Oil & Gas Review - Jan 2010

FROM THE EDITOR’S DESK

A very Happy New Year to you!

2009 was a tumultuous year for the oil and gas industry, plagued by low demand, rising inventories and abysmal level of oil prices, for most part of the year. The global economic bedlam, which affected all sectors, also had an adverse impact on the oil and gas industry. As we usher in 2010, regional and global experts believe that it’s time to be a little more sanguine. Oil and Gas Review (OGR) spoke to international and regional experts, who believe that 2010 would be much better, though most of them are cautiously optimistic.

So, what are the reasons for this optmisim? Firstly, data emanating from around the globe has been positive over the last couple of months, helping to propel crude oil prices and hence investments. Most of the economic powerhouses have now officially exited recession and are witnessing positive growth. OPEC believes that the world economy would grow at 2.1 per cent, which is significantly better than a contraction of 1.1 per cent in 2009.

Reasonably good level of oil prices are extremely crucial for the oil and gas sector, to ensure investments and security of energy supply in the future. In fact, the world is expected to need 45 per cent more energy than we consume today, with investments of almost $1 trillion a year for the next 20 years. To support such huge investments, oil prices have to be at reasonably good levels. The irony however is that high oil prices invariably leads to inflation, which is bad from a consumer stand-point. Hence, striking a balance between the needs of the industry and consumer always remains paramount.

Moving on, the current edition of OGR features an interview with Dr Zaid Khamis Al Siyabi, Director General, Exploration and Production, Ministry of Oil and Gas, Oman. Dr Siyabi believes that it’s exciting times for the Sultanate’s oil and gas sector in 2010, with a number of projects slated to go on stream. All these projects are expected to boost the Sultanate’s production levels, with the one million barrels per day mark, very much in sight. The current edition of OGR also features many more interesting articles, especially Shell’s ambitions in Qatar and Saudi Aramco’s green initiatives. Do enjoy reading the edition.

Sunil [email protected]

Is sanguInIty returnIng?

No 08 Jan-Feb, 2010

CONCEPT & CONTENTAkshay BhatnagarSunil Fernandes

DESIGNArt Director Sandesh S. RangnekarSenior Designer Shameer MoideenSenior Photographer Rajesh BurmanPhotograp herSathya Das

Production Manager Govindaraj Ramesh

MARKETINGBusiness Head - Strategic Media UnitKush GuptaMarketing Team Vinod Varma, Sanjeev Rana

CORPORATEChief Executive Sandeep SehgalExecutive Vice President Alpana RoyVice President Ravi Raman

Senior Business Support Executive Radha Kumar

Distribution

United Media Services LLC

Published by United Press & Publishing LLC PO Box 3305, Ruwi, Postal Code - 112 Muscat, Sultanate of Oman Tel: (968) 24700896, Fax: (968) 24707939 Email: [email protected] rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. OER accepts no responsibility for advertising content.Copyright © 2009 United Press & Publishing LLC Printed by Oriental Printing PressCorrespondence should be sent to: Oil & Gas Review United Media Services PO Box 3305, Ruwi 112, Sultanate of Oman Fax: (968)24707939 Email: [email protected]

An Presentation

CONTENT

Cover StoryA time for optimism

24

On the ascentDr.Zaid Khamis Al Siyabi, DG-E&P, Ministry of Oil & Gas, in an exclusive interview with OGR talks about new proposed reserach centre, EOR, gas security, MEOR and more

20

Insets:

Return to better times in 2010, says industry experts in an exclusive chat with OGR

18 ALTERNATIVE ENERGYA report on the Solar Technology Conference held recently in Oman

10 IN THE NEWSA look at some of the top international oil and gas personalities who were in the news in 2009

06 INDUSTRY SCANA complete news round-up on the latest in Oman’s oil and gas industry

Upstream spending will return to growth by 2010, predicts

Wood Mackenzie

22Prudence

- The Watchword

OGR talks to John Blascos, the new General Manager and

Shell Country Chairman Oman

Taking charge36

Refinery capacity to overshoot demand

Interview with Ian Bourne, Editor-in-Chief of Argus Media

34

2 Nov-Dec, 2009

4 Jan-Feb, 2010

CONTENT

Peral GTL and Qatargas4 are expected to contribute significant

cash flows to Shell and Qatar

46Taking giant strides

A report on Saudi Aramco’s progress on preserving natural environment

Environmental stewardship

54

52GLObAL ROUND-UP A complete news round-up on the latest from the global oil and gas industry

Insets:

72 TENDER WATCH Business opportunities from the region and other markets

57 jOb POSTINGS Job opportunities for the industry professionals from around the globe

Tony Hayward, BP Group Chief Executive on setting a course

for sustainable energy future

Energy pathways48

42

bIOFUELSIn search of green gold

42Scientists are relying on photosynthetic algae to replace fossil fuels with biofuels

64 REGIONAL ROUND-UPBrief update on the news and developments from the regional oil and gas industry

6 Jan-Feb, 2010

OOC raises stake in Bharat Oman PetrOChemiCalsState-owned Oman Oil Company SAOG (OOC) has increased its stake in Bharat Oman Refineries Limited (BORL) to 26 per cent, thus becoming the second major stakeholder after India’s Bharat Petroleum Corporation Ltd.

The agreement was signed on behalf of OOC by HE Maqbool bin Ali Sultan, minister of commerce and industry and chairman of OOC, while it was signed on behalf of Bharat Petroleum Corporation Ltd by Ashok Sinha, chairman of the board, and Joshi, general manager of Bharat Oman Petrochemicals Ltd.

Maqbool said that the agreement will contribute to promoting ties of co-operation with Bharat Petroleum Corporation Ltd which seeks to explore new opportunities for OOC in India.

BP CeleBrates 100 years

The BP Lubricants Division celebrated the company’s centenary anniversary with its Omani retail customers and Oman Oil Marketing Company, the sole distributor for BP lubricants in Oman. On the occasion, BP launched the Visco Academy Awards, a new initiative designed to recognise the outstanding performance of its customers.

“We are very proud of our heritage and history in the Middle East. BP’s success in Oman is a combination of experienced people, our trusted distributor Oman Oil Marketing Company and loyal customers,” Rick Capoccia, sales and business development manager, BP Mena Lubricants said. Commenting on the celebration, Mohammed Samir, regional marketing controller, BP Middle East Lubricants said, “The Middle East region is a key market for BP and the Visco Academy Awards is yet another way to demonstrate our commitment to our discerning trade partner.”

renaissanCe suBsidiary seCures $ 42m finanCing

Renaissance Services’ wholly owned subsidiary, Topaz Energy and Marine, has closed a long term financing deal of $42m (16.2m rials) from Standard Chartered Bank, Dubai. The funds will be used towards the post delivery financing of Offshore Support Vessels (OSV) and also will be used to fund future capex programme in the company’s offshore fleet expansion programme.

In light of the financial environment, the new long term funding facilities illustrates the company’s robust operations, assets and balance sheet, and reinforces the willingness of international and regional banks to partner with Renaissance, says the company statement issued to the press.

It further stated that the long term facilities also match the company’s policy to fund its long term asset development

with a matching long term loan profile. This cautious strategy provides reassurance during the current global economic downturn and has allowed Renaissance to acquire new investments from a safe and secure standpoint.

Topaz Marine’s continued investments programme in its fleet expansion and modernization programme has seen its OSV fleet cross the 100 vessel mark this year. The company employs a prudent vessel acquisition strategy that restricts any

speculative buying other than in technological or geographical niches. During the year 2009, the company had invested over $150m (57.8m rials) mainly in assets in its growth areas in offshore vessels fleet and building of workforce accommodation facilities in the Oman’s interior oilfields.

Recently, the company divested its offshore support vessel TEAM Siam to Thailand-based Mermaid Offshore Services Ltd for $29.5m (11.3m rials). TEAM Siam, a DP2 Diving Support Maintenance Barge, had been on charter to Mermaid Offshore for over four years. The vessel was refitted in 2002 to ensure an extended life value. Stephen Thomas, Renaissance CEO said, “Renaissance owns over $1b (384.6m rials) of assets and this type of transaction highlights the embedded value in the company’s balance sheet.”

InDuSTRy Scan

PetrOleum develOPment Oman PuBlishes new BOOk On Oman

Petroleum Development Oman (PDO) has published a new book titled, ‘Oman: Faces and Places’. The book was launched at a ceremony held in the Oil and Gas Exhibition Centre in the presence of HE Nasser bin Khamis al Jashmi, undersecretary at the ministry of oil and gas.

‘Oman: Faces and Places’ include more than 80 richly illustrated articles from PDO News which for more than thirty years was the company’s flagship publication until it discontinued in 2002.

“Today, PDO continues a long tradition of publishing books about the Sultanate aimed at the lay reader. ‘Oman: Faces and Places’ is a celebration on the nation’s rich history, its cultural heritage and uniquely beautiful landscape,” John Malcolm, managing director of PDO said.

Published by PDO’s External Affairs Department and Communications Department, the book aims to give the modern-day reader an insight into the

Sultanate as it has evolved over the last 40 years. Two separate editions are available in English and Arabic.

PDO News appeared for the first time in May 1968 and was published continuously until 2002, evolving from being a corporate

magazine into a publication of general interest, covering a wide range of subjects. Wildlife, boat-building, geology, camel racing and the life of desert dwellers are just a few of the topics covered by PDO News that are captured by the book.

Qalhat lng signs PaCt with Osaka gasQalhat LNG signed a pact with Japan’s Osaka Gas Corporation to own a 10 per cent equity share in Senboku Natural Gas Power Company. The step follows Osaka Gas’ share purchase in Qalhat LNG through its subsidiary, Osaka Gas Australia in June 2006. This mutual ownership will strengthen the two companies’ business partnership and promote ties of friendship and co-operation between Oman and Japan. Shaikh Al Fadhl bin Mohammed al Harthy, undersecretary of the ministry of national economy for development affairs and chairman of Qalhat LNG, said that Qalhat LNG has always been a source of pride for the national economy.

The financing strategies, marketing innovations, international awards, and the highest Omanisation rates the company achieved in the Omani oil and gas sector are considerable and praiseworthy, he added. Qalhat LNG figures as the first ever foreign LNG company to invest in a power plant in Japan.

2010 gift tO the natiOnHis Excellency Dr Mohammed bin Hamad

al Rumhy, minister of oil and gas laid the foundation stone of a new Eco Learning Centre to be located close to PDO’s Oil and Gas Exhibition Centre. The new centre will be PDO’s gift to the Nation for 2010, a tradition that hails back to 1990, when PDO gifted the nation with a technical library. Other gifts to the nation include the Oil and Gas Exhibition Centre, the Planetarium and, in 2005, the Traffic Safety Institute. The planned Eco Learning Centre was conceived by PDO’s External Affairs and Communications Department،

8 Jan-Feb, 2010

sOhar POwer & desalinatiOn Plant marks 1,500 aCCident-free days

STOMO (Suez-Tractebel Operation and Maintenance Oman) completed 1500 days of operating and maintaining the Sohar Power & Desalination Plant. However, the real significance of these 1500 days is that they have been entirely accident-free.

In the Sultanate of Oman, STOMO (owned by GDF Suez and SOGEX Oman) also operates and maintains power plants at Manah and Al Rusail, as well as the power & desalination plant of Barka II.

In order to commemorate this safety milestone, a ceremony was organised at

the plant site. In attendance were William King, general manager, STOMO; Shankar Krishnamoorthy, chief executive officer, GDF Suez MENA (Middle East & North Africa); and Jan Vanoudendycke, chief operations officer.

Krishnamoorthy praised the STOMO staff for their remarkable safety record, as well as for their outstanding performance in ensuring uninterrupted operation.

The exemplary performance, it was pointed out, is reflected in the high capacity of the plant, its heat rate, minimal outages,

and high efficiency in day-to-day operations. Vanoudendycke congratulated the

STOMO team on their exceptional safety record. “This achievement is an important milestone for the plant,” he said. He added, “It is a result of each employee taking responsibility for their own health, and the health and safety of others as well.”

He reiterated the GDF Suez Group’s commitment to the protection of all resources - human as well as property - while staying true to the group’s values: Drive, Commitment, Daring and Cohesion.

InDuSTRy Scan

average Omani Oil PriCe

Change 09/08 -44٪

2008 2009

$101.1 per barrel

$56.7 per barrel

average daily Oil PrOduCtiOn

Change 09/08 7٪

2008 2009

756, 800 barrels

810,000 barrels

Oil & gas seCtOr – state general Budget 2010

Oil & Gas sector’s estimated contribution to total revenue

Estimated average oil price

Estimated oil revenues

Estimated gas revenues

Estimated total expenditure on oil & gas production

Change 10/09*

76٪

$50 per barrel

4.050 billion Rials

800 million Rials

1.450 billion Rials

6%

Source: Ministry of Finance and Ministry of National Economy*approved budget for 2009

A refinery supply contract worth 31m rials ($80.5m) has been given to W. R. Grace & Co, based in Germany, according to a newswire agency report quoting a tender board official. “Grace got the contract to supply catalyst and chemical additives for the break unit for the Sohar refinery.” The other bidders in the race included Netherlands’ Entercat Europe, BASF Refining Catalysts and Albemarle Catalysts Company.

Grace is a leading global supplier of catalysts and other products to petroleum refiners; catalysts for the manufacture of plastics; silica-based engineered and specialty materials for a wide range of industrial applications; sealants and coatings for food and beverage packaging, and specialty chemicals, additives and building materials for commercial and residential construction. Founded in 1854, Grace has operations in over 40 countries.

germany’s graCe gets $80.5mn refinery deal Oman may invest in indian Crude reservesThe Sultanate of Oman may become the first investor to take up an Indian invitation to set up large crude oil storage facilities in the country, helping the world’s second fastest growing major economy reinforce emergency oil reserves and reduce its vulnerability to supply disruptions, according to a news report published in Mint-Wall Street Journal newspaper in India.

India has invited oil-producing West Asian nations to set up storage facilities on the country’s coastline to help them serve their energy markets in Asia such as Japan. In turn, the facilities will augment India’s oil storage infrastructure, helping it meet domestic demand in the event of any short-term disruption in supplies.

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51550 Oil Review.indd 1 09/04/2009 12:40

10 Jan-Feb, 2010

Ziad S. Al-Labban was recently appointed the president and chief executive officer of Petro Rabigh. Al-Labban worked for Saudi Aramco for about 27 years, starting in October 1982 with a bachelor’s degree in electrical engineering from King Fahd University of Petroleum and Minerals. In 1988, Al-Labban took part in the Out-of-Kingdom Advanced Degree Programme, where he earned a master’s degree in petroleum engineering from Stanford University in Palo Alto, California.

Al-Labban has participated in several management development activities, including the global business programme and the President’s Leadership Challenge. He has also served as a director on the board of the Saudi Arabia chapter of the Society of Petroleum Engineers.

After graduation, he returned to Saudi Aramco, where he assumed various responsibilities in the upstream and downstream oil and gas businesses, including experience in petroleum engineering and development, northern area producing, southern area producing, Exxon Production and Research Co. in Houston, corporate planning and international joint ventures.

In THE nEWS

OGR looks at some of the top international oil and gas personalities who were in the news

neWs MaKers In 2009

Peter Voser

Peter Voser was appointed as CEO of Royal Dutch Shell (RDS) plc with effect from July 1, 2009. Prior to being the CEO, Peter served as chief financial officer (CFO) and executive director of RDS since 2004, and from October 2004 up to July 2005 was CFO of the Royal Dutch/Shell Group of Companies. From March 2002 until September 2004, Peter was CFO and a member of the group executive committee of the Asea Brown Boveri (ABB) Group of Companies, based in Switzerland. In addition to his role as CFO, he was also responsible in the executive committee for group IT and the oil, gas and petrochemicals business (upstream and downstream).

Voser graduated in business administration from the University of Applied Sciences, Zurich, in 1982. From

August 1982 to March 2002, Voser was employed by the Royal Dutch/Shell Group of companies in a variety of finance and business roles. During this time, he worked in Switzerland (five years), UK (eight years), Argentina (five years) and Chile (two years).

After moving back to London from Chile in early 1997, Voser became the group chief internal auditor. In 1999, he was nominated as CFO in Shell Europe Oil Products before becoming CFO of the Global Oil Products Business (early 2001), and a member of the oil products executive committee. In April 2005, Voser was appointed to the board of directors of UBS AG. In November 2006, he was appointed a member of the Swiss Federal Auditor Oversight Authority.

Ziad Al Labban

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12 Jan-Feb, 2010

In THE nEWS

John S. Watson is the new chairman of Chevron Corporation. The board of directors of Chevron Corporation elected John S. Watson, 52, chairman of the board and chief executive officer of the company, effective Dec. 31, 2009. A native of California, Watson earned a bachelor’s degree in agricultural economics from the University of California at Davis in 1978 and a master’s degree in business administration from the University of Chicago in 1980.

Watson joined Chevron in 1980 as a financial analyst. He held financial, analytical and supervisory positions before being elected president of Chevron Canada Ltd. in 1996. In 1998, he was elected vice president of the corporation, with responsibility for strategic planning and mergers and acquisitions. In 2000, he led the company’s integration effort following the Chevron-Texaco merger and then became the corporation’s chief financial officer. In 2005, he was elected president of Chevron International Exploration and Production, with responsibility for the company’s exploration and production activities outside North America. In 2008, he was elected executive vice president for strategy and development. Watson is a director of the American Petroleum Institute.

John S. WatsonIn what came as a surprise for many, BP announced the appointment of Carl-Henric Svanberg, to replace Peter Sutherland as chairman of BP. Earlier, Svanberg was the chief executive officer and president of the Ericsson Group. He was born in1952 in Porjus, in the north of Sweden. He graduated from Sweden’s Institute of Technology at Linköping University with a master of science in engineering and also holds a bachelor of science in business administration from Uppsala University. In addition to this, Svanberg holds honorary doctorates at Luleå University of Technology and Linköping University in Sweden.

After graduation in 1977, he worked for Asea Brown Boveri (ABB) with various foreign assignments within project exports. In 1986, Svanberg moved to Securitas, the world-leading security company. After four years, he was appointed first executive vice

president for the Securitas Group. In 1994, he moved to the Assa Abloy Group as president and CEO. Svanberg was chairman of Sony Ericsson Mobile Communications AB and served on the boards of the Confederation of Swedish Enterprise, Melker Schörling AB and the University of Uppsala.

