Eog newspaper june 2010 issue

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June 2010

www.egyptoil-gas.com

Issue 42

Pa g e 2 0

All lies in the infrastructure

Drilling For A Better Future

Connecting more residential, commercial and industrial units to the natural gas grid should be met with an appropriate expansion plan to provide the adequate infrastructure to accommodate the new customers.

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Drilling for oil and gas has occurred in one way or another for hundreds of years. The Chinese, for instance, invented a bamboo rig to obtain oil and gas, but only in the last 40 years has humankind been able to efficiently extract petroleum from beneath the seas - an achievement to rank with this century’s mightiest technological triumphs

Hopeful future lies ahead

Egypt’s economy has long been one rich in resources and potential, with the petroleum and gas field currently at the helm of resource development.

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U.S seeks less oil dependence from the Middle East

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MOC: Ten-year success story

By Tamer Abdel Aziz Sama Ezz Eldin

AOC hits a new discovery

Arabian Oil Company (AOC) announced a new commercial oil discovery in its acquisition area in the Gulf of Suez in the Northwest October field, after testing three layers of the well, which gave a positive result of crude oil.

It is expected that the three layers will produce 3000 barrels per day of oil. The first layer, Tiba, produces 350 barrels, the second layer, Al Moqtam, produces nearly 1200 barrels, and the third layer, Nukhl, produces around 1200 barrels of oil.

The cost of drilling the well reached up to $23 million, using the 2500 horsepower SantaFe-124 rig, owned by Transocean company, with a daily rent of $60,000.

It’s worth mentioning that The Egyptian General Petroleum Corporation (EGPC) and AOC inked the formal production-sharing contract of the Northwest October block back in 2005. AOC established AOC Egypt Petroleum Company (AEPCO) in October 2008 as a wholly owned subsidiary to move on with the project, and production is expected to be commenced by May 2012.

EGPC has a 50% stake in the block and AOC holds the remainder.

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Alamein to drill 8 new wells Alamein Petroleum Co. is preparing to start the implementation of this year’s drilling plan. The schedule for the operations include to drill three exploratory wells in the company’s acquisition area in East Alamein in the Horus field.

“We will initiate the drilling plan for this year by drilling three exploratory wells in the Horus field,Horus 15, 16, and 17,” said Al Sayed Moussa, Assistant President for exploration of Alamein Petroleum Co., in exclusive statements to Egypt Oil & Gas newspaper (EOG).

Moussa said that his company is trying to strengthen its drilling activities for this year, as the firm failed to drill any exploration wells last year. He added that Alamein carried out some

studies on the field tanks with a cost estimated by $260,000, after a seismic survey cost $60,000.

Moussa also added that the investments of these exploratory wells reached up to $8 million, which is the company’s method to keep the current production rate steady especially that the 3D seismic studies showed positive results of oil in that concession.

Alamein is also boosting its activities by signing contract to rent a Chinese rig to drill five exploratory wells in East Alamein with investments of $15 million, located 100 kilometers near Burg Al-Arab from the east and close to the north of Alamein.

It’s worth mentioning that Alamein Petroleum Company is a joint venture between EGPC and Vegas Company.

Qarun to drill two new wells in Beni Suef

Qarun Petroleum Company is in the preparation of drilling two exploratory wells in its acquisition area “Azhar Al Fayoum”, located in the governor of Beni Suef, with investments worth by $4 million.

The company has already planned to drill seven exploratory wells in the current fiscal year of 2009-2010 with investments estimated by $19 million.

“We drilled five exploratory wells in the beginning of the year, with investments cost of

$15 million,” said Abdul Khaliq Migawer, Assistant President for Exploration in Qarun.

Migawer pointed that his company is looking into placing these wells on the production line, after conducting 3D seismic survey, which showed positive results of crude oil.

He added that Qarun is boosting its drilling activities for this year after it was decreased in the fiscal year of 2008-2009, and only drilled two development wells with a cost worth by $5 million due to the global economic crisis.

MOC 2010 represented the venue where companies would meet and fruitfully compete for the sake of the progress of the Egyptian petroleum industry

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Interviews

Arshad Sufi’s first interview with an Egyptian newspaper ICE Brent Price

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Did you hear that?

Egypt Oil & Gas

Since the eruption of the global economic crisis, we have been estimating how far would our economy be affected.

Focusing on the petroleum sector, efforts made by experienced and inexperienced people to estimate the volume of this crisis’ effects have led to a state of chaos in the industry. Every other day, we receive information that certain company is to shut down its operations and leave the country, whether due to financial problems or to some bureaucratic regulations from the government side.

Since the beginning of this year, we received information about companies threatening to leave the Egyptian petroleum arena and withdraw their investments. “Did you hear that the American company is considering leaving the country? Did you know that a British firm is studying a plan to downsize of its operations in Egypt? Did you notice that the Minister is meeting up with top companies’ heads to convince them to keep their investments intact in return for more incentives and benefits from the Ministry side... etc”. This is a sample of the information we receive from our sources. Though most of the previously mentioned information has been denied by officials, we are still questioning the accuracy and credibility of this news.

Preventing such speculations can never be achieved, especially in such a dynamic sector as the petroleum industry.

Maybe the reason behind this increasing wave of rumors is due to the lack of a clear publicly announced plan to face the threats of the global economic crisis locally. “We have made our precautions to avoid/minimize the negative effects internally,” this is what have been mostly said by officials when asked about their strategy to face and cope with this credit crunch. But, did we study the possible threats to set the list of precautions? What are exactly the measures taken? How would we endure the state of economic instability? How would the country maintain foreign investments intact? No one knows exactly the plan. Consequently, the door is widely opened to more speculations and rumors to dominate the sector.

Recently, it was published in the daily Al-Akhbar Newspaper (a government-owned publication) that Shell Egypt employees held a strike in front of the company’s headquarters, asking for the full payment of their wages after it was announced that the Dutch company is to withdraw from Egypt and other parts in Africa and lay down thousands of workers. Having such news published in a national newspaper gets us back once more to pop up the question again: do major companies consider leaving the country? Hope this would be just another rumor!

Editor-in-Chief

Editor-in-Chief Yomna Bassiouni ybassiouni@egyptoil-gas.com Managing Editor Tamer Abd El-aziz tabdelaziz@egyptoil-gas.com Senior Staff Writer Ahmed Morsy amorsy@egyptoil-gas.com Reporters Sama Ezz El-Din Shady Ahmed Freelance Editor Olivia Quinn Clarissa Pharr Media & Statistics Monitoring Webmaster Ayman Rady Photographer Ahmed Hamad Business Development Manager Laila Solaiman Business Development Officer Nourallah Khaled Customer Service Coordinator Passant Fadl Senior Graphic Designer Ahmed El-Degwy Designers Ahmed Marzouk Cartoonist Ramy Ameen Administrative Assistant Basma Naguib IT Specialist Sameh Fattouh Production Advisor Mohamed Tantawy Accountant Abdallh Elgohary 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

June 2010 / Issue 42

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Egypt News

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Dana Petroleum: close to a new find Enel pairs with Egypt on exploration

Dana Petroleum prepares to unfold a new commercial discovery in the North Gebel ElZeit block, in the Eastern Desert.

The company is currently in the final phase of drilling operations using the 2000 hp rig, Weatherford-147.

Egypt Oil & Gas learned that, in case of confirming this discovery, Dana Petroleum would found a new joint with the Egyptian General Petroleum Corporation (EGPC) to hold the necessary operations at this concession or appoint the work to East Zeit Petroleum Company (Zeitco).

Last year, the UK-based producer announced its 235-million pounds drilling program in 17 areas, distributed in Egypt, Norway and Switzerland.

Dana Petroleum allocated $130 million investment for the company’s operations in Egypt this year.

“This is considered our largest investment, which represents nearly 35% of our total group investment internationally. 25% of our company production is generated from Egypt,” said Stuart Paton, the company’s Technical and Commercial Director.

“In the current investment climate, we study carefully the method and locations before

spending our money. But, Egypt is fundamental for us.” He added that the company is interested in the coming EGPC bid round, more than the one of the Egyptian Natural Gas Holding Company (Egas) as the later releases deep offshore areas that requires high expenditure, which the company cannot afford.

It is worth mentioning that Dana Petroleum lately announced the Papyrus-1X well gas exploration, located offshore Nile Delta in West El Burullus concession. Dana, GDF Suez’s partner, said that gas was flowing up to 33 million standard cubic feet per day during a drill stem test at Papyrus-1X, the well also test flowed about 442 barrels of condensate per day.

Petrogulf expands its Gebel El Zeit investments

“We are preparing to drill three exploratory wells and another for development in Gebel El Zeit, with estimate investments of $25 million,” AlShenawy Badr, Drilling Operation Manager at Petrogulf Misr, told Egypt Oil & Gas newspaper (EOG).

Badr highlighted that the company drilled six exploratory wells last year, with a total investment of $60 million. As for 2010 drilling program, Petrogulf plans to drill four exploratory wells in Gebel El Zeit concession, with total investments of $25 million. “The company is expecting a new commercial finding in this area after finalizing the survey tests that would be announced soon,” he added.

Petrogulf is in the process of constructing a marine platform in cooperation with PICO. The company is also searching for a new rig to carry on operations at the Gebel El Zeit concession, since that

Enel, represented by Massimo Sciancalepore, Head of Business Development, Upstream Gas Division, and the Egyptian Ministry of Petroleum, represented by Ashraf Rashed, Ambassador of Egypt in Rome, signed a cooperation agreement aimed at strengthening the long-standing strategic relationship between Enel and the Egyptian Natural Gas Holding Company (EGAS), dating back to 2008.

The involvement of foreign companies has a beneficial effect for the further development of the Egyptian gas sector and, to this extent, Enel and the Egyptian Ministry of Petroleum will cooperate to identify new areas for exploration and to evaluate potential opportunities for Enel to access other concessions, in addition to the one in the Nile Delta obtained in consortium with Total in May 2009.

Specifically, through this agreement, Enel could take part in the coming bid rounds to explore gas and crude oil in open areas and farm in an existing concession area either to replace present contractors or to share with them. Additionally, Enel and EGAS recently agreed to extend their cooperation in the Liquefied Natural Gas (LNG) sector in order to carry on the activities already identified by the respective Working Groups as well as to conduct joint studies, negotiate and exchange information with relevant parties and the authorities.

Along with this agreement Enel has already

s i g n e d last year a Memorandum of Understanding with the Electricity Egyptian Holding Company (EECH) aimed at improving the performances of Egyptian thermal power plants as well as at developing renewable energy. Within the framework of this MoU, Enel will provide EEHC with technological know-how to streamline thermal power plants, introduce more advanced maintenance systems and new training programs for technical personnel. Furthermore, the MoU is focused on the introduction of renewable energy generation systems, in particular the potential development of concentrated solar power.

The Egyptian Ministry of Electricity and Energy commits to assisting Enel, thus promoting its cooperation with local administrations, research centers and energy companies.

On May 13, 2009 Enel, together with Total, was also awarded the concession for the exploration activities in Block 4, in the offshore areas in front of the Nile Delta; the related Production Sharing Agreement was signed between the parties on the 16th of February 2010.

