ITP MEDIA GROUP / BUSINESS JANUARY 2021 • VOL. 17, ISSUE 01 “WE REALISED THAT THE ENERGY LANDSCAPE AND THE WAY WE WILL DO BUSINESS IN THE FUTURE WOULD BE VERY DIFFERENT FROM THAT OF THE PAST DECADE.” ADIL TOUBIA, UPSTREAM CEO, OQ OQ IN MOTIONBeyond Delivery Agile and flexible, we are ready to go that extra mile for our clients across multiple locations around the globe, offering worry-free service and smooth delivery of all projects, helping us to build true long-lasting relationships. INDIA | KUWAIT | SAUDI ARABIA SINGAPORE | UAE | UK transasiapss.com PIPELINE SERVICES • PROCESS SERVICES • INDUSTRIAL SERVICES C M Y CM MY CY CMY KJANUARY 2021 / Volume 17 Issue 01 20 UAE in focus We examine the major happenings in the UAE, as it moves towards a recovery, with plans for growth in sustainability, technol- ogy, and some major deals changing the landscape 24 Project focus: Berri expansion Everything you need to know about Saudi Ara- mco’s Berri oilfield expan- sion project for the water injection system, with an estimated budget of $200 million 14 OQ: Upstream growth OQ’s upstream CEO Adil Toubia discusses the com- pany’s constant growth, its plans to boost exploration and production, and the growing importance of international partnerships 12 Leaders in safety As global EPC firm McDermott celebrates 90 million work hours without a lost time incident at its Jebel Ali facility, leaders from the company discuss HSE during a crisis Highlights in this issue: 14 COVER STORY 3 IN THIS ISSUE oilandgasmiddleeast.com JANUARY 20214 IN THIS ISSUE oilandgasmiddleeast.com JANUARY 2021 ITP MEDIA GROUP / BUSINESS DECEMBER 2020 • VOL. 16, ISSUE 12 RANKING: TOP 30 OILFIELD SERVICES COMPANIES OF 2020 DOWNLOAD IT TODAY ON YOUR iOS, ANDROID OR KINDLE Also inside: App 20 08 / In numbers Rystad Energy says exploration efforts need to be ramped up urgently 12 / HSE leadership Leaders at McDermott comment on maintaining safety through a crisis in worksites across the globe 34 / Five minutes with S&P Global Platts experts discuss the outlook for oil and gas, and the energy transition 18 / Human impact of coronavirus Mercer explores the real human impact of the pandemic in the oil and gas industry 10 / Sustainability BCG discusses the energy transition, and keeping things clean in oil and gas 12 10 14 8 KEEP UP-TO-DATE For all the latest news, check out www. oilandgasmiddleeast .com 20 / UAE focus We review some of the top happenings in the UAE, and its plans in the future 14 / Cover: OQ OQ upstream CEO Adil Toubia discusses the company’s plans for growth and outlook after the pandemic 18 Last month 34ALTEC.COM +1 205-317-1069 SALES@ALTEC.COM BUILT TO LAST SALES | SERVICE | SAFETY TRAINING | TOOLS & ACCESSORIES For over 90 years, Altec equipment has been used by leading companies across the United States and in over 100 countries around the world. Through advanced engineering, rigorous testing, and robust manufacturing capabilities, Altec Cranes are among the most reliable in the industry and are built to withstand the harsh climates of the Middle East. Altec’s portfolio of cranes features lifting capacities ranging from 16 tonnes to 40 tonnes and boom lengths from 21 meters to 46 meters. Mounted on your choice of commercial chassis from the US, Europe, or Japan, Altec units are backed by direct parts and service support across the Middle East.6 oilandgasmiddleeast.com JANUARY 2021 EDITOR’S LETTER We’re all happy that the year is over, and it seems like many are hop- ing that everything will suddenly change at the stroke of midnight on New Year’s Eve. Well, that probably won’t happen, but with vaccines being rolled out and OPEC+ considering boosting their output as early as February, there is much to look forward to. There are major uncertainties that persist, and most studies are pointing towards a recovery towards the second half of 2021, but companies seem to be looking ahead, understandably cautiously, towards long-term growth. Our UAE focus (page 20) this month pinpoints some of the major move- ments the nation is making towards further development in the oil and gas industry. On the cover (interview on page 14), we have the upstream CEO of Oman’s OQ, which integrated nine companies into a single entity last year, on its plans to grow its exploration and production efforts, and the importance of international partnerships in creating a more robust upstream segment. Carla Sertin Editor Oil & Gas Middle East Moving on... SUBSCRIBETo subscribe to Oil & Gas Middle East, or other ITP Business titles, go to: www.itp.com/subscriptions. 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THIS ISSUE: We interview the upstream CEO of OQ, Adil Toubia, on the company’s growth plans (p14).MATCHING BUYERS WITH SUPPLIERS AND GROWING BUSINESSES OILANDGASMIDDLEEAST.COMTIME TO EXPLORE Rystad Energy estimates that the world will run out of oil supply by 2050 unless exploration efforts are ramped up The world is on track to run out of sufficient oil supplies to meet its needs through 2050, despite lower future demand due to the Covid-19 pandemic and the accelerat- ing energy transition – unless explora- tion speeds up significantly and capital expenditure of at least $3 trillion is put to the task, a bombshell report by Rystad Energy reveals. To meet the global cumulative demand over the next 30 years, undeveloped and undiscovered resources totaling 313 bil- lion barrels of oil need to be added to cur- rently producing assets. Rystad Energy calculates that to match this require- ment, exploration programs will have to discover a worthy-to-develop