Despite the slight increase of oil prices, swinging at the $60 per barrel edge, after the dramatic fall down, service companies have modified their pricing strategy to cope with the current market conditions and ensure the spread of their technologies
Reducing the prices of services and technologies has encouraged the industry players to seize the opportunity and boost their exploration and production activities, while at the same time cutting down their costs.
The petroleum industry services and technologies have always been labeled as expensive, yet needed, factors to ensure the efficiency and success of E&P operations. Therefore, lowering prices has attracted new investors to expand their operations in the country and strengthens the E&P wheel. No one can undermine the vitality and necessity of technology nowadays, which paves the exploration route to reach new “unattainable areas or drilling depths”.
“The technological advancement, which we have witnessed lately, has contributed to a great extent to develop the process of the 3D seismic research, that used to be 2D one, enabling more accurate data of reserves volume of each well,” a petroleum expert said. Over the last 10 years, more various drilling techniques have been developed, thanks to this technological advancement. For instance, new techniques such as the horizontal drilling have contributed to increase the drilling depth up to 25 thousand feet.
He added that there is a harsh competition between the Chinese and the American rig manufactures, stating that the Chinese are invading the market with unprecedented technologies in their rigs, though they are of a less quality compared to the American rigs. However, the Chinese rigs are gaining more popularity and are utilized worldwide. In Egypt, the Ministry of Petroleum has strengthened its ties with China through the establishment of the Egyptian Petroleum HH for Rig Manufacturing Co. (EPHH) in 2007, which produced its first 2000-HP rig Mubarak-1 in 2008 in addition to five more rigs.
Asked about the reason for preferring the Chinese rigs over the American ones, the petroleum expert highlighted that the daily rent rate of a Chinese rig, able to drill to up to 15 thousand feet, counts for $24 thousand, while the daily renting rate of an American rig costs $50-65 thousand, with a double drilling depth, 30 thousand feet. “However, most of the international companies operating in Egypt seek the rent of rigs characterized by their high quality and up-to-date technologies regardless their high costs in order to ensure better production efficiency… though the current economic recession puts heavy economic burden, these companies would decrease their production activities and would never accept the low-quality rigs.”
Technology has become an indispensable factor for enhancing the exploration and production operations and a mean to boost production and calculate the volume of reserves at each well. Having such a big role, the laws of Health, Safety and Environment (HSE) set regulations for site preparations necessitate the usage of special technologies whether installed in equipments or production facilities, which are needed to ensure the safety of personnel and avoid any possible violation of the environmental decree before conducting any operations.
As a matter of fact, the obstacle hindering the technological advancement in Egypt lies in the lack of investments, which varies from one type of drilling to another. For instance, the offshore drilling is more costly compared to the onshore and that is why the Ministry is currently opting to lure more foreign investments to intensify the E&P operations in the offshore fields, which generate more promising production records. Fortunately, due to the terms of agreements signed between the ministry and investors determining specific time plan for E&P, most foreign investors bring latest technologies into fields to speed up his E&P wheel and get the most out of each drilling operation without exceeding the deadlines.
Eng. Medhat Gendy, General Manager for East Mediterranean Area, KMC Petroleum Services, declared that technology is an added value to the petroleum sector in all aspects. “Some discoveries were hit in areas explored 40 years ago, thanks to technology advancement which contributed to the re-exploration of old areas in the country.”
Gendy added that recognizable production quantities were generated and more reserves were proved through the use of technologies, which at the same time help protecting the environment from pollution. For example, new technologies have been developed to minimize the negative effects of drilling fluids on the environment, noting that these fluids are one of the primary services in the drilling sector and known to cause damages to the surrounding environment. “KMC has been already utilizing this new technology in accordance with Petrobel and El Paso companies… and GUPCO to join by next month.”
According to Gendy, this drilling fluid technology paves the way for exploration in new areas, such as the agricultural areas of Delta and touristic sites in the Red Sea and Sinai, where drilling activities were banned to protect the environment. The development of seismic research and directional drilling techniques contributed to the re-exploration of areas and wells, where results were negative in the past.
Though the new opportunities this technology offers, the cost and finance remain the barriers facing its growth, confirmed Gendy. “Unfortunately, the economic recession affecting all industrial sectors worldwide led companies to use the second generation technology instead of the first one as means to cost reduction, especially that oil prices have dramatically fallen down,” he added.
Service companies had to modify their pricing strategy to cope with the economic deficit, which has encouraged some companies to seize this opportunity of low service prices and intensify their activities. “Our company brought approximately $8-million drilling equipments to the local market over the past six months, which generated high revenues in return despite the economic crunch.”
Ahmed Tarek Mahmoud, Drilling Manager, Rashid Petroleum Company (Rashpetco) said that the evaluation of technological developments in Egypt is measured on individual basis; service companies development’s evaluation is done through their operation performance on daily basis and by end of each individual project, by measuring the impact of their new technologies which were applied, and its impact on the final cost and time of their project.
“Unquestionably, the company considered the modification of its pricing strategy and started controlling costs, because all the operators in the region reduced dramatically their activities,” highlighted Mahmoud.
He further added that the company still provides its latest services to the Egyptian petroleum sector despite the negative impacts of the economic crisis. “Our latest services are the Portable NORM decontamination units & Jet Pump which aim at enhancing heavy oil production in addition to other special offshore early production facilities.”
By Tamer Abdel Aziz