Culture of change in OmanSeptember 11, 2018
Raoul Restucci, managing director of Petroleum Development Oman (PDO), talks to TOGY about the company’s key recent developments, the significance of the Mabrouk North East discovery and how automation and digitalisation are impacting operations. PDO produces 70% of Oman’s total crude output as well as natural gas, condensate and LPG.
• On Mabrouk NE: “With estimated recoverable reserves of more than 4 tcf [113.3 bcm], 112 million barrels of condensate and a unit technical cost of less than USD 1, Mabrouk NE is indeed a very significant and strategic discovery. The project has the potential to provide a major boost for sustainable economic growth in Oman and help meet rising gas demand from residential, commercial and industrial customers.”
• On automation and digitalisation: “We collect over a billion pieces of data from our assets every day but automation, digitalisation, advanced analytics and artificial intelligence are transforming the way we do things, helping us to operate our large and complex portfolio more safely and more efficiently.”
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What are PDO’s key achievements for 2018?
We have many achievements to be proud of as our staff continue to live up to our vision “to be renowned and respected for the excellence of our people and the value we create for Oman and all our stakeholders.”
Against a backdrop of continuing oil price uncertainty, PDO has stayed the course, delivering on or exceeding our production, exploration and operations promises to our shareholders and Oman in general while continuing a gradual transition to becoming a fully fledged energy company, with a particular emphasis on renewables.
This year saw the official inauguration of our flagship Miraah solar project with the completion of four blocks on time and on budget with steam production integrated with the Amal field network for thermal enhanced oil recovery.
Moreover, we continue to build on the success of our award-winning Nimr Reed Beds project for water treatment, and are expanding the scheme to treat an even larger capacity (175,000 cubic metres), conserving gas and boosting the environment.
Safety remains our overarching priority and [as of July 2018], we have achieved a 0.14 lost time injury frequency [per million man hours] and 0.7 total recordable case frequency [per million exposure hours], the lowest on record in PDO’s history. We have also passed the milestone of 625 million kilometres driven by PDO staff and contractors without a fatal motor vehicle-related incident, further evidence that our multiple training and compliance programmes continue to bear fruit.
On exploration, the discovery of the Mabrouk North East field is a significant find and certainly has the potential to change the gas landscape in Oman. In total, six wells have been drilled and all have encountered gas. Two are already producing and another three will be hooked up by the end of the year.
Work is also progressing on two further appraisal wells, with plans for the expansion of production infrastructure. Additionally, exploration is continuing in nearby prospects. Surface development plans have been expedited for a pipeline linking the field to our Saih Rawl central processing plant, which is expected to deliver first gas by 2021 and ramp up to over 500 mcf [14.2 mcm] by 2022.
We continue to deliver on promises to our customers and I was hugely impressed by the way our people responded magnificently to Cyclone Mekunu, helping the wider community in the affected area and then working to restore production proficiently.
Despite the challenging conditions, PDO was able to safely evacuate more than 19,000 staff and contractors from the affected area and assist the splendid work of local and national authorities in providing vital support to local communities, offering shelter, food and water, facilitating the reconnection of electricity services, opening roads, and supplying municipal offices with fuel and satellite phones.
Great achievements have been made in terms of in-country value [ICV] as well. We recently celebrated the graduation of 940 young Omanis, the largest batch yet from our National Objectives training-for-employment programme, and Omanised our hoist fleet for the first time in history.
We have also created more than 6,500 employment, training and redeployment opportunities for Omani jobseekers so far this year, bringing up the total of opportunities created since the National Objectives programme was launched in 2011 to more than 50,000.
In the spirit of supporting scientific research, PDO played an important role in the Amadee-18 space mission organised by the Austrian Space Forum. We provided logistics, transport, technical, media and stakeholder engagement support to ensure the mission’s success, an achievement which garnered global headlines for the sultanate.
In terms of people, we introduced diversity and inclusion (D&I) training for all staff this year with the aim of raising collective awareness and understanding to further build an environment which fosters tolerance and respect. This is part of our ongoing D&I drive, which recently won a global Shell Upstream International Impact Award.
These are only a few examples of what has been achieved so far this year but they illustrate our focus on people and business excellence in action across the board.
What have been the main effects of the stabilisation in oil prices for the E&P sector and for PDO’s cost saving and efficiency measures?
