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2014 OUTLOOK

What the industry leaders


expect during the coming year
REGIONAL REPORT: CHINA
Drilling activity is up, but gap between
supply and demand widening
ADVANCES IN
DRILLING RIGS
Newbuilds and new equipment
enhance efficiency and safety
DECEMBER 2013 / DEFINING TECHNOLOGY FOR EXPLORATION, DRILLING AND PRODUCTION / WorldOil.com

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World Oil/DECEMBER 2013 3
CONTENTS
DECEMBER 2013 / VOL. 234 NO. 12
55 88 78
SPECIAL FOCUS:
INDUSTRY LEADERS
OUTLOOK: 2014
35 What industry leaders
expect in 2014
Russia to dominate 2014
exploration numbers
W. J. Pike
Challenges remain in exporting
North Americas shale
experience
D. N. Meehan
The Pied Piper(s) in
Washington
R. E. Warren
Full speed ahead?
S. Tollefsen
A call to action
K. W. Lynch
Chevron in 2014 - A few insights
B. Bloys
Service/supply sector will be
called on to do even more
C. E. Jones
Was the government shutdown
key to breaking Washingtons
worst stalemate?
D. Alario
The Next Wave and the next
wave
A. J. Schroeder Jr.
Iraq: Still hanging in there
D. Nester
Paradoxes to remain in prospect
for UK Continental Shelf
A. G. Kemp
COLUMNS
7 First oil
Success through failures
15 Whats new in exploration
Deghosting solutions still emerging
17 Drilling advances
Your subcontractor may be at risk
19 Whats new in production
The Bakken shale and the Red
Queens race
21 Offshore in depth
Evolving standards for Gulf of
Mexico well containment
23 Oil and gas in the capitals
Colombia: Oil industry in contrast
25 Executive viewpoint
Cloud computing and cybersecurity
are fundamentally HR problems
27 Innovative thinkers
GlassPoint: Harnessing the power
of the sun
102 The last barrel
Global organizing of indigenous
peoples is latest E&P headache
NEWS AND RESOURCES
9 World of oil and gas
29 Industry at a glance
95 People in the industry
97 Companies in the news
98 New products and services
99 Marketplace /
Advertising sales offices
100 Advertisers index
101 Meetings and events
ABOUT THE COVER
Nexens Carupa 1A shale gas well was drilled
in the Chiquinquira Block, 90 km north of
Bogota, Colombia. The well was spudded
Nov. 14, 2012 and reached a 12,725-ft TD in
first-quarter 2013.
NEW HSE TECHNOLOGIES
71 Health, safety, environmental
issues go hand-in-hand
with cost savings
H. Terrell
SHALETECH: INTERNATIONAL
78 Countries around the world
make push for domestic
reserves
I. Lewis
REGIONAL REPORT: CHINA
88 Drilling up, but supply-demand
chasm widens
J. Redden
SPECIAL SUPPLEMENT:
DRILLING RIG ADVANCES
55 In large and small steps,
new technology and newbuilds
re-invent how hole is made
M. Slaton
57 Rig fleet additionsOffshore
newbuilds
60 Rig fleet additionsOnshore
newbuilds
62 Rig equipment advances
4DECEMBER 2013/WorldOil.com
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PUBLISHER Ron Higgins
EDITORIAL
Editor-in-ChiefPramod Kulkarni
Executive EditorKurt Abraham
News EditorMelanie Cruthirds
Associate EditorRoger Jordan
Contributing Editors
Dayse Abrantes, Brazil Dr. Jeffrey M. Moore, Asia-Pacific
Dr. A. F. Alhajji, Middle East Mauro Nogarin, Latin America
Dr. Roger Bezdek, Washington Dr. ystein Noreng, North Sea
David Blackmon, Reg. Affairs Dr. William J. Pike, Exploration
Robert Curran, Canada Jim Redden, Drilling
Dr. Ali Daneshy, Shale Technology Dr. Jacques Sapir, FSU
Raj Kanwar, South Asia Mike Slaton, At Large
Ian Lewis, EAME Henry Terrell, Production
Saeid Mokhatab, LNG Russell Wright, At Large
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National Energy Technology Laboratory, U.S. Department of Energy
Ben Bloys, Manager, Los Alamos Technology Alliance, Chevron
Franklin Boitier, Technical Communications Manager, Total
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Charles E. Jones, President, Downhole, Drilling and Subsea, Forum Energy Tech-
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Alexander G. Kemp, Professor of Petroleum Economics, University of Aberdeen
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Douglas C. Nester, COO, KOGAS Akkas BV
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Tudor, Pickering, Holt and Co.
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Svein Tollefsen, Petroleum Technology Manager, Statoil
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Success through failures
FIRST OIL
PRAMOD KULKARNI, EDITOR
World Oil/DECEMBER 2013 7
IN THIS ISSUE
35
What industry leaders ex-
pect in 2014. As we turn the
corner on 2013 and head into the new
year, we can be appreciative of the good
health of the global upstream industry.
For a better understanding of the indus-
try trends, weve called upon the World
Oil Editorial Advisory Board to present
their views. Board members have de-
scribed activities in Russia and Iraq and
discussed challenges associated with
exporting North Americas shale experi-
ence to the rest of the world. You will also
gain an understanding of the obstacles
to growth, such as spiraling costs, lower
margins and greater risks. There is also a
call to action to help improve the public
perception of hydraulic fracturing.
55
Drilling rig advances. Op-
erators reap the rewards of ex-
ploration successes, but also deserving
of credit is the supporting cast of drill-
ing contractors, service companies and
equipment manufacturers. Contributing
Editor Mike Slaton examines recent rig
advances in three categories: offshore
newbuilds, onshore newbuilds and rig
equipment. Among the recent advances
includes Odjfell Drillings Dalian Devel-
oper, which is expected to be the largest
drillship afloat.
88
Regional Report: China.
China has emerged as the
worlds biggest energy consumer, edg-
ing out the U.S. in 2013. The worlds most
populous country is expected to devour
an additional 420,000 bpd of liquid fuels
this year and a further 430,000 bpd in
2014, according to EIAs Short Term En-
ergy Outlook, released in October. Con-
tributing Editor Jim Redden examines
how China is looking both outward, and
inward, to narrow an ever-widening di-
vide between consumption and domes-
tic production.
Genius is 1% inspiration and 99%
perspiration Thomas Alva Edison,
American inventor.
Thomas Edison would have known all
about failures and eventual success. To de-
velop a long-burning light bulb, the prolific
inventor tested over 2,000 different materi-
als in 1879 before settling on a carbon fila-
ment that remained lit for 40 hours.
The National Geographic magazines
September 2013 issue includes an intrigu-
ing article entitled, Failure is an option, by
Hannah Bloch. While the article discusses
failed attempts to reach the North Pole and
unsuccessful efforts to climb Mount Ever-
est, the lessons apply just as well to oil and
gas exploration. The article quotes Peter
Athans, who successfully climbed Everest
seven times. I learned how not to climb
the first four times I tried to summit Ever-
est, Athans explained. Failure gives you a
chance to refine your approach. Youre tak-
ing risks more intelligently.
The major risk in geographical explora-
tion is not being able to return alive. In the
case of Apollo 13, which suffered an oxy-
gen tank explosion in space on the journey
to the Moon, the safe return of the crew
was, in itself, a success. In oil and gas explo-
ration, risks do not always involve the loss
of life, but involve financial losses, damage
to reputation, and the opportunity cost.
Lately, frontier oil and gas exploration
is undertaken, primarily, by small inde-
pendent operators. North Americas shale
plays were discovered through the pioneer-
ing work of Mitchell Energy (Barnett),
Range Resources (Marcellus), Petrohawk
Energy (Eagle Ford) and Continental Re-
sources (Bakken). In all of these plays, it is
not simply a matter of drilling horizontally
through a shale section and fracing away.
Detailed geological evaluation is necessary
to assess the total organic content, calcu-
late the thermal maturity of the shale, and
discern the existing network of fractures to
crack the code of each play.
While offshore exploration is a more
expensive undertaking, often it is still the
minnows that take the lead in frontier
areas. UK operator Tullow and U.S.-based
Kosmos Energy and Anadarko combined
their resources to discover the giant Jubilee
field, offshore Ghana. Tullow is now pro-
gressing with a very material discovery
in the Barents Sea, offshore Norway. And
the company has scored six consecutive
discoveries onshore Kenya.
However, Tullow and partner Shell
have failed to discover commercial hydro-
carbons offshore French Guiana. It is our
No. 6 horse, in the back of the race, today,
but having said that, its a vast acreage posi-
tion, explained Angus McCoss, Tullows
exploration director, in a Bloomberg report.
What we do now is take the next year to
look at all the data from the campaign and
then decide the best way forward.
Scottish explorer Cairn Energy ach-
ieved success in developing a string of
discoveries in Indias Rajasthan desert.
However, the company is struggling with
failure in its offshore Greenland cam-
paign. But the company is gamely press-
ing on, saying, Cairn is confident that all
the elements for success are in place and
will ultimately support the views of the
USGS that the region is home to one of
the top-10 yet-to-find hydrocarbon re-
sources in the world.
My own case concerning failure and
success is instructive. As part of the
coursework for an engineering degree,
students are tasked with designing and
building a project in their senior year. The
project assigned to me was building an an-
alog amplifier (this was in 1970). I fiddled
around one afternoon in the electrical
engineering lab and managed to connect
the right set of electronic components to
make the amplifier work on the first try.
If, on the other hand, had I struggled over
the course of a few weeks and pored over
the theory of amplification and conducted
various practical experiments, I probably
would have gained a better understanding
of the design process. Then, who knows,
I might have gained the motivation to be-
come a super engineer, instead of a mild-
mannered editor.
WORLD OF OIL AND GAS
MELANIE CRUTHIRDS, NEWS EDITOR
World Oil/DECEMBER 2013 9
EXPLORATION ////////////////////////////////////////////////////////////////////////////
ACQUISITIONS ////////////////////////////////////////////////////////////////////////////
Shell encouraged by positive well test results in Albania
Shell and Petromanas Energy have
announced positive test results
from the Shpirag-2 well in Block
2-3, which covers a 3,450-sq-
km area onshore south-central
Albania. The well was drilled by the
operator, Petromanas, to a TD of
5,553 m. Based on the previously
drilled Shpirag-1 and test results
from Shpirag-2, Petromanas and
Shell believe they have identified
an oil column in excess of 800 m,
in fractured carbonate reservoirs,
providing early validation of the
blocks light oil potential. During a
three-day extended test period, the
well flowed at rates of 800 to 1,300
bopd of 35 to 37 API oil. A 450-
km, 2D seismic program for Block
2-3 is in progress, and is expected
to conclude before the end of the year. The first appraisal well is planned after completion of a second explora-
tion well, which is currently drilling. Petromanas has a 25% working interest in Block 2-3 and is the operator, with
Shell holding the remaining 75% working interest. The JV was established in February 2012. Photo courtesy of
Petromanas Energy.
Noble Energy announces drilling results ofshore Nicaragua
Noble Energy has announced results from the Paraiso-1 exploration well, in the Tyra Bank concession area
offshore Nicaragua. The well, which had hydrocarbon shows and found high-quality Tertiary-age carbonate
reservoirs, did not encounter an accumulation of hydrocarbons. Drilled in a water depth of 1,220 ft, the
well reached a TD of 10,415 ft. Following completion of permanent plugging and abandonment operations
at Paraiso-1, the drilling rig will be released. Noble operates the well, with a 70% working interest, subject
to final government approvals for the assignment of the remaining interest to other parties. The companys
fourth-quarter 2013 exploration expense is estimated to range from $225 million to $265 million, in total,
including seismic acquisition and processing, unsuccessful well costs, and various other geologic and
geophysical expenditures.
GDF SUEZ
makes rst foray
into Brazilian
exploration market
GDF SUEZ has signed an Asset
Purchase Agreement (APA) with
Vale, one of the largest metals and
mining companies in the world, to
acquire a 20% participating inter-
est in two gas exploration blocks
in the Parnaiba onshore basin, in
northeastern Brazil. The signing
of the APA marks the first entry
of GDF SUEZ into E&P activities
in Brazil. Blocks 2 and 3 cover an
area of 3,067 sq km and 3,065
sq km, respectively, in a region
relatively under-explored, with
a high potential for natural gas.
These licenses were awarded in
March 2008, as part of the ninth
exploration bidding round, to Vale
(20%), BP (40%, operator of Block
2) and Petrobras (40%, operator
of Block 3). One exploration well
in each of these two blocks is
scheduled by March 2014.
Petronas buys Talismans Montney
shale assets for $1.4 billion
Canadas Talisman Energy has agreed to sell part of its Montney acreage
to Petronas for $1.4 billion. Covering approximately 127,000 net acres, the
transaction represents 75% of Talismans Montney shale holdings in British
Columbias Farrell Creek and Cypress areas. It includes approximately
$770 million in drilling costs. With this transaction, Talisman has moved
closer to its target of $2 billion to $3 billion in divestitures by mid-2014, as
the company aims to reduce debt and cut costs. Progress Energy Canada,
which Petronas purchased last year for nearly $5 billion, is making the
acquisition. Additionally, Petronas is in the process of deciding on a
proposed LNG export terminal on Canadas western coast, at a projected
cost of roughly $8.6 billion to $10.5 billion. Shell and Chevron are also in
the race to establish export capabilities in the country.
PetroChina to acquire Petrobras
assets in Peru
PetroChina announced plans to buy Petrobras assets in Peru for $2.6
billion, expanding its portfolio in the region. In a statement to the
Hong Kong stock exchange, the Beijing-based company said it will
take over three blocks in Peruvian oil and gas fields from Petrobras.
Petrobras owns two blocks entirely, and has a 46% stake in the third,
according to the statement. Petrobras has been selling assets to help
finance projects in deepwater Brazil. China National Petroleum Corp.,
PetroChinas parent company, already owns oil and gas assets in Peru,
as well as in Venezuela. Last month, Petrobras agreed to sell oil blocks
and pipelines in Colombia to Perenco UK for $380 million.
Wood Group
enhances U.S.
shale exposure
with Elkhorn
acquisition
Wood Group has agreed to acquire
Elkhorn Holdings, a Wyoming-
based provider of construction
services for midstream oil and gas
facilities in the U.S. shale market.
Elkhorn provides infrastructure-
related services, such as pipeline
and facility maintenance,
instrumentation, and electrical,
civil and mechanical construction,
and fabrication. Elkhorn, which
generated sales of about $250
million in 2012, is headquartered in
Evanston, Wyo., and has approxi-
mately 2,200 personnel. Elkhorn
operates from 11 locations across
the Niobrara, Permian, Marcellus
and Utica shale plays. Elkhorn will
operate within Wood Group PSN,
and will continue to be led by its
existing management team under
CEO Sean Sullivan.
World record
set for real-time
wireless recording
of seismic data
Wireless Seismic, Gazprom
Neft and Asian Oilfield Services
Limited (ASIAN), have set a
world record for the number of
live seismic channels recorded, in
real time, by a cable-free seismic
recording system. ASIAN has
been acquiring a 270-sq-km, 3D
seismic survey in Kurdistan. Data
have now been acquired, with a
spread of more than 6,200 live
channels, with real-time transmis-
sion, setting a new standard for
real-time, cable-free seismic
acquisition. Photo courtesy of
Wireless Seismic.
www.fmctechnologies.com
Copyright FMC Technologies, Inc. All Rights Reserved.
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Innovative. Safe. Efcient. And decidedly protable.
World Oil/DECEMBER 2013 11
WORLD OF OIL AND GAS
MELANIE CRUTHIRDS, NEWS EDITOR
Statoil makes
Norwegian Sea
discovery at
Snilehorn prospect
Statoil has, with partners in
PL348/348B, made an oil discov-
ery in the Snilehorn prospect of the
Norwegian Sea, approximately 15
km northeast of Njord field. This is
the third near-field discovery in the
Norwegian Sea in three months.
Exploration well 6407/8-6 and
sidetrack 6407/8-6A, drilled by the
Songa Trym semisubmersible, have
proven several oil columns in for-
mations dating from the Jurassic
period. The main wellbore has
also proven oil at a deeper level in
Triassic-age rock, likely part of the
Grey Beds formation. Further data
analysis will clarify the age of this
oil-bearing formation.
Petrobras makes oil discovery in
Santos basin pre-salt Lara area
Petrobras has completed drilling the fifth exploratory
well in Block BM-S-11 in the Santos basins pre-salt Lara
area. Well 3-RJS-715D (3-BRSA-1181D-RJS), informally
known as Lara Alto ngulo, is 225 km off the coast of
Rio de Janeiro, at a water depth of 2,128 m. The well was
drilled in the central area of the concessions Discovery
Evaluation Plan, some 4 km to the north of discovery
well 1-RJS-656 (1-BRSA-618), informally known as Lara.
The well reached a TD of 6,672 m after drilling 900 m of
carbonate rock below the salt layer. A 310-m hydrocarbon
column was identified. The consortium will proceed with
the activities outlined in the Discovery Evaluation Plan,
approved by Brazils ANP.
DOE authorizes additional export volume for proposed
Freeport LNG facility
After giving conditional authorization for Dominions
proposed Cove Point facility (pictured) in September 2013,
the U.S. Department of Energy has conditionally authorized
Freeport LNG Expansion and FLNG Liquefaction to export
additional volumes of domestically-produced LNG to
countries that do not have a Free Trade Agreement (FTA)
with the U.S. Freeport previously received approval to export
1.4 Bcfd of LNG from this facility to non-FTA countries on
May 17, 2013, from its terminal at Quintana Island, Texas. Subject to environmental review and final
regulatory approval, the facility is conditionally authorized to export an additional 0.4 Bcfd, for a
total rate of up to 1.8 Bcfd, for a period of 20 years. Photo courtesy of Dominion Resources.
Alaska nets $5.6 million
in northern lease sales
Investors demonstrated significant, continu-
ing interest in obtaining new, state-owned
oil and gas leases for exploration on the
North Slope during last months annual
Alaskan lease sales, said state officials.
Preliminary results show that Alaskas
Division of Oil and Gas received 90 bids
from eight bidding groups on 89 tracts in
the North Slope Areawide sale, and two
bids from one bidding group on two tracts
in the Beaufort Sea Areawide sale. No bids
were received for the North Slope Foothills
Areawide sale. Preliminary results show
that winning bonus bids totaled approxi-
mately $5.6 million for the North Slope and
Beaufort sales, combined.
Canadian leader defends
Keystone pipeline
Alberta provincial Premier Alison Redford defended
her provinces environmental record while lobbying
in Washington for the Keystone XL pipeline, as new
questions surfaced regarding Canadas ability to
meet greenhouse gas reduction targets. Redford, in
a fifth trip to promote the $5.3-billion project that
would connect the oil sands in her province to refin-
eries on the U.S. Gulf Coast, met with officials at the
U.S. Environmental Protection Agency, the White
Houses Council on Environmental Quality and
the State Department. The State Department has
undertaken an environmental review to estimate
the extent to which Keystone would contribute to
global warming, which has become the central issue
in TransCanadas five-year effort to get approval to
build the pipeline.
Black Elk Energy makes two
discoveries in Texas
Black Elk Energy Offshore Operations, an independent
headquartered in Houston, has announced two conven-
tional pay discoveries onshore South Texas. The first dis-
covery tested in excess of 8,000 boed, while the second
tested in excess of 3,000 boed, which was primarily oil.
The company expects the new wells to produce, initially,
at a well allowable rate of 1,000 boed, and decline to
100 boed after six months, with total estimated ultimate
recoveries of 300,000 bbl. Black Elk is in the process of
acquiring a substantial land position to further exploit
the success of these discoveries. A third exploration well
began drilling Nov. 15, 2013.
DISCOVERIES //////////////////////////////////////////////
GOVERNMENT/REGULATORY ///////////////////////////////
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Sidetrack the uncertainty
of cement plugs.
Drill ahead in one trip.
Sidetracking with a cement plug means
extra materials, long cure times,
and often multiple setting attempts.
The TrackMaster OH whipstock sidetracking
system eliminates these complications by
setting a reliable hydraulically expandable
anchor so you can drill ahead in one trip.
Formation Evaluation
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Well Construction
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Completion
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Production
2013 Weatherford. All rights reserved.
Weatherford delivers an uncompromising commitment to well integrity.
We ensure effo|ent, safe and effeot|ve operat|ons throughout the ||fe of a we||.
Design Proven well-engineering and project-management expertise
Dr||| - nmatohed r|sk-m|t|gat|on teohno|og|es, |no|ud|ng managed
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Zero to|eranoe for fa||ure ensures opt|mum produot|v|ty, prooess safety
and peace of mind.
Contact and collaborate with us at wellintegrity@weatherford.com.
World Oil/DECEMBER 2013 13
WORLD OF OIL AND GAS
MELANIE CRUTHIRDS, NEWS EDITOR
Enhance the safety in the wells by
Le||ve|ng ||g| qua||ty |||ustanons
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Chevron conrms
rst oil production
from Papa-Terra,
ofshore Brazil
Chevron confirmed that, with
Petrobras, it has started crude oil
production from Papa-Terras FPSO
vessel offshore Brazil. Chevron
holds a 37.5% interest in Papa-Terra
field, while Petrobras operates
and has the remaining 62.5%.
Approximately 110 km southeast of
Rio de Janeiro, at a water depth of
approximately 1,190 m, Papa-Terra
is a heavy oil development within
Block BC-20 of the southern
Campos basin. Discovered in 2003,
Papa-Terras development features
the FPSO and the first tension leg
wellhead platform in Brazil, which
is expected to start full production
in 2014. Papa-Terra has installed
capacity to produce up to 140,000
bpd. Photo courtesy of Petrobras
News Agency.
Gazprom Neft launches production
facility at North Urengoy
CJSC Northgas, a subsidiary of Gazprom, has announced the
commissioning of the East Dome production facility at North
Urengoy field. As of now, 18 production wells have been
drilled at the East Dome. The East Domes infrastructure
also includes a gas treatment unit with a capacity of 6 Bcm/
year of gas, gas gathering networks, a gas pipeline, and a
condensate pipeline that lead to the West Dome. The launch
of the East Dome will raise production at North Urengoy field
to its design level in 2014.
ConocoPhillips receives consent
to use Ekosk 2/4 Z facility
First established in
1971, a new produc-
tion facility to serve
Ekofisk field, Ekofisk
2/4 Z, is being
designed. The well-
head facility, which
will be connected
by a gangway to
the Ekofisk Complex
(pictured), where
the wellstream will
be processed, is designed for a working life of 40 years.
ConocoPhillips, operator at Ekofisk, is planning 36 wells for
the facility. The wells are to be drilled using a jackup rig.
Photo courtesy of ConocoPhillips.
Crude reigns over upstream oil and gas economy
With Texas crude oil output increasing too quickly for state regulators to track, the Texas Petro
Index (TPI) set another new high in September at 292.2, brushing aside signs that the states
upstream oil and gas economy could be approaching a plateau. According to Texas Railroad
Commission estimates, Texas producers recovered more than 69.9 million bbl of oil during
September, 17% more than in September 2012. But crude output has grown even faster than
current numbers would indicate. In the 12 months since its initial estimate, the commission revised
September 2012 crude output upward by more than 12.5 MMbbl to about 59.8 MMbbl.
Firm reports
$3.7-billion stake
in Exxon Mobil
Berkshire Hathaway recently
reported a stake in Exxon Mobil,
worth an estimated $3.7 billion,
marking the companys largest
new holding since IBM in 2011. As
of Sept. 30, the company owned
40.1 million shares of Exxon Mobil,
with the oil majors market value
hovering just below the $100-per-
share mark. Exxon Mobil is one of
the worlds most efficient energy
producers, with a finding cost of
$19.27/boe last year, according to
data compiled by Bloomberg. That
compared with $21.4/boe costs
for Chevron and $22.66/boe for
BP. The company boosted oil and
natural gas production by 1.5%
during the third quarter, reversing a
two-year stretch of output declines.
Rosneft, PetroVietnam ink
agreements for ofshore projects
Rosneft and PetroVietnam have signed an agreement on
basic terms for geological surveying, and hydrocarbon
exploration and production in the Pechora Sea. The parties
also signed a Memorandum of Understanding for Rosnefts
potential acquisition of a stake in the production-sharing
agreement (PSA) for Block 15-1/05, in the Vietnamese
offshore area.
Ukraine signs agreements
with Chevron, Exxon Mobil
In an effort to cut costs and reduce its dependence on
Russia, Ukraine has signed natural gas agreements with
Chevron and Exxon Mobil. The countrys government inked
a production-sharing agreement for the extraction of shale
gas in Oleske field with Chevron. In a separate deal, expected
to close soon, an Exxon-led group will gain rights to explore
the Black Seas Skifska field. Ukraine depends on Russian
imports for more than 60% of its domestic energy needs,
and has recently signed a PSA with Shell to develop shale
resources in Yuzivska field.
PRODUCTION //////////////////////////////////////////////
BUSINESS /////////////////////////////////////////////////
Read the case study at
slb.com/Quartet-Muzic
Quartet
DOWNHOLE RESERVOIR
TESTING SYSTEM
Petrobras saved rig time with real-time wireless
data transmission on a deepwater well test.
The Quartet system enabled by Muzic wireless telemetry delivered highly accurate pressure data
to surface for the duration of a Petrobras deepwater well test offshore Brazil.
Obtaining downhole data in real time allowed Petrobras to terminate the test earlier than planned
and to know with certainty that their test objectives were achieved.
Deghosting solutions still emerging
WHATS NEW IN EXPLORATION
DR. WILLIAM J. PIKE, EDITORIAL ADVISORY BOARD CHAIRMAN
World Oil/DECEMBER 2013 15
The issue of receiver ghosts is long-
standing in the seismic industry. Basically,
streamers towed at shallow depths give
the high-end frequency content needed
for resolution. However, they attenuate
the low-end frequency required for deep
penetration, in addition to making the
data more susceptible to swell noise. Deep
streamer towing, alternatively, enhances
low frequencies but attenuates high fre-
quencies. With deep towing, swell and am-
bient noise are reduced. These frequency
issues cause receiver ghosts, which are the
part of the signal that reflects off the water
surface and is subsequently recorded on its
way down by the streamer.
Ghosts have, traditionally, proved dif-
ficult to eliminate through data process-
ing, leading to attempts to eliminate them
in acquisition through methods, such as
slanted-streamer towing, dual sensors and
ocean-bottom sensor placement. Yet, the
problem is not fully solved. Nowhere is
that better illustrated than in the number
of patents filed for deghosting solutions in
2013 alone. Below is a partial list.
A. 11/21/13; Patent 20130308420;
Pre-stack deghosting of seismic data. The
method includes receiving the seismic data
recorded by detectors distributed along a
variable-depth profile; calculating migrat-
ed (d1) and mirror-migrated (d2) gathers
based on the seismic data, wherein the mi-
grated and mirror-migrated gathers depend
on a feature characterizing a configuration
of the seismic system; applying a joint de-
convolution model to the migrated and
mirror-migrated gathers (d1, d2) to cal-
culate a single deghosted gather (dg); and
generating a final image of the subsurface
based on the single deghosted gather (dg).
B. 10/31/13; Patent 20130286777;
Generating deghosted seismic data. One
embodiment relates to a method for de-
ghosting seismic data from a marine seismic
survey. The data from the marine seismic
survey are obtained, where the marine seis-
mic survey was performed using multiple
sub-sources towed at two or more different
depths, and fired at distinct time-delays.
C. 10/24/13; Patent 20130282292;
Premigration deghosting of seismic data
with a bootstrap technique. Methods
and systems for optimized receiver-based
ghost filter generation are described. The
optimized ghost filter self-determines its
parameters, based on an iterative calcula-
tion of recorded data transformed from a
time-space domain to a tau-p domain.
D. 10/24/13; Patent 20130279290;
Deghosting variable depth streamer data.
The method may include receiving input
seismic data recorded by seismic receivers
located at different depths (zr), generat-
ing migration data (du) and mirror migra-
tion data (dd) from the input seismic data,
deriving a ghost-free model (m) based
on simultaneously using the migration
data (du) and mirror migration data (dd),
generating primary (p) and ghost (g) da-
tasets based on the ghost free model (m),
simultaneously adaptively subtracting the
primary (p) and ghost (g) datasets from
the migration data (du) to provide adapted
primary (p1 and p2) and adapted residual
(r1 and r2) datasets and generating a fi-
nal image (f) of the subsurface based on
the adapted primary (p1 and p2) and the
adapted residual (r1 and r2) datasets.
E. 08/29/13; Patent 20130226463;
Deghosting marine seismic wavefields
using cost-functional minimization. In
one aspect, the method computationally
transforms recorded wavefield data from
the space-time domain to a wavenumber-
frequency domain and computationally
deghosts the wavefield data in the wave-
number-frequency domain.
F. 07/18/13; Patent 20130182536;
Wavefield deghosting. A technique in-
cludes receiving sensor acquired data,
which includes pressure data representa-
tive of at least one pressure measurement
of a wavefield and particle motion data
representative of at least one particle mo-
tion measurement of the wavefield. The
technique includes filtering the pressure
data and the particle motion data with a
plurality of directional filters to provide a
plurality of filtered datasets.
G. 07/11/13; Patent 20130176818;
Variable-depth streamer srme. Methods
and systems for variable wavelet correc-
tion are described. A variable depth da-
taset is deghosted before presentation to
a multiples prediction step of multiples
elimination model.
H. 05/30/13; Patent 20130135966; Ac-
quisition and processing of multi-source,
broadband, marine seismic data. A meth-
od and system of acquiring and processing
multi-source, broadband, marine seismic
data so that at least a part of said acquired
data is partially or fully de-ghosted on the
receiver side and then partially or fully re-
assembled to a pre-stack dataset. At least
one non-uniformly horizontal streamer is
towed. At least two seismic sources emit
seismic signals at spaced positions.
I. 05/23/13; Patent 20130128695; De-
ghosting p-waves. Computing device and
method for determining primary and ghost
components from recorded p-waves. The
method includes receiving seismic data
(r, v) with regard to the p-waves, wherein
the seismic data include vertical and radial
components recorded with a buried two-
component receiver; calculating with a
processor a primary component (p) and a
ghost component (g) from the vertical and
radial components; and computing an im-
age of a subsurface based on the primary
and ghost components (p, g).
J. 01/31/13; Patent no. 20130028049;
Handling rough sea and irregular recording
conditions in multi-sensor, towed streamer
data. Rough sea elevation is estimated from
a high-frequency portion of recorded pres-
sure data and recorded vertical velocity
component data. Generalized deghosting
and datuming operators are constructed,
which consider estimated rough sea eleva-
tion and irregular recording depths.
WILLIAM.PIKE@CONTR.NETL.DOE.GOV / Bill Pike has 45 years
experience in the upstream oil and gas industry, and serves as Chairman
of the World Oil Editorial Advisory Board. He is a consultant with
Leonardo Technologies and works, under contract, in the National
Energy Technology Laboratory (NETL), a division of the U.S. Department
of Energy. His role includes analyzing and supporting NETLs numerous
R&D projects in upstream and carbon sequestration technologies.
Your subcontractor may be at risk
DRILLING ADVANCES
JIM REDDEN, CONTRIBUTING EDITOR
World Oil/DECEMBER 2013 17
Picture this: An integrated service
company, as part of a closely-guarded
R&D initiative, contracts an indepen-
dent lab to run stability tests on a tool,
the results of which could give it a strong
competitive edge. While highly respected
within its sector, the small lab does not
have the cyber safeguards intrinsic of a
much larger global organization. As a re-
sult, hackers manage to pilfer the test re-
sults and tool specs, which, of course, are
made available to the highest bidder.
Cybersecurity experts warn that such
scenarios threaten to become all too com-
mon, as computer louts find smaller com-
panies, with their more poorly defended
networks, much easier pickings than the
corporate behemoths that retained them.
Weve previously addressed the cybersecu-
rity issue as it pertains, rightfully so, to the
safety and environmental aspects of highly
computerized drilling systems, but the cy-
ber theft of intellectual property (IP), and
the resulting loss of competitive advantage,
holds huge economic ramifications, they
say. The cyber stealing issue has grown to
the point that API in November thought
it prudent to sponsor a Cybersecurity
Conference and Expo in Houston, to try
and get some semblance of a handle on a
problem that some believe will never be
eradicated. At the conference, experts told
the industry folks attending that sharing in-
formation on attacks theyve encountered
could help, at least, to detect trends.
In October, cybersecurity firm Alert
Logic, of Houston, released an extensive
analysis that presented some startling
data on the percentage of computer at-
tacks targeting the oil and gas industry,
compared to the general commercial
community. Alert Logic told the Houston
Chronicle that it found companies in the
energy sector being targeted much more
often than their counterparts in other in-
dustries, to the tune of some 9,000 threats
between Jan. 1 and May 23.
More specifically, the Oct. 23 report,
State of Cloud Security Bulletin on In-
formation Security in the Energy Sector,
found that: 1) A staggering 67% of energy
companies experienced brute force attacks
vs 34% for other businesses that the com-
pany services. Attackers, it says, look for
opportunistic points of vulnerability in
networks housing confidential geophysical
and other critical, and valuable, explora-
tion data. And 2) Some 61% of energy-re-
lated organizations experienced malware/
botnet infiltration attacks vs only 13% for
the other concerns. These attacks, Alert
Logic says, sneak into physical infrastruc-
ture systems that control key segments of
the industry. The company said that while
SCADA systems are most vulnerable to
hacking, it emphasized that much of the
problem lies with employees plugging,
into the company network, personal flash
drives and other appliances that may be in-
fected with viruses and other malware.
This industry doesnt see the typical
web application attacks. It experiences a
greater magnitude of security threats that
could have global repercussions for years
to come, Stephen Coty, Alert Logics di-
rector of security research, said in the bul-
letin, which is available for free download
at www.alertlogic.com/csr.
Even though those among the most
susceptible to cyber thieves are the sub-
contractors, Coty said the major compa-
nies typically do not emphasize cyberse-
curtity anywhere near the HSE vigilance
they insist upon for their employees
and contractors.
Coty went on to say that for operators
working in tight hole environments, or
service companies holding the formula-
tion for a unique frac fluid, for instance, the
consequences can be particularly harmful.
People are wanting to know where theyre
drilling, what their secrets are, whats the
formula for their fluids? This is all data that
people are interested in.
Research pays off. He said your typi-
cal would-be cyber thief is nothing but
thorough. First, the thief will research an
operator, service company or other entity
to discover the subcontractors who may
hold information worth a bundle on the
open market. He will go on to research the
key subcontractor employees and acquire
just enough personal information to allow
him to send directed emails that would en-
tice them to click on a corrupted link that
would give him access to the companys
computer network.
Alert Logic and other cybersecurity
outfits say that one of the most prevalent
ways of hacking into a computer network
is through brute force, as its known in
cyber jargon. In other words, electronic
thieves steal passwords that give them
clear access to company data, reinforc-
ing long-held recommendations that the
best line of defense is to come up with an
ultra-complicated assortment of letters
and numbers that would stymie efforts to
break it. However, trying to keep track of
complex combinations can be an off-put-
ting proposition, to say the least.
Well, it appears help in that regard may
be on the way. In leafing through the Nov.
25 issue of Time magazine, I came across a
special report on the 25 Best Inventions of
the Year, one of which grabbed my atten-
tion as the perfect antidote to brute force
hacking: The edible password pill.
Thats right. Venerated Motorola sup-
posedly has come up with a pill compris-
ing a tiny chip that can store the most com-
plicated of passwords. According to Time,
the pill is swallowed daily and activated by
stomach acid, after which it emits a specific
EKG-like signal that the users computer
or phone instantly detects. Essentially, the
users body becomes a breathing password,
according to the article.
Lest one dismiss this as too bizarre to be
believed, Time says the U.S. Food and Drug
Administration (FDA) apparently gave its
blessing to the concoction. We can only
assume that the FDA is involved to ensure
that it is not manufactured with any trans
fat and stays within recommended dietary
guidelines.
JIMREDDEN@SBCGLOBAL.NET / Jim Redden, a Houston-based
consultant and a journalism graduate of Marshall University, has
more than 38 years of experience as a writer, editor and corporate
communicator, primarily on the upstream oil and gas industry.
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The Bakken shale and
the Red Queens race
WHATS NEW IN PRODUCTION
HENRY TERRELL, CONTRIBUTING EDITOR
World Oil/DECEMBER 2013 19
A slow sort of country! said the
Queen. Now, here, you see, it takes all
the running you can do, to keep in the
same place. If you want to get some-
where else, you must run at least twice
as fast as that!
