AUGUST 2006
ANNUAL ONSHORE MARKET REPORT 2006
Report to INTSOK prepared by Douglas-Westwood Ltd. Report no. 391-06
www.intsok.com
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Contents
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 EXECUTIVE SUMMARY & CONCLUSIONS..................................................................................................... 7 GLOBAL MARKET TRENDS ......................................................................................................................... 11 ALGERIA ..................................................................................................................................................... 17 ANGOLA ...................................................................................................................................................... 21 AUSTRALIA.................................................................................................................................................. 24 AZERBAIJAN ................................................................................................................................................ 28 BRAZIL ........................................................................................................................................................ 31 CANADA....................................................................................................................................................... 35 CHINA .......................................................................................................................................................... 40 EGYPT ......................................................................................................................................................... 47 INDIA ........................................................................................................................................................... 52 IRAN ............................................................................................................................................................ 57 IRAQ ............................................................................................................................................................ 60 KAZAKHSTAN .............................................................................................................................................. 63 LIBYA .......................................................................................................................................................... 67 MALAYSIA ................................................................................................................................................... 72 MEXICO ....................................................................................................................................................... 74 NIGERIA ...................................................................................................................................................... 77 RUSSIA ......................................................................................................................................................... 81 UK............................................................................................................................................................... 86 USA............................................................................................................................................................. 90 VENEZUELA................................................................................................................................................. 94
Douglas-Westwood Limited, St Andrew’s House, Station Road East, Canterbury CT1 2WD, UK tel: +44 1227 780999 fax: +44 1227 780880 email: admin@dw-1.com www.dw-1.com
DW Report number 391-06
August 2006 The information contained in this document is believed to be accurate, but no representation or warranty, express or implied, is made by Douglas-Westwood Limited as to the completeness, accuracy or fairness of any information contained in it, and we do not accept any responsibility in relation to such information whether fact, opinion or conclusion that the reader may draw.
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Figures
Figure 1-1: INTSOK Sector Markets – Expenditure Summary ($ billion) ............................................................. 7 Figure 1-2: INTSOK Sector Markets – Expenditure by Top 10 Countries & Others 2006-2010 ........................... 8 Figure 1-3: INTSOK Sector & Sub-sector Markets – Expenditure Summary ($ billion) ....................................... 9 Figure 2-1: World Primary Energy Consumption by Region 1965-2005 ............................................................. 11 Figure 2-2: Oil Price 1999-2006 ........................................................................................................................... 12 Figure 2-3: Historic and Forecast World Oil and Gas Production ........................................................................ 12 Figure 2-4: LNG – Capital Investment Forecast ................................................................................................... 13 Figure 3-1: Algeria – Expenditure Totals 2001-2010 ($ million) ......................................................................... 17 Figure 3-2: Algeria – Expenditure by Component 2006-2010.............................................................................. 18 Figure 4-1: Angola – Expenditure Totals 2001-2010 ($ million) ......................................................................... 21 Figure 4-2: Angola – Expenditure by Component 2006-2010 .............................................................................. 22 Figure 5-1: Australia – Expenditure Totals 2001-2010 ($ billion)........................................................................ 24 Figure 5-2: Australia – Expenditure by Component 2006-2010 ........................................................................... 25 Figure 6-1: Azerbaijan – Expenditure Totals 2001-2010 ($ million).................................................................... 28 Figure 6-2: Azerbaijan – Expenditure by Component 2006-2010 ........................................................................ 29 Figure 7-1: Brazil – Expenditure Totals 2001-2010 ($ billion) ............................................................................ 31 Figure 7-2: Brazil – Expenditure by Component 2006-2010................................................................................ 32 Figure 8-1: Canada – Expenditure Totals 2001-2010 ($ billion) .......................................................................... 35 Figure 8-2: Canada – Expenditure by Component 2006-2010.............................................................................. 36 Figure 9-1: China – Expenditure Totals 2001-2010 ($ billion)............................................................................. 40 Figure 9-2: China – Expenditure by Component 2006-2010 ................................................................................ 41 Figure 10-1: Egypt – Expenditure Totals 2001-2010 ($ billion)........................................................................... 47 Figure 10-2: Egypt – Expenditure by Component 2006-2010 .............................................................................. 48 Figure 11-1: India – Expenditure Totals 2001-2010 ($ billion) ............................................................................ 52 Figure 11-2: India – Expenditure by Component 2006-2010 ............................................................................... 53 Figure 12-1: Iran – Expenditure Totals 2001-2010 ($ billion).............................................................................. 57 Figure 12-2: Iran – Expenditure by Component 2006-2010 ................................................................................. 58 Figure 13-1: Iraq – Expenditure Totals 2001-2010 ($ billion).............................................................................. 60 Figure 13-2: Iraq – Expenditure by Component 2006-2010 ................................................................................. 61 Figure 14-1: Kazakhstan – Expenditure Totals 2001-2010 ($ billion).................................................................. 63 Figure 14-2: Kazakhstan – Expenditure by Component 2006-2010 ..................................................................... 64 Figure 15-1: Libya – Expenditure Totals 2001-2010 ($ billion) ........................................................................... 67 Figure 15-2: Libya – Expenditure by Component 2006-2010 .............................................................................. 68 Figure 16-1: Malaysia – Expenditure Totals 2001-2010 ($ million)..................................................................... 72 Figure 16-2: Malaysia – Expenditure by Component 2006-2010 ......................................................................... 73 Figure 17-1: Mexico – Expenditure Totals 2001-2010 ($ billion) ........................................................................ 74 Figure 17-2: Mexico– Expenditure by Component 2006-2010............................................................................. 75 Figure 18-1: Nigeria – Expenditure Totals 2001-2010 ($ billion) ........................................................................ 77 Figure 18-2: Nigeria – Expenditure by Component 2006-2010............................................................................ 78 Figure 19-1: Russia – Expenditure Totals 2001-2010 ($ billion).......................................................................... 81 Figure 19-2: Russia – Expenditure by Component 2006-2010 ............................................................................. 82 Figure 20-1: UK – Expenditure Totals 2001-2010 ($ million) ............................................................................. 86 Figure 20-2: UK – Expenditure by Component 2006-2010.................................................................................. 87 Figure 21-1: USA – Expenditure Totals 2001-2010 ($ billion) ............................................................................ 90 Figure 21-2: USA – Expenditure by Component 2006-2010................................................................................ 91 Figure 22-1: Venezuela – Expenditure Totals 2001-2010 ($ billion) ................................................................... 94 Figure 22-2: Venezuela – Expenditure by Component 2006-2010....................................................................... 95
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Tables
Table 1-1: INTSOK Sector Markets – Expenditure Summary ($ million) ............................................................. 7 Table 1-2: INTSOK Country Markets – Expenditure Summary ($m) .................................................................... 8 Table 1-3: INTSOK Sector & Sub-sector Markets – Expenditure Summary ($ million) ....................................... 9 Table 3-1: Algeria – Expenditure Totals 2001-2010 ($ million)........................................................................... 17 Table 3-2: Algeria – Expenditure by Component 2001-2010 ............................................................................... 18 Table 4-1: Angola – Expenditure Totals 2001-2010 ($ million)........................................................................... 21 Table 4-2: Angola – Expenditure by Component 2001-2010 ............................................................................... 22 Table 5-1: Australia – Expenditure Totals 2001-2010 ($ million)........................................................................ 24 Table 5-2: Australia – Expenditure by Component 2001-2010 ............................................................................ 25 Table 6-1: Azerbaijan – Expenditure Totals 2001-2010 ($ million) ..................................................................... 28 Table 6-2: Azerbaijan – Expenditure by Component 2001-2010.......................................................................... 29 Table 7-1: Brazil – Expenditure Totals 2001-2010 ($ million)............................................................................. 31 Table 7-2: Brazil – Expenditure by Component 2001-2010 ................................................................................. 32 Table 7-3: Brazil - Major Identified Pipeline Projects .......................................................................................... 33 Table 8-1: Canada – Expenditure Totals 2001-2010 ($ million)........................................................................... 35 Table 8-2: Canada – Expenditure by Component 2001-2010 ............................................................................... 36 Table 8-3: Canada - Major Identified LNG Projects............................................................................................. 37 Table 8-3: Canada - Major Identified Pipeline Projects........................................................................................ 38 Table 9-1: China – Expenditure Totals 2001-2010 ($ million) ............................................................................. 40 Table 9-2: China – Expenditure by Component 2001-2010 ................................................................................. 41 Table 9-3: China - Major Identified LNG Projects ............................................................................................... 43 Table 10-1: Egypt – Expenditure Totals 2001-2010 ($ million) ........................................................................... 47 Table 10-2: Egypt – Expenditure by Component 2001-2010 ............................................................................... 48 Table 11-1: India – Expenditure Totals 2001-2010 ($ million) ............................................................................ 52 Table 11-2: India – Expenditure by Component 2001-2010................................................................................. 53 Table 11-3: India - Major Identified Pipeline Projects.......................................................................................... 54 Table 12-1: Iran – Expenditure Totals 2001-2010 ($ million) .............................................................................. 57 Table 12-2: Iran – Expenditure by Component 2001-2010................................................................................... 58 Table 13-1: Iraq – Expenditure Totals 2001-2010 ($ million) .............................................................................. 60 Table 13-2: Iraq – Expenditure by Component 2001-2010................................................................................... 61 Table 14-1: Kazakhstan – Expenditure Totals 2001-2010 ($ million) .................................................................. 63 Table 14-2: Kazakhstan – Expenditure by Component 2001-2010 ...................................................................... 64 Table 15-1: Libya – Expenditure Totals 2001-2010 ($ million) ........................................................................... 67 Table 15-2: Libya – Expenditure by Component 2001-2010................................................................................ 68 Table 16-1: Malaysia – Expenditure Totals 2001-2010 ($ million)...................................................................... 72 Table 16-2: Malaysia – Expenditure by Component 2001-2010 .......................................................................... 73 Table 17-1: Mexico – Expenditure Totals 2001-2010 ($ million) ........................................................................ 74 Table 17-2: Mexico – Expenditure by Component 2001-2010............................................................................. 75 Table 18-1: Nigeria – Expenditure Totals 2001-2010 ($ million)......................................................................... 77 Table 18-2: Nigeria – Expenditure by Component 2001-2010 ............................................................................. 78 Table 19-1: Russia – Expenditure Totals 2001-2010 ($ million).......................................................................... 81 Table 19-2: Russia – Expenditure by Component 2001-2010 .............................................................................. 82 Table 19-3: Russia - Major Identified Pipeline Projects ....................................................................................... 84 Table 20-1: UK – Expenditure Totals 2001-2010 ($ million)............................................................................... 86 Table 20-2: UK – Expenditure by Component 2001-2010 ................................................................................... 87 Table 20-3: UK - Major Identified Pipeline Projects ............................................................................................ 88 Table 20-4: UK - Major Identified LNG Projects................................................................................................. 89 Table 21-1: USA – Expenditure Totals 2001-2010 ($ million)............................................................................. 90 Table 21-2: USA – Expenditure by Component 2001-2010 ................................................................................. 91 Table 22-1: Venezuela – Expenditure Totals 2001-2010 ($ million).................................................................... 94 Table 22-2: Venezuela – Expenditure by Component 2001-2010 ........................................................................ 95
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Definitions
Phased Expenditure Model – the modelling used in this report is based on: • • Identification and valuation of significant projects – we are not attempting to replicate other detailed INTSOK reports on specific countries/markets and instead are focusing on total expenditure and major projects. Phasing of project expenditure – development spend has been apportioned through the design and build stages. Whilst appreciating that this model is less transparent on a national or sector level than a model based on ‘onstream’ dates it does allow for a clearer view of the longerterm trends within each country and sector.
Overviews have been provided for the identified significant projects to be undertaken within each geographic market through to 2010, identifying activity to date, the preferred means of development, future development schedules, the year the project is due online, initial order year and anticipated total levels of expenditure for each project. It should be noted that in the case of some countries there is considerable uncertainty regarding the prospects of individual projects being developed within our timeframe. In these cases we have therefore taken a conservative view of future prospects. Facilities – by facility, we understand any infrastructure likely to contain a significant build element or that will require a significant amount of civil engineering work. Sub-component of this includes E&P surface installations, pipelines, LNG facilities (terminals & re-gasification), downstream refining and gas processing complexes (non-LNG) as well as Maintenance, Modification and Operations (MMO) related to the above. Oil & gas production facilities – by oil & gas production facilities, we understand surface installations assisting in the production process of hydrocarbons with specific emphasis on the E&P side. It does not include downstream facilities. LNG facilities – LNG facilities are naturally downstream gas processing systems but given their particular significance and the specific technologies and market constraint associated, we have artificially separated their numbers from downstream refining and gas processing complexes. Refining & gas processing – we understand those facilities as purely downstream and those not directly associated with the extraction of hydrocarbons. The numbers given for this type of facilities also do not account for any LNG-related complex.
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1.1.
EXECUTIVE SUMMARY & CONCLUSIONS
Summary
400 350 300 250 $ billion 200 150 100 50 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 1-1: INTSOK Sector Markets – Expenditure Summary ($ billion) Table 1-1: INTSOK Sector Markets – Expenditure Summary ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 2,025 2002 1,815 2003 1,883 2004 2,076 2005 2,748 2006 2,815 2007 2,908 2008 3,011 2009 3,082 2010 3,189 01-05 10,547 337,506 151,390 77,335 517,593 06-10 15,006 504,882 327,844 121,504 702,290
63,581 53,309 63,587 70,626 86,403 99,064 98,058 98,455 102,775 106,531 21,279 24,312 28,072 32,801 44,925 63,612 67,387 66,982 66,050 63,814 13,332 16,100 14,523 17,006 16,373 22,646 30,086 25,644 22,368 20,760 94,909 95,147 101,209 108,975 117,353 124,272 131,154 139,507 148,997 158,360
195,126 190,681 209,274 231,486 267,802 312,408 329,592 333,600 343,272 352,654 1,094,370 1,671,526
Overall expenditure in the countries we have analysed (listed on the following page) amounts to some $312 billion in 2006. This represents a dramatic increase since the relative slump in 2001 ($195 billion), when oil prices fell to less than $20/bbl for a time. The situation now is very different. With very little spare capacity in global oil supply and rapidly increasing demand we are witnessing escalating oil prices and an industry that is scrambling to deliver additional product. However, at the same time the industry has to deal with a whole host of other issues including managing aging assets, years of under-investment, a lack of skilled personnel, availability of hardware, etc. In the service sector the unprecedented demand is pushing day-rates ever higher and impacting upon the costs of developments. The outlook for the next five years is, in general, of a continued growth (albeit ultimately constrained by many of the factors listed above) with overall expenditure forecast to reach $353 billion by 2010. The total spend over this five-year period amounts to a staggering $1.7 trillion. With so much infrastructure in place, and much of it now long beyond its original anticipated lifespan, it is unsurprising to see that MMO dominates total expenditure. Although the overall level of production is one driver for the increase, other inevitable upstream issues such as increased water cuts and falling reservoir pressures will have an impact. Downstream, the huge expansion in refining, gas processing and LNG infrastructure will have an impact on both facilities expenditure and also, in the longer term, on MMO. In the drilling sector high oil prices should continue to drive a good level of activity, with the additional impact of higher rig and service costs driving overall expenditure up further.
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Table 1-2: INTSOK Country Markets – Expenditure Summary ($m)
$ million Algeria Angola Australia Azerbaijan Brazil Canada China Egypt India Iran Iraq Kazakhstan Libya Malaysia Mexico Nigeria Russia UK USA Venezuela 2001 3,799 53 2,037 1,059 2,518 26,215 19,084 1,611 4,737 6,037 2,899 3,222 2,236 512 3,827 3,898 37,159 1,389 64,368 8,467 2002 4,218 52 2,409 1,075 3,687 23,935 21,867 2,544 3,878 6,777 2,663 2,764 2,296 437 4,015 4,352 36,862 1,153 58,792 6,904 2003 4,683 94 2,875 1,141 2,063 28,866 23,645 2,553 5,285 7,292 2,390 3,276 2,667 736 4,643 4,900 40,434 1,295 64,347 6,089 2004 4,980 156 2,974 1,044 3,036 30,264 26,988 2,597 6,928 8,758 3,171 4,050 3,107 266 4,778 5,269 45,304 1,304 68,804 7,707 2005 6,017 114 2,860 1,044 3,621 42,643 33,429 2,999 7,652 8,837 3,171 4,851 3,256 643 4,675 6,312 46,307 1,418 78,445 9,507 2006 6,445 659 4,394 891 5,982 48,202 45,521 3,667 10,645 9,923 3,766 5,580 4,436 657 4,672 5,535 48,837 1,584 90,544 10,467 2007 7,476 1,393 3,036 902 5,792 46,495 46,056 4,772 11,595 9,747 5,042 6,384 4,745 821 4,731 6,537 59,439 2,074 91,480 11,073 2008 7,793 1,588 3,146 919 4,399 46,563 43,226 5,049 12,505 10,433 5,882 6,864 5,281 497 4,841 6,897 61,331 2,540 90,466 13,378 2009 8,123 1,623 2,913 939 4,282 46,992 45,089 4,797 12,115 11,041 6,829 8,104 5,483 487 4,817 7,074 63,856 1,724 92,675 14,308 2010 8,599 1,698 3,672 959 4,533 47,044 44,620 4,758 11,682 11,717 7,636 9,251 5,998 504 4,837 7,544 64,081 2,046 96,045 15,430 01-05 23,697 469 13,155 5,364 14,926 151,923 125,013 12,304 28,481 37,701 14,293 18,162 13,563 2,594 21,939 24,732 206,066 6,559 334,755 38,674 06-10 38,436 6,961 17,161 4,611 24,988 235,296 224,511 23,044 58,542 52,860 29,155 36,184 25,943 2,968 23,898 33,587 297,544 9,968 461,210 64,656
Total 195,126 190,681 209,274 231,486 267,802 312,408 329,592 333,600 343,272 352,654 1,094,370 1,671,526
Four countries dominate the picture in terms of overall expenditure. Together, USA, Russia, Canada and China account for 73% of the total spend over the 2006-2010 period. The relative shares of the top ten countries in terms of expenditure are shown in the pie chart below and include Venezuela, India, Nigeria, and Algeria. Amongst the remaining countries there are some that, despite being dwarfed by the likes of the US, China, etc. in terms of market size, look set for strong growth over the period to 2010. In many cases there are countries with little onshore production but significant offshore production and the build of, for instance, an LNG terminal (which can easily cost over $2 billion in many instances) can cause the expenditure levels to leap dramatically. This situation is certainly the case in Angola, Egypt, Australia and the UK. In other instances, countries that have not previously been very open to foreign participation are now opening the doors and new licensing rounds have taken place in countries such as Libya. The involvement of Statoil in Algeria is encouraging and indicates a good potential for Norwegian suppliers to ‘piggy-back’ into this market. In other markets, we expect Norwegian suppliers to really benefit from the use of advanced technology in areas such as downhole tools, surface protection, cryogenics, EI&T, and innovate approaches to the management of complex plant in the operations sector.
Venezuela Others 4% 10% USA 28%
Algeria 2% Canada 14%
China 13% Russia 18% India 4% Iran 3%
Nigeria 2%
Kazakhstan 2%
Figure 1-2: INTSOK Sector Markets – Expenditure by Top 10 Countries & Others 2006-2010
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 50 100 150 200 250 300 350 400 450 $ billion
Figure 1-3: INTSOK Sector & Sub-sector Markets – Expenditure Summary ($ billion) Table 1-3: INTSOK Sector & Sub-sector Markets – Expenditure Summary ($ million)
$ million Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 2006 2,815 2,477 338 99,064 54,485 44,579 86,257 10,351 50,029 6,469 6,469 6,038 5,412 1,488 124,272 68,442 56,615 2007 2,908 2,559 349 98,058 53,932 44,126 97,472 11,697 56,534 7,310 7,310 6,823 6,135 1,663 131,154 72,267 59,711 2008 3,011 2,650 361 98,455 54,150 44,305 92,627 11,115 53,723 6,947 6,947 6,484 5,789 1,621 139,507 76,977 63,395 2009 3,082 2,713 370 102,775 56,526 46,249 88,418 10,610 51,282 6,631 6,631 6,189 5,566 1,507 148,997 82,454 67,172 2010 3,189 2,806 383 106,531 58,592 47,939 84,574 10,149 33,292 7,885 7,885 7,633 7,662 4,586 158,360 87,748 71,287 01-05 10,547 9,281 1,266 337,506 185,628 151,878 228,725 27,447 132,660 17,154 17,154 16,011 14,339 3,959 517,593 283,571 237,641 06-10 15,006 13,205 1,801 504,882 277,685 227,197 449,348 53,922 244,861 35,243 35,243 33,168 30,564 10,866 702,290 387,887 318,180
The breakdown of the various sectors is based upon assumptions of the comparative sizes of each as a function of the total, based upon actual examples gathered as part of Douglas-Westwood’s continuing work in the sector. In contrast to the underlying forecasts, which are built on a ‘bottom-up’ approach from identified projects, we believe this ‘top-down’ approach to the sub-sectors offers a good representation of the respective market sizes.
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1.2.
•
Conclusions
67% of global oil and 71% of gas are produced onshore. Onshore oil & gas is a major business that spans not only the exploration for and production of oil & gas, but also its processing – at some stage, even offshore oil & gas is delivered back to shore. In 2005, the oil equivalent of some 131 million barrels of oil was processed each day and this total continues to grow. Some 60% of energy supplies are provided by oil & gas. A primary market driver is the dramatic growth of energy demand in the developing countries such as China – up 70% in a decade. Other developing economies are also growing strongly but from a smaller base. As shallow-water offshore reserves deplete, oil & gas production will be increasingly focused into the major reserves of Saudi Arabia and Russia. A power-shift is underway among reserve holders as the oil majors’ reserves decline and the realisation grows that some 70-80% of known reserves are now held by National Oil Companies. Furthermore, the NOCs are increasingly involved in developing value-added refining and downstream activities to process their own oil & gas and major investments are now planned or underway. In addition to primary energy supplies and transportation fuels, a major use for oil & gas is in the production of feedstocks for petrochemicals and again developing world demand is growing strongly. We expect a large growth in gas production and with depleting gas reserves in areas such as the UK and US, and a major increase in expenditure in all facets of the gas industry will occur. The overall picture is of a surge in onshore oil & gas industry construction activity and strongly growing market for MMO activities. Past overcapacity in the downstream sector has resulted in an historic lack of investment. However, since 2002 this capacity has been increasingly absorbed, in addition there was the effect of the hurricanes of 2005 which hit US refinery capacity. The principal problem that continues to be faced by contractors is the considerable impact that political decisions make on the industry by delaying major projects. Many of the developing countries that offer the largest long-term prospects are characterised by political immaturity, low levels of transparency and high unemployment. Nevertheless, change is occurring and in many instances the situation is slowly improving. However, in this situation of unprecedented demand for their services both contractors and their individual staff are becoming more selective of where they chose to work. Therefore, some less politically or commercially attractive countries may find it difficult to realise their project plans.
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2 GLOBAL MARKET TRENDS
2.1.
12
Upstream Trends
Africa Asia Australasia FSU & Eastern Europe Latin America Middle East North America Western Europe
10 billion tons of oil equivalent
8
Figure 2-1: World Primary Energy Consumption by Region 1965-2005
Source: BP Statistical Review 2006
6
4
2
“Worldwide energy demand to grow by 71% by 2030”
EIA, June 20 ‘06
0 1966
1969
1972
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
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Global energy demand is growing dramatically – in the past decade electricity demand alone has risen by 33%. In the case of some energy sources demand is close to exceeding supply and prices have reacted accordingly. The key driver is the economic growth of developing countries – in the past decade China’s total energy demand has grown by 70%, its electricity demand by 128% and at present neither shows signs of significant slow-down. Other developing economies are growing strongly but from a smaller base. Oil & gas supplies 60% of global energy but oil production cannot match demand. It is evident the era of low energy prices has ended. It is clear that the ‘easy oil’ has been found – what remains is heavy oils or oil shales & sands, or in small and/or difficult reservoirs (Arctic, HPHT, ultra deep water) Many commentators think that an oil production peak will occur in the early years of the next decade – others believe it has already happened! Oil is a particular problem in the energy supply situation as it is virtually irreplaceable as a transportation fuel within the foreseeable future. There is not a current shortage of total oil & gas reserves – production is the problem. Political actions ranging from outright wars to civil strife to tax hikes are restricting production and delaying projects worldwide. Following the events of January 2006 when Russia restricted gas supplies, oil and gas security-ofsupply issues are impacting on both prices and government thinking worldwide. For 30 years, non-Opec production has kept oil prices down. However, depleting non-OPEC oil production from areas such as the North Sea means that industry attention will increasingly be focused on the major reserve holders, the national oil companies (NOCs), particularly those of the Middle East and Russia. Concerns are being raised regarding the future role of the oil majors – few large low-cost plays remain and those that do are in the hands of the NOCs.
