FEBRUARY 2019 / DEFINING CONVENTIONAL, SHALE AND OFFSHORE TECHNOLOGY FOR OIL AND GAS / WorldOil.

com

2019 FORECAST
Increased activity expected globally
despite the recent oil price drop

DIRECTIONAL DRILLING
New steerable system helps operators drill
long Permian and Eagle Ford horizontals

SHALETECH: MARCELLUS/UTICA
Prolific production feeds a budding colossus

EXCLUSIVE INTERVIEW
ConocoPhillips CTO Greg Leveille
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 CONTENTS
FEBRUARY 2019 / VOL. 240 NO. 2

57

35
SPECIAL FOCUS:
2019 FORECAST & REVIEW
27 Coordinated capex growth
projected for second
straight year
J. West
29 Implications of the 2018
mid-terms for the oil
and gas industry
R. Bezdek
35 U.S. set for measured increase
despite DUC build-up
C. Fleming / K. Abraham
39 Shale drilling drove rig count
gains in 2018
C. Fleming
41 U.S. crude output surges,
gas reaping benefits of LNG
expansion
43 U.S. reserves hit new,
all-time record levels
U.S. Energy Information
Administration
45 Activity outside the U.S.
to grow at moderate pace
World Oil editors
49 Canada expects a quiet,
flat year for E&P activity
R. Curran
EDITORIAL ADVISORS’
PERSPECTIVE
51 PESA companies must remain
nimble in solving challenges
L. Beyer
DIRECTIONAL DRILLING
53 RSS design aimed at a
growing scope of directional
drilling demands
J. Clegg
INTERVIEW: GREG LEVEILLE
57 ConocoPhillips’ Greg Leveille
sees rapid trajectory of
technical advancement
continuing
K. Abraham
SHALETECH: MARCELLUS/
UTICA SHALES
60 Feeding a budding
petrochemical colossus
J. Redden
EMGC SHOW PREVIEW
65 EMGC 2019 to deliver updates,
outlooks from Eastern
Mediterranean operators
E. Querubin
OFFSHORE/SUBSEA
67 Qualification of a
20,000-psi subsea BOP:
A collaborative approach
D. Kluk
REGIONAL REPORT:
AUSTRALIA & PNG
72 Australia takes the lead as top
LNG exporter, but will it last?
E. Querubin
WORKFORCE ISSUES
77 Examining the role of
outsourced service providers
and external workers
A. Srinivasan
72
COLUMNS
9 First oil
The art of discussing issues in 2019
15 What’s new in exploration
The status of airguns and
alternatives
17 Drilling advances
Is your top drive healthy?
19 What’s new in production
Well organization
21 Oil and gas in the capitals
Russia’s development and the
disconnect between oil prices
and exchange rates
23 Executive viewpoint
The Great Water Hope:
The future of oilfield produced water
86 The last barrel
U.S. inches closer
to energy independence
NEWS AND RESOURCES
11 World of oil and gas
25 Industry at a glance
80 People in the industry
81 Companies in the news
82 New products and services
83 Advertisers’ index
84 Marketplace /
Advertising sales offices
85 Meetings and events
ABOUT THE COVER
As the sun brightens up the snowy landscape
on a cold winter day, an H&P FlexRig,
working on behalf of operator ConocoPhillips,
conducts development drilling in the Bakken
shale on the Corral Creek Unit North Coast
Pad, north of the town of Killdeer, in Dunn
County, North Dakota. Image: ConocoPhillips.

World Oil® /FEBRUARY 2019 3


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4 FEBRUARY 2019 / WorldOil.com
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EDITORIAL
Editor-in-Chief Kurt Abraham
Technical Editor Craig Fleming
Associate Editor Emily Querubin
News Editor Michele Cowart
Contributing Editors
Dr. A. F. Alhajji, Middle East Dr. Jeffrey M. Moore, Asia-Pacific
Dr. Roger Bezdek, Washington Mauro Nogarin, Latin America
Ron Bitto, Offshore Dr. Øystein Noreng, North Sea
David Blackmon, Reg. Affairs Mark Patton, Water Management
Robert Curran, Canada Dr. William J. Pike, Energy Issues
Bill Head, Exploration Jim Redden, Drilling
Don Francis, Production Dr. Jacques Sapir, FSU
Raj Kanwar, South Asia Mike Slaton, At Large
Saeid Mokhatab, LNG Russell Wright, At Large
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Chairman—Doug Valleau, President, Strategia Innovation and Technology Advisers, LLC
Ben Bloys, Manager, Los Alamos Technology Alliance, Chevron
Eric Carre, Executive Vice President–Global Business Lines and Chief HSE Officer, Hal-
liburton Company
Dan Domeracki, Vice President, Government, Industry & Global Stewardship,
Schlumberger, and Chairman, Petroleum Equipment and Services Association
Deepak M. Gala, SME, Well Control Engineering and Relief Well Planning, Shell
John Gellert, CEO, SEACOR Marine Holdings, and Chairman, National Ocean
Industries Association
Alexander G. Kemp, Professor of Petroleum Economics, and Director, Aberdeen Centre
for Research in Energy Economics and Finance, University of Aberdeen
Hege Kverneland, Corporate Vice President and Chief Technology Officer, National
Oilwell Varco
Trent Latshaw, President, Latshaw Drilling Co. LLC, and member,
IADC Executive Committee
Keith Lynch, Wells Operations Advisor—Unconventional Assets, ConocoPhillips
Dr. D. Nathan Meehan, Vice President, BHGE, and Managing Director,
Gaffney-Cline & Associates
Douglas C. Nester, Senior Vice President, Project Management and Operations,
Compadre Resources, LLC
David A. Pursell, Senior Vice President, Planning and Energy Fundamentals,
Apache Corporation
Art J. Schroeder, Jr., CEO, Energy Valley, Inc.
Svein Tollefsen, Manager, Reservoir Technology, Equinor ASA
Robert E. (Bob) Warren, President, Baclenna, Inc.
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The art of discussing issues in 2019
Back in simpler days, there weren’t
many ways for the general public to air in-
dividual views and frustrations on social,
governmental and business issues. One
might write a letter-to-the-editor of the lo-
cal newspaper, or perhaps author an op-ed
piece. Today, Internet access has opened
up a plethora of social media sites and
news channel forums to air views and en-
gage in “discussions.” Our World Oil Face-
book page last month hosted an impromp-
tu exchange, with such clear-cut opposing
views, that we thought we would share it.
The names have been changed to protect
the individuals’ privacy:
John: Every barrel of oil extracted is
another nail in humanity’s coffin. Leave it
in the ground.
Bob: John, how about natural gas
too? Have fun heating your home with
good intentions.
John: Gas is better, of course. Thorough
insulation is better still, for both buildings
and bodies. What’s your alternative plan?
Bob: John, I don’t have an alternative
plan. Natural gas and oil extraction are
what pay my bills and feed my family.
John: OK, so extinction it is then.
Good luck to your family, a few years
down the road.
Bob: Well, John, a happy extinction
for your family as well!!
John: That’s what I’m trying to avoid,
for your family and mine. I’m pointing out
the consequences of continued fossil fuel
extraction. If you don’t like the message,
do something practical—don’t waste
time arguing with the messenger.
Bob: John, who was arguing? A lot of
people and equipment out there rely on
(O&G). If you want to make a difference,
then get off your phone and park your car,
and shut the gas off to your house, because
the more you use that stuff, the more the
industry needs to drill for oil. Think about
it. You’re bitching about oil staying in the
ground on a device created by oil.
John: We have to start from where we
are. I do what I can at work, and at home,
to minimize fossil fuel use and campaign
FIRST OIL
KURT ABRAHAM, EDITOR-IN-CHIEF
for arrangements that will give us a chance
of survival. And I don’t drive a car, thank
you for checking.
Bob: John, no matter what you do, you
will always need oil every day. From wind
turbines to solar panels. They can’t make
them without oil. I’ll keep drilling holes
to heat your home and provide fuel for the
tractors and combines that take the crops
off to feed you and your family. And you
keep up the good work, bud. Your wel-
come for the oil, btw. You wouldn’t be able
to campaign against oil without it.
John: Your last sentence is true today.
Very sad. But I am not ready to join you
in your despair by agreeing with your first
sentence. As you said, you have no alterna-
tive plan. I would rather push for a transi-
tion to zero carbon, which, of course, can-
not happen suddenly but can be achieved.
If we carry on pumping the (O&G) out,
and don’t even try to change course, we are
going to get runaway climate change and
human extinction. You might be willing to
roll over and accept it, but I’m not.
Don: Victim to Political Lies. Drill
baby Drill!
Scott: Bob, unless that John guy heats
his house with firewood, doesn’t drive a
vehicle, or almost anything else in life, he’s
just a head case.... that guy’s hair is defi-
nitely not straight back.
John: You’re right, I do heat my house
with firewood, and as I said above, I don’t
drive. Hair is a mess though, sorry.
Bob: Scott, he’s not dialed in.
David: Bob, your job threatens my
livelihood. I ranch—the ranges are burnt
off, cattle killed, noxious weeds. How are
u going to do your job, if I can’t feed you?
U can’t eat oil. And if oil and bitumen are
so great, why don’t we save the resource
for Canada?
Don: These hippie comments are hi-
larious. Guess what—if you are alive and
breathing, and don’t live in a third-world
country, like it or not, you support the fos-
sil fuel industry.
And, so goes the art of discussion in to-
day’s electronic environment.
IN THIS ISSUE
27 Special focus: 2019 Industry
Forecast. For the 93rd con-
secutive year, the World Oil staff presents
its annual review and forecast of global
E&P activity. Within the Forecast section,
we feature the capital spending outlook,
the regulatory picture in Washington from
Contributing Editor Roger Bezdek, and
the U.S. drilling forecast assembled by
our editorial team. The U.S. discussion in-
cludes well, footage and rig counts, along
with production. Other reports cover E&P
outside the U.S., including Canada, pro-
filed by our Calgary-based contributor.
53 Directional drilling: RSS
design handles a growing
scope of demands. A Weatherford au-
thor describes how a novel rotary steer-
able system addresses maintenance,
downhole motors, and hole geometry in
a new light. Designers created a tool for
future decades that can drill perfectly
straight, as well as drill a perfectly smooth
curve, up to the tool’s maximum capabil-
ity. In the past two years, the Magnus RSS
has been developed, tested and proven in
applications in the U.S., Latin America and
the Middle East.
60 ShaleTech: Marcellus and
Utica shales feed a bud-
ding petrochemical colossus. In this
premier gas play, Contributing Editor Jim
Redden says that the debuts of long-
awaited pipeline networks, in-basin power
and petrochemical demand, and regional
exportation of LNG and NGLs are com-
bining to provide seasonally independent
markets. There are some 26 midstream
and downstream projects in various stag-
es of development within the Pennsyl-
vania and Ohio portions of the Marcellus
and Utica shales, which feature some of
the nation's longest lateral wells.
ŝŝKURT.ABRAHAM@WORLDOIL.COM
World Oil® / FEBRUARY 2019 9
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Agile thinking. Engineering change.

 WORLD OF OIL AND GAS
EMILY QUERUBIN, ASSOCIATE EDITOR

PRODUCTION /////////////////////////////////////////////////////////////////////////////
CNOOC’s
Huizhou project
begins producing
in the South
China Sea
The Huizhou 32-5 oil field
comprehensive adjustment/
Huizhou 33-1 oil field joint
development project reportedly
started production. The project,
which is in the south-central part
of the eastern South China Sea,
is approximately 105 mi from
Hong Kong. In water depths of
about 377 ft, the project has
one drilling and production
platform that utilizes the existing
infrastructure of Huizhou 25-8.
According to CNOOC, the project
has one producing well that is
expected to reach a peak output
of about 19,200 bopd in 2020.
CNOOC Limited operates the
development project with a 100%
interest. The South China Sea
has proven itself to be a valuable
region for oil and gas E&P. It
reportedly holds proven reserves
of more than 7 Bbbl and natural
gas reserves estimated at about
265 Tcf.
Lula consortium sees start-up of Lula North,
in Brazil’s Santos basin
Just a few months following the start of production at
Lula Extreme South with the P-69 FPSO, Royal Dutch Shell
(25%)—alongside partners Petrobras (operator, 65%) and
Galp subsidiary Petrogal Brasil (10%)—announced the
start of production at the Lula North project. The deep-
water project is situated in Brazil’s prolific Santos basin.
Production at Lula North is being processed by the P-67
FPSO (pictured). It is the seventh FPSO to be deployed at
Lula, and the third in a series of standardized vessels built
for the Lula consortium. The FPSO is designed to process
up to 150,000 bopd and 6 MMcmgd. Photo: Shell.
Equinor, partners will invest millions to increase Gullfaks production
The Gullfaks field partners—Equinor, Petoro and OMV—are
working to improve oil recovery by as much as 17 MMbbl,
through the use of water injection and new production wells
in the Shetland/Lista phase 2 development. According to the
companies, seven horizontal wells are planned to be drilled
by existing drilling facilities on Gullfaks. A well test in 2012
reportedly proved that the carbonate reservoir lying above
the main reservoir at Gullfaks had an oil production potential.
Consequently, the partners have invested more than NOK
$1 billion in production wells in the formation since 2013. So
far, the investment has produced more than 6 MMbbl of oil
from Shetland/Lista phase 1, according to Equinor. Arne Sigve
Nylund, Equinor’s executive V.P. for development and production in Norway, said, “Our ambition is to maintain
profitable production from the Norwegian Continental Shelf for several decades. Wells that can be drilled fast
and at a low cost, near existing infrastructure, will be a major contributor.” Photo: Equinor.

EXPLORATION/////////////////////////////////////////////////////////////////////////////
BP reports two new oil discoveries in the U.S.
GOM, east of Na Kika
BP reported two new oil finds at
the Manuel and Nearly Headless
Nick prospects, in the Gulf of
Mexico. The Manuel discovery is
on Mississippi Canyon Block 520,
east of BP’s Na Kika platform
(pictured). The well reportedly
encountered oil pay in high-quality
Miocene sandstone reservoirs. The
company says it plans to develop
these reservoirs via a subsea tieback to the Na Kika platform. BP has
a 50-50 partnership with Shell on the Manuel discovery. Likewise, the
Nearly Headless Nick well encountered oil pay in high-quality Miocene
sandstone reservoirs and is expected to be tied back to the Delta House
facility. The discovery, operated by LLOG, is situated on Mississippi
Canyon Block 387. BP’s partners in the Nearly Headless Nick discovery
include LLOG, Kosmos Energy and Ridgewood Energy. Photo: BP.
Aker BP reports discovery on Froskelår
Main prospect
Aker BP is drilling exploration well 24/9-14 on the Froskelår Main pros-
pect. The prospect, which is in the Alvheim area, follows the company’s
Frosk discovery last year. According to AkerBP, the majority of the
discovery is in License 869 on the Norwegian Continental Shelf. After
encountering oil and gas, preliminary analysis of the discovery report-
edly indicates a gross discovery size in the range of 45 MMboe to 153
MMboe. The company will continue drilling, along with a comprehensive
data collection program. AkerBP operates License 869 with a 60% inter-
est. Partners include Lundin Norway (20%) and Vår Energi (20%).
CNOOC strikes gas on Glengorm prospect,
offshore UK
CNOOC Limited reported a discovery late last month on the Glengorm
prospect, offshore the UK in the Central North Sea. The discovery is in
License P2215, where water depths are approximately 282 ft. The explo-
ration well had been drilled to a TD of nearly 16,588 ft, encountering
net gas and condensate pay zones with a total thickness of over 121 ft.
Partners of CNOOC Petroleum Europe Limited (operator, 50%) include
Total E&P UK North Sea Limited (25%) and Euroil (25%). “Glengorm
discovery demonstrates the great exploration potential of License P2215.
We are looking forward to further appraisal,” said Xie Yuhong, executive
V.P. at CNOOC, in a release.
Equinor reports Norwegian Sea gas discovery
south of Kristin field
Equinor—alongside partners Petoro, ExxonMobil and Total—struck a gas
and condensate discovery in the Norwegian Sea. The Ragnfrid North
exploration well was drilled by the West Phoenix rig, more than 12 mi
south of the Kristin platform, and will aid in determining the area’s
resource base over the next few years. According to the company,
recoverable resources have been estimated between 6 MMboe and 25
MMboe. The discovery reportedly will now be evaluated for develop-
ment and tie-in to Kristin field and further maturing of the Kristin South
project. Equinor Senior V.P. for Norway and the UK Nick Ashton said,
“Ragnfrid North will, together with the former discoveries Lavrans and
Erlend East, give a more detailed picture of the potential in this area
of the Norwegian Sea.” The company said that it expects the find to
increase the probability of discoveries for other prospects, paving the
way for more drilling operations in the area. It was reported that the
West Phoenix rig will now move to the UKCS, where it will drill the
Equinor-operated Bigfoot prospect, south of Mariner field.

World Oil® / FEBRUARY 2019 11

 WORLD OF OIL AND GAS
EMILY QUERUBIN, ASSOCIATE EDITOR Instrumentation
for Magnetic
BUSINESS/DEVELOPMENTS ///////////////////////////////// Ranging
BP approves major expansion at U.S. GOM deepwater field
BP has approved a major expansion at Atlantis
field, in the U.S. Gulf of Mexico. Additionally, the
company reported that significant additional
resources have been identified that could create
further development opportunities around its
regional production hubs. The $1.3-billion Atlantis
Phase 3 development will include construction of
a new subsea production system from eight new
wells that will be tied into the current platform, 150
mi south of New Orleans, La. The project should
boost production at the platform by an estimated
38,000 boed, gross, at its peak. Additionally, it will access the field’s eastern area, where advanced
imaging and reservoir characterization have identified an additional 400 MMbbl of oil-in-place
at Atlantis field. “BP’s Gulf of Mexico business is key to our strategy of growing production of
advantaged high-margin oil. We are building on our world-class position, upgrading the resources
at our fields through technology, productivity and exploration success,” said BP Upstream Chief
Executive Bernard Looney in a release. “And these fields are still young—only 12% of the hydrocar-
bons in-place across our Gulf portfolio have been produced, so far. We can see many opportunities
for further development, offering the potential to continue to create value through the middle of the
next decade and beyond.” Atlantis Phase 3 is expected to go onstream in 2020. Photo: BP.

Talos Energy further Chesapeake completes

defines resource potential
of Zama discovery
Talos has provided an update on its appraisal of
the Zama discovery, in the U.S. Gulf of Mexico.
The Zama-2 well, the first of three appraisals
to be drilled by the consortium, reportedly was
drilled in a down-dip location approximately
1.3 mi north of the Zama-1 discovery. According
to the company, the well reached the top of
the Zama reservoir at about 10,759 ft, TVD.
Not only did the well give a better understand-
ing of Zama’s resource potential, but it also
provided further testing of a deeper exploration
prospect—Marte. Although high-quality sands
of consistent geological age were encountered
in Marte, they reportedly were not hydrocarbon-
bearing. “We are very pleased with the results
of the Zama-2 well, as we were able to achieve
our primary goals of understanding the depo-
sitional environment and the presence of thick
sand bodies needed for robust aquifer support,
both of which help with ultimate recovery.
We also confirmed that this section of the
reservoir has similar or better rock properties,
as compared to Zama-1 discovery well and that
the pressure information indicates connectiv-
ity to Zama-1. Perhaps most importantly, the
oil-water contact was encountered at the
predicted depth, if not slightly deeper,” said
Talos President and CEO Timothy S. Duncan in
a release. “We are staying focused on working
with urgency to meet the project timeline to
achieve first oil by the second half of 2022.”
acquisition of WildHorse
Resources
Chesapeake Energy Corporation has com-
pleted its acquisition of WildHorse Resource
Development Corporation. The merger was
approved previously by company share- Helmholtz Coil Systems
holders during a meeting on Jan. 31. Upon • Calibration of downhole tools
closing, Chesapeake shareholders reportedly
own approximately 55% of the combined • Active cancellation system
company, while WildHorse shareholders
own approximately 45%. Chesapeake is
adding approximately 420,000 high-margin
net acres, about 80% to 85% of which is
undeveloped. The acreage is in the Eagle
Ford shale and Austin Chalk formations,
with strategic access to premium Gulf Coast
markets. The acquisition reportedly will
double Chesapeake’s projected oil produc-
tion by 2020, from stand-alone adjusted
2018 estimates. Production is expected to
increase to an anticipated 125,000 to 130,000
bopd this year, and 160,000 to 170,000
bopd in 2020. Chesapeake says it expects
over 80% of future drilling and completion High Temperature
activity to be directed toward high-margin Magnetic Field Probes
oil opportunities. Chesapeake CEO said, “The
addition of the WildHorse assets to our high- • Miniature probes down to
quality, diverse portfolio, combined with our 25x10x20mm
operating expertise and experience, provides • Low noise option
another oil growth engine with significant
(<30pTrms/√Hz at 1Hz)
oil inventory for years to come and gives us
tremendous flexibility and optionality to help
achieve our strategic goals.”

Eni, BP work together on next big find in Oman

Eni and BP have signed a head-of-agreement (HOA) with the Ministry of Oil and Gas of the
Sultanate of Oman to work jointly toward a sizeable new discovery in that country. According to
the companies, the HOA will see them working with the government of Oman toward the award US distributor:
of a new E&P sharing agreement for Block 77, in central Oman. Block 77 covers a total area of
nearly 3,100 km2 and is situated almost 19 mi east of BP-operated Block 61. The latter block is the
area that contains the Khazzan gas project, as well as the Ghazeer project, which is still under www.gmw.com
development. It was reported that following the HOA, the companies will now enter discussions
with the ministry to finalize details of the agreement.

World Oil®/FEBRUARY 2019 13

 The future of energy starts
HERE
LAGCOE 2019
connect explore discover

COUNTRIES

STATES
 WHAT’S NEW IN EXPLORATION
WILLIAM (BILL) HEAD, CONTRIBUTING EDITOR

The status of airguns and alternatives

While ExxonMobil, so far, only says the ugly drillers would move in, contami- showed zones should shrink substantially.
that it is pulling out of the GOM, BP an- nating everything. I lost. A&M backed out of the DOE con-
nounced plans to develop new discover- Reality. Now, most U.S., et al, seismic tract to study and test airgun alternatives.
ies and dig in even more investment there. acquisition has to be performed under su- An industry consortium does have a web-
Chevron says they love Tengiz and the pervision of a young person on the back site, showing some non-airgun research in
Permian, and nothing else “new” exists deck with binoculars, looking for crea- hot oil places like the Bahamas and Hawaii.
for them, even after billions in attempts to tures breaching the surface; or with an ex- Not dead. I see that Polarcus, which
secure other areas. This party is focused pensive sonar boat using World War II an- survived the downturn, has come up with
on cash flow, due to B.E. production is- alog technology reformatted into a color a multi-source solution that can provide
sues and shareholders, more than explora- display. Pretty much a daylight operation data and significantly decrease operational
tion or oil price. No one understands risk, during a significant part of the season out time. Using more than one source boat or
until the party is over. past 3-mi, or 50-mi limits. Some effort has more than one recording boat is not new.
A U.S. federal court in Denver, a long been made to discuss improvements in How to work data recording and timing of ap-
time ago and far, far away [from modern both acquisition and monitoring technol- ertured “shots,” when towing multiple stream-
oceans], decided that neither pro nor ogy, to “live within the intent of the rule.” ers, while not interfering with thousands of
cons with data could prove any damage RPSEA and Battel formed a plan to returning reflection amplitudes, has been the
to marine mammals from the oil industry, use modern digital sonar while testing air- monumental equation to resolve. Combining
from ship-borne airguns, so it overruled gun alternatives in Galveston Bay, Texas. multiple sources with the age-old problem
MMS, forcing regulation intending to DOE awarded a $1-million-plus research of designaling a blended set of pulses re-
result in the least damage to the animals contract, via RPSEA, to Texas A&M Uni- corded at the same time, was more or less
of concern [sounds innocent, yes?], by re- versity (College Station) for testing airgun corrected with large-scale data processing
stricting access to, and conduct in, inter- substitutions beyond land-based ponds. [DownUnder Geo Solutions]. Perhaps
national waters. Foolishly, the U.S. Con- Battel monitoring was my add-on. Polarcus geophysicists have made a significant im-
gress and Executive Branch allowed this agreed to provide some ship-days for open provement in data while also achieving a
one person’s invention of law against U.S. water testing, if the research proceeded. reduction in the cost of shooting new off-
and international Treaties of the Sea to The PGS design was not included. shore data.
abrogate and control government policy The few majors partnering on the I agree with the authors’ acknowl-
and exploration activity. Other countries project with Texas A&M were support- edgments in total. “We thank the man-
followed course. ive at first, until I proposed testing near agements of Polarcus, and DownUnder
The Trump administration opened real mammals in salt water. They worried GeoSolutions, for encouraging the de-
the offshore U.S. East Coast and Arctic to that the regulation on the exclusion zone velopment of acquisition and process-
O&G exploration, because former Inte- would grow or, worse, Obama regulations ing techniques, and providing vessel and
rior Secretary Ryan Zinke believed politi- would be created. I argued that initial data processing resources to demonstrate the
cians in robes were not using viability of the techniques.”
sound science. The modified This figure shows the relationship between cross-line sampling I also applaud the attempt
reprieve of regulations sur- intervals and sail-line intervals for a variety of dual-source (red dots) to create a court-acceptable
rounding exclusions to ex- and triple-source (green dots) towed streamer configurations. Image:
Journal, GEOPHYSICAL SOCIETY OF HOUSTON, Vol. 9, No. 5.
resolution while performing
ploration under the Marine a necessary industry service,
Mammal Protection Act is 50 perhaps even a superior ma-
Seismic data quality cross line CMP spacing, m

45 10x200
about to collide with the new- Increasing efficiency
rine data acquisition meth-
ly elected U.S. House. Only a 40 od, that will reduce the time
35
few days in office since Jan. 1, 12x150 that offshore exploration
30
and already, eight House bills 25 12x150m
spends sharing the waters
have been submitted to stop 20 Increasing quality 12x100 14x100 16x100 18x100m with marine mammals, that
exploration in the Arctic, U.S. 15 is, those not watching from
East Coast, and pretty much 10 12x20m 12x75 on top of ice.
anywhere wet USA. Airgun 5
sound energy is the main issue 0
100 200 300 400 500 600 700 800 900 1,000 1,100 ŝŝWJHTEXAS@AOL.COM / William (Bill) Head is
claimed, and its purported ef- Acquisition efficiency, sail line interval a technologist with over 40 years of experience in
fect on marine life. Of course, domestic and international exploration.

World Oil® / FEBRUARY 2019 15

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Is your top drive healthy?
Installation of the first top drive sys-
tem, on a jackup in Abu Dhabi some 37
years ago, was intended to signal the death
knell for stand-limited kelly drilling,
shelving it alongside rotary phones and
paper road maps. Since that 1982 debut,
electric and hydraulic top drives are as
ubiquitous on a drilling rig as head office
complaints over cost overruns.
Generational upgrades notwithstand-
ing, precipitous top drive failures occur
all-too-frequently, and when they do, any
ambition of sticking to the program bud-
get typically goes out the window. In his
2011 Masters thesis at the University of
Stavanger, Andrian Rognerud, now techni-
cal manager for Norwegian marine insurer
Skuld Offshore, put the top drive among
the leading culprits of hardware-related
downtime. Consequently, it should come
as no surprise that results of a top drive sur-
vey conducted more recently by research-
ers at the University of Texas at Austin
(UTA) show that reducing downtime and
improving the ability to predict failures
before the system goes “kaput” top the in-
dustry’s wish list, far surpassing the desire
to increase torque or tonnage capacity. The
operator and contractor survey landed the
top drive hydraulic system at the top for
relative likelihood of failure, followed not-
so-closely by the electrical power system,
rotary seal and control system.
Obviously, a top drive failure, at best,
puts the brakes on drilling new hole, leav-
ing the crew standing by, awaiting either
a repair or replacement, and watching as
costs mount. Over 40% of the survey re-
spondents said a top drive-induced NPT
event lasts between 12 and 24 hr, with a
single event on a land rig costing between
$60,000 to $120,000/day, exclusive of la-
bor, parts or a replacement system.
In an industry with redundancies out
the yazoo, the typical tally of wellsite con-
sumables does not include a spare top
drive, lying in wait aboard the supply vessel
or by the pipe rack, thereby accentuating
the need to ensure the system remains in a
fully functional condition. That assurance
DRILLING ADVANCES
JIM REDDEN, CONTRIBUTING EDITOR
used to be wholly at the mercy of periodic
inspections by preventative maintenance
technicians, but given today’s digitally-in-
fused environment, machines can now tell
when other machines are ailing.
AI predictive maintenance. For in-
stance, SparkCognition of Austin, Texas,
which has built artificial intelligence sys-
tems for industries as diverse as aviation
and financial services, sees AI-powered
predictive maintenance as the hands-off
antidote to untimely failures of top drives
and equally critical components. As the
company explains, predictive maintenance
capitalizes on machine learning to predict
top drive or other component failures,
well before the rig has to be shut down.
“An unsupervised learning model collects
data from sensors on the rig, monitors and
analyzes the sensor data, and raises an alert
for impending failures far in advance, thus
vastly decreasing asset downtime,” accord-
ing to SparkCognition.
The continuous learning and self-
refinement intrinsic to an AI-centric pre-
ventative maintenance system analyzes
patterns to identify failures, even those
never before encountered. “This flex-
ibility also allows an AI solution to catch
unusual or so-called ‘edge’ cases that a
rules-based approach cannot. It detects
impending failures, long before any tra-
ditional approach can,” the company says.
Condition-based monitoring. Mean-
while, across town, scientists at UTA’s Rig
Automation and Performance Improve-
ments in Drilling (RAPID) group have
been involved heavily in work aimed at
enabling condition-based monitoring
(CBM) of top drives, largely using data
that rig-based sensors were already collect-
ing. After considering three distinct top
drive health monitoring techniques (ther-
mal, vibration and oil analysis), the univer-
sity researchers settled initially on develop-
ing a thermal model in tandem with a fault
detection algorithm. The model not only
proved very effective in monitoring the
lubrication and electric motor subsystem
of an AC-powered top drive, the thermal
analysis method can be implemented with
the sensor suite already available on most
contemporary top drives, says RAPID Se-
nior Research Scientist Pradeep Ashok.
“Our first aim was to put additional sen-
sors on the top drive, but then we realized
there already was a lot of thermal sensors
that were collecting data all the time,” he
told the IADC Drilling Engineering Com-
mittee (DEC) Technology Forum last
November in Houston. “So, we shifted our
initial approach from putting more sensors
on the top drive to using these data to see,
for example, if the motor or gear box lubri-
cation was degrading. We build a thermal
model for these, which actually predicts
what the temperature needs to be, which is
compared to actual data.”
Thermal monitoring leverages the
motor winding and gearbox oil tempera-
ture sensors already installed on most top
drives. An estimation of model param-
eters from real-time temperature measure-
ments, in turn, can determine whether the
estimated parameters are indeed healthy.
“With thermal modeling, we can prevent
these failures from happening,” Ashok said.
At the time that RAPID researchers be-
gan their response to increasing incidents
of top drive failures, the industry was keep-
ing capital in a tight fist. “When the project
came out in 2015, oil prices were low, and
nobody wanted to spend any money. Basi-
cally, we had to see what we could do about
CBM without spending any money and
how best could we use the sensors that are
already present,” he said.
At last count, no vibration or fluid
monitoring sensors have yet been in-
stalled, while the thermal model has been
put in place on two rigs. Ashok said devel-
oping and installing an entirely new suite
of sensors would cost around $15,000, far
less than the costs of even one NPT event.
“You would still save a whole lot in the
long run,” he said.
ŝŝJIMREDDEN@SBCGLOBAL.NET / Jim Redden, a Houston-based
consultant and a journalism graduate of Marshall University, has
more than 40 years of experience as a writer, editor and corporate
communicator, primarily on the upstream oil and gas industry.
World Oil® / FEBRUARY 2019 17
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Well organization
“Well organization” isn’t biz-speak for a
hospital. Rather, in the opinion of consul-
tants McKinsey & Company, it’s precisely
how to consider an operating company.
Why the well organization? In the
company’s recent report, “A new operating
model for well organizations,” authors Brun
and Zharkeshov make persuasive points.
To begin with, they note that well con-
struction and intervention account for typ-
ically 40%—and often as much as 70%—
of an operator’s capital spending. For this
and other reasons, that area is recognized
as the most critical, complex operation to
“get right” in the entire oil and gas value
chain. Furthermore, drilling and well activ-
ities are highly complex, in an environment
with significant health and safety risks, and
often involving an intricate web of interfac-
es in which 10 or more suppliers are work-
ing together to deliver a single well.
The authors believe the key to unlock-
ing full digital transformation will involve
soft and hard automation technologies, as
well as require more nimble work practic-
es. “We have seen that for a business like
the typical well organization, completion
of tasks that used to require months might
soon be possible in mere days or weeks.
“If this sounds unnerving, it’s because
it is… But along with challenges of im-
plementing digital change, there are also
enormous opportunities for substantial
cost reductions, better safety, and sus-
tained productivity improvement.”
End-to-end, digitally enabled on-
shore drilling, well-delivery setup. A
highly interesting—and entertaining—
part of the report is a colorful isometric
illustration of what could be called the
Wellsite of the Future, and what they
call “an end-to-end, digitally enabled on-
shore drilling and well-delivery setup.”
Collectively, the callouts outline how
such a wellsite might function:
• Autonomous robots strengthen safety.
• Teams use virtual- and augmented-
reality goggles to inspect equipment/
wells, and communicate hands-free.
• Basin-wide optimized water-hauling
WHAT’S NEW IN PRODUCTION
DON FRANCIS, CONTRIBUTING EDITOR
runs, from a digital control tower.
• A digital “Amazon-like” supply chain
drops off Conex boxes ahead of drill-
ing, and delivers OCTG pipe just-in-
time from mill to well.
• Drones read gas levels and look
for irregularities.
• Digital gas-oil separation, pipeline
flow, and quality management maxi-
mize value from each molecule.
• Digital drilling workflows are driven
by iPads and augmented reality.
• Digital wells have real-time monitor-
ing for predictive maintenance, safety
warnings, and compliance.
• Digital subsurface helps prioritize
well planning.
• Digitized downhole tools and
sensors enable:
◦ Real-time data capture
◦ Advanced analytics to drive in-
creased estimated ultimate recovery
◦ A “learning engine” for manufac-
turing oil
◦ Digital ESP or sucker-rod pump
to improve initial production and
reduce decline rates
• Digitized functional support includes:
◦ Robotic-process-automation-
enabled finance to manage royalty
and all daily profit calculations
◦ Digital workforce management to
ensure right people at right places
◦ Digital procurement, focused on
fulfillment of standard materials.
Possible, but is it probable? Here’s
consulting firm Deloitte’s less-than-san-
guine observation: “Despite a deluge of
digital advancements, upstream oil and
gas companies have been slow to seize the
opportunity. The prize of going digital
is clear, but for most companies, getting
there is not easy. A coherent road map
could help make sense of the digital mud-
dle and drive more value.”
The company asks: What is holding
them back from realizing this opportunity?
They answer: More than the technicalities,
it is often the digital muddle that’s deter-
ring companies from achieving digital
maturity. Companies can benefit from a
strategic road map that helps them assess
the digital standing of every operation and
identify digital leaps for achieving specific
business objectives. More importantly, it
could push them to embrace a long-term
goal of transforming their core assets and,
finally, adopting new operating models.
They finger the “digital deluge” as a
prime suspect. This aptly named prob-
lem—rapid changes in the digital world,
complex interdependencies between tech-
nologies, and many names for the same
technology—often makes it difficult for
the industry to enable digital transforma-
tion. For instance, out of more than 200
technologies listed on (the even more aptly
named) Gartner’s Hype Cycle from 2000
to 2016, over 50 technologies appeared for
just a single year, while many took years
longer to register mainstream success.
Here’s where the road map comes in.
The company’s Digital Operations Trans-
formation model is…a digital journey of
10 milestones, where the leap from one
stage to another marks the achievement
of specific objectives, and it puts cyberse-
curity and an organization’s digital traits at
the core. Although the journey technically
completes at stage 10 for a specific asset
or operation, it should be broadened into
a never-ending loop. This would include
a wider set of assets or business segments,
the entire organization and, ultimately, the
ecosystem of a company, including supply
chain and stakeholders.
The company declares that “it’s time
for action.” No doubt, but what kind of ac-
tion? Something along the lines of rapid
prototyping? Maybe, but as an upstream
executive with a supermajor remarked,
“Consumers and IT-based firms know the
early bird gets the worm, but oil and gas
players would rather be the second mouse
that gets the cheese. This is because it’s
more costly to be the first to adopt new
oil and gas innovations.”
ŝŝDON@TECHNICOMM.COM / For more than 30 years, Don Francis
has observed the global oil and gas industry as a writer, editor and
consultant to companies marketing upstream technologies.
World Oil® / FEBRUARY 2019 19
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 OIL AND GAS IN THE CAPITALS
DR. JACQUES SAPIR, CONTRIBUTING EDITOR, FSU