In addition to Svanberg’s business track record, he is personally committed to and an advocate for many corporate responsibility issues, including human rights, climate change, and the United Nations’ Millennium Development Goals. He is also a member of the steering committee of The Global Alliance for Information and Communication Technologies and Development (GAID) and the external advisory board of the Earth Institute at Columbia University. He was recently awarded the King of Sweden’s medal for his significant contribution to Swedish industry.

Carl Henric Svanberg

13Jan-Feb, 2010

Alex B Miller, deputy chairman of the board of directors, chairman of Gazprom’s management committee was in the thick of things as Gazprom cut of gas supplies to Europe in a dispute with Ukraine. Many European countries had been hit by a sudden cut in Russian gas supplies in early 2009, as sub-zero temperatures coincided with a Russian-Ukrainian row over energy prices. The impact was felt especially severely in the Balkans.

Miller was a post-graduate student at N. A. Voznesenskii Leningrad Finance and Economics Institute from 1986 to 1989, and obtained Ph. D. (Economics) degree in 1989. In 1990, Miller was appointed researcher, Leningrad Finance and Economics Institute, and then head

of section, committee on economic reform, Leningrad City Council. From 1991 to 1996, Miller served with the committee for external relations, St. Petersburg Mayor’s Office. He was head, markets monitoring section, foreign economic relations department. Later he was appointed head of the department, and deputy chairman of the committee. From 1996 to 1999, Miller was director, development and investments, at Morskoy Port of St. Petersburg Open Joint Stock Company. From 1999 to 2000, he served as general director, Balttiiskaya Truboprovodnaya Sistema (Baltic Pipeline System). In 2000, Miller was appointed deputy minister of energy of the Russian Federation. He has served as chairman of the management committee, Gazprom, since 2001.

Nance Dicciani was named to Halliburton’s board of directors in July 2009. Dicciani was appointed by president George W. Bush to the president’s council of advisors on science and technology. Before retiring in 2008, Dicciani was the president and chief executive officer of Specialty Materials, a $4.9b strategic business group of Honeywell. Prior to that, she was senior vice president and business group executive of Chemical Specialties and the director of the european region for Rohm and Haas. During Dicciani’s tenure at Rohm and Haas, she also served as vice president of the petroleum chemicals division and headed the company’s worldwide monomers business. Before joining Rohm and Haas, Dicciani held positions of increasing responsibility in research, engineering and research management at Air Products and Chemicals, Inc.

Dicciani earned a bachelor of science degree in chemical engineering from Villanova University, a master of science degree in chemical engineering from the University of Virginia, and a Ph.D. in chemical engineering from the University of Pennsylvania. She also earned a master’s degree in business administration from the Wharton School of the University of Pennsylvania.

Ranked twice as one of the “World’s 100 Most Powerful Women” by Forbes magazine, Dicciani was also named as one of the “Top 40 Most Important People in the Chemical Industry” in 2006 by Chemical Business. She has received the “Achievement Award” of the Society of Women Engineers.

Nance Dicciani

Alex B. Miller

16 Jan-Feb, 2010

Simon Henry is the new chief financial officer of Royal Dutch Shell. He was earlier the executive vice president finance in Shell International Exploration and Production. He succeeds Peter Voser who has become the chief executive of the company since July 2009.

Henry, a UK citizen, joined Shell in 1982 as an engineer at a UK refinery. After qualifying as a member of the Chartered Institute of Management Accountants in 1989, he has held a number of senior finance positions in Europe, the Middle East and Asia Pacific.

Simon Henry Nobuo Tanaka is a champion for the cause of climate change goals. He believes that climate/energy challenge is enormous but it can and must be met. He took over as executive director of the International Energy Agency (IEA) on 1 September 2007. Energy information and advice is the key to policy making and decisions, which the IEA has been facilitating for the last few decades.

Prior to joining IEA, he had been director for science, technology and industry at the Paris-based Organisation for Economic Co-operation and Development (OECD). IEA is an intergovernmental organisation which acts as energy policy advisor to 28 member countries in their effort to ensure reliable, affordable and clean energy for their citizens. Tanaka began his career in 1973 in the ministry of economy, trade and industry (METI) in Tokyo. He has extensive government and international experience within METI, the Embassy

of Japan in Washington D.C. and the OECD. Tanaka first joined the OECD in 1989 as deputy director of the directorate for science, technology and industry, and was promoted to director in 1992. In 1995, he returned to METI and served in a number of high-ranking positions, the most recent being director-general, multilateral trade system department, Trade Policy Bureau. In this role, he led many trade negotiations for the World Trade Organisation (WTO). In the energy field, Tanaka has accumulated a variety of experiences. He was responsible for Japan’s involvement with the IEA and the G7 Energy Ministers’ Meeting during the second oil crisis. In the late 1980s, he participated in establishing the comprehensive energy policy of Japan and he also oversaw the implementation of Japan’s international nuclear energy policy and led negotiations of bilateral nuclear agreements.

Nobuo Tanaka

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18 Jan-Feb, 2010

s conventional energy resources continue to deplete at an alarming rate, there’s an urgent need to

invest in renewable energy.

Energy experts believe that there is a huge potential to exploit power from renewable energy, especially solar power.

Speaking at a Solar Technology Conference, His Highness Sayyid Tarik Bin Shabib Bin Taimur Al Said stated that when he was deciding on what to say on solar energy and renewable energy in general, the first question that came to his mind was how could one get people, government and businesses excited about this subject.

“I believe that talking passionately about the subject and by showing governments and businesses how it can be good

aLTERnaTIVE EnERGy

Huge PotentIal A recent conference on Solar Technology held in Oman, highlighted the increasing need to invest in the different sources of renewable energy, particularly against the backdrop of waning conventional energy resources. OGR reports

for them financially, ethically and by building reputation, it would be helpful. We happen to be living in an era when green issues are in vogue. Despite the financial crisis, there is still a great level of talk and investment in green issues,” he stated.

According to His Highness Sayyid Tarik, countries in the Middle East that depend on fossil fuels, can and must diversify into renewable energy like solar energy while their oil stocks still last. “A great place to start is by increasing the dialogue and business prospects between innovators in the field and their clients. This symposium can create the right atmosphere for that to happen,” he stated.

Berthold Breid, CEO, Renewable Energy AG said that if one wanted to develop a market, it was of course important to share ideas and knowledge about innovation. “It’s also important to develop the right political framework. It is important to have companies that dare to widen their business and who take a new direction with new products and services. It is also important to get financing. You need companies, financing, innovation and political framework,” he said.

Speaking on Germany’s statistics, Breid said that Germany generates 15 per cent of electricity out of renewable. “The amount of energy generated through wind was more in 2008, then water power. There has also been an increase in electricity out of biomass. In Germany, there is lot of greenery and hence you can use biomass for electricity generation,” he stated.

Elaborating on photovoltaic, Breid stated that there has been an increasing use of photovoltaic. “Photovoltaic is the generation of electricity through sunlight. We use solar modules for that,” Breid noted. According to him the target set by the European Commission is 30

HH Sayyid Tarik Bin Shabib Bin Taimur Al Said

19Jan-Feb, 2010

per cent of consumption in the European Union out of renewable energy by 2020. Werner Koldehoff, board member, German Solar Industry Association revealed that the demand for primary energy will rise significantly in the years to come. According to him countries like China, India and Brazil are still hungry for energy.

“Due to the huge energy consumption that we have, we have a significant rise of CO2,” he stated. Speaking on the overall world scenario of fossil fuels, Koldehoff observed that there were options like coal, oil, gas, and uranium. “We have coal that will last for 120 to 150 years. Oil for 50 to 60 years and gas for 60 to 70 years. Uranium for 25 to 30 years. However, the sun will shine for the next 3 billion years,” he stated.

Hence, according to him the sun would remain a major source for energy and Oman had plenty of it. “If we concentrate all our efforts and energy on solar and PV, we could solve the problem with ready to use energy. We talk of downloading information from the internet, just download the Sun, it will solve a lot of problems. It is not rocket science. It is normal engineering, which needs investments and courage,” he stated.

making the right mOvesRenewables despite having a small share in energy consumption, are growing at a fast pace, the latest BP Statistical Review of World Energy 2009 says. Renewables still account for only a small share of total energy consumption, and for the most part, still require government support. But from that small base they continued to grow fast, with global deployment reflecting government support as well as natural endowments.

In contrast to all the other fuels, growth in renewables was led by OECD countries, where policy support is strongest. But like other fuels, 2008 saw rapid growth in the first half followed by a marked deceleration towards the end of the year, and into 2009.

Ethanol is now equivalent to 0.9 per cent of global oil consumption. Production growth accelerated for a fourth consecutive year, rising by 31 per cent in 2008. In volume terms it rose to 0.7 Mboe/d. The US accounted for 62 per cent of global supply growth, Brazil for most of the remainder. US production rose to 600 Kb/d, as new capacity responded to mandated increases in blending requirements and to high gasoline prices. The credit crisis and falling product prices after mid-year slowed things down and left the US ethanol industry with overbuilt capacity – by year-end about 15 per cent of US ethanol production capacity lay idle. Wind power generating capacity growth accelerated to 30 per cent in 2008, the fourth consecutive year of accelerating growth. Growth becomes a race between newly emerging big players: China recorded the fastest growth rate among the major markets and the second largest volume increment (6.2 GW, 106 per cent growth), but the US added the most new wind capacity, overtaking Germany, and with 21 per cent has now the largest global share of wind power capacity. Solar power generating capacity grew even faster than wind. Spain and Germany together accounted for more than 75 per cent of the solar growth, due to strong government support. However with capacity reaching 13.4 GW, solar is still a long way behind wind, which stands at 122.2 GW. Together, wind, solar and geothermal power supply around 1.5 per cent of global electricity.

Hydro and nuclear Hydro and nuclear power generation showed steady production levels, according to the latest BP Statistical Review of World Energy 2009. Hydroelectricity and nuclear power account for 11 per cent of global primary energy consumption – with global shares of 6 per cent and 5 per cent, respectively. Their shares have been stable for decades, and 2008 was no exception. Hydroelectricity generation increased by an above-average 2.8 per cent, with the increment accounted for by growth in China, including completion of Phase One of the Three Gorges project. Nuclear power generation fell by 0.7 per cent, and for the first time for which we have data (since 1965), it fell for two years in a row. But these were one-off events: Last year’s decline was the result of the full-year shutdown of Japan’s largest nuclear power station and extensive maintenance in the UK. No new unit entered into service in 2008. Werner Koldehoff

Board Member, German Solar Industry Association

20 Jan-Feb, 2010

on tHe ascent The Sultanate’s oil and gas industry is ushering in 2010 on a more buoyant note than ever before. Projects in Harweel, Marmul, Qarn Alam and Mukhaizna are going to significantly boost oil production in 2010. Dr Zaid Khamis Al Siyabi, Director General, Exploration and Production, Ministry of Oil and Gas talks to Sunil Fernandes on a new proposed research centre, EOR, gas security…MEOR

InTERVIEW

A lot of concession agreements have been signed in 2009. Have any companies backed off due to the adverse economic conditions prevailing globally?

Indeed, the ministry signed a handful of agreements, during 2009, in its efforts to grow the resource base of both oil and gas. I can assure that all the companies are optimistic and are extremely busy in exploring and appraising for hydrocarbons in the Sultanate. In 2010, there would be more blocks that are going to be on offer. In fact, in 2009 despite the prevailing economic conditions we had many big companies showing interest and being awarded concession agreements. In 2010, I am sure there will be an even better response, as oil prices have recovered and globally the economic scenario is getting better. I believe that the overall scenario is getting better for Oman and with each passing year, we will see production showing a gradual increment.

Do you believe that the country would be self sufficient in gas, if we consider a rapid growth in industries in the future?

The ministry has not spared any efforts in availing more gas in support of the rapid growth of industries in the country. We have awarded additional agreements in late 2008 and during 2009 specifically targeting gas operations. Moreover, as we speak, PDO had spudded a well in October, in a series of four wells targeting unconventional gas trapping concept. This is very challenging and ultra tight gas. It is going to be a challenging programme over the next couple of years to exploit this gas. The idea here is very different. We believe that the gas here is trapped by the capillary mechanism, as opposed to the more common structural and stratigraphic trapping mechanisms. If what we believe is proven right, then I think we will be sitting on a lot of gas. Having said that, I must admit that this gas is going to be expensive. If we are able to exploit it, the gas is going to be in

Dr Zaid Khamis Al Siyabi Director General, Exploration and Production, Ministry of Oil and Gas, Oman

21Jan-Feb, 2010

significant quantities and sure to power the industrial sector in Oman.

At what production levels would we end the year 2009?

In 2009, we are expecting to average at around 805,000 barrels per day (the interview was taken towards the end of 2009). In 2010, we are looking at a growth rate of 5 to 6 per cent over 2009, which should take us to around 850,000 to 860,000 barrels per day.

What are the projects that would be implemented in 2010?

The ongoing fields still contribute significantly into the 2010 production plan. In addition, projects like Harweel miscible gas injection, Marmul polymer and Qarn Alam will also be coming on stream at various stages during 2010.

So, it’s going to be an exciting time in the next two years for the oil and gas industry in Oman?

Sure it is going to be. Also, let’s not forget Occidental where we will average around 170,000 barrels per day, from Mukhaizna and Safah fields. We are also seeing increasing production from both Daleel and West Bukha fields, which will make a positive impact into 2010 production target. Clearly, we have bottomed out, and we are ascending greater heights in the future.

What are the research and development activities that are happening within the oil and gas industry in Oman?

Oman has had an exemplary track record as far as research and development are concerned. In the energy sector as a whole, we are seeing development in solar power, both for power and steam generation to be used for heavy oil production. This is a big boon for the energy sector. Petroleum Development

Oman is doing some trials in this regard. As we speak we are in the process of establishing an Enhanced Oil Recovery Institute. This would enable EOR in the existing activities and look at further enhancing our capabilities in this area. The initial focus will be on thermal recovery. The project has got the consent of the research council.

When do you believe the research institute would be up and running?

As you know setting an institute from scratch is quite an involved process. All I can say is that we are in full steam putting all the jigsaw together. Therefore, 2010 will be a special year where we hope to realise the fruition of all these efforts. It is going to be a very professional set-up as we are planning to undertake some consultancy work as well. We have a lot of ideas that we want to implement. To start with, there will be research undertaken for thermal EOR and gradually we will move to other areas, including polymer. The institute is a government of Oman initiative.

With Oman being the only country to adopt so many EOR techniques, would the country be able to offer consultancy in this area in the future?

Oman is the only country in the world that has different types of EOR techniques that are being implemented on such a large scale. We have the expertise as far as EOR is concerned and are way

ahead of countries in the region. For example, the thermal application in Oman is perhaps the most complicated EOR method adopted anywhere around the world. Yes, we are in a position to capitalise on this, and hence the research institute is a step in that direction. We are quite excited with the development of the institute. Not only surface, I believe we will be excelling in sub-surface, as well as manufacturing activities.

What about research as far as microbial enhanced oil recovery is concerned?

As far as MEOR is concerned, Sultan Qaboos University is making the right approach in advancing such technique, with the right mix of expertise. The idea is to find the right type of bacteria and multiply it fast. Various kinds of studies are being conducted. For example, the food for such bacteria. We are studying the possibility of using date syrup as a feedstock for such bacteria. We have plenty of date palms and hence dates are available in abundance here.

What’s the hope as far as MEOR is concerned?

This technology has not advanced much. India has done some studies on MEOR. Companies like Oil and Natural Gas Corporation (ONGC) have done research and we are working with companies like ONGC to study their own experiences. I believe that there has been some research done in Russia as well. MEOR processes unlike EOR takes a little more time and one has to have the patience.

What about the possibilities for exploiting unconventional resources?

Unconventional areas offer plenty of growth ambition for Oman, starting from unconventional heavy oil, to unconventional gas to sour hydrocarobon, and many more. Stay tuned to hear results in the coming years.

2010 will be a special year, in which the previous years’ efforts will fructify.

22 Jan-Feb, 2010

Oil majors had significantly pruned down their upstream spending in the light of the economic mayhem. According to Wood Mackenzie however, upstream spending will return to growth by 2011

SPEcIaL REPORT

PruDence tHe WatcHWorD

23Jan-Feb, 2010

n its latest report, titled ‘The first hints of recovery in global upstream spending’, the independent global research firm Wood Mackenzie, predicts

that investment in the upstream sector will return to growth by 2011, reaching around $350b in 2012, although caution remains.

The report stresses that upstream spend will be restored on a modest upward trend in 2011. In 2010, investment will remain at levels similar to 2009, at around $325b, down from a five-year peak of $370b in 2008, although there will be some notable exceptions: “There will be a few, major new capital projects implemented through 2010, such as Gorgon in Australia, Rumaila in Iraq, Blocks 17 and 31 in Angola and the Kearl project in the Canadian oil sands sector. But, overall, we expect such commitments to be balanced by the prevailing caution in the industry, as companies await convincing evidence that the recovery will be sustained.”

Wood Mackenzie’s examination of international and national companies’ development spending plans, reveals that trends will vary by region and sector. Iain Brown, vice president - upstream energy research for Wood Mackenzie explains: “In some regions, operators are planning slightly more ambitious capital programmes than in 2009, reassured by the oil price remaining at around $70/bbl, and ready to exploit significant reductions in the

regional cost base. However prudence is the watchword in many other areas, especially where commitments are required to large-scale, long-lead projects, or where commercial or political risks are perceived to be high.”

The report finds that many of the areas where growth has been maintained through 2009 have been underwritten by major national oil companies (NOCs), such as in Saudi Arabia, Abu Dhabi and Brazil, and Wood Mackenzie forecasts that total NOC spend will remain steady at around $100b per year (in real terms) over the next five years.

Cutbacks on investment were greatest and quickest in North America, which saw its share of global capital spend fall from 31 per cent in 2008 to 24 per cent in 2009. Wood Mackenzie attributes this to the large proportion of budgets in this region which are commonly discretionary, allowing greater flexibility in adjusting project schedules. In Canada, several oil sands developments were cancelled or postponed, resulting in a 50 per cent drop in year-on-year capital spend. Brown expands: “We expect that North America will recover to provide 27 per cent of global spend in 2012, but will not fully recover the lost ground, reflecting residual concerns over the long-term viability of higher cost resources such as oil sands and unconventional gas.” Wood Mackenzie says the impact of the recession has been severe in established producing

provinces elsewhere, with overall expenditures in Europe and Russia falling by around 20 per cent.

Brown explains what is at stake when investment levels fall: “Countries such as the US, Canada, Russia, China and Nigeria must secure consistently high levels of investment year on year to maintain their supply capacity. In the case of the UK, Norway and Indonesia, capital budgets of between $6-15b per year serve only to constrain the pace of overall capacity decline.”

