JUNE 6, 2016 | USD 20

International Petroleum News and Technology | www.ogj.com

LNG
UPDATE
US
MIDSTREAM
UPDATE

MEXICOS SHALE GAINS TRACTION

BEARINGS IMPROVE ROLLER-CONE BITS
MIDSTREAM OPERATORS SLOW GROWTH
PROCESS LIFTS FEEDSTOCK QUALITY
The most
important
oil well in
America.

Its not the deepest. Or the most profitable. But to us, its the most important. Because this one
is operated by our client. Ryder combines its industry expertise with the latest technologies
to give each site a customized logistics plan based on the specifics of that particular well
operation. That improves lead times in the upstream delivery process, creating efficiencies,
saving money, and improving safety for our clients. Be Ever Better. Discover how outsourcing
with us can improve your fleet management and supply chain performance at Ryder.com.

Ryder and the Ryder logo are registered trademarks of Ryder System, Inc.
Copyright 2016 Ryder System, Inc. Ever better is a trademark of Ryder System, Inc.
 CONTENTS
June 6, 2016 Volume 114.6

NATURAL GAS PIPELINES FIG. 1

GENERAL INTEREST
Surge in NGL and Rystad Energy:
tight-oil supplies Improving oil prices
creates worldwide could help shrink
light-ends space DUC inventory
Al Troner Paula Dittrick
26 35
78

US House passes Hydraulic fracturing

amended energy policy stymied in Canadian East SPECIAL REPORT SPECIAL REPORT
bill, sets up joint 36 LNG UPDATE US MIDSTREAM UPDATE
conference
Nick Snow BSEE, BOEM issue FERC Bear Head, Jordan Price collapse slows
33 Southern California Cove rulings offer LNG midstream operators
OCS well-stimulation market guidance 5-year growth streak
Report calls for analysis Tania Perez Dan Lippe

62
independent offshore Nick Snow Lamiya Rahman
36
78
oil and gas safety
organization
Nick Snow COGCC outlines
34 impacts if voters approve LNG oversupply faces
proposed mandatory slowing Asian demand
WoodMac: UKCS setback Monica Hwang
decommissioning Nick Snow Philip R. Weems
38
84
to ramp up over
next 5 years
35

REGULAR FEATURES
NEWSLETTER 6
CALENDAR/LETTERS 16
COVER JOURNALLY SPEAKING 22
Cheniere Energy Inc.s Sabine Pass LNG terminal be-
gan import operations in 2008 with 4 bcfd vaporiza- EDITORIAL 24
tion capacity. In third-quarter 2012 Cheniere began
construction of export liquefaction capacity, loading SERVICES/SUPPLIERS 89
its first cargo Feb. 24. Cheniere plans to have six
4.5 million-tonne/year liquefaction trains operational STATISTICS 92
at Sabine Pass by fourth-quarter 2018. Oil & Gas MARKET CONNECTION 96
Journals LNG Update special report begins on p.
78. Photo by Cheniere Energy. ADVERTISERS INDEX 99
EDITORS PERSPECTIVE/
WATCHING GOVERNMENT 100
OG&PE

P1
 Covestro Deutschland AG, D-51365 Leverkusen COV00080144
INVENTING
TIME SAVINGS
FOR YOU

What keeps contractors one layer ahead

  

  

As a leading global supplier of polymer solutions in the chemical industry,
we lay the ground for a true game changer in corrosion protection. Its
$%&'
%


% %
%

' '$
% %
'$


'$
'
%&'
''

'$
%$
$'&
%
%
'

& '%

'&

'
''$%

''$'

% 
$'
%'

%$

%'
'$
$
%'


%$
'%'

!'

$$

$
$'
%'
'
$
%


$
'"


'$
#


$%'
!'
%
'
%

&%$
'
%'%'

coating operations. What can we invent for you?

www.pasquick.com
NORTHEAST MEXICO SHALE POTENTIAL FIG. 1

Houston
Burro-Picachos
Piedras
Negras Eagle Ford
Sabinas CRUDE OIL PRODUCTION, SELECTED STATES FIG. 1
US 8
Nuevo Tex. + NM ND Okla. Colo. + Wyo.

Volume, million b/d

Laredo
6

4
Matamoros
Reynosa
Saltillo 2
Monterrey Burgos
Sierre Madre 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Oriental 39 Source: EIA 2014 2015 62
Mountains

TECHNOLOGY...

EXPLORATION & DEVELOPMENT DRILLING & PRODUCTION PROCESSING TRANSPORTATION

New bid round Bearing innovations Price collapse slows FERC Bear Head,
accelerates Mexicos extend roller-cone bit life midstream operators Jordan Cove rulings offer
shale potential Jon Schroder 5-year growth streak LNG market guidance
Scott Stevens Maurizio Di Pasquale Dan Lippe Tania Perez
Keith Moodhe Alun Richards 62 Lamiya Rahman
39 Jesse Yorty 78
50 Nelson-Farrar
EU unconventional monthly cost indexes LNG oversupply faces
resource Hybrid fracturing pilot Gary Farrar slowing Asian demand
development stalls increases Chinas Dagang 68 Monica Hwang
Hirdan Katarina de Medeiros Costa tight oil production Philip R. Weems
Edmilson M. Santos Zhihong Zhao Asphaltenes 84
Vitor Emanoel Songgen He extraction treatment
Pol Oliva Marti Jianchun Guo yields advantaged
Allan Ingelson Shengchuan Zhang hydroprocessing
44 56 feedstock
Bo Yuan
Zhifang Tang
MAIN-BEARING DYNAMIC EQUIVALENT RADIAL LOAD Keng H. Chung
FIG. 2

Thousand lbf
Qiang Wei
90-100 50-60 Xuewen Sun
80-90 40-50
70-80 30-40
Zhiming Xu
60-70 20-30 Suoqi Zhao
10-20
Chunming Xu
100 0-10
90 70
80
Load, thousand lb f

70
60
50
40
30
20
30 10
0
20
1.5
10 1.3
1.1
Lo rtic

0.9
ve

0.7
ad al

0
.3 0.5
,i n .
.1 0 aring
an , de

.1 0 f be
gl gr

10 .3 0 ter o
e ee

.5 0
0 e n
50
fro s

20 0.7 c
from
m

0.9
1.1 ance
30 5 13 Dist
 OGJ

In Houston Houston
John Thorogood Drilling Global Consultant LLP,
Publisher Jim Klingele, [email protected] Insch, Scotland
Steven Tobias Hess Corp., Houston
Editor Bob Tippee, [email protected] Shree Vikas ConocoPhillips Co., Houston
Managing Editor-News Steven Poruban, Clark White Targa Resources Inc., Houston
ARTICLES FOR [email protected]
Managing Editor-Technology Christopher E.
Colin Woodward Woodward International Ltd.,
Durham, UK
DISTRIBUTION Smith, [email protected]
Exploration Editor Tayvis Dunnahoe,
[email protected]
Editorial Offices
Use published editorial content to
Upstream Technology Editor Paula Dittrick, Oil & Gas Journal
validate your marketing initiatives. [email protected] 1455 West Loop South, Suite 400,
Downstream Technology Editor Robert Brelsford, Houston, TX 77027
[email protected] Tel 713.621.9720; Fax 713.963.6285
Senior Editor-Economics Conglin Xu, www.ogjonline.com
ELECTRONIC REPRINTS [email protected]
HIGH
HI -QUALITY G
GH-Q
GH-Q GLO
LOSS
LO SSY HA
HAND
NDOU
ND OUTS
TS Staff Writer Matt Zborowski, P.C. Lauinger, 1900-1988
[email protected] Corporate Officers
CROSS MEDIA MA
CR MARK
RKET
RK TING Special Correspondent Alan Petzet, Chairman, Robert F. Biolchini
[email protected] Vice Chairman, Frank T. Lauinger
PERSON
PE ONAL
ALIZ
AL ED DIREC
IZED ECTT MA
MAIL
IL P
PRO
RODU
RO DUCTS Editorial Assistant Vannetta Dibbles, President and Chief Executive Officer Mark C.
[email protected] Wilmoth
PL
PLAQ
LAQ U S & FR
AQUE
UE FRAM
AMED
ED PRI
RIN
NTS Executive Vice President,
Corporate Development and Strategy, Jayne
In Tulsa A. Gilsinger
Articles are available in Senior Vice President, Finance and
Statistics Editor Laura Bell, Chief Financial Officer, Brian Conway
electronic (pdf) format [email protected] Vice-President/Group Publishing Director
Senior Art Director Michelle Gourd, Paul Westervelt, [email protected]
and professional, high- [email protected] Vice-President/Custom Publishing Roy Markum,
quality prints. Art Director Clark Bell, [email protected]
[email protected]
Senior Illustrators Mike Reeder, Chris Hipp,
Dan Rodd Subscriber Service
Engage visitors on website Production Director Charlie Cole
Production Manager Shirley Gamboa P.O. Box 2002, Tulsa OK 74101
Educate target audience Ad Services Manager Zac Nash Tel 1.800.633.1656; 918.831.9423;
Fax 918.831.9482 [email protected]
Enhance email campaigns In Washington Circulation Manager Jesse Fyler,
[email protected]
Instantly credible Washington Editor Nick Snow,
conference materials [email protected] Tel 703.533.1552 Custom Article Reprints

Trusted sales presentations Editorial Advisory Board Reprint Marketing Manager, Rhonda Brown,
Foster Printing Co. Tel 866-879-9144 (ext.
content Pat Dennler Motiva Enterprises LLC, Port 194);
Arthur, Tex. Fax 219-561-2023 web site
Add 3rd party Doug Elliot Bechtel Hydrocarbon Technology www.marketingreprints.com
endorsement to social Solutions/IPSI (Advisor), Houston
Fernando Feitosa de Oliveira Pasadena Refining PennWell Corporate Headquarters
media System Inc., Pasadena, Tex.
Andy Flower Independent Consultant, 1421 S. Sheridan Rd., Tulsa, OK 74112
Professional recruiting and Caterham, UK
training materials Michelle Michot Foss Bureau of Economic
Geologys Center for Energy Economics,
Branded content marketing The University of Texas (Houston)
Michael Lynch Strategic Energy & Economic
Research Inc., Amherst, Mass.
Tom Miesner Pipeline Knowledge & Develop-
ment, Houston
Ralph Neumann Badger Midstream Energy LP
For additional Kent F. Perry RPSEA, Houston
Ignacio Quintero Chevron Pipe Line Co.,
information, please contact Houston Member Alliance for Audited
John A. Sheffield John M. Campbell & Co., Media & American business Media
Foster Printing Service, Lechlade, UK
Andrew J. Slaughter Deloitte Services LP,
 
 

for Oil & Gas Journal.
Oil & Gas Journal (ISSN 0030-1388). Oil & Gas Journal is published 12x per year - monthly the first Monday of each month in print and other Mondays
in digital form by PennWell Corporation, 1421 S. Sheridan Rd., Tulsa, OK 74112. Periodicals postage paid at Tulsa, OK 74112 and at additional
mailing offices. SUBSCRIPTION PRICES: in the US: 1 year $89; Latin America and Canada: 1 yr. $94; Russia and republics of the former USSR, 1 yr.
2,200 rubles; all other countries: 1 yr. $129, 1 yr. premium digital $59 worldwide. These rates apply only to individuals holding responsible positions
in the petroleum industry. Single copies are $20 each. Publisher reserves the right to refuse non-qualified subscriptions. POSTMASTER: Send address
corrections to Oil & Gas Journal, P.O. Box 3497, Northbrook, IL 60065. Return Undeliverable Canadian Addresses to: P.O. Box 1632, Windsor, ON N9A
7C9. Oil & Gas Journal and OGJ is a registered trademark. PennWell Corporation 2016. All rights reserved. Reproduction in whole or in part without
Call 866.879.9144 or permission is prohibited. Permission, however, is granted for employees of corporations licensed under the Annual Authorization Service offered by the
[email protected] Copyright Clearance Center Inc. (CCC), 222 Rosewood Drive, Danvers, Mass. 01923, or by calling CCCs Customer Relations Department at 978-750-
8400 prior to copying. We make portions of our subscriber list available to carefully screened companies that offer products and services that may be
important for your work. If you do not want to receive those offers and/or information via direct mail, please let us know by contacting us at List Ser-
vices Oil & Gas Journal, 1421 S. Sheridan Road, Tulsa OK, 74112. Printed in the USA. GST No. 126813153. Publications Mail Agreement no. 40612608.
Industrial communications
 June 6, 2016

OGJ

Newsletter International News

for oil and gas professionals
For up-to-the-minute news,
visit www.ogjonline.com

GENERAL INTEREST Q U IC K TA K E S refurbished and added production equipment and gas and wa-
ter-handling facilities to boost output rates to 44,400 b/d of oil
Aramco signs agreements aimed at expansion and 2.3 bcfd of natural gas by yearend 2014 from 26,100 b/d of
Saudi Aramco has entered agreements aimed at expanding into oil and 1.6 bcfd of gas when it began work.
offshore construction in Saudi Arabia. Bahrain field, discovered in 1932, earlier was known as
The expansion follows plans announced by Saudi officials in Awali field.
April to make Aramco an industrial conglomerate in a program
of sweeping economic reform called Saudi Vision 2030 (OGJ Dove to succeed Sheffield at PNR
Online, Apr. 25, 2016). Timothy L. Dove, president and chief operating officer of Pi-
Aramco signed a joint development agreement with Nation- oneer Natural Resources Co. (PNR), Dallas, has been named
al Shipping Co. of Saudi Arabia (Bahri), Lamprell of Dubai, and president and chief executive officer of the company to succeed
Hyundai Heavy Industries for a maritime yard in eastern Saudi Scott D. Sheffield, who will retire at yearend.
Arabia to provide engineering, manufacturing, and repair ser- Both executives worked for predecessor company Parker &
vices for offshore rigs, commercial vessels, and offshore support Parsley Petroleum Co., which became PNR after the merger of
vessels. Mesa Petroleum in 1997.
The companies signed a memorandum of understanding At the time of the merger, Sheffield was Parker & Parsleys
(MOU) for the project in January and have been conducting chairman of the board and chief executive officer and became
due diligence and feasibility studies. The plant would be at Ras chief executive of the new firm. He was elected chairman in
Al Khair. 1999.
Under the JDA theyll work on financing, construction, op- Dove was Parker & Parsley senior vice-president at the time
eration, and ownership issues and begin negotiations of defini- of the Mesa merger and held several PNR executive positions
tive agreements before making a final investment decision. before becoming president and chief operating officer in 2004.
Separately, Aramco signed an MOU with GE and Cividale Sheffield will continue as executive chairman of the PNR
SPA of Italy to build a forging and casting manufacturing plant board through 2017, when hell retire as an executive and em-
for maritime and energy industries in the Middle East and ployee of the company but remain on the board.
North Africa. Like the maritime plant, the facility would be at
Ras Al Khair. Cutt appointed Cobalt International CEO
Joint investment would be more than $400 million. Timothy J. Cutt has been named chief executive officer and
Aramco also is working with partners to develop an onshore Class 1 member of the board of directors of Cobalt Interna-
rig manufacturing facility, an engine manufacturing project, tional Energy Inc., Houston, effective July 2. Until last March,
and an energy industrial city to accelerate manufacturing in- he was president, petroleum, of BHP Billiton.
dustries serving the oil and gas business. Cutt, who has worked in the oil and gas industry more than
30 years, succeeds Joseph H. Bryant, who resigned as CEO and
Mubadala, Oxy withdraw from Bahrain venture chairman and member of the board.
Mubadala Petroleum and Occidental Petroleum Corp. have Van P. Whitfield, executive vice-president and chief operat-
withdrawn from Tatweer Petroleum, a joint venture formed in ing officer, was appointed interim CEO effective June 1 and a
2009 to redevelop Bahrain oil field, according to press reports Class 2 member of the board.
(OGJ Online, Nov. 10, 2009). Also effective June 1, William P. Utt, lead independent direc-
The remaining Tatweer shareholder, Nogaholding, owned tor, was appointed interim chairman.
by the Bahraini government, owns about half of Tatweer.
According to Mubadala Petroleum, owned by the govern-
ment of Abu Dhabi, Tatweer drilled more than 780 wells and

6 Oil & Gas Journal

 Hydraulic Fracturing
Isnt What it Used
to Be.
Thats Because We Are Making it Better.

Vericor is bringing our rugged, military proven gas

turbines to the Oil and Gas market, and this is good
news for hydraulic fracturing. Now you can run on
100% well head gas which reduces emissions,
eliminates trucking diesel to the site and saves big
money. Vericor gas turbines are twice the horsepower
of your standard diesel engine and are a fraction of the
size, reducing the number of rigs and the footprint of
your spread. Not only are we making hydraulic
fracturing better, we are bringing our gas turbines to
other oil field applications such as portable electric
power.
Go to Vericor.com and lets see how we can succeed
together.
www.vericor.com

Visit Us At GPS
Booth #2031 An MTU Aero Engines Company
ICE BRENT / NYMEX LIGHT SWEET CRUDE US INDUSTRY SCOREBOARD 6/6
$/bbl
49.80
49.70
49.60
4 wk. 4 wk. avg. Change, YTD YTD avg. Change,
49.50
Latest week 5/20 average year ago1 % average1 year ago1 %
49.40 Product supplied, 1,000 b/d
49.30
Motor gasoline 9,608 9,245 3.9 9,277 8,913 4.1
49.20 Distillate 4,094 4,130 (0.9) 3,739 4,057 (7.8)
49.10 Jet fuel 1,614 1,530 5.5 1,563 1,527 2.4
May 25 May 26 May 27 May 301 May 31
Residual 335 168 99.4 297 207 43.5
Other products 4,701 4,693 0.2 4,959 4,807 3.2
TOTAL PRODUCT SUPPLIED 20,352 19,766 3.0 19,835 19,511 1.7
WTI CUSHING / BRENT SPOT Supply, 1,000 b/d
$/bbl Crude production 8,796 9,393 (6.4) 9,033 9,327 (3.2)
50.25 NGL production2 3,323 3,100 7.2 3,398 3,080 10.3
50.00 Crude imports 7,577 6,829 11.0 7,804 7,271 7.3
49.75 Product imports 2,245 2,082 7.8 2,082 2,072 0.5
Other supply2 3 2,161 2,173 (0.6) 2,020 2,372 (14.8)
49.50
TOTAL SUPPLY 24,102 23,577 2.2 24,337 24,122 0.9
49.25 Net product imports (1,363) (1,394) (1,845) (1,581)
49.00
48.75 Refining, 1,000 b/d
48.50
May 25 May 26 May 27 May 301 May 31 Crude runs to stills 16,204 16,638 (2.6) 16,023 15,866 1.0
Input to crude stills 16,437 16,587 (0.9) 16,221 16,093 0.8
% utilization 89.8 92.4 89.2 89.8

NYMEX NATURAL GAS / SPOT GAS - HENRY HUB Latest Previous Same week Change,
$/MMbtu
Latest week 5/20 week week1 Change year ago1 Change %
2.240 Stocks, 1,000 bbl
2.170 Crude oil 537,068 541,294 (4,226) 479,363 57,705 12.0
2.100 Motor gasoline 240,111 238,068 2,043 220,627 19,484 8.8
2.030 Distillate 150,878 152,162 (1,284) 128,839 22,039 17.1
1.960 Jet fuelkerosine 43,138 43,151 (13) 38,453 4,685 12.2
1.890 Residual 41,773 41,914 (141) 40,324 1,449 3.6
1.820 Stock cover (days)4 Change, % Change, %
1.750
May 25 May 26 May 27 May 301 May 31
Crude 33.1 33.6 (1.5) 29.5 12.2
Motor gasoline 25.0 24.9 0.4 23.9 4.6
Distillate 36.9 37.1 (0.5) 31.2 18.3
ICE GAS OIL / NYMEX HEATING OIL Propane 70.9 76.6 (7.4)
Change
76.0 (6.7)
Change Change,%
/gal Futures prices5 5/27
152.00
150.00
Light sweet crude ($/bbl) 49.01 48.03 0.98 59.22 (10.21) (17.2)
148.00 Natural gas, $/MMbtu 2.03 2.04 2.94 (0.91) (30.9)
146.00
144.00 1
Based on revised figures. 2OGJ estimates. 3Includes other liquids, refinery processing gain, and unaccounted for crude oil. 4Stocks
142.00 divided by average daily product supplied for the prior 4 weeks. 5Weekly average of daily closing futures prices.
140.00 Source: Energy Information Administration, Wall Street Journal
138.00
May 25 May 26 May 27 May 301 May 31

BAKER HUGHES INTERNATIONAL RIG COUNT: TOTAL WORLD / TOTAL ONSHORE / TOTAL OFFSHORE
3,600
PROPANE - MT. BELVIEU / BUTANE - MT. BELVIEU 3,300
/gal 3,000
68.00 2,700
67.50 2,400
2,100
67.00
1,800
66.50
1,500 1,424
53.50 1,200 1,177
53.00 300
247
52.50 0
52.00 Apr. 15 May 15 Jun. 15 July 15 Aug. 15 Sept. 15 Oct. 15 Nov. 15 Dec. 15 Jan. 16 Feb. 16 Mar. 16 Apr. 16
May 25 May 26 May 27 May 301 May 31
Note: Monthly average count

BAKER HUGHES RIG COUNT: US / CANADA

NYMEX GASOLINE (RBOB)2/ NY SPOT GASOLINE3 1,600
/gal
1,400
164.50
164.00 1,200
163.50 1,000 875
163.00 800
162.50 600
162.00 404
400
161.50
200 98
161.00 43
May 251 May 261 May 271 May 301 May 311 0
1Not
3/20/15 4/3/15 4/17/15 5/1/15 5/15/15 5/29/15 3/18/16 4/1/16 4/15/16 4/29/16 5/13/16 5/27/16
available 2Reformulated gasoline blendstock for oxygen blending
3Nonoxygenated regular unleaded 3/13/15 3/27/15 4/10/15 4/24/15 5/8/15 5/22/15 3/11/16 3/25/16 4/8/16 4/22/16 5/6/16 5/20/16

Note: End of week average count

8 Oil & Gas Journal | June 6, 2016

 WE DELIVER WHAT OTHERS CANT.
E X PA N S I V E G E O G R A P H I C F O O T P R I N T

C&J is one of North

Americas largest vertically-

providers, with equipment,

facilities and technical
expertise distributed
across most major oil and
gas producing basins in the
United States. Our services
extend across the entire
well life cycle, including
completion, production,
workover and plug and
abandonment.

FRAC WIRELINE COILED RIG FLUIDS OTHER

TUBING SERVICES MANAGEMENT SERVICES
U.S. ACTIVE
RANKING #2 #1 #1 #2 #1
WEST TEXAS
SERVICES OFFERED

SOUTH TEXAS

ROCKIES
NORTH EAST
CALIFORNIA
All rankings current as of April 2016

For any questions, contact [email protected].

EXCELLENCE DELIVERED. CJENERGY.COM

EXPLORATION & DEVELOPMENT Q U IC K TA K E S 38.25% interest in South Block A in July 2015.
South Block A is split into two portions. The West block
NPD studies cores from northeastern Barents Sea covers 1,257 sq km onshore the North Sumatra. The East block
The Norwegian Petroleum Directorate had seven shallow wells covers 637 sq km, extending into the coastal area and offshore.
drilled in the northeastern Barents Sea in fall 2015, resulting in East block also includes four exploration wells and 180 km of
1,000 m of stratigraphic drill cores to help assess the resource 2D seismic.
base. The operator estimates combined P50 unrisked resources
The area is not open for petroleum activity. NPD did not at 442 bcf of gas and 47 million bbl of oil and condensate. The
disclose the well depths. probability of success with identified leads range from 11% to
Meter by meter, the cores are being examined and registered 48%, the company said.
in the NPD core store in Stavanger. NPD said the cores pro- The JV recently completed 183 km of 2D seismic survey,
vide a quick overview of rock types and sedimentary struc- which targeted the Simpang, Djerneh, Amanah, Sungai Lyu,
tures. and Paya Bili prospects. Lion Energy Ltd.s operational update
Containing source and reservoir rocks, the cores measure cites the Simpang Deep as the largest of the identified leads,
5-7 cm in diameter and are split lengthwise. They are being which has more than 25 sq km potential areal closure with
studied with a magnifying glass, tape measure, and hydrochlo- similar objectives as the Matang discovery (OGJ Online, Apr.
ric acid. 23, 2016). The JV may select this target for a planned late-2017
Once these studies have been completed, we will under- drilling campaign.
stand much more about the geology in these sea areas, said JV partner Lion Energy holds 35% interest in South Block A
Andreas Bjornestad, a geologist who participated in the drill- through its subsidiary KRX Energy (SBA) Pte. Ltd. According to
ing expedition with the vessel Bucentaur (OGJ Online, Feb. 28, the companys web site, Renco holds 51% overall as operator of
2013). the block, and PT Prosys Oil & Gas International also holds a
The cores were initially brought to the NPD core store in participating interest.
Trondheim, where three consultants readied them for descrip-
tions. In April, they were moved to Stavanger, which holds Black Sea seismic program under way off Romania
samples and drill cuttings from nearly all exploration and pro- Carlyle Groups Black Sea Oil & Gas SRL has awarded GC
duction wells drilled on the Norwegian shelf. The vast majority Rieber Shipping a 45-day contract for seismic work offshore
of those drill cores are from reservoir rocks, NPD said. Romania in the Black Sea. Wholly owned subsidiary Dolphin
Geophysical Ltd. will deliver fast-track 3D seismic with its
NPD greenlights North Sea wildcat, Brasse prospect 16-streamer Polar Marquis.
The Norwegian Petroleum Directorate has granted Faroe Pe- Black Sea Oil & Gas has interest in three blocks, XIII Pel-
troleum Norge AS a permit for well 31/7-1 on its jointly owned ican, XV Midia Shallow, and EX-25 Luceafarul, which cover
Brasse prospect in PL740. The area in this licence is part of 5,000 sq km within the underexplored Romanian continental
Blocks 31/7 and 30/9. PL740 was awarded in APA 2013. This is shelf. Black Sea Oil & Gas operates the blocks on behalf of
the first well to be drilled in the license. its partners Gas Plus International BV (Midia and Pelican) and
According to Faroes web site, the prospect holds stacked Petro Ventures Europe BV (Midia, Pelican, and Luceafarul).
reservoir potential in Upper and Middle Jurassic. Well 31/07-01 On May 11 OMV AG said its subsidiary OMV Petrom SA
will be drilled from the Transocean Arctic drilling facility and completed a second exploration drilling campaign in January
is expected to spud sometime in mid-2016. Faroe holds equal on its Neptun Deep block offshore Romania. In all, seven wells
interest in PL740 with Core Energy AS. were finalized with most encountering gas (OGJ Online, May
12, 2016). The company said further interpretation was needed
Drilling approved for Indonesias South Block A to determine commercial viability, but in 2013 OMV assessed
Indonesia has approved the Amanah Timur No. 1 (AT1) ap- that Neptun might produce 6.5 billion cu m/year. First produc-
praisal well, and ACL International Ltd.s subsidiary Renco tion is expected before 2020. ExxonMobil Corp. is an equal
Elang Energy Ltd. said the well will spud before Nov. 30. Ren- 50% partner.
co, the operator of South Block A, is drilling AT1 to test the
Paya Bili prospect at TD of 700 m and to evaluate reservoir DRILLING & PRODUCTION Q U IC K TA K E S
productivity in a pre-1940 oil field as well as deeper untested
sandstones. EIA: US oil output in March fell 5.4% year-over-year
South Block A is onshore and offshore Aceh Province, US crude oil production in March averaged 9.127 million b/d,
North Sumatra, Indonesia (OGJ Online, May 18, 2009). The down from 9.133 million b/d in February and 9.648 million b/d
prospect lies within the North Sumatra basin and is one of in March 2015, according to the most recent data from the US
the most productive hydrocarbon provinces in Indonesia Energy Information Administration.
with more than 80 known oil and gas fields. ACL acquired The overall US crude output decline was led by a more than

10 Oil & Gas Journal | June 6, 2016

 RPSEA-SPE GCS
Onshore and Ultra-Deepwater
Technology Conference

Best of RPSEA - 10 Years of Research

Tues August 30 - Wed August 31, 2016

ULTRA-DEEPWATER | UNCONVENTIONAL RESOURCES | SMALL PRODUCER

San Luis Resort | Galveston, TX
$100 Members (RPSEA or SPE), $500 Non-members

Network with the highest level of industry peers.

Join a Technical Advisory Committee.
www.rpsea.org/events/503
10% drop year-over-year in Texas. Production in the state dur- PROCESSING Q U IC K TA K E S
ing March totaled 3.276 million b/d, decreasing from 3.316 mil-
lion b/d in February and 3.644 million b/d in March 2015. Rosneft, Pertamina ink deal for integrated complex
North Dakota output during the month was 1.109 million Russias OJSC Rosneft and PT Pertamina (Persoro) of Indonesia
b/d, down from 1.116 million b/d in February and 1.189 in have signed a framework agreement to cooperate on develop-
March 2015. ment of a grassroots refining and petrochemical complex to be
Onshore production declines were partially offset by a 16% built at Tuban, in East Java, Indonesia.
year-over-year jump in production from federal waters of the As part of the agreement, Rosneft and Pertamina will per-
Gulf of Mexico, where March output averaged 1.641 million form a bankable feasibility study to finance the project as well
b/d, rising from 1.577 million b/d in February and 1.414 mil- as establish a joint venture for its implementation, Rosneft said.
lion b/d in March 2015. The companies also have agreed to execute studies to inves-
US natural gas production in March was 91.06 bcf, down tigate the following: prospects for joint projects in the area of
from 92.011 bcf in February but still up from 90.768 bcf in crude and oil products supplies, logistics, and infrastructure;
March 2015. Texass gas output was 22.605 bcf, falling from potential for Pertamina to enter in Rosnefts upstream projects
22.931 bcf in February and 24.087 bcf in March 2015. in Russia as an equity holder; and partnership in international
Pennsylvanias gas output totaled 14.67 bcf, down from joint projects for refining.
14.945 bcf in February but still up 11.2% year-over-year from Rosneft said the companies will take final investment deci-
13.191 bcf. Gas production from the Gulf of Mexico totaled sion on the proposed complex once they have completed the
3.562 bcf, up from 3.496 bcf in February and 3.203 bcf in feasibility study, basic engineering design (BED), and front-end
March 2015. engineering design (FEED) for the project.
The agreement follows Pertaminas previously announced
EIA: Permian oil-output drop to increase in June plans to build refineries and upgrade existing plants as part of
Crude oil production in June from the seven major US shale its strategy to reduce fuel imports into Indonesia by boosting
regions is expected to fall 113,000 b/d month-over-month to domestic production (OGJ Online, Dec. 15, 2014).
4.85 million b/d, according to the US Energy Information Ad- Rosneft, which has led competition for a share in the long-
ministrations latest Drilling Productivity Report (DPR). stalled Tuban complex, views the deal as a launching pad for
The DPR focuses on the Bakken, Eagle Ford, Haynesville, expanding its footprint as a reliable partner in oil and gas pro-
Marcellus, Niobrara, Permian, and Utica, which altogether ac- duction as well as refining throughout the Asia-Pacific region.
counted for 95% of US crude production increases and all US A timeframe for when the firms would complete the feasibil-
natural gas production increases during 2011-13. ity study, BED, and FEED on the project was not disclosed.
For the third consecutive month, the Permian is forecast to
record an oil-output decline. The projected 10,000-b/d loss in Lukoil commissions unit at Volgograd refinery
June would bring its total output to 2.02 million b/d. The West PJSC Lukoil subsidiary OOO Lukoil Volgogradneftepererabot-
Texas basin was the last major oil-producing region for which ka has commissioned a vacuum gas oil (VGO) deep-conversion
the EIA projected a monthly loss since overall US shale output hydrocracking complex at its Volgograd refinery in southern
began falling in spring 2015. Russia as part of a program to boost overall capacities of the
In South Texas, the Eagle Ford is again expected to represent companys refining assets (OGJ Online, Feb. 19, 2013).
most of the overall US loss in June, shedding 58,000 b/d to 1.21 Entered into commercial operation on May 31, the deep-
million b/d. The Bakken is projected to drop 28,000 b/d to 1.02 processing complex includes a 3.5 million-tonne/year VGO hy-
million b/d, and the Niobrara is projected to drop 15,000 b/d drocracker, units for hydrogen production and sulfur recovery,
to 391,000 b/d. as well as auxiliary installations, Lukoil said.
New-well oil production/rig in June across the seven regions Completed in 3 years at a cost of $2.2 billion, the complex
is expected to rise by a rig-weighted average of 13 b/d to 575 will increase the refinerys annual output of the following prod-
b/d, reflecting a 23-b/d jump in the Eagle Ford to 994, 23-b/d ucts for primary distribution to markets in southern parts of
gain in the Niobrara to 915, 17-b/d increase in the Bakken to Russia: Euro 5 diesel fuels by 1.8 million tpy, motor gasoline
832 b/d, and 13-b/d rise in the Permian to 493 b/d. components by 600,000 tpy, and LPGs by 100,000 tpy.
Gas production from the regions is forecast to fall 464 Startup of the Volgograd deep-processing complex establish-
MMcfd to 45.97 bcfd. The Eagle Ford is expected to lose 195 es Lukoil as the first Russian operator to fulfill its commitments
MMcfd to 6.3 bcfd, followed by a 74-MMcfd drop in the Niobr- under a July 2011 quadripartite agreement on modernization
ara to 4.11 bcfd, 64-MMcfd decrease in the Haynesville to 5.98 of Russias oil processing industry between oil companies; the
bcfd, and 53-MMcfd losses in each of the Marcellus and Perm- Federal Antimonopoly Service of the Russian Federation; the
ian to 17.29 bcfd and 6.97 bcfd, respectively. Federal Service for Environmental, Technological, and Nuclear
EIA projects gas output from the Utica to increase 4 MMcfd Supervision (Rostechnadzor); and the Federal Agency for Tech-
to 3.66 bcfd. nical Regulating and Metrology (Rosstandart) to reequip and

12 Oil & Gas Journal | June 6, 2016

Oil and Gas is Our
Field of Competence

Welding solutions for the oil & gas industry.

Our welding consumables set the benchmark all along the oil and gas value chain from exploration, production to transportation
and refinement. Whether used thousands of meters below sea level, under the most demanding conditions of sour gas or under
high pressure, the customer-driven solutions of Bhler Welding approve the safest, most material and cost efficient operations of
facilities and equipment. Our wide network of service partners and our expertise in welding techniques and applications is our
additional value to our customers.

voestalpine Bhler Welding

www.voestalpine.com/welding
upgrade oil processing capacities at the countrys refineries. The three coal seam gas-LNG projects on Curtis Island now
Addition of the complex at Volgograd follows Lukoils June have five out of the six planned trains in operation. These in-
2015 commissioning of the 6 million-tpy AVT-1 crude distilla- clude GLNG (2 trains), BGs Queensland Curtis LNG (2 trains)
tion unit at the refinery (OGJ Online, June 25, 2015; Feb. 20, and Origin Energys Australia Pacific LNG (1 train).
2015), which has lifted crude oil processing capacity at the site All gas supplies are being sourced from the Surat-Bowen ba-
to a current 15.7 million tpy from its previous 11 million-tpy sins of inland southeast Queensland.
capacity, Lukoil said in its latest annual report.
Chevron gets environmental nod for Gorgon Train 4
CPC lets contract for Cambodian grassroots refinery The Australian government has granted environmental ap-
Petrochemical Co. Ltd. (CPC) has let a contract to China Na- proval to Chevron Australia Pty. Ltd. for Train 4 at the firms
tional Petroleum Corp. (CNPC) unit Northeast Refining & $54-billion Gorgon-Jansz LNG plant on Barrow Island off
Chemical Engineering Co. to build the first phase of a proposed Western Australia. Valid until yearend 2069, the expansion
5 million-tonne/year refinery in Cambodias southwestern approval has numerous stringent environmental management,
province of Preah Sihanouk, along the Gulf of Thailand. monitoring, and reporting conditions attached.
As part of the $620-million Phase 1 contract, CNPC North- At this stage, however, Chevron has little inclination to
east Refining & Chemical Engineering will provide engineer- move into a Train 4 mode. The company and its joint venture
ing, procurement, and construction on the project, according to partners recently began production with Train 1, while Trains
a series of releases from Cambodias government. 2 and 3 are still under construction. Train 1 was shut down for
Construction on Phase 1 of the refinery, which will have a repairs for 2 months soon after coming on stream, but is now
capacity of 2 million tpy, is scheduled to begin this October and back online.
be completed by yearend 2018. The JVs priority is to complete the foundation project of
In the years following commissioning of Phase 1, CPC plans three trains and has yet to make a decision to proceed with
to invest in additional expansions of the refinery that will in- planning of a fourth. Train 2 is due to come online later this
crease its overall crude processing capacity to 5 million tpy, year with Train 3 just 6 months after that.
according to the government of Cambodia. Slumping oil prices and oversupply in the global LNG mar-
CPCs total capital investment in the grassroots refinery will ket has dampened the zest for further expansion in the short
be about $3 billion, the company said. term, although there appears to be plenty of gas in undeveloped
The new refinerywhich will be Cambodias first since a fields in the Greater Gorgon region to support a fourth train.
10,000-b/d plant built in 1968 was irreparably damaged in Nevertheless the government approval and its timeframe
the early 1970s during the countrys civil warwill produce does provide environmental certainty should a decision to pro-
finished products for domestic consumption as well as export, ceed with Train 4 be made in the future.
Cambodias Ministry of Mines & Energy said in a post to its of-
ficial Facebook account. HMEP to build US-Mexico refined products line
CPC previously let a licensing and engineering services Howard Midstream Energy Partners LLC (HMEP) unit Dos
contract to KBR and Tinajin Petrochemical Engineering De- Aguilas Pipeline LLC will build the 287-mile, 12-in. OD Dos
sign Co. Ltd. for a 1.2 million-tpy hydrocracker for a proposed Aguilas products pipeline following a successful open season.
5-million-tpy refinery originally planned for startup in 2015 Dos Aguilas is an open access system of refined products ter-
in Cambodias Kampong Som Petrochemical Industrial Zone minals and pipelines from Corpus Christi, Tex., to northern
(OGJ Online, Jan. 18, 2013). Mexico. HMEP expects the project to service first-half 2018.
It remains unclear whether contracts let for earlier iterations Dos Aguilas will ship gasoline, ultra-low sulfur diesel, and
of the long-planned refinery remain in effect under CPCs re- jet fuel from the Corpus Christi refinery to Laredo, Tex., and
vised program for the plant. on to northern Mexico through deliveries to Nuevo Laredo,
Tamaulipas, and Monterrey, Nuevo Leon. The project is broken
TRANSPORTATION Q U IC K TA K E S down for regulatory purposes into four pipelines, with different
names: Border Express Pipeline, Corpus Christi to Laredo (141
Gladstone LNGs second train starts up miles); Borrego Pipeline, Laredo to the US-Mexico border (10
The Santos Ltd.-led $18.5-billion Gladstone LNG (GLNG) miles); Poliducto Frontera Pipeline, US-Mexico border to Nue-
project on Curtis Island near Gladstone in central east coast vo Laredo (12 miles); and Poliducto del Norte Pipeline, Nuevo
Queensland has brought on line its Train 2, just 8 months after Laredo to Monterrey (124 miles).
Train 1. The Santos group has produced in excess of 2 million Howard will build terminals, with a combined 1.2 million
tonnes of LNG since Train 1 came on stream in October 2015 bbl of storage, at the pipelines start in Robstown, Tex., Lar-
and shipped 32 cargoes in that time. edo, Nuevo Laredo, and at the pipelines end in Santa Catarina,
The JV comprises Santos 30%, Petronas 27.5%, Total SA Mexico, near Monterrey.
27.5%, and Korea Gas Corp. 15%.

