Gazprom Neft taps foreign groups for technology to boost production
Gazprom Neft, Russia’s third-largest oil producer, is on the hunt for foreign partners to tap their technological expertise, as pressure to increase output and undertake increasingly complex projects pushes domestic know-how to the limit. Sample the FT’s top stories for a week You select the topic, we deliver the news. Select topic Enter email address Invalid email By signing up you confirm that you have read and agree to the terms and conditions, cookie policy and privacy policy. The company is actively seeking “international partners . . . to get access to new expertise and competent people”, its deputy chairman Vadim Yakovlev said, as pressure from US shale producers forces conventional oil producers to maximise production. Gazprom Neft, which produced 86.2m tonnes of hydrocarbons last year, has targeted output of 100m tonnes by 2020. But after six years of almost 10 per cent annual growth, it is having to turn to projects that previously would not have been considered commercially viable because of their technical complexity as it looks to maintain momentum. Despite an agreement between Russia and oil production cartel Opec to curb production in an effort to support global oil prices, Russian oil and gas companies are under pressure to maintain long-term output, sometimes from Soviet-era fields, given the state’s financial dependence on the energy industry. “We want to deploy technology from outside Russia,” said Mr Yakovlev, who used a recent oil industry conference in Houston, Texas, to reach out to potential partners. “Technology available here is suitable for the current stage of development . . . but this is not enough for us, so we are looking globally.” “Our reserve quality is going down, year on year,” he added. “So we are forced to deploy even more advanced technological applications.” Mr Yakovlev said the company was looking to the Big Four oil services companies Baker Hughes, Halliburton, Schlumberger and Weatherford International to deploy their technologies at many of its sites. Related article Five things to watch as oil prices fall Fight between Opec and US shale contributing to renewed bout of selling The company is close to announcing one of the four as an international partner to help develop its Achimovka project in Siberia, Mr Yakovlev said, without providing details on which company or the timing. Gazprom Neft, which is 96 per cent-owned by gas producer Gazprom, which in turn is controlled by the Russian state, is developing a number of complex and demanding assets, such as deposits inside the Arctic Circle and wells requiring horizontal drilling. One of its projects is located 136km from the nearest paved road. Cutting off Russian oil and gas companies from specific areas of international technology was one of the stated aims of US and EU sanctions against Russia, implemented after Moscow’s invasion and annexation of Crimea in 2014. Gazprom Neft was forced to abandon a plan to jointly develop shale oil assets with Royal Dutch Shell after shale projects were specifically targeted by sanctions, also curtailing rivals’ Rosneft and Lukoil’s ventures with international groups. While some of the technologies required by Gazprom Neft are similar to those deployed in shale deposits, none of the projects earmarked by the company for co-operation with international groups are affected by the sanctions, Mr Yakovlev said. “We have multiple projects that are being reviewed for co-operation,” he added. “These would be long-term partnerships and co-operation for joint development and shared technological solutions.”
Iran Set to Out-produce Qatar at World's Biggest Gas Field
Iran is on track to out-produce Qatar, the world’s biggest LNG exporter, at the vast natural gas deposit they share in the Persian Gulf. But as much as they might want, the Iranians won’t have much gas to export because they are likely to use most of the new production themselves.
1. How much natural gas does Iran export?
Almost nothing. Iran has 18.2% of proven gas reserves, ahead of Russia and Qatar, according to the BP Statistical Review of World Energy. Unlike its competitors, which have built far-flung pipelines and liquefied natural gas plants to reach foreign buyers, Iran exported 8.4 billion cu m in 2015 while importing 7.5 billion cu m the same year. Until recently, it was a net importer, buying or bartering for gas from Turkmenistan and Azerbaijan because its domestic distribution network doesn’t supply the entire country. Iran exports less gas by pipeline than Myanmar or Kazakhstan, which together hold less than 1% of global reserves.
2. So where is all Iran’s gas going?
Half of it goes to warming homes, 21% to generating power and 18% for industrial use, including petrochemicals production, according to Cedigaz, an industry research group. Iran, with about 80 million people, is the fourth-biggest market for natural gas, after the U.S., Russia and China. New production can barely keep up with demand. Gas consumption almost doubled to 191.2 billion cu m in 2015 from 102.7 billion in 2005, according to BP statistics, while output rose over the same period to 192.5 billion cu m from 102.3 billion.
3. Will it export more in the future?
Iran plans this year to start sending gas by pipeline to Baghdad in neighboring Iraq, a step that would make it the 15th-biggest exporter, up seven spots from its current rank. But Iraq is planning its own pipeline to export gas to Kuwait and may not prove to be a long-term customer. Iran’s development of LNG plants stalled for years due to international sanctions, and such facilities aren’t a priority given the impending glut of liquefied gas.
