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Hydrocarbons exploration rebounds

1 March 2023

MEED's upstream oil & gas report also includes: Energy security facilitates upstream spending

 

The world, and particularly countries in the Middle East and North Africa (Mena) region, remains undeterred in its quest to find more oil and gas resources, despite headwinds from energy transition activity and falling long-term hydrocarbons demand forecasts.

Last year, the global oil and gas exploration sector had its strongest year in more than a decade. In its effort to improve portfolios by adding lower-carbon, lower-cost advantaged hydrocarbons, the sector created at least $33bn of value and achieved full-cycle returns of 22 per cent, at $60-a-barrel Brent prices, according to a recent report from Wood Mackenzie.

Julie Wilson, director of global exploration research at Wood Mackenzie, says 2022 was “a standout year for exploration”. 

“Volumes were good, but not stellar. However, explorers were able to drive very high value through strategic selection and by focusing on the best and largest prospects. 

“The discoveries bring higher-quality hydrocarbons into companies’ portfolios, allowing them to reduce carbon by displacing less advantaged oil and gas supplies while also meeting the world’s energy needs.

“The highest value came from world-class discoveries in a new deepwater play in Namibia, as well as resource additions in Algeria and several new deepwater discoveries in Guyana and Brazil, where the latest wave of pre-salt exploration finally met with success,” she says.

“The average discovery last year was over 150 million barrels of oil equivalent, more than double the average of the previous decade,” she adds.

The exploration sector continues to be dominated by national oil companies (NOCs) and majors, with QatarEnergy, France-headquartered TotalEnergies and Brazil’s Petrobras leading the way in net new discovered resources in 2022, according to Wood Mackenzie. In total, NOCs and majors accounted for almost three-quarters of new resources discovered, the research consultancy said.

Qatar’s overseas footprint

In addition to raising gas production capacity from the North Field gas reserve and carrying out a liquefied natural gas (LNG) output expansion programme, QatarEnergy has been pursuing an overseas offshore oil and gas exploration and production (E&P) campaign in recent years.

The state enterprise has been investing in expanding its international upstream footprint, particularly in the gas space. In the past five years, QatarEnergy has acquired interests in gas-rich offshore blocks in Angola, Guyana, Kenya, Egypt, South Africa, Argentina, Mozambique, Morocco, Cyprus, Mexico, Brazil, Oman, Suriname and Canada.

In December, QatarEnergy won an offshore exploration block in Brazil in a consortium with TotalEnergies and Malaysia’s Petronas. QatarEnergy will hold a 20 per cent working interest in the Agua-Marinha production sharing contract, with TotalEnergies holding 30 per cent and Petronas Petroleo Brasil holding 20 per cent. Brazil’s state energy producer ANP will be the operator of the block, with a 30 per cent interest.

QatarEnergy also recently acquired a 30 per cent interest in exploration blocks four and nine off the coast of Lebanon. TotalEnergies is the operator of the blocks, holding a 35 per cent interest, with Italy’s Eni owning the remaining 35 per cent.

Oman E&P arena

Oman hosts the most foreign hydrocarbons E&P companies in the GCC. Majors such as BP, Shell and TotalEnergies have been present in the sultanate since the early 20th century, while smaller international upstream players have also been looking for – and producing – oil and gas for the past three decades.

The majority state-owned Petroleum Development Oman (PDO) operates the sultanate’s biggest and most prolific hydrocarbons concession, block six. The smaller oil and gas concession areas are operated by firms headquartered overseas such as Eni, Occidental Petroleum, Tethys Oil and Maha Energy, as well as by local firms such as ARA Petroleum, Majan Energy & Petroleum and Musandam Oil & Gas Company.

Oman’s Energy & Minerals Ministry signed a concession agreement in December 2021 with a consortium led by Shell’s Oman subsidiary, Shell Integrated Gas Oman, to develop and produce natural gas from block 10 of the Saih Rawl gas field.

