OGR-july-2011 by oeronline emagazine

July-Aug, 2011

CONTENT Cover Story Health, Safety and Environment remains an overarching priority for companies in the Sultanate

24 Technology

Acoustic based tube inspection technology is revolutionising tube inspection around the world

Insets:

INDUSTRY SCAN

A complete news round-up on the latest in Omanâ&#x20AC;&#x2122;s oil and gas industry

16 Project Report

The Bharat Oman Refineries marks a watershed in India-Oman Relationships

Interview

Cao Zhigang, BGP Internationalâ&#x20AC;&#x2122;s Senior Vice President in an exclusive interview

20 Special Report

Used frying oil has the potential to replace diesel as fuel

Environment

Improved efficiency and increased use of clean technology can reduce CO2 emissions

July-Aug, 2011

Company Report

Tracing the growth story and future opportunities at Petron Gulf

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*Comparison between a standard fuel and the same standard fuel containing our fuel economy formula. Actual benefits may vary according to vehicle, driving conditions and driving style.

CONTENT Special Report

Effective integrating of refining and petrochemicals can give superior returns

Market Round-Up

Oil prices have turned bearish touching their lowest levels since May 2010

Insets:

SPECIAL REPORT

Vietnam has begun a confrontation with China over South China sea energy riches

Job Opportunities

The latest job opportunities from around the globe

70 EVENTS CALENDAR

A calendar of events in the local oil and gas industry

Tender Watch

TENDER WATCH

Latest tenders from around the globe

Global Round-Up

A round-up of the latest global events

July-Aug, 2011

industry scan

BP to invest $15 billion

Energy major BP expects to invest an estimated $15 billion in the full field development of its gas-rich Block 61 concession, which includes the Khazzan and Makarem fields, in north central Oman. The proposed investment, which is subject to a declaration of commerciality slated before the end of next year, will boost Oman’s total gas production by a third, thereby opening up a potentially prolific supply of natural gas as fuel and feedstock for industry. According to the head of BP’s operations in Oman, the proposed project promises to have immense benefits for the Sultanate’s industrial and economic development. “This will be a very large project – the largest project in Oman for quite some time – and will require approximately $15 billion in capital investment from BP to make that happen. About $10 billion of that will go into the drilling of wells and the rest will go for surface facilities,” Dr Jonathan Evans, VicePresident of BP Oman said. Only recently, BP Oman celebrated the completion of the construction of its Extended Well Testing (EWT) facility – a pilot plant that channels test gas from early wells already drilled at Block 61. The appraisal wells, compression stations, and other infrastructure facilities are part of an investment of $600 million already made by BP over the past four years as part of the appraisal phase of its exploration and development programme.

OGWA scheduled for April 2012

Oil & Gas West Asia Exhibition & Conference 2012 (OGWA), recognised as one of the largest energy shows in the Middle East region, is set to be held from April 16 to 18, 2012, at the Oman International Exhibition Centre.

again, an event of global significance, capitalising on the ever-growing demand for oil that has stimulated the need for large-scale exploration and expansion projects and investments all over the Sultanate and in the region.

“As proof its status as the most established event in the Sultanate, OGWA has, as early as now, booked more than 65 per cent of the exhibition space from local and international companies, and from various countries to represent national pavilions. The numbers are steadily mounting and are anticipated to reach the targets even months prior to the event date. It anticipates to exceed the over 300 local and international companies and 35 countries who participated in OGWA 2010,” a release issued by the organisers OmanExpo states.

OGWA 2012 will draw together the largest group of oil and gas companies from the GCC region, international oil and gas majors, technology and service providers, and other local and international companies that play a major role in the development of the oil and gas sector. It will also introduce a CEO Forum, which is a first in the region, and will be participated in by key business executives, policy makers, and technical experts from leading oil and gas companies who will share their views in line with the government’s thrust to tap more renewable energy sources and develop more economic oil recovery projects.

As in previous editions OGWA, will be, once

Shell Development Oman signs agreements to train and employ young Omanis Shell Development Oman has signed five agreements to train and employ in various sectors, 106 young Omani jobseekers as part of its social investment programme initiatives in the Sultanate. These agreements were signed between Shell and Oman Association for Petroleum Services (OPAL), along with Technical & Administrative Training Institute and the Arabian Training Centre. John Blascos, General Manager and Shell Country Chairman in Oman signed these agreements on behalf of Shell. Hamid Bin Ali Al Bahri, OPAL’s Executive Director for Human Resources signed on behalf of OPAL. The first agreement comprised training 28 high school graduates in AutoCAD training programme. This nine month programme will be conducted by the Arabian Training Centre and will enable the trainees to learn the basics of civil engineering design system and become professional draftsmen. 8

July-Aug, 2011

Haimo Technologies bags new PDO well test contract Haimo Technologies & Co (Oman), part of the Lanzhou Haimo Group of China, has recently received a prestigious multi-million dollar contract for Surface Mobile Well Testing Services from Petroleum Development Oman (PDO), covering the whole of North and South Oman (PDO concession areas). The contract is spread over four years, from 2011 to 2014, with the possibility of a further extension of one year after the four years term expiry. This award was won in a process of competitive bidding against the best local and international oilfield service companies, and is the third consecutive occasion for Haimo to work with PDO on this critical data service. Earlier, Haimo bagged two PDO well testing contracts over the years 2004-2007 and 2007-2011, making this current third engagement an enviable hat trick. The company was also awarded the “5 Years No-LTI Award” by PDO in 2009, for their exemplary QHSE record on the job. Haimo is a leading well testing solutions provider with sales and services currently spanning the globe in China, South East Asia, India, UAE, Oman, Kuwait, Iran, Yemen, Egypt, Syria, etc. A combination of cost effective, cutting edge technology and best-in-class services allows Haimo to stand out in the highly competitive world of oilfield services.

Giant crude carrier Fida commissioned Oman Shipping Company (OSC) has named its Very Large Crude Carrier (VLCC), Fida. The carrier is designed and constructed according to the latest international standards. Fida is the first vessel of her type to incorporate advanced ballast water treatment technology, to comply with international conventions on the protection of the environment from the effects of transportation of ballast water and sediments around the world. The vessel has a 317,000 deadweight ton (DWT) capacity. It is 333 metres long, 60 metres in beam and a design draft of 21 metres. This is Oman Shipping Company’s second VLCC to be delivered out of a group of five such vessels ordered by the company from Hyundai Heavy Industries.

Total Well Testing Solutions

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industry scan

Sohar Refinery in $1.5 billion expansion A contract was signed recently to revamp and expand the nation’s flagship refinery at Sohar at an estimated cost of $1.5 billion.

Qalhat LNG funds sign language training programme for OAD

Oil and Gas Minister HE Dr Mohammed Bin Hamad Al Rumhy, who is also Chairman of the Supervisory Board, presided over the signing of the Front End Engineering Design (FEED) and Project Management Consultancy (PMC) services contract. Oman Oil Refineries and Petroleum Industries, which manages Sohar Refinery, inked the agreement with leading international technology firm CB&I Lummus, which won the contract in an international competitive tender. Scott Wiseman, Vice President, signed on behalf of CB&I Lummus.

Omanoil sponsors Guinness record breaking micro-light journey by paraplegic pilot Oman Oil Marketing Company (omanoil) sponsored British paraplegic pilot, Dave Sykes, who was recently in Muscat for a short stopover en route a solo, recordbreaking journey from York, England to Sydney, Australia. Omanoil provided fuel for his state-of-the-art micro-light aircraft which is customised with specially modified hand controls, enabling him to fly without the use of his legs. “Dave is an inspiration for all and is a prime example of triumph in the face of adversity,” expressed Eng. Omar Ahmed Qatan, CEO of Oman Oil Marketing Company. “This is the same ethos we strive to live by at omanoil. We draw on the strength of our people and their resilient spirit to identify solutions that confront the various challenges in our business,” he stated.

July-Aug, 2011

As part of its Social Investment Programme (SIP), Qalhat LNG is funding a ‘sign language’ training programme for 40 Omanis. The process will be carried out in association with the Oman Association for Disabled (OAD). An agreement in this regard was signed recently between Qalhat LNG and OAD in the presence of H.E Dr. Yahya bin Bader Al Mawali, Under Secretary for Ministry of Social Development. Khalid Bin Abdullah Al-Massan, Qalhat LNG Vice President for Corporate Affairs, said, “Qalhat LNG since its inception is paying special attention to programmes that aim at the development of the Omani community through its ever growing Social Investment Programme that is designed to identify every possible opportunity in meeting and supporting the needs of the local community.” “We in Qalhat LNG are very proud to be at the forefront of funding this pioneering programme in cooperation with the Oman

Association for Disabled. It is undoubtedly one of the essential social and educational programmes that will help people with hearing disabilities to enhance their communication skills, thereby enrich their competencies and abilities to effectively contribute in the nation building challenges,” added Al Massan. Yahya Bin Abdullah Al Amiri, OAD Chairman stated, “We truly appreciate the significant role Qalhat LNG plays in local community support in general, but specifically for this generous contribution in support of our mission in providing necessary services to the disabled. It’s only when we all join hands, together we can make a difference and together we can touch the lives of our less privileged young disabled sons and daughters. We highly appreciate Qalhat LNG’s support and we look forward to start this training programme very soon. The programme will qualify 40 Omani volunteers who will certainly add a great value to those of hearing disabilities in improving their communication skills,” concluded Al Amri.

Sohar Steel LLC SIPC , Plot no 11 PB no 452 , PC 322 , Majees, Oman Tel: +986 26850205,Fax : +968 26850204 Email: info@soharsteelsms.com Web:

www.soharsteel.com

Marketing Ofď&#x192;&#x17E;ce The Middle East Traders (Oman) LLC PB no 406 ,PC 114, Muttrah , Oman Tel: 24590694 /95 /96 , Fax: 24590496 Email: sssrmsms@omantel.net.om

Sharq Sohar Steel Rolling Mills LLC Sohar Industrial Estate , Road no 6 PB no 12 (SIE) , PC 327 , Sohar, Oman Tel: +968 26751567 ; Fax: 26751569 Email : sssrm@omantel.net.om

PB no 12 (SIE) , PC 327 , Sohar, Oman Tel: 26751405 ,26751208, Fax 26751249 Email: ecp@soharsteel.com weldmesh@soharsteel.com

Middle East Conversion Industry LLC Sohar Industrial Estate

industry scan

Al Hassan Group wins runner-up award in Pan Arab Web Awards 2011

New brand launched for Oman’s Refining and Petrochemicals business

The Al Hassan Group recently received a major award for its industry-leading website at the 7th Pan Arab Web Awards held in Beirut, Lebanon. As the only Omani company to receive such an award, Al Hassan added yet another feather to its cap when the company was announced as runner up in the Health, Safety and Environment Category. This annual regional event is organised by the Pan Arab Web Awards Academy. The awards aim to raise the standards of web design and website functionality throughout the region whilst promoting the spirit of innovation and creativity.

Batinah Manager wins Shell Award Mohammed Ali Al Balushi, Shell Oman Retail Territory Manager for Batinah won the Shell Global Best Territory Manager award at a glittering “Smiling Stars” function held at Rome, Italy on May 11th. Mohammed beat stiff competition to emerge No.1 from over 700 Shell Territory Managers representing over 60 countries where Shell operates. Mohammed joined Shell Oman in 2007 as Operations Excellence Executive, from where he was promoted to Retail Territory Manager within a span of a year.

July-Aug, 2011

Orpic, the new name brand for Oman Oil Refineries and Petroleum Industries Company, was launched recently at the firm’s plants in Muscat and Sohar. Orpic is the culmination of a successful 12month integration programme for Oman Refineries and Petrochemicals Company (ORPC), Aromatics Oman (AOL) and Oman Polypropylene. With plants in both Muscat and Sohar, Orpic aims to set a new standard for Oman’s refining and petrochemicals industry with increased efficiencies and significantly improved operational and financial performance. Musab Al Mahruqi, Chief Executive Officer of Orpic, said, “The launch of the new name and company brand is the result of wide-ranging consultation with employees and external stakeholders over the past four months. It marks another step in the evolution of this company into an integrated Omani refining and petrochemicals business we are proud of. Our employees and our company have made great progress over the last year and I know that, united behind this new brand, we will continue those efforts into the future. Our new brand identity is fresh and modern, and represents perfectly our position as a modern and forward-thinking company.” The launch of the new brand ‘Orpic’ is part

of the restructuring process started almost a year ago to integrate Oman Refineries and Petrochemical Company with each of Aromatics Oman and Oman Polypropylene. Al Mahruqi added, “Orpic has ambitious plans. We are building an integrated Omani refining and petrochemical business we are proud of. That means a business which operates safely and reliably, while paying due care to the environment. We are proud to deliver fuel to our nation as well as delivering a financial return to our shareholders. We also aim towards creating challenging and rewarding careers for our people. This year, we are providing over 130 opportunities for training and development for new graduates to be trained in the fields of operation and maintenance of refineries and petrochemical industries. We have plans to recruit over 400 Omanis in the next 5 years and enroll in similar training programmes.” The integration has created a business which brings together more than 1,600 employees, operating Oman’s two refineries and downstream petrochemicals plants. Mina Al Fahal Refinery began operations in 1982, while the Sohar Refinery and Polypropylene Plant started up in 2006. The latest addition to the complex was the Aromatics Plant, which started commercial operations in 2010.

LOCAL ROUND-UP

Oman LNG celebrates a decade of Higher energy SPEBuilding Youngthe Professionals “Empowering People, Future” prices boost Oman

is Excellency Dr Mohamed bin Hamad Al Rumhy, Minister of Oil and Gas, was the guest of honour at a special Oman LNG event at which he was presented Buoyant international energy prices swelled with the rst copy of “Empowering Oman LNG’s revenue earningsPeople, by $520 Building a book that reectspremier on million the in Future,” 2010, the Sultanate’s natural gas liquefaction company stated in the successes of the company’s pioneering its annualsocial reportresponsibility for the year.programmes Total earnings corporate $3.131 billion last year, fuelled by a insoared Omanto over the last 10 years. Oman LNG’s recovery in energy demand in the company’s Chief Executive Ofcer, Dr Brian Buckley, key markets of Korea and Oman Japan.LNG’s Revenues used the occasion to outline new were higher by $520 million compared with vision for the coming years that will focus the the previous year’s earnings — an increase company’s social investment programme achieved despite deliveries being fewer by on the three core areas of Empowering six LNG cargoes in 2010. Net income after Communities, Championing Innovation and tax was $1.380 billion, an increase of $243 Investing in People. A key initiative in 2011 million over 2009. LNG production stood will be the launch of the “Young Scientist at 8.8 million tonnes per annum in 2010, of the Year” awards in collaboration with representing 84.6 per cent of the plant’s the Ministry of Education. The awards will nameplate capacity of 10.4 million tonnes per recognise the contributions of an individual annum. This compares with output of 8.6 students and schools to innovation in science million tonnes produced a year earlier. at both the regional and national levels and is

LNG revenues

Paper Contest held

intended to encourage the creative application of science in secondary schools, to meeting the socioeconomic and environmental challenges and opportunities in Oman today. Commenting on Oman LNG’s Social Investment Programme so far, the Chairman of Oman LNG, His Excellency Nasser bin Khamis Al Jashmi, Undersecretary of the Ministry of Oil and Gas, said, “Oman LNG has made andhugely positive impact on the Omani The 2 GCC SPE Young Professionals Paper economy and the development of the nation Contest was held recently in Muscat. The contest over the past years. was aimed at recognising the efforts of young individuals and to provide a healthy competitive Through our pioneering Social Investment environment for exchange of knowledge and Programme, Oman LNG has set the benchmark

for corporate social responsibility in Oman and the region. We are very proud to have invested over RO 35 million in this programme at the local and national levels in supporting a total experience across the GCC Region. Presentations of 270 projects to date over the past decade.” were made by nine finalists from Oman, Saudi Oman LNG has become a role model for Arabia and the United Arab Emirates. The papers good corporate citizenship in Oman and a were judged by senior technical experts from the trusted partner for the development of the oil and gas sector. neighbouring communities.

