Egypt Oil and Gas - August 2011

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August 2011

www.egyptoil-gas.com

Issue 56

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Egypt’s Petroleum Services Market

The new fiscal year (2011/2012) has been described by experts in the field of petroleum industries as a major obstacle.

Such difficult times are being attributed to the revolution of 08 January the 25th and its aftermath;

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Reviewing the offshore rig market The offshore rig market continues to suffer worldwide from an oversupply of new rigs that outstrips demand. As the newly delivered rigs have been built 14 at advanced specifications, older rigs have more trouble securing contracts

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Rotary Steerable System Analysis

Industry overhaul: A call for reform More Statoil in- Agiba strengthens its vestment in the development activities Mediterranean Agiba Petroleum Company depth of 10,000 meters, while

Norway’s leading oil and gas company, Statoil, recently drilled an exploratory well in the area of the Mediterranean Sea. Statoil is the operator, with an 80% interest, in two offshore exploration licenses located in the Mediterranean and west of the Nile Delta, in water depths ranging from sea level to 3,000 meters. El Dabaa Offshore (Block 9) covers an area of 8368 square kilometers, where Statoil has fulfilled the 2D and 3D seismic commitments. The second is the Ras El Hekma Offshore (Block 10), which covers an area of 9802 square kilometers, where the company has fulfilled the work commitment in this license, including the acquisition of 2D and 3D seismic surveys.

The company invested around $24 million to implement this drilling program of the exploratory well, which is a gas producing one.

The well is expected to be placed on production line soon.

drilled two development wells, Arcadia-4 and NE-38, in the Meleiha Development lease, Northern Egypt Basin, in the Western Desert.

Agiba aims to increase its crude oil production rates. The first well was drilled to a total

the second was at 7,000 meters.

The joint operating company owned equally by IEOC and the EGPC started the production from the Lower Cretaceous Alam El Bueib Formation at the Arcadia 1 discovery well at the end of July 2010.

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The first commercial rotary steerable system (RSS) revolutionized directional drilling in the 1990s. The technology has made improvements in reliability and is now a standard drilling tool, with both push-the-bit and pointthe-bit RSS applied in directional and vertical wells worldwide. Their use is no longer limited to high-cost offshore 18 markets but is becoming more common in lower-cost land markets.

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Subsea Safety P16

Khalda: mission accomplished

Khalda Petroleum Company concluded its drilling plan for the fiscal year of 2010/2011, which included the drilling of six development wells and three other exploratory ones.

According to sources, the budget allocated for the drilling of development wells averaged $9 million.

During the year of 2010, the list of main discoveries for Khalda included the Opera 1 field that encountered oil in the Alam El Bueib, the Pepi 1, both in the Northern Egypt Basin in addition to the Samaa 1 in the Marmarica Basin, which encountered gas and condensate.

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Editor-in-Chief Yomna Bassiouni

ybassiouni@egyptoil-gas.com

Managing Editor Melissa Howell Staff Writer Sama Ezz El-Din Reporters Shady Ahmed Wael El-Serag Freelancer

Kate Dannies Media & Statistics Monitoring Webmaster Ayman Rady Researcher & Analyst Aly Salah Photographer

Samy Waheeb Business Development Manager Laila Solaiman Business Development Officers Nourallah Khaled Omneya Hesham BD USA Correspondent Clarissa Pharr Customer Service Coordinator Passant Fadl Designers Ahmed Marzouk Omar Ghazal Administrative Assistant Basma Naguib IT Specialist Sameh Fattouh Production Advisor Mohamed Tantawy Accountant Abdallh Elgohary Mohmoud Khalil Legal Advisor Mohamed Ibrahim

Publisher

Mohamed Fouad This publication was founded by Omar Donia, Mohamed Sabbour and Mohamed Fouad All rights to editorial matters in the newspaper are reserved

by Egypt Oil and Gas and no article may be reproduced or transmitted in whole or in part by any means without prior written permission from the publisher.

Contact Information: Tel: +202 25164776 +202 25192108 Fax: +202 25191487 E-mail: info@egyptoil-gas.com www.egyptoil-gas.com

August 2011 / Issue 56

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Egypt News

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Petrobel drills development well Transglobe acquires in-

In the Gulf of Suez, Balayim Petroleum Company (Petrobel) drilled a new development well, with total investment of $11 million.

The new development well is a crude oil producing well, which was drilled at 10,548 feet depth.

This drilling activity serves the company’s

development program for this year.

At the end of September 2010, Petrobel completed a directional development well BM-105 with the J/U GSF-141, offshore the Gulf of Suez. The well was spudded at the beginning of August 2010 and was drilled to a total depth of 3,082 meters in the Turonian.

The Egyptian Prime Minister HE Essam Sharaf and Eni CEO Paolo Scaroni met recently in Cairo to confirm the commitment of Eni to Egypt, following the recent agreements.

The new activities will take place in the Western Desert, in the Mediterranean and in the Sinai, and will cover both exploration and development, through the drilling of additional wells and the acceleration of production from new discoveries.

With these additional activities, Eni’s investment in Egypt in the

years 2011 and 2012 will amount to approximately US $3 billion.

Eni will also sponsor a training plan for national staff working in the Petrobel and Agiba joint ventures with EGPC. Furthermore, in accordance with the Ministry of Petroleum, Eni will support the Sinai community with social activities.

Eni is the first international operator in Egypt with total operated production of around 500,000 boe/d.

Eni enhances its commitment to Egypt

More wells await production line

PetroSilah is waiting for approval to put a number of its crude oil producing wells in the Eastern Desert area on production line.

Last February, the company drilled a development well in the same area with total investment of $1.7 million.

The company seeks to increase its production rate through the drilling of new development and exploratory wells.

EMG shareholders seek $8 billion in pipeline damages

Shareholders of East Mediterranean Gas Co. will take legal action against the Egyptian government, seeking more than $8 billion in damages for interruptions in natural gas supply through a cross-border pipeline, a company official said.

“The shareholders from Israel, the U.S. and Thailand agreed on the action in the wake of three explosions in the past five months that damaged the pipeline, which carries gas from Egypt to Israel,” Nimrod Novik, a member of the EMG board, said. The company will pursue the claims through the International Court of Arbitration, a dispute resolution service run by the Paris-based International Chamber of Commerce.

“The lawyers have advised the governments of Egypt and the United States, as well as other relevant governments that this process is under way,” Novik told Bloomberg.

Egypt previously restored gas exports to Israel at 20% of contracted amounts after a July 4 explosion disrupted the network. Among the shareholders in EMG are Egypt National Gas Co., Israeli businessman Yossi Maiman, U.S. billionaire Sam Zell and PTT Pcl, Thailand’s biggest energy company.

It is worth mentioning that Ampal American Israel (AMPL) Corp., which owns a 12.5% stake in the pipeline.

terest in South Alamein

TransGlobe South Alamein Inc., a wholly owned subsidiary of TransGlobe Energy Corporation, has entered into a SPA to acquire Cepsa Egypt’s 50% operated working interest in South Alamein for $3 million plus an inventory adjustment, effective on and subject to approval from the Egyptian Government.

El Paso South Alamein (El Paso SA), a subsidiary of Houston-based El Paso Corporation, holds the remaining 50% interest in the South Alamein Production Sharing Contract (PSC). Ancillary to this transaction is an agreement between TransGlobe and El Paso SA on a go-forward appraisal program in exchange for El Paso SA waiving preferential rights under its joint operating agreement with Cepsa Egypt. Transglobe will assume operatorship of the South Alamein Concession upon the closing of this transaction.

Located onshore in the Western Desert, the South Alamein Concession includes portions of the prolific Alamein and Tiba basins. The current size of this exploration concession is 2,258 square kilometers. The concession includes an oil discovery well, Boraq-2X, which tested a combined 1,700 bbl/d of 38° to 40° API oil from two Cretaceous zones.

Initial work by Transglobe will focus on appraising and developing the Boraq–2X discovery which includes drilling at least two appraisal wells and readying the Boraq–2X well for production.

Upon successful completion of the appraisal program, it is expected that a development plan would be submitted to the Egyptian Government for approval. The Boraq-2X discovery is close to existing infrastructure, which should reduce development time and capital.

The South Alamein PSC is in the first, two-year extension period, which expires on April 5, 2012. A further two-year extension is available under the concession agreement. An extensive 3-D seismic acquisition program was executed over the entire South Alamein Concession area. This has resulted in several well defined prospects throughout the area and will provide Transglobe with numerous exploration drilling opportunities.

Transglobe expects to close the acquisition after receiving the necessary Egyptian Government approvals and securing the waiver of the preferential right by El Paso SA. Transglobe cannot make assurances that it will successfully close the subject transaction.

The Suez Oil Company (SUCO) succeeded in the drilling of a new offshore development well, RF-A13, in the Ras Fanar field, in the Gulf of Suez Basin.

The drilling investment of this crude oil producing well counted for $5 million.

In mid December 2010, SUCO

spudded development well Ras Fanar A10A, Ras Fanar field, with the Nullipore Member of the Belayim Formation as objective.

Ocean Heritage drilled the well to a total depth of 1,729 meters and the well has been completed as an oil producer.

Another success for SUCO in the GoS

BG reviews Egypt’s investments The Egyptian Prime Minister Dr. Essam Sharaf and BG Group Chief Executive Frank Chapman reviewed the company’s current and future activities in Egypt in a meeting held last month.

Frank discussed BG’s long-term commitment investments in the country, affirming that Egypt is a key factor of BG Group global portfolio.

During the meeting attended by BG Group Executive Vice President and Managing Director for Africa, Middle East and Asia Sami Iskander and BG Egypt President Arshad Sufi, Sharaf received a review about BG Group plans to invest in a number of development and exploration activities in Egypt during 2011, including Phase 8b, a development project targeting the West

Delta Deep Marine Concession offshore the Nile Delta. This latest development phase will bring seven additional wells onstream, thus increasing the country’s gas output and ensuring BG Egypt continues to meet its contracted gas commitments.

The BG Chief Executive also highlighted BG Group’s understanding of Egypt’s need for energy to fuel growth, and pointed out that BG Group understands the importance of continued investment in Egypt’s energy sector. “The Group’s strategy concerns developing the producing concessions sustainably to ensure continued production from the fields.”

