Managed-pressure drilling (MPD) and fl owback operations take a technological leap with Weir Pressure Control Intelligent Systems
Intelligence gathering at the wellsite
OilfieldTech-Cover-Oct2017.indd 1 18/09/2017 12:07
OCTOBER 2017 EXPLORATION | DRILLING | PRODUCTION
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Managed-pressure drilling (MPD) and fl owback operations take a technological leap with Weir Pressure Control Intelligent Systems
Intelligence gathering at the wellsite
OilfieldTech-Cover-Oct2017.indd 1 18/09/2017 12:07
O
ILFIELD TECHN
OLO
GY
OCTO
BER 2017 | EXPLORATION | DRILLING | PRODUCTION
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OCTOBER 2017 OCTOBER 2017 OCTOBER 2017 EXPLORATION | DRILLING | PRODUCTION
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Contents October 2017 Volume 10 Issue 10
6026
Front cover
Take guesswork out of drilling and frac operations.
Ideal for challenging drilling situations and environmentally sensitive areas, Weir’s Pressure Control Intelligent Systems provide accurate measurements of your active discharge control systems.
Real time data is accessible from local control panels, instantly alerting you of fluid volumes, levels, and flow rates. Data is also available to customers via text, email, or Cloud-based customer portal and can be saved for more accurate EPA reporting.
03 Comment
05 World news
10 Making the most of the Middle EastAndy Ryan, Airswift, reveals how opportunities and challenges abound in the Middle East, but the workforce could be the deciding factor.
15 All in the mixMark Jones, PSM, UK, looks at the importance of the measurement process in delivering improved drilling fluid control and how the latest technology developments in transmitters are helping to increase efficiency and reduce costs.
19 Easy as 1, 2, 3Trond Skjeie, Archer, explains how a three-stage blowout preventer (BOP) cleaner can make a step change in efficient BOP and riser cleaning.
23 In with the newHan Tiebout, GustoMSC, reviews the impact of brownfield developments in a ‘lower for longer’ oil price environment.
26 Ready for the robot revolutionIan Phillips, OGIC, UK, summarises the need for the offshore sector to explore the potential of emerging technologies.
31 Supporting subsea productionMarco Gabelloni, Aker Solutions, reviews a new artificial lift system that builds on traditional ESP-based subsea boosting methods.
35 This feature showcase technologies designed to handle the harshest conditions faced by the global oil and gas industry. Contributions come from:Packers Plus Energy Services Inc. – Performance under pressure – Marlon Leggott discusses the growing requirement for HPHT completion systems and recent implementation in both onshore and offshore environments.Downhole Products – If the shoe fits... – Keith Bradford shows how reaming shoe research is helping operators address extreme well challenges.
43 Bird’s eye viewShelley Regan, Texo Drone Survey & Inspection Ltd, shows how UAV technology is adapting to meet the challenges faced by the oil and gas industry.
46 The path to operational readinessJulie Holmquist, Cortec Corporation, USA, assesses the importance of mothballing/lay-up strategies that allow for corrosion protection and speedy re-commissioning.
51 Corrosion: a fight for safetyEmma Perfect, LUX Assure, UK, explains how to address the challenge of asset integrity through enhanced corrosion management.
54 Dealing with digital twinsHari Vamadevan, DNV GL – Oil & Gas, UK, shows how ‘digital twins’ are a transformational technology for the oil and gas industry
57 Digital dawnMatt Green, Weir Oil & Gas, USA, explores the transformation of the oilfield through digitisation.
60 Decommissioning: a port’s perspectiveJoanne Allday and Zeina Sawaya-Melville, the Port of Cromarty Firth, UK, share a port’s views on the North Sea’s burgeoning decommissioning market.
See the energy at TGS.com
© 2017 TGS-NOPEC Geophysical Company ASA. All rights reserved.
Israel: See Deeper.Newly available broadband reprocessed 2D seismic in the Levant Basin, offshore Israel, dramatically improves our imaging of the biogenic plays and strengthens our understanding of the deeper geology and associated Mesozoic thermogenic hydrocarbon plays.
