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DRILLING
D RILLING & S T I M U L AT I O N
STIMULATION
COMPLETION & PRODUCTION
Cement Additives:
improves cement Drilling Chemicals: Production Chemicals:
performance and bonding Inc
Increase drilling speed, efcient cuttings fewer interventions and more
for better zonal isolation. removal
rem
re moval and reduce downtime. production.
Casing Accessories:
ensure the integrity of
the well construction and
cementing operations.
T
hese are interesting times for the upstream oil james.little@oilfieldtechnology.com
and gas industry, with the last six months or so Editor: David Bizley
david.bizley@oilfieldtechnology.com
throwing up both new opportunities and new
challenges. Design
OPECs unexpected decision to instigate production Production: Charlotte Reynell
cuts from 1 January revitalised an ailing industry and charlotte.reynell@oilfieldtechnology.com
saw oil prices bounce back up above US$50/bbl, marking the beginning of a
tentative recovery. Sales
Donald Trumps victory in the US presidential election also provided Advertisement Manager: Ben Macleod
ben.macleod@oilfieldtechnology.com
something of a morale boost to the industry. Trumps pro-fossil fuel
Business Development Manager: Chris Lethbridge
comments and promises to cut red tape and open up federal lands for chris.lethbridge@oilfieldtechnology.com
drilling sent a clear sign that the new administration was seeking a more
industry-friendly approach. Website
As a result, a renewed sense of (cautious) optimism has emerged, with Website Manager: Tom Fullerton
stalled projects finally being given the go-ahead and new plans being tom.fullerton@oilfieldtechnology.com
made. Over the course of the downturn, the industry was forced to evolve Digital Assistant Editor: Angharad Lock
into a leaner, more efficient entity. New technologies, and an increased angharad.lock@oilfieldtechnology.com
focus on the digital oilfield concept have meant that even hard-hit sectors,
such as offshore, are beginning to see a recovery. Whilst, we may not see Marketing
US$100/bbl again, it seems that much of this newly dynamic industry can Subscriptions: Laura White
laura.white@oilfieldtechnology.com
now turn a profit at US$50/bbl.
This special supplement takes highlights from recent issues of Administration: Nicola Fuller
nicola.fuller@oilfieldtechnology.com
Oilfield Technology, which cover some of the key challenges facing the
Reprints:
industry today. reprints@oilfieldtechnology.com
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Oilfield Technology | 1
2|
MICHELLE GOMEZ,
DOUGLAS-WESTWOOD, PROVIDES AN
OVERVIEW OF THE UPSTREAM INDUSTRYS
PROSPECTS IN ASIA.
T
he effects of the oil price collapse have been widely
published with headlines in the upstream sector often
containing themes of Capex cuts, postponements
and cancellations, lower oil prices for longer, seemingly a daily
ritual. Yet amidst the unwelcome news over the past one and
a half years, comes a long awaited 1.2 million bpd supply cut
committed to by OPEC an agreement which was reached on the
30 November 2016 following several futile meetings by the cartel.
While this early Christmas gift presents significant hope for the
wider oil and gas sector, the industry continues to go through an
extremely rough period. Douglas-Westwood estimates upstream
Capex declines of 35 and 14% in 2015 and 2016, respectively.
|3
As with the rest of the world, Asia has not been spared from the economic viability and transmission infrastructure) supports anticipated
realities of the oil and gas downturn. The region has seen divestments in growth in gas output. Chinas three NOCs currently have shale gas projects
Asian E&P assets from the likes of Chevron and Murphy Oil. The services operational and starting to produce notable volumes, though none are
sector has also been impacted and has witnessed the liquidation at a stage of full commerciality. Gas consumption in APAC is anticipated
of leading provider Swiber and Swissco fall in the red. Additionally, to grow by 73% by 2035, with LNG being a key enabler in facilitating
headcounts have been reduced by some of the bigger industry names distribution. The shutdown of Japans nuclear reactors following the
such as Petronas and Keppel Shipyard amongst others. Exacerbating the Japanese Fukushima accident in 2011 saw associated LNG requirements
state of the industry are Capex cuts by end users Petronas and CNOOC skyrocket. Japan is currently the largest buyer of LNG, accounting for
who have announced RM15 billion (US$3.4 billion) and RMB10 - 20 billion 34% of global demand. The next largest buyer, South Korea, accounts
(US$1.4 - 2.9 billion) cuts respectively, inevitably having a knock on for 13% of global LNG demand. While the two North Asian countries
effect to the rest of the supply chain service providers and equipment collectively import nearly half of the global total, associated requirements
manufacturers. However, while dark clouds loom, the industry should are expected to weaken as both countries look to substitute to alternative
not lose sight of a number of opportunities. energy sources such as coal and nuclear particularly in the case of Japan
Accounting for 42% (BPs Statistical Review) of energy demand, as it looks to restart nuclear reactors shut-down in 2011. Despite this, an
Asia-Pacific (APAC) will continue to be the backbone of global anticipated growth in regasification import capacity (and consequently
requirements. From a macro-economic perspective, the regions an increase in LNG demand) in China and India are likely to cushion the fall.
long-term demand fundamentals remain robust. China and India, the Interestingly, on a country level, national strategies have evolved
regions economic powerhouses, collectively account for 37% of the to capitalise on the burgeoning gas market in the region. Singapore,
global population and 28% of world energy consumption. Present whilst not endowed with hydrocarbons, is positioning itself as a natural
GDP growth rates are estimated at 6.9% and 7.6% and are expected to gas hub, tapping into its favourable geographic position of being in the
remain positive in the foreseeable future. Continued positive growth centre of East Asian LNG-hungry nations and large LNG export centres
rates for key leading indicators (GDP and population growth) will drive in the Middle East, South East Asia and Australasia. Presently with a
energy requirements, with BP expecting associated energy demand for storage capacity of 800 000 m3, Singapore is looking to venture into LNG
both China and India to reach nearly 5893 mtoe by 2035, a 61% increase bunkering as well as nitrogen blending of regasified LNG.
compared with the 2015 figure and an estimated 34% share of global
requirements. Looking at the region as a whole, APACs oil and gas Whilst traditional Asian producers will remain,
demand is estimated to grow by 37% and 73% respectively. Myanmar has grabbed the headlines
On a supply front, Asias hydrocarbon production accounted for Traditionally dominant producers in Asia such as China, Indonesia and
approximately 10% of global output in 2016 and is expected to increase Malaysia are facing challenges in maintaining hydrocarbon output.
from the current 15.9 million boe/d to 17.3 million boe/d by 2022 (6% Acknowledging its plight, Malaysia has an economic transformation
growth), with gas accounting for all of this growth. Notably, recent programme (ETP) in place to revive its oil and gas sector through marginal
years have seen traditional hydrocarbon producers such as Malaysia, field development, rejuvenation of fields through enhanced oil recovery
Indonesia and Brunei challenged by oil production decline from mature (EOR) amongst other E&P and supply chain directed initiatives. Indonesia
fields. Longer term, however, the regions investments in offshore, has seen long-term production decline until recent production additions
unconventional as well as deeper water plays are expected to offset the from Banyu Urip in 2016. However, it will take more discoveries and
decline, particularly in natural gas. developments to delay further production decline given the maturity of its
Over the next four years, more US$150 billion is expected to be spent fields. Myanmar, however, is attracting the limelight even in a depressed
on offshore developments in APAC, contributing 38% of global offshore macro-economic environment. Notably, the country has in recent
expenditure. With activity expected to pick up as commodity prices gain years attracted the attention of international players such as Shell and
momentum, the following themes will characterise Asias upstream Woodside. The latter made two significant deepwater gas discoveries this
development in the coming years: year, one big enough to justify a fast-track to production within three years.