“It was an honour to meet his Excellency Dr. Sharaf. The purpose of our meeting today was to reflect our commitment

to long term investment in Egypt. We are working with the Government of Egypt to ensure necessary investment at this point in Egypt’s history, and we understand the importance of upholding the country’s energy security and ensuring continued flow of Foreign Direct Investment,” commented BG Regional EVP Sami Iskander.

In 2010 and 2011 BG Group has, with its partners, invested in West Delta Deep Marine development Phases 7 & 8a.

In over 22 years of working in the country, BG Group has invested with its partners over $10 billion in Egypt’s energy sector, and has over the years proven its commitment to long-term investment in Egypt, making it one of the country’s largest foreign investors.

The country’s biggest gas producer and accounting for over one third of Egypt’s gas production, BG Group also has hopes for success in its exploration activities, and plans to drill further wells in its exploration Concessions El Manzala Offshore and El Burg Offshore in 2011 and 2012. In October 2010, BG Egypt carried a 3D Seismic survey over its third exploration concession, North Gamasa Offshore.

Also commenting on the visit, BG Egypt President Arshad Sufi added that in all its activities, the company works on ensuring that our continued partnership in Egypt benefits the people and communities on an enduring basis.

Africa News

August 2011 / Issue 56

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Kosmos Energy expands Tullow Oil to start Kudu Gas 2011 exploration program Development Off Namibia in Ghana Kosmos Energy has provided an update on the company’s operations in Ghana, Cameroon and Morocco. In Ghana, the Company is planning an additional well on the West Cape Three Points Block.

Kosmos will drill an additional well as part of its 2011 exploration campaign offshore the Republic of Ghana on the West Cape Three Points Block. The company has secured additional rig capacity on the “Transocean Marianas” semi-submersible rig to drill the Cedrela-1 well west of the Makore Prospect near the block’s southern boundary. The well will target multiple objectives that the company has previously encountered on the block. It is located 9 kms north of the Paradise-1 discovery well recently announced by Hess Corp. Kosmos anticipates that the well will be spudded in the third quarter of 2011.

The “Atwood Hunter” semi-submersible rig is currently drilling the Makore-1 exploration well in the southern portion of the West Cape Three Points Block. The Makore-1 well is targeting Upper Cretaceous Turonian-age reservoirs similar to those encountered in Kosmos’ Jubilee oil field. The “Atwood Hunter” will remain on the West Cape Three Points Block to drill the Akasa-1 well, formerly known as the Dahoma Up-dip Prospect.

The drilling of the Cedrela-1 well will bring Kosmos’ 2011 capital spending budget for Ghana to $430 million, $260 million of which will be spent on exploration and appraisal drilling.

Kosmos is the operator of the West Cape Three Points Block in which the company holds a 30.875% interest. An affiliate of Anadarko Petroleum Corp has a 30.875% interest; an affiliate of Tullow Oil has a 22.896% interest; E.O. Group has a 3.5% interest; Sabre Oil & Gas Holdings has a 1.854% interest; and Ghana National Petroleum Corp has a 10% carried interest.

In Cameroon, Kosmos reports that the company’s N’gata-1 exploration well, recently drilled onshore Cameroon on the Kombe-

N’sepe Block, encountered multiple reservoirs containing subcommercial quantities of natural gas. The results of drilling, wireline logs and reservoir fluid samples show the N’gata-1 well penetrated 44 meters (144 feet) of reservoir with 10 meters (33 feet) of net gas-bearing pay. An additional deeper thick sand interval with gas shows was encountered, but complete wireline logs were unable to be obtained over this target due to operational difficulties. The well has been plugged and abandoned.

Kosmos has now completed its initial drilling program commitment on the KombeN’sepe Block. This program has demonstrated viable reservoirs and a working hydrocarbon system. Future technical evaluation will focus on identifying these play elements in areas of the block where liquid content and trap effectiveness may improve.

Kosmos Energy holds a 35% interest in the Kombe-N’sepe Block. Perenco operates the block with a 40% interest, and Société Nationale des Hydrocarbures (SNH) has a 25% interest in the block.

In Morocco, Kosmos has entered into a petroleum agreement with the Office National des Hydrocarbures et des Mines (ONHYM), the national oil company of Morocco, covering the Foum Assaka area offshore the Kingdom of Morocco. The agreement will become effective upon publication of a ministerial order in accordance with Moroccan law. The Foum Assaka area, which covers approx. 6,500 sq kms (1,606,179 acres), is located in the Atlantic Ocean’s Agadir Basin about 43 km west of the port city of Agadir and contains play elements similar to those seen in Kosmos’ other West African acreage. Kosmos will be block operator and will have a 37.5% participating interest in the agreement. ONHYM will have a 25% interest that will be carried through the exploration phase, and Pathfinder Hydrocarbon Ventures will hold the remaining 37.5% participating interest.

An estimated 11 billion barrels in oil reserves have been found off Namibia’s coast, with the first production planned within four years, announced Mines and Energy Minister Isak Katali.

The finding could put Namibia on par with neighboring Angola, whose reserves are estimated at around 13 billion barrels and whose production rivals Africa’s top producer Nigeria.

Katali said that Enigma Oil & Gas, owned by London-listed Chariot Oil & Gas, has identified 11 prospects along the southern coast.

“The largest of these, the Nimrod Prospect in 350 meters depth, and most likely reserves in the event of success are estimated to be greater than four billion barrels,” he told parliament.

“Enigma expects to find oil rather than gas,” Katali said, adding that first production could begin as early as 2015.

Enigma holds 50% equity in the offshore Southern Block together with Brazil’s Petrobras.

According to Katali, another Brazilian company, HRT Oil & Gas Ltd, has raised $1.3 billion

on the Brazilian stock market, with $300 million earmarked for oil and gas exploration in Namibia.

He said that HRT has certified about 5.2 billion barrels of potential reserves.

“This finding could turn offshore Namibia into a great producer of oil and gas in a short time,” Katali said.

In his statement to Parliament, Katali added that HRT would drill three to four wells in that area as early as next year.

Another find off Namibia’s central coast called Delta Prospect contained recoverable resources of up to two billion barrels of oil, by Arcadia Expro (AEN) Namibia and British firm Tower Resources, he said.

“We expect that six to eight wells to be drilled in Namibia’s waters in the next 18 months, the highest number in Namibia’s exploration history,” he said.

Namibia has long been seen as a potential new source of oil, hampered by a lack of exploration to determine the extent of its reserves. Its offshore geology is similar to that of Brazil, which is seeing a boom in oil.

Namibia sees 11 billion barrels in oil reserves

Tullow Oil PLC (TLW) and its Russian and Japanese partners expect to agree on natural gas sales from Namibia’s Kudu field this year, allowing project development to start in 2012.

“We have been making good progress, we have finalized the concept there for gas to shore delivery,” said Tullow Chief Operating Officer Paul McDade. “Given it’s a single gas supply to a single power station, we prefer to do the work on the commercial agreements now before we start any major expenditures.”

London-based Tullow, Itochu Corp. (8001) of Japan and Russia’s OAO Gazprombank, which acquired a stake in Kudu from OAO

Gazprom, plan to develop the field to supply gas for power generation,McDade said.

The U.K. explorer with the most licenses in Africa has reduced its stake to 31% from an earlier 70% in the field, which holds about 1.8 tcf of gas, according to Gazprom estimates.

The Kudu gas project is expected to cost about $7 billion and generate 800 MW of electricity for Namibia and export to South Africa, according to the state-run utility Namibia Power Corp., National Petroleum Corp., which is Namibia’s state-owned oil company.

South Africa’s national oil company PetroSA and its South Korean counterpart Korea National Oil Corporation (KNOC) will explore investment opportunities in the oil and gas sector across Africa, the two companies said on Tuesday. Under the agreement signed between PetroSA and the KNOC, the companies will exchange commercial and technical information on hydrocarbon exploration in Africa.

South Korea is Asia’s fourth largest econo-

my and like its rivals elsehwere on the continent, it is keen on African resources to fuel its growth. Kang Young-won, KNOC’s Chief Executive, said Africa was the “most important strategic region” for the company’s quest of reaching two billion barrels of reserves by 2012 and a daily production of 300,000 barrels. He said in a statement that the agreement gave “KNOC a golden opportunity to advance into African regions.”

KNOC and PetroSA team up to explore investment opportunities across Africa

International News

Qatar First Investment Bank acquires stake in Kuwaiti Energy Qatar First Investment Bank (QFIB) announced the acquisition of a $16 million stake in Kuwait Energy Company, a Middle Eastern independent oil and gas exploration and production company headquartered in Kuwait.

The stake was acquired from an existing shareholder and marks QFIB’s second investment in the oil and gas sector.

Established in Kuwait in August 2005, Kuwait Energy has a proven track record of successes in oil and gas fields in the MENA region, has been profitable each year since inception and has increased production and reserves each consecutive year. Recently, it announced it had signed gas development contracts for the Siba and Mansuriya gas fields in Iraq. The company is focused on growth in the Middle East and North Africa region, where it has been successful in Egypt, Yemen and Oman, and has oil and gas assets in Ukraine, Latvia, Russia and Pakistan.

Commenting on the deal, Abdulla bin Fahad Bin Ghorab Al

Marri, QFIB Chairman said, “This is our second investment in the oil and gas sector. We could not have selected a better opportunity. Kuwait Energy fits perfectly with our strategy of investing in growing companies with outstanding management. Kuwait Energy has already established itself as a leading player, with strong positions in promising markets such as Egypt and Iraq. Furthermore, Kuwait Energy’s operations in the MENA and Eurasia markets provide a unique gateway to access niche opportunities which we aim to capitalize on.”

Dr. Manssour Aboukhamseen, Kuwait Energy Deputy Chairman said, “We are pleased to welcome QFIB to Kuwait Energy as a shareholder and advisor. QFIB has an excellent reputation as a leading investment bank in the region and enjoys a strong shareholder base. We aim to make the most of QFIB’s sectorial expertise, deep understanding of the MENA region and extensive network for further fund raising activities in the future.”