Russia’s development and the disconnect

between oil prices and exchange rates
Over the last two years, Russia’s policy Indeed, the relation between oil prices of inflation dynamics over the coming
toward oil prices has been closely associat- and the exchange rate has changed consid- quarters. Quite clearly, maintaining an in-
ed with a willingness to achieve an under- erably. Oil prices rose (from $50 to $80), flation rate under 4%/year is an important
standing with the OPEC countries. Hence, but the exchange rate, after some appre- target that was exceeded in 2017 and early
Russia has developed close contacts, and ciation, stabilized and even declined. This 2018, when inflation went down to an un-
some agreements, with Saudi Arabia. This trend has been examined, Fig. 1. precedented (since 1991) rate of 2.7%.
situation surprises more than a few, when Actually, taking oil price into account, What do these changes say about
the Russian and Saudi positions on the Russia’s economic and financial situation the future? The exchange rate will still be
Syrian conflict are considered. changed. Due to massive efforts to boost an important social and economic factor
But this is not the only astounding non-oil activities, Russia’s economic in Russia. But the new relation between
development. The ruble exchange rate structure began to evolve. This was the oil prices and the exchange rate is easing
has been associated with oil prices for unexpected result of Western sanctions. pressure on the Russian government. It
quite a long time. When oil prices were It seems that the old target of “economic can allow oil prices to fluctuate without
rising, the ruble strengthened. When oil diversification” became a true imperative risking social and political capital. Anoth-
prices fell, the ruble depreciated heavily. in the new geopolitical context. While oil er important point is that a low exchange
Yet, this situation seems to be changing. and gas, and commodities generally, are rate (around 65-68 RR to $1.00) is impor-
And that opens new opportunities for still important to Russia’s exports, the tant to maintain Russian goods’ competi-
the Russian government. share of non-oil products has increased. tiveness on foreign markets. The govern-
For the Russian population, the ruble The low exchange rate made Russian ment and the Central Bank will certainly
exchange rate is as much a social as eco- goods competitive on export markets. In take measures to prevent a surge of the
nomic factor. More importantly, the ex- this situation, the current account balance exchange rate, if oil prices go over $70/
change rate is also perceived as an indica- will remain high, due to stable prices for bbl. The current Central Bank toolbox is
tor of social stability. The relation then, Russian exported goods and will signifi- certainly enough until oil prices threaten
between oil prices (usually expressed in cantly exceed external debt repayments to go over $85/bbl.
Brent prices) and the exchange rate, has over the coming months. This is impor- Thus, one can see why the Russian gov-
been of paramount importance. This rela- tant for Russia’s financial stability. ernment, if it agrees on production cuts, is
tion seemed quite well-established during In these conditions, the Bank of Russia’s definitely not a driving force behind them.
the last nine years. decision to suspend foreign currency pur- Russia would be quite happy to maintain
A recent difference. But, since 2016, chases in the domestic market will limit ex- prices in the $55–$80/bbl range, which
something has been changing. The Central change rate volatility and its pass-through seems achievable in the next few months.
Bank policy has focused much This would allow economic di-
more on inflation than on the ex- versification to occur. But how
change rate. This helped Russia Fig. 1. The relationship between oil prices (Brent) and would the Russian government
the exchange rate, from January 2017 to November 2018.
to avoid a massive financial prob- Sources: INSEE, Central Bank of the Russian Federation. react, if things got out of hand,
lem, when oil prices collapsed and oil prices jumped to $100+?
from late 2014 to early 2016. 85 If some producers encountered
The exchange rate quickly ad- 80 serious political problems and
justed to oil market conditions. saw their production levels falter,
Producer costs are mostly ruble- 75 Russia has neither the capac-
denominated, but their revenues ity nor the power to equalize
Oil prices, US$, Brent

70
are partly dollar-denominated, demand and supply. Then, the
so the health of the oil (and gas) 65 Russian path of development
sector improved. This helped 60 y = 1,7908 x -44,475 would be put to a severe test.
Russia to muddle through an R2 = 0,41052
adverse environment, not just 55 ŝŝSAPIR@MSH-PARIS.FR / Jacques Sapir is a
professor of economics at the School for Advanced
because of oil prices but also U.S. 50 Studies in the Social Sciences (EHESS) in Paris, and at
and European sanctions. By ear- the Higher School of Economics in Moscow. An expert on
ly 2017, with oil prices rising, the 45 Russian economic policy, he graduated from the Institute
55 57 59 61 63 65 67 69
ruble should have appreciated. It RR per US$1.00 of Political Studies in Paris in 1976, and earned a PhD in
did, but not as much as expected. economics from EHESS in 1980.

World Oil® / FEBRUARY 2019 21

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TEXAS ALLIANCE OF ENERGY PRODUCERS
The Great Water Hope:
The future of oilfield produced water
The year is 2030. As we look into the
future, America has balanced its trade
deficits with rising oil and gas exports.
Our Texas oil fields are pumping hydro-
carbons to refineries and LNG terminals.
Global poverty is dropping, along with
emissions. Our planet’s citizens enjoy
a golden age of prosperity and wealth,
based on our worldwide fossil fuel en-
ergy network.
However, in 2030, Texas weather re-
mains mercurial. Deep in the heart of
Texas, a challenging and recurring theme
is playing out—drought.
A water management vision. But
in this futuristic scenario, there’s a new
soldier in the battle with Mother Na-
ture. In every oil field, at almost every
commercial injection well, a “midstream
water management” company is in place.
Midstream water management and re-
cycling technology will be collecting,
treating, storing, transporting and reus-
ing the ancient ocean water buried mil-
lions of years ago, which is now being
lifted to the surface, along with oil and
gas production.
This salty water, infused with hydro-
carbons and sometimes with oilfield
chemicals, has been produced alongside
oil and gas for over 100 years. It was
almost always collected and pumped
down heavily regulated, closely moni-
tored, and specially permitted disposal
wells, deep into the earth. However, the
water management companies in 2030
will have the technology and growing
economic incentives to test and treat the
produced water before it is re-used. Only
a fraction of the volume will need to be
injected back into the earth.
This treated, produced water may
be the “great water hope” for drought-
stricken regions.
In the year 2030, produced water will
be treated to whatever limits are needed
for its beneficial reuse, whether it’s in the
oil field, or outside. Non-edible crop ir-
rigation or discharge into the waters of
the U.S. will have established analytical
EXECUTIVE VIEWPOINT
JOHN TINTERA, PRESIDENT,
criteria. Public health, safety and en-
vironmental protection will have been
evaluated and addressed by science and
facts. The stream of oilfield water, once
locked out of the hydrologic circle by
over a mile of rock, will now be an asset,
not a waste.
Current status. Today, in Texas of
2019, this vision is not just a clouded
future goal. We are part-way there. Mid-
stream water management and recycling
are common in our oil fields. But the
treated water is typically reused only in-
side the oil field.
As technology and business continue
to grow, how do we safely expand this
opportunity? Do we have the policies
that allow and even encourage this water
reuse? Do we have the statutes, regula-
tory framework, civil law, and economic
incentives to safely allow this transforma-
tion of waste to publicly available water?
Those questions are currently under
evaluation. A white paper entitled, Sus-
tainable Produced Water Policy, Regula-
tory Framework, and Management in the
Texas Oil and Gas Industry: 2019 and
Beyond, is being researched and writ-
ten under the auspices of the Texas Al-
liance of Energy Producers (TAEP) and
the Independent Petroleum Association
of America (IPAA). The current white
paper is building on the earlier work
of Lyons and Tintera (2014) with data
gathering, multiple interviews of indus-
try leaders, and significant regulatory
reviews. The 2019 white paper will be
rolled out in Washington, D.C., and
Austin this spring, to help provide the
facts and analysis that decision-makers,
law-givers, and voters need to deter-
mine where we are today and where we
might be going, what we are doing right
in Texas, and what we can do better with
produced water.
A growing awareness. TAEP and
IPAA are not alone in this fact-driven
analysis. The 86th Texas Legislature
understands the need to evaluate this
opportunity. The Texas House Energy
Resources Committee will meet jointly
with the House Natural Resources Com-
mittee in early February, to discuss the
current status of water usage in oil and
gas production. The committee also will
review various technologies associated
with the recycling and reuse of water in
oil and gas production. Our elected offi-
cials are to be commended for listening.
The oil and gas industry is listening.
On April 3, TAEP and IPAA will co-host
an Expo in Irving, Texas, where over
1,000 attendees will have the opportu-
nity to meet, listen, and ask questions of
technical and regulatory experts during a
seminar on produced water.
Federal regulators are listening. The
EPA announced this winter, its own in-
ternal white paper to evaluate the role
of the federal government in produced
water handling and discharges. Business
leaders and investors are listening. The
growth of midstream water companies
in Texas, and the hundreds of millions of
dollars in financial capital they are rais-
ing, speaks volumes.
In the futuristic world of 2030, our
global citizens are counting on America’s
hydrocarbon energy. Someday, when
science, fact, economics, incentives and
politics align with regulations and policy,
the world may also be counting on our
safely recycled produced water.
ŝŝJOHN TINTERA is President of the Texas Alliance of Energy
Producers. He holds BS and MS degrees in geology from Michigan
State University and has almost 30 years of combined technical
and managerial experience. Mr. Tintera is a regulatory expert and
licensed geologist with a thorough knowledge of virtually all facets
of oil and gas E&P and transportation, including conventional and
unconventional reservoirs. His expertise has not only been sought
in the U.S., but also by European governments confronted with
the recent potential of developing unconventional energy in their
countries. As a former Executive Director and 22-year veteran of
the Railroad Commission of Texas, Mr. Tintera oversaw the entire
regulatory process, from drilling permits to pipeline transportation.
He has an in-depth knowledge of the state and federal regulatory
framework of the E&P industry, including RCRA, CERCLA, SDW Act
and OPA. In addition, Mr. Tintera has a comprehensive knowledge
of environmental assessment, remediation and emergency
response. In November 2017, he was elected President by the
Board of Directors of TAEP and took office at the beginning of
2018. The Alliance is the largest state association in the U.S. for
independents.
World Oil® / FEBRUARY 2019 23
 OFFSHORE MEDITERRANEAN
CONFERENCE & EXHIBITION

Expanding the Mediterranean Energy Sector:

Fuelling Regional Growth

REGISTER NOW
exhibition@omc.it - conference@omc.it
www.omc2019.it

FACEBOOK TWITTER LINKEDIN

@OffshoreMediterraneanConference @OmcRavenna @offshore-mediterranean-conference

Established by: Associated Companies

 INDUSTRY AT A GLANCE
CRAIG.FLEMING@WORLDOIL.COM

Crude continued to recover in January after OPEC’s pro- WORLD OIL & NGL PRODUCTION Million barrels per day
duction cuts began to influence prices. Saudi Arabia reduced DEC 2018 NOV 2018 AVG. 2017 AVG. 2016
output 450,000 bopd to average 10.64 MMbopd in December, OPEC–CRUDE OIL
and sanctions on Venezuela and Iran also helped. However, the Saudi Arabia 10.64 11.06 10.33 9.96
decline was offset partially by Russia, which upped its produc- Iran 2.80 2.97 3.58 3.81
tion 80,000 bopd to 11.45 MMbopd. The U.S. climbed to 11.66 Iraq 4.70 4.60 4.56 4.47
MMbopd, seemingly unfazed by the 18% price drop in Novem- United Arab Emirates 3.26 3.33 3.00 2.93
ber. Futures are also suffering, due to the ongoing trade war Kuwait 2.80 2.78 2.75 2.71
between the U.S. and China, which is expected to dampen de- Neutral Zone 0.00 0.00 0.61 0.00
mand growth. Gas prices plummeted 23% in January, with HH Qatar 0.60 0.61 0.61 0.61
Angola 1.48 1.44 1.50 1.64
product selling for $3.13 MMBtu after averaging $4.04 the previ-
Nigeria 1.66 1.62 1.61 1.53
ous month. The DUC count in the U.S. was revised downward to
Libya 0.99 1.11 0.97 0.83
8,594, but it still increased 218 wells m-o-m. The U.S. rig count
Algeria 1.06 1.07 1.04 1.05
was down 17 units to 1,066 in January.
Congo 0.34 0.33 0.33 0.26
Gabon 0.18 0.16 0.19 0.20
U.S. OIL PRODUCTION1 Thousand barrels per day
Equatorial Guinea 0.12 0.12 0.12 0.13
DAILY AVERAGE FOR MONTH Ecuador 0.51 0.52 0.52 0.53
DEC DEC NOV
Venezuela 1.25 1.26 1.37 1.97
STATE 20182 20173 % DIFF. 20182
Alabama 20 17 17.6 21 NGLs & condensate1 6.97 6.97 6.95 6.88
Alaska 487 512 -4.9 486 TOTAL OPEC 39.36 40.15 40.04 39.51
Arkansas 20 14 42.9 21 OECD2
California 482 474 1.7 481 U.S. 16.13 16.27 15.42 13.27
Colorado 485 436 11.2 478 Mexico 1.97 1.94 2.08 2.23
Florida 5 5 0.0 5
Canada 5.22 5.31 5.17 4.82
Illinois 23 23 0.0 22
United Kingdom 1.04 1.01 1.03 1.01
Kansas 96 92 4.3 98
Norway 1.85 1.88 1.85 1.97
Kentucky 7 10 -30.0 7
Louisiana4 1,650 1,399 17.9 1,624 Europe-others 0.52 0.51 0.51 0.51
Michigan 17 15 13.3 17 Australia 0.38 0.38 0.34 0.31
Mississippi 51 46 10.9 52 Pacific-others 0.07 0.07 0.07 0.07
Montana 65 54 20.4 63 TOTAL OECD 27.18 27.37 26.47 24.19
Nebraska 6 6 0.0 6
NON–OECD
New Mexico 720 537 34.1 738
Russia 11.78 11.70 11.49 11.32
North Dakota 1,384 1,183 17.0 1,370
FSU-others 3.11 3.17 3.06 2.98
Ohio 86 53 62.3 88
Oklahoma 584 504 15.9 580 China 3.84 3.87 3.83 3.87
Texas4 5,022 4,278 17.4 4,986 Malaysia 0.73 0.72 0.72 0.72
Utah 113 94 20.2 112 India 0.82 0.82 0.84 0.86
West Virginia 37 31 19.4 32 Indonesia 0.78 0.79 0.80 0.84
Wyoming 264 225 17.3 262 Asia-others 0.95 0.97 0.98 1.05
Others5 31 31 0.0 31 Europe 0.12 0.12 0.12 0.13
TOTAL U.S. 11,655 10,039 16.1 11,580
Brazil 2.78 2.67 2.70 2.74
LOWER 48 11,168 9,527 17.2 11,094
Argentina 0.59 0.59 0.58 0.57
1 Includes lease condensate. 2 Preliminary estimate, API.
3 DOE estimate. 4 Includes federal OCS production.
Colombia 0.89 0.89 0.87 0.86
5 Includes Arizona, Indiana, Missouri, Nevada, New York, Pennsylvania, South Dakota, Tennessee and Virginia. Latin America-others 0.35 0.35 0.35 0.37
U.S. GAS PRICES ($/MCF) & PRODUCTION (BCFD) Oman 1.01 1.01 0.99 0.98
Syria 0.02 0.02 0.02 0.02
100 7 Yemen 0.04 0.04 0.04 0.03
6 Egypt 0.65 0.65 0.65 0.64
80 Africa/Middle East-others 0.98 0.98 1.01 0.98
5 TOTAL NON–OECD 29.44 29.37 29.05 28.96
60 4 PROCESSING GAINS3 2.32 2.32 2.32 2.29
3 TOTAL SUPPLY 98.30 99.21 97.88 94.95
40
Source: International Energy Agency. Note: Totals and subtotals may not add, due to rounding.
Monthly price (Henry Hub) 2 1 Includes condensates reported by OPEC countries, oil from non-conventional sources, e.g. Venezuelan Orimulsion
20 12-month price avg.
Production 1 (but not Orinoco extra-heavy oil) and non-oil inputs to Saudi Arabian MTBE.
2 Comprises crude oil, condensates, NGLs and oil from non-conventional sources.
0 0 3 Net of volumetric gains and losses in refining (excludes net gain/loss in China and non-OECD Europe) and marine
A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J transportation losses.
2016 2017 2018 2019
Production equals U.S. marketed production, wet gas. Source: EIA.
WORKOVER RIG COUNT
DEC 2018 YR. AGO
SELECTED WORLD OIL PRICES ($/BBL) REGION ACTIVE AVAIL. IDLE STACKED TOTAL % UTIL. ACTIVE
Texas Gulf Coast 169 52 57 72 350 48% 136
100 ArkLaTex 50 13 41 66 170 29% 56
90 W. Texas Inter. Eastern U.S. 26 27 19 14 86 30% 38
80 Brent Blend South Louisiana 10 8 12 3 33 30% 20
Dubai Fateh
70 Source: DOE Mid-Continent 127 40 77 110 354 36% 118
60 West Texas / Permian 490 67 187 211 955 51% 406
50 Rocky Mountains 270 52 136 69 527 51% 232
40 West Coast / Alaska 152 23 119 113 407 37% 181
30 TOTAL U.S. 1,294 282 648 658 2,882 45% 1,187
20 Active - crewed and worked every day during the month. Source: AESC
J F M A M J J A S O N D J F M A M J J A S O N D J Available - has crew ready to work.
2017 2018 2019 Idle - capable of being put to work in 48 hr and does not require spending in excess of $50,000.
Stacked - cannot work without investment in excess of $50,000.

World Oil® / FEBRUARY 2019 25

 INDUSTRY AT A GLANCE
CRAIG.FLEMING@WORLDOIL.COM

INTERNATIONAL ROTARY RIG COUNT Monthly average INTERNATIONAL ROTARY U.S. ROTARY
DEC 2018 NOV 2018 DEC 2017 DRILLING RIGS DRILLING RIGS
REGION & COUNTRY LAND OFFSHORE LAND OFFSHORE LAND OFFSHORE
CANADA* 139 2 196 2 204 1 1,400 1,400
EUROPE 57 38 56 27 57 30
Germany 5 0 5 0 3 0
1,250 1,100
Italy 2 1 1 0 4 0
Netherlands 0 1 0 0 1 3
Norway 0 18 0 15 0 16 1,100 800
Poland 6 0 6 0 6 0
Romania 10 0 10 0 6 1 950 500
Turkey 19 1 19 0 18 0
United Kingdom 0 11 0 7 1 4
Others 15 6 15 5 18 6
800 J F M A M J J A S O N D J F M A M J J A S O N D J 200 J F M A M J J A S O N D J F M A M J J A S O N D J
2017 2018 2019 2017 2018 2019
MIDDLE EAST** 338 56 344 50 336 42
Abu Dhabi 36 19 38 17 39 12 Source: Baker Hughes, a GE company.

Egypt 21 6 21 5 17 5
Iraq 62 0 61 0 54 0
Kuwait 41 0 44 0 53 0
Oman 51 0 51 0 55 0
U.S. ROTARY RIG COUNT Monthly average

Pakistan 19 0 23 0 20 0 % DIFF.
Saudi Arabia 104 21 101 20 92 19 JAN DEC JAN JAN ‘19
Syria 0 0 0 0 0 0 STATE & AREA 2019 2018 2018 JAN ‘18
Others 4 10 5 8 6 6 ALABAMA-TOTAL 2 1 2 0.0
AFRICA** 93 15 87 16 67 10 Land 2 1 2 0.0
Algeria 50 0 46 0 50 0 Inland water 0 0 0 …
Angola 0 5 0 5 0 2 Offshore 0 0 0 …
Kenya 8 0 8 0 8 0 ALASKA-TOTAL 10 6 5 100.0
Libya 7 2 7 2 0 1 Land 10 6 5 100.0
Nigeria 8 3 6 3 5 4 Offshore 0 0 0 …
Others 20 5 20 6 4 3 ARKANSAS 0 0 0 ...
LATIN AMERICA 170 27 161 28 169 26 CALIFORNIA-TOTAL 8 15 14 -42.9
Argentina 74 0 72 0 71 0 Land 8 15 14 -42.9
Brazil 4 6 2 6 6 8 Offshore 0 0 0 ...
Colombia 30 0 26 0 25 0 COLORADO 35 34 34 2.9
Ecuador 12 0 13 0 5 0 FLORIDA 0 1 0 ...
Mexico 13 18 12 19 3 12 KANSAS 2 2 0 ...
Venezuela 25 2 23 2 45 5 KENTUCKY 0 0 2 -100.0
Others 12 1 13 1 14 1 LOUISIANA-TOTAL 63 67 60 5.0
ASIA-PACIFIC 133 98 137 85 134 83 North - Land 35 33 39 -10.3
Australia 20 2 18 2 14 0 South - Inl. water 2 3 1 100.0
China, offshore 0 35 0 30 0 32 South - Land 6 8 3 100.0
India 85 39 85 35 83 33 Offshore 20 23 17 17.6
Indonesia 21 3 28 2 32 2 MICHIGAN 0 0 0 …
Malaysia 0 7 0 8 0 7 MISSISSIPPI 2 5 3 -33.3
New Zealand 1 0 1 0 0 0 MONTANA 2 3 1 100.0
Thailand 2 5 3 3 2 5 NEBRASKA 0 0 0 ...
Vietnam 0 3 0 3 0 2 NEVADA 0 0 0 …
Others 4 4 2 2 3 2 NEW MEXICO 108 107 81 33.3
TOTAL 930 236 981 208 967 192 NEW YORK 0 0 0 …
**No data available for Iran and Sudan/South Sudan. Source: Baker Hughes, a GE company NORTH DAKOTA 54 52 45 20.0
OHIO 17 15 25 -32.0
OKLAHOMA 132 141 119 10.9
INTERNATIONAL OFFSHORE RIGS PENNSYLVANIA 48 47 37 29.7
U.S. GULF OF MEXICO NORTHWEST EUROPE WORLDWIDE SOUTH DAKOTA 0 0 0 …
JAN 2019 JAN 2018 JAN 2019 JAN 2018 JAN 2019 JAN 2018 TENNESSEE 0 0 0 …
Total rigs in fleet 72 93 89 97 758 800 TEXAS-TOTAL 526 533 459 14.6
Offshore 1 1 1 0.0
Marketed Supply 42 54 75 77 653 665
Inland water 0 0 0 …
Marketed Contracted 32 34 65 58 498 476
District 1 47 45 31 51.6
Rig utilization, % 76.2 63.0 86.7 75.3 76.3 71.6 District 2 30 30 30 0.0
District 3 17 19 14 21.4
Source: IHS Petrodata Weekly Rig Count.*
District 4 12 13 16 -25.0
District 5 4 4 2 100.0
U.S. DRILLED BUT UNCOMPLETED WELLS District 6 28 29 18 55.6
District 7B 1 1 4 -75.0
DEC NOV DEC Y-O-Y
District 7C 41 43 35 17.1
REGION 2018 2018 2017 DIFF. District 8 324 322 275 17.8
Anadarko 1,077 1,070 1,022 5.4% District 8A 13 17 19 -31.6
Appalachia 529 556 748 -29.3% District 9 2 2 2 0.0
Bakken 731 742 715 2.2% District 10 6 7 12 -50.0
Eagle Ford 1,561 1,520 1,468 6.3% UTAH 7 6 11 -36.4
W. VIRGINIA 15 12 15 0.0
Haynesville 193 187 186 3.8%
WYOMING 33 34 28 17.9
Niobrara 455 458 577 -21.1%
OTHERS 2 2 2 0.0
Permian 4,048 3,843 2,777 45.8% U.S. OFFSHORE TOTAL 21 24 18 16.7
BASIN TOTALS 8,723 8,436 7,354 18.6% U.S. GRAND TOTAL 1,066 1,083 943 13.0
Source: EIA. Note: Totals may not add, due to rounding Source: Baker Hughes, a GE company. Note: State monthly averages may not add up to U.S. total, due to rounding.

26FEBRUARY 2019/WorldOil.com
 SPECIAL FOCUS: FORECAST 2019 – E&P SPENDING

Coordinated capex growth projected

for second straight year
Worldwide E&P expenditures Table 1. North American upstream spending. Source: Evercore ISI Research, company data.
should grow 8% during 2019. 2019 Survey data, $ millions 2019 Year-on-year change %
North America’s uptick will Region 2018E 2019F $+/– %
continue, but at a slower U.S. spending 112,361.50 123,940.00 11,579 10.30%
Canadian spending 15,940.70 17,549.20 1,608 10.10%
rate, while international NAM spending $128,302.20 $141,489.20 $13,187 10.30%
activity should energize the
OFS sector. Table 2. Global upstream spending, excluding North America. Evercore ISI Research,
company data.
2019 Survey data, $ millions 2019 Year-on-year change
Region 2018E 2019F $+/– millions %
ŝŝJAMES WEST, Evercore ISI Middle East 42,485.50 49,182.20 6,697 15.8%
Latin America 34,068.20 33,388.30 –680 –2.0%
Russia/FSU 43,239.40 45,917.10 2,678 6.2%
Europe 19,665.80 19,883.40 218.0 1.1%
In 2018, a 20% increase in North India, Asia, Australia 59,267.20 68,709.10 9,442 15.9%
American capex lifted the global average Majors, Int’l spending 52,190.70 56,811.20 4,621 8.9%
to 9%, signaling the second consecutive Africa 17,326.30 17,573.50 247 1.4%
year for global growth and the first year NAM independents, int’l spending 3,844.60 3,768.60 –76 –2.0%
of coordinated growth between North Other  47,102.40 46,823.10 –279 –0.6%
America and international activity. Re- International spending 319,190.10 342,056.40 $22,866 7.2%

sults from our 2019 survey indicate glob-

al capex is poised to increase for a third
straight year, while coordinated growth
expands into a second year. However,
growth is moderating in North America
and could drag on worldwide growth de-
spite an acceleration internationally.
The U.S. will continue to pace spend-
ing gains in 2019, with an estimated 10%
lift to capex. In Canada, our survey points
to 5% growth, but flat-to-declining capex is
more likely, as operators continue to work
through the budgeting season, Table 1.
International spending is projected to
improve 7%, with 2019 marking the sec-
ond year that all three regions have simul-
taneous increased spending since 2014.
This is a welcomed change for OFS pro-
viders with appreciable exposure to inter-
national land/offshore. This reawakening
outside of NAM is vitally important on
broader OFS profitability, Table 2.
Despite consecutive years of capex im-
provements, 2019 spending may remain
35% below peak-2014 levels. Increased
spending will not adequately safeguard
against a looming supply disruption.
Oil price wildcard. Historically, compa-
nies practiced conservatism when setting
price expectations. From 2000 through
2014, initial projections for crude under-
whelmed the realized price by 20%. But
after three years of lower prices, operators
have been slow to step up their price as-
sumptions. Having benefited from actual
prices that were $5-$15/bbl above their
expectations in 2018, companies reestab-
lished the positive price trend and headed
into the 2019 budget season with $60/bbl
WTI assumptions. However, 70% of op-
erators said they would reduce spending in
2019 at $48–$50/bbl WTI.
Cash flow and oil price remain the lead-
ing determinants of budget decisions in
2019. These two factors have ranked one
or two over the past nine years, follow-
ing an 11-year stretch where natural gas
prices dominated. While the shift from
a natural gas-driven market to an oil-
focused one around 2010 is well-known,
the growing importance of capital avail-
ability remains a relatively new trend.
Capital austerity has grown since the
oil price collapsed in late 2014, and has
been a top-four budget factor since 2015.
Service pricing began to rebound in
2017, as providers began reversing conces-
sions ceded during the downturn. While
momentum slowed, and in some cases re-
versed in 2018, pricing has largely begun
to rise across all segments and geography.
Overall service pricing has improved 45%
to 55% for land-based operations from
trough levels established during the 2014-
2016 downturn, which implies upside
remains to return to pre-downturn levels.
However, more price increases are re-
quired to incite further capacity additions,
as returns do not yet justify the investment.
The current margins are unsustainable for
much of the service industry. Half of the
respondents continue to budget for flat
service costs in 2019.
DUC focus. Evercore predicts a shift
from factory drilling to completion when
budgets reset in 2019. Drilling costs de-
clined in importance as factors driving
2019 budgets, with just 13% of survey
respondents citing it as a key determinant
for setting their budget, versus 30% in our
2018 survey. This suggests an oncoming
shift to a frac factory model of completion.
Exploration spending. It appears that
exploration spending bottomed in 2016,
at least in the U.S., and a tepid recovery
that began in 2017 could pick up steam
World Oil® / FEBRUARY 2019 27
FORECAST 2019 – E&P SPENDING
in 2019. Almost one-third of respondents
are planning to increase their exploration
budgets in 2019, the highest level in our
survey since 2015, while 50% plan to keep
exploration budgets flat and 20% plan to
decrease. This marks a third straight year
that more E&Ps plan to increase their ex-
ploration spending than decrease.
Offshore upturn. Despite the recent
pullback in oil prices, the offshore rig mar-
ket remains encouraging with demand
still healthy at $60/bbl (Brent). An M&A
consolidation is coinciding with dayrates
that have already moved substantially
higher for harsh environment floaters and
high-spec jackups. Evercore predicts the
high-spec drillship segment is next, as the
industry continues to proactively manage
supply. In addition to retiring 18 floaters
and 36 jackups year-to-date, the industry
continues to defer acceptance of more
newbuilds than it accepts.
REGIONAL BREAKDOWN
North America. In the second half of
2018, completion activity slowed in North
America, as operators experienced budget
exhaustion and higher service costs caused
budgets to be expended early in the year.
Concerns around takeaway constraints
in the Permian and widening differen-
tials across several basins also combined
to drive slower completion activity. An
additional headwind came from falling
commodity prices heading into budgeting
season. While spending was expected to
decelerate following a robust 47% growth
in 2017, 2018 overall still saw spending
increase 20% vs. 14% growth anticipated
in our mid-year survey, this despite a slow-
down in activity starting in the middle of
the third quarter. Our 2019 survey sug-
gests capex growth remains robust at 10%,
but given the pullback in oil prices, it ap-
pears more likely that the industry will
muddle through the first half before a re-
bound starts to occur in second-half 2019.
U.S. onshore. While the U.S. rig count
continued to push higher in the fourth
quarter, it was masking how cycles have
become increasingly shorter. Historically,
a 3–4-year growth cycle was followed by a
few quarters of slowdown. Now, the cycle
is 3–4 quarters of growth before a slow-
down occurs. These shorter cycles are
forcing the industry to build new, sustain-
able business models.
28 FEBRUARY 2019 / WorldOil.com
Canada. Evercore expects production
and completion service companies oper-
ating in Canada to experience several bad
quarters, with activity levels declining for
unfavorable weather and still-wide crude
price differentials. Moving Canadian oil
by rail is expected to rise from current
estimates of 270,000 bpd to 450,000 bpd
by third-quarter 2019. The Canadian As-
sociation of Oilwell Drilling Contractors
forecasts a 10% decline in the rig count
during 2019, with pricing differentials
and pipeline delays curtailing capex. In
early December, Canadian Natural Re-
sources announced a 2019 capex plan that
is $1 billion below its normalized range,
because of uncertainty in the Canadian
crude markets.
Middle East. Evercore’s mid-year 2018
survey foresaw an 8% increase in spend-
ing in the Middle East that remains, and
our initial 2019 survey suggests spending
growth could double in the coming year.
Several ambitious NOC plans are buoyed
via multi-year, transformational efforts
carried out by their countries. Despite set-
backs to Iran, the regional outlook is solid,
with an expected supply growth of over
2.5 MMbpd by 2025, led by Iraq and the
UAE. Underpinning our view is the broad
effort to expand natural gas production,
with Saudi Arabia and Kuwait transition-
ing their production base to become more
gas-centric. Entrenched OFS players are
at an advantage.
Russia/FSU. Capex in Russia and the
FSU pulled back unexpectedly in 2018,
falling 3% vs. the 13% growth forecast in
our mid-year. While Gazprom continues
to increase capex for progress made on Ya-
mal LNG and other gas-driven projects,
Gazprom Neft, Lukoil and Rosneft all
posted lower capex. Although production
and profit swelled, Gazprom Neft post-
poned firming development plans for its
giant Neptune discovery and may need to
bring on partners to develop its estimated
5.6 Bbbl of reserves.
The Kazakhstan government and Eni-
led stakeholders recently resolved long-
standing disputes over profit sharing at
the Karachaganak gas and condensate
field, which should improve business re-
lations in the region. Malaysia’s Reach
Energy had success in the first of six ex-
ploration wells targeting oil at the Emir
Oil concession block, and Lukoil and Ka-
zMunaiGaz recently agreed to invest al-
most $300 million to develop the Zhenis
block in Kazakhstan’s Caspian Sea waters.
Chevron is investing $4.3 billion in the
Future Growth Project at Tengiz field.
Latin America. Finally putting a stop
to three consecutive years of declining
capex, 2018 was a much-needed bounce
off the bottom, with capex growing 19%.
However, Evercore expects spending to
decline slightly in 2019, making it the
only region to see a pullback in year-over-
year plans. Capex remains well below
2013–2015 levels, as key countries expe-
rience geopolitical instability from recent
elections and accelerating inflation. It will
be challenging for Latin America to return
to sustainable capex growth without more
stability around key oil producing coun-
tries like Mexico, Brazil and Venezuela.
Europe. At mid-year, we predicted Euro-
pean investments would increase 7% for
2018, up from 5% growth in 2017. How-
ever, a pickup in spending resulted in a
9% increase, led by Aker BP, Equinor and
OMV. European capex is now 14% off the
2016 trough but still 30% from the 2014
peak. While the operators that drove
2018 capex higher plan to keep spending
relatively flat in 2019, upside could come
from private firms and independents. The
creation of larger independents could be
a net positive event. European spending
should increase for a third straight year in
2019, but by a modest 1%.
Asia/Australia. Current estimates for
2018 are for spending to slip a modest 1%
among Asian and Australian producers,
a sharp pull-back from the 14% growth
anticipated in our mid-year 2018 sur-
vey. Almost all operators spent less than
expected, with the largest regional play-
ers all retracing. Despite the sharp in-
crease in commodity prices experienced
throughout much of the year, operators
apparently cut their 2018 capex, due to
macro uncertainties stemming from the
trade war. We forecast capex to increase
16% in 2019.
Africa. Our 2019 survey suggests capex
increased 23% for a select group of African
companies in 2018, building on revised 4%
growth in 2017. Africa has been one of the
most challenged regions, with recovery
delayed by territorial disputes, political re-
form and security risks. However, the out-
look is beginning to improve.
 SPECIAL FOCUS: FORECAST 2019 – WASHINGTON OUTLOOK
Implications of the 2018 mid-terms
for the oil and gas industry
ŝŝDR. ROGER H. BEZDEK, Contributing
Editor, Washington, D.C.
In the November 2018 mid-term elec-
tions, all 435 seats in the House of Repre-
sentatives, 35 Senate seats, and 36 gover-
norships were contested. The Democrats
won control of the House (Fig. 1), the
Republicans strengthened their Senate
majority, and the Democrats won a net of
seven governorships.
REPUBLICAN SENATE
Republicans increased their slim Sen-
ate majority with a net gain of two seats.
The Republican-controlled Senate implies
that an anti-oil-and-gas (O&G) agenda
will face headwinds at the federal level,
even as Democrat gains in the House and
in the states make such an agenda likely.
Republicans retained the administration’s
ability to appoint judges and agency offi-
cials favorably disposed to O&G policies,
and to a regulatory reform agenda.
Bernard McNamee was confirmed to
fill the crucial fifth FERC position, and
this will facilitate contested natural gas
projects. Energy policy has been a biparti-
san affair in the Senate Energy and Natural
Resources Committee under Chairman
Lisa Murkowksi (R-Alaska, Fig. 2) and
Ranking Member Maria Cantwell (D-
Wash.). They will likely continue work
on moderate legislation, but that will
have to be reconciled with a Democrat-
controlled House. Bipartisanship suffered
with the defeat of moderates, including
Heidi Heitkamp (D-N.D.). However, a
Senate victor, Joe Manchin (D-WV), is
one of the few Democrats that is even
close to being rational on energy policy.
DEMOCRATS CONTROL
THE HOUSE
Democrats won a House major-
ity, gaining 40 seats—their largest net
gain since 1974. Divided control of the
House and Senate will impede legislative
initiatives over the next two years, but a
Democrat House majority will pursue
Fig. 1. The Democrats won a majority in
aggressive oversight of the Trump admin- the U.S. House last Nov. 8, and this will
istration’s energy and deregulatory poli- likely mean a stalemate in Congress on any
cies. Oversight targets include accelerated significant oil-and-gas-related legislation
for the next two years. Image: Architect of
energy infrastructure permitting, climate the Capitol.
regulations, and O&G drilling initiatives,
and individual O&G companies also will
be investigated.
Ominously, the party platform calls
for the elimination of all fossil fuels from
society, and the Democrats are “commit-
ted to getting 50% of our electricity from
‘clean energy’ sources within a decade.”
Speaker of the House Nancy Pelosi (D-
Calif.) pledged to enact climate change
legislation.
House Democrats wasted no time, and
in the first week of the new Congress did
the following:
• They introduced seven bills to pre-
vent O&G drilling in federal waters,
warning, “We’re not going to sit
by and watch as President Trump
plunders our oceans for his friends
in the big oil companies.” The bills
oppose the administration’s plan
to open more offshore areas to
O&G production.
• Two representatives from California House Democrats now have oversight
(naturally!) introduced the Climate authority: The ability to hold hearings,
Solutions Act of 2019, to establish request documents, and issue subpoenas.
a National Renewable Energy Stan- Pelosi has stated “Make no mistake, Demo-
dard to drive the U.S. to 100% per- crats will honor our constitutional respon-
cent renewable energy by 2035, and sibility to exercise oversight of the Trump
to reduce GHG emissions to 80% administration and get the American peo-
below 1990 levels by 2050. “As one ple the answers they deserve.” The Demo-
of the defining issues of our time, crat-controlled House thus means intense
the global threat of climate change oversight of the administration’s energy
demands an audacious response, and environmental policies, with Demo-
and that’s precisely what we intro- cratic committee leaders able to subpoena
duced today.” records and hold public hearings with
The election results effectively hob- cabinet officials. The Democrats’ energy
bled the administration’s energy and en- agenda will clarify in the coming months,
vironmental legislative agenda. But the but we should recall that the last time they
victory gives Democrats little legislative controlled the House, they passed the atro-
power of their own. Thus, if by some cious Waxman-Markey CO2 bill.
miracle any Democrat-authored House The election decimated Republicans in
energy bill makes it through the Repub- the Climate Solutions Caucus, and many
lican-controlled Senate, President Trump Republicans who supported “clean energy
will veto it. policies” are gone. The caucus lost 22 Re-
World Oil® / FEBRUARY 2019 29
FORECAST 2019 – WASHINGTON OUTLOOK
publicans—half the party’s membership.
Republican losses include 14 incumbents,
and eight in formerly Republican seats
opened up by the departure of caucus
members. One caucus member defeated
was co-founder Carlos Curbelo (R-Fla.),
who sponsored a carbon tax in 2018 (the
Republican-controlled House passed a res-
olution denouncing it). However, the bad
news is that the caucus Republicans were
mostly replaced by Democrats even more
radical on O&G and CO2 issues.
The Democrat chairs of House com-
mittees overseeing energy and environ-
Fig. 2. Sen. Lisa Murkowski (R-Alaska) will
remain in charge of oil and gas legislation
and oversight in the U.S. Senate. Image:
Official Senate portrait.
Fig. 3. Democrats Eddie Bernice Johnson (left, Texas), Raúl Grijalva (center, Arizona) and Frank Pallone, Jr. (right, New Jersey), are in
charge of the Science, Space and Technology; Natural Resources; and Energy and Commerce committees, respectively. Images: Official
House portraits.
30 FEBRUARY 2019 / WorldOil.com
mental issues vowed to scrutinize the
Trump administration’s actions and bring
before them officials, who they contend
have escaped adequate oversight. Repre-
sentatives Eddie Johnson (D-Texas), Raúl
Grijalva (D-Ariz.), and Frank Pallone, Jr.
(D-N.J.), are heading the committees on
Science, Space and Technology; Natural
Resources; and Energy and Commerce,
respectively, Fig. 3. They have outlined an
aggressive agenda to contest the adminis-
tration’s rollback of President Obama’s
energy agenda and to investigate alleged
misconduct of officials.
Natural Resources Chairman Rob
Bishop (R-Utah) was replaced by Gri-
jalva, who has never seen a well, pipeline,
rig, refinery or mine that he did not want
to shut down and is a notorious inquisitor
of anyone questioning the global warm-
ing religion. The League of Conservation
Voters (LCV), which rates each Member
of Congress for environmental fanati-
cism, gave Bishop a 2 and Grijalva a 96—
enough said. Grijalva stated that he will
conduct hearings on a proposed Interior
reorganization plan, which he contends
will break up some “pretty well-function-
ing” offices. He warned that he has “a long
list of initiatives that have been dormant.”
At the powerful Ways and Means Com-
mittee, Chairman Kevin Brady (R-Texas)
was replaced by Richard Neal (D-Mass.),
who has an LCV rating of 92 and opposes
the percentage tax depletion allowance.
At the Energy and Commerce Commit-
tee, Greg Walden (R-Ore.) was replaced
by LCV stalwart Frank Pallone, who op-
poses opening the Outer Continental
Shelf and ANWR to oil drilling; supports
a moratorium on offshore oil drilling; op-
poses O&G “subsidies” (but not renew-
able energy “incentives”); supports CO2
restrictions; and advocates stricter energy
and environmental regulations. Pallone
stated, “We have serious concerns with
how Trump’s EPA has consistently sided
with the special interests over people’s
health and the environment, and we will
look to restore the environmental protec-
tions that have been gutted over the last
two years.” He vowed that he would “hold
the Trump administration accountable
for dangerous policies that make climate
change worse.”
Committee chairs have strong over-
sight authority and could harass admin-
istration officials indefinitely. They can
enforce deadlines for documents and
testimony and invoke subpoena pow-
ers to compel testimony. Expect a bliz-
zard of subpoenas for DOE, Interior and
EPA officials, and for O&G executives.
Energy executives can be hauled before
committee members—many elected with
green groups’ support—and questioned
about their companies’ roles in myriad
energy and environmental controversies.
ExxonMobil executives may be the first
called for allegedly “misleading the pub-
lic about climate change.” Appropriations
also originate in the House, so Democrats
could withhold funding from depart-
ments or programs over various issues.

