and this has boosted the gas exploration in the country.” He goes on to say that the discovery allowed the country to fulfil a long-held goal of becoming self-sufficient in gas which could then be used for power generation: “The results allowed KOC to change its strategy towards gas exploration and since then all steps are at hand to deliver Khaled Al-Sumaiti gas to the nation.” KOC now hopes to discover further sources of gas in Jurassic formations: “The potential exists in Jurassic and deeper Paleozoic reservoirs which have the promise to offer further discoveries,” says Al-Sumaiti. “The entire North Kuwait region offers the potential for further discoveries.” Earlier this year it announced it had officially commenced production of free gas from gas fields discovered in North Kuwait and that gas production from the country was expected to reach 175 milion cubic feet per day. The company has also signed a contract with the


Italian company, Snamprogetti to build a gas booster station in the South East area of Kuwait which will be the main source of clean energy in the country and will produce 500 million cubic feet of gas a day. While KOC has ambitious targets for increasing exploration and discovering further sources of gas, like all energy companies it faces significant challenges from rising costs, fluctuating oil prices and a shortage of skilled manpower. In the fight to recruit sufficient staff Middle East based oil and gas companies have been forced to raise employee salaries. Coupled with the rising cost of materials for both upstream and downstream activities and the pressure to dig deeper for more oil, the industry is operating in difficult conditions. Listing what exploration costs have increased, Al-Sumaiti, says: “Exploration of unconventional traps requires specalised studies, man and material costs in the industry have gone up, there are deeper targets and HPHT environments coupled with H2S require specialised equipment and hence has additional costs.” These factors could pose challenges to KOC’s 2020 Strategy, which has the theme, ‘Unlocking the Potential of KOC’. The 2020 Strategy has seven main objectives: To develop Kuwait’s hydrocarbon reserves, infrastructure and operational capability; to maximize reserves using exploration, integrated reservoir evaluation and technology; increase production of gas resources; ensure the health and safety of its people; be an early adopter of the latest technologies; develop a skilled, competent and motivated workforce; be a performance-based and customer-focused organisation. Al-Sumaiti says he does not believe that rising costs and increased pressure to increase exploration activities will jeapordise the company’s 2020 Strategy because the company believes in taking a long-term approach and not reacting in the short-term to market conditions. “KOC is working according to a long-term strategy,” says Al-Sumaiti. “This is updated every fi ve years so we are not reacting to the market.” Another major part of KOC’s strategy is to ensure that it operates in an environmentally friendly way to minimise the impact its exploration activities on the environment. Al-Sumaiti says the company will achieve this through a combination of factors: “Minimised drilling footprint, proper handling of the drilling mud and limited flaring during tests.” He is aware that the road ahead for KOC’s 2020 Strategy will be fraught with challenges on many different levels. However if the company’s resilience in the face of war is anything to go by, its success will be assured. „

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Metso Automation’s Jari Kirmanen lifts the lid on new developments and technologies in process control values.



O&G. What about safety valves? JK. Safety standards IEC 60508/61511 and ISA 84 are nowadays widely used in the oil and gas industry. Third party certifications of well-known authorities, such as TUV or Lloyds, are used to verify the reliability level of safety devices and valves. Due to some catastrophic accidents in the process industry, the importance of safety systems and SIL-rated devices including valve controllers has even increased. The main driver for the development is simply to verify the safety function availability whenever it is needed. The standards require safety valve operation to be verified at certain time intervals; and to do this, valve vendors have developed automatic partial stroking devices, which make it possible to carry out valve testing during runtime and provide the opportunity to improve probability on demand value. Neles ValvGuard was the first intelligent safety valve controller designed for ESD services. Intelligent safety controllers, like positioners, can be integrated into safety and automation systems, which simplifies the control and diagnosis of safety devices. Metal-seated ball valves with piston-type actuators equipped with an intelligent safety valve controller have proven to be the most reliable solution for safety applications.

O&G. What are the key trends in technology development that you see in process control valves for the oil and gas industry? Jari Kirmanen. The biggest revolution in control valve technology occurred when intelligent, digital positioners entered the market during O&G. You mentioned online advanced diagnostics. What do you mean the 1990s. Since then, valves equipped with intelligent positioners, by that? like the Neles ND9000, have become the de facto solution for process JK. Offline diagnostics mean that the diagnoses are only carried out control. In addition to easier commissioning and high performance, during process off-time, which is not the most efficient method. It may the best of these intelligent positioners provide on-line diagnostic create unnecessary maintenance activities or lack of spare parts because features. analysis is only done during a shutdown period. By contrast, with the Most installed intelligent positioners use HART-technology, but help of online diagnostics, valve performance can be detected during recently fieldbuses have established a firm foothold in the oil and process on-time. This provides opportunities to decide on maintenance gas industry. Intelligent control valves provide more solid integration activities prior to the shutdown period. One of the biggest advantages of of valves into the DCS, but they do require more training than conpredictive maintenance using online diagnostics is that you can optimise ventional technology. While this clearly presents a challenge, it also maintenance activities and sometimes avoid unnecessary maintenance. offers an opportunity to gain major benefits. Hence major oil and gas Jari Kirmanen is Product Manager of Neles Product companies have added intelliLine at Metso Automation. Kirmanen, who holds a gent technology to their existing MSc in Applied Physics, has 14 years of experience valve strategies. in the valve business. During his career, he has The ever-increasing emphadeveloped expertise in valve sizing, noise and sis on environmental issues has meant that oil and gas companies control technologies together with applications. He are paying increased attention to is Finnish national representative on the International emissions coming from control Standardisation Committee for control valves (IEC SC valves. This is one of the trends 65B/WG9), and a member of the ISA. that make rotary valves more attractive, because rotary valves typically have lower gland emissions than globe valves. Valve vendors The best technology available to gain the benefits of online diare required to develop products that can handle demanding fluids, agnostics is FDT/DTM. This technology is supported by various types because more heavy oil is now being converted to valuable products of company – from valve and instrument vendors to DCS companies and the sand content of crude is higher. New innovations, which comand end users. FDT/DTM provides an open technology, which enables bine conventional globe and rotary valve technologies, have been users to take advantage of all the benefits of demanding diagnostic launched. Average line sizes have increased, and this factor together features for complex devices like process control, safety and autowith extreme temperatures, has made metal-seated butterfly valves mated on/off valves, and all this can be integrated in the vendor’s more attractive, for example in the LNG industry in the Middle East. independent asset management systems. „


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Drilling for glory Qatargas has embarked on an ambitious expansion plan to help meet growing demand for its products. And having recently completed the drilling of 10 new wells it is one step closer to meeting its targets. O&G reports.

urging global demand for alternative energy sources has created lucrative opportunities for Qatargas as a producer of liquefied natural gas (LNG). The company, which recently signed a deal with PetroChina to provide the country with LNG for the next 25 years, has embarked on an ambitious expansion strategy to increase production from 10million tonnes of LNG to 42millon tonnes. Increasing its drilling capacity is a major part of its strategy and the company has recently completed the drilling of 10 wells at its offshore Well Head Platform-8 as part of its Qatargas 3 and Qatargas 4 expansion projects. Qatargas 4 is the newest of the company’s LNG projects to be designed and constructed. Like Qatargas 3 it involves the construction of a new LNG train with a production capacity of 7.8million tonnes per year. The plant’s infrastructure consists of three unmanned platforms, up to 33 wells and two subsea pipelines – all of which are shared with Qatargas 3. Qatargas 4 will produce 1.4billion standard cubic feet of gas per day, supplying the US and European markets. The LNG produced there will be transported on a fleet of nine ships to be constructed in Korean shipyards. Following the completion of the 10 wells at Well Head Platform-8, deputy CEO for the Qatargas 3 and Qatargas 4 joint asset development team, Ken Marnoch, said: “I am very proud of everyone in the teams offshore and onshore for safely delivering the wells on WHP-8. The team set a great example of what is possible – on safety, on quality and on performance. I wish the crew continued success as the rig moves on to the next challenge.” Gas from Qatargas 4 will be transported on a fleet of ships each with a capacity of approximately 210,000 cubic meters with the first cargo expected to be delivered this year. Gas will be delivered to the US Gulf of Mexico receiving terminals. At full capacity it will provide around one billion cubic feet of gas per day for 25 years to the US market. Shareholders in Qatargas 3 include Mitsui and ConocoPhilips and the shareholders in Qatargas 4 are Qatar Petroleum and Royal Dutch Shell. The drilling of the remaining two wellheads for Qatargas 3 and Qatargas 4 is ongoing and is expected to be completed in 2009. With LNG consumption expected to rise by 10 percent year on year for the next 10 years hopes are high for Qatargas, already one of the world’s biggest suppliers of LNG. It already ships its products to Japan and Spain and plans to reach more markets across three continents within the next decade.



The company’s plans to reach markets in Europe and the US are ground breaking because these markets, which have not traditionally been considered by Middle East suppliers due to their proximity to more ‘local’ gas fields. These are impressive achievements for a company that was only set up in 1984. Its main offshore facilities were commissioned in 1996 and the company has since drilled 20 production wells to supply 1,600 million standard cubic feet of raw natural gas per day. With drilling for the next 10 wells at Qatargas 3 and Qatargas 4 now complete, it won’t be long before the company reaches its ambitious goals and seeks new targets for the future. „

ABOUT THE QATARGAS OPERATIONS • The Qatargas offshore production, separation and treatment facilities on the North Field are located about 80 kilometres north-east of Qatar’s mainland. • Twenty production wells have been drilled and completed to supply 1,600 million standard cubic feet (45 million cubic metres) of raw natural gas per day from the field’s reservoir, underneath the seabed. • The processed gas is transferred to shore with the associated condensate via a single 32-inch sub-sea pipeline, where it becomes the feedstock for the onshore LNG plant. • Commissioned in 1996, the main Qatargas offshore facilities include: - Three wellhead platforms, two of which are located adjacent to the production facilities and one remote platform located about five kilometres away. - The process and utilities platform, ‘North Field Bravo’ which is the heart of the offshore facilities complex. This three-deck platform includes two gas and condensate trains and the required utilities facilities. - A process platform for processing the gas and condensate produced from the remote wellhead platform (the third train). - Living quarters that provide accommodation, recreational and office facilities for up to 100 people. - A flare tower and two bridge-support platforms. • The onshore LNG plant occupies a site within Ras Laffan Industrial City on a plot of land 3.7 square kilometres in area. The onshore plant consists of three LNG trains. Each of the trains is 300 metres long and the trains process the natural gas into the export product known as Liquefied Natural Gas or LNG. • The current capacity of the trains is 10 million tonnes per annum (mtpa) of LNG. This is the result of a successful debottlenecking project completed in 2005. The original nameplate capacity of the trains was two mtpa each.

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Grand plans New discoveries in Egypt and an investment in lucrative gas production facilities in Iraq mean Dana Gas is on a winning streak. We report on what the future holds for one of the Middle East’s first private sector natural gas companies. HILE many companies around the world are tightening their belts amidst difficult financial conditions, Dana Gas has embarked on a five-year growth plan. The company has been bolstered by new discoveries in its Egyptian gas fields and by a 50% increase in operated gas production in the Kurdistan region of Iraq. Earlier this year it reported a surge in profits – posting US$245m for the first nine months of 2008 with a 20% increase in gross profit and an 18% increase in net profit, compared to the same period last year. In November it announced that gas production from operations in Egypt and the Kurdistan region of Iraq had increased by over 50%, reaching over 40,000 barrels of oil per day. Dana Gas and its partner Crescent Petroleum have invested around US$650m in natural gas production, processing and transportation in Kurdistan, producing gas that will



be supplied to new power plants being constructed near to Erbil and Sulaimaniya, which will eventually provide electricity to over four million Iraqis. It completed the first phase of the project in a record 15 months and a 180-kilometre gasline has been installed across a mountain terrain. The initial primary phase of gas production is at 75 million cubic feet per day and will rise in stages to 300 million cubic feet per day within the first half of this year as the power plants became fully operational. Ahmed Al-Arbeed, Upstream Executive Director for Dana Gas described the project as a “historical milestone”: “We are very proud of this historical milestone, as the first companies from the Middle East to invest in Iraq’s oil and gas sector. We wish to thank the leadership and co-operation shown by the KRG and also all our staff, our contractors and local officials for their support in this remarkable joint effort.”

The company also made an important discovery earlier this year of gas at Al Tawil in the Nile Delta in Egypt, which has the potential to produce around 1000 barrels of condensate gas per day. Al Arbeed said ongoing drilling activities would be taking place throughout the year at the site to maximise its potential. “We are very excited about the results in Al Tawil-1, as they significantly enhance the economics of the ongoing drilling project. Additional seismic interpretation and drilling activities are being planned for the remainder of 2008 and throughout 2009 to increase the proven reserves and production rates as part of the exploration and development plans for the area. This is an important discovery which proves the high potential of the Qawasim formation, resulting in significant reserves addition to the company. The exploration programme in Egypt has been very successful so far, and we are looking forward to more discoveries before the year’s end.” The discovery was particularly significant, as the site yielded more gas than Dana’s existing producing wells and will increase the company’s existing liquid gas production from Egypt.

“We hope to build on the achievements of Dana Gas in the coming year with more upstream activity, including additional exploration and production from our concessions” These developments have enabled the company to lay out a five year plan that will see it increase its upstream activity and increase the yield from its existing sites. Describing the company’s goals, Rashid Al Jarwan, General Manager of Dana Gas, said: “We hope to build on the achievements of Dana Gas in the coming year with more upstream activity, including additional exploration and production from our concessions.” He went on to say that the five-year growth plan would include a combination of targeted investments, acquisitions and internal growth through new exploration and development in Egypt and the UAE. „

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Petrowell ATE:9jan08



Page 78


Intelligent communications Radio Frequency Identification (RFID) technology is used by a whole host of industries to accurately track merchandise across land, sea and air. But can RFID be adapted for oil companies’ drilling activities? Petrowell’s Paul Day has the answer.


ruly remote communication with downhole tools has been a hot topic for over 20 years in our industry. We have seen sonic, acoustic, electro-magnetic, microwave and a host of pulsed telemetry systems come to the fore. However, it is for others to argue the merits of these various systems. At Petrowell we identified RFID as a technology that could be readily adapted to our industry needs. The technology is simple and straightforward; over seven billion RFID tags are in use today across a host of sectors, the result of huge investments by other industries over the course of the last 40 years. The challenge for our industry is the application of this technology. Simple tracking of assets such as drill pipes is no great leap, mirroring as it does tracking systems used from freight movement to supermarket inventory control.

Transmit If one can put an RFID tag in proximity to a reader, it is possible to transmit instructions via the reader to the device in question. Petrowell first demonstrated this in 2005 where we opened and closed a simple well clean up circu-

Paul Day is the Business Development Director of Petrowell Ltd. A graduate of Aberdeen University, Day has worked in the industry for 23 years and for the last 18 years in primarily cased and open hole completions.

FRAC and stimulation sleeves, operate open hole selective sealing and flow control systems as well as a host of drilling tools and integrated system applications. The mechanical challenges of the tools to be operated do not change, one still needs a reliable packer that will set and test, a sleeve that will open and close reliably; these are at least the same challenges that the industry has faced from day one.

at tool level and not constrained by the operating environment. In simple terms, the reliability of the technology as a means to communicate with downhole devices is superior to other systems available. This is in no small part due to the fact that other industries have spent billions of dollars achieving this reliability. The oil industry’s focus need only be the technology’s application, a sufficiently large challenge.


“The reliability of the technology as a means to communicate with downhole devices is superior to other systems available” lation sleeve using RFID coded tags. The tags were dropped into the drill pipe, circulated downhole where these coded instructions, to open or close, were picked up by the antennae of the circulation sleeve. RFID coded tags are now being used to set completion packers, operate completion mounted flow control valves, open and close


RFID is not a panacea for all downhole communications; it does not have the bandwidth of say microwave technologies – it requires close proximity of tag and reader but it does offer some distinct advantages. Signal attenuation, the bugbear of sonic, acoustic and EM type technologies is virtually a non issue with RFID and such attenuation issues can be managed

The tags used transmit simple command codes to the tool and it is on board software and systems that translate these simple commands to more sophisticated actions thereafter. The communication with the downhole tool requires a signal jump measured in inches and not the thousands of feet of alternative methods. It is entirely possible to convert all hydraulic or electrically based completion and drilling tools to RFID operation, essentially every tool and system has the capability of being a remote operated intelligent tool or system. RFID as used in downhole applications was first pioneered by the Marathon Oil Company but Petrowell holds a worldwide licence for its application in downhole completions systems. 

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“We must find oil and to do that we are doubling our computing capability every year”

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He controls a multibillion-euro IT budget and co-ordinates the activities of 96,000 employees worldwide. But for Patrick Héreng, CIO of Total, the biggest challenge is yet to come as the oil giant prepares to upgrade its entire IT infrastructure. He meets Diana Milne to discuss the task ahead and the threats his organisation faces from cyber criminals.


here is only one way for Patrick Héreng to convey the complexity of the operation he oversees, and that is through numbers. When I ask him at the start of our interview to give me some idea of the scale of Total’s IT systems, he sums it up with the following vital statistics: “The global IT budget first of all is around €1.2 billion. The number of internal IT staff is around 2200. We are managing 1500 physical sites and nearly 80,000 workstations. We probably use more than 2000 terabytes a minute.” These numbers should come as no surprise. After all, as CIO of Total, Héreng manages the IT operations of one of the world’s largest oil and gas companies with activities in over 130 countries and 96,000 employees worldwide. But they are, nonetheless, mind-blowing – and set to become more so since the launch of Perspective 2008, a colossal project which will see the company replace its entire IT infrastructure, upgrading all components from workstations to network security. The scale of Total’s IT operation is due not only to the size of the company and its workforce but to the complexity of its oil and gas exploration and refining activities, which rely heavily on technology for their success. To support these activities the company’s computing power expanded 17-fold in the past five years – an increase which reflects the growing pressure on Total to source new oil supplies in a highly competitive global market. It uses highly complex technical computing methods such as digital oil field and geophysical analysis to source oil, and this year it become the global leader in scientific computing power after acquiring the high performance SGI Altix ICE+ computer from Silicon Graphics, which is capable of making 123 trillion calculations a second. “The most complex IT system is the technical computing that is used for E&P (exploration and production),” says Héreng. “An example of that is geophysical analysis such as reservoir modelling to find the oil and optimise the ways of producing it. Digital oil field is another complex IT system. We must find oil and to do that we are doubling our computing capability every year.” This system creates enormous amounts of data and Héreng says the company has reached around 1200 terabytes of storage capacity for technical computing alone. Equally complex are the company’s supply chain and logistics operations, which are supported with solutions from SAP and Microsoft. Describing the scale of the operation, Héreng says: “We have complex IT systems for supply chain, logistics and CRM as well as for petrochemical, refining and marketing activities. These systems are mainly based on global SAP. There are now 11 refineries in 10 countries and 10,000 service

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we can’t find the level of service needed in telecoms – for instance in Africa and Asia – and that means we have to manage internally, locally, or we accept those limitations.” Given the scale of Total’s global activities, the company operates within a decentralised ‘federated’ structure which means operations are managed at business unit level. Total’s IT strategy and policies, however, are governed by a central IT department with separate IT departments within each business unit. The information systems of each business unit are supported by a common global architecture. This structure, says Héreng, creates its own

“I have to face a paradox which is not simple to solve. We have to open the system but at the same time secure the system more” challenges, particularly when it comes to decision-making. “It’s not so easy to make decisions in this federated IT organisation because the decisions must be accepted by every business unit. The current governance model is a mix between a decentralised organisation stations in Europe. That requires a complex information which reinforces the alignment between system, especially for the supply chain from the refinIT and the business and the globalised ery to the service station. And we have millions of cusarchitecture which optimises the cost of tomers every day in the service stations so the CRM is the information system.” complex there also,” he goes on to say. The system will be put to the ultimate While Total’s operations require the support of cutting edge IT solutest during the upgrading of Total’s IT infrastructure for Perspective 2008, tions, the delivery of that technology is often compromised by the remote which aims to create uniform IT services across the organisation. The proand often hostile environmental conditions that it operates in. Total’s E&P ject has been two years in the planning and so far the first phase – deactivities span 40 countries, with production in 30 of those, includploying telephony over IP for 2000 employees – has been ing remote locations in Angola, the North Sea, Venezuela and the completed. Héreng admits that the federated structure of the Democratic Republic of Congo. company’s IT operations created challenges durHéreng describes how he is often required to ing the planning stages of the project. deploy IT solutions in an environment where no “We have a federated organisation but now infrastructure to support the technology exists, we must align the IT processes of everyone in the particularly on offshore oil platforms where esgroup. This means, for instance, that if we want to tablishing a telecommunications network poses deliver the same level of services to E&P and to our a major challenge. specialised chemical subsidiaries, we TOTAL IN NUMBERS “Usually we are located in the middle have to align the way we support users of nowhere and if we look at the infrastrucand the way we operate servers. That’s • Fourth largest publicly-traded integrated international oil ture in those remote areas, there is nothing. one of the main challenges and we face a and gas company in the world Often there is no telecommunications so we lot of resistance to change inside the IT • Second largest capitalisation on the Euronext Paris and have to create telecoms links using differdepartments. Add to this the fact that we the Euro zone: €136.1 billion on December 31, 2007 ent solutions, mainly satellite equipment. have to co-ordinate the deployment • Operations in more than 130 countries Sometimes we deploy marine offshore opacross 130 countries and it’s a very chal• Exploration and production operations in more than 40 tical fibres. That is one of the problems – the lenging project.” countries limitations we face because of the platHe hopes however that Perspective • Producer of oil or gas in 30 countries forms and because in a lot of the countries 2008 will help to address some of these • Approximately 540,000 French individual shareholders Patrick Héreng, 51, was appointed CIO of Total in 2006. He is a graduate of the French Institut Superieur de l’Electronique du Nord (ISEN), joining the Group in 1998 as Chief Information Officer for the refining and marketing division. He began his career with a computer manufacturer and then with an information and telecommunication consulting company, later becoming the CIO of a large French financial institution.

