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Priorities for UK energy Optimism from A new energy order

research recovering marine lies ahead
seismic sector

The magazine for oil, gas and new fuels professionals March 2019

Energy crossroads
The Middle East is embracing the energy
transition, diversifying its energy mix

Magazine of the
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VOLUME 73 | NUMBER 863
Contents
Editor
Kim Jackson MEI
t: +44 (0)20 7467 7118 IN THIS ISSUE…
Also in this issue:

The United
Priorities for UK energy Optimism from A new energy order
research recovering marine lies ahead

e: kjackson@energyinst.org seismic sector

Arab Emirate’s
Deputy Editor
The magazine for oil, gas and new fuels professionals March 2019

Brian Davis al-Reyadah This month we focus on the Middle East – an

t: +44 (0)20 7467 7142 carbon capture, area at the crossroads energy-wise, seeking
e: bdavis@energyinst.org utilisation and to diversify in terms of fossil fuel
Digital Officer storage (CCUS) developments and renewables. There is also
Elliot Tawney project aims encouraging news on the reconstruction
t: +44 (0)20 7467 7117 to capture front in Syria and Yemen, both having been
e: etawney@energyinst.org
800,000 t/y dogged by conflict. Meanwhile, Bahrain is
Editorial enquiries of CO2 to aid weighing up the pros and cons of a unique
t: +44 (0)20 7467 7118 Energy crossroads enhanced oil offshore shale prospect. And we examine the
e: petrev@energyinst.org recovery re-imposition of Iran sanctions.
The Middle East is embracing the energy

Professor Michael Bradshaw of Warwick

transition, diversifying its energy mix
General enquiries
t: +44 (0)20 7467 7100 Photo: ADNOC
Business School does some crystal ball
Magazine of the

e: info@energyinst.org
gazing, and argues that the US shale
Advertising revolution, climate change and potential
For advertising opportunities
please contact: Alexander Bassey
or Simon Kirby
Update & regulars peak oil demand augurs a new energy order.
EI President Malcolm Brinded considers
e: sponsorship@energyinst.org the challenges facing the fuel-poor in
growing urban centres, and identifies big
Magazine subscriptions 2 Perspective opportunities for UK energy research
Chris Baker MEI
t: +44 (0)20 7467 7114
3 Upstream initiatives to tackle climate change. Energy
e: cbaker@energyinst.org security is also a theme of our global
Membership 5 Downstream geopolitical round-up.
For all membership enquiries please Finally, we look at the seismic market and
contact e: membership@energyinst.org 7 Industry technology trends.
or visit www.energyinst.org
10 Energy Institute Brian Davis, Deputy Editor

Features
Abbreviations
The following are used throughout
Petroleum Review:
Middle East Seismic
mn = million (106) t/d = tonnes/day 12 At an energy crossroads 30 Market – growing confidence
bn = billion (109) kW = kilowatts (103)
tn = trillion (1012) MW = megawatts (106) Michelle Meineke Robert Stokes
cf = cubic feet GW = gigawatts (109)
cm = cubic metres kWh = kilowatt hour 16 Syria’s shifting sands 32 Technology – a clearer picture
b/d = barrels/day km = kilometre
boe = b arrels of oil sq km = square Maria Kielmas Robert Stokes
equivalent kilometres
t/y = tonnes/year 18 Bahrain – offshore shale challenge EI Young Professionals
No single letter abbreviations are used.
Abbreviations go together
Paul Cochrane 34 A lack of energy tax hurts
eg 100mn cf/y = 100 million cubic feet the majority
per year. 20 Yemen – a brighter future? Ewan Frost-Pennington
Priscilla Ross
EI Technical
Printed by Geerings Print Ltd Energy in Conversation 36 Microbial activity in the spotlight
Magazine of the 22 Priorities for UK energy research
Malcolm Brinded

Geopolitics See also online...

61 New Cavendish Chief Executive:
Street, London Louise Kingham OBE FEI 24 Caution: a new energy order ahead Energy demand in the energy
W1G 7AR, UK
Michael Bradshaw transition
Terms of control: Petroleum Review is circulated Nick Eyre
free of charge to all paid-up members of the
Energy Institute. To libraries, organisations and 26 Moving goal posts Visit bit.ly/2X3e3aT
persons not in membership, it is available on a
single subscription of £325 for 11 issues in the UK
Gordon Cope
and £500 for overseas subscribers. Single issue New technology options broaden the
£30 (UK), £45 (overseas). Agency Commission –
10%. ISSN 0020-3076. 28 Re-imposed US sanctions fall-out scope for carbon capture and storage
Energy Institute Registered Charity No.1097899,
61 New Cavendish Street, London W1G 7AR, UK.
John Gilbert and Robert Meade Mark Rowe
© Energy Institute 2019. The Energy Institute as a Visit bit.ly/2TLekgl
body is not responsible either for the statements
made or opinions expressed in these pages. Unless
specifically stated, the magazine is not a partner
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any of the advertisers in the publication; nor does Energy insights
it endorse any of the products of such advertisers
or external inserts included with the magazine. Together with Petroleum Review, the Energy Institute (EI) keeps its ‘finger on the pulse’ of global
Those readers wishing to attend future events oil and gas issues. View these timely Energy Insight pieces from the EI Knowledge Service (EIKS),
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http://tinyurl.com/pdq4w7d
Perspective
PERSPECTIVE
The future is electric
E
Azeez Mohammed,
President and
CEO, GE’s Power
Conversion business
The views and opinions
expressed here are
strictly those of the
author and are not
necessarily given or
endorsed by or on the
behalf of the Energy
Institute.
Using variable frequency
drives (VFDs) instead
of conventional gas/
steam turbines to run
process compressors for
downstream operations,
limits emissions by avoiding
the need to fire-up a furnace
to generate steam or gas for
power turbines
2 Petroleum Review | March 2019
lectrification technology can
help decarbonisation of the
oil and gas value chain.The
renewables revolution is in full
swing – but renewable energy
alone will not be sufficient to meet
the US Energy Information
Adminstration’s ( EIA) forecast of a
28% increase in world energy use
to 2040. That’s despite its
prediction in the same report that
wind, solar, hydro and other clean
technologies will collectively be the
fastest-growing energy source over
that period, when their global
consumption will increase by an
average 2.3% each year.
The oil and gas industry,
however, is widely seen as a major
barrier to the decarbonisation that
many countries worldwide signed
up to at the UN’s 2015 Paris
Climate Change Conference,
accepting it as vital for the planet’s
long-term security.
Nevertheless, many oil majors
are already responding to the quest
for sustainability and reduction of
greenhouse gas emissions, as they
seek to evolve and become active
drivers of a green energy
revolution. They see protecting
their future and that of the planet
as a two-way street.
Take Shell, for example. The
company pledged in late 2017 that
it would halve its global carbon
footprint by 2050 – announcing to
shareholders on the same day that
it would commit up to $2bn on
renewable initiatives to 2020 as
part of its strategy to deliver the
reduction. ExxonMobil is also
researching innovative, long-term
solutions such as algae biofuels, by
way of just one example, and aims
to produce 10mn b/y of algae-
based biofuel by 2025.
The will to reduce carbon
dioxide (CO2) emissions radically
among the oil and gas sector’s
top-table players is clearly there. In
my opinion, electrification now has
a key role to play as the
decarbonising transition develops.
Building a green value chain
Electrification in the oil and gas
sector is already well underway.
Indeed, it is limiting – in some
cases even eliminating – CO2
emissions in three key areas:
Upstream: Subsea cables linking
to offshore platforms are being
used to maximise the use of clean,
green energy from onshore. By
avoiding using electricity
generated from gas turbine
generators, platforms can
significantly reduce emissions.
Elsewhere, and in particular
wherever there is variation of load/
process, electrification with
variable speed technology shines a
spotlight on energy efficiency and,
therefore, reduces CO2 emissions.
For example, in a subsea well,
high/variable-speed drive systems
can meet the exact pressure
requirement, minimising the
energy consumed while extracting
the same amount of resources
compared to fixed speed systems
used in upstream applications. A
similar principle applies
downstream.
Midstream: By taking a clean
approach to gas compression using
a high-speed electric motor and
centrifugal compressor in a single
sealed casing, the integrated
compressor can eliminate oil
leakage and emissions, and is also
critical for raising safety standards.
Standalone solutions such as this
are pivotal for the future of
Photo: GE
electrification. Consolidated into
integrated machines, technologies
like this not only offer benefits in
terms of improved safety and
efficiency, but also reduce the
footprint and weight.
Downstream: Variable frequency
drives (VFDs) combine electric
motors and drive technology to
raise process efficiency by enabling
a flexible range of speeds. Driven
by the need to lower emissions and
cut costs, it’s a powerful option for
oil and gas suppliers exploring new
opportunities to upgrade their
system architecture for better
performance and efficiency.
Using VFDs instead of
conventional gas/steam turbines
to run process compressors for
downstream operations, limits
emissions by avoiding the need to
fire-up a furnace to generate steam
or gas for power turbines.
Though this represents a big
opportunity, we recognise that
most petrochemical and refinery
plants will still need steam for
some process purposes.
In any event, to enable electrical
solutions, suppliers will still need
to generate and supply power to
feed VFD motors and drives, and
have a distribution network that
can sustain such loads.
Electrification delivers a great deal,
but is inevitably not the solution
for every possible scenario.
Cutting costs, maximising revenues
The potential of electrification to
deliver significant savings also
deserves serious consideration.
Integrated systems designed for
offshore platforms not only reduce
weight and footprint, they can also
lower capex.
Electrical machines are also
highly reliable, as they require less
maintenance than traditional
mechanical systems. At the same
time as raising safety standards,
they reduce opex, ease the impact
of the currently shrinking oil and
gas workforce, and facilitate the
pathway towards future
unmanned platforms.
Electrification also offers
superior start time performance,
and gives producers the flexibility
to react more quickly to market
demands, while also maximising
revenues.
To realise the electrification of
oil and gas infrastructure, the grid
network will need to continue to
expand, improve and upgrade to
meet future demand. In turn, by
applying smart electrical solutions,
the oil and gas sector will continue
to develop in a more sustainable
way and help contribute to the
cleaner energy future. ●
 UpstreamUpdate

First gas from stage 2 of West Nile Delta

When fully onstream in 2019, combined production from all three phases of the West Nile Delta project is expected to
reach almost 1.4bn cf/d, equivalent to about 20% of Egypt’s current gas production

B
P has announced first gas
from the second stage of its
West Nile Delta development
offshore Egypt. The project, which
produces gas from the Giza and
Fayoum fields, has been developed
as a deepwater, long-distance tie-
back to an existing onshore plant.
The start-up is the second in a
string of new major upstream
projects expected to be brought
onstream in 2019 for BP. The
company plans to deliver
900,000 boe/d by 2021.
The West Nile Delta
development includes a total of
five gas fields across the North
Alexandria and West
Mediterranean Deepwater offshore
concession blocks. It was originally
planned as two separate projects;
however, BP and its partner DEA
realised the opportunity to deliver
it in three stages, accelerating
delivery of gas production
commitments to Egypt.
Stage one of the project, which
started producing in 2017, included
gas production from the first two
fields – Taurus and Libra. The Giza
and Fayoum development, which
includes eight wells, is currently
producing around 400mn cf/d of
gas and is expected to ramp up to a
maximum rate of approximately
700mn cf/d. The third stage of the
project will develop the Raven
field, with production expected in
late 2019.
When fully onstream in 2019,
combined production from all
three phases of the West Nile Delta
project is expected to reach almost
1.4bn cf/d, equivalent to about 20%
of Egypt’s current gas production.
All the gas produced will be fed
into the national gas grid.
BP has an operating stake of West Nile Delta project
82.75% in the project, with DEA Photo: BP
holding the remaining 17.25%
stake.

North Sea

CNOOC announces largest UK gas discovery since 2008

CNOOC recently announced a new
discovery on the Glengorm prospect,
located in licence P2215 in the UK
Central North Sea. The Chinese oil
company holds a 50% stake in, and
is operator of, licence P2215, with
Total E&P UK North Sea and Euroil
holding 25% each.
‘At 250mn boe, Glengorm is
the largest gas discovery in the UK
since Culzean in 2008,’ says Kevin
Swann, a senior analyst with Wood
Mackenzie’s North Sea upstream
team. He adds: ‘There is a lot of hype
around frontier areas like West of
Shetland, where Total discovered
the Glendronach field last year. But
Glengorm is in the Central North Sea
and shows there is still life in some
of the more mature UK waters.’
The gas at Glengorm is subject
to very high pressures and
temperatures (HP/HT), which
makes it more challenging and
costly to develop. Although it was
first mapped as a prospect around
20 years ago, these difficulties
mean that it has only now been
successfully drilled – technical
problems led to two failed drilling
attempts in 2017.
According to Swann, the
discovery may hail what could
prove to be a ‘pivotal year for UK
exploration, with several high
impact wells in the plan’.
Meanwhile, Dr Andrew Latham,
Vice President of Global Exploration
at Wood Mackenzie, notes: ‘[Global]
exploration industry returns
averaging 13% in 2018 were the
highest in over a decade, driven by
lower costs and a focus on drilling
prospects with a straightforward
route to commercialisation in the
event of success. Glengorm fits
this revitalised exploration model
perfectly. It looks to be a valuable
discovery that should help sustain
the industry’s profitability into
2019.’ He adds: ‘This underlines the
considerable potential of the UK
Continental Shelf (UKCS). Our official
estimate is that there still remains
between 10bn and 20bn barrels
plus to be recovered, so there is
every chance of yet more significant
finds, provided industry can increase
exploration drilling and capitalise
on the real value to be had here in
the UK.’
According to the UK Oil and
Gas Authority (OGA), the number
of exploration wells being drilled
in the UKCS has been in decline,
with just seven wells being drilled
in 2018 compared to 13 in 2014.
However, despite fewer wells being
drilled, the volume being discovered
in the UK has (provisionally) more
than doubled over the same period,
from 83mn boe in 2014 to 175mn
boe in 2017. Additionally, the
costs associated with finding these
volumes have dropped dramatically
– from an average of $9/b in 2014 to
just over $1/b in 2018.
The OGA also estimates that on
the UKCS, around 43% of exploration
wells drilled are potentially
commercial, compared with the
global average of
around 36%.
With the industry now acquiring
three times as much seismic data
in 2018 on the UKCS, compared to
the previous two years, the OGA
expects a healthier exploration
outlook, forecasting an upturn in
drilling activity, with around 18
exploration wells and 19 appraisal
wells potentially to be drilled across
the basin this year.

Petroleum Review | March 2019 3

 UpstreamUpdate

West Africa

Major boost for Nigerian oil and gas sector

Shell and its partners have (FID) for BSWA. It will open further deepwater developments and a
announced that they are to opportunities in the deepwater oil dispute over the key commercial
commence the tendering process for and gas sector in Nigeria, whilst terms of the related production
the development of the Bonga South creating significant benefits for the sharing contract (PSC). BSWA has the
West/Aparo (BSWA) deepwater oil state. BSWA, located in in OML 118, potential to produce approximately
project offshore Nigeria. OML 132 and OML 140, will be the 150,000 to 200,000 b/d of oil, which
Commenting on the news, Cao first major deepwater project in will account for around 10% of
Chai, Upstream Oil & Gas Analyst at Nigeria since Egina, which started Nigerian crude oil production.’
GlobalData, says: ‘The agreement development in 2013.’
between Shell Nigeria Exploration & ‘The FID for BSWA was initially
Production Company (SNEPCo) and set for 2014. However, it has faced
the Nigerian National Petroleum various delays due to the oil price
Corporation (NNPC) is a key step crash in the same year, as well as the
towards a final investment decision high costs associated with

IN BRIEF
The global offshore upstream supply
chain saw signs of recovery in 2018,
and this looks set to continue in
2019, according to Wood Mackenzie.
As project final investment decisions
(FIDs) increase, demand for
equipment and services are buoying
the prospects for the upstream
supply chain. But the downturn
left its mark on the sector. Projects
remain leaner and phased, and
cost discipline remains high on the
agenda. The supply chain continues
to focus on compact, modular and
standard solutions as operators seek
the shortest cycle times. For more
details, visit bit.ly/2SbvLFh
EY’s recently published annual
review of the UK oilfield services
(OFS) industry shows that turnover
in the sector declined for a third
successive year in 2017. Although
the rate of decline reduced, more
importantly the EBITDA (earnings
before interest, taxes, depreciation
and amortisation) margin decline
in 2017, dropping by 2.2 percentage
points, was the largest since the
economic downturn started in 2014.
Despite a growth in worldwide
turnover in global OFS companies in
2017 and further forecast growth in
2018 to 2020, the sector share price
index saw a significant reduction in
2018, demonstrating concerns about
the speed of recovery in the sector
and the underlying margin issues.
See bit.ly/2TVcv0v
Total has made a significant gas
condensate discovery on the
Brulpadda prospect, located on
block 11B/12B in the deepwater
Outeniqua Basin, 175 km off the
southern coast of South Africa
and about 180 km south-east of
PetroSA’s Mossel Bay gas-to-liquids
(GTL) plant. The discovery is reported
to have opened a new world-
class gas and oil play and is well
positioned to test several follow-on
prospects on the same block.
See bit.ly/2NfmGdR
ExxonMobil has made two
additional discoveries offshore
Guyana at the Tilapia-1 and
Haimara-1 wells, bringing the
total number of discoveries on the
Stabroek block to 12. The discoveries
build on the previously announced
estimated recoverable resource of
more than 5bn boe on the block.
ExxonMobil is operator and holds a
45% interest in the Stabroek block,
partnered by Hess (30%) and CNOOC
(25%). See bit.ly/2IoB30N
Petrobras has commenced
production of oil and natural
gas through the P-67 floating,
production, storage and offloading
(FPSO) vessel in the Lula Norte area,
in the pre-salt of the Santos Basin.
With the capacity to process up to
150,000 b/d of oil and compress up
to 6mn cm/d of natural gas, this is
the ninth unit to come onstream
in the BM-S-11 block. The Lula field
(comprising the Lula and Cernambi
reservoirs) is currently the largest
producer in Brazil and is expected to
reach 1mn b/d of oil production in
2019; less than a decade since the
beginning of commercial production
in October 2010. Lula is located in
concession BM-S-11, operated by
Petrobras (65%) in partnership with
Shell (25%) and Petrogal
Brasil (10%).

