Sunset in Doha: Off from WPC to OPEC!

The 20th WPC ended yesterday in Doha and it was an amazing experience. Following the opening ceremony on Dec 4th, it was another four days of intense debates, discussions, meeting and greeting and the Oilholic has been wiser for it.

Everything from peak oil to unconventional projects was under the microscope, a deal announced here and CEO speaking there, one minister throwing-up a policy initiative to another presenting a white paper and so it went. Every oil major – NOC or IOC – offered up some newsy or debatable material and the Oilholic put them across from his perspective without attempting to be everywhere at all times and being all things to all ‘crude’ men as it was near impossible.

This blogger was also truly delighted to have moderated a Baker & McKenzie event at 20th WPC which included a seminar on NOCs, where they should invest, what they should know and where the opportunities lie. Over the course of five days, several representatives from a list of companies and firms too long to list engaged in constructive discussions – some on and some off record. Furthermore, delegates from Milwaukee to the Faroe Islands got to hear about this blog and offer their insight and suggestions which are deeply appreciated.

The Qataris aside, officials from Angola, Algeria, Brazil, Canada, China, India, Kuwait, Nigeria, Netherlands, Norway, USA, Russia, Venezuela and last but not the least the UK spared their invaluable time to discuss crude matters with the Oilholic, however briefly in some cases. One oil minister even joked that if he had time – he’d be a blogger himself!

All good things come to an end and now its time to say goodbye to Doha and head back to London, albeit briefly before the 160th meeting of OPEC ministers at the cartel’s HQ in Vienna on December 14th. There were fireworks last time between the Saudis and Iranians at OPEC HQ; let’s see what happens this time.

Ahead of the OPEC meeting, Secretary General, Abdalla Salem El-Badri took a timely swipe here in Doha at speculators.

On the penultimate day of the congress he told delegates, “Speculative activities remain an issue in the current market. This can be viewed in the respective sizes of the paper and physical markets. Since 2005, there has been a sharp increase in the number of open interest futures and options contracts. At times it has surpassed three million contracts per day, equivalent to 3 billion barrels per day. This is 35 times the size of actual world oil demand.”

El-Badri also noted that between 2009 and 2011, data has shown an almost one-to-one correlation between WTI prices and the speculative activity of the net long positions of money managers. “This is in terms of both volume and value. Let me stress, excessive speculation is detrimental to both producers and consumers and can cause prices to detach from fundamentals. It is essential to avoid distorting the essential price discovery function of the market,” he added.

Meanwhile ahead of the OPEC meeting, ratings agency Moody's has raised its 2012 and 2013 price assumptions for both WTI and Brent benchmarks. It now assumes a price of US$90 per barrel WTI crude in 2012, and US$85 per barrel in 2013, dropping to US$80 per barrel in the medium term, which falls beyond 2013. The ratings agency had previously assumed a price of US$80 per barrel for WTI in 2012 and beyond.

On Brent crude, Moody's assumes a price of US$95 in 2012, US$90 in 2013 and US$80 in the medium term - higher than the previous assumption of US$90 in 2012 and US$80 thereafter. Moody's continues to use US$60 per barrel as a stress case price for both WTI and Brent.

The move reflects the rating agency's expectations that oil prices will remain robust over the next two years, while natural gas will remain significantly oversupplied. Price assumptions represent baseline approximations – not forecasts – that Moody's uses to evaluate risk when analysing credit conditions within the oil and gas industry. And on that note, its goodbye from Doha; keep reading, keep it ‘crude’!

© Gaurav Sharma 2011. Photo: Outside the QNCC at the 20th Petroleum Congress, Doha © Gaurav Sharma 2011.

Oilholic at Qatar Petroleum’s Dukhan field

On the final day of the 20th WPC, the Oilholic skipped the morning’s proceedings and headed to Dukhan oil & gas field nearly 60 km west of Doha at the invitation of Qatar Petroleum. This field is where it all began for Qatar’s oil & gas industry when oil was first discovered in 1938 and one is privileged to have been granted access to such a historic site.

Not only was access allowed, but Qatar Petroleum’s site supervisor Abdulla Mohamed Afifa spared his valuable time to both answer the Oilholic’s questions as well as accompany him around parts of the field and its gas recycling facility.

Oil was first discovered in Dukhan in 1938 at the very site this blogger stands sporting a Qatar Petroleum uniform and overalls (see left). While prospection fields were dug over 1939 and 1940, the first meaningful export of petroleum from Dukhan had to wait until after World War II in 1949.

The field contains four reservoirs – Fahahil, Khatiyah and Jaleha/Diyab. Oil & gas are separated in Qatar Petroleum’s four degassing stations – namely Khatiyah North, Khatiyah Main, Fahahil Main and Jaleha. Stabilised crude is then transported by pipeline to the Mesaieed port.

A massive turnaround came in 1959 when natural gas was discovered in the Khuff Reservoir. The discovery at Khuff and what followed has since made the state of Qatar one of the biggest exporters of natural gas.