resource of 139 billion new barrels of liquids by 2050, an impossible task if this decade’s low exploration activity levels persist. The target is high because not all exist- ing discovered volumes are profitable to develop. In theory, the total undeveloped supply would amount to 248 billion barrels of oil between 2021 and 2050. However, when we dive deeper into these discoveries and look at their discovery decade and current status, we find that about 74 billion barrels are highly unlike- ly to materialize and need to be replaced by new discoveries. Looking at the global conventional exploration potential, there are two main sources for these new volumes: further appraisal of existing fields and resources, 8 IN NUMBERS oilandgasmiddleeast.com JANUARY 2021and new discoveries. The first source includes projects in their early production stage, projects un- der development, and unrisked volumes in discovered assets. We expect that some future exploration activity will lead to reservoir delineation and enhancement of resource estimates, while technologi- cal improvements and other secondary recovery techniques will also increase recoverable volumes. Projects in the above-mentioned cat- egories are currently forecast to contrib- ute around 378 billion barrels of liquids supply between 2021 and 2050. If future exploration follows industry norms, it will enhance recoverable resources by around 5%, or 18 billion barrels, leaving a deficit of about 121 billion barrels to be unearthed through future exploration drilling in currently undiscovered areas – our second source of new supply. Analyzing the discovery rates of the current decade and the latest trends, Rys- tad Energy expects that global conven- tional discovered liquid volumes could settle at around 4 billion barrels per year, with an average discovery size of around 40 million barrels. This means that ex- plorers would need to announce at least 100 new conventional discoveries each year to reach the magic volume number needed to meet demand. However, just like in the past, not all volumes discovered during this period will be developed and produced, and much of it may not be brought on stream to meet demand by 2050. The total dis- covered volumes will therefore have to be much higher than the required cumula- tive liquids supply. To find an approximate volume num- ber for new discoveries, we looked at variables such as the share of produced volumes from discoveries in the past three decades and the time taken from discovery to start-up. About 617 billion barrels of liquids have been found since 1990, and about 25% of these discovered volumes had been produced through 2020. Analogically, explorers would have to unearth about 484 billion barrels of new resource through 2050 to put the required 121 billion barrels of liquids to production over the next 30 years. Unconventional exploration will also contribute to meet the required volumes – we expect around 30% of the deficit volumes between 2021 and 2050 to come from global unconventional plays. Conse- quently, conventional exploration drilling would need to unearth around 330 billion barrels of oil through 2050 to meet global demand. The global exploration success ratio has dropped sharply, from about 72% in 2010 to 17% in 2020. As “easier” hydro- carbons are already discovered, it will become increasingly difficult to find new resources in mature areas, and a more stringent exploration approach means that only the top-ranked prospects will be drilled. We therefore expect to see an av- erage success ratio of 15% to 20% through 2050. A 20% ratio requires around 500 wells to be drilled each year, or 650 wells at a 15% chance of success. We expect deepwater offshore areas to continue to dominate future new discovered volumes. More challenging drilling environments will push the aver- age well cost to about $50 million, lifting the annual cost of exploration drilling to between $25 billion and $33 billion in at the above success rates. However, at the past decade’s pace and success rates with average annual discoveries of 4 billion barrels, it would take about 80 years to find the 330 billion barrels needed to cover the supply deficit for undiscovered resources. This would bring the cost of drilling to between $2 trillion and $2.6 trillion. In addition to drilling, discovering these volumes will require spending on geological and geophysical studies, lease- hold costs and signature bonuses to be paid for future lease rounds. Historically, the ratio of drilling to other exploration costs is 52:48. Furthermore, appraisal drilling needs to be carried out to get the 5% incremental volumes mentioned previously. This would require further spending of about $45 billion. Altogether, we estimate that the cumulative exploration cost required to satisfy liquids supply from conventional sources could be between $3.8 trillion and $5 trillion through 2050. However, as these figures are based on historic as- sumptions, costs could be pushed down significantly – potentially to around $3 trillion – thanks to fast-tracking of discovered resources and some giant discoveries. “The scope of exploration will have to expand significantly. Unless we see a momentous transition in the global ener- gy mix sooner than currently expected, or a much faster development pace than the current norm, upstream players may have to more than double their conven- tional exploration efforts in order to meet global oil demand through 2050,” says Palzor Shenga, senior upstream analyst at Rystad Energy. 9 IN NUMBERS oilandgasmiddleeast.com JANUARY 2021Next >