1
March 2011
www.egyptoil-gas.com
Issue 51
Pa g e 2 0
P12
P14
2
Be THE CHANGE
When the legendary African Leader Nelson Mandela was released from jail in 1990, after serving 27 years in prison due to unfairness and his struggle for freedom, he did not spend the time after his release taking revenge from those who imprisoned him. On the contrary, he did not waste time for retaliation; he has been instead working hard to reconstruct his society. Following his release from prison on 11 February 1990, Mandela led his party in the negotiations that led to multi-racial democracy in 1994. As president from 1994 to 1999, he frequently gave priority to reconciliation. I recalled this role model to show how great nations were born from scratch. No one deny that South Africa has become one of the most developed countries in the African Continent and Egypt is no less to become one too. I believe we should now focus on the future instead of being stuck in the past. Let’s give the chance to the well-known figures to supervise the implementation of January 25 demands and turn the youth into the fuel to construct the society and future we have been longing for! Personally, I feel that we lack many fundamental elements that define a democratic society; the least is the right to express one’s opinions and respect the opposite voices. I believe that after years of oppression and the lack of the right of communication have been translated into divisions between citizens that are classified according to their opinions and whether they pro or against a specific issue. People have been attacking each other and condemning others
just to prove that they are exercising their right to speak freely. Unfortunately, this has been a general status since last January 25. Healthy disagreements are not tolerated by people and no ethical way of communication is followed. This has deepened a kind of split into the Egyptian body. We should set our differences aside and unite to achieve one holly goal; a better future for our beloved Egypt. I believe we should be THE change. When we ask to sue the corruption roots, we should judge ourselves as well; do I have an effective role in my society? Am I a value added to the country’s prosperity? Do I respect others’ differences? Am I a presentable model of an Egyptian citizen? The real change now should begin from within! I really admired the group of young people who are calling to make a social transformation besides the political and economical ones. Their campaign called for various basic changes, such as never throw garbage in streets, respect others’ opinions and views, stop sexual and verbal harassments, obey the traffic rules, be a positive citizen and report any case of corruption, have a social responsibility towards the less fortunate and people with special needs… etc. We should draw more attention to these fundamental social changes that would definitely be part of a real healthy political transformation. I am not saying that we should not sue or penalize the officials and businessmen who were part of the corruption, yet we should not waste the achievements we made by losing our prime goal; a new born Egypt. Editor-in-Chief
Be part of the new era I believe that the Egyptian petroleum sector is a distinct business entity that has its own infrastructure, investments, workforce, tools, and finance. The whole sector stands hand in hand, aims at enforcing the stability of Egypt and lures more funding into the Egyptian national economy. The oil and gas sector is open armed for the country to take benefits and fruitful outcomes off its vitality, not only on national basis, but also on the international ones. In one hand, this sector has the highest share in the national economy, while on the other hand, it is a fundamental sector that reachs out for more foreign relations. Besides, this sector is characterized by being filled with experienced work force, enjoying economic privileges, attracting foreign income into the local market, and not less important, it is known for tightening flexible relationships with the international world. The vitality of the petroleum sector is not limited to the previousily mentioned benefits, but it also contributes to human development system. I would suggest giving more lose attention to providing specialized training courses at the petroleum institutions, offer-
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
Samy Waheeb Business Development Manager Laila Solaiman Business Development Officer Nourallah Khaled Customer Service Coordinator Passant Fadl Designer Ahmed Marzouk Omar Ghazal Cartoonist Ramy Ameen
ing educational scholarships for eligible employees to strengthen and develop their skills, whether technically or socially. Also, the sector should play a role in educating new generations to get the know-how and needed experience to join the petroleum labor and be part of a real modernization and change of sector. For instance, companies should recruit the senior students of the petroleum engineering faculty to receive on-site training courses, which will help them to gain more technical and field experience by being part of the real life of a petroleum engineers on fields. As a reporter at Egypt Oil and Gas Newspaper, I believe I am part of this wonderful petroleum sector and it makes me feel responsible now to shape this new era and have a responsibility in building the economy and pay back to my country. Hunting for news, covering events in a profeesional and objective method and being the gate of credible information to all the sector is a fundamental role that I have been (and will be) playing to implant the roots of a new petroleum era. Shady Ahmed EOG Reporter
Administrative Assistant Basma Naguib IT Specialist Sameh Fattouh Production Advisor Mohamed Tantawy Accountant Abdallh Elgohary Mohmoud Khalil Legal Advisor Mohamed Ibrahim
Publisher
Mohamed Fouad This publication was founded by Omar Donia, Mohamed Sabbour and Mohamed Fouad All rights to editorial matters in the newspaper are reserved by Egypt Oil and Gas and no article may be reproduced or transmitted in whole or in part by any means without prior written permission from the publisher.
Contact Information: Tel: +202 25164776 +202 25192108 Fax: +202 25191487 E-mail: info@egyptoil-gas.com www.egyptoil-gas.com
March 2011 / Issue 51
3
Egypt News El Hamra to drill a new well
4
Abu Qir deepen in the Mediterranean
El Hamra Oil Company is preparing to drill a new exploratory well in the company’s acquisition area in North East El Alamein, located in the Western Desert field. The drilling of this well is part of the company’s drilling program for the current fiscal year of 2010-2011.
El Hamra Oil is the joint venture company between the EGPC and American IPR. The total investment of drilling the new AEB3x-2x well will cost $4 million. ElHamra is aiming to boost its production to reach 11200 barrels of crude oil per day.
Abu Qir Petroleum Company studies the possibility of drilling a new exploratory well in its acquisition area in the Mediterranean. Currently, Abu Qir is considering the drilling operation of the new well during the second term of the year. The total cost of investments expected to reach $100 million. It is anticipated that Abu Qir will finish some treat-
Zafarana Oil Company (ZAFCO) evaluates the south extension of the geological formation of the Zafarana field in the Gulf of Suez concession. The operation is carried in the frame text the current fiscal year of 2010-2011. It is also aiming to drill more exploratory and development wells to boost the current production rate. Through the evaluation, ZAFCO analyzed the 3D seismic survey, which helped to determine the distribution and properties of the petrophysical data of the field, aiming to obtain an accurate picture of the distribution, thickness, and poros-
ity of sand layers of the reservoir tank of the Rodius layer that is produced in the Zafarana field,” said ZAFCO source. The source also pointed that his company present production rate reached 7200 barrels of oil per day.
Company (SUCO) to implement a new project to extent the natural gas pipeline produced during the coming period. The procedure is a part of the company’s new fiscal plan of the year 2010-2011. PetroAmir is the Joint venture company between the
ment work to some of its wells, after finalizing the 3D seismic survey to wrap the drilling plan of the current fiscal year of 2010-2011. It is worth mentioning that the Abu Qir Petroleum Company is a joint venture company between the Egyptian General Petroleum Corporation (EGPC) and Italian Edison.
and SUCO to join forces ZAFCO to increase production PetroAmir PetroAmir is preparing to cooperate with Suez Oil Egyptian General Petroleum Corporation (EGPC) and
GEMPETCO evaluates the seismic data Gemsa Petroleum Company (GEMPETCO) is currently working on reassessing some of the data collected from the 3D seismic survey of some of the company’s fields. This assessment is part of GEMPETCO’s drilling plan for the fiscal year of 2010-2011. “We are studying the information we gathered from the 3D seismic survey that is conducted in the company’s acquisition area in Gulf of Suez, using all the geophysical and petrophysical data recorded
from the wells,” said GEMPETCO offical to Egypt Oil and Gas Newspaper. GEMPETCO is the joint venture company between EGPC and the Egyptian company PICO. “The studies aim to locate the oil bearing layers in the concession area in order to determine the accurate drilling spots and its nature whether development or exploratory,” he added. The studies will also reveal the storage capacity of the current tank.
Wadi El Sahl Petroleum Company (WASPETCO) denies any problem with the partner as some newspapers claimed that the company’s operations were postponed due to the clashes, said an official to Egypt Oil & Gas Newspaper. Currently, WASPETCO studies the possibility to conduct repair operations for some of its exploratory and development wells, located in its concession area of South Hurghada. The operations will be carried out as an element of the drilling plan for the current fiscal year of 2010-2011. “We are not facing any predicament in fulfilling our drilling plans as it was rumored in one of the Egyptian newspapers,” WASPETCO source told Egypt Oil and Gas Newspaper. Recently, some of the Egyptian newspaper published that WASPETCO was facing some problems with its partner over the implementation of
the company’s plans. “Our drilling plans are being accomplished according to schedule. We are also adding a number of wells to our acquisition area in Hurghada,” added the source. The current production rate of WASPETCO is 200 barrels of oil per day (bopd), with future plans to more than double this rate to reach up to 500 bopd by the end of 2011.
WASPETCO: no problems with partner
the Greek Vegas Oil & Gas. Egypt Oil and Gas newspaper learned that PetroAmir would precede a new study to evaluate the gas extension project to SUCO. The operation will be used in the artificial lift of the crude oil in SUCO.
Sea Dragon: Workflow intact Sea Dragon reported that throughout the demonstrations that took place in Egypt, field operations were relatively unaffected. Production from the Al Amir SE, Geyad and Al Baraka fields continued without any interruptions. Drilling and Service rigs are back in operation in both the NW Gemsa and Kom Ombo concessions. In the North West Gemsa Concession, the Al Amir SE #7 well was successfully drilled to a depth of 9,650 feet and the 9 5/8” intermediate casing was run and cemented. Drilling of the 8 1/2“ hole then resumed, however due to mechanical difficulties encountered at a depth of around 10,000 feet, the well was plugged back and sidetracked. The well is currently drilling at a depth of 10,835 feet towards the targeted depth of 16,750 feet. Preliminary petrophysical analysis of the logs run indicate 6 feet of oil pay in South Gharib Formation, extending the Al Amir South Gharib oil pool to the west. The primary target for this well is the Kareem Formation and the secondary target is the Lower Rudeis Formation where gas and condensates were tested in the adjacent Al Amir SE #6 well and also encountered in the Al Ola X-1 well. The well is expected to delineate the western limits of the Al Amir SE field and is anticipated to be completed as a water injector in preparation for commencing water injection in the field. Water flooding of the Al Amir field is expected to provide significant additions to reserves and production. Production from the Al Amir SE and Geyad fields is currently running steady at around 8,500 bopd. Cumulative production from the concession has now reached approximately 4.5mmbbls of 42 degree API crude oil. Sea Dragon has a 10% working interest in the NW Gemsa Concession with Vegas Oil at 50% as operator
and Circle Oil Plc with 40%. On the other side, in the Kom Ombo Concession, the fields of Al Baraka #3, #7, SE and #6 Wells have been fracked and placed back on production for clean-up of frac fluids. Frac operations appear to have been carried out successfully in all wells. The Al Baraka #5 Well was tied into the production facilities and placed on production. While, the Al Baraka #14 well was spud on January 11th and drilled to a total depth of 5,643 feet. Open hole logs were run and analyzed. Preliminary analysis of Petro-physical data showed the potential for oil pay in the Six Hills “D” sands. Casing was run and the well is now awaiting completion. Besides, the Al Baraka #15 well was spud on February 9th and is now drilling at a depth of 4,440 feet towards its targeted total depth of 5,000 feet in the Six Hills Formation. Current gross production from the Al Baraka field is running at 1050 bopd. Sea Dragon has a 50% working interest and is a joint operator of the Kom Ombo Concession with Dana Gas Egypt owning the remaining 50%. Commenting on the latest developments on the Company’s operations in Egypt, Company Chairman and CEO, Said Arrata stated, “It is comforting to see that our production operations remained stable and without disruptions during this period of unrest in Egypt. I am also pleased to see that we are back drilling again in both of our concessions. We are continuing to focus on increasing our production in Kom Ombo through the ongoing fracture stimulation program and the completion and placement of new wells on production. As well with water injection in NW Gemsa scheduled to begin soon, production levels are expected to increase substantially by the end of the year”.
