Middle East and Caspian offshore markets keep growing

Oct 13, 2008 02:00 AM

by Fiona Smith

Offshore field development projects in the Caspian Sea and Middle East currently number more than two dozen, and the active nature of the region's offshore industry inevitably will lead to more projects.
Increasing offshore oil and gas exploration and production activities in the Middle East will result in a demand increase for jackup rigs that will outstrip available supply in the next year.

Field development
In the Middle East and Caspian Sea regions, about 25 offshore field development projects are planned or are under construction, that have production start dates over the next two years. According to ODS-Petrodata's online Offshore Construction Locator market intelligence tool, the United Arab Emirates (UAE) will prove the busiest country in the region in terms of field development with five projects over the 2008-2009 period.
Neighbouring Saudi Arabia and Qatar will also be busy during this time period with four field development projects in hand each.

From now until 2016, Russia and Iran are jointly predicted to be the most prolific countries overall in terms of field development projects, with nine projects each currently scheduled over the next eight years. Qatar will follow closely with eight projects up its sleeve while the UAE is next in line with six.
LUKoil is steaming ahead as the operator with the most projects, with Saudi Aramco running a close second.

Fixed structures make up most of the developments and will be undertaken in water depths below 300 feet (91 m). However, Phase II of the Shah Deniz project offshore Azerbaijan in the southern Caspian Sea will be carried out in a water depth of 984 feet (299 m).
The BP Shah Deniz project saw phase I kick-off in 2003 with a fixed offshore platform, two subsea pipelines and an onshore gas-processing terminal. The Shah Deniz consortium began natural gas production last year. The Shah Deniz field, discovered in 1999, is 62 miles (100 km) south of Baku in the Caspian at water depths of 1,970 feet (600 m).

Current recoverable reserves for Shah Deniz are 22.1 tcf of gas and 750 mm barrels of condensate. Operator BP and partners say it will take years to assess and understand the extent of the whole field. Phase 2 of the project may produce around 700 bn cf, but not until 2013 at the earliest.
The new phase is expected to help Europe become less dependent on Russian natural gas.

BP has a 25.5 % share in the field. Partners include Statoil Azerbaijan with 25.5 %; SOCAR Azerbaijan with 10 %, Elf Petroleum Azerbaijan with 10 %, LUKAgip with 10 %, Oil Industries Engineering & Construction with 10 %; and Turkish Petroleum Overseas, which holds 9 %.
The project began in 1994 when a group of companies came together on a 30-year joint development contract for the Azeri-Chirag-Gunashli section of the Caspian. Oil production began in Chirag, Central Azeri and West Azeri in 1997 and East Azeri came onstream last year. Deepwater production at Gunashli is due to begin this year.

Offshore rig market
According to ODS-Petrodata's World Rig Forecast Short Term Trends report for September 2008, demand for jackups in the Middle East is expected to increase for the remainder of this year, and will rise through the course of next year as well. Demand will outstrip supply, even though total supply is expected to exceed 100 jackups in the fourth quarter 2009.
In the Caspian Sea, the jackup market is expected to remain relatively stable with only a small increase in demand, while demand for semis may decline slightly.

New rig construction
Maritime Industrial Services (MIS) signed a $ 364 mm contract in September for the design and construction of two jackups for MENAdrill. The rigs will be built at the MIS yard in Sharjah. MIS will also be working on rig refurbishment projects worth over $ 25 mm.
Ten rigs are at the MIS yard at the moment. Five rigs at the yard are undergoing refurbishment and five are newbuild jackup units.

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