Dr. Ties Tiessen is responsible for Wintershall’s worldwide production activities mainly in Germany, Libya, the Netherlands, Russia and Argentina. Based in Kassel, the BASF subsidiary is Germany’s largest oil and gas producer. It also operates elsewhere in Western Europe, as well as in North Africa, South America and Russia. With its recent acquisition of Revus Energy ASA, Wintershall is now one of the biggest license holders on the Norwegian Continental Shelf.
Question: How will the recent credit crunch and the fall of oil and gas prices affect Wintershall’s upcoming projects?
Answer: We are in the middle of a financial crisis of historic proportions, which will lead to further consolidation in the E&P sector. However, despite these difficult conditions, Wintershall is still in a position to show strength and, thanks to its solid investment and acquisitions strategy, will take new projects to their successful conclusion even if the oil price remains low.
The global trend to nationalize energy reserves continued. The economic and financial crisis will make cooperation with the NOCs easier in the short term, but gaining access to new oil and gas fields remains one of the greatest challenges of our times.
However, the difficult conditions also offer opportunities. For example, we can expect the heavily inflated prices for drilling rigs and services to go back down to a normal level. We know how to take advantage of lower price levels for our exploration and investment projects and we will be paying the closest possible attention to all costs as a matter of course. As a result, we will be able to approach upcoming investment decisions as we have done in the past—with both courage and careful consideration.
Q: What important projects does Wintershall have upcoming?
A: The Mittelplate offshore field, in which Wintershall and RWE Dea AG each hold a 50% share, will remain the cornerstone of Wintershall’s oil production in Germany in the future. With proven initial reserves of around 200 million bbl, Mittelplate is Germany’s largest known oil deposit. The development of this field continued in 2008 with two successful production wells. In gas production, in Germany we are focusing on developing “tight gas” projects together with our partner Gas de France. We are continuing with the development of the tight gas field in Leer in northern Germany, which we began in 2007, with the drilling of a new well scheduled to go into production in 2009.
Wintershall is also focusing on tight gas in Argentina, where we will continue to develop an existing gas field with our partner and operator Total. We will be able to use our know-how of frac technology in this project to expand several existing wells.
In the Netherlands, we managed to cater to the demands of environmental protection and economic performance at the same time. In 2008, for the second time, a natural gas production platform was dismantled and refurbished—so that it could produce natural gas again under a new name and in a new location. The P14-A gas production platform was dismantled from its location in the Dutch North Sea, taken apart and transported to the shipyards in Rotterdam, Ridderkerk and Vlissingen. A large part of the platform is being reused for a new platform, E18-A, which will begin operations in 2009 in Field E18 in the North Sea.
In western Siberia, ZOA Achimgas—our 50–50 joint venture with Gazprom—is successfully producing gas. Test production commenced in July 2008. In Yuzhno Russkoye Field, we are heading for plateau production in the next few weeks. Then all 142 wells will have been drilled, and production will be at 25 Bcmy.
In order to increase the yield from our oil fields in the Libyan desert, we are making increased use of the water injection method. A total of 22 wells, 11 of these water injection wells, will be drilled there by 2011.
However, the most important goal for us this year is to integrate Revus, which we took over last December. With its valuable development and exploration portfolio, the Norwegian company is the ideal complement to our activities in the North Sea. Overall, Wintershall now has more than 60 licenses in Norway and more than 30 licenses in the British North Sea.
Q: What is Wintershall’s current and future role outside of Germany?
A: Wintershall focuses on selected core regions where the company possesses a wealth of regional and technological expertise. These regions are Russia and the Caspian Sea as well as Europe, North Africa and South America. We know how to develop and operate difficult oil and gas deposits economically. This makes us a sought-after partner for other E&P companies as well as for national companies in the producer countries.
With the current production level of 130 million boe, we have reached the exploration and production target set in 2000 for 2010—to raise production to 120 million boe—two years earlier than expected. We have therefore increased our target: We are now aiming to raise oil and gas production to 140 million boe by 2010.
Overall last year, we invested €1.465 billion on exploration, capital expenditure and acquisitions, including the acquisition of Revus.
And we want to promote our strengths with innovations and technical expertise. For example, we now control 18 of our 26 offshore platforms in the southern section of the North Sea completely from land, from Den Helder in the Netherlands. This is done with one of the most modern radio control systems in the world and has helped improve efficiency considerably. It has reduced the number of flights needed to the platforms for transport and provisions by a third and saves €2.6 million a year for Wintershall alone.
Q: How do you see Germany’s oil and gas output trending in the next few years?
A: The proportion of crude oil produced here is relatively low compared to overall consumption in Germany; domestic production, which totals 3.1 million metric tons, covers just 3% of demand in Germany. But any production “on one’s own doorstep” increases supply security. The figure for German gas production is more encouraging; about 16% of Germany’s annual requirements are met by domestic sources.