DNO, RAK Petroleum enter merger agreement RAK Petroleum PCL, (RAK Petroleum), the oil and gas exploration and production company, and Norway’s DNO International ASA (DNO) signed a heads of agreement to merge RAK Petroleum’s Middle East and North Africa (MENA) operating subsidiaries into DNO in exchange for DNO shares to be issued to RAK Petroleum.

The agreement provides the basis of negotiation of definitive merger documents, including an integration agreement. It is intended that the transaction will be structured as a merger of two Norwegian subsidiaries of DNO and RAK Petroleum in accordance with Chapter 13 of the Norwegian Public Companies Act. The merger terms were proposed by DNO management last week and endorsed by the boards of directors of both companies on Sunday, with the RAK Petroleum directors of DNO abstaining from discussion and voting during the

DNO deliberations. Definitive agreements, once reached, will be presented to the shareholders of DNO and RAK Petroleum at separate extraordinary general meetings for final approval.

“There is a compelling logic in combining the DNO and RAK Petroleum operating assets to build a first rank independent MENA upstream operator,” said Bijan MossavarRahmani, Chairman of the Board of Directors and Chief Executive Officer of RAK Petroleum PCL. Mossavar-Rahmani was also voted in as Chairman of the Board of DNO at the June 9, 2011 annual shareholders’ meeting of that company.

“The opportunities for growth for MENA oil and gas companies with regional experience, strong assets and geographic diversity have never been better,” he added.

The headquarters of the enlarged company will remain in Oslo, Norway; opera-

tions offices will be located in the Kurdistan Region of Iraq, Yemen, the United Arab Emirates, Tunisia and Oman.

DNO is considering listing the merged company on the London Stock Exchange in addition to the Oslo listing. A listing in London is expected to contribute to extended coverage of the company’s shares, attract interest from a broader range of MENA focused investors and provide a solid platform for follow on merger and acquisition activity.

It is expected that, on merger closing, RAK Petroleum will hold a total ownership interest in DNO of approximately 40%. RAK Petroleum currently holds a 30% share in DNO. The number of shares to be issued by DNO to RAK Petroleum in consideration for the RAK MENA subsidiaries will be set by the parties based on relative evaluations of DNO and the RAK MENA business.

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Petroceltic discovers gas in South Eastern Algeria

Petroceltic, in association with its partner Sonatrach, issued an operational update on its Isarene permit (Blocks 228 & 229a) in the Illizi Basin in southeastern Algeria. Petroceltic operates the permit with a 56.625 % interest, Sonatrach holds a 25% interest, and Enel holds 18.375% interest, pending final Government of Algeria ratification, which is expected later this year.

Well AT-6, the third well in the current appraisal campaign on the Ain Tsila gas discovery was drilled to a total depth of 2085m and has successfully logged gas in the main Ordovician reservoir. The well is currently being suspended in preparation for testing with a rigless testing unit following completion of the testing program currently underway at AT-5.

The AT-6 well is a vertical well targeting a broad culmination in the southeastern region of the Ain Tsila Field outside the 3D seismic survey area, approximately 17 km southeast of the AT-4 well location.

The principal objective of the well was to extend the proven gas in place and to test the reservoir quality towards the mapped southeastern limit of the field. The well commenced drilling on June 9, 2011 and reached a total depth of 2085m on July 5, ahead of schedule and within budget.

The Ordovician reservoir was encountered as expected with good gas shows and a full suite of logs was run. Initial log interpretations indicate a gross Ordovician reservoir interval of 168m, and a net pay interval of 45m. This confirms the

extension of the field at this significant step-out from the previously drilled wells.

Following suspension of AT-6, the Dalma rig will move to drill a further vertical appraisal well in the far southwestern section of the field, AT-7, which is expected to commence drilling operations in late July.

As for the AT-5 well test, rigless well testing operations have recently commenced at the AT-5 well site, following minor delays associated with the arrival of certain personnel and equipment to the site. AT-5 was drilled with a 376m horizontal section through a fractured “pop-up” feature in the Ordovician reservoir.

Depending on the results of initial testing, the program is likely to include hydraulic fracturing of some of the reservoir zones to enhance gas flow rates.

A second rig, the KCA Deutag T-211 rig, has mobilized to the Isarene permit and is currently rigging up to drill well AT-8 at a location in the north of the field.

The AT-8 well is expected to spud in mid July and is a vertical well targeting a structural popup feature similar to AT-5. The well objective is to test for significant additional gas in place as well as potentially accessing fracture features identified on seismic testing.

With the addition of a second rig, the current six well delineation program is expected to be complete by year-end in time for the preparation of the Final Discovery Report for submittal to the Algerian authorities.

Downstream KSA to develop petrochemical technology Saudi Arabia plans to invest a total of $100 billion in its petrochemical industry by 2015, and to increase focus on advanced technologies associated with the industry, said Dr. Mohammed Ibrahim Al-Suwaiyel, President of the King Abdulaziz City for Science and Technology.

Al-Suwaiyel highlighted that the petrochemical technologies are among 12 strategic technologies that the kingdom aims to develop in partnership with private sector operators in the country, as part of the kingdom’s national technology and innovation plan.

These statements were made during the Saudi International Petrochemical Technologies Conference,

held in Riyadh in early June.

“The kingdom plans to lift petrochemical production capacity to 80 million tons per year from the current rate of 60 million tons, 62% of total GCC petrochemical production capacity,” he added in his speech.

Iraq-Iran ink $365 million gas pipeline deal

The Iraqi Ministry of Electricity signed a $365 million contract with an Iranian company nominated by the Tehran government to build a gas pipeline to supply Iraqi power plants with Iranian gas, said the ministry spokesman Musaab Al Mudaris.

“The pipeline would carry some 25 million cubic feet of Iranian gas a day that would be enough to gen-

erate some 2,500 MW,” added Al Mudaris.

According to the terms of contract, the pipeline will pass through Iraq’s Mansouriyah gas field, near the Iranian border in the restive Diyala province and will feed three power plants; one in Sadr City in northern Baghdad and the other two in the northern and southern outskirts of the capital.

August 2011 / Issue 56

Southern Sudan to extend oil pipeline through Ethiopia

The newly independent Republic of Southern Sudan (RoSS), plans to have an oil pipeline through Ethiopia as one of its options to circumvent the 2005 oil sharing agreement with Khartoum, said Dr Luol Deng, South Sudan’s Oil Minister.

Producing more than 70% of Sudan’s oil, the South Sudanese administration feels the 2005 agreement, which calls for a 50-50 sharing of oil revenue between the two entities, is unfair and cannot be implemented.

All oil refineries, storage facilities and ports lie in the Khartoum controlled territory, which receives the crude through two pipelines.

“Oil sharing has been one of the highly contested issues between us (North and South) and we have had continuous discussion over this. For now we will continue with the current mechanism and use North’s facilities, but in the future as we gain independence and pump more oil these two pipelines would be insufficient, that is why we are planning to have another one through Ethiopia,” said Dr Deng.

As South Sudan becomes the latest entrant to the list of free countries, the oil rich nation’s top officials are working overtime to drum up support and investment from across the world, particularly for its much-sought after oil industry.

Explaining further why they can’t stick to the 2005 oil sharing agreement he said, “Currently Sudan is under sanctions and that impacts oil export, if we continue to stick with them then our revenues would also be affected. We have our priorities and we can’t let that happen, so we request North to explore their reserves. At the same time we have also requested

Italy to invest in Egypt’s wind power projects Italgen Group announced it is planning to allocate around $198.7 million to wind energy projects in Gabal El Zeit, Egypt, aiming to produce about 120 MW of clean energy a year.

Managing Director of Italgen, Giuseppe De Beni has officially announced that his group, which is currently operating in 22 countries, is ready to offer contributions to “new Egypt,” in order to create the best dynamic environment for business and investment.

According to the Electricity and Energy Minister Eng. Hassan Yunis, Egypt will generate 280 MWs of solar energy by 2017. The Supreme Council of Energy has approved the Ministry’s plans to expand projects regarding the solar energy production.

Italy is not the only country that invests in Egypt’s renewable energy development.

Japan has also made feasibility studies for the Hurghada Solar Power station, whose capacity is expected to reach 20 MW. The Minister also said that international financing institutions would help Egypt with $440 million to build the 100 MW Kom Umbo station in Aswan. Another power plant is planned to be built in Koraymat, about 90 kilometers south of Cairo on the eastern side of the River Nile.

Estimated to cost around $3.27 billion, the plant is considered to become the fourth of its kind in the world, will have two gas turbines, about 40 MW each and will be able to generate 140 MW.

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the US to lift sanctions so that together we realize our potential fully.”

According to latest statistics, the current combined production of Sudan’s oil is at 500,000 bbl/d - third in Sub-Saharan Africa behind Nigeria and Angola - and it is expected to jointly produce one million barrels per day with the North in the next five years.

Presently, the only source of income for the South Sudan is oil and the administration feels the country has the resources to change that. The landlocked country has millions of acres of fertile land and importantly enough water to work the land as well. According to the Vice-President, the country has wildlife greater than that of Kenya and Tanzania, which are well known for its wildlife tourism.

The country is also seeking investment to produce electricity and is currently in talks with UAE authorities in this regard.

Kuraymat Hybdrid Power Plant Goes Live

Iberdola Engineering opened its long-awaited Integrated Solar Combined Cycle (ISCC) plant last month in Kuraymat, 95km south of Cairo. The hybrid power facility is the result of a contract awarded to the Spanish company by the Egyptian government through the New Reliable Energy Authority (NREA) in 2007.

One of the few of its kind in the world, the Kuraymat plant will utilize natural gas and solar energy to produce power for the region. With a total capacity of 150 MW, enough power to reach approximately 200,000 people, the use of renewable energy at the facility will effectively decrease CO2 emissions by an estimated 16,000 tonnes each year.

The state-of-the-art plant is equipped with a General Electric model 6FA gas turbine and a Siemens model SST900 steam turbine, as well as a 130,800 m2 solar field fitted with 160 parabolic cylinder CSP collectors and mirrors spanning 1,900 m2. The plant will operate both day and night as a conventional natural gas combined cycle plant, with increased production efficiency during the day as energy is harvested from the solar field and converted to steam energy.

Iberdola’s Kuraymat facility, utilizing two of the region’s abundant natural resources, will serve as a proving ground for future expansion of renewable energy power plants throughout North Africa and the Middle East.

