o&g mena 4

THE ETHICAL GIANTSaudi Aramco’s CEO Khalid Al-Falih

on how his company is taking responsibility for its actions

(Page 32)

OIL, TOIL AND TROUBLEWhy crime pays for the Somali pirates

holding supertankers to ransom(Page 38)

LONE RANGERInside Egypt’s largest

independent oil company(Page 54)

How nanotechnology could transform the oil and gas industry (Page 26)

A NEW DAWN?

www.ngoilgasmena.com • Q3 2009

Final Cover-HIGH RES.indd 1Final Cover-HIGH RES.indd 1 5/8/09 15:18:175/8/09 15:18:17

Baker Hughes AD.indd 2Baker Hughes AD.indd 2 28/7/09 16:06:5828/7/09 16:06:58

Baker Hughes AD.indd 3Baker Hughes AD.indd 3 28/7/09 16:07:0028/7/09 16:07:00

Jesco AD.indd 2Jesco AD.indd 2 28/7/09 16:19:3228/7/09 16:19:32

Jesco AD.indd 3Jesco AD.indd 3 28/7/09 16:19:4328/7/09 16:19:43

AGR AD.indd 2AGR AD.indd 2 28/7/09 16:05:3728/7/09 16:05:37

AGR AD.indd 3AGR AD.indd 3 28/7/09 16:05:4028/7/09 16:05:40

We Care For You

www.velosi.com

One Stop Solution for All Your Inspectionand Certification needs Locally & Globally

OFFSHORE STRUCTURECERTIFIATION

RISK BASED INSEPECTION

RIG INSPECTION &CERTIFICATION

LIFTING EQUIPMENT CERTIFICATION

PIPE & PIPELINE SERVICES

WELDING CERTIFICATION & MATERIAL INSPECTION

SERVICES

STATUTORY INSPECTION &CERTIFICATION SERVICES

PRE-SHIPMENT INSPECTION

SPECIALIZED NDTSERVICES

PRESSURE EQUIPMENT CERTIFICATION

QATAROffice No.(20), 6th FloorEli France Bldg., Ramada Jn.P.O.Box: 3408 Doha - QatarTel: +974 4352850Fax: +974 4352819E-mail: [email protected]

U.A.EVelosi Certification ServicesP.O. Box 427 Abu Dhabi,Tel: 971 26712400Fax: 971 26712401E-mail: [email protected]

OMANVelosi Certification ServicesP.O. Box: 261 P.C.131, Al Khuwair,Tel: +968 244 79970Fax: +968 244 78973E-mail: [email protected]

KUWAITVelosi Certification ServicesP.O.Box: 1294 Salmiya 22013Tel: 965 4346738 / 4346758Fax: 965 4314090E-mail: [email protected]

• ASSET INTEGRITY MANAGEMENT

• MANAGEMENT SYSTEM CERTIFICATION (ISO 9001, ISO 14001 & OHSAS 18001)

Velosi.indd 1Velosi.indd 1 28/7/09 16:40:4428/7/09 16:40:44

It is no surprise to hear that, despite diffi-cult economic conditions, oil and gascompanies are pouring million of dollarsinto funding for nanotechnology re-search. Investment in oil production fa-

cilities and recruitment may have been slowed bythe downturn, but as this issue’s cover story reveals,the world’s biggest oil companies have ramped uptheir investments in a technology which they be-lieve could hold the key to the future of the indus-try. I first came across the concept ofnanotechnology in oil and gas research when I at-tended the Next Generation Oil and Gas MENAsummit in the UAE this March. There, IbraheemAssaadan, Saudi Aramco’s VP of Exploration, gavea keynote speech on the groundbreaking workbeing done at the oil giant’s own research lab to de-velop “resbots”. In other words, nanosensors smallenough to be injected through rock pores then ca-pable of collecting information from the oil reser-voirs, which could later be downloaded. I mustadmit that, to me, the idea of a reservoir robot

scientists involved admit that there is a significantgap between the concept of nanosensors on paperand it actually becoming a reality. The scales theyare talking about are invisible to the human eye –yet in order to be effective, nanosensors must beequipped with sophisticated technology, includinglocation sensors, the ability to collect data on theirsurroundings and somewhere to store that data.

Nobody knows how far scientists are fromsolving this dilemma and whether a solution willbe found before oil runs out. Meanwhile, scientistsin the US and the Middle East are working to-wards a common goal – finding the oil and gas in-dustry’s silver bullet. n

Diana Milne Editor

sounded like the stuff of science fiction. Indeed, itis very difficult to grasp the concept of a robot thatis one hundredth the width of a human hair.

But the work that is going on to develop thistechnology is very real. Indeed, 10 of the world’sbiggest oil companies are paying US$1 millioneach to fund the US-based Advanced EnergyConsortium’s work. Their mutual co-operationon this issue signals how urgently these companiesview the need to locate the world’s remaining oilreserves; rival oil companies don’t usually joinforces to develop new exploration technology.The latest figures from Faith Birol, ChiefEconomist of the International Energy Agency,indicate that peak oil could be just over 10 yearsaway. And according to the AEC, 60 to 70 percentof all discovered oil is left in the ground because itcannot be extracted. With these numbers in mind,there’s no room in the equation for cost cuttingwhen it comes to R&D.

Several challenges must be overcome, howev-er, before this technology can become a reality. The

Big problem, small solutionDwindling oil supplies have created an urgentneed for scientists to develop nanoscalesolutions to boost oil exploration.

“The miniaturisation challengesfacing the development ofnanotechnology are parallel tothose that faced microprocessortechnology”Sean Murphy, Senior Manager,Advanced Energy Consortium(page 26)

“You can have all the data inthe world but if you don’t havethe right people, the data isuseless and the investment iswasted”Ibraheem Assaadan, VP ofExploration at Saudi Aramco(page 48)

“The complexity of thecustomer volume andensuring that your data isalways available for decision-making are big issues for us”Sina Khoory, Group ITManager at Emirates NationalOil Company (page 80)

FROM THE EDITOR7

ED NOTE O+G MENA:may09 06/08/2009 11:00 Page 7

Carbovac AD.indd 1Carbovac AD.indd 1 28/7/09 16:10:2728/7/09 16:10:27

26

32

38

Small but mightyRapidly depleting hydrocarbonsupplies mean scientists are in arace against time to delay thedreaded peak oil scenario. Weinvestigate why nanotechnologycould be the small solution to avery big problem

CONTENTS9

The ethical giantAn insight intoPresident and CEO ofSaudi Aramco KhalidAl-Falih’s outlook onthe energy sector andwhy the world’sbiggest oil company istaking responsibilityfor its actions

New horizonsDana Gas’ newly appointed CEO,Ahmed Al Arbeed, talksexclusively about the company’splans for global and regionalexpansion

44

Oil, toil and trouble The hijacking of the Sirius Star supertanker was the most daring attackto date by Somali pirates. Can the oil industry ward off potential deadlyand costly attacks or is it merely a sitting duck?

9-10-11_NGOGMENA_AUG09:july09 5/8/09 16:08 Page 9

48 At the sharp end Saudi Aramco’s Ibraheem Assaadan discussesthe effects of volatile oil prices, the constantstrive for technological development andwinning the war on talent

54 Lone ranger Behind the scenes at Egypt’s largest independentoil company, Pico Petroleum

62 Model solutionHow companies are using 3D modelling to leave nostone unturned in the search for new oil reserves

68 Sold to the highest bidderSamuel Ciszuk takes a look at the implicationsof northern fields being dropped from Iraq'sbidding round

74 Eastern promiseTPAO’s head of drilling, Zaher Ataya, reveals thecompany’s plans to conquer the Middle East region

80 The power of technologyENOC’s Sina Khoory discusses the importanceof IT for the group

90 Going seismicWith Frank Crawford, Chief Geologist atGroundstar Resources

94 The fight against corrosionWhy maintaining and inspecting pipelines isvital in the battle with corrosion

102 Prudent piggingPPSA member Jack Rankin advises on howbest to track pipeline pigs

106 A sticky problemThe challenge of sediment in oil and gaspipelines

112 Forging aheadAbdulaziz Alhajri, CEO of Borouge, AbuDhabi National Oil Company’s refiningsubsidiary, on why his company has nointention of delaying its investments

47

48

123Risky business

At the sharp end

A seismic shift

INDUSTRY INSIGHT

86 Antoine Abi Antoun, PattonElectronics

92 Dr Elmer Dougherty, Maraco

EXECUTIVE INTERVIEWS

47 Saleh Barakat, Baker Hughes53 Eric Adams, Fugro-Jason60 Jan Strom, Subsea Norway AS66 Daniel Hitzman, President of

Geo-Microbial Technologies71 Chris Sugden, AGR Petroleum

Services116 Martin Tallett, EnSys Energy

CONTENTS10

PROJECT FOCUS

88 Mohammed Amin, EMC


60

96

80

14 The brief 15 News in pictures 16 News roundup 24 In my view144 Diary dates

Going subsea

What’s in the pipeline?The power of technology

118 All in a day’s workA snapshot of life at Saudi Aramco with SeniorWorkover Engineer Khalifa Al-Amri

123 Risky businessBudget cuts and untrained contractors are justtwo of the challenges faced by QatarPetroleum’s Zaher Ataya. Diana Milne reports

ASK THE EXPERTS

64 Per Audun Hole, GeoKnowledge78 Cliff Berry, Centek110 Mohsen Salehabadi, Pall120 Matthew Kenna, Alkhorayef

Petroleum

CONTENTS11

REGULARSThe brief

NEXT BIG THING

58 Walid S. Al Shoaibi, ShoaibiGroup

72 Mark Wolfe, Geosoft

ROUNDTABLES

96 Pipelines 126 Health & Safety

130 Safety successHans Jorn Johansen assesses what can be doneto enhance current safety standards

132 Digging deepHunt Oil’s Mark Sturgess reveals thecompany’s plans for Middle East expansion

136 The importance of safetyChief Executive of the IMCA, Hugh Williamsdebates the issues

140 A new chapterSaudi Arabia’s Minister of Petroleum andMineral Resources, Ali Al-Naimi, on the firstmeeting of the Saudi Society for EnergyEconomics


Chairman/Publisher SPENCER GREENDirector of Projects ADAM BURNSEditorial Director HARLAN DAVIS

Worldwide Sales Director OLIVER SMART

Editor DIANA MILNEManaging Editor BEN THOMPSONAssociate Editor JULIAN ROGERS

Deputy Editors NATALIE BRANDWEINER, REBECCA GOOZEE, STACEY SHEPPARD, MARIE SHIELDS, HUW THOMAS

Creative Director ANDREW HOBSONDesign Directors ZÖE BRAZIL, SARAH WILMOTT

Associate Design Directors MICHAEL HALL, CRYSTAL MATHER, CLIFF NEWMAN

Assistant Designer ÉLISE GILBERT

Online Director JAMES WESTOnline Editor JANA GRUNE

Oil & Gas Director EMEA NADIA BLACKMORE

International Sales Manager OWEN BURGESS

Sales Executives LAURA WILLIAMS, BENJAMIN WILLIAMS, JASON GRIFFITHS,

DANIEL MAGGS, DARREN ROACH, KARL AXFORD

Finance Director JAMIE CANTILLON

Production Coordinators HANNAH DRIVER, HANNAH DUFFIE, JULIA FENTON

Director of Business Development RICHARD OWEN

Operations Director JASON GREEN

Operations Manager BEN KELLY

Subscription Enquiries +44 117 9214000. www.ngoilgasmena.com

General Enquiries [email protected]

(Please put the magazine name in the subject line)

Letters to the Editor [email protected]

Next Generation Oil & Gas MENA 4th floor, 3 Callaghan square, Cardiff CF10 5BT, UK

Tel: +44 (0)2920 729 300. Fax: +44 (0)2920 729 301. E-mail: [email protected]

Legal InformationThe advertising and articles appearing within this publication refl ect the opinions

and attitudes of their respective authors and not necessarily those of the publisher or editors. We are not to be held accountable for unsolicited manuscripts, transparencies or

photographs. All material within this magazine is ©2009 NG O&G MENA.

GDS InternationalGDS Publishing, Queen Square House, 18-21 QueenSquare, Bristol BS1 4NH.

+44 117 9214000. [email protected]

Find Out MoreContact NGO&G at +44 (0)117 915 4755

www.ngomenasummit.com

A Controlled, Professional & Focused EnvironmentThe NGO&G Summit is an opportunity to debate, benchmark and learn from other industry leaders. It is a C-level event reserved for 100 participants that includes expert workshops, facilitated roundtables, peer-to-peer networking, and coordinated technology meetings.

A Proven FormatThis inspired and professional format has been used by over 100 CIOs and CTOs as a rewarding platform for discussion and learning.

“A good investment of time: It was scheduled to continue talks with several potential contractors. Excellent organization.”Mikhail Ivanov, CEO, Volga Gas Plc

“Many thanks for the excellent organization of the Summit. Everything was great! Once again, many thanks.”Sergey Ryzhov, Chief Geologist, Samara-NAFTA

The Next Generation MENA Oil & Gas Summit is a three-day critical information gathering of C-level technology executives from the oil and gas industry.

Next Generation MENA Oil & Gas Summit.

Sharq Village, Doha • Qatar6 – 8 April 2010

CREDITS NG O+GMENA.indd 12CREDITS NG O+GMENA.indd 12 5/8/09 14:58:125/8/09 14:58:12

Neptune.indd 1Neptune.indd 1 28/7/09 16:22:2128/7/09 16:22:21

UPFRONTTHE BRIEF14

south but those who rejectedterms included the likes of

ExxonMobil,ConocoPhillips,

Shell, Gazprom,Sinopec and Eni.

A total of 32IOCs were declared

bidders for a poten-tial six oil fields, thought

to hold 43 billion barrels, andtwo gas fields, but the majority of

overseas investment and techni-cal knowledge. However, in arecent televised auctionjust one of the bid-ders for eight con-tracts for oil andgas fields in thecountry acceptedthe oil ministry’sterms. BP and China’sCNPC will operate the 17 bil-lion barrel Rumalia field in the

rock-bottom extraction costs.The international oil companies(IOCs) want to get their handson Iraq’s oil and Iraq wants toget its hands on badly needed

STALEMATE

It’s often billed as the land ofopportunity. An Arab stateboasting gargantuan supplies ofhydrocarbons, vast swathes ofthe land still unexplored, and

BP and China’s CNPC

will operate the

barrel Rumalia field in the south

17 billion

Iraq’s long overdue licensing rounds proved somewhatof a damp squib with just BP and China’s CNPClanding contracts. So where does Iraq and itsramshackle energy sector go next?

UPFRONT NG O&G MENA4:25 June 5/8/09 14:56 Page 14

UPFRONTTHE BRIEF 15

fields attracted little interest.The crux of the problem wasthat the oil ministry’s offer ofpayment for the 20-year servicecontracts was significantly lessthan what the IOCs request-ed. BP and CNPC originallyasked for US$4 a barrel buteventually accepted US$2 a bar-rel in order to land the contract.

“Obviously the [interna-tional] companies are going tobe disappointed,” says NadiaSalem from Al Tamimi &Company, the largest law firm inthe Middle East during an inter-view with O&G. “Thisis a huge upset forthe IOCs becausethey were ex-pecting a certainprofit marginand the Iraqis aresaying no, it won’tbe that large or lavish.”On the other side of the coin, thedisastrous licensing round willput a serious dent in Oil MinisterHussain al-Shahristani’s ambi-tions to ramp up productionfrom its current level of 2.4 mil-lion barrels per day (bpd) tomore than four million bpd inthe next five years. It’s believedthat Iraq could eventually raiseproduction to six million bpd,although al-Shahristani freelyadmits that US$50 billion willbe needed to achieve this.If Iraq can realise its potential,it is forecast that the countrywill rake in US$1.7 trillion overthe next 20 years from the fieldsfor which it is seeking partnersto develop.

Although the disappoint-ing bidding round has so farscuppered those plans, Salamsuggests re-evaluation is neededfrom both sides. “Oil compa-nies need to regroup becausenow they know where things

stand,” she says. “They need toreassess whether they are willingto take a cut in profits andwhether they want to go intoIraq. The Ministry has to re-assess how desperate they are toimmediately increase oil pro-duction and have the funds tobalance the budget again.”There are reports that Iraq couldbe arranging to hold a secondlicensing round this month butthere is still no guaranteethat the IOCs will acceptIraq’s terms.

Officially, Iraq has 115 bil-lion barrels of reserves

but this figure isbased on out-dated2D seismic read-ings. The true fig-ure could be

significantly higher.But much of Iraq’s oil

sector is in a dilapidatedand aging condition afterdecades of mismanagement andlack of investment. The facilitiesare also in bad need of repairafter sustaining extensive dam-age during the US-led invasionas well as sabotage and looting.And with oil accounting for amammoth 95 percent of thecountry’s revenue, it’s easy to seewhy Iraq needs to modernise thisvital industry. “I think the pro-duction targets can be achieved,”Salam notes. “I don’t think thenegotiations are quite over and itwill be interesting to see whetherthese deals can be resuscitated inthe next few months.” She adds:“Iraq must have a plan B to getthese oilfields back on track witha slight modification to thetimeline. The oil ministry isgoing to have to reassess its bot-tom line and how much it iswilling to give companies as aprofit and decrease their expec-tation of revenue.”

BP and CNPC originally asked for

but eventually ac-cepted US$2

US$4 a barrel

Russia is set to start drilling in the Gulf of Mexico after signing a dealwith Cuba. Havana suggests there is 20 billion barrels of oil off itscoasts, although the US claims the true figure is just five billion

With the recession impacting onenergy consumption, Royal DutchShell has announced plans to slashcapital expenditure by 10 percentnext year and make “substantial”job cuts. The Anglo-Dutch super-major reported a 67 percent dropin quarterly earnings

Venezuela’s leftist presidentHugo Chávez has threatened tofire oil workers who don’tembrace the socialist revolution.Employees of state-ownedPDVSA have been ordered to joinpro-Chávez trade unions andcommunity groups

Militants from the Movement for the Emancipation of the Niger Delta(MEND) patrol the oil rich creeks of Nigeria’s Niger Delta. Around 1.6million barrels per day of Nigeria’s production has been shut down dueto violence there according to the country’s oil minister

NEWS IN PICTURES


UPFRONTGLOBAL NEWS16

CHINA

According to reports by DowJones, China Petroleum andChemical Corporation plan tobuild a refining and petrochemicalcomplex in Shanghai which wouldincrease fuel supply to the city.Dow Jones reported that the com-pany has signed an agreement withthe Shanghai governement to clar-ify its investment in the project,which will be build in the ShanghaiChemical Industrial Zone.

BRITAIN

Gas imports should not rise in theUK between 2010 and 2020 – thecountry’s government has stated.As part of its Renewable EnergyStrategy, it aims to cut gas importsby increasing energy efficiency andusing renewable power. It aims toreach a 15 percent renewable ener-gy target, which will lead to a re-duction in overall fossil fueldemand by around 10 percent andgas imports by 20 to 30 percent by2020. Energy and Climate ChangeSecretary Ed Miliband, said:“Depletion of our North Sea oiland gas resources mean that weneed to re-think our approach tosourcing and using energy.”

VENEZUELAHalliburton has revealed the fullextent of its financial interests inVenezuela as part of efforts to se-cure the money it is owed by thestate run oil firm PDVSA. In a fil-ing with US regulators Halliburtonsaid it had invested US$265 millionin Venezuela by June. PDVSA hasrun up debts with several interna-tional oil companies, includingSchlumberger and Halliburton.Last month Venzuela’s oil ministersaid PDVSA had paid back US$2billion of the US$7 billion it owedto service providers at the end oflast year.

RUSSIA

Gazprom could rein in its spend-ing by as much as US$4 billion thisyear, according to a report byReuters. The news agency saidGazprom’s Deputy Chief ExecutiveAlexander Ananenkov had told ameeting chaired by Russian PrimeMinister Vladimir Putin that inorder to meet plans to install pipescapable of carrying 1.5 milliontonnes in 2010, the investment pro-gramme would need to total US$21billion. The gas major had original-ly earmarked US$25 billion for in-vestment this year. The companyneeds to invest in the pipes in orderto implement several large-scaleprojects, including the NordStream, which will link Russia, andGermany via the Baltic Sea.

AUSTRALIA

ExxonMobil Corporation andBHP Billiton Limited have ap-proved the US$1.3 billionTurrum oil and gas project off theSoutheast coast of Australia.According to reports by Reuters,the Turrum site has reserves ofaround one trillion cubic feet ofgas and 110 million barrels of oiland condensate. ExxonMobilstated that oil production fromTurrum would begin in 2011 andgas sales would start from 2015.

UZBEKISTAN

LUKOIL has announced plans toinvest US$5 billion in gas projectsin Kandym and Hisser inUzbekistan within the next sevenyears. According to reports byInterfax, the company expects tobe able to produce 12 billion cubicmetres of gas every year once thegas projects are complete.

PAKISTAN

Pakistan’s Ministry of Petroleumand Natural Resources (MPNR)has invited bids for the granting ofexploration rights for 53 onshoreblocks. The bids were announcedat the Petroleum ExplorationPromotion Conference in July. Ofthe 53 blocks, 23 are in high risk,high cost areas, 17 in medium risk,high-medium cost areas and 13 inlow risk, low cost areas.


UPFRONTMENA NEWS 17

KUWAIT

Sheikh Ahmad al-Abdullah al-Sabah, Kuwait’s oil minister, hasrevealed oil must stay aboveUS$60 a barrel in order to meet thecountry’s budgetary requirements.He told reporters at a parliamen-tary meeting: “We will be watchingthe market very closely. We wouldnot like to see the price go below acertain level so it at least meets ourbudgetary requirements.” TheArabianbusiness.com news web-site reported that Sheikh Ahmadsaid even if oil prices rose aboveUS$100 again, oil productionwould not necessarily increase: “Ican’t increase production withoutseeing the price and condition ofthe world economy. All these haveto be taken into account.”

QATARQatar Petroleum and Exxon-Mobil have joined forces to sellup to US$2.3 million in bonds tofinance the expansion of LNGprojects. It is expected that theproceeds of the sales will helpQatar Petroleum to double its ca-pacity this year to 62 milliontonnes. The sale of the bonds isto be managed by HSBC, CreditSuisse and Citigroup and thebonds are to be structured on aUS$500 million issues basis withthree-year maturity, a five-yearUS$1.1 billion bond and 10-yearnotes worth US$615 million.

SAUDI ARABIA

Saudi Aramco has announced itis to start operations at its ex-panded Ras Tanura refinery by2014. A statement from Aramcosaid that it planned to build a400,000 barrel per day Arabheavy crude oil refinery to en-large the existing complex to onecapable of producing one millionbarrels a day: “The intention is togenerate fuels required by thekingdom, as well as feedstock forthe Ras Tanura integrated petro-chemical complex with DowChemical Company.” It went onto say that contracts for work onthe project would be issued by2010.

ABU DHABI

Contracts worth US$9.2 billionhave been awarded to internation-al companies to set up integratedgas systems as part of Abu DhabiGas Industries Ltd (GASCO) pro-jects. The projects include a gastreatment plant at the HabshanGas Complex and storage tanksfor propane, butane and pentaneproducts. A total of 18 companieshave been awarded contracts, in-cluding a consortium of Japan’sJGC and Italy’s Tecnimont,Hyundai Engineering andConstruction, the US companyCBI and a consortium ofPetrofac and Korea’s GSConstruction and Engineering.

ALGERIA

A second national and interna-tional licensing round has been an-nounced in Algeria by the Ministryof Energy and HydrocarbonResources Valorisation (AL-NAFT). Oil companies who wishto bid must be pre-qualified by AL-NAFT either as an operator or aninvestor. The bids are for acreageacross 10 perimeters distributedthroughout sedimentary basinsacross the country.


UPFRONT BEST OF THE WEB www.ngoilgasmena.com18

Reversal of Fortune: Our analysis ofthe effects of falling prices on

oil producers proved the mostpopular with readers. It

included expert analysisfrom Goldman Sachs,Merrill Lynch and Citigroup.To read more log onto

www.ngoilgasmena.com/article/Issue-3/Exploration-

AND-Drilling/Reversal-of-

fortune

THE RESULTS ARE IN...

Although I am loath to admitit, it's clear that we need tosee oil prices rise to a fair priceif we want to see projects andtechnology improve, and tosee advances in the energyindustry overall. That said,whether the oil and gasindustry will ever manage tomaintain a steady, and fair,price for oil and gas remainsto be seen.KELLY TAYLOR Dubai, UAE

I think the key issue here isnot one of falling prices, butone of volatile prices; oil

companies just don't

in technology and people isessential to survival.JAIME WISNIAK Bahrain

Price volatility andfluctuating demand aren'thugely relevant in the longterm. It is a fact that peoplewill always want oil, just asit is that it will become moredifficult to locate andextract. Failing to makeinvestments now is juststoring up huge problems forthe future. Sure prices arehovering around US$70 abarrel now, but ultimatelyprices are going to go up andthey are going to stay there.It's surely worth preparingfor this reality.JOACHIM GETZ Berlin

know what their revenues aregoing to be from one quarterto the next. Look at BP forexample – at the end of 2008they were pilloried forannouncing record profits onthe back of the oil price spike,yet July saw half-year profitsslump by 57 percent as pricesplummeted (try figuring thosenumbers into your annualbudget). My point is, oilprices are always going tofluctuate; firms shouldtherefore be looking atinvestment as a long-term

priority, rather than justslashing budgets

whenever pricesdrop. Investing

JOIN THE DEBATE

On the O&Gwebsite we asked how badly our readers thought fallingoil prices could affect the GCC property construction boom. Here arethe results:

Very badly. This will result in cancelled projects

There will be a minimal impact as demand outstrips supply

It is impossible to tell

In the short term yes but it will recover by the end of 2009

IN THE FIRING LINEDr Mustata Alani on whyMENA oil and gas companiesare investing heavily insecurity as terrorist groupscontinue to target theirinstallations.www.ngoilgasmena.com/article/Issue-3/Health-AND-Safety/In-the-firing-line

MISSION CRITICALMeet the man who controlsTotal’s multi-million dollar ITbudget and co-ordinates theactivities of 96,000 employees,CIO Patrick Héreng.www.ngoilgasmena.com/article/Issue-3/IT-AND-Communications/Missioncritical

EDITOR’S CHOICE

BLACK GOLD RUSHAn exclusive interview with DrShokri Ghanem, Libya’s top oilofficial and Chairman of thecountry’s National Oil Corp. www.ngoilgasmena.com/article/Issue-3/Exploration-AND-Drilling/The-black-gold-rush

48%

15%

10%

27%

The oil and gas industry is under increasing pressureto dig deeper for new supplies and needs cutting edgetechnology to develop methods of doing this. Healthand safety are also strong concerns for oil companiesand investment is required into equipment to ensure

exploration methods are as safe as possible. There is aserious danger however that efforts to develop thesetechnologies could be put in jeopardy by the volatilityof oil prices. There may currently be a slowdown in de-mand, but companies must not let, what could be atemporary blip, hamper their long term investments incrucial technology.

MOST POPULAR


Motorola Enterprise Mobility, part of Motorola, has a proudheritage in the Middle East dating back over 30 years, with lo-cations based across the region. Motorola’s presence enablesit to work closely with customers in the oil and gas market, en-suring it is alive to the changing expectations and demands ofcompanies which work in challenging environments.

Exciting advances in technology are supportingMotorola’s vision of delivering real-time data and services toend users, wherever they may be; supporting them in effec-tively and safely completing their tasks. Low cost high-per-formance wireless networks, the integration of InternetProtocol, and automated monitoring equipment, support theseamless flow of company real-time information and com-munications both inside and outside facilities. From the re-motest rig to the far-flung pipeline, refinery and distributioncentre teams have the intelligence at their fingertips to dra-matically enhance company performance.

In the field, Motorola’s powerful, handheld EnterpriseDigital Assistant (EDA) computers and rugged scanners – de-signed to be operated with second nature ease – apply net-work connectivity to supply users with integratedPush-to-Talk, messaging, email, and various data services. Oiland gas companies use the technology across an extensiverange of applications. Highlights include:

BMS Davinci AS represent your partner ofchoice for tailor-made hydraulic and elec-trical driven CTUW (constant tension um-bilical winches) and AHCUW (activeheave compensated umbilical winches). Asa member of the BMS group of companies,we are located in the city of Bryne, approx-imately 35km south of Stavanger inNorway. Our vision is to expand in thecompetitive offshore and marine market byoffering the best custom designed winchesand lifting products on the market.

Traditionally, we supply various mar-kets with the well known Bryne winch instandard sizes from 2t to 12t. Based oncast iron rigid frames and a choice of highquality materials, the products havegained an excellent reputation throughoutthe industry for outstanding reliability,performance and long life. Daily useunder maritime conditions for more than10 to 15 years is not unusual. Following

strategic decisions related to expansionand product development over the years,we have broadened our ability to serve ad-ditional offshore and marine markets. Wecombine traditional, high quality productsand knowledge with the latest technologyin handling critical operations in harsh off-shore conditions.

During the last three years we havedelivered several electrical and hydraulictailored special umbilical winches forseismic and other offshore activities.Together with our subsidiary, AceTechnology, we have provided completepackages including radio or frequencyremote control systems. Our customerreferences show primarily shipyards andinternational oil and offshore relatedcompanies. Based on their satisfying ex-perience, most customers have repeated-ly made new orders. Besides our homemarkets in Scandinavia and Europe, ourproducts are operating in China, theMiddle East, Australia and the Americas.

MOTOROLA ENTERPRISE MOBILITY

GOING TO NEW HEIGHTS

PROVED RESERVES AT THE END OF 2008

UPFRONTCOMPANY NEWS 19

32

54

1 SAFETY Continuously assessing the status and location of field teams and responding more effectively to emergencies

ASSET MANAGEMENT Monitoring sensitive equipment (e.g. storage tanks and pipelines)

LOGISTICS Enhancing the movement of end products (petrol, jet fuel, paraffin and ethylene) transported by trucks, railroad and pipelines

WAREHOUSING Cataloguing and updating equipment inventories in real-time and ensuring that hazardous materials (using RFID tags) are not stored close to other dangerous substances

PRODUCTIVITY Delivering real time information and applications to employees

Motorola’s customers include BP, Statoil, Chevron, Halliburton, Dow,LUKOIL and ExxonMobil. For more information about petrochemicalsolutions please visit www.motorola.com or [email protected].

Thousand million barrels Source: BP Statistical Review of World Energy

42

AsiaPacific

70.9

NorthAmerica

123.2

S & Cent.America

125.6

Africa142.2

Europe &Eurasia

754.1

MiddleEast

For more information, contact Einar J Ronæs at [email protected] or visit www.bmsdavinci.com


UPFRONTCOMPANY NEWS20

REFINERY UTILISATION BY PERCENTAGE

“Seven million m3 of gas is crying out for accuracy.” oneof our customers once said. We could not agree more.There is an undeniable need for absolute accuracy whentransporting large volumes of gas. We would like to sharesome views about what we do best – gas metering. This hasbeen our core activity for over 160 years and we still love it.

Deviations in gas metering can easily amount to hun-dreds of thousands of dollars per day. It is here in particu-lar that our Integrated Metering Solutions add value. Withsmart combinations of the most suitable products, we re-duce metering uncertainty while concurrently monitoringall processes. Besides accuracy, it is reliability and confi-dence that ultimately matter.

Here at our Integrated Metering Solutions Division,we are excited about the projects achieved in the past andthose still in the pipeline. Our knowledge and experiencein numerous partial projects are used continuously to de-rive and implement a total solution for our customers. Ourengineering manager talks passionately about finding so-lutions within projects: “We do two things: we supply me-tering equipment as loose components and we offer TotalIntegrated Solutions. That’s a totally different ball game.”

Our products play a significant role within these solu-tions. We focus on the full process, which we address to-gether with our clients. Our customers want advice. This isa distinguishing factor for Elster-Instromet. One of theways we help, for example, is by drafting specifications forgas transport companies and gas operators.

Once the project is allocated, we provide a turnkey so-lution in co-operation with the client. The client may pro-vide the civil engineering while we are responsible forproject management, technical engineering and any third-party purchases. We take on the investment, the mainte-nance and, most importantly, accurate metering

A TOTALLY DIFFERENT BALL GAME

By Jacob Freeke, Sales and Marketing Directorfor Integrated Metering Solutions at Elster-Instromet NV

NEWS IN NUMBERS Quantity Saudi Aramco and Total hope toborrow to build an oil refinery on the Gulf coast

Amount Saudi Basic Industries Corp plans to raiseits petrochemicals output to by 2012 after postinga 76 percent drop in second quarter profits

Barrels per day of oil that Oman hopes toproduce by the end of 2009

Number of jobs to be created at the SAMco plantto be built in Jubail, Saudi Arabia, by Dow Chemical

Length of a deal signed between Qatargas andpolish state owned energy company PGNiG tosupply natural gas to Poland

Year when, according to OPEC’s 2009 World OilOutlook, consumption of crude oil will return to31 million barrels per day

Date when Iraq plans to hold a second majorenergy auction in Istanbul

US$8 billion:

12 million tonnes:

804,000:

200:

20 years:

2013:

August 25th:

Global oil demand fell in 2008 and so did refinery crude runs. The biggest reduction wasin the US, where throughputs fell by 510,000b/d. Crude runs continue to grow in Chinain support of domestic demand. Meanwhile, global refining capacity grew by 830,000b/d,mainly in Asia Pacific. As a result, global refinery utilisation fell to 84.8 percent, the low-est level since 2003.

Source: BP Statistical Review of World Energy

100

90

80

70

60

50

4001 02 03 04 05 06 07 08

North AmericaS & Cent. AmericaEuropeFormer Soviet UnionMiddle EastAfricaAsia PacificWorld


A NEW CONCEPT FOR PROCEDURE MANUALSthat procedures are well-written.Procedures need to be clear to theuser. They need to be as brief aspracticable, yet detailed enough sothat the user understands what isintended. They need to be well-or-ganised and there should not beany conflicts or contradictions. Theability to mis-read a procedure

should be minimised. There needsto be a sensible way to in-

clude large items,such as tables,drawings, and pic-tures. Electronicprocedures provide

huge advantagesover hard-copy paper

manuals. Use of colour, whichis extremely expensive in hardcopy, is free. Hyperlinks can giveinstant access to related informa-tion and regulatory requirements.With electronics, access to allprocedures can be greatly en-hanced. Making revisions ismuch easier with electronic man-uals, and it is easy to archive com-plete manuals that were in effecton any given date. All these fea-tures, and more, are incorporatedinto PRO-cedures.

You know the situation – the gov-ernment inspector asks a question,and you know that that informa-tion is covered and documentedsomewhere in the company – butwhere? PRO-cedures is a methodof writing procedures that cap-tures and preserves your compa-ny’s body of knowledge, organisesit, and provides a way to findspecific topics quickly,even if the user is in-experienced.PRO-cedures isstate-of-the-art. Ithelps to ensurecompliance withregulations and incor-porates the best ideas frommany different sources. It can beused in a hard copy format, butits features really stand out whenused electronically. It includestechniques that minimise riskand liability.

As companies are scrutinisedever more closely by outside parties,good procedures are becomingmore important than ever before.The actions of employees and con-tractors must conform with thewritten procedures. It is imperative

JARGON BUSTER: CRACKING

In petroleum geology,cracking is the process

whereby complex organicmodules such as kerogens

or hydrocarbons are bro-ken down into simpler

modules such as lighthydrocarbons.The rate of

cracking and the end productsproduced depend on the

temperature and presence ofany hydrocarbons.

Electronic

provide huge advantages over hard-copy paper

manuals

procedures


COMPANY SPOTLIGHT

BP, Europe’s second largest compa-ny by market value, has emerged asone of the biggest casualties offalling oil prices so far, following theannouncement of a sharp drop in itssecond quarter profits. The compa-ny’s half year profits fell by 57 per-cent to US$5.5 billion compared tothe same period in 2008. Its re-placement cost profit between Apriland June was US$3.1 billion, a fall of53 percent since the previous year.

Speaking to the BBC, BP’sChief Executive Tony Hayward saidhe expected the global economicdownturn to be “long and drawnout”. He added: “We are in turbu-lent times, volatile and uncertain.But we continue to steer a steadycourse through choppy waters.”

Earlier this year BP announceda sweeping cost cutting strategy thatwould see it save US$2 billion.Hayward claims it has alreadyachieved this target andthat it nowplans tocut a

further US$1 billion in costs thisyear. Speaking to Reuters, ManojLadwa, Senior Trader at ETXCapital, said: “BP may not be able tocontrol the price of oil but their mea-sures to streamline the business andreduce costs shows the board is intune with the ebbs and flows of themarket.” BP’s announcementscomes on the back of plunging oilprices from the highs last July ofUS$147 to around US$70 per barrel,which have seen companies cut ex-ploration, production and refiningcosts, which have doubled since 2004.

Despite this, Hayward saidBP’s daily product rates rose byfour percent in the three monthsleading to the end of June and itsprofits rose 30 percent from thefirst three months of the year, re-flecting a slow recovery for theindustry.