Democrats have revived a House com-
mittee on climate change—the new Select
Committee on the Climate Crisis. Pelosi
stated “The climate crisis is the existential
threat of our time—a crisis manifested
in natural disasters of epic proportions.
Congress must work to put an end to the
inaction and denial of science that threat-
en the planet and the future.” The original
Select Committee on Energy Indepen-
dence and Global Warming was dissolved
by Republicans in 2011. The committee,
founded by Pelosi, was not authorized to
advance legislation, but it held hearings
to address concerns about CO2, extreme
weather, and global warming. (Appar-
ently, Democrats do appreciate irony: In
the intervening eight years, and without
an “Energy Independence Committee,”
the U.S. has become the largest energy
producer in the world, an oil exporter, and
essentially energy-independent.)
Representative Kathy Castor (D-Fla.)
was selected to head the new Climate
Committee. The only good news is that
it ended a dramatic month-long effort to
establish a select committee on a “Green
New Deal,” which was led by Alexandria
FORECAST 2019 – WASHINGTON OUTLOOK
Ocasio-Cortez (D-N.Y.), a self-proclaimed
Democratic Socialist and new darling of
the left. Castor’s appointment also ignited
controversy, as she rejected calls to bar
members who accept money from O&G
companies from serving on the committee,
arguing it would violate free speech rights.
Democrats stated that committees
with jurisdiction over energy and envi-
ronmental issues will spend most of their
time conducting oversight. Thus, expect
numerous hearings probing the admin-
istration’s O&G policies, regulatory re-
forms and what role energy companies
may have played in such decisions as
canceling the Paris climate accord, revis-
ing the Clean Power Plan and expanding
O&G lease sales on public lands.
STATE ELECTION RESULTS
Democrats made substantial gains in
gubernatorial races and won control of
governorships in Illinois, Kansas, Maine,
Michigan, Nevada, New Mexico and
Wisconsin. However, Republicans re-
tained control over the governor’s office
and state legislatures in the battleground
states of Florida, Iowa and Ohio. More
than 350 Republican legislators were
defeated and, nationwide, 10 winning
gubernatorial candidates campaigned on
ridding their states of fossil fuels. Thus,
many states will be led by governors with
an anti-O&G agenda. Destructive anti-
energy ballot measures were defeated in
Arizona, Washington and Colorado, but
succeeded in Nevada and California. Ma-
jor state results are summarized below.
Alaska. Voters defeated a proposal to
strengthen permitting regulations for
O&G drilling that could affect salmon
habitats. The oil industry worried that
it could prohibit developments on the
North Slope and elsewhere.
Arizona. Voters rejected an increase in
Arizona’s renewable portfolio standard
(RPS) to require electric utilities to ob-
tain 50% of electricity from renewables by
2030. This was a major defeat for green
activist California billionaire Tom Steyer,
who funded the initiative.
California. Voters defeated a proposition
that would have repealed a recent 12¢/gal
World Oil® / FEBRUARY 2019 31
FORECAST 2019 – WASHINGTON OUTLOOK
Fig. 4. Fortunately, the ill-conceived
Proposition 112, which would have killed
off the majority of new field development
in Colorado with its mandated 2,500-ft
setbacks, was defeated on Nov. 6.
Image: Bonanza Creek Energy, Inc.
Fig. 5. Texas Sen. Ted Cruz (Republican)
will continue to be one of the industry’s
staunchest advocates in the U.S. Senate,
having won a close re-election last Nov. 6.
Image: Official Senate portrait.
gasoline tax increase and prevented state
lawmakers from increasing gasoline taxes
without voter approval. Newly elected
Gov. Gavin Newsom’s approach to en-
ergy issues will make former Gov. Jerry
Brown’s policies appear moderate in com-
parison. Newsom has promised to accel-
erate “decarbonization” to achieve 100%
renewable energy, and to achieve zero
diesel emissions by 2030.
Colorado. In one of the most bitterly
fought state referenda, voters rejected
Proposition 112, which would have re-
quired new O&G wells to be located at
least 2,500 ft from homes, schools, other
buildings, and waterways, Fig. 4. It could
have placed 85% of state and private land
off-limits in Colorado, which ranks sixth
32 FEBRUARY 2019 / WorldOil.com
in O&G production. The measure would
have set one of the most protective stan-
dards in the country and would have
crippled an ongoing drilling boom in the
state. Democrat Jared Polis was elected
governor. He has characterized the U.S.
as being “addicted” to fossil fuels and
pledged 100% renewable electricity by
2040. The Democrats also won control of
the state legislature, and we have thus not
seen the end of the Keep it in the Ground
movement in Colorado.
Florida. Voters approved a state consti-
tutional amendment that prohibits drill-
ing in state waters along Florida’s shore-
line. The amendment will not impact
supply, since no drilling currently takes
place in state waters, but it prohibits fu-
ture development. The amendment will
not impact the transportation of oil, re-
fined products or LNG through state wa-
ters by pipeline or ship, nor future drill-
ing in federal waters.
Michigan. Democrat Gretchen Whitmer
was elected governor. She may close En-
bridge’s 540,000-bpd Line 5 pipeline, a
key route for Canadian crude and NGLs
to the Midwest and Ontario. She also has
promised to revoke an agreement recently
reached between the state and Enbridge
to build a utility corridor under the Great
Lakes’ Straits of Mackinac that would
address environmental safety concerns
surrounding the 65-year-old Line 5 and
house a future replacement. Canadian
pipeline capacity is so constrained that
losing any throughput would exacerbate
the discount to U.S. prices at which Alber-
ta producers must sell their oil. Whitmer
campaigned on a goal of 100% renewable
energy for Michigan and will appoint
PSC commissioners in 2019 and 2021.
Missouri. Voters rejected an increase of
10¢/gal in the state’s gasoline tax.
Nebraska. Two State PSC commission-
ers were elected, who favor the Keystone
XL pipeline, defeating opponents who
oppose the pipeline. The state Supreme
Court is reviewing pipeline approval. The
outcome of the Supreme Court proceed-
ing could send the decision back to the
PSC, where approval is now likely.
Nevada. The enviros achieved their only
major success, as voters approved a state
constitutional amendment that requires
50% renewable electricity by 2030. This
was one of several state-level RPS efforts
backed by Tom Steyer’s non-profit Next-
Gen Climate Action and its sole victory.
New Mexico. Democrat Michelle Lujan
Grisham was elected governor. She will
impose tougher drilling regulations and
limits on methane emissions for drillers
in the number-three oil-producing state.
However, her influence is limited, since
most of the state’s O&G production is on
federal land. Grisham also has vowed to
move “aggressively” to promote renew-
able energy.
New York. Democrat Gov. Andrew
Cuomo, who pledged to accelerate renew-
ables, was re-elected, and the state Senate
flipped to Democrat control. The combi-
nation of Cuomo and a Democrat Senate
will likely revive ambitious renewable en-
ergy legislation and require state agencies
to apply a climate test to permitting.
Texas. In one of the highest-profile races
of the mid-terms, Republican Senator Ted
Cruz (barely) won re-election, Fig. 5. He
is one of the O&G industry’s major de-
fenders in the U.S. Senate.
Washington. Voters, for the second
time, rejected a carbon tax. It would have
been the first such tax in the U.S. and, if
passed, was predicted to encourage simi-
lar efforts in other states. The industry,
led by BP America and Phillips 66, aggres-
sively campaigned to defeat the proposal.
THE BOTTOM LINE
With a Democrat-controlled House
containing an increased number of left-
leaning and green-oriented represen-
tatives, increased Democrat presence
among governors and state legislatures,
and an energized and well-funded envi-
ronmental, anti-O&G movement, it is go-
ing to be a long two years for the O&G
industry. The industry will have to fight
hard, merely to preserve the gains it has
made. We have been warned.
DR. ROGER BEZDEK is an internationally
recognized energy analyst and president of
MISI, in Washington, D.C. He has over 30 years’
experience in the energy, utility, environmental
and regulatory areas, serving in private
industry, academia and government. He has
served as senior adviser in the U.S. Treasury
Department, as U.S. energy delegate to the EU
and NATO, and as a consultant to the White
House, governmental agencies, and numerous
corporations and organizations.
 ®

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 SPECIAL FOCUS: 2019 FORECAST – U.S. DRILLING

U.S. set for measured increase

despite DUC build-up
ŝŝCRAIG FLEMING, Technical Editor, Forecasting accuracy. For 2018, ers and acquisitions also played an im-
and KURT ABRAHAM, Editor-in-Chief/ World Oil’s original forecast early last year portant role in helping U.S. operators
Chief Forecaster called for a 12.0% gain in wells drilled to remain profitable. During 2018, several
27,095. And, by latest best estimates, companies acquired assets at attractive
actual activity grew 11.99%, to 26,974 valuations, while selling underperform-
Over the last 12 months, the global wells. The difference between that fig- ing non-core properties that could have
upstream industry has featured rising ure and our original forecast is only 121 impacted profitability negatively.
oil and gas production; volatile, un- wells, or 0.4%. And our independent As the rig count continued to expand,
predictable oil prices, as evidenced in estimate of 2018’s Texas activity is only demand for oilfield services also in-
the last three months; and in the U.S., 94 wells greater than what the RRC pub- creased, helping the sector recover from
slowly-but-steadily rising drilling activ- lished, a difference of just 0.8%. brutal price cuts required by operators to
ity. It remains to be seen, just how much survive the 2016 downturn. As such, the
impact the substantial drop in oil prices U.S. MARKET FACTORS break-even cost in most shale plays rose,
between late October and the beginning During the past year, the U.S. E&P as OFS companies increased prices on
of January will have on operators’ capital industry continued to recover, adding equipment, crews and raw materials. The
budgets. We also have detected a grow- to the gains realized in 2017. The ability increased costs and lack of equipment
ing case of “haves” and “have nots,” in and willingness of OPEC+ to orches- hampered the sector’s ability to complete
the U.S., whereby those states with a sig- trate production cuts, to stabilize crude wells. The slowdown caused an alarm-
nificant shale presence are doing better markets, was significant in helping U.S. ing build-up of drilled-but-uncompleted
than those states with more convention- oil producers eke out a profit. However, wells (DUCs).
al activity. The Permian basin remains after remaining relatively stable through- The increased activity caused produc-
the “big-dog,” dominating the U.S. mar- out the year, WTI plunged to just $42.53 tion to grow during second-half 2018
ket and accounting for 27% of all drilling on Dec. 24. But thanks mainly to pro- and, in November, crude output reached
during 2018. duction cuts by OPEC+, crude prices 11.58 MMbopd. The booming shale
We had expected growth in Permian- have recovered more than 20% since plays have made the U.S. the world’s larg-
area activity to slow to 4.8% during sec- hitting December’s two-year low. Merg- est petroleum producer, surpassing Rus-
ond-half 2018, and the reality has come
close to our forecast. During first-half Table 1. Forecast of 2019 U.S. wells and footage to be drilled.
2018, the Permian rig count grew 18.8%,
Total wells Total footage, 1,000 ft
and then just 4.2% in the second half. We
2019 2018 % 2019 2018 %
remain concerned about what appears to State or area forecast estimated4 diff forecast estimated4 diff
be an irresponsible piling up of drilled-
Texas1 12,101 11,678 3.6 161,404.0 155,963.5 3.5
but-uncompleted wells (DUCs) in the Southeast1,4 868 833 4.2 9,237.3 8,659.2 6.7
Permian, and, for that matter, across all Northeast5 2,038 2,013 1.2 27,614.2 27,511.4 0.4
U.S. shale plays. Meanwhile, the U.S. Midwest6 450 437 3.0 1,115.6 1,076.7 3.6
Gulf of Mexico finally appears to be re- Mid-continent7 5,748 5,248 9.5 70,254.4 64,093.7 9.6
covering, albeit very slowly. Rocky Mountains8 5,056 4,801 5.3 63,960.9 59,916.2 6.8
The aforementioned factors, along West Coast9 1,636 1,800 –9.1 4,543.2 4,903.0 –7.3
with World Oil’s surveys of operators Alaska–offshore2 10 10 0.0 82.0 80.0 2.5
and state agencies, have all shaped this California–offshore2 18 24 –25.0 110.0 130.0 –15.4
cycle’s U.S. forecasting process. Accord- Gulf of Mexico2 140 130 7.7 2,674.0 2,470.0 8.3
Total U.S. 28,065 26,974 4.0 340,995.6 324,803.7 5.0
ingly, World Oil’s editorial staff presents
1
its 2019 E&P forecast, as follows: 2
Excludes state and federal offshore wells, which are included in the GOM total.
Includes state and federal offshore wells.
• U.S. drilling will increase 4.0%, 3 2018 estimates are based on well counts furnished by state and federal
to 28,065 wells, Table 1 regulatory agencies, and API.
4 Includes Alabama, Arkansas, Florida, Louisiana, Mississippi and Tennessee.
• U.S. footage will gain 5.0%, 5 Includes New York, Ohio, Pennsylvania, Virginia and West Virginia.

to 341.0 MMft of hole 6 Includes Illinois, Indiana, Kentucky, Michigan and Missouri.

• U.S. Gulf of Mexico should 7 Includes Kansas, Nebraska, North Dakota, Oklahoma and South Dakota.

8 Includes Colorado, Idaho, Montana, Nevada, New Mexico, Utah and Wyoming.
improve 7.7%, to 140 wells. 9 Includes Alaska-onshore, California-onshore and Oregon.

World Oil® / FEBRUARY 2019 35

2019 FORECAST – U.S. DRILLING
sia and Saudi Arabia, turning the country
into a net oil exporter for the first time in
75 years. Although drilling is increasing
throughout much of the U.S., operators
will remain focused on the Permian and
oil-rich portions of the SCOOP/ STACK
plays in Oklahoma as the most rewarding
areas to exploit.
Capex. Drilling activity was stimulated
by rising oil prices, as operators increased
capex in 2018 to capitalize on the op-
portunity, according to James West, chief
analyst at the Evercore investment firm.
But despite a promising start in 2018,
Evercore expects the industry to pull
back on drilling activity through the first
half of 2019 because of short-term uncer-
tainty and volatile oil prices. But an ex-
pansion should take hold during second-
half 2019. The main catalysts include a
rebound in NAM—pushed back by a
quarter or two—and continued offshore
recovery. LNG is another market on the
cusp of an upcycle, with an oncoming
infrastructure build-out. While upstream
budgets should increase overall in 2019,
the risk of negative revision is more pro-
nounced than in prior years, as their sur-
vey was conducted while oil prices fell
20%, a reduction not seen since the 2008
financial crisis, West continued. Evercore
also analyzed actual spending for 2018
and planned expenditures for 2019. U.S.
capex growth will moderate to 10%, y-o-
y, after a blistering 23% increase in 2018
and 49% gain in 2017. Overall, 2019 ca-
pex should be up around 100% from the
2016 trough, but down about 30% from
the 2014 peak.
Commodity prices. WTI and Brent
oil prices rose after January 2018, from
Fig. 1. Two rigs working on the Texas
District 8 side of the Permian basin.
Photo: Latshaw Drilling.
36 FEBRUARY 2019 / WorldOil.com
around $63 and $69/bbl, respectively, in
the first part of last year, before topping
out at $70 and $81/bbl in October. But
in late 2018, crude benchmarks declined
18% in November and continued on a
downward trajectory, as WTI plunged
to just $42.50 on Dec. 24, only to jump
back to over $48 on Jan. 4. Brent fell
to $50.47 on Dec. 24, and then rose to
$57.35 on Jan. 4. To bolster benchmark
prices, OPEC+ quickly implemented
production cuts to support prices.
Henry Hub spot natural gas prices aver-
aged $3.15/MMBtu in 2018, up $0.16/
MMBtu from 2017. HH prices surged
to average $3.94/MMBtu in November,
but quickly retreated to historical levels
after harsh winter forecasts were revised.
EIA predicts that HH gas will aver-
age $2.89/MMBtu in 2019 and $2.92/
MMBtu in 2020.
Drilled-but-uncompleted. The num-
ber of DUCs in the U.S. continues to
build at an alarming rate. As of Novem-
ber, DUCs hit an all-time high of 8,723,
18.6% more than reported by the EIA a
year earlier. The lack of pressure pump-
ing equipment is not a major factor, but
service costs are a concern. Evercore esti-
mates that frac supply increased almost 5
MM HHP, or 27% over the past year. But
despite an excess supply of frac equip-
ment and in-basin frac sand, the Perm-
ian’s DUC inventory increased 55% over
the past year, followed by the Anadarko
basin (16%), Eagle Ford (9%), Haynes-
ville and Bakken (both up 8%).
LNG exports. The EIA expects U.S.
LNG exports to increase from 3.0 Bcfd in
2018 to 5.1 Bcfd in 2019, and to 6.8 Bcfd
in 2020, as three new liquefaction proj-
ects come online. The agency also pre-
dicts that U.S. LNG export capacity will
almost double by the end of 2019, to 8.9
Bcfd. This will make U.S. LNG export
capacity the third-largest, globally, be-
hind Australia and Qatar. By mid-2020,
EIA expects U.S. LNG export capacity to
reach 9.6 Bcfd.
Oilfield service companies. In the
short-cycle, shale-dominated environ-
ment, it has become challenging for ser-
vice sector companies to manage their
supply chains and logistics. Before the
rapid decrease in oil prices, most pres-
sure pumping companies expected a
slowdown in completion activity, start-
ing in the third quarter, as companies ex-
perienced budget exhaustion. The sector
kept its supply chains intact to prepare
for a rapid buildup in activity, early in
2019, when budgets are refreshed. Now,
after recent downgrades from SLB and
LBRT, it appears 2019 is off to a slower
start than many expected (Evercore).
Meanwhile, pricing rebounded in
2017, as service providers began re-
versing concessions ceded during the
downturn. Pricing has largely begun to
rise across all segments and geography.
Evercore estimates that overall pricing
has improved 45%-55% for land-based
operations from trough levels established
during the 2014-2016 downturn.
U.S. FORECAST
Despite an unprecedented build-up
of DUC wells in the major U.S. shale ba-
sins during 2018, operators working the
various plays plan to add to the backlog
during 2019. Drilling units may not be
added as rapidly in 2019 as in 2018, but if
Saudi Arabia continues to cut production
to support oil prices, U.S. companies will
continue to drill and complete wells until
operations reach the break-even cut-off.
With 8,723 DUCs waiting on completion
in the U.S., it’s difficult to understand
why operators are willing to strand more
capital before securing an ROI on their
previous drilling investments. But World
Oil forecasts the trend will continue in
2019. As mentioned earlier, U.S. drilling
is forecast to rise 4.0% in 2019, Table 1.
As expected, the Permian remains
the major target for companies adding
oil reserves. However, major leasehold-
ers in Oklahoma’s STACK and SCOOP
plays are predicting that the area’s multi-
pay zones, well-established infrastructure
and a competitive service environment
closely resemble the Permian in early
days. These factors, combined with a
favorable political environment, should
advance this dual play into second place,
in terms of total commingled footage and
wells drilled.
Gulf of Mexico. After four years of de-
clining drilling activity in the GOM and a
17% drop during 2018, World Oil predicts
a 7.7% increase in drilling and an 8.3%
jump in total footage. Although increased
efficiencies in subsea methods have re-
duced break-even costs to $40/bbl, we
don’t foresee a meaningful resurgence in
deepwater drilling during 2019–2020.
 2019 FORECAST – U.S. DRILLING

U.S. REGION-BY-REGION amount of casinghead gas. Although southern Louisiana, activity is recovering
ACTIVITY some gas is flared, the existing infra- at a more rapid pace with footage forecast
As alluded to earlier, nationwide drill- structure in West and Central Texas en- to increase 7.2%, and well spuds jumping
ing was up 12% last year. And while a ables operators to sell the rich, wet gas to 5.8%.
4.0% increase is expected this year, there midstream companies.
is a definite disparity between healthy The increased gas volume has led to Northeastern states. This region will
shale states and the more conventional bust scenarios in Districts 3, 4 and 10, be up slightly in 2019. A massive winter
states still struggling. which we predict will suffer 12.3%, 25% storm that hit the Northeast in January
and 12% declines in drilling activity, re- 2018 caused unprecedented withdraw-
Texas. Shale drilling continues to domi- spectively. Districts 5 and 7B also will de- als and pushed spot prices for natural gas
nate the Lone Star State, as the state gears cline, with losses of 17% and 16%, respec- to record levels in New York state and at
up to boost activity 3.6%. Fig. 1. Activ- tively. Total combined activity in Texas Henry Hub. According to the EIA, HH
ity levels in the Permian and Eagle Ford will increase 3.6% during 2019, with foot-
pushed Texas oil production to 4.986 age up 3.5%. On another positive note, Fig. 2. A well under construction
MMbopd in November, a 2.4% y-o-y in- new oil pipelines, with combined capacity in the SCOOP region of Oklahoma.
crease. The relentless drive to stack mul- of 1.8 MMbopd, are being constructed to Photo: Latshaw Drilling.
tiple wellbores into ever-shrinking sweet alleviate transportation issues.
spots has increased the DUC count to
4,039 wells. The idle Texas wellbores ac- Southeast. This region is set to increase
count for 46.3% of the U.S. DUC total, as 4.2%. In northern Louisiana, several
of November. operators plan to increase activity in the
Stranded capital is cause for concern, Haynesville shale to boost gas produc-
but companies plan to push activity up tion. Additional activity is planned by
4% in District 8, and 14% in District 7C. small companies to drill shallow oil wells,
The drive for ever-longer laterals will to maintain production in mature areas.
increase footage in District 7C 15.4%, Drilling activity in the northern half will
and 5% in District 8. The increased be up 4.1%, with footage increasing 7.4%,
19ENTELEC_HalfPageHorz_WorldOil.pdf 1 1/23/2019 5:13:57 PM
crude output also produces a significant due to longer Haynesville laterals. In

CM

MY

CY

CMY

World Oil®/FEBRUARY 2019 37

2019 FORECAST – U.S. DRILLING
product hit $6.24/MMBtu on Jan.3 be-
fore retreating to historical levels. Pro-
ducers also are eagerly awaiting start-up
of two gas pipelines in the Appalachia
basin and ramp-up of the Cove Point
LNG facility. Despite the trifecta of posi-
tive news, activity in the Marcellus-Utica
shale play appears to be slowing down.
After impressive increases in Pennsylva-
nia (23%) and West Virginia (26%) in
2018, World Oil forecasts a 9.6% reduc-
tion in West Virginia, and a relatively
modest increase in Pennsylvania of just
7%. After suffering an 18% reduction in
2018, we forecast Ohio’s activity to drop
another 11% in 2019.
Midwest. Drilling will be up a modest
3.0% in this region. In Michigan, the
factors affecting drilling activity are com-
modity prices, and possibly rig availabil-
ity. And officials say those two may be
related. Illinois, for many of the same
reasons as Michigan, remains at about
half to a third of its traditional drilling
level, although a few operators are explor-
ing deeper horizons. Like other states,
Indiana’s operators cite price and politi-
cal uncertainty as major factors limiting
drilling. However, given the high propor-
tion of small operators, their inability to
afford the cost of technology, to find new
locations to drill, is also a factor.
Mid-continent. We forecast solid, 9.5%
growth for this area. The SCOOP and
STACK plays of Oklahoma continue
to gain momentum, due to application
of updated technologies and comple-
tion practices tailored for the unique
petrology of the Springer, Woodford and
Meramec reservoirs, Fig. 2. Regional ac-
Fig. 3. Operations on the Wyoming side of the Niobrara play are gaining momentum.
Photo: Anadarko Petroleum.
38 FEBRUARY 2019 / WorldOil.com
tivity continues to be dominated by large
and midsized independents, including
Continental, Newfield, Devon and Ci-
marex. During 2019, we predict that
Oklahoma’s activity will increase 14.4%
overall, with a 15.7% increase in footage.
After declining to 420,000 bopd in 2015,
the state’s production has risen 38% to
580,000 bpd.
The oil-rich Bakken shale of North
Dakota has been slow to recover since
the 2016 bust. However, based on figures
from state officials and our own survey of
operators, World Oil forecasts that drill-
ing will increase 3%, with footage up
3.3%. We predict the trend to laterals in
excess of two miles will continue through
2019, with some wells reaching an MTD
of 21,000 ft. With oil transport from the
remote location still an issue, we predict
a muted recovery, compared to other ma-
jor shale plays.
In conventionally oriented Kansas,
operators continue to drill shallow oil
and gas wells, but at a much-reduced
level that is only about one-third to one-
fourth of pre-2015 figures. With investor
attention focused on shale plays in other
states, operators are finding it difficult to
access additional capital needed to in-
crease their drilling.
Rocky Mountain states. This mixed-
bag region is forecast to increase 5.3%.
During a yearlong debate in Colorado
during 2018, Proposition 112 was put on
November’s ballot. Calling for 2,500-ft
setbacks, it would have effectively ended
new oil and gas development in the state.
Although defeated, the proposition cast a
die that could resurface in Colorado and
other states. Despite the unfavorable pol-
itics, operators will drill 3.2% more wells
and 4.5% more footage. State production
hit 478,000 bopd in November, up 6.2%
from a year earlier.
On the Wyoming side of the Niobrara
shale, operators plan a 7.3% ramp-up in
drilling activity, making 8.2% more hole
in 2019, Fig. 3. State production is also
rising, pushing up to 262,000 bopd in
November, a 5% y-o-y increase. In north-
eastern Utah’s multi-horizon Uinta basin,
activity and footage will both decline
2.1% in 2019, following a 17% drop in
drilling activity in 2018. Approximately
67% of the state’s mineral acreage is con-
trolled by the U.S. BLM.
Although New Mexico was late to the
Permian shale boom, that situation start-
ed changing in 2017-2018 and will con-
tinue to increase during 2019. As com-
pletion efficiencies are increased in the
Bone Springs formation of southeastern
New Mexico, the state should reap an an-
nual 6.8% gain in drilling activity in 2019
and an 8.5% gain in footage.
On the West Coast, we expect a 9.1%
decline in drilling. California’s drilling
activity has been up and down over the
past several years. After enduring a bru-
tal 80% reduction during the 2014-2016
bust, the state enjoyed a hearty 31.5%
increase during 2018. However, this year,
onshore operators are expected to reduce
drilling and total footage 10.2%. Offshore
California, we expect a 25% decrease in
activity and a 15.4% reduction in total
footage. As in previous years, most drill-
ing is conducted by just four companies.
The 107-year-old, multipay Elk Hills field
in Kern County is still going strong, with
approximately 2,300 active oil wells. De-
spite erratic drilling, operators pumped
481,000 bopd in November, about the
same as one year ago.
The 2016 oil price collapse severely
damaged Alaska’s offshore drilling in-
dustry. Despite the slowdown, offshore
work in the Cook Inlet will remain
steady, with 10 wells forecast for 2019,
the same as drilled in 2018. Onshore ac-
tivity on the North Slope is projected to
increase 1.9%, with total footage increas-
ing 2.7%. In a politically significant ac-
tion, the Trump administration last Oc-
tober authorized Hilcorp Energy’s plan
to build an artificial gravel island in the
Beaufort Sea north of Alaska and use it
to extract crude. This marks the first ap-
proved oil production facility in federal
Arctic waters.
 SPECIAL FOCUS: 2019 FORECAST – U.S. ROTARY RIG COUNT

Shale drilling drove rig count gains in 2018

With crude prices rising during the unconventional formations in Oklahoma, oil remained fairly consistent, with 82%
first nine months of 2018, the U.S. rig the rig count in the state jumped 12%, of rigs targeting oil, and 18% targeting gas.
count grew steadily, as production cuts by from an average 120 rigs in 2017 to 134 States that experienced annual declines
OPEC+ kept the shale plays humming. units in 2018. included Utah, Texas District 7B and Loui-
The total U.S. rig count exhibited an av- Other states with shale activity that siana. Another indicator of the shift toward
erage 18% gain, from 876 working rigs in encountered good percentage growth in shale drilling is the continuing dominance
2017 to 1,032 units during 2018. 2018 included Wyoming, West Virginia, of horizontal drilling. During 2018, 87% of
Most of the growth in drilling that oc- Pennsylvania and North Dakota. Shale all wells drilled in the U.S. were horizontal.
curred during 2018 was concentrated play states that declined included Ohio The excessive expense and long start-
in the nation’s major shale plays, like the and Colorado. Although activity in the up times required in deepwater GOM op-
Permian and SCOOP/STACK. Texas ex- Marcellus is slowing, the overall ratio of erations caused offshore drilling to drop
perienced an 19% average increase in rigs, rigs targeting gas versus rigs drilling for 5% in 2018.
from 432 units in 2017 to 514 units in
2018. Similar to last year, a large increase U.S. drilling split by target. U.S. drilling split by trajectory.
occurred in District 8, in the heart of the 100 100
Permian, where the count of working rigs
averaged 240 units in 2017, but increased 80 80
to 313 in 2018. The largest percentage gain
in Texas occurred in District 6, where drill- 60 60
ing for Haynesville gas jumped 39% to 24
average units working. 40 40
On the New Mexico side of the Perm- Vertical,%%
Vertical
20 Gas drilling 20 Directional %
ian, the rig count skyrocketed 63%, from Oil drilling Horizontal
Directional,%%%
Horizontal,
58 rigs in 2017, to 95 units averaged in 0 0
2018. With operators gearing up to tap 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019

Average number of U.S. rotary rigs in operation1

State or area 2017 avg. 2018 avg. % diff. State or area 2017 avg. 2018 avg. % diff.
Alabama 2.0 1.1 –45.0 Ohio 25.3 20.8 –17.8
Alaska 6.2 6.7 8.1 Oklahoma 119.7 134.3 12.2
Land 5.8 6.1 5.2 Pennsylvania 33.2 40.9 23.2
Offshore 0.4 0.7 0.0 Texas 431.5 513.5 19.0
Arkansas 0.7 0.4 –42.9 Offshore 1.0 1.2 20.0
California 11.1 14.6 31.5 Inland Water 0.0 0.0 0.0
Land 11.1 14.6 31.5 District 1 37.9 41.4 9.2
Offshore 0.0 0.0 0.0 District 2 30.9 29.8 –3.6
Colorado 32.7 31.9 –2.4 District 3 14.2 15.3 7.7
Florida 0.1 0.3 200.0 District 4 14.5 13.9 –4.1
Illinois 0.2 0.3 50.0
District 5 3.2 3.1 –3.1
Indiana 0.2 1.3 550.0
District 6 17.1 23.8 39.2
Kansas 0.1 0.4 300.0
District 7B 4.7 2.0 –57.4
Kentucky 1.0 0.3 –70.0
District 7C 35.5 40.2 13.2
Louisiana 61.0 60.1 –1.5
District 8 240.3 313.3 30.4
North - Land 36.6 34.8 –4.9
South - Inl. Water 2.8 3.0 7.1 District 8A 20.4 17.7 –13.2
South - Land 2.8 5.5 96.4 District 9 2.6 2.7 3.8
Offshore 18.8 17.2 –8.5 District 10 9.2 10.7 16.3
Michigan 0.0 0.0 0.0 Utah 8.8 7.3 –17.0
Mississippi 2.6 3.8 46.2 Virginia 0.0 0.1 —
Montana 0.4 1.0 150.0 W. Virginia 12.2 15.0 23.0
Nebraska 0.0 0.0 0.0 Wyoming 22.4 29.1 29.9
Nevada 0.2 0.8 300.0 Others 0.3 0.3 0.0
New Mexico 58.4 95.4 63.4 U.S. Offshore Total 20.2 19.1 –5.4
North Dakota 45.4 52.7 16.1 U.S. Grand Total 875.7 1,032.4 17.9
1 Totals may not add due to rounding. *Others comprise Arizona, Idaho, New York, Oregon, South Dakota and Washington. Source: Baker Hughes Inc.