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factsheet

Daily average oil production in the Sultanate Companies/products

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

PDO

648.0

642.1

689.2

709.5

843.4

904.6

904.3

Crude Oil

552.7

588.8

630.7

660.7

771.3

831.2

839.8

Condensate

95.2

89.3

77.3

48.2

53.3

58.5

48.8

60.4

72.1

73.4

64.5

Occidental Oman

78.4

74.6

71.6

67.8

68.1

64.8

55.2

46.4

44.5

41.0

39.1

Crude Oil

69.8

66.3

64.5

60.2

61.9

58.3

51.7

46.4

44.5

41.0

39.1

Condensate

8.6

8.3

7.1

7.6

6.2

6.5

3.5

‫ــ‬

0.0

RAK Petroleum

9.0

5.7

0.5

0.9

1.1

1.3

1.5

1.8

1.9

2.3

2.6

Crude Oil

8.8

5.7

Condensate

0.2

0.0

0.5

0.9

1.1

1.3

1.5

1.8

1.9

2.3

2.6

Oxy Mukhaizna

99.2

65.0

28.3

12.8

9.6

2.6

‫ــ‬

0.0

Daleel Petroleum

26.3

21.7

18.0

15.4

15.0

11.7

6.3

4.9

5.6

6.6

Petrogas

1.2

1.6

1.7

1.6

1.8

1.9

2.5

2.6

2.3

CCED Oil

0.4

PTTEP Oman (Condensate)

2.1

2.3

2.7

2.5

864.6

737.5

774.7

779.8

897.3

955.8

954.9

Daily Average Production (000b/d)

Note: Figures may not add up due to rounding

Items

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Number of Production Oil Fields

145

138

127

125

124

116

115

114

113

Number of Production Wells

4624

4173

3836

3388

3234

3018

2869

2843

2700

2546

2525

Natural gas production 2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

Associated

6,173

5,882

6,255

6,180

6,869

7,647

8,129

7,504

7,956

7,716

7,057

Non-Associated

27,086

25,140

23,975

24,082

23,340

18,291

15,974

16,577

14,366

12,992

8,192

Total

33,259

31,022

30,230

30,261

30,209

25,937

24,104

24,082

22,322

20,709

15,248

Unit: Million M3 14

July-Aug, 2011

Courtesy: Ministry of Oil & Gas, Oman

Oil fields and productions wells

project report

Dedicating a worldclass project The 120,000 barrels per day-capacity refinery is capable of producing 6 million tonnes of petroleum products annually, chiefly diesel for the local market, in addition to smaller quantities of jet fuel and gasoline. Feedstock for the project is supplied by an overland pipeline that runs 935 km from Gujarat’s Vadinar port. Crude oil will be sourced from a number of central Asian producers. Both crude import and pipeline facilities are owned by BORL. The complex was commissioned earlier this year, boosting refining capacity in the deficit-prone northern and central regions of India. BORL has grown out of a joint venture agreement concluded by Oman Oil Company and Bharat Petroleum corporation. In November 2009, the wholly Omani government company increased its stake from 2 per cent to 26 per cent. The Indian government owned BPCL, holds the remaining equity.

The Bharat Oman Refineries which was dedicated to the nation by Indian Prime Minister Manmohan Singh last month, marks a watershed in IndiaOman relationships. OGR reports on the finer details of the project The $2.4 billion refinery complex of Bharat Oman Refineries Ltd (BORL), in Bina Madhya Pradesh, has been formally dedicated to the nation, by India’s Prime Minister, Manmohan Singh. Oman Oil Company has a 26 per cent equity interest in the refinery and BORL represents one of Oman Oil Company’s 16

July-Aug, 2011

biggest investments in the subcontinent. The Indian Prime Minister said that the venture is an example of India-Oman collaboration in several things. “The Bina refinery would provide employment for 5,000 people and through corporate social responsibility, the Bharat-Oman venture would take care of the area,” he observed.

Capacity The Refinery is designed to process 6 MMTPA of Arab Mix crude (65 per cent Arab Light and 35 per cent Arab Heavy). Crude & Vacuum Distillation Unit (CDU/VDU) The purpose of this unit is to fractionate crude oil into specific boiling range streams suitable for blending into final refined products or as feedstock to downstream processing units. Products produced from this unit are gas, LPG, naphtha, kerosene / ATF and diesel components. Remaining residue as Reduced Crude Oil (RCO) from CDU is a feed to Vacuum Distillation Unit (VDU) for further distillation under vacuum conditions. Products from VDU are Vacuum Diesel

project report

which forms a part of the diesel product, whereas Vacuum Gas Oil (VGO) forms a feed to Full Conversion Hydrocracker (FCHC). Vacuum residue (VR) is a feed to Delayed Coker Unit (DCU). CDU/VDU has been designed by Engineers India. Integrated Full Conversion Hydrocracker (FCHC) & Diesel Hydrotreater (DHT) The primary objective of the FCHC is to maximise diesel production with sulphur content less than 10 ppm and Cetane Index more than 51. The DHT desulphurises the high sulphur diesel produced from the CDU/VDU & DCU and also improves the cetane no. of these streams to meet Euro III / IV quality norms. BORL has two stages: Hydrocracker integrated with Diesel Hydrotreater for saving capital cost and this kind of integrated unit is first of its kind in India. The process involves hydrocracking of VGO and Heavy Coker Gas Oil (HCGO) at high pressure and temperature in the presence of suitable catalyst and hydrogen. Technology licensor for this state-of-the art unit is Chevron, which is a reputed licensor in this field. Delayed Coker Unit (DCU) The delayed Coker process is based on severe thermal cracking of VR to produce distillate products and petroleum coke. Feed to DCU is heated and fed to Coke drums, the hot feed cracks to form coke and vapours. Vapours leave the coke drum which are fractionated to get cracked products like Gas, LPG, Naphtha, Lt. Coker Gas Oil (LCGO) and HCGO. These off-spec products are further processed in secondary processing unit like FCHC & DHT for making on spec products. This technology is provided by M/s ABB-Lummus. Coke will be utilised for steam and power generation in the 18

July-Aug, 2011

Captive Power Plant which is CFBC (Circulating Fluidised Bed Combustion) type boiler based power plant. Naphtha Hydrotreating Unit / Naphtha Splitter Unit (NHT / NSU) The Naphtha Hydrotreating Unit (NHT) process involves catalytic treatment of naphtha to remove sulphur and other impurities from naphtha. NSU (Naphtha Splitter Unit) is required for splitting full range naphtha to light and heavy naphtha. The light naphtha is feed to the PENEX unit and Hydrogen unit and whereas heavy naphtha is a feed to CCR (Continuous Catalyst Regeneration) unit. The NHT process is licensed by UOP. Continuous Catalyst Regeneration & Reforming Unit (CCR) This unit produces high octane MS component from heavy naphtha to finally produce high quality unleaded petrol. Hydro treated heavy naphtha from NHT is combined with recycle gas and sent to a series of reactors. Reactor effluent is separated into gas, LPG and reformate streams. Continuous circulation of regenerated catalyst helps maintain optimum catalyst performance at high severity conditions for long on-stream periods of reforming operations. The CCR process is licensed by UOP. Naphtha Isomerisation Unit (PENEX) Hydro treated light naphtha from NHT unit along with make-up gas from CCR unit is fed into PENEX after pre treatment. This unit isomerises normal C5 and C6 paraffin to their respective isomer, which have got higher-octane value with no aromatics, benzene and olefins. The isomerate product when blended with reformate produces MS meeting Euro III/ IV specifications.

PENEX Process is licensed by M/s UOP Hydrogen Generation Unit (HGU) Hydrogen Generation Unit licensed by Technip Benelux produces hydrogen by steam reforming of naphtha. Hydrogen purity of 99.9 per cent is achieved through the UOP Pressure Swing Adsorption (PSA) Unit. LPG Treating Units The primary purpose of the LPG treating units is to remove mercaptans so that the final product meets sulphur and corrosion specifications. Sulphur present in LPG in the form of mercaptans is removed by catalytic oxidation of mercaptans. The process is used for LPG sweetening. The Unit is designed by Engineers India. ATF Merox The objective of this unit is to convert Mercaptans & Sulphur compounds present as impurities in ATF to disulphide oils. The process converts the mercaptans to disulphide oils by their oxidation in the presence of a suitable catalyst. Sulphur Recovery Unit (SRU) and Tail Gas Treating Unit (TGTU) The main objective of Sulphur Recover Unit (SRU) is to remove and recover the sulphur from hydrogen sulphide (H2S) rich gas stream which is formed in various secondary processing units like HCU/DHT/NHT.

SPECIAL REPORT

The trash that turns fuel Used frying oil is no longer considered trash; when processed this waste from deep fryers becomes yellow grease, a fuel that can be used to replace diesel. Saji P Moolan reports When you sit in a fast-food restaurant, do you ever wonder what happens to the oil your fries came out of? In most cases they become raw material for livestock feed, lubricants, personal care items, and hundreds of other products. And, in some cases it ends up in the fuel tank of a truck or a tractor or even a car as bio-diesel. 20

July-Aug, 2011

Used frying oil is no longer considered trash. When processed this waste from deep fryers becomes yellow grease, a fuel that can replace diesel. Waste oil does not have a long history of being a potential fuel that can power machines. But, it has traditionally been

used to spray on roads to control dust or as an additive in cattle feed. It is the rendering industry that has explored its underlying potentials and applications. â&#x20AC;&#x153;Yellow grease is an important source for biodiesel. Renderers also burn it for their own use, depending on the market. It is also used in animal feed.Â The importance to the renderer is based on the market,â&#x20AC;? says Thomas M. Cook, President of the US-based National Renderers Association (NRA). Rendering is the process that converts animal/bird byproducts or used oils into useful materials. In processing used cooking oil into yellow grease, the renderers first collect the oil from commercial or industrial cooking operations. Then, they filter out the solids, and heat the oil to reduce

moisture content until it meets industry specifications for yellow grease. Restaurants, which have a past of paying recyclers and collectors to haul away their waste cooking oil, are now increasingly paid for the icky stuff. Not all restaurants, though. “It is fair to say that the majority of operations are either not having to pay for its removal or are being paid for it,” observes Christopher Moyer, Sustainability Policy Analyst with the National Restaurant Association, which represents America’s restaurant industry. According to the NRA, the collectors pay restaurants about 18 cents a pound for grease. Once processed, it is traded for 42 to 45 cents a pound compared to less than 8 cents a pound in the year 2000. But, opinions vary on the prices. “The

collection and processing of waste cooking oils typically costs no more than $0.10 per pound of raw grease. In the past 12 years the price for these products has ranged from $.075 to $0.50 per pound in our area. Over the past four years the price has averaged approximately $0.25 per pound,” elaborates J.J Smith of Valley Proteins, a major rendering company operating in several US states. There could certainly be price differences depending upon the location of sources, size of restaurants, overheads involved, quantity, etc. The price, however, is generally determined by market forces, especially the prices of gasoline and ethanol. In the past decade, rise in fuel price has always increased the use of yellow grease. In the industry, there are generally two types of renderers that process the waste fryer-oil. The first one is a large

rendering firm integrated into a giant meat processing company. Second one is the renderers who work independently. Both mostly do general rendering that involves processing of animal/ bird scraps as well as waste oil. Some of them focus exclusively on grease collection and its processing. In 2010, the NRA, in partnership with Animal Protein Producers Industry Committee and Fats and Proteins Research Foundation, commissioned an industry-wide study that was conducted by the agricultural and commodity/ product market research firm Informa Economics. It collected detailed information from 96 rendering plants across the United States and Canada. According to the study, the total volume of raw materials processed in rendering facilities is estimated at 48.32 billion pounds in 2010, five per cent of which

SPECIAL REPORT

consist of restaurant grease. Of the 52 per cent of all raw materials handled by independent renderers, 10 per cent consists of used cooking oil. The study also reveals that the volume of restaurant grease collected exceeded 2.4 billion pounds in 2010, but has declined from more than 2.66 billion pounds in 2005. Some of this decline could reflect the economic recession as well as the sharp increase in vegetable oil prices that has occurred since 2007. It estimates the potential total volume of used cooking oil from foodservice operations at 4.7 billion pounds. One of the interesting findings of the NRA survey is that the restaurant grease can be an easy target for theft. High oil prices increase the incidence of theft, which has been increasing steadily over at least the past five years. The annual volume of stolen grease is estimated to equal about 7.9 per cent of the volume currently collected, or around 190 million pounds. This equates to about 78,500 metric tonnes of finished product referred to as yellow grease. Assuming an annual average price of $500 per metric tonne, this represents more than $39 million in lost revenue to targeted firms. Among the firms in the survey that are engaged in restaurant grease collection and recycling, all reported at least some volume of grease is stolen prior to pickup, ranging from minimal to upwards of six million pounds annually. Ordinarily, these thefts go unreported or no aggressive measures are taken against the rustlers simply because the material that is stolen is considered as waste. The potential of yellow grease has also led to the emergence of a strong fuel conversion industry. Still in nascent stage, this new era alternative fuel system is picking up steam with motorists. There are several companies that offer transition option from diesel to bio-diesel.

July-Aug, 2011

A conversion kit costs around $1,100, and you can use either pure vegetable oil from your grocery store or you can use waste fryer-oil from your favorite restaurant. They may not even charge you for the oil. “The principal motivation for conversion is fuel cost savings while additional advantages include improved emissions and fuel independence,” says Justin Carven of Greasecar Vegetable Fuel Systems, a leading manufacturer of systems run on alternative fuel. Conversion kits allow owners of older diesel cars and light trucks to install a second fuel tank and a valve that allows the driver to start the engine on regular diesel fuel and, once the engine is warm, to switch over to straight used fryer oil as its fuel source. But, it has one condition the oil must be filtered so that it does not clog up the fuel lines and fuel injector. Motorists who have gone biodiesel in the U.S primarily acquire their fuel from the waste cooking oil of food preparation industry. They collect the oil from local restaurants and filter it themselves. However, these conversions are only available for diesel engines as the

J.J Smith, Valley Proteins

combustion properties of vegetable oils are not appropriate for use in petrol engines. There are also concerns that this conversion will not be effective in new diesel engines. “This process does not work very well in newer diesel engines due to the extremely high pressures that fuel is pumped into the cylinders,” says Smith. The conversion industry peaked in 2008 with gross sales of less than $10 million, and has since fallen significantly due to lower retail fuel prices and poor economic factors. “Our company converted just over 200 vehicles in 2010, down from over 1500 in 2008. Sales have increased by approximately 30 per cent in 2011 compared to 2010,” says an optimistic Carven. May be because of this, conversion experts are shifting their focus to emerging strong economies like India and China. They foresee far more opportunities for growth in Asia and South America than in North America. It is true biodiesel production in the United States continued its decline in 2010, down by 42 per cent from 2009. The main reason for this was the duties applied by the European Union to U.S. biodiesel imports. Also, the expiration of US federal tax credits at the end of 2009 for biodiesel, renewable diesel, and alternative fuel mixture put additional pressure on the profitability of biodiesel producers during 2010. However, the global biodiesel industry continues to flourish dramatically. The NRA study says in 2010, the worldwide production of biodiesel by leading producers increased approximately 15 per cent to 17.6 million metric tons. This growth, being fuelled by expansion in developing nations and in the global middle class, is expected to continue and give more mileage to yellow grease.