YOU CAN QUOTE ME ON THAT

“Prices at this time are comfortable, but they are not at the level we are shooting for”

OPEC Secretary GeneralAbdullah al-Badri expresses his desire to see oil prices rise above US$70 a barrel


FULL PAGE AD.indd 1FULL PAGE AD.indd 1 3/8/09 16:44:023/8/09 16:44:02


According to the PPSA, the firstever pigging operation took place

around the year 1870 afterColonel Drake discov-ered oil in Titusville,Pennsylvania. At first, a

bundle of rags tied in aball was used to clear paraf-

fin deposits from the oil pipeline.Later, bundles of leather were

used in place of the rags asleather will swell whenwet, creating a tight

seal through thepipeline.

GLOBAL PERSPECTIVE

A 44 percent increase in GDP growth in 2008 was ledby the development of the country’s non oil sectors,which rose by 32.6 percent from US$16.7 billion in 2007to US$22.2 billion in 2008

Despite a decline in oil revenues due to the globalslump in oil prices, Oman’s inflation rate dropped from13.7 percent in June 2008 to 3.9 percent in May 2009

Oman is not a typical GCC oil producer, as its fields aresmall and scattered so production costs are higher perbarrel than in other GCC countries

The bulk of production is carried out by OmanPetroleum Development (OPD), which has agovernment majority ownership. PDO controls 90percent of the country’s output

The government is keen to attract foreign investmentand has increased the foreign participation ratio onjoint ventures from 49 to 70 percent

Oman’s population is around 3,311,640, of which577,293 residents are expatriate

The country’s policy of economic diversification focuseson natural gas, port developments, IT, fisheries,manufacturing and tourism

COUNTRY FOCUS: OMAN Oman’s Economic Minister Abdul-Nabi Mekki has announced plans toraise the country’s output to 804,000 barrels per day from 784,000 barrelsper day by the end of 2009. Here are some facts about the country:

32

54

1

76

DID YOU KNOW?

The latest issue of the US version of O&G featured an exclusive interviewwith Devon Energy’s Head of Exploration RICK MITCHELL. Devon is oneof the world’s leading independent oil and gas companies but Mitchellsays he has to always keep a firm eye on the costs associated withdrilling. “Time is money,” he asserts. “When you can focus on efficiencyand minimise problems, that’s one of the top ways in which you can con-trol your costs.”

To read more, visit www.ngoilgas.com


UPFRONTIN MY VIEW24

Our company has taken a well-defined position.We are very concerned about the potential impactof climate change, and last year we become the onlyUS-integrated energy company to call for a manda-tory national framework to address greenhouse gasemissions.

Current US climate policy is a key business uncertainty.This uncertainty must be resolved in order for thecountry and the world to move forward. For thisreason, we urge the presidential administration towork with congress to pass effective legislation. Andfurther to exercise world leadership in negotiatingan international climate agreement.

We cannot focus on climate change alone. Wemust also meet the challenge of improving ourenergy security.The tight oil market of early 2008 clearly demon-strated this need. As a result, the public agreed thatthe US needs more domestic production. This is whya majority now supports environmentally responsi-ble offshore drilling.

Any serious effort to reduce emissions would re-quire the greater use of natural gas to generate elec-tricity.But to do this we would need expanded domestic ac-cess for exploration and drilling. We could not do thefirst without the second. So climate change and ener-gy security issues must be resolved together throughcoordinated policies.

We recognise the important role that state initia-tives play, particularly in the areas of buildingcodes, urban planning and education. But we op-pose a patchwork state-by-state approach. We also believe that an overlay of competing andconflicting regulations, such as separate standards forrenewable and low-carbon fuels, would be too costlyor even unworkable.

We are not strangers to either the risks or the op-portunities associated with climate change.And we obviously have a vested interest in helpingachieve global energy security. We believe that ourindustry must be involved in the effort to find solu-tions to both challenges.

JIM MULVA, CEO of ConocoPhilips,on balancing climate change withenergy security


UPFRONTCOMPANY INDEX 25

Companies in this issue are indexed to the first page of the article in which each is mentioned.

Abermed 123Adison 123ADNOC 112Advanced Energy Consortium 26AGR Petroleum Services 4, 71Alkhorayef Petroleum 120, 121Aquilex Welding Services BV 115Baker Hughes IFC, 47BMS Davinci AS 19, 55BP 26, 54, 68British Gas 54Capital Safety 37, 126, 127Carbone+ 125Carbovac 8, 113Caspian Wireline 22Centek 78, 79Chart Energy & Chemicals 69Chubu Corporation 123CNPC 68ConocoPhilips 54Control Risks 38Crescent Petroleum 44Crowcon 138Dana Gas 44Detcon 105, 126, 129Dragon Oil 62Elster Instromet 20, 108EMC 88, 89, OBCENOC 62, 80EnSys Energy 116, 117

ExxonMobil 68Frost & Sullivan 59Fugro-Jason 52, 53GDS Suez 123GeoKnowledge 31, 64, 65Geo-Microbal 66, 67Geosoft 72, 73Global Insight 68Groundstar Resources 90Gulf Research Centre 38GUPCO 54Halliburton 26, 62Hunt Oil 132IGTC-Chubb Fire Qatar 123Institute of Nanotechnology 26JESCO 2, 96Lunasat 50, 83Maraco 35, 92, 93Marine Biotechnology 60, 61Meet The Boss 101Merchant Maritime Warfare Centre 38Mitsui Corporation 123Motorola 19NACE International 94Neptune Oceanographics 13ODS International 77OGP 131Oleska Associates 21, 103OPEC 144Pall 110, 111

Patton Electronics 86, 87PDVSA 15Pico International Petroleum 54Polarcus 57Polyguard Products 96, 97PPSA 102,104Qatar Electricity and Water Company 123Qatar Petroleum 123Regent Energy Control 75Rockwool 41Royal Institure of International Affairs 38SABIC 142SabryCorp 26Saudi Aramco 26, 32, 40, 48, 54, 118Schlumberger 62Shell 26, 54Shikoku Corporation 123Shoaibi Group 58Société du Pipeline 96, 99Subsea Norway AS 60, 61Sun Microsystems IBCTechnoguide 62Total 26, 54Tracerco 135TRE Europa 85Velosi 6Weidmuller 81World Refining Association 112

A NEW CHAPTERSaudi Arabia’s Ministerfor Petroleum andMineral Resourcesreveals his hopes for thenewly formed Society forEnergy Economy

OIL, TOIL & TROUBLEO&G reports on whypirates are holding theworld’s biggest oilcompanies to ransom onthe high seas

DON’T MISS...

26

38

140

COMPANY INDEX Q3 2009

SMALL BUT MIGHTYHow nanotechnologycould transform the oiland gas industry anddelay the days of peak oil

UNITED KINGDOM

GERMANY

ITALY

FRANCE

JAPAN

CANADA

USA

56.7%

55.3%

51.8%

50.3%

37.2%

25.1%

11.5%

Purchase of crude oil (FOB)Industry margin (e.g transport, insurance, refining and other costs)

National government taxes

WHO GOT WHAT FROM A LITRE OF OIL IN 2008


26 www.ngoilgasmena.com

COVER STORY

Professor Dean Neikirk and Sean Murphy (left) examine a solution containing dissolved nanoparticlesat the headquarters of the Advanced Energy Consortium (AEC) in Texas

Nanotechnology ED:16 july 6/8/09 10:52 Page 26

www.ngoilgasmena.com 27

Rapidly depleting hydrocarbon supplies mean scientists are in a raceagainst time to delay the dreaded peak oil scenario. Nanotechnology has

been touted by Saudi Aramco and America’s Advanced Energy Consortiumas the potential saviour of the industry and a way to revolutionise the

exploration process. In this special report Diana Milne investigates whynanotechnology could be the small solution to a very big problem.

MIGHTYS M A L L

but

Given the immense scale of the problem facing the world’s oilproducers, it is ironic that millions of dollars is being spent todevelop a solution so microscopic that it is invisible to thenaked eye. Nanotechnology may be based on units that mea-sure one-billionth of a metre, but, when applied to oil and gas

exploration, its potential is huge. So much so that research projects are under-way across the world to develop the technology; most notably at Saudi Aramco’sEXPEC Advanced Research Center (ARC) and the US-based Advanced EnergyConsortium, a research body funded by 10 of the world’s biggest oil companiesat a cost of US$1 million a year each. There are compelling reasons why thesecompanies are funding research into the application of nanotechnology in theoil field – a concept that is still several years from becoming a reality. Accordingto the BP Statistical Review of World Energy, global proven oil reserves fell bythree billion barrels in 2008 and the current reserves to production ratio is just42 years. Meanwhile Faith Birol, the International Energy Agency’s ChiefEconomist has predicted oil production will peak in 2020 and that the world’s800 largest fields are seeing a 6.7 percent annual decline in production.

Big problem, small solutionThe days of easily available oil are rapidly running out and oil companies

must find ever more ingenious ways of extracting the remaining reserves from

minute pores in the rock face. To do this some say the technology they use toaccess the reserves must shrink. But size isn’t the only factor. As explorationgoes deeper, already harsh conditions worsen raising the need for more ro-bust equipment and tougher coatings on drilling tools. Finding the oil too isa major challenge; even 3D and 4D seismic still lacks in resolution and theability to penetrate deeply into the reservoir’s lithology. Scientists believe thatnanotechnology could address all of these challenges. Sean Murphy is SeniorManager at the Advanced Energy Consortium – one of a team of just four sci-entists charged with finding out whether nanotechnology really is the oil andgas industry’s silver bullet. He describes why the companies who are fundingthe project are so keen to find a solution to the incredibly complex challengesthey face: “Right now we leave around 60 to 70 percent of the discovered oilin the ground. Even after applying enhanced oil recovery techniques likewater and gas flooding technologies, we still don’t know how to effectively andeconomically remove it. Drilling more wells for oil recovery isn’t the answeras it can be a multi-million dollar a hole proposition. The oil flows throughpores that are not merely microscopic, they are submicron; and the porethroats can be nanometres in scale. Quantifying reservoir characteristics toenable improved recovery processes, like low interfacial tension surfactantflooding or carbon dioxide flooding, is where nanotechnology can really as-sist in improving total recovery from existing reservoirs.”


Nanotechnology, however, exists on a scale small enough to penetratethese pores. And if scientists can produce nanoscale particles or sensors thatare able to collection information about oil reserves and deliver the informa-tion back the to well or surface these seemingly insurmountable problemscould be tackled, delaying the days of peak oil further.

The AEC and Saudi Aramco are both focussing the bulk of their researchon two areas: illumination of the reservoir and developing nanosensors thatcan be injected into oil and gas wells to collect data on the reservoir rock, flu-ids and physical characteristics then transmit or relay the data back to the sur-face for use. EXPEC ARC is working on creating what it has dubbed ‘resbots’– minuscule nanorobots no bigger one hundredth the width of a human hair.At O&G’s summit in the UAE recently, Saudi Aramco’s VP of Exploration,Ibraheem Assaadan, claimed these resbots could be deployed in reservoirsthrough injected water. Once there, they would be capable of analysing thereservoir pressure, temperature and fluid type and would store this informa-tion, effectively mapping the reservoir. The resbots would be retrieved alongwith crude oil at the producing wells and the reservoir mapping informationcould then be downloaded. Assaadan believes that resbots could revolutionisethe oil and gas industry and the company has already analysed core plugsfrom existing reservoirs to analyse the maximum size the resbots can be andto understand transport issues.

But Aramco is not alone in attempting to meet this challenge. The AECis in the process of developing what David Chapman, Project Manager forElectronics describes as a “communications enabled robot”, an activeelectronics-based, nano-based device. This would be somethingthat has a physical or chemical parameter sensor built intoit and is at least 100 times smaller than those in existencetoday. We need a telemetry solution that is capable oftransmitting data topside, or alternatively some type ofon board memory that enables them to store the dataand keep track of location so that they can be interro-gated when retrieved.”

Mission impossibleThe notion of a robot built on nanoscale dimensions

yet possessing such a high level of sensory, communi-cations and storage capacity remains for now “In the

realms of science fiction”, admits Murphy. The process of making this con-cept a reality is fraught with complication – largely to do with the scale and thefunctionality of the technology involved. “The key is to shrink the sensor downto a size that enables it to move through the pores and the fractures in the rock;this may require difficult choices and tradeoffs in functionality. For example,sensors might be event-driven, only communicating when a specific physicalor chemical parameter is sensed, or communicating at specific time intervals,which would reduce power requirements. Communication is also a huge issue;geolocation and telemetry technology will have to be scaled to overcome the

severe attenuation of traditional frequencies. Finally, it’s an extremely harshenvironment with high temperatures and pressures which are not friendly toelectronics, not to mention the mud and drilling fluids, and the saline solu-

tions, waxes and asphaltenes all saturating the heterogeneous clays androcks.”

Dr Mohamed Abdel-Mottaleb is founder of Cairo-basedSabryCorp, the Middle East’s first nanotechnology consul-tancy which aims to make the region a world hub for nan-otechnology research. He outlines some of the issues thatmust be overcome before nanorobots can become a reality in

the oilfield: “I’m not sure really that the nanorobots, as envi-sioned, would be successful. Nanorobots would be, basically, a

number of sensors with a motion, detection and transmission unit.One of the biggest issues with nanotechnology is the ability to integrate allof these systems together. They would need to have temperature sensors,pressure sensors and some sort of location sensor to be able to pinpoint theirexact location. They would also need a power source and the ability to trans-mit the information back. Each unit in the nanorobot already exists and ithas been tested and verified. But a complete integration at that level of so-phistication is still a bit far away.” Mark Morrison of the UK’s Institute ofNanotechnology is also sceptical about scientists’ ability to overcome thechallenges of developing a fully functional reservoir robot: “Providingpower and sensors all in a small particle size that is able to withstand differ-ent chemical environments and severe pressure requires concerted effort bya lot of different people. One aspect of the robot might develop more quick-ly than another. But it’s combining all these things onto one platform thatwill be the big breakthrough.”

It’s a breakthrough that Murphy says he and his team can’t make beforethey have explored the fundamental science behind the concept – i.e the fac-

tors that control the retention and transport of nanopar-ticles through the pores in the reservoir rock: “We

are funding a number of fundamental science

“Saudi Arabia is pouring billions of dollars

into advanced technologies” Dr Abdel Mottaleb




projects that are related to understanding what it’s going to take to movemicro and nanoparticles through reservoir rocks. Some are predictive stud-ies that will produce modelling and simulation tools. Other are more experi-mental in approach and are underway at petroleum engineering departments.They started with glass beads and sand particles and now they are progress-ing to constructed permeable media and micro models that are representa-tive of reservoir rocks.”

He goes on to say that he and his team are currently figuring out how toget these particles to flow from one end of the rock to the other and whetherthere are coatings they can use on the particles so that they can flow throughmore easily. He says that even if his team doesn’t succeed in moving onto thenext level by creating nano particles equipped with sensors, communicationsequipment and data storage capacity, simply being able to understand how tocreate a custom designed nanoparticle that will pass through the reservoircould have major benefits for the oil and gas industry. He goes on to explainthat this is one area where the industry could benefit from biomedical researchin that coatings developed to enable pharmaceutical nanoparticles to passthrough the body could be used in briny oil fields.” Not only do we have tofigure out how to pass a nanoparticle through heterogeneous rocks and com-plex fluids, but we need to find a material that can enhance the resolution ofsub-surface lithogies and fluids using viable remote sensing technologies.Questions that need to be answered include; can we discriminate these nanocontrast agents from the background noise? What volume of material will weneed to use? And can we functionalise them so that they will attach to hydro-carbons preferentially?”

Nanotechnology has been used to produce new materials for a range of industries. Here a scientist tests a sheet of ultra-thin foil

The material worldNanotechnology’s potential in the oil and gas field is not limited to its

reservoir mapping capabilities. Nanomaterials are already widely used acrossa wide spectrum of industries including automobiles and consumer elec-tronics products and scientists believe that nanocoatings, in particular, couldhave great benefits when applied to drill bits. Morrison says: “There is a lot ofdevelopment that could potentially be used in the oil and gas industry andprobably is being used and these are things like nano structured ceramic ma-terials which have increased hardness and durability compared with conven-tional materials which could be used in drill bits.” He explains that at thenanoscale, materials can be harder and more sheer resistant making them lesssusceptible to different forces and able to withstand higher temperatures.Using this sort of coating could enable oil companies to drill deeper and cutdown on lost time through having to replace drill bits. “If you can use a nanostructured ceramic material to coat a drill bit then you might have access tooil fields that you wouldn’t normally be able to access,” says Morrison. “Oryou might have a longer time between replacing drill bits or pipes. So it bothincreases, potentially, your access to different reservoirs, and the amount oftime those reservoirs are open compared to being offline.”

An even more sophisticated use of nanomaterials in oil and gas reservoirscould be to coat well bore tubulars with material that is able to detect and reactagainst corrosion or leakages. The most common terminology for this is‘smart’ or ‘intelligent’ materials. These materials are aware of the environmentaround them and can change their properties accordingly. This – like the useof better coatings for drill bits – could make nanotechnology a way for oil


companies to save billions of dollars in costs from well shutdowns and the re-placing of equipment, notes Dr Abdel-Mottaleb. “Another thing that is beingtested in the lab is the use of smart casing for the bore hole. For that, you needa material that can react to the environment around it so that if there is a leak-age it can immediately interact and close it. The point of all this is that the oilindustry has to invest in this sort of technology to improve its efficiency andreduce costs.”

Money talksCutting costs is a major concern for the oil and gas

industry – with worldwide demand for oil havingplunged by 0.6 percent in 2008. Despite these finan-cial pressures, however, funding for research into theuse of nanotechnology from national and interna-tional oil companies has been forthcoming as com-panies seek to make investments in technology thatcould result in lower costs and high returns on invest-ment in the long term. The AEC is set to receive US$10million dollars a year for the next three years from 10 of theworld’s biggest oil companies, including BP, Halliburton, Shelland Total. This decision by these competing companies to pool theirresources builds on approaches developed in the semi conductor electronicssectors, says Murphy; “The miniaturisation challenges facing the developmentof nanotechnology are parallel to those that faced microprocessor technolo-gy. It was an expensive multidisciplinary problem with many companieswanting to move onto the next shrink level but unsure of the exact technolo-gy to bet on. In such pre-competitive situations it makes sense to leverage thefunding from other companies so you can explore lots of problems and sharethe results.”

While a shared approach indicates co-operation amongst these com-panies, some have expressed concern about the proportion of funding goingto US-based companies. Dr Abdel-Mottaleb wants to ensure that a more in-ternational approach is taken: “One of the issues is whether this is going tobe led by American companies or European companies or whether it is


going to be an integrated effort. What I’ve seen so far is that the Americansare very active in this and that they are also looking at the American scien-tists rather than the Europeans or scientists from elsewhere. I think this isnot the right approach. This is an international discipline and they need tobe looking at it globally and not excluding solutions that come from out-side the US.” Nevertheless, he says the Middle East is catching up fast when

it comes to research into nanotechnology, led by Saudi Aramco and theSaudi government. “Saudi Arabia is pouring billions of dollars

into advanced technologies. The UAE and even Egypt arebecoming more active. In 2008 I found out the total

amount of funding available in Egypt to get a projectcomplete in the next three years is US$10 million.That is nothing compared to what the US orEuropean governments have come up with but in2007 we had no funding. So from zero to US$100million is a significant jump.”

Meanwhile, the AEC, in an effort to be more in-clusive, recently hosted a workshop in Paris where 80

percent of the participants were from European, Asian andMiddle Eastern companies. It is also currently reviewing pro-

posals for its second round of funding and is looking for opportunitiesworldwide. Abdel-Mottaleb says that it wasn’t until last year that companiesreally started to sit up and take notice of the role nanotechnology could playin the oil and gas industry. Now its full potential has been revealed, howeverthey all want a piece of what could ultimately solve some of the biggest chal-lenges facing the oil and gas industry.

Sean Murphy is reluctant to cite nanotechnology as the oil and gas in-dustry’s silver bullet. However, he says that even if this microscopic technol-ogy were to make a small difference to the numbers involved – its impact inreal terms would be massive. “I wouldn’t say it’s the saviour of the industry,but it has intriguing potential for being able to retrieve more oil than we canretrieve today. We’re talking about billions of barrels of oil that are left in theground. If we can improve the recovery rate by only a small percentage, thatrepresents an incredible amount of additional energy for the world.” �

US$10MILLIONthe amount of funding

the AEC is recieving from oil companies

each year


GeoKnowledge ADs.indd 1GeoKnowledge ADs.indd 1 28/7/09 16:15:5828/7/09 16:15:58

CORPORATE STRATEGY

Khalid Al-Falih Ed:16 july 5/8/09 15:10 Page 32


GIANTThe ethical

Earlier this year I was fortunate enough to be in Washington, notfar from the steps of the Capitol where some three months agoBarack Obama took the oath of office as the 44th president ofthe United States. Back in Saudi Arabia, I watched the swear-ing in ceremony on television, and listened as President Obamastruck a thoughtful yet upbeat tone in his inaugural address.

Towards the end of that speech he said, and I quote, “What is required of us nowis a new era of responsibility.” It struck me – because responsibility is a themethat we have been stressing within Saudi Aramco for many years. Of course, thepresident was speaking of the need for accountability in many areas of con-temporary life, and he was speaking from a uniquely American perspective.Yet I believe that such a call to take greater responsibility, and to think interms of providing long-term benefits for the many rather than selfishlyreaping short-term gains, applies equally to each and every one of us in thecorporate world. And of course that includes the global petroleum industryand all those who influence it, from technicians, engineers and researchers,to educators, investors and policymakers. I am a firm believer that whatev-er role we play when it comes to energy, each of us needs to assume re-sponsibility for the actions and impacts of our own company or institution,and to ensure that we are able to reliably meet the needs of our variousstakeholders – and when it comes to petroleum, everyone is a stakeholder.

Khalid Al-Falih, President and CEOof Saudi Aramco, lifts the lid on why

the world’s biggest oil company istaking responsibility for its actions.


of the story, since Saudi Aramco will account for more than half of the grass-roots crude oil production capacity brought onstream worldwide during thecurrent decade. And although historically we’ve been known primarily as amajor producer of crude oil, we are also constructing additional refining ca-pacity both in the Kingdom and abroad, including in the United States. Infact, Saudi Aramco is behind one out of every three barrels of firm com-mitments to new refinery capacity to be built between now and the year2015. Elsewhere downstream, we are moving forward with integrated re-fining and petrochemical ventures with some of the world’s leading chem-ical companies, including the Dow Chemical Company. These newfacilities not only add value to the Kingdom’s hydrocarbon production,but form the hubs of new industrial clusters, help to develop and diversi-fy the Saudi economy, and create new career opportunities for our na-tion’s youth. Major investments such as these allow us to play a central

role in helping to meet the world’s demand forenergy and constitute what I consider, takingcharge by taking responsibility.

The long-term viewBut some people ask us why we continue

with these projects even in a challenging businessenvironment and at a time when oil consump-tion has fallen for two consecutive years, for thefirst time in 25 years. Certainly we are well awareof the state of the global economy, and have feltthe impact of the present downturn along withthe rest of the petroleum industry. But we are in-vesting throughout the business cycle and areconsistent with our long-term focus. We knowthat as the global economy rebounds, demandfor petroleum will also grow – and in the absenceof such investments, the world is likely to face an-other vicious cycle of price spikes. In some ways,such a responsible approach is simply SaudiAramco’s destiny, given the massive resource

base we manage and the expansive petroleum infrastructure we operate andmaintain – but it is a duty we take very, very seriously indeed. At the sametime, our infrastructure development projects and programmes are coupledwith investments in advanced technology and applied research. By harness-ing innovation, leveraging our company’s intellectual capacity, and deploy-ing brain power and not simply horsepower, these research and engineeringprogrammes are enhancing our ability to find, manage and produce the vitalhydrocarbons so essential to modern life. Furthermore, the company is help-ing to spearhead the development of a bold new institution dedicated to post-graduate technical education and cutting-edge research: the King AbdullahUniversity for Science and Technology (KAUST), which will open its doorsthis September. Built on the Kingdom’s Red Sea coast, KAUST will be an in-ternational, graduate research university – designed to inspire a new age ofscientific achievement and knowledge creation in Saudi Arabia, the MiddleEast region, and indeed the world. Among other areas of endeavour, KAUSTwill be home to one of the world’s leading solar energy research centres fo-cused on making solar energy more efficient, more economical and more scal-able, and is also working with IBM to create a new supercomputer which will

Our visionFor the men and women of Saudi Aramco, taking responsibility means,

first and foremost, a commitment to ensuring that our company remains themost reliable supplier of energy to the world. But it is also something more –it is a shared sense of obligation to our stakeholders that transcends the tradi-tional measures of success in our industry like billions of barrels of reservesor millions of barrels of daily production. It is a commitment to be socially re-sponsible, wherever we do business; to be a creator of opportunity for ourpeople; an innovator of new technologies; a steward of safety and the envi-ronment; and a propagator of knowledge. This is Saudi Aramco’s vision. It isdeeply rooted in our heritage, and it defines who we are and what we strive tobe. To that end, I remind our oil field operators and maintenance techniciansin the middle of the Empty Quarter, the staff along our cross-countrypipelines and at our marine shipping terminals, and in fact all of our 55,000employees that what they do impacts men,women and children in cities, towns and villagesthroughout the world – places they have neverbeen to, will never see, and may never have heardof. Not long ago I was in Houston for a meeting ofSaudi Aramco’s Board of Directors, which againconfirmed its commitment to our ongoing slate ofprojects and programmes. Those initiatives aremany and they are massive, and in many ways theseongoing activities and new ventures are fundamen-tally transforming Saudi Aramco by expanding itsbusiness portfolio and enhancing its operational ca-pabilities. But even as they pave the way for greatersuccess in an ever more complex future, these plansalso enable us to sustain a reputation, which goesback to the earliest days of our enterprise. If you talkto any of my Saudi Aramco colleagues, you will findthat they derive their greatest satisfaction not frombeing the biggest producer and exporter of crude oil,but from being the most reliable supplier of petro-leum on the planet. In other words, they take pridein taking responsibility for the role we play in providing energy to the world, dayin and day out, year after year, without fail.

Supply and demandFirst and foremost, we continue to invest all along the petroleum value

chain to help improve the global supply-demand balance, on a scale no com-pany has approached in the history of our industry. From the subsurfacereservoir all the way through to the gasoline pump and petrochemical plants,we are working hard and partnering with others to ensure that an ample sup-ply of petroleum is available to consumers around the world, and to powereconomic recovery, social development and greater prosperity in both in-dustrialised and developing nations. To that end, we are sustaining our crudeoil and natural gas exploration efforts, including exploration in new frontierareas both on land and offshore. Just a few weeks from now we will attain ourgoal of putting in place a 12 million-barrel-per-day crude oil production ca-pacity, once we complete our Khurais oil field programme. This massive pro-ject, the largest single crude oil increment ever commissioned, will be capableof producing as much oil as the entire state of Texas. But Khurais is only part


Khalid Al-Falih



petition. Yet Saudi Aramco’s own experience demonstrates that cross-cul-tural cooperation and understanding are not only possible, but in fact helpto secure greater prosperity for all concerned. In fact, many observers havenoted that Saudi Aramco over the years has become a model of multicul-tural collaboration and exchange, at both an institutional and an individ-ual level. Those positive experiences are now being channelled into theKing Abdulaziz Centre for Knowledge and Culture, a world-class learning,cultural and arts center which Saudi Aramco is building near our head-quarters in Dhahran. In addition to the exciting new educational and cul-tural opportunities it will provide to all members of our local communities,its online offerings will serve a global constituency wishing to learn moreabout the Kingdom’s rich culture, its contemporary society and itsprospects for the future. Aside from encouraging cross-cultural exchangeand dialogue, the centre will also stress our common humanity and sharedaspirations and hopes for the future. That’s something else we know first-hand, because from the Saudi and American pioneers of the 1930s totoday’s workforce of 70 different nationalities, those who call themselves“Aramcons” have always been united by a sense of purpose, and a sharedsense of responsibility. But I also firmly believe that our dedicated menand women constitute an even more important source of competitive ad-vantage, and will ultimately sustain Saudi Aramco’s success in a newknowledge age. Therefore, we hold ourselves responsible for the develop-ment of our people, and for providing them with opportunities to enhanceand utilise their competencies and capabilities. The participants in theSaudi Aramco Management Development Seminar, a programme whichis now more than a quarter-century old, are among our best and brightestemerging leaders, and therefore this programme plays an important rolein helping us sharpen our competitive edge as a company exposing thesemen and women to new perspectives and fresh viewpoints. �

“We continue to invest all along thepetroleum value chain to help improve

the global supply-demand balance, on a scale no company has approached in

the history of our industry”KHALID AL-FALIH

be one of the most powerful computing systems in the world. And whileKAUST will provide tremendous benefits to the Kingdom, it is actually de-signed to positively impact the entire global community. For example, one ofits research programmes will focus on salt-tolerant crops – not because weface food shortages in the Kingdom, but because other nations will need toplant more crops to nourish their growing populations. It will educate inter-national students – not because we lack qualified Saudi applicants, but becauseKAUST wants to be the nexus of the best and brightest men and women frommany different national and cultural backgrounds. And the university will de-vote considerable efforts and resources to developing solar energy technolo-gies, not because we lack energy resources in the Kingdom – which alreadyboasts the world’s largest reserves of crude oil – but because we believe theworld will need contributions from all technically, economically and envi-ronmentally viable sources in order to meet growing global energy demandin the decades to come.

Positive messagesAt Saudi Aramco, as part of our responsibility to help meet the world’s

energy demand and to do so as cleanly as possible, we also hold ourselves ac-countable when it comes to the issue of environmental stewardship. Thiscommitment is nothing new – the company’s first environmental policy state-ment dates back to 1963, well before green causes became mainstream.Today, we not only work to minimise the environmental impact of our op-erations, but are also pursuing research related to the desulfurisation ofcrude oils, carbon capture and storage, and cleaner burning fuel formula-tions designed for the next generation of engine technologies, all of whichwill help to lighten the environmental footprint of petroleum consump-tion. Saudi Aramco is also heavily engaged in environmental outreach pro-grammes – especially targeting the Kingdom’s young people – in order toraise popular awareness of environmental issues and encourage people torecycle and conserve water and energy. We also view the “soft side” of ourbusiness, and indeed of our world, with a sense of responsibility. All toooften the media carries self-fulfilling prophecies about an inevitable “clashof civilisations” which pits one society against others in a zero-sum com-


Maraco AD.indd 1Maraco AD.indd 1 28/7/09 16:21:1028/7/09 16:21:10


petition. Yet Saudi Aramco’s own experience demonstrates that cross-cul-tural cooperation and understanding are not only possible, but in fact helpto secure greater prosperity for all concerned. In fact, many observers havenoted that Saudi Aramco over the years has become a model of multicul-tural collaboration and exchange, at both an institutional and an individ-ual level. Those positive experiences are now being channelled into theKing Abdulaziz Centre for Knowledge and Culture, a world-class learning,cultural and arts center which Saudi Aramco is building near our head-quarters in Dhahran. In addition to the exciting new educational and cul-tural opportunities it will provide to all members of our local communities,its online offerings will serve a global constituency wishing to learn moreabout the Kingdom’s rich culture, its contemporary society and itsprospects for the future. Aside from encouraging cross-cultural exchangeand dialogue, the centre will also stress our common humanity and sharedaspirations and hopes for the future. That’s something else we know first-hand, because from the Saudi and American pioneers of the 1930s totoday’s workforce of 70 different nationalities, those who call themselves“Aramcons” have always been united by a sense of purpose, and a sharedsense of responsibility. But I also firmly believe that our dedicated menand women constitute an even more important source of competitive ad-vantage, and will ultimately sustain Saudi Aramco’s success in a newknowledge age. Therefore, we hold ourselves responsible for the develop-ment of our people, and for providing them with opportunities to enhanceand utilise their competencies and capabilities. The participants in theSaudi Aramco Management Development Seminar, a programme whichis now more than a quarter-century old, are among our best and brightestemerging leaders, and therefore this programme plays an important rolein helping us sharpen our competitive edge as a company exposing thesemen and women to new perspectives and fresh viewpoints. �

“We continue to invest all along thepetroleum value chain to help improve

the global supply-demand balance, on a scale no company has approached in

the history of our industry”KHALID AL-FALIH

be one of the most powerful computing systems in the world. And whileKAUST will provide tremendous benefits to the Kingdom, it is actually de-signed to positively impact the entire global community. For example, one ofits research programmes will focus on salt-tolerant crops – not because weface food shortages in the Kingdom, but because other nations will need toplant more crops to nourish their growing populations. It will educate inter-national students – not because we lack qualified Saudi applicants, but becauseKAUST wants to be the nexus of the best and brightest men and women frommany different national and cultural backgrounds. And the university will de-vote considerable efforts and resources to developing solar energy technolo-gies, not because we lack energy resources in the Kingdom – which alreadyboasts the world’s largest reserves of crude oil – but because we believe theworld will need contributions from all technically, economically and envi-ronmentally viable sources in order to meet growing global energy demandin the decades to come.

Positive messagesAt Saudi Aramco, as part of our responsibility to help meet the world’s

energy demand and to do so as cleanly as possible, we also hold ourselves ac-countable when it comes to the issue of environmental stewardship. Thiscommitment is nothing new – the company’s first environmental policy state-ment dates back to 1963, well before green causes became mainstream.Today, we not only work to minimise the environmental impact of our op-erations, but are also pursuing research related to the desulfurisation ofcrude oils, carbon capture and storage, and cleaner burning fuel formula-tions designed for the next generation of engine technologies, all of whichwill help to lighten the environmental footprint of petroleum consump-tion. Saudi Aramco is also heavily engaged in environmental outreach pro-grammes – especially targeting the Kingdom’s young people – in order toraise popular awareness of environmental issues and encourage people torecycle and conserve water and energy. We also view the “soft side” of ourbusiness, and indeed of our world, with a sense of responsibility. All toooften the media carries self-fulfilling prophecies about an inevitable “clashof civilisations” which pits one society against others in a zero-sum com-


Fa l l P r o t e c t i o n E x p e r t s

Gravity Tested. Safety Approved.

Capital Safety, World Leader in Fall Protection Equipments, provides specifi c solutions for Oil & Gas working environments : from Upstream (Drilling rigs, Supply vessels, Platforms...) to Downstream (Transport, Refi nery, Storage,...). Through its leading brand names DBI-SALA and Protecta, Capital Safety has been on the forefront of fall protection innovation for more than 50 years to ensure that workers are safe and employers have confi dence they are providing theiremployees with the best protection possible.

Wide range of training • Technical assistance • Customer services and bloc repair

Capital Safety Group EMEATel : +33 (0)4 97 10 00 10 • Fax : +33 (0)4 93 08 79 70www.capitalsafety.com • [email protected]

Capital ad.indd 1Capital ad.indd 1 28/7/09 16:08:0228/7/09 16:08:02


SECURITY FOCUS

Piracy is back, but not in the traditional sense. Swashbuckling Blackbeards brandishing cutlasses have been superseded by ruthless, money-hungry Somali gangs armed with automatic weapons, global positioning systems and satellite phones. With supertankers seen as a prize catch among new-age pirates, can the oil industry ward off potentially deadly and costly attacks or is it merely a sitting duck? By Julian Rogers


Oil, toil and

Pirates.indd 38Pirates.indd 38 6/8/09 09:25:236/8/09 09:25:23


Th e lion’s share of attacks have occurred in the Gulf of Aden off the Somali coast – one of the world’s most important shipping lanes with 20,000 vessels passing through annually. Th ere are also 2.8 mil-lion square kilometres of water in this region alone, meaning shipping companies and their crews have the daunting prospect of trying to react to or predict where and when the pirates strike next. Of course, with the Sirius Star ransom being paid so publicly there is the obvious concern that handing the pirates millions of dollars to relinquish con-trol of a vessel will fuel more attacks and even bigger wallet-busting ransoms. Other young men will see the huge money to be made, round up a gang, arm themselves to the teeth and jump in a boat. Kenya’s foreign minister claimed that up until November 2008 the pirates had received over US$150 million, which can then be ploughed back into purchasing faster boats and increased hardware.

“Th e big ransom payments have fuelled attacks – there isn’t any real doubt about that,” suggests Roger Middleton, Consultant for the Africa Programme at Chatham House – formerly the Royal Institute of International Aff airs. “As ransoms go up it becomes a more attractive business for people, but it is a very diffi cult position for ship owners to be in because who wants to be the fi rst not to pay a ransom, which impacts on the safety of your crew?” Likewise, Davis is of the opin-ion that the pay-off s are spiralling out of control. “Th e pirates keep pushing, pushing and pushing for as much as they can get and they are quite happy to delay and start again. Th e industry, the insurance companies and negotiation teams are letting the ransoms get out of

Pay day: Pirates secure their biggest booty to date off the Kenyan coast in January


In early January of this year a bright red parcel attached to a small parachute glided gently toward the deck of a Saudi supertanker 800 kilometres off the Kenyan coast. Onboard the 330-metre long Sirius Star was a 23-man crew, a gang of armed Somali pirates and two million barrels of oil – a quar-ter of Saudi Arabia’s daily output. Inside the package was

believed to be US$3 million in high denomination bills. Oil giant Saudi Aramco is thought to have paid the ransom to release the supertanker, owned by its shipping arm, and its black gold, bringing an end to a terrifying two-month ordeal for the hostages in what was the world’s biggest ship hijacking. Th e pirates had demanded US$25 million but eventually settled for a fraction of this, although US$3 million isn’t too bad a pay packet for two months’ ‘work’ in a country as poor and war-ravaged as Somalia.

