OILFIELD TECHNOLOGY EXPLORATION | DRILLING | PRODUCTION · a production quota.2 Meanwhile US...

© 2015 Baker Hughes Incorporated. All Rights Reserved. 43338 07/2015

Knowing where to acquire fluid samples can be as important as knowing the sample’s quality and properties—especially in complex reservoirs.

Optimize your decision-making with a better understanding of where the best permeability potential exists by combining the MagTrak™ logging-while-drilling (LWD) magnetic resonance service and the FASTrak™ LWD fluid analysis sampling and testing service.

Call us or visit BakerHughes.com/LWD to learn more about our industry-leading porosity intelligence and LWD formation evaluation services.

+44 2070 483646 or +1 713-268-6218

See it. Sample it. Simplify it.

Copyright © Palladian Publications Ltd 2015. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. All views expressed in this journal are those of the respective contributors and are not necessarily the opinions of the publisher, neither do the publishers endorse any of the claims made in the articles or the advertisements. Printed in the UK. Images courtesy of www.shutterstock.com.

Oilfield Technology is audited by the Audit Bureau of Circulations (ABC). An audit certificate is

available on request from our sales department.

ISSN 1757-2134

Contents November 2015 Volume 08 Issue 11

3414

More from Read on the goApp available on Apple/Android

Like us on FacebookEnergy Global

Join us on LinkedInOilfield Technology

Connect on Google+Oilfield Technology

Follow us on Twitter@Energy_Global

Front cover

Tercel Oilfield Products designed and manufactured the MicroCORE Cutting System to deliver a two-in-one innovative solution to drill further and faster.

By redistributing the high energy consumption from the centre of the bit to the more efficient areas of the cutting structure, the bit delivered ROP gains up to 82% faster than traditional cutting structures.

03 Comment

05 World news

10 What’s new in West Africa?David Bizley, Oilfield Technology, takes a look at the challenges and opportunities facing the oil and gas industry in West Africa.

14 Searching with satellitesMichael Hall, Airbus Defence & Space, discusses how the latest satellite technology and derived products and services are being applied to increase exploration efficiency and reduce risk.

19 Illuminating reservesJulie Wilmore, Brad Torry, Henrik Roende, Chris Egger and Adriana Thames, TGS, USA, examine a data driven solution designed to improve imaging of current and future reserves in the Mississippi Canyon.

24 Challenges of the deepJoe Killen and William Wills, Avalon Sciences, discuss the requirements and delivery of seismic monitoring within extreme high pressure and temperature borehole environments.

31 Making the right choicesMark Freeman and Jake Steele, Tercel, review the benefits of a customisation process in the design of drilling equipment.

34 Stimulating sandstone reservoirsThomas JØrgersen, Fishbones, Norway, highlights the potential of stimulation technology to increase well productivity.

39 The key to connectivityKerry Daly, Expro, USA, explains how reservoir optimised perforation solutions can unlock hydrocarbon flow to produce vital revenue.

43 An intelligent approachSavio Saldanha, Halliburton, USA, discusses zonal control in multizone mature fields.

47 Improving efficienciesCraig Webster, AGR, UK, gives an overview of the role of the production technologist.

51 Challenges of scale managementGavin Forbes, Intertek, UK, examines the modern day obstacles facing scale management in oil wells.

55 Screening out the problemRichard Jackson, 3M Oil & Gas, UK, explains how new ceramic technology is helping to achieve a level of sand control that enables operators to fully exploit their assets.

59 Dust in the wind Steve Hiner and Charlie Brake, CLARCOR Industrial Air, UK, examine dust filtration solutions used to protect gas turbines.

63 Considering compressionColman de Jong and Brian Todd, Dresser-Rand within Siemens Power and Gas, review compression solutions for an economically challenged oil market.

67 Accommodating expatriatesManton Townend, Air Energi, Singapore, explains how high costs and low transparency makes navigating South Korea’s property market without local support a costly business.

69 Dangers of exposureMichael Tzouvelekis, Dräger, highlights the increasing dangers of exposure to hydrogen sulfide in the oil and gas industry.

Untitled-2 1 26/10/2015 09:17

O

ILFIELD TECHN

OLO

GY

NO

VEMBER 2015 | EXPLORATION | DRILLING | PRODUCTION

ww

w.oilfieldtechnology.com

NOVEMBER 2015 NOVEMBER 2015 NOVEMBER 2015 EXPLORATION | DRILLING | PRODUCTION

OFC_OT_November_2015.indd 1 30/10/2015 15:11

Thinking about Mexico?Go big, go Gigante.

