Mark Carne, executive vice president and country chairman for Shell in Dubai and Northern Emirates tells Oil & Gas Middle East that Shell’s business in the region is about to get even more exciting.
To chart Shell’s history is to follow the evolving story of the International Oil Company as the pivotal cog in the global energy business.
No version of that story is complete without a significant chapter on the Middle East. Today Shell epitomises the relationship of an IOC in the land of the NOC.
Bringing progressive technology and international experience to partners in the region has been the rationale behind some of the longest-standing affiliations as well as world leading mega-projects, the like of which only crop up a few times in a generation.
Oil & Gas Middle East met up with Mark Carne, executive vice president and country chairman for Shell in Dubai and Northern Emirates, and a member of Royal Dutch Shell’s Upstream International Leadership Team.
The company’s activities in the Middle East vary between the very well known, including long-term partnerships such as Petroleum Development Oman, to the giant mega-projects, such as Pearl GTL and Qatargas 4, as well as some quieter relationships, such as Bapetco in Egypt and its SSPD operations in Syria.
“For me the fascinating thing is that we operate right across the life cycle of the E&P business. Of course we have exploration in a variety of different ventures across the world and the region, but then we also have the huge mega-projects in Qatar and now something very exciting for us is the huge Majnoon development in Iraq,” enthuses Carne.
“The development there is extremely interesting, Majnoon is a 38 billion barrel field, and a project that will take production to 1.8 million barrels a day by 2017,” he adds.
Carne says that wherever the company is operating in the region, it is a relationship based on bringing cutting edge technology to aid national oil companies to improve or enhance E&P operations.
“Really, at every single part of the oil and gas lifecycle we are pushing the boundaries of technology, whether it is in exploration, or operating in some of the most mature fields found anywhere. The Middle East provides a fantastic opportunity to work with challenging projects,” he says.
As an example, Carne cites the company’s PDO operations in Oman. “The great thing about Oman is that it has the full spectrum of issues you are ever going to confront in the E&P business, both from the physical exploration and production perspective and an operations and development side too.”
One of the key projects in Oman which illustrates how technology barriers are being tested to the limit is the Harweel development.
“This is a very high pressure, sour gas injection project. PDO will be injecting gas at 550 – 600 bar, at 4% H2S concentration, and it will increase the production at that field through miscible flood from around 10% to 30% recovery factor, a remarkable increase,” says Carne.
The project combines the challenges of ultra high pressure and high temperature. The temperature of the reinjected associated gas is around 100 C with H2S of more than 5% and CO2 near 20%.
The project is a classic example of enhanced oil recovery with miscible gas flood that will increase the ultimate recovery factor from around 10% up to 30%.
The field will have a production capacity of around 60,000 b/d, and is already 97% complete, with full production start-up scheduled for this year.
PDO is also pushing boundaries in lots of other ways. If you take seismic as an example, Shell and its partners are operating at the forefront of seismic technology in exploration.
“In PDO we talk about these new seismic techniques in terms of ‘turning the light on’. By that we mean we are able to see things we have never been able to see before, and that other companies can’t see compared to the technology we can bring. That puts us in a fantastic position when it comes to exploration in new acreage.”
Whilst the ubiquitous ‘smart field’ tag is banded around to describe a great swathe of technology deployed in the modern oilfield, Carne says managing that data and turning it into something which delivers real benefits is the challenge.
“Gathering the knowledge and making effective use of what you have means understanding every step of the process from the reservoir right through to export in the most effective way.
That means having a really effective, dynamic reservoir model, effective reservoir control, and proper automated facilities control systems which enable you to maximise the production.”
PDO is a great case in point in that regard. They have halved the rate of decline in their existing fields through the use of this combined smart technology.
“We call it well and reservoir management, but it is using quite a lot of smart technology. Everything from reservoir simulators to dynamic process simulators and well head monitoring equipment make up the ingredients to make that possible.”
Essentially, Carne adds, the secret is not simply about deploying this technology, it is in the way all these different resources are integrated across the whole chain to optimise the value.
“Everybody is interested in smart fields because they can see the benefits which are being obtained. I think the Harweel example highlights what can be achieved, by increasing recovery at lower cost.”
The other power Shell is able to bring is its ability to harness the global knowledge and apply it anywhere it is operating.
“If you take drilling as an example, we have a very strong drilling community, so if we pick up a lesson in the Gulf of Mexico or in Canada, then we can apply that knowledge immediately in Syria. Syria now is drilling consistently top quartile performance wells benchmarked across the industry, and part of that is achieved through the benefits of learning through our global knowledge base.”
Future Fuel
Gas, Carne notes, is absolutely fundamental to the way the Middle Eastern energy business is going to be run in the coming decades, accounting for much of the project investment and exciting developments right around the region.
“If you look at the Middle East gas demand, its going to grow by at least 75% in the next 20 years. That will make it a larger gas market than Europe’s – really a huge gas market.”
Today the region is witnessing a huge amount of gas development growth, driven by economic development and the need to move away from burning fuel oil in electricity generation and towards natural gas.