Also
in thi
s issu
e:
optio
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gressi
A pro ng Pro
You
– EI ork
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fes
tax
ve en sionals
need
The carbon
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March
2019
In this month’s Energy World:
ology e, use Netw
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New bon cap

• Energy demand in the energy transition

for car rage
sto ls
and siona
profes
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for en
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maga
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• A lack of energy tax hurts the majority

• The opportunity in ESOS 2
• Priorities for UK energy research
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Flexib y Energy World is the monthly sister publication to Petroleum Review, covering
energ emen
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Redu d de
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4 Petroleum Review | March 2019

 DownstreamUpdate
Electric vehicles to number 21mn by 2030
Deloitte’s latest outlook shows sales of EVs shifting from 2mn units in 2018 to 21mn in 2030 as the cost of
manufacturing batteries falls significantly; with battery EVs accounting for 70% of total EV sales by 2030

F
ollowing news that global
electric vehicle (EV) sales
surpassed the 1mn units
mark for the first time in 2017,
Deloitte has released a new report
predicting the exponential growth
of EVs over the next decade.
The report details how
changing customer perceptions,
technological advancements and
greater intervention from
governments are combining to
drive EV adoption. Policies and
regulations have facilitated the
growth of EV markets, supported
by innovation and investment by
manufacturers.
These policies and regulations
include fuel economy and
emissions targets; financial
incentives such as subsidies and Photo: Shutterstock
tax exemptions; and planned city
access restrictions which will ban ‘consider policies that encourage ‘tipping point’ in 2022, when the To view the Deloitte report
gas and diesel cars in cities. the development of micro grids, cost of battery electric vehicle entitled New market; new
entrants; new challenges –
Approximately 20 cities worldwide dynamic energy management and (BEV) ownership is on par with battery electric vehilces, go
have announced plans to truly smart meters that can internal combustion engine (ICE) to bit.ly/2E5TIu4
implement such restrictions by optimise existing infrastructure counterparts. Once this tipping
2030 or earlier. and encourage pro-sumerism – the point is reached, it is estimated
However, Mike Hughes, Zone ability for consumers to return that EVs will become a much more
President of UK and Ireland for energy to the grid when it is viable option for new car buyers,
French energy company Schneider needed – and be fairly leading to an increased share of
Electric, argues: ‘Government compensated for that energy’. the automotive market – reaching
policies need to go beyond Meanwhile, technological an estimated 10% by 2024.
incentivising greener vehicles and advancements, such as the Deloitte’s latest outlook shows
penalising diesel and petrol cars. optimisation of battery cells, faster EV sales shifting from 2mn units in
To enable real, widespread change, battery charging and increased 2018, to 12mn in 2025, to 21mn in
business and governments will driving ranges are helping to ease 2030 as the cost of manufacturing
need to address the infrastructure customer concerns about the batteries falls significantly. BEVs
challenges this growth will fuel. viability of EV adoption, reports are already starting to outperform
One of the biggest challenges Deloitte. These changes in plug-in hybrid vehicle (PHEVs)
ahead is managing the energy customer perception will help to sales globally, and it is expected
demand to power large numbers of grow demand over the next this trend will accelerate over time.
electric vehicles on our roads.’ decade. By 2030, BEVs will account for 70%
To meet these challenges, Combined, these factors will of total EV sales, suggests the
Hughes suggests that governments lead to what Deloitte describes as a study.

Alternative fuels

EU to re-impose anti-subsidy duties on

Argentine biofuels
European Union (EU) biofuels
producers have welcomed the
approval by the EU’s Trade Defence
Committee of a European
Commission (EC) proposal to
re-impose definitive anti-subsidy
duties against Argentine biodiesel
imports, writes Keith Nuthall.
These duties had been up for
review and in September 2018 the
EC decided not to re-impose the
duties on a provisional basis, raising
concern among European producers
that the EU might let them lapse.
However, that will not now happen,
with replacement definitive duties
of between 25% and 33.4% possibly
in place as early as March.
The EU has acted because
Argentine taxes exports of biodiesel,
which the EU considers distorts the
market, ultimately creating
subsidies for Argentinean producers.
The European Biodiesel Board
(EBB) welcomed the move, saying
the taxes were an ‘illegal
subsidisation practice’. It was less
happy that the EU committee also
approved an import quota of 1.2mn
tonnes of Argentine biodiesel, sold
at a minimum price level.

Petroleum Review | March 2019 5

 DownstreamUpdate

Fuels

New development in
sustainable diesel production
A new technology that converts
biogas into a high-grade liquid fuel
that can be used as a direct
replacement for fossil fuels was
recently showcased for the first time
at Alliance Dairies in Florida, US. The
process, developed by UK-based
technology company Renovare Fuels,
allows biogas from waste material
to be used as a direct replacement
for traditional fossil fuels. The
production process is carbon neutral,
and offers a practical solution to the
growing problem of greenhouse
gases, says the company.
‘There has been a significant
push to recycle plastic and paper
products over the past two decades,
but we aren’t seeing the same push
to reuse biodegradable waste like
food-waste and agricultural
materials,’ explains Devin Walker,
CTO at Renovare Fuels. ‘That leaves a
lot of potential fuel sources lying in
landfills. Processes like anaerobic
digestion (AD) can be used to
produce fuels, but the overall
process hasn’t previously been
particularly efficient. By using a
specially developed Fischer-Tropsch
synthesis catalyst and advanced
process engineering techniques,
Renovare Fuels’ technology can
efficiently turn biogas into middle
distillate fuel. The feedstock is
sourced locally to the site and
classified as a waste product, so the
production cycle is objectively
carbon neutral.’
He continues: ‘We estimated
using the greenhouse gas Renovare CTO Devin Walker, standing in front of demonstration unit
methodology in the EU’s Renewable Photo:Renvare Fuels
Transport Fuel Obligation (RTFO)
that the entire logistical supply UK,’ comments Walker. ‘Based on
chain, from feedstock collection to this figure, we estimate that our
storage and refuelling, would technology and the resultant fuel
produce only 3 grammes of carbon could displace over 2bn litres of
dioxide equivalent per megajoule of fossil fuels annually. This would
biomass. This is only 3% of the lower greenhouse gas emissions by
94 grammes it would be using around 5mn t/y.’
fossil fuels.’ The fuel produced using the
The abundance of waste products Renovare technology is reported to
means that the production of the be distinct from typical biodiesel
biodiesel promises a low-cost products in that it is physically and
sustainable alternative to fossil chemically similar to conventional
fuels. The company believes that the fossil fuels, allowing it to be used in
fuel could be priced at under 50 p/l. engines without requiring design
‘In 2016, DEFRA reported that modifications.
31.8mn tonnes of biodegradable
waste is produced each year in the

IN BRIEF
Chevron has signed a sales and
purchase agreement (SPA) with
Petrobras to acquire all the
outstanding shares and equity
interests of Pasadena Refining
System, which includes a
110,000 b/d capacity refinery in
Texas, the US, and PRSI Trading for
$350mn, excluding working capital.
Total and Saudi Aramco have signed
a 50:50 joint venture agreement to
develop a network of fuel and retail
services in Saudi Arabia, planning
to invest around $1bn over the next
six years. Total is reportedly the first
international oil major to invest in
Saudi Arabia’s fuel retail network.
The two companies have also signed
an agreement with the owners of
Tas’helat Marketing Company (TMC)
and Sahel Transport Company (STC)
to purchase TMC and STC, acquiring
their existing network of 270 service
stations and fuel tanker fleet. Saudi
Aramco and Total plan to modernise
this network and build high-quality
service stations at selected locations.
Eni and SABIC are to jointly develop
an innovative technology for natural
gas conversion into synthesis gas
that can be further transformed
into high-value fuels and chemicals,
such as methanol. The partnership
will involve, among other activities,
the construction of an industrial
demonstration plant that will be
built and operated inside an Eni
industrial facility. The technology
is based on the short contact time
catalytic partial oxidation (SCT-
CPO) of natural gas. According
to the companies, this offers an
‘innovative way of making synthesis
gas and integration into high value
applications to achieve lower capex
and opex, higher energy efficiency,
lower CO2 footprint and wide
feedstock flexibility’.
ExxonMobil, with joint venture
partners PetroVietnam and
PetroVietnam Exploration
Production Corporation, is
advancing plans for a multi-billion
dollar integrated gas-for-power
development in central Vietnam.
The proposed project will provide
cleaner, reliable power and
stimulate economic growth and
improved living standards. A final
investment decision (FID) is targeted
in 2020. The project will produce
and treat natural gas from the Ca Voi
Xanh field, located offshore Vietnam
in block 118.
Chevron has signed an SPA with
GS Caltex Corporation for the
delivery of LNG to South Korea from
Chevron’s global supply portfolio,
beginning in October 2019. The
companies had an existing LNG SPA
executed in 2009. Chevron owns
50% of GS Caltex and is the operator
(50%) of the three-train, 15mn t/y
Gorgon LNG project in Australia,
partnered by ExxonMobil (25%) and
Shell (25%).
Finland’s Parliament has voted in
favour of a law to gradually increase
the share of biofuels in its domestic
market to 30% by 2029, according
to Petrolplaza. The measure not
only covers transport fuel but also
sets the distribution obligation of
bio-based light fuel oil. According to
the new law, a share of light fuel oil
intended for heating, construction
machines and fitted motors will
be replaced by bio-based fuel oil,
starting in 2021. The obligation is
aligned with targets already set in
Sweden and Norway.

6 Petroleum Review | March 2019


Key uncertainties shaping energy markets
More energy to support continued global economic growth and
rising prosperity, and a more rapid transition to a lower carbon
future are key challenges facing the global energy sector as it
moves forward to 2040, reports BP in its latest energy outlook.
T
he 2019 edition of the BP
Energy Outlook explores the
key uncertainties that could
impact the shape of global energy
markets out to 2040, the greatest of
which involve the need for more
energy to support continued global
economic growth and rising
prosperity, together with the need
for a more rapid transition to a
lower carbon future.
Much of the narrative in the
report is based on BP’s ‘evolving
transition’ scenario, which assumes
that government policies,
technologies and societal
preferences evolve in a manner and
speed similar to the recent past:
• Global energy demand
increases by around a third by
2040, driven by improvements
in living standards, particularly
in India, China and across Asia.
• Energy consumed by industry
and buildings accounts for
around 75% of this increase in
overall energy demand, while
growth in energy demand from
transport slows sharply relative
to the past as gains in vehicle
efficiency accelerate.
• The power sector uses 75% of
the increase in primary energy.
• Some 85% of the growth in
energy supply is generated
through renewable energy and
natural gas, with renewables
becoming the largest source of
global power generation by 2040.
• The pace at which renewable
energy penetrates the global
energy system is faster than for
any fuel in history.
• Demand for oil grows in the
first half of the outlook period
before gradually plateauing,
while global coal consumption
remains broadly flat. Across all
the scenarios considered,
significant levels of continued
investment in new oil will be
required to meet oil demand
in 2040.
• Global carbon emissions
continue to rise, signalling the
need for a comprehensive set of
policy measures to achieve a
substantial reduction in carbon
emissions.
Beyond the evolving transition
scenario, the outlook onsiders a
number of additional scenarios.
Two of the key ones are outlined
below (also see Figure 1).
More energy
The ‘more energy’ scenario
explores the fact that more energy
will be needed to support growth
and enable billions of people to
move from low to middle incomes.
There is a strong link between
human progress and energy
consumption; the UN Human
Development Index suggests that
increases in energy consumption
of up to around 100 gigajoules (GJ)
per head are associated with
substantial increases in human
development and well-being.
Today, around 80% of the
world’s population live in countries
where average energy
consumption is less than 100 GJ
per head. In order to reduce that
number to one-third of the
population by 2040, the world
would require around 65% more
energy than today, or 25% more
energy than needed in the evolving
transition scenario.
Together with the more energy
scenario, the outlook also
highlights the need for further
action to reduce carbon emissions.
This is the dual challenge for the
world – to provide more energy
with fewer emissions.
Rapid transition
The ‘rapid transition’ scenario is
the combination of analyses
throughout the report which
brings together in a single scenario
the policy measures in separate
lower carbon scenarios for industry
and buildings, transport and
power. Doing so results in around a
45% decline in carbon emissions by
2040 relative to current levels –
which is broadly in the middle of a
sample of external projections
with claim to be consistent with
meeting the Paris climate goals.
This fall reflects a combination
of gains in energy efficiency; a
switch to lower-carbon fuels;
material use of carbon capture,
utilisation and storage (CCUS); and,
of particular importance in the
power sector, a significant rise in
the carbon price.
IndustryUpdate
Figure 1: Primary energy consumption by fuel scenarios, in bn toe
*Renewables include wind, solar, geothermal, biomass and biofuels
Source: BP Energy Outlook 2019
The power sector is currently For more information,
go to www.bp.com/
the single largest source of carbon energyoutlook
emissions from energy use and it is
The report also considers
therefore critical that the world a number of other issues,
continues to seek ways to reduce including the possible
impact of an escalation
emissions from this sector.
in trade disputes and the
Reductions in carbon emissions implications of a significant
from the transport industry in all tightening in the regulation
of plastics.
scenarios to 2040 is relatively small
in comparison.
‘Policies aimed at the power
sector are central to achieving a
material reduction in carbon
emissions over the next 20 years…
most of the low-hanging fruit in
terms of reducing carbon
emissions is outside of the
transport sector,’ notes Spencer
Dale, BP Group Chief Economist.
Even in the rapid transition
scenario, a significant level of
carbon emissions remain in 2040.
In order to meet the Paris climate
goals, in the second half of the
century these remaining emissions
would need to be greatly reduced
and offset with negative emissions.
A key development would be a
near-complete decarbonisation of
the power sector – requiring
greater use of renewables and
CCUS in conjunction with natural
gas – together with greater
electrification of end-use activities
(including transport). For those
end-uses that cannot be electrified,
other forms of low-carbon energy
and energy carriers will be crucial,
potentially including hydrogen and
bioenergy. The circular economy
and greater adoption of carbon
storage and removal techniques
will have an important role to play.
Petroleum Review | March 2019 7
 IndustryUpdate

Energy policy

US imposes new sanctions on Venezuela

The US Treasury Department’s Office
of Foreign Assets Control (OFAC)
announced on 28 January 2019 the
imposition of new sanctions against
the country’s state oil company
PdVSA, write Ed Zwirn in New York
and Keith Nuthall. The sanctions
effectively halt US purchases of oil
from Venezuela – the Latin American
country’s economic lifeblood. The US
is the primary destination for PdVSA
crude oil shipments, receiving about
41% of its exports, according to the
US Energy Information
Administration (EIA).
President Donald Trump has
backed the action with an executive
order expanding the scope of
existing US financial and travel
movement to any persons and
institutions, such as PdVSA,
‘affiliated with the illegitimate
Maduro regime’. This means any US
bank accounts and property held by
PdVSA executives is frozen and
cannot be accessed, spent or sold.
Also, related money cannot be
moved from its current location.
These executives are also subject to
travel bans to and from the US.
According to Refinitiv, Venezuelan
seaborne crude exports averaged
1.3mn b/d in January 2019, down
from 1.39mn b/d in December 2019.
Looking at the potential impact US
sanctions could have on Venezuelan
crude exports, the market analyst
notes that as of 5 February 2019,
some 8.7mn barrels of crude in 15
vessels were waiting to be
discharged either at US ports or
elsewhere. Taking into account the
loading activity post the sanctions
announcement, a total of nine
vessels had loaded or were currently
loading at that date from Venezuela,
with a total 9.4mn barrels of
crude oil.
The market analyst also reports
that the restriction of Venezuelan
crude into the US, where heavier
crudes are required for refining units
to maximise their margins of profit,
creates a vacuum that could possibly
be filled by importing Middle
Eastern crudes, as these consist of
medium-heavy streams. This has
shouldered gains in Middle East
benchmark crude prices, which
typically come at a discount to Brent
and WTI, due to quality
specifications.
Refiners, particularly in the US,
may find their profit margins come
under pressure as they would have
to buy crude at higher cost, either in
the form of higher shipping rates or
in the form of compensating with
medium gravity crudes, which
typically come at a premium versus
heavier ones, notes Refinitiv. It also
says that Venezuela may seek to
shift its export base towards Asia,
replacing some volumes the Asian
powerhouses buy from the Middle
East, as significant shifts in global
crude flows could unfold in the
following weeks.