Enhancements in data quality greatly improve the intra and sub-salt imaging. In addition, deeper imagery now reveals previously unseen rift infill and dramatically increases confidence in the interpretation of the lower syn-rift and basement surfaces. This allows for better control on basin temperature models, seismic facies identification and analyses, as well as improved definition of potential traps. Improve your data. Improve your assessment. Improve your bid.
It’s time to see deeper in Israel.
2001 Processing: Data Pack Version 2016 Reprocessed
Comment October 2017
David Bizley, [email protected]
October 2017 Oilfield Technology | 3
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The pace of change in upstream technology continues unabated. It’s become something of a truism that, rather than being an obstacle, the downturn and ‘lower-for-longer’
price environment has actually been a driver of innovation and implementation of new technologies across the upstream industry. The world still needs hydrocarbons, and that demand is going to be met by the companies willing to invest in new technologies.
Total operates one of the most powerful supercomputers used in any industry. The computer, known as Pangea, is capable of 6.7 petaflops – roughly 80 000 times the number of calculations performed by a standard desktop PC. Pangea also requires 4.5 MW of energy to run, and produces enough heat to help supplement the heating in nearby buildings.1
Total uses this enormously powerful machine to analyse exploration data and indentify positive acreage. François Alabert, head of Exploration Techniques, explains that, “Thanks to Pangea, we have images that are much clearer and richer in geological information and that are available much faster than before. This is essential for identifying complex oil traps and reducing technical risks. It also enables us to improve the safety and efficiency of the drilling process, which is increasingly complex and expensive.”2 Pangea can also be used to produce detailed simulations that model the movement of reservoir fluids, which allows future areas of development to be identified. In addition to performing more complex operations, the massive computational power available means tasks that previously took weeks or even months to complete can now be carried out in just hours or days.
Other major players are making investments into supercomputers. In April of this year, Eni turned on its new HPC3 supercomputer for the first time. CEO Claudio Descalzi said that the computer “will provide Eni with unprecedented accuracy and resolution in seismic imaging, geological modelling and reservoir dynamic simulation, allowing [the company] to further accelerate overall cycle times in the upstream process and to sustain E&P performance.” As the rise of ‘Big Data’ continues, the kind of raw computational power provided by such machines is likely to become ever more important.
Another aspect of advanced technology drawing interest from the upstream sector is artificial intelligence (AI). Earlier this year, BP invested in Californian start-up, Beyond Limits, which is working on commercialising technologies developed by NASA and the US Department of Defense, including AI technology originally developed for space exploration.3 The use of AI systems to analyse the ever increasing volumes of oilfield data could provide a significant advantage to operators, with Mark Watson, chief digital innovation officer at BP, saying that AI was “one of the most critical digital technologies to drive new levels of performance.”4
These new technologies, some of which were once only found in science-fiction, look set to become the cornerstones of the upstream industry in the 21st Century.
The Oilfield Technology team will be attending ADIPEC (13 - 16 November, Booth 121004). We look forward to seeing you there and hearing about the new technologies that your company is bringing to the industry!
References1. ‘Total’s Pangea Is Now the Largest Industrial Supercomputer’ – https://www.hpcwire.com/2016/03/29/
totals-pangea-now-largest-industrial-supercomputer2. ‘Pangea: 80,000 times more powerful than your average PC’ – http://www.total.com/en/media/news/
news/pangea-3-times-more-powerful3. ‘BP joins oil rush to use AI with funding for California start-up’ – https://www.ft.com/content/d20085a6-
4ea1-11e7-a1f2-db19572361bb 4. Ibid.
World news October 2017
In brief
October 2017 Oilfield Technology | 5
Exceed creates 20 jobs with major North Sea contractExceed has announced it will create 20 jobs, having been awarded a contract by Alpha Petroleum Resources Limited for its forthcoming Cheviot Field development campaign. Alpha Petroleum is an upstream oil and gas operator focused on the UK sector of the North Sea and backed by private equity firm Petroleum Equity.
