FROM THE EDITOR’S DESK No 24
September - October 2012
DESIGN Senior Art Director Sandesh S. Rangnekar Senior Designer M. Balagopalan Senior Photographer Rajesh Burman Photographer Basim Al Maharbi
SILVER LINING DESPITE WORRIES
Production Manager Ramesh Govindraj MARKETING Senior Advertising Manager Shivkumar Gaitonde Asst. Advertising Manager Girija Shankar Mohanty Senior Business Support Executive Radha Kumar CORPORATE Chief Executive Sandeep Sehgal Executive Vice President Alpana Roy 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: akshay@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 Š 2012 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
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n spite of the continuing worries about the global economy worldwide, oil demand is still expected to grow faster in 2012 than in 2011 and the latest growth outlook for 2013 is more or less in line with 2012 at around one per cent. At the same time, the global production decline from existing fields continues to average just over four per cent per year based on numbers from IEA and IHS, hence requiring the replacement of over three million bbl/d of oil production every year. This alone will continue to require significant investments in particular, as future reserves and production will typically come from reservoirs with more challenging surface and reservoir conditions.
The Barclays E&P spending survey, which was recently updated, confirms the main trends. In this survey, the 2012 growth in International E&P spend is revised upward to 12.1 per cent. At the same time, the 2012 growth in North America E&P spend is revised downward to 6.4 per cent, mainly driven by flattening overall rig count and lower hydraulic fracturing pricing. The survey also highlights that for the first time in several years outside of a downturn, the growth in international spend is expected to outgrow that of North America in percentage terms. By area, international growth continues to be driven by key offshore markets such as Sub-Sahara Africa, the North Sea and Brazil, as well as key land markets in North Africa, the Middle East, Russia and China. This spend forecast also confirms that while we continue to face macro uncertainty and volatility in the global financial markets, the demand for oilfield products and services in the international market remains resilient, although growth rates will not always follow a straight line.
Read the emag: www.ogronline.com An
Presentation
CONTENT
13 COVER STORY
In-Country Value Just the latest buzzword? Not really, as many Omani companies are making it integral to their overall business planning.
Oman Oil Company Exploration and Production (OOCEP) .................14 Bahwan Engineering Company (BEC) ..............................................16 Oman Oil Refineries and Petroleum Industries Company (Orpic) .......18 Al Hassan Group of Companies .......................................................19 Petroleum Development Oman (PDO) .............................................20
REGULARS:
22 CSR Oman Oil Company - Investing in Gen-Next
6 Oman News 37 Global Round-Up 43 Regional Round-Up 60 Book Corner
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CONTENT VIEWPOINT
29
COUNTRY REPORT
40
Deep Diving by Mike Daly, Executive Vice President, BP
POLITICS & ECONOMY
32
Norway ranks fifth in upstream investment
INNOVATION
46
Shell moves ahead on CCS project
STATISTICS
48
Obama or Romney? Does it matter?
MARKET REPORT
57
Positive outlook in medium term
Excerpts from latest OPEC Annual Statistics Bulletin 2012
SPECIAL FEATURE – DIGITAL
MARETING FEATURE 26 Voltamp 27 Gas Arabia Summit 2012 28 International Digital Oilfield Conference (IDOC) 2012
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Sep-Oct, 2012
Energy Excellence
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OMAN NEWS
Orpic crossed 1mn tonne polypropylene production mark Oman Oil Refineries and Petroleum Industries Company (Orpic) has announced that its production crossed the one million tonne milestone of top quality polypropylene homopolymer at its Sohar plant which began production in October 2006. Orpic remains the only polypropylene manufacturing facility in the Sultanate and is part of the country’s vision to develop downstream petrochemical products. Orpic’s refinery at Sohar is the main supplier of feedstock for polypropylene production, a key part in building domestic integrated petrochemicals industry. Orpic polypropylene production is exported to markets in the UAE, India, Pakistan, Sri Lanka, Bangladesh and other countries in the Middle East. Part of the production is marketed locally. Orpic sells polypropylene under the brand name “Luban” and it is marketed in 14 different grades, from fine powder to pellets. “Luban” is the main component in the plastics production process. “Luban” is used to manufacture plastic chairs, tables, mats, carpets, packaging for snack foods, bread and food grains, ropes, caps and closures and strapping material. Orpic, Oman’s integrated refining and petrochemicals business, recently announced a major milestone in its business performance, as it achieved 12 full consecutive months of providing 100 per cent of Oman’s fuel needs. Orpic was recently named as Middle East Refinery of the Year-2012.
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India’s MRPL purchases Omani crude To compensate for lack of supplies from Iran, India’s Mangalore Refinery and Petrochemicals Ltd purchased 600,000 barrels of Omani crude oil through a tender. Indian refining companies are finding it difficult to find insurance and shipping for Iranian oil imports due to the European Union sanctions banning majority of the global insurance firms from covering Iranian oil shipments. MRPL had been Iran’s biggest Indian oil client. It loaded only one cargo of 660,000 barrels in July compared with five such parcels planned for lifting. MRPL rarely tenders for high sulphur crude because it generally imports Iranian barrels under an annual term contract with the OPEC member. The refiner has bought Omani crude
from trader Itochu at a premium of about $2.5 a barrel to Dubai. The Indian refiner has drawn up a plan including tapping spot markets for more high sulphur oil as imports from Iran have been hit by western sanctions. MRPL imports about 100,000 barrels per day of high sulphur Iranian grades.
DME Oman futures contract volumes hit new highs The Oman Crude Oil Futures Contract (DME Oman), Dubai Mercantile Exchange’s (DME) flagship contract, is now the most credible oil benchmark relevant to the Asian market. Since its launch in June 2007, DME has established itself as the premier international energy futures and commodities exchange in the Middle East, recording consistent yearon-year trading growth. In 2012, trades on DME passed the 3 billion barrel mark, with a total of 3.478 million contracts (equivalent to 3.478 billion barrels) traded on the Exchange and annual average daily volumes growing at an annual compounded rate of 31 per cent. Volumes for DME Oman have surged in the first half of 2012, reaching a record 141,129 contracts (141.129 million barrels) in May, an increase of nearly 17,967 contracts over the previous record in April of the same year, and an impressive 78 per cent growth over the same period in 2011. DME’s Chairman Ahmad Sharaf, said: “Our consistent growth in trading volumes over the last five years — a trend that has accelerated in 2012 — is an indication of the growing importance of Asian demand for oil in the global marketplace.
“This growth in demand drove the need for a credible crude oil benchmark for global oil sales to Asia, and that’s exactly what DME Oman is providing. After five successful years managing DME Oman, the largest physically delivered oil futures contract in the world, the contract has become the world’s third official benchmark for oil trading, alongside West Texas Intermediate (WTI) and Brent. “Operating in a regulated environment, DME provides easy entry into the world’s fastest growing commodities market and the largest crude oil supply/demand corridor in the world. With enhanced resources, the backing of our shareholders and five years of sustained success behind us, the DME Oman contract and DME are perfectly positioned to go from strength to strength over the next five. A joint venture between Dubai Holding, Oman Investment Fund (OIF) and CME Group, DME is the premier energy focused exchange in the Middle East. DME Oman is the sole and explicit benchmark for Oman and Dubai crude oil Official Selling Prices (OSPs), historically established markers for Middle Eastern crude oil exports to Asia.”
Blocks 3 and 4’s test production goes up Test production from the Early Production System (EPS) on Blocks 3 and 4 onshore the Sultanate of Oman continues and amounted in August 2012 to 428,865 barrels of oil, corresponding to 13,834 barrels of oil per day (BOPD), Tethys Oil reported. Tethys’ share of the production, before government take, amounts to 30 per cent of the total, or 128,660 barrels. Long term production tests have been carried out on wells from both the Saiwan East oil field on Block 4 and the Farha South oil field on Block 3. Production rates continue to vary depending on test programme design and available capacity. Tethys has a 30 per cent interest in Blocks 3 and 4. The partners are Mitsui E&P Middle East B.V. with 20 per cent and the operator CC Energy Development S.A.L. (Oman branch) holding the remaining 50 per cent. Tethys Oil is a Swedish energy company focused on exploration and production of oil and natural gas. Tethys Oil’s core area is Oman, where the company is one of the largest onshore oil and gas concession holders. Tethys Oil also has exploration and production assets onshore France, Lithuania and Sweden.
Oman LNG appoints a new CEO Harib al Kitani, a veteran of the Sultanate’s vital LNG industry, has been named the new Chief Executive Officer of Oman LNG. Al Kitani’s appointment makes him the first Omani national to lead Oman LNG, representing the largest of Sultanate’s liquefied natural gas (LNG) companies, a key component in the country’s thriving energy sector. At the helm of Oman’s second source of income and its largest private investor in social development, Harib is poised to lead Oman LNG into its next phase. His appointment comes with the critical task of overseeing the merger between Oman LNG and its sister company, Qalhat LNG, where Harib was President and Chief Executive Officer since the inception of the company seven years ago. The fusion is set to further harmonise already existing synergies between both companies in terms of plant operations, shareholding and enhance Oman’s global market presence and penetration. Al Kitani has a strong footing in the LNG business. Joining Oman LNG in 1995 as Deputy Manager Marketing. He soon became the company’s Marketing and Shipping Manager, strengthening its position in key markets such as Korea and Japan and started LNG cargoes Swapping and Diversions activities with different parties in the industry bringing more value to the shareholders. He also spent three years at Shell International in London working in various positions including LNG Global Business Adviser and Manager of Suape project in Brazil. Al Kitani was formerly Chief Executive Officer at Qalhat LNG from 2004 where he has successfully steered the company’s affairs since, enabling it to win a string of energy awards and achieve major commercial milestones including acquisition of a 10 per cent stake in Japan’s Senboku Natural Gas Power Generation Company and various other investments that the company is enjoying at the moment.
DNO resumes production in Block 8 DNO International, the Norwegian oil company, has restarted production at a field in Oman after a five-month shutdown. The Norwegian company has replaced a section of pipe that had become blocked during a cleaning operation, allowing its West Bukha field to resume production of 10,000 barrels per day. The field is part of Block 8, which DNO operates with South Korea’s LG as a 50 per cent shareholder. “We are pleased to have the two West Bukha wells flowing again,” said Bijan Mossavar-Rahmani, DNO’s executive chairman. “Our daily operated production now is approaching 100,000 barrels of oil equivalent from seven fields in three countries, a record level in DNO International’s 40-year history”. DNO, which also pumps oil in Ras Al Khaimah, Iraqi Kurdistan and Yemen, is 42.8 per cent owned by RAK Petroleum.
MOL Oman gets Block-66 The Hungarian MOL Oman LTD Company has been awarded the exploration and production sharing agreement for Block 66. As an operator of Block 66, located within the Al Wusta and Dhofar Governorates, the Company will have the right to explore, develop and produce oil and gas over an area covering 4,898 sq kms. The commitments of the Company under this agreement are to reprocess old seismic, acquire new 2D & 3D seismic and drill exploration wells during exploration periods. The Sultanate will not be responsible for any financial implications during exploration period. MOL Oman Ltd Company is expected to invest atleast $30 million during the initial exploration phase.
Sep-Oct, 2012
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OMAN NEWS
9 bidders shortlisted for $1.2bn Sohar Refinery Contract Around nine international engineering companies are shortlisted for the $1.2-billion contract, which involves the expansion of Oman’s flagship refinery at Sohar, according to reports. Technip, the Francebased provider of project management, engineering, and construction services for the oil and gas industry; TecnicasReunidas (TR), a leading Spanish engineering firm specialising in the design and construction of industrial plants of all types; Korean construction conglomerate Hyundai Engineering; and the joint venture of Indian engineering giant Larsen & Toubro (L&T) and GS Engineering of South Korea are the companies, who are in contention for the engineering, procurement and construction (EPC) contract. The partnership of Petrofac, the London-headquartered international provider of integrated facilities services to the hydrocarbon and petrochemical industries, and South Korean engineering and construction conglomerate Daelim are also in fray, along with the Fellow Korean engineering corporation Daewoo, who has teamed up with global petrochemicals firm Lurgi to bid for the contract. Japanese engineering corporation Chiyoda, which has joined hands with Seoul-based industrial contractor Samsung Engineering, Korean firm SK Engineering, and Japanese industrial contractor JGC are among other contenders. Oman Oil Refineries and Petroleum Industries Company (Orpic), a wholly government-owned integrated refining and petrochemicals entity, is overseeing the expansion estimated to cost in the range of $1.5 to $1.8 billion. Around 60,000 barrels per day (bpd) of new capacity will be added by the upgradation to Sohar Refinery’s present processing capacity of around 116,000 bpd of crude and long residue. Recently, the shortlisted bidders were invited to a site visit.
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Shell to sponsor employment training of 30 young Omanis Shell Development Oman and Oman Society for Petroleum Services (OPAL) signed two agreements with a combined value of RO81,000 to train and employ around 30 young Omani high school graduate job seekers in various sectors as part of their social investment programme initiatives in the Sultanate. The first agreement comprises training 15 high school graduates in Rigging training programme. The second agreement constitutes training 15 high school graduates in Scaffolding Installation for four months. Both programmes will be conducted by the Technical & Administrative Training Institute. These young Omanis are guaranteed immediate employment in the Oman Construction Company that has accepted to employ them once they successfully complete their training programmes. The training programmes will be funded by Shell Development Oman, and conducted by the Technical & Administrative Training Institute under the direct supervision of OPAL. John Blascos, Shell Country Chairman in Oman stated: “The signing of these agreements comes as part of our social responsibility and commitment to contribute in creating sustainable job opportunities for young Omani jobseekers that prove to be highly competent and successful in all job sectors. We are confident for these 30 young Omanis who will be trained and eventually employed, to join the workforce and have wonderful career prospects.”
Octal triples PET Resin Production Capacity Octal, a global leader in the packaging industry, has tripled its annual production capacity of PET resin used for water, juice and soft drink bottles with the commissioning of two of the world’s largest vertical reactors at the company’s leading-edge PET Complex in Salalah. With a total system output of 1 million metric tons per year of PET bottle grade resin, Octal has firmly secured its stature in the industry as the largest PET producing site in the world at any single location. “This milestone is nothing short of incredible,” said Chairman Sheikh Saad Suhail Bahwan. “What we have previously been able to produce in three years can now be achieved in only one, giving us a stronger competitive advantage to serve the growing demand for high quality and performing PET resin and sheet in emerging and transitional economies.” With the global packaging industry poised to reach US$ 820 billion by 2016, Sheikh Bahwan said, “We are building for the future and are confident that PET will continue to register strong demand given its unmatched mechanical and optical properties. This is driven by rising need for lightweight, functional, user friendly and environmentally responsible packaging.” Sheikh Bahwan went on to say that the company is now half way through its investment plan with additional capacity scheduled for 2015 and 2016. When complete, the site will manufacture a total of 2.5 Million Tons per annum of PET and PTA. He said that it is a great source of pride and accomplishment for Octal and Oman as a nation to have made such great strides in only four years. Octal supplies more than 60 countries across the Middle East, Europe, America and Africa with its PET resin that boast the lowest carbon footprint.
OMAN NEWS
New Edition of ‘Oman Oil And Gas Directory’ Launched The sixth edition of ‘Oman Oil And Gas .Com’, the first specialized oil and gas directory of its kind, in Oman, was recently launched. Mohammed Al Harthy, CEO, OPAL presented a personalized copy of the directory to HE Nasser Khamis Ali Al-Jashmi, Undersecretary, Ministry Of Oil and Gas. The user friendly directory at a glance provides information about the product/brand, services and a brief company profile. On the occasion, Mohammad said: “Oman Oil and Gas.Com provides comprehensive information about the oil and gas industry in Oman; we are therefore delighted to be associated with it. OPAL had taken these directories to Manchester for the Business Summit organized by EIC and UKTI in association with OPAL and Shell. The summit was attended by CEOs and General Managers from more than 200 British and Iraqi companies from the energy sector. The event aimed at promoting partnership between Omani and British companies
and to introduce the business opportunities available with Shell in MENA region. In the endeavor to make the directory more user friendly, the directory is also available online “OmanOilAndGas.Com” and also contains information about the petrochemical sector in not only Oman but also the other GCC countries like Bahrain, Qatar, Kuwait, Saudi and UAE. The printed version has UAE data making the directory more informative; also added is a special feature “Job Opportunities” for candidates looking for a placement
and companies looking out to recruit in the oil and gas sector. The companies can advertise the vacancies they have in their organization in the Situation Vacant section while they can also search the CVs in the Situation Wanted section. “The Endeavour to provide the Oman oil and gas industry with an accurate, concise and user friendly directory has become a successful reality through the proactive response of our clients,” said Milan Chatterjee, General Manager, Potential Advertising & Publishing Co. LLC.
PDO Awards $240mn Contract to Shaleem Petroleum Petroleum Development Oman (PDO) has awarded a $240 million contract to Shaleem Petroleum Company SAOC, a local Omani community contractor, for the provision of hoist services. Raoul Restucci, Managing Director, signed the agreement on behalf of PDO, while the local contractor was represented by its Chairman Abdulaziz Salim al Naqsh al Mahri. The contract requires Shaleem to continue to provide maintenance and workover services for PDO’s oil wells in the south of Oman for a 10year period, extendable by a further two years. “This joint work between our two companies is only one example of PDO’s care for the local communities, and also reflects His Majesty The Sultan’s concern for the welfare of the local people,” said Al Mahri. “Over the years, PDO has continuously provided strong support and assistance to the local community companies, not only by providing work contracts, but also by providing technical consultations and financial advice,” the Chairman added. Founded in 1998, Shaleem Petroleum is one of the first Local Community Contracting companies (LCCs) to launch operations as a serviceprovider to PDO and other oilfield companies. The firm is 100 per cent Omani-owned and represents the interests of over 400 local community shareholders. A specialist in oil well maintenance and workover services, Shaleem won its first contract from PDO — valued at $8.5 million — in 2000. Five years later, the company became the first Local Community Contractor to enter mainstream oil and gas workover and well maintenance operations by winning a PDO online bid, against local and international competition. The initial five-year contract, valued at $87 million, was extended for a further two years. To date, the company has completed the maintenance and servicing of more than 2,300 wells. Shaleem employs over 260 people, of whom 76 per cent are Omanis who are working at every level of the business in head office and in the field, in jobs ranging from trainee roustabout to field superintendent. To fulfil its latest contract, Shaleem plans to recruit an additional 50 suitably qualified Omanis to join its field hoist crews.
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OMAN NEWS
Omanoil on an expansion spree Oman Oil Marketing Company (omanoil) is realizing its ambitious expansion plan with the opening of five new filling stations and nine ahlain convenience stores across the Sultanate in 2012. Since the beginning of the year, omanoil has opened a filling station in Shinas in the Governorate of Al Batinah North which was followed by a filling station in Hajj in Governorate of Al Wusta. New filling stations opened in Mahdha in the Governorate of Al Buraimi and Al Salaam Street and Al Dahareez in the Governorate of Dhofar, which are complemented by ahlain convenience stores. Another two convenience stores opened their doors to customers in Samayil in the Governorate of Al Dakhiliyah and
Burj Al Sahwa, adding to the four stores that were introduced earlier this year. Further enhancing customer experiences, omanoil has also opened a car wash facility at the Tareef filling station in Sohar. “Our expansion strategy is in tandem with the country’s infrastructure development and population growth, offering a one-
stop-shopping experience and quality products which are underpinned by world-class service,” said Hussain bin Jama Al Ishaqi, omanoil’s General Manager of Retail. “We aim to maintain consistently excellent and convenient re-fuelling at our filling stations as loyal friends on the road to motorists and local communities.”
Al Hassan Engineering JV gets RO40.9mn contract A joint venture (JV) between Al Hassan Engineering Company and Spain’s Tecnicas Reunidas SA has been awarded a RO40.9mn contract by Petroleum Development Oman (PDO) for the Zauliyah gas plant. The contract involves engineering, procurement, construction and commissioning for the Zauliyah plant. “The project is for approximately three years and its scope includes modular based gas plant (on-plot) and associated off-plot works. The date of commencement is October 9, 2012. We expect a reasonable income from this project,” Al Hassan said in a statement. Al Hassan has also bagged a contract worth RO9.5mn from Oman Oil Company Exploration and Production for construction of export pipelines in Block 60.
