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THE ETHICAL GIANT Saudi Aramco’s CEO Khalid Al-Falih on how his company is taking responsibility for its actions (Page 32)

OIL, TOIL AND TROUBLE www.ngoilgasmena.com • Q3 2009

Why crime pays for the Somali pirates holding supertankers to ransom (Page 38)

LONE RANGER Inside Egypt’s largest independent oil company (Page 54)

A NEW DAWN? How nanotechnology could transform the oil and gas industry (Page 26)

Final Cover-HIGH RES.indd 1

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ED NOTE O+G MENA:may09 06/08/2009 11:00 Page 7

FROM THE EDITOR 7

Big problem, small solution

Dwindling oil supplies have created an urgent need for scientists to develop nanoscale solutions to boost oil exploration.

I

t is no surprise to hear that, despite difficult economic conditions, oil and gas companies are pouring million of dollars into funding for nanotechnology research. Investment in oil production facilities and recruitment may have been slowed by the downturn, but as this issue’s cover story reveals, the world’s biggest oil companies have ramped up their investments in a technology which they believe could hold the key to the future of the industry. I first came across the concept of nanotechnology in oil and gas research when I attended the Next Generation Oil and Gas MENA summit in the UAE this March. There, Ibraheem Assaadan, Saudi Aramco’s VP of Exploration, gave a keynote speech on the groundbreaking work being done at the oil giant’s own research lab to develop “resbots”. In other words, nanosensors small enough to be injected through rock pores then capable of collecting information from the oil reservoirs, which could later be downloaded. I must admit that, to me, the idea of a reservoir robot

“The miniaturisation challenges facing the development of nanotechnology are parallel to those that faced microprocessor technology” Sean Murphy, Senior Manager, Advanced Energy Consortium (page 26)

sounded like the stuff of science fiction. Indeed, it is very difficult to grasp the concept of a robot that is one hundredth the width of a human hair. But the work that is going on to develop this technology is very real. Indeed, 10 of the world’s biggest oil companies are paying US$1 million each to fund the US-based Advanced Energy Consortium’s work. Their mutual co-operation on this issue signals how urgently these companies view the need to locate the world’s remaining oil reserves; rival oil companies don’t usually join forces to develop new exploration technology. The latest figures from Faith Birol, Chief Economist of the International Energy Agency, indicate that peak oil could be just over 10 years away. And according to the AEC, 60 to 70 percent of all discovered oil is left in the ground because it cannot be extracted. With these numbers in mind, there’s no room in the equation for cost cutting when it comes to R&D. Several challenges must be overcome, however, before this technology can become a reality. The

“You can have all the data in the world but if you don’t have the right people, the data is useless and the investment is wasted” Ibraheem Assaadan, VP of Exploration at Saudi Aramco (page 48)

scientists involved admit that there is a significant gap between the concept of nanosensors on paper and it actually becoming a reality. The scales they are talking about are invisible to the human eye – yet in order to be effective, nanosensors must be equipped with sophisticated technology, including location sensors, the ability to collect data on their surroundings and somewhere to store that data. Nobody knows how far scientists are from solving this dilemma and whether a solution will be found before oil runs out. Meanwhile, scientists in the US and the Middle East are working towards a common goal – finding the oil and gas industry’s silver bullet. n

Diana Milne Editor

“The complexity of the customer volume and ensuring that your data is always available for decisionmaking are big issues for us” Sina Khoory, Group IT Manager at Emirates National Oil Company (page 80)


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9-10-11_NGOGMENA_AUG09:july09

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Page 9

CONTENTS 9

The ethical giant An insight into President and CEO of Saudi Aramco Khalid Al-Falih’s outlook on the energy sector and why the world’s biggest oil company is taking responsibility for its actions

Small but mighty

26

Rapidly depleting hydrocarbon supplies mean scientists are in a race against time to delay the dreaded peak oil scenario. We investigate why nanotechnology could be the small solution to a very big problem

32 38

44 New horizons Dana Gas’ newly appointed CEO, Ahmed Al Arbeed, talks exclusively about the company’s plans for global and regional expansion

Oil, toil and trouble The hijacking of the Sirius Star supertanker was the most daring attack to date by Somali pirates. Can the oil industry ward off potential deadly and costly attacks or is it merely a sitting duck?


9-10-11_NGOGMENA_AUG09:july09

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CONTENTS 10

47

At the sharp end

A seismic shift Risky business

123

48 PROJECT FOCUS 88 Mohammed Amin, EMC

74 Eastern promise

112 Forging ahead

TPAO’s head of drilling, Zaher Ataya, reveals the company’s plans to conquer the Middle East region

Abdulaziz Alhajri, CEO of Borouge, Abu Dhabi National Oil Company’s refining subsidiary, on why his company has no intention of delaying its investments

80 The power of technology 48 At the sharp end Saudi Aramco’s Ibraheem Assaadan discusses the effects of volatile oil prices, the constant strive for technological development and winning the war on talent

ENOC’s Sina Khoory discusses the importance of IT for the group

90 Going seismic With Frank Crawford, Chief Geologist at Groundstar Resources

54 Lone ranger Behind the scenes at Egypt’s largest independent oil company, Pico Petroleum

94 The fight against corrosion Why maintaining and inspecting pipelines is vital in the battle with corrosion

62 Model solution How companies are using 3D modelling to leave no stone unturned in the search for new oil reserves

47 Saleh Barakat, Baker Hughes 53 Eric Adams, Fugro-Jason 60 Jan Strom, Subsea Norway AS 66 Daniel Hitzman, President of Geo-Microbial Technologies 71 Chris Sugden, AGR Petroleum Services 116 Martin Tallett, EnSys Energy

102 Prudent pigging PPSA member Jack Rankin advises on how best to track pipeline pigs

68 Sold to the highest bidder Samuel Ciszuk takes a look at the implications of northern fields being dropped from Iraq's bidding round

EXECUTIVE INTERVIEWS

106 A sticky problem The challenge of sediment in oil and gas pipelines

INDUSTRY INSIGHT 86 Antoine Abi Antoun, Patton Electronics 92 Dr Elmer Dougherty, Maraco


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CONTENTS 11

NEXT BIG THING 58 Walid S. Al Shoaibi, Shoaibi Group 72 Mark Wolfe, Geosoft

ASK THE EXPERTS

130 Safety success

REGULARS

Hans Jorn Johansen assesses what can be done to enhance current safety standards

The brief

132 Digging deep Hunt Oil’s Mark Sturgess reveals the company’s plans for Middle East expansion

136 The importance of safety 64 Per Audun Hole, GeoKnowledge 78 Cliff Berry, Centek 110 Mohsen Salehabadi, Pall 120 Matthew Kenna, Alkhorayef Petroleum

118 All in a day’s work A snapshot of life at Saudi Aramco with Senior Workover Engineer Khalifa Al-Amri

123 Risky business Budget cuts and untrained contractors are just two of the challenges faced by Qatar Petroleum’s Zaher Ataya. Diana Milne reports

Chief Executive of the IMCA, Hugh Williams debates the issues

140 A new chapter Saudi Arabia’s Minister of Petroleum and Mineral Resources, Ali Al-Naimi, on the first meeting of the Saudi Society for Energy Economics

14 The brief 15 News in pictures 16 News roundup 24 In my view 144 Diary dates

ROUNDTABLES 96 Pipelines 126 Health & Safety

60

Going subsea

96

The power of technology

80

What’s in the pipeline?


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UPFRONT NG O&G MENA4:25 June

5/8/09

14:56

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UPFRONT THE BRIEF

14

STALEMATE Iraq’s long overdue licensing rounds proved somewhat of a damp squib with just BP and China’s CNPC landing contracts. So where does Iraq and its ramshackle energy sector go next? It’s often billed as the land of opportunity. An Arab state boasting gargantuan supplies of hydrocarbons, vast swathes of the land still unexplored, and

rock-bottom extraction costs. The international oil companies (IOCs) want to get their hands on Iraq’s oil and Iraq wants to get its hands on badly needed

overseas investment and technisouth but those who rejected cal knowledge. However, in a terms included the likes of recent televised auction ExxonMobil, BP and just one of the bidConocoPhillips, China’s CNPC ders for eight conShell, Gazprom, will operate the tracts for oil and Sinopec and Eni. gas fields in the A total of 32 barrel Rumalia country accepted IOCs were declared field in the south the oil ministry’s bidders for a potenterms. BP and China’s tial six oil fields, thought CNPC will operate the 17 bilto hold 43 billion barrels, and lion barrel Rumalia field in the two gas fields, but the majority of

17 billion


UPFRONT NG O&G MENA4:25 June

5/8/09

14:57

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UPFRONT

THE BRIEF

15

stand,” she says. “They need to fields attracted little interest. reassess whether they are willing The crux of the problem was to take a cut in profits and that the oil ministry’s offer of whether they want to go into payment for the 20-year service Iraq. The Ministry has to recontracts was significantly less assess how desperate they are to than what the IOCs requestimmediately increase oil proed. BP and CNPC originally duction and have the funds to asked for US$4 a barrel but balance the budget again.” eventually accepted US$2 a barThere are reports that Iraq could rel in order to land the contract. be arranging to hold a second “Obviously the [internalicensing round this month but tional] companies are going to there is still no guarantee be disappointed,” says Nadia that the IOCs will accept Salem from Al Tamimi & Iraq’s terms. Company, the largest law firm in Officially, Iraq has 115 bilthe Middle East during an interlion barrels of reserves view with O&G. “This but this figure is is a huge upset for based on out-dated the IOCs because BP and CNPC originally asked for 2D seismic readthey were exings. The true figpecting a certain ure could be profit margin but eventually acsignificantly higher. and the Iraqis are cepted US$2 But much of Iraq’s oil saying no, it won’t sector is in a dilapidated be that large or lavish.” and aging condition after On the other side of the coin, the decades of mismanagement and disastrous licensing round will lack of investment. The facilities put a serious dent in Oil Minister are also in bad need of repair Hussain al-Shahristani’s ambiafter sustaining extensive damtions to ramp up production age during the US-led invasion from its current level of 2.4 milas well as sabotage and looting. lion barrels per day (bpd) to And with oil accounting for a more than four million bpd in mammoth 95 percent of the the next five years. It’s believed country’s revenue, it’s easy to see that Iraq could eventually raise why Iraq needs to modernise this production to six million bpd, vital industry. “I think the proalthough al-Shahristani freely duction targets can be achieved,” admits that US$50 billion will Salam notes. “I don’t think the be needed to achieve this. negotiations are quite over and it If Iraq can realise its potential, will be interesting to see whether it is forecast that the country these deals can be resuscitated in will rake in US$1.7 trillion over the next few months.” She adds: the next 20 years from the fields “Iraq must have a plan B to get for which it is seeking partners these oilfields back on track with to develop. a slight modification to the Although the disappointtimeline. The oil ministry is ing bidding round has so far going to have to reassess its botscuppered those plans, Salam tom line and how much it is suggests re-evaluation is needed willing to give companies as a from both sides. “Oil compaprofit and decrease their expecnies need to regroup because tation of revenue.” now they know where things

NEWS IN PICTURES

Militants from the Movement for the Emancipation of the Niger Delta (MEND) patrol the oil rich creeks of Nigeria’s Niger Delta. Around 1.6 million barrels per day of Nigeria’s production has been shut down due to violence there according to the country’s oil minister

US$4 a barrel

With the recession impacting on energy consumption, Royal Dutch Shell has announced plans to slash capital expenditure by 10 percent next year and make “substantial” job cuts. The Anglo-Dutch supermajor reported a 67 percent drop in quarterly earnings

Venezuela’s leftist president Hugo Chávez has threatened to fire oil workers who don’t embrace the socialist revolution. Employees of state-owned PDVSA have been ordered to join pro-Chávez trade unions and community groups

Russia is set to start drilling in the Gulf of Mexico after signing a deal with Cuba. Havana suggests there is 20 billion barrels of oil off its coasts, although the US claims the true figure is just five billion


UPFRONT NG O&G MENA4:25 June

5/8/09

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UPFRONT GLOBAL NEWS

16

RUSSIA

VENEZUELA

CHINA

BRITAIN

Gazprom could rein in its spending by as much as US$4 billion this year, according to a report by Reuters. The news agency said Gazprom’s Deputy Chief Executive Alexander Ananenkov had told a meeting chaired by Russian Prime Minister Vladimir Putin that in order to meet plans to install pipes capable of carrying 1.5 million tonnes in 2010, the investment programme would need to total US$21 billion. The gas major had originally earmarked US$25 billion for investment this year. The company needs to invest in the pipes in order to implement several large-scale projects, including the Nord Stream, which will link Russia, and Germany via the Baltic Sea.

Halliburton has revealed the full extent of its financial interests in Venezuela as part of efforts to secure the money it is owed by the state run oil firm PDVSA. In a filing with US regulators Halliburton said it had invested US$265 million in Venezuela by June. PDVSA has run up debts with several international oil companies, including Schlumberger and Halliburton. Last month Venzuela’s oil minister said PDVSA had paid back US$2 billion of the US$7 billion it owed to service providers at the end of last year.

According to reports by Dow Jones, China Petroleum and Chemical Corporation plan to build a refining and petrochemical complex in Shanghai which would increase fuel supply to the city. Dow Jones reported that the company has signed an agreement with the Shanghai governement to clarify its investment in the project, which will be build in the Shanghai Chemical Industrial Zone.

Gas imports should not rise in the UK between 2010 and 2020 – the country’s government has stated. As part of its Renewable Energy Strategy, it aims to cut gas imports by increasing energy efficiency and using renewable power. It aims to reach a 15 percent renewable energy target, which will lead to a reduction in overall fossil fuel demand by around 10 percent and gas imports by 20 to 30 percent by 2020. Energy and Climate Change Secretary Ed Miliband, said: “Depletion of our North Sea oil and gas resources mean that we need to re-think our approach to sourcing and using energy.”

Pakistan’s Ministry of Petroleum and Natural Resources (MPNR) has invited bids for the granting of exploration rights for 53 onshore blocks. The bids were announced at the Petroleum Exploration Promotion Conference in July. Of the 53 blocks, 23 are in high risk, high cost areas, 17 in medium risk, high-medium cost areas and 13 in low risk, low cost areas.

ExxonMobil Corporation and BHP Billiton Limited have approved the US$1.3 billion Turrum oil and gas project off the Southeast coast of Australia. According to reports by Reuters, the Turrum site has reserves of around one trillion cubic feet of gas and 110 million barrels of oil and condensate. ExxonMobil stated that oil production from Turrum would begin in 2011 and gas sales would start from 2015.

LUKOIL has announced plans to invest US$5 billion in gas projects in Kandym and Hisser in Uzbekistan within the next seven years. According to reports by Interfax, the company expects to be able to produce 12 billion cubic metres of gas every year once the gas projects are complete.

PAKISTAN

AUSTRALIA

UZBEKISTAN


UPFRONT NG O&G MENA4:25 June

5/8/09

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UPFRONT

MENA NEWS

17

SAUDI ARABIA

QATAR

KUWAIT

Saudi Aramco has announced it is to start operations at its expanded Ras Tanura refinery by 2014. A statement from Aramco said that it planned to build a 400,000 barrel per day Arab heavy crude oil refinery to enlarge the existing complex to one capable of producing one million barrels a day: “The intention is to generate fuels required by the kingdom, as well as feedstock for the Ras Tanura integrated petrochemical complex with Dow Chemical Company.” It went on to say that contracts for work on the project would be issued by 2010.

Qatar Petroleum and ExxonMobil have joined forces to sell up to US$2.3 million in bonds to finance the expansion of LNG projects. It is expected that the proceeds of the sales will help Qatar Petroleum to double its capacity this year to 62 million tonnes. The sale of the bonds is to be managed by HSBC, Credit Suisse and Citigroup and the bonds are to be structured on a US$500 million issues basis with three-year maturity, a five-year US$1.1 billion bond and 10-year notes worth US$615 million.

Sheikh Ahmad al-Abdullah alSabah, Kuwait’s oil minister, has revealed oil must stay above US$60 a barrel in order to meet the country’s budgetary requirements. He told reporters at a parliamentary meeting: “We will be watching the market very closely. We would not like to see the price go below a certain level so it at least meets our budgetary requirements.” The Arabianbusiness.com news website reported that Sheikh Ahmad said even if oil prices rose above US$100 again, oil production would not necessarily increase: “I can’t increase production without seeing the price and condition of the world economy. All these have to be taken into account.”

A second national and international licensing round has been announced in Algeria by the Ministry of Energy and Hydrocarbon Resources Valorisation (ALNAFT). Oil companies who wish to bid must be pre-qualified by ALNAFT either as an operator or an investor. The bids are for acreage across 10 perimeters distributed throughout sedimentary basins across the country.

Contracts worth US$9.2 billion have been awarded to international companies to set up integrated gas systems as part of Abu Dhabi Gas Industries Ltd (GASCO) projects. The projects include a gas treatment plant at the Habshan Gas Complex and storage tanks for propane, butane and pentane products. A total of 18 companies have been awarded contracts, including a consortium of Japan’s JGC and Italy’s Tecnimont, Hyundai Engineering and Construction, the US company CBI and a consortium of Petrofac and Korea’s GS Construction and Engineering.

ALGERIA

ABU DHABI


UPFRONT NG O&G MENA4:25 June

6/8/09

09:58

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UPFRONT

BEST OF THE WEB www.ngoilgasmena.com

18 EDITOR’S CHOICE

JOIN THE DEBATE The oil and gas industry is under increasing pressure to dig deeper for new supplies and needs cutting edge technology to develop methods of doing this. Health and safety are also strong concerns for oil companies and investment is required into equipment to ensure

BLACK GOLD RUSH An exclusive interview with Dr Shokri Ghanem, Libya’s top oil official and Chairman of the country’s National Oil Corp. www.ngoilgasmena.com/arti cle/Issue-3/Exploration-ANDDrilling/The-black-gold-rush

Although I am loath to admit it, it's clear that we need to see oil prices rise to a fair price if we want to see projects and technology improve, and to see advances in the energy industry overall. That said, whether the oil and gas industry will ever manage to maintain a steady, and fair, price for oil and gas remains to be seen. KELLY TAYLOR Dubai, UAE I think the key issue here is not one of falling prices, but one of volatile prices; oil companies just don't

exploration methods are as safe as possible. There is a serious danger however that efforts to develop these technologies could be put in jeopardy by the volatility of oil prices. There may currently be a slowdown in demand, but companies must not let, what could be a temporary blip, hamper their long term investments in crucial technology.

know what their revenues are going to be from one quarter to the next. Look at BP for example – at the end of 2008 they were pilloried for announcing record profits on the back of the oil price spike, yet July saw half-year profits slump by 57 percent as prices plummeted (try figuring those numbers into your annual budget). My point is, oil prices are always going to fluctuate; firms should therefore be looking at investment as a long-term priority, rather than just slashing budgets whenever prices drop. Investing

MISSION CRITICAL

in technology and people is essential to survival. JAIME WISNIAK Bahrain Price volatility and fluctuating demand aren't hugely relevant in the long term. It is a fact that people will always want oil, just as it is that it will become more difficult to locate and extract. Failing to make investments now is just storing up huge problems for the future. Sure prices are hovering around US$70 a barrel now, but ultimately prices are going to go up and they are going to stay there. It's surely worth preparing for this reality. JOACHIM GETZ Berlin

Meet the man who controls Total’s multi-million dollar IT budget and co-ordinates the activities of 96,000 employees, CIO Patrick Héreng. www.ngoilgasmena.com/article /Issue-3/IT-ANDCommunications/Missioncritical

THE RESULTS ARE IN... On the O&G website we asked how badly our readers thought falling oil prices could affect the GCC property construction boom. Here are the results:

Very badly. This will result in cancelled projects

IN THE FIRING LINE Dr Mustata Alani on why MENA oil and gas companies are investing heavily in security as terrorist groups continue to target their installations.www.ngoilgasme na.com/article/Issue-3/HealthAND-Safety/In-the-firing-line

There will be a minimal impact as demand outstrips supply It is impossible to tell

15%

48%

Reversal of Fortune: Our analysis of the effects of falling prices on oil producers proved the most popular with readers. It included expert analysis from Goldman Sachs, Merrill Lynch and Citigroup. To read more log onto www.ngoil gasmena.com/article/ Issue-3/ExplorationAND-Drilling/ Reversal-offortune

10%

In the short term yes but it will recover by the end of 2009

27%

MOST POPULAR


UPFRONT NG O&G MENA4:25 June

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UPFRONT

COMPANY NEWS MOTOROLA ENTERPRISE MOBILITY Motorola Enterprise Mobility, part of Motorola, has a proud heritage in the Middle East dating back over 30 years, with locations based across the region. Motorola’s presence enables it to work closely with customers in the oil and gas market, ensuring it is alive to the changing expectations and demands of companies which work in challenging environments. Exciting advances in technology are supporting Motorola’s vision of delivering real-time data and services to end users, wherever they may be; supporting them in effectively and safely completing their tasks. Low cost high-performance wireless networks, the integration of Internet Protocol, and automated monitoring equipment, support the seamless flow of company real-time information and communications both inside and outside facilities. From the remotest rig to the far-flung pipeline, refinery and distribution centre teams have the intelligence at their fingertips to dramatically enhance company performance. In the field, Motorola’s powerful, handheld Enterprise Digital Assistant (EDA) computers and rugged scanners – designed to be operated with second nature ease – apply network connectivity to supply users with integrated Push-to-Talk, messaging, email, and various data services. Oil and gas companies use the technology across an extensive range of applications. Highlights include:

1 2 3 4 5

SAFETY Continuously assessing the status and location of field teams and responding more effectively to emergencies ASSET MANAGEMENT Monitoring sensitive equipment (e.g. storage tanks and pipelines) LOGISTICS Enhancing the movement of end products (petrol, jet fuel, paraffin and ethylene) transported by trucks, railroad and pipelines WAREHOUSING Cataloguing and updating equipment inventories in real-time and ensuring that hazardous materials (using RFID tags) are not stored close to other dangerous substances PRODUCTIVITY Delivering real time information and applications to employees

Motorola’s customers include BP, Statoil, Chevron, Halliburton, Dow, LUKOIL and ExxonMobil. For more information about petrochemical solutions please visit www.motorola.com or contact embinfo.emea@motorola.com.

19

PROVED RESERVES AT THE END OF 2008

42

70.9

123.2

125.6

142.2

754.1

Asia Pacific

North America

S & Cent. America

Africa

Europe & Eurasia

Middle East

Thousand million barrels

Source: BP Statistical Review of World Energy

GOING TO NEW HEIGHTS BMS Davinci AS represent your partner of choice for tailor-made hydraulic and electrical driven CTUW (constant tension umbilical winches) and AHCUW (active heave compensated umbilical winches). As a member of the BMS group of companies, we are located in the city of Bryne, approximately 35km south of Stavanger in Norway. Our vision is to expand in the competitive offshore and marine market by offering the best custom designed winches and lifting products on the market. Traditionally, we supply various markets with the well known Bryne winch in standard sizes from 2t to 12t. Based on cast iron rigid frames and a choice of high quality materials, the products have gained an excellent reputation throughout the industry for outstanding reliability, performance and long life. Daily use under maritime conditions for more than 10 to 15 years is not unusual. Following

strategic decisions related to expansion and product development over the years, we have broadened our ability to serve additional offshore and marine markets. We combine traditional, high quality products and knowledge with the latest technology in handling critical operations in harsh offshore conditions. During the last three years we have delivered several electrical and hydraulic tailored special umbilical winches for seismic and other offshore activities. Together with our subsidiary, Ace Technology, we have provided complete packages including radio or frequency remote control systems. Our customer references show primarily shipyards and international oil and offshore related companies. Based on their satisfying experience, most customers have repeatedly made new orders. Besides our home markets in Scandinavia and Europe, our products are operating in China, the Middle East, Australia and the Americas.

For more information, contact Einar J Ronæs at er@bmsas.no or visit www.bmsdavinci.com


UPFRONT NG O&G MENA4:25 June

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UPFRONT COMPANY NEWS

20

A TOTALLY DIFFERENT BALL GAME

REFINERY UTILISATION BY PERCENTAGE 100

By Jacob Freeke, Sales and Marketing Director for Integrated Metering Solutions at ElsterInstromet NV

90 “Seven million m3 of gas is crying out for accuracy.” one of our customers once said. We could not agree more. There is an undeniable need for absolute accuracy when transporting large volumes of gas. We would like to share some views about what we do best – gas metering. This has been our core activity for over 160 years and we still love it. Deviations in gas metering can easily amount to hundreds of thousands of dollars per day. It is here in particular that our Integrated Metering Solutions add value. With smart combinations of the most suitable products, we reduce metering uncertainty while concurrently monitoring all processes. Besides accuracy, it is reliability and confidence that ultimately matter. Here at our Integrated Metering Solutions Division, we are excited about the projects achieved in the past and those still in the pipeline. Our knowledge and experience in numerous partial projects are used continuously to derive and implement a total solution for our customers. Our engineering manager talks passionately about finding solutions within projects: “We do two things: we supply metering equipment as loose components and we offer Total Integrated Solutions. That’s a totally different ball game.” Our products play a significant role within these solutions. We focus on the full process, which we address together with our clients. Our customers want advice. This is a distinguishing factor for Elster-Instromet. One of the ways we help, for example, is by drafting specifications for gas transport companies and gas operators. Once the project is allocated, we provide a turnkey solution in co-operation with the client. The client may provide the civil engineering while we are responsible for project management, technical engineering and any thirdparty purchases. We take on the investment, the maintenance and, most importantly, accurate metering

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North America S & Cent. America Europe Former Soviet Union Middle East Africa Asia Pacific World

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Global oil demand fell in 2008 and so did refinery crude runs. The biggest reduction was in the US, where throughputs fell by 510,000b/d. Crude runs continue to grow in China in support of domestic demand. Meanwhile, global refining capacity grew by 830,000b/d, mainly in Asia Pacific. As a result, global refinery utilisation fell to 84.8 percent, the lowest level since 2003. Source: BP Statistical Review of World Energy

NEWS IN NUMBERS

US$8 billion: 12 million tonnes: 804,000: 200: 20 years: 2013: August 25th:

Quantity Saudi Aramco and Total hope to borrow to build an oil refinery on the Gulf coast Amount Saudi Basic Industries Corp plans to raise its petrochemicals output to by 2012 after posting a 76 percent drop in second quarter profits Barrels per day of oil that Oman hopes to produce by the end of 2009 Number of jobs to be created at the SAMco plant to be built in Jubail, Saudi Arabia, by Dow Chemical Length of a deal signed between Qatargas and polish state owned energy company PGNiG to supply natural gas to Poland Year when, according to OPEC’s 2009 World Oil Outlook, consumption of crude oil will return to 31 million barrels per day Date when Iraq plans to hold a second major energy auction in Istanbul


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UPFRONT

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COMPANY SPOTLIGHT BP, Europe’s second largest company by market value, has emerged as one of the biggest casualties of falling oil prices so far, following the announcement of a sharp drop in its second quarter profits. The company’s half year profits fell by 57 percent to US$5.5 billion compared to the same period in 2008. Its replacement cost profit between April and June was US$3.1 billion, a fall of 53 percent since the previous year. Speaking to the BBC, BP’s Chief Executive Tony Hayward said he expected the global economic downturn to be “long and drawn out”. He added: “We are in turbulent times, volatile and uncertain. But we continue to steer a steady course through choppy waters.” Earlier this year BP announced a sweeping cost cutting strategy that would see it save US$2 billion. Hayward claims it has already achieved this target and that it now plans to cut a

JARGON BUSTER: CRACKING further US$1 billion in costs this year. Speaking to Reuters, Manoj Ladwa, Senior Trader at ETX Capital, said: “BP may not be able to control the price of oil but their measures to streamline the business and reduce costs shows the board is in tune with the ebbs and flows of the market.” BP’s announcements comes on the back of plunging oil prices from the highs last July of US$147 to around US$70 per barrel, which have seen companies cut exploration, production and refining costs, which have doubled since 2004. Despite this, Hayward said BP’s daily product rates rose by four percent in the three months leading to the end of June and its profits rose 30 percent from the first three months of the year, reflecting a slow recovery for the industry.

In petroleum geology, cracking is the process whereby complex organic modules such as kerogens or hydrocarbons are broken down into simpler modules such as light hydrocarbons. The rate of cracking and the end products produced depend on the temperature and presence of any hydrocarbons.

A NEW CONCEPT FOR PROCEDURE MANUALS You know the situation – the gov- that procedures are well-written. ernment inspector asks a question, Procedures need to be clear to the and you know that that informa- user. They need to be as brief as tion is covered and documented practicable, yet detailed enough so somewhere in the company – but that the user understands what is where? PRO-cedures is a method intended. They need to be well-orof writing procedures that cap- ganised and there should not be tures and preserves your compa- any conflicts or contradictions. The ny’s body of knowledge, organises ability to mis-read a procedure should be minimised. There needs it, and provides a way to find to be a sensible way to inspecific topics quickly, clude large items, even if the user is inElectronic such as tables, experienced. drawings, and picPRO-cedures is tures. Electronic state-of-the-art. It provide huge advantages over procedures provide helps to ensure hard-copy paper huge advantages compliance with manuals over hard-copy paper regulations and incormanuals. Use of colour, which porates the best ideas from many different sources. It can be is extremely expensive in hard used in a hard copy format, but copy, is free. Hyperlinks can give its features really stand out when instant access to related informaused electronically. It includes tion and regulatory requirements. techniques that minimise risk With electronics, access to all procedures can be greatly enand liability. As companies are scrutinised hanced. Making revisions is ever more closely by outside parties, much easier with electronic mangood procedures are becoming uals, and it is easy to archive commore important than ever before. plete manuals that were in effect The actions of employees and con- on any given date. All these featractors must conform with the tures, and more, are incorporated written procedures. It is imperative into PRO-cedures.

procedures

YOU CAN QUOTE ME ON THAT “Prices at this time are comfortable, but they are not at the level we are shooting for” OPEC Secretary General Abdullah al-Badri expresses his desire to see oil prices rise above US$70 a barrel


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COMPANY NEWS

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COUNTRY FOCUS: OMAN Oman’s Economic Minister Abdul-Nabi Mekki has announced plans to raise the country’s output to 804,000 barrels per day from 784,000 barrels per day by the end of 2009. Here are some facts about the country:

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A 44 percent increase in GDP growth in 2008 was led by the development of the country’s non oil sectors, which rose by 32.6 percent from US$16.7 billion in 2007 to US$22.2 billion in 2008 Despite a decline in oil revenues due to the global slump in oil prices, Oman’s inflation rate dropped from 13.7 percent in June 2008 to 3.9 percent in May 2009 Oman is not a typical GCC oil producer, as its fields are small and scattered so production costs are higher per barrel than in other GCC countries The bulk of production is carried out by Oman Petroleum Development (OPD), which has a government majority ownership. PDO controls 90 percent of the country’s output The government is keen to attract foreign investment and has increased the foreign participation ratio on joint ventures from 49 to 70 percent

Oman’s population is around 3,311,640, of which 577,293 residents are expatriate

The country’s policy of economic diversification focuses on natural gas, port developments, IT, fisheries, manufacturing and tourism

GLOBAL PERSPECTIVE The latest issue of the US version of O&G featured an exclusive interview with Devon Energy’s Head of Exploration RICK MITCHELL. Devon is one of the world’s leading independent oil and gas companies but Mitchell says he has to always keep a firm eye on the costs associated with drilling. “Time is money,” he asserts. “When you can focus on efficiency and minimise problems, that’s one of the top ways in which you can control your costs.” To read more, visit www.ngoilgas.com

DID YOU KNOW?

According to the PPSA, the first ever pigging operation took place around the year 1870 after Colonel Drake discovered oil in Titusville, Pennsylvania. At first, a bundle of rags tied in a ball was used to clear paraffin deposits from the oil pipeline. Later, bundles of leather were used in place of the rags as leather will swell when wet, creating a tight seal through the pipeline.