TGS gives you the right data, in the right place, at the right time. This time, it’s Offshore Mexico. The data has been consistently acquired and processed, and it’s complemented by multibeam and seafloor sampling analysis. The latest, most comprehensive view of the region’s potential. See it now.

© 2015 TGS-NOPEC Geophysical Company ASA. All rights reserved.

See the energy at TGS.com

First Break_GOM.indd 1 11/5/2015 9:18:05 AM

Comment November 2015

David Bizley, [email protected]

November 2015 Oilfield Technology | 3

Contact us

Subscription

EditorialManaging Editor: James Little [email protected]

Editor: David [email protected]

Editorial Assistant: Louise [email protected]

DesignProduction: Ben [email protected]

SalesAdvertisement Director: Rod Hardy [email protected]

Advertisement Sales Executive: Ben Macleod [email protected]

Business Development Manager: Chris Lethbridge [email protected]

WebsiteWebsite Manager: Tom Fullerton [email protected]

Website Editor: Callum O’Reilly [email protected]

Digital Editorial Assistant: Angharad [email protected]

MarketingCirculation Manager: Victoria McConnell [email protected]

Subscriptions: Laura [email protected]

Office Administrator: Jo Repton [email protected]

Reprints: [email protected]

PublisherNigel Hardy

Palladian Publications Ltd, 15 South Street, Farnham, Surrey GU9 7QU, UK Tel: +44 (0) 1252 718 999 Fax: +44 (0) 1252 718 992 Website: www.oilfieldtechnology.com

Oilfield Technology subscription rates: Annual subscription £80 UK including postage/£95/e135 overseas (postage airmail)/US$ 150 USA/Canada (postage airmail). Two year discounted rate £128 UK including postage/£152/e216 overseas (postage airmail)/US$ 240 USA/Canada (postage airmail). Subscription claims: Claims for non receipt of issues must be made within three months of publication of the issue or they will not be honoured without charge. Applicable only to USA & Canada: OILFIELD TECHNOLOGY (ISSN No: 1757-2134, USPS No: 025-171) is published monthly by Palladian Publications, GBR and is distributed in the USA by Asendia USA, 17B S Middlesex Ave, Monroe NJ 08831. Periodicals postage paid New Brunswick, NJ and additional mailing offices.Postmaster: Send address changes to Oilfield Technology, 701C Ashland Ave, Folcroft PA 19032.

W inter is coming; the nights are drawing in and the weather is worsening, at least in the Northern Hemisphere. The year is gradually drawing to a close, yet the price of crude oil still spends most of its

time hovering around the mid-to-high US$40s, only occasionally spiking above US$50. The return to prices above US$60, which more optimistic estimates had promised would begin to occur around now, has yet to materialise.

As the year progressed, it became increasingly obvious to many that this downturn was unlikely to disappear overnight. In fact, the problem of oversupply looks like it might be around for a while yet: Russia continues to produce oil at well over 10 million bpd, levels not seen since the Soviet era. In addition, OPEC has thus far steadfastly refused to cut production and move its targets downwards. The group has previously hinted that it would consider cutting production if other large producers, such as Russia, joined it in doing so,1 but this looks unlikely. Indeed, even if such a deal were agreed, it’s far from certain that revised targets would be adhered to, especially as OPEC Secretary General, Abdallah Salem el-Badri prefers to think of them as a “recommendation” rather than a production quota.2 Meanwhile US output, boosted over recent years by the meteoric rise of shale production, continues to average around 9.2 million bpd.

With this in mind, it is far from surprising that oil and gas companies are still tightening their belts and reining in costs. The US alone has seen over 86 000 jobs lost as a result of the price drop, and globally over US$200 billion of planned projects have been postponed or cancelled. The Financial Times goes so far as to state that “any new project requiring an oil price of more than US$60 a barrel, almost 50% below last year’s peak, is now either being scrapped or deferred until industry costs have come down sufficiently.”3

BP and Shell have both recently announced further, significant cost reductions. BP revealed that it plans to drop Capex to below US$20 billion (almost US$5 billion lower than at its peak) and will continue with its planned US$10 billion divestment programme. Shell’s CEO Ben van Beurden announced at the company’s recent ‘Management Day’ that the company is now “planning for a prolonged downturn” and is on track to cut Opex by 10% and Capex by 20%, which it says will recover US$11 billion.

