Down with costs

Abu Dhabi

TOGY talks to José Pereira, Middle East representative at Partex, about market potential, contract terms and implementation of new technology in Abu Dhabi. Partex has been present in Abu Dhabi’s oil and gas industry since 1939 and engages in sectors including LPG and paraffinic naphtha extraction.

In 2009, Partex signed an agreement to extend its joint venture concession with the Abu Dhabi Gas Development Company (Gasco) for 20 years starting from October 2008. The company currently holds 2% ownership interest in the GASCO concession.

On the UAE market: “There are developed fields with enormous potential, particularly in Abu Dhabi, and we’re able to ascertain this potential.”

On the legal framework: “Fiscal terms in Abu Dhabi are tough, though your interest in a company is never based entirely on these terms. There are other parameters, including the levels of safety in the country and the sustainability of production in the future.”

On EOR: “The fields in Abu Dhabi are well-known, unlike those in Oman, and I don’t believe that there is the need for new, highly sophisticated technology. Enhanced oil recovery will be key, but there are a number of well-known technologies that can achieve it.”

TOGY went in depth with José Pereira about recent concession changes, the goal of 70% recovery and Adco’s 1.8 million bopd target. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find an abridged version of the interview with José Pereira below.

How does Abu Dhabi compare to other markets where you operate?
There are developed fields with enormous potential, particularly in Abu Dhabi, and we’re able to ascertain this potential.
The activity in Algeria, Portugal, Angola, Brazil and other countries in which we’re present is still more focused on exploration or appraisal. With this comes heightened risk or uncertainty. If you have a firmly consolidated business, there is much less risk.
We consider Abu Dhabi and Oman to be extremely safe. Oman and the UAE rank among the 10 safest countries in the world: the UAE is the third and Oman is the ninth. Portugal came in at number 10, though economically it is more risky.

How have recent changes to concessions affected business?
The return rate on investment was lower than expected. After a short period of time, everyone, including the government, realised that introducing minor changes to the fiscal terms would lead to a much better return on investment.
As a consequence, Total has increased its stake and GS Energy has entered the market. We anticipate having a new partner in the coming year, and quite a few potential partners are talking to ADNOC.

What are the technical challenges of achieving a 70% return rate?
It’s ambitious, and I’d like to think of it as a target. Depending upon how much you want to spend, 70% cost recovery can be achieved. Nowadays you can do anything, but at what cost?
We know that ADNOC is embarking upon cost-cutting. They want to reduce opex and rationalise capex. Obviously, this will have an impact. The 70% rate of recovery should remain a target, there’s no harm in that.
The fields in Abu Dhabi are well-known, unlike those in Oman, and I don’t believe that there is the need for new, highly sophisticated technology. Enhanced oil recovery will be key, but there are a number of well-known technologies that can achieve it, using polymer, steam injection, etc. Of course, ADNOC knows this, or it would not have set the 70% target. I don’t believe technology will pose a challenge that the company cannot handle.
In Oman, the situation is different. Fields are smaller and deeper, oil is heavier and the technological requirements are more complex.

Is the target of 1.8 million bopd achievable for Adco?
Yes, it is. By next year, or the year after, Adco can achieve between 1.8 million and 2 million bopd. This amount can be maintained as a plateau, though it will be a challenge. I would like to think that the more important target is to maintain that plateau for a long time, rather than prioritise a cost recovery of 70%. The achievement of these targets depends on technology, on how you develop and operate fields, and on a number of other parameters.

Are you interested in increasing activities in Gasco or in the Bu Hasa offshore oilfield?
Gasco is now stable, though there are no new opportunities because the company is linked to Adco. Today Gasco is a JV between ADNOC [Abu Dhabi National Oil Company] and international companies. Gasco became a JV in 2001 when it merged with Takreer [Abu Dhabi Oil Refining Company], so ADNOC now holds the largest share, with sole risk.
Still, Gasco is an excellent company with outstanding performance. We are currently not active in Abu Dhabi’s offshore sector, though we are looking into opportunities. The point is that our presence in the UAE is very strategic, historically and for reasons related to business.

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