World Oil - July 2015

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World Oil - July 2015

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  • September 2324, 2015 / Houston, Texas / HPHTConference.com

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  • OFFSHOREADVANCESNewbuilds taper off, but innovations coming from service companiesand equipment manufacturers

    MARINE SEISMICG&G integration enhances broadbandseismic data offshore Gabon

    COMPLETION TECHNOLOGYLimit water cut and gas breakthroughwith autonomous inflow control

    SHALETECH: AUSTRALIA/CHINAChina slashes shale production targets, but Australia expects a Beetaloo bounce

    JULY 2015 / DEFINING CONVENTIONAL, SHALE AND OFFSHORE TECHNOLOGY FOR OIL AND GAS / WorldOil.com

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  • World Oil/JULY 20153

    CONTENTSJULY 2015 / VOL. 236 NO. 7

    35 7262

    SPECIAL FOCUS:OFFSHORE ADVANCES35 Retooling for the upturn M. Slaton

    COMPLETION TECHNOLOGY47 Limit water cut and

    gas breakthrough with autonomous inflow control

    B. A. Voll / I. M. Ismail / I. Oguche

    MARINE SEISMIC53 Managing simultaneous

    operations during seismic acquisition in offshore fields

    S. Darling / G. PembertonL. Strater

    57 G&G integration enhances acquisition of multi-client studies offshore Gabon

    G. Duval / J. Firth

    COLUMNS7 First oil

    Adversaries on attack

    15 Energy issuesElection rhetoric blossoming

    17 Whats new in exploration Has Continental Drift moved you?

    19 Drilling advances Keeping efficiency in the game

    21 Whats new in production A trick up their sleeves

    23 Offshore in depth Disputed waters raise hopes, create conflict

    25 Oil and gas in the capitals Nuclear deal with Iran impacts U.S. producers negatively

    27 Executive viewpoint Offshore project cost-savings of 30% to 40% are possible

    29 Innovative thinkers Don Conkle: Proppant innovation at Motocross speed

    94 The last barrel Widely disparate ideologies pose continual threat to industry

    NEWS AND RESOURCES9 World of oil and gas31 Industry at a glance87 People in the industry89 New products and services90 Companies in the news91 Marketplace /

    Advertising sales offices92 Advertisers index93 Meetings and events

    REGIONAL REPORT: NORTHWEST AFRICA62 The northwestern frontier

    region has seen a boost in exploration efforts, rewarded by some key discoveries that define the region as an up-and-coming E&P province

    L. White / T. Jensen

    SHALETECH: CHINA, AUSTRALIA SHALES72 High hopes, but results

    slim so far J. Redden

    REGULATORY AFFAIRS81 Beware of calls for a national

    energy policy D. Blackmon

    ABOUT THE COVERSleepless in Seattle? While Transoceans Polar Pioneer has left Seattle harbor to drill a two-well program for Shell in the Chukchi Sea, the Arctic exploration plan is still shy of two government permits. Environmental activists are continuing to file complaints with the U.S. Department of Interior and may file additional lawsuits to stop drilling activity. Photo: Shell Oil Company.

  • 4JULY 2015/WorldOil.com

    Mailing Address: PO Box 2608Houston, TX 77252-2608, USAPhone: +1 (713) 529-4301 Fax: +1 (713) 520-4433 WorldOil.com

    President/CEOJohn RoyallVice PresidentRon HigginsVice President, ProductionSheryl StoneBusiness Finance ManagerPamela HarveyPart of Euromoney Institutional Investor PLC. Other energy group titles include: Hydrocarbon Processing and Petroleum EconomistPublication Agreement Number 40034765 Printed in USA

    PUBLISHERRon Higgins

    EDITORIAL Editor-in-ChiefPramod KulkarniExecutive EditorKurt AbrahamAssociate EditorRoger JordanNews EditorEmily Snyder Contributing Editors Dr. A. F. Alhajji, Middle East Dr. Jeffrey M. Moore, Asia-PacificDr. Roger Bezdek, Washington Mauro Nogarin, Latin AmericaRon Bitto, Offshore Dr. ystein Noreng, North SeaDavid Blackmon, Reg. Affairs Dr. William J. Pike, Energy IssuesRobert Curran, Canada Jim Redden, DrillingDon Francis, At Large Dr. Jacques Sapir, FSU William (Bill) Head, Exploration Mike Slaton, At Large Raj Kanwar, South Asia Henry Terrell, ProductionIan Lewis, EAME Peter Howard Wertheim, BrazilSaeid Mokhatab, LNG Russell Wright, At Large

    MAGAZINE PRODUCTION/+1 (713) 525-4633Vice PresidentProductionSheryl StoneManagerAdvertising ProductionCheryl Willis ManagerEditorial ProductionAngela BatheAssistant ManagerEditorial ProductionAshley SmithArtist/IllustratorDavid Weeks

    ADVERTISING SALES See Advertising sales offices

    CIRCULATION/+1 (713) 520-4400/[email protected] Alice Murrell

    EDITORIAL ADVISORY BOARDChairmanDr. William J. Pike, Managing Consultant and Contractor to the National Energy Technology Laboratory, U.S. Department of EnergyBen Bloys, Manager, Los Alamos Technology Alliance, ChevronFranklin Boitier, Technical Communications Manager, TotalDeepak M. Gala, SME, Well Control Engineering and Relief Well Planning, ShellGary Halverson, Sr. V.P. and President, Drilling and Production Systems, Cameron, and Chairman, Petroleum Equipment & Services AssociationWilliam Donald (Donnie) Harris III, President and CEO, Forrest A. Garb and AssociatesAlexander G. Kemp, Professor of Petroleum Economics, University of AberdeenKeith Lynch, Global Completion Chief, ConocoPhillipsDr. D. Nathan Meehan, Senior Executive Advisor, Baker Hughes, and SPE President-elect 2016Douglas C. Nester, TransAtlantic Petroleum Ltd.David A. Pursell, Managing Director and Head, Securities, Tudor, Pickering, Holt and Co.Art J. Schroeder, Jr., CEO, Energy Valley, Inc.Cindy B. Taylor, President and CEO, Oil States International, Inc., and Chairman, National Ocean Industries AssociationSvein Tollefsen, Manager, Reservoir Technology, StatoilDoug Valleau, Director, Unconventional Technology, Hess CorporationRobert E. (Bob) Warren, President, Baclenna, Inc.

    World Oil is indexed by Business Periodicals Index, Engineering Index Inc., and Environmental Periodicals Bibliography. Microfilm copies are available through University Micro films International, Ann Arbor, Mich. The full text of World Oil is also available in electronic versions of the Business Periodicals Index.

    World Oil (ISSN 0043-8790), est. in 1916 as The Oil Weekly, is published monthly by Gulf Publishing Company, 2 Greenway Plaza, Suite 1020, Houston, TX 77046. Periodi-cals postage paid at Houston, Texas, and at additional mailing offices. World Oil and The Oil Weekly are registered trademarks of Gulf Publishing Company.

    Subscriptions: World Oil is available on a complimentary Request Subscription basis to persons actively engaged in the exploration/drilling/producing phase of the oil and gas industry who are in a position to recommend, specify or approve the purchase or use of equipment or services used in their operations. (When requesting subscription, state title, company name and nature of business as initial qualifications.) Persons who do not recommend, specify or approve the purchase or use of equipment or services (or persons in a related field of service or industry) can order subscriptions at the following rates: one year $299, two years $525, three years $674. AIRMAIL DELIVERY: Outside North America additional, $175/year. Single copies: $35 each, prepaid. PAYMENT MUST ACCOMPANY ORDER (make checks payable to World Oil).

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    Article reprints: World Oil, Cheryl Willis, Gulf Publishing Company, Advertising Produc-tion Manager. 2 Greenway Plaza, Suite 1020, Houston, Texas 77046. Phone: 713-525-4633. Fax: 713-525-4615. Email: [email protected].

    Copyright 2015 by Gulf Publishing Company. All rights reserved.

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  • Adversaries on attack

    FIRST OILPRAMOD KULKARNI, EDITOR

    World Oil/JULY 20157

    IN THIS ISSUE

    35 Issue focus: Offshore ad-vances. Last year, this report focused on newbuild rigs to illustrate in-novations entering the market. Accord-ing to Contributing Editor Mike Slaton, the downturn has changed that per-spective, as the entry of newbuilds has tapered off, and new orders and con-tracts have ground to a painfully slow pace. Slaton has focused his report on an equally important narrative of off-shore advances gleaned from the focus of technical papers, and the array of inventions from manufacturers and ser-vice companies.

