oil and gas_jan 2011

FROM THE EDITORS DESK

No 14 Jan-Feb, 2011

CONCEPT & CONTENTAkshay BhatnagarSunil Fernandes

DESIGNSenior Art DirectorSandesh S. RangnekarArt DirectorMinaal G PednekarSenior DesignersM. BalagopalanShameer MoideenDesignerAhmed Al HosniSenior PhotographerRajesh BurmanPhotographerSathya DasMotasim Abdulla Al BalushiProduction ManagerGovindaraj Ramesh

MARKETINGBusiness Head - Strategic Media UnitKush GuptaMarketing TeamSanjeev Rana

CORPORATEChief ExecutiveSandeep SehgalExecutive Vice PresidentAlpana RoyVice PresidentRavi Raman

Senior Business Support ExecutiveRadha KumarBusiness Support ExecutiveZuwaina Said Al-Rashdi

Distribution

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Published byUnited Press & Publishing LLCPO Box 3305, Ruwi, Postal Code - 112Muscat, Sultanate of OmanTel: (968) 24700896, Fax: (968) 24707939Email: [email protected] rights reserved. No part of this publication may be reproduced without the written permission of the publisher. The publisher does not accept responsibility for any loss occasioned to any person or organisation acting or refraining as a result of material in this publication. OER accepts no responsibility for advertising content.Copyright 2010 United Press & Publishing LLCPrinted by Oriental Printing PressCorrespondence should be sent to:Oil & Gas ReviewUnited Media Services LLCPO Box 3305, Ruwi 112, Sultanate of OmanFax: (968)24707939Email: [email protected]

An Presentation

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The last quarter of 2010 saw crude prices surging to hit the $90 per barrel mark, on renewed buying interest in the commodity. It was for the first time in 25-months that crude had hit the $90 mark, largely supported by positive economic data from the U.S.

In the latest signs of improvement in the US economic recovery, data showed consumer sentiment rose more than expected in early December, while import prices in November climbed at their fastest pace in a year. Another positive signal came from the U.S. Commerce Department, which said the U.S. trade deficit narrowed much more than expected in October. Encouraging data from developing economies in Asia and European powerhouse Germany continues to propel crude prices.

As we usher in 2011, it seems clear that oil is headed towards $100 on bullish fundamentals. Analysts OGR spoke to believe that it might touch $100 and retrace a little from those levels. Our cover story features a comprehensive view on demand, supply and crude oil prices in 2011.

Moving on, we have featured some interesting articles in the current edition, including the use of solar in enhanced oil recovery (EOR) and binary actuation technology that provides intelligent solutions for EOR. By using solar in thermal EOR it is possible reduce the use of natural gas, while freeing-up this valuable resource for industrial and domestic consumption.

Oil & Gas Review has many more interesting articles for industry professionals. We hope you enjoy reading these articles and do forward us your feedback.

SURGING PRICES!

Sunil Fernandes

[email protected]

2 Jan-Feb 2011

CONTENT

Cover StoryCautious Optimism

MARKET ROUND-UP

44

Insets:

Analysts are cautiously optimistic on rising crude prices and expect the commodity to touch $100 per barrel

30 COMPANY REPORT A review on the products and services offered by Seven Seas Petroleum

12 NEWSMAKERSIndustry personalities that were in the news in 2011

05 INDUSTRY SCANA news round-up on the latest in Omans oil and gas industry

INTERVIEW

John Watson on the Energy Economy

ANALYSIS

INTERVIEWIan Anderson, Chief Operating

Officer of Camcon

32

A review of the developments in the oil and gas sector

20

26

52

Rod MacGregor, President and CEO of GlassPoint

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4 Jan-Feb 2011

CONTENT

A round-up from the regional oil and gas industry

Regional Round-Up

A round-up of the latest global events

Global Round-Up

Insets:

60 GLOBAL OIL RESERVESLatest Oil and Gas statistics

The latest job opportunities from around the globe

Job Opportunities

PEAK OIL: MORE REALISTIC THAN MYTH

Energy analyst who have historically denied the existence of peak oil have now begun to recognise its existence

65 TENDER WATCHLatest tenders from around the globe TenderWatch

66 EVENTS CALENDARA calendar of events in the global oil and gas industry

4842

68

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His Excellency Dr Mohamed bin Hamad Al Rumhy, Minister of Oil and Gas, was the guest of honour at a special

Oman LNG event at which he was presented with the first copy of Empowering People, Building the Future, a book that reflects on the successes of the companys pioneering corporate social responsibility programmes in Oman over the last 10 years. Oman LNGs Chief Executive Officer, Dr Brian Buckley, used the occasion to outline Oman LNGs new vision for the coming years that will focus the companys social investment programme on the three core areas of Empowering Communities, Championing Innovation and Investing in People. A key initiative in 2011 will be the launch of the Young Scientist of the Year awards in collaboration with the Ministry of Education. The awards will recognise the contributions of individual students and schools to innovation in science at both the regional and national levels and is

intended to encourage the creative application of science in secondary schools, to meeting the socioeconomic and environmental challenges and opportunities in Oman today. Commenting on Oman LNGs Social Investment Programme so far, the Chairman of Oman LNG, His Excellency Nasser bin Khamis Al Jashmi, Undersecretary of the Ministry of Oil and Gas, said, Oman LNG has made a hugely positive impact on the Omani economy and the development of the nation over the past years.

Through our pioneering Social Investment Programme, Oman LNG has set the benchmark

for corporate social responsibility in Oman and the region. We are very proud to have invested over RO 35 million in this programme at the local and national levels in supporting a total of 270 projects to date over the past decade. Oman LNG has become a role model for good corporate citizenship in Oman and a trusted partner for the development of the neighbouring communities.

LOCAL ROUND-UP

Oman LNG celebrates a decade of Empowering People, Building the Future

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6 Jan-Feb 2011

LOCAL ROUND-UP

Composite Pipes Industry (CPI), Omans leading manufacturer of glass reinforced plastic piping systems (GRP) has successfully completed the hydro testing of glass reinforced epoxy (GRE) fittings, as a part of the order placed by Worley Parsons Engineering Oman. CPIs scope is to supply the GRE pipes and fittings for PDOs prestigious steam project at Amal site, south of Oman.The project is due to be completed by March 2011. Successful testing has been carried out using state-of-the art machine built and installed at the Sohar facility to comply with the stringent measures PDO demands.

As the design pressure for the supplied pipes is 40 bar, the material has to stand pressurisation up to 60 bar as per ISO standards. Being successful in the challenge, CPI has become the only GRE manufacturer in the GCC capable of conducting and passing the fittings hydro test up to such pressure, the company has said. Chairman Sheikh Saif Bin Hashil Al-Maskery, congratulated the team for the achievement which he said was a another step in the organisations continuous pursuit of excellence.

Composite Pipes Industry successfully completes hydro testing of GRE fittings

Khimji Ramdas Oil & Gas division has introduced a unique synchronous lifting technology for the oil and gas, construction, power plants, reactors and other related industries, in Oman, in association with ENERPAC, the global leader in high-force tools and equipments.

The synchronous lifting solution is an engineering system from ENERPAC Hydraulics to control the lifting, lowering and positioning of any large, heavy or complex structure, regardless of weight distribution. Synchronous lifting reduces the risk of bending, twisting or tilting, due to uneven weight distribution or load-shifts between the lift points.

Nailesh Khimji, Director, Khimji Ramdas said, Khimji Ramdas Oil & Gas division has been instrumental in bringing the worlds leading products and specialised engineering services to Oman. We are pleased to introduce this new technology from ENERPAC to Oman Market. Through this specific software, the lifting (and lowering) will be extremely accurate.

Khimji Ramdas Oil & Gas division introduces unique synchronous lifting solutions

Al Hassan Engineering nominated among GCCSTop Five Contractors for second consecutive yearAl Hassan Engineering Company (AHEC), the Contracting SBU of the Al Hassan Group, has been nominated among the five finalists in the Contractor of the Year Award category, by Construction Week, for its ability to deliver projects on time and within budget for the second consecutive year. AHEC was the only Omani company to feature in the shortlist.The annual Construction Week Awards, now in its sixth year running, is the industrys leading awards recognising industry best practice across several segments of construction work which include contractors, developers, engineers and architects.

The nominations are given to the GCC construction companies who could most demonstrate operational excellence, commercial success and continuous improvement. Testimonials from clients, developers and subcontractors were welcomed, and evidence of commitment to worker welfare, environmental awareness and efficient working practices was essential. The final selection was done by a panel of independent judges comprising leading

personalities from the industry.

AHEC submitted details of work carried out on its two recently completed landmark projects, including the Salalah Methanol Project for GS E&C and the Burhan Harmal Pipeline Project for PDO. Commenting on the nomination, Peter Hall, CEO, AHEC said, This nomination is testament to the work ethic and team effort that has been contributed by everyone in AHEC, ensuring that we remain focused on the ultimate goal of being known as the best contractor in our area of operations.