NOCs have been and will continue to be key investors Growing competition amongst Asian nations
in upstream E&P field development programmes expected
Over the next five years, 62% of fixed platforms, and 32% of Increasingly apparent is the intensifying competition amongst countries
subsea tree installations in Asia will be accounted for by NOCs, the for resources and business opportunities. The ongoing South China Sea
majority of which will be rolled out by CNOOC, ONGC, Pertamina, territorial dispute amongst Brunei, China, Malaysia, Philippines, Taiwan,
Petronas and PTTEP. Associated with NOC dominant countries are and Vietnam for the Paracel and Spratly island groups, has led to
protectionist measures and local content policies, which favour underlying political tension. The shifting of shipbuilding and subsea hubs
local businesses/partners as well as vessel owners. This is unlikely away from Singapore in favour of more cost competitive centres such as
to change in the mid to long-term, unless an undersupplied market China (for ship and rig building) and Malaysia (subsea clustering) creates
surfaces. Markets such as Myanmar, which have less protectionist immediate rivalry amongst nations trying to compete for the same
measures in play, will in turn see significantly more IOC involvement. volume of work.
The industry must continue to trim the corporate fat, align
Gas will take centre stage business segments to best capitalise on the move to gas, deepwater and
Whilst oil production is set to decline in all of the key Asian producers unconventional production and simultaneously look to gain traction
over the next six years, gas output will see significant gains. The majority in new or expanding Asian markets, whilst taking into consideration
of this gain will come from shallow water gas plays across the region as potential protectionist measures. Where cost is no longer a differentiator
E&P companies take advantage of gas- and LNG-hungry local economies. or an advantage, businesses/national strategies should be centred
Additionally, the five-fold increase in Chinas recoverable shale gas on developing a niche or rather a unique selling proposition. Exciting
reserves, lifting of sanctions in gas-rich Myanmar and the development of opportunities lie ahead but until this hurdle is overcome, market forces will
Indias untapped gas market (whose development has been impeded by be ruthless in eliminating the uncompetitive.
4 | Oilfield Technology
LD
OILFIE OGY
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n April 20, 2010, the Deepwater Horizon drill rig But the tragedy had repercussions that reached far
blew up in the Gulf of Mexico, killing 11 workers and beyond the event itself. In a report commissioned by the
releasing almost 5 million bbls of crude into the administration of President Obama, the authors noted
sea. By the time the well was sealed five months later, it had that the incident resulted from cost-cutting decisions
caused massive damage to marine creatures and habitats, and an inadequate safety system. Chillingly, it said;
tourism and fishing. BP, rig operator TransOcean and service Absent significant reform in both industry practices and
company Halliburton were found largely responsible; BP government policies, (another equally serious incident)
paid over US$60 billion in fines and civic settlements. might well recur.
|5
In the aftermath, the oil and gas industry formed trade promptly addressed or corrected commensurate with their
associations such as the Centre for Offshore Safety (COS), which significance.
helped develop and implement the Safety and Environmental Personal Accountability. All individuals take personal
Management Systems (SEMS) audit. It also established the responsibility for process and personal safety, as well as
Marine Well Containment Company, with the express purpose environmental stewardship.
of designing, building and maintaining a rapid response Work Processes. The process of planning and controlling
well-blowout containment system for offshore wells. work activities is implemented so that safety and
In addition, the government agencies responsible for environmental stewardship are maintained while ensuring
the correct equipment for the correct work.
overseeing offshore oil and gas activities were overhauled,
Continuous Improvement. Opportunities to learn about
leading to the creation of, among other bodies, the Bureau
ways to ensure safety and environmental stewardship are
of Safety and Environmental Enforcement (BSEE). The
sought out and implemented.
BSEE established a commission to elevate safety beyond
a mere checklist-inspection attitude, toward a systemic,
Environment for Raising Concerns. A work environment
is maintained where personnel feel free to raise safety
comprehensive approach to compliance. Prescriptive and environmental concerns without fear of retaliation,
regulations can reduce risks to worker safety and the intimidation, harassment, or discrimination.
environment, but they alone are not enough, says BSEE
Director James Watson. Everyone working in the offshore
Effective Safety and Environmental Communication.
Communications maintain a focus on safety and
industry must adhere to a set of core values that places safety environmental stewardship.
above all else. Respectful Work Environment. Trust and respect
In 2013, the BSEE released the Safety Culture Policy permeate the organisation with a focus on teamwork and
Statement (since enshrined in legislation). The agency defined collaboration.
Safety Culture as the core values and behaviours of all Inquiring Attitude. Individuals avoid complacency and
members of an organisation that reflect a commitment to continuously consider and review existing conditions and
conducting business in a safe and environmentally responsible activities in order to identify discrepancies that might result
manner. in error or inappropriate action.
The statement contained nine characteristics that are Dr. Scott Shemwell is a Houston-based oil and gas
indicative of a robust safety culture; consultant and principal with The Rapid Response Institute
Leadership Commitment to Safety Values and (RRI). In the last several years, he has been participating in the
Actions. Leaders demonstrate a commitment to safety implementation of safety culture, and has seen a mixed bag of
and environmental stewardship in their decisions and compliance. The largest companies have mapped it into their
behaviours. operating systems, he notes. But many companies are having
Hazard Identification and Risk Management. Issues a hard time adhering.
potentially impacting safety and environmental
Part of the challenge originates in the impetus that impels
stewardship are promptly identified, fully evaluated, and
a company to improve its safety. In the event of a tragedy,
the emotional case for change is easy to make, says
Shemwell. I once spoke to the head of a service company
that had an accident in which a worker was killed. The CEO
had to go to the family and personally tell the news. He
said: Im never going to do that again, and revamped the
company from top to bottom using a scenario analysis that
covered everything from soup to nuts. Since then, they have
had a very strong track record.