Alpha’s programme includes the drilling and completion of a total of 18 subsea wells, and Exceed’s contract will begin with immediate effect. The operational phase of the project is expected to commence in 2Q18, subject to securing FID in 4Q17, with a workscope that will see Exceed provide drilling engineering and well construction operations management within blocks 2/10a, 2/15a and 3/11b of the North Sea for approximately 1000 days.
Despite the oil and gas downturn of the last two years, Exceed has continued to invest internally, in order to expand its expertise and continue strengthening its engineering capabilities.
Exceed’s Managing Director, Ian Mills, said “By playing a significant role in the delivery of one of the largest field developments in the North Sea in recent times, Exceed is delighted to be creating 20 new jobs. This award is a clear illustration of the benefits our investment strategy has delivered and we look forward to working with Alpha Petroleum and our fellow contractors to successfully deliver this key UKCS project.”
Alpha Petroleum’s COO, Graham Walters, commented: “We conducted a careful evaluation of well management companies in order to select the right fit for Alpha and Cheviot. The award to Exceed will provide the additional operational strength and support the Alpha team requires as we prepare to commence operations next year.”
Ecopetrol awards Stork new operations contractFluor Corporation has announced that Stork, part of Fluor’s Diversified Services segment, was awarded a 29 month contract by Ecopetrol S.A, to provide operations support services in production facilities and clusters for its Orinoquia Vice-Presidency project located in the central region of Colombia. Fluor booked the undisclosed contract value in the third quarter of 2017.
“Stork has worked with Ecopetrol for more than 30 years and we look forward to strengthening our relationship by continuing to provide operations and maintenance services,” said Jorge Estrada, regional vice president of Stork Latin America and Offshore. “This contract with Ecopetrol continues to position Stork as a leading provider of integrated operations and maintenance solutions in Colombia.”
The contract includes sampling and monitoring services over injection and production wells, surface facilities and the inspection of oil well locations.
FairfieldNodal wins GoM survey for ZXPLR systemFairfieldNodal will launch its inaugural ZXPLR survey in the Gulf of Mexico, October 2017.
The company’s ZXPLR data acquisition system is the next evolution in its Z Technology portfolio, with significant improvements in productivity. The new system is designed to provide a safer and more efficient acquisition experience for customers, delivering the same repeatable, high-quality seismic data and overall lower total cost of ownership. This will enable operators to make better decisions and allow them to unlock the exploration and development potential of their investments.
Charles (Chuck) Davison, President and CEO said, “We are continuing to make significant investments in new products and service offerings and are always looking for ways to improve and differentiate ourselves in the marketplace.”
Ghana Sparrows Group has formed Sparrows Offshore Ghana Ltd, a Joint Venture (JV) with local partner Hydra Group Limited, to deliver crane, lifting and inspection services in Ghana.
Stewart Mitchell, CEO at Sparrows Group, said: “We believe there is a gap in the market for a crane specialist to provide all forms of lifting, mechanical handling and inspection services in Ghana. In forming the JV with Hydra Group, we are offering a service that combines our expertise with the infrastructure of a well-respected company with extensive local knowledge of the Ghanaian offshore market.”
Panama ION Geophysical Corporation has announced an approximate 50% extension to its previously announced programme offshore Panama due to strong client interest and prefunding to evaluate offshore Panama in advance of the anticipated license round.
The client-driven survey provides a regional framework typical of BasinSPAN™ programmes to evaluate the geology of the Panamanian offshore, while the new extension provides more detailed coverage that will allow E&P companies to evaluate blocks ahead of the expected license round.
Recent exploration success offshore Colombia, adjacent to Panama’s Caribbean coast, has created interest among E&P companies in high-quality seismic data to evaluate the hydrocarbon prospectivity on this margin. The expanded programme will be approximately 9000 km and is the only modern data available offshore Panama.