Over last two decades, AHEC which is an ISO 9001:2008 certified company, has established an excellent track record of being a prime engineering, procurement and construction (EPC) contractor and construction partner in executing complex jobs in its core business sectors of oil and gas (midstream and downstream segments), power generation, electricity transmission and distribution, industrial infrastructure, maintenance of oil and gas installations and water and wastewater treatment plants.

Renaissance Services has acquired 100 per cent of Al Wasita Emirates for Services and Catering, an industrial services and catering business based in Abu Dhabi, in its latest move to expand its contract services

operations in the region.

Renaissance Services, an Omani-based oil and gas services multinational company listed on the Muscat Securities Market (MSM),

Renaissance expands in UAE with contract services company acquisition

announced to the MSM yesterday that it paid AED 56 million (R0 5.89 million) for the purchase of Al Wasita Emirates.

Al Wasita Emirates, which operates from Abu Dhabi, Dubai, Ras Al Khaimah and Fujairah provides up to 26,000 meals per day, has been successfully operating various government and private contracts since its launch in 2004, and has achieved significant growth in its recent performance.

Ananda Fernando, Chief Executive Officer of the Contract Services Group of Renaissance Services said, We are confident that this acquisition will provide significant opportunities to Renaissances Contract Services Group in the UAE market.

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Factory: Sohar Industrial Estate, Road No 9, P.O. Box 30, Postal Code 327, Sultanate of OmanTel: (+968) 26751992/3/4/5 Fax: (+968) 26751996 E-mail: [email protected] - SEPMA

8 Jan-Feb 2011

Renaissance Services, Omani-based multinational oil and gas services provider, has announced that its recent issue of subordinated loan notes of RO 40 million ($104 million) to Omani investors has been fully subscribed in the largest mezzanine financing offer by a non-banking company in the Sultanate to date. Mezzanine financing is a unique and advantageous form of tier II funding capital that is treated like equity and offers an opportunity to enhance return for investors and the companys shareholders. BankMuscat, Omans leading financial services provider, structured and supervised the capital raise in its capacity as Transaction Structuring Advisor to the investors in the loan notes. The full subscription of the subordinated loan notes signals strong investor confidence in the companys business model, future outlook and nine-year consecutive record growth track through booms and busts of economic cycles. This is the companys first exposure with this form of long-term mezzanine financing which perfectly matches with the long-term growth objectives and long-term nature of the companys solid assets base, and BankMuscat played an important role in the successful closure of this transaction by recognising the intrinsic strength of various businesses

of the company, said Vishal Goenka, Chief Financial Officer at Renaissance Services. This funding has many first to its credit, mezzanine loan notes have been issued for the first time by a non-banking corporate to Omani investors at such a scale and are fully subscribed at a price attractive to both the investors and the company, and this should further promote the market in Oman. Specifically, this funding will help us to reduce the overall cost of capital employed and will extend the companys ability to fund anticipated growth. Renaissance has set in motion its growth plans to invest RO 522 million ($1.36 billion) over the three year period 2010-2012 in assets corresponding to its growth areas in marine offshore, engineering and contract services businesses owned by the company. In the first nine months of 2010, Renaissance invested over RO 96 million ($250 million), primarily to expand the companys world class offshore support vessels fleet which is one of the youngest fleets in the world and ranks amongst the top ten globally.

Assets in the companys balance sheet stand at over RO 500 million ($1.3 billion) and are expected to grow significantly over the next three years with the investment programme.

Renaissance issues RO 40 million ($104 m) in long-term subordinated notes; fully subscribed by Omani investorsThe Ministry of Oil and Gas has signed an agreement on selling gas emission

reduction units with the Oman International Trading Company. It was the first agreement related to developing the Kyoto Protocols Clean Development Mechanism (CDM). Dr Mohammed bin Hamad Al Rumhy, Minister of Oil and Gas, said the pact was an initiative to reduce green house emissions in the Sultanate in implementation of decision No 30/2010 issued by the Ministry of Environment and Climate Affairs which regulates and co-ordinates CDM projects.

Omans oil output up 6.6 per cent to 261m barrelsThe Sultanates total oil production rose remarkably by 6.6 per cent in the first 10 months of the current year 2010 compared to the corresponding period in 2009.

The statistics released by the National Economy Ministry pointed out that the Sultanates total crude oil production amounted to 261.7 million barrels at end of October 2010 compared to 245.4 million barrels at the same period in 2009. The average daily production of oil rose to 860.800 barrel per day and its average price recorded rise by 41.9 per cent to hit $76.38 for a barrel in the same period.

Move to cut emission

Budget based on oil at $58 The Financial Affairs and Energy Resources Council held a meeting recently during which it discussed estimates for the states Budget 2011, details of revenues, expenditure and deficit, as well as basics and defaults upon which estimates are based. Oil price in the budget estimates was set at $58, taking into consideration the levels of general expenditure and the need to meet financial commitments, particularly development projects, and maintain an appropriate average in economic terms vis--vis the deficit.

LOCAL ROUND-UP

10 Jan-Feb 2011

LOCAL ROUND-UP

Bahwan Engineering Group has achieved outstanding Health, Safety & Environment (HSE) milestone by completing 35 million man hours without lost time injury accident during the execution of their six projects namely: Saih Rawl Depletion Compression Project for PDO along with TR Oman as EPC; Methanol Project for Salalah Methanol Company LLC (SFZ) with GS Engineering & Construction as EPC at Salalah; New Psychiatric Hospital Project at Al Jahlut of Al Amerat region for Ministry of Health; PDO Estate Maintaining Services coast; Shut down Works for Oman LNG and Industrial Maintenance service contract for Oman India Fertiliser Company (OMIFCO) at Sur were some of their prestigious projects. This reflects the complexity and diversity of projects and service activities the BEC group undertakes, even while adhering to the highest HSE standards, the company has stated.

To commemorate the superb HSE milestone achieved by these project teams, the company had organised a HSE function at Crown Plaza hotel to felicitate the project teams, the clients and the sub contractors. The function was attended by the senior management of various clients such as Ministry of Health, Petroleum Development Oman, Oman LNG, Oman India Fertiliser company, Salalah Methanol Company LLC(SFZ), TR Engineering (a Tecnicas Reunidas group), GS Engineering & Construction Consultants and sub contractors.

Bahwan Engineering Group achieves significant HSE milestones

Coinciding with the 40th National Day celebrations, Shell Oman opened two new service stations taking the total Shell network in Oman from 140 to 142.

The 141st Shell Station in Oman, located at 18th November Street in North Azaiba, was inaugurated by HE Engineer Ahmed bin Hassan Al Dheeb, Under Secretary of Commerce & Industry, Ministry of Commerce & Industry, in the presence of His Highness Sayyid Shihab bin Tariq Al Said and Adil bin Ismail Al Raisi, Managing Director of Shell Oman Marketing Company.

The 142nd Shell service station at Diba in Musandam Region was formally opened by HE Sheikh Mohanna bin Saif bin Salem Al Lamki, Deputy Wali of Diba in the presence of a large number of invitees. Speaking on the new site

openings, Adil Al Raisi, the Managing Director of Shell Oman Marketing Company said, As part of our ongoing effort to reach out to our customers across Oman, we have opened these two stations and dedicate them to all our customers on the occasion of the 40th National Day.

Shell Oman will always strive to bring quality fuels and excellence in service to the people of Oman and be a part of their daily life across the Sultanate.

Both the stations have received overwhelming response from customers and chief guests. These stations feature the latest state-of-the art fuelling technology with automated inventory systems associated with customers convenience, quality and Shell quality of service.

Shell Oman opens two new stations

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12 Jan-Feb 2011

NEWSMAKERS

NEWSMAKERS IN 2010 Oil & Gas Review looks at the industry personalities that were in the news in 2010

His Majesty Sultan Qaboos conferred the Royal Commendation Order Ist Class on His Excellency Dr Mohammed bin Hamad Al Rumhy, Omans Oil and Gas Minister. His Majesty conferred the orders at Bait Al Barakah on the occasion of Omans 40th National Day.

Dr Mohammed bin Hamad Al Rumhy

Irshad Al Lawati

Shell International EP appointed Irshad Al Lawati as Shell Country Chair in Iran last year. This is the second appointment for an Omani citizen to hold a senior position in the company after appointing Intisar Al Kindi as Shell Country Chair in Jordan two years ago. Irshad studied at the University of Bon and Wuppertal University in Germany from 1979 to 1982 specialising in Electrical Engineering. He obtained his Masters in Strategic Management from Henely College of Management, UK in 1994. Irshad began work in the Sultanate since the early 1980s, where he worked in a number of well reputed private and government establishments, including the banking sector.