L&T bags $232mn PDO gas depletion compression project Larsen and Toubro Limited (L&T) has won a contract valued at $232 million to execute Phase 2 of the Saih Rawl Depletion Compression (SRDC2) project on behalf of Petroleum Development Oman (PDO). The EngineeringProcurement-Construction (EPC) was won against fierce competition from nine international bidders. The project is one of several initiatives launched by PDO to sustain gas flows from reservoirs that have been in production for several years resulting in a drop in reservoir pressure. Production from the Saih Rawl (SR) Gas Fields, which are the largest in PDO’s concession, commenced in 1999. However due to declining reservoir 12
Sep-Oct, 2012
pressure in Saih Rawl Main (SRM) Field, the Saih Rawl Main wells Flowing Tubing Pressure will continuously decline until it reaches 35 bar in the first quarter 2015. In order to continue to produce on-spec gas through the Central Processing Plant (CPP) in first quarter 2015, second stage depletion compressors (SRDC2) are required to be installed upstream of the SRDC1. L&T has been chosen to execute this part of the project. The SRDC2 involves installation of 76 MW of gas compression capacity with 4 trains, and modification of the condensate handling system at CPR. This will enable the Saih Rawl Main field to produce
Maximum Annual Daily Load (MADL) of 30 MMSCMD gas. Phase 1 of the Saih Rawl Depletion Compression project was officially inaugurated by PDO in April this year. The depletion compression project managed to boost inlet pressure from 36 bar to 96 bar and the new plant has a capacity to handle 48 million standard cubic metres of gas per day. Beside the compression plant, a new power station with a total capacity of 120 megawatts was constructed as part of the project to cater for the increased power demand. Gas and condensates from the Saih Rawl field are collected and processed at Saih Rawl Central Processing Plant where the depletion compression is located.
COVER STORY
IN-COUNTRY VALUE
Just the latest buzzword? Not really, as many Omani companies are making it integral to their overall business planning. It will get a further fillip when the Oil & Gas ICV Committee makes its recommendations which could guide the companies to move forward on the path of maximizing ICV. OGR spoke to some of the major players in the sector to understand their current offering on the ICV front.
COVER STORY
‘COMMITTED TO ICV’ Oman Oil Company Exploration and Production (OOCEP) is committed to instituting In-Country Value (ICV) initiatives which aim to optimise ICV in areas such as Omanisation, on the job training development and the creation of small local entrepreneurs
O
man Oil Company Exploration and Production (OOCEP) is the upstream subsidiary of Oman Oil Company (OOC). OOCEP was incorporated, as an E&P Company in May 2009 and it is, as such, in a development stage, with expected production in late 2013. Currently, OOCEP is developing block-60 (Abutabul field) and the Musandam Gas Plant (MGP) for which the design, procurement and construction activities have commenced. Block 42 exploration is also underway. “Notwithstanding our stage of development, as a Government entity and a 100 per cent Omani company,
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our interest in upholding and coming up with ICV initiatives pertaining to a newly formed exploration and production company is something very dear to us,” says Said Ali Al-Sarhani, In-Country Value Manager, OOCEP. He further says, “ICV is not new to Oman. It has been practiced in Oman by most of the oil companies under the name of ‘Local Content’. Thus, most of the oil companies in Oman have some basis to implement the newly launched In-County-Value (ICV). OOCEP recognizes that the development of block-60 and MGP provides significant In-Country Value (ICV) opportunities. Consequently, OOCEP is committed to instituting ICV initiatives which aim to optimise ICV in areas such as Omanisation, on the job training development and the creation of small local entrepreneurs.” He adds, “Since the Oil & Gas ICV Committee was formed under the auspices of HE Nasser bin Khamis Ali Al-Jashmi, Under Secretary of Ministry of Oil & Gas (MOG), OOCEP has
been actively supporting the committee and its sub-committees to increase the supply of local goods and services with the aim of achieving step change in Omani manufacturing and services’ capabilities and thus increasing ICV and Omani job creation.”
to ensure that the contractors are in compliance with the agreed plans,” informs Said Ali Al-Sarhani. To ensure that ICV strategies are implemented in all aspects of our business, OOCEP has begun to drive a mindset change within the organization and its contractor community.
The ICV section of the company, which was formed barely eight months ago, is now an integral part of the OOCEP organization structure. ICV works closely with Supply Chain Management and OOCEP first tier Management to identify niche areas that would benefit the nation as a whole.
Talking further on the subject, Said Ali Al-Sarhani says, “Examples of ICV initiatives and tenders awarded to local companies as of today include but are not limited to: Drilling services for block-60; Supply of Carbon Steel Pipeline for the export pipeline project; General civil services; Medical services; Utilized specialized contract such as tight gas fracc services to train Omanis in US; Utilized the current major construction contracts to provide on the job training for Omanis; and Developing an ICV reporting and monitoring system.”
“This means focusing not only implementing ICV initiatives but by also monitoring. ICV is also part of the company’s tendering evaluation and selection process, which aims to maximize ICV without impacting OOCEP’s principles on HSE, quality, schedule and/or cost. “In addition, ICV forms part of supplier performance and therefore ICV detailed plan is monitored on regular basis
“OOCEP will continue maximizing ICV during the current constructions activities and in the next operation stages. We will also continue supporting Oil & Gas ICV Committee directives and initiatives,” he adds.
Sep-Oct, 2012
15
COVER STORY
MAXIMIZING THE OMANI CONTENT
‘Across its operations, BEC accords top priority to sourcing locally produced goods/ materials, subcontracting a part of construction work to Local Community Contractors and other local subcontractors and maximizing the Omanisation across various skill levels of workforce and thereby achieving considerable ICV addition,” says Pradeep Koppikar, General Manager – Corporate, Bahwan Engineering Company (BEC) LLC. Excerpts of an interview with him: WHAT ARE THE GUIDING PRINCIPLES BEHIND BEC’S ICV POLICY AND RELATED PROGRAMMES? The guiding principles behind BEC’s ICV policy and related programmes are to maximize the Omani content of our procurement and subcontracting by utilizing locally made products and services subject to meeting client’s specification, to set standards to improve productivity and develop Omani skills so that it contributes to the local economy. It focuses on training, development and employability of Omanis by imparting requisite skills and creating meaningful employment for them. We are concentrating on the line functions like selling, contracting, manufacturing, projects & construction management, HSE management and also in support functions like procurement, administration, finance & accounts and commercial to induct and encourage Omanis to take up positions at various levels. CURRENTLY, IN TERMS OF PERCENTAGE AND VALUE OF YOUR OPERATIONS, HOW MUCH ICV IS BEING GENERATED BY BEC? Our operations are diverse and complex,
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Sep-Oct, 2012
covering projects, construction, trading, facilities management & maintenance service and manufacturing. A significant part of our operational expenditure is on materials and labour, which is spent within Oman. For instance, in our civil projects more than 90 per cent of materials and 100 per cent labour spend is local. In case of procurement of mechanical & electrical products and chemicals, we give priority to the locally manufactured products. We also subcontract a variety of services like transportation, training, catering, fabrication, pre-casting, etc. to companies owned by Omanis. In general, across its operations, BEC accords top priority to sourcing locally produced goods/ materials, subcontracting a part of construction work to Local Community Contractors and other local subcontractors and maximizing the Omanisation across various skill levels of workforce and thereby achieving considerable ICV addition. SHARE DETAILS OF YOUR MAJOR ICV PROGRAMMES RELATED
TO EMPLOYMENT, TALENT DEVELOPMENT, PROCUREMENT AND CONTRACTING, ETC. In employment, our recruitment programme focuses on selection of fresh Omani graduates and diploma holders who are properly tested through standardized tests to suit local conditions. The selected persons are put through suitable training programmes to induct them into the appropriate disciplines of their attitudes and individuals are mentored by their experienced seniors. We also recruit for our site construction functions, Omanis and train them up for various trade categories and impart onthe-job training with mentors. We have recruited in the past Omani recruits for various trades, put them through HSE induction and other job/skill specific structured training programmes before inducting them to the on-the-job training under the mentorship of experienced supervisors or managers. BEC is actively working with local training institutes to offer training in the various disciplines leading to technical competence with class room
more than 35 per cent of Omanisation, which exceeded the target specified in the contract through setting up site based training center for various trades. For PDO-Marmul Polymer Flooding Project (2007 - 2009), we achieved LCC subcontracting value of more than 200 per cent of the target specified in the contract. Similarly, PDO-Saih Rawl Depletion Compression Project (2007 - 2010), we exceeded the LCC subcontracting by more than 50 per cent of the target. We have also encouraged several Omani small entrepreneurs to set up their transportation business. In this, we commit to them long term service contracts to transport goods, people for our various project sites and manufacturing unit. LASTLY, WHAT ARE THE CHALLENGES IN THE PATH OF INTEGRATING ICV STRATEGY IN THE OVERALL BUSINESS PLANNING? The major challenges in integrating ICV strategy are lack of good manufacturing base and availability of locally manufactured products and services in Oman in certain sectors. A majority of the raw material inputs like steel and other metals, chemicals are necessarily imported.
lessons, workshop training and on-thejob training in structural welding, pipe fitting, rigging, plumbing, carpentry, masonry, electrician, etc. TELL US ABOUT THE KEY SUCCESS STORIES OF BEC’S MAJOR ICV INITIATIVES. BEC has always been focusing on maximizing the ICV/Omanisation across its operations. Some of our achievements
in this regard are as follows: For all our construction contracts, we set up fabrication yards at sites and carry out pre-fabrication of pipe spools, supports, etc. We have also got a fabrication unit at Sohar to produce structural steel works on a large scale. This adds significantly to the ICV. During the execution of construction contract for QLNG Train-3 Project, BEC successfully achieved
There is lack of adequate pool of skilled and experienced workers in various technical trade categories. There are also challenges in attracting and retaining skilled Omanis in the construction sector, in particular, which offers a large employment potential. Since a major part of our workforce is in construction segment, we also feel that financial support for start-ups of SME businesses for the locals would be helpful to encourage Omanis to add In-Country Value. Sep-Oct, 2012
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COVER STORY
THE BALANCING ACT
Despite the tough challenge, Oman Oil Refineries and Petroleum Industries Company (Orpic) has been balancing the needs between business continuity and helping to develop the local market
O
man Oil Refineries and Petroleum Industries Company (Orpic) is one of Oman’s largest companies and one of the rapidly growing businesses in the Middle East’s oil industry. It has been created from the integration of three companies - Oman Refineries and Petrochemicals Company LLC (ORPC), Aromatics Oman LLC (AOL) and Oman Polypropylene (OPP). Its refineries at Sohar and Muscat, as well as the aromatics and polypropylene production plants in the Sohar complex, provide fuels, chemicals and feedstock to Oman and to the world. It has a team of more than 1,600 employees - the majority Omanis - working across these four plants with the common goal of building an integrated Omani refining and petrochemicals business which the nation is proud of. ICV POLICY Orpic’s In-Country Value Policy is based
on six key principles: Omanization and dictating to its contractors the minimum Omanisation percentage for each contract; Increasing local expenditure from the local market (aiming to reach 10 per cent in 2012); Buying local material or locally manufactured goods; Providing raw material for downstream industry at competitive price (e.g. sulphur); Meeting 100 per cent of Oman’s fuel needs and; Provision of training opportunities to Omanis. MAJOR ICV PROGRAMMES The company has initiated different programmes to promote ICV. The prominent ones include: Procurement and Contracting: Developing and updating local vendor list; Advertising tenders in local newspapers and at Sohar Chamber of Commerce; Created Orpic office outside the port area to ease vendors’ registration and offers submissions and; Annual Procurement and contracting workshop
ICV GENERATION BY ORPIC USD Mn
Orpic
PRODUCT SALES
Domestic
Export
Total
2012 Total Estimated Value
5,619
3,733
9,352
Percent Domestic / Export
60%
40%
USD Mn
Orpic
RAW MATERIAL PURCHASED
Domestic
Import
Total
2012 Total Estimated Value
6,820
1,862
8,682
Percent Domestic / Export
79%
21%
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with local businessmen and women. Employment and talent development: Developing JDP (job development profile)/ PDP (performance development plan/ and career path for technical function in order to develop its Omani staff; Initiated professional leadership programme in order to enhance the Omani leadership capabilities and ensure their readiness for the current and future requirements; An Omanization plan has been initiated to create opportunities for Omanis to fill more complex job and; Fulfill the business requirements by recruiting experience Omanis or fresh graduates and train them in order to fill vacant positions in all levels. CHALLENGES ON THE PATH Been able to meet 100 per cent of Oman’s ever increasing fuel demand and achieving an overall Omanisation rate of 69 per cent, have been the two notable successes of Orpic on the ICV front. However, there are challenges in the path of integrating ICV strategy in the overall business planning. According to a company spokesperson, the challenges include: “Balancing the needs between business continuity and helping to develop the local market; Immature local market; Government Tender Board procedures does not provide flexibility to enable companies to support local business and; Education quality necessitates longer period for Omanisation than necessary at a higher cost (the need to keep expat working while Omanis being trained).”
GROWTH PARTNER
‘In addition to the ongoing work that we are undertaking in the establishment and expansion of our manufacturing and production facilities, our ongoing mission is the continual development of nationals,’ says Peter Hall, CEO, Al Hassan Group of Companies. Excerpts of an interview with him: TELL US ABOUT YOUR ICV POLICY? Al Hassan Group of Companies has generally adopted a policy across the businesses of endeavouring to maximize the utilization of Omani products and services and strive for the development of national talent. From the early 90s, we have been manufacturing LV & MV switchgear and control equipment in our facilities in the Sultanate. Over the period, we have established ourselves as the leading supplier of this type of equipment in Oman. In Al Hassan Engineering, we have established and continue to develop and expand our fabrication facilities, which are ASME S, U and R accredited and also have ISO 9000 quality assurance accreditation. This allows us to produce high quality structural steelwork, pipework and pressure vessels for use in our Contracting Business as well as to market externally to other customers. SHARE DETAILS OF YOUR KEY ICV INITIATIVES AND CONTRIBUTIONS. In addition to the ongoing work that we are undertaking in the establishment and expansion of our manufacturing and production facilities, our ongoing mission is the continual development of nationals. We have a number of initiatives that are currently operating. Indeed, our Management Development Centre and Management Training Programmes have been operating successfully for a number
of years now; every quarter we have an intake of around 20 nationals and provide them with a structured training and development programme to effectively equip them to become value adding members to the business and industry in general across various functional and management activities. In addition, we have strong and close relationships with some of the local academic and training institutes. We are one of the very few organizations in Oman, which believes in the university/industry interface and for both University of Nizwa and Sultan Qaboos University, we are assisting them in redesigning their curriculum to meet industrial requirements. We also provide industrial training to the students of various higher colleges and universities, which is required as part of the studies. With the training institutions, we have given support through the provision of
on-the-job training at site and in our office facilities. With our established manufacturing facilities in Ghala and Buraimi, the continued development of our local switchgear products and our ability to maintain our leading market position in this field is something that we are very proud of. In addition, our growing ability to locally handle complex structures, pipework systems and pressure vessel allows us to make a great contribution to the sustained development of the national economy and society. WHAT ARE THE CHALLENGES ON THE PATH TO TAKE THE ICV STRATEGY FORWARD? Our challenge into the future will be to continue in the identification and development of local products and services that will meet our customer’s acceptance criteria. Further the quest to identify, recruit and develop nationals will be an ongoing challenge. Sep-Oct, 2012
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COVER STORY
PDO AWARDS $350MN CONTRACTS TO OMANI BUSINESSES Petroleum Development Oman (PDO) has awarded a series of significant contracts to Omani businesses as part of its drive to create and secure employment by increased procurement of local goods and services
P
etroleum Development Oman’s (PDO) In-Country Value (ICV) investment programme has seen the Company sign seven major deals worth more than US$ 350 million with domestic contractors across the Sultanate in the past three months alone.
The recent agreements include:
•
•
A Central and North Oman pipeline maintenance contract to Al Shawamikh Oil Services, one of PDO’s four Super Local Community Contractors (SLCCs), and Al Ghalbi International Engineering and Contracting, one of PDO’s Local Community Contractors. A South Oman pipeline maintenace contract to SLCC Al Baraka Oilfield Services supported by Amal Petroleum Services as subcontractor.
•
A substantial deal, initially for five years, with Shaleem Petroleum Company to cover hoist service provision in PDO’s southern operations.
•
Two hoist contracts with new local companies CPDS and BOOFs who will operate three hoists executing well access and repair operations in North and South Oman.
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Sep-Oct, 2012
Contractor ABB Muscat has also been awarded a US$ 100 million contract for the engineering, procurement and construction of a new condensate processing plant at Saih Nihayda with fabrication of process vessels, such as pressure vessels, to be carried out in Oman. In addition, PDO has received Shareholder approval to award a 10-year contract for the provision of fishing and milling services to Fishing Remedial Experts Enterprise, a key element of which is that fishing and milling tools will be manufactured in Oman within 24 months of the contract award date. PDO Managing Director Raoul Restucci said: “ICV has been part and parcel of our operations for several decades but we have stepped up our efforts pervasively across the company since 2011 in support of His Majesty’s
National Objectives Programme. These substantial contracts and ongoing contract evaluations will help to guarantee and create thousands of Omani jobs in the Oil and Gas and ancillary industries and reaffirm our faith, support and commitment to local contractors to execute the work required safely and to an excellent technical standard. “ICV is a core value in PDO and is firmly embedded in our business model, providing Omanis with sustainable job opportunities and vocational training in key skills to help underpin the economic future of the Sultanate. Integral to the Company’s ICV effort, Al Haditha Petroleum Services has recently become the first SLCC to start field work with a significant flowline replacement programme starting at PDO’s Yibal site in the north concession area.”
2-5 December 2012
INTERCONTINENTAL HOTEL, MUSCAT, OMAN
www.theenergyexchange.co.uk/gasarabia
GAS ARABIA SUMMIT
8th Annual Meeting
4 DAYS OF COUNTLESS OPPORTUNITIES 4 DAYS 200+ EXPERTS 15+ COUNTRIES A must-go gathering
SPEAKERS AND ADVISORS INCLUDE David Dalton, Regional President,
Middle East, BP
Managing Director, PDO
Abla Al Riyami, Gas Director, PDO
John Blascos, Country Chairman, Shell Development Oman
Benjamin Pappas, Head of Business Development, BP Middle East
Raoul Restucci,
UNCONVENTIONAL GAS DAY HOSTED BY 2 December
GAS ARABIA AWARDS Celebrating excellency in business 3 December
Yousuf Al Ojaili, Chief Executive Officer, Oman Gas Company
John Roper, Head of Middle East,
E.ON Ruhrgas
Ali Mohammed Al-Emadi, Head of LNG Marketing, Qatargas
Mohamed Al Harthy, Chief Executive Officer, Oman Society for Petroleum Services (OPAL) Claudine Sigam, Economic Affairs Officer, Special Unit on Commodities, UNCTAD
www.theenergyexchange.co.uk/gasarabia Co-hosts
Sponsors
Supporting Partner
Media Partner
CSR
INVESTING IN GEN-NEXT
‘Oman Oil Company is investing RO2 million annually in the National Career Guidance Center,’ said the Director General of the National Career Guidance Centre in the Ministry of Education during the awarding ceremony of ‘Ghaytuh’. Reports Fatma al Araimi
D
uring the last 12 month, Oman Oil Company (OOC) has been focusing its Corporate Social Responsibility (CSR) policy on the next generation. To creating the right environment and providing knowledge for future leaders, two interesting initiatives have been taken up by the Company to provide students with the right theoretical and practical knowledge.
