JULY 6, 2015 | USD 10

International Petroleum News and Technology | www.ogj.com

MIDYEAR
FORECAST
ETHYLENE
REPORT

EASTERN CANADA READIES DEEPWATER

EARTH MODEL AIDS ASSET VALUATION
OIL PRICES HISTORY REPEATING?
UK GAS STORAGE DEVELOPMENT

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CONTENTS
July 6, 2015 Volume 113.7
WORLD OIL MARKET AT A GLANCE

FIG. 1

Global oil demand, supply

FIG. 1a

World oil demand growth, year-over-year change

FIG. 1b

96
2.5

Non-OECD excl. China

China

OECD

95
2.0

GENERAL INTEREST
Natural gas opposition has
shifted to transportation,
speakers say
Nick Snow

37

US House committee
leaders send letters
to Plains, PHMSA
about leak

1.5

Supply
93
Demand
92

Million, b/d

Million, b/d

94

1.0
0.5

91

0.0

90

-0.5

89

-1.0

26

Nick Snow

Case for Keystone XL

has grown stronger,
TransCanada tells Kerry

43

Group suggests principles

for Alberta royalty review

Nick Snow

44

Judges order delays

BLMs implementation
of fracing regs

Poor BIA management

has hindered tribal
energy development,
GAO says

Nick Snow

Nick Snow

38

40

45

EIA: Argentina, China

lead shale development
outside North America
40

SPECIAL REPORT

SPECIAL REPORT

Global oil glut

continues despite
increasing demand

Low-cost feed supports

North American ethylene
expansion plans

Conglin Xu
Laura Bell

Robert Brelsford

MIDYEAR FORECAST

26

Oman lets contract

for Sohar refinery
unit revamp

74
International survey
of ethylene from
steam crackers2015
Leena Koottungal

85

Robert Brelsford

46

Gas faces more

competition from
coal, renewables,
IEA official says

ETHYLENE REPORT

Precommissioning tests
ongoing at Braskems
Mexican petchem project

Nick Snow

Robert Brelsford

41

47

Senate Democrats
outline broad
energy goals to
nations governors

REGULAR FEATURES

Nick Snow

42

COVER

Suncor Energy Inc.s Montreal refnery,

with a capacity of 137,000 b/d, produces
gasoline, distillates, asphalts, heavy fuel oil,
petrochemicals, solvents, and feedstock for
lubricants. Oil & Gas Journals Midyear Forecast, starting on p. 26, provides updated
global oil market data covering supply,
demand, pricing, drilling, and economics.
Photo from Suncor.

OG&PE

P1

NEWSLETTER 8
LETTERS/CALENDAR 18
JOURNALLY SPEAKING 22
EDITORIAL 24
SERVICES/SUPPLIERS 105
STATISTICS 108
MARKET CONNECTION 111
ADVERTISERS INDEX 115
EDITORS PERSPECTIVE/
WATCHING GOVERNMENT 116

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NORTH SEA COMPARISON: 1965-2010

FIG. 1

900

1,800
2D acquired (Norway)
2D acquired (NL)

800

Exploration wells drilled (Norway)

Exploration wells drilled (NL)

1,400

700

1,200

600

1,000

500

800

400

ploration wells, no.

2D seismic, 1,000 km

1,600

48

100

TECHNOLOGY...

EXPLORATION & DEVELOPMENT

DRILLING & PRODUCTION

PROCESSING

TRANSPORTATION

Newfoundland,
Labrador prepare for
deepwater exploration

Earth model assists

Permian asset valuation

Low-cost feed supports

North American ethylene
expansion plans

Lack of business
drivers inhibits UK gas
storage development

Robert Brelsford

Adrian Finn
Zak Loftus

Patrick J. Curth
James R. Courtier
Gary B. Smallwood
Rick Mauro
Scot Evans

Tayvis Dunnahoe

48

Chinas Yanchi
area, western Ordos
basin derived from
mixed source

74

International survey
of ethylene from
steam crackers2015

64

Zhou Shichao
Wang Xingzhi
Liu Xinshe
Han Peng

53

Innovation addresses
US environmental
regulations; more needed

Leena Koottungal

Bennett Resnik
Benjamin Nussdorf

The price of oil and

OPEChistory
repeating?

70

85

Manouchehr Takin
Ramin Takin

PERMIAN BASIN STRUCTURES

FIG. 1

Levelland

Lubbock

Nelson-Farrar
monthly cost indexes

Northwest
shelf

Gary Farrar

94

New
Mexico
Snyder
Lamesa

Texas

Sweetwater
Big Spring

Central basin
platform

Midland
Midland
basin

Delaware
basin

92

NELSON-FARRAR
QUARTERLY
COSTIMATING:
Indexes for selected
equipment items
Gary Farrar

98

Eastern
shelf

64

100

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OGJ

WIRELINE SERVICES

Houston offce
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GEOLOGY PRODUCTION LOGGING
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IMULATION MICROSEISMIC SEISMI Staff Writer Matt Zborowski,
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ITS ALL IN THE WAY

WERE
WIRED.
From comprehensive formation
evaluation to full casing analysis,
our wireline services help you manage
every aspect of your operations
in both openhole and cased-hole wells.
Explore the full breadth of our wireline
services at weatherford.com/wireline

Editorial Advisory Board

Pat Dennler Motiva Enterprises LLC, Port Arthur, Tex.
Doug Elliot Bechtel Hydrocarbon Technology
Solutions/IPSI (Advisor), Houston
Andy Flower Independent Consultant,
Caterham, UK
Michelle Michot Foss Bureau of Economic Geologys
Center for Energy Economics,
The University of Texas (Houston)
Michael Lynch Strategic Energy & Economic
Research Inc., Amherst, Mass.
Tom Miesner Pipeline Knowledge & Development,
Houston
Ralph Neumann Badger Midstream Energy LP
Kent F. Perry RPSEA, Houston
Ignacio Quintero Chevron Pipe Line Co., Houston
Bill Schlesing KBC Advanced Technologies Inc.,
Houston
John A. Sheffeld John M. Campbell & Co.,
Lechlade, UK
Andrew J. Slaughter Deloitte Services LP, Houston
John Thorogood Drilling Global Consultant LLP,
Insch, Scotland
Steven Tobias Hess Corp., Houston
Shree Vikas Conoco Phillips Co., Houston
Clark White Targa Resources, Houston
Colin Woodward Woodward International Ltd.,
Durham, UK

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Washington Editor Nick Snow, nicks@pennwell.com

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Houston Administration

Drilling & Formation Evaluation

____
Well Construction
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Production

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Its time to

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PROJECT SCHEDULE RISK

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65

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communication

projects over $1B

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projects under $500M

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For every $1 billion spend on a capital project,

$135 million is at risk. 56% of that ($75 million)
is at risk due to ineffective communication.

35

FAIL

A project is considered to have failed if the schedule slips or the project

overspends by more than 25%, the execution time is 50% longer, or there are
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2013 Pulse of the Profession, Project Management Institute.

Speed Kills, Klaver, Ali. 2012 Project Manager Magazine.

40 percent of projects in the oil and

gas industry are subject to budget
and schedule overruns.
Capital Project Execution in the Oil and Gas Industry.
M. McKenna, H. Wilczynski, D. VanderSchee. 2006 Booz
Allen Hamilton survey from 2006 of 20 companies
(super-majors, independents and EPC firms).

20%

30

budget & schedule

OVERRUNS

40%

anticipated value

DISAPPEARS

50

39%

schedule
Good front end
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Up to 30 percent of anticipated value

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Capital Projects - Avoiding value leakage in the transition
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PERSONNEL

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Construction Industry Institute: Adding Value Through

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67
TO

YEARS
expected to

RETIRE

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Society of Petroleum Engineers, The Great Crew Change: A Challenge for Oil Company
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It takes an average of six to seven years to develop

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E M E R S O N . C O N S I D E R I T S O LV E D .

OGJ
Newsletter

July 6, 2015

International News
for oil and gas professionals

GENERAL INTEREST Q U IC K TA K E S
USGS: Water usage for fracing varies across shale plays
The volume of water required to hydraulically fracture wells
varies widely across the country, according to the first national
analysis and map of hydraulic fracturing water usage detailed
in a recent US Geological Survey study.
The analysis was published in Water Resources Research, a
journal of the American Geophysical Union. Researchers found
water volumes for fracturing varied from 2,600 gal/well to 9.7
million gal/well.
As of 2014, median annual water volume estimates for fracturing in horizontal wells increased to more than 4 million gal/
well for oil wells and 5.1 million gal/well for gas wells. That
compared with an initial average of about 177,000 gal/well for
oil and gas wells in 2000, the study said.
One of the most important things we found was that the
amount of water used per well varies quite a bit, even within
a single oil and gas basin, said USGS scientist Tanya Gallegos,
the studys lead author. A better understanding of the volumes
of water injected for hydraulic fracturing could be a key to understanding the potential for some environmental impacts.
USGS noted that horizontal drilling accounted for the highest average water use for fracturing in 52 out of the 57 watersheds studied. The watersheds where the most water was used
to fracture wells involved shale formations.
Horizontal wells generally require more water than vertical or
directional wells. USGS said this research was part of its larger
effort to understand the resource requirements and potential environmental impacts of unconventional oil and gas development.

FWS issues LOA to Shell for Chukchi Sea lease

The US Fish & Wildlife Service issued Shell Gulf of Mexico Inc. a
letter of authorization (LOA) related to the potential disturbance of
polar bears and Pacific walrus resulting from the companys proposal to operate two drilling rigs in the Chukchi Sea this summer.
The letter, which is effective July 1 and expires Nov. 1, is
one of the remaining permits that the Royal Dutch Shell PLC
subsidiary must obtain to move forward with an exploration
program continuing activity it began in 2012 on a federal lease
it obtained in OCS Lease Sale 193 in 2008.
Shell has proposed drilling as many as 6 wells from 2 off-

For up-to-the-minute news,

visit www.ogjonline.com

shore rigs there from July 4 through Oct. 31, FWSs Alaska office indicated in the June 30 LOA, which allows incidental, but
not intentional, takes of game.
It authorizes Shell to proceed, provided the company complies with mitigation, monitoring, and reporting measures under
the Marine Mammal Protection Act, which include maintaining
a 15-mile buffer between the rigs while they are in operation.
Another US Department of the Interior agency, the Bureau
of Safety and Environmental Enforcement, continues to review
Shells drilling permit applications, DOI said. FWSs action neither approves of nor precludes the companys proposed activity
on its lease this summer, which will be subject to all applicable
regulations and conditions, it emphasized.

Survey begins of collaboration on the UKCS

Deloitte has begun a survey about collaboration in the oil and
gas producing industry of the UK Continental Shelf.
With support from Oil & Gas UK, the business advisory
firm is studying the level and quality of collaboration now occurring on the UKCS and how companies might work together
in new ways.
The survey asks participants what collaboration means,
what constitutes effective collaboration, and how companies
view themselves and each other as collaborators.
Justin Watson, a partner in Deloittes consulting practice,
said collaboration is a focus of many of the firms conversations
with clients.
With subdued oil prices set to continue, its more important
than ever that companies look at what could be gained by working more closely together to bring down costs, reduce complexity, and boost efficiency, he said. However, what collaboration
means for the oil and gas industry is not well understood.
Collaboration received emphasis in the 2013-14 Wood Review, which called for strategies aimed at achieving maximum
economic recovery from remaining oil and gas resources of the
UKCS (OGJ Online, Feb. 24, 2014).

EXPLORATION & DEVELOPMENT Q U IC K TA K E S

Lundin has spudded three wells offshore Norway
Lundin Norway AS, a wholly owned subsidiary of Lundin Petroleum AB, has spudded three wells: its second Alta appraisal

Oil & Gas Journal

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ICE BRENT / NYMEX LIGHT SWEET CRUDE

$/bbl
64.00
63.00
62.00
61.00
60.00
59.00
58.00
57.00

US INDUSTRY SCOREBOARD 7/6

4 wk.
average

Latest week 6/19

June 24

June 25

June 26

June 29

Motor gasoline
Distillate
Jet fuel
Residual
Other products

June 30

WTI CUSHING / BRENT SPOT

Crude production
NGL production2
Crude imports
Product imports
Other supply2 3
TOTAL SUPPLY
Net product imports

June 25

June 26

June 29

1Not

9,352
3,841
1,627
217
4,792
19,829

8,950
3,874
1,515
195
3,960
18,494

4.5
(0.9)
7.4
11.3
21.0
7.2

8,985
4,021
1,543
208
4,806
19,563

8,684
3,885
1,432
240
4,464
18,705

3.5
3.5
7.8
(13.3)
7.7
4.6

9,597
3,161
6,957
2,010
1,975
23,700
(1,440)

8,442
2,766
7,211
1,917
2,109
22,445
(1,172)

13.7
14.3
(3.5)
4.9
(6.4)
5.6

9,372
3,094
7,219
2,062
2,306
24,053
(1,557)

8,256
2,687
7,338
1,854
2,207
22,342
(1,572)

13.5
15.1
(1.6)
11.2
4.5
7.7

16,449
16,754
93.7

15,859
16,104
90.3

3.7
4.0

15,855
16,167
90.6

15,533
15,840
88.5

2.1
2.1

Latest week 6/19

Crude oil
Motor gasoline
Distillate
Jet fuelkerosine
Residual
Stock cover (days)4

June 24

Latest
week

Previous
week1

462,993
218,494
135,428
39,731
39,816

467,927
217,814
133,591
40,505
40,285

Change

Same week
year ago1 Change

June 25

June 26

June 29

June 30

(4,934)
680
1,837
(774)
(469)

388,090
214,977
120,566
37,799
38,539

Change, %

Crude
Motor gasoline
Distillate
Propane
Futures prices5 6/26

28.1
23.4
35.3
88.8

Change,
%

28.5
23.2
34.0
86.1

74,903
3,517
14,862
1,932
1,277

60.06
2.77

(1.4)
0.9
3.8
3.1

59.89
2.85

19.3
1.6
12.3
5.1
3.3

Change, %
24.8
24.0
31.1
65.0

13.3
(2.5)
13.5
36.6

Change

Light sweet crude ($/bbl)

Natural gas, $/MMbtu

0.2
0.1

106.58
4.64

Change

(46.52)
(1.87)

(43.6)
(40.3)

Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks
divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.
Source: Energy Information Administration, Wall Street Journal
June 24

June 25

June 26

June 29

June 30

BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE
3,900
3,600
3,300
3,000
2,700
2,400
2,100
1,800
600
300
0

2,127
1,810
318

May 14

June 24

June 25

June 26

June 29

June 30

Jun. 14

Jul. 14

Aug. 14 Sept. 14

Oct. 14

Nov. 14

Dec. 14

Jan. 15

Feb. 15

Mar. 15

Apr. 15

May 15

Note: Monthly average count

BAKER HUGHES RIG COUNT: US / CANADA

2,000

1,873

1,700
1,400
1,100

859

800
650
350

236

250
June 24

June 25

June 26

June 29 June 30 1

available 2Reformulated gasoline blendstock for oxygen blending

regular unleaded

3Nonoxygenated

10

Change,
%

Stocks, 1,000 bbl

NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3

/gal
208.00
205.00
202.00
199.00
196.00
193.00
190.00
187.00

Crude runs to stills

Input to crude stills
% utilization

June 30

PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU

/gal
57.00
53.00
49.00
45.00
44.00
42.00
40.00
38.00

YTD avg.
year ago1

Refining, 1,000 b/d

June 24

ICE GAS OIL / NYMEX HEATING OIL

/gal
190.00
188.00
186.00
184.00
182.00
180.00
178.00
176.00

YTD
average1

Supply, 1,000 b/d

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB

$/MMbtu
2.850
2.825
2.800
2.775
2.750
2.725
2.700
2.675

Change,
%

Product supplied, 1,000 b/d

TOTAL PRODUCT SUPPLIED

$/bbl
61.50
61.00
60.50
60.00
59.50
59.00
58.50
58.00

4 wk. avg.
year ago1

50

135

4/11/14

4/25/14

4/18/14

5/9/14

5/2/14

5/23/14

5/16/14

6/6/14

5/30/14

6/20/14

6/13/14

4/10/15

6/27/14

4/24/15

4/17/15

5/8/15

5/1/15

5/22/15

5/15/15

6/5/15

5/29/15

6/19/15

6/12/15

6/26/15

Note: End of week average count

Oil & Gas Journal | July 6, 2015

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well in the Barents Sea, an appraisal well on Edvard Grieg field

in the Norwegian North Sea, and the partner-operated Zeppelin exploration well in the southern North Sea.
Alta appraisal well 7220/11-3 in PL609 is 4.3 km south of
Alta discovery well 7220/11-1 (OGJ Online, Mar. 25, 2015), and
3.4 km northeast of recently completed appraisal well 7220/112 (OGJ Online, June 12, 2015). The first appraisal well encountered a 50-m gas column in reservoir rocks of good-to-poor
quality, with a sidetrack encountering gas and oil.
The main objectives of well 7220/11-3 are to confirm the
reservoir model and prove the presence of hydrocarbon columns and fluid contacts similar to those established in the Alta
discovery well, and to test the reservoir properties of the Permian carbonates, Lundin says.
Drilled by Island Drillings Island Innovator semisubmersible rig, the well will reach a total depth of 2,070 m below mean
sea level over a period of 60 days. Lundin Norway operates
PL609 with 40% working interest, while DEA Norge AS and
Idemitsu Petroleum Norge AS each hold 30%.
Edvard Grieg appraisal well 16/1-23 S is in PL338 in the southeastern part of Edvard Grieg field and 2.4 km southeast of the Edvard Grieg platform (OGJ Online, May 12, 2014; Apr. 14, 2015).
Lundin says the objectives of well 16/1-23 S are to confirm
the geological model at this part of the field so the company can
optimize drainage strategy and the placement of development
wells, and to test for upside reserve potential in the field, which
is estimated at up to 50 million boe (gross).
Drilled by the Rowan Viking jack up rig, the well will reach
a total depth of 2,200 m below mean sea level over a period of
60 days. Lundin Norway operates PL338 with 50% working
interest. Partners are OMV Norge AS 20%, Statoil Petroleum AS
15%, and Wintershall Norge AS 15%.
Zeppelin exploration well 10/4-1 in PL734, operated by
Wintershall, lies in the southern North Sea 35 km southeast
of Yme field.
The main objectives of well 10/4-1 are to prove the presence
of hydrocarbons in sandstones of the Middle to Late Jurassic
Vestland Group. Lundin estimates the Zeppelin prospect to
have the potential to contain unrisked, gross prospective resources of 152 million boe.
Drilled by Dolphin Drilling ASs Borgland Dolphin semisubmersible rig, the well will reach 2,300 m below mean sea level
over a period of 30 days. Wintershall operates PL734 with 40%
interest, while Lundin Norway and Centrica Resources (Norge)
AS each hold 30%.

Junex provides update on Galt oil property drilling

Junex Inc., Quebec City, Que., said it is finalizing construction
of the surface drilling pad for the Junex Galt No. 5 horizontal
well that the company plans to start drilling in late July.
This well is on the companys Galt oil property where Netherland, Sewell & Associates Inc. recently provided an update of
their best estimate of the total oil initially in place resources at
557 million bbl for the Forillon and Indian Point formations.

12

NSAIs best estimate of Junexs net share of the total recoverable

oil resource volume is 55.7 million bbl of oil.
Galt No. 5 horizontal well is the first well of the next phase
of operations on the Galt oil property, which includes the drilling of the Galt No. 5 horizontal well, the completion of a detailed 3D seismic program, then the drilling of the Galt Nos. 6
and 7 horizontal wells whose final locations will be determined
from the 3D seismic data.
The Junex Galt No. 5 horizontal well is planned to be drilled
to a total measured depth of 2,500 m, of which 1,300 m is to be
horizontal drilled within the Forillon oil reservoir. Similar to
Junexs Galt No. 4 horizontal oil discovery well, the horizontal
portion of the Galt No. 5 horizontal well is designed to intersect
the maximum number of open, near-vertical, natural fractures
in the Forillon oil reservoir.
Junex holds a 70% interest in the Galt oil property and it
holds 100% interest in the adjacent acreage. The adjacent 100%
Junex acreage has not yet been independently evaluated for its
resource potential. These properties are situated 20 km west of
the town of Gaspe in eastern Quebec.

DRILLING & PRODUCTION Q U IC K TA K E S

Statoil submits amended PDO for Gullfaks license
Statoil ASA has submitted an amendment to the plan for development and operations (PDO) for the Gullfaks license for the
first phase of the Shetland-Lista development.
Shetland-Lista has been producing under a test production
license since 2013. The amendment submitted to Norways
Ministry of Petroleum and Energy defines the longer-term development.
The first phase involves depressurization down to bubble
point pressure in the reservoir and will not require any new
infrastructure. It is expected to add 18 million boe, using 15
existing wells from Gullfaks platforms.
By utilizing the existing infrastructure, we manage to recover new resources at a lower cost, thus sustaining profitable
production and long-term activities on the Norwegian continental shelf, said Ivar Aasheim, Statoil senior vice-president.
Investment costs are estimated at 900 million kroner.
Statoil said the Shetland Group and Lista Formation have
different properties compared with deeper deposits of the Brent
Group, where the main Gullfaks reservoirs are located. The
producing interval in Shetland-Lista consists of thin limestone
beds that are fractured.
Good productivity was established in December 2012 and
has been confirmed through perforation in another three existing Gullfaks wells, which Statoil said has warranted commercial development.
Statoil said current recovery rate from the main Gullfaks
field is 59%. Since start of oil production in 1986, the field has
produced more than 2.56 billion bbl of oil and exported more
than 70 billion cu m of gas (OGJ Online, Apr. 19, 2013).

Oil & Gas Journal | July 6, 2015

CNOOC starts production from Bozhong 28/34 fields

CNOOC Ltd. reported the start of production from its Bozhong
28/34 oil fields comprehensive adjustment project.
The Bozhong 28/34 oil fields lie in Bohai in an average of 22
m of water. The project consists of three comprehensive adjustment projects, namely Bozhong 28-2S oil fields, Bozhong 34-1
oil field, and Bozhong 34-2/4 oil field.
The main production facilities of the project include 6 offshore platforms and 79 producing wells. There are currently 39
wells producing 22,000 b/d of crude oil.
The adjustment project is expected to reach its designed
peak production of 30,000 b/d of oil in 2016.
The Bozhong 28/34 are independent oil fields in which
CNOOC holds 100% interest and acts as operator.

BHP, Woodside move to decommission Stybarrow

BHP Billiton Ltd. and Woodside Petroleum Ltd. have started
preparations for decommissioning of the Stybarrow group
of oil fields in production licence WA-32-L offshore Western
Australia towards yearend. The field has been producing for
8 years.
As operator, BHP has lodged the first documents to the National Petroleum Safety and Environmental Management Authority to begin the abandonment process.
The Stybarrow project, including Stybarrow and Eskdale fields,
was originally flagged to produce 60-90 million bbl over 10 years.
At the end of this year, 60 million bbl will have been produced.
The fields were found in 2003 in 825 m of water and developed using the Stybarrow Venture floating production, storage,
and offloading vessel, which came on stream in 2007.
The facility comprises 6 production wells, 2 gas-lift wells,
1 gas-injection well, and 2 water-injection wells. Development
costs were $760 million.
The MODEC Inc.-operated FPSO, leased for an initial 10year period with the option of 1-year extensions for a further 5
years, will have its contract terminated early.

Tullow provides update on Jubilee, other fields

Tullow Oil PLC reported that gross production for the Jubilee
field offshore Ghana averaged 105,000 b/d in this years first
half, up from 102,000 b/d in 2014 (OGJ Online, Jan. 15, 2015).
Tullow said natural gas exports from Jubilee have averaged
80 MMscfd since final commissioning of the onshore gas processing facility was completed in March.
In Kenya, appraisal drilling and extended well tests are
continuing in South Lokichar Blocks 10BB and 13T. Tullow is
preparing for water injection tests into each of five completed
reservoir zones in Amosing-2A (OGJ Online, Mar. 11, 2015).
Tullow is also preparing for extended well tests in Ngamia
field. Multizone completions have been installed in the Ngamia-8, Ngamia-3, and Ngamia-6 wells.
The Ngamia-9 appraisal well was spudded in June by the PR
Marriott 46 rig, which is also scheduled to drill the Twiga-3 and
Amosing-5 appraisal wells.

14

A basin-testing exploration well is planned this quarter at

Cheptuket on Block 12A.

PROCESSING Q U IC K TA K E S
SIBUR plans MTBE expansion at Togliattikauchuk
Russian conglomerate OAO SIBUR Holding, Moscow, has
started preparatory work for a project designed to expand production capacity for methyl tertiary butyl ether (MTBE) at its
Togliattikauchuk petrochemical complex in Togliatti in Russias
Samara region.
The project, which involves construction of a new unit, will
increase MTBE production capacity at the plant to 135,000
tonnes/year from its current 75,000 tpy, SIBUR said.
As part of the expansion, SIBUR will install 58 pieces of
equipment, as well as upgrade existing equipment, with automated process-control systems to improve efficiency and safety
at the site, the company said.
Feedstock for Togliattis expanded MTBE production will
come from the plants own output of isobutaneisobutylene
fraction, which SIBUR said it will boost to 130,000 tpy from its
current 105,000 tpy.
Preparation of the construction site is under way, as is development of project documents for an upcoming tender the company
plans to issue for the purchase long-lead equipment, SIBUR said.
The expansion project comes as part of SIBURs companywide initiative to expand its MTBE production capacities to
help meet industry demand in regional fuel markets for octaneenhancing additives, the petrochemical producer said.
SIBUR disclosed no details regarding when the expanded
plant would be commissioned.

Ingleside lets contract for ethylene storage

Ingleside Ethylene LLC, a 50-50 joint venture of Occidental
Chemical Corp. (OxyChem) and Mexichem SAB de CV (Mexichem), has let a contract to CB&I, Houston, to provide engineering, procurement, and construction for an ethylene storage
complex in Markham, Tex. The complex will be built as part
of the JVs ethylene cracker project now under way at nearby
Ingleside, Tex. (OGJ Online, Dec. 17, 2014).
CB&Is scope of work under the EPC contract will consist
of surface installations and includes compression, dehydration,
metering, and associated pipe fabrication at the salt cavern storage site, the service provider said.
CB&I valued the contract at about $115 million.
This latest contract follows OxyChems previous letting of a
$1-billion EPC contract to CB&I for the cracker project, including associated utilities and offsites (OGJ Online, Dec. 2, 2013).
First announced in November 2013 (OGJ Online, Nov. 1,
2013), the 1.2 billion-lb/year ethane cracker will provide OxyChem with an ongoing source of ethylene for manufacturing
vinyl chloride monomer, which Mexichem will use to produced
polyvinyl chloride resin and PVC piping systems.
The cracker, which will process ethane feedstocks from

Oil & Gas Journal | July 6, 2015

Industrial Rubbers Fast Latch

Adapter Makes the Connection

Industrial Rubbers Fast Latch Coupler, the accepted

alternative to threading casing adaptors because of its
quality and time-saving value, easily connects to Industrial
Rubbers cement heads with the Fast Latch Adapter.
Industrial Rubber (IRI) provides adapters in two
confgurations ranging from 4 -in. to 20-in. sizes, so that
you have the right adapter for the right condition, and a
secure, safe connection to the cement head.

Quick
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Uses IRIs existing quick coupling union to attach the Fast
Latch to the cement head. And as an option, allows for
use of IRIs circulating cap.
Direct Connect Style
Suitable for rigs with limited vertical clearance, this adapter
attaches directly to the cement head. Compared to the
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When it comes to the best products at the best price, make
the connection with Industrial Rubber Oil Tools.

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growing US shale gas supplies, received final greenhouse gas

prevention of significant deterioration construction permits
from the US Environmental Protection Agency last year (OGJ
Online, May 29, 2014).
CB&I said it also will provide licensing for ethylene technology to be used at the project, including five short-residencetime cracking heaters.
Additionally, the project will use cracking furnaces equipped
with selective catalytic reduction technology to control emissions of nitrogen oxides, according to EPA.
At a total cost of about $1.5 billion, the ethylene project, which
began construction in late 2014, is scheduled for start-up in 2017.

Petronas lets contract for RAPID complex

Malaysias state-run Petronas, through a contractor, has let a contract to Industrial Cooling Solutions Inc. (ICS), Lakewood, Colo.,
to build a 28-cell cooling tower for its proposed refinery and petrochemical integrated development (RAPID) complex at Pengerang
in southeastern Johor, Malaysia (OGJ Online, May 13, 2011).
ICS will design and construct the multimillion-dollar cooling
tower to be used at RAPIDs steam cracker complex, ICS said.
A precise value of the contract was not disclosed.
With a planned capacity of 300,000 b/d, the proposed
RAPID refinery will produce naphtha and liquid petroleum gas
feedstock for the petrochemical complex, as well as gasoline
and diesel meeting European specifications to help address
Asia-Pacifics growing need for petroleum and petrochemical
products (OGJ Online, Mar. 27, 2014).
The refinery and petrochemical complex will have a combined capacity to produce 7.7 million tonnes/year of various
grades of products, including differentiated and specialty
chemicals products (OGJ Online, Oct. 23, 2014).
Most recently, Petronas said it currently estimates RAPID
will cost $16 billion, while associated installations for the project will involve an additional investment of about $11 billion
(OGJ Online, July 25, 2014). RAPID is scheduled for start-up in
early 2019, according to ICS.

TRANSPORTATION Q U IC K TA K E S
Shell unit takes interest in Poseidon oil pipeline
Shell Midstream Partners LP has completed its acquisition of
36% equity interest in Poseidon Oil Pipeline Co. LLC from
Equilon Enterprises LLC, a subsidiary of Shell Oil Products US,
for $350 million.
Poseidon is a proprietary 367-mile offshore crude oil pipeline
with 350,000 b/d capacity transporting to Texas and Louisiana. It
includes ownership of strategic platform South Marsh Island 205.
This marks the second acquisition by Shell Midstream Partners following the initial public offering, said Peggy Montana,
general partner board member (OGJ Online, Apr. 30, 2015).
She said Poseidon is a key corridor pipeline for producers
with close proximity to developments in the central and western Gulf of Mexico.

16

Woodside-led Browse FLNG venture enters FEED phase

The Woodside Petroleum Ltd.-led Browse LNG joint venture has entered the front-end engineering and design
phase for a floating LNG (FLNG) development of Torosa,
Brecknock, and Calliance natural gas fields offshore Western Australia.
The FEED process will finalize the costs and provide technical definition for the proposed development leading to a scheduled final investment decision in about 12 months.
Woodside Chief Executive Officer Peter Coleman says the
decision to enter FEED is a significant step towards developing
what he calls a world-class resource.
Two of the fields in the Browse basinTorosa and Brecknockwere discovered in the 1970s. Calliance field was
discovered in 2000. They have been in limbo for decades, despite numerous development studies, the penultimate of which
involved plans for an onshore processing plant at James Price
Point on the Kimberley coast.
The latest FLNG concept comprises three FLNG vessels
using Shells technology, pioneeredbut yet to be brought
on streamat Prelude field, also in the Browse basin. Torosa,
Brecknock, and Calliance have a combined 2C contingent resource of 15.4 tcf of gas and 453 million bbl of condensate.
This is the last undeveloped mega-LNG project left in Western
Australia once Gorgon-Jansz, Wheatstone, Ichthys, and Prelude
have been completed.
Retention lease renewal offers covering the three fields have
been offered by the government and accepted by the Woodside
group following last weeks deal with the Western Australia
government to reserve the equivalent of 15% of the LNG produced from the two thirds of Torosa field that lies within state
waters for domestic use.
Woodside says the Browse LNG volumes for the remainder
of the resource will be marketed on an equity basis from its
growing LNG portfolio.

Construction starts on Russia-China gas line

Construction has begun on the Chinese section of the RussiaChina Gas Pipeline, according to China National Petroleum Corp.
The June 29 commencement ceremony took place at the
construction site in Heihe, Heilongjiang province, and by video
link to Beijing and Moscow. The Chinese section will extend
from Heihe to Shanghai.
CNPC and OAO Gazprom signed a 30-year gas purchase
and sales contract for the eastern route pipeline in May 2014
(OGJ Online, May 21, 2014).
Construction of the Russian section, known as Power of Siberia, began in September (OGJ Online, Oct. 14, 2014).
Gazprom will start transporting gas to China via the eastern
route in 2018. Gas delivery will gradually increase to 38 billion
cu m/year.
CNPC and Gazprom also have signed a heads of agreement
for gas supply via a western route from Western Siberia to China (OGJ Online, May 11, 2015).

Oil & Gas Journal | July 6, 2015

2015 EVENT CALENDAR

Salaam, Tanzania, web site: www.aapg.org/
Denotes new listing or & Exhibition, Lagos,
web site: www.spe.org/ site: www.expogr.com/ events/conferences/ice/
a change in previously
events/calendar/ 4-6.
tanzania/oilgas/ 27-29. details/articleid/5664/
published information.
aapg-2015-internationalconference-exhibition
CCPS Latin American
13-16.
Conference on Process SEPTEMBER 2015
Safety, Rio de Janeiro,
JULY 2015
web site: www.aiche.
Mexico Upstream Sum- SPE North Africa
org/ccps/conferences/ mit, Mexico City, web Technical Conference
Gabon Local Content
ccps latin-americansite: www.cwcmexicoo- & Exhibition, Cairo,
Summit, Libreville,
web site: www.spe.
ilgas.com 1-3.
Gabon, web site: www. conference-on-process-safety/2015
org/events/natc/2015/
gabon-local-content.
10-12.
14-16.
SPE Liquids-Rich
com 6-8.
Basins ConferSPE Asia Pacific
enceNorth America, SPE Reservoir CharacSPE Latin American
Enhanced Oil Recovery Midland, Tex., web site: terization & Simula& Caribbean Health,
tion Conference &
www.spe.org/events/
Safety, Environment & Conference, Kuala
Exhibition, Abu Dhabi,
lrbc/2015/ 2-3.
Sustainability Confer- Lumpur, www.spe.
web site: www.spe.
ence, Bogota, web site: org/events/eorc/2015/
11-13.
APPEA Health, Safety org/events/rcsc/2015/
www.spe.org/events/
& Environment Confer- 14-16.
lahs/2015/ 7-8.
EnerComs Oil & Gas
ence, Perth, web site:
www.appeahseconfer- Middle East Process
API Offshore Safe Lift- Conference, DenEngineering Conference.com.au/ 7-9.
ing Conference & Expo, ver, web site: www.
enercominc.com/theence & Exhibition
Houston, web site:
oil-and-gas-conference
European Associa- (MEPEC), Manama,
www.api.org/eventstion of Geoscientists & Bahrain, web site:
andtraining/calendar- 16-20.
www.mepec.org/
Engineers Petroleum
ofevents/2015/offshore
14-17.
NAPE, Houston, web
Geostatistics, Biar14-15.
site: napeexpo.com/
ritz, France web site:
SPE Middle East Intelwww.eage.org/event/
International Biotech- 19-20.
ligent Oil & Gas Conferindex.php?eventid=
nology, Chemical Engience & Exhibition,
neering & Life Science IADC/SPE Asia Pacific 1155&Opendivs=s3
Abu Dhabi, web site:
7-11.
Conference, Hokkaido, Drilling Technology
www.spe.org/events/
Japan, web site: ibcelc. Conference, Singapore,
web site: www.spe.
Africa Oil & Gas EXPO, ieme/2015/ 15-16.
org 20-22.
org/events/apdt/2016/ Johannesburg, web
22-24.
site: www.africaoilexpo. Oil Sands Trade Show
SPE/AAPG/SEG
& Conference, Fort
com/ 8-9.
Unconventional
McMurray, Alta., web
Resources Technology Rocky Mountain EnConference (URTeC), ergy Summit, Denver, World LNG Series: Asia site: www.oilsandSan Antonio, web site: web site: rmesummit. Pacific Summit, Singa- stradeshow.com
15-16.
pore, web site: www.
urtec.org/2015 20-22. org/wp 24-27.
asiapacific.cwclng.
Pipeline Week, The
IADC Well Control Con- com/ 8-11.
Asset Management
Woodlands, Tex., web
ference of the Americas
& Data Analytics for
site: www.pipeline& Exhibition, Galveston, SPE Offshore Europe
Upstream Oil & Gas,
Tex., web site: www.
Conference & Exhibi- week.com/ 15-17.
Houston, web site:
tion, Aberdeen, web
www.data-asset-man- iadc.org/event/2015iadc-well-controlsite: www.offshoreeu- IADC Asset Integrity &
agement-upstream.
conference-americas- rope.co.uk/ 8-11.
Reliability Conference
com/ 21-22.
exhibition 25-26.
& Exhibition, Houston,
India Oil & Gas Review web site: www.iadc.org/
South Texas Oilfield
Summit & International event/2015-iadc-assetExpo, San Antonio, web ACIPET International
integrity-reliabilityExhibition, Mumbai,
site: www.southtexasoil- Petroleum Conferweb site: www.oilgas- conference-exhibition
fieldexpo.com 29-30. ence & Exhibition,
16-17.
Bogota, web site: www. events.com/india-oilcongresoacipet.com/
gas 9-10.
en/ 26-28.
GPA Europe AnnualAUGUST 2015
Conference, Florence,
AAPG International
Conference & Exhibi- web site: www.gpaeuSPE Nigeria Annual In- Tanzania Oil & Gas
tion, Melbourne, web rope.com 16-18.
ternational Conference Expo 2015, Dar-es-

18

Rice Global Engineering

& Construction Annual
Forum XVIII, Houston,
web site: www.forum.
rice.edu/ 21-22.

ipaa.org/meetingsevents/ 5-7.

OCTOBER 2015

IADC Advanced Rig

Technology Conference
& Exhibition, Amsterdam, web site: www.

KIOGE 2015 Kazakhstan International Oil

& Gas Conference &
Mozambique Gas
Exhibition, Almaty,
Summit, Maputo,
Kazakhstan, web site:
Mozambique, web site: www.kioge.kz/en/ 6-9.
www.mozambique-gassummit.com 21-24.
International Conference on Theoretical &
Upstream & DownExperimental Studies
stream Oil & Gas Exof Hydrocarbons
hibition & Conference, (ICTESH), Athens,
Abuja, Nigeria, web
web site: www.ictesh.
site: www.oilandgasex- org 6-9.
pos.com/ 22-24.
3P Arctic Polar PetroRio Pipeline Conferleum Potential Conference & Exhibition, Rio ence & Exhibition, St.
de Janeiro, web site:
Petersburg, web site:
www.ibp.org.br/ 22-24. www.3parctic.com
6-9.
LNG Global Congress
Conference (LNGgc),
Equatorial Guinea Oil
London, web site:
& Gas Conference &
www.lnggc.com 22-25. Exhibition, Malabo,
Equatorial Guinea, web
Global Oil & Gas Black site: www.cwceg.com
Sea & Mediterranean 7-9.
Exhibition & Conference, Athens, web site: International Oil & Gas
www.oilgas-events.
Expo, Jakarta, web site:
com/Global-Oil-Gaswww.pamerindo.com/
Black-Sea-Mediterra- events/6 7-10.
nean 23-24.
PIRA New York Annual
IADC Drilling HSE&T
Conference, New York
Europe Conference & City, web site: www.
Exhibition, Amsterdam, pira.com 8-9.
web site: www.iadc.org/
event/euro-hset-2015 SPE Kuwait Oil & Gas
23-24.
Show & Conference,
Mishref, web site:
IOGCC Annual Confer- kogs2015.com 11-14.
ence, Oklahoma City,
web site: iogcc.pubGas-to-Liquids, Lonlishpath.com/events
don, web site: www.
28-30.
gas-to-liquids.co.uk/ogj
12-13.
SPE Annual Technical Conference &
Enterprise Mobility
Exhibition, Houston,
Nigeria Oil & Gas 2015,
web site: www.spe.org/ Lagos, web site: nog.
atce/2015/ 28-30.
cwcenterprisemobility.
com 12-14.

OGIS San Francisco,

San Francisco, www.

Oil & Gas Journal | July 6, 2015

The Arab Republic of Egypt

Ministry of
Petroleum and
Mineral Resources

EGAS

The Egyptian Natural Gas Holding Company

Announcement For

Extending the International Bid Round of 2015

and The Addition of New Blocks
The Egyptian Natural Gas Holding Company (EGAS) announces extending the closing date of
its International bid round of 2015 ( 8 offshore blocks ) for two months.
And adds (4) new blocks ( blocks 12 , 13, 14 and 15), so the total blocks will be (12) offshore
blocks in the Mediterranean Sea as shown in the following map , and in accordance with the
Production Sharing Agreements (PSA) Model applicable in The Arab Republic of Egypt.
International Bid Round of 2015

Available data for review or purchase can be obtained from the Egyptian Natural Gas Holding
Company (EGAS) premises:
85 El Nasr Road, 1st District, Nasr City, Cairo Egypt, P.O. 11371
The purchase of data package for each block is considered a requirement to bid for that block.
Also the basic data, coordinates, procedures, terms and conditions and the Model Agreement
for participation in this Bid Round can be obtained through the Egyptian Natural Gas Holding
Company (EGAS) website : www.egas.com.eg
The closing date will be on Thursday, 30th July, 2015 before 12:00 P.M (Cairo local time)
For more information, please contact:
Vice Chairman for Agreements and Exploration
The Egyptian Natural Gas Holding Company (EGAS) Tel.: +202 24055830/ 31 Fax: +202 24055832

E-mail: bidround@egas.com.eg

2015 EVENT CALENDAR

iadc.org/event/rig-tech- API Fall Committee on
nology-2015 13-14.
Petroleum Measurement Standards
Offshore Energy Exhi- Meeting, Atlanta, web
site: www.api.org/
bition & Conference,
Amsterdam, web site: eventsand-training/calwww.offshore-energy. endarof-events/2015/
fallcopm 19-23.
biz 13-14.

OPITO Safety & Com- NAPE, Denver, web

petence Conference,
site: napeexpo.com/
Abu Dhabi, web site:
9-10.
www.opito-oscc.com 3.
SPE Asia Pacific
Deepwater Operations Unconventional ReLAGCOE Louisiana
Conference & Exhibi- sources Conference &
Gulf Coast Oil Exposi- tion, Galveston, Tex.,
Exhibition, Brisbane,
tion, Lafayette, web
web site: www.deepweb site: www.spe.org/
SPE Unconventional
site: www.lagcoe.com wateroperations.com/ events/urce/2015/ 9-11.
Deep Offshore TechResource Conference, 27-29.
index 3-5.
nology International,
The Woodlands, Tex., Calgary, web site:
Abu Dhabi International
web site: www.deepoff- www.spe.org/events/
Offshore Technology
SPE Annual Caspian
Petroleum Exhibition &
shoretechnology.com/ urc/2015/ 20-22.
Conference Brazil,
Technical Conference Conference (ADIPEC),
index 13-15.
Rio de Janeiro, web
& Exhibition, Baku,
Abu Dhabi, web site:
SPE/IATMI Asia Pacific site: www.otcbrasil.org web site: www.spe.org/ www.adipec.com 9-12.
events/ctce/2015/ 4-6.
SPE Eastern Regional Oil & Gas Conference & 27-29.
Exhibition (APOGCE),
Meeting, MorganAPI Cybersecurity
town, WVa., web site: Bali, web site: www.
Gastech Conference
IADC Annual General Conference & Expo,
spe.org/events/
nwvspe.org/regional& Exhibition, SingaMeeting, San Antonio, Houston, web site:
meeting.html?_ga=1.8 apogce/2015/ 20-22.
pore, web site: www.
web site: www.iadc.org/ www.api.org/events4416921.107275622.1
gastechsingapore.com/ event/2015-iadc-annu- and-training/calendar429302557 13-15.
PETROTECH Interna- 27-30.
al-general-meeting 4-6. of-events/2015/cybertional Oil & Gas Confersecurity 10-11.
CEE & Turkey Refining ence, New Delhi, web Asian Downstream
International Oil & Gas
site: www.zapaday.
& Petrochemicals,
Week, Singapore, web Exploration, ProducMangystau Regional
com/event/67326/5/
Budapest, web site:
site: www.downstream- tion & Refining Expo,
Oil, Gas & Infrastrucwww.wraconferences. Petrotech.html 25-28. asia.com 28-29.
Jakarta, web site:
ture Exhibition, Aktau,
com/event/cee-andoilgasindonesia.com/
Kazakhstan, web site:
turkey-refining-andSPE Russian Petroleum
about/about-oil-gasin- mangystau.oil-gas.kz/
petrochemicals 13-15. Technical Conference, NOVEMBER 2015
donesia/ 4-7.
en/ 10-12.
Moscow, web site:
SEG International Exposi- www.spe.org/events/
Basra Oil, Gas & Infra- AIChE Annual Meeting, Carbon Management
rpc/2015/ 26-28.
tion & Annual Meeting,
Salt Lake City, web site: Technology Conferstructure Conference
New Orleans, web site:
www.aiche.org/confer- ence, Sugar Land, Tex.,
2015, Istanbul, web
www.seg.org/web/segAPI Tank, Valves, Pip- site: www.cwcbasraoil- ences/aiche-annualweb site: fscarbonmannew-orleans-2015/ 18-23. ing & Pumps Confermeeting/2015 8-12.
agement.org/events/
gas.com 2-3.

20

ence & Expo, Las Vegas, web site: api.org/

events-andtraining/calendar-ofevents/2015/
tvp 26-29.

carbon-managementtechnology-conference-2015-cmtc-2015
17-19.
Turkmenistan International Oil & Gas
Conference (OGT),
Ashgabat, web site:
www.oilgas-events.
com/OGT 17-19.

Petroleum, Refining
& Environmental Monitoring Technologies
Conference Exhibition
& Seminars (PEFTEC),
Antwerp, web site:
www.peftec.com
18-19.
IADC Critical Issues
Asia Pacific Conference & Exhibition,
Singapore, web site:
www.iadc.org/event/
asia-pacific-2015
18-19.
SPE Latin America &
Caribbean Petroleum
Engineering Conference (LACPEC), Quito,
Ecuador, web site:
www.spe.org/events/
lacpec/2015/en/
18-20.

Oil & Gas Journal | July 6, 2015

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JOURNALLY SPEAKING

Big data, more oil

BOB TIPPEE
Editor

Development of unconventional resources soon will

enter a phase promising to lower the cost of producing oil from shale toward levels normally associated
with Saudi Arabia.
That phase, according to Mark P. Mills, senior
fellow at the Manhattan Institute, will use big-data
analytics to amplify benefits of technologies now
allowing operators to produce hydrocarbons from
low-permeability reservoirs.
Big-data analytics can already optimize the
subsurface mapping of the best drilling locations;
indicate how and where to steer the drillbit; determine, section by section, the best way to stimulate
the shale; and ensure precise truck and rail operations, Mills writes in a May report. Mobile computing, using app-centric analytics, can increase
uptime, reduce maintenance, improve workforce
productivity, reduce errors and rework, and enable
low-cost compliance.

Industry not alone

In development of these abilities, of course, the industry that produces oil and gas from shale isnt alone.
Other businesses are learning to profit from the burgeoning availability and collection of data from machines, services, and business operations, much of
which remains disparate and disorderly, according
to Mills, who also is chief executive officer of Digital Power Group and faculty fellow at Northwestern
Universitys McCormick School of Engineering and
Applied Science. The use of big-data analytics offers
nearly all industries the potential for unprecedented
insight, efficiency, and economic value.
For shale, the potential for improvement is especially intriguing.
What distinguishes shale, according to Mills,
is its unique combination of youth, the diversity
and scale of data associated with its operations,
and the variety of environments in which operations occur.
And unproduced oil expands the potential.
Citing data from Schlumberger and Bernstein
Research, Mills notes that each long horizontal
well drilled into shale is typically fractured in 2436 stages and that only one fourth to one third of
those stages are productive. With current technology, about 20% of frac stages account for 80% of
the output.
Bringing analytics to bear on the complexities

22

of shale geology, geophysics, stimulation, and operations to optimize the production process would
potentially double the number of effective stages,
thereby doubling output per well and cutting the
cost of oil in half, Mills says.
He calculates that a doubling of well productivity
would cut break-even costs of most US shale plays
to $5-25/bbl and concludes, Americas shale fields
would then be competitive in volume and in price
with Saudi Arabias vaunted ultralow-cost oil fields.
Mills expects adoption of big-data analytics to
occur quickly and production from shale to be
buoyant in the meantime.
Although the rig count has plummeted, productivity gains evident before last years oil-price
plunge, supplemented by withdrawals from hefty
inventories, will sustain output. Returning to
more-normal stock levels, Mills reckons, could
mean nearly 500,000 b/d of oil from storage.
Supply also will come from wells awaiting completion, likely to total 5,000 by yearend. According
to Mills, those wells could swiftly add 2-3 million
b/d of oil to US supply.
Responding to the price drop, meanwhile, operators will progress from the repetitive, factorydrilling approach many of them employedoften
sacrificing innovation and efficiencywhile prices
were above $100/bbl to a high-grading strategy requiring analysis not only to modify techniques for
each well but also to use the best tools and techniques in only the best parts of the shale.
This step, Mills says, will disprove conventional
supply forecasts. Starting from historical averages
based on the many low-performing wells drilled
during the price boom, he explains, those predictions are too low.

Shale 2.0
While the high-grading strategy, leveraged by new
technologies, will affect supply powerfully, however,
it remains just a precursor to what Mills calls Shale
2.0, the emergence of which comes not from individual technologies or digital connectivity but from
the use of big data for radically better asset optimization and operations.
Someday, bytes thus might become a central metric in Oil & Gas Journals Midyear Forecast. This
years report, beginning on p. 26, sticks with barrels,
of which the market already has way too many.

Oil & Gas Journal | July 6, 2015

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EDITORIAL

Considering cost
Consideration of cost in regulatory decision-making should be a simple matter of common sense. At
this moment in history, though, bureaucratic attention to economic consequence requires a ruling by
the Supreme Court.
With a margin of just one vote, the high court
upheld challenges to the Environmental Protection Agencys Mercury Air Toxics Standard
(MATS) on grounds of insufficient accounting for
cost. The decision, disclosed on June 29, is intellectually satisfying. But thats about all.

