Technology, research, and project best practices critical for producing the next generation of energy resources was the focus of panel discussions and technical paper presentations at the International Petroleum Technology Conference (IPTC), held 20–22 January in Doha, Qatar.
The seventh edition of IPTC attracted more than 6,000 attendees representing 523 companies from 63 countries, including top executives from both national and international oil companies. The largest multisociety, multidisciplinary oil and gas event in the Eastern Hemisphere, IPTC was hosted by Qatar Petroleum, with ExxonMobil as cohost. The conference was sponsored by SPE, the European Association of Geoscientists and Engineers, the Society of Exploration Geophysicists, and the American Association of Petroleum Geologists.
Andrew Swiger, senior vice president and principal financial officer for ExxonMobil and IPTC executive committee cochairperson, said that the event has become an important global forum for highlighting the research and innovation that will shape the exploration and production (E&P) industry’s future. The speakers and attendees at the event, agreeing that the era of easy oil is over, said that now is the time to deploy all technical capabilities to unlock future resources. The theme of the conference was “Unlocking Energy Through Innovation, Technology, and Capability.”
Qatar’s prime minister and interior minister, Abdullah Bin Naser Bin Khalifa Al-Thani, said during the conference opening ceremony that Qatar was eager to host and sponsor this event because of the importance of the energy sector in the prosperity and the development of the country. Meanwhile, Qatar’s minister of energy and industry, Mohamed bin Saleh Al-Sada, said that Qatar’s success in developing its natural resources and exploiting them wisely comes mainly from its long-term strategy that involved creating a well-developed infrastructure and a solid and diversified economy, as well as offering a stable investment climate.
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A New Outlook
At ITPC’s plenary session, panelists described a world in which the conventional wisdom of yesteryear has been supplanted with a new outlook for the future, ushered in by a wave of new technologies. The speakers, representing six international and national oil companies, spoke about the challenges facing the industry with optimism based on the industry’s increasing success in tapping into complex resources to produce them safely and more efficiently.
“From the dawn of the modern petroleum industry up to this moment, not only has technology been fundamental to ultimately finding, producing, and using oil and gas, it has, time after time, redefined and reinvented our destiny,” said Amin H. Nasser, vice president of upstream for Saudi Aramco. “When it comes to the big questions about energy, from security, to supply, to sustainability, and all points in between, technology has always had the last word.”
Saudi Aramco is focused on high-impact technologies to address specific challenges the company is facing. Nasser said that his company’s highest priorities include finding new ways to quadruple the amount of seismic data acquired while cutting acquisition time in half. In regard to petroleum engineering, the company hopes advancements in enhanced oil recovery technologies can increase its recovery rate by 20%.
Matthias Bichsel, project and technology director for Shell Global, used Qatar as an example to highlight the importance of new natural gas technologies that are being used to supply the world’s growing appetite for the cleaner-burning fossil fuel. “Not only are Qatar’s gas resources vast, but the scale and sophistication of its gas projects are unrivaled,” he said. “Qatar has embraced technologies that allow it to deliver its natural gas to customers in a wide variety of forms—from LNG [liquefied natural gas] to GTL [gas-to-liquids] products to petrochemicals.”
Bichsel said that, a decade ago, Qatar was exporting less than 20 million tonnes of LNG when the volume of globally traded LNG was approximately 130 million tonnes and the country had no GTL production. “Today, Qatar is the world’s largest LNG and GTL producer and North America is preparing to join the export market for LNG in a world that already handles over 240 million tonnes of that commodity,” Bichsel said.
He stressed that the changes in the energy landscape, especially the North American shale gas boom, were brought on by continued development and application of new and existing technological innovations, as well as the willpower and know-how to apply them successfully. The resurgence of North America as a leading energy producer was brought on in large part by the marrying of two long-existing technologies—hydraulic fracturing and horizontal drilling. “These technologies were both available well before 10 years ago,” he said. “But they were incremented at scale and in combination for the first time in the early 2000s, and we all know the result. The shale gas portion of total North American natural gas production increased from 4% to almost 40% within that 10-year period.”
Jakob Thomasen, chief executive officer of Maersk Oil, said his company is developing new technologies and methods to increase the overall energy efficiency in its exploration and production operations, a reflection of the global effort to reduce energy consumption and lower carbon emissions. In a joint venture with Qatar Petroleum, Maersk Oil is producing 300,000 BOPD from the Al Shaheen field with technologies that have reduced its environmental footprint and eliminated nearly all flaring of associated gas at the field by routing it to onshore facilities for domestic consumption.