NOSPCO awaits the new ministry decision North Sinai Petroleum Company (NOSPCO) is awaiting the response from the new ministry, led by Eng. Mahmoud Latif, on the workers’ demands to appoint the temporary petroleum labor. NOSPCO decided that it would hire the temporary workers in the coming period in accordance with the resolutions made by the EGPC of the mandatory of appointing the workers which spent three years in the fields. The EGPC commands came after the meeting with EGAS to solve the petroleum workers distress, especially in the petroleum service companies. It is worth mentioning that NOSPCO is a joint venture company between EGPC and the French Prenco.
March 2011 / Issue 51
Balayim leaks oil in South Sinai
An oil leak covered nearly three miles offshore the area of Balayim at the end of last month, which resulted in petroleum pollution in South Sinai. Despite the results of investigations were not concluded until the print of this issue, sources claimed that the reason behind this accident is an oil leak, covered an 18-kilometer total area and was one-kilometer depth, off one of the marine platforms. An emergency committee, led by Eng. Sayed Qotb, General Manager of Environmental Protection Association in the Gulf of Suez, went to the scene of the accident to investigate the reasons behind it. According to official sources, Balayim Petroleum Company did not assist directly the association to solve the problem. Investigations are still underway.
Operations persist in Burg El Arab
The East West Petroleum has been informed by its partner Kuwait Energy, the operator of the Burg El Arab (BEA) concession, that the operations remain unaffected by the recent events in Egypt. Kuwait Energy, as operator, continues to monitor the situation closely. East West Petroleum acquired a 20 percent participation interest from Kuwait Energy in December 2010. Kuwait Energy retains a 55% participation interest in the field with the remaining interest held by Gharib Oil Fields. East West Petroleum will continue to liaise with Kuwait Energy on BEA operations and will provide shareholders with any further updates as appropriate.
UAE’s Dana Gas shares up as Egypt fears settle down
Dana Gas closed higher after regional political developments in Egypt and Iraq appear to be settling down, analysts said. The UAE gas explorer and producer rose 2.9% at the close of play on the Abu Dhabi Securities Exchange, adding to its 3% gain made the previous day. “What is supporting the rebound in share price is that the situation is settling down in Egypt (where Dana has concessions),” said Julian Bruce, Director of Equity Sales at EFG Hermes in Dubai. “We are also starting to see foreign investors returning to equities in the UAE, in light of what is happening in the region, as local stocks appear to be more attractive in terms of valuations, and most of the bad news locally is out of the way.”
PetroGulf: operations are not affected
PetroGulf Company wrapped up its maintenance operations for four wells through the conduction of advanced technical study. These work-over operations are held in the company’s fields of AlTawila and North Geisum, which are part of the company’s current fiscal plan of 2010-2011. This recent study was an attempt from PetroGulf to continue the previously held studies that showed negative results. The total investment cost of the new technical study revolves around $500 thousand. The current crude oil production rate of PetroGulf is 6000 barrels per day.
ICE Brent Price 104.0 103.0 102.0
101.64
101.0 100.0 99.0 98.0
99.25 97.8
97.91
97.0 96.0 95.0 94.0 93.0
18/1/2010
26/1/2010
7/2/10
15/2/2010
“Initially you’ll see a pop in the market and oil comes off on the hope that this prevents violence in the streets of Egypt. But as we go forward, we’ll start wondering what’s next for the country” Jay Suskind, Senior Vice President at DuncanWilliams in Jersey City “World stocks fell for the third straight day, Wall Street looked set to open weaker and Asian stocks were on track for their biggest weekly loss in nine months, partly on growing tensions in Egypt” Reuters – Market news “You’ll just have this continual flip-flop each and every day because commodity prices have just overheated, and with the worries in Egypt” Barry Schwartz, vice-president and portfolio manager at Baskin Financial Services “The world witnessing a true moment of history in Egypt” Barack Obama, President of the United States “Crude futures have fallen back on the news of Mubarak stepping down. But lower prices may be temporary here as traders will again look broadly and see if protests in Egypt... may spark other similar movements across the Middle East,” Mark Waggoner, President at Excel Futures in Bend, Oregon “ Oil prices are reacting to events wherever they are. Events in Egypt have also contributed to the movement in prices” Mohammed al-Hamli, UAE Oil Minister “Before the Tunisian and the Egyptian crisis, we don’t see it (an extraordinary meeting). But now, I don’t know if this crisis will escalate. I hope not” Abdullah al-Badri, OPEC Secretary General
“At the moment, there is the fear that there will be problems with incoming gas from Egypt” Liat Glazer, analyst at the Excellence-Nessuah Investment House “Oil has traded right around $90 a barrel since the start of the new year and it looks like it may stay at this price throughout February, assuming the situation in Egypt does not worsen and hinder transports on the Suez Canal” Jessica Brady, spokesperson, AAA Auto Club South “The Egypt issue has also added to the uncertainty on the oil front” Debendra Kumar Dash, a fixed-income trader at Development Credit Bank in Mumbai “Investors have now been assured that in the short term there will not be chaos in Egypt” Sebastien Henin, who helps oversee $110 million at The National Investor in Abu Dhabi “But if the street begins to make demands on regime change and violence erupts, then things will get worse for the economy and Egypt’s reputation” John Sfakianakis, economist at Riyadh-based Banque Saudi Fransi -- part of the French Credit Agricole CIB group “Although Egypt is not a major oil producer, the protests had stirred concerns about the flow of crude oil along a strategic pipeline and potential disruptions to the Suez Canal.” Gary Thayer, Chief Macro Strategist with Wells Fargo in St. Louis. “There are a lot of undeveloped resources still in the Nile Delta that will need capital,” Frank Chapman, BG Group Chief Executive, on BG beginning to resume exploration drilling in Egypt
5
Egypt News
6
TransGlobe: we have not been affected To date, the Company’s West Gharib production operations have not been affected by the recent political demonstrations in Egypt. The company continues to the monitor the situation and has daily communication with our Cairo staff and our Joint Venture operating company. All employees are safe and accounted for. The Company will take all steps to adapt to the situation and will attempt to mitigate any adverse consequences. Production averaged 11,228 barrels of oil per day (bopd) to TransGlobe during December (8,247 bopd from Egypt and 2,981 bopd from Yemen). Production averaged 10,897 bopd to TransGlobe during January (7,990 bopd from Egypt and 2,907 bopd from Yemen). Production for the last week of January was approximately 11,300 bopd (8,400 bopd from Egypt and 2,900 bopd from Yemen). In West Gharib, in which the company holds 100% interest, the company drilled four wells since the Q4 mid-quarter update of December 13, 2010 resulting in two oil wells (Arta 25 and East Arta 11), one potential oil well (South Rahmi 8) and one dry well (East Arta 10). Two rigs are currently drilling development wells at Arta and East Arta. The rigs are scheduled to continue drilling development/appraisal Nukhul wells in the Arta and East Arta fields although future drilling will be dependent on continued access to services and drilling supplies from third-party suppliers. The Company and the EGPC reviewed development lease continuations for the Arta, East Arta, East Hoshia, North Hoshia, West Hoshia and South Rahmi development leases in the fourth quarter of 2010. All
of the Arta, East Arta and South Rahmi leases were continued. Approximately 50% of the West Hoshia development lease and 40% of the North Hoshia development lease were continued. The remainder of the West Hoshia and North Hoshia leases along with the East Hoshia development lease were relinquished. The relinquished lands were not considered prospective by the Company. Besides, in the East Ghazalat, in which the company holds 50%, while the operator is Vegas Oil and Gas SA, filed a declaration of Commercial Discovery for the Safwa field and is finalizing the initial Safwa development lease and development plan. In addition, the operator has requested approval to start early production. The commencement of first production will also be contingent on the availability of supplies and services in Egypt. Two wells were drilled in November and December resulting in an oil well at Safwa #2 and a dry hole at Nakhil #1. The drilling rig was moved to TransGlobe’s Nuqra Block in January. Moreover, TransGlobe contracted for one year the 1,200 HP drilling rig previously used at East Ghazalat, in the Nuqra Block 1. The rig was moved to Upper Egypt and commenced drilling the Selsella #1 exploration well on January 26. Drilling operations were temporarily suspended this week due to disruptions in the delivery of services and drilling supplies by third party contractors. Drilling will recommence as soon as deliveries are re-established. The rig is scheduled to drill two exploration wells (Selsella and Diwan) in Nuqra. The rig will be available for Nukhul development drilling at West Gharib following the Nuqra program.
EGAS adds two new Jackups in the Mediterranean The Egyptian Natural Gas Holding Company (EGAS) waits for two new jack-up rigs that will operate in the company’s concession in the Mediterranean Sea. The total cost of each rig is approximately $250 thousands. The Kaher-1 and Kaher-2 are characterized by their advanced technologies that match the international quality standards, needed to work in the difficult geological formations of the Mediterranean concession. The two rigs are equipped with anti-explosion tools, with a high capacity of 15k-BOP. Besides, they can resist this area’s high pressure and temperature, known as HP-HT. EGAS is expected to receive the first rig Kaher-1 in March, while the second Kaher-2 will
arrive by next June. The company set a complete long-term operation program for both rigs, through a specialized committee responsible for negotiating the operating scheme between the EGPC, EGAS and GANOPE. The first rig is planned to operate in the PETROBEL fields of Temsah Concession, in addition to drilling some wells for BG. Moreover, negotiations were held with PERENCO to operate the Kaher-2 in the fields of North Sinai Petroleum Co (NOSPCO). A one-year contract is to be signed soon, through which six wells will be drilled. It is worth mentioning that EGAS signed an agreement with the Egyptian Drilling Company (EDC) to market the two rigs afterwards in return for an operating share.
CORRECTION In February 2011 issue, EGAS news (page 7) was unintentionally mixed with Abu Qir News.