Through the Looking-Glass, by
Lewis Carroll
The Red Queens race has been used as
a metaphor in many diverse contexts, and is
also well-known in the oil patch. The U.S. is
producing more crude oil than it has since
1988, about 7.8 million bpd. The U.S. En-
ergy Information Administration (EIA) es-
timates that 29% of it comes from tight oil
regions. Among these, North Dakotas Bak-
ken shale has been a true champion. Recent
figures from the states Department of Min-
eral Resources reported a flabbergasting
911,000 bopd, almost 30% higher than the
same time last year. The Bakken is headed
for a million bopd, and its hard to imagine
anything stopping its dizzying ascent.
However, the chart on this page, pub-
lished by EIA, illustrates the Red Queens
dilemma. It shows projected change in
Bakken crude production from Novem-
ber to December. Note the precipitous
increase of 89,000 bopd from newly com-
pleted shale wells. Thats up from an es-
timated October-November increase of
86,000 bopd, so production is not only ris-
ing, its accelerating. The middle bar tells
the other half of the story: older legacy
wells are losing production at a steep rate.
The loss of 63,000 bopd brings the net
increase to a mere 26,000 bopd. And,
despite a climbing rate of production in-
creases, the decline is likewise picking up
speedloss from legacy wells in the previ-
ous month was 60,000 bopd, meaning the
rate of increase is still impressive, but then
it has to be.
Skeptics have been jumping all over
these numbers. The folks over at the Oil
Drum website (recently discontinued)
have been particularly vociferous in criti-
cizing the Bakken gold rush, calling it
a game where the media is the referee,
and the public doesnt know the rules.
Norwegian energy writer Rune Likvern
warned: Technology and/or price can-
not overcome the inevitable fact that field
size and well productivity [will decline]
in most plays, whether in shale or any oth-
er. Shale plays do not get a pass on the
laws of physics
Looking at legacy wells high decline
rates, one might see the critics point. It has
been estimated that the U.S. will have to
drill 6,000 new wells per year just to stay at
current production, using current technol-
ogy. As the focus shifts even more to shale,
that target number may have to rise, too.
Production declines in shale formations
vary from area to area, but in general, you
can see a 60%-70% decline in the first year,
compared to traditional wells, which can
take two years to decline 50%.
Continental Resources, which sparked
the Bakken boom in 2004 with its Robert
Heure 1-17R well, isnt standing in place.
The company plans capital spending of
$4.05 billion next year to meet its goal of
a 38%-40% production increase. Of that,
$2.505 billion is slated for the Bakken. The
company is reportedly testing tighter 360-
acre and 160-acre spacing. This practice
raises production but also elicits concerns
about depleting resources too quickly.
EOG Resources recently reported im-
proved results from 160-acre spacing on
some of its Bakken wells. EOG also has
been increasing the length of its laterals
and the number of fracture stages. This,
combined with better fracturing technolo-
gies, has effectively tripled the amount of
oil and gas recovered over a wells lifetime.
Recent completions have had IP rates be-
tween 2,120 and 2,685 boed.
Crowded house. The question of well-
bore spacing is a related issue. How close
can two wells be to each other, before they
begin to interfere, lowering the produc-
tion of each? In hydraulic fracturing, 600-ft
wellbore spacing is a fairly common prac-
tice, but some operators have experiment-
ed with 300-ft spacing.
Kevin Thuot at Drillinginfo analyzed
drilling data in the Bakken, to try and de-
termine if well spacing had a detrimental
effect on production. He compared data
from pairs of wells drilled by the same
operator at least six months apart. Logic
would suggest that if interference oc-
curred, the secondary well would produce
less than the primary well over a given pe-
riod. It was found that well interference
occurred when wellbores were spaced less
than about 2,000 ft apart, and secondary
wells produced at 85% of the rate of the pri-
mary in the tightest spacing. When spacing
was greater than 2,000 ft, the situation was
reversed: secondary wells generally out-
produced primary wells over a six-month
period (as operators gain experience and
drill more productive wells).
When comparisons were made for 12
months of production from wells drilled
at least 12 months apart, the trend was
more pronounced, with 2,000-ft spacing,
again, being the breakpoint. In these cases,
the secondary wells with the tightest spac-
ing produced at 70%-80% of the primary
rate. Over 24 months with wells drilled 24
months apart (a small dataset) the trends
continued, but with 60% secondary pro-
duction from the tightest spacing.
Closer spacing, pad drilling and lon-
ger, better laterals are all contributing and
competing factors in the ultimate life of the
Bakken shale play. However, will all the
running you can do be enough?
HENRY.TERRELL@GULFPUB.COM
0
Nov.
976,000
bopd
Source: EIA
Production
from new
wells
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150
miswaco.com/deepwater
DEEPWATER
CHALLENGES
Deepwater drilling uids and services
leadership By far, for years
M-I SWACO drilling uids technology, engineering and drilling waste management services have
helped deliver an average of 139 deepwater wells per year for the last 7 years. This is more than
twice the number of any other provider, and includes 290 wells classied as ultra-deepwater.
Its an unrivalled track record that demonstrates the proven performance of our deepwater-certied
specialists and our technical portfolio in the most challenging drilling environments.
Evolving standards for Gulf
of Mexico well containment
OFFSHORE IN DEPTH
MELANIE CRUTHIRDS, NEWS EDITOR
World Oil/DECEMBER 2013 21
As domestic and international majors
continue to invest in E&P activities in
the Gulf of Mexico (GOM), where water
depths and wells are getting deeper, the
need to be well-prepared for a containment
incident is becoming increasingly impor-
tant. According to Barclays, by the end of
2013, E&P spending is expected to have
hit a record high of more than $670 bil-
lion, with a healthy chunk going to GOM
operations. Companies are slowly ramping
up activity in the region post-Macondo,
and the Bureau of Safety and Environmen-
tal Enforcement (BSEE) virtually ensures
that operators protect their enormous
investments by regulating offshore safety
systems and spill response planning.
In June of this year, BSEEs Safety and
Environmental Management Systems
(SEMS) II rule took effect, expanding,
revising and adding to the list of safety
regulations by which GOM operators are
required to abide. SEMS II provides tools
that aim to help companies mitigate, or
potentially avoid, offshore safety issues
that may result from factors like human
error or equipment failure. Guidelines for
appropriate stop-work authority, employ-
ee participation and job safety analysis are
included in the new rule, along with key
regulations that enable offshore person-
nel to report unsafe working conditions
directly to BSEE, and to require indepen-
dent, accredited audit team leads.
Following a roughly six-month compli-
ance window, only 12 of the 84 companies
subjected to a Nov. 15 SEMS II deadline
failed to submit audit plans in adherence
with the new regulations. Firms that did
not comply in time were given a three-day
period in which to reach a safe stopping
point in operations, starting Nov. 16. BSEE
said it determined that the impact of these
stop-work orders on GOM production
would be miniscule. The agency reported
that, while most of the companies [cited]
are conducting plugging and abandon-
ment, or other decommissioning activities,
the elements of a SEMS program are appli-
cable to all offshore operations. This latest
announcement from the regulator means
that many of the regions bases are covered,
but not all of them.
On the other side of the equation, and
often working closely with BSEE, is Marine
Well Containment Company (MWCC).
Initially formed by four companies follow-
ing the 2010 spill, the groups membership
now comprises Anadarko, Apache, BHP
Billiton, BP, Chevron, ConocoPhillips,
Exxon Mobil, Hess, Shell and Statoil. After
making available an interim containment
system (ICS) in February 2011, MWCC
and its members are in the process of im-
plementing an expanded containment sys-
tem (ECS) by late 2014.
Much like the ongoing efforts to update
and augment SEMS regulations, the com-
panys expansions to its current system,
and plans for the future, are meant to keep
pace with the changing landscape of E&P
activity, specifically in the Gulf. MWCC
most recently upgraded the single-ram
capping stack in its ICS to be able to cap
wells with fluids up to 350F, at pressures
up to 15,000 psi; conditions that are in-
creasingly common, as group members
explore newer, more challenging plays.
Increasing the rating to 350F re-
quired upgrading multiple pieces of
equipment, including a lower spacer
spool, ATV valves, upper H4 mandrel
and SCC blind flange, to ensure higher
temperatures could be tolerated, said
MWCC CEO Marty Massey. The group,
he said, received technical input from its
member companies and industry provid-
ers throughout the rerate process, and
also worked closely with regulators to en-
sure all requirements were met.
MWCC plans to bring additional well
containment capabilities to the GOM
through the roll-out of its ECS, which
will considerably reduce the amount of
vessel traffic required in a response situ-
ation, allowing for the capping of wells
beneath floating structures, such as TLPs
and spars. The groups CTO, Charlie Mill-
er, explained that the new systems most
significant updates include an increased
flowback depth, from 8,000 ft to 10,000
ft, as well as expanded flowback capacity.
If a well cannot be capped, fluids can be
flowed back to two modular capture ves-
sels (MCVs)converted Aframax tank-
ersat a rate of 100,000 bpd, up from
60,000 bpd in the current set-up.
Through yearly workshops with its
member companies, Miller said MWCC
is able to glean information about things
like planned drilling designs and well
conditions, to anticipate potential well
containment needs. Because MWCC
members in the Gulf must be able to dem-
onstrate access to proper containment ca-
pabilities prior to receiving the necessary
drilling permits, a constantly-evolving
subsea containment system is of unprec-
edented importance.
Clarification: Further clarifying Pa-
cific Drillings fleet, mentioned in this
column last month, the firm already op-
erates four drillships. The Pacific Khamsin
will be the fifth rig to join the firms fleet,
and its third in Nigeria.
MELANIE.CRUTHIRDS@WORLDOIL.COM
Marine Well Containment Company
recently upgraded the temperature rating
of its single-ram capping stack in response
to industry needs in the Gulf of Mexico.
Customer:
Oil renery, Russia.
Challenge:
High reliability in extreme operating conditions.
Result:
Elliott centrifugal compressors have operated
for more than twenty years without overhaul.
They turned to Elliott
for reliable compression solutions.
Reners everywhere turn to Elliott compressors and turbines for critical applications such
as hydrotreating and hydrocracking, uid catalytic cracking (FCC), coking and alkylation.
Who will you turn to?
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www.elliott-turbo.com
The world turns to Elliott.
Colombia: Oil industry in contrast
OIL AND GAS IN THE CAPITALS
MAURO NOGARIN, CONTRIBUTING EDITOR, LATIN AMERICA
World Oil/DECEMBER 2013 23
Oil production in this South American
country is going through a tough time,
due to restricted operations and sabotage
attempts by terrorists, which have result-
ed in a net decline of 9,400 bpd. The oil
industry registered a production drop in
October, due to operational restrictions
and public order issues in several produc-
tion areas, as well as problems with the
transportation infrastructure.
According to Colombias Ministry of
Mines and Energy, production during
October 2013 averaged 986,000 bopd,
which, even though it shows a 2.6% in-
crease over the same month a year ago
(961,000 bopd in October 2012), still re-
flects a 0.9% decline from the immediate-
ly previous month. This troubling trend
began in September 2013, when produc-
tion declined 36,000 bopd from the Au-
gust level. The Colombian oil industry is
showing stress, due to terrorist attempts
to attack the petroleum transportation
infrastructure in different areas of the
country, as well as security issues in key
production areas. The Ministry reports
374 attacks against infrastructure from
January to August of this year. This rep-
resents a 21.4% increase over all attempts
registered during 2012, which totaled
308. These transportation disruptions
have greatly contributed to the countrys
production decline. However, they are
just one factor in the equation.
According to the largest international
petroleum company operating in Co-
lombia, Pacific Rubiales Energy, its total
field production for third-quarter 2013
was 311,450 boed, which was 1,385 boed
greater than second-quarter 2013s figure.
This new level of production represents
a 28% increase over the same period in
2012. However, the market did not take
the news well, and stock prices declined
7.3%, due to the fact that projected after-
tax revenue was expected to be $700 mil-
lion, but came in at only $610 million.
One spot of good news in the Colom-
bian oil industry is the negotiations be-
tween Ecopetrol and Venezuelan state firm
PDVSA, to create a JV to increase oil pro-
duction in the latter countrys mature oil
fields. This project will benefit both com-
panies and allow Ecopetrol to expand its
international operations. Venezuela is an
obvious choice for Ecopetrol to expand,
allowing the company to add additional
output to its dwindling local crude produc-
tion, and allow it to increase oil exports,
which are currently not meeting its goals.
This joint agreement with PDVSA is a
result of Ecopetrols success in increasing
production in mature oil fields. Ecopet-
rol reported that in La Cira Infantas oil
field, it was able to recover 38,196 bopd,
a production level which had not been
achieved since 1951. The technologies
applied to this oil field have increased pro-
duction 700%, from 5,000 bopd in 2005
to the current 38,196 bopd. However,
even with these new extraction technolo-
gies, other E&P difficulties in the Colom-
bian oil industry remain. It is predicted
that oil production this year will decline
12%. What is worse news, is that this rate
could accelerate in the coming years.
According to the Colombian Petroleum
Association (ACP), the rate of drilling ex-
ploratory wells, which has been increasing
15% to 20% in recent years, will begin to
decline, due to complications in continu-
ing these activities. ACP President Alejan-
dro Martinez stated that in 2013, the oil
industry will have drilled 115 new explor-
atory wells, nearly achieving the govern-
ment-set goal of 135 wells. The report pre-
sented by ACP to the Petroleum Services
Board in May pointed out that the number
of drilling rigs in operation had declined
5%. These statistics indicate that Colom-
bia is on a downward production curve,
due to the lack of new, important discover-
ies in recent years, decreasing production
levels and the drop in exploratory drill-
ing. This decline in exploratory activity is
a worrisome trend, especially when one
considers the overall, increased growth of
the general economy, which, in the second
quarter, was 4.2%. All of this indicates that
the Colombian oil industry is not keeping
production at a level that will sustain ex-
pansion of the overall economy.
The only hope that Colombia has of re-
versing this dismal outlook would be good
news from Pacific Rubiales Energy, which
recently received two environmental li-
censes from the National Environmental
Licensing Authority (ANLA) in Novem-
ber. These licenses allow the company
to proceed with production of two new
fields, CPE-6 and Guama, which are 70
km southeast of Campo Rubiales oil field
and encompass 593,000 hectares. Pacific
Rubiales has 50% equity in these two fields
along with Talisman Energy Inc.
Pacific-Talisman has already drilled six
stratigraphic wells in the lease, as well as
10 exploratory wells that have confirmed
the presence of important hydrocarbon
deposits in the region.
It is important to point out that the
environmental license is global in nature,
and permits exploration and develop-
ment of CPE-6 oil field in the future. The
two partners plan to drill additional ex-
ploratory wells and test production flows
in the existing wells during the remainder
of 2013. Pacific-Talisman plans to drill 19
additional wells in 2014, including two
exploratory wells and 17 producers, to
evaluate output potential.
M.NOGARIN@MEDIASUR.NET
Map of the oil elds operated by Pacic
Rubiales, including CPE-6 (image courtesy
of Pacic Rubiales Energy).
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World Oil/DECEMBER 2013 25
At a time when the global oil and gas
industry is engaged in robust E&P, tech-
nology continues to play a major role in
companies operations. However, the very
technology that drives our industrys suc-
cess is being stymied, not from a technical,
innovative perspective, but by a large, and
growing, personnel problem. The effects
from this HR roadblock dont just impact
daily operations. They also hamper com-
panies abilities to address cybersecurity
issues worldwide.
By generally accepted estimates, more
than 300,000 technical, engineering and
IT-related jobs in the U.S. industry, alone,
are unfilled. The causes are three-fold. The
primary reason is that the nations univer-
sities are not producing enough technical
graduates. Second is the personnel short-
fall in meeting rapidly increasing future
demand. Third is the looming crisis of re-
tiring expertise, dovetailing with a shortage
of experienced, mid-range professionals
who can advance on the career ladder.
Additionally, amid all the talk of ex-
panding H-1B visa personnel, fear mon-
gers only make the situation worse. In the
U.S., for example, having the job market
overrun by foreign workers, laboring at a
fraction of typical salaries, is not a realis-
tic scenario. On the contrary, the industry
can find wage-appropriate work for virtu-
ally everyone who is looking for a skilled
positioneven if the labor pool were
increased, to close the existing, or per-
ceived, gap. Anecdotally, one premier en-
gineering educational institution recently
said that it receives 15 offers for each
graduate in its computer science program.
However, this may beg the question of
how cybersecurity ties in with recruiting
skilled people on the E&P operational
side, when electronic security is widely
perceived as being an IT issue. Actually
its all interrelated. Keeping a companys
business running requires back office
people with a diverse knowledge base:
from knowing how to keep networks
functioning to hooking up communica-
tions systems.
So, when companies are involved in
process automation, SCADA and im-
proved data flow (oilfield of the future),
for instance, management invariably finds
itself lacking certain resources. When more
and more governmental requirements
force companies to cope with reporting is-
sues, such as affordable care (in the U.S.)
and, increasingly, cybersecurityon top
of everything elsethe companies are of-
ten caught flat-footed.
Thats because cybersecurity is essen-
tially data security, integrity and assurance.
These issues are not necessarily classed as
IT, but, nevertheless, they are run by the
same people. And, as a result, an intriguing
collision of interests has developed. The
industry has a pool of people who need to
know about IT, but who also need to know
about, and understand, the nitty gritty of
the industry. Right in the middle enters the
new 800-lb gorilla of cybersecurity.
Whats the solution? It all comes full
circle to HR, once again. Many of the
problems that companies experience can
be solved by cloud computing, but these
issues have been held in check, due to a
personnel shortage. Meanwhile, during the
industrys boom times, all signs point to
the new reality that educated, skilled and
talented people can be attracted to jobs
within oil and gas. That goes for both sides
of the HR equation: operations and IT, the
latter delivering the Cloud solution to cy-
bersecurity for companies of all sizes.
Beyond not producing and attracting
enough new graduates, the outsourcing
paradox is the worst enemy of many com-
panies. Companies, which have outsourced
virtually every function that appears viable,
have stopped short of bringing in outside
cybersecurity expertise.
Yet, real-world experience shows that
the more assistance that CEOs and man-
agement get from one or more vendors,
the more likely they will be to find the key
to leveraging their HR problems and, in
turn, solving the cybersecurity issue. Ad-
ditionally, companies should call an abrupt
halt to keeping all of their data behind their
own brick and mortar. They should follow
the example of industry leaders and utilize
secure data centers.
Meanwhile, among every issue that can
be brought front and center, citing a com-
panys small size is potentially the most
deadly way to get lulled into a false sense
of security. Hearing the comment, Were
small fish; they [hackers] wouldnt bother
with us. With some rudimentary cyber
defenses, well be okay, should make an
executive cringe because its spectacularly
unwise on both counts.
Firstly, enough companies have now
been hacked that companies should clearly
realize that having a cybersecurity plan is
necessary. Companies must be able to re-
act. They must know, specifically, how they
will respond to their data and IT systems
coming under attack. And secondly, com-
panies without a plan run the risk of having
shareholders rebel, perceiving that execu-
tives are shirking fiduciary responsibility, if
they fail to protect their investments.
In conclusion, companies cannot af-
ford to view cybersecurity as either a
technical or organizational issue. Instead,
it is, fundamentally, a personnel issue. In
wading through the labyrinth of opera-
tions, regulations and different types of
cyber attacks, it is evident that there is no
single technical solution. Rather, cyber-
security must be developed by capable
people on both the IT and operational
sides of the business.
As an astute industry insider comment-
ed, Its just a factcybersecuritys not the
technology issue that so many executives
think it is. Its a people issue, and we have
to leverage our resources to deal with it.
Otherwise, the industry will be so far be-
hind the proverbial eight-ball that its hard
to see if well ever recover.
Before joining the GlobaLogix leadership team in 2006, Chuck
Drobny was COO at Boatracs. In previous positions, he also managed
engineering operations and maintenance of Ingram Barge Companys
fleet of 4,000 barges, and provided engineering analysis as a Mobil
Oil representative. Mr. Drobny holds a BS degree in engineering from
the U.S. Military Academy at West Point, and MS degree in business
management from the University of Cincinnati.
Cloud computing and cybersecurity
are fundamentally HR problems
EXECUTIVE VIEWPOINT
CHUCK DROBNY, JR., CEO, GLOBALOGIX


2
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Advancing Reservoir Performance
World Oil/DECEMBER 2013 27
INNOVATIVE THINKERS
MELANIE CRUTHIRDS, NEWS EDITOR
GlassPoint
Harnessing the
power of the sun

GlassPoints pilot solar EOR project has a
peak output of 7 MW thermal, and is the
largest of its kind in the Middle East.
Whether you produce shale gas in the
U.S., oil sands in Canada or coalbed meth-
ane in China, one key consideration is con-
stantly on an operators mind: cost. Person-
nel costs, transportation costs, equipment
costs. They all play a part in determining
a projects economic viability, especially
where power costs are concerned.
Considering the amount of money
companies spend each year on power to
fuel production operations, the team at
GlassPoint, a manufacturer of solar steam
generators for EOR applications, set out to
reduce power costs in the field. After tak-
ing some time to understand the market,
GlassPoint was ready to design a product
that would replace natural gas-burning
steam generators with solar-powered units.
When comparing gas-fired steam gen-
erators to his firms solar-powered system,
GlassPoint CTO Pete von Behrens said
the difference in operator cost comes from
opting out of a 30-year natural gas bill,
which is bound to fluctuate, in favor of
an upfront investment in the system, and
relatively minimal maintenance. In Oman,
where wind and dust can be detrimental
to oilfield operations, the system employs
a proprietary Enclosed Trough glasshouse
to protect thousands of aluminum mir-
rors that focus sunlight on water-filled
boiler tubes to generate steam. The most
notable form of maintenance that the sys-
tem requires is automated washing of the
glasshouse roof, which can be carried out
within 24 hr, sans personnel or downtime.
The key to turning a profit in the global
oil and gas market, especially in challeng-
ing plays, is often the ability to utilize avail-
able resources to their fullest potential.
In the U.S., for example, natural gas has
become a standard, relatively cheap feed-
stock for the growing LNG and other pro-
cessing industries. However, in the Middle
East, home to GlassPoints pilot solar EOR
project, gas resources are more limited, and
rising costs have made gas less attractive as
an industrial fuel source.
In Oman, where GlassPoint and Petro-
leum Development Oman (PDO) are run-
ning an EOR project at Amal West field,
historically-low natural gas prices are set to
double to $3/MMBtu by 2015, with addi-
tional increases later. This hike, in a region
where fuel prices have been comparatively
low, means that the use of solar-power
steam generation frees up natural gas re-
sources for use elsewhere, said von Behrens.
As Middle Eastern countries, including
Oman, look to diversify their economies,
which are often dominated by oil produc-
tion, the ability of companies like PDO to
redirect natural gas represents a major ben-
efit. Although GlassPoint delivers energy at
less than $5/MMBtu, which is competitive
with natural gas, the company is set apart
from traditional systems by the fact that the
gas saved can then be exported as LNG or
otherwise reallocated for private sector use.
In competitive systems, solar-powered
steam generation can climb as high as $18/
MMBtu. But, GlassPoints enclosed trough
successfully protects against wind damage,
often the most critical factor in solar gener-
ation, and maximizes one of Omans other
plentiful natural resources: sunlight. Out-
side of the Middle East, California, with
its Low Carbon Fuel Standard, is another
location where solar-powered steam gen-
eration could be economical.
As the availability of different feed-
stocks, including natural gas, changes in
coming years, operators would be wise to
consider the use of solar technology earlier
in the design process, said von Berhrens.
Aiming for a closer integration between
oilfield service facilities and solar-powered
technology means companies might be
able to ease the transition into EOR activ-
ity, possibly reducing or avoiding down-
time. Like costs, the ability to employ solar
power generation should always be in the
back of an operators mind.
MELANIE.CRUTHIRDS@WORLDOIL.COM
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INDUSTRY AT A GLANCE
HENRY.TERRELL@GULFPUB.COM
World Oil/DECEMBER 2013 29
45
55
65
75
85
95
$0
$1
$2
$3
$4
$5
Monthly price (Henry Hub)
12-month price avg.
Production
A J J M A M F J D N O S A J J M A M F J D N O S A J
2012 2013 2011
Production equals U.S. marketed production, wet gas. Source: EIA.
45
60
75
90
105
120
135
Dubai Fateh
W. Texas Inter.
Brent Blend
O S A J J M A M F J D N O S A J J M A M F J D N O S
Source: DOE
2013 2011 2012
SELECTED WORLD OIL PRICES ($/BBL)
U.S. GAS PRICES ($/MCF) & PRODUCTION (BCFD)
WORLD OIL & NGL PRODUCTION Million barrels per day
OCT SEP
2013 2013 AVG. 2012 AVG. 2011
OPECCRUDE OIL
1
Saudi Arabia 9.49 9.86 9.51 9.06
Iran 2.68 2.58 3.00 3.62
Iraq 2.97 2.82 2.95 2.67
United Arab Emirates 2.76 2.74 2.65 2.50
Kuwait 2.48 2.53 2.46 2.24
Neutral Zone 0.52 0.52 0.54 0.59
Qatar 0.73 0.73 0.74 0.74
Angola 1.70 1.72 1.78 1.66
Nigeria 1.99 2.04 2.10 2.18
Libya 0.45 0.30 1.39 0.46
Algeria 1.12 1.15 1.17 1.18
Ecuador 0.52 0.52 0.50 0.50
Venezuela 2.45 2.49 2.50 2.50
NGLs & condensate 6.42 6.46 6.28 5.92
TOTAL OPEC 36.31 36.45 37.58 35.82
OECD
1
U.S. 10.60 10.54 9.18 8.14
Mexico 2.91 2.89 2.92 2.94
Canada 4.18 4.03 3.75 3.53
United Kingdom 0.89 0.80 0.94 1.11
Norway 1.95 1.60 1.91 2.04
Europe-others 0.59 0.57 0.60 0.61
Australia 0.46 0.47 0.48 0.49
Pacific-others 0.05 0.05 0.08 0.09
TOTAL OECD 21.64 20.97 19.89 18.95
NONOECD
Russia 10.98 10.89 10.73 10.60
FSU-others 2.95 2.92 2.89 2.97
China 4.11 4.06 4.18 4.10
Malaysia 0.68 0.67 0.67 0.65
India 0.88 0.88 0.91 0.91
Indonesia 0.81 0.81 0.89 0.93
Asia-others 1.11 1.10 1.17 1.09
Europe 0.14 0.14 0.14 0.14
Brazil 2.09 2.19 2.16 2.20
Argentina 0.63 0.65 0.66 0.69
Colombia 0.98 1.00 0.95 0.92
Latin America-others 0.40 0.41 0.42 0.43
Oman 0.95 0.95 0.92 0.89
Syria 0.04 0.05 0.17 0.33
Yemen 0.14 0.12 0.18 0.23
Egypt 0.68 0.69 0.72 0.74
Gabon 0.24 0.24 0.25 0.25
Africa/Middle East-others 1.69 1.57 1.48 1.61
TOTAL NONOECD 29.47 29.34 29.48 29.68
PROCESSING GAINS
2
2.13 2.17 2.14 2.11
TOTAL SUPPLY 89.56 88.94 89.09 86.55
Source: International Energy Agency Note: Totals and subtotals may not add, due to rounding.
1
Comprises crude oil, condensates, NGLs and oil from non-conventional sources.
2
Net of volumetric gains and losses in refining (excludes net gain/loss in China and non-OECD Europe)
and marine transportation losses.
U.S. OIL PRODUCTION
1
Thousand barrels per day
OCT OCT SEP
STATE 2013
2
2012
3
% DIFF. 2013
2
Alabama 30 27 11.1 29
Alaska 546 547 0.2 535
Arkansas 20 18 11.1 18
California 608 592 2.7 601
Colorado 178 153 16.3 171
Florida 6 6 0.0 6
Illinois 27 27 0.0 27
Kansas 131 124 5.6 130
Kentucky 7 7 0.0 7
Louisiana
4
1,229 1,257 2.2 1,259
Michigan 21 20 5.0 22
Mississippi 71 67 6.0 70
Montana 84 79 6.3 85
Nebraska 8 7 14.3 8
New Mexico 278 245 13.5 280
North Dakota 945 749 26.2 932
Ohio 13 13 0.0 14
Oklahoma 330 269 22.7 329
Texas
4
2,910 2,436 19.5 2,932
Utah 95 89 6.7 95
Wyoming 190 159 19.5 185
Others
5
42 37 13.5 43
TOTAL U.S. 7,769 6,927 12.2 7,778
LOWER 48 7,223 6,380 13.2 7,243
1
Includes lease condensate.
2
Preliminary estimate, API.
3
DOEs revision, as of 10 months from current issue date, adjusted.
4
Includes federal OCS production.
5
Includes Arizona, Indiana, Missouri, Nevada, New York, Pennsylvania, South Dakota, Tennessee,
Virginia and West Virginia.
A sharp drop in West Texas Intermediate crude oil prices was
not matched by either Brent Blend or Dubai Fateh, as stronger-
than-expected European demand kept prices buoyed on that
side of the Atlantic. Once again, a drop in OPEC crude produc-
tion was more than offset by rising output outside the organi-
zation. Natural gas prices slipped on the Henry Hub, settling in
the mid-$3 range, while production continued to trend upward.
The U.S. Rotary Rig Count continued a steady year-long decline
to around 1,740 rigs, 5% below the same period in 2012. Inter-
nationally, the rig count rose once again, with improvements on
land and offshore.
U.S. ONSHORE WELL COUNT
Basin Q2 2013 +/ Q1 2013 +/ Year Ago
Ardmore Woodford 65 18 47 25 40
Arkoma Woodford 13 1 12 15 28
Barnett 380 23 403 107 487
Cana Woodford 69 5 74 7 62
DJNiobrara 278 10 268 75 353
Eagle Ford 1,133 44 1,089 109 1,024
Fayetteville 159 35 194 13 146
Granite Wash 174 24 150 19 155
Haynesville 97 1 98 13 84
Marcellus 562 14 576 119 443
Mississippian 398 20 378 81 317
Permian 2,326 66 2,260 76 2,402
Utica 112 6 118 18 94
Williston 747 54 693 144 603
Others 2,662 11 2,651 511 3,173
TOTALS 9,175 164 9,011 236 9,411
Source: Baker Hughes
INDUSTRY AT A GLANCE
HENRY.TERRELL@GULFPUB.COM
30DECEMBER 2013/WorldOil.com
WORKOVER RIG COUNT
OCT SEP AUG OCT % chng % chng
REGION 2013 2013 2013 2012 mo. ago yr. ago
Texas Gulf Coast 213 211 215 216 0.9 1.4
ArkLaTex 133 133 127 127 0.0 4.7
Eastern U.S. 87 90 91 87 3.3 0.0
South Louisiana 14 20 14 25 30.0 44.0
Mid-Continent 218 205 214 226 6.3 3.5
West Texas / Permian 708 696 694 710 1.7 0.3
Rocky Mountains 350 357 363 360 2.0 2.8
West Coast / Alaska 338 340 337 351 0.6 3.7
TOTAL U.S. 2,061 2,052 2,055 2,102 0.4 2.0
CANADA 539 534 532 712 0.9 24.3
Source: Cameron Note: Totals may not add, due to rounding.
Source: Baker Hughes
INTERNATIONAL ROTARY
DRILLING RIGS
1,700
1,800
1,900
2,000
2,100
O S A J J M A M F J D N O S A J J M A M
2012 2013
U.S. ROTARY
DRILLING RIGS
INTERNATIONAL ROTARY RIG COUNT Monthly average
OCT 2013 SEP 2013 OCT 2012
REGION & COUNTRY Land Offshore Land Offshore Land Offshore
CANADA 374 4 382 5 364 1
EUROPE 90 49 93 51 76 48
Germany 4 0 4 0 8 0
Italy 1 2 3 1 5 2
Netherlands 3 4 4 5 2 5
Norway 0 19 6 25 0 16
Poland 8 0 6 0 6 0
Romania 8 0 8 0 8 0
Turkey 37 0 33 0 25 0
United Kingdom 2 13 1 10 2 20
Others 27 11 28 10 20 5
MIDDLE EAST* 342 41 337 36 334 43
Abu Dhabi 19 9 19 11 18 7
Egypt 43 6 42 5 50 10
Iraq 92 0 93 0 67 0
Kuwait 31 0 29 0 32 0
Oman 63 1 56 1 46 1
Pakistan 18 0 21 0 14 0
Saudi Arabia 61 19 61 19 69 19
Syria 0 0 0 0 27 0
Others 15 6 16 0 11 6
AFRICA* 96 35 84 35 74 30
Algeria 47 0 46 0 39 0
Angola 1 13 1 12 0 8
Kenya 11 0 10 0 2 0
Libya 14 1 11 1 12 0
Nigeria 8 9 7 8 7 8
Others 15 12 9 14 14 14
LATIN AMERICA 332 88 319 85 336 83
Argentina 83 0 87 0 64 0
Brazil 21 40 19 40 37 45
Colombia 41 0 36 0 39 1
Ecuador 26 0 25 1 22 1
Mexico 65 41 62 35 81 25
Venezuela 77 6 74 7 64 7
Others 19 1 16 2 29 4
ASIA-PACIFIC 139 106 140 100 140 102
Australia 11 5 12 4 7 7
China, offshore 0 18 0 17 0 17
India 86 34 86 34 82 32
Indonesia 26 9 26 9 32 11
Malaysia 0 13 0 11 0 14
New Zealand 5 2 5 2 6 0
Thailand 2 15 0 14 5 11
Vietnam 0 4 1 2 0 7
Others 9 6 10 7 8 3
TOTAL 1,373 323 1,355 312 1,324 307
Source: Baker Hughes *No data available for Iran and Sudan/South Sudan.
Note: Totals may not add, due to rounding.
U.S. ROTARY RIG COUNT Monthly average
% DIFF.
OCT SEP OCT OCT 12
STATE & AREA 2013 2013 2012 OCT 13
ALABAMA-TOTAL 3 6 7 57.1
Land 3 6 4 25.0
Inland water 0 0 0
Offshore 0 0 0
ALASKA-TOTAL 10 12 9 11.1
Land 10 12 5 100.0
Offshore 0 0 4 0.0
ARKANSAS 12 12 16 25.0
CALIFORNIA-TOTAL 41 38 36 13.9
Land 39 36 35 11.4
Offshore 2 2 1 100.0
COLORADO 72 69 62 16.1
FLORIDA 3 3 2 50.0
KANSAS 25 28 30 16.7
KENTUCKY 0 0 2 100.0
LOUISIANA-TOTAL 108 111 107 0.9
North - Land 24 25 25 4.0
South - Inl. water 18 20 16 12.5
South - Land 17 15 23 26.1
Offshore 51 52 43 18.6
MICHIGAN 0 0 3 100.0
MISSISSIPPI 8 13 13 38.5
MONTANA 11 13 25 56.0
NEBRASKA 2 0 1 100.0
NEVADA 2 2 0
NEW MEXICO 75 72 86 12.8
NEW YORK 0 0 1 100.0
NORTH DAKOTA 171 170 179 4.5
OHIO 34 35 23 47.8
OKLAHOMA 175 166 189 7.4
PENNSYLVANIA 57 52 66 13.6
SOUTH DAKOTA 1 1 0
TENNESSEE 0 0 0
TEXAS-TOTAL 820 837 867 5.4
Offshore 6 9 0
Inland water 0 0 0
District 1 130 134 135 3.7
District 2 84 88 79 6.3
District 3 50 48 48 4.2
District 4 34 35 44 22.7
District 5 12 14 20 40.0
District 6 28 30 27 3.7
District 7B 14 14 15 6.7
District 7C 69 79 76 9.2
District 8 267 263 294 9.2
District 8A 37 39 41 9.8
District 9 22 18 24 8.3
District 10 70 68 67 4.5
UTAH 29 30 37 21.6
W. VIRGINIA 31 36 26 19.2
WYOMING 49 50 50 2.0
OTHERS 7 7 3 133.3
U.S. OFFSHORE TOTAL 61 65 49 24.5
U.S. GRAND TOTAL 1,744 1,760 1,834 4.9
Source: Baker Hughes Note: State monthly averages may not add up to U.S. total, due to rounding.
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
1,900
O S A J J M A A M F J D N O S A J J M A M F J D N O S A J J
2011 2012 2013
INTERNATIONAL OFFSHORE RIGS
U.S. GULF OF MEXICO NORTHWEST EUROPE WORLDWIDE
NOV 2013 NOV 2012 NOV 2013 NOV 2012 NOV 2013 NOV 2012
Total rigs in fleet 107 109 91 90 820 784
Marketed Supply 81 82 90 88 765 718
Marketed Contracted 76 76 89 87 728 667
Rig utilization, %, 93.8 92.7 98.9 98.9 95.2 92.9
Source: IHS Petrodata Weekly Rig Count. *Rigs are no longer broken out into mobil and platform categories.