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Figure 2-2: Oil Price 1999-2006
Source: Source: www.tradingcharts.com
“With the global oil industry operating at 98% of total capacity, there's a real potential for volatile prices”
EIA, June 20 ‘06
2.2.
supplly - thousand barrels oil equiv. per day . 100000 90000 80000 70000 60000 50000 40000 30000 20000 10000
Natural Gas
oil bpd gas boepd
Figure 2-3: Historic and Forecast World Oil and Gas Production
Source: The World Oil Supply Report and The World Gas Supply Report.
Douglas-Westwood
Gas production will show large growth – an annual rate of 2.8% is forecast compared to 1.8% for oil.
1950 1970 1990 2010 2030
0 1930
•
As shown in the chart above, natural gas reserves are considerable and should long outlast those of oil. In the past two decades natural gas has become the preferred fuel for power generation but now local gas supply depletion is occurring in areas such as the North Sea where production from the UK has peaked, and the USA. Gas import is becoming a necessity for many large user nations resulting in major pipeline projects and the development of LNG plants to allow exports from suppliers situated beyond economic pipeline distances. Gas processing plants are located at terminals and take ‘wet’ gas and remove oil, water, other elements such as sulphur & carbon dioxide and natural gas liquids and output ‘dry’ gas to the pipeline systems. Gas processing is a major activity with 1,822 plants worldwide in 2005 and 19 under construction (an increase from 1,769 plants in 2004) representing a 1.1% increase in total processing capacity. We expect all facets of the gas business to enjoy strong long-term growth, from pipelines and gas compression to gas processing, LNG and gas-to-liquids (GTL).
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30 Import Terminals 25 LNG Carriers Liquefaction Terminals 20
Figure 2-4: LNG – Capital Investment Forecast
Source: ‘The World LNG Report’ Douglas-Westwood
15
10
5
LNG has become the world’s fastest growing fuel and we expect strong growth in investment in liquefaction plant, carriers and terminals in future years.
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
$ billion
0
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There is potential for even more investment. However, in common with oil, political instability in major LNG exporting countries (e.g. Nigeria) or projects stalled in potential major producers (e.g. Iran) continue to place a practical limit on investment. In the US there is local hostility to building new onshore terminals. (This is, however, less of a problem in Asia.) In some cases there are safety concerns regarding older export terminals (some now 30 years old). Security-of-supply is also an issue with concerns that LNG shipments / terminals may be vulnerable to terrorist attack.
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Downstream
Historically, refining has suffered from over-capacity and been a low margin business worldwide (in the UK, for example, delivering a mere 3.9% return on investment over the period 2000-2004). Therefore, there has been a lack of new investment in the developed markets such as Western Europe and the US. Refinery overcapacity has for some years ranged from 9% to 13%. However, since 2002 it has not matched growth in demand and has fallen to 5.7%. Therefore any significant incident can result in fuel shortages. Western European demand for road transportation fuels has been virtually static since 1997 due to an increasing proportion of diesel vehicles and increasing efficiency, enabled by cleaner fuels. European activity is mainly associated with new EU countries upgrading refineries specifications to meet EU fuel standards. The major national oil producers have been investing in developing their downstream sectors to meet local demand and, in the case of Saudi Arabia, to add value to their crude oil production. A similar drive in gas has resulted in major investment in GTL plants. We forecast strong growth in GTL investment worldwide with Capex totalling $5.3 billion over the next five years. The 2005 hurricane damage to US refineries and resulting fuel shortages demonstrated the fragility of the security-of-supply situation and refining is now experiencing higher-than-normal margins. However, a general difficulty in obtaining planning permission for new plant in the US is seriously restricting additional investment. As indicated above, barriers to downstream sector growth vary by region and country, but fundamentally relate to the increasing demand from the developing countries, in Europe volume stability but product mix change, and in the US a general difficulty in planning permission. As of January 2006, 500 refinery projects were in planning worldwide including 66 newbuilds.
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2.4.
• •
The Supply Chain
With near-record oil & gas prices the oil & gas industry is booming with both oil & gas companies and contractors profits at record highs. However, the present shortage of supply of everything from drilling rigs to experienced personnel to operate them has resulted in an unprecedented spiral of cost increases as operators compete for limited resources. In its May 2006 London strategy presentation to analysts, Shell noted that since 2002, equipment prices had increased by 20-50%, pipe by 41-65%, construction labour by 25-80% and rig rates across the world by 140-430%. Perhaps the more serious situation is the chronic shortage that is developing of skilled and experienced personnel in all sectors and at all levels.
•
•
2.5.
Transparency & Corruption
Table 2-1: Corruption Perceptions Index 2005
country Algeria Angola Australia Azerbaijan Brazil Canada China Egypt India Iran Iraq Kazakhstan Libya Malaysia Mexico Nigeria Norway Russia UK USA Venezuela position 97 151 9 137 62 14 78 70 88 88 137 107 117 39 65 152 8 126 11 17 130
This table is based on a survey of business people and country analysts on the degree to which corruption is perceived to exist amongst public officials and politicians in 159 nations. The results indicate serious levels of corruption in two thirds of the countries surveyed. The countries covered in this report are shown in the table alongside.
Source: Passau University ranking for Transparency International
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2.6.
Future Market Prospects
We forecast the key trends that will drive global onshore oil & gas sector markets over the next five years will include: • • • • • • • Growing concerns over reserve replacement Declining non-Opec reserves Increasing importance of the NOCs High oil and gas prices High supply chain cost inflation Shortages of skilled, experienced personnel Increasing expenditure on all facets of the onshore business.
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3
ALGERIA
9,000 8,000 7,000 6,000 $ million 5,000 4,000 3,000 2,000 1,000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 3-1: Algeria – Expenditure Totals 2001-2010 ($ million) Table 3-1: Algeria – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 11 329 276 74 3,169 3,858 2002 26 393 286 147 3,433 4,284 2003 29 471 390 98 3,789 4,777 2004 28 534 295 123 4,112 5,091 2005 37 586 462 586 4,469 6,141 2006 31 597 594 230 4,766 6,218 2007 37 677 1,078 595 4,878 7,265 2008 38 726 1,119 488 5,246 7,617 2009 40 731 1,040 435 5,769 8,016 2010 42 761 1,031 484 6,048 8,366 01-05 131 2,311 1,709 1,027 18,973 24,151 06-10 188 3,492 4,862 2,232 26,708 37,482
Algeria is the world’s 6th largest holder of gas reserves and supplies Europe with 30% of its gas demand. Algeria was one of the founding members of GECF (regarded by some as the beginnings of a ‘gas Opec’), along with Iran and Russia. Sonatrach is the NOC and the world’s 12th largest company, 2nd largest LNG exporter and 3rd largest gas exporter, and dominates the Algerian oil & gas sector. 80% of all of Sonatrach’s upstream equipment is sourced from the US. Levels of both oil and gas output are steadily increasing and since 2001 annual investment has increased from $3.9 billion to $6.2 billion in 2006. Strong levels of growth in MMO expenditure and new facilities (particularly LNG export terminals) are expected over next five years, with annual investment reaching $8.4 billion by 2010. Total spending for the period will amount to $37.5 billion – an increase of 55% over the previous five year period. Algeria is stable, increasingly transparent and Arabic speaking. It deregulated oil (1986), gas (1991) and in May 2005 the process of deregulation of the downstream sector began and the country is progressing towards complete deregulation of the sector. This will cover: government recovers regulatory role, effective tender evaluation, high corporate structure flexibility, taxation transparency and non-discriminatory taxation vs. Sonatrach. However, access to some areas of market is restricted, in particular transport & distribution (TRC & NAFTAL monopoly) and construction (partial control). With a high level of unemployment, creation of local content is particularly highly regarded. A consolidated approach to upstream/downstream/power is favoured hence there is a preference for an integrated approach to oil & gas developments.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 5 10 15 20 25 $ billion
Figure 3-2: Algeria – Expenditure by Component 2006-2010 Table 3-2: Algeria – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 43 74 0 224 3,169 52 147 0 224 3,433 61 98 0 317 3,789 152 123 0 128 4,112 159 586 0 287 4,469 301 230 350 277 4,766 331 595 350 728 4,878 370 488 350 728 5,246 389 435 350 630 5,769 410 484 400 600 6,048 467 1,027 0 1,180 18,973 1,801 2,232 1,800 2,963 26,708 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 11 9 1 329 181 148 349 42 202 26 26 24 17 10 3,169 2,298 872 26 23 3 393 216 177 433 52 251 32 32 30 22 13 3,433 2,489 944 29 25 3 471 259 212 488 59 283 37 37 34 24 15 3,789 2,747 1,042 28 25 3 534 294 240 417 50 242 31 31 29 21 13 4,112 2,993 1,119 37 33 4 586 322 264 1,048 126 608 79 79 73 52 31 4,469 3,271 1,199 31 27 4 597 328 269 824 99 478 62 62 58 41 25 4,766 3,486 1,280 37 33 4 677 373 305 1,673 201 970 125 125 117 84 50 4,878 3,544 1,334 38 34 5 726 399 327 1,607 193 932 121 121 112 80 48 5,223 3,793 1,429 40 35 5 731 402 329 1,475 177 856 111 111 103 74 44 5,677 4,123 1,554 42 37 5 761 418 342 1,515 182 182 182 182 182 182 182 6,040 4,379 1,661 131 116 16 2,311 1,271 1,040 2,735 328 1,586 205 205 191 137 82 18,973 13,797 5,175 188 166 23 3,492 1,921 1,572 7,093 851 3,417 600 600 572 461 349 26,583 19,324 7,260
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Major foreign operators are: AGIP, Burlington, BP, Sinopec, Gulf Keystone, Repsol Cepsa, BHP Billiton, Petronas, PIDC, Rosneft Stroytransgaz, Gazprom, Lukoil, Total, First Calgary Petroleum, Gas de France, Petrocanada, Anadarko, Amerada Hess, Medex, Statoil. Local firms include: Upstream & hydrocarbon services – ENTP, ENSP, ENAFOR (40% market share for drilling & workovers). Seismic – ENAGEO with 75% market share but the market is totally open. Engineering – BRC, IAP, CPE, market totally open. Construction – GCB (40% market share), NAC, GTP and ALESCO. There is an increased environmental concern and a willingness to stop gas flaring. BP’s pioneering Krechba project for CO2 sequestration is a JV with Sonatrach. Algeria is 97th on the Transparency’s International index. Security issues (in particular with foreign personal) remain but the situation is improving.
3.1.
Major Upstream Developments
Algeria is a virtually unexplored area (8 wells/10,0002 km whereas similar countries usually average 50 (the world average 105). Existing fields are in decline, but new finds will offset depletion and oil production will expand from around 1.96 mmbpd to reach 2 mmbpd in 2010. Gas production will expand from around 90 bcm per annum to reach 104 bcm per annum in 2010 Algeria understands its vast potential and weaknesses well. It is developing an attractive a new regime for foreign E&P in order to tackle ageing infrastructure and provide new technologies (e.g. horizontal wells and EOR). The tax regime is favouring challenging and small-field development. (There is a useful tax exemption on E&P, LNG, GTL and pipelines expenditures.). This has resulted in rising levels of seismic, particularly 3D (about 3,700 currently, over 5,700 in 2010) as well as intensive exploratory drilling effort (around 64 per year). The market is boosted by increased exploration activity and major projects such as giant In Salah and In Amenas field development ($2.7 billion and $2.7 billion respectively) and the Gassi Touil gas field prospect.
3.2.
Major Pipeline and LNG Developments
LNG feed is important to Europe but there is a diversification of clients – US, Singapore and South Korea. Europe-Algeria interaction results in numerous large projects, in particular Medgaz pipeline to Spain (350km onshore section) and Galsi connection to Sardinia. A fire at Skikda (2004) has reduced LNG export capacity to 22 mmtpa but revamp of Skikda and the new Arzew-Gassi Touil development will increase that number to 32 mmtpa by 2010. There is a need for upgrade of HSE systems. In a separate development, Statoil and Sonatrach are working together on an integrated LNG liquefaction project under an MOU signed in 2005. The project, should it go ahead, could be onstream in 2013.
3.3.
Major Downstream Developments
Sonatrach’s two priorities are refining & processing and petrochemicals. There is inconsistency between large upstream potential and the small and ageing downstream capacity. Algeria is attempting to tackle this issue through focusing on additional downstream capacity and MMO for existing plant. Major LNG prospects.
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Major downstream developments include the Tinhert GTL plant ($ 3 billion), Skikda Nafta cracker (1.3 billion), Tiaret refinery ($ 3 billion). Significant MMO projects for old refineries are mainly Arzew and Skikda (total $350 million and counting!).
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4
ANGOLA
1,800 1,600 1,400 1,200 $ million 1,000 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 4-1: Angola – Expenditure Totals 2001-2010 ($ million) Table 4-1: Angola – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 0 0 3 0 50 53 2002 0 0 3 0 49 52 2003 18 20 8 0 49 94 2004 44 49 12 0 50 156 2005 27 29 7 0 51 114 2006 22 26 561 0 51 659 2007 44 54 1,245 0 50 1,393 2008 55 68 1,413 0 52 1,588 2009 69 95 1,405 0 53 1,623 2010 87 125 1,427 0 59 1,698 01-05 89 98 33 0 250 469 06-10 278 369 6,050 0 265 6,961
The vast majority of Angola’s oil & gas production is located offshore, in numerous blocks. Total production is expected to reach 2 million bpd by 2008, when new deepwater developments are expected to come online. The primary reason for the lack of onshore development is the country’s 27year civil war, which kept oil companies away. Since the end of the war in 2002, onshore activities are restarting. State-owned oil company Sonangol aids in securing Angola revenue from its huge hydrocarbon deposits – the country’s government earns 90% of its revenue through oil & gas extraction. Bidding for onshore blocks generally attracts mid-sized players, as the fields are eclipsed in their size by their offshore neighbours. In 2005, seismic surveying of Angola’s Cabinda block heralded great potential for onshore activity, possibly even higher than its offshore reserves. The main importers of Angola’s hydrocarbons are the US (40%) and China (35%) with other buyers including Europe and South America. The top foreign oil companies operating in Angola are USbased ChevronTexaco (producing over half a million bpd) and ExxonMobil, France’s Total, UK’s BP, UK/Dutch Shell, and Italy’s Agip/Eni Oil Company. Construction is underway for Angola’s first LNG plant, located near Soyo in the north. The 5mt/y plant project is led by Sonangol and ChevronTexaco and heralds the start of Angola’s LNG industry. Angola is 151th on the Transparency International index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0.0 0.5 1.0 1.5 2.0 2.5 3.0 $ billion
Figure 4-2: Angola – Expenditure by Component 2006-2010 Table 4-2: Angola – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 0 0 0 3 50 0 0 0 3 49 5 0 0 3 49 12 0 0 0 50 7 0 0 0 51 6 0 0 554 51 14 0 400 831 50 17 0 525 871 52 24 0 550 831 53 31 0 525 871 59 24 0 0 8 250 92 0 2,000 3,958 265 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 0 0 0 0 0 0 3 0 2 0 0 0 0 0 50 27 23 0 0 0 0 0 0 3 0 2 0 0 0 0 0 49 27 23 18 16 2 20 11 9 8 1 4 1 1 1 0 0 49 27 23 44 39 5 49 27 22 12 1 7 1 1 1 1 0 50 27 23 27 23 3 29 16 13 7 1 4 1 1 1 0 0 51 27 23 22 20 3 26 14 12 561 67 325 42 42 39 28 17 51 27 23 44 39 5 54 30 24 1,245 149 722 93 93 87 62 37 50 27 23 55 49 7 68 37 31 1,413 170 819 106 106 99 71 42 52 28 24 69 61 8 95 52 43 1,405 169 815 105 105 98 70 42 53 29 24 87 76 10 125 69 56 1,427 171 171 171 171 171 171 171 59 32 27 89 78 11 98 54 44 33 4 19 2 2 2 2 1 250 135 115 278 244 33 369 203 166 6,050 726 2,853 518 518 495 402 310 265 144 121
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4.1.
Major Upstream Developments
Upstream activity onshore Angola is minimal, and no major upstream developments are currently planned.
4.2.
Major Pipeline and LNG Developments
Sonangol – Angolan LNG Liquefaction Project – 2010 The Angolan LNG project will be the country’s first major onshore gas project and will take feed gas from offshore fields in blocks 1,2,3,4,15,17 & 18. The plant is initially expected to consist of a single 5 million ton per annum train, however, latter expansion is likely. Chevron (with a 36.4% stake) are partnering Sonagol (22.8%) on the project and are joined by several other participants including Total, ExxonMobil and BP, each with a 13.6% stake. In May 2005 Sonagol awarded FEED contracts to Bechtel and a joint venture consisting of KBR, JGC and Technip. An EPC contract award is believed to be imminent.
4.3.
Major Downstream Developments
Sonagol-Sinopec – Sonaref Refinery - 2010 Following completion of a feasibility study carried out by KBR, construction of the Sonaref refinery is set to go ahead. The project involves setting up a new grassroots refinery capable of processing 200,000 bpd. The refinery will process heavy and acidic oil, mainly high-sulphur crudes produced in Angola. Products would be marketed to the Angolan and neighbouring African markets. Construction of the $3.75 billion plant is due to be complete in 2010.
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AUSTRALIA
5.0 4.5 4.0 3.5 $ billion 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 5-1: Australia – Expenditure Totals 2001-2010 ($ billion) Table 5-1: Australia – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 31 337 570 423 675 2,037 2002 21 248 1,055 413 672 2,409 2003 9 254 1,570 386 655 2,875 2004 25 402 1,464 426 657 2,974 2005 30 387 1,408 366 668 2,860 2006 30 409 1,258 2,020 678 4,394 2007 32 444 1,423 450 688 3,036 2008 58 550 1,493 353 691 3,146 2009 55 553 1,249 343 713 2,913 2010 54 555 1,326 1,000 737 3,672 01-05 116 1,630 6,068 2,015 3,327 13,155 06-10 229 2,511 6,750 4,166 3,506 17,161
First oil production in Australia occurred in 1964. Onshore production is mostly inland from the North West Shelf and from the central Cooper/Eromanga basins. Some minor onshore production occurs in the Perth basin on the southwest where there are small oil and some larger gas fields. Onshore oil forms only a small % of Australian output. Offshore, production is growing rapidly and is expected to continue to do so, both due to increased domestic demand and substantially increased exports from its onshore LNG facilities. Australia has discovered more gas than oil and the country is believed to have the second highest gas resources in the Asia-Pacific region, after Indonesia, and the highest remaining reserves and resources. Over 95% of current production is from 3 basins. Onshore, the central Cooper/Eromanga basin produces relatively small quantities of gas compared to its offshore neighbours. Other onshore production comes from remote basins in the west, centre and east of the country. Some gas production occurs in the Perth basin on the southwest where there are a few moderate sized gas fields. The largest, the Dongara field, was discovered in 1970 and contained around 12bcm. Recent success in this region has been for modest volumes of oil. The primary hydrocarbon source of Australia is coal, which powers the majority of the country’s infrastructure. The country is the world’s largest coal exporter, and the fifth largest exporter of LNG. The majority of Australia’s LNG is destined for Japan, with smaller shipments to South Korea and Spain. Negotiations are underway with the US to export LNG to the west coast. Australia is 9th on the Transparency International index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 1 2 3 4 5 6 $ billion
Figure 5-2: Australia – Expenditure by Component 2006-2010 Table 5-2: Australia – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 37 423 400 133 675 27 413 400 627 672 28 386 650 892 655 44 426 650 770 657 43 366 560 806 668 45 2,020 560 653 678 49 450 990 385 688 61 353 990 442 691 61 343 680 509 713 61 1,000 680 585 737 179 2,015 2,660 3,229 3,327 276 4,166 3,900 2,573 3,506 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 31 27 4 337 185 152 993 119 576 75 75 70 50 30 675 361 314 21 19 3 248 136 112 1,468 176 851 110 110 103 73 44 672 360 312 9 8 1 254 140 115 1,957 235 1,135 147 147 137 98 59 655 348 307 25 22 3 402 221 181 1,890 227 1,096 142 142 132 95 57 657 348 309 30 26 4 387 213 174 1,775 213 1,029 133 133 124 89 53 668 355 313 30 26 4 409 225 184 3,278 393 1,901 246 246 229 164 98 678 361 317 32 28 4 444 244 200 1,873 225 1,087 141 141 131 94 56 688 367 321 58 51 7 550 303 248 1,846 221 1,071 138 138 129 92 55 691 369 322 55 49 7 553 304 249 1,592 191 924 119 119 111 80 48 713 383 330 54 47 6 555 305 250 2,326 279 279 279 279 279 279 279 737 398 339 116 102 14 1,630 896 733 8,083 970 4,688 606 606 566 404 242 3,327 1,771 1,555 229 201 27 2,511 1,381 1,130 10,916 1,310 5,261 923 923 880 709 537 3,506 1,878 1,628
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No Australian oil companies are owned/operated by the government. Applications for onshore exploration and production projects are managed by state governments, while the Commonwealth government has jurisdiction over Australia’s offshore projects. Major oil production companies in Australia include Woodside Petroleum Limited (producing double the hydrocarbons of its nearest rival), ExxonMobil/Esso Australia, Santos Incorporated and Apache Corporation. Australia’s oil pipeline infrastructure is well developed, with several operators responsible for over 2,500 miles of pipeline each. Four companies own the eight refineries in Australia, the majority of which are located on the east coast of the country. Recent oversupply of refining in Asia has a detrimental effect on Australia’s refining industry. Gas pipelines in Australia are fragmented, carrying gas from centrally located fields to coastal cities such as Sydney and Melbourne. A large amount of investment in pipelines will be required as production from these central fields decline.
5.1.
Major Upstream Developments
At present, Australia produces about 80% of its crude oil requirements. Onshore oil forms only a small percentage of Australian output and is mostly inland from the North West Shelf and from the central Cooper/Eromanga basins which are in production decline. Some minor onshore production also occurs in the Perth basin on the southwest where there are some small oil and larger gas fields. Barrow Island remains Western Australia's largest onshore oil field.
5.2.
Major Pipeline and LNG Developments
Following completion of the major Darwin to Moomba Gas Pipeline in 2006 we expect to see a large decline in onshore pipeline activity with the next significant increase being at the end of the decade. Australia is the third largest LNG producer in the Asia-Pacific region and the fifth largest LNG producer in the world, exporting approximately 10.6 million tonnes in 2004-05. There is considerable potential for further development of the industry based on abundant resources of offshore natural gas. The Australian government believes that the LNG industry has the potential to attract up to A$30 billion in new project investment over the next 10 years. LNG exports generated more than A$3.2 billion in 2004-05. Contracts are in place to supply LNG to Japan, China and South Korea. North West Shelf – Fifth Liquefaction Train Development of a fifth LNG processing train for the North West Shelf facilities on the Burrup Peninsula, worth about $1.5 billion, was announced in June 2005. Foster Wheeler & WorleyParsons are constructing the train under a joint venture EPC project. Inpex – Ichthys LNG Liquefaction Project The Tokyo-listed firm Inpex currently owns a 100% interest in offshore block WA-285-P where water depths range from 90 to 340 metres. Total is, however, expected to take a 24% stake in the project and the involvement of the French major oil company is a great boost to the project as the company has extensive experience in the sector. The development plan shows that Ichthys will produce 6 mmtpa from mid-2012 an initial 6 million tonnes per annum of LNG with the potential for expansion up to 12 mmtpa. Around 100,000 barrels per day of condensate and liquefied petroleum gas will also be produced. An onshore location for an LNG processing plant has been selected in the remote Kimberley area.
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Woodside – Browse LNG Liquefaction Project Woodside is evaluating the potential to develop the offshore Browse fields (Torosa, Brecknock and Calliance) via an onshore LNG liquefaction plant. A contract has been awarded to Foster Wheeler and WorleyParson to study the technical viability of the project.
5.3.
Major Downstream Developments
Caltex NSW One major downstream project is ongoing, the $1.5 bn expansion of Caltex’s New South Wales refinery due for completion in 2008 by Uhde Group Engineering using technology licensed from KBR.