The country is considering pipelines to Oman, Pakistan and other countries, though cross-border links are scarce in the turbulent region. Floating LNG plants, a temporary fix until permanent facilities for liquefying gas can be built, are also an option. Ali Amirani, marketing director at the National Iranian Gas Export Co., concedes that the nation will consume most of its gas until at least 2024.
4. What about the new volumes from South Pars?
By March 2018, Iran’s output at the giant South Pars gas field in the Gulf will have surpassed Qatar’s production at the connected North Field, Oil Minister Bijan Namdar Zanganeh said on March 7. Additional development phases at South Pars should give Iran more room for exports in the future. For now, Iran’s motivation for producing more gas is to re-inject it underground into crude reservoirs, “especially into some of the shared oil fields with Iraq. The other incentive is to supply the domestic market,” Stephen Fullerton, a research associate at consultant Wood Mackenzie Ltd., said in a January interview.
Gas re-injection, which isn’t considered part of marketed consumption, can increase the production and recoverable reserves of oil. The entire output from one South Pars phase went into Iranian oil fields, Fullerton said. “They have huge demand for that, especially with the ramp-up of new projects” for oil, he said.
For more on Iran’s natural gas export plans, click here.
5. So Iran has to choose between oil and gas exports?
Exactly. Iran is seeking to attract $100 billion of foreign investment into its energy industry. To boost crude output, it needs gas -- much more gas than it’s currently injecting. Iran required 93 billion cu m of gas for re-injection in 2014 but could only allocate 32 billion, according to Cedigaz. Gas used for oil production, together with domestic consumption of the fuel, is sapping volumes available for export.
6. Is Qatar worried about rising output from the shared field?
Qatar has placed a moratorium on new drilling in the North Field since 2005, and its international expansion signals a plan to preserve domestic reserves for as long as possible. The North Field-South Pars reservoir has enough gas for both countries to exploit, according to Wood Mackenzie’s Fullerton. Even though science shows few risks to the field from shared production, a perception that Qatar has already extracted at least twice as much gas as Iran may cause tensions, Jean-Francois Seznec, a scholar at the Middle East Institute in Washington, wrote in an August study.
Saad Sherida Al-Kaabi, Qatar Petroleum’s chief executive officer, denied that his company halted drilling to allay Iranian concerns. Iran’s development of South Pars “has nothing to do with what we do with the moratorium,” he told reporters in February. “It never did and never will.”
Eni is everywhere
One company pushing ahead with operations around Africa is Eni, which continues to make discoveries and sell down finds, writes Nicholas Newman
What: Eni is focused on African opportunities.
Why: The continent remains under-explored and Eni has the skill, and interest, to push its exploration work foward.
What Next: Selling off stakes in Egypt and Mozambique should provide the company with funds to sustain its grand exploration plans.
African exploration prospects have taken a hit over the last two years but, as Eni’s successes demonstrate, there is plenty of potential still worth securing. The Italian company has almost 4,900 oil and 555 gas wells, with 10 field start-ups planned or under development.
Most of Eni’s worldwide finds of 13 billion barrels of oil were discovered in the last decade. These mainly came from finds in Nigeria, the Republic of Congo (Brazzaville), Ghana and Angola. In 2012, Eni secured a major discovery in Mozambique’s Rovuma Basin, at around 85 tcf (2.4 tcm) of gas.
A long-established presence in Egypt was crowned with the discovery of the giant 30 tcf (850 bcm) Zohr gas find in 2015. Other significant African finds include Ghana’s Offshore Cape Three Points (OCTP) oil and gas project in 2009 and Angola’s Block 15/06 gas field in 2006.
As a result of these discoveries, Eni is Africa’s leading gas producer with an output of 2.23 bcf (63 mcm) per day of gas produced and sold in 2014. The company has plans to invest US$12 billion in Africa during 2016-19, according to Eni’s CEO, Claudio Descalzi, when he presented the company’s 2016 results in March.
Employing 3,742 people in 14 countries in Africa, Eni is engaged in exploration and production in Algeria, Angola, Congo (Brazzaville), Egypt, Ghana, Libya, Mozambique and Nigeria. Lesser projects are under way in Tunisia, South Africa, Liberia, Kenya and Cote d’Ivoire.
In addition, it has refining and marketing operations in Gabon and Ghana. As of the end of 2015, Eni’s proven undeveloped reserves amounted to 2.867 billion barrels, of which 1.41 billion barrels of liquids were located in Africa and Kazakhstan.
Exploration
Eni’s exploration success rate is the envy of its peers. Between 2008 and 2015, Eni found 13 billion boe, which is 2.5 times its production, against an industry average of 0.3 times output. Of its many discoveries in Africa, two finds, in Egypt and Mozambique, stand out.
Located in the oft-surveyed Egyptian waters of the Mediterranean, Eni’s prized Zohr gas discovery, in which US$11 billion is being invested, has a goal of reaching first gas in December, just three years after discovery. The gas is largely destined for the Egyptian market to help meet domestic electricity demand. Other finds include gas in the Nooros prospect in the Nile Delta and the Sidri-18-oil discovery in the Gulf of Suez.
