Wintershall interview: Middle East Magnetism

Oil & Gas Middle East caught up with Martin Bachmann, member of Wintershall’s Board of Executive Directors with responsibility for exploration and production, in Doha, at December’s World Petroleum Congress.

“Being here and engaging with people from all over the Middle East and North Africa was really important for us. Our biggest operation regionally is in Libya, but we also have important relationships in Qatar and the UAE,” Bachmann says.

Strategically, Bachmann says, the company sees itself as the go-to medium sized upstream firm which delivers difficult and complex projects.

“We can bring our technological expertise to bear results in areas such as tight gas, sour gas, but also enhanced oil recovery projects where we can get more hydrocarbons out of existing, mature or declining fields.”

The company’s head of E&P says the firm’s long history and experience with ‘difficult’ hydrocarbon production stems from its experience in its homeland. “In Germany there aren’t any major oil fields. It always takes something extra to maximize returns on the German fields, so we have a huge testing ground right on our doorstep. That’s what we’re building upon as our strategy to grow in the Middle East,” he says.

Bachmann adds that Wintershall’s relationship with its mother company, BASF, the largest chemical company in the world, is an area it can leverage with regards to its EOR offerings.

“A specialty we have on the enhanced recovery side involves leveraging our relationship with BASF, where we can use their chemical research and development capabilities to come up with solutions, which is a bit of a niche advantage we have, and which we then complement with our drilling, subsurface, and E&P knowledge right through the production cycle.”

At a time when more challenging resource development is moving up the local agenda, Bachman says the international and national oil companies are embracing a renaissance of collaboration.

“There is absolutely a greater willingness to collaborate on the technically challenging resource extraction projects now. If you look back 20 years and compare the situation to now, there are many more investment opportunities in the region.

Obviously Iraq opening up in a major way is a major part of that. We have also seen the first tentative steps in Kuwait where Shell has a joint technical greement, and in Saudi Arabia there are gas exploration ventures with Total and Shell, and Qatar has always been relatively open.

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In the Emirates they are looking at different models of partnerships on a variety of projects, and Yemen has been open too. What we’re seeing evolve is a pretty exciting landscape for IOCs in the Middle East and North Africa.”

Bachmann says that in order to meet the energy challenge, not only is a new era of collaboration desirable, it’s necessary in light of a shortfall in projected supply if more projects do not come online.

He says Wintershall’s activities in Russia are a classic example of where resource holders and technology partners can achieve more together.

ZAO Achimgaz is a 50/50 joint venture between Gazprom and Wintershall, whereby the companies produce natural gas and condensate from the Achimov horizon at the Urengoy field in Siberia, which nudges the Arctic Circle (The field is situated around 3,500 kilometers northeast of Moscow.)

“The know-how and expertise of the two partners complement each other perfectly in the difficult-to-recover Achimov formation. Gazprom specializes in producing gas in Arctic regions, while Wintershall has many years of exploration experience in challenging geological conditions,” he explains.

Over a period of 40 years, a total of up to 200 billion cubic meters of natural gas and 40 million tonnes of condensate are to be produced from the block. During plateau production, an annual gas volume of 7.5 billion cubic meters is to be produced.

From six pilot wells, the joint venture’s current daily production is around 3.5 million cubic meters of gas and around 1,600 tonnes of condensate. Moreover, further development at the field is currently being drafted.

A further project between Gazprom and Wintershall centres around the relatively nearby Yuzhno Russkoye field. Found in the Yamal-Nenets region of Western Siberia, the field has recoverable gas reserves of over 600 billion cubic metres. 142 production wells have been operational since 2009.

Around 70 million cubic meters of natural gas are produced daily, and have reached maximum plateau production of 25 billion cubic metres of gas a year.

“That’s a fairly classic example of the value we bring, whereby a resource holder ties up with us in a true 50-50 partnership and step by step it is turned into a great success,” Bachmann enthuses, adding that the model could be easily replicated in a challenging Middle Eastern field.

Closer to home
In 2008, Wintershall became the operator of Block 4N in Qatar’s territorial waters. This block is in the Khuff formation and in the immediate vicinity of the North Field, the world’s largest natural gas field. It covers 544 square kilometers and has water depths of around 70 metres.

In addition to analyzing existing seismic data, Wintershall carried out its own 2D/3D seismic survey in the third quarter of 2009. In 2010, following the interpretation of the seismic data, the first exploration well was drilled in Block 4N. Depending on the results, another appraisal program may be planned.

