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PDO signs deal for fourth party logistics services

Petroleum Development Oman (PDO) held a ceremony on Sunday to mark the signing of a major contract for the provision of fourth-party logistics services by Exel and BahwanCybertek. The contract, which was put in place over the past three years, will let the Exel-BahwanCybertek joint venture manage all cargo operations, including drilling-rig moves, on behalf of PDO. In addition, the joint venture will integrate its logistics system nationally and regionally so that other companies and governmental agencies can take advantage of it.

The ceremony was attended by PDO Managing Director John Malcolm, Deputy Managing Director Abdulla al Lamki, and representatives of the PDO’s Logistics department led by the Logistics Manager Warith al Kharusi. Representing Exel at the signing ceremony were its CEO for contract logistics in mainland Europe, Middle East and Africa, Leigh Pomlett, and its Middle East Regional Director, Colin Wain. Representing Bahwan Cybertek were Hind Bahwan, its Chairperson, and S Durgaprasad, its CEO.

The contract’s advent promises to increase the utilisation of truck capacities by some 10-20 per cent. The subsequent reduction in kilometres driven will result in savings as well as reduced exposure to traffic accidents. The application of a new transport management system with track and trace capabilities will result in a step-change improvement of the service level offered to the primary customers, namely PDO’s interior-based drilling and engineering operations. The contract will unify the system so that everyone—not just PDO-related companies—can take advantage of it.

The scope of cargo haulage that will come under the system’s umbrella will include, amongst other things, loads from ports to the coast and interior, rig moves, loading and unloading operations, crude-oil and water haulage, and clearing and forwarding. Al Kharusi said: “This type of fourth-party logistics contract is the first in the Middle Eastern exploration and production industry. It will not only result in an improved service but will also help local businesses to grow.

The execution of all activities will be subcontracted to established local trucking companies. Logistics integration on this scale is a perfect example of sustainable development in practice: it makes optimum use of resources; it improves the safety of our operations; and it stimulates the growth of local businesses.” “What we will end up with is a unified system of logistics that spans the whole country and that links with other transport systems, including passenger transport. This is a very positive development for PDO and the Sultanate of Oman in general,” Al Kharusi concluded.

Source: Oman Observer, 28 June 2005


Agreement for new LNG carrier signed   

Ahmed bin Abdulnabi Macki, minister of national economy and deputy chairman of the Financial Affairs and Energy Resources Council and chairman of the board of directors of Oman Shipping Company, yesterday here signed a joint venture ownership agreement for an LNG carrier with Japanese companies Osaka Jaz, NVK Co. and K Line.

“With this, the number of LNG carriers under the control of Oman Shipping Company rises to seven,” said Macki after signing the agreement. He said the new 289-metre long and 49-metre wide LNG carrier with a capacity of 153,000 cubic metres would be put into service in 2008.

The new carrier will be utilised for the shipment of liquefied natural gas as per the long-term agreement signed with Oman LNG Company.

The OSC will have a 40 per cent stake in the new LNG carrier while Osaka Jaz will have 51 per cent, NVK Co. six per cent and K Line the rest of three per cent.

“The OSC attaches more significance to the marine transport sector and the new carrier will not only support the company but help boost the overall national economy,” Macki said, adding that OSC has already started providing training to the Omani cadres in the maritime sector.

The signing ceremony was attended by Mohammed bin Yusuf Al Zarafi, the Sultanate’s ambassador to Japan, and the Omani delegation accompanying the minister.

Macki also held talks with senior officials of Japanese shipping and oil giants including Mitsui. They discussed ways of promoting cooperation between Omani companies such as Oman Shipping Company, Oman LNG and PDO with the Japan companies in the field of oil and gas.

Macki stressed the significance of strengthening cooperation and establishing more joint ventures in private as well as public sectors. The meeting was attended by Sultanate’s ambassador accredited to Japan. — ONA

Source: Times of Oman, 23 June 2005


PDO notches gains in dealing with 'produced water'

Petroleum Development Oman (PDO) has reported significant gains in its ongoing effort to deal with the copious amounts of water that is produced along with oil from a number of major fields within its concession.

During 2004, nearly seven barrels of water were produced for every barrel of crude oil primarily from maturing fields in the south. But the rate at which the produced-water volume is growing is now slowing, says PDO, thanks to several technological and water-management initiatives adopted by the company.

One notable success, outlined by the company in its recently issued Annual Report for 2004, involves the use of expandable zonal inflow profiler (EZIP) technology to reduce ‘produced water’.

The EZIP is a type of well completion that, when placed in contact with water inside a borehole, swells to provide a strong seal that prevents the water from entering the well.

A total of 44 wells have been completed with EZIPs and by the end of 2004 they had contributed an additional 400,000 barrels of oil. This technology has since been massively deployed, says PDO. Almost half the amount of produced water is now used for waterflooding (in which water is injected into a producing formation in order to support reservoir pressure and displace oil towards producing wells).

Four major waterflooding projects were progressed during 2004. The waterflood-based field-development plan covering the Ghariff, Haima and Al Khalata reservoirs in the Marmul area is well on track to be completed by the end of 2005. One variant of waterflooding being seriously investigated for this area involves thickening the injected water with polymers so that the sweep efficiency of the flood is markedly improved.

The fourth waterflooding project, involving 23 fields known as the Rahab-Thuleilat-Qaharir (RTQ) cluster, lags behind the Marmul project in its scheduling.

But that position will enable what was learned from the Marmul project to be incorporated in the RTQ field-development plan, says PDO. In any case, rock samples from the reservoirs in the cluster are being analysed and an additional appraisal well will be drilled in 2005 to confirm a significant extension to one of the cluster’s fields.