14 Oil & Gas Journal | June 6, 2016

2016-17 EVENT CALENDAR
Denotes new listing or Internet of Things (IOT) Calgary, web site: ace. AUGUST 2016 Offshore Northern deen, web site: www.
a change in previously in Oil & Gas Europe, aapg.org/2016 19-22. Seas, Stavanger, web intelligentenergyevent.
published information. Aberdeen, web site: SPE/AAPG/SEG site: www.tofairs.com/ com/ 6-8.
energyconferencenet- AAPG 2016 Annual Unconventional expo.php?fair=103366
work.com/iot-oil-gas- Convention & Exhibi- Resources Technology Aug. 29-Sept. 1. NACE Egypt Corrosion
europe-2016/ 8-9. tion, Calgary, web site: Conference (URTeC), Conference, Cairo, web
www.aapg.org/events/ San Antonio, web site: 2nd International site: egyptcorrosion.
JUNE 2016 SPE Trinidad & Tobago conferences/ace/ www.urtec.org/ 1-3. Congress & Expo on nace.org/ 6-8.
Section Energy Re- 19-22. Biofuels & Bioenergy,
SPE Argentina Explora- sources Conference, Society of Petroleum Sao Paulo, web site: AAPG SEG Interna-
tion & Production Port of Spain, web site: North American Cus- Engineers (SPE) Nige- biofuels-bioenergy. tional Conference
of Unconventional spettconf.org/ 13-15. tody Transfer Measure- ria Annual International conferenceseries.com/ & Exhibition 2016,
Resources Symposium, ment Conference, Conference & Exhibi- 29-31. Cancun, web site:
Buenos Aires, web site: Nigeria Oil & Gas Con- San Antonio, web site: tion, Lagos, web site: www.aapg.org/publi-
www.spe.org/events/ ference & Exhibition, www.ceesi.com 21-23. connect.spe.org/spenc/ cations/blogs/events/
laur/2016/ 1-3. Abuja, Nigeria, web naice/naice2016/ 2-4. SEPTEMBER 2016 article/articleid/23667/
site: www.cwcnog.com/ The 4th Annual Cyber increase-your-expo-
23rd International 13-16. Security for Oil & Gas NAPE Expo, Houston, Second Applied Shal- sure-exhibition-and-
Caspian Oil & Gas Summit, Houston, web web site: napeexpo. low Marine Geophys- sponsorship-opportuni-
Conference, Baku, web SPE London Annual site: www.oilandgas- com/shows/about-the- ics Conference, ties-available/ 6-9.
site: www.oilgasconfer- Conference: Adapting cybersecurity.com/ show/houston/ 10-11. Barcelona, web site:
ence.az/2016/?p=index to a Challenging Oil 27-29. www. Eage.org/event/ AAPG SEG 2016 In-
2-3. Price Environment, EnerComs The Oil & index.php?eventid= ternational Conference
London, web site: Independent Petroleum Gas Conference-2016, 1421&Opendivs=s3 & Exhibition, Cancun,
Society of Petroleum www.spe.org/events/ Association of America Denver, web site: www. 4-8. web site: www.aapg.
Evaluation Engineers lond/2016/ 14. (IPAA) 86th Midyear theoilandgasconfer- org/events/conferenc-
(SPEE) 53rd Annual Meeting, Colorado ence.com/ 14-18. EAGE First Conference es/ice/announcement/
Meeting, Lake Tahoe, Oil & Gas Polymer Springs, Colo., web on Geophysics for Min- articleid/20311/aapg-
NV, web site: https:// Engineering Texas site: www.ipaa.org/ IADC/SPE Asia Pacific eral Exploration and seg-2016-international-
secure.spee.org/ 4-9. 2016, Houston, web meeting-events/event- Drilling Technology Mining, Barcelona, web conference-exhibition-
site: www.amiplastics- details/?mid=266 Conference & Exhibi- site: www.eage.org/ cancun 6-9.
Canadian Energy na.com/events/ 27-29. tion, Singapore, web event/?eventid=1420
Research Institute Event.aspx?code= site: www.spe.org/ 4-8. 23rd Annual India Oil &
(CERI) 2016 Petro- C734&sec=5725 2016 Exploration & events/apdt/2016/ Gas Review Summit &
chemical Conference, 14-15. Production Standards 22-24. European Association International Exhibi-
Kananaskis, Alta., web Conference on Oilfield of Geoscientists & Engi- tion, Mumbai, web site:
site: ceri.ca/index. LNG Fuels Summit, Equipment & Materi- GeoBaikal 2016: Ex- neers (EAGE) First Con- www.oilgas-events.
php?option=com_conte Amsterdam, website: als, Washington, pand Horizons, Irkutsk, ference on Geophysics com/india-oil-gas 9-10.
nt&view=article&id=57 www.lngfuelssummit. DC, web site: www. Russia, web site: for Mineral Exploration
&Itemid=60 5-7. com/14-15. api.org/events-and- www.eage.org/event/ & Mining, Barcelona, International Confer-
training/calendar-of- index.php?eventid web site: www.eage.org/ ence on Chemical
Australian Petro- CWCs LNG Fuels Sum- events/2016/e-p June =1433&Opendivs=s3 event/index.php?eventid Engineering, Phoenix,
leum Production & mit, Amsterdam, web 27-July 1. 22-26. =1420&Opendivs=s3 web site: chemicalen-
Exploration Association site: www.lngfuelssum- 4-8. gineering.conferenc-
(APPEA) Conference mit.com/ 14-16. Papua New Guinea Oil SPE Asia Pacific eseries.com/ 12-14.
& Exhibition, Bris- & Gas Summit, Port Hydraulic Fracturing 22nd European Meeting
bane, web site: www. IADC World Drilling Moresby, web site: Conference, Beijing, of Environmental and Geomodel 2016,
appeaconference.com. 2016 Conference & Ex- pngoilgas.com/ 28-29. web site: www.spe. Engineering Geophys- Gelendzhik, Rus-
au/ 5-8. hibition, Lisbon, www. org/events/aphf/2016/ ics, Barcelona, web sia, web site: www.
iadc.org/event/world- pages/general/call_for_ site: www.eage.org/ eage.org/event/
SPE Canada Heavy drilling-2016/ 15-16. JULY 2016 papers.php 24-26. event/index.php?eventid index.php?eventid=
Oil Technical Confer- =1419&Opendivs=s3 1448&Opendivs=s3
ence, Calgary, web site: IADC World Drilling World Congress on 15th European 4-8. 12-15.
www.spe.org/events/ Conference & Exhibi- Petroleum & Refinery, Conference on the
choc/2016/ 7-9. tion, Lisbon, web site: Brisbane, web site: Mathematics of Oil SPE Offshore Europe, ESOPE International
www.iadc.org/event/ petroleum.omicsgroup. Recovery (ECMOR XV), Aberdeen, web site: Exhibition & Sympo-
Caspian Oil & Gas Exhi- world-drilling-2016/ com/ 21-23. Amsterdam, web site: www.offshore-europe. sium for the Pressure
bition, Baku, web site: 15-16. www.eage.org/event/ co.uk/ 5-8. Equipment Industry,
www.oilgas-events. index.php?eventid= Paris, web site: www.
com/Caspian-OG- AAPG Annual Conven- 1416&Opendivs=s3 SPE Intelligent Energy esope-paris.com/
Exhibition/ 7-10. tion & Exhibition 2016, Aug. 29-Sept. 1. Conference, Aber- 13-15.

16 Oil & Gas Journal | June 6, 2016

 2016-17 EVENT CALENDAR

SPE Deepwater Drilling Iran International Petro- Corrosion Technology International Confer- International Confer- SEG International Exhi-
& Completions Confer- leum Congress (IIPC), Week 2016, Houston, ence on Geophysics, ence on Geosciences, bition and 86th Annual
ence, Galveston, Tex., Tehran, web site: www. web site: ctw.nace.org/ Vancouver, web site: Orlando, web site: Meeting, Dallas, web
web site: www.spe. iranpetroleumcongress. 25-29. geophysics.conferenc- geosciences.confer- site: www.seg.org/web/
org/events/ddc/2016/ com/ 19-21. eseries.com/ 29-30. enceseries.com/ 6-7. annual-meeting-2016/
14-15. SPE Annual Technical 16-21.
The CWC World LNG & Conference & Exhibi- Cyber Security for Criti-
2nd Annual IoT in Oil & Gas Series: Asia Pacific tion (ATCE), Dubai, OCTOBER 2016 cal Assets LATAM, Rio The 8th Saudi Arabia
Gas, Houston, web site: Summit, Singapore, web site: www.spe.org/ de Janeiro, web site: International Oil & Gas
energyconferencenet- web site: asiapacific. atce/2016/ 26-28. Kazakhstan Interna- www.criticalcybersecu- Exhibition (SAOGE),
work.com/iot-in-oil- cwclng.com/ 20-23. tional Oil & Gas Confer- rity.com/latam/ 6-7. Dammam, web site:
and-gas-2016/14-15. SPE Annual Technical ence (KIOGE) 2016, www.saoge.org/ 17-19.
SPE Liquids-Rich Conference & Exhibi- Almaty, Kazakhstan, 23rd World Energy
Rio Oil & Gas Expo Basins Confer- tion, Dubai, web site: web site: kioge.kz/en/ Conference, Istan- SPE Well Construction
& Conference, Rio enceNorth America, www.spe.org/events/ conference/about- bul, web site: www. Fluids 2025 Forum:
de Janeiro, web site: Midland, Tex., web site: calendar/ 26-28. conference 5-6. wec2016istanbul.org. Meeting the Chal-
www.whereinfair.com/ www.spe.org/events/ tr/ 9-13. lenges, Dubai, web
rio-oil-gas-expo/rio- lrbc/2016/ 21-22. Global Oil & Gas South USEA 9th Annual site: www.spe.org/
de-janeiro/2016-Sep/ East Europe & Mediter- Energy Supply Forum, The 2016 API Tank, events/16fmel/ 17-19.
14-16. Eastern Section, ranean Conference, Washington, DC, web Valves, & Piping Con-
American Association Athens, web site: www. site: https://www.usea. ference & Expo, Las 2016 Fall Committee
Turbomachinery & of Petroleum Geologists oilgas-events.com/ org/event/usea-9th- Vegas, web site: www. on Petroleum Mea-
Pump Users Sympo- 2016 Annual Meeting, Global-Oil-Gas-Black- annual-energy-supply- api.org/events-and- surement Standards
sium, Houston, web Lexington, Ky., web Sea-Mediterranean- forum 6. training/calendar-of- Meeting, Los Angeles,
site: tps.tamu.edu/ site: www.esaapgmtg. Conference/ 28-29. events/2016/tvp 10-13. web site: www.api.
event-info 15-17. org/ 25-27. org/Events-and-

Oil & Gas Journal | June 6, 2016 17

2016-17 EVENT CALENDAR

Training/Calendar-of- Bottom of the Barrel 5th International Confer- JANUARY 2017 Society of Petroleum www.aapg.org/events/
Events/2016/fallcopm Technology Conference ence on Petroleum Engineers (SPE) conferences/ace/ 2-5.
17-21. (BBTC) Middle East & Geology & Petroleum Global Oil & Gas Reservoir Simulation
Africa 2016, Manama, Industry, Dubai, web Middle East & North Conference, Mont- SPE International
The 37th Oil & Money web site: www.bbtc- site: petroleumgeology. Africa Conference, gomery, Tex., web site: Conference on
Conference, London, mena.biz 26-27. conferenceseries.com/ Cairo, web site: www. www.spe.org/events/ Oilfield Chemistry,
web site: www.oiland- 24-25. oilgas-events.com/ rsc/2017/ 20-22. Montgomery, Tex.,
money.com/ 18-19. Gulf Safety Forum Find-an-Event/Global- web site: www.spe.
(GSF) 2016, Doha, web Oil & Gas Safety & Oil-Gas-Middle-East- Australasian Oil & Gas org/events/en/2017/
Society of Petroleum site: www.gulfsafetyfo- Health Conference North-Africa-(1) 24-26. Exhibition & Confer- conference/17occ/
Engineers (SPE) rum.com/ 30-31. 2016 OSHA Exploration ence (AOG), Perth, homepage.html/ 3-5.
African Health, Safety, & Production, Houston, SPE Hydraulic Fractur- web site: aogexpo.com.
Security, Environment 23rd Africa Oil Week web site: www.oshasa- ing Technology Confer- au/ 22-24. SPE Asia Pacific
& Social Responsibility Africa Upstream Con- fetyconference.org/ ence, The Woodlands, Health, Safety, Secu-
Conference & Exhibi- ference 2016, Cape Events/ugm/Osha2016/ Tex., web site: www. rity, Environment & So-
tion, Accra, Ghana, Town, web site: www. default.aspx 29-30. spe.org/events/ MARCH 2017 cial Responsibility Con-
web site: www.spe. oilgas-events.com/ hftc/2017/ 24-26. ference, Kuala Lumpur,
org/events/hsea/2016/ Find-an-Event/Africa- Society of Petroleum Society of Petroleum web site: www.spe.
18-20. Oil-Week/ Oct 31-Nov Engineers (SPE) Middle NACE International Engineers (SPE) 20th org/events/en/2017/
04. East Artificial Lift Pipeline Coating Tech- Middle East Oil & Gas conference/17aphs/
SPE Latin America & Conference & Exhibi- nology Conference, Show & Conference homepage.html/ 4-6.
Caribbean Heavy Oil & tion, Manama, Bahrain, Houston, web site: (MEOS), Manama,
Extra Heavy Oil Confer- NOVEMBER 2016 web site: www.spe.org/ pipelinecoating.nace. Bahrain, web site: Gastech Conference &
ence, Lima, web site: events/meal/2016/ Nov. org/ 24-26. meos17.com/ 6-9. Exhibition, Tokyo, web
www.spe.org/events/ 2nd International Con- 30-Dec. 1. site: www.gastech-
laho/2016/ 19-20. ference & Expo on Oil Offshore West Africa, SPE/IADC Drilling event.com/ 4-7.
& Gas, Istanbul, web Lagos, web site: www. Conference & Exhibi-
Arctic Technology site: oil-gas.omics- DECEMBER 2016 offshorewestafrica.com/ tion, Dublin, web site: 11th Global Oil & Gas
Conference (ATC), St. group.com/ 2-3. index.html 24-26. www.spe.org/events/ Atyrau Conference,
Johns, Newfoundland Third EAGE Integrated dc/2017/ 7-9. Kazakhstan, web site:
& Labrador, web site: The Abu Dhabi Inter- Reservoir Modelling 2017 API Inspection www.oilgas-events.
www.arctictechnology- national Petroleum Conference, Kuala Summit, Galveston, 15th Global Oil & Gas com/Oiltech-Atyrau-
conference.org/ 24-26. Exhibition & Confer- Lumpur, web site: Tex., web site: www. Turkey, Istanbul, web Conference/ 11-12.
ence, (ADIPEC), Abu www.eage.org/event/ api.org/Events-and- site: www.global-oilgas.
SPE Russian Petroleum Dhabi, web site: www. index.php?eventid= Training/Calendar-of- com/Turkey/Home/ Neftegaz 2017 17th In-
Technology Conference adipec.com/ 7-10. 1477&Opendivs=s3 Events/2017/inspection 15-16. ternational Exhibition for
& Exhibition, Moscow, 5-7. Jan. 30-Feb 2. Equipment & Technolo-
web site: www.spe. RefComm Mumbai SPE/ICoTA Coiled Tub- gies for Oil & Gas Indus-
org/events/rpc/2016/ 2016, Mumbai, web OpEx MENA 2016 ing & Well Intervention tries, Moscow, web site:
24-26. site: refiningcommu- Operational Excellence FEBRUARY 2017 Conference & Exhibi- www.neftegaz-expo.
nity.com/refcomm- in Oil, Gas & Petro- tion, Houston, web site: ru/en/neftegaz_2017/
SPE North America mumbai-2016/ 7-11. chemicals, Abu Dhabi, 7th Basra Oil & Gas www.spe.org/events/ 17-20.
Artificial Lift Confer- web site: www.opex. International Confer- ctwi/2017/ 21-22.
ence & Exhibition, International Petroleum biz 5-7. ence & Exhibition, Society of Petroleum
The Woodlands, Tex., Technology Conference Basra, web site: www. Corrosion 2017 Confer- Engineers (SPE)
web site: www.spe. (IPTC), Bangkok, web Oil & Gas Supply Chain basraoilgas.com/Con- ence & Expo, New Health, Safety, Security,
org/events/alce/2016/ site: www.iptcnet.org/ Procurement, Houston, ference/ 8-11. Orleans, web site: Environment & Social
25-27. pages/about/future- web site: energyconfer- nacecorrosion.org/ Responsibility Confer-
dates.php 14-16. ence.network.com/ NAPE Summit, 26-30. enceNorth America,
SPE Asia Pacific Oil oil-gas-supply-chain- Houston, web site: New Orleans, web site:
& Gas Conference & 4th East Africa Oil & procurement-2016/ 6-7. napeexpo.com/shows/ SPE Oklahoma City www.spe.org/events/
Exhibition (APOGCE), Gas Summit & Exhibi- about-the-show/summit Oil & Gas Symposium, hsse/2017/ 18-20.
Perth, web site: tion, Nairobi, web site: SPE Heavy Oil Confer- 15-17. Oklahoma City, web
www.spe.org/events/ eaogs.com/15-17. ence & Exhibition, site: www.speokcsym-
apogce/2016/ 25-27. Kuwait City, web site: 19th International posium.org/ 27-31. MAY 2017
21st Annual Oil & Gas www.spe.org/events/ Conference on Oil,
The 10th Element Oil- of Turkmenistan (OGT) hoce/2016/ 6-8. Gas & Petrochemical Colombia Oil & Gas
field Engineering with Conference 2016, Ash- Engineering (ICOGPE APRIL 2017 Conference & Exhibi-
Polymers Conference, gabat, web site: ogt. Green Forum: Oil, Gas 2017), Venice, web tion, Cartagena, web
London, web site: theenergyexchange. & Petrochemicals, Abu site: www.waset.org/ AAPG 2017 Annual site: 10times.com/
oilfieldpolymers.nace. co.uk/ 16-17. Dhabi, web site: www. conference/2017/02/ Convention & Exhibi- colombia-oilgas-exhibi-
org/ 25-27. greenforum.ae 8. venice/ICOGPE 16-17. tion, Houston, web site: tion 7-9.

18 Oil & Gas Journal | June 6, 2016

 LETTERS

International Oil Spill Brasil Offshore, Rio de The 16th Asian Oil, Buoy designer misidentified
Conference, Long Janeiro, web site: www. Gas & Petrochemical
Beach, Calif., web site: brasiloffshore.com/en/ Engineering Exhibition, Our attention was recently drawn to the Oil & Gas Jour-
iosc2017.org/ 15-18. Home/ 20-23. Kuala Lumpur, web nal Online article Newly formed Quadrant Energy to
site: www.oilandgas- decommission East Spar buoy, dated June 23, 2015.
SPE Latin America & 13th Russian Petro- asia.com/home/index.
php 11-13.
We are highly concerned by the misinformation pro-
Caribbean Petroleum leum & Gas Congress
(RPGC), Moscow, web
vided in this article regarding the designer of the East
Engineering Confer- Spar Buoy. This article suggests the designer was the
ence, Buenos Aires, site: www.oilgas-
events.com/RPGC- SEPTEMBER 2017 Norwegian group Kvaerner, which is wrong and com-
web site: www.spe.
Congress/ 27-29. mercially sensitive since Ocean Resource invented the
org/events/en/2017/
conference/17lacp/
SPE Offshore Europe autonomous buoy concept and holds patents for these.
homepage.html/17-19.
14th Moscow Interna- Conference & Exhibi- We have designed, built, installed, and commissioned
tional Oil & Gas Exhibi- tion, Aberdeen, web over 15 of these buoys over the past 30 years, and they
tion (MIOGE), Moscow, site: www.offshore- have a wide range of application, including offshore oil
web site: www.oilgas- europe.co.uk/ 5-8.
JUNE 2017 and gas field support and full production.
events.com/MIOGE-
Exhibition 27-30. Global Oil & Gas
The 16th Asian Oil, Middle East & North Lewis Lack
Gas & Petrochemical Africa Conference, Business Development Director
Engineering Exhibition, JULY 2017 Cairo, web site: www. Ocean Resource Ltd.
Kuala Lumpur, web oilgas-events.com/ Portskewett, Wales
site: www.oilandgas- 22nd World Petroleum Find-an-Event/Global-
asia.com/home/index. Congress (WPC), Oil-Gas-Middle-East-
php 11-13. Istanbul, web site: North-Africa-%281%29
www.22wpc.com/ 9-13. 17-19.

PumpWorks 610
delivers. PWH API 610 OH2 PW-11 API 610 OH2
Pumps Delivered Pumps Delivered
in 16 Weeks in 2-4 Weeks

PWD API 610 PWI-BB API 610

BB1Delivered OH3 & PWI
in 26-28 API 610
Weeks OH3
Delivered
in 16-18
Weeks
We do it fast and we do it right.
Most pump OEMs make you wait 30 to 50 weeks to deliver their API 610 compliant
single and multistage pumps. By comparison, the PumpWorks 610 Model PWH and
Model PWV standard lead times are 16 weeks or less, and PWM Multistage pipeline PWM API 610 BB3 PWV API
pumps are 28 weeks or less. In addition, our pumps are manufactured in the USA. Delivered in 26-28 610 VS6 &
Weeks VS1 Pumps
PumpWorks 610 offers our online ePOD Pump Selector to simplify Delivered in
pump conguration by quickly providing you with pump selection 16 Weeks
and performance curves right off of our website no log in required.
At PumpWorks 610, you can count on our knowledgeable staff to
ensure that your nished product meets or exceeds your exact specications.
Why wait longer to get the pump you need when you need it? Visit
www.pumpworks610.com or call 1-800-405-0209 for more information.

Houston Ofce: 8885 Monroe Road, Houston Texas 77061 USA

Toll Free: 1.888.405.0209 Fax: 713.956.2141
[email protected] www.pumpworks610.com twitter: @PumpWorks610


    
 

Oil & Gas Journal | June 6, 2016 19

LETTERS

Saudi spare capacity each year just to replace decline.

I love the Arab people and enjoyed my association with
Concerning your Apr. 25 Journally Speaking [about delib- them in my work there. I think it is good for them, politically,
eration by oil-exporting countries of a production freeze], to have 2 million b/d in spare capacity, just as it was for Sad-
I think any of us could have predicted the outcome of the dam Hussein to have nuclear weapons. I think their spare
Apr. 17 meeting (OGJ, Apr. 25, 2016, p. 16). You are right, capacity may be just as real as Saddams nukes were.
you should have gone on record before the event.
I do have a comment on the generally accepted belief W. Todd Lovett
that Saudi has 2 million b/d in excess capacity. I have been Reservoir Engineer
hearing that Saudi can produce 12 million b/d for over 16 Amarillo
years. I worked in Saudi Arabia in 2000-02, and I do not
think that they can produce 12 million b/d. They couldnt
for sure then and probably cant now. Climate mantra costs
In 2006 they were producing 9.5 million b/d, and the
OPEC price was $60/bbl. In 2012 they got production to Concerning European approach to climate helps explain
10.02 million b/d, and then it dropped back to 9.24 million Trump win (OGJ, May 16, 2016, p. 27): very nice analysis.
b/d. The price was $109/bbl. If they were capable of 12 mil- Countries who adopt the climate change mantra without
lion b/d, why didnt they produce it then? They would have economics will fail. The world cannot subsidize its way to a
claimed greater market share (Iran had just been slapped cooler environment.
with sanctions), would have gotten tremendous revenue, If people find value in reducing greenhouse gases, they
and could have dampened the price enough to curtail the should be okay paying for it with higher prices. I do not see
unconventional boom that was building in the US. that happening.
In spite of hundreds of billions of dollars invested from
2002 to 2015, they were only able to boost production Michael Strathman
to 10.25 million b/d in June, an all-time maximum. They The Trinity Group Inc.
have to find 750,000-1 million b/d in new production Houston

REGISTER NOW
URTeC.org

ACT NOW!
Register by 16 June
and Save $100

1-3 AUGUST 2O16

HENRY B. GONZALEZ CONVENTION CENTER SAN ANTONIO, TEXAS

The integrated event for unconventional resource teams

3 days 11 disciplines 1 focus
Sponsoring Organizations: Supporting Organizations:

20 Oil & Gas Journal | June 6, 2016

Smart move

Tackle flat time

beyond drilling
Todays market demands a fit-for-purpose, configurable rig
capable of completing multi-well pads. The Smart Box Rig uses
an innovative box-in-box substructure with walking capabilities
for maximum flexibility in pad design. Transportable loads,
specifically designed for challenging road conditions, ensure
you are at your next site in no time.

nov.com/SmartBoxRig

To watch the box-in-box animation, download

GO NOV from the App Store or Google Play.

2016 | National Oilwell Varco | All rights reserved

JOURNALLY SPEAKING

Lost in translations
After nearly 3 years working for Oil & Gas Journal, quire as to what PR classes actually teach these
the current weekly column marks this editors first days. The exchanges to which I refer above more
to appear in a monthly printed issue. As momen- or less go something like this:
tous an occasion as this first time may be for an PR: Why didnt OGJ cover our news item?
OGJ editor, its also as equally nerve-racking. RB: You seem to have left us off your notification list.
To see your words dance across the pixelated PR: Oh, it wasnt a formal release. We released it over-
stage of the digitized screen is one thing. With a night in a post on [pick your choice] Facebook, Twitter,
single click, youre able send whatever you once LinkedIn, Instagram, etc.
had to say waltzing into the outermost limits of RB: Strange, it didnt show up on any of my feeds for
your personal cyberspace forever. To have those your social media sites.
words sepia-splashed across the space of a physi- PR: You mean dont also subscribe to our [again, take
cally printed page, thoughparticularly one your pick] German, Arabic, French, Dutch, Chinese,
between the covers of this long-revered publica- etc. page?
ROBERT BRELSFORD
tionis another thing entirely. It stirs in the writ- For the record, in this editors opinion, a PR
Downstream Technology er a desire to say something impactful, inspires departments elusive maneuvering to make-an-
Editor him to be self-reflective enough to pull back the announcement-without-making-an-announcement
curtain and provide an honest, useful glimpse into and not having that announcement picked up is a
what life is like behind-the-scenes for the OGJ edi- case of just desserts.
tors working to deliver the quality news and tech-
nical content on which their readers regularly rely. Speaking in tongues
To become part of the magazines history, this As thorough as I amand I am thoroughthere
act of entering its pageswhether digital or print arent enough hours in a day to monitor even a
unquestionably carries with it both an honor and single companys myriad English-language social
responsibility. media sites, much less its multiple foreign-language
Honor in the sense that not every news release sites. Given the hundreds of downstream operat-
or technology breakthrough will be deemed by edi- ing companies with (oftentimes) individual social
tors as important enough to our readership to merit media accounts for each plant location, time devot-
a space. ed to the act of constantly monitoring these pages
Responsibility in the sense that, in order even would displace the act of ever actually covering the
to be considered for a space, the aspiring content legitimate news they had to offer.
needs to be clearly explained, applicable to actual And lets not even get started on the pitiable
industry operations, and most importantly, made whining for coverage from PR departments of
readily accessible to the appropriate news or sec- companies that refuse to provide English transla-
tion editor. tions of information in these so-called social-me-
dia news releases posted in foreign languages. As
We released it in Sanskrit in a Tweet it is, I spend a good 30% of an average newswrit-
For this downstream technology editor, an in- ing day undertaking translations of official press
creasingly difficult barrier to pass to make it into releases to ensure accurate news stories for our
the pages of OGJ should be the easiest one of all to readers. Enough, as they say, is enough.
overcome: accessibility. If social media sites are intended to enhance
While I have a great many friends in public a companys PR, perhaps the companies should
relations, our career choices naturally discour- teach their PR departments how to use themthat,
age too much shoptalk when were together. After or maybe just how to write a good, old-fashioned
several conversations with company PR contacts press release.
at recent conferences, however, Im tempted to en-

22 Oil & Gas Journal | June 6, 2016

EDITORIAL

Trumps energy speech

Donald Trump broke the seals on three important asserts implausible certainty, foments fear, stigma-
issues in a speech about energy May 26 in Bismarck, tizes opposition, distorts facts, and manipulates
ND. The Republican aspirant to the US presidency legal systems. And its succeeding. The Obama ad-
sensibly sees the subject as a way to differentiate ministrations rejection of the Keystone XL pipeline
himself from Hillary Clinton, the probable Demo- border crossing and storm of regulations impeding
cratic candidate. To succeed, however, hell have to fossil-energy work testify to its potency.
develop his themes to depth uncharacteristic of his But repealing laws and revoking executive or-
campaign. ders wont stop climate obstructionism. The move-
Trumps first speech dedicated to energy con- ments strategic assertions and statist prescriptions
tained the grand promises and bald contradic- need scrutiny not forthcoming from the political
tions his supporters and detractors have come left or media. Having seized extraordinary atten-
to expect. The US, he said, will become totally tion, Trump can deliver overdue challenges if he
independent of any need to import energy from really understands the subject.
the OPEC cartel or any nations hostile to our in- Responding to his newly articulated heresy, de-
terests. But it will work with Persian Gulf allies fenders of climate faith will demand to know why
toward a positive energy relationship as part of Trump denies that human activity causes most
our antiterrorism strategy. When he promised to observed warming, rejects the disastrous predic-
use revenues from energy production to rebuild tions of settled science, fails to see that the costs
schools and transportation infrastructure, was he of overhauling energy economies fall below those
making a rhetorical point or revealing unwhole- of inaction, and frets about compromises to mar-
some craving for oil-industry cash? ket freedom and human liberty. These questions all
Much more usefully, Trump emphasized the have compelling answers seldom granted a hearing.
wealth-generating potential of resource develop- Trump should provide them if he can. He should
ment, even citing estimates from a study by the In- attack not only the climate movements administra-
stitute for Energy Research on economic benefits of tive triumphs but also its strained arguments and
federal oil, gas, and coal leasing. If he exaggerated hidden agendas. Rescinding the Clean Power Plan
in placesnothing new therehe nevertheless would only energize well-organized, well-funded,
made the important point that resource develop- and persistent advocacy groups. Discrediting them
ment boosts the economy, employs people, and en- would be better.
riches governments. A corollary, that shunning de- Whether by calculation or instinct, Trump in-
velopment imposes painful sacrifice, receives scant troduced a related line of argument in the third
notice in liberal circles seduced by notions of un- breakthrough of his Bismarck speech. In a Trump
burnable carbon. The real estate tycoon performed administration, he said, political activists with ex-
a service by drawing attention to it. treme agendas will no longer write the rules. He
Trump also challenged sacred icons of climate referred, of course, to the Environmental Protec-
politics. He promised to rescind the Obama ad- tion Agency, which during the Obama administra-
ministrations Clean Power Plan (which he called tion has been extraordinarily cozy with pressure
the Climate Action Plan), cancel the Paris climate groups and dangerously eager to regulate. Trumps
agreement, stop US payments for United Nations comment shines needed light on the subtle tyran-
global-warming programs, and ask TransCanada nies that develop when activism, which democracy
to renew its application for the Keystone XL pipe- needs in measured doses, migrates from frontiers of
line border crossing. All these proposals have change into centers of power.
merit. Theyd all provoke angry protest from en- Trump deserves credit for opening discussion
vironmental extremists. And they wouldnt go far of energy problems too long ignored. But can he
enough. move the conversation beyond truculent bluster?
Responding to climate change has become a The answer will determine whether his America
transcendent cause of political liberalism and a first energy plan lives up to its name.
priority of energy policy-making. The movement

24 Oil & Gas Journal | June 6, 2016

WHAT YOU DONT KNOW

CAN HURT YOU

When you know youve got a problem, but dont have time a safe distance without the need to interrupt your operation.
to nd it FLIR gas detection cameras have your back. With We have the camera for the gas you need to detect.
a wide array of cameras to t every need, FLIR GF cameras To see our full line of gas detection cameras go to
help you see or visualize dangerous gases quickly and from FLIR.com/OGI

 GENERAL INTEREST

Surge in NGL and tight-oil supplies

creates worldwide light-ends space
Al Troner
Asia Pacific Energy Consulting
Houston

While many analysts agree that oversupply, rather than It is exceptionally clear, with most containing 0.3% sulfur
weak demand, led to the current slump in the price of crude or less.
oil, few have looked closely at the nature of that supply over- Many observers try to define condensate by setting an
hang. arbitrary API gravity breakpoint: in the US commonly 45
In a new study, Asia Pacific Energy Consulting (APEC) API, in international trade usually 50 API. But these are
has examined in depth the role of NGLs, in particular con- rules made to be broken. There are crude grades well above
densate, in creating the current surplus, as well as the im- 50 API, such as Saudi Arabias Super Light and Australias
pact of tight oil and its light derivatives.1 The condensate, Laminaria. There are condensate grades under 50 API, such
other NGLs (LPG and ethane), light products, and tight oil as Kazakhstans Karachaganak and Nigerian Oso. In defin-
yielding much of the new light-product supply all occupy ing what constitutes condensate, API gravity is only a gen-
the same light segment of the hydrocarbon spectrum. eral indicator, not an exact test of what is condensate and
The shale revolution has spurred a ballooning of NGL what is crude.
output, paralleled by dizzying growth in tight oil produc- What is important for condensate is that it always origi-
tion. Almost all of this incremental liquids production has nates in gas, almost always yields 50%+ naphtha, is excep-
been light and sweet. The growing volume of this material, tionally sweet, contains little if any metals, and produces
with incremental supply in the millions of barrels per day, little residual oil. A crude and condensate can have exactly
has begun to shift pricing, trade, marketing, and supply- the same API gravity, but the condensate will always yield
demand balances for crudelight-heavy vs. sweet-sour far more naphtha and far less fuel oil.
and in products, with notable supply gains in LPG, gaso- The US has emerged as a major NGL power due to the
line, and naphtha in contrast to middle-barrel and heavy shale revolution. Despite the plateau and then decline of
products. tight oil production in 2016, overall NGL output will con-
A light-ends space is emerging, not only in the US and tinue to rise despite declining condensate volumes produced
the Atlantic Basin but also globally, as markets attempt to with tight oil, according to the US Energy Information Ad-
adjust to this surge in light, low-sulfur hydrocarbon supply. ministration.
In part this is due to the nature of NGLs, caught in a twi-
Focus on condensate light zone of production parameters. NGLs come from both
The APEC study focused on the role of condensate as the the crude and the gas sides of total production. And while
spearhead creating this light-ends space because it is the condensate has been the most prominent NGL derived from
only NGL that does not need specialized containment and gas produced in association with tight oil, plays such as the
that, when refined, yields a full range of products, from LPG Eagle Ford shale and Permian basins also have produced siz-
to residual. Once condensate becomes a liquid it remains a able volumes of LPG and even commercial volumes of eth-
liquid, and in a refinery or condensate splitter acts much like ane. Yet NGLs also come from primarily nonassociated gas
crude in the slate. production as well, such as the Marcellus and Utica shales in
Condensate is often confused with light, sweet crude oil, the US Northeast.
yet it has distinctive characteristics. Unlike crude, conden- Tight oil production, concentrated in the Bakken, Eagle
sate always originates with gas, whether nonassociated or Ford, and Permian plays, has accounted for much of the US
associated. Whole condensate almost always yields more increase in oil production and, together with the Marcellus-
than 50% naphtha and is almost always quite clean, low not Utica developments, condensate output in recent years. All
only in sulfur but also in metals and acid. have experienced differing production profiles for conden-

26 Oil & Gas Journal | June 6, 2016

sate in 2016. Overall Eagle Ford production, including con- to curb gas flaring and strip gas output for NGL flows.
densate, declined sharply by early 2016 and was trending Nationally, propane and butane production continued to
lower toward midyear. Permian crude and condensate pro- rise, mainly on field output, while ethane output used for
duction continued to rise, albeit at a diminishing rate, into petrochemicals recorded small volume gains.
the years second quarter. And while Bakken crude output
fell sharply, condensate production rose as producers moved

A LOOK AT GLOBAL SEGREGATED CONDENSATE SUPPLY Table 1

2014 2015 2016 2017 2018 2019 2020 2021
1,000 b/d

NORTH AMERICA 823 932 1,044 1,115 1,220 1,268 1,309 1,353
US1 574 665 765 810 890 910 925 925
Canada 176 194 204 228 250 276 294 322
Mexico 73 73 75 77 80 82 90 106

EAST OF SUEZ 3,357 3,546 3,751 3,910 4,099 4,264 4,383 4,519
MIDEAST GULF 2,431 2,613 2,790 2,877 2,980 3,133 3,209 3,302
Iran 498 528 624 684 757 781 801 854
Iraq 20 20 23 32 55 88 108 123
Kuwait 20 28
Oman 1 4 8 8 12 20 28 28
Qatar 730 775 800 805 795 785 770 770
Saudi Arabia 730 805 830 840 860 940 955 970
UAE 452 481 505 508 501 519 527 529
Yemen2

ASIA PACIFIC 926 933 961 1,033 1,119 1,131 1,174 1,217
Australia 130 147 158 215 293 297 311 318
Bangladesh 9 12 13 18 18 17 17 16
Brunei 19 19 21 23 25 26 30 35
China 195 197 216 240 253 262 268 271
India 16 16 16 16 16 16 16 16
Indonesia 141 129 115 107 108 113 129 147
Japan
Malaysia 115 119 137 149 152 152 150 147
Myanmar 27 29 35 35 35 35 34 34
New Zealand 19 22 22 21 19 19 18 17
Pakistan 15 15 15 15 16 16 16 16
Papua New Guinea 1 1 1 2 4 4 12 24
Philippines 14 13 13 13 13 13 12 12
Singapore
South Korea
Taiwan
Thailand 129 132 129 119 113 112 112 112
Timor Leste 54 40 30 20 16 12 10 8
Vietnam 42 42 40 40 38 37 39 44

EUROPE 868 918 994 1,028 1,063 1,129 1,192 1,238

Azerbaijan3
France
Germany
Italy
Kazakhstan 251 255 287 295 310 345 395 405
Netherlands 17 15 15 14 14 13 13 13
Norway 45 48 47 49 49 46 54 60
Russia 555 600 645 670 690 725 730 760
Spain
UK3
AFRICA 730 695 722 842 931 994 1,055 1,122
Algeria 379 380 390 410 430 445 460 490
Angola 4 12 21 24 24 34 44
Egypt 87 89 100 106 115 135 150 155
Equatorial Guinea 115 105 109 153 163 157 149 144
Libya 92 65 55 86 105 136 165 192
Mozambique 4 4 5 5 5 5 5 5
Nigeria 38 41 41 51 75 78 78 78
South Africa 11 11 10 10 14 14 14 14

SOUTH AMERICA 316 350 380 408 444 475 493 506
Argentina 23 32 38 44 52 64 78 94
Brazil 24 26 30 32 32 36 36 36
Colombia 32 38 40 38 34 32 30 28
Peru 66 78 86 96 104 110 112 112
Trinidad 27 26 26 35 54 55 55 54
Venezuela 144 150 160 163 168 178 182 182

TOTAL 6,094 6,441 6,891 7,303 7,757 8,130 8,432 8,738

US potential1 1,247 1,545 1,692 1,759 1,830 1,812 1,803 1,780

1 2 3
Figures in table above are actual production. Figures in bottom line are potential production. No numbers for Yemen due to civil war. No forecasts provided as
they do not produce segregated condensate or else use it internally.