TECHNOLOGY

Now inspect every tube! an eventual operational breakdown and financial loss.

According to a study by Pritchard and Thackery (Harwell Laboratories), 15 per cent of maintenance costs can be attributed to heat exchangers and boilers. Tube defects effect all industries and come in various forms such as blockages, corrosion, pitting and leaks. he present limitations of conventional T inspection methods include: zz A physical traversal of the tube zz No bent tubes (U-Tubes) zz Time consuming zz Dependent on wall material zz R equirement of highly skilled certified personnel

Zakaria Abdul Aziz, Managing Director, Rukun Al Yaqeen International Oil & Gas

Of the billions of tubes located in heat exchangers globally, only a select few are inspected through conventional methods. Sunil Fernandes reports on how Acoustic Eye’s breakthrough Acoustic based inspection technology is revolutionising tube inspection Of the 13 billion tubes located in heat exchangers globally, only one billion of them are being inspected by conventional means. If all of the tubes are not inspected, it could simply mean 24

July-Aug, 2011

that one has to gear-up for decreased performance, energy waste, lower heat transfer and environmental hazards. And of course, if only a small sample size is inspected, there is bound to be

The need of the hour for the industry to save time and costs is to ensure a 100 per cent test, as samplings may not eliminate tube related problems. “The market is looking for a product that tests quickly and accurately, besides inspecting all tubes irrespective of material and tube configuration. Also, the product must detect all internal diameter phenomena, including current solutions such as bulges and critical defects,” says Zakaria Abdul Aziz, Managing Director, Rukun Al Yaqeen International Oil & Gas. AcousticEye’s Dolphin now provides the complete solution and ensures ultra fast, non–invasive, heat exchanger tube inspection, which is more than 10 times faster than the current offerings and inspects any tube. Besides, one can also receive an objective computer-based interpretation of the test results.

TECHNOLOGY

The technology Acoustic Eye’s Dolphin works on the Acoustic Pulse Reflectometry (APR), which is based on the measurement of one-dimensional acoustic waves propagating in tubes. Any change in the cross sectional area in the tubular system such as pitting, erosion, holes, blockages and bulges creates a reflection, which is then recorded and analysed in order to detect defects. Rukun al Yaqeen (RAY) International Oil & Gas LLC is Acoustic Eye’s exclusive partner in Oman, who provide integrated solutions in asset integrated management. “We have seen a vast potential for the product in Oman,” adds Abdul Aziz. How does APR Work? An acoustic pulse injected into a semi-infinite tube will propagate down the tube without generating any reflections. This pulse can be measured by mounting a small microphone with its front surface flush with the internal tube wall, through a hole in this wall. The microphone will measure the pulse once only, as it passes over the microphone diaphragm. If however,

the pulse encounters a discontinuity in cross section, a reflection is created. The amplitude and form of the reflection is determined by the characteristics of the discontinuity: a constriction will create a positive reflection, whereas a dilation (increase in cross section) will create a negative reflection. Neither of these discontinuities will change the shape of the pulse in their vicinity, but the reflection measured by the microphone will be an attenuated and smeared replica of the impinging pulse, due to propagation losses. A hole in the tube wall, on the other hand, will create a reflection having a more complicated shape, affected by the size of the hole and the radiation of acoustic energy to the space outside the tube. Advantages over current technologies Currently, the most commonly used techniques for inspecting tubes found in heat exchangers are based on invasive testing. Eddy current, magnetic flux leakage, Iris tube inspection and ultrasound-based methods all require a probe to be traversed throughout the entire length of each tube being examined. Over the years, customers have simply become

No more sampling 100 per cent tubes inspected

July-Aug, 2011

Five random defects

accustomed to the limitations of invasive technology, including: Delays: Under ideal conditions, invasive technology report inspection times of about 1 minute per tube are often cited, though this rate is very difficult to maintain over an entire shift. Breakdowns: Probes often get stuck in cases where the tubes have not been cleaned properly, which is difficult to ascertain a priori. Though some flexible probes are currently available, some bends (e.g., U-tubes) are too tight for such probes. In such cases, the tube has to be inspected from both ends Configuration issues: Existing NDT-based inspection methods (e.g., ultrasound, eddy current) have difficulty inspecting tubes they cannot traverse due to the configuration or type of material. This is also very costly due to the need for experts to interpret the data and the need to manufacture probes for each specific job. Clearly, the Acoustic Eye provides unparalleled advantages over conventional means of tube inspection and can certainly save time, money and environmental hazards.

Past technologies 10 per cent tubes inspected

Five random defects

Master of Science in Petroleum Geoscience Bachelor of Applied Geosciences

Shape Your Future Tell: 24 61 66 66 98 66 77 66 98 44 64 54 E-mail: info@gutech.edu.om Website: www.gutech.edu.om PO Box 1816, Athaibah PC 130 Muscat, Sultanate of Oman

advertorial

Making a mark

BGP is one of the world’s leading geophysical services companies, delivering a wide range of technologies, services and equipment to the oil and gas industry worldwide

BGP Oil and Gas Services LLC (BGP Oman) is an Omani registered company and started its operations in Oman in 2003. The company has two shareholders, BGP International China (Subsidiary of CNPC China), and Rees Oil & Gas Services LLC Oman (a 100 per cent Omani company owned by Omzest group and Al-Yousef international Oman). It

is believed that the proven technical ability, operational experience and commitment to HSE of BGP, combined with REES’ local knowledge of the geophysical business will create win-win opportunities for BGP Oman and its clients, and will add significant values to the oil and gas industry in Oman, in any land seismic survey prospects.

BGP Oman has an impeccable track record when it comes to service and HSE. On 13th May 2011, the BGP Oman Crew 8622 achieved a HSE milestone of 8 million man-hours without any Lost Time Incidents, working for PDO seismic operations. Achieving this record in a challenging and difficult working environment can be considered as outstanding. Over the last few years, the crew has been involved in many medium to high risk operations, which make this achievement even more significant, e.g. the Fahud deep 3D project. The crew operates in some of the most hostile terrain and in very difficult temperature conditions, thus emphasising the need to increase the vigilance in managing HSE. It’s a milestone for both BGP and PDO that after nearly seven years’ continuous operation, which began recording seismic data on 26th June, 2004. BGP Oman in total has achieved more than 8 million man-hours LTI free and more than 17 million kilometers driven. This in itself is a great achievement which needs commitment, dedication and involvement from the country and crew management. In addition to HSE management, great attention was paid to efficiency and quality. After all the recent upgrading to recording system and techniques, the crew has achieved a world record daily production of 20651 VPs during 24 hours operations. With a brilliant team, adherence to the highest quality of service and technical superiority, BGP Oil and Gas Services LLC would continue to develop the industry here in Oman.

July-Aug, 2011

INTERVIEW

Cao Zhigang, BGP International’s Senior Vice President was in Oman to visit crew 8622 and celebrate 8 million man-hours LTI free. He spent time talking to Sunil Fernandes on the company’s global operations and operations in Oman. Excerpts from an exclusive interview

Committed to deliver the best Could you tell us a little about your worldwide operations, particularly here in the Middle East? BGP is one of the world’s leading geophysical service companies, delivering a wide range of technologies, services and equipment to the oil and gas industry worldwide. We are engaged in seismic data acquisition, processing, interpretation, reservoir geophysics, borehole seismic, micro-seismic, GME and multi-client surveys, equipment manufacturing and software R&D. We are a subsidiary of China National Petroleum Corporation. BGP started operations in 1986 and has grown very well since then. The Middle East region is of great importance to BGP’s global market, and we already have operations in Saudi Arabia, Iran, Oman, Syria and Iraq. Also, we have significant presence in North Africa, West Africa and East Africa. BGP has provided a wide range of services to both International Oil Companies and National Oil Companies, and played an indispensable role in discovering a number of oil and gas fields

around the globe. BGP has successfully completed projects in various challenging environments, such as mountainous area in Yemen and swampy area in Sudan. We also completed Distanced Simultaneous Slip Sweep operations for PDO, which is a technically intensive project. BGP as a company is well-geared to meet all kinds of challenges. Are you looking at other opportunities in the region? Of course. The Middle East is the hub for oil and gas exploration and production. Currently, we are looking at opportunities in Iraq and the United Arab Emirates. Both countries offer great potential for us. We already have operations in Iraq and are seeking opportunities to expand. Are you satisfied with your own performance in Oman? We started our operations here in Oman in 2003. In the last eight years, we have been serving Petroleum Development Oman and other exploration and production companies. Our crew has achieved eight million man-hours LTI free which is a significant

achievement. We remain extremely committed to HSE management. In fact, we have very stringent norms, when it comes to protecting people and the environment. I do recall that in our operations for Shell in Nigeria we completed nine million man-hours LTI free. These crews had much more people and the terrain in which they operated was very complicated. There are of course good opportunities to provide more services to the sector here in Oman. We hope to explore those opportunities. What are your strengths that have led to success? You actually cannot single out one reason. Our advantage I believe would be our people. For example our crew has people from different nationalities, who work as a team with tremendous camaraderie. Also, most our employees like to work with us on a long-term basis, hence we have very little labour turnover. We have been able to retain staff and hence our service and productivity is very stable. Of course, we have technical competence that is among the best in the world. We are also constantly upgrading our technology to enhance our services. July-Aug, 2011

INTERVIEW

“Would continue to grow in Oman” BGP Oil and Gas Services’ Country Manager, Meng Qingbing talks to OGR BGP has had a stellar performance here in Oman. Would you like to elaborate?

innovative and given sufficient training to comply with HSE. We also have some of the finest people from the industry. We follow international guidelines and continuously look forward to improving. HSE is a culture within our organisation.

Our objective has always been to provide support for the growing oil and gas industry in Oman. Since we began operations in 2003, we have fulfilled this objective. Today, it can be proudly acclaimed that we have been working with a host of oil and gas exploration and production companies in the Sultanate, apart from achieving 8 million manhours LTI free, for a PDO project. Besides PDO which are the other companies you have been working with?

We have been working with Occidental, BritishGas, Petronas, Petrogas, Daleel Petroleum, Circle Oil etc.

What are the plans for the company here in Oman?

We would like to continue to contribute to the growth of the oil and gas sector in Oman. We will continue to improve our Omanisation and provide more opportunity to our Omani staff. We would like to explore new opportunities and have a proven track record in successful implementation. We will make every effort to maintain excellence in operations with commitment, dedication and team work.

What do you attribute the success of your HSE achievements here in Oman?

We have received strong support from our head office in China. HSE is a team work. We have a great team and our people are highly motivated and

Under the Patronage of H.E. Dr. Mohammed bin Hamad Al Rumhy Minister of Oil and Gas, Sultanate of Oman Society of Petroleum Engineers

Major Improvements: What MUST We Do Differently?

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COMPANY REPORT

Enviable execution!

Petron Gulf has an enviable track record when it comes to implementation of some of the most prestigious projects in the Middle East, whether its Sohar Aluminium or Vale Oman’s Iron Pelletization project. S. Sudarsan, General Manager of Petron Gulf spoke to OGR on some of these projects and the reasons for solid execution capabilities The Petron Group has had an impeccable track record of implementing projects in the Middle East. Could you elaborate? Petron is a company set-up by professional engineers who brought with them, years of hands on experience. This led to the company’s focus on quality service to our clients. Concentrating on meeting needs of specific clients and not clamoring for volumes, ensured our track record of clients coming back to Petron every time. What are the various industries and the range of services offered by Petron Gulf? Petron has been active in the Middle East since 1983, providing EPC, fabrication and site construction activities comprising of civil, mechanical, refractory, insulation, painting, electrical and instrumentation works for heavy industrial projects such as cement, power, aluminum smelter, refineries, fertilizers, petrochemicals, oil and gas sectors and food industries. It also undertakes the expansion and upgradation of existing industrial plants as well as plant maintenance, shutdown and turnaround projects. Petron fabrication of static equipment and structures are engineered in-house, to the highest tolerances as per BS, ASME and DIN standards. Petron is an ISO 9001:2008 certified company for all the services provided by them. Petron

July-Aug, 2011

has also received accreditation from ASME for Boiler and Pressure Vessel Codes “U”, “U2” and “S”, “R” and “NB” Stamps. What do you believe are the inherent strengths of Petron Gulf LLC? The main strength of Petron is our

employees. A combination of youth and experience, we live and work as a family, irrespective of nationality. The management acts a friend, guide and mentor, delegating down the line both responsibility and authority. This gives our operating team, flexibility in executing projects and meeting or exceeding clients’ expectation.

Investments into assets required for construction and fabrication regularly, keeps us abreast of developing technology and gives a competitive edge. Combination of fabrication facilities and multi-discipline construction divisions presents clients with a one point of contact, reducing interface issues. Thinking out of the box leading to lateral solutions enhances our performance. Could you elaborate on the major projects completed by the company in Oman? We started with a major contract for the Sohar Aluminum Smelter Project in 2007, wherein we fabricated and constructed the Gas Treatment and Fume Treatment system. Thereafter, we have been continuously carrying out service contracts for maintenance and modifications since 2008. In 2009, we established a brand new fabrication shop in Sohar with stateof-the art technology for fabrication of pressure vessels, static equipments, piping, structures and large diameter tanks. We were accredited with ISO 9001 and ASME U, S and R Stamp in 2010. All this happened within a year of operations, which is commendable and due to tremendous effort of our team. One of the most prestigious jobs is the mechanical, electrical & instrumentation construction contract we have with Vale Oman for their iron pelletisation project. We are carrying out the largest scope with close to 30,000 tonnes of erection, manpower of over 1700. We have had to work against a very tight and challenging schedule, which our team met. It would be in place to mention that Vale’s team has also been very

One of the most prestigious jobs is the mechanical, electrical & instrumentation construction contract we have with Vale Oman for their iron pelletisation project

cooperative and supportive. We are also in the final stages of completion of material handling system for Jindal Shadeed Steel Project in Sohar. Jindal’s takeover of the company came to us as a blessing, as this project was stalled for more than 2 years. We again finished an early completion phase for Shadeed to enable them to commission the plant three months ahead of schedule. We are now starting work on the Barka 3 Power Station, a contract we secured from GS Engineering for Mechanical work on gas turbines, steam turbines and HRSGs. Would you like to elaborate on the CSR omanisation at the company? Having worked in Oman since 1992, I have personally seen various companies’ policies and implementation of Omanisation at close quarters. Our Directors and I were clear that we have a social responsibility of encouraging, mentoring and engaging Omanis in every aspect of our operations. There is commercial sense in that, an efficient Omani is more economical than an efficient expat. The challenge is to gain the interest of the candidate, encourage him/her to try out, mentor him/her for a reasonable amount of time. We also incentivise our expat staff for taking on Omanis. We actually

had put in a lot of schemes in place since inception of our company. So this March, when the Government issued directives on various schemes, we had them in place. But I must say, Governmental schemes have taken away a lot of people to jobs in the Government and Oilfield, because of higher salaries. Our main focus is not so much on educated Omanis, but people who have passed secondary level school. Employment opportunities abound in skilled categories. If they are willing to bend their backs, jobs are plenty. We have been lucky with our Omani team, as we have most that have lived up to or exceeded our expectations. What are the future plans of the company? We have grown in four years from about 100 people to 2200 people. There are plenty of projects coming up. For a professional and committed company, there will always be enough work. We as a group are looking to expand our fabrication facilities and bid for EPC projects in the future. We have a young team both expat and Omani to ensure the company is on the rapid growth path. Are you planning further expansions/extensions to your activities? We are planning more technology oriented solutions for our customers, while keeping our core strengths in construction and fabrication. July-Aug, 2011

EDUCATION

How to become a successful “oil-man/woman”?