His introduction to the Oil and Gas sector

began when he joined Shell in 1991 as a Sales Administrator, then as a Direct Markets Manager in Shell Markets Middle East in Muscat. Irshad then took up several senior management positions at various other companies before returning to work for Shell Oman Marketing Company in 1999 as a Retail General Manager of the company.

Irshad then moved to Kuala Lumpur, Malaysia in 2001 to take-up the position of Business Development Manager in Shell Oil Products East. He returned back to Oman in 2003 to take over as Managing Director of Shell Oman Marketing Company. In 2007, Irshad moved to the UAE to take-up the position of Deputy Managing Director and Deputy Country Chair in Shell Abu Dhabi.

14 Jan-Feb 2011

NEWSMAKERS

Raoul Restucci took-up the position of the Managing Director of Petroleum Development Oman (PDO) in October 2010. Restucci, a British National has spent 30 years with Shell, and was its Vice President for the Middle East and North Africa region, before joining PDO.

Restucci studied at the University of Nottingham, England and graduated with a BSc Honours degree in Mining Engineering,

specialising in Petroleum Engineering. He began his career in 1980, when he joined Royal Dutch Shell at Hague, Netherlands as a Production Technologist. Since then, he has had a distinguished career with Shell in various capacities. In his previous role as Shell Executive Vice President for the Middle East and North Africa region, he had been involved with the PDO Board on operational and critical issues.

Raoul Restucci

BG Group appointed Chris Finlayson to the position of Executive Vice President, Europe and Central Asia last year. Chris joined from Shell, where he held the position of Executive Vice President, Shell Global Solutions, Upstream. Chris joined BG Group with effect from September 1, 2010.

Chris began his career as Wellsite Petroleum Engineer & Petrophysicist and worked in various positions at Shell in countries like Brunei, Malaysia, Nigeria, UK and Netherlands. BG Group plc is a world leader in natural gas, with a strategy focused on connecting competitively priced resources to specific, high-value markets. Active in more than 25 countries on five continents, BG Group has a broad portfolio of exploration and production, Liquefied Natural Gas (LNG), transmission and distribution and power generation business interests. It combines a deep understanding of gas markets with a proven track record in finding and commercialising reserves.

James M. Lienert

James M. Lienert was named Executive Vice President and Chief Financial Officer, at Occidental Petroleum Corporation (Oxy). Lienert served as Oxy Executive Vice President, Finance and Planning since 2006. Reporting to him in the role was the accounting function, as well as supply chain, information technology and planning. Previously Lienert served as President of Occidental Chemical Corporation (OxyChem).

He joined OxyChem in 1974 and held a series of increasingly senior positions, culminating in his appointment as OxyChem President in February 2004. Lienert holds a Bachelor of Science in Accounting and an MBA from the State University of New York at Buffalo. He is a Certified Public Accountant in the state of Texas.

Chris Finlayson

15Jan-Feb, 2011

John Malcolm bid adieu to Oman and Petroleum Development Oman (PDO) after completing eight years as Managing Director. One of Shells heavyweights, John Malcolm became PDOs Managing Director in early November 2002. He succeeded Steve Ollereanshaw, a former Shell Chief Executive Officer.

Malcolm first joined PDO way back in 1986, as Head Instrumentation Engineer. At that time the company was producing approximately 500,000 barrels of oil per day.

When Malcolm joined as MD in November 2002, PDO was witnessing a decline in production. In fact, in 2001 it had lost 10 per cent of production. However, John Malcolm in his eight years at the helm of PDO ensured that production increased and stabilised.

On September 19, His Majesty Sultan Qaboos bin Said awarded Malcolm the Oman Civil Order Third Class. The award was bestowed on John in recognition and appreciation of his promotion of the Omani oil sector.

John Malcolm

Faisal Al Hashar, the former Managing Director of Shell Oman Marketing Company stepped-down last year. Faisal had been with Shell for almost 10 years and served in various capacities. He was also a Board Director since 2003 and the Managing Director since September 2007. In his role as the Managing Director, Faisal had been instrumental in building a sustainable growth for the company.

Faisal Al Hashar

The Board of Royal Dutch Shell appointed Guy Elliott, Chief Financial Officer of Rio Tinto since 2002, as Non Executive Director and member of the Audit Committee of the Board, with effect from 1st September 2010.

Elliott together with other directors stand for election at the Annual General Meeting of the company to be held in 2011. Prior to becoming CFO of Rio Tinto, Guy occupied a number of positions in marketing, strategy and general management at Rio Tinto and served as President of Rio Tinto Brazil. He has been a Non-Executive Director, Chairman of the audit committee and Senior Independent Director of Cadbury plc prior to the acquisition by Kraft.

Guy Elliott

16 Jan-Feb 2011

NEWSMAKERS

Bob Dudley

Tony Hayward stepped down as Group Chief Executive of BP with effect from October 1, 2010, following the Gulf of Mexico oil spill. Hayward worked with BP

Tony Hayward

Adil Bin Ismail Al Raisi was appointed as the Managing Director and Retail General Manager of Shell Oman Marketing Company with effect from September 4, 2010. Adil brings with him a wealth of experience in the telecommunications and airlines industries.

Robert (Bob) Dudley became Group Chief Executive of BP on October 1, 2010. Dudley has a degree in Chemical Engineering (University of Illinois, USA), MIM from Thunderbird School of Global Management (USA) and an MBA from SMU (USA).

Dudley joined Amoco in 1979 and worked in various positions including negotiating deals in the South China Seas. Between1994 to 1997 he worked for Amoco in Moscow and became a General Manager for strategy. After BP acquired Amoco he assumed a similar position at BP.

From 2003-2008 he was President and Chief Executive of TNK-BP.

On April 6, 2009, Dudley became a Director of BP and was given oversight of the companys activities in the Americas and Asia. On June 23, 2010 he was appointed President and Chief Executive Officer of BPs Gulf Coast Restoration Organisation working with the oil leakage in the Gulf of Mexico, which affected five US states. As head of the organisation, he was responsible for the cleaning work in the Gulf, the cooperation with authorities, informing the public about BPs activities surrounding the disaster and analysing the damage caused by the disaster.

Ali Dogru of the EXPEC Advanced Research Center (EXPEC ARC) was recognised with the Innovative Thinkers Award at the World Oil 2010 awards held in October at Houston. The black-tie gala was themed Innovation, and recognised activities, companies and professionals that are at the pinnacle of the global industry.

Dogru, Chief Technologist of the EXPEC ARC Computational Modeling Technology Team, was recognised for his forward thinking and leadership of the game-changing technology GigaPOWERS, the worlds leading reservoir simulation technology. He initiated, assembled and led the team that developed POWERS and its next-generation GigaPOWERS to simulate the worlds largest oil and gas reservoirs at geologic resolution.

Ali Dogru

Adil bin Ismail Al Raisi David OReilly was appointed as Director on the Saudi Aramco Board last year. OReilly has held a range of senior-level positions across Chevron Corporation before retiring in September 2009. From November 1998 to January 2000, he served as Vice Chairman of the Board, responsible for Chevrons worldwide exploration and production and corporate human resources. He was elected Chairman and Chief Executive Officer in January 2000. He is widely credited with transforming Chevron into one of the worlds most formidable energy companies with an unwavering dedication to operational excellence and what he often referred to as getting results the right way. After he became CEO in 2000, the company established the best exploration record among its peers in the industry and advanced its safety record to world-class levels. A native of Dublin, Ireland, OReilly joined the company as a process engineer in Chevron Research Co. in 1968 after earning his bachelors degree in chemical engineering from University College in Dublin. In 2002, University College granted him an honorary Doctor of Science degree in recognition of his outstanding career.

David J. OReilly

for 30 years, before leading the company for the last three years.

It may be recalled that the Gulf of Mexico oil debacle which happened in April 2010, caused environmental catastrophe and huge financial loss to BP. Commenting on the decision to step down, Hayward had said, The Gulf of Mexico explosion was a terrible tragedy for which - as the man in charge of BP when it happened - I will always feel a deep responsibility, regardless of where blame is ultimately found to lie.

From day one I decided that I would personally lead BPs efforts to stem the leak and contain the damage, a logistical operation unprecedented in scale and cost.

Since his resignation, the Gulf of Mexico Oil spill as been contained, though the impact on the environment has been severe.

Under the patronage of His Royal Highness Prince Khalifa bin Salman Al KhalifaPrime Minister of the Kingdom of Bahrain

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18 Jan-Feb 2011

The Spanish Chamber of Commerce of the Republic of Argentina (CECRA) awarded the Repsol YPF Chairman Antonio Brufau the title of Best Businessman of the Year 2010. The institution recognised the excellent results obtained by YPF in recent years.

