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FROM THE EDITOR’S DESK

No 13

Nov-Dec, 2010

SUPPORTING STABILITY; FUELLING PROSPERITY

CONCEPT & CONTENT Akshay Bhatnagar Sunil Fernandes

Despite its critics, OPEC has done a credible job in the last few decades, with timely interventions in the oil market to ensure oil price stability. This is despite the fact that the OPEC era has witnessed tumultuous times with wars, political turmoil and economic mayhem. Even as OPEC celebrates its 50th anniversary, the oil governing body continues to face predicaments. On the one hand it has to ensure prices are low and consumer interests are protected, while on the other hand it has to ensure reasonable level of oil prices for producers.

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

OPEC was founded on September 14, 1960, in Baghdad, Iraq by five oil-exporting countries that decided to join forces to safeguard their legitimate rights and exercise control over their petroleum resources after years of manipulation. Few could have imagined at that time that this small group of developing states – Iran, Iraq, Kuwait, Saudi Arabia and Venezuela – could evolve into an organisation that today has significant influence and recognised acclaim within the global energy community. We only hope that OPEC continues its role in a prudent manner, to protect one and all. Moving on, the current edition of Oil & Gas Review (OGR) has featured a cover story on the MB Group. Founded by Mohammed Barwani in 1982, the Group now boasts operations in 19 countries and has ambitious plans to continue to go global. Featured is an exclusive interview with Mohammed Barwani, Chairman of the MB Group on his beginnings, challenges and plans for the future. Oil & Gas Review also has many more interesting articles for industry professionals. We hope the articles are enlightening and do forward us your feedback. Sunil Fernandes sunilf@umsoman.com

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

Presentation


CONTENT Cover Story The Big Leap

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Exclusive interview with Mohammed Barwani on the MB Group’s beginnings, challenges and plans for the future

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EVENT REPORT

The OER Debate 2010 saw a rousing reponse from industry captains. A detailed report on the event

Insets:

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INDUSTRY SCAN

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

40

EVENT REPORT

An event report on the SPWLA 2010 second chapter conference

18 EVENT REPORT

A detailed report on the success of ADIPEC 2010

40 MARKET ROUND-UP

A review of the developments in the oil and gas markets

MANAGING WASTE Interview with Dr Piet van den Akker on waste management practices in the oil and gas industry

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OILFIELDS OF THE FUTURE Digital oilfields are now a reality of measureable value


CONTENT LEARNING ITS LESSONS

Excerpts from Bob Dudley’s speech at the CBI annual conference held in late October

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Regional Round-Up

A round-up from the regional oil and gas industry

Insets: Tender Watch

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TENDER WATCH

Latest tenders from around the globe

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Global Round-Up

A round-up of the latest global events

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GLOBAL OIL RESERVES Latest Oil and Gas statistics

66 EVENTS CALENDAR

A calendar of events in the global oil and gas industry

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Job Opportunities

The latest job opportunities from around the globe

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Nov-Dec 2010


NEWS REPORT

PDO and UMS forge new partnership

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etroleum Development Oman (PDO) has awarded United Media Services (UMS), a three year Integrated Media Services contract for publishing and design services. Says Sandeep Sehgal, Chief Executive of UMS, “Our partnership with PDO underscores the strong quality standards that UMS brings to the table. While we are elated at winning this contract, we are also aware of the huge responsibility that such a contract places on us and as a team we are eager to exceed client expectations.”

A signing ceremony formalising the contract took place recently. Mundhir al Barwani, PDO’s Human Resources Director, says “We are looking forward to benefiting from UMS’s creativity and wealth of experience acquired over the years in the field of publishing and design.” PDO is the major exploration and production company in the Sultanate. It accounts for more than 70 per cent of the country’s crude-oil production and nearly

all of its natural-gas supply. Established in 1988, UMS is today Oman’s largest communications and media agency with a number of specialised divisions. It is a formidable force in the field of communications, covering every aspect

of media and integrated communication operations like publishing, media marketing, advertising, interactive and distribution. UMS is a wholly owned subsidiary of Renaissance Services SAOG.

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EVENT REPORT

THOUGHT PROVOKING

T

he significance of greater cooperation between the government and private sectors to achieve the goals of Vision 2020 dominated the OER Debate 2010 held on October 25 at MSM. The tone of the debate was set by HE Maqbool bin Ali Sultan, Minister of Commerce and Industry, when he delivered the keynote touching upon three issues – development of SMEs, education and Omanisation – which, he said could throw up challenges to Oman’s economy as it pushes towards reaching the goals of Vision 2020. There was complete engagement in the debate from the audience of more than 200 corporate captains, business leaders, dignitaries besides representatives of the international and local media, who had gathered for the national debate on Oman’s economy. 6

Nov-Dec 2010

Nima Abu Wardeh, the presenter of BBC’s Middle East Business Report anchored the riveting debate. The deliberations ranged from globalisation and economics to human capital and motivation while offering glimpses of the future and reviewing the idea of a new age of leadership in a changing business landscape. The OER Debate 2010 was organised under the auspices of His Highness Sayyid Tarik bin Shabib, editor-inchief, Oman Economic Review (OER), and HE Yahya Al Jabri, Executive President, CMA. The panelists of the debate included Dr Mohamed Abdulaziz Kalmoor, CEO, Bank Sohar; Wael al Lawati, CEO, Omran; Pankaj Khimji, Director, Khimji Ramdas; Stephen R Thomas, OBE, CEO, Renaissance Services; Ross Cormack, CEO, Nawras; Dr Mohamed Ali, Vice Chairman and

Managing Director, Galfar Engineering and Contracting Company; and Dr Brian Buckley, General Manager and CEO, Oman LNG. The eminent panelists enlightened the audience with their valuable insights into the way businesses in the new age must operate and the need for the private sector to do a rethink on how they operate their businesses while keeping the interests of the nation in mind. The debate was followed by an awards ceremony in which The OER Top 20 companies for the year 2009 were awarded OER Top 20 trophies. The OER Top 20 companies are the largest listed companies by revenue in the Sultanate. Earlier, HE Jabri unveiled Perspective 2010, the official magazine of OER Debate.


LOCAL ROUND-UP

Shell launches “My Beautiful Oman” Campaign Shell Oman Marketing Company has recently launched the “My Beautiful Oman” campaign as part of the 40th National Day celebrations. The ”My Beautiful Oman” road show is happening at Shell service stations and touring around the nation across 20 locations. Recalling the remarkable progress and development achieved by the Sultanate under the wise leadership of His Majesty Sultan Qaboos, the “My Beautiful Oman” campaign offers a unique opportunity to express love, admiration and appreciation to His Majesty Sultan Qaboos and the Nation. The campaign is well structured to reach the masses and thereby generate support at all levels. “The year 2010 marks a milestone for Oman and Shell Oman attaches great significance to the occasion. As the nation recalls its achievements, Shell Oman is proud to be part of the developments leading to the transformation of the country,” said Mohammed Ali Al-Farsi, General Manager External Affairs & Business Development of Shell Oman.

Shell Oman names winners of Shell Super Promotion Swarn Singh, has won a Prado at the Shell Super promotion. In addition to Singh, 12 other lucky winners also won free fuel cards for 2000 liters each of Shell Super. “We extend our warmest congratulations to the winners and wish them an excellent experience with their prizes. Aside from the spirit of giving, this campaign was also about informing people on the advantages of the Shell Super petrol which is the only petrol available in Oman with an additive specially designed for extra kilometers,” said Mohammed Al-Farsi, GM-External Affairs and Business Development of Shell Oman Marketing Company.

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People are invited to come and sign a mega greeting card with their messages and well wishes for the nation and submit their memorable photos of Oman. These pictures will be collated and the selected pictures will

be published in the special edition of “My Beautiful Oman” book which will be dedicated as a tribute to the Nation’s great leader, the architect of Oman’s Renaissance and its growth.

Crude oil production up 7 per cent The Sultanate’s total crude oil production rose by 7 per cent in the first eight months of the current year to hit 208.5 million barrels compared to 195 million barrels during the corresponding period in 2009. The statistics released by the Ministry of National Economy pointed out that the crude oil production rose by 6.7 per cent and condensates by 8.7 per cent to reach 183 million tonnes and 25.5 million tonnes respectively. The average daily production of oil rose during the same period by 7 per cent to 858,000 barrels and its average price recorded a big rise of 53.6 per cent to $77.90 for a barrel. The statistics also pointed out that the Sultanate’s total oil exports recorded a

remarkable increase during the first eight months of this year by 11.3 per cent to hit 175.9 million barrels as compared to the same period last year. The Sultanate’s oil exports to Singapore, China and Japan increased by 49.9 per cent, 43.5 per cent and 27.1 per cent respectively. The statistics also place China as the major importer of Omani oil exports and pointed out that the Sultanate’s oil exports to the Chinese markets amounted to 74.9 million barrels (about 42.6 per cent of total Omani oil exports during the period of the report), compared to 52.2 million barrels during the same period in 2009. Exports to Japan came in second place at 14.7 per cent, followed by Thailand at 12.6 per cent.


LOCAL ROUND-UP

Petroleum Development Oman has new MD

Renaissance Services signs RO19.25 (US$50 million) term loan with BankMuscat, concludes US$100 million funding Renaissance Services has signed a term loan facility with BankMuscat for RO19.25 million (US$50 million), to support the company’s growth investment plans, primarily in the development of its marine offshore support vessel (OSV) fleet. The facility with BankMuscat is the final tranche of a total RO38.5 million (US$100 million) term loan funding announced by Renaissance earlier.

Raoul Restucci has joined Petroleum Development Oman as its new Managing Director from October 2010. Restucci, a British national, replaces John Malcolm.

Enhanced Oil Recovery project opened The Sultanate’s first full-scale Enhanced Oil Recovery (EOR) project in the south of Petroleum Development Oman’s (PDO) concession area was opened recently. Held under the auspices of Dr Mohammed bin Hamed Al Rumhy, Oil and Gas Minister, the opening was attended by Shaikh Bakshit bin Salim Salil Al Maashni, Wali of Shaleem and Halinayat Islands, senior officials from PDO, Oil and Gas Ministry officials and local dignitaries. PDO’s new Managing Director Raoul Restucci said,“ This is a historic occasion for the company as it represents a new chapter in the company’s development as this is the first full-scale enhanced oil recovery project – a project which establishes PDO as the region’s leader in EOR technology. The new project aims to add a further 8,000 barrels per day of oil production from the Marmul reservoir.”

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Stephen Thomas, CEO of Renaissance said, “Renaissance drives growth through a disciplined approach to investment and a prudent approach to financing. Our balance sheet is strong. We are sustained by strong cash flows and rigorous management of our gearing ratio. The company has a policy to

AbdulRazak Ali Issa, Chief Executive of BankMuscat, said, “We are delighted to further strengthen our mutually rewarding relationship with Renaissance Services and remain committed to supporting business opportunities in Oman. We are impressed with Renaissance’s achievements and look forward to a long and fruitful relationship with the group.” BankMuscat is the leading financial services provider in Oman and this year achieved the distinction of becoming the only corporate entity from the Sultanate to be listed in ‘The Forbes Global 2000’ featuring the largest traded companies of the world.

match loans against long-term assets with guaranteed revenues. This new facility with BankMuscat is a crucial part of our current investment plans.”

Omanoil awards 2010 Yamaha YZF motorbike to first place winner Oman Oil Marketing Company (omanoil) concluded a three month long nationwide Ahlain convenience store promotion by awarding a state-of-the-art 2010 Yamaha YZF-R1 motorbike among other runner-up prizes during a ceremony recently held at Al Qurum Service Station. As the nation’s visionary fuels and lubricants marketing company, omanoil granted the extreme sports motorbike to Harith Mohsin and a free fuel voucher each for an entire year to Mohamed Al Ghunemy and Nasser Al Shikely. In addition, Amal Dawood and Seif Alhawary were awarded a free shopping voucher each for an entire year. Hussain Jama Al Ishaqi, General Manager of Retail at omanoil said, “As leaders in the local convenience stores industry, we continually evolve and remain competitive with a clear mandate to meet the needs of our customers through innovation and providing genuine value with unmatched customer care.”


LOCAL ROUND-UP

omanoil supports national e-payment initiatives

Ushering a cashless society in light of the e-payments era, Oman Oil Marketing Company (omanoil) has reinforced its support to its long standing partner BankMuscat as Gold Sponsor of the 2010 Cardholders’ Shopping Festival. As the exclusive fuels and lubricants marketing sponsor, omanoil’s valued patrons can participate in the Festival by making a purchase through their BankMuscat credit and debit cards at any of omanoil growing network of 117 filling stations and 65 Ahlain and convenience stores across the Sultanate. Upon making an e-payment, customers will receive a coupon and

automatically enter the Festival’s weekly draws to potentially win a number of discounts and prizes. Previous collaborations between omanoil and BankMuscat include Oman’s first chip based multi-partner rewards program basma, which has significantly promoted the use of e-payments and smart cards for consumer’s various shopping needs since its establishment in 2005. The basmaCard Program extended its outreach last month through the ‘Mass Redemption’ campaign which now enables card holders to redeem points at all seventeen merchants.

Oman Crude rises to highest since June Oman Crude, a Gulf benchmark for Asia, will sell at the highest level since June after demand for heating fuels in northeast Asia boosted refining profits, spurring purchases of the grade. The December official selling price for Oman oil will be $80.52 a barrel in December, based on the average of daily futures settlement prices on the Dubai Mercantile Exchange. The high-sulfur crude will be $5.17, or 6.9 per cent, more expensive than November’s price of $75.35.

Royal Oman Police certifies Berger Paints products for fire protection Focusing on increased safety for consumers, Berger Paints has recently introduced a wide range of “Flame Spread Resistant” products in Oman. These products offer increased safety in cases of fire by limiting the spread of surface flames. The work on formulating these products started over a year ago. While the products themselves were developed and internally tested, Berger worked with premier third party-fire protection laboratories – Warrington Fire from the UK to get these products independently certified as per international standards. 12

Nov-Dec 2010

Renaissance engineering subsidiary delivers gigantic offshore oil & gas project

The engineering division of Renaissance Services subsidiary, Topaz Energy and Marine, has successfully completed the construction and delivery of a 12,400 ton deck structure for an offshore oil platform in the North Sea.Topaz Fabrication and Construction was awarded a US$75 million (RO28.8 million) contract to build the hull and topsides of the colossal structure dubbed MOPU, or Mobile Offshore Production Unit and storage, from Single Buoy Moorings (SBM) for its client, Talisman Energy Norge. The company’s project was delivered within the time and cost requirements, with more than seven million man-hours clocked by a workforce peaking at 1,400 employees. “What I’m most proud of is the fact that Topaz delivered the project without a single LTI (lost time incident). That is testament to the planning and supervisory skills of our project and QHSE teams,” remarked Bill Bayliss, Chief Operating Officer of Topaz Engineering. Bayliss added, “This is the largest project that Topaz Engineering has undertaken and it is probably the single largest offshore unit ever built in the Middle East. We are delighted as to what has been achieved by Topaz Engineering. My great appreciation extends to the highly capable construction management team, our entire workforce and our client, SBM.”