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AZERBAIJAN
1,400 1,200 1,000 $ million 800 600 400 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 6-1: Azerbaijan – Expenditure Totals 2001-2010 ($ million) Table 6-1: Azerbaijan – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 1 53 23 196 787 1,059 2002 0 49 21 210 795 1,075 2003 1 80 34 230 797 1,141 2004 0 38 16 182 807 1,044 2005 1 41 18 162 822 1,044 2006 1 45 19 0 827 891 2007 1 50 21 0 831 902 2008 1 53 23 0 842 919 2009 1 58 25 0 854 939 2010 1 64 27 0 868 959 01-05 3 261 112 980 4,008 5,364 06-10 4 270 116 0 4,222 4,611
Azerbaijan is a negligible onshore province – oil production of 60 kbpd in 2006 is estimated to decline to 57 kbpd in 2010. Inefficiencies from aging equipment and largely depleted reservoirs have caused the cost of production of onshore crude oil to reach an estimated $15-$17 per barrel. Onshore gas production is even smaller: 0.16 bcm per annum in 2006 and forecast at 0.15 bcm per annum in 2010. SOCAR is the local NOC with 60,000 employees (not including subsidiaries). The oil industry relies mainly on production sharing agreements. Conflict over the Nagorno-Karabakh province control with Armenia (1988-1994 war) remains and could hamper security of infrastructure in the region, in particular pipelines. Azerbaijan is 137th on the Transparency International Corruption Index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0.0 0.5 1.0 1.5 2.0 2.5 $ billion
Figure 6-2: Azerbaijan – Expenditure by Component 2006-2010 Table 6-2: Azerbaijan – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 23 196 0 0 787 21 210 0 0 795 34 230 0 0 797 16 182 0 0 807 18 162 0 0 822 19 0 0 0 827 21 0 0 0 831 23 0 0 0 842 25 0 0 0 854 27 0 0 0 868 112 980 0 0 4,008 116 0 0 0 4,222 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 1 1 0 53 29 24 218 26 127 16 16 15 11 7 787 367 420 0 0 0 49 27 22 231 28 134 17 17 16 12 7 795 372 423 1 1 0 80 44 36 264 32 153 20 20 19 13 8 797 373 424 0 0 0 38 21 17 198 24 115 15 15 14 10 6 807 379 428 1 1 0 41 23 19 180 22 104 13 13 13 9 5 822 388 434 1 0 0 45 25 20 19 2 11 1 1 1 1 1 827 391 436 1 1 0 50 27 22 21 3 12 2 2 1 1 1 831 393 437 1 1 0 53 29 24 23 3 13 2 2 2 1 1 842 400 442 1 1 0 58 32 26 25 3 14 2 2 2 1 1 854 408 447 1 1 0 64 35 29 27 3 3 3 3 3 3 3 868 416 452 3 3 0 261 144 117 1,092 131 633 82 82 76 55 33 4,008 1,879 2,129 4 3 0 270 148 121 116 14 55 10 10 9 8 6 4,222 2,007 2,214
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6.1.
Major Pipeline / LNG Projects
Baku-Tiblissi-Ceyhan The completion in 2005 of the $4 billion Baku-Tiblissi-Ceyhan (BTC) oil pipeline via Georgia is a major achievement for the country. Another pipeline running parallel to the BTC but finally connecting to the Turkish gas transportation system should deliver gas supplies to an export terminal. The project should be completed in 2007 at a cost of 1.3 $billion.
6.2.
Major Downstream
Baku Refinery Azerbaijan will build two gasoline units at Baku’s refinery at a cost of about $130 million.
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BRAZIL
7 6 5 $ billion 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 7-1: Brazil – Expenditure Totals 2001-2010 ($ billion) Table 7-1: Brazil – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 19 530 283 400 1,286 2,518 2002 24 444 264 1,689 1,267 3,687 2003 22 414 258 40 1,328 2,063 2004 34 462 513 684 1,344 3,036 2005 60 456 653 1,041 1,412 3,621 2006 67 497 990 2,922 1,505 5,982 2007 55 587 1,083 2,473 1,593 5,792 2008 44 665 1,201 797 1,693 4,399 2009 40 714 1,409 316 1,803 4,282 2010 43 781 1,467 323 1,919 4,533 01-05 158 2,306 1,971 3,853 6,638 14,926 06-10 249 3,245 6,150 6,832 8,513 24,988
Brazil is the 10th largest energy consumer in the world and consumption is growing at a fast pace. The country recently achieved self-sufficiency in oil, although this is largely due to production from offshore deepwater. The main issue for Brazil currently is to secure supplies of gas. In the short-term this will be met from import pipelines from Bolivia. In the longer-term, Brazil has the potential to develop its own gas production. In addition, Brazil must develop an adequate downstream capacity to take advantage of its new-found oil independence. Onshore expenditure in 2006 is estimated to amount to nearly $6 billion, however, it should be noted that current high levels are largely associated with major pipeline projects that are now coming to completion. Towards the end of the five year forecast period it is likely that expenditure will settle at around $4.5 billion per annum. Key areas set to see growth include MMO associated with onshore production and downstream refining/processing, along with downstream refining and petrochemical facilities. The National Petroleum Agency is keen to mix both onshore and offshore acreage in order to stimulate the development of the latter. However, Brazil is a small onshore oil and gas producer and onshore oil & gas acreage offered by the ANP has received little attention. Brazil is 62nd on Transparency International’s corruption index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 1 2 3 4 5 6 7 8
$ billion
Figure 7-2: Brazil – Expenditure by Component 2006-2010 Table 7-2: Brazil – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 159 400 0 124 1,286 133 1,689 0 131 1,267 124 40 0 133 1,328 138 684 0 375 1,344 137 1,041 0 516 1,412 149 2,922 0 841 1,505 176 2,473 0 907 1,593 199 797 0 1,001 1,693 214 316 0 1,195 1,803 234 323 0 1,232 1,919 692 3,853 0 1,279 6,638 973 6,832 0 5,176 8,513 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 19 16 2 530 292 239 683 82 396 51 51 48 34 20 1,286 604 683 24 21 3 444 244 200 1,952 234 1,132 146 146 137 98 59 1,267 594 673 22 20 3 414 228 187 298 36 173 22 22 21 15 9 1,328 624 704 34 30 4 462 254 208 1,197 144 694 90 90 84 60 36 1,344 630 714 60 52 7 456 251 205 1,694 203 982 127 127 119 85 51 1,412 662 750 67 59 8 497 273 224 3,912 469 2,269 293 293 274 196 117 1,505 703 802 55 48 7 587 323 264 3,556 427 2,063 267 267 249 178 107 1,593 743 851 44 38 5 665 366 299 1,998 240 1,159 150 150 140 100 60 1,693 787 906 40 35 5 714 393 321 1,725 207 1,001 129 129 121 86 52 1,803 836 966 43 38 5 781 430 352 1,790 215 1,038 134 134 125 89 54 1,919 890 1,029 158 139 19 2,306 1,268 1,038 5,824 699 3,378 437 437 408 291 175 6,638 3,114 3,524 249 219 30 3,245 1,785 1,460 12,981 1,558 7,529 974 974 909 649 389 8,513 3,959 4,554
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7.1.
Major Upstream Developments
The National Petroleum Agency (ANP) holds responsibility for issuing exploration and production licenses and ensuring compliance with relevant regulations (and ensuring local content). Since opening the sector to private investment in 1997, foreign investment has been relatively low. Petrobras has faced difficulties developing new projects on schedule, mostly due to finance and construction delays and shifting government regulations. ANP has focused the 7th licensing round on increasing gas production. However, this is unlikely to change the position of Brazil as a gas importing country (mainly from Argentina and Bolivia) as most onshore production is in Amazonas and Bahia states and is mostly for local consumption due to the lack of transportation infrastructure. Completion of the Urucu pipeline this year could start to change this situation. The main player in Brazil is the national oil company Petrobras. Major foreign companies are BG, Cairn Energy, Shell, Niko, Tullow Oil, Total, BP, KPC, Saudi Aramco, Abu Dhabi National Oil Corporation and Petronas. Brazil is also the largest producer of biofuels in the world and since the recent oil price increases, the Brazilian government and Petrobras are investing substantially in biofuel production community schemes.
7.2.
Major Pipeline and LNG Developments
Main projects are the Southeast-Northeast gas pipeline (GASENE) and the gas interconnection with Bolivia. Brazil has announced delays in the pipeline following re-analysis of the Sinopec proposal for the construction of the $4 billion pipeline. The main issue was the cost of steel which increased the cost of the link by one-third. Transpetro, a wholly owned subsidiary of Petrobras, operates Brazil’s crude oil transport network. Table 7-3: Brazil – Major Identified Pipeline Projects
Project Name Urucu-Coari-Manaus gas pipeline – Urucu Field-Coari section Nordeste gas pipeline, Bolivia (Santos Basin) Coari – Manaus Guamaré-Fortaleza gas pipeline Rio de Janeiro to Belo Horizonte pipeline Urucu to Porto Velho gas pipeline Uruguaiana to Porto Alegre Southeast-Northeast gas pipeline (GASENE) – Cacimbas-Catu section Southeast-Northeast gas pipeline network interconnection Urucu-Coari-Manaus gas pipeline – Coari Manuas section Ceará, Piauí and Maranhão pipeline Goias to Paulinia ethanol pipeline Belo Horizonte to Brasilia pipeline North-East gas pipeline network Start 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2007 2007 2008 2009 End 2006 2007 2007 2007 2006 2007 2006 2008 2008 2007 2008 2009 2010 2017 370 948 936 507 5,000 20 12 12 12 48 Length (Km) 280 1197 430 340 357 530 615 765 Diameter (inches) 10 30 16 14 14 10 20 28
The development of LNG in Brazil is a complex problem that will be fixed only by deregulation, in several areas including: third party access to infrastructure, gas release proprammeme, market dominance by incumbents, supply flexibility and security, promoting the interconnection of networks, increasing sources of external suppliers, using LNG to introduce competition.
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7.3.
Major Downstream Developments
Brazil is forecasting several large downstream projects and has signed a strategic agreement with PdVSA of Venezuela to build a $2.5 billion refinery in North-Eastern Brazil. The country is also developing a world-class PTA plant. The Pernambuco project will provide 750,000 tpa at a cost of $1.3 billion. Brazil is the largest producer and exporter of ethanol in the world. Over half of all cars are of the flexfuel variety, meaning that they can run on 100 % ethanol or an ethanol-gasoline mixture. The current high oil price has boosted production and could impact the downstream sector in the long-term. Petrobras – Canoas Alberto Pasqualini Refinery Petrobras is expanding the REFAP refinery by 50% to about 250,000 barrels per day in a $1 billion refurbishing exercise. Expansion of the refinery consists of the construction of a 30.1kbpd hydrodesulphurisation unit and 153kcbm hydrogen unit, both expected to be completed in 2009. Petrobras – Integrated Refining & Petrochemical Unit – Rio de Janeiro (Duque de Caxias) The Petrobras Duque de Caxias Refinery has installed capacity of 242,000 barrels per day and produces lubricants, gasoline, diesel fuel, jet fuel, bunker oil, as part of a line of 52 different products. Expansion of the factory includes a 30.1kbpd hydrodesulphurisation unit which is due for completion in 2009. Petrobras – Metim Gabriel Passos Refinery A hydrodesulphurization unit is currently under construction at the refinery and is due for completion in 2009.
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8
CANADA
50 45 40 35 $ billion 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 8-1: Canada – Expenditure Totals 2001-2010 ($ billion) Table 8-1: Canada – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 396 2,116 531 8,471 2002 271 2,124 700 8,292 2003 312 2,144 378 8,886 2004 218 2,229 390 2005 270 6,438 990 2006 426 7,642 2,001 2007 364 7,563 2,086 2008 374 7,290 2,160 2009 364 7,416 1,849 2010 379 6,734 1,901 01-05 1,468 15,051 2,990 45,137 06-10 1,907 36,645 9,997 61,382
14,701 12,548 17,147 18,091 24,792 27,424 25,232 24,728 24,233 23,749
87,278 125,366
9,335 10,153 10,709 11,251 12,012 13,129 14,281
26,215 23,935 28,866 30,264 42,643 48,202 46,495 46,563 46,992 47,044 151,923 235,296
Canada is one of the world’s largest producers of oil & gas since first production in 1862 (oil) and 1945 (gas). Approximately 90% comes from the Western Canadian Sedimentary Basin where major heavy crude deposits are also located. From here light and heavy crudes, including blended bitumen and syncrude, are sold to domestic and US refiners. Canada is a major supplier to the US (almost all of Canada’s exported hydrocarbons), especially the US Midwest, providing about 15% of its current import needs. However, Canada’s Western basin is now well explored and past peak. Other Canadian sources of oil & gas are the northern Alberta oil sands and offshore fields. The Athabasca oil sands deposits in northern Alberta are some of the most extensive in the world. Major projects are scheduled in the region. However, there is serious concern whether local resources and infrastructure (such as roads, water, export pipelines, natural gas, labour, etc. are sufficient to meet the forecast demand. Canada boasts an extensive pipeline system, integrated well with the neighbouring US through two pipeline operators: Enbridge Pipelines and Kinder Morgan Canada. The expansion of the Athabasca oil sands has necessitated the need for further infrastructure, built to transport diluted bitumen and synthetic crude to downstream facilities in the Edmonton area. Major export lines link directly to US cities such as Chicago. Canada has a refining capacity of around 2 million bbl/day crude. Canada is 14th on the Transparency International index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 10 20 30 40 50 60 70 80
$ billion
Figure 8-2: Canada – Expenditure by Component 2006-2010 Table 8-2: Canada – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 1,410 531 0 705 8,471 1,204 700 0 920 8,292 1,645 378 0 499 8,886 1,736 390 0 494 2,378 990 117 3,943 2,587 2,001 304 4,751 2,380 2,086 304 4,879 2,333 2,160 379 4,578 2,286 1,849 822 4,308 2,240 1,901 685 3,808 8,373 2,990 117 6,561 45,137 11,827 9,997 2,493 22,325 61,382 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
9,335 10,153 10,709 11,251 12,012 13,129 14,281
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 396 348 48 8,086 6,615 2,647 318 1,535 199 199 185 132 79 8,471 4,565 3,906 271 239 33 6,901 5,646 2,824 339 1,638 212 212 198 141 85 8,292 4,467 3,826 312 275 37 9,431 7,716 2,522 303 1,463 189 189 177 126 76 8,886 4,791 4,094 218 192 26 270 238 32 426 375 51 364 320 44 374 329 45 364 320 44 379 334 46 1,468 1,291 176 48,003 39,275 18,040 2,165 10,463 1,353 1,353 1,263 902 541 45,137 24,350 20,787 1,907 1,678 229 68,951 56,415 46,642 5,597 23,080 3,887 3,887 3,697 2,937 2,176 61,382 33,137 28,245
14,701 12,548 17,147 18,091 24,792 27,424 25,232 24,728 24,233 23,749 9,950 13,635 15,083 13,877 13,600 13,328 13,062 8,141 11,156 12,341 11,354 11,127 10,905 10,687 2,619 314 1,519 196 196 183 131 79 7,428 891 4,308 557 557 520 371 223 9,643 1,157 5,593 723 723 675 482 289 9,649 1,158 5,596 724 724 675 482 289 9,449 1,134 5,481 709 709 661 472 283 9,265 1,112 5,374 695 695 649 463 278 8,635 1,036 1,036 1,036 1,036 1,036 1,036 1,036
87,278 125,366
9,335 10,153 10,709 11,251 12,012 13,129 14,281 5,041 4,294 5,486 4,667 5,783 4,926 6,072 5,179 6,482 5,530 7,088 6,042 7,712 6,569
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Canada has a privatised oil sector that has witnessed considerable consolidation in recent years. The largest integrated operator in the country is Imperial Oil, majority owned by ExxonMobil. In 2002, Alberta Energy Company and PanCanadian Energy merged to create EnCana, Canada’s largest independent upstream operator. Other significant oil producers in Canada include Talisman Energy, Suncor, EOG Resources, Husky Energy and Apache Canada. U.S. companies maintain a sizable presence in the Canadian oil industry. The Canadian government formed Petro-Canada in 1975 in an effort to reduce the dominance of US companies in Canada’s oil industry. The company received considerable initial resources from the Canadian government in its early years, though critics accused Petro-Canada of inefficiently deploying those resources and interfering with the operations of private companies. In 1991, the Canadian government began to privatize Petro-Canada, and in late 2004, the government sold its remaining 20 % stake in the company.
8.1.
Major Upstream Developments
Bitumen is recovered by open-pit surface mining and Canada has the only commercial mining operations in the world run by Suncor Energy, Syncrude Canada and most recently Shell Canada, all in Alberta. Production commenced in 1967 with the startup of the Suncor plant (then known as Great Canadian Oil Sands). Syncrude, the world’s largest producer of synthetic oil, began production in 1978 whilst Shell began producing in late 2002. Earth-moving equipment is used to strip and stockpile the topsoil, remove and dispose of the overburden and excavate the oil sand. Many new projects are now in progress or in the planning stage including expansion of both Syncrude’s and Suncor’s operations, but growth plans have been dogged by technical problems and delays. It also seems likely that the best mines were developed first and that the energy balance (amount of energy produced versus amount used in the production) will worsen in the future. The major operating cost factor in an oil sand operation is the energy supply (primarily natural gas) that provides steam, electricity and water. Consequently, although production growth will be significant, it will probably under-perform levels hoped for by the Alberta regional government as Western Canadian gas supplies tighten. Oil sands require a lot of expensive processing, with the equivalent of one barrel of oil being burnt to process four barrels from the sands.
8.2.
Major Pipeline and LNG Developments
Table 8-3: Canada – Major Identified LNG Import Terminal Projects
Project Name Bear Head LNG, Point Tupper, NS (Canso Strait) Canaport, St John, NB Goldboro, NS Prince Rupert, British Columbia Rabaska LNG, Quebec City, QC Kitimant LNG, British Columbia Cacouna Energy, Gros Cacouna Island Saguenay, QC Operator Access Northeast Energy Irving Oil, Repsol Keltic Petrochemicals & Maple LNG Westpac Terminals Enbridge/Gaz Met/Gaz de France Kitimat LNG TransCanada Corporation and Petro-Canada SPA, Energi Grande-Anse Start 2007 2008 2009 2009 2009 2009 2010 2010 Capacity (mmtpa) 1 1 1 0.3 0.5 0.6 0.5 1
Repsol-YPF – Canaport – St John, New Brunswick A completion date of late 2008 is slated for the LNG import terminal, after construction began in May this year. The revaporised gas will flow from the East Coast to the US Northeast via a new dedicated pipeline also to be built by that time. Spain’s Repsol-YPF took a 75% stake in Canaport from Irving Oil in June 2005. Irving maintains a 25% stake in the project, which is being built at its deep-water oil
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terminal site on the Bay of Fundy. The first phase of the US$750 million development includes a jetty and two 160,000 cubic metre storage tanks. Output capacity will be 1 billion cubic feet per day of natural gas. Access Northeast Energy – Bear Head LNG – Canso Strait Located near Point Tupper, Nova Scotia, the planned terminal will deliver gas into the Maritimes and Northeast Pipeline, which services the Eastern Canada and Northeast U.S. gas markets. Proposed operations will constitute 750 mmcf/day to 1 Bcf/day of send-out capacity by November 2007 from two LNG storage tanks. The estimated cost of the project is $350 million.
Table 8-4: Canada – Major Identified Pipeline Projects
Project Name Gateway Oil Export Pipeline Blue Atlantic Transmission System Mackenzie Valley Pipeline (Norman Wells to Zama) Gateway Condensate Import Pipeline Millenium pipeline project. Bison Pipeline Corridor Pipeline Expansion Project Waupisoo crude oil pipeline Access Pipeline Northwinds Pipeline Start Edmonton Sable Island Norman Wells Compressor Station Kitimat or Prince Rupert USA/Canada border (Lake Erie) Athabasca Oil Sands Muskeg River Alberta, Cheecham Jackfish, Alberta Kirkwall, Ontario End British Columbia Nova Scotia Zama City redelivery to Edmonton Mount Vernon, USA Edmonton Scotford Upgrader Edmonton refinery hub Edmonton Ellisburg-Leidy, Pennsylvania Atlantic Canada and New England, USA Huntingdon, lower Fraser Valley Norman Wells St Johns, Labrador Quebec City Length (Km) 1158 1210 1200 1158 670 516 470 380 347 346 Diameter (inches) 36 36 / 42 30 20 36 / 24 30 42 30 30 / 24 30
Deep Panuke’s pipeline Inland Pacific Connector Project Mackenzie Delta pipeline (Inuvik to Norman Wells) White Rose field to St Johns pipeline Cartier Pipeline Project Maritimes & Northeast Pipeline Phase IV Expansion Waupisoo diluent pipeline
Deep Panuke Oliver, Okanagan Valley Inuvik White Rose offshore oil field St. Lawrence River
179 237 479 350 262 50
24 24 10 30 20 36 16
31 miles of pipeline looping in Maine Edmonton refinery hub
Oil sands region
380
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8.3.
Major Downstream Developments
Canadian Natural Resources – Horizon Oil Sands Project, Upgrader – Alberta The Horizon Project open pit mining strategy will consist of mobile equipment and bitumen extraction facilities to mine and separate the raw bitumen from the oil sands. Canadian Natural will further upgrade the bitumen to a sweet synthetic crude oil using proven delayed coking and hydro-treating technologies. The completion date is scheduled for 2011 and the upgrader will provide 270,000 b/d capacity. BA Energy Inc.– Heartland Upgrader – nr Edmonton, Alberta BA Energy has received budget approval for the first phase of the upgrader project, at a cost of CDN$900 million. The first of three phases is due for completion in 2008. Total capacity will be 250,000 b/d.
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9
CHINA
50 45 40 35 $ billion 30 25 20 15 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 9-1: China – Expenditure Totals 2001-2010 ($ billion) Table 9-1: China – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 445 6,222 3,550 1,782 7,085 2002 524 6,347 6,026 1,956 7,014 2003 598 6,413 6,850 2,113 7,671 2004 680 6,480 3,193 2005 729 7,921 3,641 2006 758 8,384 3,041 2007 777 8,991 3,035 2008 796 2009 808 2010 820 01-05 2,976 33,382 35,069 12,686 40,900 06-10 3,960 47,537 96,033 17,329 59,652
9,455 10,071 10,637 3,417 3,750 4,085
7,670 10,973 22,649 21,953 17,639 18,014 15,777 8,965 10,165 10,689 11,300 11,918 12,445 13,300
19,084 21,867 23,645 26,988 33,429 45,521 46,056 43,226 45,089 44,620 125,013 224,511
The ongoing major industrial growth in China is well documented and the implications for the oil and gas sector are clear, with a massive increase in investment in downstream facilities such as refineries, petrochemical plants and LNG import terminals. Overall, annual expenditure has increased from $19 billion in 2001 to reach a staggering $46 billion in 2006. Despite the fact that onshore production in China is now starting to decline, the high level of expenditure on downstream facilities is expected to be maintained and overall expenditure will remain high over the period to 2010. Total oil & gas spending over the five year period to 2010 is projected to amount to some $226 billion – an increase of 80% over the previous five year period. The upstream challenges for China are split between how to best manage the declining production of mature fields in the east of the country through enhanced oil recovery schemes and identifying additional reserves, to the successful exploration and development of the less-mature western regions. Downstream, China has developed a major refining and petrochemical industry and this continues to expand as a vital component in the country’s economic growth. The country boasts that it has created a variety of proprietary technologies and processes. Although the Chinese government and national oil companies claim to make serious efforts in tackling HSE issues, major events such as the Gao Qiao gas blowout in December 2003 (which killed 243 people and injured a further 9,000) raise serious concerns that HSE is currently not a major priority in China.