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Conference Program Overview:
The State of the Eastern Mediterranean
Current Exploration Programs in Israel and Cyprus
Resource Potential: Regional Seismic Data Analysis
Overview; The Levant Basin Potential
Export Opportunities: Efects of the Export Policy
Decision; Panel Discussion: Gas Monetization
Legal Issues: Panel Discussion on Project Finance,
Petroleum Taxation, Regulations, Antitrust
Economic Impact of the New Energy Resources: On both
Cyprus and Israel; Powering Jobs and Growth in Israel
and Beyond
Infrastructure Requirements and Developments
A Look into the FutureNatural Gas Applications Including
Transportation Fuels
The Future of the Eastern Mediterranean: The Oil Window;
IsraelShallow Water and Land Based; LeviathanIsrael
and Cyprus Deep Water; The Tamar Discovery
Noble Energy
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Chuck Davidson,
will give the
keynote address.
1012 March 2014
Hilton Tel AvivTel Aviv, Israel
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SPECIAL FOCUS: INDUSTRY LEADERS OUTLOOK: 2014
World Oil/DECEMBER 2013 35
What industry leaders expect in 2014
Compiled and edited by KURT S. ABRAHAM, Executive Editor
As we expected 12 months ago,
2013 has been another healthy
year for the global upstream in-
dustry, albeit on something of a
plateau in North America. Despite
a recent, gradual decline of about
10%, oil prices have remained
strong enough to sustain most
projects underway or planned,
worldwide. Some trends are a
continuation of previous activity
direction, as in operators focus-
ing on oil and reducing gas drill-
ing in North America, or NOCs and
their partners ramping up projects
in the Middle East. Other trends
are new, within the last year, as in
operators selling of increasingly
larger chunks of non-shale assets
in North America, so that they
have more cash to focus on devel-
opment of production in specic
shale plays. Deepwater exploita-
tion is also a growing core activity,
as activity builds back in the Gulf
of Mexico. Reecting on these
factors and others, in the context
of their own segments of the in-
dustry, the members of World Oil
Editorial Advisory Boardrepre-
senting the full spectrum of E&P
expertisepresent their analysis
and predictions for 2014.
Russian seismic activity should remain
high in 2014. It accounts for about 40% of
the global count, with 222 crews active in
mid-October, out of a global active crew
count of 545 (Seismic Crew Report, Dana
Cain, October 2013). Recent announce-
ments by the Russians suggest that these
numbers might move higher, as they seek to
exploit the potential in their frontier areas.
In May, Russias Rosneft and Norways
Statoil signed a JV to explore frontier areas
in the Sea of Oshkotsk and in the Barents
Sea. The license requirements include
drilling six exploratory wells from 2016 to
2021. The Kashevarovsky, Lisyansky and
Magadan-1 licenses are in the Sea of Ok-
hotsk, north of Sakhalin Island, while the
Perseevsky license is in the central Barents
Sea. The licenses cover 102,000 sq km.
Onshore, Rosneft and Statoil have signed
an agreement to undertake a pilot explora-
tion program on the Domanik shale for-
mation on 12 license blocks in the Samara
region, with Rosneft holding a 51% stake.
The Rosneft-Statoil agreements were
followed in September by a much broader
commitment to step up exploration, with
Vladimir Putins signing of a new law in-
troducing tax breaks to encourage oil ex-
ploration. The breaks are aimed at subsea
fields, estimated to hold nearly 100 Bbbl of
hydrocarbons. In addition to cutting taxes
on exploration and mineral extraction, the
bill will reduce export duties and taxes on
oil company profits. The new tax regime is
expected to come into force next year.
The Russians followed up in late Octo-
ber, with the announcement of a second
JV to expand exploration, this one with
Indias state-owned Oil and Natural Gas
Corporation (ONGC) to explore for oil
and gas in Russian Arctic waters.
The worlds second most active area
for exploration is Asia-Pacific, with a seis-
mic crew count claiming nearly 20% of
the global total in 2013. Chief among the
active explorers is China, whose Xinhua
news agency announced that the Ministry
of Land and Resources planned an 80-bil-
lion-yuan ($13.07-billion) investment
commitment to oil and gas exploration in
2013. The figure represents an expanding
commitment by the Chinese government
to exploration that amounted to only 19
billion yuan in 2002.
Under more recent plans with expand-
ed budgets (2008-2011), more than 35
Bbbl of oil, and more than 20 Tcf of gas,
have been discovered. However, these
impressive discoveries have not materi-
ally lessened the countrys dependence on
imported energy. In fact, gas imports have
increased dramatically, up more than 30%
from 2011. Most analysts agree that these
increased demands will lead to greater ex-
DR. WILLIAM J. PIKE, Managing
Consultant and Contractor, National Energy
Technology Laboratory, and Chairman,
World Oil Editorial Advisory Board
Russia to dominate 2014
exploration numbers
36DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
Challenges remain in exporting
North Americas shale experience
penditures on oil and gas exploration in
2014, and through the end of the decade.
For the rest of the world, shale and deep
water are the driving plays for exploration.
While shale development continues apace
in North America, onshore seismic crew
count numbers dropped some 30% from
October 2012 to October 2013, as devel-
opment of known, massive shale reserves
replaced exploration. For the rest of the
globe, the onshore seismic crew count re-
mained mainly stable, reflecting a continu-
ing difficulty in justifying development
of indigenous shale plays in the face of in-
creasing U.S. shale production and ramped
up Russian output.
Projections for worldwide shale explo-
ration activity should not vary significant-
ly from the scenario last year. But, farther
out, these examples of exploring for tight
oil in giant old fields, and exploring shales
for the sweet spots, where stimulation will
be productive, will likely lead exploration
back into the worlds great petroleum
provinces. These provinces include the
Lower 48 of the U.S.; Russia, where it is
beginning to happen in the Achimov/
Bazenov (area) of West Siberia and the
Domanik shales of the Volga Urals; and
the Middle East, where the variety and
concentration of plays and carbonate
rocks promises an immense and long-
term tight oil and shale future, (Future
Trends in Global Oil and Gas Exploration,
Dr. Michael C. Daly, Imperial College,
September 2013).
Although we are some 40 years into
the deepwater era, as BP executive V.P. of
Exploration, Dr. Michael C. Daly notes,
and, although we are perhaps half-way
through it in finding terms, deepwater
exploration is a trend that will be with us
for some time yet. That sentiment is mir-
rored in the current, total offshore seismic
crew count, with the deepwater areas of
the Gulf of Mexico, offshore Brazil and
West Africa accounting for more than
one-third of that number, as of October.
That, in turn, results from the growing
contribution of deepwater programs to
total discoveries. Over the past 25 years,
exploration success in deepwater has re-
sulted in a scenario that, today, has deep-
water discoveries accounting for 30%-
50% of all yearly discoveries. This trend
should also continue through 2014, as the
size of finds remains fairly high, and the
continuing expansion of infrastructure,
coupled with more sophisticated deepwa-
ter technologies, keeps these resources in
the solidly economic range.
If this is where our exploration dol-
lars have gone recently, and are forecast
to go next year, what might the scenario
look like farther out? BPs Daly has some
thoughts on that. He identifies two ex-
ploration trends that are beginning to
emerge. The first is a move to the un-
explored Arctic frontier of ice-bound
continental shelves; and secondly to a
re-exploration of the onshore and shallow
waters of the world with new images, new
technology and, occasionally, new ideas.
While nothing earth-shattering is predict-
ed for exploration in 2014, it should be a
solid step forward to a bright future.
DR. WILLIAM J. PIKE has 45 years of experience
in the upstream oil and gas industry, and serves
as chairman of the World Oil Editorial Advisory
Board. He is a consultant with Leonardo
Technologies and works under contract in the
National Energy Technology Laboratory (NETL),
a division of the U.S. Department of Energy. His
role includes analyzing and supporting NETLs
numerous R&D projects in upstream and carbon
sequestration technologies.
How well will the North American shale
experience be able to be exported? Glob-
ally, there are massive resources; however,
the challenges exceed those faced by U.S.
and Canadian operators, and service com-
panies. Even in North America, there has
been a substantial transition from a decade
of land grabs, cheap money, adding capac-
ity and playing the numbers, to a decade
of driving efficiencies and applying science.
North American shales developed rap-
idly. Readily available, risk-seeking capital,
and dozens of aggressive operators and ser-
vice companies, developed the necessary
technology, drilling thousands of wells and
commercializing previously uneconomic
resources. Major oil companies and NOCs
followed, bringing massive capital and
technical resources. Multiple, parallel ac-
tivities, no doubt, resulted in some ineffi-
ciencies; however, new approaches in mul-
tiple plays were developed simultaneously.
The following challenges will also face
international operators, who will not share
that first decade.
Availability of leases (land access).
Individuals or corporations privately own
the vast majority of U.S. mineral resources.
Lease terms and conditions are entirely
negotiable. Risk-seeking firms can obtain
acreage blocks that generate value or fail
quickly. Larger firms can accumulate mean-
ingful blocks of acreage, production and
reserves. Outside of Canada and the U.S.,
mineral rights are generally owned by the
state. One or more central agencies set the
terms and conditions. In many cases, devel-
opment occurs by, or in conjunction with,
state-owned enterprises. Buying, selling or
trading acreage often requires state consent.
Operability: Difficult terrain and
other conditions. Much of the U.S. shale
acreage is on relatively flat farmland or roll-
ing hills. International shale resources are
often in mountainous terrain, densely pop-
ulated cities or deserts. Additional costs as-
sociated with such drilling can be large and
will require advances in pad drilling.
Service company capabilities. North
American service companies have collabo-
rated with operators and developed most
of the technology unique to unconvention-
als. Most wells in the U.S. and Canada are
hydraulically fractured; this is untrue for
much of the world. The majority of U.S.
wells drilled are horizontal; this is also un-
true for most countries. The bulk of service
company capabilities overseas, particularly
in local firms, must add technical expertise
to handle widespread shale exploitation.
Well costs per unit of production, and
D. NATHAN MEEHAN, Senior Executive
Advisor, Baker Hughes Incorporated
www.tescocorp.com
marketing@tescocorp.com

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SELECTION IS
EVERYTHING
eet in
evel.
the
38DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
product prices, are two key economic driv-
ers. One lesson learned repeatedly is that
lowering costs requires lots of wells. In a
plays early stages, it is more important to
know what to do and where to do it.
Lack of numerous risk-seeking
firms. As key technologies for commer-
cializing shale were proven, hundreds of
firms appeared. These firms drilled leases
promptly, permitting them to high-grade
play potential. There were many failures.
IOCs and NOCs hold substantially
larger acreage positions and are less willing
to drill large numbers of unsuccessful wells.
They are more likely to apply substantial
G&G in early efforts. The commercial de-
velopment of shales has yet to be proven
without drilling many unsuccessful wells.
Environmentally acceptable prac-
tices/social issues. Most international
shales are in areas with little available
water or in areas of high water demand.
Technology advances have enabled the
use of saline and high-TDS (total dis-
solved solids) water from deeper sources,
as well as recycled water.
Noise abatement, truck traffic impact,
pipeline construction, and other environ-
mental issues, must all be addressed. Large-
scale shale developments with hundreds
or thousands of wells require significant
surface use. Densely populated areas may
require landowner compensation, other
than just the land value. Carefully planned,
multiple (12 to 36 wells) surface pads can
minimize the shale development footprint.
Inadequate well productivity/re-
sources. Some attractive North American
plays have failed to generate commercial
reserves. Abundant hydrocarbons dont
guarantee well productivity or reserves
warrant development. This may be a real
show stopper. There is no substitute for
well drilling to evaluate this risk.
Access to risk capital. Risk-seeking
capital is fickle. Different risk tolerance
levels for international development are
unlikely to be problematic.
Low gas prices/achieving economic
thresholds. Low natural gas prices de-
press unconventional activity. Interna-
tional prices vary substantially but must
be considerably higher than current
North American prices.
Infrastructure challenges, including
pipelines. North America has abundant
pipelines. However, significant liquid vol-
umes from the Bakken play are transported
by rail. Efforts are underway to export U.S.
natural gas. Export options are more im-
portant for Canada.
Countries with shale resources vary in
their need for pipelines and export capac-
ity. Middle Eastern countries and Chinese
shale participants are likely to use incre-
mental gas production domestically, while
Russian tight oil/shale volumes will result
in incremental export capacity.
Well stimulation technology is not
optimized for local stress conditions.
This concern is localized to the Sichuan
basin, with high pore pressures and mini-
mum horizontal compressive stresses ap-
proaching the vertical stress. This may
create undesirable fracture complexities.
Proper geomechanical models are neces-
sary to address the issue.
Data availability (basin), both G&G
and production. Log and production data
are generally public information in the U.S.
and Canada. International rules vary; how-
ever, there is limited data sharing among
operators. Few well or production logs
become public record. The only way to ad-
dress the lack of data from immature plays
is acquisition and drilling.
D. NATHAN MEEHAN, PhD, PE, is senior
executive advisor for Baker Hughes, where he
supports executive management in the areas of
reservoir technology, emerging technologies,
and business trends in E&P. Previously, he was
the founder of CMG Petroleum Consulting,
Ltd., V.P.-Engineering for Occidental Petroleum,
and general manager, E&P, for Union Pacic
Resources (now part of Anadarko Petroleum). He
holds a BS degree in physics from Georgia Tech,
an MS degree in petroleum engineering from the
University of Oklahoma, and a PhD in petroleum
engineering from Stanford University. He is a
director of JOA Oil and Gas B.V., a member of the
IOGCC, and serves on the Petroleum Engineering
Advisory Boards of the Pennsylvania State
University and the University of Houston.
The Pied Piper(s) in Washington
When you dont know what youre
doing, its best to do it quickly
Jase Robertson, Duck Dynasty
The integrity of the upright guides
them, but the unfaithful are destroyed by
their duplicity
Proverbs
When considering a forecast for the
next period, it helps to see where weve
been during the last. By all accounts, the
global production of hydrocarbons con-
tinues a healthy expansion on a relative
basis, improving domestically with the
advances of hydraulic fracturing, and off-
shore with increased efficiency in deep-
water operations. Sounds good, so far.
The future for everyone working in the
industry today should be solid, and one of
the few bright destinations for the next
generation of career-seekers. Personally,
the oil and gas industry has been an amaz-
ing vehicle for my life journey, but my op-
timism needle is unsteady; heres why.
The Plot. On a recent flight to Brazil,
I got into the film Now You See Me about
four magicians who mesmerize the au-
dience with their sleight of hand. Enter
the befuddled FBI, who cannot decipher
the remarkable tricks, and the resulting
theme: what we see is not what is really
happening. Each event is a setup for the
next, and the next will be more spectacu-
lar than the last. The plot keeps you guess-
ingand awake on an overnight flight.
Apply that implausible story line to
the events were witnessing in this nation.
Consider the notion: what were seeing
now is not really the end game, but a setup
for the next event. Whats really coming
is in progress, but out of sight. Consider
then, the definition of sleight of hand, and
a forecast.
Sleight is dexterity or deceptiveness,
and comes from a Norse word meaning
cleverness, cunning, slyness, which de-
fines where we find ourselves today with
the elected and appointed leadership. The
oil and gas industry is expected by a mi-
nority in power to keep the lights on for
society by producing sufficient quantities
of Btus from hydrocarbons, with mini-
ROBERT E. WARREN, President,
Baclenna, Inc.
40DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
Full speed ahead?
mum footprint and visibility. Call it hy-
pocrisy on steroids because, as energy de-
mand increases across both the developed
and developing world, we should see
headlines screaming for energy jobs, ca-
reers and the resulting bounty of taxable
incomepersonal and corporatethat
could be directed to bailing the deficit of
our sinking ship of state. High unemploy-
ment? This industry is open for business.
And, yes, returning veterans are very wel-
come to come aboard.
Analyze This. Only fools and con art-
ists (non-gender specific) would deny the
opportunity to provide immediate and
long-term economic solutions through
growth in the oil and gas industry, while
sustaining our energy security. But the
regulatory environment will become in-
creasing restrictive, even as E&P compa-
nies, drilling contractors, service compa-
nies and industry associations work flat
out to increase operational integrity, com-
petence and environmental stewardship.
Unfortunately, that workand the no-
table resultsis seldom recognized in the
court of public opinion because of nega-
tive media attention, uninformed young
people and a disinterested voting public.
Expect more severe restrictions with leas-
ing, permitting and environmental inter-
pretation throughout the hydrocarbon
recovery cycle.
Enter Iran. Consider an up-close-and-
personal experience with applied sleight
in international policy. While I was work-
ing in oil-rich southern Iran during the late
1970s, the Iranian Revolution was gaining
momentum with the specific goal of para-
lyzing the source of the regimes wealth.
By mid-1978, we were told that the Shah
was firmly in power, with solid support
from the U.S. government and military.
U.S. president at the time: Jimmy Carter.
As the violence escalated and the killings
began, we were instructed to continue life
as usual with no need to plan for evacua-
tion. The events that followed produced
a life lesson in skepticism of government:
dont believe everything you are told,
look for the money and observe whose
interests are really being served (often not
yours). Fast forward to our present dance
with Iran to see a disingenuous explana-
tion of a useless agreement, from an ad-
ministration desperate for any show in the
negotiations with Iranian leaders.
The Pied Piper(s). Our present ad-
ministration and the elected representa-
tives in government are, for the most part,
failing miserably our people, our industry
and our national security. The American
people are expected to believe the narra-
tive that the aggressive development of
natural resources is not a cornerstone for
the protection of our country, and only
reaffirms the fact that fools and con artists
have been entrusted with public policy
(elections have consequences). The com-
pass of leadership is broken, but those
most impacted are not reading these
words: our children and grandchildren
who will reap the disastrous legacy of
todays policymakers. The original Pied
Piper lured the children away, never to re-
turn. And sleight, sleight is at handand
it continues.
BOB WARREN is president of Baclenna, Inc., an
energy consulting service based in Katy, Texas.
He holds a BS degree in petroleum engineering
from Texas Tech University, an MBA degree
from the McCombs School of Business at the
University of Texas, and has completed the
Corporate Social Responsibility Program at
Harvard Business School. Warren has 40 years
of industry experience in foreign operations
and executive corporate management.
His perspectives are his alone, and do not
necessarily represent the views of others.
The oil and gas industry has risen from
the trembling aftermath of the global fi-
nancial crisis and is, yet again, climbing to
an all-time-high activity level. The markets
are burning hot, and the future is bright.
The world needs energy, and our industry
is set to deliver. But beware: some dark
clouds are on the horizon!
Today, many traditional and conven-
tional oil and gas regions throughout the
world are well-matured and already head-
ing steadily toward production declines.
Yet, considerable volumes still remain in
these regions, and they are far from dead.
On the contrary, the industry response has
been overwhelming, picking up the chal-
lenge and turning fading futures into new,
blooming business opportunities. Effec-
tively re-using already existing infrastruc-
ture, and available process and transport
capacity, we have adapted to a new reality
with new conditions. Certainly, over the
past decade, many good measures have
been taken to maximize exploitation and
slow down declines, as much as possible.
We continue to invest heavily in new
technology development needed to over-
come challenges and obstacles standing
in the way of further, cost-effective de-
velopment and production, while facing
ever-higher complexity and risks, and with
tougher conditions. This allows us to open
up new areas previously inaccessible for
field development, such as the Arctic, and
to expand mature regions further, capital-
izing on already-existing infrastructure
and the enormous experience base that we
have established. It also allows us to con-
tinue our efforts to increase recovery from
fields already in production.
The combination of extensive field
experience and access to new and better
technology has unleashed an additional
recovery potential that can maintain pro-
duction rates and extend field life consid-
erably. Step changes have already been
taken, and Statoil has now launched their
new recovery ambition, lifted up to a
breathtaking 60% for oil fields on the Nor-
wegian Continental Shelf (NCS). This
sends a clear message to energy markets,
and to the industry at largethe NCS will
still play an important role in supplying oil
and gas to world markets for a long time to
come, and much work and many technical
challenges still lie ahead of us. No need for
the industry to prepare for down-sizing;
rather, the contrary.
In spite of all this effort, however, the
longer-term worldwide trend is still the
sameproduction from todays conven-
tional, mature regions faces a merciless,
SVEIN TOLLEFSEN, Manager, Reservoir
Technology, Statoil ASA
World Oil/DECEMBER 2013 41
INDUSTRY LEADERS OUTLOOK: 2014
irreversible decline over time. Thus, these
regions are no longer enough, so we turn
to ever-more-complex resources, to meet
current and future energy demands. Most
major companies are now stepping up
their focus on exploration and continued
exploitation of heavy oil and unconven-
tional resources, including shale gas and
oil. We have developed advanced tech-
nology necessary to unlock such sources,
and we keep pushing the limits to unlock
more. This is where the vast majority of
the worldwide, remaining reserves are
found, and this is the arena in which fu-
ture business development will play. This
will result in a longer-term, more diversi-
fied, worldwide energy supply.
So far, so good. However, lets stop for
a moment and think through what is really
happening. Here are some observations:
The cost spiral. In general, very
high activity levels, and demand
for technical services, have led to
considerable price increases over
the past decade, escalating devel-
opment and operational costs.
In addition, substantial invest-
ments are made into costly IOR
measures, further development
of more challenging areas, as well
as an increased focus on develop-
ment and exploitation of uncon-
ventional resources, increasing
overall cost commitments and
the financing burden on compa-
nies further. Consequently, many
firms need to borrow more to
keep up the pace, eventually re-
ducing company robustness.
Lower margins. Total produc-
tion unit costs have quadrupled
over the past decade, whereas
corresponding output has hardly
increased at all. And even though
the oil price has risen consider-
ably too, reflecting an increased,
worldwide energy demand, it
is not enough to offset all the
added costs. The inevitable con-
sequence, therefore, is reduced
profitability margins for both on-
going operations and new devel-
opment projects.
Higher risks. New projects seem
to be sanctioned at increasingly
higher break-even oil price fore-
casts. Having more than doubled
during the last decade, many
projects are now approaching the
$100/bbl milestone, decreasing
project robustness and increasing
financial risks substantially. Like-
wise, as we keep entering into, and
operating in, increasingly challeng-
ing and environmentally sensitive
areas, it pushes the technological
barriers and development com-
plexity further. This, too, greatly
increases operating risks and con-
sequences, if anything goes wrong.
No wonder, then, that the stock markets
no longer seem to appreciate the real value
of our assets. Because even though we do
more and do it better, it all costs more. At
the same time, risks are higher, and profit-
ability margins are lower. Therefore, we
must respond to another reality gradually
evolving around us. We need to ask our-
selves, not how far we can go, but rather
how fast we can go.
We all have a collective responsibil-
ity to continue to build and develop a
robust, sustainable industry. The right
balance between short-term profitability
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42DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
Last year at this time, I used this forum
to present a case for the oil and gas indus-
try to take even more action to improve its
image. The vast majority of the worlds en-
ergy consumers still do not fully appreci-
ate the connection between cost-effective
energy, and their present and future living
conditions. Our industry continues set-
ting a fine example through responsible
development; however, we are not gaining
ground quickly enough with respect to bet-
ter understanding by the public of afford-
able energys contributions to society. The
industry must foster that understanding, to
solidify foundational support for further
progressing development.
State of public perception. Over
the past year, it seemed that some of the
emotionally charged rhetoric regarding
hydraulic fracturing had started to sub-
side. I began hearing more conversations
about pertinent issues, like well integrity
and its impact on the safety of oil and gas
development. Unfortunately, were now
seeing more communities enact resolu-
tions against, or moratoria on, hydraulic
fracturing, if not ordinances codifying out-
right bans. Many of these actions occurred
outside areas of active development, as
even non-impacted communities were still
inspired to send a message to the industry.
In October, I came across a commen-
tary on an investment advice website
entitled, Fracking Poses New Threat
to Homeowners. I read the article and
watched the accompanying video. The au-
thor was alerting readers to a growing, but
little-known practice of some real estate
developers retaining the mineral interests
on land sold to homebuyers in their devel-
opments. Oil and gas companies then lease
these mineral interests for potential exploi-
tation using hydraulic fracturing.
Despite the articles allegations, this is
not a growing, but little-known practice.
Severed mineral interest dates from the
early English monarchy, with the advent of
the royal mine concept in English Com-
mon Law. Initially focused on gold and
silver mining, this allowed the Crown to
control development of any precious min-
eral. The same concept was applied in the
U.S. under the Stock-Raising Homestead
Act of 1916 that only conveyed surface
ownership, without mineral interest, to
the homesteader. This was a major change
from the Homestead Act of 1862 and the
Enlarged Homestead Act of 1909, both of
which transferred undivided ownership.
To the publics credit, the few com-
ments posted in response all pointed out
the error in the basic premise. Indeed,
severed mineral interest is nothing new
and was not created to promote hydraulic
fracturing. With that said, the article still
left me believing we must do more to pro-
mote more complete understanding of our
business. With the importance of hydraulic
fracturing to the continued development
of both unconventional and conventional
resources, we need to re-double our efforts
to help people understand the process.
Hydraulic fracturing has visible, tempo-
rary impacts at the surface. The industry
must continue monitoring and responding
to actual impacts, as well as public con-
cerns and perceptions. Our actions send
the strongest message possible that we are
responsibly managing our business. Assur-
ance to the public with respect to the sub-
surface process is equally important.
What can you do? How do we get
people comfortable with a process that
they cannot see, that has already been de-
monized in the media? For all concerned,
I suggest you review George Kings paper,
SPE 152596, Hydraulic Fracturing 101:
What every representative, environmen-
talist, regulator, investor, university re-
searcher, neighbor and engineer should
know about estimating frac risk and im-
proving frac performance in unconven-
tional gas and oil wells. (Available via
OnePetro at http://www.onepetro.org or
on the FracFocus website at http://frac-
focus.org/; other great resources are also
available on the FracFocus website.)
Mr. King did an excellent job with com-
prehensive coverage of the subject. You
should also watch an overview presenta-
tion of this material via an on-demand
version of a webinar that Mr. King did for
SPE (see: http://eo2.commpartners.com/
users/spe/session.php?id=11601 ). There
are many great resources for overview ma-
terial, like APIs website (see: http://www.
api.org/ ) and IPAAs website, Energy In
Depth (see: http://energyindepth.org/).
Also, many operators are doing their
part. For example, ConocoPhillips has a
website dedicated to education on energy,
the development process and hydraulic
fracturing, Power in Cooperation (see:
http://www.powerincooperation.com).
Plenty of quality information is available,
but just making it available is not enough.
We need to encourage our people to use it
while making active connections with the
public. This will effectively counter the er-
roneous sound bites pervasive in the popu-
lar media. I would also suggest that most of
you review Extracting the facts: An inves-
tor guide to disclosing risks from hydraulic
fracturing operations, by Richard A. Liroff
(see: http://www.iehn.org/publications.
reports.frackguidance.php). Mr. Liroff suc-
cinctly summarized the types of concerns
held by many in the investment commu-
nity, and the public, regarding the practice
of hydraulic fracturing.
To establish trust with the public and
regulators, the industry needs to speak
with a consistent voice, and reinforce its ef-
forts to provide public education on the oil
and natural gas development process and
its benefits, as well as its potential impacts.
We must be informed advocates. We must
A call to action
gains, and long-term sustainable devel-
opment and growth, at the right pace, is
the simple key to this challenge, but yet
so difficult
SVEIN TOLLEFSEN holds an M.Eng. honors
degree in petroleum engineering from the Royal
School of Mines at Imperial College of Science
Technology and Medicine in London. Mr. Tollefsen
is a reservoir technology manager with Statoil
ASA, and has previous experience in a wide range
of reservoir and production engineering-related
disciplines. Over the past decade, he has held
numerous management positions with Statoil in
many diferent countries.
KEITH W. LYNCH, Global Completions
Chief, ConocoPhillips Company
World Oil/DECEMBER 2013 43
INDUSTRY LEADERS OUTLOOK: 2014
arm ourselves with the facts and prepare
for the detailed discussion that we owe
our customers and fellow citizens. If we
hear fewer and fewer public references to
hydraulic fracturing as a drilling technique,
then this will be a clear sign of progress in
this effort.
KEITH W. LYNCH is the Global Completions
chief for ConocoPhillips Company, based
in Houston. Mr. Lynch has held a variety
of technical and leadership engineering
positions, mainly focused on drilling and
completions. He graduated with honors in
1983 from the University of Wyoming with a
BS degree in petroleum engineering. He is a
member of SPE, serving on several standing
and event-focused committees.
Chevron in 2014 - A few insights
I looked back at the expectations that I
had written for 2013, and not too much has
changed. Chevron seems to be on a steady
path to increase production in a safe, reliable
manner, but, as always, there are challenges.
Safety and environmental respon-
sibility continue to be core values for
us. Our record has improved steadily,
but the ultimate goal is zero spills and
zero people injured. Do it safely or not
at all and universal Stop Work Author-
ity are deeply embedded in our culture.
Advanced training, and programs like
WELLSAFE for enhanced well control,
helps everyone remember to stay fo-
cused on safety issues every day.
Major deepwater projects continue
their progress. We have five rigs running
in the Gulf of Mexico, steadily developing
and expanding a string of Lower Wilcox
discoveries. We expect Big Foot and Jack/
St. Malo fields to be online by the end of
2014. Greater Gorgon, the giant LNG
project off the northwestern coast of Aus-
tralia, is about 70% complete, with first gas
expected in late 2014. Wheatstone is not
far behind, and both projects have long-
term contracts for almost all of their ex-
pected gas production.
The string of subsequent Chevron dis-
coveries in the area since 2009 now num-
bers 21, so the deep waters off northwest-
ern Australia will be a major focus area for
us over several decades. However, rising
labor and material costs present an ongo-
ing challenge. Newer deepwater blocks
off Brazil, China and West Africa will be
evaluated in 2014.
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BEN BLOYS, Manager, Los Alamos
Technology Alliance, Chevron Corp.
44DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
The oil and gas business is at an un-
usual juncture in our history. Were faster
and more efficient than ever in solving
subsurface engineering problems, and our
industry now has a decades-long inven-
tory of known, productive drilling loca-
tions in the U.S. The U.S. recently passed
Russia and Saudi Arabia as the top oil and
natural gas producer in the world. Oil and
natural gas supplies are not constrained
by resources any longer, but, instead, by
above-ground issues.
At a news conference on Oct. 8, 2013,
President Barack Obama called the trend
a positive economic indicator. This
year, for the first time in a very long time,
we're producing more oil than we're im-
porting, Obama said. Rep. Steve Scal-
ise (Rep. La.) said that the president
shouldn't claim too much credit. He said
the expanded production has occurred
despite administration impediments,
including overregulation and limits on
drilling in government-controlled waters
and on land.
The president has said that the admin-
istration deserves credit for an all of the
above energy policy that includes tradi-
tional oil and gas production, plus alterna-
tive fuels and conservation, to reduce U.S.
dependence on foreign oil.
Innovation is not an optionits
a must. Production is more complex,
more expensive, and occurs in more ex-
treme environments. That leaves far less
room to make mistakes. We have to con-
stantly challenge ourselves to innovate,
to rethink old solutions, to achieve what
seems to be impossible.
That means more and better technol-
ogy. But survival means accepting the fact
that we must do even better. Where will
this technology come from? Without a
doubt, the lions share will come from ser-
vice-and-supply companies. As chairman
of PESA, I hold the privilege of having a
front row seat to the best that the service-
and-supply sector has to offer.
Downhole fluid analysis. Halliburton
introduced its Integrated Computational
Element (ICE Core) fluid analysis service
during October 2013. Previously, optical
analyzers could tell an operator when a
Service/supply sector will be
called on to do even more
Shale/unconventional formations
continue to present huge new opportuni-
ties. The boom in shale plays is highlight-
ed by Texas having almost a quarter of all
the worlds active drilling rigs. Chevron
is building a new, 330,000-sq-ft office
complex in Midland, to accommodate the
personnel necessary to develop the Wolf-
camp and other plays in the Delaware ba-
sin area. This rapid expansion is running
head-on into the great crew change, as
highly experienced employees are retiring
at an accelerating pace.
Chevron is countering the trend with
creative hiring, expanded training, ag-
gressive mentoring programs, half-time
work schedules for semi-retirees, and the
Bridges program, where retirees come
back on a contracting basis.
Internationally, shale programs are get-
ting started slowly. The first wells in the
Duvernay shale of Canada look promising.
Our first few wells in Poland and Lithuania
are being analyzed, while other Eastern
Europe/FSU opportunities are in the early
stages of evaluation, including a recent
agreement in the Ukraine. New deals have
also been signed for the Vaca Muerta shale
in Argentina, the Karoo in South Africa,
and the Cooper basin in Australia.
The sheer volume of shale around the
world represents fascinating potential, but
the industry is fairly low on the technolo-
gy curve for these unconventional forma-
tions. What is the optimal well spacing?
How can we improve initial productivity?
How can we improve ultimate recovery?
How do we identify sweet spots? The
questions go on and on.
Technology continues to be a major
focus for Chevron. Technology will help
us answer some of the industrys most
challenging questionshow do we deal
with water depths greater than 10,000 ft,
bottomhole temperatures over 500F, and
reservoir pressures in excess of 25,000 psi?
How do we bring down well costs, improve
safety, improve refining margins, get better
recovery from shales, etc.? Keeping up
with, and properly using, current technol-
ogy is tough enough, but developing new
approaches to deal with the remaining
technology gaps is an added challenge.
Our technology alliances with Los
Alamos National Lab and NASAs Jet Pro-
pulsion Lab continue to deliver innova-
tive, high-value solutions. The real-time,
wireless downhole pressure and tempera-
ture monitoring system, downhole liquid
level monitoring system, and two-phase
flowmeter mentioned last year are all
quickly expanding their applications. Sev-
eral new technologies are just now enter-
ing the commercialization phase of their
life cycle. Were making progress on a full
three-phase flowmeter, an enhanced, long-
distance logging tool concept, and we may
soon have an acoustic camera that gives us
those downhole glasses that we have al-
ways dreamed about.
Dual-gradient drilling is making prog-
ress, and should be fully operational in
late 2013/early 2014. Managing big
data and drawing useful information
from it continues to be an ongoing chal-
lenge for drilling, reservoir management,
refining, etc. And the battle to keep all of
that data secure is becoming more and
more challenging.
BEN BLOYS is the manager for Chevrons
technology alliance with Los Alamos National
Laboratories. He also manages Chevrons R&D
program at the Tulsa University Center of
Research Excellence. Mr. Bloys has developed
technology in a number of areas, including
drilling uids, low-invasion coring, drilling waste
management and gas hydrates. He worked
for 17 years at the ARCO Technology Center,
before joining Chevron in 2000. Mr. Bloys
holds a BS degree in chemistry from Angelo
State University (1983). He has 33 technical
publications and 19 patents, and is a member of
SPE, AADE, ACS and API.
CHARLES E. JONES, former President,
Downhole, Drilling and Subsea, Forum Energy
Technologies; and Chairman, Petroleum
Equipment Suppliers Association (PESA)
Which Operators?
BHP including Petrohawk, Chevron including Atlas, EP
Energy, Hess, Hunt, Husky, Marathon, Murphy, Neweld,
Nexen, Pioneer, Shell, Statoil including Brigham, Suncor,
Swift and Talisman.
What plays and formations?
Altamont, Appalachia, Avalon, Bakken, Barnett, Bossier,
Deep Basin, DJ Basin, Duvernay, Eagle Ford, Evie, Exshaw,
Falher, Fayetteville, Granite Wash, Groundbirch, Haynesville,
Horn River, Magnolia, Marcellus, Mesaverde, Montney,
Muskwa, Niobrara, Olmos, Otterpark, Permian, Pinedale,
Sand, Spraberry, Three Forks, Wasatch, Wilcox, Williston,
Wolfcamp, Woodford and many more in the pipeline.
How many wells?
Thousands, and the number of Operators and wells is growing
all the time.
How reliable is the data?
Very. The data is independently quality controlled by an
organisation with 25 years experience of doing this.
How can I access this data?
If you are an Operator of shale gas or tight oil wells I would be
delighted to explain. You can nd me at
www.RushmoreReviews.com
We also have data on shale wells in Australia, Argentina,
China, Colombia, Indonesia, Jordan, Poland and Sweden
with more countries on the way.
Hello,
Im Helen Rushmore, Im here to let you
know that North American Operators
are now sharing high quality drilling,
completions and fracing data on their
shale gas and tight oil wells.
46DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
Was the government shutdown
key to breaking Washingtons
worst stalemate?