International News
Iraq to hold new O&G auction
The Iraqi government plans to hold a new oil and gas-licensing auction later this year as it seeks a major push to increase oil output and to capture natural gas for electricity generation, a senior Iraqi oil official said. Iraq has held three bidding rounds in the last few years to auction off 15 of the country’s most prized oil and gas fields. However, the oil-rich nation’s proven reserves, estimated at 143 billion barrels, could fall sharply within a few years if the country does not get serious now about exploring for more oil, said Abdul Mahdy al-Ameedi, Head of the country’s Petroleum Contracts Office, an oil ministry affiliate. The Iraqi central government has begun “serious preparations” to hold a fourth bidding round in the final quarter of the year, Ameedi told Dow Jones Newswires in an exclusive interview. Iraq also needs to boost its gas production and build more gas-fired power plants to increase its power output, currently at 6,500 megawatts, which is less than half the country’s needs, he said. Iraqi oil officials are optimistic that major international oil companies will meet their pledges to sharply increase the country’s oil production. Officials said Iraq could increase oil output up to 8 million barrels a day in 2018, though oil analysts say that target would take longer to achieve. Ameedi said oil output from three major oil fields being developed by some of the world’s majors would increase output by nearly 500,000 barrels a day by the end of this year, bringing total output to 3 million barrels a day. The U.K.’s BP has increased output at Iraq’s Rumaila oil field to 1.275 million barrels a day
from 1.06 million barrels a day and is expected to grow output further to 1.3 million barrels a day in 2011, he said. Italy-based Eni has boosted output at Zubair to 270,000 barrels a day from 148,000 barrels a day and has plans to reach 300,000 barrels a day this year. Exxon Mobil is expected to increase output at West Qurna-1 in April to 280,000 barrels a day from current output of 230,000 barrels a day, Ameedi said. Ameedi, whose office engineered three bidding rounds in the last two years to auction 15 prized oil and gas fields, said the ministry wants to offer 12 exploration blocks in this latest auction. “The number could be more, or less,” he said. The ministry will also prequalify international firms that were unsuccessful in previous bidding rounds. “We will ask prequalified companies that didn’t win contracts in the previous bidding rounds to update their legal and financial data,” he said. Those companies would need to submit additional data, including programs on health and work hazards, as well as training. Iraq prequalified some 48 international companies to take part in the three previous auctions, but less than half of them won deals in Iraq. The exploration blocks will be covering areas in western, northern, and southern Iraq, Ameedi said, “We are gathering information about these blocks in order to include them in the data package that we will hand to interested companies.” Although international companies would prefer production-sharing contracts for exploration blocks, Ameedi said the deals would be based on a service contract. But it would be slightly different from the 20-year service contract offered in the previous three bidding rounds.
South Pars gas field investment to reach $11 billion The managing director of the Pars Oil and Gas Company, Mousa Souri, said $9 billion has been invested in the South Pars gas field since the beginning of the current Iranian calendar year (started March 21 2010). Speaking during a visit by the Universities Faction of Parliament to the South Pars gas field projects earlier this week, Mousa Souri noted that total investment for this year would climb to $11 billion. Iran needs $40 billion to develop all 28 phases of the South Pars gas field over a period of 10 years, the Oil Ministry said in November 2009. Iran’s plan to develop South Pars, the world’s larg-
est single gas deposit which the Persian Gulf country shares with Qatar, have been delayed by international economic sanctions over its nuclear program. The South Pars gas field contains about 50% of Iran’s gas resources and is regarded as the largest offshore gas field in the world. The Iranian share of this field is an area of 3,700 sq kms and is estimated to contain 14.2 trillion cubic meters of gas (equal to 8% of the world’s resources) and more than 18 billion barrels of condensates. The development cost for each phase of the South Pars gas field is estimated around $1 billion.
Kingdom’s longest well drilled in Manifa field
The managing director of the Pars Oil and Gas Company, Mousa Souri, said $9 billion has been invested in the South Pars gas field since the beginning of the current Iranian calendar year (started March 21 2010). Speaking during a visit by the Universities Faction of Parliament to the South Pars gas field projects earlier this week, Mousa Souri noted that total investment for this year would climb to $11 billion. Iran needs $40 billion to develop all 28 phases of the South Pars gas field over a period of 10 years, the Oil Ministry said in November 2009. Iran’s plan to develop South Pars, the world’s largest single gas deposit which the Persian Gulf country shares with Qatar, have been delayed by international economic
sanctions over its nuclear program. The South Pars gas field contains about 50% of Iran’s gas resources and is regarded as the largest offshore gas field in the world. This monumental field is located 100 kms from the southern coast in the Persian Gulf and is a joint property of Iran and Qatar. The first exploration of the field was performed in 1990 with seismic data and results confirming the existence of gas there. The Iranian share of this field is an area of 3,700 sq kms and is estimated to contain 14.2 trillion cubic meters of gas (equal to 8% of the world’s resources) and more than 18 billion barrels of condensates. The development cost for each phase of the South Pars gas field is estimated around $1 billion.
March 2011 / Issue 51
7
WikiLeaks: 40% overstatement of Saudi Arabia’s oil reserves exaggerated by 40 percent
“Saudi Arabia may not have enough oil to stop prices from skyrocketing. That is, depending on how you define the country’s oil reserves,” revealed a Wikileaks cable. Cables from the U.S. embassy in Saudi capital Riyadh reviewed by the Guardian, describe a warning from a senior Saudi oil executive, who said the country’s crude oil reserves have been overstated by nearly 40 percent, some 300 billion barrels. The Guardian reports that Sadad alHusseini, former head of exploration at the Saudi oil monopoly Aramco, told the U.S. consul general in Riyadh that the Saudi oil company could not keep up
with the 12.5 million barrels a day needed to keep prices low. Peak oil, he said, could be reached as early as 2012. But, according the Wall Street Journal’s Angus Mcdowall, there is good reason to be wary of reading too much into the cables. Mcdowall spoke with al-Husseini, who told him his comments were referring to Saudi Arabia’s ‘oil in place’ - including recoverable and non-recoverable sources. Looking at it that way, Husseini suggested to the WSJ, makes the picture a lot less frightening. ‘The world of energy looks pretty much how it looked yesterday,’ Mcdowall writes.
Production to start in 2014 off Shah Gas
Production should begin by the middle of 2014 at the Shah gas project being developed by Occidental Petroleum and Abu Dhabi National Oil Company (ADNOC), a senior official said. Occidental won the contract to participate in the sour gas project earlier this year after U.S. major ConocoPhillips pulled out of the bidding in April last year. The official said the delay in finding a partner should not affect the
start of production. “We are looking to start production by mid-2014. Oxy’s staff is visiting and getting onboard,” Saif Ahmed al Ghafli, Chief Executive Officer of Abu Dhabi Gas Development Company, told Reuters on the sidelines of a conference. Occidental is an untested partner for ADNOC, but analysts and industry sources said its bid had been competitive. Ghafli declined to give details of the bid, saying only that it had been favorable.
Africa News
8
Circle discovers more gas Anadarko hits new discovery in Mozambique off Morocco Circle Oil announced a new gas discovery in the Base Guebbas target. The well tested gas at a sustained rate of 5.363 mmscf/d on a 26/64” choke. The perforated Base Guebbas zone of 1.5 meters at 1,042.25 - 1,043.75 meters MD and 3 meters at 1,046.0 - 1,049.0 meters MD has a calculated net gas pay of 4.5 meters. The well is being completed as a potential producer. The company announced that the DRJ-6 exploration well has been successfully tested in the Sebou Permit, Rharb Basin, Morocco. DRJ-6 was drilled in April 2009 and, as previously announced, not tested due to local logistical problems at the time of drilling. Prof. Chris Green, CEO, said, “The successful testing of DRJ-6 is particularly pleasing as it means that a 100% success rate has now been achieved from the six wells drilled during the first campaign.” A full technical evaluation of all the results of the well is under-
way. This will allow for forward planning as a precursor to further assessment of the resource, including conducting an extended well test to give a more complete estimation of the reserves. Due to bad weather and some flooding in the permit area, the drilling rig will be demobilized to move onto the higher level KSR10 site near to the location of the fifth and final well of this campaign, being the KSR-11 exploration well. The Sebou permit lies to the northeast of Rabat in the Rharb Basin in Morocco. The Rharb Basin is a foredeep basin located in the external zone of the Rif Folded belt. The concession agreement, in which Circle has a 75% share and ONHYM, the Moroccan State oil company, has a 25% share, includes the right of conversion to a production license of 25 years, plus extensions in the event of commercial discoveries.
Ghana Sells its First Crude Oil Exports to ExxonMobil Ghana, the latest entrant to the club of African oil producers, has sold its first crude oil exports to Exxon Mobil Corp., oil trading sources said. The U.S. oil company has bought cargoes of Jubilee crude loading on January 1-7 and January 8-18 from trading firms Vitol and Trafigura, the sources said. The price of the
trades was not available. Ghana’s Jubilee field produced its first sustained flow of oil at the end of last year. Initial production of around 120,000 barrels per day (bpd) will rank Ghana as sub-Saharan Africa’s seventh largest producer. Jubilee is estimated to hold up to 1.8 billion barrels and have a lifespan of 20 years.
Repsol Maintains Oil Production in Libya The Spanish oil giant Repsol has reduced, but not suspended its oil production in Libya, said Chairman Antoni Brufau. Repsol sources had earlier said the company had suspended operations in Libya. Repsol on Wednesday repatriated 131 staff and family members from the North African country. Brufau said Repsol has cut its production in Libya by about half to 160,000 barrels daily. The company still has employees in the country, but they will return to Spain “sooner rather than later,” Brufau said.
The situation in Libya will have financial consequences for Repsol, Brufau said. However, the company is more concerned about the security of its employees for the time being, he added. Brufau made the comments after Repsol announced that it had tripled its net profit to 4.69 billion euros (6.47 billion dollars) in 2010. The company attributed the gains to the sale of a 40 percent stake in its Brazilian subsidiary to China’s Sinopec, as well as high oil prices and the discoveries of new oilfields.
Anadarko made its fourth natural gas discovery in the Rovuma Basin, offshore Mozambique. The Tubarao discovery well encountered more than 110 net feet (34 meters) of natural gas pay and no water in a high-quality Eocene-age reservoir that is separate and distinct from the hydrocarbon accumulations in Anadarko’s three previous discoveries in the Rovuma Basin. The discovery well was drilled to a total depth of about 13,900 feet (4,237 meters) in water depths of about 2,950 feet (899 meters), approximately 18 miles (29 kilometers) off the Mozambique coast. The consortium plans to preserve the wellbore at Tubaro for potential utilization in future testing. Once operations are complete, the partnership plans to mobilize the rig to the Windjammer discovery, nearly 26 miles (42 kilometers) northeast of Tubarao, to begin a coring program followed by appraisal drilling in the Windjammer, Barquentine, Lagosta complex. Anadarko operates the basin, holding a 36.5% working interest. Co-owners in the area are Mitsui E&P Mozambique Area 1, Limited (20%), BPRL Ventures Mozambique B.V. (10%), Videocon Mozambique Rovuma 1 Limited (10%) and Cove En-
ergy Mozambique Rovuma Offshore, Ltd. (8.5%). Anadarko announced the latest in a string of major deepwater natural gas discoveries off the coast of Mozambique. The Tubarao discovery well encountered more than 110 net feet (34 meters) of natural gas pay and no water in a high-quality Eocene-age reservoir that is separate and distinct from the hydrocarbon accumulations in Anadarko’s three previous discoveries in the Offshore Area 1 of the Rovuma Basin. “The discovery at the Tubarao prospect opens an entirely new play style, which has additional opportunities in Mozambique’s Offshore Area 1,” Anadarko Sr. Vice President, Worldwide Exploration Bob Daniels said. “This is our fourth significant discovery in the offshore Rovuma Basin and further strengthens our confidence in our geologic and geophysical models of the basin. Our seismic imaging indicates Tubarao’s areal extent could cover about 15,000 acres that will be better defined with appraisal drilling. In addition, we continue to safely enhance our drilling efficiencies, procedures and methodology in Mozambique, as we drilled this well in half the time of our first exploration wells.”