The remainder of the ‘produced water’ is mostly injected into deep or non-exploitable aquifers, although some of it is disposed of in shallow aquifers. Most of the company’s shallow water disposal will be phased out with the completion of deep water disposal projects in Nimr, Rima and Suwaihat in 2005.

PDO, however, has requested the Ministry of Regional Municipalities, Environment and Water Resources to permit the shallow disposal of produced water in Sayyala and Sadad,

since the environmental impact of the continued disposal in those areas is very small. The request has been backed up by detailed monitoring and computer modelling of the plume of disposed water, the company stated in its Annual Report.

PDO is also investigating ways of treating production water from the Nimr field so it can be used locally for productive purposes.

For over three years now, the company has been exploring the potential use of produced water in the cultivation of beds of reeds as a means of cleaning the water of its hydrocarbon contaminants.

The produced water flows in at one end of the bed, and by the time the water has reached the opposite end of the bed, most oil has been removed by the biological action of the plants’ roots.

The treated water has then been used to irrigate a plot of salt-tolerant trees, which could perhaps yield a saleable product. An independent study of the scaling-up of this reed bed/forest combination concluded in 2004 that it was technically, financially and socially feasible.

The potential use of produced water as boiler feedstock for steam injection projects was also explored by PDO in 2004.

Source: Oman Observer, 25 June 2005


Major boost to Mukhaizna oilfield development plants

The Government of Oman yesterday signed a pair of landmark agreements with a consortium of investors designed to ramp up production from the potentially prolific Mukhaizna field. The pacts, involving investments of several billions of dollars over the operational life of the project, will contribute significantly to the government’s ongoing efforts towards reversing the trend in falling oil output. Dr Mohammed bin Hamed al Rumhy, Minister of Oil and Gas, signed the two deals — a Production Sharing Agreement and a Joint Operating Agreement — with the consortium partners at a well-attended ceremony held at the Grand Hyatt Muscat.

Participating in the venture are local subsidiaries of a number of oil majors and investment firms, notably Occidental Mukhaizna LLC, Shell Oman Trading Company Limited, Liwa Energy LLC (a subsidiary of Mubadala Development Company), Total E&P Oman, Partex (Oman) Corporation, and the state-owned Oman Oil Company (OOC).

Signing on behalf of the consortium partners were Dr Eduardo Grilo of Partex, Jean-Luc Porcheron of Total, Rolf Monjo, President of Occidental (Middle East), Sultan al Jaber of Liwa Energy, and Raoul Restucci, Shell’s Executive Vice- President (Middle East, Russia and Caspian region). Also present at the ceremony were Nasser bin Khamis al Jashmi, Oil and Gas Under-Secretary, and several senior ministry officials including Dr Ali bin Thabit al Battashi, who led negotiations on behalf of the government.

The Government of Oman, as owner of Mukhaizna’s hydrocarbon resources, will retain 80 per cent of all revenue proceeds from the field’s output. The remainder 20 per cent will be divided as follows: Occidental Mukhaizna (9 per cent), Oman Oil Company (4 per cent), Shell Oman Trading (3.4 per cent), Liwa Energy (3 per cent), Total (0.4 per cent), and Partex (0.2 per cent). As operator, Occidental Mukhaizna LLC will deploy thermal enhanced oil recovery (EOR) techniques to develop some 1 billion barrels of heavy crude from the Mukhaizna field. Production is expected to peak at around 150,000 barrels per day by 2010.

In remarks to journalists, Dr Al Rumhy hailed the significance of the agreements. “It marks the first time that we have a consortium of so many companies coming together on the upstream side. This is the first
time we’ve managed to bring together Shell, Total,
Occidental and so on, within one project, and we’re looking forward to working with them to produce
tangible results for the country.”

Development of the field, which holds heavy oil, will be fast-tracked to significantly boost production from the present 10,000-12,000 bpd, he said. “We hope to peak at 150,000 bpd, but we will see significant production from this field from next year onwards. Investment is expected to run into billions of dollars over the 30-year life of the project, much of which will be injected in the early years of the venture.”

With the signing of the production sharing and joint operating agreements, the operation of Mukhaizna, which falls within Petroleum Development Oman’s (PDO) Block 6 concession, will now pass into Occidental’s hands. While PDO as a company will not directly participate in the new venture, its shareholders — Shell, Total and Partex, besides the Omani government — are partners in the project.

Dr Al Rumhy said the enhanced oil recovery technique envisioned for Mukhaizna would involve a new approach. “We have been trying this method for a number of years, but have never done it on a large-scale. PDO has another project, quite similar to this one, at Qarn Alam, a contract for which was awarded recently. We are now embarking more and more on better recovery methods.”

First discovered in 1975, development of the Mukhaizna field has so far been limited to cold production due to the heavy nature of the oil and associated high costs. Occidental plans to implement a large-scale steam flood scheme to increase production from the field, whose hydrocarbon potential is estimated at two billion barrels of STOIP (stock tank oil in place).

Occidental’s cutting-edge enhanced oil recovery technology, combined with rapid decision-making processes, will allow for Mukhaizna’s development to the fast-tracked, say officials. Occidental of Oman, a subsidiary of the California-based oil giant, is currently the second largest producer of oil in the Sultanate, with significant volumes of natural gas also produced from its Block 9 concession.

A further shot in the arm for the Mukhaizna’s project is the participation of Liwa Energy, a subsidiary of Abu Dhabi-based Mubadala Development Company, which is also investing in a huge methanol scheme planned at the Salalah Free Zone. The methanol project, also backed by state-owned Oman Oil Company, entails the development of a 3,000 metric tonne per day state-of-the-art methanol plant, using natural gas as feedstock. Mubadala is a development and investment company wholly owned by the government of Abu Dhabi.

