Back to black in Qatar
Having achieved its LNG output targets and focused on the downstream, Qatar is turning its attention to upstream oil again
QATAR Petroleum (QP) has embarked on a sustained effort to stem the long-term decline of the emirate’s oil production, shifting its orientation away from downstream. Having successfully transformed itself into the world’s premiere LNG exporter, QP is now focused again on oil.
It is a battle that needs fighting. Qatar’s oil output in the first quarter of 2016 averaged 0.66m barrels a day, well down on the 0.72m b/d it averaged in 2014. The problem confronting QP boss Saad el-Kaabi is finding an easy route to producing more from a declining resource. So for now, attention is focused on getting more out of the offshore al-Shaheen field, Qatar’s largest, which will be operated by Denmark’s Maersk Oil until its licence expires in mid-2017.
That field is producing 300,000 b/d, but Maersk’s original target was to produce 0.525m b/d by 2010, according to a development plan hatched 11 years ago. The field’s tricky geology – thin resourcing spanning out across a large area – has so far thwarted efforts to lift the yield. Al-Kaabi’s solution, outlined last year, is to open up the field to competition from other international oil companies once Maersk’s licence ends. As the Danish firm’s boss, Nils Andersen, concedes, Maersk could lose the concession altogether.
Qatar Petroleum might feel the technical expertise and larger capital reserves of oil majors might do a better job with the field
QP might feel the technical expertise and larger capital reserves of oil majors might do a better job with the field – though Maersk’s knowledge of its geology might take a while to match. A bigger firm might also need more attractive terms. The portents for Qatar are not encouraging. Last May, Germany’s Wintershall pulled out of an offshore gas block after being denied access to infrastructure. For his part, al-Kaabi has earned his stripes as a tough negotiator with international oil companies (IOCs). So the negotiations may not move swiftly.
The other big offshore oilfield development on QP’s books is the redevelopment of the Bul Hanine field. This multi-billion-dollar project envisages the drilling of 150 new wells up to 2028; as part of an $11bn QP investment programme to extend the field’s lifetime and boost output. Production has averaged just 40,000 b/d, but QP wants 90,000 b/d by 2020. The project would involve adding new offshore central production facilities and a new onshore gas-liquids processing facility at Mesaieed. In January, Australia’s WorleyParsons won the front-end engineering and design contract for the first phase. Produced oil will be sent to Halul Island for export.
The Bul Hanine redevelopment should be seen in the context of QP’s wider redevelopment programme for its older oilfields. If the past 20 years in Doha has been all about gas, the next couple of years will see QP refreshing its diminished portfolio of crude oil assets.
This article is part of an in-depth series on upstream in the Gulf. Next article: Oman production plugs on.