Tullow discovers hydrocarbons Offshore Ghana Tullow Oil plc (Tullow) announced that the Teak-1 exploration well in the West Cape Three Points license offshore Ghana has discovered approximately 73 meters of net hydrocarbons in two Campanian and three Turonian-aged reservoirs. The well was located 4.6 km northeast of the Mahogany-2 well, 2.7 km outside the Jubilee Unit boundary. In the shallower Campanian-aged reservoirs, the well-intersected six meters of oil pay in the upper zone and 33 meters of gas pay with an underlying 15 meters 40 degree API oil leg, in the lower zone. In the deeper stratigraphic Turonian-aged reservoirs, the well intersected 14 meters of gas-condensate pay in two separate zones and five meters of 32 degree API oil pay in a deeper level. The up-dip combination structural and stratigraphic Campanian trap is potentially 50 sqkm in area and will be the subject of further appraisal activity. Interpretation of the potential extent of each of the deeper Turonian zones is ongoing. The Atwood Hunter rig drilled Teak-1 to a total
depth of 3,170 meters in water depths of 868 meters. On completion of operations, the well will be suspended for future use and the rig will move to drill the Teak-2 well which is targeting Campanian and Turonian age reservoirs in a separate fault block between the Teak discovery and the Jubilee field. Tullow has a 22.896% interest in the West Cape Three Points licence and its partners are Kosmos Energy (Operator) and Anadarko Petroleum Corporation (30.875% each), the E.O.Group (3.5%), Sabre Oil & Gas Holdings Ltd (1.854%) and the Ghana National Petroleum Corporation (GNPC) (10% carried interest). “Success in all five of the targeted reservoirs, encountering 73 metres of total net pay, is an excellent outcome for the Teak-1 well and a great start to our 2011 multi-well exploration campaign in the West Cape Three Points licence. The significant potential of this discovery, up-dip of Jubilee, will be appraised during 2011 and 2012 once the current drill-out campaign has been completed,” commented Angus McCoss, Exploration Director.
Maersk Oil to purchase Devon Energy’s Angolan shares Maersk Oil, a fully owned subsidiary of A.P. Moller Mærsk A/S, agreed to acquire a 15% interest in Block 16 in Angola from Devon Energy for an initial payment of $70 million and future contingent considerations. The agreement is subject to closing conditions including government approval. Maersk Oil already operates Block 16, which includes the Chissonga discovery. Maersk Oil’s interest in the block would increase to 65%, with Sonangol (20%) and Odebrecht (15%) as partners. “Acquiring Devon Energy’s interest in the block will provide Maersk Oil further materiality in Angola, just as the evaluation work on the Chissonga discovery gathers pace,” said Lars Nydahl Jorgensen, Head of Exploration at Maersk Oil. “It shows our confidence in the prospectivity of Block 16 and Angola as a whole.” Maersk Oil is in the process of analyzing the results from wells drilled at the Chissonga discovery to
determine whether it is commercial and if further appraisal drilling is needed. Future payments to Devon Energy are contingent on reaching a number of milestones and may ultimately amount to more than the initial payment. Maersk Oil is operator with a 50% interest in two other licenses in Angola - Block 8 and Block 23, where an exploration well is planned to be drilled later this year. Back to June 2005, Maersk Oil acquired 50% interest and operatorship in the Production Sharing Agreement for Block 16, about 100 kilometers offshore Angola. Water depth in the block ranges from 200-1500 meters. In November 2006, Maersk Oil acquired a 50% interest and operatorship in the Production Sharing Agreements for offshore Blocks 8 and 23. Partners are Svenska Petroleum (30%) and Sonangol (20%). Water depth in Block 8 is up to 500 meters and in Block 23, up to 1,500 meters.
Downstream Natural Gas market unperturbed by North Africa protests The timing of the Egypt uprising was fortunate for natural gas consumers in Europe, where supplies from North Africa become less essential as the weather warms. The protests occurred just as the northern hemisphere was emerging from a brutal winter, allowing gas prices to dodge the run-up witnessed in oil. Gas prices in Europe are virtually unchanged from before protests began in late January. The oil market has not escaped so lightly; concerns about the safety of the Sumed pipeline and the ability for tankers to traverse the Suez Canal have sent Brent crude futures above $100 a barrel for the first time in over two years. Front-month. Traders have only to look at a calendar to keep from joining in the oil rally. Even if unrest were to spread to larger gas producers such as Algeria, demand for gas plunges once the weather gets warmer. So, while oil refiners must prepare for potential supply interruptions that could be months away, the gas market’s interest in the Middle East largely ends with the last cold snap. The main threat to the gas market would come if protests quickly spread to major producers in the region, including Algeria, said Biliana Pehlivanova, an analyst with Barclays Capital. “If we see a curtailment of shipments...in the next few days, then the market would become tight, but if this
were to happen a bit later in March or April then the consequent impact on Europe would be smaller,” Pehlivanova said. Algeria is the third-largest exporter to Europe and a major supplier to Asia. Egypt is a minor producer by comparison. If Algeria’s production drops, LNG once earmarked for Europe could be diverted east. However, even this worst-case scenario seems unlikely, at least in the short term. As in Egypt, protests in Algeria have flared up in urban centers, far from the country’s gas fields. Algeria also quickly brought riots over food prices under control in January, suggesting the country’s government has a firmer grip on power, said Samuel Ciszuk, Middle East and North Africa senior analyst at IHS Energy, a consultancy. Europe’s ample gas inventories would provide a cushion to outlast any supply disruptions, particularly once the weather gets warmer and demand diminishes. Spain, which relies most heavily on gas from Egypt and Algeria, currently has contracts to import more gas than the country needs, and could simply draw on other suppliers. Other countries in Europe could draw more heavily on gas transported from Russia. Unless those spare supplies are used up, it is business as usual in the gas market, whatever the situation in Egypt, traders said.
Egypt’s 12% of electricity comes from wind power
March 2011 / Issue 51
9
Essar: Kenya Refinery upgrade could exceed $1 billion The cost of upgrading East Africa’s sole petroleum refinery at Mombasa could more than double to $1 billion, a company executive said. An executive with India-based Essar Energy PLC (ESSR.LN), which owns the refinery, said the upgrade cost was earlier estimated at $450 million, but it will require additional modernization to enable it process Ugandan crude once that country starts production. “It could cost $1 billion, a feasibility study is being conducted into the project,” the executive, who did not wish to be named, said on the sidelines of East African Petroleum Conference in Kampala. Bimal K. Mukherju, chief executive of the plant’s refinery owner, Kenya Petroleum Refineries Ltd., said separately that Essar is planning to double capacity at Mombasa in the next five-to-six years, to 80,000 barrels a day from the current 40,000 barrels a day.
Essar acquired a 50% stake in the refinery in 2009 and announced it would invest $400-$450 million to modernize the plant, which supplies refined fuel products to Kenya, Uganda, Burundi and Rwanda. Mukherju further said Essar executives are in Uganda to look at more investment opportunities following the discovery of commercial oil in Uganda’s Lake Albertine rift. “Ugandan crude is waxy but is of an excellent quality, we are looking at the opportunity of processing it” he said adding the main challenge will be how it can be delivered by pipeline to the East African coast. Because of its waxy nature it would require a heated pipeline to prevent it from solidifying during transportation. Mukherju further said the current demand in the region, estimated at 200,000 barrels a day, is enough to support a second refinery, which is being planned in Uganda.
Kuwait Paraxylene Production Company (KPPC) has exported its first ever shipment of heavy aromatics to its Asian customers, according to a company statement. The 17,000 tons shipment is headed to customers in Asia. KPPC is a fully owned subsidiary of Kuwait Aromatics Company (KARO). “The KPPC aromatics plant will continue selling heavy aromatics produced at the site, with a capacity of 80,000 metric tons annually (MTA), to enhance the added-value and returns from this stream to the aromatics business,” said KARO Board Chairman Bakhit Al-Rashidi on the occasion. Al-Rashidi added, “The stream which was previously used as a fuel substitute at the site has a higher market replacement value and will also reduce the site’s overall
carbon footprint due to lower CO2 emissions resulting from the use of cleaner fuels.” Al-Rashidi expressed his appreciation to Petrochemical Industries Company (PIC) and EQUATE Petrochemical Company for their role in the success of the heavy aromatics production. In addition to heavy aromatics, KPPC’s aromatics complex produces 829,000 MTA of Paraxylene and 393,000 MTA of Benzene. KARO is a joint venture grouping Petrochemical Industries Company (PIC) with 40%, Kuwait National Petroleum Company (KNPC) with 40%, while Qurain Petrochemical Industries Company (QPIC) owns the remaining 20%.
KPPC ships first shipment heavy aromatics
Wind power could meet 12% of the world’s electricity by 2020, creating 1.7 million jobs and reducing global emissions of carbon dioxide by more than 10 billion tons. By 2020, a total of 1.2 million Megawatts (MW) wind energy could be produced in the world, surpassing the current European electricity consumption. The current major markets are Germany, Spain, Denmark, India and some U.S. states. Other developing countries will feature prominently in the next few years. This is particularly true about 15 countries of the European Union, China, Canada, Brazil, Egypt, Poland, Turkey, the Philippines and Morocco. Countries in North Africa, including the Middle East have large resources of solar energy and operation thereof will be a crucial factor to help accelerate economic development in their regions. These countries have realized that tremendous opportunities exist and are beginning to diversify their energy markets, apart from hydrocarbons. With energy demand on the increase, Egypt is relying more on alternative sources of power generation to increase its electricity supply, thus, the country is aiming to produce 12% of its electricity from wind power and to launch projects for parks could provide 2,690 megawatts during the next five years,” said Energy Minister Hassan Younis. He said in a statement that bids for wind farms would be launched in the year for these projects in cooperation with the European Union, Spain, Japan and German banks. These parks are located mainly in the Gulf of Suez, one of the windiest areas of the Middle East. The World Bank is estimating that 7200 Megawatts could potentially be developed by 2022 in this area. The private
sector was expected to contribute to the development of wind energy by producing 1370 Megawatts. Egypt, the most populous country in the Arab world with a population that has doubled in nearly 30 years - some 80 million inhabitants, is experiencing a significant economic growth rate (+6.5% expected in 2010-2011). Meanwhile and according to figures from the World Bank, the electricity demand in Egypt has increased in average of 7% per annum between 1997 and 2004 and this increase should be around 6 to 7% by 2014. Today, the population suffers from long and frequent power shortages due to an old and insufficient network grid, especially in summer. Egyptian oil production could no longer be sufficient for its domestic market, thus the country is building its first solar power plant with a capacity of 140 Megawatts, being finalized in Kuraymat area, in south of Cairo, and is also preparing to launch the construction of its first nuclear power plant, after having announced, in last August, Al-Dabaa site on the Mediterranean coast, as a definite location.