Most companies are motivated by the bottom line,
however. The business case is different from the emotional
case, says Shemwell. You are looking at events that could
potentially jeopardise the viability of the corporation.
Management has a responsibility of safety to their
employees and their clients, but also their investors.
Creating a business case for safety is all part of a larger
corporate strategy, commonly referred to as operational
excellence (OE). There are several main criteria for
operational excellence, says Shemwell. You want to be in
the top quartile of asset performance, have an immaculate
reputation and distinctive capabilities. In addition, you
want to have a high performance culture, world class HSSE,
and best-in-class processes and systems. You do all of this
in order to achieve a competitive advantage. According to
McKinsey, world class OE can add 30% to the value of your
asset base.
While it is relatively easy to pin numbers (such as key
Figure 1. Elements of a compelling business case. performance indicators, or KPIs) on many of the OE criteria,
6 | Oilfield Technology
Beyond Providing Superior Products
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8 | Oilfield Technology
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Completion for the Digital
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Derek Boulware, PwC, South Africa, describes how the digital transformation of the oil
and gas industry will make operations more cost-effective.
DiGiTAL
DiSRUPTiON
iN THE
iN THE
AfRiCAN
OilfielD
10 |
A
sk anyone in the oil and gas business today about their greatest challenges, and cost
control will likely come out near the top of the list. With depressed global oil prices, the only
way to improve margins is through efficiency gains doing the same with less. Traditionally,
this means reduced staff headcounts and applying pressure for reduced pricing from service
providers. Strategy& analysis has shown that revenue from the 18 leading upstream, midstream
and oilfield services companies in the US have decreased by 40% between Q3 2014 and Q3 2015.
Over the same time period, operating expenses have declined only 9%, and PwC believes that the
reason for this is that traditional methods of cost optimisation are approaching their limit, due to
the high fixed costs associated with the industry. For a long time, business success has been based
on cost competitiveness, but now there is a real desire to compete instead on value, created through
innovation. Digital transformation may be the answer.
| 11
It is clear that oil and gas organisations must take the time Digital must be seen as an enabler. It is a way of doing
now to apply transformational digital applications. Not only will things underpinned by the technology trends of social, mobile,
new technologies increase margins and improve efficiencies, they analytics, cloud and cyber (SMACC). Digital means that companies
also have the potential to disrupt the entire market, changing how and individuals are using new technologies to achieve a variety
people think, how business is conducted, how people learn, and of outcomes in a variety of ways previously unimaginable or
how they conduct themselves on a daily basis. non-feasible. Figure 1 summarises the five elements of SMACC.
The problem is that oil and gas companies are slower than other Digital in oil and gas is not just about technologies. It is about
industries to respond to using new technologies. This has been redefining the operating model, simplifying underlying systems,
especially the case when it comes to digital. According to a recent empowering people and enabling deep organisational change.
CEO survey, oil and gas companies are much less likely to use social Digital must be broader than the historical digital oilfield concept
media, data analytics and CRM systems than other industries, such which has a strong focus on oil and well production optimisation.
as financial services. The energy industry tends to be inherently Some of the areas that are and will be affected include: asset
conservative, considering the high capital investments and long tracking; safety alerts; drilling data; fleet management; operations
payback periods. Energy executives tend to prefer proven solutions data; inventory management; equipment performance; field data
as opposed to new ideas that may or may not get the job done. capture; problem area scanning; and facility optimisation.
Some find this quite surprising given the reception that new There are five major market themes that will have an effect
technologies and engineering solutions have always had from oil on digital transformation in the oil and gas industry, including:
and gas companies over the years. The difference is that these the internet of things (IoT), building alliances, simplification and
solutions have always provided tangible and measureable benefits standardisation, solution-based buying and knowledge transfer
at an operational level, many times improving recovery rates or from international oil companies (IOCs) or national oil companies
overall production. (NOCs) to oilfield services companies (OFS).
In addition to these themes,
there are a number of specific
digital solutions which are already
being implemented across the
upstream space from exploration
through to production. When
these capabilities are present and
working as a system, the digital
oilfield becomes a reality. An
example follows in Figure 2.
12 | Oilfield Technology
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been very receptive to these new ways of doing business. This is is being used to connect the continent, despite infrastructure
proof that Africa can deliver innovative solutions to the market and challenges.
that industries dont necessarily have to build up from the basics. Drones also have a place in the digital oilfield from safety
For oil and gas players on the continent, why not harness the inspections to part delivery. Drones can be utilised to complete
knowledge and learning that has taken place in the rest of the world costly (and sometimes dangerous) inspections including those of a
and use it to leap-frog the competition? routine nature as well as those conducted to determine why/how
As a continent, another important challenge that must be equipment or systems might be failing. If digital innovation is really
addressed is the lack of infrastructure. This is an issue for many put to use, the industry could even see 3D printing of spare parts
industries looking to operate in and around the continent. For and drone delivery to the remote oilfield.
extractive companies, the lack of infrastructure means that it is Overall, the emerging global market for business services
difficult to get parts, equipment and people to remote work sites. It using drones is valued at over US$127 billion according to PwC.
is equally challenging to get produced natural resources to market. Leadership at the newly-mobilised Global Drone Centre in Poland
While digital does not hold the promise to teleport produced says that the application of drone technologies in existing
gas from remote locations, it does have the potential to improve business processes is allowing companies to create new business
communication, information availability and response times. In and operating models. Each industry has diverse needs and as a
fact, digital solutions may prove most viable and beneficial on a consequence requires different types of drone-powered solutions
continent lacking in physical infrastructure. and various drone functionalities. Some of them value flight speed
There are a number of other digital projects disrupting and payload capacity, while others wish to concentrate on solutions
the African continent. Facebook is currently working on its delivering high-quality, real time data in a cost-effective way.
high-altitude drone solution which will be used to bring internet
connectivity to large rural areas through a linked network of the Prompting the disruption
drones. With the ability to fly for three months straight without In order to prompt the digital disruption in an organisation, one
landing, these drones will use lasers to transmit data to a base must begin by understanding the digital fitness of the company to
station on the ground. Additionally, drone surveillance is being ascertain if it has the right capabilities to succeed in a digital world.
utilised to protect rhinos and elephants from poachers. Lastly, An organisations maturity across six key areas should be assessed
drones are being utilised to provide humanitarian aid to remote including: know, define, evolve, create, accelerate and protect.
areas. The World Health Organisation (WHO) estimates that some These areas are summarised in Figure 3.
