6.0UPSTREAM OIL & GAS EXPLORATION AND PRODUCTION INDUSTRY

Geological and Geophysical Analyses

Seismic Acquisition Vessels

Exploration Drilling

Development

Production

General Comments

Actions for Final Report

6.0THE UPSTREAM OIL AND GAS EXPLORATION AND PRODUCTION

INDUSTRY

The terms “upstream” or “E&P” in the context of the oil and gas industry refer to that part of the oil and gas industry that is concerned with the exploration for, and the production of, hydrocarbons.

The E&P process goes through a number of distinct phases with each phase roughly equating to an order of magnitude increase in expenditure:

  • Geological and Geophysical analyses (Millions of US dollars)
  • Exploration drilling (10’s of millions of US dollars)
  • Development (100’s of millions to billions of US dollars)
  • Production

Each phase requires the delivery of services which maybe of a general/generic or specialized nature. The company initiating, controlling and paying for the activities associated with E&P is called the “Operator”, and the operator will normally sub-contract a lot of the activities to specialized service providers. An understanding of what each phase of E&P entails will assist with identifying potential opportunities for South African suppliers and thereby help identify the demands that will be placed on the NPA to meet the requirements of the potential suppliers.

Geological and Geophysical Analyses

G&G studies involve the analysis of data and tend to be performed in-house by the operator, although some work can be sub-contracted to specialists. Central to G&G studies is the interpretation of seismic data.

Seismic Acquisition Vessels

In the offshore E&P industry seismic data is acquired by large highly specialized seismic acquisition vessels. There are no seismic vessels based out of South Africa and they only tend to come into the region when hired by an operator for a specific acquisition project. The vessels spend a minimum amount of time in harbour to bunker up and take on supplies or to make emergency repairs.

Seismic tow compared to the city of Oslo (Norway)

Exploration Drilling

Potential drilling locations are identified based on G&G analyses. The type of Mobile Offshore Drilling Unit (MODU) selected for a specific drilling project will depend on various criteria such as water depth, current, sea conditions and depth to target. A drilling operation requires numerous services as well as a considerable amount of equipment and consumables.

Examples of Mobile Offshore Drilling Units

All equipment and consumables need to be transported to the rig and waste materials removed from the rig. Depending on the type of MODU selected by the operator work boats will be used to tow the vessel, keep the rig supplied and to act in a stand-by capacity at the rig, the work boats are essentially specialised tugs designed to work in the oil field.

In order to help ensure that no delays occur during drilling operations an onshore logistics base is established where equipment and supplies for the MODU arewarehoused in preparation to be sent offshore as required. A typical logistics base will have office space, an open yard, warehousing and workshop facilities. Proximity of a logistics base to harbour facilities is essential so that equipment can be easily transferred to and from the base to the work boats.

Helicopters are used to transport personnel to and from the rig; therefore there is a requirement for helicopter services and associated support services. Similarly, in some instances chartered fixed wing aircraft are used to transport rig personnel to the heliport.

A drilling operation relies very heavily on logistics, due to the high cost of drilling it is imperative that all equipment and personnel are in the right place when you need them.

Development

During the development phase of the E&P process the focus shifts to engineering and construction but also includes further drilling of production wells and possible acquisition of seismic data. The construction of production facilities requires large fabrication areas with direct access to harbour facilities with all the necessary support services, warehousing, workshops etc. In addition, the offshore construction and installation vessels will also require servicing and supply.

Production

The production phase is characterized by a fairly steady demand for certain consumables as well as equipment and services focused on maintenance and support of the production facility. During its working life a facility sometimes requires upgrading and/or expansion as well as regular shutdowns for overhaul. Personnel and supplies will need to be transported to the facility and some waste materials removed.

General Comments

  • Logistics is the life blood of E&P operations; it is a service common to all the phases of the process.
  • The oil and gas E&P business is unforgiving to any company that delivers poor standards of service and workmanship.
  • The E&P industry requires both hi-tech specialized services and equipment such as wireline logging, testing services, cementing services etc. as well as generic services such as catering, fuel supply, communications, household consumables etc.
  • The availability of suitable lay-down areas, warehousing, workshop facilities and easy access are key to attracting oilfield business to the Western Cape (Cape Town and Saldanha Bay).
  • Some regulations pertaining to the movement of MODU’s in and out of the harbours need to be reviewed by NPA.
  • Authorities such as customs and excise, immigration legislation and SAMSA need to be come involved in the consultative process so that they can better understand the functioning and requirements of the E&P industry.

Actions for Final Report.

  • Regulations regarding movement of MODU’s in and out of harbours to be proposed
  • Workshop to be held to advise Customs, Immigration, SAMSA to advise them of the requirements of the E&P industry and the hub in the Western Cape

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