Sojitz jointly develops Namibia’s 1st wind power project
Sojitz Corporation has reached agreement with United Africa Group (Pty) Ltd. (UAG) (a Namibian company based in Windhoek) and Korea Midland Power Co., Ltd. (KOMIPO) (a Korean company based in Seoul) to cooperate in the implementation of Namibia’s first wind power project and signed a joint development agreement to this effect. This marks the first time that a Japanese firm will participate in an independent power project (IPP) in sub-Saharan Africa. The wind power project, which will be constructed in Luderitz in southwest Namibia, will have a generating capacity of 44 MW. Total investment is expected to be approximately $150 million, which will be raised though project financing. A detailed wind assessment will be performed in the construction area and a long-term power supply agreement will be signed with the Namibia national power company in the first half of 2011. It is expected that operations will start in 2013. A second phase that will increase the generating capacity to 90 MW is also planned.
Political
10
The other face of revolution
Egypt has been wholly transformed, whether socially, economically or politically. Over the past weeks, analysts have been observing the changes and studying the various effects of such transformation of the whole country in general and of the petroleum sector in specific. The question that should be raised, to which extent has the petroleum industry been affected? By Sama Ezz Eldin Egypt witnessed lately a huge transformation, which took 18 days before things start to come back to normal. As any foreign investor was closely monitoring the news and whether it is safe for his business to remain in the country. Egypt gained its position in the world as a leader to the Arab world and as a border crossing to major oil shipments. The North African country does produce oil but mostly for the local demand, natural gas is what Egypt leaning on these days. “Egypt is not an oil producer, but it is the most populous of the Arab states, and the nursery of the political doctrines of Islamic nationalism. It also owns and embraces the Suez Canal,” said Clay Jenkinson, the famous author at Bismarck Tribune. Egypt’s reputation as a leader came from possessing the foremost Suez Canal and the SUMED pipeline. The Suez Canal connects the Red Sea and Gulf of Suez with the Mediterranean Sea, spanning 120 miles. Through November of 2010, petroleum (both crude oil and refined products) as well as liquefied natural gas (LNG) accounted for 13% and 11% of Suez cargos, measured by cargo tonnage, respectively. Total petroleum transit volume was close to 2 million bbl/d, or just below 5% of seaborne oil trade in 2010. The 200-mile long SUMED Pipeline, or Suez-Mediterranean Pipeline provides an alternative to the Suez Canal for those cargos too large to transit the Canal (laden VLCC’s and larger). The pipeline has a capacity of 2.3 million bbl/d and flows north from Ain Sukhna, on the Red Sea coast to Sidi Kerir on the Mediterranean. The two routes are for the export of Persian Gulf oil and LNG. Closure of the Suez Canal and the SUMED Pipeline would divert oil tankers around the southern tip of Africa, the Cape of Good Hope, adding approximately 6,000 miles to transit, increasing both costs and shipping time. According to a report released by the International Energy Agency (IEA), shipping around Africa would add 15 days of transit to Europe and 8-10 days to the United States. Thus, Egypt plays an important role in international energy markets through the operation of the Suez Canal and the SUMED pipeline and this requires constant political circumstances for both Egypt and the Whole world. The minute the demonstrations started in Egypt, news reported a rise in the oil and gas prices, most of the investors were fearful for the oil shipments through the Canal and if violence ascended it would cause the
closure of the Suez Canal. The Egyptian authorities acted at a high level of responsibility and maintained the Canal protected for its towering importance for their country and the world. “There is no chance that investors would think of switching to another expedient to transfer their shipments of oil. Egyptian authorities are aware of how it would affect both Egypt and many countries if the Suez Canal was shut down,” said an official source to Egypt Oil and Gas newspaper. The source went on to describe how the ruling authorities kept the work wheel revolving in the Canal, mainly to keep the investors serene so not to take any rapid decisions to move their business somewhere else. Moreover, the events combined with the worrying over Suez Canal and SUMED pipeline, affected the price of oil that it hit $103.37 at one point. “The oil market has been on edge since the mass uprising in Egypt,” as most of the agencies reported at the start of the demonstrations. The Energy Information Administration (EIA) described the rise in oil price, “even though Egypt is not a major supplier of crude oil or natural gas to world markets, the recent unrest in that country raises the concern that unrest could spread to other countries in the region with a larger role in supplying world energy markets or that key transit routes for energy and other goods could be disrupted.” Egypt’s situation not only affected the prices of oil, it also had its influence on the oil market. Egypt is considered as a leader to the Arab world, and questions were rose of what would happen to global oil markets and politics if similar protests emerge in the Kingdom of Saudi Arabia or any other oil
There is no chance that investors would think of switching to another expedient exporting country. The west world mainly depends on the Arab world in the energy matter and stability in the region is what will keep both oil flow and prices steady. In addition, Egypt’s situation affected the United Sates offshore drilling policies. It made that the experts call for a new policy regarding offshore oil drilling in the United States. “Senior oil industry executives, sci-
entists, policy makers and environmental groups gather at the Baker Institute to discuss the path forward for U.S. offshore oil drilling. The discussions will be wide ranging and focus on everything from improving existing technologies through enhanced real time down-hole information systems to better rapid coastal defense responses to corporate strategies that enhance safety
The oil market has been on edge since the mass uprising in Egypt culture,” according to reports. Looking from Egypt’s side, and how the turmoil influenced the investing climate in the country, “It will surely affect the petroleum investments in Egypt, but we are discussing the methods of how to go through this period of time with the less damage,” said the official source. “The high prices of oil that the world witnessed through the event of Egypt must teach us a lesson of how to use this for our advantage.” “Egypt must lay the kind of investment plans that would attract the investors more than before. Both drilling and production plans ought to satisfy the investor eagerness, whether on the material or the morale side,” said the official. He added, “We must provide the morale satisfaction in such harsh times because we need to guarantee the safety of our country for investments at any time. If the foreign investor is feeling that his money will be in a safe place, then you can expect even more investments than before.” On the other hand, reports showed that there is a good to the late situation in Egypt. The good side that the number of local petroleum workers would rise and there is a big chance that foreign companies would appoint the Egyptian labor to work in their concessions. This will definitely boost the Egyptian labor shares. Others expect that the foreign labor will now cost even higher amount of money and that would also increase the existence of the Egyptian labor in the petroleum market in Egypt. Furthermore, the gas prices also rose due to the changes in Egypt, “Demand for gasoline in the U.S. is dropping, but the price at the pump is rising due to tensions and uncertainty in Egypt,” according to reports. Arab Gas pipeline faced a big hit during
the late events in Egypt as a pipeline that sends natural gas to Jordan was set on fire in the Egyptian Sinai town of El Arish, and the suspected act of sabotage has forced its temporary closing, according to officials. As a precaution as it responds to the incident, Egypt’s gas company decided to stop pumping gas in the area altogether, including gas going to neighboring Israel. Israel has been getting supplies from a location 20 kilometers away from the damaged gas pipeline in El Arish. Egypt has been Israel’s main gas supplier since 2007, accounting for 20% of the total electricity production in the state. It is known that due to an agreement signed in 2005 with Israel, Egypt has been supplying the gas at much lower rates than those of the global market. But an Egyptian court ruled recently that the agreement must be reworked to allow for steeper costs. However, the army authorities insisted in many declarations that Egypt will respect its international agreements no matter. The lesson that needs to be learned from Egypt’s late events that Egypt must not let any other country use the circumstances for its advantage and to pull the attention and investments from Egypt. “It stands on the foreign investor point of view, but we can push it towards us by showing them how safe is Egypt through anything and by giving them privileges in drilling in much more areas,” added the Official. “The future of oil and gas industry in Egypt is vivid. Only if we controlled it right and showed the positives as much as we can to the investors.” “This will only come from long-term plans that will be a magnet for the investor, we have all the trust in the army authorities that it will help us conduct such plans and provide all the help for the petroleum sector in Egypt,” pointed the Official. Egypt’s position in the world appeared clearly through the late events; the prices rose by the start of the events and became steady as the events ended. The petroleum ministry did some changes to the chairmen of major public companies, in a try to rise with the sector from the late events; all the eyes are concentrating with the ministry expecting more decisions to boost the sector into more investments and into the truthful path of brighter future to the oil and gas industry. Egypt went through a lot lately and it’s trying to continue its role as a major leader in the Middle East, and the country is expecting the petroleum sector to be on the same pace.
March 2011 / Issue 51
11
Infocus
12
How eligible is the new minister?
The wave of change has dominated every aspect in the Egyptian society. The Petroleum Sector has had its share of alterations that led to the appointment of a new Petroleum Minister, Eng. Mahmoud Latif, Chairman of EGAS. Though it is known that this interim cabinet is selected to conduct workflow for six months only, there is a long list of reforms and demands that is required to be fulfilled by Eng. Latif By Tamer Abdel Aziz
Before the official announcement of appointing Latif, the names of well-known figures were disclosed as possible candidates, such as Eng. Ibrahim Saleh, the former chairman of the Egyptian General Petroleum Corporation (EGPC) and Ahmed El-Touny. The reactions towards the suggested candidates were different among the petroleum sector, yet reactions were much different about Eng. Latif and a state of ambiguities about how far would the new Minister be up to the challenges and expectations? To answer this question, Egypt Oil & Gas Newspaper conducted a pilot study to investigate the demands of the petroleum personnel in this critical period of time and their expectations from and evaluation of the newly appointed Minister. What was easily observed is that the most interviews shared common demands, which can reflect the lack of some elements in the past. “we had a problem of decentralization of governmental entities; the petroleum sector should be assembled under one main governmental entity,” said a top official of the EGPC. “Moreover, there should be a coordination between all companies of the sector in order to save time and effort and speed up the wheel of operations.”
