Preserving our energy
Jorge Machnizh, director global oil and gas solutions for G4S looks at some of the challenges faced when securing gas and oil sites in the Middle East
As the world´s largest reservoir for oil reserves, the Middle East is the lynch pin for future oil production. Middle Eastern countries are currently responsible for nearly one third - 31.9% - of global oil production (source BP Statistical Review of World Energy 2009). Add the region´s main producers of Saudi Arabia, UAE, Iran, Iraq, Kuwait, Oman, Qatar, Syria and Yemen with the three important ´fraternal´ North African countries - Egypt, Libya and Algeria - and this rises to more than 37%.
Of these 12 countries, only four are not OPEC members (Oman, Syria, Yemen and Egypt). The other eight, along with Venezuela, Nigeria and Indonesia, form the powerful Organisation of Petroleum Exporting Countries (OPEC) and are responsible for 44.8% of current world production.
The importance of the region and of OPEC are heightened by the fact that 60% of proven world reserves are located in the Middle East and that OPEC controls 76% of the total reserves. Also, a significant 41% of proven world reserves of natural gas – the energy source with the greatest growth potential - are in the Middle East.
As other countries´ reserves start to decline, and with oil still the dominant source of world energy, the Middle East and OPEC will further increase their market share of the oil supply in coming years. In its forecast to the year 2020, the US Department of Energy estimates that OPEC´s market share will increase to 45% in 2010 and to 50% in 2020.
The Institute for the Analysis of Global Security has highlighted that this heavy reliance on the Middle East as a source for oil is likely to be a source for tension in the future as key nations strive to ensure continued access to a vital resource. The sector has also been highlighted in a recent Chatham House report as requiring $6.5 trillion of investment in exploration and production over the next 20 years to meet projected demand.
The backdrop to this epicentre of oil and gas is complex. The Middle East has a rich geopolitical history and diversity making it one of the most challenging regions in which to operate from a security perspective. The success of any project hinges on its long-term sustainability, robustness, and its ability to continue to meet the demand for oil and gas.
Defence spending in the Middle East region is expected to surpass $100 billion by 2014 - partly driven by the region´s rich oil deposits – as countries want equip themselves to protect their oil reserves as demand continues to grow sharply over the next decade.
Security risks
So what´s the size of the challenge? Take Iraq, which has the world´s third largest oil reserves that are now being opened up for exploration and production - the Zubair field being the latest field to start being developed. One of the keys to the exploitation of Iraq´s oil wealth is transport of the oil out of the country. Two options exist, through supertankers or international pipelines, but both present security risks.
Around 70% of Iraq´s oil wealth is expected to be shipped out by tanker. The recent seizing of a Saudi supertanker by Somali pirates in the Gulf of Aden highlights the challenges of an area increasingly dangerous for shipping. And while the Iraqis have gained international investment to develop the Umm Qsar port and violence in the south of the country has been less than in the north, the area is still unstable and at risk of attacks.
Ensuring the world secures new reserves and increases their longevity is a key plank of activity for oil producers, and an area where security companies are playing an increasingly important role for the wellbeing of the oil and gas industry as a whole. It means security is core.
At G4S we work for many oil and gas multi-nationals across our 110-country global portfolio, and are building an in-house oil and gas practice to support this growing area. Our risk management business has recently led, with consulting practice Upper Quartile, the first of a series of commercial trade missions to Iraq for a number of international oil and gas companies and associated service providers, many of whom will be returning to the country in the next few months for further talks with Iraqi officials.
Our operational experience, risk management expertise, and geographical footprint in new markets where oil and gas is found in difficult remote locations, has given us a unique insight into the challenges facing oil and gas companies. This led us to devise our lifecycle approach, which demonstrates the security fundamentals that underpin a robust and systematic approach to reducing risk and enhancing security for oil and gas companies.
Managing risk is at the heart of the oil and gas industry and it has matured significantly in the past 20 years. To truly understand the security risk it needs to be viewed in a comprehensive and integrated approach - not just its constituent parts - looking at the lifecycle from first exploration through to production, development, transportation and refining, the focus must be on proactive prevention and risk mitigation, based on intelligence, risk assessment, technologies and processes and best practice and trained personnel.
Companies have made significant advances in managing risk which have been in part led by advancements in geosciences technologies - for example better understanding of the sub-surface model while integrating with real time directional drilling technologies, ensuring improved exploration and production success. Enhanced recovery techniques allow prolonged productivity of existing reservoirs thus enabling more production, and health and safety, environmental and security requirements have also driven improved performance and production.
We´ve recently met a number of C-suite executives from oil and gas super-majors, and talking to them it´s clear that there can never be too much focus on ensuring a true understanding of risk, its changing patterns in particular localities, and the mitigation strategies and plans needed to combat it. These risks are wide ranging - from ensuring solid local community relations and successful integration of the project into the local area, to asset protection, provision of secure transportation of both employees and the product, and safe divestiture of a project.
Security is so integral to the success of the project that the financial rewards can be in jeopardy if the operating fundamentals are not met. In my last visit to a super-major´s site, on the wall was the managing director´s KPIs and performance metrics - and they were all non-financial. However most were driven by health and safety, security and environment issues - where risk assessment and mitigation is central - and on which the financial rewards depend.
It is vital that the world has access to energy resources for our future prosperity, so it´s in all our interests they are delivered safely and securely.