Deepwater developments entering North African region. Time for technology transfer and implementation of change. 
by Dr. Cyril Widdershoven

Increased petroleum revenues worldwide have started a E&P boom of unknown order. After that the industry faced a certain level of difficulty due to volatile oil prices present developments are promising. Not only has Moodys Investors Service given oil field service companies a generally stable-to-positive rating, based on several factors, including improving industry fundamentals. As the significant or primary driver for the recovery has been the significant rise in North American natural gas drilling activity, spurred by high reserve depletion rate and strong demand, it is normal that the Western Hemisphere, USA and Europe are receiving the highest attention.

International markets have lagged behind the American recovery. This seems now to be changing. Analysts, attending the Institute of Petroleum week in London, were more optimistic about international developments. Expectations are that only global deepwater investment to jump to a peak of $10-11 billion per year during 2001-2003, reaching a staggering $13 billion in 2003. As Matthew Shaw, Wood Mackenzie consultant, stated it is probably true to say that deepwater has been the global exploration success story of recent years. However, until now deepwater accounts for only 2 per cent of global oil and gas production at the present moment. Analysts predict that this could rise to 6 per cent in 2004, after which a certain decline is expected globally. The above mentioned analysis is one of the most conservative in the field, most theories are more optimistic and propone a thesis of a long period of continuous growth.

As Wood Mackenzie stated again, there will be a various flux of winners and losers in the game. Deepwater is dangerous, with hidden constraints, but potential big gains. Shaw stated deepwater might not be the panacea that many may have been expecting. Deepwater activity has grown massively in recent years, and worldwide there are now more than 30 billion barrels of oil discovered in deepwater, and 80Tcf of gas. However, it is very much concentrated in the big four players of Angola, Brazil, Nigeria and the Gulf of Mexico. All, except Nigeria, non-OPEC.

Not only for countries it is important to play an important role, for the major E&P companies it is definitely a game they need to play.  Petrobras is the clear leader, with net working interest reserves of more than 10 billion Boe. BP, Shell and ExxonMobil are in the second tier, soon to be joined by ChevronTexaco. Calculations are that these four players have between 10-25 per cent of their reserves in deepwater.

According to Ian Vann, technology vice-president BP, about 45 billion Boe have been found in deepwater to the end of 2000, which could be around less than half of potential global deepwater reserves. 

All of the above shows that there is lot to be done, but not overdone. As technology developments and investment requirements globally put pressure on regional developments, the Northern African region is under scrutiny. When asked by OGNAM, technical managers and analysts all agreed upon the thesis that global technology, present in the Gulf of Mexico or North Sea, without problems could be transferred to the North African environment. Technical requirements or drilling, geo-sciences and production-technology are known and common. The geophysical structures of the North African/Mediterranean or Atlantic Offshore is not too difficult and will be addressed by available standard operational facilities.

Two North African features will have their particular impact on deepwater developments. As is known around the world, technology transfer not only depends on the availability of the technology or the financial backup of both partners in a deal. There is also the human factor that plays in the end a crucial role.  Not only is there a lack of human resources in certain fields in the North African region, the level of education and experience has become a major constrain for development, but it has become the same at the service providers side. The E&P boom, globally, has put immense pressures on the available resources of companies. Choices have to be made where resources will be put into action. The relevance of the North African region has to be put in relation with E&P hotspots such as West Africa, Gulf of Mexico or Caspian region. As around half of the costs of deepwater projects is related to drilling, technology and the implementation of necessary standards or systems is critical. To bring the drilling productivity down, related to the time factor, analysts are focusing to increase productivity from the 100 days common at present to 30-40 days per 10,000 ft. The introduction of dual gradient drilling systems, expandable tubelars and multi-lateral well technology is also of great importance. When the human resources factor in the equation is out of balance, no projected results or targets can be reached. North Africa is in this out of balance. Domestic resources will not yet be able to cope with the increased demands. Transfer of qualified personnel from other E&P regions is out of the question at this moment. Hence, time is not yet right for a full-scale deepwater approach. Leading services companies, such as Halliburton, Schlumberger, when addressed on this topic, agreed to the statement that at this moment North Africa is not in the top list of regions targeted.

However, the growing availability of deepwater prospects in Egypt and Morocco, the latter until now totally virgin country, will attract the necessary attention in the coming years. Competition with the global competitors is already started, with Shell, Conoco, BG and BP involved in the deepwater projects of Egypt (Offshore Nile Delta) and Morocco (Atlantic Offshore). The scale of developments is still minor, with a potential to put the region on the map. Egypts natural gas reserves offshore Nile Delta are significant. The unexplored concessions in Deepwater will become the motor in Egypts hydrocarbon sectors. Morocco is unknown, but seems to be promising. Its Talsint discovery (onshore), published as an elephant field, but nicknamed an elephant mirage, shows that hydrocarbons are available. Offshore is virgin, but majors such as Shell are not going in without a real possibility. The next years will show how far the deepwater/offshore adventures of the region will go. An integration of efforts on all sides however is certainly necessary. North Africa is not as virgin as it seems. To cope with domestic connotations, structures and political systems, is necessary. Technology transfer and successful implementation of projects is necessary, changes are also. The available technology, professional will and financial gains will only be available to the region if the necessary human and political infrastructure is implemented to the fullest. Time is now to show face, North Africa can regain its stature globally but it should not wait for another 7,000 years to act accordingly.

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