World Oil® / FEBRUARY 2019 39

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 SPECIAL FOCUS: 2019 FORECAST – U.S. OIL AND GAS PRODUCTION

U.S. crude output surges,

gas reaping benefits of LNG expansion
Unrelenting activity in the U.S. shale
plays pushed oil production up to 11.58
MMbpd in November, making the U.S.
the world’s largest petroleum producer,
surpassing Russia and Saudi Arabia. The
booming unconventional reservoirs have
turned the country into a net oil exporter
for the first time in 75 years. This rise in
U.S. output is due largely to decisions by
OPEC and Russia to curb their produc-
tion, to support benchmark prices.
Crude oil. Overall, U.S. oil production
increased 17% in 2018, with noticeable
Alaska was not as fortunate, dropping 3% and $2.92/MMBtu in 2020. U.S. LNG
to 479,000 bopd. exports are projected to increase from 3.0
Bcfd in 2018 to 5.1 Bcfd in 2019, and to
Natural gas. Henry Hub spot natural 6.8 Bcfd in 2020, as three new liquefac-
gas prices averaged $3.15/MMBtu in tion projects come online. The agency
2018, up $0.16/MMBtu from 2017. HH also predicts that U.S. LNG export capac-
prices surged to average $3.94/MMBtu ity will almost double by the end of 2019,
in November, but quickly retreated to to 8.9 Bcfd. Marketed gas production was
historical levels. EIA predicts that HH 93.7 Bcfd in October 2018 versus 80.8
gas will average $2.89/MMBtu in 2019 Bcfd in October 2017.
U.S. oil and natural gas production.
100 12,000

U.S. crude oil production, MMbpd

increases reported in Texas, New Mexico, 80 11,000
Marketed production, Bcfd

North Dakota, Colorado and Oklahoma. 60 10,000

WTI prices rose after January 2018, from
40 9,000
around $63 in the first part of last year, and
topped out at $70/bbl in October. But in 20 8,000
late 2018, crude benchmarks declined 0 7,000
18% in November and continued on a J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D
2016 2017 2018
downward trajectory, as WTI plunged to
just $42.50 on Dec. 24, only to jump back U.S. crude and condensate production by state
to over $48 on Jan. 4. Daily, 1,000 bbl Annually, 1,000 bbl
STATE 20181 20172 20181 20172
The escalating benchmark prices dur- Alabama 16.4 18.7 6,011 6,827
ing the first three quarters of 2018 caused Alaska 478.5 494.7 174,540 180,467
U.S. production to climb, with daily aver- Arkansas 14.2 14.4 5,108 5,288
age output jumping to 10.927 MMbpd California3 477.5 492.4 174,265 217,313
in 2018, compared to 9.350 MMbpd in Colorado 457.3 357.8 166,950 130,732
2017. Texas oil production climbed 24%, Florida 4.9 5.3 1,837 1,923
Illinois 23.0 22.8 8,411 8,314
increasing to a daily average of 4.8 MMbpd
Kansas 95.2 98.1 34,739 35,822
in 2018, due to sustained drilling activity Kentucky 6.2 6.8 2,217 2,477
in the Permian and Eagle Ford shale plays. Louisiana3 1,518.6 1,486.1 554,343 438,017
On the New Mexico side of the Perm- Michigan 15.2 14.5 5,521 5,319
ian play, production increased 44%, up to Mississippi 47.9 48.8 17,514 17,781
677,000 bopd, the largest percentage gain Montana 58.5 56.8 21,442 20,706
of any state. Similarly, Bakken production Nebraska 5.7 5.8 2,057 2,125
New Mexico 676.8 469.8 247,175 171,440
in North Dakota registered a 17% output
North Dakota 1,258.8 1,073.9 459,695 392,127
increase, up to 1.259 MMbopd. Ohio 65.3 51.9 23,813 18,942
In the Western states, Colorado en- Oklahoma 549.3 454.5 200,560 165,920
joyed a 28% increase to 457,000 bopd, Pennsylvania 18.0 18.1 6,510 6,573
and Wyoming was up 15%. California’s Texas3 4,753.9 3,821.5 1,735,887 1,015,234
production remained resilient at 478,000 Utah 102.8 93.8 37,565 34,205
bopd, a loss of just 3%. In the Mid-con- West Virginia 34.1 25.8 12,481 9,469
Wyoming 238.7 207.1 87,171 75,669
tinent, production in Oklahoma shot Others4 29.3 29.9 10,283 10,474
up 21%, with operators focusing on the TOTAL U.S. 10,927.2 9,350.4 3,989,672 3,413,376
SCOOP/STACK plays, but shale-poor 1 Estimated, using API and EIA data. Totals may not add due to rounding.
Kansas dropped 3%, to average 95,000 2 Revised, using EIA data.
bopd. While Louisiana and the federal off- 3 Includes state and federal offshore.
4 Includes Arizona, Indiana, Missouri, Nevada, New York, South Dakota, Tennessee and Virginia.
shore increased 22%, up to 1.5 MMbopd,
World Oil® / FEBRUARY 2019 41
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 SPECIAL FOCUS: 2019 FORECAST – U.S. RESERVES

U.S. reserves hit new, all-time record levels

ŝŝU.S. Energy Information Administration
Stronger oil and natural gas prices, combined with continuing
development of shales and low-permeability formations, gener-
ated new all-time record levels of proved reserves for both fuels in
2017. EIA figures show that U.S. crude oil and lease condensate
reserves leaped 19.2% higher, from 35.213 Bbbl to 41.990 Bbbl.
Proved reserves are estimated volumes of hydrocarbon re-
sources that analysis of geologic and engineering data demon-
strates, with reasonable certainty, are recoverable under existing
economic and operating conditions.
Meanwhile, total U.S. natural gas proved reserves, wet after
lease separation, showed massive growth, gaining 36.1%, from
341.1 Tcf to 464.3 Tcf. The new record for natural gas extends
a longer-term trend of development, mainly in shale plays in
the Northeast.
Both U.S. proved reserves of crude oil and natural gas are
approximately double their levels from a decade ago. Total
U.S. oil reserves in 2017 exceeded a brief, one-year, 47-year-
old record.
Crude oil and lease condensate reserves. Liquid reserves
(Table 1) at year-end 2017 comprised 39.2 Bbbl of crude oil
(up 19.5%) and 2.8 Bbbl of lease condensate (up 16%). The
previous crude oil record was 39.0 Bbbl, set in 1970.
Producers in Texas added 3.3 Bbbl of crude and condensate
proved reserves, the largest net increase of all states in 2017.
The increase was a result of increased prices and development
in the Permian basin’s Spraberry Trend and the Wolfcamp/
Bone Spring shale play. Furthermore, the Wolfcamp/Bone
Spring shale surpassed the Bakken/Three Forks play in the Wil-
liston basin, to become the largest oil-producing tight play in
the U.S. during 2017.

Table 1. Crude oil and lease condensate proved reserves, reserves changes, and production, 2017, MMbbl.
Changes in reserves during 2017
Proved Revision Revision Extensions & Estimated Proved
State and Reserves Adjustments increases decreases Sales Acquisitions discoveries production reserves
subdivision 12/31/16 (+,-) (+) (-) (-) (+) (+) (-) 12/31/17
Alaska 1,574 4 557 0 0 0 58 177 2,016
Lower 48 States 33,639 748 5,434 3,279 1,350 2,385 5,621 3,224 39,974
Alabama 57 -1 7 4 0 1 1 7 54
Arkansas 41 3 2 3 0 0 0 5 38
California 1,933 90 319 113 18 90 81 173 2,209
Colorado 1,309 161 118 139 20 76 217 129 1,593
Florida 14 -14 M M M M M M M
Illinois 37 0 3 1 0 0 1 1 39
Indiana 4 0 1 0 0 0 0 0 5
Kansas 390 -10 38 58 0 0 1 36 325
Kentucky 10 -1 2 1 0 0 0 1 9
Louisiana 494 -11 77 36 19 42 20 51 516
Michigan 56 5 7 2 2 0 1 6 59
Mississippi 134 5 8 8 5 7 1 18 124
Montana 287 10 28 4 3 0 5 21 302
Nebraska 14 1 0 0 0 0 0 2 13
New Mexico 1,655 112 179 166 46 628 499 172 2,689
North Dakota 5,270 65 407 417 199 6 733 391 5,474
Ohio 167 40 69 69 24 7 18 19 189
Oklahoma 2,083 -37 330 364 123 59 462 160 2,250
Pennsylvania 71 16 5 14 2 0 21 6 91
Texas 13,998 114 2,547 1,594 769 1,261 3,051 1,281 17,327
Utah 397 -61 33 12 56 19 33 35 318
West Virginia 73 22 18 19 6 6 130 13 211
Wyoming 944 -2 151 24 27 30 124 77 1,119
Federal Offshorea 4,188 190 1,077 231 31 150 222 617 4,948
Miscellaneousb 13 51 8 0 0 3 0 3 72
U.S. Total 35,213 752 5,991 3,279 1,350 2,385 5,679 3,401 41,990
aIncludes Federal Offshore Louisiana, Mississippi, Alabama and Florida. b M - Miscellaneous states include Arizona, Idaho, Maryland, Missouri, Nevada, New York, Oregon,
South Dakota, Tennessee, and Virginia. Note: The production estimates in this table are based on data reported on Form EIA-23L, Annual Report of Domestic Oil and Gas
Reserves. differ slightly from the official U.S. EIA production data for crude oil and lease condensate for 2017 contained in the Petroleum Supply Annual 2017,

World Oil® / FEBRUARY 2019 43

2019 FORECAST – U.S. RESERVES

The next-largest net gains in crude and condensate proved Natural gas reserves. The previous record for U.S. gas re-
reserves were in New Mexico (up 1.0 Bbbl) and in the Federal serves (Table 3) was 388.8 Tcf, set in 2014. The share of natural
Offshore Gulf of Mexico (up 729 MMbbl). gas from shale compared with total U.S. proved gas reserves in-
creased from 62% in 2016 to 66% at year-end 2017.
Tight oil. As of Dec. 31, 2017, tight plays accounted for 48% Producers in Pennsylvania added 28.1 Tcf of proved gas re-
of U.S. crude and condensate proved reserves, up from 33% at serves, the largest net increase of all states in 2017, as a result of
the end of 2015. And 98% of these proved reserves came from increased prices and development of the Marcellus and Utica
seven tight plays, Table 2. As alluded to earlier, the Wolfcamp/ shales. The next largest net gains in proved gas reserves, by vol-
Bone Spring shale in the Permian surpassed the Bakken/Three ume, in 2017 were in Texas (26.9 Tcf) and Louisiana (18.4 Tcf).
Forks play in the Williston basin. In third place behind the Wolf- Proved reserves of casinghead gas rose 38%, from 72.2 Tcf in
camp/Bone Spring and Bakken/Three Forks was the Eagle 2016 to 99.4 Tcf in 2017. The largest increase in casinghead gas
Ford shale of South Texas, with 4.82 Bbbl, up 15.7% from the reserves for 2017 was in Texas (10.3 Tcf), of which 86% were in
4.173 Bbbl of 2016. the Permian basin.
Table 2. U.S. tight oil plays—production and proved reserves, 2016-2017, MMbbl
Change,
2016 2016 2017 2017 2016–2017
Basin Play State(s) production reserves production reserves reserves
Permian Bone Spring, Wolfcamp N.M., Texas 426 4,960 592 8,319 3,359
Williston Bakken/Three Forks N.D., Mont., S.D. 375 5,226 387 5,447 221
Western Gulf Eagle Ford Texas 438 4,163 411 4,815 652
Anadarko, S. Okla. Woodford Okla. 27 389 36 412 23
Appalachian Marcellus* Pa., W.V. 13 139 17 279 140
Denver Niobrara Colo., Neb., Wyo. 16 225 11 232 7
Fort Worth Barnett Texas 3 22 2 20 -2
Sub-totals 1,298 15,124 1,456 19,524 4,400
Other tight oil 42 431 35 449 18
U.S. tight oil totals 1,340 15,555 1,491 19,973 4,418
Notes: Includes lease condensate. Bakken/Three Forks oil includes proved reserves from shale or low-permeability formations reported on Form EIA-23L. Bone Spring
and Wolfcamp includes proved reserves from shale or low-permeability formations reported on Form EIA-23L in TX RRC 7C, TX RRC 8, TX RRC 8A, and NME. Other tight
includes proved reserves reported from shale formations reported on Form EIA-23L not assigned by EIA to the Bakken/Three Forks, Barnett, Bone Spring, Eagle Ford, Mar-
cellus, Niobrara, Wolfcamp or Woodford tight plays. * The Marcellus play in this table refers only to portions within Pennsylvania and West Virginia.

Table 3. Total natural gas proved reserves, reserves changes, and production, wet after lease separation, 2017, Bcf.
Changes in reserves during 2017
Proved Revision Revision Extensions & Estimated Proved
State and Reserves Adjustments increases decreases Sales Acquisitions discoveries production reserves
subdivision 12/31/16 (+,-) (+) (-) (-) (+) (+) (-) 12/31/17
Alaska 3,341 320 3,206 0 0 0 50 343 6,574
Lower 48 States 337,792 19,006 69,741 31,629 24,916 47,039 70,733 30,048 457,718
Alabama 1,855 136 84 80 485 166 18 152 1,542
Arkansas 7,420 -63 869 118 8 0 869 697 8,272
California 1,433 88 333 123 16 17 80 149 1,663
Colorado 19,086 4,516 3,136 1,912 1,515 5,228 1,888 1,700 28,727
Florida 1 -1 M M M M M M M
Kansas 3,041 74 258 181 498 412 1 210 2,897
Kentucky 1,199 23 105 29 2 0 0 75 1,221
Louisiana 18,072 7,566 7,785 3,246 418 3,144 5,823 2,245 36,481
Michigan 1,301 261 67 74 2 54 0 98 1,509
Mississippi 359 -46 22 13 5 73 0 39 351
Montana 586 22 75 6 2 0 4 48 631
New Mexico 14,372 203 1,606 1,122 4,481 9,767 1,832 1,319 20,858
New York 120 -11 38 26 5 0 0 12 104
North Dakota 8,611 -152 1,759 333 241 3 1,426 697 10,376
Ohio 15,945 180 7,649 2,048 1,305 2,918 5,475 1,793 27,021
Oklahoma 34,396 2,175 3,942 5,260 1,171 1,862 5,091 2,486 38,549
Pennsylvania 62,656 -679 13,218 2,959 5,640 8,080 21,584 5,472 90,788
Texas 88,312 2,837 20,349 6,902 4,457 11,188 11,957 8,035 115,249
Utah 3,621 -260 849 278 134 280 123 312 3,889
Virginia 2,447 -15 457 31 3 0 1 115 2,741
West Virginia 24,745 585 2,283 4,586 1,279 2,053 13,655 1,601 35,855
Wyoming 21,533 1,076 3,498 1,404 3,060 1,744 685 1,720 22,352
Federal Offshorea 6,564 389 1,346 889 142 47 221 1,064 6,472
Miscellaneousb 117 102 13 9 47 3 0 9 170
U.S. Total 341,133 19,326 72,947 31,629 24,916 47,039 70,783 30,391 464,292
aIncludes Federal Offshore Louisiana, Mississippi, Alabama and Florida. b M - Miscellaneous states include Arizona, Idaho, Illinois, Indiana, Maryland, Missouri, Nebraska,
Nevada, Oregon, South Dakota and Tennessee. Note: The production estimates in this table are based on data reported on Form EIA-23L, Annual Report of Domestic Oil and
Gas Reserves.

44 FEBRUARY 2019 / WorldOil.com
 SPECIAL FOCUS: INTERNATIONAL DRILLING & PRODUCTION

Activity outside the U.S. to grow at moderate pace

Rising oil supplies and falling prices in companies to lease drilling rights. However, after taking office
second-half 2018 constrained global drilling, in December, new President Andrés Manuel Lopez Obrador
but activity should post a measured gain in has been reviewing all Mexican upstream contracts. And since
2019. Virtually all the global oil production the election, the National Hydrocarbons Commission has post-
poned three bidding processes for onshore blocks, previously
increase is due to U.S. shale activity. planned for last fall. The bid processes were rescheduled for
mid-February, but there is now uncertainty about the new re-
gime’s direction.
ŝŝWORLD OIL EDITORS Mexico’s rig count has increased the past several months,
and there is still hope that reforms will continue. Production
declined 7.8%, averaging 1.823 MMbopd during 2018.
Over the last 12 months, the global upstream industry
has featured rising oil and gas production (particularly in the SOUTH AMERICA
U.S.); volatile, unpredictable oil prices (as in the final quarter Economic instability has stifled the region’s ability to pro-
of 2018); and slowly-but-steadily rising drilling activity. duce at full potential. Drilling activity is forecast to gain a mea-
Last year, global drilling, excluding the U.S., improved 1.6%, ger 1.7%. Regional oil output was down 9.1%, at 6.17 MMbpd.
to 45,064 wells. This year, we think drilling will be up 2.5%, to
46,209 wells. Seven out of eight regions should increase this Argentina’s economic slump continues, amid a fiscal deficit,
year. Regulatory frameworks are being loosened up and re- and demand is seen waning. Due to the recession, YPF has shut
formed in a number of countries, to attract more operators and in many of its gas wells. A few companies are still experiencing
investment. Exploration worldwide remains at a low level. exploration success in the Neuquén basin. We expect a slight
Worldwide offshore drilling will improve at a faster rate than drilling uptick this year. Oil production was up 1.3%.
the overall upstream market. We project that offshore activity
will grow just over 6%, 2,204 wells. Some of the more active ar- Brazil. The E&P industry should make a comeback, with mul-
eas will be East Canada, Brazil, Norway, Angola, Nigeria, Saudi tiple offshore projects in the works. Although it is expensive to
Arabia, Abu Dhabi, China and India. operate in Brazil’s deep waters, the pre-salt regions retain par-
Global oil production averaged 83.386 MMbpd, up 2.2%
from 2017’s level. Five of the eight main regions had produc-
Table 1. Forecast of 2019 drilling outside the U.S.*
tion gains. Nearly the entire worldwide gain can be attributed to Region Wells forecast Wells drilled
surging U.S. output, which grew 16.9%. or country 2019 2018 % diff.
North America1 6,932 6,593 5.1
NORTH AMERICA South America2 2,526 2,483 1.7
Western Europe3 431 415 3.9
Canada. Pipeline bottlenecks drove Canadian crude prices to Eastern Europe/FSU4 11,269 11,116 1.4
record lows and prompted some producers to reduce output Africa5 920 846 8.7
by 160,000 bpd. In late November, Alberta required producers Middle East6 2,954 2,970 -0.5
Far East/South Asia7 20,901 20,373 2.6
to collectively cut output by 325,000 bpd, beginning in Janu-
South Pacific8 276 268 3.0
ary 2019, to alleviate the backlog created by rising inventories
World Total 46,209 45,064 2.5
with nowhere to go. Accordingly, we expect drilling to remain
*Some countries are estimated.
flat, as Canada works off the supply glut. Overall, Canadian oil 1Includes Canada, Cuba, Mexico and Others.

output rose 13.4%, to 4.50 MMbpd. 2Includes Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Peru,

Trinidad & Tobago, Venezuela and Others.

Shell’s multi-billion-dollar LNG development in West- 3Includes Austria, Denmark, France, Germany, Italy, Netherlands, Norway,

ern Canada is making swift progress. LNG Canada partners UK and Others.
4Includes Albania, Croatia, Czech Republic, Hungary, Poland, Romania,
(Shell, Petronas, PetroChina, Mitsubishi and Kogas) agreed to Russia and Others.
project funding terms in September and reached FID the fol- 5Includes Algeria, Angola, Congo, Egypt, Gabon, Libya, Nigeria, South Sudan,

lowing month. The project is now approved for construction. Sudan, Tunisia and Others.
6Includes Iran, Iraq, Kuwait, Neutral Zone, Oman, Qatar, Saudi Arabia,
For more details on Canadian activity, please turn to page 49. Syria, Turkey, UAE-Abu Dhabi, UAE-Dubai, Yemen and Others.
7Includes Brunei, China, India, Indonesia, Japan, Malaysia, Myanmar,

Pakistan, Philippines, Thailand, Vietnam and Others.

Mexico. Things had been looking up in Mexico, since the gov- 8Includes Australia, East Timor, New Zealand and Papua New Guinea.

ernment amended the constitution in 2013 to allow private

World Oil® / FEBRUARY 2019 45
INTERNATIONAL DRILLING & PRODUCTION

ticular interest to explorers. Accordingly, we expect drilling to
increase 1.8% in 2019. Oil output eased off 1.2%.
Venezuela. Upstream activity trended downward during
2018, as Venezuela is in political and economic chaos. Oil ex-
ports fell to a 28-year low. Oil production plummeted 29.1%, to
just 1.422 MMbpd. We forecast a 15.8% drilling decline.
Guyana. With 12 recent discoveries (as of Feb. 6) by
ExxonMobil, Guyana has become South America’s hot spot.
ExxonMobil also announced that its recoverable resource esti-
mate for the Stabroek Block grew another 1 Bboe, to more than
5 Bboe. However, there are also indications that the regulatory
regime could become complicated, as various political factions
fight over the anticipated oil riches.
ity on, the Norwegian Continental Shelf (NCS). Accordingly,
regional drilling will be up 3.9% during 2019. Regional oil pro-
duction declined 2.3%, to 2.842 MMbpd.
Norway’s upstream sector had a big year during 2018, Fig. 1.
Aasta Hansteen field went onstream, and an additional 83 pro-
ducing fields were active on the NCS by year’s end. In addition,
a record 87 new production licenses were awarded, and 53 ex-
ploration wells were spudded, up 32% from 2017. Eleven dis-
coveries were made. Nearly two-thirds of the undiscovered re-
sources are in the Barents Sea. Investments are set to rise 13% in
2019 to more than $16.35 billion, excluding exploration. Johan
Sverdrup and Johan Castberg fields have estimated start-ups in
2022. Norway’s drilling increased 11.6%, and we forecast a 0.4%
increase for 2019. Oil output fell 6.2%.

WESTERN EUROPE United Kingdom. As British companies improve production

Last year saw a slight increase in regional drilling activity.
This is due mostly to considerable interest in, and high activ-
Fig. 1. It was a big year in 2018 for the Norwegian Continental
Shelf, as Aasta Hansteen field went onstream as one of 84 fields
active offshore Norway. Image: Equinor, photo by Roar Lindefjeld
and Bo B. Randulff.
efficiency and reduce maintenance costs, they are using data
from a joint industry data analytics and digital technologies
study to help save $1.94 billion in asset maintenance and op-
erational costs. An opportunity to utilize these data would be
in BP’s Alligin development, approved to proceed west of Shet-
land. It should produce 12,000 boed at peak after going online
in 2020. Equinor has acquired Chevron’s 40% operated inter-
est in the Rosebank project, west of Shetland, while Apache has
initiated production from its Garten development in the North
Sea. In 2018, UK drilling increased 5.7%, and we forecast a simi-
lar gain for 2019. Oil production crept back over 1.0 MMbpd.

EASTERN EUROPE/FSU
Five states reached an agreement on sovereign rights to the
Caspian Sea, paving the way for new oil and gas extraction. The
region increased drilling 4.3% during 2018, and should gain 1.4%
for 2019. Regional oil production was up 1.7%.

Russia. Drilling in 2018 hit an all-time, post-Soviet high of

more than 10,000 wells, due largely to a ramp-up by Rosneft.
Embracing digital transformation, Gazprom Neft plans to invest
$19.2 billion upstream, with $13.9 billion intended for capital
Table 2. Forecast of 2019 offshore drilling worldwide.* investments. The spending will apply to development of gas
Region Wells forecast Wells drilled production centers on the Yamal Peninsula and eastern Russia,
or country 2019 2018 % diff. and several major gas pipeline projects. In addition, Gazprom
North America1 274 212 29.2 Neft, Mubadala Petroleum and the Russian Direct Investment
South America2 78 79 -1.3 Fund formed a JV to develop oil fields in Western Siberia.
Western Europe3 366 359 1.9
In an accord with OPEC, Russia will reduce oil output
Eastern Europe/FSU4 113 105 7.6
Africa5 243 223 9.0
228,000 bpd by the end of first-quarter 2019 and through June.
Middle East6 244 241 1.2 Output averaged 11.009 MMbopd last year. In 2018, Russian
Far East7 864 841 2.7 drilling increased 4.6%, and it should gain 1.5% during 2019.
South Pacific8 22 18 22.2
World Total 2,204 2,078 6.1 Other FSU countries. In 2018, among the remaining FSU
*Some countries are estimated. countries, BP discovered a giant gas field in the Caspian offshore
1Includes Canada, Cuba, Mexico, U.S. (Alaska/California/Gulf of Mexico) and Others.
2Includes Argentina, Brazil, Chile, Colombia, Ecuador, Peru, Trindad & Tobago,
Azerbaijan. In Kazakhstan, Chevron’s Future Growth Project–
Venezuela and Others. Wellhead Pressure Management Project should increase Ten-
3Includes Denmark, France, Germany, Italy, Netherlands, Norway, UK and Others.
4Includes Croatia, Poland, Romania and Others. Russia not available.
giz field’s production capacity. Lukoil and KazMunayGas have
5Includes Angola, Congo, Egypt, Gabon, Libya, Nigeria, South Africa, signed agreements on cooperation and financing of the Zhenis
Tunisia and Others.
6Includes Oman, Qatar, Saudi Arabia, Turkey, UAE-Abu Dhabi, UAE-Dubai
project in Kazakhstan’s sector of the Caspian.
and Others. Iran not available.
7Includes Brunei, China, India, Indonesia, Japan, Malaysia, Myanmar, AFRICA
Pakistan, Philippines, Thailand, Vietnam and Others.
8Includes Australia, East Timor, New Zealand and Papua New Guinea.
Africa is turning the corner. The number of rigs working
reached a three-year high in 2018. Close to $200 billion in capital
46 FEBRUARY 2019 / WorldOil.com
 INTERNATIONAL DRILLING & PRODUCTION

expenditures is anticipated through 2025. World Oil forecasts
drilling to increase 8.7%. Oil output averaged 8.052 MMbpd.
Angola. An independent regulator, the National Oil and Gas
Agency, has been formed to manage concessions. Additionally,
the National Gas Regulatory Framework was enacted, estab-
lishing policies for monetizing natural gas. World Oil expects an
8.8% gain in drilling. Although Angola’s production was down
6.5% in 2018, new supplies are going onstream. Last July, Total
started up the Kaombo project in Block 32, where an FPSO is
producing 115,000 bopd. A second FPSO is expected to start
up later this year.
production could hit 12.5 Bcm this year, but reducing drilling
times and alleviating service sector bottlenecks will be critical.
In 2018, regional drilling rose 12%. We forecast a 3% gain for
2019. Regional output averaged 6.572 MMbopd.
China. IOCs are projected to increase budgets. Gas will re-
main the major strategic focus, and domestic production
should rise 6%. The Sichuan basin will contribute one-third
Fig. 3. As the world’s fourth-largest oil producer, Iraq is building
its output still higher, as drilling will rise again in 2019. Image: Abu
Dhabi National Energy Company PJSC (TAQA).

Nigeria. Despite start-up of giant offshore Egina field last month,

the nation struggles with risks from sabotage, kidnapping and
crude theft. Accordingly, the country now plans to focus on off-
shore fields. State firm NNPC says about two-thirds of produc-
tion will come from deepwater deposits by 2022. Drilling should
decrease 4.0%. Oil output rose 2.0%, to 1.984 MMbpd.

Egypt is finding new ways to attract investment. In October,

Egypt said it plans a contract overhaul as part of a bigger strat-
egy to free up its industry. Under the new system, companies
would accept the cost of E&P in return for a share of output.
World Oil projects a 12.5% drilling increase.

MIDDLE EAST
Regional energy companies are expected to borrow more
in 2019 to finance expansions. During 2018, regional drilling
increased 1%. We forecast a slight decrease for 2019, but this
will still be a very strong year for the Middle East. Regional oil
production was up 1.2%, at 27.858 MMbpd.

Saudi Arabia last year granted Saudi Aramco a 40-year con-

cession to exploit hydrocarbon reserves as part of preparation
Moving Energy Forward
for a potential IPO. Saudi Arabian reserves total 268.5 billion,
up from the previous 266.3-Bbbl figure. Gas reserves were re-
vised upward to 325.1 Tcf from 307.9 Tcf. In 2019, we see a Ideal solutions for upstream, midstream and downstream
5.4% drilling increase, as heavy development work continues.
There is an increased emphasis on natural gas development. Oil As an expert manufacturer of downhole and surface
output was up 1.8%, at 10.312 MMbpd. pumps, we produce oilfield pump systems according
to the highest quality standards. The viscosity of your
UAE-Abu Dhabi. During ADIPEC, ADNOC agreed to many crude oil or its percentage of gas or sand makes no
partnerships in alignment with its 2030 Growth Strategy. Eni difference to the NETZSCH progressing cavity pumps.
and partners will invest at least $230 million to explore and as-
sess offshore blocks. In addition, ADNOC also announced a
$1.4-billion investment to upgrade and expand Bu Hasa field to
S!
650,000 bopd. Drilling should increase about 1% during 2019. VISIT U
e 2019
o Eu p
ro
StocExp terdam
Iraq surpassed Canada last year as the world’s fourth-biggest in Rot 019
producer, averaging 4.548 MMbopd, Fig. 2. In late 2018, March 2
26 28.
.– t h E4
Halliburton signed two contracts with Eni Iraq BV to provide oy, Boo
Hall Ah
integrated drilling services at Zubair oil field in southern Iraq. In
addition, DNO ASA reported that production at Peshkabir field
in Kurdistan has ramped up to 50,000 bopd. Drilling jumped
15.9% higher in 2018, and we forecast a 2.5% increase this year.