1.3 - 2.1 billion people on the planet have no access to essential The ability to think disruptively is not second nature for most
medicines because they live in hard-to-reach places. To help people. In fact, for the most part, they do not like change, preferring
alleviate this problem in Rwanda, California drone maker, Zipline, to stay in their comfort zones for fear of rejection or failure.
signed a deal with the Government of Rwanda to shuttle supplies to Innovation and disruption require people to think differently,
remote areas on demand. With Zip drones, which cover a roughly and they require people to be comfortable in uncomfortable
50 mile radius, a health centre in Rwanda can send a text message circumstances.
to order blood for a patient, and it shows up via parachute within In order to open the mind to disruptive thinking patterns,
40 minutes. These are just three examples of how digital innovation it is often a good idea to run a disruptive innovation leadership
workshop or course. It is a way to get leaders
to push themselves with a line of questioning
which sparks thought in an unconstrained
manner. Questions starting off with what
if can be explored in a safe environment
with a clear and open mind What if a
competitor introduces a new service that
made a previous offering in the market
irrelevant? Answering those hard questions
really gets one to think about how to be the
disruptor, not the disrupted! Disruption is
a divergent shift in perspective both an
opportunity and a challenge. There are a few
good ways to start the disruptive thinking
journey including:
Constantly focus on challenging current
paradigms and the status quo.
Do not worry about the reactions of
others, but build on them.
Be open to failure.
Do not be afraid to think or say something
drastic or bold.
In the end, it is essential to remember the
wisdom of Albert Einstein: if you always do
what you always did, you will always get what
you always got! In todays world, this could
Figure 3. PwCs six areas of digital fitness. mean getting put out of business.
14 | Oilfield Technology
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JOHOR
16 |
A
s a key exporter of oil and LNG, Malaysia has been hit harder finance and trading epicentre capable of rivaling Singapore.
by the oil price slump than any other nation in Asia Pacific. In Of course, international interest in developing Malaysian oil
particular, state-owned oil company Petronas has reported is not new. The peninsula is renowned for its Tapis crude,
net-losses due to market oversupply and decreased demand from an exceptionally high quality, extra light, low sulfur
China. But despite deferring other projects, Petronas has remained product that has been the oil trade benchmark in
committed to continuing some, such as the US$16 billion refinery the region for years. The oils excellent quality
and petrochemical integrated development project (RAPID) has reigned in foreign investors in the past
complex in Johor as part of the larger Pengerang Integrated and gained international attention for
Petroleum Complex (PIPC). In addition to RAPID, the PIPC facility the ease in which it can be refined
will bring six other facilities to the southern Malaysian province: to produce premium petroleum
a co-generation plant, an LNG re-gasification terminal, an air products.
separation unit, raw water supply facility and a deepwater terminal. Remaining attractive
Although the majority of Petronas capital investments are to foreign companies
going to this downstream megaproject, its success is predicted to
significantly expand the areas upstream business as well: building
is increasingly
PHILLIP MOREL,
the diversity in petro operations and expanding downstream TA COOK,
capabilities is likely to draw more investors to the region for upstream
exploration and production projects. Improving strategic industry
HONG KONG,
opportunities with new infrastructure has the potential of improving DESCRIBES HOW
the whole oil and gas industry value chain but only if Petronas
can make operations more controllable and efficient. This article THE RAPID PROJECT
will outline the advantage of this downstream capital project for
the Malaysian upstream oil industry and the ways the country can
WILL MAKE UPSTREAM
increase their operational efficiency to turn profits. OPERATIONS IN MALAYSIA MORE
Attracting foreign experts ATTRACTIVE.
One of the RAPID projects objectives is to create
a hub for oil storage and trading that will
transform the country as an oil and gas
| 17
important as the Tapis field ages. Although drilling in the region is and gas potential, the drop in energy prices has prompted a large
slightly easier than in other areas such as the North Sea because number of companies to scale back their upstream operations. Last
the water is comparatively shallow, development in the Malaysian year, Shell Malaysia announced plans to reduce their workforce
continental shelf has serious challenges. The field has already by 20% (1300 positions) in an effort to minimise expenditures.
supplied 400 million bbls since the 1970s. As a mature region, This was regarded as a surprisingly bold move but in the current
expanding the upstream business will require more advanced commodity business, bold moves are seen as necessary to keep
exploration and production technology than in the past. Any new up with competition. Be that as it may, cutting big expenses off the
exploration projects will span a greater area than they once did and top is not going to balance the budget alone. Rather, reducing costs
drills must be able to go even deeper. As is the case with many fields and spending in a sustainable way through lean processes and
that have been developed for decades, exploiting the current fields optimisation is the best way to be successful in the long run.
with conventional drilling methods is no longer economical. In the past few years, Petronas has cut funding to new deepwater
In order for Malaysia to truly stay competitive, companies need upstream projects because of high break-even costs. In order for
to find a balance between the way things have been done historically more large Capex projects to secure funding, producers need to
and developing new sustainable exploration and production increase the prospective value and returns by focusing on operational
development strategies to process the most profitable opportunities. excellence. Committing to investing time and resources to train the
Development sites that require high-technology drilling techniques team and foster an environment of continuous improvement will
for extraction and unconventional E&P methods are complex and the benefit the organisation, employees and shareholders. Companies
intricacies of which can present a variety of potential complications. can eliminate waste (any effort spent on a work site which does not
Although Petronas has an impressive portfolio and projects add value or benefit an activity) by taking a lean manufacturing
worldwide, it can still be a great asset for Malaysian resources if business approach. If a team thoroughly understands what activities
international corporations invest in development alongside the should be eliminated, they will be able to accurately assess their
state-owned company. Collaborating with foreign businesses can output and aim their attention at the highest priority tasks, leading to
improve the likelihood that Malaysia will have access to the latest increased craft productivity.
exploration technologies and discover new reserves. The best While development expenditures may be cut, there will still be a
example of this taking place is the Tapis project Petronas is heading in budget shortfall if companies cannot bring their operational expenses
cooperation with ExxonMobil. By using enhanced oil recovery (EOR) down through improved efficiency. Employing fewer people can help
technologies, the partnership plans to extract an additional 10 - 15% cost management to some extent, but it certainly is not a decision
of past production reserves and extend the life of the Tapis field for to be taken lightly. It is very likely that companies who have cut
another 25 years. full time staff, such as Shell, will have to look to contractors in the
future. Operating with contractors requires increased organisational
Glocalisation competence from managers and more competitive bidding skills.