LNG

Green light for Golden Pass LNG project

Qatar Petroleum (70%) and
ExxonMobil (30%) have made a final
investment decision (FID) to proceed
with development of the $10bn
Golden Pass LNG export project
located in Sabine Pass, Texas, US. The
project will have a capacity of
around 16mn t/y of LNG and exports
are expected to commence in 2024.
‘Golden Pass will provide an
increased, reliable, long-term supply
of LNG to global gas markets,
stimulate local growth and create
thousands of jobs,’ says Darren
Woods, Chairman and CEO,
ExxonMobil. Preliminary estimates
by an independent study indicate
the project could generate up to
$31bn in US economic gains and
more than $4.6bn in direct federal,
state and local tax revenues over the
life of the project.
According to Wood Mackenzie,
the announcement kicks off what
could be a record year for FIDs. The
go-ahead for Golden Pass LNG
comes as Anadarko and its partners
in Mozambique LNG (Area 1) took a
major step towards FID after signing
sales and purchase agreements
(SPAs) with CNOOC, Tokyo Gas,
Centrica and Shell.
Alex Munton, Principal Analyst,
Americas LNG, at Wood Mackenzie,
says Golden Pass ‘is one of the few
remaining brownfield LNG
development opportunities in the
US Gulf Coast’.
He adds: ‘The repurposing of the
existing facility has commercial
logic. The Golden Pass regas
terminal, with its five storage tanks,
two shiploading berths and header
pipeline, already includes much of
the infrastructure needed for an
export project. Even if costs come in
at slightly above the $10bn mark, on
a dollars-per-tonne basis, it’s still
one of the lowest-cost opportunities
for new large-scale liquefaction
capacity anywhere in the world.’
‘From a cost standpoint, the
timing is prudent. Proceeding with
construction now will enable the
project to lock in costs and minimise
exposure to inflationary pressures
before the next cycle of global LNG
investment heats up. By moving
ahead now, the partners ensure that
Golden Pass will be at the forefront
of the second wave of US LNG.’
Golden Pass offers Qatar
Petroleum the opportunity to
optimise shipping costs, particularly
into Europe and Latin America. It
also helps Qatar protect its market
share as it seeks to leverage all its
LNG assets in response to a
changing market structure.
‘To delay FID any longer would
simply create the space for other US
LNG projects to be developed.
Golden Pass would miss out on the
opportunity to press home the
brownfield advantages it has over
planned US greenfield projects in
terms of cost and schedule,’
Munton adds.
There are advantages for
ExxonMobil too. The company is the
second-largest producer of natural
gas in the Lower 48 and Golden Pass
supports additional upstream supply
development, although the project
partners have not announced
intentions to tie the export project
directly to ExxonMobil’s upstream
production.
The project further strengthens
ExxonMobil’s relationship with
Qatar, the most valuable country in
its global portfolio. Through its joint
investment in Golden Pass LNG, it
will be deepening this relationship
and working with Qatar Petroleum
to diversify both upstream and
internationally. Further upstream
deals between the two are likely.
ExxonMobil said in its recently
announced fourth quarter results
that Rovuma LNG (Area 4) in
Mozambique was also on its target
list for FID this year.

8 Petroleum Review | March 2019

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 EI News

Student accommodation energy manager

nets prestigious EI award
T
he Group Energy and
Environment Manager at Unite
Students has received the
Energy Institute (EI) Energy
Management Leader of the Year
Award 2019, fighting off tough
competition from five other finalists
demonstrating the best in their
profession across diverse business
sectors.
James Tiernan IEng MEI received
the award at the prestigious edie
Sustainability Leaders Awards
ceremony in February, in recognition
for his successful strategies saving
carbon, energy, water and costs in
properties housing 50,000 students in
28 cities.
Speaking after receiving the award,
James said: ‘Getting noticed helps
push efficiency up the agenda inside
your organisation and it’s a real boost
for your own career. Winning this
award will help me in both of these.”
Also recognised by the judges was
Lara Young of Costain Group, who was
highly commended for her passion
and hard work embedding
sustainability into all stages of the
infrastructure construction process.
The EI has partnered with edie for
the award for almost two decades, as
part of its long-standing commitment
to building careers and celebrating From L to R Wildlife broadcaster Michaela Strachan, EI Head of Events and Training Laura Viscione with award winner
achievement in energy management. James Tiernan

EI shows the way with Report finds mixed views

new lighting guide on importance of women
With lighting still accounting for a
fifth of all the electricity used in UK
in closing looming
commercial buildings and almost
three in four buildings still having
‘talent emergency’
outdated lighting systems, the EI has
added a new Lighting Good Practice The new edition of the world’s largest energy recruitment
Guide to its online energy and employment trends report – the Global Energy Talent
management resources. Index – has found that most sectors are worried about a
Designed to help organisations looming ‘talent emergency’.
and professionals choose a lighting Put together by Airswift and Energy Jobline, with
system that is energy efficient, fit for support from the EI, the report highlights the severe
purpose and value for money, the shortage of women working in the energy industry, with
guide provides a road map for women accounting for no more than 14% of the workforce
overseeing a lighting upgrade, in any sector. The report recommends attracting more
questions to ask a supplier or women into the energy workforce, but only around a tenth
manufacturer, a checklist of what of male respondents believed this would be a viable way to
should be included in a tender close the skills gap, compared to over half of the women
response, and signposts to standards surveyed.
and detailed guidance. The sector that fared best in the survey was renewables
The new Lighting Good Practice – within which 78% said they would choose the sector if
Guide can be found at knowledge. beginning their careers again. For under 25s the number
energyinst.org/collections/energy expressing their enthusiasm rose to 85%.
-management The report can be downloaded at www.getireport.com

10 Petroleum Review | March 2019


EI President appears before Commons
Science and Technology Committee
T
he influential House of Commons
Science and Technology Committee
quizzed EI President Malcolm Brinded
FREng CBE FEI and other energy experts in
January, on the crucial decisions needed to
be taken by the government to meet the
UK’s emissions reduction targets.  Malcolm discusses these issues in more
During the session, Malcolm called for
the UK government to focus on the export
opportunities of clean growth innovation,
through a more integrated strategy
between the Departments for Business,
International Development, Transport and
Trade.
With global energy demand set to soar
as billions of people in lower and middle-
income countries move into the middle
classes, he stressed the ‘major opportunity
Energy Institute backs methane action coalition
Collective action by global operators to bear
down on fugitive methane emissions
during oil and gas production has received
the fulsome support of the EI.
International institutions including UN
Environment have established the Methane
Guiding Principles, calling on oil and gas
companies to reduce methane emissions
and improve accuracy and transparency
around methane emission data. Eighteen
global operators have already become
signatories.
Chief Executive Louise Kingham OBE FEI
announced in February that the EI has
become a supporting organisation, making
clear its determination to use its influence
to raise the profile of the issue among its
professional members, partners and
customers, for the public good.
Writing in a blog post, Louise said: ‘The
release of fugitive methane during oil and
New professional members
The EI provides a range of professional
membership grades and chartered titles.
Achieving these higher levels of recognition
supports your career development and
demonstrates your commitment to the
industry. Congratulations to the individuals
who have achieved professional recognition
and/or have acquired registration in the last
few months.
Member (MEI)
Kelvin Enumah, Institute for Industrial
Technology
Andrea Mazzucchelli, Carbon Credentials
Leon Moller, Robert Gordon University
Christopher Forster, Hodkinson Consultancy
Joanna Tomlinson, EVORA
Russel Williams, University of Aberdeen
Business School
EI President Malcolm Brinded addressing Commons
Science and Technology Committee
for UK plc to be involved in supporting the
innovations, technologies, businesses and
start-ups that can make an impact’.
He also outlined the need to test at scale
the ‘big solutions’, in particular carbon
gas production tends to get too little
airtime. As an industry, we have to meet
this challenge head-on, not head-in-sand.
Indeed, if we don’t up the ante on CH4,
Georgia Makridou, ESCP Europe
Member (MEI) and Chartered Energy
Manager
Simon Chiva, Trident Utilities
Member, Chartered Engineer and Chartered
Energy Engineer (MEI CEng Chartered
Energy Engineer)
Juliana Renn, WSP London
Paul Chester, PRC Engineering
Logan Black, AECOM
Matthew Maskell, GDC group
Member, Chartered Engineer and Chartered
Petroleum Engineer (MEI CEng Chartered
Petroleum Engineer)
Timothy Frank Wilson, Shell
EI News
capture utilisation and storage. ‘CCUS is
going to be an essential component of any
negative emissions strategy for the world
to get to 2°C and certainly to 1.5°C’ he said,
and testing at scale ‘is an opportunity for
the UK to be at the front of that.’
detail in his interview on page 22.
He was appearing following submission
of joint written evidence by the Royal
Academy of Engineering, the Energy
Institute and other bodies to the
Committee’s inquiry into clean growth
technologies. The written submission can
found at bit.ly/2WphMz2
Video of the evidence session is also
available to view at bit.ly/2Tc5Yyi
there’s a risk that efforts to reduce CO2
emissions elsewhere in the lifecycle could
be undermined, and with them natural gas’
licence to operate as a cleaner fossil fuel
and bridge to a sustainable energy future.’
Methane is 28-36 times more potent as
a greenhouse gas than CO2 over 100 years.
Research by the International Energy
Agency has suggested it’s technically
possible to avoid 75% of current methane
emissions in the natural gas supply chain,
of which as much as half could be avoided
at net negative cost. Despite this,
awareness within the industry is low. More
than 80% of international oil and gas
professionals surveyed by the EI last year
were unaware of the extent of the
possibilities to tackle the problem.
Read Louise’s blog on this issue at
blog.energyinst.org
Chartered Environmentalist (CEnv MEI)
Richard James Harper, Hoare Lea
Fellow (FEI)
Piers Guy, Vattenfall Wind Power
John Pitts, eJet
Haisheng Chen, Institute of Engineering
Thermophysics, Chinese Academy of
Sciences
Henrietta Stock, SES Water
Contact the EI Membership team on t: +44 (0)20
7467 7100 or e: membership@energyinst.org for
details on upgrading your membership, applying for
registration or for any other queries about your
EI membership.
Petroleum Review | March 2019 11
Middle East

OIL AND GAS

At an energy crossroads

Diversification is no longer a buzz exceed green action. Which way is
the region turning? Leftwards –
word in the Middle East’s oil and gas evolving into petro-allies and not
market. Michelle Meineke reports on victims of lower-carbon growth.
Black gold and gas will remain
how blueprints are being realised – crucial in the Middle East’s energy
for the better. basket up to 2050, at least. BP’s
2018 Energy Outlook expects the
region to be the largest oil producer
encompassing more technology
companies and financial
institutions (FI). The same applies
to maturing trading expertise.
There is an increased momentum
around plans to establish the first
independent Middle East oil
products benchmark, for example.
All efforts hone two goals – to

ADNOC’s al-Reyadah project
is the the first officially
inaugurated commercial-
scale carbon capture,
utilisation and storage
(CCUS) facility in the Middle
East and North Africa
(MENA) region and aims
to capture 800,000 t/y of
CO2 for EOR purposes
Photo: ADNOC
S
and dunes have transformed
into cities thanks to the
Middle East’s boom of
petrodollars since the mid-1900s.
Now the region is at an energy
crossroads that could – and should
– overhaul its status quo. Turning
left (metaphorically) means
embracing the great energy
transition that sees the growth of a
diversified energy basket, where
fossil fuels and renewables both
complement energy security.
Turning right means energy
producers make the right political
noises about lower-carbon growth
but green policies inevitably
and the second largest gas
producer up to 2040, accounting for
over 34% of global liquids
production and 20% of gas
production. Energy security
depends on it. The contribution of
non-fossil fuels will increase from
1% today to 8% in 2040.
Still, oil and gas markets will
grow differently as national oil
companies (NOCs), international
oil companies (IOCs), small and
medium-sized enterprises (SMEs)
and entrepreneurs broaden their
focus and asset profiles. This
extends to more sophisticated
partnerships at home and abroad,
bolster energy security and global
competitiveness.
‘The US may increase
production for two to three years
but, when that slows down, other
producers must be ready to ensure
the world is well supplied. Demand
is growing at a healthy rate and we
must continue discovering oil,’
explained HE Eng Suhail Mohamed
Faraj Al Mazrouei, UAE Minister of
Energy & Industry and President of
the OPEC Conference 2018, at the
Gulf Intelligence UAE Energy
Forum in January 2019. ‘Countries
that have invested in technology
and in increasing their output

12 Petroleum Review | March 2019

 Middle East

capacity will be able to take member is under intensifying Asian attraction

advantage of market share when it reputational pressure; the initial Deepening its foothold in Asian,
surfaces, perhaps at the expense of and very public aim was 4mn b/d European and African markets is
others who are losing significant by 2020. vital for the Middle East, especially
production. We want to make sure To the south-east, state-owned China. China is one of the world’s
that companies like Saudi Aramco Petroleum Development Oman biggest buyers of oil and one of the
or ADNOC... are not deterred from (PDO) is investing $20bn up to biggest importers of gas and LNG,
continuing to invest because of 2021, following a $5.8bn spend in while the Asian Development
inadequate returns. We don’t want 2017, to sustain long-term output. Bank expects energy demand to
to witness 2015–2016 again. That The sultanate’s particularly almost double in the Asia and
is our mission – to help keep the challenging and maturing oil fields Pacific region by 2030. This is gold
market in balance for all,’ added Al means EOR has played a pivotal dust for ambitious Middle Eastern
‘Fossil fuels Mazrouei. role in this success, establishing energy exporters who can leverage
account for Oman as a global leader in the field. their position at the crux of
Money matters Muscat turned the tables; a east-west trade and proximity to
a vital part hindrance was transformed into an the UAE’s Port of Fujairah, the
The investment outlook in the
of the energy Middle East is tentatively bullish – example of the country’s penchant world’s second largest bunkering
transition, for now. This is in part due to NOCs’ for innovation, lauded worldwide. hub.
so increased deeper state-stocked pockets and in Such investments will also be To the west, Arab Gulf exporters
part due to strict operational and critical to fully leverage the must sharpen their elbows to
upstream pay-roll cutting measures following potential of black gold’s favourite nudge the US, vying to capture the
investments the oil price plummet in 2014. cousins; gas and LNG. This year coveted Asian deals, off its
make sense, Rystad Energy expects nearly a should see an acceleration in the increasingly tall pedestal. Despite
from licensing quarter of projects – involving more Middle East’s re-engagement in one being a net energy importer since
than $240bn in greenfield of the world’s biggest energy- 1953, the Energy Information
rounds to investments that are being related juxtapositions; a region that Administration (EIA) says the US
enhanced oil sanctioned this year – to come from sits atop 40% of the world’s natural shale market will enable it to be a
recovery (EOR) the Middle East. At about $56bn, gas reserves pays expensive gas net energy exporter by next year.
projects. The this is six times higher than in and LNG import bills to meet This staggering change in fortunes
2018. Investments in gas domestic demand. extends to the gas and LNG
same applies to developments are also expected to Steps are being taken to reverse market. The US could challenge
creating long- soar from $1.7bn in 2018 to $30bn this trend as the Middle East – bar Qatar’s crown as the world’s
term strategic this year. This may ease Qatar, a first mover – revives biggest LNG exporter by 2022, the
partnerships; International Energy Agency (IEA) conversations to establish a IEA says. For now, the Middle East
concerns that sliding investments network of interconnected gas must charm Asia via its historic
allies are in recent years would trigger a pipelines and floating storage and alliances stretching back millennia
paramount supply crunch in the 2020s. regasification units (FSRUs). Nearly – think Silk Road – and track
amid today’s Hatem Al Mosa, CEO of the UAE’s half (44%) of respondents to a record of reliable deliveries.
shifting sands.’ Sharjah National Oil Corporation survey by the Middle East LNG ‘Never before have the energy
(SNOC), says: ‘Only investing in Institute said three steps, among ties between Asia and the Middle
Hatem Al Mosa, upstream [projects] when stresses others, are key to successfully East needed to be so robust – a fact
CEO of the UAE’s are low and funds are free-flowing establish a Middle Eastern LNG hub that stakeholders on both sides of
Sharjah National Oil causes major problems further by 2025 – build more LNG storage, the Indian Ocean are waking up to.
Corporation (SNOC) down the line. Major forecasters’ establish a Middle East LNG Be they public or private,
warnings that the oil market risks a benchmark price contract and stakeholders must collaborate on
supply crunch in the next few years remove gas subsidies. Momentum clarifying supply-demand
must be heeded. There is enough to tread these stepping stones will balances, technological
price volatility without us adding go up a notch as swelling demand advancements, joint local
to it through poor planning. Fossil pushes the decimal point on the capability and talent development
fuels account for a vital part of the receipt for LNG imports further to and ensuring geopolitical calm. We
energy transition, so increased the right. may be different countries in
upstream investments make sense,
from licensing rounds to enhanced
oil recovery (EOR) projects. The
same applies to creating long-term
Climate matters
strategic partnerships; allies are Stress points in the oil and gas industry are real – and intensifying.
paramount amid today’s shifting Energy consumption in the Middle East could rise by 54% up to 2040,
sands.’ estimates BP in its 2018 Energy Outlook, while the region’s population
Saudi Arabia has earmarked growth generally exceeds the global rise of 28% to 9.7bn by 2050.
$20bn in the next few years to Oman’s population is expected to nearly double (45%+) by 2050, to
maintain and possibly expand its 6.7mn, for example.
spare oil production capacity, with Pockets of frosty geopolitics and oil prices – be they catapulting or
the Kingdom’s current sustainable crashing – add to the unpredictable outlook.
capacity at 12mn b/d. The energy In the last quarter of 2018, oil prices rose sharply to $85/b before
giant said in late-2017 that it plans sliding by 37% to $54/b at the end of the year. Against this backdrop,
to spend $300bn over 10 years in the environmental drum bangs louder than ever as countries
upstream oil and gas projects and reconfigure energy strategies to support the Paris Agreement.
foreign partnerships. State-owned Such management efforts can’t come too soon. Germany’s Max
Kuwait Petroleum Corporation Planck Institute for Chemistry and the Cyprus Institute in Nicosia
(KPC) is spending $114bn in capex warn that high temperatures under the current climate scenario
over the next five years and an could make some areas uninhabitable from the mid-century
additional $394bn up to 2040, with onwards in the Middle East and North Africa. Economic and social
a new production target of crises would ensue. ●
4.75mn b/d by 2040. The OPEC