Get a Master degree in Petroleum Geosciences at GUtech in Oman By: Prof. Dr. Wiekert Visser

The German University of Technology in Oman (GUtech) is about to enter a new and exciting phase: the Executive Master of Science in Applied Petroleum Geosciences will start on October 3rd this year. This top education in petroleum geosciences has been designed according to the standards of the University of Aachen in Germany, which has accredited the curriculum. Upon completing this program, the student will be fully equipped to function independently as geoscientist at an academic level in the petroleum industry. The guiding principle of our program is that students will be stimulated to think critically, to come-up with creative ideas, to become scientifically self-supporting, and to develop a “can-do” mentality. For this, GUtech has contracted internationally renowned professors to teach the multitude of different subjects which make-up the petroleum geo-scientific profession. Students will learn how to apply geosciences at the sedimentary basin scale, at the oil & gas field scale, or even at the microscopic scale.GUtech offers what it takes to become a successful “oil-man/woman”. The program is built around intensive lecturing and exciting practicals, all offered by top instructors from Germany and the Netherlands. Teaching language is English. Core disciplines such as geology, geophysics, geochemistry, petrophysics and reservoir engineering are offered throughout the first three semesters. More advanced subjects and integration between disciplines are the focus of the next two semesters. The sixth, and last, semester is for writing an applied scientific Thesis. Essential laboratory work, such as novel experiments and measurements can be carried out in Germany. The Master’s program has been designed to accommodate students having a job. Lectures and practicals are 4 days/ week from 16.30 to 20.00 hrs. A few weekends per year will be devoted to field excursions in Oman. Total workload per week is 25 hrs, including self-study. This stimulating and rewarding internationally accredited Master program takes 2,5 – 3 years to complete.

July-Aug, 2011

ENVIRONMENT

Efficiency to curb emissions growth (PLVVLRQV SHU FDSLWD

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Reducing global emissions is increasingly recognised as a significant challenge, because different regions are at different stages in their economic development. Trends for energy-related CO2 emissions through 2030 vary greatly between OECD and non-OECD countries. The outlook for energy-related CO2 emissions is linked directly to the types and amounts of energy required globally. Today, energy-related CO2 emissions in Non OECD nations exceed those in 36

July-Aug, 2011

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the OECD by almost 40 per cent, and by 2030 are likely to be double those of OECD nations. In total, global CO2 emissions are likely to increase about 25 per cent from 2005 to 2030.

intensive energies. In OECD countries, CO2 emissions will decline through 2030 even as economic output grows by more than 60 per cent and population grows by 10 per cent.

While the expected increase in CO2 emissions is substantial, it is significantly lower than the projected 35 per cent growth in energy demand. This outlook reflects broad energy efficiency gains in economies around the world and a shift toward natural gas and other less carbon-

Those reductions will be more than offset, however, by rising CO2 emissions in Non OECD countries, where rapid economic development and rising prosperity will produce large increases in demand for energy, and particularly for power generation â&#x20AC;&#x201C; a large portion

Source: The Outlook for Energy: A view to 2030

Improved efficiency and increased use of cleaner fuels, such as natural gas, are effective tools for reducing CO2, says Exxon Mobilâ&#x20AC;&#x2122;s â&#x20AC;&#x153;The Outlook for Energy: A view to 2030â&#x20AC;?

of which will be met by coal, the most carbon-intensive fuel. While Non OECD countries will see gains in energy efficiency and increase their share of cleaner fuels, the resulting CO2 savings are more than offset by the tremendous rise in energy demand that will be needed to fuel rapid economic development. By 2030, Non OECD nations will account for approximately two-thirds of energy-related CO2 emissions worldwide.

emission levels than in the Non OECD. By 2030, the gap shrinks somewhat but remains significant.

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While global CO2 emissions are seen rising by about 1 per cent a year on average between 2005 and 2030, that is lower than the projected average rate of growth in energy demand, which is more than 1.2 percent a year.

Even with this large projected share of global emissions, average per-capita CO2 emissions in the Non OECD, while rising through 2030 in line with higher prosperity, will still be less than half the levels seen in the OECD at that time.

This achievement â&#x20AC;&#x201C; meeting rising energy demand while slowing growth in emissions â&#x20AC;&#x201C; is the result of accelerated gains in energy efficiency and a shift toward lower-carbon fuels. For example, natural gas can result in up to 60 per cent less CO2 emissions than coal, currently the most widely used fuel for power generation.

Another way to measure emissions is per unit of economic output. On this basis, OECD nations today have much lower

Progress will be most evident in the OECD, where emissions are projected to fall by about 15 per cent from 2005 to

Emissions in the power-generation sector will rise by about 35 percent from 2005 to 2030.

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Industrial

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2030. By 2030, OECD emissions will be back to levels not seen since 1980. Non OECD emissions, however, are projected to increase by almost 70 per cent over the period from 2005 to 2030. Yet, Non OECD emissions growth would be far steeper without the significant improvements in efficiency expected in these countries through 2030. ExxonMobil expects efficiency gains in Non OECD countries to offset about two-thirds of the growth in emissions that would have been associated with the steep increases in demand projected for these countries; a shift toward fuels with lower carbon intensity will have a modest impact. In all regions of the world, we see the dual power of efficiency, which not only helps balance market needs for reliable, affordable supplies but also helps mitigate risks associated with greenhouse gas emissions. 38

July-Aug, 2011

Source: The Outlook for Energy: A view to 2030

ENVIRONMENT

EVENT REPORT

For a greener Oman

Now into its second edition, Oman Green Awards 2011 has come of age as a platform to honour and appreciate outstanding environmental vision and achievements in the Sultanate. A report The prestigious Oman Green Awards (OGA) 2011 were announced at Al Bustan Palace Hotel’s Majan Ballroom which turned into a virtual green zone against a tapestry of green messages. Over 20 companies, institutions and ministries made it to the victory podium, having proven their green intent through measures that had the larger interest of the society. OGA 2011 was presided over by HE Mohammed bin Salim bin Said Al Toobi, Minister of Environment and Climate Affairs, His Highness Sayyid Tarik bin Shabib, Editor in Chief, Oman Economic Review, and Sandeep Sehgal, chief executive, United Media Services (UMS). The OGA, conceptualised and initiated by UMS, and now into its second edition, was attended by a host of executives, institution heads and senior representatives from the corporate world. Officials from the Ministry of Environment and Climate Affairs, Muscat Municipality, Ministry of Health and Environment Society of Oman – main supporters of OGA 2011 – also attended the glittering awards ceremony. OGA has earned recognition as a platform that honours and appreciates outstanding environmental vision and achievements in the Sultanate. It has, simultaneously, raised awareness to the larger cause of environment and has encouraged companies to work towards this goal. HSBC Bank Middle East Limited, Oman, won the ‘Green Campaign’ award, with the special commendation going to Electricity Holding Company. ‘Green Champion’ award went to Renaissance Services and the special commendation to Green Cover. Caledonian College of Engineering grabbed the ‘Green

Education’ award, while American British Academy (an IB World School) won the special commendation in the same category. For Haya Water it was the ‘Green Footprint’ award, along with Cowi and Partners who picked the special commendation. ‘Green Habitat’ award went to Bank Muscat and the special commendation to Port of Salalah. Mawarid Mining picked the ‘Green Innovation’ award, with the special commendation going to AlAbrar Petrogas. On the landscape front, it was Muriya Tourism Development Co who got the ‘Green Landscape’ award and Sultan Qaboos University the special commendation for its ‘Central Control System for Irrigation Water Management Project’. The Ministry of Tourism and Carillion Alawi won the ‘Green Guardian’ award and the special commendation, respectively. ‘Green Research’ award went to the Directorate General of Agricultural and Livestock Research at the Ministry of Agriculture, with Vale Oman Pelletising Company

collecting the special commendation in the same category. Panasonic received the maximum votes in the ‘Public Choice Award’. ‘Special Jury Award’ was picked by Petroleum Development of Oman and the Department of Soils, Water and Agricultural Engineering of Sultan Qaboos University. Akshay Kumar Parija, Producer of ‘The Living Ghost’ received a special recognition in honour of his commendable work towards the environment, through the entertainment media. ‘The Living Ghost’ has, previously, been nominated for an international film festival award at Cairo and the USA. Over 120 nominations were received in the different categories that had corporate houses and individuals vying for the coveted trophy. The final results were collated on the basis of the marks given by an august panel of judges, who were guided by the effectiveness, innovation and creativity, impact, originality and leadership and continuity and sustainability of the initiatives nominated. July-Aug, 2011

cover story

Creating a

safe working

environment

Health, Safety and Environment remains an overarching priority for most of the oil and gas companies in the Sultanate, even as road related work accidents continue unabated. Sunil Fernandes reports

July-Aug, 2011

cover story

The nature of the oil and gas industry makes it the most vulnerable to health, safety and environmental (HSE) hazards. Industry professionals from around the globe may well recall the Gulf of Mexico oil spill last year, which wrecked environmental havoc, even while causing considerable financial damage to oil and gas major, BP.

“Production and output tend to take priority over safe systems and practices”

The blowout of one of the rigs operated on behalf of BP saw oil leaks at a rate estimated at 2.5 million gallons per days, making it one of the largest oil spills the world has ever seen. And of course 11 workers lost their lives in the disaster, the damages of which cost BP several billions of dollars. Incidents as these always bring HSE to the fore, making it one of the top-most priorities for every organisation and cutting across industries and sectors. Setting very high standards In the Sultanate, oil and gas service providers adhere to the standards set by the nation’s largest exploration and production company, Petroleum Development Oman (PDO), and other E&P companies. PDO itself has set the most stringent norms as far as HSE is concerned, not only for itself, but for all of its service providers. The primary objective at the company being: “Goal Zero” (zero recordable injuries). Towards achieving this goal the company is doing its utmost to ensure that employees are well-trained and wellgeared to meet its targets. In 2010, a total of 3,729 staff members attended 17 core safety programmes, entailing more than 8,000 man-days of safety training at PDO. These and other efforts are aimed at securing a substantial improvement in PDO’s safety performance in 2011. However, challenges do exist, particularly in maintaining personal, process and asset safety. One of the ongoing challenges facing the company 42

July-Aug, 2011

Lawrence Alva, Chief Executive Officer, National Training Institute (NTI), talks to OGR on the HSE practices in the Sultanate and the areas for improvement NTI has been involved for many years now in training, including Health, Safety and Environment (HSE). Your comments on the HSE practices adopted in The Sultanate ? The oil and gas sector in Oman has policies and systems in place for ensuring safety of their people, property and the environment in which they operate. The safety culture in this industry is driven by Petroleum Development Oman (PDO) and other major international oil and gas companies. In fact, PDO pays for and monitors the implementation of HSE in the entire pan-PDO community although there are a handful of companies who invest on their own to make their place

a safer one. In comparison with non-oil and gas sector, the oil and gas sector is far ahead in HSE practices. Most of the oil and gas companies have a system in place, while implementation may be an issue in some cases. Any specific areas that you believe would need an improvement from companies operating in the sector, when it comes to HSE? A more visible leadership commitment would further improve the overall environment. Employee level active participation is something which needs to be promoted and that can be achieved only by the leaders leading by example. Production and output

tend to take priority over safe systems and practices. A more reasonable balancing act will make the workplace that much safer. Frequent inspection by the authorities to check compliance by both employer and employees will go a long way in creating a positive safety culture. What role would technology play in improving HSE standards around the globe? It is not the technology; it is the people who need to improve (in Oman). The people who can make a difference, must make a difference. There must be a collective ownership starting from the top to make the worker and work place a safer one. Technology can come in as an enabler once the heart and mind is committed. Driving accidents have remained a concern, as far as the industry and the country are concerned? What can be done to improve driving related issues? To begin with set the minimum qualifications for driver trainers and uniform standard for driver training and licensing. Ensure that police personnel lead by example when they are on the roads. Apply consequence management without fear or favour (no wasta) and collect fines immediately or impound vehicles. Penalise slow drivers on the fast trackand build more pedestrian bridges and take to task anyone trying to walk across a highway. Impose heavy fines to those who try to cross the road close to the overhead bridges and subways built for the purpose. Improve public transport network throughout the city (not just on the main locations). For the long term, we also need to bring in effective traffic safety awareness programmes in schools.

Safety performance as reported by PDO until early May 2011 2007

2008

2009

2010

2011

2 6 4

7 14 0

2 4 2

4 2 2

0 2 0

Fatalities PDO/Contr work related PDO/Contr non- work related Third Part (from work related) Total LTIs

127

Industrial LTIs (Hand/Finger/Thumb) Industrial LTIs (Others) RTA LTIs

31 29 12

28 44 55

20 17 8

21 45 8

7 8 5

RTAs

190

216

173

Million man-hours

109.3

137.1

157.3

158.1

56.5

Million KM driven

218.4

247

260

255.5

90.7

Process Safety Incidents

Source: PDO

Operational hazards performance as reported by PDO 30th June 2010

2006

2007

2008

2009

2010

Non-accidental deaths (PDO and contractors)

Total OH illnesses

34 (PDO 5)

57 (PDO 4)

Noise induced hearing loss

Food poisoning

Musculoskeletal Disorder

Mouse disease (RSI)

Stress

Medivac cases

229

291

345

174

Medical retirements (PDO only)

2 Source: PDO

is ensuring the personal and process safety of its people and contractors and its own assets. PDO’s safety performance in 2010 was mixed. Although the company was able to reduce the number of road traffic accidents, it regrettably experienced six road fatalities, three of which were work related. The company also experienced an increase in Lost Time Incidents (LTIs) for industrial hazards, albeit still well below its five year average.