The company is working on a potentially even more environmentally friendly system that would be capable of using any type of gas, from clean dry gas to sour gas, for energy use. Thomasen said that, together with partners Siemens and Clean Energy Partners, Maersk Oil is developing this emerging zero-emission power technology. “Try to imagine burning gas, generating power, and there is no CO2 being emitted into the environment,” he said. The technology is called Tri-Gen and involves using a turbine to combust the gas at a low temperature, resulting in pure water and clean CO2 that can be used for reinjection for enhanced oil recovery operations.
“We ought to be able to bring that technology into operation in 2015, and, right now, we are finding the right places to go for the start,” Thomasen said. “There is almost no limit to how this technology can revolutionize power generation in a highly energy efficient and emission free way.” Other companies represented at the session were China National Petroleum Corporation, India’s Oil and Natural Gas Corporation, Total, and Qatar Petroleum International.
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Success Factors in Project Management
The future of integrated project management in a cyclic environment was the theme of the first panel session at IPTC. Panelists discussed the common drivers for contractors to execute capital projects and which pillars projects should be built on from a contractor’s perspective.
To meet demand, the oil and gas industry is developing many different types of projects. “Regardless of its location, every project will have its own unique challenges; however, all are similar in that each requires partnership and collaboration to be a success,” said Enrico Cingolani, executive vice president of development for Eni.
The industry has experienced several significant cycles during the past 30 years, with some situations being more challenging and more uncertain than others. “As we look for grounding truths amongst all the uncertainty, people will find solutions and demand will continue its roller coaster ride but maintain a long-term upward trend,” Cingolani said.
Managing integrated projects is key to meeting the demand for energy and the expectations of stakeholders, especially in frontier areas and during cyclic environments, he said.
The panel discussed a long-term-perspective and disciplined approach to project management to sustain results through business cycle changes where safety, quality, cost, and schedule are critical. Limiting factors at different stages of multiproject development include challenges to resource conservation and lack of talent for project management and skilled positions, the panel said.
Stakeholder alignment around a common vision was also revealed to be key to ensuring productive and efficient resource development. “This alignment extends to all aspects of project management, including technology innovation, risk management, and, most importantly, a commitment to safety, health, and the environment,” Cingolani said. “Challenges and opportunities exist even with modern project-management techniques and processes in place. And, partnerships must extend to address external factors on projects such as regulatory compliance and socioeconomics.”
Jerry Wolahan, executive vice president with ExxonMobil Development Company, said that sustainability is important for the industry’s license to operate, adding that nontechnical delays significantly affect project results. He also referred to excellent leadership as key to project success. “Leadership drives culture and behavior,” he said.
Nafez Bseiso, chief venture officer with RasGas, talked about the common drivers for owners to execute capital projects, saying that economic return, market share, sustainability, and stewardship of shareholders’ money are the main drivers. “From an owner’s perspective, the main pillars in any projects built are safety, quality, cost, and schedule,” he said.
Bseiso said that the main differences in the drivers for owners and contractors are mainly related to time horizon, scope, ability to absorb risk, and the desire to develop national content. “Despite these differences, there are contracting strategies that create a win/win for both owners and contractors,” he said. “This includes lump-sum bidding, which tends to favor contractors in a hot market and owners in a soft market. And the reimbursable contracts shift the market risk to owners,” he added.
Frank Van Ginhoven, senior vice president of the energy and chemicals business group at Fluor, referred to a recent book by Edward R. Merrow of Independent Project Analysis (IPA) that made the statement that, of 300 global megaprojects IPA had surveyed, 65% failed to meet the objectives established at final investment stage. “His criteria were: project is built with no harm to anyone, cost within 25% of FID (final investment decision) budget, schedule is within 25% of FID date, and whether the startup date and performance are as planned,” Ginhoven said.
Current projects are bigger, more complex, highly integrated, technically complicated, and often in harsh or remote areas. Execution organizations are becoming more complex while moving to greater integration. “Owner and contractor JVs (joint ventures) are becoming common but present greater challenges in aligning stakeholders,” he said. “Owners and contractors are stepping up to greater demands on their execution organizations. In addition, local participation requirements are accelerating,” he said.