Petroleum Review | March 2019 13

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Oman’s Miraah project uses
concentrated sunlight to
generate 6,000 tonnes of
solar steam a day to support
EOR operations at the Amal
field
Photo: GlassPoint
different regions, but we all thrive
or fail together. No country is an
island when it comes to energy
security,’ comments Abd Malik
Jaffar, Regional Director, Petronas
Subsidiaries Middle East.
Merging worlds
Projects that merge the two sides
of the energy coin – fossil fuels
and renewables – are particularly
attractive to investors who are
keen to hedge their bets. Two
notable examples are Oman’s
Miraah project and the UAE’s
al-Reyadah project. Miraah, which
means ‘mirror’ in Arabic, uses
concentrated sunlight to generate
6,000 tonnes of solar steam a day
to support EOR operations at the
sultanate’s Amal field. The project
cuts carbon dioxide (CO2)
emissions by more than
300,000 t/y – the equivalent of
taking 63,000 cars off the road.
ADNOC’s al-Reyadah project is the
first officially inaugurated
commercial-scale carbon capture,
utilisation and storage (CCUS)
facility in the Middle East and
North Africa (MENA) and aims to
capture 800,000 t/y of CO2 for EOR
purposes.
Lower-carbon methods are also
being explored to comply with the
International Maritime
Organisation’s (IMO) 2020 ruling; a
point marked in red bold type and
underlined on stakeholders’
calendars. The ruling to reduce
sulphur limits in bunker fuels to
0.5%, from 3.5%, starts on 1
January 2020 (see Petroleum
Review, December 2018/January
2019). The ruling caught many by
surprise, as 2025 was the
industry’s preferred start date.
Ambiguity over the supply-
demand of compliant fuels and
policing methods sparked a blame
Middle East
Digital diamonds
Are energy stakeholders fully
embracing the world’s biggest
economic paradigm shift – the
digital toolbox of the 4th Industrial
Revolution? No, but they have
started uncovering digital
diamonds to bolster efficiency, cut
costs and encourage lower-carbon
growth. Digital savviness is no
longer a slim slice of the financial
pie; it really matters. Digitalisation
could unlock up to $2.5tn of
industry and societal value in the
global oil and gas markets in the
medium-term. Benefits include
reduced emissions and $170bn in
cost savings for customers,
according to the World Economic
Forum (WEF).
Many in the Middle East have
taken steps to leverage digital
benefits. More than half (57) of the
world’s 100 largest oil and gas
game; one that continues to burn. firms – several in the Middle East
Very lower sulphur fuel oil (VLSFO) – are using or have plans to use
and LNG bunkering tend to be predictive analytics, according to
environmentalists’ preferred Lloyds Register’s latest Technology
options. Radar Special Report (see Petroleum
‘There is no silver bullet for Review, February 2019). Predictive
post-2020 bunkering. The entire analytics are saving companies
value chain is still working out the $7mn on gas pipelines in the
logistics and associated economics. eastern US by forecasting failures,
But amid this myriad of and $325,000 per rig using
uncertainty, we do know one thing machine learning to predict
– VLSFO is a good bet for the drilling locations. Few can afford to
Middle East,’ details Chris Wood, give such savings the cold shoulder,
Managing Director at Uniper especially with oil prices in the
Energy DMCC. ‘Ensuring an $60/b range.
affordable and steady supply Every new tool comes with
means closer alliances between risks. Cybercrime cost the world
shipping companies, ports and almost $600bn, or 0.8% of global
upstream operators with the GDP in 2017, McAfee estimates.
region’s refineries, many of which Unsurprisingly then, energy
are modern and flexible facilities. stakeholders are evaluating the
Quick action and collaboration are inclusion of ‘digital sheriffs’ on
imperative. The effort will pay off their payroll. Realised threats drive
as it puts a very positive spotlight the reality home; the world’s new
on the Middle East’s ability to and largely invisible mafia is
adapt and thrive to global formidable. In 2017, the National
regulatory changes,’ Wood says. Industrialisation Company Tasnee,
The same must apply to the a privately-owned Saudi
looming change in aviation fuels, petrochemical company, and
especially for a region that is home Sadara Chemical Company
to some of the world’s busiest experienced cyber attacks. (See
airports. All links in the oil value Petroleum Review, February 2019,
chain, from producers to traders, for more on cybersecurity.)
must do their homework on how
to affordably and efficiently adapt A mixed bag
to the Carbon Offset and Reduction The outlook is multifaceted; simple
Scheme for International Aviation equations to success in the new
(CORSIA). The global CO2 offsetting energy basket remain elusive. But
scheme aims to reduce any annual so far, the historical epicentre of
increase in total CO2 emissions fossil fuels has smartly opted to
above 2020 levels, including change rather than be changed.
adjusting the fuels used. This is just the beginning of the
Mandatory compliance starts in search for the holy grail –
2027 (see Petroleum Review, affordable and low-carbon energy
November 2018). Proactivity will security while climbing the global
pay off – literally. Aviation counts ladder of influence. The next step?
for 20% of the UAE’s non-oil GDP Stride ahead with gusto. ●
alone, according to the country’s
General Civil Aviation Authority
(GCAA) in 2012.
Petroleum Review | March 2019 15
Middle East

T
hroughout 2018, US
President Donald Trump
urged Egypt, Saudi Arabia,
the United Arab Emirates (UAE)
and Qatar to provide troops and
funding to replace US forces in
Syria once Islamic State (ISIS) had
been defeated. Over that period the
Gulf States, who had sponsored
jihadist groups in Syria, signalled
that they were ready to restore
relations with Syrian President
Bashir al-Assad. Shortly after
Trump’s December 2018
confirmation that 2,000 US troops
will leave Syria, the UAE
announced it would reopen its
Damascus embassy, Kuwaiti
ministers suggested a ‘thaw’ in
relations with Syria, and the Arab
League appeared ready to re-admit
Syria to its ranks eight years after
its expulsion. Syria is now in a
‘post-conflict’ stage, Gulf
commentators observed.
Reconstruction in Syria, especially
the wrecked energy sector, is now
the priority.
Such reconstruction, and who
pays for it, may be an over-hyped
chimera. The repair and
development of Syria’s declining

Syria’s shifting sands

oil and gas resources will provide
little profit for operators beyond
financing the national or foreign
militias that control an installation
and allegedly giving a private cut
to the Assad family. International
sanctions against Syria will remain
in place for the foreseeable future
so long as the regime is supported
by Iran and its Hezbollah proxies.
Foreign energy companies that
abandoned their assets in Syria in
2011 in response to international
sanctions are not expected to
return anytime soon. Syria’s
readmission to the Arab League is
not a done deal either. Russian,
Iranian and the Gulf State interest
in reconstructing Syria and its
energy resources is a façade, local
analysts say privately. For these
powers, Syria is a springboard to
extend their influence throughout
the Levant and Mediterranean
regions.
Territorial control
Territorial control of the country
remains fluid. There is no certainty
about the degree of US withdrawal
from Syria as US intelligence
operatives are expected to stay.
Since 2016, Russia has twice
signalled its intention to leave
Syria but has remained and
consolidated control, via its
Russian and Chechen mercenaries,
over many energy installations.
Iranian militias are entrenched
around Damascus and other towns, NOAA satellite image of ISIS
often taking over homes of Syrians oil production
who have fled. Russia and Iran are
A reconstruction boom in ‘post-conflict’
Syria is not an immediate prospect,
writes Maria Kielmas.
vying to reorganise the Syrian
army. Russia wants to create a
centralised, quasi-Soviet system
with military districts and
overseen by security services. Iran
wants a dispersed militia like
Hezbollah in Lebanon. Both
countries are grooming generals to
succeed Bashir al Assad. Forces led
by Brigadier General Suhail
al-Hassan, favoured by Russia,
clash regularly with those led by
Maher al-Assad, President Assad’s
brother and Iran’s choice. Russian
and Chechen forces have clashed
with Iranian militias around
Hama, and have driven away
Iranian groups from the Israeli
border. The two countries are not
allies in Syria, Russian Deputy
Foreign Minister Sergei Ryabkov
has said.
Turkey wants a 32 km buffer
zone along the north Syrian border,
a plan supported by Trump, who
also wants US western allies to
help create it. But Ankara wants it
clear of the US’ erstwhile Kurdish
allies, the Peoples’ Protection Unit
Photo: NOAA (YPG), the militia of the Democratic
Union Party (PYD), whom it views
as aligned to the rebel Maoist
Kurdistan Workers Party (PKK) at
home. Turkey and Russia have
agreed on joint management of
strategic areas and Russian bases
around Latakia and Hama, and to
de-escalate the conflict in Idlib
Province, a jihadist stronghold.
Depleting fields
However, future investment in
damaged or abandoned oil and gas
fields faces huge technical
problems because of their rapid
depletion. Prior to the start of the
conflict in 2011, Syria produced
383,000 b/d of oil (down from a
1996 peak of 604,000 b/d) and
316mn cf/d of gas, half of which
came from non-associated fields.
About 25% of produced gas was
reinjected into oil reservoirs, while
90% of the remainder was used for
power generation. Fields in the
north-eastern Hasakah Province
and alongside the Turkish border
produce a heavy 12–26° API crude
with a high metal and sulphur
content from mainly carbonate
reservoirs with highly variable
porosities. Fields in the Palmyrid
region in the Euphrates river valley
produce a light 34–38° API crude
with low sulphur content from
sandstone reservoirs. The

16 Petroleum Review | March 2019


discovery of the Palmyrid fields in
the 1980s increased Syria’s oil
reserves from 1.5 to 2.5bn barrels.
But, by the early 2000s, the
younger fields had entered what
engineers called a ‘mid-life crisis’.
In 2006 the Omar, Thayyem and
Tanak fields, and 25 smaller
accumulations in the Euphrates
valley south of Deir ez-Zor and
operated by the Al Furat Petroleum
Company (whose 37.5%
shareholder and operating partner
was Shell) produced 145,000 b/d.
This was achieved through the
injection of 600,000 b/d of water,
of which 300,000 b/d was
produced together with the crude.
Poor connectivity between
reservoir sands and water meant
the reservoirs were not swept
properly and crude output fell to
90,000 b/d by 2011.
There were difficulties in
obtaining state-of-the-art
technology after 2004 when the US
imposed sanctions on Syria
because of its support of Hezbollah
in the Lebanon war. Operators
resorted to cheaper, low-salinity
water flooding in some fields but
believed that they only had a
10-year remaining production life,
when Syria would become a net oil
importer. A high water cut also
affected production in the
Hasakah region fields. Some
operators hoped exploration
would discover new reserves but
balked at Syria’s unattractive
contract terms. Shell considered
leaving the country.
Control of installations
After the foreign companies quit
Syria, many fields in Hasakah
Province fell under Kurdish militia
or Kurdish-Arab Syrian Democratic
Forces (SDF) control in 2012, and
produced up to 25,000 b/d by 2016.
Gulf State-backed Al Nusra, an Al
Qaeda offshoot, took control of the
Deir ez-Zor region in 2012 but was
ousted in 2013 by ISIS militias
moving in from northern Syria. Al
Nusra offshoot Hayat Tahrir
al-Sham, supported by Saudi Arabia
and Qatar, according to Iran, now
controls much of Idlib Province. ISIS
controlled the oil region until 2016
when it was pushed out by SDF
forces.
World Bank and Princeton
University researchers estimated
ISIS oil production over the period
by analysing visible infrared
imaging radiometer suite (VIIRS)
data from the NOAA/NASA Suomi
NPP satellite. The sensors captured
heat emitted by gas flares from
producing wells and this data was
used to assess oil production
volumes (see picture). These were
approximately 56,000 b/d from
July–December 2014, falling to an
average of 35,000 b/d through 2015
and 16,000 b/d in 2016.
Production targets
In May 2017, total Syrian oil
production fell to 8,000 b/d,
according to Oil Minister Ali
Ghanem. A petroleum engineer
formerly employed by Canadian
Suncor’s Syrian affiliate Ebla
Petroleum, Ghanem said in
December 2018, when oil output
was about 70,000 b/d, that end-
2019 production targets are
24.5mn cf/d of gas and 219,000 b/d
of oil. Specialists familiar with the
region deem these volumes
unlikely.
Ghanem hopes to call an
offshore exploration round in 2019
for ‘friendly nations’. Offshore
hydrocarbon prospects in Triassic
sandstones and Cretaceous
dolomites are highly rated. In 2015,
Russia’s Soyuzneftegaz signed for
two offshore blocks, but withdrew
the same year because of the
conflict. But it may return as, in
December 2018, Russian-occupied
Crimean Prime Minister Sergey
Aksyonov signed a deal with
Damascus for Chornomornaftogaz
to deliver offshore drilling
platforms and to create a joint
shipping company with Syria.
Oil revenue claims
Throughout the conflict managers
at producing oil and gas
installations paid off the controlling
militias through sales of oil and
especially gas to intermediaries
Middle East
who resold the fuel to the Assad
regime. Local populations in Deir
ez-Zor and Hasakah under SDF
control are now demanding a share
of these revenues. In late January
2019, the Democratic Autonomous
Administration, a PYD-controlled
political group, called for local
royalties to be paid countrywide.
‘Distributing Syrian wealth to
Syrian regions in a fair manner’, the
group said in a statement, is one of
its demands prior to peace
negotiations with Damascus.
Under a 2016 agreement
between Moscow and Damascus,
Russian military companies such as
Evropolis, the holding company for
the Wagner Group headed by
Evgeny Prigozhin, a friend of
Russian President Vladimir Putin,
receive 25% of oil and gas sales
revenues from the installations
they control. Russian and Chechen
mercenaries in Syria earn a
maximum of $6,000 monthly. They
are deployed in seven to eight-
month stints in Syria as well as
Ukraine, Central African Republic,
Mozambique and Venezuela. In
May 2018, Russian-led Syrian forces
attacked US troops outside Deir
ez-Zor. Over 200 of the attackers
were killed in the resulting firefight.
Iran has spent $6bn annually
since 2012 in propping up the Assad
regime, according to the United
Nations. Iranian President Hassan
Rouhani said the country faces its
worst economic crisis for 40 years
because of international sanctions.
It has also supplied 60,000–
100,000 b/d of oil to Syria under a
separate line of credit. So its stated
intent to repair the Syrian power
grid and build new power plants
may not materialise.
Repatriating jihadists
In November 2016, the UAE
together with Saudi Arabia and
Israel pushed for a grand bargain on
Syria between Trump and Putin.
The Syrian conflict could be
resolved if US sanctions on Russia
imposed after the 2014 Crimean
occupation were removed in return
for Russia pushing Iran out of Syria.
It failed. Damascus, Abu Dhabi and
Dubai host regular meetings on
investment in Syria but the only
result to emerge is the UAE’s intent
to repatriate its jihadist extremists.
China also wants to extradite an
estimated 5,000 Uighur jihadists
from Syria. Anthony Cordesman, a
strategist at Washington DC-based
Centre for Strategic and
International Studies (CSIS),
estimates there are 40,000 ISIS
fighters remaining in Syria. It seems
that Syria’s ‘friends’ want their
extremists first before financing
energy reconstruction. ●
Petroleum Review | March 2019 17
Middle East