Antonio Brufau was born in Mollerussa, Spain, in 1948. Brufau graduated in Economics from the University of Barcelona and Master from IESE. YPF is Argentinas market-leading company in hydrocarbons exploration and production, refining and marketing, and chemicals. As well as being the biggest company in the country, YPF is the main investor, the second-biggest exporter and one of the top employers with more than 30,000 staff working either directly or indirectly for the firm. Repsol has a presence in Argentina through its shareholding in YPF.

Antonio Brufau

Eamon Gorman joined MB Petroleum Services Ltd as Group Chief Executive Officer. Eamon has over three decades of rich experience in the exploration and production business with Shell International, prior to joining MB in May 2010. His last assignment with Shell was with Petroleum Development Oman (PDO) where he held the position of Director- Well Engineering and Logistics for six years. He was a member of the PDO Managing Directors Committee with joint accountability for short and long term corporate strategy. He was also one of the longest serving

members of Shell Internationals Global Wells Leadership Team.

Eamon has held a variety of technical and managerial positions, working in different countries across continents. In Europe he worked with Shell in UK, Denmark and the Netherlands, while in the Far East it was Brunei. In the Middle East Eamon has worked in Oman, Syria, UAE and Iran. He holds a Bachelors degree from Trinity College Dublin and Masters Degree in Petroleum Engineering from Herriot Watt University, Edinburgh.

Eamon Gorman

Arnaud Breuillac was appointed Senior Vice President, Middle East at Total Exploration and Production. Arnaud Breuillac, 51, joined Total in 1981. He held various Exploration & Production positions in France, Abu Dhabi, the United Kingdom, Indonesia, Angola as well as in the Refining Division in France.

From 2004 to 2006, he was Vice President Middle East Iran. In December 2006, he became a member of the Management Committee of the Exploration & Production Division, as Senior Vice President, Continental Europe and Central Asia.

Arnaud Breuillac

Michael Borrell previously Vice President, Caspian and Central Asia, was appointed Senior Vice President, Continental Europe and Central Asia at Total Exploration and Production. He held various Exploration & Production positions, notably in the United Kingdom, Argentina and Indonesia. In 2006, Borrell was appointed President of Total Exploration & Production Canada. In September 2009, he was named Vice President, Caspian and Central Asia within the Continental Europe and Central Asia Division.

Michael Borrell

NEWSMAKERS

20 Jan-Feb 2011

INTERVIEW

HOW CAN GLASSPOINT ASSIST ENERGY COMPANIES TO SAVE COSTS AND INCREASE OIL PRODUCTION? Oil and gas companies that use steam injection in their enhanced oil recovery

(EOR) projects can benefit immensely from our technology. Rather than burning natural gas to generate steam, GlassPoint specialises in generating steam through solar. Our solution allows oil companies to replace between 25 and 80 percent of

steam generated by burning natural gas with steam produced from a renewable source. In short, solar-steam for EOR saves natural gas, a valuable resource that is particularly scarce in the Middle East. Furthermore, steam generated

SOLAR FOR EOR Thermal Enhanced Oil Recovery (EOR) projects that use steam by burning natural gas can now look at the possibility of using steam from solar to save costs and draw-out more oil. Sunil Fernandes talks to Rod MacGregor, President and CEO of GlassPoint on the novel solar technology his company facilitates

Rod MacGregor, President and CEO, GlassPoint

21Jan-Feb, 2011

through solar is just a fraction of the cost compared to steam generated through burning natural gas. With low-cost steam delivered at a constant price for 30 or more years, operators can increase the amount of steam injected into wells so more oil can be ultimately recovered.

DOES THIS MEAN THAT YOU HAVE TECHNOLOGY THAT IS UNIQUE AND ACTS AS AN ENTRY BARRIER?

Solar thermal has been around since 1980 and there have been many variations. GlassPoint has developed a completely new architecture specifically designed for rugged oilfield environments, which cuts the cost of solar steam substantially. These advancements make our solution novel and patent protected. In most cases, we can help companies reduce their cost of steam by more than half with steam generated through solar, vis-a-vis steam generated by burning natural gas.

WHAT ARE THE ADVANTAGES FOR THE OIL AND GAS INDUSTRY RIGHT HERE IN OMAN?Oman has been doubly blessed; it has oil under the ground and some of the best solar resources available anywhere on the planet making it especially suitable for solar EOR.

To give you a sense of scale there are already three major thermal EOR projects in Oman, that together consume almost twice as much gas as is currently imported on the Dolphin pipeline. A 35 percent solar EOR fraction by 2015 would eliminate the need for any imports, freeing up natural gas for use in industry, power generation, desalination and of course for export as LNG.

DOES THIS MEAN THAT WE CAN ELIMINATE THE USE OF NATURAL GAS FOR STEAM GENERATION?Our projects are designed as solar-

gas hybrids. GlassPoints solar steam generators integrate with existing gas-fired generators to ensure constant 24x7 steam delivery. In a typical scenario, operators would generate steam from solar during the daytime and steam from natural gas in the night, resulting in a steaming ratio of about 25 percent from solar and 75 percent from natural gas. In these scenarios there is no change to the operators surface equipment or steaming strategy its just that 25 percent of steam comes from solar instead of from burning natural gas.

By reducing the amount of natural gas needed for enhanced oil recovery, large

quantities of gas are made available for other purposes, including domestic and industrial consumption.

IS IT POSSIBLE TO INCREASE THE USAGE OF STEAM THROUGH SOLAR FROM THE 25 PER CENT YOU HAVE MENTIONED?Yes, we believe solar could provide up to 80 per cent of the steam used in an annual steaming cycle. Recently, Petroleum Development of Oman (PDO) published a research report that concluded solar generated steam provides a viable alternative to constant rate steam-injection. This means, that in the future,

In most cases, we can help companies reduce their cost of steam by more than

half with steam generated through solar

Pumping steam down an injector well heats up the formation so that more oil can be pumped out of the producer well

22 Jan-Feb 2011

INTERVIEW

solar could be the primary energy source for steam-based EOR. Essentially, you can do variable rate steaming, whereby you increase the amount of steam that goes into an EOR project during the day and reduce the amount of steam by night. In this manner, it is possible to go as high as 80 percent.

IS IT ECONOMICALLY VIABLE TO USE A HYBRID MECHANISM, CONSIDERING THAT THERE WILL BE CAPITAL COSTS FOR GENERATING STEAM USING NATURAL GAS AS WELL AS SOLAR?

Over the lifetime of a thermal EOR oilfield the cost of purchasing gas dwarfs the capital spent on the steam generators themselves. The idea is that Glass Point displaces the cost of gas purchase, not the capital cost of the steam generators. In practice you need both gas burners and solar steam generators. However, the steam generated from solar costs less than steam generated by burning natural gas, so over the life of the project the savings can be substantial. To compare a capital cost like the purchase of a GlassPoint solar steam generator, with the operating cost of purchasing gas over many years we calculated the Levelised Cost of

Energy (LCOE). This calculation can be simply expressed as the Net Present Value (NPV) of the cost of purchasing and operating the solar field divided by the NPV of the energy it produces. This produces a price per MMBtu that can be compared with the price of natural gas.

WHAT ABOUT COSTS FROM A PROJECT THAT WILL RECOVER OIL OVER A SHORTER DURATION, SAY FOR EXAMPLE 10 YEARS?Most of the capital costs of our system are recovered in the initial years. So, 10, 20 and 30 years does not matter. Of

Constant rate steaming can be achieved by a hybrid solar-gas steam plant that uses the sun during the day and gas at night to generate steam

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24 Jan-Feb 2011

INTERVIEW

Using solar steam during times that the sun is shining reduces the amount of gas required to produce a barrel of oil

course, since costs are fixed, the longer you are able to generate steam from solar, the greater the profit. I would say that anything more than 10 years and you are on a very strong wicket.

WHAT ABOUT VARIABLE COSTS INVOLVED?I would say that the variable costs are negligible, though there are costs involved with maintenance, replacement etc. Typically, we see operating and maintenance cost of around $0.35 per MMBtu.

WHAT IS THE FEEDBACK YOU HAVE RECEIVED FROM THE INDUSTRY? We have received a very encouraging response from the oil and gas industry. In fact, people from the industry tell us that it is possible to produce more oil using solar steam than by using natural gas steam.

When production from a typical well using natural gas-based steam injection begins to decline, operators reduce the amount of natural gas used to ensure the project remains economically viable. This cost-benefit analysis between energy costs and oil production is not a concern with solar-based steam injection. Once the solar field is paid for, the ongoing operating costs are close to zero - after all the fuel for a solar array is free. Therefore, when production outputs begin to decline, operators can use solar to generate more steam and draw more oil from the well. Furthermore, the point at which it becomes uneconomic to operate the well is extended by many years thus increasing the ultimate recovery fraction.