Asked about the current burdens facing the new Minister, the official asked to be anonymous referred to the temporary labor as the main problem nowadays. “To solve this problem, new set of rules and work laws should be applied,” suggested the EGPC official. Stating the previous factors as the elements that need instant solution, most of the interviewed sources called for direct decisions made by the Minister to ensure lifting the gap of salaries between employees, maintain a steady oil and gas revenue to the national economy, enforce right laws to lure more investments and keep the existing ones. ”Despite the time-limited agenda for the new Minister to implement the needed reforms, we believe if a proficient schedule is set, many issues can be solved,” said another official. “Another critical point that should be looked at is the re-schedule of debts payments for the foreign partners, which have negatively affected the credibility of the sector.” He further added, “there is a necessity to release new areas through tenders, which will be a key factor to intensify the exploration operations in the country, and hence, this will increase the production volume of
oil and gas.” Eng. Sameh Fahmy took over, he reshufDr. Hamdy El-Banby, former Egyptian fled the board of Egyptian General Petropetroleum minister, declared that a good leum Corporation (EGPC) and appointed minister is the one who focuses on ex- Latif to the post of Vice Chairman for panding the sector’s production volumes, Natural Gas. growing the exploration and discovery HE was a key figure in implementing platforms over the coming period of time. Egypt’s integrated gas strategy and was “I would suggest fast decision-mak- the head of many petroleum companies ing, avoid personal interests and start a including the Egyptian Natural Gas Combrand new era in the Ministry are key pany (GASCO), the General Petroleum elements for a successful Ministry,” ad- Company (GPC) and Badr El Din Comvice El-Banbi. pany (BAPETCO). In a later stage, Latif Who is Mahmoud Latif? was appointed as the chairman of the Mahmoud Latif Amer graduated in state-owned Egypt Natural Gas Holding June 1974 with a degree in petroleum en- Co (EGAS). gineering from the Engineering Faculty of Cairo University. At the beginning of his professional life, he joined the Gulf of Suez Petroleum Company (GUPCO) and was appointed in a later stage as the assistant to the president of Khalda Petroleum Company. In October 1999, From left: Eng. Mahmoud Latif when former minister
Rising to the challenge
The newly appointed Petroleum Minister Eng. Mahmoud Latif will start his first days with a working agenda that is filled with lots of tribulations. The new ministry came knowing that their working table overflowing with controversial contracts, late deals, $6 million petroleum debt, and labor strikes await to be solved in such critical time
By Shady Ahmed
The late events that Egypt witnessed, 25th of January, left its mark on every sector in Egypt. Some of the experts saw that the petroleum sector will not be affected, and others oppose it, as they believe that the oil and gas sector will be largely affected. On the other hand, all experts agree on the aftermath on the petroleum sector that led to the dismissal of Eng. Sameh Fahmy. According to many experts, it is a new opportunity for Egypt to market itself by offering
new concessions areas, more desert exploration to attract more foreign investments into the country. The opposing opinion looks at the fact that Egypt is not a major oil producer, but it has the political stability that magnetize outer investments and the lack of security and political solidity that Egypt went through lately may sent away the eyes of investments, which always look for a safe and stable environment. The late demonstrations and strikes
held by the petroleum workers may affect the judge of the investor. Egypt Oil and Gas Newspaper learned from its sources in the joint venture companies that they are on track with their plans, whether it’s development or drilling or production plans. Among those companies that did not change their work plan for the fiscal year 2010-2011 are PetroAmir, Gemsa Petroleum Company (GEMPETCO), Zaafarana Oil Company (ZAFCO), Wadi El Sahl Petroleum Company
(WASPETCO), West Bakr Petroleum Co., El Hamra Oil Company, PetroGulf, and El Waha Petroleum Company (OWAPCO). “We are resuming our fiscal plans of 20102011 and we are not affected by the late events,” said Omar Bibars, Chairman and Managing Director of PetroAmir. “We have a main target this year, to increase our production of crude oil from our concession in the Red Sea to reach up to 15,000 barrels of oil per day, from the current daily pro-
March 2011 / Issue 51 duction of 4300 barrels.” “The company had a discussion with the foreign partner, Greek Vegas Oil & Gas, which entirely agrees to continue with the original plan. We all saw that there will be no obstacles to stop the company from fulfilling its plan as we already won the approval of the EGPC to start our drilling operations, after adopting the budget for that fiscal plan of the company,” pointed Bibars. He went on to describe how each Egyptian petroleum company has a role to keep the foreign investments in Egypt. “We conducted lots of projects, like the water injection project to extend the pipelines of natural gas to reach the fields of SUCO.” Bibars added that the company is joining forces with SUCO to implement a new project during the coming period. The procedure is a part of the company’s new fiscal plan of 2010-2011. “PetroAmir is conducting a new study to evaluate the gas extension project to SUCO. The operation to be used in the artificial lift of the crude oil in SUCO,” Bibars explained. He also showed his positive belief that Egypt will come out superior from the temporary chaos, especially that many locations are remained undiscovered in the Western Desert, Gulf of Suez, and the Mediterranean. Having the same opinion, a top official from an Egyptian Petroleum Company said that the influence of January 25th will not be this gigantic and that the petroleum sector is capable of hitting its target no matter. “The Egyptian companies know how to attract foreign investments. We have the concessions and the working force that can encourage international investors into the local
market,” said the source. He went on to specify the gas discoveries that can draw the investors’ attention and how can the ministry use it to bring them to the Egyptian market. “Currently we are working on reassessing some of the data collected from the 3D seismic survey of the drilling plan of 2010-2011. The company is studying the information gathered from the 3D seismic survey they conducted in the company’s acquisition area in Gulf of Suez using all the geophysical and petrophysical data recorded from the wells.” “The studies aim at allocating the oil bearing layers in the concession area to determine the accurate drilling spots and whether it’s development or exploratory. Also to resolve the limits of the current tank,” added the source. The source showed his gratitude to Eng. Sameh Fahmy, the former petroleum minister. “Fahmy’s help also appeared in removing most of the obstacles that the oil companies faced whether in or outside Egypt. In addition, he helped into bringing international and Arabian investments into the Egyptian market,” the source elaborated. Conversely, a source from Vegas Oil and Gas said that the new petroleum ministry would face huge problems that may affect the sector in Egypt, such as the temporary workers, especially that many refuse new labor and prefer to appoint members of their own family. Vegas source stressed on the importance of the Egyptian petroleum companies to keep their word with the foreign firms. “They signed contracts that keeping it will show the foreign investor that Egypt is safe for more investments.” “By continuing their drilling and production
plans, they are helping the market to rise again and to attract more investments into the Egyptian marketplace,” pointed Vegas source. He also stressed on the significance of Egyptian companies that hold international activities, as Petrojet, Enppi, and GASCO. “Their time came now for the rescue of the Egyptian petroleum sector. They must sign as many contracts in foreign and Arabian countries as possible.” “The rest of the Egyptian companies must also follow the lead of companies like Enppi and try to sign more deals outside Egypt. They should be marketing the petroleum sector in Egypt and boosting the economical sector too.” On another discussion matter, an official source told Egypt Oil and Gas Newspaper that the former ministry used to treat the temporary workers issue with short-term solutions. “There was never a clear decision towards solving such problem. They never addressed the salary differences between the workers and the heads. In the end, it negatively affected the production, when the workers started the strikes.” The official source suggested that setting a clear plan for the upcoming period would help the new ministry reaching the targets. Eng. Aziz Effat, Ex Assistant Chairman for Exploration and Board Member of Agiba Petroleum Co and Deputy GM. PetroSA Egypt, said that petroleum sector positively welcomed the appointing of Eng. Latif as the new Petroleum Minister. “They see in Latif that he will help the sector in reaching more targets through helping the workers in this sector. There are two lists for the hiring, one for those whom are close to the chairmen and of course it is rewarding, while the second is weak and
13
less economical privileges.” “The workers that were fired with no clear reason, and others whom worked for three years as temporary personnel, both will benefit from the new ministry as we all have faith in Latif,” said Effat. Effat expected the upcoming stage to witness many companies aiming to boost their production and maintaining the stability with the foreign partner. “They will also help the ministry to attract more investments into the Egyptian market and to help assure the foreign investors that Egypt working wheel is revolving and did not stop after the 25th of January.” “We must accept an important point that the new ministry does not have super powers to change everything in such short time, but we believe that they will foster a new strategy that will satisfy the Egyptian community and also to bring more economical benefits for Egypt,” Effat explained. He also pointed to the fact that last year, the petroleum sector was able to bring $23 billion into Egypt, formed into the shape of new investments whether in exploration or drilling or refineries. “I think the new ministry will follow the lead of the old ministry in this measurement to bring more foreign assets into Egypt.” The petroleum sector has always been known for its considerable share in the Egyptian economy, it will not be the first time that it faces obstacles and the main thing that can be noticed about the oil and gas sector is its capability of defying the odds. The upcoming days will show the true face of both the Egyptian petroleum workers and the Ministry, which should glorify their role to help Egypt rising to the challenge.
Round Table
14
No more drawbacks allowed!
Time for: Transparancy, Decenteralization and Long-term Business Model
Solving the negativities of the old regime and calling to bring all corrupted officials to justice should never obscure our vision for the prosperous future, we are dreaming of! This is the time to lay down the foundations of an industry that By Tamer Abdel Aziz - Yomna Bassiouni has been long outing for more reform!
As part of Egypt Oil & Gas Campaign entitled “Strengthen your investments, Listen to the FUTURE!”, EOG hosted a roundtable discussion that exposed the views of different petroleum experts who are visualizing a future image of the dynamic petroleum sector. Eng. Said Zaki, Marketing Manager of Weatherford, Eng. Hazem ElShafie, Country Manager of MI SWACO, Eng. Magdy Wedad, Managing Director of PICO Energy Petroleum Integrated Services and Eng. Ahmed Anwar, Assistant Deputy CEO for Dilling in EGPC, they all agreed on one main perception; specific basic elements should be firmly implemented in the industry or else all destructive aspects will remain the same! Noting that this roundtable discussion was held before the appointment of Eng. Mahmoud Latif as the new Petroleum Minister, the target behind it was to set the strategy we are desiring and being part of it instead of waiting for the new Ministry to disclose it. Eng. Zaki began the discussion by affirming, “We should be an effective part of the change”. But, how will it be? What will be the changes we seek? This will be answered in the following lines? Eng. Wedad said, “The Ministry of Petroleum lacks a clear policy to follow; what are the rules, objectives, long-term plans…etc? No one knows! All what we hear is that it is working hard to lure more investments into the country. But, how and what types of investments? This is undisclosed!” He added, “The service companies in Egypt do lack the vision because all deci-
sions are made internally. The announced targets of the Ministry are very vague and hence we cannot set our own goals for the petroleum industry!” Wedad described the way the Ministry’s heads treated the companies as “aliens”. He clarified that they never had a role in the Ministry’s plans, though a healthy sector would gather all key companies to be part of a real fruitful strategy. “How would I blindly allocate my investments into a sector that lacks the vision and has no exact long term strategy,” said Wedad. “Service companies have always been placed on the sideline, though they should be a key player in the petroleum industry.”
Have you tried before to address top officials concerning this issue?
“I did try several times, and without getting into details, unfortunately, all my attempts to complain or raise the issue were a complete failure,” answered Wedad. “I have tried to talk before, but there was no response!” “I am wondering how do you expect me to set long-term plans to increase my investments in a sector that does not guide me. We do not know what kind of E&P program will take place? Where will be the drilling focus over the next five years? For instance, if you tell me explicitly that your target is workover, then I will prepare myself to provide the needed services for it. But this was not the case.”
Did the Ministry of Petroleum set publicly a clear long-term strategy?