“Mexico is an example of a country which is failing to maintain capacity growth, despite a huge reserve base and recognised prospectivity. A combination of cumbersome industry bureaucracy, the limitations of the NOC and a particularly difficult recession, have caused production capacity to drop steadily since 2004. The continuing absence of significant international investment has dispelled hopes of a reversal of this situation in the near future,” warns Brown.

Brown concludes: “Given the economic shocks experienced by the industry in the past 18 months, we anticipate that companies will demonstrate a preference for low political risk and fiscal stability, such as those offered by high-cost provinces like the US, Canada, Australia and parts of Europe, which continue to offer compelling value propositions and attract high levels of external investment.”

PruDence tHe WatcHWorD

24 Jan-Feb, 2010

Production by region Million barrels daily

083 48 58 68 78 88 98 09 19 29 39 49 59 69 79 89 99 00 10 20 30 40 50 60 70 80

90

80

70

60

50

40

30

20

10

Asia Pacific

Africa

Middle East

Europe & Eurasia

S. & Cent. America

North America

World oil production increased by 380,000b/d in 2008. OPEC production increased by 990,000b/d despite production cuts instituted late in the year. Saudi Arabia saw the largest production increase, with output rising by 400,000b/d. Russian production fell by 90,000b/d, the first decline since 1998. OECD production fell by 750,000b/d, with Mexico registering the world’s largest decline (310,000b/d).

a tIMe for oPtIMIsM

he economic mayhem in 2009 had a telling effect on the oil and gas industry globally. Oil prices plummeted

to abysmal levels, leading to demand destruction and lower investments. In 2010, experts believe that it’s time to be a little more sanguine than ever before. The optimism for the oil and gas industry comes from better economic data emanating from around the globe. In fact, many countries have now exited recession and are back to positive growth levels. Data coming from the US has been positive. Even while going to press, news from the US was better, with employers there cutting only 11,000 jobs, which was the smallest loss since the start of the recession in December 2007, while the unemployment rate fell.

Economic conditions are extremely important for the oil and gas industry. Better conditions lead to better demand and hence better oil prices. Reasonably good level of oil prices are paramount for continuing investments in the oil and gas sector, which ensures security of energy supply in the future.

Time To be opTimisTic Oil and Gas Review, spoke to several

industry experts, who largely believe that 2010 would be a much better year in terms of oil prices and investments.

“Going by the major economic indicators and forecasts by analysts, demand is likely to pick up in 2010. We have seen that Organization of the Petroleum Exporting Countries (OPEC) has been fairly successful in controlling prices. We have also constantly heard that OPEC producers are fairly comfortable with $70-80 per barrel price band. We expect less volatility in demand and prices in 2010,” says Jean-Denis Bouvier, CEO of Petrogas E&P.

Energy Predictions 2010 by Deloitte Touche Tohmatsu (DTT) reveals that oil & gas companies – both international oil companies (IOCs) and national oil companies (NOCs) – are expected to face a particularly difficult set of issues in the year ahead. Mergers and acquisitions (M&A) activity is likely to begin to rebound in 2010 and attain pre-recession levels by 2011.

OPEC has revised its 2010 demand projections. According to OPEC, the demand for oil is now expected to be around 85.07 million barrels per day, in 2010, as against its earlier estimate of 84.93 m b/d. The revision comes

cOVER STORy

Source: BP Statistical Review 2009

25Jan-Feb, 2010

Production by region Million barrels daily

083 48 58 68 78 88 98 09 19 29 39 49 59 69 79 89 99 00 10 20 30 40 50 60 70 80

90

80

70

60

50

40

30

20

10

Asia Pacific

Africa

Middle East

Europe & Eurasia

S. & Cent. America

North America

World oil production increased by 380,000b/d in 2008. OPEC production increased by 990,000b/d despite production cuts instituted late in the year. Saudi Arabia saw the largest production increase, with output rising by 400,000b/d. Russian production fell by 90,000b/d, the first decline since 1998. OECD production fell by 750,000b/d, with Mexico registering the world’s largest decline (310,000b/d).

2009 was a watershed for the oil and gas industry, plagued by oil price volatility, pruning down of investments and demand destruction. Ring in 2010, and energy experts are more optimistic of a return to better times. Sunil Fernandes reports

26 Jan-Feb, 2010

amidst the economic recovery.

Interestingly, the demand growth is being propelled by countries in Asia, particularly China and India. In fact, OPEC has forecast a growth of 3.73 per cent in demand for oil from China in 2010, over 2009 levels. India too has had an insatiable demand for oil, with previous year’s figures indicating a growth of more than 5 per cent. The Middle East itself will see an increase in demand of 3.34 per cent, in 2010, according to OPEC.

While demand is expected to grow, it’s always a question of oil prices that remains moot, for both oil producers and consumers. Higher oil prices invariably are a major factor for investments in the sector. US investment bank Goldman Sachs maintained its previous $90-a-barrel 2010 average price forecast for West Texas Intermediate crude futures, but predicted the NYMEX crude futures

would rise to $110 a barrel in 2011, on rising demand from emerging markets.

“Overall, we leave our 2010 WTI crude oil forecasts largely unchanged at an average price of $90/bbl, but with lower prices at the start of the year and higher prices at the end,” the bank said in a report. In October 2009, Deutsche Bank raised its 2010 oil price forecast by $10 to $65 a barrel. Of course, besides demand driving oil prices, there’s always the weaker/stronger dollar impact and speculative activity that would continue to have a bearing on prices.

cauTious opTimism for invesTmenTs As a result of the financial crisis, investment in upstream oil and gas has already been cut by over $90 billion this year (by November 2009) compared with 2008, according to the International Energy Agency. With burgeoning demand, the cut in

investments does not augur well to meet the rising demand. In fact, such has been the impact of the recession, that there are no indications of large scale investments happening. Current oil and gas price volatility and uncertain demand are making it more difficult for oil companies to plan forward investments. Oil companies require security of demand to underpin long-term investments. Uncommitted spend is being reviewed by most companies, not only in light of lower oil prices but also in the expectation that they can get a better deal in the coming months.

In its latest report, titled ‘The first hints of recovery in global upstream spending’, the independent global research firm Wood Mackenzie, predicts that investment in the upstream sector will return to growth by 2011, reaching around $350 billion in 2012, although caution remains. The report

cOVER STORy

“The forecast for 2010 now shows positive world GDP growth of 2.7 per cent, raised from an initial forecast of 2.3 per cent in July. Only 0.5 per cent of this growth will come from OECD economies. Instead, it’s the emerging economies of China and India that will lead the way, with expected 2010 growth rates of 8.5 per cent and 6.5 per cent, respectively. In line with global growth expectations, there are signs that overall global demand contraction will ease in the fourth quarter.

The consensus is that oil demand growth will return after two full years of contraction. This suggests that demand growth will be 0.7 million barrels per day in 2010, and will gradually rise to 1.2 million barrels per day by 2013. Most of this demand growth will again be in non-OECD countries, with transportation, industrial and

petrochemical industries leading the way.

In terms of investments in the oil and gas industries, we should recognise that last year’s market volatility and low price environment had an adverse impact on projects. The instability discouraged investments projects in both OPEC and non-OPEC countries, and many other projects were delayed or cancelled.

But with current prices today — and signs of a rebound in global economy next year — we are seeing the re-activation of several OPEC projects. All these indications are in line with OPEC’s expectations. While we remain cautiously optimistic, there are signs that we are moving into positive territory for 2010. But we recognise that there are still many challenges ahead.”

demand tO rise in 2010 OPEC Secretary General HE Abdalla Salem El-Badri feels that with the anticipated rebound in the

global economy, several OPEC projects have now been revived. OGR reports

27Jan-Feb, 2010

“Of late there has been a revival in oil prices. There are two perspectives that we could discuss for 2010: one would be the global perspective and the other would be the Oman perspective. In 2009, there were many projects that were shelved or altogether cancelled. Tar sand projects in Canada were a casualty, due to prevailing low oil prices. Tight gas projects in the Rocky Mountains were also shelved because of the dismal prices.

With the prevailing oil prices, these projects are now being revived. Therefore, an improvement in prices would positively impact some of these projects. In Oman, we never altered our investments, because we always knew that low oil prices were a short term phenomenon. In fact, in 2009 we believe that we will end with more production then in 2008. And, in 2010, we are confident of increasing that amount over 2009. In fact, this year we have an increase in production of 6 per cent over the previous year.

In the long term, the world needs a lot of energy. I believe that in 2010 we should continue seeing better prices and hence investments. If you believe reports from the International Energy Agency and OPEC, demand for oil is expected to grow. In 2010, oil consumption would be above 86 million barrels per day. This is going to happen due to the increasing demand from countries like China and India.

As far as refineries are concerned, they were plagued by low gross refining margins, due to low oil prices in 2009. With an increased oil demand, we should see an increase in gross refining margins in 2010. Though, I must also admit there are reports of oversupply of crude and distillates.

As far as oil prices are concerned, it’s largely related to demand, though, when prices rose sharply to $147 per barrel, there was an element of speculation. Oil prices will drive investments in the future, even as security of supply would always remain a concern with the world needing a lot of energy in the years to come.

As far as unconventional resources are concerned, if oil prices continue to hover around the $80 per barrel mark, we will see lot of investments happening in this area. Likewise with gas. With winter in the United States and Europe region, we will see a firming-up of prices. Gas prices are hence likely to move in tandem with oil prices. If we see demand like we have seen two years back, there’s going to be pressure on supply and hence prices. High oil prices are not good for consumers since higher energy costs tend to fuel inflation.

As regards what would be a reasonable price for oil, it’s a matter of individual perception. There are some projects that are highly capital intensive, and high oil prices are always preferred. My personal opinion is that $70-80 per barrel is a fair price. Also, many countries are exiting recession, while some have already exited, and therefore very high oil prices can be detrimental to recovery.”

Oil PriCes tO aid investments Dr Zaid Khamis Al Siyabi, Director General, Exploration and Production, Ministry of Oil and Gas, talks to Sunil Fernandes on the reasons for being a little more optimistic in 2010

28 Jan-Feb, 2010

stresses that upstream spend will be restored on a modest upward trend in 2011.

“In 2010, investment will remain at levels similar to 2009, at around $325 billion, down from a five-year peak of $370 billion in 2008, although there will be some notable exceptions: There will be a few, major new capital projects implemented through 2010, such as Gorgon in Australia, Rumaila in Iraq, Blocks 17 and 31 in Angola and the Kearl project in the Canadian oil sands sector. But, overall, we expect such commitments to be balanced by the prevailing caution in the industry, as companies await convincing evidence that the recovery will be sustained,” the report states.

“No matter what shape the recovery takes, it is becoming more apparent that ‘easy does it’ should be the watchword for the industry. The year 2010 is likely to challenge all within the energy and resources industry, but it should be remembered how important a role energy plays and how its use affects each and every person on the planet,” says Peter Bommel, DTT Global Industry Leader, Energy & Resources. Power and utilities companies will likely face their own set of issues.

“The most important of these is the continued rise of the Smart Grid which has the potential to revolutionise the power sector by reducing energy consumption by up to 30 percent and decreasing the need to construct new power plants. Renewable energy production will likely heat up in two places synonymous with fossil fuels: the Middle East and North Africa. The geographic and demographic conditions are just right for a new type of renewable energy leadership. The shift from decentralised to centralised decision making is likely to increase over the long-term, giving companies

hOtBeds Of OPPOrtunitiesJean-Denis Bouvier, CEO of Petrogas E&P talks to Akshay Bhatnagar on the three key markets that will attract a lot of attention from the oil and gas majors in 2010 and beyond

2009 has been a year a reminder of the cyclicity of the oil and gas energy sector and how to cope with it. By the third quarter of 2008 when the oil price collapsed as part of the global financial meltdown, most of us had no inkling on how deep and how long its likely impact on us would be; forget about knowing how to manage the crisis with precision. Having survived the worst part of the crisis and as we enter 2010 with the global economy recovering albeit slowly but steadily, we are better prepared to withstand the aftershocks of the recession and deal with another round of economic crisis if the need arises.

In the year gone by, we have seen several significant new trends in the oil and gas market. The oil and gas companies had to adjust to the reality of very low oil prices after hitting the pole figure just few months earlier. It was surprising to learn that international oil companies (IOCs) and the national oil companies (NOCs) started talking about borrowing -- something that had not happened for a long time. The objective behind the borrowing is not only to meet their current or impending commitments, but also to take the opportunity of the market downside to make comparatively cheap asset acquisitions.

In the last six months, several exploration and production (E&P) companies with large reserves and limited finance have become attractive propositions for IOCs and NOCs. China in particular has been aggressively targeting assets and companies in South America, Africa, the Middle East and

other parts of the globe acquiring not just reserves but key technologies also.

Key prospecTsGoing by the major economic indicators and forecasts by analysts, the oil demand is projected to modestly pick up in 2010. During the recent global financial turmoil, we have seen that the Organization of the Petroleum Exporting Countries (OPEC) has been fairly successful in controlling prices. We have also constantly heard that OPEC and the other producers are fairly comfortable with a $70-80 per barrel oil price band. We should therefore expect less volatility in demand and prices in 2010. With oil prices above $60, we can expect that major companies should be resuming their investments in oil & gas projects which will go a long way towards ensuring that near term demand will be met.

With such a scenario, as from 2010, the focus of new E&P investments will be on Iraq, Brazil and to some extent the Gulf of Mexico. I’m expecting a lot of action in these three key areas in 2010 and beyond. The first two in particular are the hotbeds of growth and development that will drive the global energy market in the coming years.

We all know that there has been an enormous attention recently on Iraq. The country has the world’s third-largest oil reserves (115 billion barrels of proven reserves) after Saudi Arabia and Iran, according to market estimates. Between the first and the second bid rounds, Iraq will have offered some two-third of its

cOVER STORy

29Jan-Feb, 2010

proven reserves. Although not all fields will be developed at the same time and while it is unlikely that the production increase will equal the sum of the production forecast committed by the bid winners, Iraq is in a position of possibly increasing its production from some 2 million barrels a day currently to 5-8 million barrels a day in the coming years.

The second country to watch out for is Brazil. Numbers of giant discoveries have been made in Brazil recently in the so called “sub salt” play, opening a new oil exploration frontier deep below the Atlantic that could hold some 50 billion barrels of reserves. The South American giant is expected to see hundreds of billions of dollars invested on sub-salt oil and gas development over the next five to ten years. The third area of interest is the deep and ultra deep water sectors

of the Gulf of Mexico, where year on year discoveries in excess of one billion of barrels of oil equivalent (boe) have been made. Lately BP reported a giant discovery at Tiber in the Gulf of Mexico after drilling what was reported as the world’s deepest exploration well. The well was 10,685 meters approx., longer than the height of Mount Everest. The field reserves could be in the range of 3 billion boe. The indications are that more sizeable discoveries will follow for several years to come.

If we add the contribution of new oil from tar sands and add to that the huge increase in global gas reserves from Shale Gas and Coal Bed Methanel (CBM), as it appears, we have moved over a few years from a doom scenario of shortly running out of oil and gas to one where we can hope that there will be

enough hydrocarbon reserves to support a smooth transition from relying almost completely on fossil fuels to relying dominantly on alternative sustainable energy sources, yet to be commercially developed. For this to happen though, it will require maintaining the price of oil in a band that allows both investments in oil and gas production that meets demand as well as in the developments of economically attractive alternative sustainable energy sources.

In that respect prioritizing the arrival to the market, of this “new” oil which cost per barrel ranges from some $5-10/bbl for Iraq and $35- 50 bbl for Brazil presalt play, with the Gulf of Mexico production a shade below Brazil will require a “tough” balancing act for OPEC and non OPEC producers if one wants to keep the oil price stable.

30 Jan-Feb, 2010

shOrt-term delivery vs. future grOwth

Robert Goodwin, Audit Director-Assurance, Ernst & Young tells Akshay Bhatnagar that the new economic environment has made the benefits of partnership more compelling for some companies

“The health of the oil and gas industry is linked to the state of the global economy. Going by the current trends, the global economic recovery is sluggish. The developed nations continue to struggle with high unemployment. The governments have to continue providing the financial stimulus to the needy sectors and companies to maintain the momentum of growth. A lot also depends on the performance of BRIC (Brazil, Russia, India and China) countries as these giants have to continue moving ahead at a very fast pace to drive the global economy.

It is not an easy time to be in the business of oil and gas. Fortunately, oil prices are hovering around $70-80 per barrel and the demand is picking up in countries such as China and India. Though expectations are that oil prices will not experience any extreme fluctuations in 2010, the global recovery is so fledgling that any bad news could bring down the market sentiments and shake the confidence. We have recently seen that happening with the Dubai World debacle.

Though upstream and downstream players make investments for medium-to-long term returns, we have seen curtailment, postponement and cancellation of many projects in the oil and gas industry in the last year or so. Probably the low oil prices and lack of finance were the major factors behind the sharp reduction in the number of oil and gas projects. With upstream and downstream companies under severe pressure to contain cost and boost the bottomline, the business of service providers to these companies are also getting affected. They have lesser projects to service with lower margins. In the recent years, there

cOVER STORy

31Jan-Feb, 2010

has been a big boost in the global refining capacity. In the period 2009-2012, nine million barrels of refining capacity will be coming on stream which is quite high. Already, we have an excess capacity in place as OPEC bloc has cut down the production as there isn’t enough demand in the global market. Where is the demand for this additional capacity? This means that production and refining facilities, in many oil and gas majors, will continue to perform below their capacity, if we have to maintain the current price level.

The big question for everyone is short-term delivery vs. future growth. The need to maintain capital expenditure (capex) on projects that will deliver longer-term growth is understood by all players. Many E&P projects have a long lead-development time, are very capital-intensive and the costs of mothballing or restarting are substantial. The consequence of a major reduction in capex today could be a major supply shortfall further down the road.

The ability of the leading industry players to maintain their capex through a severe and prolonged downturn varies. International oil companies (IOCs), while all announcing significant reductions in profitability, remain profitable, generally well capitalised and with good access to capital markets for funding.

Small- to midcap companies, especially those without producing assets, are likely to be finding it hard to maintain funding for existing projects and very challenging to gain access to funding for new projects. In addition, many state-owned oil

and gas companies are less able to finance projects from cash generated from operations.

Join HandsThe new economic environment has made the benefits of partnership more compelling for some companies. Governments are becoming increasingly active in encouraging and brokering alliances in the oil and gas sphere.