A broader problem
The court didnt reject the rule; it only said EPA
should have considered costs when it determined,
to satisfy the Clean Air Act, that applying MATS
regulation to power plants was appropriate and
necessary. The court also didnt address the broader problem: the agencys autonomous, multifront
campaign against hydrocarbon energy, starting
with coal.
There, the MATS already has done its work.
Its requirements, along with those of the Cross
State Air Pollution Rule and pending Clean Power
Program, have raised the costs of generating electricity from coal punishingly. During 3-plus years
of MATS judicial review, power companies have
been retiring coal-fired plants.
Offering modest comfort is the prospect that the
ruling will make EPA less willing to ignore cost in
other initiatives. Some observers expect the agency
be more careful about cost in its final Clean Power
Plan, covering emissions of greenhouse gases from
existing power plants.
But EPA has earned profound suspicion for its
analyses of costs and benefits. In the regulatory impact analysis accompanying the MATS, the agency
estimated costs to power plants at $9 billion/year
and benefits of lowering emissions of covered substances, to the extent it could assess them, at only
$4-6 million/year. Yet what EPA called ancillary
benefitsmainly reductions in emissions of sulfur dioxide and particulatescame to an estimated
$37-90 billion/year.
The higher benefit numbers made regulation
seem advantageous. But they were based mainly
on estimates of premature deaths averted by the
regulation. When policy-makers pretend to be

24

able to quantify gruesome ambiguity, anything

can happen. In the MATS analysis, it did. Independent analysts have challenged EPAs estimates,
saying the agency toughened particulate standards and overestimated prevention of premature
death to inflate its benefit estimates. Costs then
looked proportionately lower. No matter. EPA saw
no reason to incorporate estimates of the regulatory impact analysis in its appropriate-and-necessary finding.
For EPA, statistical misdirection was nothing
new. Last year the agency skewed the cosmetics of its
Clean Power Program by pairing global estimates of
the climate benefits with cost assessments confined
to the US. The ratio thus exaggerated the apparent
desirability of the policy. And, as usual, the agencys
cost estimates fell far below those of the targeted
industry. As it did with the MATS proposal, moreover, EPA magnified the supposed health gains of
its proposal to cut emissions of greenhouse gases
by including benefitssuch as preventing asthma
attacks and more of those premature deathsby
cutting emissions of other substances.
So if the EPA repairs its MATS proposal with
a court-ordered cost estimate, why should anyone
believe it? Its assessments of costs and benefits
amount to propaganda serving a grab for control of
a large and important part of the economy.

Oil, gas affected

The oil and gas industry should understand that
whatever benefits it receives from EPAs anticoal
rampage, mainly elevated demand for natural gas
in power generation, are transitory. The agencys
expansionism, motivated by President Barack
Obamas late-term grandstanding on the climate,
threatens all forms of fossil energy with overregulation and economic restriction.
So far, the Supreme Court hasnt addressed the
main problemthe making of energy law by the
Executive Branch. Americans havent voted for
an overhaul of energy production and consumption. EPA is just pressing ahead and encountering alarmingly little resistance from the Judicial
Branch. When the costs hit energy bills, however,
Americans will demand their say. If courts wont
stop a stampeding agency, economicsexpressed
politicallyeventually will.

Oil & Gas Journal | July 6, 2015

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GENERAL INTEREST

Global oil glut continues

despite increasing demand
Conglin Xu
Senior Editor-Economics

Laura Bell
Statistics Editor

A year since crude

prices plunged, oversupply lingers, evident
in a record-setting
stock build, as production by members of the
SPECIAL
Organization of PetroREPORT
leum Exporting Countries remains far above
the group target, squeezing high-cost
producers elsewhere.
This oversupply, however, is seeing signs of easing, stemming from
rising global oil demand growth and
the slowdown in non-OPEC supply,
notably in the US.
Global oil demand, after bottoming out to a 5-year low in secondquarter 2014, has steadily increased,
supported by lower oil prices, cold
weather in Europe, and additional
economic gains. Demand from the
Organization for Economic Cooperation and Development, after a longstanding decline, has started to show
a rising trend.
A drop in drilling activity is gradually starting to take its toll on US
production, and the growth of nonOPEC supply is expected to slow.
In the US natural gas market,
supply growth will exceed the level
needed to balance the market, leading to hefty inventories and lower
prices.

26

WORLDWIDE SUPPLY AND DEMAND

Table 1

2014
2015
1st
2nd
3rd
4th
1st
2nd
3rd
4th
Qtr.
Year
Qtr. Year
Million b/d
Demand
OECD
North America
Europe
Asia/Pacifc
Total OECD

23 9
13 0
89
45.7

23 6
13 4
77
44.7

24 2
13 9
77
45.8

24 5
13 6
83
46.3

24 0
13 5
81
45.6

24 2
13 6
87
46.5

23 8
13 5
78
45.1

24 3
13 9
79
46.1

24 5
13 6
83
46.5

24 2
13 7
82
46.0

Non-OECD
FSU
Europe
China
Other Asia
Latin America
Middle East
Africa
Total non-OECD

46
06
10 2
12 2
66
78
39
46.0

48
07
10 4
12 1
68
82
39
46.9

51
07
10 4
11 8
69
86
38
47.3

50
07
10 8
12 3
69
80
39
47.5

49
07
10 4
12 1
68
81
39
46.9

46
07
10 5
12 5
67
79
40
47.0

47
07
10 8
12 6
68
83
41
47.9

48
07
10 7
12 3
70
87
40
48.3

48
07
11 0
12 8
70
81
41
48.5

47
07
10 8
12 6
69
83
41
47.9

Total demand

91.7

91.6

93.1

93.8

92.6

93.5

93.1

94.3

95.0

94.0

Supply
OECD
North America
Europe
Asia
Total OECD

18 2
35
05
22.2

18 8
32
05
22.6

19 1
31
05
22.8

19 7
35
05
23.7

19 0
33
05
22.8

19 9
34
04
23.8

19 5
33
05
23.3

19 3
32
05
23.0

19 5
34
05
23.5

19 6
33
05
23.4

Non-OECD
FSU
Europe
China
Other Asia
Latin America
Middle East
Africa
Total non-OECD

13 9
01
42
35
42
14
23
29.8

13 8
01
42
35
43
13
23
29.6

13 8
01
42
34
45
13
23
29.7

13 9
01
43
36
46
13
23
30.2

13 9
01
42
35
44
13
23
29.8

14 0
01
43
37
46
13
24
30.5

14 0
01
43
37
45
12
23
30.2

13 8
01
42
37
45
12
23
29.9

13 8
01
42
38
45
12
23
30.0

13 9
01
43
37
45
12
23
30.1

Processing gain
Other biofuels

22
17

22
23

22
25

22
23

22
22

22
18

22
23

22
26

22
23

22
22

Total non-OPEC

55.9

56.6

57.2

58.3

57.0

58.3

58.0

57.7

57.9

58.0

OPEC
Crude
NGL
Total OPEC

30 0
63
36.3

30 1
63
36.4

30 5
64
37.0

30 5
65
37.0

30 3
64
36.7

30 5
65
37.0

31 3
66
37.9

31 3
66
37.9

30 8
67
37.5

31 0
66
37.6

Total supply

92.2

93.0

94.1

95.3

93.7

95.3

95.9

95.6

95.4

95.6

05

14

11

14

11

19

28

13

04

16

Stock change

Totals may not add due to rounding

Source: International Energy Agency; OGJ estimates for OPEC 2nd, 3rd and 4th quarter 2015 crude supply

Oil & Gas Journal | July 6, 2015

World economic outlook

After hitting a soft patch at the start of
the year, global activity is expected to
finally achieve a higher growth trajectory, helped by low commodity prices
and accommodative financial market
conditions.
US economic activity stalled in
this years first quarter as the result
of another cold winter, port labor disputes, and cutbacks in capital expenditures by oil and gas companies. US
real gross domestic product decreased
0.2% in the first quarter, according
to the third estimate of the Bureau of
Economic Analysis.
As weather and strike-related disruptions receded, the US economy is
showing signs of rebounding, led by
consumer spending and housing activity. The Federal Reserve projected
US real GDP growth this year to reach
1.8-2%.
The eurozones economic recovery has been unexpectedly swift since
late 2014. This is mainly thanks to the
decline in oil prices, the weaker euro,
and the European Central Banks stimulus policies. Growth remains fragile,
however, with high debt levels and political uncertainty. The sovereign debt
crisis in Greece also is a source of great
concern.
In Japan, the consumption tax hike
in April 2014 is still hurting consumer demand. But domestic spending is
benefiting from the Bank of Japans expansionary monetary policy. A weaker
yen also makes exports more competitive.
While the recovery in developed
countries is gathering momentum,
growth in developing countries, especially oil exporters, is slowing down.
A strengthening US dollar also is raising concerns about balance-sheet exposures in developing countries with
weakened local currencies and sizable
dollar-denominated liabilities.
In China, cyclical deceleration continues, led by the downward trend in
investment and the slower pace of exports.
The stagnation of the Latin Ameri-

Oil & Gas Journal | July 6, 2015

OGJ FORECAST OF US SUPPLY AND DEMAND

Table 2

First half 2015

Volume
% change
1,000 b/d
from 20141

Year 2015
Volume
% change
1,000 b/d
from 20141

DEMAND
Motor gasoline
Dist 1-4
Dist 5

8,952
7,402
1,550

21
21
21

9,010
7,462
1,548

10
10
10

Jet fuel
Dist 1-4
Dist 5

1,515
1,064
451

58
58
55

1,503
1,058
445

22
22
22

Distillate
Dist 1-4
Dist 5

4,130
3,611
519

20
20
20

4,100
3,574
526

22
22
22

Residual
Dist 1-4
Dist 5

230
125
105

(5 7)
(5 7)
(5 7)

220
120
100

(14 4)
(14 4)
(14 4)

LPG and ethane

Dist 1-4
Dist 5

2,470
2,439
31

58
58
58

2,520
2,493
27

69
69
69

Other products
Dist 1-4
Dist 5

1,943
1,757
186

05
05
05

2,027
1,842
185

04
04
04

19,240
16,399
2,841

25
26
23

19,380
16,552
2,828

18
20
07

4,585
4,098
487

15 9
15 9
15 9

4,680
4,205
475

12 0
12 0
12 0

23,825
20,498
3,327

49
50
40

24,060
20,758
3,302

36
39
22

SUPPLY
Domestic production
Crude & condensate
Dist 1-4
Dist 5

9,482
8,347
1,135

13 1
15 0
06

9,450
8,318
1,132

85
94
22

NGL
Dist 1-4
Dist 5

3,140
3,071
69

11 1
11 1
93

3,180
3,113
67

73
73
73

12,622
11,418
1,204

12 6
14 0
11

12,630
11,431
1,199

82
88
24

Renewable fuels and oxgyenates

Dist 1-4
Dist 5

1,050
1,029
21

(0 7)
(0 7)
(5 2)

1,060
1,037
23

(1 1)
(1 1)
(1 1)

Imports
Crude oil
Dist 1-4
Dist 5

7,173
6,098
1,075

(1 8)
(1 8)
(1 8)

7,150
6,080
1,070

(2 5)
(2 5)
(2 5)

Products & unfnished oils

Dist 1-4
Dist 5

2,178
2,005
173

12 4
12 4
13 2

2,050
1,858
192

88
88
76

Total Imports
Dist 1-4
Dist 5

9,351
8,103
1,248

12
14

9,200
7,938
1,262

(0 2)
(0 1)
(1 0)

Processing gain, loss, etc

Dist 1-4
Dist 5

1,025
850
175

(4 5)
(4 5)
(5 0)

1,045
864
181

(3 8)
(3 8)
(3 8)

24,048
21,401
2,647

65
73
02

23,935
21,271
2,664

38
43
03

223
903
(680)

(125)
514
(639)

Crude runs to stills

Total Input to stills
Total refning capacity
Refning utilization, %

15,850
16,130
17,880
90 2

21
18
(0 2)
25

15,980
16,280
17,920
90 8

09
08
03
05

Total industry stocks2

Refned products
Crude oil
SPR crude oil stocks

1,256
788
468
692

15 2
11 6
21 9
(0 1)

1,215
776
439
692

42
05
11 4
01

Total domestic demand

Dist 1-4
Dist 5
Exports
Dist 1-4
Dist 5
Total Demand
Dist 1-4
Dist 5

Total domestic production

Dist 1-4
Dist 5

Total new supply

Dist 1-4
Dist 5
Stock change
Dist 1-4
Dist 5

IMPORT DEPENDENCY
Total imports % domestic demand
Net imports % domestic demand

48 6
24 8

47 5
23 3

Compared to preliminary EIA fgures 2Million bbl at end of period

27

GENERAL INTEREST

FIRST QUARTER WORLDWIDE PRODUCTION

Table 3

World oil demand

Global oil demand in 2015s first half

outperformed due to additional ecoCountry
nomic gains, lower oil prices, and cold
OPEC
30,493
30,006
487
16
winter weather conditions in Europe.
Non-OPEC
46,638
45,116
1,522
34
According to the latest Oil Market ReArgentina
531
537
(6)
(1 1)
port from the International Energy
Brazil
2,300
2,093
207
99
Agency, global oil demand averaged
Canada
3,876
3,533
343
97
Colombia
980
998
(18)
(1 8)
93.3 million b/d in this years first half,
Mexico
2,573
2,492
81
33
United States
9,434
8,080
1,354
16 8
up 1.6 million b/d on the year.
Other
3,183
3,288
(105)
(3 2)
Demand in the developed countries
Western Hemisphere
22,877
21,021
1,856
88
of OECD has been much more volatile
Norway
1,589
1,613
(24)
(1 5)
than non-OECD demand, contributUnited Kingdom
852
892
(40)
(4 5)
Other
415
429
(14)
(3 3)
ing to major shifts in market balances.
The biggest change in oil markets reWestern Europe
2,856
2,934
(78)
(2 7)
cently, from a demand perspective, has
FSU
12,705
13,143
(438)
(3 3)
Other
163
167
(4)
(2 4)
been the evolution of OECD demand
from a long declining trend to a rising
Eastern Europe & FSU
12,868
13,310
(442)
(3 3)
one, according to IEA. OECD demand,
Egypt
690
667
23
34
Gabon
260
260

which last year fell 460,000 b/d, was

Other
6,576
6,458
118
18
up 800,000 b/d to 46.5 million b/d in
Africa
7,266
7,125
141
20
this years first quarter, year-over-year.
Oman
970
952
18
19
Because of low motor fuel taxes and
Syria
30
30

Other
22,690
22,230
460
21
no negative effect from a strengthening US dollar, the spillover effect of low
Middle East
23,690
23,212
478
21
crude prices on private consumption
Australia
296
363
(67)
(18 5)
China
4,254
4,177
77
18
has been most significant in the US. In
India
768
774
(6)
(0 8)
Indonesia
794
795
(1)
(0 1)
2015s first 3 months, with West Texas
Malaysia
600
511
89
17 4
Intermediate averaging below $50/bbl,
Other
863
900
(37)
(4 1)
total US oil demand rose 480,000 b/d
Asia-Pacifc
7,575
7,520
55
07
year-on-year to 19.29 million b/d, acTotal world
77,131
75,122
2,009
27
counting for one third of the worlds
Source: Oil & Gas Journal
gain in oil demand in that quarter, according to EIA
data.
OPEC PRODUCTION AND CAPACITY
Table 4
However, as both lower price supMay 2015
Spare
ports and additional winter heating
Capacity
production
capacity
Country
1,000 b/d
demand fall out of the outlook, IEA
Algeria
1,140
1,110
30
forecasts OECD demand growth to deAngola
1,800
1,770
30
celerate through the end of the year.
Ecuador
570
550
20
SPECIAL
Iran
3,600
2,850
750
Crude oil demand throughout Asia
Iraq
3,900
3,850
50
REPORT
Kuwait
2,820
2,760
60
has been exceptionally strong over the
Libya
500
450
50
first quarter of 2015, as the Chinese reNigeria
1,920
1,760
160
Qatar
700
670
30
fineries increased run rates and strateSaudi Arabia
12,340
10,250
2,090
United Arab Emirates
2,940
2,870
70
gic reserves.
Venezuela
2,490
2,440
50
For the full year, IEA forecasts global oil demand to climb
Total OPEC
34,720
31,330
3,390
to 94 million b/d from the 2014 average of 92.6 million b/d.
Source: International Energy Agency
Demand will increase 400,000 b/d this year to 46 million
b/d in the OECD group and rise 1 million b/d in non-OECD
countries to 47.9 million b/d, with the largest increases in
can economies will continue as well, with persistent inflaChina and other Asian countries. Non-OECD countries will
tion, larger current account deficits, and foreign debts. Brazil
continue to be the main contributor to global oil demand
remains in the grip of recession.
gains.
First quarter
2015
2014
Change
Change,
1,000 b/d
%

28

Oil & Gas Journal | July 6, 2015

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EOE/Minority/Female/Veterans/Disability

GENERAL INTEREST

WORLD CRUDE PRICES

Table 5

Country

Type of
crude and
API gravity

May
2015,
$/bbl

Change
May 2015
Jan. 2015,
%

In effect
Jan.
2015,
$/bbl

Change
May 2015
June 2014,
%

In effect
June 1,
2014,
$/bbl

In effect
June 1,
2013,
$/bbl

In effect
June 1,
2012,
$/bbl

In effect
June 1,
2011,
$/bbl

In effect
June 1,
2010,
$/bbl

OPEC
Saudi Arabia
Abu Dhabi
Algeria
Nigeria
Libya

Arabian Light 34
Murban 39
Saharan 44
Bonny Light 37
Es Sider 37

62 62
66 18
64 12
65 31
63 22

40 8
36 7
33 8
34 6
35 2

44 47
48 41
47 91
48 51
46 76

(42 3)
(40 2)
(43 1)
(42 9)
(43 2)

108 61
110 74
112 66
114 36
111 31

101 30
102 61
102 07
106 12
103 07

94 51
96 76
94 69
97 19
96 04

111 16
113 33
116 62
117 74
113 72

70 56
74 78
73 97
75 61
74 22

OTHER
Indonesia
UK
Mexico
Russia

Minas 34
Brent Blend 38
Isthmus 33
Urals 32

62 98
64 32
63 78
64 33

35 8
34 4
40 1
36 8

46 37
47 86
45 52
47 03

(43 8)
(40 5)
(40 1)
(41 2)

112 13
108 03
106 47
109 44

103 19
102 92
104 08
102 74

104 83
95 19
93 16
93 81

120 12
115 59
109 97
113 55

76 99
73 26
72 14
72 23

Source: OPEC, for 2012-2015 data; US Energy Information Administration, 2010-11

US CRUDE, NATURAL GAS, AND PRODUCTS PRICES

Year
1978
1980
1985
1990
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*

Table 6

Average
wellhead
crude
price,
$/bbl

Refners
acquisition
cost of
crude,
$/bbl

Retail
motor
gasoline,
all types,
/gal

On
highway
diesel
fuel
/gal

Jet
fuel and
kerosine (ex
cluding tax),
/gal

9 00
21 59
24 09
20 03
14 62
18 46
17 23
10 87
15 56
26 72
21 84
22 51
27 56
36 77
50 28
59 69
66 52
94 04
56 35
74 71
95 73
94 52
95 99
87 39
46 98

12 46
28 07
26 75
22 22
17 23
20 71
19 04
12 52
17 51
28 26
22 95
24 10
28 53
36 98
50 24
60 24
67 94
94 74
59 29
76 69
101 87
100 93
100 49
91 98
55 68

65 2
122 1
119 6
121 7
120 5
128 8
129 1
111 5
122 1
156 3
153 1
144 1
163 8
192 3
233 8
263 5
284 9
331 7
240 1
283 6
357 7
369 5
358 4
342 5
251 4

110 9

149 1
140 1
131 9
150 9
181 0
240 2
270 5
288 5
380 3
246 7
299 2
384 0
396 8
392 2
382 5
283 7

38 7
86 8
79 6
76 6
54 0
65 1
61 3
45 2
54 3
89 9
77 5
72 1
87 2
120 7
173 5
199 8
216 5
305 2
170 4
220 1
305 4
310 4
297 9
277 2
186 3

*OGJ estimate
Source: US Energy Information Administration, for 1978-2014 data

World oil supply

mer demand, according to Simmons

Energy Research. Iraq is expected to
be the largest contributor to OPEC
production growth in 2015.
If sanctions on Iran are removed,

Tehran
could boost exports by 1 mil

lion b/d roughly 7 months afterwards,

Iranian Oil Minister said in early June.

2 49
OGJ forecasts that following this
2 09
2 27
years
first quarter supply of 30.5 mil4 31
3 96
lion b/d, crude output by the organi3 38
zation will average 31.3 million b/d
5 47
5 89
in the second and third quarters and
8 69
6 73
then ease to 30.8 million b/d in this
6 97
years fourth quarter.
8 86
3 94
Non-OPEC production is forecast
4 37
4 00
to
increase
to 58 million b/d in 2015
2 75
3 73
from 57 million b/d a year earlier. IEA
4 36
expects non-OPEC supply to decline
3 02
in the second half of the year compared with an increase in the first half,
leading to yearly growth of 1 million
b/d, which is one third of growth witnessed in 2014.
OECD commercial inventories built up 38 million
bbl in April, ending at a 147-million bbl surplus vs.
the 5-year average level, the widest since April 2009.

Henry Hub
natural
gas spot
price
$/MMBTU

OPEC has continued to surpass its collective production output quota on a monthly basis over the
course of this years first and second quarters, aiming to squeeze out competitors and regain market
Crude oil prices
share.
Crude oil prices have started to recover from the
At the organizations June 5 meeting in Vienna,
low levels witnessed at the beginning of the year,
SPECIAL
members decided to maintain their collective outdriven by increasing demand, stock draws in the
REPORT
put quota of 30 million b/d for the next 6 months,
US, conflict in the Middle East, and expectations
although actual production has surpassed that levfor an easing of US light, tight oil output growth.
el by upwards of 1.3 million b/d.
In May, North Sea Brent and WTI crude oil spot
Elevated production could persist for at least the next few
prices averaged $64.08/bbl and $59.26/bbl, respectively,
months, considering the desire to defend market share, reup from a respective average of $47.76/bbl and $47.22/bbl
cent rig count activity in key countries, and rising local sumin January. However, the upside was limited by still plenti-

30

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST

WORLD OIL MARKET AT A GLANCE

FIG. 1

Global oil demand, supply

FIG. 1a

World oil demand growth, year-over-year change

FIG. 1b

96
2.5

Non-OECD excl. China

China

OECD

95
2.0
1.5

Supply

Million, b/d

Million, b/d

94
93
Demand
92

0.5

91

0.0

90

-0.5

89

-1.0
2012

2013

2014

OPEC crude production, market share

31.25

2015

2012

2.95
2.90

41.0

2.85

Production
40.5
%

30.50
30.25

Billion, bbl

30.75

2013

OECD commercial oil inventories

FIG. 1c

41.5

31.00

Million, b/d

1.0

2014

2015
FIG. 1d

Max/Min. 2010-14
Average 2010-14
2014
2015

2.80
2.75
2.70

40.0
2.65

30.00
39.5
29.75

Market share

2.55
39.0

29.50
2013

2.60

2014

2.50
Jan. Feb. Mar. Apr. May June July Aug.Sept. Oct. Nov. Dec.

Source: IEA, OGJ analysis

ful supplies and OPECs decision of not cutting production.

In the futures market, speculators are increasing net long
positions, indicating expectations for higher prices.
The Brent premium to WTI decreased to 53/bbl in late
June from above $11/bbl in late February. In the US, higher
refinery runs to meet gasoline demand during peak driving
season have helped to support WTI.
WTI futures contracts for September 2015 delivery traded during the 5-day period ending June 4 averaged $60/bbl
while implied volatility averaged 33%. Last year at this time,
WTI for September 2014 delivery averaged $101/bbl, and
implied volatility averaged 14%.

US energy demand
Total US energy demand will rise 0.4% to 98.88 quadrillion
btu (quads), and energy efficiency will improve to 6,027 btu/
dollar of GDP from last years rate of 6,121 btu/dollar of GDP.

Oil & Gas Journal | July 6, 2015

Oil will still comprise the largest share of the US energy

mix, accounting for 35.8% of the market. Total use will be
35.426 quads, a 1.8% increase from last year. Demand for all
major petroleum products will increase this year as a result
of low prices.
With demand at 28.34 quads, gas will account for 28.7%
of the energy mix this year. In 2014, US demand for gas totaled 27.59 quads. In light of low gas prices, rising demand
for gas in electric power generation and by industrial users
will drive this years climb in gas use.
OGJ forecasts that coal demand will decrease sharply by
6.7% to 16.79 quads, and comprise 17% of this years energy
consumption. Preliminary estimates show that demand for
coal by electric power producers dropped 15% in this years
first quarter vs. a year ago.
Nuclear powers share of electricity net generation has
been increasing this year. OGJ forecasts that total demand

31

GENERAL INTEREST

CRUDE OIL PRICES

FIG. 2

120
110

Brent

100
WTI

$/bbl

90
80

US oil demand

70
60
50
40
2013

2014

2015

Source: Bloomberg, EIA, OGJ analysis. Confdence Interval derived from price of future options for the 5 trading days ending June 4, 2015

US OIL RIG COUNT, CRUDE OIL PRODUCTION

FIG. 3

1,600

10

1,500
US oil rig count

1,300
8

1,200
1,100

US crude oil production

1,000
900

Million, b/d

Oil rig count

1,400

800
5

700
2011

2012

2013

2014

2015

NON-OPEC OIL SUPPLY, Y-O-Y CHANGE

3.0
2.5

Million, b/d

2.0

US
Other
Total

1.5
1.0
0.5
0.0
-0.5
-1.0
2012

Source:EIA, OGJ analysis

32

for nuclear energy will be 8.5 quads

this year vs. 8.33 quads last year, and
nuclear powers share of the energy
market will be 8.6%.
All forms of renewable energy used in
the US this year will meet 9.9% of total
energy demand, up from 9.8% last year.

2013

2014

2015

Total US liquid fuels consumption

rose 70,000 b/d in 2014 to 19.03 million b/d. In 2015, total liquid fuels
consumption is forecast to rise 1.8%
to 19.38 million b/d, boosted by low
prices and economic gains.
US vehicle miles traveled are rising at the fastest pace in 15 years. In
this years first half, gasoline demand
is estimated to have been 2.1% higher
than during first-half 2014. As the effects of employment growth and lower
gasoline prices outweigh increases in
vehicle fleet efficiency, gasoline consumption for the whole year increases
1% to 9 million b/d.
Average US gasoline prices fell by
one-third between June 2014 and April
2015. Since then, the average price of
gasoline has continued to climb, catalyzed by short-term gasoline supply
tightness in the US Midcontinent. OGJ
forecasts that the pump price for all
types of gasoline in the US will average $2.51/gal this year.
Lower jet fuel prices have translated into lower passenger fares and
also increased numbers of flights and
routes. In its annual summer air travel forecast, the Air Transport Association of America, the industry trade
association for leading US-based airlines, forecasts that US airlines will
carry a total of 223 million passengers from June through August, about
4.7% more passengers than during
the corresponding 2014 period. OGJ
forecasts that jet fuel demand will
increase 2.2% to 1.5 million b/d this
year due to more flights.
Strong diesel fuel consumption will
continue this year because of heavy
trucking and rail use. Distillate demand will average 4.1 million b/d, up
2.2% from last year.

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST

US STORAGE: OIL, NATURAL GAS

Commercial crude oil

FIG. 4
FIG. 4a

Gasoline

Max/Min 2010-14
Average 2010-14
2014
2015

450
425
400

240
235
230
Million, bbl

475

Million, bbl

FIG. 4b

245

500

225
220
215

375

210
350
325

205

Distillate

FIG. 4c

Jan.Feb.Mar.Apr. MayJune JulyAug.Sept.Oct.Nov. Dec.

Working natural gas

180

4.0

170

3.5

160

3.0

150

2.5

FIG. 4d

Tcf

Million, bbl

200

Jan.Feb.Mar.Apr.MayJune July Aug.Sept.Oct.Nov. Dec.

140

2.0

130

1.5

120

1.0

110

Jan.Feb.Mar.Apr.MayJune JulyAug.Sept.Oct.Nov. Dec.

0.5

Jan. Feb.Mar. Apr.May June July Aug.Sept. Oct.Nov. Dec.

Source: EIA, OGJ analysis

Residual fuel oil demand has declined over time as less

is used in electric power generation and by industrial customers. This year, OGJ expects a 14.4% decline in
demand for residual fuel to average 220,000 b/d.
Liquefied petroleum gas and ethane demand
will increase 6.9% this year across industrial, residential, commercial, and transportation users, averaging 2.52 million b/d.

the 29th straight week to 628 in late-June since a recent peak

during the week ended Oct. 10, 2014. Despite of the steep
decline in oil rig count, production has increased
as producers work through the backlog of uncompleted wells and achieve potentially better completions with higher initial production rates.
Drilling costs are also declining. According to
data from the US Energy Information Administration, from June 2014 to May 2015, rates for drilling
US oil supply
activities, which primarily represent service fees
SPECIAL
In this years first half, US crude and condensate
for contractors to drill oil and gas wells, declined
REPORT
production averaged 9.48 million b/d. This was an
19.6%. Rates for support activities, which include
increase from 8.38 million b/d in 2014s first half.
the surveying, cementing, casing, and otherwise
OGJ forecasts that crude and condensate production will avtreating wells, declined 1.4%. The price of sands primarily
erage 9.45 million b/d this year, up from last years 8.71 milused for hydraulic fracturing declined 12.5%.
lion b/d.
Nevertheless, cuts in upstream spending and lower
The number of oil-directed rigs in the US has declined for
drilling activity levels have started to impact output. US

Oil & Gas Journal | July 6, 2015

33

GENERAL INTEREST

US ENERGY CONSUMPTION AND EFFICIENCY

GDP
(billion
2009
dollars)
1975
1980
1985
1990
1995
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*

5,385.4
6,450.4
7,593.8
8,955.0
10,174.8
12,559.7
12,682.2
12,908.8
13,271.1
13,773.5
14,234.2
14,613.8
14,873.7
14,830.4
14,418.7
14,783.8
15,020.6
15,369.2
15,710.3
16,085.6
16,407.3

Energy
Energy
consumption
consumption
per GDP,
(trillion
2009 dollar
btu)
(Mbtu)
71,965
78,067
76,392
84,485
91,032
98,819
96,172
97,647
97,921
100,094
100,193
99,492
101,027
98,906
94,138
97,480
96,902
94,487
97,255
98,459
98,880

13.4
12.1
10.1
9.4
8.9
7.9
7.6
7.6
7.4
7.3
7.0
6.8
6.8
6.7
6.5
6.6
6.5
6.1
6.2
6.1
6.0

Table 7

Oil
energy
consumption
(trillion
btu)

Oil energy
consumption
per GDP,
2009 dollar
(Mbtu)

32,732
34,205
30,925
33,552
34,441
38,266
38,190
38,226
38,790
40,227
40,303
39,824
39,491
36,907
34,959
35,489
34,824
34,016
34,613
34,783
35,426

6.1
5.3
4.1
3.7
3.4
3.0
3.0
3.0
2.9
2.9
2.8
2.7
2.7
2.5
2.4
2.4
2.3
2.2
2.2
2.2
2.2

Natural
gas energy
consumption
(trillion
btu)

Natural gas
energy
consumption
per GDP,
2009 dollar
(Mbtu)

19,948
20,235
17,703
19,603
22,671
23,824
22,773
23,510
22,831
22,923
22,565
22,239
23,663
23,843
23,416
24,575
24,955
26,089
26,819
27,592
28,337

3.7
3.1
2.3
2.2
2.2
1.9
1.8
1.8
1.7
1.7
1.6
1.5
1.6
1.6
1.6
1.7
1.7
1.7
1.7
1.7
1.7

Total
oil and
natural gas
energy
consumption
(trillion
btu)

Total
oil and
gas energy
consumption
per GDP,
2009 dollar
(Mbtu)

52,680
54,440
48,628
53,155
57,112
62,090
60,963
61,736
61,621
63,150
62,868
62,063
63,154
60,750
58,375
60,064
59,779
60,105
61,432
62,375
63,763

9.8
8.4
6.4
5.9
5.6
4.9
4.8
4.8
4.6
4.6
4.4
4.2
4.2
4.1
4.0
4.1
4.0
3.9
3.9
3.9
3.9

Oil and
natural gas
energy
% of total
energy
73.2
69.7
63.7
62.9
62.7
62.8
63.4
63.2
62.9
63.1
62.7
62.4
62.5
61.4
62.0
61.6
61.7
63.6
63.2
63.4
64.5

*OGJ estimate.
Source: US Energy Information Administration

US ENERGY DEMAND

Table 8

2014
2015*
Trillion btu
Oil . . . . . . . . . .
Gas . . . . . . . . . .
Coal . . . . . . . . .
Nuclear. . . . . . .
Hydro, other
renewables . . .
Total

Change,
%

Share, %
2014
2015

34,783
27,592
17,991
8,329

35,426
28,337
16,790
8,500

1.8
2.7
(6.7)
2.1

35.3
28.0
18.3
8.5

35.8
28.7
17.0
8.6

9,622
98,459

9,827
98,880

2.1
04

9.8
100 0

9.9
100 0

SPECIAL

REPORT

*OGJ estimate.
Source: 2014 US Energy Information Administration
Totals may not equal sum of components due to independent rounding

US NATURAL GAS SUPPLY AND DEMAND

Table 9

2012
2013
2014
bcf

2015,
bcf

% change,
2015/2014

Production
Texas . . . . . . . . . . . . . . .
Louisiana . . . . . . . . . . . .
Federal Gulf of Mexico . .
Other states . . . . . . . . . .
Total production

7,475
2,955
1,508
13,345
25,283

7,545
2,407
1,309
14,430
25,691

7,750
1,982
1,231
16,308
27,271

2.7
(17.7)
(6.0)
13.0
62

8,100
1,845
1,210
17,745
28,900

4.5
(6.9)
(1.7)
8.8
60

Imports . . . . . . . . . . . . . .
Canada . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . .
LNG . . . . . . . . . . . . . . . .
Total imports

2,962

175
3,137

2,785
1
97
2,883

2,634
1
59
2,694

(5.4)
0.0
(39.2)
(6 6)

2,530
1
93
2,624

(3.9)
0.0
57.6
(2 6)

Supplemental gas . . . . . .
61
Losses, etc.* . . . . . . . . . . (1,315)
Total new supply
27,166

55
(1,435)
27,194

56
(1,427)
28,594

1.8
(0.6)
51

58
(1,512)
30,070

3.6
6.0
52

Supply from storage . . . .

Total supply

(9)
27,157

546
27,740

(252)
28,342

22

(650)
29,420

38

Exports . . . . . . . . . . . . . .
Total consumption

1,619
25,538

1,572
26,168

1,524
26,818

(3.1)
25

1,890
27,530

24.0
27

*Extraction losses and unaccounted for gas.

Source: 20122014 EIA; 2015 OGJ estimate

34

% change,
2014/2013

crude oil production will begin to

decline in June, with continuing declines through early 2016, EIA said.
In a most recent report, EIA forecasts crude production from seven
major US shale plays to fall 91,000
b/d in July to 5.49 million b/d, including a 49,000 b/d drop in the Eagle Ford to 1.59 million and 29,000
b/d drop in the Bakken to 1.24 million b/d.
Natural gas liquids output will increase 7.3% to 3.18 million b/d. Most
of this growth is expected to come
from additional ethane and propane
production.

Imports, exports
Total US imports of crude and products will average 9.2 million b/d this
year, down slightly (0.2%) from last
year. Product imports will increase
8.8%, and crude imports will decrease
2.5%.
During this years first quarter, US
total petroleum imports increased 2%
over the same period the prior year to
average nearly 9.4 million b/d. Crude
oil imports were down 0.9% from the
prior year, falling to 7.27 million b/d.

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST
Imports of refined products were up 13% to nearly 2.1 million b/d.
Canada is the No. 1 crude oil exporter to the US, representing 39% of all exports in 2014 with 2.885 million b/d. During this years first quarter, crude imports from Canada averaged 3.223 million b/d, up 11.7% from the 2014 annual
average.
With the startup of two major pipelines that move Canadian heavy crude to
the Gulf Coast, Enbridge Inc.s 600,000-b/d Illinois-to-Oklahoma Flanagan South
Pipeline, and Enterprise Products Partners 450,000-b/d Oklahoma-to-Texas Seaway Twin, more crude from Canada is expected to arrive and compete with other
imports on the Gulf Coast.
Crude imports from Saudi Arabia, the No. 2 exporter, were down 21.1% to
915,000 b/d. This follows a 12.5% decrease in 2014. Total crude imports from
OPEC member countries dropped 16.5% in this years first quarter, following a
14.3% decrease last year.
The growth in refined product imports was mainly driven by motor gasoline
imports. According to data from the American Petroleum Institute, total motor
gasoline imports increased 11.2% year-over-year for the first 5 months of 2015.
Product imports from Canada surged 39.6% in the first quarter to 702,000 b/d.
OGJ forecasts that the US will export 4.68 million b/d of crude oil and petroleum products, up 12% from last year. Crude oil exports averaged 445,000 b/d
in the first quarter of 2015, up from 243,700 b/d in the first quarter of last year.
Product exports averaged 4.02 million b/d in the first quarter vs. 3.6 million b/d
a year earlier.
US crude exports have included modest amounts of Canadian-produced crude
that was moved through the US and reexported.

US oil inventories
At midyear, industry crude oil stocks stood at 468 million
bbl, up from 383.8 million bbl at the same time in 2014.
Crude in the Strategic Petroleum Reserve totaled 692 million bbl.
According to OGJs estimates, at the close of this years
first half, distillate stocks were up almost 10% from a year
earlier to 133.7 million bbl. Total gasoline stocks were up
1.1% from mid-2014 to 221.3 million bbl. Jet fuel and residual fuel oil stocks were up from year-ago levels while stocks
of unfinished oils fell.
Volumes of crude and oil products in storage will finish
2015 higher than a year earlier. OGJ forecasts that crude in
industry stocks will be 439 million bbl, and products will
total 776 million bbl compared with a respective 394 million bbl and 772 million bbl at yearend 2014.

Refining
Increased refinery runs, capacity, and utilization have
helped accommodate increases in US crude oil production.
For year to date, refinery gross inputs were up 1.8%
compared with year to date 2014. Gross inputs to refineries averaged a record 16.1 million b/d in 2014 compared
with 15.1 million b/d in 2010. According to EIAs recently
released annual Refinery Capacity Report, nearly 75% of
the 1 million b/d increase in refinery gross inputs is the
result of a four percentage point increase in refinery uti-

Oil & Gas Journal | July 6, 2015

FIRST HALF US CRUDE

PRODUCTION

Table 10

First half First half

1
2
2015
2014 Change,
1,000 b/d
%
PAD District 1
Pennsylvania
West Virginia
Others
PAD District 2
Illinois
Kansas
Michigan
North Dakota
Ohio
Oklahoma
Others
PAD District 3
Alabama
Arkansas
Louisiana
Mississippi
New Mexico
Texas
PAD District 4
Colorado
Montana
Utah
Wyoming
PAD District 5
Alaska
California
Others
Total

46
20
20
6
1,837
26
139
18
1,190
64
365
35
5,722
29
18
1,325
70
395
3,885
753
297
90
121
245
1,124
515
608
1
9,482

34
15
16
3
1,431
25
129
22
886
21
323
25
4,572
28
18
1,239
65
289
2,933
531
174
79
97
181
1,117
523
593
1
7,685

35 3
33 3
25 0
100 0
28 4
40
78
(18 2)
34 3
204 8
13 0
40 0
25 2
36

69
77
36 7
32 5
41 8
70 7
13 9
24 7
35 4
06
(1 5)
25

23 4

OGJ estimate 2Preliminary

Source: Energy Information Administration

US REFINERY UTILIZATION

Table 11

Input to
Crude
distillation
Operable Utilization
runs
units
capacity
rate,
1,000 b/d
%
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015*
1990-2015 change
Volume
Percent
2014-15 change
Volume
Percent

12,854
13,246
13,401
13,409
13,301
13,411
13,613
13,866
13,973
14,195
14,662
14,889
14,804
15,067
15,128
14,947
15,304
15,475
15,220
15,242
15,156
14,648
14,336
14,724
14,806
14,999
15,312
15,849
15,980

13,003
13,447
13,551
13,610
13,508
13,600
13,851
14,032
14,119
14,337
14,838
15,113
15,080
15,299
15,352
15,180
15,508
15,783
15,578
15,602
15,450
15,027
14,659
15,177
15,289
15,373
15,724
16,145
16,280

15,642
15,927
15,701
15,623
15,707
15,460
15,143
15,150
15,346
15,239
15,594
15,802
16,282
16,525
16,582
16,744
16,748
16,974
17,196
17,385
17,450
17,607
17,678
17,575
17,736
17,328
17,818
17,859
17,920

83 1
84 4
86 3
87 1
86 0
87 9
91 5
92 6
92 0
94 1
95 2
95 6
92 6
92 6
92 6
90 7
92 6
93 0
90 6
89 7
88 5
85 3
82 9
86 4
86 2
88 7
88 3
90 4
90 8

2,571
19 2

2,670
19 6

2,297
14 7

131
08

135
08

61
03

*OGJ estimate Source: US Energy Information Administration

35

GENERAL INTEREST

US IMPORTS

Table 12

First
quarter
average
2015,
1,000 b/d

Change
15/14,
%

Annual
average
2014,
1,000 b/d

Change
14/13,
%

Annual
average
2013,
1,000 b/d

13
37
06
12 6
98
64

34 3

94
269
41
915
717
465

2,501

(30 9)
28 1
(30 5)
(21 1)
(2 2)
(33 4)

(16 5)

136
210
59
1,159
733
698

2,995

(32 3)
(9 5)
(75 3)
(12 5)
(2 9)
(5 8)

(14 3)

201
232
239
1,325
755
741

3,493

44 3

57

02
10 4
02
01
02
47

100 0

3,223

413

13
761
13
4
15
340

7,283

11 7

40 5

(35 0)
(2 6)
44 4
(20 0)
50 0
56

(0 7)

2,885

294
16
20
781
9
5
10
322

7,337

11 9

(19 9)
(33 3)
11 1
(8 1)
(47 1)
(37 5)
(52 4)
(8 5)

(5 1)

2,579
1
367
24
18
850
17
8
21
352

7,730

Share of
total
2015
%

Country

Sources of crude imports*

Angola
Ecuador
Nigeria
Saudi Arabia
Venezuela
Other OPEC
Total OPEC
Canada
China
Colombia
Gabon
Indonesia
Mexico
Norway
Trinidad and Tobago
UK
Other Non-OPEC
Total imports

Sources of refned product imports

Algeria
Saudi Arabia
Venezuela
Other OPEC
Total OPEC
Canada
Colombia
Italy
Mexico
Netherlands Antilles
Virgin Islands
Other Non-OPEC
Total imports

42
10
23
27

10 2

89
22
49
57

217

(14 4)
214 3
(12 5)
(8 1)

(5 2)

104
7
56
62

229

20 9
75 0
77
(27 1)

09

86
4
52
85

227

33 1

06
34

52 7

100 0

702

12
71

1,116

2,118

39 6

(25 0)
16 4

61

12 4

503
23
16
61

1,052

1,884

(10 7)
45
23 1
(10 3)

(14 7)

(11 5)

563
22
13
68
2

1,234

2,129

*Includes imports for the Strategic Petroleum Reserve

Source: US Energy Information Administration

FIRST HALF CRUDE AND PRODUCTS STOCK

1
2015,
1,000 bbl

Change
15/14,
%

Table 13
1
2014,
1,000 bbl

1
2013,
1,000 bbl

Motor gasoline
Jet fuel
Distillate fuel oil
Residual fuel oil
Unfnished oils
Other

221,300
39,800
133,700
40,100
83,900
269,200

11
97
99
94
(3 9)
13 1

218,830
36,293
121,674
36,657
87,325
238,037

(2 7)
(10 3)
(0 5)
(2 1)
07
17

224,911
40,459
122,334
37,453
86,759
234,105

Total products stocks

788,000

67

738,816

(1 0)

746,021

468,000

21 9

383,886

22

375,689

1,256,000

11 9

1,122,702

01

1,121,710

Crude stocks
Total
1

At end of June 2Excludes Strategic Petroleum Reserve

Source: US Energy Information Administration, 201314 2015, OGJ estimate

lization compared with 2010. The rest of the increase is

attributable to capacity expansions.
Operable refining capacity averaged 17.88 million b/d
during this years first half and is expected to increase
though the remainder of the year, based on further investment in refinery expansion projects. Dakota Prairie Refining

36

Change
14/13,
%

recently completed
construction of one
of the few new refineries built in the US
in the past 30 years.
SPECIAL
Delek US plans to
REPORT
increase crude distillation unit capacity by 10,000 b/d at
its Tyler, Tex., refinery, and Marathon
Petroleum Corp. reported that it plans
to add 35,000 b/d in condensate splitter capacity at its Catlettsburg, Ky., refinery by yearend.
Refinery utilization will average
90.8% this year on operable capacity of
17.92 million b/d, OGJ forecasts. Last
year, refineries ran at 90.4% of capacity on average. A combination of factors
is holding utilization high, including a
strong rise in gasoline demand, high
margins in the face of low input costs,
and good exports opportunities.
For the first 5 months of this year,
the Gulf Coast cash refining margin
averaged $11.81/bbl, up 22% from a
year earlier, according to Muse, Stancil & Co. And East Coast and West
Coast margins averaged $5.87/bbl
and $22.88/bbl, respectively, compared with a respective $2.74/bbl and
$15.12/bbl during the first 5 months
of 2014. However, as infrastructure
builds out, some of the crude price
advantages for Midcontinent refiners
erode, resulting in less excessive margins from a year earlier.
The average composite cost of
crude oil for US refiners in this years
first half was estimated at $51.05/bbl,
down from $98.70/bbl a year earlier.

Natural gas market

Record-high US gas production will

be more than enough to meet growing demand, leaving larger gas inventory in storage than 2014 and
putting downward pressure on prices. Meanwhile, abundant US production and lower prices are displacing demand for gas imports and boosting
exports.
OGJs forecast of US total gas consumption is revised up
to 27.53 tcf in 2015 vs. 26.82 tcf in 2014. The growth in demand is mainly promoted by the switch from the use of coal

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST
to gas in generating electric power, coal plant retirements,
and to a smaller extent the increased gas consumption by
industry, particularly in petrochemical production. According to Bentek Energy, year-to-date gas-power burn is up 3.1
bcfd, or 12%. Residental and commercial demand will decline this year compared with a 4% increase last year.
The total count of rigs targeting gas fell to 223 for the
week ending June 19, according to Baker Hughes Inc. data.
Since the start of 2015, the number of gas rigs fell 105
units. However, gas rigs seem to have stabilized in the past
2 months.
Despite of the drop in drilling activity, market production of gas continues to climb, reflecting increases in drilling efficiency and new systems coming online to move gas
out of producing shale areas. Output from the Marcellus
shale will contribute to a large portion of 2015 production
growth.
The pace of gas production growth, however, is to decelerate slightly in 2015, driven by lower associated gas production combined with reduced activity.
From 2010 to 2014, US gas exports to Mexico doubled
in response to declining Mexican production, increasing
Mexican demand for gas, and rising US production. Mexi-

cos energy ministry projects imports to continue increasing,

reaching an annual average of 3.8 bcfd by 2018. According
to Bente Energy, recent gas exports to Mexico have reached
record levels of around 3 bcfd.
Chenieres Sabine Pass LNG Train 1 is expected to start
up as early as late this year, which should add 0.6 bcfd incremental gas demand when at full capacity, according to
Simmons Energy Research.
This year, 2.62 tcf of gas from overseas will reach the
US, a 2.6% decline from last year, according to OGJ. Imports by pipeline from Canada, accounting for nearly 97%
of all US gas imports, is main driver of the decrease in total
imports.
Due to high levels of gas production, this years injection
season is expected to one of the largest on record. Summer
weather has been warmer than both last year and normal,
which may mitigate surplus levels. EIA projects end-ofOctober inventories will total 3,912 bcf, 115 bcf above the
5-year average for that time.
The Henry Hub gas prices are expected to remain low
throughout 2015, as OGJ forecasts an average spot price
of $3.02/MMbtu for the year. This compares to last years
$4.36/MMbtu average.

Natural gas opposition has shifted

to transportation, speakers say
Nick Snow
Washington Editor

Opposition to natural gas projects has moved from exploration and production to transportation, speakers said during
a discussion on Capitol Hill of US gas infrastructure needs.
Pipeline opposition has become a stand-in for opposition to
fossil fuels for some groups, said Kim Watson, Kinder Morgan Inc.s (KMI) eastern pipeline group president.
Attacking hydraulic fracturing hasnt worked, so opponents have focused on attacking pipelines, Watson told attendees at a June 24 forum sponsored by the US House Natural Gas Caucus. Theyre using the same scare stories and
misinformation they tried upstream.
George Stark, external affairs director for Cabot Oil & Gas
Corp.s eastern US operations, said, The resource is stranded.
We have the supplies ready to be produced in Pennsylvania
and West Virginia. They wont be affected by Gulf Coast hurricanes. All we lack is the capacity to get it to customers.
Cabot has fewer rigs drilling wells on its Appalachian
leases in 2015 than it did in 2013 and 2014, Stark told OGJ
following the event. That would change with approval of two
pending pipeline projects with capacity to transport 500
MMcfd each, he said.

Oil & Gas Journal | July 6, 2015

Gas prices climb when theres not enough pipeline capacity, Watson said. New England has paid more than $7 billion in the last 2 years than what it would have with access to
supplies in Pennsylvania, West Virginia, and Ohio, she said.
Yet opponents have been saying that pipelines shouldnt be
built because consumers would be paying too much.
Referring to TransCanada Corp.s proposed Keystone XL
crude oil pipeline, David Mallino, legislative director for the
Laborers International Union of North America, said, Were
seeing Keystone-like fights on every gas pipeline thats being
proposed. We know the goal of some folks is to strand the
resource. If it cant get to market, it will stay in the ground.

Natural gas for decades

Citing figures from the Interstate Natural Gas Association of
America, Watson said the US already has more than 220,000
miles of interstate gas pipelines with 122.05 bcfd of capacity. Even with the most aggressive expansion of renewables
possible, well need natural gas for decades, she said.
Watson noted that KMI expects the current 77 bcfd of US
demand will reach 110 bcfd by 2025. Most of thatabout 10
bcfdcould be for LNG exports, while another 6-8 bcfd will
be to generate electricity, Watson said. Shale gas has created
industrial plant growth demand along the Gulf Coast which

37

GENERAL INTEREST
could reach 3.5-4.7 bcfd by 2025, she said.
Watson said that by 2035, KMI expects another $641 billion of transportation systems will be required: $313 billion
for gas, $272 billion for crude, and the remainder for natural
gas liquids. Modern pipeline development is more complicated and takes longer than in the past, she noted.
Stark, who also appeared on Americas Natural Gas Alliances behalf, confirmed this as he used the proposed $650
million Constitution Pipeline from Marcellus shale fields in
Pennsylvania to Schenectady, NY, as an example. Cabot and
Williams Cos. Inc. announced a joint venture for the 124mile, 30-in. project in February 2012 (WGL Holdings and
Piedmont Natural Gas Co. subsequently became participants) and began its prefiling process with the US Federal
Energy Regulatory Commission in April.
Ground surveys began that June, and Constitution began
its public open houses, FERC scoping meetings, and easement negotiations that fall before submitting its 7(c) application to FERC, Stark said. FERC issued a final environmental
impact statement for the project in October 2014 and followed that with a project certification order in December.

38

Construction began in May, with service scheduled to begin

during second-half 2016.
Watson said KMIs Tennessee Gas Pipeline Co. subsidiary
is in FERCs prefiling process for its proposed Northeast Energy Direct, which will upgrade infrastructure in Pennsylvania, New York, Massachusetts, New Hampshire, and Connecticut to help meet increased gas demand. It already has
strong commercial customer support, she said.