In Focus

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Egypt’s Petroleum Services Market: The winning horse for Oil Companies in Egypt

The new fiscal year (2011/2012) has been described by experts in the field of petroleum industries as a major obstacle. Such difficult times are being attributed to the Revolution of January the 25th and its aftermath; the continuous protests and increased instability have negatively affected all industrial sectors in Egypt, and has put strain on the petroleum industry in particular.

Experts note that petroleum services companies are possibly the first lifelines that could be thrown to revitalize the Egyptian petroleum industry. These companies are currently receiving significant attention from the Ministry of Petroleum due to their crucial role in extracting oil and natural gas. However, the increasing competition between the various companies has led to some problems in the petroleum services market.

Responding to such problems, experts have called for the instatement of a law that prevents competing companies from being an inadvertent detriment to the market. One of the issues emphasized is the process of renting drills from abroad. If the law were to pass, it would ensure that small petroleum companies could compete in the local market and remain profitable.

However, drilling companies encounter another major complication when it comes to settling the cost of drilling equipment rental.

Therefore, there is a pressing need for the Ministry of Petroleum to work on resolving this problem since the petroleum sector is a primary source of national income, essential to the Egyptian national economy.

A solution to the aforementioned problem is in maintaining the expected petroleum reserves to avoid unnecessary financial losses.

The technological advancements in drilling equipment also play a substantial role in the development of the industry. Therefore, it is necessary to constantly upgrade the technologies employed in drilling and extracting oil and natural gas to allow the industry to cope with its international counterparts.

Another problem facing the market is the preference that some companies have in using services that are less costly over the more expensive ones. The latter actually raises the strategic oil and gas reserves and increases the volume of production, in comparison to the former, which yields negative results even in the short term. Veteran companies in the drilling field prefer the costly equipment because their use does not only result in increased production rates but also facilitates the exploratory operations.

Among other problems facing players in the drilling industry is their minimal knowledge and lack of transparency in regards to the tenders market. By increasing awareness, companies that aren’t initially successful is winning tenders would be provided assistance through technical and financial evaluation, allowing them to further develop themselves and strengthen their ability to compete in the market.

A Ministry source also warned against neglecting the instatement of proper laws to safeguard market of petroleum services. He proceeded to emphasize that renting drills from abroad costs companies large amounts

By Shady Ahmad

of money. Hence, setting laws to regulate the the field. in benefiting the Egyptian oil sector; such process of renting drills is essential. One of In an exclusive comment to Egypt Oil & companies can provide great assistance to exthe most important of these regulations should Gas Newspaper, the source added that the ploration operations in Egypt. However, there pertain to the drilling companies who own ministry is starting to pay significant attention are numerous companies whose sole aim is to sufficient equipment and tools to becoming to companies that own drilling equipment in decrease the expenditure of the foreign parttop players in the sector, which is only pos- Egypt to try to maintain the current production ner, especially since some of these companies sible by partnering with other large players in rates. He continued to elaborate that there are invades the market in illegitimate ways which the industry. “several types of drills in Egypt ranging from could result in a shortage of equipment leadAnother significant problem that frustrates large ones that could drill holes that are 20,000 ing to renting from abroad. most of the companies in the sector of petro- feet deep, to small ones that could reach down A table showing the different leum services, our source adds, is payment to several thousand feet. delays. He points out that standard contracts Both drilling and services companies are in types of services stipulate that companies are to be paid within the process of recovering from the economic 1 (Snubbing-pulling Unit) 30 days from the commencement of the con- troubles caused by the Egyptian Revolution, 2 (Mud) tract. However, in reality payments are often and they’re positive the Egyptian investment 3 (Cementing Services) late, sometimes up to 6 months, which puts milieu will soon be viable for making consida considerable financial burden on the com- erably great profits in the coming period, due 4 (Tubulers Running Services) panies. These payment delays can sometimes to the increase in petroleum exploration op5 ( Logging) cause further damage by forcing companies to erations in Egypt.

6 (Mud Logging Unit) seek more lucrative options abroad.

The source added that the current Minister of 7 (Drilling Bits ) He additionally demanded drilling compa- Petroleum, Abdullah Ghorab, is paying a great 8 (Supply Boats) nies to provide their most sophisticated and deal of attention to drilling companies in Egypt technologically advanced drilling machinery to support the implementation of their plan for 9 (Sea bed survey) and equipment exclusively to the Egyptian the fiscal year 2011/2012, which entails drill10 (Directional drilling) market; especially because the drilling and ing several developmental and exploratory 11 (Helicopter) production companies are usually excluded wells in various hotspots that will increase in12 (Weather Reporting) from tenders, without being provided with a vestment and in turn raise growth rates. proper justification. The market needs stanAnother source from a company that oper13 (Tubulers supply) dards of higher quality in order to increase the ates in the Egyptian petroleum services sector 14 (Drilling Jars) production of oil and natural gas. has confirmed that the Ministry of Petroleum 15 (Down Hole) He also stressed the need for stabilizing the is working hard towards resolving the prob16 ( Fishing Service) petroleum services market in Egypt; a stable lems facing both drilling and services compa17 (Coring Service) market will provide the foreign companies op- nies in the domestic market. In doing so, the erating in Egypt, regardless of their size, with companies would acquire the necessary equip18 (Testing Service) the needed security to operate, especially in ment and expertise to compete in both the do19 (ROV) the coming period. Such stability would even- mestic and the petroleum tenders market.

20 ( Diving Service) tually spark growth and increase in the rates The source also pointed out the role that 21 (Cutting Treatment and disposal) of production and reserves. Moreover, he laid both drilling and services companies will play emphasis on the need for transparency in the Type of Rig Drilling Depth Location decision-making processes that would regulate the market’s mechanisms in the future.

Light Rigs 1000 to 1500 meters Land In addition, he highlighted the necessity Medium Rigs 1200 to 3000 meters Land of having a more organized set of market Heavy Rigs 3500 to 5000 meters Land regulations pointing out that international companies that operate in Egypt possess Ultra-heavy Rigs 5500 to 7500 meters Land all the tools they use abroad, yet the use of Jackup Rigs More than 400 feet Sea advanced technologies is contingent on the Sea Platform Several wells are drilled from one platform. companies’ needs. Moreover, he explained There are big platforms that don’t need supplies and can conthat the consumer’s demand for quality is tain everything needed There are several types of these still what drives the market towards higher stanplatforms dards, yet there are companies that produce an inferior product to cut cost, which harms Compliant Compliant the petroleum exploration operations.Platform The Rigs Platform Rigs (guyed-tower) (tension legs) larger producing companies deal with the

biggest service providers to present a high quality product, as it drills a larger number Concrete SteelCaisson Gravity of wells that require qualitative services.

Jacket Type Type Platform Platform Meanwhile, a source within the Ministry Platform Compliant Compliant of Petroleum has confirmed that increasing Platform Rigs Platform Rigs (guyed-tower) (tension legs) production rates of pure oil and natural gas

Semi-Submersible Also a floating drill that can move and uses an anti-denta- Sea is a new priority for the Ministry. The current tion system similar to the one used in the semi-submersible average rates, which are 700,000 barrels of model oil and 6.5 billion cubic feet of natural gas a day, are not sufficient according to experts in Also a floating drill that can move and uses an anti-dentation Sea Drill Ship system similar to the one used in the semi-submersible model

August 2011 / Issue 56

9

Round Table

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Industry overhaul:

A call for reform Round-table Speakers

Discussion Chairman Dr. Hany El-Sharkawi Dana Gas President

A team of energy professionals explore challenges facing Egypt’s petroleum sector and debate solutions for the industry at the Egypt Oil & Gas Reform 2011 roundtable discussion.

By Yomna Bassiouni

Speakers (In alphabetical order) Eng. Dirk Warzecha RWE Dea Egypt General Manager

Mrs. Hanan Abdel Moneim PMS Assistant General Manager for Business Development Mr. Helmy Ghazi Head of Structured Finance, HSBC Bank Egypt Geo. Magdy Wedad PICO Energy PIS Managing Director Eng. Mamdouh Mahfouz Amak President Mr. Mario Weisser INA Naftaplin General Manager Eng. Mohamed Fouad EOG President Eng. Sherif Abdel Wadoud PICO Energy Managing Director

Egypt’s oil and gas industry has long been in need of reform. While many issues facing the sector have been ignored for too long, the fall of Mubarak’s presidency earlier this year brought with it a call for change in the industry. Public discontent with foreign gas deals have already resulted in the renegotiation of Egypt’s contract with Jordan, and our February issue featured a roundtable discussion focused on the need for increased government transparency. Delving further into the issues facing the oil and gas market, a team of industry experts debate the future of Egypt’s oil and gas industry.

Opening the reform discussion, Dana Gas Egypt President Dr. Hany El-Sharkawi praised the favorable aspects of the Egyptian petroleum industry, noting that there is much to be thankful for and expressing gratitude for the “opportunity to exchange opinions, brainstorm new ideas and share suggestions with authorities,” in order to affect meaningful reforms.

He went on to explain that while it is important to recognize the positives, top officials and experts must commit to solving negative issues and eliminating undesirable elements that hinder the progress and prosperity of the industry’s future.

PICO Energy Managing Director Sherif Abdel Wadoud agreed that this is the right time for submitting an effective plan to the petroleum officials. “During this critical period of time, the government and authorities are helpless, I believe they need help rather than demands. And this is our role.” He further elaborated, “we need to rise to the heat of the moment and contribute to reforming the sector, especially now that the Minister of Petroleum is overwhelmed with this wave of demands...people have been camping in tents for months at the Ministry headquarters, which is a heavy issue facing him.”

August 2011 / Issue 56

“I believe that the contractual stability is way more important than the political stability. The lack of this factor can lead to postponement and/ or cancellation of major projects in the country. Hence, agreements should be honored from both sides, government and investors.”

Dr. Hany El-Sharkawi Dana Gas Egypt President

Eng. Dirk Warzecha, General Manager of RWE Dea Egypt, spoke briefly about the prominent company’s affairs saying, “currently, our biggest daily production comes from our operations in the Gulf of Suez, which is estimated at 20,000 barrels.” He added, “We are also very active, along with BP, in the West Nile Delta project and have partnerships with other companies in the Western Desert.” He assured the group that RWE Dea Egypt has plans for continued investments in the country, but made sure to include that, “any foreign investor seeks two main factors before initiating a project in any country: sustainability and reliability.”

