ADIPEC 2010 in Review

Indeed, perhaps the world and the industry has changed a little since ADIPEC’s last incarnation in 2008. There was certainly less swagger about the event, and for most visitors and exhibitors the event was the better for it, with more serious discussions and order enquiries and fewer novelty distractractions. Over the course of the week over US$4 billion worth of deals were confirmed with some of the biggest names in the industry securing contracts and re-confirming deals at the event.

In the run up to the event, Abdul Munim Al Kindy, CEO of Abu Dhabi Company for Onshore Operations (ADCO) and chairman of ADIPEC spoke about the issues facing the industry that would be addressed during the conference
“One of the greatest challenges we all face in the industry today is the management of talent. Prior to this it was reservoir management and promoting efficiency in our operations. ADIPEC will be an opportunity to discuss all of these critical issues,” he told reporters at a press conference in Abu Dhabi.

“The challenges facing the environment will feature very highly,” he told journalists ahead of the conference.

At a special session, ADCO representatives revealed and discussed the company’s enhanced oil recovery pilot project using Co2 injection in its Rumaitha field just west of Abu Dhabi, which is said to be the first in the Middle East in a bid to reduce carbon emissions associated with gas production.

The UAE holds 8% of the world’s oil reserves and has targeted a production increase of 3.5 million barrels per day by 2017.

Hifazat Ahmad, event director of ADIPEC said that by day three, over 38,000 visitors passed through the doors of the cavernous Abu Dhabi National Exhibition Centre or ADNEC, saying that it was almost as many visitors as the whole event had in 2008.

“There has been a real buzz on the show floor, whether its deals being discussed, relationships being formed or partnerships coming together. Many of these deals may have been in talks for months but companies recognise that ADIPEC is an ideal platform to sign on the dotted line and confirm the projects,” he said.

By the end of the four-day event, over 45 000 visitors had attended with 1502 companies exhibiting their products and services and 4381 conference delegates and 260 conference speakers having presented their technical papers and taken part in panel discussions.

Fourteen country pavilions (France, Spain, Germany, Korea, Russia, Norway, Netherlands, UK, USA, Canada, China, Italy, India and Turkey with increased presence from the USA, UK, Norway and China) as the who’s who of the energy industry, were featured this year.

Deal announcements

ADNOC announced that it had signed a deal worth $3 billion with the Japanese Bk Consortium to fund its expansion as it aims to double production output by 2018.

Leading UAE based cable manufacturer, Ducab, announced its signing of a $29.9 million contract with China Petroleum Engineering & Construction to provide cables for a strategic pipeline that will be the first to deliver UAE crude directly to the Arabian Sea Coast, bypassing the Strait of Hormuz.

The UK’s Derrick Services Ltd (DSL) celebrated its expansion in the MENA region with the opening of its Algerian base and the awarding of a $3 million contract from CTF of Tunisia for the engineering and project planning for the decommissioning of CTF Rig 05 from Platform 2 in Tunisian waters.

Smaller firms also managed to pick up an order or two. On day three of ADIPEC, German heavy lift specialist Stahl Crane Systems, announced a $570,000 contract from Worley Parsons for a project for Petroleum Development Oman (PDO).

The order, which consists of two 20 tonne, one 10 tonne and one 5 tonne double girder electrical overhead travelling cranes, will be deployed at PDO’s Amal steam surface facilities which are undergoing expansion. The project for Stahl is expected to last 16 weeks.

Exhibitor tie-ups

Exhibitors also formed strategic partnerships. A noteworthy example of just such partnership was that of AlMansoori Specialized Engineering (MSE) and the UK’s Camcon Oil, which announced its entry into an agreement, which will see MSE supporting and installing Camcon’s products throughout a number of regional markets, such as the UAE and Qatar. The most significant of these services will focus on Camcon’s new Digital Intelligent Artificial Lift (DIAL) solution, APOLLO, which provides operators with unprecedented control and precision over gas injection according to Camcon.

Chief executive officer of Abu Dhabi-based MSE, Nabil Al Alawi, said: “Once again, this has been a very successful ADIPEC for AlMansoori, and we are delighted to announce this new partnership with Camcon Oil.

“As a locally founded and operated company, AlMansoori is honoured to be able to showcase its extensive portfolio at the event and take the opportunity to network with the international oil and gas industry.

“We have had a constant flow of footfall to our stand and look forward to doing business with the many contacts we have made.”

