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Petronas VP calls for more service providers, equipment in Asia Pacific to develop unconventional, ultra-deepwater resources

Posted on 29 November 2011

Players who want to stay relevant in the E&P business must have an uncompromising approach to managing HSE, advised Petronas VP of production Encik Mohamad Johari at the 2011 IADC Critical Issues Asia Pacific Conference on 23 November in Kuala Lumpur.

By Linda Hsieh, managing editor

Operators in the Asia Pacific want to tap the significant potential of unconventional onshore reservoirs and the ultra-deepwater frontier, but they can’t do it without additional support and resources from the service sector. Providing the keynote address at the 2011 IADC Critical Issues Asia Pacific Conference & Exhibition on 23 November in Kuala Lumpur, Petronas Carigali VP of production Encik Mohamad Johari noted that finding suitable rigs in this part of the world for his deepwater drilling programs remains a difficult task. Even more deficient is the availability of service providers and equipment, such as for hydraulic fracturing, that would be needed to develop shale oil and gas in this region, he added.

“The difficulty we, the operators, are facing here in this region is the much lower density of elite service companies outside North America,” Mr Johari said. “I still see a large gap in most cases. The lack of presence in these service companies and equipment levels will lead to sub-optimal competition and thus often impact our project economics.”

Seeking to enhance the local presence of the service sector, Petronas is strongly encouraging international companies to set up regional bases of operations in Malaysia. “Petronas is also engaged in cutting-edge technology advancement, which is best demonstrated by the deep penetration of managed pressure drilling (MPD) and casing/liner drilling throughout our operations, be it in the domestic or international arena,” Mr Johari said.

This focus on technology will allow for not only the development of new fields but also for an improved recovery factor for existing fields, Petronas believes. Earlier this month the company announced two 30-year production-sharing contracts with Shell for enhanced oil recovery (EOR) projects offshore Sarawak and Sabah. It is anticipated that the improvement in the recovery efficiency of the fields may result in an additional 90,000 to 100,000 bbls of oil equivalent/day and extend field life to beyond 2040. Mr Johari called this investment only the first step in Petronas’ EOR efforts.

Besides boosting production, Mr Johari also challenged the industry to refocus its approach in managing HSE, important because “it is our passport to staying relevant.” Drilling in environments such as high pressures, high temperatures or deepwater, hydraulic fracturing operations and EOR all require the industry to take risk management to a new level. This means industry will need to hire people with higher levels of education than before, he believes. “HSE incidents in the drilling industry demonstrate this requirement. The reputation of the industry is at stake if their ability to rapidly implement the technical and organizational learnings from these incidents is not forthcoming,” Mr Johari said.

He further cautioned against complacency about new regulatory measures aimed at preventing further HSE incidents. “The technologies to address what happens in these instances exist and need to be advocated by industry,” he said, highlighting technologies such as high-performance mud/gas separators and MPD.

The personnel shortage also has evolved into a “precarious” situation for both operators and service companies, Mr Johari warned. In particular, experienced employees who may have been planning to retire within the next few years may have to reconsider their plans. “We must be willing to pay top money to close the gap in the organization. So for those of you who think about retirement, be warned, it will not be an option anymore in the near and immediate term,” he said.

A new drilling paradigm is emerging, Mr Johari added, and companies who want to be “movers and shakers” within this new paradigm have to step up. “We cannot falter in the preparation for the future,” he said. “It’s a survival of the fittest, and to be amongst the players we must ensure that a culture of good governance, HSE excellence and risk awareness is embedded in our day-to-day routine.”

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