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Sep-Oct, 2012
Elaborating on the importance of initiatives like ‘Takatuf’ and ‘Ghaytuh’, Ahmed Al Wahaibi, CEO of OOC said: “Education is the catalyst by which our society will be empowered to interact directly with the future. It is the gateway to modernity, prosperity and progress, and these young Omanis will be key players in the development of our future. At Oman Oil Co., priority areas for investment will continue to
be education and training to ensure that Oman’s people are best equipped for the ever-evolving global work environment. Investing in education is investing in our future,” he added. The first initiative is ‘Takatuf’ (means to stick together), a Summer Residential Programme targeting 11th grade students from the nine regions of the Sultanate, with the aim of providing opportunities for some of Oman’s brightest and most outstanding youth to succeed at top international universities and colleges. The programme brings together a range of intellectual and personal experiences that will prepare Takatuf Scholars as successful independent learners, global citizens and leaders for and in the Sultanate of Oman. When London Business School was awarded the contract of ‘Takatuf’, they were clear on the objetive of building national talent. Hence, they planned it accordingly. The first part of the programme, ‘Lead With Impact’ has been constructed for top level managers, while the second part, ‘Emerging Leaders’ focused on new and upcoming managers with less managerial experience. The goal is to cultivate a team of highly talented work force packed with entrepreneurial qualities that are fully Sep-Oct, 2012
23
CSR
equipped and capable of unlocking future business opportunities within the country. “We see our people as the key to our future – not just for our businesses, but for Oman itself. That’s why we are proud to embark on an ambitious longterm leadership development programme with London Business School, to help us maximize our people’s leadership potential and enable them to become the kind of leaders capable of developing and growing our companies and our region,” said Khalid Al-Jashmi, the Head of Human Capital, Oman Oil Company. The first stage was a three-week summer camp. The idea behind the camp was to prepare young Omanis for success in their continuing education and longterm careers. Through a competitive
process of application submission and selection, 60 of the Sultanate’s highest academic achievers were offered a place in the summer programme. During their three weeks in residence, the scholars were taught by international faculty in an integrated enrichment programme that included critical thinking, problemsolving, research and group projects. A key outcome of the experience was new ways to blend learning and action for success in university studies and employability skills for the future. As part of the first phase, Takatuf scholars worked in groups on ten projects 24
Sep-Oct, 2012
covering several topics related to economy, power, health, education and social issues. The projects discussed the difference between public and private education, prison reforms in Oman, addiction (drugs, alcohol, etc.) and social networking. Different kinds of questions ranging from the need of a nuclear reactor in Oman, to means to decrease traffic accidents and the future after oil were asked. The programme has been designed in a manner that it comprises two-courses. While the first part of it was concluded by the end of the summer camp, the longer and more comprehensive part with a duration of 10 months has started. During these months, the scholars will continue to hone their abilities through
an e-Portfolio project and online independent learning under the guidance of the Takatuf Scholars Programme Directorate. At the end of the process, a select group of ten scholars will be awarded an international scholarship for two years of pre-university enrichment and four years of undergraduate education at the world’s leading colleges and universities. IT’S ABOUT TIME The second initiative by OOC for the year was ‘Ghaytuh’ which means ‘It’s about time’. It is under the cooperation
of OOC and the Ministry of Education, represented by the National Career Guidance Centre (NCGC) in partnership with Prosper Consultancy. Dr. Sana bint Sabeel Al-Balushi, the Director-General of the National Career Guidance Centre, asserted, “Such a programme improves key skills and knowledge of students. It gives them the chance to discover new opportunities as well as realize their personal and career abilities so that they can determine their future destination.” Dr. Sana added that this fun and learning trip seeks to expand students awareness regarding job opportunities and skills needed to enhance their personalities. The pilot focused on 10th grade students for one month of their summer holidays. A
total of 80 boys and girls from Muscat Governorate schools utilized their leisure time, to acquire various skills by participating in different practical activities. The participants of this programme attended practical training courses to acquire a number of everyday skills such as plumbing, maintenance of electrical devices and vehicles, managing events, hospitality manners, technical support, graphic design and photography. The programme was also aimed at making the students know more about business terms and profit opportunities available in the labour market through
practicing simple works in their societies. The activities, applied in this programme, were characterized by fun and entertainment to encourage students to work. While exploring the business opportunities as young entrepreneurs, some tended to work alone. Alaa’ al Syiabi started photography services for 2-3 weeks before the end of Ghaytuh and accumulated a net profit exceeding RO500. Others also stood-out even though they worked in groups. A member of ‘Dream House’, a students’ company offering plumbing and electrical maintenance services, stood out for his marketing skills that got him a contract with one of the leading real-estate companies as a part-time
employee. Among the 26 enterprises, the highest profit recorded was by ‘Ghaytuh Programming and Computer Maintenance’ that earned more than RO1100 (see the graph).
GHAYTUH PROGRAMMING & COMPUTER MAINTENANCE
At the end of Ghaytuh, participants were evaluated based on their branding, marketing, services, profit and attitude. Due to the great appreciation by participants and society, both ‘Takatuf’ and ‘Ghaytuh’ are planned for continuation for more years to come, with more investment in building the national talent. Sep-Oct, 2012
25
MARKETING FEATURE
VOLTAMP BAGS 90 MVA & 75 MVA 132 KV CLASS POWER TRANSFORMER ORDERS FOR PDO PROJECTS
Voltamp recently bagged prestigious orders for 132 kV Class Power Transformers required for PDO Nimr Substation Upgrade, PDO Al Amin, Al Khalata and PDO, Lekhwair Project involving 45 MVA, 75 MVA and 90 MVA 132 kV Class Power Transformers
V
oltamp shall be forever grateful to PDO for their support and is totally committed to supplying world class quality power transformers. Voltamp is well known in the region for delivering quality products and service for over two decades and have taken a step up towards excellence. Voltamp Power LLC, Sohar, a fully owned subsidiary of Voltamp Energy SAOG, has successfully completed supply of their first order for 4 nos. 125 MVA 132/33 kV Power Transformers. Two of them have already been delivered to Oman Electricity Transmission Company SAOC (OETC) and balance 2 nos. are awaiting dispatch instructions. These Power Transformers have been 100 per cent manufactured at Voltamp’s world class power transformer factory located in the Sohar Industrial Area, Sultanate of Oman. On the occasion of the delivery of its first unit of 125 MVA Power Transformer, HE Mohammed al Mahrouqi, Chairman PAEW, said, “The dispatch of the 125MVA power transformer, manufactured by Voltamp at Sohar for the first time in the GCC, is indeed a proud moment for Oman and all Omanis. Now our power companies, utilities and contractors, do not have to look abroad for such transformers. Apart
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Sep-Oct, 2012
from manufacturing transformers up to 220KV class, location of the factory within Oman offers utilities the added benefit of locally available repairs and after sales services. I am also glad to learn that Voltamp has commenced providing in-house training of nationals and employees of public utilities in transformer design, manufacturing and maintenance”. Earlier in December 2011, Voltamp Power received an approval from DCRP, Oman for 20 MVA 33/11.5 kV Power Transformer. Voltamp is the first and only local Omani Company to have been accorded this approval. Voltamp will manufacture the large power transformers at their new world class facility at Sohar, Oman. Voltamp has received an overwhelming response from the Oman Utilities, MOD and the Oil & Gas Sector who have welcomed its foray into hi-tech manufacturing with their full hearted support. Voltamp Power is executing numerous orders from Distribution Utility Companies, MOD and EPC Contractors for Power Transformers ranging from 20 MVA 33 kV to 90 MVA 132 kV for various projects including those of the Petroleum Development of Oman. With the operation of this new world class power transformer plant, Voltamp can now cater to Oman’s requirement for
the complete range, from pole mounted to the Extra high Voltage 220 kV Class Power Transformers. It will cut Oman/ GCC’s dependence of sourcing them from outside the Region. Voltamp is committed to offer European quality at local prices and local service backup. Voltamp has been at the forefront of introducing hi-tech electrical products manufactured in the Sultanate. It was the first manufacturing unit in the Sultanate to introduce LV Switchgears in 1987, later Distribution Transformer in 1992 and now the Power Transformers up to 315 MVA 220 kV Class. The world class power transformer manufacturing facility was built at a project cost of RO11 million with a built up area of 14,500 sq m over a plot of total 80,000 sqm. The technology providers are the Tatung Company of Taiwan. Voltamp’s new factory has the annual capacity to produce 6,500 MVA and the range extends up to 315 MVA 220 kV Class. The testing facility is at par with the best in the world and has been approved by KEMA, Netherlands. Voltamp has a proven capability for repairs of transformers up to 315 MVA 220 kV Class. Their Engineering Service Division has repaired 42 different makes of Transformers including 50 MVA 132 kV Class Power Transformers. This capability is also unbeatable in the GCC.
GAS ARABIA SUMMIT TO FOCUS ON STRATEGIC DEVELOPMENT OF MIDDLE EAST’S GAS INDUSTRY
Speakers will discuss how to capitalise on the Middle East’s 42 trillion cubic metres of proven gas wealth QNB Capital, an affiliate of Qatar National Bank reported that the Middle East region has around 42 trillion cubic metres (tcm) of gas to benefit from. This December, a plethora of global and regional industry experts will convene at the 2012 Gas Arabia Summit for four days to discuss how to capitalise on the numerous opportunities that the gas industry offers. Organised by the Energy Exchange, the eighth annual Gas Arabia Summit will be held from 2–5 December, 2012 in Muscat, Oman. This year’s event is cohosted by Oman Gas Company, Oman LNG, BP and Petroleum Development Oman and sponsored by TOTAL, OMV, Honeywell and UOP. The International Energy Agency (IEA) reported that the expected Middle East gas consumption would rise from 389 billion cubic metres (bcm) in 2011, to 468 bcm in 2017. However, this 79 bcm of additional gas supply forecast is contingent on the successful development of relatively expensive new gas fields. The 2012 Gas Arabia Summit will focus on the entire gas sector including two days dedicated strictly to developing unconventional gas and reducing gas flaring respectively. Last year, Sultan Chatila, Regional Marketing Director for UOP, said: “Gas Arabia is a key event for gas upstream
and downstream interaction at the executive level.” Distinguished speakers will take the podium to discuss the favourable economics, logistics, strategies and efficient methods of extraction to significantly enhance productivity of this potentially lucrative resource. The main Gas Arabia Summit will provide a comprehensive analysis on the gas industry both globally and regionally. Presentations and discussions will help attendees understand the global gas industry, international demand and supply, global strategies in terms of anticipating setbacks and execution, technological updates and regional opportunities. Arianna Neri, Project Director, Gas Arabia Summit said: “Gas is an interesting element, a non-commodity but very much treated and traded as if it was. This year the Gas Arabia Summit will largely focus on strategic development as opposed to tactical execution. We have further expanded the summit’s scope to not just focus on Oman, but the rest of the region, specifically Qatar, Kuwait, Saudi Arabia and the UAE. With representatives from several leading international gas companies confirmed to participate at this year’s summit, it is the ideal platform to develop business strategies and sit among key decision makers in the gas arena.” The QNB Capital Report states that Qatar has the GCC’s largest
gas wealth of nearly 25 tcm, the world’s third after Russia and Iran. Furthermore, Saudi Arabia has nearly 7.5 tcm of gas resources, the UAE has 7 tcm and Kuwait has 3 tcm. According to the International Group of LNG Importers, despite a global economic downturn, LNG trade volumes grew by almost 10 per cent in 2011, with global output reaching 240.8 million tonnes. Building on last year’s inaugural meeting, the final day of the 2012 Gas Arabia Summit will be dedicated to Gas Flaring. Experts in the field of gas flaring will speak on the economic and environmental damage that is currently occurring. In addition, alternatives and strategies will be discussed on how to both efficiently use and dispose of this highly significant and valuable resource. The opening of the event on 3 December will welcome the presence of the Undersecretary of the Ministry of Oil and Gas, HE Nasser Al Jashmi. Speakers at the 2012 Gas Arabia Summit include senior level representatives from Qatargas, BP, TOTAL E&P, Shell, PDO, Oman Gas Company, OMV, UNCTAD and many more.
Official Media Partner of the event Sep-Oct, 2012
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MARKETING FEATURE
IDOC 2012
Information and Communications Technology (ICT) is at the heart of successful DOF implementation and this subject will be the focus of the workshop that precedes the 3rd International Digital Oilfield Conference (IDOC 2012 ) taking place in Muscat
While striving to realise the proposed value of Digital Oil Field (DOF), the continual development and deployment of new technologies will place an enormous burden on IT to facilitate the rapid and real time introduction of its model while maintaining a cost effective and agile position. In order to do this, an integrated and holistic approach to Asset Management must be based on a platform that facilitates common data, standards and processes and real time information flows. Alongside this, networks and telecommunications, particularly wireless scenarios that bring about fast data and data exchange, must reliably facilitate the conversion of data into information. Here comprehensive integration is required to get to right time information and enable meaningful collaboration and the vital human factor when incorporating new technologies and new software. Whereas video communications between corporate and field locations serve as a key money 28
Sep-Oct, 2012
saver, if the data is not processed properly or computer overload occurs, the opposite effect can occur. Information and Communications Technology (ICT) is at the heart of successful DOF implementation and this subject will be the focus of the Workshop that precedes the 3rd International Digital Oilfield Conference (IDOC 2012 ) taking place in Muscat from September 23 -25 , hosted by PDO (www.idoc- oman.com ). With most fields, there are many datasets and each member of an asset team needs easy access to this data in real time to contribute to an overall strategy to improve and increase field production. Combining the different data streams and allowing operators to access it on a single platform is the current next step in streamlining the E&P sector at a time when staff shortages contribute to the lack of critical skills deficit in the sector. Thus a united communications infrastructure for the entire enterprise delivers several potential benefits and
improved processes. By having a single network and embracing industry dataexchange standards, O&G companies can ensure that the right data is delivered to the right individual at the right time, enabling better-informed decisions. Individuals located either in the field or onshore will be able to access the corporate network via mobile devices, with access to the same information and resources as they would have in their corporate office. A major impediment to DOF has been a concern about the security of highly confidential data streams in a shared network. A unique approach is to drive security into the fundamental level of the network in order to manage and aggregate traffic, secure data and allow for faster response to threats in real time, which is crucial in the E&P sector.
Official Media Partner of the event
VIEWPOINT
DEEP DIVING ‘Over the next years, offshore installations will see a decrease in surface footprint matched by an increasing sub-sea one,’ says Mike Daly, Executive Vice President, BP. Excerpts from his speech at the World National Oil Companies Congress
T
he deepwater exploration and production industry has developed over the past 40 years from its early origins in Brazil. During this time, we have learned a huge amount about the geology of deepwater reservoirs and how to explore from them, about the engineering of deepwater developments and how to operate them and, the risks we face in deepwater activities. Today our industry produces about 9 mmboed from deepwater and has plans to double that by 2020. I will talk about trends in deepwater resources, and show you what I consider to be the key technology for understanding deepwater geologic systems. I will then discuss some of the key engineering and operating technologies for deepwater. DEEPWATER TRENDS AND OUTLOOK The trend of significant deepwater discoveries has continued over the last decade, with over 250 bnboe found to date in waters deeper than 200m. Deepwater resources account for around 30 per cent of the global conventional yet to find, indicating that we can expect to have another 20 years of deepwater discoveries at current rates. Of course many assumptions have to be realised for that future to materialise. So let’s look at the recent past to see how we are doing. Deepwater areas dominate with Brazil and Angola leading, along with many other significant areas. The
clear message here is that all new plays in the last decade, except Sichuan, have come from deepwater areas. And within that deepwater category, there have been three distinct exploration themes: deltas, pre-salt rifts, and stratigraphic traps. These discoveries will turn into production through this decade and underpin production growth. They also indicate a significant future of more discoveries. So, deepwater has real momentum for the future. Fundamental to
that future is the continued development of technology, both to explore for new basins, plays and prospects, and to develop and produce discoveries. TECHNOLOGY ADVANCES IN SEISMIC IMAGING It can be helpful to think of technology in two dimensions: First, in terms of developing the geoscience that enables our understanding of deepwater geological systems. This is largely through improved seismic imaging, Sep-Oct, 2012
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VIEWPOINT
which gives us the ability to see, describe and understand deepwater reservoirs. Second, in the development of engineering capability to build safe operating systems, drill deepwater wells, develop and produce deepwater fields - and do all that safely. Let’s look at a couple of case studies where BP has developed seismic technology for a particular geological problem and reaped the benefits. The Mad Dog field in the Gulf of Mexico was discovered in 1998. It lies partly beneath a salt canopy and, at that time, we could image only a section of the field due to interference from salt. We decided to develop the part of the field we could see, and launch a technology research project to improve the image of the rest of the field. We already had conventional 3D over the prospect and needed a new technique. We started by developing a workflow to simulate the seismic required to image the field. This involved building a 3D computer model of our best detailed model of the geology of the area. Then we used our high-performance computing centre in Houston to simulate seismic data, testing both existing acquisition methods, as well as some novel ones of our own. Once we understood the Mad Dog problem well enough, we came up with a potential seismic acquisition method that might solve the problem. We were ready to go to the real world and test our ideas. Our solution was to acquire wide azimuth data to image beneath the salt canopy. We termed this WATS: wide azimuth towed streamer seismic data. WATS is one of four distinctive new acquisition methods pioneered by BP over the past decade to address different problems. The others are: • Multi-Azimuth Streamer data • Deepwater ocean bottom nodes data • High density simultaneous source methods on land 30
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THE RIGHT TECHNOLOGIES
This bespoke acquisition method became the standard in the Gulf of Mexico, and helped us open up the sub-salt paleogene play fairway to make several giant discoveries on the back of Mad Dog. The latest example of this was Tiber, which was discovered in 2009. Seismic data for Tiber, both conventional 3D and WATS 3D, are shown in the next slide. The images capture the improvement in data quality that WATS provides. Let’s turn to a case study from Azerbaijan where we are pushing seismic technology further. The geology of the Caspian basin is complex; one of the seismic imaging challenges we face is “seeing through” mud volcanoes. The small picture centre-top is a mud volcano onshore Azerbaijan, similar to the large subsurface features above our offshore fields. The upper right picture shows a seismic image over the crest of one of our discovered fields. The fluidized “mud” in the volcanoes slows down the seismic waves, making it difficult to focus the seismic when it
is processed. This reduces our ability to image the reservoir structure and fluids accurately and consequently to develop them effectively. However, if we can obtain an accurate description of the seismic wave velocity field in the mud volcanoes, we can improve our seismic images significantly. The picture on the lower left shows a high-resolution velocity model derived from a processing technique known as Full Wave Form Inversion (FWI). This basically is an iterative and very intensive form of velocity modeling. The model is complex; the stems are a series of features that represent our mud volcanoes. Using the seismic velocity field derived from FWI to process the seismic data gives us a coherent picture of the structure below the model. Drilling has confirmed that this image is much more accurate than the previous one and FWI is now a required part of our approach to seismic imaging of these giant fields in the Caspian. So, I hope that you can see from the case studies that these two complementary
but very different imaging technologies have created value in our deepwater world. We use these and other imaging technologies in BP’s exploration and development programme globally, working with a number of National Oil Companies (NOCs), most notably with SONANGOL. Currently, we are exploring beneath salt in the Atlantic with SONANGOL and Petrobras. With the Libyan NOC we are starting to explore a new and exciting frontier beneath a thin but complex evaporite sequence in the Mediterranean deepwater Sirte basin. DEEPWATER ENGINEERING TECHNOLOGY Turning now to a different discipline, I want to talk about deepwater engineering technology. In 2010, BP experienced the tragic Deepwater Horizon accident where 11 men lost their lives. It is a tragedy none of us will ever forget. We continue to learn the lessons from the Deepwater Horizon accident and response, and are building on them to strengthen the way we work. The learnings have been split into five capability areas: accident prevention and drilling safety - our primary focus area – containment, relief wells, spill response and crisis management. New guidelines have been established in each area as we work to further enhance our engineering technical practices and group standards. To guide us in all this, we have created an independent Safety and Operational Risk (S&OR) organization, staffed with experienced safety professionals, including many from other high-hazard industries. We have now resumed drilling in the Gulf of Mexico and have five rigs operating there at present. The experience of Deepwater Horizon has strengthened our capability
and understanding of deepwater development and operations. Our journey into deepwater began with the extreme MetOcean conditions in the North Sea in the early 1970s. We then took a major step forward in the early 1990s with the development of the Foinaven and Schiehallion fields, West of Shetland, using moored FPSOs. Later, in Angola, we followed this trend with the giant FPSO Greater Plutonio, and today we are commissioning our second FPSO in Angola, PSVM. The Gulf of Mexico required a different solution because of the threat of hurricanes. There we built moored structures, either as Tension Leg Platforms (TLPs) like Holstein, or Spars, as on Mad Dog because they remain fixed in place during hurricanes. As we moved into deeper water with larger, more complex developments, we needed bigger platforms to accommodate all our equipment. So we built Thunderhorse, still the largest semi-submersible production unit in the world, and Atlantis, the deepest water one at the time of commission. Looking forward, the key issue is how we accommodate the weight of equipment required for large, complex developments in very deep water. We can place equipment on the sea floor but we cannot generate the power required to drive these huge developments underwater. Over the next years, offshore installations will see a decrease in surface footprint matched by an increasing sub-sea one. With this comes a huge rise in demand for power generation, which will be needed to operate rotating equipment, process oil, gas and water, and for export, communications and people. This is clearly displayed in our Mad Dog Spar, which has three levels of facilities
stacked on top of each other and a drill rig on top of that! All in a space the size of a football field. The spar is an 80mbd and 60mmscfd facility, limited not by resources (we are currently engineering Phase 2) but by scale, and by the extent to which the spar’s buoyancy can support an increasing weight load and diminishing space. So the technology of the future must target lighter-weight facilities and efficient topside components that can deliver the same or more capability with a smaller footprint. This will allow us greater flexibility in field development. Having maxed out on these constructions, we are ready for a radical solution: reconfigure topsides’ equipment so that they can be placed on the seafloor. There is huge advantage in this. It is also an inherently safer solution as we separate man from equipment and, eventually, from the processing of petroleum. Such a simple idea – but such a huge step it seems. As we move to this subsea world a further step change will be required in power generation. With sufficient power we can operate subsea pumps to provide high- pressure water injection capability from the seafloor. This debottlenecks the host facility and eliminates risks associated with high-pressure risers and flowlines, to deliver water to the seabed. It also secures additional recovery of hydrocarbons from the reservoir. We believe we can accelerate production and increase ultimate recovery by 10 per cent through subsea boosting of three-phase reservoir fluids to the surface. This benefit can be gained from many of our deepwater assets and is being realized today. However, the duty of service of these systems needs to be significantly increased. Sep-Oct, 2012
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POLITICS & ECONOMY
OBAMA OR ROMNEY? DOES IT MATTER?