    47 Limit water cut and gas breakthrough with au-tonomous inflow control. For many years, inflow control devices (ICDs), which restrict flow by creating addition-al pressure, have been used for effective reservoir sweep management and well-bore influx. They are, however, passive in nature and once installed, cannot be ad-justed. Autonomous ICDs are self-reg-ulating and classed as being active. An article by Tendeka authors describes the capabilities of the AICDs and presents a workflow to design a field-specific AICD.

    72 ShaleTech: China/Austra-lia. This months report looks at shale activity in two countries in the Eastern Hemisphere with significant shale resources. Contributing Editor Jim Redden reports that while Beijing con-tinues to contend that China is a major shale player-in-waiting, officials slashed their once-overly-ambitious shale gas production targets by more than a third. As for Australia, aside from a significant drilling program, targeting the organi-cally rich Velkerri shale in the Northern Territories Beetaloo basin, major local players see less-than-rosy prospects for unconventionals anytime soon, if ever.

    Our oil and gas industry is besieged by adversarial challenges across multiple fronts. Unfortunately, the industry is not a monolith. As such, it is difficult to develop an across-the-board strategy to combat these challenges. Weve beaten back some of the assaults, but others seem intermina-ble. Unfortunately, some of the confronta-tions are coming from within our industry.

    Market-share challenge. The indus-try was flying in the stratosphere at crude prices above $100/bbl, until Saudi Ara-bia imposed its full-production gambit to increase its market share. The resulting downturn has forced operators outside OPEC to cut back their E&P budgets (>20%) and reduce head count (>150,000 jobs). Were beating back the Saudi chal-lenge through fiscal discipline, operational efficiency and Wall Street support ($13.7 billion in new equity and debt funding in the first six months of 2015).

    Local hydraulic fracturing bans. While hydraulic fracturing bans across entire countries (e.g., France) and states (e.g., New York) are major impediments, the citywide ordinance in Denton, Texas, could have mushroomed to disrupt drill-ing throughout Texas, and spread to other parts of the North American shale plays. We were able to beat back the challenge in Texas through state legislation (HB40) that prevents a patchwork of city and county fracing regulations

    Clean water confusion. The U.S. EPA study on hydraulic fracturing and its po-tential impact on drinking water resourc-es was released in June 2015. The study concluded, We did not find evidence that these mechanisms have led to wide-spread, systemic impacts on drinking wa-ter resources in the United States. How-ever, the study left the door open for PR mischief by anti-fracing groups by stating, we have identified potential mechanisms by which hydraulic fracturing could affect drinking water resources. As such, the industry needs to continue to educate the public on the safety of our hydraulic frac-turing practices.

    Climate change conflict. The up-coming United Nations Climate Change Conference plans to impose a universal, legally binding agreement to limit global warming to below 2C by 2020. In an-ticipation of the conference, UN climate diplomat Christiana Figueres has asked the heads of six European oil majors to phase-out completely fossil-fuel emis-sions by 2100. The European oil com-panies had called for carbon pricing as a mechanism to incentivize cleaner en-ergy. U.S. oil companiesExxon Mobil and Chevronhave abstained from the carbon pricing initiative. The momen-tum, however, has shifted to the side of climate-change activists.

    Et tu Pope? Through his encyclical, Laudato S, Pope Francis has decried modern societys emphasis on consum-erism and maximization of profits at the expense of ecological degradation. The Pope has called for lifestyle changes and made climate improvement a moral im-perative. While the Pope has praised sci-entific and technological achievements, he has not fully acknowledged the role of fossil fuels and capitalism in lifting large segments of the worlds populations into a lifestyle of comfort that is the envy of every developing country.

    Low cost to high security. Who among us does not want clean water and clear skies? Our industry has long progressed on its mission to supply energy to the world at the lowest cost possible. We should replace the low-cost component of our mission with exceptional protection of the environ-ment. Lets strengthen our oil and gas infrastructure, and enhance HS&E pro-grams to the nth degree, so as to virtu-ally eliminate spills, reduce emissions, and recycle water and other waste prod-uct streams. The basic tenet of modern business is to give the people what they want. Now that the people are insisting on clean energy, we will have to insist on their acceptance of higher fuel and petrochemical costs.

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  • WORLD OF OIL AND GASROGER JORDAN, ASSOCIATE EDITOR

    World Oil/JULY 20159

    Wintershall announces first gas in Dutch North SeaWintershall has expanded its natural gas production in the Netherlands, with the start of output from the unmanned mini-platform L6-B. The so-called minimum facility-platform, off the Dutch North Sea coast, was built in just nine months and brought to its location in June 2014. The platform is in field L6-Bin the middle of a restricted military zoneand Wintershall Noordzee is the first company allowed to operate in this area. The installation needs to be as small as possible, and may well be the smallest topside known. The facility is anchored in the seabed through suction piles, rises about 18 m above the sea, and has three decks, but no helideck. The facility can accommodate a maximum of two producing wells. A pipeline will transport the gas produced at L6-B to neighbor-ing platform L8-P4. According to Wintershall, the mini-platforms substructure weighs 1,100 tons, while the top side weighs around 100 tons. To compare, L8-P4 weighs 4,500 tons. Image: Wintershall.

    BP installs Clair Ridge topside modulesBP and its co-venturers, ConocoPhillips, Chevron and Shell, have safely installed the new Clair Ridge platforms quarters and utili-ties (QU) topside modules. The QU platform comprises three modulesthe quarters and utilities integrated deck, the power generation module, and the living quarters module. Clair Ridge is a multi-billion-dollar invest-ment in the second phase of devel-opment on Clair field, which lies 75 km to the west of the Shetland Islands. The project comprises two,

    new bridge-linked platforms, and new pipeline infrastructure to connect storage and redelivery facilities on Shetland. The next major milestone will be the installation of the production and drilling platform topside modules, scheduled for summer 2016, with production expected to begin in late 2017. Clair Ridge will be able to produce an estimated 640 MMbbl of oil over a 40-year period, with peak production expected to be up to 120,000 bopd. Clair Ridge is the first sanctioned, large-scale, offshore EOR scheme using reduced salinity water injection (LoSal EOR) to extract a higher proportion of oil over the life of the field. To reduce the environmental impact of the project, the platforms will be powered using dual-fuel power generators, incorporating waste heat recovery technology. Vapor recovery will also be used to capture and recycle low pressure gas for use as fuel or for exporting to shore. In a challenging time for the industry, this project shows the potential of our basin and why it is so important that we work to ensure a competitive future business, Trevor Garlick, regional president for BPs North Sea business, said. Image: BP.

    Production underway at Kearl expansion

    Production at the Kearl oil sands expansion project in Alberta, Canada, started ahead of schedule and is expected to double overall capacity to 220,000 bpd of bitumen, Exxon Mobil announced on June 16. Ultimately, the expan-sion project is expected to reach 110,000 bpd. Kearl will access approximately 4.6 Bbbl of resources for more than 40 years. The expansion project consists of three additional trains that use proprietary, paraffinic froth treatment technology to produce bitumen. The project produces blended bitumen with about the same lifecycle greenhouse gas emissions as average crude oil refined in the U.S. The Kearl project is about 75 km northeast of Fort McMurray, Alberta, and is operated by Imperial Oil Limited, an Exxon Mobil affiliate.

    BP, Rosneft ink E&P agreementsRosneft and BP have signed several agreements, which will serve to strengthen the long-term strategic ties between them. The companies signed final binding agreements for Rosnefts sale to BP of a 20% share of Taas-Yuryakh Neftegazodobycha (Taas), creating a new JV in East Siberia. The venture will further develop Srednebotuobinskoye oil and gas condensate field, one of the largest in eastern Siberia. The Taas venture also will undertake development of suitable infrastructure for further exploration and development of the regions reserves. Related to this, Rosneft and BP will jointly undertake exploration of an associated Area of Mutual Interest (AMI) in the region, covering approximately 115,000 km2. Rosneft and BP also have agreed to jointly explore two additional AMIs in the West Siberian and Yenisey-Khatanga basins, covering a combined area of about 260,000 km2. This agreement commits BP and Rosneft to jointly conduct studies and, if successful, establish new JVs to obtain licenses and perform exploration activities. Any JVs will be owned 51% by Rosneft and 49% by BP. As part of this agreement, Rosneft and BP also will form a JV to carry out further appraisal work on the 2009 Rosneft-discovered Baikalovskiy field inside the Yenisey-Khatanga AMI. Exploration activities in the two AMIs will include screening studies, acquisition of seismic data, and the drilling of exploration wells as new licenses are added.