EVENT REPORT

A CRITICAL ROLE IN THE PRESENT ERA

Petrophysicists are increasingly playing an important role in an era where easy oil continues to wane, even while the insatiable demand for oil continues. The Society of Petrophysicists and Well Log Analysts (SPWLA), Oman Chapter, held its second chapter conference recently highlighting the role Petrophysicists need to play in the present era. OGR reports

Dr Ali Al Gheithy, Petroleum Engineering Director, Petroleum Development Oman

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he era of easy oil is slowly drawing to a close and the world continues to see a burgeoning demand for oil and gas. The role of Petrophysicists and Geologists now assume paramount importance, if we are to continue to develop the available unconventional resources optimally and book more reserves. “The quantities of reserves around the globe are huge. A large part of these reserves are in the Middle East, so we are in the right place to hold this conference. In the next forty years or so, the booked reserves will diminish. The catch however is that if we can increase the reserves by 4 or 5 per cent we can add another seven years to the global production life,” said Dr Ali Al Gheithy, Petroleum Engineering Director at Petroleum Development Oman, while speaking at the opening of the SWPLAOman second Chapter Conference.

and information which would go a long way in increasing reserves. “The good news is that by most forecasts the demand for oil would continue to grow, merely considering population growth,” Dr Al Gheithy stated. According to him a similar picture arises for gas; although gas offers a different challenge because a lot of gas is in places where the demand is not high.

“A lot of demand is in Europe and America and there are gas reserves in the Middle East and Euro Asia. Demand for gas will continue to grow. Goos Bakker, Petroleum Development Oman Tight gas is an area where but merely because they have moved there are challenges, as some to other industries. Events like these of the tight gas is in places where there encourage people to stay in the profession is a high demand. The large amounts of as it encourages a sense of belonging,” he these opportunities are becoming more observed. and more difficult to exploit. Technology According to him events like the SPWLA will become crucial and to open up these conference could help exchange ideas Dr Ali pointed out that the average age opportunities Petrophysicists of oil field professionals was increasing, will play an important role. with a peak in the 50-55 year age range. Without Petrophysicists we Given the impending retirement of would not even know that many existing workers training and these reserves exist. So the retaining young professionals – including message is there are huge Petrophysicists – would be a key and difficult reserves and requirement to providing the necessary you the audience will play a expanded workforce. He predicted a good key role in unlocking these future for new entrants into Petrophysics reserves,” he noted. in the Middle East as the work required continued to increase. Dr Al Gheithy pointed out that it was also important Goos Bakker from Petroleum to retain people. According Development Oman highlighted the to him the industry had role of Petrophysicists. “The mission of lost a lot of people and Petrophysics is to identify hydrocarbon this had more to do with resources in the sub surface and to people seeking jobs in other provide an evaluation of the nature of industries. formation of liquids,” he stated. “People have left not Dr. Sultan Al Mahrooqi, Local Chapter President, SPWLA According to him Petrophysics was because they have retired, Nov-Dec, 2010

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EVENT REPORT

SPWLA Oman Chapter Board Committee Members (from left): Ibrahim Al-Quseimi, Salim Al-Hashmi, Zeid Al-Kathiry, Labib Mohsin, Sultan Al-Mahrooqi, Masad Al-Hatmi and Nabil Al-Bulushi

very strong but over the years there had been a gradual shift in focus. “Today, much more integration is required as developments have become more complex. Also, we have to see data in a much broader context and fluids are getting in a ‘latter life stage,’” he stated. Speaking at the conference Mohammed Saleh Efnik of Mubadala Oil & Gas stated that the role of Petrophysicists had got much broader than before. “Today our role is much wider than before. We have to integrate all available data and also ensure that we integrate with different teams. Integration is now important with Geologists, Geomechanists, Drilling Production Technologists, Reservoir Engineers etc,” he said. Salim Al-Salmi from Occidental Oman presented a paper on the characterisation of oil located “below the oil-water contact”. He illustrated how detailed 16

Nov-Dec 2010

Petrophysical and Integration studies had shown that a good understanding of lithology variations could provide an understanding of the hydrocarbon distribution. This had allowed field reserves to be increased and provided several new drilling locations. Dr Mustafa Orabi from Halliburton presented an explanation of a method to evaluate the salinity of formation water. This is particularly important to understanding saturation if injected water mixed with more saline water formations. Earlier speaking on the occasion Dr Sultan Al Mahrooqi, Local Chapter President of SPWLA stated that the success & popularity of the chapter first conference combined with the increasing importance of data acquisition & evaluation has lead to a significant increase in the number of participants & sponsors this year (125 participants and nine sponsors).

He then announced at the closing, that the committee had awarded Joachim Bildstein from PDO with best technical presentation for his paper on “Small Gas Field Development in Northern Oman – Petrophysical Data Integration.” In addition Hassan Al Lawati also from PDO was awarded a prize for the Best Poster titled, “Production Logging for Fracture Detection.”

ABOUT SPWLA The Society of Petrophysicists and Well Log Analysts (SPWLA) is a nonprofit corporation dedicated to the advancement of the science of Petrophysics and formation evaluation. The Oman Chapter of SPWLA was set-up 2008, with a mission to facilitate the exchange of knowledge and experience between members of the local oil & gas industry. This was the second Chapter Conference.


EVENT REPORT

CHANGING THE ENERGY LANDSCAPE

ADIPEC 2010 saw a rousing response with deals in excess of over $4 billion being confirmed at the event. OGR reports

A

DIPEC 2010 (Abu Dhabi International Petroleum Exhibition and Conference), the largest oil and gas event outside of North America, held under the patronage of His Highness Sheikh Khalifa Bin Zayed Al Nahyan, President of the UAE, brought together energy ministers, Vice Presidents, CEOs and exhibitors from around the region and the global energy sector. Over $4 billion worth of deals have been confirmed as a 18

Nov-Dec 2010

result of this year’s ADIPEC. The event also saw $18 billion worth of long-term projects reconfirmed during the Abu Dhabi exhibition. ADIPEC 2010, which was held from November 1-4, saw 1,500 exhibiting companies showcasing the latest technologies in addition to its strongestever conference programme - developed by the Society of Petroleum Engineers featuring 262 top industry speakers from 33 countries, as well as associated show

features such as the ADIPEC Tawteen Graduate Fair.

MAJOR DEALS National oil company, ADNOC, announced that it signed a deal worth $3 billion with the Japanese Bk Consortium to fund its expansion as it aims to double production output by 2018. Leading UAE based cable manufacturer, Ducab, announced it has signed a $29.9 million contract with China Petroleum


Clockwise from top left: Exhibits of Halliburton, Honeywell, BP and Oman Cement Company

Engineering & Construction to provide cables for a strategic pipeline that will be the first to deliver UAE crude directly to the Arabian Sea Coast, bypassing the Strait of Hormuz. The UK’s Derrick Services Ltd (DSL) celebrated its expansion in the MENA region with the opening of its Algerian base and the awarding of a $3 million contract from CTF of Tunisia for the engineering and project planning for the decommissioning of CTF Rig 05 from Platform 2. BP’s Abu Dhabi General Manager Jay Pearson, said, “We are delighted to have been part of a very successful ADIPEC 2010. Hundreds of visitors to our stand

expressed strong interest in BP’s 70-year history and experience in Abu Dhabi. These were highlighted in video displays and interactive exhibits, which included a giant keyhole-shaped media table and touch-sensitive wall, all specially created for the show. Keynote speakers Charles Proctor, BP’s Regional President, and Jonathan Evans, General Manager, Oman, led BP’s contribution to the conference, where BP contributed some 10 papers on BP’s key oil and gas technologies. These included BP’s Field of the Future programme, advanced seismic imaging, enhanced oil recovery, reservoir fracturing and tight and unconventional gas development technologies. The latter are

being used in recently won contracts in Oman and Jordan. Exhibitors also worked closely together, including AlMansoori Specialized Engineering (MSE) and Camcon, who announced that they have entered into an agreement, which will see MSE supporting and installing Camcon’s product throughout a number of Middle Eastern markets, including in the UAE, Qatar, Saudi Arabia and Iran. The most significant of these services will focus on the new Digital Intelligent Artificial Lift (DIAL) solution, APOLLO, which provides operators with unprecedented control and precision over gas injection. The CEO Summit which was held in Nov-Dec, 2010

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EVENT REPORT

conjunction with the Energy Institute and in cooperation with Ernst and Young and the Arab Development Company saw a lively debate. At the top of the summit’s agenda was the Abu Dhabi 2030 energy vision that highlighted the opportunities and challenges of the region. Featuring a full-day’s programme of speaking and panel sessions, the ADIPEC CEO Summit stirred a lively debate, delving in to the issues ranging from future energy trends and challenges to unlocking unconventional resources. This year’s event took up the whole of the Abu Dhabi National Exhibition Centre (ADNEC) with over 31,000sqm of exhibiting space indoors plus an extensive outdoor area and featuring 14 country pavilions (France, Spain, Germany, Korea, Russia, Norway, Netherlands, UK, USA,

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Canada, China, Italy, India and Turkey with increased presence from USA, UK, Norway and China) as the who’s who of the energy industry. ADIPEC AWARDS: RECOGNISING INDUSTRY EXCELLENCE IN ENERGY The ADIPEC Awards: Excellence in Energy 2010 was held to honour and recognise innovation and contribution to industry as the first such awards held as a part of ADIPEC 2010. This year’s judging panel boasted a selection of key players from across the global oil and gas industry, including His Excellency Yousef M Al Nowais, Chairman of Arab Development Company; Ali Obaid AlYabhouni, the UAE Governor of OPEC and General Manager of ADNATCONGSCO; ADIPEC Conference Chairman

Abdul Munim Al Kindy, CEO of ADCO; Bassam Hage, Managing Partner Ernst & Young Abu Dhabi; and Justin Hearn, Senior Process Manager of gas treatment process technology at BASF. Organisers dmg’s Senior Vice President and newly appointed head of the energy events division Simon Mellor said, “The inaugural awards aim to honour companies and individuals which have excelled in chosen fields and are setting an example for others to follow. The awards are part of ADIPEC’s efforts to bring energy leadership to Abu Dhabi and to help the industry honour its bright lights. These awards are yet another feather in the cap for ADIPEC and have become quite an accolade for the energy industry, providing the perfect


EVENT REPORT

Clockwise from top left: Exhibits of STS, Saudi Aramco, Oxy and Jotun Paints forum to recognise and celebrate these achievements. We were overwhelmed with high-calibre entries across all categories from health and safety innovations to environmental initiatives. ADIPEC 2010 is providing to be a resounding success and we are certain the ADIPEC Awards: Excellence In Energy will be a regular highlight.”

Project or initiative of the year for its impressive HSE program and results and for its very comprehensive program with benefit to 40,000 workers.

Saudi Aramco won the award for Best Innovation / Technology and was recognised for its industry-first applications surrounding maximising product recovery ( GigaPOWERS™ Giga-cell Parallel Oil, Water and Gas Enhanced Reservoir Simulator).

The judges ranked highest Shell’s submission as an excellent all-round HSE programme with a proven track record. ADMA-OPCO was awarded for its CSR Initiative for its Bag The Bag – Plastic Reduction Programme – for its positive impact for UAE people and the environment, as well as its awareness of plastic usage and initiatives to reduce consumption described in a way for all employees to understand and engagew.

QP Shell won the Category for HSE

ADCO was recognised as the Project

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of the Year for its CO2 EOR Pilot Project which is laying the foundation stone for the implementation of both Carbon Capture and Storage Projects and Enhanced Oil Recovery Projects by successfully linking the CO2 sources to oil fields (unique to the UAE). Tawazun and Tawazun Precision Industries (TPI) won the Future Leadership Programme for its wellstructured and comprehensive training program supporting the development of UAE future leaders. Saudi Aramco won the Energy Company / Executive of the Year as an industry yardstick of excellence, presented by Mark Nolan, Vice President for ExxonMobil Production in the Middle East and Russia.


Under the patronage of His Royal Highness Prince Khalifa bin Salman Al Khalifa Prime Minister of the Kingdom of Bahrain

Society of Petroleum Engineer s

17th Middle East Oil & Gas Show and Conference

Conference: 20-23 March 2011 Exhibition: 21-23 March 2011 Bahrain International Exhibition and Convention Centre

www.MEOS2011.com Organisers

fawzi@aeminfo.com.bh Worldwide Co-ordinator

meos@oesallworld.com Conference Organisers

spedub@spe.org


COVER STORY

THE

BIG LEAP

It may not be a rags to riches story; but it sure is a story of grit, enterprise... and camardarie. From modest beginnings in 1982, Mohammed Barwani, Chairman of MB Group has spearheaded the Group to an international conglomerate of companies. He talks to Sunil Fernandes on the MB’s Group’s beginnings, challenges and plans for the future

I

n contemporary times, one might not find a first generation entrepreneur in Oman, who has created a conglomerate as big as Mohammed Barwani. With 6,500 employees and operations in as many as 19 countries, the MB Group is an Omani multinational group.

Talk of figures and the size of the enterprises that he has created and Mohammed Barwani is quick to emphasise that it is not about the numbers. “I do not think that the figures you mentioned are important. All along I have been assisted by some very competent and capable people, which has enabled our Group to reach this stage. In fact, it has been a camaraderie with my fellow employees, family, friends and well-wishers. I believe that the company is not owned by one person and one person cannot take it this far,” he says. 24

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Nov-Dec, 2010

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COVER STORY

In the nature of the business that we are in, it takes decades to establish real credibility always admired business people and aspired to be a business person. It was the creative side of the business that I had a calling for. I decided to fulfil my aspirations and what emerged is there to see,” says Barwani.

Sharifa Al Harthy, Vice Chairperson

Though one would tend to agree with Barwani, the fact remains that it has been his vision, that has taken the MB group this far. Today, the MB Group is a clear success story with a wide array of business activities that span comprehensive oilfield services, exploration and production of oil, mining, engineering services, shipbuilding, bio technology and more.

