Middle Eastern resilience

Mirzi Moralde

January 1, 2016

Both maintaining and launching new offshore production is high on the agenda in the Middle East, not least in Saudi Arabia, the UAE and Iran. IHS’ Mirzi Moralde outlines current activity in the region.

Total’s Abu Al Bukhoosh (ABK) field offshore Abu Dhabi, UAE.  Photo from Total.

Offshore construction activities in the shallow water Middle East Gulf region continue to show signs of resiliency, since the price of crude oil dropped by more than 50% in June 2014.

Several engineering, procurement, construction, installation and commissioning (EPCIC) contracts have been awarded by major operators like Saudi Aramco, Abu Dhabi Marine Operating Co. (ADMA-OPCO), Zakum Development Co. (ZADCO) and Qatar Petroleum (QP) this year alone. A number of field development projects will also be brought to tender in 2016, aimed at sustaining and increasing production capacity in line with OPEC’s decision to maintain market share in the current low oil price environment.

Iran in the Persian Gulf will also add to OPEC’s production capacity, once sanctions are fully lifted. These recently awarded projects and those that will be tendered for in the coming years will provide an added boost to current and ongoing offshore work towards the end of this decade.

Saudi Arabia

Persian Gulf Offshore Saudi Arabia.  Photo by Aditya Singh.

In Saudi Arabia, Saudi Aramco, which has a maximum production capacity of 12 MMb/d, has moved forward with its Maintain Potential Programme (MPP), covering brownfield work on producing fields, after it awarded to McDermott a lump-sum engineering, procurement, construction and installation (EPCI) contract with an estimated value of around US$1.5 billion to $1.8 billion. The project covers several platforms and pipelines.

In addition to McDermott, Saudi Aramco has also pre-qualified three other EPCI contractors, which will bid for three long-term agreement (LTA) tenders under the MPP. The list includes partners Larsen & Toubro (L&T) and EMAS, Dynamic Industries from the US and Saipem. This pre-qualification process will allow these four contractors to enter into commercial bids for LTA tender packages under unit rate basis for a period of six years with an option to extend for the next three years.

Wood Group will also carry out a firm six-year contract with options for greenfield and brownfield engineering services, procurement and construction management support for new facilities under the MPP. Wood Group Mustang in the US and its Saudi Arabia-based joint venture Mustang-HDP, which has been providing services to Saudi Aramco since 2011, L&T under a general engineering services contract, will carry out the scope.

Additional infrastructure on Saudi Aramco’s first offshore non-associated gas field, Karan, is underway, following the EPCIC contract award to Saipem in October. The package covers an observation platform, a wellhead production deck module, auxiliary platforms, a 20in internally clad flowline and composite power cable. The Karan field started production in 2012.

In December or by early 2016, the Wasit gas development program, composed of non-associated gas fields, Arabiyah and Hasbah, is set to commence production. It is targeted to produce around 2.5 Bcf/d of gas, once fully operational. The EPCIC contract, which covers platforms and pipelines on both fields, was awarded to Saipem in 2011.

Saudi Aramco will also further expand the Hasbah gas facilities with bids ongoing for the EPCIC tender package, involving six wellhead topsides, two tie-in platforms, flare tripods, bridges, pipelines and umbilicals. Saudi Aramco has pre-qualified four contractors, which includes L&T in partnership with EMAS, McDermott, Saipem and Dynamic Industries. Contract award is anticipated in Q1 2016.

Meantime, deepwater exploration drilling activities in Saudi waters of the Red Sea area are at a standstill after being put on hold since March, due to high operational costs in the current downturn. However, a jackup drilling rig is expected to continue working in the shallower parts of the Red Sea until 2018. Saudi Aramco has so far discovered the Al Shaur 1 (Al Shoor 1) well in 107m water depth in 2012 and the Al-Haryd oil field in 2014.

Abu Dhabi

The ABK field, offshore Abu Dhabi. Photo from Total.

Abu Dhabi in the UAE is aiming to increase production capacity from around 2.8 MMb/d to 3.5 MMb/d. ZADCO and ADMA-OPCO are taking the lead in offshore field development programs aimed at achieving this goal.

ZADCO is anticipated to release a tender package for around six wellhead platforms and six to eight pipelines for the North West Development Project, in around 9m water depth in the Dalma field, in 2016. Other infrastructure like the drilling platform for 12 wells will likely be awarded to NPCC under a negotiated contract by early 2016. ZADCO will prioritize gas production on the Dalma oil and gas field, which was discovered in 1971.

Meantime, construction work on the ZADCO-operated UZ 750 in the Upper Zakum field, off Abu Dhabi, is set to conclude in 2016. Oil production is expected to increase from 500,000 b/d to 750,000 b/d upon completion. A variation order on the contract, awarded to NPCC, will further enhance production capacity on this field by 100,000 b/d.