    Spectrum starts 2D survey offshore MexicoSpectrum announced on June 11 that its vessel had arrived in Mexico and started acquisition of the companys Gulf of Mexico 2D campaign, in collaboration with Schlumberger. The first phase of the acquisition program, named Mexico Campeche-Yucatan 2D Regional, comprises 12,200 km of regional lines from the full 44,000-km program. The program will cover areas from the Campeche Escarpment, including ties to Round 1 blocks, the Yucatan shelf and deepwater areas. The survey will also tie with Spectrums BigWave program in the U.S. Eastern Gulf of Mexico. Fast Track products will be available starting in July, with final products available in November.

    Petrobras sets pre-salt production recordPetrobras pre-salt production in May set two new monthly output records. Production handled by the company, including both Petrobras and partner production, reached a new high of 726,000 bopd, up 1.6% on the April figure. This includes Petrobras own record output of 519,000 bopd, 3.2% higher than the April figure.

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  • World Oil/JULY 201511

    WORLD OF OIL AND GASROGER JORDAN, ASSOCIATE EDITOR

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    Iran sanctions deal would disadvantage U.S. oilU.S. Sen. Lisa Murkowski (R Alaska) is continu-ing her efforts to lift the ban on most U.S. crude oil exports with the release of a new report. The 33-page document, which was released on June 23, argues that sanctions on Iranian oil should not be lifted without also lifting the current ban on U.S. oil exports. Any deal that lifts sanctions on Iranian oil will disadvantage American companies, unless we lift the antiquated ban on our own oil exports, Murkowski said. The impending deal with Iran is at the center of the nexus between national security and energy policy.

    Nutech reports on Gatwick Airport oil fi ndUK Oil & Gas Investments announced on June 18 that Nutech had provided the company with an independent report of the oil initially in place (OIP), contained within the 55 mi2 covered by the Horse Hill licenses (PEDL137 and PEDL246) near Gatwick Airport, south of London, UK. This evaluation does not include the OIP for the Portland sandstones. The study calculates that the total Jurassic shale plus tight conventional reservoir section of UKOGs licenses contain a best estimate, or P50, OIP of 9.245 Bbbl. The most significant OIP within the Jurassic section is contained within the shales and tight conventional reservoir limestone sequences of the Kimmeridge, with a calculated P50 total Kimmeridge OIP of 5.230 Bbbl.

    LLOG hits oil in Gulf of MexicoLLOG Exploration and its partners, Ridgewood Energy and Stone Energy Corp., have drilled a successful exploration test at the Viosca Knoll 959 Crown & Anchor prospect. The initial exploratory well encountered greater than 50 ft of net oil-bearing sand in a high-quality Miocene reservoir. LLOG owns a 60% working interest in the discov-ery. LLOG is evaluating regional hosts, as pertains to subsea development options for the project.

    Statoil in third Aasta Hansteen area discoveryStatoil and its partners in PL602 have hit a new gas find in the Gymir prospect. The find represents the third discovery in three months in the Aasta Hansteen area. Well 6706/11-2, drilled by the Transocean Spitsbergen, proved a gross, 70-m gas column in the Nise formation with good reservoir qualities. Statoil estimates the volumes in Gymir to be in the range of 6-19 MMbbl of recoverable oil equivalent. Gymir is located 8 km from Roald Rygg and 14 km from Snefrid Nord. The estimated total volumes in the three discoveries, Snefrid Nord, Roald Rygg and Gymir, amount to 75-120 MMbbl of recoverable oil equivalent, corresponding to about one third of the Aasta Hansteen recoverable volumes, Dan Tuppen, V.P. of exploration, Norwegian and Barents Sea, said. The discoveries will now be further evaluated for future tie-in to the Aasta Hansteen facilities, in order to optimize utilization of the infrastructure and prolong the production plateau. Aasta Hansteen will be the largest SPAR platform in the world and is the biggest ongoing field development project in the Norwegian Sea. Production start-up is expected in 2017.

    Low prices to slow growth of Canadian oil productionThe sharp drop in world oil prices over the past year will slow the growth of Canadian oil production over the next two decades, according to a new report by the Canadian Association of Petroleum Producers (CAPP). The association estimates that production of Canadian oil will increase 43% over 16 years, growing to 5.3 MMbpd by 2030, up from 3.7 MMbpd in 2014. CAPPs June 2014 forecast had estimated total oil production in 2030 at 6.4 MMbpd. While the two forecasts are similar during the early years of the forecast period, the slower pace of production in the latter years is the result of reduced capital

    spending intentions, due to the sharp decline in global oil prices. The oil sands remain the primary driver of oil growth in Canada, with production reaching 4 MMbpd by 2030. Conventional oil production in Western Canada, including condensates, is projected at 1.3 MMbpd by 2030. Eastern Canadian offshore production is forecast at 91,000 bopd by 2030. Image: Encana.

    OPEC keeps oil production targetOPEC opted to maintain its production target of 30 MMbopd at the organiza-tions mid-year meeting on June 5. However, according to Bloomberg, the 12-nation organization has been pump-ing above its official production ceiling for a year. Secondary data cited in OPECs June Monthly Oil Market Report, shows that OPEC nations produced 30.975 MMbopd in May, of which 10.107 MMbopd was accounted for by Saudi Arabia.

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  • World Oil/JULY 201513

    WORLD OF OIL AND GASROGER JORDAN, ASSOCIATE EDITOR

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    Redesigned Version Coming Soon!

    > Download on your iPhone or iPad today at WorldOil.com/ mobile-app.aspx

    Tendeka wins Austrian sandface completion contractTendeka has secured a contract with an international oil and gas company for installation of sand face completion technology in Austria. The installation will include FloRight Ultra premium screens with FloSure autonomous inflow control devices (AICDs) plus SwellRight packers and sleeves. The application is a brownfield development, and requires AICD technology to reduce water cut and unwanted gas production in the latest development phase with horizontal wells. Sand screens will be deployed across the full length of the 500-m lateral with up to 140 AICDs planned to be run in the well as part of the six-figure contract. This marks the first-ever AICD installation in the European land market.

    Aker Solutions, Baker Hughes cooperate on early-phase studiesAker Solutions and Baker Hughes have agreed to cooperate on early-phase studies to help customers improve the overall economics and value of oil and gas field develop-ments. Aker Solutions Front End Spectrum unit and Baker Hughes Reservoir Development Services group will provide customers with development concept studies that address the entire value chainfrom reservoir understanding and well design, to subsea and topsides facili-ties, including flow assurance and risk management. Initial customer studies are already underway.

    WPX adds acreage in Gallup oil playWPX Energy has completed the purchase of another 14,300 net acres in the San Juan basins Gallup oil window, from an undisclosed seller, for approximately $26 million. The acreage purchase represents an estimated 100 gross drilling locations, boosting WPXs tally in the San Juan Gallup to approximately 500. WPX now owns or controls approximately 100,000 acres in the core of the Gallup oil window, where it has drilled more than 100 wells following a successful discovery in early 2013.

    Hess sells half of Bakken processing unit for $2.68 billionHess Corp. has agreed to sell a 50% interest in its Bakken midstream assets to Global Infrastructure Partners, a global infra-structure investor, for a cash consideration of $2.675 billion. Hess and Global Infrastructure Partners will create a premier midstream JVHess Infrastructure Partners. The transaction is expected to be completed early in third-quarter 2015. The Hess midstream assets to be included in the JV are: a natural gas processing plant in Tioga, N.D.; a rail loading terminal in Tioga and associated rail cars; a crude oil truck and pipeline terminal in Williams County, N.D.; a propane storage cavern and rail and truck transloading facility in Mentor, Minn.; and a crude oil and natural gas gathering systems in N.D.