Source: Oman Observer, 22 June 2005



PDO adopts new method to assess hydrocarbon potential

Petroleum Development Oman (PDO) has adopted a new approach to assessing the hydrocarbon potential of a reservoir prior to planning the field for development. The revamped methodology, termed as ‘hydrocarbon maturation’, is one of six major business processes that have been implemented this year in an effort to sustain and build on the company’s performance over the coming years.

The other five priorities listed by the company as key to achieving ambitious savings and production targets are: Well & Reservoir Management; Operational Excellence; Development of Staff; on-time and on-budget delivery of Drilling & Engineering Projects; and Contracting & Procurement. ‘Hydrocarbon maturation’ is a new way of finding hydrocarbon-bearing reservoirs; appraising their size, structure and properties; accurately simulating the way in which the hydrocarbons flow through them into wells; and then planning — in light of all the data and all the uncertainties — how best to extract the hydrocarbons from them for delivery via pipeline to the coast for export.

“The hydrocarbon-maturation process, in particular, is paramount for us. It is through this process that volumes of discovered oil are progressed from ‘oil originally in place’ through ‘scope for recovery’ to reserves. And reserves constitute the portfolio of field-development opportunities that is the very future of our business,” stated Managing Director John Malcolm in the company’s 2004 Annual Report, issued here recently.

“For that reason we have redesigned the hydrocarbon maturation process as well as the other five business processes in 2004, to streamline and standardise them so that accountabilities are clear and informed decisions are made at the right time and at the right leadership level. These revamped processes will be implemented in 2005 with the support of a new organisational structure,” he added.

During 2004, PDO’s developed reserves (those volumes of oil that have been made accessible by existing wells and production facilities) increased on the basis of the comprehensive studies underlying the company’s field development plans. In particular, the field-development plans for Lekhwair and Nimr yielded increases in reserves that more than offset the decreases in the reserves of Yibal, Al Noor, Fahud, Marmul, Natih and Saih Nihayda.

The company also found some oil and gas through its exploration efforts. Exploration wells revealed 48.6 million barrels of “new oil” at Malaan, Tibr and Ghafeer that have been categorised as scope for recovery. Exploration wells drilled near existing fields also revealed an additional 66.4 million barrels of scope-for-recovery “old oil” at Musallim, Burhaan North West and Maurid. By having them hooked up quickly to the oil-production facilities, the company managed to produce an average of 3,300 barrels per day from its successful exploration wells at Musallim, Malaan and Tibr.

No gas reserves were booked in 2004, although the field development plans for the company’s major gas fields are expected to result in bookings, which will be factored into the company’s reserves at the end of 2005. However, some gas was discovered in 2004. Exploration wells did discover 0.53 trillion cubic feet (TCF) of gas that have been categorised as scope for recovery.

Several major gasfield projects critical to ensuring an uninterrupted supply of gas for domestic consumption, were progressed during 2004. PDO was well on its way to securing feedstock for the Qalhat LNG plant through the construction of the Saih Nihayda Gas Plant (SNGP) in central Oman and the laying of a 48-inch loop pipeline from the SNGP to the vicinity of Al Kamil.

Source: Oman Observer, 18 June 2005


Kuwait oil project seen approved by end-2005

Kuwait’s long-delayed multibillion dollar plan to open up its northern oil fields to western oil majors is likely to be approved by the end of the year with contracts to be awarded within six months, the country’s oil minister said Saturday.

Speaking on the sidelines of the World Economic Forum in Jordan, Sheikh Ahmad
Fahad al-Ahmad al-Sabah said the plan was likely to be finalized at the next meeting of the parliament’s finance committee May 24.

”The final step is one more session in the finance committee and if it is passed it will go to a special session of the National Assembly,” he told Dow Jones Newswires adding that session would be held before mid-July.

If the proposal doesn’t go through on May 24, then it should be ready for the parliament’s next session in October, he added.

”Either way Project Kuwait will be approved by the end of this year,” al-Sabah said.

Once approved, the tender would be announced immediately with contracts likely to be awarded within four to six months, he said. “It can go directly to tender because everything is ready.”

Project Kuwait involves a plan to double crude oil output from existing fields in northern Kuwait. Investment is estimated at between $7 billion to $9 billion.

Kuwait hopes to tap western technology and expertise to raise production at the fields.

Consortia led by BP Plc (BP), Chevron and Exxon Mobil Corp. (XOM) are among those competing for the project.

”We’ll be bidding on Project Kuwait if the price is right,” said James LeJeune, Chevron’s President for Middle East and North Africa.

Chevron is leading a consortium that includes France’s Total, Petro-Canada (PCZ), Russia’s Sibneft (R.SBN) and China’s Sinopec.

Project Kuwait has been bogged down for years because of resistance to allow foreign companies into the Gulf state’s strategic oil sector. But a decision last year to draw up technical service contracts to develop the fields swept away earlier opposition.

Project Kuwait was originally launched in 1998 and envisaged doubling output from five northern oil fields near the border with Iraq - Rawdatain, Sabrya, Ratga, Adali and Bahra - to around 900,000 barrels a day within five years.

Kuwait, a member of the Organization of Petroleum Exporting Countries, currently produces around 2.4 million b/d.

Source: FWN Financial News, 23 May 2005


Kuwait, Hyundai in $400m deal   

State-run Kuwait National Petroleum Company (KNPC) on Sunday signed a deal worth US$400m with South Korean Hyundai Engineering to upgrade a liquefied natural gas plant in Kuwait.

Work on the project will start in June and will be completed by the end of 2007, KNPC chairperson Sami al-Rasheed said during the signing ceremony.

It aims at modernising the liquefied natural gas plant at Al-Ahmadi refinery by enhancing the ethane recovery rate from the current 55 percent to 96 percent, he said.

