Could you talk through some of the major oil and gas projects that PDO started in 2015?
The headline one is Miraah (meaning ‘mirror’ in Arabic) which we have begun with our partners GlassPoint Solar. Once complete, this will deliver more energy to the customer than any other solar plant in the world.
The installation will harness the sun’s rays to generate an average of 6,000 tons of solar steam daily which will be used for thermal enhanced oil recovery (EOR) to extract heavy and viscous oil at Amal in southern Oman.
The plant will provide a sustainable solution for EOR steam which is currently produced by burning natural gas. When finished, Miraah will save 5.6 trillion British Thermal Units of natural gas each year, the amount that could be used to provide residential electricity to 209,000 people in Oman.
The project is expected to reduce CO2 emissions by over 300,000 tons annually, the equivalent of taking 63,000 cars off the road.
Meanwhile, work on PDO’s mega projects at Rabab Harweel and Yibal Khuff continues, with foundations being laid at the former and ground-breaking expected on the latter soon. Additionally, we also reached the Final Investment Decision phase for key gas installations: the Kauther Depletion Compression 2 and Saih Nihayda Depletion Compression 2 projects.
What was PDO’s total oil and gas output in 2015? Also cite an average daily output figure?
Early monetisation of prospects, improved project delivery and drilling, and other improvements have led so far to a barrel of oil equivalent production of around 1.28 million barrels per day (oil, gas and condensates).
In addition, PDO is working to a long-term oil production plateau of 600,000 bpd by 2019. Our fully audited figures for 2015 will be announced at the Omani Ministry of Oil and Gas media briefing in Q1 next year.
Almost all industry players, in the region and globally, have been affected by the low oil price situation. How do you think your company has been impacted by the declining oil prices? Has there been a fall in revenues?
We are aiming to stay the course on our main activities with a continued focus on business improvement and sustainability. Our well engineering and project activity levels continue to grow and we are pursuing early monetisation of prospects.
At the same time, we are relentlessly pursuing stricter cost control and have identified a number of great opportunities to execute work more efficiently and reduce waste. The current environment is enabling us to challenge the status quo.
From discretionary expenditure to redeployment of hoists and other resources, we need to ‘serve Oman’ by ensuring we are all working to remove inefficiency and waste.
Revenues are obviously significantly down but our development activities continue at a significant pace and remain economically robust. In periods of difficulty and uncertainty, it’s key to get the fundamentals right and our track record and robust business plan have enabled us to absorb the impact of the price fall and continue to deliver key growth and development targets to our shareholders.…(continues on next page)
What are PDO’s plans/strategies for 2016? Are you going to increase oil and gas production or intend to focus more on cost efficiency?
This is not a binary choice and it is possible to both maximise production and manage costs. Central to this objective is our Lean continuous business improvement programme which helps us to identify waste, strip out duplication and streamline our operations so that we do more for less.
When economising, any business must assess the impact of cuts across the value chain and then be surgical and selective in its approach, and the most important aspect for us has been to work collaboratively with our contracting community rather than issuing top-down cost reduction orders.
So, we have held a series of Contract Optimisation Reviews and listened carefully to our contractors for solutions on where they believe we could enhance their performance and enable us to mutually operate more efficiently.
As a result of this collaboration, and along with procurement savings on our mega projects, we are well on our way to booking $1bn real and structural savings from 2016-20.
Further initiatives include the launch of our ‘Every Rial Counts’ campaign, a wide-ranging initiative focused on savings and efficiencies across the Company (including right down to the amount of printing we do, and the level of food that is wasted) which emphasises that everybody has a responsibility to treat PDO’s money as if it were their own.
We are also progressing well with our lean continuous business improvement strategy which extends right across the business and is aimed at eradicating duplication, streamlining operations and cutting wasteful work processes.
At the same time, our teams continue to ramp up production by working harder and smarter. For example, in November, PDO achieved its best monthly oil production since April 2006. We have also just drilled the fastest well in our history, taking 3.25 days to drill to a depth of 1,289m in our Amal field in southern Oman.
Come 2016, is PDO going to start new oil and gas projects?
One to watch out for is our Khulud tight gas development. Since January 2014, six wells have been producing through an Early Production System that was commissioned in 2013 to test the long-term potential of the field. Estimated reserves are in the range of several trillion cubic feet.
Khulud’s ‘tight’ gas characteristics require the use of unconventional techniques to unlock the gas and make it flow to producing wells.
Compounding the challenge of producing this gas is the depth at which the reservoirs in Oman are often located — typically in excess of 5.5 km — far deeper than tight gas found elsewhere in the world.
What do you think is the way forward or future of the Omani oil and gas industry?
I remain optimistic that the nation’s oil and gas sector generally, and PDO specifically, can rise to the current challenge.
However, we have to ensure we get the fundamentals right. We need to press ahead with a continued focus on business improvement and sustainability, operational excellence and project delivery while all the time adhering to safety as the bedrock of everything we do.
Yes, we have to adapt and adopt new ways of working as we pursue cost control measures. However, we should seize the opportunity to eradicate wasteful and inefficient work practices for good, embracing new technologies and maintaining a robust pipeline of talent and expertise.
In doing so, we can maximise the value we create for Oman so the Sultanate can continue on the road to progress and prosperity under His Majesty’s wise and visionary leadership.
Our mantra is: never waste a crisis. In periods of difficulty and uncertainty, it’s key to get the fundamentals right and our track record and robust business plan have enabled us to absorb the impact of the price fall and continue to deliver key growth and development targets to our shareholders.
With our contractors, we have a great opportunity to review how we do things more efficiently and effectively through better ways of working and the deployment of new technologies to address key challenges so we emerge leaner, stronger and fitter from the current difficulties.
For example, our Collaborative Work Environments, spaces equipped with the latest digital technology, are enabling real-time communications and activity programme co-creation between our Coastal teams and the field to identify issues, monitor performance and devise solutions in an integrated, multi-disciplinary, faster way.