ARE YOU TALKING TO ANY OIL AND GAS COMPANIES HERE IN OMAN?We are currently engaged with several oil and gas companies that use steam-

based enhanced oil recovery to boost production.

COULD YOU ELABORATE A LITTLE ON YOUR FACILITIES?GlassPoints solar thermal design combines ultralight, low-cost and mass-manufactured components sourced from a global supply chain. GlassPoint has an R&D centre in China with aluminum components sourced from Europe and China. However, once we start working on a project domestically, we hope to source components locally.

IS THE QUALITY OF STEAM DIFFERENT FROM SOLAR WHEN COMPARED TO STEAM FROM NATURAL GAS? GlassPoint ensures that the steam quality from solar is identical to that from gas fired steam generators. Of course, what will change is the quantity of steam produced as the available sunlight changes by time of day and time of year. Basically, solar steam generators

provide constant steam quality with varying quantity. Gas generators work in combination with the solar generators to ensure that the output has constant quality and quantity.

IS IT POSSIBLE TO GENERATE STEAM THROUGH SOLAR FOR AN OFFSHORE PROJECT?We have studied the possibility of solar EOR for offshore projects but that scenario poses a new set of challenges. Solar EOR requires sufficient land resources to house the solar collector field used to capture the suns heat and generate steam. While GlassPoint offers the most efficient use of land in the industry, well still need a sizable area at our disposal to develop. If the offshore platform was in shallow waters, one could construct the solar field on land and connect to the platform with a steamline, but that would not be economical today. The Middle East remains a target market for GlassPoint as most of the projects here are onshore.

26 Jan-Feb 2011

INTERVIEW

COULD YOU ELABORATE A LITTLE ON THE BINARY ACTUATION TECHNOLOGY?Camcons Binary Actuation Technology (BAT) the result of more than 20 years of research is a new class of digital valve technology. BAT utilises catapult-like technology, based on high power permanent magnets and a spring-loaded armature to create a very short electrical pulse which disrupts the magnetic field and causes the sprung armature to switch from one position to another, thereby opening or closing the valve. This new suite of digital valve configurations can be used to transform the extraction and flow management techniques used in the oil and gas industry.

WHAT ARE THE AREAS BAT FINDS APPLICATION IN?Camcons BAT technology has applications in the automotive, life sciences, and process control industries. It is in the oil & gas industry, however, that we are seeing the technology reach its full potential through APOLLO and our new Digital Intelligent Artificial Lift (DIAL) products.

COULD YOU SHARE A LITTLE INFORMATION ON APOLLO, CAMCONS NEW DIGITAL INTELLIGENT ARTIFICIAL LIFT?

A BOON FOR THE OIL AND GAS INDUSTRY Camcons Binary Actuation Technology can provide intelligent solutions in enhanced oil recovery for the oil and gas sector. Ian Anderson, Chief Operating Officer, Camcon, talks to Sunil Fernandes on Apollo, the companys first of a range of products that are based on Binary Actuation Technology

Ian Anderson, Chief Operating Officer, Camcon

27Jan-Feb, 2011

APOLLO is the first of a new range of products, based on BAT, to support Digital Intelligent Artificial Lift (DIAL) solutions which bring enhanced oil recovery without intervention in the oil & gas industry in this case in the area of artificial gas lift, where gas is injected into the production tubing to improve reservoir performance.

APOLLO provides accurate gas injection control and flexibility from a single asset through a series of digitally operated valves, enabling the real-time setting of injection rates. Camcons patented actuators use extremely low power to switch and are multiplexed, keeping cabling requirements to the surface to a minimum and all control signals at low voltage.

WHAT ARE THE ADVANTAGES OF USING APOLLO IN THE OIL AND GAS INDUSTRY?APOLLO DIAL products enable the operator to vary injection rates in real-

time without production interruption and well intervention, and generate pressure and temperature information throughout the gas injection process (helping prevent instability in the production tubing). This is as opposed to traditional artificial lift operations, where the operator has no control or flexibility in being able to alter injection rates without intervention and the shutting down of production.

Taking into account the reduced cost of well interventions associated with side-mandrel gas-lift units, the loss of production, wireline and slickline intervention incidents, and optimal usage of gas and associated compressor equipment, Camcon believes that its DIAL products can deliver a Return

on Investment of at least 20 and have the potential to increase recovery from individual wells by up to 30 per cent.

YOU HAVE NOW SIGNED AN AGREEMENT WITH AL MANSOORI SPECIALIZED ENGINEERING SERVICES. COULD YOU ELABORATE A LITTLE ON THE NATURE OF THE AGREEMENT?Camcon has signed a three-year agreement with AlMansoori which will give AlMansoori Group Distribution Partner status and the rights to sell, install and support Camcon Oil products throughout the Middle East. The

APOLLO is the first of a new range of products to support Digital Intelligent Artificial Lift (DIAL) solutions which bring enhanced oil recovery without intervention

BAT utilises catapult-like

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28 Jan-Feb 2011

INTERVIEW

countries covered by the agreement are the United Arab Emirates (UAE), Qatar, Saudi Arabia, Egypt, Libya, Kuwait, Iran, Iraq, Bahrain & Yemen. Camcon has also signed a similar agreement with Specialised Oilfield Services (Oman) - an AlMansoori associated business - to cover this region. AlMansoori will focus its initial activities on APOLLO. With such an outstanding product, it was vital to us that we partnered with the best in the region and in the AlMansoori Group, we have done just that. WHAT IS THE POTENTIAL OF USING APOLLO IN THE MIDDLE EAST, AS THERE STILL IS A LOT OF EASY OIL LEFT IN THE MIDDLE EAST? Whether it is the Middle East, Asia or the North Sea, the era of easy oil is

definitely over.The Middle East is an ideal target area for us. It is a region with a large number of brownfield and older fields, where artificial lift is prominent, but also where many of the regions operators are embracing innovative new enhanced oil recovery techniques. We used ADIPEC this year in Abu Dhabi as a catalyst for promoting our presence in the region and the innovative technologies we are bringing to the table.

WOULD APOLLO BE USED FOR THE FIRST TIME IN THE MIDDLE EAST?ADIPEC was our product launch event for APOLLO. This is a target event based upon our market research and the interest from AlMansoori confirms there

is a specific interest and need for such a product. Our trialling programme includes

test installations in the Middle East and also one in the Far East. We are looking to add to this initial list - that is why we

were in Abu Dhabi. Trials have been concluded with a major oil operator in Europe

who has provided access to its rig and multiphase test facilities.

We fully expect the APOLLO to be used in a live installation for

the first time in the Middle East. We are confident that, with AlMansooris support, APOLLO will be deployed in the Middle East in the near future.

With oil and gas demand continuing to grow and yet Oman faced with ever more complex and maturing fields, there has been an increased focus on enhanced oil recovery techniques particularly following a comprehensive 2002 review by Petroleum Development Oman (PDO) which laid out ambitious production recovery plans, and the establishment of the Enhanced Oil Recovery Directorate in 2004. Between 2001 and 2007, Omans oil production fell by 27 per cent, but by 2009, due mostly to EOR projects, oil production increased by 17 per cent (Source: EOR Enhanced Oil Recovery Worldwide, SBI Reports, April 2010).

Camcon Oils APOLLO strengthens existing enhanced oil recovery techniques, such as artificial gas lift, where operators still have limited pressure and temperature information as well as the inability to alter injection rates without intervention and the shutting down of production. Camcon Oil has recently tied-up with Special Oilfield

Services of Oman. Under the terms of the initial three-year agreement, SOS will have the rights to sell, install and support Camcon products throughout the Sultanate of Oman.

The announcement is further recognition of the potential of Camcons Digital Intelligent Artificial Lift (DIAL) solution, APOLLO, which provides operators with unprecedented control and precision over gas injection activities and follows a recent agreement with Dubai-based, AlMansoori Group, a major shareholder in SOS.

SOS, established in March 1986, is a joint venture between Mohsin Haider Darwish LLC, one of the largest business houses in Oman, and AlMansoori Specialised Engineering. SOSs main field of activity is the provision of specialised services and supply of equipment to the oil and gas industry throughout the Middle East. With production increases in 2008 and 2009

halting a previous decline, there are few oil & gas producing countries of the world that have embraced innovative new production and enhanced oil recovery techniques in the way that Oman has, said Ian Anderson, Camcons Chief Operating Officer.

Through the gas injection control and flexibility of APOLLO and the knowledge and network of SOS, we look forward to helping Oman continue on the path of increased production and increased value from existing fields.

Joseph Steven, General Manager at Special Oilfield Services, said, One of the key criteria for us when selecting our partners is innovation and whether their solutions bring something different to existing oil & gas operations. We are confident that Camcon and APOLLO does just this. At a time when bolstering recovery rates is such a prevalent issue in Oman, we look forward to bringing this industry leading solution to the market.

