The Official Publication of the Canadian Association...

Canadian Well Construction JournalThe Official Publication of the Canadian Association of Drilling Engineers

Volume 2 | Issue 6

June 20108 PAUL ZIFF SPEAKS

Conventional at the Crossroads13 SAFEty FEAtUrE

Overturn of a Freestanding Mobile Double Service Rig

6 ASSocIAtIon InFormAtIon

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Canadian Association Of Drilling Engineers June 2010 3

table of contents

Canadian Association of Drilling engineers (CADe)800, 540-5 Ave. SW, Calgary, Alberta T2P 0M2

Phone: 403 264-4311 | Fax: 403 263-3796

www.cade.ca

managing Editors: Todd Brown, Mike MacKinnon

cWcJ Photographer: Mike MacKinnon

Advertising Sales: Nick Drinkwater

Published by: JuneWarren-Nickle’s Energy Group

CADE’s mandate is to provide high-quality techni-

cal meetings to promote awareness of the drilling

& well servicing industry. Through CADE, members

and the public can learn about the technical chal-

lenges and experience gained from our speakers,

who are most often CADE members themselves.

We invite you to join CADE and further your profes-

sional development.

Past issues of cADEnews are available online.

Current issues of canadian Well construction Jour-

nal are available via email, to CADE members only.

CADE is not responsible for any opinion or statement

expressed in this publication.

President’s MessageWelcome everyone to the final publication for the 2009/2010 year of the Canadian Well Construction Journal (CWCJ). This month’s issue signifies a complete year for the CWCJ. The support of our sponsors, volunteer editors, JuneWarren-Nickle’s Energy Group, and contributors has made our inaugural year for the CWCJ a true success.

This past year has been a year for finding our way again. The drilling and comple-tions industry has come off some tough times in 2008 for a more favourable 2009 but certainly not the activity levels of previous years. Everyone is thankful to see an upward trend in activity levels. CADE has maintained its commitment to our mem-bers. We have remained positive, growing our offering in various traditional and non-traditional ways.

The annual CADE/CAODC Conference this year was a true success. The technical program consisting of two streams—drilling and completions—was a first for the con-ference. CADE’s effort to reach the completions audience is critical to our growth and we will continue this effort in 2010/2011. The close working proximity between drilling and completions with the movement towards open-hole isolation fracturing techniques is a good example why CADE will diversify further into the completions discipline

Our first Forum Debate was well attended. Additional volunteers and efforts will be our focus in the coming months to ensure this technical social gathering happens again. CADE has identified two new and exciting topics on which to build. Drilling and completing the Cardium oil play and water consumption in the upstream sector are two very noteworthy topics that I am sure our membership will come out to hear more about.

As the 2009/2010 year comes to an end for the summer, I would like to thank you for your support. It has been fun and rewarding to be a part of CADE. I wish John Garden, CADE’s incoming president, all the success he and the organization deserves. I encourage all our members to become volunteers for CADE as your time and knowledge is required for our growth and success.

Patrick Murphy, P.Eng.President, Canadian Association of Drilling Engineers

FEAtUrE StorIES

Conventional at the Crossroads 8

overturn of a Freestanding mobile Double service Rig 13

DEPArtmEntS

Member Profile: Todd Brown 5

Association News 6

Editor’s Note 7

Upcoming Events 7

Stats At A Glance 14

Cover photo: Todd Brown

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Todd BrownSales and Marketing Manager, The Motor Company

Describe your role with The motor Company, your background, and your career path.I am the sales and marketing manager for a drilling motor manufacturer in Calgary. My job is to bring our innovative products to both the North American and international markets. My background includes attend-ing the University of Manitoba, majoring in fine arts. My business career has always centred on sales and marketing. Before I got involved in the energy industry, I was involved in bringing computers to busi-nesses (back when the Internet was only available in DOS format) and did a variety of entrepreneurial business ventures that were filled with, shall we say, hard lessons in business. I started my career in the en-ergy industry with Halliburton in 1998 sell-ing their completions and casing product lines. Reporting directly to Houston head-quarters, I was chosen to lead the Casing Accessories Team blitz for the Canadian region and was lucky enough to work with, and learn from, all the top people in the company, so it was a great experience.