The ethane will be sold to state-owned Petrochemicals Industries Co to be used as feedstock for the production of petrochemicals.

Hyundai Engineering is currently building a new oil export terminal at Al-Ahmadi at a cost of $340m.
Kuwait sits on 10 percent of the world’s proven oil reserves and it currently produces at full capacity of 2.7 million bpd.

The Opec member plans to invest up to $40bn in the next 15 years to modernise its oil sector which generates more than 90 percent of public revenue.

 Source: Agence France Presse, 16 May 2005


Kuwait Petroleum posts seven-fold rise in profits

State-run Kuwait National Petroleum Co (KNPC) posted an almost seven-fold rise in net profits for the year to March 31, the company chairman said Saturday.

Net profits reached a record 628 million dinars (2.15 billion dollars) from 95 million dinars (322 million dollars) in the previous year, Sami al-Rasheed said.

”These profits are unprecedented in the company’s history,” Rasheed told a gathering of oil executives and reporters.

The sharp increase in profits was attributed to a rise in the prices of oil products and increased operational efficiency, he said.

KNPC runs the emirate’s three refineries in the oil-rich southern region at a combined production capacity of around 920,000 barrels per day (bpd). It also controls the domestic petrol market. The company plans to boost its refining capacity to 1.2 million bpd by 2011 by modernizing two of the three refineries and building a new refinery at a cost of over 8 billion dollars.

The upgrade project is estimated to cost around 3.4 billion dollars and will be completed by the end of 2010 or early 2011. The third refinery at Al-Shuaiba with a capacity of 200,000 bpd will be closed once the project to build the new refinery is completed in early 2010, Rasheed said.

The capacity of the new refinery will range from 460,000 bpd if heavy crude is used to 600,000 bpd if medium crude is used, he said. Kuwait sits on 10 percent of the world’s proven oil reserves and it currently produces at full capacity of 2.7 million bpd.

The OPEC member plans to invest up to 40 billion dollars in the next 15 years to modernize its oil sector which generates more than 90 percent of public revenue. –– AFP

Source: Times of Oman, 28 May 2005


Kuwait to upgrade refineries

State-run Kuwait National Petroleum Co. (KNPC) is to begin shortly modernizing two of its three refineries and building a new refinery at a cost of over $8 billion, an official said yesterday.

“We are currently reviewing a report on modernizing the refineries at Al-Ahmadi and Mina Abdullah,” which together produce more than 700,000 barrels per day (bpd), KNPC Chairman Sami Al-Rasheed told a press conference.

The third refinery at Al-Shuaiba with a capacity of 200,000 bpd will be closed once a project to build a new refinery is completed in early 2010, Rasheed said.

“According to preliminary estimates, the (upgrade) project will cost around one billion Kuwaiti dinars ($3.4 billion) and will be completed by the end of 2010 or early 2011,” he said. The main purpose of the project is to produce “high quality refined products that meet stringent international standards”, he said.
Rasheed said that KNPC is currently negotiating with technology providers for the various units of the new refinery that is expected to cost up to five billion dollars. “We are currently examining the front-end engineering phase of the project which will end in February next year. After that bids will be invited from several contractors,” he said.

The capacity of the new refinery will range from 460,000 bpd if heavy crude is used to 600,000 bpd if medium crude is used, Rasheed said.

Once the two projects are completed, Kuwait’s refining capacity will top 1.2 million bpd, he said. The new refinery will initially produce 225,000 bpd of fuel oil needed for domestic consumption to operate power plants, and 375,000 bpd of oil products intended for export. It will however produce only oil products after Kuwait starts importing natural gas from neighboring countries to operate its power plants.

The OPEC member sits on 10 percent of the world’s proven oil reserves and it currently produces at full capacity of 2.7 million bpd. Kuwait plans to invest up to $40 billion in the next 15 years to modernize its oil sector which generates more than 90 percent of public revenue.

Source: Agence France Presse, 15 May 2005



Kuwait's daily oil refining capacity could exceed 1.2 million bpd

A Kuwaiti oil expert predicted that, by 2010, Kuwait’s oil refining capacity would be 1.2 million barrels per day (bpd).

He said that this capacity, which would require new installations worth USD 8.5 billion, would include the construction of a fourth new refinery and the development of two existing ones in Al-Ahmadi and the Abdullah Port.

The chairman of the board of directors of the Kuwait Petroleum Corporation, Sami Fahd Al-Rashid, who made the statement during a ceremony marking the launch of a new company logo, said that, by next year, the new refinery’s architectural plans would be ready.
He added that, nine months after the completion of the plans, the refinery’s building would be contracted out. He said that, “by 2010, the new refinery would be finished.” He said that the new refinery, which would cost up to USD 5 billion, would produce between 450 and 600 bpd.

He said that, when the new refinery is ready, the Shuaiba refinery would be closed. He added that the development of the two refineries at Al-Ahmadi and Abdullah would follow.

He stressed that the object of the development was not only to increase the production but also to produce better quality refined oil on the market.

Source: Kuwait News Agency, 14 May 2005


Statoil sees Saudi upping oil output to 9.9m b/d in 3Q 05

Statoil ASA’s (STO) top oil analyst said Monday he expects Saudi Arabia to increase its output to around 9.9 million barrels a day in the third quarter to meet rising global demand.

Statoil’s Tor Kartevold said the world’s biggest oil producer will likely up its crude output by 300,000-400,000 b/d from its current production of around 9.5
million b/d.

Statoil is the third biggest net crude seller in the market, trading both its own oil production and the Norwegian government’s share of production on the Norwegian Continental Shelf.