CAMCON IN OMAN

30 Jan-Feb 2011

COMPANY REPORT

INNOVATIVE SOLUTIONS

Seven Seas Petroleum provides insight and expertise to client companies to maximise hydrocarbon recovery, as they focus on oil and gas fields that present increasing technical challenges. OGR reports

Seven Seas Petroleum is engaged in sales and service of automation and control systems, field instrumentation, mechanical

and down hole equipment from some of the worlds top manufacturing companies. Through its expertise the

company is well placed to provide high-quality and cost-effective services to national and international oil & gas companies operating in Oman.

Established in 2002, Seven Seas Petroleum, is a quality and service oriented company providing vital services

to the Oman Oil and Gas industry, helping National and International oil companies to develop, maintain and manage their businesses.

By applying new technology and providing high quality service, Seven Seas Petroleum supports and partners,

31Jan-Feb, 2011

manufacturing and services businesses to adapt to the challenging market. Seven Seas Petroleum provides the necessary insight and expertise which enables client companies to maximise hydrocarbon recovery, as they focus on Oil and Gas fields that present increasing technical challenges.

Seven Seas Petroleum has successfully diversified its business by extending its services to different sectors like Power & Energy, Petrochemical, Waterand Wastewater, Engineering & Contracting and other related industries.The success of Seven Seas Petroleum is the result of the combined efforts and skills of its people. The teams can-do attitude and flexibility has been enhanced by the determination and dedication to serve clients in the best way possible. This goes beyond the final delivery of a product or service, providing ongoing care and support, thus ensuring that clients achieve maximum returns throughout the life of their business.

As sustained oil price drives increased exploration and development budgets, the demand for specialised services is booming. Seven Seas Petroleum has capitalised on these opportunities and

made investments into the oil & gas services sector providing Automation Systems, Valves, Integrated Metering Systems, Mechanical Seals and Systems, Specialty Crude Oil Pumps, People, Services and Technology to add value to Exploration and Production (E&P) companies.

Seven Seas Petroleum has an established state-of-the-art 7200 sq. ft. Valve Automation Centre (VAC) in Ghala, Muscat that is geared to address customers most demanding needs with cost effective and reliable solutions. They repair, refurbish, engineer, integrate, test and supply an exclusive line of Valve Automation products including Pneumatic, Hydraulic, Electric actuators, HPUs and a complete line of Valves.

For Process Control Systems & Safety Systems that are installed in Oman, all the technical and site support is provided by qualified Seven Seas service engineers who are trained by principals and are at the current level of certification. Their service focuses on providing a well-rounded experience that ensures clients achieve their business objectives and operate their plant safely and efficiently. The automation services include

commissioning and start-up, emergency on-site support, remote diagnostics, instrument verification, metering validation and training. In terms of mechanical

services, Seven Seas Petroleum provides retrofitting of mechanical seals, fishing, milling, casing, patching, perforation core services; high temperature and pressure pipeline repair; and external composite material wrapping among others.

Seven Seas Petroleum guarantees their clients a one-stop source for all their requirements in the fields of instrumentation, mechanical, engineering and projects. They deliver the best quality products at reasonable prices from the world leading companies. And their success speaks for itself. Today, Seven Seas Petroleum has a long list of successfully completed projects.

Seven Seas Petroleum has established and is maintaining an Integrated Management System which is a combination of a Quality Management System, model ISO 9001:2008 Standard, an Occupational Safety and Health Management System. All these Quality Systems are already certified by BVQI, thus paving the way to Total Quality Management and Business Excellence.

Seven Seas Petroleum has successfully diversified its business by extending its

services to different sectors

Seven Seas Petroleum provides retrofitting of

mechanical seals, fishing, milling, casing, patching...

32 Jan-Feb 2011

COVER STORY

CAUTIOUS OPTIMISM As economic green shoots emerge, crude oil continues its rise. With the commodity touching a 25-month high in December, market analysts are cautiously optimistic on a further rise in 2011. Sunil Fernandes reports

33Jan-Feb, 2011

Predicting crude oil prices can always be lip-dash. Towards the beginning of 2010, we heard quite a few predictions from investment bankers and market analysts of crude oil prices trading near the $100 per barrel mark in 2010. As the year draws to a close, it seems improbable that crude would touch the three figure mark. Economic recovery in the West has remained lackadaisical and oil prices have hovered between $70 to $80 for most part of the year. Any expectations of runaway crude oil prices in 2010 has not materialised.

Having witnessed more of a steady trend in 2010, analysts are a little more optimistic as we usher in 2011.

WORLD OIL DEMAND TO SHOW MARGINAL GROWTHDemand and supply has a lot to do with where crude would trade in the future. In 2009, the world suffered from demand destruction, thanks to the economic chaos that engulfed the world. Such was the mayhem that it resulted in energy consumption not only being lower, but also witnessing a decline for the first time since 1982.

In 2009, the real demand slowdown was from the Organisation for Economic Cooperation and Development (OECD) countries. In the OECD, energy

consumption fell faster than GDP the sharpest decline in energy consumption on record. The OECD consumed less primary energy last year than 10 years ago, although GDP since then has risen by 18 per cent. The developing world outside the Former Soviet Union, in contrast, saw energy consumption growing faster than GDP. Globally, the energy intensity of economic activity rose last year, fostered by slower growth and by many energy-intensive fiscal stimulus programmes but against the longer-term trend, the BP Review of World Energy 2010 states.

Demand in 2010 promises to be far better than that for 2009, thanks to the demand from emerging economies - notably China and India.

World oil demand growth in 2010 is now forecast at 1.5 mb/d, representing an upward revision of about 0.2 mb/d. OECD oil demand is turning out to be stronger than expected, supported by stimulus driven economic activities. Cold winter in Europe has also strengthened heating oil consumption in December, OPEC has said in its Monthly Oil Market Report.

In 2011, world oil demand growth is expected at 1.2 mb/d. One main factor that is suppressing oil demand growth

is the higher baseline. Another factor is the energy efficiency policies along with the use of biofuel, which will put more downward pressure on oil consumption worldwide, the oil cartel has pointed out.

The International Energy Agency on the other hand has revised its forecast for global oil demand growth for 2010 by 0.2 mb/d to 2.3 mb/d on higher-than-expected 3Q10 data in the OECD and slightly stronger readings in the non-OECD. Its demand prediction for 2011 is more tepid however. Assuming no recurrence of the weather-induced third-quarter surge, 2011 growth is set to slow to 1.2 mb/d year-on-year, with demand averaging 88.5 mb/d versus 87.3 mb/d in 2010, IEA has said.

Its clear that both IEA and OPEC see a marginal increase in demand for 2011. This means that oil prices would be more stable and could hover in a range.

MIXED ECONOMIC DATAIn December crude oil prices rallied to the highest in 25-months fuelled by economic data emanating from the US. In the latest signs of improvement in the US economic recovery, data showed consumer sentiment rose more than expected in early December, while import prices in November climbed

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34 Jan-Feb 2011

COVER STORY

at their fastest pace in a year. Another positive signal came from the Commerce Department, which said the U.S. trade deficit narrowed much more than expected in October.

While data from the US was encouraging, Europe acted as a wet blanket. The crisis in Ireland compounded the continents misery despite a bailout package being announced. If the impending crisis in Spain and Portugal erupts, we could see oil prices coming under pressure for a prolonged period of time. Amidst all this, there are more tepid economic growth predictions from both OPEC and EIA.

The world economy continues its expansion. Growth for 2010 was revised

up to 4.3 per cent from 4.1 per cent on better-than-expected growth in the manufacturing sector. Growth in 2011 has also been revised higher to 3.8 per cent from 3.6 per cent. The implementation of further stimulus plans is likely to have an impact on the current global growth expectations for next year. The US is forecast to grow by 2.8 per cent in 2010 and 2.4 per cent in 2011. The deceleration in Japans economy remains more pronounced with growth of 3.5 per cent in 2010 and 1.4 per cent in 2011, OPEC has said.

Economic data from the US, Germany (European Power house), China and India all major consumers of oil remains highly optimistic. In fact, the insatiable demand

for oil comes from growing economies like India and China, which are expected to reach double digit GDP growth rates in the future.

Growth around the developed economies remains lopsided however. The Organization for Economic Cooperation and Development (OECD) cut its global growth forecast for 2011, predicting a soft spot as stimulus spending fades before investment spurs a revival in 2012. The global economy will expand 4.2 percent next year instead of the 4.5 percent predicted in May, the Paris-based organisation said in its semi-annual Economic Outlook. Growth will recover to 4.6 percent in 2012, it said. We have a soft patch, yes, but we dont

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35Jan-Feb, 2011

Front-month WTI or Brent contracts could certainly break through $100 during 2011, although current fundamentals do not justify such a move. Any number of more external factors could propel the market higher for a short-term break above the century mark. A sustained collapse in confidence in the Euro vs the U.S. currency could trigger a flight to safe assets, pushing both crude and the Dollar higher (would not expect this correlation to last long, however).

