Oil majors' skills vital for Gulf

A view of Petroleum Development of Oman (PDO) near Muscat June 5, 2010. Cyclone Phet, despite weakening to a Category 1 storm, pummelled Oman's coastline on Friday, killing two and halting the small oil-producing country's oil and gas production, officials and state media said. REUTERS/Fahad Shadeed (OMAN - Tags: ENVIRONMENT DISASTER BUSINESS ENERGY) *** Local Caption *** AMM06_OMAN_0605_11.JPGShow less

The Middle East is likely to become more reliant on the expertise of international oil companies as the region's oil and gas deposits are increasingly hard to extract, says BP's chief executive.

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He said declining output at existing oil fields paired with growing domestic demand presents a challenge to Arab producers. This will lead to rising investment in boosting flagging recovery rates, and require the technology and know-how of the big international oil companies.

Robert Dudley, the chief executive of the oil major headquartered in London, yesterday outlined the scale of the challenge when he told delegates at the World Petroleum Congress in Doha that the decline in global output was equivalent to the amount Saudi Arabia pumps - 12.5 million barrels per day (bpd) .

Many oilfields in the Middle East have been tapped for years and are starting to become depleted. Without so-called enhanced oil recovery techniques, production levels fall in line with declining reserves.

"The days of easy oil are over. In order to maximise the potential, we have to have enhanced oil recovery," Mohamed Al Hamli, the UAE's Oil Minister, said on Monday.

Enhanced oil recovery (EOR) recreates the original pressure in the reservoir by injecting steam, gas or even carbon-doxide emissions. Wood MacKenzie, a consultancy, estimates oil companies will invest a total of US$40 billion (Dh146.93bn) on boosting capacity in the Middle East, 18 per cent more than last year, according to Bloomberg News.

"These are projects where national oil companies have greater need for support from international oil companies, because the international oil companies have had more experience of these challenging conditions," Iain Brown, the head of regional research at Wood Mackenzie, told Bloomberg News.

International oil companies are already engaging in EOR in the Gulf. Royal Dutch Shell has long been developing the use of enhanced recovery methods at Oman's mature oil fields through its stake in the country's Petroleum Development Oman. Its US counterpart Chevron plans to lift heavy oil from deposits in Kuwait by injecting steam into a field in what could become the world's largest "steamflood" operation by 2017.

Technologically challenging production methods will also be needed to cater to the growing demand for natural gas. A rapid increase in electricity use and an emerging petrochemicals industry have led to a steady rise in demand for gas, which can no longer be met by associated gas from crude production. Yesterday, Khalid Al Falih, the chief executive of Saudi Aramco, told the congress the company was looking for a partner to develop shale gas in the kingdom. Shale gas is stuck in rock formation that makes it difficult to extract, but new production methods have led to a huge increase in gas supply in the US.

The year, BP announced so-called tight gas reserves, those trapped in rock formations deep underground, could be commercially developed in Oman.

The company will make its final investment decision on the $15bn project next year.

Unconventional gas resources are already being developed in the UAE, where the US company Occidental has committed to the $10n Shah project to desulphurise gas so it can be used commercially.

Across the border in Rub Al Khali, Saudi Arabia's empty quarter, Shell and Saudi Aramco are exploring for gas in formations similar to Shah.

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