According to some analysts, these kinds of actions, along with asset divestments and contract renegotiations are exactly what the industry needs, even if they do make for a bitter pill to swallow. During the years of US$100/bbl oil, average productivity actually declined: For example, the average number of staff employed to produce a barrel of oil doubled between 2004 and 2014.4 The hope is that the pressure from the low oil price will force oil and gas companies to become more dynamic and efficient, allowing them to take even greater advantage when the market returns to full strength.

Exactly when is the market likely to rebound then? The fact is that nobody seems to be entirely sure – even using all the available data, making predictions on the oil price is a tricky affair; one might almost be better off reading tealeaves. Based on current trends, however, the general consensus seems to be a cautious estimate of US$60/bbl as a baseline to be achieved in roughly two years.

Demand for oil and gas isn’t going to disappear any time soon, in fact the low price will likely drive demand growth upwards. Changes are also afoot on the production side: the US EIA predicts US oil production to fall to 8.9 million bpd in 2016, marking the first decline in US output since 2008. Per Magnus Nysveen, head of analysis at Rystad Energy, was quoted by CNN Money as saying, “This is very significant. If production continues falling by 100 000 bpd, then we think the balance between supply and demand can happen earlier.”5 It’s now fairly universally agreed that the industry won’t be emerging from the current downturn in the immediate future, but perhaps the beginning of the recovery is closer than we thought?

References1. http://www.wsj.com/articles/russian-oil-output-rises-to-post-soviet-high-in-september-1443777432 2. http://www.forbes.com/sites/gauravsharma/2015/06/05/its-an-opec-recommendation-not-quota-says-secretary-general/ 3. Adams, C., ‘Oil Majors Ruthless On $60-A-Barrel Target’, Financial Times, 29 October, 2015. p. 21.4. Ibid.5. http://money.cnn.com/2015/10/06/investing/us-oil-production-declines-gas-prices

© 2015 Baker Hughes Incorporated. All Rights Reserved. 43672 10/2015

Improve torsional and lateral stability while drilling interbedded or directional intervals with the Talon™ Force high-velocity PDC drill bits with Stabilis™ reinforced cutters.

The cutter’s innovative geometrical design increases its durability and nearly triples the impact strength to deliver longer runs and higher ROP in challenging formations.

Visit BakerHughes.com/TalonForce to learn how you can take your drilling performance to the next level.

Sharpen your drilling performance.

World news November 2015

In brief

November 2015 Oilfield Technology | 5

Statoil delays start date of US$7 billion fieldAccording to the Financial Times, Statoil has pushed back the start date for its largest project in the UK North Sea for more than a decade, instead affirming that its US$7 billion Mariner field will not come online until the latter half of 2018.

In an accompanying statement, Statoil revealed that Mariner is just one of two projects which is to have its start-up date delayed. The other was Aasta Hansteen, situated just inside the Arctic Circle in Norwegian waters. The decision is a blow to hopes that recent UK tax cuts could prompt a swift revival in North Sea spending and production.

The region is among the hardest hit by the ongoing downturn in crude prices which has forced the world’s biggest companies to reduce their expenditure.

Royal Dutch Shell has announced that it would take a US$2 billion writedown after cancelling its Carmon Creek oil sands project in Canada, while BP has pushed a final investment decision on its Mad Dog 2 project in the Gulf of Mexico, to the middle of next year.

Mariner, about 150 km east of the Shetland Islands, is the largest development on the UK continental shelf in more than a decade, with Statoil investing US$7 billion.

It is expected to produce more than 250 million bbls of oil during its 30-year lifespan, with peak production estimated at around 55 000 bpd.

Equatorial Guinea expands major crude oil projectThe Ministry of Mines, Industry and Energy, representing the Government of Equatorial Guinea, announced that it has signed a Memorandum of Understanding with three companies to build a crude oil and petroleum products storage tank farm on Bioko Island, Equatorial Guinea.

In an expansion of the previous project plan, the Bioko Oil Terminal will incorporate a significant amount of crude oil storage space, as well as storage for associated petroleum products. It will serve the Gulf of Guinea region and facilitate processing and export to consumers regionally and globally.

The Ministry of Mines, Industry and Energy of Equatorial Guinea, Taleveras Group, Gunvor Group and the Strategic Fuel Fund will jointly participate in the Bioko Oil Terminal development. The tank farm will be operated by the Strategic Fuel Fund, which operates Saldanha Bay in South Africa, one of the world’s largest petroleum storage facilities.

Angola Chevron has announced that its subsidiary, Chevron Overseas (Congo) Limited, has started oil and gas production from the Lianzi Field, located in a unitised offshore zone between the Republic of Congo and the Republic of Angola.