Th e hijacking of Sirius Star was the sea bandits’ biggest booty to date and there is a real fear that other fully-laden supertankers could be snared by the pirates in future attacks. Indeed, most attacks are directed at merchant ships connected in some way to the oil industry. Recently, however, annual monsoons have hit the region, curtailing the pirates’ ability to ply their illegal trade, and ship owners are on tenterhooks amid the calm before the real storm, so to speak. “Th e whole of the in-dustry is holding its breath waiting for the wind to die down,” warns Nick Davis, a former British army pilot and Chairman of the Merchant Maritime Warfare Centre (MMWC) – a not-for-profi t organisation ad-dressing ship security. “Between late August and December we will see what happens, because we don’t know whether there will be this eerie quiet where nothing or just one or two gets hijacked, or whether we will have three or four ships a week taken.”



hand, which is making the situation quite nasty because the bigger the ransoms, the more people that want to get involved. And there is no shortage of manpower for them to send out and there can never be enough warships to ef-fectively prevent it.”

Numbers gameAccording to the International Chamber of Commerce’s Interna-

tional Maritime Bureau (IMB), the number of attacks so far this year off Somalia has already surpassed the 2008 total. Last year witnessed 111 incidents, with 42 vessels hijacked. Up until mid-May of this year 29 suc-cessful hijackings were recorded from 114 attempted attacks. And while a total of 815 crew members were taken hostage in 2008, this fi gure stood at 478 by the middle of May this year. “Th ese guys have found a busi-ness model that makes a lot more money than their traditional fi shing industry, and I mean a lot,” remarks Jeroen Meijer, a security consultant for threat and safety advisors Control Risks and former offi cer in the Royal Netherlands Navy. “Keeping that business model intact is crucial, so they constantly adapt their modus operandi. We saw them operating in the Gulf of Aden, off the coast of Mogadishu [Somalia’s capital] and we have seen them going into the Red Sea and Omani waters. So they are constantly adapting where they operate to minimise the threat to their operations.”

A knock-on eff ect of the piracy has been a sharp rise in shipping costs as some shipping fi rms choose to avoid the Suez Canal and navigate

their vessels thousands of kilometres further via South Africa’s Cape of Good Hope. On top of this, insurance costs have soared by as

much as 100 percent. However, there are more than a dozen naval forces, as part of the multi-

national coalition off ensive (Combined Task Force 150), fl exing their military muscle and patrolling the

Gulf of Aden in a bid to thwart the pirates. However, this asymmetrical warfare has forced the pirates to scour for victims in less policed waters, namely the western Indian Ocean.

If they can pass under the radar of the multinational naval armada the pirates typically approach a target by speedboat or skiff (a shallow, fast boat), fi ring on the ship until the captain submits and allows them to board by means of grapple hooks and rope ladders. Some pirate gangs

are particularly well-equipped for the job in hand, says Middleton. “Th ey are generally armed with AK47s, and sometimes RPGs (rocket-propelled grenades), while their boats generally have outboard Yamaha engines and they may have GPS and satellite phones.”

tm

thanatio

150), fl ex

The Somali

coast stretches

3000KM around the Horn

of Africa and is

the longest of any

country on the

continent.

“Somalia is a completely failed state with no political structure to speak of and there is no law enforcement capability so these gangs operate with total impunity” Jeroen Meijer, Control Risks

A patient game: Pirates lie in wait


Rockwool AD.indd 1Rockwool AD.indd 1 28/7/09 16:26:1828/7/09 16:26:18


f IGHTING BACK How ship owners can protect their cargo and crews

indian

ocean

Gulf of

aden

Yeman

KENYA

ETHIOPIA

2008 attacks

2009 attacks

0 500 1000KM

1

2

3

Where the pirates have struck in 2008/09

4

1How

One deterrent is a long range acoustic device (LRAD), which is simply a satellite dish hooked up to a humble MP3 player. The LRAD, which has a range of around 1000 metres, fi res out high-pitched messages or sirens to warn pirates that they have been spotted. In fact, this piece of kit can reach excruciatingly painful levels if the pirates get too close.

More simple but effective measures include attaching barbed wire to the boat to hamper pirates’ attempts to clamber aboard. Some vessels are also fi tted with powerful hoses used for blasting anyone who gets anywhere near, but some ship owners have taken a more hard line approach by providing machine guns.

Austrian company Schiebel has developed an unmanned helicopter fi tted with advanced sensors to alert crews of advancing maritime gangs. The three-metre long Camcopter S-100 can be fl own by remote control or by pre-programmed GPS waypoints. This ‘eye in the sky’ can fl y up to 120 knots powered by a 55hp rotary engine.

The most effective and practical measure, maritime experts suggest, is to sail at a speed exceeding 25 knots, pull up the ship’s ladder and have a high freeboard.

2erful 2ng t

ponear, nea

pr

gs towowo 2ing

ptp

a ,p

,pp

33figa

Aus

stro

flyytr

dtg

ononong

ntnng

tetAustri

d ws.

trofl y u

r

d

flflytroo

d dAus

ol

4ddeme ship’s ladder and hahip’s ladder and ha

geexperts sup’s ladder anddd

ggsume experts suggest,ship’s ladder and havaa

ge

Sirius Star

Pirates.indd Sec1:42Pirates.indd Sec1:42 6/8/09 08:28:166/8/09 08:28:16


A continuing lawless atmosphere in the country has magnifi ed the problem. “Somalia being a lawless state with a free and open coastline that no one is able and willing to defend is 100 percent the reason why the pirates can get away with it,” Davis notes. Th is sentiment is echoed by Meijer: “Somalia is a completely failed state with no political structure to speak of and there is no law enforcement capability so these gangs operate with total impunity. Th ose who live on the coast see the wealth of the world sailing by everyday, so in an extremely benign maritime environment where you can operate with a small boat for very little cost and together with a Kalashnikov and an RPG, you are able to hijack these

riches on your doorstep.” It also appears that money is the sole

factor behind the pirates’ determina-tion, with no link uncovered between the attacks and organised terrorism, say the experts. “Th ere is absolutely none,” reveals Dr Alani. “On the contrary, we get information that the pirates fear the extreme Islamists who see them as thieves.” Indeed, there is a preconcep-tion that most Somalis support the pirate gangs, but being a majority Muslim state, most of the population are vehemently opposed to theft and hijackings. On the other hand, chunks of the bandits’ ill-

gotten gains are pumped back into the local economy which rejuvenates poor villages, although a fl ipside of this cash injection is rising infl ation for ordinary Somalis. All in all, this situation won’t be changing very soon unless action is taken on land in Somalia to stamp out this menace. And with the monsoon weather subsiding soon, the coming months will be an extremely testing time for the maritime industry. “Th roughout history piracy has been an issue and it will never be completely stamped out – this is an illusion,” states a philosophical Meijer.

In a similar fashion to how burglars seek to target the house on the street with the weakest security, the sea bandits go aft er the ships that are easiest to board and take control. Th ose vessels capable of 25 knots are generally too fast for the pirates but boats sail-ing at around 14 knots and with a freeboard fi ve metres or less in height are deemed easy prey. Ship owners are doing their best to ward off potential attacks by installing barbed wire and fi ring onboard water canons should the assailants venture too close, while deck pa-trols and ‘lookouts’ have also been ramped up. “You only have a short time to prevent these pirates from boarding and taking con-trol of the ships,” explains Dr Mustafa Alani, Director of the Terrorism and Security de-partment at the Dubai-based Gulf Research Centre. “Once they have control then you have hostages and you have to deal with the situation completely diff erently.” Dr Alani argues that ship owners either need to station troops onboard or you allow the civilian crew to be armed and trained in how to repel attackers.

“However, there is always this giant ‘but’,” says Davis, “You are deal-ing with intelligent opponents who have fi gured out a number of ways in which they can very successfully board a vessel.” Davis says the crews who wind up getting hijacked invariably have little or no understanding of the threats and have been given no training in how to defend their ves-sels. However, there are certain measures crews can take to make it nigh on impossible for pirates to get on board, he reveals [see opposite]. He is also concerned with the fact that ship owners are deploying a mishmash of anti-piracy measures instead of adopting a standardised approach. “We have such a divide across the world,” he notes. “For instance, the Americans are putting arms on everything, which is not very helpful and will lead to all sorts of problems because the ultimate authority on that ship should be the master. He is still liable, irrespective of who pulls the trigger and I know a lot of masters who are very uncom-fortable with the arms issue and civilian guards.”

Root causes So can piracy be stopped on land? Experts

are in agreement that the failed state of Somalia is a perfect breeding ground for piracy, while a lack of law means the pi-rates can hijack vessels with impunity. Piracy fi rst became a problem in the region at the outbreak of Somalia’s civil war in the early 1990s, when the government was overthrown. As the war raged, and with no Somali coastguard, foreign fi shermen were accused of plundering the country’s fi sh stocks, so Somalis took to the seas to protect their livelihoods. It was then that they realised there was some serious money to be made from hijacking ships and demanding ransoms.

Capture and arrest is an occupational hazard for the pirates

“You are dealing with intelligent opponents

who have fi gured out a number of ways in which they can very successfully

board a vessel”Nick Davis, MMWC

Pirates.indd Sec1:43Pirates.indd Sec1:43 6/8/09 08:28:306/8/09 08:28:30


GASFOCUS

Flushed with success following his promotion from VP of Downstream to CEO of Dana Gas, AHMED AL ARBEED, tells Diana Milne how his company plans to transform the region’s energy industry.

NEW HORIZONS

AHMED AL ARBEED ED P44-46.indd 44AHMED AL ARBEED ED P44-46.indd 44 5/8/09 15:27:285/8/09 15:27:28


a 461 million square foot site for Kurdistan Gas City. Dana Gas has been supplying the Iraqi region of Kurdistan since late last year aft er com-pleting a US$650 million project. Th e Kurdistan Gas City project will be built with an initial investment of US$3 billion and is expected to attract foreign direct investment of over US$40 billion during the op-erations phase. It will be built to support over 20 types of petrochemi-cal and heavy manufacturing plants and hundreds of small to medium enterprises. If successful, the company believes it could create several other similar projects across the Iraqi region – with Majid Jafar, Execu-tive Director of Crescent Petroleum already having told Reuters last year that it has received interest from local authorities in Anbar in the West and Basra in the South.

The road aheadTh e scope for Gas Cities and the numbers

involved are highly impressive – but they remain, for now, a reality only on paper. No fi rm dates have been set for the completion of the fi rst project as the economic downturn casts a shadow over Dana Gas’ ambitious plans, which rely for their success on heavy investment by regional governments.

When asked when the fi rst Gas City will be built, Arbeed replies: “It is very diffi cult to judge really, es-pecially with the [economic] crisis now, because we’re not going to build the Gas Cities alone. Th ere will have to be contractors and owners of the petrochemical companies and we will have partners with us. We will open the fl oor to investors because these projects are going to cost billions of dollars. It’s a huge investment and at this stage of course, very few investors will be ready to invest unless the situation in the market con-tinues to improve. But we will always keep the idea live and we continue to talk to countries about it. We

will take the appropriate time to move it quickly and build.”Dana Gas’ success in the wider natural gas industry ensures however,

that while the Gas Cities project may be on hold for now its future in the

Having already established itself as the Middle East’s largest private sector gas company, Dana Gas’ CEO Ahmed Al Arbeed says it is now on the cusp of being one of the world’s most innovative. Its Gas Cities project will revolutionise the way gas is produced and used, with sustainability at the core of the

concept. Once complete, the Gas Cities will be fully integrated industrial zones designed to promote economic activity and attract lucrative foreign investment to the region’s burgeoning natural gas sector. Th e idea is that gas will be produced in the industrial cities which is then either converted into economically viable petroleum products or used as feedstock, so that nothing is wasted and each element of production and supply chain sup-ports the city’s infrastructure.

Breaking the mouldDescribing the thinking behind

the concept, Arbeed says: “It’s a unique idea that is similar to the in-dustrial cities all over the world but with some uniqueness in terms of the fact that it partners exactly with to-day’s needs. Sustainable development is the key to the distinction between Gas City and other industrial cities. What we are trying to build for the countries of the MENA region is cities whereby you can use the whole gas cycle. You can do this by supply-ing gas to petrochemicals and other industries, those are what we call the primary industries. Th en there are the secondary industries which take the waste and emissions from the primary industries and use this as feed to make many products of diff er-ent kinds.” As well as industrial facilities the projects will also include the infrastructure needed to support the workers that will live within the Gas City compound, Arbeed explains: “We will have tertiary services that will provide services to the whole city, which includes the residential area.”

Arbeed goes on to say that although Gas City breaks the mould in terms of modern natural gas production facilities, it is inspired by the era of the European industrial revolution in the 19th century, during which whole towns and cities sprung up around factories and other industrial sites: “Th is idea goes back 200 or 300 years,” he says. “As soon as indus-tries started to grow, the cities came as a by-product because people move closer to the area where they worked. We’re trying to set an example of how this can be done in the Middle East and in a sustainable way.”

To date Dana Gas, which is an affi liate of UAE-based Crescent Pe-troleum, plans to build four gas cities across the Middle creating “tens of thousands of jobs” in the region. It has already been in talks with the Egyptian government about building one of the fi rst Gas City complexes in the country, where it already has a strong presence since acquiring Centurion Energy for US$ 1billion in 2007. Plans are also afoot to build

PEOPLE POWERAhmed Arbeed on how Dana Gas’ international workforce has helped to contribute to its success.

“We recruit people not only from the region but from all over the world. If you look at the Dana Gas management there are eight people at the high level of management and they come from eight different countries. The COO is originally from Iraq but has UAE nationality. We have two from the UAE, I’m from Kuwait, and then the others are from Egypt, Britain and India. They bring exposure to different industries within the oil and gas industries. So we are gaining a lot of benefi ts from having an international workforce.”

Ahmed Al Arbeed



regional gas industry is bright. In 2007, the company’s fi rst year of op-eration, it reported revenue in excess of US$1 billion and in the fi rst nine months of 2008 it reported a surge in profi ts of US$245 million. Its invest-ment in Kurdistan is set to reap particularly high rewards for the company as it is on target to provide 1250 megawatts of electricity to over four mil-lion Iraqi citizens through gas supplied to two new power plants that are under construction in Erbil and Sulymaniya. Construction is complete on 180 kilometres of natural gas pipeline and two LPG plants carried out jointly by Dana Gas and Crescent Petroleum and the entire project will deliver over 300 million cubic feet of gas by the end of this year.

Speaking about the company’s success in Iraq and what it means for the people there, Arbeed, says: “We were asked by the government of Kurdistan to come and invest in two fi elds and to build an LPG to knock down the liquids and take the gas through a pipeline of 180 kilometres in length all the way to the north of the region to Erbil city. We did that in 15 months, which was amazing and was world standard for a project like that. It usually takes two and a half years or maybe three years before you see gas fl ow. As a result of our project, electricity availability to citizens increased from two hours a day to 22 hours a day.”

Widening the scopeTh e company has achieved great

success in Egypt since its acquisition of Centurion, and has recently announced the discovery of new wells in the south-ern part of the country and plans to invest over US$175 million in drilling 19 new exploration wells there.

“Aft er we acquired Centurion we really focussed our eff orts on Egypt and managed to double up the reserve last year. We made fi ve discover-ies in a very short period of time and we built up our reserve of gas in

Egypt to double what we started with when we acquired the company. We still think that our acreage in Egypt has got a lot of resources and we are continuing to explore for more gas. We think that we can add the same volume again to our reserves there.” Dana Gas now hopes to

emulate these success stories in other parts of the Middle East, including the UAE, where it is in phase one of a joint pipeline project with Emarat, which will eventually deliver one billion cubic feet of gas to the Hamriyah Free Zone in the emirate of Sharjah. Th e authorities there have also earmarked 50 square kilometres of land for a

Gas City complex. Describing the company’s regional expansion plans, Arbeed says: “We are focussing on a number of diff erent countries in the region, of course. We start with the Gulf region and then we will move onto North Africa, especially Algeria and Libya. We also plan to focus a little bit on parts of South Asia, like Bangladesh and Parkistan. We are continuing to review our plans and will add countries as and when we feel its necessary.”

But Dana Gas’ projects in the Middle East are just the start of a fi ve-year expansion strategy, which it hopes will take it onto the global energy stage. Th e company, along with Crescent Petroleum, was part of a group that had planned to pump gas from Kurdistan via Turkey to Europe through the US$10 billion Nabucco pipeline, alongside Austria’s OMV and Hungary’s MOL. Th e plan was rejected by the Iraqi government however and it’s future is now uncertain.

Arbeed says he is confi dent that the fi rm’s international expansion plans won’t be aff ected by the economic downturn – given the strength of the Dana Gas business model and the relative stability, he says, of gas prices: “In terms of fi nancials we’re ok and we will continue with our growth strategy. We are less aff ected [by the fi nancial downturn] because our revenues come from gas. Th e gas we’re working on in Egypt for ex-ample, has a fi xed price. So even if the price of oil goes up or down, this will not aff ect our price much.” Is it this sort of optimism that has al-lowed Dana Gas become one of the region’s leading natural gas suppliers in the space of just two years. And as the world’s search for alternative energy sources picks up pace, demand for its natural gas products looks set to catapult it to future success.

SAFETY FIRSTAhmed Al Arbeed on health, safety and the environment (HSE) at Dana Gas.

“We need to focus more on HSE but we have noticed in the past year, that there are a lot of improvements in this area. We are adopting methodology to implement HSE across our operations and this has so far proven successful.

I believe that once you focus on HSE you fi nd that the performance of the whole operation is improved. Once you adopt the best practice in this respect, this is a good methodology to improve operations and gain more revenue and profi ts. That will add value to the business of Dana Gas.”

“We are focussing on a number of diff erent countries in the region, of course. We start with the Gulf region

and then we will move onto North Africa, especially Algeria and Libya”

STATE OF PLAYDana Gas Executive Chairman Hamid Dhiya Fafar, speaking at the latest Dana Gas AGM, outlines the company’s expansion plans for the year ahead

“The natural gas sector continues to show extremely strong fundamentals despite the global recession. The MENASA region is unquestionably the world’s largest player in hydrocarbon supply, with 45 percent of global gas reserves yet less than 20 percent of its supply. Additionally, the robust economic growth in recent years has transformed the region into a major gas market in its own right with an estimated long term annual growth rate of between six and seven percent. This positive long-term view of our industry has been enshrined in our robust fi ve-year business plan and strategies within our region. Our goals for 2009 are to reach even greater heights than in 2008; they will undoubtedly be challenging, but we nevertheless look forward to achieving them.”



EXECUTIVEINTERVIEW

How are borehole seismic applications help-ing to achieve maximum results from oil com-panies’ wells?Saleh Barakat. Borehole seismic, in particularVertical Seismic Profiling (VSP), unites the timeand depth domains, the geology and geophysics,

for a more reliable picture of the reservoir. VSPshave been used for several decades, but recent ad-vances in data acquisition capabilities and pro-cessing techniques have made them indispensablefor optimum reservoir management. Companieslike VSFusion continually fund research into im-proved processing techniques, to deliver the max-imum amount of information from each VSPdataset, in as short a time as possible. The resultsgive improved returns on information invest-ments from well logs, surface seismic and reser-voir geophysics, and greater potential forenhanced field development – getting more oilhydrocarbons out of the reservoir with less finan-cial risk for all stakeholders.

Are there are any particular borehole seismicchallenges that the MENA region faces?SB. The quality of seismic data from the region isgenerally very good, but is characterised in partic-ular by high amplitude multiples. Also, there areoften vertical fractures in the carbonate reservoirslike the Khuff and the Arab-D. In VSFusion, welook on these as opportunities rather than chal-lenges. For example, we have developed an innov-ative technique to migrate the first-order multiplesin VSP data using our patented 3C VectorKirchhoff migration, which gives reflectivity from

TD to surface, and over a much wider lateral extentthan with conventional VSP imaging. The princi-pal fracture directions and the resulting anisotropycan be measured using VSP, and the results fedback into the surface seismic processing route, toenhance the surface seismic image.

Could you explain about the benefits of VSPfor well characterisation,even in the most difficult ofgeological environments? SB. One major advantage ofVSP data over conventionalsurface seismic data is thebandwidth. Because the VSPtravel paths are half what theyare in surface seismic data, wetypically see a 20Hz or 30Hzimprovement in bandwidth,and the corresponding im-provement in vertical resolu-tion. Faults that are invisible tosurface seismic data suddenlycome to life with VSP. Userssee smaller features, both inthe vertical scale and laterallyaway from the well and canconfirm borderline seismic in-terpretations. In addition,VSFusion has helped to devel-op specific techniques, such as Virtual Source, toallow accurate imaging in complex areas, for ex-ample beneath salt domes, areas that are notori-ously difficult to image using conventionalseismic methods.

What are your future predictions for boreholeseismic applications and VSP and how willtechnology play its part?SB. The advent of large, reliable, wireline-de-ployed geophone arrays, like the 100-level tool of-fered by Baker Hughes’ SeisXplorer service, give theopportunity to record and process large 3D VSPs,with data volumes that are more than 10 times larg-er than those of only a couple of years ago. Withthese large arrays, there is enough data recorded toallow companies like VSFusion to process not onlyhigh-resolution P-wave and S-wave cubes, but tomeasure azimuthal anisotropy and AVO, and tomake detailed studies of the fracture networks at thewell, all from the same dataset.

Even now, VSP processing can now bedone almost in real-time,and can be used for geosteer-ing and hazard avoidance dur-ing drilling. This is achieved bymeasuring the depth and two-way time, to place the drill bitprecisely in the surface seismicsection; we can update the ve-locity model in real-time, toallow re-migration duringdrilling; and VSP reflectivitycan be inverted to acoustic im-pedance, to predict overpres-sures ahead of the drill bit.These real-time applicationsare big money-savers, and aremoving borehole seismic in-terest and information awayfrom the desk of the geophysi-cist to the desks of reservoir en-gineers, geologists and drillers– those concerned with the

bigger picture of field development. As companieslook to exploit fields that are more complex, morefragmented and difficult to drain, tools such as VSPwill be increasingly necessary for economicallyviable hydrocarbon recovery. �

A seismic shift in thinkingRecent advances in data acquisition and processing techniques make

Vertical Seismic Profiling (VSP) a crucial tool in maximising a reservoir’spotential. O&G hears more from expert Saleh Barakat

“As companies look to exploit fields that are morecomplex and difficult to drain, tools such as VSP

will be necessary for economically viable recovery”

As VSFusion Middle East RegionManager at Baker Hughes, SalehBarakat’s major expertiseincludes surface and boreholeseismic data interpretation, 3D& 2D VSP data. He has over 21years of working experience ingeophysics, including eightyears at AFPC Shell International& SPC Joint Venture. Barakatjoined Baker Hughes in 1997 as asenior geophysicist.

BakerAtlas ED:16 july 6/8/09 09:06 Page 47

With oil prices tumbling from last year’s dizzy heights of US$147 a barrel, there is a worry that oil companies will be investing less in future exploration efforts. How

does Saudi Aramco view the situation at the moment and is there a danger that money will be taken out of the budget on critical areas such as exploration?

Ibraheem Assadaan. Saudi Aramco’s views are anchored on a long-term vision in dealing with the short-term fl uctuations, or perceived short-term fl uctuations,

in oil prices while remaining focused on long-term objectives.Th ere is always a price for any action to be taken and we have learned this

from experience because Saudi Aramco is similar to any other company in the world with regards to this. During the downturn in the 1980s, for ex-

ample, the fi rst victims of cost management were two major programmes – exploration and R&D. But time has proved that cutting down explo-

ration and R&D programmes while containing or helping to contain the short-term cost management issues, has a higher long-term price because

these two programmes require quite a long time to turn around and to be eff ective and yield results. In short, going radical when it comes to R&D and exploration is not the right approach all the time,

however we realise there is a need to deal with short-term fl uctuations in oil prices.

There is perhaps a school of thought that many Middle Eastern companies are focus-ing on enhancing their existing wells as opposed to exploration. Do you think that is a

short-term view?IA. Th is is a solution but it’s not maybe the optimum solution. Long-term considerations

have to be built in and the strategy and the planning process and optimising existing assets is an ongoing regardless. Th at has to be done whether the oil prices are high or

AT THE SHARP END

Saudi Aramco boasts the largest reserves in the world but how is the company maximising the potential from its gargantuan supplies? O&G speaks to the oil giant’s VP of Exploration Ibraheem

Assadaan about the effects of volatile oil prices on exploration, the constant

strive for technological development and winning the war on talent.


EXPLORATION

Assadan.indd 48Assadan.indd 48 5/8/09 15:01:035/8/09 15:01:03

low; it’s just immaterial. It’s a matter of stewardship and effi ciency, so in terms of exploration and growing the hydrocarbon resources, this is a totally diff erent exercise and it’s for a totally diff erent purpose. We are looking at growing the hydrocarbon resources in terms of oil and price from 755 billion barrels that we have today into 900 billion, and this is primarily going to be coming through exploration. Optimisation of existing assets and improved management of existing wells, infrastructures and facilities and de-bottlenecking, is ongoing at all times, whether you’re at peak or low prices, it’s just part of the business.

How are you harnessing the power of tech-nology to increase current operations and also to search for new oil?IA. Saudi Aramco is moving fast in the direction of being a leader in technology. We look around for solutions and if they are available, we’ll adapt them and if not, we’ll create them, and that applies in every single aspect of our business – whether it’s upstream or downstream. Lately, we have taken a 20 to 30-year strategy that looks at what is needed on both the upstream and downstream sides, as well as what targets are needed to deal with technological challenges, whether it is seismic imaging or reservoir characterisation. So we have put in place a major organisation dealing with R&D and we have mapped out our requirements for the coming 20 to 30 years and we have already initi-ated actions leading to implementation and realisation of positive results in diff erent aspects of the business.

We mean results when it comes our R&D business and we take steps to make sure that we deliver what is needed. It is prudent to really invest in upstream R&D, as well as downstream, to fi nd solutions to our chal-lenges and improve the effi ciency and the quality and the reliability of the operations. For instance, reservoir simulation is a very powerful tool to understand and characterise a reservoir to make sound development plans based on scenarios of production levels and what’s required for the longevity and recovery. Th is product wasn’t available in the industry off the shelf so we have to program it in house. Recently, we celebrated the completion of the Giga-Cell model where we can build simulators for our giant fi elds that can handle high-defi nition geological models and high-defi nition reservoir simulations with all the data components required, including history matching and future predictions. Th e Giga-Cell simu-lation handles a billion-cell model with all the complexities that comes with it in a record time for the biggest oil fi eld in the world.

Do you think that you will get to the stage where IT – the company’s backbone – will become a competitive differentiator?IA. It already is in Saudi Aramco’s case. With the seismic processing and reservoir simulation we are moving PC clusters and massively parallel computing. We have all the solutions already in place and we can deploy whatever number of CPU’s required to handle the most demanding computations that require horsepower. We have a fully dedicated centre

for upstream, which is one of the largest of its kind in the world and is running our seismic processing environment with all the technical so-

phistication required for prestack depth migration, prestack time migration, as well as sub-salt imag-ing and analysis of the seismic volumes in order to really milk the data.

Th is is a direction that we established way back in the 1980s, but as the technology evolves, we capitalise on new breakthroughs and better ways of doing the business to ultimately get the most demanding jobs, in terms of computer horsepower, completed.

Will you ever get to the stage where in fact you almost have too much data? Will it remove perhaps the human quality of what we would call a gut feeling?IA. Never. Data is data and interpretation is the human capital. Th is is really what makes the diff er-ence because you can have all the data in the world but if you don’t have the right people, the data is useless and the investment is wasted. Saudi Aramco

strikes a balance between automation and human capital development. Automation has its own advantages in terms of reducing cycle time and probably reducing running requirements, but nothing will replace human judgment and this is why we are putting tremendous emphasis on human resource development. Our engineers and geoscientists are receiving tremendous levels of training because we believe that human capital and human resources is the most valuable asset any company in any business may have.

So we are capitalising the technology to the level where we arrive to solutions and push the envelope as far as we can in terms of what is needed to tackle the future challenges that the industry is facing, but we have a parallel eff ort with focus on HR development to make sure that the workforce is world class and one of the best in the world.

Saudi Aramco, plans to open the Upstream Professional Development Center in 2010. How will this facility aid your group in its exploration efforts?IA. It’s an idea for creating a fully devoted facility for the development of our profes-sionals and this is driven, again, by the busi-ness needs, however there are a number of other factors that came into consideration when we thought of this Upstream Professional De-velopment Center. For one, the whole industry is suff ering from bimodal distribution when it comes to demographics, so you’ll fi nd a peak of new gradu-ates aged 30 and below and another


Ibraheem Assadaan

Assadan.indd 49Assadan.indd 49 5/8/09 15:01:125/8/09 15:01:12

Lunasat AD.indd 1Lunasat AD.indd 1 28/7/09 16:20:1428/7/09 16:20:14


and moved through the systematic process, of coaching and mentoring to the point where they are fully recognised professionals – some of them recognised on a world scale. But we look at it on a situation-by-situation basis and whenever that specialty is needed, we consider prolonging their stay by mutual interest.

Do you feel that an oil and gas company can ever be a true partner in a carbon-sensitive environment?IA. We have already embarked on a major undertaking leading to carbon management and carbon CO2 sequestration eff orts. We believe we have a role to play and we certainly want to abide to best practices when it comes to environmental stewardship and being recognised as a company that has world-class standards in environmental protection wherever we operate. We are not without a long-term strategy dealing with carbon sequestration from fi xed sources as factories and plants and from mobile sources, and we believe that the entire industry is moving into that direc-tion, which is part of the social responsibilities that we certainly have to deliver on. So we have mapped out a long-term strategy dealing with carbon sequestration from fi xed sources like factories and plants and mobile sources. We believe that the entire industry is moving in this di-rection but it’s all part of our social responsibilities so we certainly have to deliver.

How does a national oil company like Saudi Aramco expand its role globally? IA. We are well established in terms of being a global player in the downstream area and have been an international company for 20 years.

In fact, that initiative has started in the 1980s where we have a number of joint ventures in North America and Southeast Asia and in East Asia. We are a major player in the Kingdom and the world where we satisfy nearly 10 percent of the world demand today. So it is prudent to stay focused on where we are rather than splitting out the resources but we don’t have any long-term plan to expand globally in terms of upstream. We’re happy where we are at this time, however we’re open and we’re looking around and everything is going to be evaluated on its own merit. We certainly want to stay focused on what we do best and build on it, and this is the thrust of our focus these days.

peak towards the end of the spectrum who are over 50, and there is very little in between. But Saudi Aramco is not alone with this – it’s the same with every other company.

And in fact, if you look at the statistical analysis or statistical sample of the major oil and gas societies and associations you see the same pat-tern more or less, where there is a gap in between the newcomers and the professionals who are due to retire in 10 years. Th ose approaching retirement have a wealth of knowledge and experience that needs to be transferred to the next generation to carry on. So the Upstream Profes-sional Development Center is partly designed to move the experience from the aging workforce to the newcomers.

We realise that and Saudi Aramco is in a very unique position be-cause we maintain programmes that give us a competitive advantage in terms of getting world-class, quality education where we sponsor over 1000 students in diff erent universities in the world and they go through a very rigorous selection process once they complete high school. We take the best of the best of high school graduates and we run them into a programme for a year, which covers science and engineering, as well as English. However, the Upstream Professional Development Center is a mechanism of really accelerating their move from academic education into real life and it is designed to shorten the time it takes from a new graduate completing college into a full-blown professional career in en-gineering, geology or geophysics.

In the past, professionals used to work in silos. Now everything is moving into fully integrated, multi-discipline teams where it’s not good enough to be a good geoscientist – if you are a geologist you have to know a little bit about what is going on in the geophysical side and what’s going on in the reservoir engineering side, or the facilities side. So the Upstream Professional Development Center provides the em-powerment where the new graduates are raised into a multi-discipline environment until they are well aware of their roles and how they fi t into the bigger picture and how can they optimise their contribution.

How do you manage to hold on to the staff at the other end?IA. We look at individual cases but if they are in their 50s, or even 60s, we hold on as long as they’re interested in continuing and that’s very good for us. It buys us quite a bit of time to complete the transfer of knowledge through mentoring. I just mentioned the Upstream Professional Develop-ment Center but we also have very well established programmes in diff erent organisations at Saudi Aramco. We have the Specialist Development Pro-gramme where we pick certain individuals who are interested in becoming specialists in certain areas of the business, whether it’s geophysical imaging or petrophysical analysis or reservoir simulation, and through mentorship and a programme that includes a Masters degree and Ph.D, we can bring that individual to the level where he can take over in a critical specialty. We have already graduated a number in the Specialist Development Programme

“We mean results when it comes our R&D business and we take steps to make

sure that we deliver what is needed. It is prudent to really invest in upstream

R&D, as well as downstream”

Assadan.indd Sec1:51Assadan.indd Sec1:51 5/8/09 15:01:135/8/09 15:01:13

Fugro Jason AD.indd 1Fugro Jason AD.indd 1 28/7/09 16:15:3128/7/09 16:15:31


What defines a successful seismic to simulation workflow?EA. Companies invest in seismic-to-simulation analysis for the invaluable in-sight it can provide into the best production plan for the reservoir. To ensurethat the investment is well made, the workflow must meet some very strin-gent criteria. It must include and honour, all well, seismic and geological data.This is the foundation of all that follows, so it must be comprehensive and re-liable. It must also match production data, without resorting to artificial bar-riers or porosity modifiers. The workflow must accommodate iterations suchthat the model can evolve to include new information without losing its in-tegrity. It must allow creation, evaluation and ranking of production scenar-ios to aid in building the production plan. From my experience, the onlyreliable way to achieve these goals is to use a quantitative, iterative approach.

How is this approach different?EA. Quantitative integration is founded on three core principles. First, all data– including well, seismic, and production data – are included in a single, com-prehensive workflow. Second, because of the uncertainty involved in all reser-voir modelling, the workflow must be iterative and updateable, incorporatingnew information into the model as it is avail-able. Third, the model should include highlydetailed properties derived from the seismic.The more information included in the model,the more likely the model will match new dataadded to it. Any workflow based on these prin-ciples must be multi-discipline and include allthe software tools to handle petrophysics, rockphysics, inversion, geostatistics, uncertaintyestimation, upscaling, simulation and produc-tion scenario development. Most workflowstoday fall far short of that standard.

Where are the typical points of failure inreservoir modelling?EA. There are four common areas where prob-lems arise in reservoir modelling. First is indefining the range of highly detailed, plausible3D models from seismic. The results must looklike geological layers or it won’t behave prop-

erly in the simulator. Second, typical workflows do not sufficiently establishthe relationship between petrophysical reservoir properties – lithology, poros-ity, permeability, and water saturation – and elastic properties – p-velocity, s-velocity and density. This relationship is essential in obtaining accuratepetrophysical models from seismic data, through geostatistical inversion. Athird problem area is accurately transferring these 3D rock property modelsfrom seismic to corner point grids, without which problems such as disconti-nuity in fluid flow can be introduced. The final problem area comes in uncer-

tainty estimation and production scenario ranking. If modifiers orartificial barriers are added to the model to force it to match produc-tion history, its usefulness is compromised.

What extra value does a quantitative seismic-to-simulationworkflow provide?EA. By rigorously using all the available seismic, well, geological andproduction data to build the model and maintaining the connectionto that data throughout the process, the model will be accurate, ro-bust, and updateable. It can then be used with high confidence topredict future production volumes, ultimate recovery, and to eval-uate the impact of various reservoir management options.

In one North Sea operation, such a workflow yielded a finalmodel that honoured all available geophysical, geological, and en-gineering data with a 95 percent match to historical data in pro-ducing wells. In an Arabian Gulf field, a model was built includingand honouring logs from 42 wells, as much as 30 years of pro-duction history from 92 wells, and a recent seismic survey. Themodel that resulted is still in use three years later, and current fieldproduction still matches that model prediction. n

Super seismicEric Adams discusses keys to success in seismic-to-simulation workflows.

EXECUTIVEINTERVIEW

Eric Adams is Managing Director ofFugro-Jason, a leading provider ofreservoir characterisation productsand services. He joined the companyin 1996 as Region Manager, North andSouth America. Adams has 30 years’experience in the industry, includingprevious positions at Schlumbergerand Veritas.

“By rigorously using all the available seismic,well, geological and production data to buildthe model and maintaining the connection tothat data throughout the process, the modelwill be accurate, robust, and updateable”

FUGURO JASON EXEC:16 july 05/08/2009 14:58 Page 53

When it comes to PICO International Petroleum (PIP)size matters, according to the firm’s Head of Explo-ration Hamed Ibrahim, who says the company’semergence as Egypt’s leading private oil company isproof that success can come in small packages.