Brian Hanson, President and CEO, said, “Over the last 18 months, we targeted opportunities less dependent on cycle recovery in specific geographic areas and production optimisation offerings, and we are seeing these efforts pay off.”
World newsOctober 2017
Diary dates
To read more about these articles and for more event listings go to:
Web news highlights
www.oilfieldtechnology.com
6 | Oilfield Technology October 2017
ÌÌ Add Energy and Trendsetter Engineering introduce RWIS Lite
ÌÌ Gardner Denver turns to the Middle East
ÌÌ Naming ceremony held for world’s largest FSRU
ÌÌ Haakon Haaland appointed new Managing Director of MOL Norge
Rystad Energy: mature oilfields are declining fasterWhile the trend in spending for oil and gas companies since the crash in oil prices has been a steep decline, production has remained relatively stable since 2015. Detailed analysis reveals that the production plateau is largely thanks to projects approved during pre-2014 prices coming online. However, the drop in oil and gas spending has had a material impact on the production decline for maturing oil fields, where the drilling of new wells has dropped by 50%, according to data from Rystad Energy.
This lower level of activity on already-declining fields has had quite a dramatic impact on decline rates. Mature, offshore oil fields now decline at a rate of -8% per year, whereas the same fields declined by only -5% in 2014, before the drop in drilling activities.
“Old offshore fields are now declining faster, and as a consequence, 1 million bbls of oil have been removed from production balances. This impact cannot be properly accounted for unless you follow old, small fields at a frequent and detailed level,” said Per Magnus Nysveen, Head of Analysis at Rystad Energy. Global oil and liquids production has reached 97 million bpd as of early October, according to data analysts at Rystad Energy. This is exactly 10 million bbls higher than at the start of this decade. Now the Oslo-based research company predicts a continuous shift of market share from conventional oil production to US shale oil.
“We expect US oil production will continue to ramp-up towards its full potential of 15 million bbls within the next five years, and then we would again see quite a dramatic tightening of the oil market,” said Nadia Wiggen Martin, Vice President of Markets at Rystad Energy.
15 - 18 October, 2017
AAPG/SEG ICELondon, UKE: [email protected]
24 - 26 October, 2017
LAGCOELafayette, USAE: [email protected]
08 November, 2017
OSCC 2017Kuala Lumpur, MalaysiaE: [email protected]/oscc-conference
13 - 16 November, 2017
ADIPECAbu Dhabi, UAEE: [email protected]
Weatherford and Intel to collaborate on digital oilfield technologiesWeatherford International plc joined Intel Corporation at the IoT Solutions World Congress in Barcelona to showcase the collaboration between the two companties to demonstrate the benefits of bringing Internet of Things (IoT) technologies to the oilfield.
Colin Tait, Director of Information Technology at Weatherford, stood alongside Jonathan Ballon, Vice President in the Internet of Things Markets and Channels at Intel Corporation, during Ballon’s keynote on day one of the conference. The executives discussed how IoT-enabled oilfield devices can improve the efficiency and profitability of production operations, from surface equipment to the back office.
As a use-case example, the companies demonstrated how data collected by sensors on production equipment in the field can be transmitted to the cloud, or to a data centre, by the Weatherford IoT gateway. The Intel Secure Device Onboard service is used to securely onboard sensors and the Weatherford IoT gateway to Intel Wind River Helix Device Cloud for device management. After flowing through the gateway, sensor data can be visualised and analysed using the Weatherford ForeSite™ production optimisation software. The ForeSite platform, released by Weatherford in May 2017, connects and analyses data from across the production ecosystem to maximise asset performance.
“Collaborations with leading information technology companies like Intel enable us to extend the functionality of existing oilfield technologies,” said Tait. “By harnessing the power of cloud computing, advanced analytics and the IoT, we can build an end-to-end digital oilfield solution that yields greater efficiencies across the upstream oil and gas sector.”