Positioned 65 miles (105 km) offshore in approximately 3000 ft (900 m) of water, Lianzi is Chevron’s first operated asset in the Republic of Congo and the first cross-border oil development project offshore Central Africa. The project is expected to produce an average of 40 000 bpd.

Norway Jacktel AS, a wholly owned subsidiary of Master Marine A, located in Oslo, Norway, has been awarded a contract for the Haven jack-up accommodation rig for the installation and commissioning period for the Johan Sverdrup Project Phase 1.

To ensure required capacity for working on the Johan Sverdrup field, Haven will undergo an upgrade related to strength and length of the legs, including provision of new spud-cans/suction-caissons. The upgrade is expected to be performed at a yard in Norway.

Papa New Guinea Searcher Seismic has announced the Haere 2D Seismic Survey offshore PNG.

The survey, in cooperation with the Department of Petroleum and Energy (DPE) and project partner BGP, comprises ~17 000 km of 2D long-offset, high resolution, broadband seismic over the Gulf of Papua.

The BGP Explorer has now mobilised for the project.

The new survey brings Searcher’s total data library in the Gulf of Papua to 58 000 km.

TWMA strengthens Maersk Oil UK offeringTWMA has been awarded two major contracts, building on a strong relationship with Maersk Oil North Sea UK (Maersk Oil) spanning more than a decade.

The projects, which are led by an Aberdeen-based team, involve work on the Culzean development – one of the largest gas discoveries in recent years in the UKCS – and the continuation of provision of innovative technology across Maersk Oil’s Central North Sea operations.

To ensure the company continues to offer cost-effective and safe solutions available to the global oil and gas industry, multi-million pound equipment investments are being made. The new work will also result in the creation of up to 20 new jobs.

Neil Potter, Chief Operating Officer at TWMA, said: “We are delighted to have been selected to support Maersk Oil on these projects as they expand their drilling activity within the UK sector of the North Sea.”

6 | Oilfield Technology November 2015

World news November 2015

Diary dates

To read more about these articles and for more event listings go to:

Web news highlights

www.oilfieldtechnology.com

ÌÌ Energy majors to drive efficiencies in North Sea operations

ÌÌ Seatronics: new partnership with LateraL AS

ÌÌ BP study sees technology boosting energy supplies and providing path to lower carbon future

Gassco extends operationship Gassco is now operator of the new Utisra High Gas Pipe (UHGP), which is to transport rich gas to Britain’s Scottish Sea Gas Evacuation (sage) system and St Fergus in Scotland.

Running for 294 km, this pipeline starts at the Edvard Greig field approximately 57 km north of Sleipner in the northern North Sea.

“We have collaborated closely and well with development operator Statoil while readying the UHGP”, reports Kristin Kinn Kaste, vice president for the transport network at Gassco.

“The next milestone will be to complete dewatering and start to fill with gas, and the line is expected to become operational by the end of this year. This means we’re now responsible for more than 8300 km of gas pipelines.”

Gassco became operator on 1 November for the UHGP joint venture, and is also responsible for technical management of the new facility.

The UHGP rich gas line ties into the existing Saga pipeline and has a technical capacity of 5 million m3 per day.

25 - 26 November, 2015

Middle East Heavy Oil CongressManama, BahrainE: [email protected]

09 - 11 February, 2016

IP WeekLondon, UKE: [email protected]/events/ip-week

24 - 26 February, 2016

AOGPerth, AustraliaE: [email protected]

01 - 03 March, 2016

IADC/SPEFort Worth, USAE: [email protected]/events/dc/2016

07 - 10 March, 2016

GEO 2016Manama, BahrainE: [email protected]

Eni makes tough decisions: Reduces stake in SaipemAccording to the Financial Times, Eni has reached a deal to reduce its stake in Saipem, the pipeline and services company in a bid to wipe €5.1 billion of debt from its balance sheet as it adjusts to the lower oil prices.

The long anticipated deal – which entails the sale of a 12.5% stake in Saipem to Italy’s sovereign wealth fund for €441 million – also chimes with efforts by Claudio Descalzi, Chief Executive of Eni, to refocus the company on its upstream business. In a statement, Mr Descalzi said the agreement marked a ‘significant step’ in the company’s transformation.

“The additional financial resources will be used to develop the very significant oil and gas reserves we have discovered over the past few years and to strengthen our balance sheet in line with our targets”, he said.

