ESG for MENA’s energy future

Abu Dhabi

Sherif Foda, CEO of National Energy Services Reunited Corp. (NESR), talks to The Energy Year about recent fluctuations in hydrocarbons financing, how the industry is transitioning from being perceived as a water polluter to a water provider and the company’s recent contracts with ADNOC. NESR offers a wide range of product lines in the area of production services as well as drilling and evaluation.

What fluctuations have you witnessed in hydrocarbons financing over the past few years?
The global hydrocarbons market has witnessed severe under-investment over the past decade, and more so since the downturn. This has been added to the financial sector’s reluctance to invest in oil and gas projects, and notably the strong influence of ESG and the pressure especially from Europe, which seems to have demonised the concept of oil and gas given its environmental impact.
Despite this, we have seen that the MENA region has continued to bet on oil and gas, given its rich resources. The narrative in this region is not a question of hydrocarbons vs. renewables, but rather a hybrid one of hydrocarbons and renewables. MENA countries have committed to increasing their hydrocarbons output in the next few years while simultaneously lowering their emissions. For example, the UAE aims to hit 5 million bopd by 2027 while Saudi Arabia is determined to increase its spare capacity to 13 million bopd by the same year. Investment is being poured into the sector to reach these ambitious targets.
Globally speaking, USD 500 billion-600 billion was invested in the hydrocarbons industry annually, before the last downturn. This, however, decreased significantly to USD 300 billion-200 billion per year during the recent years of recession. Given the current inflation, the industry needs investment rates of almost USD 1 trillion to just maintain its current level of production.
The MENA region and its corresponding NOCs are fundamental in this equation, having a strong mandate to lead the capacity and being the most reliable producers given any worldwide shock in production. The investor community is also important, yet faces much more pressure as to where money is allocated.

What importance are you giving to ESG principles through your ESG IMPACT segment?
The oil and gas industry has acted as a catalyst for global growth over the last century. Going forward, we believe our industry can lead and address complex environmental challenges by adopting, adapting and improving its performance, and minimising our collective environmental footprint. At NESR we have committed to this belief since day one, with the creation of our ESG IMPACT segment.
While ESG is crucial in any oil and gas activity, it is important to go a step beyond and understand its actual impact. The mentality must change from principles of risk-return to those of risk-return-impact, which captures the impact of the industry on our communities and the environment.
There are three different areas for addressing ESG. Governance is essentially a must and is the first pillar involving leadership, internal controls, and shareholder rights. Secondly, social impact takes shape and form through programmes such as ICV [In-Country Value] in the UAE. Giving back to the country one works in is essential. What most people look at, especially in oil and gas, is the E. This is where we need to make a big step change to combat the climate effect of our industry.
We have set up a triangulation of key elements driving our notion of environmental impact: methane detection and control, flare capture and reuse, and water treatment and reuse. Our intention is to provide enabling technology to mitigate any hazardous environmental impact.
For example, we offer technology that will aid flare management and minimise emissions by 40%. We also provide the latest sensors that detect methane gas emissions. Detection of gas leaks is crucial for safety matters, while GHG [greenhouse gas] measurement is important for environmental standards. Lastly, we are investing heavily in water as we believe that water treatment and reuse is essential within the oil and gas sector.

How are you making the transition from water polluter to water provider?
The global energy sector produces around 100 million bopd. Parallel to this, we produce around 500 million barrels of water per day. Most of the water extracted in the process of exploration and production is reinjected for reservoir pressure management, and in cases where volumes of water are major, it is disposed of in ponds, disposable wells or deserts, where it eventually evaporates. Acknowledging this, our prime objective is to provide field-based solutions that deliver fresh water from produced water.
Thanks to technology, water that would normally be dumped is processed to take the water from 200,000 particles of impurity to 400 ppm, or essentially fresh water that communities can use. In addition, high-salinity produced water extracted from upstream activities can also be purified not only for drinking water but also to recover high-purity salt, which can be used for industrial use as mineral feedstock or even as edible or medical-grade salt. We are currently working with several technology companies on developing several plants of 25,000-100,000 barrels per day to convert high-salinity produced water into fresh water.
We are also working with several MENA operators to launch projects including high-salinity produced water treatment to freshwater quality with the aim of zero liquid discharge. The resulting fresh-quality water can be used for multiple applications within the oilfield as well, including smart water EOR, crude washing to remove salt, reservoir pressure management and drilling and completions.

Tell us about your recent contracts with ADNOC in the areas of well testing and cementing.
As a national champion in the MENA region, we pride ourselves on delivering optimal services and technical solutions to solve possible challenges our clients might face. We have won many coil tubing contracts in the UAE and now we are invested in surface well testing, where we are working for ADNOC.
We were recently awarded a major surface well testing contract where we are committed to providing brand-new packages made in the UAE. We designed and built all these packages in-country with local suppliers, and today we have a presence in practically all of ADNOC’s onshore surface well testing activities.
In March 2022, we were also given a contract for cementing services as part of a major framework agreement valued at USD 653 million awarded to five oilfield service providers. The goal is to support ADNOC in the increase of its oil production capacity through the drilling of multiple wells. This contract has a timespan of up to seven years and is also crucial for ICV empowerment. We are now rolling out the pertinent plan and structure to make some of the chemicals and products required in the UAE.
This contract underscores our alignment with ADNOC’s ICV vision and gives us the opportunity to deploy next-generation sustainable technologies across multiple service segments.

What is your near-term growth strategy and how important is R&D in this mission?
Our aim is to grow ahead of the market. In 2023, we aim to consolidate strong profitability, which will be essential to fight inflation.
We are also looking to open our brand-new research centre in Saudi Arabia in Q1 2023, this being a major milestone in our R&D efforts. As a firm, we invest around 8-10% of revenues in R&D, which includes new technologies. We live in an ever-more-digital world and technology investment is key to efficiency and effectiveness within our industry. Moreover, we are looking to grow the footprint of our ESG IMPACT segment in order for it to become a major player in terms of revenue for the company. It’s all about risk-return-impact.
In addition to this, we have looked into M&A as a strategy for growth. Apart from investing in diverse technology companies, in mid-2022 we acquired stakes in W.D. Von Gonten Engineering, which is a premier G&G [geological and geophysical] laboratory firm. This move enhances our capabilities in petroleum engineering studies, core analysis, reservoir modelling, simulation, and associated consulting services in the MENA region. Thanks to this deal, we will receive the latest custom laboratory equipment, which will serve our new NESR’s Oilfield Research and Innovation (NORI) facility in Saudi Arabia’s Dhahran Techno Valley.

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