Petroleum Development Oman optimistic despite low oil prices in 2019

Petroleum Development Oman optimistic despite low oil prices in 2019
Published: 25 March 2019 - 8 a.m.
By: CW Staff

CW editor's note: Petroleum Development Oman (PDO) is one of the largest energy companies in the Gulf, and the exploration and production company operates in concession area of about 90,000km2 – or one-third of Oman’s geographical area. Today, PDO has 130 oil fields; 14 gas fields; and 8,000 active wells, all of which entail the services of an 8,500-strong workforce and 45,000 contractors.

Oman's government holds 60% of PDO, with the remaining share held by Royal Dutch Shell (34%), Total (4%), and Partex (2%), as its website shows.

Like any major energy producer around the world, PDO has been a major contributor to Oman's economy since its inception in 1937, when Oman's Sultan Said bin Taimur granted a 75-year concession to the Iraq Petroleum Company, which set up PDO as a subsidiary covering Oman and Dhofar. Dhofar was relinquished from the concession in 1951, after which PDO adopted the formal name it is known by today.

Of course, the world has changed in the 68 years since, and today, PDO is focused on adopting management and production models that support output efficiencies and help to cut costs. In the following interview, originally published by Construction Week's sister title Oil & Gas Middle East, PDO's petroleum engineering director, Ali Al-Gheithy, discusses the energy development giant’s plans and priorities for 2019, and how the year will take PDO closer to becoming a future-focused business giant.

What are PDO’s key priorities for 2019?

I would like to quote our managing director, Raoul Restucci, who explains it as follows: “To stay the course in the face of low oil prices and production restrictions, while adding optimum value to the nation’s development and preparing the business to face a changing energy reality.”

This means driving energy efficiency in all aspects of our operations – a new PDO strategy, and refreshing the business model to add value to Oman beyond operations in concession Block 6.

What are PDO’s cost optimisation strategies in the current oil price environment?

We have looked at our end-to-end contracting strategies with our partners and optimised the entire supply chain, as well as maintained long-term partnerships. We have several framework agreements with key players and suppliers to enable stability and cost control.

We have modified our engineering, procurement, and construction (EPC) contracts to EP+C, wherein we manage the local construction of projects.

We have leveraged the procurement power of our major international contractors. We have initiated a low oil price response with all our contractors to remove waste, and tightened our belts during these turbulent times.

Several cost optimisation reviews of our ongoing contracts have been implemented to remove waste without harming the profit margins of our contractors. Lastly – and probably most importantly – we are reviewing and simplifying our standards and procedures.

We need to optimise the entire supply chain, from propants and chemicals, to pumping power, and fleet requirements and logistics, to enable us to become competitive. The journey is just starting.

What trends have you noticed in Oman’s oil and gas industry?

Oman’s oil industry continues to grow and attract new international exploration and production players. Recently, Italian company Eni entered into an exploration and production sharing agreement for Block 47, and another agreement was signed with Eni and the UK’s BP for Block 77. The Omani government is also in discussions for other open blocks.

What are some of the key technologies that are emerging in today’s regional oil and gas sector?

PDO’s in-house innovation is enabling us to do things more efficiently, safely and responsibly. For example, pit-less drilling is a new solution to reduce number of waste pits across PDO’s operations.

Technology filters and dries waste products, with a re-circulation lab beneath shale shakers, and a de-watering process using specific polymers. It is then sent through a centrifuge for final separation of cuttings and fluids.

This was implemented for the first time in Oman in Qarn Alam cluster, and it reduced water consumption by more than 90%.

Another example is Blade (Beam Lift Auto Delivery Evolution), which is a new, automated approach that uses intelligent technology, data analytics, and smart wells to enhance operational efficiency. This enables staff to detect problems more quickly, react more quickly, and make better designs.

The development of algorithms to automatically control the variable speed drives on beam pump wells added 1,250 barrels per day when it was rolled out across 80 wells in the Amal East field. This was a 30% rise, and eliminated health, safety, and environment exposure, as well as freeing up production technologists, lowering operational expenditure, and cutting waste by up to 90%.

This system can be replicated to more than 1,600 beam pump wells across PDO’s operations.

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PDO is also involved with solar energy schemes in Oman [CW Archives].

What are PDO’s initiatives and programmes for renewables?

At PDO, we walk the talk [when it comes to renewable power resources]. We are currently expanding our award-winning Nimr Water Treatment Plant and, by [later this year], the project will have a total production capacity of 175,000m3 per day of water, reducing existing water disposal methods by an additional 30% and contributing to a reduction of more than 200,000 tonnes of carbon dioxide.

Why is PDO’s Gas Network Operations Centre (GNOC) important for the industry?

This facility is part of a strategy to provide superior service to our customers by increasing plant availability and minimising disruptions to the gas network.

GNOC will help break down silos between installations and optimise operations across our entire gas network. It will also give us a real-time view of the network, enabling us to make faster decisions through the close physical proximity of all gas console operators and on-site network coordinators, to identify and resolve issues. It will also help us to manage short-term forecasting from the field and drive production.

What is the potential for hydraulic fracturing in Oman and the wider region?

Hydraulic fracturing will be a key technology to exploit more opportunities in Oman and the rest of the region. [We should aim to] learn from the US – there, they have been able to double their oil production within five years while continuously reducing cost.

This is a huge opportunity. The US hydraulically fractures almost 90% of all its wells, while in Oman – and most GCC countries – we only fracture 10% or so. As we start doing that more and more, the economies of scale will start to tip.

We need to optimise the entire supply chain, from propants and chemicals, to pumping power, and fleet requirements and logistics, to enable us to become competitive. The journey is just starting.

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