Shares in Saipem increased by 9.5% in Milan, while Eni gained 0.7%.One of the world’s largest oilfield services groups, Saipem has been hit hard by the

decline in the crude price.The company slashed 9000 jobs this year as clients cancelled contracts. Separately,

it has launched a new capital-raising effort through the sale of new shares worth €3.5 billion.

Eni has also been hard hit by the oil price dip, with its shares losing nearly 9% of their value over the past year. However, its prospects were boosted in August when it announced the discovery of a giant gas field off the coast of Egypt, the largest yet found in the Mediterranean Sea.

Energy majors collaborate for North Sea efficienciesPetrofac, Faroe Petroleum and Eni Hewett have established a cost saving partnership to drive efficiencies and commercial synergies across their UK operations in the Southern North Sea.

The tripartite agreement sees collaboration between Petrofac (Duty Holder) and the respective equity owners and operators of the Hewett, Schooner and Ketch gas fields to share logistics and accommodation services across the facilities. Faroe Petroleum is operator and 60% equity holder in the Schooner and Ketch fields, and Eni Hewett is operator and 89% equity holder in the Hewett complex.

Deirdre Michie, Oil & Gas UK’s Chief Executive, commented: “To build on the work of individual companies Oil & Gas UK has put in place the Efficiency Task Force to provide the catalyst for pan-industry improvement – in processes, standardisation and behaviours so that the UK oil and gas industry can continue to attract investment and support hundreds of thousands of high skilled jobs for decades to come.”

November 2015

DONT KNOW WHERE IN THE HOLEYOU ARE?

supremeservices.com/NGproducts

Supreme Services is the only provider to offer low-strength, non-controlled radioactive tagging devices for depth correlation.

No forms. No approvals. No headaches.

[email protected]





[email protected]





[email protected]


November 2015World news

Statoil exploration bid for offshore MozambiqueStatoil has submitted a winning bid on the A5-A block offshore Mozambique in the fifth competitive bidding round.

The successful bid will grant the company an exploration license for offshore Mozambique.

The A5-A block is located in the Northern Zambesi basin in the Angoche area about 1500 km2 north of the capital Maputo. The block covers an area of 5145 km2 in water depths ranging from 200 to 1800 m.

Eni is the operator of the joint venture with 34% participating interest. Partners are Statoil and Sasol with 25.5% each and ENH with 15%. The minimum work programme includes seismic and three commitment wells.

“The Angoche area is a very promising frontier basin with significant oil potential and builds on Statoil’s exploration strategy of access at scale”, says Nick Maden, senior vice president for Statoil’s exploration activities in the Western Hemisphere.

Blink exploration well in the Norwegian North SeaFaroe Petroleum has announced the results of the Blink exploration well in the Norwegian Sea (Faroe 25%).

The 6406/12-5 S (Blink) well was drilled on the Halten Terrace, approximately 27 km south west of the Njord field and five km north east of the Pil discovery well. Well 6406/12-5 S followed on directly from the Boomerang exploration well which encountered a 26 m gross Upper Jurassic intra-Spekk/Rogn sandstone containing estimated recoverable resources of between 13 and 31 million boe.

Graham Stewart, Chief Executive of Faroe Petroleum commented: “Whilst the results of the Blink well are disappointing we look forward to advancing the options for monetising the significant combined Pil, Bue and Boomerang discoveries, on which the Blink well result has no bearing. The company continues to perform very well despite continuing low oil prices, with low operating costs, a good cash position and strong production rates.”

Strong gas shows for Warro-6, Western AustraliaTranserv has announced that Warro-6 commenced drilling in the 8 in. hole on 30 October and is currently drilling ahead at 4387 m RT.

The progress of Warro-6 has been marked by strong gas shows in a number of sandstone units below 4147 m RT and continues to experience significant, elevated gas readings in the sands to its present depth (4387 m) which is 70 m below the lowest known gas in previous Warro wells.

Once Warro-6 as reached total depth and the electric logs have been interpreted a full report on the well results will be provided by the company.

Warro-6 is being drilled vertically to a planned total depth of approximately 4500 m RT. The well is located 2.7 km to the north of Warro-5 and 1.7 km WSW of Warro 3 and 4. Warro-6 is located in a flank position on the western side of the field.

Farstad Shipping contract for new vesselFarstad Shipping ASA has been awarded a three year contract with further up to three years operations for CSV Far Sentinel (2015, VARD 3 07, 9.200 DWT) by Subtec S.A. de C.V. for delivery of light construction work, IMR and other subsea related activities in the Gulf of Mexico.