• 2007 sales: €158.7 billion 82

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challenges by providing uniform IT services across Total’s global business units. The project includes upgrading employees’ workstations to facilitate better collaboration across the different departments using Microsoft Vista technology. “The goal is to deliver for everywhere the same level of services. We will deploy collaborative workstations and we will deliver to the users the tools to improve collaboration such as instant messaging from computer to computer and integration between the workstation and voice communication. We will provide unified communications such as a unified email system and Web 2.0 capability to provide social networking capabilities to improve collaboration inside the organisation,” explains Héreng. But while facilitating better collaboration between Total’s employees will be a major benefit of Perspective 2008, it is not the project’s main aim. That, says Héreng, is to improve Total’s IT security. Protecting Total’s networks is one of the most challenging parts of Héreng’s job – particularly given the huge amounts of highly sensitive data it processes daily and the increased security threats faced by oil companies from international cyber criminals. This, he says, clashes with the organisation’s need to improve accessibility to its systems for remote Total employees and customers. “I have to face a paradox which is not simple to solve. We have to open the system but at the same time secure the system more. Because of the extended enterprise we have to link our information system to suppliers and customers for billing or procurement purposes. Our users also need to access the system from PDAs or non-Total workstations and they want to do that everywhere in the world, from Asia and Central Africa to the USA or France. At the same time, we have to secure the system. We are not as attacked as banks but there are risks. We have to protect our knowledge and our data and that’s the reason we increase continually the level of security in the information system. It’s the main

TOTAL AT A GLANCE With operations in more than 130 countries, Total engages in all aspects of the petroleum industry, including upstream operations (oil and gas exploration, development and production, LNG) and downstream operations (refining, marketing and the trading and shipping of crude oil and petroleum products). Total also produces base chemicals (petrochemicals and fertilisers) and chemicals for the industrial and consumer markets (rubber processing, adhesives, resins and electroplating). In addition, the company has interests in the coal mining and power generation sectors. Total is helping to secure the future of energy through its commitment to developing renewable energies, such as photovoltaic power and marine energy, and second-generation biofuels.


reason we launched the Perspective 2008 programme – to be able to face the security threat in the future.” Perspective 2008 will see Total completely overhaul its security systems, extending its current perimeter limit security and integrating it throughout the system. “We will have embedded security inside the information system, inside the network, inside the LAN and inside the workstations and data centres,” says Héreng. “We will deploy a new ID management system which will allow us to have better management of the rights given to employees, contractors and partners accessing the information system.” He goes on to say that under the new system data will be classified according to the level of protection it requires rather than providing uniform security to all parts of the organisation. A variety of security solutions will be provided by several vendors, which will be integrated by IBM. Héreng is remarkably calm about the mammoth task that lies ahead of him, claiming he relishes the challenge of managing IT within what is probably one of the world’s most complex operations. “I enjoy my job although it’s quite complex. One of the major advantages is to be working for a global company. That’s one of the pleasures I have every day,” he says. I ask Héreng whether Total’s management places a high priority on IT. “No,” he replies. “The high priority for Total is to find oil to renew the resource.” But with technology playing an increasingly crucial role in enabling oil companies to find new oil sources and protect valuable data, Héreng’s role is pivotal to the success Total enjoys within a highly competitive global market. n

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Staying in touch Effective communications are paramount for oil and gas workers, especially when energy companies’ operations span the globe in the pursuit of hydrocarbons. Annamaria Raviola, of SELEX Communications, offers an insight into the business-critical solutions available.


il and gas operators require fully integrated information and communications solutions that are both reliable and robust, and that can operate in extreme and hazardous environments and during emergencies. At SELEX Communications we leverage on our know-how, experience and product-portfolio to supply the oil and gas industry with turnkey communication solutions that integrate a number of communication technologies including TETRA, DMR, and next generation wireless broadband radio to realise multi-technology network solutions. Our solutions address both the ‘traditional’ operational requirement for instant and crystal-clear voice communications and the need for a communication solution that is integrated with a company’s control and monitoring systems.

“PERSEUS is SELEX Communications’ complete, interoperable, modular and scalable communication solution” PERSEUS is SELEX Communications’ complete, interoperable, modular and scalable communication solution. PERSEUS is comprised of a number of communication technologies, each one of which was developed as a response to the needs of professional users. PERSEUS’ backbone is comprised of a wide array of information and communication solutions (Fibre optics, radio links, WiMAX, and satellite). It can be easily integrated with existing civil and private systems to ensure interconnection and interoperability.

The right message TETRA (acronym for Terrestrial Trunked Radio) is the communication standard of choice


mented; only conference calls are possible but with complex usage procedures and with performances not satisfying the emergency organisation’s and police force’s needs. The need for terminals that are safe to operate in potentially explosive environments is one that is intrinsic to the industry. SELEX Communications’ PUMAT3Ex handheld terminal has been designed to be ‘intrinsically safe’ according to ATEX standards for operations in potentially explosive environments. PUMA-T3Ex, as part of Puma-T3 family, can also operate as a conventional FM radio and allows users unique-in-the-market features to communicate with both analogue and TETRA equipment. Engineered for professional users, PUMA-T3Ex is extremely sturdy, has a large keyboard that is easy to use even when wearing gloves, and is visible in critical light conditions.

New ideas

for those organisations or groups that need immediate, reliable and secure communications. The standard was developed by the European Telecommunication Standardisation Institute (ETSI) and is a European response to the communications demands of organisations that need immediate, reliable, and secure mobile communications such as public safety agencies, emergency services, government, transportation companies, utility companies and the military. TETRA is several times more efficient than traditional analogue and digital radio systems because it maximises network capacity by efficiently re-utilising shared radio resources, optimally distributes available radio resources according to demand, and allows multiple user channels to be carried on a single radio bearer. This makes efficient use of the frequency spectrum, allows for the efficient transmission of images and video at speeds up to 400 percent faster than in analogue or digital proprietary systems, and offers advanced Virtual Private Network (VPN) capabilities. TETRA also allows for group and broadcast communications where a user (or the dispatcher) can communicate not only with another user, but with a group of users. In a GSM network group communications are not imple-

A recent development of particular importance to the oil and gas sector is represented by SCADA applications for the remote monitoring and management of equipment. SELEX Communications offers solutions engineered to allow for the connectivity of external devices to related peers for monitoring and control applications. Designed for fixed installation, they connect to SCADA sensors and collect data from the field, and remotely manage and control equipment and video surveillance systems for multiple geographical voice and data networks. WiNN – SCADA is SELEX Communications’ solution. Main features include the ability to control external devices (e.g. sensors and actuators), to interface with WiMAX, Wi-Fi, GPRS and Bluetooth, to route IP data between local WLAN/Bluetooth and geographical networks, to manage local digital video cameras, and remote configuration and software downloading via web or SNMP. n Annamaria Raviola is SVP of Marketing and Business Development for SELEX Communications, a Finmeccanica Company. SELEX Communications is a global supplier of advanced communication, navigation and identification solutions to protect communities and critical national infrastructure. The company delivers advanced, secure, integrated and interoperable networked solutions for government, military and civil applications.

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Oilfields of the

FUTURE – today Three industry experts debate the tangible benefits of digital oilfield technologies. The panel includes Rohde & Schwarz’s Eshwarahally S. Vikas, Matthew Owen of BT Global Services and Jens H. Schroeder of m:pro IT Consult. O&G. Oil & gas producers globally are currently investing heavily in ICT to develop their digital oilfield initiatives. How will this investment translate to increased production rates and greater operational efficiency? Matthew Owen. The goal of digital oilfield initiatives is to improve the economics of production and to turn a producing asset into an efficient ‘hydrocarbon factory’ where inputs, processes and outputs are managed and optimised on a real time ‘dashboard’. This requires adoption of new working practices and collaboration tools, such as audio and video conferencing and unified communications (UC). The result is accelerated and improved decision making as experts can access critical data and global teams can convene meetings instantly, regardless of location. Where digital oilfields have been fully implemented IOCs (international oil companies) report recovery, production and efficiency gains into double figures. Jens H. Schroeder. The investments are essential and spot on in this distributed business. For me the biggest gains come from good decisions and the required collaboration to reach, communicate and implement them. This means that the key stakeholders and experts view, exchange and react on consistent and reliable information to known quality. This follows the objective for the right information to the right person at the right place at the right time in no time – the right-time information. Eshwarahally S. Vikas. Increased production rates go hand in hand with increased operational efficiency. Modern ICT solutions, and in particular


digital trunked radio systems, offer a far more efficient usage of available spectrum and provide the user with enhanced operational safety as well as the ability to replace multiple legacy systems with one, more integrated, solution. Examples being voice and data transmission, SCADA, fax, SDS and emails running via one safety-oriented network.

“Good decisions rely on accurate supporting data being accessible by the key people at the right time” Matthew Owen O&G. What are the main challenges faced by O&G companies when integrating new technologies and software into their existing ICT infrastructure? MO. A major challenge is the legacy of O&G companies’ historical ‘DIY’ approach to ICT which spawned applications, protocols and networks that won’t ‘talk’ to each other, multiplying the cost and complexity of IT deployments. Now, XML based, ‘SOA’ solutions enable data to be combined from multiple sources and manipulated in whichever application is favoured by the client. In BT’s experience, the most effective way to exploit the potential of SOA is to ensure that the converged IT environment provides a solid foundation for the application layers. We call this the ‘Services Oriented

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Infrastructure’ and we produce roadmaps for our clients ensuring the journey to convergence is smooth and cost effective. JHS. Network and telecommunication companies have done an excellent job bringing together the different devices such as phones, computers, instrumentation and the multiple communication means such as cable, satellite and mobile networks. This facilitates the exchange of data – today relatively fast and reliable. In my opinion, one of the main challenges is still on the next level, when data are turned into information. What is the right-time information? Specific technologies and software applications individually have a big contribution. However, integration at this level is required to get to right-time information and enable meaningful collaboration. A common answer to questions about challenges in new technologies and new software is ‘The Human Factor’. This answer will stay valid until we really pay attention or are more ready for it. How can we really support the work of the individual? Obviously not by sending more data, more emails, more invites to meetings and teleconferences, or more training sessions for a new and great software app. ESV. Systems full compatibility is one of the major challenges faced by the oil and gas companies. It is therefore critical that a customer seeks a vendor that actively displays both the capability and the proven track record of successfully integrating their newer products into existing legacy systems. The importance of the preparation and specifically, the transfer of

Jens H. Schroeder is President/CEO of m:pro IT Consult, a project services and software products company that enables petroleum refining, petrochemical and other industries to achieve total integration of information sources and applications. Schroeder has over 20 years of experience in the execution of international projects, IT consulting and software development.

knowledge, leading up to this point cannot be stressed enough. Prospective users of new systems should ensure that their vendors have a robust and capable training concept, backed up with the right personnel, to ensure that the transfer of skills and qualifications of staff is effectively carried out prior to the commencement of operations.

“The biggest gains come from good decisions and the required collaboration to reach, communicate and implement them” Jens H. Schroeder O&G. How do your solutions help producers better gather and analyse oilfield information? MO. Beyond the core networked IT environment, BT has focused innovation on two key aspects of data collaboration: 3D seismic graphics and realtime process monitoring: BT Graphics Acceleration Technology achieves over 99 percent visually lossless compression, enabling geoscientists or engineers to remotely view, manipulate and collaborate on complex 3D seismic or CAD models from anywhere, using whatever communications are available.

Matthew Owen is Head of Marketing, Oil & Gas, at BT Global Services. Owen has been with BT since 1998, focused on innovation and driving new networked IT services solutions into industries including oil and gas. His aim is to move the BT brand beyond its roots in communications to be recognised as a global IT services partner to oil and gas companies.

Eshwarahally S. Vikas MD, is Head of Sales and Marketing of Rohde & Schwarz products in the Middle East & Africa. He has been with the company for over 12 years and has worked extensively in the Middle East and Africa. He is an engineer by profession and has a MBA degree.

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Then we have BT Real Time Data Exchange (“RTX”). Historically, third party monitoring of production processes and machinery to provide condition-based maintenance needed separate links between each supplier’s IT network and each item being monitored, running into hundreds of links per asset. BT RTX simplifies this to a single secure link into the BT network, with a ‘drag and drop’ interface to assign data streams to the appropriate, securely authenticated suppliers.

opera? The conductor has not yet arrived but the orchestra is already seated. Each professional and skilled musician plays essential notes on his instrument. The dissonance strikes you. The conductor enters the hall and a moment of silence relaxes your ear. The programme begins and you are overwhelmed by harmony and precision. Coming back to the question, you need a conductor and for the business you may even require many orchestras simultaneously to play in harmony. You need an integration platform.

JHS. In our solution/integration platform, we concentrate on three important areas:

ESV. Effective communications and data transfer play a pivotal role in ensuring accurate oilfield decision making. This is not only valid in normal daily operations but also in emergency situations as it:

• Smarter data management and integration. Here we collect, distribute, abstract, aggregate, correlate and translate data from all sources into information. The objective is to have the information ready in any dimension if and when required. • Easy to use but powerful user interfaces. It is impossible to foresee all information requirements of all persons in all situations. The objective is to access and present the information in a highly interactive, intuitive and common user interface. Fast navigation, drill down and analysis tools also put the surrounding information at your fingertips. • Effective collaboration and workflow. With workflow as a building block, this level puts the areas above to work in a collaborative and documented fashion. The objective is to provide synchronous and asynchronous communication, conferencing and co-ordination activity through a variety of devices and channels. ESV. TETRA networks enable instant information availability to help make quick decisions to confirm, modify or change the producer’s strategy, thereby avoiding unnecessary costs and saving time. One example would be the collection of telemetry information throughout a radio communication network and the transmission into a control room. The so-called SCADA application as well as instant resource location and automatic vehicle location via GPS can be run via one safety-oriented network.


• • • • • • •

Provides concrete basis when making decisions (no assumptions) Reduces doubt so no time wasted Allows easy double checking, if required Enables remote logging in Allows remote accessibility, which saves both time and money Reduces false alarms and also saves both time and money Minimises risk

“Effective communications and data transfer play a pivotal role in ensuring accurate oilfield decision making” Eshwarahally S. Vikas O&G. Do you expect elements of the digital oil field concept to become more prominent in streamlining O&G companies overall business processes? MO. The ‘DOF’ concept is an upstream example of a move towards the ‘real-time enterprise’ which in recent years has seen large scale deployment of business intelligence and workflow tools integrated with ERP. The common objective is to give senior executives ‘dashboards’ of knowledge mined from critical real-time data right through from the oilfield, refinery, trading room, down onto the fuel forecourt. Many DOF technologies are already adapted and shared between the upstream and downstream businesses, and this will only accelerate as the IT environment increasingly standardises around IP and solutions components become more modular.

O&G. What role do effective communications and data transfer technologies play in ensuring accurate oilfield decision making? MO. Good decisions rely on accurate supporting data being accessible to the key people at the right time. Collaboration solutions such as BT RTX and Microsoft Office SharePoint Server (MOSS) ensure information that was previously captured in multiple reports, departments and geographies, taking days or weeks to access and analyse, can now be quickly viewed and acted on in real-time to make faster, better decisions. For instance, one major US oil producer asked BT to help improve the availability of daily production KPIs from a large, widely dispersed asset. BT built a KPI dashboard using MOSS so that familiar Office components like Excel are now used to drive real-time decision-making, improving the asset’s operational efficiency.

JHS. I actually see two areas becoming more prominent. One area is integration at the application/business level and the other area is distributed collaboration including smarter workflow solutions. Both are essential to capture, manage, maintain and execute business and communication processes. But on top of everything, don’t forget ‘The Human Factor’.

JS. They are key enablers. However, a good decision is not made by transferring data or even effective communications. Reaching a good decision is a process. You need to understand who the key stakeholders are at each step. You need the right-time information for them. You need to know at which step of the process you are. Do you remember your last visit to the

ESV. Absolutely yes, the digital oil field will allow more data to be collected from anywhere on the oil field and to be sent to many operational and research centres simultaneously enabling different interpretations to be gathered and accurate and quicker decisions to be made in the fast changing market environment. n

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ith the vast majority of industry wells lacking a continuous, reliable measure of well/reservoir performance, a key issue in upstream E&P operations is how to manage wells and reservoirs more effectively. Yet, if we cannot measure continuously, how can we manage better? How do we monitor well and reservoir performance? How do we perform hydrocarbon accounting? How do we report production for our wells? The industry has traditionally used discontinuous well testing to determine well performance, as wells are tested once per month and it is assumed that for the other 29 days the wells produce the same. Mother Nature, however, is usually not that predictable. Also, the quality and accuracy of well tests are often unsatisfactory, so some tests are rejected and have to be repeated. At the heart of this conundrum is multi-phase flow. Almost no wells deliver a clean, measurable, single-phase stream, and it is impractical to install multi-phase flow meters or test separators on all wells. Shell’s FieldWare Production Universe (PU) is a software application that continuously estimates oil, gas and water flows for all of an


operation’s wells, all of the time. PU enables improved well surveillance, more accurate hydrocarbon accounting, automatic production reporting and production optimisation. It safeguards the technical integrity of wells and reservoirs (for example, it provides early detection and control of gas or water breakout). And it is cost-effective in that it requires minimal commodity instrumentation and IT systems, much of which may already be present in field operations. In some respects, the technology provides such a step change that successful PU deployment often requires changing the way one operates and motivating the people involved.

How does it work? PU uses dynamic data-driven models of the production system. The well models estimate water, oil and gas production flows in realtime, primarily from existing well instrumentation. Effects such as backing-out of weaker producers at headers are captured in these models. Physical models are not used – no well tubing diameters, no roughness, no fluid properties, no near well bore ‘skins’, and no pre-assumed multiphase flow correlations. Real-time well measure-

Producing smart fields, now Continuously knowing what a company’s wells and reservoirs are producing facilitates improved asset management and integrity, argues Shell’s Ron Cramer.


