Journal of Petroleum Technology – January 2013 Supplement

 Shell Q&A: Mark Carne, Executive Vice President, Middle East and North Africa, Shell
 – Abdelghani Henni, JPT Middle East Staff Writer
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Carne sees opportunities for growth and long-term investment by Shell in the region.

What are the major upstream projects that your company is involved in currently?

On the global stage, there is currently massive investment in oil and gas projects, and Shell has a significant funnel of new projects coming through. Here in the Middle East region, Shell participates in a wide range of businesses right across the value chain, but we focus on partnership, new technology and integrated gas as key strategic themes. In the upstream sector, we are, of course, proud of our long-standing participation in Petroleum Development Oman (PDO), in the Abu Dhabi Company for Onshore Oil Operations (ADCO) and in Badr Petroleum Company (BAPETCO) in Egypt.

The Pearl gas to liquids (GTL) project in Qatar is a great example where Shell proprietary technology, over 3,000 patents, has allowed us to build the world’s largest GTL plant. And, in Iraq, we are working hard on both oil developments and, in a joint venture with the Iraqi South Gas Company, on gathering associated gas that is currently flared. In Turkey, we are exploring in deep water, and, in Jordan, we are testing the vast oil shale resources, a first for Shell in the Middle East. So you can see that we have a strong project and business portfolio today and that we are working hard to use our technology leadership to build an even stronger one for the future.

How is the relationship between Shell and national oil companies (NOCs) in the region?

The way that NOCs chose to work with international oil companies (IOCs) varies significantly across the Middle East North Africa (MENA) region. However, we approach all these relationships in the spirit of aligned partnership; we are here for the long term, and so we ensure we align our business objectives with the priorities of the NOCs. Today, increasingly, the NOCs are finding that they can benefit from the technology, skills, and resources that IOCs like Shell can bring.

For example, the end of “easy oil” means the industry needs technology, both to enhance oil recovery from existing fields and to unlock “difficult” gas. Many countries in the MENA region face increasingly serious gas shortages as the pace of their industrial and power demand has outstripped the supply of indigenous gas. We work to help countries and NOCs tackle this shortage, either by finding new sources of gas, developing the deeper sour gas that has been considered too difficult previously, or by supplying LNG to displace the burning of oil.

Take Kuwait as a specific example. Shell supplies LNG today to help bridge current gas shortages and also has a unique partnership with the Kuwait Oil Company to assist in developing the Jurassic gas fields. These fields pose a significant technical challenge as the gas contains high contents of toxic hydrogen sulfide and is located deep underground in a high-pressure and high-temperature environment requiring the application of advanced drilling and processing technology.

Last year, Shell announced plans to commence work on the largest floating structure ever built, the floating liquefied natural gas (FLNG) platform. Tell us about this.

FLNG has long been discussed in the energy industry as a way to develop natural gas stranded in remote locations far out at sea, which would be too costly to pipe to land-based liquefaction plants. But Shell is the first company to actually build one. This groundbreaking innovation will allow us to bring new energy sources successfully to market—stranded gas can now be unlocked.

At the same time, FLNG technology provides a low-footprint alternative for gas developments, where undersea pipelines and ports would exact too high a toll on the marine or coastal environment. We believe FLNG is complementary to onshore LNG and see opportunities across the globe. We are very excited about this new technology, which will further strengthen our global LNG leadership position.

Is the oil/gas in the fields you operate easy to extract? What technologies does Shell use? Is your staff trained to deal with these technologies?

There is no doubt that extraction of oil and gas is getting more challenging right across the Middle East as the older fields mature, and we have to look deeper and into more challenging geology for new resources. But I am hugely optimistic about the opportunity to extract far more oil from existing fields than we ever thought possible. Oman is really a great example of this. It is a microcosm of the challenges that all countries in the region will eventually have to face, whether they are in enhanced oil recovery (EOR) or unlocking tight and sour gas. Here, working with Petroleum Development Oman, we are using polymer floods, novel solvents, steam injection, and miscible flood technology—in fact, the full gamut of EOR technology. And it is delivering remarkable results, with one field achieving record levels of production over 30 years after first oil as a result of the successful application of polymer injection. Of course, you have to match the skills of the people with the technology, and, again, Oman is a great example of how this can be done. We have over 70 Petroleum Development of Oman Omanis cross-posted in assignments around the Shell group. This gives them access to international development and experience that they can then apply directly back home on their return.

What opportunities and challenges do you face in the Iraqi market? Does the dispute between the Kurdistan regional government and the central government in Baghdad affect the operation of your company in Iraq?

Iraq is reclaiming its position in the international oil supply market. Through a series of open and transparent bidding rounds, the country has accelerated the redevelopment of its key southern oil fields, attracting a host of the world’s largest and most experienced oil companies. These fields have the potential to make Iraq one of the largest oil producers in the world. However, beyond the headlines, Iraq is a fantastically rewarding place to work, and I am very proud of our team there.

Given the history of conflict in Iraq, there are limited local companies capable of supplying the goods and services that we need. However, we have found that by focusing on developing local content, we can quickly help companies grow and local people gain the skills they need. I am pleased that over 75% of people working in Majnoon are Iraqi nationals.

Overall, Iraq remains politically challenging, but I am confident that, if the economic benefits of development flow through to local communities, both security and political stability will continue to improve.

How about your operations in Libya?

In Libya, specifically, we are stopping exploration in the current licenses; but, this is simply a fact of geology rather than politics. Shell has been very proud to have had the capacity to support all national staff throughout the revolution, and, although we were forced to suspend operations, Shell ensured employment for its staff with full pay plus benefits and also ensured that staff continued to have access to medical support. We remain present in the country and will look for new opportunities to grow.

What are your future investment plans over the next 5 years? How much do you plan to invest? Any particular region?

All our businesses in the region require considerable investment in the coming years to arrest inevitable field declines or to bring on new projects. But beyond that, I see huge opportunities for growth in this region. It is a region with a young, vibrant well-educated population. I will not be naïve and suggest that such growth is going to be easy; it isn’t. But it is precisely because the challenges are great, whether technologically or social, that I believe Shell will succeed.

What opportunities/projects are you working on?

I have already mentioned the Majnoon project in Iraq and the investments in Oman, so let me focus a little on the Basra Gas Company, also in Iraq. This joint venture is really important for Iraq because, at present, vast quantities of associated gas are still being flared, while, at the same time, many communities lack reliable power. Our job is to rejuvenate old facilities and invest in new ones so that the gas can be captured and used for power generation. Of course, in the longer term, if the growth in oil production continues, there will be even more gas. This creates the opportunity for local industrial development or gas export. There is the potential, therefore, for our business in Iraq to grow in a number of different ways, and that range of opportunity is quite exciting.