FAR EAST/SOUTH ASIA www.netzsch.com

Shale volumes are set to increase, as PetroChina works to
meet its 2020 target and Sinopec starts development. Shale
World Oil® / FEBRUARY 2019 47
INTERNATIONAL DRILLING & PRODUCTION

of 2019’s output growth. Shale will account for less than 10% SOUTH PACIFIC
of gas production. CNOOC has signed deals with nine firms After some rather fallow years, the region appears to be on the
to develop 64,000 km2 in the Pearl River basin, to boost out- upswing. Drilling should improve 3.0%, to 276 wells. Regional oil
put to 2 MMboed by 2025. Chinese drilling increased 4.9% production averaged 407,600 bopd during 2018, down 0.1%.
during 2018, and should rise 2.5% in 2019. Oil output was
3.674 MMbpd. Australia. Progress was made last year on several significant
Australian projects, including FID for Exxon’s West Barracouta
Indonesia. During first-quarter 2018, Indonesia’s Ministry of gas field in the Bass Strait. Senex Energy also announced FID
Energy and Mineral Resources launched a road show to re- for two natural gas projects in the Surat basin. Shell’s Prelude
cruit investors to bid on 26 onshore and offshore blocks, but FLNG is among seven export projects sanctioned during the
interest was sparse. Yet, the country has streamlined regula- last decade. We expect a 2.0% drilling increase this year.
tions. BP’s 4.4-Tcf Tangguh gas field in Bintuni Bay is targeted
to reach production of 7.6 MMt of LNG. Eni’s Merakas gas Papua New Guinea. A gas agreement should be finalized dur-
field has a gas-in-place estimate of 2 Tcf, for which the com- ing first-quarter 2019 for the Papua LNG Project. It will include
pany has fast-tracked its development plan to drill six subsea two LNG trains of 2.7 MTPA, each, and be developed in con-
wells. We forecast a 5.1% drilling increase for 2019. Oil pro- junction with existing PNG LNG project facilities. Total is set
duction fell 2.5%. to drill the Mailu-1 well for oil in 6,500 ft of water.
Table 3. World crude/condensate production by countries, 2018 and 2017*
Daily production Daily production
Region or (thousands of barrels) % Region or (thousands of barrels) %
country 2018 2017** Diff. country 2018 2017** Diff.
North America 17,312.8 15,358.1 12.7 Angola 1,546.3 1,653.0 -6.5
Canada1 4,500.0 3,968.7 13.4 Congo 333.6 254.0 31.3
Cuba 52.1 51.3 1.6 Egypt 619.8 614.7 0.8
Mexico 1,822.9 1,977.0 –7.8 Equatorial Guinea 175.4 188.3 –6.9
United States 10,927.2 9,350.4 16.9 Gabon 192.1 201.3 –4.6
Others 10.6 10.7 –0.9 Libya 1,005.0 896.1 12.2
South America 6,170.0 6,787.4 –9.1 Nigeria 1,983.8 1,945.4 2.0
Argentina 487.4 481.0 1.3 Sudan/South Sudan 215.0 252.6 –14.9
Bolivia 53.8 55.0 –2.2 Tunisia 39.6 38.7 2.3
Brazil 2,605.2 2,637.6 –1.2 Others 625.2 633.3 –1.3
Chile 2.2 2.0 10.0 Middle East 27,858.3 27,530.2 1.2
Colombia 858.0 853.0 0.6 Iran 4,498.5 4,468.3 0.7
Ecuador 524.1 531.0 –1.3 Iraq 4,547.7 4,461.7 1.9
Peru 133.8 134.3 –0.4 Kuwait 2,763.3 2,722.9 1.5
Trinidad & Tobago 66.5 71.8 –7.4 Neutral Zone 0.0 0.0 …
Venezuela 1,421.5 2,004.8 –29.1 Oman 980.2 975.2 0.5
Others 17.5 16.9 3.6 Qatar 1,466.3 1,503.5 –2.5
Western Europe 2,842.1 2,910.2 –2.3 Saudi Arabia 10,312.0 10,133.5 1.8
Austria 13.6 14.4 –5.6 Syria 23.6 14.1 67.4
Denmark 112.1 137.0 –18.2 Turkey 54.1 49.2 10.0
France 15.8 15.2 3.9 UAE - Abu Dhabi 2,861.0 2,856.8 0.1
Germany 41.3 43.8 –5.7 UAE - Dubai 257.0 253.9 1.2
Italy 90.9 83.1 9.4 Yemen 16.2 13.5 20.0
Netherlands 31.8 31.2 1.9 Others 78.4 77.6 1.0
Norway 1,517.0 1,617.3 –6.2 Far East/South Asia 6,572.4 6,688.3 –1.7
United Kingdom 1,013.7 963.1 5.3 Brunei 110.3 113.2 –2.6
Others 5.9 5.1 15.7 China 3,674.0 3,713.8 –1.1
Eastern Europe 14,171.7 13,931.2 1.7 India 713.3 729.6 –2.2
Albania 16.5 18.1 –8.8 Indonesia 781.3 801.3 –2.5
Bulgaria 1.2 1.2 0.0 Malaysia 683.3 678.2 0.8
Croatia 15.5 15.3 1.3 Myanmar 11.2 12.1 –7.4
Czech Republic 2.1 2.0 5.0 Pakistan 84.4 85.2 –0.9
Former Soviet Union 14,007.0 13,762.6 1.8 Philippines 12.5 15.1 –17.2
Russian Federation 11,008.5 10,891.1 1.1 Thailand 228.4 240.6 –5.1
FSU - Others 2,998.5 2,871.5 4.4 Viet Nam 247.1 271.5 –9.0
Hungary 18.0 16.6 8.4 Others 26.6 27.7 –4.0
Poland 21.3 20.3 4.9 South Pacific 407.6 408.0 –0.1
Romania 72.4 76.1 –4.9 Australia 302.7 286.5 5.7
Serbia 17.5 18.8 –6.9 East Timor 33.9 40.2 –15.7
Others 0.2 0.2 0.0 New Zealand 25.3 31.2 –18.9
Africa 8,051.5 8,013.1 0.5 Papua New Guinea 45.7 50.1 –8.8
Algeria 1,315.7 1,335.7 –1.5 World Total 83,386.4 81,626.5 2.2
*Some countries are estimated. None contain NGLs or refinery gains. **Revised 1Includes bitumen and synthetic oil output.
Sources: World Oil’s surveys of governments and companies, plus some third-party data.

48 FEBRUARY 2019 / WorldOil.com
 SPECIAL FOCUS: 2019 FORECAST – CANADIAN E&P
Canada expects a quiet, flat year for E&P activity
A year ago, things appeared to be looking
up for Canada’s oil patch, but that proved
unfounded. In early 2019, more uncertainty
and pessimism are in the air, and little on the
horizon provides hope for improvement.
ŝŝROBERT CURRAN, Contributing Editor, Calgary
Aside from the economic uncertainties still weighing down
activity—the recovery in oil prices did not extend to Alberta
for most of 2018 (Fig. 1)—the biggest issue facing producers
is on the political front. With elections looming in Alberta this
spring, and federally this fall, much is up for grabs as the differ-
ent parties jockey for position.
Pipeline chaos. At the heart of the chaos is the issue of pipe-
line development, which has proved to be divisive and polarizing,
with local politicians more than willing to abandon all reason or
thoughts of national interest in the hopes of being re-elected.
In British Columbia, the provincial government continues to
fight the Trans Mountain pipeline expansion, despite backing
other pipeline projects that suit its local needs, and refusing to
tackle the issue of dumping raw sewage into lakes, waterways
and the Pacific Ocean. In all of Canada, B.C. is the worst of-
fender in this category. In fact, a recent report suggests that the
province dumps over 34 million gal of untreated sewage into the
ocean daily. And the provincial capital, Victoria, is home to the
one of the largest coal exporting facilities in Canada.
The behavior from B.C. politicians has gotten so bad that
certain municipalities have banded together and are talking
about launching a class action lawsuit against oil and gas com-
panies for climate change. As patently ridiculous as that concept
is, and as hypocritical, the holier-than-thou sentiment seems to
be growing, further dividing Canada along regional lines.
In Quebec, the hypocrisy is even more startling. Since the con-
cept of equalization payments was established in Canada, prov-
inces are divided into two categories, based on their economic
performance: have, and have-not. The concept is to spread the
wealth evenly across all of the confederation, to ensure that all Ca-
nadians benefit equally from the country’s vast natural resources.
So, oil-rich Alberta has paid often, and handsomely, into the
system. Quebec, despite its frequent insistence that it is a sover-
eign state within Canada, has received more than $200 billion
in payments from the program. Despite this, the province has
staunchly opposed any proposed pipeline that would ship west-
ern oil to eastern refineries, so Canada, instead, regularly im-
ports oil from Saudi Arabia, Nigeria and other similar regimes,
Fig. 1. Alberta did not benefit from rising oil prices last year,
and the outlook for drilling this year is flat, unless a way is
found to get more oil and gas exported out of the country.
Image: Cenovus Energy.
which have little or no regard for environmental protection,
much less human rights, one of Prime Minister Justin Trudeau’s
most frequent talking points.
Alberta’s production cut. In Alberta, frustrated with con-
stant prevaricating from Trudeau, the government has inter-
vened in the market on several fronts. Aside from developing
a made-in-Alberta climate change plan (designed to achieve
the same results as federal requirements, but at a fraction of the
cost), Premier Rachel Notley also has announced plans to buy
railcars to increase market access, provided a $440-million loan
guarantee to Value Creation Inc. (to build a $2-billion upgrad-
ing facility east of Edmonton), and imposed production cuts
on almost 30 Alberta oil producers, in an effort to reduce the
massive discount Alberta oil was receiving on the open market.
(Canadian producers are still often selling their oil at a signifi-
cant discount between the Western Canada Select benchmark
price and West Texas Intermediate, due primarily to ongoing
market access constraints.)
The first cut, imposed in late 2018, but effective Jan. 1,
2019, reduced Alberta production by 325,000 bopd. Affected
producers were mixed in their response, with some claiming
that the market intervention would have potentially damaging
long-term effects on their operations and market dynamics.
Others supported the idea. But once the cuts were put into ef-
fect, certain producers, some of which formerly supported the
OPEC-style intervention, reversed their stance after some un-
anticipated consequences became apparent, like impacts to re-
gional operations. Ironically, one of the other issues curtailment
World Oil® / FEBRUARY 2019 49
2019 FORECAST – CANADIAN E&P
created was to make shipping by rail uneconomical, as the more
expensive rail shipments require a higher differential. Such is
the world of interventionist policy.
Provincial officials subsequently reduced the cuts by 75,000
bopd. The program was originally planned to run for all of
2019, but with a provincial election scheduled to occur this
spring, the long-term fate of the program is unknown. In the
short term, the markets responded almost immediately, and the
differential has closed to less than C$10 per barrel in January.
Vague federal policy. Meanwhile, on the federal front, the
Trudeau administration continues to send mixed messages on
its view of the oil and gas industry. Currently, the concern re-
sides with Bill C-69, which would replace the National Energy
Board (NEB) with a new entity, the Canadian Energy Regula-
tor, as well as shift much of the NEB’s power to a new Impact
Assessment Agency. Most parties that know the oil and gas in-
dustry have raised similar concerns about the proposed change,
including longer review times, less legal certainty about its
decisions (creating more appeal mechanisms), requiring Envi-
ronmental Impact Assessments for much smaller projects, and
increased red tape and process.
In short, the bill that is purported to streamline the current
system will do the opposite, making it almost impossible for the
newly minted agency to issue approvals on anything put before
it. Skeptics believe Trudeau’s true objective is to shut down Al-
berta’s oil sands, citing his government’s tanker ban on the West
Coast, while continuing to allow tankers to travel up the St.
Lawrence Seaway in eastern Canada.
With so much uncertainty, industry has responded by de-
laying or canceling projects, reducing spending, and limiting
its exposure to the current negative market conditions. As a
result, land sale revenues and drilling numbers are once again
trending downward.
One piece of positive news is the poor performance of the
Canadian dollar, which has dropped in value to 75 cents, U.S.,
well below the 80-cent mark it was at last year, at this time. The
low Canadian dollar benefits the export-driven oil and gas in-
dustry, which still ships substantial volumes of oil and gas south
to U.S. customers. But as is often the case, as oilpatch fortunes
rise, so does the dollar, which negates some of the benefits ac-
crued from improved pricing.
Optimism on the pipeline front also has dimmed consider-
ably over the past year. Keystone XL remains in limbo, pending
a Trump administration appeal of the November ruling from
Fig. 2. This chart of Canadian wells drilled, 2007-2019, shows
that drilling still has additional recovery to go through, before the
healthier days of 2010–2014 are replicated. Chart data: CAPP.
26,000
24,000
22,000
20,000 Other
18,000
16,000
14,000
12,000
10,000
8,000 Gas
6,000
4,000
2,000 Oil
0
’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17
50 FEBRUARY 2019 / WorldOil.com
U.S. District Judge Brian Morris that blocked a construction
permit for the 1,900-km (1,181-mi) pipeline.
And the Trans Mountain expansion is now the subject of a
reconsideration by Canada’s National Energy Board after the
Federal Court of Appeal overturned its approval last summer.
The court ordered the NEB to further examine the impact of
tanker traffic on the marine environment off the coast of B.C.,
and conduct additional consultation with indigenous groups.
The report is due on Feb. 22.
Drilling remained more or less flat in 2018, but the outlook for
the year ahead is significantly more bearish than it was a year
ago. According to Daily Oil Bulletin records, of the 6,939 wells
drilled last year, almost 76%, or 5,260, were estimated to be oil
wells, compared to about 74% of the total in 2017. Overall, drill-
ing dropped by just under 2%, from the 7,091 drilled in 2017.
Exploratory drilling decreased to 278 wells in 2017, or less than
4%, compared to 305 the year before.
In Alberta, drilling was basically flat in 2018, dropping 1%,
with 3,656 wells drilled, compared to 3,699 the year before. In
Saskatchewan, drilling was up 1%, with 2,557 wells drilled, ver-
sus 2,530 in 2017. In British Columbia, operators drilled 438
wells in 2018, down 29% from 614 wells in 2017. And in Mani-
toba, drilling rose almost 15%, to 276 wells in 2017, compared
to 240 the previous year.
For the year ahead, the Canadian Association of Oilwell
Drilling Contractors is predicting that drilling will remain flat,
with 6,962 wells drilled, and rig contractors delisting 10% of the
Canadian rig fleet. Meanwhile, the Petroleum Services Associa-
tion of Canada is far more bearish, calling for a total of 5,600
wells drilled, a decrease of more than 19%.
The Canadian Association of Petroleum Producers, like CA-
ODC, expects a flat year, with 6,410 wells predicted, vs. 6,416 in
2018. CAPP says that Canadian oil production jumped 13.4%
higher, to 4.5 MMbopd, from more than 79,000 active oil wells
across the country.
Land sales fell significantly in 2018, with industry doling
out C$527.1 million in Western Canada, down 34% from the
$793.3 million collected in 2017. The downward trend at such
a crucial time is a clear indicator of industry’s misgivings about
the year ahead. In sharp contrast is the record high of $5 billion
in 2008, when industry was truly booming.
In Alberta, spending reached $411.4 million, a drop of 26%
from last year’s total of $556.4 million. It was two years ago that
Alberta collected just $148.6 million, making 2016 the lowest
total recorded in Alberta in more than 20 years.
British Columbia and its anti-oil administration took the
biggest hit, collecting a meager $64.1 million in bonus bids,
down 63% from last year’s $173.3 million. B.C. posted its all-
time low in 2016, collecting just $15.2 million. The province
also recently announced there were no rights put up for bids in
its February auction.
Saskatchewan experienced a slight decline, to $50.7 million,
decreasing just over 19%.
Land inventories are one of the most consistent indicators
of future drilling activity; so this increase in land sale volumes is
a welcome portent that better times may indeed lie ahead.
’18E ’19F
MR. CURRAN is a Calgary-based freelance writer

PESA companies must remain
nimble in solving challenges
ŝŝLESLIE BEYER, President, Petroleum
Equipment & Services Association (PESA)
We have just left a transformational year
in the industry, where shifting commodity
prices and evolving drilling strategies have
demanded agile thinking and ingenuity—
especially in the oilfield services and equip-
ment sector. Technological innovation has
been on the rise, as PESA members spear-
head efforts to increase productivity and
efficiency across the supply chain.
While some market analysts remain
unsure if the downturn is truly behind us,
broad trends provide optimistic prospects
for 2019. Moody’s Investors Service sees
the weakness in the hydraulic fracturing
market as temporary, with gradual recov-
ery taking place in the second half of 2019.
This is good news for PESA members.
Indicators and trends. Strong do-
mestic production growth, combined
with market volatility abroad, has pushed
U.S. oil and gas markets toward net ex-
portation of natural gas, crude oil and pe-
troleum products, an exciting economic
prospect for the future. American influ-
ence over the industry should continue
to grow, with the Energy Information Ad-
ministration (EIA) predicting that U.S.
EDITORIAL ADVISORS’ PERSPECTIVE
crude production will exceed that of Rus-
sia and Saudi Arabia in 2019.
According to Deloitte, more than half of
industry executives expect to increase de-
velopment and exploration spend, rig de-
ployment and headcount in 2019. These
expanded operations will have significant
implications for our sector. Retaining tal-
ent, especially in high-impact, high-turn-
over regions like the Permian basin, will be
critical. PESA continues to offer multiple
opportunities for intra-sector collabora-
tion and development opportunities for
our members, to maintain and strengthen
the greatest oilfield assets: the men and
women who compose our workforce.
Permian basin. Challenges remain in
the Permian basin, from infrastructure to
labor shortages. Pipeline infrastructure
must improve, and it should do so later
in the year. An acute truck driver short-
age, excessive road traffic and increased
labor costs are also known issues. Many of
PESA’s member companies are commit-
ted to collaboration with operators in the
region, as well as local officials.
Permian activity is also driving mar-
ket dynamics in sand and water. Rapidly
growing demand for sand has fueled the
opening of at least five Permian sand
mines in 2018, with more expected in
2019. And the need for proper handling
and disposal of water in the Permian is
creating an opportunity for specialized
water companies to enter the market.
These issues provide openings for
our sector to step in and provide needed
expertise, and PESA member companies
are fully engaged in creating solutions to
this challenge.
Regulation. Our sector’s success is
also intrinsically linked to decisions made
in statehouses, capitols and economic fo-
rums worldwide. Policy outlooks for the
coming year are mixed, bringing both op-
portunities and challenges for our sector.
As we saw with the recently defeated
ballot measure in Colorado, our industry
may face additional challenges in some
states with significant operations, such as
New Mexico, Colorado and California.
With the new Democratic majority in
the House, our industry will likely see an
increase in congressional investigations
into hydraulic fracturing, Clean Air Act
enforcement, offshore leasing, crude oil
exports and LNG export permitting.
The new majority also has taken steps
to create a new Select Committee on
the Climate Crisis. PESA will continue
to ensure that our sector of the industry
and their ongoing efforts to protect the
environment are fairly represented in all
these issues.
On a global scale, international trade
policy will remain complex, as the impact
of the U.S.-China trade dispute continues
to increase. This activity has significant ef-
fects on our sector, along with the steel and
aluminum tariffs enacted last year. China
also has recently imposed a 10% tariff on
LNG, indicating a new willingness to tar-
get domestic upstream development. U.S.
sanctions against Iran will continue to play
a part in the Middle East and globally, as
the Trump administration granted waiv-
ers to eight large Iranian oil buyers in late
2018. If the exemptions are not renewed
this year, additional Iranian oil will come
off the market, impacting price. OPEC and
Russia also will have to consider regarding
further production cuts.
Our industry has reason to keep look-
ing up. This coming year provides an
opportunity to strategize, grow our busi-
nesses, and capture the tremendous op-
portunities that lie ahead.
LESLIE SHOCKLEY BEYER is President of the
Petroleum Equipment & Services Association
(PESA) in Houston. She leads strategic
and operational development of PESA’s
programs, and expansion and execution of
its mission in support of oilfield services and
equipment, serving as primary advocate
for key priorities. Career highlights include
15 years in Washington, D.C., serving in the
U.S. Senate, multiple presidential campaigns,
The White House, U.S. State Department
and U.S. Department of Housing and Urban
Development. Beyer also has extensive public
affairs experience and holds a BA degree in
Latin American Studies and Spanish from the
University of Texas at Austin.
World Oil® / FEBRUARY 2019 51
 See What the Bit Sees.
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RSS design aimed at a growing scope
of directional drilling demands
A novel rotary steerable
system addresses
maintenance, downhole
motors, and hole geometry
in a new light.
ŝŝJOHN CLEGG, Weatherford
Rotary steerable systems (RSS) are
typically based on technology developed
in the last century. Modern directional
drilling demands a very different ethos
and approach to the tool’s design. Today,
RSS are used in a much broader spectrum
of the market than was the case in previ-
ous decades. No longer a niche product,
rotary steerables now account for more
than half of the directional drilling mar-
ket, both in the U.S. and globally.
DESIGN CONSIDERATIONS
When Weatherford began developing
the Magnus RSS in 2016, it identified a
broad scope of key capabilities. The new
tool had to be capable of being deployed
anywhere in the world, which implied a
simple approach to repair and mainte-
nance without the need for specialized
facilities, test rigs or flow loops, allowing
tools to be repaired local to operations. If
the tools had to be shipped to a central lo-
cation for repair, this would significantly
impact utilization, itself a key driver for
cost-effectiveness in rotary steering. The
new tool would also have to be simple to
train people on, to accelerate learning in
more remote locations and also counter a
shortage of experience following the mass
industry layoffs since 2014.
The rotary steerable market has
changed in another way. In the early years
of rotary steering, tools were usually driv-
en directly from surface. Now, many rota-
ry steerable runs are below a positive dis-
placement downhole motor—so called
“motorized” applications. Any new tool
needs to be capable of operating below a
DIRECTIONAL DRILLING
motor and must be able to cope with not
Fig. 1. Weatherford’s Magnus RSS is
only the higher rotary speed but also the designed for a broad scope of modern
high torque outputs of new generations of directional demands.
increasingly powerful motors.
Perhaps more important, was the
wellbore quality and management of tor-
tuosity that would become paramount in
the coming years. Several existing rotary
steerables mimicked directional motor
drilling, in that they divided time between
steering (with a motor, think sliding) and
drilling with zero effective bias (with a mo-
tor, think rotating) to achieve an average
dogleg across a section. Although the aver-
age dogleg achieved this way looks accept-
able on a survey report, this process intro-
duces micro doglegs and sections of high
tortuosity. These, in turn, cause drilling
problems and, once the well is drilled, can
lead to significant problems with complet-
ing and producing the well. The tendency
toward drilling increasingly longer lateral
sections exacerbates this problem, mean-
ing that a tool for future decades must be
capable of drilling perfectly straight and
of drilling a perfectly smooth curve of any to the drill bit. Any non-rotating sleeve
curvature, up to the tool’s maximum capa- makes a tool more complex to assemble
bility, when called on to do so, Fig 1. and repair, more expensive to operate, less
These requirements were distilled into capable of torque transmission (the shaft
specifications that drove the development diameter is necessarily smaller) and less
of what became the Magnus RSS. The de- slick, with a smaller junk slot area, and
sign team was then challenged to deliver thus more prone to sticking.
a working tool and begin drilling tests
within a year of the project kick-off. Push-the-bit operation. For these rea-
The requirements mandated a very sons, point-the-bit operation was reject-
clear direction for the new RSS develop- ed, and a push-the-bit tool, where all parts
ment and the design’s associated technical on the outside of the tool rotate, was se-
features, Table 1. lected. Additionally, to reduce parts count
and make repair as simple as possible,
IMPLEMENTING THE CONCEPT drilling mud actuation was preferred over
To achieve being simple to repair and oil actuation for the steering mechanism.
use, and capable of repair at remote lo- During controlled field trials, the tool
cations at minimum cost, a minimalistic has proven simple to maintain, with key
approach to design was taken, using as wear and erosion parts replaced at the
few parts as possible in constructing the test site in just a few hours. All that was
tool. Many existing rotary steerable tools, available in the workshop used for these
including some so-called “push-the-bit” repairs was a break-out machine, a crane,
and almost all “point-the-bit” tools, use a and a tool chest. This allows the tool to
non-rotating sleeve, with a driveshaft run- be repaired close to the action, regard-
ning through the center to provide power less of where it is deployed, significantly
World Oil® / FEBRUARY 2019 53
DIRECTIONAL DRILLING
increasing utilization and asset availabil-
ity, and allowing for in-country repair or
even in-country manufacture.
The tool’s exterior uses three steering
pads, between 1 and 2 ft from the bit, to
selectively push the bit sideways, Fig. 2.
Any drill bit used with push-the-bit rotary
steerables can be utilized; there is no need
for a special bit. These pads, together with
a stabilizer about 11 ft from the bit, create
a three-point geometry that defines the
tool’s dogleg capability.
To address the requirement for infi-
nite resolution of steering bias, to drill a
smooth wellbore, and to allow the tool to
be “switched off” for operations where
steering bias is undesirable (for example,
drilling out of casing), each of these steer-
ing pads is independently controlled. To
provide a constant bias in one direction—
for example, to build or turn the well—the
pads are extended individually, each at the
same orientation and once per revolution.
To drill with no bias, the pads are starved
of drilling mud and do not extend. By com-
bining zero and maximum bias on a short
duty cycle, anything between zero and
maximum bias can be achieved, and with
Fig. 2. Fully independent control of three
steering pads near the bit selectively
pushes the bit sideways.
Table 1. Magnus RSS requirements and features 
Requirement
Simple, reliable, cost-effective
Easy to use, train, repair
Repair anywhere
Avoid stuck pipe
Ability to switch off steering
Drill straight, not spiral or corkscrew
Increasingly high PDM torque and speed
54 FEBRUARY 2019 / WorldOil.com
effectively infinite potential resolution. In
addition to providing optimal directional
control, having three independently con-
trolled pads also creates some redundancy.
If one of the pad assemblies were to fail,
the other two would be unaffected, and the
tool could continue drilling a trajectory in
most cases—in the same way that an air-
liner can complete its journey in the unfor-
tunate event that one engine fails.
The steering pads are extended by
drilling mud under pressure. The pressure
comes from a differential between the
bore of the tool and the annulus, and mud
is ported to the steering pads by three ro-
tary vales, one for each pad. To extend the
pad at a given toolface and steer the well,
the valves are held non-rotating in space as
the tool rotates around them. Thus, they
must be able to rotate backwards at the
same speed that the bit rotates forwards,
up to the specified maximum of 300 rpm
and in the presence of instantaneous
variations of rotary speed, due to stick-
slip. This is achieved by a state-of-the-art
control system that includes a rate gyro to
measure instantaneous bit rotary speed.
Commands, including toolface and
effective bias percentage, and “off ” mode
or inclination hold, where the tool will
automatically seek out and/or hold a
given inclination, can be downlinked
from the surface, as with existing rotary
steerable tools, by sending pressure puls-
es in the mud flowing into the well. The
RSS tool is capable of interfacing with
existing MWD and LWD tools to add
additional measurement capability and
to provide a conduit for information to
the surface.
Feature
Mud-actuated, push-the-bit, no driveshaft
or non-rotating sleeve
Three independent actuators
Simple design, simple philosophy
No special bit requirements
Must be repairable with basic equipment
at a remote repair and maintenance facility.
No special assembly or test fixtures
or equipment
Minimal stabilization, and minimum
20% junk slot area
Three independent actuators allow
all three control valves to be closed
simultaneously
“Off” mode and “steering” modes can
be combined to give any dogleg, including zero
Enables “Autopilot” function to
control inclination
No driveshaft
Works up to 300-rpm average bit speed
TESTING AND FIELD VALIDATION
Nine months of controlled field-test-
ing in 8-in. hole followed development
of the 6.75-in. version of the Magnus
tool. In these privately funded tests, the
development team was able to shake out
bugs and introduce simple improvements
in mechanical design and control, while
demonstrating build, drop and turn of the
tool at doglegs up to 12°/100 ft and rotary
speeds up to 260 rpm. Also demonstrated
were the ability to kick off from a cement
plug and drill vertical sections, tangents
and laterals in inclination hold mode. To
conclude testing of the 6.75-in. tool at
the controlled field test facility, a com-
plete vertical, curve and lateral well were
drilled, including a turn section in the lat-
eral. The lateral was drilled in a single run
with the tool in motorized mode, below
a straight hole, positive displacement mo-
tor. Subsequently, a 9.5-in. version drilled
a 12¼-in. well in a single run to include
a vertical section, build at 6°/100 ft, and
tangent hold.
Since controlled field tests were com-
pleted, the Magnus tool has drilled over
200,000 ft in commercial wells in the U.S.,
Latin America and the Middle East.
Texas results. More than half of this
footage has been achieved in the Permian
basin, drilling multiple formations in the
Midland and Delaware basins, including
Wolfcamp A, Wolfcamp B, Wolfcamp E,
Bone Springs, Spraberry and Woodford.
Performance has proven consistently
economical when compared with motor
drilling, increasing ROP over 400% in
some applications. The RSS also elimi-
nated expensive BHA agitation tools and
improved hole quality and tripping time.
In the Permian, the tool has repeatedly
reached TD in long, 2-mi. laterals.
Another quarter of the footage drilled
to date has been in the Eagle Ford shale of
South Texas, where the new tool has re-
placed existing point-the-bit rotary steer-
able systems while improving penetration
rates over both motor drilling and point-
the-bit RSS by at least 50%. Bearing out
the results of the market research that
drove tool specifications, over 85% of
runs in the U.S. have been motorized ap-
plications, where the bit rotary speed was
200 rpm or more.
The Magnus RSS also has seen suc-
cessful service in multiple Latin American
applications, where it has demonstrated
fine directional control, in addition to
 DIRECTIONAL DRILLING

reliability and cost-effectiveness. Latin
America saw the first application of the
RSS on a hole enlargement-while-drilling
(HEWD) application. This re-entry ap-
plication required setting a whipstock in
the 9 ⅝-in. casing, milling a window and
then exiting the window to drill the 8
½-in. intermediate section. It was neces-
sary to enlarge the hole, to provide clear-
ance required for running 7-in. casing.
Here, the RSS was used with a Weather-
ford RipTide drilling reamer and HEL
LWD system with resistivity measure-
ments. The well was drilled successfully
and steered in 8½-in. hole while simulta-
neously enlarging it to 9⅞-in.
The first offshore run with the new RSS
also took place in Latin America. Here, the
requirement was to drill a production well,
using a 6 ¾-in. rotary steerable to drill 8
½-in. hole, with HEL LWD, while displac-
ing an existing rotary steerable and drilling
the well with fewer stabilizers in the BHA.
Multiple key performance indicators
were set and achieved for this milestone
application, which was drilled in a single
run. Requirements for directional control
were strict, and required maintaining the
well trajectory with maximum dogleg be-
low 3.8°/100 ft to minimize borehole tor-
tuosity and maintain good wellbore quali-
ty. The tool’s proportional control system
was able to meet this requirement, with
maximum recorded dogleg of 3.7°/100 ft.
A requirement of a maximum 16.4
ft distance to plan at total depth also was
achieved. Maximum distance to plan at any
point was 10.7 ft. ROP benchmarks, set us-
ing existing rotary steerables, were exceed-
ed: the average on-bottom ROP was stipu-
lated to be not less than 30 fph, and the tool
achieved 55 fph. The time programmed to
drill the 8½-in. section was 429 operating
hours, and it was drilled in 133 operating
hours, an improvement of 222% and a sav-
ing of more than 12 days or $1.6 million
resulting from more efficient drilling.
In its first Middle East application, the
Magnus tool drilled a successful 8½-in.
curve section, kicking off from vertical
and drilling to landing point in a single
run through challenging interbedded
limestone and anhydrite formations.
Severe levels of stick-slip had to be over-
come through almost all the section. In
line with a key customer requirement, the
tool was retrieved with minimal pumping
or back-reaming. The RSS is currently de-
ployed in three Middle East countries.
CONCLUSION
In the past two years, the Magnus RSS
has been developed, tested and brought
to market. It builds on decades of indus-
try experience using RSS and the pro-
gression of the technology from niche to
mainstream. To fulfill the needs of a post-
2014 directional drilling industry, the tool
combines the necessary directional steer-
ing functionality with wellbore quality,
drilling and tripping efficiency, and asset
availability. These capabilities have been
proven in applications in the U.S., Latin
America and the Middle East.
JOHN CLEGG is director of
research, development, and
engineering for drilling and
evaluation at Weatherford. He
manages technologies across
the company’s drilling services,
managed pressure drilling, and
wireline product lines. Mr. Clegg’s primary areas
of expertise include rotary steerable systems,
drill bits, drilling motors, measurement-while-
drilling, logging-while-drilling, managed
pressure drilling, and subsea controls.