PDO is determined to reach “Goal Zero” where it does not harm or lose a staff member or contractor on the road or in the workplace. As a core value in PDO, safety for staff and contractors will continue to be an over-arching priority for the company and its leadership. An area of concern Road Accidents continue to remain an area of concern for most companies, including PDO and its contractors. The company has taken its efforts at July-Aug, 2011

cover story

“Road safety and driving remain an area of concern”

What about your company’s own track record as far as HSE is concerned? The Bahwan Engineering Group attaches utmost importance to HSE Management in all of their business operations and are implementing highly evolved HSE Management System (HSE-MS). The company has well established HSE organisation, managed by experienced, qualified HSE professionals supporting the line management in implementing HSE-MS at Head Office and various project sites. At sites, we regularly carry out hazard analysis, tool box talks, STOP programmes, permit to work systems and regular audits from cross-functional teams. The company’s top management periodically reviews the overall HSE performance and initiates strategies for further improvement.

Pradeep Koppikar, General Manager, Corporate Oil and Gas Division, Bahwan Engineering Co (BEC), talks to OGR on areas for improvement in HSE practices, his company’s own track record and more Any specific areas that you believe would need an improvement from companies operating in the oil and gas sector? In the oil and gas sector there is a scope for improvement in areas like subcontractor’s HSE management, journey management and training for defensive driving. There should also be an emphasis on training of new recruits in this sector, effective communication and implementation of HSE practices up to the lowest rung of the workforce. The Sultanate has set very high standards for HSE practices. Oman’s HSE practices have been set

July-Aug, 2011

at very high standards and follows stringent health and environmental standards, which is comparable to the best in the world. However, their effectiveness in implementation varies from sector to sector. While the oil and gas sector follows extremely high international standards, other sectors need further improvement with respect to the use of appropriate personal protective equipment, use of proper tools and tackles, road safety management, waste handling management etc. It is necessary to focus on HSE Management uniformity across all sectors and also on road safety initiatives.

Would you like to comment on the man-hours your company has completed without any LTIs? The BEC Group has achieved very formidable record on their HSE Management System, Lost Time Injuries (LTI) statistics which are comparable to international standards. Our LTI frequency (LTI per million man-hours) is 0.25 which is far below the industry average. With systematic and sustained approach on HSE Management, the company has completed many major projects without lost time accidents. Recently, we have completed six major projects cumulating to 35 million manhours without lost time accident, namely: zz S aih Rawl Depletion Compression (SRDC) Project with TR Spain for PDO.

zz S alalah Methanol Project at Salalah with GS EC of South Korea. zz N ew Psychiatric Hospital at Al Amerat for Ministry of Health. zz P DO Estate Maintenance Services at Mina Al Fahal. zz O man LNG Shutdown Works (Total seven shutdowns successfully completed).

“HSE is a top priority for us”

zz O man India Fertiliser Co. (OMIFCO) Industrial Maintenance Works-Sur. Driving remains an area of concern for service providers as well. what can be done to improve the standards? Road safety and driving are the main concern areas as corroborated by recent press releases of Royal Oman Police revealing increasing number of road traffic accidents. Innocent lives are being lost and many have sustained permanent disablement or serious injuries. To improve driving standards and skills, it is necessary to carry out drivers training on defensive driving skills and keep reminding the drivers periodically in Driver’s Forums on importance of safe driving. At BEC, we undertake specialised defensive driving training courses for all our drivers and aim to change their behaviour for safe and defensive driving. This also includes training on vehicle maintenance. Also, one could consider road shows and specific awareness campaigns through the media. More effective communication through presentations, video films on safe driving and lateral learning from other road traffic accidents can be imparted to drivers.

Peter Hall, Chief Executive Officer of Al Hassan Engineering Co, tells OGR that continuous vigilance and communication is a must to ensure the ongoing and active protection of people’s well-being The Sultanate has set very high standards for Hse practices. This should be seen as a tribute to the people of the Sultanate and through Al Hassan Engineering Company (AHEC’s) ongoing focus, training and implementation of world-class practices, we are in a way helping the continual development of this much respected philosophy. Any specific areas that you believe would need an attention when it comes to HSE? Every organisation can do better; continuous vigilance and communication is always needed in order to ensure the ongoing and active protection of our people’s well-being. What about your company’s own track record as far as HSE is concerned? We are extremely proud of our performance in this area – Health and

safety of our people is our top most priority. Our policies and philosophies are actively propagated throughout our whole organisation and at all levels. Our record and reputation in the market bears testimony to this. Would you like to comment on the man-hours your company has completed without any Lost Time Incidents (LTIs)? AHEC has achieved 11.3 million manhours without any LTI on PDO projects, while for non-PDO projects, it has achieved 33.1 million man-hours. Your company has received many awards for HSE practices. Would you like to comment? To achieve recognition in this area is something that we are delighted to receive, and hopefully it sets a good example for others to follow and ultimately must improve for the entire industry as a whole. July-Aug, 2011

cover story

Courtesy: PDO

to deliver fuels and other products to customers or to keep its operations running. That is equivalent to circling the world around 100 times every day. The company had 25 per cent fewer road accidents in 2010, compared to 2009. Several companies in the Sultanate are taking pro-active measures to ensure safe driving practices. â&#x20AC;&#x153;At BEC, we undertake specialised defensive driving training courses for all our drivers and aim to change their behaviour for safe and defensive driving,â&#x20AC;? says Pradeep Koppikar, General Manager, Corporate Oil and Gas Division, Bahwan Engineering Co.

reducing road accidents very seriously. To achieve continued decrease in road traffic accidents, over 11,500 drivers were educated in road safety during 2010. Furthermore, PDO installed InVehicle Monitoring Systems (IVMS) in its fleet and made considerable effort on improving roads in the interior. In all its road safety initiatives, PDO works very closely with the Royal Oman Police, whose support has been invaluable.

Throughout 2010, PDO continued to work on a wide range of initiatives aimed at improving safety performance, with four focus areas in road safety, process safety, worksite hazards and contractor safety management. Shell, which has a 34 per cent interest in PDO, has itself managed to reduce road related accidents in 2010. According to the Shell Sustainability Report 2010, drivers working for Shell travelled more than 1.3 billion kilometres

The Environment Environmental protection initiatives have remained at the forefront for most of the oil and gas companies in the Sultanate. At Nimr in southern Oman, PDO in 2010 implemented an innovative project to treat water produced during the oil extraction process. After several years of pilot trials, the full-scale Nimr reed bed project came onstream at the end of the year. Reed plants naturally absorb

OCCUPATIONAL ACCIDENTS

ROAD TRAFFIC ACCIDENTS

Lost-Time Injuries per million man-hours

Accidents per million kilometres driven

(Staff & Contractors)

0.67

0.73

0.66

0.54

0.62

0.95

0.66

0.95

0.29

0.49

1.30

0.84

0.59

0.55

0.91

0.96

0.88

0.87

0.67

0.36

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

July-Aug, 2011

Courtesy: PDO

PDO fleet installed with IVMS

“Awareness and continuous update of HSE practices necessary”

T. Sukumar, Asst General Manager, Advanced Oilfield Technology Company tells OGR that it is important to have awareness and continuous evaluation of Health, Safety and Environment (HSE) practices DO service providers in the sector need to do more to ensure better HSE practices? The attributes of the oil and gas industry are such that, HSE has to remain a top priority over everything else. Health, Safety and Environment activities have to be deeply imbibed since the job that they accomplish are very critical, as well as hazardous. Despite full-fledged HSE practices and adherence to the most stringent standards in force, there is always a possibility of fatal accidents, in which human life could be lost. Also, due to global warming the working environment has changed drastically over the years. I suggest that we adopt progressive HSE standards to avoid hazards at the work place and also review them regularly.

Any specific areas that you believe would need an improvement? Of course it is obvious that the only area that needs improvement at this juncture is the ongoing review of HSE practices. It’s more important that we focus on awareness amongst employees and evolve training programmes that match the nature of the job. What about your company’s own track record IN HSE? We regularly monitor our own HSE practices and are rather proud of what we have achieved. Having said that, I wish to emphasise that we take HSE very seriously and it remains our toppriority over everything else.

oil, and at Nimr, a giant farm with 2.4 million sqm of reed beds, the plants treat 45,000 cubic metres a day of produced water. The new farm treats the produced water, enabling re-use opportunities and reduces deep water disposal and the associated gas consumption for this stream of water. In effect, PDO has created a carbon sink. As well as demonstrating a solution to a major produced water problem, the Nimr reed bed project will save an estimated 12 billion cubic feet of gas over the next decade. Reed beds consume practically zero energy, utilising a gravity fed system and no transfer pumps. The project has the potential to be expanded to other low salinity produced water disposal streams in southern Oman. Last year, when OGR visited the Qarn Alam facilities of Petroleum Development Oman, we were quite amazed to see that Dodsal, which was implementing a part of the steam project at Qarn Alam had created a complete green tract at its labour camp there. Not only a green tract it was also heartening to see birds and pet animals at the camp. Several companies in the Sultanate are taking environmental initiatives seriously. Shell Oman conducts continuous Environmental Site Assessment and monitoring works for the underground water contaminated retail sites. omanoil on the other hand promotes pro-active measures to protect the environment of Oman with initiatives such as FRP tanks for storage of petroleum products, net stocks reconciliation, environment monitoring and remediation programmes. Most of the oil and gas companies take the environment seriously, just as they do for health and safety. Companies in the oil and gas sector are setting high standards when it comes to HSE, and the momentum is likely to continue into the future. July-Aug, 2011

SPECIAL REPORT

Effective integration delivers

superior returns

July-Aug, 2011

Stephen D. Pryor, President, ExxonMobil Chemical Company on how effective integration of refining and petrochemicals can improve financial performance

Refining Challenges Refining has always been a tough business with declining margins punctuated by brief periods of relief. But recent trends are making the business even tougher. First, shifting demand patterns are changing the shape of the barrel. Global demand for distillates and chemical feedstocks continues to grow while gasoline is expected to remain essentially flat. And, from a geographic perspective, non-OECD countries will account for all of the growth in liquids demand through 2030. At the same time, refining capacity has been growing faster than demand. As a result, global capacity utilisation has fallen to a level not seen in 25 years. In addition to these supply and demand factors, industry dynamics are increasingly shaped by ever-tightening regulatory requirements and the growing presence of financial investors. Beyond that, unprecedented swings in crude and product prices have created additional uncertainty. In the past 10 years alone, we have seen crude prices range from $16 to $144 per barrel and the “Golden Age of Refining” come and go. The same has been true in the cyclical petrochemical business, where margins have gone from bottom of cycle to top, to bottom and back to top again. And, today’s robust business environment is marked by striking regional disparities, with North American margins buoyed by increasing production of unconventional natural gas and gas liquids, while the fast-growing Asian markets are still absorbing unprecedented capacity additions. This ongoing turbulence reinforces our belief that success in these capitalintensive commodity businesses requires a disciplined, long-term approach that does not change with short-term swings in prices and profits. So I’d like to talk about a long-term approach for integrating July-Aug, 2011

SPECIAL REPORT

petrochemicals with refining — one that steers a steady course through the ups and downs of the market, and increases shareholder returns. The value of petrochemicals In his landmark book, The Prize, Daniel Yergin accurately characterised plastics and chemicals as “the bricks and mortar of contemporary civilisation.” Today, chemicals touch more than 95 per cent of manufactured goods and virtually every sector of the modern economy, from basic human needs like food, water, clothing, housing and transportation all the way to the latest advances in health care, communications and information

Petrochemical products such as strongbut-lightweight plastics and synthetic fibers help manufacturers and consumers conserve resources, save energy and reduce greenhouse gas emissions. A recent industry-commissioned, independently validated study found that for every unit of carbon dioxide emitted by the chemical industry over the product life cycle, more than two units of carbon dioxide are saved through the use of these products and technologies. The value of integration So how can refiners capitalise on growth in petrochemicals to enhance downstream returns?

Success requires a disciplined, longterm approach, supported by a steadfast commitment to leading-edge technology

technology. And every facet of the energy industry — including alternative energy — depends on the products of modern chemistry. That’s why petrochemicals is a growth business, particularly in Asia, a region that already accounts for more than half of the world’s primary petrochemical demand. Over the past 10 years, worldwide demand for the three largest primary petrochemicals — polyethylene, polypropylene and paraxylene — has grown by about 5 per cent a year, which is 2 per centage points faster than GDP. And we expect similar growth over the next decade, as chemical products continue to replace traditional materials such as metal, glass and cotton due to their superior performance, as well as economic and sustainability benefits. 50

July-Aug, 2011

We at ExxonMobil see integration of petrochemicals with upstream and downstream operations as fundamental to generating superior returns. But capturing the benefits of downstream integration requires more than simply co-locating petrochemical and refining operations. Indeed, there are many examples in our industry of companies that have gone that route and failed to generate attractive returns; some of them subsequently de-emphasised or exited the petrochemical business. What ExxonMobil has learned over the years is that the key to success is effective integration. Effective integration of refining and petrochemicals is achieved through site-wide optimisation of feedstocks, products, costs, capital and people. Let me explain each of these elements in more detail:

First, optimising feedstocks means having the flexibility to process a wide variety of feedstocks, and selecting the feed slate that generates the highest value for the entire complex. It also entails adjusting process conditions and product mix — in real time — to extract the maximum value from every molecule. What it all boils down to — no pun intended — is what we call “molecule management.” Optimising products means choosing the highestvalue combination of fuels, lubes and chemical commodity and specialty products for the integrated complex, with each produced at competitivescale facilities. Optimising costs means capturing economies of scale through common systems and services in areas where refining and petrochemicals have similar needs, such as safety and environment, maintenance, procurement and business services. The challenge is to capture these cost synergies while maintaining resources dedicated to the unique requirements of each business. Optimising capital means capturing the benefits of joint facilities planning, engineering, construction and shared infrastructure. And, finally, optimising human resources means using a unified approach to recruiting and development. At ExxonMobil, leadership development is built on rotational assignments in both downstream and chemicals, starting early in one’s career, because we want men and women who understand both sides of the business and whose capabilities and perspectives are as integrated as the operations they support. This helps foster a culture that rewards pursuing the general interest, rather than focusing solely on the success of an individual business. I am proud to say that every member of our chemical leadership team — including myself — has had extensive experience in both the downstream and chemicals.