Case for Keystone XL has grown

stronger, TransCanada tells Kerry
Nick Snow
Washington Editor

Canada is taking strong steps toward combating climate

change, and the proposed Keystone XL pipeline crude oil
pipeline remains in the US national interest, TransCanada

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST
Corp. said in a June 29 letter to US Sec. of State John F. Kerry
and two senior State Department officials.
Given the passage of time, the facts supporting the proposed project have continued to build, Kristine Delkus,
TransCanadas executive vice-president and general counsel,
said in the letter to Kerry; Amos Hochstein, special envoy
and coordinator for international energy affairs at DOSs Bureau of Energy Resources; and Judith G. Garber, acting assistant secretary for oceans and international environmental
and scientific affairs.
For this reason, as a prudent applicant, TransCanada believes it is necessary to provide [DOS] with updated information on recent developments, Delkus said. These developments include:
The Canadian governments May 15 announcement
that it intends to cut greenhouse gas emissions to 30% below
2005 levels by 2030. The government also plans to develop
additional regulatory measures, including rules aligned with
recently proposed US steps to reduce methane emissions
from oil and gas operations, Delkus said.
The Alberta governments announcement that it will

double its carbon tax to $30 (Can.)/tonne and require further

emissions intensity reductions to 20% from the current 12% by
2017. Oil sands and other companies there must either reduce
their emissions, purchase offsets, or pay the carbon price into a
fund to establish GHG emissions reduction technologies.
Canada, the US, and Mexicos joint announcement in
May that they were forming a North American energy ministers working group on climate change and energy, which
expands the North American Energy Ministers Working Dialogue that was established in 2014.
Continued implementation of the Air Quality Management System the Canadian government established in 2013
as a collaboration of federal, territorial, and provincial governments; industries; and nongovernment organizations.
One of the systems components will be emissions requirements with specific limits for oil and sands and other major
Canadian industries, Delkus said.
Growing oil industry support for a carbon tax, particularly a call by six major oil companiesincluding oil sands
producers BP PLC, Royal Dutch Shell PLC, Statoil ASA, and
Total SAfor a harmonized policy in a joint letter to the

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Oil & Gas Journal | July 6, 2015

39

GENERAL INTEREST
United Nations Framework Convention on Climate Change.
Albertas plans to invest more than $1.3 billion (Can.)
over 15 years in two large-scale, oil sands-related carbon capture and storage projectsthe Alberta Carbon Trunk Line
and Quest Projects. The projects will start up in 2015 and
store 2.76 million tonnes/year of carbon dioxide, or the equivalent of taking 550,000 cars/year off the road, Delkus said.
The letter was sent close to the fifth anniversary of the
start of the Keystone Pipelines operations from Alberta to
refineries in Illinois and the Gulf Coast, which has safely
transported nearly 1 billion bbl of Canadian and US crude
oil since 2010 after receiving a presidential permit in 2
years, TransCanada said on June 30.

Keystone XL, the proposed 1,179-mile segment from

Hardisty, Alta., to Steele City, Neb., has been mired in US
regulatory delays since 2008, it noted.
Clearly, recent Canadian, North American, and international GHG policy developments are consistent with [US
President Barack Obamas] stance on not exacerbating the
risk of climate change, TransCanada Executive Vice-Pres.
for Development Alex Pourbaix said.
We are asking [DOS] to consider these recent developments that add to the abundance of evidence already collected through 7 years and 17,000 pages of review that Keystone XL will not significantly exacerbate greenhouse gas
emissions, he said.

Judges order delays BLMs implementation of fracing regs

Nick Snow
Washington Editor

A federal district judge in Wyoming temporarily delayed the

US Bureau of Land Managements implementation of its recently issued hydraulic fracturing regulations. Judge Scott
W. Skavdahl issued a stay on June 23 to give the US Department of the Interior agency until July 22 to submit a full administrative record in legal challenges by four states and two
independent oil and gas producers associations.
The regulations, which were scheduled to take effect on
June 24, effectively have been delayed until early August.
BLM is consulting with the US Department of Justice
about Skavdahls decision, a Washington spokesman told
OGJ. While the matter is being resolved, BLM will follow
the courts order and will continue to process applications
for permits to drill and inspect well sites under its preexisting regulations, he said.
DOI issued its final rule for fracing regulations on onshore public and Indian tribal lands earlier this year (OGJ
Online, Mar. 20, 2015). Wyoming Gov. Matt Mead (R) directed the attorney generals office to petition for review of final agency action in US District Court for Wyoming on Mar.
26 (OGJ Online, Mar. 27, 2015). Colorado, North Dakota,
and Utah subsequently joined the action.
The Independent Petroleum Association of America in
Washington and Western Energy Alliance in Denver mounted a separate legal challenge. Skavdahl said the states and
their arguments have merit, but stayed his final decision until BLM could submit the administrative record, WEA said.
BLM was ill-prepared to implement an extremely complex rule in a short period of time, said Kathleen Sgamma,
WEAs vice-president of government and public affairs.
We highlighted how the BLM Washington Office has not
given sufficient guidance to the state and field offices that
are implementing the rule, and as a result they were issuing

40

confused instructions to companies on how to comply, she

said. The judge agreed that it makes no sense to implement
an ill-conceived rule which could ultimately be overruled
in court.
In Washington, US House Natural Resources Committee
Chairman Rob Bishop (R-Utah) called BLMs regulation a
rule based on fear not facts that favors Washington bureaucracy over progress and science since both the US Department of Energy and US Environmental Protection Agency
have found fracing to be safe.
The ballooning lawsuits are an obvious sign of flawed
policy, Bishop said. Back to the drawing board for BLM
would be an understatement. The regulation is fundamentally wrong and should be ended entirely. The US District
Court for Wyomings decision to grant this stay is a positive
step in that direction.

EIA: Argentina, China

lead shale development
outside North America
Argentina and China have respectively drilled more than
275 and 200 wells targeting shale plays over the past 2 years,
providing each country with the potential to significantly
increase production of shale gas and tight oil, the US Energy
Information Administration highlighted on June 26 in an
energy update.
In Argentina, YPF SA reported production in April of
22,900 b/d of oil and 67 MMcfd of natural gas from three

Oil & Gas Journal | July 6, 2015

joint ventures in the Neuquen basins Vaca Muerta shale

formation in the west-central portion of the country. The
JVs are with Chevron Corp. at Loma Campana field, Dow
Chemical Co. at El Orejano field, and Malaysias state-run
Petronas at La Amarga Chica field (OGJ Online, Aug. 28,
2014).
China Petroleum & Chemical Corp. (Sinopec) and OAO
Gazprom also have recently signed a memorandum of understanding with YPF to jointly develop from Vaca Muerta.
Initial shale exploration and development efforts in China, meanwhile, have focused on the Longmaxi formation in
the Sichuan basin in the south-central part of the country.
EIA notes that while several international companies are active in China, much of the early effort has been led by China
National Petroleum Corp.s (CNPC) PetroChina Co. Ltd. and
Sinopec.
CNPC and Sinopec are on schedule to reach 600 MMcfd
in gas production by yearend, according to Chinas Ministry
of Land and Resources. CNPC has drilled 125 shale wells,
bringing 74 of them online, and is on schedule to produce
250 MMcfd of gas by yearend. Sinopec has a commercialscale effort under way at Fuling shale gas field in Sichuan,
producing 130 MMcfd. At yearend 2014, Sinopec had completed drilling 75 test wells at Fuling field, with plans to drill
an additional 253 wells.

Oil & Gas Journal | July 6, 2015

Shale oil and gas exploration drilling also is under way

in Mexico, particularly in the countrys portion of the Eagle
Ford shale and in the La Casita formation within the Burgos
basin in northeastern Mexico. Petroleos Mexicanos (Pemex)
released in May results for 13 of its shale exploration wells,
of which 10 were categorized as commercial. The 10 gas
wells have initial production ranging 2-11 MMcfd. Pemex
also drilled three horizontal wells into the Tampico-Misantla basins Pimienta formation in 2013. The company plans to
complete all 3 wells this year.

Gas faces more competition from

coal, renewables, IEA official says
Nick Snow
Washington Editor

Natural gas faces growing competition from coal and renewable energy sources at a time when its potential demand
growth is slowing down, an International Energy Agency official said. The last large contracts for [LNG] were signed
in 2014 just before oil prices collapsed. We believe it is still

41

GENERAL INTEREST
competitive, but there are risks, said Laszlo Varro, who
heads IEAs gas, coal and power markets division.
LNG is the only option besides pipelines to transport
large amounts of gas from country to country, but its very
expensive, Varro said during a June 25 presentation at the
Center for Strategic and International Studies. The coal industry in the United States is dreaming of the day when gas
prices go $5/MMbtu higher, because it costs more than that
to transport US LNG to Europe and Asia.
Varro spoke 3 weeks after IEA said in its 2015 MediumTerm Gas Market Report that global demand would rise 2%/
year through 2020, down from the 2.3%/year it projected in
its year-earlier forecast. It said weaker gas demand in Asia,
where persistently high gas prices caused users to switch to
other options until very recently, was behind the downward
revision.
Varro noted that based on contracts for actual projects,
the new question is whether LNG is competitive with wind
and solar particularly in countries along the equator. You
do need flexibility in power systems because the wind
doesnt always blow and the sun doesnt always shine, he
told the CSIS audience. That changes gass role to a backup,
and makes it compete with coal.
Renewable energy technology is improving as new wind
turbines are designed to generate less electricity in heavy
winds and more in lighter winds, Varro said. Solar photovoltaics face daily and seasonal challenges: In many countries,
85% of SV power is generated between March and October.
In Europe, half of gas-powered generation is cogeneration
which runs during the winter, he said.

LNGs transportation entry

Varro forecast that LNGs first transportation uses will be
for barges and other maritime vessels, followed by heavyduty trucks. Tesla has yet to offer an electric garbage truck,

Varro noted. Theyre just not as fashionable as cars. Despite

growing talk that electric vehicles are catching on in the US,
he said the overall impact of natural gas vehicles domestically is four times that of electric cars because of school buses
and local delivery fleets.
LNG is very much emerging as a clean bunker fuel, Varro added. World shipping is comprised of about a dozen
megaports, all of which offer an LNG bunker fuel option.
On the supply side, he said production is following demand down because of depressed prices. One question is
whether lower oil prices will kick US gas prices down, Varro said. Years of high and stable prices predicted an illusion
of stability. Thats not true anymore. Several large US projects have started construction, and we believe they will go
ahead. But we also believe later ones may not.
He said despite IEA forecasters pessimism about investment prospects for US LNG projects, very large volumes
will leave the US Gulf Coast by the end of the decade. He
said, We are pessimistic about Canada, but see a wave of
new projects first from Australia and then from the US toward the end of the decade.
North Americas transition from an LNG importer to exporter will be important to China, Japan, and South Korea,
but a large amount of future growth could take place in
southeast Asia, Varro said. India has an underutilized gas
infrastructure, so it is positioned to take advantage of growing LNG availability.
He said IEA expects China to import more LNG, but it
will have to compete with other kinds of energy because
China has more options. Additionally, LNG cargoes are
looking for places to go, which suggests they will have to
go to Europe, Varro said. That raises the question of what
Gazprom will do particularly as more African LNG starts to
compete for European customers.

Senate Democrats outline broad energy goals to nations governors

Nick Snow
Washington Editor

Forty-five US Senate Democrats outlined broad energy policy goals including more clean energy technology investments, infrastructure improvement, and carbon pollution
reduction in a letter seeking support from the nations governors.
Your feedback will help us collectively craft a path forward on an energy policy that unleashes Americas limitless capacity for innovation, rewards middle-class families
for making smart energy choices, and keeps our air and
water clean for generations to come, Senate Minority Leader Harry M. Reid (Nev.), Energy and Natural Resources

42

Committee Ranking Minority Member Maria E. Cantwell

(Wash.), and 43 other Senate Democrats said in their June
29 letter.
Their call for more clean energy investments included
low-carbon fossil fuels as well as renewable technology, storage, and advanced grid systems. The nations infrastructure
should be modernized to make it more reliable and resilient with a safe structure from physical and cybersecurity
threats, they recommended. Business and individual consumers should be able to make their own energy choices,
they said.

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST
We must cut pollution and end needless waste in both
the way we use energy, and in the way in which governments
execute our energy policy objectives, the Senate Democrats
said. Finally, we must continue to make foundational investments in the research and development that ensure US
businesses will successfully compete in growing global markets for new energy products and services.
Their letter came less than a month before the National Governors Association holds its 2015 summer meeting
July 23-26 in West Virginia. US Senate Energy and Natural
Resources Committee Chair Lisa Murkowski (R-Alas.) has
made passage of comprehensive energy legislation her top
priority for this year.
We recognize that the success of our efforts to address
todays challenges and tomorrows opportunities will continue to rely on a foundational partnership between federal policymakers and states, the Senate Democrats told the
governors. As such, we seek your input on policies consistent with these shared principles, to help guide our consideration of reasonable, common-sense updates to our nations
energy policy.

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US House committee
leaders send letters to
Plains, PHMSA about leak
Nick Snow
Washington Editor

US House Energy and Commerce Committee leaders from

both parties asked Plains Pipeline LP and the US Pipeline
and Hazardous Materials Safety Administration for more
information following a Plains system rupture that leaked
crude oil near Santa Barbara, Calif. (OGJ Online, May 20,
2015).
The May 19 rupture leaked 1,700-2,400 bbl of oil at Refugio Beach State Park on the coast north of Santa Barbara before the Plains All American Pipeline subsidiary shut down
Line 901. Plains said on June 23 that it and the Unified Response Command continue to make cleanup progress in five
work zones.
PHMSA issued a corrective action order on May 22 requiring PAA to suspend operations on the line, make safety
improvements, clean up the spilled crude, and submit a plan
before resuming operations. Californias attorney general
and Santa Barbara Countys district attorney also are conducting a joint investigation for possible civil and criminal
charges.
PAA estimated that it spent $92 million on the cleanup
and response through June 23, an amount that does not in-

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GENERAL INTEREST
clude other potential costs, including all third-party claims,
fines, penalties or regulatory or court proceedings or lost
revenues.
In a June 25 letter to PAA Chief Executive Greg Armstrong, House committee members sought information
about the companys maintenance and integrity operations
on the pipeline.
A handful from this group of lawmakers sent a second
letter the same day to White House Office of Management
and Budget Director Shaun Donovan as well as PHMSA Interim Executive Director Stacy Cummings seeking an update on what they said are long overdue gas and hazardous
liquid pipeline safety rules under the 2011 Pipeline Safety
Act that are still awaiting action.
Seventeen of 42 mandates under that law have not been
implemented, they noted. Many include rulemakings relating to integrity and maintenance programs; decisions
concerning expansion of such programs; guidance on risk
assessment intervals; and rules concerning automatic and
remote shutoff valves, leak detection, and accident notification, among other actions, the lawmakers said.
Officials from both the Association of Oil Pipelines and
the Interstate Natural Gas Association of America have told
OGJ that congressional pipeline safety hearings appear likely this summer.

According to a government statement, the panel will be

responsible for listening to Albertans and stakeholders on
what type of royalty structure the province should have.
The advisory panel, to which Mowat will recruit members, is to finish its work by yearend.
The current royalty regime, last adjusted in 2011, has
separate provisions for natural gas, conventional oil, and oil
sands.
The gas royalty varies according to price and well productivity within a range of 5-36% of the energy content of the
well stream. Propane and butane have different rates. Adjustments are available for wells spudded after March 2009
and for deep wells.
For conventional oil production, Alberta takes crude in
kind at rates between 0-40%, depending on price and output and subject to adjustments such as for deep and horizontal wells and enhanced recovery.
The royalty scheme for oil-sands production applies
project by project. Before a project has recovered allowed
costs, including a return allowance, the rate is 1-9% of
gross revenue, depending on the Canadian dollar price of
West Texas Intermediate crude oil between $55/bbl and
$120/bbl.
After payout, the rate is the greater of the prepayout rate
or 25-40% of revenue net of allowed costs, varying according to the crude price.

Group suggests principles

for Alberta royalty review

Climate-change strategy

The Canadian Association of Petroleum Producers (CAPP)

has suggested that four principles guide Alberta in an oil
and gas royalty review planned by a new center-left government in conjunction with a toughened approach to climate
change.
The trade group said it seeks:
A commitment from the provincial government to a
vibrant and competitive oil and gas industry.
Confirmation that royalty changes will be forwardlooking.
Stability and predictability to minimize uncertainty
and maximize investment in Alberta.
Consideration of royalty changes in the context of
all new costs from policies such as those related to climate
change and corporate taxation.

Royalty review
The New Democratic Party, which defeated the long-ruling
Progressive Conservatives in an election May 5, has named
Dave Mowat, president and chief executive officer of ATB
Financial, Edmonton, chair of the provinces royalty-review
advisory panel.

44

The government said its decisions on royalty structure will

consider advice not only of the advisory panel headed by
Mowat but also of a group formed to advise it on climatechange strategy.
Headed by Andrew Leach, associate professor and academic director of energy programs at the University of Alberta School of Business, the panel will comprehensively
review the province of Albertas climate change policy,
consult stakeholders, and provide advice on a permanent
set of measures, the government said in a June 25 statement.
In a related step, the government said it will renew and
update our provinces current, expiring regulations governing carbon emissions.
Minister of Environment and Parks Shannon Phillips
said, For years, the previous government failed to develop a meaningful strategy to deal with the important
issue of climate change, and we are going to do things
differently.
Emission of greenhouse gases is a special concern for
oil sands production and upgrading, which require energy
inputs greater than those of conventional resources. CAPP
recently said per-barrel greenhouse-gas emissions from oil
sands have declined by 30% since 1990 (OGJ Online, June
26, 2015).

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST

Poor BIA management

has hindered tribal energy
development, GAO says
Nick Snow
Washington Editor

The US Bureau of Indian Affairs does not have data it needs

to verify ownership of some Indian oil and gas resources,
easily identify resources available for lease, or identify where
leases are in effect, the Government Accountability Office
said.
The US Department of the Interior agency also faces limitations and does not have a documented process or the data
needed to track its review and response times, as called for
in Executive Order 1360s implementation guidance, the
congressional watchdog service noted in a report it released
on June 15.
[BIA] therefore cannot ensure transparency in its review
of energy-related documents, GAO said. These shortcomings can increase costs and project development times, resulting in missed development opportunities, lost revenue,
and jeopardized viability of projects.
It said that according to a tribal official, BIAs review of
some of its energy-related documents took as long as 8 years.
In the meantime, the tribe estimates it lost more than $95
million in revenue it could have earned from tribal permitting fees, oil and gas severance taxes, and royalties.
The report also cited missed development opportunities and compromised project viability for wind energy
projects resulting from extended review periods. BIA also
must contend with limited personnel and jurisdictional
overlap with other federal and state regulatory agencies,
GAO said.
Several factors have deterred tribes from seeking tribal
energy resource agreements (TERA), it noted. These factors
include uncertainty about some TERA regulations, costs associated with assuming activities historically conducted by
federal agencies, and a complex application process.

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Recommended actions
It recommended that DOI take steps to address data limitations, track its review process, provide clarifying guidance,
and evaluate whether grants are effective. GAO said the department generally agreed with most but not all of the recommendations because it is taking other actions to address
some data limitations.
Washingtons poor record-keeping and lack of consistency is slowing down natural resource development for
tribes, said US Senate Indian Affairs Committee Chairman
John A. Barrasso (R-Wyo.), who requested the report.
US House Natural Resources Committee Chairman Rob

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GENERAL INTEREST
Bishop (R-Utah) called GAOs report the latest black mark
against [BIA]. He said that his committee also would work
to ensure that [DOI] is held to account for this gross mismanagement and neglect toward tribal communities.

where these are better than Euro IV, produce naphtha for
the aromatics plant, and equip the refinery to produce bitumen and petcoke (OGJ Online, July 18, 2014).

Detailed plans

Oman lets contract for

Sohar refinery unit revamp
Robert Brelsford
Downstream Technology Editor

Oman Oil Refineries & Petroleum Industries Co. (Orpic), has

let a contract to MAN Diesel & Turbo SE (MDT), Augsburg,
Germany, for work related to the overhaul and revamp of the
residue fluidized catalytic cracking (RFCC) unit at its 116,000b/d Sohar refinery, about 230 km northwest of the Omani capital of Muscat (OGJ Online, Nov. 25, 2013; Mar. 4, 2011).
MDT will provide project management as well as supply
parts and comprehensive engineering services for the complete shutdown and overhaul of Sohars RFCC plant during
a planned maintenance turnaround of the refinery in spring
2016, the service provider said.
As part of the contract, MDTs factory in Deggendorf,
Germany, will manufacture a series of major components
associated with the revamp during the next 10 months, including air grids, internal domes, and a new regenerator
head, all of which will be shipped during October 2015 for
arrival at Sohar in January 2016.
As project manager, MDT will provide about 100 specialists
from its Deggendorf office during the shutdown to oversee and
manage the RFCCs revamp, which will be the largest overhaul
of any existing RFCC unit to-date, according to MDT.
While a precise cost of the contract was not disclosed,
MDT valued the order in the double-digit million euros.
This latest contract comes as part of Orpics Sohar Refinery Improvement Project (SRIP), a brownfield, multibillion
dollar modernization project that includes major technical
improvements to the existing refinery (OGJ Online, Apr. 1,
2015; May 1, 2014).
Designed to improve the plants ability to overcome existing
technical constraints associated with processing the changing
quality of Oman Export Blend (OEB) crude, SRIP also will
enable the refinery to meet international environmental standards, serve growing domestic demand for refined products,
and enhance the refinerys competitiveness and profitability.
Last year, ORPIC said SRIPs RFCC revamp aims to improve the units feed quality to meet design parameters, meet
the polymer-grade propylene demand of the polypropylene
plant, maximize additional gasoline and diesel production,
ensure that all fuel products from the refinery conform with
Euro IV norms and meet current product specifications

46

According to a description of the project included in tender

documents, Orpic decided to undertake the RFCC overhaul
following a 2013 turnaround, during which the company
discovered severe damage to the primary and secondary cyclones of Regenerator-1, as well as tremendous coke accumulation in the reactor plenum.
Additionally, the revamp is intended to equip the RFCC
to process a heavier, more contaminated feedstock (compared with current feed) that will be fed to the unit beginning after the completed 2016 turnaround until completion
of the entire SRIP project, Orpic said.
The scope of the RFCC revamp is to include the following
elements, most of which are to be made in compliance with
recommendations from Honeywells UOP LLC:
Replacement of all 22 pairs of primary and secondary
cyclones in Regenerator 1 with upgraded design.
Replacement of the internal flue gas dome along with
skirt and flue gas vent tubes (between Regenerators 1 and 2)
with a new design from UOP.
Modification of refractory specifications and first-stage
air grid per recommendations by UOP.
Modification of first-stage air grid and replacement of second-stage air grid due to downward deflection of air-grid arms.
Replacement of regenerated catalyst standpipe expansion joints.
Replacement of reactor vortex separation system (VSS)
outlet slip joint with expansion bellows.
Replacement of entire orifice chamber (V-2302).
Renewal of VSS outlet pipe from dome to bottom of
slip joint.
Modifications to reactor plenum section.
Modifications to reactor cyclone dip legs.
Replacement of existing AF stripper baffle trays by
UOP with UOPs AF stripper packing, which will be designed, fabricated, and supplied by UOP.
In addition to the revamped RFCC, the SRIP will involve
integrating five units at the refinery, including a hydrocracker and coker, which will boost crude throughputs by 70% by
adding 82,000 b/d of OEB crude oil processing capacity to
achieve an expanded refining capacity of 198,000 b/d.
Once completed, SRIP will eliminate fuel oil yields from
the refinery entirely as well as increase the plants product
yields for diesel (90%), gasoline (37%), jet fuel (93%), LPG
(91%), naphtha (175%), and propylene (44%).
As of May, progress on SRIPs EPC-related activities stood
at 54.9%, construction at 27.3%, with overall progress on the
project at 61.6%, Orpic said in an update posted to its web site.
SRIP is now scheduled to be completed during 2017, Orpic said.

Oil & Gas Journal | July 6, 2015

GENERAL INTEREST

Precommissioning tests ongoing at

Braskems Mexican petchem project
Robert Brelsford
Downstream Technology Editor

Braskem Idesa SAPI, a 75-25 joint venture of Braskem SA, Sao

Paulo, and Groupo Idesa SA de CV, Mexico City, through a contractor, has let a contract to Atlas Copco Rental LLC, La Porte,
Tex., to supply air compressors required for process safety testing at its nearly completed Etileno XXI petrochemical complex
in the Coatzacoalcos-Nanchital region of the Mexican state of
Veracruz (OGJ, July 7, 2014, p. 90; July 1, 2013, p. 90).
As part of the contract, which was awarded in December
2014, Atlas Copco Rental has provided a selection of its oil-free
air compressors for mandatory safety and reliability testing at
the complex during the precommissioning and commissioning
phases, the service company said on June 11.
The order includes delivery of: 13 medium-pressured, diesel-powered PTS 916 air screw compressors, with a pressure
range of 10-150 psi and flow range of 1,300-1,600 cfm; 4 highpressured, diesel-powered PNS 1250 air screw compressors,
with a pressure range of 90-350 psi and maximum flow rate of
1,250 cfm; 2 medium-pressured, electric-powered ZT 90-kw
air screw compressors, with a pressure range of 40-150 psi and
flow range of 650-830 cfm; and 10 dryers.
The compressors are being used for mechanical strength
and integrity tests of the complexs processing equipment and
pipelines that require both standard and high-pressure, 100%
oil-free air. Tests involving use of the compressors and dryers,
which began in March, will run until late September, Atlas
Copco Rental said.
Braskem reported last month that physical construction on
the $5.2-billion Etileno XXI project was 92% completed by the
end of this years first quarter, with precommissioning and testing of equipment and systems at the complex already under
way (OGJ Online, May 12, 2015).
The Etileno XXI complex, which remains on schedule for
start-up during this years second half, will include a 1.05 milliontonne/year ethylene cracker that uses Technip technology; two
high-density polyethylene plants with capacities of 400,000 tpy
and 350,000 tpy, respectively, based on technology from Ineos;
and a 300,000-tpy low-density polyethylene plant that uses technology from LyondellBassell (OGJ Online, Mar. 31, 2011).
The complex will also house the following: storage, waste
treatment, and utilities, including a 150-Mw combined-cycle
power and steam cogeneration plant; a logistics platform for
shipment of 1 million tpy of polyethylene via rail, truck, or
bagged; and administrative, maintenance, control room, and
other buildings (OGJ Online, Oct. 5, 2012).
The Braskem-Idesa JV recently signed a 20-year agreement
with Pemex for the supply of 66,000 b/d of ethane based on
pricing at Mont Belvieu, Tex., to feed the complexs cracker.

Life of eld matters.

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TECHNOLOGY

Newfoundland, Labrador
prepare for deepwater exploration
Tayvis Dunnahoe
Exploration Editor

Canada-Newfoundland and Labrador Offshore

Petroleum Boards (C-NLOPB) most recent call
for bids for the Eastern Newfoundland Region
is coming to a close Nov. 12, 2015. Since 2011,
state-owned Nalcor Energy Oil & Gas has invested with seismic partners TGS-NOPEC Geophysical Co. and Petroleum Geo-Services (PGS)
to acquire more than 84,000 km of 2D seismic of
Newfoundland and Labradors offshore territory.
Prospectivity and certainty are becoming more

refined for the provinces underexplored offshore,

beyond legacy development in the Jeanne DArc
basin.

Historical

NORTH SEA COMPARISON: 1965-2010

FIG. 1

900

1,800
2D acquired (Norway)
2D acquired (NL)

700

1,200

600

1,000

500

800

400

600

300

400

200

2001

1995

1989

1977

1971

1965

White Rose (1984)

Terra Nova (1984)
Hebron (1981)
Hibernia (1979)

100

2007
2010

200

Exploration wells, no.

1,400

1983

Cumulative 2D seismic, 1,000 km

800

Exploration wells drilled (Norway)

Exploration wells drilled (NL)

1,600

Newfoundland and Labradors offshore sedimentary basins consist of more than 910,000 sq km
(350,000 sq miles). According to Nalcor President
and Chief Executive Officer Ed Martin, in an interview with OGJ, Newfoundlands offshore is parallel to the North Sea in size and scope.
Development of Newfoundland and Labradors geologically varied offshore basins began in the late 1960s, about
the same time as the North Sea. Newfoundland and Labradors offshore area is comparable in size to the North Sea,
but lags considerably in the amount of seismic data and development wells.
Regulatory uncertainties in the 1970s and 1980s slowed
Newfoundland and Labradors offshore development, according to Martin. By 2010, the Norwegian North Sea had
seen more than 1.6 million km of 2D seismic acquired, with
more than 800 exploration wells drilled, according to Nalcor. Offshore Newfoundland accounted for slightly more
than 600,000 km of 2D seismic and has had only 155 wildcats drilled in its history. Less than 20% of these were in
deep water.
In the UK sector of the North Sea, roughly one well has
been drilled per 139 sq km of 2D seismic. For Norway this
rate is 461 sq km/well. Newfoundland has one well drilled
per 4,396 sq km of 2D seismic, according to Nalcor.
There is an unexplored potential in Newfoundland and
Labradors offshore acreage, Martin said.
Newfoundlands exploration and appraisal wells have
found 19.8 million bbl of oil on average, compared with Norways 27.1 million bbl/well. The underexplored region has
potential, as further seismic studies isolate areas of interest
and decrease uncertainty.
Production built in the North Sea through the 1990s with

EXPLORATION &
DEVELOPMENT

Source: Nalcor Energy Oil & Gas

48

Oil & Gas Journal | July 6, 2015

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TECHNOLOGY

SEISMIC IMAGES, EASTERN CANADA

NEWFOUNDLANDS UNEXPLORED POTENTIAL

3,500

UK North Sea
Norwegian North Sea
Newfoundland Atlantic margin

Production, 1,000 b/d

3,000
2,500
2,000
1,500
1,000

Norway reaching more than 3 million b/d in 2001. Newfoundland and Labradors offshore production began in
1997 and peaked in 2007 at 500,000 b/d (Fig. 3). The key
takeaway is that while Newfoundland has seen fewer wells,
its finding success is similar to that of the UK and Norwegian sectors of the North Sea, Martin said.

Improved access, technology

An unclear regulatory framework served as the biggest roadblock for offshore development in Canadas Eastern Provinces, Martin told OGJ. The NL15-01EN call for bids is the first
round under C-NLOPBs Scheduled Land Tenure Regime,
which for the first time provides a data-backed research period during which prospective operators can investigate the
blocks on offer. Once this first round closes in November,
new areas will become available annually.
Were seeing a variety of play types in the new data weve

50

1997

1993

1989

1985

1981

1977

1973

Source: Nalcor Energy

1969

1965

500

2009

Source: TGS-NOPEC Geophysical Co.

2005

2014

2001

2000

gathered to date, said Richard Wright,

exploration manager at Nalcor. Where
the Jeanne DArc is a Jurassic sourced
play, many of the newly imaged areas
are showing additional Jurassic plays
and also potential Cretacious and Tertiary plays with analogs to many other
regions including the Gulf of Mexico,
North Sea, and West Africa.
Most interest in offshore Newfoundland and Labrador focused on
the shelf through the 1970s-1980s, but
the provinces new seismic acquisition
is showing promise for slope and deepwater exploration as well.
According to Tom Neugebauer,
project development manager at TGSNOPEC, there have been no data available beyond Newfoundland and LabFIG. 3
radors shelf in the Labrador Sea until
now. TGS and PGS have worked with
Nalcor to acquire more than 84,000
km of 2D seismic since 2011, an area
one and a half times that of the Gulf
of Mexico.
TGS worked in the province during 1998-2003, but regulatory issues
slowed its progress. In July 2012,
Canada changed its law to remove restrictions on foreign-flagged vessels
for seismic operations, Neugebauer
said. This move led to the wide expansion of Newfoundlands data acquisition. Now with a clear regulatory
framework in place, the region should
see an increase in activity.
One unintended positive consequence of Newfoundlands late offshore development is the
ability to benefit fully from deployment of the latest technologies. Deep-tow streamer technology is improving the quality of current shoots by avoiding the sometimes harsh conditions at surface. Fig. 2 shows the benefits of technological
advance from 2000-2014.
Much of Newfoundland and Labradors offshore acreage
is categorized as harsh environment including challenges associated with high wind and waves, Wright said.
FIG. 2

Flemish Pass
The three most recent discoveries off NewfoundlandMizzen, Bay du Nord, and Harpoonwere made in Flemish
Pass basin by Statoil ASA in 2013. The discovery region lies
100-200 km northeast of Jeanne DArc basin and about 400
km from St. Johns in 1,100 m of water. Mizzen holds an estimated 100-200 million bbl of oil. Bay du Nord holds 300-

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

NEWFOUNDLAND OFFSHORE BASINS

FIG. 4

1970s

FIG. 4a

January 2013

FIG. 4b

GREENLAND
Saglek

GREENLAND
Saglek
Henley

Nain

Chidley

Nain
Labrador Sea

Labrador Sea

Hopedale Goose Bay

Hopedale Goose Bay

Hopedale

Hopedale
Hawke

Cartwright

Hawke

Cartwright

LABRADOR

Holton

LABRADOR

Miles

186

Km

300

Orphan

NEWFOUNDLAND

Miles

186

Km

300

Orphan

NEWFOUNDLAND

Source: Nalcor Energy

600 million bbl, and the Harpoon discovery is still under

evaluation. Mizzen was drilled in 2009; Bay du Nord and
Harpoon in 2013. Statoil is operator of all three prospects
with a 65% interest. Husky Energy Inc. holds the remaining 35%.
Newfoundland and Labradors current offshore bid round
includes 11 parcels surrounding the area of these discoveries. According to Wright, these additional areas of the Flemish Pass are potentially prospective and some of the recent
new seismic acquisition activity has focused on this region
to reduce exploration uncertainty in advance of the license
round. The round features a broad range of water depths
from 200 m on the shelf to around 2,800 m in the deepwater
blocks.
C-NLOPBs scheduled land tenure system is designed to
provide increased timeframes for bids in more frontier areas
within the Newfoundland and Labrador offshore area. This
area is divided into eight regions categorized as either low
activity, high activity, or mature, based on the level of oil and
gas exploration and development.
Historical production areas such as Jeanne DArc, where
most of Newfoundlands offshore production occurs, would
qualify as mature basins.
In this system there are three rights-issuance timing cycles corresponding to activity designations. Low-activity regions are on offer for a 4-year cycle. High-activity and mature

Oil & Gas Journal | July 6, 2015

areas are ascribed a 2 and 1-year bid period, respectively.

Block 1135 is centrally located between Jeanne DArc basin and NL15-01EN blocks. Last year it was purchased for
$559 million by a consortium including ExxonMobil Corp.,
Suncor Energy Inc., and ConocoPhillips. The block remains
undeveloped, but its purchase could indicate a successful
November close for the Eastern Newfoundland bid round.

Pseudo frontier
From an analysts perspective, Canadas eastern provinces
are not frontier exploration territories. Offshore Newfoundland and Labrador has been producing oil for 17 years, and
weve developed a full suite of technology and approaches for
this environment, Wright said. Much of the region exists in
a frontier status, however, due to the underexplored nature
of most of its acreage. As early as the 1970s, many of the
productive basins on the continental shelf were known, but
as of January 2013, at least three new basins had been identified in newly imaged slope and deepwater regions (Fig. 4).
Ongoing projects such as Hebron and proven production
from current producing fields provide a safe landing for operators looking to move into the region for exploration drilling. Statoil, ExxonMobil, Suncor, and Husky are active in
projects off Newfoundland.
Even with the current decline in oil prices, offshore Newfoundland will likely be an investment risk worth taking.

51

TECHNOLOGY

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there are 10,000 todays.
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We find that operating companies are

generally taking the long view to exploration in our region as they evaluate
newly imaged frontier acreage coming
up for bid in some cases for the first
time, Wright said.

Limiting uncertainty
Part of Nalcors mission in extending
successful development of Newfoundland and Labradors offshore resources is making sure it keeps pace with
resource assessment. Nalcor, in collaboration with Newfoundland and
Labraodors Department of Natural
Resources, will conduct detailed resource assessments in advance of new
scheduled license round closings. The
state-owned company has contracted
France-based firm Beicip-Franlab to
provide risk and unrisked resource reports on each new sector. The first will
come out in September before the November 2015 round closing.
Our primary goal is to reduce uncertainty for potential investors, providing an objective externally validated resource perspective on the acreage
up for bidding, Wright said. To further that goal, Nalcor also has joined
with Canadian firm C-CORE, a harshenvironment consulting company. The
partnership is aggregating 30 years of
metocean data for the Newfoundland
and Labrador offshore region, including information on ice flow, wind,
waves, and other hazards associated
with the harsh environment. The researchers have divided Newfoundlands offshore territory into 391 cells,
with metocean data provided for each
individual cell.
Constructed as an analysis of surface conditions, this study is intended
to link to offshore exploration plans to
compare harsh conditions with other
harsh environments globally. According to Wright, the report will be released in mid-2015.

TECHNOLOGY

Chinas Yanchi area, western Ordos

basin derived from mixed source
TECTONIC SETTING; YANCHI AREA, ORDOS BASIN

Oil & Gas Journal | July 6, 2015

Liupanshan
basin

Yishan slope

Jinxi
fexure
zone
Lvliang
Mountain
uplift zone

Weihe
graben
Weibei
uplift

Qin Mountain
fold belt

0
0

40-60 m

Tianhuan
syncline

Study
area

30-60 m

West-edge
obduction
Yangchi
zone

Lower Permian

The Yanchi area

lies in the west of
Chinas Ordos basin and to the west
of the giant Sulige gas field, site
EXPLORATION &
of recent breakDEVELOPMENT
throughs in Lower
Permian exploration. Two tectonic
units, the Tianhuan syncline and Yishan slope, cross the basin, which is located where Shanxi, Gansu, Ningxia,
and Inner Mongolia converge to share
a common border.
The area extends to Huanxian in
the south, Otog Front Banner in the
north, and Anbian and Majiatan in the
east and west, respectively. Its 21,500
sq km (8,300 sq miles) include several counties and cities such as Otog
Front Banner, Yanchi, Dingbian, and
Huanxian (Fig.1).

Yimeng uplift

Member 1

PetroChina Changqing
Oilfield Co.
Xian, China

Shihezi formation
Member 8

Liu Xinshe
Han Peng

30-50 m

Hetao
graben

45-70 m

Member 7

Yinshan
fold belt

Member 2

Southwest Petroleum
University
Chengdu, China

FIG. 1

Shanxi formation

Zhou Shichao
Wang Xingzhi

62 Miles
100 Km

53

TECHNOLOGY

SANDSTONE MINERAL COMPOSITION*

FIG. 2

Shihezi formation: Member 8

Q

Shanxi formation: Member 1

Q

FIG. 2a

Test sample

90

75

z,
art
Qu

z,
art

50

25

50
Feldspar, %

75

ts,

ts,

25

75

en

Qu

50

gm

fra

en

50
Feldspar, %

ck

gm

25

Ro

fra

ck
50

3
25

Ro

50

10

75

25

25

90

10

FIG. 2b

75

75

*1=Quartz sandstone; 2=Feldspathic quartz sandstone; 3=lithic quartz sandstone; 4=Feldspar lithic quartz sandstone; 5=Feldspar sandstone; 6=Lithic feldspar; 7=Feldspathic litharenite; 8=Lithic sandstone.

SANDSTONE MINERAL COMPOSITION, YANCHI AREA

Area
Sulige feld,
west
Sulige feld,
central
Yanchi
Average

%
Quartz
Feldspar
Lithic
67
11
22

Table 1

Lithic content, %
Magmatic
Metamorphic
Sedimentary
15.7
53
31.3

74.1

1.1

24.8

36.8

35.4

27.8

71

0.2

28.8

6.6

44.6

48.8

70.7

4.1

25.2

19.7

44.33

35.97

For areas such as Chinas Ordos basin, source analysis

plays an important role in understanding its sedimentary facies. Important geological studies that further oil and gas exploration include:
The identification of ancient erosion zones.
Reproduction of ancient river systems.
The delineation of parent rock properties in the source
area.1
Identification of climate and tectonic setting for a particular sedimentary basin. The sedimentary system, paleocurrent, and source directions and the close relationship of
these features to those of the source area have a direct influence on the oil and gas exploration process.

Yanchi area
At present, methods such as heavy mineral analysis, paleocurrent direction, geochemistry, clastic rock classification,

54

Main rock types

Lithic quartz sandstone, quartz
sandstone
Lithic quartz sandstone
Lithic sandstone, lithic quartz sandstone, quartz sandstone
Lithic sandstone, lithic quartz
sandstone

lithic composition analysis, sandstone composition, and fission track dating are available for analyzing source data in a
specific basin.2-4
Researchers have put forward many views concerning the
development of circumbasin material, tectonic setting, and
general source direction in adjacent formations and areas of
Ordos basin, but few have carried out studies on the source
of the Yanchi area to the west of Sulige gas field.5 6
On the basis of previous research, this article analyzes
parent rock properties and tectonic setting with a discussion
about the sedimentary source direction and the condition
of mixed sources in Member 8 of the Shihezi formation and
Member 1 of Shanxi formation, in the Yanchi area.
This work provides a theoretical basis for future oil and
gas exploration in the Yanchi area by deploying a variety
of source analysis methods, including sandstone mineral
composition, quartz cathodoluminescence, heavy mineral
assemblage, identifying rare earth elements (REE), trace elements, and measuring zircon ages and paleocurrent direc-

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
tion. In addition, the study of these
data provides an inferred form of the
mixed source area by employing uniformitarianism.
The sediment body in the river
course found in the Lower Permian of
the Yanchi area shows a regular pattern of spreading in a NW-SE direction. Therefore, the area is divided into
three regions from West to East: Areas
1, 2, and 3 (Fig. 1).

PROVENANCE ANALYSIS*

FIG. 3

QmFLt*

FIG. 3a

Om
11%

90
20%
75
43%

42%

50%

50%

Mineral composition,
characteristics

47%

23%

13%

50%

Lt

QtFL

FIG. 3b

Qt
Qt = Total quartz granules
F = Total single-crystal feldspar
L = Unsteady rock debris
P = Anorthose
V = Volcanic cinder
Test sample
Recycled orogen
provenances

B>

Decreasing maturity
or stability

B<

Continental block provenances

with sources on stable
cratons (C) and in
uplifted basement (B)

Increasing rating of
ocean to continental
materials
V>P

P>V

Volcanic arc provenances

QpLvLs

FIG. 3c

Qp

Qp = Polycrystalline quartz
debris (including frestone)

Subduction combination
sources

Lv = Volcanic cinder (volcanic,

altered volcanic,
hypabyssal rock)
Ls = Sedimentary rock and rock
debris of metamorphic rocks
(excluding frestone and
silicifcation limestone)
Test sample

ic
en
og
qr
s
nd
sa

Oil & Gas Journal | July 6, 2015

18%
13%

18%

d
ixe
M

In addition to climate, topography,

transportation distance, and diagenesis, the properties of parent rocks and
the tectonic setting of a source area are
among the main factors affecting the
composition of clastic rocks.
To obtain the plate tectonic information for the three sections of the
Yanchi area, this study analyzed sandstone mineral composition of 429
samples from 65 wells in Member 8
of the Shihezi formation and 108 samples from 30 wells in Member 1 of the
Shanxi formation. The components
were point-counted for QFR (quartz,
feldspar, and rock fragments), as well
as QmFLt, QtFL, and QpLvLs (Table
1).7 Figs. 2-3 compare sandstone composition with that of the Sulige field.
Due to crystal lattice defects and
differences in the trace element content of crystals, quartz grains of different origins show different cathodoluminescence characteristics under
electron irradiation. The differences in
luminescence of quartz grains can discriminate their genetic environments
and determine their source direction.
In recent years, many researchers
have used this source analysis method.8
The quartz grains in the Yanchi
area mainly emit brown light with a
small number emitting blue light under cathodoluminescence. This indicates the quartz is metamorphic, with
a small amount of magmatic quartz
emitting purple light (Tables 2-3).
Heavy minerals provide an important method for identifying source di-

32%
29%

Craton interior
Transitional continental
Basement uplift
Quartzose recycled
Mixed
Dissected arc
Transitional arc
Undissected arc
Transitional recycled
Lithic recycled
Qm = Monocrystalline quartz
F = Total single-crystal feldspar
Lt = Total lithic fragments
Test sample

Lv

Magmatic arc orogeny sources

Collision sature
fold-thrust sources

Ls

*Vertices of this triangle equal 100% with the opposite side, or base, equaling 0%. The midpoint of each tangent equals 50%. Starting from the vertices,
parallel to the base, if a point falls within <50% of the range, its content expression is 100% minus the percentage number of the axes. If >50%, its
content expression is the percentage number of the axes.

55

TECHNOLOGY

MINERAL DISTRIBUTION, ZTR*

FIG. 4

Su298
Su399

100

Su301

M6

TS1

Su147
Li2

Li5

Area 1

Area 2

Su403

Su423

40

L5 S404

S399 LH1 TS1 L2

Area 3
Su282

S301 M6 S303 S147

Wells
100

Area 2

North

South

Lian6

ZTR, %

80
Su424

60
40
20
0

S399

LH1

TS1

L2

rections as they are corrosion resistant and stable, retaining

many characteristics of their parent rock.4 9 10 Furthermore,
heavy minerals are well documented in the Yanchi area, and
their comparison results are reliable. Heavy mineral analyses include heavy mineral assemblage analysis and a heavy
mineral characteristic index, or ZTR, analysis (Fig. 4). With
these two analytic methods, the stability, spatial distribution, and other characteristics of heavy mineral assemblages
can determine the types of parent rocks and tectonic settings
of the source area, infer the sediment transport distance, and
determine the source direction.
Rare earth elements (REE) and trace elements such as
Th, Sc, Cr, and Co and other trace elements in sedimentary rocks have low solubility and are relatively stable (See
Box). They are transported mainly in the form of particulate
matter and quickly enter fine-grained sediments. They are
highly resistant to transport in sedimentation and metamorphism processes. Later weathering, diagenesis, and alteration have a weak impact on these elements.
REE characteristics are controlled by the rock composition in a source area and can show the geological characteristics of source rocks.3 REE properties of a sedimentary rock
provide information about its parent rock in a source area,
which allows sedimentologists to corroborate traced sourcearea study results (Fig. 5-6).
Trace elements play important roles in researching the

S403 S282 S423 S424 Lian6

Wells

*ZTR index = zircon % + tourmaline % + rutile %.

56

60

Su404

Zircon
Leucoxene
Garnet
Tourmaline
Magnetite

20

Su303

Yanchi

80
ZTR, %

LH1

Northern areas

ELEMENTS
Co

Cobalt

Cr

Chromium

Eu

Europium

Hf

Hafnium

Ho

Holmium

La

Lanthanum

Sc

Scandium

Th

Thorium

Uranium

Yttrium

Yb

Ytterbium

Zr

Zirconium

type of source area and the identification of tectonic settings.2 11 Source indicators for sediment typically include Zr,
Th, Sc, and Y (Figs. 7-8).
The age distribution of zircon uranium-lead (U-Pb) in
the clastic rock reflects the magma-metamorphism that
occurred in the source area, further reflecting the structure of tectonic layers. The composition of sources during
sedimentation of layers can be deduced by comparing the
age information obtained from the zircon in the sediment

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

Parent rock properties

RARE EARTH ELEMENTS; LOWER PERMIAN, YANCHI AREA

Carbonate
rock

100

Kimberlite
Sedimentary or
metamorphic rocks

Alkaline
basalt

10

Granite
basalt
area

Basalt area
Chondrite

Continental
tholeiite

1
Oceanic
tholeiite

Shihezi Member 8
Shanxi Member 1
0
1

10

100

1,000

10,000

Samples, REE106

QUARTZ CATHODOLUMINESCENCE TEST RESULTS

North of the research area
Metamorphics Sedimentary
48.3
7.4
45.1
12.3

Point counting in the QFL diagram

Formation Magmatite
8-Shihezi
44.3
concludes that the main rock types in
1-Shanxi
42.6
Member 8 of the Shihezi formation include lithic quartz sandstone, quartz
sandstone, and lithic sandstone, and
the types in Member 1 of the Shanxi
formation include lithic quartz sandstone, lithic sandstone,
and quartz sandstone in small amounts (Fig. 2).
When projected on an REE-La/Yb diagram, the 26 samples collected from the research area display sourcing from
sedimentary or metamorphic rocks (Fig. 5). This conclusion
is consistent with the characteristics of abundant sedimentary or metamorphic rocks and scarce magmatic rocks found
through lithic fragment analysis (Table 1).
The major source areas of the Shehezi and Shanxi formations in the Yanchi are basically the same. Characteristics
of matrix mineral compositions, REEs, zircon U-Pb dating
in clastic rock, and chronologic isotope research of strata
from Yinshan Mountain on the north edge of the Ordos basin combine to show that parent rocks in the source area include epimetamorphic rock, moderately deep metamorphic
rock, sedimentary rock, and various kinds of intrusive and
extrusive rocks in more limited quantities.15
The data from Li 4 indicate that the zircon at the strongest

Oil & Gas Journal | July 6, 2015

FIG. 5

1,000

Samples, La/Yb ratio

and the age of rock mass outcrops

on the adjacent mountains in the basin.12-14
Our study took 90 zircon U-Pb
samples from the sandstone samples
obtained at both the Li 4 well in the
central study area and the Lian 54 well
in the southeast of the research area.
These samples are mostly transparent and of a partially light brown
color. The samples were mostly round
in shape, supplemented by idiomorphism, meaning they have experienced weathering, transportation, and
abrasion.
Most of the Th/U values for zircon
are high, between those expected for
magmatic origin and metamorphogenetic zircon, which may be caused
by incomplete metamorphic recrystallization or a later geological event.
Through comparative analysis of the
207
Pb/ 206Pb age frequency distribution
diagram at the corresponding sections,
the two wells show different peak values, meaning these two wells had different source compositions during
sedimentation (Fig. 9).