International commodity companies are also attracted to Malaysia Training to improve these skills for the remaining staff represents
because its location in the South Asian Sea is close to large energy more time and resources. A more sustainable way to compete in
consuming nations in the region. However, for companies to stay the current commodity market is by making any and all potential
truly competitive, they must understand the country and the local efficiency improvements.
workforces way of life. Malaysia is a cultural melting pot. From lush
rainforest and indigenous tribes to skyscrapers, ancient mosques and Conclusion
Hindu temples, the nation has remarkable growth opportunities for Successful oil development is a crucial element of Malaysias
companies who can take advantage of the diverse and vibrant state. economy. In fact, oil and gas represents 20% of the nations
In the region the RAPID project is based in, Johor, oil companies GDP and that revenue directly correlates with the price of Tapis
are expected to invest in local resource development. Petronas had crude. Development in upstream and downstream is synergetic.
some local issues during the initial construction of the Pengerang Although weak oil prices discourage increased output, RAPID is the
facility. The English language Malaysian newspaper, the Star, project to keep Malaysian energy investors interested. When the
reported that during the initial construction phase, a Chinese site is up and running, it will be able to produce 30 000 bpd and
cemetery needed to be moved to make way for the project. Company develop petrol that will meet Euro 4 and Euro 5 fuel specifications.
leadership postponed relocating the graves until after the Qingming, The two material offloading facilities are expected to handle
also known as Tomb Sweeping Day, a traditional Chinese festival to 4 million t of cargo over the next three years and in the future, they
honour deceased ancestors. This celebration is particularly important can accommodate very large crude carriers (VLCC) along major
for the Chinese population of the region and thanks to Petronas local international shipping lines, developing a regional hub for oil
cultural sensitivity, they were better equipped to handle the situation. storage, trading and oilfield services.
The project at PIPC is expected to create tens of thousands of jobs Overall, the Malaysian petrochemical ecosystem may be in a
for people in the community from construction and downstream lull, as others are globally, but the future looks bright. The positive
activities. To reap the largest financial rewards possible, companies influence of downstream investment and the opportunities presented
need to have a keen understanding of local specificities in order to by the countrys location makes refining oil in the area very attractive
thrive and establish themselves in Malaysia. and offers a unique opportunity to transport finished products to
regional demand centres. International cooperation has increased
Improved efficiency technological expertise and improved the extraction techniques
Not so long ago, the oil and gas industry was regarded with extreme for Tapis crude. If companies in the region can bring down their
optimism and companies enjoyed a period of rapid expansion operations costs to match current market commodity prices, they are
and increasingly high growth. However, despite the countrys oil sure to see more profit in the years to come.
18 | Oilfield Technology
Set your sights.
Gulf of Mexico
Declaration WAZ 3D covers 8,884 km2 (381 OCS blocks) in the Mississippi
Canyon, DeSoto Canyon, and Viosca Knoll protraction areas of the Central Gulf
of Mexico and was acquired to better image deep structural elements while
improving subsalt and salt flank illumination.
Lets explore.
20 |
OILFIELD TECHNOLOGY nyone who has witnessed the power, skill and coordination of
an Olympic relay race knows that the sport is fraught with the
potential for disaster; one slight case of butter-fingers during
CORRESPONDENT, GORDON COPE, the passing of the baton, and all is for naught.
But few realise how closely the process parallels the drilling
SHOWS HOW DRILLING A WELL IS of a well, which requires the handoff of highly complex data sets
from one profession to the next. These handoffs, or information
exchange moments, force organisations to look beyond the silos
A COMPLEX BUSINESS, BUT DATA and solve the problem of enabling integrated or cross-functional
workflows, says Jim Crompton, O&G data manager of Reflections
MANAGEMENT BOTTLENECKS MAKE IT Data Consulting. These are the often-quoted information
bottlenecks and sources of productivity barriers for just about
| 21
targets with the highest potential for hydrocarbon deposits. Their Geophysicists take seismic data and, using complex software
analysis is then passed on to drilling engineers, who put together applications, calibrate that data with well logs, petro-physical
a programme to drill the best prospects. (rock formation) information and formation top picks to create
Successful wells are then handed over to production a sophisticated picture of what the subsurface looks like. This
engineers, who build surface and subsurface facilities to produce, model then has to be up-scaled and reformatted to fit the input
clean and send the oil and gas to market. All through the process, requirements of reservoir simulation programmes (RSPs), says
operators are required to file pertinent information with state Crompton. The challenges these days are to get more data about
authorities in order to meet regulatory requirements. the stratigraphy and fluid properties from the seismic model for a
better understanding of the reservoir.
What can go wrong But the handoff between SEM and RSP is complicated by
Along the way, there are many potential data pratfalls. Sue Carr the fact that the SEM contains an immense amount of data,
is a data manager in the Canadian and international O&G sectors. which is often difficult to shoe-horn into other applications.
O&G is very archaic when it comes to handling data, she notes. When geophysicists work with seismic data, they are creating
In the banking or health care sectors, you would never get away interpretations based upon granularity on the millisecond scale,
with the way that many O&G companies handle things. says Carr. But when you pass that over to reservoir simulation,
Many of the complications surrounding data handover that huge mass of data is too large for their simulation programs
have been in existence for a long time. At a fundamental level, to run in realistic time frames, so they discard 90% of the data.
silos within companies have not dealt with data as a long-term This creates much less detail, which is especially important if you
corporate investment; geologists dispose of valuable information are trying to delineate stratigraphic or fluid boundaries.
when they stop exploring wells, and engineers abandon The issue is further complicated when the SEM and RSP
production data when the field is no longer operating. Carr models are handed off to drilling. Engineers use the models to
was working for a company based in Alberta when they had to design the wellbore from surface to its final destination, often
decommission the Balzac gas field, which is located just north of through dangerous zones. Todays challenge is more than just
Calgary. The field is sour gas, with around 40% hydrogen sulfide, identifying the desired bottomhole location and letting the driller
so it was very important to have detailed information to guide the take it from there, says Crompton. Complex well paths need to
decommissioning. Unfortunately, there was insufficient corporate avoid drilling hazards (salt, low pressure zones, etc.) as well as
culture when it came to data management. As a result, they had follow specific horizontal drilling paths to enable wellbores to
not kept sufficient production data. The company had to spend stay within a shale reservoir for thousands of feet. This integration
tens of millions of dollars to duplicate tests in order to safely requires a close coordination between the subsurface model and
comply with the decommissioning process. the proposed and actual drilling path.