There is not much choice for the Americans as both the contesters for the US President position have uninspiring formulaes for strengthening the economy and improve the social-wellbeing
I
n November this year, US will go to polls to elect the nation’s next president. Who will sail through? The incumbent Barack Obama? Or his Republican challenger Mitt Romney? That’s a tough question to answer as currently none of them seems to have a clear-cut advantage over the other. Does it really matter who comes to power? In the first week’s edition of ‘The Economist’, the cover page raises the pertinent question -- ‘One question, Mr President…just what would you do with another four years? The magazine’s inside pages further state: ‘…four years ago, an inspiring presidential candidate (Barack Obama) announced that he would change America…next week Mr. Obama will address his fellow Democrats at their convention in Charlotte, with little of this hopeful agenda completed… Mr. Obama’s first term record suggests that, if re-elected he could be the lamest of ducks. That’s why he needs a good answer to the big question: just what would you do with another four years?’ ‘Back to the Future: What’s at Stake for the Economy in the Obama-Romney Contest’, a report by Knowledge@ Wharton, looks at the election and its impact on the economy and society more objectively. It raises the question,
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‘Given the size of the problems, what is the most likely economic landscape to emerge after the election if President Barack Obama, a Democrat, wins, or if Republican challenger Mitt Romney wins?’ Interestingly, three Wharton faculty members quoted in the report say that, either way, the future is likely to look much like the present, for several years at least. “The notion in the political debate is that if you just do something a little bit differently, things will get much better. But it doesn’t work like that,” says Wharton finance professor Franklin Allen.
“It seems to me that one of the most depressing things about this campaign has been that it’s more or less tit-fortat, gotcha issues that have emerged, rather than any serious talk about what (the candidates) are going to do (regarding) the looming problems with the economy,” says Wharton finance professor Richard J. Herring. The report says that ‘whoever he is, the next president will face an immediate economic crisis, including the “fiscal cliff,” tax increases and deep spending cuts that will kick in automatically unless Congress and the White House can agree on an alternative. The cliff
is a result of a standoff in 2011 over raising the debt ceiling. “I think once the election’s over, that’s going to be the big issue,” says Allen. What if the Democrats, who support tax increases on the wealthy, and the Republicans, who do not, cannot agree, and the automatic provisions kick in, questions the report. “I think it’s quite likely that would lead to recession,” Allen states, predicting that tax hikes and cuts in government spending would reduce gross domestic product by about 3 per cent. The report further says ‘while both candidates say their policies would speed job creation, the problems run too deep to be resolved quickly. Allen adds. “It’s become a much more serious problem than we have ever had in this country before,” he says, arguing that many of today’s unemployed will remain so unless they are retrained, a lengthy and expensive process that he says is currently inadequate. Indeed, according to Allen, the current economic problems are unique in American history. The clearest analogy is Japan, which has been struggling for many years. What’s the solution? “I don’t think anybody really knows,” Allen says.’ The report says, ‘Obama proposes a continuation of the policies of his first term, which included efforts to stimulate the economy through federal spending and modest tax reductions focused mainly on people with low and middle-class incomes. He would allow the Bush-era tax cuts to lapse for people earning more than $250,000 a year, but would keep them for people earning less. He would stay the course with his health care overhaul -- the Patient
Protection and Affordable Care Act, or Obamacare -- and would keep most of the regulations imposed on the financial services industry after the financial crisis. Romney’s most dramatic economic proposal is to reduce tax rates even below the Bush levels in effect today, while making up for the lost revenue by eliminating some unspecified deductions and tax loopholes. Romney wants to repeal parts of Obamacare and many of the financial regulations. He would loosen environmental regulations and, compared to Obama, place heavier emphasis on exploiting coal and oil. While the candidates’ economic philosophies and positions are dramatically different, neither is likely to engineer a sweeping policy change, says Herring. The reason: divided government. Polls predict a close election, with neither contender’s coattails long enough to ensure massive wins by his party’s congressional candidates. The odds thus seem to favor a continued division in government, with neither party getting a veto-proof majority in Congress or a filibuster-proof supermajority in the Senate. “We have to recognize the fact that whoever wins isn’t going to get a huge, sweeping mandate to do whatever they want,” Herring says. Severe problems undermining the economy are therefore likely to remain unsolved, including the decay of roads, bridges and other infrastructure, debt problems, the eventual insolvency of Medicare and American students’ lagging educational achievements compared to other developed countries.’ ‘With a continuation of divided government, Obamacare will likely survive, Herring predicts. “Romney
has not clearly articulated a workable alternative, though heaven knows we don’t really understand the thing we’ve got.” From an economic perspective, a key problem with Obamacare as written, says Herring, is the requirement that businesses with 50 or more workers provide health insurance. That has dampened the creation and growth of small businesses, which are the primary source of new jobs, he argues.’ ‘Many business people favor the Republican promise to repeal Obamacare, but worry about what would come next, while Obamacare’s business mandates are a known quantity for now. “If Republicans win and I’m a business providing health insurance, I have a hard time knowing what to expect,” Pauly notes.’ ‘The stock market, after plunging in 2008 amid the financial crisis, has recouped nearly all of its losses. But Herring notes that a key factor in this rebound was the Federal Reserve’s efforts to keep interest rates low. Stocks may not do as well after these efforts end, as they must at some point. “We’re clearly relying much too much on monetary policy,” he says. “The Fed has basically been turning cartwheels” to bolster the markets and economy.’ ‘The alternative -- better fiscal policy to reduce the danger from factors like the federal government’s huge deficits and debt -- seems unlikely given divided government, according to Herring. As things stand now -- and are likely to stand after the election -major problems like the deficits, debt, growing health care costs and eventual insolvency of Medicare will be kicked down the road to be dealt with later, after they have become worse and the solutions more costly, he predicts. “If we actually wait until there’s no choice, it’s going to be very painful.” Sep-Oct, 2012
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SPECIAL FEATURE – DIGITAL
ENERGY EXCELLENCE
The potential value of following the path to smarter oil and gas becomes clearer when its financial potential is calculated through return on investment (ROI) modeling tools
T
he oil and gas industry is risky, highly political and wildly expensive. It’s also critical to every person on the planet. It fuels nearly every other industry in the world, from agriculture to information technology. In fact, worldwide energy consumption is expected to grow 53 percent between 2008 and 2035, with most of that energy being supplied by oil and gas. It heats our homes, powers our vehicles, and even serves as a key ingredient in paints, detergents and clothing. That the world is so dependent on oil and gas tends to complicate this otherwise straightforward industry. Because it is so critical to the global economy, the industry is subject to intense scrutiny by governments, regulatory bodies, investors and even ordinary citizens. Depending on which of these stakeholders you ask, oil and gas companies are expected to increase productivity, at lower cost to consumers, with less market volatility, all while managing the international political dynamics and protecting the environment. Whether these demands on the oil and gas industry are reasonable is beside the point, however. The truth is that the eyes of the world are fixed upon this $10 trillion market, and as such, this industry has little margin for error, and even less margin for inefficiency. Mistakes and waste can quickly lead to bad publicity, speculative swings, legislative action 34
Sep-Oct, 2012
and competitive disadvantage. It is an industry that should and must operate as efficiently and cleanly as possible. Fortunately, the oil and gas industry has at its disposal all the tools and capabilities it needs to do this. The technology and instrumentation to improve visibility, operating efficiency and decision making already exists and is being adopted throughout the industry. Cutting-edge technologies such as horizontal drilling and multilateral wells are expanding and improving every day. And the means to monitor and measure environmental impact are growing increasingly reliable. There is still much work to be done, however. In particular, critical data is not currently shared across tools or processes, either within or between companies. Data analysis also is highly dependent on human interpretation, slowing down the process and increasing the potential for errors. But with the amount of data already being captured, and the vast opportunities and insight that data could provide if it were integrated and analyzed in real time across the industry’s global landscape, even small improvements can add up to multi-billion-dollar payoffs. THE INDUSTRY IMPERATIVES The oil and gas industry boasts some of the most advanced geologic and chemical science in the world. But it is not the science that is holding the industry back. It is the inability to
manage and coordinate data, extract insight and increase productivity that costs the industry billions year after year. From the discovery of new reserves, to streamlining global operations, to maximizing the yield of old and new wells, the industry is leaving money and product on the table. There are three industry-wide imperatives that nearly all stakeholders agree are the keys to building a smarter oil and gas industry: ENHANCED EXPLORATION AND PRODUCTION The harder it becomes to find oil and gas reserves, the greater the need for better, more reliable information that can support timely decisions. It’s been estimated that a single well can generate over 200 DVDs worth of production data daily. But right now, petroleum engineers can spend as much as 60 percent of their time mining that data to better manage well performance. By integrating seismic and geologic data from multiple sources and using advanced data modeling combined with supercomputing, companies can increase the success rates of locating remote resources and unburden their engineers to focus on more productive work. Analytics, optimization and visualization techniques can render larger amounts of complex data in more intuitive ways, allowing engineers to improve their decision making and, ultimately, their production effectiveness. For example, Repsol’s decision to expand its primary, land-based properties into
integrated enterprise remains daunting. A key challenge is sharing operational information, including field, plant, pipeline and logistics data across sites, organizational units and geographies. Oil and gas companies need to ensure they have the right information, seamlessly integrated and without redundancy, to manage the business and its significant asset investments.
the Gulf of Mexico and offshore Brazil reflected its need to replenish declining reserves. To find substantial reserves, Repsol recognized that its best options lay farther offshore in fields difficult to both find and produce. However, by optimizing advanced seismic information and utilizing new technologies, Repsol increased its offshore drill success rate to 50 percent—against an industry average of 20 percent. IMPROVED REFINING AND MANUFACTURING EFFICIENCY In downstream operations, oil and gas companies face thin margins and are under constant pressure to manage costs. Short-term volatility in both the supply of raw material (for example crude and feedstock) and the demand for products requires greater insight, flexibility and responsiveness in refining and manufacturing operations to remain competitive and profitable. Real-time visibility into operations can help control costs and optimize the performance
of assets, facilities and employees, allowing nimble reaction to issues such as market dynamics, weather and logistics. It can also help improve safety, reduce environmental impact and track regulatory compliance. For example, one global oil refinery now has the ability to run production simulations to optimize plant runs using real-time data for decision support. This means that, in one instance, if a supplier ship with a particular type of crude becomes suddenly available, the company can use real-time information about market demand, price and plant capacity to perform ‘what-if’ scenarios and decide if it should change production operations and refine that crude. The end result is no more missed opportunities to optimize for higher margin. OPTIMIZE GLOBAL OPERATIONS Few industries are as inherently global as oil and gas. But the challenge of operating an oil and gas company as a globally
The supply chain is one area companies are increasing visibility and flexibility through sensor-based technologies across the entire enterprise’s operations. And through advanced supply-chain analytics capabilities, improved, integrated decision support is helping to optimize global activities. Already, one oil company is able to simultaneously monitor the flow of oil from more than 100 fields and nearly 50 gas-oil separators, through 11,000 miles of pipeline, into seven refineries and chemical plants—with only two dozen people in one remote location. THE PATH TO SMARTER OIL AND GAS The goal of creating a smarter oil and gas industry is daunting, but achievable. It is accomplished one process, one facility and one company at a time. Through our extensive work with clients in the industry, we have developed a series of steps that, if taken in a logical sequence, can address each of the imperatives discussed above, shortening time-to-value and increasing investment returns. Each step supports the following step and progresses the participant from instrumentation, to integration, to intelligence. STAGE 1: INSTRUMENTATION AND PRODUCTION DATA CAPTURE Implement field, well, and refinery instrumentation for surveillance of critical points, from surface, seafloor and wellbore data-gathering devices to Sep-Oct, 2012
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real-time data feeds from pipelines and refinement facilities. Instrumentation and data capture can provide real-time, system-wide visibility to better see and understand operations. STAGE 2: DATA MANAGEMENT AND INTEGRATION Integrate information using standardized upstream, downstream and enterprise data for a cross-functional view. Without proper integration and management of petro-technical data, organizations can severely limit the value of their installed analytical technologies. Valuable information goes unused and key insights are lost. In this stage, the data is set up for easy, rapid access, sharing and analysis, either automatically by applications or by staff employing webbased, front-end portals.
value
SPECIAL FEATURE – DIGITAL
Maximize value of oil and gas field
Asset Optimization Advanced Analysis and Forecasting Intelligent Alerts and Event Management Data Management and Integration Instrumentation and Field Data Capture maturity
Data in real time: implement field instrumentation for surveillance of critical points in the field
Integrated data: standardize subsurface, surface and enterprise data for a cross-functional view
Informed operations: monitor critical performance factors to enable rapid response
Predictive operations: enable proactive management of the field
STAGE 3: INTELLIGENT ALERTS AND EVENT MANAGEMENT Inform operations by monitoring critical performance factors and enabling rapid responses. Building on a strong foundation of instrumentation and integration, organizations can begin using data from multiple sources to set up intelligent alerts and event management. Compliance management, including corrective actions and action-tracking processes, can be integrated with operational management. Workflows can be organized to better leverage the intelligent alerts. Overall, the operation can benefit from greater employee productivity, deeper understanding of critical events and more effective decision making. STAGE 4: ADVANCED ANALYSIS AND FORECASTING This helps move field and refinery operations and management toward proactive decision making. Predictive analytics can assess and forecast the performance of wells, facilities and pipeline systems. Models can provide 36
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Realized value: help optimize resource recovery and model and implement systemic changes to help enhance depletion profitability and realize full value
insights into alternatives, along with changes in current operations, life-offield depletion planning and refinery production scheduling. Companies can gain greater visibility into overall field and refinery performance, essential to more comprehensive reporting, better forecasting, faster responses and higher quality decisions and actions.
the investments required to transform virtually any field. They can estimate the kind of return that is possible from each capability gained along the path.
STEP 5: ASSET OPTIMIZATION Optimize field and refinery assets through operational modeling and predictive analytics. In this final step, the producer can optimize assets by sharing information across function, visualizing interactive data and collaborating both inside and outside the company.
The oil and gas industry has never been an easy business, and it’s not getting any easier. But its importance, and its profile, in today’s economy cannot be overestimated. That is why it must transform, always strive to maximize the return on every investment dollar and recover every drop of oil. The degree to which it can do that will depend on the vision of its leaders, as well as on the ability of its business partners, to collaborate and support this unique industry and its global mandate.
The potential value of following the path to smarter oil and gas becomes clearer when its financial potential is calculated through return on investment (ROI) modeling tools. Producers can assess
Source: IBM. For more on how to build a smarter petroleum and chemicals industry, visit www-935.ibm.com/services/us/gbs/ industries/chemicalspetroleum/
GLOBAL ROUND-UP
Schlumberger Launches New Intelligent Wireline Intervention Services
Schlumberger has introduced ReSOLVE instrumented wireline intervention service, a modular system of intelligent wireline-deployed services that provides real-time measurement and control in a small footprint. “The downhole intelligence of ReSOLVE services enables our customers to see intervention operations at a level of detail not previously possible,” said Catherine MacGregor, president, Schlumberger Wireline. “With this unique technology, more complex operations can be performed, such as selective sleeve shifting or safety valve performance evaluation, with unprecedented success.” This modular system of services comprises a high-force linear actuator, a universal shifting tool (UST), a hydraulic setting tool and a milling tool. The high-force linear actuator shifts downhole valves, pulls retrievable plugs, and can perform fishing operations while monitoring force and displacement in real time. The UST is a field-configurable, high-expansion shifting tool that can selectively shift devices, even below restrictions. The plug and packer setting tool operates hydraulically, eliminating the need for explosives. The milling tool removes scale and other obstructions from wellbore tubulars while automatically controlling weight-on-bit to maximize rate of penetration. In a North Sea well, ReSOLVE milling service removed scale at a rate of 57 ft per hour over thousands of feet of production tubing, eliminating the need for a full scale intervention. In the Middle East, the ReSOLVE UST was deployed to selectively shift 10 valves in a horizontal multizone completion. Real-time confirmation of shifting eliminated the need for production logging to verify the valves had shifted.
IEA: Iran Oil Exports Up The International Energy Agency said crude oil imports from Iran have increased slightly despite Western sanctions imposed on the country. The IEA in its monthly market report stated that crude oil imports from Iran increased slightly in August to 1.1 million barrels per day, up from less than 1 million bpd mark in July. Press TV, Iran’s state-funded broadcaster, outlines of list of countries that have increased crude oil imports from Iran. Among those listed, Turkey led the way with an August increase of 50,000 barrels to 200,000 bpd of Iranian crude. The U.S. and European governments targeted the Iranian energy sector with sanctions out of concern revenue generated from oil could help fund a nuclear weapons program. Tehran says the programme is for peaceful purposes. An agreement with unspecified entities allows private companies to export about 20 percent of the country’s total oil deliveries designated for the international market. The Organization of Petroleum Exporting Countries, in its August report, reported average overall member state production at 31.2 million barrels of oil per day, down 160,000 bpd in part on decreases from Iran, Saudi Arabia, Libya and Angola. “In terms of supplier share, Saudi Arabia, Angola, Iran and Russia all maintained their positions in July as the top crude suppliers to China as in the previous month,” OPEC’s monthly report stated.