Oil & Gas Journal | June 6, 2016 27

GENERAL INTEREST

A LOOK AT GLOBAL LPG SUPPLY Table 2

2014 2015 2016 2017 2018 2019 2020 2021
1,000 b/d

NORTH AMERICA 2,143 2,225 2,268 2,401 2,516 2,609 2,677 2,738
US 1,626 1,700 1,730 1,840 1,935 2,010 2,070 2,120
Canada 315 325 336 358 367 377 379 382
Mexico 202 200 202 203 214 222 228 236

EAST OF SUEZ 3,831 3,886 3,985 4,108 4,235 4,320 4,394 4,466
MIDEAST GULF 1,921 1,998 2,067 2,132 2,208 2,278 2,336 2,411
Iran 226 250 285 315 350 380 410 440
Iraq 43 48 54 60 68 84 94 104
Kuwait 110 136 138 140 142 146 150 154
Oman 9 10 12 12 15 15 17 18
Qatar 380 410 410 413 425 430 430 435
Saudi Arabia 867 860 884 905 918 924 922 930
UAE 261 270 272 274 276 285 295 308
Yemen 25 14 12 13 14 14 18 22

ASIA PACIFIC 1,910 1,888 1,918 1,976 2,027 2,042 2,058 2,055
Australia 89 73 80 96 128 140 140 142
Bangladesh 1 1 1 1 1 1 1 1
Brunei 1 6 5 7 8 9 9 9
China 850 795 808 832 839 845 842 840
India 317 326 330 333 335 336 352 352
Indonesia 61 83 84 84 84 87 87 87
Japan 139 134 129 128 129 126 123 119
Malaysia 102 113 117 122 124 124 128 129
Myanmar 1 2 2 2 3 3 3 4
New Zealand 6 6 6 6 6 5 5 5
Pakistan 10 11 13 13 13 13 12 11
Papua New Guinea 2 3 5 5 5 5 5 5
Philippines 9 9 8 8 8 5 5 5
Singapore 30 28 27 29 32 33 33 34
South Korea 67 72 76 81 84 84 86 86
Taiwan 41 42 42 44 46 46 47 48
Thailand 146 148 151 149 147 147 145 145
Timor Leste 19 17 16 14 12 10 9 7
Vietnam 19 19 18 22 23 23 26 26

EUROPE 1,230 1,201 1,235 1,285 1,331 1,399 1,442 1,481

Azerbaijan 8 9 13 16 16 16 18 18
France 47 40 38 35 34 39 42 44
Germany 80 83 83 82 80 78 77 75
Italy 52 57 63 75 76 74 73 72
Kazakhstan 15 15 16 18 20 20 22 23
Netherlands 52 45 45 44 44 44 43 43
Norway 241 252 265 268 270 276 282 288
Russia 573 540 552 589 638 699 736 773
Spain 51 52 54 54 53 53 53 53
UK2 111 108 106 104 100 100 96 92

AFRICA 482 490 496 520 533 555 594 607

Algeria 283 286 286 290 294 298 304 310
Angola 21 23 26 30 34 36 42 44
Egypt 55 53 55 59 61 68 74 78
Equatorial Guinea 21 21 21 21 23 30 38 38
Libya 29 35 35 42 42 42 49 49
Mozambique 2 2 2 3 3 3 4 4
Nigeria 57 61 62 65 66 68 69 70
South Africa 14 9 9 10 10 10 14 14

SOUTH AMERICA 421 438 458 482 509 528 542 560
Argentina 87 91 96 102 110 118 128 134
Brazil 179 186 190 196 206 208 212 218
Colombia 21 21 22 22 25 25 25 27
Peru 45 49 51 54 54 54 54 53
Trinidad 22 21 21 26 32 33 33 32
Venezuela 67 70 78 82 82 90 90 96

TOTAL 8,107 8,240 8,442 8,796 9,124 9,411 9,649 9,852

US product exports 2015 China was the biggest single customer for US propane.
Almost unheralded, the US has emerged as the largest ex- And the opening of a revamped and enlarged Panama Canal
porter of oil products, based on Gulf Coast refiners use of by yearend will likely increase westbound LPG exports from
relatively inexpensive, domestically produced tight oil. The the Gulf Coast even further. By 2018 US exports of LPG ex-
product-export flood has been paralleled by large-volume ports will likely equal or exceed those of the United Arab
NGL sales, with LPG leading the way, in particular propane. Emirates and Qatar combined.
US sales have not only saturated the Atlantic Basin mar- Canada remains the top condensate US export market.
ket but also become important to Asia Pacific supply. At mid- APEC expects US supply to dominate Canadian diluent use

28 Oil & Gas Journal | June 6, 2016

 Expect the Best from




 BEST Engineering!

BEST Value! BEST Delivery Times!

Surpass better by starting with the best.

Victory Energy offers a full range of custom- 




 
 






 

  
 


  best 






 

  

 

  
 
 


 

  

  direct at 918-274-0023 

Fired Watertube HRSG Cogeneration Enhanced Heat Recovery

O, D and A-style boiler steam capacities range Modularly-designed units are completely Engineered to order, the Explorer Series
from 10K up to 500K PPH. Offered with high shop-assembled to maximize transportation economizer can be designed for any packaged
availability SIL rated control systems. efficiencies and minimize field labor costs.
 







F O L L O W A L E A D E R

PATENTED DESIGN SOLUTIONS | tel 



| 
 



 
 
  

 

 
GENERAL INTEREST

A LOOK AT GLOBAL ETHANE SUPPLY Table 3

2014 2015 2016 2017 2018 2019 2020 2021
1,000 b/d

NORTH AMERICA 1,396 1,466 1,622 1,888 1,966 2,102 2,152 2,203
US 1,020 1,065 1,175 1,380 1,420 1,540 1,580 1,620
Canada 265 287 307 338 351 358 366 373
Mexico 111 114 140 170 195 204 206 210

EAST OF SUEZ 628 634 655 688 743 820 900 913
MIDEAST GULF 544 552 573 600 629 675 740 748
Iran 25 26 28 40 48 66 90 90
Iraq
Kuwait 44 44 44 43 43 43 50 56
Oman 10 30 30
Qatar 150 152 154 154 158 174 178 178
Saudi Arabia 278 280 287 288 300 302 312 314
UAE 47 50 60 75 80 80 80 80
Yemen1

ASIA PACIFIC 84 82 82 88 114 145 160 165

Australia 14 14 14 14 14 13 13 13
Bangladesh
Brunei
China 7 15 25 35 40
India 30 30 30 30 50 72 80 80
Indonesia
Japan
Malaysia 21 18 18 18 16 16 14 14
Myanmar
New Zealand
Pakistan
Papua New Guinea
Philippines
Singapore
South Korea
Taiwan
Thailand 19 20 20 19 19 19 18 18
Timor Leste
Vietnam

EUROPE 563 582 585 599 624 662 688 714

Azerbaijan
France 1 1 1 1 1 1 1 1
Germany
Italy
Kazakhstan 8 10 15 20
Netherlands 8 7 7 7 6 6 6 6
Norway 42 42 40 40 38 44 46 48
Russia 500 520 525 540 560 590 610 630
Spain
UK 12 12 12 11 11 11 10 9

AFRICA 13 13 13 13 13 45 60 65
Algeria 13 13 13 13 13 45 60 65
Angola
Egypt
Equatorial Guinea
Libya
Mozambique
Nigeria
South Africa

SOUTH AMERICA 82 88 89 105 122 135 147 157

Argentina 55 62 65 80 95 110 120 132
Brazil 9 8 8 9 11 11 13 13
Colombia 2 2 2 2 2 2 2 2
Peru
Trinidad
Venezuela 16 16 14 14 14 12 12 10

TOTAL 2,682 2,783 2,964 3,293 3,468 3,764 3,947 4,052
1
No numbers for Yemen due to civil war.

until at least end-decade. Yet domestic condensate output exceed overseas sales by Saudi Arabia, and possibly by the
has been growing rapidly in Canada, based on tight oil and kingdom and Qatar combined.
shale gas development, in a trend APEC expects will grad- Ethane exports have begun as US sellers pioneered water-
ually back out US sales in the coming decade. A steadier borne ethane shipments to buyers in the UK, Norway (Ineos
though smaller market emerged for slightly refined conden- and Sabic), and Sweden (Borealis). This has been followed by
sate in Europe, where refiners use the material regularly to sales to India (Reliance) and China (Orient Energy).
fill out crude slates. By 2018 US condensate exports will The emergence of the light-ends space has not been solely

30 Oil & Gas Journal | June 6, 2016

 GENERAL INTEREST

A LOOK AT GLOBAL NGL SUPPLY Table 4

2014 2015 2016 2017 2018 2019 2020 2021
1,000 b/d

NORTH AMERICA 4,362 4,623 4,934 5,404 5,702 5,979 6,138 6,294
US 3,220 3,430 3,670 4,030 4,245 4,460 4,575 4,665
Canada 756 806 847 924 968 1,011 1,039 1,077
Mexico 386 387 417 450 489 508 524 552

EAST OF SUEZ 7,816 8,066 8,391 8,706 9,077 9,404 9,677 9,898
MIDEAST GULF 4,896 5,163 5,430 5,609 5,817 6,086 6,285 6,461
Iran 749 804 937 1,039 1,155 1,227 1,301 1,384
Iraq 63 68 77 92 123 172 202 227
Kuwait 154 180 182 183 185 189 220 238
Oman 10 14 20 20 27 45 75 76
Qatar 1,260 1,337 1,364 1,372 1,378 1,389 1,378 1,383
Saudi Arabia 1,875 1,945 2,001 2,033 2,078 2,166 2,189 2,214
UAE 760 801 837 857 857 884 902 917
Yemen1 25 14 12 13 14 14 18 22

ASIA PACIFIC 2,920 2,903 2,961 3,097 3,260 3,318 3,392 3,437
Australia 233 234 252 325 435 450 464 473
Bangladesh 10 13 14 19 19 18 18 17
Brunei 20 25 26 30 33 35 39 44
China 1,045 992 1,024 1,079 1,107 1,132 1,145 1,151
India 363 372 376 379 401 424 448 448
Indonesia 202 212 199 191 192 200 216 234
Japan 139 134 129 128 129 126 123 119
Malaysia 238 250 272 289 292 292 292 290
Myanmar 28 31 37 37 38 38 37 38
New Zealand 25 28 28 27 25 24 23 22
Pakistan 25 26 28 28 29 29 28 27
Papua New Guinea 3 4 6 7 9 9 17 29
Philippines 23 22 21 21 21 18 17 17
Singapore 30 28 27 29 32 33 33 34
South Korea 67 72 76 81 84 84 86 86
Taiwan 41 42 42 44 46 46 47 48
Thailand 294 300 300 287 279 278 275 275
Timor Leste 73 57 46 34 28 22 19 15
Vietnam 61 61 58 62 61 60 65 70

EUROPE 2,661 2,701 2,814 2,912 3,018 3,190 3,322 3,433

Azerbaijan 8 9 13 16 16 16 18 18
France 48 41 39 36 35 40 43 45
Germany 80 83 83 82 80 78 77 75
Italy 52 57 63 75 76 74 73 72
Kazakhstan 266 270 303 313 338 375 432 448
Netherlands 77 67 67 65 64 63 62 62
Norway 328 342 352 357 357 366 382 396
Russia 1,628 1,660 1,722 1,799 1,888 2,014 2,076 2,163
Spain 51 52 54 54 53 53 53 53
UK 123 120 118 115 111 111 106 101

AFRICA 1,083 1,056 1,076 1,210 1,301 1,391 1,485 1,561

Algeria 675 679 689 713 737 788 824 865
Angola 25 23 38 51 58 60 76 88
Egypt
Equatorial Guinea 136 126 130 174 186 187 187 182
Libya 121 100 90 128 147 178 214 241
Mozambique 6 6 7 8 8 8 9 9
Nigeria 95 102 103 116 141 146 147 148
South Africa 25 20 19 20 24 24 28 28

SOUTH AMERICA 819 876 927 995 1,075 1,138 1,182 1,223
Argentina 165 185 199 226 257 292 326 360
Brazil 212 220 228 237 249 255 261 267
Colombia 55 61 64 62 61 59 57 57
Peru 111 127 137 150 158 164 166 165
Trinidad 49 47 47 61 86 88 88 86
Venezuela 227 236 252 259 264 280 284 288

TOTAL 16,741 17,322 18,142 19,227 20,173 21,102 21,804 22,409
1
No field production of NGLs, but production number represents refinery LPG output only.

a western market phenomenon. It has had East of Suez im- could be exporting substantially increased volumes by
pacts as well, much of it centered on the Persian Gulf. 2018 (Table 1).
The Islamic Republic has long been a major condensate
East of Suez exporter, but progressively tightening sanctions cut deeply
Iran and the US have emerged as the two main drivers of into Iranian sales abroad while a lack of project investment
condensate supply through the medium term, and both slowed the long-anticipated expansion of South Pars field
condensate and LPG output.

Oil & Gas Journal | June 6, 2016 31

GENERAL INTEREST

Irans condensate prospects hinge on the speedy removal planned condensate splitters, the country will have no con-
of economic sanctions and a fast-track program to complete densate to export, despite a strong build-up in condensate
long-delayed gas developments. Immediate impacts of eas- production. Iran will produce over 800,000 b/d of conden-
ing sanctions included the disposal of 20-30 million bbl of sate by 2021, yet Tehrans goal is to use all of this output
condensate in floating storage. South Korea and Singapore in particular the naphtha-gasoline outturn potentialfor
emerged as major buyers, supplementing China and India, home-market needs.
while Japan took experimental cargoes, being cautious about Even if this goal of diverting condensate into domestic
the quality of condensate that had sat in storage for months. use succeeds only partially, there is little other new con-
Yet overall so far, Iran has made only limited progress densate output due to emerge through 2018 in East of Suez
in reversing years of sector neglect. In the first half of 2016 markets. In the short term, the direction and volume of US
Iran added about 350,000 b/d of liquids production. Of exports will be shaped by the price differential between
that, only about 35,000 b/d was condensate, although the Brent and West Texas Intermediate crudes as well as the
latter rate should more than double with the start-up of a opening of an expanded Panama Canal.
South Pars phase in the third quarter. By end-2016 APEC
expects Iranian production to rise by roughly 500,000 b/d Structural change
over the previous years level, with nearly 100,000 b/d of In Asia Pacific, only Australia will contribute significantly
that condensate. to incremental condensate output. Multiple projects will
Qatar has the most to lose from a freeing of Iranian mar- add segregated condensate outputbut only toward end-
keting. The tiny emirate had a lock-hold over Asian mar- decade. Of particular significance is Ichthys, which will
kets that needed large condensate volumes and could not likely equal, if not exceed, output from the Northwest Shelf.
import the material from Iran. This will add considerable The APEC study sees, as a pivotal structural change, the
pressure on Qatar International Petroleum Marketing Co. emergence of a Yin-Yang of a US light hydrocarbons long
(Tasweeq) to reshape its condensate marketing program. position, underpinned by massive NGL output moving to
Only these two producers are capable of selling condensate Asia Pacific, complemented by Asias desire to limit its de-
in large amounts in the East of Suez market. Unlike Iran, pendence on Mideast crude, refinery products, and NGLs.
Qatar does not have black oil as a back-up export. APEC expects US condensate exports to Asia Pacific to
grow rapidly once sellers adjust their condensate blends
Investment in Iran to Asian petrochemical needs. This will represent strong
Foreign companies are moving cautiously on Iranian in- competition to both Iran and Qatar, with US export rates
vestment, upstream and downstream, with legal guidelines on the order of 200,000 b/d. Asian buyers will soon have a
and financing regulations still unclear. National Iranian wide range of suppliers possibly discounting to retain mar-
Oil Co. (NIOC) and National Petrochemical Corp. (NPC) ket share. Of course US exports of other NGLs, light prod-
plan a massive expansion of Iranian condensate-processing ucts, and even tight oil will increase total sales (Tables 2-4).
capacity, using condensate splitters and petrochemical pre- Dominating Asian condensate demand will be South
treatment units. Korea, which will continue to increase its lead as the re-
Official plans call for the completion of nine more con- gions top condensate processor. The start-up of additional
densate splitters, in the Persian Star and Siraf projects, splitters will have the country capable of processing over
with working capacity totaling 828,000 b/d. This is in ad- 700,000 b/d of condensate through splitters as well as run-
dition to the 258,000 b/d of working capacity at six sites ning condensate in conventional refineries. South Korea
operating as of January this year. Whats more important, overtook Beijing as the top Asian condensate user by 2013
the first part of a three-unit splitting complex, the long- and has made cross-integration of condensate processing
delayed Persian Star, will be commissioned by the second and petrochemicals a major plank of export sales.
half of 2016. While targeted start-up dates almost certainly China remains a market paradox. Expansion plans for con-
are overly ambitiousSiraf is slated to add 480,000 b/d in densate splitting have been suspended as the central govern-
eight 60,000-b/d units by 2019it is clear that Irans con- ment reevaluates all new downstream projects. The shutdown
densate processing capacity will soon exceed that of other of Dragon Aromatics has actually reduced splitting capacity in
Gulf producers combined and that the plants will produce this market, though it is likely that Sinopec will take over the
enormous volumes of condensate outturn, mainly naphtha. now-shuttered complex and operate the splitter with side-by-
However, the intent in using this expanded splitter ca- side petrochemical aromatics units by 2017.
pacity is very different from the ongoing US splitter cam- Singapore and India have emerged as major condensate
paign. Since 2015 the US, mainly on the Gulf Coast, has import markets, both for splitting but more importantly for
added five condensate splitters with capacity totaling crude blending. India is strategically placed for short-haul
309,000 b/d, all aimed at export sales. NIOC has claimed sales from the Persian Gulf and is expected to sharply in-
that by end-decade, with the completion of currently crease its Iranian imports in the medium term.

32 Oil & Gas Journal | June 6, 2016

 GENERAL INTEREST

Japan has remained a major condensate user, but vol- The author
umes have been static in recent yearsa reflection of the Al Troner is president of Asia Pacific Energy
essentially stagnant Japanese market. Together with much Consulting. He has worked in Asias energy sec-
smaller Thailand, these markets remain important but not tor since 1984, when he established Dow Jones/
key for new condensate sales. Telerates regional energy services. He moved
The big picture remains the same. The emergence of the to Singapore in 1989 to found and then direct
light-ends space has been paralleled in Asia by a shift in de- Petroleum Intelligence Weeklys Asia-Pacific
mand focus from middle distillates to lighter products. US bureau. He was the cowinner of the International
NGLs have already made considerable inroads into Asian Association for Energy Economics award for Energy Journalism
markets and ultimately will present a long-term marketing in 1994, retiring from journalism the following year to found
challenge to Mideast exporters: Who gains the future de- APEC.
mand growth of Asia Pacific? During 1987-89, he was a research assistant for the energy
group of the East-West Center. Troner has worked in the energy
Reference industry in the US, Europe, North Africa, and Middle East, as
1. The full study, East Meets West, can be purchased from well as in Asia Pacific.
PennEnergy at http://ogjresearch.stores.yahoo.net/condensate-
east-meets-west.html.

US House passes amended energy

policy bill, sets up joint conference
Nick Snow structure from extreme weather and cyber threats.
Washington Editor Rep. Bobby Rush (D-Ill.), the committees Ranking Mi-
nority Member, disagreed. This 800-page hodgepodge of
The US House approved an amended version of energy Republican and corporate priorities is nothing more than a
policy reform legislation that the US Senate previously ap- majority wish list of strictly ideological bills, many of which
proved, setting the stage for a joint conference to reconcile the minority party opposes and the Obama administration
differences and prepare a final version that would be sent to and the American people do not support, he said.
US President Barack Obama to be signed into law. House Speaker Paul D. Ryan (R-Wis.) appointed Upton
The amended Senate bill passed on May 25 by 241 to 178, and 12 other Energy and Commerce Committee Republi-
largely along party lines. Eight Democrats joined Republi- cans to help lead House negotiators in the upcoming con-
cans in supporting its passage, while six Republicans joined ference with the Senate, the committee announced on May
Democrats in opposing. Fourteen memberssix Republi- 26. They include Energy and Power Subcommittee Chair-
cans and eight Republicansdid not vote. man Ed Whitfield (Ky.), Environment and the Economy Sub-
It has been nearly a decade since we last considered an committee Chairman John M. Shimkus (Ill.), and Chairman
energy package like this, Energy and Commerce Committee Emeritus Joe Barton (R-Tex.).
Chairman Fred Upton (R-Mich.) said as final debate began. This effort is about jobs. Its about keeping energy afford-
This has been a multiyear, multi-Congress effort, and a lot able. Its about boosting our energy security, here and across
of work has gone in to make sure that the bill that we put the globe, Upton said. I look forward to working with my
forward to support the future of American energy is truly colleagues in the Senate and my friends across the aisle to
comprehensive. enact meaningful reforms that truly make a difference for
The amended measure includes elements from HR 8, folks in Michigan and across the country.
which Upton initially introduced in December 2015, that An American Petroleum Institute official promptly ap-
include streamlined federal reviews for proposed inter- plauded the Houses action. Today marks another critical
state natural gas pipelines and liquefied natural gas ex- step by Congress to enact a comprehensive energy pack-
port facilities, and protections for critical energy infra- age that reflects Americas new energy reality, API Execu-
tive Vice-Pres. Louis Finkel said on May 25. The US is now
the worlds leading producer of oil and gas, and we need a
forward-looking energy policy if we are to remain an energy
superpower and maintain global competitiveness.

Oil & Gas Journal | June 6, 2016 33

GENERAL INTEREST

Report calls for independent offshore

oil and gas safety organization
Nick Snow It also urged industry leaders to encourage collective and
Washington Editor collaborative action to make changes in the fragmented off-
shore industry. A starting point is to engage personally and
A report issued by the National Academies of Science, Engi- encourage key employees to participate in industry organiza-
neering & Medicine called on the US oil and gas industry to tions, conferences, benchmarking opportunities, standards-
establish an independent organization dedicated to offshore setting groups, pilot projects, and exchanges of information
safety and environmental protection, with no advocacy role. and lessons learned, it said.
The report suggested that the Center for Offshore Safety, The report said leaders from API and the Independent Pe-
which the American Petroleum Institute and other industry troleum Association of America, the International Association
groups formed after the 2010 Macondo deepwater well blow- of Drilling Contractors, the Society of Petroleum Engineers,
out and crude oil spill in the Gulf of Mexico, could be made the International Association of Oil & Gas Producers, the
independent to serve this purpose. All organizations work- Center for Offshore Safety, and other groups should join with
ing in the US offshore oil and gas industry could be required leaders from the US Bureau of Safety and Environmental En-
to join, it said. forcement, the US Coast Guard, and the US Pipeline and Haz-
It said that about 75 well operators, 17 drilling contrac- ardous Material Safety Administration early in the process.
tors, and more than 1,000 service and supply contractors It would help to have a focal organization that is suffi-
and subcontractors varying in size and financial resources ciently independent and can engage the entire industry, the
support offshore drilling, production, and construction ac- report noted. There is an opportunity for BSEE and other
tivities in the gulf. regulators to provide encouragement and leadership, but de-
Because of differing safety perspectives and economic in- mands from a regulator are likely to be met with resistance
terests, offshore oil and gas firms do not all belong to a single from the industry. Regulators can help convene senior in-
industry association that speaks with one voice regarding dustry leaders and experts to craft a vision, provide feedback
safety, the May 23 report said. and encouragement, reinforce well-intentioned actions, and
Several challenges exist in setting and implementing con- coach from the sidelines, it said.
sistent goals for safety practices and culture, including or- The report also recommended that:
ganization leaders varied commitments to having a strong The industry as a whole make use of offshore safety
safety culture, the variety of organizations that may work culture knowledge and experiences of organizations that are
on a single drilling site, making practices such as supervi- moving ahead already and trying new approaches.
sion and training more heterogeneous, and the diversity of The industry overall create additional guidance for es-
employees safety attitudes and educational backgrounds, it tablishing safety culture expectations and responsibilities
indicated. among operators, contractors, and subcontractors.
Because the industry is fragmented, it is necessary to The industry work with regulators to consider changes
work with a coalition of key stakeholders, the report said. in policy (and laws when necessary, such as modifying any
Compliance by itself is insufficient; proactive collective ac- that inhibit information flow between operators and con-
tion is needed from a coalition of willing parties. This is espe- tractors) that would help accelerate safety improvements,
cially likely to be the case in the offshore oil and gas industry including information exchanges, cooperation across opera-
given the sheer number of groups charged with its operation tors and contractors, and protection of all personnel from
and the regulators limited ability to impose changes. retaliation if they speak up.
Regulators and industry participants work to facilitate
Use available resources research and information sharing on ways to share industry-
Companies senior leaders should ensure that their organiza- level data more fully, analyze positive cases, define what fac-
tions take advantage of resources available from other com- tors matter most, and systematically study safety improve-
panies, industry associations, and regulators in strength- ments among offshore oil and gas companies of all sizes.
ening their own safety cultures, it recommended. Smaller Successful culture change is a long-term effort, entail-
companies can reach out to their larger customers or indus- ing considerable uncertainties and investments, said Nancy
try groups to obtain information on establishing or strength- Tippins, principal consultant at CEB and chair of the com-
ening safety culture and to learn of success stories from mittee that conducted the study and wrote the report. It is
those who have created a safe working environment, it said. essential that industry and regulators go beyond ideas and

34 Oil & Gas Journal | June 6, 2016

 GENERAL INTEREST

possibilities, and develop concrete plans for creating a com- in UK Budget 2016 did little to improve company cash flows
mitment to a culture that establishes and maintains a safe with so few currently in a tax paying position, but it does
working environment. improve valuations. This may encourage new investment, or,
Copies of the full report are available online from the at the very least, the continuation of loss-making operations
National Academies Press at www.nap.edu/catalog/23524/ over the short term rather than early cessation of fields.
strengthening-the-safety-culture-of-the-offshore-oil-and- Investment in ageing infrastructure will prevent a domi-
gas-industry. no effect of fields ceasing in this mature sector. If no further
investment materializes, the firm warns, the future of the
North Sea could hang in the balance. To be sure, many other
countries will be watching how the UK oil and gas industry
WoodMac: UKCS leads the great global decommissioning challenge.

decommissioning to
ramp up over next 5 years Rystad Energy:
Research and consultancy firm Wood Mackenzie Ltd. esti-
mates based on current crude oil prices that 142 fields will
Improving oil prices
cease production and 55 billion will be spent on decom-
missioning on the UK Continental Shelf over the next 5
could help shrink
years.
The tally includes the removal of 340 platforms with
DUC inventory
a combined weight of 5.6 million tonnes, and more than Paula Dittrick
3,000 development wells. Operators of five fields thus far in Upstream Technology Editor
2016 have reported their intention to cease production, and
WoodMac believes the figure could rise to 50 fields, with The heart of the Denver-Julesburg (DJ) basin exhibits the
many expected to enter lighthouse mode to save the im- most commercial drilled but uncompleted (DUC) backlog,
minent decommissioning costs. said a Rystad Energy study that estimated the DUC inven-
The firm notes that 126 UK fields have already ceased but tory in Weld County, Colo., was economic to complete at an
only 27% of those fields have been fully abandoned. Based average light, sweet crude oil futures price of $30/bbl.
on the 34 fields classed as abandoned, the average time Other counties that exhibit favorable economics are
between cessation of production (COP) and abandonment Reeves County, Tex., in the Permian basins Delaware and
completion is about 3 years, but this is expected to lengthen McKenzie County, ND, in the Bakken formation, said Artem
as larger developments such as Brent are decommissioned. Abramov, Rystad senior analyst in Oslo. He believes much
Although decommissioning in the North Sea has been of the US shale DUC inventory is commercial given current
an impending reality for some time, the high oil price be- oil prices.
tween 2011-14 allowed some mature, high-cost fields to keep Significant support to the US Lower 48 oil supply can be
producing economically, explained Ian Thom, WoodMac expected in the near months as market sentiment gradually
senior research manager, UK upstream research. moves in a positive direction, Abramov told OGJ.
The lower-for-longer oil price environment compounded Weld County topped Rystads DUC ranking list by inven-
by the maturity of the basin means that continuing produc- tory size with almost 600 oil wells awaiting completion crews.
tion of certain fields in the North Sea region is no longer Intentional completion delays by Anadarko Petroleum
viable, Thom said. We expect companies will not be able Corp. accounted for much of the Weld County DUC inven-
to keep producing UK fields at a loss, and decommissioning tory. Anadarko operates almost half of the DUCs in Weld
activity will ramp up as a result. County. PDC Energy, Noble Energy Inc., and Whiting Pe-
Thom said there are a number of uncertainties in the troleum Corp. each operate about 10% of the Weld County
UKCS decommissioning activity, including the timing of DUC inventory, Rystad Energy said.
COP and abandonment spending, and the decision to oper- Hydraulic fracturing is the most cost-intensive part of
ate at a loss vs. deferring abandonment expenditure in the shale well completions. Economics vary considerably across
current environment. Furthermore, a change in mindset a play.
will be required to facilitate cooperation among the UKCS For example, the Permian basin represents a collection
companiessomething he said will be essential if the de- of some outstanding acreage positions such as the Northern
commissioning task ahead is to be done efficiently. Wolfcamp acreage. But it also has less prospective drilling
WoodMac explains that recent tax changes introduced spots, which are now far from commerciality threshold.

Oil & Gas Journal | June 6, 2016 35

GENERAL INTEREST

Within the Permian, Delaware acreage exhibits slightly cided to focus on completing these DUCs rather than new
better well economics than Midland acreage. drilling because a significant part of new drilling turned un-
In the DJ basin, the DUC inventory is concentrated in commercial.
the basins core, Weld County. Anadarko intentionally de- During this years first quarter, Anadarko completed 46
layed completions primarily during the second half of 2015 DUCs and drilled only 26 new wells so the DUC inventory
because the company had a strong balance sheet and was started going down.
financially able to wait until commodity prices improved. The trend is likely to persist in the second quarter 2016,
Essentially, these wells were not delayed because it was Abramov said. The pace of the DUC inventory contraction
uncommercial to complete them as it was the case in some is likely to accelerate as we are already at the $45-50/bbl
other plays, Abramov said. However, as we entered 2016 crude oil price level. DUCs will provide a significant support
with an extremely low price environment, the company de- to the US shale oil production.

Hydraulic fracturing stymied in Canadian East

Hydraulic fracturing remains stymied in two of Canadas At- Newfoundland and Labrador
lantic provinces. In its final report, the Newfoundland and Labrador Hydrau-
New Brunswick has extended indefinitely a moratorium lic Fracturing Review Panel, which examined socioeconomic
on the completion technique imposed in 2014. and environmental implications of fracing in western New-
And an independent panel appointed that year to assess foundland, recommended the province extend its pause in
hydraulic fracturing in Newfoundland and Labrador has re- the acceptance of applications.
fused to endorse the method. The panel unanimously recommends that a number of
gaps and deficiencies must be addressed before the necessary
New Brunswick moratorium conditions could exist that would allow for hydraulic fractur-
In New Brunswick, Energy and Mines Minister Donald Ar- ing, as an all-inclusive industrial process, to proceed reason-
seneault said five conditions the province established for ably and responsibly in western Newfoundland, it said.
fracing have not been satisfied. The conditions call for: The panel made 85 supplementary recommendations that
A social license. it said constitute a staged, cautious, and evidence-based ap-
Clear and credible information about effects of hy- proach to understanding the opportunities and challenges
draulic fracturing on public health, the environment, and of unconventional oil and gas development in western New-
water allowing the government to develop a country-lead- foundland.
ing regulatory regime with sufficient enforcement capabili- Implementation of the recommendations, it said, should
ties. allow for a better-informed decision with respect to whether
A plan to mitigate impacts on public infrastructure and hydraulic fracturing operations should be permitted in the
to address issues such as wastewater disposal. future.
A process to respect the duty of the provincial govern-
ment to consult with First Nations (aboriginal groups).
A mechanism to ensure that benefits are maximized
for New Brunswickers, including the development of a prop-
BSEE, BOEM issue Southern California
er royalty structure. OCS well-stimulation analysis
Arseneault said, It is clear to us that the industry has not
met the conditions. With oil and gas prices low, the indus- Nick Snow
try, he added, is unlikely to invest the necessary efforts to Washington Editor
address the conditions in the short or medium term.
Extension of the moratorium responded to findings re- A comprehensive environmental analysis (EA) of 23 offshore
leased in February of the New Brunswick Commission on oil and gas platforms operating on the US Outer Continen-
Hydraulic Fracturing, which was established in March 2015 tal Shelf off Southern California found no significant impact
to determine feasibility of satisfying the conditions. from the use of well stimulation treatments (WST) there, the
The Canadian Association of Petroleum Producers issued US Bureau of Safety and Environmental Enforcement and
a statement expressing disappointment with extension of the Bureau of Ocean Energy Management jointly reported.
the moratorium. The evaluated treatments included fracturing and non-
The group said it provided the commission a written sub- fracturing treatments, which may be used to enhance pro-
mission addressing the conditions. duction from existing or new wells where formation permea-

36 Oil & Gas Journal | June 6, 2016

 GENERAL INTEREST

bility and falling reservoir pressure are limiting oil recovery, logically critical areas.
according to the Programmatic Environmental Analysis pre- The degree to which the effects on the quality of the
pared by Argonne National Laboratories. human environment are likely to be highly controversial.
Four WSTs were evaluated: Whether possible effects on the human environment
Diagnostic fracture injection test (DFIT), which is used are highly uncertain or involve unique or unknown risks.
to estimate key reservoir properties and parameters that are Whether allowing use of these WSTs would establish
needed to optimize a main fracture job. a precedent for using others or represents a decision about a
Hydraulic fracturing, which involves injection of frac- future consideration.
ing fluid at a pressure (typically determined by a DFIT) nec- Whether the action is related to other actions with indi-
essary to induce fractures within the producing formation. vidually insignificant but cumulatively significant impacts.
Acid fracturing, which is similar to hydraulic fractur- The extent to which districts, sites, highways, struc-
ing except that instead of using a proppant to keep fractures tures, or objects listed in or eligible for listing in the Na-
open, an acid solution is used to etch channels in the rock tional Register of Historic Places may be affected, or signifi-
walls of the fractures, thereby creating pathways for oil and cant scientific, cultural, or historical resources may be lost
gas to flow to the well. or destroyed.
Matrix acidizing, a nonfracing treatment in which an The degree to which the action may adversely affect
acid solution injected into a formation where it penetrates an endangered or threatened species or its habitat that has
pores in the rock to dissolve sediments and muds, open- been determined to be critical under the 1973 Endangered
ing existing channels to allow formation fluids (oil, gas, and Species Act.
water) to move more freely to the well. Matrix acidizing also Whether the action potentially violates federal, state, or
removes formation damage around a wellbore, which also local environmental protection laws and requirements.
aids oil flow into the well, the programmatic EA said. BSEE and BOEM said they received more than 10,000
The two US Department of the Interior agencies conduct- comments on the draft assessment during the 30-day pub-
ed the EA under settlement agreements regarding their com- lic comment period that ended on Mar. 23. After review-
pliance with the National Environmental Policy Act, Outer ing those comments, the bureaus revised the final program-
Continental Shelf Lands Act, and Coastal Zone Management matic EAs text where appropriate, including amending the
Act. Pending completion of the EA, BSEE agreed to withhold statement of purpose and need, clarifying the descriptions
approvals of future drilling permits and permits to modify of alternatives, and adding information on greenhouse gases
WSTs involving hydraulic fracturing and other well stimula- and climate change.
tion treatments on the OCS off Southern California. The evaluated offshore resource area environmental im-
Under the agreements, BSEE agreed to develop a mecha- pacts included water quality changes from discharges of pro-
nism to increase transparency in the permit approval pro- duced water, and the potential for associated impacts to fish
cess, as well as a method to alert the public of newly submit- and wildlife, they indicated.
ted complete permit applications for hydraulic fracturing or Considering the low expected concentrations of well
acid well stimulation. The programmatic EA will provide the stimulation treatment chemicals and the protective nature of
agencys Pacific Region with valuable information as it con- the EPAs National Pollutant Discharge Elimination System
siders future WST applications, it said. General Permit and required monitoring of aquatic life, the
In their Finding of No Significant Impact concerning their analysis in the EA affirms that wastewater discharges from
proposal to allow WSTs to be used on the OCS off Southern proposed well stimulation activities will not have a signifi-
California, the agencies said that potential adverse impact cant impact on the environment, BSEE and BOEM said.
appeared insignificant. In some cases where impacts are Accidental releases of well stimulation treatment fluids
somewhat more pronounced, such as with discharge of pro- have a relatively higher potential to have consequence, but
duced water, the impacts are minor, short-term and local- the probability of an accident occurring and the reasonably
ized, they added. foreseeable size of a resulting release are so small that such
BSEE and BOEM also considered: accidents would not be expected to cause a significant im-
The degree to which the proposed action could affect pact, they added.
public health and safety. Responding to the agencies announcement, National
Unique characteristics of the geographic area such Ocean Industries Association Pres. Randall B. Luthi said
as proximity to historic or cultural resources, park lands, it confirms what the offshore oil and gas industry already
prime farmlands, wetlands, wild and scenic rivers, or eco- knowsthat there are no significant impacts from offshore
well stimulation treatments.
We hope this report quickly ends the moratorium on
well stimulation techniques offshore California, he said.
The sooner operations can resume [there], the better.

