At least five international oil companies will be bidding for the Al-Shaheen concession
- Al-Shaheen is a highly technical field.
- Maersk will be hoping to retain right to produce at offshore asset.
Several international oil companies (IOCs) are interested in bidding for Qatar Petroleums (QP) forthcoming tender for the offshore Al-Shaheen oilfield concession.
The tender follows the breakdown in talks between QP and Denmarks Maersk, the current holder of the concession, about extending the deal from 2017 to 2030.
Sources in Qatar state that Maersk are definitely bidding on the new tender along with:
There will be plenty of interest for Al-Shaheen because fields this size dont come up for tender that often, says an oil and gas source based in Qatar. Maersk will be confident that it can win an open tender, but the others will be competitive.
Saad al-Kaabi, QPs CEO, has cited Al-Shaheen as being of critical strategic importance and has said that technological innovation will be valued as highly as the financial return.
The field is stretched across several kilometres and comprises several tight reservoirs. It had been deemed financially unviable by other IOCs before Maersk signed the exploration-and-production-sharing agreement with QP in 1992.
Up to the end of 2013, Al-Shaheen was producing more than 500,000 barrels a day (b/d), but due to technical difficulties that has decreased to about 300,000 b/d.
[Al-Kaabi] knows what Maersk can do at the field, but he probably wanted the tender to be as transparent as possible, says a Qatari hydrocarbons source. He drives a hard bargain and putting it out for tender means that it will be very competitive, even with oil prices at $60 [a barrel].
Al-Kaabi has a reputation in Qatar for his strong negotiating with IOCs and has been vocal in his desire to see Qatar take a larger share in the ownership of its oil assets.
This makes it extremely likely that QP will be looking to take back ownership of a large percentage of the field. However, no indication about exactly how high a percentage has been given by QP and the company was not available for comment when contacted by MEED.
MEED reported in late March that QPs lower-yield oil field projects were under serious threat, as low crude prices and the onset of shale oil production in the US made many such assets economically unviable in the long term.
The most likely to be cancelled is the $11bn redevelopment of the Bul Hanine offshore oil field. The field is owned and operated by QP and currently has a production of about 40,000 b/d. The company plans to ramp this up to 95,000 b/d and put enhanced oil recovery (EOR) technology in place that will prolong the life of the field by 25 years.
However, investing $11bn for 50,000 b/d does not have the same return on investment as it did a year ago, when oil prices were hovering around the $110 a barrel mark. This means it is not likely to move forward from the study phase.
The official also believes there would be some opportunities for EOR for the field as the current 45,000 b/d capacity starts to deplete.
The Idd al-Shargi offshore field, the second scheme facing the threat of cancellation, is less cut and dry due to the fact that many of the packages have already been tendered and bids have been submitted. However, the $3bn project is not economically viable under the prevailing market conditions.
The US Occidental Petroleum (Oxy), has been operating Idd al-Shargi since 1994, and is planning an expansion that will sustain current production of 100,000 b/d for at least another six years. Tenders are due to be awarded by mid-2015 and work is expected to be completed by 2018. However, there is still uncertainty regarding the scheme.
- In an earlier version of this article, Schlumberger was cited as being an adviser to QP for the Al-Shaheen tender. While the company has carried out an independent technical review for the future development of the Al-Shaheen field, as well as five smaller offshore fields in Qatar waters, it wants to make clear that it had absolutely no input into QPs decision to retender the field.
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