Maersk Drilling targets Leviathan contracts

Maersk Drilling commercial manager: “The Israeli government may make things difficult, but it is also willing to listen and to learn.”

“My impression is that the regulation in Israel in the natural gas sector is difficult, but the government is prepared to study the energy field, is open to change, and is flexible, ” says Maersk Drilling commercial manager Jonas Bjork. Maersk Drilling from Denmark is a subsidiary of the largest shipping company in the world Maersk Group, which is traded on the Copenhagen Stock Exchange. “There is no doubt that Israel will be on our radar in the near future.”

Bjork participated in the UOG 2014 energy conference at the Dead Sea in Israel, which presented Israel’s oil and gas market as an attractive investment. According to Bjork, he came to Israel to investigate whether there is a market for drilling here. “I know that the Leviathan reservoir will need rigs for both drilling and production of gas and oil, ” he said.

Maersk Drilling is a contractor of sorts. Maersk carries out the actual drilling, and the gas company pays it a daily rate, regardless of whether or not gas or oil is found. The company owns rigs for deep-water, and ultra-deep-water drilling (more than 3, 000 meters), which operate today in places like Angola, Cameroon, the North Sea, Australia, and Egypt.

Why did you come to Israel now? It will be a while before the Leviathan reservoir needs a rig for drilling, and even longer for production.”

“True, but we know a year and a half in advance where our rigs will be. For example, I already know that I have a rig in Egypt that will become available in 2016, and we are looking for what to do with it going forward. Leviathan is a good option from our perspective, because Israel is near Egypt. Because the operators also pay us for the transport, it will be worthwhile for them to hire the services of a rig that is already in the area.”

How do you decide what country to send your rigs to?

“We are currently the leading shipping company in Norway, and we would like to expand. We would also like to be the biggest player in ultra-deep-water drilling. These ambitions and the terms of the contract are the most important factors. If, for example, an operator needs us to drill in only one place, it may not be worthwhile – for him or for us.”

And in the case of Leviathan?

“As I understand it, the expectation is that 8 wells will be drilled at Leviathan [for comparison, 5 were drilled at Tamar]. In other words, the drilling alone will take a year, and the entire contract will be for 2-3 years, because there are other things to do beyond the drilling activity. Developing Leviathan, for example, includes the construction of a floating facility to produce and store the condensed gas at sea. Establishing such a facility take much longer than the drilling itself.

“This is, of course, a very complicated project, because 100 experts work on the rig in 28 day shifts. A lot of planning is necessary to bring everyone to the country for a few years.”

After participating in the conference, what’s your impression of Israel?

“I think that the regulation here is challenging for foreign companies, but my impression is that the government is willing to cooperate, and to listen if it makes mistakes. In other words, it is flexible. In other countries, you cannot necessarily go to the government and say: ‘Change such and such, ’ and here, I think there is openness between the companies and the government that cannot be taken for granted. The Israeli government may make things difficult, but it is also willing to listen and to learn. I also think that Israel’s main concern right now is that there are no operators here, other than Noble and Edison. This is the situation because the operators today are pickier today with regards to which countries the want to operate in.

“In the past, the state would advertise drilling licenses, the operators would give price quotes, and the highest bid would be chosen. But, today, in light of the low price of oil, as well as other factors, there are cutbacks in spending on oil and gas exploration worldwide. It has become less profitable. So, today, the government has to impress the operators and attract them.”

What makes a country attractive?

“The taxation rate, its security and political situation, the stability of the contracts, the corruption rate, and the condition of the infrastructure. Access to skilled manpower is also very important. In the US, for example, it’s no problem to find skilled people to drill for gas at sea, while in Israel, I imagine it will be a bigger problem.

And what about the security situation. Is this a deal-breaker for you?

“Not at all. We work in stormy weather, and we have no problem working in a stormy political environment. The entire Mediterranean region is politically charged, and we know how to work in such environments.”

“We can harness Israeli brains for industry”

In order to develop a local gas industry, says Jonas Bjork, Israel needs first to train people who will be able to work on the rigs, and then to involve the high-tech industry.

“We can harness Israeli brains for industry, ” says Bjork, “The operators want to maximize their drilling activity, and they are therefore interested in technology that can provide this for them – that’s the direction we are looking towards today. So, for example, they would be willing to pay a lot of money to know what’s going on underground, without needing to take underwater samples, bring them onto the rig, and only then examine them. It would be much better if they could examine everything under the water – for example, the shape of the seabed, the porosity-level of the rocks, and, in general, to get a picture of the seabed. Today, this activity is not yet fully developed, and there are only a few companies that provide oil drilling and information technology services, including them US companies Schlumberger, Halliburton and Baker Hughes. Israel, as a high-tech country, could fit in well in this field.”

Published by Globes [online], Israel business news – www.globes-online.com