Egypt eyes more BP investments

the current 441-area rig rental period has ended.

Badr also told EOG that the company’s investments in Gebel El Zeit reached up to $110 million in 2009.

Badr ended his statements to EOG by assuring that Petrogulf aims to maintain its daily production steady.

Fahmy: $7.4 billion Egyptian Gas investments “The Egyptian service companies’ total volume of investments reached up to $7.4 billion, thanks to recent contracts signed to hold operations in 14 different countries,” announced Eng. Sameh Fahmy, the Egyptian Minister of Petroleum.

Fahmy said that during the last 10 years, these agreements added LE448 billion to the state treasury, of which LE373 billion provided financial support to the petroleum products and reflected its impact by meeting the local demand of petroleum products at prices far less than the cost of its production.

The Minister highlighted that the natural gas industry is complicated facing challenges on a global level, pointing to Egypt’s participation as a main founder in the Gas Exporting Countries Forum, held in Algiers last month, which discussed the problems of the gas industry, represented in the low gas prices that “became a mystery to all the producing and exporting countries”.

Fahmy added that the average export prices

of liquefied Egyptian gas during the period from April 2009 to March 2010 reached about $8.4 per one million BTU, compared to an average of $1.4 per one million BTU in the markets of Henry Hub in America, and an average of $30.4 per one million BTU, compared to an average of $25.4 per one million BTU in the markets of European Zeebrugge.

Furthermore, the average price of Egyptian gas exports during the same period through pipelines reached about $25.4 per one million BTU, he added. The natural gas export revenues contributed to a great extent in subsidizing the natural gas prices in the local market for various activities. He ended his comments by drawing attention the average price in the domestic market of $5.1 per one million BTU, the larger portion goes to the Electricity sector, which represents 55% of gas consumption.

As for other intensive industries, which represent 15% of the volume of consumption, gas is sold at a cost of $3 per one million BTU.

“The government aims stimulating BP into more drilling and exploration activities”, Dr. Ramadan Abul Ella, Head of Petroleum Department at Suez Canal University told Al Youm Al Sabea newspaper, commenting on the Ministry’s new agreement with BP. The Petroleum Ministry announced recently that it has made some changes to the old agreement with BP, which included working with the Production Share System, to start operating with the “Post-Investment” system.

Abul Ella said that this is the government’s strategy to meet the domestic growing need for gas, especially that BP operates in the deep water, known by its high exploration cost, and such amends would motivate BP to invest more in the area.

He also added that “Post-Investment” sys-

tem allows the foreign companies to explore for gas then sell the full production to the government, and that would stimulate other firms into the country. Besides, he pointed out the fact that Egypt is dealing with lots of countries with the Production Share system, as with Norway.

Abul Ella expected that other countries would go into discussions with the ministry to have the same adjustments in the agreements as BP. It is worth mentioning that BP persuaded the government into agreeing to make amends to the contract of its acquisition area in the Mediterranean Sea, which allowed BP to get the entire production of the north fields throughout the 20 years period of exploration and investment.

June 2010 / Issue 42

Petrojet wins first project in UAE

Eng Sameh Fahmy, the Minister of Petroleum, announced that the ministry is doing its best to give the support to the Egyptian companies in conduct projects outside Egypt. Engineering for the Petroleum & Process Industries (Enppi), the Petroleum Projects and Technical Consultations Company (Petrojet) and the Egyptian Natural Gas Company (GASCO) are among the companies, which won contracts in 14 different countries with investments worth $ 4.7 billion.

That came after the minster received a report from Eng. Fakhry Eid, CEO of Petrojet, that his company won its first project in United Arab Emirates. The project’s cost is estimated to be 220 million Egyptian pounds for establishing nine gas pipelines. In addition, Petroject will work on the water pipelines to the Habshan area, which is known for its Habshan 5 Gas Processing Plant. The project owned by Gasco Abu Dhabi.

Kuwait Energy hits seventh oilfield discovery

The Kuwait Energy Company announced a new discovery in Ras Qattarah block in the Egyptian Western Desert, which is the seventh find for the company.

“The oilfield was located in Diah-1 well where drilling began last February. The discovery is the seventh of its kind by the company and the fourth in this field since March last year,” said Sarah Akbar, Kuwait Energy Deputy Chief Executive Officer (CEO) and Managing Director, in a press release.

Akbar added that the field’s preliminary tests gave a result of 1,600 barrels per day (bpd), hoping for further discoveries to be made in Egypt.

Akbar Also said that Kuwait Energy is currently drilling another two wells in the area of Ras Qattarah and Burg Al Arab, pointing that the firm already finalized the agreement for exploration and production with the Egyptian General Petroleum Corporation (EGPC).

The Kuwaiti company share in the Eastern Ras Qattarah is estimated by 49.5%, after the company, in March 2008, acquired Oil Search Co in Egypt and Yemen.

Kuwait Energy is a private company that was founded in 2005 as an independent entity for exploring and producing oil and natural gas in the Middle East and North Africa and considered one the most growing companies in the Middle East.

Sea Dragon spuds Al Baraka #6 Well, Kom Ombo Sea Dragon Energy Inc announced that it has spudded Al Baraka #6 well in the Al Baraka Field, Kom Ombo Concession.

The Egyptian Chinese Drilling Company (ECDC) rig # 1, which has been contracted to drill up to 10 wells in the Al Baraka field spudded, the first well last month. ECDC rig #1 is a 1000HP drilling rig equipped with a top drive and is rated to10,500 feet and therefore capable of drilling and evaluating the Kom Ombo Basin entire geological section.

Al Baraka #6, Sea Dragon’s first appraisal well is proposed to drill up to 5,200 ft depth targeting the Abu Ballas and Six Hills “F” and “E” zones. An extensive coring and logging program is planned to adequately evaluate all the potential reservoirs. Once drilling operations at Al Baraka #6 well are completed the rig will move to Al Baraka #5 well located some 2 km to the northwest.

In NW Gemsa, Al Amir # 6x, the 7 inch casing was set at 11,084 ft. Drilling has resumed and the well has now reached a depth of 11,777 ft in the Lower Rudeis Zone. The plan is to drill and evaluate the Nubia Zone.

Said Arrata, CEO said, “We are delighted to commence our drilling program in Kom Ombo. The Al Baraka #6 well is the first of up to 10 appraisal wells planned to be drilled this year. We are also moving ahead with our planned seismic acquisition program expected to commence later this 2nd quarter. Further, results from drilling Al Amir 6X in NW Gemsa are expected soon”.

Sea Dragon Energy Inc paid Dana Gas Egypt Ltd. the sum of $28.48 million for its purchase of a 50% percent participating interest in the Kom Ombo (Block-2) Concession.

Sea Dragon had previously paid an initial instalment of $10 million to DGE in January 2010 concurrent with becoming the registered holder of the Kom Ombo Concession under Egyptian law. There continues to be a small balance due from the Company to DGE of approximately $3 million, which will be paid once all working capital and other adjustments have been finalized between the parties.

The aggregate purchase price for the Company’s 50% participating interest in the Kom Ombo Concession is approximately $41.27 million, inclusive of Sea Dragon’s reimbursement to DGE of approximately $4.0 million of Sea Dragon’s participating interest share of costs paid by DGE for the period after the effective date and prior to the closing date and inclusive of certain working capital adjustments of approximately $4.0 million. Under the terms of the acquisition, Sea Dragon is also responsible to pay approximately $4 million of DGE’s share of costs incurred after the effective date.

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Less traffic of oil & gas tankers in the Suez Canal

The traffic of oil and gas tankers passing through the Suez Canal in April have dropped, compared to the previous number recorded in March, said officials at the Suez Canal Authority.

Last month, 259 oil tankers, carrying 8,1 million tones, passed through the canal, which represents a drop of 50 oil tankers from March

2010, when 309 oil tankers, carrying 10,2 million tones, crossed the canal.

According to sources, a slight drop in the number of gas tankers was recorded as well; 64 gas tankers passed through the canal in April, carrying 7,041 million tones, compared to 66 gas tankers, with a capacity of 7,1 million tones in March.

Aegean adds to Egyptian assets with farm-in agreement

Aegean Energy, the only operator of Oil and Gas in Greece; after obtaining its first international exploration license in Egypt in December 2009 (East Magawish Block in the Gulf of Suez); announced a farm in agreement with Groundstar Resources Egypt (Barbados) Limited for a 70% working interest and operatorship of the West Kom Ombo (WKO) Block, located in South Central Dessert of Upper Egypt approximately, 100 km west of Aswan.

The transaction will take place in two steps; initially Aegean Energy will acquire the 60% interest currently held by Groundstar and subsequently Aegean Energy will obtain a further 10% interest from Groundstar upon completion of a transaction agreed in January 2010 between Groundstar and Karl Thompson Energy (KTE) to exchange Groundstar’s 20% working interest in the West Esh El Mallaha (WEEM) Block in Egypt for a 20% KTE in the WKO Block. The net interests in WKO upon completion of the above transactions will be Aegean Energy 70%, Karl Thomson Energy 20% and Groundstar

10% which will be carried by Aegean Energy through the first exploration phase. This agreement is subject to approval by the competent authorities in Egypt.

The West Kom Ombo Block covers an area of 31,520 km2 and is one of the largest onshore blocks in Egypt. An independent Resource Evaluation Report carried out for Groundstar

by Gustavson Associates in Boulder Colorado, resulted in a gross prospective oil resource estimate of 570 MMBO (P50).

Moreover, 699 km of 2D seismic data have been acquired and processed by Groundstar.

Aegean Energy’s working commitment includes drilling of 2 exploratory wells on the block by September 16, 2011.

Mathios Rigas, President and Managing Director of Aegean Energy commented, “After the acquisition of our first exploration license in Egypt in December 2009, we are delighted to add to our corporate portfolio of assets the West Kom Ombo Block. We will seek to advance operations in the area with an aim to drill the first exploration well in Q4 2010”.

Quotes “Egyptian service companies’ total volume of investments reached up to $7.4 billion, thanks to recent contracts signed to hold operations in 14 different countries” Eng. Sameh Fahmy, the Egyptian Minister of Petroleum “The oilfield was located in Diah-1 well where drilling began last February. The discovery is the seventh of its kind by the company and the fourth in this field since March last year,” Sarah Akbar, Kuwait Energy Deputy CEO and Managing Director “We are currently preparing to implement our drilling plan in the deep water in the Mediterranean” Eng. Taher Abdu Al Rihim, Operation Manager in Rashid Petroleum Company (Rashpetco) “Plans for the Al-Baraka oil field will include the drilling of some 30 development wells over the next several years.

Horizontal drilling and specialized fracturing are the techniques being considered in order to maximize production rates and oil recovery” Said Arrata, Sea Dragon’s Chairman and CEO, after the payment of 50% working interest in Kom Ombo Concession

International News

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RAK finds gas in Oman J. Ray McDermott maximizes Saudi

RAK Petroleum announced a gas finding in the Hamrat Duru-4 appraisal well in Block 30 onshore Oman.