Table 2

Yanchi area
Magmatite Metamorphics Sedimentary
7
28.4
64.6
12.2
25.6
62.1

peak1,800-2,000 million years (Ma.)is predominantly

metamorphogenetic, accounting for 56.7% of its content.
Zircon aged 2,000-2,600 Ma. is metamorphogenetic with a
certain amount of magmatic zircon. This result is consistent
with the age of zircon (dominated by metamorphic zircon)
in clastic rock aged 2,000-2,300 Ma. and 1,850-1,950 Ma. in
the khondalite zone on the north and northwest edge of Ordos basin; the age of TTG gneiss and granulite in the western
Yinshan Mountain region (2,500-2,600 Ma.); the formation
age of gneissic granite (2,400-2,500 Ma.); the emplacement
age of magma in the Daqing Mountain region in North Ordos basin; and the thermal tectonic event from Neoarchean
to Paleoproterozoic.
The ages of all zircon samples in clastic rock at the strongest peak (300-400 Ma., Devonian-Carboniferous) indicate
that the sedimentation at Member 8 of Shihezi formation
and Member 1 of Shanxi were supplied by the continental
crust substances in the same period.
The rocks at these sections in the Yanchi are quartz sand-

57

TECHNOLOGY

RARE EARTH ELEMENTS, YANCHI AREA

Area 1 samples,
chondrite

1,000

FIG. 6

E29
Li7
Su404
Su421

100
10
1

Area 2

Area 1
La

Ce

Pr

Nd Sm Eu Gd Tb

Dy

Area 3

Yanchi

Ho Er Tm Yb Lu

E29
Area 2 samples,
chondrite

1,000
100

Su335

Li7
Su403

10

Su404
1

La

Ce

Pr

Nd Sm Eu Gd Tb

Dy

Ho Er Tm Yb Lu

Su310

Su255
Lian6

1,000
Area 3 samples,
chondrite

Li4

Li4
Su403
Su310

Su335
Su255
Lian6
Su126

100

Su421
Su126

10
1

Wellsite
La

Ce

Pr

Nd Sm Eu Gd Tb

Dy

Ho Er Tm Yb Lu

QUARTZ CATHODOLUMINESCENCE CHARACTERISTICS, LOWER PERMIAN

Region

Wells
E 29

Area 1

Li 7
Su 404
Yu Tan 2

Area 2

Formation
8-Shihezi
1-Shanxi
8-Shihezi
1-Shanxi
8-Shihezi
8-Shihezi
1-Shanxi
8-Shihezi

Characteristics
Dark brown or disphotic, little purple
Dark brown or disphotic
Dark or light brown or little indigo-purple
Dark brown or disphotic
Dark brown or little purple
Light brown, little disphotic or purple
Brown, little disphotic
Dark brown or purple & little disphotic

1-Shanxi
8-Shihezi

Dark brown, little disphotic or purple

Indigo-purple or dark brown, little disphotic or dark
purple
Indigo or brown
Light brown or little purple
Light brown, little disphotic or purple
Brown or indigo or disphotic

Li 4

Su 179
Area 3

Su 319
Su 147

1-Shanxi
8-Shihezi
1-Shanxi
8-Shihezi

stone characterized by high contents of quartz scrap and

quartzite debris, where the source is controlled by a khondalite zone, rich in quartz and quartzite formed in the Paleoproterozoic in the Yin Mountains region (or source area where
the khondalite zone is located) and the TTG gneiss. Lithic
sandstone is characterized by many metamorphic rocks,
sedimentary rock debris, and some magmatic debris, where
the source is affected by the khondalite zone and the TTG
gneiss, as well as the Archean Eonothem old metamorphic
rock, Devonian-Carboniferous granite, and the continental

58

Table 3

Parent rock type

Light level metamorphics, sedimentary, magmatite
Light level metamorphics, sedimentary
Shallow level metamorphics, magmatite
Light level metamorphics, sedimentary
Light level metamorphics, magmatite, sedimentary
Intermediate metamorphics, magmatite, sedimentary
Intermediate-deep level metamorphics, sedimentary
Light-intermediate metamorphics, magmatite,
sedimentary
Intermediate metamorphics, sedimentary, magmatite
Intermediate-deep level metamorphics, magmatite,
sedimentary
Intermediate metamorphics, magmatite
Intermediate metamorphics, magmatite
Intermediate metamorphics, sedimentary, magmatite
Intermediate-deep level metamorphics, magmatite,
sedimentary

crust volcanic substances in the Yin Mountains region. The

source of the lithic quartz sandstone is jointly controlled by
the same source of quartz sandstone and lithic sandstone.5

Tectonic settings
The distribution patterns of the sedimentary basin and the
source area are controlled by tectonic structure to a considerable extent. Therefore, the composition and structural
characteristics of clastic sediment in the sedimentary basin

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

Co/Th

La/Th

are closely related to the tectonic propYANCHI SANSTONE, PROVENANCE IDENTIFICATION

FIG. 7
erties in the source area.
FIG. 7a
The discriminant analysis of tec14
I = Tholeiitic oceanic island sources
tonic settings in the source area obII = Lower earth crust
I
tained with the QmFLt triangular
12
III = Andesitic sources
model for continental detrital sandIV = Mixed felsic-basify sources
stone shows the sediment as primarily
II
10
V = Upper earth crust
VI = Felsic sources
from the internal craton region, or that
VII = Passive sources
8
a considerable quantity of detrital maVIII = Increasing constitution
terials were transported when a sandof ancient sediments
6
carrying water system passed through
IV
Test sample
III
the interior of the craton (Fig. 3).
4
The QtFL model shows all samples
VI
V
in the recycling orogenic belt source
VII
2
area. Point counting of lithic contents
VIII
on QpLvLs diagrams proves that the
0
tectonic settings in the source area are
0
5
10
15
of the orogenic belt with a relatively
Hf, ppm
complex structure. A few points withFIG. 7b
in the volcanic arc orogenic belt source
100
I = Basalt
area imply that volcanic materials reII = Andesite
lated to the Xingmeng trough on the
III = Palaeozoic apogrit
I
IV = Acidic volcanics
northern side may have migrated into
V = Sverage upper continental crust
the basin.
II
VI = Phanerozoic cratonic sandrock
10
La/Th-Hf and La/Sc-Co/Th data
VII = Ganite
obtained from 83 samples from 33
Test sample
III
wells in the research area show the
source rocks as dominated by a felsic
V
1
VI
source of the average upper crust, an
active continental margin source with
IV
orogenic belts, and a passive continenVII
tal margin source. The rocks are par0
tially subject to the intrusions of older
0
2
4
6
8
10
12
14
sediments such as Phanerozoic craton
La/Sc
sandstone and light amounts of andesite (Fig. 7).
Analysis of Th-Co-Zr/10, Th-ScZr/10, and La-Th-Sc shows all samples as within active and
direction of the Yin Mountains on the north margin of the
passive continental margin areas and continental island arc
basin.15
areas, which feature complex tectonic settings (Fig. 8).2
Quartz cathodoluminescence test results show that the
main source of the quartz in the research area is sedimenSource directions
tary rock, followed by metamorphic rock, with the lowest
Comparison of sandstone composition in the Yanchi area
composition from magmatic rock (Table 2). The comparison
with that in the Sulige area shows that the Yanchi features
of the composition of quartz grains in Yanchi and that in the
abundant quartz, lithic fragments (28.8%), and relatively
northern margin of the basin indicates that the quartz differ
scarce feldspar (part of the feldspar underwent alteration
in origin, a fact demonstrated by the lower magmatic rock
to kaolinite); (Table 1). In particular, there is a much lower
component in the Yanchi, and its higher metamorphic and
component of magmatic rock and a much higher proportion
sedimentary rock components. This conclusion is consistent
of metamorphic and sedimentary rock components among
with the lithic component analysis in the matrix mineral
the lithic components.
analysis (Table 1).
Previous research has demonstrated that the source north
Based on the rock matrix mineral analysis, the source of
of the basin (including the Sulige area) is mainly from the
these formations in Yanchi is not only from the north of the
basin, but also from other directions.
Two main paleocurrent directional values are based on

Oil & Gas Journal | July 6, 2015

59

TECHNOLOGY

TRACE ELEMENTS STRUCTURAL ENVIRONMENT

the western section of the Yin Mountains archicontinent in the north. The
Th
Th
central portion of Area 2 is a mixed
source region, combining source characteristics from both directions, with
shallow-medium metamorphic quartz
grains, quartz of magmatic rock origin, and a predominant sedimentary
C
quartz. The heavy mineral assemblagC
es in 15 wells in the Yanchi area show
D
D
B
a broad variation of characteristics
B
across all three study areas (Fig. 4).
A
A
Test sample
Test sample
The heavy mineral assemblage in
Zr/10
Co
Zr/10 Sc
Areas 1 and 3 is zircon + leucosphenite
La
+ garnet, while that in the mixedsource Area 2 is mainly dominated by
tourmaline + zircon + leucosphenite.
Its abundant tourmaline content is
C+D
A = Oceanic island arc
different from other regions. A higher
B = Continental island arc
ZTR index indicates higher maturity.9
B
C = Active continental margin
Comparison of Area 2 with Areas 1
D = Passive continental margin
A
and 3 in terms of their ZTR indices
for 10 northern wells, shows Area 2s
index as lower than Area 1 or 3. A
Test sample
comparison of the ZTR indices of nine
Th
Sc
wells in Area 2 reveals that the ZTR
index in the northern portion is lower
than that in the south. The maturity
the measurement and calibration of the field outcrop paof the heavy minerals increases from north to south. More
leocurrent direction in Member 8 of Shihezi formation and
than 10 sample wells in the research area were selected for
Member 1 of Shanxi formation in the northwest of the recomparison with REEs in the field profile and the basin pesearch area (Hulusitai profile: 144-189; and Qianlishan
riphery. The researchers discovered that REE distribution in
profile: 92-165)(Fig. 10). This demonstrates that the main
Area 1 shows characteristics of serious depletion of Eu, Ho,
paleocurrent direction at the northwestern field profile is
and other heavy REEs.
NW-SE, showing a source from the northwest direction.
The main source for Area 1 is the Alxa in the northwest,
When taken together with the data from Zaozhuang at the
and Area 3 is highly affected by the source in the north of
northeastern field profile of the research area, the measured
the basin, which is demonstrated by the depletion in Eu, endata indicate that the main paleocurrent direction is NErichment in light REEs, and slight depletion in heavy REEs.15
SW.15 According to the measurement results of the mineral
The curve for Area 2 is smooth, with no depletion in Eu. The
composition, cathode luminescence, and Permian paleocurmixed source area is wedge-shaped and formed under the
rent, the source of the Yanchi area commonly consists from
influences of the Alxa and Yinshan from the NW and north,
the Alxa direction in the northwest and from the Yin Mounrespectively (Fig. 6).
tains direction in the north.

Mixed source
The comparison of the cathodoluminescence characteristics
of quartz in Areas 1, 2, and 3 indicate that the degree of metamorphism of the metamorphic rocks changes from shallow
to deep from west to east (Table 3). The quartz grains in the
origin of the western portion of Area 1 are consistent with
a source feed from the Alxa area in the northwest. Quartz
grains from the eastern portion of Area 3 are affected by

60

FIG. 8

Age determination
On the basis of uniformitarianism, the Yanchi area is sourced
from two directions. The source runoff and the amounts
of material from Alxa and Yin Mountains form the mixed
source Yanchi in a fusiform S, with two pointed ends and a
wider middle portion (Fig. 10).
The original data this study employed for dating orogenic
belts in the research area and zircon U-Pb isotopes in the
basin had already been collected to provide evidence of
ages for comparison between orogenic belts and the basin
and the approximate location of the source area.13 16 Com-

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

URANIUM-LEAD DATING, DETRIAL ZIRCONS IN TWO WELLS

0.6

Percentage

2,600
206Pb/238U

2,200

0.4

1,800
1,400

0.2

1,000
600
200
0

8
207Pb/235U

12

0.4
0.2
0.0
0

16

20

20

16

16

12
8
4
0

600

1,400
1,000

12

16

12
8
4

500

1,000

1,500

2,000

2,500

3,000

500

1,000

500

1,000

1,500

2,000

2,500

3,000

207Pb/235U

parison between the zircon U-Pb data in the adjacent areas

and the positions and age measurement for zircon obtained
from the Li 4 and Lian 54 show two sources dominate
the research area: The Alxa to the northwest is represented
by 2,500-2,600 Ma. TTG gneiss and the Yin Mountains
archicontinent to the north consists of 1,800-2,300 Ma.
khondalite (Fig. 10).
The measurements for zircon in the Li 4 well and the
Uxin Banner area are similar, sharing the characteristics of
the measured values of zircon obtained in the northern and
northwestern regions of the basin.5

References
1. Zhao, H., and Liu, C., Approaches and Prospects of

Oil & Gas Journal | July 6, 2015

1,500

2,000

2,500

3,000

207Pb/235U

Th/U

Th/U

2,600

200

207Pb/235U

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

1,800

2,200

207Pb/235U

Percentage

206Pb/238U

0.6

0.0

FIG. 9

Lian54

Li4

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0

500

1,000

1,500

2,000

2,500

3,000

207Pb/235U

Provenance Analysis, Acta Sedimentologica Sinica, March

2003, pp. 409-15.
2. Bhatia, M.R., and Crook, K.A., Trace Element Characteristics of Graywackes and Tectonic Setting Discrimination of Sedimentary Basins, Contribution to Mineralogy and
Petrology, Vol. 92, No. 2, 1986, pp. 181-193.
3. Boynton, W.V., Geochemistry of the Rare Earth Elements: Meteorite Studies, Rare Earth Element Geochemistry, 1984, p. 63-114.
4. Cardona, J.P.M., Mas, J.M.G., Belln, A.S., et al, Surface textures of heavy-mineral grains: A new contribution to
provenance studies, Sedimentary Geology, Vol. 174, No. 3,
2005, pp. 223-5.
5. Luo, J.L., Zhong-xing, L., Cheng-en, S., Jian, L., Yonglin, H., Hai-hong, W., and Cheng-yu, W., Depositional systems and provenance directions for the Chang 6 and Chang
8 reservoir groups of the Upper Triassic Yanchang Formation

61

TECHNOLOGY

PALEOCURRENT DATING COMPARISON

Geological Science and Technology

Information, Vol. 20, No. 4, 2001, pp.
29-32.
Alaxaensis
Yin Mountains (ancient)
2,500-2,600 Ma.
1,800-2,280
Ma.
11. McLennan, S.M., Hemming,
Yellow Rive
r
S.,
McDaniel, D.K., and Hanson, G.N.,
Zaozhuang
Geochemical approaches to sedimentation, provenance, and tectonics,
Geological Society of America Special
Papers, Vol. 284, 1993, pp. 21-40.
1,890-2,069 Ma.
12. Li, H., Xu, Y., Huang, X., He,
Longwangmiao
B., Luo, Z., and Yan, B., Activation of
Shabatai
Qianlishan
northern margin of the North China
Haizemiao
Craton in Late Paleozoic: Evidence
Hulusitai
from U-Pb dating and Hf isotopes of
Pamiaogou
detrital zircons from the Upper Car1,800-2,800 Ma.
boniferous Taiyuan Formation in the
Ningwu-Jingle basin, Chinese Science
Bulletin, Vol. 54, No. 4, 2009, pp.
677-686.
13. Wu, C.H., Sun, M., Li, H.M.,
Zhao,
G.C., and Xia, X.P., LA-ICP-MS
Yanchi
U-Pb zircon ages of the khondalites
Li4
from the Wulashan and Jining high1,800-2,500 Ma.
grade terrain in northern margin of the
North China Craton: constraints on
Lian54
sedimentary age of the khondalite,
Acta Petrologica Sinica, Vol. 22, No.
11, 2006, pp. 2,639-54.
500 Ma.
2,350-2,500 Ma.
14. Yusheng, W., Dunyi, L., Chu60
Li4
Region of
Geologic cross
50
nyuan,
D., Zhongyuan, X., Zhejiu, W.,
Lian54
interest
section
40
Simon,
A.W., Yueheng, Y., Zhenghong,
30
Sources orientation
Wellsite
L.,
and
Hongying, Z., The Precambri20
Hypothetical
Ma. = Peak value
10
an
Khondalite
Belt in the Daqingshan
mixed sources
ages, million years
0
Magmatic Khondalite
TTG
area,North China Craton: Evidence for
rock
Gneiss
Source:
Multiple Metamorphic Events in the
Palaeoproterozoic, Geological Society
of London, Special Publications, Vol.
in the southwestern Ordos Basin, Geological Bulletin of
323, No. 1, 2009, pp. 73-97.
China, Vol. 27, No. 1, 2008, pp. 101-111.
15. Wang, G., The Study of Sources and Sequence6. Rong, C., Yong-lin, W.H., and Xiao-bing, W.C., Provelithofacies Palaeogeography of Upper Palaeozoic,Northern
nance Analysis of Chang-6 Oil Reservoir Set in Jiyuan Region
Ordos, PhD thesis in Chengdu University of Technology,
in Ordos Basin, Acta Sedimentologica Sinica, June 2008.
2011.
7. Dickinson, W.R., Interpreting Provenance Relations
16. Chen, Z., Lu, S., Li, H., Li, H., Xiang, Z., Zhou, H.,
from Detrital Modes of Sandstones, Provenance of Arenites,
and Song, B., Constraining the role of the Qinling orogen in
1985, pp. 333-61.
the assembly and break-up of Rodinia: tectonic implications
8. Gtte, T., and Richer, D.K., Cathodoluminescence
for Neoproterozoic granite occurrences, Journal of Asian
Characterization of Quartz Particles in Mature Arenites,
Earth Sciences, Vol. 28, No. 1, 2006, pp. 99-115.
Sedimentology, Vol. 53, No. 6, 2006, pp. 1,347-59.
9. Morton, A.C., and Hallsworth, C.R., Processes controlling the composition of heavy mineral assemblages in
sandstones, Sedimentary Geology, Vol. 124, No. 1, 1999,
pp. 3-29.
10. Zhonghua, H., Zhaojun, L., and Feng, Z., Latest
progress of heavy mineral research in the basin analysis,
Percentage

FIG. 10

62

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
The authors
Zhou Shichao (13881739155@163.com) is a
PhD student at the College of Earth Science and
Technology, Southwest Petroleum University,
Chengdu. She holds a BE from Southwest Petroleum University (2009), and achieved her ME
from Southwest Petroleum University in 2012.
Wang Xingzhi (wxzswpi@163.com) is a professor and doctoral supervisor at the College of
Earth Science and Technology, Southwest Petroleum University, Chengdu. He serves as the
deputy dean of the College of Earth Science and
Technology, Southwest Petroleum University.
He also serves as the leader of Sichuan provinces Academic and Technical Council, as the deputy director
of CNPCs carbonate key laboratory, and deputy director of
Ministry of Land and Resources sedimentary basin and oil and
gas resources key laboratory. He received a PhD from the China
University of Petroleum, Beijing, in 1996. He is a member of the
China Mineral Rock Geochemical Lithofacies Paleogeographic
professional committee and of the China Unconventional Oil
and Gas professional committee.
Liu Xinshe (lxs_cq@petrochina.com.cn) is a senior engineer of exploration geology and deputy
chief geologist at the Institute of Exploration,
Development, and Research of PetroChina Co.
Ltd.s Changqing Oilfield Branch, Xian, China.
He holds a PhD from the Northwest University,
Xian.
Han Peng (hanpeng_cq@petrochina.com.cn) is
an engineer of exploration geology at the Institute of Exploration, Development, and Research
of PetroChina Co. Ltd.s Changqing Oilfield
Branch, Xian. He holds an MS from Northwest
University, Xian.

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TECHNOLOGY

Earth model assists

Permian asset valuation
Patrick J. Curth
James R. Courtier
Gary B. Smallwood
Laredo Petroleum Inc.
Tulsa

Rick Mauro
Scot Evans
Halliburton Co.
Houston

Laredo Petroleum Inc.s Permian-Garden City asbasins multi-stacked horizontal targets available
set is an unconventional resource play with more
for development.
than four potential stacked zones covering a 1,700
square-mile fairway in five counties in the Midland
Garden City
basin, Texas. Early in the plays evolution, TulsaLaredo has developed extensive acreage on the east
based Laredo recognized the need to develop a
side of the Midland basin with interest in more
DRILLING &
proprietary database along with a process to charthan 350 sections representing 178,000 gross and
PRODUCTION
acterize each targeted reservoir.
148,000 net acres with most concentrated in GlassThis article describes a multi-domain model
cock and Reagan counties. Producing intervals to
that Laredo, assisted by Halliburton Co., used to
date include the vertical Wolfberry interval and
define the potential for the Permian-Garden City acreage.
the horizontal Wolfcamp shale (Upper, Middle, Lower), the
The model represents an integrated workflow combining
Cline shale, and Canyon formations. Additional horizontal
geoscience and engineering data with multivariate statistics.
targets include the shallower Spraberry, the Strawn, and the
The process began with acquisition of high-quality data
deeper Atoka-Bend-Woodford (ABW) zones.
including 3D seismic, microseismic, cores, well completion
With an average combined thickness of more than 5,000
and production histories, and petrophysical information.
vertical ft for all of the targeted zones, the Midland basin is
The data were then analyzed, processed, and incorporated
unique among US shale plays.
into a predictive three-dimensional (3D) model. The result,
Early success with horizontal wells in both the Wolfcamp
demonstrated here, is a tool used in the planning of develand Cline intervals encouraged Laredo Petroleum to build a
opment wells to optimize initial production rates and estilarge technical database from which to pursue early efforts
mated ultimate reserves and yield a better understanding of
to increase production and execute a full drilling program.
the complexities of a multi-zone stacked resource.
All the targeted zones have flowed oil to the surface from offsetting vertical wells, but horizontal drilling and hydraulic
Midland basin
fracturing have made these objectives economically viable.
Conventional production began in the Permian basin in the
Keeping in mind the goal of having an economic program
1920s and now covers more than 86,000 square miles in
that took advantage of what each stacked horizontal target
West Texas and southeast New Mexico. Fig. 1 presents the
had to offer, Laredo Petroleum understood that the number
geologic architecture of the basin, showing the subdivision
of horizontal wells to be drilled, the capital commitment it
into the Delaware and Midland basins by the Central basin
would take, and the associated operational considerations
platform. Laredo Petroleums acreage in the eastern half of
made integrated development planning mandatory.
the Midland basin is high lighted in red.
Conventional production in the Permian comes from sevEarth-model program
eral horizons ranging in age from Permian down to OrdoLaredo Petroleum invested in extensive data capture over
vician. Beginning in 2008, Laredo Petroleum targeted the
its entire Garden City asset that included geophysical (3D
more basinal source rock and tight carbonate reservoirs of
seismic, gravity and magnetic data, and microseismic surthe Wolfcamp and Cline formations, using horizontal drillveys), logs (conventional openhole and dipole), cores (whole
ing and hydraulic fracturing. Fig. 2 illustrates the Midland
and sidewall), and well testing data (single zone and produc-

64

Oil & Gas Journal | July 6, 2015

tion tests). A key element of the Laredo PetroleumHalliburton partnership is integrating these data into a 3D
geologic earth model, then using it to
support decisions about well spacing,
lateral length, and hydraulic fracturing
design.
The program has two phases:
Phase 1 focuses on the initial
coarser scale assessment of the overall
Garden City area.
Phase 2 focuses on a detailed pilot area identified in the first phase.
The goal is ultimately to drill the
best wells, as soon as possible, and determine the most efficient ways to accelerate that drilling for maximum net
present value.

PERMIAN BASIN STRUCTURES

Levelland

Oil & Gas Journal | July 6, 2015

Lubbock

Northwest
shelf

New
Mexico
Snyder
Lamesa

Texas

Sweetwater
Big Spring

Central basin
platform

Eastern
shelf

Midland
Midland
basin

EM: Phase 1
The first phase confirmed previous
work by Laredo Petroleum, focusing
on the Wolfcamp and Cline formations in the Midland basin through
attribute modeling of well and petrophysical data and using the extensive
3D seismic data Laredo Petroleum had
acquired over Garden City.
Results from Phase 1 also provided
insights into well spacing and prioritization of leases based on subsurface
modeling and dynamic simulations
including integration of microseismic,
petrophysics and core data, production and history matching with dynamic simulation of producing wells,
and geomechanical properties and
fracture modeling.
One of Laredo Petroleums goals
in Phase 1 was to obtain an overview
of the rock property heterogeneity in
each Wolfcamp and Cline zone over
much of the asset. This process identified potential sweet spots based on
such static-model indicators as hydrocarbon pore volume (HCPV) and geomechanical properties.
But a lack of production history
over the acreage base made direct correlations to potentially indicative rock
properties difficult. Laredo Petroleum
and Halliburton recognized the need
for a specific pilot program in which
better production data were available

FIG. 1

Delaware
basin

San Angelo

Area
shown
US

Ozona
arch
Sheffeld channel

Val Verde basin

Marathon-Ouachita
fold belt

Laredo leasehold

Note: Not to scale

MIDLAND BASIN: MULTISTACKED HORIZONTAL TARGETS

FIG. 2

Clearfork
Spraberry
Dean
Upper
Wolfcamp
Middle
Wolfcamp
Lower
Wolfcamp

Canyon
Penn
Cline
Stawn
ABW
Fusselman

65

TECHNOLOGY

WOLFCAMP: HYDROCARBON PORE VOLUME VARIATION

Forsan

Lomax

FIG. 4

Howard
Mitchell

Martin
Howard

INITIAL EARTH-MODEL PLANNING AREA

Howard
Glasscock
Lees

Garden City
Howard

Glasscock Sterling

Glasscock
Reagan

Stiles
Laredo leasehold

Reagan
Irion

Phase 2 initial focus area

10 miles

to validate results. Fig. 3 illustrates an example of the variation in HCPV for one Wolfcamp interval.
Results from Phase 1 highlighted how the earth model
process could assist in well planning to build potential field
development scenarios and estimate corresponding bud-

66

FIG. 3

get requirements. All the data

Laredo Petroleum had accumulated indicated their properties
had large resource potential, but
further refinement of the earth
model was needed to achieve
early sequencing of drilling the
highest potential acreage first
and establishing the basis for the
lowest cost-per-barrel unconventional development of the Garden City asset.

EM: Phase 2
The second phase focused on a specific planning area (Fig.
4), which has served as the primary pilot area for expanding the scope of the earth model and statistically tying the
results to actual well production.
Phase 2s focus has also been to provide a higher resolution understanding of such reservoir attributes as brittleness, total organic carbon, and HCPV based on actual well
data and newly acquired and reprocessed full-wide azimuth
seismic data. We analyzed more than 80 seismic, petrophysical, and engineering attributes to gain insight into those
that would highlight the most productive intervals within
each formation. Fig. 5 shows the general workflow for the
earth-model process.
A key feature of Phase 2 was to add production data and
history for dynamic reservoir simulation and add detail to
the static model listed above. The goal was to correlate the
patterns discerned from the static data with actual productivity results and to use multivariate statistics to help develop a predictive model. Shale resource plays are characterized by a wide variety of petrophysical properties both well
and seismically derived. Robust multivariate statistics indicate which properties affect production, inclusion of many of
which did not at first seem intuitive. Fig. 5 shows the general
inputs.
Dynamic reservoir simulations then provide further understanding of reservoir performance and then these history-matched dynamic models refine both horizontal and
vertical spacing in a multi-stacked, target-rich environment.
The heterogeneity of the producing rocks from all the prospective Wolfcamp and Cline intervals is better understood
by use of the earth model and allows Laredo Petroleums development program to be based on lower drilling and operating costs.
Laredo Petroleum used the fully integrated earth model developed in Phase 2 both in identifying overall sweet
spots (both vertically and horizontally) and in picking
landing points and geosteering the horizontal laterals. As
Fig. 6 illustrates, the model, now tuned to integrate static
properties and production results, is used to improve lateral
placement within a given reservoir and the corresponding

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

EARTH-MODEL WORKFLOW
Inputs

FIG. 5

Seismic inversion,
petrophysical modeling

Layer-based modeling

Reservoir-properties model

Seismic horizons
Formation tops
Petrophysical data
Seismic attributes
Completion data

Results
Production data
Optimized wellbore
geometries

Higher IPs, EURs

Multivariable analysis

Well planning, feld optimization

EARTH-MODEL RESERVOIR CONTACT

Landing points
selection

Geosteering
(stay-in zone)

Frac design,
spacing

FIG. 6

3
4
4

Intrawell vertical,
horizontal spacing

5
Lateral length

ideal landing point. The model then guides real-time geosteering, ensuring that the well maximizes contact with the
most productive reservoir areas as opposed to more common
industry practice of landing the well without steering and
hoping hydraulic fracturing will touch enough productive
reservoir rock to generate sufficient production.

Oil & Gas Journal | July 6, 2015

A detailed understanding of both static and dynamic

properties allows the well and stimulation designs to be refined. Halliburtons Cypher engineering tools and workflow
modelled and matched the existing horizontal wells to actual production history.
Improved fracture design is currently under way. The

67

TECHNOLOGY

PRODUCTION CORRELATION
200

Deliver highest EUR,

highest value wells

175

Predicted production,* %

150

125

100

75

Avoid lower
productive zones

50

25

0
0

25

of productivity compared with actual

data from existing pre-earth model
wells. To date, the model has been
compared with actual results in more
than 30 horizontal wells with an average correlation coefficient for the four
Wolfcamp and Cline intervals of 0.85
(Fig. 7). A 90-day initial production
volume from a specific lateral in an
existing horizontal well is used to reduce variations in rate and flow back.
Comparisons are then made between
the actual 90-day production and the
models prediction for the same lateral
placement in the integrated model.
Fig. 8 shows this comparison for
an 8,000-ft lateral in the Upper Wolfcamp. The predicted higher productivity zones are highlighted in the
brighter (yellow) colors and predicted
lower values in the darker colors. In
this case, the well is placed in what
would be considered a good zone and
175
200
the volume predictions match well
with the actual data.
Given this validation, a logical extension is to evaluate an existing lowperforming well bore to see if the
FIG. 8
50,000
model matches actual volumes. It can
then be examined for more productive
zones in the same vertical drilling lane
as potential future in-fill candidates.
As Fig. 9 shows, the test was an early pre-earth model horizontal well in
the Lower Wolfcamp with actual production that is about half the average
producer. This is consistent with what
the model would have predicted, but
20,000
in the same section are several zones
that potentially would be higher in
productivity based on the earth model, improving both estimated ultimate
reserves and rate of return.
Given the stacked unconventional
pays in the Midland basin, there is the
potential for considerable production
and cash flow acceleration by developing the entire column
simultaneously. This requires an approach, however, that
enables optimal lateral placement and design of the stimulation program so that fracturing in individual intervals does
not interfere with those under and overlying.
Laredo Petroleum has chosen to characterize the PermianGarden City asset with an earth model that will ultimately reduce uncertainly in production rates and estimated
FIG. 7

50

75

100

125

150

Actual production,* %
*90-day oil production.

90-day cumulative oil, bbl

UPPER WOLFCAMP: HIGHER PRODUCTIVITY ZONE

Comparison

Actual results

Model prediction

46,302

45,985

90-day initial production

tools include a fracture simulator to assist understanding of

the effect of complex fracture growth, integrated with a new
compositional reservoir simulator capable of modeling and
further defining the fracture patterns associated with successful resource plays.

Comparison with 30 wells

Evaluating the integrated model begins with its predictions

68

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

LOWER WOLFCAMP: LOWER PRODUCTIVITY ZONE

FIG. 9

90-day cumulative oil, bbl

50,000

20,000

James R. Courtier (jcourtier@laredopetro.com)

joined Laredo in August
2014 as vice-president,
exploration and geosciences technology. Before
joining Laredo, he spent
8 years at Hess Corp.,
most recently as regional subsurface
manager for the Bakken. Before that,
he spent 10 years at ConocoPhillips as
a senior geophysicist. Courtier holds a
bachelor of science in applied geology
from the University of Leicester and a
master of science in basin evolution and
dynamics from Royal Holloway, University of London.

Gary B. Smallwood (gsmallwood@laredopetro.

com) joined Laredo in
August 2009 as reservoir
engineering senior techComparison
Actual results
Model prediction
nical advisor and became
90-day initial production
25,100
24,000
reservoir engineering
manager and Granite
Wash team leader in 2011 and vicepresident, reservoir modeling and field development planning,
ultimate reserves. The science of unconventional shale plays
in April 2013. Before joining Laredo, he gained extensive Granrequires that an operator understand that variation in proite Wash experience with Samson Resources 2003-09, worked
ductivity is driven by complex variations in lithology and
in the Texas Panhandle division for BP America 2000-03, and
rock properties. The building blocks of a successful earth
worked the Permian and Delaware basins for ARCO 1990model are a strong acquisition program, use of modern
2000. Smallwood is a member of the Society of Petroleum Engimodeling technologies, and a well-defined workflow that reneers and holds a bachelor of science in chemical engineering
ceives input from multiple disciplines.
from Missouri University of Science and Technology, Rolla.

Acknowledgment
The authors acknowledge Global Geophysical, Houston, for
its contribution and collaboration on Phase 2 of the project.

Rick Mauro (rick.mauro@halliburton.com) is

director of integrated asset management in Halliburton Co.s consulting and project management
product service line, having previously served as
Halliburtons director for unconventional consulting. He has 35 years of experience with Mobil
Corp., consulting organizations, and Halliburton.
Mauro holds a bachelor of arts in geology from
the University of Rochester, Rochester, NY, and a master of science in geology from Louisiana State University, Baton Rouge.

The authors
Patrick J. Curth (pcurth@laredopetro.com) has
been senior vice-president, exploration and
land, at Laredo Petroleum Inc., Tulsa, since
October 2006. Before joining Laredo, he joined
Latigo Petroleum Inc. in 2000 as exploration
manager and served as vice-president, exploration, when Latigo was sold in May 2006. He
was vice-president, exploration, 1997-2001, at
Lariat Petroleum. Curth holds a bachelor of arts in geology from
Windham College, Putney, Vt., a masters in geological sciences
from the University of WisconsinMilwaukee, and a masters
in environmental sciences from Oklahoma State University,
Stillwater.

Oil & Gas Journal | July 6, 2015

Scot Evans (sevans@lgc.com) is vice-president

of integration asset management and business
development for Halliburtons consulting and
project management product service line. He
has a combined 32 years of experience with
ExxonMobil Corp. and Landmark Graphics
Halliburton. He has been involved with unconventional and naturally fractured reservoirs for
25 years, beginning with the Monterey shale in California. Evans
holds a bachelor of arts in geology from Bucknell University,
Lewisburg, Pa., and a master of science in geology from the
University Texas at Arlington. He is a member of the Society of
Professional Engineers.

69

TECHNOLOGY

Innovation addresses US environmental

regulations; more needed
Bennett Resnik

tion, however, operators have advanced strong technological

and operational initiatives to reduce emissions, curb water
use, and improve water treatment and disposal.
This article looks at current and pending regulations
from the US Environmental Protection Agency (EPA) and US
Department of Interiors Bureau of Land Management (BLM)
that will require further partnership with, and innovation
from, the oil and gas industry to advance the countrys environmental efforts. It also looks at steps the industry has taken to address and even stay ahead of regulations.

Vermont Law School

South Royalton

Benjamin Nussdorf

US Department of Energy
Washington

Technology spawned the recent boom in US oil and gas production which in turn led to new regulations that
keep the environment and people safe. That same
dedication to innovation will enable oil and gas
Air emissions, drinking water
companies to partner with regulators and meet the
Under the Clean Air Act, EPA regulates natural gas
new requirements.
industry air emissions by establishing new source
The environmental concerns over oil and gas
performance standards for various categories of
production, specifically unconventional producnew and newly modified stationary sources of air
tion such as hydraulic fracturing, are well known.
pollutants.1 It also regulates emissions of hazardDRILLING &
Water and air pollution and water conservation
ous air pollutants (HAPs).2
PRODUCTION
concerns are close to the front of the minds of operThe EPA issued a final rule, Oil and Natural
ators, regulators, and environmental groups. Each
Gas Sector: New Source Performance Standards
seeks continual and comprehensive improvement.
and National Emission Standards for Hazardous
Rigorous standards and best practices through efficient
Air Pollutants Reviews, imposing new emissions requiremonitoring and strict regulation can mitigate potential enviments on hydraulically fractured natural gas wells effective
ronmental risks. Alongside proper state and federal regulaJan. 1.3

ENERGY-RELATED CARBON DIOXIDE EMISSIONS

FIG. 1

25
CO2

20
15

10
Change/year, %

-5

Change/year, %

CO2 , billion tpy

-10
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Source: US Energy Information Administration

70

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

CARBON DIOXIDE EMISSIONS, SOURCE

Coal, including coal coke net imports

300

FIG. 2

Natural gas, excluding supplemental gaseous fuels

CO2 , million tpy

Petroleum, excluding biofuels

200

100

0
2000

2002

2004

2006

2008

2010

2012

2014

Source: US Energy Information Administration

EPA estimates that these new regulations will reduce

emissions by 190,000-290,000 tonnes/year (tpy) of volatile
organic compounds (VOCs), 12,000-20,000 tpy of HAP, and
900,000-1.5 million tpy of methane.4
In addition to air emission regulations, EPA is expected to
release a final draft report this year on hydraulic fracturing
and its potential impact on drinking water.
Neither industry nor government has waited for the release of this report to advance more environmentally friendly treatment of water. Issues of water availability for drilling and hydraulic fracturing, water quality, treatment of
produced and flowback water, and methods of disposal of
wastewater are, to a degree, addressed in current regulations
under the Clean Water Act and Safe Drinking Water Act.5
Federal regulations, such as BLMs pending Oil and Gas;
Well Stimulation, Including Hydraulic Fracturing, on Federal and Indian Lands, as well as technological innovations,
have addressed water management.

Industry responds
Innovative and advanced water treatment equipment is gradually supplanting traditional extraction and treatment technologies. Companies are developing more efficient means to
clean and recycle drilling water on site, as well as engineering more environmentally friendly drilling solutions.
Hydraulic fracturing is particularly water intensive. As
several regions in the US have experienced drought conditions, the need for efficient and effective water management
and treatment technologies has come to the fore.
Some oil and gas companies have taken a strong step to
green the hydraulic fracturing process through electrocoagulation (EC), as well and by using downhole drilling solutions with active ingredients from the food industry.
EC treatment applies an electric current across metal
plates to remove contaminants from water. The water might

Oil & Gas Journal | July 6, 2015

contain hydrocarbons, high levels of dissolved solids, and

chemicals from drilling and production. EC removes specific contaminants, such as suspended solids, allowing future fracturing operations and applications to use the treated
water.
Companies also are applying advanced desalination to
treat contaminated water. The technology removes salts and
other contaminants to allow companies to reuse the water.
At the end of the process, the recycled water returns to the
original source in a decontaminated state.
Treating water on site is not only environmentally beneficial but cost effective. Treating produced and flowback water
at the well pad means less water to haul off site, reducing
traffic congestion and fuel and water costs.
Reuse and recycling are beneficial methods of wastewater
treatment. Reclaiming produced water in hydraulic fracturing not only alleviates water dependence but also decreases
overall costs.
Produced water is generally disposed of down saltwater
injection wells, which state agencies regulate under EPAs
Underground Injection Control program, part of the Safe
Drinking Water Act.6

Green completions
Methane emissions from the oil and gas industry continue
to be a concern. Natural gas is the cleanest burning fossil
fuel and is less carbon-intensive than alternative fuels. Despite this, gas well completions release VOCs, HAPs, and
methane.
The oil and gas industry has adopted special completion methods, known as green completions, to reduce
these emissions. Green completions capture gas flowback
that would otherwise be vented or flared. Instead, the gas is
cleaned and routed to the flowline or a collection system to
be reinjected into the well or another oil or gas well.

71

TECHNOLOGY

ENERGY-RELATED EMISSIONS, FEB. 2015

FIG. 3

completion operations that began on or after Jan. 1.

BLM Onshore Order 9

CO2 , million tpy

Petroleum

175

Natural gas

Coal

159

135

Source: US Energy Information Administration

Several states require the use of green-completion technology, and others address this issue by including best-management practices in their permitting processes. Companies
can also use captured gas as an on site fuel source or for
other purposes.
In August 2012, EPA unveiled rules revising NSPS and
HAPs standards for oil and gas production. EPA, under the
Clean Air Act, must review the NSPS every 8 years.
These new standards, implemented in January, require
companies to capture natural gas and VOCs that escape when
they prepare hydraulically fractured gas wells for production.
Reduced-emission completions capture or burn emissions, including methane, during the initial phase of water
flowback from hydraulic fracturing operations.
The EPA estimates these rules will result in the capture
of about 95% of the VOCs emitted from 11,400 newly fraced
and 1,400 refracture wells.4
Equipment to capture the emissions will require increased capital investment from the oil and gas industry.
EPA, however, estimates a net average savings of $11-19 million/company/year if companies sell captured gas (including
propane and LNG) and condensate in the market.4
Plunger lift systems, desiccant dehydrators, vapor recovery units, and various monitoring and repair technologies
are also being deployed to address the new regulatory requirements.
New rules also demand reductions in emissions from
equipment such as processing plants, storage tanks, and
certain pipeline compressors. The rules provide several reporting and notification requirements but only apply to well

72

Greenhouse gases, such as CO2 continue to be a problem in

the energy sector (Figs. 1, 2, and 3). US Pres. Barack Obamas
Climate Action Plan, published in June 2013, addresses the
reduction of greenhouse gas emissions, including curbing
methane and CO2 emissions.7
The Obama administration tasked federal, state, and
tribal agencies with improving permitting for infrastructure
projects via the Bakken Federal Executive Group, an interagency group that works with the oil and gas industry to reduce venting and flaring in the Bakken. The World Bank has
estimated that around 14 bcfd of gas is flared globally, with
10.3 bcf of gas flared in the Bakken during April 2014 alone.7
About 30% of associated gas produced in the Bakken is
flared. Capturing this resource and reducing gas flaring are
priorities for operators and regulators.
Companies have been testing mobile systems that convert
associated gas into compressed natural gas at the wellsite to
capture and sell the gas. Bakken fields are losing more than
$100 million/month in potential capture and sales due to
flaring.8
BLM has announced a proposed rulemaking that may
further the administrations Climate Action Plan entitled
Onshore Oil and Gas Order No. 9: Waste Prevention and
Use of Produced Oil and Gas for Beneficial Purposes. This
proposed rule would establish standards to minimize the
amount of venting and flaring of natural gas that occurs at
oil and gas production sites on federal and Indian land.
The notice also directs BLM to set criteria for determining avoidable and unavoidable losses. Authority for this
rule falls under the Mineral Leasing Act of 1920 that allowed
leasing, exploration, and production of selected commodities, including oil and gas, on public lands. Section 16 of the
act reads:
That all leases of lands containing oil or gas, made or issued under the provisions of this Act, shall be subject to the
condition that the lessee will, in conducting his exploration
and mining operations, use all reasonable precautions to
prevent waste of oil or gas developed in the land, or the entrance of water though wells drilled by him to the oil sands
or oil-bearing strata, to the destruction or injury of the oil
deposits. Violations of the provisions of this section constitute grounds for the forfeiture of the lease.9
The continued progression of Order No. 9 and the details of how BLM seeks to reduce venting and flaring may
set a baseline for other regulatory agencies to curb methane
emissions and for operators to address them via new technologies.

References
1. 42 US Code 7411 - Standards of performance for new
stationary sources, 1970.

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
2. 42 US Code 7412 Hazardous air pollutants, 1970.
3. Oil and Natural Gas Sector: New Source Performance
Standards and National Emission Standards for Hazardous Air
Pollutants Reviews, Federal Register, Vol. 77, Issue 159, Aug.
16, 2012.
4. Overview of Final Amendments to Air Regulations for
the Oil and Natural Gas Industry, US Environmental Protection Agency, Apr. 17, 2012.
5. Safe Drinking Water Act, Public Law 109-58, 322,
2005.
6. 42 US Code Part C Protection of underground
sources of drinking water, 1974.
7. Presidents Climate Action Plan, Executive Office of
the US President, June 2013.
8. Scheyder, E., Bakken Flaring Burns More than $100
Million a Month, Reuters, July 29, 2013.
9. 30 US Code 181- Mineral Leasing Act, 1920.

The authors
Bennett Resnik (resnikbe@gmail.com) has
worked in both public and private sectors,
focusing on federal and state energy and environmental regulation, government affairs, and
domestic public policy matters. He holds a JD
from Vermont Law School, a certificate in energy
innovation and emerging technologies from
Stanford University, California, and a BA from James Madison
University, Harrisonburg, Virginia.
Benjamin Nussdorf (nussdorf@american.edu) is a senior
regulatory advisor with the US Department of Energy, Office of
Fossil Energy, and a lecturer at the Washington College of Law,
George Washington University Law School, Washington, DC.
He holds a JD from American University Washington College of
Law, Washington and a BA from the University of Pennsylvania.

DELIVERING

GLOBAL

SOLUTIONS FOR
E &P CHALLENGES
Drilling & Completion
Well Control
Reservoir & Production

+1.713.956.0956 Sierra-Hamilton.com

Oil & Gas Journal | July 6, 2015

73

TECHNOLOGY

Royal Dutch Shell PLC has concluded a long-planned upgrade and expansion of its ethylene cracker complex (ECC) on Bukom
Island, Singapore, which along with the nearby 462,000-b/d Pulau Bukom refinery and 750,000-tonne/year monoethylene glycol
plant on Jurong Island, forms part of the companys integrated Shell Eastern Petrochemicals Complex. The upgraded ECC now has
an ethylene production capacity of more than 1 million tpy. Photo from Shell.

74

Oil & Gas Journal | July 6, 2015

Low-cost feed
supports North
American ethylene
expansion plans
Robert Brelsford
Downstream Technology
Editor

Until this year, OGJs global ethylene

survey has relied exclusively on direct
responses from operators. Over the last
decade, however, heightened government
regulations and policies have discouraged
voluntary response from some global opSPECIAL
erators, which have expressed concerns
REPORT
that disclosure of detailed capacity data
could attract greater scrutiny to their operations from government regulators.
As a result, OGJ this year began to
broaden its collection methods to include
capacity data an individual operator has
disclosed publicly but did not report to
OGJ by the survey deadline (OGJ, Nov.
PROCESSING
10, 2014, p. 14).
While OGJs enhanced data-gathering
procedures continue to evolve, particularly for regions where capacity information remains difficult
to obtain, this years survey does reflect data captured via
broader collection methods, which includes analyses from
Vince Guercio of CTC International, Montclair, NJ, before
the reporting deadline.
This approach to improved, ongoing information collection, which led to the removal of inactive plants and more
accurate unit capacity information, resulted in a sharp drop
in global ethylene production capacity compared with the
previous years survey (OGJ, July 7, 2014, p. 90).
As of Jan. 1, 2015, global ethylene production capacity
OGJ subscribers can download, free of charge, the 2015
Worldwide Ethylene Survey tables at www.ogjonline.com: Scroll
to Surveys and Statistics. Click on OGJ Subscriber Surveys,
then Ethylene Report, and choose from the list below July 6,
2015. To purchase spreadsheets of the survey data, please go
to http://www.ogj.com/resourcecenter/orc_survey.cfm or email
orcinfo@pennwell.com.

Oil & Gas Journal | July 6, 2015

75

TECHNOLOGY

TOP 10 ETHYLENE COMPLEXES*

1
2
3
4
5
6
7
8
9
10

Company
Formosa Petrochemical Corp.
Nova Chemicals Corp.
Arabian Petrochemical Co.
ExxonMobil Chemical Co.
ChevronPhillips Chemical Co.
ExxonMobil Chemical Co.
Dow Chemical Co.
Ineos Olefns & Polymers
Equistar Chemicals LP
Yanbu Petrochemical Co.

Table 1

Location
Capacity, tpy
Mailian, Taiwan, China
2,935,000
Joffre, Alta.
2,811,792
Jubail, Saudi Arabia
2,250,000
Baytown, Tex.
2,200,000
Sweeny, Tex.
1,950,113
Jurong Island
1,900,000
Terneuzen, Netherlands 1,800,000
Chocolate Bayou, Tex.
1,752,000
Channelview, Tex.
1,750,000
Yanbu, Saudi Arabia
1,705,000

*As of Jan. 1, 2015.

was down by more than 2 million tonnes/year (tpy) from the

same period in 2014 to about 143.8 million tpy, according to
Oil & Gas Journals latest survey of the industry.
The year-on-year changes to regional capacities, however,
largely resulted from the inclusion of more current, accurate
operating data collected by OGJ rather than actual capacity
reductions.

The survey
Table 1 shows rankings of the 10 largest ethylene production
complexes in the world. The order for 2015 changed from
2014 amid revised data submitted from operators as well as
OGJs enhanced data collection efforts.
Table 2 ranks ethylene production capacity by region; Table 3 shows changes for individual countries between 2014
and 2015.
Table 4 lists the top 10 owners of ethylene capacity worldwide. The first column of capacities presents them for assets
owned entirely by one company; the second column reflects
the total of actual percentages for companies in joint ownership.
The exclusive, plant-by-plant ethylene production table,
based on OGJs survey, follows this article.

North America
Rising NGL supplies alongside projections for further
growth in long-term production from unconventional shale
development continued to support ethylene capacity expansion plans in North America despite a weaker crude oil price
environment (OGJ, June 1, 2015, p. 58; OGJ Online, May
12, 2015).
Late in 2014, Chevron Phillips Chemical Co. LP (CPCC)
completed installation of a furnace at its Sweeny petrochemical complex in Old Ocean, Tex., to expand ethylene production by 200 million lb/year, or about 91,000 tpy (OGJ
Online, Dec. 11, 2014).
The addition of the tenth furnace to Ethylene Unit 33
completes the Sweeny plants ethylene expansion project,
which began in 2013 (OGJ Online, June 3, 2013).