Business always brings about its set of challenges and Barwani recounts his own. “There have been numerous challenges and they tend to grow, as the business grows. But my belief is to stay calm during adversities. Initially, the challenge was to gain credibility. In the nature of the business that we are in, it takes decades to establish real credibility, due to the fact that technical competencies are of utmost importance. Once you gain credibility, business follows,” he says. Ask the Chairman if he believed that building an empire as large as the present one has really surprised him and he candidly admits, “Perhaps, I would have not have envisaged such a

Most of the companies under the MB banner have met with resounding success. The flagship company of the Group, MB Petroleum Services is the largest oilfield services provider in the Middle East with operations in 17 countries, while Mawarid Mining was the first private sector mining company in the Sultanate. It’s been a classic case of “the midas touch” for United Engineering Services, which has seen a turnaround after the MB group tookover the company’s operations. At Petrogas E&P it has been a sterling performance of producing over 8 million barrels of oil over 11 years from a concession that, at the time, appeared to be close to the end of its useful life. It’s almost impossible to pen the success stories of each company, the number of which is quite large. TRACING THE HISTORY Leaving a job in Petroleum Development Oman (PDO) can always be a little intimidating, considering that PDO is amongst the best employers in the region. “I would agree that it can be intimidating to leave an employer like PDO. However, I have 26

Nov-Dec 2010

Usama Barwani, Director - Business Development


big and diversified Group of companies with operations in myriad areas. Initially, I started business to ensure that I am self employed and growth has happened with the passage of time,” he recounts. PLANS FOR THE FUTURE The MB Group would continue to lay emphasis on taking its operations global in the coming years. Already, the company has presence in several markets including Germany, Hungary, China, Malaysia, Indonesia, Brunei, Thailand, India, Australia, New Zealand, Syria, Libya, Saudi Arabia, Bahrain, UAE and Yemen. “The world has become very much local today. The opportunities are global and they are much more than they were when we started our business in 1982. Therefore, the plans are to continue our global ambitions and have Omani managers that could manage these operations. The day of operating in one country and using a standardised manner of operations is passé. I would like to build the MB Group into a global group,” he says. Of course going public is perhaps the best way to augment resources and could act as a stepping stone to further the group’s global ambitions. “Having an initial public offering and getting listed is always a better proposition as it adds to transparency and obviously enhances credibility. In the future we would go public. In fact, the idea of creating MB Holding Company was to ensure that individual companies could go public and the holding company could remain a part of the family business. Having said that we could consider any or all of the companies to go public including MB Petroleum Services, Petrogas or Mawarid Mining,” says Barwani. Talk of growth and the Chairman is bullish on all of its businesses and is not averse to adding to his present portfolio of businesses. “We would evaluate opportunities as they come. Having said that I must emphasise that an opportunity must make business sense. We would continue to expand and evaluate growth opportunities, both organically and through acquisitions,” he says. Barwani is particularly bullish on minerals. “Mining is a

The MB Group would continue to lay emphasis on taking its operations global in the coming years

Hafidh Busaidy, Executive Director - Petroleum Services & Mining

business that I believe has immense potential. Today, there are many companies that want to enter into this business. The world is running out of resources, as population grows. We are seriously looking at two or three mining opportunities,” he adds. While opportunities are large across the globe, North America and South America have been avoided for exapansion purposes because of language and cultural barriers. “In the past we have avoided Americas, including Latin America. But we have always targeted companies in Europe to New Zealand and Australia. We like Europe, Asia, Africa, New Zealand and FSU countries,” says Barwani. While the MB Group has businesses that are very diverse, the Chairman is not averse to looking at new business opportunities. “We could also consider a relatively new business activity. For example, in India we have a biotechnology company and in Europe we have shipbuilding. We have investments in insurance, banking and all of these have made business sense.” In Oman, the Group would look for opportunities and has plans to bid for oil blocks that PDO is relinquishing. Apart from this, internationally too, the Group plans to establish footprint in two countries and is bidding for part of the assets relinquished by a leading company in North Africa. Under MBPS the group would be looking for opportunities in Iraq and Libya. Nov-Dec, 2010

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BUOYANT ABOUT THE FUTURE 2009 was a year of economic mayhem and even the MB group felt the aftershocks. “The first half of 2009 was tough; and I must admit I was worried. In some of our businesses we compete with companies from abroad and in these companies it may not be a strict business consideration as the objectives maybe different. So, there is a scope that these companies quote rates that may not make business sense and this adversely affects our business. Even otherwise commodity prices, including oil were at ridiculously low rates, which had a telling effect on our business,” says Barwani. In fact, 2009 was the only year in the last several years that the MB Group had a decline in revenues. “Prior to 2009, we had been witnessing strong growth year on year, for the past several years. Call it a blip or a temporary aberration, but the first half of 2009 was certainly intimidating,” the Chairman recounts. The MB Group seems to have weathered the storm and its back to

There are great opportunities today, than we had before. Sectors like IT have immense potential

Mohammed al Kharusi, Director - HR & IT, MB Holding

“business as usual.” “Things are looking good and countries in Europe are coming around. I also believe that oil prices would go up. It has the potential to cross the $100 mark in the next one year. If China, India and the US do well, I do not see oil prices receding. I am a little worried of the weakening Dollar though,” says Barwani. A SOUND MESSAGE Having tasted resounding success as a first generation entrepreneur, the MB Chairman has a message for budding entrepreneurs. “There are great opportunities today, then we had before. Sectors like Information technology have immense potential and I would urge aspiring entrepreneurs to look at opportunities in this sector. Initially, it would be best if an entrepreneur refrains from getting into manufacturing, and looks at opportunities in service. At a later stage you could look at manufacturing.

Sushil Shrivastava - CFO, MB Holding 28

Nov-Dec 2010

Also, my belief is you can start a business in the early stage of your life. This gives you immense flexibility and for some reason if the business fails, you could return back to seeking employment. Also, for me, my wife Sharifa has been able to assist me from the very inception of the MB group. Her expertise was valuable and was extremely useful in various stages of the business. Therefore, what I urge the young wives of the present entrepreneurs and aspiring ones is to get involved in the business. Your experience could be very valuable and could take the business a long way.”


COVER STORY

DELIVERING OILFIELD SERVICES ACROSS FRONTIERS

MB Petroleum Services, the flagship company of the MB Group is one of the largest oilfield services companies in the Middle East. From modest operations in 1982, MB Petroleum has emerged as a global conglomerate with operations in the Middle East, Europe, North Africa, Asia Pacific, South East Asia and Australia. MB Group CEO Eamon Gorman talks to Sunil Fernandes on the inherent strengths of the company and its plans for the future

MB PETROLEUM SERVICES (MBPS) HAS AN IMPECCABLE TRACK RECORD IN PROVIDING OILFIELD SERVICES TO COMPANIES ENGAGED IN EXPLORATION AND PRODUCTION. WHAT DIFFERENTIATES THE COMPANY FROM PEERS IN THE REGION? We are one of the very few companies in 30

Nov-Dec 2010

the region to offer a complete range of drilling and production related services along with drilling fluids, chemicals and other complementary product lines. This broad portfolio opens-up many more tender opportunities than otherwise. It also enables the company to take advantage of reduced overhead where integrated services or bundled services are required.


MBPS Rig in Germany

Nov-Dec, 2010

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IN OMAN A LOT OF UNCONVENTIONAL CHALLENGES ARISE WHEN DEALING WITH OILFIELD SERVICES DUE TO COMPLEX GEOLOGICAL PROPERTIES? WHAT HAS ENABLED THE COMPANY MEET COMPLEX CHALLENGES, PARTICULARLY IN OMAN? The company has grown hugely since its inception in 1986, largely through contracts with our main client here in Oman, Petroleum Development Oman. As the challenge and complexity of operations in Oman have increased over the years, we too have evolved and adapted. This has equipped us with a valuable, highly developed workforce and leading edge technology which again provides competitive advantage. MB PETROLEUM IS NOW AMONGST THE LARGEST OILFIELD SERVICE PROVIDERS IN THE REGION. WHERE IS THE NEXT LEG OF GROWTH GOING TO COME FROM? Our acquisitions in recent years have given MBPS a fresh platform for growth. In every region, MENA, Australasia

and Europe, we see considerable opportunities to expand in our present line of activities and to also introduce new product lines where gaps exist. There is substantial growth anticipated in the greater GCC area and Iraq in particular. We are now well advanced in establishing MBPS branch offices in every country in the region. Closer to home, we see continuing opportunities in Oman with influx of new operators and a greater thrust on Enhanced Oil Recovery technologies. MB PETROLEUM IS A MULTINATIONAL COMPANY WHICH HAS SUBSIDIARIES SPREAD ACROSS SEVERAL CONTINENTS. COULD YOU DESCRIBE THE NATURE OF ACTIVITIES IN SOME OF THESE COUNTRIES? Provision of drilling, workover and production services is our core business and our strategy is to provide the complete suite of services in all our subsidiaries. Quite distinctively, we also have a Geothermal centre of excellence in New Zealand where we have been providing steamfield design, drilling and power station maintenance services for

MBPS employees making up drill pipes on one of the drilling rigs in Oman 32

Nov-Dec 2010

over fifty years. Our fabrication facilities in Celle, Germany and Hungary also deserve special mention. ARE YOU LOOKING AT OPPORTUNITIES IN UNCONVENTIONAL OIL AND GAS RESOURCES LIKE SHALE OIL AND GAS, COAL BED METHANE, TAR SANDS ETC.? The development of unconventional resources is drilling intensive and carries an equally heavy workover and well servicing requirement. This plays to our strengths in MBPS. Whether it is EOR developments here in Oman, CBM developments in Australia or Geothermal in the Pacific Rim or Chile they are all attractive markets with huge potential for the future. We believe we have the strengths to meet requirements of most of these markets. WOULD YOU LIKE TO SHARE THE CAPITAL OUTLAY PLANS FOR THE COMPANY IN THE NEXT FEW YEARS? Capital investment planning is largely tied to growth and this in turn is hostage to the markets. All of us would wish we had a clear view of the future. Suffice to say that our strategy is to aggressively grow the company commensurate with our ability to sustain quality operational delivery and access to funds. I would like to see the company double in size within five years. THE LAST FEW YEARS HAVE NOT BEEN PARTICULARLY GOOD FOR THE OIL AND GAS SECTOR. HOW DID MB PETROLEUM WEATHER THE STORM? We managed to sustain our growth trend through 2008-2009 despite the recession, but at a much reduced pace. This was achieved through some judicious cost cutting but mostly as a result of the stable longer term contracts that make up the majority of our portfolio. The decision taken by key clients (such as PDO, BP, Oxy coupled with new players) to largely


QUICK FACTS z Largest oilfield services company in the Middle East z Drilled, serviced, tested and completed more than 3,000 Oil, Gas and Geothermal wells z Completed 25,000 work-over well entries z World-class fabrication facilities in Celle, Germany and Hungary z Geothermal centre of excellence in New Zealand, providing steamfield design, drilling and power station maintenance services

Eamon Gorman, CEO, MB Group

maintain their programs protected us from the activity drop that negatively impacted so many others. A LOT HAS BEEN WRITTEN ABOUT HEALTH, SAFETY AND ENVIRONMENT (HSE) PRACTICES ACROSS THE OIL AND GAS INDUSTRY IN THE LIGHT OF THE GULF OF MEXICO OIL DEBACLE. WOULD YOU LIKE TO ELABORATE A LITTLE ON YOUR OWN INITIATIVES IN HSE HERE AT MB PETROLEUM SERVICES? HSE is a very wide subject, but, in essence it comes down to people. At MBPS, HSE practices range from good but in need of improvement, to excellent. Our objective is to aim high to eliminate incidents completely. I have concentrated in my first few months as CEO MBPS Group in ensuring we have the right

talent in the right place and that our staff are fully trained and competent. This is an essential pre-requisite before moving on to review and upgrade our internal HSE management systems. COULD YOU ELABORATE A LITTLE ON THE INFRASTRUCTURE AT MB PETROLEUM SERVICES? As a global company, we operate a fleet of 25 drilling rigs, 44 workover rigs, 74 production services units equipped with the latest technologies and supported by extensive workshop, transportation and maintenance facilities. A good example of the caliber of our infrastructure is our manufacturing facility in Celle, Germany. This has leading edge equipment and staff providing high end engineering design and fabrication services to premium clients such as Cameron and Baker Hughes.

z Drilling and integrated well services in Australia, Austria, China, Germany, Hungary, India, Indonesia, Libya, Malaysia, New Zealand, Qatar, Saudi Arabia, Syria, United Arab Emirates and Yemen besides Oman z Employs more than 5000 people, predominantly locals z Clients include Saudi Aramco, Petroleum Development Oman, Qatar Petroleum, Shell, SASOL (Mozambique), ONGC(India), Occidental, Total, Wintershall, Gas du France, AI-Furat Petroleum (Syria), Chevron, Phillips Petroleum, Contact Energy de France and Exxon. z Impeccable track record in Health, Safety and Environment

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MAKING A MARK

Petrogas E&P has an exemplary track record in exploration and production of undeveloped fields. The company now has ambitious plans to add to assets in the E&P business riding high on experience and expertise. Jean Denis Bouvier, CEO of Petrogas E&P talks to Sunil Fernandes concession, we succeeded in boosting production from 4,000 to over 30,000 bopd by implementing a water flood and artificial lift technologies over a period of eight years. Furthermore, through two service agreements, we managed to increase production from 2,000 bopd and 3,000 bopd to over 10,000 bopd and 7,000 bopd respectively in less than 2 years. Commensurate with these results, Petrogas’ remaining reserves have increased year-on-year securing the basis for many more years of activity in the future. However, my reply would not be complete if I did not mention that Petrogas sees its employees as the largest enablers of our success. It is a source of pride and a key success factor to have achieved a work environment basically devoid of politics, ensuring that our employees are sincerely contributing to both the success of the company and, by inference, to their own success as professionals and individuals.

Jean Denis Bouvier, CEO, Petrogas E&P

PETROGAS E&P HAS A SPLENDID TRACK RECORD IN BLOCK 7, ESPECIALLY IN EXTENDING THE LIFE OF PRODUCING FIELDS AS WELL AS BOOSTING PRODUCTION. HOW IS THAT ACHIEVED? Petrogas’ business model puts sound 34

Nov-Dec 2010

subsurface, engineering and production operations underpinned by appropriate long term economics at the top of its value system. This has allowed us to produce over eight million barrels of oil over 11 years from a concession that, at the time, appeared to be close to the end of its useful life. In another

HOW DO YOU SEE PETROGAS GROWING IN FUTURE? With our track record as very effective developer, operator and value creator of producing undeveloped fields while maintaining excellent relationship with partners, Governments and other stakeholders, Petrogas has developed a powerful “value” proposal to Governments, National Oil Companies and International Oil Companies. I therefore expect that we should be in a


Briefing at Petrogas prior to operations in Sahmah

position to add new assets to our portfolio in the near term. ARE YOU TARGETING SPECIFIC PARTS OF THE WORLD TO ACQUIRE NEW ASSETS? We will consider producing/marginal oil and gas fields and “low” risk Exploration where Petrogas and MB Petroleum, our sister company, have a track record of successful operation and insight based on long term relationships, cultural affinity and mutual respect. Currently this encompasses the Middle East, North and West Africa, the Indian subcontinent and parts of the Far East. COULD YOU ELABORATE ON PETROGAS’ INTERNATIONAL OPERATIONS? We participate in several oil fields in Egypt producing some 6,000 bopd. In India, we are the operator of one offshore exploration concession where we are preparing for the drilling of three wells in shallow waters starting at the end of

this year. We also participate in two more exploration concessions. Altogether, Petrogas will participate in 11 exploration wells in 2011 and 2012 in India. WHAT IS THE FORESEEN CAPITAL OUTLAY FOR THE NEXT FEW YEARS? There is significant reserves and production upside in Petrogas’ current assets. We have prepared Work Programs and budgets for the next five years and more. And while the implementation of these plans will require yearly capital expenditure in excess of US$ 150-200 million, it will support material increase in reserves, production and (commercial) value in future. Through organic growth and new ventures, Petrogas is well positioned to double its size in the near term. THIS IS TRUE TO PETROGAS MOTTO: “GROW WITH US” ? Yes it is definitely true from a business viewpoint. In terms of human resources,

we have the right balance between commitment to progressing Omanisation and embedding international standards through expatriates managers and professionals. But my most satisfying achievement as CEO of Petrogas is that all employees of Petrogas have grown with the company as professionals and individuals. Thanks to the company’s continuous growth, they have been given the opportunity to take on more and more responsibilities which has forced them to constantly acquire new skills and competence while gaining in experience. In this process most of our employees have seen their salary increasing over time. This has given them and their families the opportunity to adopt higher standards of living, but, most importantly, they can now afford good education for their children who, in turn, will contribute to raising the standards of Oman’s human resource capability. Receiving their thanks for my modest contribution towards this development in itself warrants the burden of my charge. Nov-Dec, 2010

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COVER STORY

IN THE QUEST FOR MINERAL RESOURCES Mining maybe an unrelated diversification for the MB Group, but Mawarid Mining (Mawarid), a wholly-owned subsidiary of MB Holding Company has made rapid strides in the last few years and plans to emerge as the largest privately owned mining company in the Middle East. OGR reports

M

awarid Mining (formerly National Mining Company) was the first privately owned mining company to engage in the exploration and development of copper and gold in the Sultanate of Oman. In 2000, Mawarid was granted a license by the Government of Oman for the exploration of Block 1 at Hatta and Shinas in the Batinah region. The project went ahead and commenced copper concentrate production in May 2007. Mining success saw ambitions growing and the company bid for more blocks. “Initially, we had license for Block 1, but now have licenses for Block 2 and Ghuzaiyn, spanning an area of 742 sq kilometers,” says Jan Jansen, Chief Executive Officer (CEO) of Mawarid Mining. To date, mining operations have produced a combined total of over 2.5 million metric tonnes of ore since inception. Copper ore is hauled using standard road trucks to Mawarid’s Lasail concentrator, located 20 kilometers west of Sohar. “The copper concentrate we produce is sold to Oman Mining Company, which is a Government entity and MR International of Switzerland,” says the CEO. INHERENT STRENGTHS Besides a professional management team, Mawarid has put together a structure that

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Nov-Dec 2010

identified four new areas of blind VMS mineralisation at Mandoos, Safwa, Khaznah and Aswad. Mandoos and Safwa progressed from discovery to feasibility in just 12 months. “We would continue our ambitious programmes in Oman and bid for more blocks. Also, we are planning to look at international mining operations and this would not be restricted to mining for copper only. We have sound technical competence and expertise to fulfill our ambitions,” adds the CEO.