The gas was found flowing at initial rates of up to 19 million cubic feet per day from the Shuaiba reservoir. RAK also reported flow rates in excess of expectation from the Natih A, C and D reservoirs.

Hamrat Duru-4 is the first appraisal well drilled to test the Shuaiba reservoir on the HamratDuru structure as the primary target. The well also tested the Natih A, Natih C and Natih D reservoirs as its secondary objectives.

The United Arab Emirates-based firm took over Block 30 after placing an offer to buy the London listed Indago Petroleum. The onshore block contains four dry gas fields, HamratDuru, Nadir, Al Sahwa and Hafar. Commercial discoveries in these fields could be exploited jointly with any discoveries that are made in Indago’s adjacent Block 47.

Aramco’s production

J. Ray McDermott, S.A. (J. Ray), a subsidiary of McDermott International, Inc, has been awarded a project to upgrade crude gathering and power supply facilities in Saudi Aramco’s Safaniya field. The facility, infrastructure upgrade and electrification project will help sustain crude oil production to meet Saudi Aramco’s maximum sustainable capacity targets for the field by 2013.

Steve Johnson, President and CEO of J. Ray said, “Innovative engineering, global procurement strength, installation by our new pipe lay barge LB32 in tandem with other vessels from our fleet, and our firm understanding of Saudi Aramco’s requirements enabled us to develop an execution strategy to deliver this significant project to meet the customer’s demands.”

The work includes engineering, procurement, construction, and installation – EPCI

– of a new tie-in platform (STP-20) with a 6,000-ton topside, a new electrical deck module for an existing platform (STP-18), a 53-kilometer, 42-inch trunk line, four new in-field lateral flowlines and valve skids, 156 kilometers of subsea electrical cable, and the modification and electrification of nine existing wellhead platforms.

Saudi Aramco has continuously employed groundbreaking methods and technology for the electrification of the Safaniya field, incorporating the largest power cables in the region.

Engineering design work will begin in the second quarter of 2010 with contract completion expected during 2013.

J. Ray has successfully executed Maintain Potential Projects for Saudi Aramco in the Berri, Marjan, Zuluf, Abu-Safah and Safaniya fields since the early 1980’s.

New technology ‘to boost Saudi recovery rates’

Saudi Oil Minister, Ali Naimi said that his country is aiming to boost recovery rates at key producing oilfields up to 70% through using a new technology.

“These scientific developments and applications will contribute to improve recovery rates by 50% overall, and by 70% in the Kingdom’s key producing fields,” Naimi said in a presentation to an industry event in Qatar, held last month.

Saudi Arabia, which has the world’s largest crude production capacity of 12.5 million bpd and home to the world’s largest oilfield “Ghawar”, pumped around 8.25 million barrels per day in April, according to a Reuters survey.

“Yes, there is balance between supply and demand,” added Naimi, commenting on the global oil markets, on the sidelines of an energy conference.

Qatar Petroleum, Shell & Petrochina sign E&P deal

Qatar Petroleum on behalf of the Government of the State of Qatar has signed a new Exploration and Production Sharing Agreement with Shell and PetroChina Company Limited for Qatar Block D. The agreement was signed in Doha by His Excellency Abdulla bin Hamad Al-Attiyah, Deputy Prime Minister and Minister of Energy and Industry, Peter Voser, Chief Executive Officer of Royal Dutch Shell plc, and Mr. Zhao Dong, Chief Financial Officer of PetroChina International Investment Company Limited.

Under the agreement, the partners will jointly explore for natural gas in Block D. Block D covers an area of 8,089 square kilometers onshore and offshore Qatar and is located close to Ras Laffan.

The Block D concession is for pre-Khuff

geological intervals. The overlying Khuff horizon contains the super-giant North Field. Part of the Block D concession extends beneath the North Field.

The total term of this agreement is 30 years and starts with a five year First Exploration Period. During the exploration period, Shell and PetroChina will implement a work program including exploration technical studies, 2D and 3D seismic acquisition, processing, re-processing and interpretation, and drilling a number of exploration wells to the pre-Khuff formation.

Shell, as operator, will hold a 75 per cent equity share with PetroChina holding a 25 per cent share.

In a success case, Shell and PetroChina will produce the natural gas under Qatar Petroleum’s supervision. Under the agreement QP will be the off-taker of any potential gas produced .

His Excellency Minister Al-Attiyah said:

NPCC wins $560 million Qusahwira job

ADNOC, Abu Dhabi National Oil Company, announced the signing of a $560.4 million oilfield development contract with the UAE’s National Petroleum Construction Company (NPCC).

The onshore division of state-run company said the project is to develop infrastructure at the Qusahwira oilfield, and building an oil gathering system and a pipeline to the Asab field, as ADNOC aiming to boost its output capacity to 1.8 million bpd from around 1.4 million bpd.

It’s worth mentioning that NPCC beat six

other bidders to the field, which is located south east of the UAE’s capital Abu Dhabi.

“This new agreement is part of QP’s plans to implement the wise policy and guidance of HH The Emir, Sheikh Hamad Bin Khalifa Al-Thani, to increase the country’s hydrocarbon reserves base, oil and gas production potential and further strengthen Qatar’s economy. This is the second Qatar agreement dedicated to exploring hydrocarbons from the deep pre-Khuff reservoirs. QP is also preparing for ad- in the near future. Shell is a major investor in the development of ditional pre-Khuff reser- Qatar’s proven gas resources. I am delighted that they will now invest voir exploration tenders in exploration. Also, I welcome PetroChina a new investor in Qatar.”

CROSCO mobilizes additional workover rigs to Oman

CROSCO Integrated Drilling & Well Services Co., Ltd. announced that two additional workover rigs, CROSCO Cardwell 9 and CROSCO Cardwell 10 have been mobilized to Oman. Both workover rigs will be made available to CROSCO’s joint venture company in Oman (MIDWESCO) for workover and field maintenance services.

Currently, MIDWESCO is providing workover and field maintenance services with four CROSCO workover rigs (Skytop 4, National 1, Cardwell 11 and Cardwell 13) as well as slickline services with two CROSCO highly mobile wireline crane units.

DrazenHerak, Midwesco’s General Manager explained, “With the arrival of the two CROSCO workover rigs, Midwesco currently has available in Oman two CROSCO workover rigs and three CROSCO slickline units. We are prepared to commence work with the available workover rigs and slickline units. In Oman, we have a well-equipped maintenance base and excellent maintenance staff and personnel. We maintain a sizeable inventory of spares and replacement parts.

Plus we have both an effective Preventative Maintenance System and QHSE management systems in place.”

Total fires up 2nd Yemen LNG Train Total announced that the second train of the Yemen LNG natural gas liquefaction plant has started production. Combined with liquefied natural gas (LNG) production from the first train, commissioned on October 15, 2009, it will enable the Yemen LNG plant to reach its full capacity.

“The commissioning of the second Yemen LNG train ahead of schedule represents another major step in the history of our partnership in Yemen, where we have been present for over twenty years” said Yves-Louis Dar-

ricarrère, President of Total Exploration & Production. “I would like to thank our project teams for their commitment, hard work and constant attention to industrial safety. Thanks to them, the first liquefaction train had reached its plateau production very quickly. This start-up will cement Total’s position as a top-tier global LNG producer.”

The total investments of this project count for $4.5 billion, the biggest project ever made in Yemen. A 320-kilometre gas pipeline carries feed gas from Block 18 in central

Yemen’s Marib region to the Balhaf liquefaction plant on the country’s southern coast.

With the startup of the second train, total production capacity reaches 6.7 million tons of LNG per year, equal to a hundred cargos to be delivered each year over 25 years. Since the start-up of the first train,18 cargos have already been delivered to South Korea, the United States, China, Spain and Mexico.

Total is the main shareholder in Yemen LNG, with an interest of 39.62%, alongside state-owned Yemen Gas Company (16.73%),

Hunt Oil Company (17.22%), SK Energy (9.55%), Korea Gas Corporation (6%), Hyundai Corporation (5.88%) and Yemen’s General Authority for Social Security and Pensions (GASSP, 5%).

June 2010 / Issue 42

Application & Coating Defects ADHESION FAILURE Description: Probable Causes: Prevention: Repair:

Paints fails to adhere to substrate or underlying coats of paint.

Surface contamination or condensation.

Ensure that the surface is clean, dry and free from any Contamination and that the surface has been suitably Prepared. Use the correct coating specification.

Depends Upon the extent of adhesion failure. Removal of Defective areas will be necessary prior to adequate Preparation and application of correct coating system to Manufacturer’s recommendations.

BLISTERING Description:

Probable Causes:

Prevention: Repair:

Dome shaped projections or blisters in the dry paints film Through local loss of adhesion from the underlying surface.

Blisters may contain liquid, gas or crystals.

Localised loss of adhesion caused by contamination with Grease, oil, salts, rust, trapped moisture, retained solvent, Hydrogen vapour pressure (on coatings used with cathodic Protection), soluble pigments etc. Osmotic blistering can Also occur in immersed conditions.

Ensure Correct Surface preparation and application. Apply A suitable coating system.

Depending upon size and type of blistering, remove Blistered areas or entire coating system and repair or fully recoat.

7

Downstream

8

Egypt and China to join refinery forces The Egyptian Ministry of Petroleum signed an agreement with China to build a new $2 billion refinery, which will have its affect on the oil industry in Egypt. “Signing this agreement with China to build a refinery could not pick a better time. We are now on the right track, especially that our current refineries lack the technologies that being used in other countries,” an official in the petroleum sector told Egypt Oil & Gas newspaper (EOG).

He added that the nine refineries operating in Egypt now are mostly producing Mazut and Solar, but the new refinery, to operate with the two stages system, will provide up to 30 million tones of petro-

leum products and decrease the country’s imports from other countries, which would decrease the bill of importing products at high prices from the foreign partner.

According to the terms of agreement, the refinery will be operated under the B.O.T system through which Egypt will fully own the refinery after a 25-year period. “Most of the developing countries operate with the B.O.T system in order to avoid the high cost of initiating private refineries with modern technologies that need major investments,” answered the source when asked about his opinion concerning this ownership condition.

“Our production is rising, however it is not parallel to the continuous increase of

Chevron and GreenGulf to study solar energy in Qatar Chevron Qatar Energy Technology QSTP-B, an affiliate of Chevron Corporation, and GreenGulf Inc. QSTP-B (GreenGulf), a Qatar-based renewable energy and clean technology company, announced the signing of a memorandum of understanding for a joint study to test solar energy technologies and their application in Qatar.

The project will collect and evaluate the data provided by technologies to be located at a 35,000 square meter solar test site at QSTP. The project will also study the performance of different photovoltaic and solar thermal technologies.

Under the memorandum of understanding, Chevron and GreenGulf will each invest up to $10 million in the study program, with Chevron’s investment part of an initial $20 million commitment to QSTP. Technology tests are expected to commence in late 2010 and continue for two to four years.

Omran Al-Kuwari, CEO of GreenGulf Inc, said, “We see solar as potentially an important part of the region’s future energy mix. Together with energy efficiency, we need to identify appropriate technologies and applications and demonstrate that they are sustainable solutions. GreenGulf’s joint study with Chevron provides a strong foundation on which to build that knowledge and ensure that we are updated on this rapidly moving industry.”