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Ron Cramer ments are related to volumetric flows from test separators. The data-driven approach has been proven to be robust, usable and sustainable in the oil and gas production environment. A key aspect is the Deliberately Disturbed Well Test (DDWT), which is used to characterise well performance. These tests go beyond traditional production well testing. The objective is to relate well production (oil, gas, water) to simultaneously measured well parameters, such as flowing tubing head pressure, gas-lift rate, etc. The emphasis is on capturing the response of the well to step changes in controllable parameters. Once created, the individual well models are used to compute the well production per stream. PU accumulates daily flow per well, which reflects the actual producing conditions, including trips and restarts and plant operating mode changes. A simplified abstract topography is constructed relating wells to a calibration point. Typically, the calibration point is a bulk separator continuously providing oil, water and gas measurements from wells in a given production system. PU production data per well is compared and reconciled automatically against the installation’s overall export meter. This provides a reconciliation factor for each produced/injected stream on a continuous basis for the current day and the last 24 hours. Also in this graphical user interface is a diagnostics panel that alerts the user to production systems events. Event detection can be single point measurements or a complex logical mask to detect a specific event (for instance, contamination of the water disposal stream with oil). There is also an information panel, which alerts defective instruments and communications infrastructure.

“The technology provides such a step change that successful PU deployment often requires changing the way one operates and motivating the people involved”

With this single screen, an asset manager can gauge the current health of the production systems. If all the reconciliation factors are within acceptable bounds, then the production system is under control. If this is not the case, it is possible to drill down to process, header and well-level. The output from the measurements on the bulk separator provide a 24/7 data stream at one-minute or more frequent intervals. PU uses the dynamic variation seen at the calibration point to further tune its well models. Plant trips and restarts are very visible and generate a lot of useful data, especially when the field is brought back online. The dynamic well models are updated every 24 hours to reflect the total

information available in the preceding period, allowing tracking of decline in well rate and increase in gas oil ratio (GOR) and water cut. PU thrives on dynamics (for example, well bean up/bean down) to continuously update individual well models. Normal E&P operations provide a dynamic environment with well interventions, process trips, etc. If assets exhibit stable production with minimal dynamics, then dynamics can be introduced. Wells can be beaned up/down for short periods to cause transients to ripple through the process. Single or multiple disturbances can be introduced simultaneously. These pseudo-tests are known as Deliberately Disturbed Production Tests (DDPTs). If these tests are insufficient to re-align the models, then PU initiates a full DDWT. PU is currently running on more than 1500 wells in 14 Shell operating units (OU) and affiliates, covering about 35 percent of Shell’s global production.

What’s coming down the PU pipe? Real-time estimates of oil, gas and water flows for all wells are valuable for surveillance purposes. A logical next step is to use that information for real-time optimisation of reservoir, wells and the production process. PU-based real-time optimisation has been piloted for gas-lift optimisation and is being developed for beam pumps. For example, PU Real-Time Optimisation (PU RTO) is currently operational on an offshore gas lifted platform. It incorporates the basic PU functionality extended to include an optimisation algorithm for adjusting lift gas injected to each well for maximum production using minimal lift gas. PU RTO continuously computes optimal set points based on an inbuilt model and estimates of the amount of oil, gas and water that each well is producing; set points are automatically transmitted to the well gas-lift

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injection valves via the platform control system. The system connow significantly lower as compared to other similar platforms in the trols eight wells to optimise the overall gross production. operating unit. The PU optimisation was installed some two years after the basic As a result, PU is now being rolled-out across all Shell upstream surveillance module, which had already demonstrated significant assets. Each candidate field is assessed carefully in a readiness surveillance/optimisation gains (production gain of 370m3/day, check to identify what repairs are required to existing instrumenincreased well potential of 600-900m3/d tation and, if required, where additional and 20 percent reduction in utilisation of instruments need to be added before in“Shell’s challenge now is to platform lift gas). stallation will start. The subsequent PU RTO deployment scale up these benefits to has stabilised gas lifted production for this Conclusions full global brown-field and field. Individual wells have been optimised PU is well established in multiple Shell green-field operations and effectively and PU RTO has demonstrated OUs, sufficient to establish significant bento transform the traditional its ability to rapidly detect dead wells efits for more than 30 projects completed manual operations culture subsequent to a well or platform trip (reto-date: a five-20 percent increase in proinstating 670m3/d potential). It also has duction due to improved surveillance and into a new ‘Smart Fields’ way been demonstrated that sub-optimal lift optimisation; up to fi ve percent reduced of working” settings can decrease gross production by operating costs due to optimisation (for more than 10 percent. example, reduced gas-lift gas and logistics The new system allowed header intersavings due to reduced travel to the wells); action effects on well production to be quantified. After experiments and safer operations due to reduced operator exposure to hazard. were completed, a new production line was installed in June 2004. Shell’s challenge now is to scale up these benefits to full global Installation of this line provided a gain of 11 percent in platform gross brown-field and green-field operations and to transform the traditionproduction, and also generated a number of non-quantifiable benal manual operations culture into a new ‘Smart Fields’ way of working efits. For instance, changes in well performance are noticed quickly based on remote surveillance and control. Good progress is being and countermeasures initiated. PU automatically notifies staff of made along this road, with some 60 projects in global assets planned well performance and of significant changes via email. In addition, over the next two years. „ since PU installation the performance of wells and instrumentation is Ron Cramer works in the area of oil field automation and production systems and is a Senior Advisor highly transparent and the level of attention given to the facility has for Advanced Production Management with Shell Global Solutions in Houston. He has 30 years’ much increased. Unscheduled deferment due to process problems is experience with Shell International E&P in upstream oil field operations and production systems.

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MAKING THE CONNECTION Weidmüller’s Adam Segalés speaks to O&G about how major oil companies in the MENA region are reaping the rewards of better connectivity. O&G. What are the biggest connectivity challenges that oil and gas companies in the MENA region are currently facing? Adam Segalés. Due to the increasing dimension of plants and the need for high efficiency and non-interrupted production, green field facilities are being built with technologies that allow higher information flow and reliability, such as Fieldbus Control Systems (FCS) – mainly with Fieldbus Foundation (FF). Also, integration of these new systems with existing traditional Distributed Control Systems (DCS) is necessary. The target is to provide high availability, reliability, maintainability and remote operation of the plants. To achieve this, redundancy of most systems is required. In the MENA region the harsh environment must be taken into account: high temperatures, sand presence and salt ambient due to nearby seas. O&G. How do Weidmüller’s products aim to address those challenges? AS. Weidmüller’s products are designed following the highest standards to provide users with the needed reliability. Our long proven terminal blocks are a clear example of it. Also, our new Klippon TB range of Junction Boxes is second to none, due to new innovative features such as the Compression Control Silicone gaskets which provide also increased temperature range and chemical resistance, improved moisture/dust channel, optimisation of glanding area to allow greatest number of entries in same box size, or hinges with captive pins to prevent accidental removal of the lid. This allows removal without tools and maximum working space (door opens 170 degrees). Other examples are the new Functional Electronics designs, like the ACT20X family of Intrinsic Safety Isolators that cover most applications with only six variants and use an innovative housing concept for cabinet space optimisation and easy handling. The main in-


novation is that the isolators are configured via the FDT/DTM software standard. Another of the operators’ concerns is related to safety of installations. Weidmüller develops also products to satisfy such needs like SIL3 relays. Further developments aim to solve the increasing price of copper cables, by using Fieldbus and wireless communication technologies. Furthermore, our wide portfolio of Industrial Ethernet devices for data communication, strive to supply the means for safe information exchange within and without users’ facilities. Such wide product scope is complemented with our OEM and Customer Specific Solutions (CSS) departments, which provide application tailored products and solutions for all industries. O&G. Why are strong and reliable components in data and connectivity solutions so crucial to the efficient running of oil and gas operations? AS. Continuous and precise data flow is required to operate process plants in order to take appropriate real-time or delayed decisions, and to achieve maximum production profitability and safety for installations and people. In oil and gas plants, where a malfunction in such environments could cause dangerous explosions and environmental disasters, electrical connections should not be of any concern to plant operators. O&G. How do your products contribute to companies’ ability to operate in a sustainable way? AS. Weidmüller not only complies strictly with the relevant environmental and social welfare standards, but also makes sure that the EU guidelines on health and safety in workplaces are followed at all production sites around the world. Our products are manufactured in compliance with those international standards relative to the application (functionality) and to the environment (i.e. reduced gas emissions

Spaniard Adam Segalés is Global Market and Applications Manager for Weidmüller. His role is to implement the company’s strategy within the process market worldwide, defining the required approach, products and measures, and interfacing between the demand and supply departments. Leading companies using Weidmüller products include Saudi Aramco, Sabic, KOC, ADNOC, Honeywell, Schneider, ABB, Petronash, Invensys, Siemens, Yokogawa and many more.

and use of hazardous substances, environmentally friendly packaging). Indeed, 90 percent of our materials can be recycled. Saving energy at all levels of production is particularly important to us. Simply saving electricity and making better use of heat and cold in production will reduce our carbon emissions by 18,000 tons a year. The centre of our activities regarding environmental protection, which have a high priority for Weidmüller, is energy efficiency and the protection of careful exposure with natural resources. Weidmüller innovations are always a benefit for our customers – not only innovations in products and functionality, but also in the areas of production, services, logistics and sales. With our new Weidmüller corporate strategy we guarantee in the long term, that our product and performance spectrum is dedicated to add value to the products and thereby the business of our customers. We support our customers in their endeavour to operate their own businesses more successfully. „

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Consolidating HSE systems Implementing Synergi within the organisation of French oil giant Total meant replacing 40 local databases with one global centralised system. But Total is not the first Synergi customer to benefit from this kind of consolidation of their HSE system, says Siv L Seljevold.


hrough its presence in 130 countries all over the globe, Total covers the whole supply chain within the oil, gas and energy industry. Synergi Solutions has provided Total’s E&P (upstream) operations in 25 countries with their new risk management system. Thanks to considerable resources put into research and development, Synergi has become a very up to date technological platform. Following a pilot run in three affiliates, Synergi was globally accepted according to Total E&P’s high quality demands. Compared to the systems previously used by Total, Synergi gives a much more complete online overview of the risk management in all E&P activities. It offers integrated online eventreporting management together with a corrective action tracking management for the whole company, across geographical borders. All corrective actions originating in different events, audits, downgraded situations, experience feedback and so on, are now managed in a single database which offers a clear picture of the real workload, says Gerard Bachoué. He is HSE responsible for Total’s STRE@M project, which is what the company named Synergi internally. “Both reporting and statistics are more concrete and meaningful to us now that we have gathered everything in one single database. We see more registrations than before and the quality of the reports is better, though we still have to make an effort to improve them,” reveals Bachoué. “This is due to the fact that everybody, that is a potential of 3000 people, not only HSE personnel, can now feed the system with information and read the in-

Gerard Bachoué is HSE responsible in Total’s STRE@M project, which is what the company have named Synergi internally. STRE@M IT Project Manager Claudie Jover is pictured alongside him.


“Both reporting and statistics are more concrete and meaningful to us now that we have gathered everything in one single database” formation registered. Before, this was only done by a few dedicated HSE users of our old system.” STRE@M IT Project Manager Claudie Jover describes their previous risk management system as “home made”. They used to have several databases for tracking and reporting but centralising this also means that the support function could be centralised and the system can be run by fewer people. The relationship to Synergi Solutions was initiated in 2005. The implementation started in May 2006 and was finished in March 2007. Both Jover and Bachoué are proud of the result. “In 10 months we had migrated 85,000 cases from the old systems. We had also merged all the information from 40 different databases from several years back, backup included, into one,” Jover explains, adding that the Synergi consultants are very good technicians and the tool is appreciated for being user friendly. Together with a Synergi representative, a project team from Total have been travelling around the world training designated super users in the company. As of autumn 2006, these people have been educating their Total colleagues to use Synergi whenever HSE relevant incidents occur – be it big or small. n

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business based on information’s changing value. Through ILM, you get the most value from your information, at the lowest TCO, at every point of its lifecycle. To successfully implement your ILM strategy, EMC offers a variety of solutions as part of tiered storage architecture for the oil and gas enterprise.

Maximising the value of your data

GETTING TO GRIPS WITH THE IT ENVIRONMENT EMC’s Mohammed Amin discusses the key issues and outlines how optimising the IT environment can drive efficiency to your business.


nformation is estimated to be growing at about 55 percent yearly. To handle this massive influx, organisations are continuously investing in IT resources, both capital as well as human; the net result is that organisations are struggling to keep up with IT requirements from the business. This forces them to implement tactical strategies rather than building and maintaining broader, visionary strategies for their data centres. The ‘block and tackle’ approach is leading to largescale inefficiencies across data centres, resulting in financial loss for businesses. The widening gap between physical and operational assets of a data centre and the lack of their optimal use are resulting in higher costs for everything including hardware acquisition and maintenance, energy consumptions, data centre real estate, infrastructure management, lost revenues and human resources. Today, oil and gas companies are facing many challenges, including the following: • Exponential data growth and terabyte-sized project data sets are placing intense pressure on the petrotechnical computing environment and forcing companies to take a new look at how they manage and protect growing volumes of data. • High costs as reservoir, ERP, and CRM data is unused for periods of time. The expense of manag-


Mohammed Amin is the Regional Manager of EMC Middle East and North West Africa, a position he has held since November 2002. He is based at EMC’s regional headquarters in Dubai Internet City. During this time, Amin’s managed to develop regional awareness and demand for EMC’s comprehensive information infrastructure solutions and increase EMC’s regional customer base. ing historical volumes continues to increase. • Aligning business needs and technology expenditures to ensure the appropriate level of performance, protection, and availability to support business unit application requirements. • Compliance with various regulations such as Sarbanes-Oxley. • Protecting data from planned and unplanned outages, and accidental or malicious deletion. • In today’s world of mature basins and smaller reservoirs, the need to operate in a highly costefficient manner is paramount to continued success and profitability. So how do energy organisations need to act to overcome those challenges? Information lifecycle management (ILM) is a strategy for aligning your IT infrastructure with the needs of your

Seismic data is being captured and is changing in value over time. EMC’s ILM offerings deliver solutions for seismic file storage and management of every point along the data lifecycle, until eventual archival and/or disposal. EMC has the breadth and depth of solutions to add value across the entire value chain in oil and gas environments. From upstream to downstream, EMC manages the lifecycle of your data, regardless of the project, initiative, or business process and supports all your data management including: • Enterprise business applications, such as enterprise resource planning (ERP), customer relationship management (CRM), databases and email. • Enterprise content management for compliance, archiving and retrieval, and digital asset management. • Business continuity and security for tiered storage replication, back and recovery, server cluster replication and virtualisation, and information security. • Consolidation of applications, servers and storage. EMC is able to combine hardware, software and services with industry leading application vendors to produce solutions for oil and gas customers bringing immediate and lasting value to the bottom line. In today’s economy and with the credit crunch challenges, organisations need to build an efficient information infrastructure, they need to take a holistic view of their information infrastructure operations including people and process. Organisations need a staff with business process and technical expertise. Definition, creation and implementation of operational processes in IT projects are fundamental for IT efficiency. Awareness, understanding, and effort in optimising all aspects of data center are required in building fully functional efficient information infrastructure. 

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Approximately 50% of new drug development fails in the late stages of phase 3 – while the cost of getting a drug to market continues to rise.

What business processes work? What are the proven, successful strategies for taking advantage of domestic and international markets?

NGP is written by pharmaceutical experts from the discovery, technology, business, outsourcing, and manufacturing sectors. It is committed to providing information for every step of the pharmaceutical development path.

Business Management is about real, daily management challenges. It is a targeted blend of leadership and learning for key decision makers in government and private enterprise. Available for: US, Middle East, Russia

Available for: US, Europe, Asia-Pacific Find out more: Find out more:




Benny Vogels explains how to utilise information and visibility to control and optimise the delivery of business services

he industry’s trend, to move from real client-server applications in favour of centralised, web-based programs is moving forward at a rapid pace. In addition, many companies, no matter from which industry, are in the process of moving the voice communication towards a partially or even fully integrated Voice over IP (VoIP) system. As a result, additional data (VoIP control and call traffic) will be transported on the existing data network. Together with the fact that MPLS has reached many companies as well, there are new challenges IT managers are confronted with today if they have aligned their IT strategies to follow these trends. Monitoring and troubleshooting converged environments also means that the different groups (silos) within the IT organisation will have to grow a lot closer together because they are sharing the same infrastructure to deliver different services to the end users. As a result, there will be a larger overlap with respect to the monitoring and management tools the different IT groups (functions) will use. The fact that different management solutions will present similar information from different data sources in a completely different way does not help the communication between the members of the IT organisation either. Hence, there is a need for an integrated platform to manage application, VoIP and network performance, which is capable of delivering broad enterprise or carrier network visibility as well as deep analysis and troubleshooting allowing IT organisations to maximise the value and performance of their IT infrastructure and deliver a superior enduser experience.

Remote/branch office – on site staff: Imagine a remote office or a branch office, that has no IT staff on site, a few hours away from the HQ. To gain visibility into the performance of the network and applications on that site is one thing. But to troubleshoot such a problem is a completely different story. Usually it means sending someone from the IT staff to the site with an analyser to collect information that allows them to understand the root cause of a problem and to solve it. This is certainly not the most efficient way of dealing with a challenge like that. Apart from the cost and travel time for the IT person to go on site, the actual down – or browntime – is a large factor.


Some new challenges Data centres – escalation process owner: There are multiple infrastructure pieces


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in a data centre (routers connecting the data centre to other locations, distribution switches, load balancers and of course the servers running the applications) that can have a negative impact on the performance of an application (data or VoIP). In the case of application performance degradation the question that arises is who owns the escalation? Is it the network, server or application department? WAN management – lack of visibility: The WAN becomes more and more of a ‘Black Hole’. The reason is MPLS. Carriers are migrating their networks to support higher traffic volumes as well as to reduce distances between branches and/or headquarters to support new technologies such as VoIP. MPLS allows the carrier to create a virtual network for each customer with what we call ‘any to any’ connections. The positive effect is that headquarters traffic volumes drop dramatically. Visibility however becomes a real challenge in these environments, since not all traffic is routed through a central location where it could be monitored! With ‘any to any’ connections, the visibility from the central location is gone.

Fluke Networks provides information and visibility to control and optimise the delivery of business services for managed service providers, telecom services providers and enterprises. Visual Performance Manager, our integrated new performance management platform is a solution for managing the performance of applications, VOIP and networks in a converged environment. The information is gained by using various data sources like Cisco NetFlow, IPSLA, dedicated data centre and WAN appliances. „

Benny Vogels is the EMEA Marketing Manager for Performance Management Solutions at Fluke Networks. He is responsible for the development and implementation of key marketing strategies for the Performance Management Solutions category, as well as the tactical implementation of marketing plans using a variety of tools across the entire marketing mix.

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CORROSION Pipeline corrosion is an ever-present threat for oil and gas companies who are adopting increasingly sophisticated methods to minimise its impact on their operations. Bob Herbert, President of NACE International, outlines the challenges facing the industry when it comes to tackling corrosion.


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O&G: What are the main challenges that oil and gas companies face today in terms of tackling corrosion in pipelines? Bob Herbert: The number one concern is the aging infrastructure—many of our pipelines and related structures have met or are exceeding their original design lives. Replacing these assets is very expensive and disruptive, so the corrosion industry continues to work on more effective ways to inspect, rehabilitate, and maintain the infrastructure. Another challenge involves the expansion and encroachment of cities in areas where pipelines were once easily accessible. For example, a major pipeline buried in an open field may now be covered over with roads and buildings, challenging corrosion professionals to come up with more complicated and innovative ways to inspect and repair. In addition, corrosion control becomes even more of a priority when a pipeline’s proximity to civilisation increases and public safety is at stake.


“The number one concern is ageing infrastructure – many of our pipelines and related structures have met or are exceeding their original design lives”

O&G: How difficult is this issue when it comes to maintaining and replacing worn out parts in hostile environments? BH: There are many environments that are considered hostile and conducive to corrosion for various reasons, including fog and humidity, air pollution, proximity to saltwater, and corrosive soils. It is critical that the corrosion professionals understand the specific conditions of the area in order to select the best materials and corrosion control methods, whether in the design phase or during maintenance. With the corrosion control methods we have today, which include cathodic and anodic protection, numerous coating and lining formulations and systems, chemical treatment, and materials selection and design, we can tailor a programme to best control corrosion in specific environments. It is not always easy, but it can be done. O&G: How much would you say corrosion costs the oil and gas industry every year, worldwide?