Jan Jansen, Chief Executive Officer (CEO), Mawarid Mining

gives it natural advantages. “We have in-house technical expertise that includes mineral exploration, project evaluation, mine planning, mine engineering, mining and mineral processing. We also have owner-operated drilling capabilities owner-operated open pit mining fleet and owner operated copper concentrator,” says Jansen. GROWTH PLANS Mawarid Mining plans to continue to grow its business and also look at additional mining blocks, apart from looking at opportunities overseas. In 2009, Mawarid conducted an airborne geophysical survey programme and

To meet its growth plans in Oman, Mawarid will shortly develop its Safwa and Mandoos fields. Simultaneously, it will conduct an infill drill programme in Ghuzayn, Khaznah, and Aswad in 2010 – 2011. “Feasibility studies for these areas are in process. We will see our ore processing capacity going up from 125 tonnes per hour to 140 tonnes per hour. Simultaneously, we are ensuring cost optimisation and recovery enhancement,” says Jansen. Mining like other businesses is capital intensive and needs a high level of technical expertise. Challenges arise in meeting technical requirements relating to functional skills like mine production, processing, environmental management and setting up good support services departments.


Operations at Mawarid’s Hatta mine site

“Yes, we did have these set of challenges like bringing in technical competence, training of the local labour force, initial labour turnover etc. However, we have overcome most of these challenges and are now streamlined to meet our ambitious growth plans,” says Jansen.

Oman. The plastic liner prevents tailings material from penetrating into ground soil underneath the tailings facility, thus preventing potential contamination of underground water source. This is fully compliant with international best practice standards,” he says.

SOCIAL AND ENVIRONMENTAL RESPONSIBILITY Mawarid strongly believes that corporate social responsibility should be aligned and entrenched along with its business. Mining like other businesses brings in challenges, particularly related to the environment. “Disposal of waste is always an issue for mining companies and here is where we pride ourselves in creating international best practices in waste disposal. For example, we have created a first fully HDPE lined tailings disposable facility in

Mawarid is also doing its utmost when it comes to fulfilling its corporate social responsibilities. The company’s Community Management Development programme ensures that community member concerns surrounding its operations are addressed. “Over the years, as many as 34 social and sustainable community development projects have been successfully implemented in local communities associated with Mawarid’s mining activities in the Al Batinah region,”

says Jansen. Pertinently, all of these projects have aimed to improve the quality of life of the local communities by addressing the needs of each community and providing opportunities for growth and prosperity. The development of these projects are based on sound socio-economic data and social assessment of the local community. Mawarid also ensures that it provides employment opportunities to the local community apart from sponsorship of local events and seminars promoting Omani culture and history. Jansen best describes the company’s commitment to corporate social responsibility, when he says, “All stake holders shall benefit from the areas where we operate. We shall look after ourselves, the people around us and the world we live in.” Nov-Dec, 2010

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COVER STORY

A CENTRE FOR U ENGINEERING EXCELLENCE Since being acquired by the MB Group, United Engineering Services (UES) has witnessed rapid expansion, improved efficiencies and a more profitable performance. OGR reports

nited Engineering Services provides a wide array of services to the oil and gas industry and water industries in Oman and the Gulf region. The company has an API licensed machines shop and ASME fabrication shop that provides repairs to downhole tools, repairs to tubular, besides providing customised solutions to clients. UES also supports it clients through a very well established Agency Sales arm which represent some of the most renowned names in the Oil, Gas & Water industries. The UES Quality System is certified to ISO 9001:2000. UES also holds accreditations from ASME (U, U2 and S Stamps) and NBBI (R Stamp) for its fabrication wing. Its machine shop holds licenses from API, VAM & Tenaris for products manufactured under 5CT, 6A & 7, specifications. UES was part of a multinational group until 2007, when MB Holding Company acquired a 100 per cent stake in the company. “Today, we are a 100 per cent Omani company. Since the MB group took over we have witnessed a lot of changes. We have ensured that efficiencies have improved across all areas of UES operations and our portfolio of products has broadened. Besides, we have increased our workforce which has added to greater technical competencies,” says Neville Storey, Chief Executive Officer of the company. The change in management at the company has ensured that fresh ideas emerge. There has also been addition to equipment. “We do more manufacturing now than we ever did. Our CNC capability is the biggest in Oman and we have a solid customer base,” says Storey.

Neville Storey, Chief Executive Officer, UES 38

Nov-Dec 2010

The clients of UES include Petroleum Development Oman, Oxy, Halliburton, Schlumberger, Weatherford, MB Petroleum, Daleel Petroleum to name just a few. Besides, the company also does manufacturing for a host of other


clients. “We do manufacturing for the very blue chip companies like Halliburton, Smith International, Baker, M-I Swaco etc. We manufacture components under manufacturing agreements, after receiving drawing and specific instructions. As far as the domestic industry is concerned the contracts with many oil and gas companies now has a percentage of local manufacturing. We remain amongst the preferred local partners in the manufacturing services that we provide,” says Storey. EXPORTS UES also manufactures for exports, which is rather unusual for the nature of activities the company is in. The company has manufacturing agreements with M-I Swaco, and thus exports to countries like Cameroon, Australia, UAE, etc.

Manufacturing at one of UES’ workshops

UES was a part of a multinational group until 2007, when MB Holding Company acquired a 100 per cent stake

“Our exports include produced water treatment equipment for M-I Swaco. We are manufacturing partners for M-I Swaco and adhere to the design and specifications provided by them. The water treatment equipment assist in removing oil from produced water, after the drilling phase is complete,” says Storey. EXPANSION PLANS UES has facilities at Ghala, Rusayl and Nizwa. It also acquired an additional plot measuring a sizeable area of almost 200,000 sq metres at Rusayl. The area at Nizwa is also large spanning almost 76,000 sq metres. “We are continually expanding at Nizwa and development at Rusayl is underway. We have outgrown the Ghala facility, so expansion would have to happen

at the Rusayl facility. The area of 200,000 sq metres is really huge, but we have taken into account any future expansions that might happen. We are looking to be the Centre of Excellence in Engineering for the whole MB Group and hence we need facilities that span a large area. The area at Nizwa is also sizeable, but our expansion during 2010 has utilised all the available land and we are negotiating with the industrial estate for additional plots,” says Storey. As a goal to “Meeting The Industry Challenges”, UES continues to review new technology available and services required to optimise on the demanding business environment of the industry, whilst maintaining existing market share and target growth objectives.

SNAPSHOT

. .

. . .

Leading engineering and oilfield services company that caters to the oil and gas and water industry in Oman and the Middle East Elite list of clients that including Petroleum Development Oman, Oxy, Halliburton, Schlumberger, Weatherford, MB Petroleum, Daleel Petroleum etc. Exports to Cameroon, Australia, UAE etc. Manufacturing partner for M-I Swaco Workshop facilities at Ghala, with additions now in Rusayl (200,000 sq metres), and Nizwa (76,000 sq metres)

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MARKET ROUND-UP

OPTIMISTIC OUTLOOK CONTINUES

Oil prices continued their rise with OPEC’s Reference Basket surging to the highest levels since April 2010

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T

he OPEC Reference Basket increased a further 48¢ in September to average $74.63/b, the highest since April. The futures market saw mixed patterns. Nymex WTI front month averaged $75.55/b, down $1.12 from August, while ICE Brent rose for the second month in a row, gaining $1.30 to $78.42/b. In early October, improvement in macroeconomic data and the weaker dollar supported the market, pushing the OPEC Basket above $81/b for the first time since early May. WTI recovered to move beyond $83/b and ICE Brent reached more than $85/b. On October 11, the Basket stood at $80.44/b.

report, driven by the stronger-thanexpected, stimulus-led economic growth in the first half of the year. Despite some turbulence and setbacks, the global economic recovery continues to provide support for oil consumption. While oil demand in the third quarter has been supported by warm summer weather along with the driving season, however, it is not expected to be as strong as in the previous two quarters. The recovery in industrial activities has positively affected industrial fuel demand across the globe. In 2011, global oil demand is forecast to grow by 1.0 mb/d, unchanged from the last month, with demand growth anticipated to be stronger in the second half of the year.

The world economy continues to expand at below-average levels. The global growth forecasts remain unchanged at 3.9 per cent for 2010 and 3.6 per cent for 2011. The US forecast stands at 2.6 per cent in 2010 and 2.3 per cent in 2011, in line with the previous report. Japan’s forecast was revised up 0.3 points to 2.8 per cent in 2010, but remained unchanged at 1.3 per cent in 2011. The Euro-zone is forecast to grow at 1.2 per cent in 2010 and 1.0 per cent in 2011, unchanged from the previous month. China and India are expected to continue their growth. So far, China has been successful in cooling down its economy with growth expectations at 9.5 per cent in 2010 and 8.6 per cent in 2011. India is forecast to grow by 8.2 per cent in 2010 and 7.7 per cent in 2011.

Non-OPEC oil supply is forecast to increase by 1.0 mb/d in 2010, following an upward revision of 0.1 mb/d from the previous month, mainly due to higher-thanexpected supply from Canada, Mexico and China. In 2011, non-OPEC oil supply is expected to grow 360 tb/d, supported by anticipated growth in Brazil, Canada, Azerbaijan, and Kazakhstan. OPEC NGLs and nonconventional oils are forecast to increase by 0.5 mb/d in 2011, following growth of 0.4 mb/d this year. In September, total OPEC crude oil production averaged 29.08 mb/d according to secondary sources, representing a slight decline of 30 tb/d over the previous month.

World oil demand growth in 2010 now stands at 1.1 mb/d, following an upward revision of 0.1 mb/d from the previous

Strong distillate demand across the globe ahead of the winter season has provided some support for product markets, although this has been partially offset by weak gasoline demand and oversupply in the Asian fuel oil market. High stocks for

The recovery in industrial activities has positively affected industrial fuel demand across the globe

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3.7 mb, while crude stocks dropped slightly by 0.8 mb. The most recent monthly data for August shows that commercial oil stocks in Japan fell by 6.7 mb to stand around 11 mb below the seasonal norm. Preliminary indications show Japanese total commercial oil stocks declined a further 1 mb at the end of September. Demand for OPEC crude in 2010 is estimated at 28.6 mb/d, around 0.1 mb/d lower than in the previous report. This represents a decline of 0.3 mb/d from the demand for OPEC crude in 2009. In 2011, the demand for OPEC crude is expected to average 28.8 mb/d, unchanged from the previous assessment and an increase of around 0.2 mb/d over the previous year. CRUDE OIL PRICE MOVEMENTS The OPEC Reference Basket strengthened in September to move within a $72-$78/b range, supported by improving global macroeconomic sentiment. The Basket generally followed an upward trend in September, moving from $72.49/b on the first day to $77.48/b on the last day, the highest level since the first week of August. Consequently, the upward trend lifted the Basket’s monthly average by 48¢ to hit a five-month high of $74.63/b in September. So far this year, the OPEC Reference Basket has averaged $75.25/b during the first three quarters compared with $56.60/b for the same period a year ago.

light distillates amid refinery maintenance, combined with the oversupply in fuel oil, will keep product market sentiment bearish and continue to weigh on refinery margins over the coming months. The tanker market has experienced declining rates on all routes in September. High tonnage availability combined with seasonally lower oil demand has resulted in reduced freight rates. In the crude freight market, VLCC spot rates declined 8.7 per cent, Suezmax rates decreased 18.8 per 42

Nov-Dec 2010

cent and Aframax freight rates fell by 13.7 per cent m-o-m. Product spot freights also saw a negative performance in September. East of Suez spot rates slumped by 9.4 per cent, while West of Suez routes declined 12.1 per cent. US commercial stocks reversed the upward trend seen over the last five months to decline by 4.4 mb in September. However, the surplus with the five-year average remained very high at 118 mb. The bulk of this draw came from products which fell by

All Basket components increased further in September with the exception of Merey, which retreated 28¢. The gains were led by the Ecuadorean crude Oriente, followed by the African crudes, Murban and Qatar Marine. African grades were supported by bullish sentiment in Europe on the back of tight supply due to oil field maintenance in the North Sea. In addition, concerns over tighter Iraqi supplies amid Kirkuk-Ceyhan pipeline problems have also contributed to the strengthening of African grades.


