OIL IS BACK in the limelight in Qatar after years of playing second fiddle to gas. The days when Qatar General Petroleum Corporation (QGPC) focused almost exclusively on developing gas reserves are giving way to a more balanced approach. The result should be a comeback for Qatari oil as production figures pick up after a long period of stagnation.
‘Developing our crude reserves is one of the main issues for QGPC in the coming decade,’ says Energy & Industry Minister Abdulla Bin Hamad al-Attiya. The goal is clear. Qatar does not want to become completely reliant on its huge gas assets and intends to remain an integrated hydrocarbons producer well into the next century. This means reversing the steady decline in crude production. QGPC wants to push oil output back up to at least 500,000 barrels a day (b/d) by the end of the decade from 420,000 b/d at present. And it is prepared to consider new ways of doing business to achieve its ambition.
In the past 12 months QGPC has signed an innovative development and production sharing agreement (DPSA) for the Idd al-Shargi field and given the go- ahead for field development of the offshore Al-Khaleej reservoir. The increased activity has laid to rest any worries that Qatar’s aging oil sector was in terminal decline.
QGPC has a twin-track strategy for oil. The first involves extensive secondary recovery and enhanced oil recovery programmes at existing fields, where reserves are estimated at 1.6 billion barrels. These efforts should increase recovery rates and maintain reservoir pressures. The other tack is to employ outside expertise and finance for identified discoveries that have yet to be developed. These reserves total some 2.6 billion barrels.
The involvement of international oil companies is critical to the success of efforts to achieve the 500,000 b/d target. QGPC has few funds to spare for investment in oil. Oil prices have been low and the national energy company has had to pour substantial sums into getting the first generation of gas export schemes off the ground. And the new oil effort will be complex, relying on the latest oil field technology to exploit the known reserves. Most are trapped in marginal structures that will be difficult to work.
QGPC has adopted new fiscal terms to attract international partners. ‘Very difficult geophysical structures demand considerable investment. If you are going to tackle them, you have to be prepared to make concessions and strive to achieve a balance, so that both sides feel they are getting something,’ says a senior QGPC oil official. Terms vary from block to block, depending on the difficulty of oil extraction.
When drawing up plans with its partners to develop new reserves, QGPC has also sought to maximise the use of its existing infrastructure. ‘If we didn’t do this, technical costs would jump from $3 a barrel up to $10 a barrel or so,’ the official says.
A milestone was reached last September when the US’ Occidental Petroleum Corporation signed a DPSA agreement for the offshore Idd al-Shargi. The field, in production since 1964, has complex reservoirs which had limited production to around 20,000 b/d with an oil depletion ratio of only 5 per cent of the estimated 4.4 billion barrels of oil originally identified.
Under the agreement Occidental will invest $700 million over seven years with the aim of increasing sustainable capacity to 80,000 b/d. Over the investment period, Occidental hopes to add 480 million barrels of recoverable reserves. Production sharing terms are on a sliding scale with recovery costs starting at 42 per cent, with the remainder split 81:19 in favour of QGPC.
Occidental became field operator in January and had raised production to 40,000 b/d by late June, through workovers and new drillings in the Arab C, D and Shuaiba reservoirs. Further wells are being drilled in the C and D reservoirs to increase water injection rates. At Shuaiba, where the bulk of the new capacity is expected to come from, Occidental is evaluating the production performance of a pilot gas injection project, begun by QGPC in April 1994, before starting a major development programme. Slated to start in two years time, the programmme should include drilling up to 40 additional vertical and horizontal wells and the installation of a new platform in Idd al-Shargi.
Occidental is upbeat about its prospects. Shuaiba is a low permeability and tight reservoir, but with horizontal wells the company is confident the development will be worthwhile. In structure, it is similar to the Safaa field in Oman, where Occidental has had considerable success using horizontal drilling, according to Charles DesBrisey, vice president and general manager of Occidental Petroleum of Qatar.
In QGPC’s view, the arrangement with Occidental provides a model for future production sharing deals. ‘It is a test case, a unique case,’ says Nasser Jaidah, director of exploration and development at QGPC’s new ventures directorate. ‘There are very few similar production sharing arrangements anywhere in the world.’ Encouraged by its success, QGPC has offered a similar appraisal and DPSA deal to international bidders for the south- east concession in block one.
QGPC wants to introduce other innovations to boost development of producing fields. It has received bids from engineering contractors for a $300 million- 400 million gas recycling project at the Dukhan onshore field, which aims to increase the field’s recoverable reserves by 350 million barrels and maintain production rates. Included in the tender was a request for bidders to present terms for executing the project in an alliance with QGPC.
The alliance concept, first deployed in the North Sea, is intended to maximise incentives for the project partners, leading to fast and efficient completion. At the heart of the arrangement is a risk/reward model. Any savings made from a completed project which comes in under budget are shared by both parties, giving them a mutual interest in keeping costs as low as possible.
QGPC plans two more oil recovery projects at other offshore fields. At Bul Hanine, the aim is to sustain current production of 80,000 b/d for the next five years through debottlenecking and redeveloping existing horizontal wells. Maydan Mahzam is due to get 20 new wells which will maintain output of 50,000 b/d for the foreseeable future.
In addition to the development of Idd al-Shargi, which is the main element in the plans to raise sustainable capacity by at least 80,000 b/d, there are two other field developments which will add capacity:
p Offshore block five. Maersk Oil Qatar has been producing around 20,000 b/d from the Al-Shaheen reservoir since early 1995 using horizontal and vertical drilling techniques. In 1996, production is expected to go above 30,000 b/d. Development is still in an initial phase but a full field development project should boost production to around 80,000 b/d by early next century.
p Offshore block six. QGPC and Elf Aquitaine Qatar announced an agreement on 17 June to develop the Al-Khaleej reservoir. Under the accord, production is due to begin in early 1997 and reach 30,000 b/d in the initial phase. The field will be linked by a new pipeline to the existing Halul island terminal.
Elsewhere, Pennzoil Qatar is carrying out a seismic survey in block eight. A first appraisal well in the offshore concession is expected to be drilled in 1996. A consortium, led by Arco Qatar, is also evaluating an oil discovery in the former Wintershall concession, located on the southern edge of the North Field.
QGPC is taking a fresh look at oil because it cannot be certain that its new gas ventures will deliver copious profits. Until profits from gas start to flow in the first decade of the next century, prosperity will be closely tied to Qatar’s ability to extract and export oil. The influx of foreign companies has got QGPC off to a speedy start and could provide a model for other Middle East producers when the time comes to develop marginal oil deposits.