Despite only having been set up in 1989, today PIP has grown to becomethe third largest producer in Egypt’s Gulf of Suez region.

Over the past decade it has focused on the development of mature oil andgas fields and between 2003 and 2008 its net production increased by 100 per-cent. During that time it has also maintained an average ReserveReplacement Ratio of 152 percent. The speed of its development has inlarge part been due to its independence and relatively small sizewhich allows it greater agility in its decision makingprocesses, according to Ibrahim.

“It gives us the advantage of beingable to move faster and easier than the majorcompanies. Definitely the decision-making ismuch easier. The process of this is muchfaster. You can tackle small and mediumsize opportunities. You don’t have a min-imum size of work. So we are lookingfor whatever opportunities come upand if they suit our business casethey will be one of our targets.”

Taking on the giantsPICO’s acquisition strategy has seen it take over mature wells from the likes

of Shell, Total and British Gas. Its aim is to take over wells that have become tooexpensive for the companies to continue to work on, then explore deeper to max-imise their potential, as Ibrahim explains. “PICO acquires mature fields frommajor companies such as Shell or ConocoPhilips. The operating criteria of thosefields with majors becomes a little bit expensive for them. For us it’s not. We tack-

le these fields differently from what they are doing.” An example of asuccessful acquisition was that of the Gemsa field in Egypt, which

was producing 6500 barrels of oil a day when PICO took it over.Within six months it had increased capacity to 13,500 barrels a

day. “Doubling oil production in a field like this is a great success.It’s all about looking for a new horizon in the same field that nobody

else has yet discovered,” says Ibrahim.Describing another successful acquisition, he says: “Two years ago

we acquired a field from Total and Samali Aramco and at the time it wasonly producing gas. We dug deeper and discovered it was possible to

also produce oil from the field. Now it is producing 10,000 bar-rels a day and the plan now is to increase that production

by almost three times.” It achieved this, he says, byincreasing the “drillability” of the well. PICO

now plans to drill three additional wellswithin the same field. The most

challenging area it is work-


Behind the scenes at Egypt’s largest independent oil company.

COMPANYFOCUS

Hamed Ibrahim:16 july 5/8/09 15:34 Page 54

HIGH QUALITY STANDARD WINCHES.

Traditionally, we supply various markets with the well known Bryne winch in stand-ard sizes from 2t to 12t. Based on cast iron rigid frames and a choice of high quality materials, the products have gained an ex-cellent reputation throughout the industry for outstanding reliability, performance and long life. Daily use under maritime conditions for more than 10 - 15 years is not unusual.

ELECTRICAL AND HYDRAULIC TAILORED SPECIAL UMBILICAL WINCHES.

Following strategic decisions related to expansion and product development over the years we have broadened our ability to serve additional off shore and marine mar-kets. We combine traditional, high quality products and knowledge with the latest technology in handling critical operations in harsh off shore conditions.During the last three years we have delivered several electrical and hydrau-lic tailored special umbilical winches for seismic and other off -shore activities. Together with our subsidiary, Ace Technol-ogy, we have provided complete packages including radio or frequency remote control systems.

LIFTING PRODUCTS SUPPLIED GLOBALLY.

Our customer references show prima-rily shipyards and international oil and off shore related companies. Based on their satisfying experience, most customers have repeatedly made new orders. Besides our home markets in Scandinavia and Europe, our products are operating in China, the Middle East, Australia and the Americas.

BMS Davinci ASYour partner of choice for tailor-made hydraulic and electrical driven CTUW (constant tension umbilical winches) and AHCUW (active heave compensated umbilical winches). As member of the BMS group of companies, we are located in the city of Bryne, approximately 35km south of Stavanger in Norway. Our vision is to expand in the competitive off shore and marine market by off ering the best custom designed winches and lifting products on the market

Contact : Einar J Ronæs General managerTel : +47 51 772 070E-mail: [email protected]: www.bmsdavinci.com

BMS.indd 1BMS.indd 1 28/7/09 16:07:2728/7/09 16:07:27


ing in, says Ibrahim, is the Gulf of Suez, which, because of the fact that it hasbeen in production since the 1960s, is becoming increasingly difficult to ex-tract from – defying even PICO Petroleum’s perseverance: “Maintaining pro-ductivity is a huge challenge for everybody working in the Gulf of Suez. Sincethe 1960s it has produced something like five million barrels of oil and thereis around 1.5 billion barrels of oil left there. Everybody is struggling to get itout of the ground,” says Ibrahim.

The cutting edgePICO Petroleum’s success in maximising the capacity of mature oil

fields, means developing Enhanced Oil Recovery (EOR) and IntelligentOil Recovery (IOR) techniques is an important part of its strategy.Describing some of the methods it uses to bring to life wells that were previ-ously thought to be redundant, Ibrahim says: “We try to maintain or stop thehigh decline rate by maintaining the pressure, by artificial lifting of the crudeitself and by increasing the recovery factor. If you manage to achieve a goodresult in those three aspects you will definitely have the chance to increaseyour production.”

The most effective EOR techniques currently are, according toIbrahim, artificial lifting, horizontal drilling and chemical or steaminjections. In the future he believes companies will makemore use of chemical injections: “From the point of viewof increasing the porosity of the bore salt this technolo-gy will allow the oil to move easier and smootherthrough the reservoir itself and if you can help partsof the oil to move smoothly that will increase the re-covery factor in the oil field.”

Ibrahim says he believes that companies are under greater pressure thanever before to develop and take advantage of IOR and EOR as they can nolonger afford to take a short-term view of the future of oil production or to ac-cept the recovery factors of wells at their current levels.: “If you look at the av-erage recovery factor you will find, all over the world, that the maximum is 40percent. But what about the remaining 60 percent? If you even manage to in-crease your recovery factor by five percent then you are adding a lot, even tothe international reserves.”

Forward thinkingPICO Petroleum’s ultimate aim is to increase its exploration activi-

ties in Egypt however, Ibrahim acknowledges that the current economicclimate could make building up the funds needed to invest in new fields achallenge.

Because of this he says the company prefers take a gradual, not aggres-sive approach, to achieving its expansion strategy: “PICO is a small, inde-pendent company. We have managed to achieve a good rate of success inthe last 10 to 15 years. Our target is to increase it but the ups and downs in

the market recently make you very cautious in choosing your nextstep and very alert about what’s going on in the whole

global system. Right now nobody is isolated from theinfluence of what is going on in the world so we

have to be cautious about taking a decision andmaking the next step. We believe that movingslowly is much better than rapidly jumping tosome conclusion because you don’t knowwhat conclusion this will result in later.”

Despite taking a more low key approachtowards its expansion strategy, PICO Petroleum

has some lofty ambitions, including the expan-sion of its operations across the Middle East.

Ibrahim says the company plans to target Syria andYemen and outside the region in Indonesia. “Our near fu-

ture plan is to expand outside of Egypt. Last year we visitedIndonesia to find a target outside our current location.”

Clearly this is a company that believes in thinking creativelyabout how best to maximise its resources as Ibrahim confirms: “Oil,to me, is always the industry of the new ideas. You have to be innov-ative. You have to be inventing a new way or a new idea to achieve abetter result in the future.”�

THE BIG QUESTIONHamed Ibrahim on oil prices“The oil price right now, because of this economiccrisis has been down to less than US$40 a barrel.Right now because of the demand and the amountof discovery adding to the actual reserve in theworld, definitely the days of the cheap oil is alreadypast. I believe the oil price will never be less thanUS$30 by any means in the future.”

“Oil, to me, is always the industry of the new ideas. You have to be

inventing a new way or a new ideato achieve a better result

in the future”

Hamed Ibrahim:16 july 6/8/09 09:08 Page 56

Polorcus AD.indd 1Polorcus AD.indd 1 28/7/09 16:25:2728/7/09 16:25:27

In the past, the oil and gas industry has been notoriously slowin accepting and embracing new technology to find and ex-tract reserves, and has instead relied upon ‘tried and tested’methods that have been in use for more than 30 years. The tra-

ditionally accepted adoption cycle of new technology into industrywide use has often been regarded as a 15-year process. There arehowever significant strides being taken in the MENA region, led bySaudi Aramco and Algeria’s Sonatrach for the relatively rapid test-ing and deployment of new technologies to enhance discovery andrecovery of reserves. This development has been accelerated through:

• The need to control costs by becoming more efficient in the dis-covery and recovery processes

• The need to improve the recovery rates of existing and new fieldsas reserves usage continues to outstrip new discoveries and worldreserves fall

• The need to focus technology to the specific geophysical charac-teristics of the MENA region, when historically development ofnew technologies by innovative companies has been tailored tothe North American and North Sea markets

The Shoaibi Group, in recognising these developments, hasover the last five years become a developer of, partner to and investor in manyinnovative oil and gas technology companies with the objective of address-ing the needs of the region’s reservoirs. This strategy has been further ex-tended by the creation of Shoaibi Group’s own ‘Incubator’. Theincubator project is a R&D hub, located in Dhahran Techno

Valley (‘DTV’), Al-Khobar, to assist in bringing new technologiesto Saudi Aramco and the wider region through sponsorship andinvolvement of local and international universities such as KingFahd University of Petroleum & Minerals (KFUPM) in Dhahran,and other R&D centres. The purpose of this project is to incubateideas either in-house or take existing technology and modify it to-wards an oilfield application. By understanding the current andfuture technology needs of Saudi Aramco, the ‘incubator’ servesto take these challenges to universities and other R&D centres tovalidate whether these challenges can be met. There is no betterway to gain this understanding than by working alongside Saudi

Aramco. If the technology fits and/or exists, either as a concept or prototype,then the incubator team will secure funding to take the technology to the‘Technical and Commercial Feasibility’ stage.

The Shoaibi Group has experience of workingwith and investing alongside many of the world’sleading venture capital companies that have a focuson the oil and gas sector, including LimerockPartners, Energy Ventures and Scottish EquityPartners amongst others, in addition to leading in-vestments in its own right. The partnering by ShoaibiGroup in such investments brings an added under-standing of the specific needs of the MENA region,and a direction of funding to address these needs.

Finally, once the technology/prototype hasbeen developed and thoroughly tested it will bepassed on to a company with sufficient fundingfrom local and international investors with the ob-jective to commercialise the product, delivering newvalue to NOC’s and international oil companies(IOCs) in the region and globally. The ShoaibiGroup, in working with Saudi Aramco and its vari-ous partners very much aims to be a part of devel-oping the next big thing. n

Making the leap


Now is the time for the oil and gas giants to put their faith in new technologiessays Walid S. Al Shoaibi.

NEXT BIGTHING

Walid S. Al Shoaibi is ShoaibiGroup Managing Director andFirst Vice President of the SaudiItalian Business Council, as wellas a member of the IndustrialCommittee Eastern ProvinceChamber of Commerce &Industry. Al Shoaibi received a BSin Civil Engineering from RiceUniversity, Houston, in 1984 andan MBA from the University ofHouston in 1987.

“The Shoaibi Group has experience ofworking with and investing alongside many ofthe world’s leading venture capital companies

that have a focus on the oil and gas sector”

SHOAIBI:CO PROOF 05/08/2009 15:01 Page 58

frost sulivan AD.indd 1frost sulivan AD.indd 1 28/7/09 16:15:0128/7/09 16:15:01


With oil and gas companies working in in-creasingly diffi cult environments, what are the main challenges they face with their subsea equipment and production systems? Jan Strom. With the ever-changing climate there are many new challenges to cope with, such as increased wind and currents off shore. Flexible risers, umbilicals and mooring equipment will see increased motion related stress, fl oating pro-duction and storage units will have changed pat-terns of movement. And this will increase stress and cause a higher risk of fatigue on production lines. We have seen several fi elds where risers and anchor chains start to interfere with each other. Many low cost subsea developments with only

topside control systems (riser and umbilical to each well) will face these new challenges, calling for fewer risers and the need to introduce subsea control systems to reduce this risk.

How does technology help your work in providing subsea services for your clients? JS. Subsea Norway has a high focus on Life Cycle Manage-ment and a key item is to have a good PLM system to have full traceability of all deliver-ables, changes, modifi cations throughout a subsea fi eld’s lifetime. Th e recent years behind us with extreme high activity have been

a challenge to quality of products delivered. We have all experienced quality issues

with all kinds of components, from steel structures, bolts, valves

and so on. However, this kind of risk can be reduced by

having a good track of the equipment. Th ere is

a major diff erence in changing 10 bolts on a live production line instead of changing several thousand if you have lost track of where the diff er-ent material has been

installed.

Can you give a recent example of how you

aided a client with their subsea work ?

JS. One of our recent clients is operating a ‘brown’ oilfi eld which

produces light crude oil and some gas. Th e fi eld is at the present time developed

by ‘hard wiring’ each Xmas trees directly to a

EXECUTIVEINTERVIEW

production unit and offl oading and shipping with a separate FSO. Th e owners are looking for a cost eff ective solution to expand the fi eld and need a new subsea infra structure for this expansion, which is planned to be hooked up to a FPSO. Th is is done to decrease production

down-time due to

weath-er and

fatigue problems with production fl owlines. By off ering one of our fast track solutions we combine the re-use of existing equipment and add some new, such as choke bridge modules and subsea distribution of hydraulics and power/signal. Th is gives a robust, easily main-tainable and cost eff ective solution to extend an oilfi eld’s lifetime and extend production capabilities. And that is one of Subsea Nor-way’s core technologies – refurbishment of subsea equipment and adding value for our clients.

What plans do you have for your busi-ness in the coming years and how will the Middle East fi t into these plans?JS. With reduced activity in the North Sea area our focus is more worldwide and we are plan-ning to establish ourselves as a key supplier of subsea engineering in the Middle East and Southeast Asia. We are especially focusing on the extension of existing ‘brown’ fi elds by in-troducing low cost and robust add-on solutions to increase hydrocarbon recovery. Key is the re-use of previously installed equipment and re-furbishment of equipment done subsea in order to increase the lifetime of equipment. Lower CAPEX – higher return on investment.

Going subsea Offshore exploration is an especially diffi cult and challenging aspect of the pursuit of hydrocarbons.

O&G quizzes Jan Strom of Subsea Norway AS on the key trends his company is witnessing

Jan Strom, who has an engineering degree in Marine Engineering and Electronics, is the Managing Director of Subsea Norway AS. Strom has been working with subsea engineering offshore and onshore for more than 20 years and was the co-founder of the Norwegian AMEK group.

MArineBio_EXINT.indd 60MArineBio_EXINT.indd 60 6/8/09 08:52:596/8/09 08:52:59

Marinebio AD.indd 1Marinebio AD.indd 1 28/7/09 16:21:3628/7/09 16:21:36

A M O D E L S O L U T I O N

SEISMICMODELLING

Noel Lucas, Senior Modeller at Dragon Oil, tells O&G aboutthe latest trends revolutionising the industry.

Noel Lucas ED:16 july 5/8/09 15:13 Page 62

How did you come to be a Senior Modeller at Dragon Oil?Noel Lucas. I’ve been with Dragon Oil for the past year. For two years Iworked for Halliburton in Abu Dhabi and now I’m working on the same pro-jects but as part of the asset team at Dragon Oil that carriesout outsourced projects. We are representing Halliburtonand are involved in generally assessing their resources andhelping them with enhancing oil recovery.

What are the latest trends in terms of 3D modellingtechnology?NL. Because the technology that we had five years ago is ba-sically still the same, nothing has changed that drastically.The only thing we are trying to improve right now is to gethold of all the aspects of a static model. So aside from pip-ing, we also consider the pressure regime and the produc-tion weight on each of the floor units. This way, theuncertainties which affect the volumetrics and the perfor-mance of each of the flow units later on are being captured.

What technology are you using in order to achieve this?NL. Right now we only have around two packages that we’reusing in the industry for treating modelling – Petrel andRoxar. Petrel is owned by Schlumberger and was originallydeveloped by a Norwegian company called Technoguide. Itwas developed specifically for PCs and is Windows-based.Roxar is Linux or Unix based. If you use a Windows based-software you arelimited to a very small area and also the number of cells you can have in thestatic model is limited. You can only operate up to 10 million cells. The per-formance is much better with Linux-based software because you can operatemore than 10 million cells and so you can make your models last for years.

If the technology has been the same for the past five years, what is thenext step?NL. The trend right now is to input seismic attributes to your models. That’sthe dream of all the modellers around the world. At the moment you have anidea of the trend of your reservoir laterally because most of the studies usinga static model are based on the wells. But if you can incorporate and use seis-mic attributes then you can have a better view. The dream of every modelleris to try to relate each flow unit from the wells outside with the conditioningeffects from the seismic attributes. That will improve production and also thevolumetrics of the area. That is the future for 3D modelling.

How close is the industry to being able to achieve that?NL. There are several companies right now who are developing everything inWindows specifically. This can be done more effectively and in a very shorttime. Then turnaround time is fast. But the really fun part is when you are try-ing to do a dynamic model from a static model. I have just attended a work-shop in Abu Dhabi, that showed how we can stimulate up to more than amillion cells now. Before that were were limited to only half a million. Intel isthe company that is spearheading this new technology. It means there is nowa seamless approach to doing the simulation that means a static model can bemade using a million cells instead of being limited to very thick layers ormaybe small cell sizes.

Oil companies are having to dig ever deeper to find new energy sources.How does 3D modelling enable them to achieve their aims?NL. Today’s technology increases companies’ confidence when it comes to in-

vesting in deeper prospects. It’s much easier to makethese decisions. The workflow is simpler and uncertainplaces are being studied all the time. This cuts down therisk of exploring in those areas. A lot of companies don’twant to invest in a high-risk area simply because theydon’t know what’s there. There is also the risk of prob-lems like stuck pipes or there not being any oil at the site.With the latest technology, such as modelling using mag-netic resonance, we can explore deeper prospects whereoil is deeply embedded.

Has the economic downturn affected investment inreservoir modelling technology?NL. Right now I think it’s the golden age for this industry.The only challenge is investment. People are still scared ofinvesting in this industry because it’s so high risk. And thecost of wells right now is horrendous. Shallow waterdrilling costs around US$20 million or more for a project.That includes the testing of the wells. Because there arenot many prospects in the shallow drilling range howev-er, most companies are venturing into deep waters, whichpeople don’t go to much. This brings up the price to

around US$60 million. But right now companies are venturing into theareas that are high risk in deeper water because we are running out of re-sources. The good ones have been taken.

In terms of manpower, are there enough skilled modelling geologistsworking in the energy industry?NL. There are lots of people today who are going down this career path. Andhopefully there are lots of universities that are encouraging people to gointo this technology. But it boils down to the price of oil right now.Recently, oil and gas has been all over the news and its controlling the econ-omy right now so maybe this will encourage this generation of students togo into it as a career. �


Noel Lucas

About Dragon OilDragon Oil plc is an independent oil development andproduction company, registered in Ireland and listedunder a dual primary listing on the London and IrishStock Exchanges. Approximately 52 percent of theCompany’s equity is held by the Emirates National OilCompany (ENOC). It is headquartered in Dubai and itsprincipal development and production activity is thedevelopment of its asset in the Cheleken Contract Area,offshore Turkmenistan by a Group subsidiary, Dragon Oil(Turkmenistan) Limited.

“Right now I think it’s the

golden age for thisindustry. The

only challenge isinvestment”

Noel Lucas ED:16 july 5/8/09 15:13 Page 63


With business rules, conditions and contin-gencies modelling, the user can capture the full range of economic returns for single target opportunities while also handling more complex concessions and clusters that involve multiple targets and staged decisions. A global fi scal library completes the tool set. Th e result is a fi t-for-purpose platform for rapid and consistent assessment of interna-tional exploration opportunities.

Optimising the exploration portfolioTh e successful player in the upstream

E&P business needs to manage and develop a portfolio of exploration opportunities. Th e portfolio enables the company to exploit economies of scale and scope, spread risks and grow the business. Managing the portfolio of exploration opportunities requires choosing a composition of projects that maximises eco-nomic returns. Th e composition should also adhere to strategic objectives concerning key performance indicators such as production levels and reserve replacement.

Given the inherent uncertainties and risks of exploration ventures, the analysis of alternative portfolios cannot assure that tar-gets will be met. Instead, the analysis needs to give estimates of, for example, the prob-ability of achieving the desired production level. Th e foundation is assessments of the individual opportunities that refl ect the full range of possible outcomes.

Portfolio composition evaluation is primarily assessment of the joint outcomes of the projects. In a system such as GeoX where project evaluations are databased, as-sessment of portfolio composition reduces to project selection. Th e relevant portfolio assessment tool then calculates the results of drilling out the set of exploration projects in the portfolio.

eff ective platform for a scenario-based as-sessment workfl ow. Best practice uses a report from the probabilistic aggregation of alternative scenarios as the central assess-ment review document. Th e result is eff ective consideration of relevant scenarios.

Assessing the full range economic value outcomes

Accurate and unbiased ‘prospectivity’ assessment is critical. But it is not a suffi cient basis for making informed decisions on ex-ploration opportunities. Projects need to be characterised and understood in terms of their economic potential. A barrel of oil is not a barrel of oil: exploration, development and production costs vary signifi cantly as do fi scal terms; there are potentially signifi cant economies of scale. Eff ective decisions need therefore to consider not only subsurface

risks and uncertainties, but also the complemen-tary and interdependent ‘above the ground’ risks and uncertainties such as exploration and develop-ment costs, well produc-tivity and hydrocarbon prices. Th e assessment also needs to capture the consequences of delays and capacity constraints. Consistent analysis should be based on integrated business modelling tools that include rules for how opportunities can and will be both explored and exploited.

In a system such as GeoX, there is full integra-tion from rocks to dollars.

The fi rst challenge is delivering a ’correct’ probabilistic representa-tion of risks and volume for all possible outcomes of a prospect

drilling campaign. ‘Prospectivity’ assessment is the foundation for exploration decisions. One of the paradoxes of modern exploration is the challenge of the ‘overconfi dence trap’. High quality seismic and 3D geological map-ping systems provide detailed representa-tions of the subsurface. Th e apparent realism of interpreted maps and sections oft en leads assessors into believing that they have the ‘right’ picture of the prospect. Subsequent drilling has repeatedly shown that nature can surprise. Uncertain and incomplete data and interpretations can oft en overlook diff er-ent stories–diff erent fl uid systems, diff erent dry zones, diff erent facies or diff erent and incomplete contacts and spill points.

Th e best in the indus-try have found that the antidote to overconfi dence in one story is to use tools and a workfl ow that both supports and promotes active consideration of al-ternative scenarios. Th ere is still room for develop-ing the details of the most likely scenario, but this is balanced with at least one alternative. Together, the alternative scenarios provide a more robust and realistic evaluation of exploration opportunities. Scenario analysis is built into a databased prospect assessment system such as GeoX from GeoKnowledge. Th e database provides an

A model for successBringing risk, uncertainty and scenarios into value and portfolio assessment is critical for building the E&P business. Per Audun Hole discusses the three key challenges for exploration risk and resource and economic value assessment.

ASK THEEXPERT

Per Audun Hole, CEO GeoKnowledge, has been with the company since 2004. Hole, who began his career as an exploration geologist at Statoil in 1986, has a broad experience in oil and gas exploration, production geology and integrated fi eld development projects. He has an MSc in geology from the University of Bergen.

GEOKNOWLEDGE ED P64.indd Sec1:64GEOKNOWLEDGE ED P64.indd Sec1:64 5/8/09 15:23:575/8/09 15:23:57

GeoKnowledge ADs.indd 2GeoKnowledge ADs.indd 2 28/7/09 16:15:5928/7/09 16:15:59

What exactly is a microseep? Daniel Hitzman. Very small and very buoyant molecules of light hydrocar-bon gases – methane, ethane, propane, butane and C5+ – escape from oil andgas reservoirs and penetrate their permeable reservoir seals. These gases trav-el vertically through micro fractures to the surface atmosphere. There aremany seismic data sets that confirm such gas chimneys. These direct indica-tor gases can be measured at the surface in both soil and offshore sedimentsamples.

How do seeps help with oil and gas exploration? DH. Observing visible oil seeps at the surface – like outcrop stains or oilslicks on water – builds huge confidence that hydrocarbons are present ina basin or block area. Historically, parts of many Middle East basins werefirst targeted because of these visible surface macroseeps. But macroseepsreveal only part of the seepage spectrum story. Hydrocarbon microseepsof light hydrocarbon gases are now being used to more accurately locateoil and gas reservoirs at depth. These microseep gases are invisible to thehuman eye, but to gas chromatographs and microbial cultures they areclearly discernible and are very potent indicators of hidden traps chargedwith hydrocarbons.

Why test for hydrocarbon microseepage? DH. Seismic data is imperative for making structural interpretations.Unfortunately, dry holes tell us that not all seismic traps contain hydrocar-bons. We still drill an unacceptable number of dry holes. We must improveour exploration accuracy and optimise our development programmes.Microseepage surveys are great for ranking seismic prospects. I believe de-tailed microseep signatures reflect original reservoir heterogeneities beforedrilling and also accurately track dynamic reservoir pressures as productionmatures. Plus, as structures are becoming increasingly scarce, we must lookfor more subtle stratigraphic traps as future reserve builders. I think mi-croseepage surveys may turn out to be the preferred exploration tool for dis-covering strat reservoirs.

What are typical microseepage survey strategies? DH. Microseep surveys are very flexible in their design and scope. This trans-lates to great efficiency and low cost. Microseep surveys commonly followseismic programmes and rank their numerous structural prospects. Thesepost-seismic surveys help focus limited drilling budgets and avoid wastefuldry holes. In MENA basins we also frequently conduct large-scale reconnais-sance surveys – sampling expansive frontier areas prior to expensive seismicshoots. In mature producing areas we utilise more detailed sampling patternsto locate by-passed reservoir compartments, offset well locations, and helpplan waterflood and in-fill drilling projects.

How does GMT measure microseepage? DH. GMT conducts hydrocarbon microseep surveys throughout the MiddleEast and North Africa – both on and offshore. We collect shallow soil and sed-iment samples and then use two hydrocarbon microseepage detection meth-ods: the Microbial Oil Survey Technique (MOST) and Sorbed Soil Gas (SSG).These microseep tools were first investigated by Phillips Petroleum Companyand then further developed by GMT. For over 25 years we have worked withsmaller independents, integrated majors, and national oil companies (NOCs).A MOST survey tests for specific microbes which consume thermogenic mi-croseep gases. These microbial signatures are very reliable and reproducible

and serve as excellent vertical seep locators. To distinguish whether the reser-voir source is oil or gas or condensate, we supplement the microbial mea-surements with Sorbed Soil Gas (SSG) analyses. These SSG tests areconducted on leftover and preserved MOST samples or from separate andsometimes deeper samples. SSG results are measured in parts per million andthe gas ratios are excellent indications of reservoir source. We find the com-bination of microbial and sorbed soil gas surveys to be an extremely cost-ef-fective exploration strategy.

What does the future hold for GMT and microseepage advancement? DH. As exploration budgets are stretched and tolerance for dry holes is re-jected, the adoption of low-cost microseep surveys will obviously increasedrilling accuracy and efficiency. Additionally, the ability to discover strati-graphic reservoirs and optimise mature fields will boost microseep accep-tance. GMT looks forward to being a leader of microseep technologies andcontinuing our service to the petroleum industry. n

A precise science


Daniel Hitzman, President of Geo-Microbial Technologies (GMT) discussesthe key issues with hydrocarbon microseep.

EXECUTIVEINTERVIEW

For more information, please visit www.gmtgeochem.com or [email protected].

GEOMICROBIAL EXEC:16 july 05/08/2009 14:59 Page 66

Geo microbial AD.indd 1Geo microbial AD.indd 1 28/7/09 16:16:3328/7/09 16:16:33

The Iraqi Oil Ministry has issued a new revised list ofoil and gas fields being tendered in the secondbidding round later this year, pulling five oilfields and one gas field from the north out ofthe offering. The fields withdrawn from the

list are the Qayarah, Gullabat, Najmah, Naudoman, andQamar oilfields and the Khashm al-Ahma gas field,which all are located in the northern hydrocarbon areaof Iraq, some of them in the disputed areas betweenthe autonomous Iraqi Kurdistan region and Iraqproper, according to a report in industry newsletterPetroleum Intelligence Weekly (PIW). Citing a sourcein the Iraqi Oil Ministry, PIW says the Iraqi explanationis that it will now concentrate on awarding contracts for therehabilitation and expansion of producing fields, awaiting theaward of ‘greenfield’ projects until a national oil law –regulating exploration and development more clear-ly – is in place. The explanation, however, ringshollow, given that no other producing fields havebeen added to the list in the (largely) undevel-oped fields’ stead. Rather, their common de-nominator (Qamar, Gullabat, and the Khashmal-Ahma gas field have been relatively exploredbut not developed, while the rest of the fields arevery underexplored discoveries) is that they are lo-cated in an increasingly volatile northern region, andsome of them even in territory disputed between the KurdistanRegional Government (KRG) and the Iraqi government.

Neither are the fields particularly large, compared with much of thesouthern offering, which includes the massive West Qurna second-phase devel-opment, the Majnoon and Halfaya fields, and the central Iraqi East Baghdadheavy oilfield. Still, the second round contains some other relatively small (byIraqi standards) oil and gas fields, although these are located in the south or inthe Missan province further inland from the prolific Basra province in the ex-

SOLD


With northern fields dropped from Iraq’s bidding round amid political and security fears, IHSGlobal Insight Middle East Energy analyst Samuel Ciszuk takes a look at the implications.

INDUSTRYANALYSIS

treme south. Given that IOCs and NOCs bidding for the northerncrown jewels, the Kirkuk and Bai Hassan fields, in the first bidding

round failed to come back with bids close to the Oil Ministry's max-imum-requirement additional barrel remuneration fee, there is lit-tle to suggest that much smaller non-producing fields, with acompletely unclear legal situation in an area that is looking in-

creasingly volatile, would attract bidding interest.

Disputed territoryWhile the north of Iraq, since the 2003 US-led invasion, has been one

of the country’s quietest spots – with the autonomous Iraqi Kurdistan re-gion often being held up as a good example of governance, business acu-men, and security to the rest of the country – there is today rising tensionin the area as the hitherto ad hoc relationship between the Iraqi governmentand the KRG needs to be properly codified. Originally consisting of thethree northernmost Iraqi provinces, the KRG in 2003 used its close alliancewith the invading US army to secure itself a significant role in the securi-ty of areas much larger, where the Kurdish population was in the majori-

to the highest bidder

A total of 5 oil fields

have been pulled from the second round of

bidding

Samuel Ciszuk Ed:16 july 5/8/09 15:15 Page 68

Chart energy AD.indd 1Chart energy AD.indd 1 28/7/09 16:11:4728/7/09 16:11:47


ty or at least a dominant population group. Since then the KRG has at-tempted to solidify its increased territory, which now extends to manyareas seen as core Kurdish territory in the broad nationalist discourse, al-though it has failed to incorporate one of Kurdish nationalism's mainprizes – the Kirkuk city and region, including its oil production hub –under its aegis.

As Iraq now attempts tomove forward from a martial-law-like situation into a moreordered political phase, the ex-tent of the KRG's autonomyand its borders will have to besettled, prompting the temper-ature to rise when Iraq's PrimeMinister Nuri al-Maliki – aproponent of greater centrali-sation and 6 Iraqi nationalist –tries to rein in Kurdish claims,while Iraqi Kurdistan preparesfor regional elections just months before Iraq casts a parliamentary ballot.

Levelling the playing fieldWith the legal situation in these internal border areas continuing to be

unclear to say the least, potential investors among IOCs and NOCs remainvery much discouraged from investing in these fields. Given the lower-than-expected result in the first bidding round – where only a consortium consist-

ing of BP and CNPC in the end managed to match the incredibly tough fi-nancial terms, securing access to the massive Rumaila field – the Oil Ministryis likely to want to avoid a similarly drab statistic, without being politicallyready to significantly improve the financial terms offered. Hence, pulling theleast attractive fields out of the race is probably a reaction based on soundingswith potential bidders, and also a sign that a greater sense of realism is creep-ing into the Oil Ministry's most senior echelons.

With political rhetoric continuing to run high against the BP and CNPCcontract among those opposing international investment in Iraq's previ-ously nationalised hydrocarbons industry, there will be little tangible suc-cess to use as reference for the Oil Ministry by the time it manages to kickoff the second upstream bidding round (scheduled for later this year,though the ministry hopes to perhaps launch it before the end of the thirdquarter). Given that only one contract was signed as a result of the first bid-ding round, the Oil Ministry will have to achieve a better result this time orelse see its bidding round-based strategy over the past two years appear analmost complete failure. The Oil Ministry has been under fire over the pastnine or 10 months for having concentrated entirely on preparing the bid-ding while neglecting to make easy repairs and developments in the mean-time, thus failing to reverse Iraq's declining production at a time when lowoil prices were hurting the country's budget – and general reconstructioneffort – immensely.

Still, given the political resistance to foreign investment into its oil andgas sector, the Oil Ministry might be unable to offer significantly more at-tractive financial terms to oil companies – despite having demonstrated atough attitude in the first bidding round and gained some resource-national-istic credibility. With parliamentary elections in early 2010, oil companies willbe likely to want to await the outcome before committing to vast investments,while the government and Oil Ministry will be politically unable to offer at-tractive terms while electioneering. Hence, pulling the least attractive fieldsfrom the second-round offering is one way of making the end result look atleast somewhat more attractive, although it also recognises the increased po-

litical volatility in the north and the need to get legal clarity on the issue ofIraqi Kurdistan's borders before any significant investment can start tricklinginto those areas through the central government. The Iraqi Kurdistan gov-ernment, however, was early to award oil contracts to smaller oil companiesin some disputed areas, hoping to create ‘facts on the ground’ and now nodoubt making sure that their interests in the disputed territories come with aclear price tag. �

Known Reserves(bil. bbls)

12.876 12.580 4.098 8.108

****

0.863 0.807

**0.209

****

0.073 0.098 0.104

**

Approx 39.816

OILFIELD

West Qurna-2MajnoonHalfayaEast Baghdad Siba (gas) Najma Gharraf QayaraBadraWest KiflKiflMirjanQamar GullabatNaudomanKhashm al-Ahma

TOTAL

TARGETEDPRODUCTION

(b/d)

560,000600,000250,000120,000

125 mmcf/d70,000120,000170,00050,000

100,000****

100,000******

2,050,000 and 125mmcf/d

Source PIW 6 October 2008, Iraqi Oil Ministry

“Given that only one contract wassigned as a result of the first biddinground, the Oil Ministry will have toachieve a better result this time or elsesee its bidding round-based strategyover the past two years appear analmost complete failure” Samuel Ciszuk

Samuel Ciszuk Ed:16 july 5/8/09 15:15 Page 70


Who are AGR Petroleum Services and what services do you provide tothe oil and gas industry?Chris Sugden. AGR Petroleum Services is the world’s largest independentwell and reservoir management group and has the international experience,capacity and work processes required to deliver efficient and assured resultsfor its clients. Our headquarters are in Oslo, Norway. Additionally, we havean established presence in the UK, Russia, Kazakhstan, USA, Australia andare now operating a regional hub in the UAE to develop business across theMENA region. We are a global provider of services for all phases of the up-stream asset life cycle in the oil and gas industry. This ranges from interpret-ing the first seismic data through exploration and appraisal drilling to fielddevelopment and production optimisation.

AGR PS is designed to provide full project organisation, supplement aclient’s existing staff or provide expertise that may not be available in its or-ganisation. Importantly, we provide subsurface and well engineering re-sources or services on an as-needed basis through discussion and liaison withthe client. As a result, we are a flexible service provider which can act withinor out with client offices as a fully integrated subsurface, drilling and field de-velopment team, or provide each of these service streams individually.

What has attracted AGR Petroleum Services to the MENA region?CS. The MENA region is the most important and active E&P area in the worldtoday. The phenomenal growth in worldwide E&P activity over the last fiveyears has led to a dilution of expertise in all functional areas required to deliverthe expected performance on important E&P projects. AGR Petroleum Serviceshas an array of solutions to the problems inherent with constrained talent poolsand an advanced value proposition that we anticipate E&P operators in the re-gion will find compelling in their quest to deliver or exceed their goals.

How are your products and services aiding the industry?”CS. AGR PS is a process driven organisation with certified management sys-tems supporting our operations to deliver upper quartile performance to our

clients on a consistent basis. Last year, AGR PS drilled over 78 wells in sevencountries for 34 clients, operated seven offshore rigs simultaneously world-wide, completed over 200 reservoir management studies and placed 191 con-sultants through our consultancy services group.

We are recognised as providers of the world’s leading project risk man-agement software, P1. Sometimes the most cost effective option can bring thegreatest risks consequently we have designed the software to offer a range ofsolutions and highlight the level of risk associated with each of these, therebygiving engineers complete control over their projects. Breaking from tradi-tional risk management tools, P1 V 3.8 draws on data from previous well con-struction projects to offer operators a range of solutions to problems that mayarise during construction work. It provides the associated solution costs al-lowing engineers to quickly understand the financial impact of their decisionand generates likely outcome scenarios of particular actions.