“This is a significant milestone for Camcon Oil as we move from product qualification to market acceptance,” said Ian Anderson, Camcon’s chief operating officer.

“At a time when there is an increased focus throughout the Middle East on bolstering recovery rates, we believe that APOLLO is a truly industry-changing product, bringing digital, real-time control to the production process and saving millions in unnecessary shut-downs and well interventions.”

Anderson concluded by adding: “With such an outstanding product, it was vital to us that we partnered with the best in the region and in the Al Mansoori Group, we have done just that. We look forward to a long and mutually beneficial
relationship.”

Conference sessions

Efficiency seemed to be a running theme throughout the event and the various panel and conference sessions.

At the Executive Plenary session on the first day, keynote speakers from Dana Gas, ExxonMobil, the IEA, Schlumberger, Total and Masdar Institute discussed the challenges of maintaining reliable oil and gas supplies to meet the ever-growing global energy demand whilst achieving sustainable economic growth and cutting carbon emissions.

Yves-Louis Darricarrére, president of Exploration and Production, Total, said that from a consumer point of view, there was a need for better energy efficiency through modification of usage but also set out the French oil giant’s own targets.

“Fossil fuels will still account for 75% of energy supply in 2030, to satisfy and secure the future of energy, sources of supply have to be diversified,” compared to 81% today, he said.

“We must succeed in reducing our CO2 emissions and more generally our customers’ greenhouse emission so that fossil fuel production can be increased.

“Securing future world energy supply goes hand in hand with energy efficiency starting with optimising our core installations wherever their location,” he said.

Darricarrére pledged for his part, that Total would stop continuous flaring from 2011 onwards from its oil and gas operations, he also said that Total has invested in renewable energy solutions such as solar and biomass.

Didier Houssin, director of the International Energy Agency said that worldwide future demand in energy would require tremendous investment in energy production.

He observed that, “Energy demand in OECD regions will remain relatively flat, while in non-OECD regions they are expected to double between 2007 and 2050. Energy security will continue to be a very important issue as fossil fuel demand will continue rising.

The energy technology revolution that the IEA has been calling for must take place in both the developed and developing regions of the world.”

Unconventional gas

With tight and sour gas reservoirs constituting significant proportions of the world natural gas resource, there is great potential in these for future reserve growth and production. This was the premise of a very pertinent panel discussion by experts from Weatherford, Schlumberger, Baker Hughes, ExxonMobil and BP.

Robert Gales, VP Geosciences at Weatheford stressed the importance of good quality scientific analysis of gas-bearing reservoirs.

“We need to do good science on the front-end if we’re going to be able to do good engineering on the back-end. By getting the right information you can improve the results,” he explained.

He said that procedures such as core analysis, mud logging, and testing are critical on the front-end before expensive field development decisions are taken.

“What are we trying to do? We’re trying to be able to get a ‘no-go’ decision so that we can start looking at the real
economics when you look at field development on conventional or big projects, it’s lots of wells when it comes to tight gas or shale gas and stimulation required, so that’s another whole economic decision that needs to be taken into consideration,” explained Gales.

Schlumberger’s chief economist, Kamel Bennaceur explained how the shale gas boom in North America has encouraged other countries such as China which has recently discovered its own reserves – and started licensing rounds for shale gas – to better exploit the resource.

However, in his presentation he warned that ‘not all shales are created equal’, alluding to the fact that there are considerable risks with many shale gas completions suffering from suboptimal results.

“We’ve been working with a number of geological institutes and a number of companies to do a more detailed assessment around the world.

“We have identified over a hundred basins around the world where you have unconventional gas and especially shale gas,” he revealed.

Bennacuer explained that the challenges of extracting from unconventional gas reservoirs are twofold saying that the first one would be technical and it is about trying to get the technology from the US without doing a ‘Xerox design’ but doing the right engineering for proper formation evaluation, then doing all the proper drilling, the proper fracturing and closing the loop as far as evaluation is concerned.

The second challenge according to the oilfield service provider’s chief economist is commercial: “Do we have the prices that we should have to justify the commerciality of these resources?,” he asked. “If I go for instance to Russia, they have huge resources, does it make sense from a portfolio standpoint to start looking at their coal bed methane or shale gas?” This is a question that needs to be asked and answered by the operators,” Bennacuer advised.