What is the most rewarding part of your job?The most rewarding part of my job is see-ing our new designs successfully making our customers money. We keep trying to reinvent the wheel, and I think we have with some of our new drilling motor products. We received two rare calls from directional drilling hands last year, from a rig location, saying how much they loved our motors. I don’t think I’ve ever witnessed a directional driller getting that excited that he had to call a supplier. That was a very rewarding experience.

What is the toughest part of your job?Being patient. We are a young company and we came on the scene five years ago

MEMBER PROFILE

when the market was coming out of the last boom, so we feel we are past the hard part and are looking to the future now. Stability and longevity are the keys to suc-cess in this business, as proven by numer-ous long-standing service companies in the province, so I think our future looks bright.

Who has had the greatest influ-ence on your career?For me, it’s not so much an individual that has impacted on my career, but a “what” has influenced my career choice. I think

studying drawing, sculpture, and painting in university has influenced my career the most. I think my creative schooling has helped me add more value to my employ-ers through my creative marketing ideas.

What do you like to do when you are not working?I am a long-time F1 racing fan, I like cooking things I can’t pronounce, and I like photogra-phy. So it’s fun to go on CADE photography missions with Mike MacKinnon, the CWCJ co-editor/photographer.

Photo: Mike M

acKinnon

6 June 2010 Canadian Well Construction Journal

cADE Executive 2010/2011TITLE NAME TITLE NAME

President John Garden Social Chairman Dan SchlosserPast President Patrick Murphy CWCJ Editor VacantVice-President Vacant Technical Chairman Jeff ArvidsonSecretary Tammy Todd IT Chairman Cris CatrinescuTreasurer Alice Skoda Drilling Conference Liaison Kim BartonMembership Chairman Jason Tiefenbach Executive Member Ryan SchoenhalsEducation Chairman Mike Buker CAODC Liaison John Pahl

Association/Membership News

Welcome new members NAME COMPANY TELEPHONE EMAIL

Olumide Adigun Student 4477609220116 [email protected] Brown Calmena Energy Services 403-366-2097 [email protected] Bush Extreme Engineering 403-537-5799 [email protected] Cameron NL Fisher Supervision and Engineering 403-226-7478 [email protected] Casorso Fire Creek Resources Ltd. 403-234-9309 [email protected] Demian Statoil 403-718-8755 [email protected] Doble Crescent Point Energy Corporation 403-718-1777 [email protected] Heath Newpark Drilling Fluids 403-266-7383 [email protected] Howat Newpark Drilling Fluids 403-266-7383 [email protected] Johnson Engineered Drilling Solutions Inc. 403-233-2850 [email protected] Khan Student – Pakistan [email protected] A. Konkin Performance Fluid Management 403-538-4719 [email protected] Lutz Q'Max Solutions Inc. 403-513-6021 [email protected] Masikewich Dril-X Fluids Inc. 403-444-1517 [email protected] McCosh University Of Alberta 780-289-4335 [email protected] Muir Husky Energy Limited 403-298-6064 [email protected] Onslow Q'Max Solutions Inc. 403-513-6027 [email protected] Oszust Devon Canada Corporation 403-515-5701 [email protected] Ozegovic Weatherford Canada Partnership 403-693-7521 [email protected] Runge Axis Energy Services 403-264-4301 [email protected] Schmigel Weatherford Canada Partnership 403-693-7873 [email protected] Shah National Geotechinical Services 92-33-3866668 [email protected] K. Shopperly Southridge Petroleum Consultants Ltd. 403-263-3035Randy Smith RSP Energy Canada 403-444-4815 [email protected] Wallis Devon Canada Corporation 403-213-8114 [email protected] Wilson Statoil 403-724-0307 [email protected]

