Struggles below the mud line

Malaysia

TOGY talks to Tammi Morytko, Baker Hughes’ vice-president of the Asia Pacific region, about the company’s new strategy to collaborate with local service companies, new geomechanical technology being put to use in the field and the ease of doing business in Malaysia. Baker Hughes provides industrial equipment and machinery to the oil and gas industry of the region through its office in Kuala Lumpur.

Could you highlight the scope of what’s changed for Baker Hughes in Malaysia over the past year and a half?
Our headquarters has been centred in Malaysia for a third decade now, so we’ve had a great presence here and across the region. We also manufacture in the country, as well as in Singapore, and are continuing to expand in the region. We offer a full-service line that includes downstream support, all the upstream performance drilling and completion systems as well as upstream chemicals.
We have recently come out of a potential acquisition with Halliburton that has enabled us to relaunch a go-to-market strategy as of the beginning of May. Rather than being simply a full-service company, we have entered into the go-to-market sales line to collaborate with local service companies to enable them to mature in the local economy.

What has motivated this change to encourage and employ small-scale companies in the region’s oil and gas industry?
The landscape is changing. The local capabilities and competencies in a lot of local regions have grown. While we continue to advance technologically, in a downturn market in particular, some of the lower-tech ideas are considered enough to fulfil some of the applications of many wells that are being drilled. A lot of those can be performed by local service companies. It’s a way for us to help with investment in the local economy, beyond just retailing our services and products.

How would you describe competition with the local service providers?
There are two levels of competition in Malaysia. You have the local service providers, which we look at as not necessarily competitors but collaborators. There is also the historical competition, which, like in every other part of the world, is incredibly saturated.
We all have a lot of capacity and there is a very fixed finite demand. Customers’ budgets are not increasing, and if anything, we expect them to decrease here in the Asia Pacific region over the next year. That will be a bit of a challenge for us from a competition perspective.

What kind of major players are you currently working with?
We’re working with Petronas and many of the IOCs that are still present here. As you are aware, the rig count is down substantially in Malaysia, but we work on joint consortium projects with the likes of Hess, Shell and ConocoPhilips. We help support a lot of those entities with a variety of historical services as well as some of our new technology and new geomechanics activity.

What new technology is advancing the regional oil and gas industry?
What we’ve seen over the past year is a real embracing of geomechanics, and what is called pre-drill pour. Basically, this allows us to do geomechanical studies within the well itself, along with real-time monitoring of the asset.
You can get insight into the rock formations and layers, how you are moving through these layers and what the porosity might be. Ultimately, this real-time monitoring allows you to make adjustments on the fly.
Companies such as Petronas have been on the cutting edge of embracing that technology. I think the downturn only makes that more important, because it’s still very costly to drill a well. The return on the well is challenged given the current oil price, so you can’t afford any mistakes. If you can make adjustments on the fly to make sure that you can get the most production out of that particular reservoir, it is advantageous for everyone.
We’ve had a significant advancement in that part of strategic data acquisition and the utilisation of that strategic data. That’s been one of the most dramatic changes in Malaysia, which ultimately has driven down not only the cost of products that we’re putting in the well, but the overall well cost for the provider.
In terms of EOR techniques, the main one is the water injection technique to separate the oil and help it to proliferate. Other people have used carbon dioxide flooding, but we are not using that here at the moment. Water alternate gas is one that a couple of providers are using here, but we do not have an application for that.

How would you describe the reservoirs located in Malaysia?
We have a big offshore area off the eastern coast of Malaysia in the state of Sabah. Pressures here are a little over 4,500 psi [310 bars] at around 3,200 m below the mud line.
In the Malay Basin, there’s a large depth variation in the basin, between 3,500 feet [1,070 metres] and 14,000 feet [4,270 metres]. It’s a deepwater play. It has a lot of variable levels and we have some restricted marine areas, which make it a little more challenging.
This basin probably has one of the more detailed technical requirements and requires some of our high-end technical products and services. That would challenge some of these local service companies, hence the need to partner with them to enable local entities to work in some of these larger areas. Our wireline services, logging while drilling and long-life welding programmes allow them to do a lot of testing and sampling.
We’re using some of that technology in the water injection programme today, and we’re also considering using coal tubing drilling [CTD]. We employed a lot of CTD in Saudi Arabia, USA and Australia. We’re still advancing with the concepts for CTD in these fields. It’s a more economical way to drill; sometimes we will produce while we are drilling.

What kind of projects are upstream companies mainly focused on in the Malaysian market?
Obviously, greenfield projects and new explorations are costly and take a lot of time. Right now, most funding and activities are taking place in brownfield projects and the rejuvenation of existing fields. We expect this to continue in 2017.

What is your forecast for Malaysia’s rig count over the next year?
We anticipate rig count to be relatively flat next year in Malaysia and down a couple of percentage points between this year and next year in the Asia Pacific region. This is due to NOCs continuing to tighten their funding. This region is high in NOC-directed content; nearly everybody you deal with is a national oil company.

Does this high level of government-controlled activity make it easier or harder in terms of the ease of doing business in the region?
It depends. Countries are like businesses; some are run better than others. I think Malaysia does a really nice job in terms of its economic and social responsibility as well as managing its funding appropriately.
In some other countries, NOCs are just coming to grips with the fall in oil price and the impact it is having on their economy. I think that Malaysia does a very good job with regards to that. We have a pretty good view of what Petronas is going to do over the next couple of years.

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