‘PDO is a global leader in EOR technology’

In recent years, Petroleum Development Oman (PDO) has embarked on a major drive to sustain oil production. As primary and secondary recovery techniques come to the end of their natural life, PDO is increasingly turning to Enhanced Oil Recovery (EOR) methods to extend Oman’s production plateau into the coming decades. In 2006, the company spent more than US$2 billion in oilfield development projects and is likely to continue to see continued high capital expenditure in the coming years. Oman Economic Review spoke to PDO’s deputy managing director Dr. Abdulla al-Lamki about the company’s plans.

What triggered PDO’s move to EOR on such a large scale?
The main change of our strategy towards EOR is due to the maturity of our producing oilfields. All fields in the world have limited recovery from primary mechanisms and Oman is no exception. We operate a portfolio of over 120 fields and in many of them we have already followed up with secondary methods, primarily waterfloods or gas injection. We have now reached a point when we need to embark on tertiary mechanisms and those are EOR. However, in Oman there is an additional factor, namely the existence of multiple fields with very heavy, viscous oil which require thermal methods to heat the oil and improve recovery.

To what extent will EOR improve your final recovery factors?
The average recovery factor of our portfolio is around 21 per cent from primary and secondary methods and we can add another 6 per cent by the application of further secondary and EOR methods.

However, matching the right EOR technology to individual fields is a complex task. The available processes are not universally applicable as each field has its own unique characteristics. Indeed, for some fields, an appropriate EOR method might not exist at this moment in time. And, more importantly, EOR technology is costly requiring the careful appraisal of each project to ensure that it is economically viable. Unless oil prices are very high, many EOR technologies such as the use of chemical surfactants or direct heat injection are not economically viable even though they might be technologically appropriate.

As one of the first companies applying EOR techniques in multiple projects, how has PDO managed to find the necessary expertise?
I recall that there was an excellent global pool of EOR experts in the 1960s and 70s in areas such as in-situ combustion and steam-driven production. However, low oil prices in the ‘80s and ‘90s meant that the oil industry as a whole moved away from EOR processes and, unfortunately, we lost 20 years of expertise.

What PDO has done with the help of our private shareholders is to draw on the remaining expertise around the world. We visited companies which had already embarked on tertiary recovery such as the Californian oil producer Aera Energy which is jointly owned by Shell and ExxonMobil. We drew on some of the available Shell know-how in the US and Canada but fundamentally we have been forced to develop our own in-house expertise. I am glad to say that, today, we are a global leader in EOR technology. We are the only Shell joint venture company in the process of developing projects using the three main available EOR technologies; miscible gas injection at the Harweel field, steam injection at the Qarn Alam and Amal fields and polymer injection at Marmul. These projects will help us to continue growing our in-house expertise for the next phase in which we have a string of EOR projects in Southern Oman.

How is PDO managing to cope with surging engineering, procurement and construction (EPC) costs that are affecting companies throughout the GCC region?
Our projects are, indeed, a lot more expensive than they were three or four years ago. For example, the initial bid for the Qarn Alam project was horrendous at US$1.6 billion. We managed to reduce this considerably by splitting the contract into on-plot and off-plot elements. This allowed us to capitalise on the expertise of local Omani contractors for the off-plot work while limited the need for international contractors to the on-plot component. This is the direction we will be forced to take over the next few years. As you point out, the GCC market for turnkey EPC contracts is overheated and, unfortunately for PDO, our projects are relatively small compared to the likes of Saudi Arabia and Qatar which puts us in a weaker competitive position.

Has there been a trade-off between reducing costs and ensuring timely project delivery?
We may have to accept such a trade-off. In recent months, we have had to accept our contractors’ time constraints given that many of them are suffering from delays by their own suppliers in the delivery of materials. But, furthermore, we may well have to accept that we may save some costs by delaying the project slightly. However, such delays might also lead to a better project by giving us extra time to improve detailed design work and by allowing the contractor more time to deliver the project.

How well is the Harweel field miscible gas injection project progressing?
Harwell is going well. We had some initial issues following the introduction of new industry standards to manage the risks of working in a high-pressure, sour gas environment and we had to adapt our engineering designs accordingly.

In the short to medium term how do you see PDO’s oil production evolving?
In the short to medium term, I expect oil production to be within the current target range with the commissioning of EOR projects. So, for the next 8 to 10 years we will be able to maintain our production levels and we are working to find new ways in the next few years to maintain our plateau for longer. Indeed, I am confident that we can. We continue to invest heavily in new exploration in our concession area and we have had some important successes, most notably the Budour Northeast field in Southern Oman.

Do you see PDO’s move into EOR as the beginning of a regional trend?
Yes, in many ways PDO is ahead of the region and I expect a lot of countries going down the EOR route in the future. Eventually, any mature oil company will get to the phase when tertiary recovery is required.

 

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