A ‘subdued’ ADIPEC analysis

Oil & Gas Middle East caught up with IHS Global Insight’s visiting senior energy analyst for Middle East and North Africa, Samuel Ciszuk to give us his take on this year’ ADIPEC and to discuss the regional oil and gas industry trends.

“It seemed a bit subdued to say the least,” the London-based Ciszuk said, “people were expecting more, but saying that, we’re also coming out of a rather strange time economically for the whole world although the oil industry hasn’t been as [badly] hit,” he opined on ADIPEC 2010.

He coupled this with the death of the ruler of Ras al Khaimah and a calendar clash with Singapore International Energy Week.

On Abu Dhabi’s production increase aspirations, Ciszuk said that after so many false starts, things are finally getting underway.

“ADNOC seems to be set to move, it seems like ZADCO is making progress. If all that actually starts moving forward then we are actually in a situation where Abu Dhabi is starting to make headway on this 3.5 million barrels per day goal by 2017,” he said.

Rest of the region

Ciszuk said Kuwait’s ability to develop its oil and gas industry has historically been quite disappointing, hinting at the political wrangling that usually characterises the decision-making process for much of the industry in the oil and gas-rich state, but he is hopeful that things are changing for the best.

“Quite a few people are quite certain that Kuwait will get under way, there have been so many disappointments.

When was the last time that everybody including the Kuwaitis themselves were satisfied with the performance when it comes to development?”

Gas is the next major shift in energy production that Ciszuk predicts will take place in countries such as Saudi Arabia where the focus has mostly been on oil production first.

“In Saudi Arabia we see gas being the big question, now they’ve reached a development target for oil and now it’s gas. They really do need to raise the gas production, they have that in common with everybody else in the Gulf except Qatar.

“Saudi Aramco has said ‘now gas is the priority’, they’re happy with the oil pressure capacity where it is and they’re moving forward on gas, they’re going to try to drill for deeper gas in the Gulf and try to explore in the deepwater Red Sea but few people are extremely enthusiastic [about that] right now.

“Even in Iran, they still need to raise their gas production in order to meet reinjection and domestic demand, they’re just raising their imports still from Turkmenistan and so they’re in a far-from-a-straightforward situation so everybody needs gas.

Qatar, Ciszuk pointed out would start looking more outwardly in terms of investments once its major gas projects are complete.

Iraq

Despite the flurry of activity on the ground in Iraq, news from the conflict-ridden potential oil giant has been deafening in its near absence at ADIPEC, although there may be a good reason for this, claimed Ciszuk.

“You don’t hear much from Iraq, I suppose they’ve had their own dedicated conferences. The big players now, the companies with their contracts, they just want to get their heads down to it.

On Iraq’s third round gas auction Ciszuk said that the fact that all three fields were taken was good news for the country but it was a disappointing group of companies that took them.

“It was nowhere near the caliber of companies normally taking up Iraqi projects and what the government had been hoping for,” he explained. “It had Kuwait Energy which is a rather a small company, KazMunaiGas which to my knowledge has no Middle East experience whatsoever, TPAO with a lot of political contacts in Iraq but still not a very experienced [player].”

Ciszuk described the irony of the lack of a functioning Iraqi government in that there are few political stakeholders for oil companies to have to deal with. However, he warned that this might lead to a future backlash once a government is established as politics could once again obfuscate the oil and gas landscape for companies, the IHS analyst explained.

Movers and Shakers

With their major presence at ADIPEC this year, specialised players Statoil, Maersk, Wintershall and Occidental are definitely fixing for some significant activity in the region according to Ciszuk.

Occidental, he said, have already proved themselves in complex EOR projects in Oman, this is sure to be useful experience when dealing with clients such as those in Abu Dhabi where EOR activity will be increasing.

“It will all be about sour gas and CO2 injection because they need so much gas to inject but if they could replace it with CO2, that would be such an elegant solution and they need that,” he explained.

He added that these medium-sized companies have their work cut out for them when dealing with already-established major operators in these markets.

“Those companies that come in and say ‘we are specialised in these types of reservoirs and these types of production, use us’, I think they [customers] will be tempted, [although] there are good reasons for why they should not be tempted and remain with the big players who have been here for a long time,” he advised.

Conclusion

Once again the ADIPEC conference sessions drew in decision makers and policy shapers from across the upstream spectrum, and some fascinating papers were delivered. The growing number of exhibitors revealed just how key the Middle Eastern energy market remains to vendors and suppliers the world over. A success indeed.