US Crude Oil Production to Rise 74pc by 2022 Crude oil production in the United States is projected to grow by 74 per cent, or more than 4.9 million barrels per day (MMb/d), during the next 10 years to an average of 11.6 MMb/d by 2022, according to Bentek Energy, the energy data analytics unit of Platts, a leading global energy, petrochemicals and metals information provider. “Not only will the projected record growth in oil production affect North America, it will have dramatic implications for global crude oil markets,” said Jodi Quinnell, Bentek oil analysis manager. “We foresee a massive displacement of traditional waterborne oil imports to the United States by 2022, taking them from 45 per cent of US total crude supply to no more than five percent.” In the North American Perspective section of its ‘Crude Awakening: Shale Boom Hits Oil’ special report, a series of regional and global long-term forecasts and analysis, Bentek says US waterborne imports will likely plummet to less than one MMb/d by 2022, compared to 6.7 MMb/d in 2011. The section features Bentek’s latest 10-year crude oil supply and demand forecasts for the US and Canada, including projections for regional production, overseas imports, regional flows and refining demand. There is also an examination of crude oil transportation constraints. “As could be expected with such a forecast, we also see North American crude oil prices declining versus their global counterparts,” said Quinnell. Bentek analysts say the projected rise in US petroleum production – largely driven by shale oil activity of the Eagle Ford and Bakken plays in mid-western US and parts of Canada – will be accompanied by lower US and Canadian oil prices relative to international oil benchmarks. For example, as sweeter, lighter sulfur crude oils compete for market share in the US Gulf Coast, Louisiana Light Sweet crude oil is seen disconnecting from those of Brent crude, found near the North Sea, off Europe and Britain. West Texas Intermediate crude is pegged for a price decline of up to $16 per barrel by the end of 2017.
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GLOBAL ROUND-UP
Plains to buy BP assets for $5.5bn the development of giant fields and deepwater exploration. It also reflects a greater focus in the Gulf of Mexico on producing more high-margin barrels from fewer, larger assets. BP will concentrate future activity and investment in the Gulf on growth opportunities around its four major operated production hubs and three non-operated production hubs in the deepwater, as well as on significant exploration and appraisal opportunities in the Paleogene and elsewhere. “While these assets no longer fit our business strategy, the Gulf of Mexico remains a key part of BP’s global exploration and production portfolio and we intend to continue investing at least $4 billion there annually over the next decade,” said Bob Dudley, BP group chief executive.“This sale, as with previous divestments, is consistent with our strategy of playing to our strengths as a company and positioning us for long-term growth. In the Gulf of Mexico that means focusing future investments on our strong set of producing assets and promising exploration prospects.” BP is selling its interests in a number of oil and gas fields in the deepwater US Gulf of Mexico to Plains Exploration and Production Company (‘Plains’) for a total of $5.55 billion, as part of a previously-announced plan to divest the assets and position its Gulf portfolio for long-term growth. BP is selling its interests in three BP-operated assets: the Marlin hub, comprised of the Marlin, Dorado and King fields (BP working interest 100 per cent); Horn Mountain (BP, 100 per cent) and Holstein (BP, 50 per cent). The deal also includes BP’s stake in two non-operated assets: Ram Powell (BP, 31 per cent) and Diana Hoover (BP, 33.33 per cent). BP announced its intention to sell these non-strategic assets in May 2012. The divestment is in line with BP’s global strategy of playing to its strengths, including
Shell to sell Holstein asset Royal Dutch Shell has agreed to sell its 50 per cent working interest in the Holstein Field, comprised of Green Canyon Blocks 644, 645 and 688 in the Gulf of Mexico, to Plains Exploration & Production (PXP) for approximately $560 million, subject to closing. Shell received an unsolicited offer from PXP for Shell’s working interest. The transaction is effective October 1, 2012 and is expected to close by year-end 2012. Holstein is a mature deepwater asset and the sale is consistent with Shell’s continuing practice of reviewing its existing portfolio and evaluating new opportunities. The Holstein Unit is centered on a spar platform anchored in 1350 meters (4400 feet) water depth and first produced in December 2004. Shell’s 50 per cent interest represents about two percent of the company’s overall Gulf of Mexico net production and had a 30-day net average production of 7.4 kboe/d prior to Hurricane Isaac. Shell retains a major Gulf of Mexico presence and is a leading deepwater producer. The company recently noted three successful appraisal wells at the Appomattox and Vito fields, which are expected to begin producing in the second half of the decade.
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Under the terms of the agreement, Plains will pay BP a total of $5.55 billion in cash for the assets, subject to regulatory approvals, certain pre-emption rights and customary post-closing adjustments. The parties anticipate the deal closing by the end of 2012. BP expects to divest assets with a total value of $38 billion between 2010 and 2013 as it focuses its business around the world on its strengths and opportunities for growth. With today’s agreement, BP has now entered into agreements to sell assets with a value of over $32 billion since the beginning of 2010.
China to Auction 20 Shale Gas Blocks The Chinese government has announced plans to have a shale natural gas auction in October to boost exploration and development. The Chinese Ministry of Land and Resources announced 20 blocks would go on the auction. Each entity taking part in the auction can bid for a maximum of two blocks in an area spread over 7,700 square miles in seven provinces, according to agency reports. The government estimates its recoverable reserve capacity of shale natural gas at more than 800 trillion cubic feet, which would make it the world leader in shale gas. Beijing, under the terms of a 5-year plan ending in 2015, aims to double the amount of natural gas it uses to about 9 trillion cubic feet per year. An International Energy Agency report described that goal as “ambitious,” adding it’s twice the level of natural gas consumed in China last year. Chinese companies and joint ventures controlled by a Chinese partner are eligible for the October 25 auction, the country’s second for shale gas. Beijing aims to produce more than 220 billion cubic feet of shale natural gas under the terms of the 5-year plan. China has yet to produce shale gas commercially.
Three Giants Further Developing the INTERSECT NextGeneration Reservoir Simulator Schlumberger, Chevron Corporation and Total are collaborating to further develop the INTERSECT next-generation reservoir simulator. Total will contribute engineering resources and expertise to expand the INTERSECT simulator effort. The INTERSECT simulator is an industry first, combining Chevron’s reservoir simulation capabilities and reservoir management experience with the leading software development capability and commercial experience of Schlumberger. Using advanced mathematical techniques, the INTERSECT simulator goes beyond the capabilities of current-generation software to simulate large and complex reservoirs using high-resolution models. This allows operators to test a large number of scenarios to increase the effectiveness of development plans and design innovative production systems to maximize field recoverable reserves. “We look forward to a productive partnership between the three parties and welcome the contribution of Total to continue to broaden INTERSECT’s capabilities,” said Ashok Belani, executive vice president, Technology, Schlumberger. “The jointly developed product will leverage the practical and global expertise of Chevron and Total in managing diverse and complex oil and gas reservoirs.” “The INTERSECT simulator is being successfully deployed around the world by Chevron and other oil and gas companies,” said Paul Siegele, president, Chevron Energy Technology Company. “INTERSECT’s success reflects Chevron’s belief that technology and partnership can transform energy challenges into opportunities. Through our partnerships we create value, innovate and drive results.” The development of the INTERSECT simulator began in 2000 as an extensive research and development effort between Chevron and Schlumberger, which was released commercially in 2009. Total contributed thermal simulation expertise to the development effort leading to the 2011 release of the thermal option in the INTERSECT software.
Legitimate Public Concerns Over Fracking Must Be Addressed The potential of unconventional gas and lighttight oil (LTO) supplies are both significant and wide-reaching, the International Energy Agency’s (IEA) Executive Director has said. Speaking at the Baker Institute in Houston, Maria Van der Hoeven described the rise of unconventional gas – sources of gas trapped deep underground by impermeable rocks, such as coal, sandstone and shale – as an energy revolution. From no production 25 years ago, in 2010 shale gas accounted for 23 per cent of total gas production in the United States, according to the US Energy Information Administration. She also highlighted excitement surrounding potential LTO – conventional crude oil trapped in geological formations with low permeability (e.g. shale) – production of which is expected to grow by more than 1 million barrels per day in the next five years. Ms. van der Hoeven warned, however, that while worldwide unconventional gas and LTO supplies are considerable, whether they meet their full potential is still subject to serious uncertainties. “Such uncertainties exist because alongside the potential economic and energy security benefits of unconventional gas and LTO production,
there are also legitimate public concerns about its environmental and social impacts,” she said. “These include the implications for water resources, land use and disruption to local communities.” Unconventional gas is commonly extracted by a method known as hydraulic fracturing: large volumes of water (mixed with some sand and chemicals) are injected underground to create cracks in the rock. This frees the trapped gas which can then flow into the well bore created by the drill and be collected. A similar process is used to extract LTO.
While the process of hydraulic fracturing has been around for years, the rapid increase in the number of North American wells, as well as the large number of companies which drill them, has put a spotlight on these issues, Ms. van der Hoeven said. “The issue is therefore one of good governance, good management, and good oversight,” she noted. “The industry must win public confidence by demonstrating exemplary performance; and governments must ensure that appropriate policies and regulatory regimes are in place. Otherwise, we are likely to see a backlash against unconventional extraction methods, and blanket bans.” Sep-Oct, 2012
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COUNTRY REPORT
NORWAY RANKS FIFTH IN UPSTREAM INVESTMENT Around two thirds of the US$25 billion development expenditure in 2012 in Norway will be spent on increasing recovery from producing fields, and the remaining third on new field developments
W
ood Mackenzie estimates that upstream development expenditure in Norway will increase to US$25billion in 2012 – a rise of over 30 per cent compared with 2011 – ranking it fifth in the world behind the US, Russia, Canada and Australia. Furthermore, development capex is estimated to reach almost US$30 billion in 2015, ensuring Norway remains a top five investment destination over this period. Ross Cassidy, Head of North West Europe upstream research for Wood Mackenzie says: “Norway remains a core country within company portfolios for all existing players. It continues to offer good prospects to create value through increased oil recovery (IOR) in producing fields, satellite tie-backs to production hubs and exploration in mature and frontier areas. “We estimate that around two thirds of the US$25 billion development expenditure in 2012 will be spent on increasing recovery from producing fields, and the remaining third on new field developments. At this level, Norway ranks fifth in terms of upstream 40
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development expenditure, behind the US, Russia, Canada and Australia,” Cassidy continues. “Over the next three years, we estimate over US$82 billion will be invested in Norway’s upstream sector. Statoil and the SDFI will invest around US$40 billion combined, around half of the total investment in this period.” Wood Mackenzie’s report, titled ‘A review of the Norwegian corporate landscape’, highlights that Norway remains an attractive investment destination for the IOCs and Majors: “We value the Norwegian upstream sector at US$216 billion (Nkr1.3
We value the Norwegian upstream sector at US$216 billion (Nkr1.3 trillion). For IOCs, this places it in the top ten countries by remaining value. The majors still have a strong foothold in Norway, holding 22 per cent of remaining reserves and accounting for approximately 24 per cent of total production
trillion). For IOCs, this places it in the top ten countries by remaining value. The majors still have a strong foothold
in Norway, holding 22 per cent of remaining reserves and accounting for approximately 24 per cent of total production. Norway is a core part of the global upstream portfolio of Total (8 per cent of value), ConocoPhillips (7 per cent) and Eni (5 per cent). “Our production estimates out to 2017 shows that output from the majors as a group is expected to decline (excluding Statoil), although Total, Eni and BP are forecast to increase production. The majors are set to invest around US$26 billion over the next three years, around 32 per cent of total development expenditure. A large portion of this is being spent on giant, legacy fields such as Ekofisk and Troll.” Statoil and the State’s Direct Financial Interest (SDFI) remain dominant players with a combined share of 60 per cent of the total value. Cassidy expands: “Statoil holds around 34 per cent of Norway’s remaining reserves and accounts for around 30 per cent of total Norwegian production. The company remains the most active explorer on the Norwegian Continental Shelf, and in recent years has rejuvenated its portfolio with worldclass exploration success at Johan Sverdrup and Skrugard/Havis.” The Norwegian sector also attracts a mix of large and mid-size international Sep-Oct, 2012
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COUNTRY REPORT
The first key change was the mature acreage licensing round system brought in to ensure that mature areas are fully exploited. This was followed by an exploration tax refund which reimburses 78 per cent of the exploration cost for companies, regardless of their tax-paying position
oil companies, niche explorers and European utilities, which as a group account for 17 per cent of total value, shared between some 31 companies. Norway accounts for more than 10 per cent of global upstream value for Hess (12 per cent), Marathon (11 per cent) and Talisman (11 per cent). Lundin Petroleum, has been propelled into the top ten companies by remaining reserves following its exploration success at Johan Sverdrup. Cassidy comments: “The company is entering an exciting and sustained decade of growth, with its production set to increase five-fold post-2020. We also expect to see substantial production growth for Wintershall, Det Norkse, E.ON Ruhrgas and Hess.” The introduction of exploration incentives in Norway – namely the mature licensing rounds and the 78 per cent exploration cost refund for companies - have been a big success in increasing exploration, and more importantly, in delivering value to the Government and the companies involved. Malcolm Dickson, North West Europe Upstream Analyst for Wood Mackenzie says: “Exploration is a hot topic in Norway, and interest is higher than ever. But increased activity levels have not come easily, especially as Norway has had to compete with emerging 42
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exploration provinces as an investment destination. The Government has been proactive in introducing several catalysts to boost exploration. “The first key change was the mature acreage licensing round system brought in to ensure that mature areas are fully exploited. This was followed by an exploration tax refund which reimburses 78 per cent of the exploration cost for companies, regardless of their taxpaying position. There has been much debate on the effectiveness of these measures, but our analysis shows they have been very successful.” Wood Mackenzie’s comparison of the mature exploration rounds, introduced in 1999, against frontier rounds reveals many interesting facts. The number of companies exploring on the Norwegian Continental Shelf (NCS) has more than doubled since the introduction of the mature acreage licensing round system, with many attracted by the exploration terms. Drilling has increased as a result, and the mature rounds have produced an average of 17 wells per round, whereas the frontier rounds averaged 11 wells per round. Mature rounds have accounted for 51 per cent of total commercial reserves, or 3.2 billion barrels of oil equivalent (boe), since being introduced in 1999. They have also delivered substantial average discovery sizes of 87 million boe. Furthermore, Wood
Mackenzie’s assessment shows that both exploration incentives – the mature rounds and tax refund measure - have benefitted all types of companies. Niche explorers have been given a chance to grow, with cheaper exploration and easier access to acreage. The majors, although absent from some of the key discoveries of mature rounds, have been able to develop their hub areas by drilling surrounding prospects on acreage gained in mature rounds. Many companies have also grown by acquiring successful niche explorers and as a result there is a strong farm-in exploration market in Norway. Statoil has been able to enhance its portfolio by making big discoveries in mature and frontier areas. Dickson continues: “The exploration incentives introduced in Norway over the past ten years have been controversial, particularly the introduction of the 78 per cent exploration cost refund. However our analysis suggests the exploration cost rebate has created substantial value. We estimate US$4 billion has been created by qualifying explorers, which accounts for around 20 per cent of total value created. Looking only at small companies, regardless of tax-paying position, the share increases to 35 per cent. Given that Statoil/Hydro was responsible for nearly 40 per cent of the rest of the value, this is impressive.” “The future looks bright for exploration in Norway. We expect that the mature areas will continue to deliver some sizeable discoveries in the region of 100 million boe. Giant discoveries are more likely to be found in the higher risk frontier areas in northern Norway. There is also potential for prospective new areas to be opened up in the coming years, with most of the interest centred around East Barents and the areas surrounding Lofoten,” Dickson concludes.
REGIONAL ROUND-UP
Qatar to host World GTL Congress Under the patronage of HE Dr. Mohammed bin Saleh Al-Sada, Minister of Energy and Industry and Chairman and Managing Director of Qatar Petroleum (QP), the World GTL Congress will gather government officials and leading gas experts in Doha on 13-15 January 2013 at the St Regis Hotel. The congress is being organised with QP as the Host Organisation, and Shell and ORYX GTL as the Host and Lead Sponsors, respectively. To be held in the State of Qatar, the World GTL Congress will highlight Qatar’s drive to pioneer the continued development of the gas-to-liquids (GTL) industry for producing cleaner and more environmentally-friendly products. Qatar is not only the global GTL energy leader, but it is also home to the world’s largest commercial GTL plant. The World GTL Congress will be the world’s first annual meeting for global GTL stakeholders, experts and leading names in the industry. The congress will focus on strengthening international cooperation to enhance commercialisation of remote stranded gas through GTL technology and will explore the impact of GTL products on the economy of the host countries, the environment and climate change. Over the three days of conference and breakout workshops, leading industry experts will discuss and decide upon the most strategic issues regarding GTL’s legal and financial framework as well as develop policies that will drive the development of the industry. The congress will also feature a world-class exhibition of international GTL visionaries including IOC’s, NOC’s, technology providers, EPC contractors and consultants who will showcase technological innovations, provide solutions to the global GTL industry and offer advice and updates on industry developments.
424km Long Oil Pipeline Commissioned in Abu Dhabi
The approximately 424 km, 48 inch diameter Abu Dhabi Crude Oil Pipeline, located in the United Arab Emirates, has been commissioned and is now operational. The project includes both on- and offshore components, and is capable of transporting 75 MMt/a of crude oil. The pipeline extends from the Habshan Oil Field to the Fujairah Port, bypassing the congested Hormuz Strait, and has a 405 km onshore section and a 19 km offshore section, including a 13 km subsea section. The pipeline’s design rated delivery capacity is 1.5 MMbbl/d, which will be loaded through marine single point moorings. The International Petroleum Investment Company, which was tasked by the Government of Abu Dhabi with the execution of the project, said “The scale of the project is immense and encompasses the construction of pumping stations, a main oil terminal and offshore loading facilities at Fujairah, in addition to the installation of the main pipeline.” In 2008, China National Petroleum Corporation (CNPC) was contracted to provide engineering, procurement and construction services on the project, a contract worth $3.29 billion. China Petroleum Engineering and Construction Corporation (CPECC) awarded Penspen the contract for carrying out the detailed engineering.
Shale Gas a ‘Game Changer’ Middle Eastern producers are at a stage in their development where pure ethane plays are difficult to secure and the industry is moving towards heavier feedstocks, however with the development of new shale gas resources in the United States of America, the region needs to prepare to capitalise on potential opportunities in its own petrochemical sector. Eli Andjelich, Vice President, Business Development, Middle East from Chevron Phillips Chemical Company LLC recently participated in an interview with The World Refining Association ahead of PETCHEM Arabia 2012 to explain the changing global scenario of petrochemical production from the Middle East to the West. PETCHEM Arabia, running from 30 September to 3 October in Manama, Bahrain will address these challenges and explore future directions for the region’s industry. Andjelich reported that announcements have been made over the past year regarding the high probability that several (four to six) new crackers will be constructed in the US based on feed supply from the growth of shale gas production. If these announcements are built, the US would become a larger exporter of ethylene and ethylene derivatives. According to Dr Christian Günther, Partner at McKinsey and Company, the consultancy, this is unlikely to affect Middle East aspirations of growth in a major way - the US is estimated to add around 9 - 11 million tons of ethylene capacity within the next 10 years, which can be absorbed by the forecasted global demand growth of around 50 million tons and still leave space for other players.
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REGIONAL ROUND-UP
Citigroup: ‘Saudi Arabia May Become Oil Importer by 2030’
KIPCE 2012 Attracts Record Number of Paper Submissions The fourth edition of the Kuwait International Petroleum Conference and Exhibition (KIPCE), which will take place 10-12 December, 2012 at the Hilton Kuwait Resort, Kuwait, has attracted 489 abstracts from 165 companies representing 35 countries operating in the oil and gas sector. This is an increase of 242 per cent on the submissions received for the last edition of KIPCE which took place in 2009.