Carl Atallah, Vice President of Chevron Qatar Energy Technology, said ‘Bringing together parties with appropriate strengths is the key to successful projects. Chevron’s technical expertise, GreenGulf’s entrepreneurial vision and Qatar Foundation’s science community at QSTP bring together excellent resources for studying solar energy. Chevron is proud to take a lead technical role in this study on sustainable energy in Qatar.”

In February 2009, Chevron announced that it would establish its Center for Sustainable Energy Efficiency (CSEE) at QSTP and is now in the process of building out the Center.

Through the CSEE, Chevron supports Qatar’s goal for energy sustainability through research, demonstration and training of solar power and energy efficiency technologies. The Chevron CSEE will identify solar power, solar air-conditioning and

local demand. That is why the ministry is always busy trying to satisfy the citizens’ needs,” he commented when asked about the main goal of founding such refinery with China. He also said that it would bring more foreign investments to the country, and that would support the movement of exploration too.

Eng. Sameh Famhy, the Egyptian Minister of Petroleum said that Egypt would hold 10% share at the beginning of this project that will be paid from the revenues attained during operation phase. Then, after 20 years, a 41% ownership share will be transferred to Egypt, while the remaining 49% share will be gradually given to the

By Tamer Abdel Aziz Sama Ezz Eldin Egyptian side during the last five years of the agreement.

Fahmy assured that the 25-year period is too short compared to other petroleum projects, such as the refinery of Al-Nasr Petroleum Co. at the Suez governorate, which has been held for 100 years, and still operating effectively and partially supplying the needs of local market thanks to the regular maintenance of equipments.

“The new Egyptian-Chinese refinery will be constructed at the Al-Nasr Petroleum Co. properties in order to utilize the existing facilities, which reflects the trust in the capabilities of this 100-year refinery,” said Fahmy.

building efficiency technologies that work best in Middle Eastern conditions. The Center is scheduled to open in mid 2010.

Google invests in two wind farms Now big companies are going green and proudly proclaiming it too from rooftops. Google Inc has invested $38.8 million in two North Dakota wind farms. This is the first direct investment by Google in utility-scale renewable energy generation.

These two wind farms produce 169.5 megawatts of power that can light up around 55,000 homes. Designed by General Electric and created by Next Era Energy Resources, they generate power from one of the world’s richest wind resources in the North Dakota plains. There is no need to lay down extra infrastructure for the two wind farms. Current transmission facilities are able to transmit power to the nearby areas.

Google’s official blog claims, “Through this $38.8 million investment, we are aiming to accelerate the deployment of renewable energy — in a way that makes good business sense, too.”

Earlier, Google Inc has invested in companies, which are developing new technologies in the area of solar, wind and geothermal power.

Google’s stakes in the wind farms are in the form of “tax equity” investments. This way Google will be able to avail the benefit of use federal tax credits provided by the Government.

According to this incentive, the investors also take over a project and use federal tax credits to offset their own taxes as a return.

According to NextEra they sold about $190 million of Class B membership interests in the two wind farms. Now Google’s stake is around 20% of the Class B shares. The companies are not talking about the other investors currently. While Google’s NextEra investment doesn’t include to help in future expansion of the company but they hope that their investment would help in establishing additional wind power projects.

The power production from the wind farms would be sold to utilities under power purchase agreements. A Google spokesman claimed that their data centers would not be using the power generated by wind farms.

The wind farms are willing to experiment with new technologies. They want to go for the cutting edge turbine technologies and new kind of the control systems that can continuously monitor output from every turbine and always adjust individual blade angles to improve efficiency.

They would also use the blades that are 15% larger on the usual turbines.

Studies

9

All lies in the infrastructure Connecting more residential, commercial and industrial units to the natural gas grid should be met with an appropriate expansion plan to provide the adequate infrastructure to accommodate the new customers. Though the Ministry of Petroleum is carrying a major part of this heavy burden, the contribution of private sector has been a factor contributing to the implementation of this national plan

By Yomna Bassiouni Back to 1997, the Egyptian government decided to engage the private sector in its national plan to develop and expand the country’s distribution network.

Since then, the private sector has been building and operating gas networks as private Local Distribution Companies (LDCs). The Egyptian General Petroleum Corporation (EGPC) signed franchise agreements with private investors to develop the distribution network in specific concession areas and connect them to all customers for 20 years. This decision changed the gas distribution sector in Egypt that used to consist of one state-owned monopoly operator and allowed private LDCs to work under the EGPC guidance (and later Egas) and receive compensation for their investment over a five-year period.

From 1997 to 2000, the original compensation set for the connection of each residential unit counted for 2670 egyptian pound (EGP). This sum has been reduced to EGP 2500 (the Ministry of Petroleum pays EGP 1000, while the customer pays the remaining EGP 1500 over a 10-year period).

Currently, there are two state-owned companies, Egypt Gas Company (80% government owned) and Town Gas Company, in addition to 10 privately owned LDCs, which are: National Gas Company (El Sharkeya Governorate and 10th of Ramadan City), Natgas Company (6th of October city and parts of Alexandria), El Fayoum Gas Company (Upper Egypt), Repco Gas (Damietta), Nile Valley Gas Company (Upper

Egypt), City Gas (Suez Governorate), Transgas (Kafr El Sheikh), MEGAS, Cairo Gas and Aqalim Gas. The last two companies are subcontractors to Town Gas Company.

Besides, there are another four companies that have been qualified to enter the market as local distribution companies, which are Modern Gas, Fagr, Arab Contractors and MY Gas. Engaging the private sector has not been the sole attempts of the Ministry of Petroleum to serve its expansion plan of the natural gas distribution infrastructure. The Ministry committed to connect six million residential units country-wide by 2011, which was later amended to 5.5 million by the year of 2014. In august 2008, approximately 2.9 residential units were connected to the distribution target, according to Egas reports.

The vitality of such expansion plans lies in mitigating the country’s risk against rising oil prices as the current levels of government allocated subsidy for liquid fuels could not be sustained with the rising demand on oil resources.

Moreover, expanding the natural gas infrastructure beyond its current size to reach new areas such as Upper Egypt is a main supporter for the much-needed economic development for this area through industrial development and increased investment.

Obstacles challenging expansion plans - Installation cost: the EGP 1500 connection fees paid by consumer is sometimes a burden on low-income consum-

ers that consume a lower volume of fuel. At lower consumption levels, it is not sufficient to fund the cost of a new connection to the gas distribution grid, despite the fact that there is an annual fuel cost saving by switching from LPG to natural gas.

- LDC Connection incentives: the incentives for LDCs to connect commercial and industrial customers are based on gas consumption, which is a different mechanism than that of residential customers. Therefore, connecting residential customers to the grid is less desirable for LDCs due to the low incentive. Therefore, this mechanism needs to be modified by increasing the benefits of conversion to the government from LPG subsidy saving, which would by its turn justify the increased incentives to LDCs. - Challenges of development: there are various challenges facing the development phase, which are: current LDCs are limited and would not be able to provide all the needed work resources, traffic challenges resulting from road inconveniences due to network installations and finally, gas has not been delivered to the full region of Upper Egypt, hence less there will be less natural gas applications to optimize the economics of infrastructure development.

To sum up, the speed by which the Ministry aims at developing the natural gas distribution grid causes some challenges that could hinder the plan execution. Yet, these barriers can be dealt with, if the development plan for each

region is well studied and included into an overall implementation strategy.

Throughout the past six months, this series of “All lies in the infrastructure” shed the light on the vitality of developing and continuously upgrading Egypt’s infrastructure for energy resources, which is a key factor that completes the scheme from production to distribution phases. Egypt is characterized by being one of the largest oil and gas infrastructures in the continent of Africa, especially in the segment of transportation. That is the reason why the country developed an extensive pipeline system for natural gas and liquids transportation to meet the increasing demands and cover every corner of Egypt. In addition, the country is considered as a vital natural gas exporter due to its transmission pipeline systems as well as the Liquefied Natural Gas (LNG) facilities situated on the coast of the Mediterranean Sea. This gas infrastructure has been extended and upgraded on regular basis to serve the national plan of expanding gas utilization in the residential sector. The government aims at increasing the number of citizens benefiting form gas by connecting them to the national gas distribution grid. This national plan is not only a way of better utilizing and efficiently allocating our energy resources, but it also brings economic prosperity and more investments to many forgotten areas such as Upper Egypt by connecting it to the natural gas grid and providing the needed energy.

Infocus

10

Drilling For A Better Future Drilling for oil and gas has occurred in one way or another for hundreds of years. The Chinese, for instance, invented a bamboo rig to obtain oil and gas, but only in the last 40 years has humankind been able to efficiently extract petroleum from beneath the seas - an achievement to rank with this century’s mightiest technological triumphs

By Tamer Abdel Aziz Sama Ezz Eldin

Locating an oil and gas “trap” - as it is known - and extracting the oil and gas is difficult enough on land. But offshore, in deep and often stormy waters, it becomes an awesome undertaking.

Potential traps are identified by analyzing seismic survey data, but whether they contain oil or gas will not be known until a drill bit penetrates the structure. Directing the drill bit to a precise location - perhaps several kilometers away - requires sophisticated technology. A navigation device, installed above the drill bit feeds back information, enables the exact position of the well to be measured and monitored. A steerable motor within the drill pipe can be remotely controlled to adjust the direction of the drill.

Drilling through our Egyptian fields, we will find too many changes occurred to the drilling industry. Eng. Osama Ismail, Senior Drilling Engineer at The Gulf of Suez Petroleum Company (GUPCO) told Egypt Oil & Gas newspaper (EOG) in exclusive statements that his company used a new rig “Ben Nives” in the October field, at the end of last year. This 2000-hp rig, owned by Pyramid Drilling International (PDI), was used to drill and develop the wells in the October block, located in the Gulf of Suez.

Ismail added that GUPCO drilled three Petroleum Company (EGPC) and responwells in the area of Sinai, operating with sible for Oil and Gas production in the the Nafta-1 rig.

Gulf of Suez, the Western Desert and the The company is also planning to rent Nile Delta, also implements the “Rotary the Super Rig to drill in its acreage in Steerable” system, a new form of drilling NS377 in Gulf of Suez, which is operat- technology used in directional drilling ing for the first time as a land rig and will and employs the use of specialized downexpand into the Gulf to a three and a half hole equipment to replace conventional meter length, having the tankers placed directional tools such as mud motors. in the Gulf waters. The daily rent of this The drilling system designed to drill di3000-hp rig is estimated by $150,000. rectionally with continuous rotation from “GUPCO is operating with the latest the surface, eliminating the need to slide drilling technologies, represented in the a steerable motor. The advantages of successful implementation of the “Stress this technology are many for both main Cage” mechagroups of usnism,” said ers: geosciGUPCO plans to drill 27 new entists and Ismail. Stress Cage is de- wells, of which five are explora- drillers. Conpendent upon tinuous rotatory and 22 development the use of aption of the drill propriate constring allows structive drillfor improved ing practices transportaand avoidance of detrimental practices, tion of drilled cuttings to the surface rewhich may destabilize the stress cages, sulting in better hydraulic performance, and help in reducing mud loss. The com- better weight transfer for the same reapany has been maneuvering with that sys- son allows a more complex bore to be tem for nearly two years now, through the drilled, and reduced well bore tortuosity companies like MISWACO and AMEC. due to the utilization of a steadier steerGUPCO, which is a joint venture ing model. The well geometry therefore owned by BP and The Egyptian General is less aggressive and the wellbore (wall of the well) is smoother than those drilled with motor. This last benefit concerns to geoscientists because the measurements taken of the properties of the formation can be obtained with a higher quality.