Kartevold, however, doesn’t expect members of the Organization of Oil Exporting Countries - meeting in Vienna on Wednesday - to call for an increase in actual production yet. Furthermore, a widely-forecast inflation of the official production ceiling - a paper figure largely ignored by OPEC - by 500,000 b/d will be viewed by the market as a purely symbolic gesture, he said.

”The industry is at full capacity...and high prices will most likely remain throughout this year,” Kartevold said, though large price fluctuations of up to $10 a barrel should also be expected to continue.

Around 1500 GMT, front-month Brent crude contracts on London’s International Petroleum Exchange traded up 75 cents to $53.42, while front-month light, sweet. crude was up 66 cents at $54.20 on the New York Mercantile Exchange.

Last October, Saudi Arabia raised its production to around 9.7 million b/d, but with global demand forecast by Statoil to increase by around 1.8 million b/d this year, Kartevold says the kingdom’s production this year should grow to at least 9.7 million b/d. According to Statoil’s data, demand could grow by as much as 2.9 million b/d in the fourth quarter of this year.

But with limited capacity to refine Saudi’s heavy crude, which makes up the lion’s share of its spare production capacity, “There’s not much OPEC can really do,” he said.

With all the other OPEC nations pumping at full capacity, if Saudi Arabia ups its output, “OPEC’s spare production capacity...could fall below 500,000 b/d,” the senior analyst said.

”Thus, the market will be very vulnerable to supply distortions,” he added.

The outlook for the rest of 2005 and 2006 rests largely on how much the Chinese and U.S. economies continue to grow, how fast Russia’s crude production growth cools, and if the hoped-for 600,000 b/d-700,000 b/d of new production comes onstream on time.

Kartevold said there’s a risk new projects in Angola and Brazil, such as Albacore Leste and Jubarte fields, could “easily be delayed.”

Source: FWN Financial News, 13 June 2005



BP's Innovene agrees to $2 billion Saudi investment

Oil major BP's Innovene petrochemicals unit has signed a preliminary deal to build a $2 billion plastics manufacturing unit in Saudi Arabia, in a further move to orient the firm more toward fast-growing Asian markets. BP said Innovene had signed a memorandum of understanding with Saudi-owned Delta International to build a “cracker” unit, which will convert natural gas into ethylene, the raw material for plastic wrappings and containers.

The cracker, which is expected to start production in late 2008, will produce around 1.2 million tonnes of ethylene per annum and Delta added in a statement that the long-term goal was to build two crackers at a cost of around $2 billion each.

“The memorandum marks the beginning of detailed negotiations between Innovene and Delta for the construction of a world-scale cracker and associated derivative capacity in the (Saudi) kingdom, with sites being explored in Jubail,” BP said in a statement.

Innovene and Delta will contribute equal amounts to the project but the partners will also now seek to attract funding from third parties as well to meet the cost of the project.

Source:, 08 June 2005



Costs rising for Saudi oil expansion plans

Tougher-than-expected technical hurdles and an accelerated schedule are quickly raising costs for Saudi Arabia’s ambitious plans to increase its oil production capacity, a Saudi analysts said Wednesday.

The government is now budgeting $15 billion-$18 billion to ramp up its capacity to about 12.6 million barrels a day by early 2009, according to Nawaf Obaid, managing director of the Saudi Strategic National Security Assessment Project.

The earlier estimates had been for a more modest $12 billion-$15 billion budget.

Obaid said getting oil out of the Khoreis and Khursaniyah oil fields has proven more challenging and required costlier drilling technology then expected. A speeded up rollout has also raised costs, he said.

Bigger spending poses a challenge to Saudi Arabia’s regime which relies on oil for about three quarters of its government revenue.
Rising oil prices have funded two years of budget surplus ending years of deficits, but the government of the world’s biggest and most important oil producer is spending more on social welfare programs to fight off mounting unemployment stemming from a population explosion.
Under pressure from big oil consumers such as the U.S. smarting under $50 oil, Saudi Arabia has pledged to ramp up its production to stave off high prices and meet rising demand.
The expansion plans are being funded by the Ministry of Finance, unlike the rest of the operating costs for state-owned Saudi Arabian Oil Co. (SOI.YY), which continue to come from the company’s own budget, he said.

Source: FWN Select, 01 June 2005



Saudi Pumping 9.5 Million Barrels Per Day of Oil in May

Saudi Arabia is pumping 9.5 million barrels a day of crude oil in May, but future output depends on how much refiners want, a senior OPEC delegate said Thursday.

Saudi officials said they ramped up production to 9.5 million b/d starting March in an effort to cool overheating futures markets and build up global oil inventories to cushion a forecast winter surge in demand. The Persian Gulf source denied reports Saudi Arabian output had risen even higher.
Saudi Arabia, the world’s biggest and most important oil producer, has been under mounting pressure from consumer countries smarting from $50 oil to raise output.

The Organization of Petroleum Exporting Countries meets June 15 in Vienna. Some members are already calling for production cuts because they fear oil prices could collapse under the weight of rising inventories.

Earlier this week, Saudi Oil Minister Ali Naimi said the country was still committed to a stock build.

A surprise draw in U.S. crude inventories Wednesday sent oil futures in New York back above $50 a barrel, up more than a dollar, marking a two-week high. The strong reaction to the downtick in U.S. crude inventories after they hit a six-year high just last week underscores the market’s sensitivity to supply shifts and fears surrounding rising oil demand.

Wednesday, reports cited an OPEC delegate saying Saudi output was 9.65 million b/d in May and could rise further.

Outside estimates put Saudi output slightly lower. Closely watched tanker-tracker Petrologistics estimates Saudi May output slightly at 9.4 million b/d.

In addition, tanker rates are still below the peaks reached in December when the 11-members of the Organization of Petroleum Exporting Countries sent a surge of crude out to stem rising prices and strong demand. That suggests OPEC is shipping less oil.