How have advancements in process and technology helped the oil andgas Industry?CS. We are an industry that thrives on the challenges of enhanced hydrocar-bon extraction from the earth’s crust. There is a vast offering of technologyand process solutions that may be selected to deliver value for any given setof circumstances. Sometimes the choice is bewildering and selecting the mostadvantageous solution to any particular set of conditions is not a black andwhite decision.

At AGR PS emphasis is placed on a detailed understanding of a particu-lar challenge. Once the detail of the challenge is understood the appropriate

technology can be applied. We believethis is the key to delivering superiorvalue to a project within acceptableand transparent risk parameters.

The industry is well served withtechnology and it is fair to say that asignificant portion of new technologyis underutilised mainly due to the lackof obvious fit due to limited front-endengineering. n

Excelling in explorationChris Sugden discusses how AGR Petroleum Services is aiding the oil andgas industry in the hunt for hydrocarbons.

Chris Sugden, General Manager ofMENA region for AGR PetroleumServices, is a Chartered Engineerand a Fellow of the EnergyInstitute. He holds a MBA degree,MSc degree in OffshoreEngineering and a BSc degree inMechanical Engineering. Sugdenhas held senior drilling andcompletion engineering positionsonshore and supervisory drillingpositions offshore on platformsand semi-submersibles.

“AGR Petroleum services has an array ofsolutions to the problems inherent with

constrained talent pools and an advancedvalue proposition that we anticipate E&P

operators in the region will find compelling intheir quest to deliver or exceed their goals”

EXECUTIVEINTERVIEW

AGR EXEC:16 july 06/08/2009 09:48 Page 71


Advancements in earth map-ping technologies, coupled with the industry’s emerging need to characterise sub-surface systems,

have led to a resurgence of interest in using gravity and magnetic methods in oil and gas exploration and development. Faced with the challenge of meeting growing global demand for gas supply, the industry has been steadily expanding exploration eff orts into frontier and seismically challenging areas. Both environ-ments are ideally suited to gravity and magnet-ic techniques (also known as potential fi eld).

“Potential fi elds are typically used in fron-tier areas to do reconnaissance exploration, to look for new basins and to investigate large areas that might be prospective for doing more detailed and expensive seismic work,” says Gerry Connard, Petroleum Industry Market Manager with Geosoft Inc.

Although seismic visualisation technology still remains the powerhouse of oil and gas exploration, the industry now has the tools and the knowledge to integrate the best of this technology with gravity and magnetic methods. By combining technologies, the industry has added a robust new dimension that is enabling explorers to look more quickly and effi ciently into the uncharted frontier, while reducing the risks associated with technically challenging exploration.

Exploration in the new frontier areas can be an order of magnitude more costly using seismic visualisation when compared to the less expensive potential fi eld methods. Economics aside, Connard says that gravity and magnetic methods are commonly

used in areas where seismic work is diffi cult or impossible. He notes as an example instances where you are trying to gather images beneath basalt-covered areas that have high-velocity rocks near the surface or exploring sub-salt plays. “When visualising salt structures, seis-mic technology is very eff ective for imaging top of salt but has diffi culty imaging below the salt because of the high velocity of salt,” Connard

says. “Gravity and magnetics have been used extensively in sub-salt exploration to integrate with the seismic data and image the base of the salt, or to assist in the processing of the seismic data.” Petrobras has experienced major success

using gravity and magnetic methods with the discovery of a major natural gas and condensate fi eld in the pre-salt layer, at a depth of 5000 metres, in the Santos Basin located in the south-eastern part of Brazil.

Th e Petrobras discovery reinforces the notion that there is decreased explora-tion risk in the pre-salt layer. In their discovery an-nouncement, Guilherme Es-trella, Petrobras Exploration and Production Director, is quoted as saying, “All of the pre-salt blocks achieved ex-ploratory success, something

that confi rms the region’s high prospectivity”.“Th ere’s also been a recent explosion of

smaller oil companies getting into explora-tion,” Connard says. “Many of them are

NEXT BIGTHING

starting to use gravity and magnetics in their exploration of the frontier areas with great success.”

Advances in soft ware that provide the ability to eff ectively display, rapidly assess and dynamically experiment with multiple datasets have helped to reduce risk and in-crease prospecting capabilities in explora-tion. Th ese technological innovations have

helped to make the use of gravity and mag-netic methods in the oil and gas industry more eff ective.

Th e use of specialised three-dimensional modelling soft ware for prospect modelling of salt bodies can help to further reduce risk in areas such as potential fi eld exploration. “We’ve been using 3D seismic volumes and approximations of a 3D velocity volume in our interpretations for some time.” says geo-physicist Dr Michal Ruder of Wintermoon Geotechnologies. “With modelling soft ware such as Geosoft GM-SYS, we can convert that to depth, and ensure that it makes sense with the observed gravity and magnetic data.”

Today’s visualisation soft ware also sup-ports the easy integration of diff erent types of datasets, including geosciences data, satellite imagery and other GIS data into the map-ping environment. And while geoscientists recognise that there’s a lot to gain by looking at diff erent types of data, Dr Ruder admits : “I think people don’t realise how easy it is to inte-grate all of their datasets, whether it’s seismic and non-seismic, raster and vector.”

THE NEW FRONTIERMark Wolfe investigates the resurgence of gravity and magnetics

Mark Wolfe is a Canada-based freelance writer, editor, researcher and photographer who specialises in business and industry, oil and gas, construction, healthcare, education and technology. His articles and photographs have appeared in over 18 publications across North America over the past 12 years.

“Faced with the challenge of meeting growing global demand for gas supply, the industry has been steadily expanding exploration eff orts into frontier and seismically challenging areas”

For more information, log on to www.geosoft.com/oilandgas

Geosoft_NBT.indd 72Geosoft_NBT.indd 72 5/8/09 15:02:425/8/09 15:02:42

Geosoft AD.indd 1Geosoft AD.indd 1 28/7/09 16:17:1728/7/09 16:17:17


With 4000 employees in Turkey and branch offi ces across the world, TPAO (Turkiye Petrolleri Anonim Ortakligi) has established itself as one of Europe’s top drilling and oil exploration companies. And as

its operations move further east it is taking its place alongside other IOCs on the MENA oil and gas stage. Having been founded in 1954 as Turkey’s sole national oil company, today TPAO focuses on drill-ing, exploration, well completion and production, as well as natural gas storage, oil trade and transportation and pipeline projects. Its activities span the Caspian and MENA regions, with exploration and production in Azerbaijan, Kazakhstan and Libya. Th is list of coun-tries is set to grow, however, with the company involved in talks about new projects in Syria, Turkmenistan, Georgia, Iraq, Egypt, Russia and Algeria.

Home territory For now however, the bulk of TPAO’s drilling activities concentrate

on the Black Sea area and it is involved in extensive activities to source hydrocarbon reserves following the discovery of natural gas there in 2004. Th e company’s Drilling Department Manager, Recep Ataya, reveals the company’s planned activities in the area: “In Turkey drill-ing activity is increasing but the highest potential is not onshore, but off shore. In 2010 TPAO, and some of the TPAO joint venture companies such as ExxonMobil and Petrogas, are going to drill some ultra deepwa-ter wells in the Black Sea. Th e Black Sea will be a very active place in the coming years, especially for off shore operations.” Th e latest development in the company’s Black Sea activities is the signing of a Drilling Services Agreement between Petrobras and Ocean Rig company for the use of the Leiv Ericsson submersible drilling rig – which can reach depths of 75000 feet – to drill in the joint Sinop Block in the Black Sea. Th e deal also allows for TPAO to use the rig to drill else-where in the ultra deepwaters of the Black Sea.

Shifting horizonsBut while its main focus remains

the Black Sea, TPAO’s horizons are shift ing towards the Middle East, where it is particularly keen to become involved in drilling and explora-tion in Iraq. It has made major inroads in this area, having been listed as one of the 35 pre-qualifi ed companies by the Petroleum Ministry of Iraq following its fi rst licensing round held in June this year.

TPAO took part in the bid as part of a consortium of three compa-nies, bidding for Zubair Oil Field, Kirkuk Oil Field and Akkas Oil Field. Late last year it also signed a lucrative MOU with Boru Hatlariyla Petrol Tasima AS (BOTAS) and Shell Energy Europe as part of the Turkey Gas Export Project which will see natural gas exported from Iraq to Turkey. As part of the Iraq to Turkey Gas Export Project the three parties will also examine the possibilities of cooperation in developing natural gas related upstream opportunities in Iraq and export activities to other European markets via Turkey. But these are not the company’s fi rst at-tempts to stake its claim in the Iraqi energy sector. “Before the war we

drilled 20 wells in Iraq very successfully,” says Ataya. “Aft er the war we took our crew out but now there are some good opportunities coming up so we are ready to go back.”

Ataya says that Libya is another key market that TPAO hopes to tap into it. However he acknowledges this will be a challenging prospect: “Th ere are a limited number of drilling contractors working in Libya. Th ere is no free market there. But in the coming years, a lot of concessions may open to contractors.” Th e company already has drilling operations in Libya where it is actively drilling in Block NC188, Block NC189 and 147/3 and 147/4. It now hopes to expand its operations across the country.

Ataya says it faces signifi cant health and safety challenges in its current activities in Libya, because of the remote locations of the areas in which it

is drilling and the fact that this is rela-tively unchartered territory for many IOCs. However, he says these issues will be addressed when more compa-nies enter the market: “Oil companies will most probably bring high quality contractors and as a result the health and safety will be increased.”

In the Levant, TPAO is seeking drilling opportunities in Syria where it is continuing to negotiate for oil and gas exploration development op-

portunities. It signed an MOU with the Syrian National Oil Company in Damascus in 2005. In accordance with the terms of the MOU, a joint company is planned to be established to develop and carry out explora-tion production projects at designated concessions.

DRILLING

TPAO is already drilling deep in the Black Sea and now it plans to conquer the Middle East’s oil fi elds. Diana Milne meets the company’s drilling chief Recep Ataya to fi nd out how.

By 2010 TPAO hopes have reserves of 1.5 billion barrels of oil.

This compares to reserves of 558 million which it had in 2005.

“In Turkey drilling activity is increasing but the highest potential is not onshore, but off shore”

ansportompl

d trproduc

ationction, awell c mpletion and pompletion and prod

oday Tl completion and product

nationalund

focuthe

sole en fo

PAO

oyeworld, TPA has establis

ing and oil expr east it is tak

gas stage. nal oil company, today TPAO f

e MEside

e MENA oil and gas stage. Having been founded ong

MENA oil and gas stage. Having been fouperat

n the MENA oil and gas stage. Having been found

atiits p

p dre fur

Wtions move further east it is taking its place alongsi

opeAnd

Eures. AW and oil explorat

(hed l tW l i i A

hekligW Turkey and bra

Turkiye Petrolleriitself as one of With 4000

across tOrtak gWWOrtakligi) has established itself as one ofW offi c

nonO t kli i) h t bli h d it lf f E

cesim

O kli i) h bli h d i lf f EWWWW iyes inAO (W ross the world TPAO (Turkiye Petroller

empe world TPA ki P tW tlW 000 employees in Turkey and braWW dd

ing ing demeets t

Tfi e ds. Diana MMilnefi elds. Diana Milne meets the company’s drilling

andng

a alineetsmeets

already dril p in the BlacllingTPAO is already drilling deep in the Black Sea ad d illi d i th

G

rotries is

ew projectsAlgeria.

Home territoryFor now however,

on the Black Sea area anhydrocarbon reserves foll2004. Th e company’s Dreveals the company’s planing activity is increasing buoff shore. In 2010 TPAO, andsuch as ExxonMobil and Pet

in the Black Sea. Th coming years, especially for oin the company’s Black SeaAgreement between Petrobthe Leiv Ericsson submerrig – which can reach deet – to drill in the jo

in the Black Sea. Th for TPAO to usewhere in the u

Sea.

S

Eastern promise

Ataya.indd 74Ataya.indd 74 6/8/09 09:31:086/8/09 09:31:08

Regent Energy AD.indd 1Regent Energy AD.indd 1 30/7/09 09:53:4330/7/09 09:53:43

on the rig side and those are very exciting technologies with which to monitor the drilling activities. We have a visualisation room and we see all the well trajectories on the screens.”

Th is sort of technology means it is easier than ever now for TPAO to keep a bird’s eye view of its operations overseas. And as it continues to expand ever further east and its remit becomes wider, the challenges of overseeing multiple drilling operations will only increase.

High tech drillingTo take maximum advantage of the drilling opportunities in the

countries where it hopes to expand, TPAO is taking advantage of the latest drilling technologies, including digital data from the drilling units: “We have one of the latest technology drilling units and we can see the whole drilling parameters sitting in our homes. We are transferring all the data on the internet. So we can see the data just as clearly as from


TPAO’s operations

TPAO is continuing to negotiate for oil and gas exploration and production investments in Syria. An agreement was signed between TPAO and Syrian Petroleum Company ) in Ankara, Turkey on January 4, 2008.

SYRIA

According to the MOU signed on July 14, 2007, parts of the South Pars Field Development and Production Project, were reserved to TPAO. Evaluations of the sites are ongoing.

IIIIIIRRRRRRRAAAAAAANNNNNNN

TPAO has been in contact with the Ministry of Oil in Iraq since 1994, for exploration and production opportunities in Iraq.

IIIIIIIRRRRRRRAAAAAAAQQQQQQIIIIIIRRRRAAAAAAQQQQQQQQQQQQQQQQQQQQQQQQQ

TPAO has been carrying out oil and natural gas exploration and development studies on onshore and offshore areas of Turkmenistan since 1993.

TTUUUUUUURRRRRRRRRRRRRRRRRRRRKKKKKKKKKKKMMMMMMMMMMMMMMMMMMMEEEEEEENNNNNNNISTANTTTTTTTTTTTTTTTUUUUUUUUUUUUU

In 2007, TPAO experts visited data rooms in Congo, Equatorial, Guinea, Gabon and Tanzania to study technical and commercial evaluations of some blocks there with a view to beginning exploration activities in those countries.In addition, TPAO has been continuing to search and negotiate for business opportunities in other hydrocarbon-rich regions such as the Russian Federation, Ukraine, Algeria, Egypt, Brazil, Indonesia, Sudan and South America.

OOOOOOTTTTTTTTTTTTTTTTTTTTHHHHHHHHHHHHHHEEEEEEERRRRRRR CCCCCCCCCCCCCCCCCCCCCCCOOOOOOOOOOOOOOOOOUNTRRRRRRRRRRRRRRRIIIIIIEEEEEESSSS

Ataya.indd Sec1:76Ataya.indd Sec1:76 6/8/09 08:44:166/8/09 08:44:16

ODS AD.indd 1ODS AD.indd 1 28/7/09 16:22:4828/7/09 16:22:48


cement is impaired, an inadequate cement seal results and the life of the well can be shortened. If the centraliser breaks the consequences can be very expensive. If it breaks in a deviated or horizontal well, the casing will lie along the bottom of the borehole.

Centralisation is usually completely lost, making eff ective cementation impossible, added to which the centraliser may jam the pipe down hole. Stuck drill strings are one of the major contributors to drilling downtime, and a common cause of sticking down hole is a failed centraliser. A conservative estimate is that every year 400 wells worldwide are af-fected by centraliser problems. Assuming an average daily cost per well of US$250,000, and a typical downtime of six days, the cost per well is around US$1.5 million, with an overall annual loss of US$600 million. Th ese losses are largely preventable.

UK based-Centek went back to basics and concluded that the only way to ensure consis-tent centraliser performance, particularly with the extreme demands of under-reamed bores, was to radically redesign the bow spring type of centraliser to remove its defi ciencies and incorporate the ruggedness of fi xed dimension units. Centek believes that its family of centra-lisers achieves this. Centek products have been used successfully since 2002, in thousands of applications worldwide without a single cen-traliser failure.

ASK THEEXPERT

Correct centralisation of oil casings is vital to the success of a well, as poor centralisa-tion can result in channel-ling and faulty cementation.

In extreme cases the centraliser can fail caus-ing distortion or splitting of casings necessi-tating the withdrawal of the damaged casings, at great expense and production downtime. Centralisers assist the passage of a tubular into the well bore to the required depth by keeping the tubular and its protruding connections off the borehole wall to minimise mechanical interference and diff erential sticking in the open hole. At fi nal depth centralisers need to counteract the forces exerted by the tubular and centralise it within the borehole to allow optimum annular passage of fl uids and dis-placing cements.

Traditionally bow spring centralisers were widely used, but their construction of welded or interlocking, multi-part components re-quired that they be made substantially over-size in order to withstand the forces exerted by the tubular. Th is created considerable ‘start’ and ‘running’ forces. Multi-part centralisers are also prone to component failure when down hole. Once the failings of traditional bow spring centralisers became apparent, solid centralisers were adopted whose main virtue was robustness. However fi xed dimen-sion centralisers need to be undersize so as to pass through any previously installed tubular, with the result that they do not centralise ef-

fi ciently once out in the open borehole. With the recent introduction of ‘under-reaming’ i.e. passing a drilling head through a previously installed tubular to create an open borehole greater in diameter then the tubular bore, fi xed dimensional centralisers have proved even more inadequate.

ComplexModern wells are increasingly complex in

profi le and run to ever increasing lengths. Th e preload of traditional bow spring centralisers, created by being oversize, results in a cumula-tive resistance that can prevent the passage of the tubular to fi nal depth. In addition, their multipart or welded construction produces centralisers of inadequate strength for the more complex wells and catastrophic failures can occur, especially in under-reamed wells. Th e cost implications for the industry are con-siderable. If the centraliser isn’t strong enough to centre the pipe, annular circulation of the

Cliff Berry outlines the importance of good casing centralisation.

• Centek centralisers are manufactured from a single piece of steel with a hardened surface that greatly reduces torque and drag losses

• The construction strength is such that failure will not occur in even the most exacting well bore profi les

• Reactive force is achieved without being oversize, and performance is substantially in excess of industry standard ANSI/API 10D/ISO 10427-1&2

• Complete compression of the bow-spring’s outer diameter allows the centraliser to pass through narrow tubulars and then expand fully to its design diameter enabling it to centralise effectively in an under-reamed bore

Staying centred

Cliff Berry is Sales and Marketing Manager for

worldwide sales at Centek Ltd. His oilfi eld career started

in 1977 with Halliburton in Brunei, Malaysia. He has

also worked for Diamond B (UK) Ltd., and was

European Operations Manager for BJ

Tubular Services.

Centek.indd 78Centek.indd 78 5/8/09 15:11:415/8/09 15:11:41

Centek AD.indd 1Centek AD.indd 1 28/7/09 16:11:2028/7/09 16:11:20

IT

THE POWER OF TECHNOLOGYEstablished just 15 years ago, Dubai government-owned Emirates National Oil Company has rapidly fl ourished into a diversifi ed group with international interests. And a vital cog in ENOC’s operations is information technology, as O&G discovers during an interview with Group IT Manager

Sina Khoory.

Inside Sina Khooy’s offi ce, a polished glass trophy sits proudly on a shelf. Th is prestigious award was given recently by the IT Governance Assurance Forum (ITGAF) – a non-profi t organisa-tion created by the Dubai government to assist and promote the development of IT governance practices. As you would expect,

the achievement means a great deal to this soft ly spoken IT chief, who is responsible for the technology and systems across the energy group’s vast operations, spanning 30 active subsidiaries and joint ventures.

Khoory, who exudes a calm but assured demeanour, describes the award as “not easy to win” and adds that it was in recognition of ENOC’s


Sina Khorey.indd 80Sina Khorey.indd 80 5/8/09 15:39:325/8/09 15:39:32

Weidmuller AD.indd 1Weidmuller AD.indd 1 28/7/09 16:40:5028/7/09 16:40:50


sation. Since 2003 the group has been making signifi cant overhauls of systems and the technology infrastructure and Khoory argues that the energy industry itself would be paralysed without IT running 24/7 behind the scenes. “Oil and gas businesses rely heavily on the systems that constantly produce accurate data to support diversifi ed and dynamic activities, especially in our group. We have lots of diff er-ent subsidiaries and operating companies working in diff erent types of business – everything from refi ning to retail to shipping to bunkering and more. Th e volume and speed of data required to operate this busi-ness are huge and we require complex analytics to make decisions and to do our day-to-day jobs. Getting an overview of these diverse opera-tions is key,” Khoory notes. “You have to understand the dynamics of the various sites that we service and how technology can be an enabler of business success for each one of them.”

One part of the business that Khoory desribes as “especially com-plex” is the retail operations. In fact, when he joined ENOC he invento-ried the information systems portfolio and discovered that almost all of the group’s operations touch the retail business in one way or another. Th e group has a network of 170 ENOC Retail and EPPCO service stations dotted across Dubai and the Northern Emirates, employing 3500 staff .

More than 100,000 customers stop by to fi ll up their vehicles, use the car wash, purchase groceries or use other services on off er at the

garages every day. Th ese customers generate around 300,000 trans-actions per day or 110 million a year. “At these sites we have

all kinds of technologies and an interfacing portfolio of systems. We have full pump technologies, car wash facilities, the point of sale (POS), the payment gate-ways – including payment technology for utility bills

and road tolls and so on,” Khoory explains. “We also have a CRM system available there,

the convenience store and its intelligent gro-cery business, while there are plans to implement RFID (radio frequency iden-tifi cation) technologies to combat loyalty card fraud, too.” With all this technol-ogy, it comes as no surprise to learn that ENOC is gathering and managing data every minute, of every hour, of every day.

hard work with the group’s IT systems. “It came at the right time and was a reward for the fi ve-year eff ort by ENOC’s IT here pursuing and maintaining our governance management systems,” he explains, whilst glancing at the prize. “It is not the ultimate goal for us but it indicates that we are moving in the right direction; we are mature enough, and it pushes us for further improvement.”

Th is is not the fi rst time, however, that Khoory has got his hands on such a coveted prize; his previous employer the Department for Health and Medical Services (DOHMS), a government-controlled department heavily reliant upon technology, was a past winner, too. As IT Direc-tor, he was instrumental in executing and running the networking and information systems integration of Dubai’s four main hospitals and 20 other primary healthcare centres with the DOHMS online platform. For ENOC to now win is “double joy”, he enthuses. It was last April that Khoory, who has been an IT professional since he graduated from uni-versity 18 years ago, made the switch from healthcare to energy aft er 10 years at DOHMS.

A key componentLike companies in many industries, ENOC has seen IT become

intrinsically linked with its operations; you get the impression from speaking to Khoory that it has become the beating heart of the organi-

“Th e complexity of the customer volume and

ensuring that your data is always available for decision-making is a big issue for us”

Sina Khorey.indd Sec1:82Sina Khorey.indd Sec1:82 5/8/09 15:32:345/8/09 15:32:34

Lunasat AD.indd 2Lunasat AD.indd 2 28/7/09 16:20:1628/7/09 16:20:16


“Th e complexity of the customer volume and ensuring that your data are always available for decision-making is a big issue for us.” So are there other challenges that he faces at ENOC? Khoory quickly responds: “Retaining high calibre technical resources in a competitive market like Dubai, as well as maintaining the overall incurring costs of IT on the organisation are challenges.”

Global networks Another issue for an IT manager like Khoory is the nature of the

ENOC group’s international mix of business operations. Centralised platforms are key here.

“We are servicing broad entities in Djibouti, Singapore and in the future Monaco, where people will use the centralised information plat-forms to do their day-to-day business – all over the internet through secure channels,” Khoory explains.

And like many organisations today, ENOC embraces staff mobility by opening the network through a secure virtual private network (VPN) so staff can work from home and other locations off site. Th e infrastructure in place enables staff to work abroad, too.

Despite this fl exibility for staff across the group, you cannot ignore the pertinent issue of security, as the danger of networks being breached intensifi es due to remote working. Indeed, defi ning your company’s perimeter is becoming all the more dif-fi cult with staff logging into the network on laptops and other mobile devices from diff erent locations. Khoory has to weigh up the risks and the rewards, he suggests.

“We try to balance the business needs and the security consciousness. No system is 100 percent security

proof and there is always risk-taking versus the business benefi ts you gain from opening up a remote system. Th is is

very important because if an organisation becomes paranoid then even printing out data from the system and taking it home

is a breach in security and very diffi cult to control.” He adds: “We take the industry-standard measures at all levels and in all aspects of our work. Th is can include investing a little bit more in certain security tools and preventative soft ware to allow people to work from any place in the world.”

Security aside, right now, and for the im-mediate future, improvement is paramount. A determined Khoory says he and his team won’t be resting on their laurels aft er the ITGAF award, because they have a clear agenda of improving and redesigning internal processes according to industry-standard frameworks. “For the next year we have performance tar-gets that have to be met here as we streamline documents and re-analyse eight internal pro-cesses. We have to make sure they are aligned with the framework, train our internal re-sources, implement them, and measure it all at the end of this year.” He concludes: “We are always looking to improve – we will never reach the maximum that we can achieve.”

Sina Khoory and ENOC CEO Saaed Abdullah Khoory with the IT Governance Assurance Forum (ITGAF) award

work

nd the nt security

probene

very imthen even

is a breach in se

ENOCEstablished in 1993

Has 30 subsidiaries and

joint ventures

The brand is visible in

20 countries

Sina Khorey.indd Sec2:84Sina Khorey.indd Sec2:84 5/8/09 16:01:235/8/09 16:01:23

Tre AD.indd 1Tre AD.indd 1 28/7/09 16:28:1428/7/09 16:28:14

INDUSTRYINSIGHT

Oil and gas companies have much togain from the convergence of voiceand data communications. Withpowerful new ease-of-use features

for all users – from field operators to executivemanagement – the next-generation networkpromises long-term cost savings from consoli-dated hardware and streamlined operations.

But has state-of-the-art IP technology ren-dered legacy technologies entirely useless? Or doesit make sense to evaluate the cost-benefit of oldertechnologies? Is immediate migration to converged-IP imperative? For many applications a stepwisetransition to Ethernet/IP is wanted. For others, con-version rather than wholesale replacement may bethe best answer – if not the only answer.

What’s worth keeping?Asynchronous devices. Vast numbers of me-

ters, flow-monitors, PLCs, EFMs, RTUs, and soon, are deployed and operating in industrial net-works. These work horses offer proven reliability,employing such protocols as EIA-232/V.24, EIA-422/V.11, EIA-449/V.36, and EIA-530 to transmitlow-overhead, low-speed (e.g. 115.2 kbps) datastreams. Is ripping them out in the name ofprogress really a good idea? What is the cost – interms of new hardware, disrupted operations, anddowntime – of purchasing, installing and turningon IP-enabled alternatives? Are Ethernet-ready re-placements even available? With most asynchro-nous devices, conversion, not replacement, is themost cost-effective strategy. By encapsulating asyn-chronous protocols for Ethernet/IP transport, pro-tocol converters offer the best of both worlds by:

• Connecting async devices to the next-genera-tion IP network

• Preserving stable systems while avoiding cost-ly replacement

Sync-serial transport technologies are wellunderstood and widely deployed over ubiquitouscopper twisted-pair infrastructures. Is it cost-effec-tive to rip it all out to install CAT5 cables, Ethernet

switches, and IP routers? When embedded in struc-tural materials (steel, concrete, etc.) copper wiringis expensive or impractical to replace. Often re-placement is simply not an option.

Statistical multiplexers are often employed tocombine asynchronous outputs for transmissionacross a synchronous-serial V.35, X.21, T1, or E1composite link (over twisted-pair). An Ethernet-enabled statmux that also supports these legacyprotocols delivers the best of both worlds by:

• Preserving legacy infrastructure while provid-ing migration to next-generation networks

• Future-proofing asynchronous devices withEthernet/IP connectivity

Patton’s IpStatMux Model 3038 transpar-ently transmits multiple asynchronous EIA-232/V.24 data-streams over dual Ethernet/IP andsynch-serial composite links. This unique combi-nation of interfaces and functions offers immedi-ate or future migration to all-IP networking – athalf the cost of a traditional statmux.

Where Ethernet falls shortWhile transitioning to converged-IP net-

works, we must also consider the shortcomings ofEthernet in industrial environments:

• While RS-422 supports data transmission upto 4000 feet at 100 kbps, the 300-metre dis-tance limitation of standard Ethernet is ofteninsufficient

• Implementing standard Ethernet is costly; pur-chasing and installing CAT5 or CAT5e cablingmay not be practical or possible

The future of legacy in the next generation

By Patton Electronics’ Antoine Abi Antoun


Antoine Abi Antoun is MENARegional Director for Patton

Electronics, Co. focused on telecomtechnologies and marketing

strategies. Prior engagements includeproject manager of PDH network

installation for PTT Lebanon.

• Designed for climate-controlled offices ordata-centres, most Ethernet equipment is nothardened for industrial installations

By extending standard Ethernet up to fivemiles over installed twisted pair, Ethernet exten-ders address the shortcomings of Ethernet for in-dustrial deployment. Available auto-rateadaptation achieves reliable connections againstelectromagnetic interference with maximumspeeds across maximum distances.

Enclosed in a ruggedised metal enclosure withavailable conformal coating for protection againstcondensing humidity, Patton’s CopperLink Model2157R withstands operating temperatures from 40to 85°C.

ConclusionAs oil and gas industries transition to con-

verged-IP communications, there is much residualvalue in legacy technologies that can, and should,be leveraged. Interface converters provide a cost-effective strategy that preserves investments inhighly-reliable asynchronous devices while realis-ing the benefits of IP convergence. IP-enabledmultiplexers provide similar best-of-both advan-tages by leveraging sync-serial transmission tech-nologies that operate over existing twisted-pairinfrastructure. Ethernet extenders solve the dis-tance, cabling, and environmental shortcomings ofstandard Ethernet to enable deployment in in-dustrial environments.

With over 25 years of experience designingand manufacturing network access and connectiv-ity solutions, Patton Electronics specialises in solu-tions that leverage state-of-the art and legacytechnologies to provide smooth migration to next-generation communications for the industry. �

“Patton Electronicsspecialises in solutions that

leverage state-of-the artand legacy technologies”

Patton ED:16 july 6/8/09 09:46 Page 86

Patton AD.indd 1Patton AD.indd 1 28/7/09 16:25:0528/7/09 16:25:05


In this article I will explain how one of the world’s largest publicly traded oil and gas companies manages risk and uncertainty with EMC Exploration

and Production Infrastructure (EPI) and Schlumberger Petrel, an advanced soft ware solution for exploration and production. Petrel generates enormous volumes of data for the mission-critical work of geophysicists, geologists, engineers and executive decision makers. Ultimately, tens of billions of dollars of potential revenue ride on well-informed decisions and the process requires an infor-mation infrastructure that provides excep-tional performance, reliability and scalability. When Schlumberger introduced Petrel, the customer was uncertain if its legacy non-EMC IT infrastructure, running UNIX/Linux-based applications, would be the best choice for Petrel, which is Microsoft Windows-based. A new storage area network (SAN) solution was needed to better suite the advanced earth modeling and reservoir characterisation capabilities of Petrel to achieve performance and platform resiliency, combined with excel-lent service and support particularly for the remote locations.

Th e company used a sophisticated pro-curement system that ranks technology pro-viders across hundreds of criteria, including system architecture, pricing, partnerships and services to determine the most appropriate so-lutions for its SAN and NAS requirements. In the SAN arena, EMC demonstrated excellence in the architectural design of the EMC CLARi-iON storage system, and in services and key partnerships, particularly with Schlumberger. Th e customer decided to standardise on the CLARiiON CX series, now deployed in more than 200 locations worldwide. Th e customer’s

CLARiiON systems support Petrel with nearly one petabyte of storage, which is growing at roughly 300 terabytes each year.

Th e customer also uses EMC Navisphere Management Suite soft ware to centrally manage, monitor and confi gure its CLARi-iON SANs from a user-friendly web browser. In addition, the company employs a disaster recovery strategy by using EMC MirrorView soft ware to replicate data to an alternate site where it then performs backups from copies generated by EMC SnapView soft ware. Based on its success with EMC CLARiiON SANs, the

company chose to replace its legacy non-EMC devices with EMC highly scalable Celerra uni-fi ed storage systems in NAS environments, which met the company’s multi-protocol re-quirements and enabled rapid deployment in isolated exploration sites by E&P operations staff with minimal IT support.

Benefi ts of the new systemTh e improved performance driven by

EMC’s CLARiiON and Celerra systems, key components in the EMC Exploration and Production Infrastructure, played a vital role in optimising the Petrel environment. EMC EPI and Schlumberger Petrel enabled the

PROJECTFOCUS

company’s scientists to generate prospects more quickly by providing faster, more reliable access to critical geophysical and geological data used for earth modelling and reservoir characterisation.

Th e ease of deployment of EMC plat-forms enables the company to quickly outfi t new E&P operating offi ces while signifi cantly reducing deployment costs. Th e modular ar-chitecture of these systems also provides the company with a cost-eff ective, reliable way to rapidly scale in response to sudden changes in storage demands without fear of over or un-der-provisioning. Th e simplicity of managing EMC Information Infrastructure using EMC Navisphere eliminated complexity found in legacy non-EMC systems. Navisphere au-tomated storage administration helped the company redeploy almost two-thirds of the associated IT staff to other duties.

Remote staffi ng and support costs were further reduced by utilising EMC Global Ser-vices organisation to train an in-house team of IT personnel. Th is allowed the company to be self-suffi cient, and speed up problem resolu-tion as company staff were able to communi-cate more effi ciently and eff ectively with EMC support staff . In the end, the company has been able to successfully leverage EMC’s EPI per-formance to decrease its time-to-oil, minimise downtime risk associated with data availabil-ity, and ultimately reduce costs by eliminating complexity and unnecessary IT staff . As proof of the improvements and benefi ts obtained, the customer has awarded its ‘Top IT Vendor Award’ to EMC for three years running.

TOP performanceHow EMC storage helped one of the world’s largest oil and gas companies gain time-to-market advantage in exploration and production. By Mohammed Amin

Mohammed Amin is the Regional Manager of EMC Turkey Middle East and North West Africa, based at EMC’s regional headquarters in Dubai. In his seven years of regional management, he developed EMC regional awareness across industries and built a strong team to cater to customer information infrastructure needs and expectations.

“Th e ease of deployment of EMC platforms enables the company to quickly outfi t new E&P operating offi ces

while signifi cantly reducing deployment costs”

Amin_EMC.indd 88Amin_EMC.indd 88 6/8/09 08:36:326/8/09 08:36:32

EMC2, EMC, and where information lives are registered trademarks of EMC Corporation. © Copyright 2009 EMC Corporation. All rights reserved.

Deliver the cost savings and productivity improvements your business demands.

EMC is uniquely positioned to help you take a holistic approach that enables you to address IT challenges one at a time or across your entire information infrastructure. Our unmatched expertise and experience combined with the broadest range of industry-leading solutions have enabled customers to:

• Realize a 25% reduction in storage TCO in less than a year• Reduce backup data and time by 90%• Reduce data center space, power, and cooling costs by 70-80%• Reduce e-mail operational costs by 50%• Lower cost of compliance by 30-70%• Decrease security spending by 150%• Manage 3-4 times more servers, storage, and network devices without adding headcount

We’ve been guiding organizations through economic and IT challenges for over 30 years and can enable your business to emerge from today’s economy stronger than ever.

For more information about EMC Effi cient IT visit: www.middle-east.emc.com

VirtualizeConsolidateDeduplicateAutomate ProtectComply

Thrive

Thrive AD.indd 1Thrive AD.indd 1 28/7/09 16:13:5428/7/09 16:13:54

What protects does your company have in the Middle East?Frank Crawford. Our company has a project in Upper Egypt where we’re operating a large concession in a virtually unexplored area. We are shoot-ing seismic and preparing to drill some wells there in the next four to six months. We are also working with partners on a block in the Gulf of Suez, which we’re planning to drill in the next two to three months. We have a small percentage of a block with large potential in the Kurdistan area of Iraq. Although we are a small company we are hopefully going to be doing some successful drilling ventures and getting ourselves on

SEISMICTECHNOLOGY

Going seismic

the map in the Middle East in the next six to eight months. Our strategy is to continue to drill successful wells in the region. We hope to make a signifi cant discovery in Upper Egypt.

How much potential do you think there is for your exploration ac-tivities in Iraq?FC. It’s a phenomenal area with probably many opportunities to fi nd very large fi elds. It’s in a part of the world that can fl uctuate in terms of its sta-bility but at the same time there are companies in there making discover-

O&G asks Frank Crawford, Chief Geologist at Canadian based Groundstar Resources about the challenges of conducting seismic studies in the Middle East.


FrankCrawford.indd 90FrankCrawford.indd 90 5/8/09 15:02:175/8/09 15:02:17


that you’re trying to use to detect the actual hydrocarbons, calibrated accurately, so that you can be sure that you in fact have hydrocarbons below where you plan to drill your well.

Th ere’s a lot of geochemical modelling that has been used, with in-creasing success. Gore technology is at the leading edge of geochemical exploration. Th is is a technology that can sometimes detect hydrocar-bons but can’t tell you if it’s commercial, how big it is or what. So they’re still quite a long way from being able to replace the actual drill bit to fi nd out what exactly is down there.