Oil & Gas Journal | June 6, 2016 37

GENERAL INTEREST

COGCC outlines impacts if voters

approve proposed mandatory setback
Nick Snow What proposal would do
Washington Editor The proposal, Initiative 78, would add a 30th article to the
state constitution requiring that any new oil and gas devel-
Ninety percent of Colorados surface acreage would be off- opment facilities, including reentry into a previously aban-
limits to future oil and gas development or hydraulic fractur- doned well, would have to be at least 2,500 ft from an occu-
ing under a November ballot initiative that would establish pied structure or area of special concern.
a minimum 2,500 ft mandatory setback from any occupied It is one of four, for which signatures are being collected
structure or area of special concern, the Colorado Oil & through Aug. 3 for inclusion on the November ballot, which
Gas Conservation said in a May 27 report. would affect oil and gas operations in the state, COGCC Di-
In the top 5 producing counties, 95% of the surface area rector Matt Lepore said at an Apr. 18 hearing.
would be within mandatory setback zones and unavailable Initiative 78 defines occupied structure as any build-
for new oil and gas development or [fracing] operations, the ing or structure that requires a certificate of occupancy, or
20-page COGCC staff analysis said. The ballot initiative building or structure intended for human occupancy, in-
language does not provide any exceptions to or possibility cluding homes, schools, and hospitals.
of variance from the mandatory 2,500 ft setback distance. An area of special concern would include public and
In Colorados top five producing countiesWeld, Gar- community drinking water sources, lakes, rivers, perennial
field, La Plata, Rio Blanco, and Las Animasmore than 10.1 or intermittent streams, creeks, irrigation canals, riparian
million acres would be off-limits, the report said. Eighty- areas, playgrounds, permanent sports fields, amphitheaters,
five percent of surface acreage in Weld Countythe states public parks, and public open space.
largest oil and gas producing countywould be unavailable
for new oil and gas development facilities or [fracing] opera- Additional authority
tions, it noted. Section 4 of the proposal would give the state and local gov-
This report and map from the state is the smoking gun ernments authority to establish larger setbacks. In the event
that antioil and gas activists have been trying to hide, Col- that two or more local governments with jurisdiction over
orado Oil & Gas Association Pres. Dan Haley said in re- the same geographic area establish different setback distanc-
sponse to the reports release. It clearly shows that activists es, the larger setback shall govern, it says.
arent trying to protect neighborhoods or homeowners, but Of the initiatives two featured categories, areas of special
are simply pushing an extreme agenda to end an industry concern would have the bigger impact, the COGCC report
that 5 million Coloradans rely on every day. Any reasonable said. A 2,500-ft setback in that category would put 89% of
person can look at this map and see theyre advocating for a surface land in the state off-limits to oil and gas development,
statewide ban. while the calculated estimate for occupied structures is 22%,
Colorado Petroleum Council Executive Director Tracee it indicated. In Weld County, the proposed setback require-
Bentley agreed. The COGCC maps prove this setback pro- ment from an Occupied Structure [would] potentially make
posal is short-sighted and reckless, she said in a separate more than 40% of the land unavailable, it added.
May 27 statement. Robust regulations exist in the state for In those areas defined as off-limits to drilling, which is
oil and gas development and to ensure environmental pro- a vast majority of the state with oil and gas resources, lie the
tection. property rights of tens of thousands of Coloradans, Haley
Current statewide setback regulations were created in said. Those constitutionally protected mineral rights would
2013 through a COGCC-led stakeholder process consisting be shredded by this initiative and would prompt thousands
of meetings over several months, and allow for responsible of lawsuits against the State of Colorado for billions of dol-
development of oil and gas to exist at least 500 ft from homes lars.
and buildings, Bentley noted. Proposals like this seek to Its just another reason why land use regulations do not
disregard the well thought out stakeholder process that Col- belong in the state constitution and why we need to reject
orado is known for, she said. Interfering with this effective these extreme measures that are trying to solve issues that
system would undermine a crucial source of income for both are best left to robust discussions in town halls, city councils
the state GDP and individual families. and statehouse committee rooms, he said.

38 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

New bid round accelerates

Mexicos shale potential
Scott Stevens retaria de Energia de Mexico (Sener) announced 11 pipe-
Keith Moodhe line projects totaling 2,300 km and costing $5.2 billion to
Advanced Resources be built 2014-15 (OGJ Online, May 29, 2014). The recent US
International Inc. Department of Commerce decision to allow crude oil swaps
Arlington, Va. with Mexico is another sign of the countries closer energy
integration (OGJ Online, Aug. 24, 2015).

Mexicos shale industry may find traction in 2016. Well-pre- Favorable geology
pared early movers will bid on the choicest geologic areas in Mexicos shale geology appears prospective, especially in
one of the most anticipated shale offerings of recent years. identified sweet spots. Stratigraphy will be familiar to North
Development hasnt occurred as quickly as expected. Not American geologists, particularly those working the Gulf
only were early Petroleos Mexicanos (Pemex) shale wells Coast, because the two principal shale targets in Mexico are
meager producers, they also were expensive to drill and frac. stratigraphic equivalents of major source rocks and produc-
Despite the disappointing start, Mexicos geologic and com- tive shales in the US. Northern Mexico hosts the southern
mercial qualities could thrust the country to the front of the portion of the greater Gulf of Mexico basin.
emerging global shale market. The Upper Cretaceous Eagle Ford shale extends directly
Low oil prices delayed the countrys first shale into northern Mexico from South Texas, though
auction, originally scheduled for last year and de- it undergoes significant structural and lithologic
signed to attract needed foreign investment and changes just inside the border. The less renowned
technology. But it could take place later this year Upper Jurassic Pimienta formation, a prolific Gulf
or in 2017. Coast source rock correlating with the Cotton Val-
Recognizing its vast shale resources, Mexicos ley-Bossier-Haynesville sequence of East Texas, is
government is opening the countrys most pro- regionally more extensive and uniform and could
spective acreage, formerly the exclusive domain of EXPLORATION & be a superior target to the Eagle Ford shale.
DEVELOPMENT
Pemex, to foreign capital and expertise. The open- Regional geologic mapping reveals the Pimienta
ing of Mexicos onshore and offshore basins to for- trend stretching 1,000 km across northeast Mexico
eign investment for the first time in 75 years is a (Fig. 1). The regional structure is simple through-
key part of the countrys ongoing reforms. out much of this trend, with few faults and mostly gentle
Mexicos resource potential ranges from mature onshore dip angles (Fig. 2).2 Shale thickness, depth, and thermal
fields to rank deepwater settings, including conventional maturity are prospective within a belt 50-200 km wide and
and unconventional reservoirs. The countrys upstream re- spanning 27,000 sq miles (17 million acres), covering just
naissance will continue to be an area of interest for the glob- the Pimienta shales two key basins: Burgos and Tampico-
al oil and gas industry. Misantla.
Total organic compound (TOC), mineralogy, porosity,
Delayed development and reservoir pressure appear mostly favorable, however,
Mexican regulator National Hydrocarbons Commission understanding is constrained due to fewer data. Further
(CNH) has not yet announced a revised schedule for Round potential exists in the Sabinas, Veracruz, and Macuspana
1 of its unconventional shale lease. Industry interest has basins, though these tend to be structurally more complex.
been growing steadily despite the delay, along with an ap- One geologic feature that differs from most US shale basins
preciation of Mexicos shale geology.1 is the significant igneous activity (Miocene to Recent, both
The macro outlook for shale is also improving, with more intrusive and extrusive) which may sterilize local areas.
than $10 billion invested in pipeline construction and a bur- As noted, many of the early Pemex shale wells tested at
geoning cross-border trade in oil and gas, as US and Mexico low rates, despite in some cases being directly adjacent to
move to integrate their refining and marketing systems. Sec- successful Eagle Ford producers in South Texas. This sug-

Oil & Gas Journal | June 6, 2016 39

TECHNOLOGY

completion practices coupled with bet-

NORTHEAST MEXICO SHALE POTENTIAL FIG. 1
ter sweet-spot well placement could
lead to commercially viable produc-
Houston tion.
Burro-Picachos
Ample resources
Piedras
Negras Eagle Ford Pemexs latest official shale-resource
Sabinas estimate is 60.2 billion boe, compris-
US ing 31.9 billion bbl oil, 36.8 tcf wet
Nuevo
gas, and 104.1 tcf dry natural gas.4 The
Laredo methodology and assumptions used
for this estimate were not disclosed by
Pemex. Separately, Advanced Resource
Matamoros International Inc.s (ARI) 2013 assess-
Reynosa ment for the US Energy Information
Saltillo Agency (EIA), which included areas
Monterrey Burgos
not assessed by Pemex, found 104 bil-
Sierre Madre lion boe of risked, technically recover-
Oriental able resources, comprising 13.1 billion
Mountains bbl of oil and 545 tcf of natural gas.5
US Gulf of Mexico Our current analysis, based on a
Victoria
larger public data set that we assem-
Tamaulipas bled for our multiclient study, indi-
M
ex

Mexico Arch cates the oil potential could be greater.

ic
o

Area Shale areas in the Burgos and Tam-

shown
Ciudad Valles Tampico pico-Misantla basins are structurally
0 Miles 100 simple with few faults. Owing to gen-
0 Km 161 Tampico- tle or flat structural dips, the liquids-
Misantla rich windows often are wider than in
Unconventional exploration blocks
the Texas Eagle Ford. Overpressuring
Poza Rica
De Hidalgo occurs locally in these prolific and still
Pemex exploration well
actively generating source-rock shales.
Basin
Bid rounds
Source: Advanced Resources International Inc., 2015 Seeking to reverse its declining oil out-
put, Mexico is transforming its petro-
leum industry, with shale leasing as
MEXICOS ESTIMATED RESOURCE, BLOCKS one of the pillars of reform. CNH and
Number Resources, Pemex
Basin of blocks Area, sq km billion boe shale wells Sener recently published a detailed
Burgos 124 14,406 6.5 27
multiyear plan to auction shale blocks
Tampico-Misantla 158 18,528 17.6 3 in the Burgos and Tampico-Misantla

Total 282 32,934 24.1 30 basins in four separate bid rounds.6
Round 1 will focus on the Tampico,
while Round 2 will feature extensive
areas in the southern Burgos. Both re-
gests operational issues, such as poor lateral placement or gions offer liquids-rich shale targets, with the subsequent
ineffective stimulation, rather than inferior geologic condi- Rounds 3 and 4 allowing room for growth.
tions. CNH has identified an estimated 24.1 billion boe poten-
Pemex has since improved shale performance, testing tial in 282 blocks totaling nearly 33,000 sq km in the Bur-
500 bo/d (37 API) from a horizontal Pimienta well in the gos, Burro-Picachos, Tampico-Misantla, and other onshore
volatile oil window.3 Another Pimienta well, this one in the basins (see accompanying table). Our independent analysis
dry gas window, tested 10.9 MMcfd. Considering only 30 shows the offered blocks varying widely in reservoir quality
shale wells have been drilled thus far in Mexico, all Pemex and surface conditions, from excellent to poor. The bet-
operated, these results indicate that improved drilling and ter blocks have thick organic-rich shale of mainly carbon-

40 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

ate-silica lithology at optimal depth PIMIENTA SHALES STRUCTURAL SETTING FIG. 2

(~3,000 m) and thermal maturity (Ro SW P. Aleman NE
Citlalli-1
~1.1%), with few faults and flat sur- Entabladero-2 Yachik-1 1,696-1,674 ft Axochiti-1
face topography. Other blocks have
shale targets that, in our view, are too 1.0
shallow (<1,000 m) or thermally not

Escala Tiempo section

sufficiently mature to be prospective

Reflection, sec
(Ro <0.5%). Access to infrastructure Tertiary
and services also affects block desir- sequence
ability. 1.5
Upper Jurassic
Pimienta formation
Service access, security risks
Once shale blocks have been awarded,
service companies based in the south- 2.0
ern US (Eagle Ford, Permian, and
Haynesville) are positioned to bring
Source: Pemex, 2012
in specialized drilling and completion
equipment and expertise. The Mexi-
can government is working to facilitate
such cross-border trade. Local estab-
lished service companies experienced
NORTHEAST MEXICO SHALE, DATA EVALUATION FIG. 3

with conventional oil and gas develop-

ment in the Burgos and Tampico-Mis- Houston
antla basins offer partnering options. Burro-Picachos
Early Pemex shale wells report-
edly cost $20-25 million each, triple Piedras
Negras Eagle Ford
the cost of equivalent Eagle Ford wells Sabinas
in South Texas. These wells were dis-
persed across the shale trend and re-
US
Nuevo
quired additional engineering. But Laredo
capital costs should fall with greater
geologic subsurface control, increased
competition amongst service provid-
Matamoros
ers, and the inevitable logistical econo- Reynosa
mies of scale. An influx of shale-savvy Saltillo
Monterrey Burgos
oil companies from abroad also will
introduce needed efficiencies. Sierre Madre
Potential complications, however, Oriental
remain a part of the nascent Mexican Mountains
shale industry. One of the largest is the Gulf of Mexico
local security situation. Both the Bur- US Victoria
gos and Tampico-Misantla basins are Tamaulipas
plagued by organized criminal gang Arch
Mexico
M
ex

activity. Shale development involving

ic
o

thousands of widely spaced wells and Area

shown Ciudad Valles Tampico
surface infrastructure presents daunt-
ing security issues. The government 0 Miles 100 Tampico-
will need to focus law enforcement Misantla
0 Km 161
and security resources in these areas
Poza Rica
to enable large-scale shale develop- De Hidalgo
ment. Other countries (e.g., Colombia) Data site
have successfully grappled with simi- Basin
lar concerns, but the security situation
remains an active risk in Mexico. Source: Advanced Resources International Inc., 2015

Oil & Gas Journal | June 6, 2016 41

TECHNOLOGY

Future prospective Petroleum Engineering Conference (LACPEC), Quito, Ecuador,

With the contract structure for shale licenses still somewhat Nov. 18-20, 2015, pp. 13.
uncertain, there is talk that the government may consider 2. Pemex, Aceite y Gas en Lutitas, June 21, 2012, pp.
sweeter terms due to low oil prices. This seems likely fol- 54.
lowing the poor response to the recent shallow offshore bid- 3. Araujo, O., Garza, D., Garcia, D., Ortiz, J.R., Bailon, L.,
ding round, only two out of 14 blocks being successfully and Valenzuela, A., First Production Results from Pimienta
awarded. Oil Source Rock ReservoirA Promising Shale: Case History
Mexicos switch from its old service agreements to more from Burgos Basin, Mexico, SPE 169420, SPE Latin America
standard production-sharing contracts, providing the con- and Caribbean Petroleum Engineering Conference, Mara-
tractor with actual title to the resource, is a positive develop- caibo, Venezuela, May 21-23, 2014, pp. 15.
ment. The governments share is determined by a royalty on 4. Pemex, Presente y Futuro del Proyecto Burgos, May
gross revenues, an exploration fee, and a negotiated percent- 2014, pp. 38.
age of operating profit after cost-recovery. Signature bonuses 5. US Energy Information Administration (EIA), Techni-
are not required.7 cally Recoverable Shale Oil and Shale Gas Resources: An
Data availability for assessing Mexicos shale resource po- Assessment of 137 Shale Formations in 41 Countries Outside
tential could be problematic. Much of the basic geologic and the United States June 2013, Report by Advanced Resourc-
well data publicly available in other countries is kept confi- es International, Inc., pp. 730.
dential in Mexico. And the future CNH data room may pro- 6. Sener, Plan Quinquenal de Licitaciones para la Explor-
vide limited-to-no data outside the offered blocks, hamper- acin y Extraccin de Hidrocarburos 2015-19, Oct. 7, 2015,
ing regional geologic interpretation and leasing strategies. pp. 139.
Fortunately, a wealth of geologic data on source-rock 7. Powell Shale Digest, Mexico: Update on Energy Re-
shales has been published in various Mexican technical jour- forms, Sep. 1, 2015, p. 43.
nals and university theses. ARI has spent several years syn-
thesizing data from these public sources into a proprietary
GIS data base of Mexicos shale geology. Data were compiled
from nearly 500 Spanish-language technical articles, mostly
published before shale development began and focused on
conventional source rock geology.
Shale data locations plotted on our Mexico maps provide
an indication of geologic control (Fig. 2). With about 10,000
mapped shale geologic and reservoir data points, we now
have reasonably good control of thickness, depth, structure,
lithology, and thermal maturity for the principal Upper Cre- The authors
taceous and Upper Jurassic shale targets across northeast Scott Stevens ([email protected]) is senior
Mexico. Geochemical data such as TOC and hydrocarbon vice-president with Advanced Resources Inter-
indicators (HI) also were found but were less abundant. national, Inc. He has worked on unconventional
High-graded Pimienta shale areas, for example, may have reservoirs since starting his career with Getty Oil
more than 200 m of gross shale thickness, double the typical Co. and Texaco Inc. in 1983. He holds degrees
Eagle Ford thickness in South Texas. Mineralogy comprises in geology from Pomona College, Claremont,
mainly calcite with minor quartz and illite clay. TOC gen- Calif., and Scripps Institution of Oceanography,
erally is lower than in the Eagle Ford at 2-3% (unadjusted). University of California, San Diego.
The Pimienta can be found in the volatile oil to wet gas
windows (0.8-1.2%) and at optimal depths of 2-3.5 km. Po- Keith Moodhe ([email protected]) is a
rosity has been measured at a reasonably high 7%. Reser- project manager with Advanced Resources
voir pressure often is high, reaching 50% over hydrostatic in International, Inc., having joined in 2006. He
places. The stress gradient has tested at a moderate 0.9 psi/ holds a BS in geology from the College of Wil-
ft, enabling good 3D fracturing systems during stimulation. liam and Mary, Williamsburg, Va. He is a mem-
Coupled with the vast prospective area, these are intriguing ber of the American Association of Petroleum
reservoir properties. Geologists and Society of Petroleum Engineers.

References
1. Stevens, S.H. and Moodhe, K.D., Evaluation of
Mexicos Shale Oil and Gas Potential, SPE 177139, Society
of Petroleum Engineers (SPE) Latin America and Caribbean

42 Oil & Gas Journal | June 6, 2016

TECHNOLOGY

EXPLORATION &
DEVELOPMENT

EU unconventional
resource development stalls
Hirdan Katarina de Medeiros Costa rapid shale development across Europe. Exploration drilling
Edmilson M. Santos is the best method of alleviating uncertainties about reserves
Vitor Emanoel estimates and reservoir engineering practices. With no real
University of Sao Paulo path to test prospective shale plays in Europe, it will be dif-
Brazil ficult to perform a rigorous economic evaluation of the re-
gions unconventional basins.
Pol Oliva Marti In most European countries, social opposition further in-
IFP Energies hibits implementation of supportive regulations. The lack of
Nouvelles, France exploration activity has kept recoverable reserves estimates
low and high reserves estimates are typically required to dis-
Allan Ingelson play the true economic benefits of developing unconvention-
University of Calgary al reserves. Near-term shale gas development is unlikely for
Canada countries caught in this type of gridlock.

European governments are reluctant to promote shale gas US example

development even though technology has advanced and ex- Commercial shale gas development depends on factors spe-
traction processes have matured in North America. Europe cific to each unconventional reservoir.1 Production costs,
continues to rely on Russia for much of its natural gas de- resource volumes, and market prices factor into a plays vi-
spite unconventional resources that could be exploited. Even ability. Other factors include drilling and completion cost,
considering the benefits shale development has brought to infrastructure availability, water access, and estimated ulti-
the US and Canada, Europe will likely not develop its un- mate recovery.
conventional resources in the near future. In the US, annual gas production increased 45% between
This article outlines the many barriers European coun- 2008 and 2012, with unconventional gas accounting for
tries face in exploiting their shale resources and analyzes 60% of this growth.2 3
data from 2014 supporting the benefits shale gas develop- As a result of increased production, US Henry Hub gas
ment could bring to many European countries. prices dropped to $2.76/Mbtu in 2012 from $8.85/Mbtu in
2008.3
Crucial barriers The surge in shale gas production lowered LNG imports
Technological and geological uncertainty, strong social op- 50% and 45% in 2012 and 2013, respectively. Several re-
position, and the lack of supportive governmental frame- gasification terminal projects were modified to become ex-
works combine to provide the most detrimental barriers to port plants and consumers began switching from coal to

44 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

ASSESSED SHALE BASINS FIG. 1

With resource estimate

Without resource estimate

Source: EIA, 2014

natural gas.4 By 2012, coal-fired electricity generation had Some Eastern European states are also reluctant to dam-
decreased to 42% of the US total from 48% in 2008. age political and economic relationships with Russia as their
The rise in shale gas production increased US energy se- primary natural gas supplier.
curity, reduced natural gas imports, and opened the possi-
bility of exporting natural gas. The US was expected to be- Economic factors
come a net exporter of natural gas by 2018. But this outcome Recession, public debt, and the financial capacity of national
has become unclear in the current downturn. oil companies and market investors have all impacted coun-
Other countries evaluating their shale gas potential in- tries interest in shale development on both macro- and mi-
clude Canada, Australia, the UK, China, and Argentina. croeconomic levels.
The countries of continental Europe have generally ad- The European economy continues to languish in gener-
opted a more cautious approach to unconventional devel- al. Individual companies have also had difficulty securing
opment, although the region contains 615 tcf of technically capital for the intensive exploration drilling and completions
recoverable shale resources (Fig. 1).2 required in Europe, where current costs can exceed $15 mil-
Political, economic, social-environmental, and techno- lion/well.5 6
logical-geological concerns all play roles in the opposition
to shale gas development, as do regulatory and market con- Social, environmental factors
cerns. Many Europeans have concerns related to the potential di-
rect and indirect environmental impacts of hydraulic frac-
Political factors turing. Europe is more densely populated than the US,
Environmental or green parties often have more influence where most shale development has occurred in rural areas,
in Europe than their counterparts in the US, and popular and a public mistrust exists regarding governments ability
opposition to hydraulic fracturing keeps mainstream devel- to regulate the oil and gas sector.
opment at bay. In regions already affected by austerity poli- Concerns about groundwater contamination, disposal of
cies, electoral support for ruling governments is low. Open- flowback water, and the volume of water used in drilling
ing shale gas development in these countries could further and hydraulic fracturing tend to raise fears regarding shale
weaken public sentiment. development.

Oil & Gas Journal | June 6, 2016 45

TECHNOLOGY

UK SHALE FORMATIONS, WELLS FIG. 2

While pipeline infrastructure ex-
ists through most of Europe, some pro-
Northern Ireland
Arns Farm carboniferous spective areas lack the access needed to
Airth Cambrian shale allow for commercial extraction.
Coalbed methane
Bargeddie Cousland Gas field, discovery Regulation, competition
Gas with oil
UK Oil with gas
Many European countries need to
Northumberland modify existing oil and gas legisla-
NORTHERN trough Kimmeridge clay
IRELAND Oxford clay tion to clearly define the rights, du-
Kilcoo Cross Alston Lias ties, and liabilities related to shale gas
Slisgarrow 1, 2 Kirkleatham 4 Millstone grit
Cleveland
exploration, including laws penaliz-
Big Dog 1 Cambrian tremadoc
Eskdale
Knock Beg basin ing returns on shale investments.
Glenoo Pickering Lockton Moratoriums and bans on hy-
Owngarr Kirby Misperton Manshes
Wind Farm Askrigg Malton Caythorpe draulic fracturing in some countries
Mulianawinna Elswick S ou th e rn would have to be lifted. The absence
Eas t I r is h Se a
Trumfleet Crosby Warren No rt h of EU-wide regulation of shale-gas
Pennines Hatfield Moors
East S ea extraction and hydraulic fracturing
Doe Green Everton 1 Midlands Saltfleetby produces uncertainty and results in
Calow an extensive bureaucracy that lacks
Nooks Farm Ironville
definitive fiscal incentives to drive
The Croft
Rempstone shale gas development.
Midlands
Welsh Microcraton Volatile natural gas pricing mech-
basin Welsh
borderland Worcester
anisms in Europe further complicate
graben the commercial viability of shale gas
Fownhope Twyford
Usk Fowlet Farm production. The lack of a well-devel-
anticline oped onshore oil and gas service in-
Cooles Farm
dustry also makes Europe less com-
Se ve rn Estuary Mendips Shrewton Albury Bletchingley petitive. Equipment and contract
Cowden 2
Godley Bridge Lingfield 1 Weald services are more expensive, and op-
NORTHERN Baxters Copse erations are carried out with less gen-
Heathfield
IRELAND Wytch Farm Wessex
IRELAND NorthSea eral experience.
UK Brent crudes fall below $40/bbl in
North 0 Miles 100
Atlantic December 2015, raised further doubt
Ocean 0 Km 100
FRANCE about European shales commercial
Source: British Geological Survey, 2013 potential. The combination of cheap
substitutes, such as coal, and low
output from some of the European
Other environmental concerns include: wells drilled to date has only deepened this uncertainty.
Seismic events.
Potential fugitive methane emissions. EU shale potential
Sand consumption in fracking fluids and concerns Although a common EU legal framework is generally de-
about silica pollution. manded by both supporters and opponents of shale gas
Land surface disturbances that can impact biodiversity. development, it does not yet exist.
Noise and visual impacts. UK Prime Minister David Cameron considered the
EU process too slow and felt it generated regulatory un-
Technology, geology certainty that would reduce private investment in shale
Europes basins differ geologically from the US in both for- gas development. Camerons position led to rejection
mation and composition. In many cases, European uncon- of amendments to Directive 2011/92/EU, which pro-
ventional reservoirs are deeper and harder to extract re- posed requiring an environmental impact assessment
sources from, potentially requiring more expensive methods for all upstream activities involving hydraulic fractur-
such as ceramic proppants. ing.7 Instead, the European Commission developed a
Reserve levels also remain uncertain with so few test recommendation on how to regulate hydraulic fractur-
wells drilled in Europe, and the limited fracturing experi- ing activities to ensure the public health, environmental
ence increases financial risk. protection, efficient use of resources, and public access

46 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

to information. 8 The recommendation included: EUROPES 2014 PETROLEUM CONSUMPTION FIG. 3

Performing strategic environmental assessments
prior to granting licenses. Others, Germany,
Risk assessments. 19.1% 17.9%
A minimal distance between fractured zones and
groundwater.
Fracturing fluids disposal management.
These recommendations, however, are not legally Poland,
binding and EU member states can decide whether or not 3.8%
to follow them.
Spain exemplifies strong social opposition to uncon- France,
Belgium, 12.4%
ventional development despite its dependence on im- 4.7%
ported oil and gas. In 2014, 300 municipalities declared
Turkey,
themselves fracing free. Four of the countrys 17 region- 5.3%
al governments banned hydraulic fracturing in portions
UK,
of Spains most prospective areas. Netherlands, 11.3%
France imports 97% of its hydrocarbons.9 Natural gas 7.2%
represented 15% of its primary energy mix in 2012. De-
spite being one of the smallest gas consumers in the EU,
France has a fully functioning, interconnected gas mar- Spain, Italy,
9.0% 9.2%
ket. It has prospective basins and could provide a com-
petitive environment for unconventional development, Source: EIA, 2014

Looking for a new way

to promote your company?
Document your
Look no further than companys growth
Foster
and history
PennWell custom publishing relationships
with both
current
We provide high quality work from the leading publisher of the Capture your companys and new
history and highlight customers
oil & gas industry. Put our expertise to work use our first class
milestones
writers, designers and photographers to create your own publication.

Corporate Profiles History Books

Let us do the work for you!
For details contact:
the worlds natural resource

Roy Markum, VP Custom Publishing

at [email protected], 713.963.6220 F. Jay Schempf
TECHNOLOGY

but enacted a total ban on hydraulic fracturing in 2011 import sources also suggest a continued lack of support for
(OGJ Online, May 12, 2011). The governments morato- shale gas development.
rium is strengthened by broad social opposition to the Low reserve estimates for shale gas and sustained social
technology. opposition to its development create a similarly bleak sce-
Poland has made attempts to reduce its carbon intensi- nario for unconventional development in Spain. The Span-
ty and diversify its energy mix with shale gas, but suffers ish government has not enacted fiscal incentives promot-
from technological-geological barriers. The governments ing development.
regulatory framework has been weighted down with ex- Poland was the first European country to pursue shale-
cessive bureaucracy increasing the time required to se- gas exploration, but its prospects have worsened in the ab-
cure drilling permits, amend existing permits, or reach sence of needed regulatory changes. Increased time cycles,
an environmental decision on subsequent drilling.. unclear directives, and an indecisive environmental evalu-
The UK has promise as a shale gas producer (Fig. 2). ation system have also discouraged companies from invest-
Despite the growing dependence on hydrocarbon im- ing in Polands shale prospects.
ports, the country is one of the largest EU oil producers. The UK is working to implement regulations for domes-
The country added 907,000 b/d of natural gas liquids in tic shale gas exploration. While the path is not yet clear,
2014, but its overall hydrocarbon production is declin- it appears the country will develop its unconventional re-
ing. As the third-largest EU consumer of hydrocarbon re- sources once the needed regulations have been passed.
sources (Fig. 3), the UK is implementing policies to devel- The current price climate mitigates against EU shale gas
op shale gas and reverse a potentially precipitous decline. production becoming a reality. The UK could play a pivotal
Given the barriers to continental European shale develop- role in reversing this fortune if its attempts are success-
ment, the UK is the most likely EU member to develop its ful. If UK efforts fail, however, resolve could strengthen
unconventional resources.. against unconventional resource development elsewhere in
Europe.
Short-term potential
The outlook for European unconventional resource devel- Acknowledgment
opment is bleak. Advances in shale extraction projects in The authors acknowledge support from BG E&P Bra-
France seem highly unlikely. Both the regulatory ban on sil Ltda. and Fundao de Amparo Pesquisa do Es-
fracing and strong social and political opposition to the tado de So Paulo (FAPESP Sao Paulo Research Founda-
practice appear to be entrenched. The countrys strong nu- tion) through the Research Centre for Gas Innovation
clear energy mix combined with well-diversified fossil fuel - RCGI (Fapesp Proc. 2014/50279-4), hosted by the
University of Sao Paulo, and Brazils National Petroleum
Agency (ANP) through its research and development
levy regulation.

Manuscripts welcome References

1. American Geosciences Institute (AGI), Americas
Oil & Gas Journal editors are happy to consider Increasing Reliance on Natural Gas: Benefits and Risks of a
for publication manuscripts about exploration and Methane Economy, AGI Critical Issues Forum: Final Report,
development, drilling, production, pipelines, LNG, Fort Worth, Tex., Nov. 19-20, 2014.
and processing (refining, gas processing, and 2. US Energy Information Administration (EIA), Techni-
basic petrochemicals). These papers may be highly cally Recoverable Shale Oil and Shale Gas Resources: An
technical in nature and appeal or they may analyze Assessment of 137 Shale Formations in 41 Countries Outside
oil and natural gas supply, demand, and markets. the United States, June 13, 2013.
OGJ accepts manuscripts submitted exclusively to 3. BP PLC, The 63rd Annual Statistical Review of World
it or those adapted from oral and poster presenta- Energy, (www.bp.com), June 2014.
tions. An Author Guide is available at www.ogj.com; 4. Araujo, R. and Moutinho dos Santos, E., Impactos
click Home, then Submit an article. Or, contact da Produao de Shale Gas no Mercado de Hidrocarbonetos
Christopher Smith, Managing EditorTechnol- nos Estados Unidos, Instituto Brasileiro de Petrleo, Gs e
ogy ([email protected]; 713/963-6211; or, fax Biocombustveis (IBP), Rio Oil & Gas Expo and Conference,
713/963-6282), Oil & Gas Journal, 1455 West Loop Rio de Janeiro, Sept. 15-18, 2014.
South, Suite 400, Houston TX 77027 USA. 5. EIA, Trends in U.S. Oil and Natural Gas Upstream
Costs, Mar. 23, 2016, pp. 141.
6. Erbach, G., Shale Gas and EU Energy Security, Euro-
pean Parliamentary Research Service, December 2014, pp. 10.

48 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

7. European Parliament, Amendment of Directive Pol Oliva Mart ([email protected]) is an

2011/92/EU on the assessment of the effects of certain pub- associate at the Boston Consulting Group, Ma-
lic and private projects on the environment, Sept. 10, 2013, drid. He has also served as product and sales
www.europarl.europa.eu. manager at JBC Soldering Tools. He holds an
8. Official Journal of the European Union, Commission MS in petroleum economics and management,
recommendation of 22 January 2014 on minimum principles and he earned a BS at the Universitat Politc-
for the exploration and production of hydrocarbons (such as nica de Catalunya (Industrial Engineering) and
shale gas) using high-volume hydraulic fracturing (2014/70/ specialized in petroleum economics and management at the
EU), Jan. 22, 2014. IFP School, Rueil-Malmaison, France.
9. Spooner, M., Tomasi, M., Arnoldus, P., Johannesson-
Linden, A., Kalantzis, F., Maincent, E., Pienkowski, J., and Allan Ingelson (allan.ingelson@haskayne.
Rezessy, A., Member States Energy Dependence: An ucalgary.ca) is the academic director of the
Indicator-Based Assessment, European Commission, Eco- Haskayne Energy Management Program and an
nomic and Financial Affairs, Occasional Papers 196, June associate professor in the faculty of law, at the
2014, p. 105-113 University of Calgary. He has also served as the
associate dean for undergraduate and graduate
programs at the Haskayne School of Business,
Calgary. He holds a JD from the University of Alberta and Cal-
gary and an LLM from the University of Denver.

The authors
Hirdan Katarina de Medeiros Costa (hirdan@
usp.br) is a lawyer and visiting professor at the
University of Sao Paulos Institute of Energy and
Environment. She holds an MS in law from the
University of Oklahoma, Norman, Okla. Costa
also holds an MS in energy and a PhD in sci-
ences from the University of Sao Paulo.

Edmilson Moutinho dos Santos (edsantos@iee.

usp.br) is an associate professor at the Institute
of Energy and the Environment at the University
of Sao Paulo. He holds a BS in both economics
and electrical engineering from the same institu-
tion. Santos holds MAs in energy management
and policy from the University of Pennsylvania,
Philadelphia, and energy-systems planning from the University
of Campinas, Sao Paulo. He has a PhD in energy economics
from the Petroleum Institute and Universite de Bourgogne,
Rueil-Malmaison Cedex, France.

Vitor Emanoel Siqueira Santos (vitorssz@gmail.

com) is a masters degree student at the Institute
of Energy and Environment at the University of
Sao Paulo. He has also served as a consultant at
the University of Sao Paulos Agency for Innova-
tion. He holds a BS in petroleum engineering
from the University of Sao Paulo.