As oil and gas projects have grown in complexity, so have the agreements governing joint ventures. In the current market environment, project participants could find themselves exposed to distressed joint venture partners who are unable to fund their share of commitments. However, the downturn is also likely to increase the appetite for joint ventures — they provide the opportunity for companies to share the operational and financial risks of so-called megaprojects.

Oil and gas companies interested in increasing their partnerships should focus on optimising partnerships and alliances in order to mitigate project risks, share costs and access specialist skills and technology. They could build sustainable relationships with key industry stakeholders.

Oman may not be a very attractive market for the entry of big global oil players but it is a very lucrative market for small-to-medium companies. In the last few years, we have seen entry of many of them but more consortiums and joint ventures among the small-to-medium companies could be formed to optimally utilise the opportunities in the Sultanate. We won’t be surprised if we see a spurt in such attempts.”

an opportunity to exert more control over increasingly complex and costly E&P projects,” DTT has observed.

burgeoning demand over THe long Term For the oil and gas industry, factoring only the 2010 outlook would always be an extremely short term prediction, and hence it would be important to look at a long term story. In fact, if we look at the long term picture, it’s quite clear that to meet the rising demand for energy will pose a major challenge, as the era of easy oil is fast coming to an end. Alternative energy sources, as well as non conventional energy resources are expensive and need huge investments.

Tony Hayward, chief executive officer of BP, while speaking recently at the World Oil and Gas Assembly in Bangalore said, “According to BP’s projections, we’ll need up to 45 per cent more energy in 2030 than we consume today. And we mustn’t underestimate what it will take to achieve that. We’ll need investment of more than $1 trillion a year for the next 20 years. Does the recession alter those projections? I don’t think so. The big picture is that the world is experiencing a dramatic growth in its economy as emerging economies like India industrialise. Energy demand rose by 5.6 per cent here last year.

And we have to see the recent downturn in that long-term context. Unless something really unexpected happens, the upward trend is set to continue.” According to IEA’s World Energy Outlook 2009, as one of the consequences of the financial crisis, global energy use is set to fall this year (2009), but projects that it will soon resume its upward trend if government policies don’t change. “In this Reference Scenario, demand increases by 40 per cent between now and 2030, reaching 16.8 billion tonnes of oil equivalent. Projected global demand is lower than in last year’s report, reflecting

32 Jan-Feb, 2010

PrOjeCts are COming BaCk OntO the agenda

Greg Stringham, Vice President, Markets and Oil Sands, Canadian Association for Petroleum Producers tells Saji P Moolan it’s time to be cautiously optimistic

“There will be several key indicators to watch for into 2010 as the industry tries to reposition itself for success coming out of recession. For natural gas, keep an eye on US drilling, US conventional gas supply, natural gas storage levels (slow drilling and cold weather reducing supply), as well as the competitiveness of Canadian gas supplies in the North American market. Although the outlook for oil is cautiously optimistic, it will be important to watch global oil demand as driven by economies in China and India, the impact on cost inflation and the value of the dollar.

2009 was a very challenging year for Canadian oil and gas producers. We reacted to a dramatic drop in oil and natural gas prices, as well as the financial crisis that dried up access to both bank financing and equity markets. In addition, new shale gas resources entered the supply scene across North America unlocked by new drilling

technology, such as horizontal multi-stage fracturing. This drastic shift in natural gas supply at the same time as the recession was reducing demand drove natural gas prices to very low levels. This imbalance continues to be an enormous challenge for Canadian natural gas producers going into the upcoming winter drilling season.

In 2009, companies were living on cash flows without the normal external investment. Their focus was on tight cost controls and investment limited by low cash flows which resulted in the lowest drilling levels in over a decade.

The industry is looking forward to 2010 with cautious optimism - oil prices are recovering, particularly for heavy oil. Costs are coming down, but slowly. Oil sands projects that were scheduled to go ahead, such as Imperial’s Kearl Lake, have continued their trajectory, and a few new projects are coming back onto the agenda, such as Suncor’s Firebag expansion and the next phase at Devon’s Jackfish project. New tight oil resources, such as those in the Bakken play, are attracting the attention of investors and producers.

However, the situation for natural gas producers remains a concern. High storage levels going into this winter, initial mild winter temperatures, low demand still caused by economic recession, lack of North American market growth and strong new shale gas supplies becoming available at lower prices all indicate a longer period of lower prices and lower activity levels. While there is hope that the North American economy will slowly emerge from the recession over 2010 and that the current slowdown in drilling for gas will help balance the supply side, it still looks to be a challenging year for natural gas producers.

Overall, the outlook for the industry is different for oil and natural gas. Total oil and gas investment levels in Canada are expected to rise from $34 billion this year to $40 billion in 2010, driven primarily by oil but still below the $54 billion invested in 2008.”

cOVER STORy

33Jan-Feb, 2010

the impact of the economic crisis and of new government policies introduced over the past year. Fossil fuels continue to dominate the energy mix, accounting for more than three-quarters of incremental demand. Non-OECD countries account for over 90 per cent of this increase, and China and India alone for over half.

In addition to increasing susceptibility to energy price spikes, the Reference Scenario projects a persistently high level of spending on oil and gas imports which would represent a substantial financial burden on import-dependent consumers. China overtakes the US around 2025 to become the world’s biggest spender on oil and gas imports. The energy poverty challenge also remains unresolved with 1.3 billion people still without electricity in 2030 from 1.5 billion today; though universal access could be achieved with investment of only $35 billion per year in

2008-2030,” the report states.

There’s a huge demand for energy over the long term, fuelled largely by countries like China and India. ExxonMobil’s Outlook for Energy: A view to 2030, states that the world uses approximately 245 million barrels per day of oil-equivalent energy to fuel transportation, generate electricity, run farms and factories, heat and cool homes, and more. By 2030, with projected economic and population growth, the world’s total energy demand is expected to be approximately 35 percent higher than it was in 2005, despite significant gains in energy efficiency.

“The majority of this expected increase in demand will take place in developing countries, where growth is occurring most rapidly and a transition to higher standards of living is taking place. The

immense scale as well as the pace of this growth poses many challenges.

Power Generation will be the largest and fastest-growing energy-demand sector through 2030. China, which today meets almost 90 percent of its power needs with coal, will see its energy demand for power generation more than double by 2030, surpassing U.S. demand by more than one-third,” ExxonMobil’s latest Outlook for Energy: A view to 2030 states. It’s pertinent, that despite prevailing economic conditions, the demand and hence the need for large scale investment for the oil and gas industry would remain. Hayward rightly put it when he said at the Bangalore conference, “As well as ensuring that we don’t leave future generations with the prospect of rising sea levels, we need to ensure that we keep the lights on in the next decade.”

North America 23.43 23.67 23.09 23.61 24.29 23.67 0.99

Western Europe 14.75 14.64 14.04 14.66 14.93 14.57 -1.25

OECD Pacific 7.65 7.94 7.10 7.16 7.71 7.48 -2.26

Total OECD 45.84 46.24 44.23 45.42 46.94 45.71 -0.27

Other Asia 9.48 9.58 9.89 9.54 9.60 9.65 1.85

Latin America 5.82 5.67 5.89 6.10 5.95 5.90 1.34

Middle East 7.10 7.18 7.30 7.55 7.29 7.33 3.34

Africa 3.22 3.31 3.29 3.22 3.30 3.28 2.12

Total DC’s 25.62 25.74 26.37 26.41 26.13 26.16 2.12

FSU 3.96 3.85 3.72 4.17 4.22 3.99 0.77

Other Europe 0.76 0.75 0.73 0.77 0.78 0.76 0.02

China 8.14 7.93 8.66 8.78 8.39 8.44 3.73

Total Other regions 12.86 12.54 13.11 13.72 13.39 13.19 2.60

Total World 84.31 84.52 83.71 85.55 86.46 85.07 0.89

Previous Estimate 84.24 84.36 83.69 85.36` 86.29 84.93 0.83

Revision 0.08 0.16 0.01 0.19 0.17 0.13 0.07

wOrld Oil demand fOreCast fOr 2010 (mB/d) 2009 1Q2010 2Q2010 3Q2010 4Q2010 2010 change %

Sour

ce: O

PEC

34 Jan-Feb, 2010

refInery caPacIty to oversHoot DeManD

InTERVIEW

Ian Bourne, Editor-in-Chief , Argus Media

Argus is a leading provider of price assessments, business intelligence and market data on the global coal, electricity, oil, gas, emissions and transportation industries. Ian Bourne, Editor-in-Chief of Argus Media talks to Sunil Fernandes on refineries, non-conventional energy and more

35Jan-Feb, 2010

Do you believe that the oil and gas industry will see increased level of investments in 2010, especially in the light of an economic revival?The recovery and a rise in oil prices has prompted some oil and gas exporting countries to re-start projects that they had postponed because of the recession and lower oil prices. This should raise the level of investments in 2010, although major oil companies do not plan to spend more in 2010 than in 2009. Major oil companies are seeking to cut costs, which rose steeply until 2008, so even if they intend to continue developing resources at the same pace, they will do so with a lower level of investments.

The six majors — ExxonMobil, Shell, BP, Total, Chevron and ConocoPhillips — have spent about $130 billion a year over the past two years on capital expenditure, up from $100 billion in 2007, but plan to trim investment to about $125 billion in 2010.

Would demand for oil rise in 2010, especially since consumption was dismal in 2009?Oil demand is expected to rise by 1.6 million b/d to 85.2 million b/d in 2010. But the steep increase in demand in 2010 still fails to take consumption back to pre-recession levels because demand fell by over 350,000 b/d in 2008 and by 1.9mn b/d in 2009. Oil demand in 2010 will be just a little higher than it was in 2006, but lower than in 2007. Oil demand in the following years will grow at a slower pace than the 1.9% of 2010 because that year’s large increase represents a one-off bounce back from depressed demand in the recession. Relatively high oil prices are likely to keep oil demand growth at only 1%/yr after 2010.

Would it make sense to revive projects that were shelved, particularly in refinery and petrochemicals ?Many refinery projects are going ahead more or less as planned, especially in India and China. Some Middle East

refinery projects have been delayed as investors seek to reduce costs from inflated levels demanded by engineering firms and other suppliers during the boom of 2007-08. But almost all of these delayed projects will eventually be built.

The problem is that a lot of extra capacity will be added over the next three years by refineries in India, China, other Asia-Pacific countries, the Middle East and north Africa. These will maintain levels of overcapacity in refining at as much as 8mn b/d. This degree of overcapacity means that companies that have delayed building refineries are better off waiting until demand growth finally catches up with increases in refinery capacity, eroding the surplus that keeps margins low.

Petrochemicals projects are already being revived because the process of destocking in the sector appears to have been reversed. As economic recovery gathers pace, demand for plastics in manufacturing has already started to feed into the petrochemicals supply chain, encouraging some producers — especially in China and the Middle East — to revive investment plans that were put on the back burner when the recession hit in 2008.

What is the scope for refineries? Would excess capacity in the industry, continue to put pressure on gross refining margins?Yes, as explained with reference to refinery projects, excess capacity will keep refining margins under pressure. Refinery capacity will still overshoot demand by 6mn-8mn b/d in 2011, reversing the crunch that necessitated higher oil prices to cap demand when surplus refining capacity fell below 2mn b/d in 2005-07.

Where are oil prices headed for in 2010?The recovery from recession has been slow in many OECD countries, but

faster in emerging markets. OECD oil demand has peaked, so any growth in overall world demand requires emerging markets’ consumption to grow faster than developed economies’ oil use declines. In addition, oil demand growth has to absorb the build up in oil inventories that has built up during the recession. Finally, the refinery glut means that product prices are not likely to exert upward pressure on overall oil prices for many years, unlike in 2005-08 when a shortage of refinery upgrading and desulphurisation capacity was a key oil price driver.

Further off, in the medium and longer term, crude supply is constrained by a lack of spare capacity. Only Saudi Arabia has significant oil output capacity shut in. Iraq may develop new capacity through its recent oil field tenders, but this oil production potential is still some years away from development and requires political stability in Iraq. So, the market is in a period of short-term glut, but with an expectation of longer term crude supply constraints. This fragile equation became entrenched in the second half of 2009, keeping crude prices in a narrow range of $70-80/bl. Forecasters see little that will change the balance in 2010, with oil price forecasts averaging at about $75/bl — close to today’s oil price.

Would there be an increased level of investments in unconventional energy like coal-bed methane, shale oil and gas etc?Investments in coal-bed methane and shale gas are spreading from their original strongholds in Australia and the US, respectively. Companies are looking at unconventional gas investments in Asia-Pacific, South America and Europe. The technologies developed to extract gas, especially from shale, have transformed the natural gas industry. This quiet revolution in gas technology has led to a surge in gas output, especially in the US. But the resulting low natural gas prices could act as a cap on investment in the short term.

36 Jan-Feb, 2010

taKIng cHarge John Blascos, the new General Manager and Shell Country Chairman Oman, has worked at Shell for the last 28 years. It’s his third posting in Oman and he’s been a witness to the dramatic changes the country has undergone in the last few decades. Fatma Al Araimi talks to Blascos in an exclusive interview

PERSOnaLITy

John Blascos, General Manager and Shell Country Chairman, Oman

37Jan-Feb, 2010

Tell us about your background.I’m from the United Kingdom, though my name is Spanish, which is misleading at times. I am a qualified engineer by profession, having graduated from Cambridge. I later went on to complete my masters in business administration. After completing my education, I joined Shell as a training engineer in drilling/production technologies in the early 80s, and have been working for Shell for almost 28 years.

Can you share more details about your different postings?

After working in the UK, I worked as a drilling engineer in Algeria. In 1985, I married and moved to work in Petroleum Development Oman (PDO), continuing in the same role and later production technology. Four years later, I moved to London and took up a gas commercial role. I have worked in Nigeria as head of production technology and later moved to Malaysia as a development manager at one our units there. A period in Shell’s upstream head office at Hague followed. And now, I am right here in Oman!

What are the significant changes that you have observed in Oman as you have come back to the Sultanate for your third innings?

I was first here in 1985, and worked for four years, before coming back in 2003, for a two-year stint. And, here I am once again.

One thing that hasn’t changed much in the Sultanate is the Omani warmth. The people here are extremely kind. Though, I must admit that Oman has developed, and become quite advanced on all fronts.

Personally, I hope Oman will continue to strike a balance between development and preserving its nature and beauty.

Of course, it’s going to be a difficult challenge considering the frantic pace of growth being witnessed.

What’s your take on the changing oil and gas scenario here?

I have been witness to the less technically challenging times, when I was here in the early 80s. Now it is more challenging, as we gradually move away from the so-called “easy oil”, which is not unique to Oman but a common feature across the world. However, advanced new technologies should help meet these challenges. As I was leaving Oman for the first time, gas discovery was in a very nascent stage. We now have state of the art gas facilities like Oman LNG, Qalhat LNG, etc.

What more is in store as Shell Development Oman has moved to its new building?

We began here modestly by representing our parent company. However, we have evolved and our activities have increased beyond the remit of a representative office. We have established Shell Technology Oman Center and a regional Learning Hub. Also, some of the business activities that used to be handled by the regional office in Dubai will be done from

here. Obviously, as you grow and add business activities and people, you need that extra space and this is a sign of our long-term commitment to Oman.

What value in your opinion would be a fair price for crude oil?

This is a difficult question; no one can speculate what the oil prices should be. Last year we have seen the price of oil reaching $147 per barrel and at the beginning of 2009 it dropped to below $50. They are many factors, which determine the price of oil. A fair price is one that is good for both producers and consumers, while also allowing oil companies to invest in major projects, which should secure the energy need for future generation. We at Shell believe that the need for energy across the world would double by year 2050. We also believe that to meet this need, most would come from fossil fuel. We must continue to invest in oil and gas projects in order to meet the energy challenge.

What role are you expected to play in your new position?

As the GM & Shell country chairman, I will be looking after our interests in Oman, while simultaneously nurturing the relation between us and our stakeholders in the Sultanate. I am a member of the board of directors of PDO, Oman LNG and Qalhat LNG. In addition, I am also the chairman of Shell Oman Marketing Company SAOG.

You obviously have a strenuous job. How do you destress?

I am a sports enthusiast, I like golf and sailing. I love photography and it’s the best way to capture nature and relive memories somewhere down the line. I look forward to discovering more of Oman during my leisure time taking in the natural beauty and enjoying the warmth of the people.

We at Shell believe that the need for energy across the world would double by year 2050. We also believe that to meet this need, most would come from fossil fuel.”

38 Jan-Feb, 2010

MaKes you stay focuseDNewrest Wacasco is one of the few global players in the catering industry which focuses on isolated areas such as oil exploration (onshore and offshore) says Oliver Laurac, general manager of Newrest Wacasco in an interview with OGR

than 120 international airlines including Emirates, Etihad, Saudia Arabian Airlines, Singapore Airlines, Thai, KLM, etc. Newrest is also bringing its expertise in retail & business solutions and catering & support services. The company retail team has designed and developed nine concepts in retail business -- bar and traditional restaurants, fast food services, buffet & self services, and finally mini market & bar concept. The company manages the entire process through concession con-tracts, human resources, construction and or refurbishment, product offer develop-ment, merchandising, purchasing, stocks, control and compliance with quality and hygiene standards.

Newrest Support is one of the few global players in the catering industry which focuses on isolated areas such as oil explo-ration (onshore and offshore), developing and operating mines, peacekeeping areas and major construction sites. Our specialty is to operate in places where infrastructure and or geographical conditions demands the use of prefabricated camps to accom-modate our potential guests particularly in Africa, South America and of course the Middle East including Oman, Saudi Arabia and Yemen operations.

We operate in Oman under the name of Newrest Wacasco (Waleed Catering & Services Company LLC) serving more than 12,000 guests a day from Buraimi to Sala-lah and from Muscat to Shama. We provide services ranging from catering operations to support activities (laundry, housekeep-ing, pest control) including facilities management (camp construction/provision and administration, access control, utilities/waste management). We also offer our services in retail area in few coffee outlets under the name of “Daily Break”. Globally Newrest is serving more than 450,000 meals a day, a challenge which 12,000 strong Newrest team meets successfully.

What is the nature of Wacasco’s tie-up with Newrest and what value they bring

Oliver Laurac, General Manager, Newrest Wacasco

Tell us about your company’s background and the main services.Founded in 2005, Newrest has quickly increased its footprints in a short span of four year. Currently, we have operations

in 32 countries. Newrest’s core business is in-flight catering. The company creates innovative customized meals adapted to meet the high quality standards required by international airlines. We serve more

SPEcIaL aDVERTISInG FEaTuRE

39Jan-Feb, 2010

on the table for you?Wacasco was established in 1982 and till 2006 it was owned completely by Waleed Associates before Newrest became the main shareholder in the company. Newrest provides material support and readymade solutions to Newrest Wacasco. Our head office team based in France and our managing directors based in Saudi Arabia interact with us on a daily basis. We can rely on them in terms of human resources, important biddings, technical knowhow, infrastructure design, QHSE (quality, hygiene safety and environment) and operational supports.