Targeting best qualities, GUPCO deals with major companies for rig renting. Its current fleet consists of four 2000-hp rigs owned by Transocean, another two 2000hp rigs and one 1500-hp rig owned by the Egyptian Drilling Company (EDC) and another 200-hp one owned by Pyramid Drilling International (PDI).

Besides, GUPCO selects different service companies for specific services, such as the logging services provided by Schlumberger, direction-drilling technique by Baker Hughes, fishing service offered by Premier Oilfield Services, while Halliburton provides Salt Cribbing (cement for avoiding drilling loss), Lightweight Cement service (implemented in depleted reservoirs) and the

SP1 HW System (enables the drilling of two wells in the same conductor).

The year of 2009 symbolized best drilling results for GUPCO in the Western Desert. A total of 10,000 feet were drilled in 12 days only, which was nine days ahead of the usual 21-days of drilling. Such speedy improvements is one of the main factors that contributed to the quick placement of the placing the well on production line and led to the increase of daily output from the Western Desert to 15,000 barrels per day (bpd).

“GUPCO is planning to drill 27 new wells, of which five are exploratory and 22 development,” added Ismail. In addition, it will operate a Fix Well operation on nine wells.

It is worth mentioning that GUPCO’s investments reached up to $130 million for the current fiscal year, as the financial year for BP starts from January 1st and ends on December 31.

Another success story goes to the Belayim Petroleum Company (Petrobel).

Mohamed Alshabrawy, Drilling Operation Manager, highlighted that drilling is the mandatory base for any petroleum sector and through which, companies work hard to maintain their daily production.

“Petrobel is ranked first in Egypt in terms of the daily oil and gas production volume… a total of 500,000 barrels of oil equivalent per day (boed),” clarified Alshabrawy.

“Petrobel’s main goal for the upcoming period is to expand its drilling activities, trying to catch up with the same rate of 2009. This plan comes with certain time table and rules, aiming to reach the best fiscal results,” Alshabrawy told EOG. He pointed to the fact that his company is planning to drill 35 development wells during the current fiscal year of 2010– 2011, in addition to the drilling of nine exploratory wells; four in the Delta, two in the Mediterranean, and the remaining three wells in the Gulf of Suez.

He emphasized on Petrobel’s drilling plan, that it drilled wells in the Deep Water after founding platforms with the length of 360 meters off the surface.

June 2010 / Issue 42

11

Also, the company will be producing large amount of gas from those areas, as the test results showed positive existence of natural gas.

Petrobel, two of them operate in the Mediterranean with a daily rent of $ 97,000 and $ 120,000, though both operate with the same horse power of 3000. The other two rigs operate in Gulf of Suez in Abu Redis filed, one Petrobel aims to drill 35 de- is a “Jackup” with a daily rent of $ 55,000 and 2000 hp, the velopment wells during the cur- 4rth is 2000 hp and rented by rent fiscal year of 2010–2011, in $112,000.

• Petrobel is also in business addition to the drilling of nine with Sino-Tharwa Drilling Company, which offers three exploratory wells of its rigs for Petrobel’s concessions in the Gulf of Suez.

Two of which are a 2000hp land rigs, with daily rental cost of Alshabrawy said that his company op- $13.500. The third is a 600-hp Workover erates with the latest drilling technolo- rig, operating in the Balayim filed with a gies, whether drilling or service tools. daily rent of $4800.

The company is looking into service • Weatherford Drilling Internationcompanies that offer new methods of al Company offered two of its rigs to drilling, which helps to drill 15 wells Petrobel. WDI 94 rig operates in the at the same moment instead of just one, Delta area with a 2000 hp and daily rent and being drilled from a stable point as of $10,500. The second is WDI 147, a an alternative of moving the rig from Workover rig operating with a 550 hp and time to time. These types of technolo- daily rent of $4500. gies enable the horizontal drilling (90 • Atlantic Drilling Company, the final degree) of wells are drilled with 90 de- firm in the list to offer one of its rigs to gree horizontal.

Petrobel. Medstar Jackup rig operates He pointed to another technology that in the Gulf of Suez with a daily rent of Petrobel utilizes in drilling, the Echo $88,000 and 2000 hp.

Scope, which provides instant and upPetrobel’s budget of the fiscal year dated information about the oil and gas of 2010-2011 is estimated at $300 milin the well. This technology is considered lion. The company still in the process of one of the latest in the drilling industry, coming up with plans to cut down costs characterized by its effective cost reduc- through the usage of latest technologies, tion by an average of 30-40%. as it announced during the 2010 MediterAlshabrawy also pointed out that ranean Offshore Conference & ExhibiPetrobel deals with international service tion (MOC). firms, signified by Schlumberger, HalliIt is worth mentioning that Petrobel burton, and Baker Hughes. was able to save up to $50 million from The number of the working rigs in the the drilling bill of the current year, due to Petrobel’s concessions areas counts for the decrease of rigs prices resulted from 14 rigs, divided as the following: the global economic crisis.

• EDC comes on the top of the list with Eng. Taher Abdul Rehim, Operation four operating rigs; one in the Mediterra- Manager at Rashid Petroleum Company nean (a 3000-hp Maersk Endurer rig with (Rashpetco), said that his company is a daily rent of $115 thousand), another in preparing to drill in the Deep Water of the the Gulf of Suez (Zoser rig of 2000 hp Mediterranean with investments reached comes second in the list with a daily cost up to $3 billion. The company’s drilling of $52 thousand), EDC RIG 5 (a 3000- plan is scheduled to start by next month hp land rig and a daily rent of $13.500), and would last for four years.

EDC Rig 2 (a 900-hp workover rig and a “We are preparing to implement our daily cost of $5 thousand). drilling plan in the deep water in the • Transocean the world’s largest off- Mediterranean,” Abdul Rehim told EOG. shore drilling company offers four rigs to Abdul Rihim added that this plan in-

Drilling Schedule

cludes the drilling of 24 exploratory wells in the period of time that ends by EOG also learned that the Ministry is 2014, in the area of the Mediterranean. planning to drill 86 wells with investBesides, he pointed that Rashpetco raised ments reached up to $5 billion, each the investment volume to reach up to $3 well drilling costs around $6.5 million. billion from $700 million last year.

As for the joint venture companies, they He also added that Rashpetco, a joint are planning to drill 434 wells with inventure company between EGPC along vestments reached up to $2 billion. with BG, and the Malaysian Petronas, EGPC is would start concentratthe phase of this year Over the past two years, the ing development on the Eastoperations in number of wells drilled was ern Desert, the West Delta of concession to reduced due to the global eco- Gulf Suez, the develop three nomic crisis, in the fiscal year of M e d i t e r r a wells (D1, D4, nean, and and D5) in the 2007-2008, which saw 562 wells the Sinai West Delta area comes drilled, and 642 wells drilled in Deep Marine last. ( W D D M ) , 2008-2009 The drillwhich were ing comdiscovered this panies in year, after concluding the current 3-D Egypt are divided into two types deseismic research. This $120-million depending on the type of rigs it supplies, velopment phase is scheduled to start b whether land or marine. These comy the beginning of this month and end panies are represented in Transocean, by the end of this year. The company Pyramid Drilling International (PDI), will also drill eight wells in the Deep Diamond Offshore Drilling, Atwood Water of West Delta.

Oceanics, Somaser, Weatherford, SiLooking back at the past two years, the no-Tharwa, and the Egyptian Drilling number of wells drilled was reduced due Company. to the global economic crisis, in the fisAs a matter of fact, the daily rental cal year of 2007-2008, which saw 562 cost differs depending on the type of rig. wells drilled, and 642 wells drilled in For instance, the rental cost of offshore 2008-2009. rigs counts for an average of 50 to 373 At the beginning of this year, the Minthousand per day, while the average for istry of Petroleum announced that it is land rigs is 9-15 thousand per day. going to drill 520 new oil wells, and 36 Installed technology is another main new gas wells. factor in selecting the appropriate rig for each drilling operation, for instance, offshore drilling requires high techniques necessary to avoid the threats of this type of drilling. For instance, due to high waves and wind conditions, a marine rig owned by GlobalSantaFe Corporation, years before it was acquired by Transocean, was swept away to the Israeli’s shore, and after it was safely returned to the Egyptian shores, the Ministry suspended all operations held by this rig.

This is the reason behind the continuous efforts made by the Ministry to work closely with companies that supply the latest technologies, whether in the onshore or the offshore drilling.

Interview

12

BG investments counted for 12% of Egypt’s total 2009 FDI “I am in the right place, at the right time,” described Dr. Arshad Sufi the timing of his appointment as the new President and General Manager of BG Egypt, earlier this year. He believes this is an “exciting time” for investment, future projects and education. Holding a Ph.D in petroleum engineering from Stanford University and distinguished by a splendid resume that includes diverse work experiences in the U.S.A, Canada, Trinidad, Egypt, Qatar, U.K, Nigeria and Oman, the new president bears the mission of maintaining and developing BG activities in the country. Dr. Sufi shares his views and discusses the current and future plans of BG Egypt

By Clarissa Pharr

This is not your first time working and living in Egypt. How would working here compare to your extensive experience with the oil and gas industry abroad?

This is in fact my third time coming back here to Egypt; I have drunk water from the Nile River I suppose... Egypt is very dynamic, of course, it is a major economy that is growing very rapidly and to be an integral part of that is very exciting actually. It is not always easy to see how [Egypt’s market] feels compared to others, because it depends on the position that the company is in.

How would BG Egypt compare to other regions?

BG Egypt produces, or is associated with, 40% of the gas produced in Egypt.

Given that it is such a large amount, you are, in all aspects, dealing a lot more with different entities as you go along. Compared to somewhere not producing that much gas, you are exposed to a more isolated piece of the business. BG Egypt is a production site. We supply to domestic, we export supplies and supply for the export market as well. This combination puts us in a very integral role, joined up with what the government is doing.

How would you characterize the investment climate; i.e. the level of investment, quality of opportunity, risk, etc, in Egypt?

Well, with our partners, we have invested $7 billion to date in Egypt. We are one of the largest British investors and have contributed extensively to the foreign di-

rect investment in Egypt. Last year alone, our investments accounted for over 12% of Egypt’s total FDI in 2009. We are planning to spend another billion this year. We have been a major investor, and Egypt is very pleased to have us as an investor.

Would you place BG at the leading head of investors in your field?