Challenges facing the petroleum sector The roundtable’s conversation about the upstream sector focused on a number of issues, mainly payment delays and lack of transparent strategy. Abdel Wadoud spoke about the difficulties created by a lack of clear strategy for the future in regards to Egypt’s market. “From a contractor’s point of view, ambiguity surrounds the strategies of this sector,” explained Abdel Wadoud, attributing this lack of strategy to low performance. “How would I study the market and figure out the volume of my investments, when there is no clear five-year plan for drilling operations, technologies needed and costs,” he asked the participants of the roundtable discussion. He went on to voice frustrations from producers’ points of view over the level of bureaucracy in the upstream sector, and also referred to cash flow issues plaguing the production sector.

“This sector has been an enclave and has managed to survive trembles,” said Abdel Wadoud, praising the oil industry’s ability to avoid nationalization over the past 50 years. “But nowadays, there is a level of uncertainty due to payment delays. Over the last 7 years, the Egyptian petroleum sector took a lot of loans to finance operating expenses, which shows that we do have a financial issue,” he continued.

Dr. El-Sharkawi agreed that payment delays were a cause of trouble for the upstream players. Noting the troubled state of the Egyptian economy and the hesitancy of banks to provide financing, he asserted that the upstream operators and the government need to be cooperating to solve the problem. “There are several solutions for this issue,” he offered, “one of which we have already agreed to by accepting that part of our payment is given in Egyptian Pounds, which is a violation of the contract.” Yet he is sure there is a solution that will be agreeable for both parties. He gave examples of several companies who have agreed to reschedule payments noting, “we have to be very pragmatic about how to fund our operations, yet at the

11

“There should be a patriotic will for reform.

There should be a new formula; whether managerially, politically and financially, in order to address the roots of challenges threatening the progress of the petroleum sector.”

Eng. Sherif Abdel Wadoud PICO Energy Managing Director

same time, we should be helping the government.”

The group spoke next about the Personal Sharing Agreements (PSA) applied by the petroleum officials. Wadoud claimed that Egypt’s PSAs are “extremely generous,” speculating that “public authorities will probably be complaining in the future from the split of revenues and profits. This happened in vain in various parts of he world and it will likely take place in Egypt as well.” Wadoud, however, did mention the lack of transparency of the PSAs as a growing concern.

El-Sharkawi disagreed however, disputing the claim that PSAs in Egypt are too generous. “Our PSAs are standard ones, which come originally from Indonesia. The terms are similar and are applied in about half of the world,” he said, while explaining that the other hemisphere follows the Tax-Royalty system. Dr. El-Sharkawi proposed a public justification from the Ministry to clarify the reasons behind the system of PSAs and to explain how the shares of production are allocated. “I believe,” he affirmed, “that the terms of the PSA are a masterpiece, but their application is the concern.”

The Dana Gas Egypt President elaborated that a PSA should provide “contractual stability” since it is a law; modifications and approval must be made by either the Egyptian president or the parliament. “Cases of contract violations, from both parties have been documented,” he stated, “which is a very dangerous sign for investors.” El-Sharkawi warned that honoring PSAs is even more crucial than political stability, pointing out that “some countries are tremendously volatile, such as Yemen during the civil war, yet the businesses were not affected operations ran steadily with both the government and our company respecting signed contracts,” he insisted.

Turning the topic to the joint venture dilemma, Dr. El-Sharkawi stated that he is “not really a fan of joint ventures in Egypt in terms of structure. They tend to be more like employment schemes.”

Meanwhile Warzecha stressed the importance of the sector’s reliability as a core factor in attracting foreign investors to conduct upstream operations in the country. He noted that contract reliability is “extremely vital for foreign investors as it enables them to securely implement a time-planned project.”

He highlighted that investors will be encouraged to initiate bigger projects, increase their spending and deliver high-end products. “For instance, the company’s portfolio in Egypt is very important for us compared to our portfolio in other regions, due to reliability factors,” he concluded.

Weighing in on the same issue, INA Exploration & Production General Manager Mario Weisser asserted that the Egyptian authorities respect their commitments with foreign investors. “Major changes have been taking place since the Revolution of January 25th and though the current conditions are not quite stable, the petroleum sector makes many efforts to maintain its contractual reliability,” he offered.

Round Table Warzecha explained that one of the obstacles that has come up due to current political instability is the lack of efficient decision making. “This can lead to the postponement of major projects and can affect the sustainability of the whole sector,” he warned. “Such a problem should be immediately solved.” He noted that some government entities are trying to overcome this issue. RWE is primarily involved in the natural gas sector and Warzecha insisted that EGAS has been in close communication with the company and pushing their operations forward to “avoid any delay or reschedule of any plans.”

Eng. Mamdouh Mahfouz, President of Amak Company agreed with the general sentiment of the roundtable participants that “bureaucracy, lack of quick

12 The announced targets of the Ministry [of Petroleum] are very vague and hence we cannot set our own goals for the petroleum industry.”

Tendering System A brief discussion about Egypt’s tendering system brought a few concerns to the table. Dr. El-Sharkawi spoke specifically in terms of cost recovery. “It was suggested that we should renegotiate our contracts and cancel all terms related to cost recovery in order not to go through the tendering process and accept lower quality just to save money.”

Weisser’s comments on the tendering system clarified that INA ran out of concessions and is looking for new bid rounds, whether or not the tendering system will be modified. “We are eager to reinforce

“There is always a first step to solve any issue, and in this case, I would recommend to have more transparency of finances in order to properly deal with this critical issue.

For instance, in case of national companies, they should provide clear figures in order to assess the credit risk.”

“Reliability is the key for foreign investors in terms of agreement. In the shadow of this factor, investors will be encouraged to initiate bigger projects, increase their spending and deliver high-quality products, as their portfolio in the country are boosted!”

Eng. Dirk Warzecha RWE Dea General Manager

decision making, payment delays... all have existed since the January 25th Revolution.”

Geologist Magdy Wedad, PICO Energy PIS Managing Director agreed and went as far to say, “The Ministry of Petroleum lacks a clear policy. What are the rules, objectives and long-term plans? No one knows!

All we hear is that the Ministry is working hard to lure more investments into the country. But how and what types on investments? This is undisclosed!.”

He continued, “the service companies in Egypt lack a strategy because all decisions are made internally.

to the involvement of private banks in financing the petroleum industry. “Most of today’s discussion revolved around the problem of payment delays, but unfortunately I do not have a solution for it. In my opinion, there is always a first step to solve any issue and in this case, I would recommend having more transparency of finances.” Ghazi suggested. He mentioned that national companies provide clear figures to assess credit risk as an initial, durable solution. Employing a reputable auditing company would provide in-depth assessment of each company’s financial statements as well as consulting services regarding any resulting difficulties, he argued. He assured the group that “transparency will undoubtedly open diverse financing channels for national companies.”

Mr. Helmy Ghazi

Head of Structured Finance, HSBC Bank Egypt

our investments in Egypt and this why we want to get listed in new bid rounds and acquire new concession areas. The petroleum authority will definitely respect its commitments with foreign investors in order to avoid sending any negative messages that would certainly harm the rate of investments,” he declared.

Oil & Gas Finance Helmy Ghazi, Head of Structured Finance for HSBC Bank Egypt, who has 13 years of experience with the petroleum industry, answered some questions related

“We are eager to reinforce our investments in Egypt and that is why we want to get listed in new bid rounds to acquire new concession areas.

The petroleum authority will definitely respect its commitments with foreign investors in order to avoid sending any negative messages.”

Mr. Mario Weisser

INA Exploration & Production General Manager

When asked by Mahfouz about the financing of projects led by private oil and gas companies, Ghazi explained that the private sector provides all needed documents, including financial reports and assessments conducted by well-known auditing organizations, which makes them more attractive to banks.

Ghazi recommended the Central Bank of Egypt’s list of accredited auditing firms for these services.

Ghazi touched again on the subject of payment delays, but noted that they are not the sole financial obstacle facing the petroleum sector. He cited the bill of subsidies as another heavy burden on the industry.

Additionally, he referenced the dilemma facing the oil and gas sector regarding accuracy of assessments of Egypt’s reserves. “The Ministry of Petroleum publicized specific counts for the country’s oil and gas reserves, which contradicted the ones announced by Wood Mackenzie.” Ghazi finished saying, “it all leads back to the core issue mentioned earlier: transparency of finances.”

Developing Human Resources Ms. Hanan Abdel Moneim, Assistant General Manager for Business Development at the Petroleum Marine Services (PMS) stated that the driving force behind any successful entity lies in the capabilities and competitiveness of the organization’s human resources. Currently preparing to discuss her PhD thesis on the topic, Abdel Moneim addressed the main issues that should be resolved in order to create a professional and productive work environment. She spoke about the decentralization of authority, the effectiveness of organizational charts, supervision, performance evaluation, equality and justice, interactive and transformational leadership and fair distribution.

“Decentralization of authority is a roadblock that the petroleum sector has been facing for a long time,”

August 2011 / Issue 56 explained Abdel Moneim, “the sector used to be run under the concept of circle of trust and connections.”

“The decentralization of authority will definitely have a positive impact on the employees’ competitiveness, which would in turn be an incentive for them to improve and enhance their work performance and have a fair and equal chance for promotion.”

Abdel Moneim urged top management to allow more room for middle management to take part in the decision making process. “This is a key variable for a professional and competitive organizational climate.

The right of expression and contribution in the decision making process should not be exclusively for the top management. There should be a kind of integration between the A and B levels in order to convey

experience to new generations who are supposed to take the lead one day.”

Abdel Moneim suggested a complete new organizational structure that would serve to strengthen all employees’ skills and improve their work performance. “Moreover, top officials should work on ways to improve decision making and work to increase the involvement of workers in making decisions and solving problems. There should be no centralization of authority’ on the contrary, there is a surging need for the delegation of authority to lower administrative levels to achieve the objectives of the sector” Abdel Moneim concluded.