Even when global oil prices were at a record low, PDO still managed to meet, and in many cases surpass, expectations right across the business. Business efficiency is a strategic aim to ensure our long-term sustainability, and the slow recovery of oil prices does not mean that we should halt our efforts in this regard.
On the contrary, we are stepping up our efforts to drive cost saving and continue to do more for less. Driving efficiency is simply good business and the downturn has enabled us to challenge the status quo and develop more streamlined, standardised and simplified ways of working.
The implementation and ongoing entrenchment of lean business efficiency is helping us to achieve this goal. It is transforming the way we do business. The first half of 2018 saw the completion of more than 60 lean projects, bringing the total of projects completed to date to 388.
In addition, more than 2,500 ideas have been proposed by staff and endorsed while more than 1,000 have been implemented so far this year, contributing to the overall implementation total of more than 4,500. These combined efforts have resulted in achieving more than USD 50 million of direct bottom line savings from improvement pilots in 2018 alone.
Through contract optimisation reviews, which are focused, multi-day workshops where PDO, together with relevant contractors, identified opportunities for efficiency enhancement and waste elimination, and our Low Oil Price Response programme, we have managed to achieve savings of USD 113 million so far in 2018, meaning we are on track to meet this year’s target of USD 250 million.
We aim to instil a lean culture across the company, and have established a new continuous improvement function. Moreover, our Managing Director’s Committee members have recently signed a pledge highlighting their commitment to continuous improvement as we continue to position ourselves towards becoming a global pioneer in performance and regularly benchmarked leader in the oil and gas industry.
We hope to maintain this excellent momentum as we further develop our lean capability and drive efficiency in our workplace.
What is the strategic significance of the Mabrouk North East discovery for PDO’s operations, future outlook and the country’s energy security in the long term?
With estimated recoverable reserves of more than 4 tcf [113.3 bcm], 112 million barrels of condensate and a unit technical cost of less than USD 1, Mabrouk NE is indeed a very significant and strategic discovery. The project has the potential to provide a major boost for sustainable economic growth in Oman and help meet rising gas demand from residential, commercial and industrial customers.
This year, we are celebrating the 40th anniversary of PDO gas production and this is a fitting way to mark that milestone. In light of this new discovery, the current and future focus of our gas programme will be on balancing short-term demand with long-term growth, and being prepared to adjust our production as the swing producer.
What is the role of automation and digitalisation in PDO’s operations in the short and medium terms?
We have in excess of 10,000 wells and approximately 60 facilities interconnecting more than 180 fields across the sultanate, besides our terminal and corporate headquarters at Mina Al Fahal.
We collect over a billion pieces of data from our assets every day but automation, digitalisation, advanced analytics and artificial intelligence are transforming the way we do things, helping us to operate our large and complex portfolio more safely and more efficiently.
We are aiming to integrate agility and adaptability into our DNA and corporate culture by harnessing evolving technologies and we have some in-house solutions which are leading the way. For example, our automated NIBRAS exception-based real-time surveillance and Al Fikr field development plan systems help liberate our staff with greater and faster value creation insights.
Recently, we introduced a chief information and digitalisation officer (CIDO) into the company’s organisational fabric to ensure we have a coherent data strategy and effectively manage this part of the business. This includes the development and deployment of high-impact accelerators in areas ranging from predictive maintenance to production optimisation and people analytics, to mention just a few.
It also entails addressing culture, capabilities and change management through a Digital Immersion programme that the CIDO team is developing to support leadership and staff alike to make the most of the tools, systems and practices that will drive digitilisation in PDO.
There is no doubt that the technological changes sweeping the world offer many challenges as well as opportunities for the modern-day workplace but PDO’s willingness to embrace technology, including new digital and automated systems, will stand it in good stead for the future.
What is the strategic importance of EOR to PDO’s overall production over the next 10 years?
EOR is a critical component of PDO’s current and, more importantly, future reserves and production promise. We estimate EOR will contribute just under a quarter of our production by 2025.
In the current economic conditions, PDO has continued to pursue EOR technologies with a focus on reducing costs through replication and optimisation of recovery processes, maturing new projects in PDO’s EOR heartlands, such as Marmul for chemical EOR, Amal and Qarn Alam for steam, and Harweel and Birba for miscible gas.
PDO continues to add new EOR technologies to our portfolio with field trials such as the Marmul alkaline surfactant polymer pilot, and Nimr high viscous polymer injection in horizontal wells. Both of these were concluded successfully and the programme focuses on maturing these technologies at attractive unit technical costs.