Well, we are certainly one of the more important companies here, in the oil and gas sector, at this stage.

What are the future drilling plans for BG?

when we will be drilling the wells. The strategy is evolving, as we plan.

What is the time frame for these drilling projects?

Normally, it would take about 2-3 years.

We look at some projects to be carried earlier, others carried later, but that is the current [time] period. For example, for the new concession that we have got, we need to acquire more detailed seismic work over that acreage, which then we need to interpret. Such study phase will take about

With our partners, we have invested $7 billion to date in Egypt

We can break it into two areas.

One of them is the development of our current two concessions: West Delta Deep Marine (WDDM) and Rosetta. The phase I have mentioned earlier about the billiondollar investment includes the installation of an onshore booster compressor and a pipeline. There are phases beyond that, which we will need to develop technically.

These are deep-water wells. We will drill these wells to continue producing gas at a certain rate.

Also, there are exploration wells; we have three concessions that are termed exploration concessions right now; El Burg Offshore, El Manzala Offshore, and North Gamasa Offshore, the latter of which we won last year, and signed the concession agreement for this year.

We are currently looking at our exploration strategy for these; as to which and

a year, after which we can start planning the wells t h e m selves.

These wells are

quite challenging, especially if you are going for deeper horizons, so we must spend [a good deal of] time in the planning phase. So, it is a 2-3 year horizon we are looking at.

But of course the development wells are more ongoing, and underway.

Back to investment, do you feel the climate in Egypt is encouraging right now? Are the obstacles significant for most investors?

To what extent has the industry been affected by the financial crisis?

Well, the financial crisis happened...if you look at the business that we are in, we drill and produce gas predominantly over here. Part of that goes into the domestic market, and part into the export market.

Those are basically assigned and fixed contracts where the product will be taken, even when the market prices might fluctuate a little bit. But, we are kind of buffered from the larger fluctuations that will happen here. So, in general, it was not really affecting [us] much.

Are BG’s investments mostly concentrated in the Mediterranean region?

Yes. It is predominantly offshore in the Mediterranean area.

Are there any plans or opportunities to expand elsewhere?

Not at the moment! I think there is enough there, we do not have reason to look elsewhere. At this stage, the focus remains in this area. Because a lot of these do require a lot of focus to sort of bring in the right technology to maximize hydrocarbon recovery from those areas. So our focus remains fixed.

Moving on to policy, what do you think about the recent debate concerning the EGPC’s contract No, I would not say there are obstacles. policy regarding foreign partners?

This is a very focused business, where you drill, you find hydrocarbons, you produce them, and they are supplied into a very dynamic market. In this context, it is a good place to be investing in Egypt.

These are very standard contracts. You take concessions, you bid them out, it is a very transparent process. Companies bid a certain amount of signature bonus and work commitments. And then you nego-

June 2010 / Issue 42 tiate; and the party that is bringing the largest benefit to Egypt is awarded the contract.

The risk of all of that is taken by the party that is actually investing. So, it is a standard model used around the world, which has been very successful worldwide, and very successful in Egypt. So policy-wise, it is a model that has worked.

which means great potential. The rate of growth will continue, and to help propel that, you need energy. So, a growing market is always a good place to be.

Given the fact that we have worked so well with the ministry, with our partners, and with the government, to reach the point that we are at now, we hope to be part of the solution for Egypt’s ongoing energy needs.

you have. If it is oil, you can sell it in the world market. If it is gas, it is more focused, and depends on availability, and how close the market is.

Yes. Right now in BG Egypt, we have around 400 employees; and more than 90% are Egyptians. Of course, we have got a very capable staff, coming into the system and gaining more experience. In the past, there was the perception that a lot of people would go to the Gulf for jobs. But at this point, we think the resources are here, as we need them-- so the first place we look, we try to maximize on our Egyptian workforce.

Does BG apply this model in its international partnership contracts? Egypt’s workforce brings a lot of Well, it is discussions pretty standard to the table It [Egypt] is a very dynamic on many as far as going into acrecounty and the growth rate is levels, and age around the world. The high… a growing market is al- is well terms are difknown for ways a good place to be ferent, dependits large ing on where young unexactly you are. Of course, the terms have to reflect the prospectively of the area you employed workforce. Is BG capiare looking at and then, the closeness that talizing on this resource at all?

What else would you add regarding investment in Egypt? i.e. what can we expect in the near future, and what is unique to the market here?

For one, the market growth; it is a very dynamic county and the growth rate is high. The population is relatively young,

13

What are the future plans of BG? it comes to soft skills and language,

We are always looking at opportunities. which are very important when it Obviously, as new blocks come up for bid- comes to international oil companies. ding we will evaluate those, as well as the What we are trying to do along with exploration that we talked about. the British Council is to address this We celebrated 20 year of our presence in gap and give these students the EngEgypt last year. We hope for a continued, lish skills and the soft skills they need long-term presence here. to be more employable.

We have got the exploration projects Another program we have involved that we are focusing on, exploration a chair at the American University in blocks. The other step is to see what Cairo (AUC) for a government school comes, then focus on that and see how student in the field of petroleum engiwe can compete. neering every five years, which gives In terms of localization, BG has some this student the chance to study at AUC. important projects underway. We are doWe have been supporting educaing an interesting social investment project tion efforts. Since 2007, we have had a that we launched in October, last year, to number of students who went on the BG mark our 20th anniversary. It is kicking off Chevening Scholarship (a British Counvery soon, a project for building skills of cil Higher Education Scholarship, which geosciences students. This is focused on BG Egypt has supported since 2007). We the University of Cairo, geo-science, ge- have sent three Egyptians on Chevening ology and geo-physics majors, to improve scholarships, and two other on BG Group language skills and general marketability scholarships, to study at higher educaskills. tion instiHis Exceltutes in Given the fact that we have worked lency the the UK. Minister of The so well with the ministry, with our partPetroleum had ners, and with the government, to reach student identified a currently the point that we are at now skills gap in on BG the graduates Chevening of Egyptian universities, particularly scholarship is an engineer from ENPPI, [those studying] petroleum engineering an EGPC affiliate company, and is and geology. They are very strong when studying sustainable development at it comes to the core skills, but when Cambridge.

Political Review

14

Hopeful future lies ahead

Egypt’s economy has long been one rich in resources and potential, with the petroleum and gas field currently at the helm of resource development. While much of the global economy has been consumed by the difficulties of the global financial crisis, Egypt’s economy has shown consistent production rates in mining natural resources, making readily available the fuel for a growing domestic and international market

By Clarissa Pharr Recent developments in the gas and oil sector show that through innovative and efficient processes, Egypt’s petroleum industry continues to produce satisfactory results for its market demand.

In spite of a comparatively fair whether trade climate, major companies must proceed with considerable caution and precision to ensure the maximum results for a beneficial market, as well as official cooperation throughout the drilling and development process.

Drilling is often considered the driving force behind the production process. As such, the regulations and politics of the drilling process are exceedingly important in the oil and gas community.

As with any major sector procedure, results are achieved through a combination of legal obligations, government commitment, and economic calculations.

Developments such as the announcement made earlier this year by the Egyptian Minister of Petroleum Eng. Sameh Fahmy to assign15 new protects for drilling 64 exploratory well in the Upper Egypt region, indicate the great importance of and attention to the drilling process. The expected $438 million spent on the investment reflects Egypt’s active role in the regional economy.

A close look at a range of successful companies and conglomerates in the country rounds out the politics and procedures of drilling in the oil industry, with an up-to-date breakdown of current drilling projects and procedures to view as examples.

Dana Gas is one of Egypt’s leading petroleum companies, with centers located throughout the Gulf, greater Middle East and Asian regions. Over the past quarter, the company operated two exploration concessions and nine development leases in the Nile Delta region, with collaborations in the Upper Egypt region. With production rates ranking 34.7 kboepd in 2009, the company anticipates a steady rise for the coming quarter, with continued exploration drilling, which has wielded no fewer than 12 new source discoveries in recent years. As one of the leading petroleum establishments in the country, Dana Gas has spearheaded a large portion

of the Minister’s plans to revamp Egypt’s drilling map, first put in place in 2000.

In conjunction with Dana Gas Egypt, Sea Dragon Energy Inc is currently overseeing drilling projects for wells in the Al Baraka Field, in collaboration with the Egyptian Chinese Drilling Company (ECDC). The agreement, which entails the drilling of 10 new wells in the region, was recently discussed in April of this year. According to company spokespeople, the rig responsible for these first 10 wells is rated to 10,5000 feet, equipped to evaluate comprehensive geological sections. Along with geological assessments for the wells, comprehensive coring and logging systems must be put in place in order to best moderate the wells digging of the wells themselves.

Besides the rig technique, the company has employed a new 450 2D seismic program to help put into place seismic lines, whose launch date of May 2010 assures a fast paced, technologically advanced methodology.

For high-pressure zones, Sea Dragon Energy Inc has entered into a project with NW Gemsa Concession, Vegas Oil and Gas, and Circle Oil Plc for drilling operations, in which wells with depths of up to 9,860 feet have been established. After precautions were taken by cementing the 95,8 inch casing at 8,000 feet.

With a goal of excavating the oilbearing sandstones of the Miocene Kareem Formation, the drilling is expected to help obtain valuable information for future reservoir projects. As a secondary goal, the drilling will help procure premoiocene Nubia specimens, and achieve a well depth of 15,000 feet.

Upon achieving the 15,000 feet depth, the rig will be transported to help with further projects, while total hydrocarbon bearing zones logged and appraised.

Hess Corporation, another leading oil drilling operation, continues to develop exploration opportunities first announced in 2006. The projects achieved over 50% working interest in the West Mediterranean Block 1, an important deepwater section. According to the company’s spokesperson, the 25 year development lease plan lends the corporation enough Leigh-way to complete projects in the

following categories: Abu Sir, El King, Al Bahig, El Max. Petroleum heavyweights BG Egypt and Edison International SPA have entered several collaborative works over the past few decades. Recently, Edison International agreed to a 20-year concession agreement for offshore oil drilling in the Abu Qir area. The $1.4 million investment will see a series of exploration, production and development wells for the pending future, with the overall achievement goal to procure and process 70 billion cubic meters of gas matter.

For yet another example of current drilling procedures, BP Egypt’s primary focus lies in exploration wells (drilling) and production. The exploration procedures have seen a series of successes over the recent quarter, with hopes of continuation into the second half of 2010. The company’s ongoing drilling projects include extensive exploration in the Nile Detla, with the hopes of doubling Egypt’s current gas reserves via new technology use. First cemented in 2008, new fields were first discovered and mined in Saqqara, located in Suez. Nearly two years later, petroleum continues to be processed from this and other company discoveries.

As is to be expected, government regulations, backing, and funding play a paramount role in drilling politics and procedures. Whether collaboration with the Egyptian Government, Ministry of Petroleum, or backing by the Egyptian General Petroleum Company (EGPC), projects depend a great deal on the approval and support of official offices.