Moreover, continued healthy appetite from Asian buyers for West African crudes, particularly China and India, and weak freight rates added more support to African crudes. Es Sider showed the largest gain of 88¢ or 1.2 per cent over the previous month to average $77.15/b, followed by Bonny Light which gained 83¢. The Algerian crude Saharan Blend rose 73¢ but stood at the top of all Basket components with a monthly average of $78.95/b. Angolan crude Girassol showed the lowest gain of 70¢, pressured by relatively higher supply. Middle East crude market sentiment remained strong in September, supported in the first week by the increase in Saudi Arabia official selling price formula for its crude to Asia for October, followed by a tightness in Iraqi crude supplies to Asian term buyers and Abu Dhabi Murban crude for November loading sold at a premium. Middle Eastern crudes were supported by growing demand from Asian buyers, particularly for medium heavy grades for utilities. In addition, a strong distillate crack also contributed to the bullish sentiment of the Middle East crude oil market. Murban and Qatar Marine rose by around 80¢ and Kuwait Export by 50¢ while Arab Light, Basrah Light and Iran Heavy gained less than 40¢ each. Driven by bullish sentiment in the oil market, the OPEC Reference Basket increased further in early October to move above $80/b for the first time since May. WORLD ECONOMY The US economy continues its steady expansion and, despite the recovery losing steam, the expansionary trend continues –– at 1.7 per cent in 2Q10 as just released

in the third and final reading of the GDP numbers by the Bureau of Economic Analysis (BEA). Still, the economy remains at a critical stage at a time when growth is slowing down due to the fading fiscal amidst a still very challenging level of unemployment. More stimuli are in the pipeline, having been proposed by the administration recently, but would need confirmation by Congress. Those measures include a tax credit for research and development in the range of around $100 billion over 10 years, an additional $50 bn on infrastructure spending and tax breaks on capital investments of $200 bn until the end of 2011. While the 1.7 per cent growth, released as the final 2Q10 growth number, was slightly better than the 1.6 per cent published at the second release, it should be considered a low number, below the five-year average of 2.3 per cent annual growth and the 20-year

Demand for OPEC crude in 2010 is estimated at 28.6 mb/d, around 0.1 mb/d lower than in the previous report

average of 2.8 per cent annual growth. The final number was also far below the 2.4 per cent of the first release. The current growth momentum is certainly at the lower end, but the most recent detailed economic indicators at least support these levels as they have not declined on average. Thus, this trend should be expected to continue in 2H10. The economic structure of the US depends very much on private household consumption, which contributes around 70 per cent to US GDP. To classify the recovery as sustainable, one would have to see consumption pick up over an extended period of time. Over the recent four quarters, consumption has been inflated by short-term stimulus measures such as the “cash-for-clunkers” scheme, support for the housing sector and others. So far – and to a certain extent still inflated by those fiscal and monetary stimulus measures – consumption is holding up well. It contributed 1.54 percentage points of the 1.7 per cent growth in the 2Q10, a contribution level of 90 per cent, up from the second GDP estimate of 86 per cent. To put it into context again, this comes after a contribution level of only 36 per cent in 1Q10 and only 14 per cent in 4Q09. Courtesy: OPEC Report Nov-Dec, 2010

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TECHNOLOGY

OIL

FIELDS OF THE

FUTURE Started as a vision nearly a decade ago, Digital Oilfields (DOFs) are now a reality of measurable value. Saji P. Moolan reports from Toronto on their remarkable success

I

n the last couple of years, Digital Oilfields (DOFs) have evolved as a highly calibrated technology that has seen enormous growth in the energy industry. This is largely due to the industry’s efforts to cope with volatile oil and gas prices, and also to leverage a shrinking, high-turnover workforce. Increasing energy demand and rising E&P (exploration and production) costs

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are also pressuring energy producers to look for technologies and solutions that can improve overall efficiency of their production process. As of now, many oil and gas majors have either adapted to a digital era or are considering going digital. “The concept has almost gone mainstream all over the world. The early adaptation phase is over and today we can see a tremendously

higher degree of automation in these digital oilfield scenarios in many fields around the globe,” said Albrecht Ferling, Microsoft’s Dubai-based Managing Director for Global Oil & Gas Industry, while talking to a Russian magazine, ‘Oil&Gas Eurasia’. Microsoft is at the forefront of this digital revolution with high stakes in Russia’s oil and gas industry, and also in the Middle East. In simple terms, Digital Oilfields or Intelligent Oilfields are


about focusing information technology on the objectives of energy companies. These objectives are accomplished by integrating three main components of the industry - people, processes, and technology. Integrated solutions provide the ability to instrument and link all down-hole and up-hole operations based in multiple locations with regional offices and corporate headquarters.

Collection of data, such as temperature, pressure, and fluid data, using more and more sensors are then analysed to get better understanding of the subsurface and the movement of oil. Upstream and downstream operations in any location - be it a location in a remote desert or an offshore location – can thus be controlled from any location. This helps industry personnel to share data with

another E&P location and give instructions to a third location through real-time communication. The process of integrating oilfields operations and monitoring capabilities thus lead to optimised performance and optimised use of resources. Another high priority area of DOF is enhancing safety and ensuring health and environmental (HSE) compliance. The HSE concerns became reinforced after several oil spills, rig explosions and other E&P related

Nov-Dec, 2010

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TECHNOLOGY

disasters. It focuses on reducing mishaps by enhancing responsiveness through digitisation and integration of safety procedures. Then, it helps to minimise environmental footprint, which includes reducing waste and spills, increasing recycling and conserving resources. Data management and process automation are especially valuable at a time when energy industry is experiencing growing shortage of expertise. Nearly 50 per cent of workforce is slated to retire within a couple of years as the demand for and production of oil and gas are growing at a faster rate. Digitisation will allow experienced workforce to technically assist less experienced personnel from anywhere in the world. In April 2010, International Digital Oil Field Conference (IDOC) held its first international conference in Abu Dhabi. It drew massive support from national oil companies (NOCs) and international oil companies (IOCs), and of course, technology providers to sell their concepts and to share what integrated solutions could bring in for E&P companies worldwide.

further gives rosy figures that oil production will be accelerated by up to 6 per cent and downtime be reduced by as much as four per cent. Digitisation will also improve operational efficiency by as much as 25 per cent. While, cost of drilling be reduced by as much as 15 per cent.

While championing the digital idea, the IDOC reiterates the importance of customising the technology and its integration into each company’s business environs: “DOF principles allow operators to access greater volumes of data in real time for ongoing analysis to optimise asset values and performance. However, to ensure that these technologies have a positive effect on human capital efficiency depends on how they are introduced and embedded into the company’s business operations.”

It is true, in the pre-automation days the industry was more dependent on manual operational data collection and invoicing, which were less accessible and prone to process delays, errors and inaccuracies. But, automation increased data capture several folds and can be effectively processed, digitised and stored in immense volumes. These data can be accessed from anywhere, anytime. All facilities can be wired and remotecontrolled. Thus, the operational intricacies would be tremendously reduced.

According to IDOC, digitising oil fields would eventually result in increase in oil production by 125 billion barrels while improvement in hydrocarbon recovery by up to 7 per cent (but it does not give any time frame). It

Oil and gas industry is a strategic industry. Compared to other industries, it has been growing at a relatively higher rate. And, digitisation of oil production has certainly reduced their production and distribution costs.

According to IDOC, digitising oil fields would eventually result in increase in oil production by 125 billion barrels

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Despite their successful implementation and operation, companies believe that there are still areas where they lack or their methods are less effective particularly in new and remote areas. They continue to seek cost effective ways. Moreover, the industry is still struggling with adopting standards - should they adopt individual or collective standards? “E&P firms continue to face the challenge of how to attain “The Prize” of the digital oil field— improved reservoir recovery, lower costs, and increased production rates—in the face of volatile oil prices, more technically challenging asset types, and a shrinking E&P workforce,” says Cambridge Energy Research Associates (CERA), a US-based consulting company, specialised in advising governments and energy companies and also one of the pioneers of DOF. Success, and thereby competitive advantage, depends upon achieving several key goals. According to CERA, industry should refocus the digital oil field from a tactical to a strategic level to broaden and accelerate adoption. There should be deployment and monitoring of early implementations to ensure that E&P firms recover their investments and show early success. CERA suggests achieving proper alignment among people, processes, organisations, and technologies are also important to make DOF viable. Resolving complex relationships among E&P firms, major resource holders, regulatory agencies, and oilfield service companies are significant measures to streamline existing issues.


Tender Watch Work

Company

More Information

Maintenance of company airports at Fahud and Qarn Alam

Petroleum Development Oman

www.pdo.co.om

Provision of mud logging and early kick detection

Petroleum Development Oman

www.pdo.co.om

Testing, calibration and repair of protection relays of surface installations of Mehsana asset

Oil & Natural Gas Corporation of India

www.ongc.co.in

UPDATED ON OCTOBER 20, 2010


ENVIRONMENT

MANAGING

WASTE

Managing waste is an important part of operations for an oil and gas company. Dr Piet van den Akker, with decades of experience in establishing waste management projects talks to Sunil Fernandes on the significance of waste management to the industry YOUR COMPANY CMTS VAN SOMMEREN INTERNATIONAL PLANS TO SET-UP WASTE MANAGEMENT AND DISPOSAL PROJECT IN OMAN. COULD YOU ELABORATE? We have made a presentation for a national hazardous waste management project to the tender board. We are awaiting approvals in this regard. Five companies have presented a bid on October 18. We are confident about the award of the contract because our proposal has a number of positives.

COULD YOU ELABORATE A LITTLE? Our company is the Omani Branch of the Dutch company CMTS-VSI, which has completed installations for the treatment of waste in China, Europe, Malaysia, Iran, etc. We will also be working with our German partner Remondis AG, which is a leading international water and environmental service company with over 500 branches and associated companies in 26 countries in Europe, Asia and Australia. Across the world, Remondis provides professional services to more than 20 million individuals and many thousands of companies. We have partnered with 48

Nov-Dec 2010

Durat Al Sahil for our proposed venture.

WHAT ARE THE FACILITIES YOU PLAN TO ESTABLISH? Subject to approvals we plan to set-up a central burning facility of 115,000 tonnes of hazardous waste. This would include solid waste of 36,000 tonnes, inorganic waste of 7,000 tonnes, toxic waste of 15,000 tonnes, organic waste of 10,000 tonnes and liquid waste and sludge of 47,000 tonnes. In our case we would be the first company to start waste management with the realisation of an incinerating plant and collection of waste later.

WHO WOULD ACTUALLY PAY FOR HAZARDOUS WASTE MANAGEMENT? Of course, those who generate the hazardous waste would have to pay for it.

WHAT ABOUT SCOPE OF WASTE MANAGEMENT FOR THE OIL AND GAS SECTOR? There is a big scope for waste management in the oil and gas sector, particularly in the production and refinement of oil, and the production of gas. Our goal is to assist the

Omani authorities in creating a country in which families live in a safe and sustainable environment free from risks generated by hazardous waste.

WHAT WOULD BE THE ADVANTAGES OF DISPOSING OFF WASTE USING A WASTE DISPOSAL PLANT, RATHER THAN DISPOSING IT OFF BELOW THE SURFACE? You may have read of the catastrophe in Hungary, which was actually an environmental


disaster. The reservoir break at an alumina plant dumped up to 700,000 cubic meters (184 million gallons) of sludge onto three villages. Later, the sludge resurfaced resulting in deaths. Therefore, if actual hazardous waste is not treated the repercussions are severely damaging on health and the environment. Yes, it is possible to keep hazardous waste in landfills, but this is not a sensible solution because the hazardous waste in the landfills remains hazardous. The above case in Hungary is a fine example of a catastrophe waiting to happen.

HOW IMPORTANT IS IT TO EDUCATE PEOPLE, INDUSTRY AND GOVERNMENTS AT LARGE? A change of mentality is required. I recommend a system of control and inspection that might be the need of the hour. Companies who have no choice but to continue creating hazardous industrial waste due to the nature of their business need to ensure that they properly dispose of that material. Environmental protection acts encourage and reward companies who do their part to more effectively

manage waste and work with environmental agencies to maximise efforts to minimise the impact on the environment. Industrial waste producers need to pay for the disposal of their materials and in particular, need to take caution in the way they dispose of hazardous materials.

WHAT ABOUT NORMS IN CERTAIN COUNTRIES OF EUROPE? In most European countries all the hazardous waste is collected, analysed, separated from other materials and burnt. Illegal dumping is a crime and is punishable. Nov-Dec, 2010

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ANALYSIS THE ACCIDENT AND BP’S RESPONSE Let me start with the accident itself, and our response. Everyone in BP remembers exactly where they were and what they were doing on April 20 when the Deepwater Horizon rig exploded. The event was shocking in many dimensions. The human tragedy. The environmental consequences. Our difficulties in stopping the leak on the sea-bed. The protracted media and political firestorm it generated in the months leading up to the elections, both in Washington and the states of the Gulf of Mexico. It quickly became clear that we would need to mount a massive response. From the outset, my predecessor Tony Hayward defined our aims with great clarity. We would do the right thing and stay the course. Ultimately, he said, we would be judged by our response - by what we do, not what we say. That meant stopping the leak, containing and cleaning up the damage, and compensating those affected. It also meant making every effort to understand what happened and learning lessons so that something like this could never happen again. So how are we doing? The first thing to say is that we have stopped the leak and made huge progress in cleaning up the spill.

LEARNING ITS LESSONS Bob Dudley, Group Chief Executive of BP spoke at the recent CBI annual conference in late October. He reflects on the Gulf of Mexico lessons, challenges and damage containment exercise 50

Nov-Dec 2010

After months of work involving more than 150 companies and multiple government agencies, we fitted a sealing cap on the well on July 15th. No oil has flowed into the ocean since that date, and on September 19 the US Government declared the Macondo well finally sealed. Second, our containment and clean-up efforts have gotten results. Our efforts significantly reduced the amount of oil reaching the shore and environmentally sensitive marsh areas. In fact, we believe this has been the largest and most extensive maritime response effort ever undertaken. At its peak it involved the mobilization of 48,000 people, deployment of some 15 million feet of boom (more than 3,000 miles) and co-ordination of nearly


to mitigate the economic impact and to fund long-term environmental research in the Gulf. Clearly, these commitments represent a substantial burden, but BP does have the financial strength to shoulder this. As you may know, in June we cancelled dividend payments for the rest of this year and we have also announced our intention to sell assets worth up to $30 billion over the next 18 months to help fund the cost. Finally, we committed to investigate the causes of the accident, to publish our findings, and to apply the lessons so as to avoid a recurrence. Our internal investigation of what happened was published last month by a team of experts led by Mark Bly, BP’s head of safety. It found that no single factor caused the tragedy, and that the well design itself, despite what you have heard, does not appear to have contributed to the accident. This has been further verified by recent retrieval of equipment. Rather, a sequence of interlinked failures involving a number of companies led to the explosion and fire. It was a combination of equipment and system failures. We have accepted the 26 recommendations Bly made to improve practices in deepwater drilling, and are implementing them in our operations around the world. My hope is that others in our industry are as well.