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Drilling Seismic
Seismic Equipment Seismic Acq & Reservoir Management Dow nhole & Well Services Drilling Equipment EDPM
Facilities
Construction Electro, Instrumentation & Telecoms Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 10 20 30 40 50 60 70 $ billion
Figure 9-2: China – Expenditure by Component 2006-2010 Table 9-2: China – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 350 1,782 0 3,200 7,085 400 1,956 0 5,626 7,014 500 2,113 0 6,350 7,671 577 3,193 80 614 3,641 296 1,509 3,041 296 1,432 3,035 753 1,337 3,417 868 1,337 3,750 803 1,337 4,085 803 2,441 12,686 376 32,252 40,900 6,952 17,329 3,523 85,559 59,652 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
7,013 10,063 20,844 19,769 15,434 15,875 13,638 8,965 10,165 10,689 11,300 11,918 12,445 13,300
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 445 392 53 6,222 3,422 2,800 5,332 640 3,093 400 400 373 400 27 7,085 3,945 3,140 524 461 63 6,347 3,491 2,856 7,982 958 4,630 599 599 559 599 40 7,014 3,915 3,099 598 526 72 6,413 3,527 2,886 680 599 82 6,480 3,564 2,916 729 641 87 7,921 4,357 3,565 758 667 91 8,384 4,611 3,773 777 684 93 8,991 4,945 4,046 796 701 96 5,200 4,255 808 711 97 5,539 4,532 820 722 98 5,850 4,787 2,976 2,619 357 33,382 18,360 15,022 3,960 3,485 475 47,537 26,145 21,392
9,455 10,071 10,637
8,963 10,863 14,614 25,691 24,989 21,056 21,765 19,862 1,076 5,199 672 672 627 672 45 7,671 4,325 3,346 1,304 6,300 815 815 760 815 54 1,754 3,083 2,999 2,527 2,612 2,383
47,755 113,362 5,731 27,698 3,582 3,582 3,343 3,582 239 40,900 23,013 17,886 13,603 65,750 8,502 8,502 7,935 8,502 567 59,652 33,375 26,277
8,476 14,901 14,493 12,213 12,623 11,520 1,096 1,096 1,023 1,096 73 1,927 1,927 1,798 1,927 128 1,874 1,874 1,749 1,874 125 1,579 1,579 1,474 1,579 105 1,632 1,632 1,524 1,632 109 1,490 1,490 1,390 1,490 99
8,965 10,165 10,689 11,300 11,918 12,445 13,300 5,065 3,900 5,764 4,401 6,051 4,638 6,355 4,945 6,663 5,255 6,928 5,518 7,379 5,922
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9.1.
Major Upstream Developments
Three oil companies dominate the industry. Sinopec operates mainly in the south and east, PetroChina (a subsidiary of the China National Petroleum Corporation) operates in the north and west and the China National Offshore Oil Corporation (CNOOC) controls offshore activity. The involvement of international companies is mostly limited to the offshore regions and overall foreign companies only produce around 5% of China’s output.1 China is one of the most intensively drilled countries in the world and currently over 12,000 wells are drilled per year. What it loses in modern technology it gains in very tight well spacing so that modern EOR is unlikely to yield significant extra oil from existing fields. In the west output has grown from the Tarim, Junggar and Ordos basins where new discoveries are rapidly developed at the same time as they are delineated. A high level of drilling has led to a series of large discoveries. Huo 10, with 700 million barrels of oil in place and located on the southern margin of Junggar was an important addition. More recently, Sinopec has been successful with exploration efforts on the northwestern edge of the Junggar basin and hit oil with wells Ke 92 and Ke 110. A focus on gas exploration has yielded some significant discoveries, including the recent Qingshen find – the first field in eastern China to hold in excess of 100 bcm reserves and the fifth largest onshore gas field in the country. In March 2006, Total and PetroChina signed a Production Sharing Contract for the evaluation, development and production of the natural gas resources of the South Sulige block of Ordos Basin. Due to the intense drilling, production from China has followed a classic curve and is nearing peak with little chance of increased output from the old giant fields. Some YTF potential remains in the unexplored west of China, and investment is being concentrated in the Tarim basin from which a 2,500 pipeline was recently completed, but it is unwise to underestimate the effort that the Chinese government has already put into drilling all but the most technologically difficult areas. Nevertheless, with domestic demand growing rapidly and oil prices at record levels, Chinese E&P expenditure remains strong. Seismic activity is expected to total some 66,000 km of 2D and nearly 21,000 km of 3D acquisitions in 2006. Major projects underway include: CNPC – Luojiazhai Gas Field Development – 2006 The Luojiazhai Gas Field is located in Xuanhan County Sichuan Province and Kai County Chongqing City. The $250 million project involves two stages, the first involves the construction of plant to clean sulphur and carbon dioxide from the produced gas, the second is the construction of the necessary infrastructure to collect and transmit gas from the Luojiazhai and Gunziping fields. The project is significant as it is the first purifying plant to be constructed for a high sulphur content field in China. MI Energy – Daan Jilin Oilfield Development – 2006 The ongoing development of the Daan Jilin oilfield, which spans some 253,000 km in the Songnen Plain, continues, with a $163 million investment in 2005 to raise output from 190,000 tons to 250,000 tons in 2006. The plan includes the drilling of 81 new wells this year. CNPC/Total – Sulige Gas Field Exploration Project – 2008 PetroChina has signed a deal with Total to jointly explore this natural gas field which currently holds proven reserves of over 100 billion cubic metres but which could ultimately hold up to 600 bcm. The agreement calls for cooperating in development and production in the south Sulige block in northern China Ordos Basin. Total will invest at least US$20 million during this initial evaluation period of 30
1
Smith, Dr M. The World Oil Supply Report p.165
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months to evaluate if full-field development is achievable. If the results are positive Total has estimated that production could reach 400 million cubic feet per day, although such production could only commence two years after the evaluation period. SINOPEC – Henan Natural Gas Project – 2010 China’s State Department gave approval in May 2006 for Sinopec to develop the “Sichuan Gas transport project”. The project, which will require total investment of some $2.79 billion, is due to commence in late 2006 and will deliver gas from fields in northeast Sichuan to the Henan province. Currently, proven reserves at Sichuan are 252 bcm and it is estimated that by 2007 this figure could rise to 350 bcm, then 530 billion cubic metres in 2010. CNPC – Shell Changbei Gas Field Development – 2011 Changbei, located in the Shaanxi and Inner Mongolia provinces, it is the first onshore upstream project for Shell in China and also the largest project launched by PetroChina with foreign investors (total development costs of $600m). It is hoped to market Changbei gas to Beijing, Tianjin, Hebei, Shandong and other east China provinces from 2011. Shell – Jilin Oil Shale Deposit Development Project – 2015 Drilling began in 2005. Jilin has an estimated 546 million tons of total proven oil shale reserves; about half of which is commercially exploitable. In 2005 Shell took a 61% stake in a new joint venture firm that will invest up to US$150 million in exploring and developing oil shale deposits in the Province. Oil produced from the Jilin reserves will be used to generate electricity.
9.2.
Major Pipeline and LNG Developments
Table 9-3: China – Major Identified LNG Import Terminal Projects
Project Name Guangdong Dapeng LNG Phase I, Dapeng bay, Shenzhen Guangdong Dapeng LNG Phase II, Dapeng bay, Shenzhen Putian, Fujian Shandong, Huangdao Gaolan Port, Zhuhai (Guangdong Province) Zhejiang, Ningbo Caofeidian Port, Tangshan (Hebei) Shanghai (Liaoning Province) Hong Kong, Black Point Power Plant Qinhuangdao, Hebei
Operator CNOOC/BP/Local partners CNOOC/BP/Local partners CNOOC Sinopec CNOOC CNOOC PetroChina PetroChina CNPC ExxonMobil, CLP Holdings CNOOC
Start 2006 2007 2008 2007 2008 2008 2008 2008 2010 2010 2010
Capacity (mmtpa) 3.3 3.5 2.6 3 3 3 6 4 4 3 2
Status Under construction
Under construction Concept Possible Possible Under construction Possible Concept Possible
Major projects include: CNPC – Lanzhou-Yinchuan Pipeline Project The Lanzhou-Yinchuan pipeline project, which commenced in May 2006, has been contracted by CNPC, with a total investment of $200 million. The project will connect three lines of Se-Ning-Lan, West to East and Chang-Ning, connecting the Qinghai, Changqing and Talimu basins. The total length of the pipeline is 459.6km with a diameter of 24 inches.
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CNPC – Heilongjiang Oil Pipeline Project CNPC plans to build the country’s first oil pipeline to Russia, underscoring growing Chinese interest in tapping Siberian petroleum resources. The line will be built by Heihe-based Xinghe Industries in cooperation with the Lanta Oil Company of Moscow at a cost of $64 million. The Chinese and Russian governments have already discussed the feasibility of constructing the one million bpd oil pipeline from Anagarsk in Russia to join the existing Chinese pipeline network at the north-eastern city of Daqing.
9.3.
Major Downstream Developments
Dalian Shide Group – Liaoning Shuangdaowan Petrochemical Project Located in Shuangdaowan Lueshun Dalian city, the project is divided into three parts: phase I – oil refining, phase II – chemical and phase III – public facilities. Phase I includes the oil refining unit which can handle 10 million tons of crude oil per year and a power plant. Phase II includes an ethylene plant with annual capacity of 1 million tons and a downstream petrochemical production unit. Phase III includes a dock, desalinator, wastewater treatment plant, storage and transport facilities. Major items of equipment to be sourced include a fractionating tower, cracking equipment, reactor, preserving equipment, wastewater treatment equipment, electrical instrumentation and telecommunications equipment. Liaoning Dalian Shide Group and SABIC (Saudi Basic Industries Corporation) have jointly invested a total of $5 billion into the project, which will become the biggest ethylene producing base in China, once phase II of the project is completed. Sinopec – Refining & Cracking Units Project This project is designed to handle 10 million tons of crude per year and includes construction of a cracking unit with annual capacity of 1 million tons. Once the project is complete, it will supply basic raw materials for the refined chemical industry and alleviate national ethylene scarcity. The project has a total of $4.2 billion of investments by (primarily) SINOPEC and Shanghai Chemical Industry Zone Development Co. (SCIPDC). Major items of equipment to be sourced include a reactor, extrusion machine, cracking equipment and fractionation equipment Sinopec – Tianjin Ethylene Refining & Chemical Integration Project The scope of the project, which is due to be completed in late 2008, includes ethylene refining and power station engineering. Once completed, the project will bring Sinopec-Tianjin’s annual ethylene production capacity to 1.2 million tons, oil throughput will reach 12.5 million tons per year and petroleum, petrochemical & chemical fibre production will amount to 12 million tons. Major items of equipment to be sourced include ethylene equipment, polypropylene equipment, cracking furnace, gasoline hydro-processing fraction tower and a reactor. Petrochina – Guangdong Refinery In late 2005, Petrochemical Industries Co. and Kuwait Petroleum International –representing Kuwait Petroleum Corp. – signed a $5 billion memorandum of understanding with PetroChina to build an oil refinery and petrochemicals plant in Guangdong province. The refinery alone will cost $3 billion and is expected to be completed in 2010. The complex will refine Kuwait crude oil and have a capacity of as much as 400,000 barrels per day. Formosa Plastics Group – Ethylene Plant Formosa Plastics Group plan to build the light oil cracking plant together with downstream facilities, at a cost of $3 billion, the plant would include a naphtha cracker able to produce 1.2 million tonnes of ethylene a year. Possible Chinese locations for the plant include Dalian, Tianjin, Yangzhou and
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Zhuahi. More than ten years have passed since the Formosa Plastics Group first proposed the idea of building a naphtha cracker in China, but government approval for the plan was refused because of political tensions across the Taiwan Strait. Taiwan restricts Chinese investment – the country is concerned its economy may become too dependent on China; already the nation's largest trading partner. CNOOC – Nanhai Petrochemical & Refining Project This project is designed for the production of high quality gasoline, coal oil and diesel oil. It would also provide high quality raw material for cracking, for the South China Sea petrochemical project. The project, which was approved by the Chinese government in late 2004, is invested in exclusively by CNOOC ($2.9 billion) and will be the biggest single oil refining project in China, with annual oil consumption of 12 million tons. Major items of equipment to be sourced include 13 main production lines, oil storage & transportation facilities, public engineering facilities and auxiliary production equipment. Sinopec Zhenhai Refining & Chemical Co. – Ethylene Project Sinopec Zhenhai Refining & Chemical Co. is the biggest refining company in China, handling up to 20.6 million tons per year. This project is located in Yufan Towne Zhenhai Ningbo City, and has a total investment of $2.8 billion. On completion in 2009, this major project will provide an annual ethylene capacity of 1 million tons, 450 thousand tons of low density polyethylene, 100 thousand tons of ethylene oxide, 650 thousand tons of glycol, and 300 thousand tons of polypropylene. Major items of equipment to be sourced include an ethylene unit, polymerisation equipment, cracking furnace, gasoline hydroprocessing fraction tower and reactor. CNPC – Sichuan Integrated Chemical Industry Project This project, located in Longfeng County Chengdu City, is to be constructed by CNPC and Chengdu Petrochemical Company, with a total investment of $2.6 billion. The project will provide an annual ethylene capacity of 800 thousand tons, 300 thousand tons of low density linear polythene, 150 thousand tons of butadiene and 360 thousand tons of glycol. On top of this it will also produce polybutadiene rubber, caprylic alcohol, phenol acetone and phenolA. Major items of equipment to be sourced include a fractionating tower, compressor, polymerisation kettle, fired heater, ejecting press and transformer facilities. PETROCHINA – Sichuan Ethylene Plant In March 2003, PetroChina and the Sichuan provincial government agreed to jointly develop an 800,000 ton ethylene complex to help increase supply in China’s southwestern region, where petrochemicals are otherwise largely sourced from the country’s manufacturers in the eastern coastal region and from overseas. By December 2005, China’s National Development and Reform Commission granted approval for PetroChina to build a $2.5 billion ethylene plant at Sichuan. The new ethylene plant at Chengdu might secure feedstock from its Lanzhou refinery in Northwest China’s Gangsu Province, which is doubling its refinery capacity to 10 million tons a year. CNPC – Xinjiang Refining & Chemical Integration Project The project is located in Dushanzi Xinjiang with a total investment of $3.4 billion, equally invested by CNPC and Kazakstan National Petroleum & Natural Gas Company. The project includes three parts; part I – a crude oil pipeline from Atasu Kazakstan to Dushanzi China, part II – a refining project which handles 10 million tons per year and part III – an ethylene project with annual capacity of 1.2 million tons. In February 2005, the Chinese government approved parts I and II of the project – construction of these started in August of that year. Major items of equipment to be sourced include a compressor, reactor and fractionating tower.
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Tenglong Aromatic Hydrocarbon Co. – Xiamen PX Project This project is mainly operated by Tenglong Aromatic Hydrocarbon (Xiamen) Co., Ltd and is located in South Canghai industry zone of Xiamen City, Fujian Province. The project occupies an area of about 114.74 square kilometres and includes a special dock for oil and a thermoelectricity terminal. At present, the layout includes 10 combine settings for aromatic hydrocarbon, the auxiliary equipment include a special dock for oil, thermoelectricity terminal, oil pot region, water processing and sewage processing, etc. CNPC – Fushun Petrochemical Co. Ethylene Reformation Project This project, located in Fushun City, Liaoning Province, with a total investment of $1.6 billion, is designed with nine case production units – ethylene, linearity low density polyethylene, high density polyethylene and polypropylene units, etc. When the project is complete, the annual ethylene capacity of the company will be up to 1 million tons – the company will be the world-class chemical industry production base for olefin, lubricating basic oil, alkyl and synthetic resin. CNPC – Guangxi Petrochemical Co. Sudan Oil Refining Project Total investments in this project, located in Qingzhou Harbor Economy Development Area, stand at $1.6 billion. The project is designed to handle 10 million tons of crude oil transported from Sudan per year to produce gasoline, kerosene and diesel oil, etc. Major items of equipment to be sourced include refining processing equipment, apparatus instrument panels, examination facilities, workshops and auxiliary facilities. Petrochina – Liaoning Ethylene Reconstruct Project The Fushun Petrochemical Branch Company of PetroChina has invested $1.6 billion in this project, which was established in April 2004 and has been approved by the China National Environmental Protection Bureau and is expected to be complete by 2008. The project will boast an annual capacity of 800 thousand tons ethylene, 450 thousand tons linearity low density polyethylene, 350 thousand tons high density polyethylene and 300 thousand tons polypropylene from nine sets of producing equipment. Major items of equipment to be sourced include a pyrolysis furnace, polymerisation kettle, compound tower, apparatus, electrical instrumentation and fire control fittings.
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10 EGYPT
6 5 4 $ billion 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Seismic Drilling Facilities Pipelines MMO
Figure 10-1: Egypt – Expenditure Totals 2001-2010 ($ billion) Table 10-1: Egypt – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 3 228 364 0 1,016 1,611 2002 6 286 1,221 18 1,013 2,544 2003 6 325 1,206 18 999 2,553 2004 5 318 1,226 43 1,005 2,597 2005 6 404 1,457 118 1,014 2,999 2006 5 412 1,927 303 1,020 3,667 2007 6 445 2,775 528 1,018 4,772 2008 6 460 3,314 244 1,025 5,049 2009 6 477 3,256 19 1,040 4,797 2010 6 481 3,210 19 1,042 4,758 01-05 26 1,560 5,475 197 5,046 12,304 06-10 28 2,275 14,483 1,111 5,146 23,044
Natural gas demand has grown rapidly in Egypt mainly as a result of the conversion of oil fired power stations to gas which accounts for over 62% of power generation consumption. Natural gas consumers are currently served by several private distributors – one of the franchises was awarded to a team headed by BG and the Egyptian construction firm ORASCOM. Egypt has also recently embarked on an ambitious programme to develop its petrochemical industry, with construction of several new plants based on natural gas as a feedstock. The Ministry of Petroleum controls the industry through 4 state organisations: EGPC (the national oil companyl), EGAS (Gas), ECHEM (Petrochemicals) and Ganoupe (Upper Egypt). These operate either directly, or through a series of subsidiaries, such as ENPPI (Engineering), Petrojet (Construction), Gasco (Gas Transmission and Distribution), EMC (Maintenance), etc. The current Minister of Petroleum introduced several reforms including the expediting of the two LNG projects which will contribute significant export earnings, and plans to attract more foreign investment. In 2004, Egypt announced a radical and ambitious economic reform programme under the slogan “Egypt: Open for Business”. Customs tariffs have been reduced and simplified and tax reforms made. There are demands for foreign companies to take on a certain %age of Egyptians. As a consequence there are opportunities in training. Legislation in the environmental area is fairly loosely enforced. Egypt is 70th on Transparency International’s index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 1 2 3 4 5 6 7 8
$ billion
Figure 10-2: Egypt – Expenditure by Component 2006-2010 Table 10-2: Egypt – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 44 0 0 320 1,016 73 18 804 344 1,013 80 18 988 139 999 76 43 988 162 1,005 145 118 521 791 1,014 295 303 140 1,492 1,020 302 528 140 2,333 1,018 252 244 407 2,656 1,025 256 19 407 2,594 1,040 131 19 407 2,672 1,042 419 197 3,300 1,756 5,046 1,236 1,111 1,500 11,747 5,146 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 3 3 0 228 125 102 364 44 211 27 27 26 18 11 1,016 501 515 6 5 1 286 157 129 1,239 149 719 93 93 87 62 37 1,013 499 514 6 5 1 325 179 146 1,224 147 710 92 92 86 61 37 999 490 508 5 4 1 318 175 143 1,269 152 736 95 95 89 63 38 1,005 494 511 6 5 1 404 222 182 1,576 189 914 118 118 110 79 47 1,014 499 514 5 5 1 412 226 185 2,230 268 1,293 167 167 156 111 67 1,020 503 517 6 5 1 445 245 200 3,303 396 1,916 248 248 231 165 99 1,018 502 516 6 5 1 460 253 207 3,558 427 2,064 267 267 249 178 107 1,025 506 519 6 5 1 477 262 215 3,275 393 1,899 246 246 229 164 98 1,040 515 525 6 5 1 481 265 216 3,229 387 387 387 387 387 387 387 1,042 517 526 26 23 3 1,560 858 702 5,672 681 3,290 425 425 397 284 170 5,046 2,483 2,563 28 25 3 2,275 1,251 1,024 15,595 1,871 7,560 1,315 1,315 1,253 1,006 758 5,146 2,543 2,603
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10.1.
Major Upstream Developments
Egypt has a Production Sharing Agreement for the E&P sector where oil companies fund the entire exploration programme, then form joint venture (JV) companies once production has been established. The resultant companies are: Gupco (BP), Bapetco, (Shell), Rashpetco (BG), Petrobel (AGIP) and Khalda (Apache). There are approximately 25 international oil & gas companies operating in Egypt and around 60 companies with equity interests in licences. Egypt is an old, small and declining oil province. Production from current fields should fall from around 118,000 bpd currently to 100,000 bpd in 2010. Gas production onshore is also small and declining from a current 6bcm per annum down to forecast 5.8bcm per annum in 2010. There is, however, hope for new discoveries in the Western Desert with several new discoveries and EOR projects and interest is at an all time high because of the availability of acreage, low finding costs and good financial returns and an ongoing series of licensing rounds. 3D seismic has very much become the norm. Apache is now the largest holder of 3D seismic in Egypt, and this has in part contributed to their high level of exploration success.
10.2.
Major Pipeline and LNG Developments
GASCO is responsible for the transportation, distribution and processing of natural gas. It is also responsible for the maintaining and developing of the oil and gas grid, which comprises over 5,000 line km of pipeline. In addition, GASCO owns and operates 2 NGL plants and the Aneya LPG plant. The Alexandria to Tobruk link with Libya is an important oil pipeline that should be completed in 2007. Also the Asyut to Aswan Dam gas pipeline will be developed from 2007 to 2008 at a cost of $450 million. The proposed pipeline between Al Arish and the Gaza Strip has been postponed given the destruction of the Palestinian power plant by Tsahal just prior to the invasion of South Lebanon. Egypt has the 2,500,000 bopd Sumed Pipeline, and there are plans for the expansion of both facility, as global trade in both crude oil and LNG increases. Egypt’s other option for exports are the LNG projects currently underway. The Spanish firm Union Fenosa has built a one-train liquefaction at Damietta, which begun commercial production in late 2004. The second LNG export project (“Egyptian LNG”), at Idku, has been built by BG in partnership with EGAS, EGPC, Gaz de France and Petronas. The project is tied in to natural gas reserves from BG’s Simian/Sienna offshore fields, and began production ahead of schedule in June 2005. Major Projects include: ELNG Liquefaction Project – Train 3 Expansion The ELNG (Egyptian LNG – a joint venture that includes BG, Petronas, EGAS, EGPC and Gaz de France) – has started operations at Idku near Alexandria on the Mediterranean coast and shipments from the first 3.6mmtpa train commenced in the third quarter of 2005. The train utilises the Phillips Optimised Cascade Process and was constructed by Bechtel. Gaz de France has signed a 20-year agreement to purchase the entire output of train 1, with feedstock gas being piped from BG and Edison’s Saffron and Scarab fields. Train 2 is expected to start-up this year and has been under construction for 18 months. The third train will go ahead provided sufficient reserves are proven, and an EPC award is thought to be imminent. The site can accommodate six LNG trains and a multiple company structure has been adopted by the sponsors with the intention of giving maximum flexibility for future expansion.
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SEGAS – Damietta LNG Liquefaction Project – Train 2 Expansion SEGAS (Spanish Egyptian Gas Company) got its 5 mmtpa plant at Damietta (also on the Mediterranean coast) up and running in mid 2005. The project was constructed by a consortium of Halliburton KBR, Japan’s JGC and Spain’s Tecnicas Reunidas under an EPC contract worth an estimated $1 billion. In July 2004, BP Egypt agreed a deal to supply the plant with up to 310mcf/d of natural gas starting from 2008. In addition, BP has also signed an agreement to purchase LNG under a long-term contract from Egas (Egyptian Natural Gas Holding Company) which began in 2005. The construction of a second train at Eni’s Damitta facility, located northwest of Port Said, will pave the way for future exploration and development of new fields in Egypt that will serve domestic and international markets. The train will have a treatment capacity of 7.6 billion cubic metres of gas per year for 20 years, doubling the capacity of the current plant. Eni predicts that Damietta will increasingly serve as the Mediterranean basin’s gas hub, representing a significant step toward diversifying gas supply sources.
Damietta had also been proposed a potential location for a GTL plant, with Shell and the Egyptian General Petroleum Corporation (EGPC) signing a development protocol in 2000 for a 75,000bpd plant using Shell’s SMDS process. However, there has been no news of this recently and Shell, along with the other major GTL players, seem to be very much focused on developing new plants in Qatar.
10.3.
Major Downstream Developments
Egypt’s nine refineries are able to process 727,000 bpd of crude, with the largest refinery being the 146,300 bpd El-Nasr refinery at Suez. EGPC operates all but one of the refineries, which is MIDOR. The government has plans to increase production of lighter products, petrochemicals, and higher octane gasoline by expanding and upgrading existing facilities. Rising domestic consumption means the refineries are operating at near 100% capacity, and as a consequence many products are being imported to meet rising demand. Egypt is embarking on an ambitious 3 phase, 15 year ‘master plan’ which requires $10 billion worth of foreign investment. The first phase is designed to produce simple bulk chemicals such as polyethylene and polypropylene, plus methanol and urea which utilize ‘dry’ gas as the feedstock. The main production areas are the Nile Delta and Western Desert. Five new petrochemical plants are scheduled to be built within the next 3 years. There is potential use for Egypt’s gas reserves in gas-to-liquids (GTL) projects. Shell has proposed a 75,000 bopd GTL plant to be co-located with its LNG export terminal when it is built, using reserves from its offshore NEMED block as feedstock. No final agreements have yet been reached on the proposal and Shell are currently undertaking feasibility studies.