“Oil and gas companies have a growing interest in using IoT strategies to transform their business operations by fully integrating equipment and systems – from the field to their operational and analytics backend.” said Dipti Vachani, Vice President and General Manager, Internet of Things Group at Intel. “Weatherford’s requirements for hardware assisted security, scalable device onboarding, and device management is a proving ground for IoT zero touch onboarding technologies. The combination of solutions will modernise how legacy oilfield technologies can produce value for the industry.”
October 2017
8 | Oilfield Technology October 2017
October 2017World newsTendeka releases new technologies
ST9 Gas + Oil launches first productFollowing months of development and research, Houston, Texas-based ST9 Gas + Oil has unveiled the new XGen Seat + Valve for frac and well service pumps. This is the first release of many high-performance products that the company plans to launch to challenge the traditional industry practices.
The technology was subject to extensive research, design innovation, engineering and field-testing. Designed by industry experts and manufactured in-house from premium-grade, domestically sourced materials, the XGen Seat + Valve is designed to offer improvements of 33% for life and 36% for cost.
“Tested to perform 33% longer [...], ST9’s XGen Seat + Valve is a vital component in helping companies maximise their ROI, delivering longer operational service life, increasing pumping hours, and reducing total cost of ownership,” said Chris Buckley, founder and CEO of ST9 Gas + Oil.
Ampelmann in partnership with SeaqualizeAmpelmann, a provider of offshore access solutions, has announced an exclusive partnership with Seaqualize, a Dutch marine motion technology innovator, to collaborate on the development of its latest S-type gangway.
The S-type, is designed specifically to be fully integrated into large, high speed vessels and dedicated to long-term crew change operations. The gangway is designed to safely compensate the challenging motion characteristics of these vessels when in dynamic positioning (DP) alongside the platform. This is combined with a reduction in power requirement and weight of the gangway itself.
Production is due to start on the gangway in early 2018. In total, the cost of operators using the system will be around 30% cheaper than helicopters. The S-type builds on Ampelmann’s track-record of design by incorporating a lightweight system that uses a low amount of energy to operate.
Subsea 7 awarded contracts by Ophir EnergySubsea 7 has announced the award of an integrated contract by Ophir Energy for the Fortuna LNG project offshore Equatorial Guinea, located in average water depths of 1790 m. The substantial contract was awarded to Subsea Integration Alliance, which is a partnership between Subsea 7 and OneSubsea.
The upstream EPCIC contract will be delivered as part of an integrated solution combining SURF and subsea production systems (SPS). Four deepwater wells will be tied-back to a subsea manifold and connected to a FLNG vessel by steel lazy-wave risers, a cost-effective riser solution. EPCIC operations will commence after the final investment decision and offshore operations are scheduled for 2020.
Ophir Energy has also awarded the contract for future inspection, repair and maintenance (IRM) services to Subsea Integration Alliance.
IT ALL STARTS WITH API QUALITY.
ONSHORE. OFFSHORE. EVERY SHORE.
Show the oil and gas industry you’re dedicated to quality through the API Monogram® Program and
API Quality Registrar. For certification, training, events, standards, statistics, or safety, start from a
place of quality. Start with API.
See us at ADIPEC 2017 – Stand No. 7550
877.562.5187 (Toll-free U.S. & Canada) | +1.202.682.8041 (Local & International) | [email protected] | www.api.org© 2017—API, all rights reserved. API, API Monogram, the API logo, the “It All Starts with API” tagline, and the “It’s times like these” tagline are trademarks or registered trademarks
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OilfieldTechnology_Oct2017_APIQuality.indd 1 9/8/17 7:47 AM
After significant R&D focus, Tendeka has recently launched two technologies, PulseEight and Cascade³.
PulseEight is the latest advance in wireless intelligent completion technology for the digital oilfield, and uses pressure pulse telemetry to channel wireless communication between a well’s downhole monitoring and control system and the wellhead. Previously, Tendeka installed several wireless pressure/temperature gauges and so proved communication from the wellbore to the wellhead. This relayed critical reservoir pressure and temperature data which the client used for depletion monitoring and for the planning of an infill drilling campaign.