    Apache completes sale of Australian operations

    Apache Corp. has completed the sale of its Australian subsidiary, Apache Energy Limited, to a consortium of private equity funds managed by Macquarie Corporate Holdings Limited and Brookfield Asset Management Inc. Total proceeds of $1.9 billion are net of $225 million in customary, post-closing adjustments for the period between the effective date, Oct. 1, 2014, and closing.

    Maersk Training, Seadrill sign agreement

    Maersk Training has entered into an agree-ment with Seadrill, according to which Maersk will deliver its well control training globally under the accreditation of The International Well Control Forum (IWCF). The agree-ment will cover more

    than 2,000 assistant drillers, drillers, toolpushers, installa-tion managers, derrickmen and subsea engineers, when they need to renew their well control certification. It will give Seadrill a standardized training process, which previ-ously involved more than 27 schools, and ensure improved safety and performance excellence. Financial details under this agreement were not disclosed. Image: Seadrill.

    FMC wins $297-million Shah Deniz contractFMC Technologies has received an order from BP Exploration (Shah Deniz) Ltd. to supply subsea production systems for well clusters 3-5 of the Shah Deniz Stage 2 project in the Caspian Sea. The order has an estimated value of $297 million in revenue, and it is in addition to the initial order for well clusters 1-2, received in 2014 from BP, operator of the project. Shah Deniz field is in the Azerbaijan sector of the Caspian Sea, approximately 100 km south of Baku.

    BUSINESS /////////////////////////////////////////////////

    MERGERS AND ACQUISITIONS //////////////////////////////

  • ENERGY ISSUESDR. WILLIAM J. PIKE, EDITORIAL ADVISORY BOARD CHAIRMAN

    World Oil/JULY 201515

    Election rhetoric blossoming

    With the U.S. presidential elections only 16 months away, I am feeling more pressure daily to announce my candida-cy. Timing is importanttoo early, and you are just one of the pack. Too late, and you have missed the opportunity to es-tablish a media and online presence. So, I am thinking it will be soon.

    Of course, there are one or two other little hitches in my plan to run for Presi-dent. Perhaps the most vexing is my ener-gy policy. As an oil and gas guy, the elec-torate will expect me to have one. They will also expect it to embrace all sources of energy. And, it will have to differentiate me from the other candidates, which may be difficult as the announced and poten-tial candidates span the plausible options for energy policies. Here are samples of what I am up against.

    Republican candidate Jeb Bush, who has alternately opposed and sup-ported offshore drillingso long as it is not too close to his house in Floridawas bold and to the point in a recent statement. Expanding domestic energy production is key to ensuring Americas energy security, and with input from state leaders, we now have a chance to create a national energy plan to reform the leasing system, to expand drilling in areas where it is safe.

    Democrat Hillary Clinton, viewed as ber-liberal by many, has actually leaned to the right in her limited discus-sions/displays of energy policy. Like many others, her notions on energy poli-cy are tied to CO2 and greenhouse gas is-sues. But, contrary to expectations, they have, at times, been driven by practical-ity, as when she noted in a 2007 speech in Cedar Rapids, Iowa, that one of her poli-cy goals was to cut foreign oil imports by two-thirds from projected levels by 2030.

    A year earlier, she sided with Republi-cans and oil-patch Democrats by voting for the Gulf of Mexico Energy Security Act in 2006. The act opened some 8 mil-lion acres of the Gulf of Mexico for oil and gas development. To be sure, Clinton

    is no great lover of oil and gas, preferring the development of alternative energies. But, she is pragmatic about the role of oil and gas in the countrys energy mix.

    Republican Sen. Ted Cruz, from Texas, would be expected to be a strong proponent of oil and gas. Speaking at the Heritage Action for Americas 2014 Con-servative Policy Summit, Cruz said, the government will not solve our economic problems by controlling the economy or placing bureaucratic barriers to growth. The only thing that it must do is what it did in the Ronald Reagan eraget out of our way and let Americans do what they do best: dream, innovate and prosper. Its happening in Texas, and it's happening in North Dakota (referring to the shale oil boom). Now, we just have to convince Washington to let it spread through the rest of America.

    But, Cruz doesnt go as far as some might think. He introduced a bill last year to give states the right to determine whether they would allow drilling off their coasts, although, curiously, the bill did not include that right for some ar-eas of the North Atlantic and the North Aleutians basin offshore Alaska.

    Louisiana Gov. Bobby Jindal, like Cruz another Republican from a major oil and gas state, would also be expected to have a pro-oil-and-gas energy policy. He doesnt disappoint. Speaking to the Heritage Foundation last year, Jindal un-veiled his energy platform for America.

    Noting that the United States has the largest natural energy resources in the world, Jindal argued for expanded energy production to create jobs and strengthen the economy. The oil and gas industry employs millions of Americans, and mil-lions of more jobs could be created, if the federal government simply stays out of the way, Jindal said. Many manufactur-ers are now choosing to bring their jobs and facilities back to the U.S., because of the low energy prices that resulted from domestic energy innovations like frac-ing. According to the governor, fracing,

    alone, will lead to a 7% increase in Amer-icas median household income.

    Republican Sen. Marco Rubio of Florida has noted that he supports a comprehensive energy plan that encour-ages nuclear energy, exploration in the Arctic National Wildlife Refuge and environmentally safe leasing of oil and natural gas fields in the outer continental shelf, and on federally owned lands with oil shale in the West (2010 Senate cam-paign website, www.marcorubio.com, "Is-sues," Feb. 3, 2010).

    One of the best ways to encourage growth is through our energy industry. Of course, solar and wind energy should be a part of our energy portfolio. But God also blessed America with abundant coal, oil and natural gas. Instead of wast-ing more taxpayer money on so-called "clean energy" companies like Solyn-dra, let's open up more federal lands for safe and responsible exploration (GOP Response to the 2013 State of the Union Address).

    Democratic independent candidate Sen. Bernie Sanders of Vermont is pub-lically against all offshore oil and gas de-velopment, and supports punitive legisla-tion aimed at the industry. Among other actions, he introduced the gold standard for climate change legislation, with Sen. Barbara Boxer (D-Calif.), to tax carbon and methane emissions, and he led the opposition to the Keystone XL pipeline.

    Hmmmm! On second thought, I have decided to abandon my candidacy. This is politics at its highest level. The stakes are huge, the egos even larger and the propensity to concede on any issue pro-nounced. The bottom line is that we have 16 months (16 long, irritating, noisy months) to Election Day, a period in which any stance is directly related to its ability to generate votes. Energy policy. What energy policy?

    [email protected] / Bill Pike has 47 years experience in the upstream oil and gas industry, and serves as Chairman of the World Oil Editorial Advisory Board.

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  • Has Continental Drift moved you?

    WHATS NEW IN EXPLORATIONWILLIAM (BILL) HEAD, CONTRIBUTING EDITOR

    World Oil/JULY 201517

    Hawaii has moved to the left since yes-terday. Actually, Hawaii has moved a con-siderable, measurable distance to the left [on a map, to the northwestward] since you went to college. It is a disaster to stop learning topically, what you know or what you think you know, in your career journey. Worse yet, you could jump from techie to management and be frozen at what you thought you knew, when you became one of the chosen to be frozen. We have moved from the theory of continental drift to plate tectonics. We will move from global warm-ing to something else, too. Rotary dialing and analog telephones are things of the past. So are silos of knowledge relegated to professional fraternities.

    Where we learned our geo history can help us stay in the lanes of factual knowl-edge. This years annual AAPG meeting in Denver [ACE] presented some history on William Strata Smith. It was Smith, who organized the paleontologists recognition, internationally, of the age and classification of rock formations. During his tenure in the 1800s, words such as Cretaceous and Carboniferous became common. At one London Society meeting, all agreed that when they found the last occurrence of a certain dinosaur, that would be the end of the Cretaceous time period.

    Today, the public is being told that the Cretaceous ended rather instantaneously, since no dinosaurs are found after that day. Even though age dating shows that event could have been as many as 10 mil-lion years long, we still see peer-reviewed articles about the Yucatan, volcanic ash, and yes, global warming killing those poor giants. No worries, Hollywood has restored our knowledge base for the next generation through the Jurassic Park and Jurassic World movies.