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UPFRONT 24 JIM MULVA, CEO of ConocoPhilips, on balancing climate change with energy security Our company has taken a well-defined position. We are very concerned about the potential impact of climate change, and last year we become the only US-integrated energy company to call for a mandatory national framework to address greenhouse gas emissions. Current US climate policy is a key business uncertainty. This uncertainty must be resolved in order for the country and the world to move forward. For this reason, we urge the presidential administration to work with congress to pass effective legislation. And further to exercise world leadership in negotiating an international climate agreement. We cannot focus on climate change alone. We must also meet the challenge of improving our energy security. The tight oil market of early 2008 clearly demonstrated this need. As a result, the public agreed that the US needs more domestic production. This is why a majority now supports environmentally responsible offshore drilling. Any serious effort to reduce emissions would require the greater use of natural gas to generate electricity. But to do this we would need expanded domestic access for exploration and drilling. We could not do the first without the second. So climate change and energy security issues must be resolved together through coordinated policies. We recognise the important role that state initiatives play, particularly in the areas of building codes, urban planning and education. But we oppose a patchwork state-by-state approach. We also believe that an overlay of competing and conflicting regulations, such as separate standards for renewable and low-carbon fuels, would be too costly or even unworkable. We are not strangers to either the risks or the opportunities associated with climate change. And we obviously have a vested interest in helping achieve global energy security. We believe that our industry must be involved in the effort to find solutions to both challenges.

IN MY VIEW


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UPFRONT COMPANY INDEX

25

WHO GOT WHAT FROM A LITRE OF OIL IN 2008

DON’T MISS... 56.7%

UNITED KINGDOM GERMANY

55.3%

ITALY

51.8%

FRANCE JAPAN

How nanotechnology could transform the oil and gas industry and delay the days of peak oil

37.2%

CANADA USA

26 SMALL BUT MIGHTY

50.3%

25.1% 11.5%

Purchase of crude oil (FOB) Industry margin (e.g transport, insurance, refining and other costs) National government taxes

COMPANY INDEX Q3 2009 Companies in this issue are indexed to the first page of the article in which each is mentioned. Abermed 123 Adison 123 ADNOC 112 Advanced Energy Consortium 26 AGR Petroleum Services 4, 71 Alkhorayef Petroleum 120, 121 Aquilex Welding Services BV 115 Baker Hughes IFC, 47 BMS Davinci AS 19, 55 BP 26, 54, 68 British Gas 54 Capital Safety 37, 126, 127 Carbone+ 125 Carbovac 8, 113 Caspian Wireline 22 Centek 78, 79 Chart Energy & Chemicals 69 Chubu Corporation 123 CNPC 68 ConocoPhilips 54 Control Risks 38 Crescent Petroleum 44 Crowcon 138 Dana Gas 44 Detcon 105, 126, 129 Dragon Oil 62 Elster Instromet 20, 108 EMC 88, 89, OBC ENOC 62, 80 EnSys Energy 116, 117

ExxonMobil 68 Frost & Sullivan 59 Fugro-Jason 52, 53 GDS Suez 123 GeoKnowledge 31, 64, 65 Geo-Microbal 66, 67 Geosoft 72, 73 Global Insight 68 Groundstar Resources 90 Gulf Research Centre 38 GUPCO 54 Halliburton 26, 62 Hunt Oil 132 IGTC-Chubb Fire Qatar 123 Institute of Nanotechnology 26 JESCO 2, 96 Lunasat 50, 83 Maraco 35, 92, 93 Marine Biotechnology 60, 61 Meet The Boss 101 Merchant Maritime Warfare Centre 38 Mitsui Corporation 123 Motorola 19 NACE International 94 Neptune Oceanographics 13 ODS International 77 OGP 131 Oleska Associates 21, 103 OPEC 144 Pall 110, 111

Patton Electronics 86, 87 PDVSA 15 Pico International Petroleum 54 Polarcus 57 Polyguard Products 96, 97 PPSA 102,104 Qatar Electricity and Water Company 123 Qatar Petroleum 123 Regent Energy Control 75 Rockwool 41 Royal Institure of International Affairs 38 SABIC 142 SabryCorp 26 Saudi Aramco 26, 32, 40, 48, 54, 118 Schlumberger 62 Shell 26, 54 Shikoku Corporation 123 Shoaibi Group 58 Société du Pipeline 96, 99 Subsea Norway AS 60, 61 Sun Microsystems IBC Technoguide 62 Total 26, 54 Tracerco 135 TRE Europa 85 Velosi 6 Weidmuller 81 World Refining Association 112

38 OIL, TOIL & TROUBLE O&G reports on why pirates are holding the world’s biggest oil companies to ransom on the high seas

140 A NEW CHAPTER Saudi Arabia’s Minister for Petroleum and Mineral Resources reveals his hopes for the newly formed Society for Energy Economy


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COVER STORY

Professor Dean Neikirk and Sean Murphy (left) examine a solution containing dissolved nanoparticles at the headquarters of the Advanced Energy Consortium (AEC) in Texas

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SMALL but

MIGHTY Rapidly depleting hydrocarbon supplies mean scientists are in a race against time to delay the dreaded peak oil scenario. Nanotechnology has been touted by Saudi Aramco and America’s Advanced Energy Consortium as the potential saviour of the industry and a way to revolutionise the exploration process. In this special report Diana Milne investigates why nanotechnology could be the small solution to a very big problem.

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iven the immense scale of the problem facing the world’s oil producers, it is ironic that millions of dollars is being spent to develop a solution so microscopic that it is invisible to the naked eye. Nanotechnology may be based on units that measure one-billionth of a metre, but, when applied to oil and gas exploration, its potential is huge. So much so that research projects are underway across the world to develop the technology; most notably at Saudi Aramco’s EXPEC Advanced Research Center (ARC) and the US-based Advanced Energy Consortium, a research body funded by 10 of the world’s biggest oil companies at a cost of US$1 million a year each. There are compelling reasons why these companies are funding research into the application of nanotechnology in the oil field – a concept that is still several years from becoming a reality. According to the BP Statistical Review of World Energy, global proven oil reserves fell by three billion barrels in 2008 and the current reserves to production ratio is just 42 years. Meanwhile Faith Birol, the International Energy Agency’s Chief Economist has predicted oil production will peak in 2020 and that the world’s 800 largest fields are seeing a 6.7 percent annual decline in production.

Big problem, small solution The days of easily available oil are rapidly running out and oil companies must find ever more ingenious ways of extracting the remaining reserves from

minute pores in the rock face. To do this some say the technology they use to access the reserves must shrink. But size isn’t the only factor. As exploration goes deeper, already harsh conditions worsen raising the need for more robust equipment and tougher coatings on drilling tools. Finding the oil too is a major challenge; even 3D and 4D seismic still lacks in resolution and the ability to penetrate deeply into the reservoir’s lithology. Scientists believe that nanotechnology could address all of these challenges. Sean Murphy is Senior Manager at the Advanced Energy Consortium – one of a team of just four scientists charged with finding out whether nanotechnology really is the oil and gas industry’s silver bullet. He describes why the companies who are funding the project are so keen to find a solution to the incredibly complex challenges they face: “Right now we leave around 60 to 70 percent of the discovered oil in the ground. Even after applying enhanced oil recovery techniques like water and gas flooding technologies, we still don’t know how to effectively and economically remove it. Drilling more wells for oil recovery isn’t the answer as it can be a multi-million dollar a hole proposition. The oil flows through pores that are not merely microscopic, they are submicron; and the pore throats can be nanometres in scale. Quantifying reservoir characteristics to enable improved recovery processes, like low interfacial tension surfactant flooding or carbon dioxide flooding, is where nanotechnology can really assist in improving total recovery from existing reservoirs.”

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Nanotechnology, however, exists on a scale small enough to penetrate these pores. And if scientists can produce nanoscale particles or sensors that are able to collection information about oil reserves and deliver the information back the to well or surface these seemingly insurmountable problems could be tackled, delaying the days of peak oil further. The AEC and Saudi Aramco are both focussing the bulk of their research on two areas: illumination of the reservoir and developing nanosensors that can be injected into oil and gas wells to collect data on the reservoir rock, fluids and physical characteristics then transmit or relay the data back to the surface for use. EXPEC ARC is working on creating what it has dubbed ‘resbots’ – minuscule nanorobots no bigger one hundredth the width of a human hair. At O&G’s summit in the UAE recently, Saudi Aramco’s VP of Exploration, Ibraheem Assaadan, claimed these resbots could be deployed in reservoirs through injected water. Once there, they would be capable of analysing the reservoir pressure, temperature and fluid type and would store this information, effectively mapping the reservoir. The resbots would be retrieved along with crude oil at the producing wells and the reservoir mapping information could then be downloaded. Assaadan believes that resbots could revolutionise the oil and gas industry and the company has already analysed core plugs from existing reservoirs to analyse the maximum size the resbots can be and to understand transport issues. But Aramco is not alone in attempting to meet this challenge. The AEC is in the process of developing what David Chapman, Project Manager for Electronics describes as a “communications enabled robot”, an active electronics-based, nano-based device. This would be something that has a physical or chemical parameter sensor built into it and is at least 100 times smaller than those in existence today. We need a telemetry solution that is capable of transmitting data topside, or alternatively some type of on board memory that enables them to store the data and keep track of location so that they can be interrogated when retrieved.”

Mission impossible The notion of a robot built on nanoscale dimensions yet possessing such a high level of sensory, communications and storage capacity remains for now “In the

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realms of science fiction”, admits Murphy. The process of making this concept a reality is fraught with complication – largely to do with the scale and the functionality of the technology involved. “The key is to shrink the sensor down to a size that enables it to move through the pores and the fractures in the rock; this may require difficult choices and tradeoffs in functionality. For example, sensors might be event-driven, only communicating when a specific physical or chemical parameter is sensed, or communicating at specific time intervals, which would reduce power requirements. Communication is also a huge issue; geolocation and telemetry technology will have to be scaled to overcome the

“Saudi Arabia is pouring

billions of dollars into advanced technologies” Dr Abdel Mottaleb severe attenuation of traditional frequencies. Finally, it’s an extremely harsh environment with high temperatures and pressures which are not friendly to electronics, not to mention the mud and drilling fluids, and the saline solutions, waxes and asphaltenes all saturating the heterogeneous clays and rocks.” Dr Mohamed Abdel-Mottaleb is founder of Cairo-based SabryCorp, the Middle East’s first nanotechnology consultancy which aims to make the region a world hub for nanotechnology research. He outlines some of the issues that must be overcome before nanorobots can become a reality in the oilfield: “I’m not sure really that the nanorobots, as envisioned, would be successful. Nanorobots would be, basically, a number of sensors with a motion, detection and transmission unit. One of the biggest issues with nanotechnology is the ability to integrate all of these systems together. They would need to have temperature sensors, pressure sensors and some sort of location sensor to be able to pinpoint their exact location. They would also need a power source and the ability to transmit the information back. Each unit in the nanorobot already exists and it has been tested and verified. But a complete integration at that level of sophistication is still a bit far away.” Mark Morrison of the UK’s Institute of Nanotechnology is also sceptical about scientists’ ability to overcome the challenges of developing a fully functional reservoir robot: “Providing power and sensors all in a small particle size that is able to withstand different chemical environments and severe pressure requires concerted effort by a lot of different people. One aspect of the robot might develop more quickly than another. But it’s combining all these things onto one platform that will be the big breakthrough.” It’s a breakthrough that Murphy says he and his team can’t make before they have explored the fundamental science behind the concept – i.e the factors that control the retention and transport of nanoparticles through the pores in the reservoir rock: “We are funding a number of fundamental science


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Nanotechnology has been used to produce new materials for a range of industries. Here a scientist tests a sheet of ultra-thin foil

projects that are related to understanding what it’s going to take to move micro and nanoparticles through reservoir rocks. Some are predictive studies that will produce modelling and simulation tools. Other are more experimental in approach and are underway at petroleum engineering departments. They started with glass beads and sand particles and now they are progressing to constructed permeable media and micro models that are representative of reservoir rocks.” He goes on to say that he and his team are currently figuring out how to get these particles to flow from one end of the rock to the other and whether there are coatings they can use on the particles so that they can flow through more easily. He says that even if his team doesn’t succeed in moving onto the next level by creating nano particles equipped with sensors, communications equipment and data storage capacity, simply being able to understand how to create a custom designed nanoparticle that will pass through the reservoir could have major benefits for the oil and gas industry. He goes on to explain that this is one area where the industry could benefit from biomedical research in that coatings developed to enable pharmaceutical nanoparticles to pass through the body could be used in briny oil fields.” Not only do we have to figure out how to pass a nanoparticle through heterogeneous rocks and complex fluids, but we need to find a material that can enhance the resolution of sub-surface lithogies and fluids using viable remote sensing technologies. Questions that need to be answered include; can we discriminate these nano contrast agents from the background noise? What volume of material will we need to use? And can we functionalise them so that they will attach to hydrocarbons preferentially?”

The material world Nanotechnology’s potential in the oil and gas field is not limited to its reservoir mapping capabilities. Nanomaterials are already widely used across a wide spectrum of industries including automobiles and consumer electronics products and scientists believe that nanocoatings, in particular, could have great benefits when applied to drill bits. Morrison says: “There is a lot of development that could potentially be used in the oil and gas industry and probably is being used and these are things like nano structured ceramic materials which have increased hardness and durability compared with conventional materials which could be used in drill bits.” He explains that at the nanoscale, materials can be harder and more sheer resistant making them less susceptible to different forces and able to withstand higher temperatures. Using this sort of coating could enable oil companies to drill deeper and cut down on lost time through having to replace drill bits. “If you can use a nano structured ceramic material to coat a drill bit then you might have access to oil fields that you wouldn’t normally be able to access,” says Morrison. “Or you might have a longer time between replacing drill bits or pipes. So it both increases, potentially, your access to different reservoirs, and the amount of time those reservoirs are open compared to being offline.” An even more sophisticated use of nanomaterials in oil and gas reservoirs could be to coat well bore tubulars with material that is able to detect and react against corrosion or leakages. The most common terminology for this is ‘smart’ or ‘intelligent’ materials. These materials are aware of the environment around them and can change their properties accordingly. This – like the use of better coatings for drill bits – could make nanotechnology a way for oil

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companies to save billions of dollars in costs from well shutdowns and the replacing of equipment, notes Dr Abdel-Mottaleb. “Another thing that is being tested in the lab is the use of smart casing for the bore hole. For that, you need a material that can react to the environment around it so that if there is a leakage it can immediately interact and close it. The point of all this is that the oil industry has to invest in this sort of technology to improve its efficiency and reduce costs.”

going to be an integrated effort. What I’ve seen so far is that the Americans are very active in this and that they are also looking at the American scientists rather than the Europeans or scientists from elsewhere. I think this is not the right approach. This is an international discipline and they need to be looking at it globally and not excluding solutions that come from outside the US.” Nevertheless, he says the Middle East is catching up fast when it comes to research into nanotechnology, led by Saudi Aramco and the Saudi government. “Saudi Arabia is pouring billions of dollars Money talks into advanced technologies. The UAE and even Egypt are Cutting costs is a major concern for the oil and gas becoming more active. In 2008 I found out the total industry – with worldwide demand for oil having amount of funding available in Egypt to get a project plunged by 0.6 percent in 2008. Despite these financomplete in the next three years is US$10 million. cial pressures, however, funding for research into the That is nothing compared to what the US or use of nanotechnology from national and internaEuropean governments have come up with but in the amount of funding tional oil companies has been forthcoming as com2007 we had no funding. So from zero to US$100 the AEC is recieving panies seek to make investments in technology that million is a significant jump.” from oil companies could result in lower costs and high returns on investMeanwhile, the AEC, in an effort to be more ineach year ment in the long term. The AEC is set to receive US$10 clusive, recently hosted a workshop in Paris where 80 million dollars a year for the next three years from 10 of the percent of the participants were from European, Asian and world’s biggest oil companies, including BP, Halliburton, Shell Middle Eastern companies. It is also currently reviewing proand Total. This decision by these competing companies to pool their posals for its second round of funding and is looking for opportunities resources builds on approaches developed in the semi conductor electronics worldwide. Abdel-Mottaleb says that it wasn’t until last year that companies sectors, says Murphy; “The miniaturisation challenges facing the development really started to sit up and take notice of the role nanotechnology could play of nanotechnology are parallel to those that faced microprocessor technoloin the oil and gas industry. Now its full potential has been revealed, however gy. It was an expensive multidisciplinary problem with many companies they all want a piece of what could ultimately solve some of the biggest chalwanting to move onto the next shrink level but unsure of the exact technololenges facing the oil and gas industry. gy to bet on. In such pre-competitive situations it makes sense to leverage the Sean Murphy is reluctant to cite nanotechnology as the oil and gas infunding from other companies so you can explore lots of problems and share dustry’s silver bullet. However, he says that even if this microscopic technolthe results.” ogy were to make a small difference to the numbers involved – its impact in While a shared approach indicates co-operation amongst these comreal terms would be massive. “I wouldn’t say it’s the saviour of the industry, panies, some have expressed concern about the proportion of funding going but it has intriguing potential for being able to retrieve more oil than we can to US-based companies. Dr Abdel-Mottaleb wants to ensure that a more inretrieve today. We’re talking about billions of barrels of oil that are left in the ternational approach is taken: “One of the issues is whether this is going to ground. If we can improve the recovery rate by only a small percentage, that be led by American companies or European companies or whether it is represents an incredible amount of additional energy for the world.” 

US$10 MILLION

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CORPORATE STRATEGY


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The ethical

GIANT Khalid Al-Falih, President and CEO of Saudi Aramco, lifts the lid on why the world’s biggest oil company is taking responsibility for its actions.

E

arlier this year I was fortunate enough to be in Washington, not far from the steps of the Capitol where some three months ago Barack Obama took the oath of office as the 44th president of the United States. Back in Saudi Arabia, I watched the swearing in ceremony on television, and listened as President Obama struck a thoughtful yet upbeat tone in his inaugural address. Towards the end of that speech he said, and I quote, “What is required of us now is a new era of responsibility.” It struck me – because responsibility is a theme that we have been stressing within Saudi Aramco for many years. Of course, the president was speaking of the need for accountability in many areas of contemporary life, and he was speaking from a uniquely American perspective. Yet I believe that such a call to take greater responsibility, and to think in terms of providing long-term benefits for the many rather than selfishly reaping short-term gains, applies equally to each and every one of us in the corporate world. And of course that includes the global petroleum industry and all those who influence it, from technicians, engineers and researchers, to educators, investors and policymakers. I am a firm believer that whatever role we play when it comes to energy, each of us needs to assume responsibility for the actions and impacts of our own company or institution, and to ensure that we are able to reliably meet the needs of our various stakeholders – and when it comes to petroleum, everyone is a stakeholder.

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Our vision For the men and women of Saudi Aramco, taking responsibility means, first and foremost, a commitment to ensuring that our company remains the most reliable supplier of energy to the world. But it is also something more – it is a shared sense of obligation to our stakeholders that transcends the traditional measures of success in our industry like billions of barrels of reserves or millions of barrels of daily production. It is a commitment to be socially responsible, wherever we do business; to be a creator of opportunity for our people; an innovator of new technologies; a steward of safety and the environment; and a propagator of knowledge. This is Saudi Aramco’s vision. It is deeply rooted in our heritage, and it defines who we are and what we strive to be. To that end, I remind our oil field operators and maintenance technicians in the middle of the Empty Quarter, the staff along our cross-country pipelines and at our marine shipping terminals, and in fact all of our 55,000 employees that what they do impacts men, women and children in cities, towns and villages throughout the world – places they have never been to, will never see, and may never have heard of. Not long ago I was in Houston for a meeting of Saudi Aramco’s Board of Directors, which again confirmed its commitment to our ongoing slate of projects and programmes. Those initiatives are many and they are massive, and in many ways these ongoing activities and new ventures are fundamentally transforming Saudi Aramco by expanding its business portfolio and enhancing its operational capabilities. But even as they pave the way for greater success in an ever more complex future, these plans also enable us to sustain a reputation, which goes back to the earliest days of our enterprise. If you talk to any of my Saudi Aramco colleagues, you will find that they derive their greatest satisfaction not from being the biggest producer and exporter of crude oil, Khalid Al-Falih but from being the most reliable supplier of petroleum on the planet. In other words, they take pride in taking responsibility for the role we play in providing energy to the world, day in and day out, year after year, without fail.

Supply and demand First and foremost, we continue to invest all along the petroleum value chain to help improve the global supply-demand balance, on a scale no company has approached in the history of our industry. From the subsurface reservoir all the way through to the gasoline pump and petrochemical plants, we are working hard and partnering with others to ensure that an ample supply of petroleum is available to consumers around the world, and to power economic recovery, social development and greater prosperity in both industrialised and developing nations. To that end, we are sustaining our crude oil and natural gas exploration efforts, including exploration in new frontier areas both on land and offshore. Just a few weeks from now we will attain our goal of putting in place a 12 million-barrel-per-day crude oil production capacity, once we complete our Khurais oil field programme. This massive project, the largest single crude oil increment ever commissioned, will be capable of producing as much oil as the entire state of Texas. But Khurais is only part

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of the story, since Saudi Aramco will account for more than half of the grassroots crude oil production capacity brought onstream worldwide during the current decade. And although historically we’ve been known primarily as a major producer of crude oil, we are also constructing additional refining capacity both in the Kingdom and abroad, including in the United States. In fact, Saudi Aramco is behind one out of every three barrels of firm commitments to new refinery capacity to be built between now and the year 2015. Elsewhere downstream, we are moving forward with integrated refining and petrochemical ventures with some of the world’s leading chemical companies, including the Dow Chemical Company. These new facilities not only add value to the Kingdom’s hydrocarbon production, but form the hubs of new industrial clusters, help to develop and diversify the Saudi economy, and create new career opportunities for our nation’s youth. Major investments such as these allow us to play a central role in helping to meet the world’s demand for energy and constitute what I consider, taking charge by taking responsibility.

The long-term view But some people ask us why we continue with these projects even in a challenging business environment and at a time when oil consumption has fallen for two consecutive years, for the first time in 25 years. Certainly we are well aware of the state of the global economy, and have felt the impact of the present downturn along with the rest of the petroleum industry. But we are investing throughout the business cycle and are consistent with our long-term focus. We know that as the global economy rebounds, demand for petroleum will also grow – and in the absence of such investments, the world is likely to face another vicious cycle of price spikes. In some ways, such a responsible approach is simply Saudi Aramco’s destiny, given the massive resource base we manage and the expansive petroleum infrastructure we operate and maintain – but it is a duty we take very, very seriously indeed. At the same time, our infrastructure development projects and programmes are coupled with investments in advanced technology and applied research. By harnessing innovation, leveraging our company’s intellectual capacity, and deploying brain power and not simply horsepower, these research and engineering programmes are enhancing our ability to find, manage and produce the vital hydrocarbons so essential to modern life. Furthermore, the company is helping to spearhead the development of a bold new institution dedicated to postgraduate technical education and cutting-edge research: the King Abdullah University for Science and Technology (KAUST), which will open its doors this September. Built on the Kingdom’s Red Sea coast, KAUST will be an international, graduate research university – designed to inspire a new age of scientific achievement and knowledge creation in Saudi Arabia, the Middle East region, and indeed the world. Among other areas of endeavour, KAUST will be home to one of the world’s leading solar energy research centres focused on making solar energy more efficient, more economical and more scalable, and is also working with IBM to create a new supercomputer which will


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“We continue to invest

all along the petroleum value chain to help improve the global supply-demand balance, on a scale no company has approached in the history of our industry” KHALID AL-FALIH

be one of the most powerful computing systems in the world. And while KAUST will provide tremendous benefits to the Kingdom, it is actually designed to positively impact the entire global community. For example, one of its research programmes will focus on salt-tolerant crops – not because we face food shortages in the Kingdom, but because other nations will need to plant more crops to nourish their growing populations. It will educate international students – not because we lack qualified Saudi applicants, but because KAUST wants to be the nexus of the best and brightest men and women from many different national and cultural backgrounds. And the university will devote considerable efforts and resources to developing solar energy technologies, not because we lack energy resources in the Kingdom – which already boasts the world’s largest reserves of crude oil – but because we believe the world will need contributions from all technically, economically and environmentally viable sources in order to meet growing global energy demand in the decades to come.

Positive messages At Saudi Aramco, as part of our responsibility to help meet the world’s energy demand and to do so as cleanly as possible, we also hold ourselves accountable when it comes to the issue of environmental stewardship. This commitment is nothing new – the company’s first environmental policy statement dates back to 1963, well before green causes became mainstream. Today, we not only work to minimise the environmental impact of our operations, but are also pursuing research related to the desulfurisation of crude oils, carbon capture and storage, and cleaner burning fuel formulations designed for the next generation of engine technologies, all of which will help to lighten the environmental footprint of petroleum consumption. Saudi Aramco is also heavily engaged in environmental outreach programmes – especially targeting the Kingdom’s young people – in order to raise popular awareness of environmental issues and encourage people to recycle and conserve water and energy. We also view the “soft side” of our business, and indeed of our world, with a sense of responsibility. All too often the media carries self-fulfilling prophecies about an inevitable “clash of civilisations” which pits one society against others in a zero-sum com-

36 www.ngoilgasmena.com

petition. Yet Saudi Aramco’s own experience demonstrates that cross-cultural cooperation and understanding are not only possible, but in fact help to secure greater prosperity for all concerned. In fact, many observers have noted that Saudi Aramco over the years has become a model of multicultural collaboration and exchange, at both an institutional and an individual level. Those positive experiences are now being channelled into the King Abdulaziz Centre for Knowledge and Culture, a world-class learning, cultural and arts center which Saudi Aramco is building near our headquarters in Dhahran. In addition to the exciting new educational and cultural opportunities it will provide to all members of our local communities, its online offerings will serve a global constituency wishing to learn more about the Kingdom’s rich culture, its contemporary society and its prospects for the future. Aside from encouraging cross-cultural exchange and dialogue, the centre will also stress our common humanity and shared aspirations and hopes for the future. That’s something else we know firsthand, because from the Saudi and American pioneers of the 1930s to today’s workforce of 70 different nationalities, those who call themselves “Aramcons” have always been united by a sense of purpose, and a shared sense of responsibility. But I also firmly believe that our dedicated men and women constitute an even more important source of competitive advantage, and will ultimately sustain Saudi Aramco’s success in a new knowledge age. Therefore, we hold ourselves responsible for the development of our people, and for providing them with opportunities to enhance and utilise their competencies and capabilities. The participants in the Saudi Aramco Management Development Seminar, a programme which is now more than a quarter-century old, are among our best and brightest emerging leaders, and therefore this programme plays an important role in helping us sharpen our competitive edge as a company exposing these men and women to new perspectives and fresh viewpoints. 


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“We continue to invest

all along the petroleum value chain to help improve the global supply-demand balance, on a scale no company has approached in the history of our industry” KHALID AL-FALIH

be one of the most powerful computing systems in the world. And while KAUST will provide tremendous benefits to the Kingdom, it is actually designed to positively impact the entire global community. For example, one of its research programmes will focus on salt-tolerant crops – not because we face food shortages in the Kingdom, but because other nations will need to plant more crops to nourish their growing populations. It will educate international students – not because we lack qualified Saudi applicants, but because KAUST wants to be the nexus of the best and brightest men and women from many different national and cultural backgrounds. And the university will devote considerable efforts and resources to developing solar energy technologies, not because we lack energy resources in the Kingdom – which already boasts the world’s largest reserves of crude oil – but because we believe the world will need contributions from all technically, economically and environmentally viable sources in order to meet growing global energy demand in the decades to come.

Positive messages At Saudi Aramco, as part of our responsibility to help meet the world’s energy demand and to do so as cleanly as possible, we also hold ourselves accountable when it comes to the issue of environmental stewardship. This commitment is nothing new – the company’s first environmental policy statement dates back to 1963, well before green causes became mainstream. Today, we not only work to minimise the environmental impact of our operations, but are also pursuing research related to the desulfurisation of crude oils, carbon capture and storage, and cleaner burning fuel formulations designed for the next generation of engine technologies, all of which will help to lighten the environmental footprint of petroleum consumption. Saudi Aramco is also heavily engaged in environmental outreach programmes – especially targeting the Kingdom’s young people – in order to raise popular awareness of environmental issues and encourage people to recycle and conserve water and energy. We also view the “soft side” of our business, and indeed of our world, with a sense of responsibility. All too often the media carries self-fulfilling prophecies about an inevitable “clash of civilisations” which pits one society against others in a zero-sum com-

36 www.ngoilgasmena.com

petition. Yet Saudi Aramco’s own experience demonstrates that cross-cultural cooperation and understanding are not only possible, but in fact help to secure greater prosperity for all concerned. In fact, many observers have noted that Saudi Aramco over the years has become a model of multicultural collaboration and exchange, at both an institutional and an individual level. Those positive experiences are now being channelled into the King Abdulaziz Centre for Knowledge and Culture, a world-class learning, cultural and arts center which Saudi Aramco is building near our headquarters in Dhahran. In addition to the exciting new educational and cultural opportunities it will provide to all members of our local communities, its online offerings will serve a global constituency wishing to learn more about the Kingdom’s rich culture, its contemporary society and its prospects for the future. Aside from encouraging cross-cultural exchange and dialogue, the centre will also stress our common humanity and shared aspirations and hopes for the future. That’s something else we know firsthand, because from the Saudi and American pioneers of the 1930s to today’s workforce of 70 different nationalities, those who call themselves “Aramcons” have always been united by a sense of purpose, and a shared sense of responsibility. But I also firmly believe that our dedicated men and women constitute an even more important source of competitive advantage, and will ultimately sustain Saudi Aramco’s success in a new knowledge age. Therefore, we hold ourselves responsible for the development of our people, and for providing them with opportunities to enhance and utilise their competencies and capabilities. The participants in the Saudi Aramco Management Development Seminar, a programme which is now more than a quarter-century old, are among our best and brightest emerging leaders, and therefore this programme plays an important role in helping us sharpen our competitive edge as a company exposing these men and women to new perspectives and fresh viewpoints. 


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SECURITY FOCUS

Oil, toil and

Piracy is back, but not in the traditional sense. Swashbuckling Blackbeards brandishing cutlasses have been superseded by ruthless, money-hungry Somali gangs armed with automatic weapons, global positioning systems and satellite phones. With supertankers seen as a prize catch among new-age pirates, can the oil industry ward off potentially deadly and costly attacks or is it merely a sitting duck? By Julian Rogers

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I

n early January of this year a bright red parcel attached to a small parachute glided gently toward the deck of a Saudi supertanker 800 kilometres off the Kenyan coast. Onboard the 330-metre long Sirius Star was a 23-man crew, a gang of armed Somali pirates and two million barrels of oil – a quarter of Saudi Arabia’s daily output. Inside the package was believed to be US$3 million in high denomination bills. Oil giant Saudi Aramco is thought to have paid the ransom to release the supertanker, owned by its shipping arm, and its black gold, bringing an end to a terrifying two-month ordeal for the hostages in what was the world’s biggest ship hijacking. The pirates had demanded US$25 million but eventually settled for a fraction of this, although US$3 million isn’t too bad a pay packet for two months’ ‘work’ in a country as poor and warravaged as Somalia. The hijacking of Sirius Star was the sea bandits’ biggest booty to date and there is a real fear that other fully-laden supertankers could be snared by the pirates in future attacks. Indeed, most attacks are directed at merchant ships connected in some way to the oil industry. Recently, however, annual monsoons have hit the region, curtailing the pirates’ ability to ply their illegal trade, and ship owners are on tenterhooks amid the calm before the real storm, so to speak. “The whole of the industry is holding its breath waiting for the wind to die down,” warns Nick Davis, a former British army pilot and Chairman of the Merchant Maritime Warfare Centre (MMWC) – a not-for-profit organisation addressing ship security. “Between late August and December we will see what happens, because we don’t know whether there will be this eerie quiet where nothing or just one or two gets hijacked, or whether we will have three or four ships a week taken.”