To give you few examples, last year while we renewed our ISO 9001/2001 and HACCP certifications, we benefited a lot from the support of Newrest Morocco that has maintained high standards of operations. They sent their experts to help us renew our processes and assess our sites prior to the audit. Our ISO internal auditor from Saudi Arabia also visits us every six months. Last year, we needed to provide a camp to one of our client and we were able to source the expertise within the group as Newrest Madagascar had built one similar camp for Total. We are currently helping a major company in Oman in creating a facility for which the complete design is done in coordination with Newrest’s head office and the Saudi team.

We have also revamped our complete logistic software through Newrest suppliers that already understands our business. In-stead of taking months and months for such project, the whole exercise was finished in less than two months. Another great advantage of Newrest is that it enables us to find solutions and information in a very quick time. What matters in today’s world is time. Efficiency allows us to gain new contracts and grow faster.

Which are the main industries you cater to?We cater to all sectors – banking & investment, oil & gas, healthcare,

education and tourism. We are on top of the mind of any new company which starts operations in the country.

How do you make a difference to your client’s business? What are your unique selling propositions?We pay lot of attention to our food items. We supply quality items from all over the world in order to be compliant with our quality policy that we monitor through supplier performance measurements. We have operations team from our head office (chef trainers, site supervisors, trainers, and QHSE managers) visiting the different sites on a regular basis to support our site representatives. In addition, we focus on relooking and improving our QHSE policies to ensure we are proactive in this field. We also give support to our clients (camp design especially) during the tender process so that they could achieve better cost efficiency.

Finally, our job is to provide service and we must ensure complete satisfaction to our clients. For this, we have people working all over our camps or in our head office 365 days a year. We are never closed, we always there committed to serve our clients.

Tell us about some of your most challenging assignments in Oman.The whole Newrest Wacasco operation is a daily logistical challenge! We give support to oil & gas companies or construction companies in areas where no one else is living. Adhering to quality and hygiene standards while transporting food is a must for us.

Two projects currently managed by us are really challenging. One is a labor camp located in Harweel (south Oman) where PDO is building one huge plant. For this, we needed to cater for 4,000 people during the peak period. The quantity of food was massive and the required standards were really high whereas Harweel is 850 km away from Muscat.

There we employed more than 150 employees during the peak time. We were producing there on a daily basis more than 65,000 pieces of Indian bread called chapatti. The second type of project we are participating in is giving catering and support services to seismic crews. This is a compulsory activity prior to drilling in order to know the topography of the soil. The camps for the seismic crews are usually in difficult areas and under testing conditions. The roads are only graded. Sometimes even roads are also not there. Many times, in the absence of a landline, fax or Internet, we have to rely only on satellite phone for telecommunication. The number of people you cater for is around 400 guests so total number of meals required per month is 36,000.

What are the challenges your business face in Oman especially under the current business environment when all companies are looking at cost optimization and what is your strategy to overcome them?The main challenge is to remain cost effective as well for our client to continue the relationship going during these difficult times especially in Oman where selling price is really low. It is a day to day activity wherein each department is involved. HR has to choose the right persons to avoid any operational malfunction on the site. The purchase team has to source the right product at the right time and at the right price. The operation supervisors have to closely monitor and support site representatives that are there to satisfy their clients while they have budget constraints.

Even finance is involved in recovering our dues. The clients must understand that payment on time helps them to get better price and service from us. If they pay on time, we pay our supplier on time and therefore we maintain our competitiveness. In 2009, the toughest exercise we had undertaken was to implement our own logistic chain in order to take full control of our supply chain.

40 Jan-Feb, 2010

Better control, More value‘Our products and services add tremendous value to long-term reliable production,’ says Nathan Steffenhagen, regional manager of Canadian multinational Tierra-Alta in an interview with OGR

What is the relationship between TAGC Ltd and Tierra Alta?Tierra Alta is a privately owned Canada based company. We are primarily a progressing cavity pump manufacturer and associated services provider with most of the personnel having extensive experience in Canadian oilfields, specifically heavy oil. Having been involved in unique projects in the Sultanate since 2007, and following the corporate model of establishing local entities in the belief that local partners add tremendous value, integrity, and insight, TAGC Ltd. LLC was formed in May 2008. It is through this Omani company that we continue to bring world-class products and services to Oman.

What are the unique products offered by your company?As is known throughout the industry, the most conventional and efficient way to extract cold heavy crude is with a progressing cavity pump (PCP) coupled to a continuous sucker rod. Although there are many manufacturers of PCP’s, what is normally missing from the equation is the application knowledge of how, where and what type of product is installed, along with the service equipment to perform installation and maintenance. It is in this area that Tierra Alta excels

– from hands-on customer interaction and design recommendations to our Active Intervention on the service and maintenance side. Although Tierra Alta’s most unique product is its heavy oil PCP - a PCP with a revolutionary geometry design allowing for optimized cavity fillage - our spotlight in the Sultanate has been focused principally on what we label as Active Intervention. This includes flush-by services for primarily PCP and beam pump wells as well as the installation and service of continuous sucker rod in both cold and steam production wells.

How are they relevant to Oman’s oil and gas sector?Focusing primarily on Oman’s oil sector, our products and services add tremendous value to long-term reliable production. In describing our products’ and services relevance, it can be stated very simply (and has been documented through various SPE papers) that wells completed with continu-ous sucker rod will pump longer with less rod/tubing related failures than convention-al rods, resulting in increased production time and decreased operating costs. Also, wells that are pro-actively serviced with equipment such as flush-by hoists, will pump longer resulting in intervention sav-ings and increased production revenue. We

have been successful in proving this around the world (this technology has existed for over 30 years), and have had the privilege of pioneering this technology successfully in the Sultanate together with one of our principal customers.

Tell us about your major clients and projects undertaken in Oman.Our entrance to the Omani market was through Occidental Mukhaizna, in the area of continuous rod supply and services. What began as a pilot project quickly became a field wide standardization for Occidental, with Tierra Alta providing the operation and supervision of the specialized equipment required for installation and servicing. We have had success in the area of PC pump system supply to PDO, however the largest breakthrough yet has been the award of the flush-by services contract to TAGC – the first of its kind anywhere in the Middle East. We are extremely pleased with the co-operation of PDO management in understanding and accepting this technology, as well as both the immediate and long-term benefits of actively intervening their wells, through previously unheard of turnaround times, and in many cases preventing pump failures and downtime altogether.

Nathan Steffenhagen Regional Manager, Tierra-Alta

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42 Jan-Feb, 2010

BIOFUELS

Millions of years ago, a natural process transformed dead organisms buried in the innards of earth into the oil that we drill and burn today. Scientists are now simulating the same process in their laboratories not to produce, but to replace fossil fuels with biofuels. Their feedstock in this process is photosynthetic algae, those commonplace organisms that grow in water. Saji P Moolan reports from Canada

In Search of Green Gold

ver the past couple of years, governments and oil companies have been under tremendous pressure to produce alternative fuels to reduce greenhouse gases that

threaten the very existence of the planet. And, also to meet the growing energy needs. When they found the first and second-generation biofuel feedstock not producing desired results, they turned to pond scum to produce algal fuel a.k.a algaeoleum. Several oil and biotech companies are now on a crusade to take hold of this holy grail of

alternative energy. They have invested millions of dollars to research and develop a viable version of algaeoleum. There are several US energy companies in the forefront including Sapphire Energy, OriginOil, BioCentric Energy, PetroAlgae and Chevron in partnership with National Renewable Energy Labs, to pursue this goal.

The year 2009 saw two big corporations jumping on the bandwagon. Teaming up with California-based biotech company Synthetic Genomics Inc., Exxon Mobil

43Jan-Feb, 2010

44 Jan-Feb, 2010

made an investment of $600 million in renewable energy in July. Incidentally, the oil giant, which has invested more than $1.5 billion over the past five years on projects to improve energy efficiency and reduce greenhouse gas emissions, had never shown any interest in the idea of renewable energy earlier. Why this sudden shift, then? “We have said publicly that we would not commit significant resources to biofuels development until we believed there was a new technology that had real promise. After several years of study, we have concluded that biofuel from photosynthetic algae has the potential to be a commercially viable transportation fuel,” rejoins Rob Young, corporate media adviser, Exxon Mobil Corporation.

Close on the heels of this R&D alliance, British Petroleum (BP) signed in August a $10 million deal with US-based Martek Biosciences Corporation for a joint research project to hunt for green gold. Recently, the US government also showed its interest in algal fuel when the Department of Defense awarded $35 million to California-based General Atomics and Science Applications International to develop jet fuels from algae for military aircraft. There are obvious reasons for this green gold rush. Unlike the widely used biofuel feedstock such as corn, sugarcane, and soybean, algae have numerous advantages as a raw material. On annual basis, algae are 10-30 times more productive than terrestrial crops.

“This is true of all biologically derived biodiesel in general because of the superior lubricative characteristics of the fuel itself. This phenomenon might also be related to the relative BTU content of the respective fuel,” confirms Dr. John Cushman, Professor of Biochemistry and Molecular Biology at the University of Nevada and a researcher of algal fuels. Other advantages that make these aquatic organisms a favourite of energy

BIOFUELS

companies is that they do not compete with food crops and can be grown in almost any climate. They grow on non-arable lands and can sustain on fresh, brackish, salt, or waste water. Algae can also be used to recycle carbon dioxide and NOx emissions.

Even though far from being commercialised, production of oilgae has

already been demonstrated in a number of labs around the world. But, the most tangible display of efficiency was shown by Sapphire Energy. The company, which has announced annual one million gallons of algae-based diesel and jet fuel by 2011, successfully tested its algal jet fuel in January with Continental Airlines. It was the first commercial airline test of algaeoleum. Algal fuel, therefore, is

Algae use the energy from sunlight to convert CO2 into sugar, which they metabolize into lipids (oils)

45Jan-Feb, 2010

now a reality. It is promising too. And, there is no dearth of algae to produce it. The green organism can be grown anywhere, anytime. There is an estimated 300,000 different species of algae. Fewer than about 3,000 species have so far been examined. Therefore, the odds are that many different species are likely to produce green crude. But, there is a hitch with the algae commonly found in nature.

“Naturally-occurring algae do not carry out this process at the efficiencies or rates necessary for commercial-scale production of biofuels,” observes Young. However, there are two methods to resolve this problem. One is closed bioreactors. They are more productive, but much more expensive to construct, maintain, and scale. If one considers enormous production, then the open raceway pond systems appear to be more economically viable. The process of extracting oil from algae is simple. But, the complexity lies in inventing the right production method. All that the producers need are sunlight, water, carbon dioxide and algae. Algae use the energy from sunlight to convert CO2 into sugar, which they metabolize into lipids (oils). In the process, no forests are converted to farm fields, no food grains are turned into fuels and no water is polluted. Algae can, rather, be grown in wastewater, and the process brings down greenhouse gases substantially.

So, no carbon emission, less dependence on foreign oil and intact food chain - algae have all these features to be popular. In no time the idea gained currency, especially in the US where biofuels overall got a boost through a 2007 energy law that mandated the expansion of national renewable fuels standard (RFS) to reach 36 billion gallons by 2022.

But, the commercialization of algal fuel has not moved as fast as its supporters hoped due to problems with scalability

and optimization of production process. “Algae fuels hold tremendous potential and, like all other advanced biofuel technologies, are worth our time and investment to explore. It is very young in its development and will take time,” says Matt Hartwig of Renewable Fuels Association (RFA). Even though the research and development of algal fuels accelerated in the last couple of years, efforts to produce fuels from algae were made during the 1970s oil shock in America. Hundreds of species of algae were tested then. But, the government discontinued the program when they realised that it was not economically viable. Currently, it costs around $30 to produce one gallon of algal jet fuel. But, many researchers are hopeful of bringing it down to less than $5 per gallon

by maximizing algal strains, growth conditions, and production facilities.

However, some believe commercialization of algaeoleum is still a future reality. “I think it will become viable once petroleum diesel cost about $10/gal. Until then, we have time to conduct more research and perfect algae as a feedstock,” says Dr. Cushman.

So, is the algal fuel industry ready to bloom? Yes, there are signs. But, they are certainly no early signs. The industry is in a nascent stage. Here, things are foreseeable. But, it might take some more time to get them tangible. Even those who have commercially tested oilgae believe that it will take at least three years to start commercial production of algae-based biofuels. However, it is important to have alternatives, especially biofuels, to the depleting fossil fuels. Several studies indicate that accessible crude oil is limited and our major source of energy could be gone by the year 2050. It is also important to protect nature and mitigate the problem of global warming given the increasing CO2 content in the atmosphere. In 1960, there was 260 ppm CO2. Today that number is about 385 ppm. We have either to grow enormous acreage of algae or to plant billions of trees to offset the current state of climate deterioration. Algae is, of course, a better option as it serves two purposes – reduces carbon emissions as well as quenches world’s thirst for energy.

Unfortunately, it takes decades to develop the technology and global infrastructure necessary for a fuel source to fundamentally alter the overall energy mix. Therefore, “in the years to come”, says Young “oil and natural gas will continue supplying the majority of our energy because they are scalable, affordable, and versatile. But alternatives and next-generation fuels - like algae - could play important roles.”

The process of

extracting oil from

algae is simple. But,

the complexity lies

in inventing the right

production method

Dr. John Cushman Professor of Biochemistry and Molecular Biology, University of Nevada

46 Jan-Feb, 2010

PROJECT REPORT

TaKInG GIanT STrIdeS In QaTarPearl GTL and Qatargas 4 are unique projects in the global oil & gas industry, with unprecedented scale and technology. Once on stream, the projects will contribute significantly to Shell’s upstream production. OGR reports

oyal Dutch Shell plc (Shell) reconfirmed good progress of the Pearl GTL and the Qatargas 4 projects for a group of

its shareholders and investment analysts recently. Shell is partnering in both Pearl GTL and Qatargas 4 with Qatar Petroleum. Pearl GTL will use Shell’s proprietary Gas-to-Liquids (GTL) technology to convert some 1.6 billion cubic feet (bcf/d) of gas per day into high quality, clean-burning oil products such as gasoil, high specification lubricants base oils, and chemicals feedstock. These products are usually produced by oil refineries. Shell will use its leading brand, technology, global supply chain and marketing capabilities to maximise the value of these products in global markets.

Pearl GTL is designed to produce 120,000 barrels per day (b/d) of natural gas liquids (NGLs) and ethane, and 140,000 b/d of GTL products. Pearl will be the world’s largest GTL plant, building on over 30 years of Shell experience with these technologies. Shell is funding 100 per cent of the development costs for Pearl GTL, under a profit sharing agreement with the State of Qatar.

Shell has now entered into the testing phase at Pearl GTL, having inaugurated the massive plant’s control room, which

Malcolm Brinded Executive Director, Upstream International, Shell

47Jan-Feb, 2010

is the nerve centre of one of the largest and most sophisticated process control systems in the oil and gas industry. The control room comprises of almost 1,000 control cabinets hosting 179 servers which are programmed with 12 million lines of software code. The system is linked to every part of the plant by about 5,850 kilometres of control cables, which would stretch from Doha to London if laid end-to-end.

While testing begins on many thousands of pieces of equipment that have already been installed at the plant, construction on the rest of the plant continues. Some two million tonnes of equipment and materials have been imported to the site and there are some 48,000 workers on the project. At the peak of construction, Pearl GTL installed enough steel and pipe to make 2.5 Eiffel Towers every month.

Qatargas 4 is designed to convert some 1.4 bcf/d of natural gas into liquefied natural gas (LNG) and NGLs. Qatargas 4 will add to Shell’s current worldwide LNG capacity of 18.5 million tonnes per year (mtpa), and sustain Shell’s industry leadership in LNG.

Qatargas 4 will have a capacity of 7.8 mtpa of LNG and some 70,000 boe/d of NGLs. Shell has a 30 per cent stake in Qatargas 4, with partner Qatar Petroleum, under a tax-and-royalty structure. Clean-burning LNG will be sold to customers in China, Dubai and the United States, with further new markets currently being developed.

Pearl is a unique project in the global oil & gas industry, with unprecedented scale and technology. Construction is progressing well at Pearl, with both schedule and budget in line with Shell’s expectations. Major construction at both Pearl GTL and Qatargas 4 is scheduled to be completed by the end of 2010, with production ramp-up from late 2010 and into 2011. Pearl GTL upstream production is expected to reach 320,000 boe/d. Qatargas 4 is expected to reach 280,000 boe/d.

Shell’s annual outlay on these two Qatar projects peaked in 2008. Once Pearl GTL and Qatargas 4 come on stream, Qatar has the potential to contribute some 350,000 boe/d of upstream production for Shell, and significant cash flows for the State of Qatar and the company.

HE Abdullah bin Hamad Al Attiyah, deputy prime minister and minister of energy and industry said: “Shell has only been back in Qatar a few years and over that time through the realization of Pearl GTL and Qatargas 4 projects they have established a significant position in Qatar’s energy sector. We appreciate our partnership with Shell and we believe this relationship will be a source of long term prosperity and growth.”

Shell chief executive officer Peter Voser commented: “I am very pleased with the progress that we are making with Pearl GTL and Qatargas 4. We have enjoyed tremendous support from our partner Qatar Petroleum and we are pleased to play our part to establish Qatar as the number one LNG and GTL producer in the world. On today’s basis these two projects alone would represent over 10 per cent of our world-wide production. Qatar underpins Shell’s growth plans to 2012 and will be a heartland for decades to come.”

“Our business in this region is healthy and growing here...including relatively new partnerships with NOCs for example here in Qatar. You can see some of our recent moves - licence extensions in Syria, Abu Dhabi and Oman, and new projects across the region. We bring energy product markets, technology and expertise, including skills transfer and supply chain management,” Malcolm Brinded, executive director - upstream international, Shell said at the presentation.