The naming of a well is a basic attribute for identifying the Even among disciplines such as engineering, significant
asset. Yet such a simple process is bedevilled with irregularities handover impediments emerge. Crompton was employed as the
that create data handover snags. A major issue is using a IT manager for his companys offshore business unit. The facilities
non-geographic name for a well, such as BP Unicorn 5A, says drafting group was a part of the business unit IT function, which
Trudy Curtis, CEO of the Professional Petroleum Data Management was responsible for keeping master plans of each platform. The
association (PPDM). The name can easily change on later drafting group worked primarily from two-dimensional plans and
documents, or someone can reuse the name on an entirely different documents.
well. The problem with paper-based design is that the original
Even when a system uses surface geographic coordinates to copies are rarely accurate after the facility begins operating; when
identify a well, (commonly called a universal well identification, building a facility, there are changes to the plans right from the
or UWI), modern drilling technology can quickly make it start. But if no one gets back to the drafting group whenever
obsolete. Several years ago, Carr was working with a company a pipe or valve or connector is altered, they dont know what
that was developing a new shale play in Western Canada called is actually out there, says Crompton. When it came time to
the Duvernay. The Alberta regulators UWI is based upon the do an upgrade to a platform, the drafting group had to send a
wells surface geographical location, using township and range technician out to survey what was actually there. It added weeks
designations. But the company was using horizontal drilling of unnecessary delay to the project.
technology, which meant that the bottomhole location for a Several years ago, when a new platform was required,
horizontal wellbore was at an entirely different township and Cromptons company hired an EPC engineering firm that was using
range location. Some wells had several different boreholes, which some of the most advanced CAD/CAM digital design software.
complicated matters tremendously, because you would have log The EPC firm created a design model that was rich in valuable
sets for each borehole under the same UWI. By the time we had 20 detail. The problem was that the operator couldnt handle the
wells drilled, you couldnt identify what belonged where with any model; they could have spent US$30 000 annually in software
accuracy. license and storage fees, but they didnt want to, so the EPC
created mountains of paper plans, change orders and equipment
Interdiscipline problems descriptions, and threw it over the wall.
While handoffs can be confused by well-name issues, many of In all, poor handovers can create expensive do-overs, cause
the major complications arise due to the ways that different the loss of valuable data and allow potentially hazardous drilling
disciplines use data. The initial interpretation of seismic situations to occure. Even abandoning a well can have serious
is commonly referred to as the shared earth model (SEM). hurdles. Take the situation of a company that goes bankrupt,
22 | Oilfield Technology
abandoning some of its wells, says Curtis. The responsibility to The future
deal with the abandoned wells often falls back on the regulator, Although technological fixes are valuable, a longer-term solution
but they may not have sufficiently-accurate information, as the to the issue of handovers is going to have to involve the evolution
only information available may be what the company filed as of both how companies view data, and how O&G data managers
planned for the well, and not what was actually built. view their profession.
For too many years, the fall-back position in O&G companies
Solutions has been to treat data as a secondary consideration, instead
Stakeholders agree that overcoming handover issues is not going of giving it the critical value it deserves. When recounting her
to be easy; it is a hydra-headed beast that will require concerted experience with a firm that had to spend tens of millions of dollars
efforts on many fronts. A significant advance has recently been to duplicate information on a sour gas field that it had lost,
made on the issue of well identification. For the last several Sue Carr notes that, unfortunately, such lapses are more the norm
years, PPDM has been overseeing the modernisation of well than the exception; Companies have to take data management
identification systems in the US and Canada. After consultations seriously on a high level, rather than viewing it as glorified clerical
with operators, regulators, vendors and service companies, work.
the association launched the USA API D12a and the Well Even when a company promotes a data manager to the
Identification Canada systems. Designed for global application, C-suite, the message is still being lost. Chief Information Officers
the systems allow for the integration of both modern and legacy are usually concerned with the boxes and wires, the bits and
data to create UWIs in a manner that eliminates the major apps, says Carr. They often dont have a clue as to the usage or
sources of confusion. value of the information generated by the data. Its like being in
Other organisations have been working on the technical charge of the chicken coop and asking, So, what do you do with
aspects involved with handing data from one set of professional this egg? Theres a big disconnect, one that we have to work to
applications to the next. Major vendors, such as Schlumberger bridge.
and Halliburton, have developed integrated suites that allow Elevating data management itself is also an important goal
geologists to pass data from their interpretation applications to in the effort to not only aid handoffs, but to achieve better
engineering systems, but corporations (especially those formed value from data throughout the sector. For decades, O&G data
through mergers), may have a host of different vendor applications managers have been recruited from a wide assortment of
embedded in the way their day-to-day work processes. Various backgrounds, everything from computer science, geology and
bodies have been working to create vendor-neutral formats in order engineering to such esoteric disciplines as Bible scholarship.
to move information from discipline to discipline. Energistics, a While many industries have developed professional development
global, non-profit organisation, develops open-exchange standards programmes for data managers that lay out training, certification
for O&G data. It has created WITSml, RESQml, and PRODml, and practices, the O&G sector is just beginning to address these
software mechanisms to move well, reservoir and production necessities.
information from application A to application B, regardless of the Working with industry, regulators and veteran data managers,
proprietary application. PPDM has created a data management curriculum, and is
As for inter-disciplinary concerns over handovers, the solution overseeing classes that allow junior data managers to achieve
may not be so much the number of barriers, but the way the issue formal certification. The user community needs to trust that data
is approached in the first place. Most work is done within a silo managers know what they are doing, says Curtis. By pursuing
because that helps maintain focus; EPC engineers concentrate data as a strategic asset using professionally established norms
on designing a project, and production engineers oversee and behaviours, we can all build that trust.
operations and maintenance, says Crompton. Each has their Data management is often a subset of IT, often buried in the
own perspective on data that is central to what they do. The goal operations and earth science groups, says Crompton. Except
of data management is to create a common data view that each for a few companies and jurisdictions, there isnt a recognition of
silo can look at with their unique perspective, whether they are professional standing for data managers. But the good news is, for
EPC, operations, geology, geophysics or accounting. those companies who do recognise the value of data managers,
Even when companies value data, they often approach it from a the light bulb goes on and they realise the many possibilities of
limited direction. The primary challenge is that users treat data as being able to do so much with data.
a tactical process, as opposed to a strategic process, says Curtis. O&G companies are beginning to understand the vast
A tactical process is one in which the data is used in a potential of digitised information. People still think in terms
fit-for-purpose solution, such as a seismic interpretation of flat sheets of paper, but the train is starting to move out of
application; traditionally, data managers are taught to think the station, says Crompton. Software developers have created
of data in such a tactical manner. The geoscientists want it training applications on gaming engines so that operators can
now, and they want it in a manner that they can immediately now use the design model created by EPC companies to train
use, says Curtis. But there are many more professions besides personnel in procedures long before the facility is constructed.
geoscientists who are going to use data; it has to be a corporate When they finally commission the plant, staff have a year of virtual
asset capable of interoperability. experience with various scenarios.
Strategic processes, on the other hand, are attached to the In the longer term, finding fixes to handover bottlenecks will
business as a whole, and retain their value and availability to facilitate the immense potential of big data, allowing operators
the entire corporation. Data managers strive to keep the data to implement forecasting and analytics based upon superior
above the tactical level, so that it remains an asset throughout the digital data quality. The better the data model, the better the
company and all its myriad users. prediction, says Crompton.
Oilfield Technology | 23
IRANS
REVIVAL
AT RISK
Ali Al-killidar, GllobalData, UK,
explains why political wrangling
leaves Irans long term future in
doubt.