Major Projects include: EAgrium – Damietta Ammonia Urea Plant The project to be constructed in Damietta will comprise of a $500 million methanol plant to produce 1.3 million tons/year and another $700 million urea/ammonia plant to produce 3,500 tons/day. Construction of the $1 billion complex, for which front-end engineering design (FEED) is underway, is due to be completed by the end of 2009.
IEFC – Edfu Phosphoric Acid Plant
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This project will produce phosphoric acid in Edfu. ENMC – Egypt’s largest rock phosphate company – will provide the basic raw material rock phosphate, while IFFCO will buy back all of the phosphoric acid produced for its Kandla plant in Gujara once the project is commissioned. Out of the $1 billion investment, around $800 million would be invested in backward integration of DAP/NKP production, while the remaining $200 million would be invested in energy saving, urea production and expansion schemes. ECHEM – Alexandria Ethylene & Polyethylene Complex This major ethylene and polyethylene project is based on an estimate that the market will grow annually by 6-8%. The proposed capacity of the plant will be 1,000,000 tons/year, of which 25% will be used domestically and 75% will be exported. Total investment cost is anticipated as being $1.5 billion, with a fixed investment cost of $450 million. EATCO – Polyolefins Complex This planned gas to polyolefins facility will be a grass roots plant with offsites & utilities designed to produce 300,000 mty of polyethylene as well as 250,000 polypropylene. The ethylene and propylene will be sent to the polyolefins plant for conversion to polyethylene and polypropylene, respectively. The polyethylene unit can alternate between the production of high density polyethylene and linear low density polyethylene. The process technologies used for this facility are based upon proven operating plants around the world and information gained from the operation of these plants will form the basis of the design and operation of the complex. Petroleum Ministry – Port Said Refinery Cairo is planning to develop a 350,000bpd grassroots refinery at Port Said. This estimated $3,500 million project is to be developed by a special purpose project company that will be established by the Petroleum ministry. The new company will build an integrated third-generation refinery in the Port Said area, with investment of about $3.5 billion. The Refinery will have a capacity of 350,000bpd and will aim to produce high-quality petroleum products as well as maximising stock exchange market utilisation to include citizens and private companies in high-revenue petroleum projects. Ivanhoe – GTL Plant After three years of negotiations, Ivanhoe Energy and EGAS signed a memorandum of understanding advancing a longstanding plan for Ivanhoe Energy to study the feasibility of a GTL plant in Egypt. If the feasibility study indicates that a GTL plant is economically viable, the parties will enter into negotiations for a definitive agreement for the development of a project with capacity options of 45,000b/d and 90,000b/d being evaluated.
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11 INDIA
14 12 10 $ billion 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 11-1: India – Expenditure Totals 2001-2010 ($ billion) Table 11-1: India – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 38 289 1,537 1,412 1,461 4,737 2002 47 286 471 1,610 1,465 3,878 2003 44 252 1,642 1,838 1,508 5,285 2004 45 251 2,867 2,104 1,661 6,928 2005 50 206 3,410 2,188 1,798 2006 56 199 5,423 2,993 1,975 2007 63 192 5,700 3,487 2,153 2008 71 189 5,879 4,037 2,330 2009 81 186 6,469 2,884 2,496 2010 92 184 6,477 2,222 2,707 01-05 224 1,283 9,926 9,153 7,894 28,481 06-10 362 950 29,947 15,622 11,661 58,542
7,652 10,645 11,595 12,505 12,115 11,682
India is the 6th largest energy consumer in the world and the fastest growing democracy at 7% per annum. Onshore oil production is a mere at 0.22 mmbpd in 2006 and is forecast to reach 0.24 mmbpd by 2010. Recovery rates have been on average 30% in producing fields but foreign investment is expected to bring in the technology to increase this. Gas production was 2.9 bcm per annum in 2006 and should rise to 3.2 bcm per annum in 2010. The sheer size of its population and fast pace of development makes it one of the major markets in the downstream sector. There is a very strong demand forecast for gas reaching 400bcfd in the power & domestic market and its contribution to the Indian energy mix will grow from 8% to 20%. Overall expenditure in the Indian onshore market is currently estimated at $10.6 billion – more than double 2001 levels. We expect this high level of investment to be maintained through to 2010, with the overall five-year spending totalling $58.5 billion. Downstream facilities (including LNG terminals) will form the bulk of the spend, amounting to $30 billion over this period. It should be noted that India has established a reputation for major projects failing to reach realisation and so we have taken a conservative view of the prospects. India is 88th on Transparency International’s index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 5 10 15 20 25 30 $ billion
Figure 11-2: India – Expenditure by Component 2006-2010 Table 11-2: India – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 87 1,412 225 1,225 1,461 86 1,610 225 160 1,465 76 1,838 225 1,342 1,508 75 2,104 225 2,567 1,661 62 2,188 0 3,348 1,798 60 2,993 93 5,270 1,975 58 3,487 287 2,153 57 4,037 287 2,330 56 2,884 93 2,496 55 2,222 93 2,707 385 9,153 900 8,641 7,894 285 15,622 853 50,702 11,661 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
8,424 11,413 12,789 12,805
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 38 33 5 289 159 130 2,949 354 1,710 221 221 206 206 29 1,461 720 742 47 41 6 286 157 129 2,080 250 1,207 156 156 146 146 21 1,465 720 745 44 39 5 252 138 113 3,480 418 2,019 261 261 244 244 35 1,508 743 765 45 40 5 251 138 113 4,971 597 2,883 373 373 348 348 50 1,661 823 838 50 44 6 206 113 93 5,598 672 3,247 420 420 392 392 56 1,798 895 903 56 49 7 199 109 90 8,416 1,010 4,881 631 631 589 589 84 1,975 987 988 63 55 8 192 106 87 9,187 1,102 5,328 689 689 643 643 92 2,153 1,076 1,078 71 62 9 189 104 85 9,916 1,190 5,751 744 744 694 694 99 2,330 1,162 1,167 81 71 10 186 102 84 9,352 1,122 5,424 701 701 655 655 94 2,496 1,244 1,252 92 81 11 184 101 83 8,698 1,044 5,045 652 652 609 609 87 2,707 1,349 1,359 224 197 27 1,283 706 577 19,079 2,290 11,066 1,431 1,431 1,336 1,336 191 7,894 3,901 3,993 362 319 43 950 523 428 45,569 5,468 26,430 3,418 3,418 3,190 3,190 456 11,661 5,817 5,844
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India is actively seeking Coal Bed Methane (CBM) opportunities. The government has committed to invest US$ 43 million. It has signed a total of 16 contracts for exploration and production under the CBM programme. The New Exploration Licensing Policy (NELP) was set up in 1997 although the first round in 1999 was a failure with nil submissions. Following substantial improvements to terms, three new rounds have occurred with good participation. The full privatization of the petroleum sector has been abandoned. Oil & Natural Gas Corporation (ONGC) is the NOC. Major foreign operators are: BG, Cairn Energy, Shell, Niko, Tullow Oil, Total, BP, KPC, Saudi Aramco, Abu Dabi National Oil Corporation, Petronas. Local players include: BPCL, IOCL, ONGC, Reliance, HPCL, Essar, GAIL India Ltd.
11.1.
Major Upstream Developments
India is fundamentally offshore oil & gas producing province and a small onshore producer.
11.2.
Major Pipeline and LNG Developments
Table 11-3: India – Major Identified Pipeline Projects
Project Name BPCL - Bina Refinery pipeline BPCL - Bina Refinery pipeline GAIL - Dabhol - Panvel Pipeline GAIL - Dabhol - Panvel Pipeline GAIL - Jagoti - Pithampur Pipeline Project GAIL - Kolkata (Haldia) - Jagdishpur Pipeline HPCL - Bhatinda Refinery to Mumba oil terminal pipeline, Punjab IOC - Dadri - Panipat R-LNG Spur Pipeline IOC - Paradip - Rourkela- Haldia Pipeline (PRHPL) IOC- Koyali-Ratlam Pipeline Project Central India Pipeline Dahej to Uran gas pipeline Dahej-Vijaipur to Indore pipeline Jammu-Srinagar pipeline Jamnagar-Bhopal-Cuttack Pipeline Kakinada to Goa Pipeline First Phase (Hyderabad-Goa section) Kandla to Bathinda products pipeline Miraj-Solapur multi-product pipeline Mudra to Delhi Products Pipeline Paradip to Haldia onshore crude pipeline Pune-Miraj Multiproduct Pipeline Tripura Gas Pipeline GAIL-KCJP – ODJP - KJP Natural Gas Loop Line Project, KG Basin Kakinada to Goa Pipeline Second Phase (Kakinada-Hyderabad section) Mangala Field Export Pipeline GOI - India - Bangladesh - Myanmar Pipeline PETRONET - Bina Kanpur Pipeline (BJKPL) PETRONET MHB - Mangalore Bangalore Pipeline (MHBPL)
Start 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2006 2007 2007 2007 2008 2008 2008
End 2010 2010 2008 2008 2006 2008 2010 2007 2009 2008 2007 2007 2007 2007 2008 2007 2007 2006 2007 2007 2006 2007 2008 2008 2009 2010 2010 2011
Length (Km) 17.8 935 64 23 90 853 1011 133 418 274 1755 489 180 190 2500 652 1443 160 1046 330 206 354 30 469 471 800 361 1100
Diameter (inches)
30 6 16 30 22 30 22 16 12 16 10 8 20 36 20 12 20 24 14 30 18 48 20 22
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Resolution of difficulties with Pakistan is imperative for the development of the last leg of the IranIndia pipeline. Whilst Iran is still negotiating Pakistan has already announced it would go ahead regardless of the Indian decision. Alternative sources such as Bangladesh and Burma are also investigated though development would take longer and it is difficult to forecast Capex. Dahej LNG Import Terminal Expansion Project – 2008 The capacity of the Dahej LNG terminal needs to be increased sooner than expected, as economic growth has raised energy demand. Natural gas plays an increasingly important role under the Government of India’s policy to diversify the country’s energy base and reduce air pollution, which results mainly from the use of oil and coal. As such, the Government plans to have natural gas meet 20–30% of the country’s energy demand by 2025, meaning natural gas consumption will increase on average by about 2 MMTPA. The Project, therefore, will help meet this projected demand. The project will consider two alternatives: (i) a new terminal with 5mmtpa capacity could be developed at a new site, or (ii) the LNG terminal at Dahej could be expanded. The second alternative is considered more appropriate, given the advantages of the existing site and the fewer environmental impacts that would be created compared to a new site.
11.3.
Major Downstream Developments
India is the world’s 10th largest refiner (2.1 mmbpd currently). A batch of new refineries, gas processing and petrochemical facilities is forecast to be constructed including a gas distribution network of 22 cities. India is planning to set up a strategic petroleum reserve equal to 15 days of the country’s oil consumption and to develop a gas storage reserve at a cost of $2 billion. Location of the facility is not yet defined, possible locations for deep aquifers could be Vindhyas - Aravalli Ranges and adjoining areas of gange’s plains. Alternative locations could be Eastern or Western Ghats and the tertiaries of Tamilnadu. GAIL – Assam Gas Cracker – 2006 The Gas Authority of India Ltd. (GAIL) is planning to construct a new gas cracker plant in Assam. The plant would be located at Duliajan, is expected to cost $1.4 billion and would produce 160,000 tonnes of ethylene every year. In order to run the plant at full capacity, GAIL has requested the central government to guarantee supply of gas sufficient for producing 2 LTPA ethylene. RPL – Dow Global – Polypropylene Plant – 2006 Reliance Petroleum (RPL) has involved US-based process technology major Dow Global Technologies (DGTI) as a technical collaborator for its new polypropylene plant; this plant would also have a catalyst plant along with a solvent extraction unit. The company has proposed an option of installing a catalyst plant and solvent recovery unit with an initial capacity of 100tpa with a provision of expanding it to 300tpa by adding two more plants. BRPL – Diesel Hydro –Treatment Project – 2006 In 2001, BRPL had proposed setting up of Diesel Hydro Treatment Plant (DHDT) to upgrade the quality of High Speed Diesel (HSD) manufactured from Assam Crude Oil. Accordingly, BRPL had engaged Engineers India Limited to prepare the ‘Detailed Feasibility Report (DFR)’ and select the licensor/technology for the project. The DFR was prepared and submitted by EIL in November, 2001. Techno-commercial offers were also received from various licensors for the project but commercially not evaluated. BRPL are now looking into the supply of Basic Design Engineering Packages for the diesel hydrotreater unit; a sulphur block consisting of sulphur recovery unit, amine absorption unit, amine regeneration unit and sour water stripping unit.
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ONGC – Dahej SEZ Project – 2006 The project will include an integrated petrochemical complex, envisaged to be implemented through SPV route (ONGC: 45%, GSPC: 5%, Strategic Investor and Fls: 50%). ITB preparation for selection of Cracker and Polymer Licensors and EPC contractor is in progress. Ernst & Young Ltd (E&Y) have been engaged as consultant for development of SEZ and selection of a third party developer. An EOI was floated by E&Y for a Strategic Partner who would be responsible for infrastructure development, marketing and operations and maintenance of SEZ. HPCL – Bhatinda Refinery, Punjab – 2006 The Hindustan Petroleum Company Limited (HPCL) has planned for constructing a new refinery at Bhatinda in Punjab. In April 2005, HPCL completed a soil investigation at Mundra and completed a detailed route survey of crude oil pipeline. The scope of work consists of the construction of a new refinery over two phases: phase I consists of the construction of a 6mmtpa capacity refinery, increasing to 9mmtpa under Phase II. HPCL will also construct a crude oil terminal at Mundra supplied by a 1,011km-long underground 22 inch diameter crude oil pipeline. Kayamkulam, Kerala (Kochi) 2009 is the deadline set by the NTPC to commission the first module of its 1,950MW expansion programme at Kayamkulam. The programme envisages shifting fuel from costly naphtha to far cheaper liquefied natural gas at this plant to substantially bring down the cost of power generation. The proposal is to increase the generation capacity of this station from the present 350MW to 2,300MW. The existing 350MW stage-one power station will continue to be fully dedicated to Kerala, while the power from the next stage (1,950MW) will be distributed to various States as per the guidelines of the Union Government. Kerala too will be eligible for its share of the stage-two station. The State will get a total of about 820MW of power from the Kayamkulam NTPC project when the expansion is completed. This will be enough to meet more than 20% of the State’s power requirement.
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12 IRAN
14 12 10 $ billion 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 12-1: Iran – Expenditure Totals 2001-2010 ($ billion) Table 12-1: Iran – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 14 109 1,574 131 4,209 6,037 2002 16 117 2,533 131 3,981 6,777 2003 17 118 2,281 178 4,698 7,292 2004 19 130 3,462 190 4,956 8,758 2005 21 143 3,038 275 5,360 8,837 2006 24 155 3,677 277 5,790 9,923 2007 27 173 3,122 268 6,157 2008 31 193 3,166 174 6,868 2009 35 216 2,909 165 7,716 2010 40 230 2,784 157 8,506 01-05 88 618 12,889 904 23,203 37,701 06-10 157 967 15,658 1,042 35,037 52,860
9,747 10,433 11,041 11,717
Iran is a pivotal oil supplier, producing around 10% of world supplies and the Iranian government is heavily reliant on its oil export revenues which total 40-50% of the national budget. Upgrade of existing capacity in its 27 onshore fields and additional exploration activity is therefore critical. An important issue for the development of onshore fields in the most productive region – near the border with Iraq – are the minefields remaining from the conflict between Iran and Iraq. Iran gas production is increasing at a fast pace and due to the huge size of the offshore South Pars field, this has strategic implications for Europe (a possible pipeline through Turkey) and other large energy consumers such as Pakistan and India. Gasoline is subsidised by the government and prices were frozen in 2003 which has lead to rapid growth of consumption (around 8-10% per annum) to exceed Iran’s production capacity. This has led to a bizarre situation where Iran has to import 1/3 of its gasoline consumption! In terms of investment, we expect total annual expenditure to increase from an estimated $9.9 billion in 2006 to $11.7 billion in 2010. The overall spend for the five year period to 2010 is expected to amount to nearly $53 billion – an increase of 40% on the previous five-year period. Iran is 88th on the Transparency International index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 5 10 15 20 25 $ billion
Figure 12-2: Iran – Expenditure by Component 2006-2010 Table 12-2: Iran – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 469 131 0 1,105 4,209 339 131 0 2,194 3,981 208 178 0 2,073 4,698 514 190 0 2,949 4,956 504 275 0 2,534 5,360 651 277 0 3,026 5,790 284 268 0 2,838 6,157 284 174 360 2,522 6,868 60 165 360 2,489 7,716 60 157 360 2,364 8,506 2,033 904 0 10,856 23,203 1,340 1,042 1,080 13,238 35,037 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 14 12 2 109 60 49 1,705 205 989 128 128 119 119 17 4,209 2,525 1,684 16 14 2 117 65 53 2,664 320 1,545 200 200 186 186 27 3,981 2,388 1,592 17 15 2 118 65 53 2,459 295 1,426 184 184 172 172 25 4,698 2,819 1,879 19 17 2 130 72 59 3,652 438 2,118 274 274 256 256 37 4,956 2,973 1,982 21 19 3 143 79 64 3,313 398 1,922 248 248 232 232 33 5,360 3,216 2,144 24 21 3 155 85 70 3,954 475 2,294 297 297 277 277 40 5,790 3,474 2,316 27 24 3 173 95 78 3,390 407 1,966 254 254 237 237 34 6,157 3,694 2,463 31 27 4 193 106 87 3,341 401 1,937 251 251 234 234 33 6,868 4,121 2,747 35 31 4 216 119 97 3,074 369 1,783 231 231 215 215 31 7,716 4,630 3,087 40 35 5 230 127 104 2,941 353 1,706 221 221 206 206 29 8,506 5,103 3,402 88 77 11 618 340 278 13,793 1,655 8,000 1,034 1,034 966 966 138 23,203 13,922 9,281 157 138 19 967 532 435 16,700 2,004 9,686 1,252 1,252 1,169 1,169 167 35,037 21,022 14,015
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Impact on the Iranian oil & gas industry of the current context of crisis between Iran and the UN Security Council over its nuclear technology development programme is difficult to predict. The US has extended sanctions on Iran in 2004 and it imposes mandatory and discretionary sanctions on non-US companies investing more than $20 million in the Iranian oil & gas industry. Despite the 1987 constitution prohibiting the grant of rights to companies over the resource, the Iranian Ministry of Petroleum can arrange specific systems to attract foreign investors. Iran has shown a marked preference for buyback contracts over the past years but this could change as the long delays in negotiation and charges of corruption are changing the policy maker’s mind. The National Iran Oil Corporation (NIOC) is the NOC and it has an internet-accessible database of oil & gas industry managers in Iran.
12.1.
Major Upstream Developments
Iranian oil production peaked in 1979 and is now in decline. From 3.3 mm bpd currently, it is forecast to be down to 3.3 mm bpd by 2010. Gas production is growing fast. From 83 bcm per annum in 2006, it will grow to reach 121 bcm per annum in 2010. The main onshore oil fields in Iran are Ahwaz-Asmari (700kbpd), Gachsaran (560kbpd), Marun (520kbpd), Bangestan (245kbpd), Karanj-Parsi and Agha Jari (200kbpd each). With recovery rates at just 24-27% (compared to a world average of 35%), the fields are in need of upgrading, modernization, and enhanced oil recovery efforts (i.e., gas reinjection). Oil exploration is also critically needed with only 28 exploratory wells drilled in 2005. With adequate technology and exploration it is commonly accepted that Iran could increase its production significantly. Enhanced oil recovery (EOR) programmes, are underway at a number of fields, including Marun and Karanj. Latest discoveries include the Azdegan 26 billion bbl field a $2.5 billion development initially awarded to the Japanese corporation Inpex in 2001. As of today, little progress has been made and no agreement was signed. Iran has blamed the Japanese for the failure and is contemplating developing the project on its own. Other discoveries encompass the Darkhovin 3-5 billion bbl $1.5 billion field developed by ENI under a buy-back contract, and the recent Norsk Hydro’s find – Anaran – a 2 billion bbl field which would eventually be developed with Lukoil as a minority partner.
12.2.
Major Pipeline and LNG Developments
Iran is currently developing a substantial gas pipeline capacity, with development towards Europe (Austria, Ukraine, Turkey) but also in the direction of central Asia (Armenia, Pakistan and India). LNG will see two major developments at the end of the decade with the construction of the NIOC and South Pars projects. On 4th August 2006, Total released the $4 billion main EPC tenders for the project.
12.3.
Major Downstream Developments
Iran’s downstream sector facilities (nine, almost all pre-1979 revolution refineries) are ageing and the major refineries (Abadan, Isfahan, Bandar Abbas, Tehran, Arak and Tabriz) are nearly all undergoing multi-billion dollar rehabilitation and upgrade. Iran wishes to boost revenues from its downstream sector, in particular by climbing up the added-value chain of petrochemical production.
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13 IRAQ
9 8 7 6 $ billion 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 13-1: Iraq – Expenditure Totals 2001-2010 ($ billion) Table 13-1: Iraq – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 3 21 95 25 2,755 2,899 2002 5 35 139 39 2,445 2,663 2003 0 198 302 167 1,723 2,390 2004 0 110 263 93 2,705 3,171 2005 0 143 315 120 2,593 3,171 2006 0 162 380 136 3,087 3,766 2007 25 204 407 172 4,234 5,042 2008 29 196 428 165 5,064 5,882 2009 33 220 422 185 5,969 6,829 2010 38 350 455 165 6,628 7,636 01-05 7 507 1,114 443 12,221 14,293 06-10 125 1,132 2,092 823 24,983 29,155
Iraq is an important oil supplier whose capacity in 2001 was about 2.4 mm bpd. After the invasion in 2003 capacity has recovered and is thought to be around 2.9 mm bpd currently with the potential to grow up to 3.6 mm bpd by 2010. Iraq is producing a negligible amount of gas: 2.7 bcm per annum in 2006, expected to increase to 3.7 bcm in 2010. The current security situation in Iraq – with the country on the brink of civil war – makes any firm forecast virtually impossible. In addition, the sources of information as to development and expenditures on the ground are particularly scarce and unreliable. The result of hostilities requires a major infrastructure re-build. We have allocated the bulk of repair and reconstruction work under the MMO category. At present, we speculate that overall expenditure could increase from $3.8 billion to reach $7.6 billion by 2010. Iraq is 137th on the Transparency International Index.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 2 4 6 8 10 12 14 16
$ billion
Figure 13-2: Iraq – Expenditure by Component 2006-2010 Table 13-2: Iraq – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 66 25 0 30 2,755 101 39 0 38 2,445 128 167 0 174 1,723 167 93 0 96 2,705 189 120 0 125 2,593 238 136 0 142 3,087 228 172 0 179 4,234 257 165 0 171 5,064 229 185 0 193 5,969 283 165 0 172 6,628 651 443 0 464 12,221 1,235 823 0 857 24,983 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 3 2 0 21 11 9 120 14 70 9 9 8 6 4 2,755 1,622 1,132 5 4 1 35 19 16 178 21 103 13 13 12 9 5 2,445 1,437 1,009 0 0 0 198 109 89 468 56 272 35 35 33 23 14 1,723 1,003 720 0 0 0 110 61 50 356 43 206 27 27 25 18 11 2,705 1,580 1,125 0 0 0 143 79 64 435 52 252 33 33 30 22 13 2,593 1,510 1,083 0 0 0 162 89 73 517 62 300 39 39 36 26 16 3,087 1,804 1,283 25 22 3 204 112 92 579 69 336 43 43 41 29 17 4,234 2,490 1,744 29 25 3 196 108 88 593 71 344 44 44 41 30 18 5,064 2,986 2,079 33 29 4 220 121 99 607 73 352 46 46 42 30 18 5,969 3,526 2,443 38 33 5 350 193 158 620 74 74 74 74 74 74 74 6,628 3,918 2,710 7 6 1 507 279 228 1,558 187 903 117 117 109 78 47 12,221 7,152 5,069 125 110 15 1,132 623 509 2,915 350 1,406 247 247 235 189 143 24,983 14,724 10,259
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The Ministry of Oil and INOC (Iraqi National Oil Corporation), is managing the projects with the assistance of the US Corp of Engineers who is managing all development to restore oil & gas infrastructure and has delegated the task to KBR (Southern Region, $1.2 billion) and Parsons Iraqi Joint Venture (Northern Region, $800 millions). In addition to this, Iraq is also massively indebted. Local oil companies include: Oil projects company, Oil Exploration Company, Oil Marketing Company, North Oil Company, South Oil Company, Oil Products Distribution Company, Pipelines Company, North Refineries Company, Midland Refineries Company, South Refineries Company, Iraq Drilling Company, North Gas Company, Gas Filling Company, South Gas Company and the Iraq oil tanker company.