76

With the furnace now commissioned, the Sweeny complex has ethylene production capacity of about 4.3 billion lb/
year, or 1.95 million tpy.
Completion of the Sweeny project represents the next increment of expansion to the companys ethylene business,
which will include start-up of the US Gulf Coast petrochemicals project in 2017 as well as incremental growth of
CPCCs olefins derivative businesses, said Dave Smith, vicepresident of CPCCs olefins and natural gas liquids division.
CPCCs Gulf Coast expansion project includes the construction of an ethane cracker at the companys Cedar Bayou plant in Baytown, Tex., as well as two polyethylene (PE)
units with capacities of 1.1 billion lb/year (about 499,000
tpy) each at its Sweeny complex (OGJ Online, June 18, 2014;
Apr. 8, 2014).
The company also announced a study to boost the Cedar
Bayou plants production capacity of low-viscosity polyalphaolefins to 58,000 tpy from its current capacity of 48,000
tpy (OGJ Online, Nov. 7, 2014). If approved, the expansion
project is targeted for completion in 2016, CPCC said.
In February, LyondellBasell announced completion of an
800 million-lb/year (363,000-tpy) expansion at its ethylene
plant in La Porte, Tex. (OGJ Online, July 1, 2013).
Commissioning of the expansion, which was scheduled
to occur last summer (OGJ Online, May 2, 2014), took place
during third-quarter 2014, the company said in its annual
report to investors.
The postponed start-up resulted from a delay in the completion of extensive scheduled maintenance at the La Porte
plant during second-quarter 2014 after a mechanical issue
with a compressor (OGJ Online, July 28, 2014).
The La Porte project is one of four planned ethylene expansions LyondellBassel has undertaken, which also include
two possible projects at its plant in Channelview, Tex., and
one at its Corpus Christi, Tex., plant, all of which are benefitting from rising North American shale gas production
(OGJ Online, May 2, 2014).
During third-quarter 2014, LyondellBasell said it had begun preliminary engineering work to assess the feasibility of
an expansion project at its Channelview plant that possibly
could add as much as 550 million lb/year (249,000 tpy) of
ethylene capacity, according to a Sept. 24, 2014, company
release. If approved, the project would be completed sometime in 2017.
The proposed expansion project would be in addition to
work already under way to install two large cracking furnaces at the Channelview site that will increase the plants
ethylene capacity by 250 million lb/year (113,000 tpy). This
initial expansion at Channelview is to be commissioned
sometime this year, the company recently told investors.
An 800 million-lb/year (363,000-tpy) expansion project
at LyondellBasells Corpus Christi ethylene plant is scheduled to be completed by yearend.
In February, Williams Partners LP, Tulsa, commissioned

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
and started production of ethylene
REGIONAL CAPACITY BREAKDOWN
Table 2
for sale from its newly rebuilt and exJan. 1, 2015
Jan. 1, 2014
Change
panded Geismar, La., olefins plant fol Ethylene capacity, tpy
tpy, %
lowing a series of setbacks occurring
AsiaPacifc
45,455,000
45,701,000
246,000
0.54
Eastern Europe
7,971,000
7,971,000

0.00
in the wake of a June 2013 explosion
Middle East, Africa
27,507,000
26,007,000
1,500,000
5.77
at the site (OGJ Online, Feb. 10, 2015;
North America
35,045,780
35,035,926
9,855
0.03
June 13, 2013).
South America
5,038,500
6,383,500
1,345,000
21.07
Western Europe
22,745,265
24,918,265
2,173,000
8.72
The commissioning effort alongside

the beginning of ethylene production

Total capacity
143,762,545
146,016,691
2,254,145
1.54
for sale from the site officially completes the rebuild and 600 million-lb/
year (272,000-tpy) expansion at Geismar, with the plant now ramping up to its fully expanded
and Center Townships in Beaver County.
capacity of 1.95 billion lb/year (884,000 tpy) from a previous
The transaction follows Shells original 2012 land option
capacity of 1.35 billion lb/year (612,000 tpy).
agreement for the site with Horsehead, a specialty zinc proStart-up of the revamped and rebuilt Geismar plant faced
ducer based in Pittsburgh (OGJ Online, Mar. 15, 2012).
a string of delays related to implementation of about $20
While Shell has determined the site is suitable for the
million in additional safety and maintenance upgrades as
potential development of the proposed complex, the comthe company redoubled efforts to safeguard operations after
pany has not made a final decision to build, Shell Chemical
the explosion, which killed two workers (OGJ Online, Feb.
spokesman Michael Marr told OGJ.
3, 2015; Dec. 31, 2014; Dec. 2, 2014; Oct. 29, 2014; Aug. 5,
The land purchase is a necessary step for Shell to ad2014).
vance the permitting process and allows us to proceed with
Ingleside Ethylene LLC, a 50-50 joint venture of Occisome preliminary site development work, Marr said, adding
dental Chemical Corp. (OxyChem) and Mexichem SAB de
that receipt of necessary permits is required before Shell can
CV (Mexichem), started construction during second-quarter
reach a final investment decision.
2014 on a planned ethane cracker to be built at OxyChems
The company did not disclose a timeline for completion
existing plant in Ingleside, Tex. (OGJ Online, Dec. 17, 2014).
of the project evaluation, but it did confirm plans to perform
Once completed, OxyChem will operate the cracker,
some preliminary site development work once Horsehead
which remains on schedule to be commissioned during firstcompletes site demolition work.
quarter 2017, the company said. The JV estimated its total
Pennsylvanias Department of Environmental Protection
investment in the project at about $1.5 billion.
(DEP) announced its intention to approve Shells air quality
First announced in November 2013 (OGJ Online, Nov. 1,
plan and issue operating permits for the proposed project,
2013), the 1.2 billion-lb/year (544,000-tpy) ethane cracker
via an Apr. 1, 2015, memo. A public hearing on the plans
will provide OxyChem with an ongoing source of ethylene
approval took place May 5, with DEPs written responses to
for manufacturing vinyl chloride monomer, which Mexpublic comments on and objections to the project yet to be
ichem will use to produce polyvinyl chloride (PVC) resin
released.
and PVC piping.
First announced in 2011 (OGJ Online, June 6, 2011), the
OxyChem previously let a $1 billion contract to CB&I,
petrochemical complex would include an ethane cracker
Houston, for the engineering, procurement, and construcwith an average ethylene production capacity of about 1.5
tion of the cracker as well as associated utilities and offsite
million tpy, three PE units with a combined production of
units (OGJ Online, Dec. 2, 2013).
1.6 million tpy, as well as associated installations for power
The cracker, which will process ethane feedstocks from
and steam generation, storage, logistics, cooling water and
growing US shale gas supplies, received final greenhouse gas
water treatment, emergency flare, and offices, Shell says on a
prevention-of-significant-deterioration construction permits
web site created for the project.
from the US Environmental Protection Agency (EPA) in May
Feedstock for the proposed complex likely would be sup2014 (OGJ Online, May 29, 2014).
plied by Shells recently reshuffled and newly discovered
In November 2014, Shell Chemical LP, a subsidiary of
holdings in the Marcellus and Utica shale regions (OGJ OnRoyal Dutch Shell PLC, advanced plans to purchase land
line, Sept. 3, 2014; Aug. 14, 2014).
near Monaca, Pa., for a proposed petrochemical complex
Westlake Chemical Corp., Houston, let a contract in Nothat would process ethane from natural gas produced in the
vember to Technip for work related to the expansion of ethMarcellus shale (OGJ Online, Nov. 7, 2014).
ylene capacity at its Sulphur, La., plant near Lake Charles
Shell exercised its option under an amended and restated
(OGJ Online, Nov. 18, 2014).
option and purchase agreement with Horsehead Corp. for
Technip will provide detailed engineering and procureHorseheads zinc production operation on a site in Potter
ment services to expand the recovery section of Westlakes

Oil & Gas Journal | July 6, 2015

77

TECHNOLOGY

NATIONAL ETHYLENE CAPACITIES

Country
Algeria
Argentina
Australia
Austria
Azerbaijan
Belarus
Belgium
Brazil
Bulgaria
Canada
China
China, Taiwan
Colombia
Croatia
Czech Republic
Egypt
Finland
France
Germany
Greece
Hungary
India
Indonesia
Iran
Israel
Italy
Japan
Kazakhstan
Kuwait
Libya

Jan. 1, 2015
133,000
838,500
527,000
500,000
330,000
193,000
2,230,000
3,500,000
400,000
5,235,794
13,878,000
4,540,000
100,000
90,000
544,000
330,000
330,000
3,050,000
5,757,265
20,000
660,000
3,420,000
600,000
4,734,000
200,000
1,420,000
6,645,000
130,000
1,650,000
350,000

Table 3

Jan. 1, 2014
133,000
838,500
502,000
500,000
330,000
193,000
2,460,000
3,500,000
400,000
5,530,794
13,778,000
4,006,000
100,000
90,000
544,000
330,000
330,000
3,373,000
5,757,265
20,000
660,000
3,315,000
600,000
4,734,000
200,000
2,170,000
6,935,000
130,000
1,650,000
350,000

Change, tpy

25,000

230,000

295,000
100,000
534,000

323,000

105,000

750,000
290,000

Country
Malaysia
Mexico
Netherlands
Nigeria
North Korea
Norway
Philippines
Poland
Portugal
Qatar
Romania
Russia
Saudi Arabia
Serbia
Singapore
Slovakia
South Africa
South Korea
Spain
Sweden
Switzerland
Thailand
Turkey
Ukraine
UAE
U.K.
US
Uzbekistan
Venezuela
Total

Petro 1 (P1) ethylene plant at the Sulphur complex. The

contract follows a series of feasibility studies executed by
Technip to help Westlake evaluate expansion options and
development of the process-design package and front-end
engineering design (FEED) for the project.
Westlake Chemical released details on the Lake Charles
ethylene capacity expansion plan last October, at which time
it said the expansion, as well as other capital improvements
to be included in the project, would require an investment of
about $330 million (OGJ Online, Oct. 23, 2014).
The expansion, which will increase the plants ethane-based ethylene capacity by about 250 million lb/year
(113,000 tpy), is on schedule to be completed during firsthalf 2016, Albert Chao, chief executive and president of
Westlake Chemical, told investors on May 4.
The company completed an expansion of the Petro 2 (P2)
ethylene unit at its Lake Charles complex during first-quarter 2013.
Westlake Chemical initially announced plans to expand
P1 and P2 in April 2011 as part of its strategy to capitalize on
low-cost ethane and other light NGLs becoming available as
a result of North Americas increased shale gas production.
ExxonMobil Corp. let a contract to Jacobs Engineering
Group Inc. to provide engineering, procurement, and construction services as part of a multibillion dollar ethane

78

Jan. 1, 2015

Jan. 1, 2014

Change, tpy

1,723,000
1,384,000
4,037,000
300,000
60,000
550,000
320,000
700,000
330,000
2,520,000
844,000
3,490,000
13,155,000
200,000
3,980,000
220,000
585,000
5,630,000
1,280,000
625,000
33,000
3,532,000
588,000
630,000
3,550,000
1,995,000
28,425,987
140,000
600,000

143,762,545

1,723,000
1,384,000
3,965,000
300,000
60,000
550,000

700,000
330,000
2,520,000
844,000
3,490,000
13,155,000
200,000
5,380,000
220,000
585,000
5,630,000
1,430,000
625,000
33,000
3,172,000
520,000
630,000
2,050,000
2,855,000
28,121,132
140,000
1,900,000

145,971,691

72,000

320,000

1,400,000

150,000
0
0
360,000
68,000

1,500,000
860,000
304,855

1,300,000

2,209,145

cracker project at its Baytown, Tex., complex and associated

premium product installations in Mont Belvieu, Tex. (OGJ
Online, Aug. 13, 2014; July 1, 2013; June 5, 2012).
Jacobs will provide works for the two locations, including
preparation of 350 acres for the ethane cracker in Baytown
and 100 acres for the associated operations in Mont Belvieu.
Additionally, Jacobs will interconnect the two ExxonMobil
sites by integrating a 1.5 million-tpy ethane steam cracker in
Baytown and two 650,000-tpy, high-performance PE lines at
its Mont Belvieu plastics plant.
ExxonMobil began construction on the US Gulf Coast
ethylene expansion project in June 2014 (OGJ Online, June
19, 2014).
Formosa Plastics Corp. (FPC) let a contract to Germanys
ThyssenKrupp Industrial Solutions AG to provide process
technology for a propane dehydrogenation plant (PDH) to be
built as part of the third major expansion of its petrochemical complex in Point Comfort, Tex. (OGJ Online, Sept. 26,
2014; Aug. 6, 2014).
ThyssenKrupp will deliver its proprietary Steam Active
Reforming (STAR) process technology for dehydrogenation
of light hydrocarbons for the plant. The contract also includes licensing, basic engineering, detailed engineering for
key equipment, delivery of STAR catalyst, and technical support during the entire project execution.

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
The PDH plant in Point Comfort will have a propylene
production capacity of 545,000 tpy.
Neither a value of the contract nor a timeframe for the
PDH project was disclosed.
EIA recently issued three final greenhouse gas prevention-of-significant-deterioration construction permits for
the Point Comfort complex expansion, which FPC first announced in February 2012.
According to EPA, the $2 billion planned expansion will
include:
A 625,500-tpy low-density PE (LDPE) plant.
An olefins production unit at the complex as well as a
PDH unit consisting of 14 cracking furnaces, four PDH reactors, four steam boilers, and other associated equipment.
Two GE 7EA, 80-Mw natural gas-fired, combined-cycle turbines to the plants existing six GE 7EA combinedcycle gas turbines.
The Olefins 3 and associated PDH units will increase the
plants production capacity of high-purity ethylene by about
1.75 million short tons/year (about 1.59 million tpy), according to the final EPA permit.
FPC previously said the Point Comfort expansion was
designed to take advantage of increasingly reliable and lowcost North American natural gas feedstock supplies, as well
increase the security, flexibility, and breadth of material
supplies and products at the complex (OGJ Online, June 3,
2013).
In February 2015, South Africas Sasol Ltd. let a contract
to GE Oil & Gas, Florence, Italy, to provide the main-compression trains required for an LDPE plant at its proposed
integrated ethane cracker and downstream derivatives complex to be located in Westlake, La., adjacent to the companys existing operations near Lake Charles (OGJ Online,
Feb. 2, 2015; Dec. 3, 2012).
GE will supply main-compression and power-generation
trains consisting of primary-purge and hyper-compression
services for a 20-cyclinder, two-stage, LDPE hyper-compressor that will have discharge pressures of 45,000 psi and be
situated in the center of the new plant. GEs project equipment is scheduled to ship from Florence to the Lake Charles
site during first-half 2016.
In December 2014, Sasol let a contract to Toyo Engineering Korea Ltd., a subsidiary of Toyo Engineering Corp., to
provide detailed engineering, procurement, module fabrication, and construction support services for the planned
450,000-tpy linear LDPE plant to be included at the Westlake complex (OGJ Online, Dec. 4, 2014).
In addition to the LDPE plant, the $8.9 billion petrochemical complex will include a 1.5-million tpy grassroots
ethane cracker, as well as several other chemical manufacturing plants (OGJ Online, Dec. 23, 2014).
With site preparation now under way, the new complex is
on schedule to be commissioned in 2018.
While construction of the planned ethane cracker and

Oil & Gas Journal | July 6, 2015

derivatives complex remains ongoing, Sasol delayed final investment decision on a proposed large-scale, gas-to-liquids
plant that would be located adjacent to the Westlake complex as part of a company-wide plan to conserve cash in response to lower international oil prices (OGJ Online, Jan.
28, 2015).
Shintech Inc., the US subsidiary of Shin-Etsu Chemical
Co. Ltd., Tokyo, through a contractor, let a series of contracts
in April to CB&I, Houston, to provide technology licensing
as well as equipment and construction work for a grassroots
ethylene production plant in Louisianas Iberville Parish
(OGJ Online, Apr. 24, 2015).
Under the contracts, which amount to more than $640
million, CB&I will provide ethylene technology, basic engineering and cracker heater supply, and construction services
for the project, which will be located in Plaquemine, La.
CB&I will deliver its proprietary ethylene technology, including SRT cracking heaters and recovery section design,
which features low-pressure separation and mixed refrigeration.
The contract awards follow Shintechs announcement
that it will invest $1.4 billion to build the 500,000-tpy plant
(OGJ Online, Apr. 23, 2015). The project is due to be completed during first-half 2018.
As of May, Braskem Idesa SAPI, a 75-25 joint venture of
Braskem SA, Sao Paulo, and Groupo Idesa SA de CV, Mexico
City, was nearing completion of its long-planned Etileno XXI
petrochemical complex in the Coatzacoalcos-Nanchital region of the Mexican state of Veracruz (OGJ Online, May 12,
2015; OGJ, July 7, 2014, p. 90; July 1, 2013, p. 90).
By the end of first-quarter 2015, construction on the project was 92% completed, with precommissioning and testing
of equipment and systems at the complex under way.
The total cost of the project, which initially was pegged at
$2.5-3 billion (OGJ, July 2, 2012, p. 78), currently stands at
$5.2 billion. The complex remains on schedule for start-up
during second-half 2015, according to Braskem.
The Etileno XXI complex will include a 1.05 million-tpy
ethylene cracker that uses Technip technology; two highdensity PE (HDPE) plants with capacities of 400,000 tpy
and 350,000 tpy, respectively, based upon technology from
Ineos; and a 300,000-tpy LDPE plant that uses technology
from LyondellBassell (OGJ Online, Mar. 31, 2011).
The complex will also house the following installations:
Storage, waste treatment, and utilities, including a 150Mw combined-cycle power and steam cogeneration plant.
A logistics platform for shipment of 1 million tpy of PE
via rail, truck, or bagged.
Administrative, maintenance, control room, and other
buildings (OGJ Online, Oct. 5, 2012).
The Braskem-Idesa joint venture previously signed a 20year supply agreement with state-owned Petroleos Mexicanos for the supply of 66,000 b/d of ethane based on pricing
at Mont Belvieu, Tex., to feed the complexs cracker (OGJ,

79

TECHNOLOGY

TOP 10 ETHYLENE PRODUCERS1

regulatory approvals, and government

support (OGJ Online, Nov. 15, 2013).
Of wholly owned
With only company
In Canada, Nova Chemicals Corp.,
complexes
partial interests
Calgary,
completed in November 2014
Company
Sites2
Capacity, tpy
all
remaining
modifications and up1
ExxonMobil Chemical Co.
19
15,013,000
8,448,550
2
Saudi Basic Industries Corp.
15
13,392,245
10,273,759
grades as part of a cracker feedstock
3
Dow Chemical Co.
21
13,044,841
10,529,421
conversion project at its Corunna,
4
Royal Dutch Shell PLC
13
5,358,385
6,146,693
Ont., refinery and petrochemical com5
Sinopec
13
7,895,000
7,275,000
6
Total AS
9
5,610,000
3,148,750
plex, according to a January 2015 proj7
Chevron Phillips Chemical Co.
8
5,607,000
5,352,000
ect update on the companys website
8
LyondellBasell
8
5,200,000
5,200,000
(OGJ, July 1, 2014, p. 90; OGJ Online,
9
National Petrochemical Co. (Iran)
7
4,734,000
4,734,000
10 Ineos
5
4,316,000
3,946,000
Aug. 15, 2014; July 7, 2014; Dec. 19,
As of Jan. 1, 2015. Wholly owned plus partially owned.
2013; July 1, 2013).
Designed to allow the cracker to use
up to 100% NGLs from growing North
American supplies, the site is now proJuly 4, 2011, p. 100).
cessing entirely NGL feedstock, most of which is Marcellus
While the Etileno XXI project continues to advance,
ethane, Nova Chemicals said.
Braskems majority shareholder, Odebrecht SA, has extendConstruction on Nova Chemicals Polyethylene 1 (PE1)
ed the timeline for development of its proposed Appalachian
plant expansion project also continues to progress at its ethShale Cracker Enterprise (Ascent) petrochemical complex in
ylene and PE complex in Joffre, near Read Deer, Alta. (OGJ
Wood County, W.Va., which would include an ethane crackOnline, June 13, 2014), with mechanical completion scheder, three PE plants, and associated infrastructure for water
uled for fourth-quarter 2016, the company said in March.
treatment and energy cogeneration (OGJ Online, May 12,
Designed to expand PE capacity at the Joffre site by 40%,
2015; OGJ Online, Nov. 15, 2013).
the PE1 project includes installation of a 450,000-tpy singleA feasibility study for the project now will require more
train linear LDPE unit.
time than the company initially expected in view of changThe company also said plans remain under way for exing global crude oil and PE prices, Braskem told investors
pansion of the Corunna cracker, as well as for an LDPE
earlier this year.
debottleneck and HDPE retrofit at Novas Moore plant in
Odebrecht already has entered a series of agreements for
Mooretown, Ont., about 140 miles west of Toronto.
the Ascent project. In late 2014, the company let a contract
The existing and planned projects come as part of the
to Technip to supply its proprietary ethylene technology and
companys Nova 2020 growth strategy, which includes conprocess design package for the complex (OGJ Online, Nov.
tinued capital spending on strategic petrochemicals expan4, 2014), as well as a contract to Ineos Technologies Ltd. to
sion in Ontario and Alberta based on North Americas inprovide its proprietary Innovene S and Innovene G technolcreased demand and emerging feedstock opportunities.
ogies to be used for PE production at the site (OGJ Online,
Oct. 2, 2014).
Asia-Pacific
Odebrecht subsidiary Odebrecht Oil & Gas SA in early
Shell has concluded a long-planned upgrade and expansion
2014 tapped Antero Resources Inc. to become the anchor
of its ethylene cracker complex (ECC) on Bukom Island, Sinethane supplier for Ascent (OGJ Online, Mar. 28, 2014). Ungapore, which along with the nearby 462,000-b/d Pulau Buder that agreement, Antero will supply the complex 30,000
kom refinery and 750,000-tpy monoethylene glycol (MEG)
b/d of ethane, which represents almost half of the volume
plant on Jurong Island, forms part of the companys fully
required to operate the plants planned ethane cracker.
integrated Shell Eastern Petrochemicals Complex (OGJ, July
The Ascent project also has secured ethane supplies from
1, 2014, p. 90; OGJ Online, Apr. 2, 2015; July 27, 2006).
Range Resources Corp., according to Odebrecht subsidiary
In addition to reducing the ECCs energy consumption
Braskem America, who will be responsible for petrochemiand carbon dioxide emissions by about 7% and 11%, respeccal-related activities for the complex, including the markettively, the debottlenecking and expansion project has boosting of the plants PE production.
ed its ethylene production capacity by more than 20% from
The Ascent project, which Odebrecht first announced
its previous 800,000-b/d level.
in November 2013, would include an ethane cracker, three
While the company did not immediately disclose a prePE plants, and associated infrastructure for water treatment
cise figure for the plants expanded capacity, a Shell spokesand energy cogeneration. At the time, Odebrecht said the
person told OGJ that the upgraded ECC can now make
projects feasibility would depend on several important facmore than 1 million tpy.
tors, including securing long-term ethane supply, financing,
The expansion and upgrading project was completed
1

80

Table 4

Oil & Gas Journal | July 6, 2015

TECHNOLOGY

ETHYLENE EXPANSIONS, 2015-17

Location
Arzew, Algeria
Alexandria, Egypt
Dahej, Gujarat, India
Nachital, Mexico
Ras Laffan Industrial City, Qatar
Nizhnekam, Tatarstan, Russia
Baytown, Tex.
Freepor, Tex.
Baytown, Tex.
Ingleside, Tex.
Channelview, Tex.
Corpus Christi, Tex.
Lake Charles, La.
Lake Charles, La.

Company
Total/Sonatrach
Egyptian Ethylene and Derivatives Co.
Oil & Natural Gas Corp.
Braskem/Idesa
Qatar Petroleum/ExxonMobil Corp.
Nizhnekamskneftekhim OAO
Chevron Phillips Chemical Co. LP
Dow Chemical Co.
Exxonmobil Corp.
Ingleside Ethylene LLC
LyondellBasell
LyondellBasell
Sasol
Westlake Chemical

Total

Table 5

2015
2016
2017
Ethylene capacity, tpy
1,100,000
460,000
1,100,000
1,000,000
1,600,000
1,000,000
1,500,000
1,500,000
1,550,000
544,000
552,000
363,000
1,500,000
113,000

6,175,000
4,050,000
3,657,000

Source: Oil & Gas Journal, May 4, 2015, p. 30 (data available at www.ogj.com)

ahead of schedule, within budget, and without lost-time injury, according to Huck Poh, general manager for Shells Pulau Bukom manufacturing site.
The ECC upgrade included installation of new furnaces,
heat exchangers, and heating coils to make the conversion
process more efficient, Shell says in a project description
posted to the companys web site.
Following with Shells strategy to maximize integration
of its Singapore refining and petrochemical operations to
meet growing regional demand, increased production from
the ECC will be shipped via a subsea pipeline to Jurong Island to support further expansion of intermediates plants,
including Shells MEG plant and third-party installations.
A final cost of the upgrading project was not disclosed.
China Petrochemical Corp. (Sinopec), however, has
shelved plans to build a $3.1 billion ethylene plant at Qingdao in Shandong Province, Honolulu-based consultancy FGE
reported in late 2014. The plant was to be Chinas first based
on natural gas and light-end feedstocks.
With a designed production capacity of 1 million tpy of
ethylene, the Qingdao plant was planned to be built over 3
years and completed in 2016-17. Half of the LPG feed would
come from imported natural gas and ethane and the remaining produced from a nearby refinery in Qingdao. The plant
received environmental clearance in June 2013, according
to FGE.
While the fate of Sinopecs Qingdao ethylene plant remains uncertain, FGE says it is likely that future olefin
plants in China may allow for an increased ability to use
lighter hydrocarbons as feedstock. Use of LPG could accelerate based on increased supply of US LPG into Asia coupled
with the widening spread between LPG and naphtha prices.
CNOOC Oil & Petrochemicals Co. Ltd., a subsidiary of
China National Offshore Oil Corp. (CNOOC), in April let
a contract to Praxair Inc., Danbury, Conn., to provide in-

Oil & Gas Journal | July 6, 2015

dustrial gases to support expansion of its 12 million-tpy

Huizhou refinery in Guangdong province, China (OGJ Online, Apr. 27, 2015).
As part of the contract, Praxair will build, own, and
operate two 2,400-tonne/day air separation plants in the
Huizhou Daya Bay Chemical Industrial Park to supply oxygen and nitrogen to support CNOOCs expansion of crude
oil processing capacity at the Huizhou refinery to 22 million
tpy, Praxair said.
Praxair will start delivery of industrial gases for the expansion beginning in 2017, said the service provider, which
already supplies specialty gases both to the existing Huizhou
refinery and the CNOOC-Shell Petrochemicals Co. Ltd. 5050 joint ventures 2.3 million-tpy Nanhai petrochemical
complex, also in Guangdong province (OGJ Online, May 7,
2010).
In late 2013, CNOOC let a contract to Technip for the
supply of its proprietary ethylene technology and process
design package for the grassroots 1 million-tpy ethylene
plant to be built as part of Huizhous Phase-2 integration
project, which Chinas National Development and Reform
Commission approved in May 2013.
Both the Huizhou expansion, which would boost the refinerys crude oil processing capacity by another 10 million
tpy, and the associated ethylene plant are due to be commissioned during 2016-17, according to the most recent updates
from CNOOC (OGJ Online, Feb. 2, 2015; Dec. 20, 2013).
According to FGE, CNOOC is considering using LPG for
the Guangdong ethylene cracker (OGJ, June 1, 2015, p. 58).
In late 2014, Malaysiaian olefins producer Lotte Chemical Titan (M) Sdn. Bhd., a subsidiary of South Koreas Lotte
Chemical Corp., let a contract to KBR Inc. for revamp of an
existing steam cracker plant at its 300-acre integrated petrochemical complex located across five sites in Pasir Gudang
and Tanjung Langsat in Johor, Malaysia (OGJ Online, Dec.

81

TECHNOLOGY
2, 2014).
In addition to basic engineering design services for the
project, KBR will provide licensing for its proprietary catalytic olefins technology, which converts olefinic, paraffinic,
or mixed streams into propylene and ethylene.
The project is intended to increase the plants olefins production capacity as well as help to diversify its feedstock
slate.
Lotte Chemical Titans production site in Malaysia consists of 11 production plants, 2 cogeneration plants, and 3
tank farms connected by a system of underground pipelines,
shared utilities, and controls that enable the sites to operate
as a single integrated petrochemicals complex, according to
the companys web site.
The Malaysian complex hosts two naphtha steam crackers with a combined ethylene production capacity of about
720,000 tpy, said parent company Lotte Chemical.
Lotte Chemical had yet to determine the investment cost
for the planned expansion of its Malaysian steam cracking
operations, which is scheduled for mechanical completion
in 2017.
The expansion project would increase the complexs production capacities for ethylene by 92,000 tpy, for propylene
by 170,000 tpy, and for BTX by 134,000 tpy, Lotte Chemical said.
Following a March 2014 agreement, Asahi Kasei Corp.
and Mitsubishi Chemical Corp. are advancing plans to unite
their naphtha cracking operations in Mizushima, Japan
(OGJ Online, Mar. 7, 2014).
The companies have concluded an agreement to establish
Asahi Kasei Mitsubishi Chemical Ethylene Corp., an equally
held joint venture for the operation of the unified naphtha
cracker in Mizushima, according to May 28 releases from
Asahi Kasei and Mitsubishi Chemical.
After start-up of the joint venture on Apr. 1, 2016, Nishi Nippon Ethylene LLP, which currently operates the
Mizushima naphtha crackers, will remove and dispose of
equipment resulting from unification of the crackers, the
companies said.
Asahi Kasei will shutter the 500,000-tpy naphtha cracker
at its Mizushima plant and share in the operation of the existing 500,000-tpy cracker at Mitsubishis nearby complex.
Unification of operations is scheduled for April 2016 following a planned upgrade to the naphtha cracker at Mitsubishis
plant, which will boost its ethylene capacity to 570,000 tpy
(OGJ, July 7, 2014, p. 90).
The companies, which established Nishi Nippon Ethylene in April 2011 to unify management of their respective
Mizushima naphtha crackers, made the decision jointly to
operate a single cracker.
But previously announced capacity closures in Japan remain ongoing (OGJ, July 7, 2014, p. 90; July 1, 2013, p. 90).
Mitsubishi in 2014 shuttered its No. 1 ethylene unit with
a capacity of 390,000 tpy at its Kashima complex in east-

82

ern Japan to reduce fixed costs by $50 million/year after

boosting capacity of the plants No. 2 unit by 50,000 tpy to
540,000 tpy.
Sumitomo Chemical plans to close an ethylene plant at its
petrochemical plant at Chiba on or before September 2015.
Elsewhere, Malaysias state-owned Petronas, through a
contractor, let a contract to CB&I for the engineering and
supply of ethylene heaters for its refinery and petrochemical integrated development (RAPID) complex at Pengerang
in southeastern Johor, Malaysia (OGJ Online, Oct. 3, 2014;
May 13, 2011).
Under the contract, valued at more than $200 million,
CB&I will deliver its proprietary SRT VII cracking heaters to
the RAPID complex, which will produce 1.1 million tpy of
ethylene. Petronas previously awarded CB&I the complete
steam cracker technology package under a separate contract
(OGJ Online, July 13, 2012).
In addition to the naphtha steam cracker and a 300,000b/d refinery, other associated installations to be included in
RAPID will be Regasification Terminal 2 (RGT2), an air-separation unit, as well as crude and product tanks (OGJ Online, Aug. 11, 2014).
Last July, Petronas estimated the cost of RAPID at $16
billion, while associated installations for the project will
involve an additional investment of about $11 billion (OGJ
Online, July 25, 2014).
Elsewhere in the region, Reliance Industries Ltd. (RIL),
Mumbai, commissioned a purified terephthalic acid (PTA)
plant at its Dahej petrochemical manufacturing site near
Bharuch, in Indias Gujarat state (OGJ Online, Apr. 10, 2015).
The 1.15 million-tpy PTA plant, which is equipped with
process technology from INVISTA Performance Technologies, will use paraxylene feedstock from RILs nearby 1.24
million-b/d Jamnagar refinery to boost the companys total
PTA capacity to 3.2 million tpy, RIL said.
A second PTA plant of similar capacity already is under
construction at the Dahej complex, RIL said.
The Dahej manufacturing site also includes an ethanepropane recovery unit, gas cracker, caustic chlorine plant,
and four downstream plants for the production of polymers
and fiber intermediates.
RIL recently also has let a series of contracts for work
related to the Phase 3 expansion project at the Jamnagar
complex (OGJ Online, Feb. 26, 2015; Aug. 8, 2014; Jan. 22,
2014).
Known as J3, the project is designed to increase production capacity of ethylene and other petroleum products at
the complex, which includes expanding Jamnagars gasification plants, ethylene cracker complex, and paraxylene plant.
The refinery off-gas cracker expansion would increase
Jamnagars production capacities as follows: ethylene to
3.248 million tpy from 1.883 million tpy; propylene to
913,000 tpy from 759,000 tpy; MEG to 1.466 million tpy
from 733,000 tpy; LDPE to 590,000 tpy from 190,000 tpy;

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
HDPE and linear LDPE to 1.478 million tpy from 928,000
tpy; and paraxylene to 3.656 million tpy from 1.856 million
tpy (OGJ Online, May 3, 2012).
Indian Oil Corp. Ltd. (IOC) has approved a series of expansions and upgrades designed to improve fuel quality and
production at several of its refining and petrochemical operations in India (OGJ Online, Feb. 19, 2015).
The companys board at its Feb. 13 meeting approved a
total investment of 78.18 billion rupees ($1.259 billion) for
the projects, IOC said in a filing to Indias BSE Ltd. (formerly
Bombay Stock Exchange).
In addition to projects at the Koyali refinery in Gujarat
and the Barauni refinery in Bihar, the company will invest
8.9 billion rupees ($143 million) both for the construction of
a dedicated naphtha pipeline from Jaipur, Rajasthan, to Panipat, and for augmentation of IOCs 1,056-km (about 655mile) Koyali-Sanganer products pipeline to help meet naphtha feedstock requirements at its 2.3 million-tpy naphtha
cracker at Panipat in Haryana, according to the filing.
At Paradip, on Indias northeastern coast, the company
will invest 37.52 billion rupees ($604.5 million) on an ethylene glycol project, along with associated installations, IOC
said.
Designed to help IOC consolidate its glycol business, the
project would result in the production of low-cost MEG using off-gas from fluid catalytic cracking operations at the
companys Paradip refinery, which is scheduled to reach its
full processing capacity of 15 million tpy later this year (OGJ
Online, Dec. 1, 2014). Detailed timelines for the newly announced projects, however, were not disclosed.

Russia, Europe
Shell Chemicals Ltd., a Shell subsidiary, completed upgrades to improve efficiency and boost production volumes
at its Shell Deutschland Oil GMBHoperated petrochemicals plant at Wesseling, Germany, which together with the
Godorf refinery near Cologne-Godorf, comprise Shells
325,000-b/d integrated Rheinland refinery, Germanys largest (OGJ Online, Mar. 17, 2015; Jan. 11, 2012; Aug. 4, 2009).
The revamp, which involved modifications to furnaces,
compressors, column systems, tubes, and pipes at the complexs 2A naphtha steam cracker, lowered stack temperatures
and reduced fuel consumption at the plant. The project also
has enabled the upgraded 2A steam cracker to increase production of ethylene, propylene, butane, and pygas by 15%,
according to the company.
The decision to increase throughput and improve feedstock flexibility at the 2A cracker came in late 2011, following the shuttering of the Wesseling plants 2B cracker as part
of Shells strategy to strengthen both its refining-chemicals
integration and feedstock position at core manufacturing locations across the world.
During 2014, Wesselings 2A steam cracker, which receives advantaged feedstock and absorbs byproduct streams

Oil & Gas Journal | July 6, 2015

from the nearby Godorf site, had an ethylene production capacity of 272,000 tpy, according to Shells website.
Shell, however, did not disclose details regarding either
the impact to processing units or current status of operations at the Wesseling olefins plant following a May 10 fire
that broke out in a cracker furnace at the site (OGJ Online,
May 11, 2015).
In September 2014, Borealis AG, Vienna, let a service contract to Neste Jacobs Oy of Finland for work related to an
upgrade of the ethane steam cracker at subsidiary Borealis
ABs petrochemical complex in Stenungsund, Sweden (OGJ
Online, Sept. 16, 2014).
Neste Jacobs will deliver engineering, procurement, and
construction management services for an upgrade of the
crackers processing section to enable increased cracking of
ethane at the unit. The upgraded steam cracker, which is
designed to produce 625,000 tpy of ethylene, will process
ethane feedstocks Borealis imports from the US.
Borealiss total investment for the project, which will include the addition of an ethane storage tank, is about $155.4
million. A timeframe for the project was not disclosed, but
Borealis signed a 10-year contract to buy ethane from Antero
Resources through Marcus Hook, Pa., starting in 2016 (OGJ,
June 1, 2015, p 67).
In November 2014, Petkim Petrochemicals Holding Co.
completed an expansion of its ethylene plant in Aliga, Izmir,
Turkey, the company said in its 2014 annual report to investors. The $118 million expansion project boosted ethylene
production capacity at the plant by 13% to 588,000 tpy from
a previous 520,000 tpy, according to a May presentation by
Petkim.
In April, Lukoil resumed production of ethylene and propylene at its 350,000-tpy Stavrolen petrochemical complex
in Budennovsk, Russia, following a February 2014 fire in
the plants ethylene production unit gas separation area (OGJ
Online, Apr. 7, 2015; Feb. 27, 2014).
As part of the repair and maintenance work, which was
completed according to the approved schedule, Lukoil also
carried out a project to expand the ethylene units capacity to
process straight-run naphtha and LPG feedstock supplied to
Stavrolen via rail from the companys Russian refineries and
gas processing plants.
The upgrading project included reconstruction of cracking furnaces, fuel-gas skids, gas feedstock evaporation complexes, and water-flush columns, the company said.
Lukoil, however, did not disclose current ethylene production rates at the complex.
In addition to the modernization of existing ethylene and
PE units at the Stavrolen complex, the first stage of a 2 billion-cu m/year gas processing plant also was scheduled to be
commissioned this year, Lukoil has said.
ZapSibNeftekhim LLC, a subsidiary of Russian petrochemical manufacturer OAO SIBUR Holding, Moscow, started construction this year on its long-planned integrated ethylene,

83

TECHNOLOGY
PE, and polypropylene (PP) production complex at Tobolsk in
Western Siberias Tyumen region (OGJ Online, Feb. 20, 2015).
The first foundations were laid for the ZapSibNeftekhim
(ZapSib-2) complex, which will include a 1.5 million-tpy
ethylene steam cracker, four PE production units with a
combined production capacity of 1.5 million tpy, a 500,000tpy PP production unit, and a 100,000-tpy butane-butylene
fractionation (BBF) unit, SIBUR said.
The start of construction follows the January issuance of
requisite permits by Tobolsks local government, which followed approval of final designs for the ZapSib-2 project by
Russias Glavgosexpertiza (General Board of State Expert Review) in late 2014.
Most on site preparations already have been completed,
and contracts for detailed design work, equipment, and material supplies for the complexs key process units have been
signed and initiated, SIBUR said.
First announced in 2012 and recently valued at a total capital cost of $9.5 billion, ZapSib-2, may face further delays.
Given the large capital investment required for the project, as well as the recent downturn in market conditions,
the budget for ZapSib-2 now will be adjustable subject to
exchange rates and the price of oil, which could change the
projects timeline, the company said.
As of late 2014, ZapSib-2 was scheduled to be commissioned in 2019-20, SIBUR said in a report to investors.
SIBUR awarded the following engineering and technology-related contracts for ZapSib-2s major units shortly after
announcing the project:
Linde AG to provide licensing and FEED for the 1.5
million-tpy ethylene plant (OGJ Online, June 22, 2012).
Ineos Technologies Ltd. to provide licensing for its proprietary Innovene G and Innovene S processes for the manufacture of linear LDPE and HDPE. The two 400,000-tpy
Innovene G plants and two Innovene S plants will produce
the full range of Ziegler monomodal, Ziegler bimodal, chromium, and metallocene products for Russian and export
markets, Ineos said in a June 29, 2012, release.
Technip SA to provide FEED for the PE plant, the service provider said in a June 27, 2012, release.
LyondellBasell to provide its Spheripol process technology for the single-line, 500,000-tpy PP plant, according
to a July 9, 2012, release from LyondellBasell.
ThyssenKrupp AG to provide FEED for the PP plant,
according to an Aug. 21, 2012, release from ThyssenKrupp.
SIBUR also said it recently has let a contract to Russias
OAO NIPIgazpererabotka to design infrastructure and off
site installations for the project.
To be located near SIBURs current Tobolsk polymer production site, ZapSib-2 will have direct access to gas fractionation capacity at those installations, where fractionation capacity in March 2014 was expanded to 6.6 million tpy from
3.8 million tpy specifically to handle growing volumes of
raw NGL supplies for the new project, the company said.

84

In 2014, SIBUR also completed construction of the PurovskPyt-YakhTobolsk pipeline, a 1,100-km raw NGL
pipeline that will have throughput capacities of about 4 million tpy between Purovsk and SIBURs loading rack in Noyabrsk, 5.5 million tpy between Noyabrsk and Pyt-Yakh, and
8 million tpy between Pyt-Yakh and Tobolsk, SIBUR said in
a recent report to investors.
Once fully commissioned in 2015, the company said it
expects the new pipeline will further ensure raw NGL feedstock supplies for ZapSib-2.

Middle East
State-owned TurkmenGaz, through a subcontractor, let a
contract to Metso Corp., Helsinki, in April to supply valve
technology for a $3-billion petrochemical complex under
construction in the Turkmenbashi district of Balkan province in western Turkmenistan (OGJ Online, Apr. 20, 2015).
This latest contract follows TurkmenGazs previous contract award to a consortium of Toyo Engineering Corp.,
Hyundai Engineering Co. Ltd., Hyundai Engineering &
Construction Co. Ltd., and LG International Corp. for engineering, procurement, construction, and commissioning of
the complex (OGJ Online, May 12, 2014).
The complexwhich will use gas sourced from Caspian
Sea fields to produce 400,000 tpy of ethylene, HDPE, and
80,000 tpy of PPis scheduled to be completed in 2018.
Last August, Oman Oil Refineries & Petroleum Industries Co. (ORPIC) let a contract to LyondellBasell for PP technology to be implemented at the Liwa Plastics Project (LPP)
in Omans Sohar Industrial Port Area (OGJ Online, Aug. 7,
2014).
LyondellBasell will provide its Spheripol PP process technology for LPPs 300,000-tpy PP plant. Scheduled for completion in 2018, LPP also will include a grassroots 800,000tpy ethylene plant, a pygas unit, a methyl tertiary butyl ether
(MTBE) and butene-1 unit, two polymer plants, a gas plant
and pipeline, and related offsites and utilities (OGJ Online,
Mar. 31, 2014).
ORPIC previously said that LPP, which will be adjacent to
the companys existing refinery and petrochemical plants at
Sohar, is valued at $3.6 billion (OGJ Online, Mar. 31, 2014).
The contract follows a previous award of additional contracts for technology licensing and engineering design of
three units for LPP to CB&I (OGJ Online, July 16, 2014), including the new 90,000-tpy high-conversion MTBE unit, as
well as technology for a 41,000-tpy butene-1 recovery unit.
CB&I said it also will provide its NGL-MAXSM gas processing technology for an 18 million-cu m/day NGL extraction plant.
LPP is scheduled for completion in 2018, the state-owned
company said.

Oil & Gas Journal | July 6, 2015

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015

Leena Koottungal
Survey Editor/News Writer

Capacities as of Jan. 1, 2015

Total
nameplate
capacity,
tonnes/year

Typical feedstock or feedstock mixture

on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

Company

Location

ALGERIA
Sonatrach
Total Algeria

Skikda

133,000
133,000

ARGENTINA
Dow Chemical Co.
Dow Chemical Co.
Huntsman Corp.
Petrobras Energia
Petrobras Energia
Total Argentina

Bahia Blanca (BB1)

Bahia Blanca (BB2)
San Lorenzo
Puerto San Martin
San Lorenzo

275,000
490,000
21,000
32,500
20,000
838,500

100
100

AUSTRALIA
Huntsman Chemical Co. Australia Ltd.
Qenos Pty. Ltd.
Qenos Pty. Ltd.
Total Australia

Melbourne, Vic.
Altona, Vic.
Botany, NSW

32,000
205,000
290,000
527,000

100
90
90

AUSTRIA
OMV AG
Total Austria

Schwechat

500,000
500,000

15

AZERBAIJAN
Azerichimia
Azerichimia
Total Azerbaijan

Sumgait
Sumgait

30,000
300,000
330,000

BELARUS
Production Association Polymir
Production Association Polymir
Total Belarus

Novopolotsk
Novopolotsk

73,000
120,000
193,000

BELGIUM
BASF Antwerpen NV
Benelux FAO
Benelux FAO
Total Belgium

Antwerp
Antwerp
Antwerp

1,080,000
580,000
570,000
2,230,000

BRAZIL
Braskem SA
Braskem SA
Copesul
Copesul
Petroquimica Uniao SA
Rio Polimeros
Total Brazil

Camacari, Bahia
Camacari, Bahia
Triunfo, RS
Triunfo, RS
Santo Andre, Sao Paulo
Duque de Caxias

600,000
680,000
700,000
500,000
500,000
520,000
3,500,000

BULGARIA
Lukoil Neftochim Bourgas JSC
Lukoil Neftochim Bourgas JSC
Total Bulgaria

Bourgas
Bourgas

250,000
150,000
400,000

3.4

CANADA
Dow Chemical Co.
Imperial Oil Products & Chemicals
Nova Chemicals Corp.
Nova Chemicals Corp.
Nova Chemicals Corp.
Nova Chemicals Corp.
Total Canada

Ft. Sask., Alta.

Sarnia, Ont.
Corunna, Ont.
Joffre, Alta. (E1)
Joffre, Alta. (E2)
Joffre, Alta. (E3)

1,285,000
300,000
839,002
725,624
816,327
1,269,841
5,235,794

100
33
25
100
100
100

CHINA
BASF-YPC Co. Ltd.
China National Offshore Oil Co.

Oil & Gas Journal | July 6, 2015

Nanjing
Daya Bay, Guangdong

25
100
100

16
16

75

10
10

6
16
16

23

62

18
18

94
50
50

95
100
100
100
100

10

33
30

34
20

86.6
100

25

600,000
950,000

85

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015 (CONTINUED)

Company

Location

China National Offshore Oil Co.

China Petrochemical Industrial Corp.
Dalian Petrochemical Co.
Fujian Petrochemical Co. Ltd.
Fushun Petrochemical Complex
Gaoqiao Petrochemical Co.
Guangzhou Petrochemical Co.
Jilin Chemical Industrial Co. Ltd.
Lanzhou Chemical Industrial Co.
Norinco/Zhenhua
Panjin Ethylene Industry Corp.
Petrochina
Petrochina
Saudi Basic Industries Corp.
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Sinopec
Total China

Dushanzi
Daqing
Dalian
Quanzhou
Fushun
Gaoqiao
Guangzhou
Jilin
Lanzhou
Panjin
Panjin
Dushanzi
Liaoning Province
Tianjin
Beijing
Caojing, Shanghai
Caojing, Shanghai
Guangzhou, Guandong
Maoming, Guangdong
Neijing
Puyang, Henan
Qilu
Tianjin
Tianjin
Zhenhai

CHINA, TAIWAN
Chinese Petroleum Corp.
Chinese Petroleum Corp.
Chinese Petroleum Corp.
Formosa Petrochemical Corp.
Formosa Petrochemical Corp.
Formosa Petrochemical Corp.
Total China, Taiwan

Kaohsiung Linyuan
Linyuan
Linyuan
Mailiao
Mailiao
Mailiao

COLOMBIA
Empresa Colombiana de Petroleos
Total Colombia

Barrancabermeja

CROATIA
Polimeri
Total Croatia

Typical feedstock or feedstock mixture

on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

140,000
320,000
4,000
800,000
115,000
14,000
150,000
700,000
700,000
480,000
130,000
1,000,000
800,000
1,200,000
660,000
145,000
700,000
140,000
380,000
650,000
180,000
720,000
200,000
1,000,000
1,000,000
13,878,000

30
30
60
100
100
60
100
80
100

500,000
720,000
385,000
700,000
1,035,000
1,200,000
4,540,000

6.8
6.8
0.6

0.8
5.8

100
100
100
93.2
92.4
93.6

56

100,000
100,000

80

Zagreb

90,000
90,000

100

CZECH REPUBLIC
Unipetrol
Total Czech Republic

Litvinov

544,000
544,000

EGYPT
Sidi Kerir Petrochemicals Co.
Total Egypt

Alexandria

330,000
330,000

FINLAND
Borealis OY
Total Finland

Porvoo

330,000
330,000

100

Feyzin
Notre Dame de
Gravenchon
Lavera
Dunkerque
Berre l'Etang
Carling-St. AvoldMarienau

250,000
400,000

100
100

FRANCE
A. P. Feyzin
ExxonMobil Corp.
Naphthachimie
Versalis France SAS
Societe du Craqueur de L' Aubette SCA
Total Petrochemicals

86

Total
nameplate
capacity,
tonnes/year

740,000
370,000
450,000
320,000

70
70
40

40
20

20

50
16
12

50
76
75
100

Hydrowax-40

13

Oil & Gas Journal | July 6, 2015

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015 (CONTINUED)

Total
nameplate
capacity,
tonnes/year

Company

Location

Total Petrochemicals
Total France

Gonfreville l'Orcher

520,000
3,050,000

GERMANY
Basell Polyfine GMBH
Basell Polyfine GMBH
BASF AG
BP Gelsenkirchen
BP Gelsenkirchen
INEOS
INEOS
LyondellBasell
Dow Chemical Co.
OMV Deutschland GMBH
Shell & DEA Oil GMBH
Shell & DEA Oil GMBH
Total Germany

Wesseling
Wesseling
Ludwigshafen
Gelsenkirchen
Gelsenkirchen
Dormagen
Dormagen
Munchsmunster
Bohlen
Burghausen, Bavaria
Heide
Wesseling

738,000
305,000
620,000
576,265
484,000
550,000
544,000
320,000
560,000
450,000
110,000
500,000
5,757,265

GREECE
EKO Chemicals Co. AE
Total Greece

Thessaloniki

20,000
20,000

HUNGARY
Tiszai Vegyi Kombinat Ltd.
Tiszai Vegyi Kombinat Ltd.
Total Hungary

Tiszaujvaros
Tiszaujvaros

370,000
290,000
660,000

INDIA
Gas Authority of India Ltd.
Haldia Petrochemicals Ltd.
Indian Oil Corp. Ltd.
Indian Petrochemicals Corp. Ltd.
Indian Petrochemicals Corp. Ltd.
Indian Petrochemicals Corp. Ltd.
Reliance Industries Ltd.
Total India

Pata, Uttar Pradesh

Haldia, West Bengal
Haryana, New Delhi
Baroda, Gujarat
Gandhar, Gujarat
Nagothane, Maharashtra
Hazira, Gujarat

INDONESIA
PT Chandra Asri
Total Indonesia

Cilegon, West Java

600,000
600,000

IRAN
Amir Kabir Petrochemical Co.
Arak Petrochemical
Arya Sasol Polymer Co.
Bandar Imam Petrochemical Co.
Jam Petrochemical Co.
Marun Petrochemical Co.
Tabriz Petrochemical Co.
Total Iran

Amir Kabir
Arak
Assaluyeh Bushehr
Bandar Imam
Assaluyeh Bushehr
Bandar Assaluyeh
Tabriz

520,000
247,000
1,000,000
311,000
1,320,000
1,200,000
136,000
4,734,000

IRAQ
Present Status Unknown
Total Iraq

100

10

90

5
2
1

5
12
11

13

17

17

2.5

90
73
64
100
100
53
100
84

100
13
23

1.5

65

.01
14.4

5
16.4

95
65.4

Ref. gas-35

3.8

100
100
35-50
35-50

50-65
50-65
100

24

12

58
100

20

10

80

10

10

80

100
100
65

67

ISRAEL
Carmel Olefins Ltd.
Total Israel

Haifa

ITALY
Versalis SPA
Versalis SPA
Versalis SPA
Total Italy

Brindisi
Porto Marghera
Priolo

Oil & Gas Journal | July 6, 2015

300,000
700,000
800,000
130,000
300,000
400,000
790,000
3,420,000

Typical feedstock or feedstock mixture

on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

200,000
200,000

440,000
490,000
490,000
1,420,000

32

87

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015 (CONTINUED)

Typical feedstock or feedstock mixture
on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

Company

Location

JAPAN
Asahikasei Chemicals Corp.
Idemitsu Petrochemical Co. Ltd.
Idemitsu Petrochemical Co. Ltd.
Keiyo Ethylene
Maruzen Petrochemicals
Mitsubishi Chemical Corp.
Mitsubishi Chemical Corp.
Mitsui Chemicals Inc.
Mitsui Chemicals Inc.
Nippon Petrochemical
Showa Denko KK
Tonen Chemical Corp.
Tosoh Corp.
Total Japan

Kurasiki, Okayama
Chiba
Tokuyama
Ichihara, Chiba
Chiba
Kashima (Unit 2)
Mizushima
Ichihara, Chiba
Takaishi City, Osaka
Kawasaki
Oita
Kawasaki
Yokkaichi

KAZAKHSTAN
Akpo
Government
Total Kazakhstan

Aktau
Atyrau

KUWAIT
Equate Petrochemical Co.
Equate Petrochemical Co. (Equate II)
Total Kuwait

Shuaiba
Shuaiba

LIBYA
National Oil Co.
Total Libya

Ras Lanuf

MALAYSIA
Ethylene Malaysia Sdn. Bhd.
Optimal Olefins Sdn. Bhd.
Titan Petrochemicals Sdn. Bhd.
Titan Petrochemicals Sdn. Bhd.
Total Malaysia