    Lack of cross-knowledge transfer. A profound, but simple illustration: SPE Blog, 4-19-2015. One of our production engineers always jokes, you reservoir en-gineers you spend all that money and time on cutting and studying a core, and in the end, you know everything about the

    only piece of rock thats not in the reservoir anymore. Michael Braun, petroleum engi-neer, ConocoPhillips Alaska Inc., Anchor-age, Alaska. From an explorationists point of view, an engineer is an engineer. Appar-ently, petroleum engineers dont think so.

    Whats new. The SEG Advanced Mod-eling (SEAM) pore-pressure project, with participation from operators and service companies, will be showcased this year at the RPSEA Annual Ultra Deepwater Con-ference, Sept. 9-10 in Houston. The Tech Transfer Event is co-sponsored by SPE Gulf Coast section. This is some evidence that geos and engineers are aware of each other.

    I had to spend time getting the SEAM project started with a reluctant SEG, now primarily funded by NETL-DOE. What I find fascinating about assembling a group of subject matter experts, on deriving pore pressure from seismic, is not in finding equations to better calculate pore pressure from 2D or 3D seismic, but the surprise is the very intense discussion among the sub-group members about creating a geologic model to test the perfect SEAM Phase 1 data set. That seismic data set is simulated from a geologic model that includes sub-salt and the most common GOM reservoir, tur-bidite fans. Now the newer geologic model must address specific shear-wave aspects and precise log analysis, meaning picking a more detailed geologic framework for pet-rophysics/rock physics not needed in the earlier model. If we are having that level of discussion among the experts, where we know with exact certainty the rocks and their coordinates, then how careful and cau-tious should we be with our less-than-per-fect, real-world well logs and 3D seismic?

    2015 ACE. Attention was widespread in technology presentations, not in inter-pretation, but in analysis of attributes from seismic and better GIS-based analysis of well logs. The best-attended sessions were on database management. The key to the future is finding out who did what and where, with their money, before you do anything with your [companys] money.

    Db issues were not solved with the

    invention of paper or the computer. This was evident from the exhibitors and their audiences, mainly of international geos and students. The professional papers were poorly attended, with only 70 chairs occupied of the seating for 300. Some papers were impressive, especially one invited paper from SPE on simulation of CO2 injection into a homogeneous media. Most papers that I attended were not really papers of a high standard for a national or international meeting. Your email bucket has been full this year of Calls for papers for about every conference that exists. There is an obvious reason.

    What is not new, but seems like a rev-elation, is based on a reality check at this years Denver AAPG meeting. Attendance was down, and we know why. This down-turn is somewhat different. People are gone, retired, and not going into environmental, teaching or governmental jobs. The knowl-edge base is diminishing. In 1994, I heard a V.P. tell his entire Houston staff that he had 700 resumes on his desk, and if anyone did not like the state of affairs, theres the door. Over 20% took that option. The number went up to 35% within two years.

    Geology in 2015 is a commodity. Seis-mic 3D, and now 4D, is a commodity. Boats and crews are as much a commod-ity to Big Oil as are lawn crews in Houston. About 70% of the fleet is stacked. Yet, no oil company is selling bunkering fuel to a seismic boat at a discount. Management this time is not the geo, or the lawyer, but the accountant. I note that self-destruction is not new to a species. The folks at AAPG, who were doing well, were those who add-ed value that cannot be commoditizedanswers to specific problems. Most people still cannot rebuild their own auto engine, no matter how many millions of these have been manufactured.

    [email protected] / William (Bill) Head is a project manager for RPSEAs Ultra-Deepwater program. As a senior technologist, he has worked over 38 years in U.S. and international exploration, exploitation and production. Mr. Head has been instrumental to several new international ventures, coordinating local and global operations, and has managed one of the industrys largest computer facilities.

  • Keeping efficiency in the game

    DRILLING ADVANCESJIM REDDEN, CONTRIBUTING EDITOR

    World Oil/JULY 201519

    With more rigs forced to take sabbati-cals, and media attention fixated on cost-cutting (read: shedding as many jobs as possible), drilling efficiency of late seems to receive all the play of the kid riding the bench during a game that has become ter-ribly lopsided. Sure, the kid has made tre-mendous contributions, but that was in yesterdays game.

    To even the score a bit, organizers of Junes IADC Drilling Engineering Com-mittee (DEC) Technology Forum, in Houston, put drilling efficiency front-and-center with eclectic, and largely peer-reviewed, presentations focusing on established and emerging technologies. They were all aimed at illustrating, as a Weatherford engineer pointed out, how even marginal increases in drilling ef-ficiency can lead to significant savings in field development cost.

    Specifically, he went on to explain how established managed pressure drill-ing (MPD) techniques, once generally re-served for drilling the undrillable, can be equally effective in increasing rates of pen-etration (ROP) and reducing downtime in the assembly-line approach that character-izes shale drilling. By having better control over the wellbore, operators can use MPD to optimize ROP, said Bhavin Patel, a Weatherford International MPD engineer.

    Patel said that compared to a con-ventional drilling methodology, MPD offers a number of advantages in high-rate, unconventional well construction programs. For one thing, closed-loop MPD techniques deliver appreciably better control over equivalent circulat-ing densities (ECD) and, therefore, help corral downhole issues that can lead to non-productive time (NPT). Moreover, he said that by employing MPD, opera-tors can reduce mechanical specific en-ergy (MSE) with more constant drilling parameters, such as mud weight, torque and weight-on-bit (WOB).

    MPD allows for enhanced mud weight management during drilling, he said. By keeping a constant mud weight, even in

    deeper depths, we can drill at higher ROP, and with smaller and less-expensive rigs.

    Patel said MPD techniques are being used on 42 wells, and counting, in Argen-tinas Vaca Murta shale, which followed an earlier application in the Haynesville where, he says, overall drilling time on four wells was cut 49%, saving the opera-tor more than $2 million.

    Meanwhile, Halliburtons Akshay Sagar laid out how the companys inte-grated Drilling Engineering Solution (DES) helped set new benchmarks in the drilling of a deepwater exploration well offshore Mexico.

    Sagar, the DES business manager, said the complex objectives of the Mexican deepwater wildcat were to deliver a direc-tional well plan through faulted formations comprising unconsolidated sand and shale layers. In addition, the 121/4-in. hole was to be enlarged to 20 in. and 16 in. And, all this had to be accomplished with zero NPT and 100% real-time data acquisition for pore pressure and wellbore stability calculations.

    Sagar said the integrated DES meth-odology set an area benchmark for build-ing angle and another by delivering a comparative, 65% ROP improvement.

    Deepwater well delivery also was the topic du jour for Ed Adams, senior busi-ness development manager for Huisman U.S., who explained the intricacies of the Dutch companys newest-generation, dual multi-purpose drilling tower, which promises to enhance efficiencies some 30% to cut ultra-deepwater drilling costs. He was followed by Robert Estes, Baker Hughes R&D manager for sensor phys-ics, who presented the results of recent above-ground and vertical well tests of the recently engineered AccuTrak pas-sive magnetic ranging (PMR) service. The PMR, he said, can be applied broadly with measurement-while-drilling tools to improve accuracy, speed and safety, in a variety of applications, especially those with high risks of wellbore collision.

    Cuttings engineering. Civil engi-neering principals usually are not part

    of the mix when discussing technologies for treating and managing drill cuttings. Yet, Blake Scott of Scott Environmental Services, in Longview, Texas, told the DEC that combining cuttings solidifica-tion and stabilization technologies with construction disciplines not only helps operators reduce the solid waste stream generated at the wellsite, but it also cuts costs by putting treated cuttings to work as lease roads and drilling pads.

    We not only sequester the (mud) contaminants, but also meet design crite-ria, so loads are supported, and there are no construction issues to deal with, he said. These are competing parameters that we try to make fit, whereas before, solidification was something that was used just to sequester contaminants.

    The engineered cuttings recycling process begins with a sample of a wells solid waste to determine its geotechnical properties, and the entrained salts, met-als and hydrocarbons, to determine the percentage and type of reagents required to meet widely diverse state regulations.

    Though fewer new holes are being constructed these days, Scott said that with multi-well pads, the need for con-struction integrity does not end when the rig is laid down. When you start drilling multiple wells off a pad, naturally your traffic increases, and that continues during completion and production. If you build a pad and road correctly, you dont have to go back and re-work it for completions and production.