Sharper focus on deliverability and AffordabilityNew Organisation increases accountability + focus •

Transition 2009 reorganisation•

2011-2012 growth programme One million boe/d upstream + selected downstream •under construction

Value creation from long term operations Pre-FID portfolio potential to deliver upstream growth •to 2020

Once Pearl GTL and

Qatargas 4 come on

stream, Qatar has the

potential to contribute

some 350,000

boe/d of upstream

production for Shell,

and significant cash

flows for the State of

Qatar and the company

Shell: Strategic themeS

48 Jan-Feb, 2010

here is a question of whether the industry needs a “complete makeover” - or whether the current storms will

pass and no change is required. I believe the right approach lies between those two extremes. We cannot continue with ‘business-as-usual’ - but sudden and dramatic change at a time of rising demand are likely to put energy supplies at risk. Our industry needs evolution rather than revolution. And if we’re going to make that evolution happen in

a sustainable, manageable way, we need to apply some basic business principles to the new challenges. I would pick out three as being particularly important. First, we need to be as clear as possible about our objective – the destination. What do we expect the future energy landscape to look like? What will its main components be? Second, we need to have a clear regulatory framework which enables business to invest with confidence to build such a future.

And third, we need to set out pathways

towards the destination. At BP we think this approach is particularly important, especially when there is a continuing debate over targets and the regulatory framework. The overall direction of travel is fairly clear and we can make progress if we identify the most important types of energy that are going to be needed, in different regions and sectors, in the short, medium and long term.

The approach of ‘energy pathways’ is also useful because it allows us to

OPInIOn

Tony Hayward, BP Group Chief Executive, talked about setting a course for a sustainable energy future at the World Oil and Gas Assembly, held in Bangalore recently. Here are the excerpts:

enerGy paThwaySPi

ctur

e co

urte

sy: B

P

49Jan-Feb, 2010

analyse the comparative benefits of different types of energy in different contexts and highlight the most efficient options. In my view, we are looking to build a future energy industry which achieves four things: availability, sustainability, security and affordability. According to BP’s projections, we’ll need up to 45% more energy in 2030 than we consume today.

And we mustn’t underestimate what it will take to achieve that. We’ll need investment of more than $1 trillion a year for the next 20 years. Does the recession alter those projections? I don’t think so. The big picture is that the world is experiencing a dramatic growth in its economy as emerging economies like India industrialise. Energy demand rose by 5.6% here last year. And we have to see the recent downturn in that long-term context. Unless something really unexpected happens, the upward trend is set to continue.

And what about the types of energy that will be used in 2030? Certainly there will need to be changes in the energy mix. We need more low-carbon energy. And we need to use energy more efficiently. But what I take from our analysis at BP and the work of experts like the International Energy Agency, there are no silver bullets and we will need a wide range of energy types in 20 years time.

The share of renewable energy will certainly increase, but we have to be realistic about its contribution. As of today, all of the world’s wind, solar, wave, tide and geothermal energy accounts for only around 1 per cent of total consumption. And that’s even with the already impressive output of renewable energy facilities such as the JV solar plant that we operate with the Tata Group here in Bangalore. Every day that plant produces enough panels to light 10,000 Indian homes.

However, given the scale of demand and the practical challenges of scaling up renewable technologies, it is hard to see them accounting for much more than 5% of consumption in 2030. Undoubtedly nuclear energy and biofuels will also have a role, and by 2030 we expect that carbon capture technology could be deployed at scale.

But there will still be a major role for hydrocarbons. If you look closely at the IEA’s World Energy Outlook published in November 2009, even in the scenario for major carbon emissions reduction over the next 20 years, they still foresee – and I quote - that “fossil fuels remain the dominant energy sources in 2030”. So in other words, we can have a sustainable energy future and significant volumes of fossil fuels. That’s important. It’s also reassuring because it would be impossible to fulfil the demand without hydrocarbons.

The good news is that the hydrocarbons are there to fulfill that role. We have enough reserves to last for decades and reserve estimates are rising as we develop ways of unlocking both conventional and unconventional resources. Finding oil and gas is getting more challenging. That’s true - but it’s not new. It’s been getting more challenging ever since I’ve been in the business. However, experience shows

that we can develop the technologies and the capabilities we need. A good example is BP’s recent discovery of the giant Tiber oil field in ultra-deep water in the Gulf of Mexico. This well was drilled to a depth of 9.5 km below the seabed – the world’s deepest ever oil and gas well and a great example of how we continually challenge new frontiers in this industry - and how technology is continually opening up new potential.

The deepwater is a growing part of our business and I’m pleased that we’re working with Reliance in exploring in the deepwater offshore India. So although we can’t know the precise shape of the industry two decades out, we can see that it will be a mix, using all the sources of energy that are available and competitive. Within the mix, there will also be a bias to forms of energy that provide energy security. That can either mean countries tapping more sources of domestic energy or building strong and reliable trans-national supply chains.

the right regulatory framework Building such a future demands action both from businesses and policy-makers. We can provide the building blocks and tools - but we need to work within the architecture provided by governments. I can see two ways in which the current architecture can be strengthened. First, with continuing pressure on supply, it’s important to develop energy resources as efficiently as possible - I believe that means opening resources and markets up to greater competition.

This naturally includes providing opportunities for international oil companies to offer expertise where relevant. I am not saying that international oil companies have a monopoly on leading edge technology. They don’t. Some local and national oil companies have built great capabilities

Given the scale of demand and the practical challenges of scaling up renewable technologies, it is hard to see them accounting for much more than 5 per cent of consumption in 2030.

50 Jan-Feb, 2010

- such as Reliance’s and ONGC - and I also know from our experience that we have been able to add a lot of value through our technology and know how. For example in Azerbaijan, where we have deployed leading edge real-time reservoir management techniques, or Russia where our business TNK-BP has doubled production in five years, or Iraq where we recently concluded an agreement with an aim to triple the production of the giant Rumaila field. However it remains the case that access to a lot of the world’s best resources is restricted. Today almost 80% of the world’s oil resources are off limits to the technology and expertise that international oil companies can provide. I think that needs to change and I welcome moves like the transparent and open bidding process that India has used recently.

Competition has a transforming impact on any sector. Just look at Bangalore’s IT industry. It is a great illustration of what can be achieved with the right environment. In BP, we have recently simplified our IT application development approach and now have just five strategic vendors globally – three of them are Indian companies and the other two are global companies that also operate from India. In terms of the regulatory framework for energy, the other priority is of course climate change and the effort to limit greenhouse gas emissions. We’re meeting on the eve of the Copenhagen climate conference where, I am optimistic, a clearer framework will begin to emerge.

The big missing link at present is a global carbon price –one that applies equally to all carbon, whether from a smokestack or a tailpipe. Carbon pricing will make energy conservation more attractive and alternative energy more cost competitive. It will allow informed investment in fossil fuels and will

encourage investment in the technology necessary to reduce the carbon they produce. Europe now has an emissions trading system. Plans for a US cap-and-trade system are before Congress. Australia also has a system under development. We now need moves at the global level to strengthen, extend, and ultimately link these systems. Carbon pricing is the centrepiece of the framework, but it will need to be supplemented both by financial incentives and by regulation. These are needed to provide the extra impetus required to develop low-carbon technologies and encourage greater energy efficiency.

PathwayS to the future There is work to do in order to create a policy framework that provides more competitive access to resources and a clearer platform for a lower-carbon economy. But even today, we can see the direction of travel. We know that the world is moving towards a future in which energy has to be more secure and more sustainable. At the same time, practicalities mean that certain types of energy are limited – as renewables are today – and others are plentiful – such as fossil fuels.

By mapping our objectives against what is realistically possible, we can see how different factors become important at different stages of the pathways. In all circumstances and at all times, energy efficiency is both possible and sensible. The prize here is huge. For example, by far the most effective pathway to a lower-carbon transport industry is through making car engines more efficient. Better engine technology, combined with the increasing use of hybrids, offers potential efficiency gains of as much as 50% by 2030. In the shorter term, advanced lubricants can also make a significant difference and that’s why I am pleased that BP’s Castrol business is the market leader in

retail automotive lubricants here in India where car use is growing so rapidly.

Similar benefits can be achieved through better standards in building construction and electrical appliances. The McKinsey Global Institute suggests that energy use could be cut by more than a fifth by 2020 and 8 billion tonnes of greenhouse gases avoided through energy efficiency investments that would more than pay for themselves. Looking at the power pathway, we believe it will increasingly make sense to use more natural gas for power. Gas is the fuel that offers the greatest potential to achieve the largest greenhouse gas reductions - at the lowest cost - in the shortest time - and all that by using

OPInIOn

51Jan-Feb, 2010

technology that’s available today. India with its large and growing gas reserves should be in a good place to begin to build a gas based economy and reduce its dependence on coal.

Gas is easily the cleanest burning fossil fuel. It’s very efficient. Combined-cycle turbines, fuelled by natural gas, are quick and relatively cheap to build. Gas can also complement renewable energy - given the intermittency with which wind and solar power operate, gas-fired plants are ideal for providing the necessary swing capacity. So a very important way that the world can deal with the issue of carbon is to move much more of its power generation to gas – especially as we can’t realistically expect to see

clean coal technology deployed at scale before 2020. I’m pleased to say that the world seems to be waking up to the advantages of natural gas. Last year gas consumption increased in both the OECD and non-OECD countries. It was the only hydrocarbon to do this - and this in spite of the recession which dampened demand for all fuels.

The transport pathway is an area where we need to distinguish between options that are promising for the long-term and those that are practical for the near-term. For example, electric vehicles and hydrogen fuel cells will have a part to play in the long term. But today they face two big obstacles. They need massive new infrastructure and their

electricity or hydrogen needs to be produced more sustainably. Electric vehicles are only as sustainable as the power that fuels them. So over the next two decades we need other options. I’ve mentioned the part energy efficiency can play in the transport sector, but there is also a major role for advanced biofuels as a medium term means of delivering lower carbon or even zero carbon fuel. At BP we are investing significantly in advanced biofuels, such as sugarcane and lingo-cellulosic ethanol, that don’t endanger food production or biodiversity, but do provide reductions in greenhouse gases of 80% or more.

In concluding, let me underline one further point. These are not issues on which we have endless time to deliberate. It matters what we do over the next 25 years. There is real benefit to deciding on the most cost-effective remedies now - such as promoting energy efficiency, using more gas for power and developing new biofuels for transport. These options make economic sense today and will not cost the world more than it can afford.

We can act now to support these developments, working with policy-makers at national and regional levels to make progress along the best energy pathways. The consequences of failure would be serious. Without a credible and enduring framework, it would be impossible for industry to invest in maintaining and enhancing our energy supply.

As well as ensuring that we don’t leave future generations with the prospect of rising sea levels, we need to ensure that we keep the lights on in the next decade. It’s a complex challenge but we will meet it if we keep certain principles in mind: clarity about objectives, clarity in the policy framework, and clarity about the course that we set to build tomorrow’s energy landscape.

52 Jan-Feb, 2010

GLOBAL nEWS

Schlumberger SignS excluSive Agreement with rock DeformAtion reSeArchSchlumberger announced an agreement with Rock Deformation Research Limited (RDR) to provide the RDR structural analysis module within the Petrel seismic-to-simulation workflow. RDR is a global leader in structural geology consultancy and research associated with deformation and fluid flow in the subsurface.

“This is the first Ocean partner plug-in to be released as a module with Petrel. The RDR plug-in, combined with the wealth of prospect assessment and uncertainty analysis capabilities in Petrel, provides unmatched power to reduce risks associated with exploration,” said Olivier Peyret, Vice President, Software Products, Schlumberger Information Solutions (SIS).

Sbc SignAlS expAnSion of teAm SBC, the management consultancy arm of Schlumberger, has announced the expansion of its global senior leadership team with the appointment of five vice-president level staff. The management team appointments have been made to help SBC meet its continually growing business and coincide with the launch of four new offices in New Delhi, Rio de Janeiro, Beijing and the Middle East (Abu Dhabi).The announcement comes as SBC further cements its position as the only management consultancy with the strategic and operational insight, the global reach and the practical experience capable of providing a material impact to the oil and gas sector.

Antoine Rostand, President of SBC commented: “Since its launch five years ago, SBC has been about transforming the world’s energy business for the 21st Century. The brainpower we’ve just brought on board is only helping us do so quicker and the senior team we now have in place represents the finest in management consultancy.

We fully welcome such additions to our growing team of consultants and look forward to their contribution in helping reshape the energy industry for the next generation.”

“In addition, the opening of our new offices in India, Brazil, China and the Middle East reflects the changing nature of the global energy map as well as our commitment to a critical presence in these regions.

The emergence of new players in countries such as China and Brazil further adds to the already challenging competitive environment for all companies within the energy sector. Having a team on the ground in these key markets will better help our clients make informed, strategic and impactful decisions.

Now more than ever, the complexities faced by the energy industry require players to re-think their operations in order to remain competitive. By guiding our clients into more progressive mindsets, we’re helping ensure their ability to claim a stake in the new energy landscape of the next generation.”

exxonmobil celebrAteS chinA’S fujiAn fAcility completion

ExxonMobil and its partners, Sinopec, Fujian Province and Saudi Aramco, recently celebrated the full operation of China’s first integrated refining and petrochemical facility with foreign participation. This facility, the Fujian Integrated Refining and Ethylene Joint Venture Project, will help meet the region’s growing need for fuels and chemical products.

“Our participation in this world-class complex illustrates our commitment to the region and to provide our customers with the products they need,” said Rex W. Tillerson, Chairman and Chief Executive Officer of Exxon Mobil Corporation, who attended a ceremony in Quanzhou to mark the occasion.

“This is an unprecedented partnership built on years of collaboration. The support from our partners will help ensure the safety, reliability and best-in-class performance of these facilities.”

More than $4.5 billion was invested in the complex, which tripled the capacity of the existing refinery to 240,000 barrels per day to produce transportation fuels and other refined products. In addition, the project added a new petrochemical complex that includes an 800,000 tons-per-year ethylene

steam cracker, an 800,000 tons-per-year polyethylene unit, a 400,000 tons-per-year polypropylene unit and a 700,000 tons-per-year paraxylene unit. The complex also features a state-of-the-art 250 megawatt cogeneration facility, which will meet the majority of the site’s power demands.

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Shell openS lubricAntS plAnt

totAl trAnSferS intereSt

Shell Lubricants has announced the start-up of its newest lubricants complex in Asia to meet growing demand in China. With a production capacity of 200 million litres a year, and the potential for a phased development to 400 million litres a year, the complex could become one of Shell’s top three lubricants blending plants worldwide in volume terms. Located in Zhuhai, Guangdong Province, the blending plant will be Shell’s sixth in China and will produce consumer, transport, industrial and marine lubricants, targeted at the Chinese market.

In a further development, Shell also announced new investment in a technical facility at the complex. This will offer a range of technical services including a quality control laboratory to provide key customers and original equipment manufacturers (OEMs) in the automotive industry with technical research, marketing and training services related to their lubricants applications.

Total E&P Russie, a wholly-owned subsidiary of Total S.A., has announced the transfer of a 10 per cent interest in the Kharyaga oil field to state-owned Zarubezhneft of Russia. A memorandum of understanding (MOU) signed in 1999 at the same time as the Kharyaga production sharing agreement (PSA) stipulated that a Russian partner would take a stake in the project. Total is operator of phases 2 and 3 of the Kharyaga field, which is located in the Nenets Autonomous District. The development of phase 3, which received the go-ahead in December 2007, will increase output to 30,000 barrels per day (b/d), compared to 20,000 b/d in 2008.

Total has been present in Russia since 1989. It holds a 25 per cent interest in the first phase of the Shtokman project, alongside Gazprom (51 per cent) and Statoil (24 per cent). Front-end engineering design (FEED) is being performed prior to a final investment decision in 2010.

oil DiScovery by reliAnce inDuStrieS Reliance Industries Limited (RIL) has announced the first oil discovery in the onland exploratory block CB–ONN–2003/1 (CB 10 A&B) awarded under the NELP-V round of exploration bidding. RIL holds 100 per cent participating interest (PI) in this block which is located at a distance of about 130 kms from Ahmedabad in Gujarat in the Cambay basin. The block covers an area of 635 sq km in two parts viz., Part A located in the west with an area of 570 square kilometers & Part B located to the east with an area of 65square kilometers.

3D Seismic data has been acquired over 80 per cent of the block area and 2D Seismic data has been acquired over the entire area. Five wells have been drilled in this block. The fifth well, CB10A-A1, which is the discovery well was drilled to a total depth of 1451 m in Part A of the block with the objective of exploring the play fairway in the Miocene Basal Sand (MBS) of Babaguru formation. A gross reservoir thickness of about 15 m was encountered and the well flowed at a rate of 500 barrels of oil per day (bopd) through a 6 mm bean with a flowing tubing head pressure of 360 psi on conventional testing. This Discovery is expected to open future potential within the block.

The Discovery, named ‘Dhirubhai–43’ has been notified to Government of India and Directorate General of Hydrocarbons. Commerciality of this discovery is being ascertained through more data gathering and analysis.

Shell StArtS-up worlD-ScAle monoethylene glycol plAnt in SingApore Shell Chemicals Limited has announced the successful start-up of its new world-scale monoethylene glycol (MEG) unit at the Shell Eastern Petrochemicals Complex in Singapore. The unit started up as initially planned. With a nameplate capacity of 750,000 tonnes of MEG per annum, it is one of the largest in the world, reinforcing Shell’s ambitions to maintain a leading position in the expanding Asian petrochemicals market. The Shell Eastern Petrochemicals Complex also includes a new 800,000 tonnes per annum ethylene cracker, a butadiene plant and modifications to Shell’s Bukom refinery, which are planned to start up in early 2010. Mark Williams, Shell Downstream Director said, “The commissioning of the MEG plant is a significant step towards the completion in early 2010 of the Shell Eastern Petrochemicals Complex in Singapore (SEPC). SEPC is our largest investment in Singapore and our largest petrochemicals investment to date, reinforcing our intention to continue to grow our Chemicals business selectively and to anticipate the needs of our customers in Asia.” “When SEPC is fully operational,” Williams continued, “it will be our biggest, fully-integrated refinery and petrochemicals hub, from which we will enjoy economic and efficiency benefits in terms of feedstocks, operations and logistics.”

The Singapore MEG plant marks another technology first for Shell. It is the first time Shell is using its award-winning OMEGA processing technology. The OMEGA process gives the highest commercial yields of MEG from ethylene.”

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EnVIROnMEnT COnSERVATIOn

As Saudi Aramco continues to pursue

best practices in discovery and

efficient production of petroleum

for the world, the company

also maintains a deep dedication

to preserving and restoring

the natural environment and ecosystems of the

Gulf. OGR reports

55Jan-Feb, 2010

a commITmenT To envIronmenTal STewardShIp

undreds of millions of years ago, aquatic life thrived in primordial seas now submerged below the surface

of the Arabian peninsula and beneath the floor of today’s Arabian Gulf. Over the eons, the remains of these ancient plants and animals underwent chemical transformation into petroleum. From this natural resource, human ingenuity today yields abundant energy, as well as petrochemical-derived products ranging from plastics to pharmaceuticals, improving the quality of life to levels unimaginable only a few generations ago.

