Unconventional talk in Abu DhabiFebruary 29, 2016
TOGY speaks to Musabbeh Al Kaabi, CEO of Mubadala Petroleum, about the merits of partnerships between operators in upstream activities and the future of unconventional resource development in the UAE and the region. Mubadala Petroleum was established as a wholly owned subsidiary of Mubadala Development Company in June 2012 and has since expanded its operations globally.
What is the outlook for developing unconventional resources in the Middle East?
The levels of success in developing unconventional resources in North America might be difficult to replicate elsewhere. The reasons are due to North America’s well-established onshore oil and gas infrastructure, a regime that encourages property owners to facilitate drilling and production activities on their property, and an extremely well-developed and flexible supply chain.
In this way, a number of different parameters have aligned together to allow for the commercialisation of these resources.
Despite these advantages, there is still pressure on the operators in North America as the oil price remains persistently low. They are responding with efficiency gains and a concentration on the sweet spots in the unconventional plays. However, current oil prices make commercialising unconventionals outside North America, including in the Middle East, even more difficult.
The industry needs either lower operational costs or a higher oil price for companies to be able to commercialise such assets, and perhaps additional incentives to produce more unconventional resources outside of the US.
Does the UAE have plans to assess the potential for unconventional resource development?
Many countries have plans to assess unconventional opportunities in their own territories, in North Africa and the GCC in particular. After the assessment phase, the question is whether these resources could be used for commercial purposes. The challenge is the lack of infrastructure and contractors experienced in developing unconventional reservoirs in a cost-effective way.
The lack of water presents barriers to commercially developing unconventional reservoirs. An operator must hydraulically fracture the rock to access and develop an unconventional reservoir, and this requires significant amounts of water. In the UAE, water is a scarce resource, with much of the country’s potable water derived from energy-intensive desalination plants.
What type of infrastructure is needed in the UAE to pursue unconventional resources?
In the UAE, infrastructure tends to concentrate on already-producing fields. Outside of these fields, limited pipelines exist, and accessibility can be an issue. North America has a complex system of pipelines that allows for companies to easily tie a well to the system after drilling.
The GCC region lacks the same level of oil infrastructure as in Texas, for example, and this is certainly a barrier to commercial production of any unconventional reservoirs. The region may find it cheaper to import LNG to meet its domestic gas requirements than developing unconventional reservoirs and extending the infrastructure that would be necessary to transport the produced hydrocarbons to processing plants.
What are the advantages of more partnerships between operators in upstream projects?
Part of the key to developing new oil and gas assets lies in building strong and sustainable partnerships. These partnerships are needed to balance the significant risks in upstream projects and can facilitate knowledge transfer between organisations. In new ventures, through partnerships, companies can also share the capital expenditure required to explore and drill wells.
In addition, international companies tend to have the ability to leverage their experience of operating in various countries and locations.
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