Amid these issues, projects fail mainly because of inadequate clarity, alignment, and accountability of stakeholders; insufficient expertise, project management ability, systems, and procedures to manage project scale; and selection of the wrong contractors. “Poor, unrealistic budgets, schedules, and poor front-end planning are also among the main reasons for project failure, in addition to arbitrary cost cutting during the project and schedule acceleration initiatives,” he said.
While many projects fail because the participants are unable to step up to increased technical and execution challenges of today’s projects, people will always be the key, and, during every up cycle, owners and contractors stretch their resources. The successful companies will be the ones that figure out how to grow and retain the best talent, Ginhoven said. “Projects today require a solid backbone of IT (information technology) systems to support execution, and they are about getting millions of details 100% right and on time,” he said.
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New Partnership Models
The relationship between the parties involved in the development of hydrocarbon resources is changing because, as the era of easy oil ends, companies are turning toward the development of unconventional resources and oil that is more difficult to extract, according to panelists during IPTC’s industry breakfast session.
Panelists discussed the keys to success in the new partnership models between national oil companies (NOCs), international oil companies (IOCs), and service companies. The consensus on the panel was that the alignment portfolio, the clarity of roles and responsibilities, and cultural alignments are the main ingredients of success in any partnership.
Sabeur Mansar, general manager of development and commercial at Shell Qatar, said that the key to success is the mutual understanding between all parties of what is required from each party. “For example, our journey in Qatar has started with listening to what the state of Qatar and Qatar Petroleum and its affiliate in the country are looking for,” Mansar said.
Mansar, who was speaking from an IOC perspective, said that the key is managing the expectations up front and being clear about what companies can bring to the table because this will lead to a strong foundation of the partnership. “For example, QP doesn’t need IOCs in everything, and they have been very successful in what they want for many decades. Going forward, they have the vision and the strategy of what they want and how they wanted to develop their natural resources. They wanted to build 77 million t/a of LNG, and also they wanted to be the world’s capital of GTL.”
Within these specific targets, the question then becomes what can IOCs do to support NOCs in achieving their vision and aspirations. “At Shell, we believe to invest upfront in some of the priority technology that allows us to come and offer those services and add value to host a government,” Mansar said. “We don’t need to play on the whole spectrum, as we need to stick to our area of strength and build further on them,” he added.
Overall, it is of utmost importance to bring that clarity to the table and manage expectations up front and have that quality on the table to sustain that partnership beyond the first year of operation, he said. “We are talking about joint venture that expands for more than 30–40 years, so, it is very important to set ourselves on a very strong start basis.”
Speaking from an NOC perspective, Ramlan Malek, vice president of petroleum management, E&P, at Petronas, said that relationships between parties involved in a project are very important, mainly the business partnerships. “Being the host, our partners understand that they need to comply with certain regulations and requirements in the country,” Malek said. “We need to be appreciative to our partners who face challenges and issues in order to help us.”
As a host company, an NOC should try to help its partners address the challenges they face to operate smoothly. “This would make the relationship between all parties excellent and help them to enjoy the benefits.”
For service companies, sharing risks is one of the factors of success, said Brice Bouffard, vice president for wireline services for Weatherford. He said that the ability to share the risk and deciding who takes which part of the risk is important.
In some projects, the risks are not known, and partners should be clear about their responsibilities. “For example, when developing the unconventional resources, the risks are not well known before we embark with the project, and that makes it difficult to predict what’s going to happen because it is unknown territory to a certain extent,” Bouffard said.
In these cases, risk tolerance is important, according to Steve Peacock, chief operating officer of Mubadala Petroleum. “Being very clear on the very simple stuff, like if this is intended to be a growth platform or a harvest platform, if this will be a major cash contributor or minor cash contributor, these are very important details,” he said.
Because the challenges are new, such as those involving unconventional resources, companies are looking at new ways of collaboration and functioning between different parties. “For example, service companies guiding operators in doing new FEED (front-end engineering and design) by sharing experiences from other places is relatively new. And it is not simply technical consulting; it goes way beyond this,” Bouffard said. “We have been asked to organize one workshop per week to actually come and speak on how we operate in the US, which is totally new in our partnership. We have seen requests for and information from NOCs and IOCs that we have never seen before. All parties are trying to be more efficient,” he said.