The Arabian Gulf region contains some 60 to 70 percent of the world’s proven reserves of petroleum. The Kingdom of Saudi Arabia alone holds nearly 25 percent of the world’s crude oil reserves. As Saudi Aramco continues to pursue best practices in discovery and efficient production of petroleum for the world, the company also maintains a deep dedication to preserving and restoring the natural environment and ecosystems of the Gulf. Stewardship of natural resources is a cornerstone of Saudi Aramco’s commitment to corporate social responsibility. In the environmentally sensitive area of Manifa on the Arabian Gulf coast, Saudi Aramco has taken an innovative approach to a major new oil development project.

Other activities nearby reinforce the company’s commitment to environmental stewardship. These have involved community and youth volunteer mobilization, grassroots education, and strategic business decision-making, harmonizing environmental renewal with higher productivity to meet the world’s energy needs. ‘Save the mangroves’ – Volunteers in action Since the 1970s, Saudi Aramco has waged its signature ‘Save the Mangroves’ campaign, responding effectively to the previous loss of these valuable coastal swamp trees due to dredging, landfills, pollution, and increased demand for wood. Having begun as a corporate and community awareness effort, the campaign now encompasses a major volunteer mobilization.

On April 9, 2009, in an annual tradition, more than 500 volunteers, including 150 orphans from local schools, joined Saudi Aramco CEO Khalid A. Al-Falih and other company executives in planting about 10,000 mangroves along the shores of Tarut Bay, near some of Saudi Arabia’s significant historic and archaeological sites, including a fortress from the era when control of the coast was contested by the Turks and the Portuguese. To date, the campaign has planted 50,000 mangroves, which have multiplied over the years into hundreds of thousands

of trees. Mangroves help stabilize the shoreline and sustain coastal wetlands, essential nursing grounds for commercial fish and shrimp. Besides the manifest benefits to the natural environment, the tree-planting campaign has taught young Saudis lessons in stewardship and volunteerism as virtues of civil society.

advanced Drilling methods Preserve marine environment Near the mangrove plantings, Saudi Aramco drilling specialists introduced state-of-the-art technologies to save both marine life and investment funds. Horizontal Directional Drilling, a technique used successfully for some years in exploration, now has been used by Saudi Aramco for the first time to lay offshore pipeline. In the Berri offshore oil field north of Tarut, Saudi Aramco installed more than 3,000 meters of pipeline horizontally as deep as 32 meters beneath the seabed.

This sophisticated engineering technique uses electronic steering instrumentation to lay underground sections of pipeline without having to trench or dredge the pipe route. This leaves undisturbed large tracts of the marine environment, including areas with significant species of endangered coral. In the Berri field, the new technology also reduced financial costs, because former practice would have required costly access dredging just to reach the area for the pipeline.

56 Jan-Feb, 2010

manifa: a mega-Project for environmental Sustainability Up the coast north of both Berri and Tarut is Manifa, site of the largest single offshore crude oil project in Saudi Aramco’s history. World demand for energy, matched with new refining capabilities, led the company to plan operations at Manifa that will add 900,000 barrels per day in production capacity of heavy crude oil. Developing this oil field required extraordinary sensitivity to the environment, and innovative research and investment to put this ecological concern into practice. Manifa Bay is a rich ecosystem containing intensive algal habitats and dense beds of sea-grass that are a primary source of nutrition for other marine life. It is the habitat for many species, including pearl oysters, hamour fish (a variety of grouper), crabs, dolphins, shrimp, and sea turtles, including the endangered Hawksbill turtle.

The waters of the Manifa field are unusually shallow, not permitting the use of conventional offshore rigs. As engineers considered effective and efficient ways to produce the oil from the field, Saudi Aramco commissioned a comprehensive environmental impact assessment, with expert evaluation by authoritative international institutions. Annamalai University in India classified the marine organisms that would be affected by the project; RCF, a United States firm, carried out a socioeconomic study on the area’s fisheries; and the Danish Hydraulic Institute, a world leader in its field, performed hydraulic modeling. King Fahd University of Petroleum and Minerals Research Institute coordinated the work of the consulting institutions and performed field work including marine biology, physics, chemistry and environmental monitoring.

A patient, iterative process to plan Manifa as an environmentally responsible project resulted in some unexpected cost savings. For example, Saudi Aramco’s

initial assumption was that 30 percent of the causeway should be open for water circulation, but research determined that only about 10 percent of the causeway length would have to be open. This brought about major cost avoidance for a large part of the project. World-class hydrodynamic and ecological research determined that the position of the openings was much more important than the length of the openings.

A critical factor in evaluating the health of Manifa’s marine ecosystem is the time needed for “flushing,” or recirculating 50 percent of the seawater in the area. Before the project, Manifa’s waters flushed in 17 days. One early version of Saudi Aramco’s causeway plans would have extended flushing time to 71 days. In the end, research guided the company toward a design limiting flushing time to 21 days -- very close to the natural state. The final causeway design was dramatically different from the first proposed design, with the final design having only one access route to the mainland instead of two connections to the mainland as originally planned. The causeway system connects 27 man-made islands in the shallow waters that will serve both as platforms for wells and as artificial coral reefs, attracting birds and crabs and other marine life to the bay. Once the causeway design had been determined, the environmental impact assessment also led the company to find areas where dredging could take place with the least impact on marine life.

During construction, a team of scientists conducted daily measurements of key parameters of marine ecology to assure that the project would avoid harmful, unforeseen consequences.

Following construction, Saudi Aramco is providing remedial investments, in cooperation with the Kingdom’s Ministry of Agriculture. These include programs transplanting coral, mangroves and sea-grass, developing new fish and shrimp hatcheries for restocking purposes, and upgrading local fishing piers to enhance the livelihood of Saudi fishermen. The company continues to fund ongoing research into the stock conditions of the fish and shellfish in the Manifa waters and is working with the local fishing industry to enact and observe regulations to prevent overfishing.

from aquaculture to human cultureThe end purpose of respect for plant and animal life, and for the waters and soils and geological habitats that sustain them – and indeed the purpose of all concern with “sustainability” -- is to improve the quality of human life. Notwithstanding all the blessings that technological advances have brought to the human condition, human beings need to respect nature in its inherent beauty and dignity, without a surfeit of technology, in order fully to know and respect themselves. This is especially so in Saudi Arabia today, where simultaneously “everything is old and everything is new.” It is well known that the deepest meaning and purpose in Saudi national life are found in religious faith, piety, and cultural tradition. At the same time, this is a nation of young people: the cohort 25 years of age and younger makes up some 60 percent of the Kingdom’s population. To carry on our traditions in a world confused by pressures promoting radical change as an end in itself, young people need to learn habits of stewardship, and their elders must teach them by example.

Since the 1970s, Saudi Aramco has waged its signature ‘Save the Mangroves’ campaign, responding effectively to the previous loss of these valuable coastal swamp trees.

EnVIROnMEnT COnSERVATIOn

Proved reserves At end 1988 At end 1998 At end 2007 At end 2008 Thousand Thousand Thousand Thousand Thousand million million million million million Share R/P barrels barrels barrels tonnes barrels of total ratio

US 35.1 28.6 30.5 3.7 30.5 2.4% 12.4Canada 11.9 15.1 28.6 4.4 28.6 2.3% 24.1Mexico 53.0 21.6 12.2 1.6 11.9 0.9% 10.3Total North America 100.0 65.3 71.3 9.7 70.9 5.6% 14.8Argentina 2.3 2.8 2.6 0.4 2.6 0.2% 10.5Brazil 2.8 7.4 12.6 1.7 12.6 1.0% 18.2Colombia 2.1 2.5 1.5 0.2 1.4 0.1% 6.0Ecuador 1.5 4.1 4.0 0.5 3.8 0.3% 20.3Peru 0.9 0.9 1.1 0.2 1.1 0.1% 25.5Trinidad & Tobago 0.6 0.7 0.9 0.1 0.8 0.1% 15.2Venezuela 58.5 76.1 99.4 14.3 99.4 7.9% *Other S. & Cent. America 0.6 1.1 1.4 0.2 1.4 0.1% 27.7Total S. & Cent. America 69.2 95.6 123.5 17.6 123.2 9.8% 50.3Azerbaijan n/a n/a 7.0 1.0 7.0 0.6% 20.9Denmark 0.5 0.9 1.1 0.1 0.8 0.1% 7.7Italy 0.8 0.8 0.9 0.1 0.8 0.1% 21.1Kazakhstan n/a n/a 39.8 5.3 39.8 3.2% 70.0Norway 7.3 11.7 8.2 0.9 7.5 0.6% 8.3Romania 1.2 1.2 0.5 0.1 0.5 13.3Russian Federation n/a n/a 80.4 10.8 79.0 6.3% 21.8Turkmenistan n/a n/a 0.6 0.1 0.6 8.0United Kingdom 4.3 5.1 3.4 0.5 3.4 0.3% 6.0Uzbekistan n/a n/a 0.6 0.1 0.6 14.6Other Europe & Eurasia 63.2 2.1 2.1 0.3 2.1 0.2% 13.4Total Europe & Eurasia 77.3 104.9 144.6 19.2 142.2 11.3% 22.1Iran 92.9 93.7 138.2 18.9 137.6 10.9% 86.9Iraq 100.0 112.5 115.0 15.5 115.0 9.1% *Kuwait 94.5 96.5 101.5 14.0 101.5 8.1% 99.6Oman 4.1 5.4 5.6 0.8 5.6 0.4% 20.9Qatar 4.5 12.5 27.4 2.9 27.3 2.2% 54.1Saudi Arabia 255.0 261.5 264.2 36.3 264.1 21.0% 66.5Syria 1.8 2.3 2.5 0.3 2.5 0.2% 17.2United Arab Emirates 98.1 97.8 97.8 13.0 97.8 7.8% 89.7Yemen 2.0 1.9 2.7 0.3 2.7 0.2% 23.9Other Middle East 0.1 0.2 0.1 † 0.1 10.6Total Middle East 653.0 684.3 755.0 102.0 754.1 59.9% 78.6Algeria 9.2 11.3 12.2 1.5 12.2 1.0% 16.7Angola 2.0 4.0 13.5 1.8 13.5 1.1% 19.7Chad – – 0.9 0.1 0.9 0.1% 19.4Republic of Congo (Brazzaville) 0.8 1.7 1.9 0.3 1.9 0.2% 21.3Egypt 4.3 3.8 4.1 0.6 4.3 0.3% 16.4Equatorial Guinea – 0.6 1.7 0.2 1.7 0.1% 12.9Gabon 0.9 2.6 3.2 0.4 3.2 0.3% 37.0Libya 22.8 29.5 43.7 5.7 43.7 3.5% 64.6Nigeria 16.0 22.5 36.2 4.9 36.2 2.9% 45.6Sudan 0.3 0.3 6.7 0.9 6.7 0.5% 38.1Tunisia 1.8 0.3 0.6 0.1 0.6 18.5Other Africa 1.0 0.7 0.6 0.1 0.6 12.0Total Africa 59.0 77.2 125.3 16.6 125.6 10.0% 33.4Australia 3.4 4.1 4.2 0.5 4.2 0.3% 20.4Brunei 1.2 1.0 1.1 0.1 1.1 0.1% 16.9China 17.3 17.4 16.1 2.1 15.5 1.2% 11.1India 4.5 5.4 5.5 0.8 5.8 0.5% 20.7Indonesia 9.0 5.1 4.0 0.5 3.7 0.3% 10.2Malaysia 3.4 4.7 5.5 0.7 5.5 0.4% 19.8Thailand 0.1 0.4 0.5 0.1 0.5 3.9Vietnam 0.1 1.9 3.4 0.6 4.7 0.4% 40.8Other Asia Paci� c 1.0 1.3 1.1 0.1 1.1 0.1% 12.8Total Asia Paci�c 39.9 41.3 41.3 5.6 42.0 3.3% 14.5Total World 998.4 1068.5 1261.0 170.8 1258.0 100.0% 42.0of which: European Union 8.3 8.9 6.7 0.8 6.3 0.5% 7.7 OECD 118.3 89.2 90.3 12.0 88.9 7.1% 13.2 OPEC 764.0 827.2 957.1 129.8 955.8 76.0% 71.1 Non-OPEC‡ 173.5 157.6 174.7 23.6 174.4 13.9% 14.8 Former Soviet Union 60.9 83.8 129.2 17.4 127.8 10.2% 27.2Canadian oil sands • n/a n/a 150.7 24.5 150.7 Proved reserves and oil sands n/a n/a 1411.7 195.3 1408.7

* More than 100 years. †Less than 0.05.

Less than 0.05%.‡Excludes Former Soviet Union. • ‘Remaining established reserves’, less reserves ’under active development’.

Notes: Proved reserves of oil – Generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can b e recovered in the future from known reservoirs under existing economic and operating conditions. Reserves-to-production (R/P) ratio – If the reserves remaining at the end of any year are divided by the production in that year, the result is the length of time that those remaining reserves would last if production were to continue at that rate. Source of data – The estimates in this table have been compiled using a combination of primary o�cial sources, third-party data from the OPEC Secretariat, World Oil, Oil & Gas Journal and an independent estimate of Russian reserves based on information in the public domain. Canadian proved reserves include an o�cial estimate of 22.0 billion barrels for oil sands ‘under active development’. Reserves include gas condensate and natural gas liquids (NGLs) as well as crude oil. Annual changes and shares of total are calculated using thousand million barrels �gures.

Oil GLOBAL OIL RESERVES

Production *

Change 2008 2008 over shareThousand barrels daily 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2007 of total

US 8011 7731 7733 7669 7626 7400 7228 6895 6841 6847 6736 -1.8% 7.8%Canada 2672 2604 2721 2677 2858 3004 3085 3041 3208 3320 3238 -2.0% 4.0%Mexico 3499 3343 3450 3560 3585 3789 3824 3760 3683 3471 3157 -9.1% 4.0%Total North America 14182 13678 13904 13906 14069 14193 14137 13696 13732 13638 13131 -3.8% 15.8%Argentina 890 847 819 830 818 806 754 725 716 699 682 -2.6% 0.9%Brazil 1003 1133 1268 1337 1499 1555 1542 1716 1809 1833 1899 3.6% 2.4%Colombia 775 838 711 627 601 564 551 554 559 561 618 10.3% 0.8%Ecuador 385 383 409 416 401 427 535 541 545 520 514 -1.2% 0.7%Peru 116 107 100 98 98 92 94 111 116 114 120 4.0% 0.1%Trinidad & Tobago 134 141 138 135 155 164 152 171 174 154 149 -5.0% 0.2%Venezuela 3480 3126 3239 3142 2895 2554 2907 2937 2808 2613 2566 -1.9% 3.4%Other S. & Cent. America 125 124 130 137 152 153 144 143 141 143 138 -2.7% 0.2%Total S. & Cent. America 6908 6699 6813 6722 6619 6314 6680 6899 6866 6636 6685 0.6% 8.5%Azerbaijan 231 279 282 301 311 313 315 452 654 869 914 4.2% 1.1%Denmark 238 299 363 348 371 368 390 377 342 311 287 -7.7% 0.4%Italy 117 104 95 86 115 116 113 127 120 122 108 -10.9% 0.1%Kazakhstan 537 631 744 836 1018 1111 1297 1356 1426 1484 1554 5.1% 1.8%Norway 3138 3139 3346 3418 3333 3264 3189 2969 2779 2556 2455 -4.1% 2.9%Romania 137 133 131 130 127 123 119 114 105 99 99 -0.4% 0.1%Russian Federation 6169 6178 6536 7056 7698 8544 9287 9552 9769 9978 9886 -0.8% 12.4%Turkmenistan 129 143 144 162 182 202 193 192 186 198 205 3.8% 0.3%United Kingdom 2807 2909 2667 2476 2463 2257 2028 1809 1636 1638 1544 -6.3% 1.8%Uzbekistan 191 191 177 171 171 166 152 126 125 114 111 -2.7% 0.1%Other Europe & Eurasia 506 474 465 465 501 509 496 468 457 451 427 -5.3% 0.5%Total Europe & Eurasia 14199 14480 14950 15450 16289 16973 17579 17541 17598 17819 17591 -1.3% 21.7%Iran 3855 3603 3818 3794 3543 4183 4248 4233 4282 4322 4325 -0.2% 5.3%Iraq 2121 2610 2614 2523 2116 1344 2030 1833 1999 2144 2423 13.0% 3.0%Kuwait 2232 2085 2206 2148 1995 2329 2475 2618 2690 2636 2784 5.3% 3.5%Oman 905 911 959 961 900 824 785 782 747 701 728 3.7% 0.9%Qatar 701 723 757 754 764 879 992 1028 1110 1197 1378 13.2% 1.5%Saudi Arabia 9502 8853 9491 9209 8928 10164 10638 11114 10853 10449 10846 4.0% 13.1%Syria 576 579 548 581 548 527 495 450 435 415 398 -4.1% 0.5%United Arab Emirates 2643 2511 2626 2534 2324 2611 2656 2753 2971 2925 2980 2.0% 3.6%Yemen 380 405 450 455 457 448 420 416 380 345 305 -11.6% 0.4%Other Middle East 49 48 48 47 48 48 48 34 32 35 33 -5.7% Total Middle East 22964 22328 23516 23006 21623 23357 24788 25262 25499 25168 26200 4.0% 31.9%Algeria 1461 1515 1578 1562 1680 1852 1946 2015 2003 2016 1993 -1.3% 2.2%Angola 731 745 746 742 905 862 976 1246 1421 1720 1875 9.1% 2.3%Cameroon 105 95 88 81 72 67 89 82 87 82 84 2.3% 0.1%Chad – – – – – 24 168 173 153 144 127 -11.5% 0.2%Republic of Congo (Brazzaville) 264 266 254 234 231 215 216 246 262 222 249 12.3% 0.3%Egypt 857 827 781 758 751 749 721 696 697 710 722 1.3% 0.9%Equatorial Guinea 83 100 91 177 204 242 345 373 358 368 361 -2.1% 0.5%Gabon 337 340 327 301 295 240 235 234 235 230 235 2.2% 0.3%Libya 1480 1425 1475 1427 1375 1485 1624 1751 1834 1848 1846 -0.1% 2.2%Nigeria 2167 2066 2155 2274 2103 2263 2502 2580 2474 2356 2170 -8.0% 2.7%Sudan 12 63 174 217 241 265 301 305 331 468 480 2.6% 0.6%Tunisia 85 84 78 71 74 68 71 73 70 97 89 -8.9% 0.1%Other Africa 63 56 56 53 63 71 75 72 66 59 54 -8.5% 0.1%Total Africa 7644 7583 7804 7897 7994 8402 9268 9846 9992 10320 10285 -0.4% 12.4%Australia 644 625 809 733 730 624 582 580 554 567 556 -1.5% 0.6%Brunei 157 182 193 203 210 214 210 206 221 194 175 -10.1% 0.2%China 3212 3213 3252 3306 3346 3401 3481 3627 3684 3743 3795 1.4% 4.8%India 737 736 726 727 753 756 773 738 762 770 766 -0.5% 0.9%Indonesia 1520 1408 1456 1389 1289 1183 1129 1087 1017 969 1004 3.2% 1.2%Malaysia 779 737 735 719 757 776 793 744 717 743 754 1.8% 0.9%Thailand 130 140 176 191 204 236 223 265 286 309 325 5.5% 0.3%Vietnam 245 296 328 350 354 364 427 398 367 337 317 -6.0% 0.4%Other Asia Paci� c 217 218 200 195 193 195 186 201 203 229 237 3.1% 0.3%Total Asia Paci� c 7641 7556 7874 7813 7836 7750 7804 7845 7810 7862 7928 0.9% 9.7%Total World 73538 72325 74861 74794 74431 76990 80256 81089 81497 81443 81820 0.4% 100.0%of which: European Union 3553 3684 3493 3285 3339 3128 2902 2659 2422 2388 2239 -6.6% 2.7% OECD 21500 21103 21521 21303 21430 21165 20766 19861 19458 19148 18400 -4.0% 22.0% OPEC 32277 31054 32569 31914 30318 32136 34658 35736 36007 35714 36705 2.7% 44.8% Non-OPEC‡ 33870 33719 34278 34220 34580 34355 34191 33513 33171 32930 32295 -2.0% 39.3% Former Soviet Union 7391 7552 8014 8660 9533 10499 11407 11839 12318 12799 12821 0.2% 16.0%

* Includes c rude oil, shale oil, oil sands and NGLs (the liquid content of natural gas where this is recovered separately). Excludes liquid fuels from other sources such as biomass and coal derivatives.‡Excludes Former Soviet Union.