Source: FWN Financial News, 26 May 2005



Saudi Arabia aims to boost Asian crude sales

Oil giant Saudi Arabia is aiming to capture higher crude sales and maximise revenue in energy-hungry Asia.

Abdulaziz Al Khayyal, senior vice-president of refining and international marketing at Saudi Aramco, said while all markets Asia, Europe and North America remain “strategically important”, Riyadh is sharpening its Asian sales drive.

“Asia has been and will continue to be one of our highest realisation markets,” he said on the company’s website.

“We want to remain in our three major market enclaves ... but send a higher percentage of our exports to the Asian markets.”

That is already the case, with Aramco shipping about 60 per cent of its overseas oil sales, or some 4.5 million barrels per day (bpd), to Asia. But energy requirements are soaring in the region that accounted for nearly two-thirds of global demand growth in 2004.

And Aramco, now producing just over 9.5 million bpd, stands ready to supply still more oil. “We’re going to work to do our part to meet this growing demand,” said Khayyal.

“We are always eager to look at opportunities in growth markets such as China and India.”

To that end, talks are under way with China for a refining and petrochemical project in China’s Fujian Province with units of Sinopec and ExxonMobil.

Source: Reuters, 20 May 2005


Bluewater Energy wins SPM contract from Abu Dhabi Oil Co.

Bluewater Energy Services B.V. has been awarded a contract by the Abu Dhabi Oil Co. Ltd. Japan (ADOC) for the design and supply of a complete SPM system for the Mubarraz Oil Field offshore UAE. The system will be used for the export of crude oil and condensate.

Bluewater’s scope of supply consists of the design, procurement and fabrication of a Turret type, catenerary anchor leg mooring (CALM) buoy including pipeline end manifold (PLEM), telemetry system, geo-physical/technical survey and a piled mooring system.

The buoy will be located offshore Abu Dhabi, in a water depth of approximately 19 meters servicing tankers up to 330,000 dwt. Delivery of the complete system is expected to take place in 2006.

“This contract award by ADOC for a Turret type CALM buoy represents the third successive contract for Bluewater in the UAE for this type of buoy. The previous two were for VOPAK for the Fujairah Terminal and for ADMA-OPCO for the DAS Island Marine Terminal,” stated Hugo Heerema, President of Bluewater Energy Services B.V. “Bluewater’s Turret type CALM buoys are increasingly finding favor with clients worldwide in preference over the more traditional Turntable buoys due to design considerations that result in higher uptime, lower maintenance costs and lower operational costs over the life of the buoy.”

Source: Bluewater Energy Services press release, 28 June 2005


New rig to shore up business

An Abu Dhabi-based company sees promising prospects for its pioneering offshore geo-technical drilling rig which was developed locally in association with a Belgian company.

A senior company official said yesterday the company has secured its first contract in Saudi Arabia and is likely to win more contracts in the UAE and the region.

“The new rig pioneered by our company, along with Gems International NV of Belgium, is designed to conduct offshore geo-technical investigations of the seabed to depths of 300 metres,” said Maher Muqattash, head of the Architectural and Civil Department of Control Contracting and Trading Company (CCTC).

“We have won our first contract from Saudi Aramco and the completed unit set sail on its maiden voyage late last month and it will be involved in carrying out a geo-technical survey,” he told Gulf News. The project work will take 45 to 60 days, he added without stating the contract value.

CCTC, based in Mussafah, Abu Dhabi, plans to build more geo-technical drilling rigs. “We foresee good demand for such rigs in the UAE and the region, especially in Iran.

“The drilling equipment enables high quality site investigations to be undertaken from a variety of vessels and the modular construction ensures efficient transportation and mobilisation.

“The equipment is equally at home in near-shore environments as well as deep offshore with a maximum drill depth rating of 300 metres below the sea-bed using standard five-inch API drill piping.”

The 30-year-old company has diversified its business activities over the years from power, water, industrial and commercial projects to the oil and gas sector as well as the fast-growing construction industry.

“This project marks a departure for CCTC while for Gems it is part of their core business.

“Both companies have collaborated on projects in the past, but this is the first time they have worked on a project of this nature,” Muqattash said.

Explaining the technical details of the rig, Muqattash said in survey terms, it provides real-time data acquisition with graphic display, using both Wilson APB-100 and 150 kn tools.

Source: Gulf News, 26 June 2005


Dh4.1b power company set up in Abu Dhabi

President His Highness Shaikh Khalifa Bin Zayed Al Nahyan has issued a decree, in his capacity as Abu Dhabi Ruler, creating Abu Dhabi National Power Company (ADNPC), also called Taqa.

The decree sets Dh4.1 billion as capital for the newly created joint stock company, with the nominal value of each share being Dh1.

The Abu Dhabi Water and Electricity Authority (Adwea) is assigned by the provisions of the decree to take necessary procedures to establish the ADNPC in Abu Dhabi, which may have branches in and outside the UAE.

Adwea is required to meet 90 per cent of the capital of the new company from its financial resources invested in the Emirates Power company, Gulf Power Company, Al Shuweihat Power Company, the Arab United Company for Power and Al Tawila United Company for Power.

The remaining part of the capital must be paid in cash. The value of the company’s shares, upon institution, will be nominal and wholly owned by the Adwea.

The company will buy and hold shares in existing projects and companies in energy, electricity, water, gas, oil and mineral projects. It will also provide financing facilities for such projects and companies in and outside the UAE.

It will own shares in credit and portfolio companies in and outside the UAE, and which are involved in the same field as the company.

It will arrange financing deals with banks and monetary institutions for the service of its objectives, and offer all necessary guarantees.

The company will also sign agreements and contracts for setting up, operating and running of the projects it initiates or takes stakes in.