The Fahahil plant was commissioned to recover raw natural gas liquids (NGL) in 1974. Two years later, the first development well at Khuff reservoir was dug, and between 1978 and 1982 eight wellhead treatment plants were commissioned at Khuff alone.

Several production stabilisation techniques have been employed in the last decade making Qatar Petroleum the world’s six largest oil company by barrels of oil equivalent at the time of writing this post. These days the field produces up to 336,000 barrels of crude/crude oil equivalent per day with future plans such as Dukhan Gas Lift project aimed at maintaining crude oil production.

The adjoining Dukhan city, which began life as a mere camp for Qatar Petroleum employees, is today a vibrant city boasting its own amenities, facilities, a service sector economy and not to mention a pristine beach. It is connected to Doha by Qatar's only four-lane motorway along which the Oilholic zipped down to see this site. Visiting Dukhan was a memorable experience much enriched by site supervisor Afifa’s insight about the field.

© Gaurav Sharma 2011. Photo I: The Oilholic at the site of the first discovery of oil in Qatar - the Dukhan field. Photo II: A well at Dukhan field, Qatar © Gaurav Sharma 2011. Photo III: Oil Rig No 54, Gas separator valves in foreground, Dukhan, Qatar, Archive July 1956 © Qatar Petroleum.

Of ConocoPhillips & the integrated model

Is the integrated model of operations incorporating a mixed bag of upstream, midstream and downstream assets ‘dead’ for oil & gas majors given that so many of them have put refining & marketing (R&M) assets up for sale in the last half decade? The question of raises some fierce emotions! Some say it’s not dead, some (including the Oilholic) say it is and others simply say it is on “life support.” The wider market and quite a few delegates here at the 20th WPC point to one company's move which typifies the market dilemma – that's ConocoPhillips.

The US major's announcement in July that it will be pursuing the separation of its exploration and production (E&P) and R&M businesses into two separate publicly traded corporations via a tax-free spin-off R&M to its shareholders did not surprise the Oilholic and those who think the integrated model is no longer in vogue.

As many are watching what unfolds at ConocoPhillips, it is worth turning one’s attention to what its Chief Executive Jim Mulva had to say amid a cacophony of soundbites in Doha. Mulva intends to retire once his company’s split is complete and will be replaced by Ryan Lance as head of the split upstream business.

He notes that ConocoPhillips will spend close to US$14 billion on E&P in 2012 with the majority of the stated capital invested in unconventional projects in North America – namely the Canadian oil sands and liquids rich shale plays (Eagle Ford shale, Permian, Bakken and Barnett prospection fields). From these, the outgoing Chief Executive expects “competitive returns”. The company also hopes to remain active in Indonesia, Malaysia and Kazakhstan and is not giving up on the North Sea.

In fact, it will invest more on existing and new prospects in the North Sea’s Greater Britannia, Greater Ekofisk fields and Jasmine and Clair ridge projects. However, moving away from E&P, ConocoPhillips will divest between US$15 to US$20 billion in assets by Q4 2012. Some, but not all, proceeds will be used to finance a recently announced US$10 billion share buy-back.

Mulva has been as clear as he can be on his company's forward planning. The wider market will now be watching how things pan out for the split companies. However, nothing the Oilholic has heard at the 20th WPC fundamentally alters his initial thoughts - that the integrated model is in deep trouble in Western jurisdictions.

© Gaurav Sharma 2011. Photo: ConocoPhillips exhibition stand at the 20th Petroleum Congress © Gaurav Sharma 2011.

Canada, India pitch to world & each other!

One country aims to be a leading producer (Canada) and one is projected to be a leading consumer or at least among them (India), so the Oilholic has clubbed them together for purposes of blogging about what officials from each country said and did here today at the 20th WPC.

Starting with Canada, its ministerial session complete with a RCMP officer on either side of the stage saw Serge DuPont, Deputy Minister, Natural Resources Canada and Cal Dallas, Alberta’s Minister of Intergovernmental, International and Aboriginal Affairs outline their country’s goals for its energy business with the session being moderated by Neil McCrank, Counsel at Borden Ladner Gervais LLP.

The Canadians maintained that in context of developing and investing in the oil sands – of which there is considerable interest here – the country’s energy strategy would be transparent, accountable and responsible both internally and internationally. They also outlined plans to support their industry, akin to many rival oil & gas exporting jurisdictions, via grants – chiefly the provincial government’s energy innovation fund.

This would, according to Deputy Minister DuPont, accompany developing renewable energy sources and a C$2 billion investment in carbon capture and storage. Canada indeed is open for business with foreign direct investment (FDI) welcomed albeit under strict investment guidelines. Proof is in the pudding – not even one top 10 international oil major worth its balance sheet has chosen to ignore projects in the Alberta oil sands.

