Gong Changli, CEO of Daleel Petroleum, speaks with United World about its operations in Oman, the challenges facing the sector and frackingOil and gas is the largest contributor to GDP - how would you assess the sector now with the new developments lately?
I believe it has been stable, with a slight increase. Early this year, the information said they plan to fix 950,000 bpd for the next 10 years. With the new developments, the strategy should be accomplished.As an oil producer, how do you see the sector? Stabilized— or increasing with more players coming in to Oman?
It is possible to keep this level with a partial increase. According to the available information, the extractable reserves for the country will be for more than 13 years, and additional reserves will be around 30 years.
The big players like PDO, Oxy, may keep stable but the smaller players will increase their production, also there are some new comers, new operators will also produce more. The oil and gas from deeper onshore and from offshore will contribute as well to the stabilization and the increases in the future.Daleel is now operating in block 5, and you have finally found oil; how big are the reserves?
started in 2002 and took over the concession from the former operator. We operate the block very successfully-we increased the daily production from 4500 bpd in 2002 to 41,500 bpd in 2013, more than 9 times compared to the year 2002.
For reserves, it’s difficult to mention an accurate number. We might produce more than 10 years as per the current level. Both the reserves in hand and the new findings from other explorations and development will be the contributor in determining this possibility.How much are you exploring in different areas?
Besides the high risk exploration wells are costly. Therefore we are very careful when it comes to exploration. Each year, we only consider drilling 2-3 exploration wells so that we can have enough time to spend on the well proposals and ensure the implementation on the most likely to succeed. With the new seismic acquisition and processing, we may drill more exploration wells in the coming years.
This year, more than 60 wells including both appraisal wells and development wells were planned to be drilled to extract oil. We treat each well as a project with purpose to optimize the revenue of the expenditure.In 2012, you stated that your production goal was 50,000 barrels per day, on average by 2015. How close are you?
Last year, we produced around 40,670 bpd and this year our target is 44,000bpd. So far we are a little bit behind this target. We are struggling for the target by taking many efforts. I believe we will achieve the goal 50,000 bpd as of 2015 at the base of 44,000bpd as of 2014.What are the challenges you are facing with production here in Oman?
I think the biggest one is to replenish/add new reserves. They are the base.
Another challenge is the increase of the operating cost. Our operating costs increase every year. Health care enhancement, manpower costs, material costs, and maintenance costs for the integrity of the facilities and so on, are all contributing to the increase in operating cost.
The third challenge is the recruitment. With the expansion of the business, more talents are demanded but they are difficult to recruit due to low supply from the market.
Regarding your development plan, what are the main pillars?
Well, the main pillars are talents, capital, materials, and environment.
Internally, talent as mentioned above is one of the main pillars because their dynamic roles and their creativeness are the main drive to the business. Capitals and materials such as the reserves, software, rigs, investment from the shareholders etc are the base for talents to rely on and deliver their intelligence to the company.
Externally, the stable political, economical and social environment is the most important pillar and precondition for doing business successfully in Oman. We shall cherish the status and make our best contribution to the country. Regarding the US policy on oil and gas, for example fracking is a new focus, and the US is now an exporter for energy and not just a buyer - has this affected the energy sector?
Actually, this is an opportunity for Oman. We need to use this kind of fracking technology to release the tight reserves, if it is appropriate.
Two issues at least should be considered and resolved before introducing this technology in Oman, Firstly, it is very costly both equipment and the materials used like fluids and proppants. The outcome and the investment should be balanced.
Secondly there are environmental issues such as vibrations and chemicals - you have to use fluids –(chemicals) to bring the proppants to the formation, and if there is any contamination to the water table - how can the remaining fluid be treated? There are indeed the issues associated with it. For Oman, they should bring the technology here but also together with the standards and the guidelines etc. that will protect the environment. Are the gas reserves attractive in Oman?
Gas is another opportunity for Oman, both for industry and civil use. What are the opportunities for US investment in oil and gas sector?
For the US companies, I think it is better to focus on the products and services, because in oil and gas, it is a core business for the US companies. For example, we have some wells and flow lines blocked with scales, and we tried different companies to resolve, but one company from the US was able to do it. So, there are many opportunities here if you have good technologies. Please tell us about your CSR projects?
There are two sides. One is indirect, like some projects which are environmental; with an objective to sustain environment. The gas plant which was launched in 2008, for example, takes care of the excess gases for environmental concerns by consuming them to produce LPG and NGL as well as to reduce the emission. Further, we launched the power plant in 2011 by feeding gas after processing it from the gas plant to the turbine to generate electricity for the operation of the field.
For direct CSR, we sponsor some projects. For example, we have an agreement with the Ministry of Higher Education, where we sponsor 20 students coming from our area for internal scholarships over 4 years. You have been here for 4 years, you have seen development, how do you see Daleel in the next 5 years?
Daleel is still in a position to grow in terms of production and investment. We are recruiting more people, implementing more activities to produce more oil for the country. Daleel will be very busy in the coming 5 years.