Geopolitical risks, from an all-out confrontation on the Korean penninsula to further terrorist acts (hopefully weve seen the end of bombs on cargo planes headed to the West) could result in a spike in both volatility and the underlying. And lastly, while supply/demand and the overall stock picture for both crude and products certainly turned

relatively bullish by 4Q10, the prevailing picture is simply for the underlying to trade between $75-95 as opposed to the earlier $70-90 range.

As for optimism regarding a higher crude price, I would site the above factors (although Id rather label them bullish as opposed to optimistic) as well as the current colder-than-expected winter drawing down already falling heating oil and distillate stocks.

Couple that with the current demand for gasoil from China (which many expect not to last much longer... in fact, the Singapore Gasoil crack has already weakened) and surprisingly positive data on Chinese PMI and German retail sales, and we could see a stronger recovery in global GDP than many are expecting in 2011. This would certainly drive crude

WTI OR BRENT COULD BREAK THROUGH $100 Jonathan Kornafel, Director, Asia/Europe, Hudson Capital Energy talks to OGR on fundamental issues and oil prices; investments in the energy sector; US Dollar movement...oil prices. Excerpts from an interview

demand and thus prices higher in the new year.

U.S. economic growth could certainly trend higher in 2011, although the moribund housing market will continue to act as a heavy drag on any momentum. Employment numbers as of late have been improving and the effect of QE2, both immediate and far into the future is a topic of much debate. Any pick-up in U.S. economic growth (or even a fairly flat 2011 vs 2010) should result in positive sentiment towards crude prices.

The Dollar will always have a large impact on crude, so long as the contracts are priced in the U.S. currency and liquidity and trading remain unburdened with excess regulation.

A panic to safeassets could result in both moving higher together, but for the most part, we would expect a stronger Dollar (vs the Euro) for the medium-term applying downward pressure on crude.Its not so much the recent rise in oil prices (although it helps), but the relatively low volatility is the major factor in pushing producers to develop new projects. From the independent majors to National Oil Companies, volatility is just as big a fear as low prices.

Combine the recent high prices with a range-bound market, and you have the perfect recipe for a renewal in oil and gas projects from the Canadian oil sands to continued deep-water exploration and drilling.

Jonathan Kornafel, Director, Asia/Europe, Hudson Capital Energy

36 Jan-Feb 2011

COVER STORY

think its going to last long, OECD Secretary General Angel Gurria said in a Bloomberg Television interview from Paris recently. Were going to recover in the second half of 2011 and have a better 2012.

Clearly, growth in some of the industrialised countries has been lethargic. Fears of sovereign debt sustainability and withdrawal reduction of financial stimulus would also have a bearing on oil prices in the short term.

Another factor that could have a bearing on prices would be the movement of the US dollar. Oil being a global commodity, is priced in dollars and uniform across the globe. Therefore, a fall in the dollar relative to other currencies would result in oil price going up relative to the dollar. This means that to understand

the price of oil, one must keep an eye on what the US is doing and what happens with regards to the US economy

MIXED OPINION ON PRICESWhile economic growth remains uninspiring in select economies, crude oil prediction remains mixed. US banking giant Goldmans Sach reported recently that their medium term forecast for oil prices in 2012 would be substantially higher as global oil stockpiles shrink and oil production tightens.

We continue to expect strong price appreciation for key commodities and thus substantial aggregate commodity returns. We continue to see differentiation across commodity fundamentals and ultimately, relative performance, the report also noted. The investment bank sees oil prices at US$ 100 per barrel in

2011. A recent string of stronger data and technically bullish signals have some analysts believe that the market is likely to rally. Jonathan Kornafel, Director, Asia/Europe, Hudson Capital Energy is bullish on short term oil prices. Front-month WTI or Brent contracts could certainly break through $100 during 2011, although current fundamentals do not justify such a move. Any number of more external factors could propel the market higher for a short-term break above the century mark, he says.

According to the CEO of Kuwait Petroleum Corporation, oil prices, which have fluctuated sharply in the past few years, are expected to stabilise over the next two decades. From an economic standpoint, the oil market today is more balanced than at any time over the last few years, Faruk Al Zanki told a two

37Jan-Feb, 2011

DO YOU BELIEVE THAT 2011 COULD SEE OIL PRICES SCALE PAST THE $100 LEVEL?In general, we see oil price hovering between $80 to $100 in 2011. Nevertheless, we cannot rule out temporary price movements above the $100 mark in 2011 when risk appetite improves or geopolitical tensions in some critical regions flame up. We only pencil in a sustainable move above this threshold for 2012, when inventories are lower and spare capacities are falling.

WHAT ARE THE REASONS FOR OPTIMISM, IF ANY?We expect the market to gradually tighten over 2011 due to the steady rise in oil demand. Demand should be mainly driven by emerging markets that are still growing at an impressive rate and where energy consumption per capita is still low. However, as supply should remain adequate in 2011 given the current ample OPEC spare capacities and still relatively high OECD inventories, we do not expect prices to move sharply higher. Spare capacities and inventories serve as a cushion for the market and thus should prevent price spikes in the event that short-term supply side problems occur.

DO YOU BELIEVE THAT ECONOMIC GROWTH WOULD PICK-UP IN 2011, PARTICULARLY IN THE US AND EUROPE WHICH COULD PROPEL CRUDE PRICES FURTHER?We expect oil demand to remain mainly driven by demand growth in emerging markets. Economic growth in the USA and Europe is likely to slow down

TEMPORARY PRICE MOVEMENTS OVER $100 CANNOT BE RULED OUT Eliane Tanner, Commodity Strategist, Bank Sarasin & Co Switzerland, talks to OGR on crude prices, energy investments and more

Eliane Tanner, Commodity Strategist, Bank Sarasin & Co, Switzerland

somewhat from the levels seen in 2010. Moreover, demand from those regions is structurally weakening due to improvements in energy efficiency, stricter environmental legislations and natural gas substitution. Consequently, we do not expect demand growth from the USA and Europe to be a major driver in the oil market in the coming years.

WOULD IT NOW BE LUCRATIVE FOR PROJECTS ASSOCIATED WITH THE OIL AND GAS SECTOR TO BE REVIVED, CONSIDERING A RISE IN OIL PRICES?With crude oil prices above $80 and with

relatively stable prices, investments in the sector are currently looking more attractive, then before.

Moreover, as we think that the longer-term prospects are improving as spare capacity is falling, we think that projects in the oil sector could prove to be lucrative. In the gas sector, the environment is somewhat more challenging, as we expect prices to remain relatively low given the current supply glut in the market. Nevertheless, the long-term outlook remains positive, as demand for natural gas is rising strongly in non-OECD markets.

38 Jan-Feb 2011

COVER STORY

day conference recently. Clearly, unlike in the past hazarding a guess on oil prices can be lipdash, particularly considering the delicate situation the world is passing through whether its the world economy or tensions on the Korean Peninsula. But it seems certain that crude oil prices are gaining strength and showing a bullish trend. In the short term the commodity is clearly headed towards the $100 mark. In general, we see oil price hovering between $80 to $100 in 2011. Nevertheless, we cannot rule out temporary price movements above the $100 mark in 2011 when risk appetite improves or geopolitical tensions in some critical regions flare up, says Eliane Tanner, Commodity Strategist, Bank Sarasin & Co, Switzerland.

LONG TERM ENERGY DEMAND INTACT For the oil and gas industry, factoring only the 2011 outlook would be a short term prediction. In fact, if we take a more of a long term view its clear that the world would need a lot more energy than they consume today. As the global economy recovers from recession, growing populations worldwide will

continue to seek higher standards of living, requiring greater amounts of energy. The correlation between these trends between economic growth and energy demand is clear. On a global scale, energy demand is expected to increase approximately 25 percent between now and the year 2030, even taking into account significant gains in energy efficiency. This enormous increase is more pronounced in developing countries, which will account for approximately 95 percent of this growth, said Andy P. Swiger, Senior Vice President, Exxon Mobil Corporation at the recently concluded ADIPEC 2010. Echoing a similar sentiment was John S. Watson, Chairman and CEO of Chevron. Those of us in the United States, as well as those in other developed nations, have a standard of living that most of humanity is still trying to achieve. In many parts of the world, particularly in China, India and Africa, billions are waiting for the same essentials of progress, and a better life. That will take energy a lot of it. According to most estimates, the worlds demand for energy will increase 30 percent to 40 percent by the year 2030, Watson said while

speaking at the University of Chicago recently. By 2030, International Energy Agency estimates indicate that the world could be consuming 40 per cent more energy than today.