O&G: What effect does this have on the companies’ projects and how could this figure be reduced in your opinion? BH: The cost of corrosion study determined that up to 30% of corrosion costs could be saved just by using currently available corrosion control technologies. The problem is convincing management that by incurring the costs of professionally planned and managed corrosion programmes, such as using trained personnel, conducting regular inspections, and implementing the best control and repair methods, companies actually save significant money over the lifetime of the asset. Unfortunately in many instances it is a matter of “out of sight, out of mind,” until something goes wrong—and that can be not only expensive, but catastrophic.

O&G: How are technologies helping to tackle the problem, especially in the area of pipelines? BH: During the last 10 years or so, we have seen a big push in new research and development to address older systems as well as smaller-diameter pipelines. There have been improvements in coating formulations and systems for internal and external use, better inhibitors for protecting against such problems as microbiologically influenced corrosion and sulfate-reducing bacteria, and breakthroughs in materials, including plastics and other nonmetallic composites. In addition, there are a wide variety of very effective inspection and monitoring techniques available, including close interval surveys, direct current voltage gradient and alternating current voltage gradient surveys, alternating current attenuation surveys, soil resistivity surveys, ultrasonic testing, and smart pigging, all of which help provide an accurate indicator of a pipeline’s condition.

“The study found that direct corrosion costs overall for the United States are US$276 billion per year, or 3.1% of the Gross Domestic Product”

BH: According to the 2002 study, “Corrosion Costs and Preventive Strategies in the United States,” pipeline corrosion costs approximately US$7 billion annually in this country alone. This figure does not include indirect costs such as downtime and lost productivity. If you look at the oil and gas industry as a whole, including production, processing, refining, etc, the figure is closer to US$20 billion annually. The study found that direct corrosion costs overall for the United States are US$276 billion per year, or 3.1% of the Gross Domestic Product. We have since learned that this percentage can be extrapolated to the economies of other developed countries to determine just how pervasive and expensive the problem is worldwide.

O&G: How do integrated risk assessment and integrity management programmes help? BH: The emphasis on pipeline integrity has increased significantly in recent years, largely in response to several high profile, catastrophic failures that were caused by corrosion. Stricter regulations, liability and safety issues, and increased emphasis on protecting the environment are bringing corrosion control considerations to the forefront of pipeline protection programs. The continuing development of pipeline integrity technology brings regular improvement to pipeline

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integrity and safety. The accuracy with which the inspections can pinpoint areas of concern even in apparently good pipes continues to improve as well. This has enhanced safety since now problem areas can be accurately located and remedial action taken as required. In my opinion, one of our biggest opportunities is to optimise the use of existing tools and technologies through the use of risk and decision analysis principles.

“The accuracy with which the inspections can pinpoint areas of concern even in apparently good pipes continues to improve”

O&G: What is your organisation doing to help oil and gas companies tackle the challenges posed by pipe corrosion? BH: NACE was founded by 11 pipeline corrosion experts back in 1943, and although the association has since branched out to cover all areas of the corrosion industry, pipeline corrosion remains at our core. I believe our most significant contribution to this industry, and the corrosion industry as a whole, is our corrosion education, training, and certification programmes. There has been unprecedented growth in these programmes over the last several years, especially internationally, as countries and governments everywhere recognise the importance and value of a trained corrosion workforce. NACE offers numerous pipeline-related courses, including four levels of cathodic protection training, a course on using coatings with cathodic protection, the world-renowned Coating Inspector Programme, assessment training, operator qualifi cation, and many others. NACE is also the leading standards organisation for corrosion control, offering more than 200 standards developed by industry experts, approximately half of which relate to the oil and gas industry. NACE holds corrosion conferences and seminars worldwide, publishes and disseminates journals, books, and reports; has a strong public affairs presence; and offers many other corrosion resources from our web site: O&G: In your opinion are oil and gas companies in the Middle East in particular, doing enough to tackle pipeline corrosion challenges? BH: As with other areas of the world, I am pleased to see the progress being made in the Middle East regarding corrosion awareness, increased training, more implementation of the latest corrosion control technologies, and a growing membership in NACE. NACE exceeded 20,000 members for the first time in its history last year, with most of the growth occurring outside of the United States and Canada. Although the prominent types of industries, environments, and regulatory requirements may differ from country to country and even city to city, one thing is clear—we all recognise that controlling corrosion will reduce costs in any economy while protecting public safety and the world around us. „

NACE International was originally known as ‘The National Association of Corrosion Engineers when it was established in 1943 by 11 corrosion engineers in the pipeline industry.

These founding members were involved in a regional cathodic protection group formed in the 1930s, when the study of cathodic protection was introduced.

With more than 60 years of experience in developing corrosion prevention and control standards, NACE International has become the largest organisation in the world committed to the study of corrosion.

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IPLOCA is determined to stamp out pipeline corrosion through early detection and promoting a ‘prevention is better than cure’ mentality among its members. O&G met IPLOCA president Bruno de La Roussière, to find out how the organisation is practising what it preaches.

The pipeline

DETECTIVES O&G. How does IPLOCA bring pipeline owners, engineers and contractors together to establish safety and planning procedures? Bruno de La Roussière. Safety is a high priority for IPLOCA members. For many years the association has required its members to submit (confidentially) their safety statistics for the previous year so that the aggregate numbers can be reviewed and provided to the membership. A Safety Award is also offered by the association, sponsored by Chevron, and each year an increasing

number of entries are received. This year’s award went to Bonatti (Italy) for their entry “The Year of Living Safely” detailing their safety approach to the Sicilian Gasline, Montalbano-Messina Tranche – “one of the most challenging and critical in the Bonatti pipeline history.” BP currently sponsors the IPLOCA New Technology Award every alternate year, and Shell similarly sponsors the IPLOCA Environmental Award. In addition, operators are participating in IPLOCA’s Novel Construction Initiative, enabling topics like

ABOUT IPLOCA In 1966 companies active in the international pipeline construction industry recognised that they had many common interests and challenges that could most effectively be addressed through the establishment of an industry association. That same year the then leaders of the industry met in Paris and established the International Pipeline Contractors Association. Originally established as a division of the US Pipeline Contractors Association, the International Pipeline Contractors Association became fully independent in 1976 after a significant increase in membership. In 1988 the association was extended to include those companies working offshore in the oil and gas industry and on 5 May 1989, the International Pipeline and Offshore Contractors Association (IPLOCA) was officially established. The Association’s headquarters were later moved to Brussels, and then in 1992 to Gent, in Belgium. The Gent office was closed in June 2005, and the office was re-established in Geneva, Switzerland, where it remains today.


Contract Negotiation and Risk Sharing to be addressed by operators and contractors working together. O&G. What are the major challenges that the pipeline industry faces, particularly when it comes to construction work in the more inhospitable parts of the world? B de LR. Lack of qualified manpower continues to be a big issue. Engineers and qualified project managers are in high demand the world over. To help alleviate this problem IPLOCA has established a training committee, chaired by Leonid Bokhanovskiy of Stroytransgaz, a member of its board of directors, to spearhead training communication and database development throughout the membership. Member companies have contributed details of universities and specialised training institutions in their region and this information is being collected to be made available to the membership. The training committee met recently in Rome and is holding teleconferences to move the initiative ahead. O&G. What has the industry learned from incidents like the spillage at Prudhoe Bay pipelines in 2006? B de LR. The industry is striving to prevent

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such accidents in future, analysing the risk of corrosion-causing bacteria in the fluid being transported, avoiding producing environments in the pipeline that may be conducive to the incubation of bacteria and reducing and monitoring build up of water in the line. Along with the increased frequency of maintenance pigs and inspections using smart pigs, operators are increasing the sensitivity of leak detection systems and employing overflight of the lines using infrared detectors. Furthermore, geo pig runs are used to evaluate geological risks. O&G. What are the knock-on effects for the industry of ageing and poorly maintained pipelines? B de LR. As the infrastructure ages, the potential for failure with safety and environmental implications clearly increases, with potential for soil contamination due to pipeline contents leaking to the ground from small leaks and the possible need for additional booster stations because of increased pressure drop with the corrosion of the pipeline internal surfaces. O&G. What is needed to improve vigilance when it comes to detecting and dealing with corrosion?

B de LR. Some have suggested that legislation to mandate the intelligent pigging of pipelines at regular intervals with increased regularity with pipeline age and condition would be helpful, along with regular on-line inspection programmes, over line surveys and a proactive response to acting upon the results of inspection data. Regular assessment of pipelines should be made not only from the corrosion and coatings aspect but also from the perspective of ground use and land development over time. This is seen as particularly true in some countries where it needs to be mandated by the codes. O&G. When it comes to corrosion, is it the case that prevention is the best cure, and what technologies are out there to make monitoring and maintenance easier? B de LR. The more accurate results of online inspection, coupled with GPS technologies, now make it easier to efficiently maintain the pipeline – for example by targeting corroded sections of pipelines for replacement rather than entire pipelines. Corrosion is a natural process and attempts to either prevent it or make allowance for its occurrence must be made if pipeline integrity is to be maintained. There are many proven methods of detecting pipeline corrosion. The

Bruno de La Roussière graduated as a mechanical and mining engineer from the Ecole des Mines in Nancy, France and after working for four years, three of which were dedicated to Middle-Eastern projects in remote locations, he went back to university and obtained an MBA from INSEAD in Fontainebleau. He then served as general manager of subsidiaries in various Middle-Eastern countries before returning to Paris and rounding off his management experience. In 2002 he participated in the management buyout of Entrepose Contracting and in 2006/2007 in the acquisition of Spiecapag. Bruno is closely involved in IPLOCA’s Novel Construction Initiative as leader of the Contract Negotiating and Risk Sharing Work Group. The mission of the initiative is to stimulate innovation in the technology and processes required for execution of onshore pipeline projects.

continuous development of existing detection and repair methodologies should yield continuous improvement in the detection and repair of corroded elements. Prevention is the best cure but a lot of lines which have been installed over the years have experienced less than perfect operations, resulting in the design conditions being exceeded for both coatings and cp. Modern GIS-based technology can make a lot of the monitoring and recording easier. „

KEY OBJECTIVES OF IPLOCA • To promote safety and to develop methods for the reduction and elimination of accidents and injury to contractors, employees in the industry, and all those engaged in, or affected by, operations and pipeline work. • To promote, foster and develop the science and practice of constructing onshore and offshore pipelines, and associated works. • To promote the protection of the environment and contribute to social, cultural and environmental development.

IPLOCA recognises its members’ efforts in these specific domains by making the following awards: • Health and Safety Award, sponsored by Chevron, given each year to three members or associate members who have succeeded in improving safety regulation and decreasing the number of accidents. • New Technologies Award, sponsored by BP, given every second year to a member or an associate member who has made a significant contribution to innovation in onshore cross-country pipeline construction. • Environmental Award, sponsored by Shell, given every second year to a member or an associate member who has made a significant contribution to reducing the impact of pipeline construction on the environment.

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Pipeline protection and the options available Proclad’s David Neill looks at what companies can do to safeguard their pipeline equipment against long-term corrosion and what technologies are available to provide the best solutions.


he ability to safely transport produced hydrocarbons is an important factor for any operating company in the development of an oil and gas field – and poor pipeline maintenance can lead to extensive corrosion and leaks. One of the recent examples of an oil leakage was Alaska’s Prudhoe Bay which caused the operating company to shut down a field due to “unexpectedly severe corrosion”. This leakage led the operating company to shut down a field producing 400,000 barrels per day (bpd), which affected eight percent of US oil production, pushing petrol prices to an all time high.

For the oil and gas industry the specific condition of operating variables needs constant monitoring if the asset is required to operate for the design lifetime of the oilfield. Material selection must be tailored to the service conditions, with specific attention to correct fabrication procedures and maintenance schedules. There are many guidelines available for material selection and corrosion testing of material.

“For the oil and gas industry the specific condition of operating variables need constant monitoring if the asset is required to operate for the design lifetime of the oilfield” To ensure correct materials selection to protect against corrosion some of the main variables that have to be considered are: • Operating pressure and temperature • CO2 content • H2S content • Oxygen and oxidising agent’s content.

David Neill has been with Proclad since its inception in 1983. As a welding engineer, Neill worked with several large engineering companies and has several years’ experience working in the North Sea operations with a major oil producer. Educated as a welding engineer in Central Scotland, his passion for research and development has served him well, as he has developed many new techniques and processes for the benefit of the oil and gas industry.


process will yield the same results in alloy selection, but in the case of a 14-inch Schedule 80 pipe, 16mm of a 19mm wall thickness pipe will be carbon steel, reducing the capital cost significantly. This technology is widely known within the oil and gas industry as cladding. The clad layer, generally 3mm thick, can be applied in a variety of forms, and covers most pipeline components, including fittings, flanges and valves.

If the corrosivity of the hydrocarbon requires the use of corrosion, resistant alloys (CRA) the capital cost, particularly in large diameter pipelines, can become prohibitively high. However, if consideration is given to the purpose of the corrosion resistant alloy in providing a protective barrier from the well service, consideration should then be given to providing a protective barrier of CRA, but combining this protective barrier with a less noble material. In selecting materials that are a combination of CRA and carbon steel, the same process variables listed above have to be considered. The outcome of the selection

There are two types of clad layer: Metallurgically bonded, which includes process such as weld overlay, explosive bonding, roll bonding, and co-extrusion. Mechanically bonded which involves using a mandrel or using hydrostatic pressure to expand the CRA inner pipe material beyond its plastic limit, whilst elastically deforming the carbon steel outer pipe. Relaxation of pressure produces a mechanical bond. There have been many concerns over the jointing of these various components, since it consists two dissimilar materials. The objective in this case is to ensure the corrosion resistance is maintained; therefore the materials used for the jointing process must also be a corrosion resistant alloy. In consideration of the pipeline design, the strength is also a factor. For example, if the base material grade is API 5LX 65 which has a yield value of 448MPA, the CRA jointing material must at least match this value. In which case UNS 006625, with an as welded yield strength of 460MPA, would be the correct material selection. n

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Pipe dreams Oil and gas companies battling pipeline corrosion are finally winning the war thanks to the next generation of pigging technology. Diana Milne meets Tom Sowerby of the PPSA to find out how.


igging technology has revolutionised the way companies inspect and maintain pipelines. Where once the conditions inside pipes were a source of mystery and guesswork for oil companies, pigging provides them with crucial data which could save them millions of dollars in lost revenue through leakage or pipeline corrosion. Tom Sowerby is a technical advisor of the PPSA, an international trade association which serves the pipeline industry. The organisation, which was formed in 1990, has over 90 members representing the pigging industry across the world and its main aim is to promote knowledge of pigging worldwide and to provide a channel for communication between the different PPSA members. Describing how the oil and gas industry has benefited from In-Line Inspection Tools or Smart Pigs, Sowerby says: “The use of In-Line Inspection Tools has helped to take away the guesswork about the condition of pipelines. The use of new generation inspection tools has allowed operators to understand exactly what is going on in their lines and therefore helped them to either upgrade the lines with flowrate or pressure with confidence or extend the safe working life of their pipeline investment. “

WHAT ARE PIGS? Pipeline pigs are devices which are inserted into and travel through pipelines and are driven by the product flow. Originally developed to remove deposits in the pipe which could obstruct the oil flow, they are now used for multiple purposes including: internal inspections; to batch or separate dissimilar products; for displacement purposes. There are three different types of pigs: Utility pigs for cleaning, separating or dewatering; In-Line Inspection Tools, to provide information on the condition of the line and the location of any problems and Gel Pigs which are used in conjunction with conventional pigs to optimise pipeline dewatering, cleaning and drying tasks.


The availability of data on the conditions of the pipelines has greatly increased companies’ ability to detect and tackle corrosion within their pipes – a condition with the potential to cause serious damage to pipelines and result in gas leakages as seen at Prudhoe Bay oil field in Alaska, where severe corrosion and leakages were discovered through data from a smart pig in 2006. As a result oil production on the site was reduced by around 400,000 barrels a day. Expanding on how such data is processed following a pipeline inspection Sowerby says: “The data recorded by In-Line Inspection Tools is carefully analysed using many complex software programmes by experienced analysts and a report is produced for the operator showing the exact details of corrosion, dents, etc. in the pipeline.” He goes on to say that this data can be combined with information on products being transported in the line to help provide companies with the comprehensive information on the state of their pipelines: “Many other tools

“The use of new generation inspection tools has allowed operators to understand exactly what is going on in their lines” can be used to back up the data such as fluid composition, corrosion coup on readings from the pipeline as well as programmes that can look at the corrosivity of the products being transported in the line and help predict areas of concern in the pipeline.” Sowerby says he believes that operators can be confident in the integrity of information produced about the conditions of pipelines by the pigging products: “Because the major operators of pigs have many years experience with their pigs they can give, with confidence, reports on the exact state of the pipeline. On land-based pipelines the results can easily be verified by ‘digging’ a feature of corrosion to verify the data.” However he admits that there are not currently any standardised tools that have been developed to assess the performance of pigs, therefore there is no accurate way for operators to tell whether the pigs are performing as required. “No specific standards exist for pig performance but operators can look at test results from the pig when pulled through pipelines with known defects machined in them at the pig operator’s workshops,” says Sowerby. Another traditional shortcoming of pigs is that they are not suitable for all pipes, for instance, if the pipe contains butterfly valves. However Sowerby says technology is being developed to create suitable in-line inspection tools for those types of pipes: “Many pig vendors are developing pigs for ‘unpiggable’ pipelines,” he says. “These pigs can be inserted into lines and then reversed out of the lines. There are a number of crawler type devices being developed which can crawl down a line pulling an inspection head and then reverse back out of the line. There are also tethered pigs for such pipelines.”

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Frequently Asked Questions

The Pigging Products and Services Association (PPSA) was formed in 1990 and

How is the correct pig selected for a given pipeline? There are many different pigs available in the marketplace and many different suppliers (see PPSA membership list). Choosing the correct pig involves setting the objective and defining the task that the pig has to perform. This may be removal of a hard scale in an 8” line for a cleaning pig or the location of corrosion pits in a 24” sour gas line for an inspection pig for example. Operating conditions can sometimes dictate the type of pig that must be considered. For example, an ultrasonic pig requires a liquid couplant around the pig and this may be difficult to achieve in a gas pipeline. The pipeline layout and features will largely dictate the geometry of the pig. Changes in internal line diameter will influence the design effort required for the pig. The correct pig type is chosen for the task but then the pipeline design and operating conditions will affect the actual design of the pig.

now has over 90 members, representing the pigging industry throughout the world. The association is entirely funded by its members through their annual subscription fees. Its aims are, “To promote the knowledge of pigging and its related products and services by providing a channel of communication between the members themselves, and with users and other interested parties.” PPSA plays a major role in providing information, equipment and services for pipeline operators and the industry generally and

What inspection techniques are there? The main inspection methods that are used are MFL (magnetic flux leakage) and UT (ultrasonics). MFL is an inferred method where a strong magnetic flux is induced into the pipeline wall. Sensors then pick up any leakage of this flux and the extent of this leakage indicates a flaw in the pipe wall. For instance, internal material loss in the line will cause flux leakage that will be picked up by the sensors. Defect libraries are built up to distinguish one defect from another. Ultrasonic inspection is a direct measurement of the thickness of the pipe wall. A transducer emits a pulse of ultrasonic sound that travels at a known speed. The time taken for the echo to return to the sensor is a measurement of the thickness of the pipe wall. The technique needs a liquid through which the pulse can travel. The presence of any gas will affect the output.

responds to hundreds of enquiries each year. The PPSA web site enables visitors to source the products and services they need quickly and easily and provides a link to PPSA’s technical information service. PPSA runs seminars and training courses on pigging, sponsors lectures and meetings about the subject and supports relevant conferences. Full members are companies manufacturing or marketing pigging products or services. Associate members are companies connected with the industry, e.g.