American energy entered a renaissance
in 2013 that could change the economic
direction of the U.S. for generations. For
the first time since former President Rich-
ard Nixon and his successors vowed to
achieve American energy independence,
the U.S. is on the verge of that milestone.
Our industry has provided the backbone
for a steadily recovering economy that
has stabilized growth and provided much
needed energy resources.
To a large degree, our success has been
in spite of, not because of, federal policies.
This year saw increasing polarization in
Washington, D.C., culminating in a fed-
eral government shutdown and the still-
looming threat of defaulting on national
debt payments. From these crises sprouted
a bi-partisan compromise, showing that
Congress and the White House can work
together (on some issues).
Will 2014 bring more agreements or
more knock-down, drag-out battles? My
hope is that the shutdown in October was
the tipping point of a new conversation
that breaks through the partisanship grid-
locking D.C., and results in the implemen-
tation of sound energy policies in 2014.
While the shutdown didnt shutter off-
shore permitting entirely, had it continued,
there is no question that production on
federal lands would have been hurt. While
nearly all reports predict that Congress and
the White House will not endure another
shutdown in 2014, there are some linger-
ing effects on the offshore arena.
Administration actions. Citing the
shutdown, the Bureau of Safety and En-
vironmental Enforcement (BSEE) has
delayed new requirements for blowout
preventers, as well as vital new standards
for oil and gas activity in U.S. Arctic wa-
ters. These regulations will bring needed
clarity to offshore operators, but now they
wont be unveiled until sometime in 2014.
DICK ALARIO, Chairman, President and
CEO, Key Energy Services; and Chairman,
National Ocean Industries Association (NOIA)
sample was pure enough to collect, but
rarely could they describe which fluid
components were present, and in what
proportions. ICE Core fluid analysis tech-
nology delivers this information. Hal-
liburtons new technology is well-suited
for downhole fluid analysis, including
applications in deep water, exploration,
sample validation, fluid analysis between
samples, where flow assurance is an is-
sue, when mapping water floods, when
determining reservoir connectivity,
when determining compositional grad-
ing of reservoir fluids, and to see if fluids
are changing.
Subsea intervention services. Ocea-
neering International has commissioned
the construction of a subsea support
vessel that will be U.S.-flagged and docu-
mented with a coastwise endorsement by
the U.S. Coast Guard. M. Kevin McEvoy,
president and CEO, stated, Deepwater
drilling rig use in the Gulf of Mexico is
currently at a historically high level of 40
rigs, and recent industry market reports
have forecast that it may grow to as many
as 60 rigs by the end of 2015. Our vessel
will be equipped to perform increasingly
complex deepwater field development in-
stallation work and life-of-field IMR proj-
ects resulting from the increased drilling
activity. In particular, this vessel will have
a crane that is capable of handling lifts,
100 greater than any of the vessels we cur-
rently operate. This will increase our ca-
pability to meet our customers demand
to safely handle heavier subsea payloads
in deeper water depths.
Deep-sea tech proposed for shale
drilling. A key technology frontier for
the shale gas industry will be found in an
unlikely place10,000 ft down, at the
bottom of the sea. Johan Pfeiffer, V.P. of
surface technologies of FMC Technolo-
gies, says tough, compact equipment
required to handle remote, deep sea-
bottom operations will become increas-
ingly important to shale gas drillers. We
believe we're going from an industry that
is very fragmented, involving smaller
players and not a lot of technology, to an
industry where technology is going to be
introduced, said Pfeiffer.
American ingenuity fuels our indus-
try. The industrys positive impacts are
astounding. Among the few U.S. employ-
ment bright spots, the energy complex
stands out. Domestic energy employment
has already shown impressive expansion,
principally as a result of the surge in un-
conventional oil and gas development.
Data from the Bureau of Labor Statistics
shows that the U.S. oil and gas industry
employed 971,200 people in 2012, up 7%
from 2011. The industry paid a national
annualized average wage of $107,200 in
2012, more than 119% percent greater
than the national average, private sector
wage of $48,900.
Our industrys future will live or die
by technology. Its a testament to indus-
try innovators that were able to produce
at a level today that was not even dreamed
in the not-too-distant past. We can, and
will, do better.
As we continue to search for hydrocar-
bons, in even more remote and difficult-
to-reach areas, the sum total of our inno-
vation is that were providing solutions
to the challenges faced by our industry.
Continued advancements will not only
ensure our industrys success but also
provide the resources vital to continued
economic growth.
CHARLES E. JONES is a graduate of the
Advanced Management Program at Harvard
Business School. He holds a mechanical
engineering degree from the University of
Houston, where he served as chairman of
the Deans Leadership Advisory Board. He
is the former president of Forum Energy
Technologies Drilling, Downhole and Subsea
segment. Prior to Forum, he was executive
V.P. and COO of Hydril Company which was
sold to Tenaris S.A. in 2007. Before joining
Hydril, Mr. Jones served as director of Subsea
Business for Cooper Cameron Corporation,
where he developed the global subsea
production business.
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48DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
The Next Wave and the next wave
Yes, I am referring to the Offshore
Technology Conferences (OTCs) very
successful young professionals leadership
program. We initiated this program in
2006, to help retain and attract oil and gas
professionals with under 10 years experi-
ence. The young professionals Leadership
Team selects program content, speakers
and formats that address their needs.
I am pleased to report that each year
since, The Next Wave component has led
the way with one of the largest delegate
counts and highest-caliber speaker seg-
ments of the entire OTC conference. The
2014 planning is well underway via the
able leadership of Russell Scott, Amber
Sturrock and Diana Phu.
I am also talking about a next wave that
isnt so much segregated by age or a gen-
eration gap, as it is by a mindset, an un-
derlying philosophy, an outlookalmost
a way of life. In the late 1990s, I sat on an
extended leadership team meeting of an
international oil company, where the vice
chairman talked about the dire straits of
our industry. Oil prices were collapsing,
and the need to drastically slash costs
including head-countwhile still grow-
ing production, set a rather grim stage.
However, our leader offered hope and a
path forward. This executive talked about
the need for new technologies, and a new
culture of innovation and risk perspective
to drive us forward. He summed up his
call for action by declaring that the man-
agement team must embrace, encourage
ART J. SCHROEDER, JR., CEO, Energy
Valley, Inc.
To the average layperson, such delays seem
harmless, but for companies with literally
hundreds of thousands of dollars on the
line EVERY DAY, that adds up to a real
economic disincentive to work in the U.S.
Other delays were granted at the behest
of industry, itself, to ensure that the most
relevant, scientifically proven information
is brought to bear, as was the case with
BSEEs proposed offshore production safe-
ty systems rule and the U.S. Coast Guards
proposed Safety and Environmental Man-
agement Systems regulations for vessels.
The proposed vessel-specific SEMS regu-
lations come on the heels of final SEMS
regulations from BSSE.
Of course, there are groups that seek to
shut down the process entirely with end-
less delays; environmental organizations
have launched targeted attacks on seismic
surveys. The administration has long held
a position that new OCS access hinges on
science-based decisions as to where re-
sources lie. Among the first steps toward
making a science-based decision are seis-
mic surveys. Yet, DOIs Programmatic En-
vironmental Impact Statement (PEIS) on
Atlantic seismic activities has been delayed
multiple times. Held up since fall 2012,
DOI now says that due in part to the gov-
ernment shutdown, the PEIS on Atlantic
seismic may not be released until February
2014, followed by a Record of Decision
in March 2014. The decision on Atlantic
seismic activities is critical, since DOI is
expected to begin work on the 2017-2022
leasing plan in 2014. Secretary of the Interi-
or Sally Jewell has made it clear that the de-
cision to include new areas will hinge upon
known resource potential. Continued EIS
delays could result in the Atlantic being left
out of the planning process, future lease
sales, and the continued energy boom.
This PEIS decision is not without
controversy. Will the administration and
Washington listen to unfounded claims by
environmental groups that seismic studies
harm marine mammals and wildlife? Or
will they listen to the facts? A report by the
National Academy of Sciences National
Research Council stated that No scientific
studies have conclusively demonstrated a
link between exposure to sound and ad-
verse effects on a marine mammal popu-
lation. The decision, if based on science,
would allow for seismic surveys in the At-
lantic and the opportunity for oil and gas
exploration in an area with proven reserves.
Turning to Congress, there is a glim-
mer of hope for bipartisan agreement on
energy. The Senate and the House passed
similar versions of the U.S.-Mexico Trans-
boundary Agreement, opening over 1.5
million acres in the Gulf of Mexico for
E&P, and allowing for U.S. companies to
work with Pemex. The House also passed
a bill providing sales in the Atlantic, East-
ern Gulf of Mexico, Pacific and offshore
Alaska. The Senate has not been coop-
erative to date, but there is hope. Senators
Mary Landrieu (Dem. La.) and Lisa
Murkowski (Rep. Alaska) introduced a
revenue sharing bill, which would increase
the amount of revenue received by coastal
states. It holds the possibility of being
amended to open up more areas offshore.
The continued economic prosperity of
this country hinges on Washingtons ability
to put aside partisan politics and imple-
ment a united American energy policy is
based on the science of where the resourc-
es actually are, and which empowers our
country in an ever-growing, competitive
global market. The next 100 years will see
countries that have affordable energy, and
aggressive energy policies, prosper.
America is fortunate that our private
and state lands helped produce the energy
that, in large part, pulled this country out of
one of the worst recessions since the Great
Depression. Our offshore federal lands
hold even more potential, if only we had the
right policies in place. As we lock up over
85% of our outer continental shelf (OCS)
to offshore energy development, emerging
countries, such as Brazil, or even old stal-
warts like Russia, understand the promise
of offshore energy, and they will go to the
ends of the seas to pursue it. A nonpartisan
solution, based on science and economics,
is the key to unlocking the OCS. The next
100 years of economic prosperity, not just
for Republicans or Democrats, but Ameri-
ca as a whole, are at stake.
DICK ALARIO is chairman, president and CEO
of Key Energy Services. He joined Key in August
2004 from BJ Services, where he was V.P. Mr.
Alario has a distinguished career in international
markets, having held top-level positions managing
oileld service businesses in the UK, Europe,
Latin America and the Middle East. He is the
current chairman of the National Ocean Industries
Association (NOIA), as well as a director of
Kirby Corp. He is a member of the Forever LSU
Foundation, the Tiger Athletic Foundation, AADE
and PESA.
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50DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
and promote entrepreneurship. I was in-
trigued. I wanted to buy-in. However, as
I thought about it, inside our company I
had seen examples of outside-the box in-
novative thinking, and risk-taking, before.
As I recalled, individuals exhibiting those
traits were usually labeled loose cannons,
and their careers did not seem to flourish.
During the Q&A session, my question
was, Whats the difference? The answer,
after 15 min. of torturous explanation
by the vice chairman, was entrepreneurs
deliver and loose cannons fail. While
there are still probably a lot of corporate
chieftains with that view, the good news
is that, particularly here in Houston, there
is plenty of help available to improve an
entrepreneurs chance of success.
According to The Financial Times, Rice
University ranks No. 1 in the world for
entrepreneurship and its Rice Alliance for
Technology and Entrepreneurship (Rice
Alliance), headed up by Brad Burke, has
helped launch over 1,000 new companies,
creating over 15,000 jobs and raising a cu-
mulative $2.1 billion in funding over the
last 10 years. Astoundingly, over 69% are
currently in business or had successful exits.
Oxane is one of a multitude of success
stories. Rice professor Andrew Barron
presented some interesting lab results at
a Rice Alliance meeting in 2002, when
Chris Coker was in the audience. It didnt
take long for them to get together and de-
velop a business model to commercialize
the work. Oxane Materials manufactures
and markets patented proppants, which
economically augment oil and gas pro-
duction while reducing the environmen-
tal impact of hydraulic fracturing. Oxane
has gone forward, raising over $160 mil-
lion, with Coker leading the team of more
than 100 employees and recently being
named one of Houston Business Journals
40 under 40.
Another interesting example emerging
from the Rice Alliance is OsComp Sys-
tems Inc. Its breakthrough compressor
technology enables wet gas compression
and decreases the energy required to com-
press natural gas. Founded out of MIT,
the company presented as part of the Rice
Alliance 2010 business plan competition
and was subsequently funded by Energy
Ventures and Chevron Technology Ven-
tures. The company is now in Houston
and recently secured a research contract
with the Research Partnership to Secure
Energy for America (RPSEA). Pedro
Santos, founder and CEO, was named by
Forbes as one of its 30 under 30 in en-
ergy, in December 2011.
We also benefit from the University of
Houstons Cyvia and Melvyn Wolff Center
for Entrepreneurship. The Princeton Re-
views 2013 list of leading undergraduate
entrepreneurship programs ranks UHs
Bauer College in second place. Ultimately,
as my former vice chairman was trying to
explain, the most valuable employees are
those who create the most value for their
employers. The program founder and
chairman emeritus, William Bill Sherrill,
was named the Ernst & Young National
Entrepreneur of the Year (Educator) in
1994 in recognition of this model.
SURGE Accelerator, also based in
Houston, is a world-leading seed fund and
mentor-driven accelerator helping entre-
preneurs focus on the world's energy and
water problems. SURGE companies have
raised $20 million in funding and landed
over 75 enterprise customers. SURGE
runs an intensive 90-day boot camp to
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52DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
Iraq has a glorious history, immense
resources and rightfully proud people.
Unfortunately, in 2013, Iraq continued
to struggle with regional geopolitical and
sectarian tensions. This deterioration
of security interrupted IOC operations
already struggling with an inefficient
government and infrastructure. Unfor-
tunately, such troubles come while Iraq
needs national stability to attract the in-
vestments required to meet production
and re-construction targets.
With so many existing problems, it is
fair to question why a company or indi-
viduals would want to enter, or continue
working in, Iraq. As Prime Minister Nuri
al-Maliki recently proclaimed, Iraq is the
biggest investment opportunity in the re-
gion, if not the world. He said that all fa-
cilities and infrastructure were destroyed
by the former regime and wars, and then
terrorism destroyed the countrys recon-
struction. His statements about opportu-
nity are justified.
Opportunity. Iraq is blessed with
abundant, untapped hydrocarbons and
has the worlds largest collection of under-
developed super-giant fields. Also, a great
majority of Iraq remains underexplored.
The chance to use modern technologies
and experience to tackle these opportuni-
ties continues to draw attention.
Nearly six years ago, Iraq announced
an ambitious plan to boost production
to 12 MMbopd by 2017. In June 2013,
the Oil Ministry reduced this target to
4.5 MMbopd by the end of 2014, and 9
MMbopd by 2020. Officials also recog-
nized the possibility of a low-side target of
just 6 MMbopd. Given Iraqs current situ-
ation, the International Energy Agency
suggests that 6.1 MMbopd is achievable.
The government also said that invest-
ments of nearly $600 billion will be need-
ed to reach the 9-MMbopd target. About
1,500 new wells will need to be drilled
by 2016, to make this goal a reality. Now,
only about 2,000 wells exist in the coun-
try. Such an effort will require mobilizing
large amounts of new rigs, equipment and
technologies, and experienced staff.
2014 obstacles. An obvious obstacle
to this aggressive target is the number of
rigs that are available and willing to en-
ter Iraq. Certainly, the security situation
in 2013 is causing some companies to
pause. Iraq, however, remains the Middle
Eastern leader in rig growth. There are
some 93 rigs in Iraq, a 31-unit increase in
the last six months.
This increased field activity creates
additional obstacles, as significant ser-
vice industry investments are needed.
This involves nearly everything from
training of local staff, to creating supply
chains and upgrading the countrys infra-
structure. An overhaul of Iraqs logistics is
mandatory to support the importation of
equipment and materials. This includes
the need to expedite the processing of
visas for individuals required to operate
equipment or perform needed services.
Some of 2013s largest project delays
resulted from inefficient customs clear-
ance associated with Iraqs limited ac-
cess to open-water ports. Only the Umm
Qasr, Khor Al Zubair and Abu Floos
ports are operational. The number of
cranes, onshore storage and material
handling equipment available makes the
processing of arrivals challenging. These
limitations, and unclear or changing reg-
ulations, resulted in customs delays of up
to nine months, and more, for drilling-
related materials in 2013.
The final obstacle that I wish to men-
tion involves the ongoing political strife
between the central government and the
Kurdistan region. This conflict has re-
sulted in a failure to pass the countrys
long-awaited Oil and Gas Law, which has
been debated and delayed for over two
years. As a result, there are two different
oil-and-gas contracts available for IOCs
in Iraq. Many of the known reserves re-
side in fields under central governmental
control. However, the central govern-
ments contracts are much less favorable
than Kurdistans production-sharing
contracts, as they only provide for a fee
in the range of approximately $1-2/bbl
of oil. This caused some companies to
move their operations into Kurdistan, to
capture the more-lucrative contacts be-
ing offered there.
The central government forbids
IOCs working in the south of Iraq to
sign Kurdish contracts. Until now, inde-
pendents and smaller companies had to
make choices about where to conduct
Iraqi operations. Majors began to dis-
regard this policy in 2011, when Exxon
identify leaders, validate business mod-
els, raise capital, and connect companies
to customers and the global energy eco-
system. SURGE has recruited over 150 of
the worlds top professionals in the energy
and power industries to serve as mentors.
The Houston Technology Center
(HTC) is the largest technology business
incubator and accelerator in Texas. The
HTC staff and partners work closely with
entrepreneurs and start-up companies,
addressing their unique needs and goals
by providing them with in-depth strategic
and tactical business guidance, fundrais-
ing advice, and connecting them to op-
portunities and capital. Since its incep-
tion in 1999, HTC has assisted its clients
and graduates in raising $1 billion and
creating thousands of jobs
The fact that you are reading World Oil
suggests that you have already bought into
my mantra of lifelong learning. As we ap-
proach 2014, I encourage each of you to
learn from the entrepreneurs support sys-
tem and apply it to your career, whether it
be within an existing corporate framework
or as part of a start-up enterprise. Go for it,
and best regards for success!
ART J. SCHROEDER, JR., is CEO of Energy
Valley, Inc., a company that provides money,
marketing and management to commercialize
and advance energy-related technologies. He
has over 25 years experience in operations,
engineering, construction, strategy development
and crisis management. He sits on several
professional, corporate and civic boards, and
has published numerous technical papers. Mr.
Schroeder graduated from Georgia Tech with
BS and MS degrees in chemical engineering,
with a minor in environmental engineering. He
earned an MBA in nance and international
business from the University of Houston.
Iraq: Still hanging in there
DOUG NESTER, COO, KOGAS Akkas B.V.
World Oil/DECEMBER 2013 53
INDUSTRY LEADERS OUTLOOK: 2014
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Mobil signed a Kurdish exploration
agreement. Chevron and Total followed
suit in 2013. These actions trouble the
central government, as it views the capi-
tal and experience available in the ma-
jors as critical for re-developing Iraqs
super-giant oil fields. While Baghdad
has threatened to blacklist companies,
little action has occurred. Also concern-
ing Baghdad is that other Iraqi regions
have noted the challenge to the central
government, and soon other governor-
ates may offer direct contracts.
Risks. Not surprisingly, the biggest
risk to IOC operations in 2014 will be se-
curity. This year started out with high ex-
pectations for stable security conditions
after relatively low civilian death tolls
were reported in 2011 (2,771) and again
in 2012 (3,238). Civilian death tolls for
first-quarter 2013 remained in line with
those from 2011 and 2012. However,
beginning in April, the numbers leaped
from around 200 per month to nearly
600. This number increased further, with
three recent months having totals of over
900. Through October 2013, the civilian
death total sits at a disturbing 5,740.
Many regional geopolitical and sectar-
ian issues are fueling this problem. There
is hope that in 2014, this violent trend can
be ebbed and possibly reversed. Support
for this comes from Iraqs western border
along Syria, where recent diplomatic en-
deavors associated with the destruction of
chemical weapons appear successful, and
the momentum for genuine peace talks
seems to be growing. To the east, a new
Iranian regime is having positive dialogue
with the international community that
may ultimately alleviate regional tensions.
And to the north, Turkey is proposing to
mediate the ongoing oil revenue dispute
between Baghdad and Kurdistan.
Another risk that may interrupt opera-
tions in 2014 is the planned parliamentary
election for prime minister. Intra-sectarian
competition could cause fragmentation of
large, established voting coalitions. As a re-
sult, the period leading up to the election
(if not delayed), and the period immedi-
ately after, could contain many episodes
of civil demonstrations, unrest and height-
ened terrorist activity.
The future. I have little doubt that
Iraqs hydrocarbon potential rivals or
surpasses that of Saudi Arabia. Iraqs abil-
ity to stabilize its government, and con-
trol security, will determine whether it
can also equal, or surpass, that kingdoms
production volumes. Of course, there
is also the small issue of OPEC and its
potential control over Iraqs abilities to
grow production volumes. As mentioned
earlier, Iraq is blessed with much, from
its history to its people to its enormous
reserve potential. As of now, the oppor-
tunity that Iraq presents to our industry
cannot be overlooked. While challenges
exist and risks are real, I believe that with
support from our industry, Iraq can ful-
fill its re-construction goals and return
to being a dominant world oil producer.
DOUGLAS C. NESTER serves as COO for KOGAS
Akkas B.V., in charge of eld development
operations in Iraq. Prior to this position, Mr. Nester
served as COO and director for Prime Ofshore
in Houston. He has over 30 years of broad
global experience in exploration, development
and operations. He was previously with Devon
Energy (Santa Fe Energy Resources), where he
held various executive positions. He holds a BS
degree in geology from Indiana University of
Pennsylvania. He attended the Masters program
for geology at the University of Houston, and
he holds an MBA degree in nance from the
University of St. Thomas.
54DECEMBER 2013/WorldOil.com
INDUSTRY LEADERS OUTLOOK: 2014
The year 2013 on the UK Continen-
tal Shelf (UKCS) has been personified
by major paradoxes. On the positive side,
field development expenditures have been
at a record high with Oil and Gas UK, the
industry trade association, estimating that
the amount could be 13.5 billion. This
reflects, in particular, the coincident devel-
opment of several very large and expensive
new projects, such as Clair Ridge, Schie-
hallions redevelopment, Laggan/Tormore
and the Mariner heavy oil field. For 2014,
it is quite possible that even higher levels of
development expenditures will take place.
Thereafter, there is likely to be a modest
fall from these record levels.
Higher costs. But the record levels
of investment have been accompanied
by large increases in unit costs. Thus, for
2013, Oil and Gas UK has estimated that
average development costs could be over
$21/boe. In some fields, the figure is much,
much higher, particularly in the small fields
(i.e. with reserves of less than 20 MMboe),
which reflects current conditions in the
UKCS. Cost inflation and project comple-
tion delays are very common in the sector.
Operating costs per boe have also been
increasing sharply. For 2013, Oil and Gas
UK estimates that the average is now
around $23/boe. This reflects not only
inflation, but the sharp decrease in produc-
tion, which has been a worrying feature for
some years. For 2013, total hydrocarbon
production could be 1.39 MMboed, com-
pared to 1.55 MMboed in 2012. This is
a far cry from the peak of 4.55 MMboed,
achieved in 1999.
Concern over output levels. The
recent, unexpectedly sharp, output de-
cline has been due to a combination of
the modest additions from new fields
coming onstream and the sharp de-
cline in production efficiency. This re-
fers to the ratio of actual production to
maximum potential production. The
Department of Energy and Climate
Change (DECC) has estimated that this
has fallen from around 80% in 2004 to
around 60% in 2012. It is unlikely that
there has been any improvement dur-
ing 2013. Unplanned shutdowns have
occurred in several fields, due to leaks
and other technical problems. The grow-
ing interconnectedness of hub platforms
and infrastructure with other fields has
sometimes exacerbated the unplanned
shutdown problem. More than a third
of UKCS platforms are over 30 years old
and prone to age-related problems.
The industry and the UK government
are well aware of the problem, and a joint
working party is examining the issue. The
extent to which production efficiency can
be enhanced will have a major bearing on
total production over the next few years.
With the coming onstream of fields under
development, there is potential to reverse
the downturn. But, if production efficiency
does not improve, the result may be a flat
overall output profile, in line with the 2013
figure. This is the view of DECC. Suc-
cess of the production efficiency initiative
could have a major positive effect.
In 2012, some new tax allowances
were introduced to encourage investment
in both new and mature fields. These are
having a significant effect. Thus, DECC
approval has already been given to 23 in-
cremental projects that promise to signifi-
cantly enhance production from mature
fields. In these, the tax rate can be as high
as 81%, but the Brownfield Allowance can
substantially reduce the effective rate and
enhance post-tax returns.
Low exploration activity. In recent
years, a cause for concern has been the
relatively low level of exploration. Thus,
in 2011, only 14 exploration wells were
started, and 22 in 2012. Thirteen explo-
ration wells were started in the first nine
months of 2013. To put these figures in
perspective, during the 2005-2008 period,
inclusive, the annual average effort was 40
wells. This year, the effort has been held
back by a shortage of drilling rigs, so some
increase can be expected in 2014. The re-
cent increase in the value of the small field
tax allowance, and in the interest rate al-
lowed on unused tax allowances carried
forward, should also have a positive effect
on exploration activity. Cost inflation and
difficulties of access to capital remain prob-
lems for smaller companies.
The problems outlined above, and sev-
eral others, such as lack of ready third-party
access to infrastructure and low levels of
R&D, have been recognized in the Interim
Report of the review being undertaken by
Sir Ian Wood at the request of the Secre-
tary of State for Energy. The report recom-
mends the establishment of an indepen-
dent regulator, (broadly, such as exists in
Norway) with greatly augmented resourc-
es and some additional powers, compared
to the current situation. The final report is
expected in the early part of 2014.
Given the magnitude of the problems
outlined here, a significant change in the
regulatory arrangements can be expect-
ed. The need for additional resources to
regulate an increasingly complex indus-
try is clear. The potential gains, in terms
of accelerating and enhancing activity,
could be substantial.
ALEXANDER G. KEMP is professor of Petroleum
Economics at the University of Aberdeen, and
director of the universitys Aberdeen Centre
for Research in Energy Economics and Finance
(ACREEF). For many years, he has specialized
in petroleum economics research, particularly
licensing and taxation issues, and has published
over 200 papers and books in this eld. Kemp
was a specialist adviser to the UK House of
Commons Select Committee on Energy from
1980 to 1992, and again in 2004 and 2009.
From 1993 to 2003, he was a member of the
UK governments Energy Advisory Panel.
In May 1999, Kemp was awarded the Alick
Buchanan-Smith Memorial Award for personal
achievement and contribution to the ofshore
oil and gas industry. He is a fellow of the Royal
Society of Edinburgh, and was awarded the
OBE in 2006 for services to the oil and gas
industry. Kemp was a member of the Council
of Economic Advisers to the First Minister of
the Scottish government from 20072011. In
June 2011, he was appointed a member of the
Scottish Energy Advisory Board to the Scottish
government. In March 2012, Kemp received the
Lifetime Achievement Award at SPEs Ofshore
Achievements Awards ceremony. In September
2013, he was appointed a member of the
Independent Oil and Gas Expert Commission by
the Scottish Government.
Paradoxes to remain in prospect
for UK Continental Shelf
ALEXANDER G. KEMP, Professor of
Petroleum Economics, University of Aberdeen
2013
Copyright 2013 Gulf Publishing Company. All rights reserved.
For additional copies, contact Gulf Publishing Company.
Phone: +1 (713) 529-4301. Fax: +1 (713) 520-4433
(World Oil, Attention: Reprints Department).
Mailing address: Gulf Publishing Company, PO Box 2608, Houston, TX 77252 USA.
SPECIAL SUPPLEMENT TO
PUBLISHED IN DECEMBER 2013
The MD-2 dual-deck, flat-bed shaker with
full-contact composite screen technology. Photo
courtesy of M-I SWACO, a Schlumberger company.
World Oil/DECEMBER 2013 R-57
DRILLING RIG ADVANCES
In large and small steps, new technology
and newbuilds re-invent how hole is made
Big water and deep holes are the tar-
gets of much of the offshore newbuilds
entering the market. Drillships dominate
shipyard output, while semis and high-
performance jackups fill in the spare
slots. In bulk, these drilling rigs are high-
ly automated, focused on safety and effi-
ciency, and geared for exceptional water
and hole depths in HPHT extremes.
Following are some of the advanced
newbuilds that describe the leading
edge of offshore rigs sailing into todays
marketplace.
Odfjell Drilling. Commissioning of
the huge, multi-tasking Dalian Developer
drillship was planned for second-half
2013, Fig. 1. Combining drilling and oil
spill containment capabilities, it will be
largest drillship afloat, at about 1,000 ft
long and 150 ft wide.
Odfjell will manage the rig. Vantage
Drilling provided construction oversight
at the shipyard in China, and Technip
performed the conceptual design of the
topside production system that acts as an
oil capture system.
Vantage Drilling. The Vantage Tung-
sten Explorer ultra-deepwater drillship
started work in September 2013. Vantage
Drilling is employing it on a three-well
contract in Southeast Asia. The 781-ft
vessel is equipped for 10,000-ft water
depths, able to drill to 40,000-ft well
depths. Drilling equipment includes an
AC 9,000-hp drawworks; four 2,200-hp,
7,500-psi mud pumps; and a 101,200-ft/
lb top drive, all built by Aker Kvaerner
Maritime Hydraulics.
Another Vantage ultra-deepwater drill-
ship, Cobalt Explorer, is under construc-
tion. The companys fleet consists of four
Baker Marine Pacific Class 375 ultra-pre-
mium jackups and three ultra-deepwater
drillships, the Platinum Explorer, Titanium
Explorer and Tungsten Explorer.
Atwood Oceanics. Construction of
the Atwood Archer was announced in
June 2013. Due for delivery by Decem-
ber 2015, it will be the fourth ultra-deep-
water drillship built by this contractor at
the Daewoo yard in South Korea. The
company also has a 2016 option for a
fifth ultra-deepwater drillship.
The Archer will be Atwoods 17th
mobile offshore drilling unit. Its design
is identical to the previously ordered
Advantage, Achiever and Admiral. All
four are dynamically positioned, dual-
derrick, ultra-deepwater drillships, rated
to 12,000-ft water depths and 40,000-ft
drilling depths.
Noble Corp. Noble began operating
two new ultra-deepwater drillships, the
Noble Don Taylor and Noble Globetrot-
ter II (Fig. 2), in third-quarter 2013, and
took delivery in August of the company's
first of six JU3000N high-specification
jackups, the Noble Mick O'Brien. A third
deepwater drillship, the Noble Bob Doug-
las, is planned for delivery this year,
along with two more high-specification
jackups, the Noble Regina Allen and No-
ble Houston Colbert.
The Don Taylor and upcoming Bob
Douglas are Gusto P10000 designs,
rated to 10,000-ft water depths and
40,000-ft drilling depths. Drilling
Mike Slaton, Contributing Editor
Rig advances come in all shapes and
sizes. From a line of software code to a
BOP stack, and from deepwater drilling
vessels to walking land rigs, these in-
novations describe a dynamic industry
focused on safety, efficiency and capabil-
ity, in some of the most difficult circum-
stances on earth. In the following three
articles, we look at offshore and onshore
newbuild rigs, and highlight a few of the
innovations that, on a daily basis, re-
invent the process of drilling a hole in
the ground.
RIG FLEET ADDITIONSOFFSHORE NEWBUILDS //////////
High tech sets sail for deep water
Fig. 1. When commissioned, the Dalian
Developer will be the worlds largest
drillship aoat.
Fig. 2. The Globetrotter II drillship features
the Husiman multi-purpose tower/derrick.
R-58DECEMBER 2013/Drilling Rig Advances
DRILLING RIG ADVANCES
equipment includes an AHD-1250,
9,000-hp main drawworks; NOV TDX-
125 150,000-ft-lb top drive; four Na-
tional 14-P, 2,200-hp mud pumps; and
six Himsen 6H32/40-v engines with
8,000 kw, each.
The Globetrotter II drillship is a
10,000-ft water depth, 40,000-ft drill-
ing depth unit that features the Husiman
multi-purpose tower/derrick (see ac-
companying Rig Advances Section), as
does the Globetrotter I. Other equipment
includes an NOV TDS-1000 top drive
and four NOV 14-P-220, 2,200-hp mud
pumps, plus eight Caterpillar C-280 Tier
II diesel engines with 4,790 kw, each.
Noble announced three-year drill-
ing contracts for two of the ultra-deep-
water drillships under construction at
the Hyundai Heavy Industries shipyard
in Ulsan, South Korea. The Noble Sam
Croft and the Noble Tom Madden rigs
will drill for Plains Exploration & Pro-
duction. Noble has four ultra-deepwa-
ter drillships being constructed at the
Hyundai yard. With the awards for these
two units, all four ultra-deepwater drill-
ships are under contract.
Delivery of the Noble Sam Croft is due
in second-quarter 2014, followed by the
Noble Tom Madden in second-half 2014.
Both will work in the Gulf of Mexico.
The two rigs will be fully equipped to
operate in up to 10,000 ft of water while
offering DP-3 station-keeping and two
complete, six-ram BOP systems. Both
rigs will be equipped with a 165 heave
compensated construction crane, to fa-
cilitate deployment of subsea produc-
tion equipment for greater efficiency
during development programs.
Future construction includes an
ultra-high-specification jackup for use
in the UK North Sea. The jackup will
be an enhanced version of Statoils Cat
J specifications and will operate in
water depths of up to 492 ft, in harsh-
environment conditions, with a maxi-
mum total drilling depth capacity of
approximately 33,000 ft.
The rig will be able to deploy either
a surface or subsea BOP. It will be based
on the Gusto MSC CJ-70-150 design.
The rig was designed for operations
over a very large platform or in a subsea
configuration. Noble says that it will be
one of the most versatile jackup rigs in
the industry.
Ensco. Continuing its newbuild pro-
gram, Ensco in 2013 has added three
rigs, the ENSCO DS-7 drillship and
two premium jackups, ENSCO 120 and
121. The ENSCO DS-7 was contracted
to Total in Angola for three years. It is a
750-ft vessel, able to work in 12,000 ft of
water. Rig equipment includes an NOV
TDS-1250 main drawworks; a TDX-
1250 top drive; four N14-P-220 mud
pumps; and six MAN-STX 16V32/40
8,000-kW diesel main engines and gen-
erators. The ENSCO 121 jackup was
contracted to Wintershall in the North
Sea for two years.
Last year, the company delivered two
semisubmersibles, ENSCO 8505 and
ENSCO 8506, the final two rigs in its
proprietary 8500 series. Also delivered
was the ENSCO DS-6, the companys
fourth Samsung DP-3 ultra-deepwater
drillship. Two drillships and one jackup
are planned for 2014, with a jackup and
drillship on the 2015 horizon.
Transocean. The company announced
in mid-October that it would build a new
ultra-deepwater drillship for a five-year
contract with Chevron. Construction,
geared to second-quarter 2016 delivery,
is taking place at Daewoos Okpo South
Korea shipyard, where Transocean is
building six other drillships.
The new, 12,000-ft/40,000-ft ves-
sel will support parallel drilling op-
erations. It includes two 15,000-psi
BOPs to reduce NPT between wells; a
2.5-million-pound hook load capacity;
and a variable deck load capability of
23,000 mt.
Pacific Drilling. The company took
delivery of its newest drillship in early
2013. The Pacific Khamsin drillship will
work in Nigeria on a two-year contract,
Fig. 3. It is a Samsung 12000 double-hull
design. Focused entirely on deepwater
markets, Pacific has added four drillships
since 2011, for a fleet of eight. The com-
pany plans to have a 12-rig fleet operat-
ing by 2019.
The 12,000-ft water depth, 40,000-ft
drilling depth Khamsin drillship features
dual-load path capability and dual-drill-
ing fluid systems. It has an NOV RST
755, 75.5-in main rotary, and an NOV
RST 605, 60.5-in auxiliary rotary, plus
two NOV active heave drawworks and
TDX-1250 top drives. The rig has four
NOV 14-P-220 7,500-psi mud pumps,
and a dual-gradient-capable mud system.
Diamond Offshore. The first of three
deepwater semisubmersibles ordered
by Diamond Offshore in the last several
years, the Ocean Onyx, was expected in
fourth-quarter 2014. The unit will work
for Apache Corp. in the U.S. GOM early
in 2014.
The next semi in line is the Ocean
Apex, slated for delivery in fourth-quar-
ter 2014. Earlier this year, Diamond or-
dered a third deepwater semi, the Ocean
GreatWhite, for delivery in mid-2016.
The Ocean Onyx (built at AmFELS
in Brownsville, Texas) and Ocean Apex
(built at Jurong in Singapore) are each
6,000-ft water depth, 30,000-ft drilling
depth vessels with 15k five-ram preven-
ters. The Ocean Onyx has a 750 maxi-
mum hookload, while the Ocean Apex
can handle 1,000.