The lion’s share of attacks have occurred in the Gulf of Aden off the Somali coast – one of the world’s most important shipping lanes with 20,000 vessels passing through annually. There are also 2.8 million square kilometres of water in this region alone, meaning shipping companies and their crews have the daunting prospect of trying to react to or predict where and when the pirates strike next. Of course, with the Sirius Star ransom being paid so publicly there is the obvious concern that handing the pirates millions of dollars to relinquish control of a vessel will fuel more attacks and even bigger wallet-busting ransoms. Other young men will see the huge money to be made, round up a gang, arm themselves to the teeth and jump in a boat. Kenya’s foreign minister claimed that up until November 2008 the pirates had received over US$150 million, which can then be ploughed back into purchasing faster boats and increased hardware. “The big ransom payments have fuelled attacks – there isn’t any real doubt about that,” suggests Roger Middleton, Consultant for the Africa Programme at Chatham House – formerly the Royal Institute of International Affairs. “As ransoms go up it becomes a more attractive business for people, but it is a very difficult position for ship owners to be in because who wants to be the fi rst not to pay a ransom, which impacts on the safety of your crew?” Likewise, Davis is of the opinion that the pay-offs are spiralling out of control. “The pirates keep pushing, pushing and pushing for as much as they can get and they are quite happy to delay and start again. The industry, the insurance companies and negotiation teams are letting the ransoms get out of

Pay day: Pirates secure their biggest booty to date off the Kenyan coast in January

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ali The Somtches e r t s t coas

A patient game: Pirates lie in wait

hand, which is making the situation quite nasty because the bigger the ransoms, the more people that want to get involved. And there is no shortage of manpower for them to send out and there can never be enough warships to effectively prevent it.”

3000Ke HM orn

their vessels thousands of kilometres further via South Africa’s Cape of Good Hope. On f t top of this, insurance costs have soared by as A y of est of aen g n lo m much as 100 percent. However, there are more e h t on th countryinent. tha than a dozen naval forces, as part of the multicont natio national coalition offensive (Combined Task Force Numbers game 150), flexing ex their military muscle and patrolling the According to the International Chamber of Commerce’s InternaGulf of Aden in a bid to thwart the pirates. However, this tional Maritime Bureau (IMB), the number of attacks so far this year off asymmetrical warfare has forced the pirates to scour for victims in less Somalia has already surpassed the 2008 total. Last year witnessed 111 policed waters, namely the western Indian Ocean. incidents, with 42 vessels hijacked. Up until mid-May of this year 29 sucIf they can pass under the radar of the multinational naval armada cessful hijackings were recorded from 114 attempted attacks. And while the pirates typically approach a target by speedboat or skiff (a shallow, a total of 815 crew members were taken hostage in 2008, this figure stood fast boat), firing on the ship until the captain submits and allows them at 478 by the middle of May this year. “These guys have found a busito board by means of grapple hooks and rope ladders. Some pirate gangs ness model that makes a lot more money than their traditional fishing industry, and I mean a lot,” remarks Jeroen Meijer, a security consultant for threat and safety advisors Control Risks and former officer in the Royal Netherlands Navy. “Keeping that business model intact is crucial, so they constantly adapt their modus operandi. We saw them operating in the Gulf of Aden, off the coast of Mogadishu [Somalia’s capital] and we have seen them going into the Red Sea and Omani waters. So they are constantly adapting where they operate to minimise are particularly well-equipped for the job in hand, says Middleton. “They the threat to their operations.” are generally armed with AK47s, and sometimes RPGs (rocket-propelled A knock-on effect of the piracy has been a sharp rise in shipping grenades), while their boats generally have outboard Yamaha engines costs as some shipping firms choose to avoid the Suez Canal and navigate and they may have GPS and satellite phones.”

th aroundrica and is

“Somalia is a completely failed state with no political structure to speak of and there is no law enforcement capability so these gangs operate with total impunity” Jeroen Meijer, Control Risks

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Where the pirates have struck in 2008/09

Yeman Sirius Star

Gulf of aden

ETHIOPIA

indian ocean KENYA

2008 attacks 2009 attacks 500 0

1000 KM

f IGHTING BACK

2

How ship owners can protect their cargo and crews

1

One deterrent is a long range acoustic device (LRAD), which is simply a satellite dish hooked up to a humble MP3 player. The LRAD, which has a range of around 1000 metres, fires out high-pitched messages or sirens to warn pirates that they have been spotted. In fact, this piece of kit can reach excruciatingly painful levels if the pirates get too close.

2

1

ing ng g More simple but effective measures include attaching ptts to t barbed wire to the boat to hamper pirates’ attempts po o erful ow clamber aboard. Some vessels are also fitted with p powerful nea ar, hoses used for blasting anyone who gets anywhere near,

but some ship owners have taken a more hard line approach by providing machine guns.

4

Aus Austri Austrian company Schiebel has developed an unmanned helicopter tted with w advanced sensors to alert crews of advancing maritime fitted ga gs. s The three-metre long Camcopter S-100 can be flown by remote gangs. on ntro nt trrol o or by pre-programmed GPS waypoints. This ‘eye in the sky’ can control flyy u fl up to 120 knots powered by a 55hp rotary engine.

3

4

me experts su suggest, gge is The most effective and practical measure, maritime hip’s p’s ladder dde and d hav ha a to sail at a speed exceeding 25 knots, pull up the ship’s have a high freeboard.

3

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In a similar fashion to how burglars seek to target the house on the street with the weakest security, the sea bandits go after the ships that are easiest to board and take control. Those vessels capable of 25 knots are generally too fast for the pirates but boats sailing at around 14 knots and with a freeboard five metres or less in height are deemed easy prey. Ship owners are doing their best to ward off potential attacks by installing barbed wire and firing onboard water canons should the assailants venture too close, while deck patrols and ‘lookouts’ have also been ramped up. “You only have a short time to prevent these pirates from boarding and taking control of the ships,” explains Dr Mustafa Alani, Director of the Terrorism and Security department at the Dubai-based Gulf Research Centre. “Once they have control then you Capture and arrest is an occupational hazard for the pirates have hostages and you have to deal with the A continuing lawless atmosphere in the country has magnified the situation completely differently.” Dr Alani argues that ship owners either problem. “Somalia being a lawless state with a free and open coastline need to station troops onboard or you allow the civilian crew to be armed that no one is able and willing to defend is 100 percent the reason why and trained in how to repel attackers. the pirates can get away with it,” Davis notes. Th is sentiment is echoed by “However, there is always this giant ‘but’,” says Davis, “You are dealMeijer: “Somalia is a completely failed state with no political structure ing with intelligent opponents who have figured out a number of ways to speak of and there is no law enforcement capability so these gangs in which they can very successfully board a vessel.” Davis says the crews operate with total impunity. Those who live on the coast see the wealth who wind up getting hijacked invariably have little or no understanding of the world sailing by everyday, so in an extremely benign maritime of the threats and have been given no training in how to defend their vesenvironment where you can operate with a small boat for very little cost sels. However, there are certain measures crews can take to make it nigh and together with a Kalashnikov and an RPG, you are able to hijack these on impossible for pirates to get on board, he reveals [see opposite]. He is riches on your doorstep.” also concerned with the fact that ship owners are It also appears that money is the sole deploying a mishmash of anti-piracy measures factor behind the pirates’ determinainstead of adopting a standardised approach. “We tion, with no link uncovered between have such a divide across the world,” he notes. the attacks and organised terrorism, say “For instance, the Americans are putting arms the experts. “There is absolutely none,” on everything, which is not very helpful and will reveals Dr Alani. “On the contrary, we lead to all sorts of problems because the ultimate get information that the pirates fear authority on that ship should be the master. He the extreme Islamists who see them as is still liable, irrespective of who pulls the trigger thieves.” Indeed, there is a preconcepand I know a lot of masters who are very uncomtion that most Somalis support the pirate fortable with the arms issue and civilian guards.” gangs, but being a majority Muslim state, Root causes most of the population are vehemently opposed to theft and hijackings. On the So can piracy be stopped on land? Experts other hand, chunks of the bandits’ illare in agreement that the failed state of Somalia gotten gains are pumped back into the local economy which rejuvenates is a perfect breeding ground for piracy, while a lack of law means the pipoor villages, although a flipside of this cash injection is rising inflation rates can hijack vessels with impunity. Piracy first became a problem in for ordinary Somalis. All in all, this situation won’t be changing very soon the region at the outbreak of Somalia’s civil war in the early 1990s, when unless action is taken on land in Somalia to stamp out this menace. And the government was overthrown. As the war raged, and with no Somali with the monsoon weather subsiding soon, the coming months will be an coastguard, foreign fishermen were accused of plundering the country’s extremely testing time for the maritime industry. “Th roughout history fish stocks, so Somalis took to the seas to protect their livelihoods. It was piracy has been an issue and it will never be completely stamped out – this then that they realised there was some serious money to be made from is an illusion,” states a philosophical Meijer. „ hijacking ships and demanding ransoms.

“You are dealing with intelligent opponents who have figured out a number of ways in which they can very successfully board a vessel” Nick Davis, MMWC

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GAS FOCUS

Flushed with success following his promotion from VP of Downstream to CEO of Dana Gas, AHMED AL ARBEED, tells Diana Milne how his company plans to transform the region’s energy industry.

NEW HORIZONS 44 www.ngoilgasmena.com

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H

aving already established itself as the Middle East’s largest private sector gas company, Dana Gas’ CEO Ahmed Al Arbeed says it is now on the cusp of being one of the world’s most innovative. Its Gas Cities project will revolutionise the way gas is produced and used, with sustainability at the core of the concept. Once complete, the Gas Cities will be fully integrated industrial zones designed to promote economic activity and attract lucrative foreign investment to the region’s burgeoning natural gas sector. The idea is that gas will be produced in the industrial cities which is then either converted into economically viable petroleum products or used as feedstock, so that nothing is wasted and each element of production and supply chain supports the city’s infrastructure.

Breaking the mould Describing the thinking behind the concept, Arbeed says: “It’s a unique idea that is similar to the industrial cities all over the world but with some uniqueness in terms of the fact that it partners exactly with today’s needs. Sustainable development is the key to the distinction between Gas City and other industrial cities. What we are trying to build for the countries of the MENA region is cities whereby you can use the whole Ahmed Al Arbeed gas cycle. You can do this by supplying gas to petrochemicals and other industries, those are what we call the primary industries. Then there are the secondary industries which take the waste and emissions from the primary industries and use this as feed to make many products of different kinds.” As well as industrial facilities the projects will also include the infrastructure needed to support the workers that will live within the Gas City compound, Arbeed explains: “We will have tertiary services that will provide services to the whole city, which includes the residential area.” Arbeed goes on to say that although Gas City breaks the mould in terms of modern natural gas production facilities, it is inspired by the era of the European industrial revolution in the 19th century, during which whole towns and cities sprung up around factories and other industrial sites: “Th is idea goes back 200 or 300 years,” he says. “As soon as industries started to grow, the cities came as a by-product because people move closer to the area where they worked. We’re trying to set an example of how this can be done in the Middle East and in a sustainable way.” To date Dana Gas, which is an affi liate of UAE-based Crescent Petroleum, plans to build four gas cities across the Middle creating “tens of thousands of jobs” in the region. It has already been in talks with the Egyptian government about building one of the fi rst Gas City complexes in the country, where it already has a strong presence since acquiring Centurion Energy for US$ 1billion in 2007. Plans are also afoot to build

a 461 million square foot site for Kurdistan Gas City. Dana Gas has been supplying the Iraqi region of Kurdistan since late last year after completing a US$650 million project. The Kurdistan Gas City project will be built with an initial investment of US$3 billion and is expected to attract foreign direct investment of over US$40 billion during the operations phase. It will be built to support over 20 types of petrochemical and heavy manufacturing plants and hundreds of small to medium enterprises. If successful, the company believes it could create several other similar projects across the Iraqi region – with Majid Jafar, Executive Director of Crescent Petroleum already having told Reuters last year that it has received interest from local authorities in Anbar in the West and Basra in the South.

The road ahead The scope for Gas Cities and the numbers involved are highly impressive – but they remain, for now, a reality only on paper. No firm dates have been set for the completion of the first project as the economic downturn casts a shadow over Dana Gas’ ambitious plans, which rely for their success on heavy investment by regional governments. When asked when the first Gas City will be built, Arbeed replies: “It is very difficult to judge really, especially with the [economic] crisis now, because we’re not going to build the Gas Cities alone. There will have to be contractors and owners of the petrochemical companies and we will have partners with us. We will open the floor to investors because these projects are going to cost billions of dollars. It’s a huge investment and at this stage of course, very few investors will be ready to invest unless the situation in the market continues to improve. But we will always keep the idea live and we continue to talk to countries about it. We will take the appropriate time to move it quickly and build.” Dana Gas’ success in the wider natural gas industry ensures however, that while the Gas Cities project may be on hold for now its future in the

PEOPLE POWER Ahmed Arbeed on how Dana Gas’ international workforce has helped to contribute to its success. “We recruit people not only from the region but from all over the world. If you look at the Dana Gas management there are eight people at the high level of management and they come from eight different countries. The COO is originally from Iraq but has UAE nationality. We have two from the UAE, I’m from Kuwait, and then the others are from Egypt, Britain and India. They bring exposure to different industries within the oil and gas industries. So we are gaining a lot of benefits from having an international workforce.”

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SAFETY FIRST regional gas industry is bright. In 2007, the company’s first year of operation, it reported revenue in excess of US$1 billion and in the first nine months of 2008 it reported a surge in profits of US$245 million. Its investment in Kurdistan is set to reap particularly high rewards for the company as it is on target to provide 1250 megawatts of electricity to over four million Iraqi citizens through gas supplied to two new power plants that are under construction in Erbil and Sulymaniya. Construction is complete on 180 kilometres of natural gas pipeline and two LPG plants carried out jointly by Dana Gas and Crescent Petroleum and the entire project will deliver over 300 million cubic feet of gas by the end of this year. Speaking about the company’s success in Iraq and what it means for the people there, Arbeed, says: “We were asked by the government of Kurdistan to come and invest in two fields and to build an LPG to knock down the liquids and take the gas through a pipeline of 180 kilometres in length all the way to the north of the region to Erbil city. We did that in 15 months, which was amazing and was world standard for a project like that. It usually takes two and a half years or maybe three years before you see gas flow. As a result of our project, electricity availability to citizens increased from two hours a day to 22 hours a day.”

Widening the scope

Ahmed Al Arbeed on health, safety and the environment (HSE) at Dana Gas. “We need to focus more on HSE but we have noticed in the past year, that there are a lot of improvements in this area. We are adopting methodology to implement HSE across our operations and this has so far proven successful. I believe that once you focus on HSE you find that the performance of the whole operation is improved. Once you adopt the best practice in this respect, this is a good methodology to improve operations and gain more revenue and profits. That will add value to the business of Dana Gas.”

Egypt to double what we started with when we acquired the company. We still think that our acreage in Egypt has got a lot of resources and we are continuing to explore for more gas. We think that we can add the same volume again to our reserves there.” Dana Gas now hopes to emulate these success stories in other parts of the Middle East, including the UAE, where it is in phase one of a joint pipeline project with Emarat, which will eventually deliver one billion cubic feet of gas to the Hamriyah Free Zone in the emirate of Sharjah. The authorities there have also earmarked 50 square kilometres of land for a Gas City complex. Describing the company’s regional expansion plans, Arbeed says: “We are focussing on a number of different countries in the region, of course. We start with the Gulf region and then we will move onto North Africa, especially Algeria and Libya. We also plan to focus a little bit on parts of South Asia, like Bangladesh and Parkistan. We are continuing to review our plans and will add countries as and when we feel its necessary.” But Dana Gas’ projects in the Middle East are just the start of a fiveyear expansion strategy, which it hopes will take it onto the global energy stage. The company, along with Crescent Petroleum, was part of a group that had planned to pump gas from Kurdistan via Turkey to Europe through the US$10 billion Nabucco pipeline, alongside Austria’s OMV and Hungary’s MOL. The plan was rejected by the Iraqi government however and it’s future is now uncertain. Arbeed says he is confident that the firm’s international expansion plans won’t be affected by the economic downturn – given the strength of the Dana Gas business model and the relative stability, he says, of gas prices: “In terms of fi nancials we’re ok and we will continue with our growth strategy. We are less affected [by the fi nancial downturn] because our revenues come from gas. The gas we’re working on in Egypt for example, has a fi xed price. So even if the price of oil goes up or down, this will not affect our price much.” Is it this sort of optimism that has allowed Dana Gas become one of the region’s leading natural gas suppliers in the space of just two years. And as the world’s search for alternative energy sources picks up pace, demand for its natural gas products looks set to catapult it to future success. „

“We are focussing on a number of different countries in the region, of course. We start with the Gulf region and then we will move onto North Africa, especially Algeria and Libya”

The company has achieved great success in Egypt since its acquisition of Centurion, and has recently announced the discovery of new wells in the southern part of the country and plans to invest over US$175 million in drilling 19 new exploration wells there. “After we acquired Centurion we really focussed our efforts on Egypt and managed to double up the reserve last year. We made five discoveries in a very short period of time and we built up our reserve of gas in

STATE OF PLAY Dana Gas Executive Chairman Hamid Dhiya Fafar, speaking at the latest Dana Gas AGM, outlines the company’s expansion plans for the year ahead “The natural gas sector continues to show extremely strong fundamentals despite the global recession. The MENASA region is unquestionably the world’s largest player in hydrocarbon supply, with 45 percent of global gas reserves yet less than 20 percent of its supply. Additionally, the robust economic growth in recent years has transformed the region into a major gas market in its own right with an estimated long term annual growth rate of between six and seven percent. This positive long-term view of our industry has been enshrined in our robust five-year business plan and strategies within our region. Our goals for 2009 are to reach even greater heights than in 2008; they will undoubtedly be challenging, but we nevertheless look forward to achieving them.”

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EXECUTIVE INTERVIEW

A seismic shift in thinking Recent advances in data acquisition and processing techniques make Vertical Seismic Profiling (VSP) a crucial tool in maximising a reservoir’s potential. O&G hears more from expert Saleh Barakat How are borehole seismic applications helping to achieve maximum results from oil companies’ wells? Saleh Barakat. Borehole seismic, in particular Vertical Seismic Profiling (VSP), unites the time and depth domains, the geology and geophysics,

TD to surface, and over a much wider lateral extent than with conventional VSP imaging. The principal fracture directions and the resulting anisotropy can be measured using VSP, and the results fed back into the surface seismic processing route, to enhance the surface seismic image.

What are your future predictions for borehole seismic applications and VSP and how will technology play its part? SB. The advent of large, reliable, wireline-deployed geophone arrays, like the 100-level tool of-

fered by Baker Hughes’ SeisXplorer service, give the opportunity to record and process large 3D VSPs, with data volumes that are more than 10 times larger than those of only a couple of years ago. With these large arrays, there is enough data recorded to allow companies like VSFusion to process not only high-resolution P-wave and S-wave cubes, but to measure azimuthal anisotropy and AVO, and to make detailed studies of the fracture networks at the well, all from the same dataset. Even now, VSP processing can now be Could you explain about the benefits of VSP done almost in real-time, for well characterisation, and can be used for geosteereven in the most difficult of ing and hazard avoidance durgeological environments? ing drilling. This is achieved by SB. One major advantage of measuring the depth and twoVSP data over conventional way time, to place the drill bit surface seismic data is the precisely in the surface seismic bandwidth. Because the VSP section; we can update the vetravel paths are half what they locity model in real-time, to are in surface seismic data, we allow re-migration during typically see a 20Hz or 30Hz drilling; and VSP reflectivity improvement in bandwidth, can be inverted to acoustic imand the corresponding impedance, to predict overpresprovement in vertical resoluAs VSFusion Middle East Region Manager at Baker Hughes, Saleh sures ahead of the drill bit. tion. Faults that are invisible to Barakat’s major expertise includes surface and borehole These real-time applications surface seismic data suddenly seismic data interpretation, 3D are big money-savers, and are come to life with VSP. Users & 2D VSP data. He has over 21 years of working experience in moving borehole seismic insee smaller features, both in geophysics, including eight years at AFPC Shell International terest and information away the vertical scale and laterally & SPC Joint Venture. Barakat from the desk of the geophysiaway from the well and can joined Baker Hughes in 1997 as a senior geophysicist. cist to the desks of reservoir enconfirm borderline seismic ingineers, geologists and drillers terpretations. In addition, – those concerned with the VSFusion has helped to develbigger picture of field development. As companies op specific techniques, such as Virtual Source, to look to exploit fields that are more complex, more allow accurate imaging in complex areas, for exfragmented and difficult to drain, tools such as VSP ample beneath salt domes, areas that are notoriwill be increasingly necessary for economically ously difficult to image using conventional viable hydrocarbon recovery.  seismic methods.

“As companies look to exploit fields that are more complex and difficult to drain, tools such as VSP will be necessary for economically viable recovery” for a more reliable picture of the reservoir. VSPs have been used for several decades, but recent advances in data acquisition capabilities and processing techniques have made them indispensable for optimum reservoir management. Companies like VSFusion continually fund research into improved processing techniques, to deliver the maximum amount of information from each VSP dataset, in as short a time as possible. The results give improved returns on information investments from well logs, surface seismic and reservoir geophysics, and greater potential for enhanced field development – getting more oil hydrocarbons out of the reservoir with less financial risk for all stakeholders. Are there are any particular borehole seismic challenges that the MENA region faces? SB. The quality of seismic data from the region is generally very good, but is characterised in particular by high amplitude multiples. Also, there are often vertical fractures in the carbonate reservoirs like the Khuff and the Arab-D. In VSFusion, we look on these as opportunities rather than challenges. For example, we have developed an innovative technique to migrate the first-order multiples in VSP data using our patented 3C Vector Kirchhoff migration, which gives reflectivity from

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EXPLORATION

AT THE SHARP

END

Saudi Aramco boasts the largest reserves in the world but how is the company maximising the potential from its gargantuan supplies? O&G speaks to the oil giant’s VP of Exploration Ibraheem Assadaan about the effects of volatile oil prices on exploration, the constant strive for technological development and winning the war on talent.

With oil prices tumbling from last year’s dizzy heights of US$147 a barrel, there is a worry that oil companies will be investing less in future exploration efforts. How does Saudi Aramco view the situation at the moment and is there a danger that money will be taken out of the budget on critical areas such as exploration? Ibraheem Assadaan. Saudi Aramco’s views are anchored on a long-term vision in dealing with the short-term fluctuations, or perceived short-term fluctuations, in oil prices while remaining focused on long-term objectives. There is always a price for any action to be taken and we have learned this from experience because Saudi Aramco is similar to any other company in the world with regards to this. During the downturn in the 1980s, for example, the fi rst victims of cost management were two major programmes – exploration and R&D. But time has proved that cutting down exploration and R&D programmes while containing or helping to contain the short-term cost management issues, has a higher long-term price because these two programmes require quite a long time to turn around and to be effective and yield results. In short, going radical when it comes to R&D and exploration is not the right approach all the time, however we realise there is a need to deal with short-term fluctuations in oil prices. There is perhaps a school of thought that many Middle Eastern companies are focusing on enhancing their existing wells as opposed to exploration. Do you think that is a short-term view? IA. Th is is a solution but it’s not maybe the optimum solution. Long-term considerations have to be built in and the strategy and the planning process and optimising existing assets is an ongoing regardless. That has to be done whether the oil prices are high or

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low; it’s just immaterial. It’s a matter of stewardship and efficiency, so in terms of exploration and growing the hydrocarbon resources, this is a totally different exercise and it’s for a totally different purpose. We are looking at growing the hydrocarbon resources in terms of oil and price from 755 billion barrels that we have today into 900 billion, and this is primarily going to be coming through exploration. Optimisation of existing assets and improved management of existing wells, infrastructures and facilities and de-bottlenecking, is ongoing at all times, whether you’re at peak or low prices, it’s just part of the business.

for upstream, which is one of the largest of its kind in the world and is running our seismic processing environment with all the technical sophistication required for prestack depth migration, prestack time migration, as well as sub-salt imaging and analysis of the seismic volumes in order to really milk the data. Th is is a direction that we established way back in the 1980s, but as the technology evolves, we capitalise on new breakthroughs and better ways of doing the business to ultimately get the most demanding jobs, in terms of computer horsepower, completed.

Will you ever get to the stage where in fact you almost have too much data? How are you harnessing the power of techWill it remove perhaps the human quality nology to increase current operations and of what we would call a gut feeling? also to search for new oil? IA. Never. Data is data and interpretation is the IA. Saudi Aramco is moving fast in the direction human capital. Th is is really what makes the differof being a leader in technology. We look around for solutions and if they are available, we’ll adapt ence because you can have all the data in the world Ibraheem Assadaan them and if not, we’ll create them, and that applies but if you don’t have the right people, the data is in every single aspect of our business – whether useless and the investment is wasted. Saudi Aramco it’s upstream or downstream. Lately, we have taken a 20 to 30-year strategy strikes a balance between automation and human capital development. that looks at what is needed on both the upstream and downstream sides, Automation has its own advantages in terms of reducing cycle time as well as what targets are needed to deal with technological challenges, and probably reducing running requirements, whether it is seismic imaging or reservoir characterisation. So we have put but nothing will replace human judgment and in place a major organisation dealing with R&D and we have mapped out this is why we are putting tremendous emphasis our requirements for the coming 20 to 30 years and we have already inition human resource development. Our engineers ated actions leading to implementation and realisation of positive results and geoscientists are receiving tremendous levels in different aspects of the business. of training because we believe that human capital We mean results when it comes our R&D business and we take steps and human resources is the most valuable asset any to make sure that we deliver what is needed. It is prudent to really invest company in any business may have. in upstream R&D, as well as downstream, to fi nd solutions to our chalSo we are capitalising the technology to the level lenges and improve the efficiency and the quality and the reliability of where we arrive to solutions and push the envelope as far the operations. For instance, reservoir simulation is a very powerful tool as we can in terms of what is needed to tackle the future to understand and characterise a reservoir to make sound development challenges that the industry is facing, but we have a parallel plans based on scenarios of production levels and what’s required for the effort with focus on HR development to make sure that the longevity and recovery. Th is product wasn’t available in the industry off workforce is world class and one of the best in the world. the shelf so we have to program it in house. Recently, we celebrated the completion of the Giga-Cell model where we can build simulators for our Saudi Aramco, plans to open the giant fields that can handle high-defi nition geological models and highUpstream Professional Development definition reservoir simulations with all the data components required, Center in 2010. How will this facility aid including history matching and future predictions. The Giga-Cell simuyour group in its exploration efforts? lation handles a billion-cell model with all the complexities that comes IA. It’s an idea for creating a fully devoted with it in a record time for the biggest oil field in the world. facility for the development of our profesDo you think that you will get to the stage where IT – the company’s backbone – will become a competitive differentiator? IA. It already is in Saudi Aramco’s case. With the seismic processing and reservoir simulation we are moving PC clusters and massively parallel computing. We have all the solutions already in place and we can deploy whatever number of CPU’s required to handle the most demanding computations that require horsepower. We have a fully dedicated centre

sionals and this is driven, again, by the business needs, however there are a number of other factors that came into consideration when we thought of this Upstream Professional Development Center. For one, the whole industry is suffering from bimodal distribution when it comes to demographics, so you’ll fi nd a peak of new graduates aged 30 and below and another

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peak towards the end of the spectrum who are over 50, and there is very little in between. But Saudi Aramco is not alone with this – it’s the same with every other company. And in fact, if you look at the statistical analysis or statistical sample of the major oil and gas societies and associations you see the same pattern more or less, where there is a gap in between the newcomers and the professionals who are due to retire in 10 years. Those approaching retirement have a wealth of knowledge and experience that needs to be transferred to the next generation to carry on. So the Upstream Professional Development Center is partly designed to move the experience from the aging workforce to the newcomers. We realise that and Saudi Aramco is in a very unique position because we maintain programmes that give us a competitive advantage in terms of getting world-class, quality education where we sponsor over 1000 students in different universities in the world and they go through a very rigorous selection process once they complete high school. We take the best of the best of high school graduates and we run them into a programme for a year, which covers science and engineering, as well as English. However, the Upstream Professional Development Center is a mechanism of really accelerating their move from academic education into real life and it is designed to shorten the time it takes from a new graduate completing college into a full-blown professional career in engineering, geology or geophysics. In the past, professionals used to work in silos. Now everything is moving into fully integrated, multi-discipline teams where it’s not good enough to be a good geoscientist – if you are a geologist you have to know a little bit about what is going on in the geophysical side and what’s going on in the reservoir engineering side, or the facilities side. So the Upstream Professional Development Center provides the empowerment where the new graduates are raised into a multi-discipline environment until they are well aware of their roles and how they fit into the bigger picture and how can they optimise their contribution. How do you manage to hold on to the staff at the other end? IA. We look at individual cases but if they are in their 50s, or even 60s, we hold on as long as they’re interested in continuing and that’s very good for us. It buys us quite a bit of time to complete the transfer of knowledge through mentoring. I just mentioned the Upstream Professional Development Center but we also have very well established programmes in different organisations at Saudi Aramco. We have the Specialist Development Programme where we pick certain individuals who are interested in becoming specialists in certain areas of the business, whether it’s geophysical imaging or petrophysical analysis or reservoir simulation, and through mentorship and a programme that includes a Masters degree and Ph.D, we can bring that individual to the level where he can take over in a critical specialty. We have already graduated a number in the Specialist Development Programme

and moved through the systematic process, of coaching and mentoring to the point where they are fully recognised professionals – some of them recognised on a world scale. But we look at it on a situation-by-situation basis and whenever that specialty is needed, we consider prolonging their stay by mutual interest.

“We mean results when it comes our R&D business and we take steps to make sure that we deliver what is needed. It is prudent to really invest in upstream R&D, as well as downstream” Do you feel that an oil and gas company can ever be a true partner in a carbon-sensitive environment? IA. We have already embarked on a major undertaking leading to carbon management and carbon CO2 sequestration efforts. We believe we have a role to play and we certainly want to abide to best practices when it comes to environmental stewardship and being recognised as a company that has world-class standards in environmental protection wherever we operate. We are not without a long-term strategy dealing with carbon sequestration from fi xed sources as factories and plants and from mobile sources, and we believe that the entire industry is moving into that direction, which is part of the social responsibilities that we certainly have to deliver on. So we have mapped out a long-term strategy dealing with carbon sequestration from fi xed sources like factories and plants and mobile sources. We believe that the entire industry is moving in this direction but it’s all part of our social responsibilities so we certainly have to deliver. How does a national oil company like Saudi Aramco expand its role globally? IA. We are well established in terms of being a global player in the downstream area and have been an international company for 20 years. In fact, that initiative has started in the 1980s where we have a number of joint ventures in North America and Southeast Asia and in East Asia. We are a major player in the Kingdom and the world where we satisfy nearly 10 percent of the world demand today. So it is prudent to stay focused on where we are rather than splitting out the resources but we don’t have any long-term plan to expand globally in terms of upstream. We’re happy where we are at this time, however we’re open and we’re looking around and everything is going to be evaluated on its own merit. We certainly want to stay focused on what we do best and build on it, and this is the thrust of our focus these days. „

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EXECUTIVE INTERVIEW

Super seismic Eric Adams discusses keys to success in seismic-to-simulation workflows. What defines a successful seismic to simulation workflow? EA. Companies invest in seismic-to-simulation analysis for the invaluable insight it can provide into the best production plan for the reservoir. To ensure that the investment is well made, the workflow must meet some very stringent criteria. It must include and honour, all well, seismic and geological data. This is the foundation of all that follows, so it must be comprehensive and reliable. It must also match production data, without resorting to artificial barriers or porosity modifiers. The workflow must accommodate iterations such that the model can evolve to include new information without losing its integrity. It must allow creation, evaluation and ranking of production scenarios to aid in building the production plan. From my experience, the only reliable way to achieve these goals is to use a quantitative, iterative approach.