24 |
I
rans upstream sector has been opening up to foreign
investment since the implementation day of the Joint
Comprehensive Plan of Action (JCPOA). However internal
power struggles, a lack of clarity on residual sanctions and the
absence of the finalised terms of the Iran Petroleum Contract (IPC)
are hampering progress. Currently, most IOC activity has been
limited to non-binding agreements, leaving the upstream sector at a
standstill. Analysis conducted on the reported IPC fields has shown
significant upside potential, but this can only be realised if the
terms of the contracts include adequate remuneration fees, license
durations and cost recovery mechanisms to justify investment.
Upstream performance
Irans liquid production reached peak levels of 6 million bpd in 1974.
This level of production was short lived and fell to 1.3 million bpd by
1981. Despite some dips in following years, Iran steadily increased
production to 4 million bpd by 2005. This level was maintained until
2009, when production fell to 3.6 million bpd. The tightening of
sanctions and an embargo in 2010 and 2011 led to a further decrease
in production levels, falling to 3.2 million bpd by 2014. The National
Iranian Oil Company (NIOC) attributed this decrease in production
to delays and cancellations of upstream projects as a result of IOCs
leaving the country. Additionally, a large number of wells were shut-in,
as the embargo substantially reduced Irans available liquid export
market.
Prior to the implementation of the JCPOA, Iranian production
had not been able to meet its pre-sanction levels despite measures
in place to offset the challenges presented by the sanctions and
embargo. However, since its implementation in January of this
year, the JCPOA has allowed Iran to restart its oil shipments to
European countries such as France via Total, Spain via Repsol and
the Netherlands via Royal Dutch Shell. Renewed access to this
export market and state of the art technology has allowed Iran to
ramp up production from approximately 3.2 million bpd in 2015 to
3.85 million bpd by August 2016. Forecast near-term production is
expected to continue to increase and the growth of production has
been established based on three factors. The first factor is the speed
at which Iran can bring greenfields online and ramp up production.
By 2020 these fields are expected to contribute to approximately
1.5 million bpd of the countrys production. The second factor
is how quickly Iran can restart shut-in wells from the time of the
embargo. Shut-in wells are expected to contribute to approximately
0.9 million bpd of production. The final factor that will dictate
near-term performance is the countrys ability to mitigate the
natural decline rates of its mature fields, which are expected to
decline to just under 2 million bpd by 2020.
Natural gas is an abundant commodity in Iran with 2016
production forecast at 25 billion ft3/d. The South Pars gas field
will remain the major contributor, with more than 14 billion ft3/d
yet to come online. Production from this field will provide natural
gas for domestic demand and enhanced oil recovery, as well as
gas and condensate for the export and petrochemical sectors.
The development of remaining phases has been fast tracked by
the Pars Oil and Gas Company (POGC), a subsidiary of the NIOC,
shifting the expected completion dates for the final phases to
2018. As a result of the sanctions, the NIOC relied on inexperienced
and less equipped Iranian contractors to continue with the field
developments, resulting in delays of a minimum of 3 - 5 years.
The POGC has attributed its ability to fast track the South Pars
developments to being able to source more sophisticated European
equipment directly from manufacturers, as a result of the JCPOA.
| 25
Apart from the JCPOA Iran has also unveiled preliminary terms of inactive in Iran. A common link between the MoUs is support
a new contract, which has the objective of attracting financing and of the development of a variety of fields, in the form of either
technical experience to the upstream industry. 51 oil and gas fields investment, evaluation, equipment, technology or experience. The
are expected to be offered under the framework of this new contract, second category of activity is that of ongoing agreements, whereby
referred to as the IPC. Although the terms of the IPC are yet to be companies which remained active in Iran during the sanctions
ratified, it is expected to offer more flexible terms and reduced risk in continue to secure agreements, such as Sinopec and China National
comparison to the preceding buy-back contracts. Petroleum Corporation (CNPC). The third form of activity is the
re-establishment of relationships, by restarting oil trade and the
Licensing process opening of offices in Iran. Collectively, IOCs have the same stance in
The route to being awarded one of the 51 oil and gas fields has stating that no concrete steps will be made until a solid framework is
commenced via an ongoing process referred to as the expression in place.
of interest phase. Here potential investors sign a memorandum of The next step to being awarded an upstream project is the
understanding (MoU) and engage in direct negotiations with the pre-qualification process, whereby the NIOC determines if a potential
NIOC. The latter has potential to offer preferential treatment to company has the necessary experience and resources to develop the
companies favoured by the NIOC, which steps away from the clear fields on offer. According to Iranian oil officials, only around 37 oil and
and transparent process Iran is trying to implement. The activity gas companies currently possess the necessary criteria to participate
of foreign companies can be split into three distinctive categories, in the bidding process. Operators expect the pre-qualification
the first being preliminary licensing agreements, where a number procedure to continue over the next year and half, with projects
of MoUs have been signed by companies who were previously offered in stages. South Azadegan is expected to be the first field on
offer, in a closed bidding process starting
this quarter. This will allow the ministry to
gauge investor interest and refine the bidding
process. Further projects are expected to be
offered from 2017, but it remains unclear
whether the process will involve closed
bidding, open licensing rounds or a mixture
of the two.
The initial licensing rounds are expected
to target 17 high priority fields shown in
Table 1. These fields are prioritised because
they are shared fields with neighbouring
countries and/or are high impact fields which
are expected to contribute to significant
production growth. Examples of shared fields
include the South Pars Phase 11 and the
South Pars Oil layer, shared with Qatar, North
and South Azadegan shared with Iraq, Salman
shared with the UAE and Farzad-A shared with
Figure 1. Irans liquid production forecast. Saudi Arabia. As well as the risk of depleted
Table 1. Priority NIOC upstream projects Table 2: Other NIOC upstream projects
Priority (Recoverable reserves - STOIP/OGIP) [Source: NIOC] Others (Recoverable reserves - STOIP/OGIP) [Source: NIOC]
Ahwaz- Bangestan (2955 million bbls - 31 570 million bbls) Ferdowsi Oilfield (2181 million bbls - 31 700 million bbls) Sefied-Zakhour (151 million boe - 1382 million boe)
South Azadegan (3462 million bbls - 25 642 million bbls) Mansuri-Bangestan 9786 million bbls - 15 142 million bbls) Tang-e-Bijar (147 million boe - 1362 million boe)
Darquain-3rd Phase (238 milion bbls - 7945 million bbls) Soroosh (569 million bbls - 14 230 million bbls) Sepehr (113 million boe - 838 million boe)
Dehloran (363 million bbls - 5184 million bbls) Ab-Teymour (5539 million bbls - 12 202 million bbls) Halegan (47 million boe - 772 million boe)
Salman (1742 million bbls - 4148 million bbls) Dorood (2642 million bbls - 11 007 million bbls) Naft Shahr (75 million bbls - 580 million bbls)
Foroozan (583 million bbls - 3432 million bbls) North Pars(5992 million bbls - 9511 million boe) Sefeid-Baghoun (29 million boe - 395 million boe)
South Pars Phase 11 (470 million boe - 3355 million boe) Kish (825 million boe - 9167 million boe) Karun- Bangetan (29 million boe - 395 million boe)
Susangerd (490 million bbls - 6996 million bbls) Dalpari (29 million bbls - 367 million bbls)
Changuleh (273 million bbls - 2367 million bbls)
Golshan oilfield (1692 million bbls - 4505 million bbls) Sumar (207 million bbls - 333 million bbls)
Khami Fields (377 million boe - 2183 million boe)
Aghra (946 million boe - 4298 million boe) Dey (30 million bbls - 292 million boe)
Farzad-A (499 million boe - 1748 million boe)
Norooz (378 million bbls - 4201 million bbls)
Arvand (345 million bbls - 1114 million bbls)
*Recoverable reserve estimates are based on recovery
Golshan gas field (2296 million boe - 3750 million boe)
West Paydar (62 million bbls - 1077 million bbls) factors of analogous fields.