Kertih
Kertih
Pasir Gudang, Johor
Pasir Gudang, Johor

400,000
600,000
287,000
436,000
1,723,000

100
100

MEXICO
Petroleos Mexicanos
Petroleos Mexicanos
Petroleos Mexicanos
Total Mexico

La Cangrejera, Veracruz
Morelos, Veracruz
Pajaritos, Veracruz

600,000
600,000
184,000
1,384,000

100
100
100

NETHERLANDS
Dow Chemical Co.
Dow Chemical Co.
Dow Chemical Co.
SABIC Europe
SABIC Europe
Shell Nederland Chemie BV
Total Netherlands

Terneuzen (No. 1)
Terneuzen (No. 2)
Terneuzen (No. 3)
Geleen (No. 3)
Geleen (No. 4)
Moerdijk

580,000
585,000
635,000
595,000
670,000
972,000
4,037,000

NIGERIA
Eleme Petrochemical Co. Ltd.
Total Nigeria

Eleme River

NORTH KOREA
Namhung Youth Chemical Complex

Anju, South P'yong'an

Province

Total North Korea

NORWAY
Noretyl AS
Total Norway

88

Total
nameplate
capacity,
tonnes/year

484,000
374,000
450,000
768,000
525,000
453,000
540,000
553,000
450,000
450,000
600,000
505,000
493,000
6,645,000

10
5

100
98
100

20
5
10

55
80
90

NGL-15
NGL-10

100
100
100

100,000
30,000
130,000

800,000
850,000
1,650,000

100

350,000
350,000

10
10

10
10

15
15

80
80

85
85
100
100
100

300,000
300,000

NGL

60,000

60,000

Rafnes, Bamble

550,000
550,000

30

45

25

Oil & Gas Journal | July 6, 2015

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015 (CONTINUED)

Total
nameplate
capacity,
tonnes/year

Typical feedstock or feedstock mixture

on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

Company

Location

PHILIPPINES
JG Summit Petrochemical
Total Philippines

Batangas

320,000
320,000

POLAND
PKN Orlen SA
Total Poland

Plock

700,000
700,000

PORTUGAL
Repsol SA
Total Portugal

Sines

330,000
330,000

QATAR
Qatar Petrochemical Co.
Q-Chem I
Ras Laffan Olefins Co.
Total Qatar

Mesaieed
Mesaieed
Ras Laffan

720,000
500,000
1,300,000
2,520,000

100
80

20

ROMANIA
Petrom SA
Petromidia SA
Petromidia SA
Petrotel SA
Total Romania

Pitesti
Navodari
Constanta
Teleajen

200,000
200,000
224,000
220,000
844,000

19.5

8.5

23.7

48.4

10.7

5.0

54.7

5.2
5.2

89.2
89.2

RUSSIA
Angarskneftorgsintez
Angarskneftorgsintez
Lukoil
Nizhnekamskneftekhim
Norsy
Omskykauchuyk
Orgsintez
Orgsintez
Orgsintez
Oxosyntez
Polimir
Salavatneftorgsintez
Sibur Himprom
Sibur-Neftechim
Sintezkauchuk
Tomsk PCC
Uraorgsintes
Total Russia

Angarsk, Siberia
Angarsk, Siberia
Budennovsk
Nizhnekamsk
Omsk, Siberia
Kazan
Kazan
Kazan
Orsk
Salavat
Nizhny Novgorod
Tomsk
Ufa

SAUDI ARABIA
Al Jubail Petrochemical Co.
Arabian Petrochemical Co.
Arabian Petrochemical Co.
Arabian Petrochemical Co.
Chevron Phillips Chemical Co. LP
Eastern Petrochemical Co.
Jubail United Petrochemical Co.
Saudi Basic Industries Corp.
Saudi Kayan Petrochemical Co.
Saudi Petrochemical Co.
Saudi Polymers
Tasnee
Yanbu Petrochemical Co.
Yanbu Petrochemical Co.
Total Saudi Arabia

Jubail
Jubail
Jubail
Jubail
Jubail
Jubail
Jubail
Yanbu
Jubail
Jubail
Jubail
Jubail
Yanbu
Yanbu

SERBIA
HIP-Petrohemija
Total Serbia

Pancevo

Oil & Gas Journal | July 6, 2015

100

90

100

60,000
240,000
350,000
450,000
300,000
90,000
140,000
100,000
100,000
45,000
150,000
300,000
30,000
300,000
300,000
300,000
235,000
3,490,000

800,000
800,000
800,000
650,000
205,000
1,300,000
1,000,000
1,300,000
1,350,000
1,045,000
1,200,000
1,000,000
875,000
830,000
13,155,000

Kero.-29.6

5.6
5.6

100

100

20

50

50

50
100

50

80

100

100

100
16

16

18

50

200,000
200,000

89

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015 (CONTINUED)

Company

Location

SINGAPORE
ExxonMobil Chemical Co.
Jurong Island
ExxonMobil Chemical Co.
Jurong Island
Petrochemical Corp. of Singapore Pte. Ltd.Pulau Ayer Merbau
Petrochemical Corp. of Singapore Pte. Ltd.Pulau Ayer Merbau
Shell Eastern Petroleum Ltd.
Bukom Island
Total Singapore

Typical feedstock or feedstock mixture

on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

900,000
1,000,000
465,000
615,000
1,000,000
3,980,000

33

Bratislava

220,000
220,000

SOUTH AFRICA
Sasol Polymers
Sasol Polymers
Total South Africa

Sasolburg
Secunda

110,000
475,000
585,000

SOUTH KOREA
Honam Petrochemical
Korea Petrochemical Industries Co. Ltd.
LG Daesan Petrochemical
LG Petrochemical Co. Ltd.
Lotte Daesan Petrochemical
Samsung General Chemicals
SK Corp.
SK Corp.
Yeochon
Yeochon
Yeochon
Total South Korea

Yeochun
Onsan
Daesan
Yeochun
Daesan
Daesan
Ulsan
Ulsan
Yeochun
Yeochun
Yeochun

700,000
320,000
450,000
760,000
600,000
820,000
545,000
185,000
480,000
420,000
350,000
5,630,000

100
100
100
100
100
100
100
100
100
100
100

SPAIN
Dow Chemical Co.
Repsol SA
Repsol SA
Total Spain

Tarragona
Puertollano
Tarragona

580,000
100,000
600,000
1,280,000

100

SWEDEN
Borealis AB
Total Sweden

Stenungsund

SWITZERLAND
Lonza Ltd.
Total Switzerland

Visp

THAILAND
Map Ta Phut Olefins Co.
Rayong Olefins Ltd.
PTT Global Chemical
PTT Global Chemical
PTT Global Chemical
PTT Global Chemical
IRPC Public Co.
Total Thailand

Map Ta Phut, Rayong

Map Ta Phut, Rayong
Map Ta Phut, Rayong
Map Ta Phut, Rayong
Map Ta Phut, Rayong
Map Ta Phut, Rayong
Cherng Nern

TURKEY
Petkim Petrochemicals Holding Co.
Total Turkey

Aliaga, Izmir

588,000
588,000

Kalush

250,000
180,000
200,000
630,000

Lisichansk

625,000
625,000

8.3

80
75

Residue-34

13.5

20
5

78.2

20

Ref. streams

40

33,000
33,000

900,000
800,000
437,000
385,000
350,000
300,000
360,000
3,532,000

33

100
100

SLOVAKIA
Slovnaft AS
Total Slovakia

UKRAINE
Chlorvinyl
Oriana
TNK-BP
Total Ukraine

90

Total
nameplate
capacity,
tonnes/year

20

30

40

60

10

100
80
5
100

6
18

LPG-60
LPG-14
28

49

90

Ref. gas-10

100

100
100

Oil & Gas Journal | July 6, 2015

SPECIAL REPORT

I NTERNATIONAL SURVEY OF ETHYLENE FROM STEAM CRACKERS2015 (CONTINUED)

Company

Location

Total
nameplate
capacity,
tonnes/year

UNITED ARAB EMIRATES

Borouge Abu Dhabi Polymers Co. Ltd.
Borouge Abu Dhabi Polymers Co. Ltd.
Borouge Abu Dhabi Polymers Co. Ltd.
Total UAE

Ruwais, Abu Dhabi

Ruwais, Abu Dhabi
Ruwais, Abu Dhabi

600,000
1,450,000
1,500,000
3,550,000

UNITED KINGDOM
INEOS
ExxonMobil Chemical Co.
SABIC Europe
Total United Kingdom

Grangemouth
Mossmorran Fife
Wilton

730,000
400,000
865,000
1,995,000

UNITED STATES
BASF Fina Petrochemicals
Chevron Phillips Chemical Co. LP
Chevron Phillips Chemical Co. LP
Chevron Phillips Chemical Co. LP
Dow Chemical Co.
Dow Chemical Co.
Dow Chemical Co.
Dow Chemical Co.
Dow Chemical Co.
Dow Chemical Co.
DuPont
Eastman Chemical Co.
Equistar Chemicals LP (LyondellBasell)
Equistar Chemicals LP (LyondellBasell)
Equistar Chemicals LP (LyondellBasell)
Equistar Chemicals LP (LyondellBasell)
Equistar Chemicals LP (LyondellBasell)
Equistar Chemicals LP (LyondellBasell)
ExxonMobil Chemical Co.
ExxonMobil Chemical Co.
ExxonMobil Chemical Co.
Flint Hills Corp.
Formosa Plastics Corp. USA
Formosa Plastics Corp. USA
Huntsman Corp.
INEOS Olefins and Polymers USA
Javelina Co.
Sasol North America Inc.
Shell Chemicals Ltd.
Shell Chemicals Ltd.
Westlake Petrochemicals Corp.
Westlake Petrochemicals Corp.
Westlake Petrochemicals Corp.
Williams Olefins
Total United States

Port Arthur, Tex.

Cedar Bayou,Tex.
Port Arthur,Tex.
Sweeny,Tex.
Freeport (LHC 7),Tex.
Freeport (LHC 8),Tex.
Plaquemine (LHC 2),La.
Plaquemine (LHC 3),La.
Taft 1,La.
Taft 2,La.
Orange,Tex.
Longview,Tex.
Channelview,Tex.
Channelview,Tex.
Clinton,Iowa
Corpus Christi,Tex.
LaPorte,Tex.
Morris,Ill.
Baton Rouge,La.
Baytown,Tex.
Beaumont,Tex.
Port Arthur,Tex.
Point Comfort,Tex.
Point Comfort,Tex.
Port Neches,Tex.
Chocolate Bayou,Tex.
Corpus Christi,Tex.
Lake Charles,La.
Deer Park,Tex.
Norco,La.
Calvert CityKy.
Sulphur #1,La.
Sulphur #2,La.
Geismar,La.

UZBEKISTAN
Uzbekneftegaz
Total Uzbekistan

Shurtan

VENEZUELA
Pequiven-Petroquimica de Venezuela SA El Tablazo, Zulia
Pequiven-Petroquimica de Venezuela SA El Tablazo, Zulia
Total Venezuela
TOTAL WORLD

Oil & Gas Journal | July 6, 2015

860,000
835,000
855,000
1,950,113
630,000
1,010,000
520,000
740,000
590,000
410,000
680,000
781,000
875,000
875,000
476,000
771,000
1,189,000
550,000
1,000,000
2,200,000
900,000
634,921
816,000
725,000
180,000
1,752,000
151,000
471,655
1,179,138
1,451,247
285,714
567,000
630,844
884,354
28,425,987

Typical feedstock or feedstock mixture

on which listed capacity is based, %
Ethane
Propane
Butane
Naphtha Gas oil
Other

100
100
100

100
100
20

10

30
80

20
15

25
5

50
10
75

50
20
25
70
40

20
100
25
5
5
80
10
60
80
9
58
8

67

20
30
20
20
8
8
8

70

100
25

70
10

20
40

1
95
95
60
20

8
9
9

45
45

15
15

25
25
75
60
40
40

50

35

15

25

Residue-25

LPG-40

Ref. Gas-100
100
5
100
100
70
92

35

60

30
8

140,000
140,000

250,000
350,000
600,000

30
100

70

143,762,545

91

TECHNOLOGY

The price of oil and OPEChistory repeating?

Manouchehr Takin
International oil and energy consultant
London

Ramin Takin
Parkway Logic Ltd.
London

from $3/bbl in 1974, and to more than $35/bbl by

The world oil market today is characterized by a
about 1980. Bumper oil and gas industry revenues
standoff between the Organization of Petroleum
helped expand field operations around the world
Exporting Countries (OPEC) and non-OPEC proand subsidized the development of new technolducers amid excess supply. Financial markets,
ogy, resulting in a rapid increase in global oil prospeculators, and conspiracy, however, may have
duction.
played a role in creating this standoff. In the curBy the early 1980s, however, the aftereffects of
rently weaker oil-price environment, market playPROCESSING
the 1974 and 1980 price spikes contributed to a
ers are waiting to see who will blink first.
sharp decline in demand for oil, with demand parIn this article we seek to draw some lessons
ticularly weaker for OPEC oil.
from the past in order to shed light on nuances in
OPEC defended high oil prices by cutting its production
oil market fundamentals, as well as present some views on
at different intervals during 1980-85, reducing output from
OPECs response patterns.
OPEC-member countries to less than 15 million b/d from
about 30 million b/d.
Lessons from the past
Within OPEC, Saudi Arabia incurred the greatest proWhile there are other occasions when OPEC either has deduction losses. By 1985, about 60% of its production capaccreased or increased its production levels in response to
ity was idled (Fig. 1).
changing conditions in the world oil market, we will examAfter setting the price of oil since late 1973, in late 1985,
ine three cases of drastic drops in the price of oil: 2008,
OPEC announced that it would no longer reduce its produc1998, and 1986.
tion in support of prices and that it would start netback pricOil prices fell in late 2008 amid a drop in world demand
ing, i.e., letting the market decide the price of oil. Oil prices,
following the global financial crisis and economic contracas a consequence, fell to less than $10/bbl from nearly $30/
tion. Oil prices fell from nearly $150/bbl in July to about
bbl.
$40/bbl by late 2008-early 2009.
Some observers described OPECs action as a price war
Another case, in 1998-99, was due to both excess supply
with non-OPEC producers.
and weaker demand. The excess supply followed OPECs decision to increase its production quotas at a Nov.26 Dec. 1,
Industry stress, political pressures
1997, meeting in Jakarta.
In the 1986 and 1998-99 cases, OPEC called on non-OPEC
The decision to raise production rates was attributed to
producers to cooperate in helping stabilize the market by
a standoff between Saudi Arabia and Venezuela. The latter
reducing their production. Meetings took place between the
had been producing above its OPEC quota for about 4 years,
two groups of producers, as did a flurry of discreet and open
while Saudi Arabia and other members generally had curlobbying of OPEC by world politicians. Actual significant
tailed their production over that period.
cooperation by non-OPEC producers, however, did not maWhile the Jakarta decision to raise production quotas
terialize, despite statements and promises by various nonremedied that situation, higher OPEC output coincided with
OPEC-member governments.
economic crises in the Far East and Russia, as well as a drop
The lower oil-price environment eventually made highin oil demand. Oil prices, consequently, fell to less than $10/
cost production areas unprofitable, reducing cash flows
bbl from about $20/bbl.
for oil companies and forcing them to scale back activities.
A third case of a major decline in the price of oil occurred
Service companies, manufacturers, suppliers, and subconin 1986, when increased supply coincided with weaker detractors suffered from the loss of major contracts and were
mand. Much like current market conditions, a sustained peforced to downsize. Many oil and service companies went
riod of high oil prices created competitors for OPEC, with
bankrupt, and there were extensive layoffs across the global
non-OPEC producers increasing production levels.
oil industry.
Preceding this period, the price of oil rose to $11/bbl

92

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
Surviving companies had to lower
their exploration and capital expenditures, delay developing new fields,
and even reduce investments in maintenance for existing production fields.

SAUDI ARABIA: OIL PRODUCTION, CAPACITY

FIG. 1

14
Production

Capacity

12

Million b/d

10

Notable lessons

8
Although measures by the industry to
scale back spending resulted in a slow6
down in the growth ofor sometimes
an actual decrease inoil production,
4
it took several months, and sometimes
more than a year, to establish a new
2
supply-demand balance.
0
Expensive offshore platforms and
1985
2014
major onshore production installaSource: Worldwide oil and natural gas reserves, production, and refning tables in OGJ, Dec. 30, 1985, p. 63 and Dec. 1, 2014, p. 30; authors estimates
tions, for example, continued to operate because owning companies treated
their capital outlay as a sunk cost and
because their operating cash outflow was still below the
Underinvestment in the global industry occurred from
price of oil.
1998 until about 2004 because industry decision-makers
The impact to production occurred more quickly in cases
took years to gain confidence that the price of oil would not
where operating costs were too high or required more freagain fall back to $10/bbl or lower, as it did during the 1998quent capital expenditure. Many stripper wells, for example,
99 price collapse. Given the several-year lead times of upwere closed when they became due for costly maintenance
stream operations, when the industry did finally start to inwork.
crease investments in the mid-2000s, supply could not catch
The massive redundancies, recession, and crises in alup with years of strong growth in world oil demand (e.g.,
most all world oil provinces also forced politicians to act. In
Chinas economy).. Fear of a peak-oil crisis and new develop1986, for example, US Vice-Pres. George Bush visited Sauments in financial markets accentuated these factors, helpdi Arabia to meet with King Fahd bin Abdulaziz al Saud.
ing prices rise to nearly $150/bbl by July 2008.
Again, in 1998-99, US Secretary of Energy Bill Richardson
openly lobbied OPEC, including visits to some of its counExcess supply, weak demand
tries to meet with oil ministers.
In recent years the reverse has been happening, as the inIn order to restore balance to the world market, OPEC
dustrys field activities began to result in higher production,
eventually deemed it necessary to reduce its own producprompting the current oversupply and thus a reduced need
tion, choosing a lower production ceiling and allocating
for production from OPEC, the residual supplier. The accomsmaller quotas to its members.
panying table shows annual changes in world oil demand
The combination of OPECs decision to curtail producand supply met by non-OPEC producers during 2011-14.
tion and the fall in oil prices resulted in some actual reducSustained prices of more than $100/bbl since the late
tion to both OPEC and non-OPEC output.
2000s encouraged major investments in high-cost areas and
But the effects of reduced production were not immedithe application of new technology around the world, includate. It took more than a year before the world market stabiing US shale and tight rock plays, offshore West Africa, and
lized. This was particularly the case when the decision to cut
onshore-offshore East Africa.
production had been delayed and excess supply had gone
Another important but often unrecognized reason for
into inventories around the world, filling both onshore and
surplus oil supplies is improved performance of many older
offshore oil storage. The price of oil remained low until these
producing fields around the world due to the application of
inventories shrank to more normal levels, when it finally setnew technology. Production declines at these aging fields
tled lower compared with prices before the crisis.
have slowed, and in some cases, actually been reversed.
Social unrest, wars, lack of security, and the imposition of
Recent conditions
sanctions (e.g., Iraq, Libya, Nigeria, and Iran) kept some noThe oil price collapse in late 2014 appears to be broadly simtable oil producers out of the world market over the past few
ilar to previous price downturns. An imbalance appeared
years, but not enough to compensate for the surplus. And as
in the oil market, principally due to excess supply, and the
conditions in some of these areas have improved, more oil
price of oil fell sharply.
has reentered the world market.

Oil & Gas Journal | July 6, 2015

93

TECHNOLOGY
Global oil demand has been growing more slowly than supply due to
weak economies in Europe, North
America, Japan, China, and other regions. The global economy also has
improved its energy efficiency and is
using less oil by substituting other energies.
These factors put downward pressure on oil prices. Producers hoped
OPEC would follow precedent and cut
production to defend the price of oil.
In an echo of the past, OPEC called
on non-OPEC producers to cooperate

with it. In late 2014, oil ministers of

Saudi Arabia, Venezuela, Mexico, and
Russia met to discuss market conditions and the need for cutting production. Mexico and Russia, however, did
not agree to cuts.
A few days later, on Nov. 27, 2014,
OPEC ministers decided not to cut
production quotas for member countries, either.
Reflecting on the experience from
the first half of the 1980s, Saudi Arabia feared it would be forced to leave
much more than the current 2.7 mil-

lion b/d of its production capacity unused (Fig. 1).

Saudi Arabias oil minister has stated that OPEC does not want to keep
losing market share and that he is not
concerned with falling prices, even if
they reach $20/bbl.
UAEs oil minister, meanwhile, said
that producers of shale oil and other
non-OPEC production were acting irresponsibly. OPECs strategy is to gain,
or at least preserve, market share, setting up a price war similar to one that
occurred in 1986.

Moving ahead

NELSON-FARRAR COST INDEXES1

Refnery construction (1946 basis)
Explained in OGJ, Dec. 30, 1985, p. 145.

1962
Pumps, compressors, etc.
222.5
Electrical machinery
189.5
Internal-comb. engines
183.4
Instruments
214.8
Heat exchangers
183.6
Misc. equip. average
198.8
Materials component
205.9
Labor component
258.8
Refnery (infation) index
237.6

1980

2012

2013

2014

Mar.
2014

Feb.
2015

Mar.
2015

777.3

2,170.6

2,221.1

2,271.9

2,264.2

2,306.7

2,309.5

394.7

514.8

516.7

515.8

515.5

516.8

516.8

512.6

1,047.0

1,046.8

1,052.9

1,051.4

1,060.3

1,058.4

587.3

1,477.0

1,509.9

1,533.6

1,520.6

1,528.4

1,536.4

618.7

1,220.9

1,293.3

1,305.0

1,305.0

1,305.0

1,305.0

578.1

1,286.1

1,317.5

1,335.8

1,331.4

1,343.5

1,345.2

629.2

1,579.7

1,538.7

1,571.8

1,568.2

1,490.7

1,469.9

951.9

3,055.6

3,123.4

3,210.7

3,181.4

3,259.8

3,260.1

822.8

2,465.2

2,489.5

2,555.2

2,536.1

2,552.2

2,544.1

Refnery operating (1956 basis)

Explained in OGJ, Dec. 30, 1985, p. 145.

Fuel cost
Labor cost

1962

1980

2012

2013

2014

Mar.
2014

Feb.
2015

Mar.
2015

100.9

810.5

968.1

1,123.7

1,264.8

1,400.4

946.6

954.2

93.9

200.5

287.9

308.3

312.8

326.3

315.4

297.0

123.9

439.9

1,407.5

1,506.4

1,541.3

1,562.4

1,615.1

1,609.6

131.8
Invest., maint., etc.
121.7
Chemical costs
96.7
Operating indexes2

226.3

489.4

489.1

493.1

478.9

512.1

542.0

324.8

896.5

905.3

939.4

932.4

948.8

945.7

229.2

517.2

502.6

472.3

477.4

437.9

442.1

Wages
Productivity

Refnery

103.7

Process units

103.6

312.7

637.5

661.8

688.5

703.2

661.9

654.7

457.5

739.0

802.6

865.3

914.4

758.0

754.1

These indexes are published in the frst of each month and are compiled by Gary Farrar, OGJ Contributing Editor.
Add separate index(es) for chemicals, if any are used. Indexes of selected individual items of equipment and materials are
also published on the Quarterly Costimating page in frst issues for January, April, July, and October.
3
For correct values to March 2013 refnery construction and refnery operating indexes, see OGJ, Dec. 1, 2014, p. 87.
2

94

There has to be a political solution

with pressure on Saudi Arabia and the
other wealthy OPEC members, both
from within OPEC (Venezuela, Nigeria, Iran, Algeria, and others) and from
outside. Outside pressure, however, so
far has not been very effective.
The fall in oil prices should improve
the trade balance of net oil-importing
countries, and cheaper fuels should
strengthen their economies. These
countries, however, will face difficulties in the short-term.
The banking sector could face problems due to high exposure to some
parts of the oil sector and a concern
that many producers need $100+/bbl
prices to sustain their large debts. This
is particularly true of many medium
and small exploration and production
companies, as well as service companies, suppliers, and manufacturers exposed to high-cost operations.
The fracking companies may be under the greatest financial stress. Their
breakeven costs range from $30-70/
bbl, but their heavy gearing (e.g., using a high proportion of bank debt to
finance asset acquisitions) makes even
the lower-cost operators vulnerable.
International trade also is suffering
because of the drastic cut in revenues
of oil-exporting countries and the subsequent sharp reduction of their imports from Europe, North America,
Japan, and other OECD countries.
Countries heavily exposed to the oil
and banking sectors could experience

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
further recessionary pressure, unemANNUAL CHANGES IN GLOBAL OIL SUPPLY, DEMAND
ployment, and social stress.
2011-12
2012-13
2013-14
As on previous occasions, almost
Million b/d
World oil demand
0.9
1.2
1
all major and independent oil compaWorld oil supply (exclud0.6
1.5
2.2
nies around the world have announced
ing OPEC oil)
Demand for OPEC oil*
0.2
0.2
1.2
notable reductions of their exploration
and field development budgets for
*Totals may not add up due to independent rounding.
Source: OPEC Monthly Oil Market Report, February 2015
2015, as well as redundancies and other cost cutting measures.
These will result in lower oil production later in 2015 and, more noticeably, in the following
These intra-OPEC negotiations will eventually involve
years. Oil production declines could occur sooner where opheads of state capable of overriding the business decisions of
erating costs are high or where relatively heavy investment
their oil ministers and cutting production. Saudi Arabia may
is required for production maintenance or for drilling new
have to incur the greatest cuts.
wells to maintain rates of production. Fracing operations for
Pressure on politicians in the non-OPEC world also is
shale and tight formations fall into this group, as do stripbuilding. Non-OPEC producers have reduced output in the
per wells.
past. The Texas Railroad Commission, for example, imposed
High-cost operations with relatively short lead times,
smaller production quotas on oil companies in 1930-32 in
some highly leveraged, constitute a relatively larger share
response to the Great Depression (OGJ, July 28, 2003, p. 31).
of world oil supply today than in 1986. Some operators are
The current low-price regime will result in some reducfinding breathing room by negotiating lower prices with sertion of production in non-OPEC regions, but it will be insufvice companies, continuing to improve their operational effificient to raise the oil price to near its previous levels. Politiciency, and by virtue of current low-interest rates. Neverthecal pressure on OPEC to cut its own production will rise,
less, these are not enough to protect them from the realities
principally focused on Saudi Arabia and coming from both
of the oil market.
non-OPEC and OPEC countries. At the time of this writing
Concerns exist that productivity of wells fracked in existin January, we estimate this will not occur before autumn
ing formations may not be as high as the early wells focused
2015 and could occur much later.
on sweet spots. Highly leveraged operators may also find
If history repeats itself, the price of oil will begin to rise
themselves out of favor with the financial sector, leading to
until the market gradually stabilizes at a price lower than
a more rapid reduction of non-OPEC oil production than ocbefore the current crisis. The lower price, then, will encourcurred in 1986.
age higher consumption, prompting increased global oil deSome OPEC members (e.g. Saudi Arabia, Kuwait, the
mand. Higher demand, in turn, will lead to higher prices
United Arab Emirates, and Qatar), however, can tolerate an
and more field activity, which will increase supplies, and
extended drop in oil export revenues, as they could draw on
consequently, add downward pressure on oil prices once
healthy reserve funds or use their strong credit position to
again.
secure finance from the international banking system.
Other OPEC members, however, have smaller financial
OPECs future
reserves, larger populations, and already are suffering from
Extending the prognosis further, OPEC ultimately will debudget deficits. These countries cannot withstand the loss of
cide to lower its production ceiling and allocate new quooil revenues for long, creating tensions within OPEC.
tas to its members. This reversed course, however, will not
Saudi Arabia has the largest oil production capacity in
mean the organization is irrelevant, nor does it spell the end
OPEC (12.5 million b/d), with nearly 3 million b/d already
of OPEC.
unused. While this gives Saudi Arabia the flexibility in prinSimilar market conditions have occurred in the past. In
ciple to increase production and partly compensate for lower
spite of its shortcomings, OPEC is the only institution of
prices if world oil prices do not recover to $100/bbl levels,
commodity producers in the developing world that has its
other member countries already are producing near their
leaders meet regularly, its secretariat conduct systematic remaximum capacities. Some are above and some are below
search and market and policy analysis, and that has been
their theoretical production quotas because of technical
in existence for more than 50 years. It was established to
problems, imposed sanctions, politics, and lack of security.
strengthen the bargaining position of the producing counThey cannot compensate for the fall in prices by increasing
tries against the majors hegemony over the world oil martheir oil exports.
ket, the price of oil, and the volume of production from each
These countries are putting increasing pressure on Saudi
country.
Arabia to lower its output, raise the price, and provide them
OPEC may not have been nearly as successful as it was in
with much-needed oil revenue.
its early days had it not been for new independent oil compa-

Oil & Gas Journal | July 6, 2015

95

TECHNOLOGY
nies giving OPEC producers credible partnering alternatives
to the majors.
The industry, the world oil market, and the role of OPEC
have evolved over the decades. The price of oil is now decided by the market. While OPEC no longer determines the
price of oil, it tries to ensure the price is reasonable for its
purposes and that the market is stable, even though it may
be difficult to define these goals.
Tensions within the organization will not eliminate
OPECs influence on the market in the near term. Member
states have but to look at the fate of many other commodity
producers, which have a much weaker bargaining position
and have needed fair trade activism by consumers to help
them receive reasonable revenue, to be reminded of the perils of diminishing their strength.
It is probably with this in mind that OPEC is exercising
its influence now, in an echo of its actions from 1986.

during 1990-2014, where he examined technical and economic aspects of world oil supply
and demand, OPEC policy, investments, among
other topics. Before joining CGES, he worked for
9 years at the OPEC Secretariat in Vienna after
careers with Irans International Oil Consortium,
Amoco, Ultramar, National Iranian Oil Co., and
Shell, as well as the Geological Survey of Iran and Anglo-American/Charter Consolidated. Takin holds a BS in geology from
Manchester, a PhD in geophysics from Cambridge, and an MBA
from Industrial Management Institute, Tehran.
Ramin Takin (ramin.takin@takin.co.uk) is an
energy finance professional and start-up cofounder. He was vice-president of corporate
finance and development at Unaoil Group after
serving as managing director and risk manager
at Essdar Capital Ltd. Takin began his career
at Citigroup in London. Ramin holds a PhD in
quantitative finance from Imperial College, London in 2005, and
a masters in engineering, economics, and management from
University College, Oxford University, in 2001. He is an associate member of the Institution of Mechanical Engineers.

The authors
Manouchehr Takin (manouchehr.takin@gmail.com) is a
London-based independent global oil and energy consultant.
He was with the Centre for Global Energy Studies in London

TM

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Oil & Gas Journal | July 6, 2015

NelsoN-Farrar Quar
Indexes for selected equipment items
Gary Farrar

t e r l y

INDEXES FOR SELECTED EQUIPMENT ITEMS

Contributing Editor

The Nelson-Farrar refinery construction

index rose to 2,475.6 by December 2012
from 2,467.4 in January of the same year.
The index continued to rise over the next
2 years to reach 2,567.9 in December
2014.
The labor index rose to 3,252.2 in
December 2014 from 3,019.1 in January
2012, while the materials index decreased
to 1,541.5 from 1,639.8 during the same
period.
The miscellaneous equipment index
varied a modest 53 points from 2012-14.
Since the category includes manufactured
items, their costs are a measure of manufacturing efficiency.
The Nelson-Farrar refinery operations
index mildly rose during the 3-year period, while the process unit index experienced a near 100-point gain to reach
857.4 by December 2014. While changes
in the cost of refinery fuels accounted for
a great deal of oscillation in these two indexes from 2012-14, continued increases
in refinery operating efficiency helped stabilize values of both indexes.

Refnery construction Refnery operations

Material
Labor
Infation
Miscellaneous
Refnery
Process
component
component
Index
equipment
operations
units

Year
and
month
2012
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Year
2013
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Year
2014
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
Year

1,639.8
1,629.5
1,630.7
1,623.9
1,614.9
1,576.3
1,542.3
1,546.1
1,555.9
1,519.3
1,534.2
1,543.8
1,579.7

3,019.1
3,025.3
3,029.9
3,039.2
3,040.6
3,041.0
3,051.8
3,075.6
3,076.3
3,082.1
3,089.5
3,096.8
3,055.6

2,467.4
2,467.0
2,470.2
2,473.1
2,470.3
2,455.1
2,448.0
2,463.8
2,468.1
2,457.0
2,467.4
2,475.6
2,465.3

1,287.6
1,292.7
1,291.3
1,277.6
1,276.7
1,274.1
1,277.3
1,280.3
1,296.2
1,292.9
1,289.6
1,296.7
1,286.1

643.2
638.8
633.6
632.3
629.2
623.3
624.9
632.6
638.9
648.1
654.3
651.0
637.5

763.3
733.7
716.6
700.6
693.5
706.7
725.4
747.5
736.5
757.5
788.2
798.1
739.0

1,544.9
1,530.1
1,545.6
1,546.1
1,527.1
1,519.2
1,536.1
1,535.7
1,533.2
1,533.1
1,548.6
1,564.8
1,538.7

3,098.8
3,101.6
3,103.7
3,107.9
3,112.4
3,115.9
3,119.3
3,120.8
3,120.8
3,150.8
3,162.0
3,166.7
3,123.4

2,477.3
2,473.0
2,480.5
2,483.2
2,478.3
2,477.2
2,486.0
2,486.7
2,485.7
2,503.7
2,516.7
2,525.9
2,489.5

1,297.8
1,300.2
1,308.6
1,318.1
1,319.8
1,319.8
1,323.7
1,325.1
1,324.2
1,322.3
1,322.5
1,328.5
1,317.6

650.3
664.1
660.8
669.8
668.1
664.9
656.6
652.4
653.7
670.3
665.9
665.4
661.8

782.7
785.9
785.9
820.9
834.2
827.8
805.2
785.4
786.5
800.8
801.3
815.1
802.6

1,587.8
1,582.9
1,568.2
1,583.4
1,574.9
1,573.5
1,574.9
1,577.0
1,582.0
1,567.0
1,549.1
1,541.5
1,571.8

3,167.4
3,171.6
3,181.4
3,196.9
3,206.3
3,210.5
3,217.7
3,219.1
3,228.3
3,234.0
3,243.2
3,252.2
3,210.7

2,535.6
2,536.1
2,536.1
2,551.5
2,553.7
2,555.7
2,560.6
2,562.3
2,569.8
2,567.2
2,565.6
2,567.9
2,555.2

1,337.6
1,330.6
1,331.4
1,334.1
1,334.4
1,334.5
1,338.2
1,337.0
1,337.9
1,336.9
1,336.9
1,340.5
1,335.8

688.9
713.4
703.2
690.0
690.2
691.4
684.0
674.2
679.4
688.2
676.0
683.4
688.5

863.5
954.9
914.4
871.7
880.6
877.8
857.8
821.3
833.1
837.8
813.3
857.4
865.3

I TEMIZED REFINING COST INDEXES

The cost indexes may be used to convert prices at any date to prices at other dates by ratios to the cost indexes of the same
date. Item indexes are published each quarter (first week issue of January, April, July, and October). In addition the Nelson
Construction and Operating Cost Indexes are published in the first issue of each month of Oil & Gas Journal.

Operating cost
(based on 1956 = 100.)

1954

1972

2011

2012

2014

Power, industrial electrical

Fuel, refnery price
Gulf cargoes
NY barges
Chicago low sulfur
Western US
Central US
Natural gas at wellhead
Inorganic chemicals
Acid, hydrofuoric
Acid, sulfuric
Platinum
Sodium carbonate
Sodium hydroxide
Sodium phosphate
Organic chemicals
Furfural

98.5
85.5
85.0
82.6

84.3
60.2
83.5
96.0
95.5
100.0
92.9
90.9
95.5
97.4
100.0
94.5

131.2
152.0
130.4
169.6

168.1
128.1
190.3
123.1
144.4
140.7
121.1
119.4
136.2
107.0
87.4
137.5

968.2
1,166.7
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
3,692.9
1,216.2
414.9
439.1
1,379.9
801.4
1,098.4
844.2
1,117.6
1,612.8

1,042.4
923.8
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
2,499.5
1,215.3
414.9
439.1
1,224.5
800.8
1,097.6
844.2
1,048.9
1,513.7

1,077.8
1,211.5
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
3,912.8
1,083.7
414.9
439.1
1,098.4
714.0
978.6
844.2
1,002.4
1,446.5

1,094.6
900.8
3,403.2
3,460.4
3,238.2
4,176.7
3,368.3
2,386.8
1,116.2
414.9
439.1
1,044.4
735.5
1,008.1
844.2
796.1
1,148.9

82.6
90.4

87.5
47.1

625.0
500.3

625.0
500.3

625.0
500.3

625.0
500.3

MEK, tank-car lots

Phenol

98

Feb. 2015 *References

Code 0543
OGJ
OGJ
OGJ
OGJ
OGJ
OGJ
Code 531-10-1
Code 613
Code 613-0222
Code 613-0281
Code 1022-02-73
Code 613-01-03
Code 613-01-04
Code 613-0267
Code 614
Chemical Marketing
Reporter
Reporter
Code 614-0241

Index for earlier year in

Costimating and Questions
on Technology issues
No. 13, May 19, 1958, p. 181
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
July 7, 1975, p. 72
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
No. 4, Mar. 17, 1958, p. 190
Oct. 5, 1964, p. 149
Apr. 1, 1963, p. 119
No. 94, May 15, 1961, p. 138
July 5, 1965, p. 117
No. 58, Oct. 12, 1959, p. 186
No. 94, May 15, 1961, p. 138
No. 58, Oct. 12, 1959, p. 186
Oct. 5, 1964, p. 149
No. 58, Oct. 12, 1959, p. 186

No. 58, Oct. 12, 1959, p. 186

Oil & Gas Journal | July 6, 2015

o s t i m a t i N g
I TEMIZED REFINING COST INDEXES
Operating cost
(based on 1956 = 100.)

1972

2011

2012

2014

88.7
97.2

210.0
197.0

1,304.3
470.8

1,407.5
489.4

1,541.3
493.1

1,615.1
512.1

Employ & Earn

Employ & Earn

No. 41, Feb. 16, 1969

No. 41, Feb. 16, 1969

Construction labor cost (1946 = 100)

Skilled const.
174.6
Common labor
192.1
Refnery cost
183.3

499.9
630.6
545.9

2,684.9
3,540.2
2,985.6

2,746.0
3,636.7
3,055.6

2,866.3
3,848.5
3,210.7

2,914.4
3,901.3
3,259.8

Eng. News Record

Eng. News Record
OGJ

No. 55, Nov. 3, 1949

No. 55, Nov. 3, 1949
May 15, 1967, p. 97

161.4
143.6
144.7
193.1
188.1
159.1
141.1
138.5
159.9
157.7
171.2
161.9
150.5
171.7
190.7
156.8

151.0
173.8
154.6
198.5
197.8
181.2
238.0

324.4
212.4
252.5
322.8
274.9
342.0
218.4
199.6
216.3
211.0
271.0
149.3
233.3
274.3
266.7
281.9

278.5
346.5
328.4
272.4
353.4
303.9
310.6

1,809.1
1,106.1
1,381.3
1,953.3
1,667.3
952.7
1,247.9
998.1
513.7
1,070.2
1,346.8
821.1
1,036.0
1,153.6
1,067.3
1,153.0
1,136.1
1,405.4
1,987.7
1,469.9
2,039.0
1,151.1
797.9
1,644.4

1,804.9
1,136.8
1,338.5
2,020.7
1,718.2
935.0
1,270.5
1,016.7
514.8
1,098.6
1,368.3
815.7
1,047.0
1,220.9
1,133.7
1,229.3
1,199.2
1,424.4
2,027.4
1,477.0
1,960.4
1,210.0
870.6
1,793.9

1,827.1
1,204.8
1,375.6
2,077.9
1,743.1
963.2
1,360.7
1,086.9
515.8
1,125.3
1,400.6
798.2
1,052.9
1,305.0
1,178.5
1,320.9
1,312.7
1,457.9
2,099.7
1,533.6
2,014.9
1,489.7
1,025.0
2,112.1

1,815.1
1,228.6
1,388.6
2,101.7
1,740.2
973.8
1,395.2
1,120.4
516.8
1,125.8
1,404.7
773.9
1,060.3
1,305.0
1,178.5
1,320.9
1,312.7
1,461.9
2,100.1
1,528.4
2,038.2
1,435.4
990.2
2,041.0

Computed
Code 13
Code 1342
Code 135
Code 1015
Code 134
Code 132
Code 133
Code 117
Code 1173
Code 1175
Code 1174
Code 1194
Manufacturer
Manufacturer
Manufacturer
Manufacturer
Computed
Code 1042
Computed
Manufacturer
Code 81
Code 81102
Code 811-0332

July 8, 1962, p. 113

No. 61, Dec. 15, 1949
No. 20, Mar. 3, 1949
May 30, 1955, p. 104
Apr. 1, 1963, p. 119
No. 20, Mar. 3, 1949
No. 22, Mar. 17, 1949
Oct. 2, 1967, p. 112
May 2, 1955, p. 104
May 2, 1955, p. 104
May 2, 1955, p. 104
No. 31, May 19, 1949
No. 36, June 23, 1949
Mar. 16, 1964, p. 154
Mar. 16, 1964, p. 154
Mar. 16, 1964, p. 154
July 1, 1991, p. 58
June 8, 1963, p. 133
June 27, 1955
No. 34, June 9, 1949
July 4, 1988, p. 193
No. 7, Dec. 2, 1948
No. 7, Dec. 2, 1948
July 5, 1965, p. 117

159.9
165.9
161.9
159.0

278.5
324.4
269.1
231.8

1,434.7
1,752.3
1,904.6
1,278.4

1,480.2
1,824.2
1,956.2
1,399.3

1,540.5
1,899.9
2,017.8
1,424.6

1,559.5
1,921.7
2,012.2
1,423.6

Code 114
Code 112
Code 1191
Code 621

Feb. 17, 1949

Apr. 1, 1968, p. 184
Oct. 10, 1955, p. 267
May 16, 1955, p. 117

195.0
182.7
166.5
187.1
198.7
187.0
177.0
169.0
193.4
180.0
147.3
123.0
197.0

346.9
319.9
337.5
330.6
349.4
365.5
225.9
221.2
386.7
265.5
246.4
125.3
350.9

3,244.7
3,162.6
2,108.7
1,907.6
1,407.3
2,089.3
1,086.7
1,160.2
2,308.5
3,204.8
1,130.0
712.8
2,234.7

3,343.8
3,227.7
2,170.6
1,837.6
1,387.7
1,984.2
1,031.9
1,101.8
2,211.1
3,270.2
1,154.5
699.2
2,331.4

3,392.1
2,895.4
2,271.9
1,775.9
1,419.2
1,969.8
1,024.5
1,093.8
2,153.6
2,933.8
1,181.8
692.8
2,445.5

3,391.6
2,854.0
2,306.7
1,699.1
1,426.9
1,847.5
961.0
1,026.0
2,018.1
2,892.0
1,186.1
676.2
2,461.9

Code 1015-0239
Code 1017-0611
Code 1141
Code 1017
Code 1017-0831
Code 1017-0711
Code 1017-0733
Code 1017-0755
Code 1017-0400
Code 1017-0622
Code 1072
Computed
Code 1149

Jan. 3, 1983, p. 76
Jan. 3, 1983, p. 76
No. 29, May 5, 1949
Jan. 3, 1983, p. 73
Apr. 1, 1963, p. 119
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
Jan. 3, 1983, p. 73
No. 5, Nov. 18, 1949
Oct. 1, 1962, p. 85
No. 46, Sept. 1, 1940

Nelson-Farrar Refnery (Infation Index)

(1946)
179.8

438.5

2,435.6

2,465.2

2,555.2

2,552.2

OGJ

May 15, 1969

Nelson-Farrar Refnery Operation

(1956)

88.7

118.5

651.9

637.5

688.5

661.9

OGJ

No. 2, Mar. 3, 1958, p. 167

Nelson-Farrar Refnery Process Operation

(1956)
88.4

147.0

814.7

739.0

865.3

758.0

OGJ

No. 2, Mar. 3, 1958, p. 167

Operating labor cost (1956 = 100)

Wages and benefts
Productivity

Equipment or materials (1946 = 100)

Bubble tray
Building materials (nonmetallic)
Brickbuilding
Brickfreclay
Castings, iron
Clay products (structural, etc.)
Concrete ingredients
Concrete products
Electrical machinery
Motors and generators
Switchgear
Transformers
Engines (combustion)
Exchangers (composite)
Copper base
Carbon steel
Stainless steel (304)
Fractionating towers
Hand tools
Instruments (composite)
Insulation (composite)
Lumber (composite)
Southern pine
Redwood, all heart
Machinery
General purpose
Construction
Oil feld
Paintsprepared
Pipe
Gray iron pressure
Standard carbon
Pumps, compressors, etc.
Steel-mill products
Alloy bars
Cold-rolled sheets
Alloy sheets
Stainless strip
Structural carbon, plates
Welded carbon tubing.
Tanks and pressure vessels
Tube stills
Valves and fttings

Feb. 2015 *References

Index for earlier year in

Costimating and Questions
on Technology issues

1954

*Code refers to the index number of the Bureau of Statistics, US Department of Labor, Wholesale Prices Itemized Cost Indexes, Oil & Gas Journal.

Oil & Gas Journal | July 6, 2015

99

TECHNOLOGY

Lack of business drivers inhibits

UK gas storage development
Adrian Finn
Zak Loftus

Costain Group PLC

Manchester, UK

the gas as measured by the Wobbe Index (WI; see

Aging UK gas terminals require modification to
accompanying equation box).
maximize profitability and extend service life.
Gas production from the Irish Sea originalDevelopment of marginal fields will require rely blended low-WI gas with high-WI gas to meet
configuration of existing gas processing assets
transmission specification of between 47.20 and
and systems. Environmental legislation will con51.41 megajoules (MJ)/cu m, and this continued
tinue to direct industry change. The absence of
until large-scale cryogenic nitrogen removal bebusiness and regulatory drivers has prevented
TRANSPORTATION
came essential.3
several natural gas storage projects set to use deGas from the Irish Sea arrives at the Centrica
pleted gas reservoirs as long-term storage from
North Morecambe terminal with ~8% nitrogen
proceeding and is also inhibiting investment in
concentration. Integrated cryogenic nitrogen rejection that
fast-cycle onshore salt cavern storage. Continued failure to
uses a prefractionation column is part of gas treatment.4 This
address long-term gas storage will increase the UKs energy
minimizes power consumption and gives the lowest capital
security risk.
and project costs of the evaluated technologies. Subsequent
Production of UK natural gas began in the 1960s with
application of this technology to the 200-MMcfd gas treatdiscoveries made in the Southern North Sea. The discoverment plant at Connahs Quay, North Wales, processing gas
ies were largely methane, requiring little processing as the
from Liverpool Bay, reduced nitrogen concentration to less
gas met calorific value specification and contained negligible
than 5% from 11% (OGJ, Feb. 1, 1999, p. 36).
contaminants. Gas processing typically consisted of monoBefore 2005 domestic North Sea production provided
ethylene glycol (MEG)-based hydrate inhibition and dehymost of the natural gas consumed in the UK. Limited sumdration and Joule-Thomson (JT)-based refrigeration to meet
mer-winter price fluctuations provided few drivers for gas
National Transmission System (NTS) specification.
storage construction. After 2005, however, the UK became a
Silica gel-based adsorption was first used in the UK for
net importer of natural gas, depending on imports through
dewpointing natural gas in the late 1980s at the Easington
both dedicated pipelines with continental Europe and new
gas terminal, processing gas from partially depleted offshore
LNG terminals.
Rough field. Silica gel offers a method of meeting water and
Completion of a series of underground gas storage sites
hydrocarbon dewpoint in one reliable and simple system
in the UK in 2012, with one more last year, provided shortand removes the requirement for expensive machinery such
term storage to exploit daily price fluctuations and delivered
as turboexpanders and compressors. The process is best
a small increase in total UK storage capacity. Holford undersuited to lean gas at < 80 barg with a C6+ content of < 0.25
ground gas storage in Cheshire, designed and built in 2012
vol %, as the quantity of absorbent required for rich gases (>
for E.ON with purpose-built salt caverns, stores up to 160
0.75 vol % C6+) makes it uneconomical.1 2
million cu m of gas, with withdrawal and gas dewpointing
In the 1980s gas exploration extended into the Irish Sea,
rates up to 22 million cu m/day.
where discovery of fields with high concentrations of nitroExploration and field development in the North Sea congen, carbon dioxide, and hydrogen sulfide led to additional
tinues, albeit not rapidly enough to offset decreasing prodifficulties. Processing plants built in the 1990s addressed
duction from established assets. Recent activity includes
these contaminants. North Morecambe terminal is still one
Total SAs 1-tcf+ Laggan-Tormore development west of the
of the most complex processing plants in Europe. Inert gasShetland Islands, sanctioned in 2010, and Centricas 106ses such as nitrogen and carbon dioxide lower the quality of

100

Oil & Gas Journal | July 6, 2015

E.ONs purpose-built salt cavern storage in Cheshire, UK, stores up to 160 million cu m of gas, with withdrawal and gas dewpointing
rates up to 22 million cu m/day (Fig. 1).

bcf York field in the Southern North Sea that saw first gas
in 2012.
York field development included a new 120-MMscfd onshore processing plant at Centricas existing Easington terminal. Maximum reuse of existing equipment minimized
capital cost but directly engaged the UKs Control of Major
Accident Hazard (COMAH) top-tier regulations. A modular design approach, with unit bundles constructed offsite
before installation minimized both contractor exposure to
hazards and effects on terminal operation.

UK natural gas
UK gas production peaked in 2000 at 115 billion cu m
(bcm). It declined to 39 bcm in 2013. The UK has moved
to being a net importer (45 bcm, 2013) from a net exporter
(9 bcm, 2000). With future gas fields likely to be of lower
quality, optimizing ageing gas terminals is crucial and will
require reconfiguration of existing sites.
The Langeled pipeline began operations in 2006, measuring 1,166 km (about 725 miles) long with a 42-44 in. OD.
The pipeline ships gas to the UK from Nyhamna, Norway,
and can supply up to 26 bcm of the UKs 77 bcm/year consumption. Other pipelines connect the UK to Belgium, the

Oil & Gas Journal | July 6, 2015

EQUATIONS
WobbeIndex (WI) = calorific value (HHV) / specific gravity

Netherlands, and Norwegian gas fields; the UK-Belgium Interconnector (IUK), the UK-Netherlands pipeline (BBL), and
the Vesterled pipelines, respectively.
LNG arrives at three UK terminals: Isle of Grain in
Kent and the Dragon and South Hook terminals in Pembrokeshire, Wales. These terminals can import a combined
54 bcm/year, but only 25% of this capacity was used in 2012
due to increasing Asian demand for LNG, including surging Japanese demand following the 2011 Fukushima nuclear
incident.
LNG is typically used globally for local power generation,
and a wide heating value range is acceptable. UK imports,
however, enter the NTS, which has stringent specifications
for heating value and WI. To avoid LPG removal or ballasting with nitrogen to meet specifications, LNG imported
from Qatar is processed to remove NGL, including some of
the ethane, before liquefaction, with the removed products

101

TECHNOLOGY

Development of Centricas 106-bcf York field in the southern North Sea included a new 120-MMscfd onshore processing plant
inside the boundary of the companys existing Easington Terminal (Fig. 2).

used for ethylene production and heating. LNG from other

sources is often rich and above WI specification but all UK
LNG import terminals are equipped with nitrogen ballasting to reduce the heating value and WI before transmission.
Driven by technological advances and government incentives, future UK natural gas supplies are likely to come from
lower-quality marginal fields, typically with high nitrogen,
carbon dioxide, or sulfur.
UK gas storage capacity is only 4% of annual demand because strong production from the North Sea removed the
requirement for storage. With greater reliance on imports,
however, and increasing requirements for short-term storage to offset intermittent energy production from renewable
sources, gas storage has become critical to UK energy security.