“By rigorously using all the available seismic, well, geological and production data to build the model and maintaining the connection to that data throughout the process, the model will be accurate, robust, and updateable” How is this approach different? EA. Quantitative integration is founded on three core principles. First, all data – including well, seismic, and production data – are included in a single, comprehensive workflow. Second, because of the uncertainty involved in all reservoir modelling, the workflow must be iterative and updateable, incorporating new information into the model as it is available. Third, the model should include highly detailed properties derived from the seismic. The more information included in the model, the more likely the model will match new data added to it. Any workflow based on these principles must be multi-discipline and include all the software tools to handle petrophysics, rock physics, inversion, geostatistics, uncertainty estimation, upscaling, simulation and production scenario development. Most workflows today fall far short of that standard. Where are the typical points of failure in reservoir modelling? EA. There are four common areas where problems arise in reservoir modelling. First is in defining the range of highly detailed, plausible 3D models from seismic. The results must look like geological layers or it won’t behave prop-

erly in the simulator. Second, typical workflows do not sufficiently establish the relationship between petrophysical reservoir properties – lithology, porosity, permeability, and water saturation – and elastic properties – p-velocity, svelocity and density. This relationship is essential in obtaining accurate petrophysical models from seismic data, through geostatistical inversion. A third problem area is accurately transferring these 3D rock property models from seismic to corner point grids, without which problems such as discontinuity in fluid flow can be introduced. The final problem area comes in uncertainty estimation and production scenario ranking. If modifiers or artificial barriers are added to the model to force it to match production history, its usefulness is compromised.

Eric Adams is Managing Director of Fugro-Jason, a leading provider of reservoir characterisation products and services. He joined the company in 1996 as Region Manager, North and South America. Adams has 30 years’ experience in the industry, including previous positions at Schlumberger and Veritas.

What extra value does a quantitative seismic-to-simulation workflow provide? EA. By rigorously using all the available seismic, well, geological and production data to build the model and maintaining the connection to that data throughout the process, the model will be accurate, robust, and updateable. It can then be used with high confidence to predict future production volumes, ultimate recovery, and to evaluate the impact of various reservoir management options. In one North Sea operation, such a workflow yielded a final model that honoured all available geophysical, geological, and engineering data with a 95 percent match to historical data in producing wells. In an Arabian Gulf field, a model was built including and honouring logs from 42 wells, as much as 30 years of production history from 92 wells, and a recent seismic survey. The model that resulted is still in use three years later, and current field production still matches that model prediction. n

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COMPANY FOCUS

Behind the scenes at Egypt’s largest independent oil company.

W

hen it comes to PICO International Petroleum (PIP) size matters, according to the firm’s Head of Exploration Hamed Ibrahim, who says the company’s emergence as Egypt’s leading private oil company is proof that success can come in small packages. Despite only having been set up in 1989, today PIP has grown to become the third largest producer in Egypt’s Gulf of Suez region. Over the past decade it has focused on the development of mature oil and gas fields and between 2003 and 2008 its net production increased by 100 percent. During that time it has also maintained an average Reserve Replacement Ratio of 152 percent. The speed of its development has in large part been due to its independence and relatively small size which allows it greater agility in its decision making processes, according to Ibrahim. “It gives us the advantage of being able to move faster and easier than the major companies. Definitely the decision-making is much easier. The process of this is much faster. You can tackle small and medium size opportunities. You don’t have a minimum size of work. So we are looking for whatever opportunities come up and if they suit our business case they will be one of our targets.”

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Taking on the giants PICO’s acquisition strategy has seen it take over mature wells from the likes of Shell, Total and British Gas. Its aim is to take over wells that have become too expensive for the companies to continue to work on, then explore deeper to maximise their potential, as Ibrahim explains. “PICO acquires mature fields from major companies such as Shell or ConocoPhilips. The operating criteria of those fields with majors becomes a little bit expensive for them. For us it’s not. We tackle these fields differently from what they are doing.” An example of a successful acquisition was that of the Gemsa field in Egypt, which was producing 6500 barrels of oil a day when PICO took it over. Within six months it had increased capacity to 13,500 barrels a day. “Doubling oil production in a field like this is a great success. It’s all about looking for a new horizon in the same field that nobody else has yet discovered,” says Ibrahim. Describing another successful acquisition, he says: “Two years ago we acquired a field from Total and Samali Aramco and at the time it was only producing gas. We dug deeper and discovered it was possible to also produce oil from the field. Now it is producing 10,000 barrels a day and the plan now is to increase that production by almost three times.” It achieved this, he says, by increasing the “drillability” of the well. PICO now plans to drill three additional wells within the same field. The most challenging area it is work-


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“Oil, to me, is always the industry

of the new ideas. You have to be inventing a new way or a new idea to achieve a better result in the future”

ing in, says Ibrahim, is the Gulf of Suez, which, because of the fact that it has been in production since the 1960s, is becoming increasingly difficult to extract from – defying even PICO Petroleum’s perseverance: “Maintaining productivity is a huge challenge for everybody working in the Gulf of Suez. Since the 1960s it has produced something like five million barrels of oil and there is around 1.5 billion barrels of oil left there. Everybody is struggling to get it out of the ground,” says Ibrahim.

Ibrahim says he believes that companies are under greater pressure than ever before to develop and take advantage of IOR and EOR as they can no longer afford to take a short-term view of the future of oil production or to accept the recovery factors of wells at their current levels.: “If you look at the average recovery factor you will find, all over the world, that the maximum is 40 percent. But what about the remaining 60 percent? If you even manage to increase your recovery factor by five percent then you are adding a lot, even to the international reserves.”

The cutting edge PICO Petroleum’s success in maximising the capacity of mature oil fields, means developing Enhanced Oil Recovery (EOR) and Intelligent Oil Recovery (IOR) techniques is an important part of its strategy. Describing some of the methods it uses to bring to life wells that were previously thought to be redundant, Ibrahim says: “We try to maintain or stop the high decline rate by maintaining the pressure, by artificial lifting of the crude itself and by increasing the recovery factor. If you manage to achieve a good result in those three aspects you will definitely have the chance to increase your production.” The most effective EOR techniques currently are, according to Ibrahim, artificial lifting, horizontal drilling and chemical or steam injections. In the future he believes companies will make more use of chemical injections: “From the point of view of increasing the porosity of the bore salt this technology will allow the oil to move easier and smoother through the reservoir itself and if you can help parts of the oil to move smoothly that will increase the recovery factor in the oil field.”

THE BIG QUESTION Hamed Ibrahim on oil prices “The oil price right now, because of this economic crisis has been down to less than US$40 a barrel. Right now because of the demand and the amount of discovery adding to the actual reserve in the world, definitely the days of the cheap oil is already past. I believe the oil price will never be less than US$30 by any means in the future.”

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Forward thinking PICO Petroleum’s ultimate aim is to increase its exploration activities in Egypt however, Ibrahim acknowledges that the current economic climate could make building up the funds needed to invest in new fields a challenge. Because of this he says the company prefers take a gradual, not aggressive approach, to achieving its expansion strategy: “PICO is a small, independent company. We have managed to achieve a good rate of success in the last 10 to 15 years. Our target is to increase it but the ups and downs in the market recently make you very cautious in choosing your next step and very alert about what’s going on in the whole global system. Right now nobody is isolated from the influence of what is going on in the world so we have to be cautious about taking a decision and making the next step. We believe that moving slowly is much better than rapidly jumping to some conclusion because you don’t know what conclusion this will result in later.” Despite taking a more low key approach towards its expansion strategy, PICO Petroleum has some lofty ambitions, including the expansion of its operations across the Middle East. Ibrahim says the company plans to target Syria and Yemen and outside the region in Indonesia. “Our near future plan is to expand outside of Egypt. Last year we visited Indonesia to find a target outside our current location.” Clearly this is a company that believes in thinking creatively about how best to maximise its resources as Ibrahim confirms: “Oil, to me, is always the industry of the new ideas. You have to be innovative. You have to be inventing a new way or a new idea to achieve a better result in the future.” 


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NEXT BIG THING

Making the leap Now is the time for the oil and gas giants to put their faith in new technologies says Walid S. Al Shoaibi.

I

n the past, the oil and gas industry has been notoriously slow in accepting and embracing new technology to find and extract reserves, and has instead relied upon ‘tried and tested’ methods that have been in use for more than 30 years. The traditionally accepted adoption cycle of new technology into industry wide use has often been regarded as a 15-year process. There are however significant strides being taken in the MENA region, led by Saudi Aramco and Algeria’s Sonatrach for the relatively rapid testing and deployment of new technologies to enhance discovery and recovery of reserves. This development has been accelerated through: • The need to control costs by becoming more efficient in the discovery and recovery processes • The need to improve the recovery rates of existing and new fields as reserves usage continues to outstrip new discoveries and world reserves fall • The need to focus technology to the specific geophysical characteristics of the MENA region, when historically development of new technologies by innovative companies has been tailored to the North American and North Sea markets The Shoaibi Group, in recognising these developments, has over the last five years become a developer of, partner to and investor in many innovative oil and gas technology companies with the objective of addressing the needs of the region’s reservoirs. This strategy has been further extended by the creation of Shoaibi Group’s own ‘Incubator’. The incubator project is a R&D hub, located in Dhahran Techno

“The Shoaibi Group has experience of working with and investing alongside many of the world’s leading venture capital companies that have a focus on the oil and gas sector” Valley (‘DTV’), Al-Khobar, to assist in bringing new technologies to Saudi Aramco and the wider region through sponsorship and involvement of local and international universities such as King Fahd University of Petroleum & Minerals (KFUPM) in Dhahran, and other R&D centres. The purpose of this project is to incubate ideas either in-house or take existing technology and modify it towards an oilfield application. By understanding the current and future technology needs of Saudi Aramco, the ‘incubator’ serves to take these challenges to universities and other R&D centres to validate whether these challenges can be met. There is no better way to gain this understanding than by working alongside Saudi

58 www.ngoilgasmena.com

Aramco. If the technology fits and/or exists, either as a concept or prototype, then the incubator team will secure funding to take the technology to the ‘Technical and Commercial Feasibility’ stage. The Shoaibi Group has experience of working with and investing alongside many of the world’s leading venture capital companies that have a focus on the oil and gas sector, including Limerock Partners, Energy Ventures and Scottish Equity Partners amongst others, in addition to leading investments in its own right. The partnering by Shoaibi Group in such investments brings an added understanding of the specific needs of the MENA region, and a direction of funding to address these needs. Finally, once the technology/prototype has been developed and thoroughly tested it will be Walid S. Al Shoaibi is Shoaibi passed on to a company with sufficient funding Group Managing Director and from local and international investors with the obFirst Vice President of the Saudi Italian Business Council, as well jective to commercialise the product, delivering new as a member of the Industrial Committee Eastern Province value to NOC’s and international oil companies Chamber of Commerce & (IOCs) in the region and globally. The Shoaibi Industry. Al Shoaibi received a BS in Civil Engineering from Rice Group, in working with Saudi Aramco and its variUniversity, Houston, in 1984 and an MBA from the University of ous partners very much aims to be a part of develHouston in 1987. oping the next big thing. n


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EXECUTIVE INTERVIEW

Going subsea Offshore exploration is an especially difficult and challenging aspect of the pursuit of hydrocarbons. O&G quizzes Jan Strom of Subsea Norway AS on the key trends his company is witnessing With oil and gas companies working in increasingly difficult environments, what are the main challenges they face with their subsea equipment and production systems? Jan Strom. With the ever-changing climate there are many new challenges to cope with, such as increased wind and currents offshore. Flexible risers, umbilicals and mooring equipment will see increased motion related stress, floating production and storage units will have changed patterns of movement. And this will increase stress and cause a higher risk of fatigue on production lines. We have seen several fields where risers and anchor chains start to interfere with each other. Many low cost subsea developments with only

topside control systems (riser and umbilical to each well) will face these new challenges, calling for fewer risers and the need to introduce subsea control systems to reduce this risk.

production unit and offloading and shipping with a separate FSO. The owners are looking for a cost effective solution to expand the field and need a new subsea infra structure for this expansion, which is planned to be hooked up to a FPSO. Th is is done to decrease production downtime due to

How does technology help your work in providing subsea services for your clients? JS. Subsea Norway has a high focus on Life Cycle ManageJan Strom, who has an engineering degree in Marine Engineering and Electronics, is the ment and a key item is to have weathManaging Director of Subsea Norway AS. Strom a good PLM system to have er and has been working with subsea engineering offshore and onshore for more than 20 full traceability of all deliveryears and was the co-founder of the ables, changes, modifications Norwegian AMEK group. throughout a subsea field’s lifetime. The recent years behind us with extreme high activity have been fatigue problems with production flowlines. a challenge to quality of products delivered. By offering one of our fast track solutions we We have all experienced quality issues combine the re-use of existing equipment and with all kinds of components, from add some new, such as choke bridge modules steel structures, bolts, valves and subsea distribution of hydraulics and and so on. However, this kind power/signal. Th is gives a robust, easily mainof risk can be reduced by tainable and cost effective solution to extend having a good track of an oilfield’s lifetime and extend production the equipment. There is capabilities. And that is one of Subsea Nora major difference in way’s core technologies – refurbishment of changing 10 bolts on subsea equipment and adding value for our a live production line clients. instead of changing several thousand if What plans do you have for your busiyou have lost track ness in the coming years and how will the of where the differMiddle East fit into these plans? ent material has been JS. With reduced activity in the North Sea area installed. our focus is more worldwide and we are planning to establish ourselves as a key supplier of subsea engineering in the Middle East and Can you give a recent Southeast Asia. We are especially focusing on example of how you the extension of existing ‘brown’ fields by inaided a client with their troducing low cost and robust add-on solutions subsea work ? to increase hydrocarbon recovery. Key is the JS. One of our recent clients is re-use of previously installed equipment and reoperating a ‘brown’ oilfield which produces light crude oil and some gas. furbishment of equipment done subsea in order The field is at the present time developed to increase the lifetime of equipment. Lower by ‘hard wiring’ each Xmas trees directly to a CAPEX – higher return on investment. „

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SEISMIC MODELLING

A MODEL SOLUTION Noel Lucas, Senior Modeller at Dragon Oil, tells O&G about the latest trends revolutionising the industry.


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How did you come to be a Senior Modeller at Dragon Oil? Noel Lucas. I’ve been with Dragon Oil for the past year. For two years I worked for Halliburton in Abu Dhabi and now I’m working on the same projects but as part of the asset team at Dragon Oil that carries out outsourced projects. We are representing Halliburton and are involved in generally assessing their resources and helping them with enhancing oil recovery. What are the latest trends in terms of 3D modelling technology? NL. Because the technology that we had five years ago is basically still the same, nothing has changed that drastically. The only thing we are trying to improve right now is to get hold of all the aspects of a static model. So aside from piping, we also consider the pressure regime and the production weight on each of the floor units. This way, the uncertainties which affect the volumetrics and the performance of each of the flow units later on are being captured.

Oil companies are having to dig ever deeper to find new energy sources. How does 3D modelling enable them to achieve their aims? NL. Today’s technology increases companies’ confidence when it comes to investing in deeper prospects. It’s much easier to make these decisions. The workflow is simpler and uncertain places are being studied all the time. This cuts down the risk of exploring in those areas. A lot of companies don’t want to invest in a high-risk area simply because they don’t know what’s there. There is also the risk of problems like stuck pipes or there not being any oil at the site. With the latest technology, such as modelling using magnetic resonance, we can explore deeper prospects where oil is deeply embedded.

Noel Lucas

Has the economic downturn affected investment in reservoir modelling technology? “Right now I NL. Right now I think it’s the golden age for this industry. The only challenge is investment. People are still scared of think it’s the investing in this industry because it’s so high risk. And the golden age for this What technology are you using in order to achieve this? cost of wells right now is horrendous. Shallow water industry. The NL. Right now we only have around two packages that we’re drilling costs around US$20 million or more for a project. only challenge is using in the industry for treating modelling – Petrel and That includes the testing of the wells. Because there are investment” Roxar. Petrel is owned by Schlumberger and was originally not many prospects in the shallow drilling range howevdeveloped by a Norwegian company called Technoguide. It er, most companies are venturing into deep waters, which was developed specifically for PCs and is Windows-based. people don’t go to much. This brings up the price to Roxar is Linux or Unix based. If you use a Windows based-software you are around US$60 million. But right now companies are venturing into the limited to a very small area and also the number of cells you can have in the areas that are high risk in deeper water because we are running out of restatic model is limited. You can only operate up to 10 million cells. The persources. The good ones have been taken. formance is much better with Linux-based software because you can operate more than 10 million cells and so you can make your models last for years. In terms of manpower, are there enough skilled modelling geologists working in the energy industry? If the technology has been the same for the past five years, what is the NL. There are lots of people today who are going down this career path. And next step? hopefully there are lots of universities that are encouraging people to go NL. The trend right now is to input seismic attributes to your models. That’s into this technology. But it boils down to the price of oil right now. the dream of all the modellers around the world. At the moment you have an Recently, oil and gas has been all over the news and its controlling the econidea of the trend of your reservoir laterally because most of the studies using omy right now so maybe this will encourage this generation of students to a static model are based on the wells. But if you can incorporate and use seisgo into it as a career.  mic attributes then you can have a better view. The dream of every modeller is to try to relate each flow unit from the wells outside with the conditioning effects from the seismic attributes. That will improve production and also the About Dragon Oil volumetrics of the area. That is the future for 3D modelling. Dragon Oil plc is an independent oil development and production company, registered in Ireland and listed How close is the industry to being able to achieve that? under a dual primary listing on the London and Irish NL. There are several companies right now who are developing everything in Stock Exchanges. Approximately 52 percent of the Windows specifically. This can be done more effectively and in a very short Company’s equity is held by the Emirates National Oil time. Then turnaround time is fast. But the really fun part is when you are tryCompany (ENOC). It is headquartered in Dubai and its ing to do a dynamic model from a static model. I have just attended a workprincipal development and production activity is the shop in Abu Dhabi, that showed how we can stimulate up to more than a development of its asset in the Cheleken Contract Area, million cells now. Before that were were limited to only half a million. Intel is offshore Turkmenistan by a Group subsidiary, Dragon Oil the company that is spearheading this new technology. It means there is now (Turkmenistan) Limited. a seamless approach to doing the simulation that means a static model can be made using a million cells instead of being limited to very thick layers or maybe small cell sizes.

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ASK THE EXPERT

A model for success Bringing risk, uncertainty and scenarios into value and portfolio assessment is critical for building the E&P business. Per Audun Hole discusses the three key challenges for exploration risk and resource and economic value assessment.

T

he fi rst challenge is delivering a effective platform for a scenario-based as’correct’ probabilistic representasessment workflow. Best practice uses a tion of risks and volume for all report from the probabilistic aggregation of possible outcomes of a prospect alternative scenarios as the central assessdrilling campaign. ‘Prospectivity’ assessment ment review document. The result is effective is the foundation for exploration decisions. consideration of relevant scenarios. One of the paradoxes of modern exploration Assessing the full range economic is the challenge of the ‘overconfidence trap’. value outcomes High quality seismic and 3D geological mapAccurate and unbiased ‘prospectivity’ ping systems provide detailed representaassessment is critical. But it is not a sufficient tions of the subsurface. The apparent realism basis for making informed decisions on exof interpreted maps and sections often leads ploration opportunities. Projects need to be assessors into believing that they have the characterised and understood in terms of ‘right’ picture of the prospect. Subsequent their economic potential. A barrel of oil is drilling has repeatedly shown that nature not a barrel of oil: exploration, development can surprise. Uncertain and incomplete data and production costs vary significantly as do and interpretations can oft en overlook differfi scal terms; there are potentially significant ent stories–different fluid systems, different economies of scale. Effective decisions need dry zones, different facies or different and therefore to consider not only subsurface incomplete contacts and spill points. risks and uncertainties, The best in the indusbut also the complementry have found that the tary and interdependent antidote to overconfidence ‘above the ground’ risks in one story is to use tools and uncertainties such as and a workflow that both exploration and developsupports and promotes ment costs, well producactive consideration of altivity and hydrocarbon ternative scenarios. There prices. The assessment is still room for developalso needs to capture the ing the details of the most consequences of delays likely scenario, but this and capacity constraints. is balanced with at least Consistent analysis should one alternative. Together, be based on integrated the alternative scenarios Per Audun Hole, CEO GeoKnowledge, has been business modelling tools provide a more robust with the company since 2004. Hole, who began his career that include rules for how and realistic evaluation of as an exploration geologist opportunities can and exploration opportunities. at Statoil in 1986, has a broad experience in oil and will be both explored and Scenario analysis is built gas exploration, production geology and integrated field exploited. into a databased prospect development projects. He has In a system such as assessment system such as an MSc in geology from the University of Bergen. GeoX, there is full integraGeoX from GeoKnowledge. tion from rocks to dollars. The database provides an

With business rules, conditions and contingencies modelling, the user can capture the full range of economic returns for single target opportunities while also handling more complex concessions and clusters that involve multiple targets and staged decisions. A global fi scal library completes the tool set. The result is a fit-for-purpose platform for rapid and consistent assessment of international exploration opportunities.

Optimising the exploration portfolio The successful player in the upstream E&P business needs to manage and develop a portfolio of exploration opportunities. The portfolio enables the company to exploit economies of scale and scope, spread risks and grow the business. Managing the portfolio of exploration opportunities requires choosing a composition of projects that maximises economic returns. The composition should also adhere to strategic objectives concerning key performance indicators such as production levels and reserve replacement. Given the inherent uncertainties and risks of exploration ventures, the analysis of alternative portfolios cannot assure that targets will be met. Instead, the analysis needs to give estimates of, for example, the probability of achieving the desired production level. The foundation is assessments of the individual opportunities that reflect the full range of possible outcomes. Portfolio composition evaluation is primarily assessment of the joint outcomes of the projects. In a system such as GeoX where project evaluations are databased, assessment of portfolio composition reduces to project selection. The relevant portfolio assessment tool then calculates the results of drilling out the set of exploration projects in the portfolio. „

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GEOMICROBIAL EXEC:16 july 05/08/2009 14:59 Page 66

EXECUTIVE INTERVIEW

A precise science Daniel Hitzman, President of Geo-Microbial Technologies (GMT) discusses the key issues with hydrocarbon microseep. What exactly is a microseep? Daniel Hitzman. Very small and very buoyant molecules of light hydrocarbon gases – methane, ethane, propane, butane and C5+ – escape from oil and gas reservoirs and penetrate their permeable reservoir seals. These gases travel vertically through micro fractures to the surface atmosphere. There are many seismic data sets that confirm such gas chimneys. These direct indicator gases can be measured at the surface in both soil and offshore sediment samples. How do seeps help with oil and gas exploration? DH. Observing visible oil seeps at the surface – like outcrop stains or oil slicks on water – builds huge confidence that hydrocarbons are present in a basin or block area. Historically, parts of many Middle East basins were first targeted because of these visible surface macroseeps. But macroseeps reveal only part of the seepage spectrum story. Hydrocarbon microseeps of light hydrocarbon gases are now being used to more accurately locate oil and gas reservoirs at depth. These microseep gases are invisible to the human eye, but to gas chromatographs and microbial cultures they are clearly discernible and are very potent indicators of hidden traps charged with hydrocarbons. Why test for hydrocarbon microseepage? DH. Seismic data is imperative for making structural interpretations. Unfortunately, dry holes tell us that not all seismic traps contain hydrocarbons. We still drill an unacceptable number of dry holes. We must improve our exploration accuracy and optimise our development programmes. Microseepage surveys are great for ranking seismic prospects. I believe detailed microseep signatures reflect original reservoir heterogeneities before drilling and also accurately track dynamic reservoir pressures as production matures. Plus, as structures are becoming increasingly scarce, we must look for more subtle stratigraphic traps as future reserve builders. I think microseepage surveys may turn out to be the preferred exploration tool for discovering strat reservoirs. What are typical microseepage survey strategies? DH. Microseep surveys are very flexible in their design and scope. This translates to great efficiency and low cost. Microseep surveys commonly follow seismic programmes and rank their numerous structural prospects. These post-seismic surveys help focus limited drilling budgets and avoid wasteful dry holes. In MENA basins we also frequently conduct large-scale reconnaissance surveys – sampling expansive frontier areas prior to expensive seismic shoots. In mature producing areas we utilise more detailed sampling patterns to locate by-passed reservoir compartments, offset well locations, and help plan waterflood and in-fill drilling projects.

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How does GMT measure microseepage? DH. GMT conducts hydrocarbon microseep surveys throughout the Middle East and North Africa – both on and offshore. We collect shallow soil and sediment samples and then use two hydrocarbon microseepage detection methods: the Microbial Oil Survey Technique (MOST) and Sorbed Soil Gas (SSG). These microseep tools were first investigated by Phillips Petroleum Company and then further developed by GMT. For over 25 years we have worked with smaller independents, integrated majors, and national oil companies (NOCs). A MOST survey tests for specific microbes which consume thermogenic microseep gases. These microbial signatures are very reliable and reproducible

and serve as excellent vertical seep locators. To distinguish whether the reservoir source is oil or gas or condensate, we supplement the microbial measurements with Sorbed Soil Gas (SSG) analyses. These SSG tests are conducted on leftover and preserved MOST samples or from separate and sometimes deeper samples. SSG results are measured in parts per million and the gas ratios are excellent indications of reservoir source. We find the combination of microbial and sorbed soil gas surveys to be an extremely cost-effective exploration strategy. What does the future hold for GMT and microseepage advancement? DH. As exploration budgets are stretched and tolerance for dry holes is rejected, the adoption of low-cost microseep surveys will obviously increase drilling accuracy and efficiency. Additionally, the ability to discover stratigraphic reservoirs and optimise mature fields will boost microseep acceptance. GMT looks forward to being a leader of microseep technologies and continuing our service to the petroleum industry. n For more information, please visit www.gmtgeochem.com or email danielh@gmtgeochem.com.


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INDUSTRY ANALYSIS

SOLD r e d d i b t s e h the hig to

With northern fields dropped from Iraq’s bidding round amid political and security fears, IHS Global Insight Middle East Energy analyst Samuel Ciszuk takes a look at the implications.

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he Iraqi Oil Ministry has issued a new revised list of oil and gas fields being tendered in the second bidding round later this year, pulling five oil fields and one gas field from the north out of the offering. The fields withdrawn from the list are the Qayarah, Gullabat, Najmah, Naudoman, and Qamar oilfields and the Khashm al-Ahma gas field, which all are located in the northern hydrocarbon area of Iraq, some of them in the disputed areas between the autonomous Iraqi Kurdistan region and Iraq proper, according to a report in industry newsletter Petroleum Intelligence Weekly (PIW). Citing a source in the Iraqi Oil Ministry, PIW says the Iraqi explanation is that it will now concentrate on awarding contracts for the rehabilitation and expansion of producing fields, awaiting the award of ‘greenfield’ projects until a national oil law – regulating exploration and development more cleartreme south. Given that IOCs and NOCs bidding for the northern ly – is in place. The explanation, however, rings crown jewels, the Kirkuk and Bai Hassan fields, in the first bidding hollow, given that no other producing fields have round failed to come back with bids close to the Oil Ministry's maxbeen added to the list in the (largely) undevelimum-requirement additional barrel remuneration fee, there is litoped fields’ stead. Rather, their common detle to suggest that much smaller non-producing fields, with a have been pulled from nominator (Qamar, Gullabat, and the Khashm completely unclear legal situation in an area that is looking inthe second round of al-Ahma gas field have been relatively explored creasingly volatile, would attract bidding interest. bidding but not developed, while the rest of the fields are very underexplored discoveries) is that they are loDisputed territory cated in an increasingly volatile northern region, and While the north of Iraq, since the 2003 US-led invasion, has been one some of them even in territory disputed between the Kurdistan of the country’s quietest spots – with the autonomous Iraqi Kurdistan reRegional Government (KRG) and the Iraqi government. gion often being held up as a good example of governance, business acuNeither are the fields particularly large, compared with much of the men, and security to the rest of the country – there is today rising tension southern offering, which includes the massive West Qurna second-phase develin the area as the hitherto ad hoc relationship between the Iraqi government opment, the Majnoon and Halfaya fields, and the central Iraqi East Baghdad and the KRG needs to be properly codified. Originally consisting of the heavy oilfield. Still, the second round contains some other relatively small (by three northernmost Iraqi provinces, the KRG in 2003 used its close alliance Iraqi standards) oil and gas fields, although these are located in the south or in with the invading US army to secure itself a significant role in the securithe Missan province further inland from the prolific Basra province in the exty of areas much larger, where the Kurdish population was in the majori-

A total of 5 oil fields

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OILFIELD

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TARGETED PRODUCTION (b/d)

Known Reserves (bil. bbls)

West Qurna-2

560,000

12.876

Majnoon

600,000

12.580

Halfaya

250,000

4.098

East Baghdad

120,000

8.108

125 mmcf/d

**

Siba (gas) Najma

70,000

**

Gharraf

120,000

0.863

Qayara

170,000

0.807

Badra

50,000

**

West Kifl

100,000

0.209

Kifl

**

**

Mirjan

**

**

Qamar

100,000

0.073

Gullabat

**

0.098

Naudoman

**

0.104

Khashm al-Ahma

**

**

2,050,000 and 125

Approx 39.816

TOTAL

mmcf/d Source PIW 6 October 2008, Iraqi Oil Ministry

ty or at least a dominant population group. Since then the KRG has attempted to solidify its increased territory, which now extends to many areas seen as core Kurdish territory in the broad nationalist discourse, although it has failed to incorporate one of Kurdish nationalism's main prizes – the Kirkuk city and region, including its oil production hub – under its aegis. As Iraq now attempts to move forward from a martiallaw-like situation into a more ordered political phase, the extent of the KRG's autonomy and its borders will have to be settled, prompting the temperature to rise when Iraq's Prime Minister Nuri al-Maliki – a proponent of greater centralisation and 6 Iraqi nationalist – tries to rein in Kurdish claims, while Iraqi Kurdistan prepares for regional elections just months before Iraq casts a parliamentary ballot.

Levelling the playing field With the legal situation in these internal border areas continuing to be unclear to say the least, potential investors among IOCs and NOCs remain very much discouraged from investing in these fields. Given the lower-thanexpected result in the first bidding round – where only a consortium consist-

70 www.ngoilgasmena.com

ing of BP and CNPC in the end managed to match the incredibly tough financial terms, securing access to the massive Rumaila field – the Oil Ministry is likely to want to avoid a similarly drab statistic, without being politically ready to significantly improve the financial terms offered. Hence, pulling the least attractive fields out of the race is probably a reaction based on soundings with potential bidders, and also a sign that a greater sense of realism is creeping into the Oil Ministry's most senior echelons. With political rhetoric continuing to run high against the BP and CNPC contract among those opposing international investment in Iraq's previously nationalised hydrocarbons industry, there will be little tangible success to use as reference for the Oil Ministry by the time it manages to kick off the second upstream bidding round (scheduled for later this year, though the ministry hopes to perhaps launch it before the end of the third quarter). Given that only one contract was signed as a result of the first bidding round, the Oil Ministry will have to achieve a better result this time or else see its bidding round-based strategy over the past two years appear an almost complete failure. The Oil Ministry has been under fire over the past nine or 10 months for having concentrated entirely on preparing the bidding while neglecting to make easy repairs and developments in the meantime, thus failing to reverse Iraq's declining production at a time when low oil prices were hurting the country's budget – and general reconstruction effort – immensely. Still, given the political resistance to foreign investment into its oil and gas sector, the Oil Ministry might be unable to offer significantly more attractive financial terms to oil companies – despite having demonstrated a tough attitude in the first bidding round and gained some resource-nationalistic credibility. With parliamentary elections in early 2010, oil companies will be likely to want to await the outcome before committing to vast investments, while the government and Oil Ministry will be politically unable to offer attractive terms while electioneering. Hence, pulling the least attractive fields from the second-round offering is one way of making the end result look at least somewhat more attractive, although it also recognises the increased po-

“Given that only one contract was signed as a result of the first bidding round, the Oil Ministry will have to achieve a better result this time or else see its bidding round-based strategy over the past two years appear an almost complete failure” Samuel Ciszuk

litical volatility in the north and the need to get legal clarity on the issue of Iraqi Kurdistan's borders before any significant investment can start trickling into those areas through the central government. The Iraqi Kurdistan government, however, was early to award oil contracts to smaller oil companies in some disputed areas, hoping to create ‘facts on the ground’ and now no doubt making sure that their interests in the disputed territories come with a clear price tag. 