13.1.
Major Upstream Developments
Iraq is mostly unexplored with around 2,300 wells drilled, of which only 1,600 are producing oil. The largest oil fields are Kirkuk, Bay Hassan, West Qunrah, Jambur, Luhais, Jabal Fauqi, Az Zubair, Misa/Burzugan, North Rumaila and South Rumaila. In the north, the 8.7 billion barrels Kirkuk oil field is commonly accepted to be severely damaged and experiencing high water cut level. In addition, the field is producing sour crude and requires specific treatment. This year, Exploration Consultant Ltd and Shell will investigate the Kirkuk field to evaluate damage and recovery actions. Similar studies will be conducted for the Rumaila and Maysan fields. Another important issue is the major East Baghdad field which produces around 50,000bpd as well as associated natural gas. Future developments are in sight despite a Shell representative mentioning that any serious development would not occur before 2007. Companies believed to be in process of signing MOUs includes Anadarko, Dome, Vitol, Avrasya Technology Engineering (Turkey), OGI Group, CNPC, Eni, Petronas, CanOxy, TPAO, Japex, Petro Vietnam, Noor (Syria), Heritage Oil (Canada), Aabar Petroleum (UAE), PetroPrime (Turkey). According to Tariq Shafiq, INOC Vice-President, the development and production cost could be close to $7.5-16 / bbl, other estimates point to $35 / bbl. In December 2005, Norway’s DNO has been drilling in the Kurdish region. Further exploration and development is expected.
13.2.
Major Pipeline and LNG Developments
Pipelines are now being buried and reinforced with concrete in order to resist to insurgent attacks. The main export pipelines are the Kirkuk-Turkey oil line, the Iraq-Syria oil pipeline, the IPSA pipeline through Saudi Arabia, and the “Strategic Pipeline” a reversible oil pipeline from North-Kirkuk to the Persian Gulf. Prospective pipeline is the Iran-Iraq line between Basra and Abadan refinery. The MOU between Iraq and Iran specifies that the line would be 24 miles in length.
13.3.
Major Downstream Developments
Iraq has eight refineries, none of which were seriously damaged during the invasion. Currently Iraq refineries are only operating at around 50% of their capacity and the country needs to import fuel. Subsidised gasoline prices are not helping the economics whilst attempts to remove them would fuel further unrest. A new refinery is expected in Basra whilst some extra-capacity was reported to be under development at the Daura refinery (contract signed in 2005 with Hydrocarbon Supply Ltd and Prokop).
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14 KAZAKHSTAN
10 9 8 7 $ billion 6 5 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 14-1: Kazakhstan – Expenditure Totals 2001-2010 ($ billion) Table 14-1: Kazakhstan – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 4 716 307 726 1,468 3,222 2002 5 702 301 76 1,679 2,764 2003 6 799 312 76 2,082 3,276 2004 7 946 386 0 2,711 4,050 2005 8 1,034 420 94 3,294 4,851 2006 6 1,060 414 401 3,699 5,580 2007 8 1,284 501 401 4,191 6,384 2008 9 1,458 569 94 4,735 6,864 2009 9 1,670 651 94 5,679 8,104 2010 10 1,842 718 94 6,587 9,251 01-05 30 4,198 1,726 973 11,236 18,162 06-10 42 7,314 2,852 1,084 24,892 36,184
Kazakhstan is an important oil producer with around 1.5 mm bpd in 2006 forecast to rise to nearly 2.0 mm bpd in 2010, putting Kazakhstan amongst the leading producers in the world. Kazakhstan’s growing petroleum industry, which accounts for roughly 30% of the government’s revenues and about half of its export revenues, has driven the country's recent economic growth. In an effort to reduce Kazakhstan's exposure to price fluctuations, the government created the National Oil Fund of Kazakhstan. As of the end of June 2005, this held $5.2 billion. Although the government is clear in its intent to raise oil and gas output in the long term, it is still unclear the extent to which the state will partake in the additional revenues from higher output. Additional exploration and development potential exists in a number of other areas adjacent to the northern Caspian Sea. Production of oil from the onshore region has in the past been restricted by a lack of pipeline capacity but new lines commissioned in 2001 now allow more rapid development of any smaller accumulations that may be identified. Kazakhstan has large gas reserves and a major potential for increased production. Natural gas in Kazakhstan is almost entirely “associated” gas. For this reason, several fields including Karachaganak re-inject significant quantities of gas to maintain crude wellhead pressure for liquids extraction. Flaring has declined steadily, but in May 2005 the government ordered all 34 oil producing firms to reduce oil production to levels that would avoid natural gas flaring. Many of the companies that produce associated gas have made pledges to develop ways to use the gas (such as for electricity generation) but reportedly plans have stalled. Kazakhstan is 107th on Transparency International’s transparency list.
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Drilling Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 2 4 6 8 10 12 14 16
$ billion
Figure 14-2: Kazakhstan – Expenditure by Component 2006-2010 Table 14-2: Kazakhstan – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 307 726 0 0 1,468 301 76 1 0 1,679 312 76 2 0 2,082 369 0 3 17 2,711 403 94 4 17 3,294 414 401 5 0 3,699 501 401 6 0 4,191 569 94 7 0 4,735 651 94 8 0 5,679 718 94 9 0 6,587 1,692 973 10 34 11,236 2,852 1,084 35 0 24,892 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 4 4 0 716 394 322 1,033 124 599 78 78 72 52 31 1,468 856 613 5 4 1 702 386 316 377 45 219 28 28 26 19 11 1,679 982 697 6 5 1 799 440 360 388 47 225 29 29 27 19 12 2,082 1,224 858 7 6 1 946 520 426 386 46 224 29 29 27 19 12 2,711 1,602 1,110 8 7 1 1,034 569 465 514 62 298 39 39 36 26 15 3,294 1,950 1,344 6 5 1 1,060 583 477 815 98 473 61 61 57 41 24 3,699 2,192 1,507 8 7 1 1,284 706 578 902 108 523 68 68 63 45 27 4,191 2,486 1,706 9 8 1 1,458 802 656 663 80 384 50 50 46 33 20 4,735 2,810 1,924 9 8 1 1,670 919 752 745 89 432 56 56 52 37 22 5,679 3,375 2,304 10 9 1 1,842 1,013 829 812 97 97 97 97 97 97 97 6,587 3,919 2,669 30 26 4 4,198 2,309 1,889 2,699 324 1,565 202 202 189 135 81 11,236 6,614 4,622 42 37 5 7,314 4,023 3,291 3,937 472 1,910 332 332 316 254 191 24,892 14,782 10,110
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Kazakhstan is a major pipeline transit route for gas from Turkmenistan to Russia and on to other markets across the territory of the former Soviet Union. International projects have taken the form of joint ventures with Kazmunaigaz (formerly Kazakhoil), the national oil company, as well as production-sharing agreements (PSAs), and exploration/field concessions. The Kazakh government wants the state oil company, KazMunaiGaz, to have a larger role in the country’s production, and the company’s recent partial buyout of BG'’ 16.67% Kashagan stake is one prime example.
14.1.
Major Upstream Developments
Onshore giant fields in Kazakhstan – Karachaganak and Tengiz - are being rapidly developed by foreign operators. Developed by Karachaganak Integrated Organization (KIO) BG and its partners in the giant Karachaganak field (2.4 billion bbl), discovered in 1979 in the northwest and one of the world’s largest oil and gas/condensate fields, produced first export oil in 2003 when the CPC project connected the field production to the main Kazakh pipeline system and removed the need for Russian processing. Output is now planned to increase to more than 200,000 bls of oil per day (plus up to 7 Bcm of sales gas per year to Orenburg. Meanwhile ChevronTexaco, operator of the giant Tengiz field in western Kazakhstan, expects oil production to continue to rise as investment continues. Kazakhstan is only a small gas producer at present with around 17 bcm per annum in 2006 and 25 bcm forecast by 2010. However, it has large estimated reserves and as other discoveries are added output will ultimately reach a plateau of 66 bcm per year by 2030. The ultimate capacity of the country to produce gas is influenced by the huge volumes contained in the Karachaganak field, thought to contain some 65% of remaining gas reserves whilst the giant Tengiz oil and gas field in the same region close to the northeast coast of the Caspian Sea, accounts for a large part of the remainder. Although not a gas field, the giant Kashagan field, in the Caspian Sea is very important in the Kazakhstan energy market. The main technological problem is the high pressures and the huge volumes of hydrogen sulphide gas, which will be re-injected after processing.
14.2.
Major Pipeline and LNG Developments
Kazakhstan has and will witness important pipeline developments. Completion of the Caspian Pipeline Consortium (CPK) in 2001 provided for the opportunity of yet to be agreed expansion. Some opportunities are also emerging for refurbishment and expansion of existing lines. Kazakhstan-China Pipeline The 962km Kazakhstan-China Pipeline (LLP), conveying oil to the Chinese border was completed in 2005 at a cost of $700m. The second phase of the project will have an estimated cost of $800 million. The pipeline is a challenge as it is exposed to important seismic stress, extreme climatic conditions, wide temperature range and flooding. Hurg Pipeline Another ongoing project is the Western Kazakhstan to Iran’s port of Hurg oil pipeline which should start imminently and be completed in 2007.
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Caspian Pipeline Consortium The CPC crude pipeline system is the largest operating investment project with foreign participation on the territory of the former USSR, with the main 1,150km pipeline connecting the oil fields in Western Kazakhstan with the new Marine Terminal in Russia. The cost of the first phase of construction amounted to $2.6 billion. The development process for CPC to reach its full projected capacity is, however, not completed. CPC was designed from the outset to be expanded to 2.5 times its initial capacity. The expansion of the pipeline will involve the construction of new pump stations, storage facilities and a third loading buoy at CPC’s Marine terminal at Novorossiysk. Ultimately, CPC will be able to transport 67 million tons per year. In fact, expansion is integral to CPC realising its full economic potential for the host governments and shareholder companies.
14.3.
Major Downstream Developments
The downstream sector is entirely state-controlled. Kazakhstan refineries only operate at 51% of their nominal capacity. There are three refineries, Pavlodar, Atyrau and Shymkent. These old facilities are in need of repairs and Marubeni revamped Atyrau refinery in 2004 and 2005. Refining in Kazkhstan is difficult because the high costs make it more economical to export the crude to be processed elsewhere. This trend could revert in the future but not at a large scale during the forecast period.
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15 LIBYA
7 6 5 $ billion 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 15-1: Libya – Expenditure Totals 2001-2010 ($ billion) Table 15-1: Libya – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 11 92 178 0 1,955 2,236 2002 20 95 186 52 1,943 2,296 2003 27 120 203 202 2,115 2,667 2004 89 122 277 272 2,348 3,107 2005 191 115 277 122 2,552 3,256 2006 203 127 998 356 2,753 4,436 2007 213 139 1,239 296 2,858 4,745 2008 234 156 1,657 146 3,088 5,281 2009 258 174 1,594 54 3,404 5,483 2010 283 195 1,814 54 3,651 5,998 01-05 339 543 1,120 647 10,913 13,563 06-10 1,190 792 7,301 905 15,755 25,943
Following the ending of international sanctions by the UN in 2003 and the US in 2004, Libya is a reemerging major oil province. It has the largest reserve base in Africa (almost all onshore) and holds 3% of the world’s oil reserves. With production of 1.6 mmbpd it is the second largest oil producer in Africa and could increase production to 1.8 mm bpd by 2010 and up to 3 million bpd by 2015. 90% of Libyan oil is supplied to the European market but it will be increasing shipping to the US. Libya has considerable gas reserves and could become an important supplier to Europe although at present its production capacity and infrastructure is not matching its reserves potential. Gas production is forecast to expand from around 7 bcm per annum to reach 11 bcm per annum in 2010. As the market opens up, overall expenditure is set to increase from its current level of $4.4 billion to reach $6 billion by 2010. All sectors are expected to see growth, however, following the recent licensing rounds we would expect to see seismic activity and exploration drilling being the first to benefit, along with much needed investment in the facilities sector. Considerable opportunities are available for exploration and development and in particular the upgrading of existing production facilities. However, with very high unemployment (estimated at 50%), creation of local content is of major importance. Libya is 117th on Transparency’s International index. Corruption is commonplace and reported to be growing.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 1 2 3 4 5 6 7 8 9
$ billion
Figure 15-2: Libya – Expenditure by Component 2006-2010 Table 15-2: Libya – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 97 0 0 81 1,955 105 52 0 81 1,943 122 202 0 81 2,115 196 272 0 81 2,348 196 122 0 81 2,552 188 356 0 810 2,753 404 296 25 810 2,858 822 146 25 810 3,088 1,069 54 25 500 3,404 1,389 54 25 400 3,651 715 647 0 405 10,913 3,871 905 100 3,330 15,755 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 11 10 1 92 51 41 178 21 103 13 13 12 9 5 1,955 1,058 897 20 18 2 95 52 43 238 29 138 18 18 17 12 7 1,943 1,052 891 27 24 3 120 66 54 405 49 235 30 30 28 20 12 2,115 1,146 968 89 78 11 122 67 55 548 66 318 41 41 38 27 16 2,348 1,275 1,074 191 168 23 115 63 52 398 48 231 30 30 28 20 12 2,552 1,384 1,168 203 178 24 127 70 57 1,354 162 785 102 102 95 68 41 2,753 1,494 1,259 213 187 26 139 77 63 1,534 184 890 115 115 107 77 46 2,858 1,551 1,308 234 206 28 156 86 70 1,803 216 1,046 135 135 126 90 54 3,088 1,676 1,412 258 227 31 174 96 78 1,647 198 955 124 124 115 82 49 3,404 1,848 1,555 283 249 34 195 107 88 1,868 224 224 224 224 224 224 224 3,651 1,984 1,668 339 298 41 543 299 245 1,767 212 1,025 133 133 124 88 53 10,913 5,916 4,997 1,190 1,047 143 792 436 356 8,206 985 3,900 700 700 668 541 414 15,755 8,553 7,202
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The Libyan National Oil Corporation (NOC) controls the oil & gas sector, but most of the international majors are active in the country. Other players include: Azzawaya oil refining companies, Brega petroleum marketing company, Ras Lanuf Oil & Gas Processing Company (RASCO), NOC Petroleum Research Centre, Jowfe Oil Technology (drilling and safety instrumentation), Petroleum Training and Qualifying Institute, National Drilling and Workover Company and the National Oilfield and Terminal Catering Company. Of particular note is Umm Al Jawaby, the service procurement arm of NOC, which has a major procurement facility in London. HSE is reported to be at a primitive level in Libya. Following high-profile incidents such as a major fire at Ras Lanuf in early 2002 the focus on health and safety in the state-owned operators is increasing. There is also increasing pressure from NOC on companies to stop disposal of gas by flaring.
15.1.
Major Upstream Developments
Since June 2003, Libya is slowly moving away from a state-regulated petroleum industry. However, only 25% of the total acreage is available to foreign companies and nothing can happen without consent from a slow and heavy bureaucracy (some projects have taken up to 2 years to take-off after bids were submitted). The NOC launched licensing rounds in January and October 2005. EPSA IV-1 (January 2005) offered 15 areas for auctions and intense competition ensued (56 companies, 104 bids) with carefully selected – mainly American – companies winning acreage. EPSA IV-2 (October 2005) had 51 bidders, of which 19 (only one American) were selected. On 24th and 30th of August 2006, the third exploration round will be launched and award of 41 blocks is expected in September-October 2006. In addition, Libya hopes to hold another three rounds that will see some 261 areas in total opened to foreign companies. Future rounds will require link between upstream and downstream development Libya has substantial potential for exploration with an average 16 wells/10,000km whereas similar countries usually average 50 (world average 105). Development of upstream activity is still mainly at seismic and exploration stage. 2D seismic should rise from over 15,000km to reach about 19,700km in 2010 whilst 3D should see similar growth from around 4,900km² up to over 6,500km². Intensive exploratory drilling is also forecast from 28 wells currently up to 69 by the end of the decade.
15.2.
Major Pipeline and LNG Developments
The increasing pipelines activity should be sustained, in particular to link upstream and downstream facilities. This is the case for the Sirte to Brega gas pipeline developed by ZOC, the oil and multiproducts pipeline linking Zaouia to Skhira as well as the JV with Egypt to carry oil from Tobruk to Alexandria ($600 million). Altayoub – Tobruk to Alexandria Pipeline In 2001, Egypt and Libya formed a $300 million company to pipe Egyptian natural gas to Libya and Libyan crude oil to Egypt. The newly formed Al Tayoub company is currently conducting a route survey and technical studies for the proposed pipeline between Alexandria and Tobruk. The project is of major importance – by 2010, Egypt could become a net importer of oil. The pipeline will supply 150,000bpd of crude for Egyptian refineries.
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The project will consist of two pipelines: a gas pipeline with a capacity of 1,100 million cubic metres/day and an oil pipeline with a capacity of 150,000bpd. The 620km, 62 inch pipeline will extend from Tobruk in Libya to the Egyptian port of Alexandria, of which 127km would be in Libyan territory and 495km in Egypt. SOC – Khoms to Tripoli & Melitah to Tripoli Pipelines This project will consist of a 160km pipeline which will serve the Khoms gas-fired power plant, as well as another 120km going from Melitah to Tripoli. The Khoms-Tripoli project is estimated to cost about $170 million, while the Melitah-Tripoli pipeline is estimated at about $100 million. ZOC – Sirte to Brega Pipeline This major project involves the construction of a 215km steel pipeline with a diameter of 42 inches and capacity of 1,500 million cubic feet per day. The pipeline will run from Zueitina’s 103A supply base in the Sirte basin to the Brega coastal pipeline. The project will supply gas that will either run on to Melitah and Italy via the recently-commissioned Greenstream subsea pipeline, or be used as feedstock for power generation. Shell – Brega LNG Liquefaction Plant Upgrade Shell is to upgrade the Brega LNG plant with the aim of increasing the LNG production capacity of the plant from its current levels of 0.75mtpa back up to its original nameplate production capacity of some 3.2mtpa. The rejuvenation is expected to take up to 30 months from the start of work, which is expected later this year. It was hoped that work could start earlier, but the Brega LNG plant will undergo a long planned six week shutdown during August and September.
15.3.
Major Downstream Developments
Libyan crude oils are of very high quality and are low in sulphur producing a high proportion of light refined products, including gasoline and are particularly suitable for the increasingly environmentally conscious European market. There is a need for important upgrade of HSE systems. Major facilities development is underway for refineries in petrochemical complexes, including Azzawiya, Marsa El Brega, Sehba and Ras Lanuf. In total the sector should grow from around $1 billion in 2006 to reach in excess of $1.7 billion by the end of the decade. ARC – Azzawiya Refinery Expansion & Rehabilitation This project is aimed at increasing the capacity of the 120,000 barrel/day refinery by 24%, which will involve the installation of a new continuous catalytic reformer (CCR) unit, naphtha and gas-oil hydrotreaters and an isomerisation unit, as well as the installation of pneumatic control units and a supervisory control & data acquisition (SCADA) system. The future planned expansion will convert crude atmospheric residue into distillate products by the addition of residue catalytic cracking and associated downstream process units. The first phase will see the installation of a new continuous catalytic reformer unit, naphtha and gas/oil hydrotreaters and an isomerisation unit at the 120,000 barrel/day plant. The project is financed by the Libyan Government. NOC/Shell – Marsa El Brega LNG Plant Upgrade The first phase of the expansion project estimated at $179 million is expected to be carried out over a period of three years and will see a major overhaul of superstructure and facilities at the 700,000 ton/year plant. The phase two expansion of the facility, which would see capacity increased to about 3.2 million t/y, is dependent on the availability of gas feedstock.
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NOC, SOC and Shell will cooperate to detail the scope of work required for the LNG rejuvenation and upgrade project, which will be carried out in phases to suit gas availability. RASCO – Ras Lanuf Refinery Revamp Ras Lanuf, the country’s largest refinery with capacity of 220,000 b/d, will commence construction of a $1,900 million upgrade in the first quarter of 2007. A number of US companies are also understood to be in talks with Tripoli over the estimated $1,500 million modernisation and expansion programme for the Ras Lanuf naphtha-based complex. The study is also looking at options to add butadiene, butene-1, methyl tertiary butyl ether (MTBE), tert-amyl methyl ether (TAME) and iso-octane units to the existing petrochemicals complex at Ras Lanuf.
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16 MALAYSIA
900 800 700 600 $ million 500 400 300 200 100 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 16-1: Malaysia – Expenditure Totals 2001-2010 ($ million) Table 16-1: Malaysia – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 0 0 246 0 266 512 2002 0 0 171 0 266 437 2003 0 0 0 470 266 736 2004 0 0 0 0 266 266 2005 0 0 365 0 278 643 2006 0 0 365 0 292 657 2007 0 0 515 0 306 821 2008 0 0 176 0 322 497 2009 0 0 150 0 338 487 2010 0 0 150 0 355 504 01-05 0 0 782 470 1,342 2,594 06-10 0 0 1,355 0 1,613 2,968
Malaysia has no onshore production, however, it does have some downstream activity including refining, petrochemicals, gas processing and LNG. The country is likely to have some growth in expenditure in the MMO and facilities sectors, but overall the total expenditure, currently at $650 million is insignificant in comparison to the other countries considered in this study. Recognising the limits of domestic oil and gas potential, Petronas, the NOC, has significant international exploration and production activities. The company currently has interests in Syria, Turkmenistan, Iran, Pakistan, China, Vietnam, Burma, Algeria, Libya, Tunisia, Sudan, and Angola. Overseas operations make up nearly one-third of Petronas’ revenue. Malaysia is 39th on the Transparency International index.
16.1.