    REFERENCES1. Grayson, B., B. Patel and H. Gans, Optimized unconventional

    shale development with MPD techniques, presented at the IADC/SPE Managed Pressure Drilling and Underbalanced Operations Conference and Exhibition, San Antonio, Texas, 2013.

    2. Wijning, D., Dual multi-purpose tower engineered to cut ultra-deepwater well delivery costs, World Oil, April 2015.

    3. Hanak, F. C., and R. Estes, High-speed, continuous single-well magnetic ranging, SPE paper 173135, presented at SPE/IADC Drilling Conference and Exhibition, London, England, March 17-19, 2015.

    [email protected] / 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.

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  • A trick up their sleeves

    WHATS NEW IN PRODUCTIONDON FRANCIS, CONTRIBUTING EDITOR

    World Oil/JULY 201521

    Unsurprisingly, some thought leaders think mainstream, multi-stage completion methods are suboptimal. Its true that fac-tory wells in U.S. shale plays have yielded remarkable results, but problems remain.

    Among other service companies, the boffins (Editors note: a term used in Britain during World War II, to refer to technical ex-perts) at NCS Multistage have done some head-scratching about solving these prob-lems, which they believe is best done by multiple-cycle sleeves. According to NCS, this relatively new frac sleeve development is a tidy solution in the completions and production phases of unconventional well development, which they describe in a re-cent conversation:

    During completion operations, prop-pant flowback into the wellbore can be a problem. Its even worse in unconsolidated formations, where theres a lot of sand flow-back when the well is put in production through the perforations. With a closable sleeve, operators can frac each stage indi-vidually and close the sleeve immediately following the frac; that allows the frac to heal while finishing stimulation of the rest of the well. At the end of that process, each frac sleeve is reopened individually. The formation pressures will have stabilized, greatly reducing or eliminating proppant flowback into the wellbore.

    Fracture sequencing. In addition to frac healing, theres the option of fracturing stages out of sequence, to deal with shadow stress, in which a fracture in a single zone creates pressures that affect the frac in the subsequent zone. Operating companies have developed techniques for dealing with shadow stress, e.g., zipper fracs, and the latest entry in the oilfield lexicon of col-orful terms, the Texas Two Step, which calls for fracturing out of sequence.

    For example, theyll fracture zone one, then three, and then come back and frac-ture between them after the stress, to take advantage of the stress shadowing to may-be create a more complex frac structure be-tween those two stages, and then alternate that same way throughout the well. Com-

    panies have never had this option before. Theyve been limited to fracturing from the toe of the well to the heel, in sequence.

    Zipper frac, a technique involving the simultaneous fracturing of parallel wells at the same time, adds tremendous logis-tical challenges and operational risks, due to added equipment and personnel, and concurrent operations. Using multiple-cycle sleeves to perform out-of-sequence frac operations from a single wellbore has the potential to take advantage of stress alterations, but without the costs and risks of simultaneous completion operations on multiple wellbores at the same time.

    During production, a multiple-cycle sleeve allows management of the whole well, stage by stage. For example, with un-wanted gas or water production, or a thief zone, a coiled tubing unit could be used to close any combination of sleeves to isolate and shut off zones of the well. This capa-bility is used, now, in waterflood projects, where sleeves are opened and closed, as needed, to enhance flood efficiency.

    Recompletions. Large potential can be seen in recompletions. The biggest problem facing operators, who want to recomplete a multi-stage well, is that they cant control wellbore pressure, especially in plug-and-perf completions. With clos-able sleeves, you could go down and close as many sleeves as needed, to re-establish wellbore integrity, so that you could focus the refrac energy in a single stage at a time.

    Considering that thousands of multi-stage wells have been drilled and complet-ed, how serious does the industry believe these problems to be? Just a nuisance? Something that in an ideal world would be nicebut nonessentialto solve?

    Proppant flowback. According to NCS, in some areas, proppant flowback is worse than in others, but generally more of a nuisance than a crisis. Operators always can go back in and clean up the well, but theyre also losing some proppant from the fractures. Resin-coated sand is used some-times, but proppant placement dynamics cannot guarantee that the resin-coated

    proppant will prevent flowback.As usual, theres a spectrum between

    the extremes. But even at the nuisance level, costs are involved. One of the ways by which proppant flowback is addressed is by over-flushing each frac stage, which means pumping a lot more fluid into it than is needed to fill the frac, to place prop-pant further from the wellbore. This adds to fluid costs and pumping time.

    So why has the industry resisted ad-dressing these problems? NCS says its because operators havent had any options until now. Operators have completed wells, in the way that theyve completed them, because that was the only technology avail-able. They werent thinking about refrac-turing, because it wouldnt have made any difference. They were limited to plug-and-perf and ball-drop sleeves with open-hole packers, as open-hole completions.

    Of course, there is always risk in any-thing that you run downhole, including multiple-cycle sleeves. However, NCS says the risk of catastrophic failure is small. Op-erators always have an option to go back in and plug-and-perf to complete the well. Al-though the well wouldnt be lost, the abil-ity to manage the wellbore would be. But thats no worse than the current state of af-fairs in multi-stage completions.

    Net of the costs and risks, it appears that operators stand to gain considerably by solving these problems with multiple-cycle sleeves. Among these gains are extended well life, greater ultimate recovery, and the big onewellbore management. Refrac-turing, a big subject and grist for another mill, also can be enabled under the correct set of conditions by multiple-cycle sleeves.

    Well, there you have it. The industry may be on to something here. Several fla-vors of the multiple-cycle sleeve concept have popped up, and this portends a whole-sale change in the way that multi-stage shale wells are completed. Stay tuned.

    [email protected] / 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.

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  • Disputed waters raise hopes, create conflict

    OFFSHORE IN DEPTHRON BITTO, CONTRIBUTING EDITOR

    World Oil/JULY 201523

    The recent controversy in the Spratly Islands of the South China Sea is a remind-er that the presence of natural resources in disputed waters can be a source of conflict, even when sharing them could provide economic benefit and political stability for countries with competing claims.

    750 islets. The Spratly Islands are an ar-chipelago of 750 islets, atolls and cays, many of which are submerged at high tide. The relatively shallow seas around the Spratlys have been a prime fishing ground for cen-turies. Since the 1970s, the area has been a potential target for oil and gas exploration. Without drilling any wells, China has de-clared that the area has potential reserves of 225 Bboe, 70% of which are natural gas. More important are the shipping lanes that pass through the area. The Christian Science Monitor reported that half the worlds ocean tonnage passes through this part of the South China Sea, and the U.S. EIA estimates that 11 MMbbl of oil and 6 Tcf of LNG are moved through the Spratlys every day.

    Some 45 of the Spratlys outcrops are occupied by Vietnam, Malaysia, the Phil-ippines, Taiwan, Brunei and China. China claims all of the South China Sea as its Ex-clusive Economic Zone (EEZ), based on the Nine-Dash Line encircling the area surrendered by Japan and granted to China after World War II. Since 2013, China has been dredging sand from the seafloor to turn small reefs (also claimed by the Phil-ippines) into islands, and building an air-strip and other permanent installations, so that it can be the protector and promoter of peace and stability in the area. While China has announced a halt to its land reclamation program, most observers are convinced that the country intends to use its new bases to project its military power.

    Historical disputes live on. The Sprat-lys arent the only international conflict over offshore resources. The 1982 Falklands War, though sparked by an Argentine incur-sion on the British-claimed islands, also was motivated in part by potential offshore oil production. Though no fields have been de-veloped, British companies Premier Oil and

    Borders & Southern have made discoveries of oil and gas condensate, which are not likely to see first production before 2018.

    In 2002, soon after East Timor gained its independence from Indonesia, it had a dis-pute with Australia over offshore reserves. Based on a 2005 agreement between the two countries, production from the Joint Pe-troleum Development Area and the Greater Sunrise fields bankrolls the East Timor gov-ernment and has accumulated nearly $10 billion in the Timor-Leste Petroleum Fund. The Guardian reports that recent disclosures about Australias alleged bugging of the East Timor cabinet meetings, during the 2005 negotiations, have led to public protests on the island nation to seek a larger production share from the two fields, and for construc-tion of an LNG facility on East Timor soil, instead of a planned floating facility.