Eng. Anwar believes that we should first ask what are our requirements? Where
should the drilling be intensified? What companies should be involved...etc. “I want to clarify the Ministry’s plan for the fiscal year of 2010-2011. From July 1st, 2010 to January 31st, 2011, only 51% of the 2010/11 drilling plan of joint ventures were achieved, while the exploration companies achieved 40.5% only. He further added that there were 12 companies drilling in the Western Desert, 9 in the Eastern Desert, 3 in the Gulf of Suez, 4 in the Mediterranean, 3 in Delta and one company in Sinai. “We can conclude from these figures that drilling operations are intensified in the Western and Eastern Deserts, led by the U.S Corporation Apache and its affiliates.” The Joint ventures solely drilled a total of 207 development wells so far, out of planned 386 wells, in addition to 38 out of 94 exploratory wells. “If we divide the total drilled wells (exploration and development) of JV per area, we will have 165 wells (out of 318) in the Western Desert, 13 wells (out of 42) in the Gulf of Suez, 35 wells (out of 65) in the Eastern Desert, 13 wells (out of 23) in Sinai, 8 wells (out of 10) in Delta and 11 wells (out of 24) in the Mediterranean Sea,” highlighted Anwar. On the other side, the exploration companies drilled 24 wells out of 52 planned wells in the Western Desert, 3 wells in the Eastern Desert, another 2 in Sinai, 1 out of 4 in the Gulf of Suez, 6 out of 7 wells in the Mediterranean Sea and 2 in Delta. “The total drilled wells was 41 out of 75 planned wells,” added Anwar. “To some extent the 2010-2011 was not achieved so far and due to the current cir-
cumstances, I do not believe that it would be fully implemented.” Answering a question by Eng. El-El-Shafie, “on which periodical basis does the Ministry set the drilling plan?”, Anwar explained that plans are built on the studies and history of each area and that is why there is no exact plan on which the service companies can build their investments. “This can be considered as a drawback, yet we try to provide a vision as a guide for companies to follow.” El-Shafie emphasized that forming a complete plan based on the history of an area does not serve him, as a service company.
What are the other undesirable elements affecting the sector?
Wedad pointed out to the problem of “conflict of interest” as another major drawback threatening the fairness and objectivity of the sector. “For instance, weighing who is qualified and eligible for a tender is not solely limited to what you provide and how far do you abide by the requirements, but the top officials have used also to take into consideration some unrelated factors, which can be summarized in four words, personal conflict of interest!” In addition, we should not relate the friendship and hater outside the sector to the workflow inside the sector and interfere it in the process of tender awards, warned Wedad.
How do you see the coming period?
Being in the kitchen of the EGPC future plans, Anwar explained that due to the current instabilities a lot of rigs, mostly land ones, were moved outside the country, especially to
March 2011 / Issue 51 Libya, Iraq, Sudan and Syria. This migration out led to a drop in the market. Yet, some are seizing the opportunity and are contracting new rigs, as during times of drop, they can get better services at good prices. “What we are suffering for now is the shortage of land rigs, while we have around six stacked marine rigs (four in the Gulf of Suez) and cannot find anyone to rent them!” clarified Anwar. “Searching for an operator, he would be asked to pay around $10 million to get the rig back to its operating shape once again or instead he would ask to get a one-year secured agreement… the problem is that most of offshore drilling operations, whether in the Mediterranean Sea or the Gulf of Suez will not cover this one year condition.” Moreover, though we managed to gather three companies to operate the same rig and hence reduce the cost, we faced a problem of operation priority and there was a schedule conflict between the three companies, he clarified. “There was a conflict of interest once more,” added El-Shafie. However, Anwar prefers to call this problem as the result of appointing wrong personalities in leading positions. From a different perspective, Zaki suggests to have a win-win strategy. “We have been through three main crisis so far and we can say that the trend of operators during those hard times was to drop the costs and prices as much as possible. In 1986 credit crunch, cutting costs was on the expenses of service companies by forcing them to reduce their prices (which in fact negatively affected the quality) and laying down experienced labor… once again in 1998, the budget cut off was a bit different as operators mostly reduced their expenditures.” Zaki spelled out that such trend negatively affected both operators and service companies and they should have applied the win-win strategy. “In Egypt, the case is different. We are not a crude oil producer; we are an important natural gas producer. And, all the decisions and plans made are symbolized in one entity, which is the EGPC. So, when the head office asks us for a market forecast, we fail to provide any since the main industry body does not enlighten us!” wondered Zaki. “Due to the lack of transparency, we lost $5.6 million in Egypt,” he revealed. To sum up, the pricing list of any service companies is aligned to the interna-
tional oil prices, stated El-Shafie. “This concept is not understandable for most of operators. And, in order to address officials for this concept, you will confronted by the various governmental entities that rule the sector, such as the EGPC, EGAS, Ministry… etc. and you then lose track of who to speak to! You lose time addressing each entity individually. Hence, the long-term plans are mandatory for us. Another problem was the timing gap of the each fiscal year’s plan. The EGPC sets its annual plan in June, while most of the companies start finalizing their yearly plan in September.” Besides, El-Shafie added that the petroleum sector in Egypt is a sector of connection, which is another drawback. “There is no sole company that can declare it was fairly treated all the time.” He further added that the company’s entire plan in Egypt was based on history. Another factor that is destructing the sector is the abusive farm-out of tenders. “Looking to all the mentioned factors, we can see how they lead the investor to seek only profit, without having for instance adequate human development trainings to the employees or providing high wages… Also, have you ever read a recruiting ad in a newspaper? Definitely NO! It is a sector of connections and most of employees are appointed, whether qualified or not for the job vacancy, through connections.”
What are the drawbacks hindering the petroleum sector?
El-Shafie angrily replied that there are three main drawbacks; absence of longterm plans, connections and lack of transparency. “Even if you try to refuse the connections to employ unqualified candidate, you will be threatened of facing problems in your operations.” Although Said disagrees with ElShafie and declared that this problem of connection is found in every sector worldwide, all participants believe that the rate is really high in Egypt, specifically in Egypt.
If you are appointed the Minister of Petroleum, name one decision you will add or change? Zaki: I would call for transparency
as the fundamental element for the petroleum system and abolish the “circle of trust” system. I believe that the petroleum sector enjoys plenty of qualified heads, which we should depend on instead of the “circle of trust”. We should
appoint the right qualified member in the right place, no matter who is he/she. Due to the so-called trusty people, many occupied top and critical positions, while they were in fact unqualified for it! Also, we should pay more attention to the 2nd class labor force, which should one day replace the old aging figures. There is a severe shortage of skilled and well-trained generations to take over the senior positions. We do have a huge gap in this matter. Our future is already behind us; it is time now for the youth to build their own future. Our role should be limited to passing our long years of experience to the young generations. Wedad: as I mentioned earlier, first thing I will work hard to lay down in the sector is transparency. Besides, the Ministry of Petroleum should apply the Business Concept that should takes into consideration the political as well as the commerciality aspects. This sector has always been following a one sided vision, however, this dynamic sector should be based on a multi-considerations that combine political, commercial and social aspects at one time. If all I am suggesting applied, we will ensure a state of fairness in the release and awards of tenders, for instance. There would avoid the long-suffered problem of unexplained farms in and out and the abusing right of undisclosed explanations behind a tender’s awards… etc. Everything should be built on transparency, which would leave no room for any corruptive entities. I cannot deny the fact that this sector has a perfect system and laws, but it is all on papers! When it comes to implementation, no one does apply or follow any! My third decision as a Minister, I would develop the new generations to be ready to take over the lead and do not keep relying on the old faces. We should pass on our expertise to the young petroleum personnel; create steady knowledgeable and skilled calibers that can take the lead. We should no longer monopolize the top positions to the old faces. Anwar: in my opinion, I will first address the delegation of authority problem, which I have been suffering from personally. I know a manager’s responsibilities is to be in control of his department and the work process, yet this does not necessarily mean that he has the needed technical background, hence there should be the role of his technical team members, who should be given some space to make a decision. There should be no centralization of authority or decision-making. Such attitude oppresses the skills of the manager’s team under the pretext of position hierarchy. Everyone should be given the right to share, comment and be part of whatever decision based on his specialty. Moreover, I believe there should be a succession plan, which would not be achieved without the implementation of a concrete career development program in each entity. Also, I would abolish the idea of having a governmental observing entity that establishes service companies and holds part of its shares, and yet asked to be ob-
15
jective! This creates a conflict of interest. El-Shafie: definitely, I will call for transparency as a basic tool in this sector, upon which, we can avoid any possible negativity or corruption generated by anyone in the industry. Besides, I would strengthen the concept of “lead by example” that would help produce a brand new generation of skilled engineers, managers and labor in general who can be the adequate replacement for any senior position and have the know-how to be in leading positions. At the end of this fruitful discussion, all participants agreed on a common belief; this is not the time to take revenge, it is time to build, correct and reshape the petroleum sector for a better country. “Let’s give the lead to the youth who is capable enough to write a more prosperous future”.
Delegation of authority and the centralization of decision making is a issue that needs to be addressed
ENG. AHMED ANWAR
With transparency, we can avoid any possible negativity or corruption
ENG. HAZEM EL SHAFIE Personal confilct of interest is a main undesirable element affecting the sector.
ENG. MAGDY WEDAD
The petroleum sector enjoys plenty of qualified heads,which we should depend on instead of the circle of trust
ENG. SAID ZAKI
InReview
16
Breakthrough
in 2011 E&P spending
Global exploration and production spending is forecast to rise 11% in 2011 from $442 billion in 2010 to $490 billion. This increase will be driven by spending gains in Latin America, the Middle East/North Africa and Southeast Asia. Prepared by Mostafa Mabrouk, Vice Chairman Assistant For Economic Affairs, Ganope
According to Wood Mackenzie, the capital spending on upstream activities such as drilling and production will increase substantially in many global regions over the next three years, but it will be minimal in the Gulf of Mexico. It is predicted that upstream spending in the U.S. will climb to around $95 billion in 2013 from a low point of $63 billion in 2009. Even more spectacular growth is expected in Australia (up 190%) and Iraq (up 1,700%). For the first time in several years, large Western oil companies are leading the industry’s charge, increasing their budgets faster than the state-run national oil companies that have dominated spending in recent years.