“This is an important and significant contract for Farstad Shipping. It proves that even in a very challenging market, we are able to conclude long-term contracts for our vessels. This contract secures valuable competence and activity for our employees”, said CEO Karl-Johan Bakken.

“By this, we have now signed important contracts for both of our subsea new buildings delivered in 2015. We hereby confirm Farstad Shipping’s strong position into the subsea market, which is vital for us in the time ahead”, said Bakken.

The contract is scheduled to begin during December 2015.

Global oil reserves likely to double by 2050, says BPAccording to Reuters, the world will not be at risk of running out of oil or gas for decades ahead. Oil major BP predicts that existing technology is capable of unlocking so much that global reserves will almost double by 2050 despite growing consumption.

“When taking into account all accessible forms of energy including nuclear, wind and solar, there are enough resources to meet 20 times what the world will need over that period” said David Eyton, BP Group Head of Technology.

“Energy resources are plentiful. Concerns over running out of oil and gas have disappeared,” Eyton said at the launch of BP’s inaugural Technology Outlook.

Oil and gas companies have invested heavily in squeezing the maximum from existing reservoirs by using chemicals, super computers and robotics. The halving of oil prices since last June has further dampened their appetite to explore for new resources, with more than US$200 billion worth of mega projects scrapped in recent months.

By applying these technologies, global proven fossil fuel resources could increase from 2.9 trillion (boe) to 4.8 trillion boe by 2050, nearly double the projected 2.5 trillion boe required to meet global demand until 2050, BP said.

“With new exploration and technology, the resources could leap to a staggering 7.5 trillion boe”, Eyton said.

“We are probably nearing the point where potential from additional recovery from discovered reservoir exceeds the potential for exploration.”

Governments are expected to agree on a framework to limit global warming by limiting carbon emissions at the United Nation’s climate summit in Paris starting this month. European oil companies have urged policy makers to introduce a global price on carbon that will favour the use of cleaner natural gas at the expense of coal.

November 2015

SUBSEA SERVICES ALLIANCEHelix OneSubsea Schlumberger

The Subsea Services Alliance integrates marine support with well access and controls, as well as downhole services to deliver subsea well intervention services to help clients increase production and recoverable reserves.

The extensive track record and expertise of the industry experts at Helix Energy Solutions, OneSubsea, and Schlumberger, provide our client partners with uniquely integrated solutions for deep- and ultradeepwater basins and higher well pressure environments.

Partner with Subsea Services Alliance today. Discover your unique solution at www.subseaservicesalliance.com.

© 2015 Helix, OneSubsea, Schlumberger. All rights reserved.

SUBSEAINTERVENTIONS

COST-EFFECTIVESINGLE SOURCE FORYOUR

¡ Well Construction & Completion

¡ Installation & Well Commissioning

¡ Intervention & Life-of-Field

¡ Brownfield Development

¡ Decommissioning

¡ Well Construction & Completion

¡ Installation & Well Commissioning

¡ Intervention & Life-of-Field

¡ Brownfield Development

¡ Decommissioning

AD

0193

9SSA

A4

10 |

David Bizley, Oilfield Technology, takes a look at the challenges and opportunities facing the oil and gas industry in West Africa.

West Africa?What’s new in

| 11

The impact of low oil prices has been felt by producers across the globe; no region, no matter how dynamic, has completely avoided the impact of the downturn. The

squeeze has been felt in Houston, with redundancies and lay-offs becoming an unpleasant reality for many oilfield veterans; Sheikh Sabah al-Ahmed al-Sabah, Emir of Kuwait, has urged his government to adopt urgent reform measures and cut national spending in the wake of a 60% drop in income.1 Even Saudi Arabia is rumoured to be setting up a special department to manage spending cuts.2

Oil producers in Africa have also felt the impact of reduced O&G spending with national governments cutting back on costs and IOCs reining in Capex and Opex. Despite this, there is still reason for optimism; Infield Systems Ltd, for example, has predicted that Africa will account for 20% of all offshore oil and gas Capex over the next five years. With West Africa positioned as the key offshore region on the continent, the future of the industry here looks comparatively bright.

West African O&G at a glanceThe West African O&G industry is far from immune to market turmoil and has felt the impact of the downturn just like anywhere else, with many operating companies (both indigenous and international) posting shrinking profits and even outright losses. Two such examples are African Petroleum, which operates across five countries in West Africa and posted a net loss of just over US$8 million for H1 2015, and Oando Energy Resources, which focuses mostly on on- and offshore Nigeria, and posted a net loss of more than US$50 million for the same period.