How far down should companies be drilling – what limits do they have?

FC. I think we should be drilling wherever we can with the technology we have and there should be no off -limit areas. I do believe that oil is a fi nite resource and we’re using it up fast. Some of these giant fi eld and super giants are being depleted no matter how much they say they can replenish the resource or recover more out of the fi elds. It’s a good thing they can but they are not fi nding super giants anymore, except some in deep water. But at the same time, to drill US$50 to US$100 million wells off shore is certainly not like drilling in an oil fi eld on land.

How concerned are you about a peak oil situation occurring?FC. We are reaching a limit and there will be a serious situation in the future when consuming countries will be competing for a depleting resource. People think there are rivers of oil running under the ground but there are not. It’s hard to fi nd and the sizes of the fi elds are declin-ing for the most part. You can’t count on fi nding the super giants or the giants like you did in the past, to produce a larger inventory of reserves. We’re depleting the reserves very quickly. Technology will help to delay that but it won’t delay it for that long.

What issues exist with the availability of experienced manpower in the industry?FC. Th ere are a large number of people that are not far from retiring from their professions and leaving a large gap in the industry. Saudi Aramco has said it is searching for people with talent, mentoring them then provided them with the education they require to carry on the torch to the next generation. I don’t know if we’re doing that in the West so much. You can have all the technology in the world, but you still need people to do exploration. Oil is found in the minds of men and women who think creatively as well as just look at a computer screen. We need to blend people’s experience, their creativity and geo-thinking with modern technology in order to be successful. Employers must try to retain their experienced people and get the most out of them to train up and help to mentor the younger ones that are coming along.

ies and planning to drill in the next phase. Th ere are signifi cant reserves there but not at suffi cient enough levels to off set the decline in the world’s overall picture of reserves. If there is a favourable economic and political climate those reserves will reach market much more quickly.

When you’re looking at a 70 kilometre long undrilled structure in an area not far from the Kirkuk oil fi eld, which has reserves of maybe 20 bil-lion barrels of oil, that area certainly surpasses anywhere else that I could imagine, even in the deep water area of Brazil. Th ere are literally scores of undrilled structures in an area that has a proven massive hydrocarbon generation and entrapment potential.

What are your views on the research Saudi Aramco is carrying out

into the use of nanotechnology robots to explore deep reservoirs?FC. It’s something that I’d never heard of before and to think of sending some little entity off into a rock to bring back a report seems a little bit far fetched. However, I guess tomorrow’s discoveries always seem a bit far fetched. To put artifi cial intelligence into something so small to determine the reservoir characteristics just seems beyond capability. If it could be done it would make exploration a lot easier. You wouldn’t have to drill a well, you’d just send something down to look for your oil and gas then come back and bring you a report.

But if it was something that was close to happening today, there wouldn’t be so much investment going in to proven conventional ex-ploration techniques such as seismic and various ways of analysing seismic data for velocity off sets, 3D and all that sort of thing. Th ey are still using those techniques primarily for exploration. Exploring out into the reservoir thousands of feet to try and determine fl uid content, porosity and permeability is a new realm of thinking. I hadn’t heard of anything that could explore that far out.

What are the main improvements that need to be made to seismic modelling techniques today?FC. I think what needs to be maintained at the moment is the expe-rience level of the people who are involved in the development and exploitation and exploration parts of the industry. At the same time improvement in direct hydrocarbon detection would be a real advan-tage. Th is is about fi nding a suitable model to have your measurements

“We are reaching a limit and there will be a serious situation

in the future when consuming countries will be competing for

a depleting resource. People think there are rivers of oil running under the ground

but there are not”Frank Crawford

FrankCrawford.indd 91FrankCrawford.indd 91 5/8/09 15:02:275/8/09 15:02:27

Presently the economic luster of naturalgas (NG) is dimmed by slackened de-mand overshadowed by excess capac-ity. In Canada and the US, NG’s

Btu-equivalent price has slumped to less thanUS$25/bbl. Thus, soundly financed companieshave squeezed NG investment while leveragedexplorationists are riding out a life-or-deathstruggle. Elsewhere, NG’s price-tie to oil supportsa more limited restraint.

Nevertheless, certainty calls from the gloom,“This too shall pass.” The greenness halo over‘clean’ NG with its maximal H/C ratio propels itsuse. Oil exporting countries can preserve the ‘gold-en-egg laying goose’ by using NG for their prodi-gious power needs. NGL and gas-to-liquid plantsprovide growing consumer access. BP WorldEnergy 2009 shows NG reserves (6534 TCF) equiv-alent to oil (1258 BBbl). With exploration’s focus –plus new tech á la shale gas – NG will expand.

Since its incorporation 30 years ago, Maracohas evolved a suite of software spanning NG ex-ploration, development and production. OurGORE (GasOilReserveEstimate) is tailored to ad-dress the explorationist’s key question, “How bigis my find?” Using Q&P from a production test,GORE estimates GIP and decline fraction – and,given price and well cost, payout time for the nextwell. Updates with the latest observations providethe earliest guide to ‘what next?’

Simulation GMAN.OPT simulates NG reservoir/surface

flow while determining an optimal schedule ofwells and compressors that stretches a plateaurate through time. Each addition to the scheduleis the well/compressor that now has the highestreturn (PVR). Development stops – and declinebegins – when PVR of all additional candidates isbelow cutoff. Experience has shown us that case-study schedules contain sub-standard invest-ments. Years ago, a development plan preparedby a competent consultant – commissioned byclient management as a check on OPT – carried25 percent higher cost for the same rate profile.When the price of liquids collapsed in 1986, this

client eliminated a third of budgeted wells in atwo-week evaluation.

Maraco’s GOMAN replaces OPT when:

• Detailed economic tables – revenue, cost andreturn – are needed

• Surface processing unit capacities – separators,sales gas, sulfur, NGL plants and product com-positions need detailing

• Number of reservoirs becomes large. The largestcurrent application has over 70 reservoirs

GOMAN also can integrate combined crudeoil and associated and non-associated gas com-plexes, which is now being done for SaudiAramco and Kuwait Oil Co.

Analysis Finally, our GasPal system provides the most

advanced nodal analysis NG planning tool avail-able today. GasPal’s core programme calculatescapacity of one or many reservoirs flowing to oneor several offtake points. The underlying frame-work for the model’s reservoirs is wells in place orscheduled versus time (and for layered forma-tions, perforation and plug dates or flow condi-tion) and compressors dated-in at specifiedsurface-network nodes. From capacity, GasPaldetermines production schedule with specifiedspare capacity pursuant to a requested rate pro-file. Aquifer influx, relative permeability and gastrapped are accounted for. Elaborate graphics

support history matching and performance in-terpretation.

Auxiliary programmes are:

• UPSCLR – upscales a petrel geologic modelinto a GasPal computing grid via an onscreeninterface

• GRIDDER – generates a computing grid on-screen overlaying a reservoir’s contour map

• TFR (TubingFlowlineRiser) history matcheswell/flowline performance using a collection ofcorrelations

A single reservoir model can be built and on-stream in one hour (with run time for 360months of 1-2 seconds). Large models requiringextensive history matching take longer. The de-velopment and validation of Total’s Tunu Fieldmodel – 23 platforms, over 700 wells – stretchedover several months. Similarly, for EBN’s (Dutchgovernment) model of the Groningen Field.Here, wells produce into a ring of pipe. As re-gional demand shifts, gas-flow direction in thering changes. GasPal is the only commerciallyavailable software that dynamically calculatessuch flow reversals in a pipe loop. n

Maximising your gas potentialDr. Elmer Dougherty gives O&G the lowdown on planningand managing natural gas operations.


INDUSTRYINSIGHT

Dr. Elmer Dougherty, founder of Maraco, develops andapplies software to optimise oil and gas developmentand analyse production operations. Middle Eastconsulting includes Saudi Arabia (Aramco), Kuwait(Kuwait Oil), Libya (Oasis) and Iran (Consortium). He isEmeritus Professor at the University of SouthernCalifornia, where he has 24 years of petroleum andchemical engineering experience.

MARACO:16 july 06/08/2009 09:47 Page 92

Maraco AD.indd 1Maraco AD.indd 1 28/7/09 16:21:1028/7/09 16:21:10


In 2002, the US Federal Highway Administration (FHWA) released a breakthrough two-year study on the direct costs associated with metallic corrosion in nearly every US industry sector, from infra-structure and transportation to production and manufacturing. Th e study, entitled Corrosion Costs and Preventative strategies in

the United States and initiated by NACE International, revealed that corro-sion is the primary factor aff ecting the longevity and reliability of pipelines that transport crucial energy sources throughout the nation. Th ere are more than 528,000 kilometers of natural gas pipelines, 119,000 kilometers of crude oil pipelines and 132,000 kilometers of hazardous liquid pipelines in the US, amounting to an estimated US$7 billion in average annual corro-sion-related costs in monitoring, replacing and maintaining these assets.

“Given the slow and destructive nature of corrosion we are looking at replacing a kilometer of pipeline for around US$643,000 or more, which is an extremely expensive proposition,” explains Mark Byerley, President of NACE International, the world’s leading corrosion engineering organisa-

tion. “Maintenance and inspection are of primary importance, at least they should be to many companies, so the driving force for that expenditure is to preserve the asset of pipeline and to ensure they operate safely without failures and jeopardising public safety and the environment.

Th e survey indicated that the primary loss of protection on the pipe-lines was due mainly to two reasons, the degradation or deterioration of the coating and the inadequate protection levels. So the majority of gen-eral maintenance is associated with monitoring and repair problems. In addition to maintenance there is the issue of integrity management and inspection which focusses on condition assessment, corrosion mitigation, life assessment and risk modeling. “If you look at maintenance packages, you’re looking at between US$3000 and US$6500 per kilometer annually to maintain a pipeline and protect it from corrosion, which compared to the off set from what it costs to replace a pipeline, you can see that the ROI is fairly extended,” says Byerley.

Following a number of high-profi le pipeline failures, public safety

Replacing corroded

pipelines costs upwards

of US$643,000 per kilometer. Mark

Byerley, President of NACE International, explains why

maintaining and inspecting pipelines is vital in the battle

against corrosion.

THE FIGHT AGAINST CORROSION

GLOBALPIPELINEFOCUS

MarkByerley.indd 94MarkByerley.indd 94 5/8/09 15:03:305/8/09 15:03:30


their upper management teams to explain to them what they do everyday to NACE staff going to a board of directors of major suppliers, major pipe-line companies, oil companies, gas companies and working with senior management and teams within the company to educate the management

on corrosion and its eff ects on their systems or assets. “Knowledge is power. And if you look at what NACE are doing in this respect, we hold 450 classes and train 9000 people per year. No-one educates more people on corrosion prevention than NACE International.”

Along with education, Byerley believes that the biggest challenge in the fi ght against corrosion is in inspection and maintenance frequencies. Th e more remote or hostile the environment, the more diffi cult it is to get to the point of inspection or a component that needs to be maintained. “It really starts at the lay of the pipeline,” claims Byerley. “But that said we are now doing a lot of work with remote monitoring, where the pipe-line actually reports to a central hub via satellite or cellular communica-tions, so we can actually monitor the pipeline from an offi ce thousands of miles away.”

Byerley advises that companies looking to improve the issue of cor-rosion need to start getting involved in the industry and look at how they can participate. “Whether it’s getting the members of their companies involved at a local section of an organisation like NACE or whether it’s in a research committee at NACE, technical committees that help drive

standards which then form new edu-cation programmes,” he says. “Th ese are just some of the more vital areas in NACE International, but there are other things that can be done like sup-porting an employee and furthering their education on corrosion preven-tion, whether they get involved in formal training or attend conference and technical symposiums.”

Moving forward it is clear that increasing research and development as well as furthering education could dramatically improve the issue of cor-rosion in the US and around the world. While technological advancements are happening all the time, the best way to prevent corrosion involves better cor-rosion management through preven-tive strategies in both non-technical and technical areas.

concerns have driven new regulations and corrosion control practices for gas and liquid transmission pipelines. Byerley highlights the various tech-nologies that can help in maintaining and ensuring pipelines live a long and happy life. “First of all you need to look at the materials that go into the pipeline, the types of steel you use,” he advises. “Plus there’s a coating com-ponent, making sure that the pipeline is well protected from the outside elements. And we do that through various coating technologies, whether it be fusion-bonded epoxies or tape-wrap systems. Th ere are several spray-applied type systems as well. And then we get into the electronics side, where we’re inducing currents into the fi eld to help slow the eff ects of cor-rosion, or to mitigate them in areas where the coatings are not present.”

Byerley goes on to explain corrosion engineers are benefi tting from an increase in research and development worlwide. “We’re one of the few disciplines in the engineering fi eld that actually works every day to put our-selves out of a job, because once corrosion’s eliminated we’ll have nothing else to do.”

Much of the work done at NACE International continues to revolve around the US Department of Defense, however, NACE is looking at dif-ferent protects and not just in the US pipeline market, but around the world to help mitigate the problems, including Australia and New Zealand, as well as Europe. And as pipelines improve around the world the industry is seeing a much more aggressive use of improved data gathering, whether that is through the use of multiple technologies and coatings in conjecture with the cathodic protection ECDA (external corrosion direct assessment) and other pipeline integrity management programmes.

And as a result of the increased use of pipeline integrity management programmes, NACE has seen a rise in demand for education on these pro-grammes too. “If you look at the lack of knowledge of senior management, it’s not a bad thing, just something that they usually don’t deal in,” explains Byerley. So getting that senior management buy-in is a huge challenge for the corrosion department in these companies, and while there are over 21,000 NACE members worldwide, the vast majority are not even consid-ering corrosion until a calamity strikes.

“Th rough the media staff at NACE, we have the responsibility of asking for an audience with those in senior management positions, and have done some corporate outreach programmes getting people to understand how easy it is to protect pipelines and how this can prevent having to replace that pipeline. Today’s technologies allow us to keep pipelines in the ground well over 100 years, as long as they’re administered properly,” says Byerley. “However, these outreach programmes are probably not as successful as we’d like, which is prob-ably due to corrosion being a very unsexy topic, so it’s hard to get people in the doors at fi rst.”

Th e corporate outreach programmes can involve anything from tasking em-ployees of the company to really focus on

• Increase awareness of signifi cant corrosion costs and potential cost savings

• Change the misconception that nothing can be done about corrosion

• Change policies, regulations, standards and management practices to increase corrosion cost savings though sound corrosion management

• Improve education and training of staff in recognition of corrosion control

• Implement advanced design practices for better corrosion management

• Develop advanced life-prediction and performance-assessment methods

• Improve corrosion technology through research, development and implementation

PREVENTIVE STRATEGIES

corrosion costs

nothing can be

andards anase corrosion co

management

aff i

Source: www.nace.org

“We’re one of the few disciplines in the engineering fi eld that actually work every day to put ourselves out of a job, because once corrosion’s eliminated we’ll have nothing else to do”

MarkByerley.indd 95MarkByerley.indd 95 5/8/09 15:03:335/8/09 15:03:33

What’s in the pipeline?

O&G gathers three industry experts to discuss corrosion, new technologies and pipeline issues in the MENA region.

Pipeline corrosion costs the industry billions of dollars every year. What are the main unsolved corrosion problems for the industry?Khalil Ibrahim Al Gannas. If we analyse steel pipes’ corrosion history, we can see now several solutions for previously un-solved corrosion problems, and advanced technologies off er improved solutions at a very high pace. To solve an unsolved cor-rosion problem is related more to what is an acceptable cost on preventing corro-sion against inspection and maintenance during operation. Current major unsolved corrosion problems are related to new re-quirements for pipeline steels that are be-

coming more and more severe to comply with pipeline operation at higher internal pressures, higher design factors (internal pressure related to the

yield strength) and severe loading condi-tions, cumulated with an increase of trans-mission of corrosive and multiphase gases; therefore new or optimised steel and pipe manufacturing technologies are needed to cover such increasing requirements. While in pipe manufacturing there are several choices, we need to be able to source new or optimised steel specifi cations for use as the raw material for pipe making. Pipe making technologies need then to be ad-justed to process such specifi cations.

“Whether we speak about In-Line Inspection, Hydrotesting or Direct

Assessment, new technologies and techniques provide several opportunities for specifi c cases, all having both advantages and

disadvantages depending on pipe location and environment”

Khalil Ibrahim Al Gannas

ROUNDTABLE


Pipeline_RT.indd 96Pipeline_RT.indd 96 5/8/09 15:04:065/8/09 15:04:06

Polyguard AD.indd 1Polyguard AD.indd 1 28/7/09 16:25:5928/7/09 16:25:59


Richard Norsworthy. Almost all pipelines are protected by cathodic pro-tection (CP). One of the main corrosion problems facing the worldwide pipeline industry is the use of pipeline corrosion coatings which are not compatible with cathodic protection systems. Th e name of this problem is ‘cathodic shielding’. Shielding happens when the pipeline coating loses adhesion to the pipe (‘disbonds’), allowing water to penetrate. Corro-sion can now occur unless the protective electrical current from the CP system can reach the steel. If the corrosion coating is one that shields (blocks) the protective electrical current when disbondments occur, then corrosion can proceed without interference. Th e problem of disbonded coatings that shield cathodic protection has been well documented in the pipeline industry over the last 25 years. Unfortunately, many in the industry do not require that pipeline corrosion coatings used on their systems be compatible with cathodic protection systems when disbond-ments occur.

Miguel de Castro. Corrosion problems can have costly consequences; therefore this item is usually taken into account at the design stage of the pipelines. Generally speaking, actions are mostly prevention ori-ented. External corrosion prevention can be hard to achieve locally, due to other networks such as electrifi ed railways, power line or pipelines which can impact cathodic protection effi ciency. But once the area is identifi ed, fi eld solutions exist. Th ese solutions must take into account a large array of fi eld problems. Th ey must include an electro-magnetic compatibility evaluation in order to allow a performing monitoring and eventually, an eff ective lightning protection separated from the cathodic protection equipments.

Internal corrosion is a more serious matter for crude oil lines as corrosion inhibitors aren’t always effi cient on long distance lines. Th e only eff ective way to fi ght that is to closely monitor the evolution with intelligent pigging and eventually replace or reinforce default areas. Th is can be a little diff erent for refi ned product lines, or short distances as these products are chemically better evaluated and inhibitors can be eff ective.

Th is is an issue that is really coming out nowadays due to aging pipe-line networks. Th e tools to detect some specifi c defaults aren’t yet avail-able. More specifi cally, stress corrosion cracks are very hard to detect and can end up with a pipeline rupture.

How are new technologies and techniques providing opportuni-ties for more effi cient detection and risk management activities to ensure the integrity of pipelines?MdC. New technologies bring up an assessment of the real condition of pipelines. For external corrosion they are based in classical techniques,

but the improvement of sensors for cathodic protection monitoring and better positioning during close interval surveys amke it easier to better pin point the areas and techniques for action.

Regarding internal corrosion it must be pointed out that the develop-ment of intelligent pigging in the last 10 years, really brought the possibility of having a reliable evaluation of a pipeline without going for a pressure test. A regular metal loss control by ultrasonic means (which requires a perfect cleaned line) or a magnetic tool (more tolerant to the line cleaning condi-tion), associated with a more close interval acoustic pigging, give a good base for pipeline risk assessment and therefore a risk management plan.

Technical evolution is providing many new tools. As to the usual monitoring equipment used for pipelines, operations can be now added

using computers with specifi c risk oriented soft wares. To work correctly, these soft wares need much information and a perfect model of the line behaviour. Th ose are the existing limits for a general implementation of such systems. Anyway, the pipeline industry is a dangerous industry, therefore all means should be used in risk management. Some-thing as simple as line balancing with per-forming meters can give very good real time information regarding leak detection. Th is kind of simple tool must be included in the risk management plan.

Moreover, risk management is coming out from a purely technical approach to a more quality management approach. Th at requires inspection plans, systematic reviews with experience feedback and technology im-provements evaluation.

MIGUEL DE CASTRO is Head of Flowmetering, Sampling, Lab Analysis at Société du Pipeline

RICHARD NORSWORTHY is Director, Lone Star Corrosion Services, Polyguard Products.

KHALIL IBRAHIM AL GANNAS is CEO of JESCO

THE PANEL

“External corrosion prevention can be hard to achieve locally, due to other networks such as electrifi ed railways, power line or pipelines which can impact cathodic protection effi ciency. But once the area identifi ed, fi eld solutions exist” Miguel de Castro


Pipeline_RT.indd Sec2:98Pipeline_RT.indd Sec2:98 5/8/09 15:04:125/8/09 15:04:12

SPSE AD.indd 1SPSE AD.indd 1 28/7/09 16:26:3828/7/09 16:26:38


MdC. As a European pipeline operator, we are not really familiar with MENA region specifi c problems. Our experience regarding the MENA region concerns metering as we calibrate meters to be installed there. Our experience is therefore more related to crude oil quantity and quality assessment. We didn’t identify specifi c problems in that fi eld. Flowmeter calibration for the MENA region isn’t signifi cantly diff erent

than calibrations for other regions. Th e issue is to have similar characteristics between calibra-tion and fi eld product.

How are your products and services benefi t-ing the oil and gas companies today?KG. JESCO products are obtained by using the most advanced technology, with the most advanced available manufacturing equipment, including advanced automation systems, math-ematical models to set up and optimise the pro-cess parameters and extended process control to allow eff ective continual improvement. Th e main benefi ts our products are bringing to the oil and gas companies are resulting from high dimensional precision, very smooth surface, quality of surface and lack of internal defects, the uniformity of the metallographic structure and mechanical properties – even for extra heavy

wall – specially tailored chemistry for specifi c projects, very low sulphur and residuals, making them suitable for sour service, off shore applica-tion, automatic welding and coating (FBE).

MdC. SPSE is mainly a pipeline operator. We generally share our 50-year experience in pipeline operation and maintenance in diff erent committees or on demand.

Th e only out of core services provided are sampling and meter cali-bration. Th ese have an interest from a commercial point of view and also on the monitoring of the lines. Th ey give access in a reliable manner to what gets into the pipeline system and what gets out. Metering allows a very good control of deliveries, and as a consequence keeps losses as low as possible, which in the existing economic situation is a major issue.

RN. Polyguard’s most successful product has been the development of a non-shielding, fi eld applied pipeline coating system that now has over 20 years of proven success in the fi eld. Th is particular non-shielding coating system will allow adequate CP to be eff ective if there is a disbondment and water does penetrate between the coating and the pipe.

Th ough it is rare for this coating system to disbond, poor application or surface preparation has allowed water to be present under the coating on fi ve diff erent occasions that we are aware of at this time. None of these locations reported metal loss. When the pH of the water under the coat-ing was checked it was between 10 and 12, indicating adequate CP was able to protect the area under the disbonded coating. We have developed a higher temperature version of this pipeline coating system that will retain these same protective properties.

RN. Advances in Internal Line Inspection (ILI) tools along with the use of External Corrosion Direct Assessment (ECDA) have helped compa-nies to determine where and why corrosion is occurring on these pipe-lines. Although these methods are not 100 percent eff ective, they have greatly improved over the last few years. If a non-shielding pipeline coating has been installed on the pipeline, Direct Current Voltage Gra-dient (DCVG) surveys will allow the operator to fi nd disbonded coatings and make necessary repairs. If shielding pipeline coatings are used, disbonded areas are unlikely to be found.

KG. Whether we speak about In-Line Inspec-tion, Hydrotesting or Direct Assessment, new technologies and techniques provide several opportunities for specifi c cases, all having both advantages and disadvantages depending on pipe location and environment. On the side of risk management, the new API 5L is diff erenti-ating pipes for non-sour application versus sour service and/or off shore, and therefore increases the number of inspections and their severity for these products. For example, API 5L 44th edi-tion requires now ultrasonic tests for laminar imperfections for line pipes ordered for sour services and/or off shore applications. Th ere are also requirements for seamless pipes to pass HIC, SWC and SSC tests. Actually, there is a clear diff erentiation now on line pipes classifi cation not only as a product specifi cation level but also according to the end use and specifi c environment. All of the additional requirements are intended to ensure the integrity of pipelines in given conditions.

Are there any unique pipelining challenges for the oil and gas in-dustry in the MENA region – is the diffi cult and often inhospitable environment a problem?RN. Th is area does present a challenge. Th e Subkha sand areas are very corrosive environments with cyclic (wet and dry) conditions which cause damage to many types of coating systems. Cathodic protection can also be a challenge in these environments. Another challenge is that of higher temperature production. As the depth of drilling increases, so does the temperature of the production. Th ere are also areas where hot methods are used to stimulate production. Once the higher temperature produc-tion is transported in a pipeline, both coatings and CP are aff ected.

KG. Th e MENA region is having similar diffi culties in terms of pipelin-ing as other regions have with regards to steel used and anti corrosion techniques. Still, this region has relatively recently started to explore off shore and we expect certain specifi c diffi cult and inhospitable envi-ronments as projects develop. If we speak about Saudi Aramco, for ex-ample, its specifi cation for line pipes has been revised to diff erentiating further sour service and off shore applications and adding its specifi c requirements to those mentioned by latest edition of API 5L. We expect oil companies within MENA to expand their exploration and produc-tion off shore and therefore we expect related challenges.

“Polyguard’s most successful product has been the development

of a non-shielding, fi eld applied pipeline coating

system that now has over 20 years of proven

success in the fi eld”Richard Norsworthy

Pipeline_RT.indd Sec1:100Pipeline_RT.indd Sec1:100 5/8/09 15:04:165/8/09 15:04:16

200,000 Challenges 100,000 ExecutivesOne Community

Dedicated to business

Join now: www.meettheboss.com

If your network isn’t focused on your business, change it.

MeettheBoss.com membership reads like an industry who’s who. CEOs, CIOs and other senior executives from leading organizations are just two clicks away.

But there’s more. Weekly interviews with industry leaders are webcast on the site’s dedicated channels. These are combined with live, moderateddiscussion groups, video conferencing, IM and secure e-mail in one easy-to-use app that’s dedicated to business.

New York 8:50 a.m.John is upgrading some core business functions. He wants to know how to ensure a smooth transition, so he video calls…

London 1:50 p.m.Paul, who has seen the benefi ts of an upgrade and is now sharing project management tips with…

Dubai 4:50 p.m.Georgina, the turnaround expert who’s moving on to a new project in Japan, where…

Tokyo 9:50 p.m.Ringo has the local knowledge. But he’s also planning for tomorrow, and that’s all about core business...

MeettheBoss.com is simple, intuitive, unintrusive and secure. It’s also free to use. Membership restrictions apply.

MTB AD (Full page B2B Mag).indd 1MTB AD (Full page B2B Mag).indd 1 30/7/09 10:12:5830/7/09 10:12:58


PRUDENT PIGGINGJack Rankin, PPSA member and Manager of Engineered Solutions at TD Williamson, provides guidelines for successfully tracking and locating pipeline pigs.

Tracking and/or locating a pig stuck in a pipeline can present a challenge. A little preparation and proper tracking tech-niques however, help ensure success. Th ere are man applica-tions in which it is important to track the progress of a pig as

it travels through a pipeline, including:

• Running a smart pig• Conducting a nitrogen purge with pigs• Running a pig with a transmitter to track a smart pig

Th ere are also several situations that can result in a pig getting stuck in the line such as:

• Excessive by-pass when the pig is in a bend• Excess debris build up in front of the pig• An obstruction such as a buckle in the pipe or a partially-closed valve

ManpowerFirst, plan to have an adequate number of two-man crews with each

crew consisting of a pipeline operator who knows, and has access to, the pipeline right-of-way (ROW), as well as a contractor who is experienced in tracking equipment and procedures. Th e number of crews needed depends upon a variety of factors, including:

• Is the ROW accessible by vehicles?• How long is the run from launcher to receiver?• What is the velocity of the pig under expected conditions?• Is the pig propelled with gas or liquids?• Is there a contingency plan if the pig gets stuck and can, or can’t be

located?

Job preparation and trainingTh e pipeline operator should provide suitable maps and alignment

sheets, and be thoroughly familiar with the pipeline ROW and access to various tracking locations. Th e contractor should possess an operating manual and be thoroughly familiar with the operation and maintenance of the tracking equipment. Crews should practise with the equipment so the signal can be observed, recorded and interrogated before every launching of the pig. For practice purposes, the transmitter should be positioned a few metres away from the electronic receivers and moved parallel to the receivers at various velocities to demonstrate what the signal will sound and look like. For training, the transmitter should be placed out of sight. Th e trainee, following the instructions in the opera-tor’s manual, should walk along a line that is parallel, but about three metres from the transmitter at its closest point. Th is exercise should be conducted in a fi eld with overgrown vegetation where conditions are less favourable.

EquipmentElectronic tracking systems are an electromagnetic-pulse transmit-

ter (mounted on the pig) and an electronic receiver system. Th e trans-mitter should be selected, based on the specifi c application considering size and wall thickness of the pipeline, and the amount of time that it

PIPELINEANALYSIS

PPSA ED P102-104.indd 102PPSA ED P102-104.indd 102 5/8/09 14:56:335/8/09 14:56:33


geophone probe, each crew should have a pipe locator to confi rm it is over the pipeline. A spare receiving system should be carried by one of the tracking crews. If the pipeline goes through a casing, the receiver antenna should be positioned a bit upstream or downstream of the casing pipe so that the signal doesn’t have to travel through two pipes. Where possible, pigs should be tracked at approximately two-kilometre (1.5-mile) intervals. Avoid areas with a lot of traffi c, railroad crossings and high voltage power lines as these may induce ‘noise’ in the tracking system receivers.

may take to locate the pig should it get stuck. Lithium batteries will provide extended life (though there may be some restrictions on the use of lithium batteries in some areas). Th e tracking equipment should provide audible, visual and recorded indication of the pig passage. In addition to the electronic receiver, a geophone is recommended as it amplifi es the sound being made by the cups, discs and brushes as the pig travels through the line, allowing the crew to hear the pig coming well in advance of its scheduled arrival time at the tracking location. Once the crew or crews are in place, confi rm that all mainline valves are fully opened and that fl ow is going through the receiver barrel. Each crew should have spare batteries as needed, and a laptop computer with variable project inputs and a spreadsheet for recording data and notes. When positioning the tracking system receiving antenna and

“Communication is critical. Everyone involved in the tracking process must have accurate information at all times to know when the pig is expected to arrive at a particular location"



this point, one person equipped with an antenna and receiver would start at each station walking toward each other until the stuck pig is found. If the ROW can be cleared in this area it will make the job easier and success more likely. If there are any fi ttings, valves etc., between the two stations, they should be searched fi rst. Th e receiver and associ-ated valves and fi ttings should be checked on a regular basis (every few hours is recommended) until the pig is located.

CommunicationCommunication is critical. Everyone involved in the tracking

process must have accurate information at all times to know when the pig is expected to arrive at a particular location. Should a pig pass a given tracking station (station 73 for example) but not arrive in a timely manner at the next station (station 74), the crew at station 74 should wait for the late-arriving pig. Perhaps the pig was damaged and is still moving but is by-passing fl ow, or one of the units (compressor or fl ow) may have shut down, causing it to be late. Th e crew should proceed as though nothing has changed, assuming that the signal was simply missed for some reason.

If aft er diligent tracking eff orts all the way to the receiver, the crew has not heard/recorded pig passage at any location, including the receiver barrel and associated valves and fi ttings, it would be as-sumed that the pig is stuck somewhere between station 73 and 74. At

Where possible pigs should be tracked at

2KMintervals

“Th e tracking equipment should provide audible, visual and recorded indication of the pig passage"


from your Gas Detection DecisionsRemoving the Environmental Equation


Model Series 700Gas DetectionSensors

100% Encapsulated

Water-Proof

Vibration-Proof

Corrosion-Proof

Multi-Layer Surge Protection

Pre-emptive Fault Diagnostics

[email protected]

CATALYTIC COMBUSTIBLE

INFRARED CH & CO2

ELECTROCHEMICAL TOXICS

OXYGEN DEFICIENCY

SOLID STATE H2S

PHOTO IONIZATION VOCs


INFRARED CH & CO2


OXYGEN DEFICIENCY

SOLID STATE H2S


Detcon Ad.indd 1Detcon Ad.indd 1 28/7/09 16:13:0128/7/09 16:13:01


PROBLEMA STICKY

PPSA member John Smart of John Smart Consulting Engineers in Houston addresses the challenge of sediment in oil and gas pipelines.

Black powder, or sediment in pipelines, is generated by corro-sion reactions in the pipeline and can either accumulate in the line or move from fl uid drag in pipelines once the veloc-ity reaches a certain minimum value. Or, black powder can

be swept clean by pigging. Knowing the velocity required to move loose powder can help plan the cleaning of a pipeline. Th is helps to prevent sticking of pigs by solids accumulation in front of a pig. Th e bed height to which black powder can accumulate under existing fl ow conditions can help plan the amount of debris expected to be removed from a line and therefore the method of cleaning. Particulates consisting of iron oxides, sulfi des, carbonates, sand, salt, clay, asphaltenes, and so on, can be gener-ated in a pipeline if water exists in the line and the water can wet the walls of the pipe. Corrosion can also occur in nominally dry pipelines under upset conditions and during hydrotesting. Solids will accumulate as sedi-ment if the velocity is not high enough to drag the particles along or if they are glued in place by hydraulic oil or corrosion inhibitors, or form crusty deposits. Sediment deposits will cause increased pressure drop through the pipeline and can lead to blockage of the line, especially during pig-ging. Build-up of solids in front of a pig can cause the pig to become stuck. For a 12-inch pipeline with ½ inch (1.25 cm) deep deposits in the bottom of the line only, the volume of solids is about 223 per mile, weighing over 4000 pounds per mile (1130 Kg/KM). If the depth of the deposit were one inch, the weight of iron oxides/sulfi des would be over 18,000 pounds per mile (5000 Kg/KM). Build-up of solids in front of a cleaning pig can cause a plug to develop in the line, which can stick the pig.

PIPELINEFOCUS

Pipeline.indd Sec1:106Pipeline.indd Sec1:106 5/8/09 15:03:475/8/09 15:03:47


• Use of fl uid by-pass and jetting in front of the pig• Use of gel pigs to suspend the particulates depending on how much

solids is expected to be in the line• Use of less aggressive cups and discs on the pig

Other operating parameters such as how long the pipe can remain out of service are also important factors. Use of heavier more viscous oils will result in much longer particle settling times back to the bottom of the pipe if stirred up by turbulence in front of the pig.

Iron compounds Diesel is sometimes used for cleaning pipelines as the compound is

relatively inexpensive and available, and much of it can be recovered or sold. Th e velocity for entrainment of the same iron compounds is shown in Figure 3, with velocities similar to 20oAPI oil. In eight-inch lines, 1 mil (40 micron) particles will move at 1.9 feet/sec., and at 6.1 feet/sec for fi ve-mil particles. For 18-inch lines, one-mil particles will move at 3.8 feet/sec., and 8.6 feet per second for fi ve-mil particles. Th irty inch lines require 5.8 feet per second for one-mil particles and 10.3 feet per second for fi ve-mil particles.

Planning aheadKnowledge of whether or not the fl ow conditions can sweep solids

through a pipeline ahead of a cleaning pig is thus of great importance when using pigs to clean a line, and of fundamental importance in de-signing the pig cleaning process. Sticking a pig in a pipeline is a problem on land, but absolutely cannot be tolerated in off shore lines. In deep water, it would be extremely diffi cult to handle these solids accumula-tions and would likely require replacement of the line if they could not be removed. Furthermore, when an off shore platform loses its sales line, the platform must be shut in, cutting off production. Pipelines must be cleaned for a number of reasons, including the need to maintain operat-ing effi ciency, to be able to successfully run ILI tools, and to distribute corrosion inhibitors over the entire internal wall of a pipeline in wet mul-tiphase gathering systems. Solids can include produced sand, corrosion products such as iron carbonate, iron oxides and iron sulfi de, metallic iron, weld spatter, salt, asphaltenes and scale. Th e term black powder is a good generic name for these solids, as sometimes they don’t seem to have a lot in common other than being black. When a disc, scraper, or wire brush pig is run inside a pipeline, solids are scraped off the wall of the pipe and pushed in front of the pig. Whether or not these particles fall to the bottom and stop moving or are swept along by fl uid velocity determines the extent that of solids will accumulate ahead of the pig.

Water velocity to move sand Th e velocity to move rounded sand particles with a shape factor of

1.5 in water at 60F is shown in Figure 1. Pipe diameter is given in inches. Th e velocity required depends upon pipe diameter but is fairly constant for sand particles greater than about two-mils (50 microns) eff ective di-ameter. Th e meaning of this velocity is that for a pipeline being pigged, if the fl uid velocity is greater than that shown, particulates in front of a pig will not pile up to form blocking deposits.