“The Ministry of Petroleum lacks a clear policy; what are the rules, objectives, longterm plans…etc.? No one knows! All what we hear is that it is working hard to lure more investments into the country. But, how and what types of investments? This is undisclosed!”

“Bureaucracy, lack of quick decision-making, payment delays… all have existed post the January 25th Revolution.”

Eng. Mamdouh Mahfouz Amak President

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Geo. Magdy Wedad

PICO Energy PIS Managing Director

“Most of the organizational charts of the petroleum industry lack the basic variables that create a professional and competitive work environment. We have been suffering for a long time from the concepts of circle of trust and personal relationships in the hiring scheme!”

Mrs. Hanan Abdel Moneim

Assistant General Manager for Business Development, Petroleum Marine Services (PMS)

InReview

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Reviewing the offshore rig market

The offshore rig market continues to suffer worldwide from an oversupply of new rigs that outstrips demand. As the newly delivered rigs have been built at advanced specifications, older rigs have more trouble securing contracts

Prepared by Mostafa Mabrouk, Vice Chairman Assistant For Economic Affairs, Ganope

The number of mobile offshore drilling units under contract is currently 572 worldwide; almost identical to the number of rigs under contract at this time last year. However, there are now 790 rigs in the drilling fleet, compared to the 749 in January 2010. With the increase in fleet size, worldwide offshore rig utilization stands now at 72.4%, down from 76.5% a year ago.

According to ODS-Petrodata’s Rig Base market intelligence tool, 104 mobile offshore drilling rigs are under construction or on order around the world, with 57 of these rigs scheduled for delivery this year. Only 30 of the rigs set for delivery this year have contracts lined up.

Gulf of Mexico Currently, the offshore rig fleet utilization in the U.S. Gulf is 47.6%, down from 55.9% utilization rate in January 2010. Of the 126 rigs in the region, 60 are under contract. Jackup utilization is only 37.3%, while semisubmersible utilization languishes at 69.2%, down from 100% a year ago. Drillship utilization has remained 100%, and, although only three rigs are actually working, all of the 11 units that remain in the area still have contracts and/or contract commitments.

Despite the grim situation, drilling in the U.S. Gulf is expected to resume in some fashion over the next 12 months, and demand is expected to rise for some rigs, according to ODS-Petrodata’s World Rig Forecast Short Term Trends.

Jackup demand went up by nine units in last May. If the speed of the deepwater permitting process is rapid, drillship demand in the U.S. Gulf of Mexico could grow by around six rigs by the end of 2011. However, semisubmersible demand is expected to decline somewhat over the next year by one or two units.

Latin America Looking further south towards Latin America, Brazil, Mexico and Venezuela continue to be the major hubs for offshore drilling in the region.

Current offshore rig fleet utilization in Mexico, Central, and South America combined is at 76.43%. Of the 31 offshore rigs in Mexican waters, 22 are under contract to state oil company Petroleos Mexicanos (PEMEX). The Mexican rig market has declined significantly since last January, when 33 out of 36 rigs were under contract. Demand for jackups in Mexico is expected to rise in 2011, assuming PEMEX can deal with certain

budget and political unrest. An increase in demand for semisubmersibles is also possible, with the number of semisubmersibles under contract to PEMEX potentially increasing by as many as three by mid-year. In South America, 97 out of 123 mobile offshore rigs are under contract for a fleet utilization rate of 78.86%, up from around 76.3% a year ago. Brazil accounts for the vast majority of this activity, boasting a total of 67 rigs under contract to companies such as state giant Petrobras, domestic oil company OGX Petroleo, and international operators like Anadarko, Chevron, ExxonMobil and Repsol YPF. In Venezuela, PDVSA has 24 rigs, most of them Lake Maracaibo barges, either under contract or owneroperated, while one jackup is working in the country for Repsol YPF. Based on currently known drilling plans put forth by operators, demand for semisubmersibles and drillships should rise in South America throughout the next year, due for the most part to work offshore Brazil.

For jackups in South America, the story is different, with little change expected in the number of rigs under contract over the course of the coming year.

Europe, Mediterranean and Black Sea The European rig fleet has increased since January 2010, going from 104 units to a current level of 116. The contracted rig count also increased, from 90 to 93, but utilization dropped from 86.5% to 80.2%. Even with this decline, Europe still has the highest fleet utilization of any major rig market. An increase in semisubmersible demand is expected in Northwest Europe over the next year. However, demand will slacken somewhat in the latter half of 2011.

This will be coupled with little change in the small European drillship market, so overall the number of floating rigs working in European waters will rise only modestly in 2011. However, number of jackups under contract in the area could rise by 10% or more by the end of the year.

West Africa The West African mobile offshore rig fleet has undergone only a small amount of change over the past year. Compared to January 2010, the number of rigs in the region has gone up by a net two to 64, while the number of contracted rigs is the same 48. Fleet utilization is now 71.9%. When broken down by rig type, 11 of 13 drill ships, 15 out of 19

semisubmersibles and 20 out of 30 jackups are under contract. Demand for all three-rig types is predicted to rise modestly in West Africa this year. New drilling programs offshore Nigeria, Ghana, Angola, and Cote d’Ivoire will drive the majority of the increases.

Middle East The Middle East is a jackup market, and the region’s mobile offshore rig fleet is essentially unchanged from a year ago. Now, 90 out of 119 mobile offshore drilling units are under contract for a fleet utilization rate of 75.6% versus year-ago numbers of 90 out of 118 rigs under contract and a fleet utilization rate of 76.3%. Boosted by Saudi Aramco’s activities offshore Saudi Arabai and the Iranian Offshore Oil Co. in Iran, Middle Eastern jackup demand is likely to rise during 2011.

Offshore Middle East developments move forward Offshore capex across the Middle East and Caspian Sea is set to rise by onethird over the next five years, according to a recent report from Infield Systems Ltd. Much of the growth will come from the Persian Gulf and new projects off Saudia Arabia; but Israel should also become increasingly influential, with its gas field programs in the eastern Mediterranean incurring expenditure of over $2 billion between now and 2015.

Whether these developments, led by the Noble Energy-operated Tamar, go forward as planned will depend on political as well as commercial considerations. Israel’s parliament (Knesset) has been considering a bill to implement the Sheshinksi Committee’s recommendations on raising taxes on oil and gas production. If ratified in full, it could impact the economics of Tamar and other gas discoveries in the Tamar basin, such as Noble’s Leviathan. Here, though, drilling of the Leviathan 1 well was recently suspended due to the need to procure equipment from outside Israel to deepen the well. The Sedco Express has since transferred to the Tamar field for development drilling.

Other companies are moving into the region, among them ATP Oil & Gas, which was recently awarded five deepwater licenses. Toronto-based Adira Energy commissioned two seismic surveys (both acquired by WesternGeco) earlier this year over its Gabriella and Yitzchak offshore permits.

Noble’s drilling success has sparked interest among Israel’s neighbors, with Greek-controlled southern Cyprus considering staging a second offshore licensing round later this year, comprising 12 deep-water blocks, although this might draw objections from the Turkishcontrolled north. Noble is reportedly looking to drill southeastern offshore block 12, which is thought to hold 10 TCF of gas.

Syria’s Petroleum and Mineral Resources Ministry recently launched an international offshore bid round, with CGG Veritas providing technical support. And Lebanon’s Ministry of Energy & Water may open the country’s first offshore licensing round in November, which could be promoted by PGS.

Lebanon has also voiced concerns that development of Tamar may infringe its rights, if it is proven that the field extends into Israeli waters.

More surprisingly, according to press reports in Israel, Prime Minister Benjamin Netanyahu has approached the Palestinian Authority for talks on a potential $800 million-plus development of two gas fields offshore Gaza discovered a decade back by BG Group. Gaza Marine 1 and Gaza Marine 2 are thought to hold combined reserves of 1.4 TCF. If the project went ahead, it could alleviate current power generation costs in Gaza.

Offshore Saudi Arabia, development continues in Saudia Aramco’s giant Manifa field in shallow water, 200 km northwest of Dhahran. The company’s drilling team recently set a new record for a long-reach well, using a Precision Drilling rig. Earlier this year, Aramco awarded Saipem a $2.2 billion-plus EPC contract for offshore development of the Arabiyah and Hasbah fields, 150 km northeast of Jubail Industrial City. The program involves building and installing 12 wellhead platforms; one injection and two tie-in platforms; a network of infield flow lines and subsea electric/control cables, and a 260-km export pipeline.

Farther southeast along the Arabian Peninsula, RasGas, the joint venture between Qatar Petroleum and ExxonMobil, awarded Hyundai Heavy Industries a $900-million contract for the Barzan gas project, 80 km northeast of Ras Laffan Industrial City. The offshore facilities will include three wellhead platforms and 200 km of subsea pipelines, designed to deliver 1.9 mmcf/d of gas.

Dubai Petroleum Establishment has commissioned an unmanned wellhead platform and associated pipelines from Global Industries for the Al Jalilah project. The newly built Global 1200 vessel was due to participate in the installations.

Offshore Oman, the Ras Al Khaimah gas Commission approved RAK Petroleum’s application to re-develop the long shutin Saleh gas condensate field. The initial program involves deepening an existing well to the Thamam reservoir and rehabilitation of four platforms.

In the Persian Gulf, Pars Oil and Gas Company aims to start production next March from the South Pars Phase 12 development. This is designed to produce 75 mmcm/d of gas and 120,000 bbl/d of condensate. According to Iran’s Petroleum Minister Seyyed Masoud Mirkaze-

mi, all remaining 19 South Pars phases should come onstream by 2015. Iran is also looking at ways to lift oil production from various offshore fields close to Bushehr province, of which Norouz and Soroush are the main producers.

In the Kazakh sector of the Caspian Sea, progress on the ultra-shallow water Kashagan project remains slow. The government is now thought to be pushing for a simplified design to cut costs of the full field development. Korea National Oil Corp has commissioned DSME to construct a drillship for exploration on Kahazakstan’s Zhambyl oil field, using local shipyards on the Caspian Sea coast and the Mangalia shipyard in Romania Asia/Australia In this region, offshore rig fleet utilization is at 76.1%, with 108 out of 142 mobile offshore rigs under contract. Jackup utilization is at 77.4%, semisubmersible utilization is 72.2%, and drillship utilization is 75.0%. In the Indian Ocean, jackup and semisubmersible demand will increase slightly this year, while drillship demand will be essentially flat. In Southeast Asia, slight increases in semisubmersible and drillship demand will be countered by a drop in demand for jackups. In the Far East, major changes in offshore rig activity are not expected this year. In Australia and New Zealand, jackup demand is expected to go up by one or two rigs this year, and the floating rig market could see a similar net increase in the number of rigs under contract.