In addition to semisubmersibles, Dia-
mond Offshore ordered four deepwater
drillships in 2011 and 2012. Built by
Hyundai Heavy Industries, the four iden-
tical drillships are a dual-activity design,
and are 12,000-ft water depth; 40,000-
ft drilling depth vessels with a 1,250
maximum hookload and two seven-ram
BOPs. The Ocean BlackHawk and Ocean
BlackHornet are due in fourth-quarter
2013, and will work for Anadarko in the
U.S. GOM. The company's remaining
drillships, Ocean BlackRhino and Ocean
BlackLion, will be finished in 2014 and
2015, respectively.
Fig. 3. The Pacic Khamsin double-hull
drillship is working ofshore West Africa.
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R-60DECEMBER 2013/Drilling Rig Advances
DRILLING RIG ADVANCES
In terms of market drivers, land and off-
shore newbuilds share much in common,
including environmental, safety, efficiency
and operational imperatives. But the diver-
sity of the results in the land rig market is
remarkable. Focused on unconventional
resources, newbuild land rigs cover a spec-
trum, reaching from small, powerful and
exceptional mobile rigs, to deep-drilling
behemoths that walk between wells.
Here are some of the new land rigs roll-
ing, and walking, onto well sites.
Nabors Drilling. Nabors continues to re-
fine and reinvent its Pace rig design, with
the introduction this year of the Pace-X
walking rig, engineered specifically for
multi-well pad, shale drilling applications,
Fig. 4.
It is the latest iteration of a rig series
introduced nearly a decade ago. The
first model was aimed at shortening the
drilling cycle. It was a powerful, com-
pact design, with variable-frequency AC
drives and programmable logic controller
(PLC) technology for driller control of
the main rig components. The company
has 25 skid rigs and 61 walking rigs, each
about one-third of the respective industry
fleet. Newbuilds and upgrades in 2013
will bring the walking rig total to 114.
The new Pace-X design features a side-
saddle substructure, with a 16-ft-wide-by-
26-ft-high clearance that allows the rig to
walk over existing wellheads. It has one-
fifth the permit load of a traditional unit, so
rig moves can be at night, and on weekends
and holidays. A closed-loop mud system
provides for cuttings disposal in environ-
mentally sensitive areas. The units boot-
strap mast rigs up vertically, with a hook-
load of 600, 800 or 1,000 kips, and a 500
AC top drive that provides 42,1000 ft-lb of
continuous torque. Two 1,150-hp motors
drive the rigs AC drawworks.
Three Derrick Hyperpool shakers
ride on the substructure, when moving,
to cut the time and risk of flowline han-
dling. The mud system has two 1,600-hp
mud pumps, with the option for a 7,500-
psi system and up to three 2,200-hp
mud pumps.
The rigs drillers cabin and console
feature advanced monitoring and control,
including Canrigs RigWatch instrumen-
tation system, which also provides access
to a variety of software, such as applica-
tions for directional steering control and
stick-slip mitigation.
Helmerich & Payne. As of October, six
of H&Ps AC-drive FlexRigs remained to
be delivered, Fig. 5. Roughly 24 rigs were
planned in 2013, based on an expected
build rate of about two rigs per month.
During 2012, H&P dominated indus-
try AC-rig construction, with delivery of
48 new FlexRigs. Last year, and into 2013,
the newbuilds are mostly FlexRig3 (67%)
and FlexRig5 (28%) designs, with a hand-
ful of FlexRig4 units. The latter rigs target
a shallower depth market. H&P figures
that almost 40% of the 650 estimated, ac-
tive AC-drive rigs in the U.S. land market
are FlexRigs.
The FlexRig3 is a 22,000-ft, 1,500-hhp
unit. In 2006, the 18,000-ft, 1,500-hhp
FlexRig4 model introduced multi-well pad
drilling capabilities to the companys line.
That pad drilling capability is continued in
the latest model, FlexRig5, which extends
bi-directional multi-well pad drilling ca-
pabilities to deeper-drilling units, with the
same 22,000-ft reach of the FlexRig3.
Precision Drilling. Precision built eight
of its Super Series (Fig. 6) rigs between
December 2012 and August 2013, and
planned to deliver three more U.S. rigs
and two international units by the end
of 2013. The 13 newbuilds and upgrades
boost Precisions Super Series fleet from
188 units to 201, out of a total fleet of
331. Since 2009, the company has added
approximately 90 newbuild and upgraded
Super Series rigs, with approximately half
going to the U.S. market.
Fig. 4. As the latest iteration of a rig series,
the Pace-X walking rig is engineered
specically for use in multi-well pad, shale
drilling applications.
RIG FLEET ADDITIONSONSHORE NEWBUILDS //////////
Innovation is diverse in a dynamic marketplace
Fig. 5. Two newbuild FlexRigs work on-site
for owner Helmerich & Payne.
Fig. 6. Precision Drilling is boosting its
Super Series rig eet from 188 to 201 units.
R-62DECEMBER 2013/Drilling Rig Advances
DRILLING RIG ADVANCES
Precisions Super series consists of
three basic modelsthe 1500 and 1200
triples, and a single design. Built for high-
performance horizontal drilling, the rig
features include walking/skidding sys-
tems (Fig. 7), a small footprint and auto-
mated pipe handling.
Patterson UTI. Six of Pattersons APEX
rigs were delivered during first-half 2013,
and the contractor planned to add six
APEX XK 1500 rigs (Fig. 8) to its fleet
during the last half, for an APEX total of
126 rigs. All APEX rigs delivered in 2013
have walking systems for pad drilling.
The APEX-XK 1500 rig is the compa-
nys newest design (there is also an APEX-
XK 1000 Model). The latest newbuilds
will bring the 1500 series total to 19 rigs by
year-end. The XK model features a ground
level around the sub-structure that allows
for greater movement and clearance over
wellheads and other pad structures. The
rig is capable of multi-directional walking,
with drill pipe and collars racked in the
derrick. Walking times average 45 min. for
10-to-15-ft well spacing.
The rig was designed to improve move
times between locations, hence there is a
modular design, dedicated shipping skid
for the mast, and unified skids for the sol-
ids control equipment. The company re-
ports that rig moves are routinely done in
less than three days. The AC-rig operating
and control system allows strict drilling pa-
rameters to be set, to enhance drilling rates,
and it offers a platform for drilling process
automation. The rig comes standard with
the latest in rig floor handling systems.
DrillMec. The firm will build six rigs for
SnamProgetti Arabia Saudita and for Iraq
Drilling Company (IDC). Three 2,000-
hp, 21,000-ft conventional rigs built for
SnamProgetti will go to work in Saudi
Arabias Dammam region. The contract
includes rig-up services, maintenance and
dedicated technical support. For IDC,
three customized conventional rigs outfit-
ted for 11,000-ft to 21,000-ft drilling will
join operations initiated by Iraq in 2008,
to increase the countys production.
Unit Drilling. Unit planned to deliver the
first of its new BOSS rigs during fourth-
quarter 2013, along with three to five
more units in 2014. The BOSS (box-on-
box, self-stacking) rig is a proprietary-
design, 1,500-hp AC electric drilling rig,
built for multi-well pad drilling.
Features include a multi-directional
walking system, a compact location foot-
print, and a quick assembly substructure
that moves in 32 truckloads. The unit has
two 2,200-hp mud pumps and dual-fuel-
capable engines.
The span of rig technology innovation
runs the gamut, from automation and in-
telligent systems, to catching a wrench
dropped in the hole. No option remains
untouched or unconsidered, as software
and hardware are driven toward increasing
safety, efficiency and capability.
Here are just a few of the latest advances
in rig design, and the impressive compo-
nents used to build todays new rigs.
ADVANCES IN RIG DESIGNS
Deepwater planning aims for
20,000 psi and 350F
The next generation of deepwater drill-
ing technology is in the works with Maersk
Drilling and BP collaborating on concep-
tual designs. Their focus is on rig technolo-
gies that can operate in HPHT environ-
ments, up to 20,000 psi and 350F.
The collaboration is part of BPs Proj-
ect 20K, a multi-year initiative to develop
next-generation deepwater systems and
tools for wells conditions in excess of cur-
rent 15,000-psi, 250F limits. BP estimates
that the technology across its own portfo-
lio, alone, could access an additional 10-20
Bbbl of oil.
A jointly staffed team in Houston will
perform engineering studies to design the
rigs, risers and BOP equipment. Areas of
interest include operating systems that aid
the situational awareness of the rig crew
and inform decision-making; real-time
BOP monitoring to continuously verify its
functionality; and significantly enhanced
mechanical capabilities for the BOP, rig
structures and piping systems.
Tower design adds new drillship
advances
The latest advances in Huismans dual
multipurpose tower (MPT) are featured
aboard the Noble Globetrotter II drillship
that was delivered this year. The novel
technology was first introduced as a single
MPT in 2001, aboard a Helix vessel. In
RIG EQUIPMENT ADVANCES //////////////////////////////////
Latest innovations meet new challenges
with high-tech and engineering insight
Fig. 7. Walking system on a Precision
Drilling Super Series rig.
Fig. 8. The APEX-XK 1500 rig is Pattersons
newest design.
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R-64DECEMBER 2013/Drilling Rig Advances
DRILLING RIG ADVANCES
2010 and 2011, the Noble Bully I and II fea-
tured the first dual-MPT, followed in 2012
by the Noble Globetrotter I.
The MPT technologys open charac-
ter sets up a new way of organizing drill-
ing systems that enables smaller vessels,
offline capabilities, and other safety and
efficiency gains. Locating the dual MPT
box-type structure between the drill floor
and the auxiliary floor creates two physi-
cally separated work areas, allowing dif-
ferent processes to be conducted discrete-
ly and simultaneously. One side supports
offline activities, such as stand building,
and riser and tree running, while the oth-
er supports drilling, landing the BOP, and
completion operations.
Advances include multi-functional pipe
manipulators, a skiddable rotary table,
and a drill floor that is flush with the vessels
main deck. Designed for fully automated
control, the new manipulators can be fitted
with various tool heads, such as drill pipe,
casing and tubing grippers, Fig. 9.
The innovative rotary table uses a set of
U-shaped clamps, one for drilling and one
for casing, to reduce handling of power
slips and bushings. The drillstring clamp
can handle 27/8-in. through 10-in. pipe
without changing inserts. The clamps can
also be skidded out of the well center to
provide a 90-in. opening.
Changes in the rig/vessel layout have al-
lowed the drill floor to be lowered, so that it
is flush with the vessels deck. Onboard ma-
terial handling is more efficient, as goods
do not need to be hoisted to different el-
evations. A removable section of the floor
facilitates the handling of large objects.
Lowering the floor lowers the vessels
center of gravity (CoG), to increase its sta-
bility, so that a larger payload can be stored
on the smaller vessel. For example, on the
HuisDrill 12000 design, lowering the floor
to the work deck level allows for a vessel
that can carry a 30,000-mt VDL, with a
displacement of only 67,000 mt versus a
traditional VDL of 20,000 mt, with a dis-
placement of approximately 100,000 mt.
Semi design will quell heave and
vortex motion
A low-motion HVS semisubmersible
concept from Technip optimizes the hull
form to improve heave and vortex-induced
motion (VIM) performance, which trans-
lates to increased riser fatigue life.
The heave- and VIM-suppressed
(HVS) semisubmersible design uses a cais-
son ballast system to eliminate the need
for pump rooms and sea chests inside the
lower hull. Higher pontoon blisters are at-
tached to the base of the columns, and the
pontoons are narrower and taller than a
conventional semi. The higher blister stops
vortex shedding oscillations along the col-
umn length and improves stability at quay-
side. The narrowed pontoon helps reduce
heave load, and the higher pontoon pro-
vides more VIM dampening and vertical
bending stiffness.
Such designs come about through
considerable simulation power. Technip
conducts simulations before and after rig
modeling, to optimize the design process.
The simulations also reduce the number of
physical models and shorten design time.
After model testing, computational flu-
id dynamics simulation (CFD) can be used
to create design variations that shorten the
overall process. In addition, simulation
provides more information on the physics
than can be acquired in model tests.
Mobile land rig is a 100-t,
high-tech package
Atlas Copco has developed a 100-t
pullback (hook load) top-drive mobile
rig called the Predator. The automated
hydraulic system is a self-contained, single-
load drilling package, made up of three
key components: the rig, substructure
and pipe skate, Fig. 10. The company had
three of the compact rigs in the field in
fourth-quarter 2013, and three more were
expected by years end.
One key market for the versatile system
is drilling pre-sets using the mixed-fleet ap-
proach, says Atlas Copco. The rigs depth,
plus its capacity and ability to move and rig
up quickly, makes the Predator well-suited
for drilling and casing surface and interme-
diate hole in advance of a larger rig.
The drilling unit is powered by a 950-
hp, high-efficiency hydraulic system. En-
vironmental features include leak and spill
protection, a substructure with distributed
weight for less land disturbance, and rig en-
closures for less noise.
Crew size and manual labor are re-
duced, thanks to hands-free pipe and cas-
ing handling, and an on-demand control
system. The advanced control system
also monitors operating efficiency, and in-
cludes diagnostic and safety programs. An
innovative, API 4F telescopic mast handles
range 2 and 3 drill pipe and casing, and a
powerful, two-speed top drive provides
performance rated to 30,000 lb-ft of torque
and 180 rpm.
Compact hydraulic rig designed
for shale plays
Schramm has introduced a compact
hydraulic rig designed for shale plays. The
T500XD Telemast rig has made its debut
in the Marcellus and Utica shales, Fig. 11.
It is a 500,000-lb hook load unit that moves
in an eight-truckload package. It has full,
360 walking portability, for fast moves
from hole to hole, and is self-erecting.
Fig. 9. Automatically controlled Huisman
pipe grippers can be tted with a variety
of tools.
Fig. 10. Predator is a mobile, three-
component drilling package from Atlas
Copco.
Fig. 11. The T500XD Telemast unit from
Schramm is a 15,000-ft walking rig.
World Oil/DECEMBER 2013 R-65
DRILLING RIG ADVANCES
Designed specifically for horizontal
and directional drilling to well depths
of approximately 15,000 ft, the rig can
precisely control weight-on-bit and does
not rely solely on drill collars and gross
string weight. It offers 35,000 ft-lb of
top head torque, third-party directional
steering interface, and 80,000 lb of hy-
draulic pull-down capacity.
Pipe handling is automated (Fig. 12),
with an integral system that can handle 24-
in. diameter, range III tubulars weighing up
to 10,000 lb. Drill pipe is racked in the hor-
izontal position for easier and safer loading
and offloading. The rig has full commu-
nication connectivity to third-party data
acquisition providers, who use Internet
or dedicated satellite communications to
reach remote operational centers.
ADVANCES IN OPTIMIZATION
AND AUTOMATION
Intelligent condition monitoring
optimizes equipment
If equipment optimization had a face,
it would look a lot like that old guy down
the hall, who can sniff the breeze, lay his
hands on the railing, and reliably predict
that the mud pump will need work next
week. Monitoring the condition of rig
equipment, using intelligent data acquisi-
tion and analysis, is starting to provide that
level of expert performance. The magic is
in assimilating a broad range of data, com-
paring it to past experience, tossing out the
irrelevant items, making a decision, and
learning from it.
Thats the task faced by new hires and
grizzled veterans alike, and its the solu-
tion that National OiIwell Varco (NOV)
is working toward. The companys eHawk
condition monitoring service is based on
intelligent data acquisition and analysis
that looks for patterns in operational pa-
rameters, compares it to past failures, and
predicts outcomes, Fig. 13.
The data include equipment usage and
performance, as well as estimates of re-
maining equipment life and component
durability, based on such parameters as
running hours, cycle counts, pressure, load
and stress.
In this data mix, the intelligent system
must account for changes in operating
conditions (including tripping, circulat-
ing, and making connections) as well as
random events, such as jarring. This infor-
mation is integrated with historical data,
and the equipments normal and abnormal
operating states, to dynamically create an
operating profile, listen for abnormal sig-
natures, and produce high-quality predic-
tions that avoid false alarms.
In addition to the intelligent platform,
the eHawk system includes online moni-
toring and support, vibration and debris
monitoring, and can be extended with real-
time BOP monitoring services.
Software brings subject matter
experts into the loop
Heres another look at optimization
from NOVthis one aimed at drilling. In
this case, software advances improve the
pace and flexibility of drilling optimiza-
tion by automating the process of informa-
tion analysis and action. A plug-in software
framework developed by NOV, and incor-
porated in its DrillShark automated drilling
service, makes it faster and easier for subject
matter experts to prototype and develop
various drilling optimization algorithms.
Early drilling optimization efforts used
general algorithms that were indepen-
dent of drilling-specific knowledge. Later
systems sought to improve performance
by focusing on information analysis and
the development of algorithms to apply
driller-specific knowledge. The plug-in
architecture extends this evolution by al-
lowing analytical and control techniques
to be developed and implemented in the
field. Drilling specialists with low-level
computer programming skills can apply
drilling-specific knowledge and techniques
without a team of software engineers and
software release cycles.
DrillShark service objectives include
improving ROP and bit life, and reduc-
ing vibration by automatically adjusting
drilling parameters. It consists of a remote
monitoring team that configures and
adapts drilling algorithms in conjunction
with rig instrumentation; a multi-parame-
ter auto driller for managing weight on bit;
and a top drive control interface.
Pipe makeup moves offline
and off the rig
One of the latest innovations in opti-
mizing rig floor tubing running and han-
dling moves a lot of it offline, and keeps it
remote from the rig. Using an adaptation of
its wellsite makeup and breakout technol-
ogy, Weatherford is building ready-to-run
pipe stands at onshore facilities and deliv-
ering them to the rig.
The ComCam offline bucking system
(Fig. 14) is integral to a broader Weather-
ford initiative for tubular handling and run-
ning. While top drive systems, along with
the ability to remotely control derrick and
drill floor operations, can achieve remark-
able improvements in safety and efficiency,
the company believes that further gains are
achievable by a more inclusive approach
that integrates planning, pipe logistics,
preparation, and make-up with traditional
rig floor competencies.
Fig. 13. Condition monitoring provides
advance notice of equipment failure, such
as a mud pump drive fault, that reduces
parts and repair time.
Fig. 14. Of ine tubing running and handing
is achieved with Weatherfords ComCam
bucking system.
Fig. 12. Automated pipe handling on
Schramms new T500XD Telemast rig can
handle 24-in. diameter, range III tubulars.
R-66DECEMBER 2013/Drilling Rig Advances
DRILLING RIG ADVANCES
The ComCam bucking system makes
up API and premium tubing, casing and
drill pipe in double or triples, using the
same basic technology found in rig op-
erations. The high-speed system monitors
torque curves and provides automated
control of tightening that ensures precise
makeup. Each stand is individually bar-
coded and torque, length, drift, and tally
data are recorded and integrated with well-
site makeup data. The modular bucking
system can also be configured for special-
ized operations, such as the sub-assembly
of downhole equipment.
Controller gives grace and
precision to heavy iron
Precise, smooth control of rig floor pipe
handing equipment is essential for success-
ful automation. Delta Computer Systems
makes the motion controller that choreo-
graphs this multi-ton ballet.
Its RMC 150 eight-axis electrohydrau-
lic motion controller (Fig. 15) is used in
Weatherfords Iron Derrickman, where
precise coordinates are required for each
axis of motion (slew, extension, scoping
up and down, and tilt. Given these coordi-
nates, Deltas controller changes the axes to
move the pipe from one place to another.
Feedback about movement comes from
linear transducers mounted on the equip-
ments hydraulic cylinders. The high-reso-
lution transducers provide smooth motion
using precise velocity measurements. Fil-
tering large spikes in the command signal
avoids vibration in the hydraulic system,
which further ensures smooth motion.
Skidding system simplifies rig
moves, reduces time
A new ratcheting, claw-type skidding
system from AXON Energy Products is
designed to enhance rig-up time and the
removal process between each rig move
by enhancing compatibility with AXONs
Mast Equipment Package.
The design is focused on accurate and
controllable positioning; safety; skidding
capacity; and ease of operation, instal-
lation, removal and maintenance. The
patent-pending skidding system (Fig.
16) features a claw design that reduces
the number of system components. The
compact assembly has eight moving parts,
with a total weight approximately 60% of
existing systems. The design makes re-
versing the skidding direction a simple
manual operation that does not require
tools or rigging. Lightweight components
that can be handled by one person, and a
self-stowing feature, eliminate the need
for removal between rig moves.
Compact tools aimed at slant and
single rigs
Tesco Corporation entered the small
rig market with the introduction of
the 150-ton HXI top drive (Fig. 17)
and compact casing running tool, the
HCCDS. Premiered to the industry earli-
er in the year, these tools have since pen-
etrated the market. Both offerings stem
from feedback received from customers
to incorporate the firms equipment into
a smaller compact package without sac-
rificing any performance. The 150 HXI
is a scaled-down version of the globally
known 250 HXI. Offering the same key
features and benefits, the 150 HXI was
designed to integrate into single rigs
and slant rigs, for both newbuilds and
retrofits. Recently, customers applica-
tions are looking at converting service
rigs to drilling-capable rigs for specific
operations. The HCCDS complements
the 150 top drive in its compact, light-
weight design. Taking the firms 500
Casing Drive System with a few design
changes, the HCCDS overall length has
been shortened, yet it still provides op-
erational benefits.
Both the HCCDS and 150 HXI went
through a trial stage of significant field us-
age. Les Wilson Inc. was one such drilling
contractor that first saw the 150 HXI turn
to the right for a well in Indiana. Once this
test was completed, Project Drilling pio-
neered the second trial, which extended
the course of four wells and completed the
field trial.
With the growing trend to drill horizon-
tals in a pad scenario, TESCO responded
to customer demand to have a top drive
ideal for drilling these complex wells. Ca-
pable of generating 24,000 ft-lb of drill
torque, the 150 HXI can take the well
from a vertical profile, all the way out to
the end of the horizontal. Compact and
lightweight, it makes mast transport, and
mast raising and lowering, a safer opera-
tion that also allows the operator to move
faster. Companies in Argentina are already
seeing the benefits of using this top drive.
After successful field trials in the U.S. with
Les Wilson Inc. and Project Drilling, the
150 HXI is now being utilized in the South
American market to tackle the regions
need for a compact, high-torque-output
top drive. After completion of the recent
well programs, the footage tally for the top
drive model exceeds 70,000 ft to date.
ADVANCES IN MANAGED
PRESSURE DRILLING
Choke and RCD advances contain,
control pressure
Applying managed pressure drilling
(MPD) methods requires a basic set of rig
Fig. 15. At the heart of precise equipment
motion is Delta Computer Systems RMC
150 controller.
Fig. 16. The patent-pending skidding system
from AXON was designed in response to
the needs of a mast equipment package
project.
Fig. 17. Tescos 150 HXI top drive is
designed for small rig, pad drilling of
complex wells and horizontals.
World Oil/DECEMBER 2013 R-67
DRILLING RIG ADVANCES
equipment to establish a closed loop cir-
culating system, and to monitor, analyze
and control pressure. Key in this lineup
is the rotating control device (RCD) that
contains and diverts annular flow, and the
MPD choke that manages and manipulates
the flow.
To improve RCD operation, Hal-
liburtons Sperry Drilling group has
fielded a compact RCD 1000 unit with
a patented no pre-load design that
houses all seals and bearings. The fea-
ture extends bearing life and allows easy
replacement without tripping out of the
hole. Its smaller size facilitates placement
without making rig modifications.
Halliburtons GeoBalance MPD ser-
vice, which provides a suite of equipment,
software, and engineering support for
MPD operations, has designed a pump di-
verter to maintain pressure in the wellbore
during trips and connections. Its RPD300
unit is a valve manifold with an onboard
choke for diverting flow from rig pumps to
provide a fluid supply and adequate flow to
meet choke operational requirements. The
technology replaces larger backpressure
pumps that are typically employed to keep
pressure applied to the wellbore, when the
mud pumps are off.
Large orifice, HPHT choke built for
MPD extremes
M-I SWACO/Schlumberger has in-
troduced a high-pressure MPD choke
to control and manipulate annular
backpressure. Its Versa-Choke product
(Fig. 18) features a large orifice and high
pressure and temperature ratings in mod-
els rated for 5,000-, 10,000- and 15,000-
psi service. In the higher-pressure models,
the choke orifice is adjusted by a specially
designed, hydraulically driven worm-gear
actuator. The modular technology reduces
maintenance time by enabling the actuator
to be hot-swapped without any internal
disassembly. Choke life is extended with
reversible trim, and trim size can be varied
with a change of internal components.
Fig. 18. A large orice and HPHT ratings
are key MPD features of M-I SWACOs
Versa-Choke.
Modern ships and rigs have advanced computer
systems for dynamic positioning, power
generation & distribution and drilling operations.
Software errors in these systems lead to delay,
non-productive time and compromise safety.
Marine Cybernetics performs third party testing
and verication of control system software. We
detect and eliminate such errors and weaknesses
using Hardware-In-the-Loop (HIL) testing
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Fig. 19. Experience with Weatherfords
Model 7875 BTR shows prevention of
development of riser gas.
R-68DECEMBER 2013/Drilling Rig Advances
DRILLING RIG ADVANCES
Riser gas prevented with MPD
deployment
Advances in deepwater MPD tech-
nology have provided an answer to the
long-standing challenge of riser gas.
Weatherford deployed the industrys first
riser-integrated RCD, the below-the-
tension-ring Model 7875 BTR, aboard a
drillship in 2010 to fully enable deepwa-
ter MPD, Fig. 19. Since then, experience
has shown that automated MPD control
of wellbore pressure prevents riser gas by
eliminating the conditions that lead to its
development in the first place.
By detecting and stopping gas influxes at
the onset, while they are very small, MPD
minimizes and manages the entrainment of
gas before it can break out of solution in the
riser. Of the numerous deepwater MPD
applications that it has conducted, Weath-
erford reports that no instances of riser gas
were experienced. This capability removes
a significant well control risk that is con-
ventionally mitigated by venting gas in the
riser to a high-rate mud-gas separator.
ADVANCES IN FLUID SYSTEMS
Shaker adjusts on the fly
A new, four-panel shale shaker from
Derrick Equipment Company allows the
angle of the screen deck to be adjusted on
the fly, to achieve the best performance
without interrupting operations. The Hy-
perpool shaker can be configured as the
primary shaker and mud cleaner, or as a
secondary drier for drill cuttings. Its ad-
justable-while-drilling feature permits the
screen deck angle to be lowered and raised
within a range of +3 to +8, respectively.
Two Derrick Super G vibratory mo-
tors apply more than 8-G acceleration to
the screen frame. A greased-for-life, mo-
tor bearing system eliminates the need for
lubrication, reducing maintenance and
repair costs.
The shaker increases capacity over
similar Derrick models, up to 35% in the
same footprint. Fluid centering technol-
ogy and a concave screen bed maximize
fluid throughput. The larger, non-blanked
API screen area significantly increases
capacity over conventional shakers and,
in some cases, may reduce the number of
shakers required.
Shaker matches to the task by
changing motion
A dual-deck shale shaker from M-I
SWACO provides flexibility in respond-
ing to variations in drilling conditions and
cuttings volume, Fig. 20. Equipped with
DuraFlow com-
posite screens, the
MD-2 shaker can
double the capacity
of a standard single-
deck stacker.
At the flip of a
switch, the shaker
changes between
balanced and pro-
gressive elliptical
motion. This op-
tion provides 7-G
balanced motion for
larger cuttings, and
higher fluid capac-
ity and conveyance
rate. Progressive
motion at 6.5-G ac-
celeration produces
a thin ellipse to re-
move solids, and
a wide ellipse for
drier cuttings.
The compact
mid-range shaker
features full prima-
ry and half-width
scalping decks with
adjustable angles to handle variations in
drilling conditions, different fluid types,
and solids. The scalping deck has a 4 ad-
justment range, and the primary deck can
be adjusted between +3 to +7.
The shaker accepts most gas detec-
tion devices and can be equipped with
an optional fume extraction system for
removing gas.
ADVANCES IN PROCESS
ENHANCEMENTS
Magnet system prevents
downhole litter
The recovery of objects dropped in the
hole, and the capture of metal in the fluid
system, is the objective of a novel mag-
netic device from 5D Oilfield Magnetics,
Fig. 21. Placed above the BOP, its Open
Hole Net (OHN) device catches metal
objects dropped into wellbores, such as
hand tools, nuts and bolts, and tong dies.
Tests that dropped objects from a height
of three feet in a water-filled wellbore
with pipe in the holehave caught a 36-
in., 18-lb pipe wrench.
The OHN also catches metal coming
out of the wellbore, such as materials from
pipe and casing wear, that can affect BOP
and annular preventer cavities, and accel-
erate wear in LWD and MWD systems.
The device is an unpowered mechani-
cal system of magnets in a set of doors
that are opened selectively to remove the
magnetic field, when running sensitive
logging tools, or to retrieve captured met-
al and objects. Caught objects and mate-
rials are removed by draining fluid from
the OHN and opening the doors, which
is typically a one-man operation.
The OHN is designed for use on all
rigs, from workover to marine riser sys-
tems. It is available in four sizes, with the
unit for 133/8-in. bore BOP system service
providing a 15-in. internal diameter.
Tagging pipe provides tracking
and insights
The applications for radio frequency
identification (RFID) technology con-
tinue to grow. Recent innovations have
applied the technology to manipulating
reamers and circulating subs. Now the
move is to drill pipe.
Weatherfords Smart Iron drill pipe
RFID tagging technology (Fig. 22)
promises a neat solution to keeping track
of individual joints over the life of the
pipe. RFID tagging is achieved with an
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World Oil/DECEMBER 2013 R-69
DRILLING RIG ADVANCES
insert that is embedded in the pipe col-
lar, and read with a hand-held device or a
reader at the rotary table.
Tagging each individual joint sets up
the ability to assign and collect various
data associated with the pipe, which offers
short- and long-term safety and efficiency
benefits. Tracking history and usage pro-
vides hard-to-come-by data on fatigue, fail-
ures, and service interruptions for develop-
ing better technologies and practices.
The position of joints in the drill string,
run history and downhole usage data, such
as rotating hours, can be collected and ac-
cessed quickly. Pipe specifications and
history, including inspections and mainte-
nance, are immediately available on the rig,
as well as remotely.
ADVANCES IN TRAINING
Rig training stresses communica-
tions, high-tech simulations
As new technology is fielded and com-
petencies change, rig training remains an
integral part of getting the job done. Yet,
increasingly, even the training is taking on
a decidedly techie feel. Its sophistication
reflects the advanced technology and the
risks at hand.
Maersks drilling rig simulator com-
plex (Fig. 23) in Svendborg, Denmark,
is on the leading edge of rig training ca-
pabilities and thinking. The facility is
based on a team approach to well control
training that emphasizes communication
and situation handling in a near-real life
environment. All the high-end rigs in the
Maersk fleet can be recreated virtually in
the simulator, including specific equip-
ment and control systems.
The 3D complex includes simulators
for drilling, as well as the control room,
engine room and crane, to enable inte-
grated training for the full crew. The ar-
rangement allows the entire crew to be
trained, together, in communication and
interaction, as well as technical skills. Sim-
ulations can be conducted for various well
control scenarios, including historical in-
dustry events. A downhole visualization
tool helps trainees better understand the
drilling process.
Fig. 22. RFID technology for drill pipe
tagging is provided by Weatherfords
Smart Iron system.
Fig. 23. Communication and situation
handling in a near-real-life environment
are at the heart of Maersks new drilling
simulator.
Fig. 20. Dual decks and motion options
provide performance with M-I Swacos
MD-2 shaker.
Fig. 21. 5D Oileld Magnetics novel
magnetic device, the Open Hole Net, keeps
a wrench from becoming a bottomhole
tool.
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World Oil/DECEMBER 2013 71
The upstream oil and
gas industry has its own
unique set of health,
safety and environmental
(HSE) challenges. Drilling,
completion and production
have become increasingly
specialized and complex.
Some techniques, pose an
inherently high risk to the
environment and to worker
safety. The purpose of HSE
technology is to provide
products and services that
minimize those risks.
HENRY TERRELL, Contributing Editor
Health, safety and environmental issues
go hand-in-hand with cost savings
NEW HSE TECHNOLOGIES
DURA-BASE is an interlocking mat system
that provides stable worksites and ground
protection, supporting drilling rigs and
completions operations. The system can
also be used to construct temporary
roadways for rugged or sensitive terrain.
In the broad categories of health,
safety and environmental products and
systems, the overlap is so complete, it
becomes obvious why this field is known
simply as HSE. A product that im-
proves workplace safety is clearly ben-
eficial to worker health, while another
that mitigates environmental problems
likewise contributes to public safety and
quality of life. The three are inseparable.
Its also true that the E in HSE could
just as easily stand for economics. In
purely dollars-and-cents terms, risks to
worker health and safety, or to public
safety, or a sound environment, are ex-
pensive. A trained, skilled employee is
a valuable investment to be protected.
Additionally, risk to a company comes
not just from loss of production, added
downtime and the necessity of training
new workers, but in individual and class-
action lawsuits. Damage to a companys
reputation and brand are less quantifi-
able but just as real. Safe environmental
practice is good business.
Greenfield OCTG construction. Re-
ducing environmental impact begins
before a well is even drilled. Tenaris is
currently building a new greenfield
seemless pipe mill in Bay City, Texas,
near Houston, for the manufacture of
OCTG products. With a $1.5-billion in-
vestment, the facility, called TenarisBay-
City, is designed and will be constructed
under stringent environmental and safe-
ty standards.
The plant will implement several air
emissions technologies, such as selec-
tive catalytic reducers (SCRs). These
are used in the exhaust stream of inter-
nal combustion engines to reduce NOx,
and are designed to significantly reduce
the plants emissions footprint to exceed
both state and federal regulations. These
NOx emissions are also mitigated by ap-
plying advanced burner design to maxi-
mize efficiency.
Volatile organic compounds will be
kept to a minimum by the use of water-
based varnish coatings, with add-on
controls, such as thermal oxidizers, to
reduce remaining organic compounds.
The closed-loop water system is de-
signed to have the smallest possible im-
pact on local water resources. The facil-
ity will apply for LEED (Leadership in
Energy and Environmental Design) cer-
tification, a rating system developed by
the U.S. Green Building Council.
The mill is projected to produce
600,000 tpy of seamless pipe.
Composite mat system. The first line
of defense in safety and ground protec-
tion for drilling and completions op-
erations is the mat. The DURA-BASE
Advanced-Composite Mat System from
Newpark Mats & Integrated Services is
used widely throughout North America
and other parts of the world for stable
worksites and ground protection. The
system is also utilized to construct tem-
porary roadways for accessing difficult or
sensitive terrain. In environmentally sen-
sitive areas like the Marcellus and Utica
shale plays in the northeastern U.S., the
mat system is deployed atop spill-con-
tainment poly-liners to safeguard against
premature failure resulting from wear
72DECEMBER 2013/WorldOil.com
NEW HSE TECHNOLOGIES
and tear. DURA-BASE is part of an in-
tegrated system that includes ramps and
berms, as well as a fully automated mat-
cleaning system that minimizes the use
of water and speeds up remobilization.
Each mat measures 8 ft 14 ft 4.25
in. thick and is tested to support loads up
to 1,000 lb/sq in. The mats are made of
an advanced-composite formulation that
weighs half as much as wooden mat al-
ternatives. This lightweight design allows
more mats to be carried on each truckload
(45 DURA-BASE mats vs. 20 wooden
mats), not only reducing fossil fuel con-
sumption and emissions, but also lessen-
ing road wear. The composite material
also contains an additive that eliminates
potentially dangerous static buildup.
The mat system features a connection
system that interlocks on all four sides.
This minimizes differential movement,
helps prevent load destabilization and
creates a continuous, temporary work
surface that reduces the risk of trips,
slips and falls. The twist-lock fasten-
ers and overlapping lip system ensure a
continuous barrier between ground and
work surface, eliminating the possibility
of individual boards coming loose and
damaging equipment, and also prevent-
ing the pinching and tearing of liners.
This complies with environmental regu-
lations and significantly reduces main-
tenance and rig downtime, due to liner
repair and leak mitigation.
DURA-BASE mats are 100% recy-
clable and can be reused multiple times,
typically lasting five times longer than
wooden alternatives. A specially de-
signed tread pattern and anti-skid surface
material prevents slips, and improves pe-
destrian and vehicle traffic.