WINNING BACK TRUST The Capping Stack BOP is skidded onboard the Transocean Discoverer Inspiration to mate with the Vetco and EDS Control panel on top of the moon pool

7,000 vessels. That is more than during the Normandy invasion. A silver lining of the event is the significant and sustained advance in industry preparedness that will now exist going forward from the learnings and the equipment and techniques invented by necessity under pressure to contain the oil and stop the well. Third, we are meeting our commitments as a

responsible party of this accident. On June 16, we agreed with President Obama at the White House to set aside $20 billion in a compensation fund with an independent adjudicator. To date claims totalling more than $1 Âź billion have been paid out to affected individuals and businesses. That is on top of the substantial costs of the clean-up and the many hundreds of millions of dollars we have paid to help the affected states

This was a devastating industrial accident that should never have happened. We have mounted a substantial response and have stepped up to meet our obligations to all our stakeholders. We fully intend to continue doing so until the job is done. That is the basis, I believe, on which we will earn back trust in BP and begin to restore the company’s battered reputation. We have to earn back the trust of governments, of our customers, our employees, our shareholders, the people of the Gulf Coast and of society at large. It is a challenge, but I am quietly confident we can do it. Nov-Dec, 2010

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ANALYSIS

Why am I confident? As I see it, we have three strong foundations to build on for the future. First, we are committed to learning the lessons from these shattering events at all levels and in a way that goes far beyond the specifics of deepwater drilling. There are lessons for us relating to the way we operate, the way we organize our company and the way we manage risk. Many of our businesses have excellent safety records, and indeed BP has been working intensively to improve its safety systems and processes in recent years. But there is always more that can be done to

enhance protection and resilience. I have been spending time in recent weeks with experts from other hazardous industries including the nuclear and chemicals industries, and I am convinced we in the energy industry have a lot to learn from them and others. So this is my commitment to governments, regulators and society. Our Board and our management team are determined that BP will learn from and apply best practice from wherever it can be found, and that it will, over time, become one of the best companies in our industry at managing risk.

To that end we have announced a number of initial steps. We are creating a powerful new safety division with authority to oversee and intervene in the company’s operations around the world. It will have its own expert staff, independent from the project teams, and will be fully empowered to intervene in all aspects of BP’s technical activities. That new function will be headed by Mark Bly and report directly to me and that role will join the most senior executive team. We are also re-structuring our upstream segment from a single business into three functional divisions – Exploration, Development and Production. I believe this will foster the long-term development of specialist expertise and reinforce transparency and accountability for risk management. In addition we are reviewing how we manage third-party contractors and how we incentivize and reward performance. While that review is underway, we have suspended all performance contracts for all our employees, except for those measures related to safety, compliance and operational risk management. They will be the sole criteria for performance reward for the remainder of the year. These are fundamental and far-reaching changes designed to strengthen safety and risk management across the group. Together they will provide renewed and strengthened assurance that we have the right checks and balances in place to manage the risks in our business.

BP’S GLOBAL STRENGTHS Our second foundation for the future resides in the strength of BP’s existing global businesses. I have spent my entire career in the energy industry and I know that BP has a great portfolio of assets – one of the best in our industry – and that will still be the case even after we have completed our current divestment programme.

The drill bit that completed the relief well and made the intersection, onboard the Transocean DD III in the Gulf of Mexico 52

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We are financially healthy. Our operations around the world - from Alaska to Australia and Angola to Azerbaijan – are delivering as they should. Our underlying operational and financial performance is sound. We have unique technology and excellent


capabilities in our global workforce. And we have strong local relationships in the many countries where we operate around the world. This network of relationships has been a strength of BP for decades and it is definitely not broken despite our current problems in the United States. On the contrary: I have spent much of the last few weeks travelling the world and visiting our partners. The message I have come back with is strong support and a powerful desire for BP to succeed and prosper. And of course, that interest is shared by the British Government, which gave us such stalwart support during the recent crisis. Let me spend a moment talking about the US, because there has been much comment in recent months suggesting the US might turn its back on BP or BP could leave the US. I am confident that neither of these propositions is true. Contrary to what is sometimes said, BP is not widely seen over there as “British Petroleum”: we’re part of the American community. That certainly applies to our Gulf response, where we’ve been working intensely with a whole range of Federal and state government departments and agencies. I believe it would be fair to say that BP now has more points of contact across the US government than any other company. All of these people have of course been saddened by what happened. But they have not completely lost faith in BP. Our relationships have survived and are now beginning to recover. The scale of our response, much of it going beyond the demands of legal compliance, has not gone unnoticed. Make no mistake, we have a long way to go to earn back trust – but the journey is well under way. And for our part, I can promise you that I did not become chief executive of BP in order to walk away from the U.S. BP will not be quitting America.

A FUTURE IN THE DEEP WATER That brings me to the third foundation for

Capping Stack BOP onboard the Transocean Discoverer Inspiration close to the MC252 location

BP’s future: the world’s growing need for our products. By 2030, it is estimated that the world could be consuming as much as 40 per cent more energy than today, thanks largely to growth and urbanisation in the emerging markets. This will require investments of $25-30 trillion – more than $1 trillion per year for the next 20 years. So provided we can earn back trust, BP has a vital economic role to play for decades to come. We plan to continue to invest in growth and deliver excellent returns for our shareholders.

One of the most important sources of that growth will be finding and producing oil and gas in the deep waters of the world’s oceans. The deep waters are becoming an increasingly important source of energy to fuel the global economy. They account for around 7 per cent of total oil supplies now, growing to a projected 9 per cent in 2020. And we are one of only a handful of companies with the financialv and technological strengths to undertake development projects in these difficult geographies. And it can be done safely. Nov-Dec, 2010

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REGIONAL ROUND-UP

KCA Deutag commences operations in Iraq KCA Deutag, the international drilling and engineering contractor has commenced operations in Iraq, with the deployment of one rig in the north of the country and a second being mobilised shortly. KCA Deutag established its presence in the country with its first rig, now operating in Northern Iraq. The company’s second Iraqi rig, a newbuild 2,000HP land rig, T-601, is arriving in Basra, Southern Iraq, in the next few weeks and will be operational as of early 2011. Tim Summers, KCA Deutag chairman said, “Iraq is a key strategic market for KCA Deutag as the country looks to develop its huge reserves base. Even before the Iraqi government increased their estimate of the country’s proven oil reserves by 25 per cent to 143bn barrels, the Iraq Drilling Company was planning to drill more than 250 wells each year from 2011. Iraq represents an important opportunity both for KCA Deutag and Bentec given the anticipated level of industry activity and investment in the region. KCA Deutag has been operating in country with one rig in the North since September 2010. Our second rig, a 2,000hp land-rig destined for Southern Iraq, will be arriving in November 2010 with operations expected to start in early 2011.”

IEA says Iran may not sustain gasoline output rise The International Energy Agency has said that Iran may not be able to keep up its announced strategy of converting petrochemical plants to increase its production of gasoline. Last August, Iran exported for the first time gasoline with low 75 research octane number assuming that self-sufficiency had been fully achieved.

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Dana Gas announces a new discovery and the start of new production in Egypt Dana Gas, the Middle East’s first and largest regional private sector natural gas company has announced a new gas discovery in the Nile Delta, Egypt. The discovery well ‘South Abu El Naga-1ST’, located in the West El Manzala Concession, encountered 7.2 and 12.6 metres of net pay in the Abu Madi Upper and Lower formation respectively, and 4.8 metres in the Kafr El Sheikh formation. A multi rate test was carried out for a 12 metre interval in the Abu Madi lower reservoir, and yielded a production rate of 19.4 million standard cubic feet per day (MMscfpd) of gas and 1160 barrels per day (bpd) of condensate. This is the fourth 2010 gas discovery for Dana Gas in Egypt, following the three previously announced gas discoveries: El Pansieya-1, South Faraskur-1 and Ward Delta-1. The preliminary reserves estimate for the South Abu El Naga-1 ST is in the range of 50 to 90 billion standard cubic feet of gas, with 1 to two million barrels of associated condensate. The South Abu El Naga-1 ST discovery will be further appraised, and development options will be studied. In addition, Dana Gas has commenced new

production in August from the Sharabas & Faraskur fields via its El Wastani gas plant. This has brought the total Egypt production to 230 MMscfd, plus 7000 bpd of condensate and LPG. This is equivalent to 45,500 barrels of oil equivalent per day, a 20 per cent increase in the production rate at the start of 2010. Ahmed Al Arbeed, Dana Gas CEO said, “Our dedicated teams in Egypt continue to deliver excellent results. We are very pleased that this well has been successful. Dana Gas Egypt’s ability to develop its discoveries in a timely fashion is delivering gratifying increases in our production volumes for 2010.” Dr Hany Elsharkawi, Dana Gas Egypt President said, “The discovery at the South Abu El Naga1ST well adds significantly to the company’s hydrocarbon reserves.”

GigaPOWERS goes live to global audience The EXPEC Advanced Research Center (EXPEC ARC) held its first live webcast recently for a global audience of more than 100 industry professionals. The milestones and many new features of Saudi Aramco’s leading technology, GigaPOWERS were presented live. The webcast was moderated by the Editor of World Oil Magazine and featured a presentation and live narration by Computational Modeling Technology (CMT) Team members, followed by a question-and answer-session. Participants represented diverse international and national oil companies, service companies and academia, and submitted questions ranging from general interest to asking for advice on

handling their own reservoir simulation and modeling challenges. Within five days of the webcast, about 80 additional viewers had accessed the archived webcast. The numbers continue to increase. “Given the variety of new features our team has achieved for GigaPOWERS so far this year, the webcast was a very timely event for us to illustrate our accomplishments to similar professionals around the world,” said Ali Dogru, CMT Chief Technologist at EXPEC ARC and webcast lead speaker. “At the recent SPE annual conference in Florence, Italy, we received several compliments from those who had tuned in to the webcast.”


Qatargas and Repsol sign deal Qatargas and Repsol Energy Canada Ltd have signed a new sales and purchase agreement under which Qatargas will supply liquefied natural gas (LNG) to Repsol Energy Canada. The proposed annual LNG sale to Canada will involve Q-Max deliveries and will come from the Qatargas 3 Company. It will be delivered at the Canaport LNG facility in Saint John, New Brunswick (Canaport LNG). Initially, the supply will be for three years commencing with the first LNG delivery from Qatargas 3 project, Train 6. Commenting on the deal, Sheikh Khalid bin Khalifa Al-Thani, Chief Executive Officer of Qatargas said, “This agreement comes at a significant time for Qatargas as we prepare for

the grand celebration of the state of Qatar’s 77 mtpa of LNG production capacity, under the wise leadership of His Highness the Emir Sheikh Hamad bin Khalifa Al-Thani and guidance and direction of His Excellency Abdullah bin Hamad AlAttiyah, Deputy Premier and Minister of Energy and Industry. The deal further adds value as it will allow us to have access to the premium North East US market and Canada for the first time.” Benjamin Palomo, Executive Director of LNG for Repsol said, “The new LNG supply from Qatar strengthens Repsol’s position in the Canadian and Northeast US markets as a reliable, diversified, flexible supplier of natural gas.”

RasGas unveils industry-leading sustainability report RasGas Company Limited (RasGas) has issued a sustainability report, making it the first Qatari energy company to do so.

progress in formalising its commitment to sustainability as a goal that applies to every aspect of its operations.”

The RasGas Sustainability Report 2009 details the actions that RasGas has been undertaking to improve its environmental, economic and social performance, while providing energy to meet increasing global demand. RasGas’ first-ever sustainability report was launched at the second annual Corporate Social Responsibility (CSR) Conference in Doha, of which RasGas was a key sponsor.

“As one of the world’s leading global energy providers, we are working towards managing our performance in a way that balances our obligations to achieve profits and dividends for shareholders with our responsibilities to society and the environment, in line with the Qatar National Vision 2030.”

Speaking on behalf of RasGas, Acting Managing Director and Operations Group Manager, Hamad Mubarak Al Muhannadi said, “Over the last year, RasGas made great

The RasGas Sustainability Report 2009 details how RasGas has reduced greenhouse gas emissions, led the industry in worker safety and exceeded its Qatarisation targets. The Report includes performance indicators in areas such as protecting people and the environment, and ensuring health and safety.

TAQA strengthens North Sea footprint The Abu Dhabi National Energy Company’s (TAQA) wholly owned subsidiary, TAQA Bratani Limited (TAQA Bratani) has signed a Sale and Purchase Agreement (SPA) relating to Total’s entire equity stake of 81 per cent in production licences for two blocks in the Otter Field Development Area (Otter). Otter lies adjacent to TAQA Bratani’s existing North Sea interests, purchased in 2008, and is a sub-sea tieback to the TAQA Bratani operated Eider Platform. Average daily production year to date from the Otter Field is approximately 8,000 barrels of oil per day. HE Abdulla Saif Al-Nuaimi, Chief Executive Officer and Managing Director of TAQA, said, “This transaction again underscores our long-term commitment to the North Sea. Since entering the North Sea, TAQA has gained first hand operational expertise of operating mature fields in the area and we are confident of the opportunity to optimise the asset efficiently. We have a world-class team in place and, with the addition of this adjacent property, we have a clear opportunity to add to TAQA’s overall oil and gas production levels efficiently.”

Genel sells stake in Iraq oilfields to UI Energy Turkey’s Genel Energy International agreed to sell stakes in three oil fields in northern Iraq to UI Energy Corporation for $175 million. Genel sold a 5 per cent interest in the Dohuk and Tawke fields and 10 per cent of Miran, the Ankara-based company said. The transactions need to be approved separately by the Kurdish authorities in northern Iraq, the company said.

Nov-Dec, 2010

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REGIONAL ROUND-UP

Pipelines honoured for innovative GPS uses The Environmental Systems Research Institute recognised Saudi Aramco’s Pipelines organisation with its Special Achievement Award for the company’s innovative use of the Geographic Information System (GIS) in its Pipelines Integrity Management System (PIMS). “This project represents a milestone in Pipelines’ efforts to maintain the Saudi Aramco pipelines network’s integrity,” said Pipelines General Manager Muhammad Ali M. Trabulsi, explaining there is a shift from fixed inspection schedules to condition and risk-based assessments and mitigation. PIMS is a continuous and structured analytical process that consists of advanced risk algorithms and comprehensive integrated databases. It supports the experts as they enhance integrity-assessment plans and risk, ranking all pipeline segments for inspection and maintenance priorities. The project integrates all pipelinesrelated data to be accurately represented according to GPS coordinates. In the same approach, calculated risk values based on threats and consequences for pipeline segments are reflected.

Petrofac awarded Duty Holder Services contract Petrofac, the international oil & gas facilities service provider, has been awarded a contract by the Government of Sharjah, to take over operational responsibility and facilities management of the Sajaa Gas Plant and related assets, located approximately 30 kms from the commercial center of Sharjah, UAE.

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Nov-Dec 2010

RasGas celebrates 20 million hours of safe work RasGas Company Limited’s Operations Group (Onshore) recently achieved 20 million man hours without a single lost time incident (LTI) – a safety milestone considered unparalleled in the energy industry. Speaking on behalf of RasGas, Hamad Mubarak Al Muhannadi, RasGas’ Operations Group Manager and Acting Managing Director said, “Reaching such a milestone is a clear indication of the entire team’s commitment to achieving a safe work environment. Safety is a top priority at RasGas, where employees and contractors are expected to keep safety as a primary focus in all their activities. At RasGas we believe that that a job is not well done unless it is done safely.” This incredible feat was achieved by thousands of RasGas’ employees and contractors working together across many areas of specialty, including operations, maintenance, transportation, warehousing and administration. “What makes this achievement stand out

from the rest is that it takes into account the successful and safe completion of four planned liquefied natural gas (LNG), train shutdowns – each of which utilised a specific Shutdown Management System,” added Al Muhannadi. In terms of normal operations at RasGas’ LNG facilities – which consist of seven of the world’s largest LNG trains – there are approximately 650 personnel on site at any time, however, during the 2010 planned shutdown period this peaked to around 3150 personnel, including 2500 contractors hired and trained specifically to assist with the additional activities. At the ceremony held to recognise the 20 million man hour safety achievement, Al Muhannadi said, “On behalf of RasGas, I would like to express my appreciation to the entire RasGas Operations team and our contractors for their dedication leading to this remarkable accomplishment, and to extend our thanks to the RasGas Safety, Health and Environment Group for their continued support.”