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with Jenna Robertson, Steve Baumgartner, Yusra Ahmad and Moderator, Joe D. Woods

Replacing Bridge Plugs Can Lead to Cost Savings and Increased Moderator:
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Continued Enhancement of Fracturing Shale Formation Stimulation

Results Using Silicon Dioxide Nanoparticle Dispersions
PRESENTER: Yusra Ahmad, Sr. Petroleum Engineer, Nissan Chemical America Corporation
 Expand Your Horizons with World Oil
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JANUARY 2019 / DEFINING CONVENTIONAL, SHALE AND OFFSHORE TECHNOLOGY FOR OIL AND GAS / WorldOil.com
JANUARY 2019

HYDRAULIC FRACTURING
Tunable friction reducer improves
Eagle Ford shale completions

WATER MANAGEMENT
HYDRAULIC FRACTURING

No single approach to treatment

is always the right answer

SHALETECH: SCOOP/STACK
Plays should “take off” in 2019

SPECIAL INTERVIEW
BHGE’s Simonelli sees busy year ahead

GEORGE H. W. BUSH
RETROSPECTIVE
An exemplary E&P career
GULF ENERGY INFORMATION

ConocoPhillips’ Greg Leveille sees rapid trajectory
of technical advancement continuing
In an exclusive interview with World Oil Editor-in-Chief Kurt Abraham,
ConocoPhillips Chief Technology Officer Greg Leveille discusses the technical issues facing
global E&P, particularly as relates to the many U.S. unconventional plays
ConocoPhillips Chief Technology Officer
Gregory P. Leveille
World Oil (WO): What do you con-
sider your company’s strongest ar-
eas of technical expertise?
Greg Leveille (G.L.): If I had to pick
one, I’d call out our unconventional reser-
voir technology capabilities. Over the last
10 years, we’ve grown our unconventional
portfolio from very, very small volumes
to 8 Bboe, which is half of ConocoPhil-
lips’ resource base. That is at under $50/
boe, cost of supply. And we’ve been able
to develop a suite of technologies around
completion design, optimizing drilling,
and using digital and data analytics capa-
bilities to improve production uptimes.
So, there is a suite of capabilities that has
made our unconventionals industry-lead-
ing and certainly one of the best-perform-
ing parts of our portfolio.
WO: Are there areas of technical ca-
pability, in which you would like to
see the company do better?
G.L.: I think where a lot of our focus
has turned in the last two years is to the
INTERVIEW: GREG LEVEILLE
digital and data analytics space. Frankly,
it is a second revolution happening in the
oil and gas industry. We have put an enor-
mous amount of effort into upping our ca-
pabilities. But if you look at where we are
today, and how much further we have to
go, there’s quite a big gap there. So, I think
finding ways to transform the way our
subject-matter experts work—our petro-
leum engineers and geoscientists—we’re
looking at this as a complete change in the
way work gets done, and not so much as a
suite of specialty skills.
WO: What are some of the greatest
technical challenges that the indus-
try faces in onshore projects, either
for shale or conventional fields?
G.L.: If you look at what’s happening
onshore, the industry continues to increase
productive capacity—the U.S. is producing
hydrocarbons at a phenomenal rate, which
is putting loads of pressure on the industry
to continue to reduce cost of supply. So,
our primary focus is finding ways to con-
tinue to reduce costs and/or increase pro-
duction per well. We’ve had loads of suc-
cesses, but it’s one of those places, where
you really can’t stop being vigilant and stop
trying to make improvements, even if pric-
es rise up to $60 or $70/bbl. Another area
is probably things like water management
and methane emissions—basically pieces
of business that don’t necessarily get as
much attention as the production of a mol-
ecule of gas or a barrel of oil, but which are
integral to being able to operate onshore in
the long run.
WO: How are IP rates faring? What
is the average IP?
G.L.: Within our unconventional
reservoirs, we’ve increased our produc-
tive capacity quite a bit. IPs are up many,
many tens of percent from a few years
back. That’s a combination of changes
in completion design, changes in lateral
length, the way we manage the wells, etc.
So, we’re finding ways to increase not just
the initial production but also the total
recovery from the reservoir. The statistic
we’re most proud of is the recovery fac-
tors that we’re seeing in the Eagle Ford,
which are now at 20% or greater. That’s
been a tremendous effort, and one that’s
paid enormous dividends.
WO: Methane emissions seem to
have come to the fore lately among
industry issues. Why is that?
G.L.: I think there’s more and more
attention being paid to sustainability of
the industry. ConocoPhillips has put a
lot of effort into sustainability. We talk
with Wall Street quite a bit about our
sustainability efforts, Fig. 1. One of the
things we recognize is that we have to
run the business in a very sustainable
way, in order to be able to continue to
operate the way we do, across the United
States. So, finding ways to reduce meth-
ane emissions through detection and/or
using different technologies has been a
big focus for us.
WO: Shifting focus, what are the
greatest technical challenges that
you see in moving forward with off-
shore projects, particularly in deep
water?
G.L.: If we look at the offshore, prob-
ably the biggest challenge is the length of
time required to go from conceiving an
idea to actually testing it and then deploy-
ing it. It’s not atypical for offshore proj-
ects, particularly in deep water, to have
timeframes—between conceptualization
of the project to actual first oil—of a de-
cade or more. When you’re competing
against a class of assets like the unconven-
tionals, where literally within three to six
months, you can be out field-testing new
World Oil® / FEBRUARY 2019 57
INTERVIEW: GREG LEVEILLE
ideas and new technologies, and within
12 to 18 months deploying at scale, it’s
very hard to match the pace of innovation
that’s occurring in the unconventionals.
So, really, in the offshore space, the chal-
lenge for industry, or the opportunity, is
to find ways to dramatically improve the
pace at which innovations can be tested
and ultimately deployed, if successful.
WO: The Permian basin seems to
be the gift that keeps on giving.
Assuming reasonable oil prices, do
you see the region slowing down, at
all, during the next several years?
G.L.: When we look at the Permian
(Fig. 2), and most of the unconventional
plays, they have a really long life ahead of
them. The resource volumes are sufficient
in all of the large unconventional plays in
Fig. 1. ConocoPhillips has spent
considerable time talking with Wall Street
about its sustainability efforts. Last fall,
the company was named to the Dow Jones
Sustainability Index (DJSI) for the 12th
consecutive year. Image: ConocoPhillips.
Fig. 2. The Permian basin appears to have a very long development life ahead of it,
yet. Image: ConocoPhillips.
58 FEBRUARY 2019 / WorldOil.com
the U.S. for multiple decades of develop-
ment, with the Permian obviously being
the largest liquids-rich basin in the coun-
try. We’re talking out to 2050, probably, as
far as development opportunities. Things
that will slow it down temporarily are
items like infrastructure constraints and
being able to manage water in the basin.
We think that industry will sort most of
these things out. We certainly have found
ways to do that in the Eagle Ford, the Bak-
ken and some of the more mature areas.
WO: Your own chart from a presen-
tation last year shows that “fractur-
ing intensity” grew from 3.5 mil-
lion pounds of proppant and 70
perf clusters in 2012, to 15.5 million
pounds of proppant and 300 perf
clusters in 2017. Are we getting
close to reasonable limits per well
for these items, or is there still more
room for growth?
G.L.: There are probably physical lim-
its on the amount of proppant that will be
pumped. Basically, the proppant is there
to serve the purpose of keeping the frac-
tures open. And I think what industry has
been focused on, to date, is essentially a
brute-force approach to placing proppant
in the reservoir, which is basically more
proppant, more perf clusters. What we’re
looking at now, is trying to find ways to
effectively prop more of the fractures we
create. We’ve run experiments, where
we’ve hydraulically fractured a reservoir,
drilled through it, taken core, taken logs
and pressure measurements. And what
we find is that we create far more frac-
tures than are expected from the models
that the industry uses to predict fracture
geometries. But very few of the fractures
created are actually propped. And so, it’s
going to be companies that can find ways
to better distribute the proppant that are
going to be successful in further increas-
ing recovery factors, further increasing
production rates. We know that we are
going to be one of those companies that
makes those types of advancements.
WO: Another item that you’ve talk-
ed about is the incredible growth in
lateral lengths. In your company’s
own Delaware basin drilling pro-
gram, in just two years, from 2015
to 2017, you went from 50% of wells
having laterals longer than 7,500 ft
to 95% of wells having laterals of
that length or longer. Accordingly,
how much more growth in lateral
lengths could we still see?
G.L.: If you look at extending lateral
lengths, it’s one of the most effective ways
to improve a well’s cost of supply. Very
little increase in drilling cost, and you’re
able to increase the output by many tens
of percent. So, if you’re doubling the well
length, you can usually come close to dou-
bling the output. We expect this trend to
continue, and, frankly, we’re working with
companies on tool designs, to try to allow
accessing of longer laterals. It really isn’t
the drilling of the long lateral, which is the
constraint, it’s the completion. So, most of
the focus is on the completion tools and
the way you would go about completing a
well, which is longer than 2 mi. We think
the industry will advance in that space,
and it will continue to yield benefits. The
other constraint is just the land arrange-
ments, and you’re seeing companies try to
trade land, so that they have continuous
acreage positions that allow for these lon-
ger laterals.
WO: Water management has be-
come a leading issue in uncon-
ventional plays, particularly in the
Permian. How important is this issue
to your company’s operations, and
what are some examples of technol-
ogy that you may be employing to
manage water?
G.L.: It’s absolutely crucial. I look at
water management, and it’s one of those
things that you need to do well, to enable
efficient exploration and production. If
you think about the technologies being
used, it varies by play. In certain areas,
water is both scarce and you produce a
 INTERVIEW: GREG LEVEILLE

lot of it, when you are in the development

phase. So, the Permian basin would be an Fig. 3. In some plays, the situation is more about just managing the sourcing of
water in an effective way that minimizes cost, as well as impact on the environment.
example, where there is a relatively small One example is the Montney shale of Western Canada, where ConocoPhillips uses
amount of resource available for hydrau- closed-loop water recycling infrastructure to sustainably solve the question of water
sourcing. Image: ConocoPhillips.
lic fracturing, and a large amount of water
production associated with oil and gas
coming out of the ground. In those types
of situations, you’re looking at almost a
complete, full-cycle management, where
you’re recycling the water, and cleaning it
up enough to be re-used as hydraulic frac-
turing fluid. So, you have a very sophisti-
cated water management approach. Some
other areas may be looking at some com-
ponent of that system. There are a num-
ber of plays, where you don’t produce
much water after hydraulic fracturing is
completed. It’s more about just managing
the sourcing of water in an effective way
that minimizes cost, as well as the impact
on the environment, Fig. 3.

WO: You’ve mentioned that “further

completions optimization” is com-
ing—what might that entail?
G.L.: It ties back to what I said about
placement of the proppant. We think that
the key going forward is placing the prop-
pant in the fractures more efficiently. So,
you have a higher percentage of the frac-
tures created, which are actually propped.
As you do that, you’re going to be able to
get to higher and higher recovery factors,
and better IPs. It may not be more prop-
pant per well, but finding ways to do the
completion, such that you’re increasing
the overall recovery factor. We’re working
on that in a number of different places.
WO: You also expect to achieve ar-
tificial lift improvements and great-
er production uptime—how might
these goals be accomplished?
G.L.: The oil field is experiencing
a digital and data analytics revolution.
Looking at artificial lift, much of the op-
timization has been manually driven. The
well would get attention, only when a
multi-skilled operator was on site. We’re
going to a world, where there will be com-
puter technology deployed at the wellsite
that will allow 24/7 optimization of sys-
tems. And doing it in a way beyond what
the current control systems are capable of.
We’re finding that Silicon Valley has rec-
ognized that there’s a big opportunity in
the industrial space, and more and more
of their attention is being turned toward
it, rather than just the consumer applica-
tions. And as they do that, they recognize
that oil-and-gas is one of the biggest in-
dustries in the U.S. We’re partnering with
a number of companies, to find ways to
optimize production, and automate drill-
ing and optimize completions.
WO: If you’re going to have more
technology at the wellsite, how are
you going to power it?
G.L.: A lot of the technology is com-
pact enough, that the solar capture of en-
ergy stored in batteries is going to give us
plenty of power. You’re going to have es-
sentially remote intelligence that will be
able to call home, but it won’t need to call
home necessarily to get instructions as to
what to do. It will send information about
what it’s been doing, and every now and
then, you can update its intelligence, if you
will, over the wire. So, I think there’s going
to be a lot of remote power generation.
WO: How important is the use of
digital technology to your field op-
erations?
G.L.: One of the most interesting as-
pects is the people side of it. What we’re
actually trying to do is take all 11,000 of
our employees and upskill them in digi-
tal and data analytics. Go back five years,
and a petroleum engineer or data scien-
tist wouldn’t have had much, if any, train-
ing in the use of sophisticated data ana-
lytics. Today, we’ve trained over 4,000 of
our 11,000 employees, and we are on a
path toward getting all 11,000 upskilled
to the level at which they need to be, to
do their particular jobs. We think it’s go-
ing to make them far more productive.
We’re going to be growing our produc-
tion, so we expect to be able to do that
without growing the number of people,
because each person will be more pro-
ductive, using the digital tools we’ll pro-
vide them with.
WO: Any final thoughts or com-
ments?
G.L.: It’s a very exciting time in the in-
dustry. If you think about the pace and scale
of change, it’s been enormous over the last
15 years. We’ve basically taken an industry
in the United States, which was dying, and
turned it into the powerhouse of the entire
global industry. So, I think there’s more to
be done with technology, and it’s really just
a matter of getting enough focus on it, to
keep this trajectory going.
World Oil® / FEBRUARY 2019 59
 Shale Energy Technology Conference
MARCELLUS-UTICA SHALES
FEEDING A BUDDING
PETROCHEMICAL COLOSSUS
ŝŝJIM REDDEN, Contributing Editor
A cooperative thermometer has lost favor as the
primary gauge for measuring the economic winds
of the gas-rich Appalachian basin.
To point, the debuts of long-awaited pipeline
networks, in-basin power and petrochemical de-
mand, and regional exportation of liquefied natural
gas (LNG) and natural gas liquids (NGLs) combine
to provide seasonally independent markets that
overshadow the yearly price bumps that accompany
falling temperatures and rising consumption.
The chief of Cabot Oil & Gas Corp., for one,
counts some 26 midstream and downstream proj-
ects in various stages of development within the
Pennsylvania and Ohio swaths of the tri-state Mar-
cellus and Utica shale plays, which feature some of
the nation’s longest lateral wells. “If you look at all
of those 26 projects, and you get them up to speed
and commission them along the levels and size that
are forecast up there, that’s greater than 3.5 Bcf of
in-basin demand that I don’t think a lot of people
talk about,” says President and CEO Dan Dinges.
60 FEBRUARY 2019 / WorldOil.com
West Virginia rounds out the triumvirate that
has transformed this once coal-dominant basin
into one of the world’s premier gas production
provinces. Taking in both the dry and wet gas win-
dows of the Marcellus and the Ohio-centric Utica,
which is often linked with the underlying Point
Pleasant shale, the Appalachian basin is expect-
ed to deliver a record 31.569 Bcfgd in February
(Fig. 1), according to the U.S. Energy Information
Administration (EIA). Moreover, once-widening
price differentials are largely in the rear-view mir-
ror, thanks to the basin’s neoteric midstream build-
up, highlighted by the Oct. 6 start-up of the Atlan-
tic Sunrise interstate pipeline network.
Marcellus-Utica drilling activity remained
steady throughout 2018, a pace that is continuing
into 2019, with an average 78 active rigs at work
in January, compared to 75 at the beginning of last
year, according to Baker Hughes, a GE Company.
All but 18 of the rigs at work last month targeted
the Marcellus, primarily in Pennsylvania, which
Independent of the season, combined
Marcellus-Utica drilling activity maintained
a consistent pace in 2018, averaging around
76 rigs throughout the year. Image: CNX
Resources Corp.

World Oil® / FEBRUARY 2019 61

SHALETECH / MARCELLUS-UTICA SHALES
also cradles the emerging deep Utica dry gas play.
With a backlog of 55 drilled-but-uncompleted (DUC) wells
at year’s end, Gulfport Energy Corp. is the outlier, putting the
kibosh on further drilling within its 215,000-net-acre Utica-fo-
cused asset. “When you have 55 DUCs in inventory, to continue
to drill and add to that inventory for us in this quarter just really
didn’t make sense,” interim CEO Donnie Moore said on Nov. 2.
Before suspending drilling in the fourth quarter, Gulfport
operated two rigs and spudded 23 gross wells, with average
laterals of 10,350 ft. Leaving open the possibility of bringing
back one or two rigs early this year, Gulfport produced 294,741
MMcfe over the first three quarters, up from 236,383 MMcfe in
the like 2017 period.
POTENTIAL PETROCHEMICAL HUB
Meanwhile, a late-arriving, yet brutal, winter heating season
pushed U.S. gas price futures to a two-month high of $3.5910/
MMBtu on the New York Mercantile Exchange (NYMEX).
However, it is the rich concentration of higher-priced NGL en-
cased within much of the basin that drives a good portion of
the drilling activity and brightens the regional supply-demand
equation.
Since late last year, Cabot, alone, is flowing nearly 1.05 Bcfd
of Marcellus gas “with significantly better pricing realizations”
to new markets, which include two new gas-fired power plants
in Pennsylvania. The Atlantic Sunrise connection to Maryland’s
Cove Point LNG export facility (Fig. 2) also provides Cabot a
clear path to capitalize on a 20-year, 350-MMcfd supply con-
tract with Pacific Summit Energy.
Fig. 1. January-to-February Appalachia gas production
is expected to increase 232 MMcfd. Source: U.S. Energy Information
Administration (EIA).
36,000
30,000 Gas +232 MMcfgd,
Appalachia Region natural
month-over-month
gas production, MMcfgd
24,000
18,000
12,000
6,000
0 quisition of Rice Energy Inc. in late 2017 would set off a wave
2010 2011 2012 2013 2014
Year
Fig. 2. With its first shipment in March, the Cove Point terminal
in Lusby, Md., became the second operational LNG export facility
in the U.S. Image: Dominion Energy Cove Point.
62 FEBRUARY 2019 / WorldOil.com
Cabot estimated that production in fourth-quarter 2018 will
range from 2,225 to 2,275 MMcfed, up from 1,884 MMcfed in
the first three months. The company averaged three rigs and
two completion crews last year, with an estimated 80 net wells
put into production within the tightly concentrated 172,000 net
acres it holds, primarily in prolific Susquehanna County, Pa.
Further bolstering the regional outlook, the U.S. Depart-
ment of Energy (DOE) in December said it expected Appala-
chian NGL production, particularly ethane, to increase 20-fold
between 2013 and 2025, a projection that the agency used to
justify a proposed federal ethane storage and distribution hub.
Pointing specifically to the basin’s abundant ethane concentra-
tion, the results of a commissioned IHS-Markit study released
last March concluded that any petrochemical project in Appa-
lachia would be “four times more profitable” than similar ven-
tures along the U.S. Gulf Cost, where the key feedstock is not
readily available in sufficient volumes.
In November, pure play Antero Resources Corp. delivered
an initial shipment of 337,000 bbl of ethane as part of an 11,500-
bpd 10-year export agreement with major Austrian polyethylene
and polypropylene producer Borealis AG. The first load was de-
livered through the Mariner East 1 pipeline to the Marcus Hook,
Pa., terminal for export to a Borealis steam cracker in Sweden.
The December start-up of the Mariner East 2 also cleared the
way for Antero to export up to 50,000 bpd of propane and butane.
Antero plans to average five rigs and four completion crews
this year and complete between 115 to 125 wells, with average
lateral lengths of 10,200 ft, and another 120 to 130 wells with
average 11,900-ft reaches. Production from Antero’s 621,000
net acres in 2019 is expected to jump up to 20%, year-over-year,
to a projected high of 3,250 MMcfed. In the third quarter, An-
tero put a quarterly record 73 wells online, including an eight-
well Marcellus pad with 60-day average production of more
than 23 MMcfed/well, including 25% ethane recovery.
The opening of new markets, likewise, has some players
jockeying for position, though not on the scale seen in other
shale basins.
ASSETS CHANGE HANDS
It was generally believed that EQT Corp.’s $6.7-billion ac-
2015 2016 2017 2018 2019 of regional consolidations, especially as operators look to block
up acreage to accommodate ever-increasing laterals. While deals
of that magnitude have yet to materialize, 2018 saw a number of
smaller transactions unfold.
Among the “not-so-small” deals, Chesapeake Energy Corp.
in late October finalized the sale of its entire Ohio Utica hold-
ings to Encino Acquisition Partners for $2 billion. The deal
gives Encino 900,000 net acres, 900 producing wells and some
119,00 boed of production.
A Utica early mover, Chesapeake retains approximately
547,000 net Marcellus acres in Pennsylvania, which produced
135,000 boed in the third quarter. Chesapeake, which tenta-
tively plans to add a third rig this year, expects the Marcellus
asset to deliver $350 million in free cash flow in 2018.
Deals completed in 2018 also included the all-stock merger
of Pennsylvania’s Eclipse Resources Corp and Irving, Texas-
based Blue Ridge Mountain Resources, Inc., which was to
close in the fourth quarter. The combined company plans to
run a two to three-rig development program this year across its

227,000 net effective undeveloped acres. In late 2017, Eclipse
drilled a Utica well in southeastern Ohio with a then-record
20,800-ft lateral reach.
Eclipse spudded nine gross operated Utica wells, and con-
nected 13 wells to production pre-closing, including the first
Utica well in the Flat Castle development in northern Pennsyl-
vania. Completed with a lateral reach of around 13,800 ft, the
well flowed at a better-than expected 35-day rate of 32 MMcfgd.
Eclipse expected post-closing fourth-quarter production to
reach 500-560 Mcfed, including an estimated 187-to-212-
MMcfed contribution from Blue Ridge.
An approximately $1.5-billion buying spree last year netted
privately held Ascent Resources-Utica, LLC an additional
113,400 net acres, which included 93 operated wells, with pro-
duction of approximately 216 MMcfed. Sellers included joint
venture partners Hess Corp. and CNX Resources Corp, which
received $400 million for the jointly operated 39,000 net Utica
acres and some 14,000 boed of production in eastern Ohio.
Just over a year removed from splitting with its former coal
producer parent, CNX exited 2018 with projected Marcellus
and Utica production of between 497.5 and 507.5 Bcfe. Fol-
lowing accelerated completion activity late in the year, 35 Mar-
cellus-Utica wells were put online in the third quarter, setting
the stage for a significant production ramp over the final three
months of 2018. The third-quarter production mix included
a 17% year-over year increase in Marcellus production to 70.6
Bcfe, while the deep dry gas play in Pennsylvania contributed to
the 67% hike in Utica production to 33.6 Bcfe.
Averaging four rigs and three frac crews in the third quarter,
CNX drilled 23 wells, including 15 Marcellus wells in Greene
County, Pa., and completed 27 Marcellus and Utica wells. CNX
expected to wrap up 2018 with the drilling of 64 Marcellus and
15 Utica wells, including stacked-pay prospects on two multi-
well Marcellus-Utica pads in southwestern Pennsylvania.
An independent operator since spinning off from CON-
SOL Energy Inc. on Nov. 29, 2017, CNX controls some 1 mil-
lion net acres.
On Aug. 30, privately held PennEnergy Resources, LLC
paid $600.5 million to acquire Rex Energy Corp, then under
bankruptcy protection, expanding its property base to 203,500
gross acres, primarily in southwestern Pennsylvania. The com-
bined assets give PennEnergy net production of 450 MMcfed.
PUSHING THE ENVELOPE
Meanwhile, Pittsburgh’s EQT has been forced to dial back ef-
forts to quickly, and literally, extend its reach across an estimated
1.2-million-net-acre leasehold. With much of the largely contig-
uous properties concentrated in a 680,000-net-acre Marcellus
core, EQT in 2018 went full-bore in pushing lateral lengths well
beyond the 14,000-to-15,000-ft “sweet spot,” a move the com-
pany now concedes was premature.
“With the Rice acquisition, we found ourselves with a land
position that gave us the opportunity to go from an average of
8,000-ft laterals to almost 14,000 ft,” said Senior V.P. and CFO
Rob McNally. “But, mixed in there were quite a number of later-
als that were between 15,000 ft and 20,000 ft, and many in the
kind of 18,500-ft range, which present a whole new set of chal-
lenges, stretching rigs to the limits of their capabilities.”
EQT was expected to wrap up 2018 with the drilling of 115
to 120 Marcellus wells in Pennsylvania and West Virginia, and
MARCELLUS-UTICA SHALES / SHALETECH
Fig. 3. One of the 11 rigs that were at work for EQT during 2018.
Image: EQT Corp.
34 gross Utica wells in Ohio. The company plans to stabilize at
around 10 rigs and six to eight frac crews this year, after fluctuat-
ing between nine and 11 rigs (Fig. 3) and six to eight frac crews
in 2018.
For now, a horde of ultra-long reaches is not on the board.
“In hindsight, we probably tried to drill too many of those ultra-
long laterals in 2018. I think that there is potential upside in
drilling those longer-than-15,000-ft laterals, but we need to do
it at a more measured pace, so that we can incorporate the learn-
ings into the next well as opposed to having multiple ultra-long
laterals going at once,” McNally said.
With the late 2018 drilling of a southwestern Pennsylvania
well with an 18,566-ft reach, first-mover Range Resources
Corp., for now, can lay claim to the longest Marcellus well to
date. Results also were pending at year-end on two newly com-
pleted 18,000-ft lateral wells drilled within a Pennsylvania foot-
print comprising roughly 875,000 net acres, most of which of-
fers stacked pay potential, combining the Marcellus, Utica and
Upper Devonian shales. Range expected to put 92 wells on
production in 2018 at completed well costs ranging from $6.5
million to $9.2 million. Third-quarter net production averaged
around 1,988 MMcfed, a 24% year-over-year quarterly increase.
Southwestern Energy Co., for another, established compa-
ny records in the third quarter with the 16,272-ft and 15,559-ft
laterals of two wells drilled in Pennsylvania and West Virginia,
respectively. The duo was among the aggregate 22 wells that the
company drilled in the third quarter across its 500,000 net acres
in southwestern and northeastern Appalachia, which produced
535 Bcfe over the first nine months of 2018. Staking a claim as
one of the basin’s largest NGL producers, Southwestern esti-
mates 2018 production of 707 to 731 Bcfe.
Southwestern ended the year averaging three wholly-
owned rigs and two frac crews, and the firm may run up to
six rigs in 2019. Company-owned rigs and self-sourced sand
have helped enable Southwestern to “mitigate increases in cost
quite well,” says President and CEO Bill Way. ‘We’re actually
seeing a deflationary effect on the balance of items we use.”
Completed Marcellus wells, with 6,960-ft to 6,994-ft average
horizontal reaches, currently cost between $7.0 million and
$8.6 million/well.
World Oil® / FEBRUARY 2019 63
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EMGC at a glance:
• Delegates from at least 19
countries are expected to
attend the conference in its
sixth year.
• Approximately 96% of
last year’s attendees found
information presented
at the conference to be
“very valuable to
extremely valuable.”
• Attendees will get the
opportunity to network
and connect with industry
professionals from major
companies operating in
the region.
ŝŝEMILY QUERUBIN, Associate Editor
EMGC 2019 to deliver updates, outlooks
from Eastern Mediterranean operators
The Eastern Mediterranean Gas Con-
ference (EMGC) is gearing up for anoth-
er must-attend event in Cyprus. The con-
ference, now in its sixth year, will be held
March 6–7, 2019, in Cyprus’ capital, Nic-
osia. EMGC provides the most relevant,
up-to-date information on the region by
operators working in the area.
Attendees. EMGC attendees will get the
latest information on the region’s natural
gas industry, as well as the ability to gain
entry to regional markets and seek poten-
tial new business partners through various
presentations and networking events. Key
players in the energy market will be present.
Attendees can expect to hear from major
companies and administrations including
Eni, Total, IEF, Hellenic Hydrocarbon Re-
sources Management, Hellenic Petroleum,
Energean Oil & Gas, Noble Energy and the
Lebanese Petroleum Administration.
Last year, EMGC attracted 156 del-
egates from 19 countries. This year, the
conference will attract not only diversity,
but a plethora of high-quality attendees,
speakers and decision-makers. In 2018, a
reported 52% of attendees held a job title
at the level of director or higher. Likewise,
another 35% reported a job title at a man-
agement level. When asked the value of in-
formation provided at the conference, 96%
of EMGC 2018 attendees rated the confer-
ence “very valuable to extremely valuable.”
Day One of the conference will begin
with keynote addresses on the state of the
Eastern Mediterranean gas sector. Key-
notes are scheduled from Alessandro Bar-
beris, managing director of Eni Cyprus;
Elias Kassis, V.P. of North Africa, Total
E&P; and Yannis Bassias, CEO of Hellen-
ic Hydrocarbon Resources Management.
Following an Oceaneering-sponsored
coffee and networking break, Session
One will feature talks from Panos Benos,
CFO of Energean Oil & Gas; Walid Nasr,
chairman of the board for the Lebanese
Petroleum Administration; and Tristan
Aspray, V.P. of Exploration, Europe, Rus-
sia, Caspian and Asia-Pacific/Middle
East, ExxonMobil.
In Session Two after lunch, speakers
and panelists will discuss E&P challenges
of the region. Gerald Butt, Middle East
editor for Petroleum Economist will mod-
erate a panel of industry professionals in-
cluding Bill Alashqar, senior V.P. of global
sales and marketing at JP Global Digital;
John Charalambides, director of interna-
tional business development, Oceaneer-
ing; and Giuseppe Tese’, project director
for the offshore Zohr EPCI fast-track
project, Saipem SpA.
Day Two of EMGC 2019 will focus on
the future of Eastern Mediterranean oil
and gas. Dr. Sun Xiansheng, secretary
general of the International Energy Fo-
rum will begin the day with a keynote
address on international and regional
energy cooperation and the emerging
role of the Eastern Med. Other speakers
will include Elfride Covarrubias Villegas,
business development manager for Italy
and the Mediterranean, DNV-GL; and
Charles Morrison, partner at DLA Piper.
Following another coffee and net-
working break, Nicos Papakyriacou,
partner at Deloitte’s Cyprus Oil & Gas
Leader, will moderate a panel discussion
on how Cyprus can fulfill its potential to
develop into an O&G service center for
the Eastern Mediterranean. Panelists will
include Alessandro Barberis, V.P., Explo-
ration, Eni; Yannis Grigoriou, CEO, Hel-
lenic Petroleum; Yves Grosjean, general
manager of Total E&P Cyprus; L. Gene
Kornegay, country manager and V.P. at
Noble Energy International; and Varna-
vas Theodossiou, lead country manager
at ExxonMobil.
World Oil® / FEBRUARY 2019 65
 25
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VISIT OFFSHORE-EUROPE.CO.UK/CFP NORTH SEA AND RUSSIA AT TOTAL HALLIBURTON AND OE19 TECHNICAL
AND OE19 CONFERENCE CHAIR COMMITTEE CHAIR

Qualification of a 20,000-psi subsea BOP:
A collaborative approach
To navigate continually
changing HPHT design and
regulatory requirements,
a collaborative approach
is required. The team is
qualifying a 20,000-psi rated
BOP. Engineers are hopeful
that the HPHT design process
will reach the same level of
standardization as today’s
15,000-psi equipment, after
completion of this and similar
qualification efforts.
ŝŝDANIEL KLUK, Stress Engineering
Services
The term high pressure, high tem-
perature (HPHT) is codified in the U.S.
Code of Federal Regulations to mean any
equipment with greater than 15,000-psi-
rated pressure and/or greater than 350°F
rated temperature, intended for wells with
these conditions. The new HPHT devel-
opment paradigm, as described in API
17TR8, has been applied recently to a
variety of subsea equipment, such as well-
heads and production trees. To meet the
higher qualification standard, designers
have adopted new processes with regards
to specifications, materials qualification,
verification, validation and independent
third-party review (I3P).
While there are no particularly
unique physical design conditions as-
sociated with HPHT equipment, the
higher pressure and/or temperature rat-
ings, combined with the environmental
effects of wellbore fluids and subsea op-
eration, have driven the industry to focus
a high level of engineering resources to
accomplish the design goals.
A modification of the general HPHT
framework is now being applied to a
20,000-psi blowout preventer (BOP).
This article describes the elements of the
OFFSHORE/SUBSEA
Fig. 1. The HPHT development process is more complex than a traditional approach,
and includes field monitoring and re-assessment steps.
Traditional development
Concept Design
Quality plan Build and FAT
HPHT development
Concept Standardize
Qualify and select Analysis (verify)
materials
Regulator approval/ Build and FAT
acceptance
framework in general, as well as the spe-
cific documents and procedures being
applied to the BOP qualification project.
NEW DEVELOPMENT PARADIGM
A traditional equipment develop-
ment process contains the usual steps of
concept development, design, material
selection, analysis, prototyping/testing
and production build with factory accep-
tance testing (FAT), Fig. 1. The process
ends with standardization, typically after
acquiring a significant amount of field ex-
perience with similar equipment.
This legacy process stands in striking
contrast with the HPHT development
sequence, which contains significantly
more steps, including:
1. Regulatory approval of the concept.
2. Formal risk assessment.
3. Formal materials qualification.
4. Third-party review, and regulator
pre-approval.
5. Field load monitoring
and reassessment.
However, one of the biggest changes
with the HPHT development process is
determining where the standardization
step is applied. In traditional develop-
ments, standardization comes at the end,
Material Prototype and test
Analysis (verify)
selection (validate)
Deploy Standardize
Conceptual
Design
approval
Risk assessment
Prototype and Quality plan Third party
test (validate) review
Deploy Field monitoring Reassessment
after a long period of successful equipment
use. In HPHT, it’s happening almost at
the beginning for many equipment types,
including BOPs. In many cases, standards
have already been drafted or released prior
to actual equipment deployment. While
necessary from a risk management stand-
point, the acceleration of standards devel-
opment without the benefit of historical
experience has proved to be a challenge
to designers attempting to implement the
new requirements, analogous to “flying an
airplane while it’s being built.”
HPHT LANDSCAPE
The HPHT stakeholder landscape is
difficult to navigate because of shifting
requirements, roles and responsibilities.
Additionally, miscommunication and/or
misunderstanding between two or more
parties can cause friction between indi-
viduals and companies. In general, the
major factions include:
Regulator. The overarching regulation,
30 CFR 250.804, is the basis for U.S.
governmental oversight and is where the
HPHT delineation is codified. The regu-
lators also oversee the conceptual deep-
water operations plan and final DWOP
World Oil® / FEBRUARY 2019 67
OFFSHORE/SUBSEA
process, by which documentation is sub-
mitted for acceptance or approval.
Industry. Historically the industry has
been responsible for writing standards to
track and comply with the regulation, such
as the old 1PER15K and its successor, API
17TR8, now in its second edition. These
guidelines are making their way into equip-
ment-specific standards.
Operator. The operating companies need
to drill and develop specific HPHT fields
where they are invested. To do that, they
require qualified equipment and need to
fully characterize the operating conditions
of the field and create functional specifica-
tions on this basis. As the stakeholder, they
are also responsible for submitting the final
qualification reports to the regulator.
Original equipment manufacturer
(OEM). The OEM’s function consists
of creating technical specifications for
the equipment, and then designing and
building the required prototypes. The
Fig. 2. The equipment to be qualified: Category 1 (blue); Category 2 (red);
Category 3 (green).
68 FEBRUARY 2019 / WorldOil.com
manufacturers then perform the verifica-
tion, validation and associated reporting
necessary to demonstrate that all require-
ments have been met before building pro-
duction hardware.
Independent third party. The I3P plays
a unique role in the HPHT process, similar
to a class society or certified verification
authority. Their job is to perform due dili-
gence by reviewing the OEM’s documents
and operator specifications. Next, they pre-
pare and resolve findings, then prepare the
final qualification reports that are submit-
ted to the regulator by the operator.
QUALIFICATION TEAM
To navigate the difficult HPHT de-
velopment landscape, several companies
have joined forces to form a qualification
team. The goal is to qualify and approve
all new equipment necessary to build a
20,000-psi subsea BOP stack for Gulf of
Mexico deployment.
The Bureau of Safety and Environmen-
tal Enforcement’s (BSEE) 250.804 HPHT
regulations were combined with the re-
cently updated BOP regulations, including
the new Subpart G implemented with the
well control rule in 2016. Because of the
evolving regulatory climate, the qualifica-
tion team wanted to engage early and often
with BSEE. This engagement has proved
beneficial to all concerned parties.
The industry is represented by the
American Petroleum Institute (API). API
has been instrumental in facilitating BOP
standards development, and the qualifi-
cation team built on the work started by
the API 17TR8 committee, drafting new
HPHT qualification guidance specifically
for BOPs. This guidance is being imple-
mented as an Annex to API Specification
16A, 4th Edition. It is currently in draft
form but is in final ballot and should be
published within the next few months as
an addendum to API 16A.
Stress Engineering Services is provid-
ing technical advisory services on behalf
of an operator. From the operator’s per-
spective, BOP operations were analyzed
in drilling, completions and intervention
phases to create functional specifications
with site-specific loads. Stress also is pro-
viding technical guidance and review of
the work being done by the OEM, Baker
Hughes, a GE company (BHGE).
BHGE’s legacy Hydril division pro-
duced some of the early 20,000-psi BOP
prototypes and have been steadily pro-
gressing their development through the
changing HPHT landscape. BHGE main-
tained their existing developments and
drafted new technical specifications, but
also implemented a new materials quali-
fication plan. This included incorporating
the new API guidance in their verification
and validation procedures.
Finally, the independent third-party re-
view is being provided by ABS, whose ex-
perience in performing class certification
for BOPs has been beneficial to the project.
ABS’s deliverable is a series of BOP qualifi-
cation reports for BSEE review. ABS also is
serving as liaison between all five parties,
which has significantly enhanced commu-
nication. Although the company’s role is
to review documentation as strictly an I3P,
the qualification team expects that some of
their work will translate directly into a class
review of the stack.
HPHT BOP STACK
With the background overview pro-
cess clearly defined, we can now focus on
the details surrounding the equipment
 OFFSHORE/SUBSEA

qualification progress of the 20,000-psi
BOP stack, Fig. 2. The new BOP looks
similar to the 15,000-psi version by de-
sign. BHGE has put a significant amount
of effort into reducing the stack’s height
and weight, so it can be handled and de-
ployed by many of today’s existing rigs.
Some of the earlier concepts were much
larger and mandated a new, purpose-built
rig to handle the 20,000-psi stack.
The configuration of the 20,000-psi
BOP is conventional, too. Starting at the
top, there is a riser adapter, flex joint, dual
annular BOPs, and an LMRP connector.
Many of these components are either
identical to, or only slight modifications
of, the conventional equipment on a
15,000-psi stack.
The new 20,000-psi equipment mostly
resides in the lower portion, and consists
of the LMRP mandrel, dual-body ram
BOPs, and the wellhead connector. The
BOP rams consist of a blind shear ram,
casing shear ram, Hydril variable rams,
and a test ram. The engineering team also
is qualifying a 9 5/8-in. fixed pipe ram
for use in completions and interventions.
The choke and kill equipment is also new
and 20,000-psi rated, consisting of dual
block valves, isolation valves, a gas bleed
valve, and piping and flex loops.
Qualifying subsystems. The scope of
the current project is to qualify only the
subsystems necessary to build a 20,000-
psi BOP, not to actually construct the full
stack. Fortunately, this allows the consor-
tium to limit the development scope to
manageable pieces. Specifically, the focus
for the 20,000-psi equipment qualifica-
tion is the subsystems shown in blue and
red, Fig. 2.
Much of the discussion around HPHT
has centered around categorizing equip-
ment according to criticality, with Catego-
ry 1 being the most critical and Category 3
being the least. In the case of the BOP, the
team has identified the lower stack main
drill-through tooling as Category 1 pri-
mary barrier equipment, or the “barrier-of-
last-resort” in a well control scenario. This
includes the ram BOPs, wellhead connec-
tor, shear rams, pipe rams, and C&K valves.
Category 2 is defined as secondary bar-
rier equipment. It is rated to 20,000 psi and
used for well control. On the BOP, it is the
C&K lines, connectors, gas bleed valve, and
isolation valves. The qualification team has
defined Category 3 as either non-HPHT,
or support equipment that does not com-
prise a critical barrier. This includes the
LMRP drill-through equipment and BOP
controls. The use of previously qualified,
15,000-psi or lower-rated equipment is ac-
ceptable for these functions.
The qualification team has defined the
end game goal as follows: Once BSEE ac-
ceptance is obtained, the 20,000-psi BOP
stack may be manufactured for field appli-
cation. Separate approval will be required
on a specific project basis. The distinction
between acceptance and approval is that
approval is site-specific, while acceptance
is generically applied to equipment.
FUNCTIONAL/
TECHNICAL SPECIFICATIONS
In this section, we will review specific
steps in the qualification process. The
first is to define the equipment’s opera-
tional loads and target ratings as a set of
specifications. In this instance, our indus-
try has adopted the approach set forth in
the ASME code boiler and pressure vessel