AGR EXEC:16 july 06/08/2009 09:48 Page 71

EXECUTIVE INTERVIEW

Excelling in exploration Chris Sugden discusses how AGR Petroleum Services is aiding the oil and gas industry in the hunt for hydrocarbons.

Who are AGR Petroleum Services and what services do you provide to the oil and gas industry? Chris Sugden. AGR Petroleum Services is the world’s largest independent well and reservoir management group and has the international experience, capacity and work processes required to deliver efficient and assured results for its clients. Our headquarters are in Oslo, Norway. Additionally, we have an established presence in the UK, Russia, Kazakhstan, USA, Australia and are now operating a regional hub in the UAE to develop business across the MENA region. We are a global provider of services for all phases of the upstream asset life cycle in the oil and gas industry. This ranges from interpreting the first seismic data through exploration and appraisal drilling to field development and production optimisation. AGR PS is designed to provide full project organisation, supplement a client’s existing staff or provide expertise that may not be available in its organisation. Importantly, we provide subsurface and well engineering resources or services on an as-needed basis through discussion and liaison with the client. As a result, we are a flexible service provider which can act within or out with client offices as a fully integrated subsurface, drilling and field development team, or provide each of these service streams individually. What has attracted AGR Petroleum Services to the MENA region? CS. The MENA region is the most important and active E&P area in the world today. The phenomenal growth in worldwide E&P activity over the last five years has led to a dilution of expertise in all functional areas required to deliver the expected performance on important E&P projects. AGR Petroleum Services has an array of solutions to the problems inherent with constrained talent pools and an advanced value proposition that we anticipate E&P operators in the region will find compelling in their quest to deliver or exceed their goals. How are your products and services aiding the industry?” CS. AGR PS is a process driven organisation with certified management systems supporting our operations to deliver upper quartile performance to our

clients on a consistent basis. Last year, AGR PS drilled over 78 wells in seven countries for 34 clients, operated seven offshore rigs simultaneously worldwide, completed over 200 reservoir management studies and placed 191 consultants through our consultancy services group. We are recognised as providers of the world’s leading project risk management software, P1. Sometimes the most cost effective option can bring the greatest risks consequently we have designed the software to offer a range of solutions and highlight the level of risk associated with each of these, thereby giving engineers complete control over their projects. Breaking from traditional risk management tools, P1 V 3.8 draws on data from previous well construction projects to offer operators a range of solutions to problems that may arise during construction work. It provides the associated solution costs allowing engineers to quickly understand the financial impact of their decision and generates likely outcome scenarios of particular actions.

“AGR Petroleum services has an array of solutions to the problems inherent with constrained talent pools and an advanced value proposition that we anticipate E&P operators in the region will find compelling in their quest to deliver or exceed their goals” How have advancements in process and technology helped the oil and gas Industry? CS. We are an industry that thrives on the challenges of enhanced hydrocarbon extraction from the earth’s crust. There is a vast offering of technology and process solutions that may be selected to deliver value for any given set of circumstances. Sometimes the choice is bewildering and selecting the most advantageous solution to any particular set of conditions is not a black and white decision. At AGR PS emphasis is placed on a detailed understanding of a particular challenge. Once the detail of the challenge is understood the appropriate technology can be applied. We believe this is the key to delivering superior Chris Sugden, General Manager of MENA region for AGR Petroleum value to a project within acceptable Services, is a Chartered Engineer and transparent risk parameters. and a Fellow of the Energy Institute. He holds a MBA degree, The industry is well served with MSc degree in Offshore Engineering and a BSc degree in technology and it is fair to say that a Mechanical Engineering. Sugden significant portion of new technology has held senior drilling and completion engineering positions is underutilised mainly due to the lack onshore and supervisory drilling positions offshore on platforms of obvious fit due to limited front-end and semi-submersibles. engineering. n

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NEXT BIG THING

THE NEW FRONTIER Mark Wolfe investigates the resurgence of gravity and magnetics

A

dvancements in earth mapused in areas where seismic work is difficult or ping technologies, coupled with impossible. He notes as an example instances the industry’s emerging need to where you are trying to gather images beneath characterise sub-surface systems, basalt-covered areas that have high-velocity have led to a resurgence of interest in using rocks near the surface or exploring sub-salt gravity and magnetic methods in oil and gas plays. “When visualising salt structures, seisexploration and development. Faced with the mic technology is very effective for imaging top challenge of meeting growing global demand of salt but has difficulty imaging below the salt for gas supply, the industry has been steadily because of the high velocity of salt,” Connard expanding exploration efforts into frontier and seismically challenging areas. Both environments are ideally suited to gravity and magnetic techniques (also known as potential field). “Potential fields are typically used in frontier areas to do reconnaissance exploration, to look for new basins and to investigate large areas that might be prospective for doing more says. “Gravity and magnetics have been used detailed and expensive seismic work,” says extensively in sub-salt exploration to integrate Gerry Connard, Petroleum Industry Market with the seismic data and image the base of the Manager with Geosoft Inc. salt, or to assist in the processing of the seismic Although seismic visualisation technology data.” Petrobras has experienced major success still remains the powerhouse using gravity and magnetic of oil and gas exploration, methods with the discovery the industry now has the of a major natural gas and tools and the knowledge condensate field in the preto integrate the best of this salt layer, at a depth of 5000 technology with gravity metres, in the Santos Basin and magnetic methods. By located in the south-eastern combining technologies, part of Brazil. the industry has added a The Petrobras discovery robust new dimension that reinforces the notion that is enabling explorers to look there is decreased exploraMark Wolfe is a Canada-based freelance writer, editor, more quickly and efficiently tion risk in the pre-salt researcher and photographer into the uncharted frontier, layer. In their discovery anwho specialises in business and industry, oil and gas, while reducing the risks nouncement, Guilherme Esconstruction, healthcare, associated with technically trella, Petrobras Exploration education and technology. His articles and photographs have challenging exploration. and Production Director, is appeared in over 18 publications Exploration in the quoted as saying, “All of the across North America over the past 12 years. new frontier areas can be pre-salt blocks achieved exan order of magnitude ploratory success, something more costly using seismic visualisation when that confirms the region’s high prospectivity”. compared to the less expensive potential field “There’s also been a recent explosion of methods. Economics aside, Connard says that smaller oil companies getting into exploragravity and magnetic methods are commonly tion,” Connard says. “Many of them are

starting to use gravity and magnetics in their exploration of the frontier areas with great success.” Advances in soft ware that provide the ability to effectively display, rapidly assess and dynamically experiment with multiple datasets have helped to reduce risk and increase prospecting capabilities in exploration. These technological innovations have

“Faced with the challenge of meeting growing global demand for gas supply, the industry has been steadily expanding exploration efforts into frontier and seismically challenging areas” helped to make the use of gravity and magnetic methods in the oil and gas industry more effective. The use of specialised three-dimensional modelling soft ware for prospect modelling of salt bodies can help to further reduce risk in areas such as potential field exploration. “We’ve been using 3D seismic volumes and approximations of a 3D velocity volume in our interpretations for some time.” says geophysicist Dr Michal Ruder of Wintermoon Geotechnologies. “With modelling soft ware such as Geosoft GM-SYS, we can convert that to depth, and ensure that it makes sense with the observed gravity and magnetic data.” Today’s visualisation soft ware also supports the easy integration of different types of datasets, including geosciences data, satellite imagery and other GIS data into the mapping environment. And while geoscientists recognise that there’s a lot to gain by looking at different types of data, Dr Ruder admits : “I think people don’t realise how easy it is to integrate all of their datasets, whether it’s seismic and non-seismic, raster and vector.” „

For more information, log on to www.geosoft.com/oilandgas

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DRILLING G

Eastern promise TPAO is already T d drilling d dril illi lling ing deep d de p in i the th Black Blac Sea a and a now it plans to conquer the Middle East’s oil fields. e ds. Diana Milne Milne meets eets the t company’s drilling lin ing ng chief Recep Ataya to find out how.

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ith 4000 000 employees emp oye s in Turkey and d bra branch officces across ross the t hee world world, l TPAO TPA AO (Turkiye (Turkiye kiiye Petrolleri P Petroller t Anonim non im Ortak Ortakligi) O t klig klig i) has h established establis t bli h hed d itself it i lf as one off E Eur Europe’s ope top p dr drilling ing and oil exp explorat exploration l ati t i companies. ies. And A as its operations perattions movee fur furtherr east it is taking tak its place p alongsi alongside ongside other IOCs on n thee MENA ME oil and gas stage. Having been en found fou fo founded und in 1954 as Turkey’s sole national nal oil company, today oday TPAO T PAO focuses focu f on drilling, exploration, welll completion c ompletion ompl mpletion and production, product produc prod p ction, as a well as natural d transportation tr ansport ation and pipeline projects. Its gas storage, oil trade and activities span the Caspian and MENA regions, with exploration and ro production in Azerbaijan, Kazakhstan and Libya. Th is list of countries is set to grow, however, with the company involved in talks about ew projects in Syria, Turkmenistan, Georgia, Iraq, Egypt, Russia and new Algeria.

Home territory

TPAO took part in the bid as part of a consortium of three companies, bidding for Zubair Oil Field, Kirkuk Oil Field and Akkas Oil Field. Late last year it also signed a lucrative MOU with Boru Hatlariyla Petrol Tasima AS (BOTAS) and Shell Energy Europe as part of the Turkey Gas Export Project which will see natural gas exported from Iraq to Turkey. As part of the Iraq to Turkey Gas Export Project the three parties will also examine the possibilities of cooperation in developing natural gas related upstream opportunities in Iraq and export activities to other European markets via Turkey. But these are not the company’s fi rst attempts to stake its claim in the Iraqi energy sector. “Before the war we

“In Turkey drilling activity is increasing but the highest potential is not onshore, but offshore”

drilled 20 wells in Iraq very successfully,” says Ataya. “After the war we For now however, the bulk of TPAO’s drilling activities concentrate took our crew out but now there are some good opportunities coming up on the Black Sea area an and it is involved in extensive activities to source so we are ready to go back.” hydrocarbon reserves foll following the discovery of natural gas there in Ataya says that Libya is another key market that TPAO hopes to tap 2004. The company’s D Drilling Department Manager, Recep Ataya, into it. However he acknowledges this will be a challenging prospect: reveals the company’s plan planned activities in the area: “In Turkey drill“There are a limited number of drilling contractors working in Libya. ing activity is increasing bu but the highest potential is not onshore, but There is no free market there. But in the coming years, a lot of concessions offshore. In 2010 TPAO, and some of the TPAO joint venture companies may open to contractors.” The company already has drilling operations in such as ExxonMobil and Pet Petrogas, are going to drill some ultra deepwaLibya where it is actively drilling in Block NC188, Block NC189 and 147/3 ter wells in the Black Sea. The Black Sea will be a very active place in the and 147/4. It now hopes to expand its operations across the country. coming years, especially for off o shore operations.” The latest development Ataya says it faces significant health and safety challenges in its current in the company’s Black Sea activities is the signing of a Drilling Services activities in Libya, because of the remote locations of the areas in which it Agreement between Petrobras Petrob and Ocean Rig company for the use of is drilling and the fact that this is relathe Leiv Ericsson submer submersible drilling tively unchartered territory for many rig – which can reach d depths of 75000 IOCs. However, he says these issues feet eet – to drill in the joint jo Sinop Block will be addressed when more compain the Black Sea. The deal also allows By 2010 TPAO hopes have reserves nies enter the market: “Oil companies for TPAO to use the rig to drill elseof 1.5 billion barrels of oil. u will most probably bring high quality where in the ultra deepwaters of the contractors and as a result the health Black Sea. This compares to reserves of 558 million and safety will be increased.” which it had in 2005. In the Levant, TPAO is seeking Shifting horizons S But while its main focus remains drilling opportunities in Syria where the Black Sea, TPAO’s horizons are it is continuing to negotiate for oil shift ing towards the Middle East, and gas exploration development opwhere it is particularly keen to become involved in drilling and exploraportunities. It signed an MOU with the Syrian National Oil Company tion in Iraq. It has made major inroads in this area, having been listed as in Damascus in 2005. In accordance with the terms of the MOU, a joint one of the 35 pre-qualified companies by the Petroleum Ministry of Iraq company is planned to be established to develop and carry out explorafollowing its first licensing round held in June this year. tion production projects at designated concessions.

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High tech drilling To take maximum advantage of the drilling opportunities in the countries where it hopes to expand, TPAO is taking advantage of the latest drilling technologies, including digital data from the drilling units: “We have one of the latest technology drilling units and we can see the whole drilling parameters sitting in our homes. We are transferring all the data on the internet. So we can see the data just as clearly as from

on the rig side and those are very exciting technologies with which to monitor the drilling activities. We have a visualisation room and we see all the well trajectories on the screens.” Th is sort of technology means it is easier than ever now for TPAO to keep a bird’s eye view of its operations overseas. And as it continues to expand ever further east and its remit becomes wider, the challenges of overseeing multiple drilling operations will only increase. „

TPAO’s operations

SYRIA TPAO is continuing to negotiate for oil and gas exploration and production investments in Syria. An agreement was signed between TPAO and Syrian Petroleum Company ) in Ankara, Turkey on January 4, 2008.

IRAQ TPAO has been in contact with the Ministry of Oil in Iraq since 1994, for exploration and production opportunities in Iraq.

TURKMENISTAN TPAO has been carrying out oil and natural gas exploration and development studies on onshore and offshore areas of Turkmenistan since 1993.

OTHER COUNTR RIES In 2007, TPAO experts visited data rooms in Congo, Equatorial, Guinea, Gabon and Tanzania to study technical and commercial evaluations of some blocks there with a view to beginning exploration activities in those countries. In addition, TPAO has been continuing to search and negotiate for business opportunities in other hydrocarbon-rich regions such as the Russian Federation, Ukraine, Algeria, Egypt, Brazil, Indonesia, Sudan and South America.

IRAN According to the MOU signed on July 14, 2007, parts of the South Pars Field Development and Production Project, were reserved to TPAO. Evaluations of the sites are ongoing.

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ASK THE EXPERT

Staying centred Cliff Berry outlines the importance of good casing centralisation.

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orrect centralisation of oil casings is vital to the success of a well, as poor centralisation can result in channelling and faulty cementation. In extreme cases the centraliser can fail causing distortion or splitting of casings necessitating the withdrawal of the damaged casings, at great expense and production downtime. Centralisers assist the passage of a tubular into the well bore to the required depth by keeping the tubular and its protruding connections off the borehole wall to minimise mechanical interference and differential sticking in the open hole. At fi nal depth centralisers need to counteract the forces exerted by the tubular and centralise it within the borehole to allow optimum annular passage of fluids and displacing cements. Traditionally bow spring centralisers were widely used, but their construction of welded or interlocking, multi-part components required that they be made substantially oversize in order to withstand the forces exerted by the tubular. Th is created considerable ‘start’ and ‘running’ forces. Multi-part centralisers are also prone to component failure when down hole. Once the failings of traditional bow spring centralisers became apparent, solid centralisers were adopted whose main virtue was robustness. However fi xed dimension centralisers need to be undersize so as to pass through any previously installed tubular, with the result that they do not centralise ef-

ficiently once out in the open borehole. With the recent introduction of ‘under-reaming’ i.e. passing a drilling head through a previously installed tubular to create an open borehole greater in diameter then the tubular bore, fi xed dimensional centralisers have proved even more inadequate.

Complex Modern wells are increasingly complex in profi le and run to ever increasing lengths. The preload of traditional bow spring centralisers, created by being oversize, results in a cumulative resistance that can prevent the passage of the tubular to fi nal depth. In addition, their multipart or welded construction produces centralisers of inadequate strength for the more complex wells and catastrophic failures can occur, especially in under-reamed wells. The cost implications for the industry are considerable. If the centraliser isn’t strong enough to centre the pipe, annular circulation of the

cement is impaired, an inadequate cement seal results and the life of the well can be shortened. If the centraliser breaks the consequences can be very expensive. If it breaks in a deviated or horizontal well, the casing will lie along the bottom of the borehole. Centralisation is usually completely lost, making effective cementation impossible, added to which the centraliser may jam the pipe down hole. Stuck drill strings are one of the major contributors to drilling downtime, and a common cause of sticking down hole is a failed centraliser. A conservative estimate is that every year 400 wells worldwide are affected by centraliser problems. Assuming an average daily cost per well of US$250,000, and a typical downtime of six days, the cost per well is around US$1.5 million, with an overall annual loss of US$600 million. These losses are largely preventable. UK based-Centek went back to basics and concluded that the only way to ensure consistent centraliser performance, particularly with the extreme demands of under-reamed bores, was to radically redesign the bow spring type of centraliser to remove its deficiencies and incorporate the ruggedness of fi xed dimension units. Centek believes that its family of centralisers achieves this. Centek products have been used successfully since 2002, in thousands of applications worldwide without a single centraliser failure. „

Cliff Berry is Sales and Marketing Manager for worldwide sales at Centek Ltd. His oilfield career started in 1977 with Halliburton in Brunei, Malaysia. He has also worked for Diamond B (UK) Ltd., and was European Operations Manager for BJ Tubular Services.

• Centek centralisers are manufactured from a single piece of steel with a hardened surface that greatly reduces torque and drag losses • The construction strength is such that failure will not occur in even the most exacting well bore profiles • Reactive force is achieved without being oversize, and performance is substantially in excess of industry standard ANSI/API 10D/ISO 10427-1&2 • Complete compression of the bow-spring’s outer diameter allows the centraliser to pass through narrow tubulars and then expand fully to its design diameter enabling it to centralise effectively in an under-reamed bore

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IT

THE POWER OF TECHNOLOGY Established just 15 years ago, Dubai government-owned Emirates National Oil Company has rapidly flourished into a diversified group with international interests. And a vital cog in ENOC’s operations is information technology, as O&G discovers during an interview with Group IT Manager Sina Khoory.

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nside Sina Khooy’s office, a polished glass trophy sits proudly on a shelf. Th is prestigious award was given recently by the IT Governance Assurance Forum (ITGAF) – a non-profit organisation created by the Dubai government to assist and promote the development of IT governance practices. As you would expect, the achievement means a great deal to this soft ly spoken IT chief, who is responsible for the technology and systems across the energy group’s vast operations, spanning 30 active subsidiaries and joint ventures. Khoory, who exudes a calm but assured demeanour, describes the award as “not easy to win” and adds that it was in recognition of ENOC’s

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hard work with the group’s IT systems. “It came at the right time and was a reward for the five-year effort by ENOC’s IT here pursuing and maintaining our governance management systems,” he explains, whilst glancing at the prize. “It is not the ultimate goal for us but it indicates that we are moving in the right direction; we are mature enough, and it pushes us for further improvement.” Th is is not the fi rst time, however, that Khoory has got his hands on such a coveted prize; his previous employer the Department for Health and Medical Services (DOHMS), a government-controlled department heavily reliant upon technology, was a past winner, too. As IT Director, he was instrumental in executing and running the networking and information systems integration of Dubai’s four main hospitals and 20 other primary healthcare centres with the DOHMS online platform. For ENOC to now win is “double joy”, he enthuses. It was last April that Khoory, who has been an IT professional since he graduated from university 18 years ago, made the switch from healthcare to energy after 10 years at DOHMS.

A key component Like companies in many industries, ENOC has seen IT become intrinsically linked with its operations; you get the impression from speaking to Khoory that it has become the beating heart of the organi-

sation. Since 2003 the group has been making significant overhauls of systems and the technology infrastructure and Khoory argues that the energy industry itself would be paralysed without IT running 24/7 behind the scenes. “Oil and gas businesses rely heavily on the systems that constantly produce accurate data to support diversified and dynamic activities, especially in our group. We have lots of different subsidiaries and operating companies working in different types of business – everything from refi ning to retail to shipping to bunkering and more. The volume and speed of data required to operate this business are huge and we require complex analytics to make decisions and to do our day-to-day jobs. Getting an overview of these diverse operations is key,” Khoory notes. “You have to understand the dynamics of the various sites that we service and how technology can be an enabler of business success for each one of them.”

“The complexity of the customer volume and ensuring that your data is always available for decisionmaking is a big issue for us” One part of the business that Khoory desribes as “especially complex” is the retail operations. In fact, when he joined ENOC he inventoried the information systems portfolio and discovered that almost all of the group’s operations touch the retail business in one way or another. The group has a network of 170 ENOC Retail and EPPCO service stations dotted across Dubai and the Northern Emirates, employing 3500 staff. More than 100,000 customers stop by to fi ll up their vehicles, use the car wash, purchase groceries or use other services on offer at the garages every day. These customers generate around 300,000 transactions per day or 110 million a year. “At these sites we have all kinds of technologies and an interfacing portfolio of systems. We have full pump technologies, car wash facilities, the point of sale (POS), the payment gateways – including payment technology for utility bills and road tolls and so on,” Khoory explains. “We also have a CRM system available there, the convenience store and its intelligent grocery business, while there are plans to implement RFID (radio frequency identification) technologies to combat loyalty card fraud, too.” With all this technology, it comes as no surprise to learn that ENOC is gathering and managing data every minute, of every hour, of every day.

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“The complexity of the customer volume and ensuring that your data are always available for decision-making is a big issue for us.” So are there other challenges that he faces at ENOC? Khoory quickly responds: “Retaining high calibre technical resources in a competitive market like Dubai, as well as maintaining the overall incurring costs of IT on the organisation are challenges.”

Global networks Another issue for an IT manager like Khoory is the nature of the ENOC group’s international mix of business operations. Centralised platforms are key here. “We are servicing broad entities in Djibouti, Singapore and in the future Monaco, where people will use the centralised information platforms to do their day-to-day business – all over the internet through secure channels,” Khoory explains. And like many organisations today, ENOC embraces staff mobility by opening the network through a secure virtual private network (VPN) so staff can work from home and other locations off site. The infrastructure in place enables staff to work abroad, too. Despite this flexibility for staff across the group, you cannot ignore the pertinent 1993 issue of security, as the danger of networks Established in being breached intensifies due to remote iaries and working. Indeed, defi ning your company’s Has 30 subsid n perimeter is becoming all the more difjoint ve tures ficult with staff logging into the network sible in The brand is vi pro on laptops and other mobile devices from proof and there is always risk-taking versus the business 20 countries bene different locations. Khoory has to weigh up benefits you gain from opening up a remote system. This is the risks and the rewards, he suggests. very im important because if an organisation becomes paranoid nd the “We try to balance the business needs and then even printing out data from the system and taking it home nt security se security consciousness. No system is 100 percent is a breach in security and very difficult to control.” He adds: “We take

ENOC

Sina Khoory and ENOC CEO Saaed Abdullah Khoory with the IT Governance Assurance Forum (ITGAF) award

the industry-standard measures at all levels and in all aspects of our work. This can include investing a little bit more in certain security tools and preventative soft ware to allow people to work from any place in the world.” Security aside, right now, and for the immediate future, improvement is paramount. A determined Khoory says he and his team won’t be resting on their laurels after the ITGAF award, because they have a clear agenda of improving and redesigning internal processes according to industry-standard frameworks. “For the next year we have performance targets that have to be met here as we streamline documents and re-analyse eight internal processes. We have to make sure they are aligned with the framework, train our internal resources, implement them, and measure it all at the end of this year.” He concludes: “We are always looking to improve – we will never reach the maximum that we can achieve.” „

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INDUSTRY INSIGHT

The future of legacy in the next generation By Patton Electronics’ Antoine Abi Antoun

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il and gas companies have much to gain from the convergence of voice and data communications. With powerful new ease-of-use features for all users – from field operators to executive management – the next-generation network promises long-term cost savings from consolidated hardware and streamlined operations. But has state-of-the-art IP technology rendered legacy technologies entirely useless? Or does it make sense to evaluate the cost-benefit of older technologies? Is immediate migration to convergedIP imperative? For many applications a stepwise transition to Ethernet/IP is wanted. For others, conversion rather than wholesale replacement may be the best answer – if not the only answer.

What’s worth keeping? Asynchronous devices. Vast numbers of meters, flow-monitors, PLCs, EFMs, RTUs, and so on, are deployed and operating in industrial networks. These work horses offer proven reliability, employing such protocols as EIA-232/V.24, EIA422/V.11, EIA-449/V.36, and EIA-530 to transmit low-overhead, low-speed (e.g. 115.2 kbps) data streams. Is ripping them out in the name of progress really a good idea? What is the cost – in terms of new hardware, disrupted operations, and downtime – of purchasing, installing and turning on IP-enabled alternatives? Are Ethernet-ready replacements even available? With most asynchronous devices, conversion, not replacement, is the most cost-effective strategy. By encapsulating asynchronous protocols for Ethernet/IP transport, protocol converters offer the best of both worlds by: • Connecting async devices to the next-generation IP network • Preserving stable systems while avoiding costly replacement Sync-serial transport technologies are well understood and widely deployed over ubiquitous copper twisted-pair infrastructures. Is it cost-effective to rip it all out to install CAT5 cables, Ethernet

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switches, and IP routers? When embedded in structural materials (steel, concrete, etc.) copper wiring is expensive or impractical to replace. Often replacement is simply not an option. Statistical multiplexers are often employed to combine asynchronous outputs for transmission across a synchronous-serial V.35, X.21, T1, or E1 composite link (over twisted-pair). An Ethernetenabled statmux that also supports these legacy protocols delivers the best of both worlds by:

“Patton Electronics specialises in solutions that leverage state-of-the art and legacy technologies”

• Preserving legacy infrastructure while providing migration to next-generation networks • Future-proofing asynchronous devices with Ethernet/IP connectivity Patton’s IpStatMux Model 3038 transparently transmits multiple asynchronous EIA232/V.24 data-streams over dual Ethernet/IP and synch-serial composite links. This unique combination of interfaces and functions offers immediate or future migration to all-IP networking – at half the cost of a traditional statmux.

Where Ethernet falls short While transitioning to converged-IP networks, we must also consider the shortcomings of Ethernet in industrial environments: • While RS-422 supports data transmission up to 4000 feet at 100 kbps, the 300-metre distance limitation of standard Ethernet is often insufficient • Implementing standard Ethernet is costly; purchasing and installing CAT5 or CAT5e cabling may not be practical or possible

• Designed for climate-controlled offices or data-centres, most Ethernet equipment is not hardened for industrial installations By extending standard Ethernet up to five miles over installed twisted pair, Ethernet extenders address the shortcomings of Ethernet for industrial deployment. Available auto-rate adaptation achieves reliable connections against electromagnetic interference with maximum speeds across maximum distances. Enclosed in a ruggedised metal enclosure with available conformal coating for protection against condensing humidity, Patton’s CopperLink Model 2157R withstands operating temperatures from 40 to 85°C.

Conclusion As oil and gas industries transition to converged-IP communications, there is much residual value in legacy technologies that can, and should, be leveraged. Interface converters provide a costeffective strategy that preserves investments in highly-reliable asynchronous devices while realising the benefits of IP convergence. IP-enabled multiplexers provide similar best-of-both advantages by leveraging sync-serial transmission technologies that operate over existing twisted-pair infrastructure. Ethernet extenders solve the distance, cabling, and environmental shortcomings of standard Ethernet to enable deployment in industrial environments. With over 25 years of experience designing and manufacturing network access and connectivity solutions, Patton Electronics specialises in solutions that leverage state-of-the art and legacy technologies to provide smooth migration to nextgeneration communications for the industry. 

Antoine Abi Antoun is MENA Regional Director for Patton Electronics, Co. focused on telecom technologies and marketing strategies. Prior engagements include project manager of PDH network installation for PTT Lebanon.


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PROJECTFOCUS

TOP

performance How EMC storage helped one of the world’s largest oil and gas companies gain time-to-market advantage in exploration and production. By Mohammed Amin

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n this article I will explain how one of the world’s largest publicly traded oil and gas companies manages risk and uncertainty with EMC Exploration and Production Infrastructure (EPI) and Schlumberger Petrel, an advanced soft ware solution for exploration and production. Petrel generates enormous volumes of data for the mission-critical work of geophysicists, geologists, engineers and executive decision makers. Ultimately, tens of billions of dollars of potential revenue ride on well-informed decisions and the process requires an information infrastructure that provides exceptional performance, reliability and scalability. When Schlumberger introduced Petrel, the customer was uncertain if its legacy non-EMC IT infrastructure, running UNIX/Linuxbased applications, would be the best choice for Petrel, which is Microsoft Windows-based. A new storage area network (SAN) solution was needed to better suite the advanced earth modeling and reservoir characterisation capabilities of Petrel to achieve performance and platform resiliency, combined with excellent service and support particularly for the remote locations. The company used a sophisticated procurement system that ranks technology providers across hundreds of criteria, including system architecture, pricing, partnerships and services to determine the most appropriate solutions for its SAN and NAS requirements. In the SAN arena, EMC demonstrated excellence in the architectural design of the EMC CLARiiON storage system, and in services and key partnerships, particularly with Schlumberger. The customer decided to standardise on the CLARiiON CX series, now deployed in more than 200 locations worldwide. The customer’s

CLARiiON systems support Petrel with nearly one petabyte of storage, which is growing at roughly 300 terabytes each year. The customer also uses EMC Navisphere Management Suite soft ware to centrally manage, monitor and configure its CLARiiON SANs from a user-friendly web browser. In addition, the company employs a disaster recovery strategy by using EMC MirrorView soft ware to replicate data to an alternate site where it then performs backups from copies generated by EMC SnapView soft ware. Based on its success with EMC CLARiiON SANs, the

“The ease of deployment of EMC platforms enables the company to quickly outfit new E&P operating offices while significantly reducing deployment costs”

company’s scientists to generate prospects more quickly by providing faster, more reliable access to critical geophysical and geological data used for earth modelling and reservoir characterisation. The ease of deployment of EMC platforms enables the company to quickly outfit new E&P operating offices while significantly reducing deployment costs. The modular architecture of these systems also provides the company with a cost-effective, reliable way to rapidly scale in response to sudden changes in storage demands without fear of over or under-provisioning. The simplicity of managing EMC Information Infrastructure using EMC Navisphere eliminated complexity found in legacy non-EMC systems. Navisphere automated storage administration helped the company redeploy almost two-thirds of the associated IT staff to other duties. Remote staffing and support costs were further reduced by utilising EMC Global Services organisation to train an in-house team of IT personnel. This allowed the company to be self-sufficient, and speed up problem resolution as company staff were able to communicate more efficiently and effectively with EMC support staff. In the end, the company has been able to successfully leverage EMC’s EPI performance to decrease its time-to-oil, minimise downtime risk associated with data availability, and ultimately reduce costs by eliminating complexity and unnecessary IT staff. As proof of the improvements and benefits obtained, the customer has awarded its ‘Top IT Vendor Award’ to EMC for three years running. „

company chose to replace its legacy non-EMC devices with EMC highly scalable Celerra unified storage systems in NAS environments, which met the company’s multi-protocol requirements and enabled rapid deployment in isolated exploration sites by E&P operations staff with minimal IT support.

Benefits of the new system The improved performance driven by EMC’s CLARiiON and Celerra systems, key components in the EMC Exploration and Production Infrastructure, played a vital role in optimising the Petrel environment. EMC EPI and Schlumberger Petrel enabled the

Mohammed Amin is the Regional Manager of EMC Turkey Middle East and North West Africa, based at EMC’s regional headquarters in Dubai. In his seven years of regional management, he developed EMC regional awareness across industries and built a strong team to cater to customer information infrastructure needs and expectations.

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Virtualize Consolidate Deduplicate Automate Protect Comply Thrive

Deliver the cost savings and productivity improvements your business demands. EMC is uniquely positioned to help you take a holistic approach that enables you to address IT challenges one at a time or across your entire information infrastructure. Our unmatched expertise and experience combined with the broadest range of industry-leading solutions have enabled customers to: • Realize a 25% reduction in storage TCO in less than a year • Reduce backup data and time by 90% • Reduce data center space, power, and cooling costs by 70-80% • Reduce e-mail operational costs by 50% • Lower cost of compliance by 30-70% • Decrease security spending by 150% • Manage 3-4 times more servers, storage, and network devices without adding headcount We’ve been guiding organizations through economic and IT challenges for over 30 years and can enable your business to emerge from today’s economy stronger than ever.