However, despite these losses the region continues to show promise; the rig count drop experienced earlier this year was lower than that experienced in other regions and, despite taking something of a hit, exploration activity is still ongoing.3

Indeed, a series of recent discoveries has fuelled industry optimism: Total and Foxtrot International both made finds offshore Côte d’Ivoire; Hess Corporation struck hydrocarbons offshore Ghana; Kosmos Energy encountered 117 m of net hydrocarbon pay with the Tortue-1 well offshore Mauritania; and Cairn Energy’s SNE-1 discovery offshore Senegal was one of 2014’s largest. With this spate of discoveries in mind, it is perhaps unsurprising to note that the West Africa Transform Margin (WATM) currently boasts an enthusiasm-bolstering 65% exploration success rate.4

Problems with piracyAs well as opportunities, however, West Africa also faces plenty of challenges, many of which have little to do with lower oil prices. Piracy, oil theft and institutional corruption are ongoing hazards and pose significant concerns for IOCs hoping to invest in the region.

Of these challenges, piracy is perhaps the most alarming; the Gulf of Guinea saw more than 100 attempted vessel hijackings in 2013 alone. Reports have also shown that over recent years the violence of pirate attacks in the Gulf of Guinea has increased, with crewmembers being kidnapped, tortured, and shot. As of 2013, rates of kidnapping for ransom were also on the rise.5

Making the problem of piracy particularly intractable is the trend for hijacking attempts to occur well within territorial waters and close


to terminals and harbours rather than on the high-seas; this limits the ability of international military forces to intervene. As a consequence, operators are left relying on local naval and coastguard forces, which in turn are often prohibited from entering the territory of neighbouring nations, thus hindering their ability to pursue pirates and hijackers.6

Local laws also complicate the matter of providing vessels with adequate security; international maritime security firms are banned from carrying firearms in many of the region’s territorial waters, limiting their efficacy. When armed guards are available, they can often only be sourced from local government forces, which have been cited as having generally poor professional standards.

Focus: NigeriaNigeria, which has access to 37 billion bbls of proven crude oil reserves and over 5 trillion m3 of natural gas, is Africa’s largest hydrocarbon producer and one of the continent’s economic powerhouses. However, some long-term forecasts are predicting a gradual drop in output as a consequence of underinvestment.7

As the scope of the current downturn in oil prices became clear, NNPC (Nigeria’s state oil company) slashed its budget for joint venture operations by 40% to US$8.1 billion. This is expected to have a knock-on effect to the country’s oil output as joint ventures between various IOCs and NNPC account for roughly half of all production. Some reports have calculated that, as a result of this cut in expenditure, various projects amounting to the equivalent of an additional 750 000 bpd will never get off the ground.8

However, investment in the Nigerian oil sector from IOCs had been in a state of decline for several years before NNPC’s cuts, with recently developed fields failing to sustain output and exploratory drilling declining. Some companies, such as Shell and Chevron, have even begun to divest their assets, whilst ConocoPhillips has left the country altogether after selling its upstream assets to Oando Energy Resources.

Exactly why IOCs are losing enthusiasm for Nigeria is down to a variety of factors, but perhaps the most obvious reasons are security related. To quote Shell on the matter, “The Niger Delta is one of the most challenging locations in which Shell companies do business. Crude oil theft, sabotage and illegal refining have become increasingly serious problems, with long-term social, economic and environmental impacts.”9 Some reports have calculated that as much as 100 000 bbls of oil are stolen each day, often taken directly from pipelines via a dangerous process known as bunkering. There are even reports that senior politicians and military officers are involved in the industrial-scale theft, which generally sees stolen oil shipped out to tankers waiting offshore and sold to international markets.

As mentioned earlier, piracy and kidnapping are also significant concerns for companies operating on and offshore Nigeria. Gerry Northwood, COO of maritime security firm MAST, was quoted as saying: “While the Nigerian Government and Nigerian Navy should be commended for the effort recently made to try and eradicate product theft, [...] kidnap and ransom of personnel is likely to remain a threat for the foreseeable future.”

The threat posed by Boko Haram, an Islamist militant group operating largely in the northeast of the country, also remains an ongoing security concern despite recent advances made against the group by Nigerian security forces with US assistance.

Despite these challenges, one can perhaps be hopeful that Nigeria has turned a corner with the election of its new President, Muhammadu Buhari. Buhari has vowed to clean up the industry, combat oil theft, and eradicate Boko Haram. Solving these issues, will be key to restoring IOC confidence and enthusiasm when it comes to investing in Nigeria.