TITLE NAME TELEPHONE

President Patrick Murphy 403-266-7383Past President David White 403-699-5160Vice-President John Garden 403-441-2300Secretary Tammy Todd 403 613-8844Treasurer Alice Skoda 403-232-6066Membership Chairman Jason Tiefenbach 403-543-8012Education Chairman Mike Buker 403-213-3615 Social Chairman Dan Schlosser 403-531-5284CWCJ Editor Todd Brown 403-230-3055Technical Chairman Jeff Arvidson 403-232-7100IT Chairman Ryan Schoenhals 403-767-0202Drilling Conference Liaison Doug Hollies 403-604-6645Executive Member Shannon Kelsick 403-992-4142CAODC Liaison John Pahl 403-292-7966

cADE Executive team 2009/2010


Association/Membership News

Editor’s note

cADE membership renewals 2010-2011

cADE technical Luncheon ticket Price Increase

Upcoming Events

CADe Technical luncheon Wednesday, June 16, 2010 The Westin Calgary

CADe Technical luncheon September TBA, 2010 The Westin Calgary

The CADE membership year is September to September. Watch your email over the summer for your CADE renewal link. Please remember the benefits of being a CADE member include APPEGA’s professional development hour, staying abreast of technological and industry advances, drilling conferences, and a great opportunity to network. Your prompt attention will be greatly appreciated when you receive your renewal notification.

Members: $45 (incl. GST)Non-members: $55 (incl. GST)

Full tables of 10: $450 (incl. GST)Student: $15 (incl. GST)

Walk-up: $55 (incl. GST)GST Registration #R123175036

This is the final issue of the Canadian Well Construction Journal (CWCJ) for this 2009/2010 season and my last issue as your editor. It has been a very exciting few years for me, and I want to thank the whole membership for all the contributions and encouragement. Our Canadian energy industry is full of brilliant minds, diverse backgrounds, and a variety of characters. We are known around the world as industry lead-ers, so it has been a great honour for me to have worked for all of you.

About a year and half ago we agreed to work with the JuneWarren-Nickle’s Energy Group (JWN) to develop and create a ‘new look’ monthly publication, and I think our team has really done a good job. Doreen McArthur (long-time publisher of the Canadian Oil Register at JWN) got the task of teaching Mike MacKinnon (technical editor and profile contributor) and I the ropes of publishing a professional magazine. We are both quick learners, so we caught on right away—we did whatever the heck Doreen told us to do. I’d say she made us look pretty good. Thanks Doreen for the publishing lessons.

Dale Lunan (who’s the editor of Oilweek magazine, one of the flagship publications along with the Daily Oil Bulletin in the JWN portfolio) has taken over as our publisher and he will be working to advance the content of the journal and connect us as an association.

Billions of dollars are transacted in the 15 square blocks of downtown Calgary every year, and no one has a better handle on our industry’s corporate weather than Paul Ziff of Ziff Energy. I am excited to end my term with a fantastic interview with him done by independent writer Jacqueline Louie. I have been lucky enough to meet Paul at a few events over the years, and the one common theme I’ve picked up from his communications is that we should all think globally—but act locally. So it is with great pride we present the final say to one of our best navigators. This issue—Ziff speaks.

I hope you enjoy the issue and have a great summer. I look forward to seeing you all again next year.

Todd Brown, CWCJ Editor [email protected] | cell: (403) 969–8148

Effective September 1, 2010, the following ticket price increases will take effect:

Technical Luncheon—SEPTEMBER 2010


ZIFF SPEAKS

While the strong price of oil drives activity in the Canadian oil-patch, western Canada’s conventional gas industry faces several disadvantages compared to the United States that could hinder its competitiveness in the years to come.

This is what Paul Ziff, chief executive officer of Ziff Energy, sees ahead if companies continue doing business as usual and do not take a longer-term view of things.

“If we all think of only the next couple of quarters or the next year, as opposed to a longer-term time frame, then we will slowly increment ourselves to a smaller industry,” Ziff says. His Calgary-based consulting firm specializes in exploration and production analysis across North America and in more than 30 countries worldwide.

He cautions that the conventional industry (primarily gas, as well as older types of oil) is facing major challenges. The first, he says, is the high loonie.