For more information about EMC Efficient IT visit: www.middle-east.emc.com

EMC2, EMC, and where information lives are registered trademarks of EMC Corporation. © Copyright 2009 EMC Corporation. All rights reserved.

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SEISMIC TECHNOLOGY

Going seismic

O&G asks Frank Crawford, Chief Geologist at Canadian based Groundstar Resources about the challenges of conducting seismic studies in the Middle East. What protects does your company have in the Middle East? Frank Crawford. Our company has a project in Upper Egypt where we’re operating a large concession in a virtually unexplored area. We are shooting seismic and preparing to drill some wells there in the next four to six months. We are also working with partners on a block in the Gulf of Suez, which we’re planning to drill in the next two to three months. We have a small percentage of a block with large potential in the Kurdistan area of Iraq. Although we are a small company we are hopefully going to be doing some successful drilling ventures and getting ourselves on

the map in the Middle East in the next six to eight months. Our strategy is to continue to drill successful wells in the region. We hope to make a significant discovery in Upper Egypt. How much potential do you think there is for your exploration activities in Iraq? FC. It’s a phenomenal area with probably many opportunities to fi nd very large fields. It’s in a part of the world that can fluctuate in terms of its stability but at the same time there are companies in there making discover-

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ies and planning to drill in the next phase. There are significant reserves there but not at sufficient enough levels to offset the decline in the world’s overall picture of reserves. If there is a favourable economic and political climate those reserves will reach market much more quickly. When you’re looking at a 70 kilometre long undrilled structure in an area not far from the Kirkuk oil field, which has reserves of maybe 20 billion barrels of oil, that area certainly surpasses anywhere else that I could imagine, even in the deep water area of Brazil. There are literally scores of undrilled structures in an area that has a proven massive hydrocarbon generation and entrapment potential. What are your views on the research Saudi Aramco is carrying out

Frank Crawford

that you’re trying to use to detect the actual hydrocarbons, calibrated accurately, so that you can be sure that you in fact have hydrocarbons below where you plan to drill your well. There’s a lot of geochemical modelling that has been used, with increasing success. Gore technology is at the leading edge of geochemical exploration. Th is is a technology that can sometimes detect hydrocarbons but can’t tell you if it’s commercial, how big it is or what. So they’re still quite a long way from being able to replace the actual drill bit to fi nd out what exactly is down there. How far down should companies be drilling – what limits do they have? FC. I think we should be drilling wherever we can with the technology we have and there should be no off-limit areas. I do believe that oil is a fi nite resource and we’re using it up fast. Some of these giant field and super giants are being depleted no matter how much they say they can replenish the resource or recover more out of the fields. It’s a good thing they can but they are not fi nding super giants anymore, except some in deep water. But at the same time, to drill US$50 to US$100 million wells offshore is certainly not like drilling in an oil field on land.

“We are reaching a limit and there will be a serious situation in the future when consuming countries will be competing for a depleting resource. People think there are rivers of oil running under the ground but there are not”

into the use of nanotechnology robots to explore deep reservoirs? FC. It’s something that I’d never heard of before and to think of sending some little entity off into a rock to bring back a report seems a little bit far fetched. However, I guess tomorrow’s discoveries always seem a bit far fetched. To put artificial intelligence into something so small to determine the reservoir characteristics just seems beyond capability. If it could be done it would make exploration a lot easier. You wouldn’t have to drill a well, you’d just send something down to look for your oil and gas then come back and bring you a report. But if it was something that was close to happening today, there wouldn’t be so much investment going in to proven conventional exploration techniques such as seismic and various ways of analysing seismic data for velocity off sets, 3D and all that sort of thing. They are still using those techniques primarily for exploration. Exploring out into the reservoir thousands of feet to try and determine fluid content, porosity and permeability is a new realm of thinking. I hadn’t heard of anything that could explore that far out. What are the main improvements that need to be made to seismic modelling techniques today? FC. I think what needs to be maintained at the moment is the experience level of the people who are involved in the development and exploitation and exploration parts of the industry. At the same time improvement in direct hydrocarbon detection would be a real advantage. Th is is about fi nding a suitable model to have your measurements

How concerned are you about a peak oil situation occurring? FC. We are reaching a limit and there will be a serious situation in the future when consuming countries will be competing for a depleting resource. People think there are rivers of oil running under the ground but there are not. It’s hard to fi nd and the sizes of the fields are declining for the most part. You can’t count on fi nding the super giants or the giants like you did in the past, to produce a larger inventory of reserves. We’re depleting the reserves very quickly. Technology will help to delay that but it won’t delay it for that long. What issues exist with the availability of experienced manpower in the industry? FC. There are a large number of people that are not far from retiring from their professions and leaving a large gap in the industry. Saudi Aramco has said it is searching for people with talent, mentoring them then provided them with the education they require to carry on the torch to the next generation. I don’t know if we’re doing that in the West so much. You can have all the technology in the world, but you still need people to do exploration. Oil is found in the minds of men and women who think creatively as well as just look at a computer screen. We need to blend people’s experience, their creativity and geothinking with modern technology in order to be successful. Employers must try to retain their experienced people and get the most out of them to train up and help to mentor the younger ones that are coming along. „

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MARACO:16 july 06/08/2009 09:47 Page 92

INDUSTRY INSIGHT

Maximising your gas potential Dr. Elmer Dougherty gives O&G the lowdown on planning and managing natural gas operations.

P

resently the economic luster of natural gas (NG) is dimmed by slackened demand overshadowed by excess capacity. In Canada and the US, NG’s Btu-equivalent price has slumped to less than US$25/bbl. Thus, soundly financed companies have squeezed NG investment while leveraged explorationists are riding out a life-or-death struggle. Elsewhere, NG’s price-tie to oil supports a more limited restraint. Nevertheless, certainty calls from the gloom, “This too shall pass.” The greenness halo over ‘clean’ NG with its maximal H/C ratio propels its use. Oil exporting countries can preserve the ‘golden-egg laying goose’ by using NG for their prodigious power needs. NGL and gas-to-liquid plants provide growing consumer access. BP World Energy 2009 shows NG reserves (6534 TCF) equivalent to oil (1258 BBbl). With exploration’s focus – plus new tech á la shale gas – NG will expand. Since its incorporation 30 years ago, Maraco has evolved a suite of software spanning NG exploration, development and production. Our GORE (GasOilReserveEstimate) is tailored to address the explorationist’s key question, “How big is my find?” Using Q&P from a production test, GORE estimates GIP and decline fraction – and, given price and well cost, payout time for the next well. Updates with the latest observations provide the earliest guide to ‘what next?’

GOMAN also can integrate combined crude oil and associated and non-associated gas complexes, which is now being done for Saudi Aramco and Kuwait Oil Co.

Simulation

Analysis

GMAN.OPT simulates NG reservoir/surface flow while determining an optimal schedule of wells and compressors that stretches a plateau rate through time. Each addition to the schedule is the well/compressor that now has the highest return (PVR). Development stops – and decline begins – when PVR of all additional candidates is below cutoff. Experience has shown us that casestudy schedules contain sub-standard investments. Years ago, a development plan prepared by a competent consultant – commissioned by client management as a check on OPT – carried 25 percent higher cost for the same rate profile. When the price of liquids collapsed in 1986, this

Finally, our GasPal system provides the most advanced nodal analysis NG planning tool available today. GasPal’s core programme calculates capacity of one or many reservoirs flowing to one or several offtake points. The underlying framework for the model’s reservoirs is wells in place or scheduled versus time (and for layered formations, perforation and plug dates or flow condition) and compressors dated-in at specified surface-network nodes. From capacity, GasPal determines production schedule with specified spare capacity pursuant to a requested rate profile. Aquifer influx, relative permeability and gas trapped are accounted for. Elaborate graphics

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client eliminated a third of budgeted wells in a two-week evaluation. Maraco’s GOMAN replaces OPT when:

support history matching and performance interpretation. Auxiliary programmes are:

• Detailed economic tables – revenue, cost and return – are needed • Surface processing unit capacities – separators, sales gas, sulfur, NGL plants and product compositions need detailing • Number of reservoirs becomes large. The largest current application has over 70 reservoirs

• UPSCLR – upscales a petrel geologic model into a GasPal computing grid via an onscreen interface • GRIDDER – generates a computing grid onscreen overlaying a reservoir’s contour map • TFR (TubingFlowlineRiser) history matches well/flowline performance using a collection of correlations A single reservoir model can be built and onstream in one hour (with run time for 360 months of 1-2 seconds). Large models requiring extensive history matching take longer. The development and validation of Total’s Tunu Field model – 23 platforms, over 700 wells – stretched over several months. Similarly, for EBN’s (Dutch government) model of the Groningen Field. Here, wells produce into a ring of pipe. As regional demand shifts, gas-flow direction in the ring changes. GasPal is the only commercially available software that dynamically calculates such flow reversals in a pipe loop. n Dr. Elmer Dougherty, founder of Maraco, develops and applies software to optimise oil and gas development and analyse production operations. Middle East consulting includes Saudi Arabia (Aramco), Kuwait (Kuwait Oil), Libya (Oasis) and Iran (Consortium). He is Emeritus Professor at the University of Southern California, where he has 24 years of petroleum and chemical engineering experience.


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GLOBAL PIPELINE FOCUS

Replacing corroded pipelines costs upwards of US$643,000 per kilometer. Mark Byerley, President of NACE International, explains why maintaining and inspecting pipelines is vital in the battle against corrosion.

THE FIGHT AGAINST CORROSI ON

I

n 2002, the US Federal Highway Administration (FHWA) released a breakthrough two-year study on the direct costs associated with metallic corrosion in nearly every US industry sector, from infrastructure and transportation to production and manufacturing. The study, entitled Corrosion Costs and Preventative strategies in the United States and initiated by NACE International, revealed that corrosion is the primary factor affecting the longevity and reliability of pipelines that transport crucial energy sources throughout the nation. There are more than 528,000 kilometers of natural gas pipelines, 119,000 kilometers of crude oil pipelines and 132,000 kilometers of hazardous liquid pipelines in the US, amounting to an estimated US$7 billion in average annual corrosion-related costs in monitoring, replacing and maintaining these assets. “Given the slow and destructive nature of corrosion we are looking at replacing a kilometer of pipeline for around US$643,000 or more, which is an extremely expensive proposition,” explains Mark Byerley, President of NACE International, the world’s leading corrosion engineering organisa-

tion. “Maintenance and inspection are of primary importance, at least they should be to many companies, so the driving force for that expenditure is to preserve the asset of pipeline and to ensure they operate safely without failures and jeopardising public safety and the environment. The survey indicated that the primary loss of protection on the pipelines was due mainly to two reasons, the degradation or deterioration of the coating and the inadequate protection levels. So the majority of general maintenance is associated with monitoring and repair problems. In addition to maintenance there is the issue of integrity management and inspection which focusses on condition assessment, corrosion mitigation, life assessment and risk modeling. “If you look at maintenance packages, you’re looking at between US$3000 and US$6500 per kilometer annually to maintain a pipeline and protect it from corrosion, which compared to the offset from what it costs to replace a pipeline, you can see that the ROI is fairly extended,” says Byerley. Following a number of high-profi le pipeline failures, public safety

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concerns have driven new regulations and corrosion control practices for their upper management teams to explain to them what they do everyday gas and liquid transmission pipelines. Byerley highlights the various techto NACE staff going to a board of directors of major suppliers, major pipenologies that can help in maintaining and ensuring pipelines live a long line companies, oil companies, gas companies and working with senior and happy life. “First of all you need to look at the materials that go into the management and teams within the company to educate the management pipeline, the types of steel you use,” he advises. “Plus there’s a coating component, making sure that the pipeline is well protected from the outside elements. And we do that through various coating technologies, whether it be fusion-bonded epoxies or tape-wrap systems. There are several sprayapplied type systems as well. And then we get into the electronics side, where we’re inducing currents into the field to help slow the effects of corrosion, or to mitigate them in areas where the coatings are not present.” Byerley goes on to explain corrosion engineers are benefitting from an increase in research and development worlwide. “We’re one of the few disciplines in the engineering field that actually works every day to put ourselves out of a job, because once corrosion’s eliminated we’ll have nothing on corrosion and its effects on their systems or assets. “Knowledge is else to do.” power. And if you look at what NACE are doing in this respect, we hold Much of the work done at NACE International continues to revolve 450 classes and train 9000 people per year. No-one educates more people around the US Department of Defense, however, NACE is looking at difon corrosion prevention than NACE International.” ferent protects and not just in the US pipeline market, but around the world Along with education, Byerley believes that the biggest challenge in to help mitigate the problems, including Australia and New Zealand, as the fight against corrosion is in inspection and maintenance frequencies. well as Europe. And as pipelines improve around the world the industry The more remote or hostile the environment, the more difficult it is to get is seeing a much more aggressive use of improved data gathering, whether to the point of inspection or a component that needs to be maintained. that is through the use of multiple technologies and coatings in conjecture “It really starts at the lay of the pipeline,” claims Byerley. “But that said with the cathodic protection ECDA (external corrosion direct assessment) we are now doing a lot of work with remote monitoring, where the pipeand other pipeline integrity management programmes. line actually reports to a central hub via satellite or cellular communicaAnd as a result of the increased use of pipeline integrity management tions, so we can actually monitor the pipeline from an office thousands programmes, NACE has seen a rise in demand for education on these proof miles away.” grammes too. “If you look at the lack of knowledge of senior management, Byerley advises that companies looking to improve the issue of corit’s not a bad thing, just something that they usually don’t deal in,” explains rosion need to start getting involved in the industry and look at how they Byerley. So getting that senior management buy-in is a huge challenge for can participate. “Whether it’s getting the members of their companies the corrosion department in these companies, and while there are over involved at a local section of an organisation like NACE or whether it’s 21,000 NACE members worldwide, the vast majority are not even considin a research committee at NACE, technical committees that help drive ering corrosion until a calamity strikes. standards which then form new edu“Through the media staff at NACE, cation programmes,” he says. “These PREVENTIVE STRATEGIES we have the responsibility of asking are just some of the more vital areas for an audience with those in senior in NACE International, but there are • Increase awareness of significant corrosion costs management positions, and have done other things that can be done like supand potential cost savings some corporate outreach programmes porting an employee and furthering getting people to understand how easy it their education on corrosion preven• Change the misconception that nothing can be is to protect pipelines and how this can tion, whether they get involved in done about corrosion prevent having to replace that pipeline. formal training or attend conference • Change policies, regulations, standards andards an and Today’s technologies allow us to keep and technical symposiums.” management practices to increase ase corrosion cost co pipelines in the ground well over 100 Moving forward it is clear that savings though sound corrosion management years, as long as they’re administered increasing research and development • Improve education and training of staff aff in i properly,” says Byerley. “However, these as well as furthering education could recognition of corrosion control outreach programmes are probably not dramatically improve the issue of coras successful as we’d like, which is probrosion in the US and around the world. • Implement advanced design practices for better ably due to corrosion being a very unsexy While technological advancements are corrosion management topic, so it’s hard to get people in the happening all the time, the best way to • Develop advanced life-prediction and doors at first.” prevent corrosion involves better corperformance-assessment methods The corporate outreach programmes rosion management through prevencan involve anything from tasking emtive strategies in both non-technical • Improve corrosion technology through research, ployees of the company to really focus on and technical areas. „ development and implementation

“We’re one of the few disciplines in the engineering field that actually work every day to put ourselves out of a job, because once corrosion’s eliminated we’ll have nothing else to do”

Source: www.nace.org

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ROUNDTABLE

What’s in the pipeline? O&G gathers three industry experts to discuss corrosion, new technologies and pipeline issues in the MENA region. coming more and more severe to comply with pipeline operation at higher Pipeline corrosion costs the industry billions of dollars every year. internal pressures, higher design factors (internal pressure related to the What are the main unsolved corrosion problems for the industry? yield strength) and severe loading condiKhalil Ibrahim Al Gannas. If we analyse “Whether we speak about In-Line tions, cumulated with an increase of transsteel pipes’ corrosion history, we can see now several solutions for previously unmission of corrosive and multiphase gases; Inspection, Hydrotesting or Direct solved corrosion problems, and advanced therefore new or optimised steel and pipe Assessment, new technologies technologies offer improved solutions at a manufacturing technologies are needed to and techniques provide several very high pace. To solve an unsolved corcover such increasing requirements. While opportunities for specific cases, rosion problem is related more to what is in pipe manufacturing there are several an acceptable cost on preventing corrochoices, we need to be able to source new all having both advantages and sion against inspection and maintenance or optimised steel specifications for use disadvantages depending on pipe during operation. Current major unsolved as the raw material for pipe making. Pipe location and environment” corrosion problems are related to new remaking technologies need then to be adKhalil Ibrahim Al Gannas quirements for pipeline steels that are bejusted to process such specifications.

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Richard Norsworthy. Almost all pipelines are protected by cathodic protection (CP). One of the main corrosion problems facing the worldwide pipeline industry is the use of pipeline corrosion coatings which are not compatible with cathodic protection systems. The name of this problem is ‘cathodic shielding’. Shielding happens when the pipeline coating loses adhesion to the pipe (‘disbonds’), allowing water to penetrate. Corrosion can now occur unless the protective electrical current from the CP system can reach the steel. If the corrosion coating is one that shields (blocks) the protective electrical current when disbondments occur, then corrosion can proceed without interference. The problem of disbonded coatings that shield cathodic protection has been well documented in the pipeline industry over the last 25 years. Unfortunately, many in the industry do not require that pipeline corrosion coatings used on their systems be compatible with cathodic protection systems when disbondments occur. Miguel de Castro. Corrosion problems can have costly consequences; therefore this item is usually taken into account at the design stage of the pipelines. Generally speaking, actions are mostly prevention oriented. External corrosion prevention can be hard to achieve locally, due to other networks such as electrified railways, power line or pipelines which can impact cathodic protection efficiency. But once the area is identified, field solutions exist. These solutions must take into account a large array of field problems. They must include an electro-magnetic compatibility evaluation in order to allow a performing monitoring and eventually, an effective lightning protection separated from the cathodic protection equipments. Internal corrosion is a more serious matter for crude oil lines as corrosion inhibitors aren’t always efficient on long distance lines. The only effective way to fight that is to closely monitor the evolution with intelligent pigging and eventually replace or reinforce default areas. Th is can be a little different for refi ned product lines, or short distances as these products are chemically better evaluated and inhibitors can be effective.

THE PANEL

MIGUEL DE CASTRO is Head of Flowmetering, Sampling, Lab Analysis at Société du Pipeline

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RICHARD NORSWORTHY is Director, Lone Star Corrosion Services, Polyguard Products.

Th is is an issue that is really coming out nowadays due to aging pipeline networks. The tools to detect some specific defaults aren’t yet available. More specifically, stress corrosion cracks are very hard to detect and can end up with a pipeline rupture. How are new technologies and techniques providing opportunities for more efficient detection and risk management activities to ensure the integrity of pipelines? MdC. New technologies bring up an assessment of the real condition of pipelines. For external corrosion they are based in classical techniques,

“External corrosion prevention can be hard to achieve locally, due to other networks such as electrified railways, power line or pipelines which can impact cathodic protection efficiency. But once the area identified, field solutions exist” Miguel de Castro

but the improvement of sensors for cathodic protection monitoring and better positioning during close interval surveys amke it easier to better pin point the areas and techniques for action. Regarding internal corrosion it must be pointed out that the development of intelligent pigging in the last 10 years, really brought the possibility of having a reliable evaluation of a pipeline without going for a pressure test. A regular metal loss control by ultrasonic means (which requires a perfect cleaned line) or a magnetic tool (more tolerant to the line cleaning condition), associated with a more close interval acoustic pigging, give a good base for pipeline risk assessment and therefore a risk management plan. Technical evolution is providing many new tools. As to the usual monitoring equipment used for pipelines, operations can be now added using computers with specific risk oriented soft wares. To work correctly, these soft wares need much information and a perfect model of the line behaviour. Those are the existing limits for a general implementation of such systems. Anyway, the pipeline industry is a dangerous industry, therefore all means should be used in risk management. Something as simple as line balancing with performing meters can give very good real time information regarding leak detection. Th is kind of simple tool must be included in the risk management plan. Moreover, risk management is coming out from a purely technical approach to a more quality management approach. That requires inspection plans, systematic reviews KHALIL IBRAHIM AL GANNAS with experience feedback and technology imis CEO of JESCO provements evaluation.

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RN. Advances in Internal Line Inspection (ILI) tools along with the use of External Corrosion Direct Assessment (ECDA) have helped companies to determine where and why corrosion is occurring on these pipelines. Although these methods are not 100 percent effective, they have greatly improved over the last few years. If a non-shielding pipeline coating has been installed on the pipeline, Direct Current Voltage Gradient (DCVG) surveys will allow the operator to fi nd disbonded coatings and make necessary repairs. If shielding pipeline coatings are used, disbonded areas are unlikely to be found.

MdC. As a European pipeline operator, we are not really familiar with MENA region specific problems. Our experience regarding the MENA region concerns metering as we calibrate meters to be installed there. Our experience is therefore more related to crude oil quantity and quality assessment. We didn’t identify specific problems in that field. Flowmeter calibration for the MENA region isn’t significantly different than calibrations for other regions. The issue is to have similar characteristics between calibration and field product.

“Polyguard’s most successful product has been the development of a non-shielding, field applied pipeline coating system that now has over 20 years of proven success in the field”

How are your products and services benefitKG. Whether we speak about In-Line Inspecing the oil and gas companies today? tion, Hydrotesting or Direct Assessment, new KG. JESCO products are obtained by using technologies and techniques provide several the most advanced technology, with the most opportunities for specific cases, all having both advanced available manufacturing equipment, advantages and disadvantages depending on including advanced automation systems, mathpipe location and environment. On the side of ematical models to set up and optimise the prorisk management, the new API 5L is differenticess parameters and extended process control ating pipes for non-sour application versus sour to allow effective continual improvement. The service and/or off shore, and therefore increases main benefits our products are bringing to the the number of inspections and their severity for oil and gas companies are resulting from high Richard Norsworthy these products. For example, API 5L 44th edidimensional precision, very smooth surface, tion requires now ultrasonic tests for laminar quality of surface and lack of internal defects, imperfections for line pipes ordered for sour the uniformity of the metallographic structure services and/or offshore applications. There are and mechanical properties – even for extra heavy also requirements for seamless pipes to pass HIC, SWC and SSC tests. wall – specially tailored chemistry for specific projects, very low sulphur Actually, there is a clear differentiation now on line pipes classification and residuals, making them suitable for sour service, offshore applicanot only as a product specification level but also according to the end tion, automatic welding and coating (FBE). use and specific environment. All of the additional requirements are intended to ensure the integrity of pipelines in given conditions. MdC. SPSE is mainly a pipeline operator. We generally share our 50year experience in pipeline operation and maintenance in different committees or on demand. Are there any unique pipelining challenges for the oil and gas inThe only out of core services provided are sampling and meter calidustry in the MENA region – is the difficult and often inhospitable bration. These have an interest from a commercial point of view and also environment a problem? on the monitoring of the lines. They give access in a reliable manner to RN. Th is area does present a challenge. The Subkha sand areas are very corrosive environments with cyclic (wet and dry) conditions which cause what gets into the pipeline system and what gets out. Metering allows a damage to many types of coating systems. Cathodic protection can also very good control of deliveries, and as a consequence keeps losses as low be a challenge in these environments. Another challenge is that of higher as possible, which in the existing economic situation is a major issue. temperature production. As the depth of drilling increases, so does the temperature of the production. There are also areas where hot methods RN. Polyguard’s most successful product has been the development are used to stimulate production. Once the higher temperature producof a non-shielding, field applied pipeline coating system that now tion is transported in a pipeline, both coatings and CP are affected. has over 20 years of proven success in the field. Th is particular nonKG. The MENA region is having similar difficulties in terms of pipelining as other regions have with regards to steel used and anti corrosion techniques. Still, this region has relatively recently started to explore offshore and we expect certain specific difficult and inhospitable environments as projects develop. If we speak about Saudi Aramco, for example, its specification for line pipes has been revised to differentiating further sour service and offshore applications and adding its specific requirements to those mentioned by latest edition of API 5L. We expect oil companies within MENA to expand their exploration and production offshore and therefore we expect related challenges.

shielding coating system will allow adequate CP to be effective if there is a disbondment and water does penetrate between the coating and the pipe. Though it is rare for this coating system to disbond, poor application or surface preparation has allowed water to be present under the coating on five different occasions that we are aware of at this time. None of these locations reported metal loss. When the pH of the water under the coating was checked it was between 10 and 12, indicating adequate CP was able to protect the area under the disbonded coating. We have developed a higher temperature version of this pipeline coating system that will retain these same protective properties.„

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PIPELINE ANALYSIS

T

racking and/or locating a pig stuck in a pipeline can present a challenge. A little preparation and proper tracking techniques however, help ensure success. There are man applications in which it is important to track the progress of a pig as it travels through a pipeline, including: • Running a smart pig • Conducting a nitrogen purge with pigs • Running a pig with a transmitter to track a smart pig There are also several situations that can result in a pig getting stuck in the line such as: • Excessive by-pass when the pig is in a bend • Excess debris build up in front of the pig • An obstruction such as a buckle in the pipe or a partially-closed valve

Manpower

PRUDENT PIGGING Jack Rankin, PPSA member and Manager of Engineered Solutions at TD Williamson, provides guidelines for successfully tracking and locating pipeline pigs.

First, plan to have an adequate number of two-man crews with each crew consisting of a pipeline operator who knows, and has access to, the pipeline right-of-way (ROW), as well as a contractor who is experienced in tracking equipment and procedures. The number of crews needed depends upon a variety of factors, including: • Is the ROW accessible by vehicles? • How long is the run from launcher to receiver? • What is the velocity of the pig under expected conditions? • Is the pig propelled with gas or liquids? • Is there a contingency plan if the pig gets stuck and can, or can’t be located?

Job preparation and training The pipeline operator should provide suitable maps and alignment sheets, and be thoroughly familiar with the pipeline ROW and access to various tracking locations. The contractor should possess an operating manual and be thoroughly familiar with the operation and maintenance of the tracking equipment. Crews should practise with the equipment so the signal can be observed, recorded and interrogated before every launching of the pig. For practice purposes, the transmitter should be positioned a few metres away from the electronic receivers and moved parallel to the receivers at various velocities to demonstrate what the signal will sound and look like. For training, the transmitter should be placed out of sight. The trainee, following the instructions in the operator’s manual, should walk along a line that is parallel, but about three metres from the transmitter at its closest point. Th is exercise should be conducted in a field with overgrown vegetation where conditions are less favourable.

Equipment Electronic tracking systems are an electromagnetic-pulse transmitter (mounted on the pig) and an electronic receiver system. The transmitter should be selected, based on the specific application considering size and wall thickness of the pipeline, and the amount of time that it

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“Communication is critical. Everyone involved in the tracking process must have accurate information at all times to know when the pig is expected to arrive at a particular location" may take to locate the pig should it get stuck. Lithium batteries will provide extended life (though there may be some restrictions on the use of lithium batteries in some areas). The tracking equipment should provide audible, visual and recorded indication of the pig passage. In addition to the electronic receiver, a geophone is recommended as it amplifies the sound being made by the cups, discs and brushes as the pig travels through the line, allowing the crew to hear the pig coming well in advance of its scheduled arrival time at the tracking location. Once the crew or crews are in place, confi rm that all mainline valves are fully opened and that flow is going through the receiver barrel. Each crew should have spare batteries as needed, and a laptop computer with variable project inputs and a spreadsheet for recording data and notes. When positioning the tracking system receiving antenna and

geophone probe, each crew should have a pipe locator to confi rm it is over the pipeline. A spare receiving system should be carried by one of the tracking crews. If the pipeline goes through a casing, the receiver antenna should be positioned a bit upstream or downstream of the casing pipe so that the signal doesn’t have to travel through two pipes. Where possible, pigs should be tracked at approximately two-kilometre (1.5-mile) intervals. Avoid areas with a lot of traffic, railroad crossings and high voltage power lines as these may induce ‘noise’ in the tracking system receivers.

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Where possible pigs should be tracked at

2KM intervals

“The tracking equipment should provide audible, visual and recorded indication of the pig passage" Communication Communication is critical. Everyone involved in the tracking process must have accurate information at all times to know when the pig is expected to arrive at a particular location. Should a pig pass a given tracking station (station 73 for example) but not arrive in a timely manner at the next station (station 74), the crew at station 74 should wait for the late-arriving pig. Perhaps the pig was damaged and is still moving but is by-passing flow, or one of the units (compressor or flow) may have shut down, causing it to be late. The crew should proceed as though nothing has changed, assuming that the signal was simply missed for some reason. If after diligent tracking efforts all the way to the receiver, the crew has not heard/recorded pig passage at any location, including the receiver barrel and associated valves and fittings, it would be assumed that the pig is stuck somewhere between station 73 and 74. At

this point, one person equipped with an antenna and receiver would start at each station walking toward each other until the stuck pig is found. If the ROW can be cleared in this area it will make the job easier and success more likely. If there are any fittings, valves etc., between the two stations, they should be searched fi rst. The receiver and associated valves and fittings should be checked on a regular basis (every few hours is recommended) until the pig is located. „

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PIPELINE FOCUS

A STICKY

PROBLEM

PPSA member John Smart of John Smart Consulting Engineers in Houston addresses the challenge of sediment in oil and gas pipelines.

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lack powder, or sediment in pipelines, is generated by corrosion reactions in the pipeline and can either accumulate in the line or move from fluid drag in pipelines once the velocity reaches a certain minimum value. Or, black powder can be swept clean by pigging. Knowing the velocity required to move loose powder can help plan the cleaning of a pipeline. This helps to prevent sticking of pigs by solids accumulation in front of a pig. The bed height to which black powder can accumulate under existing flow conditions can help plan the amount of debris expected to be removed from a line and therefore the method of cleaning. Particulates consisting of iron oxides, sulfides, carbonates, sand, salt, clay, asphaltenes, and so on, can be generated in a pipeline if water exists in the line and the water can wet the walls of the pipe. Corrosion can also occur in nominally dry pipelines under upset conditions and during hydrotesting. Solids will accumulate as sediment if the velocity is not high enough to drag the particles along or if they are glued in place by hydraulic oil or corrosion inhibitors, or form crusty deposits. Sediment deposits will cause increased pressure drop through the pipeline and can lead to blockage of the line, especially during pigging. Build-up of solids in front of a pig can cause the pig to become stuck. For a 12-inch pipeline with ½ inch (1.25 cm) deep deposits in the bottom of the line only, the volume of solids is about 223 per mile, weighing over 4000 pounds per mile (1130 Kg/KM). If the depth of the deposit were one inch, the weight of iron oxides/sulfides would be over 18,000 pounds per mile (5000 Kg/KM). Build-up of solids in front of a cleaning pig can cause a plug to develop in the line, which can stick the pig.

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Planning ahead Knowledge of whether or not the flow conditions can sweep solids through a pipeline ahead of a cleaning pig is thus of great importance when using pigs to clean a line, and of fundamental importance in designing the pig cleaning process. Sticking a pig in a pipeline is a problem on land, but absolutely cannot be tolerated in offshore lines. In deep water, it would be extremely difficult to handle these solids accumulations and would likely require replacement of the line if they could not be removed. Furthermore, when an offshore platform loses its sales line, the platform must be shut in, cutting off production. Pipelines must be cleaned for a number of reasons, including the need to maintain operating efficiency, to be able to successfully run ILI tools, and to distribute corrosion inhibitors over the entire internal wall of a pipeline in wet multiphase gathering systems. Solids can include produced sand, corrosion products such as iron carbonate, iron oxides and iron sulfide, metallic iron, weld spatter, salt, asphaltenes and scale. The term black powder is a good generic name for these solids, as sometimes they don’t seem to have a lot in common other than being black. When a disc, scraper, or wire brush pig is run inside a pipeline, solids are scraped off the wall of the pipe and pushed in front of the pig. Whether or not these particles fall to the bottom and stop moving or are swept along by fluid velocity determines the extent that of solids will accumulate ahead of the pig.

