Increased agility through local manufacturingMay 2, 2023
Mohammed Doghmi, president of Alkhorayef Petroleum Company (APC), talks to The Energy Year about how Saudi Aramco’s production capacity expansion is creating demand for artificial lift solutions and how electric submersible pumps adapt to harsh field conditions. APC designs, engineers and manufactures specialised production systems and solutions for the global oil and gas sector.
How do Saudi Aramco’s production capacity expansion and efforts to maintain the output of mature fields affect the local demand for artificial lift solutions?
Saudi Aramco continues to drill new wells and increase their number of wells converted from natural flow to artificial lift. It’s a natural process. As the reservoirs age and more oil is produced, the reservoir pressure goes down. As a consequence, artificial lift mechanisms are required, and the preferred one is electric submersible pumps [ESPs]. This increases the size of the market for all the ESP providers, and APC aims to continue to gain additional market share.
APC is playing a critical role in helping Aramco achieve its production capacity expansion because we provide them with electric submersible pumps, a critical element in boosting production.
With Saudi Aramco’s ambition to increase production to 13 million bopd by 2027, activity in Saudi Arabia will increase significantly for us. As a consequence, we are also investing a lot in our manufacturing capabilities here to be able to meet that demand.
How does APC adapt its innovations according to the harsh environment of Saudi offshore fields?
Offshore fields are challenging given their high H2S [hydrogen sulphide] levels, corrosive environments and extreme temperatures. A lot of our R&D projects in Saudi Arabia are done in collaboration with Saudi Aramco. We are able to work with their experts to design technologies addressing these harsh environments. In 2022, we introduced the PerSevere technology. The PerSevere system is an enhanced technology developed to endure in high-H2S/CO2-content wells and is designed to smoothly run the ESP motors, achieving vibrations far below the API standards while keeping the acid fluids away from the electrical connection in continuous or uninterrupted operation. This will, according to our modelling, significantly increase the life of our equipment in harsh environments.
When it comes to reservoirs of unconventional gas such as Jafurah, the environment is harsher, and we have specific technology for this. There’s also a need for a high number of water wells to maintain pressure, for instance.
How have you developed ESP technology in order to reduce cost and minimise downtime?
Many companies have failed in trying to increase the efficiency of ESP installations, especially ESP replacements. Alkhorayef is bringing its own solution to the market called a cable-deployed ESP. The key benefit is that you can do interventions without the workover rig and in live wells – two conditions that are typically a big challenge for ESP providers and operators since downtime is quite significant and the need for a workover rig is also cost-prohibitive.
Our solution reduces downtime and eliminates the need for a workover rig, targeting high-cost environments offshore and high-producing wells in countries like Saudi Arabia.
The cable-deployed ESP is currently under development in collaboration with Saudi Aramco. Alkhorayef has managed to develop a very elegant solution, combining very promising technologies and delivering on efficiency and cost-reduction.
Please give us more technical details on your cable-deployed ESP.
A specially designed, load-bearing power cable is mounted on a reel and is used to connect and deploy the ESP under a live well condition using a crane and a commercial surface deployment unit. The ESP then lands in a pre-installed packer. The power cable is then cut to length and attached to a special cable hanger that is landed inside the wellhead using the same cable. The system is then connected to the surface power supply and production can start. For retrieval the reverse operation is carried out. The entire operation can be carried out within two days of the service request time.
How much of APC’s equipment is locally manufactured?
Today, we have the biggest ESP manufacturing centre in Saudi Arabia, where we manufacture 100% of our downhole equipment, as well as our surface equipment. We get some raw material from abroad. But all the products are manufactured, integrated, and assembled and tested in-country.
We’re continuing our efforts to localise as much as possible. At the same time, we export these technologies and products internationally to the Middle East, Africa and Latin America. Over 75% of our production is exported to these regions.
What are some of the advantages of developing solutions and manufacturing them in Saudi Arabia?
We have localised parts of our Research and Engineering departments in Saudi Arabia, which makes us very agile, enabling us to innovate, build prototypes and test, market and commercialise new solutions in a relatively short time. Having local manufacturing is also allowing us to be cost-competitive and reduce our lead time to deliver to our key customers. Cost and lead time are two elements that are critical for our clients.
We have also been able to develop solid local suppliers that strengthen our manufacturing capacity, such as WESCOSA [Wahah Electric Supply Company of Saudi Arabia], a local power transformer manufacturer.
Other competitive advantages come from the quality of our products, our ability to control our supply chain and access to local talent. A strong focus on the quality of our human resources and investment in their training and development is a key to our success. We pride ourselves on recruiting locally, even in Latin America and Africa. That gives us the local knowledge and access to local clients to be able to push the technology forward.
What are APC’s most immediate steps in its growth roadmap?
Our growth strategy is built along three axes. The first is growing our core ESP business by gaining market share in countries where we are already established as well as geographical expansion in new territories. Second is the development of our production facilities business, ranging from small water treatment to fully fledged oil and gas processing facilities. Third is growing our wireline business. We recently signed a nine-year contract for cased-hole wireline services with Saudi Aramco, which is a massive achievement that gives us the foundation to take our wirelines business global.
Our growth strategy is being executed. In 2022, we entered the Omani market with a major contract with Occidental of Oman. We continue to expand in Latin America. We recently signed a five-year contract with Pemex and we are initiating work in Venezuela. We see a lot of opportunities in the US, and even more in the MENA region. The DNA of the company is international since we have worked in an international environment for more than 40 years.
We continue to grow organically, taking our different businesses across the world. We tend to favour organic growth versus just growing with M&As. We keep our eyes open, and when we see a good opportunity, we go after it.
How could your In-Kingdom Total Value Add (IKTVA) score play a role in a service provider’s appetite to invest?
In 2022, Saudi Aramco granted us the IKTVA Excellence Award for manufacturing, while our IKTVA score today stands at 68%. We aim to be at 70% in 2023. This score is one of the highest in the country. All this positively impacts the support we get from Saudi Aramco and from our end users.
In the future, we expect this score to also impact market share allocation. Saudi Aramco could give preferential treatment to local companies that have high IKTVA scores. The higher the score, the higher the market share, as long as the quality and service delivery are good and the pricing is competitive. That’s the biggest motivation to continue investing in the country, to increase our development of local suppliers and to increase our IKTVA score.
How would you describe Saudi Arabia’s most recent socioeconomic transformations?
We are witnessing a phenomenal transformation of the country in a relatively short time. Vision 2030, initiated by His Royal Highness the Crown Prince, is in full motion. It is clear that the many changes initiated by the Saudi authorities are having a significant impact on business. Just to mention one example, the entry of women into the industrial marketplace is going to be a driver of change in Saudi Arabia. Five years ago, we had almost no women working with us. Today, we have many women working in the office as well as in our manufacturing centre.
It’s also key to highlight that leaders in this country walk the walk and really support the private sector. Saudi Arabia is now the place to be.