Raising the bar for effective oilfield servicesFebruary 21, 2023
Abdourazak Kone, general manager of Emirates Western Oil Well Drilling & Maintenance Company, talks to The Energy Year about the business environment emerging with the high oil price and how the company succeeded in winning a major cementing contract with ADNOC. Emirates Western provides oilfield services including cementing, stimulation, coiled tubing, marine services, downhole tools and supply of oilfield chemicals.
What type of business environment do you see emerging with the high oil price?
Oil prices ranging in the neighbourhood of USD 85-95 represent a healthy business environment for oilfield services providers. This price range allows major operators and NOCs to invest, which opens opportunities in the market for oilfield services companies.
However, with the uptick of activities comes more competition. Moreover, what is required from all service companies today is effectiveness. Clients need to see the cost versus the value they are getting from the service provided. Also, operators look into effectiveness in terms of CO2 consumption, analysing the impact a given oilfield services company has on their overarching decarbonising strategy. Effectiveness is also measured as in the value one brings to the country – in this case the UAE, which makes direct reference to the ICV [In-Country Value] programme rolled out by ADNOC.
What bet should local companies make on high tech and related partnerships?
Most local companies do not invest extensively in R&D. However, we have other virtues such as being agile and nimble, which has been important during difficult times. For us, partnerships have proven crucial to service ADNOC in an accurate and timely fashion. We need to have solid ties with technology partners that will support us. Local oilfield services companies must come to terms with digital oilfields as these are already a reality.
To this end, we are planning to collaborate with some technologically-driven local SMEs to produce customised software for some of our operations. We want to have remote operation capability to bring the field closer to the office.
Lastly, one of the added values we bring to partnerships is our experienced and competent workforce, which at the end of the day makes the difference. We are one of the first oilfield services companies in the UAE, which means we have a well-respected track record. We are well known in the industry for our cementing and offshore stimulation services but over the years we have expanded our portfolio.
What first steps have you taken to carry out ADNOC’s cementing contract efficiently?
Our cementing services contract is part of a framework agreement valued at USD 653 million awarded to five oilfield services companies. It will cover ADNOC’s onshore and offshore activities, including conventional and advanced cementing services. It is a long-term contract of five years with an optional two-year extension. If well executed, it could translate into double-digit growth for us.
Moreover, we have committed to a four-year supplier development plan where we will gradually build up capacity and technical know-how. We are now dealing with ADNOC’s work order where they define our budget and give us key details for the contract execution. From there, the NOC will issue the call of order, which will be more specific in terms of fields and units required. We have started working on this iconic project, which is very important for us.
In order to take on a project of this calibre, we are looking to hire 30 people. This will depend on the locations we work in, where we will deploy our personnel gradually. Likewise, we are looking to integrate some of our staff vertically to enhance efficiency. We are also looking to collaborate with cementing product companies so we can excel in the space of advanced cementing. With these steps, we hope to raise the bar and not only have the capability of tackling this project but also other ones, even outside of the UAE.
How did Emirates Western succeed in winning the cementing contract?
This opportunity was in our direct scope of interest and we did not hesitate to participate in the tender. The first challenge is to demonstrate that you are technically capable of doing the operation in accordance with ADNOC’s standards and expectations. This process was rigorous and extensive. For instance, they verified all of our HSE capabilities first, then our technical capabilities, and so on. They also asked us to work on a supplier development plan. The second phase was the commercial one. We had to work on our supply chain to make sure we can get the best product at the right cost.
Lastly, we had to produce an ICV plan for ADNOC that shows that for every dollar we are getting, a certain percentage is being reinvested into the country based on key parameters of emiratisation, value added. Parallel to this, one must make sure to support local supply chain companies and not solely international firms. These are the steps and key elements that made us a successful bidder.
How is demand shifting among your different services?
In 2022, we noticed that the stimulation market was not as active as in previous years. Yet, it is still our service with the greatest demand. Our mix of activities has shifted towards more technical, demanding and challenging products to make sure we do effective stimulations. We expect that in 2023, stimulation demand and activities will start growing. We have the technology ADNOC requires to work on some of the most challenging wells they have. We know that in the near future the NOC will have to do plenty more stimulation in horizontal wells, which are very challenging as they require high technical and technological capabilities.
Service-wise, cementing is now picking up thanks to our major long-term agreement with ADNOC. We are expecting to see a larger growth in that segment in 2023. We want to make sure that we have a balanced revenue stream coming from our different product lines and services. In sum, stimulation is still dominant in our revenue base, but in 2023 we believe cementing will start getting a bigger share.