The Oilholic is reasonably convinced after hearing the ministerial session, that when it comes to environmental concerns versus developing oil & gas projects who would you rather reason with – an open democracy like Canada or Chavez about Venezuela’s heavy oil? In light of recent events, one simply had to raise the Keystone XL question as the Oilholic did with Canadian Association of Petroleum Producers (CAPP) President Dave Collyer on a visit to Calgary earlier this year. After all, one wonders, what is the Canadian patience threshold when it comes to US exports given that new buyers are in town chiefly China, Korea and India.

“Well Canadians are a patient lot. The US remains a major export market for us. The delays associated with the Keystone XL project are frustrating but our medium term belief is that the construction of the pipeline would be approved,” said session moderator and member of the Canadian delegation Neil McCrank of BLG.

He also believes the new buyers in town can be happily accommodated with the oil sands seeing investments from China, South Korea and India (among others). “We acknowledge that there are difficulties in pulling a pipeline from Alberta via British Columbia to the Pacific coast as well – but we are working to resolve these issues as patiently, pragmatically and ethically as only Canadians can!” McCrank concludes.

There is certain truth in that. Despite being an oil producer, Canada does not have a national oil company (NOCs) to trumpet and shows no inclination to shun FDI in Alberta. One of the aforementioned investors, whether ethical or not, is India which has a ‘mere’ 14 NOCs all aching to explore and secure fresh oil reserves to help meet its burgeoning demand for oil.

Of the 14, some four are in the Fortune 500 and operate in 20 international jurisdictions; the loudest of these is ONGC Videsh Limited (or OVL) which among other countries is also looking at Canada as confirmed by both sides. India’s Minister for Petroleum & Natural Gas S. Jaipal Reddy sounded decidedly upbeat at the WPC, telling the world his country’s NOCs would make for robust project partners.

Over a period of the last 12 months, the Oilholic notes that Indian NOCs have invested in admirably strategic terms but overseas forays have also seen them in Syria and Sudan which is politically unpalatable for some but perhaps ‘fair game’ for India in its quest for security of supply. Canada – should Indian NOCs increase their exposure in Alberta – would be interesting from a geopolitical standpoint given China’s overt stance on being a Canadian partner too.

However, the only open quotes in terms of overseas forays from Indian officials came regarding investment in Russia and FSU republics. A high powered Russo-Indian delegation met on the sidelines of the 20th WPC to discuss possible investment by Indian NOCs in the Sakhalin project. Separately, officials from ONGC and GAIL told the Oilholic they were keen in buying a stake in Kazakhstan’s Kashagan oilfield, which is thought to contain between 9 to 16 billion barrels of oil, and join the consortium under the North Caspian Sea Production Sharing Agreement which sees stakes by seven companies – Eni (16.81%), Shell (16.81%), Total (16.81%), ExxonMobil (16.81%), KazMunayGas (16.81%), ConocoPhillips (8.4%) and Inpex (7.56%).

However the rumoured seller – ConocoPhillips – quashed all rumours and instead said it was actually checking out material prospects in Kazakhstan itself. It also detailed its plans for Canada and shale plays. That’s all for the moment folks. Keep reading, keep it ‘crude’!

© Gaurav Sharma 2011. Photo 1: Canadian Ministerial session at the 20th Petroleum Congress (Seated L to R: Neil McCrank, BLG, Cal Dallas, Alberta Goverment, Serge DuPont, Canada's Deputy Minister, Natural Resources. Photo 2: Indian Ministerial session (Seated third from right: India’s Minister for Petroleum & Natural Gas S. Jaipal Reddy) © Gaurav Sharma 2011.

Oilholic’s photo clicks @ the 20th WPC venue

The Oilholic is by no means a photojournalist, but there is no harm in pretending to be one armed with a fully automatic Olympus FE-4020 digital camera at such an impressive venue as the Qatar National Convention Centre (QNCC) which was opened to the public for the first time for the 20th World Petroleum Congress when things began here on December 4th.

According to a QNCC spokesperson, the “sheer size (of the building pictured above left), sensational spaces spread over three levels and high-tech solutions have set new standards when it comes to hosting an event as prestigious as the Petroleum Congress.

One supposes that you can brag a little when your venue has 40,000 sq. metres of exhibition space, a conference hall facility for 4,000 delegates, 2,300-seat lyric style theatre, three additional smaller-tiered auditoriums all complete with theatre-style seating, banquet space for up to 10,000 in exhibition halls, 52 meeting rooms, ample space for pre-function logistics, exhibition foyers, lounges, hospitality suites, business centers and more importantly for fellow scribes - impressive media rooms! Phew!

Hope you enjoy the virtual views, as the Oilholic is enjoying them here on the ground.

QNCC entrance lobby

QNCC Interior: lobby level I

QNCC Exhibition floor

QNCC Exhibition floor

Total CEO Christophe de Margerie at QNCC Theatre Hall

© Gaurav Sharma 2011. Photos from the 20th World Petroleum Congress being held at the Qatar National Convention Centre, Doha, Qatar © Gaurav Sharma, Dec 2011.