What is a plug? A plug is a specialist pig that can be used to isolate a section of pipeline at pressure while some remedial work is undertaken. For example, a valve can be changed while the pipeline remains at pressure. This can be done by setting two plugs either side of the valve. Work can then proceed on removing the existing valve and installing the new one. In complex systems, this can allow production to continue while maintenance work proceeds at a platform for example. The plugs can typically withstand pressures up to 200 bars. The plug works by gripping into the line pipe and then having a separate sealing system. Lower pressure techniques include using high friction pigs, which provide a barrier for depressurised systems.

Is it possible to pig multi-diameter pipelines? For economic reasons, a number of dual diameter pipelines have been designed and built in recent years. An existing riser or J-tube at a platform may require that there is a difference between the pipeline and the riser diameters. Tying a line into an existing pipeline may result in a change in diameter from one to the next. Dual and multi-diameter pigs have had to be designed and tested to allow such systems to be pigged. These include pre-commissioning pigs for dewatering the lines; operational pigs to allow liquid holdup to be removed from gas lines and inspection pigs to provide information on the line. Typical examples of dual diameter lines include a 10 x 8” line, a 20 x 16” and a multi-diameter line 11 x 12 x 14”. The biggest line is the Åsgard gas export line, which is 28 x 42” in the Norwegian sector of the North Sea. This can be both pigged and inspected.

How often should a pipeline be pigged? Pigging frequency depends largely on the contents of the pipeline. Some gas pipelines for example are normally never pigged. This is because they contain very little by way of liquid to remove or debris/corrosion products in the line. On the other hand, production oil lines can suffer from wax deposition, which must be managed in order to allow production to continue. It is difficult to give general guidance on this, as the pigging frequency must be set for each specific pipeline. The general advice would be that a pig is a valuable flow assurance tool and a decision should be reached with the operator on the frequency of pigging based on the flow assurance analysis of the line and in conjunction with the pigging specialists. Likewise, inspection intervals should be based on discussions between integrity management and the pig vendors.

operators, suppliers and allied industries. Individual members are anyone with an interest in pigging.

Since pigs were first launched they have undergone several upgrades and become increasingly sophisticated as a technology. Modern pigging systems feature global positioning systems that provide information on the exact location of the pig within the pipe. They can also come equipped with internal cameras that provide live video pictures of the inside of the pipe and the condition it is in. However Sowerby says the innovation which has made the greatest impact on the effectiveness of pigging is Magnetic Flux Leakage – a magnetic method of non-destructive testing which is used to detect corrosion and pitting in oil pipelines. A powerful magnet is used to magnetise the steel inside the pipe then, in areas where there is corrosion or missing metal, the magnetic field leaks from the steel. “Without doubt the technology that has had the most impact on the pipeline inspection market is that of Magnetic Flux Technology,” says Sowerby. “To this date it is still the most reliable, most robust and most used technology in the pipeline inspection market.” n


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The right combination We take a look at how Magnatech, a manufacturer of specialised equipment for orbital pipe welding systems, was able to deliver on a multimillion euro contract for oil and gas giant Saudi Aramco. quires less welders and simplifies the associated logistical organisation. A last reason is the increasing use of X70 quality pipeline steel and higher, requiring low-hydrogen welding consumables and therefore excluding the use of cellulosic downhill electrodes.

The Magnatech Pipeliner II


Aramco’s requirement for mechanised welding applies to the filling of the joint – the root pass may be done manually, semiautomatic or mechanised. The Magnatech solution for filling, used by Nacap-SRB and brought on the Saudi market by Pangulf Welding Solutions, is based on uphill welding with flux-cored wires (FCAW). For the Khurais project, it is applied on pipe diameters of 16 to 36 inch in X65 and X70 grade steel, accounting for 331km of pipeline. The root pass is performed by semi-automatic, controlled downhill welding with the STT process (modified short circuit transfer mode). The Magnatech solution can, however, equally be used in combination with downhill or uphill MMA for the root pass. The Pipeliner II can be used on pipes from six-inch up to 60-inch diameter and above, simply by changing the guide ring – an advantage relative to downhill mechanised equipment which starts at approximately 30 inches. Another advantage is that its use becomes already economical with significantly shorter pipeline lengths. Moreover, pipeline contractors will own the equipment and not have to rent it.

n 2006 Nacap-Suedrohrbau Saudi Arabia Ltd. (Nacap-SRB), a subsidiary of Dutch international contractor Nacap BV, was granted a €70 million contract by Saudi Aramco, the state-owned national oil company of Saudi Arabia, for the engineering, procurement and construction of the Khurais Sea Water Injection and Distribution Headers Project. This included the construction of 507km of eight-inch to 36-inch non-sour and sour seawater transfer lines and headers. For 16-inch pipes and above, (Nacap-SRB) applies automatic uphill welding for filling, relying on Productivity Magnatech’s Pipeliner II orbital welding system and ESAB’s PZ6113 all-poMechanised uphill welding with the Magnatech Pipeliner II and FILARC sition rutile cored wire. PZ6113 rutile cored wire is very productive. Nacap-SRB takes full benefit The Khurais field is an existing field with an output from the high deposition rate of 3-4 kg/h of some 300,000 barrels per day. It is located in the area at 250A, by achieving a duty cycle of 80 Magnatech is a manufacturer of specialised of Khurais, halfway along the motorway between percent, due to clever organisation of the equipment for orbital pipe welding systems, Dammam and Riyadh in the middle of the ‘red dunes’ filling procedure. Equally important, it is a using the GTAW, FCAW, and GMAW welding desert. It is envisaged that water injection will boost very secure technique. Uphill welding with processes. Magnatech has specialised in production to 1.2 million barrels per day. The seawater PZ6113 in the spray arc mode, at a relativepipe welding since 1970. It is its mission to is supplied from the Arabian Gulf, and is then distributed ly high welding current, is a very tolerant provide products and know-how that will throughout the Khurais field. method for filling when compared to mechincrease welding productivity and quality, for anised downhill short circuit welding. customers in a wide spectrum of industries. Mechanised welding The latter method is faster due to a reFor various reasons, Saudi Aramco stipulates the use of mechanised duced weld volume, but is based on a more expensive J-preparation, and one welding equipment on its pipelines – the most important being that they must expect comparatively high defect rates and associated repair work. are in a great hurry to boost oil and gas production, making them demand Moreover, Aramco would additionally require 100 percent ultrasound testing, short time frames for their projects. Mechanised welding makes the planwhich is costly and often difficult to organise in remote areas. Using the uphill ning more predictable, and, since it is less strenuous for the welders, leads technique, Nacap-SRB has recorded their weld defect rate to be consistently to better weld quality. Also, manual pipeline welders, hired mainly from below 0.5 percent, measured by common x-ray testing – prescribed by Aramco Asian countries, are not as plentiful as in the past. Mechanised welding reto be 100 percent for the first 40 joints and 10 percent thereafter. n


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Getting a handle on corrosion Intertek’s Dr Kirsten Oliver asks whether it is possible to have a truly integrated approach to managing integrity of upstream oil and gas facilities?


ithin the upstream and downstream oil and gas sectors, integrity management of the assets is concerned with getting fluid from the reservoir through the pipelines to process facilities and onward to refineries and into the distribution system. A break or failure in integrity in any of these stages interrupts production and supply, in addition to causing the release of hydrocarbons and therefore the potential for significant health and safety and environmental implications. A vast number of factors influence the ‘integrity’ of an upstream oil and gas facility including materials of construction, internal and external environment, operations and process conditions, management issues, regulatory issues and cultural issues.

that directly affect the internal environment are unlikely to be constant throughout the asset life and therefore an ongoing programme of monitoring/inspection and assessing the probability of degradation and the consequence of a failure (from internal or external degradation) is key to understanding the condition of an asset. All too often the potential for changing conditions is overlooked. A facility will be designed at the project stage based on predicted field conditions and often optimised for peak production. Each part of the operations of the facil-

“The set up and implementation of an effective integrity management system is key to effective management of the facility”

Corrosion In the upstream oil and gas sector, the predominant degradation mechanism affecting metallic materials is corrosion, either external or internal. External corrosion is influenced by the surrounding area and this environment is typically consistent throughout the life of the facility. Items such as pipelines, process equipment and structures are typically protected from external corrosion by the application of coatings and/or cathodic protection systems. Regular maintenance of these systems is required over the life of the asset. Internal corrosion is influenced by the properties of the fluids contained within the pipeline or process facility, typically hydrocarbon, and is mitigated by the selection of materials, removal of corrosive species in the fluid (e.g. water, CO2 and H2S) and the injection of chemicals into the fluid streams (e.g. corrosion inhibitors and biocides). Unlike the external environment, the property of the fluids and the operating conditions


ity will collect data and go about their daily operations to enable fluid to be transferred thoughtout their part of the process, but without appreciating how changes in production and conditions can affect long term integrity. In the upstream environment, process and operational changes (e.g. reservoir acid stimulation, introduction of fluids from another reservoir, change in chemical provider, etc.) are often carried out but not effectively communicated, throughout the organisation and result in integrity issues in pipelines and process facilities. To fully manage the integrity of an asset, data from a number of sources is required and this data must be transferred into information that can be interpreted to make knowledgeable decisions regarding future degradation of the pipelines, process equipment, piping and structures and therefore maintaining asset integrity. The set up and implementation of an effective integrity management system is key to effec-

tive management of the facility. A large number of companies will offer ‘integrity management’ services, which are in fact a small piece of the overall jigsaw. Co-ordination of these integrity activities and interpretation of the vast amount of data that is generated is required to obtain a picture of ‘how is degradation occurring across my facility’? or ‘when am I going to get a failure’?

Review Regular review of operational changes allows corrosion risk assessments to be updated, as well as allowing the implementation and future refinement of successful risk-based inspection programmes (potentially offering cost savings) and a thorough understanding of the condition of the asset to be demonstrated though a combination of inspection, monitoring, fluids sampling and data analysis. The data gathered can be housed in one central system or a number of integrated data management systems. ‘One size does not fit all’, and the requirements for setting up and implementing an integrity management system will vary for different operators and asset types. Any system has to be based on an understanding of the asset itself as well as ensuring that the overall goal is clearly understood. n Dr Kirsten Oliver is Upstream Production and Integrity Manager for Intertek based in the UAE. She has a bachelor’s degree and PhD in Materials Science, worked as an operational corrosion engineer and has eight years experience of setting up and implementing integrity management systems for clients around the world. For more information go to Alternatively, telephone +971 6 538 7036 or email:

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PART 2 OF O&G’s EXCLUSIVE INTERVIEW In the second part of our interview with Abdulkarim Al-Sayed, CEO for the Bahrain Petroleum Company (BAPCO), he discusses the HR issues affecting the industry, technological advances and the growing importance of the Middle East as the future energy centre of the world. O&G. BAPCO finances a number of its employees through higher education programmes, both in Bahrain and abroad. Why is it important to develop your talent this way? Abdulkarim Al-Sayed. In the past Bapco believed that its past good reputation and the loyalty shown by the older generation workforce would automatically be carried forward to the younger generation. This has not happened. The better-performing and brilliant graduates and other well-qualified youngsters are being attracted to other areas such as finance, stock market, international taxation, insurance, law, and private entrepreneurship. The skilled manpower crunch in the oil and gas sector this time is not a short-term phenomenon. The Middle East does realise that this drastic shortage cannot be overcome through expatriate resources alone. The right environment must be created in our own countries to promote the pursuit of engineering and technical careers amongst our school leavers.


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There are two key areas related to the indigenous workforce in which we need to invest significantly more than we have been doing in the past: training and re-training of existing workforce, and adoption of performance-based rewards. It should be noted that even during the past, many resources have been invested in training of our personnel. Most NOCs have dedicated training and development departments as well as training co-ordinators assigned to each client department. Many training consultants and organising companies have opened branch offices in the Middle East to cater to the huge demand for training courses that exists in this region. Under Bapco’s Skills for the Workplace scheme, a major project is run and hosted to provide unemployed young Bahrainis with the skills they need to gain a successful entry to employment. O&G. Technology is obviously very important in your industry. Is BAPCO looking to make more technological advances this coming year? AS. Bapco is looking for technological advances in all areas of operations. On the production side, enhanced oil recovery (EOR) technology is being looked at as a means to sustain oil and gas production. In refining, emphasis is on advanced process control to maximise production of high-value middle distillates and on ways to process the “bottom of the barrel” to minimise the fuel oil pool. In the storage area, implementation has begun of high-tech gauging techniques using the advanced SAAB radar gauging technology. In the marketing field, smart fuel cards have been introduced to streamline the cash collection system and Bapco has embarked on an ambitious plan to upgrade and modernise service stations. The Bahrain Field was discovered in 1932 and was the first oil discovery in the southern part of the Arabian Gulf. Last year Bapco initiated a new development phase following comprehensive and detailed studies using state-of-the-art modeling and visualisation software systems. The new development plan aims at doubling the number of wells drilled per year from 24 to 48 wells, and also introducing special architecture wells designed differently for each of the 16 producing reservoirs in the field. On another front, last year Bapco and NOGA invited major International Oil Companies to participate in enhancing the production and recovery from the Bahrain field. The objective of this joint venture is to extend the life of the Bahrain field beyond 2030 at a sustained production rate that significantly exceeds the current production levels. Offshore and onshore development of oil wells is also on Bapco’s agenda. Bapco used to produce between 75,000 to 80,000 barrels a day back in the 70s. Now we are down to 35,000 barrels a day. Our challenge is to enhance the production of oil and gas and at the same time look at the opportunities for gas import.

Bapco is still considered to be a relatively old refinery having multiple units with a design capacity of 250, 000 barrels a day. A modern refinery of this capacity will probably have one or two crude units but Bapco at present has five, which is not cost efficient. Future plans are to rationalise this. Also, Bapco’s refinery is producing 15 percent of the barrel as fuel oil. Fuel oil, referred to as the bottom of the barrel, is the heavy stuff that is sold at a lower price than the crude oil used as feedstock to the refinery. So if this 15 percent can be converted into a higher value product with the help of modern technological processes then it will result in more profitability for the company. In 2008 Bapco will be studying different technologies that will transform this 15 percent into a more profitable fuel. This project is estimated at over US$1.5 billion (BD 654 million). On the refining side, Bapco is looking beyond 2012 – at its refining capability to give itself a competitive advantage and better position to capture the opportunities that future market environments may offer. This initiative has been named as the Refinery Master Plan Project.

“We must contribute to and promote the development of the non-oil sector and regional infrastructures: transport, communications, education, and health services”


O&G. How do you see the Middle East region developing over the next few years with regards to its oil and gas sector? What will be the key issues, challenges and success stories? AS. The concern related to human resources and skilled manpower remains at the top of the list. There is a need to sustain production levels in an efficient manner so as not to rob future generations of their chances at development and enjoying the hydrocarbon generated wealth. Another area that needs our immediate attention is how to ensure security of our installations, transport and supply routes. We need to conduct detailed assessments of our security vulnerability issues and concerns, and implement viable remediation measures to reduce any perceived risk. We need to go full steam ahead with our commitment to energy conservation. This will require a new way to look at projects aimed at energy conservation. Most NOCs grant local subsidies per their respective government legislations for local consumption of oil and gas products. For economic justification of energy conservation projects we need to adopt the more realistic free market prices for utilisation of gas and oil products. Bapco also plans to accelerate the implementation of all projects aimed at enhancing the environmental performance of our installations. We need to ensure that any hiccups and belches from our stacks have virtually no impact on the communities that live in the vicinity of our plants. The dream is to achieve totally flare-less refinery operations. We must contribute to and promote the development of the non-oil sector and regional infrastructures: transport, communications, education, and health services. This is the opportune time to make heavy investments in R&D and promote academia in the region. The new-found oil wealth has created a boom in the construction industry and as a result there is a tremendous pressure on available real

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estate. When the Bapco refinery was being built back in the early 1930s, we just drew a line in the sand and claimed a “Leased Area” large enough to minimise impact of our operations on nearby communities. Bahrain is a very small island and we no longer have the luxury of using space as a risk mitigation measure. O&G. In line with best practice, BAPCO has created an EHS policy that integrates the functions of occupational health, industrial safety and environment. Can you tell us more about this? AS. Bapco is fully committed towards the protection of the environment, the health and safety of its employees, contractors and the surrounding community as stated in its EHS Policy and guidelines. Bapco also recognises the importance of minimising the environmental impact associated with all its operations and sound environmental management forms an integral part of its business philosophy. When someone asks me how many safety officers there are in Bapco, my answer is the entire workforce; i.e. about 3200. In line with best practices, we have embarked on a new initiative called Behaviour Based Safety. BBS is designed to ensure involvement

in H&S matters by all employees and contractors. The programme implementation commenced in November 2006 and will be completed by end of 2009. The Industrial Safety Committee (ISC) launched Behaviour Observation Obtains Safe Trends (BOOST) processes across the company in the first quarter of 2007. The process is expected to take 24 months to fully mature and has the following objectives: • Reduce exposure to injuries • Increase engagement of all employees in safety • Move to a more proactive safety approach with upstream measures • Improve safety behaviour, attitudes, conditions, culture and systems In response to Bahrain Ministerial Order No.10 in 1999 (based on Amiri Decree No.21 with respect to the environment in 1996), which prescribed limits for emissions to air and discharges to water, Bapco carried out a review of its compliance status with the legislation and identified the gaps between the current performance and the requirements of the legislation. A comprehensive environmental compliance plan and programme was agreed with the Government General Directorate of Environment and


Wildlife Protection (EWP). These projects were included in Bapco’s Strategic Investment Program. O&G. BAPCO is one of the founding members of RESCO (Regional Clean Sea Organisation) and the company is an expert in oil spill response. Do enough oil and gas companies take these safety issues seriously? AS. All the regional major NOCs from Saudi Arabia, Qatar, Kuwait, Oman, Abu Dhabi, Dubai, Iran and Bahrain, including Saudi Chevron, are members of RECSO. A major membership drive is in place requesting all the national tanker companies of the region to join. Bapco takes its responsibilities very seriously in this matter. Bapco recently signed a five-year alliance mobilisation agreement with the world’s largest international oil spill response organisation, OSRL/EARL (Oil Spill Response Limited and East Asia Response Limited). Bapco wants to ensure that it has the very best protection for the Kingdom of Bahrain and its territorial waters because of the high risk posed due to heavy shipping of crude oil and products in the Gulf region. It is vital that response time to an oil spill is within the first two to four hours otherwise it becomes difficult to combat a spill effectively. The key to RECSO’s success is and will be “mutual co-operation”. We all recognise the mammoth challenge before us in view of the sheer volumes of barrels being transported from the region day in day out. The governmental environment agencies have an equally significant role to play in this matter. This is why RECSO must maintain an effective working relationship with another organisation; namely the Regional Organisation for the Protection of Marine Environment (ROPME) and its marine wing, the Marine Emergency Mutual Aid Centre (MEMAC). In my view co-operation and mutual aid in combating oil spills and the clean-up operations that follow are extremely important. But more important are the oil spill prevention efforts. One key area in this is sharing by tanker companies of past performance information. The Lloyds List therefore provides vital information to port authorities in this respect. Operators with sub-standard or defective vessels can be identified and remedial measures can be implemented to safeguard the Gulf. Bapco has developed a comprehensive oil spill contingency plan. It is company policy that any pollution incident at sea or land that might get linked to its facilities and operations will be promptly addressed, the first priority in all cases being to prevent the pollution from happening in the first place. However in the event of an incident, a comprehensive oil spill contingency plan has been put in place to mitigate the consequences on the environment at sea or land. In addition a number of marine assessment studies have been carried out to assess the coastal ecosystem of the Bapco Refinery over the last 21 years by well known Swedish experts from the universities of Stockholm and Kalmar. The previous assessments have indicated a significant improvement in the quality of the effluent outfall from the refinery. The last assessment was carried out in April 2007. „

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The tip of the iceberg Gabriele Peri, of GE Oil & Gas, says a smarter approach to petroleum production is needed if we are to meet the energy demands of future generations.


y 2030 an estimated 65 million more barrels per day will be needed to outpace demand growth and reservoir depletion. It's no news that significant challenges lie ahead, but what is relatively new is a more holistic view of oil and gas development. Globally, there is a greater intertwining of industrial, environmental, social and broader economic growth interests. So when the people at GE Oil & Gas talk about sustainability, we are considering all of these aspects together for the long term.