To unlock the full potential of the system and allow for greater control, Tendeka embarked on a project to prove bi-directional communication via a PulseEight Interval Control Valve (ICV). The device was required to send pressure/temperature data to the surface and pressure pulses were sent down the well to communicate with the ICV in a multi-phase fluid environment.
PulseEight technology simplifies operations by removing the need for traditional hydraulic or electric control lines. Downhole connections are eliminated and therefore overall system costs are significantly reduced and HSE is improved. The device can either be fitted during the completion phase, or retrofitted into existing wells in order to maximise production.
Each device functions independently providing modular flexibility to meet a range of requirements from low cost single zone monitoring to full multi-zone, multi-lateral measurement and control.
Tendeka’s Cascade³ is an advancement in sand control technology. The technology eliminates the failure mechanisms associated with water injection wells, providing operators with improved injectivity, recovery, and well life.
In conventional reservoirs, a significant portion of oil production is driven by water injection into unconsolidated reservoirs. Water injection wells with sustained high rate and high ultimate volumes are critical for the economic success of many subsea and deepwater developments around the world: Gulf of Mexico, West Africa, North Sea and South East Asia to name a few.
Water injection programs can boost oil recovery by 20% due to a more effective sweep of the reservoir. They also present challenges such as crossflow, backflow and water hammer which lead to fines building up inside the sand screen completion and impaired injectivity.
Simple and unobtrusive, Cascade3 is compatible with both gravel packs and stand-alone screens and prevents any back flow whilst allowing unrestricted injection. In addition to boosting production, the system helps reduce the need for interventions and re-drills, significantly lowering long-term operational costs.
Gillian King, VP Corporate Development & Marketing, said: “Cascade³ was developed with a major Gulf of Mexico operator to
increase the longevity of their subsea water injection wells. By doing this, less wells are required to be drilled to maintain production, delivering real value to our client.”
October 2017 IT ALL STARTS WITH API QUALITY.
ONSHORE. OFFSHORE. EVERY SHORE.
Show the oil and gas industry you’re dedicated to quality through the API Monogram® Program and
API Quality Registrar. For certification, training, events, standards, statistics, or safety, start from a
place of quality. Start with API.
See us at ADIPEC 2017 – Stand No. 7550
877.562.5187 (Toll-free U.S. & Canada) | +1.202.682.8041 (Local & International) | [email protected] | www.api.org© 2017—API, all rights reserved. API, API Monogram, the API logo, the “It All Starts with API” tagline, and the “It’s times like these” tagline are trademarks or registered trademarks
of API in the United States and/or other countries.
TM
It’s times like these you need people like us.®
OilfieldTechnology_Oct2017_APIQuality.indd 1 9/8/17 7:47 AM
Making themost of the
Middle East
Making themost of the
Middle East
10 |
Andy Ryan, Airswift, reveals how opportunities and challenges abound in the Middle East, but the workforce could be the deciding factor.
I f America can claim the title of the world’s breadbasket, the Middle East is surely its oil well. Of the 19 countries that topped 1 million bpd in 2016, seven are Middle Eastern (five on the
Arabian Peninsula), eclipsing any other region for total output or concentration of major players.
It is a region that offers rich opportunity to the upstream oil and gas sector, but it has its challenges too. The geopolitical situation, low oil price – despite OPEC’s production cuts – and drives by various states to diversify their economies and energy sectors are all headwinds.
However, some of the most pressing structural challenges have to do with the industry’s workforce. The time to act is now, but concerted efforts are difficult, not least because tomorrow’s challenge often masquerades as today’s opportunity.
HeadwindsUltimately, it all boils down to cost per barrel and price. The most obvious challenge then, is one that is hit upstream operators around the globe – the persistent low oil-price environment.
| 11
12 | Oilfield Technology October 2017
Fortunately, for the Arabian Peninsula and broader Middle East, cost of production is famously lower than in some of the world’s other major basins, such as the North Sea, or Gulf of Mexico. This is partially down to the lower cost of labour, but more so the sheer volume of hydrocarbons available. Middle Eastern fields are still rich in reserves and it is simply not necessary to go to the expense and lengths that operators in other regions have to for extraction.