Right across the Middle East two primary factors are driving this shift. Firstly because burning gas is cheaper than burning oil, there is the obvious economic driver. But also there is an environmental driver.
Gas emits around 30% less CO2 than fuel oil when its burnt in power stations.
“In almost every country in the MENA region, we are seeing huge demand for gas. That quantity of gas cannot all be supplied by associated gas from existing oil fields, so major developments are being undertaken to fill that gap.”
The seasonal demand flux of gas means associated production, which has a very flat supply profile, is unsuited to the Middle Eastern spikes in electricity demand in summer.
However, there are various solutions available, and Shell is working throughout the region on bringing that gas to market in various ways.
“We are seeing an emergence of more LNG in Dubai, and also in Kuwait, and I’m certain there are many other countries looking at LNG import to help meet their energy needs as well.”
Dubai LNG is an example of how an innovative solution can be a great fit to meet regional energy demands. In Dubai an LNG regasification vessel has come on stream in a very short time, providing DUSUP with gas.
“Using a converted vessel brought some economic benefits, but primarily time and turnaround was slashed considerably,” he explains.
Shell, Carne says, is the global gas major in many respects. “We are the largest LNG producing company in the world. We actually supply more than 50% of the LNG that is currently used in the Gulf today.
We have all of the skills that you need to succeed along the gas value chain. Gas is very different to oil in that regard. You have to be able to assemble the complete gas value chain in order to be successful.”
The company operates a huge fleet of LNG tankers which traverse the globe, linking producers with major consumers everywhere.
“We have an extraordinary reputation for reliability in this space. I used to be managing director of Shell’s operations in Brunei, and there we have been delivering LNG into the Japanese and South Korean markets for 35 years. That’s over 5000 tanker loads, and we have never missed an delivery schedule.”
LNG has tremendous advantages for producing countries too. Once the gas is processed and liquefied it becomes easily movable.
“With LNG tankers you have the freedom of the oceans. This means producers don’t need bilateral agreements such as those required with pipelines. This also means customers can buy from a portfolio of suppliers, which is a great advantage too.”
The gas game is an area Carne is particularly excited about. A huge proportion of the world’s gas is in the Middle East, but Carne says the company can play an even more exciting role than linking producers to customers by adding value to the resources regionally available.
“Qatar’s gas to liquids project (GTL) is a great example of taking gas and then adding value, by converting it into higher value liquid products.”
Pearl GTL will come online this year, generating 140,000 barrels of oil equivalent (boe) products a day, and another 120,000 boe of natural gas liquids and ethane each day. Pearl GTL will generate an incredible three billion boe of natural gas over the life of the project.
The GTL products can be used in anything from car fuel to jet fuel. Over 5000 retail outlets are supplied with GTL products from the Bintulu plant in Malaysia which Shell has been running since 1993.
Bintulu was the world’s first commercial GTL plant. It has the capacity to convert approximately three million cubic metres per day of natural gas into some 14,700 barrels per day of cleaner GTL products.Local Focus Across the MENA region Shell operates in a number of different business models in conjunction with national oil companies and as stakeholders in joint ventures.
“The model varies from country to country. In the Middle East we have public joint stock companies, Enhanced Technical Services contracts, and more straightforward joint ventures. Across this region we have the whole gamut of fiscal regimes,” explains Carne.
“What we try to do is remain fundamentally aligned with the development objectives of the country we are operating in. Irrespective of the fiscal regime, we examine whether there is an alignment of objectives, and if we can bring our capabilities and our skills to bear in such a way that we can, then we have the recipe for a long term sustainable relationship in those countries.”
Carne adds that while the framework changes, the underlying relationships are based on the same fundamentals.
“We always focus on creating relationships where we are able to bring technology to bear, better able to bring knowledge transfer to the table, and better able to develop the local talent. I’m actually extremely proud of the fact that out of all the people who work for the JV companies of which we are a part, over 90% are local nationals, which is extraordinarily high.”
The Middle East today represents 13% of Shell’s global production, but that’s going to increase significantly as Pearl GTL comes on onstream. “The coming years will be very exciting for Shell in the region. Throughout 2011 and 2012 we will see production start to ramp up in Iraq and this region is going to become even more important for the group,” he concludes.
Shell in Qatar
Pearl Gas to Liquids (GTL) is the largest project ever launched in Qatar. It will be the world’s largest GTL plant and will cement Qatar’s place as the GTL capital of the world.
The Qatargas 4 LNG project is being developed by Qatargas on behalf of shareholders QP and Shell (30 per cent). The project combines Shell’s global leadership amongst private energy companies in LNG with Qatar’s vision to become the world’s largest LNG supplier.
Shell has established a world-class research and development facility and a learning centre at the Qatar Science & Technology Park. Called Qatar Shell Research & Technology Centre, the company is committed to investing up to $100 million on programmes there over 10 years.
Shell has been appointed by Qatar Gas Transport Company (known as Nakilat) as shipping and maritime services provider for one of the most significant fleets in the global LNG business.
A key element of the agreement is the commitment to develop Nakilat’s shipping expertise.