The largest producers, a club that includes Exxon, Royal Dutch Shell PLC, Chevron Corp. and BP PLC, are expected to increase spending by 16% to $108.6 billion, according to Barclays Bank. A decade ago, these companies were slow to ramp up spending after an oil-price slump and ended up paying more for drilling rigs and other services. This time, they appear committed to not making the same mistake. The substantial increase in E&P capital budgets for 2011 is due in part to a number of factors including engineering and construction related spending for several large LNG projects expected to move forward next year (specially in Qatar), in-
creased spending in Iraq (majors oil companies with all their capital power intend to increase daily production to its utmost at 12MM Barrel / day by 2015) and an increase in deep-water activity (South East Asia, GOM, West Africa and Brazil). Mexico’s PEMEX and Brazilian Energy Company Petrobras are expected to drive E&P spending in Latin America, with PEMEX pursuing onshore and offshore projects and Petrobras significantly expanding its deep water activity with development of the Tupi field (largest field in Brazil 100,000 BOE + 177MMCF). As the global appetite for energy rises, led by Asian economies, the increased spending for new supplies is being seen as a good sign. In Asia and Australia, the spending outlook for state-owned and international companies is mixed, as Pertamina in Indonesia and PTT Exploration and Production in Thailand are expected to increase E&P spending. Significant spending increases are expected for India’s ONGC, Malaysia’s Petronas and Sinopec in China. Capital spending budgets outside North America are expected to rise by 12 % in 2011 to $ 363.3 billion (from $324.1 billion in 2010). Meanwhile, U.S. E&P expenditures are forecast to grow 8.1% to $93.6 billion from $86.6 billion in 2010 by 210 companies. Of the 210 companies with spending in the U.S., the largest increases in 2011 are expected from companies that spend under $50 million, up 63% year over year. However, the 107 companies that fall into this category represent on 2% of total 2011 estimated spending. Companies that spend over $1 billion are expected to increase their capital expenditures next year by 5.2%; these 28 companies represent roughly 71% of 2011 forecast U.S. E&P spending. Canadian E&P budgets are expected to rise 4.8% to $32.6 billion in 2011 from $31.1 billion in 2010, according to 126 companies in the survey. A survey made by Barclays found that companies are basing their 2011 E&P budgets on average oil prices of approximately $77.32/ barrel, up from the $70.16/barrel average oil price used for 2010 budgets in December 2009. Companies used an oil price of $73.56/barrel at mid-year for budgeting
purposes. E&P budgets for 2011 also are reflecting a natural gas price forecast of $4.27/ Mcf, 18% lower than the $5.21/MCF price assumption used one year ago and 8% decrease from expectations at mid-year, or $4.65/MCF. The Organization for Petroleum Exporting Countries (OPEC), meeting earlier in December in Ecuador, showed no desire to increase production, a move the group would typically consider if it felt that high oil prices could hinder economic growth. And a recent survey of oil companies indicated an increasing confidence that prices in 2011 will be robust.
Chevron
Chevron Corporation announced a $26.0 billion capital and exploratory spending program for 2011, out of which a $2.0 billion of expenditures by affiliates that do not require cash outlays by Chevron. Around 85% of the 2011 spending program is for upstream oil and gas exploration and production projects worldwide, while the remaining 15% is associated with the company’s downstream businesses that manufacture, transport and sell gasoline, diesel fuel and other refined products, fuel and lubricant additives, and petrochemicals.
HESS
This year, the company allocated $5.6 billion for 2011 capital and exploratory budget; $3.1 billion for production, $1.6 billion for developments and $900 million for exploration. The exploration expenditures include conventional deep water drilling in Egypt, Ghana, Indonesia and Brunei.
Marathon Oil
Marathon’s 2011 worldwide Exploration and Production (E&P) budget of approximately $3.4 billion reflects an increase of 29% over 2010 capital spending. Marathon’s E&P strategy is based on three key elements: a solid portfolio of base assets, growth assets and impact exploration. The Company plans to spend approximately $1 billion on its base E&P assets to provide stable production, income and free cash flow. These assets include production operations in the Gulf of Mexi-
March 2011 / Issue 51 co, Norway, U.S. conventional oil plays, Equatorial Guinea and elsewhere. With a continued emphasis on high operational reliability, Marathon will implement a disciplined investment plan and competitive cost structure for its base assets. The increase in spending for base E&P assets, compared to 2010, is primarily due to additional activity on conventional oil assets in Norway and the U.S. Besides, Approximately $1.9 billion of the capital spending budgets is allocated to E&P growth projects. Of that, nearly $1 billion is concentrated on three key North America liquids-rich resource plays: North Dakota’s Bakken play, the Eagle Ford Shale play in Texas, and the Anadarko Woodford Shale play in Oklahoma. Marathon plans to spend $465 million selectively investing in a controlled high-impact exploration program. Activity will include conducting seismic surveys and drilling 10 - 15 high-potential prospects this year across the deep water Gulf of Mexico, Indonesia, the Iraqi Kurdistan Region and Poland. Marathon estimates 2011 production available for sale will be between 380,000 and 400,000 barrels of oil equivalent per day, excluding the effect of any future acquisitions, dispositions or exploration suc-
cess, essentially flat with 2010 volumes. Increases in the Company’s U.S. unconventional production is expected to largely offset natural declines elsewhere, largely in North Sea assets.
ConocoPhillips
ConocoPhillips has approved a 2011 capital program of $13.5 billion, representing a significant increase in Exploration and Production expenditures. Approximately $12.0 billion of the capital programs will be in support of E&P, while the Refining and Marketing (R&M) segment represents about 9% of this year’s spending. The 2011 capital program is consistent with the company’s plan to enhance returns on equity through shifting capital to higher returning investments, maintaining capital discipline and funding growth in shareholder distributions. This capital budget reflects the company’s emphasis on building the upstream business. In Europe, Asia Pacific and Africa, the E&P capital program is expected to total about $6.0 billion. Within the Asia Pacific region, the company’s funds will be used for further development of the coaled methane-to-LNG project associated with the Australia Pacific LNG joint venture, as well as for the development of new fields offshore Malaysia, Indonesia, and
offshore Vietnam. In the North Sea region, spending is planned for existing and new opportunities in the Greater Ekofisk Area, the U.K Fields, various Southern North Sea assets, and the development of the Jasmine and Clair Ridge projects. As for the capital for the African region is expected to be in support of onshore developments in Nigeria, Algeria and Libya. Spending in the Caspian Sea region is planned to be in support of continued development of the Kashagan Field.
Noble Energy
Noble announced its estimated 2011 capital program to count for approximately $2.7 billion, with investment split relatively between the U.S. and international operations. Approximately, 42% of the program is directed towards major project investments, 18% for exploration and appraisal activities, and the remaining 40% for ongoing maintenance and near-term growth opportunities. Major project investments include the company’s development activities in the horizontal Niobrara, deep water Gulf of Mexico, West Africa, and Eastern Mediterranean. The company anticipates investing $875 million in the Central DJ basin. In addition to the existing vertical well program in Wattenberg, Noble Energy intends to expand horizontal Niobrara drilling activ-
17
ity, targeting around 70 horizontal wells in 2011. In the deep water Gulf of Mexico, the company’s $275 million program is focused on progressing near-term oil developments at Galapagos and Raton South. It also includes three exploration wells with expectations to resume drilling at the moratorium-suspended Santiago and Deep Blue wells, along with a first appraisal well at the Gunflint discovery. Noble Energy’s core international programs in West Africa and the Eastern Mediterranean represent approximately $575 million and $650 million, respectively. In West Africa, the company plans to advance liquid developments at Aseng and Alen (Equatorial Guinea, gas/condensate) and to resume oil exploration with two to three tests in the region. A large portion of the Eastern Mediterranean expenditures will be the development of the Tamar natural gas field, offshore Israel. Exploration plans in the Eastern Mediterranean include three to four wells, which will include at least one appraisal well at the Leviathan discovery. The remainder of the capital program is set aside for other opportunities onshore in the United States, as well as in the North Sea and China. Excluded from the capital program is $70 million of noncash capital to be accrued for the Aseng FPSO capital lease.
Industry Statistics
18
Egypt Statistics Table 1
Production - October 2010
Egypt Rig Count per Area -December 2010 RIG COUNT
Area
Total
Area
Sold
Percentage of Total Area
13
Gulf of Suez
11%
Offshore
Planned
Million cubic feet Million cubic feet Med. Sea
131934
%
Oil
Equivalent Gas
Condensate
Barrel
Barrel
Barrel
23559643
94.43
139717
Liquefied Gas Barrel
1418203
Total Gas & Derivatives Ton
350605
31165
Barrel 25328451
13
Land
E.D.
11
Mediterranean Sea
9%
Offshore
11
Land
1
N.Red Sea
1
2237346
W.D.
39013
38719
100.76
8010646
6966607
1910438
439982
39110
17327673
GOS
1173
2635
44.52
5301530
209464
82346
207342
18430
5800682
Delta
14621
13547
107.93
123480
2610893
219111
111676
9927
3065160
Sinai
282
248
113.71
2112496
50357
43244
85838
7630
2291935
1%
Offshore Land
2237346
68
Western Desert
59%
Offshore Land
62
Upper Egypt
9
Sinai
8%
Total
Offshore Land
9
16331 187023
9%
Actual
Planned
%
Oil
17801829
22375645
79.56
Condensate
3673342
17801829
20.63
Gas & Derivatives
34592407
36155951
95.68
Total
56067578
58531596
95.79
Offshore 11
3673342
1195443
106262
56067578
3%
Offshore Land
3
116
Total
100%
Rigs per Specification
Rigs perArea Delta 3% G.O.S. 11%
E.D. 9%
33396964
3
Delta
Sinai 8%
17801829
11
Eastern Desert
Land
95.98
194866
16331
Puilling Unit Drill Ship 2% 2%
Med. Sea 9%
N.Red Sea 1%
PlaBorm 2%
Standby/Stacking 17% Land-‐Drilling 41%
Semi Submersible 2% Jack-‐Up 11%
W.D. 59%
Work-‐Over 23%
Average Currency Exchange Rate against the Egyptian Pound (January 2010/ February 2011)
US Dollar 5.805
Euro 7.860
Sterling 9.221
Yen (100) 7.019
Stock Market Prices (December 2010/ January 2011) Company Alexandria Mineral Oils [AMOC.CA] Sidi Kerir Petrochamicals [SKPC.CA]
Table 1
High
Low
57.89
49.07
14.85
12.82
Wortld Crude Oil Production (Including Lease Condensate) (Thousand Barrels per Day) Libya
Sudan
Other
World
OPEC1
Table 2
Persian Gulf2
North Sea3
2010 February
1,650
510
2,436
73,586
31,163
20,650
3,600
March
1,650
515
2,455
73,552
31,074
20,581
3,682
April
1,650
521
2,388
73,581
31,149
20,707
3,622
2010 February March April May June
May
1,650
525
2,405
73,494
31,208
20,825
3,485
June
1,650
510
2,412
73,237
31,449
21,004
2,945
July
1,650
510
2,399
73,441
31,367
20,934
3,153
August
1,650
515
2,385
73,305
31,418
20,969
2,902
September
1,650
515
2,400
73,542
31,348
20,955
3,066
1,650
505
2,366
74,080
31,414
20,984
3,431
1,650
513
2,406
73,497
31,266
20,819
3,356
October
2010 10-Month Average
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.
July August September
United States2
Persian Gulf3
OAPEC4
OPEC5
E
9,523
23,248
24,099
34,517
86,153
E
9,570
23,183
24,017
34,429
86,135
E
9,525
23,315
24,145
34,513
86,104
E
9,622
23,449
24,262
34,590
86,152
E
9,529
23,644
24,440
34,847
85,799
E
9,552
23,625
24,506
34,816
86,140
E
9,712
23,670
24,533
34,878
85,979
PE
9,746
23,669
24,523
34,822
86,173
9,784
23,714
24,562
34,905
86,835
9,582
23,470
24,313
34,674
86,092
October 2010 10-Month Average
World Oil Supply1 (Thousand Barrels per Day)
PE
World
1«Oil Supply» 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.
March 2011 / Issue 51
19
March 2011 / Issue 51
20