BAHRAIN
20 wells to understand a play
properly. With offshore wells, [the
cost is] a minimum of $10mn, even
$20mn, per well, so it is pretty
costly.’
However, the find’s viability is
bolstered by being in shallow
waters. It could draw on the
technologies and practices of other
offshore fields in the Gulf, such as
development of Qatar’s offshore Al
Shaheen field by Maersk Oil in the
1990s. ‘Al Shaheen was a difficult
conventional field [to bring into
production]. Maersk made a
success of it, bringing it up to
300,000 b/d; it is a good
comparison as some of the
Government event
celebrating Bahrain’s first technology might be used,’
ever oil find in 1932 comments Mills.
Photo: Bahrain News Agency Meanwhile, Al Doseri cites the
Saudi Aramco-developed Manifa

Offshore shale challenge

‘I don’t think anyone is jumping at the field and the proposals
Bahrain’s unique offshore shale find it because we would need to see
could see the development of new the results, and if that looks
promising; even then there is a
extraction technology, writes longish road ahead to get an
Paul Cochrane. international partner and
negotiate a deal,’ says Robin Mills,
field, off Saudi Arabia’s northern
Gulf coast. ‘Manifa is close to shore
so they had to develop man-made
islands, which Bahrain could do,
but it will depend on who develops
suggested,’ he says.
Bahrain’s National Oil and Gas
Authority (NOGA) does not have
experience with offshore drilling
or shale, and has not given sole
concessions to IOCs in the recent

I
n April 2018, Bahrain
announced it had found an
estimated 81.5bn barrels of oil
and 390bn cm of associated gas in
the Khaleej Al Bahrain Basin,
which lies offshore to the west and
south of the archipelago-state, in
territorial waters between it and
Saudi Arabia. Bahrain’s first oil find
since 1932, the discovery is of
major economic significance to the
small Gulf state, which has been
less reliant on hydrocarbons than
its oil and gas-rich neighbours.
However, it is also of global
significance, being a unique,
conventional-unconventional
offshore shale find in shallow
waters. ‘Globally, there’s no similar
development, so Bahrain would be
the first to develop shale offshore,’
reports Abdulaziz Al Doseri,
Research Analyst, Economics &
Energy Studies, at the Bahrain
Center for Strategic, International
and Energy Studies (DERASAT).
With Bahrain running a budget
deficit, the government wants
production to start by 2023. One
year into the find, Halliburton and
Schlumberger are drilling two test
oil wells to determine the crude’s
quality, with the results to be
announced in 1Q2019.
So far, there has been no
interest from major international
oil companies (IOCs) in the find.
CEO of Qamar Energy, in Dubai. past. ‘The government is proposing
Halliburton and Schlumberger some sort of concession and
have classified the find as a ‘P50’. long-term contract as the Bahraini
‘At least 50% or more can be petroleum business model is not
recovered given the current like the private sector. We need a
conditions, but it could fluctuate. bigger profit margin to justify
Some officials have said the oil projects. The budget is based on
field is borderline conventional and $55/b, so any cost higher than that
unconventional, not being rock but [for extraction] is not worth it,’
like mud, so we’re not sure how says Al Doseri.
difficult it is to extract from such The resource is expected to be
geology. The government is exported as Bahrain does not have
optimistic that it will be cheaper a refinery configured for light
than fracking in the US,’ comments crude, and there is pressure on the
Al Doseri. government to get the project
Based on US fracking online as soon as possible to bring
experience, an estimated 5–10%, in revenues.
may be recoverable. With the kingdom’s GDP growth
sluggish (projected at 2.6% for 2019
Offshore challenge by the World Bank), ‘there is
The challenge with the field being pressure on the Bahrain economy
what Edgar van der Meer, Senior to boost production and the
Research Analyst at NRG Expert, in bottom line will perhaps dictate
London, calls ‘a one of a kind oil such decisions’, notes van der Meer.
find’ is that fracking technologies ‘As the time frame given is short,
have thus far been developed for there’s not the time to put
use onshore. ‘Nobody has yet regulatory amendments in place
produced unconventionals offshore. [re fracking] – but they could learn
There’s no reason not to do it, but from others’ experience.’
inevitably it is more expensive. This As the government and IOCs
adds another layer of complexity await the test drilling results, the
and caution, to get the appropriate potential of the find will be driven
drilling rigs and service vessels and by the cost of oil going forward. ‘If
so on.’ says Mills. oil prices went up, to $80 or $100/b,
Well costs and flow rates will there would be a lot more interest
determine the find’s commercial and push from the Bahrain side,’
viability, he adds. ‘In the US, it takes concludes Mills. ●

18 Petroleum Review | March 2019

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Middle East

YEMEN

L A brighter future?
ast year closed with a glimmer
of hope on the horizon for
Yemen, with the
announcement in December of a
ceasefire between the Houthi
rebels and the Yemeni government
and supporting coalition of Saudi
Arabia and the United Arab
Emirates after four years of civil
war that have led to a devastating
humanitarian crisis in the country.
As we moved into February 2019,
the ceasefire appeared to be
holding, with the main port of
Hodeidah, previously held by
Houthi forces, to be placed under
the control of the United Nations.
There are tentative hopes that a
longer lasting peace process might
be agreed, with the promise of
further round table talks early
in 2019.
Amidst this turbulent backdrop,
Austrian oil and gas company OMV
resumed its Yemeni E&P operations
in Shabwa Province in southern
Yemen in April 2018 and resumed
transporting oil by truck some 40
km to the Bir Ali pipeline, which
runs 204 km from Block 4 in south
Yemen to Block 14 to the east of the
country. OMV is the first foreign oil
producer in Yemen to restart oil
production since the shut-in of
March 2015 as the security
situation deteriorated and an
embargo was declared on the
Marib/Ras Isa oil terminal by the
Saudi-led coalition as it attempted
to liberate the port of Hodeidah.
Sector support
According to Terrence Fern,
Chairman and CEO of Petsec
Energy, a relatively new operator in
Yemen, the Saudi coalition has
‘since the beginning of 2018 stated
its intention to support the Yemen
oil industry by providing increased
security in Marib and Shabwah and
to secure the port of Hodeidah [on
the Red Sea], Ras Isa oil terminal’
and the 300,000 b/d capacity Marib
pipeline. Meanwhile, Yemeni
Minister of Oil and Minerals, Aws
Al-Oud, has sent all operators in the
country letters of directive to
restart production.
Fern points out that the
Minister, the Oil Ministry,
operators, sub-contractors, and
local tribal and administrative
leaders are ‘generally all supportive
of the restart’; however, ‘as a new
operator in Yemen, the
administrative review is slow’. On
24 January 2019 Petsec published
its 4Q2018 financial results, with
the report noting that: ‘Operations
at the company’s An Nagyah oil
field on Block S-1 continue to be
Photo: Shutterstock
A tentative ceasefire in Yemen and the $450mn developing the oil field,
whose production facility has been
first foreign operator restarting oil and ‘well maintained’ according to Fern
gas operations in the country, could and ‘remains in good condition,
with 20,000 b/d capacity’. He
signal a glimmer of light on the horizon continues: ‘A recent survey of
for the beleaguered state, writes wellheads, the pumping station,
generators, compressors, control
Priscilla Ross. room, pipelines and warehouse
confirmed there is no damage and
shut-in… [although] the operating the field can readily be restarted.’
environment in Shabwa Governate, Petsec also has an 85%
within which both S-1 and Block 7 participating interest in Al Barqa
are located, continue[s] to improve.’ Block 7 and has an agreement in
The company also reported that place to acquire the remaining 25%
‘OMV has maintained production from Kufpec, pending authority
of 14,000 b/d since April 2018 in approvals. The block contains the
the neighbouring Block-S2 from its undeveloped Al Meashar oil
Habban oil field.... [with] shipments discovery, with potential reserves
of some 500,000 barrels made every estimated up to 50mn barrels.
one to two months.’ Petsec has a further eight prospects
Petsec Energy reports that in Yemen, the four largest (Omega,
it remains ‘engaged with the West Irema, East Irema and Lead E)
Yemen administration’ and is promising over 1bn barrels
just waiting on the green light to exploration potential, according to
start operations at An Nagyah. the company.
It estimates it will cost between
$5mn and $10mn to do so, A positive note
producing at an initial 5,000 b/d. OMV’s restart of field operations in
Having commenced operations Yemen ‘bodes well’ for Petsec’s
in Yemen in 2014, and currently planned restart of the An Nagyah
holding a 100% working interest oil field. However, the security risk
in Damis Block S1 and Al Barqa remains. While OMV’s operations
Block 7, Petsec Energy plans to confirm the viability of an export
produce 10,000 b/d at An Nagyah, route via the government company
trucking the oil 70 km by road YICOM-operated Bir Ali export
eastwards to the West Ayad/Bir terminal, the alternative option of
Ali pipeline for export from the using the Ras Isa oil export terminal
Bir Ali terminal and/or via the at the port of Hodeidah is more
PetroMasila-operated Block 10, complex given the dispute over the
some 580 km by truck. port. But, negotiations permitting,
Some 15 production wells are operations could resume and the
currently shut-in at An Nagyah. The Marib pipeline could swing into
previous operator invested over operational mode. ●

20 Petroleum Review | March 2019

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Energy in conversation

R&D

Priorities for UK
energy research
In last month’s interview, EI President Malcolm
Brinded CBE FREng talked about the huge
improvement in the availability of energy to
populations globally, as well as the continuing
challenges for the most vulnerable and those in
growing urban centres. In this second instalment,
Energy World editor Steve Hodgson asks about
priorities for the UK energy research community.

Malcolm, I’d like to discuss UK
energy research priorities in the
global energy context. To increase
access to energy while
simultaneously addressing climate
change, where should the UK
prioritise energy research?
Research and innovation must be
our first ports of call for the biggest
energy and climate challenges the
world faces, especially where our
trajectory to a solution is still
unclear. And I should acknowledge
up front the UK’s proud history in
energy research and innovation –
some of the most significant
advances have been made in
universities and company
laboratories in Britain.
Building on this, we should
ensure we have a good
understanding of global challenges
– and then focus our research
where we have some intrinsic,
differentiated and sustainable
capability, and have a chance of
turning successful research into
real national competitive
advantage.
To what particular challenges
should the UK energy research
community address itself?
Let me start with the UK’s own
energy and climate challenges.
Power and light vehicle transport
often seem to claim 90% of the air
time – and I guess almost as much
of the research effort. But it’s
becoming easier to see the
pathways to lower carbon at
reasonable costs in both these
areas. So I suggest the two highest
priority challenges for researchers
to focus on for the UK are heat
– that’s residential, commercial
and industrial – and the built
environment – and, within that,
energy poverty.
In both these areas, the
technical and policy solutions are
much less clear.
What do you see as the biggest
challenges within these two areas?
First, energy poverty. I find it
shocking that 2.5mn households in
the UK are fuel poor – which
means at least 6mn people live in
fuel poor homes; and that
percentage has not materially
changed in the last 15 years. This
especially impacts the more
vulnerable in our society, where
23% of households of lone parents
with dependent children live in
fuel poverty.
Progress has been made in the
past few years with the increased
number of fuel poor who are now
in Energy Performance Certificate
Band D housing – which I would
suggest could be defined as ‘pretty
bad but not terrible’. But the 2030
target of all fuel-poor being in
reasonably efficient homes at
Band C or better is still a very long
way off.
Solutions could include
lower-cost insulation of new
homes, easier insulation retrofit to
old homes, or more efficient,
lower-cost boilers and heat pumps.
I don’t know the answers – but
very little R&D seems to be focused
on this chronic issue.
How about the other big challenge
you mentioned, decarbonising heat?
Heat is responsible for around a
third of the UK’s greenhouse gas
emissions. More than 80% of that
heat today comes from gas, coal
and oil – so this is not immediately
helped by decarbonising power.
Residential sector heat is only
one part of the picture – business
and industrial heat
decarbonisation will be key to
reaching the UK 2050 carbon
target. Again, this is an area where
the winning technologies are less
clear than for power and cars.
For example, it’s clear that heat
pumps, low carbon district heating
Malcolm Brinded CBE,
FREng, EI President and decarbonising the gas grid will
all feature, but the right mix is very
uncertain. What’s vital, in
developing technologies and
evaluating options, is to take a
system-wide view, recognising
that artificial intelligence (AI) and
big data enabled control systems,
innovative business models and
regulatory and pricing signals
could all play as big a role in
triggering impact at scale as
getting the right core technology.
I don’t know the pathways that
will win – I just know that
decarbonising heat needs more
intense R&D focus.
Are there any pathways that seem
particularly promising to you?
One is the potential for
substituting hydrogen for natural
gas in our existing gas network.
I’m impressed by the studies by
Northern Gas Networks and its