This integrated business model provides a high degree of efficiency, enabling all product lines — fuels, lubes and petrochemical commodities and specialties — to benefit from lower costs. That’s why at ExxonMobil, 90 per cent of our operated petrochemical capacity is integrated with refining or upstream gas processing. This is in sharp contrast to prevailing petrochemical industry practice, where chemical companies tend to gravitate either to high-volume commodities or specialties produced at numerous stand-alone sites. So that, in a nutshell, is what I mean by effective integration. It is easy to describe, but hard to do well. Success requires a disciplined, long-term approach, supported by a steadfast commitment to leading–edge technology. We focus on technologies that reduce energy use, emissions and costs in our own facilities and deliver

products that enable consumers to do the same. The last point I’ll make about integration is that it’s never complete. My company has been at it for decades and every year we find new synergy opportunities. This constancy of purpose has enabled our downstream and chemicals businesses to generate a combined average return on capital employed of 20 per cent from 2000 through 2010. The evolution of petrochemical feedstocks Having discussed integration of petrochemicals with refining, let me now turn to an emerging opportunity for the U.S. petrochemicals industry and one that reinforces my point about the need for feedstock flexibility ... that is, the growing availability of unconventional natural gas liquids as a petrochemical feedstock. To put this opportunity in

perspective, a brief look at history is instructive, because the petrochemical industry has always been driven by the search for more attractive feedstocks. The modern chemical industry was born in Germany in the early 1900s using coal-based feedstocks such as coal tar and coke oven gases. In the 1930s and 40s, the industry’s center of gravity shifted to the U.S Gulf Coast, where the burgeoning refining industry provided an abundant source of advantaged petrochemical feedstocks that were safer and cleaner to process.The next step in this evolution was the shift to ethane-based petrochemical feedstocks derived from natural gas, as ethane was taken out of flares and upgraded to ethylene and derivatives. This process started in the U.S. Gulf Coast in the 1960s and 70s; and in the 1980s, it enabled the emergence of the Middle East petrochemical industry, capitalising

SPECIAL REPORT

on the region’s abundant supply of advantaged ethane associated with oil and gas production. Meanwhile, most of Europe and Asia continues to crack naphtha, which of course is tied to the price of oil. And today, we see ethane re-emerging as an advantaged feedstock in North America, reflecting the growing production of unconventional natural gas and the increasing importance of gas in the future energy mix. The growing role of unconventional natural gas Natural gas is the world’s fastest growing major fuel, propelled by strong demand for power generation and by policies that encourage reduction in CO2 emissions and, hence, a shift away from coal. ExxonMobil projects that by 2030, natural gas will have overtaken coal as the world’s second-largest fuel. In the United States, the world’s largest gas consumer, unconventional natural gas supplies have driven a 20 per cent growth in U.S. gas production over the last five years. This production growth has, in turn, increased U.S. ethane production by 25 per cent over the same period, providing a significant feedstock cost advantage for U.S. petrochemical manufacturers with light-feed steam cracking capabilities. In 2010, this ethane advantage drove strong U.S. margins in the ethylene chain, a further lightening of steamcracking feed slates and increased exports. The current strength of the U.S. market contrasts with the conventional wisdom just a few years ago that U.S. petrochemical production would decline, steamcracking feed slates would get heavier, and the U.S. would become a net importer of petrochemicals. Growth in U.S. ethane production is clearly a positive development in the ongoing search for advantaged petrochemical feedstocks. But will it drive new investment in ethane cracking in North America? 52

July-Aug, 2011

The short answer is yes, but we believe, at least in the near term, this investment will be incremental in nature. The level of ethane cracking investment will depend, in part, on the pace and pattern of North American ethane supply growth which, in turn, will depend on multiple factors, including: the location and rate of gas development; the liquids content across geological plays; and the construction of infrastructure to strip, transport and store NGLs. Given the uncertainties about ethane supply and its long-term price advantage, we would expect to see quick-payout projects to debottleneck existing light feed crackers as well as limited conversions of heavy feed crackers. Just as in refining, incremental investments in feed flexibility and capacity creep

commitment to leading-edge technology. So to summarise, we believe that unconventional natural gas presents an opportunity for both petrochemical and energy producers in North America and, potentially, other regions of the world. For petrochemicals, the dimensions of this global opportunity will be shaped over decades to come, just as today’s feedstocks have evolved since the birth of the modern petrochemical industry nearly a century ago. And, as one of the world’s leading oil, gas and petrochemical companies, ExxonMobil looks forward to helping to shape that future. In closing, as we navigate today’s turbulent times in the energy and petrochemicals arena, we would do well to keep in mind the technique used by sailors during storms

Unconventional natural gas presents an opportunity for both petrochemical and energy producers in North America and, potentially, other regions of the world

are the most efficient ways to meet growing demand in a mature market like North America. On the other hand, major investments at full grassroots costs would be subject to significant risks relative to long-term oil and gas prices, export economics, and gas developments around the world that could provide feedstock for competitors overseas. The bottom line is that the relative attractiveness of ethane or any other feedstock will vary over time. As such, we believe that the most successful companies will be those that maintain the flexibility to process the lowest-cost feedstocks. This feedstock flexibility is a critical element of a disciplined, long-term approach to the business that captures the full benefits of integration and is enabled by a steadfast

at sea. They will tell you that to avoid becoming seasick, you must not look at the churning waves, but instead fix your sights on the steady line of the horizon. For ExxonMobil, that line on the horizon is our commitment to creating value for our shareholders. For more than 125 years, we have found that by maintaining a long-term perspective — coupled with investment discipline and operational excellence — we can weather the market’s shifting tides, remain steadfast in our commitment to shareholders, and deliver the energy and petrochemicals that improve the lives of people around the world.

Stephen D. Pryor was speaking at CERAWEEK Downstream Plenary

EVENT REPORT

BEST PERFORMERS GET FELICITATED AT AIWA AWARDS 2011 In a gala event at Shangri-La Barr Al Jissah Resort & Spa held recently, Alam al-Iktisaad Wal A’mal (AIWA) felicitated the top achievers from Oman’s corporate world. AIWA Awards for Best Performing Companies are instituted by Alam al-Iktisaad Wal A’mal (AIWA), Oman’s leading Arabic monthly business magazine, published by United Media Services (UMS). Held under the auspices of HE Dr. Rasheed Bin Al Safi Al Huraibi, Chairman of Tender Board and in association with Capital Market Authority (CMA), AIWA Awards 2011 attracted the top echelons of the corporate community and senior government officials in the Sultanate. The high profile event was powered by Voltamp, Vertu from Khimji’s Watches, BankMuscat, Hyundai Centennial and Samsung. On the occasion, UMS’ Chief Executive Sandeep Sehgal stated, “Our endeavour behind AIWA Awards 2011 is to celebrate the success of Oman’s corporate sector that has continued to excel despite challenges from different quarters and has met its responsibilities towards the shareholders and society admirably.” In the first set of Awards, select 15 companies listed on the Muscat Securities Market (MSM) were felicitated. There were five winners in each of the following three categories: Large-Cap (market-cap above RO75 million); Mid-Cap (marketcap between RO25 million to RO75 million) and; Small-Cap (market cap between RO10 million to RO25 million). In the large cap, Ahli Bank, Omani Qatari Telecom Co. (Nawras), Oman Oil Marketing, BankDhofar and Shell Oman Marketing got the Awards. Al

Anwar Ceramic Tiles, Muscat Finance, Oman Refreshment, A’Saffa Foods and Al Omaniya Financial Services were the winners in the mid cap category. Among the small cap companies, Oman Chromite, Muscat Gases, Oman Fiber Optics, Oman Chlorine and Sahara Hospitality were the recipients of the Awards. The winners were selected on the basis of their performance on five key financial parameters including Revenue Growth, Net Profit Growth, Return on Average Assets, Return on Average Equity and Net Profit Margin in 2010. The ranking process was done by Gulf Baader Capital Markets (GBCM) and the results were

validated by KPMG. In the next set of Awards, Omantel and BankMuscat received the AIWA Awards for Excellence in Corporate Leadership for their immense contribution to the society and economy. The AIWA Award for Lifetime Achievement was bestowed on Sheikh Suhail Salim Bahwan, Chairman of Suhail Bahwan Group for his unparalleled service, for decades, in the development of the business and economy in the Sultanate. Dr. Mohammed Al-Barwani, Chairman of MB Holding Company won the AIWA Global Omani of the Year Award for steering his enterprise to a fast track sustainable growth path in the international market. July-Aug, 2011

special report

Vietnam’s oil and gas industry is currently the country’s biggest foreign currency earner

David & Goliath

Vietnam has begun a confrontation with China over South China sea energy riches. A special report An increasingly fractious maritime confrontation is developing in the South China Sea, with enormous implications for international companies interested in developing East Asia’s offshore hydrocarbon

July-Aug, 2011

resources. Far from the radars of the city of London and Wall Street investors, the clash has seen Vietnam emerge as spear carrier for its fellow ASEAN members on the dispute. Offshore drilling is the most

capital-intensive form of exploiting hydrocarbons, but its expense and scarcity has also allowed technically advanced Western companies to drive hard bargains with third world countries over their offshore waters, as

they don’t have indigenous advanced technical resources, nor finances to exploit their maritime wealth. Accordingly, most countries attempt to procure the best bilateral deals with foreign companies to get a taste of the offshore revenues that come from exploiting their Exclusive Economic Zones (EEZs), which the 1982 United Nations Convention on the Law of the Sea (UNLOS) recognised 12 nautical miles as normal for territorial seas and waters and provided international recognition of 200 mile EEZs. On the vexed question of overlapping claims, when an overlap occurs, UNLOS deferred to the competing states to negotiate to delineate their final and actual maritime boundary, with the general principle that any point within an overlapping area defaults to the nearest state. According to U.S. government statistics, Vietnam’s oil and gas industry is currently the country’s biggest foreign currency earner and a major procurer of imported technology. Since Vietnam’s first oil export shipment in April 1987, crude oil has earned over $17 billion for Vietnam’s economy, all of it from offshore production. Vietnam is currently Asia’s third largest oil producer behind Indonesia and Malaysia. Over the past few years China has asserted its sovereign maritime claims and takeovers even as Beijing has settled most of its disputes over its land

Since Vietnam’s first oil export shipment in April 1987, crude oil has earned over $17 billion for Vietnam’s economy

frontiers with post-Soviet Central Asian states since the early 1990s. China’s expansive sovereignty claims on the South China Sea, including the Spratly (Nansha) and Paracel (Xisha) islets, puts Beijing directly in conflict with the sovereignty claims and security of five Southeast Asian states - Vietnam, the Philippines, Malaysia, Brunei and Indonesia, not to mention China’s irredentist claims on Taiwan. All, except Taiwan, are members of the Association of Southeast Asian Nations or ASEAN.

currently deploy only light maritime forces, and for the moment, regional rhetoric exceeds firepower.

Vietnam has now emerged as the plucky David challenging Beijing’s Goliath. The confrontation began on May 26, when three Chinese patrol boats halted a seismic survey in spratly waters claimed by Vietnam as part of its EEZ, 80 miles from Vietnam’s coast and 375 miles south of China’s Hainan Island. Following other incidents, on June 13, Vietnam’s navy held live-firing exercises in an area 25 miles off central Quang Nam province after warning other vessels to steer clear. While China has the stronger navy, both sides can

Beyond the regional posturing, the issue seems tailor-made for international arbitration. UNCLOS provides for bilateral discussions, but given the diversity of claims, ASEAN would seem to be a better forum. In the meantime, the South China Sea hardly seems to be the best potential zone for foreign energy investment companies.

Besides the cover support of its ASEAN partners, China is in a dialectical trap of its own making. Asserting its unilateral sovereignty will weaken ASEAN dominated by China as a political organisation and potentially drive a number of its members to closer relations with the U.S., the only significant non-Asian power in the western Pacific.

By Dr. John C.K. Daly for oilprice.com For more information on oil prices and other commodity related topics please visit: www.oilprice.com

MARKET ROUND-UP

bearish trend Speculative unwinding saw crude prices drop to their lowest since May 2010

July-Aug, 2011

The OPEC Reference Basket plunged by $8.15 or almost 7 per cent in May to average around $110/b. This decline, which was the first since July 2010 and the largest in percentage terms since May 2010, was attributed to bearish market sentiment, which triggered an outflow of investment from the paper oil market. The WTI front-month contract fell below $100/b for the first time since mid-March to average $101.36/b, the lowest since Februaryâ&#x20AC;&#x2122;s $89.74/b. ICE Brent also declined sharply by $8.67 or 7 per cent to average $114.42/b. This represents the first drop since last July. However, continued unrest in the MENA region maintained a risk premium in prices. So far in June, the OPEC Reference Basket has hovered around $110/b, reaching $113.43/b on June 9. The world economic growth forecast for 2011 remains at 3.9 per cent, but challenges to the forecast have become more pronounced. The US forecast remains unchanged at 2.6 per cent, although developments require close monitoring given the weakening labour market and slower industrial activity. Euro-zone growth also remains broadly unchanged at 1.8 per cent, but continues to be significantly challenged by sovereign debt concerns. Japan experienced a much larger-than-expected decline in the 1Q11 and, as a result, this yearâ&#x20AC;&#x2122;s forecast has been revised to minus 0.5 per cent from minus 0.1 per cent last month. While industrial activity is decelerating in Developing Asia, the region is still expected to contribute

the most to global growth in 2011, with China growing by 9.0 per cent and India by 8.1 per cent. World oil demand is forecast to grow by 1.4 mb/d in 2011, following growth of 2.1 mb/d in the previous year. Several factors continue to impact oil demand worldwide. The Japanese earthquake continues to impact on oil demand estimates. Additionally, the latest monthly US oil data showed much weaker oil consumption than anticipated. In contrast, Chinaâ&#x20AC;&#x2122;s economy continued to grow strongly resulting in increased oil usage, offsetting to some degree the weaker growth in the US. Non-OPEC oil supply is now projected to increase by 0.7 mb/d in 2011, following a minor upward revision from the last report. Estimated non-OPEC supply growth in 2010 remains unchanged at 1.1 mb/d. OPEC NGLs and nonconventional oils are expected to average 5.3 mb/d in 2011, a gain of 0.4 mb/d over the previous year. In May, estimated OPEC crude oil production averaged 28.97 mb/d, according to secondary sources, an increase of 171 tb/d over the previous month. Product markets have been impacted since the middle of May by weaker-than-expected gasoline demand at the start of the driving season and a stock build in US gasoline after several weeks of inventory draws. However, this disappointing situation has been partially offset by gains at the bottom of the barrel in some regions, allowing margins to remain healthy. Looking ahead, demand is expected to improve

with the start of the driving season and expected higher gasoil demand for power generation in China. This could encourage an increase in refinery runs across the globe, potentially adding support to the crude market. Dirty spot freight rates were mixed in May with VLCC and Aframax rates decreasing, while Suezmax rates increased slightly. Lower demand for vessels and high tonnage availability affected rates in May. Clean spot freight rates decreased by 3.3 per cent over the previous month, mainly due to refinery maintenance. In May, OPEC spot fixtures decreased by 7.4 per cent compared to the previous month. Sailings from OPEC were marginally higher and arrivals in the US gained 7.9 per cent. US commercial inventories rose 20.4 mb in May. The build was divided between products and crude which increased by 13.1 mb and 7.3 mb respectively. With this build, US commercial oil inventories stood at 12.5 mb above the historical average. The most recent data for April shows that commercial oil inventories in Japan rose strongly by 18.2 mb, with crude and products showing an increase of 7.1 mb and 11.0 mb respectively. Japanese oil inventories showed a surplus with the historical trend at 6.5 mb. The demand for OPEC crude in 2010 is estimated at 29.6 mb/d, around 0.1 mb/d higher than the previous report. With this adjustment, the demand for OPEC crude stood at about 0.4 mb/d higher than 2009 level. In 2011, the demand from OPEC

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OECD stocks & floating storage, mb

Source: OPEC

MARKET ROUND-UP

Demand for OPEC crude, mb/d

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* Deviation for last 5-year average

crude is expected to average 29.9 mb/d, representing an increase of about 0.3 mb/d from the previous year and a slight adjustment over the previous assessment. Outlook for the second half of the yearIn recent weeks, the market has been experiencing excessive volatility. Recent economic data and releases point to a widening slowdown in global manufacturing activity and persistently high levels of unemployment. Concerns about the debt burden in the OECD area have also become more pronounced, at a time when major economies are preparing for the inevitable transition to fiscal consolidation with the end of quantitative easing. In the emerging economies, continued rapid growth has raised the risk of overheating and inflationary pressures. Despite these challenges, world growth in 2011 remains at 3.9 per cent, driven by strong momentum in the emerging economies and steady growth in the OECD. The outlook for global oil demand in the second half of the year also shows a similar dichotomy. In the OECD, the tragic events in Japan continue 58