Iron compounds in 20oAPI oilTh e calculated velocity to move iron compounds in 20oAPI oil by

velocity is shown in Figure 2. Oil velocities from 10 feet/sec to over 15 feet per second are required, plus the 10-15 percent safety margin for up-hill fl ow. Some types of pigging programmes designed to accommodate solids is still desirable. Th ese include:• Progressive pigging

00

1

2

3

4

0.0005

Particle equivalent diameter, Inches

0.001 0.0015 0.002 0.0025

8 inches

12 inches

18 inches

24 inches

30 inches

Figure 1 : VELOCITY TO MOVE SAND PARTICLES IN WATER

0.05 0.1 0.15 0.2 0.250

0

5

10

15

20

Particle equivalent diameter, inches

Figure 2 : VELOCITY TO MOVE IRON COMPOUNDS IN 20OAPI OIL

8 inch

18 inch

30 inch


Elster AD.indd 1Elster AD.indd 1 28/7/09 16:13:2728/7/09 16:13:27


pipeline, it fractures and becomes very fi ne, with a size in the range of one micron. Extremely fi ne powder like this can pass through normal pipeline fi lters. Th ey also report that extremely fi ne powder such as one micron can be tolerated by reciprocating compressors, but can damage turbine compressors, even with fi lters in place.

Th ese velocities also illustrate the cleaning requirements when crude oil pipelines are converted to natural gas service. One technique to keep the amount of black powder fl owing down a pipeline is to treat the line with corrosion inhibitor. Corrosion inhibitors put a tacky fi lm of the wall of the pipe to which the black powder sticks, making it im-mobile.

Figure 5 shows the eff ect of pipeline operating pressure on the ve-locity required to move 1 mil diameter and fi ner black powder particles in an eight-inch pipeline

Challenges aheadConversations with pipeline operators reveal that when pipelines

are cleaned for such purposes as ILI inspections, using pigging with and without chemical cleaning initially results in a clean line. How-ever, aft er some time, black powder is usually found coming down the line again when the lines are dry. Further, many gas pipelines are not dry, but contain compressor lubricating oil and possibly other liquids such as glycol which can adhere solids to the wall of the pipe and keep them from moving. One common technique to keep black powder from moving is to treat the line with a corrosion inhibitor. Inhibitors are tacky compounds and can glue black powder in place.

Further, operators report, when black powder solids move down a pipeline, they tend to fracture and become very fi ne, in the range of one micron or less. Th ese particles are more easily moved down a line. One advantage for fi ne powder in pig cleaning is that it settles much more slowly than coarse powder, and can be kept fl uidised more easily by turbulence. However, it is much more diffi cult to fi lter.

Th e most important problem with black powder movement is that it can destroy equipment such as gas compressors and turbine genera-tors by the abrasive action of the particles on the equipment.

Lines using No. 2 diesel should also be treated with caution as larger particles will collect in front of the pig and will need to be pushed by it. Th is means that diesel is not a particularly good fl uid to use when clean-ing very dirty pipelines containing black powder. Also, with the safety margin added in for up-hill fl ow, these numbers may be a bit optimistic. Th erefore, by-pass pigs with jetting nozzles, progressive pigging or gel pigging is more conservative for lines with iron oxides, sulphides and carbonates in them .

Black powder in natural gas pipelines

Figure 4 shows the velocity to move black powder in natural gas pipelines operating at 60F and 1000 psi. Gas velocity is 10.4 feet per second in eight-inch lines, up to 13.6 feet per second in 30-inch lines. Natural gas pipelines can vary in their fl ow velocity depending on the season, and may cycle above and below this number. If the pipeline was operated in a corrosive condition, even just enough to cause mill scale to fl ake off the inside wall, large amounts of black powder could result that could possibly be delivered to customers, or, at the least, require substantial fi ltering before delivery. Th ese results explain why gas pipeline compressor stations need to have fi lters installed in front of compressors, to catch black powder coming down the pipeline. Pipeline operators report that as black powder is transported down a

0

0 0.002 0.004 0.006 0.0008 0.01 0.012

2

4

6

8

10

12

14

16


Figure 4 : BLACK POWDER IN NATURAL GAS PIPELINES

8 inch

12 inch

18 inch

24 inch

30 inch

500 1000 1500 200000

5

10

15

20

25

30

35

40

0.00001 inchdiameter

0.0001 inchdiameter

0.01 inchdiameter

Gas pressure, psi

Figure 5 : VELOCITY TO MOVE BLACK POWDER PARTICLES IN AN EIGHT-INCH PIPELINE AS A FUNCTION OF LINE OPERATING PRESSURES

0

0

2

4

6

8

10

12

14

0.01 0.02 0.03 0.04 0.05 0.06


Figure 3 : IRON COMPOUNDS IN NO. 2 DIESEL. THE PROPERTIES OF THE DIESEL USED FOR CALCULATIONS WERE 32OAPI DIESEL AT 60OF, WITH A VISCOSITY OF 200 CP.

8 inch

18 inch

30 inch



Every year, refi neries around the world spend millions of dollars needlessly without re-alising it. Maintenance cycles are shorter than they could be,

operating costs are higher than they should be, and unscheduled shutdowns leading to lost production are all too common. Pall, as a fi ltration and separations solution provider, is able to support refi ners with industry leading expertise and a portfolio of products that help maximise the effi ciencies and operations in many critical processes, including:

• Crude distillation unit.• Reformer units effi ciency improvements.• Hydro-treater/hydrodesulphurisation/hy-

drocracker reliability upgrading.• FCC separation technology enhancement.• Amine units and sulphur recovery plant

optimisation.• Final products purifi cation/cleanliness level

upgrading of exported fuels. • Sour water treater protection.• Water and waste water plant upgrading.

Enabling a greener future Oil refi neries and processors are not

only striving to produce environmentally friendly products, but are equally mindful of the impact of their own operations. Recent advances in separation technologies enable new clean and green fuel specifi cations to be achieved when producing eco-friendly fuels, cleaning up wastewater and increasing energy effi ciency – what some would call the ‘Big Th ree’ of today’s green revolution. In addition, oil refi neries equipped with a FCCU or RCCU face the challenge of further particulate emission reduction. In Europe many countries now target 40-50 mg/Nm3 particulate emissions in the FCCU/RCCU fl ue gas. Even more stringent is the proposed micro particulate specifi cation relating to

particles below 10 microns and 2.5 microns, so-called PM 10 and PM 2.5 respectively and likely to become legislation in some countries before the decade is out.

Pall advanced separation technologies provide solutions as best practice to refi neries and process licensors in clean fuel projects in multiple applications including:

• HDT / HDS feed fi lters & coalescers (Cata-lyst Bed Protection).

• Burner protection for HDT/HDS furnace (to minimise Nox emissions & operation costs).

• Hydrogen recycle gas compressor protection.• Heat exchanger protection – Steam stripper

feed exchanger.• Sour water stripper (SWS) protection.• Final product de-watering.• Amine & sulphur plant protection.

Global company, local presence From regional offi ces in Dubai, Pall pro-

vides support and sales to the Middle East oil refi neries, including GCC countries and Egypt. Pall’s presence has strengthened in the MENA

region from two engineers in 2004 to 35 in 2008 plus sales, marketing and laboratory ser-vices, test rigs, pilot and demonstration plants, demonstrating a commitment to provide world class fi ltration and separation solutions to the region by being close to its customers.

Pall provides services and solutions to existing refi neries in areas such as:

• Improvement in hydrocarbon products quality.

• Process equipment protection.• Total Fluid Management (TFM) services

including mobilised de-pollution services, cleanliness control and laboratory services in contamination analysis.

• Onsite auditing and online pilot tests to help our clients to select contamination control effi cient technology.

Pall’s list of references is extensive and it is very honoured to count Saudi Aramco, Takreer, KNPC and Qatar Petroleum amongst its major reputable customers. Pall is actively communicating with process licensors, local and international contractors, and end-users to propose global solutions. Th rough continu-ous improvement programmes and annual investment in R&D, Pall provide a steady stream of innovative, high-quality products of polymeric, inorganic, metal and ceramic formats, backed by unmatched service and support. Pall’s fi ltration and separation solu-tions have been successfully applied over many years in refi neries throughout the world, in consultation with customers, to design and deliver long-lasting solutions for sustainable and profi table success.

ASK THEEXPERT

Mohsen Salehabadi is responsible for Pall’s oil refi nery sales and marketing programmes in the Middle East. He has supported reputable oil refi neries and engineering contractors for process optimisation in distillation units, hydro-processing plants, sulphur and amine units, reformers, FCC, isomerisation, alkylation and lube oil movement areas and total fl uid management (SM) programmes in refi nery processing plants.

Refi ning operationsMohsen Salehabadi tells O&G how advanced phase separation technology lowers the costs associated with petroleum refi ning processes.

Pall.indd 110Pall.indd 110 5/8/09 15:12:595/8/09 15:12:59

Pall AD.indd 1Pall AD.indd 1 28/7/09 16:23:2128/7/09 16:23:21


There are fears of over-capacity following the recent decline in demand for petrochemicals. How do you see that changing in the future?Abdulaziz Alhajri. Th e specifi c high end infrastructure and advanced packaging markets of the Middle East and Asia where we operate have not experienced the decline in demand seen in many other petrochemi-cal market sectors. Also, generally, the Asian markets that we serve havee

fared better than many other parts of the world during these volatile market conditions. We expect that the high growth of the added value polyolefi ns application markets will resume in the near future.

How has Borouge’s expansion strategy changed to refl ect the cur-rent economic climate?AA. We have not designed our strategy around today’s environment. We

FORGING AHEAD

Ahead of the 2009 Petchem Arabia Conference in Abu Dhabi, Abdulaziz Alhajri, CEO of Borouge, Abu Dhabi National Oil Company’s refi ning subsidiary, tells Dominica Andrews of the World Refi ning Association why his company has no intention of delaying its investments.

Refining.indd 112Refining.indd 112 5/8/09 15:04:285/8/09 15:04:28

Carbovac AD.indd 2Carbovac AD.indd 2 28/7/09 16:10:2728/7/09 16:10:27


How do you see the current business model evolving for Gulf petrochemical producers? AA. Reducing reliance on the availability of attractive feedstock as the drive to apply market pricing will increase; optimising costs throughout the manufacturing process and integration of upstream and downstream processes is

becoming increasingly important whilst ensuring local supplier status in the markets where the customers are. Developing our own technologies through innovation and mergers and acquisitions will be a key success factor.

have a very clear long-term strategy and we are focused on implement-ing it. We see no reason to delay our investments and we aim to capitalise on the high growth when it resumes.

What is the current status of the Borouge 3 project? Will there be a Borouge 4 project? AA. A number of contracts have been awarded for the Borouge 3 expansion at our plant in Ruwais in Abu Dhabi. We have taken Bechtel on board to provide proj-ect management support (PMC), and we commissioned the Linde Group to construct a 1.5 million tonnes per year ethane cracker. We awarded Tecnimont the contract to execute the front-end engineering and design (FEED) for the poly-olefi ns units and off site and utilities. Th ese contracts confi rm our full commitment to the Borouge 3 project which will increase the total capacity of our plant to 4.5 million tonnes of polyolefi ns annually by the end of 2013. We are considering future opportunities beyond 2013 with our owners but it is too early for us to discuss further expansion; right now we need to focus on the implementation of our Borouge 2 and Borouge 3 projects.

How high is demand for Borouge’s products?AA. You fi nd our plastics solutions in everyday products all around you; in highly eff ective water and sanitation pipe systems, energy and com-munication cables, automotive components, healthcare and advanced packaging. Th ey play an important role in addressing some of the world’s challenges such as access to safe drinking water and sanitation and the reduction of the weight of packaging and motor vehicles. At Borouge, we continually look at providing better solutions to these challenges. Our commitment to “Value Creation through Innovation” drives us to seek innovative solutions which we do in cooperation with our customers throughout the value chain.

How is Borouge dealing with the fi nancial crisis?AA. Firstly, the priority is to remain focused on our long-term goals and avoid distraction. Secondly, we focus on the most effi cient and eff ective management of our operations, and thirdly, and of course most impor-tantly, we stay as close as we can to the market and to the needs of our customers.

What new opportunities has the current climate presented for Borouge?AA. In addition to having more favourable market conditions for our investment plan, the current climate has also given us an opportunity to prove to our customers that we are the most reliable long-term partner for them.

Since 1997 the World Refi ning Association has organised high level, strategic and technical conferences within the downstream sector

worldwide. Petchem Arabia 2009 is taking place from 12-15 October in Abu Dhabi. It is set to attract over 200 participants with representation from petrochemical companies, NOCs and IOCs, technology and solution providers, specialty chemical companies, traders, consultants, fi nanciers and governments.

ABOUT THE WORLD REFINING ASSOCIATION

“Developing our own technologies through innovation and mergers and acquisitions will be a key success factor”

Established in 1998, Borouge is a joint venture between Abu Dhabi National Oil Company (ADNOC) and Borealis A/S, one of Europe’s largest polyolefi n producers. The company is a market leader in high-performance polyolefi ns.

Refining.indd Sec1:114Refining.indd Sec1:114 5/8/09 15:04:315/8/09 15:04:31

Our parent company, AQUILEX CORPORATION, based at 3399 Peachtree Road NEAtlanta, GA 30326 USA (http://www.aquilex.

com/news.htm) is a platform of global, complimentary businesses providing maintenance, repair and overhaul services with associated

engineering and technical support. These businesses serve a variety of heavy industries, both in the USA and internationally, including Power

Generation (Nuclear, Fossil, Hydro), Oil & Gas Processing,

Chemical / Petrochemical Production, Pulp & Paper Mills and Steel / Metal Refi ning.

AQUILEX WELDING SERVICES BV is the leader in mechanical life extension

and enhancement of a wide variety of process-critical components. We deliver reduced outage cycle times

and superior quality by applying ourpatented, remote-controlled weld-overlay systems

to sophisticated repair and life extension challenges.

Whether through our shop services out of Poland or our fi eld services out of the Netherlands, we are able to provide unrivalled support on

either a scheduled or emergency basis.

We offer component solutions for, amongst others Vessel Corrosion / Erosion RepairHeater and Waste Heat Recovery

Reformer and Ethylene Furnace maintenance

Please view our website at http://www.weldingservicesbv.com

Tel:+31 (0) 88 2784531Fax: +31 (0)88 278 4540

Marconiweg 163225 LV Hellevoetsluis

The Netherlands

SOLUTIONS BY INDUSTRY > OIL REFINING

SOLUTIONS BY INDUSTRY > WASTE TO ENERGY

SOLUTIONS BY INDUSTRY > PETROCHEMICAL

Aquilex.indd 1Aquilex.indd 1 30/7/09 08:44:5930/7/09 08:44:59

How is the economic crisis impacting refining? Martin Tallett. Th e place we must start is with demand. Versus what the industry was plan-ning, we are facing a reduction of over fi ve million barrel per day (bpd) for 2010 – and one that does not recover but extends to seven million bpd and higher by 2015 and beyond. Th is is a huge – and seemingly permanent – loss. Together with supply changes centred on increasing supplies of biofuels and other

non-crudes, it is going to rewrite the outlook for and economics of refi ning for many years to come. Non-OECD countries and Asia will continue to grow, but it is the Atlantic basin that has been most severely impacted and where demand will stay fl at. Th e implications

are for substantial refi nery rationalisations and clo-

sures. Our recent

WORLD model based projections, includ-ing in support of the 2009 OPEC World Oil Outlook, show, without closures, refi nery utilisations at unsustain-able levels, below 75 percent in several world regions.

What does this mean for refi n-ery projects, including those in the Middle East?MT. Th e ‘golden’ margins from 2003 through to mid-2008 led to 24 million bpd of listed projects by late 2008, of which four mil-lion bpd are under construction. Based on our projections, the world needs total new capacity of only around 7.5 million bpd by 2015 and somewhat over 11 by 2020. If you list out projects for the Middle East, you arrive at eight million bpd of planned additions, plus over three million bpd in North Africa. It is diffi cult to see more than two million bpd of these projects being justifi ed for start up before 2015, and three million bpd before 2020. It is our sense that every project needs to be very closely scrutinised in terms of its justifi cation and security of product outlets in the context of a global market that has substantial excess capacity and willingness to export.

What does this mean for the major projects in the region?MT. In our view this means there is scope for a number of the leading projects. Saudi Aramco has delayed both Yanbu and Jubail but is now moving ahead with bids at today’s, hopefully lower, cost levels. It is similar for the Al Zour refi nery project in Kuwait, plus there are some other advanced projects in the UAE and elsewhere.

Th e two leading Saudi projects will pro-vide assured outlets for heavy crude oils – al-though, interestingly, there could be a medium

EXECUTIVEINTERVIEW

term shortage of such crudes because of supply declines and substantial new coking capacity.

Both refi neries also stress dis-tillates over gasoline which we believe makes sense and Jubail incorporates production of par-axylene, benzene and propylene, all petrochemicals which have been experiencing growth rates much higher than those for fuels products. Where projects emphasise these products and assured domestic demand, we believe their economics will be sound. Th e issue comes with projects that export.

How does Ensys help oil and gas companies best plan ahead against the backdrop of the volatile worldwide energy market?

MT. Our approach – and belief – is that you have to evaluate the downstream industry on a global scale and in a way that captures the supply, product and regional interactions. Th is is the core of our WORLD modelling approach. It is used by and for government agencies such as the US DOE and EPA, by international insti-tutions, notably the World Bank, International Maritime Organisation and OPEC, and major oil companies, to obtain quantifi ed assessments of future refi ning activity, economics, invest-ments and trade.

Today, we are focussing on new services that provide our projections in the form of integrated outlooks of downstream ‘strategic parameters’: crude and product prices/diff eren-tials, refi nery utilisations, investment require-ments and margins by region. We believe these will provide sound planning bases for strategic decisions. Th e projections will be developed using diff erent scenarios, thus enabling users to address the wide uncertainties that exist in the outlook.

Walking a refi ne lineThe global recession has impacted heavily on most industries around the world, and the oil and gas

sector is no exception. We hear about its effect on refi ning with EnSys Energy’s Martin Tallett.

Martin Tallett heads EnSys Energy, specialists in refi ning economics and global oil markets analysis. EnSys works closely with oil companies, government agencies and industry institutions including the World Bank and OPEC. Its international experience covers North and South America, Europe, the Middle East and Africa.

“Our approach – and belief – is that you have to evaluate the downstream industry on a global scale and in a way that captures the supply, product and regional interactions”


Ensys_EXINT.indd 116Ensys_EXINT.indd 116 5/8/09 15:15:395/8/09 15:15:39

Ensys AD.indd 1Ensys AD.indd 1 28/7/09 16:14:2528/7/09 16:14:25


an order for this equipment and it could take a long time until it is avail-able. From the logistical side of the business, the biggest challenges have been the infl ated prices we’ve seen. Th at aff ected the price of contractors and paying for equipment. Th ose prices were infl ated and now, even with the low oil prices, they are still infl ated.

What about the challenge in terms of human capital? How challenging is it to recruit people to carry out workover engineering work?KAA. It’s hard to fi nd people nowadays with the right skillset. We’re put-ting the new graduates through intensive training programmes to allow them to learn the basics of running rigs – whether it’s a drilling rig or a workover rig. We have adopted a programme called the ‘Accelerated Training Programme’. It’s a one-year programme with a rotation be-tween engineering and operations. It’s especially suitable, not for petro-leum engineers but for mechanical and chemical engineers, because they get to become familiar with the equipment involved. Another important programme is Saudi-isation which has been very valuable. You won’t fi nd any non-Saudis in management. Th ere aren’t more than 25 to 30 percent of expatriates in any department.

What are the main health and safety issues you are tackling?KAA. Working in confi ned spaces in the sea certainly creates its chal-lenges. Accidental gas releases are especially deadly so that has to be taken care of. When you are working on an off shore rig it’s important to educate people in safety and they should make it a habit and as part of their daily working lives.

What sort of work do you foresee your team doing in the future?KAA. I think we’ll be working on more complex wells. Th e more we ad-vance in technology, the more complex the wells become.

ALL IN A DAY’S WORKEver wondered what it’s like to work for Saudi Aramco? O&G catches up with Senior Workover Engineer Khalifa Al-Amri to find out more.

Can you describe what your role involves?Khalifa Al-Amri. My role involves a variety of workover jobs that range from simple changing and replacing defective electrical submersible pumps to tasks as complicated as plugging a well and drilling it. Most workover wells are geared for re-entries as their technologies have ad-vanced greatly during recent years. Many rigs are assigned to do such jobs in order to save assets that don’t produce anymore. With a short drill these assets can be put back on line. Th e most common work we do is re-entries – all types; long radius, medium radius and short radius re-entries. What we are mainly using to carry out this work is existing technologies that have been improved or upgraded. In the past we could not do as many re-entries as we do now because we were limited depend-ing on the size of the well and of the equipment. We are now able to achieve nearly all requirements using technology such as expandable tubulars, new cementing equipment and ultra-slim hole equalising tools. Th e greatest advancement has been slimmer drills.

What are the biggest challenges that you face currently in your work?KAA. From an operational point of view, I would say the biggest challenge is the competency of manpower. Also the lead-time required for certain types of equipment to be manufactured. Diff erent wells have diff erent designs and we work on wells that have existed for 60 to 70 years. Every time a well gets scheduled for workover we have to look at its design and some of the designs are obsolete so we have to come up with a new tech-nology to be adapted in those wells. Th at requires placing a request and

PERSONNEL

KhalifaAmri.indd Sec1:118KhalifaAmri.indd Sec1:118 5/8/09 15:02:545/8/09 15:02:54

From the people you hire to the products you sell, if you’re in business, we’ve got it covered...

Your World. COVERED

Find out more: www.ngoilgasmena.com

Oil & GasCollaboration between Government and multinationals to ensure the energy supply is developing on two fronts. O&G is the defi nitive publication for stakeholders and service companies to read about the regional projects, technologies and strategies affecting their group.

NextGen Power & EnergyA poll of 4000 utility executives posed the simple question: what keeps you up at night? The answers were costs, new technologies, ageing infrastructure, congested transmission and distribution, viable renewables and inadequate generation capacity. NextGen P&E covers them all.Available for: US

Find out more:

www.nextgenpe.com

InfrastructureInfrastructure provides insight on how developers can achieve critical objectives by integrating leading-edge solutions across their operations – helping them to make informed decisions about technology and operations solutions for all of their areas of responsibility.Available for: Middle East, Europe

Find out more:

www.menainfra.com

Business ManagementWhat business processes work? What are the proven, successful strategies for taking advantage of domestic and international markets?Business Management is about real, daily management challenges. It is a targeted blend of leadership and learning for key decision makers in government and private enterprise.Available for: Middle East, US, Russia

Find out more:

www.businessmanagement.com

100Thousand Club 100Thousand Club Magazine is a unique venture – an exclusive magazine and content-driven website for a very select group of readers. Where informed writing is complemented by passion, superb Available for: Middle East, US, Europe, Russia

Find out more:

www.100thousandclub.com

AVAILABLE FOR: MENA / US / RUSSIA

MENA Edition

Find out more: wwww.ngoilgasmena.comww n

Russian Edition US Edition

CataloguePAge.indd 1CataloguePAge.indd 1 5/8/09 14:18:145/8/09 14:18:14


Lean manufacturing is designed to remove waste (non-value added processes) through the entire life of product, from the supplier of the

raw material to delivery of the product to the customer. Forms of waste include waiting, ex-cessive movement, re-work, over production, unused creativity and over management. I have practised Lean for 11 years. My Lean work has been mostly in the oil fi eld and given the tough delivery and well conditions, I can assure you that this is the best system for any oil fi eld man-ufacturing. Every well is a small manufacturing plant and each plant needs diff erent equipment as the conditions for each plant are unique.

Forecasting and inventory in the oil fi eld will not help you get the proper piece every time. Th is is particularly important given the

economic conditions we all fi nd ourselves in these days. Quick delivery of equipment for any given well with high quality is what you want. One of the major tools within the Lean toolbox is the concept of single piece fl ow and the re-moval of batch processing within the plant and fi eld operations. Batch processing comes from the concept that economies of scale drive the cost down for the benefi t of the customer and the company. Th is however leads to longer lead times. Single piece fl ow recognises that the cus-

tomer usually only needs one unit at a time and receiving 100 at a reduced rate usually leads to extra costs when you consider the full cycle of cost not just the one cell or process. In the oil and gas industry the beat (or tact) of the cus-tomer comes from the rig count they have avail-able. If they only have one rig why ship them 10 pieces of equipment?

Effi ciencies In Lean you recognise that long transport

times to market do not add value and tend to lead to batch thinking. Long lead times lead customers to think they had better order a large batch of pumps to ensure they don’t run out. Th e customer also might recognise cost savings if they order a large batch (batch dis-counting) however, if you review your cost for the whole cycle (not just the cell of purchasing) you will probably fi nd that the cost savings are wiped out. It is largely recognised in most industries around the world that inventory can cost up to 45-50 percent per year. APC can apply single piece fl ow and get product to the customer faster based on the tact (beat) of the customer’s rig availability. Toyota (the leanest company in the world) not only have their sup-pliers next door they set up their plants where their customers are – they don’t centralise.

Alkhorayef Petroleum is unique in that it is the only manufacturer of ESP equipment locat-

ASK THEEXPERT

ed in the Middle East, which is one of the largest users of ESP equipment in the world. Many of the other ESP companies centralise in one area. By applying lean manufacturing at WSP, the overall delivery of motors (in process time not including back order) has been reduced 87 per-cent, pumps 93 percent and seals 92 percent.

APC is currently accessing the needs of our customers in our WEPCO foundry and is applying lean principles to deliver a quality product. We are also reviewing the customers’ needs in Libya and Kuwait and using some of the Lean principles there to deliver better service with a reduced need for capital. In the book Natural Capitalism, Paul Hawkin, Amory Lovins and Hunter Lovins refer to Lean and how it applies to the environment. One waste, which I feel is the largest of all waste, is over production. Over production occurs when either the production is completed before it is required by the customer, when the product is produced and never consumed by the cus-tomer or the product is produced and quality issues prevent consumption by the customer. In all these instances, natural resources are consumed at a higher rate than necessary.

Putting Lean to workThe benefi ts of Lean manufacturing in the oil and gas industry, according to

Matthew Kenna, VP of Manufacturing at WSP & WEPCO, Alkhorayef Petroleum.

Matthew Kenna put his Lean manufacturing experience to work for Alkhorayef in 2008 and has completed a Lean Management conversion for two factories – a foundry and an ESP plant. Kenna has a fi nance degree from the British Columbia Institute of Technology and is a Certifi ed Management Accountant (1992).

“One of the major tools within the Lean toolbox is the concept of single piece fl ow and the removal of batch processing within the plant and fi eld operations”

MATTHEW KENNA

AlkhorayefPetroleum_ATE.indd 120AlkhorayefPetroleum_ATE.indd 120 6/8/09 08:32:076/8/09 08:32:07

Where there is a Well,There is a Way.

There is Alkhorayef.www.alkhorayefpetroleum.com

Alkhorayef Petroleum HQDammam Khobar Expressway

P.O. Box 30204Alkhobar 31952

Kingdom of Saudi ArabiaTel: (+966) 3 858 8090Fax: (+966)3 857 8569ISO 9001:2000 / ISO 14000 / OHSAS 18000

Alkhorayef full page Ad for NGOG.indd 1Alkhorayef full page Ad for NGOG.indd 1 28/7/09 16:06:2228/7/09 16:06:22


As investment in upgrading aging infrastructures grinds toa halt, health and safety departments of the region’s oilcompanies are entering dangerous territories. Faced withincreasing pressures to meet targets to eradicate work-place deaths and injuries, they are also becoming con-strained by shrinking budgets in the face of the economic

downturn. It’s a situation Qatar Petroleum Senior Health and Safety EngineerZaher Ataya knows all too well. “The financial crisis is one of the major chal-lenges we face now. Because of this, budgets are shrinking and you don’t haveas much room to improve or to do what you want.”

Ataya says shrinking budgets are affecting training and recruitment, butin particular the department’s ability to facilitate the modifying of equipmentin line with health and safety standards: “Equipment itself and modificationis particularly affected, particularly when it comes to modifying a facilitywhich was built 35 years ago. In that situation companies want to upgrade thefacility, especially for HSE. But you come to a point where that may not bepossible.” He goes on to say that Qatar Petroleum has even been forced to can-cel or put some projects on hold: “We have had to stop some of the projectsand prioritise just the work that is required to produce the oil. When the oilprices went up to US$150 a barrel there was so much recruitment and newprojects. But oil and gas has really been affected [by the fall in oil prices].”

Proactive measuresThere is, however, a more positive side to the credit crunch for Qatar

Petroleum’s health and safety department, jokes Ataya, who says one advan-tage is that because of project delays he and his staff are under less pressure tomeet multiple health and safety quotas: “The only positive now is that thereare not so many projects so not so many quotas.”

This temporary lifting of the pressure also relieves Ataya and his teamof one of the biggest challenges it faces: the risks posed by employing

contractors that are not always trained to work to the company’s HSEstandards. “In terms of safety, the biggest challenge we face is man-agement of contractors – especially an unskilled workforce thatyou bring in for a short period to work on a project. Then youexpect to have these safety incidents because these people arenot really trained and we don’t always have the time to trainthem. This is one of the major challenges.” To tackle the prob-lem, he says Qatar Petroleum is working on several initiatives,including providing incentives for contractors that practiceproper health and safety standards and selecting contractors

on the basis of their HSE practices: “The company has actu-ally looked to many programmes and ways to encourage

contractors, such as setting bonuses and incentives. Itis trying as much as it can to audit and inspect con-

tractors to try to push these companies to proper-ly train their people.”

A growing concernEnsuring contractors adhere to its stan-

dards is all the more important given QatarPetroleum’s commitment to raise HSEstandards across the board within the or-ganisation, as the company embarks on

an ambitious expansion strategy. In 2007 it an-

A risky businessBudget cuts and untrained contractors are just two of the challenges faced by QatarPetroleum’s drilling Safety Officer, Zaher Ataya. Diana Milne reports.

HEALTH & SAFETY

Zaher Ataya ED:16 july 6/8/09 09:19 Page 122

Abermed AD.indd 1Abermed AD.indd 1 28/7/09 16:05:0028/7/09 16:05:00


“We have had to stopsome of the projectsand prioritise just the workthat is required toproduce the oil”

One of the reasons why the minister wanted to establish stronger linkswith Qatar Petroleum’s HSE department was so that the company could beused as an example to others in the setting of health and safety standards, re-veals Ataya: “Qatar Petroleum is actually leading the way for industries inQatar and helping to set the standards and act as a regulator.” One of itsbiggest responsibilities, in this regard, is to encourage energy companies tominimise the impact on the environment. It has set itself targets, includingachieving zero gas flaring, maximising the use of energy to produce clean safeenergy sources and become a leader in sustainable development in the region.One of its most important achievements is the setting up of a departmentwhich deals solely with responding to oil spills in the area and has five oil spillresponse bases across the area.

Ataya says Qatar Petroleum is also involved in joint research ventureswith International Oil Companies (IOCs) such as Shell to carry out envi-ronmental impact assessments. “The environment has been a big concernto the company. The effort it will put into this is unlimited.” In terms ofpartnerships, it has also recently signed an agreement with IGTC-ChubbFire for the maintenance and repair of portable fire extinguishers at RasLaffan Industrial City. Under the terms of the agreement, IGTC-ChubbFire Qatar will supply all labour, supervision and tools for the mainte-nance and repair of the extinguishers and will provide inspection certifi-cates for all the work that is carried out.

Qatar Petroleum’s expansion plans and its close working relationshipwith the Qatari authorities means health and safety is higher on the agendafor the company than ever before. But heightened expectations, combinedwith shrinking budgets, mean this is a truly challenging time for Zaher Atayaand his team. �

nounced plans to invest up to US$20 billion in opportunities overseas invest-ment, including a US$7 billion refinery in Panama. It also signed an agreementwith the Tunisian government to establish a US$2 billion oil refinery in the coun-try with a capacity of 150,000 barrels per day. It later committed to building twoLNG receiving terminals in Texas at a cost of US$2.2 billion and in Italy whereit will own a 45 percent stake alongside ExxonMobil and Addison.

As well as downstream activities, it is involved in several high profile infra-structure projects, including the construction of one of the region’s largest waterand power plants, the US$3.9 billion Ras Girtas development on Ras Laffan,alongside Qatar Electricity and Water Company, GDS Suez of France, and Japan’sMitsui Corporation, Chubu Corporation and Shikoku Corporation. Earlier thisyear the company revealed plans to set up a consortium with the sovereign wealthfund, Qatar Investment Authority, which would see it invest in energy projectsoutside the Middle East and also make further downstream investments. Thesedevelopments and partnerships with international organisations heighten theneed for Qatar Petroleum to ensure it has world-class HSE standards in place.

Joined up thinkingTo create a more coherent HSE policy, Qatar Petroleum recently

consolidated HSE activities across its various departments and it has nowestablished a direct line of contact between corporate HSE and the QatariMinister of Energy and Industry, HE Abdullah bin Hamad al-Attiayah.This, says Ataya, has enabled it to more swiftly put into practice new HSEpolicies within the organisaton: “The benefit of this is empowerment. Themanagement commitment to HSE means it is easier to push things through.We’re not obstructed. The HSE message comes through loud and clear. Ifwe didn’t report directly to him the message might not reach that level.”

Zaher Ataya ED:16 july 6/8/09 09:19 Page 124

Caborne AD.indd 1Caborne AD.indd 1 28/7/09 16:09:5528/7/09 16:09:55

What are the key health and safety issues that the oil and gas industryis facing and how do the risks differ between offshore and onshore?Christophe Chausse. Health and safety remains the first focus of any O&Gcompany. Onshore and offshore have common concerns, but any vessel,barge, drilling ship and platform needs to be 100 percent ‘recovery and firstaid’ self sufficient. By its complexity and environment, offshore is the mostdangerous O&G area. Rescue procedure and recovery time are crucial andneed to be properly planned and handled. Confined space, access and res-cue are nowadays the main concerns, especially offshore. Fortunately, re-cent technologies and new systems assist workers by limiting theirexposure to risk.

Bob Masi. Dangers in the oil and gas industry haven’t changed much sincethe first oil well was drilled and the first barrel of oil refined. However, our un-

derstanding and awareness of the hazards associated with the production andrefining of fossil fuels has improved over the years. Toxic and combustible gasleaks present a danger to personnel and capital equipment investment in everyphase of the petroleum industry. Offshore safety is more challenging due toharsh environmental conditions, and personnel are bound to a structure orvessel surrounded by water. Operators and workers cannot simply walk to asafe area. Our philosophy has to be one that recognises a fundamental prin-ciple that our products are concerned with safety, in an environment wherefailure can have catastrophic consequences to human life, the environment,and possible destruction of major structures. One key issue facing oil and gasproducers is the requirement for efficient and safe operation amidst volatileand wide-ranging market prices. Safe operating conditions are not withoutcost. Safety budgets and continuing improvement in safety policies and pro-cedures require constant attention and should always remain a high priority.

In safe hands


Health and safety has come a long way in the oil and gas sector, although itremains one of the most dangerous industries in the world. We gauge the thoughts

of two experts in this field on the latest trends – Christophe Chausse

of Capital Safety and Detcon’s Bob Masi.

HEAD TO HEAD

Health&Safety RT:16 july 5/8/09 15:07 Page 126

Fa l l P r o t e c t i o n E x p e r t s

Gravity Tested. Safety Approved.

Capital Safety, World Leader in Fall Protection Equipments, provides specifi c solutions for Oil & Gas working environments : from Upstream (Drilling rigs, Supply vessels, Platforms...) to Downstream (Transport, Refi nery, Storage,...). Through its leading brand names DBI-SALA and Protecta, Capital Safety has been on the forefront of fall protection innovation for more than 50 years to ensure that workers are safe and employers have confi dence they are providing theiremployees with the best protection possible.

Wide range of training • Technical assistance • Customer services and bloc repair

Capital Safety Group EMEATel : +33 (0)4 97 10 00 10 • Fax : +33 (0)4 93 08 79 70www.capitalsafety.com • [email protected]

Capital ad.indd 1Capital ad.indd 1 28/7/09 16:08:0228/7/09 16:08:02


The oil and gas sector is one of the most dangerous industries in theworld. How is technology playing a role in protecting workers from po-tential dangers?BM. Automation and safety instrumentation is used to control productionand processing operations while providing real-time status of the work area.Well-designed process and safety controls utilise pre-emptive fault diagnos-tics and will more often than not alert personnel when conditions are chang-ing prior to the danger level. Automation and safety instrumentation hascontinually advanced in two very important areas: capability and sophistica-tion. Measurement and analytical technology continues on a steady line ofimprovement. Embedded intelligence at virtually every level of instrumenta-tion helps to reduce the probability of human error. The design characteris-tics of instrumentation for the oilfield require utilising advancements in

technology but in a package that is rugged enough to work at optimum andsafe levels in harsh environments. Properly engineered and applied technol-ogy simplifies operator interface and routine maintenance. The net gain is bet-ter fail-safe performance throughout the oil and gas industry. The key to safetyis reliability. The key to reliability is durability.

CC. During the last two decades the industry has received full attention from‘fall protection’ manufacturers and trainers. Specific solutions have been de-veloped to increase the reliability of products for the day-to-day tasks (highreliable sealed self-retracting life line, versatile harnesses, as well as engineeredfall protection system) but also rescue materials (rescue kit for self evacua-

tion), limiting suspension risks (suspension trauma straps), as well descen-der/evacuator (vertical and slope evacuations up to 400 feet). Comfort andsafety of workers has always been a focus; as one example the new Derrickharness includes high safety features that are easy to install, connect and use;and high comfort, which reduce fatigue effects, because the majority of acci-dents occur when the worker is tired or in a rush.