22 Petroleum Review | March 2019


partners into the potential for
converting the UK network to
hydrogen – first the H21 Leeds
City Gate project and then the
more ambitious H21 North of
England report. Decarbonising gas
with hydrogen has potential cost
and practical advantages to other
heat solutions, which are worth
exploring in detail.
Looking further afield now, what
do you see as promising areas for
UK research to have significant
global impact?
Let me first stress that UK
researchers should put much
more priority on the challenges of
low and middle-income countries
– because that is where the largest
impact on the climate challenge
can be achieved and where the
biggest business opportunities
will lie. That said, decarbonising
freight and aviation are
challenges for the entire world.
Freight transport already
causes 8% of all global greenhouse
gas (GHG) emissions; of which
three-quarters comes from trucks
and one-quarter from shipping,
with both growing very fast.
These are areas where it is much
more difficult to displace oil than
in light vehicle transport.
On trucks, the International
Energy Agency did an excellent
review of road freight transport in
2017. Their headline reference
case states that, with major
efficiency and fuel mix
improvements, GHG emissions
would ‘only’ increase by 55% by
2050. I say ‘only’ – but that’s pretty
hopeless when a 2°C world needs
at least a 50% reduction - not a
50% increase!
They then studied options to
radically reduce from this
reference case – such as less truck
activity via AI-enabled logistics
management; higher truck load
factors and consolidation to
bigger fleets; the use of advanced
biofuels and electrification; and
the introduction of ultra-efficient
vehicles, with autonomous
driving enabling very close
proximity convoys.
How about one of the most difficult
areas to decarbonise – aviation?
Absolutely. Aviation is especially
challenging – and although
representing only 2% of global
GHG emissions today, this is set to
triple by 2050, even allowing for
very significant fuel efficiency
increases.
There is also concern around
non-carbon dioxide warming
effects of aviation, from ozone and
vapour trails, which potentially
more than double the warming
Energy in conversation
impact compared to just the term drops in GHG emissions –
carbon dioxide. So the aviation which seem to me distinctly
sector needs radical change – to over-optimistic, given the
improve aircraft fuel efficiency backdrop of human aspirations in
and to accelerate the shift to emerging economies and less
alternative fuels. In fuels, developed countries that I
advanced biofuels seem the most described in my interview last
promising, but are little used so month (bit.ly/2ROCxAC). This
far. Turbine adaptation and adds to the urgency to focus on
materials technology will low carbon solutions best suited
presumably also be key. Surely to meet the needs for such
these are prime areas for UK economies whose energy usage is
researchers? increasing so rapidly.
All IPCC pathways rely on the
The challenges of meeting global significant use of GHG removal
energy demand and averting this century and achieving net
dangerous climate change will negative emissions from around
require herculean effort. Do you 2050 onwards. I think the
think the UK has the right significant overshoot pathway is
approach overall? probably more plausible.
I am truly optimistic about what As the recent Royal Society/
innovative technology and Royal Academy of Engineering
business can together achieve, report said, the most suitable GHG
given the right enabling policies removal measures to focus on are
and financial support. Let me probably afforestation and
stress, we are surely right to want reforestation; land restoration
the UK, the EU and the OECD to and soil carbon sequestration; and
maintain their records of bioenergy with carbon capture,
improving energy efficiency and usage and storage (CCUS).
reducing GHG emissions at pace. The IPCC report perhaps
However, that’s almost a sideshow underestimates the contribution
in terms of where the world’s that CCUS could play in reducing
climate future will be played out. GHG emissions from coal and
Look at the IEA forecasts. Even gas-fired power generation, and
on its ‘New Policies’ scenario, the from industrial processes in the
world’s energy demand is still period to 2050. This would enable
expected to grow by over 25% by the costs of CCUS technology to be
2040, driven by development in driven down. But of course, this
Asia-Pacific, Africa and South requires rapid roll-out of not just
America. The real priority is to demonstration or one-off CCUS
find lower-carbon routes for this projects, but of CCUS on an
growth, which surely represents a industrial scale.
major opportunity for UK
research and for UK-based What are your takeaways from all
entrepreneurs and investors. these challenges? And where does
I gave evidence last month to UK energy research fit in?
the Commons Science and In prioritising UK energy research,
Technology Select Committee on we must look at global, not just
just this point. That the UK, needs, and at where energy
government’s industrial and clean usage and emissions are set to
growth strategies could achieve grow most rapidly. We should
more for the UK economy and for focus on supporting early-stage
overseas development, and much entrepreneurs with genuinely
more in terms of cost-effective disruptive and scaleable solutions
global GHG emission reduction, which address the challenges of
by setting their sights beyond the emerging economies. And I would
UK’s shores and supporting again reinforce the significance of
early-stage innovative start-ups CCUS – where the UK has the
focusing on the energy and potential to be a pioneer,
transport challenges of lower and developing a whole-system
middle-income countries. capability that could be a
significant export, particularly
And what are your thoughts on given the major need for CCUS for
how the IPCC 1.5°C report fits into a 2°C, and especially a 1.5°C world.
this? ●
It sets out unequivocally that a
1.5°C ecosystem is much better
than a 2°C one – 99% of coral reefs
dying in a 2°C world is the
starkest call-to-arms one could
have.
However, nearly all the IPCC
pathways to achieve 1.5°C assume
massive and very rapid short-
Petroleum Review | March 2019 23
Geopolitics
ENERGY TRANSITION
Caution: new energy
order ahead
The US shale revolution, climate change and the
prospect of ‘peak oil demand’ herald a new
energy order, according to Michael Bradshaw,
Professor of Global Energy, Warwick Business
School (WBS).
T
wo developments are
undermining the
foundations of the existing
energy order. First is the shale
revolution that has transformed
the place of the US in the global
energy system. Second is the
unequivocal evidence of human
impact on the earth’s climate
system and the realisation that
rapid and significant action is
required if we are to avoid the
most catastrophic impacts of
global warming.
The two developments promote
countervailing tendencies. The
shale revolution is heralding an
age of fossil fuel abundance, while
As the single the pressing need to mitigate
greatest source greenhouse gas emissions means
of anthropogenic that the world must transit away
from fossil fuels to a low carbon
carbon energy system. The two tendencies
emissions, there are colliding in ways that are
must be rapid challenging old assumptions and
‘decarbonisation’ creating a new energy order.
of the global Age of abundance
energy system. In the last decade, the shale
This means revolution in North America has
fossil fuel gained rapid momentum and has
transformed the role of the US in
consumption the global energy system. The US
must peak, Energy Information
very soon, Administration’s (EIA) Annual
and thereafter Energy Outlook 2019 charts how
the US will become a net energy
decline rapidly to exporter in 2020, having been an
achieve net zero importer since 1953.
emissions by the The ban on crude oil exporters,
2050s. imposed in 1975, was lifted in
2015; and the following year the
US exported its first cargo of LNG.
This does not mean that the US
won’t have to import oil, and even
some gas, but it is changing the
dynamics of both markets. The
rapid growth of US light tight oil
(LTO) has challenged the position
24 Petroleum Review | March 2019
would limit global warming by the
end of this century to less than 2°C
and closer to 1.5°C.
Late last year (2018) the
Intergovernmental Panel on
Climate Change (IPCC) published a
report explaining the impacts of
global warming above 1.5°C and
made clear the possible emission
pathways to achieving the Paris
of OPEC, which is fast losing its Agreement.1 A few weeks later, at
ability to influence the global oil COP24 in Katowice, Poland, the
market. At the same time, as the US nations of the world agreed on the
LNG sector draws on a continental ‘rule book’ needed to realise the
gas market, it is introducing promises made in Paris. However,
greater flexibility and the initial Nationally Determined
competitiveness in this fast Contributions (NDCs) fall well
globalising arena. short of what is required and there
At home (in the US), abundant is a pressing need to ‘ratchet up’
gas and liquids supply is driving global climate ambitions. But one
coal out of the power sector and thing is clear – as the single
promoting a renaissance in greatest source of anthropogenic
petrochemicals. Abroad, this carbon emissions, there must be
newfound ‘energy dominance’, to rapid ‘decarbonisation’ of the
use the term favoured by the White global energy system. This means
House, is impacting on US foreign fossil fuel consumption must peak,
policy with, as yet, unclear very soon, and thereafter decline
consequences. The question now rapidly to achieve net zero
being asked is: how far can the emissions by the 2050s. Fossil fuels
shale revolution travel? Will it must be replaced by low carbon
result in a similar change in power, and industry and transport
fortunes elsewhere? The answer to must also become low carbon.
that is unclear, but already the The challenge is immense and,
narrative has changed from a although ‘clean growth’ will create
world struggling with the prospect new opportunities, it also presents
of peak oil supply, to a world a threat to the incumbent energy
contemplating global peak oil system. This was apparent in
demand. Katowice when the US, Saudi
Arabia, Russia and Kuwait refused
Climate change and decarbonisation to ‘welcome’ the IPCC report. It is
Since the 1990s the UNFCCC becoming clear that future
(United Nations Framework competition will not be over access
Convention on Climate Change) to fossil fuels, but over what
has been warning that human remains of the global carbon
activity was having an increasingly budget in a carbon-constrained
negative impact on the world’s world.
climate. With each round of
evidence gathered, the warnings Challenge for producer economies
came with greater certainty and Just as there is growing acceptance
more significant impact. Yet carbon of the need for more action on
emissions have continued to rise, climate change, so the geopolitical
the concentrations of carbon consequences of the low carbon
dioxide (CO2) in the atmosphere transition are becoming clearer. It
have increased, as has the global is relatively easy to think of a
temperature compared to the global energy transition and
world before the industrial generate scenarios to achieve the
revolution. In 2015, 174 countries required rate of decarbonisation,
and the European Union agreed in even if there is a need for
Paris to set in train policies that technologies that have yet to be

deployed at scale, such as carbon
capture and storage (CCS).
However, the incumbent system
is a cornerstone of the global
political economy, with strong
vested interests. A recent study by
the International Energy Agency
(IEA) examined what the changing
energy dynamics mean for major
oil and gas exporters.2 The IEA
calculated that the difference in oil
demand between its ‘New Policies’
scenario, which includes pledges
made under the Paris Agreement,
and the ‘Sustainable Development’
scenario that constrains warming
to 2°C, would lead to a long-run oil
price in the $60–70/b range that
would mean that oil and gas
income never returns to the
2010–2015 levels, leading to a
cumulative loss in revenue of $7tn
over the period to 2040.
There seems to be an emerging
school of thought that the
combination of abundant supply
and carbon constraints will
produce a future of ‘lower forever’
that will see development of only
the most cost-competitive oil and
gas resources. The narrative
surrounding future oil and gas
demand now talks of ‘unburnable
carbon’, ‘stranded assets’, ‘carbon
lock-in’, ’divestment’ and ‘transition
risk’. In an industry that makes
multi-billion dollar investments
that must pay back over decades,
the impact of decarbonisation on
future demand and price is now a
critical uncertainty.
National champion challenges
The aforementioned study by the
IEA, and a more recent study by its
sister organisation IRENA,3 make
clear that the biggest losers in the
coming energy transition are the
so-called ‘fossil fuel producer
economies’. It remains unclear how
they will respond to the new
energy order.
Some, such as the Gulf States,
seem to have a two-track policy of
increasing production to ensure
that their assets do not become
stranded, while using their oil and
gas rents to diversify their
economies. At the same time, they
are promoting efficiency and low
carbon energy at home to preserve
their exportable surplus of fossil
fuels.
Ironically, recognition that
reserves in the ground may not be
worth more in the future may lead
to over-supply that will push down
the price, reducing income; while
seeking to constrain supply to push
up the price will encourage
competition and result in a loss of
market share. But, prolonged
periods of high oil and gas prices
will drive demand destruction as
consumers seek alternatives. The
harsh reality is that the producer
economies must now plan for the
new energy order or face economic
and political instability when the
oil and gas rents decline and
eventually disappear.
The real challenge is that
nobody knows how quickly this is
going to happen. What is worrying
is that some producer economies
are still in complete denial –
Russia, for example, seems to have
an energy strategy based on
increased oil and gas production
and exports. While it has plentiful
gas reserves, it is oil exports that
generate the bulk of the
government’s revenues and future
oil production is likely to be
expensive.
The national champions of the
producer economies face a
particular challenge as they were
created to harvest the resource
wealth of their host states and are
likely to struggle to deliver in the
increasingly competitive new
energy order. This may well create
opportunity for the international
service companies, but many of
these states are under sanctions
and/or present a high political risk.
All of this highlights that the
energy transition is going to be a
bumpy ride and that falling
demand for fossil fuels will create
new geopolitical tensions that will
demand careful management.
The future for IOCs
The various forecasts and scenarios
produced by the international oil
companies (IOCs) reflect the
growing uncertainty over future
demand for oil and gas. At the
same time, their shareholders are
demanding that they make clear
the potential impact of climate
change policy on their business
and their plans for the future.
An early response was to
expand their involvement in
natural gas in the belief that it had
a brighter future as a ‘transition’
fuel to a low carbon future. That
remains to be seen, but for gas to
stay in the mix it must be cost
competitive in the face of
renewables and address the
problem of fugitive methane
emissions. Even then, its future is
limited without CCS. Beyond that
the responses are varied. Some do
not see global oil demand peaking
before 2040 but accept that the
future will demand cost
competitiveness, and their strategy
is to improve their performance,
technically, financially and
environmentally to be the most
competitive. Others see peak oil
demand in the 2020s or 2030s, and
accept the need to reposition
Geopolitics
themselves for the new energy
order and are seeking to invest in
new energy and its supporting
infrastructures. The two
approaches are not mutually
exclusive, but it remains to be seen
if IOCs have the skill-sets necessary
to thrive in a carbon-constrained
world.
New geopolitical landscape
When it comes to energy futures,
In an industry the only thing that is clear is that it
that makes will not be business as usual. There
is good reason to think that the
multi- current energy transition will be
billion dollar different from those in the past.
investments that First, it is driven by the purpose of
must pay back reducing global emissions. Second,
the rate at which the cost of low
over decades, carbon alternatives are falling is
the impact of adding a growing sense of
decarbonisation dynamism. And third, there is
on future growing political commitment that
can only be reinforced as evidence
demand and of extreme weather events and a
price is now changing climate gathers.
a critical The energy transition is
uncertainty. generating a new geopolitical
landscape, which itself may act as
an impediment to progress. The
emphasis here has been on the
challenges facing the incumbent
fossil fuel economy. However, the
emerging low carbon economy
comes with its own geopolitics
related to conflict over critical raw
materials, control over ‘clean tech’
and the new independencies
associated with electricity grid
interconnection.
In the final analysis, it is all too
easy to demonise the fossil fuel
economy and be overly optimistic
about the pace of progress of the
low carbon transition. What is
required is a clearer understanding
of the threats and opportunities
and winners and losers in the
coming new energy order. ●
1. Global warming of 1.5 oC: Summary for
policy makers. IPCC, WMO, Geneva, 2018.
2. Outlook for producer economies 2018:
What do changing energy dynamics mean
for major oil and gas exporters? IEA, Paris,
2018.
3. A new world: The geopolitics of the energy
transformation. IRENA, Abu Dhabi, 2019.
Petroleum Review | March 2019 25
Energy security
GEOPOLITICS
Moving goal posts
In the geopolitics of oil and gas, one
truth holds eternal: the energy security
picture has moving goal posts, writes
Gordon Cope.
O
il and natural gas is vital to
all modern economies.
Those who have it
manipulate those who don`t. And
those who need it are often
compelled to strike bargains with
producing nations.
Over the last decade, the
unconventional shale revolution
has disrupted traditional market
relationships globally. Geopolitics,
in turn, have followed suit.
Chinese growth
China’s spectacular growth is
reflected in its insatiable demand
for oil and gas. In late 2018,
Chinese officials reported that
crude imports had risen to
10.48mn b/d, a 15.7% increase over
the previous 12 months. In
addition, LNG imports had spiked
32%, to 90.5mn tonnes, as the
government switched homes and
industries from coal to gas.
The fact that China is a major
energy importer impels the
country to seek agreements with
producing nations to guarantee
supplies. This has led its state
Photo: Shutterstock companies to invest in assets as
26 Petroleum Review | March 2019
widely diverse as Canada and
Venezuela.
Producing nations, however, are
also beholden to China’s prospects.
The trade war between the White
House and Beijing is having a
negative impact on Chinese
commerce. Should the current
90-day ceasefire expire without an
agreement in place, commercial oil
demand in China could shrink,
renewing the glut that led to lower
oil prices and once again putting
economic pressure on producing
countries that rely on crude for the
majority of their income.
US relations
Prior to the production of
unconventional shale in the
country, US geopolitical concerns
largely focused on ensuring
security of supply from the Middle
East. They did so by building a solid
relationship with Saudi Arabia and
neighbouring Gulf nations.
According to the Energy
Information Administration (EIA)
however, the US is producing
approximately 12mn b/d of oil and
over 88bn cf/d of gas, and is set to
become a net energy exporter in
2020.
That said, traditional
relationships are still very
important. In spite of the grisly
murder of journalist Jamal
Kashnoggi in Saudi Arabia’s
Turkish Embassy, the Trump
administration has refused to
publicly condemn the regime,
rationalising that such a move
would push the country into the
arms of the Russians.
The US is also looking to use its
new-found export muscle to
influence policy in Europe.
Gazprom’s Nord Stream 2 pipeline,
currently under construction,
expands the original gas system
that runs under the Baltic Sea from
Russia to Germany. When it is
completed in 2020, the 1,200 km
line will double the system’s total
capacity to 110bn cm/y.
The US worries that the pipeline
will give Russia expanded leverage
over energy supplies in Europe.
Prior to a 2018 NATO summit in
Brussels, Trump admonished
Germany for supporting Nord
Stream 2. Germany has not
backtracked, but has expressed an
interest in diversifying sources,
including building LNG import
terminals and signing deals with
US LNG suppliers. While detractors
see Trump’s criticism as a pretext
to sell more US gas, previous US
presidents, including Bush and
Obama, expressed similar
concerns.
The Trump administration’s
trade war with China is also having
a domestic impact. A 25% tariff on
imported steel is raising the cost of
some pipeline projects. Plains All
American Pipeline had ordered
pipe from Corinth Pipeworks in
Greece for its Cactus II line prior to
instigation of the tariff. It
requested an exclusion, but was
denied, with the US Commerce
Department ruling that suitable
material was available from
domestic suppliers.
Mexican politics
Mexico, which was well on the way
to seeing its oil and gas sector
being rejuvenated by privatisation,
is attempting to reel it back in.
Andres Manuel Lopez Obrador
(AMLO), a left-wing populist,
successfully campaigned on the
promise to review the opening of
the sector to international
investment. Upon taking office as
president, he cancelled two
planned auctions.
AMLO also exhorted companies
that have already won offshore
permits to expedite oil production,
adding that there will be a
three-year ‘truce’, without
specifying further details. While
firms operating in shallow waters
have already begun pumping new
oil (Eni recently began production