OPEC a Half-Century Old The Organization of Petroleum Exporting Countries (OPEC) this year celebrates 50 years of helping member countries make the most of their nonrenewable oil resources. The anniversary celebration came to Saudi Arabia from Oct. 18-20 during the International Energy Symposium here.

the organisation.” In an interview, HE Ali I. Al-Naimi, Minister of Petroleum and Mineral Resources, spoke of the central role the Kingdom and, especially, former Minister of Petroleum and Mineral Resources the late Abdullah Al-Traiki played in establishing the organisation.

“Fifty years ago, when OPEC was set up in Baghdad, there were some who predicted that the organization would not last long,” said OPEC Secretary General HE Abdalla S. El-Badri of Libya in an address to symposium participants from OPEC countries and energy industry groups. “Fifty years on, however, that initial small group of developing oil producing countries has evolved into a group of 12. These come from across the world and have brought more strength and diversity to

“The Kingdom worked throughout the years to ensure that the organisation stayed wellfocused on its main mission and that it also remained cohesive,” Al-Naimi said. “It has advocated moderation in the decision-making during the posted oil-price and the marketdetermined price eras. It championed dialogue between producers and consumers and called for the organisation to be involved and proactive in the various global environmental and economic forums.”


Nov-Dec, 2010

57


GLOBAL OIL RESERVES

2009 oil reserves stand at 1333.1 billion barrels Global proved oil reserves in 2009 rose by 0.7 billion barrels to 1,333.1 billion barrels. Increases in Brazil, Denmark, Saudi Arabia, Egypt, and Indonesia outpaced declines in Mexico, Russia, Norway, and Vietnam. The 2008 figure was revised higher by 74.4 billion barrels, with an upward revision in Venezuela of 73 billion barrels accounting for a majority of the change, says BP’s Statistical Review of World Energy 2010 at end 1989 Thousand million barrels

at end 1999 Thousand million barrels

at end 2008 Thousand million barrels

Thousand million tonnes

at end 2009 Thousand million barrels

Share of total

R/P ratio

US Canada Mexico

34.3 11.6 52.0

29.7 18.3 21.5

28.4 33.2 11.9

3.4 5.2 1.6

28.4 33.2 11.7

2.1% 2.5% 0.9%

10.8 28.3 10.8

Total North America

97.9

69.5

73.4

10.2

73.3

5.5%

15.0

Argentina Brazil Colombia Ecuador Peru Trinidad & Tobago Venezuela Other S. & Cent. America

2.2 2.8 2.0 1.4 0.8 0.6 59.0 0.6

3.1 8.2 2.3 4.4 0.9 0.8 76.8 1.3

2.5 12.8 1.4 6.5 1.1 0.8 172.3 1.4

0.3 1.8 0.2 0.9 0.2 0.1 24.8 0.2

2.5 12.9 1.4 6.5 1.1 0.8 172.3 1.4

0.2% 1.0% 0.1% 0.5% 0.1% 0.1% 12.9% 0.1%

10.2 17.4 5.4 36.1 21.1 15.1 * 26.8

Total S. & Cent. America

69.5

97.8

198.9

28.5

198.9

14.9%

80.6

Azerbaijan Denmark Italy Kazakhstan Norway Romania Russian Federation Turkmenistan United Kingdom Uzbekistan Other Europe & Eurasia

n/a 0.6 0.8 n/a 8.4 1.2 n/a n/a 3.8 n/a 69.4

1.2 0.9 0.9 25.0 10.9 1.2 59.2 0.5 5.0 0.6 2.3

7.0 0.8 1.0 39.8 7.5 0.5 74.3 0.6 3.1 0.6 2.1

1.0 0.1 0.1 5.3 0.9 0.1 10.2 0.1 0.4 0.1 0.3

7.0 0.9 0.9 39.8 7.1 0.5 74.2 0.6 3.1 0.6 2.2

0.5% 0.1% 0.1% 3.0% 0.5% Š 5.6% Š 0.2% Š 0.2%

18.6 9.5 27.2 64.9 8.3 14.2 20.3 8.0 5.8 15.2 14.9

Total Europe & Eurasia

84.2

107.8

137.2

18.5

136.9

10.3%

21.2

Iran Iraq Kuwait Oman Qatar Saudi Arabia Syria United Arab Emirates Yemen Other Middle East

92.9 100.0 97.1 4.3 4.5 260.1 2.0 98.1 2.0 0.1

93.1 112.5 96.5 5.7 13.1 262.8 2.3 97.8 1.9 0.2

137.6 115.0 101.5 5.6 26.8 264.1 2.5 97.8 2.7 0.1

18.9 15.5 14.0 0.8 2.8 36.3 0.3 13.0 0.3 ^

137.6 115.0 101.5 5.6 26.8 264.6 2.5 97.8 2.7 0.1

10.3% 8.6% 7.6% 0.4% 2.0% 19.8% 0.2% 7.3% 0.2% Š

89.4 * * 18.9 54.7 74.6 18.2 * 24.5 9.4

Total Middle East

661.0

685.8

753.7

102.0

754.2

56.6%

84.8

Oil: Proved reserves


at end 1989 Thousand million barrels

at end 1999 Thousand million barrels

at end 2008 Thousand million barrels

Thousand million tonnes

at end 2009 Thousand million barrels

Share of total

R/P ratio

9.2 2.1 0.7

11.3 5.1 1.7

12.2 13.5 0.9 1.9

1.5 1.8 0.1 0.3

12.2 13.5 0.9 1.9

0.9% 1.0% 0.1% 0.1%

18.5 20.7 20.9 19.4

Egypt Equatorial Guinea Gabon Libya Nigeria Sudan Tunisia Other Africa

4.3 1.0 22.8 16.0 0.3 1.8 0.9

3.8 0.6 2.6 29.5 29.0 0.3 0.3 0.7

4.2 1.7 3.7 44.3 37.2 6.7 0.6 0.6

0.6 0.2 0.5 5.8 5.0 0.9 0.1 0.1

4.4 1.7 3.7 44.3 37.2 6.7 0.6 0.6

0.3% 0.1% 0.3% 3.3% 2.8% 0.5% Š Š

16.2 15.2 44.1 73.4 49.5 37.5 18.4 11.0

Total Africa

59.1

84.7

127.5

16.9

127.7

9.6%

36.0

Australia Brunei China India Indonesia Malaysia Thailand Vietnam Other Asia Pacific

3.1 1.2 16.0 4.3 5.1 3.7 0.2 0.1 0.9

4.7 1.3 15.1 5.0 5.2 5.0 0.4 1.8 1.4

4.2 1.1 14.8 5.8 3.7 5.5 0.5 4.7 1.4

0.5 0.1 2.0 0.8 0.6 0.7 0.1 0.6 0.2

4.2 1.1 14.8 5.8 4.4 5.5 0.5 4.5 1.3

0.3% 0.1% 1.1% 0.4% 0.3% 0.4% Š 0.3% 0.1%

20.7 17.6 10.7 21.1 11.8 20.4 3.8 35.7 11.2

Total Asia Pacific

34.7

39.9

41.7

5.6

42.2

3.2%

14.4

1006.4

1085.6

1332.4

181.7

1333.1

100.0%

45.7

7.7 116.4 763.2 175.8 67.3

9.0 93.3 831.9 166.4 87.2

6.1 91.3 1028.8 180.6 123.0

0.8 12.4 140.4 24.6 16.7

6.3 90.8 1029.4 180.9 122.9

0.5% 6.8% 77.2% 13.6% 9.2%

8.2 13.5 85.3 14.7 25.5

n/a n/a

163.3 1248.9

143.3 1475.7

23.3 205.0

143.3 1476.4

Oil: Proved reserves Algeria Angola Chad Rep. of Congo (Brazzaville)

Total World of which: European Union # OECD OPEC Non-OPEC £ Former Soviet Union Canadian oil sands• Proved reserves and oil sands

* More than 100 years. ^ Less than 0.05. Š Less than 0.05%. # Excludes Estonia, Latvia, Lithuania and Slovenia in 1989. £ Excludes Former Soviet Union. • ‘Remaining established reserves’ less reserves ‹under active development’. Notes: Proved reserves of oil - Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and operating conditions. Reserves-to-production (R/P) ratio - If the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate. Source of data - The estimates in this table have been compiled using a combination of primary official sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas Journal and an independent estimate of Russian reserves based on information in the public domain. Canadian proved reserves include an official estimate of 27.1 billion barrels for oil sands ‘under active development’. Venezuelan reserves are taken from the OPEC Annual Statistical Bulletin, which notes that the figure includes “proven reserves of the Magna Reserve Project in the Orinoco Belt, which amounted to 94,168mb in 2008” Reserves include gas condensate and natural gas liquids (NGLs) as well as crude oil. Annual changes and shares of total are calculated using thousand million barrels figures. Courtesy: BP Statistical Review of World Energy 2010


GLOBAL OIL PRODUCTION

Global oil production witnesses worst fall since 1982 Global oil production fell by 2 million b/d in 2009, the largest decline since 1982, BP’s latest statistical review of World Energy 2010 shows. OPEC production fell by 2.5 million b/d; Saudi Arabian output fell by 1.1 million b/d, the world’s largest volumetric decline. Production outside OPEC rose by 450,000 b/d, led by an increase of 460,000 b/d in the US, the largest increase in the world and the strongest US growth since 1970. Oil: Production* Thousand barrels daily

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

US

7733

7669

7626

7400

7228

6895

6841

6847

6734

7196

Canada

2721

2677

2858

3004

3085

3041

3208

3320

3268

3212

Mexico

3450

3560

3585

3789

3824

3760

3683

3471

3167

2979

13904

13906

14069

14193

14137

13696

13732

13638

13169

13388

Total North America Argentina

819

830

818

806

754

725

716

699

682

676

1268

1337

1499

1555

1542

1716

1809

1833

1899

2029

Colombia

711

627

601

564

551

554

559

561

616

685

Ecuador

409

416

401

427

535

541

545

520

514

495

Brazil

Peru

100

98

98

92

94

111

116

114

120

145

Trinidad & Tobago

138

135

155

164

152

171

174

154

149

151

3239

3142

2895

2554

2907

2937

2808

2613

2558

2437

130

137

152

153

144

143

141

143

140

141

6813

6722

6619

6314

6680

6899

6866

6636

6678

6760

Azerbaijan

282

301

311

313

315

452

654

869

915

1033

Denmark

363

348

371

368

390

377

342

311

287

265

95

86

115

116

113

127

120

122

108

95

744

836

1018

1111

1297

1356

1426

1484

1554

1682

3346

3418

3333

3264

3189

2969

2779

2550

2451

2342

Venezuela Other S. & Cent. America Total S. & Cent. America

Italy Kazakhstan Norway Romania Russian Federation Turkmenistan

131

130

127

123

119

114

105

99

98

93

6536

7056

7698

8544

9287

9552

9769

9978

9888

10032

144

162

182

202

193

192

186

198

205

206

2667

2476

2463

2257

2028

1809

1636

1638

1526

1448

Uzbekistan

177

171

171

166

152

126

125

114

114

107

Other Europe & Eurasia

465

465

501

509

496

468

455

448

425

400

14950

15450

16289

16973

17579

17541

17595

17810

17572

17702

Iran

3855

3892

3709

4183

4248

4234

4286

4322

4327

4216

Iraq

2614

2523

2116

1344

2030

1833

1999

2143

2423

2482

Kuwait

2206

2148

1995

2329

2475

2618

2690

2636

2782

2481

Oman

959

960

904

824

786

778

742

715

754

810

Qatar

757

754

764

879

992

1028

1110

1197

1378

1345

9491

9209

8928

10164

10638

11114

10853

10449

10846

9713

548

581

548

527

495

450

435

415

398

376

United Kingdom

Total Europe & Eurasia

Saudi Arabia Syria 60

Nov-Dec 2010


Oil: Production* Thousand barrels daily

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

United Arab Emirates

2547

2455

2260

2553

2664

2753

2971

2900

2936

2599

450

455

457

448

420

416

380

345

304

298

48

47

48

48

48

34

32

35

33

37

23475

23025

21729

23299

24797

25258

25497

25156

26182

24357

Algeria

1578

1562

1680

1852

1946

2015

2003

2016

1993

1811

Angola

746

742

905

870

1103

1405

1421

1684

1875

1784

88

81

72

67

89

82

87

82

84

73

Yemen Other Middle East Total Middle East

Cameroon Chad

-

-

-

24

168

173

153

144

127

118

Rep. of Congo (Brazzaville)

254

234

231

215

216

246

262

222

249

274

Egypt

781

758

751

749

721

696

697

710

722

742

Equatorial Guinea

91

177

200

244

346

376

364

376

350

307

Gabon

327

301

295

240

235

234

235

230

235

229

Libya

1475

1427

1375

1485

1623

1745

1815

1820

1820

1652

Nigeria

2155

2274

2103

2238

2431

2499

2420

2305

2116

2061

Sudan

174

217

241

265

301

305

331

468

480

490

Tunisia

78

71

74

68

71

73

70

97

89

86

Other Africa

56

53

63

71

75

72

66

84

79

79

7804

7897

7990

8386

9324

9921

9925

10238

10219

9705

809

733

730

624

582

580

554

567

556

559

Total Africa Australia Brunei

193

203

210

214

210

206

221

194

175

168

China

3252

3306

3346

3401

3481

3627

3684

3743

3901

3790

India

726

727

753

756

773

738

762

769

768

754

Indonesia

1456

1389

1289

1183

1129

1087

1017

969

1031

1021

Malaysia

735

719

757

776

793

759

747

763

768

740

Thailand

176

191

204

236

223

265

286

305

321

330

Vietnam

328

350

354

364

427

398

367

337

317

345

Other Asia Pacific

200

195

193

195

235

286

305

320

340

328

7874

7813

7836

7750

7853

7946

7942

7968

8175

8036

Total Asia Pacific Total World

74820

74813

74533

76916

80371

81261

81557

81446

81995

79948

of which: European Union #

3493

3285

3339

3128

2902

2659

2422

2388

2222

2082

OECD

21521

21303

21430

21165

20766

19861

19458

19140

18414

18390

OPEC

31072

30544

29132

30877

33592

34721

34920

34604

35568

33076

Non-OPEC £

35734

35608

35869

35540

35371

34700

34321

34046

33602

33671

8014

8660

9533

10499

11407

11839

12316

12795

12825

13202

Former Soviet Union

* Includes crude oil, shale oil, oil sands and NGLs (the liquid content of natural gas where this is recovered separately). Excludes liquid fuels from other sources such as biomass and coal derivatives. ^ Less than 0.05. Š Less than 0.05%. # Excludes Estonia, Latvia and Lithuania prior to 1985 and Slovenia prior to 1991. £ Excludes Former Soviet Union. Notes: Annual changes and shares of total are calculated using million tonnes per annum figures. Growth rates are adjusted for leap years. Nov-Dec, 2010

61


GLOBAL NEWS

Baker Hughes has been awarded a $137million, eight-year contract extension from Repsol for the exclusive supply and maintenance of electrical submersible pumping (ESP) systems in Ecuador’s Block 16 and Tivacuna production areas. The award covers 200 wells in which Repsol requires ESP systems to maximise production. Baker Hughes has supplied ESP systems for Repsol’s Block 16 and Tivacuna wells since 1998. The recent contract was awarded to Baker Hughes based on 12 years of successful new technology introduction, operational excellence and continuous reliability improvement. As part of its ongoing efforts to extend run times, Baker Hughes will deploy its latest Centrilift SP Superior Performance ESP system, featuring an extreme-duty pump design.