“The Canadian dollar has had a huge uplift,” he says. “Every time the Canadian dollar gets stronger, it’s good for our vacations but it’s lousy for our commodities.”

Gas prices in particular are adversely affected by the strong loonie. “The negative impact of the loonie hits gas prices harder, because the price of gas is so much lower than the price of oil.”

Equally significant is the fact that gas prices—set internationally at the Henry Hub in Oklahoma—have remained weak due to high drilling and initial production levels of shale gas. The Canadian full cycle cost for new gas has dropped from $7 per thousand cubic feet to just a little more than $6, due to the very low current royalties, but it still remains far above the current gas price.

For these reasons, “it’s much better to be a McDonald’s than an explorer for new gas,” Ziff observes, noting that selling a ham-burger for US$4 is far more profitable than selling natural gas for US$4 per thousand cubic feet. Input costs for the backyard BBQ hamburger are just $1.25, he explains, although input costs for gas come in at around $6.30 in Canada and a lower $5.60 for North America.

Currently, gas is selling at a high discount to oil. Typically, the price ratio of oil to gas ranges from 8:1 to 10:1, which is a moderate

Conventional at the CrossroadsWith gas prices stagnating and the shale

gas revolution underway, western Canada’s

conventional oil and gas business faces an

uncertain future

by Jacqueline Louie


discount for gas. And in a worst-case scenario, that ratio will rise to approximately 15:1.

Now that oil prices are pushing past US$85 a barrel and natural gas prices are hovering stubbornly at around US$4 per a thousand cubic feet, the ratio rises to over 20:1, which represents “a huge discount” in the price of gas, Ziff says.

“So when you consider the heat equivalent is 6:1, it means that oil is a lot better to direct investment towards [than gas]—if you have the option,” he notes. “That’s why you are seeing a very strong increase in oil-directed drilling.”

Another challenge facing the conventional industry is the gener-ally more mature Western Canadian Sedimentary Basin, which is shallower on average than most U.S. deposits.

As well, service costs in Canada tend to be higher than in the United States, due to spring breakup and winter-only seasonal access to northern areas with muskeg.

The fifth disadvantage for Canadian gas is the ‘basis differen-tial,’ which refers to the average transportation cost of bringing the product to market. Since Canada is further to market for both oil and natural gas, the average Canadian basis differential is higher than in the United States. Gas, in particular, is expensive to trans-port, since it must be compressed at regular intervals and moved through capital-intensive pipeline networks.

For these four reasons, Ziff thinks it’s important for the industry to begin moving to a different way of doing business. Traditionally, he observes, “when prices are high, service companies increase ➤

© ZIFF ENERGY GROUP, 2010

Cost of the Natural Gas “Hamburger”

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their rates. And when prices are low, the producers beat up the drillers and service providers.” The industry, he says, needs to get past that kind of thinking.

“We believe a new business paradigm that recognizes some of these uniquely Canadian challenges,” Ziff says. “I’m not suggest-ing it’s going to be easy; however, if we do not do it, then we are all going to be in a smaller industry in western Canada. If we con-tinue with those disadvantages, if we continue doing business the traditional way, it is guaranteed that the overall size of the industry is going to progressively get smaller. The reason is that capital is mobile, particularly for the U.S. super-independents and the U.S. and international majors. They may want to invest in the oilsands, although there is nothing to suggest their capital is captive for con-ventional gas and oil. If it is more economic in the U.S. or another country, the discretionary capital will migrate to the region that gives them the best economic return.”

The Alberta government has offered a number of concessions to the energy industry “which certainly helps,” he adds, complimenting the government on its recent changes to the province’s royalty regime, which he thinks will help boost competitiveness and industry activity.

“On the conventional side, we’ve seen the coming back to life of a number of projects that had been mothballed, which reflects the fact that oil prices are pretty decent and also that the mega-inflation caused by the very high oil prices stimulating so much oilsands activity two and three years ago has now been reduced to something like normal,” Ziff says. “That means that oilsands activ-ity is not sucking labour from across the provinces, and causing provincial inflation to be higher.

