Exploring unchartered territory is never easy. Creativity, risk and some fresh wrinkles are often the norm, especially amid in a $60 a barrel oil market and talk of a global economic slowdown.
But we are now living in a 100 million barrel a day world — clearly the effort pays off.
Accordingly, Sharjah National Oil Corp. was the first company worldwide to successfully conduct a competitive tender using a gross split basis structure for oilfield concessions for what is our first major exploration in more than a decade. The three concessions total an area of 1,885 square kilometres in Sharjah and were awarded to Italy’s Eni as part of our first “International Competitive Exploration Licensing Round”.
Different to old concession agreements and production sharing agreements (PSAs), the gross split structure at its most basic level means the objectives of the international oil company (IOC) and the national oil company (NOC) are far more streamlined. Whatever it costs the IOC, it costs the NOC; and whatever value one saves, the other saves.
The ethos of “all for one and one for all” is especially valuable at a time when all energy stakeholders are balancing their books against the impact of climatic concerns, peak oil, frosty geopolitics and the burgeoning demand of soaring populations. The BP Outlook expects the Middle East’s energy consumption alone to rise by 55 per cent by 2040.
Against this backdrop of trouble spots, we are pushing forward to find solutions — ideas that can be used by other energy companies in the UAE and worldwide.
Energy companies must take their time; cross the ‘t’s and dot the ‘i’s. None of us can step into bidding rounds — especially with new structures — without doing our homework thoroughly. Time is too short and energy demand too high to make mistakes.
We must get it right the first time, especially when dealing with resources that relate to national energy security. SNOC’s actions support the UAE’s 2030 National Agenda to ensure access to affordable, reliable, sustainable and modern energy for all.
A golden location certainly helps. Bordering all the UAE emirates, plus a border with Oman, Sharjah plays an integral role in connecting the country’s energy industry. It is the only emirate that lies on both coasts; the Arabian Gulf in the west and the Gulf of Oman (Indian Ocean) to the east.
Despite occupying just 3.3 per cent of the UAE’s total land mass, Sharjah’s prominence as one of the country’s most important energy hubs is rapidly growing. SNOC’s exploration plans will enable the emirate to recapture its role as the biggest gas producer in the Northern Emirates. Sharjah also supplied almost 100 per cent of Dubai’s demand in the 1980s and ‘90s, thanks largely to the major discovery of the Sajaa field in the 1980s.
We must also incorporate rising industrial demand for gas into our supply-demand equation. Such appetite, such as from the alumnus industry in Abu Dhabi and Dubai, can equate to that of another large city. Sharjah alone has 19 industrial areas that contribute to more than 48 per cent of the UAE’s gross industrial output, according to the UAE government. Plus, the Sharjah Tourism Vision 2021 bid to attract up to 10 million tourists by 2021 will add to demand; consider that the UAE’s total population is 9.4 million.
Location is a huge slice of the success pie, but it needs help; enter technology.
Opportunity to cut costs and boost production abounds with the Fourth Industrial Revolution, the world’s biggest economic paradigm shift since the 1800s. Digitalisation could unlock up to $2.5 trillion of industry and societal value in the global oil and gas markets in the medium-term. Benefits include reduced emissions and $170 billion in cost savings for customers, according to the World Economic Forum (WEF).
With oil prices hovering in the $60s for a barrel and the aforementioned pressure points, digital tools are our friends.
The ability to fully understand the complicated geology of the Northern Emirates has been vastly improved over the last two years, thanks to modern 3D seismic interpretation. The first well at our Moveyeid field discovery in 1982 was a very weak well, as was the second.
Yet subsequent drilling following a 3D seismic interpretation of the same area 10 years later produced 10 times the production of the first well. The distance between the wells is less than two kilometres. That’s near double the height of the world’s tallest building in Dubai, the Burj Khalifa — a tiny hop in geological terms.
Kahaif, our third reservoir, was revisited after a 10-year hiatus using 3D seismic interpretation and unlocked nearly 250 million standard cubic feet a day of production.
This all boils down into one simple message: try and try again — with the latest technology! As the world changes, energy companies must change with it. Success rewards the creative.
Hatem Al Mosa is CEO of Sharjah National Oil Corporation (SNOC).