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OFFSHORE/SUBSEA
code. The ASME requires the end-user to
prepare a design specification (UDS), de-
fining all site-specific loads and operating
conditions. These details are provided to
the manufacturer, who designs and builds
the equipment and prepares a manufac-
turer’s design report (MDR), document-
ing how the user’s requirements have
been met or exceeded.
BSEE and API have adopted a simi-
lar process. However, in the drilling tool
qualification scenario, the UDS is called
a “functional specification” and is usually
written by the operator, but it could be au-
thored by a drilling contractor. The MDR
is replaced by a “technical specification”
written by the OEM.
The main difference between the two
approaches is with how the equipment is
certified. In the pressure vessel code, cer-
tification is performed by registered pro-
fessional engineers from both parties—
end-user and manufacturer. In the BSEE
and industry process, certification is re-
placed by an I3P analysis where relevant
Fig. 3. The materials qualification results were used to justify verification analysis inputs.
Fig. 4. An analytical process checks for plastic collapse, local failure and fatigue.
70 FEBRUARY 2019 / WorldOil.com
documents and activity are reviewed, and
summary reports are prepared for BSEE
approval or acceptance.
HPHT materials selection. Once the
specifications have been written, the real
qualification work can begin. One of the
new steps in the HPHT process has been
an emphasis on materials qualification
and selection. There are two motivations
behind this new philosophy.
The first is to characterize the effect
of the environment on materials as they
operate at higher pressures and tempera-
tures. The term, “environment,” primarily
refers to the fluid and chemical combi-
nation of seawater, cathodic protection,
mud, completion brines, and the sour
environment due to produced fluids with
hydrogen sulfide.
The second is to obtain new material
properties to support a fracture mechan-
ics fatigue analysis, Fig. 3. A fracture
mechanics analysis is now required for
certain critical HPHT BOP components
per the new API 16A HPHT Annex draft.
They can produce favorable fatigue lives
relative to other methods in certain situ-
ations; however, the required material
properties are poorly documented. The
material test program will fill in the gaps,
to enable an accurate analysis.
Testing is being performed on me-
tallic and non-metallic materials. In the
qualification stage, the test coupons are
taken from sacrificial forgings or parts. In
production, there will be limited testing
via first-article inspection, prolongations,
and other methods.
Ultimately the results will be used to
justify the inputs for verification. This is
a long, expensive endeavor, but it should
create a solid foundation of materials in-
formation on which to build our indus-
try’s future equipment.
VERIFICATION OF
BOP EQUIPMENT
The next step is verification of the
BOP equipment designs. The process
employed by the engineering team is
drawn from the new API 16A HPHT An-
nex draft, which is based on the the Boiler
and Pressure Vessel Code. It also mirrors
the approach defined in API 17TR8, with
some key differences.
Verification involves several steps, and
the process is laid out as a series of analyti-
cal checks against known failure modes,
Fig. 4. These include plastic collapse,
which is equivalent to burst or rupture;
local failure, in which strains exceed cer-
tain limits and initiate cracks; ratcheting,
which is failure due to progressive defor-
mation, bolting failures, and fatigue. Fa-
tigue analysis may be via the fracture me-
chanics approach, or more traditional S-N
Fig. 5. A successfully sheared composite
sample, consisting of shear sub, control
lines, coiled tubing, and wireline.
 OFFSHORE/SUBSEA

methods. In either case, environmental
material properties are required as inputs.
Analytical verification provides a ro-
bust check against many failures, but it
has limitations. A good example is seal-
ing. There are serviceability and sealing
checks that may be employed analytically,
but the only way to know for sure that
equipment will seal properly is to test it.
BOP validation process. Validation is
the physical testing of prototypes, which
are equivalent to the production equip-
ment, to demonstrate compliance to speci-
fication requirements. The testing baseline
is outlined in the recently updated API
Specification 16A, in which validation test-
ing requirements were revamped signifi-
cantly, with the PR2 suite being the most
robust. Additional validation requirements
also have been imposed in the API 16A
HPHT Annex draft. The validation pro-
gram includes extensive thermal and cy-
cling fatigue qualification for ram BOPs, as
well as full-scale external load testing of the
wellhead connector and 18-20 flange. The
concept of operating, extreme and survival
load ratings is also introduced, and carried
into the HPHT standards in both API 16A
and 17TR8. Finally, the protocol includes
a robust shear test program, designed to
comply with all aspects of the current
Code of Federal Regulations, including the
2016 well control rule, Fig. 5.
INDEPENDENT
THIRD-PARTY REVIEW
The I3P review process sets the stage
for the actual project deliverables and jus-
tifies why the equipment is fit-for-service.
After discussing requirements with all
parties, the coalition developed a compre-
hensive review process, outlined in Fig. 6.
A prominent feature is that the initial
review of each OEM document is done
in parallel, by the I3P and the operator.
These reviews are performed indepen-
dently, but then comments are collected
and resolved together. This is performed
in three stages, consisting of informal
close-out of minor comments, a formal
findings review to resolve major com-
ments, and then a document revision to
implement major comment actions. The
document is then released, and the asso-
ciated findings and resolutions captured.
and released, the I3P prepares a summary
report for that category to document the
work. The reports are laid out as seven
“volumes” as follows:
• Report 1A is the basis of design,
consisting of the technical
specification, and also the risk
assessment (usually a FMECA).
• Report 1B documents the
materials selection and
qualification, including the
environmental testing reports.
• Report 1C summarizes the
verification analysis, including the
strength and fatigue analysis per the
code requirements.
• Report 1D captures the
validation testing performed on
all the equipment, including 16A
PR2, the HPHT Annex tests,
and shearing tests.
• Report 1E documents the plan for
actual field monitoring of loads. It is
intended primarily to address fatigue
loading and reassessment against the
original assumptions made in the
fatigue analysis.
• Report 1F involves the quality plan
and handover of the qualification
basis to production via materials
specifications, inspections, and
process routers, as captured in the
inspection and test plan.
• Finally, Report 1G ties all the other
reports together with the operator
functional specification to assess
fitness for service. While 1A through
1F apply to the equipment specifi-
cally, 1G applies to the equipment
deployed in a particular operator’s
field. Acceptance requires
Fig. 6. A three-stage I3P review generates summary reports that are submitted to BSEE.
OEM OEM submits
A document document
I3P reviews
pending to I3P
OEM submits
document
to operator
I3/
operator/ OEM actions
OEM meeting Open to resolve
B remaining
to close out
findings findings
Closed
1A through 1F, but 1G is required
for approval.
These documents formally declare
that the equipment is qualified and fit for
service. The summary reports are submit-
ted by the I3P, via the operator, for BSEE
approval or acceptance.
QUALIFICATION STATUS
The process described above has been
ongoing for several years, but the consor-
tium is presently moving forward with the
qualification of actual BOP equipment.
BHGE is making steady progress in each
20,000-psi equipment subsystem, despite
the evolving process and continually shift-
ing standards and regulations. It has been
challenging, but the engineering team has
made significant strides toward the finish
line by working together and maintaining
strong communication.
At the current pace, it is expected that
the OEM work will complete around the
end of 2019, with the I3P and regulatory
reviews following afterward. The team
hopes to attain final acceptance sometime
around mid-2020.
DANIEL KLUK is a principal
at Stress Engineering Services,
Inc. He is experienced in
machine design and systems
engineering. His work portfolio
at Stress includes specification,
design evaluation, qualification
of HPHT BOP and drilling riser equipment
systems. Prior to joining Stress, he worked in
the aerospace and mechanical testing
industries, designing spacecraft propulsion
components and automotive fatigue test
equipment. Mr. Kluk holds a BS degree in
mechanical engineering from Northwestern
University and an MS degree in mechanical
engineering from the Massachusetts Institute
of Technology.
OEM responds to
Combined I3P/
I3P develops
operator findings I3P and operator
B
document initial findings to clarify and
log issued to OEM
close findings
Informal Informal
Operator Operator discussions discussions
reviews develops
document initial findings
I3P develops OEM uploads final
Finding log Open comments for document to
completed significant operator document C
findings control
Closed

I3P develops I3P I3P Issues I3P Adjustments BSEE

Independent third-party reports. C reports for BOP by I3P, OEM if approves/accepts
reports to BSEE
When all qualification documents in a equipment required by BSEE I3P reports
particular category have been reviewed
World Oil® / FEBRUARY 2019 71
REGIONAL REPORT
AUSTRALIA & PNG
Australia takes the lead as top LNG exporter, but will it last?
 EMILY QUERUBIN, Associate Editor
For years, Australia’s overall production rate has been shrink-
ing. However, according to the U.S. EIA, additional production
from new condensate and crude oil developments is expected
to offset the decline over the next few years. After peaking
around 828,000 bpd in 2000, Australia’s total liquids produc-
tion decreased to an estimated 387,000 bpd in 2016.
Nonetheless, Australia still holds a surplus of energy com-
modities. In 2015, it was the world’s largest coal exporter and
the second-largest exporter of LNG, according to EIA. It’s en-
ergy exports account for approximately 39% of its total export
revenues. Australia is attractive to foreign investors, not only be-
cause of its substantial hydrocarbon reserves, but also because it
maintains a stable political environment and is in close proxim-
ity to Asian markets, where demand is high.
In November, Australia surpassed Qatar as the world’s larg-
est exporter of LNG. During that month, Australia report-
edly loaded 6.5 million tons of LNG for export. The surge
in Australian exports is credited largely to the start-up of sev-
eral key projects, including the most recent start-up of the Ich-
thys project.
Left to right: Situated off the country’s northwestern coast, Woodside’s North West Shelf Project delivers a third of Australia’s oil and gas. Photo: Woodside. The Cooper basin,
which extends across the northeastern part of South Australia, has been producing for more than 50 years. Photo: Beach Energy. The Wheatstone LNG project is Australia’s
first major gas hub. Photo: Chevron.
72FEBRUARY 2019/WorldOil.com
OFFSHORE
Several significant projects are underway offshore Australia.
They feature considerable technical innovation.
Ichthys LNG. The Ichthys project lies offshore Australia’s
northern coast and consists of Ichthys gas and condensate field,
a 552-mi gas pipeline, and an onshore LNG plant near Darwin,
in the Northern Territory. The project’s offshore facilities in-
clude a subsea well development connected to a central process-
ing facility for gas treatment, and an FPSO vessel (Ichthys Ven-
turer) to which the condensate is produced. According to Total
(30% stakeholder), the project’s offshore facilities will produce
about 285,000 boed and 85,000 bcpd at full capacity. The gas is
being exported to the onshore LNG plant near Darwin, where
approximately 8.9 million tons of LNG will be supplied to the
Asian market every year.
In late July, Total announced that the more-than-$40-billion
project put its first production well online. By October, the first
cargo of condensate was shipped to Asia. The first LNG ship-
ment followed just a few weeks later. According to operator
INPEX, approximately 70% of LNG produced by the Ichthys
project will be shipped to Japan over the course of its operation-
al lifetime—which is expected to be about 40 years.
Prelude FLNG. Shell’s first-of-its-kind FLNG, Prelude, float-
ing 124 mi off Australia’s northwestern coast, is expected to rev-
olutionize the way that gas resources are developed. The project
not only features the world’s first FLNG, but it also is the larg-
est offshore facility ever constructed, according to the company.
It is 1,601 ft long, 243 ft wide, and was constructed with more
than 260,000 tons of steel.
Although it is one of seven export projects to be sanctioned
in Australia during the last decade, it is unlike any of the oth-
ers. The project’s equipment—including power generation, gas
processing and liquefaction—is contained on the colossal float-
ing platform that is connected to wells more than 820 ft below
the sea’s surface.
In June of last year, Shell reported that hydrocarbons had
been flowed onboard for the first time. According to the com-
pany, LNG is carried through process equipment and pipework
before it is stored in tanks found in the facility’s hull. Four of the
LNG tanks, which hold 39,000 m3, each, are already full, Shell
said in a release.
West Barracouta. ExxonMobil reached FID on its West Bar-
racouta gas field this past December. The project—situated on
the VIC/L1 Block, offshore Victoria, in the Bass Strait—will
see development of one of the largest remaining sweet gas res-
ervoirs in the area, through a two-well brownfield tie-back to an
existing Gippsland basin JV infrastructure. The Gippsland ba-
sin, offshore southeastern Australia, is one of the country’s old-
est, most important areas for E&P.
“The Gippsland basin Joint Venture has 50 years of experi-
ence in Bass Strait,” ExxonMobil Australia Chairman Richard
Owen said in a release. “Since the first Bass Strait well was
drilled in 1965, about 4 Bbbl of crude oil and 8 Tcf of natural
gas have been produced.”
The Gippsland basin JV—which is a 50-50 joint venture be-
tween ExxonMobil and BHP—supplies approximately 40% of
east coast Australian domestic gas demand. Graham Salmond,
general manager of BHP Petroleum Australia, said, “The West
Barracouta project is an important investment, underpinned
by strong economics and rates of return that will unlock a high-
quality, new gas resource and help offset Bass Strait production
decline at a vital time for the east coast market.”
The JV has invested more than $4 billion in new projects in
Victoria, to help meet Australian domestic gas demand. The part-
ners expect to see production from West Barracouta by 2021.
Dorado-1 discovery. Last July, Santos Limited (operator,
80%) and Carnarvon Petroleum (20%) reported a significant
oil discovery in the Caley Member within the WA-437-P off-
shore exploration permit, in the shallow waters of Australia’s
Northwest Shelf. The Dorado-1 well not only confirmed a hy-
drocarbon column in the Caley Member, but also confirmed the
presence of gas and condensate in the top of the Baxter Member.
The company reported that while drilling through the Caley
Member, LWD tools indicated a sandstone reservoir section
with elevated gas readings and increased resistivity. Light oil was
recovered from a sand in the upper-most section of Caley. Like-
wise, further reservoir sands were encountered in the Baxter
Member, with accompanying indications of hydrocarbons. The
well was drilled to approximately 13,290 ft, MD, and reportedly
had yet to encounter water-saturated sands.
World Oil® /FEBRUARY 2019 73
REGIONAL REPORT / AUSTRALIA & PNG
Carnarvon had estimated in April that there was a possibil-
ity for the structure to contain resources of approximately 545
Bscf of gas and 125 MMboe. The company’s 2019 drilling pro-
gram reportedly will include two Dorado appraisal wells that
will focus on gaining further information on the volume of oil,
gas and condensate in the Dorado-1 well to build proved re-
serves; determine the flow properties of hydrocarbons from the
reservoirs intersected; and obtain additional data at different
locations within the field. In December, the Noble Tom Prosser
jackup was secured to drill the appraisal wells, Fig. 1.
“The objective in 2019 is to enhance our understanding of
the volume of the resources recoverable and move to making a
Final Investment Decision for development, ideally in 2020,”
Managing Director Adrian Cook said in a release.
North West Shelf Project. Delivering a third of Australia’s oil
and gas is Woodside’s North West Shelf (NWS) Project, also off
the country’s northwestern coast. According to Woodside, it is
the largest producer of domestic gas for Western Australia.
The A$34-billion project has been in operation for 35 years.
NWS assets consist of the Karratha gas plant (KGP), about 783
mi north of Perth; the North Rankin Complex (North Rankin A
and B platforms), situated nearly 84 mi northwest of Karratha; the
Goodwyn A platform, about 14 mi southwest of North Rankin A;
and the Angel platform, nearly 75 mi northwest of Karratha.
KGP features an export capacity of 16.9 MTPA. It has five
LNG processing trains, two domestic gas trains, six condensate
stabilization units and three LPG fractionation units. Addition-
ally, the NWS project includes the Okha FPSO vessel, which is
moored to a riser turret approximately 21 mi east of the North
Rankin Complex.
Scarborough development. Woodside started awarding
contracts for the proposed Scarborough development, offshore
Western Australia, in August. The field is in the Carnarvon ba-
sin, about 233 mi northwest of the Burrup Peninsula. Scarbor-
ough is estimated to contain approximately 7.3 Tcf of dry gas.
Fig. 1. The Noble Tom Prosser jackup has been contracted to drill
two Dorado appraisal wells this year. Photo: Noble Corp.
74 FEBRUARY 2019 / WorldOil.com
According to Woodside, the proposed development will
comprise 12 subsea, high-rate gas wells tied back to a semisub-
mersible floating production unit, moored in nearly 2,953 ft of
water near Scarborough field. The company plans to transport
gas via a 267-mi pipeline to existing LNG infrastructure (Pluto
LNG expansion) on the Burrup Peninsula.
With LNG capacity of 4.9 Mtpa, Woodside’s Pluto LNG pro-
cesses gas from Pluto and Xena gas fields, offshore Western Aus-
tralia. Gas from these fields is transported to a single onshore
LNG processing train. However, with the potential develop-
ment of Scarborough gas field, Woodside reportedly is planning
an expansion of the facility.
Gorgon LNG. Also off the coast of Western Australia, the
Chevron-operated Gorgon project is of great significance. Not
only is it the largest single resource project in Australian history,
but it also is one of the largest LNG projects in the world.
Approximately 37 mi off Australia’s northwestern coast, on
Barrow Island, the Gorgon project consists of a three-train,
15.6-Mtpa LNG facility and a domestic gas plant with the ca-
pacity to supply 300 terajoules of gas per day (284.3 MMcfd)
to Western Australia. Additionally, Gorgon can produce
20,000 bcpd.
The project’s offshore facilities include 18 high-rate, big-bore
development wells—eight of which are at Gorgon field, and 10
of which are at Jansz-Io field.
A subsea gathering system is affixed to the seafloor, collect-
ing from both Gorgon and Jansz-Io fields. Gorgon field can be
found about 40 mi west of the island, while Jansz-Io field is situ-
ated more than 80 mi northwest of the island, in deeper waters.
According to Chevron, the gathering system utilizes 18 subsea
trees to contain and control production wells at both fields. The
gas is then transported via pipeline to Barrow Island.
Wheatstone LNG. Likewise, Chevron’s Wheatstone LNG is
a significant project for the Australian energy sector. The proj-
ect is one of the country’s largest resource developments, and it
is Australia’s first major gas hub. It consists of two LNG trains,
with combined capacity of 8.9 Mtpa, as well as a domestic gas
plant, nearly 7.5 mi west of Onslow, in Western Australia.
The offshore platform is one of the largest in Australia, stand-
ing approximately 700 ft tall. It rests on a steel substructure in
about 230 ft of water. Natural gas is carried from the platform to
the onshore plant via a 140-mi pipeline.
ONSHORE
Australia’s onshore E&P activity is concentrated primarily in
the Cooper basin, in the eastern part of the country. According
to EIA, production from this region has doubled since 2010 and
accounts for approximately 11% of Australia’s oil production.
Cooper basin. Santos has been making significant progress at
several of its onshore assets. In August, it reported that a fourth
rig, the Ensign 965, had begun drilling operations in the Coo-
per basin. According to the company’s report, the rig would
drill eight new wells in Big Lake field by year-end, before mov-
ing to Moomba South, where it would drill four appraisal wells.
The company said that the fourth drilling rig would allow it to
drill up to 90 wells in 2018, which reportedly is the most wells
drilled in a single year since 2014.

“As Santos has become Australia’s lowest-cost onshore
natural gas developer, reducing development well costs by more
than 40% in the Cooper since 2015, we now have the right cost
base to invest in making the most of the vast discovered resource
base of Cooper basin natural gas,” said Santos Managing Direc-
tor and CEO Kevin Gallagher in a release.
The Cooper basin—which covers approximately 127,000
km2 (49,035 mi2) extending across the northeastern part of
South Australia—has been producing for more than 50 years.
Senex Energy is another Australian E&P company that invests
heavily in these resources.
Senex successfully completed an initial flow test of the Gem-
ba-1 exploration well, in the Cooper basin, in December. The
well was drilled on the southwestern margin of the Allunga
Trough, nearly 23 mi southwest of the Moomba processing fa-
cility, north of Adelaide.
Prior to the flow test, Senex had successfully completed a
seven-stage hydraulic fracturing program across depths of 2,360
to 2,730 m (7,146 to 8,957 ft). The company proceeded with a
seven-day flow test, which subsequently recovered 44 MMscfg
and 88 bbl of liquids. Senex reported that a stabilized flowrate of
~8 MMscfd was achieved.
Senex said that preliminary interpretation of volumes indi-
cated pre-drill estimates of 15 Bcf of ultimate gas recovery, which
could be exceeded. This year, the company plans to move forward
with an extended production test across each of the discovered
intervals to further assess the reservoir, deliverability and ultimate
recovery of each zone. It anticipates first gas sales by year-end.
Surat/Bowen basins. Senex Energy also made progress
in Queensland during October, when the company reported
FID for two natural gas projects in the Surat basin. The more-
than-$200-million developments, Project Atlas and Roma
North, will see the drilling of a combined 110 wells at the outset,
two gas processing plants, and associated pipelines and facilities.
Both developments are in close proximity to existing infrastruc-
ture, as Project Atlas is just 12 mi southwest of Wandoan, and
Roma North is approximately 18 mi north of Roma. Beginning
at the end of first-quarter 2019, development is expected to con-
tinue for about 18 months, the company reported.
Santos also has a position in the Surat and Bowen basins, in
Queensland. In a 50-50 joint venture with Shell, Santos was des-
ignated the operator of new exploration acreage in November.
The PLR201718-2-5 license covers about 400 km2 (154 mi2),
approximately 12 mi east of the town of Surat. The area report-
edly was released by the government, solely to boost domestic
gas supply on Australia’s east coast.
According to Santos, exploration in the new acreage will tar-
get natural gas in the deep sandstone reservoirs of the Bowen
basin, beneath the Surat basin. If drilling yields positive results,
a new gas supply source could be unlocked for Australia’s east
coast domestic gas market.
PAPUA NEW GUINEA
Despite a brief setback last year, Papua New Guinea (PNG)
remains a competitor in the oil and gas sector of the South Pa-
cific region. Last August, Santos reported a significant natural
gas find in the Forelands region. The Barikewa-3 well report-
edly encountered 82 ft of net gas pay in the Toro and Hedinia
reservoir objectives. “The Barikewa-3 result is encouraging and
AUSTRALIA & PNG / REGIONAL REPORT
Fig. 2. The Papua LNG project should see the development and
commercialization of the Elk-Antelope resource in PRL 15. Source:
Oil Search.
confirms that there are significant natural gas resources close to
PNG LNG infrastructure, still to be developed,” Gallagher said.
“Barikewa is located approximately 10 km from the PNG LNG
gas pipeline and is, therefore, well-placed to play a part in future
LNG expansion projects.”
PNG LNG. ExxonMobil’s $19-billion PNG LNG project is the
largest development ever undertaken in PNG. Its production fa-
cilities are spread out across three provinces, with two process-
ing facilities connected via a nearly 435-mi pipeline network. In
2017, alone, PNG LNG produced 8.3 million tons of LNG to
its Asian customers.
Production was disrupted last year, however, when a major
earthquake rocked the country’s oil and gas sector. The destruc-
tive 7.5-magnitude quake triggered landslides, destroyed build-
ings and killed more than 100 people. PNG LNG operations were
completely shut in for a period of time, as damage was assessed.
Just a few months later, ExxonMobil announced a signifi-
cant increase in resources at P’nyang field, in PNG’s Western
Province. The company reported an 84% increase, to 4.36 Tcf
of gas, from its previous assessment. The company, and its JV
partners—Oil Search, Kumul Petroleum Holdings, Santos, JX
Nippon Oil & Gas Exploration and Mineral Resources De-
velopment Co.—reported that the results support plans for a
three-train expansion for PNG LNG, near Port Moresby.
According to Exxon, one new train will be dedicated to gas
from P’nyang and PNG LNG fields, while the other two trains
will be dedicated to gas from the Papua LNG project. The ex-
pansion reportedly would add about 8 million tons of LNG an-
nually, doubling the plant’s existing capacity.
Papua LNG project. In November, Total and its partners,
ExxonMobil and Oil Search, signed an MOU with PNG for the
Papua LNG project. The project, first proposed in 2015, should
see the development and commercialization of the Elk-Ante-
lope resource in PRL 15 (Fig. 2), situated in the New Guinea
Fold Belt, Papuan basin.
The project will include two LNG trains of 2.7 Mtpa, each.
They are expected to be developed in cooperation with the ex-
isting PNG LNG project facilities. The project partners already
have launched the first phase of engineering studies, and they
reportedly expect to see FID this year.
World Oil® / FEBRUARY 2019 75
 AMERICAN ASSOCIATION OF DRILLING ENGINEERS

2019 NATIONAL TECHNICAL CONFERENCE AND EXHIBITION

Elevating Data
FOR MILE HIGH PERFORMANCE

09 -10 April 2019 | Hilton Denver City Center | Denver, Colorado

REGISTER TODAY | www.aade.org

The American Association of Drilling Engineers will host the CONFERENCE CHAIRS
National Technical Conference covering subjects considered to
Frank Seidel
be improvements and innovations in drilling operations. fseidel@seideltech.com
The 2019 AADE conference will be of interest to major Erin Britton
and independent operators, service companies, drilling ebritton@sundanceenergy.net
contractors, equipment and materials manufacturers.
Stephen Flowers
sflowers@kecorp.us
TECHNICAL SESSIONS INCLUDE:
• Automation
CONFERENCE COORDINATOR
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PROGRAM COORDINATOR
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AMERICAN ASSOCIATION
SPONSORSHIPS AVAILABLE of DRILLING ENGINEERS
 WORKFORCE ISSUES
Examining the role of outsourced
service providers and external workers
The oil and gas industry relies heavily on
external workers, in the field and in the
office. A recent survey of senior oil and gas
executives shows how the external workforce
is sourced, managed and deployed—and how
it adds value.
ŝŝARUN SRINIVASAN, SAP Fieldglass
Outsourced service providers and external workers are fuel-
ing oil and gas operations to achieve companies’ strategic ob-
jectives and get work done. To find out how companies gain
better value from non-payroll workers and contracted service
providers, SAP Fieldglass collaborated with Oxford Economics
to survey senior oil and gas executives. The research results pro-
vide an unprecedented deep dive into the ways that the external
workforce is sourced, managed and deployed—and how value
is added to companies, accordingly.
Our groundbreaking research study, External Workforce In-
sights 2018: The Forces Reshaping How Work Gets Done, found that
nearly half (47%) of oil and gas workforce spend is on external
workers—slightly above the 44% cross-industry average.
WHERE ARE THESE WORKERS,
WHAT ARE THEY DOING?
Outsourced service providers and external workers are oper-
ating at the core of the enterprise. They are spread widely across
functions, including field services, facilities management, cus-
tomer service, administration, product development, cyberse-
curity, IT and more.
Great importance. In our research, 70% of oil and gas execu-
tives told us that the external workforce is critical to their ability
to operate at full capacity and meet market demands. Further-
more, just over half (52%) of oil and gas participants told us
they could not conduct business as usual without their external
workforce. These findings reflect the breadth and importance
of work performed by outsourced service providers and exter-
nal workers.
There has been a huge sea change in this area. A decade ago,
companies were reluctant to outsource any core elements of
their businesses, so when talent was needed, they hired more
employees. Now, forward-thinking companies identify the
work that needs to be done—whether it’s a one-off project, field
services or a gap in a corporate function, such as HR or IT—
then look at the best way to source the talent. The aim is that
businesses use flexible labor to respond to opportunities, when
and where they arise, as indicated by 56% of the industry execu-
tives in our research. In addition, nearly two-thirds (64%) of oil
and gas executives look to external workers to increase organi-
zational agility—a vital ingredient for competing successfully in
today’s digital economy.
Cost is not the whole story. Another significant change is
the relative importance of cost. After the global financial crisis
of 2008, many businesses reduced payrolls and increased their
use of external workers, looking to cut costs and reduce risk.
Today, cost remains an important factor, yet oil and gas execu-
tives are more focused on the role of external workers in meet-
ing strategic objectives. For example, 62% believe that external
workers are important for developing or improving products
and services, and 58% say the external workforce is important
for speed to market. Indeed, 68% of oil and gas executives say
that their external workforces enable them to improve their
companies’ overall financial performances, Fig. 1.
WHY IS THE EXTERNAL WORKFORCE STRATEGIC?
One factor in the strategic role played by external workers
is the aging workforce and mass retirement of baby boom-
ers, many of whom had amassed valuable industry expertise.
The reliance on an external workforce is also driven by a skills
shortage. The number-one labor market trend that executives
say is affecting oil and gas today is challenges in accessing
specialized skills (e.g., AI and machine learning, data science,
industry-specific expertise). The skills shortfall is expected to
intensify, as 90% of executives expect that the external work-
force will be important for sourcing skills in scarce supply in
three years, Fig. 2.
The skills shortage isn’t the only factor at play. Companies
have increased their use of outsourced service providers and ex-
ternal workers, because they recognize this approach gives them
Fig. 1. The external workforce delivers on strategic business goals.
Operating at full capacity/meeting market demands 70%
“Important” and “very important” responses
How important is the external workforce in
meeting the following business goals?
Increasing organizational agility 64%
Developing or improving products and services 62%
Increasing speed to market 58%
Reducing risk 52%
Achieving sustainability goals/shrinking our carbon footprint 50%
Managing costs 50%
World Oil® / FEBRUARY 2019 77
WORKFORCE ISSUES

greater access to skills, when and where they are needed. This they give workers greater freedom and choice than they would
flexibility is a key factor, given the intense pressure to maintain have as an employee. What’s more, for certain skill sets, contract
profitability in the face of volatile crude oil prices. As such, the employment can be far more lucrative.
external workforce helps companies to meet investors’ high ex- With oil and gas companies paying competitive rates for ex-
pectations of operating windows and asset performance, and to ternal workers, engineers and other highly skilled talent are on
combat increasing competition, following the recent expansion board with the shift to contract employment, as opposed to be-
of several national oil companies. ing on corporate payrolls. In fact, many engineers from other
sectors, such as industrial manufacturing, have re-skilled to take
PEOPLE ARE HAPPY TO DO CONTRACT WORK advantage of the lucrative packages and flexible working ar-
You’d be wrong to think that only companies are benefiting rangements available in oil and gas.
from flexible working arrangements. Many people with sought-
after skills prefer to work on a contractual basis. Although con- EXTERNAL WORKERS RAISE THE QUALITY LEVEL
tractual arrangements are more volatile than permanent jobs, As the external workforce becomes ever more deeply em-
bedded in the oil and gas industry, there is an inevitable im-
Fig. 2. Staying competitive in the digital age. pact on corporate culture. Most executives feel that the change
in their companies is positive. For instance, nearly two-thirds
Outsourced projects (64%) of executives say the external workforce challenges their
76%
82% employees to do their best work. More than half (54%) say it
Field services/manufacturing
improves their culture by bringing in new people with differ-
74% ent backgrounds and new experiences. On the flip side, 74% of
How important are the following kinds of external workers

90% executives say it’s important that their companies are viewed as
to meeting your business needs today? In three years?
“Important” and “extremely important” responses

Support services good places to work by external workers.