The company will be run by a board of directors and a number of members. The first board will be appointed by a decision by the Adwea board. The decision will set the board tenure and remuneration of the members.

The Adwea board will set up the ordinary and extraordinary general assembly, and lay down the company statute.

Part of the Adwea shares in the company may be waived or sold by the consent of the majority of the Adwea board members. The selling may be made in public or private offerings, and the Adwea will set selling prices and determine possible buyers.

The duration of the company is set at 100 years renewable for similar periods unless a decision by the general assembly orders closure of the company.

Source: Gulf News, 22 June 2005


Mubadala Development & Shell to form strategic alliance

HH General Sheikh Mohammed bin Zayed Al Nahyan attended a ceremony held at his palace to sign a Memorandum of Understanding (MOU) between Mubadala Development Company, a wholly-owned investment and development vehicle of the Government of the Emirate of Abu Dhabi, and Shell EP International Ltd, which is intended to lead to the formation of a strategic alliance.

The MOU provides the general framework upon which Mubadala Development and Shell will form the alliance, which is expected initially to focus on the Middle East and North Africa, outside Abu Dhabi. Areas of cooperation are likely to include the economic development of new and existing hydrocarbon resources, and the research and development of economically viable and environmentally acceptable energy solutions.

The agreement was signed by His Excellency Khaldoon Khalifa Al Mubarak, Chief Executive Officer, Mubadala Development, and Malcolm Brinded, Executive Director of Shell Exploration & Production. HE Khaldoon Khalifa Al Mubarak said today: “The signing of the Memorandum of Understanding with Shell is in line with our objective to partner with the best in the business and build a substantial oil and gas portfolio in the region and internationally. Mubadala looks forward to developing many exciting business opportunities with Shell in the Middle East and North Africa, and elsewhere.”

Mr. Brinded said: “We look forward to working closely with Mubadala. The Middle East and North Africa are important regions for Shell and they are regions in which we are expanding. With Mubadala’s strong regional relationships and our technical and operational expertise, we will now have even more to offer resource-holding countries.”

Source: Shell press release, 13 June 2005


Nabors Drilling International: Going deep with new technology

Nabors Drilling International has announced the construction of Rig 54 and Rig 200, the most technologically advanced deep drilling rigs, designed to meet the deep gas exploration and development needs in the Middle East in an official celebration of the completion of rig 54 at the Lamprell in Jafza (Jebel Ali Free Zone) facility.

The function was attended Sultan Ahmed bin Sulayem, Executive Chairman of Ports, Customs and Free Zone Corporation and number of senior officials in Jafza and companies.

Rig 54 and Rig 200 will utilize Nabors proprietary PACE (Programmable A/C Electric) drilling technology to create a new generation of deep drilling rigs. The 3000 horsepower A/C drawworks, three 1600 horsepower pumps, and the 7500 pounds per square inch mud circulation system enable the rigs drill deep, high pressure wells safely and efficiently. All rig operating and safety systems are designed to be controlled from an air conditioned Drillers Control Center using just a joystick and touch screens.

The rigs will have the option to add a rig skidding system to quickly move the rig from well to well in pad drilling applications. Pad drilling which is becoming an alternative for many Middle East operations
is when multiple wells are drilled from a central location.

Siggi Meissner, president of Nabors Drilling International commented “In Speaking to our customers, we determined there was a need for a new advanced drilling system to handle the deeper gas wells our customers want to drill. Rig 54 and Rig 200 will add value to the deep drilling programs of our customers, here in the Middle East, for years and years to come.

“The advances in technology, captured in these revolutionary new rigs, will allow our customers to drill safely deeper, and faster than ever before,” he added.

Following the rigs completion, they will each begin 6-month contracts and Nabors expects to secure multi-year contracts before the construction process is completed.

Source: AME Info, 01 June 2005


Dolphin Project to handle 3.2bcf/d gas in initial phase

The initial phase of the Dolphin Gas Project, a strategic energy initiative designed to supply large quantities of natural gas from offshore Qatar to the UAE for 25 years starting in 2006, involves processing and transportation by pipeline of up to 3.2 billion cubic feet per day (bcf/d) of processed ‘sweet’ gas from Qatar’s North Field, to customers in the UAE.

The project is the first venture of Dolphin Energy Limited, a development company established in Abu Dhabi to implement the Dolphin Gas Project, and to undertake other important energy-related developments such as the Al Ain-Fujairah Gas Pipeline.

The mandate of Dolphin Energy is to produce, supply and transport natural gas from a dedicated section of Qatar’s North Field to customers in the UAE.

The linking pipeline will be over 370kms in length, and 48 inches in diameter. The costs of the complex upstream gas gathering and processing plant in Qatar’s Ras Laffan and the overall investment in the Dolphin Gas Project makes it one of the largest energy-related ventures ever undertaken in the Middle East.

The shareholders of Dolphin Energy Limited, include Mudabala Development Company, fully owned by the Government of Abu Dhabi with 51 per cent stake, Total of France with 24.5 per cent and Occidental Petroleum of the USA with 24.5 per cent.

Although Abu Dhabi possesses the fourth-largest gas reserves in the world, a major portion of these reserves has already been allocated to essential projects. These include future supply of gas to power and water plants-as well as gas re-injection programs for the oilfields, to maintain reservoir pressure for optimum production.

Hence Abu Dhabi’s - and potentially Oman’s - requirement for a reliable, long-term source of imported natural gas.

Dolphin Energy entered the business of gas supply in January 2004, with the commissioning of its natural gas pipeline that connects Al Ain with the UAE East Coast Emirate of Fujairah. This 24-inch, 182-km pipeline supplies gas to the power and desalination plants in Fujairah of the Union Water and Electricity Company (UWEC).