Back in 2007, Wintershall was given the go-ahead to operate Offshore Block 3, which covers an area of 1,666 square kilometres. After an initial depth measurement survey in the shallow section of the block, seismic surveys and two exploration wells are planned in Block 3.

Bachmann says the company’s work in Qatar predates these current projects. “Now we have an exploration presence in Qatar, but we have been here for a very long time. Many years ago we were one of the companies responsible for the exploration work which discovered the North Field. Gas wasn’t really considered particularly economical to develop back then, but of course things have changed,” he says.

This year, Bachmann adds, the company has drilled an exploration well in Qatar and is looking to spud another in early 2012. “again this is in the Khuff formation, so we’re primarily looking for gas,” he explains.

A local, sustained presence in the region will be key to taking advantage of future business opportunities, says Bachmann. “One of the reasons we opened an office in Abu Dhabi ahead of winning any contract work is because when you work closely with people on the redevelopment of mature fields, or on sour gas projects, you really have to be there to discuss closely with them what they want to achieve.”

In May 2010 a memorandum was signed with ADNOC which allows Wintershall to conduct long-term exploration and development of a deposit in the western region of the Emirate, a breakthrough development for the company in the UAE.

“We consider Abu Dhabi one of the most important centres of the oil and gas business in the Gulf Region, and this is supportive of our strategy to get more actively involved in long-term upstream projects in the Gulf,” he explains. Wintershall was originally involved in the original Shah sour gas field tender as a potential minority partner.

The project, initially awarded to ConocoPhillips, which subsequently pulled out, has since been awarded on a partnership basis to Occidental Petroleum.

“Whilst we weren’t successful in the format we had tendered, those conversations led to us being invited to the table with ADNOC for a project we are discussing now. I think they liked the technical approach we took and the expertise which we brought. They felt there would be something we could work with them on in the future.”

Bachmann says a great example of the value in proximity of local offices had been illustrated at the World Petroelum Congress. “It was very interesting to hear from the Oman Oil Minister. He said people often assume steam flooding solutions are a best-fit for Oman, but in practice that was a problem because there simply wasn’t enough gas to green-light a raft of steam-based EOR projects.”

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Libyan Operations
In the middle of October Wintershall restarted its oil production in the Libyan Desert which had been suspended in February for security reasons after the start of the unrest. Production is currently being ramped up. Initially, a production capacity of 20,000 barrels per day has been achieved.

“The facilities are undamaged. Our 370 Libyan employees looked after and continuously maintained the production sites in the desert, so we have been very fortunate in that regard,” explains Bachmann.

Before suspending its operations, Wintershall was producing around 100,000 barrels of oil a day in Libya. The daily production volume in OPEC member state Libya generally fluctuates since oil production there is subject to OPEC restrictions.

“Right now I think it is too early to say when the maximum daily production capacity will be reached. As soon as enough crude oil has been collected in the fuel storage facilities, it will then be transported via ship. Earnings will only be achieved once this has taken place – probably toward the end of the year,” explains Bachmann.

“Our top priority in Libya is to ramp up and stabilize as whatever level the country reaches. Obviously we depend on infrastructure, on the pipelines and export facilities – the whole machine has to turn at the same pace. But there is certainly potential for more production. That has never been doubted. It will have to be a conversation with the new NOC about what the right rate to unlock the potential is.”

“We have been active in Libyan E&P since 1958. We remain optimistic that we have a bright future in Libya and do not consider any of our activities to be in danger following the regime change. The Transitional National Council and the Libyan NOC has confirmed on several occasions that it intends to respect the existing agreements,” Bachmann says.

With investments of more than $2 billion and over 150 wells sunk, Wintershall is the second largest foreign oil producer in Libya after Italy’s Eni, and the North African country is a critical component of the company’s energy mix.

“Excluding gas operations, Wintershall produces on average 400,000 barrels of oil per day, and around 100,000 barrels of that daily production comes from Libya,” says Bachmann.

New turf
Elsewhere in the region, Bachmann stresses that partnerships where Wintershall’s expertise can be brought to bear could abound.

“Of course the EOR possibilities which we have built a reputation for in Europe, in addition to the gas projects in Russia, but also a very large and exciting acreage in Argentina all bear in at least some regards, similarities to the challenges which are being recognized by the NOC’s in the Middle East,” he explains.

To date the company has participated in the qualification for bid rounds in Iraq, but so far not participated in any of the live projects.

“For us, it boiled down to where and how we could add value as a mid-size oil company. We wouldn’t have been adding value in the factory-like drilling of hundreds of wells, explains Bachmann. “We are watching Iraq very closely and if the right opportunity to participate came up then we would look at it very closely.”