Focus: GhanaGhana is believed to hold between 5 and 7 billion bbls of crude oil and up to 6 trillion ft3 of natural gas, giving it some of Africa’s largest proven reserves. The country’s oil industry has grown significantly over the last decade, especially since Tullow Oil’s discovery of the major Jubilee field, and has attracted a number of major operators including Kosmos Energy, ENI, and Hess Corporation.

Ghana appears to hold significant future prospects for oil and gas operations and the government is keen to encourage growth in this sector; “Recent discoveries are that the country’s oil and gas resources stretch across the country’s shoreline from Cape Three points in the West to Keta in the East. The Volta Basin as well is also believed to hold oil and gas reserves. Government through GNPC [Ghana National Petroleum Corporation] is seeking to fully maximise Ghana’s prospects in the oil industry. It has recently sought to extend the country’s continental shelf to increase the country’s oil and gas scope.”10

Earlier this year, Ghana received US$700 million in guarantees from the World Bank for its new Sankofa gas project, which is expected to attract just under US$8 billion in investment. The Sankofa project, located 60 km offshore, holds approximately 1.5 trillion ft3 of gas and 500 million bbls of oil and is expected to provide 80 000 boe/d by 2019.

Concerns had been raised after the neighbouring nation of Côte d’Ivoire asked the International Tribunal for the Law of the Sea to settle a maritime border dispute with Ghana; this could have had grave implications for the future of Tullow Oil’s US$4.9 billion TEN project, which lies in the disputed territory. Fortunately for Ghana and Tullow, the Tribunal ruled that development of the TEN project could continue on the proviso that no further drilling be carried out. However, this was a temporary settlement and the Tribunal has not yet come to a decision over the merits of the case. A final decision is expected in 2017, with analysts predicting a ruling in Ghana’s favour.11

The future of Ghana’s oil and gas industry looks comparatively bright, though like elsewhere, it too will have to endure the challenges posed by the current low oil price.

SummaryWest Africa remains a challenging region for oil and gas companies, despite long-term industry activity. Problems such as piracy, kidnappings and corruption pose significant security risks for operators. However, for those willing to make the investment and take adequate precautions, the lower operating costs and significant untapped potential of West Africa make it an attractive opportunity. As a consequence, the region is likely to see continued growth over the coming years.

References1. http://www.reuters.com/article/2015/10/27/kuwait-economy-emir-

idUSL8N12R30S201510272. http://www.bloomberg.com/news/articles/2015-11-02/saudi-arabia-said-to-

create-special-office-to-help-cut-spending 3. http://energy.globaldata.com/resources/expert-insights/oil-and-gas/exploration-

activity-in-africa-undeterred-by-slump-in-oil-price 4. http://energy.globaldata.com/resources/expert-insights/oil-and-gas/

interest-remains-across-frontier-of-west-africa-as-exploration-transitions-to-development

5. http://www.skuld.com/topics/voyage--port-risks/piracy/overall/piracy---gulf-of-guinea/general-information

6. Ibid.7. http://energy.globaldata.com/resources/expert-insights/oil-and-gas/reversal-of-

fortune-in-nigerias-oil-sector-challenged8. Ibid.9. http://www.shell.com/global/environment-society/society/nigeria.html 10. http://www.pwc.com/gh/en/industries/energy-utilities-mining.html 11. http://www.reuters.com/article/2015/04/25/us-ghana-ivorycoast-oil-

idUSKBN0NG0IX20150425

THINK BIG.

Size does matter. ROSEN maintains the industry’s most comprehensive technology portfolio, from hardware to software, as well as the largest tool fleet. Meaning more flexibility for you.

www.rosen-group.com

You will need to register to read the full edition. Please log in to www.oilfieldtechnology.com or alternatively click here to register for free!

For more information about Oilfield Technology subscription package, please contact us:

THAT WAS A SAMPLE OF

NOVEMBER ISSUE

DON’T WANT TO MISS OUT?

E: [email protected]: +44 (0)1252 718999

www.oilfieldtechnology.com

http://www.energyglobal.com/signin/oilfield.aspx?mgz=oilfield-technology

OILFIELD TECHNOLOGY EXPLORATION | DRILLING | PRODUCTION · a production quota.2 Meanwhile US...

Documents

Transcript of OILFIELD TECHNOLOGY EXPLORATION | DRILLING | PRODUCTION · a production quota.2 Meanwhile US...