Oil & Gas Journal | June 6, 2016 49

TECHNOLOGY

Bearing innovations
extend roller-cone bit life
Jon Schroder loading conditions downhole, including reaming, up-drill,
Maurizio Di Pasquale directional drilling, and high-weight.
Baker Hughes Inc. Proprietary bearing-analysis software enabled develop-
The Woodlands, Tex. ment of bearings that perform effectively across various
loading conditions. Roller-cone rock bit bearings originally
Alun Richards were designed for vertical shallow wells, which differ greatly
DRILLING &
Baker Hughes Inc. PRODUCTION from todays very deep wells and horizontal wells.
Dhahran, Saudi Arabia Opposed-taper roller bearings eliminate play and stabi-
lize cones, but need to be configured into roller-cone design.
Jesse Yorty Many roller cones use inserts in drilled holes having suffi-
Timken Co. cient depth to retain them.
Canton, Ohio Shell thickness between a holes bottom and the internal
bearing assembly must be kept above a minimum to ensure
A new tapered bearing assembly, developed specifically for sufficient strength to withstand downhole drilling condi-
roller-cone rock bits, significantly increased bit life for a tions. The cone assembly also must be attached to the leg
Middle Eastern operator. This technology can help oil and with enough strength to endure downhole drilling.
gas customers avert premature bit failures, minimizing non- Attachment occurs via blind-hole assembly. The bearing
productive time, and decreasing costs. Longer-life expectan- assembly must be precisely preloaded to allow for optimum
cy of the tapered bearing and seals package improves the bearing life and seal performance. Lab tests validated the
attractiveness of roller-cone bits in applications where fixed- opposed-tapered roller bearings (TRB) as did successful field
cutter polycrystalline diamond compact (PDC) bits tradi- trials.
tionally have been selected.
Engineers used analytical modeling and simulations to
build 28-in. tungsten carbide insert (TCI) bits, which were
tested in a laboratory and then sent for a Middle Eastern ex-
ploration run in which the bearing assemblys first iteration
increased reliability and endurance.
The run had 70% more bit revolutions and 58% more
footage than the field average. Bit life traditionally constrains
roller-cone technology. Traditional journal bearings and cy-
lindrical-roller bearings with ball-lock cone retention have
inherent play, reducing bearing and seal life.
Shorter bit life increases drilling costs by requiring more
trips and more drill bits. Recent innovations effectively
packaged application-specific, tapered-bearing technology
into roller-cone assemblies (Fig. 1).
A preloaded bearing package eliminated axial and radi-
al play, which also stabilized the sealing interface between
the head and cone, promoting extended seal life. Analyti-
cal modeling helped designers define and simulate various A tapered bearing assembly increased
bit life for an operator in the Middle East
Based on a presentation to SPE/IADC Drilling Conference and working with Baker Hughes Inc. (Fig. 1).
Exhibition, London, Mar. 1719, 2015 .

50 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

Roller-cone bits still play a role in MAIN-BEARING DYNAMIC EQUIVALENT RADIAL LOAD FIG. 2
drilling, but bearing technology has
Thousand lbf
not kept pace with the hybrid tech-
90-100 50-60
nology that has merged PDC bits and
80-90 40-50
roller-cone bits. TRB application in- 70-80 30-40
creased both capacity and life of roll- 60-70 20-30
ing-cone bits. 10-20
100 0-10
Tapered roller bearings 90
Anti-friction bearings can meet nu- 80

Load, thousand lb f
merous needs. Various anti-friction 70
60
bearing types exist, requiring compro- 50
mises during bit design and selection 40
decisions. 30
Roller-bearing or ball-bearing types 20
30 10
can satisfy boundary (or fixed) condi-
0
tions in widely varying applications. 20
1.5
10 1.3
Customized bearings improve per- .9 1.1
Lo rtic

0
ve

.7
.5 0
ad al

formance in specific operating condi- 0

.3 0 in.
.1 0 ring,
an , de

0 b e a
gl gr

10 0.1 o f
tions. The bearing raceway and roller .3 r
e ee

.7 0
.5 0 ente
fro s

profiles can be designed to control 20 .9 0 f r om c

m

0 e
1.1 anc
maximum stress levels, boosting du- 30 1.5 1.3 Dist
rability and enhancing performance
in demanding applications. Optimiza-
tion normally targets bearing profile,
surface finish, material, coating, and
precision setting.
Key boundary conditions to be con-
sidered include: BASIC BALL, CYLINDRICAL ROLLER BEARING CONFIGURATION FIG. 3
External loads; e.g., radial,
thrust, moment, shock, and combina-
tion loads.
Operating temperature range,
such as extreme limits and thermal cy-
cling.
Fluids, debris, and vibration.
Spatial constraints.
Seal type and performance.
Early cylindrical-roller bearings
(CRB) featured two roller-guide flanges
on the outer raceway and none on the
inner raceway. Most current CRB de-
ploy crowned rollers to avoid prema-
ture spalling from roller-edge loading.
Crowning addresses loading concen-
tration from inner-race misalignment
caused by combined bearing and sys-
tem deflections.
In rock bits, the assembly attaches
via a central beam between the cone
assembly and leg section. The beam at-
taches to the leg (or static side of the bit
assembly), providing a structure to the
bearing and supporting bend loading.

Oil & Gas Journal | June 6, 2016 51

TECHNOLOGY

CYLINDRICAL ROLLER-BEARING, PRESSURE DISTRIBUTION PLOTS FIG. 4

Row 1 Row 2

This TCI bit was brought to the surface

The legs bearing section needs to be made of low-carbon after 216-hr run because of a suspected
materials that can be welded. Since the beam is independent washout in the drilling string. The bit was
of the head, high-strength alloys establish a strong overall dull-graded (Fig. 5).
leg-section bearing pin.
Bearing lubrication also must be addressed. While the
central beam is keyed to the leg section to prevent rotation, The threaded ring seals the cone assembly to the leg section.
targeted grease channels can be integrated to the beams A static o-ring seals the ring and the cone together. A dy-
shaft in a non-loaded direction. From precise flats on either namic seal between the ring and the leg enables a smaller-
side of the shaft of the central beam, lubricant flows through diameter seal, linearly reducing the seal-sliding speed which
holes feeding the opposed tapered bearings. This assembly reduces overall wear and extends seal life. Lower speeds re-
diverts the lubrication channels away from the bearing axis duce seal-face temperatures and slow degradation.
center, typically the assemblys highest-stressed area.
The cone-bearing assembly uses one axial contact point Analysis, simulation
and precise shimming controls tolerances. A preload setting Bearing fundamentals, tribology, and advanced modeling
of the opposed tapered-bearing configuration increases sys- are a few aspects of total system analysis when maximiz-
tem stiffness and reduces deflection. ing bearing-fatigue life (or service life) under high-loading,
A permanent shim, under the head of the central beam, high misalignment, thin lubrication film, debris, or other
establishes preload settings in the bearing assembly. Axial prevalent drilling conditions. Bearing evaluation involves
loads stem from two sources: a detailed review of boundary conditions and performance
Taper in the bearings that split any loading into axial expectations.
and radial load components. Designers determined bearing loads by evaluating bit
Inward loading on the cone assembly, particularly loading from various new-well profiles and historical drill-
prevalent during directional drilling or reaming. ing data (Fig.2).
Applying calculated torque settings beyond severe-load- Varying cutter profile designs, bit designs, and applied
ing conditions to a nut on the end of the central beam pre- weights on bit prompted bit-by-bit development of the ex-
vents elongation of the beam during operation. pected duty cycle. Consideration also was taken for bound-
The overall size and cutting structure of the drill bit is as ary conditions.
important as the bearing assembly. The varying size of the Although current roller-cone bits use CRB and ball ar-
cones and the natural taper of the cutting structure decrease rangements, preloaded tapered-roller arrangements increase
the radial space available toward the end of the cones. bit performance. A preloaded tapered-roller bearing offers
The package needs adequate clearance for cutting-struc- clearance advantages over other bearing types, especially
ture elements while maintaining load capacity. Simulations when the bearing encounters system misalignment.
showed that available space played a primary role in devel- Improving load distribution between the two bearing po-
oping a nominal effective bearing spread through taper an- sitions increased power density. Heavy loading with repeat-
gles and bearing profiles. ed stops and starts of the roller-cone bits creates misalign-
In blind-hole application of bearings, a threaded ring is ment. Traditional CRB and ball lock roller-cone design and
used to retain the bearing assembly in the cones. The ring the new tapered bearing series were evaluated in larger bit
threads down until it contacts the outer race of the main sizes (Fig. 3)
bearing, fixing its position. The bearing assembly is in- Optimizing roller-cone geometry allows handling of the
stalled with no gaps in the system, to prevent movement. most severe-loading conditions, which result in off-set load-

52 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

A 216-hr run left the raceways (left) and the roller elements of the bearings within the customers requirements. (Fig. 6).

ing and uneven load distribution on the bearings. The roller- angle improved tilting stiffness or resistance to overturning
cone load location and load angle induce an over-turning loads, helping stabilize the cone assembly during drilling.
moment force on the bearings. Such load scenarios often re- Bearing preload minimized axial movement of the roller
duce seal performance and bearing reliability. Heavy load- cone under operating load. Axial preload values were re-
ing with repeated stops and starts of the roller-cone bits cre- viewed to maintain a minimum load zone in the setup-bear-
ates misalignment of the roller-cone and bearing axis. ing row. Bit designers refined the setting and balance life,
A proprietary bearing-analysis program accounted for contact stress and distribution, heat generation, and other
multiple loading conditions, misalignment, lubrication ef- bearing performance indicators.
fects, and determined fully adjusted bearing-performance Excessive axial preload can lead to unwanted heat gen-
results. Simulations considered nominal load directions, eration, lubrication problems, premature bearing damage,
heavy outward loads, and severe inward loads from ream- and reduced bearing-fatigue life. Excessive axial play results
ing or directional drilling. Analysis prompted changes that in fewer rolling elements carrying the load, increasing in-
increased calculated bearing-fatigue life and improved po- dividual roller load and reducing bearing life. Optimizing
tential seal performance. the bearing setting improves bearing life and load sharing
A tapered-roller bearing has as much as six times more between bearing rows.
radial stiffness as a comparably sized angular contact ball The enhanced internal geometry enables reduction of
bearing and twice as much radial stiffness as a comparably geometric stress concentrations at the extreme edges of the
sized cylindrical-roller bearing for a zero-clearance condi- roller-raceway contacts. Specific component profiles were
tion. Increased stiffness allows for only two tapered-roller designed for a uniform stress distribution under normal
bearings and increases seal-face stability, leading to a more and severe loading conditions. Standard and inward load-
evenly distributed load and extended seal life. ing conditions of traditional CRB configuration vs. TRB were
Estimated loads and physical space limitations allow op- studied with displacement amplitude reduced by 50 times.
timizing of bearing geometric-spread. The inherent taper Plots showed loading distribution on standard ERB rollers
moves an effective bearing center-location from on center, (Fig. 4).
for indirect mount like a CRB, to further outside. The angu- It is difficult to control load distribution across the CRB
larity of the bearing, or K factor, is a function of the half- rows. Raceway and roller diameter tolerances result in a
included cup angle and is the ratio of basic dynamic radial- minimum mounted-radial internal clearance that is non-ad-
load rating (C90) to basic dynamic axial-load rating (Ca90) justable and required for assembly of the roller cone onto the
in a single row-bearing. leg. The peak load is shared in TRB arrangement, stresses
Too much cup angle can result in reduced radial load are reduced, and load is more evenly shared by the systems
capacity. Selection of a nominal tapered-roller bearing cup rollers.

Oil & Gas Journal | June 6, 2016 53

TECHNOLOGY

High overturning moment loads, deflection, or misalign- Field testing

ment resulted in less than optimal roller-raceway contact The bearing was tested in a Middle Eastern application. The
stress distribution using a standard bearing geometry. An bearing package along with a metal face-seal system was in-
ideal pressure distribution involves an optimized roller pro- stalled on the 28-in. tungsten carbide insert bit IADC 445,
file with loading relatively centered between the two bearing as classified by the International Association of Drilling
positions. Contractors.
When studying contact stresses at the most loaded roller Section length was typically 2,500-3,500 ft, and IADC
during off-set loading, high overturning loads, or misaligned 435 or 445 roller cones on performance motors delivered
conditions, non-optimized profiles resulted in uneven pres- optimum results. Bearing and seal life constitute a limiting
sure across the roller-raceway contact. Geometric modifica- factor that resulted in more runs on rotary bottomhole as-
tions improved the center and edge stress values along with sembly and multiple trips. Roller-cone bits were pulled out
the pressure slope across the roller length. of hole at a maximum of 1.3 million revolutions (MRevs) and
Testing the first bit assembly with the tapered-roller an average of 0.91 Mrevs. The tapered-bearing bit extended
bearing configuration in a lab under controlled conditions the maximum to more than 1.7 MRevs.
yielded initial proof of concept. Water was used and the test The subject bit was run with a performance motor assem-
conducted only under atmospheric pressures, which dont bly (12-in. OD, 5/6 lobe, 0.13 rev/gal) that drilled through
impact bearing capability. The bit was a 28-in. TCI-roller a section of 10,000-20,000 psi unconfined compression-
cone that drilled into two different limestones. It was run strength rock consisting of anhydrites, limestone, and dolo-
twice for just more than 36-in. of effective drilling per run. mitic limestone with minor shale layers.
Rotating speed was brought to 120 rpm and held at 90,000 Limiting penetration rate to 30 ft/hr prevented circula-
lbf weight on bit (WOB). Cone-rotating torque was smooth tion loss. Compared with average parameters in offset runs,
and cones spun freely with no difference in rotating torque. the bearing and seals experienced the same WOB while rpm
This bit was sent for field testing. was 100% higher. Results showed 31% higher revolutions
compared with previous best performance.
In another test run in the Middle East, the same bit de-
sign with a rotary assembly drilled comparable lithologies
within 10,000-20,000 psi unconfined compressive strength.
Crews drilled 3,555 ft, reporting the bit accumulated 216 hr
and 1.6 MRevs with 60,000-80,000 lb-ft WOB and speeds
of 70-100 rpm. The run included backreaming twice per
stand. The bit came to the surface because of a suspected
drill-string washout and the dull grading satisfied customer
requirements (Figs. 5-6).
Any type of reaming typically causes premature bearing
and seal failures, but this was not the case for the tapered
bearing assembly. The bearing assembly maintained preload
I can think of no one better to translate the complexities of
natural gas liquids into a more easily understandable subject.
with a visually polished surface on raceways and rollers. In-
ward loading caused more nose-bearing wear than main-
Frank H. Richardson, President and CEO, Shell Oil Company, Retired bearing wear.
Natural Gas Liquids: A Nontechnical Guide The cone profile traces on the main bearing showed very
is a comprehensive overview of NGLs from good conformity and very little wear across the raceway sur-
production in the oil patch to consumption in face. No spalling resulted and bearing integrity remained
the fuels and petrochemicals industries.
uncompromised.
Learn what is behind natural gas liquids: The use of tapered-roller bearings reduces and potentially
How they are produced eliminates axial play and angular misalignment while pro-
How they are transported viding superior reliability, including but not limited to high-
How they are consumed in the fuels speed motor bottomhole assembly (>350 rpm and up to 500
and petrochemicals industry rpm).
Profles of successful NGL companies
Bibliography
ORDER YOUR COPY TODAY AT Cave, B. and Nixon, H., A Family of Tapered Roller
WWW.PENNWELLBOOKS.COM 226 Pages/Hardcover/Sept. 2014 Bearings for Front-Wheel Drive Vehicles, SAE International
OR CALL 800-752-9764 ISBN 978-1-59370-324-0/$79.00 Technical Paper 810756 in SAE Transactions Journal, Vol. 90
No. A, June 1, 1981.

54 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

Doll, G.L., Evans, R.D., and Ribaudo, C.R., Improving the Alun Richards (Alun.Richards@bakerhughes.
performance of rolling contact bearings with tribological coat- com) is Baker Hughes applications engineering
ings, Surface Engineering in Materials Science III, The Min- manager for drilling systems and drill bits. He
erals, Metals & Materials Society Journal 2005, pp. 153-162. has worked in various engineering roles in the
Harris, T.A. and Kotzalas, M.N., Rolling Bearing Analysis UK, Middle East, and Asia during his 17 years in
Essential Concepts of Bearing Technology, Fifth Edition, CRC the upstream oil and gas industry. He earned a
Press, Boca Raton, 2007. BS in geology (1994) and an MS in geotechnical
Hays, Kristen, Exxon Mobil breaks record with well off engineering (1997), both from the University of Wales, Cardiff.
Russian island, Houston Chronicle, Feb. 7, 2008.
Nixon, H., Ai, X., Cogdell, J., and Fox, G., Accessing and Jesse Yorty ([email protected]) is a
Predicting the Performance of Bearings in Debris Contami- principal application engineer for Timken Co.
nated Lubrication Environment, SAE Technical Paper #1999- where he has worked since 2005 in various
01-2791, International Off-Highway & Power Plant Congress & roles. He has extensive experience with the
Exposition, Indianapolis, Sept. 13, 1999. practical application and performance analysis
Schroder, J. Cone Retention and Tapered Bearing Preload of rolling element bearings. Yortys main re-
System for Roller Cone Bit, US patent application filed Nov. sponsibility is technical application support for a
2, 2011. broad industrial customer base, including heavy industries and
Sonowal, K., Bennetzen, B., Wong, K., and Isevan, E., power transmission. He earned a BS in mechanical engineering
How Continuous Improvement Lead to the Longest Horizon- (2005) from the Worcester Polytechnic Institute.
tal Well in the World, SPE/IADC Drilling Conference & Exhibi-
tion, Amsterdam, Mar. 17-19, 2009.
Timken Co. web site, High Performance Bearings article.
Zhou, R.S., and Nixon, H., (1992), A Contact Stress
Model for Predicting Rolling Contact Fatigue, SAE Technical
Paper 921720 in SEA Transactions Journal, Vol. 101, No. 2,
Sept. 1, 1992.

Acknowledgment
The authors acknowledge A al Darwaish and M. Mohamed,
both of Baker Hughes Inc., for their efforts in developing the
technical paper on which this article was based. Nichigo
g G-Polymer
y Water Soluble
TM
Vinyl
y Alcohol Resin
Nippon Gohseis Nichigo G-Polymer (www.G-Polymer.com) is
making its way into more and more applications in the oil and gas
The authors exploration marketplace because of its unique water solubility
characteristics, Such unique water solubility characteristics include:
Jon Schroder ([email protected])
Controlled dissolution time, ability to rapidly dissolve
is Baker Hughes product development engineer in cold water, and salt water solubility
TM
for drill bits. He supports the development of
Nichigo G-Polymer is also biodegradable/compostable and can
new drill bits technologies and solutions world- easily be extruded or molded into various forms, further broadening
wide. Schroder has been with Baker Hughes its fit into this marketplace.
TM
since 2010. He previously worked on mechani- Nichigo G-Polymer is a family of products, each product tailored to
cal development of industrial gas compression suit various applications in the oil and gas exploration marketplace.
engines for Cummins. He earned a BS in mechanical engineer- Such applications include:
ing (2008) from Texas Tech University. drilling fluids, diverter fluids, frack balls, and proppants
TM
Nichigo G-Polymer is available in both pellet and powder form.
Maurizio Di Pasquale (Maurizio.DiPasquale@ Call us today to learn how Nichigo G-Polymer can become your water
soluble polymer of choice for your particular application.
bakerhughes.com) is Baker Hughes product
manager for tricone bits. He supports the Nichigo G-Polymer is a product of Nippon Gohsei of Japan, and marketed by its
introduction and commercialization of new drill North American subsidiary Soarus, LLC of Arlington Heights, IL.
TM
bits technologies and solutions worldwide. Di For more information or questions regarding Nichigo G-Polymer , or other
Pasquale has been with Baker Hughes since unique vinyl alcohol polymers suitable for the oil and gas exploration
marketplace (e.g., cementing, fluid loss control, etc.), contact:
2007, working in Europe and North Africa drill Terry Nishio at Soarus, LLC
bits operations. He earned an MS in automation engineering [email protected]
847-255-1211 ex.147
(2003) from the University of Bologna in Italy and is a licensed
professional engineer.

Oil & Gas Journal | June 6, 2016 55

TECHNOLOGY

DRILLING &
PRODUCTION

Hybrid fracturing pilot increases

Chinas Dagang tight oil production
FAILURE MODEL FIG. 1 Zhihong Zhao
Songgen He
60
Jianchun Guo
Shear failure Southwest Petroleum University
50 Conjugate failure
Chengdu, China
Quartz content, %,

40
Shengchuan Zhang
30 China National Petroleum Corp.
Tianjin,China
20
Hybrid fracturing used in combina-
10 tion with secondary fracturing boosted
stimulated reservoir volume (SRV) and
0 conductivity in a pilot on Dagang-field
0 2 4 6 8 10 12 14 16 18 20 22 vertical oil wells in Chinas Bohai basin.
Source: Core number The combination of fracturing tech-
niques helped producers unlock tight oil
reservoirs more effectively than a sin-
gle fracturing technique would have.
TIGHT OIL FIELD COMPARISON Table 1 Hybrid fracturing yields a complex
fracture network by using slick water
Items Bagang Bakken Eagle Ford or linear gels and carries proppant into
Depth, m 2,900-4,600 2,500-3,300 1,200-3,600 the fracture using cross-linked gel.
Thickness, m 75-150 2-18 20-60
Source TOC, % 2-6 10-14 3-7
Tight oil reservoirs, usually in-
Ro, % 0.5-1.0 0.6-1.0 0.5-2.0 volving clastics or carbonates, exist
Kerogen type I + II I + II I + II in plays where oil migrated from the
Siltstone, fine Dolomitic,
Lithology sandstone argillaceous siltstone Marlstone source rock to a reservoir offering
Reservoir Thickness, m 7-40 m 5-30 m 30-90 m very low matrix-permeability (in-situ
Porosity, % 5-12 2-12% 2-12 permeability 0.1 md).1 Similar to US
Permeability, md Mainly 0.001-1.0 0.01-1.0 <0.01-1.0
plays, tight oil accounts for much of
Viscosity of crude oil, MPas 6.3-34.8 0.36
Density of crude oil, g/cu cm 0.87-0.90 0.81-0.83 0.82-0.87 Chinas reserves. Table 1 compares the
Pressure coefficient 0.94-1.19 1.35-1.58 1.35-1.8 two nations tight oil reservoirs.
Companies developing northeast-

56 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

ern Chinas Dagang field, discovered EQUATIONS

and brought on stream in 1965, strive
1 E - E min v - v min
to more effectively produce tight oil us- B = 2 S E max - E min + v max - v min X (1)
ing emerging completion and produc-
tion technology to handle the main
reservoirs high water cut. vH - vh
Researchers applied secondary hy- d= vh (2)
brid fracturing to eight wells. Different
from conventional fracturing, second-
128L f Q K PZ - K m A m VQ 1 - v 2 V Pnet H f ah
ary fracturing has two independent Vf = 45EFc (3)
procedures. The first procedure is like
conventional fracturing but the well
also is shut in for about 1 hr to ensure NOMENCLATURE
proppant settlement. B = Rickman brittleness index, %
Emax = maximum static Youngs modulus MPa
The second fracturing procedure Emin = minimum static Youngs modulus MPa
helps obtain complexity and conduc- MPa, vmax and v = the maximum and minimum static Poissons ratio
tivity. Well G1, with a vertical depth = the horizontal stress difference coefficient
H= maximum horizontal principal stress
of 3,483-96 m and reservoir thickness h = minimum horizontal principal stress
of 13 m, showed the best results. Log- Vf = equivalent fracture volume or proppant volume, cu m
ging data demonstrated average per- Lf = equivalent fracture half-length or HPZ half-length
meability of 0.29 md, average porosity A = the area of HPZ, sq m
KmHPZ = matrix permeability, md
of 8.56%, and oil saturation of 48.1%. Am = matrix cross sectional area, sq m
Well G1 has 79.1% broad-brittle V = Poissons ratio, dimensionless
minerals and 33% quartz. Rickmans E = Youngs modulus
MPa, Fc = fracture conductivity, dcm
brittleness index showed 51% medium Pnet = net pressure, MPa
brittleness. G1s horizontal-stress dif- Hf = equivalent fracture height, m
ference coefficient was 0.2-0.3, higher = unit conversion factor
than differential strain analysis results = correlation factor, dimensionless
from other wells.
Based on optimal length of 160 m
and equivalent average permeability of DAGANG OIL WELL G1 Table 2

6 md, optimal proppant volume was Cross-linked Fluid volume, Rate, Proppant Shut-in
Stage Liner gel, cu m gel, cu m cu m cu m/min volume, cu m interval, min
52.5 cu m. 1 207 191 398 8 21 50
This secondary-hybrid fracturing 2 117 291 408 8 31.5 50
pilot increased fracture complexity by
using mostly low-viscosity linear gels
in the first stage and a cross-linked gel
in the second stage.
Stress interference reduced the
horizontal-stress difference coefficient
during first-stage hydraulic fracturing.
A lower stress-difference coefficient
also can increase fracture density and
connectivity. Red lines drawn on cores show the distribution and width of natural fractures (Fig. 2).
The use of numerical simulation
helped optimize field test parameters
for fractures (Table 2). fracture conductivity. Its oil production rate increased to a
rounded 213 b/d from 4 b/d after fracturing with a stimula-
Fracability tion ratio of 47.4.
Tubing-head pressure of the second stage was about 15 MPa Researchers expanded testing of the secondary hybrid
lower than the first stage, likely because the first stage gen- fracturing method to another seven vertical wells (Table 3).
erated a complex multi-branch fracture. The second stage The wells in which conventional cross-linked gel fracturing
experienced a different failure mode. was used in only one stage had average production of 35 b/d.
Well G1 had a complex fracture network and higher The field test involved the second member of Paleogene

Oil & Gas Journal | June 6, 2016 57

TECHNOLOGY

PILOT WELL TEST, FRACTURING FORMULAS Table 3

Fluid Rate Proppant

Well Permeability, Porosity, Thickness, volume Minimum volume Oil production Stimulation
name Method Depth, m md percent m cu m cu m/min cu m cu m/d ratio
K9 3,794.4- 0.240 7.80 8.1 206.5 5.00 17.20 5.20 144.6
3,796.3
K17-1 Conventional 4,106.8- 0.420 6.50 20.1 396.9 5.42 34.00 5.70 27.2
fracturing 4,147.1
K17-2 3,968.8- 0.710 9.40 18.3 406.6 5.00 28.00 5.90 17.6
3,971.5
G6 4,135.5- 0.770 7.90 29.3 924.2 5.60- 71.80 32.60 165.7
4,164.8 5.90
G1 3,483.2- 0.290 8.56 13.0 821.1 8.00 52.50 33.80 47.4
3,496.2
K26 4,061.1- 0.287 8.13 7.0 850.9 3.70- 50.30 23.60 9.8
4,073.8 5.50
G10 3,810.4- 0.080 6.14 13.6 523.3 6.10 34.09 2.92 69.0
Secondary 3,830.2
G3 hybrid fracturing 4,011.9- 0.684 10.30 14.7 821.0 6.10 51.50 30.10 144.2
4,053.7
G9-1 3,799.2- 0.044 5.09 9.8 645.0 6.90 36.41 6.34 6.2
3,820.4
G9-2 3,689.9- 0.255 8.05 21.9 522.6 5.65 45.20 1.01 474.0
3,711.8
G13 4,138.0- 0.270 7.30 23.8 641.0 4.70- 23.50 5.10 56.6
4,171.0 5.80
G108 3,196.0- 0.550 8.51 27.5 538.0 8.00 45.00 4.44 361.0
3,236.0

Kongdian formation of Cangdong sag (Kong 2 member). pression test in which the confining pressure was 40 MPa.
Reservoir characteristics exhibited fine-grained facies sedi- The average Rickman brittleness index was 42.3% using
mentation.2 Equation 1 for the triaxial compression test.3
The Kong 2 member shows four vertical sequences: Ek24, Both the mineral composition and mechanics parameters
Ek23, Ek22, and Ek21 from bottom to top. Kong 2 features reflected the reservoirs medium brittleness. Triaxial com-
sedimentation created during maximum lake flooding in pression test results involved two categories: shear failure
the Kongdian formation. Sedimentation consists of fine grey and conjugate failure. Conjugate failure was more prone
sandstone, grey mudstone, and red mudstone. with increased quartz content (Fig.1).
Tight oil comes from good shale having enough thick- Shear failure accounted for most failures while conjugate
ness, total organic carbon (TOC), and formation conductivi- failure was limited. Results demonstrated the difficulty of
ty indicated by vitrinite reflectance, Ro, which demonstrates generating complex fracture networks in the Kong 2 mem-
the thermal maturity of organic matter. But the low pore ber given its mineral components.
space, permeability, viscosity of crude oil, and pressure co- The differential strain analysis shown in Table 4 yielded
efficient show the low-flow capacity of oil in reservoir rock. Kong 2s in situ stresses. The horizontal principal stress gra-
Dagang field has higher oil viscosity and density than the dient is 1.41-1.71 MPa/100 m and the horizontal stress dif-
Bakken formation in North Dakota or Eagle Ford shale in ference coefficient 0.1-0.2 (Equation 2).
South Texas. Consequently, Dagang field, which has a deep- Natural fracture widths, shown in core samples in Fig. 2,
er formation, requires more SRV than the Bakken or Eagle typically measured 0.03-0.23 mm.
Ford plays. The Kong 2 member demonstrated primarily horizontal
Reservoir characteristics and engineering factors, including bedding and middle-low angle natural fractures. Natural
rock brittleness, stress difference, natural fracture, net pressure, fracture conditions proved favorable for generating a fracture
and fracturing fluid viscosity, determine a formations ability to network, but maintaining conductivity under high vertical
generate a complex fracture network (fracability). stress in those fractures proved difficult.
X-ray diffraction data show Kong 2 member has broad The brittleness index, the stress difference, and natural
brittle minerals, including quartz, feldspar, and carbonate. fracture were moderately favorable. The Kong 2 member
Kong 2s average Youngs modulus was 18,047 MPa while provides medium fracability and development potential us-
the average Poissons ratio was 0.322 during a triaxial com- ing an appropriate combination of fracturing techniques.

58 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

Conductivity FRACTURE DESIGN PROCESS FIG. 3

Researchers used massive hydraulic
fracturing to connect natural frac- Geologic Reservoir High-permeability zone
tures across a large area and increase model numerical simulator optimization
SRV.
Two failure types resulted from
this process: tensile fracture and
shear fracture. High-concentration
Optimized Network fracture
proppant was needed to achieve con- operation numerical
Fracturing Proppant
ductivity when the rock faces aligned method volume
parameters simulator
in tensile fractures.
Resulting displacement yielded Source:
conductivity and also provided self-
support within the shear fractures.
Conductivity of proppant-supported IN-SITU STRESSES Table 4
aligned fractures was tested based on Principal stress, MPa
API standards. Smooth rock plates Minimum Vertical The horizontal
Maximum horizontal horizontal principal stress difference
were made from cores of the Kong Well Depth, m principal stress principal stress stress coefficient
2 member, as outlined by API stan- G-A 3,158.36 53.3 44.4 72.5 0.2
G-B 4,113.25 70.2 63.6 106.1 0.1
dards.
A broken-gel fracturing fluid car-
ried ceramic proppant. Researchers
studied proppant embedding and fluid damage effects by SRV) were simplified as a high-permeability zone (HPZ)
injecting broken gel into the cell for 2 hr at 0.5 MPa before according to the equivalent seepage principle.4
the test. Calculating a ratio of the HPZ width and length yielded
With increased size and proppant concentration, con- a fracture complexity index. Index calculation used fraca-
ductivity increases were obvious at closure pressures lower bility evaluations or microseimic data.
than 40 MPa. Conductivity only increased slightly when HPZ parameters included area and equivalent average
closure pressure was higher than 40 MPa. The fracture can permeability. Parameters were tested for optimized pro-
achieve conductivity of about 5 darcies-cm (dcm) under ductivity simulation. Kong 2 members optimal length was
50-MPa closure pressure. 160 m and equivalent average permeability was 6 md.
Self-supported displaced fracture sensitivity was test- Equation 3 calculates the required proppant volume
ed by following API conductivity standards. Testers used based on fracture conductivity and optimal HPZ param-
Kong 2 member plates and a rock splitter. eters.
Cutting the opposite sides of the top- and bottom-frac- Conductivity of the self-support displaced fractures
tured cores yielded displacement of 2.54 mm. Plates were proved very low. Researchers selected proppant-support
mounted in a conductivity cell without proppant. Test aligned fracturing as the primary approach to maintain
fluid was water with 2% fracturing fluid. The self-support fracture conductivity.
displaced fracture started with conductivity of 13.6 dcm, Based on the optimal HPZ parameters, fracability, and
which declined quickly to 0.01 dcm at 34.5-MPa closure conductivity, a combination of secondary and hybrid frac-
pressure. turing was the best fracturing formula to boost tight oil
Higher closure pressures produced conductivity values production from the Kong 2 member.
beyond the minimum test limit. The in situ stress of the Hybrid fracturing involves creating complex fractures
Kong 2 member was more than 44.4 MPa, so conductivity using slick water or linear gels and then carrying proppant
of self-support displaced fractures was very low. into the fractures with cross-linked gel.5
The fracturing design model for Kong 2 did not test for Typically, hybrid fracturing yields a more complex frac-
self-support displaced fractures. An appropriate proppant ture network than cross-linked gel fracturing alone. Gel
concentration designed for the specific fracture network enhances proppant placement better than water. Research-
enabled better crude oil flow. ers found hybrid fracturing was necessary to balance effec-
tive fracture length and equivalent average permeability (or
Fracturing design conductivity) for the Kong 2 member.
Fig. 3 shows the basic workflow of the fracturing design But for middle-fracability vertical wells, hybrid fractur-
process for tight oil reservoirs. The fracture networks (or ings complexity was still insufficient, prompting use of
secondary hybrid fracturing. Secondary fracturing was di-

Oil & Gas Journal | June 6, 2016 59

TECHNOLOGY

Acknowledgment
The authors would like to thank the
Youth Science Foundation of the Na-
tional Natural Science Foundation of
China (51504204) for its support.

References
1. Clarkson, C. R. and Pedersen,
P. K., Production analysis of Western
Canadian unconventional light oil plays,
Canadian Unconventional Resources
Conference, Calgary, Nov. 15-17, 2011.
2. Pu, X., Zhou, L., Han, W., Zhou,
J., Wang, W., Zhang, W., Chen, S., Shi,
Z., and Liu, S., Geologic features of
fine-grained facies sedimentation and
Stage 1 Stage 2
tight oil exploration: A case from the
Second Member of Paleogene Kong-
dian Formation of Cangdong sag, Bohai
Bay basin, Petroleum Exploration and
Development, Vol. 43, No. 1, February
2016, pp. 26-35.
3. Rickman R., Mullen M. J., Petre
J.E., Grieser W. V., and Kundert D.,
A practical use of shale petrophysics
for stimulation design optimization: All
shale plays are not clones of the Barnett
shale, Society of Petroleum Engineers
Annual Technical Conference and Exhi-
bition, Denver, Sept. 21-24, 2008.
4. Zeng, J., Deng, Y., Guo, J., Lu, C.,
Gou, B., and Zeng, F., A Mathemati-
cal model for calculating the volume of
Stage 3 Stages 1-3
proppant in shale vertical wells, Society
Microseismic images show the process of vertical well fracturing stages. Fig. 4 of Petroleum Engineers/ Ikatan Ahli
Teknik Perminyakan Indonesia (SPE-
IATPI) Asia Pacific Oil & Gas Conference
and Exhibition, Nusa Dua, Bali, Oct.
vided into two fracturing stages with a shut-in interval to 20-22, 2015.
obtain enough complexity and conductivity. 5. Sharma, M. M., Gadde, P. B., Sullivan, R., Sigal,
Fig. 4 shows seismic results at three stages of fracturing R., Fielder, R., Copeland, D., Griffin, L., and Weijers, L.,
with two shut-in intervals in a vertical well on a tight-gas Slickwater and hybrid fracs in the Bossier: Some Lessons
block. The main fracture network was generated mainly in Learned, SPE Annual Technical Conference and Exhibition,
Stage 1. The SRV (or HPZ) increased slowly, and density and Houston, Sept. 26-29, 2004.
connectivity improved, during Stage 2.
Secondary fracturing proved best for Stage 3, with sec-
ondary hybrid fracturing best for the Kong 2 member. The authors
Considering proppant volume and secondary hybrid frac- Zhihong Zhao ([email protected]) lectures
turing, crews targeted optimal HPZ parameters using a at the School of Petroleum and Gas Engineer-
fracture numerical simulator. ing, Southwest Petroleum University, Chengdu,
Dagang tight oil wells completed in a pilot using a com- China. He obtained his PhD (2011) in petroleum
bination of fracturing techniques had higher production engineering from Southwest Petroleum Univer-
rate increases, averaging 99 b/d, and the process boosted sity.
the stimulation ratio to 150.4 from 63.1.

60 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

Songgen He (hesong-
[email protected]) is
a doctoral student in
reservoir stimulation
Expand Your
theory and technology
at State Key Laboratory
of Oil and Gas Reservoir
Knowledge
in Other Industry Areas
Geology and Exploitation at Southwest
Petroleum University. He obtained his
BS in petroleum engineering (2011) and Our nontechnical series is tailored for energy
his MS in petroleum engineering (2014) industry professionals, especially those who lack
from Southwest Petroleum University. technical training in an area, providing a basic
understanding of the industry in a simple, easy-to-
Jianchun Guo (guojian- understand language.
[email protected]) is
a professor and dean of Whether you need quick information for a new
the School of Petroleum assignment or just want to expand your knowledge
and Gas Engineering, in other areas of the industry, we have your
Southwest Petroleum nontechnical needs covered. Best of all, our books
University. He obtained and videos ft easily into your budget!
his PhD (1998) in petroleum engineering
from Southwest Petroleum University. Many
Many
Ma topics
y ttop
opic
op
opic choose
icss to choos
ho from,
osse fr
from including:
m, in
incl
clud
cl udin
in
ng:
He is a Society of Petroleum Engineers
member. Basic petroleum Petrochemicals
Drilling Petroleum production
Shengchuan Zhang Financial management Petroleum refning
(zhangshchuan@ Geology & exploration Pipelines
petrochina.com.cn) is Natural gas Well logging
deputy chief engineer
of Petroleum Engineer-
ing Institute of Dagang
Oil Field, CNPC. He
obtained his MS (2001) in petroleum
engineering from China University of
Petroleum,Beijing.