July-Aug, 2011

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to impact consumption and it is yet unclear when recovery efforts will result in a rebound. Additionally, the latest monthly data from the US shows much weaker-than-expected oil demand, affected by the impact of higher retail prices. In contrast, developing countries are expected to show continued strong growth, accounting for more than 90 per cent of the increment. Moreover, anticipated shortages in power generation this summer in China are likely to boost the use of diesel generators, which could strengthen demand growth over the coming months. Crude oil futures prices weakened significantly in May as the market turned bearish despite ongoing absent Libyan crude oil because of unrest. On the Nymex, US benchmark WTI front-month plunged by almost $9.5 on May 5 to settle below $100/b for the first time since mid-March. The drop of $9.5/b was the largest decline in a single day since the onset of the 2008 financial crisis. Prices fell further on the following day, bringing the total loss of the first five trading days of May to $16.75/b, or almost 15 per cent. The collapse in prices was attributed to a strong speculative

sell-off triggered by bearish expectations for the US and global economic growth as well as to the strength of the US dollar. WTI recovered on May 9, but fell again in the following days, particularly on May 11, when it lost 5.6 per cent on the back of an unexpected jump in gasoline inventories and rising concerns about slowing economic growth in China and continuing Euro-zone debt worries. This brought the WTI front-month to around $98.2/b before it dropped to $96.91/b on May 17, the lowest in 13 weeks. However, the WTI front-month stabilised to some extent in the following eight trading days, moving within a range of $98-100/b as uncertainties about global economic growth and oil demand remained, before it jumped to a three week-high of $102.70/b on the last trading day, supported by concerns of a supply disruption on the Keystone pipeline carrying Canadian crude to the US. The WTI price was also supported by a weaker US dollar against the euro on the back of news that the European Union will grant Greece a new package to resolve its debt problems. Courtesy: OPEC Report

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REGIONAL ROUND-UP

Kuwait Energy signs gas contracts Kuwait Energy Company has signed two 20year Gas Development and Production Service Contracts with the Iraqi Ministry of Oil for the Siba and Mansuriya fields. Both fields were won by Kuwait Energy and its partners during Iraq’s Third Petroleum Licensing Round in October 2010. The Siba contract was signed on behalf of the Iraqi Ministry of Oil by the Acting Director General of the South Oil Company, Faisal Khalaf, and for the Mansuriya contract by the Director General of the Midland Oil Company, Dalman Najem Abdullah. Sara Akbar, Kuwait Energy’s Deputy Chairman and Chief Executive Officer signed the contracts as well as other partner representatives. Sara Akbar, said, “The signing marks the beginning of a long-term partnership with Iraq, a milestone for

Borouge wins award Borouge, a leading provider of innovative, value creating plastics solutions, was awarded two 2010 Adnoc HSE Awards. An Adnoc HSE Award was granted to Borouge in the Environment category for the Borouge 2 Cracker successful start-up with environmental friendly Nitrogen cool down. Start up with Nitrogen at the world’s biggest Ethane Cracker at Borouge 2 cooled down the plant and its temperature stress sensible equipment to as low as minus 100 degree centigrade to Hydrocarbon introduction. Subsequently, the plant start up time was greatly reduced with less overall flaring, massive reduction of CO2 emissions and associated environmental and economical benefits. This successful accomplishment set a milestone in the direction of environmentally safer operation of ethylene plants.

July-Aug, 2011

Kuwait Energy and a step forward in Kuwaiti-Iraqi relations. Along with our partners, we are very excited to start participating in the development of the country’s natural gas resources. The gas will be utilised to generate power in Baghdad and Basra, providing the Iraqi Government with cost savings, an environmentally friendlier fuel and the opportunity to better serve its people as per its overall plan.” In October 2010, Kuwait Energy jointly bid with the Turkish Petroleum Corporation (TPAO), the national oil company of Turkey, for both gas fields. The bids were judged on a remuneration fee in US dollars per barrel of oil equivalent (boe) and a plateau production target expressed in millions of standard cubic feet per day (MMSCFD) of dry gas.

Adnoc commissions first CNG filling station Adnoc Distribution has commissioned its first Compressed Natural Gas (CNG) filling station and vehicle conversion centre in Khalifa ‘A’ city in Abu Dhabi. “Adnoc Distribution, in collaboration with its sister company Abu Dhabi Gas Industries (GASCO), is set to complete the project’s first phase which entails construction of 16 CNG filling stations, 10 in Abu Dhabi, two in Al Ain and four in Sharjah, as well as nine vehicle conversion centres, operated by specialist companies, Abdullah Salem Al Dhaheri, Director General of Adnoc Distribution,” said.

APICORP reports highest annual net profit in its history Building further on its strong performance amidst a challenging global economic environment, The Arab Petroleum Investments Corporation (APICORP) has reported its highest ever annual net profit, total assets and total shareholders’ equity. The 2010 net profit of the multilateral bank, owned by the ten member states of the Organization of Arab Petroleum Exporting Countries (OAPEC), surged to $95 million, a 62 per cent increase over 2009 profit of $58.5 million. Total assets for the period rose to $4.3 billion, a 5 per cent increase over their 2009 levels of $4.1 billion, while total shareholders’ equity also rose by 13 per cent to reach $1.1 billion. Ahmad Bin Hamad Al-Nuaimi, Chief Executive and General Manager of APICORP said, “The historic results for 2010 reflect our continued commitment to maintaining strong banking fundamentals by strategically and prudently managing our equity and debt portfolios. Since its founding, APICORP has consistently played a counter-cyclical role by being exceptionally resilient to unfavourable economic conditions. Despite the tight credit conditions prevalent today, we have maintained an exceptional level of stability and a steady growth momentum.”

Oilfield experts tackle upstream challenge Hundreds of oilfield experts attended the Society of Petroleum Engineers’ and the Dhahran Geoscience Society’s largest-ever technical symposium and exhibition in Saudi Arabia. The three-day event featured 20 technical sessions and more than 70 scientific papers in addition to workshops, courses and an outreach day to encourage Saudi high-school boys and girls to consider energy industry careers. This year’s theme was “Tackling Upstream Challenges: Fueling the World Safely, Reliably and Cost Effectively.” “With ever increasing energy demand, this theme is timely, calling for the use of innovative methods, new technologies and improved practices that will take the upstream sector of the oil and gas industry to new frontiers,” Saudi Aramco’s Upstream Senior Vice President Amin H. Nasser said. “A lot is riding on the petroleum industry’s ability to satisfy the ever increasing demand for oil and gas, and doing so safely, reliably, and cost effectively,” Nasser said. “Striking a balance between these three fundamental objectives is crucial to the sustainability of our industry, and in my opinion, the key to this is people and technology.”

Picture courtesy: OMV Refining and Marketing

OMV discovers oil in Kurdistan Region of Iraq

OMV, the leading energy Group in Central and Southeastern Europe, has successfully drilled the Bina Bawi block in the Kurdistan Region of Iraq. OMV is currently drilling an exploration well (Bina Bawi 3) and has encountered hydrocarbons in one of the primary reservoir targets. The well is still being drilled and further investigations are planned in the course of the well operations including evaluation of deeper potential targets. Jaap Huijskes, OMV Executive Board member responsible for exploration and production stated, “We are very pleased to announce this discovery of oil. The oil seems to be of good quality and it was flowing to surface following a drawdown test. We are now going to continue drilling and I am confident that the final results will be promising.”

Dana Gas announces increase in net profits Dana Gas, the Middle East’s largest regional private sector natural gas company, has announced its financial results for the quarter ended 31st March 2011, with a net profit after tax of AED 92 million, a 180 per cent increase compared to the first quarter of 2010, and a 56 per cent increase compared to the last quarter of 2010. Revenue from the sale of hydrocarbons increased to AED 616 million, with gross profit reaching AED 337 million. These figures represent increases of 50 per cent and 108 per cent respectively, compared to the same period last year. This is due to production growth coupled with higher market prices for oil, condensate and LPG during 2011. Production increased in aggregate by 34 per

cent, from the company’s operations in Egypt, where new discoveries continue to be brought into production, and in the Kurdistan Region of Iraq, where production from the Khor Mor field continues to increase. Earnings before interest, tax, depreciation, amortisation and exploration (EBITDAX) increased by 77 per cent to AED 403 million as compared to the first quarter of last year. The above net profit after tax excludes an unrealised gain of AED 326 million in the quarter for the company’s investment in MOL (the Hungarian oil and gas company, one of our partners in the Kurdistan Region of Iraq), booked directly to equity in line with the company’s published accounting policy.

20th World Petroleum Congress issues final call for projects

The 20th World Petroleum Congress Organising Committee has issued its final call for projects, inviting oil and gas companies around the world to share their knowledge and expertise with delegates and attendees at the industry’s largest and most prestigious oil and gas event, being held in Doha in December. A key component of the Social Responsibility Programme at the 20th WPC will be the Social Responsibility Global Village (SRGV) within the Congress Exhibition. The Global Village will showcase projects and initiatives that highlight the contribution of the petroleum industry to human development at the local level. Fahad Al Tamimi, Head of Social Responsibility for the 20th World Petroleum Congress stated that, “Petroleum companies are working hard to ensure they make a positive contribution to the communities in which they operate. The SRGV offers companies a chance to showcase their efforts in this area and to share their experiences with other companies.” The 20th WPC Organising Committee invites companies and organisations to submit projects and initiatives they believe best illustrate the link between corporate social responsibility and human development. The Committee is particularly interested in projects that encourage open collaboration and partnerships between nongovernmental organisations and petroleum companies.

July-Aug, 2011

REGIONAL ROUND-UP

Gulfsands Petroleum suspends activity at Abu Ghazal-1

Dow and Aksa combine for new carbon fiber project The Dow Chemical Company, through its wholly-owned subsidiary Dow Europe, and Aksa Akrilik Kimya Sanayii have signed Memorandum of Understanding (MOU) with the intent to form a joint venture to manufacture and globally commercialise carbon fiber and derivatives. Through this agreement, both companies will work together to explore opportunities to create fully integrated production facilities for the manufacture and global supply of carbon fibers and derivatives. The companies will examine opportunities to develop and market a broad range of products and technical service offerings in the carbon fiberbased composites industry.

analyses of well results. The AGZ-1 well commenced drilling operations on January 23, 2011, utilising the Crosco E-401 drilling rig and was drilled to a depth of 3850 metres measured depth. The well was planned to evaluate potential reservoirs within the cretaceous aged massive and triassic aged Butmah and Kurrachine Dolomite formations within a large, fault bound structure identified and mapped on 3D seismic data.

Kuwait has named Mohammad Al Busairi, former Communications Minister, as the country’s Oil Minister. Al Busairi succeeds Sheikh Ahmad Al Abdullah Al Sabah, a member of the country’s ruling family.

Qatargas commissions Petrochina’s first LNG Qatargas delivered its first cargo of liquefied natural gas (LNG) to PetroChina’s first LNG receiving terminal at Rudong, Jiangsu Province. The cargo was delivered by the Q-Flex LNG carrier “Al-Rekayyat”. Khalid Bin Khalifa Al Thani, Chief Executive Officer of Qatargas said, “This is a significant milestone for Qatargas. We are very pleased that LNG from Qatar will contribute towards guaranteeing the supply of natural gas to homes and industry in the People’s Republic of China. This achievement underpins Qatargas’ capability to supply LNG to customers around the globe safely and reliably.” He further stated that,“Under the guidance of His Excellency Dr. Mohammed Saleh Al Sada, Minister of Energy & Industry of the State of Qatar and Chairman of the Board of Directors at Qatargas; Qatari LNG has a key role to play in helping governments around the world improve the diversity of their energy supplies. The start-up of PetroChina’s first LNG terminal, located in a fast economic and populous region, is a significant milestone meeting the growing demand for energy in the People’s Republic of China and we at Qatargas are very proud to have played a contributing role.”

Rowan announces contracts to build two 12,000 foot drillships Rowan Companies subsidiary has entered into turnkey contracts for the construction of two ultra-deepwater drillships with a cost of approximately $605 million each. The drillships will be constructed by Hyundai Heavy Industries Co., (HHI) at its Ulsan shipyard, and are expected to be delivered in late 2013 and mid-2014.

Matt Ralls, President and Chief Executive Officer, commented, “Our long-stated strategy has been to focus on and diversify our offshore drilling business, and we are excited to take this first step into the ultra-deepwater sector. This investment will expand the breadth of Rowan’s drilling services and enable us to address significant market and customer opportunities in the deepwater arena.” The construction cost is expected to be funded from available cash, cash flow from operations and short-term borrowings. Construction cost includes commissioning, project management, owner-furnished equipment, spares and rig inventory, but excludes capitalised interest. 62

July-Aug, 2011

Picture courtesy: Rowan Companies

Gulfsands Petroleum has said that drilling and testing operations have recently been completed on the Abu Ghazal-1 (AGZ-1) exploration well. Potentially significant hydrocarbon columns were encountered within the Triassic aged Butmah and Kurrachine formations. However, a series of drill-stem tests (DST) undertaken on the well resulted in the recovery of subcommercial quantities of heavy/viscous oil. The well has now been suspended pending detailed

Kuwait appoints new oil minister

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Seadrill secures new jack-up contract Seadrill has been awarded a new contract by a subsidiary of Santos for the jackup rig offshore resolute. The assignment for operations in Bangladesh will have a minimum duration of 130 days under a three firm well plus two optional wells contract. Commencement of operations under the new contract is scheduled for early third quarter 2011, in direct continuation of the rig’s existing contract. The estimated contract value is $17.5 million for the firm 130 day minimum duration period.

Petronas makes strategic entry into Canada Petronas, through wholly-owned subsidiary Petronas International Corporation Ltd (PICL), has reached an agreement to form a strategic partnership with Canada-based Progress Energy Resources Corporation to develop the Altares, Lily and Kahta shale gas assets in northeastern British Columbia. Under the agreement signed last month, PICL will acquire 50 per cent of Progress’ interest in the three areas for a total consideration of CDN$1.07 billion. The assets included in the transaction cover approximately 150,000 gross working-interest acres of land with an estimated contingent gas resource of more than 15 trillion cubic feet. The assets will be operated by Progress. The proposed acquisition will mark Petronas’ maiden entry into Canada and will allow for accelerated upstream growth that could potentially advance a liquefied natural gas (LNG) export value proposition in that country. Petronas views the acquisition as a highly attractive opportunity, paving its entry into the North American shale gas industry while at the same time further strengthening its position as a leading global LNG player.

July-Aug, 2011

Repsol net income increases to 765 million euro

Repsol posted net income of 765 million euros in the first quarter of 2011, 11.2 per cent more than the year-earlier period. Excluding extraordinary items, recurring net income improved 23.4 per cent, to 791 million euros. The 2011 earnings increase is mainly due to improved oil and gas price realisation prices, with a 13.4 per cent and 14.8 per cent rise respectively. This was boosted by the solid performance of the liquefied natural gas (LNG) division and the recovery of the chemicals business. Repsol’s core businesses also experienced significant increases in operating income: Upstream (+13.4 per cent), LNG (+238 per cent) and Downstream (+14.1 per cent), while the operating income of its holdings fell slightly: YPF earnings fell 6.8 per cent and Gas Natural Fenosa declined 3.5 per cent. The Group’s financial strength, with significant cash generation, allows Repsol to undertake the planned investments in productive assets. In the first quarter, EBITDA was 2.518 billion euros, and investments totalled 1.107 billion euros, 43 per cent higher than the same period last year.