The consortium comprises Omani state energy enterprise OQ and Marsa LNG, a joint venture of France’s TotalEnergies and OQ. The concession agreement established Shell as the operator of block 10.

By late January, Shell had started producing gas from the Mabrouk North East field located in block 10.

In September last year, the Omani energy ministry signed another E&P agreement with Shell and France’s TotalEnergies to develop block 11, which is located adjacent to block 10 and is understood to be rich in natural gas reserves.

Shell and TotalEnergies will own 67.5 per cent and 22.5 per cent stakes in block 11, respectively, with OQ holding the other 10 per cent. Shell is the operator with the majority stake in the concession.

UAE makes strides

Abu Dhabi National Oil Company (Adnoc) has completed two upstream concession licensing rounds in the past

four years, attracting oil and gas producing companies from the US, Italy, Pakistan, India, Thailand and Japan to explore for resources.

Offshore block two, which is operated by Italian energy major Eni with Thailand’s state-owned PTT Exploration & Production Public Company (PTTEP), has so far yielded two discoveries with combined estimated reserves of up to 3 trillion cubic feet (tcf) of gas.

In addition, in May last year, Adnoc announced the discovery of 650 million barrels of onshore crude oil reserves in Abu Dhabi, which increased the UAE’s hydrocarbons reserves base to 111 billion stock tank barrels of oil and 289 tcf of gas.

Adnoc also awarded Malaysia’s Petronas a six-year concession agreement in December to explore and appraise oil in unconventional onshore block one, deemed to be the Middle East’s first unconventional oil concession.

In Sharjah, Eni won stakes in all three upstream concession areas offered by Sharjah National Oil Company (SNOC) to international investors in the emirate’s first competitive hydrocarbons block bidding round, launched in June 2018. 

In January 2019, Eni successfully secured 75 per cent, 50 per cent and 75 per cent stakes in SNOC’s concession areas A, B and C, respectively.

Then, in October last year, PTTEP acquired a 25 per cent stake from Eni in area A, as a result of which Eni’s share in all three concession zones is now at 50 per cent.

Sharjah’s oil and gas fortunes reversed in January 2021, when SNOC, together with its partner Eni, announced the start-up of the Mahani 1 gas well. This marked the commencement of gas production from the Mahani field, located in area B, the first such onshore hydrocarbons discovery made in Sharjah in 37 years.

Energy security facilitates upstream spending

Bahrain labours on

Bahrain announced the discovery of the large Khalij al-Bahrain offshore hydrocarbons basin – estimated to contain 80 billion barrels of oil and 10-20 trillion cubic feet of gas – in April 2018.

Nearly five years later, Manama has been unable to make significant progress on the commercial appraisal of the oil and gas resources base. However, the lack of success with Khalij al-Bahrain has not deterred the country from continuing its exploration elsewhere.

In November, state energy conglomerate Nogaholding announced the discovery of natural gas in the two reservoirs of Al-Jawf and Al-Juba. The gas deposits are unconventional and situated in the Khuff and Unayzah geological formations.

Mena players make progress

Iraq, Opec’s second-largest oil producer, continues to seek more hydrocarbons resources in its territory. As recently as in February, the Oil Ministry awarded six oil concessions as part of the country’s fifth licensing round.

Three E&P concessions – one in Basra and two in Diyala governorates – were awarded to UAE-based Crescent Petroleum. Three others, also in Basra and Diyala, were awarded to China’s Geo-Jade Petroleum.

Eni’s discovery of the large Zohr gas field in the Mediterranean waters in 2015 elevated Egypt’s status as a significant upstream market globally, and the country’s government intends to continue to attract more E&P players on the back of this success.

Egypt’s hydrocarbons reserves spiked in 2022 with 53 new oil and gas discoveries: 42 oil wells and 11 gas wells, according to the Petroleum & Mineral Resources Ministry. The discoveries were made in Egypt’s Western Desert region, the Suez Gulf, the Mediterranean Sea and the Nile Delta.