One exciting success was achieved by Novatek, which recently enjoyed getting both the green light and the backing to proceed with projects ahead of schedule, beginning operations for two wells in 2009 instead of the scheduled 2010. “We said earlier that we had to start drilling in 2010. But if we receive seismic interpretation data soon enough, we could start drilling at the end of 2009. Anyway, drilling must be launched no later than early 2010,” Leonid Mikhelson of Novatek, was recently quoted as saying.

More promising still has been a change in technology tactics, as dis-

cussed by National Oil Production Company (NOPC) in recent news. The company, of which Citadel Capital holds 15% ownership, has revealed an increase in production rates of 80% since the close of 2009, indicating continued success due to drilling operations. This translates into up to 6,100 boepd from Egypt’s drilling operations.

Overall, companies involved in Egypt’s increasingly outstanding oil drilling sector have demonstrated great flexibility in the complex policies that involve government, company alliances between private and public sectors, through contracts that involve both domestic and international parties. The Ministry of Petroleum oversees the majority of large-scale drilling operations for exploration wells fielded in the Mediterranean region, the Nile Delta and Suez. Legal guidelines encourage companies to set up and excavate in the exploration drilling process, as exhibited in the Ministry’s announcement this February that stated explicit goals of aggressive exploration in the Mediterranean region, in a bid to encourage further resource discovery as well as to further pit Egypt as an attractive investment for foreign funds.

Stating that this has “succeeded in increasing participation of Egyptian companies in petroleum and mining operations,” Minister Fahmy continues to push ahead with his framework for major drilling projects.

With companies such as BP at the helm of drilling operations, the political implications stand to greatly help Egypt’s economy, as well as playing a major role in global trade. The May 14th announcement to bid on deepwater drilling in the North Alexandrian region, made on the part of Minister and BP President Hisham Makawi, as well as the general manager of German company RWE, Hans Hermon Iki, demonstrated yet again the nature of drilling politics, as the multi-national party anxiously awaited approval from Egyptian parliament. With low market rates on gas, and the high risk, high cost nature of the drilling process; the process continues to be tenuous, although many believe a hopeful future lies ahead.

InReview

15

U.S seeks less oil dependence from the Middle East

“And for the sake of our economy, our security, and the future of our planet, I will set a clear goal as president in 10 years… We will finally end our dependence on oil from the Middle East,” announced the U.S President Barack Obama

The Obama administration is proposing to open vast expanses of oil and gas drilling in the Atlantic coastline, the eastern Gulf of Mexico and the north coast of Alaska, much of it for the first time.

Secretary of the Interior Ken Salazar announced that, as part of a comprehensive strategy for strengthening the nation’s energy security and reducing America’s dependence on oil imports, this decision generates revenue from the sale of offshore leases and help win political support for comprehensive energy and climate legislation.

“By responsibly expanding conventional energy development and exploration here at home we can strengthen our energy security, create jobs, and help rebuild our economy,” said Salazar. “Our strategy calls for developing new areas offshore, exploring frontier areas, and protecting places that are too special to drill. We are opening a new chapter for balanced and responsible oil and gas development here at home.”

President Obama said repeatedly during his presidential campaign that he supported the expansion of offshore drilling. He noted in his State of the Union address that weaning the country from imported oil would require “tough decisions about opening new offshore areas for oil and gas development.” It is not known how much potential fuel lies in the areas opened to exploration. According to Interior Department, there could be as much

as a three-year supply of recoverable oil and more than two years’ worth of natural gas, at current rates of consumption. But those estimates are based on seismic data that is, in some cases, more than 30 years old. The first lease sale off the coast of Virginia could occur as early as next year in a triangular tract 50 miles off the coast that had already been approved for development but was held up by a court challenge and additional Interior Department review, officials said.

But as a result of the Obama decision, the Interior Department will spend several years conducting geologic and environmental studies along the rest of the southern and central Atlantic Seaboard. If a tract is deemed suitable for development, it will be listed for sale in a competitive bidding system. The next lease sales, if any were authorized by the Interior Department, would not be held before 2012.

“The plan we are proposing calls for four more lease sales in the Gulf of Mexico by 2012 and, in the years beyond, would open up two-thirds of the oil and gas resources in the Eastern Gulf while protecting Florida’s coast and critical military training areas,” said Salazar. “Our efforts to strategically open new areas in the Eastern Gulf would represent the largest expansion of our nation’s available offshore oil and gas supplies in three decades.” The Department of the Interior’s Minerals Management Service estimates that the

By Mostafa Mabrouk, Vice Chirman Assistant for Economic Affairs, Ganope

Gulf of Mexico contains 36-41.5 billion barrels of undiscovered, economically recoverable oil and 161-207 trillion cubic feet of undiscovered, economically recoverable natural gas resources.

Moreover, there will be more oil and gas exploration expansion in frontier areas, such as the Arctic Ocean and areas in the Atlantic Ocean, to gather the information necessary to develop resources in the right places and the right ways. “If we are to responsibly develop resources in frontier areas we must expand exploration activities, gather the science needed, and listen to affected communities,” said Salazar.

According to MMS (Mineral Management Service) estimates, 39-63 billion barrels of economically recoverable oil and 168-294 trillion cubic feet of natural gas are economically recoverable from the eight planning areas under consideration for leasing under the 2012-2017 program. That represents as much as 80% of the undiscovered economically recoverable oil and gas on the U.S. outer continental shelf.

Secretary Salazar declared, “In our quest to secure our energy future, we must not lose the places and values that set our nation apart…

Bristol Bay (Southeast Alaska) is a national treasure that we must protect for future generations.” President Obama is withdrawing Bristol Bay from consideration for oil and gas development through 2017.

T. Boone Pickens, Founder and Chairman of BP Capital Management, is principally responsible for the formulation of the energy futures investment strategy said, “It is an addiction (oil imports) that threatens our economy, our environment and our national security. It touches every part of our daily lives and ties our hands as a nation and as a people.

The addiction has worsened for decades and now it’s reached a point of crisis.”

He further added, “In additional to putting our security in the hands of potentially unfriendly and unstable foreign nations, we spent $475 billion on foreign oil in 2008 alone”. The global oil production is 85 million barrels daily, out of which 21 million are used in the U.S. A, in order to satisfy the needed daily oil consumption, the U.S imports 12 million barrels a day.

Despite growing demand and an unprecedented increase in prices, oil production has fallen over the last three years. Oil is getting more expensive to produce, harder to find and there just isn’t enough of it to keep up with demand. The simple truth is that cheap and easy oil is gone. But America is focused on another crisis, which is the economy. “That money is taken out of our economy and sent to foreign nations, and it will continue to drain the life from our economy for as long as we fail to stop the bleeding. It will be the greatest transfer of wealth if we stop importing oil,” Salazar said.

QHSE

16

Safety is Our Common Language A trip through Fugro SAE’s Change in Safety Culture

By Wessam Mamdouh, Fugro SAE QHSE Manager, IIRSM Member

Fugro SAE (FSAE) has activities carried out all over Egypt that are primarily aimed at providing a complete range of offshore and onshore survey services to the oil and gas industry. FSAE considers safety as the solid ground from which to launch any of its successful operations

As part of its mission in Egypt, FSAE believes that development of its operations has to come through reaching a level of performance where safe and efficient operations are the twin wings for its market leadership. To accomplish this vision, FSAE initiated a program of Changing Safety Culture that has allowed safety to become a common language within the company and amongst its employees at all levels.

The main aspects of the project are described in the following equation: 5 Ms + 4 Es = maximum working hours – Minimum Losses 5 Ms These 5 Ms describe the main elements of the HSE management system: Man: the safety of the human factor starts even before hiring any of Fugro SAE employees by setting minimum requirements for any position. Training and education are the corner stone of the safe performance of our employees. A no blame culture reinforcing the safety ownership by staff and measuring the employee competencies according to an international competency matrix is one of the tools used to measure, evaluate and improve our

HSE performance.

Machine: hazard identification, risk assessment and operability checks are always undertaken before and during operating equipment. Checking safety devices, developing and observing safe operating instructions and measuring the Overall Equipment Efficiency (OEE) are all part of managing machine safety.

Material: FSAE is committed to preservation of natural resources.

Adopting a waste monitoring process, developing an environmental report and implementing waste recycling are initiatives that have minimized the effect our activities have on the environment.

Method: all operations and activities are controlled with FSAE’s QHSE management system. Hazard observation cards, risk assessments, toolbox talks, safety work instructions and working procedures have become common tools for all FSAE staff. No operation to be run without a set of updated safe operational procedures is a rule within FSAE. Management: commitment is the word for the management. The management team is committed to safety

to set an example for all employees: performing audits, undertaking visits to work sites and participating in closing NCRs and incident investigations are the main HSE management commitment duties within FSAE. 4 Es These 4 Es describe how FSAE HSE system implementation principles Engineering: FSAE developed a webbased QHSE intranet designed that allows all FSAE employees to logon and use the system documents and tools.

Education: FSAE implemented an educational program that starts from induction and continues with training planning, training programs, daily safety meetings and group discussions and includes sending employees abroad to get the best training.

Enforcement: the system does not differentiate between nationality, occupation or even seniority. FSAE is enforcing the system through safety recognition awards, monitoring departments, projects and individuals.

Evaluation: evaluation is a continual process that allows FSAE the opportunity to improve HSE performance.

FSAE’s latest tool in this area is the Personal Performance Report, which measures the HSE performance of individuals through the year, individually and within different departments.

The outcome of the project has been a success as FSAE now reached 1,000,000 working hours without lost time incidents and the management system has been certified against the following international standards: OHSAS 18001: 2007 Occupational Health and Safety Management System Requirements ISO 14001:2004 Environmental Management System Requirements ISO 9001:2008 Quality Management System Requirements

June 2010 / Issue 42

17

Fatigue Management INTRODUCTION

Fatigue is a significant risk in Schlumberger operations. Sleep loss due to demanding hours of operation and limited time between assignments increases the likelihood of fatigue.

Fatigue impairs alertness, often without you realizing it. In fact, sleepiness or fatigue can produce performance problems similar to those caused by alcohol.

Staying awake for over 18 hours will impair a person’s performance as much as having a blood alcohol concentration of .05% or higher, above the legal limit for driving in many countries.

What is fatigue?

Fatigue is the lack of energy resulting from prolonged, extensive mental or physical activity, exposure to environmental stresses, or from insufficient sleep or body-clock disturbances. The fatigue from sleep loss is the most dangerous of these in terms of its impact on mental performance.

Fatigue affects driving performance and other tasks in which vigilance is important, especially outside of “normal” operating hours: 07:00 – 18:00.

Signs of fatigue

Fidgeting - Rubbing eyes -Repeated yawning -Staring blankly-BlinkingDifficulty keeping eyes open-Head nodding

Causes of fatigue

Schlumberger employees, like most throughout the oilfield services industry, are accustomed to long hours, frequent changes of schedule and long hours of travel from one assignment to the next – all factors that add real excitement to our work, but that also can lead to profound fatigue.

So we can summarize the main causes of fatigue in: Accustomed to long hours Frequent changes of schedule Long hours of travel

Practical countermeasures for fatigue:

Taking a pre-work nap Avoiding vigilance tasks during times of low alertness Varying your job routine Taking breaks Adjusting the work environment Managing your nutritional intake

How do we manage fatigue?