Offshore rigs daily rates Over time, in normal rig market conditions, daily rates tend to move with utilization, although rates generally will drop faster and rise more slowly than utilization. On a worldwide basis, average offshore rig day rates increased slightly over the course of 2010. Rates for 250 ft. to 300 ft. jackups in the U.S. remained flat, while jackup rates in Northwest Europe fell slightly. Globally, rates for mid-water depth semisubmersibles increased during the second half, but fell back in December, while rates for deep water rigs rose in the second quarter and then leveled off. ODSPetrodata’s latest offshore rig demand forecast predicts improved global fleet utilization among all three major rig types, jackups, semis and drill ships.

However, the gains are expected to be fairly modest for all three, and that foreshadows a similar situation for day rates over the course of the year.

August 2011 / Issue 56

15

Political

16

Subsea Safety

The political events of the last few months have left Egypt’s economy in a battered state. The country’s once lucrative tourism industry suffers and the stock market continues to struggle as financiers scale back their investments. The oil and gas industry however, has largely been able to maintain its successes and continues to see investments despite the need for some reforms (see page 10). Indeed if the correct steps are taken to resolve some of the industry’s grievances, it could very well be this industry that saves the country from the brink of economic meltdown. And while controversy surrounds deepwater drilling, it is likely to be the way forward for Egypt’s oil and gas production. As with so many aspects of the industry however, there are several measures that need to be addressed.

By: Melissa Howell

Offshore drilling is a controversial aspect of the oil and gas industry because of its high cost and risk factor, and the public opinion of subsea oil and gas production has become a heated debate with many arguing that the financial and environmental risks are not worth the payout. It is up to the industry as a whole to change the reputation of offshore drilling and this must be achieved, above all else, through increased safety standards. These necessary adjustments will not only ameliorate concerns from the public, but will make offshore drilling a more sound investment and ultimately, a more lucrative endeavor.

Last summer’s Red Sea spill is a topic of concern for those wary about the safety of offshore drilling in Egypt.

The government came under heavy criticism for initially keeping silent about the incident and never fully disclosing the details of the spill to the public. However, praise is due to the Egyptian government for their speedy and thorough cleanup process in which millions of dollars were spent to ensure that the Red Sea and its popular beaches were fully restored.

The incident had potential to be much worse. The highly publicized Macondo blowout in the Gulf of Mexico last April has had far reaching effects. The explosion of the Deepwater Horizon caused 11 deaths and 17 additional injuries. Over the three months that the well remained uncapped, an estimated 4.9 million barrels were lost into the Gulf of Mexico, crippling the region’s tourism and fishing industries. Well owner BP has since established a $20 billion dollar relief fund for those affected by the disaster and have received an estimated 800,000 claims for compensation. Although BP, the rig operator Transocean and the United States government were instrumental in capping the well and cleaning the oil, initial attempts to do so failed, prolonging the process thus increasing damages and losses.

These incidents and other recents mishaps in the industry show that while pouring immense amounts of money into cleanup is essential, more needs to be done to prevent disasters in the first place.

The majority of Egypt’s offshore producing wells are currently in the Gulf of Suez, yet the fields are mature and there have not been substantial discoveries in this area recently. According to recent assessments, 81% of Egypt’s remaining recoverable natural gas reserves are in the Mediterranean (compared to the Gulf of Suez’s 6%.) 2010 figures claim 57.84 tcf of proven gas reserves are in the Mediterranean and with exploratory concessions lining the North Coast of Egypt, the proven natural gas reserves in this area will likely increase. BP, who has recently signed agreements with the government to invest billions of dollars, and RWE dea Egypt lead the

pack of exploration projects in the Mediterranean. While operations in the Mediterranean currently only account for about 9% of Egypt’s rigs, the next few years should witness a marked increase in applications for development leases as there is a growing call to exploit Egypt’s natural gas reserves.

The main reason for the disparity between the vast amount of natural gas available in the Mediterranean and the relatively low number of rigs working to extract these resources, is the high cost of offshore drilling.

The average cost of well exploration in the Mediterranean Sea is currently around $111.3 million, though some individual wells have had a much higher associated cost. So while the Western Dessert, for example, counts for roughly 60% of drilling in Egypt, activity in the Mediterranean Sea account for 82% of the country’s total exploration costs, and 59% of development costs, with the average Mediterranean drilling well costing $26.2 million.

With these high costs in mind, the government should be welcoming any prospective investors to the region.

The government would do well to expedite contracts with investors seeking to produce these wells as natural gas plays an increasingly important role in Egypt’s energy sector. The opportunity to attract offshore drilling investments is ideal now, especially during this time when approval of offshore oil drilling in the United States is lagging due to trepidation over last year’s disaster and investment in UK offshore drilling now falls behind recent investments in Africa. The government should incentivize investments to make projects even more attractive to companies whose sights are set on the promising discoveries in the Mediterranean.

However, as important as incentives and speedy contracts are, it is imperative that the government focuses on safety regulations surrounding the production of Mediterranean gas reserves.

Egypt currently operates with prescriptive regulations, a system which has been questioned since the Deepwater Horizon spill. Enacting risk-based regulations would allow the government to identify possible risks according to each project and ensure that a high standard of safety is always in place. Even more important than the nature of these regulations, is the need to monitor their implementation. Safety regulations are useless if not enforced and Egypt simply cannot afford another hit to the tourism industry that would result from an offshore catastrophe.

The Ministry of Petroleum and the Ministry of Environment need to increase communications with each other as well. The oil and gas industry’s natural resources are necessarily tied to the environment, so coopera-

tion between the two entities is advised, not only for disaster prevention or relief, but for developing strategy for concessions and other applicable matters.

The responsibility to enforce high standards of safety cannot fall solely on the government of course; the onus is equally on the companies who explore and produce the wells, assemble and operate drilling equipment, and transport Egypt’s subsea natural gas. Employees must undergo extensive training in safety practices with employers regularly monitoring operations to ensure that these practices are being upheld. Equipment should be thoroughly tested and rigorously maintained to prevent devastating malfunctions. While the debate continues in the United States over who was ultimately accountable for the Deepwater Horizon explosion, experts agree that the oil spill was not the result of any single error from any one company, rather multiple errors from a number of parties involved have been documented.

In regards to drilling equipment, it is essential to rely on the most up-to-date technologies and models available. Opting for equipment and services that are older and lower in quality in attempt to save money is not advisable in the realm of offshore drilling. Rashid’s Mediterranean operations set an example for the region, as the company is in the practice of renting newly advanced rigs, such as the Saffron DOST 1. With a reported drilling cost of $29.325 million, the rig has reached depths of 7,812 feet. These new rigs have additional safety measures to prevent spills from happening and should set the standard for operations in the Mediterranean.

Utilizing subsea compression technology is another attractive option on which operations in the Mediterranean Sea should rely. Gas compression, a technology that is receiving much attention from companies such as Statoil, is a cost-effective substitute for platform-based facilities recommended for deep waters, which permits gas to be pumped longer distances. This will allow for safer operations in fields that are farther off Egypt’s North Coast. The technology is still relatively new with manufacturers working to improve design for easier maintenance once the compressor is operating, but subsea compression will likely be an important aspect in the future of deepwater offshore drilling in Egypt.

Egypt’s offshore drilling future has the potential to be extremely profitable for investors. Increasing production rates in the Mediterranean would certainly boost Egypt’s economy. However, the companies and government entities involved in this industry need to have a serious talk about expectations of safety standards and utilization of high quality services before it is viable to push forward with such costly endeavors.

QHSE FIT into the right management

August 2011 / Issue 56

17

Being the first of its kind in the country has been a motivation factor that has strengthened the company’s aim to establish its solid roots in Egypt. The Fleet Information Technology (FIT) cherishes the concept of providing advanced fleet management and drivers control solutions by creating invocative technology that helps in reducing fleet cost and increase productivity

By Yomna Bassiouni

Fleet Information Technology (FIT) is the first Egyptian company to focus on fleet management and driving control solutions. Established in 2008, FIT continues a success history of more than five years in promoting and supporting brand VDO fleet management in Egypt and North Africa. FIT professional services are offered by highly experienced and certified technical engineers and technicians.

When asked about their entry to the Egyptian market and challenges facing FIT team, Managing Director Waleed El-Khayat highlighted that the gas sector has been the first sector to attribute more attention to safety, specifically safety the on road. “Smart computers have been installed into vehicles to track the drivers’ behaviors and monitor any deviation throughout the route.” He further added that all information later retrieved on from the device will allow the company to analyze the data that would assist them to achieve short term return-on-investment (ROI), increase safety, improve driver performance, get better vehicle utilization and drive down the fleet cost.

“Since the establishment of our company, we have had one vision, which is to balance between reaching a firm leadership in the local market as well as

fulfilling North Africa markets requirements,” added El-Khayat.

FIT is the local dealer of MixTelematics, which was founded in South Africa in 1996. “The MixTelematics was established to manufacture and develop VDO FM products under the VDO license, which is the German leader in manufacturing of automotive electronics and control systems since 1921. In 2008 MixTelematics acquired VDO fleet management brand and CI-Omnibrigde the world’s sole distributor of VDO FM products line. VDO invented speedometers, tachograph (black box) and fleet management solutions with the development of digital tachograph. SIEMENS AG merged with VDO in 2001 to become the world’s leading supplier for automotive electronics. Continental AG acquired SIEMENS VDO group in 2007.”

El-Khayat clarified that MixTelematics installed 450,000 fleet management units in 75 countries worldwide. “FIT is the exclusive agent for VDO (Fleet Management Systems) - MixTelematics in Egypt.”