Of course, it is partially this abundance that keeps prices low. Iran’s stated ambition to go full-throttle in ramping production up to pre-sanction levels is unlikely to assuage the situation either. Interestingly, OPEC’s production cuts do not seem to be making the marked changes to pricing that they once would have.
So, it could be argued that, taken in isolation, the low price is a storm the region’s upstream industry could ride out without too much discomfort. The problem is, nothing happens in isolation. Though not itself catastrophic, the oil price is the rough undercurrent to a host of other challenges.
Take for example, the ongoing diplomatic tensions between Qatar and its neighbours, including Saudi Arabia and the United Arab Emirates (UAE). Accusations of foul play and supporting terrorism have led to Qatar’s larger neighbours imposing sanctions and all but closing the borders.
Of course, Qatar’s national oil company (NOC), Qatar Petroleum, continues to extract resources and has even pressed ahead with expansion of its capacity. In April 2017, Doha announced it was lifting the moratorium on the North Field – the world’s largest gas resource, shared with Iran. Already the top global LNG exporter, Qatar aims for new gas exports of 2 billion sft3/d, an extra 400 000 boe.
However, things are more difficult in the region as a result of the dispute. Sanctions and border restrictions make everything more expensive: from the food eaten by the crews on-site, to the construction materials required for asset development and maintenance.
It also causes problems for suppliers to the upstream industry. Multinationals typically set up a central regional office and serve the region from there. If that office is in Dubai and there’s work to be done in Doha, then a sub-one-hour direct flight is now a circuitous trek of about seven hours. Though aimed at Qatar, in this way the restrictions hamper ease of doing business throughout the region.
There are other less direct challenges too. The energy sector is changing in the Middle East, as it is everywhere, and renewables are making inroads. The UAE, for example, is investing US$163 billion in renewables with the aim of meeting half of its power requirements sustainably by 2050. Similar projects have been planned and ambitions stated across the region. This is unlikely to spell disaster for upstream operators anytime soon, but it does reduce domestic demand and begin to chip away ever so slightly at oil’s privileged position as the centrepiece of national economies.
Not all the challenges are external either – it is long been pointed out that the ease of extraction in the Middle East has led to under-investment in efficiency and technology compared to more demanding regions around the world. It could be argued that as reserves gradually reduce, operators may come to regret the underinvestment.
In every challenge, an opportunityBut it is hardly all doom and gloom for the industry. For every downside, there is an upside for the upstream sector.
Low oil price? The optimist can point to the fact that it quickly rebounded from the bottom and that, though the US$50 - 60/bbl corridor is hardly as attractive as prices over US$100/bbl, it is a relatively stable range at which it is possible to make a profit. As recent history has shown, things could certainly be worse.
The reasons for optimism when it comes to geopolitics are more fragile, but it could be predicted that pragmatism will win out in the end, as a global economy still thirsty for fossil-fuels calls the eventual tune.
As for the uptick in renewables and attempts to diversify national economies? It is unlikely that the NOCs will be dethroned just yet. There are still countless barrels to be extracted and no Middle Eastern state is about to turn its back on an industry that has served – and is still serving – it so well. Moreover, demand shows little sign of drying up. As recently as September 2017, McKinsey predicted that coal, oil, and gas would still provide 74% of primary global energy consumption in 2050. Hardly ‘death throes’.
Furthermore, there is arguably a huge second-mover advantage when it comes to oilfield technology. Operators and tech suppliers have poured millions into solving problems in more mature and marginal basins. Those upfront development costs have now been absorbed, but tech providers will be keen to sell to new customers. If and when the Arabian upstream industry comes knocking, it will be in an enviable bargaining position.
The workforce challenge: the sleeping giantThe greatest challenge that Arabian upstream operators face is not to do (directly) with geopolitics or technology: it is to do with people.