at its 2bn barrels of oil-in-place
Mixton project in the Bay of
Campeche), most deepwater
projects take a decade before first
oil flows. A three-year deadline
places unrealistic expectations on
the industry and compromises the
sophisticated technologies and
deep pockets necessary to operate
in Mexico’s deep waters.
Venezuelan freefall
Meanwhile, Venezuela is in
freefall, its disastrous policies
destroying both the oil and gas
sector, and the country’s economy.
According to OPEC statistics,
Venezuela’s output was 1.1mn b/d
in November 2018. Thanks to years
of chronic under-investment in
fields and infrastructure, output is
expected to decline at
approximately 26% through 2019.
Although Russian and Chinese
firms have made emergency loans
in exchange for exports and assets,
the economic collapse is expanding
throughout the entire country. A
significant portion of the
population is starving, and
millions have fled to neighbouring
countries, seeking relief. The
Trump administration has placed
sanctions against President
Maduro’s government (see p8), and
the US Department of Justice has
thrown numerous Venezuelans in
jail for fraud and money
laundering. In late January 2019,
Juan Guaido, President of the
opposition-held National
Assembly, appointed himself
Interim President. Numerous
nations, including the US,
recognised his legitimacy.
Qatari LNG focus
Qatar exports over 80mn t/y of
LNG, one quarter of global trade.
The country recently announced
that it will boost capacity by
approximately 30% over the next
five to seven years.
On the diplomatic front, Qatar
has been at loggerheads with Saudi
Arabia and neighbouring countries
over its support of the Muslim
Brotherhood and the Al-Jazeera TV
network. In December 2018, Qatar
announced that it would withdraw
its membership from OPEC,
starting on 1 January 2019.
Government officials stated that
the country would focus on its
long-term LNG growth strategy.
According to Reuters, energy
officials in the US have been
discussing with Qatar the potential
for supplying Europe with LNG as a
counter to Russia’s dominance.
Qatar is also keen on expanding
into the US LNG sector – it recently
announced a deal with ExxonMobil
to jointly invest in the latter’s
$10bn Golden Pass LNG project in
Texas – creating a one-two punch
with the potential to supply gas
internationally at competitive
prices.
Russian success
Russia’s latest figures show that
it produced an average of
11.16mn b/d of crude in 2018.
Arctic LNG is now being
transported on a regular basis to
destinations around the world. It
has been working successfully
with OPEC to prop up the price by
participating in production cuts.
The new ESPO pipeline is
delivering an additional
600,000 b/d of crude to China.
Indeed, by most metrics, the
country’s oil and gas sector is a
shining example of success.
Unfortunately, however,
President Putin’s administration
has pursued a war in Ukraine,
seized Crimea, and allegedly
meddled in elections abroad (most
notably that of the US). In
retaliation, the US and allies
imposed extensive sanctions
against Russian energy companies
and people associated with the
Putin administration.
In an effort to reduce its reliance
on Russian gas, Poland has inked
several deals to import LNG,
including one with Venture Global
of the US to displace 10bn cm
when a deal with Gazprom expires
in 2022, and a long-term
agreement with Cheniere Energy
to deliver 40bn cm/y after 2023.
Still, Russia is having
geopolitical success. Its growing
influence in the Middle East is
exemplified by the warm reception
between Putin and Saudi leader
Crown Prince Mohammed bin
Salman, at the recent G20 summit
in Argentina.
Iran sanctions
Meanwhile, Iran is feeling the long
arm of US might. In 2018, the
Trump administration stepped
away from the nuclear deal and
again imposed sweeping sanctions,
reducing the country’s exports to
around 1mn b/d. (See p28 for more
details.)
Until the sanctions are resolved,
Iran’s oil and gas sector faces
significant pressure.
Saudi struggles
Saudi Arabia, the largest crude
producer in the Middle East and
second largest in the world, is
being pummeled by geopolitical
gales. Saudi leader Crown Prince
Mohammed bin Salman has been
consolidating power under his own
tribal branch and is planning an
initial public offering (IPO) of
Energy security
Aramco. In addition, he has been
leading a proxy war in Yemen
against Iran and an economic
boycott against Qatar. If that
weren’t enough, he has been
accused of orchestrating the
murder of journalist Jamal
Khashoggi. International
condemnation has rained down
upon the country and regime.
Still, Saudi Arabia possesses
tremendous leverage that it is
using to bolster its fortunes abroad.
Saudi Aramco has announced
investments of up to $100bn in
refinery and petrochemical plants
in China, India and Pakistan. It is
working with OPEC and non-
members like Russia to stabilise oil
prices through cuts.
Canadian troubles
Canada’s oil and gas companies
stagger from one woe to another,
largely thanks to federal animosity
toward the sector. Since being
elected Prime Minister, Justin
Trudeau has dealt several severe
blows, including cancelling the
approved Northern Gateway
pipeline, beating TransCanada’s
Energy East Pipeline into oblivion
with red tape, and battering
virtually every other potential
project with complications. Kinder
Morgan, champion of the Trans
Mountain expansion (TMX), threw
its hands up in defeat and obliged
the federal government to buy the
C$4.5bn ($3.4bn) pipeline in a
last-ditch effort to keep it alive.
Trudeau has since been hoisted
by his own petard by a Federal
Court of Appeal, which decided
that the National Energy Board
(NEB) had not consulted
indigenous peoples over TMX in a
significant way, or considered the
impact of increased marine traffic
on whales. As a result, Rachel
Notley, the Premier of Alberta and
former political ally, has been
forced to impose restrictions on
provincial production in order to
reduce the glut and reverse
discount rates on Canadian oil that
had reached $45/d.
Future prospects
Looking ahead, in the short term
expect Canada to blunder on with
controversial federal regulation
and Venezuela to flounder in
political disarray.
China will persist in extending
its global reach to keep supplies
flowing. Meanwhile, Saudi Arabia
will probably continue to buy itself
out of trouble.
While, both the US and Russia
will stir the pot in everyone else’s
kitchen. ●
Petroleum Review | March 2019 27
Geopolitics
IRAN
O Re-imposed US
n 8 May 2018, continuation
of the international
agreement concerning
Iran’s nuclear activities, known as
the joint comprehensive plan of
action (JCPOA), was thrown into
doubt when President Trump
announced the US would cease
participation.
The JCPOA was an agreement
reached in 2015 between China,
France, Russia, the UK, the US,
Germany, the European Union
(EU) and Iran, that provided for
Iranian sanctions relief in
exchange for verifiable
curtailment of the Iranian nuclear
programme. The first tranche of
sanctions relief became effective
on 16 January 2016. Almost all UN
and EU sanctions on Iran were
lifted. The extra-territorial aspects
of the US sanctions (secondary
sanctions), which sought to
prevent non-US persons from
doing business with Iran, were
also relaxed. But US persons
continued to be restricted in their
dealings with Iran.
Following a 180-day wind-down
period, the US re-imposed
sanctions on Iran’s energy sector
with effect from 5 November 2018.
US Secretary of State, Michael
Pompeo, said re-imposition of
sanctions was ‘an unprecedented
campaign of economic pressure’.
However, other signatories to the
JCPOA, including the EU, expressed
regret at this unilateral action by
the US.
Which sanctions were re-imposed?
As of 5 November 2018, more than
700 individuals, entities, aircraft
and vessels were added to the US
sanctions list, many of which are
involved in the production and
export of Iranian oil, gas and
petrochemicals. Once again, many
non-US persons were prohibited
from engaging in a significant
transaction for the purchase,
acquisition, sale, transport or
marketing of petroleum or
petroleum products or
petrochemical products from Iran.
All US persons must comply
with the US sanctions on Iran,
including all US citizens and
permanent resident aliens, all
persons within the US, all US
incorporated entities and their
foreign branches and foreign
subsidiaries owned or controlled
by US companies. In addition,
non-US natural and legal persons
who conduct prohibited activities
again risk becoming the subject of
US secondary sanctions and
finding themselves cut-off from
28 Petroleum Review | March 2019
sanctions fall-out
and exports fell more than 60% in
What has been the impact of the December 2018.
re-imposition of Iran sanctions by There has been a less severe
decline in Iran’s production figures.
President Trump? John Gilbert, Reuters reported decline in Iran’s
Partner, and Robert Meade, a Senior production from 3.82mn b/d in
April 2018 to 2.85mn b/d in
Associate, in Bracewell (UK) LLP’s December 2018. By comparison,
dispute resolution team examine this according to OPEC, Iran produced
2.67mn b/d in 2013 at the height of
complex issue. the pre-JCPOA sanctions. As
production significantly exceeds
export, Iran will likely need to store
the US financial system and
significant quantities of crude once
unable to deal with US persons.
again.
Exceptions to the rule
Winding down
The US has put significant
reduction exemptions in place
Since the US Re-imposition of sanctions caused
withdrew from a number of energy companies to
in respect of the import of
wind down their Iranian business
Iranian crude oil to China, the JCPOA, in the run-up to 5 November 2018.
India, Italy, Greece, Japan, South exports of In May 2018, Total pulled out of the
Korea, Taiwan and Turkey.
These exemptions permit those
Iranian South Pars 11 gas project. In June
crude have 2018, Maersk Line announced that
countries to continue buying
it would cease loadings out of Iran
Iranian oil on a reduced basis significantly from end-August 2018.
for a six-month period. reduced. Some of those able to take
According to advantage of the significant
EU blocking statute
Bloomberg reduction exemptions continue to
To uphold the JCPOA and protect
import Iranian oil, but it remains to
its Member States from US Finance, in be seen how long this will last. The
enforcement action, the EU April 2018 Chinese state-owned energy
revitalised the ‘Blocking Statute’,
which seeks to protect EU nationals
Iran exported company CNCP is reported to be
2.496mn b/d; taking Total’s stake in the South
and companies from the extra-
Pars 11 gas project.
territorial effect of US sanctions on by December What’s next? President Trump’s
Iran. The Blocking Statute puts EU 2018, this had administration has clearly stated
companies in a difficult position. If
they continue their business with
reduced to just its ambition to reduce Iranian
452,000b/d. exports to zero. US Secretary of the
Iran in breach of the re-imposed US
Treasury Steven Mnuchin has said
sanctions, they risk being made the
pressure from the US will continue
subject of US secondary sanctions.
to mount.
If they decide to exit Iran as a
Recent history suggests that this
result of the re-imposed US
could lead to significant penalties
sanctions, they risk breaching the
being imposed (BNP Paribas was
Blocking Statue.
fined almost $9bn in 2015).
International energy companies
Crude exports impact
with business in the US, or that
Since President Trump announced
utilise the US financial system, are
US withdrawal from the JCPOA,
unlikely to risk business with Iran
exports of Iranian crude have
unless the sanctions are once again
significantly reduced. According to
relaxed. ●
Bloomberg Finance, in April 2018
Iran exported 2.496mn b/d. By
December 2018, this had reduced
to just 452,000 b/d.
On 5 November 2018, US
Secretary of State Pompeo said:
‘More than 20 importing nations
have zeroed-out their imports of
crude oil.’ Decline has continued
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Seismic
MARKET
Growing confidence
Leaders in the marine seismic survey industry suggest the sector
is showing a continued recovery despite a tough market.
Robert Stokes reports.
R
ecovery in the global marine
seismic survey market for oil
and gas E&P is entering its
third year, with the surviving
leaders in the sector starting to
sound more optimistic after
making painful adjustments.
London-based consultancy
Visiongain values the global
marine seismic acquisition and
equipment market at $5bn in 2018,
far below the $8bn it estimated in
2014, but nearly 15% higher than
in 2017. This market is set to grow
at a compound annual growth rate
(CAGR) of 4.4% over the period
2018–2022, according to market
analyst TechNavio.
The story since 2010 was at first
about expanding seismic vessel
fleets and capabilities, and
investment in costly R&D to claim
technology leadership. It then
became a familiar cyclical tale of
overcapacity, cost cutting and
sector consolidation amid much
lower oil prices. Only 22 3D survey
vessels were active by summer
2018, compared with about 29 the
previous year and more than 80
before 2014.
Greater optimism
With oil prices now more than
double the low in 2016, oil and gas
operators are growing in
confidence and set to increase
capital and operational
expenditure in 2019. The leading
marine seismic survey and
equipment companies are also
more optimistic than a year ago.
Shearwater GeoServices CEO Irene
Waage Basili told Petroleum
Review: ‘We are upbeat. The market
is catching up for the loss of
valuable exploration time.’ The
Norwegian-based company was
quick out of the starting blocks last
November in completing the
acquisition of the marine seismic
acquisition assets and operations
of Schlumberger’s WesternGeco
business.
‘We are now experiencing an
increasing number of enquiries
with high likelihood of [contracts]
materialising. The market is
tightening and we see a positive
30 Petroleum Review | March 2019
invested in 2018, following
$213mn in 2017. PGS’ multi-client
revenues last year were $654mn,
22% greater than in 2017, and
multi-client late-sales revenues
were a record $371mn, 58% up on
price trend,’ Basili continued. She
the previous year. PGS, which
reported seeing a general pick-up
positions itself as the only
of activity in all major regions and
fully-integrated marine seismic
increased demand from oil
provider, reported total revenues of
companies across the board, with
$874mn. Hotspots for PGS’
oil majors in the vanguard. Interest
multi-client library activities
extends across the full range of
include the Santos Basin (Brazil),
acquisition services, including 3D,
offshore Sabah (Malaysia) and the
4D and ocean bottom cable (OBC)
eastern Mediterranean.
seismic. Market prospects in the
TGS of Norway, which provides
longer-term are even more
‘The market multi-client data to E&P companies
encouraging, she predicted: ‘Oil
worldwide, saw continued
companies need to make is catching up improvement in net late sales –
significant investments in marine for the loss $152mn in 4Q2018, 6% higher than
seismic acquisitions if this industry
is going to deliver on satisfying the
of valuable 4Q2017. Net revenues were
exploration $188mn in 4Q2018, 20% higher
world’s energy needs. Hence, we
than in 4Q2017. TGS CEO Kristian
are confident that capex on marine time.’ Johansen stated: ‘While there
seismic will pick up considerably in
continues to be some uncertainty
the next couple of years.’ Irene Waage Basili,
related to important factors such
In January 2019, French global CEO, Shearwater
as US onshore production, oil price
geoservices company CGG, which GeoServices
and E&P budgets, we are confident
completed a painful restructuring
that the positive trend from 2018
a year ago, pointed to gradual Photo: Shearwater
GeoServices will continue this year. As a result
market improvement. It
we are guiding a multi-client
anticipated revenue of $432mn for
investment growth of
4Q2018, 16% above the same
approximately 20% for 2019,
period in 2017, and 54% higher
backed by a good pipeline of
than in the previous quarter. In
interesting investment
particular, CGG reported strong
opportunities.’
multi-client after-sales and a
United Arab Emirates-based
market recovery in equipment
Polarcus, which provides towed
sales.
streamer data acquisition and
Last year, 2018, brought further
imaging services, saw the full-year
evidence of the rising importance
utilisation rate of its active fleet of
of multi-client surveys to marine
six high-performance 3D seismic
seismic players. Indeed, CGG was
vessels rise to 87% last year, from
expecting multi-client sales of
77% in 2017.
around $219mn for 4Q2018, the
Polarcus CEO Duncan Eley said
highest quarterly segment revenue
last November: ‘Growth in tender
since 4Q2015; and after-sales of
activity and a strengthened oil
about $114mn were expected.
price, along with increasing E&P
When Norwegian company PGS ‘In the contract company exploration focus, point
presented preliminary 2018
results, President and CEO Rune
market we towards continued improvements
experience to the 3D marine seismic
Olav Pedersen anticipated the
acquisition market going into
seismic market to continue higher activity, 2019. Pricing levels of recent
improving in 2019. ‘In the contract improved awards represent an encouraging
market, we experience higher
activity, improved visibility and
visibility and improvement in the global marine
better prices as seismic acquisition market.’ ●
better prices as we move into
2019,’ he said. Meanwhile, Bård we move into
Stenberg, VP of Investor Relations, 2019.’
stressed how multi-client markets
had shown strength for PGS Rune Olav
throughout 2018 after it had Pedersen, CEO, PGS
continued to invest in its multi-
client library throughout the Photo: PGS
downturn. Some $277mn was
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Seismic

TECHNOLOGY

T
he growing sophistication of
seismic data collection, in
terms of Big Data and its
manipulation, means seismics can
give oil and gas companies a real
competitive edge.
This year (2019) will be the first
full year of operation post merger
for Norwegian company Magseis
Fairfield. Founded in 2009, Magseis
has big ambitions in ocean-bottom
systems (OBS) for acquiring seismic
data. The company recently took
over Houston, US-based Fairfield
Seismic Technologies (a division of
Fairfield Geotechnologies) in a cash
and shares deal completed last
November and valuing the
purchased business at some
$233mn. The combined operation
created the industry’s largest nodal
inventory, comprising Magseis’
14,000 node pool and 20,700 from
Fairfield Seismic Technologies.
The Fairfield business is a
leading global provider of marine
ocean bottom nodal seismic
systems, having performed its first
deepwater nodal survey back in