So far in 2023, US-based Chevron, which operates the Nargis offshore concession in the East Mediterranean, together with its partners Eni and Egypt’s Tharwa Petroleum, has announced a discovery of Miocene and Oligocene gas-bearing sandstones.

At the start of this year, Egypt also launched an international licensing round for exploration rights in the Nile Delta and the Mediterranean, comprising 12 onshore and offshore blocks.

“There is a lot of uncertainty in future long-term demand scenarios for oil,” says Wilson. 

“Explorers are accelerating oil exploration to meet near- and mid-term demand, while gas exploration was focused in geographies that can supply the gas-hungry European market. In some cases, major leases are approaching the expiration of the exploration term and companies are pushing to optimise their value.”

She concludes: “By 2030, fast-tracked development of these new discoveries could deliver 1 million barrels a day in oil and half a million barrels a day of equivalent gas production, generating $15bn in free cash flow.” 

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Indrajit Sen

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    “Proximity to reliable power supply at an affordable cost, and speed in licensing processes and grid connections, are increasingly becoming strategic factors in data centre deployment – and the GCC offers that.”

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    On the other hand, AI investments also aim to future-proof the hydrocarbons sector, which Sim expects will continue to be a significant driver of growth, revenue and exports, even as the use of renewable power grows.

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    The first factor is the ability of countries to advance their AI goals from infrastructure to capital and partnerships. The second involves the speed with which they can build up adequate human capital and a skilled workforce.

    “We will have to see how governments align their educational curricula with the AI policies and electricity infrastructure development,” she says.

    Ecosystem investment

    AI and data centre investments go beyond the facilities that house thousands of advanced graphics processing units, miles of cables and many cooling systems. To run and execute applications – particularly AI inferencing tasks – data centre facilities require a substantial amount of energy. 

    Moreover, data centres in the Middle East and North Africa region face elevated environmental risks due to the high ambient temperatures, which increase energy demand for cooling, as well as water requirements.

    This presents both a challenge and an opportunity, according to Obeid. "The GCC has an opportunity to advance innovation in energy and cooling technologies. Liquid cooling is necessary for AI workloads, and small modular reactors will become central in these data centres.” 

    In January, Abu Dhabi’s Emirates Water & Electricity Company (Ewec) appeared to show the way with a plan to build a round-the-clock solar photovoltaic (PV) plant combined with a battery energy storage system (bess) facility.

    The 5.2GW solar PV and 19 gigawatt-hour bess plant is expected to deliver renewable power as baseload, and UAE President Sheikh Mohamed Bin Zayed Bin Sultan Al-Nahyan has said that the project will help power advancements in AI and emerging technologies, and support the delivery of the UAE National AI Strategy 2031 and 2050 Net Zero initiative.

    Sim agrees that renewables combined with battery storage is part of the answer when it comes to building sustainable data centres. “Globally, data centres consume about 1% of electricity, and this figure – together with carbon emissions by data centres – is expected to grow significantly.”

    He notes that Goldman Sachs Research forecasts that global power demand from data centres will increase 50% by 2027, and 165% by the end of the decade, compared to 2023.

    “The other part of the puzzle with regard to sustainability is water consumption by data centres, particularly those in the Gulf, where high temperatures necessitate even more cooling measures.

    “Singapore, for instance, has pioneered integrated water systems that recycle treated wastewater for reuse – and this circular water model could be an option for data centres in the Gulf, instead of using expensive desalinated water,” says Sim.

    As things stand, the GCC can play a key role in the advancement of these and other technologies, along with efficiency measures and the optimisation of server utilisation through AI applications such as digital twins, says Obeid.

    This is just as well, since the region appears to be on the cusp of a boom in inbound and outbound investments that will build data centre capacity abroad and closer to home.

    “We are at a pivotal moment for innovation, where the intersection of digital advancements and energy innovation could position the GCC as a global leader, shaping the future of sustainable digital infrastructure,” concludes Obeid.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/13732105/main5907.jpg
    Jennifer Aguinaldo