Buckskin prospect gets U.S. deepwater drilling permit Maersk Oil is participating in a new deepwater well in the U.S. Gulf of Mexico after operator Chevron received a drilling permit from the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). The permit marks the restart of the drilling campaigns Maersk Oil has been a part of in the U.S. Gulf of Mexico after deepwater activities were suspended last year as a consequence of the Deepwater Horizon accident. “We are very pleased that this permit has been issued as it will allow us to move forward with appraisal activities on the exciting Buckskin prospect,” said Bruce Laws, President at Maersk Oil in the U.S. “The U.S. Gulf of Mexico remains a world class region for exploration and production and we look forward to continuing our work there with our partners.” The Buckskin appraisal well is located in the Keathley Canyon in Block 785, offshore Louisiana, at water depth of 6,540 feet. It is being drilled eight kilometres from the discovery well that encountered oil in 2008.

Picture courtesy: Repsol

GLOBAL NEWS

BP has agreed to sell its interests in the Wytch Farm, Wareham, Beacon and Kimmeridge fields to Perenco UK (Perenco) for up to $610 million in cash. The price includes $55 million contingent on Perenco’s future development of the Beacon field and on oil prices in 2011-13. The sale of these interests is part of BP’s plan, announced in July 2010, to divest up to $30 billion of assets by the end of 2011. Before the agreement, BP had already announced sales agreements totalling around $25 billion. BP Group Chief Executive Bob Dudley said, “Today’s agreement brings us even closer to the target of $30 billion of divestments by year end that we set out last summer. It demonstrates that we do have assets of quality that other operators see as more strategically valuable to them than to BP, thus unlocking value for our shareholders.” An immediate payment of $500 million has been made a further $55 million will be paid on completion which is expected at the end of 2011 with the remaining $55 million contingent on submission of the Beacon field development plan and oil prices.

Gas pipeline commissioned

Gazprom has commissioned the Dzhubga – Lazarevskoye – Sochi gas pipeline. The city of Sochi hosted the celebrations devoted to this event, which saw Vladimir Putin, Prime Minister of the Russian Federation, Alexey Miller, Chairman of the Gazprom Management Committee, representatives of construction and contracting companies, and public organisations. Gazprom was tasked to ensure energy supply to the Olympic venues and rapidly growing infrastructure of the Black Sea coast. At the same time, it was critically important

Picture courtesy: Gazprom

BP agrees sale of Wytch Farm to Perenco

to keep the ecosystem intact in the coastal area where millions of tourists go on holiday every year. Gazprom has successfully accomplished this task. The gas pipeline will allow active developing of the gasification of Sochi and the Tuapse District of the Krasnodar Krai, increasing the living standards of the population and giving a powerful impetus to the business development, particularly enabling transition of the Black Sea health resorts to year-round operations.

Shell to move forward with groundbreaking floating LNG end. When fully equipped and with its storage tanks full, it will weigh around 600,000 tonnes – roughly six times as much as the largest aircraft carrier. Some 260,000 tonnes of that weight will consist of steel – around five times more than was used to build the Sydney Harbour Bridge. “Our innovative FLNG technology will allow us to develop offshore gas fields that otherwise would be too costly to develop,” said Malcolm Brinded, Shell’s Executive Director, Upstream International. “Our decision to go ahead with this project is a true breakthrough for the LNG industry, giving it a significant boost to help meet the world’s growing demand for the cleanest-burning fossil fuel.”

Picture courtesy: Royal Dutch Shell

Royal Dutch Shell has decided to build the Prelude Floating Liquefied Natural Gas (FLNG) Project in Australia (Shell 100 per cent), making it the world’s first FLNG facility. Moored far out to sea, some 200 kilometres from the nearest land in Australia, the FLNG facility will produce gas from offshore fields, and liquefy it onboard by cooling. The decision means that Shell is now ready to start detailed design and construction of what will be the world’s largest floating offshore facility, in a ship yard in South Korea. From bow to stern, Shell’s FLNG facility will be 488 metres long, and will be the largest floating offshore facility in the world – longer than four soccer fields laid end to

July-Aug, 2011

Picture courtesy: Statoil

GLOBAL NEWS

Apache’s Halyard Field produces first gas Apache Corporation’s subsidiary Halyard-1 discovery well has commenced producing gas and condensate for delivery into the Western Australian domestic market. Production from the well, drilled in 2008 in production license WA-13-L, will be transported to the market via an existing pipeline to the East Spar field facilities and from there to Apache’s Varanus Island processing and transportation hub. Development of the Spar field, located in adjacent License WA-4-R, is expected to follow in late 2012 as additional capacity becomes available at Varanus Island. The fields are both controlled from Apache’s John Brookes platform. Apache’s subsidiary owns a 55 per cent interest in both WA-13-L and WA-4-R. Santos owns the remaining interests.

Marathon Oil announces $3.5 billion acquisition Marathon Oil Corporation has reached a definitive agreement with Hilcorp Resources Holdings, LP to purchase its assets in the core of the Eagle Ford shale formation in Texas in a transaction valued at $3.5 billion subject to closing adjustments, customary terms and conditions, and HartScott-Rodino approval. Hilcorp Resources Holdings is a partnership between affiliates of Hilcorp Energy Company and Kohlberg Kravis Roberts & Co. LP. Along with other transactions expected to close by the end of 2011, Marathon’s Eagle Ford acreage position is expected to more than double to 285,000 net acres. The Hilcorp transaction is expected to close Nov. 1, 2011 with an effective date of May 1, 2011.

July-Aug, 2011

Statoil to divest in Gassled Statoil will divest a 24.1 per cent direct and indirect stake in its Gassled joint venture for a consideration of NOK 17.35 billion. Following this transaction, Statoil will continue to own 5 per cent in the joint venture. Solveig Gas Norway will purchase the stake. Solveig, a holding company, is approximately 45 per cent owned by Canada Pension Plan Investment Board, 30 per cent by Allianz Capital Partners, a subsidiary of Allianz SE, and 25 per cent by Infinity Investments, a wholly owned subsidiary of the Abu Dhabi Investment Authority. “This transaction contributes to a further streamlining of Statoil’s portfolio. The divestment is part of our continuous efforts to increase capital efficiency and maximise shareholder value creation,” said Eldar Saetre, Executive Vice President for Marketing, Processing and Renewable, Statoil.Gas sled is the owner of the integrated gas transportation grid and processing facilities on the Norwegian Continental Shelf, transporting Norwegian gas by pipelines from the producing fields to consumers on the European continent and United Kingdom. Gassled was established in 2003 by the merger of the majority of the gas pipeline joint ventures into one joint venture.

Apache announces changes in operational leadership Apache Corporation has affected the following promotions and appointments to its management team: Jon Jeppesen has been promoted to the new role of Executive Vice President overseeing the operations of the Gulf of Mexico Shelf,

Deepwater and Gulf Coast Onshore regions. Jon Graham has been named Vice President of the global environmental, health and safety organisation. Mark Bauer has been promoted to region Vice President for the Gulf of Mexico Shelf.

Plains All American remains committed to construct Eagle Ford infrastructure Plains All American Pipeline (PAA) has committed to construct a new 130-mile crude oil and condensate pipeline, a marine terminal facility and 1.5 million barrels of storage capacity to service growing Eagle Ford production in south Texas. The project is expected to cost approximately $330 million and to be in service in the fourth quarter of 2012. To

underpin the project, PAA has secured a longterm throughput agreement with Chesapeake Energy Marketing, a subsidiary of Chesapeake Energy Corporation. The project is designed to provide approximately 300,000 barrels per day of take-away capacity from the western region of the Eagle Ford play to Corpus Christi, TX and other Gulf Coast markets.

As supply and demand factors increasingly point to a future in which natural gas plays a greater role in the global energy mix, the International Energy Agency (IEA) has released a special report exploring the potential for a “golden age” of gas. The new report, part of the World Energy Outlook (WEO) 2011 series, examines the key factors that could result in a more prominent role for natural gas in the global energy mix, and the implications for other fuels, energy security and climate change. The report, titled, “Are We Entering a Golden Age of Gas?” presents a scenario in which global use of gas rises by more than 50 per cent from 2010 levels and accounts for more than a quarter of global energy demand by 2035. However, the report also strikes a cautious note on the climate benefits of such an expansion, noting that an increased share of gas in the global energy mix is far from enough on its own to put the world on a carbon emissions path consistent with a global temperature rise of no more than 2 degrees Celsius.

Rosneft acquires stake Rosneft has closed its acquisition of 50 per cent of Ruhr Oel from the Venezuelan state oil company Petróleos de Venezuela S.A. (PDVSA). The European Commission approved acquisition by Rosneft of a 50 per cent stake in Ruhr Oel. President of Rosneft Oil Company, Eduard Khudainatov, said, “This is a step towards strengthening of Rosneft’s positions on priority foreign markets. The acquisition means that about 18 per cent of our refining capacity will be located in Europe’s industrial heartland, giving Rosneft access to petroleum product and petrochemical markets in Germany and neighbouring countries. By developing cooperation with our partners at BP, Rosneft plans to strengthen the positions of Ruhr Oel by

Picture courtesy: Rosneft

IEA special report explores potential for “golden age” of natural gas

supplying it with Rosneft crude oil, and to enrich our own refining and petrochemical business with the latest European experience and most up-to-date technologies. Completion of the deal exemplifies the long-established partnership relations between Rosneft and BP, which are cemented by many years of joint work.”

Role of electricity in meeting climate change goals addressed Removing CO2 emissions from electricity generation is a key challenge that must be overcome if the rise in global temperatures is to be limited to 2 degrees celsius. A new book from the International Energy Agency (IEA) addresses some of the major policy and technology steps needed to achieve such “decarbonisation” of the electricity sector, and provides an authoritative resource on progress to date.

The report, Climate & Electricity Annual 2011: Data and Analyses, is the first in a new series from the IEA that addresses the role of electricity in meeting climate-change goals. In addition to examining the massive task of curbing CO2 emissions from electricity and showing how electricity makes a difference in enduse efficiency, the new publication provides statistics related to CO2 and the electricity sector across ten regions of the world.

First cargo of Pearl GTL products shipped from Qatar Qatar Petroleum and Shell have announced that the Pearl gas-to-liquids (GTL) plant, located in Ras Laffan Industrial City in the State of Qatar, has sold its first commercial shipment of GTL Gasoil. The sale marks the start of production of GTL products when the State of Qatar and Shell, the operator of the Pearl GTL plant, begin to receive revenue from the project. Over the coming months, production will ramp up from the first production unit (‘train’) of the Pearl GTL project. The second train is expected to start up before the end of 2011. The plant is

expected to reach full production capacity by the middle of 2012 and is the largest energy project ever launched in the State of Qatar.

wish the Qatar Petroleum and Shell teams all the success in bringing this project into full production safely and successfully.”

His Excellency Dr. Mohammed bin Saleh Al-Sada, Qatar’s Minister of Energy and Industry said, “The Pearl GTL project will play an important role in further enhancing our diversification of the North Field gas utilisation and will support the optimisation of Qatar’s competitive position in the world markets by supplying high quality GTL products. I

Peter Voser, Chief Executive Officer of Royal Dutch Shell said, “Today’s milestone provides further evidence that innovative technology and strong partnerships can help meet the world’s growing need for energy. I would like to thank Qatar Petroleum and the State of Qatar for their support throughout, to make such a substantial project possible.” July-Aug, 2011

EVENTS CALENDAR

Regional

Maintenance Planning and Scheduling

Oil Sands Trade Show and Conference

Gas LNG Contracts Negotiation and

Training

Sept 13-Sept 14

Pricing

August 8-August 12

Canada

Sept 18-Sept 22

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Intelligent Energy International

Australian Petroleum Show

Conference and Exhibition

August 17-August 19

Oct 3-Oct 5

Australia

SMIâ&#x20AC;&#x2122;s 4th Energy from Waste Conference Sept 19-20

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London, UK Asia Pacific Oil & Gas Conference and Exhibition

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SPE Reservoir Characterisation and

Pacific 2011

Jakarta, Indonesia

Simulation Conference and Exhibition

Sept 5-Sept 7

Oct 9-Oct 11

Singapore

Abu Dhabi

Shanghai 6th International Petroleum Petrochemical Natural Gas Technology

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Sept 7-Sept 8

Sept 21-Sept 23

Oct 24-Oct 26

Beijing

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UAE Oil and Gas Thailand

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Sept 8-Sept 10

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Sept 22-Sept 23

Kuwait City

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July 19-July 20

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NG Oil and Gas Africa

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Sept 13-Sept 15

Sept 26-27

August 8-August 12

Cape Town

London

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July-Aug, 2011

World Independent & Junior

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Deep Offshore Technology 2011

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Nov 8-Nov 10

Sept 26-28

Oct 16-19

Perth

London, UK

Mexico

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Nov 21-Nov 25

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Oct 18-20

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6th Annual International Offshore

Nov-Dec 1

Sept 29-Oct 1

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Goa

Oct 19-20

India

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GITA’s GIS for Oil and Gas Pipeline

Dec 13-15

Oct 12-Oct 13

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Houston

Chad

Oct 24-27

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Petroleum Development Oman

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H2S Life Support Systems & Services

Petroleum Development Oman

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Supply of Industrial and Domestic Gases

Petroleum Development Oman

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Prov. of FSR and Overhaul of TA&TB Ruston Spare

Petroleum Development Oman

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EPC for Off-plot Amin Water Injection Development

Petroleum Development Oman

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Concept Engineering Services

Petroleum Development Oman

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Insulation Maintenance Works for Gas Operations at Mesaieed

Qatar Petroleum

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Supply of Passive Fireproof Equipment

Jordan Petroleum

www.jopetrol.jo

Complete Lighting Fixtures

Jordan Petroleum

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Controllers Proportional-Integral

Jordan Petroleum

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Supply of Tetra Radios

Qatar Petroleum

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Maintenance Support Services for Various Scada, DAS and SCS within Dukhan Fields

Qatar Petroleum

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EPIC for upgrading HMI of TOU & Furnaces Including . KT8501 CCC in NGL4

Qatar Petroleum

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Provision of top-up perlite filling services for Rasgas LNG tanks

RasGas

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Instal/construction, testing & commissioning of 6 nos pcrâ&#x20AC;&#x2122;s at qp refmes.

Qatar Petroleum

www.qp.com.qa

Last updated: June 19, 2011

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July-Aug, 2011

Now Established in the UAE and Bahrain. STS - INSPIRED TO DELIVER! STS leverages over 30 years of Oil & Gas experience in Oman, to become a regional differentiated Oil & Gas service company in the GCC region. We have operations in Abu Dhabi and Bahrain and will soon open in Saudi Arabia. While we provide complete solutions to the Oil & Gas industry, we specialise in maintenance activities, HDPE lining works, exotic material fabrication and major construction works.