Major Downstream Developments
Malaysia has six refineries, with a total processing capacity of 544,832 bbl/d. The three largest are the 155,000-bbl/d Shell Port Dickson refinery and the Petronas Melaka-I and Melaka-II refineries, which have capacities of 92,832 bbl/d and 126,000 bbl/d respectively.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
$ billion
Figure 16-2: Malaysia – Expenditure by Component 2006-2010 Table 16-2: Malaysia – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 0 0 0 246 266 0 0 0 171 266 0 470 0 0 266 0 0 0 0 266 0 0 0 365 278 0 0 0 365 292 0 0 0 515 306 0 0 0 176 322 0 0 0 150 338 0 0 0 150 355 0 470 0 782 1,342 0 0 0 1,355 1,613 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 0 0 0 0 0 0 246 30 143 18 18 17 12 7 266 120 146 0 0 0 0 0 0 171 21 99 13 13 12 9 5 266 120 146 0 0 0 0 0 0 470 56 272 35 35 33 23 14 266 120 146 0 0 0 0 0 0 0 0 0 0 0 0 0 0 266 120 146 0 0 0 0 0 0 365 44 212 27 27 26 18 11 278 125 153 0 0 0 0 0 0 365 44 212 27 27 26 18 11 292 131 161 0 0 0 0 0 0 515 62 299 39 39 36 26 15 306 138 169 0 0 0 0 0 0 176 21 102 13 13 12 9 5 322 145 177 0 0 0 0 0 0 150 18 87 11 11 10 7 4 338 152 186 0 0 0 0 0 0 150 18 18 18 18 18 18 18 355 160 195 0 0 0 0 0 0 1,252 150 726 94 94 88 63 38 1,342 604 738 0 0 0 0 0 0 1,355 163 717 108 108 102 78 54 1,613 726 887
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17 MEXICO
7 6 5 $ billion 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 17-1: Mexico – Expenditure Totals 2001-2010 ($ billion) Table 17-1: Mexico – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 67 421 1,383 0 2,681 4,551 2002 68 419 1,522 13 2,709 4,731 2003 69 546 1,737 255 2,751 5,358 2004 70 617 1,809 243 2,755 5,494 2005 72 678 1,583 343 2,748 5,423 2006 75 645 1,643 271 2,822 5,457 2007 79 667 1,454 471 2,884 5,555 2008 83 718 1,497 415 2,993 5,707 2009 87 772 1,479 398 2,709 5,446 2010 92 814 1,329 426 2,850 5,511 01-05 345 2,681 8,034 854 13,644 25,558 06-10 417 3,617 7,402 1,981 14,258 27,675
Mexico is the fifth largest oil supplier in the world but its production has been declining for several years now and was troubled further by Hurricane Emily in July 2005. Onshore oil production is a small fraction of total production (14%). From a production of around 570,000 bpd, a drop to 490,000 bpd by 2010 is anticipated. Mexican gas imports are growing rapidly (currently 23% of consumption but industrial demand is growing by 4.5% per annum) which has led to a good market for gas pipelines and LNG infrastructure. PEMEX, the NOC controls the oil & gas sector with some production handled through Multiple Services Contracts with international companies. PEMEX’s budget must be approved by the Parliament each year. For this reason, PEMEX often seems to take a very optimistic view of its proposed developments and subsequently our (more-conservative) forecast may vary from the official projections. We currently anticipate that overall expenditure in the onshore sector will amount to some $5.5 billion in 2006. Growth over the period to 2010 will be very modest and ultimately the outlook is for levels of spending to remain at the current plateau throughout the period. The political situation in the country following the tormented presidential election process could deteriorate and, of course, we are unable to forecast the impact of this on the oil & gas industry. The focus of increasing levels of expenditure on MMO and complex upstream projects is expected to mainly be in the Chicontopec and Burgos basin.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 1 2 3 4 5 6 7 8
$ billion
Figure 17-2: Mexico– Expenditure by Component 2006-2010 Table 17-2: Mexico – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 218 0 0 1,165 2,681 192 13 0 1,330 2,709 79 255 600 1,058 2,751 170 243 622 1,018 2,755 176 343 272 1,135 2,748 140 271 362 1,141 2,822 101 471 217 1,136 2,884 107 415 292 1,098 2,993 97 398 277 1,106 2,709 86 426 120 1,123 2,850 835 854 1,493 5,706 13,644 531 1,981 1,267 5,604 14,258 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 67 59 8 421 232 190 1,383 166 802 104 104 97 69 41 2,681 1,236 1,445 68 59 8 419 230 188 1,535 184 891 115 115 107 77 46 2,709 1,252 1,457 69 61 8 546 300 246 1,993 239 1,156 149 149 139 100 60 2,751 1,275 1,476 70 62 8 617 339 278 2,052 246 1,190 154 154 144 103 62 2,755 1,277 1,478 72 63 9 678 373 305 1,926 231 1,117 144 144 135 96 58 2,748 1,203 1,545 75 66 9 645 355 290 1,914 230 1,110 144 144 134 96 57 2,822 1,240 1,582 79 70 10 667 367 300 1,925 231 1,116 144 144 135 96 58 2,884 1,270 1,614 83 73 10 718 395 323 1,912 229 1,109 143 143 134 96 57 2,993 1,326 1,667 87 77 10 772 425 347 1,877 225 1,089 141 141 131 94 56 2,709 1,399 1,310 92 81 11 814 448 366 1,755 211 1,018 132 132 123 88 53 2,850 1,472 1,378 345 304 41 2,681 1,474 1,206 8,888 1,067 5,155 667 667 622 444 267 13,644 6,243 7,400 417 367 50 3,617 1,989 1,628 9,383 1,126 5,442 704 704 657 469 281 14,258 6,707 7,551
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Multiple Services Contracts (MSC) were introduced in 2001 to boost gas production and ultimately reduce imports from the US. MSCs are contracts based on work carried out that were aimed at increasing foreign investment and technology. By 2006, they have failed to deliver significant improvement. A generally good standard of labour is readily available and skilled technical and professional people can usually be sourced in most areas. All goods above a value of $250,000 must be tendered in a highly bureaucratic process. Although noncompulsory, registration with a PEMEX list of suppliers (managed by ITS, Pemex’s Houston branch) is useful. WTO membership is putting pressure on tackling corruption and increasing transparency of the oil and gas sector and a special body, the Comision Reguladora de Energia (CRE), have been established to manage the natural gas and electricity sector. Mexico is 65th on Transparency International’s corruption index.
17.1.
Major Upstream Developments
Most of onshore areas in Mexico have been thoroughly investigated and exploited. What remains is probably only complex heavy-crude fields in Burgos and the Chicontopec. However, a high level of MMOs are expected. Such difficult areas together with highly depleted fields will require new technologies. The Instituto Mexicano de Petroleo (IMP) is the semi-independent R&D arm of PEMEX and most new technology requirement will be reviewed by it. Often, IMP would prepare on behalf of PEMEX most of the tender documents for major projects, in particular in the construction sector.
17.2.
Major Pipeline and LNG Developments
A major MMO programme is underway including the Vera Cruz pipeline under the Strategic Gas Program. Given the fast rising need for gas, Mexico is developing major LNG projects. Flagship projects Baja California at Enseneda (a JV with Sempra Shell/Chevron), Lazaro Cardenas in Manzanillo (Repsol – contract awarded 2004), alternative Sonora (in case Baja California does not come to fruition) and Altamira (JV Shell/Total). Gas pipelines will see important activity. Interconnectors with the US are being developed, such as the Corales-Arguelles, the Eagle Pass-Laredo, the Del Rio-Acuna, or the Ductos de Nogales.
17.3.
Major Downstream Developments
Significant development of downstream capacity is taking place. This includes additional capacity at Minatitlan, Tula and Madero refineries. Also more petrochemical investment will occur at Reynosa and Poza Rica. PEMEX controls around 2/3 of petrochemical production in Mexico but plants are unreliable and desperately in need of rehabilitation work. Privatisation of the petrochemical sector could be in prospect despite several attempts having stalled in the past.
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18 NIGERIA
8 7 6 5 $ billion 4 3 2 1 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 18-1: Nigeria – Expenditure Totals 2001-2010 ($ billion) Table 18-1: Nigeria – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 4 34 606 445 2,808 3,898 2002 6 42 1,093 526 2,686 4,352 2003 5 30 1,304 622 2,940 4,900 2004 3 15 1,417 738 3,096 5,269 2005 8 27 2,156 878 3,244 6,312 2006 12 32 1,415 707 3,369 5,535 2007 9 35 2,257 767 3,470 6,537 2008 7 39 2,242 833 3,777 6,897 2009 7 44 1,977 904 4,143 7,074 2010 7 47 1,962 981 4,548 7,544 01-05 25 148 6,577 3,210 14,773 24,732 06-10 41 196 9,852 4,192 19,306 33,587
Nigeria is the largest producer of oil in Africa. The majority of Nigeria’s reserves are held along the Niger Delta in hundreds of small fields. In recent years, continuous attacks to pipelines throughout the country have contributed to over 400,000 bbl/d of production to be shut in – civil strife remains a significant issue in the region. The Nigerian government is aiming at transforming the country from a situation of fuel scarcity to a net petroleum product exporter. Nigeria would like to refine around 50% of crude oil production locally by 2010. In a similar way to Algeria’s policy, Nigeria is attempting to address the inadequacies between the upstream and downstream sector. This should occur in addition to a push to increase local content from 40% currently to 50% in 2010. The capability to do so in a context of qualified labour scarcity remain to be seen. The majority of Nigeria’s gas is associated with oil production – a great deal of this is flared as fields lack the infrastructure required to produce the gas. In fact, Nigeria flares over 40% of extracted natural gas each year – the highest in the world. The country is working to stop flaring by 2008. Total expenditure in the onshore sector is set to increase from the current level of $5.5 billion in 2006 to over $7.5 billion by 2010. Much of this increase is being driven by investment in the downstream facilities and LNG sectors and MMO expenditure is also increasing steadily. Nigeria is 152nd on the Transparency International index.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 2 4 6 8 10 12 $ billion
Figure 18-2: Nigeria – Expenditure by Component 2006-2010 Table 18-2: Nigeria – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 15 445 300 292 2,808 18 526 825 250 2,686 13 622 525 766 2,940 7 738 525 886 3,096 11 878 775 1,370 3,244 14 707 250 1,152 3,369 15 767 1,850 392 3,470 17 833 1,850 375 3,777 19 904 1,600 358 4,143 20 981 1,600 342 4,548 63 3,210 2,950 3,563 14,773 84 4,192 7,150 2,618 19,306 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 4 4 0 34 19 15 1,052 126 610 79 79 74 74 11 2,808 1,619 1,189 6 5 1 42 23 19 1,619 194 939 121 121 113 113 16 2,686 1,546 1,140 5 4 1 30 16 13 1,926 231 1,117 144 144 135 135 19 2,940 1,698 1,242 3 2 0 15 8 7 2,156 259 1,250 162 162 151 151 22 3,096 1,792 1,304 8 7 1 27 15 12 3,034 364 1,760 228 228 212 212 30 3,244 1,881 1,363 12 10 1 32 18 14 2,122 255 1,231 159 159 149 149 21 3,369 1,955 1,413 9 8 1 35 19 16 3,024 363 1,754 227 227 212 212 30 3,470 2,016 1,454 7 6 1 39 21 17 3,074 369 1,783 231 231 215 215 31 3,777 2,200 1,577 7 6 1 44 24 20 2,881 346 1,671 216 216 202 202 29 4,143 2,420 1,723 7 6 1 47 26 21 2,943 353 1,707 221 221 206 206 29 4,548 2,663 1,885 25 22 3 148 81 66 9,786 1,174 5,676 734 734 685 685 98 14,773 8,535 6,239 41 36 5 196 108 88 14,044 1,685 8,145 1,053 1,053 983 983 140 19,306 11,254 8,052
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18.1.
Major Upstream Developments
There is minimal onshore upstream activity involving major projects. In the 2005 bid round – the first open and transparent process in the country – only 7 blocks were awarded, two for each main basin (Anambra, Benue and Chad), and one for the onshore part of the Nigeria Delta basin. Work programmes involved around 500-600km of 2D seismic for each block and an additional 300km² 3D survey for the Benue and Chad basin awards. The next round to be launched in October 2006 should include 20 blocks in the inland basins.
18.2.
Major Pipeline and LNG Developments
LNG is a major sector in Nigeria, with regular shipments to the US market from the huge Bonny Island LNG plant which was put into operation in late 1999. Additional LNG facilities are being planned throughout the country. Chevron put onstream the Escravos Gas Project (EGP) in 1997 with capacity due to be expanded to 630MMcf/d by 2007. The West Africa Gas Pipeline (WAGP) is due for startup this year, delivering natural gas to power stations in neighbouring Ghana. Domestic gas pipeline projects are also underway, supplying gas to northern and eastern Nigeria. The Trans-Saharan gas pipeline is being discussed which would take gas from Nigeria’s fields to an export terminal in Algeria. The $7 billion project would take six years to complete, if given the go-ahead. SPDC – Gbaran/Ubie Oil & Gas Fields Development In February 2006, Saipem was awarded a $420 million contract by Shell Petroleum Development Company of Nigeria (SPDC) within the Gbaran/Ubie integrated oil & gas project. The contract calls also for the laying of 340km of pipelines and flowlines. Work is expected to be completed at the end of 2008. The contract includes the engineering, procurement and construction of pipelines, flowlines and composite fibre optic and high voltage electrical cables connecting the Gbaran oil and gas production fields – Bayelsa State, Niger Delta, with the central processing facility in the area. Project Management, Engineering and Procurement Services will be carried out in Saipem’s operations base located in Port Harcourt, Nigeria, in accordance with the company's policy of maximizing its local content profile. NNPC – Aba-Enugu-Gboko Pipeline The proposed Aba-Enugu-Gboko pipeline will deliver natural gas to portions of eastern Nigeria; one of the several schemes in place to promote the use of domestic gas within the country. Expected budgeting for the project is expected to be around the $430 million mark. Trans-Saharan Gas Pipeline (TSGP) The 4,000km TSGP is designed to link Nigerian gas fields with the existing Algerian pipeline network at Beni Saf. A feasibility study is currently underway into the project, which will be undertaken jointly by Sonatrach and NNPC. The cost of construction of the project is estimated to be around $7 billion. Political tensions and civil strife are relevant issues in the region, but the project could be very profitable on paper with the increasing availability of Nigerian gas supplies and growing EU market. NNPC – Ajaokuta-Abuja-Kaduna Pipeline The proposed $580 million Ajaokuta-Abuja-Kaduna pipeline would supply natural gas to central and northern Nigeria. Like the Aba-Enugu-Gboko scheme, the pipeline is designed to improve the distribution of Nigeria’s growing domestic gas supplies.
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18.3.
Major Downstream Developments
Nigeria’s refining capacity is not sufficient to meet current demand, which forces the country to import petroleum. Constant problems of vandalism, sabotage, fire, poor management and lack of maintenance cause overall refining to run at around half capacity. Several new refineries are planned, backed by government grants, including a major facility in Delta State which is poised to save the country over $2 billion in costs for imported petroleum. Despite very limited interest from multinational companies, the Nigerian government continues in its attempts to privatise the sector, selling off NNPC’s oil refineries and petrochemical plants. NLNG - Bonny Island LNG Liquefaction Plant – Train 6-8 Expansion The Bonny Island LNG plant is the most ambitious project in the region. Coming onstream in 1999, the development currently consists of five trains. Once all six trains are running simultaneously, total capacity will be 22 million tonnes of LNG per year. The additional train will require several new vessels, bringing the total up to 24. Plans are already underway to expand the project beyond six trains although this is still at the concept stage. Initial plans for the 8mmpta train 7 have been in discussion since mid-2005. Train six, which boasts a capacity of 4.1 million metric tonnes per year, is due to come onstream in 2008. Olokola LNG Liquefaction Project The Olokola LNG or OK-LNG project is situated in the South-West and would have four trains with a total capacity for 22 metric tonnes yearly of LNG export. Initial plans call for a total of four trains of 5.5mmpta capacity each. Additionally, the plant will produce significant quantities of natural gas liquids. A two-phase plan is envisaged for the project, two trains per phase. Although a memorandum of understanding has been signed by partners NNPC, Chevron, Shell and BG, a final investment decision is not expected until later in the year. The plant is expected to commence production by 2010 and is likely to cost around $6 billion. Brass LNG Liquefaction Project, Niger Delta The Brass LNG project, due for start-up in 2011 will initially consist of two trains, each with a capacity of 5mmpta. The majority of the LNG will be exported to Europe and the US. The gas feed for the project will be supplied by the partners’ (NNPC, Eni, ConocoPhillips and Total) productions. The project is designed to step up the commercialisation of Nigeria’s onshore and offshore reserves (Nigeria’s onshore segment has been dormant for almost three decades due to civil strife).
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19 RUSSIA
70 60 50 $ billion 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 19-1: Russia – Expenditure Totals 2001-2010 ($ billion) Table 19-1: Russia – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 161 4,657 4,035 4,737 2002 107 4,138 3,792 3,355 2003 189 4,445 4,123 3,652 2004 72 4,227 4,557 6,144 2005 384 4,627 5,318 3,054 2006 166 5,119 5,589 2,774 2007 225 5,790 6,278 9,942 2008 235 6,355 6,778 8,447 2009 280 7,047 7,248 7,501 2010 252 7,748 7,691 4,630 01-05 913 22,094 21,824 20,943 06-10 1,158 32,058 33,585 33,295
23,569 25,470 28,024 30,304 32,925 35,189 37,203 39,516 41,780 43,760 140,292 197,447 37,159 36,862 40,434 45,304 46,307 48,837 59,439 61,331 63,856 64,081 206,066 297,544
Russia holds 33% of the world’s gas reserves and is only surpassed by Saudi Arabia for its production of oil. Virtually all oil and gas is produced onshore. Future oil production is likely to grow slightly, from around 9.4 million bpd in 2006 to 9.7 million bpd in 2010. On average, fields have been producing for over 40 years and are significantly depleted. The combination of a high level of production and an aging array of fields and refineries means that onshore MMO expenditure is particularly high in Russia. Drilling, facilities and pipelines are also major expenditure segments. Overall, the onshore market is estimated at $49 billion in 2006 and is expected to grow to reach $64 billion by 2010. Russia is strategically positioned between Europe and the large energy consumers of South-Eastern Asia’s fastest growing economies, and controls both the energy supply and supply-route of two of the three world’s largest economic areas. As a result, whilst there is some degree of uncertainty as to the extent and the pace of Russian energy sector’s growth, there is absolutely no doubt that it will grow dramatically. The size of Russia and the sheer diversity of situation makes it difficult to embrace in a single panorama the considerable complexity of its oil & gas industry. Sources of information regarding Russia are uncertain (often unreliable) and scarce. The short-term outlook for Russian oil production growth is somewhat unclear due to a lack of good seismic data and exploration in major potential producing areas during the last decade.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 20 40 60 80 100 120 $ billion
Figure 19-2: Russia – Expenditure by Component 2006-2010 Table 19-2: Russia – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 3,105 4,737 0 930 2,758 3,355 0 1,033 2,963 3,652 0 1,160 2,818 6,144 0 1,739 3,085 3,054 350 1,883 3,413 2,774 350 1,826 3,860 9,942 767 1,652 4,237 8,447 767 1,775 4,698 7,501 767 1,784 5,165 4,630 767 1,759 14,729 20,943 350 6,744 21,372 33,295 3,417 8,797 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
23,569 25,470 28,024 30,304 32,925 35,189 37,203 39,516 41,780 43,760 140,292 197,447 KEY SECTORS & SUBSECTORS
Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations
161 142 19 4,657 2,562 2,096 8,772 1,053 5,087 658 658 614 614 88
107 94 13 4,138 2,276 1,862 7,147 858 4,145 536 536 500 500 71
189 167 23 4,445 2,445 2,000
72 63 9 4,227 2,325 1,902
384 338 46 4,627 2,545 2,082 8,371 1,005 4,855 628 628 586 586 84
166 146 20 5,119 2,815 2,304
225 198 27 5,790 3,184 2,605
235 207 28 6,355 3,495 2,860
280 247 34 7,047 3,876 3,171
252 221 30 7,748 4,261 3,486
913 804 110 22,094 12,152 9,942 42,766 5,132 24,804 3,207 3,207 2,994 2,994 428
1,158 1,019 139 32,058 17,632 14,426 66,880 8,026 38,791 5,016 5,016 4,682 4,682 669
7,775 10,701 933 4,510 583 583 544 544 78 1,284 6,206 803 803 749 749 107
8,363 16,221 15,226 14,749 12,322 1,004 4,850 627 627 585 585 84 1,946 9,408 1,217 1,217 1,135 1,135 162 1,827 8,831 1,142 1,142 1,066 1,066 152 1,770 8,555 1,106 1,106 1,032 1,032 147 1,479 7,147 924 924 863 863 123
23,569 25,470 28,024 30,304 32,925 35,189 37,203 39,516 41,780 43,760 140,292 197,447 12,697 13,743 15,147 16,401 17,831 19,062 20,156 21,412 22,641 23,714 10,872 11,727 12,877 13,903 15,094 16,126 17,048 18,103 19,138 20,046 75,820 106,985 64,473 90,462
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Major oil & gas company players include: Bashneft, Gazprom, Lukoil, Nortgaz, Norilskgazprom, Novatek, Purgaz, Rosneft, Rospan, Slavneft, Sibneft, Surguneftgaz, Surgutneftgaz, Tatneft and TNKBP. Trust is hugely important in Russian business. Russia tends to foster indigenous companies and local content expectations are very high. Russian companies are often focused on the short-term are highly price sensitive and only reluctantly recognising the through-life cost of high-maintenance low-capital cost equipment. Progress on HSE is slow but accelerating through partnership with Western companies. The impact of nationalisation is yet to be seen. Russia is listed as 126th on Transparency International’s corruption index indicating that it suffers widely from corruption. Accordingly, trust is hugely important in Russian business. Despite corruption, nationalisation (Yukos, etc.) and local fragilities, the current political situation is deemed stable at the higher level.
19.1.
Major Upstream Developments
Russian oil fields are on average over 40 years old. They are severely depleted and as the Soviet state deemed it un-necessary, their structural integrity could have been greatly affected by the production peak (12.5 million bpd) occurring just prior to the fall of USSR. As a result of oil field depletion, Russian and international oil companies are investing heavily in upstream developments and pipeline capacity. Some very large facilities are under development, in particular those linked with the Sakhalin project. The recent growth clearly shows the benefit of modern technology and management methods to boost output from the less mature regions such as West Siberia. In particular the introduction in less drilled West Siberian fields of hydraulic fracturing and directional drilling has already led to substantial increases in production.
19.2.
Major Pipeline and LNG Developments
Due to the vast distances involved, large new upstream projects incur major associated pipeline expenditure. Identified major oil & gas pipeline projects total $30 billion. The main ones are the 4,500km Far Eastern pipeline with an eventual capacity of 1.6 million bpd (estimated cost over $11 billion); the North European Gas Pipeline running under the Baltic Sea from Russia to Germany with a capacity of up to 55bcm (estimated cost $5.7 billion); and the Kovykta gas pipeline project from Central Siberia to China and Korea with a capacity of at least 30 bcm (estimated cost over $10 billion).
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Table 19-3: Russia - Major Identified Pipeline Projects
Project Name ROSNEFT - Verkhnechonsk Deposit Field Development TNK-BP - Kovykta–Sayansk–Angarsk–Irkutsk Gas Pipeline Gryazovets-Vyborg pipeline Unva to Permneftegazpererabtka pipeline Vankor oil field to Transneft line Kovyktinskoe (Kovykta) to Beijing and South Korea Gas Pipeline ESPO oil pipeline first stage - Taishet to Skovorodino segment Kovykta to Irkutsk gas pipeline Surgut - Timan Petchora - Port of Indiga pipeline Timan-Pechora to Port of Murmansk pipeline Angarsk to Daquing option oil pipeline KoRus Natural Gas Pipeline Sakhalin 1 (Prigorodnoye to Niigata or Tokyo Gas Pipeline) Sakhalin to Alaska Oil Pipeline Vankor oil field to Dikson oil pipeline Eastern and western Siberia to China gas pipeline ESPO oil pipeline second stage - Skovorodino to Perevoznaya Bay YUKOS - Russia To China Pipeline Start 2006 2006 2006 2006 2006 2006 2006 2006 2007 2007 2007 2007 2007 2007 2008 2008 2008 2009 End 2009 2009 2008 2007 2007 2008 2008 2006 2008 2008 2009 2009 2009 2010 2010 2011 2010 2010 Length (Km) 574 650 917 180 399 2,022 2,390 645 1,878 2,993 1,700 2,890 1,440 100 764 4,000 1,800 30 Diameter (inches) 26 48 6 20 48 48 48 48 60 36 56 28 30 28 60 48
19.3.
Major Downstream Developments
The large Russian oil companies dominate the refining and petrochemicals sector. Refineries are old (built in the 1950s or before), simple and inefficient (most run at about 70% capacity). There is a large investment programme in the sector (led by Lukoil and TNK-BP) to increase both %age of light products produced and their quality. Desulphurisation is a key issue as Russian crude is sour (about 1.5% sulphur) and the main markets for Russian products lie in Europe. CPC – Kazakhstan to Russia Pipeline Expansion Phase 3-4 – 2008 The CPC pipeline expansion programme is designed to increase throughput capacity of the pipeline through four stages that will bring it to 1.34m b/d by 2008. The CPC pipeline is to be expanded in four future stages. The first expansion project was completed at the end of 2005 with a capacity of 38mn tons/year, upgrades included; two 120,000 cubic metre working capacity tanks at the Novorossysk marine terminal tank farm and 3 new pump stations. The second and third parts of the project will increase capacity to 58.5m tons/year (1.17m b/d). Two new pump stations will be built between Komsomolsk and Kropotkin as well as a new maintenance facility. 88km of 28inch diameter pipe is to be installed. The fourth expansion project is expected to be complete by the end of 2008 with a capacity of 67m tons/year (1.34m b/d), with two 120,000 cubic meter shell capacity tanks to be constructed at the Novorossysk marine terminal tank farm. Novatek – Petrochemical Plant Development, Omsk – 2007 Novatek, together with Titan Group and the Regional Government of Omsk region, plans to build a petrochemical plant in the Omsk region. The three parties have signed a memorandum on construction of a new petrochemical plant, providing for development of a modern petrochemical facility, expansion of Titan’s existing capacity, improvements to the region’s environment, as well as Novatek using the new plant to process its liquid hydrocarbons and natural gas condensate.
