Al Shaheen oilfield tender attracts significant international interest
Eight international oil companies (IOCs) are reportedly in discussions with the state-owned Qatar Petroleum about taking over the field’s development, writes The Edge’s global energy editor Simon Watkins.
The Al Shaheen oil field consists of a thin heavy oil reservoir lying around 80 km offshore above the North Field. In 2015, QP opened up the bidding for developing without allowing incumbent operator, Denmark’s Maersk Oil, first option to extend its original 25-year contract before it ends in the middle of 2017. However, any successful bid is expected to include taking over responsibility for drilling at least on the same scale as Maersk had promised (USD2.5 billion/QAR9 billion pledged towards a drilling programme in 2013) and achieving the same production targets (maintaining output at 300,000 barrels per day (bpd), and plans to produce 400,000 barrels of oil equivalent a day by 2020), a legal source in Abu Dhabi close to the negotiations told The Edge.
While Maersk has also now been explicitly invited to reapply in the Qatari firm’s public announcement of the tendering process, ostensibly other contenders include QP’s established major partners: ExxonMobil of the United States (US), Royal Dutch Shell, and France’s Total.
Exxon has extensive experience dealing with QP, having been chosen in 2011 to participate in the domestic supply-orientated USD8.6 billion (QAR31.3 billion) Barzan gas development, in addition to also operating seven LNG trains at Ras Laffan, alongside QP. More applicable to Al Shaheen is the fact that Exxon has extensive capabilities and experience in the enhanced oil recovery (EOR), which the Qatari oil field requires.
The same oil sector-related expertise goes in Total’s favour as well, with the firm having agreed in 2012 to a new deal for the offshore Al Khaleej oilfield. At least as important as this, is that these negotiations for the new deal were undertaken with current Qatar Petroleum CEO Saad Sheridan Al Kaabi, and they resulted in the conversion of an existing Exploration and Production Sharing Agreement (EPSA) into a joint venture-based contract in which QP took the majority stake.
Nevertheless, Shell’s existing partnership with QP is solely in the gas arena – as the foreign shareholder in the Pearl GTL (gas-to-liquid) project and in the Qatargas IV LNG train – with the same counting for US firm ConocoPhillips (also said to be among those expressing interest in Al Shaheen), as a foreign partner only in the Qatargas III LNG train.
QP is not expected to make a decision on this any time soon, as it is not dependent on oil for crucial domestic power usage, but rather for higher value petrochemicals production (although it is the second-lowest crude oil producer among the 12-member Organisation of the Petroleum Exporting Countries (OPEC) group, Qatar has the 13th largest reserves in the world, at 25.2 billion barrels).
Additionally, with no other significant oil finds in the last 15 years or so, Al Shaheen remains the most important in Qatar’s relatively small oil sector (otherwise largely comprising the Dukhan and Idd Al Shargi fields), accounting for well over a third of the state’s total output of around 670,000 bpd average in 2015 and described as being of ‘critical strategic importance’ to Qatar’s future oil production prospects in the tender announcement.
Given this, and the fact that Al Shaheen has already been subject to some EOR techniques, it is likely that the contract will go to a firm which has true global experience in the oil sector, access to the widest range and most up to date EOR technology and expertise, and is willing to proceed on a closely coordinated JV basis with QP itself up to 2030 (believed to be the likely end date of the contract), concluded the legal source to The Edge.
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