Coiled tubing inspection in real
time. The safest, cost-effective tech-
niques are those that prevent problems
before they occur. The CoilScan real-
time, CT pipe inspection system from
Schlumberger is a portable device that
detects internal and external CT dam-
age or defects on CT pipe sizes ranging
between 1 in. and 27/8 in. diameter,
Fig. 1. When used in conjunction with
CoilLIMIT coiled tubing pressure and
tension limit modeling and interpreta-
tion software, the CoilScan measure-
ments provide enhanced operational
safety by accurate determination of the
operating envelope of the coiled-tubing
pipe. Non-invasive, real-time monitoring
of CT pipe condition before, during and
after jobs can eliminate costly problems
during CT interventions.
Previously, coiled tubing evaluations
were limited to visual inspection and fa-
tigue calculations that totaled the num-
ber of flexures under stress. With the
CoilScan technology, these calculations
are augmented by detailed, non-destruc-
tive metal inspection using magnetic
flux-leakage (MFL) and eddy current
techniques to reveal continuous wall
thickness, and spot defects and ovality
that could cause anything from pin-hole
leaks to catastrophic failure.
Safer logging. Chemical neutron
sources are used with measuring devices
in logging-while-drilling (LWD), and
these involve the possible exposure of
personnel or the environment to these
chemical sources, when they are trans-
ported, loaded and unloaded. NeoScope
from Schlumberger is the industrys first
sourceless formation evaluation-while-
drilling service. Fig. 2. The system uses
pulsed neutron generator (PNG) tech-
nology in the shortest LWD collar avail-
able. The neutron supply is controlled by
the power voltage applied to the PNG,
which removes chemical source trans-
portation risks and associated costs, and
eliminates the HSE risks found in load-
ing and unloading.
The service provides a number of
measurements, including azimuthal
gamma ray, array resistivity, dual ultra-
sonic calipers, sourceless neutron-gam-
ma density, neutron porosity, spectros-
copy, sigma and a full drilling mechanics
package. For exploration drilling, the
NeoScope service enables operators to
avoid complex fishing, sidetracking or
abandonment features. In unconven-
tional plays, the service delivers critical
data to optimize completion quality and
enhance efficiency, in addition to pro-
viding sourceless measurements in real
time, for better well placement.
Mobile treatment for flowback wa-
ter. Development of unconventional
oil and gas presents an opportunity
to use one of the oil fields oldest chal-
lengesunwanted produced and flow-
back wateras a source for the water
needed to perform hydraulic fracturing.
Cost-effectively managing this water can
mean the difference between economic
Fig. 2. The industrys only sourceless
formation evaluation-while-drilling service
uses pulsed neutron generator technology
for formation evaluation. (Photo courtesy
of Schlumberger)
Fig. 1. The Schlumberger CoilScan system provides a full array of measurements every
0.005 in. 3D modeling software produces MFL output signatures that detect pinhole
leaks, as well as butt and seam welding defects, both internally and externally.
74DECEMBER 2013/WorldOil.com
NEW HSE TECHNOLOGIES
success and failure in many hydraulic
fracturing operations.
Effective surface water management
requires scientific knowledge of the com-
position of the water and how that water
could be impacted by reservoir tem-
perature and pressure, rock characteris-
tics, the wellbore, and surface handling
and treating techniques. Understanding
these water chemistry variables is critical
to ensuring reservoir productivity, well
integrity and a safe environment.
The H2prO water management ser-
vice from Baker Hughes (Fig. 3) com-
bines a comprehensive suite of solutions,
a dedicated team of oilfield water appli-
cation engineers, mobile treatment sys-
tems and effective processes to enable up
to 100% reuse of produced and flowback
water in hydraulic fracturing operations,
without potential damage to the reser-
voir. One system, the H2prO heavy met-
als and solids (HMS), uses a non-chemi-
cal electrocoagulation process to remove
contaminants that can damage the reser-
voir and cause electrode scaling. Unlike
traditional electrocoagulation systems,
the H2prO HMS service uses a design
that prevents electrode fouling to en-
sure consistent, dependable treatment.
Additionally, the applied electric field
improves contaminant coagulation for
better separation efficiency compared to
chemical treatment methods.
Using the H2prO service, a Texas op-
erator was able to treat an entire volume
of 1.16 million gal of produced water on
the fly, and reuse it to fracture 17 stages.
Using treated produced water, instead of
fresh water, eliminated freshwater and
disposal trucking costs, and significantly
reduced operating expense for the job.
Environmentally sound scale con-
trol. For oil fields around the world, oil
production means water production, and
a risk of mineral scale formation. If left
unchecked, mineral scale deposits within
the near-wellbore, in production tubing
and on processing equipment, inevitably
lead to a slowdown in production. Aggres-
sive under-deposit corrosion is also likely,
leading to production leaks that may
threaten the surrounding environment.
While chemical treatments fight to
inhibit scale formation, and have been
in use for decades, the push for greener
treatment alternatives has spurred the
development of more environmentally
benign technologies. Weatherford has
pioneered the development of a novel
solution called ClearWELL, a water-
treatment technology that employs a
high-frequency AC signal to create an
electromagnetic field within the produc-
tion tubing and equipment. This signal,
which travels through the pipe and pro-
duction equipment, allows scale crys-
tals to form in suspension and remain
suspended in the produced fluid, rather
than allowing them to deposit and grow
on the internals of the production sys-
tem, Fig. 4.
The system is chemical-free scale
control technology that is installed on
the outside of the surface conduit, avoid-
ing environmentally risky, costly well in-
terventions. The signal can be transmit-
ted throughout the well conduit, from
the surface to the bottom of the well,
and through the separation system. This
technology has been able to control scale
deposition as deep as 17,000 ft. It is also
compatible, and does not interfere with,
a pipelines cathodic protection system.
Significantly, the system does not add
anything to the produced water that was
not already present. The tiny scale par-
ticles form in suspension and remain
suspended throughout the normal sepa-
ration process.
ClearWELL has been used extensive-
ly worldwide. In a recent six-month trial
in the Middle East, the technology was
deployed to prevent calcium carbonate
and strontium sulfate scale depositions
in downhole and surface applications
in a well using an ESP for artificial lift.
Through the use of mechanical ID-gaug-
ing methods, it was possible to track the
progress of scale build-up on the internal
tubing walls.
ESP performance was closely moni-
tored and continuously compared to his-
torical baseline performance. The device
exhibited an ability to inhibit mineral
scale deposition inside the tubing string
and within the ESP pump, while reduc-
ing the overall use of acids and chemicals
in the well.
Cleaner alternative for hydraulic
fracturing. Diesel fuel has powered
high-horsepower hydraulic fracturing
pumps for decades. While proven and
effective, diesel creates risks for air emis-
sions and adds other HSE problems in
transportation and refueling operations.
Bi-fuel pumps burn a mixture of natu-
ral gas and diesel to reduce diesel use by
Fig. 3. The H2prO water management
service from Baker Hughes ofers a
comprehensive suite of solutions via
mobile treatment systems that efectively
and safely process produced and owback
water for 100% reuse in hydraulic
fracturing operations.
Fig. 4. The ClearWELL system from
Weatherford is installed on the outside
of the surface conduit. The signal can be
transmitted throughout the well conduit,
from the surface to the bottom of the well
and through the separation system, and
allows scale crystals to form in suspension
and remain suspended in the produced uid.
World Oil/DECEMBER 2013 75
NEW HSE TECHNOLOGIES
up to 70% and slash a number of emis-
sions. The pumps also capitalize on the
availability of the natural gas that opera-
tors have unlocked in unconventional re-
sources. Baker Hughes is a pioneer in bi-
fuel hydraulic fracturing technology with
its Rhino bi-fuel pump fleets. The pumps
can operate twice as long as engines run-
ning solely on diesel, improving safety by
eliminating refueling during pumping.
The company introduced bi-fuel hy-
draulic fracturing North America dur-
ing the fall of 2012 by converting a small
fleet of pumps in Canada. When results
were successful, the company converted
an entire fleet in the U.S. During the first
two quarters of 2013, they completed 24
bi-fuel pumping jobs and pumped 404
cumulative stages from October 2012
through June 2013 using liquefied petro-
leum gas (LPG).
Recently, the company achieved an-
other significant milestone, fracturing a
series of wells in the northeastern U.S.
and the Rockies using line gas from the
field to pump 240 stages over 18 differ-
ent wells. Using the operators line gas
displaced more than 100,000 gal of die-
sel and eliminated several shipments of
fuel to rural areas, achieving significant
cost savings.
By the end of 2014, the company an-
ticipates that more than 25% of its hy-
draulic fracturing fleet in North America
will be fully bi-fuel capable. The com-
pany expects that to grow to more than
50% over the next three to five years.
Fracturing technique enhances
production, safety. The HiWAY
flow-channel fracturing technique from
Schlumberger incorporates a workflow
process that consistently delivers signifi-
cant production improvements in hori-
zontal and vertical completions, Fig. 5.
The versatile technique has applications
in shale formations with naturally frac-
tured networks and in single- or multi-
stage completions. It is also suitable for
consolidated rocks, and works over a
wide temperature range. The proppant
deposited by the technique supports
the fracture while creating infinitely
conductive flow channels through the
pack. Production is improved, with
fewer screenouts and with reduced
completion costs.
A combination of a unique pumping
technique and innovative fluid engineer-
ing, the HiWAY process delivers conduc-
tivity all the way from the wellbore to the
fracture tip. This allows for longer effec-
tive half-lengths, higher effective contact
areas, better fluid and polymer recovery,
and less fracture face damage. The cumu-
lative effects are better productivity and
superior hydrocarbon recovery.
Rod lift systems giving way to safer
ESPs. After years of setting the standard
for artificial lift in conventional mature
fields with low flowrates, rod lift systems
are being challenged, particularly in un-
conventional fields, by ESP solutions. An
operating range paradigm shift, and a per-
fect convergence of technology services
and commercial models, are making ESP-
based solutions reliable, economically vi-
able and environmentally preferred across
the broad production range exhibited by
these unconventional fields.
The new ProductionWave suite
of products and services from Baker
Hughes epitomizes this trend, helping
operators in unconventional plays in-
crease production ratesin some cases
by more than 40%while lowering in-
stallation and maintenance costs, and re-
ducing HSE risks when compared to rod
lift operations.
The ProductionWave solution, featur-
ing FLEX pump technology, is primarily
targeted at unconventional oil plays in
which post-frac production rates decline
rapidly, and wellbore trajectories prove
troublesome for rod lift systems. FLEX
pumps can operate in flow ranges from
50 to 4,000 bpd, enabling operation in
dynamic producing conditions while
providing better associated gas and sol-
ids-handling capabilities than traditional
rod lift systems.
Rod lift systems can stand 47 ft tall,
with numerous moving parts at the sur-
face. At 46 ft tall, ESP systems (Fig. 6)
are more landscape-friendly and have no
exposed moving parts at the surface. In
addition, ESPs eliminate the risk of per-
sonnel becoming entangled in the rotat-
ing equipment. Operation is less intru-
sive, with no potential of wellhead leaks.
Well performance is continuously moni-
tored to stay ahead of changing condi-
tions and can be monitored remotely.
In a 2013 example from the Bakken
play, the rod lift system became unreli-
able as the well declined, and the gas/
liquids ratio increased. Three rod fail-
ures cut production rates from 200 to
100 bopd. The operator converted to a
Centrilift FLEX 3.2 pump system and
a variable-speed-drive (VSD) surface
component. These were supported by
newly developed algorithms that detect
gas issues and automatically adjust oper-
ating parameters to adapt to gas events.
After the conversion, oil production in-
creased 42%, with no gas-, rod-and-tub-
ing-, or ESP-related downtime.
In another ProductionWave example,
well performance was monitored to de-
termine whether conversion from gas
lift to ESP was economic. Oil produc-
tion increased by more than 75% and gas
production by more than 60%, providing
an ESP conversion payout in less than
one month.
Fig. 5. Schlumberger's HiWAY ow-channel
fracturing technique can be applied to all or
to select stages of a multi-stage stimulated
completion. Proppant pillars (inset)
support the fracture, leaving a network
of linked innite conductivity channels
between the fracture tip and the wellbore.
Fig. 6. While traditional rod lift systems
can tower over the landscape, with many
moving parts exposed, Baker Hughes ESP
systems have no exposed moving parts at
the surface, making them safer and more
environment-friendly.
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Project Development
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Neils Udengaard
Haldor Topsoe, Inc.
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Sasol
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Chief Operating Ofcer
Velocys
Timothy Vail
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G2X Energy
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78DECEMBER 2013/WorldOil.com
INTERNATIONAL
COUNTRIES MAKE PUSH
FOR DOMESTIC RESERVES
BY IAN LEWIS, Contributing Editor
Despite the abundance of unconventional oil
and gas potential in all corners of the globe, North
America remains the only region with a booming
shale industry. However, a host of other countries
are eager to emulate the regions success and exploit
their own, domestic shale resources.
GLOBAL OVERVIEW
There is no doubt that the companies that have
fared well in the maturing North American shale
sector are eager to seek opportunities to repeat their
success elsewhere; and there is no shortage of coun-
tries eager to emulate this same success at home.
More than 90% of the worlds technically recoverable
resources (TRRs) of shale gasamounting to some
6,634 Tcflie outside the U.S. (Fig. 1), according to
the U.S. Energy Information Administration (EIA).
However, despite the fact that an abundance of
resources is available, the global shale revolution
is not to be hurried. While significant investments
are being made in shale gas and oil explorationin
countries such as Argentina, Australia, China, the
Ukraine and the UKcommercial-scale produc-
tion has yet to occur, on a sustained basis, outside
North America.
Many observers believe that it is only a matter of
time before the shale sector takes off globally. Pro-
ponents argue that as technology and know-how
spreads, service firms build up their global infra-
structure, and conventional reserves mature, invest-
ment will start to flow into the global shale sector.
Others believe that the absence of a low-cost en-
vironment, of the type that triggered the U.S. boom,
will stymie shale development. There is also an ar-
gument that if U.S. LNG exports, based on shale gas,
come onstream soon, projects that would produce
relatively expensive shale gas in other parts of the
world will be deferredin which case, the industry
may come to be seen as a victim of its own success.
However, as usual, the reality is likely to lie some-
where in between, with shale projects taking off in
some places and failing in others. Either way, the
number of countries hoping to hit the jackpot is
growing steadily.
World Oil/DECEMER 2013 79
Nearly half of the gas produced from Apaches
operations in Neuquen basin contributes to
Argentinas Gas Plus program, which targets
development of new gas from undeveloped
formations.
80DECEMBER 2013/WorldOil.com
SHALETECH/ INTERNATIONAL
LATIN AMERICA
The largest of Latin Americas shale gas reserves lie in Mexico,
Argentina and Brazil; Argentina and Venezuela hold the bulk of
the regions shale oil deposits. Until recently, investment in shale
development has been limited, due largely to uncertain invest-
ment conditions, bureaucratic hurdles, limited infrastructure
and restricted markets. While Argentina is now making efforts to
draw in investment, to exploit its vast shale reserves, for others
it is less of a priority. In countries such as Brazil and Mexico, the
governments prefer to target conventional reserves.
Argentina. The attraction of the worlds second-largest shale
gas reserves (TRR of 802 Tcf, according to the EIA) and fourth-
largest shale oil resources (27 Bbbl) has pulled foreign invest-
ment into the sector. This is despite the uncertainties caused
by the governments expropriation of Repsols 51% stake in
Yacimientos Petrolferos Fiscales (YPFa company which was
state-controlled prior to 1993 and is so again, now).
In July, YPF finalized its first agreement since renationaliza-
tion, when Chevron signed up to develop the shale oil and gas
reserves of the Vaca Muertathe countrys largest shale forma-
tionin the western province of Nequn. Chevron is to make
an initial investment worth $1.24 billion, with the possibility of
raising that to $15 billion, if exploration merits such expendi-
ture. Initial activity will involve drilling more than 100 wells on
a 5,000-acre tract, which is part of a 96,000-acre concession.
This agreement was followed up by a deal with Dow Chemical
in September, under which Dows Argentine unit will invest $120
million a year, and YPF will invest $68 million a year in drilling 16
shale gas wells, in the Vaca Muerta.
China National Offshore Oil Corp. (CNOOC) is also be-
lieved to be nearing an agreement to explore and develop Vaca
Muerta acreage, possibly through Bridas Group, its existing joint
venture with two brothers, Carlos and Alejandro Bulgheroni.
Several international firms have been operating in the Nequn
basin, and elsewhere in the country, for several years. These in-
clude Apache Corp., EOG, Exxon Mobil, Total and Chevron.
However, developments have progressed at a snails pace, due to
a lack of investment, poor prospective returns, red tape and po-
litical uncertainties. Now, however, there is evidence of a change.
Wellhead prices have increased, as consumer subsidies have been
reduced, while returns for investors have improved.
While Repsols experience highlights Argentinas political
riskthe government said that the Spanish multinational was
not investing enoughanalysts say the countrys desire to bolster
domestic energy reserves should ensure that state interference
is minimized. The Argentinian government says it is hopeful of
reaching a settlement with Repsol by the end of the year.
Mexico. The Mexican portion of the highly-productive Eagle
Ford shale formation, which extends from Texas into Mexicos
Burgos basin, is an obvious focus for drillers, active in the U.S.,
who are seeking to expand out of a now-saturated market, Fig. 2.
The Eagle Ford stretches across the western margin of the
Burgos basin, where the formation interval ranges from 100 m to
300 m thick, with total organic content (TOC) averaging around
5%. The basin is estimated to hold around 345 Tcf of Mexicos
TRRs, which at 545 Tcf are the worlds sixth-largest. The Mexi-
can section of the Eagle Ford also holds 6.3 Bbbl of the countrys
estimated 13.1 Bbbl of technically recoverable shale oil reserves.
While Mexican President Enrique Pena Nieto has proposed
reforms that could allow foreign investment in oil and gas, for the
first time in decades, it is unclear if, or when, these will be imple-
mented. It is also likely that the government and Pemex, the state
oil firm, would seek to develop the more lucrative, conventional
oil reserves.
Shale oil would be more expensive to exploit than conven-
tional oil reserves. And shale gas developments would neces-
sitate costly infrastructure to move the supply to domestic or
foreign markets; it may even require the construction of LNG
plants. Sending the gas to the already well-supplied U.S. mar-
ket, where prices are low, would not be an economically at-
tractive option.
Pemex has been conducting exploratory shale gas drilling
since 2010, and so far, it has sunk just five wells. However, the
company plans to drill around 175 wells by 2015.
Brazil. Latin Americas third-largest shale gas reservesafter
Argentina and Mexicolie in Brazil, which has TRRs of 245 Tcf.
These reserves are in three basinsnamely Paran, Solimes and
Amazonaswhich have been assessed as potential shale plays.
These basins already produce conventional oil and gas. Once as-
sessed, other basins may be shown to be shale plays.
The Paran basin, which covers some 747,000 sq mi, stretches
across parts of Paraguay, Uruguay and Argentina, as well as Brazil.
The Brazilian section is covered by flood basalts, which increase
drilling costs and make seismic surveying difficult.
Fig. 1. Basins with assessed shale oil and shale gas formations (source:
U.S. basins from U.S. EIA and USGS; other basins from Advanced
Resources International, based on data from various published studies).
Fig. 2. Burgos basin
outline, and shale
gas and shale oil
prospective areas
(image courtesy of
EIA, ARI).
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82DECEMBER 2013/WorldOil.com
SHALETECH/ INTERNATIONAL
As is the case in Mexico, Brazils heavy investment in its con-
ventional hydrocarbon reservesnotably its offshore pre-salt
discoveriesmeans that more costly-to-extract, less-profitable
shale gas is unlikely to receive much attention, in the near term.
So far, no shale drilling has been undertaken.
EUROPE
Europe is home to substantial shale reserves (TRRs of 470
Tcf of shale gas in the European Union); however, commercial
quantities of such gas have yet to be produced anywhere on the
continent. While the shale geology is more complex than much
of that in North America, the lack of success may be due more
to the very limited extent of exploration and investment under-
taken, so far. Poland has taken the lead in shale gas exploration;
however, results there have been largely disappointing, to date.
Now the UK and Ukraine are beefing up their efforts to create a
shale industry, by offering more attractive terms to drillers.
Environmental concerns have sparked grassroots opposition
in several European countries, sometimes leading to fracing bans.
Such concerns have also spurred the European Commission
(Editors note: the European Commission is the EUs executive body,
which seeks to represent the interests of Europe as a wholeas op-
posed to the interests of individual countries) to prepare legislation
that could introduce tougher requirements for environmental
impact assessments, for the EU shale sector. Project managers
will need to bear in mind the cost and time implications of this, if
the legislation comes into force, said Darren Spalding, a London-
based attorney at law firm Bracewell & Giuliani.
Poland has Europes largest shale gas reserves, with esti-
mated TRRs of 148 Tcf, across four basins, and TRRs of shale
oil estimated at 3.3 Tcf. The country is a forerunner in shale
gas exploration, outside of North America, and in recent years,
it has attracted investment from major energy firms. Chevron,
ConocoPhillips and Eni are among companies operating in
the sector.
Despite strong governmental support, and limited public op-
position, a string of drilling failures has contributed to an exodus
of players, such as Exxon Mobil, Marathon and Talisman. Some
50 wells have been drilled, without locating commercial shale gas
reserves. Difficult geology, and excessive
red tape, have also been cited as problems
in the country. Proposed legislation, which
is designed to improve investment condi-
tions for drillers, has been criticized by
some operators, for not going far enough.
The government, which is keen to re-
duce Russian gas imports, and its heavy re-
liance on coal for power generation, hopes
that recent successful drilling by Lane En-
ergy (70%-owned by ConocoPhillips and
30% by London-listed 3Legs Resources)
in mid-2013 will turn the tide. In August,
the company said it was producing around
8 Mcmd of shale gas, from its LE-2H hori-
zontal well, in the Baltic basin of northern
Poland, Fig. 3. While still not at commer-
cial levels, this is still one of the highest
flows achieved in Europe, to date.
The Baltic basin is considered to con-
tain the most potential. The Podlasie ba-
sin, in the east, and the Lubin basin (which
extends into Ukraine), to its south, are
other targets for explorers. The Fore Su-
detic Monocline, in the southwest, may
also hold substantial reserves.
Ukraine has led the field in Europe,
in terms of attracting fresh investment
to the global shale sector this year, as
the country strives to reduce its depen-
dence on imports from Russia. Two ma-
jor deals have paved the way for a rapid
Fig. 3. ebie LE-2H
operations (image
courtesy of 3Legs
Resources).
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INTERNATIONAL / SHALETECH
acceleration in exploration, but the extent of commercial poten-
tial remains uncertain.
The country has estimated TRRs of 128 Tcf of shale gas and
1.1 Bbbl of shale oil, according to the EIA. The two main shale
plays are Olesska field, in the west, a continuation of Polands Lu-
blin basin, and Yuzivska field, in the east, which is in the Dniepr-
Donets basin. The latter is a mid-to-late Devonian structure con-
taining a thick sequence of Lower Carboniferous black shale.
So far, little drilling has been done, but this is now set to
change. In June, the government signed a 50-year production-
sharing agreement (PSA) with Shell, which could be worth $10
$50 billion, depending on exploration results, to explore and de-
velop shale gas resources in Yuzivska field. The deal permits 70%
investor recovery and a 16.5% governmental revenue take. Earlier
this year, the government said that the field could be producing
720 Bcm of gas, annually, by 2018. In October, Shell said that it
planned to drill its first 15 wells during 2014.
A PSA, worth up to $10 billion, with Chevron to develop
shale gas in Olesska field is also set to be signed, once the draft has
made its way through Ukraines political process. Under the deal,
Chevron would invest $350 million to assess reserves on 5,260
sq km of the field. The company also has interests in the Polish
section of this formation.
UK shale gas exploration has been limited, to date. However, a
promise of governmental support, and attractive incentives, could
turn the UK into one of the EUs major players, if commercial
quantities of gas can be found. The presence of a conventional oil
and gas industry, in the country, should aid investor confidence.
However, public opposition to shale drilling, on environmental
grounds, is evident, and has resulted in disruption to some work;
most recently, a well being drilled as part of shale oil exploration
in southern England by Cuadrilla Resources, Fig. 4.
TRRs of shale gas are estimated at 26 Tcf and those of shale oil
are 700 MMbbl. The EIAs estimate of shale gas-in-place is much
higher, at 632 Tcf. In June, the British Geological Survey doubled
its estimate of gas-in-place in a swathe of northern England (in-
cluding the Bowland shale and surrounding areas) to a range cen-
tered on 1,300 Tcf.
Shale gas drilling has, so far, been focused on the Bowland
shale of northwestern England; however, other Carboniferous
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Fig. 4. Aerial photograph of a Cuadrilla Resources rig site in England.
84DECEMBER 2013/WorldOil.com
SHALETECH/ INTERNATIONAL
formations across northern England and central Scotland, and
Jurassic shales in southern England, are also regarded as prospec-
tive. The geology of much of these formations is more complex
than those in the U.S., meaning that drilling costs are likely to be
much higher.
One sign of growing interest in exploration is the arrival of in-
vestment from larger firms. The sector has, until this year, been
occupied by pioneering innovators. In June, Centrica bought a
25% stake in licenses in the Bowland shale, operated by Cuadrilla
Resources. In October, Frances GDF Suez took a 25% stake in 13
Bowland shale licenses held by Dart Energy. GDF is paying Dart
$12 million in cash, and funding $27 million in exploration and
appraisal costs. If these operations yield results, and the govern-
ment delivers on its promised incentives, other major players may
also enter the UK market, Fig. 5.
Other European countries. Several prospective shale plays
exist elsewhere in Europe, but development has been stymied, in
several countries, by bans on hydraulic fracturing, introduced by
governments in response to public opposition.
France is thought to have the continents second-largest shale
gas reserves after Poland (TRRs of 137 Tcf); however, a fracing
ban has been in place since 2011, when exploration licenses, held
by Total and others, were cancelled. In October, the constitution-
al court upheld the ban in response to a challenge by Dallas-based
Schuepbach Energy, one of the licensees affected.
Other countries with bans in placeat least while environ-
mental reviews are carried outinclude Germany, the Nether-
lands and Bulgaria. The government in Romania, where Chevron
is a license-holder, is keen to push on with shale gas exploration,
but is, nevertheless, meeting stiff opposition from the general
public. Romanias TRRs are estimated at 51 Tcf.
Russia. While Russia has the worlds largest estimated shale
oil reserves (TRRs of 75 Bbbl) and ninth-largest shale gas re-
serves (TRRs of 285 Tcf), the country is in no hurry to exploit
them. Instead, Russia is likely to prioritize its lucrative conven-
tional reserves for the time being.
However, some resources are being directed to shale drilling.
Exxon Mobil has agreed to collaborate with Rosneft in shale oil
and gas exploration, and technology development. In 2012, the
companies said they would drill pilot wells, in a tight oil forma-
tion, in the Bazhenov formation, in western Siberia, which has
similar geology to the U.S. Bakken shale. Statoil has also signed an
agreement with Rosneft to launch a pilot shale oil program in the
Samara region, in the southeastern part of European Russia. The
deal covers 12 blocks in the Domanik formation. Rosneft holds
a 51% stake in the project, while Statoil holds the other 49% and
will inject $60 million of investment. The Norwegian firm said, in
August, that it also hoped to sign a deal, soon, to explore in west-
ern Siberia, and that it could start drilling there in 2014.
ASIA-PACIFIC
Most of the regions known shale resources lie in China and
Australia, the countries on which most investor attention has
been focused. China has the lions share, but may lose out to Aus-
tralia, in the short term, in attracting experienced shale drillers,
who are looking to expand out of North America. Australias fast-
growing conventional hydrocarbons sector has already proved
a magnet for major foreign players, whereas Chinas regulatory
environmentwhile under reformstill remains complex and
favors domestic companies over their foreign counterparts. Indo-
nesia, India, Pakistan, Mongolia and other countries in the region
are all keen to attract investment for shale development, but have
made only limited progress so far.
China holds the worlds largest shale gas reserves (estimated
TRRs of 1,115 Tcf) and third-largest shale oil reserves (TRRs of
32 Bbbl). To date, most exploration efforts have been focused on
the Sichuan basin, in the southwest, and the more remote Tarim
basin, in the northwest. A lack of expertise and equipment, and
the challenges of complex geology, have limited drilling. With less
than 200 wells drilled so far, Chinas hopes of producing 2.8 Tcf of
shale gas annually by 2020 look unlikely to be realized (see China
Regional Report, p. 88).
Fig. 5. View of a rig site in the UK (image courtesy of Cuadrilla Resources).
World Oil/DECEMBER 2013 85
INTERNATIONAL / SHALETECH
The government has held two shale-licensing rounds, with
results announced in 2011 and 2013. All blocks are held by do-
mestic firms, ranging from the big state-run firms, such as China
Petroleum & Chemical Corp. (Sinopec), to smaller players, in-
cluding coal and power firms. While homegrown know-how is
limited, it is growing, due, in part, to the involvement of Chinese
firms in the North American shale market.
Foreign expertise has been called upon. In 2012, ConocoPhil-
lips and PetroChina agreed to jointly explore 500,000 acres in the
Sichuan basin. However, Shell is the biggest foreign investor in
Chinese shale, investing up to $1 billion per year in exploration. In
March, Shell signed a PSC with Sinopec to explore around 4,000
sq km of the Fushin shale gas blocks, in
the Sichuan basin, where foreign firms are
already active in the conventional oil and
gas sector. Shell is also exploring with Sin-
opec in central China, where little drilling
has been carried out, so far.
The extent to which foreign firms be-
come further involved may depend on
the extent to which regulations, govern-
ing foreign participation and sales into the
Chinese market, are reformed.
Other Asian countries. Indonesia is
actively seeking foreign investment in its
shale sector. The country is seeking to
exploit TRRs estimated, by the EIA, at
46 Tcf of shale gas and 7.9 Bbbl of shale
oil. The government suggests that there
could be around 575 Tcf of gas in the main
shale formations of Sumatra, Kalimantan,
Papua and Java. In May 2013, state firm
Pertamina was awarded the countrys first
shale gas license, for the Sumbagut block
in North Sumatra, and said it would spend
almost $8 billion on the project, as part
of Indonesias efforts to make up for flag-
ging, conventional oil and gas production.
However, a complicated regulatory envi-
ronment, limited financial incentives and
poor infrastructure could deter foreign
investment in shale resources, as they have
done in the nations conventional sector.
Both India and Pakistan also hold po-
tential for shale gas and oil, which their
respective governments would like to ex-
ploit. However, their ability to exploit the
reserves is limited by their infrastructure
and funding. Many of Indias reserves
mainly in the Cambay, Krishna-Godavari,
Cauvery and Damodar Valley basinsare
far from the pipeline network and feature
difficult geology. A new shale gas policy,
which was approved by the government in
September 2013, is designed to speed up
exploration. It also promises the licensing
of new blocks in the near future.
In Pakistan, the largest reserves lie in
the southern Indus and Baluchistan ba-
sins. Indias TRRs are estimated at 96 Tcf
of shale gas and 3.8 Bbbl of shale oil, according to the EIA. Com-
paratively, Pakistans TRRs are 105 Tcf of shale gas and 9.1 Bbbl
of shale oil.
Australia could be the next major shale gas and oil province
to undergo development. The country has substantial reserves of
both shale gas and oil; a large, existing conventional oil and gas
sector; and a fast-developing LNG export sector to provide ready
buyers. It is already basing some of those exports on unconven-
tional resources, in the form of coal seam gas. However, rising
costs in the oil and gas sector, in general, coupled with the need to
direct much funding toward major conventional projects, could
create a drag on shale developments.
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86DECEMBER 2013/WorldOil.com
SHALETECH/ INTERNATIONAL
Australia has TRRs of shale gas estimated at 437 Tcf, and of
shale oil estimated at 17.5 Bbbl. The countrys main focus of shale
exploration, which is still in its infancy, is the Cooper basin. This
basin is also Australias main source of onshore gas. Estimated,
risked recoverable shale gas reserves in the basin total 85 Tcf.
Other prospective shale basins in Australia include the Georgina,
Galilee, Bowen, Sydney, Canning, onshore Perth, Beetaloo and
McArthur basins.
Significant investments are already being made in the nations
shale sector. In February, Chevron agreed to pay up to $349 mil-
lion to farm into two shale prospects being developed by Beach
Energy in the Cooper basin. Santos has already embarked on a
drilling program in shale and tight gas formations in the same ba-
sin. ConocoPhillips, Total, Mitsubishi Corp., Statoil and Indias
Bharat Petroleum are among firms that have also made invest-
ments in prospective shale projects.
In November 2013, Armour Energy said that it had carried
out what it described as the first successful use of multi-stage, hy-
draulically stimulated, horizontal drilling, in the Australian shale
gas industry, at its Egilabria-2 well in the Lawn shale of northern
Queensland. Initial gas flows to surface, and a flare of at least 2 ft,
were observed. The company provided no flowrate data.
AFRICA
Northern Africa. Algeria has the worlds third-largest shale
gas reserves (TRRs estimated at 707 Tcf), while Libya has the
worlds fifth-largest shale oil reserves (26 Bbbl), as well as an esti-
mated 122 Tcf of shale gas. Morocco and Tunisia also have plans
to develop their shale gas reserves, but they have yet to make any
significant strides.
Algerias shale gas is located across the Mouydir, Ahnet, Ber-
kine-Ghadames, Timimoun, Reggane and Tindouf basins. While
Shell, Exxon Mobil and Eni have all held talks with the govern-
ment over the development of these resources, no serious drilling
has occurred, so far. Sonatrach, the state energy company, has said
that it plans to drill pilot wells, in the most promising shale forma-
tions, at less than a 3,000-m depth.
Libyas efforts to develop its shale reserves have been ham-
pered by continued unrest, since the overthrow of Muammar
Gadhafi in 2011, which also has brought conventional hydrocar-
bon production to periodic halts. The Ministry of Oil and Gas
has said it may assess its shale gas strategy in mid-2014, to see if
progress would be possible.
South Africa is the country with the worlds eighth-largest
shale gas reserves (TRRs of 390 Tcf). These reserves are located
mainly in the Karoo basin, which covers much of the center and
southeast of the country. Lacking in conventional gas, and over-
reliant on coal for power, the government is keen to exploit its
shale reservesif environmental, and practical, obstacles can be
overcome. Plans to develop shale resources have met with envi-
ronmental protests over potential damage to the Karoo, a semi-
arid wilderness area (with little water to spare for hydraulic frac-
turing) that has a growing tourist industry.
In September 2012, the government lifted a moratorium
that had been in place, since 2011, on shale gas exploration. In
October 2013, it took another step toward permitting explora-
tion, by proposing new regulations to govern shale gas drill-
ing. However, the need to ensure careful water management,
and satisfy environmental concerns, could delay drilling for a
while longer.
Royal Dutch Shell, Falcon Oil & Gas, Anglo American, and
a group including Sasol, Statoil and Chesapeake applied for per-
mits prior to the moratorium and could be well-placed to lead
drilling efforts, if they arise. Shell, the largest acreage-holder,
said in 2012 that it could invest at least $200 million in shale
gas exploration.
MIDDLE EAST
While most Middle Eastern countries are focused mainly on
developing conventional oil and gas resources, some have reason
to invest in shale oil and gas, too. Jordan, which has few conven-
tional hydrocarbons, is eager to develop its unconventional re-
sources, to reduce costly imports. Saudi Arabia would also like
to develop shale gas, to reduce its use of oil in the power sector.
Oman, which is already producing from tight gas reserves, has
also expressed interest in shale gas exploration.
In October, Saudi Arabia said that it plans to be among the
first countries, outside North America, to use shale gas for
power generation. The government says that it believes the
Kingdoms shale gas reserves could total 600 Tcf, more than
double its proven conventional gas reserves. However, while
the country has drilled a few test wells, water scarcity and
subsidized domestic gas prices are likely to prevent the sector
from taking off for several years.
The most promising formation in Jordan is the Batra shale in
the Hamad and Wadi Sirhan basins, of eastern Jordan, and in sec-
tions of the Southern Desert region. These potential reserves also
extend into Saudi Arabia and Iraq.
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Underbalanced Drilling:
Limits and Extremes
IsraelOn the Verge of Becoming an Exporter of Natural Gas
The State of Natural Gas in Israel
A series of recent discoveries by Noble Energy, the largest
operator in the region, has increased the estimated gross
resources of natural gas awaiting development in the area
to more than 35 trillion cubic feet (Tcf). The Tamar natural
gas eld, rst discovered in 2009, came online in March
2013, and is estimated to contain 10 Tcf of natural gas. The
Leviathan eld, discovered in December 2010 and now
nearing the production phase, is the largest in the region,
with an estimated recoverable gross mean resource of 18
Tcf of natural gas. Leviathan is expected to initially supply
domestic markets, while exploring regional and LNG
export options.