    Eastern Mediterranean. This is an-other area where energy production in disputed waters has created economic op-portunity while increasing tensions. Ac-cording to a March 2015 Policy Brief by the German Marshall Fund of the United States (GMF), Israels Leviathan gas field has given the country a measure of energy security while increasing economic ties with Jordan, Egypt and the Palestinian Authority. Lebanon, in a state of war with Israel, has claimed economic rights to a disputed 330-mi2 area near Leviathan that could contain 25 Tcf of gas.

    The Republic of Cypruss EEZ has up to 5 Tcf of discovered gas. In 2014, however, disputes with Turkey and the Turkish Re-public of North Cyprus resulted in Turk-ish warships chasing away a Norwegian seismic vessel, and then escorting Turkish-sponsored seismic crews surveying in its overlapping EEZ. Russia also has increased its military presence in the Eastern Medi-terranean, in part to protect over $30 bil-lion of Russian investments in Cyprus.

    Seaflower and TEN. According to a Platts report, Colombia and Nicaragua squared off in 2013 over their maritime border and possible oil exploration in a dis-puted block. Colombia moved to protect an

    unspoiled reef area called Seaflower, which appeared to be threatened by a planned Ni-caraguan lease auction. In 2012, the Interna-tional Court of Justice ruled that Colombia had sovereignty over seven islands, but ex-tended Nicaraguas maritime boundary into areas claimed by Colombia. Subsequently, in 2013, Noble Energy drilled a dry, deep-water wildcat in Nicaraguan waters.

    In March 2015, at the International Tri-bunal of the Law of the Sea in Hamburg, Ivory Coast argued that Tullow Oils TEN project, carried out on behalf of neighbor-ing Ghana, is actually on Ivory Coasts side of their maritime boundary. Reuters reported that the Tribunal subsequently ruled that Ghana could finish developing current projects, but could not start up new fields in the area.

    China vs. Vietnam. In May 2014, The New York Times reported on the con-frontation between Vietnam and China over a deepwater drilling rig operating in disputed waters near the Paracel Islands, which both countries claim is within their respective EEZs. After a standoff between coast guard vessels, the CNOOC rig was moved to uncontested waters, where it made a gas discovery.

    Because of limited exploration, there are no proven oil reserve estimates for the Paracels or Spratlys. The EIA does not share Chinas optimistic estimates about potential production in either chain. The agency cites industry sources that suggest the Spratlys hold almost no oil and less than 100 Bcf of natural gas in proved and probable reserves, and the Paracels likely have even less.

    China has shown its willingness to com-promise, at least on paper. In 2008, it agreed with Japan to jointly develop Chunxiao/Shi-rakaba gas field in the East China Sea, 309 km from the disputed islands called Diaoyu by China and Senkaku by Japan. CNOOC and Inpex were expected to be partners on the project, but, according to Bloomberg, joint development never started.

    [email protected] / Ron Bitto has more than 30 years of experience as a technology marketer and writer in the upstream oil and gas industry.

  • Nuclear deal with Iran impacts U.S. producers negatively

    OIL AND GAS IN THE CAPITALSDR. ANAS F. ALHAJJI, CONTRIBUTING EDITOR, MIDDLE EAST

    World Oil/JULY 201525

    A nuclear deal with Iran is bad for U.S. oil producers, even if the ban on U.S. oil exports is lifted. The negative impact on U.S. oil producers is not only from the ad-ditional oil production that Iran will bring online, once sanctions are lifted, but also from OPEC-on-OPEC competition as a reaction to the deal.

    A normalization of relations between the U.S. and Iran, which some might view as far-fetched at this time, should benefit large service companies and oil majors, but not the medium-sized and smaller inde-pendent companies that brought the shale revolution. In addition, in the long run, Irans LNG exports will compete directly with U.S. LNG exports.

    The negative impact on U.S. oil produc-ers is not direct. The quality of crude that Iran produces is different from the oil that U.S. companies produce. In addition, Ira-nian crudes do not compete directly with U.S. crudes because of the ban on exports of U.S. oil. The impact is indirect, making U.S. producers a victim of U.S. foreign policy.

    Newtons third law of motion, for ev-ery action, there is an equal and opposite reaction, is not limited to physics. It also applies to economics and politics. Ignoring this law leads to several, sometimes danger-ous, unintended consequences.

    Saudi relevancy. In politics, politi-cians who support a nuclear deal with Iran ignore the reactions of Israel, Saudi Ara-bia, and the Arab states in the Gulf. This reaction might not be aligned with U.S. interests in the long run. When the leaders of Saudi Arabia realized that a nuclear deal with Iran was imminent, they embarked on hyperactive petrodollar diplomacy. Adel Aljubair, the Saudi ambassador to Washington, summed up the Kingdoms response by stating that all options could be on the table. As we will see in a mo-ment, those options include nuclear re-actors for civilian and non-civilian use.

    Saudi Deputy Crown Prince Moham-med Bin Salman visited Russia and France last month, and six deals were signed with Russia. One of the deals includes helping

    Saudi Arabia build some of 16 nuclear re-actors for peaceful purposes. The reac-tion does not stop here: the Saudis want to make political deals with Russia, where the Obama administration has failed. They want to make a deal to stabilize Ye-men and Syria. Oh, wait, there is more: Russia and Saudi Arabia signed a pact to create an oil alliance, a sort of OPEC on the side of the existing OPEC. In a sense, the Obama administration made the Saudis feel irrelevant. They are using Putin to regain their lost relevance.

    During the Deputy Crown Princes visit to France, he signed deals worth $12 bil-lion, including nuclear deals. The Saudis want to prove to the Obama administra-tion that the U.S. lost billions of dollars of possible trade deals because of the nuclear deal with Iran. The message is loud and clear: if Iran gets nuclear, the Saudis will get nuclear too, without the help and the monitoring of the U.S.

    The reaction does not stop here. Last month, Nawaf Obaid, a visiting fellow at Harvards Belfer Center for Science and International Affairs, who is considered a Saudi insider by many, wrote a column for CNN, stating that Saudi Arabia might build a nuclear program to deter the threat of Iran: A nuclear Iran would be viewed as a direct threat to the Kingdom, and a re-sponse of equal measure would be consid-ered prudent, necessary and justified. He also warned against the assumption that Saudi Arabia will remain passive.

    How does the above relate to the oil market? First, the Saudi refusal to cut production, as oil prices declined, is an intervention. The Saudi decision to increase production from about 9.6 MMbopd to 10.3 MMbopd is an inter-vention. Saudi has two objectives for this intervention: 1) maintain market share in crude, products, NGLs and petrochemi-cals; and 2) maintain OPEC unity. While the Saudi decision was purely economic, it was clear that they do not mind seeing supporters of the Asad regime in Syria get hurtIran, Russia and Venezuela.

    However, Saudi might continue to in-crease production. Saudi strategy might have shifted recently from economics to politicstargeting Iran, Iraq and others, instead of U.S. shale producers. Imme-diately after the Saudis announced their strategic alliance with Russia, they an-nounced that they are ready to increase production and rig count! Meanwhile, the Kingdom made an offer to ship oil to India on Saudi oil tankers, free of charge, at a time when Saudi oil exports to the U.S were at their highest level in almost a year.

    Newtons third law of motion does not stop with Saudi Arabia. In response to the complete loss of market share in the U.S., increased Saudi oil production, and lower prices, Nigeria decided to give large dis-counts in Asia to attract buyers who tradi-tionally have been customers of the Gulf countries and Iran. This reminds us of the Nigerian actions in 1984, which started a cycle of repeated discounts and eventu-ally led to the collapse of the oil market in the 1980s.

    We have an action, which is the Iranian nuclear deal that led to a Saudi reaction, which includes increasing production, which in turn led to a Nigerian response, which is giving large discounts to former Saudi customers, which in turn affects the rest of the oil industry, including U.S. oil producers. Now you can see how a nu-clear deal hurts U.S. producers.

    Finally, Iran has been trying to build LNG trains for several years, to no avail. Lifting the sanctions should enable Iran to export LNG that can compete directly with U.S. LNG exporters. Iran holds the second-largest natural gas reserves in the world.

    In short, a deal with Iran will not only hurt U.S. oil producers, it also will hurt U.S. natural gas producers.