Brownfield modification
With maturing assets and declining production, the profitability of gas in the UK is declining; 2014 saw profits slide
to near 5-year lows, as the cost of extracting diminishing reserves increased. Extensions to design life, compliance with
environmental legislation, and changing gas composition

102

from maturing fields and future developments are among

the issues contributing to this.
The most substantial problem in addressing maturing assets is working at COMAH top tier sites. These sites are subject to the highest degree of industry regulation and brownfield modification is inherently complex.

Environmental legislation
Environmental legislation prompts change within the gas
processing industry and often results in substantial modifications. The Montreal Protocol affected the industry globally, enforcing restrictions on use of hydrochlorofluorocarbons
(HCFC) from Jan. 1. The UK, among others, commonly used
HCFC refrigerant R22 (freon) in gas dewpointing plants because it provides effective low pressure drop dewpointing,
reducing costly sales gas compression.
The protocol prevents the charging of HCFC refrigerant
into existing systems, forcing terminals to invest in alternative technology to meet dewpoint specification. Two projects
at UK gas terminals (Dimlington and Barrow-in-Furness),
sought to remove reliance on R22 refrigeration, design and
build alternatives, bring them into accordance with the pro-

Oil & Gas Journal | July 6, 2015

TECHNOLOGY
tocol, extend asset life, and minimize
capital cost.
Decreasing offshore reservoir pressures require additional field compression to maintain system throughput and
achieve contractual discharge pressures.
The increasing need for compression
faces challenges from legislation such as
the European Unions (EU) Large Combustion Plant Directive (LCPD), affecting existing and future compressor installations with a thermal output greater
than 50 Mw. The directive enforces
stringent emission limits for NOx, SO2,
and particulates, with compliance set to
begin in 2016 and 2018.
The directive also requires a bestavailable technology (BAT) assessment
to establish the best solution for minimizing environmental emissions. Similar techniques are in place worldwide, The 400-MMscfd Teesside gas processing plant (TGPP) produced more than 900
with the US Environmental Protection tonnes/day (tpd) of NGL from dense rich gas produced in the central North Sea. A
second 400-MMscfd processing train, shown here under construction, boosted NGL
Agency (EPA) deploying best-available production to more than 2,000 tpd in 1997 (Fig. 3).
control technology assessment program.
The Industrial Emissions Directive
(IED), which came into force in 2011, is the culmination of
er process design which removed the need for a sales gas
the LCPD and six other directives that govern, among other
compressor, substantially reducing capital cost, as plant
topics, the emission of solvents and pollutants to the envidischarge pressure remains above that of the transmission
ronment.
pipeline. It also optimized propane recovery to maximize
investment return (OGJ, Jan. 3, 2000, p. 37). Design also
NGL extraction
provided the ability to respond to changes in NGL prices by
UK NGL production decreased to 2.2 million tonnes in 2013
adjusting extraction rates.
from 6.2 million tonnes in 2008,5 mostly due to a decline
in natural gas production. As a result there has been a net
Cryogenic nitrogen rejection
increase in NGL imports. UK demand for ethane is set to
All UK gas must meet a pipeline specification of less than 5%
increase, with plans for ethane import sites and ethylene
nitrogen. Nitrogen occurs naturally in the North and Irish
cracker conversions to ethane feedstock at Ineos and SabicSea, with concentrations of as much as 10% in developed
owned plants at Grangemouth and Teesside, respectively,
areas. Cryogenic nitrogen removals high thermodynamic
designed to capitalize on low-cost US ethane.
efficiency results in low power consumption, low operating
Natural gas arriving from the north and central North Sea
costs, and high hydrocarbon output. Other nitrogen-removis often rich, requiring NGL removal to meet WI and hydroal technologies, such as rubbery membranes and pressurecarbon dewpoint. NGL recovery also increased profit. The
swing adsorption, are better suited to small plants up to 30
optimum liquids recovery to maximize return should balMMscfd, their high sales-gas compression costs being unance an incremental increase in NGL recovery rate over the
economical for larger projects.6
minimum needed to meet heating value or WI against the
Process design of nitrogen removal must consider the enincremental revenue obtained. This also applies to debottletire gas handling system, as the nitrogen rejection part may
necking existing plants.
typically be only 25% of project cost. The remaining cost
The 800-MMscfd Teesside gas processing plant (TGPP)
stems from feed-gas compression, pretreatment, and prodproduces more than 2,000 tonnes/day (tpd) of NGL from
uct gas compression. Pretreatment must remove sufficient
dense rich gas produced in the central North Sea. The origiwater and carbon dioxide to avoid freezing and is more capinal 400-MMcfd plant supplied a 1,875 Mw power plant and
tal intensive than typical gas processing.
was completed at its initial 900-tpd capacity only 20 months
Process selection and optimization of cryogenic plants reafter engineering, procurement, and construction award.
quire balancing of capital cost against compression cost, the
The second 400-MMcfd train used a twin turbo-expandprincipal operating expense. Design will aim to minimize

Oil & Gas Journal | July 6, 2015

103

TECHNOLOGY
compression through sensibly and pragmatically maximizing thermodynamic efficiency.4

Gas security, storage

The UKs reliance on natural gas imports is set to rise to 76% in
2030 of annual demand from 51%.7 Although capacity exists to
increase LNG imports, Asian demand set to rise 250 bcm between 2014 and 2020 will increase competition for LNG cargoes.
The EU Security of Supply Directive requires EU members to have adequate supplies to meet 20-year peak demand
scenarios via production, imports, and storage. With production declining and imports subject to variable prices,
storage plays a vital role in providing UK energy security.
The UK has 4.6 bcm of gas storage, equivalent to 4% of
its annual UK demand (14 days). Additional capacity of 1.6
bcm is available at the three LNG import terminals. But LNG
inventory will fluctuate and may at any given time be much
lower.
The country has several short-term gas storage sites, totaling 1.3 bcm, which offer large withdrawal rates for sudden changes in demand. Additional reliance will be placed
on short-term storage growing renewable power generation,
set to reach 225 Tw-hr by 2020 from 64 Tw-hr in 2012.
The only UK long-term storage is offshore in depleted
Rough field, with 3.3 bcm capacity. A February 2006 incident rendered the site inoperable for several months while
repairs were made. Lack of UK long-term storage diversity
places heavy reliance on Rough to provide supply through
the winter.
Reuse of depleted Deborah field in the North Sea was proposed with 4.6 bcm of capacity, doubling UK storage and
diversifying its options. The UK government granted a gas
storage license for the project in 2010, but it didnt progress
due to difficulties obtaining offshore planning permission.
Weak economics led to the 2-3 bcm Baird field not being
developed. Without subsidies, such projects will not proceed due to continued small differentials between summer
and winter gas prices.

Acknowledgments
The authors would like to thank Terry Tomlinson and Grant
Johnson for their help in preparing this article.

References
1. Finn, A.J., and Tomlinson, T.R., A Case for Dehydration, Hydrocarbon Engineering, December 2007, pp. 71-75.
2. Kane, A., Lorenzo, M., and Luciano, G., Adapt Silica
Gel Adsorption Technology: Reasons for Selection on Gas
Conditioning Plants, GPA Europe Annual Conference, Berlin,
May 24-25, 2012.
3. Mayer, M., and Crowe, T., The North Morecambe
Onshore Terminal, GPA Europe Meeting: Production and
Processing Difficult or Marginal Fields, London, Sept. 28,
1995.

104

4. Kennett, A.J., and Finn, A.J., UK Patent, GB 2208699,

Separation of nitrogen from methane-containing gas
streams, Aug. 18, 1988.
5. Activity Survey 2014, Oil & Gas UK, p. 33.
6. Johnson, G.L., and Eastwood, T., Knowledge Session
Rejection of Nitrogen from Natural Gas, GPA Europe Spring
Conference, Copenhagen, May 27, 2011.
7. Analysis: United Kingdom, US Energy Information
Administration, June 3, 2014

The authors
Adrian Finn (adrian.finn@costain.com) is process
technology manager at Costain, Manchester,
UK, with responsibility for process technology
development and commercialization, process
technology selection and supervision of feasibility studies, pre-FEEDs and FEEDs. He has
spent 32 years with Costain, mainly on cryogenic
gas processing projects including NGL extraction, natural gas
liquefaction, and nitrogen rejection. He holds a BS in chemical
engineering and fuel technology from the University of Sheffield, UK, and an MS in integrated design of chemical plant
from the University of Leeds, UK. He is a fellow of the Institution
of Chemical Engineers, a chartered engineer in the UK, a member of both the management and program committees of GPA
Europe, and is on the editorial review board for the 14th Edition
of the GPSA Engineering Data Book.
Zak Loftus (zak.loftus@costain.com) is a
process engineer at Costain in Manchester. He
has spent 3 years with Costain working on the
detailed design and management of brownfield
modification projects for gas terminals around
the UK and conceptual studies within the gas
processing industry. He holds an MS in chemical engineering with industrial experience from the University of
Manchester, UK, and is an associate member of the Institution
of Chemical Engineers.

Manuscripts welcome
Oil & Gas Journal editors are happy to consider for publication manuscripts about exploration and development, drilling, production, pipelines, LNG, and processing (refining, gas
processing, and basic petrochemicals). These papers may be
highly technical in nature and appeal or they may analyze oil
and natural gas supply, demand, and markets. OGJ accepts
manuscripts submitted exclusively to it or those adapted from
oral and poster presentations. An Author Guide is available
at www.ogj.com; click Home, then Submit an article. Or,
contact Managing EditorTechnology (chriss@ogjonline.com;
713/963-6211; or, fax 713/963-6282), Oil & Gas Journal, 1455
West Loop South, Suite 400, Houston TX 77027 USA.

Oil & Gas Journal | July 6, 2015

JULY

2015

VOL

61,

NO.

OGPE.COM

OIL, GAS
&petrochemequipment

W H AT S N E W F O R O N S H O R E & O F F S H O R E : U P S T R E A M , M I D S T R E A M , D OW N S T R E A M O P E R AT I O N S

The Newest Equipment, Products, Systems, Services & Technology for

Upstream, Midstream, Downstream

Pipeline and coating inspection
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Lighter, smaller, high power density

AC drilling motors newly introduced
A new line of high power density AC induction motors is unveiled as purpose-built for top drives, mud
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In motors ranges from 450 to 2,000 hp, models are
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Induction motor designs feature identical frame size
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A full complement of pipeline and coating inspection

products highlight this free
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It illustrates, describes and
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for onshore and offshore applications. Some 20 pipeline
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Pipeline Inspection Company Ltd.: Houston
For FREE Literature, select #250 at ogpe.hotims.com

New hydraulic casing gas compressors

Hydraulic Casing Gas Compressors are introduced
with a new compression element designed specifcally
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Simple-designed HCGs process liquids so there is no
possibility of liquid lock. They do not have pneumatic
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Compact Compression Incorporated: Calgary Canada
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P2

Products

FROM

THE

OG&PE

EDITOR

Thanks for opening this OG&PE section of Oil & Gas Journal.
Our July edition highlights fndings
at the recent International Liquid
Terminals Association 35th annual conference and
tradeshow. As always an impressive array of equipment, products, and services was presented. Beginning
on Page 10 is a sampling of the specialties showcased at
this years ILTA. Most offer free literature which you are
welcome to request at OGPE.com.
Our front-of-the-issue before the ILTA followup highlights free literature and product information for all segments of upstream, midstream, and downstream operations. Of note this month are sulfur-in-fuels analysis on
which a free application brief is offered, along with a
celebration of one companys 10 years of separation solutions, and the addition of mass fowtubes to an established line of Coriolis products.
This months Page 1 announcements are particularly
signifcant with newly developed and just-announced
drilling motors and casing gas compressors, as well as
free information on an established line of pipeline and
coating inspection products. Several surveillance aiding
cameras and imaging developments are also presented
from Italy and Israel. These once again reinforce the ongoing innovations and developments of global companies specifc to oil, gas, and petrochemical operations.
Please feel free to go to OGPE.com homepage Click
Here for Product Information button to request free
information or literature on all items of interest.
J.B. Avants, Publisher & Editor
jba@pennwell.com / 918 832 9351 / OGPE.com

Copyright 2015 by PennWell Corporation. Established: November 1954.

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JULY 2015

J.B. Avants
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Digital Marketing Manager

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PENNWELL CORPORATION
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Senior Vice President
Publisher

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ADVERTISING SALES:
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AD INDEX

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Singapore
Michael Yee
+65 9616 8080
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AMETEK Chandler Engineering . . . 4 AMETEK Grabner Instruments . . . . 5

AMETEK Drexelbrook . . . . . . . . 4 High Pressure Equipment Company . 3
AMETEK Process Instruments . . . . 4 LAGCOE . . . . . . . . . . . . . . 13
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AMETEK U.S. Gauge . . . . . . . . . 5 Turbomachinery & Pump Symposia 16

For Print / Online Advertising Information, Assistance:

http://www.ogpe.com/index/advertise.html

OGPE.com

July 2015
Month
2015

Oil, Gas & Petrochem Equipment makes every reasonable effort to verify its content.
However, neither Oil, Gas & Petrochem Equipment nor our parent firm,
PennWell Corporation, assume responsibility for validity of manufacturer claims or statements made in published items.
Need Reprints of your ad or recent editorial?
Contact Foster Printing for a quote:
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P3

New Products & Services

Moisture analyzers get upgrade with

new frmware, improved user interface

At-line analysis of sulfur in fuels per

ASTM D4294: free application brief

DF-700 ultra-trace moisture analyzers are upgraded with new frmware

and an improved user interface.
Optimized for specialty
gas applications that depend on ultra high purity
gas quality, the instruments offer exceptional and repeatable performance and ease of use, its declared.
DF-700 uses its makers Hummingbird Tunable Laser
Diode sensing technology for outstanding sensitivity to
analyze moisture at ultra-trace levels.
The new frmware ensures very low-end stability. It
also eliminates spurious background noise effects at
very low parts-per-billion levels. The new graphical
menu interface gives additional confdence the system
is functioning to exact standards and at peak performance.
Servomex: Crowborough United Kingdom

A free application brief is available on at-line analysis

of sulfur in fuels according to ASTM D4294 using
ED-XRF spectroscopy.
It stresses sulfur content as a key quality determinant
for many petroleum products in both processing and
government regulation compliance.
Highlighted is a new generation of portable ED-XRF
spectrometers. They enable accurate analysis right at
the production line to shorten traditional production
delays from days to minutes.
SPECTRO Analytical Instruments: Mahwah NJ
For FREE Literature, select #253 at ogpe.hotims.com

In August OG&PE:

Oil & Gas Prime Movers Special Report:

Pumps, Compressors, Turbines, Engines, Motors
Turbomachinery & Pumps Users Symposia Bonus Distribution

OG&PE and OGPE.com

For FREE Information, select #4 at ogpe.hotims.com

Multiple-input/output mesh network

nodes tested, now meet CE standards
Conformity with CE standards is announced for BreadCrumb ME4 MIMO multiple-input, multiple-output
mesh network nodes.
Built for rigorous environments, the CE designation
enables global oil and gas usage of the scalable, mobile,
and highly secure BreadCrumb technology, its noted.
The nodes also have HAZLOC Class 1 Div. 1 accessibility for hazardous locations.
Rajant Corporation: Malvern PA
For FREE Information, select #5 at ogpe.hotims.com

Torque specialties made engineer to

order for tests, as multipliers
This free Engineer To Order brochure highlights this companys ability to design and manufacture special torque-oriented equipment to
serve valve actuator and valve testing.
Projects beyond standard equipment range include modifed torque
wrench end fttings to complete
torque and angle control of multispindle nut runners. Besides actuator and valve testing, torque multipliers for integration
and subsea are highlighted.
Norbar Torque Tools Incorporated: Willoughby OH
For FREE Literature, select #252 at ogpe.hotims.com

Extreme
Conditions
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Nobody Does it Better
Count on our proven
valves, fittings &
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HiPOur Name is High Pressure

Erie, PA USA 814.838.2028 HighPressure.com

For FREE Information, select #401 at ogpe.hotims.com

July 2015

OGPE.com

By any measure, AMETEK knows your process.

TRULY PORTABLE BTU ANALYZER
FOR NATURAL GAS IN PRODUCTION
AND AT CUSTODY TRANSFER

The new AMETEK Chandler Engineering

Model 292B portable natural gas chromatograph is compact and light weight, yet it
includes fully integrated sample handling and
onboard storage for up to 1,000 sample runs.
 
 
   
 
 
raw and calibration data, analytical reports and
real-time chromatograms. Advanced software
accurately calculates heating value, relative
density, and compressibility using industry
standard methods. Precise monitoring and
control yields exceptional sensitivity and peak
performance. Connectivity includes USB and
Ethernet, plus compatibility with HP printers.
AMETEK Chandler Engineering. Tel: 412-8289040. www.ametekpi.com

#403 at ogpe.hotims.com

SPOOL PIECEMOUNTED
WATER CUT MONITOR

MODEL 5100 GAS ANALYZER

MEASURES MOISTURE IN BULK GAS,
HYDROCARBON STREAMS

Using tunable diode laser absorption spec 

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cells are available in a wide range of path
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#405 at ogpe.hotims.com

NEW WAVE GUIDE OPTION

ELIMINATES SIGNAL INTERFERENCE
FROM TANK NOZZLES

The new Universal IV CM water cut

monitor from AMETEK Drexelbrook has
been designed specically to make highaccuracy water-in-oil measurements. Spoolpiece mounting allows the sensing element
to extend into the main process line so it
measures the uids capacitance over its
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response, regardless of the uids mixture
characteristics.
Drexelbrooks
exclusive
Cote-Shield technology ignores coating
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The extremely durable sensing rod needs no
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Drexelbrook. www.drexelbrook.com

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INTRINSICALLY SAFE PRESSURE

TRANSMITTER OPERATES IN
HAZARDOUS LOCATIONS

AMETEK PMT Model IDT intrinsically safe

pressure transmitters offer superior accuracy
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Pressure ranges are available from vacuum
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#407 at ogpe.hotims.com

THE NEW THERMOX WDG-V

COMBUSTION ANALYZER OFFERS
IMPROVED CONTROL PLUS
UNPARALLELED PROCESS SAFETY

The WDG-V measures excess oxygen, hydro

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Impulse wave-guided radar level systems  & &
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from AMETEK Drexelbrook generate total lev- safety. Logs of historical operating data

 

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option eliminates nozzle interference, mak- dirty gas applications, probes are available at
   
    


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2015 AMETEK Inc. All rights reserved.

ALL-WELDED PROCESS GAUGE &

SEAL FOR ECONOMY, RELIABILITY

P5

New Products & Services

Firmware upgrade for vibration tester

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#409 at ogpe.hotims.com

MINIVAP ON-LINE VAPOR PRESSURE

ANALYZERFOR ALL STANDARDS

  
 
  



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IPS-4 DUAL UV/VIS AND NIR

PROCESS SPECTROPHOTOMETER

New IPS-4 spectrophotometer detects and

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#411 at ogpe.hotims.com

Fluke 810 Vibration Testers now have a free frmware upgrade to help maintenance teams more
quickly identify and prioritize mechanical problems.
Testers combine a powerful diagnostic engine with
a simple step-by-step process to report on specifc machine faults and their severity the frst measurements
are taken without prior measurement history.
The frmware features overall vibration level data,
more intuitive maintenance recommendations, fexible machine speed confguration, detailed diagnostic reports and spectral
diagrams, along with more precise machine-train images.
Fluke Corporation: Everett WA
For FREE Information, select #7 at ogpe.hotims.com

Ethernet switches = FastEthernet data rates up to

100 Mbps, Ethernet/IP support
Scalance XB-200 Industrial Ethernet
Switches deliver FastEthernet data rates to
100 Mbps and support Ethernet/IP standard.
These four designs provide real-time communication in a variety of automation environments as compact, plug and play designs. They support VLAN and are
certifed for use in IECEx/ATEX Zone 2/UL HazLoc.
Multicast blocking, loop detection, and access control via radius server
enhance performance.
Siemens: Norcross GA
For FREE Information, select #8 at ogpe.hotims.com

10 years of separation solutions:

free case study, reference portfolio
Eighteen illustrated case histories and references highlight this free brochure on ProSeps 10
years of separation solutions.
Showcased are onshore and offshore oil treatment, H2S scavenging, produced water treatment,
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generation, and crude desalting successes with
the companys ProSalt and ProScav technologies.
ProSep: Houston
For FREE Literature, select #255 at ogpe.hotims.com

Oil & Gas facility security, surveillance aided by true

UHD media wall processors
Announced as the worlds frst true UHD
video wall processor: MediaWall V, offers
up to 4K resolution I/O, single wire connectivity, and fully scalable windows.
The media wall processors serve a broad
range of applications including surveillance and security at oil and gas facilities. The display processor combines real-time processing and reliability
of a hardware-based processors with fexibility of a separate, dedicated
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MediaWall Vs maker notes its true video wall is not simply a wall of monitors but a continuous multi-screen surface upon which to display a combination of graphics and video with beneft of 4K resolution.
RGB Spectrum: Alameda CA
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July 2015

OGPE.com

P6

New Products & Services

Mass fowtube Coriolis addition

CFS25 mass fowtube is newly added to the Foxboro Coriolis Solutions line.
Using the same proven digital Coriolis technology, the
mass fowtube works with
CFT51 Coriolis mass transmitter to form the Foxboro Mass Flow and Density meter, declares the manufacturer.
CFS25 provides direct measurements of both mass
fow and density to deliver high accuracy and eliminate
problems of multiple process measurements associated
with volumetric fow devices.
Schneider Electric Foxboro Field Devices: Foxboro MA
For FREE Information, select #11 at ogpe.hotims.com

Communications in
explosive environments

Organic coconut absorbent = fast,

safe hazardous liquid spills cleanup
SpillFix Industrial Organic
Absorbent is now available in
the United States and Canada.
Of 100% renewable organic
materials, SpillFix instantly absorbs hazardous liquid spills
on contact including oils, fuels, solvents, paints, and chemicals.
It is made from a biproduct
of the coconut (coir) which is noncarcinogenic, silica
free, and contains no chemicals. Compared to claybased products, SpillFix clients reportedly need 80%
less product to clean up spills in half the time.
American Green Ventures (US) Incorporated: Cary NC
For FREE Information, select #14 at ogpe.hotims.com

A complete package of integrated

multimedia communication systems are designed to serve in explosive atmospheres and harsh industrial or marine environments.
Oxalis PAGA systems and CCTV
camera stations with integrated communications serve applications including drill rigs and refneries.
The CCTV is all 316L stainless steel
for corrosion protection while SoniX
public address general alarm (PAGA) offers advanced
communications for extreme environments. It comprises
high effciency amplifers, state of the art IT-style design
plus main distribution frame easy of termination.
Eaton: Syracuse NY

Strong, comfortable oil, gas work boots

For FREE Information, select #12 at ogpe.hotims.com

For FREE Information, select #15 at ogpe.hotims.com

10-year LED marine lighting for hazards

Free tech guide: canted coil springs for

EMI/RFI shielding

LED Marine Lighting solutions are

newly available for rigs, offshore facilities, petroleum locations, and other
marine environments.
These lighting products are rugged
and cost effective with very low energy
consumption. They are also corrosion
resistant and practically maintenance
free for illumination up to 10 years of continuous operation. Among LED specs are UL 844 and UL 1598A
certifcation for marine environments.
Models also carry their manufacturers standard
5-year warranty and are environmentally friendly with a
focused light that reduces glare.
Unimar Incorporated: North Syracuse NY
For FREE Information, select #13 at ogpe.hotims.com

OGPE.com

July 2015

V12 E1300 Defant high leg zip

side safety leather work boots
were developed with leading oil and
gas companies.
They are lightweight and fexible
to provide comfort and protection.
The sole is special rubber compound
to provide outstanding slip protection in hostile environments. A zip side with storm fap
is incorporated for easy access.
Among work boot features are wide ftting toecap
with 200 Joule protection, tough armor-coated anti-scuff
toe, and padded ergo collar to prevent chafng during
ladder work or driving.
Durasafe Pte. Ltd. : Singapore

Detailed information in this

new, free technical guide is
offered on how canted coil
springs can be used to address EMI/RFI shielding
challenges.
Its 10 pages present Bal
Spring compact precision-engineered springs to protect sensitive electronics from harmful EMI/RFI, particularly in high-frequency, small-package applicaitons.
Data provided include transfer impedance and shielding effectiveness as well as illustration of attenuation
versus frequency at 1 to 10-GHz and 100 MHz to 1 GHz.
Bal Seal Engineering Incorporated: Foothill Ranch CA
For FREE Literature, select 257 at ogpe.hotims.com

When Your SIS is Your

Last Line of Defense

M
oore IIndustries
ndustries IIs
sT
here
Moore
There
Like a good goalkeeper, a Safety Instrumented System (SIS) is
your dependable last line of defense. This means you need
reliable Functional Safety products to anchor your team.
You can count on Moore Industries with FS Functional Safety Series
products designed for Safety Instrumented Systems and to IEC
61508 standards. Our alarm trips, relays, isolators and splitters help
your SIS perform at its highest level. With approval from exida for
use in SIL 3 and SIL 2 environments, you can install our products
with condence.
Looking to add more reliability to your SIS roster? Our FS Functional
Safety Series products...

Are exida certied with reviewed FMEDA reports

Warn of and prevent potentially hazardous conditions
Add layers of protection to existing safety systems
Isolate an SIS from a basic process control system
Share, split and pass valuable HART data

Great teams are condent their keeper will make the big save with
the game on the line. Shouldnt you feel the same about your safety
instrumentation?
Get A FREE White Paper
on Tank Overll Protection

Scan the code

and go directly to
the white paper

Demand Moore Reliability

Get this and other white papers,, datasheets and videos to
learn about our safety products at:
www.miinet.com/safetyseries
Or call 800-999-2900
For FREE Information, select #413 at ogpe.hotims.com

P8

New Products & Services

New SS spool valves automate up, mid,

downstream valves

Inert gas clean agent delivery system

aids engineered fre suppression

Automate upstream, midstream,

or downstream valves with new
ASCO 362 & 562 series stainless steel spool valves.
Using proven solenoid technology, the low-power models consume 1.4-w.
The 562 is a four-way design for double-acting process
valves. The three-way 362 serves sincle-acting applications. Both valves come in 1/4 i., 316L SS construction
for corrosion resistance in harsh oil and gas operations.
ASCO Numatics: Florham Park NJ

Regulated and effective discharge pressure of inert gas clean agent is delivered
by iFLOW system for engineered fre
suppression.
The new delivery system eliminates potential for peak pressure and fow spikes.
Its controlled fow enables use of smaller
diameter, low pressure piping and reduced pressure relief venting equipment. This minimizes piping complexity plus reduces costs associated with
providing pressure venting.
iFLOW combines proven fre extinguishing properties
with environmental benefts of inert gas technology to
overcome pipe size, venting design, and overall installation challenges.
Tyco Fire Protection Products:
Enschede The Netherlands

For FREE Information, select #17 at ogpe.hotims.com

Ethernet switch = sub-ms automation

clock synchronization, is space saving

EDS-405A-PTP Ethernet Switch makes it possible to

synchronize clocks of all connected devices distributed
over Ethernet networks to sub-microsecond accuracy.
This enables precise motion control of all machines so
they cooperate in unison.
The compact with fve ports models are declared one
of the worlds frst Ethernet switches using hardwarebased time sync to fully comply with the Precision Time
Protocol (PTP) specifed in the new IEEE 1588v2 realtime clock (RTC) standard.
MOXA Americas Incorporated: Brea CA
For FREE Information, select #18 at ogpe.hotims.com

Monitor equipment, environments

w/o Internet connection

Sentinel system delivers continuous unattended equipment and remote locations monitoring where
Internet or Ethernet connectivity
isnt available.
When the cellular system detects
a problem (leaks, temperature
change, power outage) it immediately sends alerts by phone, text, or email over standard
cellular networks provided by AT&T or Verizon. Instant
notifcation enables quick corrective action to save critical assets and address possible costly situations.
A single Sentinel monitors up to 12 different environmental and equipment status conditions including -109
to +115F., humidity, water, and power.
Sensaphone: Aston PA
For FREE Information, select #19 at ogpe.hotims.com

For FREE Information, select #20 at ogpe.hotims.com

Optical gas imaging cameras serve

constant fugitive emissions monitoring
Continuous fugitive emissions monitoring at petrochem, oil, and gas
facilities or offshore platforms and
rigs is provided by new EyeCGas
FX optical gas imaging cameras.
The handheld thermal cameras
provide fast, automated detection
of hazardous, explosive, and toxic
gas leaks: Various hydrocarbon gas emissions including
ethylene, methane, butane, propane, and VOCs.
EyeCGas FX comprises a sensitive infrared camera
plus HD color camera for fast fugitive emissions recognition. It automatically alerts via color display plus
warning message, or any other alert mechanism in use.
Opgal Optronic Industries Ltd: Karmiel Israel
For FREE Information, select #21 at ogpe.hotims.com

OGPE.COM
Online all the time

While asking for products info or free literature check out

online products, oil industry & company news, plus Twitter, Facebook & LinkedIn feeds, videos, as well as archived data.
If it has to do with products, its in OG&PE as a new monthly
section of Oil & Gas Journal and/or at
OGPE.com All Products All The Time Since 1954

Free Info or Literature Click the link Request Get Response!

OGPE.com

July 2015

P9

New Products & Services

LED foodlights require less service, are

vibration resistant

Outdoor video surveillance aided by

HD network camera, CMOS sensor

E LED Lighting Floodlights not only

operate effciently to save power, they
also reduce maintenance and service
costs, its announced.
Unlike conventional designs, these LED
versions do not require frequent lamp
replacement and routine service during
critical work periods, declares their manufacturer.
The lighting is not vibration sensitive nor does it have
a light source that requires replacement. It operates at
a reported fraction of the temperature for conventional
foodlights for safer working situations.
Contour Leisure Ltd.: The Netherlands & United Kingdom

ULISSE RADICAL PTZ cameras like this aid outdoor surveillance as factory assembled with
motorized zoom lenses.
Models require only power and
network connectivity to operate.
The camera and lens are preconfgured during production
so you only need connect up to
power supply and network, then
carry out simple fnal set-up to adapt to requirements.
ULISSE RADICAL integrates a full HD network camera, 1/2-in. CMOS sensor, 1080p/60fps, with outstanding low light sensitivity at up to more than 300 m away.
VIDEOTEC SpA: Schio, Vicenza Italy

For FREE Information, select #22 at ogpe.hotims.com

Filter assemblies withstand 20,000 psi

High pressure (20,000 psi) T-Type
flter assemblies are on the market for offshore oil and gas.
They feature all-stainless-steel
construction for both flter housing and for flter elements.
FJV-3 series high pressure flters
use porous metal felt flter elements with flter media of thin flaments of nonwoven stainless steel.
This especially suits them for highly corrosive, viscous,
or radioactive applications. Because it is highly porous
up to 85%, metal felt media provides reported high fow
rates of up to 20-times that of other media types.
Swift-JB International LLC: Houston
For FREE Information, select #23 at ogpe.hotims.com

Intrinsically safe VOC monitors

Tiger handheld volatile organic
compound monitors are introduced
as entry-level photoionization detection designs.
Models offer worldwide Intrinsic
Safety certifcation for use in potentially explosive environments.
Besides PID technology, Tiger comprises advanced patented fence electrode system. Three-electrode format
ensures increased humidity and contamination resistance as well as feld
accuracy, reduced drift issues, plus extended run time,
declares the manufacturer.
The monitors detect in 2 sec 0.1 to 5,000 ppm
using a standard two-point calibration protocol.
Ion Science: Fowlmere UK
For FREE Information, select #24 at ogpe.hotims.com

For FREE Information, select #25 at ogpe.hotims.com

New pipe wrench head made to give

more torque fexibility
Greater fexibility than would
be possible with a standard pipe
wrench, is how this company
announces its new pipe wrench
head adapter.
With a 1/2-in. square opening
on the side, adapters can be attached to a breaker bar, torque wrench, or any tool with
a 1/2-in. male drive to tighten or loosen gas line
compression fttings.
Because the tool is just a wrench head, you can easily
grab it from different angles, especially in tight spots.
With 1 1/2 to 5 1/4-in. jaw opening, this steel wrench
weighs 3 1/4 lb and delivers 280-lb/ft torque.
Lowell Corporation: West Boylston MA
For FREE Information, select #26 at ogpe.hotims.com

5-in-1 gas + temperature measuring

TDLS monitors unveiled
LaserGas iQ2 analyzers are introduced to measure four gases and
temperature in one device.
The all-in-one tunable diode laser
instruments measure O2, CO, CH4,
H2O plus temperature to eliminate
the need for multiple process analysis units.
Among LaserGas iQ2 features are ability to handle typical 1,200C. process control, increased absorption signal for low concentration, plus design for cross stack,
one-fange with probe, or open path confgurations,
NEO Monitors: Skedsmokorset Norway
For FREE Information, select #27 at ogpe.hotims.com

July 2015

OGPE.com

P10

ILTA Highlights

recently exhibited at the 35th Annual International Liquid Terminals Association Conference & Tradeshow and participated as media sponsor
in Houston.
Here are highlights representing equipment manufacturers and service providers on which we gathered information.
To request free information or literature on products and services of interest go to OGPE.com, right
hand side homepage click Product Information
the yellow button. Or you can click the items right
here on the pages if you receive OG&PE digitally as an
Oil & Gas Journal section.

Oilfeld processing pumps & systems

Valuable hydrocarbon recovery,

emissions hazards prevention

For FREE Literature, select #262 at ogpe.hotims.com

OG&PE

Vapor Recovery Systems are

emphasized in this free datasheet to recover valuable hydrocarbons and control fugitive
emissions.
A range of designs are based
on varying vapor inlet capacities
to ft specifc applications from
small truck-loading terminals to
large marine-loading operations.
They reduce loss of proftable
products with recovery effciencies up to 99%+ along with recovery rates between 1 to
2 liters / 1,000 liters loaded.
The datasheet summarizes how this frms vapor recovery process works and typical products recovered.
These include gasoline, crude oil, naptha, condensates,
benzene, xylenes, toluene, methanol, ethanol, MTBE,
and ETBE. It also emphasizes fugitive emissions control.
ZEECO: Broken Arrow OK
For FREE Literature, select #260 at ogpe.hotims.com

This free 20-page brochure describes and illustrates a complete

line of pumps and systems for
midstream or downstream oil and
gas operations.
Its four sections highlight NEMO
progressing cavity pumps,
TORNADO rotary lobe pumps,
engineering and accessories.
Complete technical diagrams
and text depict pump features to
serve broad petroleum applications. All products and
components are cited to API 676, 3rd Edition.
NETZSCH Pumps North America LLC: Exton PA

Midstream analytics solutions offered

Covering all KPIs and metrics in
all major pipeline and terminal
departments are newly introduced midstream oil and gas
analytics solutions subject
of this free datasheet.
They are cited to transform
data into meaningful information for fast, informed decisions.
Areas of focus are cited to include daily up-to-date data and
trends for pipeline volumes and
revenues, terminal rack throughput, nominations, shippers, terminal customers, terminal rankings, fnancial
planning and analysis reporting, capacity utilization,
butane blending, marine terminal operations, HSE, plus
commercial/marketing, sales inventory and margins.
Salient Software Incorporated: Houston
For FREE Literature, select #263 at ogpe.hotims.com

Foulant removal technologies data

Funnels pull samples fast

without spills, messes

Refning, offshore, and chemical

foulant removal is this companys specialty and subject of a
free brochure.
Using patented sonic-resonance
technology, they restore fow and
proftability by effectively eliminating a variety of foulants from industrial pipes, heat exchangers, and reactors. And this is said to be accomplished
far more safely and in a fraction of the time.
Summaries are provided on how pressurized variable
fuid vibrations break down material from the pipe wall.
Hydrokinetics: Texas City TX

Speed Funnels highlight this free pamphlet to help feld personnel to pull samples quicker and cleaner.
Besides saved time and money, plus
eliminated waste the funnels get samples back to the lab for analysis fast and
back to clients. They also allow operations
to start quicker and take any demerge
charges out of the equation.
Sampling times are emphasized to be
reduced from hours to minutes for shore tanks, barges,
or vessels.
PetroFunnels: Houston

For FREE Literature, select #261 at ogpe.hotims.com

OGPE.com

July 2015

For FREE Literature, select #264 at ogpe.hotims.com

ILTA Highlights

P11

Rental vessels cited to optimize liquid

process systems

Data present multi-use couplings wont

come off when pressure is in the line

JRS Rental Vessels highlight

this free brochure to help optimize the performance and reliability of our clients process
systems.
Designed for liquid applications with high fow rates, vessels most commonly remove
solid and semi-solid contaminants from produced water, wastewater, pipeline fuels,
cooling water or utility water that require particulate
removal from liquids and heavy dirt loading. This includes refning, petrochemicals, terminals, pipelines or
oil production.
Also highlighted: LiquiPleat RV series elements
high fow flters specifcally designed for JRS Rental
Pressure Vessels.
Jonell Rental Services: Houston

Twister Locking Quick Connects are cited in this free datasheet as the only coupling in the
world guaranteed to not come off
when pressure is in the line.
It is physically impossible to disengage the coupling when pressure is in oil, fracing, LPG, acids,
ammonia, or lubricants lines.
Quarter-turn on/off functionality
provides rapid engagement and
reduces operator stress.
LQC series comes in 3/4, 1, 2, 3, 4, and 6 in. of stainless
steel, cold-temperature carbon and steel or aluminum.
OPW Engineered Systems: Lebanon OH

For FREE Literature, select #265 at ogpe.hotims.com

For FREE Literature, select #268 at ogpe.hotims.com

API 6D shutoff pig valves brochure

For more than 50 years, this company has designed

liquid storage and pipeline facilities highlights a free
eight-page brochure.
They offer technical skills, knowledge, and background
for all facilities aspects: receiving, storage, blending,
booster stations, loading and unloading with safety
as a critical focus on worksites and operations.
Its engineer-procure-construct model is cited to deliver
high-quality, cost-effective, fast-track projects for crude
oil, gasoline, diesel, jet fuel, ethanol, chemicals, NGL,
and LPG.
Burns & McDonnell: Kansas City MO

Model SHPV shutoff pig valves

are described and illustrated in this
free brochure as engineered, manufactured, and tested to API 6D.
The 2 to 16-in. models are ANSI
Classes 150 to 1500 rated and designed to operate over -50 to
+400F. in LF2, 316 stainless, or exotic alloys as required.
SHPV features: trunnion block
mounted ball for reduced torque
and stem loading, large bearings for smooth operation,
upstream sealing with automatic downstream cavity relief,
double block and bleed with vent and drain capabilities.
Tiger Valve Company: Houston

High Defnition survey for

refning, transport, storage

Inspection, NDT, corrosion engineering

mechanical integrity industrial services

High Defnition Surveying systems

and services are this frms specialty
and subject of its free pamphlet.
Its laser scanning survey instrument
produces tens of thousands of coordinates per second over tank surfaces.
HD surveying is offered refning, transport, and storage operations.
Also available from the company: 3-D
modeling, calculation of capacity tables
to API, alarm level calculation to API,
tank, shell, and bottom contour reports as well as calculation of damage, overfll, and environmental levels.
Gauge Point Calibration Incorporated: Crockett CA

Petrochem, pipeline, offshore, and

terminal storage industries are
serve by this companys industrial services highlighted in a free
datasheet.
They offer global visual inspections, NDT testing, advanced
NDT, corrosion engineering,
corrosion under insulation programs, mechanical integrity and
reliability programs, shutdown
and turnaround support, or pipeline and oilfeld
fabrication.
TechCorr USA Management LLC: Pasadena TX

Liquid storage, pipeline facility design

For FREE Literature, select #266 at ogpe.hotims.com

For FREE Literature, select #267 at ogpe.hotims.com

For FREE Literature, select #269 at ogpe.hotims.com

For FREE Literature, select #270 at ogpe.hotims.com

July 2015

OGPE.com

P12

ILTA Highlights

Aluminum geodesic domes information

Mobile degassing and water treatment

Specifcations, photos, and summaries of aluminum geodesic

dome storage advantages are
presented in this free brochure.
Benefts of this designer are
cited to include all-aluminum
construction for corrosion resistance and freedom from maintenance as well as strong space
frame design with reduced vapor losses on internal and external foaters.
Data highlight this designer and manufacturers proprietary software, automated drawings and download
fles along with proprietary extrusions, struts, batten
bars, and node cover designs.
Tank Connection LLC : Parsons KS

This Total Plant Mobile Vapor

& Water Treatment Services
brochure is yours free.
It illustrates, diagrams, and
describes how since 1992 this
company has assisted large petrochemical and oil production
facilities.
The literature sections address
capabilities in tank, vessel, and
pipeline degassing as well as
scrubbers and carbon services.
It also presents marine and truck loading vapor control
as well as mobile water treatment.
Envent Corporation: Long Beach CA

For FREE Literature, select #272 at ogpe.hotims.com

Environmental feld & support services

A variety of environmental
feld and support services are
presented in free literature.
Field tagging and inventory,
DOT pipeline inspections, and
tank seal inspections are available. Support services include
data management and reporting, project management, emission calculations, compliance
and/or safety consulting, as well
as liaison for regulatory agencies.
Combination GeoTagging, photos, and FLIR optical
imaging for leak detection is emphasized.
Avanti Environmental: League City TX
For FREE Literature, select #273 at ogpe.hotims.com

Oil and gas-designed pumps info

Oil & Gas-applicable pumps
are shown and described in this
free eight-page brochure.
Seven designs and series are
presented for demanding exploration, hydraulic fracturing, or
application dewatering where
their extra heavy wall thickness
is benefcial.
Water distribution pumps are
cited as available in 3 to 8-in. sizes with up to 28 ft suction, 475 ft head, as well as 7,000
gpm fow capabilities.
Cornell Pump Company: Clackamas OR
For FREE Literature, select #274 at ogpe.hotims.com

OGPE.com

July 2015

For FREE Literature, select #275 at ogpe.hotims.com

Salt remover & fash rust

preventer information
HoldTight 102 salt remover / fash
rust preventer is declared in this free
pamphlet to remove all salts and other
contaminants, per independent tests.
Unlike other products, this formulation
is cited to work with all feld test methods both ion specifc and all total salt
tests. After removing salts, HoldTight
102 then prevents fash rusting, a simple and obvious
indication a surface is clean and ready for coating. The
product also cleans concrete, steel, aluminum, fberglass, and composites.
HoldTight Solutions: Houston
For FREE Literature, select #276 at ogpe.hotims.com

Storage and terminal engineering and

construction data
Storage tank and terminal engineering, procurement, fabrication and construction service
capabilities are emphasized in
this free four-page brochure.
Illustrated and described are
feld-erected storage tanks that
include ambient spheres and
pressure vessels, low-temperature
and cryogenic, or LNG designs.
By combining its storage tank and balance of plant
capabilities, the frm also offers complete bulk liquid
terminals, LNG regasifcation terminals, and LNG peakshaving and transportation facilities. They have completed projects in 160 countries across seven continents.
Bechtel: Houston
For FREE Literature, select #277 at ogpe.hotims.com

lagcoe.com
c
c

2015

Years

& Still
Climbing
Global
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ba Collaboration
Co bo i
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Local
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Resources
s rc
LAGCOEE proudly
udly celebrates
eleb t 60 years
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supporting
p rtin th
tthe oil and
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industry
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through w
world-class
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and a commitment
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Register now at:

lagcoe.com/register.
October 27-29, 2015

Oil & Gas Exposition

Lafayette,Louisiana USA

P14

Advertiser Product & Service Followup:

June Advertiser Product & Service Followup

Companies featured here advertised their equipment, products, systems, or services in June 1 OG&PE within Oil
& Gas Journal. These summaries give you an opportunity to receive free information on them and their oil and
gas specialties. Go to OGPE.com and use the Click Here for Product Information button on the right. You
will receive prompt, complete response from these valued OG&PE clients.

Wallmount enclosures bar raised,

then prices lowered on 100+ UL styles

Issue the heat a warning of its

own with Flame Resistant T-shirts

Youve known Rittal quality in Wallmount Enclosures

for years. Now you get the industrys highest-quality enclosures at a price so low Hoffman and Saginaw cant
bear for you to see.
With more than 100 UL Listed standard sizes available in both carbon and stainless steel, and features like
foamed-in-place gasket and secure locking systems on
every enclosure Rittal Wallmounts are ideal for all
industrial needs.
Rittal Corporation: Urbana OH
RittalEnclosures.com

The Carhartt Force FR T-shirt issues the heat a warning of its own.
Temperatures can rise but your crew will dominate in
the Force Flame-Resistant T-Shirt. With FastDry technology to wick away sweat plus odor fghting elements, it
empowers the work that fuels our nation. United. We
outwork them all.
Carhartt: Dearborn MI
Carhartt.com/category/carhartt-flame-resistant

For FREE Information, select #30 at ogpe.hotims.com

By any measure, AMETEK knows your

petroleum process product needs
AMETEK Chandler Engineering Model 292B portable natural gas chromatographs are compact and
lightweight yet include fully integrated sample handling
and onboard storage for up to 1,000 sample runs.
Drexelbrook Universal IV CM water cut monitors
make high-accuracy water-in-oil measurements.
AMETEK Process Instruments Model 5100 Gas
Analyzers measure moisture in bulk gas or hydrocarbon streams via Tunable Diode Laser Absorption Spectroscopy.
Drexelbrook Impulse wave-guided radar level systems generate total level, distance or volumetric outputs
unaffected by variations in process material electrical
characteristics.
AMETEK PMT IDT intrinsically safe pressure
transmitters deliver 0.2% full-scale accuracy for critical applications plus meet FM, ATEX, and IECEx.
AMETEK Thermox WDG-V Combustion Analyzers
offer improved control and process safety as they measure excess oxygen, hydrocarbon, and combustibles in
fue gas.
AMETEK U.S. Gauge all-welded process gauges
comprise integrated seal for lower cost than gauges and
seals purchased separately.
Grabner MINIVAP ON-LINE process analyzers automatically monitor vapor pressure of gasoline, crude
oil, and liquefed or natural petroleum gas.
IPS-4 Spectrophotometers detect and quantify thousands of chemical species up to eight at once to
verify feedstock, intermediate, and fnal product quality.
AMETEK: Berwyn PA
AMETEK.com
For FREE Information, select #31 at ogpe.hotims.com

OGPE.com

July 2015

For FREE Information, select #32 at ogpe.hotims.com

Valves, fttings, tubing handle

extreme oil/gas conditions, pressures
Count on HiP proven valves, fttings, and tubing to
handle extreme conditions and pressures in all oil, gas,
and petrochem needs because no one does it better.
Our name represents high pressure in all oil, gas, and
petrochemical conditions, demands, and high pressure
applications.
High Pressure Equipment Company: Erie PA
HighPressure.com
For FREE Information, select #33 at ogpe.hotims.com

Explosionproof enclosures and

electrical systems + fast shipping
This manufacturer of aluminum explosionproof enclosures offers a complete line of junction boxes, control stations, circuit breakers, motor starters, conduit outlet boxes, conduit unions, seal fttings, and
XP operators.
75 sizes are available to meet NEMA 7, 9, 4, 4X, and
3 as well as UL, CSA, and ATEX. Many of its specialties
are offered with fast shipping. A free catalog offers complete information, illustrations, and specs.
Akron Electric Incorporated: Barberton OH
AkronElectric.com
For FREE Information, select #34 at ogpe.hotims.com

Be in this Advertiser Only section:

Purchase any size magazine ad

The following month your it will be summarized in this section
You receive reader response & link to your website with free
sales leads
OG&PE and OGPE.com:
All Products All The Time Since 1954

Advertiser Product & Service Followup:

Intelligent protection monitors

serve small to medium machinery
Protect critical small to medium rotating machinery
with new DN26 G3 Machine Protection Monitors.
The intelligent instruments are designed for fans,
pumps, motors, turbines, and centrifuges. They are fully
programmable, scalable, and compact.
Models monitor absolute and relative vibration shaft
position as well as dedicated speed and phase. They
offer TCPIP and RS485 communications with built-in
Webserver.
Sensonics Ltd.: Berkhamsted, Hertfordshire UK
Sensonics.co.uk

Dont miss another

CAREER OPPORTUNITY

For FREE Information, select #35 at ogpe.hotims.com

Energy effcient quarter-turn valves

for broad oil, gas, petrochem duties
Four designs are offered by this manufacturer as energy
effcient quarter-turn valves: American-BFV butterfy,
Ener-G ball, QuadroSphere trunnion ball, and Cam-Centric plug.
These models are designed to serve broad ranges of
oil, gas, petrochemical and chemical operations. Complete information is provided at the companys website.
Val-Matic: Elmhurst IL
ValMatic.com
For FREE Information, select #36 at ogpe.hotims.com

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Wheeled Rod Guide Couplings

successfully employed 40+ years
Successfully used for more than 40 years by 90% of major oil and gas companies Wheeled Rod Guide Couplings serve deviated, directional, and horizonal wells.
Models consistently reduce wear and prolong sucker
rod and tubing service life as they centralize the rod
string in tubing. Both free literature and online information are available for the asking.
Oilfield Improvements Incorporated: Broken Arrow OK
RodGuides.com
For FREE Information, select #37 at ogpe.hotims.com

Compressor valves, parts, services

This company offers a variety of compressor parts,
valves, and services.
It manufactures and sells compressor valves while offering reconditioning. Online condition monitoring is
available as well as engineering and consultancy on
compressor valves.
Individual products and special applications are
served along with capacity control systems.
Complete BORSIG specifcs on both on both valves
and available services are free upon request.
BORSIG Compressor Parts GmbH: Flensburg Germany
Borsig.de/cp
For FREE Information, select #38 at ogpe.hotims.com

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SERVICES | SUPPLIERS
ZION OIL & GAS

WEATHERFORD

Zion Oil & Gas, Inc. announced that

the Board of Directors appointed Victor
G. Carrillo as the Companys new Chief
Executive Officer and
also appointed Glen
Perry as the Companys
new President and Chief
Operating Officer, to be
effective on June 15,
2015.
Mr. Carrillo sucCarrillo
ceeds John Brown, who
was named as CEO in
January 2014. Mr. Brown, the Companys founder, will continue to serve as
Executive Chairman of Zions Board of
Directors.
Mr. Carrillo, age 50, was appointed
to Zions Board in September 2010 and
appointed Executive Vice President in
January 2011. In October of 2011 he
was appointed as the Company President and COO. Mr. Carrillo also currently
serves as a director of Magnum Hunter
Resources Corporation (an oil and gas
company engaged in the acquisition, development and production of unconventional oil and gas resource plays in the
US) and serves on the Board of Directors
for the Texas-Israel Chamber of Commerce and the Maguire Energy Institute
at Southern Methodist University.
Mr. Carrillo is a petroleum geologist
and geophysicist, attorney, former city
councilman, former county judge, and
former statewide elected official. From
2003 to 2011, Mr. Carrillo served as a
commissioner of the Railroad Commission of Texas, having served twice as
chairman of the three-member statewide
elected board. Mr. Carrillo holds a law
degree from the University of Houston,
a Master of Science degree in geology
from Baylor University, and a Bachelor of
Science degree in geology from HardinSimmons University.
Zion Oil & Gas explores for oil and gas
onshore in Israel and its operations are
focused on the Megiddo-Jezreel License,
(approximately 99,000 acres) south and
west of the Sea of Galilee, where the
Company plans to start drilling a deep
exploratory well in late 2015.