“However, the problem is bigger than that, and the government through royalties and taxes can’t fix everything—so the various

industry sectors also need to be proactive,” he says. “We now face the larger problem of how the other players in the Canadian gas industry are going to make this basin competitive. Absent this, what we will see is service companies sending equipment over-seas, as they did in the downturn, and gradually, even Canadian companies will become more active internationally.”

Ziff sees several ways the Canadian energy industry could work together to develop a new business paradigm. Forming strategic alliances, for instance between an operator and a service provider, could help, as could taking a longer-term view of the business cycle.

“If there were multi-year contracts, as opposed to bidding every winter drilling season, then there could be better planning and everyone could move toward a steadier program,” he says. “This would certainly help with hiring staff, which is not the easiest, partly because of demographics, and also because whenever the oilsands are hot they absorb people out of the various labour markets. If a service provider can give an assurance of year-round employment to its staff, there will be less turnover and greater efficiency, which will benefit the user of the service.”

Some companies are already going this route. In particular, some of the majors have reconceived their activities, Ziff points out.

For instance, instead of annual budgets they are looking at a life cycle of three, five, or even seven years. This way, when considering repeatable projects, companies can plan and achieve better econo-mies than when their budget goes up or down each year depending on commodity prices.

“In this way, activities become more and more economic.”Ziff Energy has just completed an analysis of ‘full-cycle’ supply

costs for new gas in all North America’s significant basins,


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including Alaska and the Mackenzie Delta. In this, Ziff Energy’s second major study on this topic, the gas consulting firm is com-paring a large number of shales with conventional gas plays.

“Shale is very young in its growth,” Ziff notes. “So the trajecto-ries for shale gas growth are very high and the economics can be

good, especially if there are associated natural gas liquids.”However, one needs to look at the cold hard facts, not just the

corporate press releases. Notwithstanding, most of Canada’s gas plays rank in the third and fourth quartile, adding to the urgency for action by the industry’s stakeholders. ■


sIlVeRGolD

Sponsorship opportunities

The CADE sponsorship package offers a cost-effective way to inform the key decision makers of our member companies about your products and services. Stay visible and competitive by making a CADE sponsorship part of your overall marketing strategy.

Thank You To Our Sponsors

In addition to advertising placements, sponsors receive:• Coverage at each technical luncheon in print and PowerPoint slides• Visibility on the CADE website • Recognition on the dedicated Sponsor Page in each issue of the journal

Contact Nick Drinkwater today to arrange for your sponsorship advantage. email: [email protected] or phone 403-516-3484.


SAFET Y FEATURE

Safety Alert (#06—2010)

Overturn of a Freestanding Mobile Double Service Rig

Description of incident:

On December 10, 2009, a freestanding mobile double service rig was erected with the catwalk in the incorrect position preventing the driller’s side tubing board guy wire from being securedThe off-driller’s side tubing guy wire could not be tightened to required tension.The rig commenced work in an unstable environment.On December 14, 2009, 113 stands of 3.5-inch tubing were evenly racked, and 15 stands of 4.75-inch drill collars, 10 stands racked on the drillers side, and five stands were racked on the off-driller’s side.A single or combination of triggers, such as wind on the racked tubing, uneven racked drill collars in the tubing board, ice heave, or shift in soil, potentially created a twist in the structure.With the tubing board guy wires not installed and pre-tensioned, the mast stem carried the twist through the tubing board lugs.The rig overturned and fatally injuried a worker.