Local commitment There has been a key shift in resource location combined with a shift of control away from private corporations to host nations. Shareholders have been joined by a much wider range of stakeholders as national oil companies strive to extend the economic benefits of oil and gas to their overall populations. GE Oil & Gas has always recruited local employees and invested in local facilities. But in recognition of recent industry shifts, we have significantly increased local training initiatives and decentralised more manufacturing and service resources so that decision-making authority and technological prowess are heightened in every region. Our newest facilities are in Qatar (4000 m2 including metallurgy lab, five welding stations, DEA and X-ray) and Algiers (at 15,000 m2 it’s our largest service center and a Center of Excellence for both GE Oil & Gas and GE Energy portfolios). With this approach, we help increase sustainable employment, investment and educational opportunities at the community level – because oil and gas aren't the only natural resources upon which the future depends.

Environmental responsibility This is no longer just corporate goodwill, but a firm reality for regulatory compliance and a normal cost of doing business. As a result, a standing mandate for our engineers is to find, wherever


possible, more opportunities for reduced emissions and increased energy efficiencies. Our DLN-1 upgrade for Fr5 gas turbines reduces NOx emissions by as much as 63 percent. Our worldwide fleet of BCL compressors has the capacity to prevent more than 49 million tons of CO2 emissions annually. iCenter remote monitoring and tuning services optimise plant performance and reduce emissions across a wide range of equipment and applications. Our pipeline integrity solutions reduce downtime

GE Oil & Gas technologies for enhanced oil recovery increase well exploitation by 30 percent. Our equipment easily operates in the highest-pressure applications of 820+ bar. Our turbocompression technologies enable the largest-capacity LNG plants and the most sour gas applications. We recently extended ethylene train capacity beyond 1.2 MTPY. Most recently, our VetcoGray and Hydril Pressure Control technologies helped set the world record for deepwater drilling.

“Resources are now farther from markets, deeper below the surface, more challenging to extract and more difficult to refine. The future depends on imagination and innovation” and enable safer long-term operation in high consequence areas. Our teams even see opportunities to help outside of oil and gas – like the recent modification of robust steam turbines and centrifugal pumps to withstand the extremely high number of start-up/shut-down cycles in Concentrated Solar Power plants.

Leading technologies Resources are now farther from markets, deeper below the surface, more challenging to extract and more difficult to refine. The future depends on imagination and innovation.

Equally important are the ongoing efforts to make our technologies more economically viable for customers. Global Services teams inject our latest technological advances to extend the useful operating life of aging equipment. Our product structuring programme has moved design and manufacturing away from extreme customisation to reduce cycle times and increase reliability. Like our customers, we have invested considerably in this industry and we have a great deal riding on its future. Our goals are realistic and our outlook optimistic. Sustainability is at the core of who we are. n

Gabriele Peri has more than 10 years of GE experience, all in the oil and gas business. He started his GE career as a marketing specialist within the Aftermarket Services division and progressed to a Marketing Communications Co-ordinator role. In 2000 he moved into HQ marketing in the Oil & Gas business where he heads up Global Marketing Communications for GE Oil & Gas.

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perations at Shell and Aramco’s SASREF joint venture are to receive a major boost following the signing of two contracts with Petrocon Arabic Limited (PAL) and Yokogawa Middle East (YME).The two companies will carry out phase two of the refinery’s Instrumentation Master Plan (IMP) – a project worth around US$90 million which will help ensure business continuity and reliable operations at SASREF’s joint venture plant which has a current production capacity of 305,000 barrels a day. O&G met SASREF President Abdulhakim Al-Gouhi to find out more about the refinery’s operations.

O&G. What is the significance of the deal signed between SASREF and Petrocon Arabia Limited and Yokogawa Middle East, for the refinery’s IMP? Abdulhakim Al-Gouhi. SASREF signed two of the main IMP project contracts back in middle of 2006. The first with Petrocon Arabia Limited as the Engineering, Procurement, and Construction Management Contractor. The second with Yokogawa Middle East as the Main Automation Contractor. This project is the second and final implementation phase of the Instrumentation Master Plan programme. This is based on ensuring business continuity and reliable operations at SASREF’s plants for the next decade and beyond supporting the company’s vision to best in class performance in the Asia-Pacific and Middle East region


SASREF’s leading edge technology, optimal utilisation and obsolescence abatement will further boost its international competitiveness as a pacesetter refinery.

O&G. What will the IMP involve? AG. There will be a total replacement of the refinery’s obsolete relay based Instrumented Protective System (IPS or Safeguarding system) and relevant obsolete field instruments. The refinery’s obsolete Distributed Control System (DCS) and relevant obsolete field instruments and quality measurement instruments, will also be replaced as will any other obsolete standalone automation systems and applications. Theses upgraded systems and applications will be integrated with new facilities within the IMP programme. O&G. How challenging is it to recruit and retain a strong and skilled workforce to work on the IMP programme and across all divisions at SASREF? AG. It is a major challenge. In SASREF, our focus since the beginning has been to continuously feed the organisation with fresh Saudi graduates and develop them via structured training and development programnmes. Once they join the workforce, they continue learning via career progression schemes. We also recruit highly skilled people capable of supporting them. While in the short term this approach has made our staff a good target, it

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HISTORY OF SASREF has been serving us well over the longer term. Furthermore we regularly benchmark and review our compensation package to be among the market leaders in the region. O&G. What would you say are the biggest challenges currently facing the oil and gas industries in the region? AG. The uncertainty created by high fluctuation of commodity prices in the market is a significant challenge facing these companies. There is a scarcity of technical resources, which can make it more difficult products to the market place. Suppliers are also taking longer to deliver goods and services. All of these factors result in the higher cost of capital projects.

1981 Pertomin and Shell sign a joint agreement to establish a refinery, envisioned as one of the most modern refineries in the world
 1982 Construction of the refinery starts 1984 Completion of the refinery and start-up of the first unit

 1985 Completion of start-up

 1986 Inaugurated on the December 23, 1986 by the Custodian of the Two Holy Mosques, King Fahad Bin Abdulaziz 1988 Debottlenecking from 250,000 to 305,000 barrels per day 1989 Saudi Arabian Marketing and Refining Company (SAMAREC) takes over Petromin’s share

O&G. What areas of SASREF’s operations most require investment at present? 1993 Saudi Aramco AG. We are focusing our investment on areas; SAMAREC’s share which will secure business continuity and margin growth over the longer term. We have two on-going projects with those two objectives. The ULSD (Ultra Low Sulphur Diesel) project aims to produce a premium Euro 5 Diesel (10 ppm Sulphur), targeted for the European market, which has adopted a higher standard of environmental related product specification. It is currently under construction and is expected to be complete before the end of next year. This project helps to achieve both objectives of securing business continuity and also margin growth from the early implementation to benefit from the product premium for sale in Europe. The SCOT (Shell Claus Off-gas Treating) project aims to achieve a higher standard of adherence to the local environmental regulations. SCOT is a process using Shell Technology to reduce SO2 in the stack gas,


Crude oil supply and NG supply agreements



O&G. How successful has the partnership between Shell and Aramco at SASREF been? AG. From SASREF’s point of view the partnership has been a success. We have technical service agreements with both Shell and Aramco whereby we enjoy access to technical resources from both parties as and when required. In addition, both are marketing our products oversees, while supply of crude AGREEMENT is secured via Aramco.

50% 50%

50% Saudi Aramco

Shell International Trading Middle East

Product offtake agreement


O&G. What new technology is being developed to improve the efficiency of the operations at SASREF? AG. With the three projects already mentioned (IMP, ULSD & SCOT) we are implementing new technologies in the area of instrumentation and adopting the latest standard in design during the project design stage for energy efficiency for the on-going project. SASREF has also adopted a system of energy efficiency monitoring at all its processing units and participated in benchmarking with other refineries.


Saudi Aramco

O&G. What health and safety challenges does SASREF currently face? AG. The biggest challenge is the continuous enhancement of our health and safety culture at a time when a large number of newcomers are joining our workforce and we are working with many contractors.

takes over

Shell Saudi Arabia (Refining) Ltd.

Saudi Aramco

mainly at the existing Sulphur Recovery Unit (where sulphur is removed from our crude fractions). This is purely meeting a business continuity objective to secure our license to operate via compliance to the higher environmental regulations standard. We are also exploring other opportunities for longer-term growth and synergy opportunities with local industries, particularly the petrochemicals industry.

Technical service agreements Saudi Aramco Shell Global Solutions Internat

O&G. How do the two companies plan to continue working together going forward? AG.Both Shell and Aramco are investing substantial amounts of money on constructing additional facilities such as the ULSD project. With their support and expertise, we continue to study and explore other opportunities for growth and margin enhancement that are feasible to implement over the coming three to five years. 

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Khalid G. Al-Buainain, SVP of Refining, Marketing and International at the world’s largest oil and gas company, Saudi Aramco, offers O&G an insight into the challenges ahead in these difficult economic times.


arly in my Saudi Aramco career, I cut my teeth as a young engineer and as a superintendent in producing operations both in the North and the South, as well as gas operations at Uthmaniyah. So I know first hand just how critical and complex upstream operations are, and understand the significance of these achievements not only to Saudi Aramco and the Kingdom, but to the entire industry and in fact the global economy itself.

Economic woes An issue which is on the minds and the tongues of many people these days, not only here in the Kingdom but elsewhere around the globe, is the impact of the present worldwide economic situation on Saudi Aramco, and in particular on its portfolio of major industrial projects. If you have picked up a newspaper, read a magazine, watched television, listened to the radio or visited the internet at any time recently, you will be well aware that the global economy is in the midst of one of its most


serious crises in many decades. In rapid succession, we’ve gone from the collapse of a housing bubble in the US as a result of defaults in the subprime mortgage sector, to the collapse or buyout of some of the world’s most storied financial institutions and the evaporation of interbank and consumer credit markets. Stock markets around the world have plummeted as a result, with hundreds of billions of dollars wiped off the value of equity holdings. Unfortunately, we are now familiar with a whole new lingo: ‘CDOs’ or collateralised-debt obligations; so-called ‘ninja’ loans made to people with ‘no income, no job or assets’, and of course the infamous ‘toxic debt’. And yet it appears that even though more than a year has passed since the implosion of the US housing market, no one is quite sure to what extent banks, insurers and re-insurers, and indeed the global financial system as a whole, are exposed to such bad debts and junk loans. To date, governments around the world have spent an estimated US$3.5 trillion to bail out banks and provide additional liquidity but it’s still not clear




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Demand for oil Of course, all of this doom and gloom has had a negative impact on petroleum demand, which is down roughly eight percent from last year. The markets have taken their cues from both the economic slowdown and this rapid stock-build, with light sweet crude prices touching levels last seen in the spring of 2007. At the moment, the US$147 a barrel high seems just a distant memory. Clearly this is a turbulent time for the petroleum industry as a whole, given the widespread economic uncertainty and destruction of demand that we are currently witnessing. But what do these developments mean for Saudi Aramco, and in particular, for the various megaprojects which we are developing? When it comes to our new crude oil increments and gas expansion projects, the impact of the present economic turmoil will be minimal. By and large, our upstream projects are self-financing, or ‘corporate financed’, meaning that we are not reliant on the banks or credit institutions to finance our expansion programmes. However, the need to bring in additional volumes of oil in a contracting market will be examined carefully. Of course, we already possess substantial spare crude oil production capabilities, in keeping with the Kingdom’s longstanding commitment to maintain 1.5 to two million barrels per day in spare capacity. Coupled with today’s softening demand picture, this capacity gives us an additional cushion when it comes to project timetables and commissioning activities, and contributes to our operational flexibility in the area of crude oil production. When it comes to our downstream joint ventures, including our export-oriented refineries and our integrated refining and petrochemical projects, I can tell you that our partners are still highly committed and anxious to see these projects move forward. I think it is realistic to say that financing these megaprojects through borrowing in a tight credit market will be a challenge. However, because of the uncertain nature of the global financial crisis, it is really too early to tell what sort of fallout there will be for the funding of these projects. In addition, any such impact will be a function of the generally tight global credit market and the internal lending considerations of banks and financial institutions themselves, rather than a reflection of the long-term economic viability of these projects, which remains positive.

“Clearly this is a turbulent time for the petroleum industry as a whole, given the widespread economic uncertainty and destruction of demand that we are currently witnessing”

whether either the banking sector or the stock markets have hit rock bottom. Even more worrying is the fact that, at present we are moving from a crisis in the financial markets to a slowdown in what people call the real economy: Main Street and the high street as opposed to Wall Street and the City. A number of major global economies appear to be on the edge of a recession, or already in one. Even rapidly developing and expanding economies like China and India are experiencing flatter growth rates: China’s GDP grew roughly 10 percent year-on-year for the first three quarters of 2008 – two and half percent less than last year, while India’s central bank recently cut its forecast of 20082009 GDP growth from eight to 7.5 percent. While those are still astounding rates of growth, consider that analysts estimate China must maintain annual GDP growth of eight percent simply to absorb new jobseekers. Then consider that as a result of the slowing global economy, the United Nations is now predicting that some 20 million people around the world will lose their jobs by the end of this year, and that the total number of unemployed men and women across the globe will top 200 million for the first time in history.


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On the bright side, the declining commodity prices that are a by-product of the global economic slowdown, will help to reduce the estimated price tags of these projects, as the cost of materials like steel and copper fall sharply. In addition, equipment like drilling rigs and building cranes as well as the qualified professionals needed to operate them will likely be in greater supply as a result of cancelled or delayed projects elsewhere in the industry, and in other parts of the global economy such as the construction and basic infrastructure sectors. As a result, short-term project economics may actually benefit from the current financial turmoil, and companies with a lot of cash will come ahead.

Impact on projects But I would argue that the whole question of the impact these shortterm market gyrations will have on Saudi Aramco and its projects is somewhat misguided because of the very nature of our business and in particular, because of the nature of our business model. Just as we have for many, many decades, we look to the long-term, so the day-to-day noise generated by the markets doesn’t matter very much when it comes to Saudi Aramco’s project portfolio.

than a sprint, and why the oil business is not for the faint of heart or the short of breath. In fact, given the long lead-times involved in petroleum industry projects, we may actually be poised to catch the bounce as the global economy recovers, energy demand picks up, and our new facilities come on-stream. But even if the global economic recovery proves to be some way off, the only way these investments don’t make good business and economic sense over their useful life spans is if you believe that rising economies like China and India will cease to grow; that the billions of people living in those markets will no longer want to enjoy a more prosperous and affluent lifestyle; that they are not interested in providing greater economic and social opportunities for their children; and that overall energy demand will somehow decrease even as the total population of the planet increases. I for one don’t see any of those scenarios coming to pass, and therefore I remain bullish on Saudi Aramco’s plans for the future and our business portfolio of tomorrow. Our ship may have encountered choppy seas as a result of the current economic crisis, and we may be in for a bumpy few months. But at Saudi Aramco, we set our course as the world’s foremost supplier of energy a long time ago, and are both committed to and capable of reaching our chosen destination, no matter how hard the storm around us may blow or how dark and gloomy the skies above us may seem. A few weeks ago I was in Canada, visiting one of the oil sands production facilities there in Alberta. It was a vast open-pit mining operation incorporating powerful earth moving equipment, huge dump trucks, vast amounts of heated water used to create slurry, and massive bitumen extraction and upgrading units to process it. It was truly an incredible operation from both a logistical and a technological perspective. But while petroleum production from Canada’s oil sands has doubled over the last 10 years, it still totals only about 1.2 million barrels per day roughly equivalent to the production of our upcoming Khurais increment alone, and just one tenth of what Saudi Aramco’s total crude oil production capacity will be at the end of this year. If the folks I met at that facility are willing to go to such extremes to tap even a small fraction of the crude oil we produce, think about the significance of what the Kingdom and its petroleum sector contribute to global energy markets.

“Given the long lead-times involved in petroleum industry projects, we may actually be poised to catch the bounce as the global economy recovers, energy demand picks up, and our new facilities come on-stream”

Let’s face it: our facilities are designed and built with 40 or 50-year time horizons in mind. We know without a doubt that the massive hydrocarbon resource base is there and therefore we know for certain that these facilities will still be in our operational portfolio when our sons, our daughters and even our grandchildren are the ones producing and processing our oil and gas. No one today could tell you what the Dow was doing when we began to produce Ghawar or where the FTSE index was when Safaniya was developed, and in the future the world will only remember that Saudi Aramco brought sufficient crude oil, refining and petrochemical capacity on-stream when it was needed, where it was needed just as we have done for 75 years. Furthermore, short-term market volatility is nothing new to our industry; as the well-known energy analyst and historian Dan Yergin has said: “Cycles of shortage and surplus characterise the entire history of oil.” Over the last decade, for example, we’ve seen WTI prices as low as 12 and as high as US$147. It’s a similar picture in refining, where refiners made a killing between 2004 and 2006 after having haemorrhaged money for years. These chronic boom-and-bust cycles are why successful petroleum enterprises view their activities as a marathon rather

Responsibilities At Saudi Aramco we have been entrusted with the world’s largest reserves of crude oil and its fourth-largest natural gas reserves. We are charged with operating, maintaining and further developing the planet’s largest petroleum production network; processing that hydrocarbon energy; and supplying oil, refined products and natural gas to domestic and international markets in a timely and reliable fashion. And that is why as the world’s economy continues to grow – billions of our fellow men and women will increasingly look to us to meet their energy needs, so that they might realise the promise of prosperity for themselves and for generations to come.


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s oil and gas companies face increasing pressure to raise their safety standards, the OGP is working to expose the truth about the real dangers threatening workers in the industry. Its research on the subject makes surprising reading – revealing that commonly held beliefs about the biggest safety hazards in the oil and gas industry are in fact wrong, as OGP Executive Director Charles Bowen testifies. Describing the results of the latest research carried out by the organisation, he reveals that vehicle incidents were the biggest hazards facing oil and gas workers in 2007: “For 2007, the OGP report recorded 2.91 billion hours worked in the upstream industry, covering the activities of 38 companies in 93 countries.The data showed that the largest causes of fatalities in upstream operations were vehicle incidents. These accounted for 29.9 percent of deaths recorded – a figure consistent with performance throughout most of the previous decade.” Bowen went on to say that as a result of its findings, the OGP had published a report on Land Transportation Recommended Safety Practice. He acknowledges that raising oil and gas companies’ health and safety records

is still a work in progress – despite figures showing improvements in safety standards in 2007. According to the OGP’s annual safety report, there was a “marked improvement” in upstream industry safety performance in 2007. Although a total of 87 people were killed in incidents relating to upstream activities, that represented 28 fewer fatalities than in the previous year. The fatal accident rate (FAR) was 3.0 deaths per 100 million hours worked, a 24 percent improvement over 2006’s FAR. There was an even more significant drop in the frequency of lost time injuries (LTIFs), which decreased by a third from 0.99 per million hours worked in 2006 to 0.66 in 2007. Bowen describes these results as “encouraging” but says they indicate a need to raise standards further: “Encouraging though these improvements are, they should be seen within the broader context of a decade’s performance. Though the overall trend is positive, recent figures suggest the industry has reached something of a safety plateau. The challenge ahead is to achieve a significant and sustainable safety improvement.” Before it can reach this goal, however, the industry faces big challenges, he goes on to say, citing the pressure on companies to dig deeper

LIVES IN THE BALANCE Despite the fact that oil and gas companies are facing mounting pressure to reduce fatalities, hundreds of their workers are killed every year. Diana Milne meets Charles Bowen, Head of the International Association of Oil and Gas Producers (OGP), to find out why.