2005. Fairfield previously acquired
the UK marine geo-services group
WGP in early 2018, which is also
now included in Magseis Fairfield.
OBS has a big technical
advantage over towed streamers. In
simple, non-technical terms,
putting the receiver of seismic data
on the seabed away from the
surface source of the acoustic
energy that is reflected
differentially by geological
structures provides a clearer, more
defined picture of the geophysics
below. In addition, the sensor types
used in OBS yield finer detail that
can help find carbonate reservoirs
and establish whether oil and gas
are present.
Standalone capsules called
ocean-bottom nodes (OBN) can be
deployed for acquiring seismic
survey data for processing seismic
vessel data offshore or onshore.
They can also be used in hybrid
acquisition strategies to
complement streamers towed on
the ocean surface. There are also
ocean-bottom cables (OBC) which
connect hydrophones and
geophones on the seabed. OBNs are
heavier and bulkier than OBCs, and
typically cost more and take longer
to deploy and retrieve for data
analysis as both operations involve
using remotely operated vehicles
(ROVs). Single untethered nodes can
be deployed and remain in place
where conventional cables cannot
be used because of the length and
weight required, and other location
difficulties.
A clearer picture
In deepwater fields, nodes can
be left for as long as is required to
collect data. Nodes can also be left
in-situ in producing fields to
generate 4D data and track
reservoirs over time to optimise
field interventions.
Magseis designs and makes
lightweight nodal technology
which links autonomous nodes
together to combine streamer-style
cost advantages with the high data
quality of nodes. Its MASS 1 system
(Marine Autonomous Seismic
System) joins the nodes to each
other with inert cables. This allows
a single vessel to hold thousands of
nodes over several hundred
kilometres of cables, and these can
be laid much quicker than ROVs
could deploy single nodes.
Magseis Fairfield offers
full-scale operations of seismic
node surveys and also leases and
sells nodes. The company is due to
deliver 17,000 MASS 1 OBNs and
four MASS Modular handling
systems to BGP Offshore, a
subsidiary of China National
Petroleum Corporation (CNPC) in
the first nine months of 2019.
Growing opportunities
Growing interest in OBS will
generate opportunities for higher
Robert Stokes takes a look at some of
the latest technological trends in the
marine seismic survey sector.
productivity and reduced cost
while delivering a superior quality
image, says Irene Waage Basili, CEO
of Shearwater GeoServices
(Norway), whose multipurpose
vessels can acquire both seabed
nodal and towed streamer seismic
data. ‘OBS decouples the seismic
source and seismic receiver and
will allow technological advances
on both the source and receiver
side independently and in parallel.
Therefore, we should see multiple
efficiency and cost improvements
in OBS in the next three to four
years,’ she explains.
‘E&P companies have for a long
time recognised that ocean bottom
nodes can deliver a significant
uplift in data quality,’ said Kristian
Johansen, CEO of Norway-based
TGS, last November when
announcing a strategic
PGS’s Ramform Hyperion
collaboration for OBN projects in is engaged in Phase 4 of
the North Sea. ‘Technology the multisensor Sabah 3D
development and operational seismic survey, one of the
largest multi-client projects
efficiencies are bringing costs worldwide and the first in
down to a level where large-scale Malaysia
exploration node surveys are Photo: PGS

32 Petroleum Review | March 2019


The growing case for ocean-bottom systems (OBS) – Magseis Fairfield says that the proven superiority of imaging by
OBS is gaining market share as systems such as its MASS 1 improve the cost efficiency of such technologies
Photo: Magseis Fairfield
becoming an attractive option to
support exploration and drilling
decisions. This is our second OBN
announcement related to 2019
investments and we are excited by
the momentum we see in this
market.’
TGS is working with fellow
Norwegian company Axxis Geo
Solutions (AGS), which is
pioneering technologies and
methodologies for OBN operations
and offering innovative acquisition
configuration options. The
collaboration focuses on multi-
client OBN projects, an area of
mutual interest to TGS and AGS,
covering the core part of the
central North Sea up to and
including the Utsira area on the
Norwegian Continental Shelf. TGS
has the rights to process all the
new node data acquired. AGS has a
proprietary node-handling system
and operates four vessels with
more than 9,000 nodes.
AGS’ technology and
capabilities complement TGS’
multi-client experience. TGS notes
that AGS’s management team has
experience of executing over 100
surveys in more than 20 countries.
As part of the collaboration, TGS is
joining the 1,560 sq km Utsira node
multi-client project that AGS has
been acquiring in the Norwegian
North Sea.
Demonstrating a hybrid
approach to seismic acquisition,
the United Arab Emirates’ Polarcus
was due to start work in 1Q2019 to
manage a combined OBN and
towed streamer 3D seismic
acquisition and processing project
in the Middle East with E&P
company Dubai Petroleum
Establishment. The OBN
acquisition services for the project
are being provided by Houston
-based SAExploration, with the
M/V Vyacheslav Tikhonov vessel
providing high quality marine
seismic acquisition services. A
former Polarcus vessel, this was
chartered to the seismic division of
Sovcomflot, Russia’s largest
shipping company.
Announcing the deal in
December 2018, Polarcus Chief
Operating Officer Lars Oestergaard
highlighted how the combined use
of undershoot OBN with towed
streamer could address imaging
challenges in obstructed areas:
‘We see OBN as an important
complement to towed streamer
Shearwater’s Polar Empress
(left) and Amazon Conqueror
seismic survey ships
Photo: Shearwater GeoServices
Seismic
acquisition in certain
environments,’ he said. For
SAExploration, using OBN
technology lets it acquire and
process 2D, 3D and 4D full azimuth
and full wavefield seismic datasets,
with either single (1C), two-
component (2C) or four-component
(4C) sensing technology, in water
depths from zero to 3,000 metres in
all aquatic environments.
A changing environment
Oil and gas operators considering
conventional field developments
are looking to back leaner, more
agile projects than before the oil
price slumped. For this purpose,
they need technology, including
seismic, to play a significant part in
delivering and maintaining such
projects safely and sustainably.
Seismic companies will remain
under pressure to reduce costs and
speed up turnaround times for
surveys and data processing, but
without reducing the quality of the
final produced image. Enhanced
data analytics, machine learning,
and use of cloud computing will
play a part in this. So will multi-
sensor streamer technology, which
Basili expects to become ‘the new
normal for towed streamer
seismic’.
However quickly new or
improved technologies capture
market share in the data
acquisition and processing side of
the seismic sector, a broader and
more important question is
looming about technology
development, she adds: ‘Who will
take the onus for the advancement
of seismic technology going
forward?’
The conventional way of
thinking was that seismic service
providers would seek to
differentiate themselves in the
market through superior
technologies, a mindset that drove
‘often expensive’ technology
innovation. In the new cost-
conscious era, marine seismic
service providers have switched
increasingly to asset-light business
models, and oil and gas producers
now have multiple ways to access
the data.
‘Oil and gas producers will have
to play an important role in
ensuring that the technology
advancement in seismic continues,
so that the focus is not just on data
being at the right time in the right
place,’ notes Basili. ‘The data will
also have to be able to provide
more certainty into the answers
required to make the right
investment decisions.’ ●
Petroleum Review | March 2019 33
Energy Institute

YOUNG PROFESSIONALS

A lack of energy tax hurts

the majority
We kick off a new series of articles from EI Young doing this is compelling and
intuitive.
Professionals Networks around the country with Of course, there are negatives
an article suggesting a progressive energy tax, associated, primarily that no-one
(myself included) wants to pay
from Ewan Frost-Pennington from the London more in energy bills. Politically this
and Home Counties YPN. type of measure has been
impossible to implement – in fact,

H
igh energy prices have
historically been followed
by innovation and
increased energy efficiency as they
justify greater investment into
reducing energy use and ultimately
carbon emissions. An energy tax
replicates this, while also providing
tax revenues that can be reinvested
elsewhere. Despite the obvious
benefits, no one wants to pay extra
for energy, so how can it be made
politically palatable?
In 1973 the price of oil jumped
from $25 to $46 per barrel, a price
spike that caused upheaval of
energy systems in Europe. The
great innovation that followed still
can be seen today. It is speculated
that it triggered almost universal
district heating in Copenhagen and
large investment in nuclear and
North Sea oil, and even led to the
release of the ultra-economical
Mini Cooper. Similarly, an increase
in the energy prices for domestic
houses could lead to greater energy
efficiency and on-site renewable
generation.
It is therefore understandable
that an energy tax has allure for
policymakers, with the promise of
stimulating energy efficiency and
innovation within the sector, while
also receiving greater revenues.
Promoting self-generation and
energy efficiency measures
through taxation would not only
save the UK and its citizens overall
energy spend in the long term, but
also create jobs and drive
innovation in the sector, which
could subsequently be exported to
other countries. The evidence for
the government does the opposite
and subsidises energy. The
reduction of VAT from 20% to 5%
and the recent imposition of an
energy price cap has resulted in ‘The concept [of
lower prices, increasing energy a progressive
usage.
This policy is pursued for noble
energy tax] is
reasons under the guise of like income
preventing fuel poverty. However, tax, penalising
as it is the wealthy who use the those who use
most energy (and carbon),
subsidising consumption is
substantially
essentially ‘anti-Robin Hood’ – more energy
stealing from the majority to than the rest of
subsidise the rich. society’
A progressive energy tax Ewan Frost-
A progressive energy tax would Pennington
mitigate this, while also capturing
the benefits previously mentioned.
The tax would function by

EI London and Home Counties Young Professionals Network

Welcome to the first in the series of viewpoint articles from the EI We would like to thank CNOOC Petroleum UK for its continued
Young Professional Networks (YPN) from around the UK. Over the support, as well as to each of our individual event sponsors.
next five months you’ll hear voices from young energy If you or your company wish to support our network then please
professionals talking about issues important to them. email ypnlondonhc@energyinst.org Don’t forget to follow us on
The EI YPN was formed in 2013 with the intent of reaching into Twitter (@EIYPNLondon), and you can connect with us on LinkedIn
the energy industry to support young professionals from all areas and Facebook.
of the industry. This includes students, graduates and anyone in
the early stages of their career.
Through a variety of networking opportunities these branches
help individuals to develop in their fields. We want our members to
broaden their understanding of the wider industry, to discuss the
important topics and to build their networks.
In London, we do this by hosting monthly evening networking
events. These vary from panel speakers featuring prominent
experts, keynote lectures from eminent figures in energy and fun
socials where you can rub shoulders with the future leaders of the
energy industry.
After the success of hosting Jeremy Leggett in January and an
all-star panel debate at IP Week, we are keeping the momentum
going. Join us next month for our discussion on distributed energy:
‘The Many, Not the Few: The New World of Distributed Energy’,
hosted at the London Business School. We follow that up with the
second run of our YPN.FutureTech in May and don’t forget to sign
up to our field trip to a wind farm. The London and Home Counties YPN Committee

34 Petroleum Review | March 2019

 Energy Institute

consumption below the taxable

threshold. The target could also
move in line with what is
reasonable energy consumption
based on the technologies available.
This would have the benefit that it
still informs today’s business cases
without actually causing
difficulties for people in the near
term, which would also allow
development within the industry
at an organic rate. l

Ewan Frost-Pennington is an Energy and

Climate Change Consultant for Arup and a
London and Home Counties YPN Committee
Member.

Figure 1. Progressive London and Home Counties

energy tax allocating everyone in the country
a tax-free (or even subsidised)
proportion of energy which would
continue to combat fuel poverty,
whereas beyond a certain threshold
the tax would begin to increase.
The concept is like income tax,
penalising those who use
substantially more energy than the
rest of society. South Korea and
Japan already implement a
measure like this, demonstrating
that it is technically possible, even
with analogue meters.
The concept described is
illustrated by Figure 1, which
indicates how those penalised are
only those that use excessive
energy (generally those who are
very affluent).
To further counter the
arguments of opponents, the
technology now exists to track the
tax paid and then provide it as
credit that the payer can spend on
specific energy efficiency
programmes, so they still have a
net gain. This could revolutionise
the energy efficiency sector.
Finally, to make such a tax more
palatable, it could be deferred for a
period so that people have ample
warning to invest in measures
necessary to get their energy
ypnlondonhc@energyinst.org
South West South Wales
ypnswsw@energyinst.org
Aberdeen, Highlands and Islands
ypnaberdeen@energyinst.org
North West North Wales
ypnnwnw@energyinst.org
North Eastern
ypnnortheastern@energyinst.org
Yorkshire
ypnyh@energyinst.org
Northern Ireland
ypnni@energyinst.org

Membership Book now

Just starting out

in energy?
Join your local EI Young
Professionals Network (YPN)

• Career advice
• Debates and
briefings Find your
• Social events
nearest YPN - visit:
• Networking energyinst.org/
ei-near-me/uk
EI Technical
MICROBIOLOGY
Microbial activity in
the spotlight
The 24th Reservoir Microbiology Forum
met in 4Q2018 to discuss the latest
opportunities and challenges facing the
reservoir microbiology sector.
T
he Reservoir Microbiology
Forum (RMF) provides a
multi-disciplinary platform
where industry and academia,
including students, come together
to present, share and discuss
experiences in the area of
microbiology relevant to the oil
and gas industry, working
collaboratively to learn from
current practices and new
developments within industry. It is
a topic that attracts much interest
due to the high costs involved
when mitigating the effects of
microbiological influenced
corrosion (MIC) and reservoir
fouling, and also because of the
potential to recover oil through
microbially-enhanced oil recovery
(MEOR) technologies.
The forum is an annual two-day
conference, organised by a small
working group within the Energy
Institute’s Microbiology
Committee, which is committed to
providing technical guidance on
microbial issues across the range
of oil industry activities.
The 24th RMF, held on
31 October and 1 November 2018,
brought participants from all over
the world to discuss developments
in the field, addressing for the
Microbiological influenced first-time microbiological
corrosion (MIC) on sheet contamination during shale gas
steel piling
extraction. Contributions were in
Photo: Jim Stott, Intertek
the form of results from scientific
research projects or case studies.
The programme aims to
promote participant engagement,
with the floor open for discussion
at the end of each presentation.
This provides the opportunity to
share experiences and receive
feedback, creating an invaluable
space to receive expert insights.
Additionally, during the conference
eight posters were on display, and
time was reserved to discuss the
content of these in more depth.
Dinner at a local restaurant at
the end of day one provided an
36 Petroleum Review | March 2019
opportunity for attendees,
presenters and organisers to
network further.
Forum highlights
The 24th RMF hosted 18
presentations, divided into five
sessions. Each was chaired by an
industry or academic expert,
highlighting key points of interest,
challenges, recent developments
and topics that require further
development in the area. At the
end of each session a Q&A panel
was scheduled, providing more
opportunities for discussion to
exchange ideas and experiences.
Day one consisted of three
sessions – microbially enhanced oil
recovery (MEOR), mitigation and
remediation case studies, and
microbiologically-influenced
corrosion (MIC).
During session one, Wintershall
and BASF provided an update on a
long-term study presented at RMF
in the past, sharing a summary on
latest developments on the
operational activities and current
results of dynamic tests and their
implications for MEOR field
applications. They demonstrated
the potential for MEOR in mature
fields, and stressed the value of
understanding both the reservoir’s
microbial community and the
minerology for the successful
implementation of MEOR.
It is not uncommon for
presenters to return to RMF to
provide an update on long-term
projects, highlighting the
invaluable feedback received at this
event and allowing the discussion
to develop and mature over time.
For the second session, The
University of Manchester
presented its research on the
potential for biofouling during
shale gas extraction, mentioning
the fact that although the
microbiology of oil reservoirs is
well established, the microbiology
of hydraulic fractured shales has
recently been revealed to differ
greatly from that of oil reservoirs.
The results of laboratory-based
experiments were used to
demonstrate the potential for
biofouling to occur during shale
gas extraction.
MIC was discussed in the last
session of the day, a problem
encountered by many industrial
applications. This topic is
extensively studied due to the high
cost involved in mitigating its
effects. The session highlighted the
potential corrosive impacts of
biological sulphide oxidation
during nitrate applications in oil
field systems; MIC indications in a
subsea production pipeline in a
sand-producing North Sea oil field;
and MIC assessment models,
analysing how a prediction
compares to reality and how a
combination of techniques and
methodologies could provide a
new tool for assessing MIC risk in
pipelines. Participants agreed that
it is necessary to work together, in
order to develop a more
standardised approach to MIC.
Day two consisted of two
sessions – on monitoring and
reservoir souring. Interesting
presentations included Petrobras
research on biogenic sulphide
generation at 10 kpsi, sharing
results that demonstrate the
possibility of microbial H2S
generation inside high-pressure
reservoirs; and a Dow discussion
on biocide stability in soured
oilfield environments and the
performance evaluation of biocides
for souring control under near-
wellbore conditions.
As in previous years, RMF
proved to be an excellent platform
to collectively discuss and work
towards the development,
standardisation and deployment of
the tool box for microbial
monitoring to determine the
impact of mitigation strategies and
ultimately achieve microbial
control.
RMF 2019 Invitation
The Reservoir Microbiology Forum
is celebrating its 25th anniversary
this year (RMF 25). It will be held
on 20–21 November 2019 at the
Energy Institute in London. A first
announcement highlighting key
topics, including the invitation for
abstract submission, will be
published in March 2019. The
organising committee invites those
interested to suggest relevant
novel topics for inclusion and
discussion, and to submit their
contributions. ●
For more information, please see
bit.ly/2DG6kGX
*RMF 24 was sponsored by Dow Microbial
Control
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