Saudi Arabia, the world’s biggest crude exporter, risks becoming an oil importer in the next 20 years, according to Citigroup Inc. Oil and its derivatives are used for about half of the kingdom’s electricity production, which at peak rates is growing at about 8 percent a year, the bank’s report mentioned. A quarter of the country’s fuel production is used domestically, more per capita than other industrialized nations, as the cost is subsidized, according to the report. “If Saudi Arabian oil consumption grows in line with peak power demand, the country could be a net oil importer by 2030,” Heidy Rehman, an analyst at the bank, wrote. The country already consumes all its natural-gas production and plans to develop nuclear power, which pose execution risk amid a lack of available experts, safety issues and cost overruns, Rehman said. Saudi Arabia, which depends on oil for 86 percent of its annual revenue, is accelerating exploration for gas and is planning to develop solar and nuclear power to preserve more of its valuable crude for export. The kingdom has refused to import gas, unlike neighboring producers such as Kuwait, and the United Arab Emirates that also lack fuel for power generation. “Indeed we would expect consumption to continue to outstrip population growth as Saudi Arabia’s currently young population ages and consumer spending increases supported by rising GDP per capita,” Rehman wrote. Saudi Arabian power providers pay $5 to $15 a barrel for its fuel from state-owned Saudi Arabian Oil Co., according to the report. Whereas more than half the world’s oil is currently trading above $100 a barrel. “As a result of its subsidies, we calculate ‘lost’ oil and gas revenues to Saudi Arabia in 2011 to be over $80 billion,” Rehman wrote. “At the domestic level, we believe the only real way to rationalize energy consumption would be to reduce subsidy levels.”
Tata Petrodyne May Buy Al Hayat Group’s Oil Assets India’s Tata Petrodyne is in talks with Bahrain-based Al Hayat Group for buying oil blocks in the country. The Al Hayat Group is looking for partners for its oil blocks in Bahrain. Sources say the deal may be conducted by Tata Petrodyne via the joint venture route. Tata Petrodyne, a wholly owned arm of Tata Sons, has interests in over six blocks in India and six assets overseas spread across the United Kingdom, Australia and Indonesia. The deal is expected to expand Tata Petrodyne’s presence in West Asia. 44
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The event, co-organised by the Society of Petroleum Engineers (SPE) and Kuwait University, will be held under the patronage of HE Hani A. Hussain, Minister of Oil and Chairman of the Board of Kuwait Petroleum Corporation (KPC). Among the 489 abstracts received, the steering committee of the event has selected 84 papers from 38 companies representing 19 countries. These papers will be presented during 14 technical sessions over the three-day event which expects to host more than 500 delegates. This year’s event will focus on “People and Innovative Technologies to Unleash Challenging Hydrocarbon Resources.” It will explore in detail how to get the most from the industry’s precious resources, the people, and the skills professionals need to acquire to be successful in the workplace. The event will also spotlight the challenge of using unconventional resources, as well as covering exploration, development, and production topics. The technical programme of the event will cover all aspects of conventional resources and it will also feature sessions on the development of unconventional reservoirs and intelligent oilfields.
UAE Oil and Gas Museum to debut at ADIPEC The Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) will this year include a unique feature: the first UAE oil and gas museum at ADIPEC. The ADIPEC museum, which will remain open throughout the exhibition, is set to provide visitors with an interactive journey exploring the discovery, extraction and production of oil in the UAE. Comprising exhibits loaned by local and multinational energy companies, plus personal contributions, the museum will be a chronological study of the UAE’s oil and gas industry, and will include an interactive timeline from 1928 to the 2000s. The ADIPEC Oil and Gas Museum will comprise a wide variety of exhibits, many of them on public display for the first time, including archive photography, film, plans, engineering components and machinery, as well as the testimonies of former and present-day oil executives. In addition, the museum will feature a tribute to the vision of the UAE’s founder, His Highness Sheikh Zayed bin Sultan Al Nahyan. A number of exhibits have already been received with the support of contributors and sponsors (which include Partex Oil & Gas, ExxonMobil, TOTAL and Shell). To date, the organisers have received interesting exhibits which include a copy of the original Abu Dhbai concession
agreement dating back to 1939 as well as a geological map of the hinterland of Abu Dhabi drawn in 1935.Hundreds of images have also been received for inclusion in the museum. Amongst these are an image of the late ruler of Abu Dhabi, Sheikh Shakhbut bin Sultan, pictured with Dr. Macpherson of BP and N. Barnonty of Khanaqin Oil Company, dating back to 1953, and a photo of a water distillation plant for fresh drinking water dated 1963. Sure to be a key attraction at the museum is the equipment section, which will comprise some of the original tools and paraphernalia used to aid the extraction of oil, such as hydraulic power tongs, monitoring systems used for ADCO and ADMA-OPCO fields, and crude oil loading pumps dating back to 1966.
Not Easy for East Africa to Develop its 100tcf of Discovered Gas Wood Mackenzie estimates that 100 trillion cubic feet (tcf) of gas has been discovered in Mozambique and Tanzania to date, ranking the Rovuma Basin as one of the most prolific conventional gas plays in the world. However, there are significant technical and commercial challenges to be overcome in order to bring the gas to market by the end of this decade. These include: addressing issues around infrastructure, government capacity, financing and reaching a positive outcome to unitisation negotiations in Mozambique. Recent discoveries and high profile M&A activity in Mozambique and Tanzania are attracting attention and Martin Kelly, Wood Mackenzie’s Head of Sub-Sahara Upstream Research, says the interest is justified: “100 tcf of gas has been discovered to date in East Africa and we estimate yet-to-find reserves could be as much as 80 tcf in Mozambique and 15 tcf in Tanzania. There is clearly plenty of gas to supply the likely commercialisation route of LNG - theoretically enough to support up to 16 LNG trains. “The Rovuma basin is the most prolific in the region, and one of the hottest conventional gas plays in the world, with 85 tcf discovered so far. Globally in 2011, it yielded the third most hydrocarbons, and we expect it to top the list in 2012 if the first half of the year is anything to go by,” Kelly continues. In neighbouring
Tanzania, the targets are the northern extension of the Rovuma Basin and the Mafia Basin. Kelly says: “Tanzania has enjoyed considerable exploration success as well, but hasn’t discovered the same scale of reserves.” One of the most immediate challenges for Mozambique, is the unitisation discussions which Wood Mackenzie understands have already begun. Kelly explains; “Of the 85 tcf of gas discovered to date in Mozambique, around half of it is thought to be one enormous field which is in communication across the block. Under Mozambican law, a unitisation agreement between the operating parties will be required.” Giles Farrer, Senior LNG research analyst for Wood Mackenzie comments: “Many challenges will need to be overcome prior to LNG project sanction. The region’s remoteness and lack of development present serious technical obstacles. There is virtually no existing skilled workforce and both Mozambique and Tanzania will have to build and establish deepwater ports capable of servicing the needs of the petroleum sector. On the commercial side, there is the question of government capacity - whether there is sufficient impetus and capability within the governments and national oilcompanies to advance the huge legislative, bureaucratic, customs and financial challenges that such a development would bring.”
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INNOVATION
SHELL MOVES AHEAD ON CCS PROJECT
Quest Q uest iis s iimportant mportant b because ecause iitt iis s a ffully ully iintegrated ntegrated p project roject tthat hat will demonstrate demonstrate e xisting c apture, ttransportation, ransportation, iinjection njection a nd will existing capture, and storage ttechnologies echnologies w orking ttogether ogether ffor or tthe he s afe a nd p ermanent storage working safe and permanent storage o O2 storage off C CO2
S
hell is going ahead with the first carbon capture and storage (CCS) project for an oil sands operation in Canada. The Quest project will be built on behalf of the Athabasca Oil Sands Project joint venture owners (Shell, Chevron and Marathon Oil) and with support from the Governments of Canada and Alberta. The Athabasca Oil Sands Project, with 255,000 barrels per day of mining and upgrading capacity, is a joint venture among Shell Canada Energy (60 per cent), Chevron Canada Limited (20 per cent) and Marathon Oil Canada Corporation (20 per cent). CCS is critical to meeting the huge projected increase in global energy demand while reducing carbon dioxide (CO2) emissions, explained Peter Voser, Chief Executive Officer of 46
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Royal Dutch Shell plc. “If you want to achieve climate change goals, CCS has to be part of the solution. We are helping to advance CCS technology on a number of fronts around the world, but Quest will be our flagship project.” Alberta’s oil sands are a secure, reliable source of energy and an economic engine which drives employment, training and business development across Canada and beyond. “We will need all sources of energy to meet world demand in the coming decades,” Voser noted. “Lower CO2 energy sources will grow, but even by 2050 at least 65 per cent of our energy will still come from fossil fuels. So CCS will be important to manage climate impacts.” The Athabasca Oil Sands project produces bitumen, which is piped to Shell’s Scotford Upgrader near Edmonton, Alberta. From late 2015,
Quest will capture and store deep underground more than one million tonnes a year of CO2produced in bitumen processing. Quest will reduce direct emissions from the Scotford Upgrader by up to 35 per cent – the equivalent of taking 175,000 North American cars off the road annually. “Quest is another example of how we are using technology and innovation to improve the environmental performance of our oil sands operations,” said Shell Executive Vice President of Heavy Oil, John Abbott. “The opportunity Quest provides to reduce emissions from our upgrading activities is an important achievement in itself, but the project’s technical and strategic value reaches beyond the emissions it will capture.” “Quest is important because it is a fully integrated project that will demonstrate existing capture,
transportation, injection and storage technologies working together for the safe and permanent storage of CO2. The knowledge it provides will help to enable much wider and more cost-effective application of CCS through the energy industry and other sectors in years to come.” Both the Canadian federal and Albertan provincial governments have identified CCS as an important technology in their strategies to reduce CO2 emissions. The Alberta government will invest $745 million in Quest from a $2-billion fund to support CCS, while the Government of Canada will invest $120 million through its Clean Energy Fund. “We will continue to invest in innovative clean energy technologies such as the Shell Quest project to help support high-quality jobs and responsible development of Canada’s energy resources,” said the Honourable Joe Oliver, Minister of Natural Resources. “Carbon capture and storage has the potential to help us balance our need for energy with our need to protect the environment.” “Today’s announcement reaffirms Alberta’s position as a global leader in carbon capture and storage,” said Energy Minister Ken Hughes. “Technologies like CCS will play an instrumental role in helping to lower greenhouse gas intensity from the oil sands and demonstrate to the world Alberta’s commitment to responsible energy development.” The International Energy Agency (IEA) calls CCS “a crucial part of worldwide efforts to limit global warming” and estimates that it could deliver about one-fifth of necessary worldwide reductions in greenhouse gases by 2050. Shell is also working with governments and experts to help the development of CCS in other
KNOW MORE ABOUT QUEST The Quest CCS project will capture more than one million tonnes per year of CO2 from the Scotford Upgrader located near Edmonton, Alberta and transport it up by an 80 km underground pipeline to a storage site north of the Scotford site. Here, it will inject it more than two kilometres underground into a porous rock formation called the Basal Cambrian Sands (BCS), which is located beneath layers of impermeable rock. Sophisticated monitoring technologies will ensure the CO2 is permanently stored. In 2011, Quest received the world’s first certificate of fitness for its storage development plan from Det Norske Veritas (DNV), an international risk management firm. DNV assembled a panel of seven CCS experts from academia and research institutions - opens in new window to perform the review over a two-week period. To improve efficiency, up to 50 per cent of project work will be done offsite at a construction yard yet to be selected. Shell will use third-party construction facilities - opens in new windowin Edmonton, helping the continuing development of key construction capacity in the province. Large pre-assembled modules will then be delivered to the Shell site for installation.
countries, including projects in Norway and Australia. Quest is the world’s first commercial-scale CCS project to tackle carbon emissions in the oil sands, and the first CCS project in which Shell will hold majority ownership and act as designer, builder and operator. It will also form the core of Shell’s CCS
research programme and help develop Shell’s CO2 capture technology. Shell has received the necessary federal and provincial regulatory approvals for Quest. Construction has begun and will employ an average of about 400 skilled trades workers over roughly 30 months, peaking at about 700. Sep-Oct, 2012
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STATS
OPEC Annual Statistics Bulletin 2012 World proven crude oil reserves by country (m b) North America Canada1 United States Latin America Argentina Brazil Colombia Ecuador Mexico Venezuela Others Eastern Europe and Eurasia Azerbaijan Belarus Kazakhstan Russia Turkmenistan Ukraine Uzbekistan Others Western Europe Denmark Norway United Kingdom Others Middle East IR Iran Iraq Kuwait Oman Qatar Saudi Arabia Syrian Arab Republic United Arab Emirates Others Africa Algeria Angola Egypt Gabon Libya Nigeria Sudan Others Asia and Pacific Brunei China India Indonesia Malaysia Vietnam Australia Others Total world of which OPEC OPEC percentage OECD FSU
2007
2008
2009
2010
2011
25,872 4,900 20,972 137,422 2,587 12,624 1,510 6,368 12,187 99,377 2,768 122,519 7,000 198 39,828 72,970 600 395 594 934 15,006 1,113 8,168 3,593 2,132 750,619 136,150 115,000 101,500 5,572 25,090 264,209 2,500 97,800 2,798 121,349 12,200 9,500 4,070 1,995 43,663 37,200 6,700 6,020 40,223 1,200 15,493 5,459 3,990 5,357 3,410 4,158 1,156 1,213,008
26,217 4,900 21,317 210,210 2,616 12,624 1,510 6,511 11,866 172,323 2,760 125,503 7,000 198 39,828 75,954 600 395 594 934 14,318 1,113 7,491 3,590 2,124 752,258 137,620 115,000 101,500 5,572 25,405 264,063 2,500 97,800 2,798 122,207 12,200 9,500 4,340 1,995 44,271 37,200 6,700 6,001 41,568 1,200 15,493 5,459 3,990 5,357 4,700 4,158 1,211 1,292,280
24,021 4,900 19,121 248,820 2,520 12,802 1,362 6,511 11,692 211,173 2,760 126,177 7,000 198 39,800 76,650 600 395 594 940 13,282 1,060 7,078 3,100 2,044 752,079 137,010 115,000 101,500 5,500 25,382 264,590 2,500 97,800 2,798 124,171 12,200 9,500 4,300 2,000 46,422 37,200 6,700 5,849 44,226 1,100 18,000 5,800 3,990 5,500 4,500 4,158 1,178 1,332,776
24,021 4,900 19,121 334,881 2,505 12,857 1,360 7,206 11,692 296,501 2,760 126,930 7,000 198 39,800 77,403 600 395 594 940 12,940 812 7,078 2,800 2,250 794,265 151,170 143,100 101,500 5,500 25,382 264,516 2,500 97,800 2,798 130,139 12,200 13,048 4,400 2,000 47,097 37,200 6,700 7,494 44,187 1,100 18,000 5,820 3,990 5,500 4,400 4,158 1,219 1,467,363
25,582 4,900 20,682 340,782 2,504 13,986 1,990 8,235 13,800 297,571 2,696 126,994 7,000 198 39,800 77,403 600 395 594 1004 12,648 900 6,700 2,800 2,248 796,845 154,580 141,350 101,500 5,500 25,382 265,405 2,500 97,800 2,828 128,578 12,200 10,470 4,500 2,000 48,014 37,200 6,700 7,494 50,097 1,100 20,350 9,043 3,990 5,800 4,400 4,158 1,256 1,481,526
948,058 1,023,393 1,064,288 1,196,720 1,199,707 78.2 57,457 121,684
79.2 56,799 124,668
79.9 53,405 125,336
Notes: Figures as at year–end. Totals may not add up due to independent rounding. Revisions have been made throughout the time series. For some countries condensates are included. 1. Data refers to conventional crude oil.
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81.6 53,126 126,089
81 56,542 126,089
% change 11/10 6.5 – 8.2 1.8 – 8.8 46.3 14.3 18.0 0.4 –2.3 0.1 – – – – – – – 6.8 –2.3 10.8 –5.3 – –0.1 0.3 2.3 –1.2 – – – 0.3 – – 1.1 –1.2 – –19.8 2.3 – 1.9 – – – 13.4 – 13.1 55.4 – 5.5 – – 3.0 1.0
0.2
–0.7 6.4 –
World proven natural gas reserves by country (billion standard cu m))
North America Canada United States Latin America Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Peru Trinidad & Tobago Venezuela Others Eastern Europe and Eurasia Armenia Azerbaijan Kazakhstan Poland Romania Russia Turkmenistan Ukraine Uzbekistan Others Western Europe Denmark Germany Italy Netherlands Norway United Kingdom Others Middle East IR Iran Iraq Kuwait Oman Qatar Saudi Arabia United Arab Emirates Others Africa Algeria Angola Cameroon Congo Egypt Libya Nigeria Others Asia and Pacific Bangladesh Brunei China India Indonesia Malaysia Myanmar Pakistan Thailand Vietnam Australia Others Total world of which OPEC OPEC share OECD FSU
2007
2008
2009
2010
2011
8,360 1,630 6,730 7,768 440 740 365 44 106 8 373 355 480 4,838 19 54,650 165 1,285 1,900 97 628 44,900 2,680 1,030 1,755 210 5,344 116 137 84 1,266 2,961 647 133 73,643 28,080 3,170 1,784 690 25,636 7,305 6,072 906 14,608 4,504 270 235 130 2,060 1,540 5,292 578 15,180 374 343 2,630 1,055 3,002 2,475 600 850 317 220 2,510 804 179,554
9,168 1,700 7,468 8,017 428 750 380 46 114 8 359 415 500 4,983 34 55,006 164 1,325 1,910 93 629 44,900 3,000 1,020 1,745 220 5,292 113 119 82 1,236 2,985 625 132 75,289 29,610 3,170 1,784 690 25,466 7,570 6,091 908 14,735 4,504 272 235 130 2,170 1,540 5,292 593 15,394 370 350 2,660 1,065 3,100 2,475 590 852 304 217 2,600 811 182,901
9,168 1,700 7,468 8,065 399 750 365 46 124 8 359 415 500 5,065 34 60,487 164 1,359 1,950 93 629 44,900 8,400 1,020 1,745 227 5,246 118 119 69 1,222 2,985 601 132 75,540 29,610 3,170 1,784 690 25,366 7,920 6,091 908 14,782 4,504 310 235 130 2,170 1,549 5,292 593 16,425 344 350 3,090 1,065 3,280 2,350 590 843 340 217 3,145 811 189,712
8,760 1,685 7,075 8,341 379 695 358 45 134 8 339 345 480 5,525 33 61,279 164 1,310 1,950 98 606 46,000 8,340 990 1,682 139 5,019 105 98 64 1,247 2,819 564 122 78,890 33,090 3,158 1,784 610 25,201 8,016 6,091 939 14,497 4,504 310 157 130 2,185 1,495 5,110 607 15,763 364 309 2,751 1,085 2,960 2,362 510 818 360 215 3,225 804 192,549
9,900 1,700 8,200 7,903 359 281 417 43 153 7 349 353 381 5,528 32 62,860 180 1,317 1,913 93 595 46,000 10,000 969 1,661 132 4,817 101 87 66 1,161 2,762 520 120 79,575 33,620 3,158 1,784 610 25,110 8,151 6,091 1,050 14,715 4,504 366 155 127 2,210 1,547 5,154 652 16,394 366 301 2,853 1,085 3,068 2,328 522 810 300 288 3,701 772 196,163
% change 11/10 13.0 0.9 15.9 –5.3 –5.3 –59.6 16.5 –4.4 14.2 –12.5 2.9 2.3 –20.6 0.1 –3.0 2.6 9.8 0.5 –1.9 –5.1 –1.8 – 19.9 –2.1 –1.2 –5.0 –4.0 –3.8 –11.2 3.1 –6.9 –2.0 –7.8 –1.6 1.0 1.6 – – – –0.4 1.7 – 11.8 1.5 – 18.1 –1.3 –2.3 1.1 3.5 0.9 7.4 4.0 0.5 –2.6 3.7 – 3.6 –1.4 2.4 –1.0 –16.7 34.0 14.8 –4.0 1.9
88,500 49.3 16,915 53,814
90,290 49.4 17,746 54,169
90,669 47.8 18,250 59,642
94,292 49 17,641 60,540
95,020 48.4 19,171 62,139
0.8 –1.2 8.7 2.6
Notes: Figures as at year–end. Totals may not add up due to independent rounding. Revisions have been made throughout the time series. Sep-Oct, 2012
49
STATS
Active rigs in OPEC Members and in world North America Canada United States Latin America Argentina Bolivia Brazil Chile Colombia Ecuador Mexico Trinidad & Tobago Venezuela Others Eastern Europe and Eurasia Azerbaijan Kazakhstan Poland Romania Russia Turkmenistan Others Western Europe France Germany Italy Netherlands Norway United Kingdom Others Middle East IR Iran Iraq Kuwait Oman Qatar Saudi Arabia Syrian Arab Republic United Arab Emirates Yemen Others Africa Algeria Angola Egypt Gabon Libya Nigeria South Africa Sudan Others Asia and Pacific Australia China Brunei India Indonesia Malaysia New Zealand Pakistan Others Total world of which OPEC OPEC percentage OECD FSU
2007
2008
2009
2010
2011
2,171 360 1,811 389 87 2 46 2 40 9 98 5 90 10 409 12 76 16 25 274 6 – 120 1 5 5 2 19 22 66 346 52 30 11 53 6 76 19 14 16 69 178 29 5 50 4 50 11 – 27 2 269 21 28 1 84 66 11 5 19 34 3,882
2,143 361 1,782 424 70 3 59 1 42 18 111 4 108 8 509 11 107 14 31 335 11 – 152 1 10 4 5 25 22 85 413 52 29 19 52 2 127 20 14 15 83 210 27 6 60 1 63 20 1 30 2 272 26 30 1 82 61 19 4 21 28 4,123
1,485 313 1,172 426 55 4 66 4 31 12 122 3 120 9 473 14 85 15 28 320 11 – 125 1 5 4 5 22 14 74 369 52 22 28 48 6 102 19 11 12 69 192 27 5 49 2 60 18 – 28 3 313 17 47 1 104 58 13 5 18 50 3,383
2,109 398 1,711 424 61 5 75 3 54 11 80 1 125 9 400 15 58 9 15 294 9 – 149 – 7 4 7 19 20 92 423 54 36 56 41 6 98 31 13 12 76 217 24 11 57 4 60 35 – 20 6 325 16 43 – 112 60 8 5 15 66 4,047
2,432 429 2,003 507 64 5 86 4 75 39 105 4 116 9 404 14 60 11 10 300 9 – 132 1 5 4 4 10 16 92 501 98 59 49 50 6 121 27 13 2 76 246 24 22 71 6 55 38 – 26 4 299 14 40 3 117 53 8 4 12 48 4,521
change 11/10 323 31 292 83 3 – 11 1 21 28 25 3 –9 – 4 –1 2 2 –5 6 – – –17 1 –2 – –3 –9 –4 0 78 44 23 –7 9 – 23 –4 – –10 – 29 – 11 14 2 –5 3 – 6 –2 –26 –2 –3 3 5 –7 – –1 –3 –18 474
383 10 2,410 368
485 12 2,432 464
463 14 1,749 430
529 13 2,354 376
640 14 2,968 413
111 1 614 37
Notes: Geographic area totals include all countries in the region, some of which may not have been mentioned in the breakdown. Totals may not add up due to independent rounding. Revisions have been made throughout the time series. Number of workover rigs for Venezuela is estimated to stand at 77 in 2010 and 64 in 2009.
