Mario Mehren, CEO, Wintershall spoke exclusively to Pipeline Magazine’s Julian Walker about the company’s growth plans and how the potential merger with fellow German oil firm DEA later in year would broaden its footprint and widen its growth opportunities
Wintershall has seen its production keep on growing over the years and Mario Mehren expects the company to set a new production record in 2018. “We increased our production by around 50 per cent since 2011 but we haven’t done it at the cost of our future resources as we have also increased our reserves by almost 50 per cent,” Mehren said. “We want to continue to improve costs and production. In 2018, we are planning to produce more, reaching a new production. This is quite positive.”
On why Wintershall has seen significantly improved results for 2017 it is down to two things according to Mehren. “We are really harvesting the results of our hard work over the years 2014-2016. Two pieces have fallen together. We have been working hard at optimising costs and increasing performance. At the same time the price of oil and gas has picked up a little bit. If the two things come together you bring down your break even costs and bring down your operating costs. While your revenue starts to increase and your margins get better.”
Our focus in the UAE is in Abu Dhabi with the Shuwaihat Project. We have been very successful with the appraisal of the field
Wintershall’s CEO provided an update on the potential merger with DEA following the signing of the letter of intent between BASF and LetterOne to merge their oil and gas subsidiaries. “We have a busy year ahead of us. We believe the merger with DEA is a great opportunity. This would mean allowing a great company like Wintershall, with a very good growth record to grow even faster. We could accelerate growth in a joint portfolio. That is a very nice perspective that fits for us. The newly formed company would become Wintershall DEA and would create one of the largest independent European E&P companies. Mehren said that when they merge, the new company would have an annual production of around 210 million barrels of oil equivalent (boe). With over three quarters of the production coming from Wintershall and the final quarter coming from DEA. “The merger would broaden our footprint. Today we are not in Egypt or Algeria but that would come into our portfolio as DEA is in both the countries. DEA has a nice growth portfolio especially in Egypt. So the merger would definitely strengthen our footprint in Northern Africa,” added Mehren. Mehren said there were many great synergies between both German fi rms. “I expect the merger to be carried out in the second half of the year. But nothing is decided yet and for now we are analysing data and are in the midst of negotiations. The prospect is exciting,” he said.
MIDDLE EAST FOCUS
Wintershall counts the Middle East as a core region and is expanding its activities in the region. “Our focus in the UAE is in Abu Dhabi with the Shuwaihat Project. We have been very successful with the appraisal,” explained Mehren. In 2017 Wintershall completed the second appraisal well successfully, significantly faster than planned and at a lower cost. “In addition to the operational capabilities I think we have executed the second appraisal well faster and cheaper. We have set some records in terms of drilling times. The way how we have used the Mugharraq port infrastructure as a service port for our project rather than bringing everything from Abu Dhabi port was something that ADNOC could see that Wintershall’s thinking in making things efficient, sustainable and less impact on the environment. On the further development of the Shuwaihat project, the Wintershall CEO explained the firm’s thinking. “Together with our partners we have decided not to do any more exploratory wells for the time being. Now we are discussing with ADNOC what will be the development concept for the Shuwaihat field – will it be a standalone development or will it be in a greater area. If you look at the greater area there is definitely a benefit to developing it together. You can use joint infrastructure that will allow it to be developed more effectively, efficiently and economically. “At the end, this is something that ADNOC needs to decide and then we need to look and decide whether we like the terms and conditions being offered. Once we have seen the terms and conditions we will make up our mind.”
SOUR GAS EXPERTISE
The sour gas nature of the Shuwaihat field means it is technologically challenging and why Mehren feels Wintershall is in demand for this particular project. “In Germany almost all of our gas production is sour gas production. We are not blessed with easy gas and we only have the more complicated gas (tight or sour gas). So we are bringing 40 years of sour gas expertise to the table and I think it is something that ADNOC has clearly recognised,” he noted.
We have a busy year ahead of us. We believe the merger with DEA is a great opportunity
LIBYA AND IRAN
Mehren touched on his outlook for Wintershall’s operations in Libya. Currently the firm operates eight oilfields in the onshore concessions 96 and 97 as the operator. In both concessions, crude oil production was initially discontinued in March 2017. In an agreement with the government-owned National Oil Corporation (NOC), production was able to be resumed from June to October 2017 with production rates of 55,000 barrels of oil per day (BOPD) for concession 96 and 10,000 BOPD for concession 97. “The situation there remains unpredictable. As far as oil production is concerned: In onshore concessions 96 and 97 we were able to produce between June and October last year but the bottom line is since 2013 Wintershall has been able to produce less than 10 per cent of the actual possible production volume.” Regarding Iran, Mehren said that there are several projects that appeal to Wintershall from a technical perspective. “We are in dialog with the National Iranian Oil Company about these projects. Whether anything comes from these discussions depends on the overall political climate, and the risk of sanctions. Plus in the end it depends on whether oil production is financially worthwhile. We need to be patient.”
Wintershall is really looking at expanding its digital footprint. “Digitalisation is very important to us. We intend to make Wintershall more digital. And we want to be more innovative in the way we work together.” He highlighted that they have initiated more than 30 projects to be more digital in the near future. From the use of artificial intelligence for production optimisation to drill core analysis with computer tomography.
Mehren was adamant that even if the merger with DEA didn’t happen Wintershall would still grow. “Wintershall stands for profitable growth. We aim to continue to grow our production. We want to continue to invest in the future. And we will continue to push ahead with our exploration activities.”