• Use of fluid by-pass and jetting in front of the pig • Use of gel pigs to suspend the particulates depending on how much solids is expected to be in the line • Use of less aggressive cups and discs on the pig Other operating parameters such as how long the pipe can remain out of service are also important factors. Use of heavier more viscous oils will result in much longer particle settling times back to the bottom of the pipe if stirred up by turbulence in front of the pig.

Figure 2 : VELOCITY TO MOVE IRON COMPOUNDS IN 20OAPI OIL 20 8 inch

15

18 inch

10

30 inch 5 0 0

0.05

0.1

0.15

0.2

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Particle equivalent diameter, inches

Figure 1 : VELOCITY TO MOVE SAND PARTICLES IN WATER

Iron compounds

4 8 inches 3 12 inches 2

18 inches 24 inches

1 30 inches 0 0

0.0005

0.001

0.0015

0.002

0.0025

Diesel is sometimes used for cleaning pipelines as the compound is relatively inexpensive and available, and much of it can be recovered or sold. The velocity for entrainment of the same iron compounds is shown in Figure 3, with velocities similar to 20oAPI oil. In eight-inch lines, 1 mil (40 micron) particles will move at 1.9 feet/sec., and at 6.1 feet/sec for fivemil particles. For 18-inch lines, one-mil particles will move at 3.8 feet/sec., and 8.6 feet per second for five-mil particles. Thirty inch lines require 5.8 feet per second for one-mil particles and 10.3 feet per second for five-mil particles.

Particle equivalent diameter, Inches

Water velocity to move sand The velocity to move rounded sand particles with a shape factor of 1.5 in water at 60F is shown in Figure 1. Pipe diameter is given in inches. The velocity required depends upon pipe diameter but is fairly constant for sand particles greater than about two-mils (50 microns) effective diameter. The meaning of this velocity is that for a pipeline being pigged, if the fluid velocity is greater than that shown, particulates in front of a pig will not pile up to form blocking deposits.

Iron compounds in 20oAPI oil The calculated velocity to move iron compounds in 20oAPI oil by velocity is shown in Figure 2. Oil velocities from 10 feet/sec to over 15 feet per second are required, plus the 10-15 percent safety margin for uphill flow. Some types of pigging programmes designed to accommodate solids is still desirable. These include: • Progressive pigging

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Figure 3 : IRON COMPOUNDS IN NO. 2 DIESEL. THE PROPERTIES OF THE DIESEL USED FOR CALCULATIONS WERE 32OAPI DIESEL AT 60OF, WITH A VISCOSITY OF 200 CP. 14 12 10

8 inch

8 18 inch

6 4

30 inch

2 0 0

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pipeline, it fractures and becomes very fi ne, with a size in the range of one micron. Extremely fi ne powder like this can pass through normal pipeline fi lters. They also report that extremely fi ne powder such as one micron can be tolerated by reciprocating compressors, but can damage turbine compressors, even with fi lters in place. These velocities also illustrate the cleaning requirements when crude oil pipelines are converted to natural gas service. One technique to keep the amount of black powder flowing down a pipeline is to treat the line with corrosion inhibitor. Corrosion inhibitors put a tacky fi lm of the wall of the pipe to which the black powder sticks, making it immobile. Figure 5 shows the effect of pipeline operating pressure on the velocity required to move 1 mil diameter and fi ner black powder particles in an eight-inch pipeline

Particle equivalent diameter, inches

Lines using No. 2 diesel should also be treated with caution as larger particles will collect in front of the pig and will need to be pushed by it. Th is means that diesel is not a particularly good fluid to use when cleaning very dirty pipelines containing black powder. Also, with the safety margin added in for up-hill flow, these numbers may be a bit optimistic. Therefore, by-pass pigs with jetting nozzles, progressive pigging or gel pigging is more conservative for lines with iron oxides, sulphides and carbonates in them .

Black powder in natural gas pipelines Figure 4 shows the velocity to move black powder in natural gas pipelines operating at 60F and 1000 psi. Gas velocity is 10.4 feet per second in eight-inch lines, up to 13.6 feet per second in 30-inch lines. Natural gas pipelines can vary in their flow velocity depending on the season, and may cycle above and below this number. If the pipeline was operated in a corrosive condition, even just enough to cause mill scale to flake off the inside wall, large amounts of black powder could result that could possibly be delivered to customers, or, at the least, require substantial fi ltering before delivery. These results explain why gas pipeline compressor stations need to have fi lters installed in front of compressors, to catch black powder coming down the pipeline. Pipeline operators report that as black powder is transported down a Figure 4 : BLACK POWDER IN NATURAL GAS PIPELINES 16 14

8 inch

12 12 inch

10 8

18 inch

6

24 inch

4 30 inch 2 0 0

0.002

0.004

0.006

0.0008

Particle equivalent diameter, inches

0.01

0.012

Figure 5 : VELOCITY TO MOVE BLACK POWDER PARTICLES IN AN EIGHT-INCH PIPELINE AS A FUNCTION OF LINE OPERATING PRESSURES 40 35 30 25 20

0.00001 inch diameter

15

0.0001 inch diameter

10

0.01 inch diameter

5 0 0

500

1000

1500

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Gas pressure, psi

Challenges ahead Conversations with pipeline operators reveal that when pipelines are cleaned for such purposes as ILI inspections, using pigging with and without chemical cleaning initially results in a clean line. However, after some time, black powder is usually found coming down the line again when the lines are dry. Further, many gas pipelines are not dry, but contain compressor lubricating oil and possibly other liquids such as glycol which can adhere solids to the wall of the pipe and keep them from moving. One common technique to keep black powder from moving is to treat the line with a corrosion inhibitor. Inhibitors are tacky compounds and can glue black powder in place. Further, operators report, when black powder solids move down a pipeline, they tend to fracture and become very fi ne, in the range of one micron or less. These particles are more easily moved down a line. One advantage for fi ne powder in pig cleaning is that it settles much more slowly than coarse powder, and can be kept fluidised more easily by turbulence. However, it is much more difficult to fi lter. The most important problem with black powder movement is that it can destroy equipment such as gas compressors and turbine generators by the abrasive action of the particles on the equipment. Â&#x201E;

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ASK THE EXPERT

Refining operations Mohsen Salehabadi tells O&G how advanced phase separation technology lowers the costs associated with petroleum refining processes.

E

very year, refi neries around the world spend millions of dollars needlessly without realising it. Maintenance cycles are shorter than they could be, operating costs are higher than they should be, and unscheduled shutdowns leading to lost production are all too common. Pall, as a fi ltration and separations solution provider, is able to support refi ners with industry leading expertise and a portfolio of products that help maximise the efficiencies and operations in many critical processes, including:

particles below 10 microns and 2.5 microns, so-called PM 10 and PM 2.5 respectively and likely to become legislation in some countries before the decade is out. Pall advanced separation technologies provide solutions as best practice to refi neries and process licensors in clean fuel projects in multiple applications including:

• Improvement in hydrocarbon products quality. • Process equipment protection. • Total Fluid Management (TFM) services including mobilised de-pollution services, cleanliness control and laboratory services in contamination analysis. • Onsite auditing and online pilot tests to help our clients to select contamination control efficient technology.

• Crude distillation unit. • Reformer units efficiency improvements. • Hydro-treater/hydrodesulphurisation/hydrocracker reliability upgrading. • FCC separation technology enhancement. • Amine units and sulphur recovery plant optimisation. • Final products purification/cleanliness level upgrading of exported fuels. • Sour water treater protection. • Water and waste water plant upgrading.

Enabling a greener future Oil refi neries and processors are not only striving to produce environmentally friendly products, but are equally mindful of the impact of their own operations. Recent advances in separation technologies enable new clean and green fuel specifications to be achieved when producing eco-friendly fuels, cleaning up wastewater and increasing energy efficiency – what some would call the ‘Big Th ree’ of today’s green revolution. In addition, oil refi neries equipped with a FCCU or RCCU face the challenge of further particulate emission reduction. In Europe many countries now target 40-50 mg/Nm3 particulate emissions in the FCCU/RCCU flue gas. Even more stringent is the proposed micro particulate specification relating to

region from two engineers in 2004 to 35 in 2008 plus sales, marketing and laboratory services, test rigs, pilot and demonstration plants, demonstrating a commitment to provide world class fi ltration and separation solutions to the region by being close to its customers. Pall provides services and solutions to existing refi neries in areas such as:

• HDT / HDS feed fi lters & coalescers (Catalyst Bed Protection). • Burner protection for HDT/HDS furnace (to minimise Nox emissions & operation costs). • Hydrogen recycle gas compressor protection. • Heat exchanger protection – Steam stripper feed exchanger. • Sour water stripper (SWS) protection. • Final product de-watering. • Amine & sulphur plant protection.

Global company, local presence From regional offices in Dubai, Pall provides support and sales to the Middle East oil refineries, including GCC countries and Egypt. Pall’s presence has strengthened in the MENA

Pall’s list of references is extensive and it is very honoured to count Saudi Aramco, Takreer, KNPC and Qatar Petroleum amongst its major reputable customers. Pall is actively communicating with process licensors, local and international contractors, and end-users to propose global solutions. Th rough continuous improvement programmes and annual investment in R&D, Pall provide a steady stream of innovative, high-quality products of polymeric, inorganic, metal and ceramic formats, backed by unmatched service and support. Pall’s fi ltration and separation solutions have been successfully applied over many years in refi neries throughout the world, in consultation with customers, to design and deliver long-lasting solutions for sustainable and profitable success. „ Mohsen Salehabadi is responsible for Pall’s oil refinery sales and marketing programmes in the Middle East. He has supported reputable oil refineries and engineering contractors for process optimisation in distillation units, hydro-processing plants, sulphur and amine units, reformers, FCC, isomerisation, alkylation and lube oil movement areas and total fluid management (SM) programmes in refinery processing plants.

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FORGING AHEAD

Ahead of the 2009 Petchem Arabia Conference in Abu Dhabi, Abdulaziz Alhajri, CEO of Borouge, Abu Dhabi National Oil Company’s refining subsidiary, tells Dominica Andrews of the World Refining Association why his company has no intention of delaying its investments. There are fears of over-capacity following the recent decline in demand for petrochemicals. How do you see that changing in the future? Abdulaziz Alhajri. The specific high end infrastructure and advanced packaging markets of the Middle East and Asia where we operate have not experienced the decline in demand seen in many other petrochemical market sectors. Also, generally, the Asian markets that we serve havee

fared better than many other parts of the world during these volatile market conditions. We expect that the high growth of the added value polyolefi ns application markets will resume in the near future. How has Borouge’s expansion strategy changed to reflect the current economic climate? AA. We have not designed our strategy around today’s environment. We

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have a very clear long-term strategy and we are focused on implementing it. We see no reason to delay our investments and we aim to capitalise on the high growth when it resumes. What is the current status of the Borouge 3 project? Will there be a Borouge 4 project? AA. A number of contracts have been awarded for the Borouge 3 expansion at our plant in Ruwais in Abu Dhabi. We have taken Bechtel on board to provide project management support (PMC), and we commissioned the Linde Group to construct a 1.5 million tonnes per year ethane cracker. We awarded Tecnimont the contract to execute the front-end engineering and design (FEED) for the polyolefi ns units and off site and utilities. These contracts confi rm our full commitment to the Borouge 3 project which will increase the total capacity of our plant to 4.5 million tonnes of polyolefi ns annually by the end of 2013. We are considering future opportunities beyond 2013 with our owners but it is too early for us to discuss further expansion; right now we need to focus on the implementation of our Borouge 2 and Borouge 3 projects. How high is demand for Borouge’s products? AA. You fi nd our plastics solutions in everyday products all around you; in highly effective water and sanitation pipe systems, energy and communication cables, automotive components, healthcare and advanced packaging. They play an important role in addressing some of the world’s challenges such as access to safe drinking water and sanitation and the reduction of the weight of packaging and motor vehicles. At Borouge, we continually look at providing better solutions to these challenges. Our commitment to “Value Creation through Innovation” drives us to seek innovative solutions which we do in cooperation with our customers throughout the value chain.

“Developing our own technologies through innovation and mergers and acquisitions will be a key success factor” How do you see the current business model evolving for Gulf petrochemical producers? AA. Reducing reliance on the availability of attractive feedstock as the drive to apply market pricing will increase; optimising costs throughout the manufacturing process and integration of upstream and downstream processes is becoming increasingly important whilst ensuring local supplier status in the markets where the customers are. Developing our own technologies through innovation and mergers and acquisitions will be a key success factor. „ Established in 1998, Borouge is a joint venture between Abu Dhabi National Oil Company (ADNOC) and Borealis A/S, one of Europe’s largest polyolefin producers. The company is a market leader in high-performance polyolefins.

ABOUT THE WORLD REFINING ASSOCIATION

S

ince 1997 the World Refining Association has organised high level, strategic and technical conferences within the downstream sector worldwide. Petchem Arabia 2009 is taking place from 12-15 October in Abu Dhabi. It is set to attract over 200 participants with representation from petrochemical companies, NOCs and IOCs, technology and solution providers, specialty chemical companies, traders, consultants, financiers and governments.

How is Borouge dealing with the financial crisis? AA. Firstly, the priority is to remain focused on our long-term goals and avoid distraction. Secondly, we focus on the most efficient and effective management of our operations, and thirdly, and of course most importantly, we stay as close as we can to the market and to the needs of our customers. What new opportunities has the current climate presented for Borouge? AA. In addition to having more favourable market conditions for our investment plan, the current climate has also given us an opportunity to prove to our customers that we are the most reliable long-term partner for them.

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EXECUTIVE INTERVIEW

Walking a refine line The global recession has impacted heavily on most industries around the world, and the oil and gas sector is no exception. We hear about its effect on refining with EnSys Energy’s Martin Tallett.

How is the economic crisis impacting refining? Martin Tallett. The place we must start is with demand. Versus what the industry was planning, we are facing a reduction of over five million barrel per day (bpd) for 2010 – and one that does not recover but extends to seven million bpd and higher by 2015 and beyond. Th is is a huge – and seemingly permanent – loss. Together with supply changes centred on increasing supplies of biofuels and other

“Our approach – and belief – is that you have to evaluate the downstream industry on a global scale and in a way that captures the supply, product and regional interactions” non-crudes, it is going to rewrite the outlook for and economics of refi ning for many years to come. Non-OECD countries and Asia will continue to grow, but it is the Atlantic basin that has been most severely impacted and where demand will stay flat. The implications are for substantial refi nery rationalisations and closures. Our recent

WORLD model based projections, including in support of the 2009 OPEC World Oil Outlook, show, without closures, refi nery utilisations at unsustainable levels, below 75 percent in several world regions.

term shortage of such crudes because of supply declines and substantial new coking capacity. Both refi neries also stress distillates over gasoline which we believe makes sense and Jubail incorporates production of paraxylene, benzene and propylene, all petrochemicals which have been experiencing growth rates much higher than those for fuels products. Where projects emphasise these products and Martin Tallett heads assured domestic demand, we EnSys Energy, specialists in refining economics and believe their economics will be global oil markets analysis. sound. The issue comes with EnSys works closely with oil companies, government projects that export.

What does this mean for refinery projects, including those in the Middle East? MT. The ‘golden’ margins from 2003 through to mid-2008 led to 24 million bpd of listed projects by late 2008, of which four million bpd are under construction. Based on our projections, the agencies and industry world needs total new capacity institutions including the World Bank and OPEC. Its of only around 7.5 million bpd How does Ensys help oil and international experience by 2015 and somewhat over 11 by gas companies best plan ahead covers North and South America, Europe, the Middle 2020. If you list out projects for the against the backdrop of the East and Africa. Middle East, you arrive at eight volatile worldwide energy million bpd of planned additions, market? plus over three million bpd in North Africa. It MT. Our approach – and belief – is that you is difficult to see more than two million bpd of have to evaluate the downstream industry on these projects being justified for start up before a global scale and in a way that captures the 2015, and three million bpd before 2020. It is supply, product and regional interactions. This our sense that every project needs to be very is the core of our WORLD modelling approach. closely scrutinised in terms of its justification It is used by and for government agencies such and security of product outlets in the context as the US DOE and EPA, by international instiof a global market that has substantial excess tutions, notably the World Bank, International capacity and willingness to export. Maritime Organisation and OPEC, and major oil companies, to obtain quantified assessments What does this mean for the major projects of future refining activity, economics, investin the region? ments and trade. MT. In our view this means there is scope Today, we are focussing on new services for a number of the leading projects. Saudi that provide our projections in the form of Aramco has delayed both Yanbu and Jubail integrated outlooks of downstream ‘strategic but is now moving ahead with bids at today’s, parameters’: crude and product prices/differenhopefully lower, cost levels. It is similar for tials, refinery utilisations, investment requirethe Al Zour refi nery project in Kuwait, plus ments and margins by region. We believe these there are some other advanced projects in the will provide sound planning bases for strategic UAE and elsewhere. decisions. The projections will be developed The two leading Saudi projects will prousing different scenarios, thus enabling users to vide assured outlets for heavy crude oils – aladdress the wide uncertainties that exist in the though, interestingly, there could be a medium outlook. „

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PERSONNEL

ALL IN A DAY’S WORK Ever wondered what it’s like to work for Saudi Aramco? O&G catches up with Senior Workover Engineer Khalifa Al-Amri to find out more.

an order for this equipment and it could take a long time until it is available. From the logistical side of the business, the biggest challenges have been the inflated prices we’ve seen. That affected the price of contractors and paying for equipment. Those prices were inflated and now, even with the low oil prices, they are still inflated.

Can you describe what your role involves? Khalifa Al-Amri. My role involves a variety of workover jobs that range from simple changing and replacing defective electrical submersible pumps to tasks as complicated as plugging a well and drilling it. Most workover wells are geared for re-entries as their technologies have advanced greatly during recent years. Many rigs are assigned to do such jobs in order to save assets that don’t produce anymore. With a short drill these assets can be put back on line. The most common work we do is re-entries – all types; long radius, medium radius and short radius re-entries. What we are mainly using to carry out this work is existing technologies that have been improved or upgraded. In the past we could not do as many re-entries as we do now because we were limited depending on the size of the well and of the equipment. We are now able to achieve nearly all requirements using technology such as expandable tubulars, new cementing equipment and ultra-slim hole equalising tools. The greatest advancement has been slimmer drills.

What about the challenge in terms of human capital? How challenging is it to recruit people to carry out workover engineering work? KAA. It’s hard to fi nd people nowadays with the right skillset. We’re putting the new graduates through intensive training programmes to allow them to learn the basics of running rigs – whether it’s a drilling rig or a workover rig. We have adopted a programme called the ‘Accelerated Training Programme’. It’s a one-year programme with a rotation between engineering and operations. It’s especially suitable, not for petroleum engineers but for mechanical and chemical engineers, because they get to become familiar with the equipment involved. Another important programme is Saudi-isation which has been very valuable. You won’t fi nd any non-Saudis in management. There aren’t more than 25 to 30 percent of expatriates in any department.

What are the biggest challenges that you face currently in your work? KAA. From an operational point of view, I would say the biggest challenge is the competency of manpower. Also the lead-time required for certain types of equipment to be manufactured. Different wells have different designs and we work on wells that have existed for 60 to 70 years. Every time a well gets scheduled for workover we have to look at its design and some of the designs are obsolete so we have to come up with a new technology to be adapted in those wells. That requires placing a request and

What are the main health and safety issues you are tackling? KAA. Working in confi ned spaces in the sea certainly creates its challenges. Accidental gas releases are especially deadly so that has to be taken care of. When you are working on an offshore rig it’s important to educate people in safety and they should make it a habit and as part of their daily working lives. What sort of work do you foresee your team doing in the future? KAA. I think we’ll be working on more complex wells. The more we advance in technology, the more complex the wells become. „

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ASK THE EXPERT

Putting Lean to work The benefits of Lean manufacturing in the oil and gas industry, according to Matthew Kenna, VP of Manufacturing at WSP & WEPCO, Alkhorayef Petroleum.

MATTHEW KENNA

L

ean manufacturing is designed to remove waste (non-value added processes) through the entire life of product, from the supplier of the raw material to delivery of the product to the customer. Forms of waste include waiting, excessive movement, re-work, over production, unused creativity and over management. I have practised Lean for 11 years. My Lean work has been mostly in the oil field and given the tough delivery and well conditions, I can assure you that this is the best system for any oil field manufacturing. Every well is a small manufacturing plant and each plant needs different equipment as the conditions for each plant are unique. Forecasting and inventory in the oil field will not help you get the proper piece every time. This is particularly important given the

“One of the major tools within the Lean toolbox is the concept of single piece flow and the removal of batch processing within the plant and field operations”

tomer usually only needs one unit at a time and receiving 100 at a reduced rate usually leads to extra costs when you consider the full cycle of cost not just the one cell or process. In the oil and gas industry the beat (or tact) of the customer comes from the rig count they have available. If they only have one rig why ship them 10 pieces of equipment?

Efficiencies In Lean you recognise that long transport times to market do not add value and tend to lead to batch thinking. Long lead times lead customers to think they had better order a large batch of pumps to ensure they don’t run out. The customer also might recognise cost savings if they order a large batch (batch discounting) however, if you review your cost for the whole cycle (not just the cell of purchasing) you will probably fi nd that the cost savings are wiped out. It is largely recognised in most industries around the world that inventory can cost up to 45-50 percent per year. APC can apply single piece flow and get product to the customer faster based on the tact (beat) of the customer’s rig availability. Toyota (the leanest company in the world) not only have their suppliers next door they set up their plants where their customers are – they don’t centralise. Alkhorayef Petroleum is unique in that it is the only manufacturer of ESP equipment locat-

ed in the Middle East, which is one of the largest users of ESP equipment in the world. Many of the other ESP companies centralise in one area. By applying lean manufacturing at WSP, the overall delivery of motors (in process time not including back order) has been reduced 87 percent, pumps 93 percent and seals 92 percent. APC is currently accessing the needs of our customers in our WEPCO foundry and is applying lean principles to deliver a quality product. We are also reviewing the customers’ needs in Libya and Kuwait and using some of the Lean principles there to deliver better service with a reduced need for capital. In the book Natural Capitalism, Paul Hawkin, Amory Lovins and Hunter Lovins refer to Lean and how it applies to the environment. One waste, which I feel is the largest of all waste, is over production. Over production occurs when either the production is completed before it is required by the customer, when the product is produced and never consumed by the customer or the product is produced and quality issues prevent consumption by the customer. In all these instances, natural resources are consumed at a higher rate than necessary. „ Matthew Kenna put his Lean manufacturing experience to work for Alkhorayef in 2008 and has completed a Lean Management conversion for two factories – a foundry and an ESP plant. Kenna has a finance degree from the British Columbia Institute of Technology and is a Certified Management Accountant (1992).

economic conditions we all find ourselves in these days. Quick delivery of equipment for any given well with high quality is what you want. One of the major tools within the Lean toolbox is the concept of single piece flow and the removal of batch processing within the plant and field operations. Batch processing comes from the concept that economies of scale drive the cost down for the benefit of the customer and the company. This however leads to longer lead times. Single piece flow recognises that the cus-

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HEALTH & SAFETY

A risky business Budget cuts and untrained contractors are just two of the challenges faced by Qatar Petroleum’s drilling Safety Officer, Zaher Ataya. Diana Milne reports.

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s investment in upgrading aging infrastructures grinds to a halt, health and safety departments of the region’s oil companies are entering dangerous territories. Faced with increasing pressures to meet targets to eradicate workplace deaths and injuries, they are also becoming constrained by shrinking budgets in the face of the economic downturn. It’s a situation Qatar Petroleum Senior Health and Safety Engineer Zaher Ataya knows all too well. “The financial crisis is one of the major challenges we face now. Because of this, budgets are shrinking and you don’t have as much room to improve or to do what you want.”

Ataya says shrinking budgets are affecting training and recruitment, but in particular the department’s ability to facilitate the modifying of equipment in line with health and safety standards: “Equipment itself and modification is particularly affected, particularly when it comes to modifying a facility which was built 35 years ago. In that situation companies want to upgrade the facility, especially for HSE. But you come to a point where that may not be possible.” He goes on to say that Qatar Petroleum has even been forced to cancel or put some projects on hold: “We have had to stop some of the projects and prioritise just the work that is required to produce the oil. When the oil prices went up to US$150 a barrel there was so much recruitment and new projects. But oil and gas has really been affected [by the fall in oil prices].”

Proactive measures There is, however, a more positive side to the credit crunch for Qatar Petroleum’s health and safety department, jokes Ataya, who says one advantage is that because of project delays he and his staff are under less pressure to meet multiple health and safety quotas: “The only positive now is that there are not so many projects so not so many quotas.” This temporary lifting of the pressure also relieves Ataya and his team of one of the biggest challenges it faces: the risks posed by employing contractors that are not always trained to work to the company’s HSE standards. “In terms of safety, the biggest challenge we face is management of contractors – especially an unskilled workforce that you bring in for a short period to work on a project. Then you expect to have these safety incidents because these people are not really trained and we don’t always have the time to train them. This is one of the major challenges.” To tackle the problem, he says Qatar Petroleum is working on several initiatives, including providing incentives for contractors that practice proper health and safety standards and selecting contractors on the basis of their HSE practices: “The company has actually looked to many programmes and ways to encourage contractors, such as setting bonuses and incentives. It is trying as much as it can to audit and inspect contractors to try to push these companies to properly train their people.”

A growing concern Ensuring contractors adhere to its standards is all the more important given Qatar Petroleum’s commitment to raise HSE standards across the board within the organisation, as the company embarks on an ambitious expansion strategy. In 2007 it an-

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“We have had to stop some of the projects and prioritise just the

work

that is required to

produce the oil”

nounced plans to invest up to US$20 billion in opportunities overseas investment, including a US$7 billion refinery in Panama. It also signed an agreement with the Tunisian government to establish a US$2 billion oil refinery in the country with a capacity of 150,000 barrels per day. It later committed to building two LNG receiving terminals in Texas at a cost of US$2.2 billion and in Italy where it will own a 45 percent stake alongside ExxonMobil and Addison. As well as downstream activities, it is involved in several high profile infrastructure projects, including the construction of one of the region’s largest water and power plants, the US$3.9 billion Ras Girtas development on Ras Laffan, alongside Qatar Electricity and Water Company, GDS Suez of France, and Japan’s Mitsui Corporation, Chubu Corporation and Shikoku Corporation. Earlier this year the company revealed plans to set up a consortium with the sovereign wealth fund, Qatar Investment Authority, which would see it invest in energy projects outside the Middle East and also make further downstream investments. These developments and partnerships with international organisations heighten the need for Qatar Petroleum to ensure it has world-class HSE standards in place.

Joined up thinking To create a more coherent HSE policy, Qatar Petroleum recently consolidated HSE activities across its various departments and it has now established a direct line of contact between corporate HSE and the Qatari Minister of Energy and Industry, HE Abdullah bin Hamad al-Attiayah. This, says Ataya, has enabled it to more swiftly put into practice new HSE policies within the organisaton: “The benefit of this is empowerment. The management commitment to HSE means it is easier to push things through. We’re not obstructed. The HSE message comes through loud and clear. If we didn’t report directly to him the message might not reach that level.”

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One of the reasons why the minister wanted to establish stronger links with Qatar Petroleum’s HSE department was so that the company could be used as an example to others in the setting of health and safety standards, reveals Ataya: “Qatar Petroleum is actually leading the way for industries in Qatar and helping to set the standards and act as a regulator.” One of its biggest responsibilities, in this regard, is to encourage energy companies to minimise the impact on the environment. It has set itself targets, including achieving zero gas flaring, maximising the use of energy to produce clean safe energy sources and become a leader in sustainable development in the region. One of its most important achievements is the setting up of a department which deals solely with responding to oil spills in the area and has five oil spill response bases across the area. Ataya says Qatar Petroleum is also involved in joint research ventures with International Oil Companies (IOCs) such as Shell to carry out environmental impact assessments. “The environment has been a big concern to the company. The effort it will put into this is unlimited.” In terms of partnerships, it has also recently signed an agreement with IGTC-Chubb Fire for the maintenance and repair of portable fire extinguishers at Ras Laffan Industrial City. Under the terms of the agreement, IGTC-Chubb Fire Qatar will supply all labour, supervision and tools for the maintenance and repair of the extinguishers and will provide inspection certificates for all the work that is carried out. Qatar Petroleum’s expansion plans and its close working relationship with the Qatari authorities means health and safety is higher on the agenda for the company than ever before. But heightened expectations, combined with shrinking budgets, mean this is a truly challenging time for Zaher Ataya and his team. 


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HEAD TO HEAD

In safe hands Health and safety has come a long way in the oil and gas sector, although it remains one of the most dangerous industries in the world. We gauge the thoughts of two experts in this field on the latest trends – Christophe Chausse of Capital Safety and Detcon’s Bob Masi. What are the key health and safety issues that the oil and gas industry is facing and how do the risks differ between offshore and onshore? Christophe Chausse. Health and safety remains the first focus of any O&G company. Onshore and offshore have common concerns, but any vessel, barge, drilling ship and platform needs to be 100 percent ‘recovery and first aid’ self sufficient. By its complexity and environment, offshore is the most dangerous O&G area. Rescue procedure and recovery time are crucial and need to be properly planned and handled. Confined space, access and rescue are nowadays the main concerns, especially offshore. Fortunately, recent technologies and new systems assist workers by limiting their exposure to risk. Bob Masi. Dangers in the oil and gas industry haven’t changed much since the first oil well was drilled and the first barrel of oil refined. However, our un-

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derstanding and awareness of the hazards associated with the production and refining of fossil fuels has improved over the years. Toxic and combustible gas leaks present a danger to personnel and capital equipment investment in every phase of the petroleum industry. Offshore safety is more challenging due to harsh environmental conditions, and personnel are bound to a structure or vessel surrounded by water. Operators and workers cannot simply walk to a safe area. Our philosophy has to be one that recognises a fundamental principle that our products are concerned with safety, in an environment where failure can have catastrophic consequences to human life, the environment, and possible destruction of major structures. One key issue facing oil and gas producers is the requirement for efficient and safe operation amidst volatile and wide-ranging market prices. Safe operating conditions are not without cost. Safety budgets and continuing improvement in safety policies and procedures require constant attention and should always remain a high priority.


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THE PANEL

Christophe Chausse is the Oil and Gas Global Director for Capital Safety. Chausse, a French graduated engineer, joined the company two years ago.

Bob Masi is Director of Research and acting President at Detcon, Inc., a leading manufacturing company and global provider of gas detection sensors, control systems and process analysers.

The oil and gas sector is one of the most dangerous industries in the world. How is technology playing a role in protecting workers from potential dangers? BM. Automation and safety instrumentation is used to control production and processing operations while providing real-time status of the work area. Well-designed process and safety controls utilise pre-emptive fault diagnostics and will more often than not alert personnel when conditions are changing prior to the danger level. Automation and safety instrumentation has continually advanced in two very important areas: capability and sophistication. Measurement and analytical technology continues on a steady line of improvement. Embedded intelligence at virtually every level of instrumentation helps to reduce the probability of human error. The design characteristics of instrumentation for the oilfield require utilising advancements in

“Well-designed process and safety controls utilise pre-emptive fault diagnostics and will more often than not alert personnel when conditions are changing prior to the danger level” Bob Masi technology but in a package that is rugged enough to work at optimum and safe levels in harsh environments. Properly engineered and applied technology simplifies operator interface and routine maintenance. The net gain is better fail-safe performance throughout the oil and gas industry. The key to safety is reliability. The key to reliability is durability. CC. During the last two decades the industry has received full attention from ‘fall protection’ manufacturers and trainers. Specific solutions have been developed to increase the reliability of products for the day-to-day tasks (high reliable sealed self-retracting life line, versatile harnesses, as well as engineered fall protection system) but also rescue materials (rescue kit for self evacua-

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tion), limiting suspension risks (suspension trauma straps), as well descender/evacuator (vertical and slope evacuations up to 400 feet). Comfort and safety of workers has always been a focus; as one example the new Derrick harness includes high safety features that are easy to install, connect and use; and high comfort, which reduce fatigue effects, because the majority of accidents occur when the worker is tired or in a rush. Are there any safety challenges unique to the sometimes harsh and inhospitable conditions of the MENA region? CC. As in any outdoor job, harsh environments and weather variations are a real challenge for workers. People need to be prepared and trained for any situation they might face. As a manufacturer, we always take into account these difficult tasks to develop with users the right products – reducing risks at work and workers’ tiredness, as well as increasing workers’ comfort and the reliability of products. We develop easy-to-use products and specific and customised fall protection solutions.

