Petrofac To Manage Dubais Offshore Oil/Gas For Newly-Formed Petroleum Establishment

Petrofac announced on 7 August that it had been commissioned to take over responsibility for well and facilities management of Dubais offshore oil and gas assets on behalf of Dubai Petroleum Establishment (DPE) from that date. DPE is a new entity which is wholly-owned by the Dubai government. Petrofacs Group Chief Executive Ayman Asfari described the contract as ground-breaking because it represented the first occasion on which a national government entity has chosen to exploit its hydrocarbon reserves through direct contracting with an international service provider, and we believe DPEs choice represents the leading edge of an emerging trend.

The creation of DPE follows a decision by the Dubai government to take back operating control of its offshore assets from Dubai Petroleum Company (DPC) in April 2007. DPC is wholly-owned by ConocoPhillips and is operator on behalf of the DPC/Dubai Marine Areas (DUMA), a licensee consortium that also involves interests from Total, Repsol, RWE Dea and Wintershall. A ConocoPhillips statement on 6 August said the Dubai government and DPC had reached an agreement to change the operating arrangement that had come into force in 1961. Forty years later, said ?Abd Allah ?Abd al-Karim, Dubai government representative, it is clear that production will now far outlast the period of the concession agreement, and all parties agree that it is appropriate to initiate a transition of operatorship to the government at this time and to begin a new era. As from 2 April 2007, DPE will be responsible for operating the oilfields and for all business related to the production of oil and gas in Dubai.

In the meantime, a transition process has begun. A Petrofac statement on 7 August said the company, the Dubai government and DPE would work in close collaboration with DPC and would be responsible as Facilities Manager and Safety Case Holder for production and well management operations on the Dubai offshore assets. Operating in a one-team culture alongside the development planning and reservoir management teams of DPE, Petrofac will employ the offshore staff and the onshore operations support group. Petrofacs full responsibility for these operations will commence in early April 2007 and the contract has no time limit.

The Dubai offshore assets comprise four oilfields (Fateh, Southwest Fateh, Falah and Rashid, discovered in 1966, 1970, 1972 and 1973 respectively MEES , 17 October 1994) with 70 platforms. Around 1,100 personnel are involved in running the operation. Over the years, Fateh and Southwest Fateh together have accounted for some 85-90% of production (split around 50-50 between the two fields), while the much smaller Falah and Rashid fields accounted for the remaining 10-15%. The main producing horizon in these fields is the Middle Cretaceous Mishrif formation (8,200ft at Fateh and 7,900ft at SW Fateh and Falah and 9,500ft at Rashid), but the Lower Cretaceous Thamama is also productive at Fateh (8,500ft), SW Fateh (9,900ft) and Rashid (10,500ft) as well as the Upper Cretaceous Ilam at Fateh (7,500ft).

Production Decline

Dubai has not issued official figures for oil production or reserves for many years. But from a peak of around 420,000 b/d in 1991, the emirates crude output has been declining steadily, dropping to 230,000 b/d in 1998 and as low as 200,000 b/d in 1999. In March 2000, the then-Crown Prince of Dubai, Shaikh Muhammad bin Rashid Al Maktum said crude production there had dropped to 180,000 b/d (MEES , 3 April 2000). According to Abu Dhabi National Oil Company (ADNOC) figures included in the Statistical Appendix of the IMFs 2006 Article IV Consultations on the UAE, published in July, production from the other emirates (mainly Dubai, with marginal throughput from Sharjah and Ras al-Khaimah) was 160,000 b/d in 2004, while the preliminary estimate for 2005 was 140,000 b/d. This same 2005 figure for Dubai was included in the UAEs Country Paper to the 8^th Arab Energy Conference in ?Amman in May with Sharjahs output put at 48,000 b/d and Ras al-Khaimahs at 700 b/d. But some unofficial assessments indicate that Dubais production has fallen still more, and is now in the region of 100,000 b/d.

The hope in the mid-1990s was that the introduction of new technology, particularly in the field of horizontal drilling and enhanced oil recovery (EOR), would stabilize production at around the 300,000 b/d mark for some years (MEES , 17 October 1994). Initially, horizontal drilling produced promising results, and an EOR pilot project for miscible gas injection in part of the Fateh field began in 1994. But in early 1996, DPC was scaling down the miscible gas program because the pilot had not turned out to be as successful as the operators had originally hoped (MEES , 29 January 1996).

Margham Field

Dubais onshore asset, the Margham gas/condensate field, was discovered in 1982, came on-stream in November 1984 and was inaugurated one month later (MEES , 17 December 1984), with 25,000 b/d of condensate flowing through a 68km/16in pipeline to the Jebel Ali export terminal. Dry gas was reinjected. At the time the field was operated by Arco Dubai and Britoil. The latter was taken over by BP in 1988. Two years later, BP acquired Arco, giving the firm 100% interest in the Margham field. By the end of 1988, BP had relinquished the Margham concession to a newly established government-owned company, Margham Dubai Establishment (MEES , 25 December 2000/1 January 2001). Production from Margham is in decline gas production dropped from 380mn cfd in 1998 to around 200mn cfd in 2003. Raw gas continues to be treated at the Margham plant, with the dry gas returned to the reservoirs and condensate piped to Jebel Ali. In 2003, condensate output was estimated at 18,000 b/d. In recent years, Dubai has been forced to draw gas from Margham to help meet peak summer electricity generation demand thus speeding up the depletion of the field (MEES , 29 May 2000).

According to figures submitted to the IMF by Dubais Department of Finance, oil and gas revenue totaled Dh5.9bn ($1.6bn) in 2000, but declined to Dh5.0bn in 2001 and Dh3.7bn in 2002. In 2003 it changed only a little (Dh3.8bn), but then, with rising global oil prices, it grew in 2004 to Dh4.2bn, while the preliminary figure for 2005 is Dh5.9bn.