ExxonMobil expands support for technologies that help women in developing countries ExxonMobil has made a $1 million commitment at the Clinton Global Initiative (CGI) to invest in the expansion of high impact, sustainable technologies that advance women economically in the developing world. The programme is expected to directly benefit more than 13,500 people, with indirect benefits reaching more than 475,000 people in the next two years. “The programmes identified through the 2009 commitment use technology to improve the lives of women in developing countries,” said Suzanne M. McCarron, General Manager, ExxonMobil public and government affairs.

62

Nov-Dec 2010

Repsol and Sinopec form alliance Repsol and China’s Sinpoec will jointly develop the projects of Repsol Brasil, the upstream subsidiary of Repsol in Brazil, creating one of Latin America’s largest energy companies, valued at $17.773 billion. Repsol Brasil’s assets are currently valued at US$10.664 billion. Under the terms of the agreement, Repsol Brasil will increase its share capital by issuing new shares to which Sinopec will fully subscribe. On completion of the transaction, Repsol will hold 60 per cent of the shares of Repsol Brasil while Sinopec will hold 40 per cent of the shares. The injection of funds generated by this transaction will allow Repsol Brasil to fully develop all of its current projects, which include some of the world’s largest exploratory discoveries in recent years. The agreement between Repsol and Sinopec involves full collaboration in the development of the existing projects in Brazil, and allows for both companies to continue expanding their activity in that country jointly or independently. The agreement is subject to the approval of competent authorities. Repsol Chairman Antonio Brufau said, “The deal is a good reflection of the value created by the investment of technical, human and material means by Repsol in exploration, particularly in Brazil’s pre-salt offshore in the last few years.”

Picture courtesy: Repsol

Baker Hughes awarded eight-year ESP contract in Ecuador

“We are very pleased to share the development of Repsol’s Brazilian subsidiary with an internationally renowned and experienced partner as is Sinopec. Together we can help expand business relations between our countries,” Brufau added. Brazil’s offshore boasts one of the world’s fastest-growing oil and gas reserves. The deal highlights the enormous international interest in this historic moment for Brazil, and particularly for the Santos Basin pre-salt activity led by Petrobras.

Halliburton acquires Boots & Coots Halliburton has closed the acquisition of Boots & Coots Inc., creating the industry’s premier intervention services and pressure control product service line. The merger combines Halliburton’s coiled tubing and hydraulic workover operations with Boots & Coots’ well intervention services, providing operators with a more comprehensive production services portfolio. Halliburton acquired all of the outstanding stock of Boots & Coots through the stock and cash transaction. Boots & Coots’ operating management have been retained to lead Halliburton’s Boots & Coots product service line with operating results reported through Halliburton’s Completion and Production reporting segment. The acquisition is expected to be accretive in the first full year of operation.

“We are pleased to close this acquisition and initiate the integration process with Boots & Coots’ talented group of professionals,” said Marc Edwards, Halliburton’s Senior Vice President of Completion and Production. “Through the new Boots & Coots product service line, our customers will have access to the industry’s most advanced and wideranging suite of well intervention and pressure control services to optimise and improve full life-cycle returns.” “Merging with Halliburton serves as a perfect complement to Boots & Coots’ growth strategies and is a natural addition to Halliburton’s global service capabilities,” said Jerry Winchester, Halliburton’s Vice President of the Boots & Coots product service line.


New growth for Shell in Upstream Americas

Picture courtesy: Shell

Antonio Brufau, voted businessman of the year in Argentina

The Spanish Chamber of Commerce of the Republic of Argentina (CECRA) has awarded the Repsol YPF Chairman Antonio Brufau the title of Best Businessman of the Year 2010. The institution wishes to recognise the excellent results obtained by YPF in recent years. Antonio Brufau will receive the award in Buenas Aires in a ceremony that will be attended by the Spanish Ambassador in Argentina, Rafael Estrella, and the President of the Chamber of Commerce, Guillermo Ambrogi.

BG Group agrees to sell its interests in Santa Rita and San Lorenzo power stations BG Group has signed a Sale and Purchase Agreement (SPA) with Korea Electric Power Corporation for the sale of the Group’s 40 per cent interests in both the Santa Rita and San Lorenzo power stations in the Philippines for a net consideration of approximately US$400 million. The net consideration is subject to standard completion adjustments, including interest to be paid to BG Group upon closing which is expected in the first quarter of 2011. Closing of the transaction is subject to receiving necessary waivers and consents from non-recourse lenders and First Philippine Holdings Corporation.

Royal Dutch Shell plc (Shell) reconfirmed strong momentum in its businesses in the Americas. Shell’s oil & gas production in the region could reach 1 million barrels of oil equivalent per day in 2014, an increase of some 40 per cent on current levels, subject to the pace of investment, which could be some $40 billion for the 2011-14 period. Shell’s world-wide strategic framework is set around three distinct themes: performance focus, delivering growth, and maturing new project options. The “Transition 2009” reorganisation, now completed, created the Upstream Americas division, simplifying Shell’s businesses, and underpinning some $1 billion of Upstream cost

reduction achievement. Upstream Americas is now organised along four strategic lines, namely heavy oil, onshore gas, deep water and exploration. This has created a strong platform for new performance focus, capital efficiency, and faster implementation of strategy. Shell has invested over $60 billion in Upstream Americas since 2004 including development of new fields, new exploration leases, and acquisitions of undeveloped resources positions. Development and rationalisation of this portfolio continues, with an emphasis on asset quality, profitable growth and capital efficiency. Upstream Americas asset sales proceeds are expected to exceed $2 billion in 2010-11, part of Shell’s world-wide plans for $7-8 billion of disposals. In heavy oil, the recent start-up of the Jackpine Mine takes the Athabasca Oil Sands Project (AOSP, Shell 60 per cent) to a total capacity of 255,000 bbl/d, developing over 3 billion barrels of resources. After a period of rapid growth in the last decade, AOSP’s next focus is on delivering operating synergies and debottlenecking these facilities, whilst retaining longer-term options for additional expansion. Shell has a strong track record in cold production and enhanced oil recovery in California, and growth potential in Canada, where studies are underway for an 80,000 bbl/d in-situ project at Carmon Creek.

BP and SOCAR sign Shafag-Asiman PSA BP and SOCAR (the State Oil Company of the Republic of Azerbaijan) signed a new production sharing agreement (PSA) on joint exploration and development of the Shafag-Asiman structure in the Azerbaijan sector of the Caspian Sea. The PSA was signed in Baku by Rovnag Abdullayev, President of SOCAR, and Rashid Javanshir, BP Azerbaijan President, in the presence of BP’s visiting Group Chief Executive Officer (CEO) Robert Dudley. Speaking at the event Dudley said: “This is an important day for Azerbaijan and BP as it marks the beginning of our bilateral cooperation in exploration and development of a new offshore block. With SOCAR and our partners BP has helped to establish

Azerbaijan as a world scale oil and gas producer, and I believe the significant remaining potential will continue to make it relevant for decades to come.” “We in BP very much hope that the combination of our leading technology and expertise with Azerbaijan’s experience and potential will lead to new discoveries in the Caspian,” Dudley added. The signing of the PSA follows the earlier concluded Heads of Agreement (HOA) which defined the basic commercial principles of the contract. Under the PSA, which is for 30 years, BP Exploration (Azerbaijan) Limited will be the operator with 50 per cent interest while SOCAR will hold the remaining 50 per cent equity.

Nov-Dec, 2010

63


Shale gas transaction closed

Statoil enters Eagle Ford shale Through agreements with Enduring Resources LLC and Talisman Energy Inc., Statoil will acquire 67,000 net acres in the Eagle Ford shale formation in Southwest Texas.

Carrizo Oil & Gas Inc. has closed its previously announced joint venture transaction in the Marcellus Shale with a subsidiary of Reliance Industries Limited (“Reliance”). In connection with the joint venture, Reliance acquired a 20 per cent interest in approximately 52,200 net Carrizo acres in Pennsylvania considered highly prospective for Marcellus Shale natural gas at a purchase price of $65 million.

“The magnitude of the shale resources in North America and the significant role these resources are expected to play in the future energy mix make this an attractive opportunity,” says John Knight, Senior Vice President, Business Development and Global Unconventional Gas.

Reliance paid $11.4 million in cash to Carrizo at closing with $1.7 million more expected later this year. In addition, Reliance will pay an expected $52 million of Carrizo’s share of future drilling, completion, and seismic costs (“development carry”). The joint venture agreement is effective immediately.

“This Eagle Ford position complements Statoil’s existing US onshore portfolio, supplying a different range of hydrocarbons to different markets, and it also has a clear path towards operatorship. We now have a long term flexible portfolio with significant optionality and growth potential from the top shale plays,” Knight said. Statoil and Talisman have formed a joint venture for the purpose of developing assets in the Eagle Ford shale. As part of the joint venture, Statoil and Talisman have jointly acquired the Eagle Ford assets of Enduring, comprising 97,000 acres (48,500 net to Statoil), in a $1.325 billion transaction. The purchase price equates to about $10,900 per acre.

Petronas to acquire BP’s interests in Malaysian Ethylene and Polyethylene ventures

Shell ranked No. 1 lubricants supplier globally for fourth consecutive year

Under the terms of the agreement, Petronas will pay $363 million in cash to BP, inclusive of a balance sheet adjustment of US$13 million and the repayment of a shareholder loan of $53 million. Subject to certain conditions, both parties anticipate completing the transaction by the end of 2010. Datuk Wan Zulkiflee Wan Ariffin, Petronas’ Executive Vice President of Downstream Business said, “Our purchase of BP’s interests in EMSB and PEMSB would enable us to strengthen our presence in the Olefins and Polyolefins business in the region.”

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Nov-Dec 2010

Picture courtesy: Shell

Petronas has signed an agreement with BP to acquire BP’s entire 15 per cent and 60 per cent interests respectively in Ethylene Malaysia Sdn. Bhd. (EMSB) and Polyethylene Malaysia Sdn. Bhd. (PEMSB).

Shell has been named the No.1 global lubricants supplier for the fourth consecutive year in an annual research study carried out by Kline & Company (Kline). Despite one of the toughest operating environments since the Great Depression, Shell Lubricants trumped a tumultuous 2009, growing its global market share to 13.4 per cent from 12.7 per cent in 2008. It also widened its lead over its nearest competitor to 2.5 per cent up from 1.6 per cent the year before. These figures are especially significant, given that 2009 worldwide lubricant demand declined 8.4 per cent over 2008 to 35 million tonnes. “Kline’s research shows that despite very challenging market conditions, Shell has continued to outperform the lubricants market as a whole and maintain our global leadership position,” said Chong-Meng Tan, Executive Vice President for Shell B2B and Shell Lubricants. “I believe this is the result of a consistent strategy that focuses squarely on customers, as well as leading technologies delivering superior products and services that add value for clients.”

Picture courtesy: Trond Isaksen- Statoil

GLOBAL NEWS


Picture courtesy: BP

Eurasia Drilling Company and Schlumberger enter strategic alliance Eurasia Drilling Company Limited (Eurasia) and Schlumberger have signed a Letter of Intent to sell and purchase each other’s drilling and service assets, while entering a strategic alliance in the CIS. Schlumberger has agreed to sell all drilling, sidetrack and workover rigs currently operating mainly in West Siberia to Eurasia. As part of the sale, the rigs’ crews will transfer to Eurasia. Schlumberger has also agreed to purchase the Eurasia drilling services businesses, which include the directional drilling, measurement while drilling, cementing, and drilling fluids services to support 80 rigs. The field crews to support delivery of these services will move to Schlumberger. In addition, Schlumberger and Eurasia have agreed to enter a strategic alliance upon completion of the transaction whereby Schlumberger becomes the preferred supplier of drilling services to Eurasia Drilling for up to 200 rigs for a 5-year period.

M-I SWACO introduces new Inhibitive Drilling Fluid System M-I SWACO has released the KLA-Shield high-performance water-base drilling fluid system. Designed for use in onshore and offshore fields, the KLA-Shield system is made up of products that are formulated to address environmental concerns worldwide. Onshore, the system can be customised to provide shale inhibition without the use of salts, making cuttings ideally suited for land farming. The system is equally fitted for offshore operations, displaying a low marine toxicity and employing fast biodegradation rates. The inhibitive drilling fluid system is specifically designed for fields characterised by reactive shales, large-diameter wellbores and extended-reach drilling.

BP pledges collateral for Gulf Of Mexico Oil Spill p Trust BP has pledged certain Gulf of Mexico assets as collateral for the $20 billion Deepwater Horizon Oil Spill Trust which was set up to pay legitimate claims arising from the April 20 incident. The pledged collateral consists of an overriding royalty interest in oil and gas production of BP’s Thunder Horse, Atlantis, Mad Dog, Great White and Mars, Ursa and Na Kika oil and gas assets in the Gulf of Mexico. “The pledging of these assets underscores our commitments to the Trust which we set up to pay all legitimate claims arising from the tragedy,” said Lamar McKay, Chairman and President of BP America Inc. and BP’s Gulf Coast Restoration Organisation. Since the Macondo well was finally confirmed sealed on September 19, BP has been completing the process of plugging and abandoning the well. This includes removing portions of the casing and setting cement plugs. BP has also started the process of dismantling and recovering containment equipment and decontaminating the vessels that were in position at the wellsite. The cost of the response to September 29 amounts to approximately $11.2 billion, including the cost of the spill response, containment, relief well drilling, static kill and cementing, grants to the Gulf states, claims paid and federal costs. On August 23 processing of claims from individuals and businesses related to the Deepwater Horizon incident transferred to the Gulf Coast Claims Facility (GCCF). To date, over 86,000 claimants have submitted claims to the GCCF, with over 44,000 claims totalling over $806 million being paid, including a $34.5 million fund for real estate brokers and agents.

Shell to sell downstream businesses in Finland and Sweden Shell has agreed to sell the majority of its refining and marketing businesses in Finland and Sweden to Keele Oy. Keele Oy is the major shareholder of St1 Holding Oy, whose businesses include fuel retail networks in Finland, Sweden, Norway and Poland. The terms of the transaction, which are subject to regulatory approvals, include Shell’s retail business, including some 340 service station

in Sweden and some 225 in Finland as well as its commercial road transport (CRT) in both markets. All service stations together with the CRT business will remain Shell-branded in both markets under a licensing agreement(*2). Also included is Shell’s 87,000-barrels-perday Gothenburg Refinery, Shell’s bulk fuels business in both markets and the Shell marine business in Sweden. Nov-Dec, 2010

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Oil & Gas - November 2010