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The petrochemical complex is the leader among the manufactures in Omsk region, accounting for more than one third of all industrial products in the region; more than one forth of capital assets is concentrated there and one sixth of all employees involved in the production sector work at the complex. The plant will produce polypropylene, butadiene and synthetic rubbers through deep processing of liquefied petroleum gas. Rosneft – Komsomolsk Refinery Expansion – 2010 This project consists of an expansion programme is scheduled to be completed by 2010. In April 2004, start-up of the catalytic reforming plant at the refinery took place as all of Rosneft’s refineries had been suffering from the fact that the company had only limited control over its production units and therefore could not guarantee crude supplies. In April 2004, start-up of the catalytic reforming plant at the refinery took place, resulting in raising the oil-refining process up to the level of world standards – the ratio of high-octane non-ethylated gasoline will account for 60% and more. Estimated capacity of the plant is now 450,000 tons of petroleum per annum.
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20 UK
3,000 2,500 2,000 $ million 1,500 1,000 500 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 20-1: UK – Expenditure Totals 2001-2010 ($ million) Table 20-1: UK – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 1 29 52 317 990 1,389 2002 1 39 39 85 989 1,153 2003 0 23 140 122 1,010 1,295 2004 1 19 142 101 1,042 1,304 2005 1 35 330 13 1,039 1,418 2006 1 33 408 108 1,034 1,584 2007 1 33 489 521 1,029 2,074 2008 1 33 639 842 1,024 2,540 2009 1 35 391 274 1,024 1,724 2010 1 37 346 641 1,022 2,046 01-05 5 144 702 638 5,069 6,559 06-10 4 172 2,273 2,387 5,133 9,968
The United Kingdom is the largest exporter of oil & gas in the European Union. However, the UK is past its peak in both oil (1999) and gas (2000) – the major fields of the 1970’s are now in decline, and the newer, smaller fields that utilise modern extraction technologies are unable to offset the decline. Total oil production from the UK is currently around 1.6 million barrels per day (down from 2.9 at peak), while gas production is declining from the current level of around 90 billion cubic feet per year. Onshore production from the UK stands at around 34,000 bpd oil and 3,000 boepd gas. Most of the UK crude oil grades are light and sweet (30° to 40° API), which generally makes them attractive to foreign buyers. The UK has been a net exporter of crude oil since 1981, with main importers being the United States, the Netherlands, France and Germany. With relatively modest quantities of onshore production it is not surprising to note that levels of expenditure on items such as drilling and seismic are low. The majority of the MMO expenditure relates to refining (the UK has around 1.85 million bpd refining capacity) and gas processing activities. As domestic gas production declines, investment into LNG import infrastructure (and associated gas trunklines) is increasing and will drive much of the increase in overall expenditure over the period to 2010. It is expected that annual expenditure will increase from $1.6 billion in 2006 to $2 billion by 2010. The Government’s stance on past-peak hydrocarbon production is to increase domestic production from marginal fields and through efficiency gains, increase gas import by investing in LNG receiving terminals & trans-national pipelines, improve energy conservation and increase investment in renewable energy. Major operators for onshore oil & gas in the UK include British Petroleum, Cirque, Blackland, Edinburgh, Europa, Midmar, OPS, ROC, Star, UK Gas, Viking and Warwick. The UK is joint 11th on Transparency International’s corruption index.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0.0 0.5 1.0 1.5 2.0 2.5 3.0 $ billion
Figure 20-2: UK – Expenditure by Component 2006-2010 Table 20-2: UK – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 2 317 0 50 990 2 85 0 37 989 2 122 0 138 1,010 2 101 60 80 1,042 2 13 293 35 1,039 2 108 389 17 1,034 2 521 470 17 1,029 2 842 620 17 1,024 2 274 376 12 1,024 2 641 331 12 1,022 10 638 353 340 5,069 11 2,387 2,188 74 5,133 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 1 1 0 29 16 13 369 44 214 28 28 26 18 11 990 457 533 1 1 0 39 21 18 124 15 72 9 9 9 6 4 989 456 533 0 0 0 23 13 10 262 31 152 20 20 18 13 8 1,010 464 545 1 1 0 19 10 8 243 29 141 18 18 17 12 7 1,042 479 563 1 1 0 35 19 16 343 41 199 26 26 24 17 10 1,039 477 562 1 1 0 33 18 15 516 62 299 39 39 36 26 15 1,034 474 560 1 1 0 33 18 15 1,010 121 586 76 76 71 51 30 1,029 472 558 1 1 0 33 18 15 1,482 178 859 111 111 104 74 44 1,024 469 555 1 1 0 35 19 16 665 80 386 50 50 47 33 20 1,024 469 555 1 1 0 37 20 16 987 118 118 118 118 118 118 118 1,022 468 554 5 5 1 144 79 65 1,340 161 777 101 101 94 67 40 5,069 2,333 2,736 4 3 0 172 95 77 4,659 559 2,248 394 394 376 302 229 5,133 2,351 2,782
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20.1.
Major Upstream Developments
Onshore, UK production has been evident for many years; the first commercial discovery was made in 1919. In 1973, Wytch Farm in Dorset was the first major onshore oil field discovery and is now the largest onshore oil field in Western Europe (Wytch farm is the second largest user of electricity in the South of England after Heathrow airport due to its use of electrical submersible pumps). The majority of UK onshore production is centred around the south of England (Wessex-channel basin); however, other major areas include East Midlands, Yorkshire, NW England and Midland Valley in Scotland.
20.2.
Major Pipeline and LNG Developments
Table 20-3: UK - Major Identified Pipeline Projects
Name / Route Ganstead to Asselby Easington terminal modifications Garton to Sproatley Milford Haven to Aberdulais Wormington new compression & modifications Pannal to Nether Kellet Asselby to Pannal Easington to Ganstead Felindre to Tirely Wormington to Honeybourne Felindre compressor station Churchover replacement and modifications Kings Lynn to Wisbech pipeline Lockerley Compressor Modifications Barton Stacey to Lockerley Wormington to Sapperton Ottery St Mary to Aylesbeare to Kenn + Ilchester to Barrington Kenn to Fishacre adoption + Fishacre to Lyneham Year Approved 2004 2004 2004 2005 2005 2005 Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Under consideration Year of Build 2006 2006 2006 2007 2007 2007 2008 2008 2008 2008 2008 2008 2008 2009 2009 2009 2009 2009 Details 52km x 1200mm Rationalisation and other 7.9km x 900mm 128km x 1200mm Additional compressive power and reverse flow modifications 93km x 1200mm 62km x 1200mm 32km x 1200mm 186km x 1200mm 11km x 900mm 30MW new compressor station New compression units & pipework modifications 33km x 1200 mm High Flow Mods 28km x 900m 42km x 900mm 41km x 600mm 32km x 900mm adoption + 34km x 600mm Product Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Gas Cost $m 79 18 12 282 50 189 92 54 462 21 111 51 50 4 40 83 83 65
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Table 20-4: UK - Major Identified LNG Import Terminal Projects
Project Name Dragon LNG, Milford Haven (Wales) Isle of Grain, nr London (Expansion Project) South Hook LNG, Milford Haven (Wales) South Hook LNG, Milford Haven (Wales) - Phase II (Expansion project) Isle of Grain, nr London (Expansion Project) Canvey island, London Teesport, Teesside Seal Sands, Teesside, England Operator Dragon LNG - BG (50%), Petronas (30%) and Petroplus (20%) National Grid Transco South Hook LNG - ExxonMobil, Qatar Petroleum South Hook LNG - ExxonMobil, Qatar Petroleum National Grid Transco Centrica Excelerate Energy Conacco Phillips Start 2008 2008 2009 2010 2010 2011 2011 2013 Capacity (mmtpa) 4.4 6.6 7.5 7.5 5 5.4 Status Possible Possible Under construction Under construction Possible Possible Concept Concept
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21 USA
120 100 80 $ billion 60 40 20 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Seismic Drilling Facilities Pipelines MMO
Figure 21-1: USA – Expenditure Totals 2001-2010 ($ billion) Table 21-1: USA – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 793 3,680 1,562 2002 660 2,854 4,510 2003 525 3,376 3,676 2004 717 3,884 1,982 2005 818 5,650 2,277 2006 885 6,474 3,884 2007 892 6,920 4,478 2008 881 7,672 2,749 2009 840 6,163 2,983 2010 860 6,362 3,363 01-05 3,512 19,444 14,006 06-10 4,358 33,591 17,456
36,026 28,007 32,567 37,292 44,004 53,271 52,480 51,730 54,737 57,046 177,897 269,264
25,518 24,696 25,780 25,941 27,171 28,019 28,687 29,399 30,046 30,613 129,107 146,763 67,580 60,727 65,925 69,816 79,920 92,533 93,456 92,430 94,769 98,244 343,967 471,432
The US is one of the world’s largest producers of oil & gas, and second in terms of total reserves and peak volume. The history of the US oil industry is well documented; it has been a pioneer of technologies both onshore and offshore and in extreme climates. The US has driven the oil price, firstly due to supply peaks and latterly due to demand needs. Furthermore, perhaps surprisingly to most Europeans, it has pioneered environmentalism in the industry, restricting exploration in areas deemed environmentally fragile. US drilling activity exceeds that of other countries by some margin. In 2006 a total of over 46,000 wells are expected to be completed at a cost of some $53 billion. Drilling forms the largest component of overall US expenditure, which in 2006 is estimated to amount to $92.5 billion. With high oil prices likely to maintain drilling levels for some time, expenditure is likely to remain elevated at current levels over the period to 2010. The US imports around 58% of the petroleum it requires to satisfy demand (imports of around 12 million b/d for at least 20 million b/d demand). Top suppliers to the US are Canada, Mexico, Saudi Arabia, Venezuela and Nigeria. Growing US demand for Canadian natural gas has been a dominant factor underlying many of the pipeline expansion projects this decade. The US and Canadian natural gas grids are highly interconnected and Canadian natural gas has become an increasingly important component of the total natural gas supply for the United States. However, to satisfy future demand it will be necessary to import increasing volumes of gas from overseas as LNG. Five terminals are currently in operation and some 55 new terminals have been proposed, although we do not expect all of these to go ahead. However, at the time of writing a total of six have been approved and are under construction, whilst a further six have been granted approval and look likely to be constructed. Over the period to 2010 we forecast that a total of $11 billion will be spent developing new LNG terminal infrastructure.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 20 40 60 80 100 120 140 160
$ billion
Figure 21-2: USA – Expenditure by Component 2006-2010 Table 21-2: USA – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 1,691 1,562 0 50 1,314 4,510 0 37 1,528 3,676 0 138 1,750 1,982 60 80 2,065 2,277 293 35 2,503 3,884 389 17 2,471 4,478 470 17 2,440 2,749 620 17 2,587 2,983 376 12 2,701 3,363 331 12 8,348 14,006 353 340 12,702 17,456 2,188 74 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
25,518 24,696 25,780 25,941 27,171 28,019 28,687 29,399 30,046 30,613 129,107 146,763 KEY SECTORS & SUBSECTORS
Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations
793 698 95
660 581 79
525 462 63
717 631 86
818 720 98
885 779 106
892 785 107
881 775 106
840 739 101
860 757 103
3,512 3,091 421
4,358 3,835 523
36,026 28,007 32,567 37,292 44,004 53,271 52,480 51,730 54,737 57,046 177,897 269,264 19,814 15,404 17,912 20,511 24,202 29,299 28,864 28,451 30,106 31,375 16,212 12,603 14,655 16,781 19,802 23,972 23,616 23,278 24,632 25,671 5,242 629 3,041 393 393 367 262 157 7,364 884 4,271 552 552 515 368 221 7,052 846 4,090 529 529 494 353 212 5,866 704 3,403 440 440 411 293 176 7,926 10,358 11,399 10,420 951 4,597 594 594 555 396 238 1,243 6,007 777 777 725 518 311 1,368 6,611 855 855 798 570 342 1,250 6,044 782 782 729 521 313 9,145 1,097 5,304 686 686 640 457 274 9,725 1,167 1,167 1,167 1,167 1,167 1,167 1,167 97,843 148,095 80,054 121,169 33,451 4,014 19,401 2,509 2,509 2,342 1,673 1,004 51,047 6,126 25,134 4,266 4,266 4,060 3,233 2,407
25,518 24,696 25,780 25,941 27,171 28,019 28,687 29,399 30,046 30,613 129,107 146,763 13,300 12,849 13,439 13,518 14,185 14,651 15,018 15,410 15,766 16,078 12,218 11,847 12,341 12,424 12,986 13,368 13,668 13,989 14,280 14,535 67,291 61,817 76,923 69,840
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21.1.
Major Upstream Developments
The oil industry began in Pennsylvania in 1859 and is now home to many major oil & gas basins. Mineral rights in the US mainly belong to the landowner, which prompted speculative activity. Discovery peaked in 1930 when the giant East Texas Field was discovered triggering a slump in oil price and the government intervened by imposing mandatory production cuts managed by the Texas Railroad Commission. The US now dominated world oil production. In 1930 it supplied about 65% of global production. The Lower 48 states had been well explored by the 1960s and peak output was reached in 1970. Since then production has declined despite leading edge technology and the excellent infrastructure and market conditions in the country. There are few opportunities for additional incremental production onshore in the Lower 48 states although small companies continue to produce wells, install EOR (especially for heavy oil) and discover small fields that slightly reduce overall decline. In the early part of the 20th century large amounts of associated gas were flared, but since around 1950 gas flaring has been almost abandoned. About 80% of remaining reserves are now believed to comprise non-associated gas. The states with the largest gas reserves are Texas (25%), New Mexico (9%), Wyoming (9%) and Oklahoma (8%). Gas is used in all sectors through an extensive pipeline network. Gas used for electricity generation grew substantially in the 1990s and power stations continue to increase their market share. As well as LNG, the US imports pipeline gas from Canada. Although production has been capped below capacity since 1970 to meet rather flat demand, growth in consumption through the 1990s and a general shortage of new gas reserves to bring onstream prompted a drilling boom in 2000. Despite new drilling, gas output from the Lower 48 States is declining.
21.2.
Major Pipeline and LNG Developments
Table 21-3: USA - Major Identified Pipeline Projects
Project Name
Start
End
Length (Km)
Diameter (inches)
El Paso - Tucson - Phoenix pipeline Alaska to Lower 48 gas pipeline - All onshore route option Continental Connector Beacon Pipeline - Rockies to Chicago Pipeline Picacho Gas Pipeline Rockies Express Pipeline - First segment Silver Canyon Pipeline Picacho Products Pipeline Western Frontier Pipeline Project Lebanon East Expansion project Overland Pass Pipeline All-Alaska Gasline Rockies Express Pipeline - Second segment
2005 2006 2006 2006 2006 2006 2006 2006 2006 2007 2007 2007 2008
2007 2010 2008 2007 2008 2008 2006 2007 2007 2008 2008 2008 2009
682 3443 1609 1448 1327 1142 732 692 640 2000 1207 1170 671
16 / 12 52 42 34 36 42 30 / 36 20 30 36 16 48 42
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Table 21-4: USA - Major Identified LNG Import Terminal Projects
Project Name Corpus Christi, TX Sabine Pass, LA Freeport, TX Cove Point, MD (Expansion Project) Cameron LNG (ex Hackberry) Philadelphia, PA. Freedom Energy Centre Fall River, MA Crown Landing, Logan Township, NJ Golden Pass', Sabine Pass, LA Port Arthur, TX Creole Trail LNG, Cameron LA Robbinston, ME. Downeast LNG Operator Cheniere, BPU Cheniere LNG Freeport LNG - ConocoPhillips (50%), Cheniere Energy (30%) Dominion Resources Inc Sempra Energy PGW Weaver's Cove Energy/Hess LNG BP Exxonmobil Sempra Cheniere LNG Kestrel Energy Start 2007 2007 2008 2008 2008 2008 2009 2009 2009 2010 2010 2011 Capacity (mmtpa) 15.3 15.3 3.6 11 10.6 4 6 9 7.6 11.5 7 3.5 Status Under construction Under construction Under construction Planned Under construction Concept Possible Possible Possible Planned Possible Concept
21.3.
Major Downstream Developments
Refinery numbers in the US have been decreasing since the 1980s; from 324 in 1981 to 148 at the start of 2005. Many of the closures resulted from the 1981 deregulation – making smaller refineries struggle to stay competitive. Whilst no new refineries have been built in the last 30 years, the expansion of existing refineries has taken place – increasing overall refining capacity. Major projects include: Marathon Petroleum – Garville Refinery – Louisiana Currently the Refinery processes 245,000 barrels per day. The Refinery is being upgraded and the following additional facilities will be installed by 2009: crude distillation, delayed coker, hydrocracker and reformer adding capacity of 180,000 b/d. Estimated to cost a total of nearly $700 million in capital expenditure. Cenex Harvest States – Laurel – Montana The refinery only processes 55,000 b/d at present. A project estimated to cost $325 million, for the installation of a delayed coker is scheduled for completion in 2008. ASA Alliances The company operates three refineries (Bloomburg, Ohio; Albion, Nebraska and Linden, Indiana) all with Ethanol facilities being constructed currently and due for completion in 2008. The total cost is estimated at $750 million and will add over 1 billion litres a year in ethanol processing capacity.
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22 VENEZUELA
18 16 14 12 $ billion 10 8 6 4 2 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Seismic Drilling Facilities Pipelines MMO
Figure 22-1: Venezuela – Expenditure Totals 2001-2010 ($ billion) Table 22-1: Venezuela – Expenditure Totals 2001-2010 ($ million)
$ million Seismic Drilling Facilities Pipelines MMO Total 2001 24 2,049 410 571 5,414 8,467 2002 8 1,107 221 571 4,997 6,904 2003 6 1,025 205 0 4,853 6,089 2004 19 1,631 326 100 5,630 7,707 2005 36 2,358 663 106 6,344 2006 46 2,562 851 221 6,786 2007 52 2,677 1,031 116 7,196 2008 59 2,776 2,459 284 7,800 2009 69 2,965 2,453 215 8,607 2010 82 3,222 2,349 215 9,562 01-05 92 8,171 1,826 1,347 27,239 38,674 06-10 310 14,202 9,144 1,051 39,950 64,656
9,507 10,467 11,073 13,378 14,308 15,430
Venezuelan oil production is forecast to grow from around 3.2 million bpd to 3.5 million bpd by 2010. Gas production is on a rising trend from a current around 30.4 bcm per annum to 33.22 bcm in 2010. Venezuela is an important oil supplier to the US market which is the destination for 68% of its total production. PdVSA (the NOC) controls 50-60% of production, the remainder being in joint ventures with foreign companies through Operating Services Agreements (OSA). Most of Venezuelan gas is either used for pressure-support for oil production or domestic consumption. However, there is potential for marketing production of gas and that could lead to the development of either large LNG projects or a pipeline (the much-discussed 8,000km “Hugoduct” line is an example.) Overall, total investment is expected to rise from a level of $10.5 billion in 2006 to reach some $15.4 billion by 2010. Drilling and MMO account for the two largest expenditure segments, followed by facilities. Development of the offshore South Pars field will ultimately lead to substantial onshore gas processing opportunities, particularly LNG plants. The high oil depletion rate has forced Venezuela to bring onstream an estimated additional 400,000 bpd capacity to sustain production. Venezuela’s oil fields are challenging (acid) and the 2003 shutdown has resulted in irrecoverable damage to reservoirs. Depletion has reached a critical rate whereby intensive gas re-injection is required. Venezuela is 130th on Transparency International’s corruption index.
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Seismic
Seismic Equipment Seismic Acquisition. & Reservoir Management Dow nhole & Well Services Drilling Equipment Design, Engineering & Project Management
Drilling
Facilities
Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE
MMO
Operations Maintenance & Modifications 0 5 10 15 20 25 $ billion
Figure 22-2: Venezuela – Expenditure by Component 2006-2010 Table 22-2: Venezuela – Expenditure by Component 2001-2010
$ million FACILITIES Oil & Gas Production Pipelines LNG Terminals Refining & Gas Processing MMO 410 571 0 0 5,414 221 571 0 0 4,997 205 0 0 0 4,853 326 100 0 0 5,630 472 106 0 192 6,344 512 221 0 339 6,786 535 116 0 496 7,196 555 284 0 1,904 7,800 593 215 300 1,860 8,607 644 215 300 1,705 9,562 1,634 1,347 0 192 27,239 2,840 1,051 600 6,304 39,950 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 01-05 06-10
KEY SECTORS & SUBSECTORS Seismic Seismic Acquisition. & Reservoir Management Seismic Equipment Drilling Drilling Equipment Downhole & Well Services Facilities Design, Engineering & Project Management Construction Electro, Instrumentation & Telecommunication Mechanical Equipment / Piping / Valves Surface Protection & Insulation Logistics & Transportation HSE MMO Maintenance & Modifications Operations 24 21 3 2,049 1,127 922 980 118 569 74 74 69 49 29 5,414 2,922 2,492 8 7 1 1,107 609 498 792 95 459 59 59 55 40 24 4,997 2,692 2,304 6 5 1 1,025 564 461 205 25 119 15 15 14 10 6 4,853 2,613 2,240 19 16 2 1,631 897 734 426 51 247 32 32 30 21 13 5,630 3,041 2,590 36 31 4 2,358 1,297 1,061 769 92 446 58 58 54 38 23 6,344 3,430 2,914 46 41 6 2,562 1,409 1,153 1,073 129 622 80 80 75 54 32 6,786 3,673 3,113 52 46 6 2,677 1,472 1,205 1,147 138 665 86 86 80 57 34 7,196 3,898 3,298 59 52 7 2,776 1,527 1,249 2,743 329 1,591 206 206 192 137 82 7,800 4,231 3,569 69 61 8 2,965 1,631 1,334 2,668 320 1,547 200 200 187 133 80 8,607 4,674 3,932 82 72 10 3,222 1,772 1,450 2,564 308 308 308 308 308 308 308 9,562 5,200 4,362 92 81 11 8,171 4,494 3,677 3,173 381 1,840 238 238 222 159 95 27,239 14,698 12,541 310 272 37 14,202 7,811 6,391 10,195 1,223 4,733 880 880 842 689 537 39,950 21,675 18,275
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Heavy oil is the only way to sustain production over the long term and will require several development projects (of between $2.5-5 billion each), although the new batch of four projects will not come online prior to 2011 at the earliest. Venezuela is actively squeezing foreign companies involved in its OSAs by back taxing previous year’s revenues. In a similar vein, PdVSA is chronicly late in payment as it has implemented a new system whereby it can pay items in Bolivar and not in Dollars. Venezuela may shift a certain amount of its production from current clients (e.g. the US), towards emerging demand: CNPC in China, Lukoil in Russia, NIOC in Iran and Petrobras in Brazil. All new heavy oil projects include foreign NOC participation (Statoil, Lukoil, NIOC, CNPC, ONGC, Gasprom, Petrobras), hence collaboration with NOCs may become of increasing importance to gain access to the market, an important, although non-factorable upside potential for Norwegian companies. Major foreign operators include Total, Exxon Mobil, Statoil, Conoco Phillips and Chevron. The country is regarded as unstable, and following the sacking of 2/3 of workers after the 2003 oil strike may be incapable of implementing either the technology or the investments to sustain production. Environmental management is regarded as poor with no improvement in sight. With a high level of unemployment, creation of local content is imperative.
22.1.
Major Upstream Developments
Half of the production from PdVSA is coming from the Maraca Ibo basin but the area is already very mature requiring heavy investments to maintain. In 2004 PdVSA completed in developments at the Tomoporo field which increased production by around 100,000bpd. Future expansion is expected to add 250,000bpd in 2008. In the Tiujana field, development should increase production from around 312,000bpd to 527,000bpd in 2012. Further exploration is currently ongoing in the Franquera field. In the Oriental Basin – a less mature area – PdVSA is planning additional exploration in the El Tejero and Cotoperi fields. Future developments are heavily reliant on foreign NOCs. Petrobras is the biggest oil company operating under OAS and has a plan for the Oritupano-Leona field – a JV with Anadarko. In addition Petrobras was awarded in February 2005 the further development of 20 other mature fields. PdVSA also signed an agreement with CNPC for the development of the Zumano field. In August 2006, drilling of appraisal wells at the Ayacucho Block in the Orinoco belt were announced. Seven companies were understood to be associated with the programme including Gazprom and Iran Petropars. Other ventures with Lukoil are also under talks.
22.2.
Major Pipeline and LNG Developments
Considerable expansion of product pipelines is in prospect including the Colombia-Venezuela pipeline between Punta Ballenas and Maracaibo for gas re-injection in depleted oil fields. There is a strategic agreement with Brazil to manufacture pipelines in order to avoid procurement from US firms. There has been LNG development since PdVSA announced it would develop itself the Mariscal Sucre project – formerly developed with Royal Dutch Shell and Mitsubishi.
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22.3.
Major Downstream Developments
Venezuela may have reached its maximum capacity from existing installations and could develop substantial downstream capacity to ensure independence from the US (where it currently owns 23 refineries) and increase employment.
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