74%
98% “MIND THE GAP”
Skills in scarce supply While oil and gas companies see significant value in engaging
56%
90%
an external workforce, most find it challenging to manage, and,
Seasonal work
therefore, they will not be able to unlock its full potential. Too of-
52% ten, management has a limited view of who is engaged and where
64% they are working, let alone how well they are performing. This
Staff augmentation
Today
visibility gap hinders leadership’s ability to drive success.
50% In 3 years Our research revealed mixed results about how well-in-
64% formed executives are about their external workforces. When
Corporate staff it comes to non-payroll workers, just 38% of these executives
38%
94%
are highly informed about who they are; 38% are highly in-
formed about their access to systems and confidential infor-
mation; and only 26% are highly informed about whether
external workers have the licenses and certifications that are
Fig. 3. The oil and gas industry is using advanced technologies to required to perform their roles. Slightly more executives were
inform workforce decisions.
highly informed when it came to responsibilities (40%) and
We use data and analytics to help inform our workforce strategy access to facilities (48%).
70% Visibility into service providers, although not what it should
and artificial intelligence AI/machine learning to inform your overall workforce decisions?
To what extent do you agree with the following statements about your use of analytics

68%
We use AI/machine learning to inform workforce scenarios
be, is somewhat better. We found that 58% of oil and gas ex-
56% ecutives are highly informed about service providers’ respon-
45% sibilities; 48% are highly informed of their access to facilities;
We use AI/machine learning to inform workforce strategy 44% about contract terms; and 40% regarding compliance with
54%
“Agree” and “strongly agree” responses

57% licenses and certifications. Fewer report being highly informed

We use predictive analytics to inform workforce scenarios when it comes to service providers’ access to systems and confi-
52% dential company information (34%).
53%
In many cases, the lack of visibility is symptomatic of a
We use AI/machine learning to source talent
48% broader lack of rigor around engaging and managing the exter-
49% nal workforce. Further, many companies do not have a single
We use predictve analytics to anticipate talent shortfalls system that delivers a clear view of external workers across their
42% enterprise. But lack of a structured approach to managing exter-
56%
We use AI/machine learning to get real-time visibility into payroll and rate nal workers could come back to bite companies.
data to inform workforce decisions The stakes are particularly high for compliance with health
38%
47% and safety regulations. If service providers assign personnel
We use AI/machine learning to anticipate talent shortfalls without the appropriate skills, licenses and certifications for
Oil and gas
32% Cross-industry each task and type of equipment, companies risk heavy financial
41% penalties for non-compliance, even if the workers concerned
aren’t employees. If an external worker does not have the cor-
78 FEBRUARY 2019 / WorldOil.com

rect certifications, and gets injured on the job, the results could
be even worse. Companies also must be able to track worker fa-
tigue, to maintain robust safety standards.
Another element of compliance concerns access rights. To
reduce risk, companies should ensure that external workers
have access only to the facilities and systems they require for
their roles—and maintain a robust record of access given.
Another issue is that without a single system, companies
cannot verify easily how much they are paying workers and
whether rates are in line with master contracts. That makes it
very difficult to tell whether appropriate negotiated rates are be-
ing used, and all too easy for discrepancies to arise.
There are other finance-related topics to consider. In fact,
34% of executives told us that they had experienced unauthor-
ized spend without approval (6% higher than the cross-industry
average), and 56% find this aspect of managing their external
workforce challenging. In addition, 30% had experienced over-
charges and duplicate payments. Other issues include charges
deviating from an agreed rate card or master services agreement
(22%), compliance issues (18%), and quality issues regarding
resources and/or projects (18%).
The oil and gas industry has unique financial complexities,
for which visibility and accurate tracking are essential. For ex-
ample, it’s critical to know in which country work is getting
done, so the correct tax is paid—or no tax, if it’s in international
waters. Companies also want to be able to track which activi-
ties fall into exploration, drilling, production and tear-down,
because these phases are taxed at different rates.
GOING BEYOND VISIBILITY
TO INFORMING DECISIONS
Some companies are using advanced analytics and AI/ma-
chine learning to gain deeper insight into external workforces,
Fig. 3. More than two thirds of executives use data and analyt-
ics to help inform workforce strategy (70%), 52% use predictive
analytics to inform workforce scenarios, and 42% use predictive
analytics to anticipate talent shortfalls. AI/machine learning
is used by 56% to inform workforce scenarios, 54% to inform
workforce strategy, 38% to get real-time visibility into payroll
and rate data to inform workforce decisions; and 32% to antici-
pate talent shortfalls.
LEARNING FROM BUSINESSES SETTING THE PACE
Our research reveals a path forward for companies that need
to catch up. Some respondents demonstrate markedly superior
performance in managing and extracting value from the exter-
nal workforce. These companies—called the Pacesetters in our
research—make up about 10% of research participants and
stand out from the crowd in three important ways. One, Pace-
setters are more likely to say their external workforce enables
them to improve their company’s overall financial and business
performance, and/or compete in a digital world.
Two, Pacesetters are better-informed about their non-pay-
roll workers and service providers. This includes responsibili-
ties, duration of work, compliance, and access to systems and
confidential information. And three, Pacesetters find it much
less challenging to effectively perform a wide range of external
workforce management tasks, such as finding high-quality re-
sources at the right time, in the right place, at the right rate, and
tracking quality of resources and projects.
WORKFORCE ISSUES
BECOMING A PACESETTER
The good news is that companies do not have to go on this
journey alone. There are specific solutions to help upstream,
midstream and downstream companies source, engage, manage
and pay their external workforce. With effective management,
careful governance, and a robust solution, companies can gain
better visibility into outsourced service providers and external
workers and manage them more effectively.
ARUN SRINIVASAN is the senior V.P., Strategy &
Customer Operations, for SAP Fieldglass. He is
responsible for ensuring customer success, and
oversees strategic consulting, implementation, account
services, support, shared services and marketing. Mr.
Srinivasan has more than 20 years of experience in
enterprise software solutions. Prior to joining SAP
Fieldglass, he held positions in general management, development,
marketing and product management while working at ClickCommerce,
Elance and Oracle. He holds a bachelor’s degree in physics from the
University of Madras, India, and a master’s degree from the Indian
Institute of Science.
A TALE OF TWO COMPANIES ON THE
JOURNEY TO IMPROVING EXTERNAL
WORKFORCE MANAGEMENT
Having built a large contract workforce using a decen-
tralized, highly fragmented process, a multinational opera-
tor was exposed to a myriad of risks, some of which could
be costly. There was no single point of accountability for
procuring services, a lack of clarity over spend, and poor
visibility into many aspects of their contractor workforce.
To address the situation, the company selected a managed
services provider (MSP) to manage its external workforce
via SAP Fieldglass. This approach enabled the company to
take advantage of the MSP’s management expertise and gain
access to a robust technology solution, to help manage its ex-
ternal workforce. The solution helps the company gain more
visibility and better manage its external workforce, leading
to much improved governance and compliance.
A global oil and gas company managed its external workers
in a decentralized fashion throughout its numerous business
units and groups, lacking common processes and solutions.
As a result, the company was unable to meaningfully measure
or analyze the effectiveness of its external workforce of thou-
sands of people. To better manage its external workers, the
company selected SAP Fieldglass as its technology partner.
The company aimed to gain visibility to drive cost-savings,
enable better decision-making and maintain compliance. The
company adopted a phased approach to the implementation,
and now uses SAP Fieldglass to manage thousands of work-
ers—accounting for tens of millions of dollars of spend.
Transitioning to a single solution to manage external
workers has dramatically improved visibility into this pre-
viously fragmented workforce and has improved compli-
ance with various industry-specific health and safety re-
quirements. Leadership can now identify trends and make
strategic decisions, thereby improving the bottom line.
World Oil® / FEBRUARY 2019 79

Lee Tillman
Marathon Oil
Corporation’s board of
directors has named Lee
Tillman as chairman.
Tillman will continue
to serve as president
and CEO, a position he
has held since 2013. He
succeeds Dennis Reilley,
who has elected to retire
after nearly six years as
chairman and more than
17 years on the company’s
board of directors. In
addition, the board has
appointed Gregory Boyce
as its lead independent
director. Boyce has been
a director of the company
since 2008.
Independent operator
Faroe Petroleum has
appointed Bjørn Dale as
chairman of the company.
In addition, Ørjan Gjerde
has been appointed as
non-executive director
of the company with
immediate effect. John
Bentley (chairman),
Graham Stewart (CEO),
Helge Hammer (COO),
Jonathan Cooper (CFO)
and Roger Witts have
resigned as directors of
the company.
MFG Chemical, a specialty
and custom chemical
manufacturing company,
has named Darin Gyomory
as CFO. Gyomory brings
25 years of experience
to the company, having
served as CFO of WL
Plastics (INEOS), Scepter
Inc., and area controller at
Dean Foods.
ROVOP, the inde-
pendent provider of
subsea remotely operated
vehicle (ROV) services, has
appointed Lee Wilson to
head of technology. Wilson
joins the company from
Subsea 7, where held the
role of ROV and autonomy
program manager.
80 FEBRUARY 2019 / WorldOil.com
PEOPLE IN THE INDUSTRY
MICHELE.COWART@WORLDOIL.COM
Mark Richard
Halliburton Company
has selected Mark
Richard, previously senior
V.P. northern region,
to succeed Jim Brown as
president of the Western
Hemisphere. Richard
began his career with the
company in 1984 in the
Gulf of Mexico. Since then,
he has held numerous
positions of increasing
responsibility, including
V.P. of the Gulf of Mexico
Region, senior V.P. of the
Asia Pacific Region, and
senior V.P. of the Europe/
Sub-Saharan Africa and
Eurasia Regions, and
senior V.P. of global
business development
& marketing.
Chevron Corporation has
named Pierre Breber
V.P. and CFO, effective
April 1, 2019. After joining
the company in 1989,
Breber became V.P. and
treasurer in 2009, V.P.
of gas & midstream
in 2014, executive V.P.
of gas & midstream in
2015 and executive V.P.
of downstream and
chemicals, his current
position, in 2016. He
will replace Patricia
Yarrington, who has
elected to retire after 38
years of service with the
company.
David Lang has joined
King & Spalding as
a partner with the
corporate, finance and
investments practice
group in Houston. Lang,
who previously served
as global head of Baker
McKenzie’s Liquefied
Natural Gas practice,
began his career with
the firm. His practice
focuses on energy infra-
structure development,
acquisition and disposi-
tion, with particular
expertise in LNG
projects.
Jon Rogers
Jon Rogers has been
named CEO of Locus Bio-
Energy Solutions, a disrup-
tive technology company
whose unique bio-chemical
based production and
drilling fluid chemistries are
increasing oil production
and safety. Rogers plans to
open and staff new facili-
ties in the Houston area, to
support growth throughout
the U.S., with a focus on
Permian basin. Prior to
joining the company, he
was global head of BL Oil
Services at Clariant, had
overall P&L leadership
and responsibility for
operations throughout 76
countries, and held roles
including global technol-
ogy director at BP. In
addition, Rogers is a fellow
of the prestigious Royal
Society of Chemistry.
ICR Integrity has appointed
Richard Wilson as COO
and Alan McQuade as CFO
to support the business’
international growth
strategy. Wilson brings 30
years of operational and
commercial experience to
the role. He is a qualified
engineer, and spent over
12 years with Sparrows
Offshore, latterly as a
director of operations.
In addition, McQuade is
a chartered accountant
with over 12 years of
experience. Prior to this he
served as CFO of two of
Acteon Group’s operating
companies.
Airborne Oil & Gas has
appointed Renato Bastos
as V.P. Brazil. Bastos brings
over 20 years of experi-
ence in the SURF market
for installation of flexible
pipe. His previous roles
include ship operations
manager and techni-
cal director, and most
recently, he held the role
of subsea projects director
subsea for Ocyan.
Barton Sponchia
TAM International, Inc.,
an independent oilfield
services company provid-
ing inflatable and swellable
packers to the oil and
gas industry, has named
Barton Sponchia as V.P.
Western Hemisphere.
Sponchia joined the
company in 2016 as global
business development
manager, and brings over
28 years of experience to
the company. Prior to this,
he held various manage-
ment positions at BHGE,
Schlumberger and Archer
Well Company. In addition,
he has been active in
promoting new technolo-
gies in the industry as an
instructor, inventor, and
board member of technical
organizations.
Valor Mineral Management,
LLC, a management and
advisory firm based in
Fort Worth and Midland,
Texas, has added Ed
McCabe, Greg McCabe
and R. Wesley Moncrief,
Jr. to its board of advisors.
Combined, Ed and Greg
add over 60 years of
industry management
experience to the team. Ed
is the president of McCabe
Energy, Inc, and for over
35 years has been active in
Permian basin. Greg is an
experienced geologist who
brings over 32 years of
industry experience to the
company. He is a principal
of numerous oil and gas
focused entities. Moncrief
is a fourth-generation oil
and gas executive, and
leader at Moncrief Oil.
Nizami Musayev joins
Tendeka as Russia area
manager. Prior to this
he was responsible for
completion business
growth at Interwell, and
held various roles, with
increasing responsibility
at Schlumberger over a
19-year period.
Raul Gonzalo
ProSep, a technology
and service provider for
integrated process solu-
tions to the global energy
industry, has named Raul
Gonzalo as its Middle
East regional sales and
service manager. Gonzalo
has been involved in
project management,
service sales, product
development and com-
missioning of mixers and
other process equipment,
during his four years with
the company. In addition,
Ryan McPherson left the
firm to join EIC as Middle
East Director.
Maersk Drilling has
strengthened its board
of directors in preparation
for its independent listing
on Nasdaq Copenhagen.
CEO Jørn Madsen and
CFO Jesper Ridder
Olsen will continue to
constitute the executive
management team.
Claus V. Hemmingsen,
chairman since 2016, will
continue as chairman
and Robert M. Uggla
will be appointed vice
chairman of the board.
Both will constitute the
chairmanship of the
company. In addition,
other board members
have been appointed,
including Kathleen
McAllister, former
CEO, CFO and board
member of Transocean
Partners LLC; Robert
Routs, former executive
director of Royal Dutch
Shell plc. and Martin
N. Larsen, CFO of A.P.
Moller Holding A/S.
Furthermore, current
member, Mads Winther,
senior V.P. and head
of strategy and M&A,
energy division, A.P.
Moller, Maersk, will not be
proposed as a member
of the board in the future
listed company and will
step down in connection
with the listing.
 COMPANIES IN THE NEWS
MICHELE.COWART@WORLDOIL.COM

Equinor and its partners have
started production from Aasta
Hansteen gas field in the
Norwegian Sea. Gas from the
field is available to the market
for the first time, and together
with the Polarled pipeline, the
field opens a new region for gas
export to Europe. In addition,
the company and its partners
have received approval from
the Ministry of Petroleum and
Energy for the PDO of the Troll Phase 3 development. Capital
expenditures of $925 million will help extend the field’s productive
life beyond 2050. Also, the company has opened two IOC support
centers to help reduce CO2 emissions from NCS installations.
BP has approved a $1.3 billion Qatar Petroleum has entered
Atlantis Phase 3 development, into an agreement with Eni to
after determining an additional acquire a 35% participating
400 MMbbl of oil. In addition, the interest in three offshore oil
company announced the Manuel fields in Mexico. The agreement
discovery in Mississippi Canyon covers Amoca, Mizton and Tecoalli
Block 520, and a stake in the offshore oil fields, which lie in
Nearly Headless Nick discovery, Area 1 of Mexico’s Campeche Bay.
which is in Mississippi Canyon Production is expected to ramp
Block 387. up to 90,000 bopd by 2021.
Total has started up production CNOOC has signed strategic
from Egina field, in about 5,250 cooperation agreements with
ft of water, 93 mi off the coast of Chevron, ConocoPhillips, Equinor,
Nigeria. At plateau, the field will Husky, KUFPEC, Roc Oil, Shell, SK
produce 200,000 bopd, which Innovation and Total for areas in
represents about 10% of Nigeria’s the Pearl River Mouth basin off-
production. The Egina FPSO used shore China, including Areas A and
to develop the field is the largest B. Area A is approximately 5,907
vessel that Total has ever built. mi2, with a water depth of 262 ft
to 394 ft. Area B is approximately
18,803 mi2, with a water depth of
1,640 ft to 9,843 ft.
marine warranty services for the
company’s offshore operations
in the Asia-Pacific region. The
agreement is valid for five years
and covers five countries, includ-
ing Singapore, Vietnam, India,
Myanmar and Australia. In addi-
tion, the company has opened an
office in Perth, Western Australia.
Rowan Companies plc’s Ralph
Coffman, a 240-C Class harsh-
environment jackup rig, has been
awarded a one-well contract from
CGX Resources in Guyana for an
estimated duration of 60 days.
The contract is expected to com-
mence in second-quarter 2019.
Enpro Subsea has moved into a
new UK headquarters. The firm’s
new 5,000-ft² office at Arnhall
Business Park, Westhill, has
double the space of its previous
site, including meeting rooms,
breakout areas and client offices.
Lukoil’s cumulative production of
oil in the Russian part of the
Caspian Sea has exceeded 20
MMt, with Vladimir Filanovsky
field accounting for the most
significant gain. Thus, cumulative
production of the field reached
11.3 MMt of oil since commercial
production commenced in
October 2016. Fourteen wells, five
of which are bi-lateral, were
drilled during phases one and two.
to fuel the company’s drilling and
workover initiatives in Mexico and
Latin America. Terms of the deal
were not disclosed.
The sale of Premier’s interests
in the Babbage Area to Verus
Petroleum SNS Ltd has now been
completed. The company has
received $38.7 million since the
effective date of Jan. 1, 2018. In
addition, Verus will take on explo-
ration commitments valued at $24
million. Production from Babbage
has averaged 2,500 boed, year
to date. The sale proceeds will be
used to pay down the company’s
existing debt.
RESMAN AS has agreed to acquire
Restrack AS in a share purchase
agreement. The combined com-
pany will have up to 100 employ-
ees and provide reservoir monitor-
ing and intelligent chemical tracer
systems, inter-well gas & water
tracing, single-well tracer tests and
partitioning inter-well tracer tests
for improved well production and
production optimization.

McDermott International, Rovco has been awarded further

Aker BP has selected Optime
Subsea as a provider of well
access systems and services on
the NCS for the next two years.
The subsea services company is
planning to use its Subsea
Controls and Intervention Light
System on Aker BP’s Jette, as part
of their P&A operations, and
Skogul for installation.
Inc., has signed a lease for
its new corporate headquarters
and will consolidate approxi-
mately 1,700 Houston-area
employees into one site. The
16-year lease is for Energy Center
Five, an 18-story, 524,000-ft2
office tower at 915 North Eldridge
Parkway. The company will be
the sole tenant in the building.
Ikon Science Limited has wholly
acquired Perigon Solutions
to build a global business that
develops scalable solutions for
interpreting and understanding
subsurface information. This
serves a market that is looking for
faster effective decision-making,
using integrated subsurface data
and solutions.
Aqualis Offshore has entered
into an MSA with McDermott
Asia Pacific Sdn Bhd to pro-
vide engineering reviews and
TWMA, has secured a seven-
figure contract with Neptune
Energy. The three-year contract,
will include skip-and-ship and sol-
ids control to manage and process
drill cuttings. The scope of work
also will include the provision of
cuttings containment, pit and tank
cleaning, and offshore processing,
using TCC RotoMill technology.
Emerson has acquired Advanced
Engineering Valves to expand
its portfolio of valves and critical
isolation technologies serving
the LNG industry. This acquisi-
tion supports the company’s
Main Valve Partner initiative and
complements its Vanessa triple-
offset valve range. Terms of the
deal were not disclosed.
Simmons Edeco has sold its
European well integrity services
division, Simmons Edeco Europe.
This capital injection will be used
funding to develop AUV3D Phase
2, the next stage of its integrated,
live 3D vision and AI survey
technology. This brings the
combined total in technology
grants provided by Innovate UK
to $1.9 million.
THREE60 Energy has acquired
Aberdeen-based North Sea
Construction and Commissioning
for an undisclosed sum. This is
the fourth company added to the
developing energy services firm,
which now employs over 320
people.
Orbital Gas Systems has been
awarded purchase orders for
integration projects totaling $3.3
million from a large Texas-based
EPC company during fourth-
quarter 2018. The purchase orders
comprise custom analytical
integration systems for two new
fractionation units.

World Oil® / FEBRUARY 2019 81

 NEW PRODUCTS AND SERVICES
MICHELE.COWART@WORLDOIL.COM

3D hydraulic
Electric remotely operated vehicle fracturing software
drives cost efficiencies in subsea
offers cloud-based
Forum’s XLe Spirit is the first observation-class ROV solution
to utilize the company’s Integrated Control Engine
StimPlan is NSI Technologies’
(ICE) to bring greater functionality that is normally
complete and integrated software
only found in larger work-class vehicles. The eROV
incorporates regulated propulsion power, optimized solution for hydraulic fracture
thruster orientation and location, accurate thruster design, analysis and optimization.
speed control and a wide range of auto-functions With a comprehensive integrated
for positioning and flying. The advanced control toolkit, and the industry’s most
electronics enable superior connectivity and rigorous geometry models,
expansion capabilities when compared with other the software helps operators
ROVs on the market. Ethernet interfacing allows for maximize well performance
seamless integration with other industry sensors, while lowering expenditure time
using common IP architecture and ease of remote data transfer. and reducing environmental
footprints.
www.f-e-t.com
nsitech.com

Sensor monitor tool increases safety Safety apparel offers comfort

around wellheads
C-Kore Systems’ new subsea
testing tool, the C-Kore Sensor
Monitor, can be used in decom-
missioning, fault-finding and
construction campaigns to provide
feedback from subsea sensors,
such as wellhead pressures and
temperatures, even when a subsea
datalink is not available. The tool
allows for fast, automated reading,
and supports an extensive range of
pressure, temperature, positional
and other sensors. In addition, it
does not require any subsea infra-
structure or downlines to operate.
www.c-kore.com
in rugged environments
The Targo FR Foul Weather
Bomber and Bib, offered
by National Safety Apparel,
features 7 oz., 2-layer GORE-TEX
PYRAD fabric that meets gas
Probe Shirley Method 138:2000,
in addition to other safety
standards. The apparel is 100%
waterproof and windproof,
and resists cold cracking in low
temperatures. Lightweight and
fast drying, the personal protec-
tive equipment resists hot liquid
and steam, and petroleum and
oil-based mud.
www.thinknsa.com

Downhole steam Improved injected water conformance Hydraulic sleeve

injection valve
helps maximize
economic recovery
Pragma Well Technology has
been given the green light by
Pharis Energy and the Oil and Gas
Technology Center to manufac-
ture, and prototype test their
Downhole Steam Injection Valve
(DSIV), following a successful
feasibility study. The surface-con-
trolled DSIV will be the first steam
injection valve available on the
market to meet UK safety regula-
tions. The valve will be rated to
withstand the extreme downhole
conditions required for continuous
high-pressure steam injection, and
will operate at temperatures of up
to 343°C. Pharis will use the DSIV
valves during phased develop-
ment of the pilot field in United
Kingdom Continental Shelf Block
21/27a.
www.pragma-well.com
optimizes oil production enables maximum
Tendeka’s FloFuse can increase oil recovery by improving injected casing pressure test
water conformance in fractured reservoirs or by ensuring effec-
tive placement of matrix stimulation acids. When installed across before stimulation
a segmented wellbore, the technology autonomously chokes back The Packers Plus Toe-XT Hydraulic
injection into thief zones or large fractures that dominate the outflow Sleeve is designed to enable a
profile, and ensures effective injection into the rock matrix or fracture maximum casing pressure test
structure. The dynamic and reversible operation of the valve makes before activating the sleeve for
it suitable for applications, where the permeability contrasts change stimulation operations. While
over time. pressure test and stimulation have
been combined into one tool, the
www.tendeka.com
mechanisms for each procedure
are separate. During field trials,
Innovative scintillator-based 4.5-in. and 5.5-in. versions of the
sleeve combined for successful
technology provides accurate, installation and operation in
more than 50 wells across North
reliable measurements America. Among these installa-
Tracerco has launched Hyperion, a non-contact, no-moving-parts mea- tions was a well in the Eaglebine
surement solution that provides bulk level and density measurements, formation in East Texas where the
ensuring that vibrations or dust settling have no impact on its operation. operator conducted a 30-min.
Externally mounted, eliminating possible leak paths, this robust device is pressure test at 11,450 psi, and
not affected by high pressures, extreme temperatures, fouling or corro- then came back a week later to
sive fluids. Housed in 316L stainless steel, the tool is highly ruggedized, begin stimulation operations.
and includes internal sealing to safeguard against water ingress.
packersplus.com/solution/
www.tracerco.com toe-xt/

82 FEBRUARY 2019 / WorldOil.com
 ADVERTISERS IN THIS ISSUE

AADE ...............................................................76 Events – EMGC ...........................................42 LAGCOE ...........................................................14

www.aade.org www.EMGasConference.com www.lagcoe.com/expo
Abaco Drilling Technologies ......................16 Events – POC ..............................................64 NCS Multistage .............................................88
www.Abacodrilling.com www.PipelineOpportunities.com
www.ncsmultistage.com
Events – MCEDD ........................................87
AFGlobal......................................................... 10 NETZSCH Werbe- Und Service- GmbH.47
www.mcedd.com
www.afglobalcorp.com/NRG www.netzsch.com
World Oil Subscription .............................56
Ariel Corporation ..........................................12 www.WorldOil.com/Free Nissan Chemical America Corporation .22
www.arielcorp.com/partnerships
World Oil Full Access ............................... 40 www.nanoactiv.com
Bartington Instruments ...............................13 ww.WorldOil.com/Full-Access-Plan
NOV Rig Technologies ..............................34
www.gmw.com World Oil Webcast –
www.nov.com/rig
C&J Energy Services ....................................18 Hydraulic Fracturing ...................................... 55
www.worldoil.com/webcasts NOV Wellbore Technologies....................... 2
www.cjenergy.com
World Oil, Oil & Gas Forecast 2019.......69 www.nov.com/agitator
Distribution Now .........................................6,7
www.worldoil.com/webcasts OMC 2019 .......................................................24
www.distributionnow.com
Halliburton .....................................................52 www.omc2019.it
ENTELEC 2019 .............................................. 37
www.halliburton.com
www.entelec.org Shale Support ...............................................20
Industrial Rubber ........................................... 4
Fluid USA Inc.................................................33 www.shalesupport.com
www.iri-oiltool.com
www.fluidusainc.com IVS Industrial Valve Summit ......................31 SPE Offshore Europe ..................................66
Gulf Energy Information ................................. www.industrialvalvesummit.com www.offshore-europe.co.uk/CFP

Energy Web Atlas......................................83 JP Global Digital............................................. 8 TechnipFMC ..................................................... 5

www.energywebatlas.com www.jpglobaldigital.com www.TechnipFMC.com

This index and procedure for securing additional information are provided as a service to World Oil advertisers and a convenience to our readers. Gulf Energy Information is not responsible for omissions or errors.

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84 FEBRUARY 2019 / WorldOil.com

FEBRUARY
IADC, Drilling Caspian 2019
Conference & Exhibition,
Feb. 20-21, Hilton Baku,
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MARCH
SPE/IADC, Drilling Conference
and Exhibition, March 5–7,
Churchillplein 10, 2517 JW Den
Haag, The Hague, The Netherlands
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AAPG, Global APPEX – Prospect
and Property Expo, March 5-7,
Business Design Centre, London,
England, UK
P: +1 (918) 560-2616
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Gas Conference, March 6-7,
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SPE, Middle East Oil &
Gas Show and Conference,
March 18–21, Bahrain
International Exhibition
and Convention Centre,
Manama, Bahrain
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IADC, International Deepwater
Drilling Conference & Exhibition,
March 19-20, Petrobras R&D,
Rio de Janeiro, Brazil
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SPE/ICoTA, Well Intervention
Conference and Exhibition,
March 26-27, The Woodlands
Waterway Marriott Hotel
& Convention Center,
The Woodlands, Texas
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IPTC, International Petroleum
Technology Conference,
March 26-28, Beijing
International Convention Center,
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APRIL
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Conference 2019, April 3-5,
Fairmont Hotel Singapore
P: +65 (6533) 2988
judy.foong@seapex.org
http://seapexconf.org
AAPG, Southwest Section Annual
Convention, April 6-9, Irving
Convention Center, Irving, Texas
P: +1 (918) 560-2616
acollins@aapg.org
www.aapg.org/events
IADC/SPE, Managed Pressure
Drilling & Underbalanced
Operations Conference &
Exhibition, April 9-10, Mövenpick
Hotel Amsterdam City Centre,
Amsterdam, The Netherlands
(See box for contact information)
SPE, Oil and Gas India Conference
and Exhibition, April 9-11,
Renaissance Mumbai Convention
Centre Hotel, Mumbai, India
(See box for contact information)
MAY
OTC, Offshore Technology
Conference, May 6-9, NRG Park,
Houston, Texas
P: +1 (972) 952-9494
F: +1 (713) 779-4216
meetings@otcnet.org
http://2019.otcnet.org
IADC, Drilling Onshore Conference
& Exhibition, May 16, Omni Hotel
Houston Westside, Houston, Texas
(See box for contact information)
AAPG, Annual Convention and
Exhibition, May 19-22, Henry B.
Gonzalez Convention Center,
San Antonio, Texas
P: +1 (918) 560-2616
acollins@aapg.org
www.aapg.org/events
dmg events, Canada Gas & LNG
Exhibition and Conference,
May 21-23, Vancouver Convention
Center East, Vancouver,
British Columbia, Canada
P: +44 (20) 3615-5936
richardmackintosh@dmgevents.com
http://www.canadagaslng.com
JUNE
SPE, 81st EAGE Conference
and Exhibition, June 3-6,
ExCel London, London,
England, the UK
(See box for contact information)
dmg events, Iberia Gas & LNG
Conference & Exhibition,
June 10-11, Palacio Municipal
de Congresos, Madrid, Spain
P: +44 (7810) 003-125
gavin@praxisevents.co.uk
https://www.iberiagas.com
IADC, World Drilling 2019
Conference & Exhibition,
June 19-20, NH Milano Congress
Centre, Milan, Italy
(See box for contact information)
JULY
AAPG/SPE/SEG, Unconventional
Resources Technology Conference
(URTeC), July 22-24, Denver, Colo.
(See box for contact information)
AUGUST
IADC, Well Control Conference
of the Americas & Exhibition,
Aug. 27-28, Moody Gardens
Hotel, Galveston, Texas
(See box for contact information)
AAPG, International Conference
& Exhibition, Aug. 27-30,
Hilton Buenos Aires, Buenos
Aires, Argentina
P: +1 (918) 560-2616
acollins@aapg.org
www.aapg.org/events
SEPTEMBER
dmg events, World Heavy Oil
Congress & Exhibition,
Sept. 2-4, Oman Convention
& Exhibition Centre, Muscat,
Sultanate of Oman
P: +971 (2) 697-0504
clairepallen@dmgevents.com
http://www.worldheavy
oilcongress.com/
SPE, Offshore Europe Conference
and Exhibition, Sept. 3-6,
Aberdeen Exhibition and
Conference Centre,
Aberdeen, Scotland
(See box for contact information)
AAPG, Rocky Mountain Section
Annual Meeting, Sept. 15-19,
Little America Conference Center,
Cheyenne, Wyo.
P: +1 (918) 560-2616
acollins@aapg.org
www.aapg.org/events
World Oil® / FEBRUARY 2019 85
SEG, Annual Meeting,
Sept. 15-20, Henry B. Gonzalez
Convention Center,
San Antonio, Texas
P: +1 (918) 560-2616
acollins@aapg.org
www.aapg.org/events
dmg events, Gastech
Exhibition & Conference,
Sept. 17-19, Houston, Texas
+44 (203) 615-2393
jamiegordon@dmgevents.com
https://www.gastechevent.com/
IADC, Drilling HSE&T Europe
2019 Conference & Exhibition,
Sept. 18-19, Marriott Amsterdam
Hotel, Amsterdam,
The Netherlands
(See box for contact information)
World Oil, HPHT Drilling
and Completions Conference,
Sept. 24-25, Norris Conference
Centers, CityCentre,
Houston, Texas
SPE, Annual Technical Conference
and Exhibition, Sept. 30-Oct. 2,
Calgary, Alberta, Canada
(See box for contact information)
OCTOBER
AAPG, Eastern Section Annual
Meeting, Oct. 12-16, Doubletree
by Hilton Hotel Columbus –
Worthington, Columbus, Ohio
P: +1 (918) 560-2616
acollins@aapg.org
www.aapg.org/events
IADC, Advanced Rig Technology
Conference & Exhibition,
Oct. 22-23, Mövenpick Hotel
Amsterdam City Centre,
Amsterdam, The Netherlands
(See box for contact information)
International Association of
Drilling Contractors (IADC)
P: +1 (713) 292-1945
F: +1 (713) 292-1946
info@iadc.org
www.iadc.org/events
Society of Petroleum
Engineers (SPE)
P: +1 (972) 952-9393
F: +1 (972) 952-9435
spedal@spe.org
www.spe.org/events/calendar
World Oil/Gulf Energy
Information Events
P: +1 (713) 529-4301
F: +1 (713) 520-4433
energyevents@
gulfenergyinfo.com
www.worldoil.com/events

U.S. inches closer
to energy independence
After four years of cutbacks, oil compa-
nies are poised to increase spending and
start developing offshore fields. The long-
awaited rebound is expected to re-energize
oil service providers that survived the deep
cost reduction, due to mergers, debt re-
structuring and massive personnel reduc-
tions. Despite recent oil price volatility,
spending on offshore oilfield services will
rise 6% in 2019, reaching $208 billion, and
surge 14% in 2020 (Bloomberg).
Subsea leads rebound. Oil producers
are forecast to commit to 110 new sub-
sea projects this year, up from 96 in 2018
and just 43 in 2016—when the industry
slashed capex as oil slumped. The mar-
ket for subsea equipment is projected to
expand between 13% and 14% each year
through 2023. This is set to take place, as
suppliers resume hiking prices. Oilfield
surveyors and providers of support and
maintenance services should rebound,
but at a slower pace. Overcapacity of ves-
sels continues to glut the market and the
rig sector.
London-based oilfield services pro-
vider TechnipFMC forecast that 2019
revenue for its subsea division will climb,
but margins may fall. The company an-
ticipates “continued strong activity” for
investment in small-to-mid-sized proj-
ects, and “an increasing number of the
larger greenfield subsea projects,” CEO
Doug Pferdehirt said in December. Many
of these projects are in deep waters, which
should benefit subsea manufacturers in-
cluding, TechnipFMC and Subsea 7.
Rigs and seismic should benefit.
While operating companies press ahead
with new developments, they will most
likely focus on developing production
from existing fields. However, some may
take on more risk and drill wildcats in
riskier exploration projects, forcing sur-
veyors and drillers to send more vessels
and rigs to scrap. “With oil prices trad-
ing below $60/bbl, there continues to be
some uncertainty on 2019 E&P spend-
ing, particularly offshore,” Kristian Johan-
sen, CEO of Norwegian oilfield surveyor
86 FEBRUARY 2019 / WorldOil.com
THE LAST BARREL
CRAIG FLEMING, TECHNICAL EDITOR
TGS Nopec Geophysical said in Janu-
ary. However, TGS should benefit from
its solid balance sheet, while Petroleum
Geo-Services may face “challenges ahead,
in terms of an oversupplied seismic vessel
market and approaching debt maturities,”
Nordea analysts Glenn Lodden and
Even Mostue Naume said, France’s
CGG should be more attractive, once it
completes a plan to shed its remaining
seismic vessels. However, restructur-
ing takes time, and the company may
incur additional costs, the analysts said.
There should be a “slight rise in demand
from drilling,” meaning that just 30% of
deepwater rigs may remain idle this year,
down from 35% last year, Mhairidh Ev-
ans, an analyst at Wood Mackenzie, said
in an interview. “Some more overcapacity
needs to be taken out of the supply chain.”
Transocean, which last month announced
an $830-million drilling contract, may
benefit from the rebound as it focuses on
deep water, while Shelf Drilling may also
gain from its exposure to the Middle East.
Still hard times for some. On the
other hand, the market for equipment
used on shallow-water platforms, such
as pumps, turbines and heat exchangers,
may lag, partly because they tend to be or-
dered later in project cycles.
Bourbon Corp., a French operator of
support vessels for offshore industry, is
also looking for signs of recovery, as per-
sistent low rates have forced it to suspend
payment of its debt. Bourbon’s situation is
“worrying,” as it operates in an oversup-
plied market, said Kevin Vo, an analyst at
AlphaValue in Paris.
“As a company sanctions a project
or an exploration campaign, that cash
doesn’t flow through the supply chain,
until perhaps one or two or three years,
so the supply chain isn’t out of the woods
yet,” said Woodmac’s Evans. “So, 2020
looks like the year, where many parts of
the supply chain will start to feel better.”
Large deepwater discovery. South Af-
rica’s first deepwater discovery, by French
oil major Total, is exactly the type of news
that the offshore industry needed to kick-
start other similar ventures. The Brulpadda
find, estimated at about 1 Bbbl by Total
CEO Patrick Pouyanne, could be enough
to supply South Africa’s refineries for al-
most four years. That’s a boon for a coun-
try that has always been short of oil and is
running out of its scant domestic supply of
gas. “It is really transformational,’’ Andrew
Latham, V.P. of global exploration at con-
sultant Wood MacKenzie, said Thursday.
The field, which produces mostly gas-
condensate, was discovered 109 mi off the
country’s southern coast in the Outeni-
qua basin. The area may now draw further
interest, especially since South Africa is
due to introduce new legislation later this
year aimed at spurring exploration. The
find “is potentially a major boost for the
economy,” said Minerals Minister Gwede
Mantashe. “We welcome it, as we contin-
ue to seek investment.”
Total’s discovery is a “catalytic find”
for the country, said Niall Kramer, CEO
of the South African Oil & Gas Alliance,
an industry lobby group. “There’s noth-
ing that has been on this kind of scale.”
The resource could be about three times
the size of all of South Africa’s gas finds
to date, according to WoodMac’s Latham.
Total, operator of the license, now plans
to acquire 3D seismic data before drilling
as many as four more exploration wells.
More good news. With 12 recent dis-
coveries by ExxonMobil, the deepwater
Guyana finds have shed new light on the
entire South American offshore industry.
ExxonMobil recently reported its 12th
discovery in January. It also announced
that its recoverable resource estimate for
the Stabroek Block grew another 1 Bboe,
to more than 5 Bboe.
Another phoenix rising. As witnessed
by the amazing rebound in the U.S. shale
fields, offshore suffered a mighty blow, but
with the industry’s typical never-say-die at-
titude, the deepwater fields are starting to
recover with an eye on the prize.
ŝŝCRAIG.FLEMING@WORLDOIL.COM
 2019

2-4 April, 2019 London, UK

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