Order Today!
Visit our website for complete listings!

www.PennWellBooks.com
1-800-752-9764 (toll free)

Oil & Gas Journal | June 6, 2016 61

TECHNOLOGY

Price collapse slows midstream

operators 5-year growth streak
Dan Lippe
Petral Consulting Co.
Houston

Despite expectations that a 50% de- and 2017, the concurrent drop in asso-

US MIDSTREAM UPDATE
cline in the price of West Texas Inter- ciated natural gas volumesthe basis
mediate (WTI) would prompt sharp for US NGL output in the most impor-
drops in US crude oil production, tant producing regions of West Texas,
the first leg of the current downturn Kansas-Oklahoma, and the Rocky
struck its most significant blows on US Mountainswill drive a decline in
rig counts and day rates, as production gas-plant NGL production.
continued to increase into second- From the perspective of US mid-
quarter 2015 when WTI staged a 25% stream infrastructure operators, how-
price rally. ever, an imminent surge in ethane
While this price rebound may ap- demand before yearend 2016 will po-
pear illogical, a rally often occurs after sition it as a crucial element of interna-
prices have fallen sharply during the tional NGL trade, prompting immedi-
first leg of a bear market. Unsurpris- ate requirements for increased ethane
ingly, then, after the rebound ran its recovery.
course, WTI prices continued to fall to
a 1-day low of $27/bbl in mid-Febru- SPECIAL NGL raw-mix production
ary 2016. PROCESSING REPORT Gas-plant NGL production is the pri-
After a lag of 6-8 months, US crude mary driver for most of the midstream
production finally responded to the industrys infrastructure expansion
accelerating decline in the oil-directed rig count, which fell projects. Growth in crude oil production and resulting in-
567 units (140%) from February to March 2015, according creases in associated gas production have been, and will
to Baker Hughes. After staging a short recovery in July-Au- remain, the primary drivers of gas-plant NGL production
gust 2015, the rig count began to decline steadily from Sep- trends.
tember to average only 384 by March 2016, or 41% lower Statistics from the US Energy Information Administra-
than the May-September 2015 average of 654. tion (EIA) showed year-on-year growth in US crude produc-
While Petral Consulting Co. (PCC) accurately concluded tion of 1.30 million b/d in fourth-quarter 2014 but 1.26 mil-
at the time that US oil exploration companies eliminated all lion b/d in first-quarter 2015 and 0.99 million b/d in the
drilling activity in marginal areas of various plays and ba- second quarter (Fig. 1). Slowing growth rates for US crude
sins, drilling continued in sweet spots such as West Texas oil production shifted to outright declining production in
and the Bakken shale to account for the slow and uneven first-quarter 2016. PCC estimates US production for the first
shift from rising to declining overall production. quarter was 9.08 million b/d, or 0.23 million b/d less than in
As US crude oil production continues to fall during 2016 first-quarter 2015.

62 Oil & Gas Journal | June 6, 2016

 Table 1 summarizes quarterly CRUDE OIL PRODUCTION, SELECTED STATES FIG. 1
trends in US crude oil production.
8
PCC estimates associated gas pro-
Tex. + NM ND Okla. Colo. + Wyo.
duction in the six core states (Texas,

Volume, million b/d

6
New Mexico, Kansas, Oklahoma, Wy-
oming, and Colorado) during first-half
4
2015 increased to 13.4 bcfd from 12.3
bcfd in second-half 2014. Associated
gas production remained constant at 2
13.4-13.5 bcfd in second-half 2015,
but PCC forecasts production will fall 0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
to 12.5-12.7 bcfd in 2016. Source: EIA 2014 2015

Regional trends
US gas plant NGL production contin- US CRUDE OIL PRODUCTION Table 1
ued to increase in second-half 2015. Tex.-NM ND Okla. Colo.-Wyo. All others Total
In third-quarter 2015, gas-plant NGL 2015-16 1,000 b/d

production rose to 3.32 million b/d, 1 Qtr. 3,913.8 1,186.0 360.0 508.5 3,349.8 9,318.0
2 Qtr. 3,964.8 1,203.0 357.0 562.6 3,415.5 9,503.0
or 225,100 b/d higher compared with 3 Qtr. 3,847.5 1,176.0 327.0 592.6 3,392.7 9,335.8
4 Qtr. 3,776.2 1,157.0 408.0 561.4 3,406.6 9,309.2
the same quarter in 2014, according to 1 Qtr.* 3,673.2 1,103.0 395.0 538.8 3,373.5 9,083.5
EIA data. During fourth-quarter 2015, *Petral Consulting Co. estimates.
production volumes increased to 3.41 Source: EIA Petroleum Supply Monthly
million b/d, or 306,000 b/d more than
in fourth-quarter 2014.
Changes in ethane rejection, how-
ever, have significant impact on an- US GAS-PLANT NGL PRODUCTION Table 2
nual growth in US NGL volumes, and PADD 1 PADD 2 PADD 3 PADD 4 PADD 5 Total
trends in propane+ production pro- 2015-16 1,000 b/d
vide a clearer view of year-over-year 1 Qtr. 237.2 635.0 1,822.3 324.0 69.8 3,088.3
2 Qtr. 283.3 691.6 1,904.8 327.6 67.7 3,275.1
growth in NGL output. 3 Qtr. 293.8 696.6 1,950.0 316.5 58.5 3,315.4
Production of propane+ in third- 4 Qtr. 292.0 761.9 1,964.0 326.8 68.6 3,413.3
1 Qtr.* 316.9 743.7 1,874.2 323.9 68.9 3,327.6
quarter 2015 grew by 227,100 b/d
*Petral Consulting Co. estimates.
from the same period a year earlier to Source: EIA Petroleum Supply Monthly
2.23 million b/d but fell to 2.22 mil-
lion b/d in fourth-quarter 2015, which
was down by 189,800 b/d from the fi-
nal quarter of 2014 (Table 2). Ethane rejection, NGL raw mix production
NGL production from new gas plants in eastern Ohios Spot prices for purity ethane and ethane-propane mix in
Utica shale during second-half 2015 contributed to sub- Mont Belvieu, Tex., during third-quarter 2015 remained
stantial growth in overall US Midcontinent production. well below levels that would support full ethane recovery.
Production from gas plants in the eastern Upper Midwest Spot prices in Mont Belvieu were generally 18-19/gal in sec-
was 163,200 b/d in third-quarter 2015, or 12,100 b/d higher ond-half 2015. PCC estimates recovery costs were 25-35/
from the same quarter in 2014, according to EIA data. Dur- gal in primary producing regions (Texas-New Mexico, Kan-
ing fourth-quarter 2015, production increased to 195,600 sas-Oklahoma, and Wyoming-Colorado) and 45-55/gal in
b/d for a year-over-year increase of 45,500 b/d. Ethane re- the Marcellus, Utica, and Bakken shales.
jection limited growth in overall NGL production in third- Recovery margins also remained well below breakeven lev-
quarter 2015 but contributed to stronger growth in the els in third-quarter 2015, with ethane rejection reaching a peak
fourth quarter. of 650,000 b/d for the quarter, according to PCC estimates.
Excluding rising ethane production, NGL production While a decline in natural gas prices during early fourth-
from gas plants in the Marcellus shale remained nearly flat quarter 2015 weakened recovery costs to 21-22/gal for gas
in second-half 2015 compared with the first 6 months of the plants in the Texas-New Mexico and Kansas-Oklahoma re-
year. Production was 201,600 b/d in third-quarter 2015 and gions, recovery margins in Texas-New Mexico subsequently
195,300 b/d in the fourth quarter, according to EIA (Fig. 2). improved enough for gas processors to increase ethane re-
covery at some gas plants. PCC estimates ethane rejection

Oil & Gas Journal | June 6, 2016 63

TECHNOLOGY

US GAS-PLANT NGL PRODUCTION FIG. 2

orado) will be required to operate in
4 full ethane-recovery mode to meet ris-
PADD 3 PADD 2 PADD* 4 Others ing demand.
Volume, million b/d

3
NGL market overview
2 Three markets account for more than
90% of US NGL demand:
1
Petrochemical feedstock.
0 Gasoline blending.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Retail space heating, internal
2014 2015
combustion.
*See OGJ, June 2, 2014, p. 96, for explanation of PADDs.
Source: EIA All five NGL components are used
as feedstock in petrochemical produc-
tion, and normal butane, isobutane,
GAS-PLANT ETHANE REJECTION FIG. 3 and natural gasoline are used in gaso-
700 line blending. Retail space heating and
PADD 4 PADD 2 PADD 3 PADD 1 internal combustion-engine markets,
600
Volume, 1,000 b/d

500
however, consume only propane. Of
the three primary domestic end-use
400
markets, only the petrochemical in-
300
dustry has the potential to consider-
200 ably increase domestic NGL consump-
100 tion. During 2017-19, petrochemical
0 companies will start up a minimum
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
of 15 billion lb/year of new ethylene
2012 2013 2014 2015
Source: Petral Consulting Co. capacity, almost all of which will be
based on purity-ethane feedstock.
PCC estimates ethylene feedstock
US ETHYLENE FEEDSTOCK DEMAND Table 3
demand by direct contact with eth-
Ethane Propane n-Butane Pentane+ Total
ylene producers. Other segments of
2015-16 1,000 b/d the petrochemical industry include
1 Qtr. 1,035.5 382.3 72.9 28.1 1,518.9 propane dehydrogenation (propane),
2 Qtr. 1,085.5 363.7 89.5 28.8 1,567.5
3 Qtr. 1,114.5 377.3 96.1 37.8 1,625.7 methyl tertiary butyl ether (MTBE;
4 Qtr. 1,166.0 392.1 68.2 48.5 1,674.9 normal butane and isobutane), and
1 Qtr.* 1,171.0 382.0 74.0 47.0 1,674.0
propylene oxide (isobutane).
*Petral Consulting Co. estimates.
Source: Petral Consulting Co. monthly survey NGL demand in the ethylene feed-
stock market was 1.63 million b/d in
third-quarter 2015 but increased to
1.67 million b/d in fourth-quarter
fell to 525,000-550,000 b/d in November-December 2015 2015. PCC estimates demand was again 1.60-1.70 million
(Fig. 3). b/d in first-quarter 2016. Demand in third-quarter 2015 was
If gas processors had operated all gas plants at full eth- 128,000 b/d more than in third-quarter 2014. Year-to-year
ane-recovery mode, total US NGL production would have growth in demand, however, increased to 162,000 b/d in
been 3.95-4.00 million b/d in second-half 2015. fourth-quarter 2015. Demand for NGL feedstock increased
By mid-2017, petrochemical companies will complete during second-half 2015 because these feeds continued to
construction of several new ethylene plants (OGJ, July 6, provide ethylene producers with lower production costs vs.
2015, p. 74). Enterprise Products Partners LP (EPP) will also refinery naphtha and gas oil.
complete its ethane export terminal at Morgans Point, Tex., Ethane accounted for 68-70% of ethylene industry NGL
in second-half 2016 (OGJ, June 6, 2015, p. 79). feedstock demand in second-half 2015. Ethane was respon-
During third-quarter 2016 through yearend 2017, feed- sible for 76% of growth in NGL feedstock demand during
stock demand for ethane and ethane exports will increase third-quarter 2015 and 87% in the fourth quarter (Table 3).
by 400,000-500,000 b/d.
By mid-2017, US gas plants in core producing regions Gasoline blending demand
(Texas-New Mexico, Kansas-Oklahoma, and Wyoming-Col- The refining industry is the second largest industrial-com-

64 Oil & Gas Journal | June 6, 2016

 SEPTEMBER 20-22, 2016
The Woodlands Waterway Marriott Hotel & Convention Center
The Woodlands, Texas USA
TM WWW.PIPELINEWEEK.COM
INCLUDING

AND
GITA PODS
OIL & GAS PIPELINE USER CONFERENCE
CONFERENCE
REGISTER BY AUGUST 18TH AND SAVE!
2016 will represent a landmark milestone as GITA celebrates its 25th year of providing an invaluable forum for oil and gas pipeline industry professionals
to interact with each other on a personal basis. For the third time, the annual GITA Oil & Gas Pipeline Conference & Exhibition and the Pipeline Open Data
Standard (PODS) User Conference will come together for Pipeline Week.
The 12th Annual PODS User Conference will include a robust program of Operator presentations, workshops, training, and round-table discussions focusing
on leveraging the PODS Standard. Running simultaneously, GITAs Oil & Gas Pipeline Conference will host an operator forum, a number of dynamic panel
discussions, and numerous networking functions. In conjunction with the conferences, an exhibition hall will showcase the most advanced technology,
equipment, and services vital to the oil and gas community.

GENERAL CATEGORIES INCLUDE:

NEW TRACK FOR 2016! Mobility Convergence of Information Technology and Operational
Pipeline Integrity/Integrity Management (non-GIS) Analytical Planning Technology Systems
Pipeline Integrity/Integrity Management from a GIS Operational Awareness Existing and Emerging Standards
Perspective Integration/Interoperability Construction Standards/Data Standards
Asset Management
Project Planning and Records Management

YOU CANT AFFORD TO MISS THIS IMPORTANT EVENT! REGISTER TODAY!

OWNED & PRODUCED BY: PRESENTED BY: FLAGSHIP MEDIA SPONSORS:

.pods.org
TECHNOLOGY

US REFINERY GASOLINE BLENDING Table 4 mand for isobutane fell to 207,400 b/d during fourth-quar-
Natural ter 2015 amid seasonal reductions in refinery crude runs
n-Butane Isobutane gasoline Total
2015-16 1,000 b/d and fluid catalytic cracking unit (FCCU) feed rates. PCC
1 Qtr. 205.1 173.8 129.2 508.0
estimates demand continued to fall in first-quarter 2016 to
2 Qtr. 57.3 191.7 122.3 371.3 180,000-190,000 b/d alongside still-reduced crude runs and
3 Qtr. 91.5 216.6 144.9 453.0
4 Qtr. 272.0 207.4 127.7 607.1 FCCU feed rates as US refineries carried out ongoing sea-
1 Qtr.* 221.5 186.0 141.0 548.5
sonal maintenance.
*Petral Consulting Co. estimates. The factors that determine refinery demand for natural
Sources: EIA Petroleum Supply Monthly, Petral Consulting Co. adjust-
ments gasoline differ from demand drivers for normal butane and
isobutane. PCCs ongoing economic analysis indicates refin-
eries primarily seek natural gasoline for use as supplemen-
tal feed to pentane-hexane isomerization units. While some
mercial market for NGLs. As is true for propane demand refineries have these units, many do not. This consideration
in retail markets, refinery demand for normal butane is results in demand variability that is not seasonal but instead
strongly seasonal but demand for isobutane and natural more or less random. During third-quarter 2015, refinery
gasoline is only moderately seasonal. demand for natural gasoline was 144,900 b/d before falling
Refinery demand for normal butane reaches its seasonal to 127,700 b/d in the fourth quarter, according to EIA statis-
peak November through January, while refinery demand for tics (Table 4).
isobutane and natural gasoline is usually at its seasonal peak
May through August. The counter-cyclical nature of refinery Retail markets, NGL exports
demand for isobutane and natural gasoline offsets some of Retail markets consume propane in four primary end-use
the strongly seasonal demand for normal butane. segments:
During the winter RVP season, refinery butane demand Residential, commercial, and resellers (space-heating
historically varied little from one winter to the next. Growing markets).
surpluses of ethane, propane, and normal butane, however, Agriculture.
increasingly have resulted in weakening prices, prompting Motor fuel.
refineriesfirst at the US Gulf Coast and then in other re- Miscellaneous industrial.
gionsto make adjustments to gasoline blends during the Of these four segments, consumption in the residential-
winter months to take advantage of weaker normal butane commercial sector typically accounts for 75-80% of total de-
prices. mand in the retail market. Unfortunately for propane retail-
In winter 2010, EIA data show inputs of gas plant normal ers, winter 2015 was even milder than winter 2014. PCC
butane into Gulf Coast refineries were 16.8 million bbl and estimates propane demand in all-end use sectors was just
remained near this level through winter 2012. Beginning to 590,000-600,000 b/d in fourth-quarter 2015 and 880,000-
rise in winter 2013, Gulf Coast demand reached 23.9 mil- 900,000 b/d in first-quarter 2016.
lion bbl in winter 2015. Demand in fourth quarter 2015 was 140,000-150,000
At US East Coast refineries in winter 2010, normal butane b/d (13-14 million bbl) less than in fourth-quarter 2014.
demand was 2.2 million bbl, which began to rise incremen- Winter weather remained milder in first-quarter 2016, leav-
tally starting in winter 2012 to reach 7.0 million bbl during ing demand 110,000-130,000 b/d (10-12 million bbl) less
winter 2015, according to EIA statistics. than in the same period of 2015. PCC estimates retail pro-
For unknown reasons, however, RVP blending demand pane demand in winter 2015 was 23-26 million bbl less than
for gas-plant normal butane in the US Midcontinent re- winter 2014.
mained almost flat 2010-15, within a range of 8.5-9.5 mil- Waterborne exports continued to gain importance in
lion bbl, EIA data show. 2015 as an outlet for surplus US LPG supply. According to
EIA statistics for refinery inputs show demand for bu- statistics published by the US International Trade Commis-
tanes and natural gasoline was 453,000 b/d in third-quarter sion (USITC), NGL exports (LPG exports + ethane and natu-
2015 before increasing to 607,100 b/d in the fourth quarter. ral gasoline exports) topped 1 million b/d in third-quarter
In first-quarter 2016, PCC estimates demand was 540,000- 2015 and remained above 1 million b/d in fourth-quarter
550,000 b/d. 2015. Total NGL exports in the third quarter were 1.03 mil-
According to EIA statistics, refinery inputs of gas-plant lion b/d, or 292,000 b/d more than in third-quarter 2014. In
normal butane were 91,500 b/d in third-quarter 2015 and fourth-quarter 2015, NGL exports were 1.01 million b/d,
increased to 272,000 b/d in the fourth quarter. 239,000 b/d more than the last quarter of 2014. PCC esti-
EIA statistics show refinery inputs of isobutane increased mates NGL exports increased to 1.14 million b/d in first-
to a new record high of 216,600 b/d in third-quarter 2015. quarter 2016, which was 300,000 b/d more than first-quar-
As typically occurs during the winter months, refinery de- ter 2015.

66 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

Propane exports accounted for 63% US NGL EXPORTS Table 5

of total NGL exports in third-quarter Ethane Propane Butane gasoline Total
2015 and 68% in the fourth quarter, 2015-16 1,000 b/d
with exports in January and February 1 Qtr. 64.6 541.7 64.5 181.2 852.0
2 Qtr. 70.0 586.9 101.0 164.2 922.0
2016 jumping to 861,000 b/d. Detailed 3 Qtr. 58.8 653.4 117.8 204.5 1,034.4
statistics published by USITC show 4 Qtr. 66.0 682.8 99.8 160.5 1,009.1
1 Qtr.* 85.0 804.0 66.0 185.2 1,140.2
propane exports to destinations in
*Petral Consulting Co. estimates.
Asia Pacific were 357,000 b/d in Janu- Source: USA Trade Online; EIA; Petral Consulting Co. estimates
ary 2016 and increased to 459,000 b/d
in February 2016, with all exports to
the region originating from export ter-
minals on the Texas Gulf Coast. Exports to Asia Pacific ac- ement: LPG import-export terminals.
counted for 45% of total exports in January and increased Export terminals were one of the industrys critical bot-
to 57% in February. Exports of propane to Asia Pacific from tlenecks until second-half 2015. As with other major ele-
Texas Gulf Coast terminals in January 2016 were 303,000 ments of midstream infrastructure, export terminal capacity
b/d more than in January 2015, with exports in February was inadequate to meet the industrys rapid 2010-15 growth
209,000 b/d more than in February 2015. of propane and butane surpluses. In 2010, US midstream
US butane exports also continued to increase during sec- companies had LPG import terminals at several East Coast
ond-half 2015 but not at propanes breakneck pace. Total bu- locations; two merchant LPG import-export terminals in the
tane exports to all destinations were 117,800 b/d in the third Houston Ship Channel; and two privately operated LPG im-
quarter, or 12,100 b/d more than in third-quarter 2014, port terminals in Louisiana and Texas. The export capacity
while exports during fourth-quarter 2015 were 99,800 b/d, at existing Houston Ship Channel sites was about 180,000
or 40,400 b/d higher compared with fourth-quarter 2014. b/d in 2010. An idle facility in the Corpus Christi area was
PCC estimates butane exports fell to 65,000-70,000 b/d in reactivated 2010-12, boosting total capacity along the Texas
first-quarter 2016, nearly unchanged from the same period Gulf Coast to 230,000 b/d by yearend 2012.
in 2015 (Fig. 5). As with other major elements of midstream infrastruc-
EIA statistics showed US ethane exports to Canada of ture, midstream companies expanded the capacity of ex-
58,800 b/d in third-quarter 2015, increasing to 66,000 b/d isting export terminals and launched new build projects
in the fourth quarter. While ethane exports historically have during 2011-15. By year-end 2016, five companies (EPP, Oc-
moved only to Canada, increased demand from overseas has cidental Chemical Corp., Phillips 66, Sunoco Logistics, and
spurred preparations for rising US ethane exports to desti- Targa Resources Partners LP) will have operational LPG ex-
nations in Europe and Asia Pacific. Sunoco Logistics Part- port terminals on the Texas Gulf Coast. Based on informa-
ners LP completed commissioning a cryogenic storage and tion from company press releases and regulatory filings, the
export terminal at Marcus Hook, Pa., in first-quarter 2016, combined nominal capacity of LPG export terminals in the
loading its first shipment for export to Norway in March region was 925,000-950,000 b/d in late 2014 or early 2015.
(OGJ Online, Mar. 11, 2016). EPP is scheduled to complete By yearend 2016, this will reach 1.2 million b/d.
its ethane export terminal at Morgans Point before year-end During 2010-12, refrigeration capacity of export termi-
2016 (OGJ Online, Nov. 11, 2015). In 2017, US ethane ex- nals at the Texas Gulf Coast was sufficient to accommodate
ports to ethylene producers in Europe and India will surge the exportable surplus. Exports were 99,800 b/d in 2010,
to 100,000-200,000 b/d. 109,800 b/d in 2011, and 155,600 b/d in 2012. In 2010 and
2011, the single-month maximum export rates were 128,000
Midstream infrastructure b/d and 160,100 b/d, respectively. US ITC statistics showed
NGL midstream companies historically have built and oper- Gulf Coast (all customs districts, including overland sites)
ated four basic elements of infrastructure: propane exports spiked to 216,200 b/d in November 2012.
Gas processing plants. Based on Customs District details, propane exports from the
Raw mix purity-product transportation systems. Houston-Galveston Customs District (which extends to Cor-
Fractionators. pus Christi) were 197,600 b/d in November and 182,000 b/d
Storage. in December.
The midstream industry has typically focused all its re- Capacity was constrained 2013-14. As terminal opera-
sources and management efforts on expanding capacity in tors completed each incremental expansion, LPG exports
the first three elements but made no investment in expand- increased immediately. When nominal capacity at the Texas
ing NGL storage and affiliated infrastructure. As US NGL Gulf Coast reached 950,000 b/d in early 2015, however, ca-
supplies have increased to chronic surplus, however, a few pacity stopped being a limitation. LPG exports were 429,000
midstream companies have expanded the industrys fifth el- b/d in 2014 with the single-month maximum in December

Oil & Gas Journal | June 6, 2016 67

TECHNOLOGY

2014 of 535,000 b/d. In 2015, LPG ex- such fees. Freight rates from Houston vessels, fright rates began a sharp de-
ports from Texas Gulf Coast terminals to Japan also are consistently higher cline in third-quarter 2015. Ship yards
increased to 612,800 b/d with the sin- than from the Middle East to Japan. continued to deliver additional new
gle-month maximum of 752,000 b/d PCC views Gulf Coast terminal fees vessels in first-half 2016, and freight
in December 2015. to be a fixed cost, but international rates continued to fall. As a point of
Two companies also have operation- freight rates vary with the availability comparison, freight rates from Houston
al East Coast LPG export terminals. of vessels for spot-cargo shipments. to Japan were 55-60/gal (not including
Sunoco Logistics operates at Marcus Freight rates for deepwater LPG export terminal fees) but began a fall in
Hook, and DCP Midstream at Chesa- trade in international markets rose to July 2015, reaching 12-14/gal in Feb-
peake, Va. By yearend 2016, combined record highs in first-half 2015. As ship ruary-March 2016.
capacity of East Coast LPG export ter- owners received new world-class LPG More LPG vessels are slated for de-
minals will be about 300,000 b/d.

Price trends, profitability

PCC tracks gas processing economics
based on netback values of NGL raw
mix for gas plants in Texas, New Mex-
ico, and the Rocky Mountains. Gas
plants in these regions are the primary
sources of NGL raw mix deliveries to
NGL fractionators in Mont Belvieu. NELSON-FARRAR COST INDEXES1
Gas plant NGL production contin- Refinery construction (1946 basis)
ued to increase in second-half 2015, Explained in OGJ, Dec. 30, 1985, p. 145.

but demand in domestic markets re- Feb. Jan. Feb.

1962 1980 2013 2014 2015 2015 2016 2016
mained almost stagnant. Spot prices
in Mont Belvieu for propane, butanes, Pumps, compressors, etc.
222.5 777.3 2,221.1 2,271.9 2,313.6 2,306.7 2,348.3 2,334.1
and natural gasoline fell to levels not Electrical machinery
189.5 394.7 516.7 515.8 516.5 516.8 513.7 513.2
seen since 2002. Internal-comb. engines
PCC estimates the weighted-av- 183.4 512.6 1,046.8 1,052.9 1,062.3 1,060.3 1,034.4 1,034.4
Instruments
erage price of NGL raw mix in Mont 214.8 587.3 1,509.9 1,533.6 1,554.4 1,528.4 1,565.8 1,583.5
Heat exchangers
Belvieu was 41/gal ($3.91/MMbtu) in 183.6 618.7 1,293.3 1,305.0 1,305.0 1,305.0 1,221.2 1,221.2
Misc. equip. average
third-quarter 2015. Prices recovered 198.8 578.1 1,317.5 1,335.8 1,350.3 1,343.5 1,336.7 1,337.3
to 43/gal ($4.04/MMbtu) in fourth- Materials component
205.9 629.2 1,538.7 1,571.8 1,434.9 1,490.7 1,344.2 1,342.2
quarter 2015 but fell to 37/gallon Labor component
258.8 951.9 3,123.4 3,210.7 3,293.8 3,259.8 3,341.9 3,347.6
($3.44/MMbtu) in first-quarter 2016. Refinery (inflation) index
Historically, competition among 237.6 822.8 2,489.5 2,555.2 2,550.2 2,552.2 2,542.8 2,545.4

various feedstock options available to Refinery operating (1956 basis)

Explained in OGJ, Dec. 30, 1985, p. 145.
ethylene plants along the Texas-Lou- Feb. Jan. Feb.
isiana Gulf Coast has been the para- 1962 1980 2013 2014 2015 2015 2016 2016

mount influence on Mont Belvieu NGL Fuel cost

100.9 810.5 1,123.7 1,264.8 915.9 946.6 832.7 837.2
prices. While competitive economics Labor cost
in the Gulf Coast ethylene industry re- 93.9 200.5 308.3 312.8 319.2 315.4 350.9 361.5
Wages
main an important influence, the role 123.9 439.9 1,506.4 1,541.3 1,584.4 1,615.1 1,642.8 1,661.6
Productivity
of international markets has grown. 131.8 226.3 489.1 493.1 497.1 512.1 468.1 459.7
Invest., maint., etc.
As US NGL exports expanded dur- 121.7 324.8 905.3 939.4 948.0 948.8 918.0 918.9
ing 2013-15, pricing in Northwest Eu- Chemical costs
96.7 229.2 502.6 472.3 434.6 437.9 406.9 402.1
rope and Northeast Asia as well as in- Operating indexes2
Refinery
ternational freight rates became more 103.7 312.7 661.8 688.5 660.0 661.9 648.8 653.2
important influences on Mont Belvieu Process units
103.6 457.5 802.6 865.3 748.1 758.0 718.0 723.1
NGL pricing. Terminal fees for the new
export terminals in the Texas Gulf
1
These indexes are published in the first of each month and are compiled by Gary Farrar, OGJ Contributing Editor.
Coast are 12-15/gal, with produc- 2
Add separate index(es) for chemicals, if any are used. Indexes of selected individual items of equipment and materials are
also published on the Quarterly Costimating page in first issues for January, April, July, and October.
er-exporters in the Middle East and
North Africa able to operate without

68 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

livery over the balance of 2016, and as additional vessels gas plants from ethane rejection to full recovery in the Tex-
come into service, downward pressure on freight rates will as-New Mexico and Kansas-Oklahoma regions.
increase. As US LPG supply growth slows, global markets Domestic demand for most NGL components will remain
will stabilize, while prices in Northeast Asia may increase at current levels through yearend 2016 and into first-half
if demand continues to grow at rates similar to second-half 2017, but startup of two 750-tonne/year propane dehydra-
2015. Given that LPG freight rates are variable and some- tion plants will coincide with increased chemical feedstock
times change several times in any given month, this variabil- demand for propane of 15,000-25,000 b/d in first-half 2016
ity is an important influence on spot prices in Mont Belvieu. and 35,000-50,000 b/d in second-half 2016 vs. second-half
2015.
Outlook Finally, PCC forecasts propane exports will stabilize at
As it almost always has been, the near-term outlook for sup- 550,000-600,000 b/d during 2016, but ethane exports will
ply and pricing is a function of crude oil prices. In an ideal increase to 100,000 b/d before yearend 2016. Butane exports
scenario for midstream companies, crude oil prices would will remain within the established ranges of 2014-15.
remain strong and US NGL production would steadily in-
crease to create opportunities for midstream operators to
respond to the ongoing need for additional pipeline and
fractionation capacity in the domestic market and to further
develop export terminal capacity to meet the needs of in-
ternational markets. As upstream and midstream operators
realize, however, this currently is not the case.
According to the Organization of Petroleum Exporting
Countries latest monthly Oil Market Report, Saudi Arabia
increased crude oil production to 10.0-10.5 million b/d in
second-quarter 2015 and maintained output constant at
10.1-10.3 million b/d in both second-half 2015 and first-
quarter 2016.
Just before the Doha meeting (OGJ Online, Apr. 18,
2016), Saudi Arabia reminded global oil markets that it could
raise its oil production to 11.5 million b/d within a matter The author
of weeks. The reminder had limited immediate impact on Daniel L. Lippe ([email protected]) is presi-
crude oil prices for the various benchmarks. dent of Petral Consulting Co., which he founded
Global markets, however, have already factored gradually in 1988. He has expertise in economic analysis
increasing Iranian production into near-term supply expec- of a broad spectrum of petroleum products
tations. PCC previously expected prices for global crude oil including crude oil and refined products, natural
benchmarks to remain in the range of $40-50/bbl during gas, natural gas liquids, other ethylene feed-
first-half 2016 (OGJ, Nov. 2, 2015, p. 70). While a minor stocks, and primary petrochemicals.
panic regarding US crude oil inventory and storage capacity
sparked a sharp drop in crude oil prices in January and Feb- Lippe began his professional career in 1974 with Diamond
ruary, prices for WTI and Dated Brent quickly rebounded to Shamrock Chemical Co., moved into professional consulting in
$40-45/bbl. This aspect of the near-term outlook remains 1979, and has served petroleum, midstream, and petrochemi-
intact. cal industry clients since. He holds a BS (1974) in chemical
According to EIA statistics, US crude oil production in engineering from Texas A&M University and an MBA (1981)
fourth-quarter 2015 was 9.31 million b/d, an increase of from Houston Baptist University. He is an active member of the
about 200,000 b/d from the same quarter in 2014. US pro- Gas Processors Suppliers Association.
duction peaked in April 2015 before falling an additional
439,000 b/d by December 2015.
Production declined more slowly than markets initially
anticipated in fourth-quarter 2014 when oil prices began to
fall. But the number of oil-directed rigs in service continues
to decline, and the rate of decline for US production is likely
to accelerate during second-half 2016 and first-half 2017.
PCC expects US NGL production to stabilize at 3.25-3.50
million b/d in second-half 2016 before increasing to 3.40-
3.60 million b/d in first-half 2017 as gas processors swing

Oil & Gas Journal | June 6, 2016 69

TECHNOLOGY

PROCESSING

Asphaltenes extraction treatment yields

advantaged hydroprocessing feedstock
Bo Yuan crude oils and petroleum residue eliminate its need to use costlier but
Zhifang Tang has emerged as an alternative treat- less-efficient coking and ebullated-bed
Keng H. Chung ment option that could deliver cleaner, reactor systems for feedstock pretreat-
North Huajin Chemical higher-quality feedstock immediate- ment.
Industries Group Corp. ly usable across multiple processing
Panjin, China units (OGJ, Apr. 5, 2010, p. 52). Background
A series of follow-up tests at exist- Heavy crude oils and petroleum resi-
Qiang Wei ing pilot and commercial-scale units due contain high concentrations of
Xuewen Sun in China concluded that using SELEX- contaminants that must be removed
Zhiming Xu Asp technology instead of traditional before most refining processes. While
Suoqi Zhao processes to pretreat vacuum residua common industry practice is to use en-
Chunming Xu (VR) derived from inferior-quality, ergy-intensive and costly pretreatment
China University of Petroleum heavy crudes also prepares a cost- technologies such as coking and ebul-
Beijing friendly and environmentally compli- lated-bed hydroprocessing to remove
ant feedstock especially for conven- most contaminants, these processes
Selective extraction of asphaltenes tional packed-bed hydroprocessing often require extended unit shutdowns
(SELEX-Asp) technologya solvent- units. Direct production of this feed- and yield feedstock still unsuited for
based physical separation process stock via SELEX-Asp can further additional processing in units produc-
capable of selectively removing as- maximize profitability of a refinerys ing fuels that will meet todays increas-
phaltenes as dry granulates in heavy existing bottoms stream as well as ingly stringent environmental regula-
tions.1
In conventional refineries, fluid
KEY SPECIES, DISTRIBUTION CURVES FIG. 1
catalytic cracking (FCC) is the key
process used to convert heavy distil-
100
Distillates, < 524 C. Pitch, > 524 C. lates (vacuum gas oil) into transpor-
tation fuels such as gasoline, jet fuel,
80 and diesel. Packed-bed hydrotreat-
Total fraction in bitumen, %

ing and hydroprocessing units re-

move contaminants and enhance
60
H C
feedstock processability before fur-
S
ther downstream processing.
N
40 Improvements to catalytic refin-
ing processes over the past 30 years
V Ni
CCR have enhanced their ability to process
20
heavier feedstock, which typically in-
cludes a blend of distillates as well as a
0 certain amount of residua. Many mod-
0 20 40 60 80 100
ern refineries are equipped with resid
Source: OGJ, Jan. 20, 1997, p. 66 Bitumen, cumulative weight, wt %
fluid catalytic cracking (RFCC) units

70 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

and packed-bed resid hydroprocess- PREPARING VR AS PACKED-BED HYDROPROCESSING FEED FIG. 2

ing units to treat and convert low-cost,
Bitumen, SELEX VR Hydrogen
heavy feedstock into transportation extra-heavy oil
fuels. LGO SELEX-Asp.
These catalytic processes, howev-
HGO Guard
er, require stringent feedstock-quality
Vacuum
specifications to prevent rapid catalyst resid HD
metals
deactivation and plugging of packed-
bed catalysts. HD sulfur,
For RFCC units, Conradson carbon HD nitrogen
residual (CCR) content of feedstock HD
should not exceed 8 wt%, while total- aromatics

metals content should not exceed 20 MHC

Gasoline,
ppm.2 3 diesel, HGO,
Feedstock with excessive CCR or Asphaltene FCC-RFCC
granules feedstock
total-metals contents is unsuitable for
processing through packed-bed resid
hydrocrackers.3 CCR content of feed-
stock for this type of processing should in petroleum asphaltenes, most CCR hydroprocessing conditions.
not exceed 12 wt%, with total-metals species in VR can be converted to non- Designed in a grading-bed configu-
content not to exceed 100 ppm.4 5 coke species via hydrotreating and hy- ration, the testing unit contained five
Even after subjecting heavier drocracking processes.8 types of catalysts:
feedstock to conventional solvent Undesirable components concen- Hydrodemetalization (HD
deasphalting (SDA), the resultant trated in asphaltenes must be removed metals).
deasphalted oil (DAO) still may be un- before processing remaining VR frac- Hydrodesulfurization (HD sul-
suitable for packed-bed resid hydro- tions in conventional refinery RFCCs fur).
processing. It first must be blended and packed-bed hydroprocessing Hydrodenitrogenation (HD ni-
with light crude or a lighter hydrocar- units.9-10 trogen).
bon fraction to sufficiently dilute un- SELEX-Asp technology can selec- CCR removal (HD aromatics).
desirable contaminants.6 tively remove VR subfractions, includ- Mild hydrocracking (MHC).
ing asphaltenes (OGJ, Apr. 5, 2010, Results of pressure-drop monitor-
Residuum chemistry p. 52) and prepared DAOs with dif- ing across the packed-catalyst bed re-
The lack of adequate analytical tech- fering amounts of asphaltenes (from actor showed that SELEX DAO with
niques for characterizing heavy petro- trace amounts to 9 wt%), from VRs less than 2 wt% asphaltenes had a con-
leum fractions makes the chemistry of of different origins. Studies of SELEX stant differential pressure across the
petroleum residuum difficult to define DAO-derived asphaltenes using ul- catalyst bed after an 18-hr continuous
and detailed quantification and corre- trahigh-resolution Fourier transform run, without any sign of catalyst cok-
lation of resid feedstock properties to ion cyclotron resonance mass spec- ing or plugging.
reaction process performance impos- trometry (FT-ICR MS) concluded that SELEX DAO with higher than 2
sible. The use of feedstock specifica- their chemistry hinged on asphaltene wt% asphaltenes showed a 50-kPa dif-
tions (CCR, total-metals contents) as content resulting from the selective ferential pressure increase across the
criteria for selecting reactor systems to extraction of asphaltene subfractions. catalyst bed after a 7-hr continuous
process various heavy crudes and re- Varying solvent extraction powers at run, indicating possible catalyst cok-
sidua, then, is more intuitive than sci- critical solvent conditions created the ing or plugging.
entific.3-5 selective extraction.11-12 In an extreme case of SELEX DAO
CCR is an indicator of the amount with 9 wt% asphaltenes, the catalyst
of coke that forms when hydrocarbon Packed-bed hydroprocessing reactor was plugged after 2 hr of op-
samples undergo destructive distilla- SELEX DAO samples of various as- eration, suggesting that SELEX DAO
tion (OGJ, Jan. 20, 1997, p. 66). Not all phaltene contents underwent cata- with higher than 2 wt% asphaltenes
CCR species in VR subfractions have lytic hydroprocessing screening tests. was not suitable for packed hydropro-
the same coking propensity.7 These tests involved mixing the sam- cessing.
Fig. 1 shows uneven distributions ples with hydrogen gas and introduc-
of CCR and metals species in VR. ing the mixture to a 125-ml continu- Additional studies
Except for the CCR content present ous catalyst testing unit under mild Athabasca oil sands bitumen and Ven-

Oil & Gas Journal | June 6, 2016 71

TECHNOLOGY

SELEX-ASP VR, COLORATION FIG. 3 metals, HD sulfur, HD nitrogen, HD

aromatics, and MHC) in a grading-bed
Before hydroprocessing After hydroprocessing configuration.
Feeding the reactor unit continu-
ously for 1,500 hr with a similar-quali-
ty feed derived from extra-heavy crude
preceded the SELEX DAOs resid-hy-
droprocessing run, allowing catalysts
in the reactor to be at an equilibrium
state when the SELEX DAO-hydrogen
mixture entered the unit.
The continuous packed-bed hydro-
processing run with SELEX DAO also
lasted for 1,500 hr, with no observable
sign of pressure drop across the cata-
lyst bed. Results showed no catalyst-
bed plugging, even though the SELEX
DAO feedstock contained relatively
BITUMEN-DERIVED VR FEED PROPERTIES high CCR (13 wt%) and metals (250
Bitumen VR After SELEX-Asp Product post MHC ppm) concentrations.
Yield, wt% A gas-liquid separator divided the
IBP-350 C. 0 0 10 reaction product into gas and hydro-
350-524 C. 0 0 40
Density at 20 C., g/cu m 1.0648 0.9990 0.9486 processed liquid that were sampled for
Carbon, wt% 82.97 82.82 86.22
Hydrogen, wt% 9.65 10.43 11.53 analysis daily.
H/C, atomic ratio 1.39 1.50 1.60 The accompanying table shows the
Sulfur, wt% 6.00 4.80 0.59
Nitrogen, wt% 0.68 0.51 0.36 properties of bitumen-derived VR be-
CCR, wt% 23.3 13.0 4.2
Nickel, ppm 144 77 2 fore and after SELEX-Asp treatment as
Vanadium, ppm 357 176 1 well as SELEX DAO products proper-
Saturates, aromatics, resins,
asphaltenes ties following MHC.
(SARA) composition, wt %
Saturates 9.31 18.99 44.80 Test run results showed a dramatic
Aromatics 43.44 56.24 43.97
Resins 21.67 24.77 11.23 improvement in the properties of bi-
Asphaltenes 25.58 Not detectable Not detectable tumen-derived VRs following SELEX-
Asp treatment and subsequent packed-
bed hydroprocessing of SELEX DAO,
including a yield of 10 wt% diesel and
ezuelan Orinoco extra-heavy crude of all pentane-insoluble asphaltenes as 40 wt% heavy gas oil (HGO) based on
served as worst-case scenarios for sub- solid granules and an asphaltene-free simulated distillation.
sequent studies to investigate SELEX VR product. SELEX DAO also yielded a much
DAOs suitability as feedstock for While the unit removed asphaltenes lighter reaction liquid following MHC
packed-bed hydoprocessing units. equivalent to 16 wt% of oilsands bitu- (Fig. 3).
Fig. 2 shows the processing steps men, SELEX DAO still contained 13 Most importantly, the reaction liq-
used to prepare these VRs as feedstock wt% CCR and 250 ppm metals, both uid product contained 4 wt% CCR,
for packed-bed hydroprocessing. of which exceed packed-bed resid hy- 3 ppm metals, and 45 wt% saturated
droprocessing specified feedstock-op- hydrocarbons, all of which are charac-
Canadian bitumen erating guidelines of 12 wt% CCR and teristics of superior catalytic cracking
Testing of a bitumen-derived VR ob- 100 ppm metals. feedstock.
tained from a commercial oil sands Mixing the SELEX DAO with hy-
plant in Fort McMurray, Alta., oc- drogen gas occurred before introduc- Venezuelan Orinoco
curred at a 1-b/d continuous pilot- tion to a 125-ml continuous catalyst A separate investigation tested SELEX
scale SELEX-Asp unit at the China testing reactor operated under MHC DAO derived from extra-heavy Orino-
State Key Laboratory of Heavy Oil Pro- conditions. The catalyst-testing reactor co crude obtained from PetroChinas
cessing, Beijing. was a commercial apparatus packed refinery near Liaohe oil field, which
Adjusting the SELEX-Asp process with a guard-bed material and the is equipped with a commercial-scale
operating parameters ensured removal five types of equilibrium catalysts (HD SELEX-Asp unit (OGJ, Apr. 5, 2010, p.