In addition, we look at initiatives where we can utilise renewable energy sources in our EOR projects. Miraah is a prime example in which solar energy is used to generate steam for thermal EOR.
EOR is one of the focus areas of the more than 90 new technologies and oil and gas recovery solutions our New Technology team is currently assessing, with others including production optimisation and energy efficiency.
For future EOR growth, PDO is working with our partners and various research institutes, locally and internationally, to identify and develop technologies that will continue to unlock further reserves in challenging reservoirs, especially in tight and fractured carbonates.
Given PDO’s objective to become a fully fledged energy company, what are your key initiatives to achieve greater energy sustainability and efficiency?
The company will continue to place a greater focus on renewables and energy and water management. The giant Miraah solar energy installation at Amal, which we are developing with partner GlassPoint Solar, is in daily operation and meeting its targets for steam output for use in thermal enhanced oil recovery. Construction is progressing on schedule with another eight blocks on track to be completed in early 2019, on top of the four which were commissioned in December 2017.
This year, we launched a new energy management drive called Estidama (Sustainability) which is dedicated to building a positive environmental culture not only in PDO but across Oman, focusing on six main pillars: renewable energy, people, energy efficiency and saving, environment and the economy.
As we embrace this “green” energy to a greater degree, we opened our first solar car park at our headquarters in Muscat at the beginning of the year. The 6-MW installed peak (MWp) solar project will generate 9,480,000 electrical units (kWh) per year to help power some of our main buildings, with the capacity to feed electricity into the national grid outside of work hours.
By the end of the year, we’ll be tendering out for 100 MW in our installations. We’re working together with the Oman Power and Water Procurement and engaging with them to see how we can assist them in their 500-MW project.
Our focus is not just on initial value streams, but on leveraging our human capital which is a competitive advantage we have in this region and arguably in many locations globally. It’s recognising that although the solar business in Oman is still in its infancy, the opportunity is absolutely huge. And we’re doing a lot about it.
PDO has also undertaken work to understand the opportunities for solar and wind over the next decade, identifying significant scope in electricity generation, energy-intensive industries and “Power to X” applications (for example, solar to hydrogen), the latter providing the platform for our potential involvement and contribution.
We have also begun rolling out a company-wide ban on single-use plastics, starting with our Mina Al Fahal headquarters and our Ras Al Hamra Recreation Club.
We are aiming to reduce the amount of produced water going to deepwater disposal from 52% to 22% by 2025. This will be achieved by executing the Rima Produced Water Million Date Tree project, expansion of the Nimr Reed Beds project, the construction of a produced water pipeline from Yibal to Lekhwair, the Runib Water Injection project and optimising water production. There are some exciting spin-offs from this approach. For example, we are making progress on a biosaline agriculture trial at Nimr and plant growth from a number of crops has been promising with the potential for commercial application, and the possibility of biomass and oil seed production.
What are PDO’s objectives for 2019, and its medium- and long-term vision for the country and the region?
Going forward, and in line with stakeholder expectations, we will stay the course on our strategic priorities of sustainable production, in compliance with government guidance, acting as a swing producer and meeting government gas demand, ensuring we replace reserves at a greater rate than we produce them, and generating strong revenues, through the creation of new value streams. Integral to our 2019 Business Plan, we are aiming to achieve a long-term production plateau of 650,000-700,000 barrels per day.
Likewise, we will not let up on our ICV drive, supporting economic diversification through the Tanfeedh programme and developing Omani talent and businesses. We are targeting the creation of more than 20,000 job opportunities for Omanis in 2019.
The board has given its full endorsement to proposals to pursue opportunities beyond our natural mandate and Block 6 concession, including services and consultancy, nationally and regionally, in areas such as project management, engineering and design.
As well as continuing our gradual transition to becoming a fully fledged energy company, we will maintain our focus on securing greater alignment between academia and industry on research and development through our involvement in the Ejaad platform. As we evolve and commercialise our expertise in years to come, there is the distinct prospect of becoming Energy Development Oman (EDO).
Notwithstanding the daunting challenges, PDO is determined to continue to make its mark, by doing, by learning, by adapting and consistently striving to exceed societal expectations. Through all this change, one theme remains constant: the country can rest assured that everyone at PDO remains ready and proud to serve Oman to the best of our ability.