    [email protected]/Dr. Anas Alhajji joined NGP Energy Capital Management, one of the leading energy private equity firms in the industry, in 2008 as Chief Economist. He leads the firms macro-analysis of the oil, natural gas and related markets, and the overall economic environment.

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  • Offshore project cost-savings of 30% to 40% are possible

    EXECUTIVE VIEWPOINTDAN JACKSON, CEO, IO OIL AND GAS CONSULTING

    World Oil/JULY 201527

    Change in the oil and gas industry often comes slowly, and rarely is there a disruptive shift in technology or thinking that revolutionizes the sector. However, todays offshore industry is in urgent need of change. While it has come a long way in the last century, past accomplishments overcoming a constant stream of technical and commercial challenges do not guar-antee success against what may be our biggest challengesecuring offshore as an integral part of the global energy mix.

    Other forms of energy will continue to emerge, but the world still needs oil and gas to meet its increasing demand. Emerg-ing economies have been responsible for the global growth in oil consumption of 1.4 MMbpd in 2013.1 Global population growth of 3 billion people by 20502 will likely see this continue to rise.3

    Increasing costs and complexity. So, if oil and gas are still very much in demand, why is the industry struggling? The reason is that the landscape has changedmajor deepwater and LNG projects can cost tens of billions of dol-lars now. This is a far cry from the 1990s, when projects cost several hundred mil-lion dollars; oil was just under $20/bbl and industry benchmarks were complete-ly different. In spite of the industry being far more technically capable, operators say they cannot make projects commer-cially viable at $60/bbl.

    Overspending is commonplace. A staggering two out of three offshore proj-ects are running significantly over budget, or are delayed and cancelled.4 Operators are challenged to either directly manage and integrate a vast array of specialist con-tractors, or to place them under the con-trol of an umbrella project management engineering company. That firm may not have the required technical expertise to effectively control the relationships, con-tracts and integration issues. Most opt for the former, resulting in fragmented contracting relationships, with too many interfaces, inefficiencies, unknown risks and uncertainties, as regards cost, design,

    materials and scheduling. This is exacer-bated further by market changes in the five to seven years that it takes to bring a project onstream.

    THE SOLUTIONRe-set industry norms. To survive

    and thrive, the offshore industry needs to transform the way it works. Projects need to be made commercially viable project cost-savings of 30% to 40%, and the mar-ket needs to be stabilized. The industry needs to re-think established ways of working, to better handle increasing proj-ect costs and complexity.

    Redesign the operator-contractor re-lationship. Part of the reason that projects are not completed on time, and on budget, is the disconnect between operators and contractors. Credit Suisses findings from the 2013 Offshore Technology Confer-ence showed that 21% of project failures resulted from management processes and contracting and procurement strategies; 65% were due to people, organization and governance; and 14% were due to external factors, such as government intervention and environment-related mandates.5

    Better planning and project man-agement. Companies are also underesti-mating the costs of completing projects from the outset, which exacerbates un-derperformance. For example, the latest EY Survey shows that current, estimated project completion costs were, on aver-age, 59% above the initial estimate.6

    Act as full-project architects. Opera-tors and contractors need to work together to develop the best blueprint, to take the project into execution with a common pur-pose. There needs to be a holistic approach to project management, including all as-pects of subsurface, subsea and facilities design components. Consultancies must act as full-project architects, rather than just engineers. This will result in consoli-dated thinking and effective development.

    The offshore industry can be compared to a train transportation system. Even with a top-of-the-line locomotive, you need the

    tracks, ticketing and signaling systems to ensure that the whole infrastructure runs smoothly. If track signaling is two years late, you lose revenue for two years, and your economic model is at a standstill. It is the same in the offshore arenaif a subsea floater is late, you cannot connect the sub-sea equipment, and nothing flows.

    Systems thinking. Additionally, the industry suffers from a lack of systems thinking. We need to review all variables of systems engineering and its influence on the operating strategy and project objec-tives. Applying this methodology, as early as possible in the conceptual and defini-tion stages, ensures that economic and op-erational considerations are woven into the project. Systems thinking allows conscious decision-making on contracting strategy.

    Reduce complexity. The industry has recognized the need for standardization to drive down costs, but there also needs to be a simplification process, with just one trusted partner managing and coor-dinating multi-disciplinary projects. This not only saves operators time, but also reduces cost and scheduling risks in the form of design conflicts, materials, deliv-ery and communications.

    Powerful thinking is needed to deliver fresh engineering solutions for the next generation of offshore fields. The indus-try needs consultancies that can effec-tively manage the intricacies of each part of the project, thereby reducing risk and complexity and ensuring projects are de-livered on time and on budget.

    REFERENCES1. BPs Statistical Review of World Energy 20142. Earth Policy Institute3. BP Energy Outlook 20354. 2013 EY survey5. 2014 EY Survey6. 2014 EY Survey

    DAN JACKSON is CEO of io oil and gas consulting, a new model of offshore consultancy, backed by GE Oil & Gas and McDermott. Previously, he was senior director, Global Subsea Engineering, at McDermott International Inc., from April 2013 to January 2015. He also served as CEO of DeepSea Engineering from 2001 to 2013. Mr. Jackson holds a BSc degree in mechanical engineering and an MSc degree in ocean engineering from Cranfield University in the UK.

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  • World Oil/JULY 201529

    INNOVATIVE THINKERSPRAMOD KULKARNI, EDITOR AND EMILY SNYDER, NEWS EDITOR

    Don Conkle

    Proppant innovation

    at motocross speed

    As a teenager growing up in southeast-ern Ohio, Don Conkle had a passion for speed. Don raced motocross throughout the U.S., secured a sponsorship with Su-zuki, and was the national amateur cham-pion in 1979. A severe ankle injury, unfor-tunately, ended Dons racing career before turning professional.

    While the world of motocross lost a racing champion, the oil and gas industry gained a petroleum engineer with a passion for fast technology development. As V.P. of Marketing & Sales for CARBO, Conkle is one of the proppant technology gurus, who is helping operators improve produc-tion and increase recoverable reserves.

    After graduating with a petroleum en-gineering degree from Marietta College in Ohio, Conkle began his career in Dowell as a fracturing engineer. His industry ex-perience continued to grow, as he took on various operations and management roles, first with Dowell, and subsequent-ly, with Schlumberger, including senior management positions in the U.S. and globally, including the Middle East and the North Sea.

    Conkle was enticed to CARBO in 2012 by the opportunity to make transformative improvements to proppant technology and bring the technology to the market quick-ly due to the streamlined organization. There hadnt been significant advances in proppant technology in the last 30 years, Conkle explained. CARBO is an ideal set-ting for developing new technology, with

    the ability to make quick executive deci-sions with a world-class product develop-ment team.

    KRYPTOSPHERE HD, an ultra-high conductivity proppant for deep wells, pushed the industry standard for prop-pants as it was engineered to withstand high closure stresses and extreme cyclic loading conditions. CARBO has per-formed conductivity testing with KRYP-TOSPHERE HD to 20,000 psi, and crush tests to 30,000 psi. Its a unique ceramic proppant with a secret sauce, and manu-factured in a completely different way, ex-plained Conkle. KRYPTOSPHERE can also be utilized as the base proppant for our technology platforms.

    In addition, CARBO is developing new products on three technology platforms: production assurance, flow enhancement and fracture evaluation services. An exam-ple of a new production assurance product is SCALEGUARD, which inhibits scale from the tip of the frac and throughout the production system. Chemical inhibitor is infused into the manufactured porosity of the grain and coated, allowing an engi-neered release of inhibitor based on the cli-ents design objectives.

    One technology under CARBOs new flow enhancement platform is RPM. RPM has an altered wettability to neutral, pre-venting the retention of water-based fluid in the proppant pack. The capacity to flow liquid hydrocarbons is enhanced because of this characteristic.

    CARBOs technology for fracture eval-uation services is FRACTUREVISION, which uses a proppant with a traceable non-radioactive, rare earth mineral. The E&P operator can then run a neutron log to detect proppant placement effectiveness in horizontal wells and measure propped fracture height in vertical wells.

    Recently, CARBO announced success-ful application of its KRYPTOSPHERE and SCALEGUARD technologies in the Lower Tertiary trend. The operator want-ed to maximize the long-term treatment of scale without impacting the conductiv-ity of their proppant pack.