50
Sep-Oct, 2012
World crude oil production by country (1,000 b/d) North America Canada United States Latin America Argentina Brazil Chile Colombia Ecuador Mexico Peru Trinidad & Tobago Venezuela Others Eastern Europe and Eurasia Azerbaijan Kazakhstan Romania Russia Turkmenistan Ukraine Others Western Europe Denmark France Germany Italy Netherlands Norway Turkey United Kingdom Others Middle East Bahrain IR Iran Iraq Kuwait 1 Oman Qatar Saudi Arabia1 Syrian Arab Republic United Arab Emirates Yemen Africa Algeria Angola Congo Egypt Equatorial Guinea Gabon Libya Nigeria Sudans Others Asia and Pacific Australia Brunei China India Indonesia Malaysia New Zealand Others Total world of which OPEC OPEC percentage OECD FSU
2007
2008
2009
2010
2011
% change 11/10
6,452.6 1,388.4 5,064.2 9,835.9 641.5 1,748.0 2.0 529.5 511.4 3,081.7 77.0 120.5 2,981.9 142.3 12,005.7 855.2 1,079.3 100.2 9,572.1 180.2 69.7 149.0 4,319.8 304.6 19.6 66.3 107.7 40.2 2,210.4 41.9 1,477.4 51.6 22,361.6 184.7 4,030.7 2,035.2 2,574.5 653.0 845.3 8,816.0 380.0 2,529.0 313.2 8,997.6 1,371.6 1,694.6 243.1 500.7 287.8 250.1 1,673.9 2,059.3 483.1 433.5 7,313.9 448.7 169.7 3,736.0 684.1 843.8 695.3 41.7 694.7 71,287.2
6,299.2 1,348.7 4,950.4 9,635.2 641.6 1,812.1 2.0 587.8 501.4 2,798.5 76.6 114.3 2,957.5 143.5 12,045.5 899.7 1,142.7 92.8 9,498.5 202.1 62.2 147.4 4,046.6 279.8 19.6 61.7 99.5 33.6 2,107.6 41.6 1,352.5 50.8 23,141.6 184.5 4,055.7 2,280.5 2,676.0 669.3 842.8 9,198.0 377.0 2,572.2 285.7 9,191.4 1,356.0 1,896.3 259.7 522.6 299.8 239.6 1,721.5 2,017.4 456.8 421.7 7,414.0 463.7 157.5 3,802.1 682.0 853.4 694.2 60.1 701.0 71,773.6
6,577.5 1,216.9 5,360.6 9,506.8 623.1 1,950.4 2.8 670.2 464.7 2,601.4 71.8 107.2 2,878.1 137.1 12,396.3 1,014.4 1,256.3 88.5 9,650.4 188.4 58.1 140.2 3,828.8 261.3 18.2 54.6 82.8 25.5 1,989.2 46.2 1,301.2 49.8 20,868.5 182.0 3,557.1 2,336.2 2,261.6 712.6 733.0 8,184.0 377.0 2,241.6 283.4 8,461.0 1,216.0 1,738.9 274.9 523.1 281.7 237.6 1,473.9 1,842.0 475.2 397.7 7,345.8 463.7 148.6 3,794.6 666.3 826.1 659.9 55.9 730.8 68,984.7
6,708.1 1,227.1 5,481.0 9,664.4 608.8 2,054.7 3.0 784.8 476.4 2,575.9 72.6 98.2 2,853.6 136.3 12,657.0 1,026.7 1,333.4 85.7 9,841.3 180.0 51.4 138.3 3,527.7 246.3 18.0 49.0 96.0 19.9 1,799.3 48.3 1,202.4 48.4 21,030.6 181.8 3,544.0 2,358.1 2,312.1 758.3 733.4 8,165.6 386.0 2,323.8 267.5 8,655.6 1,189.8 1,757.6 295.6 534.1 256.1 245.5 1,486.6 2,048.3 462.2 379.8 7,596.9 428.7 153.1 4,076.4 735.6 824.4 635.9 54.9 687.9 69,840.3
6,916.8 1,258.2 5,658.6 9,823.1 572.6 2,105.4 4.2 913.6 500.3 2,550.0 69.6 92.0 2,880.9 134.3 12,653.3 915.9 1,325.9 83.8 9,943.3 200.2 48.7 135.4 3,194.8 227.7 17.8 51.8 99.2 21.4 1,680.0 45.7 1,006.6 44.6 23,005.8 189.5 3,576.0 2,652.6 2,658.7 780.1 733.5 9,311.0 334.6 2,564.6 205.1 7,418.9 1,161.6 1,618.0 296.7 530.4 239.9 245.3 489.5 1,974.8 428.0 434.7 7,424.1 339.9 150.2 4,079.7 766.9 794.4 573.0 46.8 673.2 70,436.7
3.1 2.5 3.2 1.6 –5.9 2.5 41.5 16.4 5.0 –1.0 –4.2 –6.3 1.0 –1.5 – –10.8 –0.6 –2.2 1.0 11.2 –5.2 –2.1 –9.4 –7.5 –1.0 5.7 3.3 7.6 –6.6 –5.6 –16.3 –7.8 9.4 4.3 0.9 12.5 15.0 2.9 – 14.0 –13.3 10.4 –23.3 –14.3 –2.4 –7.9 0.4 –0.7 –6.3 –0.1 –67.1 –3.6 –7.4 14.5 –2.3 –20.7 –1.9 0.1 4.3 –3.6 –9.9 –14.7 –2.1 0.9
31,123.4 43.7 14,357.4 11,862.6
32,075.4 44.7 13,683.1 11,908.6
28,927.1 41.9 13,540.0 12,267.6
29,249.4 41.9 13,308.2 12,529.7
30,121.6 42.8 13,062.3 12,525.4
3.0 2.1 –1.8 –
Notes: Totals may not add up due to independent rounding. Revisions have been made throughout the time series. 1. Figures include share of production from Neutral Zone.
Sep-Oct, 2012
51
STATS
Nautal gas production in OPEC Members (million standard cu m) 2007
2008
2009
2010
2011
% change 11/10
68,400
72,638
56,716
71,758
84,004
14.6
Nigeria Gross production Marketed production
32,500
32,825
23,206
28,099
41,323
32.0
Flaring
22,300
19,073
13,328
15,294
14,270
–7.2
Reinjection
10,000
14,423
14,245
21,286
22,519
5.5
3,600
6,317
5,937
7,079
5,892
–20.1
Gross production
77,200
90,887
102,800
110,205
130,270
15.4
Marketed production
17.5
Shrinkage Qatar
63,200
76,981
89,300
96,335
116,700
Flaring
4,200
3,597
3,966
2,800
2,800
–
Reinjection
3,500
4,758
3,886
5,600
5,300
–5.7
Shrinkage
6,300
5,551
5,648
5,470
5,470
–
Saudi Arabia Gross production
83,280
86,400
89,610
97,030
102,430
5.3
Marketed production
74,420
80,440
78,450
87,660
92,260
5.0
200
Flaring Reinjection Shrinkage
100
160
50
60
30
–100.0
8,560
5,800
11,110
9,310
10,140
8.2
United Arab Emirates Gross production
78,963
80,055
75,840
79,778
82,433
3.2
Marketed production
50,290
50,240
48,840
51,282
52,308
2.0
Flaring Reinjection Shrinkage
970
980
967
972
982
1.0
22,033
23,135
22,051
22,406
23,974
6.5
5,670
5,700
3,983
5,118
5,169
1.0
Venezuela Gross production
71,622
71,978
72,170
71,075
73,274
3.0
Marketed production
20,729
20,750
18,430
19,728
20,769
5.0 28.0
7,184
9,173
8,753
6,680
9,284
Reinjection
30,974
30,200
31,626
31,391
29,827
–5.2
Shrinkage
12,735
11,855
13,362
14,277
13,394
–6.6
Flaring
OPEC Gross production
820,022
853,828
873,441
912,994
941,031
3.0
Marketed production
467,771
495,461
544,918
585,274
618,137
5.3
Flaring Reinjection Shrinkage
73,074
72,422
66,313
49,551
49,793
0.5
195,955
200,922
192,412
209,161
210,036
0.4
84,222
86,023
70,772
62,091
63,067
1.5
Notes: Totals may not add up due to independent rounding. Revisions have been made throughout the time series.
52
Sep-Oct, 2012
World marketed production of natural gas by country (million standard cu m) 2007
2008
2009
2010
2011
% change 11/10
North America
719,570
745,250
741,940
763,200
805,800
5.6
Canada
179,350
171,190
159,530
152,600
154,900
1.5
United States
540,220
574,060
582,410
610,600
650,900
6.6
Latin America
187,534
193,940
188,366
198,356
216,051
8.9
Argentina
44,830
44,060
41,360
40,100
38,100
–5.0
Bolivia
14,090
14,660
12,620
14,730
14,003
–4.9
Brazil
9,840
12,620
10,280
12,600
13,300
5.6
Chile
1,760
1,870
1,350
1,070
1,430
33.6
Colombia
7,640
9,000
10,490
11,300
10,700
–5.3
400
1,160
1,150
1,208
1,173
–2.9 –27.0
Cuba Ecuador Mexico Peru Trinidad & Tobago Venezuela Eastern Europe and Eurasia Azerbaijan Hungary Kazakhstan Poland Romania Russia
275
260
296
330
241
46,290
46,610
48,320
47,710
57,710
21.0
2,670
3,650
3,470
7,200
14,550
102.1
39,010
39,300
40,600
42,380
44,075
4.0
20,729
20,750
18,430
19,728
20,769
5.3
814,620
832,690
732,950
803,314
845,738
5.3
10,800
12,500
16,330
18,220
17,800
–2.3
2,600
2,610
3,090
2,490
2,730
9.6
27,800
31,400
33,470
34,900
37,169
6.5
4,300
4,100
4,110
4,240
4,150
–2.1
11,600
10,700
10,950
10,470
10,707
2.3
611,500
621,300
546,800
610,090
629,003
3.1 43.5
Turkmenistan
64,600
66,100
35,720
41,610
59,700
Ukraine
19,500
19,800
19,880
19,000
19,560
2.9
Uzbekistan
61,200
63,400
62,270
61,960
64,438
4.0
720
780
330
334
481
44.1
271,700
289,410
272,200
282,369
254,400
–9.9
1,850
1,530
1,590
1,630
1,583
–2.9
Others Western Europe Austria Croatia
1,580
1,580
1,410
1,523
1,504
–1.2
Denmark
9,210
10,090
8,450
8,190
7,000
–14.5 16.9
France Germany Ireland Italy
1,080
920
880
718
839
17,100
15,600
14,590
12,710
12,000
–5.6
380
360
320
388
356
–8.2
9,710
9,140
8,020
8,300
7,500
–9.6
Netherlands
68,300
79,960
73,730
85,900
80,300
–6.5
Norway
89,700
99,200
103,750
106,350
101,200
–4.8
United Kingdom
72,300
69,900
59,100
56,300
41,500
–26.3
490
1,130
360
360
617
71.3
356,540
382,581
450,790
486,217
514,622
5.8
11,780
12,640
12,580
12,910
12,710
–1.5
111,900
116,300
175,742
187,357
188,753
0.7
Others Middle East Bahrain IR Iran
Notes: Totals may not add up due to independent rounding. Revisions have been made throughout the time series.
Sep-Oct, 2012
53
STATS
World refinery capacity by country (1,000 b/cd)
North America Canada United States Latin America Argentina Brazil
2007
2008
2009
2010
2011
% change 11/10
19,416.7
19,409.1
19,802.8
19,771.2
19,706.2
–0.3
1,969.5
2,029.5
2,039.3
1,902.0
1,918.5
0.9
17,447.2
17,379.7
17,763.5
17,869.2
17,787.7
–0.5
7,991.0
8,135.9
8,135.9
8,155.9
8,135.0
–0.3
626.1
626.1
627.1
627.1
630.6
0.6
1,908.3
1,908.3
1,908.3
1,908.3
1,917.3
0.5
Colombia
285.9
285.9
285.9
290.9
290.9
–
Ecuador
188.4
188.4
188.4
188.4
188.4
–
1,540.0
1,540.0
1,540.0
1,540.0
1,540.0
–
320.0
320.0
320.0
320.0
320.0
–
Mexico Netherland Antilles Trinidad & Tobago Venezuela Virgin Islands Eastern Europe and Eurasia
168.0
168.0
168.0
168.0
168.0
–
1,034.7
1,027.2
981.2
987.3
1,016.2
2.9
500.0
500.0
500.0
500.0
500.0
–
9,921.4
9,624.9
9,521.8
9,786.9
9,840.1
0.5
Russia
5,339.0
5,428.5
5,428.5
5,430.9
5,430.9
–
Others
4,582.4
4,196.4
4,093.3
4,356.0
4,409.2
1.2
15,405.2
15,439.2
15,736.3
15,446.2
14,888.9
–3.6
797.6
797.6
797.6
740.3
739.8
–0.1 –6.8
Western Europe Belgium France
1,938.1
1,986.2
1,986.2
1,843.8
1,718.8
Germany
2,417.1
2,417.5
2,417.5
2,417.7
2,417.2
–
Italy
2,337.2
2,337.2
2,337.2
2,337.2
2,337.2
– –1.0
Netherlands
1,226.9
1,207.7
1,207.7
1,208.6
1,196.6
Spain
1,277.0
1,271.5
1,271.5
1,271.5
1,271.5
–
United Kingdom
1,857.7
1,857.7
1,857.7
1,766.2
1,767.2
0.1
Middle East
6,914.6
7,036.2
7,245.4
7,488.4
7,277.4
–2.8
IR Iran
1,474.0
1,474.0
1,474.0
1,741.0
1,772.0
1.8
Iraq
638.5
658.5
824.0
800.0
800.0
–
Kuwait
936.0
936.0
936.0
936.0
936.0
–
Qatar Saudi Arabia
80.0
80.0
80.0
80.0
80.0
–
2,130.0
2,135.0
2,109.0
2,109.0
2,107.0
–0.1
466.3
466.3
466.3
466.3
466.3
–
3,275.4
3,278.4
3,278.4
3,278.4
3,289.6
0.3
Algeria
475.0
523.1
652.4
652.4
652.4
–
Angola
38.0
38.0
38.0
38.0
37.5
–1.3
726.3
726.3
726.3
726.3
726.3
–
17.3
24.0
24.0
24.0
24.0
–
United Arab Emirates Africa
Egypt Gabon Libya
380.0
380.0
380.0
380.0
380.0
–
Nigeria
445.0
445.0
445.0
445.0
445.0
–
24,438.1
24,552.4
24,552.4
24,750.3
24,918.4
0.7
6,246.0
6,446.0
6,446.0
6,806.0
6,866.0
0.9 1.1
Asia and Pacific China India
2,255.5
2,255.5
2,835.5
4,000.5
4,042.8
Indonesia
1,050.8
1,050.8
1,050.8
1,011.8
1,011.8
–
Japan
4,650.7
4,690.7
4,690.7
4,729.9
4,729.9
– 1.4
South Korea
2,633.5
2,576.5
2,606.5
2,721.5
2,759.5
Singapore
1,344.0
1,344.0
1,344.0
1,357.0
1,357.0
–
Chinese Tapei
1,290.0
1,290.0
1,290.0
1,310.0
1,310.0
–
Australia Total world
701.1
707.1
724.7
757.2
760.1
0.4
87,362.4
87,476.1
88,272.9
88,677.3
88,055.6
–0.7
8,285.8
8,351.5
8,574.2
8,823.2
8,880.6
0.7
9.5
9.5
9.7
9.9
10.1
1.4
45,280.0
45,365.7
45,819.7
46,280.4
44,958.7
–2.9
8,311
8,015
8,015
8,196
8,209
0.2
of which OPEC OPEC percentage OECD FSU
Notes: Figures as at year–end. Totals may not add up due to independent rounding. Some figures were changes are calculated using 1,000 barrels daily figures. 54
Sep-Oct, 2012
World oil consumption by country (1,000 b/cd) North America Canada United States Others Latin America Argentina Brazil Colombia Ecuador Mexico Venezuela Others Eastern Europe and Eurasia Czech Republic Hungary Kazakhstan Poland Romania Russia Slovakia Ukraine Others Western Europe France Germany Italy Netherlands Spain United Kingdom Others Middle East IR Iran Iraq Kuwait Qatar Saudi Arabia Syrian Arab Republic United Arab Emirates Others Africa Algeria Angola Egypt Libya Nigeria Tunisia Others Asia and Pacific Australia China India Indonesia Japan New Zealand South Korea Thailand Others Total world of which OPEC OPEC percentage OECD FSU
2007
2008
2009
2010
2011
% change 11/10
23,313.4 2,283.1 21,027.5 2.7 7,811.0 527.4 2,381.5 270.8 192.5 2,172.9 675.7 1,590.2 5,385.4 211.3 160.8 246.7 521.6 213.0 2,913.3 83.3 337.9 697.5 14,925.9 1,979.1 2,419.7 1,728.7 1,111.0 1,610.5 1,734.1 4,342.9 6,516.8 1,718.6 582.6 316.4 81.9 2,073.9 357.9 569.3 816.1 3,052.3 282.6 76.9 693.8 233.6 222.5 88.0 1,454.8 25,543.3 951.8 7,586.7 2,999.3 1,244.0 5,037.1 156.0 2,240.7 937.7 4,389.9 86,548.0
22,023.7 2,231.5 19,789.6 2.6 8,023.3 595.2 2,518.4 273.9 197.3 2,161.1 650.2 1,627.2 5,432.4 211.3 158.8 266.5 534.1 194.5 3,036.3 86.0 322.5 622.5 14,816.7 1,945.5 2,545.3 1,666.7 1,068.6 1,546.7 1,725.4 4,318.5 6,930.7 1,813.8 600.2 324.0 105.0 2,252.5 393.9 597.8 843.4 3,185.9 309.6 80.8 697.7 253.2 246.6 84.0 1,514.1 25,654.8 963.8 7,971.5 3,071.8 1,247.5 4,788.3 157.2 2,142.2 911.2 4,401.4 86,067.6
21,225.3 2,157.4 19,065.3 2.6 8,027.5 600.2 2,572.1 276.1 222.4 2,070.6 679.6 1,606.6 5,294.4 205.4 158.1 253.4 538.1 176.1 2,935.7 80.5 288.3 658.8 14,090.9 1,870.2 2,452.0 1,543.4 1,005.2 1,467.2 1,645.7 4,107.3 7,100.6 1,858.8 662.6 340.6 109.2 2,362.4 347.2 565.3 854.5 3,246.9 315.4 81.6 709.4 272.9 237.2 85.2 1,545.2 25,788.7 951.1 8,253.9 3,231.1 1,285.8 4,393.8 152.0 2,188.2 931.1 4,401.8 84,774.3
21,689.8 2,210.7 19,476.5 2.6 8,223.8 631.4 2,709.2 277.8 241.7 2,072.9 675.1 1,615.7 5,473.8 195.6 146.4 261.8 568.3 164.9 3,199.3 83.6 256.1 597.9 13,983.0 1,861.1 2,495.0 1,528.4 1,009.0 1,440.9 1,622.4 4,026.1 7,364.9 1,820.4 693.9 358.2 118.3 2,599.5 320.1 591.1 863.6 3,348.5 343.6 87.9 716.4 301.1 270.6 86.8 1,542.1 26,906.2 960.6 8,951.2 3,305.9 1,332.5 4,452.5 151.5 2,251.6 945.8 4,554.5 86,990.1
21,435.8 2,239.7 19,193.7 2.5 8,449.0 652.3 2,779.8 282.1 255.9 2,078.2 741.7 1,659.0 5,574.1 192.3 141.3 271.5 579.3 163.3 3,269.3 80.7 261.2 615.2 13,690.7 1,823.9 2,423.3 1,455.8 1,005.9 1,383.5 1,602.1 3,996.2 7,556.3 1,776.8 751.7 361.0 124.9 2,713.7 301.5 617.6 909.0 3,360.4 329.5 89.6 751.1 231.3 267.1 87.9 1,604.0 27,726.7 997.4 9,409.9 3,432.6 1,370.6 4,481.0 147.2 2,227.1 998.6 4,662.4 87,793.2
–1.2 1.3 –1.5 –5.7 2.7 3.3 2.6 1.5 5.9 0.3 9.9 2.7 1.8 –1.7 –3.5 3.7 1.9 –0.9 2.2 –3.4 2.0 2.9 –2.1 –2.0 –2.9 –4.8 –0.3 –4.0 –1.3 –0.7 2.6 –2.4 8.3 0.8 5.6 4.4 –5.8 4.5 5.3 0.4 –4.1 2.0 4.8 –23.2 –1.3 1.3 4.0 3.0 3.8 5.1 3.8 2.9 0.6 –2.8 –1.1 5.6 2.4 0.9
7,026.6 8.1 50,029.1 4,043.5
7,431.0 8.6 48,329.3 4,106.9
7,708.0 9.1 46,307.4 3,999.9
8,101.2 9.3 46,816.4 4,183.1
8,260.8 9.4 46,324.9 4,289.9
2.0 1.0 –1.0 2.6
Notes: Revisions have been made throughout the time series.
