Fast-track focusJune 12, 2019
Emilio Salandin, managing director of Saipem Misr, talks to TOGY about how the Zohr project was successfully fast-tracked, new opportunities the company sees in Egypt and its experience working with local contractors. Saipem engages in EPC, drilling and installation works in energy and infrastructure projects worldwide.
How was the Zohr project successfully fast-tracked?
Zohr is the largest known discovery in the Mediterranean Sea. We’ve been involved in Zohr since day one, as Saipem 10000 was the vessel that was used for the drilling of the first well. Since then, Saipem 10000 has been drilling, completing and putting wells into action. Fourteen wells have already been drilled and completed and are ready for production.
Zohr is important for us. It was an exceptional opportunity to show the quality of our fleet, the knowledge of Italy and the commitment that Saipem has toward Egypt.
Our part in this fast-track project meant delivering EPIC compressed and in parallel instead of going in sequence. You start procuring when you’re not yet finished with engineering; you start installing when you’re not finished procuring and so on.
It is also a matter of taking a risk – a calculated one, but a risk. It’s a matter of changing the way of doing business. If you have a normal process in which you have engineering, procurement and installation, all in good sequence with contracts and tendering, it takes five years to develop a field. In Zohr we did all this in only two years.
What’s required is commitment. You start working when the contractual terms and conditions are not completely finalised. It’s a little like jumping from a tower: You don’t know exactly where you’re going to land, but if you jump, it means you’re committed. This was true for us, Saipem, but also for Petrojet, the other company that was in charge of this construction. We knew from day one that it was an important project and that we’d like to be part of its success. We committed to that, and now we’re there. We’re reaching the milestones per the plan.
Do you think Zohr’s fast-track success is a model that could be exported regionally?
To be honest, it’s very difficult. It’s a combination of very special conditions. We had the intense attention of the leaders of this country. We knew that this project was in the national interest. You wouldn’t have these conditions every day, so it would be difficult to replicate.
A project with national value is something that you cannot fail in. You know that if you fail, you will not be invited to projects for many years to come. The special focus that the leaders of this country put on this project was a part of ensuring its success. It pushed the local and the international contractors in a different direction.
Another point is that contractual boundaries were not very well defined in the very beginning. Everyone knew what they had to do, even above the scope of work, for the general interest of the project. Sometimes there were conflicting interests with a company that wanted to stop at certain point, but the extra mile was needed. However, all the companies worked these extra miles in different moments to reach the goal.
The true special condition was the climate. From day one, Minister Tarek El Molla was saying, ”If you have a problem, escalate it while it’s still manageable.” At any moment, we could call and reach the top authorities of this country in order to get a problem solved. We didn’t use this much; we usually managed to get by with our own resources. But that is a special condition that cannot happen everywhere, every time.
After Zohr’s success, what other projects are you pursuing in Egypt?
After the successful development of Zohr, which is still in progress but is towards the end, we are looking for other challenges that the industry will tackle. Of course, there are interesting prospects offshore Egypt in the Mediterranean, such as Merak-1, the well that Dana Gas has just spudded, and prospects such as Orion that will be developed by Eni and Edison. These have great potential for finding more gas and proving the Mediterranean as a prolific place for gas production.
That’s the expectation that we have for this year and the beginning of next year. These comprise some aspects of the exploration that will be important to Burullus (Shell) and other offshore companies. The expectation is that more geological discoveries will bring more projects to the drawing board. The momentum is excellent, but it must be sustained.
As Zohr’s production will exceed 85 mcm (3 bcf) per day in 2019, do you see Egypt eventually competing with the big gas players?
It’s difficult to say. That depends on the dynamic of internal growth and internal consumption. That is the true challenge: to modernise the existing infrastructure, to have a more efficient system of energy distribution within the country. That will be one of the drivers to increase production and bring more gas to the LNG market.
With the country’s growing energy needs, to determine whether the increase of gas production will be sufficient to compensate for both the internal need and to help Egypt become an international player in the gas market is a tough call.
What is the impact and application of the Ministry of Petroleum’s modernisation project?
The feeling is that this push is happening, but it has not yet happened to the fullest extent. In other words, we’ve seen concessions issued, and we’re waiting for these concessions to start working – to have more geological surveys and drilling, and then, based on their success, the development of the fields. This will happen, but it won’t be tomorrow.
For example, projections for offshore activity in 2020 are not as flamboyant as they were in previous years. After two or three years of crazy activity in the Mediterranean, we see that 2020 will be a moment of reduction of operations. This is also because what has already been done is starting to produce the desired effect. The job has been done. The push is for more activity in production, but the effect will probably only be visible in 2021.
What are the synergies to be found with local contractors such as Petrojet or Enppi?
That is part of our knowledge. We’ve been in the country for a long time, and we know these companies. We have to say these companies have improved their performance over the years, and we’ve improved our relationships. They probably didn’t perform better; perhaps we got to know them better.
Now we are also working with Petrojet and Enppi outside Egypt – in Iraq, Saudi Arabia and other parts of the world. This year, we have deepened our knowledge and appreciation of their quality. Companies such as Petrojet, Enppi and PMS are proving to be reliable partners. We’re taking the opportunity to involve them in other projects abroad.
What are the key capabilities that you brought to Egypt?
Saipem is focused on offshore operations. In offshore construction, what we bring to the table is top-class equipment. We had the ability to accommodate several changes in the schedule and scope of work for the client, and this was needed. These fast-track projects mean that you must be flexible.
One of the qualities we brought was a flexible fleet, capable of accommodating substantial re-ideation of the scope of work. The fleet performed very well, and the result is that we’ve been achieving all the milestones given to us. We are not finished yet; there’s still work to do. We are confident that we will keep on meeting the milestones until the end of the project.
Could you give us an overview of the fleet you currently have in Egypt?
We have seven construction vessels and another forty-something support vessels. As for construction vessels, we have the Normand Cutter, Normand Maximus, Far Samson, Saipem 7000, Saipem 3000 and Saipem FDS. We will make available to ourselves PMS 12, subcontracting it from PMS, and we also have the Beltino. These are the vessels we currently have operating in Egypt.
What opportunities are you looking at in the downstream sector?
We started Saipem Misr For Petroleum Services SAE and opened a branch here. The goal is to explore the potential of the onshore construction market, namely the revamping or upgrading of refineries. We will probably be able to prove ourselves in this sector – that has always been part of our history in Egypt – but for the last few years we have not pursued it properly. Now, we have a different focus in the country, with an onshore engineering and construction division.
That will bring some interesting projects for us here in Egypt. We have seen that the upgrading of the existing facilities is a great opportunity. The country needs to produce top-class products, bearing in mind not only quantity but also quality. We are certain that there is lot of value in improving the quality of the chemicals and the petrochemicals that are produced locally. That is where we want to offer our expertise.
What is your outlook for the coming years?
The outlook is very positive. The country has proven to have a fantastic geology, which will bring substantial work to national and international oil companies with new discoveries. That will enable this country to grow in terms of production, knowledge, and capabilities. When you work, you grow in your capabilities. Here in Egypt, we are confident that there will be many years of sustained success to come.