From March 2015 to October 2016, it is estimated that more than 300 000 oil and gas jobs were lost worldwide, with the Middle East certainly seeing its share. Now, having made the painful adjustments, operators are prima facie in a great position. There is a lot of highly skilled talent out there eager for work; to some it may look like a buyer’s market.
However, that situation cannot last. Because – as has been seen across the sector – many of those
people, rather than wait around for the oil price to pick up and the phone to ring, went out and made new careers for themselves. These are skilled workers, with highly transferable experience that can open doors in many industrial or infrastructure sectors. Even without leaving the energy sector, the burgeoning renewables market has been a willing recipient of veteran engineering and managerial talent.
The figures here paint a difficult picture for the oil and gas industry. In the 2016 Global Energy Talent Index (GETI), conducted by Airswift and Energy Jobline, it was found that 67% of oil and gas professionals worldwide were interested in working in other energy sectors, particularly renewables. One of the biggest motivations was job security (cited by 42%) and, shockingly, nearly half (49%) would take a pay cut to achieve this.
The oil and gas industry cannot assume it will easily tempt these people back – people who have been let go are not quick to forget.
In fact, in the Middle East, 50% of surveyed hiring managers had not rehired any of their laid-off employees, with a further 33% having rehired less than 10%. Those numbers may improve, but there is no room for complacency.
In fact, they might find that some of the skilled talent they seek to rehire has left the job market entirely. The ageing workforce is a well-publicised phenomenon in the
upstream sector. 72% of hiring managers cited an overall talent deficit as a challenge to the industry, with nearly half (46%) believing the ageing workforce to be the main reason for this.
If the industry tries to ratchet up hiring again in the near-medium future, it may find that a significant number of skilled energy workers are happily settled in other sectors, and others have opted to retire. So, while it may feel like a buyer’s market with regards for talent now, upstream operators should have one eye on the future.
Room for optimism?Luckily for operators in the Middle East, many of the figures cited above are global ones, representative of the oil and gas sector as a whole. For regional operators, there are some nuggets of good news in the more granular data.
For example, 46% of hiring managers thought that the Middle East would be a hotspot for the industry over the next 12 months, with only 13% saying the same of Europe.
When professionals were asked for their top places to work, the Middle East came second behind only North America.
Professionals in the Middle East were also optimistic about pay. 48% believed it would increase in the next 12 months; far more than people who thought it would stay the same (33%) or decrease (14%). An important caveat though, is that hiring managers asked the same question were less bullish, with figures of 25%, 58% and 17% respectively.
Putting these figures together offers a broadly optimistic outlook for the Middle Eastern workforce. Global talent sees it as an attractive place to work and expresses cautious optimism about remuneration in the region. When considering that,
traditionally, one of the biggest battles for the sector in the Middle East has been to counter false narratives in Western media about the quality of life in the region, this is hugely encouraging.
These perceptions are especially important for the Middle East, which reported a staggering 86% to 14% split on expat to local talent ratios. The next highest region for expat-dependence was Africa at 21% to 79%. To see what that means in the real world, just look at Qatar. In June 2017, the country’s population decreased by 5.7% as the expat workforce declined. In July, another 2.9% fall, and another 1% in August.
However, these reasons for optimism do not make the looming workforce challenges disappear. The skills and talent shortages are very real, and it is up to the industry to act now to avoid or mitigate the issue.
SummarySo, when it comes to the upstream oil and gas sector in the Middle East, it is a mixed picture. The region continues to be the sector’s powerhouse, but there are some gale-force headwinds ahead. However, the sector is not lacking for opportunity either.
Perhaps the biggest deciding factor in the region’s upstream medium-term future is how it deals with the looming challenge of talent and skills shortages. The Middle East has some advantages in this sector compared to other regions, but it will be important not to overplay that hand. To get it right, the industry will need to make concerted and sincere efforts to make the most skilled talent feel wanted and to plan for skills transfer to counteract the effect of the ageing workforce. These programmes should have started yesterday, and tomorrow will be too late. That leaves today.
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