Providing services to various sectors, FIT has been focusing on the petroleum sector as well. “We are dealing with major corporations, whether on a global level like Schlumberger, Baker Hughes, Statoil and

BG, or on a local level in Egypt, with Petrobel, Egyptian General Petroleum Corporation, Zeitco…etc.,” said El-Khayat.

Penetrating the Egyptian market in a very challenging time, financially, politically and even culturally, many companies would pay less for the QHSE department in order to cut down budgets and reduce costs.

El-Khayat believes that when approaching customers, safety values should be prioritized first before talking about money. “Customers should receive a crystal clear view about the vitality and efficiency of our services in the first place.”

However, the ongoing dilemma of value versus cost remains an extremely thought-provoking factor that any company faces. “Some would recognize the importance of safety services, while others would neglect it and prefer to cut down costs on the QHSE expenses.”

Commenting on the current political and economic unrest in Egypt following the Revolution of July 25th, FIT management expects promising outcomes on all levels. “This was one of the quickest and most positive revolutions in the Middle East and it will bring fruitful outcomes and businesses will flourish more and more.”

Research & Analysis

18

Rotary Steerable System Analysis The first commercial rotary steerable system (RSS) revolutionized directional drilling in the 1990s. The technology has made improvements in reliability and is now a standard drilling tool, with both push-thebit and point-the-bit RSS applied in directional and vertical wells worldwide. Their use is no longer limited to high-cost offshore markets but is becoming more common in lower-cost land markets.

By Aly Salah

In directional applications, drill bit stability and steerability are critical to performance. Without a smooth torque response or a laterally stable design, neither the desired rate of penetration nor durability to drill the required interval is achieved. It is also important to match the side-cutting capability of the cutting structure and gauge geometry to the operating mechanism of the specific tool and the directional objectives.

These factors affect borehole quality, which has a direct impact on the directional control of the RSS. Maintaining wellbore quality, particularly borehole gauge, is crucial for obtaining predictable directional response in both pushthe-bit and point-the-bit systems. Also, with any RSS, directional control and borehole quality are linked directly to how quickly and precisely the internal control system operates.

Rotary steerable systems The principle and drive mechanism of the commercial RSS have diversified over the years, with evolution in both push and Pathfinder point tools. The steering unit of the tool has evolved uniquely to be run in both point-the-bit and push-the-bit configurations. It consists of three pads for directional control, which also act as an anti-rotation device, to hold the steering unit stationary while drilling ahead. All three pads make full contact with the formation, and steering is accomplished by offsetting the steering unit in the desired direction. The RSS controls the dogleg severity (DLS) by varying the amount of offset that the steering unit creates from a typical 12 1⁄4 in. hole size PathMaker RSS in a point-the-bit configuration.

The centerline of the hole and the pads are constantly adjusted to achieve the target settings.

This continuous adjustment to maintain orientation of the steering unit allows the system to drill a constant curve.

In push mode, the steering unit pushes the bit sideways in the desired direction, whereas in point mode, a full-gauge near-bit stabilizer is used as the fulcrum, allowing the bit to

tilt in the required direction. There are advantages to both systems, depending upon the application. Typically the system runs in push-the-bit mode if excessive hole wash-out is expected or if higher degree doglegs are required. The former relates to the fact that the pad extension is considerably larger than that of conventional push tools and thus can maintain borehole contact in enlarged holes.

There are four fundamental characteristics of the fixed-cutter bit: durability, steerability, stability, and aggressiveness. Drill bit designs need to be tuned in terms of bit profile, cutting structure, and gauge design to optimize performance for a given BHA, formation, interval mud type, and directional requirement. One key for a rotary steerable assembly is the operating mode of the specific tool itself; an in-depth knowledge of the tool and field performance enables both bit cutting structure and gauge geometry to be matched with a specific RSS drive mechanism.

Confidential drilling rig test facilities were used for the controlled RSS directional test program. These included the GTI Catoosa Test Facility near Tulsa, Oklahoma, and the Rocky Mountain Oilfield Test Center (RMOTC) near Casper, Wyoming. Both facilities provided adequate geological variations and rig/pump capabilities for the tests in 8 1⁄2 in. (22 cm) and 12 1⁄4 in. (31 cm) hole sizes.

Push mode Stability versus steerability was tested in push mode: all four gauge designs were test-

ed on the 6 3⁄4 in. push tool in 8 1⁄2 in. hole. With an 88% deflection setting, the active gauge design delivered nearly double the build rates (9.9°/100 ft [30 m]) compared to other designs tested. The active gauge bit was then run on the tool but with reduced spacing from the steering unit to the third touch point stabilizer (short push assembly).

This 1.5 ft (0.5 m) reduction increased the build rate to 11.4°/100 ft, while maintaining a very stable assembly and encountering no drillabililty problems.

Both short and long push assemblies were then tested with a 7 in. (18 cm) spacing increase between the steering unit and the bit. This extra spacing dramatically affected reducing build rate by approximately 4°-5°/100 ft.

Stability also was evaluated after each test. The memory data was retrieved and the near-bit vibration data was used to analyze bit stability. Test results revealed that the active gauge bit provided the highest DLS with the lowest lateral, axial, and torsional vibration at the RSS. This is because it efficiently r e -

moves rock when side force is applied, thus giving smoother drilling. Testing with 12 1⁄4 in. bits on the 8 in. tools revealed similar trends between steerability and gauge design.

The different gauge designs had a less dramatic variance in steerability when in point mode, with the steering wheel gauge marginally providing the highest build rates. The key point is in the comparison between push versus point mode using the same primary cutting structure design of the bits. From analysis of the 6 3⁄4 in. (17 cm) assemblies, both push and point BHAs exhibited similar rates of penetration, good lateral, torsional, and axial stability, and borehole quality. There were no signs of borehole ledging or spiraling with either configuration. The only notable difference between the two is the average build rate, which was 10°/100 feet in point-the-bit mode with 98% deflection, compared to 11.4°/100 feet in push-the-bit mode with 88% setting.

This was also evident in the comparison between the 8 in. push and point BHAs: Using a 12 1⁄4 in. bit with Smooth-Steer gauge, an average build rate of 5.4°/100 feet was established in push mode (91% offset), compared to 4°/100’ average build rate in point mode.

Industry Statistics

19

August 2011 / Issue 56

Egypt Statistics Oil

Equivalent Gas

Condensate

Liquefied Gas

Barrel

Barrel

Barrel

Barrel

May-09

May-10

May-11

May-09

Med. Sea

May-10

May-11

May-09

May-10

May-11

May-09

28,074,60023,207,321 22,724,464 1,871,489 1,601,306 1,421,421

E.D.

465,914

May-10

May-11

406,131 454,671

Table 1

2,052,941 2,269,946 2,329,040

Egypt Rig Count per Area -March 2011 RIG COUNT

Area W.D.

7,316,617 6,960,139 7,789,304 7,109,800 6,454,821 7,057,143 1,580,092 1,674,026 1,809,361

609,313

577,086 610,784

Gulf of Suez

GOS

5,434,233 5,026,408 4,943,372 186,800

104,643

333,214

67,361

59,463

80,311

177,638

139,520 219,217

186,404

206,585

196,702

81,424

112,290 100,798

Offshore

202,024

129,719

102,479 2,222,200 2,536,607 2,307,679

Percentage of Total Area

10

10 %

7

7%

0

0%

63

62 %

9

9%

9

9 %%

3

3%

101

100%

10

Land Mediterranean Sea

Delta

Total

Area

Offshore

7

Land N.Red Sea

Sinai

2,292,995 2,116,704 2,139,977 103,400

56,429

32,500

64,107

50,022

33,399

95,936

82,863

68,777

Offshore

0

Land

Upper Egypt

3,328

15,803

Western Desert

26,892

Offshore Land

63

Total

Sinai Offshore Land

9

Eastern Desert Offshore Land

9 Delta Offshore

Land

3 Total

Rigs per Specifica-on May -­‐ June 2011 60 50 40 30 20 10 0

May-­‐11

Up

ub m er sib le

Dr ill Sh ip Fix

ed P la Fo St rm an db

y/ St ac kin g

k-­‐

Se m i S

Ja c

ve r -­‐O

or k

nd W

Rigs per Area May -­‐ June 2011

La

La

nd -­‐

Dr

illi ng

Jun-­‐11

70.00%

Rigs per Area June 2011 (Total of 101 Working Rigs)

Rigs per Specifica-on June 2011

50.00%

3% 9%

7%

10%

9%

60.00%

G.O.S. 0%

40.00%

Standby/Stacking, 32, 24% Land-­‐Drilling, 55, 41%

PlaForm, 2, 2%

Med. Sea N.Red Sea

Drill Ship, 0, 0%

Jack-­‐Up, 12, 9%

10.00%

Work-­‐Over, 29, 22%

Sinai

0.00%

E.D. Delta

G.O.S. Med. N.Red W.D. Sea Sea

Egypt Suez Blend

Opec Basket Price

Sinai

E.D.

Delta

Brent Price

116

116 114 112 110 108 106 104 102 100 98 96 94

120

114

115

112 110

110

108 106

105

104 102

100

1 /1 /7 15

1 /1 8/ 7

1 /1 1/ 7

1 /1 /6 24

1 /1 /6

20 /6 /1 21 1 /6 /1 22 1 /6 /1 23 1 /6 /1 24 1 /6 /1 27 1 /6 /1 28 1 /6 /1 29 1 /6 /1 30 1 /6 /1 1 1/ 7/ 11 4/ 7/ 11 5/ 7/ 11 6/ 7/ 11 7/ 7/ 11 8/ 7/ 1 11 1 /7 /1 12 1 /7 /1 13 1 /7 /1 14 1 /7 /1 15 1 /7 /1 18 1 /7 /1 19 1 /7 /1 20 1 /7 /1 1

95

98 17

1

1

/1

/1 13

15 7/

1 /1

11

7/

7/

11 9/

7/

11 7/

7/

11 5/

7/

11 3/

7/

1

11

1/

7/

1

/1 29

6/

1

/1 27

6/

1

/1 25

6/

1

/1 23

6/

1

/1 21

6/

1

/1

6/

19

/1 17

15

/1

1

100

6/

6/

Jun-­‐1

20.00%

W.D. 62%

May-­‐

30.00%

Semi Submersible, 3, 2%

August 2011 / Issue 56

20