Clearly, the demand for energy in the long term is insatiable, particularly in the developing world. Of course, its not that there would be complete dependence on crude oil, but the fact remains that the energy mix is also expected to change dramatically over the years.

As oil prices rise, oil and gas from shale, tar sands (where cost of production are high) also become conceivable. This would continue to add to the supply side.

All said and done it seems clear that in the short term the oil market would see volatility depending on economic indicators. However, if we take a more long term view, its clear that the world would need a lot of energy. Concerns of declining production particularly in Russia (amongst the largest producers of oil and gas), sharp rise in population and geopolitical threats would continue to see an upward momentum on prices.

39Jan-Feb, 2011

As we part further away from the financial and economic crises of 2008-2009, the world is looking at 2011 with great optimism. Governments around the globe have put in great efforts to revive their economies.

Most markets around the world have shown recovery, varying of course from one market to another, but the cherry on top of the cake is yet to come. I think the cherry will come once the individual investors are over the emotional impact of the 2008-2009 global financial and economic crises. And the only cure for emotional distress is time and time has passed.

Looking ahead, I can see 2011 as a year that will bring life back to many organisations and will allow them to breathe again. With oil prices today hitting the $90 mark, I wont be surprised at all to see prices touching the $100 mark as early as the second quarter of 2011.

Today, with markets still recovering from 2009 financial and economic crises, oil prices are at $90 - what will the prices be once markets around the world recover fully? I am quite confident that prices will continue to rise. China being the worlds largest energy consumer and a major driver of oil prices will continue to maintain an aggressive growth strategy and will drive oil prices further up. In early 2010, markets in the US and Europe were showing signs of recovery, now they are recovering, maybe some

countries in Europe like Germany and France more than others.

If we do not consider the $140 unprecedented oil price in the first half of 2008, then oil prices today are far better than what we have seen in the last two decades. This, in my opinion, is a golden opportunity for investments in oil and gas projects and projects associated with oil and gas.

Today, many of the oil and gas producing countries have realised that oil and gas are scarce natural resources and it is much more feasible for them to maintain a high price tag on them. In 2010 projections, most analysts were anticipating an oil price range of $45 - $70 but prices today are far better. There were some reservations in investing in oil

and gas projects and projects associated with that at the beginning of the year due to concerns over a drop in oil prices, but with oil prices around $90, it has taken away much of those concerns. If we take a close look at the situation in the GCC, markets are very attractive and have gained a lot of attention from businesses around the world.

With Qatar the hosting 2022 World Cup and their plans for massive infrastructure developments in all the sectors, the GCC will see a sharp incline in economic growth. Recently, the IMF said that Qatars vibrant natural gas sector will propel the country to a 20 per cent growth rate in 2011. With this projected growth rate many businesses in the region will target business opportunities in Qatar.

OIL PRICES WILL CONTINUE THEIR RISEHaitham Al Fannah, Chief Operations Officer, Al Sulaimi Group talks to OGR on potential for investments in the GGC and the recent oil price rise

Haitham Al Fannah, Chief Operations Officer, Al Sulaimi Group

40 Jan-Feb 2011

COULD YOU ELABORATE A LITTLE ON BAHWAN WAGENBORG HEAVY LIFT & OILFIELD SERVICES?Bahwan Wagenborg is a joint venture between the Suhail Bahwan Group, one of Omans leading business groups and the Royal Wagenborg Group of Netherlands, a strong multi-discipline provider of world logistics. We concentrate specifically on the transportation of heavy and over dimensional cargoes within the greater GCC area.

YOU HAVE JUST COMPLETED A YEAR. WHATS BEEN THE EXPERIENCE IN THE VERY FIRST YEAR OF OPERATIONS IN OMAN?

A majority of what we transport is very specialised and expensive equipment that caters to petrochemicals, chemicals, EPC, power, water and gas industries. The economic climate in 2010 for investment in such large scale projects has reflected the wider downturn which has cascaded to service providers such as Bahwan Wagenborg. However, market indications are improving and we are expecting an upturn in the transportation side of our business.

WHAT KIND OF FLEET AND EQUIPMENT DOES YOUR COMPANY POSSESS?We have made a strategic decision to use the same equipment and components that we use at Wagenborg Netherlands,

THE SPECIALIST WITH A DIFFERENCEJonathan D.R. Taylor, General Manager, Bahwan Wagenborg talks to OGR on the companys business, facilities and plans for the future

LOGISTICS

41Jan-Feb, 2011

Europe and Russia. Therefore, the equipment is more standardised throughout the parent companys operations. Having said that, I must emphasise that we are now specialists and a niche player in Oman due to the equipment that we have. The prime movers, trailers and auxiliary equipment are fit-for-purpose and brand new for our operations. In fact, our vehicles have diesel additives that enable us comply with Euro 5 standards.

We are potentially the only company in the GCC to run these kind of trucks. The trailers we have are specialised hydraulic trailers, which means they are steerable and controllable through the prime mover - or steerable and controllable through an independent operator. This not only allows flexibility to be precise when we turn and access sites, but also allows independent steering and suspension possibilities, which further allows us to raise and lower the platform height, depending on obstacles or transportation needs.

DOES WAGENBORG PROVIDE YOU WITH TECHNICAL EXPERTISE THAT IS NEEDED OR IS IT MERELY A FINANCIAL STAKE?

We took a strategic decision not to set-up an engineering department here. A lot of work that we do requires engineering back-up. So basically the client provides us with the dimensions of a piece of equipment that needs to be transported and we study the possibilities of placing that piece of equipment on our trailers. Therefore, we work on ground force pressures, axle pressure, centre of gravity, length of the trailer etc.

We do the preliminary engineering in Oman, while the computer aided design is done in the Netherlands. This enables us lower costs, even while ensuring that our information is entered into a wider database, which can act as a study for improved deliveries for our global operations.

ARE THE TRAILERS AND OTHER EQUIPMENT LEASED?No - we very much own all of our fleet and equipment.

ARE YOU PLANNING FURTHER ADDITIONS TO THE FLEET AND EQUIPMENT?Our expansion will be pre-dominantly market led. We might look at the possibility of adding a self propelled modular trailer next year. Having said

that it is pertinent to note that we are a niche player - we do not handle normal cargo. For us to be involved, we would typically look at cargo that is over 18 metres in length and 50 to 60 tonnes in weight. We specialise in heavy cargo and would not be looking at smaller cargo. Also, its not cost effective for a client to use our equipment if they have a smaller size of cargo.

HOW HAS YOUR ORDER BOOK BEEN?We have a steady order book at the moment, through a combination of volume as well as ad-hoc deals. Our intent is to build long standing relationship with our customers, as there could be repeat orders from a particular client. Our motto is, If we work for you once, we would like to work for you again.

We offer complete handling services alongside transportation such as jacking and skidding, which is basically the ability to move the clients equipment through the X and Y axis by utilising hydraulic rams. Bahwan Wagenborg offers its clients engineered loading, transportation, offloading and final alignment and positioning on foundation: a complete specialised heavy cargo handling service.

Loading a diesel engine at Port Sultan QaboosHydraulic trailer in action on even and sloping ground, loaded with an electrical transformer

42 Jan-Feb 2011

PEAK OIL: MORE REALISTIC THAN MYTH

Energy analyst who have historically denied

the existence of peak oil have now begun to recognise its existence. Saji P. Moolan reports

from Canada

The question now is not whether or not it is a myth, but how realistic peak oil is. Scientists and oil experts have already

started talking about it in real terms. Energy analysts, who have historically denied it, have begun to recognise the existence of peak oil. International Energy Agency (IEA) no longer considers peak oil as a spectre, but as the very guest at the feast. One of the highlights in its World Energy Outlook (WEO) 2010, released on November 9, 2010, is global oil production which it says will peak, plateau, and then enter a decline. In 2008, the agency projected that conventional oil production would continue to climb slowly for several more decades. This earlier optimism, however, is missing in the new report. The Paris-based IEA confesses that global oil production peaked in the year 2006!

Crude oil output reaches an undulating plateau of around 68-69 mb/d by 2020, but never regains its all-time peak of 70 mb/d reached in 2006if the governments act more vigorously than currently planned to encourage more efficient use of oil and the development of alternatives, then demand for oil might begin to ease soon and, as a result, we might see a fairly easily peak in oil production. The scenario, which IEA admits to exist, refers to the maximum rate of production of oil in any area under consideration and its decline. Proponents of peak oil recognise that as oil is a finite natural resource, it is

subject to depletion.According to WEO 2010, global oil supplies will come close to a peak by the year 2035 when oil prices will exceed $200 a barrel. Emerging new

ANALYSIS

43Jan-Feb, 2011

economies, and new economic powers like China and India are driving demand in that direction.Nevertheless, the agency that advises 28 industrialized nations does not see e

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