72 Oil & Gas Journal | June 6, 2016

 1144 TTHH ANNUAL OV. 8 110,
ANNUAL NNOV. 0, 2016
2016

SUSTAINABILITY THROUGH THE CYCLE

MOODY
M O O DY GARDENS
G A R D E N S HHOTEL
OT E L & CCONVENTION
O N V E N T I O N CCENTER
E N T E R GGALVESTON,
A LV E S TO N , TTXX

Thee De
Th Deep
Deepwater
epwa
ep wate
wa terr Op
te Oper
Operations
erat
er atio
at ions
io ns C
Con
Conference
onfe
on fere
fe renc
re ncee an
nc andd Ex
Exhi
Exhibition
hibi
hi biti
bi tion
ti on w wil
will
ililll co
cont
continue
ntin
nt inue
in ue
thee tr
th trad
tradition
adit
ad itio
it ionn of eexc
io excellence
xcel
xc elle
el lenc
le ncee in aaddressing
nc ddre
dd ress
re ssin
ss ingg op
in oper
operational
erat
er atio
at iona
io nall ch
na chal
challenges
alle
al leng
le nges
ng es
involved
invo
in volv
vo lved
lv ed iinn de
deve
developing
velo
ve lopi
lo ping
pi ng ddee
deepwater
eepw
ee pwat
pw atter rres
resources.
esou
es ourc
ou rces
rc es.. We w
es wil
will
ililll re
retu
return
turn
tu rn ttoo th
thee
Moody
Mood
Mo odyy Ga
od Gard
Gardens
rden
rd enss Ho
en Hote
Hotel
tell an
te andd Co
Conv
Convention
nven
nv enti
en tion
ti on C
Cen
Center
ente
en terr on N
te Nov
November
ovem
ov embe
em berr 8
be 810
810,
10,, 20
10 2016
16
in GGal
Galveston,
alve
al vest
ve ston
st on,, Te
on Texa
Texas.
xas.
xa s.
Challenges
Chal
Ch alle
al leng
le nges
ng es iinn de
deep
deepwater
epwa
ep wate
wa terr pr
te production
rod
oduc
ucti
uc tion
ti on aare
re ccom
complex
ompl
om plex
pl ex aand
nd ccom
command
omma
om mand
ma nd oour
ur
attention
atte
at tent
te ntio
nt ionn to ddev
io develop
e el
ev elop
op ssol
solutions
olut
ol utio
ut io
ons ttha
that
hatt ar
ha aree ec
econ
economical
onom
on omic
om ical
ic al aand
nd llong-term.
ong-
on g-te
g- term
te rm. Th
rm Thee
Deepwater
Deep
De epwa
ep wate
wa terr Op
te Oper
Operations
erat
er atio
at ions
io ns C
Con
Conference
onfe
on fere
fe renc
re ncee an
nc andd ExExhi
Exhibition
hibi
hi biti
bi tion
ti on p
pro
provides
rovi
ro vide
vi dess a un
de uniq
unique
ique
iq ue
experience
expe
ex peri
pe rien
ri ence
en ce ffor
or aatt
attendees
tten
tt ende
en dees
de es aand
nd eexh
exhibitors
xhib
xh ibit
ib itor
it orss to ssha
or share,
hare
ha re,, le
re lear
learn
arnn an
ar andd co
conn
connect
nnec
nn ectt
ec
forum
in a ffor
orum
or dedicated
um dded
edic
ed icat
ic ed tto
ated
at addressing
o ad
addrdres
dr essi
es sing
si these
ng tthe
hese
he challenges.
se ccha
halllll en
ha engeges.
ge s.
www.deepwateroperations.com
www.deepwateroperations.com

Photo Courtes
rtesyy of Hess Corp
Corpoorat
ration
io
ionn

HOSTED
HOST
HO STED
ED BBY:
Y:
OWNED
OWN ED & PRESEN
PRE SENTED
TED BY:
PRESENTED BY: SUPPOR
SUPPORTED
TED BY:
SUPPORTED BY:
PRODUCED
PRODUC
PRODUCED
ED BY:
TECHNOLOGY

52). MILD HYDROCRACKING PILOT* FIG. 4

This study adjusted SELEX-Asp
9
operating parameters to yield SELEX
8.5
DAO containing 1.3 wt% pentane-
insoluble asphaltenes as well as high 8

CCR, wt%
concentrations of CCR (13.5 wt%) and 7.5
metals (280 ppm). Ultrahigh-resolu- 7
tion FT ICR-MS analysis showed that 6.5
SELEX DAO asphaltene (1.3 wt%)
6
chemistry was not the same as typical
70
DAO asphaltenes derived from con-
ventional SDA processes, likely be- 60
cause a liquid-liquid extraction SDA

Metals, ppm
system made the entrained DAO as- 50
phaltenes nonselective. SDA DAO as- 40
phaltenes have an established history
of causing catalyst coking and plug- 30
ging of packed-catalyst beds. 20
The Orinoco-derived SELEX DAO
ran through the same 125-ml continu- 10
ous catalyst testing reactor after being +0.4
LHSV, hr-1

mixed with hydrogen gas. The unit

operated under MHC conditions and +0.2
was packed with a guard-bed material
as well as the five fresh catalysts (HD Base
metals, HD sulfur, HD nitrogen, HD
aromatics, and MHC) in a grading-bed
configuration.
Before resid-hydroprocessing the low LHSV) increasing removal. however, showed no signs of pressure-
reactor unit went through presulfiding The slopes of CCR and metals con- drop build-up across the catalyst bed
with 2% carbon disulfide in cyclohex- centrations of daily reaction products after more than 2 months of operation.
ane for 72 hr, followed by precoking showed high-reaction pressure re- Moreover, if catalyst coking and bed
with VGO derived from Chinese Daq- ducing the catalyst deactivation rate. plugging had occurred, pressure-drop
ing crude for 48 hr. The continuous Results generally verified that even build-ups across the packed-catalyst
packed-bed resid hydroprocessing run though SELEX DAO is a heavier feed- bed likely would have been more se-
with SELEX DAO took 1,300 hr. stock, it performs similarly to VGO vere in a pilot-scale reactor system
The resid hydroprocessing run var- during resid hydroprocessing. than a commercial-scale system. The
ied both the operating pressure and studies demonstrated that SELEX DAO
liquid hourly space velocity (LHSV), Results overview perform better and more economically
with the temperature kept constant. The catalyst systems used in both tests than traditionally derived VRs as feed-
Fig. 4 shows the online process per- were not optimized and commercial stock for packed-bed hydroprocessing
formance data and concentrations of packed-bed residuum desulfurization as a result of the longer catalyst-service
CCR and metals from the runs daily (RDS) unit specifications for process- cycle.
reaction product samples. ing cleaner feedstock (containing Results also confirmed that conven-
The reactor ran at base pressure for less than 12 wt% CCR and 100 ppm tional packed-bed resid hydroprocess-
its first 500 hr, later increased to base metals) provided the basis for select- ing of VRs derived from SELEX-Asp
+4 MPa pressure. Test results showed ing mild hydroprocessing conditions pretreatment further increases the vol-
relatively constant reactor pressure, for continuous pilot testing of SELEX ume and quality of potential feedstock
with no pressure-drop build-up ob- DAOs.5 RDS units, however, require suitable for other refinery processes
served across the catalyst bed for the replacement of HD metals catalyst af- downstream of the hydroprocessor,
runs duration. ter 3-4 months of service due to cok- eliminating the need to use coking or
Removal of CCR and metals de- ing and bed plugging. ebullated-bed reactor systems for feed-
pended on reaction severity, with high SELEX DAOs containing higher stock pretreatment.
reaction severity (high pressure and concentrations of CCR and metals, Results also pointed to the need to

74 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

FIG. 5
LOW-COST CAPACITY EXPANSION
Conventional crude
Alkylation unit
LPG
Naphtha Catalytic
hydrotreater reformer
Naphtha Crude Gasoline
distillation unit hydrotreater

Gas oil
FCC unit
Distillates hydrotreater

Distillate
hydrotreater
VGO
Vacuum
distillation unit
Residue
Sulfur plant

SELEX-Asp unit Carbon

products
Asphaltene
granules

revise currently less-than-sophisticat- er, RFCC) to process SELEX-DAO and 9.5 wt% Arabian Heavy, and 16 wt%
ed feedstock-specification guidelines increase yields of more valuable fuel oil sands bitumen), highlighting as-
used by the industry to select reactor streams without having to purchase phaltene removal as the key problem
systems,2-5 incorporating actual feed- additional feedstock. of residuum processing.
stock-characterization data obtained With only a small amount of low- Benchmark crudes treated by
from advanced analytical techniques.11 value solid asphaltenes left over, dis- SELEX-Asp technology in ongoing
posal costs also are minimized. tests have shown removal of residua
Applications contaminants sharply increases the
It is common practice in the refining Refinery flexibility amount of VGO (shown in blue) feed-
industry to design and construct a The studies discussed in this article stock that is well-prepared for further
processing unit 10-15% larger than its also confirmed SELEX-Asps ability to downstream processing.
planned operating capacity. This ad- expand a refinerys flexibility to pro- At current global crude-consump-
ditional capacity, in most cases, is not cess unconventional heavy crudes tion rates of 95 million b/d, the authors
used. more economically by averting the estimate SELEX-Asp processing tech-
The studies discussed in this arti- need to use costlier cokers and ebullat- nology could provide conventional
cle offer further evidence that adding ed-bed reactor systems to pretreat the refineries an additional 5 million b/d
a commercial-scale SELEX-Asp unit at more contaminated cuts derived from of feedstock for production of cleaner
a typical conventional refinery (Fig. 5), these crudes. fuels.
such as North Huajin Chemical Indus- Fig. 6 shows the compositions of
tries Group Corp.s in Panjin, creates a benchmark crudes Arabian Light (36 References
low-cost and simple means of expand- API gravity), Arabian Heavy (26 API 1. Chung, K.H., Xu, Z., Sun, X.,
ing its overall operating and produc- gravity), and oil sands bitumen (8 API Zhao, S., and Xu, C., Selective as-
tion capacities. gravity), before and after SELEX-Asp phaltene removal from heavy oil, PTQ,
VRs and bottom streams such as fuel treatment. Fourth Quarter 2006, p. 99.
oil that otherwise would be discarded As a crude gets heavier, its resid- 2. Motaghi, M., Subramanian, A.,
now serve as feedstock for SELEX-Asp uum content (524 C.+ fraction) in- and Ulrich, B., Slurry-phase hydro-
treatment to produce feedstock for fur- creases. For untreated crudes, the cracking-possible solution to refining
ther processing. Since processability of amount of native residua (shown in margins, Hydrocarbon Processing,
SELEX-DAO mirrors that of VGO, the red) varies slightly. The amount of as- Feb. 1, 2011, pp. 37-43.
refinery can capitalize on spare capac- phaltenes (shown in black), however, 3. Zuo, L., Present situation and
ity of existing units (gas oil hydrotreat- differ sharply (1 wt% Arabian Light, prospect for FCC technology develop-

Oil & Gas Journal | June 6, 2016 75

TECHNOLOGY

CRUDE PROCESSING FLEXIBILITY FIG. 6 lysts by resdiue fractions of bitumen,

Energy & Fuel, 1999, Vol. 13, p. 1037
100
10. Yang, C., Du, F., Zheng, H.,
and Chung, K.H., Hydroconversion
80 IBP-200 C. characteristics and kinetics of residue
200-343 C. narrow fractions, Fuel, Vol. 84, No. 6,
Composition, wt%

343-524 C. 2005, pp. 675-684.

60 524 C. +*
Asphaltenes 11. Zhang,Y., Zhang, L., Xu, Z.,
Zhang, N., Chung, K.H., Zhao, S., Xu,
40 C., and Shi, Q., Molecular character-
ization of vacuum resid and its frac-
tions by Fourier transform ion cyclotron
20
resonance mass spectrometry with
various ionization techniques, Energy
0 Fuels, Vol. 28, 2014, pp. 7448-7456.
Arabian Light Arabian Heavy Oilsands bitumen
12. Zhao, S., Wei, Q., Xu, C, Xu, Z.,
Sun, X., and Chung, K.H., A method
After selective asphaltenes removal of processing heavy oils and residua,
US Patent Application No. 15/054,
959; Canadian Patent Application No.
100
2,920,054; China Patent Application
No. 201510290167.0.
80
Composition, wt%

60

40 The authors
Bo Yuan (yuan-
[email protected])
20
is director of Technol-
ogy Research and
0 Development Centre at
Arabian Light Arabian Heavy Oilsands bitumen
North Huajin Chemicals
*Crude residuum content. Industries Group Corp.
He has held various senior technical
ment in China, Technology-Economics recent advances in RDS/VRDS-RFCC and executive positions in petrochemi-
in Petrochemicals, Sinopec Technology process and catalyst technology, 24th cal operations for 30 years. He holds a
and Economic Information Center, Vol. Japan Petroleum Institute International BS in chemical technology from Dalian
16, No. 1, 2000, pp. 16-21. Symposium, Nov. 5-7, 2008. University of Science and Technology,
4. Dai, L., Hu, Y., and Li, J., Activ- 7. Chung, K.H., Xu, C., Gray, M., China.
ity evaluation of residue hydotreating Zhao, Y., Kotlyar L., and Sparks,
cayalyst during commercial running B., The Chemistry, Reactivity, and Zhifang Tang (tzfsin@
and its remaining life prediction, Petro- Processability of Athabasca Bitumen sina.com) is chief engi-
leum Processing and Petrochemicals, Pitch, Reviews in Process Chemistry neer and board director
Vol. 31, No. 12, 2000, pp. 13-16. and Engineering, Vol. 1, 1998, pp. at North Huajin Chemi-
5. de Haan, D. Street, M., and 41-79. cals Industries Group
Orzeszko, G., New residue-upgrading 8. Chung, K.H., and Xu, C., Corp. Ltd. He previously
complex achieves Euro 5 specifica- Narrow-cut characterization reveals held senior technical and executive
tions, Hydrocarbon Processing, Feb. resid processing chemistry, Fuel, Vol. positions with PetroChina Fushun Pet-
1, 2013, pp. 41-44. 80, No. 8, 2001, p. 1165. rochemical Co. Ltd. With more than 30
6. Threlkel, R., Dillon, C., Singh, 9. Gray, M.R., Zhao, Y., McKnight, years of refinery and ethylene production
U.G., and Ziebarth, M.S., Increase the C.M., Komar, D.A., and Carruthers, experience, Tang holds a BS in petro-
flexibility to upgrade residuum using J.D., Coking of hydroprocessing cata- chemical engineering from Fushun Pe-

76 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY
HRM FOR THE
troleum Institute, China. Heavy Oil Processing. He was a visiting OIL & GAS
Keng H. Chung (keng-
[email protected])
scholar at Canada National Research
Council, Ottawa. Xu specializes in heavy
INDUSTRY
serves as refinery advisor oil chemistry and processing technol-
for North Huajin Chemi- ogy and supercritical fluid extraction.
cal Industries Group He holds a BS and MS in chemical
Corp. He also acts as a engineering from China University of
process troubleshooting expert for petro- Petroleum.
leum operations and actively is involved
in developing sustainable heavy oil Suoqi Zhao (sqzhao@
technologies. Chung holds a BS and MS cup.edu.cn) is a profes-
in chemical engineering from Queens sor at China University of
University, Kingston, Ont., and a PhD Petroleum, Beijing and a
in chemical and petroleum engineer- deputy director at China
ing from the University of Calgary. He State Key Laboratory of
is a registered professional engineer in Heavy Oil Processing. He
Alberta. was a visiting scholar at Canada National
Research Council, Ottawa. Zhao special-
Qian Wei (weiqiangcup@ izes in heavy oil chemistry and supercrit-
hotmail.com) is an as- ical fluid technology. He holds a BS and
sociate professor and re- PhD in chemical engineering, both from
search scientist at China China University of Petroleum.
ISBN: 978-1-59370-362-2
University of Petroleum,
Price: $89.00
Beijing. He was a visiting Chunming Xu (xcm@cup.
410 Pages/Hardcover/6x9
scholar at Natural Resources Canadas edu.cn) is a vice-pres-
February 2016
CANMET Western Research center at ident and professor at
Devon, south of Edmonton, Alta. He spe- China University of Petro-
cializes in hydroprocessing and desul- leum and also serves as
Order Your Copy Today!
furization catalysis. Wei holds a BS from a deputy advisory chair at
Shandong University and an MS and China State Key Labora-
PhD from China University of Petroleum, tory of Heavy Oil Processing. Xu was a
An in-depth look at human
all in chemical engineering. visiting scholar at Syncrude Research
resource management for all aspects
Center, Edmonton. His research interests
of the oil and gas sector. Managing
Xuewen Sun (sunx- include heavy oil chemistry and process-
Human Resources in the Oil & Gas
[email protected]) is ing technology. Xu holds a BS, MS, and
Industry will help:
an associate professor PhD in chemical engineering, all from
at China University of China University of Petroleum. Guide managers in the oil and gas
Petroleum and a senior sector on how to better manage
scientist at China State their employees
Key Laboratory of Heavy Explain ways to deal eectively with
Oil Processing. He specializes in heavy the complexities of globalization
oil processing technology, petrochemi-
cals, and supercritical fluid extraction. Describe numerous ways to foster a
Sun holds a BS from Daqing Petroleum safety culture
College and a PhD from China University Show how eective management
of Petroleum, all in chemical engineer- of human resources can improve
ing. project success
Explain how human resources will
Zhiming Xu (scf@cup.
recruit and train the next wave of
edu.cn) is an associate
industry workers and leaders during
professor at China Uni-
the Great Crew Change
versity of Petroleum and
a senior scientist at China
State Key Laboratory of

www.pennwellbooks.com
800-752-9764
TECHNOLOGY

FERC Bear Head, Jordan Cove

rulings offer LNG market guidance
Tania Perez
Lamiya Rahman
Cadwalader, Wickersham & Taft LLP
New York

The US Federal Energy Regulatory These orders, addressing projects

Commissions (FERC) Bear Head and from the East Coast of Canada and the
Jordan Cove decisions highlight the US West Coast, point out what might be
difficulties LNG applicants face when the most significant legal maxim cur-
dealing with FERCs and the Depart- rently affecting the LNG industry: both
ment of Energy Office of Fossil Energys SPECIAL DOE/FE and FERC possess (and exer-
(DOE/FE) discretionary authority un- TRANSPORTATION REPORT cise) significant, discretionary authority
der the Natural Gas Act (NGA). Appli- under the NGA. Bear Head showcases
cants have no control over the agencies a favorable outcome in circumstances
decision-making processes, but can where the agency had no established
proactively shape their permitting strategy to mitigate the guiding policy or applicable procedures for processing ap-
potential for a negative outcome. Applicants must engage plications. Jordan Cove, by contrast, exposes how an LNG
the agencies and other stakeholders early in project de- export application may be denied even when longstand-
velopment and must understand the political climate in ing policy favors the development of LNG infrastructure.
which deliberations are occurring. This article examines the lessons learned and policy con-
On Feb. 5, 2016, the DOE/FE issued orders to Bear siderations revealed by both proceedings as they relate to
Head LNG Corp. and Bear Head LNG (USA) LLC both au- LNG projects across North America.
thorizing the export of US-sourced natural gas from Ca-
nadian LNG plants to countries with which the US does Bear Head
not have a free-trade agreement (non-FTA nations)1 and In Order 3769 (In-Transit Order) DOE/FE determined it
disclaiming NGA Section 3 jurisdiction over shipments of lacks jurisdiction under NGA Section 3 over Bear Head
Canadian natural gas travelling by pipeline through the LNGs proposed imports of Canadian natural gas travelling
US on its way back to Canada (in-transit shipments).2 Both by pipeline through the US on its way back to Canada. In
decisions tackled issues of first impression, announcing this regard, DOE/FE dismissed Bear Head LNGs applica-
DOEs comprehensive policy for considering applications tion seeking authorization to access Western and Central
that involve LNG exports from Eastern Canada to global Canadian natural gas supplies that necessarily must cross
markets. the US-Canada border (due to transportation pipeline
Mar. 11, 2016, FERC denied Jordan Cove Energy Proj- configurations) en route to the proposed Bear Head LNG
ect LPs application to site, construct, and operate an LNG project. In Order 3770 (Non-FTA Order) DOE/FE granted
export plant at Coos Bay, Ore.,3 the first time FERC re- long-term, multi-contract authorization under NGA Sec-
jected an LNG export plant. Denial of the Jordan Cove tion 3(a) to export US natural gas by pipeline to Canada
terminal was not predicated on a finding of inconsistency for subsequent liquefaction and export (i.e., re-export) to
with the public interest. FERC instead denied the associ- non-FTA nations.
ated pipeline and reasoned that without a pipeline con- The Bear Head LNG proceedings presented legal issues
necting [the terminal] to a source of gas to be liquefied of first impression and an unusual factual circumstance,
and exported, the proposed Jordan Cove LNG terminal as DOE/FE described it. DOE/FEs legal determinations in
can provide no benefit to the public to counterbalance the Bear Head LNG proceedings were significant. But the
any of the impacts which would be associated with its legal significance of the Bear Head LNG orders is dwarfed
construction. 3 by the political implications of DOE/FEs announced poli-

78 Oil & Gas Journal | June 6, 2016

 NATURAL GAS PIPELINES FIG. 1

Interstate pipelines
Intrastate pipelines

Source: US Energy Information Administration

cies of adopting a laissez-faire approach to applications non-FTA nations in 12-20 bcfd volumes.5
for Canadian gas in-transit through the US and giving the In reviewing Bear Head LNGs in-transit and non-FTA
green light to natural gas exports of US natural gas to Can- applications, DOE/FE had to determine which of the two
ada for liquefaction and export to non-FTA nations. legal standards under NGA Section 3 applied. The depart-
NGA Section 3 provides only two legal standards for au- ment opted to apply the discretionary, non-FTA standard,
thorizing exports of US natural gas and LNG. Section 3(a) LNG produced at the Bear Head LNG being intended for
involves a lengthy public interest analysis for exports to non- delivery and end-use in non-FTA nations. It explained
FTA nations, while Section 3(c) provides an expedited pro- that its decision was rooted in Congressional intent that
cess whereby exports to FTA nations are granted without all exports destined for non-FTA nations be reviewed for
modification or delay. Before DOE/FEs Feb. 5 orders, it was their consistency with the US public interest. To do other-
unclear which of these standards the agency would apply to wise, DOE/FE reasoned, would permit potential export-
applications proposing exports of US-sourced gas to an FTA ers to evade the non-FTA public interest analysis simply
nation for liquefaction and subsequent re-export as LNG to by transiting natural gas and LNG through an FTA nation.
a non-FTA nation. In anticipation of this approach, Bear Head LNG had
To complicate matters, DOE/FE previously provided included a public interest analysis in support of its pro-
little guidance or procedural transparency regarding how posed LNG exports from Canada to non-FTA nations, al-
it would review Canadian applications. The DOE/FEs though it expressly caveated that nothing in [its] Appli-
Procedures for LNG Export Decisions apply only to non- cation is intended as a concessionthat NGA Section 3
FTA exports from the Lower-48 states and do not address jurisdiction extends to LNG exports from Canada.6
exports from Canada.4 Similarly, DOE/FE had not consid- Bear Head LNGs proceedings required DOE/FE dis-
ered Canadian LNG exports in its recently issued stud- charge its statutory mandate under the NGA without
ies examining the cumulative impacts of LNG exports to violating US obligations under the North American Free

Oil & Gas Journal | June 6, 2016 79

TECHNOLOGY

Trade Agreement (NAFTA) or aggravating a US-Canada impact (FONSI). In other instances that an EIS is prepared,
energy relationship already strained by discord over the DOE/FE issues a record of decision.
Keystone XL pipeline.7 Since then, relevant DOE/FE non-FTA precedent has
DOE/FEs decision to exercise its NGA Section 3(a) juris- evolved, culminating with the Feb. 5, 2016, decisions:
diction extends beyond the US-Canada border (where the In applications involving existing LNG facilities not
export of US natural gas by pipeline will occur) and follows subject to FERC jurisdiction, DOE/FE grants categorical ex-
the gas into Canada (where the export of LNG by vessel will clusion under its regulations at 10 CFR Part 1021, Subpart
occur). Accordingly, the non-FTA order arguably is an exer- D, Appendix 85.
cise of extraterritorial jurisdiction by DOE/FE, which is not In applications involving the construction of new CNG
to say it is impermissible. facilities not subject to FERC jurisdiction, DOE conducts the
To further complicate matters, before DOE/FES issu- NEPA review process and prepares NEPA documentation.
ance of the in-transit order, there was uncertainty regard- In applications involving the construction of new LNG
ing which NGA Section 3 standard DOE/FE would apply to facilities in Canada (i.e., not subject to FERC jurisdiction),
in-transit shipments of Canadian gas and whether DOE/FE DOE/FE grants categorical exclusion in accordance with its
would be legally consistent in exercising its NGA Section 3 regulations at 10 CFR Part 1021, Subpart D, Appendix 85,
jurisdiction when Canadian gas was in question, as opposed with authorized export volume in proportion with the level
to US gas.8 DOE/FE opted to dismiss the in-transit applica- of existing US pipeline capacity.
tion for lack of jurisdiction. Canadas National Energy Board
(NEB) also had authorized, without restriction, the export of In-transit shipments
Canadian gas intended for liquefaction and export from US DOE/FE dismissed Bear Head LNGs in-transit application
West Coast projects, including Jordan Cove.9 on the grounds that in-transit shipments returning to the
With the lawsuits stemming from the US deci- country of origin are not imports or exports within
sion to reject the Keystone XL as a backdrop, and the meaning of NGA Section 3, such that they fall
a newly elected Canadian government looking for outside of DOE/FEs NGA Section 3 jurisdiction.
a fresh start with the Obama Administration, par- In reaching this conclusion, DOE/FE noted Con-
ticularly in energy and climate change, DOE/FEs gress likely intention that the terms import and
favorable determinations in the Bear Head LNG export apply only to those categories of shipments
proceedings strengthened ties between the two na- that, by their nature, could have a material effect
tions. SPECIAL on the US public interest. Shipments of Canadian-
REPORT sourced natural gas between Canadian points, ac-
NEPA cording to DOE/FE, are categorically unlikely to
A secondary but significant legal issue arose un- have a material impact on the US public interest
der the National Environmental Policy Act (NEPA), which and therefore lie outside DOE/FEs NGA Section 3 purview.
requires DOE/FE to consider the environmental impacts of In further support of its jurisdictional determination,
its decisions on applications seeking authorization to export DOE/FE cited a 1977 agreementthe Agreement Between
natural gas. In the past, DOE/FE could meet its NEPA obli- the Government of the United States of America and the
gations as a cooperating agency in the NEPA review process Government of Canada Concerning Transit Pipelines
led by FERC for US LNG terminals and plants. In the case which espouses a laissez-faire policy for in-transit shipments
of the Bear Head LNG project, however, the environmental of hydrocarbons between the two countries.
and safety review would be conducted by Canadian federal, Despite dismissing the application and disclaiming Sec-
provincial, and local authorities. tion 3 jurisdiction, however, DOE/FE drew on its authority
When Bear Head LNG filed its applications, relevant under Section 16 of the NGA to direct Bear Head LNG to file
DOE/FE non-FTA precedent could be summarized in a sin- monthly reports and maintain records related to in-transit
gle bullet: shipments.
In applications involving the construction of new, or
the modification of existing, LNG facilities subject to FERC Jordan Cove
jurisdiction, DOE/FE acts as cooperating agency in the NEPA In its Mar. 11 Jordon Cove order, FERC considered both
review process led by FERC. DOE/FE then adopts the NEPA Jordan Coves application under NGA Section 3 for the ter-
documentation prepared by FERC, be it an environmental minal, and Pacific Connectors application under NGA Sec-
assessment (EA) or environmental impact statement (EIS), tion 7 for the pipeline. FERC first evaluated and rejected
provided DOE/FE has conducted an independent review of the proposed pipeline, finding that Pacific Connector was
such NEPA documentation and determined its comments unable to adequately demonstrate a market need. FERC
and suggestions have been satisfied. In those instances that next denied Jordan Coves Section 3 application on the
an EA is prepared, DOE/FE issues a finding of no significant grounds that, without a supply source, the terminal could

80 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

APPROVED LNG IMPORT-EXPORT SITES1 FIG. 2

Import terminals
US
Approved, under construction; FERC
1. Corpus Christi, Tex.: 0.4 bcfd;
13 Cheniere-Corpus Christi LNG
Approved, not under construction; FERC
2. Salinas, PR: 0.6 bcfd; Aguirre
Offshore GasPort LLC
14
12 Approved, not under construction;
MARAD/Coast Guard
3. Gulf of Mexico: 1.0 bcfd; Main Pass
McMoRan
4. Gulf of Mexico: 1.4 bcfd; TORP
Technology-Bienville LNG

8 Export plants
US
Approved, under construction; FERC
5.Sabine Pass, La.: 2.76 bcfd; Cheniere-Sabine
Pass LNG
6. Hackberry, La.: 1.7 bcfd; Sempra-Cameron LNG
7. Freeport, Tex.: 1.8 bcfd; Freeport LNG
11 Development-Expansion-Liquefaction
5
7 10 8. Cove Point, Md.: 0.82 bcfd; Dominion-Cove
6 4 Point LNG
1,9
3
9. Corpus Christi, Tex.: 2.14 bcfd; Cheniere-Corpus
Christi LNG
10. Sabine Pass, La.: 1.4 bcfd; Sabine Pass
Liquefaction2
2
Approved, not under construction; FERC
11. Lake Charles, La.: 2.2 bcfd; Southern
Jurisdiction Union-Lake Charles LNG
FERC Canada
Approved, not under construction
MARAD/USCG
12. Port Hawkesbury, NS: 0.5 bcfd; Bear Head LNG
Canada 13. Kitimat, BC: 3.23 bcfd; LNG Canada
1As of Mar. 22, 2016. 2Trains 5 and 6, Train 5 under construction
14. Squamish, BC: 0.29 bcfd; Woodfibre LNG Ltd.
Source: US Federal Energy Regulatory Commission

provide no benefit to the public that would justify the im- under NGA Section 7. FERC also has not previously found
pacts of building it. a proposed pipeline to be required by the public conve-
FERCs order marked the first denial of an LNG export nience and necessity under NGA Section 7 on the basis of
project in the Lower-48 states. But as discussed in the Jor- a DOE finding under NGA section 3 that the importation
dan Cove order, FERCs rationale for denying the Pacific or exportation of the commodity natural gasis consistent
Connector pipeline is not without precedent. Any appli- with the public interest. 9
cant who has not entered into binding precedent agree- FERC, however, had never before predicated approval of
ments for a significant portion of a proposed pipelines ca- an LNG export plant on the associated pipelines ability to
pacity and is faced with significant landowner opposition satisfy the public convenience and necessity requirement
will be challenged to satisfy FERCs public convenience under NGA Section 7. In fact, in most (if not all) orders
and necessity requirement. considering both LNG terminals or plants and interstate
In looking at stand-alone interstate pipelines (pipelines pipelines, FERC has first considered the LNG terminal
not proposed to directly interconnect with LNG terminals (which benefits from the Section 3 presumption in favor
and that do not cross the US border into Canada or Mexi- of approval) and then the pipeline, which under Section 7,
co), FERC typically has no basis for considering the public does not benefit from a presumption in favor of approval.
interest served by the import-export of natural gas or LNG In the Jordan Cove order, however, FERC reversed that
in its consideration of public convenience and necessity sequencing and first considered the pipeline, followed by