Sep-Oct, 2012
55
STATS
World crude oil exports by country(1,000 b/cd)
North America Canada United States Latin America Columbia Ecuador Mexico Trinidad & Tobago Venezuela Others Eastern Europe and Eurasia Russia Others Western Europe Norway United Kingdom Others Middle East IR Iran Iraq Kuwait Oman Qatar Saudi Arabia Syrian Arab Republic United Arab Emirates Others Africa Algeria Angola Cameroon Congo Egypt Gabon Libya Nigeria Others Asia and Pacific Australia Brunei China Indonesia Malaysia Vietnam Others Total world of which OPEC OPEC percentage OECD FSU
2007
2008
2009
2010
2011
1,422 1,401 21 4,727 244 342 1,738 26 2,116 262 5,279 5,264 14 3,222 2,012 933 277 16,948 2,639 1,643 1,613 683 615 6,962 250 2,343 200 6,883 1,253 1,158 99 239 44 207 1,378 2,144 361 1,791 239 182 76 319 401 276 298 40,273
1,564 1,525 39 4,479 346 348 1,446 10 1,770 559 5,058 5,046 12 2,786 1,702 840 243 17,575 2,574 1,855 1,739 593 703 7,322 253 2,334 203 6,397 841 1,044 99 240 98 209 1,403 2,098 364 1,743 239 164 107 294 402 206 330 39,602
1,535 1,491 44 4,271 358 329 1,312 9 1,608 655 5,630 5,608 22 2,775 1,773 776 226 15,498 2,406 1,906 1,348 574 647 6,268 250 1,953 147 6,771 747 1,770 89 216 102 188 1,170 2,160 327 1,613 248 152 104 250 372 202 284 38,093
1,431 1,388 44 4,203 482 340 1,459 44 1,562 316 5,632 5,609 23 2,451 1,605 741 105 16,322 2,583 1,890 1,430 745 586 6,644 149 2,103 191 6,613 709 1,683 79 180 87 158 1,118 2,464 136 1,506 314 161 40 356 369 153 112 38,158
1,735 1,688 47 4,566 399 334 1,420 40 1,553 821 5,809 5,786 23 2,248 1,423 563 262 17,742 2,537 2,166 1,816 738 588 7,218 114 2,330 236 5,355 698 1,543 68 145 83 127 300 2,377 15 1,399 272 170 51 301 260 104 242 38,854
24,205.1 60.1 5,372 6,622
24,031.7 60.7 5,048 6,471
22,312.7 58.6 5,013 6,653
23,112.1 60.6 4,772 6,750
23,457.4 60.4 5,662 6,500
Notes: Revisions have been made throughout the time series. Data includes exports of lease condensates, re-exports, changes in the quantity of oil in transit, movements not otherwise shown, unspecified use, etc. 56
Sep-Oct, 2012
% change 11/10 21.2 21.6 7.4 8.6 –17.3 –1.8 –2.7 –10.4 –0.6 160.1 3.2 3.2 – –8.3 –11.4 –24.0 150.3 8.7 –1.8 14.6 27.0 –1.0 0.2 8.6 –23.7 10.8 23.2 –19.0 –1.6 –8.3 –13.0 –19.8 –4.7 –19.3 –73.2 –3.6 –88.8 –7.1 –13.4 5.7 25.4 –15.4 –29.6 –32.2 114.9 1.8 1.5 18.7 –3.7
MARKET REPORT
POSITIVE OUTLOOK IN MEDIUM TERM
Developing and emerging economies have constituted the sole source of incremental oil demand growth, amounting to a cumulative increase of 15 mb/d since 2000
T
he expansion of the emerging economies in recent years has been a major factor contributing to demand for oil and other key commodities. While representing only 42 per cent of global economic growth at the start of the last decade, developing and emerging economies are expected to contribute 76 per cent of this year’s 3.3 per cent global growth, with the biggest part coming from China and India. This steady shift in contribution to total GDP has led to a substantial hike in demand for energy in the developing and emerging economies, particularly from China, India, Latin America and the Middle East. In recent years, developing and emerging economies have constituted the sole source of incremental oil demand growth, amounting to a cumulative increase of 15 mb/d since 2000. Given its strong economic growth, China alone has doubled its oil consumption over the past 12 years. This represents a marked contrast to the developed economies, which have seen a contraction in their oil demand of more than 4 mb/d since 2005, driven largely by energy policies. As these divergent trends are expected to continue, non-OECD consumption will exceed that of the OECD within the next few years. This change in the overall demand structure is already altering oil demand
seasonality, putting the third quarter on top due to summer cooling needs and agricultural sector demand in the developing world, in addition to the traditional higher oil consumption in the developed economies during the driving season. Thus, oil prices have become increasingly sensitive to the economic conditions in these dynamic regions, particularly China. A review of current economic developments shows that the impact of the recent global slowdown — originating from developed economies, mainly the Euro-zone — is particularly visible in emerging Asia. Manufacturing activity in China and India slowed in the first half of the year meanwhile, some developed economies are also being affected, including South Korea which in July suffered its sharpest fall in exports since 2009, declining 8.8 per cent from a year earlier. Meanwhile, Japan has also faced a drop in exports and the pace of its economic recovery continues to be restrained. Bank deleveraging policies in the European Union have also negatively affected the funding flows to developing and emerging economies. The escalation of the Eurozone crisis has dented immediate growth prospects for Eastern Europe, as well as Latin America, including its largest economy, Brazil. The recovery in the MENA
region has also been constrained by such factors as decelerating domestic consumption and softening demand from the EU. Despite these short-term difficulties, the medium-term outlook is more positive. Emerging Asia is expected to continue to benefit from China’s position as a major driving force behind global growth. In Latin America, policy initiatives adopted to boost economic activities should begin to show more of an impact by the second half of 2013. While the Euro-zone crisis is likely to remain a major source of uncertainty in the oil market during the second half of the year, positive developments in the emerging markets could help to underpin global growth, as well as to ease some of the challenges faced by the developed economies, which are their main trading partners. This would also provide steady support for oil and other commodities. OPEC REFERENCE BASKET The OPEC Reference Basket rebounded in July from its three-month-long declining streak to settle near the key $100/b mark at $99.55/b, almost 6 per cent above the previous month’s level. Although the global economic slowdown continued to dominate the scene over the month, the re-emergence of geopolitical tensions, production problems in the North Sea and hopes Sep-Oct, 2012
57
MARKET REPORT
that the world’s major economies would act to ease monetary policy to support their economies were among the main reasons for the overall increase in global crude oil prices. Also, sporadic positive economic data, which was not as bad as predicted from the US and China, was seen as an optimistic sign that pushed prices higher in most equity and commodity markets, including crude oil. Furthermore, increasing money-managed long positions also contributed to the upward momentum in market sentiment. The Basket rose to $99.55/b in July, a significant $5.57 or 5.9 per cent higher than the previous month. Year-todate, the Basket averaged $110.22/b, compared with last year’s average of $107.41/b for the same period, an increase of $2.81 or 2.6 per cent. All the Basket’s component values improved by around $6 in July, but were a long way from redeeming the significant drop of the previous month. Saharan Blend, Es Sider,Bonny Light and Girassol – or “Brent-related” crudes – rose by $6.36 to an average of $102.45/b, up by 6.6 per cent for the month. 58
Sep-Oct, 2012
Meanwhile, Middle Eastern grades Murban and Qatar Marine, along with the Latin American Basket components, Ecuador’s Oriente and Venezuelan Merey, increased by around 5 per cent to $100.48/b and $93/b respectively. The remaining Basket components, namely Arab Light, Basrah Light, Kuwait Export and Iran Heavy, rose by over 6 per cent in July to end at $98.91/b, which was $5.67 higher than in the previous month. Brent-related Basket components, light-sweet African crudes and European-bound Middle Eastern sour grades were supported by the production disruptions in the North Sea fields due to the short-lived Norwegian strikes, coupled with the tight medium-sour crude market in the Mediterranean which sent spot crudes to record highs. Furthermore, loading problems with alternative crudes, such as Iraqi Kirkuk, also supported the increase in spot prices for crudes that Middle Eastern export formula prices are benchmarked against, such as Urals. Asian or Dubai/ Oman related Basket components
rose the least over the month in a well-supplied market, as seen by the narrowing backwardation in the Dubai market structure, implying that the market was less tight than last month. Part of the reason for this was China freeing up available Middle Eastern supply for other buyers, after taking the bulk of the surplus sanctioned crudes on offer. The shutdown of the Motiva expansion also resulted in an additional surplus flow to Asia. In the US Gulf Coast (USGC), Light Louisiana Sweet (LLS) gained some ground on West Texas Intermediate (WTI), but it lagged behind the pace of Brent, based on the much-cited supply effect on LLS from increasing the blending of light, tight oil into the grades pool. The relative improvement in the USGC light sweet crude, LLS, has positively affected the overall prices of the Latin American Basket components. The mediumsour crude, Mars, remained largely unchanged for much of the month, but made some gains over the end of the month, after the Energy Information Administration’s (EIA’s) inventory data was released. At the end of July,
the market received confirmation of a prolonged outage at the Motiva refinery. A new 325,000 b/d crude distillation unit at the facility will remain offline until early 2013. It is likely that the volumes of Saudi crude heading for the USGC will go down significantly, as Saudi Aramco is a joint owner of the refinery. On 8 August, the Basket stood at $108.36/b, almost $9 above the July average. THE OIL FUTURES MARKET Crude oil futures prices recovered in July from the significant record low levels reached in June, although most of the fundamental reasons behind the fall are still at play in the market, as economic outlooks continue to worsen, while global stocks remain somewhat high. Economic woes continued to dominate the headlines, led by the International Monetary Fund’s (IMF’s) downgrading of global growth for both 2012 and 2013. Growth has slowed not only in troubled OECD countries, but also in key non-OECD economies, such as China, India and Brazil. The massive stock-builds over the first half of the year are still in play, although they are beginning to decline. China, in particular, appeared to have ramped up crude-buying for storage. According to official statistics, the country had an implied stock-build of in the first half. This build is very much in line with the country’s strategic storage objective, as well as with the high Middle Eastern production seen in the first half. Nevertheless, the resurfacing of geopolitical tensions, production glitches in the North Sea, successive large crude oil inventory-draws and optimism that the world’s major economies would act to ease monetary policy to revive economic growth were the main reasons for the recovery in an already oversold market in July. Positive economic data from the US and
Crude oil futures prices recovered in July from the significant record low levels reached in June, although most of the fundamental reasons behind the fall are still at play in the market as economic outlooks continue to worsen, while global stocks remain somewhat high China, although limited, was seen as an optimistic sign that pushed prices higher in most asset classes, including crude oil. Additionally, increasing moneymanaged long positions also reflected the bullish sentiment in the global crude oil futures markets. Intercontinental Exchange (ICE) Brent front-month prices increased in July by $6.80 or over 7 per cent to settle at $102.72/b, back above the significant $100/b mark, after briefly retracting from this level last month. Similarly, the WTI front-month price rose by 6.7 per cent or $5.53 to average $87.93/b in July. The year-to-date average of $112.07/b for the ICE Brent frontmonth was almost identical to that of the same period last year, namely $111.98/b. On the other hand, WTI’s front-month year-to-date average value was $1.45/b lower than that of last year, at $96.74/b, indicating a 1.5 per cent decline from the same period last year. Crude oil futures prices kept their upward momentum in the first week of August, when New York Mercantile Exchange (Nymex) WTI settled at $93.35/b and ICE Brent moved up to $112.14/b on 8 August. OIL PRICES, US DOLLAR AND INFLATION As in the previous months, the US dollar continued its relative strength. On a monthly average from June to July, it rose significantly by 2 per cent versus
the euro and 2.1 per cent compared to the Swiss franc, while versus the yen it fell by 0.4 per cent and relative to the pound sterling it stayed almost flat at -0.2 per cent. This support for the US dollar over the recent months highlights the relative strength of the US economy combined with its continued status as a safe haven, which has been accentuated by the weakness of the euro and the depth of US financial markets. Over the last six months (i.e. since February), it gained 7.2 per cent versus the euro and the Swiss Franc, 1.3 per cent compared to the pound sterling and 0.8 per cent versus the yen. The euro held up relatively well given ongoing issues in the economy, but the accelerating trend of the US dollar is obvious and it should be expected to continue as many unresolved issues in the Euro-zone prevail. It averaged $1.2274/€ in July, but depending on further developments in the Euro-zone’s sovereign debt crisis, it is likely that it will touch down to the $1.20/€ level, which is the next big support line. Of some interest is the recent development of the yen to the US dollar, which remained largely below the critical ¥80/$ level. The Bank of Japan seems not to have significantly intervened in the currency markets lately, although the yen has been trading at this relatively high level since already the beginning of May. Source: OPEC Report Sep-Oct, 2012
59
BOOK CORNER
WHEEL OF FORTUNE: THE BATTLE FOR OIL AND POWER IN RUSSIA The Russian oil industry—the world’s largest producer and exporter, providing nearly 12 percent of the global supply—is facing mounting problems that could send shock waves through the Russian economy and worldwide. Wheel of Fortune provides an authoritative account of this vital industry from the last years of communism to its uncertain future. Tracking the interdependence among Russia’s oil industry, politics, and economy, the author Thane Gustafson shows how the stakes extend beyond international energy security to include the potential threat of a destabilized Russia. Gustafson, a leading consultant and analyst of the politics of energy in the former Soviet Union, draws on interviews with key players over the course of two decades to provide a detailed history of the oil industry’s evolution since the breakup of the Soviet Union. At its center is the complex and fraught relationship between the oil industry and the state, which loosened its grip under Yeltsin only to tighten it again under Putin. As oil becomes harder to find and more expensive to produce and deliver, Gustafson warns, Russia’s growing dependence on revenue from oil exports, along with its inefficient and often-corrupt management of the industry, is unsustainable.
SOCIETIES BEYOND OIL: OIL DREGS AND SOCIAL FUTURES What would a de-carbonised society be like? What are the implications of a general deglobalisation for our social futures? How will our high-carbon patterns of life be restructured in a de-energized world? As global society gradually wakes up to the new reality of peak oil, these questions remain unanswered. For the last hundred years oil made the world go round, and as we move into the century of ‘tough oil’ this book examines some profound consequences. It considers what societies would be like that are powering down; what lessons can be learned from the past about de-energized societies; will there be rationing systems or just the market to allocate scarce energy? Can virtual worlds solve energy problems? What levels of income and wellbeing would be likely? In this groundbreaking book, the author John Urry analyzes how the 20th century created a kind of mirage of the future that is unsustainable into even the medium term and envisions the future of an oil-dependent world facing energy descent. Without a largescale plan B, how can the energizing of society possibly be going into reverse?
BYPASSING IRAN: PETROLEUM PRODUCTION AND THE STRAIT OF HORMUZ Some officials of Iran have recently renewed threats to close or exercise control over the Strait of Hormuz. Iran’s threats appear to have been prompted by the likely imposition of new multilateral sanctions targeting Iran’s economic lifeline - the export of oil and other energy products. In the past, Iranian leaders have made similar threats and comments when the country’s oil exports have been threatened. However, as in the past, the prospect of a major disruption of maritime traffic in the Strait risks damaging Iranian interests. U.S. and allied military capabilities in the region remain formidable. This makes a prolonged outright closure of the Strait appear unlikely. Nevertheless, such threats can and do raise tensions in global energy markets and leave the United States and other global oil consumers to consider the risks of another potential conflict in the Middle East. This book examines the Iranian threats to the Strait of Hormuz and analyses the implications of some scenarios for potential U.S. or international conflict with Iran. 60
Sep-Oct, 2012