Right and responsibility of every person to stop the job for any quality, health, safety or environmental hazard.

Health Hub Driving Hub QHSE Training and Certification Catalog QUEST Fatigue Management pocket guide

Summary

Be familiar with your location’s Fatigue Management Plan.

Agree with your manager on an optimum work schedule that allows for ample rest

Breaks and sleep between shifts.

Complete your assigned levels of fatigue management training.

Report any fatigue-related incidents in Quest or directly to your manager, regardless of how minor they may seem.

Consider how your level of alertness can affect your safety and the safety of others when you conduct a vigilance task.

Know and use the many tools available to support your fatigue-management efforts – ask your line manager or QHSE manager for help.

Keep a copy of these guidelines with you while working irregular shifts.

MOC 2010

18

MOC: Ten-year success story

MOC 2010 represented the venue where companies would meet and fruitfully compete for the sake of the progress of the Egyptian petroleum industry

By Ahmed Morsy The 2010 edition of the Mediterranean Offshore Conference and Exhibition (MOC) represented the international confirmation of the importance of such event for the offshore petroleum industry, on one hand. While on the other hand, the threeday event also strengthened the business and commercial relationships that bind the Northern and Southern shores of the Mediterranean Sea. Being held under the patronage of Eng. Sameh Fahmy, the Egyptian Minister of Petroleum, the 6th edition of the MOC played a crucial role in paving the road to overcome the hard-hitting challenges, which the Egyptian petroleum industry fronts through boosting the harmonization between the foreign partners and the Ministry of petroleum.

A part of Fahmy’s speech in the conference opening focused on the link between the producers and the consumers. “Despite there is a link between the producers and consumers in the oil industry, it needs to be strengthened as it did not reach a satisfactory level yet,” Fahmy stated.

Moreover, he also shed the light on the strategy of subsidizing the petroleum products and said, “It will be changed but will not be cancelled”. Besides, Fahmy added that it will be focused on the needed citizens only since it is now reaching all the social classes.

In addition, Fahmy asked the foreign investors to give a hand to the ministry in the issue of infra-

structure. He highlighted the importance of it as a factor behind developing the industry.

“The infrastructure of the Gulf of Suez region needs to be entirely replaced with a new one,” he stated. Despite the fact that it needs to be wholly modernized, the ministry cannot afford to perform the whole process by its own since it will be very expensive, he added.

Fahmy’s words left a number of queries in the heads of both audience and companies throughout the two-day event. Hence, Egypt Oil & Gas newspaper (EOG) was keen to investigate during the event the reactions of participants for their views about challenges, which the Minister has tackled.

“We can see some positive indicators this year.

Together, the ministry and the foreign partners have been working hard lately to achieve better solutions,” Hamid Al Ahamdi, The Advisor of Sea Harvest, told EOG. “It was showed clearly in the model presented by the ministry, the infrastructure of Gulf of Suez, of which the foreign partner should take the lead role in developing the infrastructure that EGPC long took it upon itself,” said Al Ahamdi.

He also added that the success of MOC 2010 is a result of the clarity policy the companies followed this year, through showing the latest technologies to help boosting the oil and gas industry.

On the other hand, Arshad Sufi, President of BG

Egypt, stressed on his speech that BG Group has become a leading player in the development of the country’s natural gas industry. Sufi also added that BG Egypt is a core company for their Group and, with partners, they have invested more than $7 billion to date.

“We move into our third decade of partnership here, BG Group continues to look to Egypt as a location for new opportunity. We remain committed to substantial further investment in order to grow our business and maintain the pace of development of Egypt’s natural gas industry,” Sufi expressed.

“Our operations, in both the domestic supply and export market, now account for around 40 per cent of total gas production. Our contribution to the total Foreign Direct Investment is sizable, with more than US$1 billion invested last year alone representing over 12 percent of Egypt’s FDI for 2009.”

Additionally, the conference’s technical sessions of this supreme event for the Mediterranean oil and gas industry was the best opportunity for many of the attendees due to giving them the opportunity to present, interact and discuss their opinions, troubles as well as solutions.

Regarding the exhibition, it showed splendid and superior creativity in the design of several booths despite the absence of major players like BG, BP and Shell. While for the first time in MOC history, 3 national groups are exhibiting: China, Italy and Scotland.

The fierce competition between the companies to provide their best may give a wrong impression of the way they dealt with each other, but in reality you could see the cooperating between the booths that make you think of the exhibition as a one big happy family.

From her side, Mahy Tousson, Managing Director of Drexel Oilfield Equipment, saw that exhibition was entirely different this year from many sides.

“The newcomer companies began to be more witnessed thanks to the climate for investments in Egypt which helped on easing their way in the local market,” Tousson emphasized.

She also praised the organizational aspect of the exhibition.

“We might need to see a bigger MOC next year, especially regarding the exhibition area,” added Tousson, describing how the space is a main factor for the exhibitors to express themselves well.

Tousson also welcomed the idea of having the MOC on the form of a Book Fair, in which each country would have its own number of companies showing in a single section.

Concerning the Chinese services companies, she believes that they will time to prove themselves since the companies prefer to deal with the services providers which have substantial experience. However, she expected the Chinese players to enter the market with all their forces in the coming period, due to the low-cost services they may offer.

Furthermore, what drew the attention is how the exhibitors were keen to wander among all the exhibition’s sections, in order to gather more information about the companies exhibiting.

Overall, the event proved its success even before its inauguration due to the noticeable increase in the number of exhibitors, exhibition area, and papers approved as well as the number of general attendance.

A total of 226 companies took part in MOC 2010, which reflects a 12% increase in the number of exhibitors compared to 2008. Besides, the exhibiting companies come from 20 different nations worldwide. The conference was featured with the presentation of 108 approved papers which were selected from 228 submitted papers. In order to cope with such growth in the exhibitors’ number which is 266 as it was 188 exhibitors in MOC 2008, the exhibition area also increased from 5900 sqm in 2008 to be 6350 sqm this year.

Through the years, MOC has become an international meeting for the oil & gas industry attracting several of the industry’s major players to Egypt, showing an unexpected growth, increasing every year. Hence, MOC 2010 proved to be the complete event for the Mediterranean oil and gas industry as it brings together hundreds of companies and attendees from both the Northern and Southern shore of the Mediterranean Sea.

Industry Statistics

19

Egypt Statistics Table 1

Production - April 2009

Egypt Rig Count per Area -May 2010 RIG COUNT

Total

Area Gulf of Suez Offshore Land Mediterranean sea Offshore Land Western Desert Offshore Land Sinai Offshore Land Eastern Desert Offshore Land Delta Offshore Land

Sold

Percentage of Total Area

11

11%

11 9%

8 8 60

57%

10

10%

9

9%

60

10

9 5

Planned

Million cubic feet Million cubic feet

%

Oil

Equivalent Gas

Condensate

Barrel

Barrel

Barrel

Liquefied Gas Barrel

Total Gas & Derivatives Ton

Barrel

Upper Egypt

26227

26227

E.D.

2078507

2078507

Med. Sea

123890

156150

79.34

W.D.

35923

37260

96.41

Delta

13926

8430

GOS

696

Sinai Total

24778000

1467159

384434

34172

26629593

6961711

7184600

1604690

503923

44793

16254924

165.2

144570

2785200

203340

92963

8263

3226073

3030

22.97

5029693

139200

67649

156999

13955

5393541

376

450

83.56

2024146

75200

47793

70643

6279

2217782

174811

205320

85.14

16264854

34962200

3390631

1208962

107463

55826647

4%

Actual

Planned

%

5

Total

100%

99

Rigs perArea

Oil

16264854

17772390

91.52

Condensate

3390631

3580470

94.7

Gas & Derivatives

36171162

42359580

85.39

Total

55826647

63712440

87.62

Rigs per Specification

Average Currency Exchange Rate against the Egyptian Pound (April 2010/ May 2010)

US Dollar 5.538

Euro 7.320

Sterling 8.426

Yen (100) 5.652

Stock Market Prices (April 2010/ May 2010) High

Low

45.05

44.09

14.98

13.42

Company Alexandria Mineral Oils [AMOC.CA] Sidi Kerir Petrochamicals [SKPC.CA]

Table 1

Wortld Crude Oil Production (Including Lease Condensate) (Thousand Barrels per Day) Libya

Sudan

Other

World

OPEC1

Persian Gulf2

Table 2

North Sea3

July

1,650

490

2,381

72,532

30,857

20,771

3,761

August

1,650

495

2,397

72,112

30,992

20,711

3,248

September

1,650

500

2,389

72,513

30,942

20,616

3,314

October

1,650

500

2,383

72,918

30,993

20,577

3,595

World Oil Supply1 (Thousand Barrels per Day) United States2

Persian Gulf3

OAPEC4

OPEC5

World

July

E

9,007

23,319

24,246

34,151

84,639

August

E

9,084

23,273

24,192

34,312

84,232

September

E

9,297

23,184

24,094

34,270

84,685

October

E

9,279

23,167

24,061

34,343

85,176

November

E

9,354

23,136

24,022

34,286

85,489

December

E

9,398

23,083

23,950

34,199

85,377

Novemer

1,650

495

2,412

73,162

30,940

20,542

3,753

2009 Average

E

9,056

22,890

23,805

33,873

84,243

December

1,650

495

2,468

72,996

30,834

20,464

3,644

2010 January

E

9,275

23,208

24,075

34,457

85,488

2009 Average

1,650

483

2,415

72,251

30,639

20,402

3,673

February

PE

9,540

23,290

24,147

34,560

86,217

2010 2-Month Average

PE

9,401

23,247

24,109

34,506

85,834

2010 January

1,650

500

2,422

73,150

31,068

20,571

3,689

February

1,650

510

2,448

73,593

31,163

20,650

3,594

2010 2-Month Average

1,650

505

2,434

73,360

31,113

20,608

3,644

1 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

2 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Production from the Kuwait-Saudi Arabia Neutral Zone is included in Persian Gulf production.

3 North Sea includes the United Kingdom Offshore, Norway, Denmark, Netherlands Offshore, and Germany Offshore.

Revised data are in bold italic font.

1ÂŤOil SupplyÂť is defined as the production of crude oil (including lease condensate), natural gas plant liquids, and other liquids, and refinery processing gain (loss).

2 U.S. geographic coverage is the 50 States and the District of Columbia. Beginning in 1993, includes fuel ethanol blended into finished motor gasoline and oxygenate production from merchant MTBE plants. For definitions of fuel ethanol, oxygenates, and merchant MTBE plants 3 The Persian Gulf countries are Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Production from the Kuwait-Saudi Arabia Neutral Zone is included in Persian Gulf production.

4 OAPEC: Organization of Arab Petroleum Exporting Countries: Algeria, Iraq, Kuwait, Libya, Qatar, Saudi Arabia, and the United Arab Emirates.

5 OPEC: Organization of the Petroleum Exporting Countries: Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela.

E=Estimated data. RE=Revised estimated data. PE=Preliminary estimated data.

Revised data are in bold italic font.

June 2010 / Issue 42

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