What caused it:

Review of the rig design by an independent engineer to the API Specification 4F, 2nd Edition, confirmed that the overall rig assembly was stable and safe for operation within the manufacturer’s design load limits as per the recommended rig-up procedure.Wind acting on the driller’s side of the racked pipe (26 kilometres per hour) and the uneven racked load created a positive induced torsion twist around well centre of the mast stem.When the tubing board twisted, a side load was applied as the racked pipe shifts from a straight lean (away from the mast) to a combined straight and side lean. At the point just prior to the mast overturning to the off-driller’s side, the side load at the tubing board exceeded the torsional stiffness of the mast stem and overturned capacity of the free-standing package.The point of failure was determined to be the pin connection on the off-driller’s side load beam. As the mast stem and pipe began to shift, the resulting overturning load caused the rear jacks to lift off the load beam. As the off-driller’s side rear jack began to lift off the load beam, the load in the pin connection exceeded ultimate strength and failed causing the off-driller’s side outrigger to shear off.

corrective actions:

➤ Ensure all rig designs meet or exceed API Specifications 4F, 2nd and 3rd Edition.➤ Communicate the importance of following company and manufacture safe-operating procedures.➤ Educate employees of the importance of the employee’s obligation to refuse unsafe work. (Alberta OH&S Act Section 35)➤ Educate employees of the Wellsite Safety Responsibility for the operator, wellsite supervisor, and employer (IRP 7—Section 7.4)

Incident Type: Fatality

Release Date: May 20, 2010

location: Western Canada

DISCLAIMER: This Safety Alert is designed to prevent similar incidents by communicating the information at the earliest possible opportunity. The information may change accordingly over time. It may be necessary to obtain updates from the source before relying upon the accuracy of the information contained herein. This material is presented for information purposes only. Managers and supervisors should evaluate this information to determine if it can be applied to their own situations and practices.

Contact: Enform | 1538 – 25 Avenue NE | Calgary, Alberta, Canada T2E 8Y3 | E: [email protected] | T: (403) 250-9606 | www.enform.ca


Stats At A Glance

Drilling rig Activity May 18, 2010

PSAC Zone ACTIVE DOWN TOTAL % ACTIVE

Alberta 80 465 545 15%

Saskatchewan 70 67 137 51%

British Columbia 43 66 109 39%

Manitoba - 10 10 0%

Western Canada Total 193 608 801 24%

Northwest Territories - 1 1 0%

Northern Canada Total - 1 1 0%

Ontario - 1 1 0%

Quebec 1 2 3 33%

New Brunswick - 3 3 0%

Nova Scotia 1 - 1 100%

Newfoundland 1 - 1 100%

eastern Canada Total 3 6 9 33%

Canada Total 196 615 811 24%

Service rig Activity May 18, 2010

PSAC Zone ACTIVE DOWN TOTAL % ACTIVE

Alberta 277 390 667 42%

Saskatchewan 120 73 193 62%

British Columbia 6 27 33 18%

Manitoba 5 4 9 56%

Western Canada Total 408 494 902 45%

Quebec 1 1 2 50%

eastern Canada Total 1 1 2 50%

Canada Total 409 495 904 45%

JouRNAl CoNTeNTInformation in this publication may be sourced through a variety of contributors. Members are encouraged to email their suggestions regarding articles, general content, and statistical graphs and charts to: Dale Lunan at [email protected]

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Here’s How

we stack Up

FLATpak umbilicals offer a wide range of dual and triple options, tailored to your specific needs

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Contact InformationNick Drinkwater P: 403.516.3484E: [email protected]

www.cade.ca

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SponSor

Support CADE by SponSoring our tEChniCAl lunChES, our wEbSitE AnD thE Canadian Well ConstruCtion Journal.

As you look to build your business and launch new technologies, new products and services in the Drilling industry, your CADE Sponsorship offers you a cost effective way to deliver your message directly to the entire membership of the leading industry association for well Construction professionals in Canada.

Your SponSorShip includeS:Your SponSorShip includeS:➟ Ads in the brand new Canadian Well

Construction Journal, full of relevant industry news and articles, presented in a high quality, full colour magazine

➟ Your logo in the “Thank you to our sponsors” feature on the CADE website and in every issue of Canadian Well Construction Journal

➟ Your logo on the “Thank you to our sponsors” display at every CADE Technical Luncheon

➟ Authorized use of the CADE logo on your website and in marketing materials

2010/2011 SponSorShip packageS now available2010/2011 SponSorShip packageS now available

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The Official Publication of the Canadian Association...

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Transcript of The Official Publication of the Canadian Association...