Are there any safety challenges unique to the sometimes harsh and in-hospitable conditions of the MENA region?CC. As in any outdoor job, harsh environments and weather variations are areal challenge for workers. People need to be prepared and trained for any sit-uation they might face. As a manufacturer, we always take into account thesedifficult tasks to develop with users the right products – reducing risks at workand workers’ tiredness, as well as increasing workers’ comfort and the relia-bility of products. We develop easy-to-use products and specific and cus-tomised fall protection solutions.

BM. The Middle East region is a vast desert region where extremely high tem-peratures, dust storms and high levels of UV are expected. Add corrosive gasesto the natural environmental conditions and the region ranks as one of the mostchallenging environments for instrumentation applications in the world.

In your experience, are the International Oil Companies (IOCs) moreaware of health and safety regulations than their counterparts from theNational Oil Companies or is this way of thinking a myth?BM. There is no difference in awareness by either an IOC or an NOC. Both areacutely aware of the requirement for health and safety regulations. IOCs may drawfrom a wider range of regulations and standards than an NOC. The net sum ofthe most stringent requirements may be the major difference between the two.

CC. A myth. Almost all O&G companies are health and safety focused. IOCsand NCOs work jointly to improve standards. NCOs mix and educate theirteams with Western consultants and safety specialists. Both IOCs and NOCshave to carry out risk assessments and rescue planning is evaluated. Themost difficult part is the education of day-to-day workers, inspection andmaintenance. As a leader in fall protection for the O&G industry, we havedeveloped unique product solutions but also all associated services. Theseinclude self retracting life line inspection and repair centre, awarenessvideos, onsite fall protection training and ISAFE system*. As fall protectionleader, we develop unique solutions and services to accompany both ofthem locally and globally for a safer world. �

Christophe Chausse is the Oiland Gas Global Director forCapital Safety. Chausse, a Frenchgraduated engineer, joined thecompany two years ago.

Bob Masi is Director of Researchand acting President at Detcon,Inc., a leading manufacturingcompany and global provider ofgas detection sensors, controlsystems and process analysers.

THE PANEL

*ISAFE system allows companies to inspect, track and inventory products through a PDAand web portal, reducing paperwork.

“Well-designed process and safety controlsutilise pre-emptive fault diagnostics

and will more often than not alert personnelwhen conditions are changing prior to the

danger level” Bob Masi

“As in any outdoor job, harsh environmentsand weather variations are a real

challenge for workers. People need to beprepared and trained to tackle any situation

they might face” Christophe Chausse

Health&Safety RT:16 july 6/8/09 09:14 Page 128



Model Series 700Gas DetectionSensors

100% Encapsulated

Water-Proof

Vibration-Proof

Corrosion-Proof

Multi-Layer Surge Protection

Pre-emptive Fault Diagnostics

[email protected]


INFRARED CH & CO2


OXYGEN DEFICIENCY

SOLID STATE H2S



INFRARED CH & CO2


OXYGEN DEFICIENCY

SOLID STATE H2S


Detcon Ad.indd 1Detcon Ad.indd 1 28/7/09 16:13:0128/7/09 16:13:01

In the last 20 years or so the oil and gas industry has acknowledged thataccidents are preventable and that safety is a value and not a competi-tive edge. It is important to emphasise that accidents are not unman-ageable, they are simply something of the past. I was attending a

conference in Tehran recently and it was particularly impressive to hear in theopening ceremony that accidents are preventable, that we do not need to haveaccidents happen.

Lifting and hoisting, driving safety and diving safety are our absolute num-ber one killers and we now see statistics that these three areas are the ones that westill do not have a good handle on and the areas where we continue to see toomany fatalities occurring. These accidents may only kill one or two at a time but

they are just as important as the accidents that occur less frequently but incur ahigh number of fatalities. We have therefore targeted our work in the last five yearstowards these three particular areas. A few years ago, a set of best practices was is-sued in regards to lifting and hoisting to address recommendations from the bestoperators in the world. We are hoping that everybody will be using or imple-menting these best practices. The documents are freely available to anybody andwe promote them at all the safety conferences we can around the world. Last sum-mer we published another recommended practice on diving safety also, becausethis was the third area we have been targeting in the last five years.

Low frequency, or the accidents that happen very rarely, say every one tothree years, have something to do with what we call process safety. This is the

Safety


The International Association of Oil and Gas Producers has been publishing safety data since1985. Hans Jorn Johansen, Head of the Safety Committee, examines the improvements theindustry has seen in the past 24 years and looks at what can be done in the future to enhancecurrent industry standards.

EXPERTANALYSIS

success

Hans Johansen ed:16 july 6/8/09 09:13 Page 130

process of maintaining your plant such that you know you can rely upon safe-ty features and that it will not all of a sudden break down or cause a se-ries of events unpredictably. While we are less likely to see these accidentsit is nevertheless an important area to deal with because the accident mayhave had a long time to build up, slowly breaking down the very compli-cated system that has been set up to ensure the safety and integrity of theplant. These accidents are much more complicated to deal with than astraight-forward accident that just kills one person at a time.

PressureOil and gas companies are engaged in exploration projects in some of the

most inhospitable regions of the world requiring high standards of safety.While best practices are developed and can be taken and implementedaround the world, there are many more challenges when starting fromscratch in the middle of nowhere as opposed to being in a fairly developedregion of the world where facilities are available. The InternationalAssociation of Oil and Gas Producers (OGP) represents around 50 per-cent of the world’s oil and gas producers and from our perspective bestpractices are increasingly being developed and taken around the world. Ofcourse I can only speak on behalf of the 50 percent of the world’s oil pro-duction that our members represent so we still have challenges as regardsthe other half of the oil production that takes place through other compa-nies that we are not directly dealing with.

Will we come to represent more than 50 percent of the world’soil production? Well, only time will tell, but over the last twoyears we have been quite active in promoting OGP as an or-ganisation that gives something to its members, I have seeninterest from companies in parts of the world where wehaven’t traditionally been so strongly represented, such asAustralia and the Far East. We have actually seen seven newmembers that have joined just recently, including a companyin Greenland, and have seen the growing interest of being partof a good organisation.

Best practicesWith so much experience in the oil and gas industry available today it

should be possible to take down and state the way you do business and thenreapply that in a different part of the world in a different plant, and in a senseprovide comprehensive safety guidelines, or best practices, for all workers.However, for some reason it doesn’t seem to be as simple as that. In my mindif you do not try to accumulate your experiences and learnings and transferthem to other parts of the company then you are wasting your energy. Andthat is one of the good things about being active in OGP, you are no longercompeting with best practices, you are sharing your best practices and open-


A GLOBAL INDUSTRYThe International Association of Oil and Gas producers(OGP) encompasses most of the world’s leadingpublicly-traded, private and state-owned oil and gas

companies, industry associations and majorupstream service companies. OGP members

produce more than half the world’s oiland about one third of its gas.

OGP has been publishing safetydata since 1985. Though there havebeen improvements in terms offatalities in recent years, muchremains to be done, particularly in

the areas of land and airtransportation, marine transfer and

lifting and hoisting, as well as diving andmarine operations. In particular, OGP’s Safety

Committee aims to:

• Promote the integration of safety into the everydaybusiness of OGP member companies and other E&Pcompanies and contractors

• Provide safety leadership with cost effectiveness• Promote a level playing field for safety that is

recognised by the E&P industry and administered bynational and global regulatory authorities

ing up completely to anybody who wants to know something and get this in-formation through a couple of mouse clicks on the computer or by callingsomebody in the organisation. I believe that is truly inspiring.

In order to achieve this, we at the OGP will need to better manage ourdocuments and we need to have a more interactive webpage that people canreally use, because sometimes it is not enough to have the telephone numbersof the right people to call. Sometimes you are not ready to call somebody andsay, ‘Look here, I need help, I’m standing in the middle of Alaska’. Sometimespeople want to go to a webpage and look at a Q&A, and so that is what we’redeveloping at OGP right now. We have set ourselves a target to be the fore-most reference point with regard to health and safety in the world and we aregoing to build databases of all this information that anybody can access fromanywhere in the world.

Later this year we will be developing key performance indicators becausewe need to have these in place before we can start saying these are the bestpractices. We will be starting to collect information to know what to manageand this will be the starting point for safety integrity works, but before this weneed the indicators. We will start publishing them from next year onwardsand this will ultimately result in a best practice document. We are definitelyspreading the safety message around the world and are also hoping to gathermore information on performance indicators and on experiences, but weneed more information before we can publish a best practices document onthis one because it is such a complicated subject. �

“We have set ourselves a target to be the foremost reference point as regardsto health and safety in the world and we are going to build databases that

anybody can access”

Hans Johansen ed:16 july 5/8/09 15:06 Page 131


GLOBALVIEW

Mark Sturgess ED:16 july 5/8/09 15:11 Page 132

It may not be the biggest name among international oil compa-nies (IOCs) but Hunt Oil is gradually carving a niche for itselfin some of the world’s emerging oil hotspots. As well as carry-ing out extensive activities in the United States and Canada, thecompany is rapidly moving in on the Middle East and NorthAfrica market, with exploration underway in Yemen, Oman,the Kurdistan region of Iraq, Morocco and Senegal.Describing Hunt Oil’s Middle East and Africa activities the

company’s General Manager for EMEA, Mark Sturgess, says: “We’re cur-rently drilling for oil in Oman to run a deep gas test. We’ve had a long his-tory in the country, comparatively speaking, certainly over the last eightto nine years. We see a significant amount of potential there for oil and onthe gas side.” He goes on to say that the company sees the greatest poten-tial from Kurdistan where it has exploratory acreage under evaluation. InYemen, the company’s biggest oil market to date in the MEA region, HuntOil’s oil exploration activities are carried out by its subsidiary JannahHunt Oil, which has a 15 percent stake in the Block 5 well. Gross produc-tion there averaged over 45,500 barrels of oil production per day in 2006,resulting in cumulative oil production of 158 million barrels. Three infillproduction wells at Dhahab and two at Halewah have been approved fordrilling and reservoir simulation studies have been completed on bothfields to evaluate additional drilling and compression requirements.

Gas focusWhile oil exploration is a key element of Hunt Oil’s strategy, its main

focus has become the burgeoning Liquefied Natural Gas (LNG) sector whereit is particularly active in Yemen. In 1997 Hunt Oil signed agreements withthe Yemeni government and partner companies to develop the Yemen lique-fied natural gas project. Natural gas reserves from Marib Block 18 and otherfields in the area have been allocated to the project, which, when working atfull capacity, will require one billion cubic feet of gas per day to produce 6.7million tonnes of LNG a year. The existing gas production facilities in MaribBlock 18 currently have a capacity of 3.2 billion cubic feet a day. Hunt oilholds a 17.2 percent stake in the firm developing the project, Yemen LNGCompany. It is currently constructing a two-train natural gas liquefactionplant with guaranteed capacity of 6.7 million tonnes per year. The project tobuild the pipeline was launched in August 2005 and YLNG signed three 20-year take-or-pay sale and purchase contracts with KOGAS, TGP and Suez,


With exploration active in Yemen,Oman and Iraq, Hunt Oil has

successfully staked its claim in theMENA oil market. O&G meets the

company's General Manager for EMEAMark Sturgess to find out how it

plans to beat the competition.


cerned people on the face of the planet and theyprobably know more about it than 90 percent ofthe population.” Although it is heavily involvedin traditional oil exploration, Hunt Oil’sBusiness Development group, is activity seekinginvestment opportunities in new energy sources,ranging from improved resource recovery to re-newable energy and clean technologies. Its partic-ular areas of interest, in addition to LNG, includegeothermal, solar, CO2, wind and LNG re-evapo-ration. In these areas it is particularly keen to ex-plore acquisition opportunities that would see itspread its footprint worldwide. In the past it hasacquired Newport Petroleum Corp for US$500million, Chieftain International for US$600 mil-lion and assets from Canadian 88 for US$120 mil-lion. Describing the importance of investing inalternative energy and unconventional energy ex-ploration sources, Sturgess says: “We have ourown unconventional resources department in theUS which has come up with some novel ideas. Ithink in the past, as an industry we’ve tended to ig-nore trying to evaluate things in depth and maybethat’s not the wisest decision in hindsight becausethere is a (oil) shortage looming.”

Organic growthHunt Oil’s interest in new investment op-

portunities reflects its long term strategy, which,as stated on its website focuses on organic growth: “Part of our business strat-egy is to focus on the pursuit of high potential projects, that in and of them-selves can significantly impact the company. The company remainscommitted to growth through organic exploration; and as such we placegreat emphasis on the early stages of the exploration process.” The websitestates that the company’s investments in new ventures is balanced out by afocus on “lower risk and more predictable sources of production and cashflow”. “Hunt balances technical and political risks with a very conservativefinancial strategy seeking to mitigate those risks and minimise exposurethrough partnering and leveraging strategies.”

Hunt Oil’s main focus remains the US and Canadian markets. It has sig-nificantly expanded its exploratory activities in South America, particular-ly Peru where it has acquired a stake in the upstream and downstreamsegments of the world-renowned Camisea project. It is running an activedrilling programme in the Gulf Coast regions of Texas, Louisiana, theWilliston Basin of North Dakota, the Permian Basin of West Texas and off-shore in the Gulf of Mexico, both on the shelf and in its deep waters. InCanada, where it operates under the name Hunt Oil Company of Canada,it is focussing on the Western Canadian Sedimentary Basin in Alberta andBritish Columbia. It now plans to expand its exploration activities inWestern Canada and in other parts of North America.

The Middle East, however, looks set to take a significant share of the com-pany’s activities as world demand for LNG grows and activities in theKurdistan region of Iraq reach their full potential. �

committing 100 percent of the guaranteed plantcapacity. The resulting LNG will be shipped tomarkets in the US and Korea.

These ambitious projects have not, saysSturgess, been affected by the global economicdownturn: “Obviously we have challenges likeeverybody else but for us it’s business as usual.”A bigger challenge, he says, is finding skilledmanpower in the region to work on its projects,particularly as it is a relative newcomer to theMiddle East: “This is an issue for the whole in-dustry. Finding skilled professionals, whether thisis at the upstream, downstream or midstream endis gong to be a major impacting element on thefuture of our business. From our side, becausewe’re working on basically new ventures, findingexperienced geological and geophysical staff is very difficult. It doesn’t look sogood for our industry. We need some younger people coming in to the indus-try.” He adds that part of the problem is the “dumbing down” of the science cur-riculum in schools: “The recent trend where they’ve dumbed down the science(curriculum) is going to make it difficult. We need more young people goinginto sciences, but they need to be going into at the top level, not where it’s madeeasy for them to make the grade.”

Green credentialsLike all oil companies engaged in multiple exploration activities, Hunt

Oil has come under scrutiny for the impact it is having on the environmentand like its counterparts around the world it is keen to extol its green creden-tials. Most recently its Dallas headquarters was awarded the LEED Silver cer-tification for Commercial Interiors in recognition of the fact that 20 percentof the materials within the building are recyclable, 50 percent of the electric-ity comes from renewable sources and it uses has an irrigation system thatuses 50 percent less water than a traditional system. Sturgess says he believesoil companies are not doing enough to spread the message about efforts theyare making to minimise their impact on the environment. “To be frank, Ithink the industry has been quite lackadaisical about this and is not reallypushing itself. Unfortunately people tend to shy away from it [global warm-ing and environmental issues] but I think there are ways that the industrycould sell itself better. We’re not the big ogres that everybody thinks we are.Most geologists, for example, are probably the most environmentally con-


“Part of our businessstrategy is to focus on

the pursuit of highpotential projects

that can significantlyimpact the company”

Mark Sturgess


Tracerco AD.indd 1Tracerco AD.indd 1 28/7/09 16:27:5328/7/09 16:27:53

There is nothing more important to the International MarineContractors Association (IMCA) and its members thansafety. Indeed, the quest for ‘zero incidents’ remains at theheart of virtually every guidance published by the interna-tional trade association that represents, and works on be-

half of, over 500 offshore, marine and underwater contracting companiesin more than 50 countries. Heading our list of aims and objectives is ourcommitment to strive for the highest possible technical and safety stan-dards. Nothing can, or should, override this key mission statement and as-sociated action.

Safety ranks so high up the list of IMCA activities that its two core com-mittees – Safety, Environment & Legislation (SEL); and Training,Certification & Personnel Competence (TCPC) – work right across all thespecial interest divisions within IMCA (Marine, Diving, Remote Systems

& ROV and Offshore Survey) and the four sections (Americas Deepwater;Asia Pacific; Europe and Africa; and Middle East and India).

There are a number of ongoing safety initiatives, which include theIMCA safety flash system; publication of safety statistics and of annual in-cident reports; the continued development of safety aids such as pocketsafety cards, safety posters and videos; and also the work of the SecurityTask Force that addresses such issues as piracy and security. These initia-tives rely on sharing, where IMCA is the conduit used to share individualexperiences with the wider industry for the common good.

Current concernsWith a strong oil price and exceptional levels of activity throughout the

offshore oil and gas industry, we are living in exciting and challengingtimes. The US$20 billion-a-year offshore marine contracting industry, key

Hugh Williams, Chief Executive of theInternational Marine ContractorsAssociation, examines the issues.

GLOBALSAFETY

THEIMPORTANCEOF SAFETY

Hugh Williams ED:16 july 6/8/09 09:20 Page 136

to the offshore oil and gas industry, is responsible for construction workon major oil and gas field developments globally as well as undertakingspecific contract work for field improvements and extensions.Sophisticated vessels and platforms are vital for the safe and efficient sup-port of underwater and surface construction, so many would expect theindustry to be overjoyed by the knowledge that over US$17 billion-worthof new vessels are in yards or in planning and engineering phases.However, there are very strong concerns.

In a relatively short time, some 50 new marine construction vessels and600 offshore support vessels will be in service around theworld; to say nothing of 40 floating drilling rigs, 100 newwork class ROVs, 10 new portable or modular saturation div-ing systems, and a whole new generation of dredgers and seis-mic vessels.

The top-of-the-range installation vessels will be fitted with cranes of3000t-5000t capacity, whilst the top-of-the-range pipelay vessels will have upto 60-inch diameter pipe handling capacity. Except for vessels such as Allseas’Solitaire and Lorelay, nothing like these top-end vessels has been built for twoor three decades. A new breed of ‘single lift’ vessel with capacities from20,000t-48,000t is also being built with decommissioning in mind. At thesame time, more heavy lift transport ships are being added to the fleet, andthese, plus some of the offshore support vessels, may be used for offshore con-struction projects.

The offshore fleet is certainly about to become physically larger (in termsboth of the number of vessels and their actual size), and more sophisticated,with the majority featuring dynamic positioning (DP) and state-of-the-artcontrol systems. Many vessels will have the scope to fit and operate addition-al capacity such as cranes, ROVs, diving systems and reels for pipelines, um-bilicals and cables. We’re moving into a new era, but there is a major concernabout whether skills and safety levels will match the sophistication of this‘new-look’ fleet; and, of course, there is a pressing need for current and newsupply bases to accommodate these large vessels, and all the high tech equip-ment that goes with them. Progressively we should be considering new basesincorporating supply chain elements; for example, major contractors are es-tablishing shore-based pipeline fabrication and spooling facilities in remoteareas as close to offshore fields as possible.

One item topping the IMCA agenda is the global concern about skillsshortages. To operate just these new construction vessels, we need 2000 ad-ditional watch-keepers across the bridge, deck and engine room; 800 person-nel in saturation diving and related positions; 1000 additional survey andinspection personnel; 1200 ROV personnel and many other diving, support,project and engineering personnel. It is a huge ask.

With zero incidents in mind, all these people, newly recruited to the in-dustry, must be capable of absorbing the available knowledge and taking onboard industry safety objectives. Training must continue across the board tokeep them safe – training establishments and trainers will be in high demand.Yes, even more people will be needed to man them.

It may be that many of the people new to the industry have transferredfrom other sectors of the civil or defence marine industries, but whatevertheir background and wherever they are from, training to the high levelsrequired by the offshore oil and gas industry, and adopting the ethos ofour industry is vital.


Hugh Williams

Hugh Williams is Chief Executiveof the International MarineContractors Association (IMCA),which represents offshore marineand underwater engineeringcompanies worldwide. Theassociation has over 500 companymembers in 50 countries aroundthe globe. Williams is a charteredcivil engineer with 33 years ofbroad experience. His career hasfocused on marine operations,particularly heavy lifting andmarine construction in theoffshore oil and gas industry.


crownconAD.indd 1crownconAD.indd 1 28/7/09 16:12:2828/7/09 16:12:28


We can certainly help to build strong foundations for the new fleet and newpeople who will be joining the industry. IMCA has published over 200 guidelinesrelevant throughout the world. The most pertinent to the new fleet may be DP forsupply vessels (and many other DP documents including incident analyses); theCommon Marine Inspection Document; training and competence framework;crane specifications and lifting operations; maintenance of wire ropes; commu-nications (bridge and dive control); incident investigation; vessel and personnelsecurity (including ISPS); as well as the suite of diving documents that supportIMCA’s international code of practice for offshore diving. There are specificguidelines relating to various aspects of safety – and also our much-used safetypromotional material aimed at individuals within the industry – but safety andefficiency are the goals of the content of almost all our guidelines.

A living exampleIMCA’s Common Marine Inspection Document (CMID) was developed

originally to reduce the number of audits carried out on individual vessels, to-gether with the adoption of a common auditing standard for the offshore ma-rine industry. It is gratifying that the CMID is seeing ever-greater adoptionaround the world and members are actively promoting its use to clients, sub-contractors and other vessel operators. Indeed, a significant part of the inter-national offshore industry has accepted the CMID as the standard for vesselinspections, and therefore when requesting copies of recent inspections theywill expect them to be in the format laid out in the CMID.

The CMID is treated as a living document. Some parts can be completed bythe crew prior to an independent auditor’s arrival and, thereafter, the vessel’s crewcan keep it updated wherever possible, so that the minimum amount of work isrequired at each audit, and auditors can spend their time on board as effectivelyas possible. We view it as so important that it was the subject of one of the work-shops at our annual seminar, when we explored how the CMID is used in prac-tice and how the use of the document can be enhanced. It is vital to ensure thatthe CMID meets (and indeed exceeds) all needs and that there is no need for du-plication of effort, something that would dissipate the element of self-regulation,a key step in ever-increased safety standards, that is now working so well.

In our desire to facilitate safe and efficient marine operations, we lookforward to a challenging and far-reaching debate and resolutions to ensurethe enlarged offshore fleet can operate optimally – and safely. �

Safety flash systemA key tool of IMCA is its safety flash system, which enablesprompt distribution of safety flashes across the industry ontopics that would otherwise pose a latent hazard to othermembers. The purpose of an IMCA safety flash is to notifyIMCA member companies of a significant hazard that could bepresent at their worksites and to provide solutions forcontrolling the hazards. Such a hazard may already have led toa fatality, injury or illness at a member’s site or it may be arecognised problem that could lead to an unwanted incident.In either case, the publication of such hazards through theIMCA safety flash system keeps people informed and helpsprevent similar occurrences.

Sophisticated technologyWithin the offshore contracting industry, we are used to multi-redun-

dant, fail-safe systems. The lack of new vessels over the past decade or so hasmeant working with vessels with long histories. Systems have been added andevolved, teething problems ironed out and performance improved. Now,fresh from the yards, we are going to see very sophisticated vessels (with sim-ilarly sophisticated equipment fitted on them) often going straight out to re-mote oil and gas provinces. Almost without exception, this will see themoperating in ever deeper and more hostile waters far from shore – yes, it real-ly is ‘new frontier’ country. What can we expect?

There is no simple answer to the three inter-linked issues of skills avail-ability, skills and safety, and the impact of new technology. We need to debatethe issues, get feedback and views from across the industry and ensure wework together to identify challenges and set the wheels in motion to share so-lutions. IMCA’s real-time safety flash system will be used to share specific op-erational knowledge as it becomes available.

Collective wisdomThe new fleet and its new personnel will want to learn from the collective

wisdom of the past. This is contained in new design codes that have im-proved since much of the current fleet was built. But a considerable con-tribution comes from the equipment specifications, procedures andpersonnel competence described within IMCA’s good practice guidelines.These also address trials and commissioning; ‘failure modes and effects’analyses; audit and maintenance programs developed on past successesand occasionally from past incidents; and the development and recogni-tion of competence in the workforce.

“There is no simple answer to the threeinter-linked issues of skills availability,skills and safety, and the impact of new

technology. We need to debate the issues”


A newchapter


Following the first meeting of the Saudi Society for Energy Economics,

Saudi Arabia’s Minister of Petroleumand Mineral Resources, Ali Al-Naimi

reveals how he thinks the organisationwill address the challenges facing the

energy industry.

VIEW FROM THE TOP

Now that we are in the process of establishing a societyconcerned with the energy industry, I should focus onthe role of the Saudi petroleum sector on the premisethat it represents a central hub of the energy industry,contributing to the consolidation of the foundations ofour national economy for over 75 years. This sector still

makes up the bulk of our gross domestic product. Its contribution to the GDPhas amounted on average to 35 percent during this decade. The sector also ac-counts for the greater share of the Kingdom’s exports and some 86 percent ofgovernment revenues.

Great as this contribution is to the Kingdom on an overall economiclevel, the oil sector also makes feedstock and fuel available from crude oil, inaddition to providing products, natural gas and natural gas liquids, for in-dustry and utilities, benefiting the petrochemical industries, mining indus-tries, cement industry, power generation industry, water desalination andother industries. Availability of feedstock and energy at affordable prices hasbeen a great incentive for expansion in these industries and the registering ofhigh growth rates. The industrial sector grew by six percent annually, there-by multiplying the percentage of its contribution to the GDP.

Ali Al Naimi ED:16 july 5/8/09 15:04 Page 140

DiversificationThe oil sector’s contribution has not been restricted to the growth of the

basic petrochemical industries, but has been extended to include their diversi-fication. The combined efforts of the petroleum and industry sectors have cul-minated in the expansion of secondary and specialised chemical industries.This has been followed by the launch of the industrial clusters, an endeavourblessed with the direct support of our wise leadership. A Council of Ministers’decision was issued in this regard in support of this trend, to identify and at-tract investments to those industries in which the Kingdom enjoys a relativeadvantage and which are associated in one way or another with the oil indus-try, including metal industries and the auto supplies industry, such as tires andother products, in addition to the packaging and packing industries. These in-dustries are regarded as suitable for meeting the Kingdom’s needs for two par-ticular reasons: first, they have the potential to create many jobs in line with theobjectives of the national industry strategy, and, second, they maximise thebenefits from the Kingdom’s relative advantages, including the abundant avail-ability of basic petrochemicals, phosphate and aluminum. The industrial clus-ters programme seeks to attract, facilitate and develop a number of pivotalprojects in these four clusters by 2013. The anticipated total investments by theprivate sector in all the projects of these clusters are estimated at SR40 billion.Additionally, the projects will contribute SR90 billion to the GDP annually andcreate some 160,000 employment opportunities by 2020.

The growth in demand by industries and utilities for fuel and feedstockhas resulted in the expansion of the Kingdom’s natural gas industry in all itsvarious stages – exploration, production and processing – in tandem with theprogressive growth in oil production and refining. Saudi Aramco’s effortsmanaged to yield an increase in discovered gas reserves from 184 trillion cubicfeet in 1990, almost one-quarter of which was in the form of non-associatedgas, to 267 trillion cubic feet in 2008, more than half of which is in the formof non-associated gas, notwithstanding cumulative production of some 97trillion cubic feet during the period. Saudi Aramco’s programme increasedthe percentage of non-associated gas out of total gas production from 25 per-cent to about 58 percent. Further gas reserve increases are anticipated fromthe gas joint ventures. Saudi Aramco’s programmes for reserve developmentand gas production will continue unabated. For instance, the Karan offshoregas field is expected to boost production capacity by some 1.8 billion cubicfeet per day. Similarly, the refining projects, both under implementation andon the drawing board, which are associated with petrochemical complexes,such as the Petro Rabigh and Ras Tanura projects, and other projects in Jubail,Yanbu’ and Jizan, will result in expanded refining capacity and a diversifiedpetrochemical products base. Collaboration between the mining sector andthe petroleum industry – implementing the active and planned projects atRas al-Zawr Port, in preparation for completion of the railway link projectconnecting the Northern Frontier Area via the Central Province to the Eastern

Province – will lead to the exploitation and processing of raw phosphate andbauxite, coupled with creation of an industrial base that combines the oil sec-tor with the minerals and petrochemical industries, expanding from there intomore diversified and more specialised industries.

Research and developmentThe Kingdom was aware quite early that the existence of those resources per

se would not bring prosperity and development in the long run, and that the truelitmus test is its ability to efficiently exploit its resources and maximise the ben-efits from them, promoting and diversifying the economy and linking produc-tion and treatment of these resources to other economic sectors. This can beachieved first by building the qualified human resources to manage the petrole-um industry, national development and local business. For this very reason, theKing Fahd University of Petroleum and Minerals was established over 40 yearsago as a prominent sign of this trend, which has involved the grooming and de-veloping of qualified national forces. The university has been playing, and con-tinues to play, its role with other Saudi universities in promoting research andcooperation with the research and development centers of Saudi Aramco andSABIC in areas that serve the industry and growth. The relationship between thepetroleum industry and development of scientific and technological research didnot stop there, but extended to broader horizons through establishment of KingAbdullah University of Science and Technology (KAUST) on the west coast,which the Custodian of the Two Holy Mosques envisions as a beacon and mon-ument of science and research transcending the Kingdom and reaching the en-tire world.

Continuing this approach, high-level approval was secured for the es-tablishment of the King Abdullah Center for Petroleum Research and Studiesin Riyadh, for the purpose of conducting environmental studies and scientificand applied research related to the petroleum industry, to support and pro-tect the Kingdom’s interests. This new centre, as envisioned, will serve as an-other link between the oil sector and the Kingdom’s economic, scientific andtechnological environment. We are looking forward to the Saudi Society forEnergy Economics’ contribution, in concert with other scientific and profes-sional societies, to the centre’s research and study plans.

The new economic and scientific opportunities and initiatives doubtlessface a host of uphill challenges that must be addressed. On the one hand, oureconomy is still reliant on oil and its revenues, which are affected by the con-ditions of the oil market, changes in supply and demand patterns, and pricefluctuations. Therefore, the challenge of diversifying our national economywill remain alive and well, and petroleum and its revenues will continue to bethe causeway to a diversified economy, a challenge to be met head-on by theMinistry of Petroleum and Mineral Resources and Saudi Aramco, with theinvolvement of many of the concerned sectors in the Kingdom.

Rising demandIn our effort to maximise benefit from the Kingdom’s petroleum sectors,

one of the local challenges we must confront is the increased consumption ofpetroleum products in the Kingdom since 1990, at an annual rate of five per-cent, and the ever- growing consumption of natural gas, now at an annual rateof seven percent – both much higher than the 3.4 percent average growth rateof the GDP during the same period. Consumption of all types of energy grewfrom 3.6 percent during the period 1995-2000 to 5.6 percent during the peri-od 2001-2008. This progressive increase and growth in the intensity of ener-


“The oil sector’s contribution has not beenrestricted to the growth of the basic

petrochemical industries, but has beenextended to include their diversification”


gy consumption in the Kingdom can be attributed to industrial expansion andthe fact that prices are much lower than international levels. This energy con-sumption pattern in the Kingdom will, if it continues, have an impact on boththe volume of exports and the Kingdom’s income. This requires us to proceedforthwith to institute a national programme for rationalisation of energy con-sumption that will take into consideration the Kingdom’s condition, thegrowth phase it is passing through and the need to optimise utilisation of en-ergy in the various sectors, in order to reflect the real cost of petroleum re-sources and its conservation for future generations. The last local challengeresides in our ability to develop suitable alternative energy sources to addressthe growing demand for electrical energy and water desalination associatedwith population growth and economic development. Fortunately, theKingdom enjoys a relative advantage that qualifies it to develop renewablesolar energy, not only on account of its climate but also due to its extensivesurface area. KAUST has already initiated research in this area by establish-ing a specialised solar energy research centre, concluding agreements for thedevelopment of solar energy technology with prestigious international cen-tres and investing to supply the university campus in Thuwal with its re-quirements of solar energy electricity. Solar energy does represent a viablealternative that the Kingdom is in a position to promote, not only to replacepetroleum and gas in power generation and water desalination, but perhapsalso in the long run to become a source of electrical energy.


Environmental concernsOne last challenge that remains to be addressed at the international level

is global environmental concerns, particularly climate change and its impacton the Kingdom in the long run. We have long underscored in internationalcircles concerned with this issue the importance of channelling internationalefforts to technology research that produces and consumes environmentallyfriendly petroleum with minimal damage to the environment.

Given the many opportunities for growth of the Kingdom’s energy sec-tor as well as the challenges the sector faces, our new society can and will con-tribute in confronting these challenges. On the one hand, it can participate indeveloping the research and studies that will improve performance on this ex-tremely important issue, namely advancing economic diversification in theKingdom. It can also, in concert with other societies and research centres,contribute to achieving maximum exploitation of our petroleum resourcesand minimising excess consumption of these depleting resources. It may alsocontribute to formulating new concepts related to the environment and its re-lationship to the energy industry, and directing local and international effortsto innovate more solutions to advance the energy industry and have a morepowerful impact on the local and regional levels.

In conclusion, I wish to extend my congratulations on the establishmentof this society and do hope that its future will be blessed with the same en-thusiasm it has enjoyed in its establishment. It is our hope that it will spawnmany studies and works, which will assist the Kingdom’s energy industry inachieving its future ambitions and provide further opportunities for prosper-ity for future generations. �

Gulf Arab oil ministers meeting in Riyadh. Oil giant Saudi Arabiasaid that global oil inventories were at ‘very comfortable’ levelsand supply exceeded demand


DIARDARY

ATESWorld Heavy Oil CongressNovember 3-5Puerto Ordaz, Venezualawww.petroleumshow.com

Nanotechnology: The Next FrontierNovember 18-19Cairo, Egyptwww.npg.sabrycorp.com

GETENERGY for LibyaDecember 1-2Tripoli, Libyawww.getenergyevent.com

Contracting in the Changing World of ProjectsDecember 9-10Singaporewww.ipainstitute.com

Best Practices for Power ProjectsDecember 16-17Beijing, Chinawww.ipainstitute.com

DIARY DATES144

SPE Offshore Europe Oil & Gas Conference & ExhibitionSeptember 8-11Aberdeen, Scotlandwww.spe.org

154th Meeting of the OPEC ConferenceSeptember 9Vienna, Austriawww.opec.org

IEA 9th Annual Workshop on Greenhouse Gas Emission TradingSeptember 14-15 Paris, Francewww.iea.org

Exploration & Production Technology Summit 2009September 23-25Houston, Texaswww.exproevent.com

Unconventional OilOctober 14-15London, UKwww.smi-online.co.uk

GETENERGY for Iraq 2009October 16-17Istanbul, Turkeywww.getenergyevent.com

8th Energy Risk ManagementOctober 6 - December 6London, UKwww.acius.net

SPE/EAGE Reservoir Char-acterisation and Simulation Conference & ExhibitionOctober 19-21Abu Dhabi, UAEwww.spe.org

16th Africa Oil Week November 2-6Cape Town, South Africawww.petro21.com

World Refi ning Technology 2009November 2-3Vienna, Austriawww.standardboard.com

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

OPEC will hold its 154th meeting on September 9

The EAGE Reservoir Characterisation Conference takes place from October 19-21

Diary dates.indd 144Diary dates.indd 144 5/8/09 15:12:005/8/09 15:12:00

Sun microsystems AD.indd 1Sun microsystems AD.indd 1 28/7/09 16:27:1528/7/09 16:27:15

EMC2, EMC, and where information lives are registered trademarks of EMC Corporation. © Copyright 2009 EMC Corporation. All rights reserved.

Deliver the cost savings and productivity improvements your business demands.

EMC is uniquely positioned to help you take a holistic approach that enables you to address IT challenges one at a time or across your entire information infrastructure. Our unmatched expertise and experience combined with the broadest range of industry-leading solutions have enabled customers to:

• Realize a 25% reduction in storage TCO in less than a year• Reduce backup data and time by 90%• Reduce data center space, power, and cooling costs by 70-80%• Reduce e-mail operational costs by 50%• Lower cost of compliance by 30-70%• Decrease security spending by 150%• Manage 3-4 times more servers, storage, and network devices without adding headcount

We’ve been guiding organizations through economic and IT challenges for over 30 years and can enable your business to emerge from today’s economy stronger than ever.

For more information about EMC Effi cient IT visit: www.middle-east.emc.com

VirtualizeConsolidateDeduplicateAutomate ProtectComply

Thrive

Thrive AD.indd 1Thrive AD.indd 1 28/7/09 16:13:5428/7/09 16:13:54

o&g mena 4

Documents