Digging deep

Mark Sturgess, General Manager for Hunt Oil in EMEA, reveals the company’s plans for Middle East expansion.

“Part of our business strategy is to focus on the pursuit of high potential projects that can significantly impact the company”
-Mark Sturgess

It may not be the biggest name among IOCs but Hunt Oil is gradually carving a niche for itself in some of the world's emerging oil hotspots. As well as carrying out extensive activities in the United States and Canada, the company is rapidly moving in on the Middle East and North Africa market, with exploration underway in Yemen, Oman, the Kurdistan region of Iraq, Morocco and Senegal. Describing Hunt Oil's MEA activities the company's General Manager for EMEA, Mark Sturgess, says: “We're currently drilling for oil in Oman to run a deep gas test. We've had a long history in the country, comparatively speaking, certainly over the last eight to nine years. We see a significant amount of potential there for oil and on the gas side.” He goes on to say that the company sees the greatest potential from Kurdistan where it has exploratory acreage under evaluation. “I would have to say the biggest potential is in Kurdistan. I think everybody would agree with that.” In Yemen, the company's biggest oil market to date in the MEA region, Hunt Oil's oil exploration activities are carried out by its subsidiary Jannah Hunt Oil, which has a 15 percent stake in the Block 5 well. Gross production there averaged over 45,500 barrels of oil production per day in 2006, resulting in cumulative oil production of 158 million barrels. Three infill production wells at Dhahab and two at Halewah have been approved for drilling and reservoir simulation studies have been completed on both fields to evaluate additional drilling and compression requirements.
Gas focus

While oil exploration is a key element of Hunt Oil's strategy, its main focus has become the burgeoning Liquefied Natural Gas (LNG) sector where it is particularly active in Yemen. In 1997 Hunt Oil signed agreements with the Yemeni government and partner companies to develop the Yemen liquefied natural gas project. Natural gas reserves from Marib Block 18 and other fields in the area have been allocated to the project, which, when working at full capacity, will require one billion cubit feet of gas per day to produce 6.7 million tonnes of LNG a year. The existing gas production facilities in Marib Block 18 currently have a capacity of 3.2 billion cubic feet a day. Hunt holds a 17.2 percent stake in the firm developing the project, Yemen LNG Company. It is currently constructing a two-train natural gas liquefaction plant with guaranteed capacity of 6.7 million tonnes per year. The project to build the pipeline was launched in August 2005 and YLNG signed three 20-year take-or-pay sale and purchase contracts with KOGAS, TGP and Suez, committing 100 percent of the guaranteed plant capacity. The resulting LNG will be shipped to markets in the US and Korea.

These ambitious projects, have not, says Sturgess, been affected by the global economic downturn: “Obviously we have challenges like everybody else but for us it's business as usual.” A bigger challenge, he says, is finding skilled manpower in the region, to work on its projects, particularly as it is a relative newcomer to the Middle East: “This is an issue for the whole industry. Finding skilled professionals, whether this is at the upstream, downstream or midstream end is gong to be a major impacting element on the future of our business. From our side, because we're working on basically new ventures, finding experienced geological and geophysical staff is very difficult. It doesn't look so good for our industry. We need some younger people coming in to the industry.” He adds that part of the problem is the “dumbing down” of the science curriculum, particularly in European schools: “The recent trend where they've dumbed down the science (curriculum) is going to make it difficult. We need more young people going into sciences, but they need to be going into at the top level, not where it’s made easy for them to make the grade.”

Green credentials
Like all oil companies engaged in multiple exploration activities, Hunt Oil has come under scrutiny for the impact it is having on the environment and like its counterparts around the world it is keen to extol its green credentials. Most recently its Dallas headquarters was awarded the LEED Silver certification for Commercial Interiors in recognition of the fact that 20 percent of the materials within the building are recyclable, 50 % of the electricity comes from renewable sources and it uses an irrigation system that uses 50 percent less water than a traditional system. Hunt says he believes oil companies are not doing enough to spread the message about efforts they are making to minimise their impact on the environment. “To be frank I think the industry has been quite lackadaisical about this and is not really pushing itself. Unfortunately people tend to shy away from it (global warming and environmental issues) but I think there are ways that the industry could sell itself better. We're not the big ogres that everybody thinks we are. Most geologists, for example, are probably the most environmentally concerned people on the face of the planet and they probably know more about it than 90 percent of the people.” Although it is heavily involved in traditional oil exploration, Hunt Oil's Business Development group, is activity seeking investment opportunities in new energy sources, ranging from improved resource recovery to renewable energy and clean technologies. Its particular areas of interest, in addition to LNG, include geothermal, solar, CO2, wind and LNG re-evaporation. In these areas it is particularly keen to explore acquisition opportunities that would see it spread its footprint worldwide. In the past it has acquired Newport Petroleum Corp. for US$500 million, Chieftain International for US$600 million and assets from Canadian 88 for US$120 million. Describing the importance of investing in alternative energy and unconventional energy exploration sources, Sturgess says: “We have our own unconventional resources department in the US which has come up with some novel ideas. I think in the past, as an industry we've tended to ignore trying to evaluate things in depth and maybe that's not the wisest decision in hindsight because there is a (oil) shortage looming.”

Organic growth
Hunt Oil's interest in new investment opportunities reflects is long term strategy, which, as stated on its website focuses on organic growth: “Part of our business strategy is to focus on the pursuit of high potential projects, that in and of themselves can significantly impact the company. The company remains committed to growth through organic exploration; and as such we place great emphasis on the early stages of the exploration process.” The website states that the company's investments in new ventures is balanced out by a focus on “lower risk and more predictable sources of production and cash flow”. “Hunt balances technical and political risks with a very conservative financial strategy seeking to mitigate those risks and minimise exposure through partnering and leveraging strategies.”

Hunt Oil's main focus remains the US and Canadian markets. It has significantly expanded its exploratory activities in South America, particularly Peru where it has acquired a stake in the upstream and downstream segments of the world-renowned Camisea project. It is running an active drilling programme in the Gulf Coast regions of Texas, Louisiana, the Williston Basin of North Dakota, the Permian Basin of West Texas and offshore in the Gulf of Mexico both on the shelf and in its deep waters. In Canada, where it operates under the name Hunt Oil Company of Canada, it is focussing on the Western Canadian Sedimentary Basin in Alberta and British Columbia. It now plans to expand its exploration activities in Western Canada and in other parts of North America.

The Middle East however, looks set to take a significant share of the company's activities as world demand for LNG grows and activities in the Kurdistan region of Iraq reach their full potential.