Danan (262 million bbls - 3738 million bbls)
Paydar (157 million bbls - 1047 million boe)
Jufair (351 million bbls - 3514 million bbls)
Balal Gas Field (177 million boe - 1042 million boe)
Band-e-Kakheh (381 million bbls - 3468 million bbls) Remaining recoverable reserves of
Sohrab (120 million bbls 736 million bbls)
Cheshmeh-Khosh (646 million bbls - 3232 million bbls) 40 billion boe
Aban (4 million bbls - 138 million bbls) Ferdowsi Gas Field ( 351 million boe - 1467 million boe)
26 | Oilfield Technology
reserves from shared fields as a result of competitive draining from the business with Iran are likely to take advantage of the situation by
neighbouring country, most fields on offer also contain poor quality charging premiums of their services, as there is limited competition in
hydrocarbons. 20 of the 29 oilfields contain heavy or ultra-heavy oil and the market. Further financial concerns also include the risk of higher
18 of the 22 gas fields contain a high proportion of hydrogen sulfide, interest rates, transaction costs and rapid inflation.
resulting in increased corrosion of field facilities and risk of leaks.
Additionally the conditions present at offshore developments will also Upside potential
present a risk of hydrate formation. If untreated, hydrates can cause Despite these challenges the country does have a host of benefits which
blockages in pipelines and equipment. These operational challenges make it appealing from an investment perspective. From a medium-
require constant monitoring and additives to minimise their impact. term point of view, the fields offer a variety of opportunities with 18
exploration blocks, 33 greenfields and 18 brownfields, producing
Investment challenges crude oil, condensates, NGLs, natural gas and LNG. Companies with a
Further short-term challenges facing potential investors include the particular focus such as exploration, production and/or enhancement,
uncertainty looming over of the IPC. The internal conflict between will be able to apply their expertise to target specific fields of interest.
the conservative party and Rouhanis cabinet has caused delays and Long term benefits include low cost field development and
substantial variation to the framework of the licensing contracts. operating costs with an average combined Capex and Opex of
In addition to the IPC contracts, reports cite the potential for the US$6 - 16/boe. These costs fall at the lower end of the spectrum of
NIOC to offer fields under the previous Engineering Procurement global development and operating costs, despite the heavy oil or sour
Construction and Financing (EPCF) and buy-back contracts. The gas nature of the fields. The ability to develop and operate fields at
buy-back contracts are expected to have improved terms, extending low cost is mostly attributed to Irans favourable geology and terrain.
the contract from around seven years to 20 years and being The country also has existing infrastructure and export terminals
rebranded an advanced buy-back contract. The publicly available which reduce the risk of bottlenecked production, which has been
data provided by the NIOC is also very limited and of poor quality, experienced by neighbouring countries. Irans geographic location
making it very difficult for those evaluating prospects to assess the is also an advantage as it has a nearby export markets with growing
economics of investing in a field. More detailed field data is only demand from India, China and other countries in Asia, which receive
offered to IOCs at the discretion of the state, and many fields still lack more than half of Irans exported crude and condensate.
technical evaluation. This issue leads on to the potential of over- or
underestimating biddable parameters during the bidding process, Conclusion
such as the plateau production target or remuneration fee. Operators in Iran share the underlining sentiment that the lack of
The threat of sanctions continues to present a challenge as progress on the bid round, such as the contract terms and dates,
the current agreement can be reversed, particularly as a result and the lack of clarity over the residual sanctions, have delayed the
of a change of US or Iranian foreign policy. The current status progress of foreign investment. However given time, both counts are
can significantly change based on the outcomes of the US and expected to diminish and local operators believe the prospects on
Iranian presidential elections over the next two years. The current offer have substantial value. The JCPOA has granted Iran the ability
dtente could be derailed by continued hostilities between various to showcase its investment opportunities, which are expected to be
establishments within both governments. Iran has also continued lucrative ventures. However, progress is highly dependent on short
to test its ballistic missiles and according to a German domestic to mid-term challenges being addressed and the final terms of the
intelligence company, has continued to attempt to buy nuclear contracts.
compatible technology. This is a concern for foreign
companies considering investments in Iran, as the
snapback mechanism automatically reinforces punitive
sanctions if the terms of the JCPOA are violated. There
is also a regional threat to conducting business in Iran.
Though not currently directly engaged in Iran, regional
conflicts are common in neighbouring countries, such as
the presence of Daesh and the Arab spring. As a result of
Irans involvement via proxies in these conflicts there is
potential for a spill over into the country and therefore
foreign companies can find themselves operating in a
rapidly escalating hostile environment.
Medium-term challenges include the lack of clarity
over residual US sanctions, including dollar dominated
transactions. Fears of violating remaining sanctions are
enough to stop financial institutions from engaging in
business with Iran. BNP Paribas has previously been fined
US$8.9 billion for violating sanctions against Iran, Cuba
and Sudan. The bank maintains that even if the residual
sanctions were to be removed, they still would not get
involved in Iran. Many banks and companies share a similar
sentiment. However, some European banks have started
processing transactions or are preparing to do so, such as
Belgiums KBC, Austrias Erste Bank, Swedens SEB and
Italys UniCredit. Financial institutions that do conduct Figure 2. Irans natural gas production forecast.
Oilfield Technology | 27
S C I E NT
N T I F I C D R I L L I N G I NT
N T E R N AT
A T I O N A L
L S
PROPRIETARY
P R O P R I E TA RY TECHNOLOGIES
T E C H N O L O G I E S HAVE
H AV E PROVIDED
PROVIDED
I N D U S T RY L E A D I N G
PERFORM ANCE &
V E R S ATI L IT Y
FOR OVER 48 YEARS
DO
D OB
BUSINESS
USINESS T HE SCIENTIFIC
THE WAY