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as hydrocarbons diminish as creating major safety issues. These include marine risks, as companies explore deeper underwater for new sources of oil, and risks incurred from working in harsh climatic conditions such as the Arctic: “The deeper the industry has to go, the greater the heat and pressure of oil and gas deposits. This naturally has safety implications. So does the location of production facilities, which are increasingly to be found offshore in deep water,” says Bowen. “Greater water depths introduce, by definition, additional marine risks. Looking ahead, as the upstream industry moves its search to areas such as the Arctic, operations in severe cold will create new safety challenges for equipment and personnel.” Another challenge facing the industry is the fact that it is ageing – both in terms of personnel and facilities. Bowen says there is an urgent need to

But while staff with the right attitude can make a difference to a company’s safety record – successful safety performance relies on a combination of high tech solutions, behaviour and physical barriers, says Bowen who stresses that there is no silver bullet to solve all safety issues: “Improved control and detection systems improve safety within our industry, but we should not underestimate the human element, nor the basic barriers such as personal safety equipment. For example, cars have become much safer, with better brakes, ABS, steering, tyres etc. Fatalities have been reduced with safety belts, airbags and crumple zones. The key to safety, however, is the driver’s behaviour.” In terms of what the OGP can do to further encourage oil and gas companies to raise their safety standards Bowen acknowledges the need for it not just to produce historical data on incidents logged by companies, but also to publish information that will predict future trends and enable com-

“The deeper the industry has to go, the greater the heat and pressure of oil and gas deposits. This naturally has safety implications” recruit skilled personnel to replace those that have reached retirement age, taking valued skills and experience away with them: “The upstream industry is ageing in terms of people and the facilities they operate. These are global issues, as true for NOCs as it is for IOCs. The cyclical nature of the industry over the last 30 years has led to a particularly large proportion of experienced people arriving at retirement age at the present time. This implies a massive loss of knowledge and experience in an industry which is seeing high levels of activity. Ensuring that this knowledge and experience is not lost remains a major challenge for the industry.” He goes on to say that ageing equipment and facilities are also posing a significant threat to oil and gas workers. “Older assets such as production installations, platforms and offloading facilities are also subject to wear and stress. That is why asset integrity is a priority issue for OGP, involving a wide range of disciplines including design, construction, production, maintenance and safety engineering.” According to Bowen there is no consistent difference between the safety standards employed by national oil companies or independent oil companies – both he says face the challenge of encouraging the development of a safety culture among their staff: “There is no general rule about which is safer. Much more relevant is the safety attitude that prevails in the local culture as well as the wider corporate culture. The challenge for all companies is to develop the right safety culture, and to ensure that it applies across all its sites. One should never underestimate the influence of a local manager who may have a very positive effect, or the opposite.”


Charles Bowen panies to stay one step ahead of potential problems. “Traditionally, the industry has concentrated on historic performance data, such as the annual safety performance indicators report produced by OGP,” he says. “Essential though this information is to create benchmarks and targets, the challenge now is to create leading (rather than lagging) indicators that actually give warning of potential problems and can be used to influence future performance in the areas of health and safety.” And with the pressures on oil companies showing no sign of abating, anticipating the increased threats they will face from digging deeper in ever more remote parts of the world will be the only way for the OGP to ensure a sustained reduction in fatalities in its next annual safety report. 

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KEEPING SECURITY TIGHT Oil and gas companies’ operations often stretch the globe, making them particularly difficult to defend against theft and sabotage. But without the right action plan the consequences could be disastrous and extremely costly. Industry expert Alec Owen gives his thoughts on security and suggests what needs to be done. O&G. What do energy companies need to do to protect facilities and mitigate risks, especially the area of counterterrorism? Alec Owen. In overall terms, the most important thing to do is to have a security plan, a response strategy and a response mechanism in place. Sure, you need to be able to detect and identify threats to facilities but this is of little value without an action plan outlining what to do when a break-in does occur. There are two major risk areas to be managed, firstly the protection of oil and gas facilities themselves and secondly, the protection of the oil and gas transport infrastructure – the pipelines. Each of these areas needs to be addressed and a different solution is required for each.

ducing countries, higher oil prices make it even more attractive for thieves to steal product from the pipelines through illegal tapping. O&G. From your experience, are there any unique security/surveillance issues that companies face in the Middle East compared to other parts of the world? AO. The first thing that comes to mind is the extremes. Temperatures can range from near zero overnight to almost 50°C during the day and there are sandstorms and high coastal winds. All of these play havoc with equipment, reducing the life of electronics and literally moving equipment. The Middle East is also one of the most heavily armed regions in the world, with any number of active region-

turer using technology which clearly differentiates between a legitimate intrusion event and naturally occurring and environmental events such as high winds and sand storms, virtually eliminating nuisance alarms. Our technology can also detect intruders on perimeter fences and activity around oil and gas transmission pipelines. n

“There are two major risk areas to be managed, firstly the protection of oil and gas facilities themselves and secondly, the protection of the oil and gas transport infrastructure – the pipelines” O&G. We have seen companies appointing heads of security to deal with the concern. Why do you think the oil companies, particularly the majors, have intensified their security efforts in recent years? AO. As the price of crude oil has increased, oil has become more attractive as a vehicle for political and financial destabilisation through terrorist activities. Not only could a terrorist cripple an oil-producing country’s income by taking out a refinery, but it could potentially drive up the world price for crude oil, hitting the consumers (mainly in the West) as well. Higher oil prices also mean that any disruption to production can significantly impact the bottom line for oil companies. In poorer oil-pro-


al conflicts driven by history, ethnicity, religion, politics and territorial disputes. These can quickly escalate to an attack on an oil or gas installation simply as a reprisal or to gain territory. O&G. How are your products and solutions aiding security efforts within this sector? AO. At Future Fibre Technologies, we have specialised in the design and manufacture of fibre optic based intrusion detection systems since 1994. Our equipment requires no electronics or power in the field, making it ideal for the hostile Middle East conditions and intrinsically safe for use at oil and gas facilities. We are the only intrusion detection system manufac-

Alec Owen, International Client Manager for Future Fibre Technologies Pty Ltd, has more than 25 years experience in the management and commercialisation of high-tech businesses, specifically in the areas of setting up international distribution channels, international operations, training, marketing and sales support. He holds a Certificate of Technology (Communications) and a Diploma of Frontline Business Management.

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Drilling for black gold Varel International’s Jim Nixon lifts the lid on the challenges of supplying drill bits that meet the strict requirements of the Middle East and North Africa market. O&G. What do you think is the future direction of the oilfield supply business in the Middle East and North Africa region (MENA)? Jim Nixon. The MENA areas are of great importance to the ongoing business of Varel as our company provides both roller cone and PDC drill bits to operators throughout this region. We have worked diligently over the past few years to ramp up our service and support functions in order to increase our presence in the region. Our growth efforts also included placing a regional management and engineering office in Abu Dhabi. We believe this region demands the attention of any growth oriented supply company. We foresee the activity, in this area of proven hydrocarbon resources, continuing to command an increased commitment from the global supply industry. O&G. How are you structured in MENA? JN. The Eastern Hemisphere operations are run from Varel Europe, based in Pau, France. Our activities in Algeria are also directly managed from Pau. We strive to keep as much of the design, development, and drill bit production work we do close to the region, for our customers’ benefit. We perform a great deal of


rock analysis work from Pau, allowing customers to gain the greatest amount of value and efficiency from their use of Varel products. Our Abu Dhabi office and other satellite country offices provide for direct, on-the-ground service and support to local drilling operations. Areas of the Middle East where we are active include the UAE, Saudi Arabia, Kuwait, Egypt, Qatar and Oman. Additionally, we have begun to provide products into Iraq. The Varel approach is to obtain the best available local representation for our products. We want to have knowledgeable personnel on the ground – those who know the area and the conditions that operators are dealing with everyday. Our network then assists our field staff by operating as a support mechanism with engineering and management tools available in both France and the US. O&G. What does it take to succeed in the MENA region? JN. Obviously, a company needs to be serviceoriented, hence our efforts at increasing and supporting this function in the region. Beyond this, a company must have competitive products that meet the local needs. Casing programmes

in the Middle East frequently require very large diameter roller cone drill bits in the top hole and Varel is one of only a few manufacturers of 34inch and 36-inch drill bits. Likewise, there are many applications that present hard and abrasive drilling; these applications typically require specialised diamond and PDC bits which our Pau operation is well suited to deliver. Logistics are also incredibly important in MENA operations. A product must be delivered to the customer in a timely manner, and it must be done consistently in order to gain the trust that builds a long-term relationship. Our office in Abu Dhabi was set up in part to increase our ability to manage logistics throughout the region. Lastly, it is vital that a company be ready to take customer input and their requirements seriously. More importantly, companies have to be ready to act and to fulfill those requirements. The diversity of application challenges in MENA does not allow for an assembly line approach. You have to be prepared to quickly deliver custom, fit-for-purpose solutions for individual customer needs. n

Jim Nixon is the President and CEO of Texas-based Varel International, the largest independent drill bit supplier to the oil & gas and mining industries. Nixon, who has more than 23 years of drilling experience, holds an ONC in Mechanical Engineering and The City and Guilds of London Institute full technician’s certificate in Production Engineering, both from Stow College of Engineering in Glasgow, Scotland. For more information, visit

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Middle East oil and gas companies are investing heavily in security as terrorist groups continue to threaten to attack their installations. Dr Mustafa Alani, Director of the security and terrorism department at the Dubai-based Gulf Research Centre, tells O&G what the effects of a successful attack would be and how companies can protect themselves.


he latest security bulletin of the Dubai-based Gulf Research Centre (GRC) makes alarming reading. It highlights the threats facing oil and gas installations in the GCC from both terrorist groups and state organisations and sends a clear message to these companies to put security at the top of their priority list. According to Dr Mustafa Alani, director of the security and terrorism department at the GRC, there are two main threats to oil production in the Gulf: “There are state and non state threats. The non-state threat is from terrorist activities in the region. The state threat comes mainly from Iran, which has threatened to target oil installations in the GCC if it is attacked by America. If Iran is attacked it wants to deny oil supplies to the West,” he explains. Dr Alani goes on to say that in recent years the extent to which oil production facilities are a target for terrorists has increased considerably. He says this is due to a shift in doctrine on the part of terrorist groups, such as al Qaeda: “We have witnessed a major shift in the philosophy and justification of al Qaeda. They declared a strategy four years ago to attack


oil. Before that oil was not allowed to be attacked because it belonged to the nation, not to the ruler or the government.” He uses the examples of recent foiled attacks in Saudi Arabia and Yemen to demonstrate how serious these groups are about putting their threats into practice. In 2006 a group of militants attempted to attack the Abqaiq in Saudi Arabia oil plant by trying to ram the gates of the plant with cars carrying explosives. The attack was linked to al Qaeda and was the first direct assault on a Saudi oil production facility. In the same year suicide bombers launched attacks on two oil facilities in Yemen. Authorities successfully foiled the attacks and four bombers and a security guard were killed. While both those attacks were unsuccessful, Dr Alani warns that the consequences could have repercussions across the world should an attack succeed. “If the attack on Abqaiq had been successfull it would have caused a fire that would have lasted for several days. This would disable the site, which produces around 7 million barrels a day. If you lost 50 percent of those barrels it would have had a huge impact on oil markets all around the world and on market psychology. Oil is very easy to attack. The installations are huge and they cannot be

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hidden. The product is highly flammable so it’s easy to ignite and any attack on it brings huge results.” The most devastating impact would be felt, he warns, if a terrorist group attacked multiple sites across the GCC: “To be really effective they would need to launch multiple attacks in a number of states at the same time. For example if they attacked two or three oil producing states, such as Kuwait, Saudi Arabia and the UAE, this would have a huge impact on the psychology of the market.”

It is the biggest investment in security so far. We are talking about a cost of billions not millions.” Companies themselves are also placing a higher priority on recruiting security staff internally with this function having become one of the most important within these organisations: “Heads of security have become some of the most important people in the company. They are equal now to the heads of safety,” says Alani. As well as investment in extra personnel to protect oil installations, companies are investing heavily in technology such as satellite monitoring systems, security cameras and sensors: companies can invest in human or technical “We have to live with the security. But you cannot substitute humans with technolreality that oil installations ogy or vice versa. You have to invest in both in order to be and transportation are under successful.” threat and this must be taken He goes on to say that it is crucial for oil and gas companies to invest in security to protect oil exports from seriously. We are not dealing maritime threats. This is particularly the case for oil being with a crisis, we are dealing transported on the Strait of Hormuz, which is used to with a permanent issue” transport around 20-30 tankers on average per day. “The Iranians have been saying for the past two years Alani points to the example of Iraq as the greatest example of what that they are going to close the Strait of Hermes and prevent oil shipment can happen when a company’s oil installations are attacked. Referring to from the region,” says Alani. the attacks on Iraqi oil installations by insurgents since the beginning of He says that while oil and gas companies are clearly placing a high the US occupation in 2003, he cautions: “We must learn from the lesson priority on security – they must not become complacent because the of Iraq. The attacks on the installations there were terrifying. Two years measures have worked so far. ago the country was not able to export one single barrel of oil.” A report “We have to live with the reality that oil installations and transportaby the Gulf Research Centre into the attacks describes them as “remarktion are under threat and this must be taken seriously. We are not dealing ably effective”. “Within a relatively short period, attacks by different inwith a crisis, we are dealing with a permanent issue and it has to be dealt surgent groups were able to inflict huge damage, rendering many sectors with as a permanent issue. The investment in it must be sustainable.” „ partially or totally non operational. Production, ABOUT THE GULF RESEARCH CENTRE refining, distribution or export of oil have all been affected or suspended for long periods of time”. The Gulf Research Center (GRC) is an independent research institute located in Dubai. The GRC Because of these risks, companies are inwas founded in July 2000 by Abdulaziz Sager, a Saudi businessman, who believed that in a world vesting heavily in security – both to protect the of rapid political, social and economic change, it is important to pursue politically neutral and perimeter and interior of their facilities. Governacademically sound research about the Gulf Cooperation Council (GCC) countries and disseminate ments are also investing in security measures, the knowledge obtained as widely as possible. The GRC seeks to provide a better understanding of says Alani, who explains that it is the responthe challenges and prospects of the GCC. sibility of the state to protect the areas outside oil sites. “Companies are investing in their own security – the security of their installations, their offices and their staff. They are also relying on governments to protect the area outside the installation. So there are two levels of protection.” He gives the example of the Saudi government which has invested in an additional 35,000 oil protection forces to protect the outside of Aramco’s facilities across the Kingdom: “The oil protection forces used to be about 10,000. Now the government has injected an extra 35,000 personnel just to protect oil installations. Many of them will have come from security or military institutions and they will have had special training to understand the new class of oil protection.


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Activities and Services: Research: Conducting research on Gulf issues. Providing education solutions: through Implementing the ‘knowledge program’, which targets higher management circles in the fields of politics, economics, business administration and security from an international perspective and within a framework of coordination with international universities and institutes. Offering training courses for students, especially postgraduate students, government and non-government employees on scientific research methods and applications of modern technologies in research. Media: Monitoring news coverage around-the-clock of events and developments in the Gulf region as published, broadcast and/or tele-cast by local, regional and international media. Consultancy: preparing studies and offering expert consultation to governmental and nongovernmental organisations in different fields within the centre’s primary concerns. Publishing books on topics in the field of social sciences and/or humanities.


15/1/09 09:14:07

Next Generation Oil & Gas Summit 30Th March – 1St April 2009 Le Méridien Al Aqah Beach Resort, Fujairah, United Arab Emirates The Next Generation Oil and Gas Summit is a three-day critical information gathering of C-level technology executives from the oil and gas industry.

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A Controlled, Professional & Focused Environment NG O&G ’09 is an opportunity to debate, benchmark and learn from other leaders. NG O&G ’09 is a C-level event reserved for 75 participants that includes expert workshops, facilitated roundtables, peer-to-peer networking, and coordinated technology meetings.

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The best of both worlds Hybrid CCTV systems can offer the best solutions for protecting facilities, says Harun Özerdem.


oday, a CCTV system is considered as an essential facility for any industrial area. For several decades analogue CCTV systems had a successful track record of securing assets. More recently, as digital technologies found their way into every corner of life, CCTV system suppliers have also changed their approach to solution design by adding IP systems to their product ranges. This has provided many new options but it has also generated many new considerations for customers trying to select the optimum CCTV system solution. The selection process has also not been helped by the polarisation between traditional security suppliers and the IT-based newcomers.

Pros and cons Looking at analogue and digital systems from my standpoint in a security company which embraced IT technology at a very early stage, I see a variety of advantages and disadvantages for both technologies. Analogue has in its favour that there is a very wide variety of equipment available and it is guaranteed compatible. Analogue systems deliver real-time video and support latency-free pan/tilt operation. They achieve high reliability by using dedicated networks. Security industry professionals have much more experience in analogue than in IP. But on the downside, analogue has limited flexibility after installation and limited potential for expansion. The rates of innovation and improvement are also low.

As Geutebruck’s area manager for Eurasia, Harun Özerdem is responsible for sales activities in Turkey, the Middle East and the Balkan countries. He is an electronic engineer with 14 years’ experience in the security industry in Germany and Turkey.


Pure digital systems offer considerable advantages as a result of their greater flexibility and their ability to operate with higher picture resolution. They are also easy to install and offer high levels of innovation. However, the non-compatibility and complexity encountered when integrating different types of equipment and systems present difficulties in using this technology. Besides this, there is the practical consideration that there is still a general lack of competence and experience in this technology in the industry.

both ‘hard’ functional criteria and ‘soft’ selection criteria. In planning a hybrid CCTV system involving both analogue and digital elements, the main ‘hard’ considerations should focus on features such as bandwidth management, scalability, compatibility with different IP cameras, easy and transparent operation, provision of a transparent and homogeneous setup, effective picture analysis options and open and documented interfaces, as well as the robustness and stability of the system.

“In my experience, hybrid systems are usually the best available solution to complex security problems” Best solution for complex problems If you want to protect high-risk areas and valuable assets, then it makes sense to combine the advantages of both technologies and to choose a hybrid system. In my experience, hybrid systems are usually the best available solution to complex security problems. They are very flexible, future-proof and enable the selection of the most reliable elements and proven technologies. Rather than be distracted by the technical arguments for one CCTV technology or another, it is important that you, the user, focus on what you want your system to do. The whole idea of modern video systems is that they should provide just the right information at just the right moment. Achieving this critical task is not just dependent on good system planning but on the accurate definition of the user’s needs and then the application of the appropriate selection criteria to fulfil them. Finding the best system involves using

In the ‘soft’ category come selection criteria such as: the continuity and stability of the supplier, the quality of the consulting service offered, issues of trust and reliability, the reliability and compatibility of the products, the potential for expanding and making system enhancements at a later date, and the support structure which is available.

Legacy and longevity A hybrid system should still give operators and administrators uniform interfaces with the same ease of use, look and feel, whatever the technology behind them. A well designed and implemented system can combine legacy equipment with innovation and deliver top performance and flexibility while keeping your options open by providing a smooth cost-efficient migration route to pure IP if that is what the future demands. n For more information on Geutebrueck CCTV systems call +49 2645 1370, email Carmen Lahr at Alternatively, visit

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O&G. Is there a serious shortage of qualified HSE officers among oil and When you get a graduate and put them through an HSE qualification gas companies in the Middle East? it doesn’t necessarily mean straight away that they will be an instant great Justin Smith. Gulf based companies have always operated under complex HSE professional. It takes time to take someone from the classroom to a and challenging conditions. HSE is a very demanding role and not only withposition of competency so they can go out on site and manage these very in the Gulf countries but also anywhere around the world good HSE people complex risks. are still a scarce resource. In the Gulf this is coupled with the fact that the pool of nationals these countries have to O&G. How high a priority is HSE for oil and gas companies pick from is very small and that alone makes conditions in the Middle East? “Traditionally HSE very difficult for them. JS. The oil and gas industry has put HSE very high up on the has been perceived as a less glamorous corporate agenda. As a whole it’s a very high profile industry subject than the O&G. What are the reasons for this shortage? with high profile stakeholders. Lots of the organisations we more high profile JS. Traditionally HSE has been perceived as a less glamwork with are governmental and they have lots of resources ones that graduates orous subject than the more high profile ones that gradto invest in HSE. are attracted into” uates are attracted into such as marketing, finance, So if they need additional financial resources to attract operations and strategy. good people they do have that. I would not say necessarily that the pool of candidates But HSE is a very scarce resource, whether you’re a Gulf is too small but that the lifecycle of taking someone from a graduate age to company trying to attract people or a private international oil and gas compaa qualified safety officer with experience takes quite some time. ny. There are always opportunities for improvement when you’re in a situation where workers are operating in very high-risk environments in large volumes with complex chemicals and machinery. You could have a plant with thousands of people or tens of thousands. You’re managing risk on that vast scale. O&G. How competitive is the talent war for HSE professionals in the Middle East. JS. At the moment what we’re seeing is that because the pool of good people is finite and the demand for oil is growing, we’re seeing some competition between countries. People are being headhunted from where they work. We’re seeing that with nationals and expatriates and that increases the overall expenditure that the company would have to outlay on HSE. Almost all of the companies we work with try to make it a core competency and it is certainly a source of competitive advantage when you are tendering, whether you are an upstream or a downstream company. HSE is the main priority when you’re winning contracts or you’re looking to expand projects or work with international partners.