At the same time, German production is falling. In 2008, 15.5 Bcm of gas was produced in Germany, 9% less than the previous year’s figure. Domestic crude oil production decreased by around 10% in 2008 to 3.1 million metric tons. This is mostly due to technical factors—for example, production from older fields falling due to the condition of the deposits. In addition, in Germany it is becoming more and more difficult, both technologically and geologically, to develop new fields.
However, oil and gas producers in Germany are making great efforts to stop production from falling further. Investments rose substantially in 2008, by 17%, to more than €470 million. A large proportion of the investments were devoted to enhanced recovery from existing fields. But drilling activities also increased again in 2008 with 27 wells completed.
In the future, the German industry can expect success in the area of unconventional deposits, such as the further development of tight gas deposits. But that calls for considerable efforts in the development of advanced technologies.
Q: How has the German government been investing in energy development?
A: The Renewable Energies Act, which came into force at the beginning of the year, is one of the ways in which geothermal energy is promoted in Germany. Additionally, the Federal Environment Ministry has set up a program to support deep drilling, which aims to minimize the discovery risk.
Q: Is Wintershall involved in geothermal development in Germany?
A: Wintershall is active in the area of geothermal power. For example, in Landau in the Palatinate region, we supply geothermal energy from a former crude oil reservoir to the nearby municipal water park, La Ola, heating 22,000 L of water every hour. The energy produced this way is roughly equivalent to the average consumption of around 300 households. The average CO2 emissions amount to about 13 metric tons per household per year. That means savings of more than 3,750 metric tons of CO2 per year.
Q: How has recent German government policy affected domestic E&P?
A: The German E&P sector has had to cope with a substantial drop in earnings because of the heavy fall in energy prices since last summer. So far this has not been reflected in the royalties policies of federal states Lower Saxony and Schleswig-Holstein. Overall, public revenue from oil and gas production has increased disproportionately in the last few years. While the revenue for producers almost doubled from 2000 to 2008, royalties revenue more than quadrupled.
The increase in royalties for gas in Lower Saxony from 35% to 36%, and from 15% to 17% for oil, at the beginning of 2008 puts a heavy strain on oil and especially gas production in Lower Saxony, where more than 90% of gas in Germany is produced.
Recently, we were surprised and disappointed by the 20% increase in the royalty rates for oil and gas from 15% to 18% by the state government of Schleswig-Holstein, where we are active with the Mittelplate oil field and also the operator of the sole German offshore gas platform, A6-A. This move did not meet with our expectations, especially when one considers the drastic fall in the oil price, to below the level that prompted the Schleswig-Holstein state government to raise the royalties in 2007.
This policy framework is jeopardizing projects. Some pioneering exploration projects can no longer be maintained. This means the underlying research projects, partly managed by universities, also have to be cut back.
The times of “easy” oil and gas in Germany are over. As such, we need the support of the policymakers and, more importantly, we need a fundamental reorientation of royalties policies. Otherwise, the tendency by German producers to relocate investments abroad will continue undiminished.
Q: What are the latest developments with the Nord Stream pipeline project and Yuzhno-Russkoye Field?
A: Our successful project in Yuzhno Russkoye Field, which we launched together with Gazprom, produced the whole year round for the first time in 2008. The field is currently producing around 50 MMcmd from more than 110 out of a total of 142 production wells planned. The plateau phase of 25 Bcmy is expected to be reached earlier than planned, in the middle of 2009. The field has recoverable reserves of more than 600 Bcm. In addition to Yuzhno Russkoye, we launched the second joint project in gas production, Achimgaz, with our strategic partner Gazprom. In the middle of 2008 we were able to begin producing from the Achimov Formation of the Siberian Urengoy gas field.
Regarding the offshore Nord Stream pipeline, the extensive report on the environmental impact assessment according to the Espoo Convention was published in the first quarter of 2009. The submission of the applications in Finland and Denmark in February means that all the national permitting processes have also been initiated. We are anticipating that Nord Stream will be awarded all the permits by December 2009. The commissioning of the first pipeline is planned for the end of the third quarter of 2011, in good time for the beginning of the new gas year. 
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Dr. Ties Tiessen joined the Board of Executive Directors of Wintershall AG in 2005, as head of the company’s production activities. In this role, he oversees existing production in Germany, Libya, the Netherlands, Russia and Argentina, as well as scheduling of new projects. Dr. Tiessen moved to this position from Tripoli, Libya, where he was General Manager of the company’s activities in that country. He studied law and political science at Christian Albrecht University in Kiel, Germany. After he obtained his PhD degree, Dr. Tiessen became a lawyer in a Cologne-based firm with international activities. He joined the BASF Group in 1989, initially as legal adviser at BASF’s head office in Ludwigshafen. He joined Wintershall AG in Kassel in 1996, initially heading the Legal, Tax and Insurance division.
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