Several ADMA-OPCO-operated projects were also awarded in the first half of the year. The $855 million EPIC Lower Zakum Pipeline Replacement program that went to NPCC involves around 25 oil pipelines plus topside modification work while the $200 million EPIC Zakum facilities project was awarded to McDermott. Both campaigns are set for completion in 2017.

As the first phase for ADMA-OPCO’s Nasr and Umm Lulu fields is now operational, the full field development programs or Phase 2 of both fields are targeting completion in 2018 and 2019, respectively. Both projects involve super complexes, wellhead platforms and pipelines.

Future prospects, off Abu Dhabi, include the Wintershall-operated Shuwaihat field from where two offshore appraisal wells will be drilled, with the first campaign commencing in mid-2016. Moreover, in the Hail and Ghasha oil fields, Abu Dhabi National Oil Co. (ADNOC) and Occidental Petroleum Corporation (Oxy) will carry out 3D seismic surveys, drilling of appraisal wells and engineering studies by 2017. The activity is covered in the $500 million technical evaluation agreement (TEA) signed between ADNOC and Oxy in February 2015.

Qatar

Several contracts were awarded offshore Qatar in Q4. The RasGas EPCI package for the flow assurance and looping project that covers around 119 km of 6-8in pipelines as well as topside modification contract went to McDermott. The scope is expected to be concluded in Q3 2017. QP also awarded McDermott the EPCI contract for brownfield work on the Bul Hanine field. The campaign will cover four wellhead jackets, with the first two set to be installed by December 2016, while the remaining two will be installed in July 2017.

Meanwhile, bids for the QatarGas Operating Co.’s EPCIC tender for a living quarters (LQ) platform on the North Field Bravo (NFB) are underway. The LQ platform will have the capacity to accommodate around 90 persons. The scope will also include modification of existing LQ facilities and brownfield tie-ins to the process and utility platforms. The NFB is in about 52m water depth.

However, development on the Al Radeef gas field, in Block 4, near the North Field, remains at a standstill after Wintershall returned the block to Qatar in May 2015. Wintershall discovered the Al Radeef field in 2013.

Bahrain

BAPCO is in the process of evaluating its offshore blocks for the new licensing and bid round, anticipated to open in 2016. BAPCO’s evaluation will be based on previous campaigns carried out by Thailand’s PTTEP and Oxy. PTTEP relinquished Block 2 in 2012 while Oxy also relinquished Blocks 1, 3 and 4.

Oman

Over in Oman, plans for deepwater exploration activities in Block 41 have yet to progress after Total relinquished the block in 1H 2015. Total had signed an Exploration and Production Sharing Agreement (EPSA) with the government of Oman in 2013. The EPSA covers 23,580sq km of the block in 30-3000m water depth. Total pulled out of Block 41 after conducting studies on seabed cores and samples.

Iran

Prospects of multi-billion dollar projects offshore Iran have been generating a lot of interest from both international oil and gas companies as well as international and Middle East-based offshore EPIC and service contractors since last year. These development programs are anticipated to move forward in 2016, once the Iran Petroleum Contract (IPC) is in place, when sanctions are fully lifted. Iran is targeting to reach around 4.7 MMb/d of production capacity in the years ahead.

Other than the current and ongoing development campaigns on the South Pars field, major prospects like the North Pars, Golshan, and Ferdowsi gas fields have yet to be developed. Plans have been drafted since 2007, for the Ferdowsi and Golshan gas fields. The Ferdowsi master development plan, estimated to be around $2 billion, will cover the drilling of 13 initial producing wells, one gas production platform, one 26in pipeline and an onshore processing plant plus support facilities.

The Ferdowsi field is estimated to be capable of producing around 500 MMcf/d of gas. A major oil layer beneath the Ferdowsi gas field had also been discovered with an estimated in-place reserve capacity of around 34 billion bbl. On the other hand, the Golshan gas field is planned to have around two platforms and two 26in pipelines that will connect to an onshore processing plant. This field is targeted to produce around 2 Bcf of gas, once fully operational. The estimated cost for this development is around $6 billion. Over in the North Pars gas field, final studies of development phases are underway. The North Pars sits in around 2-30m water depth. It is estimated to hold around 58.9 Tcf of sour gas.

Going forward, more offshore construction work is anticipated, once Iran commences development of its new and major oil and gas fields. In the meantime, Saudi Arabia, Abu Dhabi in the UAE and Qatar will continue to lead the Middle East Gulf region in maintenance of existing fields and the expansion of producing assets as well as developing greenfields for production.

Mirzi Moralde is a senior specialist at IHS based in Dubai. Moralde covers the Middle East Gulf offshore oil and gas construction market, focusing on field development activities from discovery, engineering, procurement, construction, installation and production phases. Moralde joined ODS-Petrodata in 2008, which was acquired by IHS in 2011, and has 10-years’ journalism experience in the Philippines and Dubai and a degree in Mass Communication, major in Broadcast from the University of the Philippines.