Additional smaller gas elds have also been discovered
including the Dalit and Tanin elds, and additional
exploration is planned. Noble Energy, with partner Delek
Group and its subsidiary, Avner Oil and Gas Exploration,
are the regions main operators.
With these discoveries, Israel is now well-positioned
to utilize natural gas as the primary fuel for electricity
generation and industrial consumption. As reported
in World Oils Eastern Mediterranean regional report in
February 2012, Israel consumed 187 Bcf of natural gas in
2012, with 40% of the nations electricity generated from
natural gas. By 2015, the rate of natural gas consumption
is expected to rise to 50%. At the same time, natural gas
production from new reserves will be increased, and the
transmission and distribution systems will be upgraded.
Developing Policy
The Israeli government is actively determining its natural
gas policies, as well as evaluating plans to develop the
infrastructure needed to process and transport natural
gas. The Israeli cabinet (Knesset) approved a plan to
reserve 60% of natural gas for domestic use, projected to
be around 540 Bcm over the next 25 years. The remaining
40% will be available for export, which is expected to earn
$50 billion in the next 25 years. The decision was upheld
when Israels High Court rejected appeals to the decision
to export 40% of the natural gas.
Key Players
Noble Energy and Partners
Noble Energy, with partners Delek Group and Avner Oil
and Gas Exploration, are the main operators responsible
for the discovery and development of the Tamar and
Leviathan elds.
Woodside Energy
Since 2012, Noble Energy and partners have been in
negotiation with Woodside Energy on a deal to provide a
working interest in the ofshore Leviathan licenses to the
latter. Woodside Energy is Australias largest producer of
LNG with over 25 years of experience. Their expertise in
LNG would be an important asset in the development of
LNG or FLNG processing facilities in the region.
Cyprus
Recent discoveries in Cyprus have made it a pivotal player
in the region. Noble Energy and partners are also drilling
of Cyprus, where they were responsible for the Cyprus-A
discovery estimated to contain 5 Tcf of natural gas. Cyprus
is now positioned to be an energy exporter. Total and
Eni have taken major positions in the region. The fragile
state of the Cypriot economy has created an urgency to
monetize its natural gas supply. Many in Cyprus are keen
to develop an LNG facility, estimated to cost $12 billion.
Israels participation in the project would lessen the
nancing burden on Cyprus, such a facility would also
open the door for exports to Europe, Asia and beyond.
Turkey
A partnership with Turkey remains a possibility, though
the unsteady political relationship between the Israeli
and Turkish governments decreases the chances this will
happen. If a partnership were to be formed, existing and
potential Turkish pipelines would provide lucrative access
to consumers in the European and Asian markets.
Jordan
Jordan has been approved by the Israeli High Court to
receive gas exports, and was targeted as a potential
market by Noble Energy.
Egypt
Egypt began exporting gas to Israel in 2008, but the
contract was cancelled in 2012. Along with Jordan, Noble
Energy listed Egypt a potential market in 2012.
A Recap of Possible Scenarios:
A) LNG plant based in Cyprus utilizing gas from both
Israeli and Cyprus elds
B) FLNG located in the Eastern Mediterranean sea
C) Israeli gas connected to Turkey via pipeline
An opportunity for collaboration
and networking at the 2014 Eastern
Mediterranean Gas Conference
The Eastern Mediterranean Gas Conference will be held
1012 March 2014, and will give special focus to the latest
market and technology trends related to the exploration,
drilling, production, processing and marketing
of natural gas ofshore Israel and throughout the
Eastern Mediterranean. Topics to be discussed include
resource potential, leasing/permitting, development
plans, infrastructure requirements, regulations, and more.
We are thrilled to be bringing the Eastern
Mediterranean Gas Conference to Tel Aviv, Israel at such
an important time. Like in Nicosia this past April, the 2014
conference will provide an opportunity for those who are
actively involved in the planning and development of the
industry to gain valuable information and strengthen
relationships, John Royall, president and CEO of Gulf
Publishing Company, publisher of World Oil, Hydrocarbon
Processing and Gas Processing said.
Noble Energy will be the lead sponsor for the event
and was also lead sponsor of the inaugural Eastern
Mediterranean Gas Conference, held in April 2013, where
the companys Chairman and CEO Charles Davidson
delivered the keynote address. EMGC 2014 will be
held at the Hilton Tel Aviv, Independence Park,
Tel Aviv 63405, Israel. For more information, visit
http://www.emgasconference.com.
TABLE 1. MAJOR OFFSHORE ISRAEL FIELDS
Field Discovery Production Est. size, Bcf
Mari-B 2000 2004 1,000
Tamar 2009 2013 9,700
Dalit 2009 2013 700
Leviathan 2010 2016 18,000
Dolphin 2011 Pending 81
Tanin 2012 Pending 1,2001,300
40% OF
PRODUCTION
Approximate percentage the Israeli
government has made available
for export.
18 Tcf
Projected amount of gas in
the Leviathan eld, discovered
in December 2010.
1999
The year natural gas was rst
discovered in Israel, of the coast
of Ashdod at the Noa eld.
$50
BILLION
Revenue natural gas exports are
projected to bring to Israel over
the next 25 years.
88DECEMBER 2013/WorldOil.com
REGIONAL REPORT
CHINA
The CNOOC-ConocoPhillips Peng Bo FPSO, Chinas largest, on location at the Penglai 19-3 oil eld in Bohai Bay, courtesy of ConocoPhillips (left); the Liwan gas eld Central
Platform (CEP) during the commissioning stages, courtesy of Husky Energy (center); and CNOOCs HYSY981 drilling platform on the Liwan gas eld, courtesy of Husky Energy.
Drilling up, but supply-demand chasm widens
JIM REDDEN, Contributing Editor
Even as its once-ethereal economy returns to the real
world, China continues to wield tremendous clout in global
oil and gas markets, as it looks outward and inward to narrow
an ever-widening divide between consumption and domestic
production. Rapidly increasing energy demand has made
China extremely influential in world energy markets, stated
the U.S. Department of Energys (DOE) Energy Information
Administration (EIA).
To be sure, as the worlds largest aggregate energy consum-
er by a wide margin (Fig. 1), and second only to the U.S. in
oil consumption, China is expected to devour an additional
420,000 bpd of liquid fuels this year and a further 430,000 bpd
in 2014, according to the EIAs Short-Term Energy Outlook, re-
leased in October. The most recent EIA data had China con-
suming roughly 6.3 million bbl more in September than its
onshore and offshore fields produced, officially pushing it past
the U.S. as the worlds largest net oil importer. Chagrined that
imports are expected to soar to some 9.2 million bpd by 2020,
rumblings out of Beijing have the relatively embryonic adminis-
tration of President Xi Jinping reportedly moving to relax some
of the licensing requirements, and liberalizing pricing, to help
boost domestic production.
Chinas leaders also remain steadfast in their official procla-
mation to double natural gas consumption by 2015, to ease de-
pendence on imported oil, but more importantly, to accelerate
the pending divorce from coal, to relieve notorious and wide-
spread air pollution. While a major step in Chinas ambitious
plan of engineering a more gas-directed energy base is unfold-
ing with its first deepwater field coming online, exploitation of
its world-leading onshore shale reserves has barely gotten off
the starting blocks, owing to myriad geological, logistical and
cost constraints. Moreover, China already is one of the planets
premier markets for liquefied natural gas (LNG), and is hedging
its bets on a complete turn-around in homegrown production,
with China National Offshore Oil Corp. (CNOOC) laying the
groundwork to double LNG receiving capacity by 2015.
In the meantime, Chinas well-moneyed state-owned com-
panies show no signs of putting away their checkbooks anytime
soon, as they persist on a multi-billion-dollar international
shopping spree. While focusing largely on snapping up a big-
ger stake in North America, two of its national oil companies
(NOC) in October were awarded a cumulative 20% interest
in Brazils estimated 12-billion-bbl ultra-deepwater Libra field.
That deal followed on the heels of the September purchase of
World Oil/DECEMBER 2013 89
a single-digit share in giant Kashagan oil field off Kazakhstan.
Despite year-on-year production that vacillates from modest
increases to flat, China continues to reign as the worlds fourth-
largest oil producer. The latest data available from the Interna-
tional Energy Agency (IEA) show China producing 3.98 million
bpd of oil and NGL as of August, down from an August 2012
average of 4.18 million bpd. EIA, meanwhile, said aggregate pro-
duction in both July and August declined, with flooding in the
southwest and north restricting output from the mature-but-
still-fertile Changging and Daqing fields. According to the most
recent EIA assessment, China averaged oil production of 4.42
million bpd for 2012, although the outlook for both oil and gas
production, at least in the near-term, suggests domestic output
will do little to close the supply-demand gap, Fig. 2.
Reflecting the national trend, CNOOC reported in its yearly
U.S. Securities and Exchange Commission (SEC) filing that net
offshore domestic oil production rose modestly to 615,122 bpd
in 2012, from 598,590 bpd the previous year. However, gas went
in the other direction, dropping year-on year to 663.1 MMcfd
at the end of 2012 from 689.9 MMcfd the year prior. The SEC
Form 20-F is required of all international companies with equity
listing on U.S. stock exchanges.
Though CNOOC continues to spearhead an aggressive off-
shore drilling campaign, concentrating to a large extent on the
perennially disputed South China Sea, roughly 85% of in-house
production still flows from aging and rapidly depleting interior
fields, particularly in the Xinjiang Uygur Autonomous Region in
the northwest and the central Ordos basin. To coax more oil out
of these graybeard reservoirs, a host of enhanced recovery proj-
ects, including water and polymer flooding and CO
2
injection,
have been initiated over the past few years. China National Petro-
leum Corp. (CNPC) launched the countrys first CO
2
EOR and
sequestration project in 2009 at Jilin field in Songyuan, where it is
injecting some 200,000 tpa of CO
2
captured at a gas processing
plant. Plans call for increasing CO
2
injection to 800,000 tpa by
2015 as part of a second development phase.
China is estimated to hold between 20.35 and 25.6 Bbbl of
proved oil reserves, but the Xi regime is especially keen on pro-
ducing what the EIA, in its most recent assessment, said is the
worlds largest, technically recoverable, shale gas resources, es-
timated at 1,275 Tcf. The state-controlled Xinhua news agency
said CNOOC, CNPC, and China Petroleum and Chemical
Corp. (Sinopec) will spend $13.07 billion this year on domestic
offshore and onshore exploration programs, in an attempt to es-
tablish yet another annual drilling record. According to World Oil
statistics, the Big Three drilled 26,349 wells during 2012, up 8.4%
from 2011, and are on pace to increase by another 2.9% this year,
with 27,125 new wells forecast to be constructed.
NO END TO BUYING BINGE
The capital that Chinese operators plan to invest at home,
however, pales in comparison to what they continue to spend well
outside their borders. Following on the heels of blockbuster deals
over the past few years, Chinas appetite for non-domestic oil and
gas shows no indication that it is close to be satiated. By the end of
October, Brian Lidsky, a managing director of Houston data pro-
vider PLS Inc., said in a CNN broadcast that more than 20% of all
global oil and gas deals in 2013 have involved a Chinese company.
While the buying binge traverses the world, North America
has been a particularly attractive target for Chinese companies,
which have collectively forked over some $44 billion in U.S. and
Canadian acquisitions over the past five years, often paying a
premium in the process, according to data compiled by The Wall
Street Journal. Nearly a third of that aggregate expenditure went to
90DECEMBER 2013/WorldOil.com
REGIONAL REPORT / CHINA
CNOOCs late 2012 acquisition of Canadas Nexen, a whopping
$15-billion transaction that gave China a substantial foothold
in the oil sands, as well as a non-operating stake in the Gulf of
Mexico. In addition to its other new holdings, CNOOC also ac-
quired the Nexen-operated Rochelle gas-condensate field in the
UK North Sea, which initiated first production in October.
At the center of Chinas attraction for North American assets
is its well-documented interests in the U.S. shale plays, where the
state operators desperately hope to acquire operational insight to
help jump-start Chinas own fledging onshore unconventional
plays. The most recent case-in-point is Sinochem Petroleum USA
LLCs $1.7-billion acquisition of a 40% interest in Pioneer Natu-
ral Resources Co. acreage in the Permain basins Wolfcamp shale.
The May 31, 2013, West Texas transaction covers some 207,000
net acres that Pioneer controls in the southern portion of the
Spraberry Trend.
Outside of North America, CNPC and CNOOC each
snapped up 10% stakes during the politically charged auction for
the ultra-deepwater Libra field in Brazils Santos basin. The late
October sale gave the two a combined 20% interest in the Petro-
bras-led multi-company consortium that will develop what has
been described as Brazils largest oil discovery.
With more operators wanting to grab a larger toehold in the
flourishing U.S. shale plays, prospects are becoming available
elsewhere, which petroleum-hungry Chinese firms are more than
eager to scoop up. Further evidence of that trend came in August,
when Sinopec and Apache Corp. formed a strategy partner-
ship that gives the former a non-operating 33% interest in the
U.S. independents Egyptian assets. Apache Chairman and CEO
G. Steven Farris said the $3.1 billion that his firm received un-
der the agreement, which is expected to close at year-end, will be
ploughed into its North American E&P operations.
The joint venture covers 9.7 million gross acres in the West-
ern Desert, only 18% of which has been developed. In 2012, the
acreage recorded gross oil production of 213,000 bpd and 900
MMcfgd. Ferris suggests that the Sinopec partnership in Egypt
Fig. 1. Chinas energy consumption is expected to continue to surpass,
by a wide margin, that of both the U.S. and India. Source: U.S. Energy
Information Administration.
0
50
100
150
200
250
1990
Source: EIA
2000 2010 2020 2030 2040
History Projections
U.S.
India
China

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Drawing on Vallourec Expertise for
the Future of Riser Applications
Over the last 20 years Vallourec has launched several riser connections and pipe
grades that withstand harsh fatigue environments within the Drilling, Production,
and Completion/Workover/Intervention riser systems. Full product lines have been
developed through multiple full scale tests per ISO13679 and ISO13628-7 as well as
specic customer specications. This record of R&D and customer collaboration has
resulted in VAM RISER success through years of eld service worldwide.
This webcast will highlight some of the key testing and eld success stories as well
as point to the specic upcoming challenges that the VAM RISERs are prepared to
meet in the areas of:
Production outer and inner Riser (HPHT)
Drilling Riser (HPHT)
Workover/Completion/Intervention Riser (Drill Pipe Riser)
View On Demand at: WorldOil.com/webcasts
World Oil Presents:
View On Demand Webcast
Speakers:
Thomas Peter
Product Manager,
T&C Risers
Vallourec Oil
and Gas France
Mike Tricarico
Technical Sales
Manager, T&C Risers
Vallourec USA Corp.
Dr. Cline Sches
Innovation and
R&D Team Manager
Vallourec Oil
and Gas France
Moderator:
Melanie Cruthirds
News Editor
World Oil
Scott Sibert
Sales Manager
T&C Risers
Vallourec USA Corp.
Sponsored by:
World Oil/DECEMBER 2013 91
CHINA / REGIONAL REPORT
could be the first of many, as Apache continues to add heft to its
North American activities.
We are pleased to launch a global partnership with Sinopec,
and to welcome them into our business in Egypt. Sinopec is
an ideal partner for us, and we look forward to the growth and
value generation ahead for both companies through the expan-
sion of our collaboration to other projects, Ferris said upon an-
nouncing the JV.
Elsewhere, CNPC thus far this year has reportedly shelled
out roughly $10 billion to acquire interests in prolific oil and gas
fields in Mozambique and Kazakhstan. Among its new holdings
is an 8.33% interest in the estimated 11-billion-bbl Kashagan oil
field in the Caspian Sea, offshore Kazakhstan. The September
announcement of the estimated $5-billion CNPC stake was wel-
come news in China, which was stifled in its earlier attempts to
secure a position in the Asian states of the former Soviet Union.
In a related development, Russias Rosneft claims that it has
reached agreement with Sinopec to provide 100 MMt of crude
oil over the next 10 years, worth an estimated $85 billion.
DOUBLING DOWN ON GAS
As China weans itself from a passionate attachment to coal
and toward a more gas-centric fuel mix, the nation is hedging a
good portion of its bets on what has been assessed as the worlds
largest shale reserves. The EIA assessment, released earlier this
year, has China holding potentially recoverable shale gas reserves
of 1,115 Tcf, compared to 665 Tcf in the U.S., locked primarily in
seven core basins, Fig. 3. In addition, the nations interior is esti-
mated to hold 32 billion bbl of technically recoverable tight oil.
The National Energy Administration (NEA) has established,
what some say, is an unachievable target of producing 6.5 Bcm
of shale gas by 2015, or roughly 6% of Chinas current total gas
production, Fig. 4. Reaching that aggressive objective, however,
has thus far proven to be a frustrating proposition. The latest
data available show shale gas accounting for less than 1% of the
countrys total gas production, which as things now stand, does
not bode well for domestic unconventional production making
a noticeable dent in the countrys ambitious plan to double gas
consumption, from around 130 Bcm in 2011 to 260 Bcm in 2015.
For one thing, the NOCs admit that they lack the experience
and technical know-how required to fully exploit their uncon-
ventional reserves, hence the growing footprint in the North
American shale plays and partnerships at home with shale-savvy
Western operators. Shale experience is most definitely a premium
in China, where a host of geological complexities, thus far, have
helped thwart full-blown exploitation.
The Sichuan basin to the south is the countrys most active
shale theater, but it poses a number of technical and economic
challenges. The eastern portion of the basin contains extensive
steep folding and faulting that can make horizontal drilling a
daunting proposition, while the western part of the Sichuan is
characterized by deeper wells. All this combines to increase drill-
ing costs, which run as high as $16 million/well, according to a
newly released Deloitte analysis. Would-be China shale produc-
ers also face stiff environmental barriers, due primarily to severe
water shortages in the largely arid interior basins. The only excep-
tion is the Sichuan basin, which has ready access to water supplies.
Nonetheless, despite the barriers, China expects to be the
most successful nation in developing shale gas outside North
America. So says BP in its Energy Outlook 2030, which has shale
gas projected to grow to 6 Bcfd by 2030, accounting for 20% of to-
tal Chinese gas production. Though paltry by comparison, Wood
Mackenzie says a record 400 shale wells are expected to be drilled
outside the U.S. in 2014, specifically citing China and Russia as
the dominant players.
Sinopec claims that it has made a significant move in that di-
rection with a major breakthrough in the challenging Sichuan
basin, with first production from its Jianghan unit in the Fuling
area, which covers some 311 sq mi. Both Sinopec and state-con-
Fig. 3. Location of Chinas primary shale and CBM basins from latest
assessment. Source: U.S. Energy Information Administration.
Shale gas
CBM
Junggar basin
Tarim basin
Songliao
basin
Chongqing
Wuhan
Shanghai
Ordos basin Tianjin
Beijing
Sichuan
basin
North China
basin
Bohai
basin
Source: EIA
Fig. 2. Chinas oil and gas production through 2012. Source: U.S. Energy
Information Administration.
1,500
1980
Source: EIA
1985 1990 1995
Crude oil production
2000 2005 2010
2,000
2,500
3,000
3,500
4,000
4,500
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1,500
1980
Source: EIA
1985 1990 1995
Natural gas production
2000 2005 2010
2,000
2,500
3,000
3,500
4,000
4,500
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92DECEMBER 2013/WorldOil.com
REGIONAL REPORT / CHINA
trolled media say six of the Jianghan wells reportedly are pro-
ducing steady test flows at an aggregate 1.06 MMcf, or roughly
180 Mcf per well, while another has notched up production
as high as 547 Mcfd. Sinopec also claims to have surmounted
some of the technical difficulties, pointing to one Jianghan well
completed with a 22-stage frac job at a depth of 4,921 ft.
The NOC purportedly plans to drill up to 50 wells in the
Jianghan complex next year, as it attempts to increase field pro-
duction to 5 Bcm/year by year-end 2015. Reaching that target,
however, would require some 170 new wells with each produc-
ing at a 100-Mcfd clip, according to Reuters, which reported that
Sinopec, as of now, has drilled roughly 30-odd exploration wells
in the Fuling area play.
Sinopec also claims that the cumulative costs of at least one
Sichuan well have been reduced to around $14.7 million, and
says it intends to cut costs even more through domestic sourc-
ing of rigs and other drilling equipment, recycling frac fluids
and turning toward more batch drilling.
Also in the Sichuan basin, ConocoPhillips in January entered
into a joint study shale assessment with the countrys largest gas
producer, PetroChina, covering 500,000 acres in the Neijaing-
Dazu Block. A similar agreement was inked between Cono-
coPhillips and Sinopec a month earlier for the 1-million-acre Qi-
jiang Block in the Sichuan.
In July, CNPC and Hess also agreed to a joint shale explora-
tion venture for the Malang Block of the Santanghu basin in Xin-
jiang to the northwest. Neither player has released any details of
the JV. Statoil has also pointed to China as one of its possible tar-
gets for new prospective shale ventures.
Earlier this year, Shell received governmental approval for the
companys first shale gas production-sharing contract in China,
joining BP, Chevron and other IOCs, which have acquired joint
production stakes. The Shell-CNPC PSC takes in the Fushun-
Yongchuan Block in the Sichuan basin. According to Bloomberg,
Shell plans to spend upwards of $1 billion/year in Chinas uncon-
ventional shale plays.
On Oct.30, Shell and CNPC also inaugurated a joint shale
research center in Beijing to advance technology R&D coop-
eration, the operators said in a joint statement. Earlier, the two
signed memorandums of understanding (MOU) for coopera-
tive R&D that involves increased efforts in joint research on
unconventional oil and gas development. The first phase of the
research focus at the newly christened facility will center on
marine facies, shale oil blocks in the U.S. and the continental
facies, shale oil blocks in China. Research offices will be set up
in the two countries, respectively. Theoretical basis of shale oil
geology will be studied in the first phase that is expected to run
three years, with the second phase to concentrate on engineer-
ing technology.
Total, which has maintained a presence in China for more
than three decades, likewise is conducting a joint R&D program
in China. In late September, Total inked a flagship research initia-
tive with the Chinese Academy of Sciences (CAS) in Beijing, to
examine High Precision Multi-Scale Simulation for Multi-Phase
Complex Systems.
Adding more weight to its aggressive gas goals, China says it
plans to hold a third round of shale gas auctions, possibly as early
as the end of the year. The intention is to encourage more par-
ticipation from small-and-medium-sized operators, according to
a report in the Shanghai Securities News.
Like shale gas, production of Chinas estimated 36.8 Tcm of
coalbed methane (CBM) has barely taken off after two decades
of exploration. Owing primarily to low gas saturation and perme-
ability, China is still producing an average of only 150 MMcfd
of CBM. State-owned Coal Bed Methane Corp. Ltd. says it has
drilled roughly 5,000 CBM wells, primarily in its core Qinshui
basin area and the eastern margin of the Ordos basin (Fig. 5),
where it has identified 13.82 Tcm of CBM reserves. Last year,
the company said it produced a cumulative 2.3 Bcm from surface
boreholes in the southern portion of the Qinshui basin.
In August, China United Coalbed Methane signed a technical
service contract with Canadas Can-Elite Energy Limited, focus-
ing on CBM reserves within the Sunan area of Anhui Province.
Meanwhile, Chinas intention to go all-in on domestic gas pro-
duction sent jitters through Australia, Qatar, and other current
and prospective LNG producers, which have invested billions in
facilities. China has long been targeted as one of the primary mar-
kets for a substantial chunk of export capacity.
CNOOC allayed those fears with the recent announcement
that it would add five LNG receiving terminals by 2015, effec-
tively doubling its total capacity to 35-40 mtpa. The four termi-
nals currently in operation have a combined receiving capacity
of 18.7 mtpa, CNOOC says.
In its 2013 Oil and Gas Reality Check, Deloitte said LNG ex-
porters have little reason to worry about losing a prime market in
the foreseeable future. Chinas 12th Five Year Plan has set shale
gas production targets of 5.8 to 9.6 Bcfd by 2020, which Deloitte
says would require 1,200 to 1,500 new wells, but only 60 explo-
ration wells have been drilled to date.
Fig. 5. A coalbed methane drilling operation in the Qinshui basin. Source:
China Coal Bed Methane Corp. Ltd.
Fig. 4. China has established what some contend are unrealistic goals
for shale gas production by 2020. Source: Seeking Alpha from China
National Development and Reform Commission (NRDC), Bernstein
analysis and other estimates.
80
48
29
18
11
6.5
3 2
1
2020E 2019E 2018E 2017E 2016E
65% CAGR between 2015 and 2020
2015E 2014E 2013E 2012E 2011E 2010
A
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p
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n
,

B
c
m
0
10
20
30
40
50
60
70
80
90
Source: China NDRC, Bernstein analysis and estimates
World Oil/DECEMBER 2013 93
CHINA / REGIONAL REPORT
China is moving from a dormant to a nascent stage of shale
development, but is unlikely to be a globalizer, according to De-
loitte. Over the short term, China will continue in a nascent stage
with success in the Sichuan basin a critical indicator of its transi-
tion to an incubator.
OFFSHORE MILESTONE
While China is banking much of its hope for a more gas-fueled
economy on its onshore reserves, the national effort received a ma-
jor boost with the expected initiation of production from its first
deepwater gas field. Located in up to 4,921 ft of water in an undis-
puted portion of the South China Sea, the CNOOC and Husky
Energy-operated Liwan-3 gas field is slated to begin the first phase
of production by the end of this year. The second phase of produc-
tion is anticipated for third-quarter 2014 with the planned subsea
tieback of the nearby Panyu 34-1/35-1/35-2 gas fields (Fig. 6),
Weiqiang Liu, CNOOCs chief engineer for South China Sea Deep
Water Development PMT, said in a presentation at Septembers bi-
lateral U.S.-China Oil and Gas Forum in Beijing.
Located some 200 mi southeast of Hong Kong, the Liwan-3
field is expected to produce at an initial rate of about 300 Mcfd,
increasing to around 350 Mcfd with next years tiebacks. The field
is being produced from 10 subsea wells, which are tied back to a
shallow-water central production platform. From there, gas flows
to the onshore processing facility on Zhuhais Gaolan Island, ad-
jacent to Macao, Fig. 7. The Gaolan plant was commissioned in
October and ready to receive Liwan-3 production by the end of
2013, Weiqiang said. Husky is operating the deepwater portion of
the development, while CNOOC operates the shallow-water and
onshore processing components.
Historically, offshore has accounted for around only 15% of
Chinas total production, with the bulk flowing from the mature
Bohai Bay, a seaward extension of the onshore Liaohe, Dagang,
and Shenglie oil fields. China appears determined to increase its
overall offshore output with an aggressive drilling campaign that,
as of early November, had 18 active rigs, up one from the like pe-
riod last year, according to Baker Hughes.
More recently, along with Canadas Husky, CNOOC has
teamed with a host of international players, including Anadarko,
BG Group, BP, ENI, ConocoPhillips and Chevron, to focus on
World Oil Webcast
Available for on
Demand Viewing
at WorldOil.com
PANEL MEMBERS AND TOPICS:
Topic: Shale plays: what to
consider when selecting
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MARK GARRETT is production
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Topic: The efectiveness
and versatility of jet pumps
in shale plays.
ALEX HAGEMAN is an engineer
with Accelerated Production
Services in Houston.
Topic: Sucker rod
challenges in shale wells.
JIM FEW is the technical sales
engineer for Tenariss sucker
rods division in the USA.
PANEL MODERATOR:
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Sponsored by:
Articial Lift and the Shale Revolution
Fig. 6. Existing and 2014 tiebacks in the deepwater Liwan-3 gas eld
development. Source: China National Ofshore Oil Corp.
94DECEMBER 2013/WorldOil.com
REGIONAL REPORT / CHINA
deepwater blocks in the South China Sea. The U.S. Geological
Survey (USGS) has estimated that the South China Sea, where
some of the boundaries are being hotly contested by Vietnam and
the Philippines, could hold some 28 Bboe.
Attention, of late, centers on the deeper waters of the northern
South China Sea, mainly in the Pearl River Mouth (PRM) and
the Qiongdonghan (QDN) basin, in water depths ranging from
just under 985 to more than 10,500 ft. The QDN basin off Hain-
an Island Province is a daunting HPHT theater, with bottomhole
temperatures up to 475F and pressures requiring equivalent
mud weights up to 19.5 lb/gal.
In January, Chevrons China subsidiary entered into a PSA
with CNOOC for two exploration blocks in the Pearl River
Mouth basin. The PSA gives Chevron China Energy Co. a 100%
working interest in Blocks 15/10 and 15/28. During the explora-
tion phase, Chevron will operate the two shallow-water blocks,
which cover an approximately 2,233-sq-mi. area.
Exploration of these blocks builds on our strategy to grow
our business across the Asia Pacific region, where we are develop-
ing LNG, deepwater, shale and sour gas resources, said Chevron
vice chairman George Kirkland.
In its 2012 SEC 20-F filing, CNOOC reported that it singu-
larly drilled 38 offshore exploration and 58 appraisal wells, spread
out among Bohai Bay and the South and East China Seas, which
delivered nine new discoveries. Of those, 50 aggregate wildcat
and appraisal wells were drilled in Bohai Bay. Those are in addi-
tion to the 40 wells drilled with international partners. CNOOC
also reported proved developed and undeveloped offshore China
oil reserves of 1,665.7 MMbbl and 4,459 Bcf of net proved gas
reserves, which represents 69% of its global reserve base.
CNOOC said that its year-end 2012 home-grown produc-
tion efforts were stymied by myriad adversities, including fre-
quent typhoons, a decrease in new projects coming onstream,
and a lengthy shutdown of the ConocoPhillips-operated Peng-
lai 19-3 oil field in northern Bohai Bay (Fig. 8). Production
was halted in September, 2011, but clearance was finally given
to resume full output in February, following an environmental
impact assessment and revised, overall development program.
After the partners were approved to partially resume output
last year, ConocoPhillips, which holds 49% interest in the field,
recorded net third-quarter production of 45,000 bopd, down
from 62,000 bopd recorded before the shutdown.
Things have looked up a bit for CNOOC this year, with the
October discovery of what it described as a mid-sized exploration
discovery in the Kenli 9-5/9-6 Block in Bohais Liaodong Bay. Ac-
cording to CNOOC, the shallow-water Luda 5-2 North and the
LD 5-2N-4 wildcats encountered oil zones with total thickness
of 394 ft and 279 ft, respectively. The latest report has the Luda
5-2N-2 well testing at around 1,040 bopd.
Announcement of the Kenli discovery preceded the produc-
tion start-up of Phase II of the CNOOC Suizhong 36-1 oil field,
also in Liaodong Bay. The second phase of the development in-
cludes four new platforms and is expected to hit peak production
next year. No further details were made available.
Elsewhere, Reuters reported in early November that
Anadarko Petroleum is considering selling its offshore China
oil and gas holdings, in a potential deal valued at roughly $1
billion, which, like Apache, the Texas independent, would
funnel back into its U.S. holdings. During its third-quarter
earnings call, Anadarko said no further details were available
on its China plans; partner and potential buyer CNOOC also
would not comment.
Anadarko holds a reported 35% interest in Bohai Bay hold-
ings and a 50% working stake in Block 43/11 in the South Chi-
na Sea. Its China assets recorded third-quarter gross production
of 33,000 bopd. During the quarter, Anadarko said it completed
a successful nine-well drilling program, and in November mobi-
lized a rig to drill the Liwan 21-1-1 well in the South China Sea,
which was top-set earlier. The new well will test a 64,000-acre,
four-way structure on the 43/11 block.
STILL HOLDS THE ACE
When Chinas economy began to slow last year, dropping
from the year-on-year double-digit growth that it had been
recording, it brought with it not a small degree of uneasiness
within the world oil and gas markets. With China holding the
proverbial wildcard in the global price deck, industry observers
caution that a significant cooling of its economy could do the
same for commodity prices.
To add perspective to the weight that China carries in the
global oil picture, consider how a higher-than-expected in-
crease in domestic consumption of less than one percentage
point can swing oil prices. That reality was driven home in
August, when the Chinese industrys output in the month pri-
or rose 9.7% from the 9% growth that analysts had expected,
which the IEA credited as the primary reason that September
oil futures rose, snapping a decline that had continued over
the five previous trading sessions.
Lest there was any doubt, analysts said afterward that China
continues to be a chief driver of world oil prices.
Fig. 8. Domestic production in China in 2012 was stymied by outside
factors, including weather interruptions and an extended shutdown of
ConocoPhillipss Bohai Bay operations. Source: ConocoPhillips.
Fig. 7. Liwan-3 onshore gas processing facility on Gaolan Island. Source:
Husky Energy.
World Oil/DECEMBER 2013 95
PEOPLE IN THE INDUSTRY
MELANIE.CRUTHIRDS@WORLDOIL.COM
National Oilwell Varco
Chairman and CEO Merrill
A. Pete Miller, Jr.,
intends to step down from
his positions contempora-
neous with the completion
of the plan to spin off
to NOV shareholders its
Distribution Business.
Miller will become the
executive chairman of
that publicly traded
distribution company. Clay
Williams (above) has been
appointed to the board,
and is slated to succeed
Miller as the companys
chairman and CEO.
Lundin Petroleum has
appointed Paul Atkinson
as general manager for
Malaysia, and managing
director for its Southeast
Asia business. Atkinson
joins Lundin Petroleum
from Talisman Energy,
where he has held various
senior managerial posi-
tions since 2001.
T.D. Williamson announced
that Chad C. Fletcher
has joined the executive
management team as
V.P. of operations for the
Western Hemisphere.
Most recently, he was V.P.
of marketing and global
business solutions for
Dresser-Rand.
Earlier this fall, the
Houston-based Offshore
Energy Center inducted
four new Offshore Pioneers
into its Hall of Fame. The
new inductees and their
career affiliations include
Mark Childers (Humble Oil
and Refining Co., ODECO,
Diamond Offshore, DI
Industries, Oceaneering
and Atwood Oceanics);
Hugh Elkins (S&R Tool
and Supply Co., Hydril and
National Oilwell Varco);
Alvaro Teixeira (Petrobras
and Brazilian Institute of
Oil, Gas and Biofuels); and
Bruce Watkins (deceased,
Shell Oil Co., Regan Forge
and Engineering/Regan
Offshore, Hughes Offshore
and Dril-Quip).
FMC Technologies has
announced that its
president, Robert L. Potter,
retired on Nov. 30. John
T. Gremp, chairman and
CEO of FMC Technologies,
will assume the role of
president, in addition to
his current responsibilities.
Potter had served as presi-
dent of FMC Technologies
since 2012.
Ensco has announced that
chairman, president and
CEO Dan Rabun will retire.
Rabun will continue to
serve in his current role as
chairman, president and
CEO, until the board of
directors has completed
the succession process,
and a new CEO has been
appointed. To assist with
the new transition, Rabun
will remain chairman
through at least the 2014
annual general meeting.
Statoil has appointed
ystein Michelsen (above)
as Tanzania country man-
ager in its Development
and Production
International, Sub-Saharan
Africa (DPI SAF) business
area. Michelsen will assume
his new responsibilities on
Jan. 1. Elsewhere within
Statoil, Brge Brende
resigned as a member of
the board of directors in
Statoil, as he was recently
appointed Minister of
Foreign Affairs in the
Norwegian government.
The Independent
Petroleum Association
of America (IPAA) has
elected Mike Watford as
chairman and Mark Miller
as vice chairman for the
2013-2015 term, effective
Nov. 7, 2013. Since 1999,
Watford has been the
chairman, president and
CEO of Ultra Petroleum.
SBM Offshore has
confirmed that Bruno
Chabas, CEO, has
temporarily taken over the
role of COO, following the
dismissal of former COO
Jean-Philippe Laures. The
company has made no fur-
ther comments regarding
the circumstances leading
up to the dismissal.
BP has appointed Richard
Herbert as its new head of
exploration. Herbert will
succeed Mike Daly, who
has chosen to retire from
BP at the end of 2013,
after a 28-year career with
the company, eight of
which were while leading
BPs exploration arm.
Herbert rejoins BP from
Talisman Energy, where he
has held the position of
executive V.P. of explora-
tion since 2009. Before
joining Talisman, Herbert
spent six years with
TNK-BP in Russia, serving
first as V.P. of exploration,
and then executive V.P.
of technology. Prior to
TNK-BP, Herbert had a
19-year career with BP.
He joined BP as COO,
Exploration at the end of
October, and will be based
in London.
Parker Drilling has
announced that Robert
Bobby L. Parker, Jr.,
will retire as an employee
of the company, effective
Dec. 31. Parker will con-
tinue to serve as chairman
of the companys board of
directors until the annual
meeting of stockholders,
to be held in 2014. At that
time, Gary G. Rich, the
companys CEO, will be
nominated to serve in that
role, and Parker will be
nominated to stand for re-
election to the board for
an additional three-year
term. Parker has served
as president and CEO of
Parker Drilling for 18 years.