Initially all the gas being supplied to UWEC comes from Oman and is delivered via a tie-in on the UAE-Oman border near Al Ain.

An average of 135 million cubic feet of gas per day is currently being supplied to Dolphin from Oman Oil Company, for between three and a half and five years. After 2006, when Dolphin’s new export pipeline from Qatar is operating, Qatar natural gas will reach Fujeirah through existing land lines to Al Ain-and thereafter via the new Dolphin link.

Source: The Peninsula, 30 May 2005


Qatar to tender oil block in mid-July

Qatar is to commence the tender of a rare oil block in mid-July, a Qatar Petroleum executive said Wednesday.

Speaking at a Qatar investment conference in London, Nasser al-Jaidah, director of oil and gas ventures for the state-owned energy company, said Block 14 would then be awarded in December at the latest.

Al-Jaidah said reserves in the field are “significant.”

Unlike other countries in the Gulf, Qatar’s strength doesn’t lie in oil but in natural gas - it is the world’s third-largest producer.

Al-Jaidah also said that Qatar hopes to raise its oil production to 900,000 barrels a day from 750,000-800,000 b/d currently. Current capacity stands at 840,000 b/d, he said.

The executive also said that block 5, operated by Danish company Maersk Oil via its local subsidiary, produces 200,000 barrels a day, but is expected to raise output to 400,000 b/d in the future.

Source: FWN Financial News, 25 May 2005


Qatar to produce 24b SCF of gas a day starting 2010

Qatar has brought forward by 10 years its plan to produce 24 billion standard cubic feet of gas Qatar has brought forward by 10 years its plan to produce 24 billion standard cubic feet of gas a daystarting in 2010, a downstream executive for the country’s state-owned oil company said Wednesday.

Speaking at an industry conference here, Ali Hassan Al-Sidiky, director of downstream ventures for Qatar Petroleum, said the country currently produces 10-11 billion SCF feet a day.

The tiny, gas-rich Middle-East country had originally targeted output of 24 billion SCF a day, starting in 2020.

Qatar is stepping up its production of gas because of increasing local consumption, a rise in exports to neighboring United Arab Emirates and an increase in liquefied natural gas, or LNG, processing.

Al-Sidiky also said that Qatar’s recent decision to delay some gas-to-liquids, or GTL, projects is attributable to the need to manage increased production of gas. But, Al-Sidiky clarified that the LNG plants and GTL projects that are closest to completion wouldn’t be postponed. He said the Oryx 1 project, operated by Sasol Ltd. (SSL), will start up early next year as scheduled.

The Pearl project, led by Royal Dutch/Shell Group (RD, SC), will enter production as planned in the second quarter of 2009.

Regarding the projects that Qatar has already said it would delay for three years, Al-Sidiky said: “We are not stopping them, just slowing down development.”

The projects postponed include one operated by Marathon Oil Co. (MRL) and ConocoPhillips (COP) and another from SasolChevron, a joint-venture between Sasol and Chevron Texaco (CVX).

Al-Sidiky said the decision to postpone the projects was due to a 40%-50% rise in prices charged by services companies for Qatar’s numerous gas projects.

GTL consists of the conversion of natural gas to liquid petroleum after being formed into a mixture of carbon monoxyde and hydrogen.

Source: FWN Financial News, 18 May 2005


Qatar and Kuwait plan petrochem ventures

Qatar and Kuwait plan to set up joint petrochemical projects worth around $2 billion in Qatar, the states’ oil ministers said yesterday.
“They said their countries intend to set up joint petrochemical projects in Qatar,” state news agency QNA quoted the ministers of the two Opec producers as saying.
“Although it is too early [to discuss] the costs of these projects, I expect them to be around $2 billion,” Kuwait’s oil minister, Shaikh Ahmad Al Fahd Al Sabah, was quoted as saying.
Doha, which has the world’s third largest natural gas reserves, is trying to become a top producer of petrochemical products.

Earlier this month, it signed an initial deal with ExxonMobil to build a $2 billion petrochemical plant in Qatar.

Shaikh Ahmad and his Qatari counterpart, Abdullah Bin Hamad Al Attiyah, were speaking ahead of a meeting in Doha in which they are also expected to discuss a $2 billion pipeline project to export Qatari gas to Kuwait.

Source: Reuters, 20 May 2005


Qatar to build world's largest petrochemical plant

Qatar Petroleum (QP) and the US Exxon-Mobil announced on Monday May 16, 2005 they have signed principles of agreement to set up the world’s largest petrochemicals plant.

The contract was co-signed by Qatar’s Second deputy Premier, Minister of Energy & Industry H.E Abdullah bin Hamad Al-attiyah, who is also QP board chairman, and Exxon-Mobil’s chief executive officer for petrochemicals Michael Dolan.

After singing the contract, that the US $ 2 billion project is planned to produce some 1.6 million tonnes of ethylene per annum. This quantity of ethylene would be processed to obtain some 420,000 tonnes of linear low-density polyethylene, 420,000 tonnes of low-density polyethylene and 420,000 tonnes of high-density polyethylene per annum, he explained.

These basic principles of agreement are being signed just one year after a memorandum of understanding was signed and upon the completion of the economic feasibility study for this gigantic project, H.E Abdullah bin Hamad Al-attiyah said.

A letter of intent (LOI) for the project would be signed next July and the ultimate signing of the final agreement would take place next year, while construction works, he added, are expected to be completed in 2010.

Earlier last month in Paris, a number of agreements were signed between Qatar Petroleum and several French companies to set up plants to produce ethylene and other petrochemical products.

The plant is expected to go on stream in early 2010, he noted, and production activities are to begin in the next year in the Industrial city of Ras Lafaan as agreed with the US company.

Source: Foreign Information Agency of the State of Qatar, 17 May 2005




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