Weatherford International plc introduced

the commercial release of the IntegraLine liner system with swage technology at the IADC World Drilling 2015
Conference and Exhibition. Designed
and engineered by Weatherford for
critical environments, the IntegraLine
high-performance liner system provides
maximum reliability in critical applications such as ultra-deepwater, extendedreach, and sour-gas wells with high
pressures and temperatures.
The IntegraLine liner system is comprised of three premium components:
the polished bore receptacle, liner-top
packer, and rotational hanger. The
packer features swage sealing technology that forms an anti-extrusion, gas-tight
barrier between the outer diameter of
the packer body and the inner diameter
of the host casing. This configuration
reduces equipment failures that may
threaten well integrity, allowing clients to
achieve total depth efficiently while withstanding harsh conditions. Alternative
components are also available to create
a fit-for-purpose liner-hanger solution for
specific, complex applications.
In a gas and condensate well in Alberta, Canada, the IntegraLine liner system with SwageSet packer established
a gas-tight seal that enabled fracturing
through the liner. Stimulation pressures
reached 8,288 psi (57,144 MPa), and
the system maintained zero pressure
losses throughout the frac application.
Weatherford is one of the largest
multinational oilfield service companies
providing innovative solutions, technology, and services to the oil and gas
industry. The Company operates in more
than 100 countries and has a network of
approximately 1,400 locations, including
manufacturing, service, research and
development, and training facilities.

Oil & Gas Journal | July 6, 2015

SIEMENS
Siemens continues to develop its controller portfolio to handle sophisticated tasks
in the process industry. Users of the
flexibly configurable controllers, which
offer a high level of security and availability, will therefore benefit from long-

term investment protection. The first

step was to give the Simatic S7-410 the
standard coating for operation in toxic
atmospheres and to further increase the
fault tolerance of the redundant system.
Siemens has also extended the ambient
temperature range up to 70 C., which
allows users to deploy the powerful Simatic PCS 7 controller in harsh
environments, such as in oil and gas
applications. The next steps will be, for
example, to further expand the Profinet
functionality in order to increase fault
tolerance and availability.
The Simatic S7-410 controller is an
integral part of the Siemens Simatic PCS
7 process control system and currently
the most powerful controller in the process industry. This is particularly obvious
in the integrated scaling feature: it is now
possible to apply a uniform hardware
and software environment for very small
systems of 100 I/Os up to large-scale
plants of more than 100,000 inputs/
outputs. The Simatic S7-410 controller
is available in a standard version as well
as in fault-tolerant and fail-safe versions. The device therefore meets all the
requirements of the process industry,
including the chemical, glass, metal,
food & beverage, pharmaceuticals, solar,
oil & gas industries as well as the water
and wastewater sectors.

CEONA
Ceona, SURF contractor with deepwater
subsea construction capabilities, has
announced that the companys executive
vice president commercial and business development, Mark Preece,
has been appointed as
Chief Executive Officer.
Mark takes over from
current CEO, Steve Preston, who after 40 years in Preece
the industry has decided
to retire from operational
management and step down. Steve has
worked to establish Ceona as a key subsea
player over the last three years, having
been a prime mover and overseeing the
construction of the companys purposebuilt flagship, Ceona Amazon.

105

SERVICES | SUPPLIERS
Ceona is a SURF and heavy subsea
construction contractor in the deepwater
market, specializing in full-service engineering, pipelay and construction project
management and execution, including
floater installation (Semi, TLP, SPAR).
The company has already established an
impressive track record which has seen
it expand into West Africa, the Gulf of
Mexico and Brazil.
The Ceona Amazon is a powerful,
purpose-built hybrid vessel that can
execute complex logistical projects in
remote, harsh and deepwater territories
in one trip. Designed to deliver full flexible or full rigid pipelay, she can change
easily and quickly between each mode
within five days and is weather resilient.
Due to her on-board capacitythe
Amazon has a deck area of 4,600m2
and the ability to carry 9,500te of pipe
on deck and in her two holds she can
carry more product than any other of her
counterparts while the multiple, verticallay pipelay system features a top tension
of 600 tonnes and capable to lay rigid
pipe to 3,000m (10,000 ft) water depth.
Ceona, which is backed by majority shareholder Goldman Sachs
Capital Partners, has offices in London,
Aberdeen and Houston, with strategic
partners in Brazil and West Africa.

AFGLOBAL
AFGlobal Corporation announced that
Curtis Samford, the Companys Chief
Operating Officer, will assume the role of
President and Chief Executive Officer of
the Company. Samford succeeds Gean
Stalcup who has served in this capacity for
the past 5 years. Stalcup has been named
Chairman of the Board for AFGlobal.
Samford joined the Company in 2012
as President - Oil & Gas and was later
promoted to Chief Operating Officer in
July 2013. Samford began his career in
the oil and gas industry more than 30
years ago as a field engineer for Dresser
Atlas. Over the course of his career, he
has held escalating positions of responsibility for Shell Oil Company, Alcoa, and
Precision Castparts.
AFGlobal Corporation is a privatelyheld Houston-based company with

106

more than 30 facilities worldwide. The

Company operates across the offshore
drilling, onshore stimulation and subsea
production segments of the oil and
gas industry. AFGlobal also provides
products and services to the industrial,
aerospace and power generation industries, offering a broad range of highlyengineered products, as well as complementary aftermarket services.

HALLIBURTON
Halliburtons Completion Tools business
line, a long-standing industry leader in
total composite plug technology, today
introduced the Illusion frac plug, the
only fully dissolvable frac plug on the
market. The new high-performance,
10,000 psi rated product shortens the
time to production by eliminating the
need to mill out plugs after fracturing,
saving time and money for operators.
The Illusion frac plug revolutionizes
plug-and-perf completions for fracturing
in unconventional markets. Plugs can
be installed at any position in the wellbore to enable optimal placement of perforations for improved fracturing, without
prepositioned locator subs or other
equipment that remains in the wellbore
post-frac. Illusion frac plugs dissolve
completely to leave an unrestricted bore
for production, and since no intervention
is required to clean the wellbore after the
frac, risk is reduced and production may
be brought on sooner to improve the net
present value (NPV) of the asset.

SPARROWS GROUP
The Sparrows Group has boosted its senior
management team with the appointment
of an experienced director to head up its
operations across the Americas. Steve
Bertone joins the global leader in the provision of engineered products and services
in the specialist areas of lifting and handling, cable and pipelay, and fluid power to
the offshore oil and gas industry, after 33
years with McDermott International.
In his new role, Mr. Bertone will be
based in Houston and will oversee all
of Sparrows Groups operations in the
US, Brazil, Mexico and the Caribbean.
Before joining Sparrows Group, Mr.

Bertone was McDermotts vice president

of Marine Operations and has held the
roles of country manager for Qatar and
Saudi Arabia. He has an
engineering background
and graduated with a
Masters from Rensselaer Polytechnic Institute
in the state of New York.
Sparrows Group has
had a presence in the
Bertone
US since 1999 and
works across the Gulf
of Mexico as the original equipment
manufacturer (OEM) for a number of
crane brands. The company also has a
joint venture, SparrowsBSM, in Brazil,
and a partnership in Mexico. In the US,
Sparrows Group operates over five sites.
The company has office, workshop and
fabrication facilities in Houston and at
Abbeville, Broussard, Houma and Slidell
in Louisiana.

FUGRO
Fugro has successfully completed a
year-long wellhead monitoring project
for BP Americas Inc., measuring BOP
stack motions and calculating wellhead
fatigue during a deployment in the Gulf
of Mexico.
The drilling campaign was conducted
throughout 2014 in 6,000 ft of water
depth and utilized the Fugro Wellhead
and Riser Instrumentation Service
(WARIS). This installation included
transmission of motion spectra from the
BOP stack and riser using standard hydroacoustic modems and the automatic
processing of this data with topside environmental data to show levels of motion
and fatigue and their correlation with sea
states and ocean currents. This provided
BP with access to real-time subsea data
to aid their decision making throughout
the deployment. Communications from
the lower marine riser package (LMRP)
and riser remained successful even with
surface wave heights greater than 3
meters at times during the campaign.
The DeepData subsea motion monitoring pods, the main component in the
system, were deployed to positions on
the BOP stack and riser by a remotely

Oil & Gas Journal | July 6, 2015

SERVICES | SUPPLIERS
operated vehicle (ROV). The pods were
integrated with hydroacoustic modems
and had battery capacity to last for one
year of deployment. A topside system
was supplied that included vessel motion
monitoring and links to existing environmental monitoring systems.
To ensure that the data could be
accessed and utilized by BP engineers
anywhere in the world, Fugros onshore
data delivery system was used to plot
and display all the processed data from
the WARIS system. Summary plots were
also distributed by email to a designated
list of client recipients.
The success of the project indicated
the technology could be deployed on
other wells where fatigue capacity and
potential loading is of interest.

IWCF
The International Well Control Forum
(IWCF), the independent organization
that sets international well control standards, has appointed David Conroy as its
first Chief Technical Officer (CTO).
Based at the organizations UK headquarters, Mr. Conroy will be developing
this new role to lead changes to the
technical aspects of IWCFs services,
including exam quality, programme development, curriculum and training.
Mr. Conroy has 20 years experience
in the international oil and gas industry.
He will join IWCF in July from Schlumberger where he has held a variety of positions for over 10 years, latterly serving
as Drilling & Drilling Engineering Director
of Curriculum in Dubai.
Mr. Conroy holds a PhD in Geology
from The Queens University of Belfast,
which initially led him to roles in geological surveying. Since joining the oil and
gas industry in Aberdeen, he has worked
in a variety of positions in Norway, Oman
and Houston.
IWCF has recently invested in new
facilities at its headquarters in Montrose,
UK to improve training for well control
assessors and instructors who address
drilling operations and well intervention
activities. The organization is actively recruiting for new members, anyone who is
interested in having a say in well control

Oil & Gas Journal | July 6, 2015

safety should visit http://www.iwcf.org/

for more information.

HSB SOLOMON ASSOCIATES

HSB Solomon Associates, a leading
performance improvement company for
the global energy industry, announced
that they have entered into an agreement
with Concord Consulting Group (CCG).
The agreement gives Solomon ownership of CCGs methodology and database
relating to their terminal and trucking
business.
CCG is a consulting firm operating
in the petroleum industry assessing the
productivity of logistical operating units
of over 30 major oil companies around
the world. They have provided strategic
benchmarking and logistics productivity
analysis for more than 20 years. CCG is
well known for its Petroleum Distribution
Productivity Analysis (PDPA), an analysis
of petroleum terminal and trucking
operations.
Solomon will continue to provide CCG
clients with benchmarking services that
they have grown accustomed to over the
past 20 years.
Solomons benchmarking and consulting solutions help customers across
the energy value chain achieve operational excellence by increasing efficiency,
reliability, and profitability. Solomon also
provides forecasting and advice on the
North American gas market. Based in
Dallas, Texas, USA, Solomon is part of
The Hartford Steam Boiler Inspection
and Insurance Company (HSB).

CIRCOR ENERGY
Statoil has chosen CIRCOR Energy | Instrumentation products as part of a significant supply package awarded to MRC
Teamtrade, a Norwegian unit of MRC
Global Inc., distributor of pipe, valve
and fitting products and services to the
energy and industrial markets. The package consists of all tube products and a
complete range of high pressure valves
and fittings, which includes CIRCORs
Gyrolok instrumentation tube fittings and
HOKE valves and manifolds. The project
will be using smart NORSOK compliant
metallurgy to resist the potentially cor-

rosive conditions and testing operational

requirements.
Johan Sverdrup is one of the five
largest oil fields on the Norwegian continental shelf. With expected resources
between 1.7-3.0 billion barrels of oil
equivalent, it will be one of the most
important industrial projects in Norway
over the next fifty years. The development and operation of this enormous
field will provide revenues and jobs for
the coming generations.
CIRCOR Energys Instrumentation
group has installed products in the
Norwegian market for over twenty years.
The installed base, combined with a best
in class supply chain for the needed specialist raw materials, played an integral
role in securing the flagship contract.
CIRCOR will be manufacturing all
Johan Sverdrup project products at their
state of the art manufacturing center in
Spartanburg, South Carolina, USA. The
Spartanburg location utilizes state of
the art machining capability, supported
by highly experienced supply chain and
project management teams.

KEY ENERGY SERVICES, INC.

Key Energy Services, Inc. announced
that Robert Drummond has joined
the Company as President and Chief
Operating Officer, effective immediately.
Mr. Drummond was formerly employed
by Schlumberger for 31 years, serving in various positions of increasing
responsibility including management,
business development and operations.
He most recently served as President of
Schlumberger Limiteds North American
business unit.
With Mr. Drummond assuming the
position of President, Richard J. Alario
will remain Keys Chairman and Chief
Executive Officer.
Mr. Drummond is a member of the
Society of Petroleum Engineers and
serves as a Director of the National
Ocean Industries Association and is a
member of its Executive Committee.
In addition, he serves on the Board of
Directors for the Petroleum Equipment
Suppliers Association and the Houston
Offshore Energy Center.

107

STATISTICS

IMPORTS OF CRUDE AND PRODUCTS

Districts 1-4
District 5
Total US
6-19
6-12
6-19
6-12
6-19
6-12
6-20*
2015
2015
2015
2015
2015
2015
2014
1,000 b/d

Total motor gasoline .............

Mo. gas. blending comp.....
Distillate...............................
Residual ..............................
Jet fuel-kerosine ..................
Propane-propylene ..............
Other ...................................

770
749
123
142
12
73
677

596
589
141
137
66
91
925

127
124
6
66
97
10
(3)

85
82
7
60
75
10
112

897
873
129
208
109
83
674

681
671
148
197
141
101
1,037

507
481
83
112
196
53
661

Total products ......................

1,797

1,956

303

349

2,100

2,305

1,612

Total crude ...........................

5,592

5,897

1,173

1,169

6,765

7,066

7,341

Total imports ........................

7,389

7,853

1,476

1,518

8,865

9,371

8,953

EXPORTS OF CRUDE AND PRODUCTS

Total US
5-1-15
4-24-15
*5-2-14
1,000 b/d
547
547
399
188
188
122
988
988
901
378
378
391
470
470
314
945
945
877
3,516
3,516
3,004
467
467
71
3,983
3,983
3,075
4,093
(1,981)
6,074

5,993
(986)
6,979

OGJ CRACK SPREAD

6-26-15* 6-27-14* Change Change,

$/bbl %

SPOT PRICES
Product value
Brent crude
Crack spread

79.25 123.14 (43.89) (35.6)

60.84 113.12 (52.28) (46.2)
18.41 10.02
8.39
83.8

FUTURES MARKET PRICES

One month
Product value
83.17
Light sweet crude
60.06
Crack spread
23.11
Six month
Product value
76.61
Light sweet crude
61.76
Crack spread
14.85

*Revised.
Source: US Energy Information Administration
Data available at PennEnergy Research Center.

Finished motor gasoline

Jet fuel-kerosine
Distillate
Residual
Propane/propylene
Other oils
Total products
Total crude
Total exports
NET IMPORTS
Total
Products
Crude

Additional analysis of market trends is available

through OGJ Online, Oil & Gas Journals electronic
information source, at http://www.ogj.com.

128.96 (45.79) (35.5)

106.06 (46.00) (43.4)
22.91
0.21
0.9
121.49 (44.88) (36.9)
101.68 (39.92) (39.3)
19.81 (4.96) (25.0)

*Average for week ending.

Source: Oil & Gas Journal
Data available at PennEnergy Research Center.

5,782
(1,032)
6,814

*Revised.
Source: Oil & Gas Journal
Data available at PennEnergy Research Center.

CRUDE AND PRODUCT STOCKS

District

Motor gasoline
Blending
Jet fuel,
Fuel oils
PropaneCrude oil
Total
comp.
kerosine
Distillate
Residual
propylene
1,000 bbl

PADD 1 .....................................
PADD 2 .....................................
PADD 3 .....................................
PADD 4 .....................................
PADD 5 .....................................

17,075
137,733
230,432
21,590
56,163

59,578
48,186
75,010
7,295
28,425

54,424
41,565
65,625
5,240
25,761

11,865
6,837
12,810
650
7,570

43,284
32,394
43,032
4,316
12,402

9,212
1,150
23,798
204
5,453

5,048
22,175
51,955
1
2,790

June 19, 2015 ..........................

June 12, 2015 ...........................
June 20, 20142 ..........................

462,993
467,927
388,091

218,494
217,814
214,977

192,615
191,476
185,930

39,732
40,505
37,799

135,428
133,591
120,566

39,817
40,285
38,538

81,968
80,660
53,671

Includes PADD 5. 2Revised.

Source: US Energy Information Administration
Data available at PennEnergy Research Center.

REFINERY REPORTJUNE 19, 2015

District

REFINERY
OPERATIONS
Gross
Crude oil
inputs
inputs
1,000 b/d

REFINERY OUTPUT
Total
motor
Jet fuel,
Fuel oils
Propanegasoline
kerosine
Distillate
Residual
propylene
1,000 b/d

PADD 1 ..............................................
PADD 2 ..............................................
PADD 3 ..............................................
PADD 4 ..............................................
PADD 5 ..............................................

1,221
3,646
8,792
605
2,530

1,220
3,645
8,662
609
2,397

3,241
2,524
2,031
280
1,678

79
255
874
34
430

365
1,005
2,805
192
603

51
40
140
17
132

226
333
894
1
179

June 19, 2015 .....................................

June 12, 2015 .....................................
June 20, 20142 ....................................

16,794
16,648
15,872

16,533
16,283
15,672

9,754
9,933
10,130

1,672
1,672
1,476

4,970
5,012
4,876

380
370
396

1,632
1,652
1,489

17,874 Operable capacity

94.0 utilization rate

Includes PADD 5. 2Revised.

Source: US Energy Information Administration
Data available at PennEnergy Research Center.

108

Oil & Gas Journal | July 6, 2015

STATISTICS
OGJ GASOLINE PRICES
Price
Pump
ex tax
price*
6-24-15
6-24-15
/gal

OGJ PRODUCTION REPORT

BAKER HUGHES RIG COUNT

Pump
price
6-25-14

(Approx. prices for self-service unleaded gasoline)

Atlanta ..........................
216.4
262.3
Baltimore ......................
220.0
265.8
Boston ...........................
223.9
268.8
Buffalo ..........................
210.4
279.3
Miami ............................
217.9
272.3
Newark ..........................
224.4
257.3
New York........................
227.0
295.9
Norfolk...........................
210.2
245.9
Philadelphia ..................
229.7
289.9
Pittsburgh .....................
226.7
286.9
Wash., DC......................
235.0
276.9
PAD I avg ..................
222.0
272.8

358.9
363.4
364.4
366.8
375.4
354.4
371.9
364.4
373.4
368.9
370.4
366.6

Chicago .........................
Cleveland ......................
Des Moines ....................
Detroit ...........................
Indianapolis ..................
Kansas City ...................
Louisville .......................
Memphis .......................
Milwaukee .....................
Minn.-St. Paul ...............
Oklahoma City ...............
Omaha ..........................
St. Louis ........................
Tulsa .............................
Wichita ..........................
PAD II avg .................

252.8
232.3
240.3
218.3
209.5
224.0
248.8
221.9
234.4
231.7
227.3
217.7
243.0
224.3
219.3
229.7

310.3
278.7
280.7
278.7
269.7
259.7
299.7
261.7
285.7
278.7
262.7
263.4
278.7
259.7
261.7
275.3

412.1
396.3
367.3
370.8
373.3
362.3
376.3
378.3
379.3
372.3
343.3
358.3
345.9
340.8
365.8
369.5

Albuquerque ..................
Birmingham ..................
Dallas-Fort Worth ..........
Houston .........................
Little Rock .....................
New Orleans ..................
San Antonio ...................
PAD III avg ................

225.4
214.5
224.1
216.1
219.1
219.8
215.3
219.2

262.7
253.8
262.5
254.5
259.3
258.2
253.7
257.8

356.4
346.1
344.4
348.1
345.9
349.2
348.4
348.4

Cheyenne.......................
Denver ...........................
Salt Lake City ................
PAD IV avg ................

218.4
225.4
252.4
232.1

260.8
265.8
295.3
274.0

353.7
365.9
359.1
359.6

Los Angeles ...................

Phoenix..........................
Portland ........................
San Diego ......................
San Francisco................
Seattle...........................
PAD V avg .................
Weeks avg. ..................
June avg........................
May avg.. ......................
2015 to date .................
2014 to date .................

316.4
241.3
244.8
303.5
316.4
210.3
272.1
232.1
229.5
219.7
195.3
303.4

384.5
278.7
294.2
371.7
384.5
266.2
330.0
279.5
276.9
267.0
242.6
350.7

418.9
389.9
399.9
405.9
412.9
380.9
401.4
369.1
367.9
365.0

6-26-15

6-27-14

Alabama............................................
Alaska ...............................................
Arkansas ...........................................
California ..........................................
Land................................................
Offshore ..........................................
Colorado ............................................
Florida ...............................................
Illinois ...............................................
Indiana..............................................
Kansas ..............................................
Kentucky............................................
Louisiana ..........................................
N. Land ...........................................
S. Inland waters ..............................
S. Land............................................
Offshore ..........................................
Maryland ...........................................
Michigan ...........................................
Mississippi ........................................
Montana ............................................
Nebraska ...........................................
New Mexico........................................
New York............................................
North Dakota .....................................
Ohio...................................................
Oklahoma ..........................................
Pennsylvania .....................................
South Dakota.....................................
Texas .................................................
Offshore ..........................................
Inland waters ..................................
Dist. 1 .............................................
Dist. 2 .............................................
Dist. 3 .............................................
Dist. 4 .............................................
Dist. 5 .............................................
Dist. 6 .............................................
Dist. 7B ...........................................
Dist. 7C ...........................................
Dist. 8 .............................................
Dist. 8A ...........................................
Dist. 9 .............................................
Dist. 10 ...........................................
Utah ..................................................
West Virginia .....................................
Wyoming............................................
Others NV-1 .......................................

0
10
5
11
11
0
38
1
2
0
13
1
75
27
7
13
28
0
0
3
0
2
44
0
74
17
105
47
0
361
0
0
50
39
18
22
5
19
2
33
144
12
2
15
8
20
21
1

6
10
11
48
48
0
69
2
2
2
30
3
107
25
18
15
49
0
0
14
7
1
90
0
171
41
208
59
0
889
3
0
117
92
61
33
7
33
13
104
323
36
14
53
27
25
51
0

Total US ........................................
Total Canada ................................

859
135

1,873
236

Grand total ...................................

US oil rigs..........................................
US gas rigs........................................
Total US offshore ...............................
Total US cum. avg. YTD .....................

994
628
228
28
1,155

2,109
1,558
314
55
1,816

2
6-26-15
6-27-14
1,000 b/d

(Crude oil and lease condensate)

Alabama .................................
27
Alaska ....................................
420
California ...............................
598
Colorado .................................
302
Florida ....................................
6
Illinois ....................................
25
Kansas ...................................
138
Louisiana ...............................
1,317
Michigan ................................
19
Mississippi .............................
69
Montana .................................
94
New Mexico.............................
420
North Dakota ..........................
1,243
Ohio ........................................
71
Oklahoma ...............................
375
Pennsylvania ..........................
21
Texas ......................................
3,989
Utah .......................................
124
West Virginia ..........................
23
Wyoming .................................
241
Other states ...........................
58
Total
9,580
1
OGJ estimate. 2Revised. Source: Oil & Gas Journal.
Data available at PennEnergy Research Center.

US CRUDE PRICES
Alaska-North Slope 27 .........................................
Light Louisiana Sweet ...........................................
California-Midway Sunset 13 ..............................
California Buena Vista Hills 26 ...........................
Wyoming Sweet .....................................................
East Texas Sweet ...................................................
West Texas Sour 34 ..............................................
West Texas Intermediate........................................
Oklahoma Sweet....................................................
Texas Upper Gulf Coast .........................................
Michigan Sour .......................................................
Kansas Common ...................................................
North Dakota Sweet ...............................................

Research Center.

WORLD CRUDE PRICES

OPEC reference basket

Rotary rigs from spudding in to total depth.

Defnitions, see OGJ Sept. 18, 2006, p. 46.
Source: Baker Hughes Inc.
Data available at PennEnergy Research Center.

IHS PETRODATA RIG COUNT

6-19-15
/gal

JUNE 26, 2015

Total
supply
of rigs

Spot market product prices

No. 2 Distillate
Motor gasoline
Low sulfur diesel fuel
(Conventional-regular)
New York Harbor ......... 200.30 New York Harbor .........
Gulf Coast .................. 190.80 Gulf Coast ..................
Los Angeles ................
Motor gasoline
Kerosine
jet fuel
(RBOB-regular)
New York Harbor ......... 218.80 Gulf Coast ..................

186.30
177.00
187.80
169.80

Propane
No. 2 heating oil
New York Harbor ......... 173.80 Mont Belvieu .............. 35.10

US Gulf of
Mexico. . . . . .
South
America
Northwest
Europe. . . . .
West
Africa. . . . . .
Middle
East. . . . . . .
Southeast
Asia. . . . . . .
Worldwide. . . .

Marketed
Marketed
supply
Marketed utilization
of rigs contracted rate (%)

109

73

60

82.2

74

70

62

88.6

100

94

84

89.4

77

70

56

80.0

159

152

137

90.1

94
852

85
769

61
655

71.8
85.2

Wkly. avg.

$/bbl
6-26-15
59.74
Mo. avg., $/bbl
Apr. -15
May -15

OPEC reference basket.......................

Arab light-Saudi Arabia .......................
Basrah light-Iraq .................................
Bonny light 37o-Nigeria........................
Es Sider-Libya ......................................
Girassol-Angola....................................
Iran heavy-Iran.....................................
Kuwait export-Kuwait ...........................
Marine-Qatar........................................
Merey-Venezuela ..................................
Murban-UAE .........................................
Oriente-Ecuador ...................................
Saharan blend 44o-Algeria ...................
Other crudes
Minas 34o-Indonesia ............................
Fateh 32o-Dubai ...................................
Isthmus 33o-Mexico .............................
Brent 38o-UK ........................................
Urals-Russia ........................................
Differentials
WTI/Brent .............................................
Brent/Dubai..........................................

Includes state and federal motor fuel taxes and state

sales tax. Local governments may impose additional taxes.
Source: Oil & Gas Journal.
Data available at PennEnergy Research Center.

6-19-15
/gal

6-26-15
$/bbl*
51.94
55.00
53.85
61.13
52.38
53.00
51.00
56.00
56.00
49.75
48.00
55.25
47.50

*Current major refners posted prices except N. Slope lags 2

months. 40 gravity crude unless differing gravity is shown.
Source: Oil & Gas Journal. Data available at PennEnergy

REFINED PRODUCT PRICES

27
531
606
232
7
26
130
1,324
19
67
81
326
1,093
41
340
16
3,433
115
24
209
49
8,696

57.30
57.73
55.61
60.65
58.40
61.12
56.26
55.96
58.51
49.49
61.66
52.73
59.75

62.16
62.62
60.40
65.30
63.22
65.51
61.38
60.92
63.26
55.09
66.18
58.04
64.12

58.55
58.55
59.10
59.50
59.70

62.98
63.54
63.78
64.32
64.33

(5.07)
0.95

(5.04)
0.78

Source: OPEC Monthly Oil Market Report.

Data available at PennEnergy Research Center.

US NATURAL GAS STORAGE1

6-19-15

Producing region ................

Consuming region east ......
Consuming region west ......
Total US .............................
Total US2 ............................

6-12-15

6-19-14

bcf
1,018
1,003
652
1,053
1,000
848
437
430
313
2,508
2,433 1,813
Change,
Apr.-15
Apr.-14
%
1,804

1,066

Change,

%
56.1
24.2
39.6
38.3

69.2

Source: EIA Weekly Petroleum Status Report.

Data available at PennEnergy Research Center.

Oil & Gas Journal | July 6, 2015

Source: IHS Petrodata

Data available in PennEnergy Research Center

Working gas. 2At end of period.

Source: Energy Information Administration
Data available at PennEnergy Research Center.

109

STATISTICS
PACE REFINING MARGINS

US Gulf Coast
Composite US Gulf Refnery..............
Mars (Coking) ..................................
Mars (Cracking) ...............................
Bonny Light ......................................
US PADD II
Chicago (WTI)...................................
US East Coast
Brass River ......................................
East Coast Comp .............................
US West Coast
Los Angeles (ANS) ............................
NW Europe
Rotterdam (Brent) ............................
Mediterranean
Italy (Urals) ......................................
Far East
Singapore (Dubai) ............................

WORLDWIDE NGL PRODUCTION

Apr.
May June
June
2015 2015 2015
2014
Change
$/bbl

Change,
%

14.22
14.02
10.56
11.22

14.96
14.86
11.29
10.55

15.98
16.49
13.30
14.09

13.50
15.02
12.15
6.40

18.3
9.8
9.5
120.2

16.73

19.79 20.49

19.13

1.36

7.1

11.74
12.22

15.09 18.57
19.58 21.95

6.16
7.70

12.41
14.25

201.5
185.0

20.81

28.22 16.69

11.20

5.50

49.1

5.52

5.11

6.33

2.47
1.47
1.15
7.69

(0.70)

7.02

7.67 (1,088.9)

6.45

6.17

6.96

(0.70)

4.57

5.65

5.87

0.74

5.13

3 month
Change vs.
average
previous
Mar.
Feb.
production
year
2015
2015
2015
2014
Volume
1,000 b/d %

(1,007.0)

694.5

Source: Jacobs Consultancy Inc.

Data available at PennEnergy Research Center.

US NATURAL GAS BALANCE

DEMAND/SUPPLY SCOREBOARD
Apr.
Total
YTD
Apr.
Mar.
Apr. 2015-2014 YTD 20152014
2015
2015 2014 change 2015
2014
change
bcf
DEMAND
Consumption ...................
Addition to storage ..........
Exports ............................
Canada .........................
Mexico ..........................
LNG ...............................
Total demand ..................

2,044
405
123
52
71
-2,572

2,636
181
163
89
74
-2,980

1,975
323
122
65
57
-2,420

69
82
1
(13)
14
-152

10,780 10,535
718
629
563
545
279
323
278
219
6
3
12,061 11,709

245
89
18
(44)
59
3
352

SUPPLY
Production (dry gas) ........
Supplemental gas............
Storage withdrawal..........
Imports ............................
Canada..........................
Mexico ...........................
LNG................................
Total supply .....................

2,239
5
84
205
202
-3
2,533

2,299
4
375
257
242
-15
2,935

2,058
5
105
201
198
-3
2,369

181
-(21)
4
4
--164

8,885 8,164
19
20
2,059 2,465
995
976
954
957
-1
41
18
11,958 11,625

721
(1)
(406)
20
(3)
(1)
23
334

Brazil ...................................
Canada................................
Mexico .................................
United States ......................
Venezuela ............................
Other Western
Hemisphere .......................
Western
Hemisphere..................

100
632
340
3,181
213

100
632
346
3,100
213

100
632
346
3,087
213

83
696
364
2,705
213

17
(64)
(19)
382

19.8
(9.3)
(5.1)
14.1

246

241

243

245

(2)

(0.9)

4,712

4,633

4,620

4,308

313

7.3

Norway.................................
United Kingdom ...................
Other Western
Europe ...............................

372
47

332
52

349
53

317
66

32
(13)

10.2
(19.7)

10

(1)

(10.0)

Western Europe .............

428

393

411

393

18

4.7

Russia .................................
Other FSU ............................
Other Eastern
Europe ...............................
Eastern Europe ..............

470
178

467
176

457
177

447
185

10
(8)

2.2
(4.6)

15
634

14
634

12
634

10
640

2
(7)

21.1
(1.0)

Algeria .................................
Egypt ...................................
Libya....................................
Other Africa .........................
Africa..............................

340
174
50
83
647

340
174
50
83
647

340
174
50
83
647

340
174
48
82
644

2
1
2

3.4
0.7
0.3

Saudi Arabia........................
United Arab Emirates ..........
Other Middle East ................

1,830
400
691

1,830
400
691

1,830
400
691

1,830
400
646

45

7.0

Middle East.....................

2,921

2,921

2,921

2,876

45

1.6

Australia..............................
China...................................
India ....................................
Other AsiaPacifc ...............
AsiaPacifc ...................
TOTAL WORLD .................

72

100
315
487
9,828

72

100
315
487
9,714

72

100
315
487
9,720

66

103
337
507
9,368

(3)
(22)
(20)
352

8.5

(2.9)
(6.7)
(3.9)
3.8

Totals may not add due to rounding.

Source: Oil & Gas Journal.
Data available at PennEnergy Research Center.

OXYGENATES

NATURAL GAS IN UNDERGROUND STORAGE

Apr.
Mar.
Feb.
Apr.
2015
2015
2015
2014
Change
bcf
Base gas
Working gas
Total gas

4,364
1,804
6,168

4,364
1,482
5,846

4,363
1,677
6,040

4,357
1,066
5,423

Apr.
Mar.
YTD
YTD
2015
2015 Change
2015
2014
Change
1,000 bbl

2,477
738
3,215

Source: DOE Monthly Energy Review.

Data available at PennEnergy Research Center.

Fuel ethanol
Production ..................
Stocks .........................

27,910
20,787

MTBE
Production ..................
Stocks .........................

1,368
704

29,489 (1,579)
20,865
(78)

823
889

545
(185)

113,942 109,698
20,787 17,356

3,708
704

4,430
671

4,244
3,431

(722)
33

Source: DOE Petroleum Supply Monthly.

Data available at PennEnergy Research Center.

US HEATING DEGREEDAYS
May
2015

May
2014

Normal

2015 %
change
from
normal

New England ................................................................

Middle Atlantic .............................................................
East North Central........................................................
West North Central .......................................................
South Atlantic ..............................................................
East South Central .......................................................
West South Central.......................................................
Mountain ......................................................................
Pacifc ..........................................................................

163
99
160
213
29
43
19
239
177

253
165
207
215
40
66
35
188
106

281
217
238
208
61
76
17
233
182

(42.0)
(54.4)
(32.8)
2.4
(52.5)
(43.4)
11.8
2.6
(2.7)

6,818
6,116
6,791
6,642
2,878
3,736
2,362
4,260
2,243

6,881
6,213
7,194
7,402
2,932
3,910
2,655
4,621
2,538

6,545
5,872
6,447
6,701
2,846
3,597
2,286
5,127
3,152

4.2
4.2
5.3
(0.9)
1.1
3.9
3.3
(16.9)
(28.8)

US average*............................................................

116

128

159

(27.0)

4,411

4,668

4,485

(1.6)

Total degreedays
July 1 through May 31
2015
2014
Normal

% change
from
normal

*Excludes Alaska and Hawaii.

Source: DOE Monthly Energy Review.
Data available at PennEnergy Research Center.

110

Oil & Gas Journal | July 6, 2015

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112

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Crane Operator(s), Welder(s), 3rd Engineer(s),
and 3rd Mate DPO(s)
For detailed info. & how to apply, visit http://
www.enscoplc.com/Careers/GLOBAL-JOBS/
default.aspx & enter the job title as a keyword.
Sonangol Marine Services, Inc. in Houston,
Texas seeks Suezmax Fleet Marine
Superintendent Senior. Qualifed applicants
will possess a Nautical Science HND (Higher
National Diploma) or equivalent with Deck
Offcer Certifcation and fve (5) years of
experience in the job offered or fve (5) years
of experience in sailing onboard ocean-going
tanker as a Senior Deck Offcer and tanker
operations. Qualifed applicants should email
resumes to sonshipresume@sonangolshipping.
com, Must put job code SFMSS2014 on
resume.

Oil & Gas Journal | July 6, 2015

113

MARKET
CONNECTION
WHERE THE INDUSTRY GOES TO CLASSIFY

The Oil & Gas Journal has a circulation of over 100,000 readers and has been the worlds most widely read petroleum publication for over 100 years
E MPL OY ME NT

NOW HIRING: REFINERY MANAGER

NARL REFINING LP
COME BY CHANCE, NEWFOUNDLAND
NARL Refning Limited Partnership (NARL Refning or the Company) owns and operates a
115,000-barrel-per-day oil refnery located in Newfoundland, on Canadas east coast, approximately 130 kms from the city of St. Johns, the capital of Newfoundland and Labrador. Nearly
500 skilled employees make some of the cleanest fuels in the world for our customers at home in
Newfoundland and around the world.

THE EASTERN CARIBBEAN SUPREME

COURT IN THE HIGH COURT OF
JUSTICE BRITISH VIRGIN ISLANDS
COMMERCIAL DIVISION
IN THE MATTER OF BAGHLAN
GROUP LIMITED
AND IN THE MATTER OF THE BVI
BUSINESS COMPANIES ACT, 2004
(AS AMENDED)
AND IN THE MATTER OF THE
INSOLVENCY ACT, 2003
CLAIM NO. BVI HC(COM) 2015/0072

Te Company is seeking a permanent Refnery Manager to enhance the Companys senior management team and to lead the refnerys performance improvement and capacity expansion. Te
Refnery Manager will be responsible for the leadership and overall management of the refnery
facilities and workforce and for the safe and efcient operation of the North Atlantic Refnery.
Te successful candidate will possess strong operations, leadership, stakeholder management and
communication skills. An undergraduate degree in chemical engineering, or related discipline,
as well as a Masters degree in business or engineering is required. Tis position requires 15-20
years of experience in refnery operations in a technical and supervisory capacity. Several years
of refnery experience in a senior management role coupled with an engineering and technical
background is desired.
Priorities for this position include:
Ensure the health and safety of all operations personnel through the establishment of
efective HSSE policies
Manage operations, asset integrity, maintenance and technical activities in terms of
HSSE, organization, budget, product delivery, and quality
Oversee day-to-day refnery operations to ensure the plant is operating in a safe and efcient manner and in compliance with all applicable environmental licenses and permits
Oversee day-to-day logistics, including the tank farm, dock and terminals, and coordinating with external parties
Develop and execute planning processes, metrics and KPIs, and refning operational
excellence / continuous improvement for operations, asset integrity, maintenance, and
technical support activities
Coordinate and contribute to the annual budget setting process by submitting cost
proposals, detailed investment projects and spending patterns for each of the facilities
constructed and under development
Assure that government and municipal codes, standards, permits and licenses are efectively maintained, and that the relationships with these entities are supportive
Lead the operations and engineering teams, including establishing, monitoring, and
communicating performance objectives and participating in recruiting to fll vacant
positions within the organization.
Manage relations with the local union workforce
Plan and execute the plant turnaround, scheduled for 2016
Contribute to the planning and execution of North Atlantics growth capital expenditure
program to increase facility capacity.
Tis is a full time permanent position ofering a competive salary and an attractive benefts program including a company vehicle, Defned Beneft Pension Plan, Extended Health Care, Vision
and Dental Plans. Te company operates a shuttle bus service from St. Johns to the refnery and
return daily, and would also cover reasonable relocation costs, if necessary.

If you are a highly motivated team player, meet the described qualifcations and
are prepared to meet the challenges of this senior management position,
you are invited apply in strictest confdence to:
NARL Refning Limited Partnership
Human Resources Department
1 Refnery Rd, Box 40
Come By Chance, NL, A0B 1N0
Fax: (709) 463-8122 or Email: hr@northatlantic.ca
114

NOTICE
NOTICE IS HEREBY given that an application
for the appointment of a liquidator to Baghlan
Group Limited whose registered offce is located
at Trinity Chambers, PO Box 4301, Road Town,
Tortola, British Virgin Islands, VG1110 was presented to the High Court of Justice on 17 June
2015 by BNP Paribas Trust Corporation UK
Limited, c/o Walkers, 171 Main Street, PO Box
92, Road Town, Tortola, British Virgin Islands.
The application will be heard on 13 July 2015
at the Commercial Court, Road Town, Tortola,
British Virgin Islands.
Any person intending to appear on the hearing
of the application (whether to support or oppose it) must give written notice of intention
to do so to the applicant or its legal practitioners in accordance with Rule 162 of the Insolvency Rules, 2005 by 4.00pm on the business
day before the date fxed for the hearing of the
application. A copy of the application will be
furnished by the undersigned to any director,
member or creditor requiring the same on payment of the prescribed fee.
Dated this 17th day of June 2015
WALKERS
Legal practitioners for the Applicant
PO Box 92, 171 Main Street
Road Town, Tortola
British Virgin Islands, VG 1110
Tel: 284 494 2204
Fax: 284 494 6683
(Ref: MN/OC/B09569)

Find MORE
employment
opportunities
online at
www.ogj.com/
market-connection.html
or contact
gracej@pennwell.com
Oil & Gas Journal | July 6, 2015

ADVERTISING SALES

ADVERTISERS INDEX

US Sales

COMPANY NAME

Mike Moss, (713) 963-6221, mikem@pennwell.com.

Mark Gates, (713) 963-6237, markg@pennwell.com.
Stan Terry, (713) 963-6208, stant@pennwell.com.
Grace Jordan, (713) 963-6291, gracej@pennwell.com
Courtney Ferguson, (918) 831-9558, courtneyf@pennwell.com

American

P4, P5

Mike Twiss, Miklin Business Services, Unit 15,

3 Benjamin Way, Rockingham, Western Australia 6168;
Tel +61 8 9529 4466, Fax +61 8 9529 4488
Email: miklinbusiness@bigpond.com

Aramco Services Company

Brazil / South America

www.arielcorp.com
www.assuredflowsolutionsllc.com

Stan Terry, (713) 963-6208, stant@pennwell.com

Carhartt

France / Belgium / Spain / Portugal /

Southern Switzerland / Monaco

www.carhartt.com

Germany / Austria / Northern Switzerland /

Eastern Europe / Russia / Former Soviet Union
Sicking Industrial Marketing, Kurt-Schumacher-Str. 16,
59872, Freienohl, Germany. Tel: 49(0)2903.3385.70,
Fax: 49(0)2903.3385.82; E-mail: wilhelms@pennwell.
com; www.sicking.de <http://www.sicking.de> Andreas
Sicking

Italy

23
43, 45, 47

Drager Safety AG

Mason and Morse Ranch

Company

EGAS Egypt
Emerson Process Management

17
19

Fidelity Investments

41

www.fishbonesafetysolutions.com

Greatwall Drilling Company

25
13

21
P15
96

www.pipelineweek.com

C3

www.deepoffshoretechnology.com

Petroperu
Fishbone Safety

P7

www.PennEnergyJobs.com

PennWell Corporation
52

49

www.konggloves.com

PennWell Corporation
7

73

www.miinet.com/safetyseries

PennEnergy Jobs

www.emersonprocess.com/projectcertainty

www.glenguard.com

P13

www.mechanixwear.com

ORR Safety Corporation

www.egas.com.eg

Japan

63

www.ranchland.com/williamsfork

Moore Industries

www.draeger.com/passion

Glen Raven, Inc.

20

www.petroperu.com.re

Schweitzer Engineering
Laboratories

www.selinc.com/7965-og7

Sierra Hamilton

73

www.Sierra-Hamilton.com

www.gwdc.com.cn

Halliburton

China / Korea / Singapore / Asia-Pacific

www.halliburton.com/Complete1/Illusion

Michael Yee, 19 Tanglin Road #05-20, Tanglin Shopping

Center, Singapore 247909, Republic of Singapore; Tel: 65
9616.8080, Fax: 65.6734.0655; E-mail: yfyee@singnet.
com.sg

High Pressure Equipment Company

United Kingdom / Scandinavia / Denmark /

The Netherlands

Lagcoe 2015

Mechanix Wear

38-39

Ferruccio Silvera, Viale Monza, 24 20127 Milano Italy;

Tel:+02.28.46 716; E-mail: info@silvera.it
e.x.press sales division, ICS Convention Design Inc.
6F, Chiyoda Bldg., 1-5-18 Sarugakucho, Chiyoda-ku,
Tokyo 101-8449, Japan, Tel: +81.3.3219.3641, Fax:
81.3.3219.3628, Masaki Mori, E-mail: Masaki.Mori@
ex-press.jp

Ariel Corporation
Assured Flow Solutions, LLC

Kimray

PAGE

www.lagcoe.com

www.aramco.jobs/ogj

Canada

COMPANY NAME

www.kimray.com

Ametek
www.ametekpi.com

Stefy Picoitti Thompson, Tel: +33(0)4 94 70 82 63; Cell:

+33(0)6 21 23 67 02, stefaniat@pennwell.com.
Daniel Bernard, 8 allee des Herons, 78400 Chatou,
France; Tel: 33(0)1.3071.1119, Fax: 33(0)1.3071.1119;
E-mail: danielb@pennwell.com

29

www.american-usa.com

Australia / New Zealand

Jim Klingele, (713) 963-6214, jimk@PennWell.com

1455 West Loop South, Suite 400, Houston, TX 77027

PAGE

11
P3

TIPRO

97

www.tipro.org

Turbomachinery Laboratory

P16

www.tps.tamu.edu

www.HighPressure.com

Honeywell

Tyco-Scott Safety

C2

www.UniversalByScott.com

www.honeywellprocess.com/oilandgas

Graham Hoyle, 10 Springfield Close, Cross, Axbridge,

Somerset BS26 2FE, Phone: +44 1934 733871 Mobile:
+44 7927 889916, grahamh@pennwell.com or ghms@
btinternet.com

Industrial Rubber Inc

West Africa

www.kenwood.com/usa

15

Weatherford

www.weatherford.com/wireline

www.iri-oiltool.com

JVCKENWOOD

Weatherford

C4

www.weatherford.com/secureview

Dele Olaoye, Flat 8, 3rd Floor, Oluwatobi House, 71

Allen Ave., Ikeja Lagos, Nigeria; Tel: +234 805 687 2630;
Tel: +234 802 223 2864; E-mail: dele.olaoye@q-she.com

OGJ Reprints
Rhonda Brown, Foster Printing Co., Reprint Marketing
Manager; 866.879.9144 ext 194, Fax: 219.561.2023;
4295 Ohio Street, Michigan City, IN 46360;
rhondab@fosterprinting.com. www.fosterprinting.com

Custom Publishing
Roy Markum, Vice-President/Custom Publishing, roym@
pennwell.com, Phone: 713-963-6220, Fax: 713-9636228

PennWell

This index is provided as a service. The publisher does not assume any liability for errors or omission.

1455 West Loop South, Suite 400, Houston, TX 77027

www.ogj.com

Oil & Gas Journal | July 6, 2015

115

THE EDITORS PERSPECTIVE

Emerging producers
offered guidelines
for governance
by Bob Tippee, Editor
Like most worthy endeavors, governing oil and
gas activity at the national level is easier said
than doneespecially where oil and gas never
before have been produced.
Chatham House, The Royal Institute of
International Affairs, of London, offers help in
a research paper, Guidelines for Governance
in Emerging Oil and Gas Producers, compiled
under auspices of the New Petroleum Producers Discussion Group.
The document describes these objectives
and elaborations, summarized mercilessly here:
Attract the most qualified investor for the
long run. Governments should invest in geological data before licensing, set prequalification
criteria tough and transparent enough to preclude corrupt bidders, and adopt laws covering
transfers of license interests.
Maximize economic returns to the state
through licensing. Fiscal terms should provide
the state early revenue for urgent development
while ensuring long-term economic benefits.
Taxes should be simple and defined in tax
codes rather than contracts.
Earn and retain public trust, and manage
public expectations. To avoid misunderstandings and overcome mistrust, governments and
industry should engage meaningfully with communities, the document says. This involves
real listening.
Increase local content and benefits to
the broader economy. Laws should require purchases by foreign and national oil companies of
domestic goods and services to the extent possible or at least provide timetables for shifting
from foreign to domestic sourcing.
Build capable national organizations to
participate in and oversee the development
of the resources. Governments should seek
technical advice for capacity-building yet avoid
becoming overloaded with unsolicited help.
The roles of national oil companies should be
shaped strategically and in accordance with
discovery sizes and likely production lives.
Increase accountability. Early in resource
development, one credible body should manage all aspects of work. Checks and balances
can be introduced over time as capacity builds
in other branches of government. But mechanisms for public accountability, including
audits of agencies and state-owned companies,
should be introduced immediately.
The guidelines fill 44 pages. Theyre easy
to find at www.chathamhouse.org. History suggests implementing them is more difficult.
(From the subscription area of www.ogj.com,
posted June 26, 2015; authors e-mail: bobt@
ogjonline.com)

116

WATCHING GOVERNMENT

Nick Snow
Washington Editor

Court to EPA: Costs matter

Oil and gas groups did not respond
immediately when the US Supreme
Court ruled on June 29 that the US
Environmental Protection Agency
acted unreasonably when it said costs
were irrelevant in regulating mercury
and air toxics emissions from coalfired power plants. But the decision
potentially could affect other evolving
EPA regulations that would apply to
the industry.
EPA must consider costincluding cost of compliancebefore
deciding whether regulation is appropriate and necessary, the 5-to-4
decision on Michigan vs. EPA said. It
will be up to the agency to decide (as
always, within the limits of reasonable interpretation) how to account
for cost.
Business organizations outside oil
and gas said the ruling matters. The
Supreme Court upheld a fundamental
precept of smart regulation today
that a rigorous cost-benefit analysis
is a necessary component of any
major regulatory proposal, Business
Roundtable Pres. John Engler said.
The ruling establishes an important
and valuable precedent for evaluating
proposed and pending federal regulations. Requiring agencies to weigh the
economic costs of proposed regulations will lead to better rulemaking
and fairer outcomes for businesses,
workers, and families, he said.
US Chamber of Commerce Pres.
Thomas J. Donohue, meanwhile,
said, The Supreme Court made it
clear that EPA cannot turn a blind
eye when it imposes massive costs
on our economy in return for minimal
environmental benefit. The decision

affirms the common-sense principle

that Congress requires agencies to
consider the consequences of regulations they impose on businesses and
consumers.
National Association of Manufacturers Senior Vice-Pres. and General
Counsel Linda Kelly said, Today, the
Supreme Court called out the EPA
for a systematic problemfailure to
appropriately consider coststhat
the agency has repeatedly used to issue overly aggressive regulations that
place manufacturers at a competitive
disadvantage.

A balanced approach
Manufacturers depend on affordable, reliable energy supplies to
remain competitive, and face other
pending regulationssuch as ozone
and greenhouse gaseswhich will
impose further burdens, Kelly said.
We need a balanced approach to
regulations that considers both costs
and benefits to continue to create
jobs and economic growth, she said.
The American Petroleum Institute
has warned that EPAs proposal to reduce National Ambient Air Quality Standards to 65 ppb came as several US
metropolitan areas were having trouble
meeting the current 70 ppb limit.
It said that a recent NERA
Economic Consulting study found
a stricter ozone regulation could
reduce US gross domestic product
by $270 billion/year and $3.4 trillion
from 2017 to 2040, and result in 2.9
million fewer jobs or job equivalents
annually on average through 2040.
Those seem like potential costs
EPA may have to consider now.

Oil & Gas Journal | July 6, 2015

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