The company announced
the recent appointment
of Peter C. Wallace to the
companys board of direc-
tors. Wallace most recently
served as president and
CEO of Robbins & Myers,
Inc., when the company
was acquired by NOV.
As part of Bibby Offshores
recent expansion, Andrew
Duncan will relocate to
Houston, from his existing
position of business and
commercial director at
the companys Aberdeen
headquarters, to be
president and managing
director of Bibby Subsea.
Errol Campbell has been
recruited into the role of
ROV operations manager.
Chad Deaton has been
elected to Marathon Oil
Corporations board of
directors, effective Jan. 1.
Deaton previously served
as executive chairman of
the board of Baker Hughes
from January 2012, until
his retirement on Apr.
25, 2013. Prior to that,
he served as chairman,
president and CEO of the
company from 2004 until
January 2012. Before join-
ing Baker Hughes, Deaton
was president and CEO
of Hanover Compressor
Company from 2002
through October 2004.
Deaton was a senior
advisor to Schlumberger
Oilfield Services from 1999
to September 2001, and
was an executive V.P. of
that company from 1998
to 1999.
Total has appointed
Arnaud Breuillac as its
president of E&P, effective
Jan. 1. He will report to
Yves Louis Darricarrre,
Upstream president and
member of Totals execu-
tive committee. Effective
Oct. 1, 2014, Breuillac
will join Totals executive
committee. Between 2004
and 2006, Breuillac served
as V.P., Iran, in the Middle
East Division. In 2006, he
was appointed to E&Ps
management committee
as senior V.P., Continental
Europe and Central Asia.
In July 2010, he was
appointed senior V.P.,
Middle East, in E&P. In 2011,
he was appointed to Totals
management committee.
Lafayette, La.-based
lease acquisition and land
management software
company iLandMan
appointed Steve Vitale to
the national sales team
as Western Region sales
executive. Most recently,
Vitale consulted for startup
company Fortech Energy.
U. S. Steel Tubular Products, Inc., has named
Bruce H. Vincent (left), president and director
of Swift Energy Company, as the recipient
of its Chief Roughneck Award for 2013. The
announcement was made last month at the
84th annual meeting of the Independent
Petroleum Association of America (IPAA).
U. S. Steel Senior V.P. of Tubular Operations
David Britten (right) said that Vincent has
served this industry for many years. He has
created a culture at Swift Energy Company,
based on values that are the foundation of
American business success. His enthusiasm and integrity inspire those around
him in their pursuit of excellence. Vincent joined Swift Energy Company in 1990
and has been president since November 2004, as well as a board member since
2005, serving on the executive committee. Active in numerous industry and trade
organizations, Vincent is a former IPAA chairman.
Commercial Sessions
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Kevin Currence, Tchnclcgy Managr - Gas Prccssing,
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LNG & Gas Shipping & Shipbuiloing
LNG Trminals & Plants:
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World Oil/DECEMBER 2013 97
COMPANIES IN THE NEWS
EDITORIAL@WORLDOIL.COM
LINN Energy, LinnCo and Berry
Petroleum Company have
announced that their boards
of directors have unanimously
approved an amended merger
agreement. The companies have
executed an amendment to the
existing merger agreement, to
provide for an increase in the
exchange ratio that each outstand-
ing share of Berry common stock
would receive in the merger, and
an extension of the end date to
Jan. 31, 2014. Under the amended
terms of the agreement, LinnCo
has agreed to increase the number
of common shares it is issuing to
1.68 common shares, from 1.25
common shares, for each common
share of Berry outstanding prior to
the merger, for total consideration
of approximately $4.9 billion,
including the assumption of debt.
Lamprell, a provider of diversified
engineering and contracting ser-
vices to the onshore and offshore
oil and gas industry, has success-
fully completed and delivered the
first of two Caspian Sea jackup rigs
to its client. The rig was recently
towed out from the Astrakhan
re-assembly yard, to commence
operations on its first contract
elsewhere in the Caspian Sea. The
group is making progress on its
on-going, second Caspian Sea
project, which is already underway,
and is expected to be delivered in
fourth-quarter 2014.
Vallourec will provide a range of
offshore solutions to the CLOV
deepwater oil and gas project,
operated by Total E&P in Angola.
The project is expected to start
production in second-quarter 2014.
CLOV is a cluster of four oil and
gas fieldsCravo, Lirio, Orquidea
and Violetain the northwestern
sector of Angolas offshore Block
17, with water depths ranging from
1,100 to 1,400 m. Vallourec will
equip the 34 subsea wells with
approximately 15,000 t of OCTG
products, featuring VAM premium
connections. Constructed in South
Korea, the CLOV FPSO reached
Paenal Yard in Porto Amboim,
Angola, on Nov. 8.
Empyrean Energy, an independent
onshore E&P company with
assets in Texas and California, has
provided updates on its flagship
Sugarloaf AMI in the Eagle Ford
shale. Empyrean has a 3% working
interest in the project, which is
operated by Marathon Oil. As
of September 2013, Empyrean
had 101 gross producing wells
on Sugarloaf, an increase of 10
wells since the end of June 2013.
Through those three months,
production at the property
averaged approximately 544
boed (before separating NGLs)
net to Empyrean. This production
output represented a 2% increase
(equivalent to 1,029 net boe) over
the previous quarter, and a 60%
increase compared to third-quarter
2012 for the company.
Hornbeck Offshore will employ
GE Power Conversions latest
generation DP technology for its
four new multipurpose supply
vessels (MPSVs). In their role as
MPSVs, they can operate as either
a subsea construction vessel,
capable of performing complex
subsea construction operations,
or as a resupply and support
vessel to ultra-deepwater drilling
in the GOM, or anywhere else in
the world as required by their
charterers. GE will power, propel
and position the new ships by
delivering the integrated diesel-
electric system.
OSM Offshore has agreed to enter
into a six-year contract with Statoil
to operate the Heidrun FSU. The
FSU is being built by Samsung
Heavy Industries, at the shipyard
in Geoje Island, South Korea. It
is expected to be on location at
Heidrun field in first-half 2015. The
contract between OSM Offshore
and Statoil, for full management of
the FSU, is a long-term contract,
with options for further extensions
of 13 years. The Heidrun FSU will
be permanently connected to a
buoy, and the oil will be lifted from
the FSU via shuttle tankers.
Expro has expansion plans into
Saudi Arabia, following two con-
tract wins worth $50 million. Expro
has a two-year deal with a major
Saudi operator, which includes an
option to extend for a further 12
months. The contracts will focus
on providing integrated service
procedures on 160 wells across
four different sites in Udhailiyah, an
eastern province of Saudi Arabia.
GE Oil & Gas has introduced
innovative flexible pipes to address
challenges found in Brazils pre-salt
Santos basin, by developing new
materials for piping required to
bring hydrocarbons to the surface.
During the past three years, the
GE Oil & Gas team in Niteri has
developed new flexible pipe
technologies to meet the specific
conditions of Santos basin oil. As a
result, the company now is one of
only two accredited providers of
advanced flexible pipes to be used
in this location. Each pipe layer is
made with a specific material.
ITF, a global technology facilita-
tor, together with subsea and
pipeline engineering and project
management company Subsea
Engineering Associates (SEA)
in Perth, Australia, has recently
launched a joint industry
project (JIP) that will explore and
demonstrate a new approach to
assessing pipeline span issues on
the seabed. Phase I of the JIP is
expected to run for six months
and cost around $240,000, and
involve four regional oil and gas
operators. The aim of the JIP with
SEA is to demonstrate that the
creation of an enhanced partial
safety approach with the delivery
of more accurate data may negate
the need for often unnecessary,
costly intervention.
Delta Rigging & Tools has begun
construction on a 27,000-sq-ft
multipurpose building on 3.7 acres
of land in Pasadena, Texas. The
new facility will consolidate Delta
Rigging & Tools Pasadena branch
location, and the corporate office
building, in Pearland, Texas, into
one location. The current Pasadena
branch houses 29 employees in
10,000 sq ft, and is mainly used
as a rigging production shop
and sales distribution office. The
new facility will feature a total
of 22,000 sq ft of rigging shop
and warehouse, in addition to an
expanded 5,000-sq-ft corporate
office space.
COOPER Valves has acquired
Accuseal, a manufacturer of severe
service, metal-seated ball valves.
Accuseal will conduct future
business as a brand of COOPER
Valves, under the name COOPER
Accuseal. Financial terms were not
disclosed. Accuseal, headquartered
in Houston, has served the global
energy and mining markets since
2005. The company manufactures
advanced, optimally engineered,
severe service, metal-seated ball
valves that meet Class VI zero-
leakage shut-off standards.
Hoover Container Solutions,
a subsidiary of Hoover Group,
has acquired the assets of Tote
Systems LLC, Liquid Division, a
provider of stainless steel interme-
diate bulk containers (IBC) in the
U.S. Headquartered in Fairhope,
Ala., with offices in Nashville, Tenn.,
and Burleson, Texas, Tote Systems
assets include a fleet of 350- and
550-gal stainless steel IBCs, as
well as various custom designed
stainless steel units. Hoover will
continue to provide its full range of
IBC products and services to Tote
Systems customers.
TESCO Corporation has acquired
automated catwalk technology
from Custom Pipe Handlers
Canada. The acquired catwalk
models offer customers the
ability to service drilling rigs using
state-of-the-art rig mechanization
technology. The catwalk designs
are highly mobile, and adapt-
able to various rig structures, for
handling pipe from the ground to
the rig floor. These catwalks, the
Brutus, Zeus and Hercules models,
increase the safety and efficiency
of pipe handling.
AMEC has been awarded the
hook-up and commissioning (HUC)
support contract for GDF SUEZ
E&P UKs Cygnus gas field devel-
opment, the UK southern North
Seas largest gas discovery in the
last 25 years. The HUC contract for
the four Cygnus platforms follows
the FEED and detail design work
executed by AMEC from London.
This phase, with first gas sched-
uled for fourth-quarter 2015, will
be delivered by AMECs Aberdeen
offshore North Sea team.
Stork Technical Services,
a global provider of
knowledge-based asset
integrity management
services has announced
a further $3.2-million
investment in its new
daughter craft, the
Edradour. The vessel was
delivered to the Subsea
division in November, and
will provide additional
operational support to meet
the expanding needs of
Storks diving operations.
The vessels addition
complements the companys
fleet; daughter craft, the
Aberlour; a mother vessel,
the SIEM Stork; and three
dive intervention crafts.
98DECEMBER 2013/WorldOil.com
NEW PRODUCTS AND SERVICES
EDITORIAL@WORLDOIL.COM
Drive train advances vessel propulsion
The Switch, a Finnish manufacturer
of permanent magnet motors,
generators and converters, has
launched its next-generation
drivetrains for energy-efficient
power generation and propulsion of
vessels, including those in offshore
oil and gas applications. Based on
permanent magnet (PM) technol-
ogy, the electrical drivetrains provide advanced control, with a permanent
magnet motor and a frequency converter as the major components.
www.theswitch.com
Ball-activated frac sleeve for horizontal completions
TEAM Oil Tools has developed the ORIO XL, a ball-activated
frac sleeve utilized in multi-stage completions. Designed for
5.5-in. production casing, this technology gives operators the
ability to frac extended reach, horizontal wells in a more efficient
manner, by stimulating a single cluster at a time, versus several,
ensuring that proppant is getting into every cluster, increasing the
possibility of greater production. This frac sleeve allows for the
completion of laterals in excess of 10,000 ft. TEAM Oil Tools will
began taking orders for the ORIO XL this quarter.
www.teamoiltools.com
Heavy-duty
landing system for
ultra-deep water
Vallourec Drilling Products has
developed a heavy-duty landing
system that provides the ability to
set and run larger, heavier casing
strings in ultra-deepwater wells.
The new product, called Crush-
Free Landing String, consists
of a pipe with a thick-walled,
high-strength material section, to
ensure slip-crush resistance in the
slip area, as well as a lightweight
tube and rotary-shouldered
connections.
www.vallourec.com
New downhole uid analysis service
Halliburton has introduced its Integrated Computational Element (ICE
Core) downhole fluid analysis service, including applications in deep wa-
ter, exploration, sample validation, and fluid analysis between samples.
The technology can also be employed where flow assurance is an issue;
when mapping waterfloods; when determining reservoir connectivity;
when determining compositional grading of reservoir fluids; and to see
if fluids are changing. ICE Core works via light shining through downhole
fluids, and then through the individual ICE Core sensors. Each sensor
is programmed to recognize the chemical natureor optical finger-
printof a specific fluid component, such as ethane, propane, aromatics,
saturates or water.
www.halliburton.com/rdt
Multidimensional
cutter extends life,
feet per run
Baker Hughes Inc. has made avail-
able its StayCool multidimensional
cutter, which helps operators drill
to TD faster, and more cost-
effectively, by extending cutter
life and footage per run. Used
exclusively on the Hughes Chris-
tensen Talon platform of premium
PDC bits, these cutters incorpo-
rate a contoured diamond table,
wear-resistant diamond materials
and new interface designs. The
cutters patent-pending contoured
design reduces friction, maintains
a sharper cutting edge throughout
the bit run, and reduces MSE. In
testing, the cutters generated 20%
less heat on the cutter face than
conventional flat-surface cutters.
www.bakerhughes.com
Christmas tree for
harsh conditions
The Ashcroft Type 1020S pres-
sure gauge is designed specifi-
cally for monitoring pressures on
Christmas tree control assemblies
on top of oil and gas wellheads.
This 4-in.-diameter gauge is
constructed with a stainless steel
exterior and wetted parts, to resist
the potentially damaging effects
of petroleum pressure media.
http://www.ashcroft.com/prod-
ucts/pressure_gauges/steel/
Type-1020S-Gauges.cfm
Multipole sonic-while-drilling service
for large boreholes
Schlumberger has released the SonicScope multipole sonic-while-drilling
service for wells with large boreholes. The service provides high-fidelity
measurements to determine formation pore pressure and breakout limits,
to improve drilling risk management. It has been field-tested globally, in-
cluding multiple deepwater locations, such as the GOM, West Africa, East
Africa, Brazil, the North Sea and Australia. More than 150 runs have been
conducted successfully in well boreholes, ranging from 10 in. to 17 in.
Data obtained with the service have proven to be valuable components of
a real-time workflow that identifies geological layers, and adjusts the mud
weight window accordingly, to improve drilling risk management.
www.slb.com/sonicscope
Plunger design
evens out erratic
production
Multi Products Company has
introduced its new Steady-Flo
plunger for wells that produce
high volumes of fluid, but lack
sufficient gas energy to drive fluid
evacuation. The plunger incor-
porates a through-bore design,
which allows the plunger to find
a hydrostatic equilibrium point
in the wellbore by slipping fluid
as the plunger rises. With this
design, the plunger utilizes the
wells available energy to produce
an even amount of fluid on each
plunger cycle.
www.plungerlift.com
Elastomer tested
to API standards
Freudenberg Oil & Gas
Technologies has developed new
NBR elastomer compounds that
have been incorporated into
its spherical elements and ram
block product offerings. The new
NBR compounds were used in
the companys 13 -in. spherical
element, and were tested
according to the API 16A standard
for BOP elastomer components.
Initial results showed the element
exceeding the fatigue test.
www.fogt.com
Two new alloy
steel grades
The Timken Company has
introduced 4130HW and 4140HW
grades of high-performance alloy
steel that meet AISI4130 and
4140 standards. These products
expand upon their energy
offerings portfolio, especially
for HPHT applications. Typical
applications for 4130HW steel
include oil and gas drilling
and completion equipment,
such as packers, liner hanger
components, drilling jars and
fishing tools.
www.timken.com/
steeloilandgas
Online marketplace
for multiple-source
seismic data
In response to demand for seismic
data, Katalyst has released
SeismicZone. This transaction-
based e-commerce website gives
users access to current seismic
data available across North
America, stored digitally in secure
infrastructure. As opposed to the
traditional model for licensing
seismic data, SeismicZone
expedites the process by allowing
geoscientists to view available
seismic data 24/7, and select
areas of quality-checked data to
license, all through a map interface.
Users can access volumes of
quality-controlled data, with
corresponding metadata, in an
open, online environment.
www.seismiczone.com
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at 713-525-4633 or
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100NOVEMBER 2013/WorldOil.com
Archer ..............................................................................39
www.archerwell.com
Baker Hughes ................................................................26
www.bakerhughes.com/Mfrac
Baker Hughes ................................................................70
www.bakerhughes.com/here
Bluebeam Software Inc. ..............................................16
www.bluebeam.com/customtools
Cameron .........................................................................56
www.c-a-m.com
CJ Winter .......................................................................50
www.cjwinter.com
Clover Tool Company ................................................. 47
www.clovertool.com
CNPC GWDC .................................................................24
www.cnlc.cn
Delta Rigging & Tools .................................................59
www.deltarigging.com
Dragon Products, Ltd .................................................. 31
www.dragonproductsltd.com
Elliott Group .................................................................. 22
www.elliott-turbo.com
Expro ...............................................................................34
www.expropowerchokes.com
Flexsteel Pipeline Technologies ............................... 28
www.flexsteelpipe.com/products
FMC Technologies........................................................ 10
www.fmctechnologies.com
Gardner Denver .............................................................. 6
www.pumpingperfected.com
Gastech Conference & Exhibition ...........................96
www.gastechkorea.com/worldoil3
GE Water & Process Technologies ..........................49
www.geimagination.com/CMS/HPI
Gulf Publishing Company
Events - EMGC ...............................................32-33, 87
www.EMGasConference.com
Events - GTL ........................................................76-77
www.GTLTechForum.com
Events - WGLC ......................................................... 103
www.WGLConference.com
Handbook ....................................................................83
www.GulfPub.com/MatureOil
World Oil Webcast ............................................ 90, 93
www.WorldOil.com/webcasts
World Oil Marketplace .............................................99
Halliburton ..................................................................54A
Industrial Rubber ........................................................... 4
www.iri-oiltool.com
M-I SWACO, A Schlumberger Company ...............20
www.miswaco.com/deepwater
Marine Cybernetics...................................................... 67
www.marinecyb.com
McAda Fluids Heating Services ............................... 82
www.McAdaFluidsHeating.com
MTU, A Tognum Group Brand ...................................61
www.mtu-online.com
National Oilwell Varco .................................................. 2
www.nov.com/eo
One Nature ....................................................................69
www.OneNature.US
OneSubsea ....................................................................... 5
www.onesubsea.com/highavailability
Packers Plus ...................................................................18
www.packersplus.com
PCC Energy Group......................................................... 8
www.pccenergygroup.com
PEPPERL+FUCHS .........................................................41
www.pepperl-fuchs.us
Rushmore Reviews ......................................................45
www.RushmoreReviews.com
Safety Management Systems,
An Acadian Company .............................................43
www.SafetyMS.com
Schlumberger ............................................................ 104
www.slb.com/SonicScope
Schlumberger ................................................................11
www.slb.com/TrackMasterOH
Schlumberger ...............................................................14
www.slb.com/Quartet-Muzic
Scott Safety .................................................................... 51
www.UniversityByScott.com
Statoil ...............................................................................81
www.statoil.com
Superior Energy Services .......................................... 73
www.superiorenergy.com/C2
Tesco Corporation ....................................................... 37
www.tescocorp.com
Tri-Pac Engineering .....................................................84
www.tripacengineering.com
Vicinay Cadenas SA .................................................... 53
www.vicinaymarine.com
Volant Products Inc. ....................................................63
www.volantproducts.ca
Weatherford ................................................................... 12
www.weatherford.com
Weir Oil & Gas ...............................................................85
www.weiroilandgas.com
Wellbarrier AS................................................................ 13
www.wellbarrier.com
This index and procedure for securing additional information are provided as a service to World Oil advertisers and a convenience to our readers. Gulf Publishing Company is not responsible for omissions or errors.
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Technology and Business Information for the Global Gas Processing Industry
World Oil/DECEMBER 2013 101
MEETINGS AND EVENTS
EDITORIAL@WORLDOIL.COM
JANUARY
LNG 360 Forum, Latin America &
Caribbean, Jan. 1416,
Houston, Texas
P: +44 (0)203 615 2873
swapneelshah@dmgevents.com
www.lng360latamcar.com
SPE, International Petroleum
Technology Conference (IPTC),
Jan. 2022,
Qatar National Convention Center,
Doha, Qatar
P: +971 (4) 4575800
iptc@iptcnet.org
dmg Events, Global Energy Career
Expo Aberdeen, Jan. 22-23,
Aberdeen Exhibition and
Conference Centre,
Aberdeen, UK
P: +44 (0)20 36152845
katecheetham@dmgevents.com
www.globalenergycareerexpo.
com/aberdeen/2014
FEBRUARY
ASME/ALDRC, 37th Annual
International Gas-Lift Workshop,
Feb. 37, Norris Conference
Center, Houston, Texas
P: +1 (281) 493-3491
hartje@asme.org
www.asme-ipti.org/gas-lift-
workshop
IADC, Health, Safety, Environment
& Training Conference &
Exhibition, Feb. 45,
Omni Houston Hotel West,
Houston, Texas
(See box for contact information)
SPE, Hydraulic Fracturing
Technology Conference, Feb.
46, The Woodlands Waterway
Marriott Hotel and Convention
Center, The Woodlands, Texas
(See box for contact information)
Arctic Technology Conference,
Feb. 1012,
George R. Brown Convention
Center, Houston, Texas
P: +1 (888) 945-2274 ext. 2617
www. arctictechnologyconference.
org
The Minerals, Metals & Materials
Society (TMS 2013), Feb. 1620,
San Diego Convention Center, San
Diego, Calif.
P: +1 (805) 677-4293
tms2014@rcsreg.com
www.tms.org/meetings
SPE, International Symposium and
Exhibition on Formation Damage
Control, Feb. 2628, Lafayette
Hilton, La.
(See box for contact information)
dmg Events, Global Energy
Career Expo London, Feb. 2728,
Business Design Centre,
London, UK
P: +44 (0)20 36152845
kate.cheetham@dmgevents.com
www.globalenergycareerexpo.
com/london/2014
MARCH
IADC/SPE Drilling Conference and
Exhibition, Mar. 46, Fort Worth
Convention Center, Texas
(See box for contact information)
World Heavy Oil Congress,
Mar. 57, Hyatt Regency,
New Orleans, La.
P: +1 (403) 209-3555
F: +1 (403) 245-8649
davidghoris@dmgevents.com
http://worldheavyoilcongress.
com/2014
GEO 2014, 11th Middle East
Geosciences Conference and
Exhibition, Mar. 912, Bahrain
International Exhibition and
Convention Centre, Manama,
Bahrain
P: +44 (0) 20 7840 2136
www.geo2014.com
Gulf Publishing Events, Eastern
Mediterranean Gas Conference
(EMGC), Mar. 1012, Hilton Tel Aviv,
Tel Aviv, Israel
(See box for contact information)
APPEX Global 2014, Prospect
and Property Expo, Mar. 1113,
Mezzanine at the Business Design
Centre, London, UK
P: + 44 (0) 207 434 1399
F: +44 (0) 207 434 1386
www.aapg.org
Gastech Conference & Exhibition,
Mar. 2427, Kintex1, Seoul, Korea
P: +44 (0) 203 615 2847
F: +44 (0) 203 615 0679
info@gastech.co.uk
www.gastechkorea.com
Offshore Technology Conference
(OTC) Asia, Mar. 2528, Kuala
Lumpur Convention Centre, Kuala
Lumpur, Malaysia
F: +65 6290 5887
P: +65 6297 9322
otcasia@otcnet.org
www.otcasia.org/2014
APRIL
SPE, 2014 Unconventional
Resources Conferences, Apr. 13,
The Woodlands Waterway Marriott
Hotel and Convention Center,
The Woodlands, Texas
(See box for contact information)
AAPG with Houston Geological
Society, Annual Convention and
Exhibition, Apr. 69, George
R. Brown Convention Center,
Houston, Texas
P: +1 (918) 560-2616
www.aapg.org/houston2014
IADC/SPE, Managed Pressure
Drilling and Underbalanced
Operations Conference, Apr. 89,
NH Eurobuilding Hotel,
Madrid, Spain
(See box for contact information)
NAPE East, Apr. 911, David L.
Lawrence Convention Center,
Pittsburgh, Pa.
P: +1 (817) 847-7700
F: +1 (817) 847-7704
info@napeexpo.com
www.napeexpo.com/nape-shows/
regional-nape-east
SPE, Nineteenth Improved Oil
Recovery Symposium, Apr. 1216,
Renaissance Hotel, Tulsa, Okla.
(See box for contact information)
Texas Alliance of Energy
Producers, Alliance Expo & Annual
Meeting, Apr. 2223,
Multi-Purpose Events Center,
Wichita Falls, Texas
P: +1 (940) 723-4131
F: +1 (940) 723-4132
donnab@texasalliance.org
http://texasalliance.org
Black Sea Oil & Gas Forum,
Apr. 2830, Bucharest, Romania
P: +44 (0) 203 615 2871/2872
ayapariy@blackseaoilgas.com
www.blackseaoilgas.com
MAY
Offshore Technology Conference
(OTC), May 58, Reliant Center,
Houston, Texas
P: +1 (972) 952-9494
F: +1 (972) 952-9435
service@otcnet.org
www.otcnet.org
SPE, International Oilfield
Corrosion Conference and
Exhibition, May 1213,
Aberdeen Exhibition and
Conference Centre, Aberdeen, UK
(See box for contact information)
IADC, Drilling Onshore Conference
and Exhibition, May 15,
Omni Houston Hotel Westside,
Houston, Texas
(See box for contact information)
SPE, LACPEC 14 (Latin American
and Caribbean Petroleum
Engineering Conference),
May 2123, Maracaibo, Venezuela
(See box for contact information)
JUNE
West Africa Exploration & Pre-Salt
Forum, Jun. 35,
Windhoek, Namibia
P: +44 (0)20 36152872
guymcculloch@dmgevents.com
www.presaltafrica.com
OGIS Toronto, Jun. 5,
The Ritz-Carlton,
Toronto, Ont., Canada
P: +1 (202) 857-4722
F: +1 (202) 857-4799
bgreen@ipaa.org
www.ipaa.org
IADC, International Tax Seminar,
Jun. 56, New York Hilton
Midtown, New York
(See box for contact information)
SPE, Energy Resources
Conference, Jun. 911,
Hyatt Regency,
Port-of-Spain, Trinidad
(See box for contact information)
SPE, Heavy Oil Conference-
Canada, Jun. 1012,
BMO Centre at Stampede Park,
Calgary, Alta., Canada
(See box for contact information)
Independent Petroleum
Association of America (IPAA),
Midyear Meeting, Jun. 1820,
The Broadmoor,
Colorado Springs, Colo.
P: +1 (202) 857-4722
F: +1 (202) 857-4799
rcarter@ipaa.org
www.ipaa.org/meetings-events
IADC, World Drilling 2014
Exhibition & Conference,
Jun. 1820, Austria Center,
Vienna, Austria
(See box for contact information)
International Association of
Drilling Contractors (IADC)
P: +1 (713) 292-1945
F: +1 (713) 292-1946
info@iadc.org
www.iadc.org/events
Society of Petroleum
Engineers (SPE)
P: +1 (972) 952-9393
F: +1 (972) 952-9435
spedal@spe.org
www.spe.org/events/
calendar
World Oil/Gulf Publishing
Company Events
P: +1 (713) 529-4301
F: +1 (713) 520-4433
events@gulfpub.com
www.worldoil.com/
gpc-events.aspx
Global organizing of indigenous
peoples is latest E&P headache
THE LAST BARREL
KURT S. ABRAHAM, EXECUTIVE EDITOR
102DECEMBER 2013/WorldOil.com
It seems that every couple of months,
we run into yet another entity that believes
it sits on unassailable, moral high ground,
and thus uses that perceived status as an
excuse to harass and/or extort the global
upstream industry. Just three months ago,
we brought you news of the group that
has appointed itself the status of environ-
mentally certifying oil and gas companies
for responsible production, whether they
want it or not.
The art of FPIC. Now comes yet an-
other group, which has decided that the
indigenous peoples (I.P.) of the world
are not having their native rights respected
by operators. Therefore, this organization,
First Peoples Worldwide (FPW), is now
going around, teaching I.P. the art of cor-
porate engagement. This tactic includes
the insistence that oil and gas companies
must consult local I.P. tribes/groups and
reach an understanding (better known
as Free, Prior and Informed Consent, or
FPIC) with those people before any work
is done on I.P. land, even if these firms al-
ready hold valid, legal permits for seismic
work or drilling from the appropriate na-
tional or state/provincial government.
I asked Nick Pelosi, FPWs corporate
engagement associate, to explain the latter
point. Being antagonistic has not been our
purpose, said Mr. Pelosi. We are trying to
promote the business case that it is more
productive to be respectful to I.P. Legal
protections (provided by governments)
are not always adequate to ensure that
I.P.s way-of-life and lands are respected.
Wouldnt it make more sense, I proposed,
for the I.P. to go after the governments and
effect changes there, rather than attack the
producers, who are merely acting on per-
mits and contracts reached with officials?
Mr. Pelosi replied that in theory, the gov-
ernments need to be held accountable, but
he also admitted that for some indigenous
groups, the companies are easier targets.
Speaking of targets, FPW recently re-
leased its first-ever Indigenous Rights Risk
Report, which analyzed 52 U.S.-based ex-
tractive companies, and assessed 70 oil, gas
and mining sites located on, or near, I.P.
lands. Not surprisingly, FPW found that
92% of the sites pose a medium-to-high
risk for these firms shareholders. Further-
more, laments FPW, only five of the 52
firms have an I.P. policy in effect for engag-
ing those communities.
FPW used Southwestern Energys Ca-
nadian subsidiary as an example of a firm
that didnt practice sufficient FPIC before
embarking on a seismic exploration pro-
gram on Elsipogtog First Nation land in
New Brunswick. On Oct. 1, the Elsipogtog
tribes chief delivered an eviction notice
to SWN Resources Canada, as dozens of
protestors blocked the firm from mov-
ing seismic trucks down Route 134. The
situation escalated, with daily blockades,
and SWN requested an injunction against
the tribal protestors. The Canadian Royal
Mounted Police (CRMP) moved in on
Oct. 17 and arrested 40 people while en-
forcing the injunction. SWN requested a
permanent injunction that was denied on
Oct. 22, but continued protests resulted in
a new, temporary injunction being issued
on Nov. 22, which was extended by two
weeks on Dec. 2.
Meanwhile, SWN said that the delays
from the protests and blockades were cost-
ing it up to $60,000 per day. Furthermore,
the firm sued 13 protestors on Nov. 1, say-
ing that at that point, it already had lost
$650,000, including a $380,000 drilling
rig destroyed by fire, along with vandalized
geophones and trucks.
We do not encourage violence or the
tactics used in New Brunswick, said Pe-
losi. He then mentioned a situation in Bo-
livia, where FPW encouraged the local I.P.
groups to work with an unnamed oil com-
pany, to reach a fair understanding. The
parties did reach an agreement eventually,
but predictably, it resulted in the operator
shelling out a significant amount of money
to provide compensation (agricultural pro-
grams and local jobs) for impacts that af-
fected the I.P. lifestyle and property.
So, the net conclusion that one takes
away from this discussion is that I.P.
groups will, increasingly, demand consul-
tation and compensation from producers,
no matter what permits the companies al-
ready have from the governments. If the
firms dont comply, and these I.P. groups
are unhappy, then they will resort to pro-
tests, blockades and whatever means are
necessary to stop development. This is a
form of anarchy. It also is a form of extor-
tion. It reminds this editor of organized
crime thugs putting the hit on shopkeep-
ers in New York City or Chicago for pro-
tection money, just so they can continue
to operate without being harassed.
On its website, FPW says, Everything
we do is geared toward helping our commu-
nities achieve control over their own assets,
including land, cultural rights and intellec-
tual property. This situation bears watch-
ing worldwide, especially in places with
high I.P. populations, like Canada, Austra-
lia, South America, and portions of Africa.
Another tax war. Predictably, the
Obama administration, through its con-
gressional surrogates, is mounting another
assault on the U.S. upstream industrys tax
provisions, to drain more tax money. This
time, the threat comes from lame duck
Sen. Max Baucus (Dem. Mont.), who,
conveniently, is not running for re-election
next year, and thus has introduced tax re-
form provisions that would wipe out the
Intangible Drilling Costs (in the tax code
since 1913) and Percentage Depletion (in
the code since 1926) write-offs.
If these ill-advised proposals become
law, they will cripple our momentum to-
ward achieving U.S. energy independence,
said Townes Pressler, chairman of the Texas
Alliance of Energy Producers. The dra-
conian changes proposed in Sen. Baucus
draft would drain as much as 30% to 35% of
the risk capital we use to sustain the current
shale energy boom, said Mike McDonald,
co-owner of Houston-based Triad Energy.
This situation is fluid and wont be resolved
overnight. It could change considerably, so
stay tuned to further developments.
KURT.ABRAHAM@WORLDOIL.COM
2013 WOME N S
H
O
U
S
T
O
N
A Recap of the 2013 Womens Global
Leadership Conference in Energy
& Technology (WGLC)
The tenth Womens Global Leadership Conference
in Energy & Technology was held October 2930
in Houston and focused on Changing the Global
DynamicsAmericas Renaissance. One of the
largest womens events in the industry, this years
WGLC was host to 685 industry professionals. The
event featured three outstanding keynote speakers,
14 presentations and panel discussions covering
shale and unconventional resources in North
America and womens professional development
issues, and included an exhibition area full of
supporting organizations.
The conference opened on Tuesday with a keynote
speech by Amity Shlaes, Director 4% Growth Project,
George W. Bush Institute and New York Times best-
selling author. In her keynote address, Ms. Shlaes
noted that innovation is key to keeping the energy
sector at the forefront of U.S. economic growth, and
more of this innovation must come from women.
The message to women today is to rise to the top
to walk in the halls of power, speak up, and improve
your company as you do it, Ms. Shlaes said.
Jo Miller, CEO of Womens Leadership Coaching,
began day two with a workshop titled Becoming a
Person of Inuence. In her workshop, Miller taught
attendees how to create their own 30-second
commercial and advised that the fundamental truth of
becoming a person of inuence at their organization
was that our behavior teaches others how to treat
us. Miller then went on to address the six types of
inuence people can exert in the professional world
and the ways in which oil and gas professionals can
expand their inuence at any career stage.
Following lunch on day two, track and eld record
holder Jackie Joyner-Kersee spoke to attendees
about using their God-given gifts and blessings
to get the most out of themselves and shared her
message of hope, faith, perseverance and hard work
to a rapt audience who gave her a standing ovation.
In keeping with the 2013 theme, other presentations
and panel discussions focused on U.S. shale and
unconventional resources, exports, Americas
energy future and developing the future generation
of leaders in the oil and gas industry. In the
conferences rst panel discussion, panelists from
Baker Hughes Incorporated, XTO Energy, Statoil and
Tudor, Pickering, Holt & Company discussed how
shale and unconventional resources are reshaping
how we do business and the lessons to be learned
in this characteristically lowmargin space. Later,
Charles T. Drevna, President, American Fuel &
Petrochemical Manufacturers, warned that U.S. fuel
and petrochemical companies must shake of past
inclinations toward energy protectionism if they are
to fully take advantage of the shale revolution.
Throughout the conference, panelists and speakers
stressed the importance of getting the next
generation, and women in particular, involved in STEM
studies and excited about the oil and gas industry.
Shelly Cory, Strategic Integration Project Manager,
Baker Hughes Incorporated, shared the initial results
of their STEM initiative, and Tyra Metoyer, Energy
Nation Consultant, American Petroleum Institute,
spoke about employment opportunities for minorities
in the industry. Additional panel discussions focused
on the Great Crew Change and recruitment
and training.
The next WGLC is scheduled for November 45,
2014 at the Hyatt Regency Houston.
Participate in the 2014 Womens
Global Leadership in Energy &
Technology
Speaker Inquiries: Melissa Smith, Events Director,
Melissa.Smith@GulfPub.com, +1 (713) 520-4475.
Exhibit or Sponsorship Inquiries: Lisa Zadok,
Events Sales Manager, Lisa.Zadok@GulfPub.com,
+1 (713) 525-4632
Plan to Attend: WGLConference.com
Amity Shlaes
Director 4% Growth Project
George W. Bush Institute
Jo Miller
Chief Executive Of cer
Womens Leadership
Coaching, Inc.
Jackie Joyner-Kersee
Track and Field
Record Holder
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