Safetyin numbers

Skills shortages are affecting every area of the oil and gas industry – but when it comes to health and safety departments the shortages could be affecting lives. O&G asks Justin Smith, Business Manager of the British Safety Council what his organisation is doing to boost the recruitment of health, safety and environment (HSE) officers in the Gulf region.


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O&G.What is the BSC doing to help raise health and safety standards among O&G.What are you doing to encourage young people to pursue HSE as Middle Eastern oil and gas companies? a career? JS. Developing workforce competency across the board is an area we’re JS. One area we’re involved in is developing HSE skills before people enter working on with a number of companies with the aim of developing workthe workplace. er competency away from the traditional safety teams. Historically compaThis year we will develop around 80,000 school children in the UK. nies’ safety resource would be a safety department with a number of safety From 2009 we will roll the scheme out internationally. The BSC has officers who would manage HSE for the whole organisation. committed 10 million dollars of its charitable funds to support that proWe’re encouraging companies to move away from that model and degramme over the next ten years because statistics show that people velop skills and competencies lower down the emwithout formal HSE training when they enter ployee pyramid. By developing core competencies the workplace for the first time are 50% more for a far greater number of employees you have at risk than their adult equivalents. The British Health and Safety Council much more of a team focus on safety. The cumuWe’re also in discussion with the Bahrain recently acquired e-learning solutions lative effect of all those people contributing, even Labour Fund and Bahrain Training Institute provider ComplyWise – which Justin if it’s a small amount, is very powerful. about an initiative to develop 200 18 years says will enable it to enter a new era of olds. learning: O&G.Can you give an example of how this approach They recognised that their pool of HSE “We are going through an acquisition has worked for a Middle East company in practice? professionals is far smaller than they need with ComplyWise, one of the UK’s leading JS. We’ve been working with a number of high proparticularly as their economy and oil and gas health and safety e-learning providers. file companies in the region. One particular one in industry is expanding. What they are targeting This will very much help us to North Africa has developed that model and has now is 200 under grads with the two-year proachieve our goal of being able to train developed around 500 to 600 people with recoggramme. At the end of the programme there large volumes of people. nised HSE qualifications. will be 200 qualified junior safety managers. The company provides e-learning We run a series of new one-day qualificatraining solutions on a range of different tions, which we’re rolling out internationally. It has O&G.How much specialised technical training subjects focusing on health and safety. given these people a complex new skill set and they do HSE professionals in the oil and gas inWe’re very excited about this are now plugged into their safety performance and dustry require? because it will mean that health and have seen around a 20% reduction in lost time inciJS. It is a highly technical area. There is a sesafety training is just a click away for dents. The quantity and the quality of their reporting ries of core management skills then also some thousands of people around the world. has gone up dramatically. There is a completely new very specific industry expertise as well. For instance oil company employees set of channels reporting into the safety department That changes depending on which part of based on an oil rig will be able to easily through the line managers creating much more of a the industry you are working in. For instance access the training materials. departmental focus on safety instead of one revery different skills are required for those The company’s e-training solutions source trying to tackle this enormous safety requireworking in the upstream or the downstream are already very big in the UK and people ment which is almost impossible. sides of the business. Both require core HSE access the services in 30 countries competencies then you would need speacross the world.” O&G.How are you able to provide training for cialised skills depending on the area you are Middle East based companies from your UK base? working in. JS. We’ve been working with ME companies and nationals for around 20 years. Traditionally people would have travelled to O&G. Why does the Middle East oil and gas industry in particular reour UK corporate centre to take our qualifications here. But what we’ve quire a stronger focus on HSE? done is bring the services far closer to our customers so they are far more JS. The demand for its products is rising all the time. The industry is able to take part in these development programmes. managing very complex risks each day, and the size of the sites is vast We’ve recently developed series of fairly unique short course qualifiwith thousands and often tens of thousands of workers to manage. cations. The main difference with those is that the organisation can take There’s always pressure to increase reservoir yields and make new them on board on a licensed basis and run the qualifications themselves. finds as the demand for energy increases. Companies face a number That takes away the reliance on external companies. of HSE risks as they go into higher risk environments such as very deep A key aspect of our mission is empowering organisations to have the water. ability to run safety training courses internally. These companies are working with a very diverse mix of cultures. We’ve developed a channel whereby we provide materials that comThere’s lots of different behaviours and value systems and for managers panies can give to employees for self-study. Alternatively they can go down trying to develop a positive safety culture that is very challenging. When the classroom route or they can take a blended approach. It’s a far easier you are increasing workforce competencies and you are involved in way of training volumes of people and gives companies discretion over the workers away from the safety department that helps create a far more type of language that they use in their training materials. positive safety culture, which has a number of obvious benefits.


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Spreading the word on safety Hugh Williams, Chief Executive of the International Marine Contractors Association, describes how his organisation is working to raise safety standards worldwide.


afety is of prime importance in our industry. It is essential that there is a full understanding of the need for self-regulation as a vital tool and its implementation by those who understand its challenges and proper solutions. That is a key reason why IMCA was formed in 1995 and has steadily expanded throughout the years. IMCA seeks to:

• Strive for the highest possible standards with a balance of risk and cost in relation to: Health and safety; technology; quality and efficiency; environmental awareness and protection • Achieve and sustain self-regulation in the industry • Ease the free movement of equipment and personnel globally • Achieve equitable contracting regimes • Provide the framework for training, certification, competence and recruitment to support and sustain the industry globally • Resolve industry issues • Promote co-operation across the industry It encourages improvements in quality, health, safety, and environmental and technical standards through the publication of guidance and information notes, codes of practice, and by other appropriate means. These include safety cards and videos (the latter with subtitles in many languages including Russian); and our major annual seminar and various subject-specific workshops and smaller seminars. Members receive regular briefing notes on technical issues, regulatory developments, and news appropriate to their own activities.

contractors who often work for different clients all around the world it is a potentially repetitive, expensive and avoidable burden. As it is, contractors working in the Barents Sea can use the same IMCA Guidelines as those off Sakhalin Island or in the Caspian Sea.

Technical reports and guidance As a trade association we produce guidelines for a wide variety of marine operations. At first these were for diving and dynamic positioning. We then went on to publish guidance for safety, training and competence, marine, ROV and survey operations. In an industry, which is highly regulated, because of its economic, social, environmental and political profile, IMCA has established a respected list of industry guidelines that has become widely used and accepted. The spread of IMCA’s guidelines becomes ever greater as more members join the association and IMCA produces more documents. In addition, the penetration of the documents increases gradually as clients require the guidelines to be used as a condition of contract. The larger clients in recent years have moved towards using a single approach worldwide for all their

“If an industry does not selfregulate, then some other body will impose its own regulations, either in the form of government legislation or through client requirements”

Self-regulation is vital In common with many other contractor trade associations, self-regulation has always been an IMCA goal. Trade associations do not regulate in the way that legislators do. They provide guidance to members and work to update and introduce new guidelines wherever there appears to be a need. Members working to those guidelines is a way of ‘self-regulating’, rather than looking to clients or government for regulation. Self-regulation is the logical result of action by industry participants to address a number of concerns. If an industry does not self-regulate, then some other body will impose its own regulations, either in the form of government legislation or through client requirements. If this happens, contractors face the prospect of each client and each government stipulating its own, varying requirements. This causes considerable strain to each contractor and extra, unnecessary costs. The strain includes finding out the different requirements, tendering with allowance for them and then complying with them for each project so for


offices and projects in all regions. The approach used is often based on IMCA guidelines. In addition, as the industry moves into new geographical zones, where often there are few detailed government requirements for marine construction, IMCA guidelines have been used as an available, acceptable reflection of industry ‘good practice’ for the government or local client to use without having to “start all over again” from a blank sheet of paper. Currently IMCA publishes some 200 guidance documents and technical reports. They are very much a definition of what IMCA stands for, including widely recognised diving and ROV codes of practice, DP documentation, marine good practice guidance, the ‘Common Marine Inspection Document’, safety recommendations, outline training syllabi and the IMCA competence scheme guidance. In addition to the range of printed guidance documents, IMCA also produces safety promotional materials and circulates information notes and safety flashes.

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In pursuit of efficiency

As with the DP and lifting incident reLearning from our mistakes is a key porting system, any safety incident part of business improvement and the shared with IMCA is anonymised and pursuit of efficiency. Avoiding repeating checked with the contributor and, where an incident or accident saves lives, time relevant, organisations such as equipand money. ment suppliers, before being issued. IMCA has been at the forefront of tryAlthough this industry is huge, there are ing to help members help themselves in sometimes only a few suppliers of certain this way with two separate but connected pieces of specialist equipment. Sharing initiatives – incident reporting and safety concerns about equipment quickly with flashes. colleagues throughout the industry realWe maintain a database on DP incily helps avoid future incidents. dent reports from dynamically positioned vessels stretching back over the past 25 Joining forces years. User-friendly incident reporting IMCA has formed a Security Task forms help to make the task relatively easy Force to work on security related topics. for our members. Each year the reports are These include issues such as personnel collated and an analysis of the incidents is in transit, health, piracy, the implications issued. This helps establish trends in inciof the International Ship & Port Facility dents for discussion with vessel operators, Security (ISPS) Code and general securiequipment suppliers, training establishty in the workplace and onboard vessels. ments and others in order to address parThe advent of the ISPS Code which ticular issues. The results have played an increased awareness of terrorist and piraimportant role in keeping the DP fleet opcy issues, and heightened health conHugh Williams was appointed Chief Executive of IMCA in erational, safe and acceptable to authoricerns has led our members to ask us to 2002. Prior to joining IMCA he had worked in marine ties by feeding into improvements in bring all manner of maritime security iscontracting and consultancy with responsibilities in designs, procedures and training. sues under the banner of our newly esengineering, project management, business development Now we are seeking to mirror the tablished task force. Its establishment and on the commercial side. His previous employers were achievements of the well-established DP provides us with the opportunity to work Heerema Marine Contractors, and consultants Global system with collection of data on incidents together with our members’ clients (priMaritime and Noble Denton. This followed training as a involving lifting operations and equipment marily oil and gas exploration and proChartered Civil Engineer at ports and harbours consultants, – a new project, but with the same aims of duction companies) in various regions, Rendel Palmer and Tritton, with a period on the Thames helping members help themselves. share our concerns and explore the comBarrier site on the resident engineer’s staff, which included There is, of course, nothing particumon interests of both clients and their diver training at Fort Bovisand. larly new about safety flashes and alerts contractors. IMCA is the international trade association representing – a wide range of organisations generate, Through our members and their well over 300 offshore, marine and underwater engineering receive and circulate them. Those issued clients this will also help us to encourcompanies in over 35 countries. It was formed from the by IMCA are focused on members’ work in age host governments to play a more amalgamation of AODC (The International Association of offshore construction, which can be vesactive role. We believe that our member Offshore Diving Contractors) founded in 1972 and DPVOA sel-related. Work on a vessel is often difcompanies have a great deal of valu(The Dynamic Positioning Vessel Owners Association) ferent from onshore because of confined able knowledge to share – the Task founded in 1990. spaces, multiple hazards and vessel moForce is a useful means for helpful diation. The safety flashes also cover unique logue across the board aimed at inequipment and operations, diving, ROVs, engine rooms, heavy-duty creasing safety and security levels for everyone’s benefit. cranes and winches and specialist survey tools. Even so, many accidents The most recent development within the Task Force is the publication still stem from simple avoidable mistakes. of ‘Guidance on Travel Security’, which is being followed by a convenient The safety flash system aims to let colleagues know about an incident pocket card for individuals summarising key points from this guidance. or newly discovered hazard and to share experience, learning and action Work is also proceeding on a number of further projects including guidto try to avoid someone else repeating the same mistakes. Our published ance for the verification of third party personnel; guidance on threat risk safety statistics indicate that this system has contributed to the early draassessment in respect of security issues; a guide to the ISPS code; and matic improvements and continued steady improvements in the annual figguidance on a common security audit format. n ures – but “zero accidents” is still a good way off, and we urge all in the industry to continue to work towards this goal. Further information on the work of IMCA is available from


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Attracting the top talent Mahesh Puducheri, Senior Director for Talent at Halliburton, explains how he is building a long-term pipeline of engineering talent. or Mahesh Puducheri, Senior Director for Talent at Halliburton, changing industry perception is fundamental in addressing the skills shortage in the oil and gas industry. He believes that in order to attract young talent to the industry it is crucial that the industry is perceived as the important, innovative and interesting workplace that it is. In order to succeed in his mission, Puducheri is building relationships with universities. “By building more strategic education partnerships and working with key universities we are identifying the long-term talent pipeline.” Eighteen months ago, Puducheri began targeting the key go-to markets, and chose specific universities in each of those countries, narrowing the list from 17 to six major countries that he was keen to focus on. “We are constantly in contact with these universities, helping them put together a curriculum architecture, so that the students have an expectation of the oil and gas services industry, and are well prepared to take on jobs within the energy industry,” he says. Puducheri believes that many students lack knowledge and exposure to the oil and gas industry, and perceive the industry as a low-tech, manual job. “It is changing,” says Puducheri, “thanks to the media and increased information about the industry. And we are working with companies, who are involved in perception surveys on campus, to talk about the current technology that the students who’ll be coming for work for us will train in when they leave college.” Puducheri is also keen to work on Halliburton’s college recruiting brand, ‘Go Further, Faster’. He wants the brand to define the engineering department and the graduates that he plans to hire from the various campuses. He believes that it will take time for perceptions around the industry to change, but every effort is being made to convince students that they will be working with the very latest hightech technology. “We are mapping their needs in terms of what we are doing in technology development areas, as well as in development



and improvement areas so that it really matches up to their needs,” says Puducheri.

Mind the gap Over the next five years, the gap between new graduates and experts leaving the industry is estimated at almost 500,000. Puducheri believes that it is vital that everything possible is done to close that gap. However, there is not just one silver bullet that can solve this potentially major problem. He says that changing the mindset of potential employees to think of oil and gas as a clean and environmentally friendly industry is key. “Knowledge transfer will also be a key issue that will help close the gap,” believes Puducheri. Puducheri says that the knowledge management systems currently employed at Halliburton are “pretty good”; particularly in the way that knowledge is exchanged and transferred. He is currently working with companies who have already engaged in the retired network and is trying to find out the people who would be interested in coming back to work for Halliburton on a part-time, mentoring basis.

Talent pipeline The knock-on effect of a shortage of skilled and qualified engineers can affect business in a big way. “If you think long-term,” says Puduch-

eri, “the effects are going to be heavy – business is going to become harder and it will be much more difficult to find oil.” Puducheri sees some companies, who don’t have the right people in place, investing in technology and other assets as an alternative, but believes it is not going to solve the skills problem because it is people who run the technology and are key in bringing in their knowledge and expertise. He goes on to say that once you have secured the talent it is vitally important that it is developed to its full potential. In the past the oil and gas industry has been slow to embrace the development and retention aspects of recruitment, but Puducheri sees this changing. “We’ve got to be able to attract the best fit for the job and we should be able to continually accelerate the development of that person,” he says. Puducheri goes on to explain that talent at Halliburton is identified through a process of leadership competencies that are assessed against each candidate. “We use a two-level process to talk about strengths and weaknesses, development areas and potential career moves. After the talent has been identified, Puducheri explains that they progress through a number of programs, including a one-year leadership development course.

Long-term thinking Going forward, Puducheri is keen to make the systems side of processes more robust as well as continue to invest the same amount of senior management time and energy. He wants to send a clear signal to people that Halliburton takes the recruitment, development and retention of talent seriously. “As people come into supervisory roles we try to train them around the importance of evaluating talent and understanding the difference between performance and potential, so we prepare them for frontline thinking,” explains Puducheri. “The time we spend around people and development processes and talking about key talent in the company really pays off in the long-term, and that’s very important.” „

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FINAL WORD Incorporating geophysics into geologic models


Graeme Eastwood on how a new approach has made geophysical data available to engineers.

ost E&P companies have a substantial investment in seismic data. This data contains a wealth of information about the reservoir properties between the well locations, information of great interest to geologic modelers, if they could use it in their geologic models. Geologic models are generally built from well data, making the model very reliable at each well location. But what is going on between the wells? Seismic data is an obvious source for inter-well surface data, but for reservoir properties it is inherently incompatible in its measuring system – time instead of depth and samples instead of grid cells and layers. Loading the seismic data into a well-based grid has been a serious challenge, but a model that combined the two datasets would be valuable to geologists, geophysicists and engineers alike. One approach is to load the seismic data directly into the corner point grid (CPG) using depth (geometric) resampling. Unfortunately, the difference in measurement systems and grids results in assigning the seismic time values to the wrong cells in the CPG, potentially populating, for example, a carbonate layer with shale properties or vice-versa. Smearing of reservoir property values outside the stratigraphic layering in the CPG is unavoidable without a common grid linking the seismic and CPG worlds.


Uncertainty A simpler, commonly used approach collapses the seismic data into maps, using an average for volume. This, unfortunately, means that the 3D information in the seismic is lost and also results in errors when used to propagate well


data. The uncertainty caused by these errors can be severe. Volumetric and reserves calculations can be inaccurate, and obtaining a history match can require substantial and often unrealistic adjustments in the reservoir parameters. As a result, seismic information is generally only used as a very loose constraint and adds minimal value to the model.

Graeme Eastwood is Region Manager in the Middle East with Fugro-Jason, a leading provider of seismic inversion and reservoir characterisation products and services. He joined the company in 2003 as Business Manager in Kuala Lumpur and has 16 years of experience in the seismic and reservoir characterisation sectors of the industry with Fugro and Schlumberger.

Accuracy A new approach preserves the seismic property data in terms of geomodel stratigraphy, enabling correlation of well and seismic datasets with far greater accuracy. Geostatistical modeling can then be performed using the correlated data as a strong 3D trend. This constrains the geologic model to agree with the seismic information between wells, dramatically reducing variance among the

geostatistical realisations. This, in turn, leads to better estimates of recoverable reserves, reducing overall uncertainty. Because the model more accurately matches both well and seismic data, history matching can usually be achieved more rapidly. Fugro-Jason’s RockScale software module, part of FastTracker, correlates the CPG and seismic grid in a neutral stratigraphic model grid (SMG). Using Zonal Adjustment, Rockscale manages the transformation of properties from seismic grid to SMG ensuring that they are structurally and stratigraphically correct when transformed from SMG to CPG. This includes detailed structural and heterogeneous models with many faults and sub para-sequences. When Zonal Adjustment is applied, flow units and associated net-to-gross are properly preserved. The advertisement opposite illustrates the difference in models generated using depth resampling and the SMG supported by RockScale. It shows the original seismic-derived porosity model (top), depth resampling (centre) and RockScale Zonal Adjustment results (lower). Seismic data is tremendously helpful in understanding reservoirs when it is presented to each geoscience discipline in a usable form. With the addition of 3D seismic, geologic modeling becomes more accurate, reducing uncertainty and enhancing well positioning throughout the field management process. For engineers, including seismic properties in the reservoir model makes history matching faster and improves volumetric calculations. Using a model that accurately integrates well and seismic data also ensures better reserve estimations. „

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O&G MENA 3  

Oil & Gas MENA magazine. Issue 3. January 2009. How Libya’s top oil official Shokri Ghanem is opening his country up to the IOCs and their t...

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