Eni pioneered the push into the Nile Delta, in 1967, and its Zohr discovery continues its bold trend. The Zohr find, in a Miocene carbonate formation, confounded received wisdom on the area and has driven a number of companies to reconsider local prospects.
In Mozambique, the company is working on a floating LNG (FLNG) project, on the Coral field, in addition to the shared development of a field overlapping with its neighbour, on Area 1.
Eni has also made significant discoveries off Congo (Brazzaville), in the pre-salt Marine XII block, said to contain around 5.8 billion boe, of which 1.5 billion barrels lie in the Nene Marine field. Exploration of the pre-salt sequences of this block, in which Eni is lead operator with a 65% share, continues to lead to new discoveries and confirms the effectiveness of Eni’s exploration technologies in geologically complex situations.
Production
In Angola, Eni is ramping up production in its West Hub project located in the deepwater Block 15/06 and is starting production in the East Hub.
West Hub production started in 2014, with the Armada Olombendo floating production, storage, and offloading (FPSO) vessel, on the Sangos, Cinguvu and Mpungi fields. The N’Goma FPSO, meanwhile, is operating on the East Hub, with production from the Cabaca South East field, which lies 350 km northwest of Luanda and 130 km west of Soyo. Block 15/06 is expected to reach peak production of 150,000 bpd of oil this year.
In Nigeria, Eni’s licence for Oil Prospecting Licence (OPL) 245, estimated to hold 9 billion boe, is being held up by a legal dispute concerning the destination of payments made by Eni and its Royal Dutch Shell. In the interim, Eni reports that both the Bonga North West and Abo phase 3 projects have started up.
Eni’s exploration success is linked to its CEO’s background in exploration and production, backed by superior seismic and geophysics – along with a huge investment in super-computers, located near Milan. With computing capacity exceeding three Petaflops – a thousand trillion floating point operations per second – to process its seismic data and create 3D simulations of oil and gas reserves, the company has attracted and built a team of highly talented geophysicists. A combination of science and creative thinking has yielded spectacular results.
In this low-price environment, Eni has adopted a growth strategy based on exploration and production at the expense of midstream and downstream. It has also become leaner and more efficient, reducing costs by more than 30% since 2014, by cutting rig numbers and daily hire rates.
“This has resulted in breakeven cost for new projects declining from US$45 per boe in 2015 to US$27 in 2016,” said Descalzi.
Eni has also accelerated the speed of new field development, helped by selling stakes in projects to share development costs. A case in point is the Zohr field, where Eni has recently sold a 30% stake to Rosneft and a 10% stake to BP.
Similarly, for early monetisation of exploration discoveries, Eni has just sold, subject to government approval, a chunk of equity in its gas finds off Mozambique to ExxonMobil.
At Eni’s 2016-2019 strategy presentation in March, Descalzi predicted “its operational focus and cost-cutting methods could allow savings of around 3.5 billion euros [US$3.7 billion] between 2016 and 2019.” With future production assured, improved efficiency and reduced costs, Eni is investing for both its own and Africa’s future.
Pöyry Awarded Detail Engineering Services Assignment For Revamp Of Dispersion Plant In Worms, Germany
Synthomer (Synthomer Deutschland GmbH) has awarded Pöyry with the detail engineering services assignment for the revamp of its dispersion plant in Worms, Germany. The assignment includes detail engineering services for all disciplines as well as Health, Safety and Environment (HSE) management, permitting engineering, cost control and project scheduling. Project completion is expected in the course of the third quarter 2018.
Synthomer develops and markets polymers used in a wide range of industries to create and enhance everyday consumer products. It holds leading positions in its chosen markets and has a proven record to generate added value to its customers through in-depth application know-how and strong R&D support.
Synthomer's EUR 20 million total investment cost (TIC) adds several new and fully automated production lines for acrylic dispersions. The plant extension strengthens the company's continuous growth in paints & coatings, construction chemicals, technical textiles as well as adhesives and sealants.
The investment will add 30,000 tonnes to its existing capacity. The high flexibility of the newly constructed lines enables further organic growth in the specialty segments, since more than 25% of the new capacity will be utilised by innovative, highly environmentally friendly products.
"The expansion will allow shorter supply lead times and meet highest production and quality standards. This investment further strengthens Synthomer's pan-European dispersion plant network across the United Kingdom, Germany, Czech Republic, France, Italy and Spain," says Dr. Christoph Breuker, Synthomer, Vice President EMEA.
"Pöyry's safety focus together with our excellence in chemical engineering provided by our German team supported by Pöyry's international organisation aligns very well with Synthomer's high value expectations", says Kay Radtke, President of Pöyry's Chemicals & Biorefining business.
The value of the order is not disclosed. The order was recognised within the Industry Business Group order stock in Q1/2017.