“As in any outdoor job, harsh environments and weather variations are a real challenge for workers. People need to be prepared and trained to tackle any situation they might face” Christophe Chausse

BM. The Middle East region is a vast desert region where extremely high temperatures, dust storms and high levels of UV are expected. Add corrosive gases to the natural environmental conditions and the region ranks as one of the most challenging environments for instrumentation applications in the world. In your experience, are the International Oil Companies (IOCs) more aware of health and safety regulations than their counterparts from the National Oil Companies or is this way of thinking a myth? BM. There is no difference in awareness by either an IOC or an NOC. Both are acutely aware of the requirement for health and safety regulations. IOCs may draw from a wider range of regulations and standards than an NOC. The net sum of the most stringent requirements may be the major difference between the two. CC. A myth. Almost all O&G companies are health and safety focused. IOCs and NCOs work jointly to improve standards. NCOs mix and educate their teams with Western consultants and safety specialists. Both IOCs and NOCs have to carry out risk assessments and rescue planning is evaluated. The most difficult part is the education of day-to-day workers, inspection and maintenance. As a leader in fall protection for the O&G industry, we have developed unique product solutions but also all associated services. These include self retracting life line inspection and repair centre, awareness videos, onsite fall protection training and ISAFE system*. As fall protection leader, we develop unique solutions and services to accompany both of them locally and globally for a safer world.  *ISAFE system allows companies to inspect, track and inventory products through a PDA and web portal, reducing paperwork.


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EXPERT ANALYSIS

y t e f a S success The International Association of Oil and Gas Producers has been publishing safety data since 1985. Hans Jorn Johansen, Head of the Safety Committee, examines the improvements the industry has seen in the past 24 years and looks at what can be done in the future to enhance current industry standards.

I

n the last 20 years or so the oil and gas industry has acknowledged that accidents are preventable and that safety is a value and not a competitive edge. It is important to emphasise that accidents are not unmanageable, they are simply something of the past. I was attending a conference in Tehran recently and it was particularly impressive to hear in the opening ceremony that accidents are preventable, that we do not need to have accidents happen. Lifting and hoisting, driving safety and diving safety are our absolute number one killers and we now see statistics that these three areas are the ones that we still do not have a good handle on and the areas where we continue to see too many fatalities occurring. These accidents may only kill one or two at a time but

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they are just as important as the accidents that occur less frequently but incur a high number of fatalities. We have therefore targeted our work in the last five years towards these three particular areas. A few years ago, a set of best practices was issued in regards to lifting and hoisting to address recommendations from the best operators in the world. We are hoping that everybody will be using or implementing these best practices. The documents are freely available to anybody and we promote them at all the safety conferences we can around the world. Last summer we published another recommended practice on diving safety also, because this was the third area we have been targeting in the last five years. Low frequency, or the accidents that happen very rarely, say every one to three years, have something to do with what we call process safety. This is the


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process of maintaining your plant such that you know you can rely upon safety features and that it will not all of a sudden break down or cause a series of events unpredictably. While we are less likely to see these accidents it is nevertheless an important area to deal with because the accident may have had a long time to build up, slowly breaking down the very complicated system that has been set up to ensure the safety and integrity of the plant. These accidents are much more complicated to deal with than a straight-forward accident that just kills one person at a time.

“We have set ourselves a target to be the foremost reference point as regards to health and safety in the world and we are going to build databases that anybody can access” Pressure Oil and gas companies are engaged in exploration projects in some of the most inhospitable regions of the world requiring high standards of safety. While best practices are developed and can be taken and implemented around the world, there are many more challenges when starting from scratch in the middle of nowhere as opposed to being in a fairly developed region of the world where facilities are available. The International Association of Oil and Gas Producers (OGP) represents around 50 percent of the world’s oil and gas producers and from our perspective best practices are increasingly being developed and taken around the world. Of course I can only speak on behalf of the 50 percent of the world’s oil production that our members represent so we still have challenges as regards the other half of the oil production that takes place through other companies that we are not directly dealing with. Will we come to represent more than 50 percent of the world’s oil production? Well, only time will tell, but over the last two years we have been quite active in promoting OGP as an organisation that gives something to its members, I have seen interest from companies in parts of the world where we haven’t traditionally been so strongly represented, such as Australia and the Far East. We have actually seen seven new members that have joined just recently, including a company in Greenland, and have seen the growing interest of being part of a good organisation.

Best practices With so much experience in the oil and gas industry available today it should be possible to take down and state the way you do business and then reapply that in a different part of the world in a different plant, and in a sense provide comprehensive safety guidelines, or best practices, for all workers. However, for some reason it doesn’t seem to be as simple as that. In my mind if you do not try to accumulate your experiences and learnings and transfer them to other parts of the company then you are wasting your energy. And that is one of the good things about being active in OGP, you are no longer competing with best practices, you are sharing your best practices and open-

ing up completely to anybody who wants to know something and get this information through a couple of mouse clicks on the computer or by calling somebody in the organisation. I believe that is truly inspiring. In order to achieve this, we at the OGP will need to better manage our documents and we need to have a more interactive webpage that people can really use, because sometimes it is not enough to have the telephone numbers of the right people to call. Sometimes you are not ready to call somebody and say, ‘Look here, I need help, I’m standing in the middle of Alaska’. Sometimes people want to go to a webpage and look at a Q&A, and so that is what we’re developing at OGP right now. We have set ourselves a target to be the foremost reference point with regard to health and safety in the world and we are going to build databases of all this information that anybody can access from anywhere in the world. Later this year we will be developing key performance indicators because we need to have these in place before we can start saying these are the best practices. We will be starting to collect information to know what to manage and this will be the starting point for safety integrity works, but before this we need the indicators. We will start publishing them from next year onwards and this will ultimately result in a best practice document. We are definitely spreading the safety message around the world and are also hoping to gather more information on performance indicators and on experiences, but we need more information before we can publish a best practices document on this one because it is such a complicated subject. 

A GLOBAL INDUSTRY The International Association of Oil and Gas producers (OGP) encompasses most of the world’s leading publicly-traded, private and state-owned oil and gas companies, industry associations and major upstream service companies. OGP members produce more than half the world’s oil and about one third of its gas. OGP has been publishing safety data since 1985. Though there have been improvements in terms of fatalities in recent years, much remains to be done, particularly in the areas of land and air transportation, marine transfer and lifting and hoisting, as well as diving and marine operations. In particular, OGP’s Safety Committee aims to: • Promote the integration of safety into the everyday business of OGP member companies and other E&P companies and contractors • Provide safety leadership with cost effectiveness • Promote a level playing field for safety that is recognised by the E&P industry and administered by national and global regulatory authorities

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With exploration active in Yemen, Oman and Iraq, Hunt Oil has successfully staked its claim in the MENA oil market. O&G meets the company's General Manager for EMEA Mark Sturgess to find out how it plans to beat the competition.

I

t may not be the biggest name among international oil companies (IOCs) but Hunt Oil is gradually carving a niche for itself in some of the world’s emerging oil hotspots. As well as carrying out extensive activities in the United States and Canada, the company is rapidly moving in on the Middle East and North Africa market, with exploration underway in Yemen, Oman, the Kurdistan region of Iraq, Morocco and Senegal. Describing Hunt Oil’s Middle East and Africa activities the company’s General Manager for EMEA, Mark Sturgess, says: “We’re currently drilling for oil in Oman to run a deep gas test. We’ve had a long history in the country, comparatively speaking, certainly over the last eight to nine years. We see a significant amount of potential there for oil and on the gas side.” He goes on to say that the company sees the greatest potential from Kurdistan where it has exploratory acreage under evaluation. In Yemen, the company’s biggest oil market to date in the MEA region, Hunt Oil’s oil exploration activities are carried out by its subsidiary Jannah Hunt Oil, which has a 15 percent stake in the Block 5 well. Gross production there averaged over 45,500 barrels of oil production per day in 2006, resulting in cumulative oil production of 158 million barrels. Three infill production wells at Dhahab and two at Halewah have been approved for drilling and reservoir simulation studies have been completed on both fields to evaluate additional drilling and compression requirements.

Gas focus While oil exploration is a key element of Hunt Oil’s strategy, its main focus has become the burgeoning Liquefied Natural Gas (LNG) sector where it is particularly active in Yemen. In 1997 Hunt Oil signed agreements with the Yemeni government and partner companies to develop the Yemen liquefied natural gas project. Natural gas reserves from Marib Block 18 and other fields in the area have been allocated to the project, which, when working at full capacity, will require one billion cubic feet of gas per day to produce 6.7 million tonnes of LNG a year. The existing gas production facilities in Marib Block 18 currently have a capacity of 3.2 billion cubic feet a day. Hunt oil holds a 17.2 percent stake in the firm developing the project, Yemen LNG Company. It is currently constructing a two-train natural gas liquefaction plant with guaranteed capacity of 6.7 million tonnes per year. The project to build the pipeline was launched in August 2005 and YLNG signed three 20year take-or-pay sale and purchase contracts with KOGAS, TGP and Suez,

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committing 100 percent of the guaranteed plant capacity. The resulting LNG will be shipped to markets in the US and Korea. These ambitious projects have not, says Sturgess, been affected by the global economic downturn: “Obviously we have challenges like everybody else but for us it’s business as usual.” A bigger challenge, he says, is finding skilled manpower in the region to work on its projects, particularly as it is a relative newcomer to the Middle East: “This is an issue for the whole industry. Finding skilled professionals, whether this is at the upstream, downstream or midstream end is gong to be a major impacting element on the future of our business. From our side, because we’re working on basically new ventures, finding experienced geological and geophysical staff is very difficult. It doesn’t look so good for our industry. We need some younger people coming in to the industry.” He adds that part of the problem is the “dumbing down” of the science curriculum in schools: “The recent trend where they’ve dumbed down the science (curriculum) is going to make it difficult. We need more young people going into sciences, but they need to be going into at the top level, not where it’s made easy for them to make the grade.”

“Part of our business strategy is to focus on the pursuit of high potential projects that can significantly impact the company” Mark Sturgess

Green credentials Like all oil companies engaged in multiple exploration activities, Hunt Oil has come under scrutiny for the impact it is having on the environment and like its counterparts around the world it is keen to extol its green credentials. Most recently its Dallas headquarters was awarded the LEED Silver certification for Commercial Interiors in recognition of the fact that 20 percent of the materials within the building are recyclable, 50 percent of the electricity comes from renewable sources and it uses has an irrigation system that uses 50 percent less water than a traditional system. Sturgess says he believes oil companies are not doing enough to spread the message about efforts they are making to minimise their impact on the environment. “To be frank, I think the industry has been quite lackadaisical about this and is not really pushing itself. Unfortunately people tend to shy away from it [global warming and environmental issues] but I think there are ways that the industry could sell itself better. We’re not the big ogres that everybody thinks we are. Most geologists, for example, are probably the most environmentally con-

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cerned people on the face of the planet and they probably know more about it than 90 percent of the population.” Although it is heavily involved in traditional oil exploration, Hunt Oil’s Business Development group, is activity seeking investment opportunities in new energy sources, ranging from improved resource recovery to renewable energy and clean technologies. Its particular areas of interest, in addition to LNG, include geothermal, solar, CO2, wind and LNG re-evaporation. In these areas it is particularly keen to explore acquisition opportunities that would see it spread its footprint worldwide. In the past it has acquired Newport Petroleum Corp for US$500 million, Chieftain International for US$600 million and assets from Canadian 88 for US$120 million. Describing the importance of investing in alternative energy and unconventional energy exploration sources, Sturgess says: “We have our own unconventional resources department in the US which has come up with some novel ideas. I think in the past, as an industry we’ve tended to ignore trying to evaluate things in depth and maybe that’s not the wisest decision in hindsight because there is a (oil) shortage looming.”

Organic growth

Hunt Oil’s interest in new investment opportunities reflects its long term strategy, which, as stated on its website focuses on organic growth: “Part of our business strategy is to focus on the pursuit of high potential projects, that in and of themselves can significantly impact the company. The company remains committed to growth through organic exploration; and as such we place great emphasis on the early stages of the exploration process.” The website states that the company’s investments in new ventures is balanced out by a focus on “lower risk and more predictable sources of production and cash flow”. “Hunt balances technical and political risks with a very conservative financial strategy seeking to mitigate those risks and minimise exposure through partnering and leveraging strategies.” Hunt Oil’s main focus remains the US and Canadian markets. It has significantly expanded its exploratory activities in South America, particularly Peru where it has acquired a stake in the upstream and downstream segments of the world-renowned Camisea project. It is running an active drilling programme in the Gulf Coast regions of Texas, Louisiana, the Williston Basin of North Dakota, the Permian Basin of West Texas and offshore in the Gulf of Mexico, both on the shelf and in its deep waters. In Canada, where it operates under the name Hunt Oil Company of Canada, it is focussing on the Western Canadian Sedimentary Basin in Alberta and British Columbia. It now plans to expand its exploration activities in Western Canada and in other parts of North America. The Middle East, however, looks set to take a significant share of the company’s activities as world demand for LNG grows and activities in the Kurdistan region of Iraq reach their full potential. 


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GLOBAL SAFETY

T

here is nothing more important to the International Marine Contractors Association (IMCA) and its members than safety. Indeed, the quest for ‘zero incidents’ remains at the heart of virtually every guidance published by the international trade association that represents, and works on behalf of, over 500 offshore, marine and underwater contracting companies in more than 50 countries. Heading our list of aims and objectives is our commitment to strive for the highest possible technical and safety standards. Nothing can, or should, override this key mission statement and associated action. Safety ranks so high up the list of IMCA activities that its two core committees – Safety, Environment & Legislation (SEL); and Training, Certification & Personnel Competence (TCPC) – work right across all the special interest divisions within IMCA (Marine, Diving, Remote Systems

& ROV and Offshore Survey) and the four sections (Americas Deepwater; Asia Pacific; Europe and Africa; and Middle East and India). There are a number of ongoing safety initiatives, which include the IMCA safety flash system; publication of safety statistics and of annual incident reports; the continued development of safety aids such as pocket safety cards, safety posters and videos; and also the work of the Security Task Force that addresses such issues as piracy and security. These initiatives rely on sharing, where IMCA is the conduit used to share individual experiences with the wider industry for the common good.

Current concerns With a strong oil price and exceptional levels of activity throughout the offshore oil and gas industry, we are living in exciting and challenging times. The US$20 billion-a-year offshore marine contracting industry, key

THE IMPORTANCE OF SAFETY Hugh Williams, Chief Executive of the International Marine Contractors Association, examines the issues.


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to the offshore oil and gas industry, is responsible for construction work on major oil and gas field developments globally as well as undertaking specific contract work for field improvements and extensions. Sophisticated vessels and platforms are vital for the safe and efficient support of underwater and surface construction, so many would expect the industry to be overjoyed by the knowledge that over US$17 billion-worth of new vessels are in yards or in planning and engineering phases. However, there are very strong concerns. In a relatively short time, some 50 new marine construction vessels and 600 offshore support vessels will be in service around the world; to say nothing of 40 floating drilling rigs, 100 new work class ROVs, 10 new portable or modular saturation diving systems, and a whole new generation of dredgers and seismic vessels.

The top-of-the-range installation vessels will be fitted with cranes of 3000t-5000t capacity, whilst the top-of-the-range pipelay vessels will have up to 60-inch diameter pipe handling capacity. Except for vessels such as Allseas’ Solitaire and Lorelay, nothing like these top-end vessels has been built for two or three decades. A new breed of ‘single lift’ vessel with capacities from 20,000t-48,000t is also being built with decommissioning in mind. At the same time, more heavy lift transport ships are being added to the fleet, and these, plus some of the offshore support vessels, may be used for offshore construction projects.

Hugh Williams is Chief Executive of the International Marine Contractors Association (IMCA), which represents offshore marine and underwater engineering companies worldwide. The association has over 500 company members in 50 countries around the globe. Williams is a chartered civil engineer with 33 years of broad experience. His career has focused on marine operations, particularly heavy lifting and marine construction in the offshore oil and gas industry.

Hugh Williams

The offshore fleet is certainly about to become physically larger (in terms both of the number of vessels and their actual size), and more sophisticated, with the majority featuring dynamic positioning (DP) and state-of-the-art control systems. Many vessels will have the scope to fit and operate additional capacity such as cranes, ROVs, diving systems and reels for pipelines, umbilicals and cables. We’re moving into a new era, but there is a major concern about whether skills and safety levels will match the sophistication of this ‘new-look’ fleet; and, of course, there is a pressing need for current and new supply bases to accommodate these large vessels, and all the high tech equipment that goes with them. Progressively we should be considering new bases incorporating supply chain elements; for example, major contractors are establishing shore-based pipeline fabrication and spooling facilities in remote areas as close to offshore fields as possible. One item topping the IMCA agenda is the global concern about skills shortages. To operate just these new construction vessels, we need 2000 additional watch-keepers across the bridge, deck and engine room; 800 personnel in saturation diving and related positions; 1000 additional survey and inspection personnel; 1200 ROV personnel and many other diving, support, project and engineering personnel. It is a huge ask. With zero incidents in mind, all these people, newly recruited to the industry, must be capable of absorbing the available knowledge and taking on board industry safety objectives. Training must continue across the board to keep them safe – training establishments and trainers will be in high demand. Yes, even more people will be needed to man them. It may be that many of the people new to the industry have transferred from other sectors of the civil or defence marine industries, but whatever their background and wherever they are from, training to the high levels required by the offshore oil and gas industry, and adopting the ethos of our industry is vital.

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Safety flash system A key tool of IMCA is its safety flash system, which enables prompt distribution of safety flashes across the industry on topics that would otherwise pose a latent hazard to other members. The purpose of an IMCA safety flash is to notify IMCA member companies of a significant hazard that could be present at their worksites and to provide solutions for controlling the hazards. Such a hazard may already have led to a fatality, injury or illness at a member’s site or it may be a recognised problem that could lead to an unwanted incident. In either case, the publication of such hazards through the IMCA safety flash system keeps people informed and helps prevent similar occurrences.

Sophisticated technology Within the offshore contracting industry, we are used to multi-redundant, fail-safe systems. The lack of new vessels over the past decade or so has meant working with vessels with long histories. Systems have been added and evolved, teething problems ironed out and performance improved. Now, fresh from the yards, we are going to see very sophisticated vessels (with similarly sophisticated equipment fitted on them) often going straight out to remote oil and gas provinces. Almost without exception, this will see them operating in ever deeper and more hostile waters far from shore – yes, it really is ‘new frontier’ country. What can we expect?

“There is no simple answer to the three inter-linked issues of skills availability, skills and safety, and the impact of new technology. We need to debate the issues” There is no simple answer to the three inter-linked issues of skills availability, skills and safety, and the impact of new technology. We need to debate the issues, get feedback and views from across the industry and ensure we work together to identify challenges and set the wheels in motion to share solutions. IMCA’s real-time safety flash system will be used to share specific operational knowledge as it becomes available.

Collective wisdom The new fleet and its new personnel will want to learn from the collective wisdom of the past. This is contained in new design codes that have improved since much of the current fleet was built. But a considerable contribution comes from the equipment specifications, procedures and personnel competence described within IMCA’s good practice guidelines. These also address trials and commissioning; ‘failure modes and effects’ analyses; audit and maintenance programs developed on past successes and occasionally from past incidents; and the development and recognition of competence in the workforce.

We can certainly help to build strong foundations for the new fleet and new people who will be joining the industry. IMCA has published over 200 guidelines relevant throughout the world. The most pertinent to the new fleet may be DP for supply vessels (and many other DP documents including incident analyses); the Common Marine Inspection Document; training and competence framework; crane specifications and lifting operations; maintenance of wire ropes; communications (bridge and dive control); incident investigation; vessel and personnel security (including ISPS); as well as the suite of diving documents that support IMCA’s international code of practice for offshore diving. There are specific guidelines relating to various aspects of safety – and also our much-used safety promotional material aimed at individuals within the industry – but safety and efficiency are the goals of the content of almost all our guidelines.

A living example IMCA’s Common Marine Inspection Document (CMID) was developed originally to reduce the number of audits carried out on individual vessels, together with the adoption of a common auditing standard for the offshore marine industry. It is gratifying that the CMID is seeing ever-greater adoption around the world and members are actively promoting its use to clients, subcontractors and other vessel operators. Indeed, a significant part of the international offshore industry has accepted the CMID as the standard for vessel inspections, and therefore when requesting copies of recent inspections they will expect them to be in the format laid out in the CMID. The CMID is treated as a living document. Some parts can be completed by the crew prior to an independent auditor’s arrival and, thereafter, the vessel’s crew can keep it updated wherever possible, so that the minimum amount of work is required at each audit, and auditors can spend their time on board as effectively as possible. We view it as so important that it was the subject of one of the workshops at our annual seminar, when we explored how the CMID is used in practice and how the use of the document can be enhanced. It is vital to ensure that the CMID meets (and indeed exceeds) all needs and that there is no need for duplication of effort, something that would dissipate the element of self-regulation, a key step in ever-increased safety standards, that is now working so well. In our desire to facilitate safe and efficient marine operations, we look forward to a challenging and far-reaching debate and resolutions to ensure the enlarged offshore fleet can operate optimally – and safely. 

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VIEW FROM THE TOP

A new chapter Following the first meeting of the Saudi Society for Energy Economics, Saudi Arabiaâ&#x20AC;&#x2122;s Minister of Petroleum and Mineral Resources, Ali Al-Naimi reveals how he thinks the organisation will address the challenges facing the energy industry.

N

ow that we are in the process of establishing a society concerned with the energy industry, I should focus on the role of the Saudi petroleum sector on the premise that it represents a central hub of the energy industry, contributing to the consolidation of the foundations of our national economy for over 75 years. This sector still makes up the bulk of our gross domestic product. Its contribution to the GDP has amounted on average to 35 percent during this decade. The sector also accounts for the greater share of the Kingdomâ&#x20AC;&#x2122;s exports and some 86 percent of government revenues. Great as this contribution is to the Kingdom on an overall economic level, the oil sector also makes feedstock and fuel available from crude oil, in addition to providing products, natural gas and natural gas liquids, for industry and utilities, benefiting the petrochemical industries, mining industries, cement industry, power generation industry, water desalination and other industries. Availability of feedstock and energy at affordable prices has been a great incentive for expansion in these industries and the registering of high growth rates. The industrial sector grew by six percent annually, thereby multiplying the percentage of its contribution to the GDP.

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Diversification The oil sector’s contribution has not been restricted to the growth of the basic petrochemical industries, but has been extended to include their diversification. The combined efforts of the petroleum and industry sectors have culminated in the expansion of secondary and specialised chemical industries. This has been followed by the launch of the industrial clusters, an endeavour blessed with the direct support of our wise leadership. A Council of Ministers’ decision was issued in this regard in support of this trend, to identify and attract investments to those industries in which the Kingdom enjoys a relative advantage and which are associated in one way or another with the oil industry, including metal industries and the auto supplies industry, such as tires and other products, in addition to the packaging and packing industries. These industries are regarded as suitable for meeting the Kingdom’s needs for two particular reasons: first, they have the potential to create many jobs in line with the objectives of the national industry strategy, and, second, they maximise the benefits from the Kingdom’s relative advantages, including the abundant availability of basic petrochemicals, phosphate and aluminum. The industrial clusters programme seeks to attract, facilitate and develop a number of pivotal projects in these four clusters by 2013. The anticipated total investments by the private sector in all the projects of these clusters are estimated at SR40 billion. Additionally, the projects will contribute SR90 billion to the GDP annually and create some 160,000 employment opportunities by 2020.

“The oil sector’s contribution has not been restricted to the growth of the basic petrochemical industries, but has been extended to include their diversification” The growth in demand by industries and utilities for fuel and feedstock has resulted in the expansion of the Kingdom’s natural gas industry in all its various stages – exploration, production and processing – in tandem with the progressive growth in oil production and refining. Saudi Aramco’s efforts managed to yield an increase in discovered gas reserves from 184 trillion cubic feet in 1990, almost one-quarter of which was in the form of non-associated gas, to 267 trillion cubic feet in 2008, more than half of which is in the form of non-associated gas, notwithstanding cumulative production of some 97 trillion cubic feet during the period. Saudi Aramco’s programme increased the percentage of non-associated gas out of total gas production from 25 percent to about 58 percent. Further gas reserve increases are anticipated from the gas joint ventures. Saudi Aramco’s programmes for reserve development and gas production will continue unabated. For instance, the Karan offshore gas field is expected to boost production capacity by some 1.8 billion cubic feet per day. Similarly, the refining projects, both under implementation and on the drawing board, which are associated with petrochemical complexes, such as the Petro Rabigh and Ras Tanura projects, and other projects in Jubail, Yanbu’ and Jizan, will result in expanded refining capacity and a diversified petrochemical products base. Collaboration between the mining sector and the petroleum industry – implementing the active and planned projects at Ras al-Zawr Port, in preparation for completion of the railway link project connecting the Northern Frontier Area via the Central Province to the Eastern

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Province – will lead to the exploitation and processing of raw phosphate and bauxite, coupled with creation of an industrial base that combines the oil sector with the minerals and petrochemical industries, expanding from there into more diversified and more specialised industries.

Research and development The Kingdom was aware quite early that the existence of those resources per se would not bring prosperity and development in the long run, and that the true litmus test is its ability to efficiently exploit its resources and maximise the benefits from them, promoting and diversifying the economy and linking production and treatment of these resources to other economic sectors. This can be achieved first by building the qualified human resources to manage the petroleum industry, national development and local business. For this very reason, the King Fahd University of Petroleum and Minerals was established over 40 years ago as a prominent sign of this trend, which has involved the grooming and developing of qualified national forces. The university has been playing, and continues to play, its role with other Saudi universities in promoting research and cooperation with the research and development centers of Saudi Aramco and SABIC in areas that serve the industry and growth. The relationship between the petroleum industry and development of scientific and technological research did not stop there, but extended to broader horizons through establishment of King Abdullah University of Science and Technology (KAUST) on the west coast, which the Custodian of the Two Holy Mosques envisions as a beacon and monument of science and research transcending the Kingdom and reaching the entire world. Continuing this approach, high-level approval was secured for the establishment of the King Abdullah Center for Petroleum Research and Studies in Riyadh, for the purpose of conducting environmental studies and scientific and applied research related to the petroleum industry, to support and protect the Kingdom’s interests. This new centre, as envisioned, will serve as another link between the oil sector and the Kingdom’s economic, scientific and technological environment. We are looking forward to the Saudi Society for Energy Economics’ contribution, in concert with other scientific and professional societies, to the centre’s research and study plans. The new economic and scientific opportunities and initiatives doubtless face a host of uphill challenges that must be addressed. On the one hand, our economy is still reliant on oil and its revenues, which are affected by the conditions of the oil market, changes in supply and demand patterns, and price fluctuations. Therefore, the challenge of diversifying our national economy will remain alive and well, and petroleum and its revenues will continue to be the causeway to a diversified economy, a challenge to be met head-on by the Ministry of Petroleum and Mineral Resources and Saudi Aramco, with the involvement of many of the concerned sectors in the Kingdom.

Rising demand In our effort to maximise benefit from the Kingdom’s petroleum sectors, one of the local challenges we must confront is the increased consumption of petroleum products in the Kingdom since 1990, at an annual rate of five percent, and the ever- growing consumption of natural gas, now at an annual rate of seven percent – both much higher than the 3.4 percent average growth rate of the GDP during the same period. Consumption of all types of energy grew from 3.6 percent during the period 1995-2000 to 5.6 percent during the period 2001-2008. This progressive increase and growth in the intensity of ener-


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Gulf Arab oil ministers meeting in Riyadh. Oil giant Saudi Arabia said that global oil inventories were at ‘very comfortable’ levels and supply exceeded demand gy consumption in the Kingdom can be attributed to industrial expansion and the fact that prices are much lower than international levels. This energy consumption pattern in the Kingdom will, if it continues, have an impact on both the volume of exports and the Kingdom’s income. This requires us to proceed forthwith to institute a national programme for rationalisation of energy consumption that will take into consideration the Kingdom’s condition, the growth phase it is passing through and the need to optimise utilisation of energy in the various sectors, in order to reflect the real cost of petroleum resources and its conservation for future generations. The last local challenge resides in our ability to develop suitable alternative energy sources to address the growing demand for electrical energy and water desalination associated with population growth and economic development. Fortunately, the Kingdom enjoys a relative advantage that qualifies it to develop renewable solar energy, not only on account of its climate but also due to its extensive surface area. KAUST has already initiated research in this area by establishing a specialised solar energy research centre, concluding agreements for the development of solar energy technology with prestigious international centres and investing to supply the university campus in Thuwal with its requirements of solar energy electricity. Solar energy does represent a viable alternative that the Kingdom is in a position to promote, not only to replace petroleum and gas in power generation and water desalination, but perhaps also in the long run to become a source of electrical energy.

Environmental concerns One last challenge that remains to be addressed at the international level is global environmental concerns, particularly climate change and its impact on the Kingdom in the long run. We have long underscored in international circles concerned with this issue the importance of channelling international efforts to technology research that produces and consumes environmentally friendly petroleum with minimal damage to the environment. Given the many opportunities for growth of the Kingdom’s energy sector as well as the challenges the sector faces, our new society can and will contribute in confronting these challenges. On the one hand, it can participate in developing the research and studies that will improve performance on this extremely important issue, namely advancing economic diversification in the Kingdom. It can also, in concert with other societies and research centres, contribute to achieving maximum exploitation of our petroleum resources and minimising excess consumption of these depleting resources. It may also contribute to formulating new concepts related to the environment and its relationship to the energy industry, and directing local and international efforts to innovate more solutions to advance the energy industry and have a more powerful impact on the local and regional levels. In conclusion, I wish to extend my congratulations on the establishment of this society and do hope that its future will be blessed with the same enthusiasm it has enjoyed in its establishment. It is our hope that it will spawn many studies and works, which will assist the Kingdom’s energy industry in achieving its future ambitions and provide further opportunities for prosperity for future generations. 

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DIARY DATES 144

DIAR RY DA SEPTEMBER

SPE Offshore Europe Oil & Gas Conference & Exhibition September 8-11 Aberdeen, Scotland www.spe.org

154th Meeting of the OPEC Conference September 9 Vienna, Austria www.opec.org

IEA 9th Annual Workshop on Greenhouse Gas Emission Trading September 14-15 Paris, France

OPEC will hold its 154th meeting on September 9

www.iea.org

Exploration & Production Technology Summit 2009 September 23-25 Houston, Texas www.exproevent.com OCTOBER

Unconventional Oil October 14-15 London, UK

www.smi-online.co.uk

GETENERGY for Iraq 2009 October 16-17 Istanbul, Turkey www.getenergyevent.com

www.petroleumshow.com

8th Energy Risk Management October 6 - December 6 London, UK www.acius.net

SPE/EAGE Reservoir Characterisation and Simulation Conference & Exhibition October 19-21 Abu Dhabi, UAE www.spe.org

NOVEMBER

16th Africa Oil Week November 2-6 Cape Town, South Africa www.petro21.com

The EAGE Reservoir Characterisation Conference takes place from October 19-21

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World Heavy Oil Congress November 3-5 Puerto Ordaz, Venezuala

World ReďŹ ning Technology 2009 November 2-3 Vienna, Austria www.standardboard.com

Nanotechnology: The Next Frontier November 18-19 Cairo, Egypt

www.npg.sabrycorp.com DECEMBER

GETENERGY for Libya December 1-2 Tripoli, Libya

www.getenergyevent.com

Contracting in the Changing World of Projects December 9-10 Singapore www.ipainstitute.com

Best Practices for Power Projects December 16-17 Beijing, China www.ipainstitute.com

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