Less than 0.05%.Notes: Annual changes and shares of total are calculated using million tonnes per annum �gures.Growth rates are adjusted for leap years.

GLOBAL OIL PRODUCTIOn

Courtesy: BP Statistical Review: 2009

60 Jan-Feb, 2010

ProjectsPetrochemicals and Refining

61Jan-Feb, 2010

Energy Projects Database

Licenses & FieldsGas ProjectsPipeline ProjectsPetrochemicals

www.gulfoilandgas.com

64 Jan-Feb, 2010

REGIOnAL ROUnD-UP

enoc offerS environment frienDly ServiceS Emirates National Oil Company has introduced a waterless car wash services for all its employees at the ENOC complex. Offered at a minimal charge, the service will be offered at the office parking spaces, and aims to strengthen the participation of the company’s staff in environmental-friendly initiatives. Offered by ENOC/EPPCO Automotive Services Unit, the new initiative helps staff protect the environment with the use of eco-friendly biodegradable chemicals instead of harmful detergents.

QAtAr to Sign pAct with chinA Qatar will finalise an agreement to send 7 mn tones of LNG to China in December 2010, taking the Persian Gulf nation’s exports to the country to 12 mn tones a year, Qatar’s oil minister said recently. The fuel will come from Qatargas and will be diverted from LNG originally intended to supply the United States, Abdullah bin Hamad Al-Attiyah, Qatar’s Oil Minister for Oil and Gas and Industry said.

irAQ StArtS work to Develop AkkAS gAS fielD Iraq has started work to develop the Akkas natural gas field and bring it to production, the country’s Deputy Oil Minister Abdul Kareem al-Leaby said, according to a report from Bloomberg.

The field near the Syrian border will start in two years time, supplying gas to power stations, the Minister said recently. Iraq, the holder of the world’s third-largest oil reserves, failed to attract foreign partners for most of the oil and gas fields it offered in a licensing round in June, because companies had proposed fees that were too low.

A new recorD for j. rAy mcDermott in SAuDi ArAbiA

DAnA gAS ADDS to egypt reServeSDana Gas, the Middle East’s first and largest private sector natural gas company, has announced two more gas discoveries at its concessions in the Egyptian Nile Delta: Sharabas-1 and Sama-1. These are the latest in a string of discoveries resulting from the company’s aggressive drilling campaign in Egypt, which began in 2008.

The Sharabas-1 discovery, located in the West El Manzala concession, tested at 7 million standard cubic feet per day (MMscf/d) of gas with 198 barrels per day (bbl/d) of condensate. The estimated reserves for this discovery are about 28 billion cubic feet (bcf) gas plus the associated condensate.

The Sama-1 discovery, located in the West El Qantara concession, tested at 13 MMscf/d of dry gas from a reservoir of Messinian age. The estimated reserves for this discovery are about 48 bcf gas. Based on the preliminary analysis of the testing data, the well has the potential to produce in excess of 20 MMscf/d of gas. A new 3D seismic survey is planned to better define the extent of this gas accumulation, with the potential to increase its reserves considerably. The dry gas nature of the hydrocarbons produced by Sama-1 well offers the opportunity for an early production start-up via a 30 km pipeline to the Company’s South Manzala plant. Commenting on these latest discoveries, Dana Gas Chief Executive Officer Ahmed Al Arbeed declared, “We are very pleased that our Egypt exploration programme is continuing to yield discoveries. The Sharabas-1 and Sama-1 discoveries will boost Dana Gas’ production and profitability, and will take us closer to achieving our target production of 40,000 barrels of oil equivalent (boe) per day by the end of the year – a target that we are already well on the way to achieve. I am confident that the Dana Gas team will also maintain our excellent delivery rates and bring these discoveries on stream soon.”

Dr Hany Elsharkawi, President of Dana Gas Egypt said that the exploration programme is continuing to progress well on all fronts. “In addition to the Sharabas-1 and Sama-1 exploration discoveries, Dana Gas has also successfully drilled and tested an important appraisal location at Salma Delta-2 in the West El Qantara concession, and good productivity has also been confirmed at the previously announced Tulip-1 discovery, also in the West El Qantara concession.”

J. Ray McDermott, S.A. (‘J. Ray’) recently carried out a record-setting lift with the installation of a 3,000-tonne deck for a tie-in platform in the Safaniya offshore field.

This is the first-of-a-kind tie-in platform built by J.Ray for Saudi Aramco with a built-in switchgear module including two heavy duty 69 KV transformers. Other segments of the LTA project scope, including 60 kilometers of pipelines, 14 jackets and 10 of a total of 11 Production Deck Modules (PDM) have been successfully installed by J. Ray’s offshore crews. The last PDM will be installed in early

2010. Remaining segments, such as offshore installation of 50 kilometers of submarine power and fiber optic cables; subsea spool and hydrotesting; and hook-up of a second tie-in platform are expected to be completed shortly. “In addition to our installation achievements offshore, J. Ray’s Dubai fabrication facility safely completed the fabrication of 14 jackets, 11 PDMs, the TP19 deck, 195 over-sized subsea spools and accessories. We are proud of our teamwork, commitment and safety record in this endeavour,” said Makarem.

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DAnA gAS AchieveS revenue of AeD 359 million in the thirD QuArterDana Gas PJSC, the Middle East’s largest regional private sector natural gas company, has announced its financial results for the quarter ending 30th September 2009. Revenue from the sale of hydrocarbons increased to AED 359 million, with gross profit reaching AED 143 million. These figures represent increases of 12 per cent and 64 per cent respectively, compared to the same period last year, mainly due to new condensate sales from the Company’s operations in the Kurdistan Region of Iraq (which commenced in October 2008) and continued strong operations in Egypt. Earnings before interest, tax, depreciation, amortization and exploration (EBITDAX) increased by 41 per cent to AED 205 million as compared to the same quarter last year. However, exploration write-offs and impairment provisions, principally in respect of 3 wells in the Egyptian exploration program, were required totaling AED 110 million. As a result, the Company incurred a net loss of AED 79 million in the third quarter. However, the above Income Statement results exclude an unrealised gain of AED 257 million in the quarter for the Company’s investment in MOL (the Hungarian oil and gas company,

fitch DowngrADeS DewAFitch Ratings has said that the state-owned Dubai Electricity and Water Authority (Dewa) has been placed on rating watch negative, due to uncertainty over payment of a substantial portion of privately held debt, The National has reported. Fitch also said it had placed Dewa’s short-term default rating of “F3” on rating watch negative and its Dhs3.2bn ($871.2m) sukuk, maturing in 2013, which is rated “minus BBB”.

SAuDi ArAmco’S fujiAn fAcility goeS into full operAtion

QAtArgAS hoStS Sixth AnnuAl engineering forum

Qatargas recently held its sixth annual Engineering Forum, bringing together engineering experts from oil and gas companies, academia and the private sector. The Forum is an important opportunity to share latest developments, best practice activities underway in Qatar and meet professionals in the engineering field. Forum papers were presented on a wide range of industry topics such as technological advances in the LNG industry, inspection and maintenance, safety and environmental systems and financial aspects of the industry. Sheikh Ahmed Al-Thani, Chief Operating Officer – Engineering & Ventures said: “The active participation and the high quality of the papers presented in this year’s event is very encouraging. This is the sixth year in a row that Qatargas is hosting the engineering forum which has become a much anticipated annual event.” “Qatargas is pleased to be able to facilitate networking between professionals working in various sectors in the public and private sector. We believe that promoting engineering expertise and knowledge sharing is vital to our country’s industrial development.” Qatargas sponsors a Chair of Engineering at the University of Qatar and is a founding member of the Qatar University Gas Processing Centre.

Saudi Aramco and its joint venture partners, Fujian Province, Sinopec and ExxonMobil, have announced the full commercial operation of the Fujian Integrated Refining and Ethylene Joint Venture Project (FREP), China’s first integrated refining and petrochemical facility with foreign participation. FREP has tripled the capacity of the existing refinery - from 80,000 barrels per day to 240,000 barrels per day - to produce transportation fuels and other refined products, which will help meet the region’s growing need for fuels and chemical products.

His Excellency Ali I. AI-Naimi, Minister of Petroleum and Mineral Resources, Saudi Arabia; said, “This project reflects the depth of Saudi-Chinese relations and

opens wider horizons of cooperation between the two countries in the petroleum and petrochemical areas. China has one of the fastest growing oil consumption rates, and Saudi Arabia, being the world’s largest oil exporter, always seeks to enhance its petroleum relations with China through joint ventures thereby boosting sales of Saudi oil in China.”

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npc AnnounceS increASeD oil proDuction in the Shukheir bAy fielD

The National Petroleum Company (NPC), Citadel Capital’s upstream oil and gas business, has undertaken operations on its Shukheir Bay-5 ST well, which was drilled in June 2006. NPC has lease rights on the 40-square-kilometer development lease, which is located approximately 125 kilometers north of Hurghada on the western coast of the Red Sea.

The concession operator, Offshore Shukheir Petroleum Co. Ltd. (OSOCO), a joint venture company of NPC’s Petzed Investment and Project Management Ltd and the Egyptian General Petroleum Corporation (EGPC), performed a non-rig well intervention on November 9, 2009, adding 7 meters of new perforations in the

Lower Rudeis sandstone.The well had been previously producing

at a stabilised rate of 60 BOPD on artificial lift from one set of perforations in the Upper Rudeis sandstone. Cumulative production to date from the Upper Rudeis was 0.288 million barrels of oil (MMBO).

Shukheir Bay-5 ST now has a total of 17 meters of perforations naturally producing 1600 BOPD and 3.6 million standard cubic feet per day (MMSCFD) of gas on a 40/64” production choke. The well has produced approximately 24,000 barrels cumulative of new oil to-date since November 9, 2009. Production from Shukheir Bay-5 ST will continue to be monitored over the coming period

to confirm productivity, sustainability and a potential increase in reserves. The increase in oil production from this brown field follows a major focus to revive production through applied reservoir engineering and the use of modern cased hole logs that help identify potential bypassed oil.

This success potentially opens other opportunities to access bypassed oil by adding additional perforation intervals in other existing wells or by sidetracking existing wells to new bottom hole locations in the Shukheir Bay field. An offset well on the lease, Shukheir Bay-1, has produced over 5.4 MMBO from the Lower Rudeis Formation.

tAQA AnnounceS thirD QuArter AnD nine-month 2009 finAnciAl reSultS TAQA has announced a total revenue of AED 12.5 billion for the first nine months of 2009, compared with AED 13.1 billion for the same period in 2008. Revenue from the electricity and water business, excluding supplemental fuel, increased 13 per cent to AED 4.6 billion, from AED 4.0 billion for the same period in 2008, primarily due to the expansion of Taweelah B and Fujairah I and revenue from the Red Oak tolling contract acquired in December 2008. Supplemental fuel revenues were AED 2.8 billion in 2009, compared with AED 2.2 billion in 2008. This was due to higher back up fuel costs in 2009, primarily in the domestic subsidiaries, which is then passed through to the off takers. Revenue from oil and gas activities (including gas storage and other revenue) decreased 25 per cent to AED 5.1 billion, compared with AED 6.8 billion for the same period in 2008. This decrease was due to the decline in realised crude oil and natural gas prices.

QAtArgAS celebrAteS opening of chinA repreSentAtive officeQatargas Operating Company Ltd (Qatargas) celebrated the opening of its representative office in Beijing, China. At a ceremony held in Beijing, Qatargas together with senior representatives of the Chinese and Qatari Governments, LNG customers, the diplomatic community and its shareholders gathered to mark the next milestone in the strengthening of the long-term relationship between the State of Qatar and the People’s Republic of China.

Recently, Qatargas celebrated the first shipment of liquefied natural gas (LNG) to China in one of its state-of-the-art Q-Flex LNG carriers. The cargo was delivered at the Guangdong Dapeng LNG receiving terminal near the major Chinese industrial city of Shenzhen, Guangdong Province. The arrival of this cargo represented the beginning of long-term stable supplies of clean energy from the State of Qatar to the People’s Republic of China.

His Excellency Abdullah Bin Hamad Al-Attiyah, Deputy Prime Minister of The State of Qatar and The Minister of Energy and Industry who was in Beijing to attend the celebration considers that “China is the centre today of the new LNG compass”.

Faisal M. Al Suwaidi, Chairman and Chief Executive Officer of Qatargas, said, “With the opening of our Beijing representative office we are demonstrating our long-term commitment to the Chinese energy market which is poised to be one of the biggest LNG consumers in the world in the near future.”

REGIOnAL ROUnD-UP

JOB POSTInGS

JoB PoStiNg uPDateD oN DecemBer 15, 2009

Attract the best talent from around the globe. To advertise in job opportunities call: +968-99253729

Manager Mine Support Services Shell Alberta, Canada www.shell.com

Maintenance Support Engineer Shell Germany www.shell.com

Portfolio Credit Risk Manager Shell United States www.shell.com

Tax Advisor – Direct Tax Audit – Federal Shell United States www.shell.com

Cost Engineer - Field Compression Stations & Gathering BG Australia www.bg-group.com

Cost Engineer-Pipelines BG Australia www.bg-group.com

Rotating Equipment Engineer OMV Austria www.omv.com

Process/DCS Engineer OMV Austria www.omv.com

Reliability Inspecting Engineer - NDT BAPCO Bahrain www.bapco.com.bh

Analsyer Technician Engineer BAPCO Bahrain www.bapco.com.bh

Administration Assistant I (technical) Qatar Petroleum Qatar www.qp.com

Senior QA/QC Engineer PDO Oman www.pdo.co.om

postions company location Details

68 Jan-Feb, 2010

EVEnTS CALEnDAR

regioNal

Plant maintenance in the middle east Jan 10-13 Abu Dhabi UAE

gas arabia Summit Jan 31-Feb 3Abu Dhabi UAE

Saudi oil, gas and PetrochemicalJan 17-20 Riyadh Exhibition Center Riyadh

13th middle east corrosion conference and exhibition Feb 14-17 Manama Bahrain

gloBal

Produced water management 2010Jan 21-22, 2010Stavanger Norway

introduction to wellsite operationsJan 11-15 ReadingUnited Kingdom

asset integrity management Jan 18-22Bali Indonesia

cameron international energy and water experience Jan 21-22Hilton Hotel Cameroon

operations and wellsite geologist Jan 25-27 Reading United Kingdom

hSe risk management asia for oil and gas 2010 Jan 26-27 Kuala Lampur Malaysia

the canadian institute’s 6th annual Shale gas Symposium Jan 26-27 CalgaryCanada

Negotiating Successful gas and lNg contracts Feb 1-4Singapore

Seabed mapping and inspection 2010 Feb 9-11, Norway

the canadian institute’s well & Pipeline abandonment, Suspension and reclamation Feb 9-10 Calgary Canada

e & P information and Data management Feb 9-10 LondonUK

Production Sharing contracts & upstream economic analysis Feb 10-12Lagos Nigeria

introduction to wellsite operationsFeb 15-19 Aberdeen United Kingdom

fPSo oslo training course 2010 Feb 16-18 Oslo Norway

fundamentals of the oil and gas industry Feb 17-19 London , UK

oil field chemistry Symposium March 14-17 Norway

unconventional gas March 15-16 LondonUnited Kingdom

turoge 2010 March 16-17 Ankara, Turkey

Nigeria’s oil and gas legal Systems March 22Lagos Nigeria

9th South east asia hydrocarbon flow measurement workshop March 2-4, 2010Kuala Lampur Malaysia

oceaNteX- 2010 offshore conference & technology exposition March 3-6, 2010Bombay Exhibition Centre Mumbai

oil field chemistry Symposium March 14-17, 2010Geilo, Norway

unconventional gas March 15-16, 2010United Kingdom

SPe/icota coiled tubing well & intervention conference & exhibition March 23-24, 2010USA

caPe iV, 4th african Petroleum congress & exhibition March 24-27, 2010South Africa

5th china offshore Summit March 24-26, 2010Beijing, China

oil and gas technology forum March 25-28, 2010LondonUnited Kingdom

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Oil & Gas Review is the strategic media partner for the following forthcoming events:

• Plant Maintenance in the Middle East 2010 (Jan 10-13, 2010)

• Gas Arabia Summit (Jan 31, Feb 3, 2010)

• 9th Middle East Geosciences Conference & Exhibition (March 8-10, 2010)

• Middle East Petroleum & Gas Conference (April 25-27, 2010)

• Middle East Petrotech 2010 (May 24-26, 2010)

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