Coming in from the cold (page 1 of 2)

By Gerald Butt in Muscat

The trail from North America to the oil and gas fields of the Middle East is well-trodden. American companies, having gained experienced in producing oil from the wastelands of the southern United States, were among the first to start exploring the vast deserts of the Arabian peninsula and the Gulf in the first half of the 20th century. What they found - in quantity and quality - was beyond their wildest dreams.

Many of these US giants - or merged conglomerates - are still operating in the Middle East. At the same time, they have deployed their resources worldwide to look for new major reserves of oil and gas in other corners of the globe - for example, in the oceans off Africa or South America. In other words, the giant operators are looking for the giant fields with the giant rewards.

This is a policy that is leaving openings for other, smaller companies with less ambitious business plans to move in and develop the fields regarded by the giants as insignificant or uneconomical. As oil resources around the globe start to decline and the demand for natural gas soars, these apparently insignificant fields - along with smaller reserves in other Middle East states - are acquiring greater and greater importance.

Quick to seize upon these new opportunities have been a string of Canadian firms. Several companies, which gained experience in the icy wilds of North America, are establishing themselves in the deserts and the rocky hills of the Middle East. In Yemen and Sudan, in several of the countries of North Africa - even in the Gulf states - the soft Canadian accent can be heard more and more amid the Texan drawl.

The Canadians are well-placed to follow in the footsteps and exploit some of the castoff fields of the international majors. This is a pattern which has become well established in their own country. In the mid-1980s, the Canadian government made dire predictions about the future of its domestic oil industry. No major oil discoveries had been made for decades, and production from older fields was declining. New fields were smaller, harder to find and more expensive to exploit.

Multinationals. Equally alarmed were the giant multinational oil companies. Experts were predicting that they would abandon the declining conventional oilfields and seek major new reserves elsewhere - in the remote frontier areas, offshore or even outside Canadian territory altogether.

The experts were right. The multinationals, for the most part, pulled out of the main producing areas of Canada. But the Canadian oil and gas industry did not fall into decline. Instead, production stabilized. The government had underestimated the role and capabilities of the smaller Canadian companies, which came in on the heels of the departing multinational giants. Today, as much as 73 percent of conventional oil and gas production in Canada is from smaller companies - which are also responsible for drilling 96 percent of the wells. These same Canadian firms account for most of the expenditure in the country's oil and gas industry.

Much of this expenditure has been on developing the technology to target smaller and less easily accessible oil and gas fields. And it is this expertise that the Canadian firms are now offering to the Middle East oil and gas producers.

One of the companies which has extended operations from Canada to the Middle East is Calgary-based Gulfstream Resources. Its operations in Oman provide an interesting case study of how Canadian-developed expertise can be transferred to a very different setting to good effect.

In the 1980s, two international companies searched for oil in two adjacent blocks in the rocky desert landscape of central Oman, west of the capital Muscat.