Oil & Gas Journal | June 6, 2016 81

TECHNOLOGY

the export plant. FERC therefore never reached a favorable rights of way would have to be obtained by eminent do-
public interest determination on the plant. Without this main. FERC denied the application, finding that the gen-
favorable determination, the possibility of relying on gen- eralized allegations of need proffered by Pacific Connec-
eralized market conditions supporting the export of LNG tor do not outweigh the potential for adverse impact on
to substantiate, even in part, the need for the pipeline, landowners and communities.
was removed. The stage then set for FERC to consider the Having denied Pacific Connectors application to con-
Pacific Connector pipeline on a stand-alone basis under struct and operate its proposed interstate pipeline, FERC
the more exacting Section 7 standard failed to meet the then rejected the Jordan Cove plants Section 3 applica-
requirements needed for approval, its reliance on general- tion. FERC noted that the Pacific Connector pipeline was
ized market demand deemed insufficient to counterbal- the only proposed transportation path for natural gas to
ance landowner opposition. reach the Jordan Cove LNG plant and that it could not
The authors express no opinion with regard to the like- operate absent the pipeline. Asserting that it has not pre-
lihood of a different outcome for the Jordan Cove proj- viously authorized LNG export terminal facilities without
ect had FERC followed the same approach taken in other a known transportation source of natural gas, FERC con-
LNG proceedings and allowed Pacific Connector to enjoy cluded that permitting Jordan Cove to site, construct, and
the cushioning a favorable public interest determination operate the LNG terminal would be inconsistent with the
on the plant may have provided. But it is clear that FERCs public interest. FERC made this decision, notwithstand-
discretionary authority may be exercised without advance ing that DOE/FE already made a favorable public interest
warning. determination with regards to Jordan Coves plant.11
Section 7(c) of the NGA requires companies On Apr. 8, 2016, Jordan Cove and Pacific Con-
seeking to build and operate an interstate pipe- nector filed a request for rehearing of the Mar. 11
line to apply to FERC for a certificate of pub- order, asking FERC either grant the application
lic convenience and necessity.10 In determin- or permit Jordan Cove and Pacific Connector to
ing whether an application meets this standard, supplement their public convenience and neces-
FERC balances the benefits of the project against sity findings. Specifically, Jordan Cove and Pacif-
potentially adverse effects on economic interests. ic Connector requested FERC to grant rehearing
SPECIAL
To satisfy the necessity aspect of the Sec-
tion 7 standard, an applicant must demonstrate a
REPORT and grant their Section 3 and Section 7 applica-
tions. Alternatively, they requested FERC grant
market need for a pipelines services. Applicants rehearing and (1) grant the applications, subject
can do this in a variety of ways, such as submit- to a condition that would prevent the initiation
ting precedent agreements, demand projections, potential of condemnation proceedings until executed precedent
cost savings to consumers, or a comparison of projected agreements are submitted to commission staff; or (2) stay
demand with the amount of capacity currently serving the Mar. 11 order and re-open the record for 6-months to
the market. Although FERC considers all of the infor- receive additional evidence of customer support. On May
mation provided by an applicant, precedent agreements 9, FERC issued on order granting rehearing of the Mar. 11
constitute significant evidence of need or demand for a order and extending the time by which FERC must act on
project. 9 the request for rehearing.
Indications of market need are then weighed against
a projects potentially adverse economic impacts. FERC References
assesses whether the applicant can financially support 1. Office of Fossil Energy, Bear Head LNG Corporation
the project without relying on subsidization from exist- & Bear Head LNG (USA), LLC, DOE/FE Order No. 3770, FE
ing customers, and whether there is an adverse impact on Docket No. 15-33-LNG, Feb. 5, 2016.
the interests of the applicants existing customers, com- 2. Office of Fossil Energy, Bear Head LNG Corporation
petitors and their captive customers, and landowners and & Bear Head LNG (USA), LLC, DOE/FE Order No. 3681, FE
surrounding communities.9 Docket No. 15-14-NG, Feb. 5, 2016.
Here, according to FERC, is where Pacific Connector 3. FERC, Jordan Cove Energy Project, L.P. and Pacific
failed to adequately demonstrate evidence of market need Connector Gas Pipeline, LP, Order Denying Applications for
for the proposed pipeline. Certificate and Section 3 Authorization, 154 FERC, Mar. 11,
The application also faced opposition from landown- 2016.
ers, who identified several possibly detrimental impacts 4. Procedures for Liquefied Natural Gas, 79 Federal
on their economic interests, such as land valuation, tax Register 48, 132, Aug. 15, 2013.
revenue, and business operations. Because Pacific Con- 5. Macroeconomic Impacts of LNG Exports Studies, 80
nector had acquired only a small portion of the easements Fed. Reg. 81, 300, Dec. 29, 2015.
required to develop the project, FERC noted that some 6. Office of Fossil Energy, Bear Head LNG Corporation

82 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

& Bear Head LNG (USA), LLC: Application for Long-Term The authors
Authorization to Export Natural Gas to Canada and to Export Tania Perez ([email protected]) is a partner
Liquefied Natural Gas from Canada to Free Trade Agreement at Cadwalader, Wickersham & Taft LLP, focused
and Non-Free Trade Agreement Nations, Feb. 25, 2015. on development of US and international energy
7. FERC, Maritimes & Northeast Pipeline, L.L.C.: Order infrastructure projects. She also participates
Amending Presidential Permit and Authorization Under Sec- in proceedings before FERC and DOE. Tania
tion 3 of the Natural Gas Act, 128 FERC 61,070, p. 10, received her JD (2002) from Fordham University
July 2l, 2009. School of Law, New York, NY, and BA from Co-
8. Notice of Application: Bear Head LNG Corporation lumbia University, also in New York City. Tania is a member of
and Bear Head LNG (USA) LLC, Application for Long-Term, the natural gas and renewable energy committees of the Energy
Multi-Contract Authorization To Import Natural Gas From, for Bar Association and the New York Sub-Chapter founding com-
Subsequent Export to, Canada for a 25-Year Term, 80 Fed. mittee of the Association of International Petroleum Negotiators.
Reg. 20,484, Apr. 16, 2015.
9. Office of Fossil Energy, Jordan Cove LNG L.P., DOE/ Lamiya Rahman ([email protected]) is
FE Order No. 3412, FE Docket No. 13-141-NG, Mar. 18, an associate at Cadwalader, Wickersham & Taft,
2014. focused on representing energy and commod-
10. 15 US Code 717f, Construction, extension, or aban- ity companies, financial institutions, and trade
donment of facilities. associations. Her work includes representing
11. Office of Fossil Energy, Jordan Cove Energy Project, clients in enforcement matters before the Com-
L.P., DOE/FE Order No. 3413, FE Docket No. 12-32-LNG, modity Futures Trading Commission (CFTC)
Mar. 24, 2014. and FERC, advising on regulatory matters, and assisting with
transactions. Rahman received her JD from the Georgetown
University Law Center and her BS from Georgetown Universitys
Edmund A. Walsh School of Foreign Service.

COSMODYNE
Air Separation Plants and Nitrogen Generators
Natural Gas (LNG) Liquefaction Systems
 

  
 


 
  


 

  
 
 
 


  
 
  

 
 
  
    

 

   


www.cosmodyne.com
TECHNOLOGY

LNG oversupply faces slowing Asian demand

Monica Hwang
Philip R. Weems
King & Spalding LLP
Houston

Prolonged LNG oversupply in the face of support financing. This need for buyers
slowing Asian demand will be the big- is one reason small to mid-scale plans
gest factor affecting the industry in 2016. may lead the next wave of export proj-
Continuing low oil prices will also affect ects; they have less production to sell
the LNG industry in expected ways (de- and lower costs to finance.
lays and cancellations in export projects) SPECIAL Project developers may be forced to
and unexpected ways (takeovers between TRANSPORTATION REPORT assume that postponing FID to beyond
major players in an already consolidated 2016 is inevitable and turn their attention
industry). How the industry reacts to the instead to increasing their projects com-
oversupplied, low-price environment will have far-reaching petiveness and ensuring sufficient development funding re-
consequences. mains available.
Only a handful of export projects made a final invest- Some 104.8 million tonnes/year (tpy) of liquefaction
ment decision (FID) in 2015. These include one land-based capacity is expected to come online by 2020 as a result of
greenfield project (Cheniere Energys Corpus Christi LNG), completing at least 10 greenfield projects (Table 1). These
one floating project (Golars Cameroon project), and two re- projects will add to the three export projects that started
lating to existing LNG export projects (Chenieres Train 5 production in 2015Santoss Gladstone LNG (7.8 million
expansion at Sabine Pass, La., and Woodsides North West tpy) in Australia, ConocoPhillipss Australia Pacific LNG (9
Shelf Greater Western Flank Phase 2 upstream gas develop- million tpy), and Mitsubishis Donggi-Senoro in Indonesia
ment project in Australia). Petronass Pacific Northwest LNG (2 million tpy)plus Sabine Pass (eventually 18 million tpy)
made a conditional FID in mid-2015, dependent on obtain- and Chevrons Gorgon LNG (eventually 15.6 million tpy)
ing certain Canadian governmental approvals, the most im- in Australia, both of which started first-train production in
portant of which is a federal environmental approval that first-quarter 2016.
was recently postponed.1 This new capacity has led some to predict a prolonged
Projects cancelled in 2015 included Downeast LNG in LNG oversupply. Buyer-friendly terms are arising in LNG
the US and Shells Arrow LNG in Australia. Two Canadian sale and purchase contracts as a result, including greater
projects were halted in first-quarter 2016AltaGas Ltd.s volume and destination-flexibility and more seasonality in
Douglas Channel LNG and Repsols Canaport LNGas was deliveries.2
Woodsides Browse LNG in Australia and Colombias Pa- Indias Petronet also shook up the market by opting to
cific Rubiales project. The cutback in capital spending has buy spot LNG cargoes instead of honoring its contract to
also resulted in FID delays for projects such as Inpexs LNG purchase LNG from Qatars RasGas, taking less than its
plant in Indonesia and Petronass second floating LNG proj- required cargoes under the RasGas contract.3 RasGas and
ect in Malaysia. Project postponement, whether officially Petronet have since negotiated a new contract price at a 50%
announced or not, may be tantamount to cancellation in at discount, with RasGas reportedly waiving recovery of $1 bil-
least some of these cases. lion otherwise due from Petronet as part of the agreement.4
A number of projects still aim to make an FID and start Following Petronets success, China National Petroleum
construction in 2016, including Anadarkos Mozambique Corp. (CNPC) announced it also intends to renegotiate its
LNG, Enis Coral LNG offshore Mozambique, Kinder LNG price with Qatar.5
Morgans Elba Island LNG, Liquefied Natural Gas Ltd.s Other buyers have publicly stated their intention to use
Magnolia LNG, and BG Group-Energy Transfer Partners flexibility in existing contracts to resell cargoes in the spot
Lake Charles LNG. The key to successful development of market or simply procure more supplies in the spot market
these projects will be their ability to attract customers to than under long-term contracts. If other buyers follow suit,

84 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

this development could affect financ- LNG EXPORT PROJECTS UNDER CONSTRUCTION Table 1
ing for new LNG export projects, as Project Location Expected startup Capacity, million tpy
lenders place more scrutiny on the risk Sabine Pass, Trains 3-4 Louisiana 2016-17 9.0
of buyers not honoring the terms of Gorgon, Train 1 started Australia 2016-17 10.4
Petronas FLNG 1, floating Malaysia 2016 1.2
long-term, take-or-pay contracts. Even Prelude, floating Australia 2017 3.6
Golar Hilli, floating Cameroon 2017 1.2
where buyers simply use their contrac- Wheatstone LNG Australia 2017 8.9
tual flexibility to divert cargoes into Ichthys LNG Australia 2017 8.9
Exmar. floating Cameroon 2017 1.2
the spot market, such actions could Freeport LNG Texas 2018 13.9
Yamal LNG Russia 2018-21 16.5
mean more competition for producer- Cameron LNG Louisiana 2018 12.0
sellers looking to place excess cargoes. Cove Point Maryland 2018 5.2
Corpus Christi LNG Texas 2019 13.5

Total 104.8
Large FLNG
When Shell launched the Prelude LNG
project off Australia, it was heralded as
the beginning of a new era for floating liquefaction technol- dominated by a handful of players. Some shippers of other
ogy. Such exuberance has been dampened by more recent commodities are already pushing into the LNG industry,
events, from Browse LNGs (in which Shell has a 27% par- helping fuel the rapid expansion of the LNG spot market.
ticipating share) cancellation to shipping company Hoegh Non-traditional LNG players such as Glencore, Vitol, and
LNGs exit from the floating liquefaction business. The In- Trafigura all recently began or expanded LNG trade,11 with
donesian government also recently rejected Inpexs floating Trafigura doubling its LNG trading volumes in just 1 year.12
liquefaction proposal for the Masela Abadi project on its be- Market veteran Total is aiming to double its LNG trading
lief that an onshore solution offers more economic benefit to volumes by 2020.13
the country.6 Along with the portfolio players, traditional LNG buyers
When Shell made its FID on Prelude LNG, however, oil are seeking opportunities to participate in spot LNG trade.
was trading near $120/bbl7 and it was the sole owner and These developments could lead to exponential growth in the
developer of the project and made its decision on the basis of LNG spot market.
equity financing. The more recent announcements similarly
reflect the economic circumstances in which they occurred, Mergers, acquisitions
with current oil prices also cited in Petronass delay of its The recent merger between Shell and BG combined 33 mil-
second floating liquefaction project.8 lion tpy of LNG production in one company.14 Woodsides
While large floating liquefaction projects have been tout- bid to take over Oil Search (whose assets include a stake
ed as cheaper, faster to construct, and more effective for in Papua New Guinea LNG) was rejected and ended in De-
certain locations, whether a large floating liquefaction proj- cember when Woodside withdrew its proposal.15 Other LNG
ect is successful ultimately depends on the same factors as companies (such as Santos and Excelerate) targeted for take-
a land-based project. Overcoming these factors, including over have generally rebuked such efforts. Market observers
permitting, attracting buyers, and procuring financing, is viewed Woodsides refusal to increase its offer price for Oil
more challenging for all LNG export projects in the current Search as an indication that oil prices have not yet bottomed.
climate of high oil prices and plentiful LNG supplies. Companies have also shown more interest in strategic
divestments of certain assets, especially minority stakes
Business impacts in LNG projects, to raise capital and reduce debt. Activist
Even though most US LNG export projects arent yet run- shareholders drove Apache to sell its stakes in the Wheat-
ning, early movers into the industry have sold or want to stone and Kitimat LNG projects.16 And while Santos rejected
sell-down committed liquefaction service capacities or LNG a takeover offer, it did sell an 11.7% stake in the company
volumes. Lowered domestic demand prompted GAIL (India) to Chinese LNG newcomer ENN Energy Holdings Ltd. As
Ltd. to offload some of its Cove Point capacity and Sabine part of merging with BG, Shell sold off its stake in Kinder
Pass volumes.9 Pertamina also sold Total 0.4 million tpy of Morgans Elba Island project while retaining its right to LNG
its contracted volumes from Corpus Christi LNG starting capacity there. Shell is now considering a divestiture of its
in 2020 in exchange for Total supplying it 0.4-1 million tpy North Sea oil assets.17
from its global portfolio. Other companies, however, see the potential to increase
LNG oversupply has likewise led to a drop in LNG ship- their LNG-related stakes in the midst of the current down-
ping prices. At the end of 2015 charter rates were $32,000/ turn. TransCanada recently announced its $13 billion acqui-
day, 50% lower than the previous year.10 sition of Columbia Pipeline Group, which will help position
Available capacity in the secondary market could, howev- it to transport North Americas abundant natural gas supply
er, lead to a lower cost of entry into an industry traditionally to liquefied natural gas terminals for export to international

Oil & Gas Journal | June 6, 2016 85

TECHNOLOGY

NEW FSRU FLEET ASSIGNMENTS 2015 Table 2

Vessel Storage, cu m Owner Charterer Initial charter, years Location

Explorer 151,000 Excelerate Energy Dubai Supply Authority 10 Dubai, UAE

Exquisite 150,900 Excelerate Energy Engro Corp. Karachi, Pakistan
Golar Eskimo 160,000 Golar LNG Jordan LNG 10 Port Aqaba, Jordan
Golar Igloo 170,000 Golar LNG Kuwait National Petroleum Co. 5 Mina al-Ahmadi, Kuwait
Hegh Gallant 170,000 Hegh LNG Egyptian Natural Gas Holding Co. (EGAS) 5 Ain Sokhna, Egypt
BW Singapore 170,000 BW Maritime EGAS 5 Ain Sokhna Port, Egypt

markets.18 To fund the acquisition it will sell its merchant China LNG Shipping to provide LNG ships for the Yamal
power assets in the Northeast US.19 ExxonMobil is rumored LNG project.23 Industry analysts are predicting more joint
to be pursuing a stake in Enis Mozambique project.20 ventures and mergers in 2016 as the LNG shipping industry
LNG buyers, meanwhile, have increased collaboration. deals with a low charter-rate environment.
The major example completed in 2015 is the fuel-procure-
ment venture Jera, between Tokyo Electric Power Co. and New demand
Chubu Electric Power Co. Inc., which created the largest Traditional Asian LNG buyers have cut their forecast de-
LNG buyer in the world, with about 40 million tpy of annu- mand. Assuming the successful restart of numerous nuclear
al demand.21 Jera has entered into LNG collaboration MOUs reactors, Japan predicts its LNG demand will decline to a
with Singapores Pavilion Gas, the Electricity Generating Au- 5-year low of 79.6 million tpy starting in 2016.24 Korea, the
thority of Thailand, GAIL, South Koreas Kogas, and China second largest LNG importing country in the world after Ja-
National Offshore Oil Corp. and CNPC. Tokyo Gas has en- pan, also expects its LNG demand to fall.25
tered into similar MOUs with Taiwans CPC Corp. and fel- China and India dominate the list of import terminals
low Japanese utility Tohoku Electric. These collaborations under construction and the Middle East the list of floating
are, in part, aimed at further increasing buyers leverage in import terminals placed into service this year. New LNG im-
LNG negotiations. porters Egypt, Pakistan, and Jordan bought a total of 5.5
Major buyers additionally are seeking the right to divert million tonnes of LNG in 2015.26 According to the Interna-
or resell cargoes without obtaining the sellers approval. Pric- tional Energy Agency (IEA), China and the Middle East will
ing index variations emerged in 2015 seeking shorter con- be the big centers of overall gas demand by 2035.27
tract terms and supply flexibility based on seasonality. Che- Some additional demand should be created by the six ad-
niere Marketing has taken the lead in exploring new pricing ditional floating storage and regasification units (FSRU) de-
indices, inking sales contracts based on European gas indi- livered or contracted in 2015 (Table 2).LNG import projects
ces. Tokyo Gas called for pricing index diversification in its under development suggest that the next wave of LNG buy-
efforts to procure another 2-3 million tpy for 2020.22 ers will be smaller and new. The main problem such buyers
Tokyo Gas has also noted its preference for 5-10 year pose for exporters is access to sufficient credit.
terms.22 Jera similarly said that it will be relying more on
short and mid-term contracts to fulfill its LNG demand, not- Production shutdowns
withstanding that such terms may not be adequate for LNG Producers shut down almost 25 million tpy of LNG produc-
export projects financing requirements. tion in 2015 at four export terminals. Egypts gas shortage
The degree of seasonality extracted by PetroChina from continues to hinder operations at both the Idku (7.2 million
Qatar may end up being a major concession. Seasonality is tpy) and Damietta (5.5 million tpy) export terminals. BG has
desirable for LNG buyers who have historically looked to declared force majeure at the Idku terminal and the owners
spot cargoes in managing seasonal demand fluctuations. But of the Damietta LNG plant (Union Fenosa and Eni) are purs-
seasonal deliveries are hard to manage for LNG export proj- ing arbitration against the Egyptian Government to restart
ects that have to sell and perhaps transport full production gas supplies and LNG production. While there have been
throughout the year. While Qatars arrangement with Petro- two recent major gas discoveries offshore Egypt and BG has
China is limited to 2016, Qatar has left open the possibility agreed to buy Nobles stake in the Aphrodite field off Cyprus,
of extending the arrangement. intending in part to supply the Idku terminal,28 these mea-
LNG shippers, meanwhile, are joining forces to improve sures are unlikely to permit Egypt to restart LNG exports in
cost efficiencies. Golar LNG, Dynagas, and GasLog Ltd. an- the near term. Egypt is now an emerging LNG buyer, pro-
nounced an agreement whereby they will contribute certain curing two floating regasification units to import LNG and
LNG ships to a pool available to the spot market. Sinotrans seeking a third for delivery within 2 years.29
has also announced five joint ventures with Dynagas and Angola LNG (5.2 million tpy), which was shut down in
2014 for a major rebuild, has yet to restart. Chevron had

86 Oil & Gas Journal | June 6, 2016

 TECHNOLOGY

hoped for a restart by end-2015 but is now targeting July of this area. Gazprom and Fluxys have announced collabora-
this year.30 Upon restart, the industry will keep a close eye tion on developing a small-scale market in Europe.41
on its reliability. The growing use of FSRUs in LNG-to-power projects may
Yemen LNG (6.7 million tpy) has been shut since April provide a new source of LNG demand for liquefaction proj-
2015 due to civil unrest by Houthi rebels.31 There are no ects, potentially opening up new countries for LNG imports.
signs production will resume soon. AES Panama LNG, for example has been awarded the tender
Other export plants have also suffered unforeseen cur- to build Panamas first gas-fired power plant and associated
tailments. In late December force majeure was declared at LNG import terminal.42 LNG-to-power projects are also un-
Nigeria LNG due to acts of sabotage on a pipeline to the der development in Africa (including three in Ghana alone),
terminal.32 The force majeure may affect deliveries to long- Latin America, and Asia.
term buyers in Italy, Spain, Turkey, Portugal, and France.32 An LNG import capacity of 2-5 million tpy and higher ex-
poses some of these projects to the same need for long-term
Project costs offtake contracts or financing as LNG export projects. Ac-
One potential bright spot from the downturn in oil prices tivities in the Philippines (which is expected to import LNG
might be decreased construction and development costs. given the depletion of its only major gas field) illustrate the
While this did not occur in 2015, the completion of three problems facing these projects. While a few different parties
projects this year and increased contractor competition re- are evaluating LNG-to-power projects there, progress has
sulting from the scarcity of new export project FIDs, may yet been delayed while long-term buyers, or partners to provide
help reduce overall project costs. financing, are sought.43
Labor costs, however, are region-specific and will vary.
North America labor costs remain below historical average33 References
and Woodfibre LNG is one project that believes it can take 1. The Canadian Press, Pacific Northwest LNG Decision
advantage of lowered labor costs to cut construction costs.34 on Hold To Get it Right, Minister Says, Times Colonist, Mar.
LNG export projects may also look to new project designs 21, 2016.
or technology to lower costs. Magnolia LNG credits its pro- 2. Vukmanovic, O., Qatar and PetroChina Alter LNG Sup-
prietary optimized single-mixed refrigerant (OSMR) tech- ply Deal, Winter Spot Price Fallout, Reuters, Aug. 26, 2015.
nology for its $500/tonne of capacity construction cost vs. an 3. Qatar to Waive $1 Billion Penalty on India for Lower
average of $800-900/tonne for other US projects.35 The costs Gas Offtake, The Financial Express, Nov. 23, 2015.
at Lake Charles LNG are an estimated $512/tonne, which 4. Bhardwaj, M., Indias Energy Muscle Helps Petronet
could yield a liquefaction toll cost of less than $2.00/MMbtu get Better Qatar Gas Deal, Reuters, Dec. 31, 2015.
and a delivered price of $6.50/MMbtu into Asia.36 Fortuna 5. Paton, J. and Shiryaevskaya, A., China Joins India
LNG in Equatorial Guinea has reportedly cut capital costs Seeking Better LNG Contracts for Buyers, The Washington
from $800/tonne to $600/tonne and secured an HOA with Post, Mar. 11, 2016.
a customer willing to prepay for LNG in its initial stages of 6. Da Costa, A.B. and Jensen, F., Indonesia rejects
production.37 Inpexs Mega Floating LNG Projects, Wants to Stay Onshore,
The lowered cost and shortened development time for Rigzone, Mar. 23, 2016.
floating LNG regasification units (FLRUs) have facilitated 7. Treadgold, T., One Floating LNG Dream Sinks as An-
smaller LNG users entrance to the industry. In the western other Get Ready to Float, Forbes, Mar. 23, 2016.
hemisphere, FLRUs are planned for Hawaii, Puerto Rico, and 8. Sustaita, M., Petronas Delays PFLNG 2 Amid Slump,
Jamaica. Cheniere appears to be preparing for the increase Offshore Engineer, Feb. 29, 2016.
in demand for small-scale LNG, requesting government ap- 9. Vaijayanthi, M.C., Indias Gail Sells Another 1 Million
proval to permit its Sabine Pass terminal to load LNG into Mt/Year From US LNG Contracts, Platts, July 16, 2015.
LNG-fueled vessels and handle containerized LNG.38 AES 10. Wallis, K., LNG Shipper Brace for Wave of Consolida-
Dominicana is seeking to capitalize on its existing onshore tion as Freight Rates Sink, Reuters, Dec. 20, 2015.
LNG terminal in the Dominican Republic to provide LNG 11 Gronholt-Pedersen, J., Glencore Vies with Trafigura,
transshipment and bunkering services for the Caribbean Vitol in Thawing LNG Market, Reuters, Sept. 17, 2015.
and Latin American markets.39 12. Shiryaevskaya, A., Trafigura LNG Trading More Than
Small-scale LNGs potential has also been recognized by Doubles on New Buyer Demand, Bloomberg Business, Dec.
Singapores Pavilion Energy. Pavilion points to the fact that 14, 2015.
65% of all contracts signed in the past 5 years are for less than 13. Abreu, A., Total Outlines LNG Ambitions, Platts
1 million tpy as a sign of the potential growth in small-vol- International Gas Report, Nov. 2, 2015.
ume business.40 The company views the many small islands 14. Shell, Recommended Cash and Share Offer for BG
of Southeast Asia as a great fit for small-scale LNG solutions Group PLC by Royal Dutch Shell PLC, Feb. 15, 2016.
and is in talks with several parties regarding collaboration in 15. Stewart, R.M., Australias Woodside Abandons $8.4

Oil & Gas Journal | June 6, 2016 87

TECHNOLOGY

Billion Bid to Take Over Oil Search, The Wall Street Journal, Cost, Offshore Engineer, Dec. 9, 2015.
Dec. 7, 2015. 38. Fisher, J., Sabine Pass Seeks to Add Containerized
16. Macdonald-Smith, A., Woodside Petroleum Closes LNG Capabilities, Natural Gas Intelligence, Dec. 3, 2015.
$US2.8 b Purchase of Apache Australia Assets, The Sydney 39. Michel, M., Dominican LNG Firm Gets Syndicated
Morning Herald, Apr. 3, 2015. Facility, Global Trade Review, Dec. 23, 2015.
17. Clark, P., Shell Weighs North Sea Assets For Potential 40. Woo, J., Home-Grown LNG Player Eyeing Small Re-
Sale, Financial Times, Mar. 27, 2016. gional Projects, The Straits Times, Sept. 10, 2015.
18. TransCanada, TransCanada to Acquire Columbia 41. Devitt, P. and Winning, A., Russians Gazprom to
Pipeline Group for US$13 Billion, Mar. 17, 2016. Cooperate with Fluxys on Europes Small-Scale LNG Market,
19. Penty, R., TransCanada Bought a Plant Only to Sell It Reuters, Mar. 29, 2016.
Six Weeks Later, Bloomberg Business, Mar. 17, 2016. 42. AES, AES Awarded Panamas First Natural Gas-Fired
20. Reuters, ExxonMobil In Talks to Buy Into Enis Giant Generation Plant, Sept. 11, 2015.
Mozambique Gas Field, Fortune, Mar. 26, 2016. 43. Cheang, C.Y., Shell, Total Mull LNG Terminal Projects
21. Tsukimori, O. and Obayashi, Y., Japans Jera Says Will in the Philippines, Rigzone, Mar. 25, 2016.
Significantly Cut Long-Term LNG Contracts, Reuters, Oct. 21,
2015.
22. Abreu, A. and Amaha, E., Tokyo Gas Seeks More
LNG, Platts International Gas Report, Nov. 2, 2015.
23. Liang, L.H., Sinotrans Seals Joint Venture Deals for
Five Arctic LNG Carriers, Seatrade Maritime News, Dec. 22,
2015.
24. Tsukimori, O. and Sheldrick, A., As Japans Oil, Gas, The authors
Power Use Stalls, Coal Imports Hit New Record, Reuters, Monica Hwang ([email protected]) is counsel
Jan. 25, 2016. in King & Spaldings Houston global transac-
25. Lee, C., S Korean Kogas Records Sharpest-Ever tions practice group. She has advised LNG
Decline in LNG Sales in Dec to 3.49 mil mt, Platts, Jan. 19, projects globally, including (on the liquefaction
2016. and export side) in Australia, Canada, the US,
26. International Group of Liquefied Natural Gas Import- Mozambique, and Colombia and (on the import
ers, The LNG Industry in 2015, http://www.giignl.org/publi- and regasification side) in Canada, the US, the
cations. Caribbean, and South America. Hwang holds a JD from the
27. Bloomberg, China, Middle East to be New Gas-Guz- University of Houston Law Center and a BBA in finance from
zlers by 2035, The Economic Times, Nov. 12, 2015. the University of Texas at Austin.
28. Kambas, M., Britains BG Group Pays $165 mln for
Stake in Cyprus Gas Field, Reuters, Nov. 23, 2015. Philip R. Weems ([email protected]), based
29. Egypt to Charter Third FSRU Late Next Year, LNG in Houston, is a partner at King & Spalding and
World News, Oct. 26, 2015. is co-head of the firms global energy practice.
30. Agencia Angola Press, Angola LNG Resumes Gas He has more than 25 years of intensive experi-
Production in July, Mar. 16, 2016. ence in the LNG industry, including as lead
31. Clark, A. and Hong, C.H., Yemens LNG Plant Halts in-house attorney for the Tangguh LNG Project
Supply as Fighting Worsens Security, Bloomberg, Apr. 13, and associate general counsel of Virginia Indo-
2015. nesia Co. (a major supplier of gas to the Bontang LNG Plant).
32. George, L., Eni Declared Force Majeure on Nigerias He served as President of the Association of International
LNG Export Plant Loadings, Reuters, Dec. 21, 2015. Petroleum Negotiators (AIPN), 2003-04. Weems has a JD from
33. IHS, Commodity Prices May Have Reached Bottom, Texas Tech University School of Law (1982), a Master of Laws
But the Rebound Will be Very Slow, Mar. 23, 2016. from the University of Sydney, Australia (1984), and a Certifi-
34. Hoekstra, G. Woodfibre LNG Seeks to Cut Construc- cate of Advanced Study (1989) from Thunderbird, The Ameri-
tion Costs to Offset Gas-Price Drop in China, Vancouver Sun, can Graduate School of International Management, Glendale,
Dec. 13, 2015. Ariz.
35. Magill, J., Magnolia LNG Signs Contract to Build Lake
Charles, La., Project, Platts, Nov. 17, 2015.
36. Good, A., Barclays: Lake Charles Positioned as
Lowest-Cost US LNG Export Project, SNL Financial, Nov. 19,
2015.
37. Maslin, E., Ophir Inks Fortuna LNG Deal, Reduces

88 Oil & Gas Journal | June 6, 2016

C O M PA N Y P R O F I L E

Innovative Technologies:
Forging a New Path for the FLOTEK INDUSTRIES, INC.
10603 W. Sam Houston Pkwy. N,
Suite 300

Future Houston, TX 77064

1+ (713) 849-9911
www.flotekind.com

Flotek Industries is a leader in an energy Consumer & Industrial Chemistry Technol-

services renaissance focused on creative ogies. While each requires unique technical
chemistry. It recognizes that innovation is expertise, all share the commitment to client in mind and tailored to solve specific
essential to ensure oil and natural gas pro- Floteks vision for best-in-class technol- challenges in a basin, play and/or well. The
duction can be cost effective and coexist ogy, cutting-edge innovation to address the patented CnF technology is a combination
with a heightened sense of environ- of surfactant and solvent in a nanoscopic
mental awareness. With this in mind, structure. The surfactants that are carefully
in the Fall 2016 Flotek is opening a chosen, significantly lower interfacial tension
Research & Innovation Leadership and change the contact angle. D-limonene
Center in Houston with state-of- is a superior solvent derived from oranges
the-art laboratory and analytical that dissolves organic deposits, changes
wettability and is fully renewable and sus-
tainable. The nanoscopic structure delivers
the synergistic relationship between the sol-
vent and surfactant to evenly treat much
larger surface areas and permeate the pore
spaces of the well. The result is a significant
ever-changing challenges for improvement in initial production, improved
our clients and exceptional performance after shut-in and greater pro-
customer service. duction overall.
Floteks line of stimulation Floteks Production Technologies group
chemistries offers clients a wide is introducing the Genius Series which will
range of hydrocarbon mobility bring together our proven, technology-en-
solutions for their unique reser- abled ESP equipment, our world-class
voirs. Flotek has unveiled a new customer service and our proprietary soft-
line of patented, Pressure reduc- ware into a package that can help you
TM
space. The center will provide unique oppor- ing Fluid chemistries that do less damage increase efficiency, profits and safety. In addi-
tunities for real-time client interaction and to the reservoir than traditional friction reduc- tion, Flotek technicians are equipped with
sensory demonstrations of the impact of our ers. The PrFTM line of products is also more digital solutions to reduce installation time,
chemistries. environmentally friendly and delivers superior minimize the chance for errors and provide
Flotek is a Houston-based oilfield tech- performance. These products can be applied accurate and thorough reports with each
nology company focused on value-added in freshwater fracturing fluids to brines with installation or service call.
drilling, completion and production prod- high levels of total dissolved solids without Recent low prices have challenged the
ucts. Value is delivered through a network affecting performance. industry. Technology remains an important
of field offices in key basins across North The flagship line of Complex nano-Fluid element of success. Flotek remains com-
America and through strategic partnerships chemistries enable more production from mitted to Research & Innovation in order
internationally. Floteks product lines include: client wells. Floteks R&I group is further to demonstrate their leadership in provid-
Energy Chemistry Technologies, Drilling developing the next generation of the CnF ing best-in-class, environmentally friendly,
Technologies, Production Technologies and product line which are designed with the value-added technologies.

S2 Business Strategies in a Low-Price Environment

Low
Price
companies must drive toward more efficiency and
effectiveness to stay in business, and they are. Neces-
sity is the mother of invention. Innovations, busi-
ness process improvements, creative people and new
technologies, all inspired by the current downturn,
are helping the industry lower cost, be more effi-
cient and profitable.

Survey results
PennEnergy Research conducted a survey of what

What are the industry was actually doing to survive in this

market. It confirmed cost reduction is important.
Sixty-three percent (63%) of respondents thought

companies
cost reductions of 25% or less were achievable.
The tactics for attaining such cost reductions
were most interesting. Efficiencies in operations
ranked highest with forty-seven percent (47%) of

doing? respondents, the majority highlighting technology

and innovation. Stopping or slowing certain activ-
ities was second with twenty-eight percent (28%).
Re-negotiating with suppliers garnered fourteen
percent (14%) and reducing work force, eleven

T
here is good news and bad news for the oil patch. Prices are percent (11%).
down dramatically; the predictable reactions are budget cuts and lay- Sixty-five percent (65%) of respondents were
offs. With those announcements, drill rig counts have fallen and the operators or consultants advising them. The mix
negative feelings about jobs and the industry have grown. Suppliers, of respondents provides a good cross section of the
manufacturers, operators and companies of all sizes are making adjust- industry. More than eighty-five percent (85%) of
ments, and rightly so. But the industry does not make investments based on respondents described themselves as mid-level or
current prices; it makes them on expected prices, which are influenced by cur- higher, therefore, the information shared reflects
rent ones. So, historical perspectives are in order. Figure 1 is a historical view opinions of many decision makers.
of oil prices back to 1946.
FIGURE 1
Adjusting to 2015 dollars, the current
prices ($35-$40) are still higher than the $160
Crude oil prices June 2008
monthly averages for most of the past 70
$140 Nominal monthly average peak
years. There has been increased volatility Inflation adjusted
$136.55 in 2015 dollars
December 1979 peak
in recent decades primarily due to OPECs $120
monthly average $117.18
influence since the 1970s. Despite the vola-
tility, the industry has been successful with $100
Nominal peak $38 October 1990 peak
the average prices over those years. (Monthly average price) $61.46
$80 Intraday prices peaked higher
Natural production decline, on average
$63.57
8%-10% per year, brings the need for more March 1946 Average since 2000
$60 $17.71 $53.08
supply. The world still needs hydrocarbons. in 2015 dollars Average since 1980
$41.78
Although alternatives are gaining, most pro- $40 Average since 1946

jections still show a large market share for Nominal daily price
$28 January 21st
hydrocarbons well into the future. The busi- $20
February 2009 $34.60 in 2015 dollars
ness reality is the price needs to be adequate December 1998 $12.47 in 2015 dollars
$0
to bring them to market. At current prices, 1950 1960 1970 1980 1990 2000 2010 http://www.InflationData.com
Credit:
Creddit:: InflationData.com
Inflatio
onDataa.ccom

Business Strategies in a Low-Price Environment S3

 Low prices are a problem for the industry, but as Churchill reminds us, and innovation center. It is uniquely designed for
...an optimist sees opportunity in every difficulty. Based on the survey, the clients to interact with scientists and thought lead-
opportunity is technology and innovation. The survey questions explored six ers directly.
facets of the industrys reaction which are summarized in Figure 2. First, we Schlumberger, the largest of the service compa-
will examine the strategies companies are adopting to cope with the current nies, is also aligned with the need for technology.
price environment. The respondents were asked about four traditional busi- More than twenty-five percent (25%) 1 of its 2017 total
ness areas where improvement opportunities might exist: drilling, comple- revenue is expected from new technologies. On Feb-
tions, production, and midstream (gathering, processing and transportation). ruary 3, 2016, as part of an earnings call outlining
In addition, the survey asked about data analytics, a relatively new business staff cuts and closing facilities, major service com-
area. It is an active discussion topic, applicable to all facets of the industry. pany, National Oilwell Varco CEO Clay Williams

1. Strategies
Two strategic themes were chosen by respondents. Sixty-seven percent (67%)
summarized the situation, the opportunity for
NOV to once again pioneer new, more efficient ways
of extracting oil and gas to reduce their cost.
selected strategies that involved technology, innovation and finding ways Pioneer Natural Resources is pursuing an opti-
to operate assets more efficiently and/or at lower cost. Thirty-three percent mization strategy expedited by the low-price envi-
(33%) selected strategies that involved buying, selling and/or prioritizing assets. ronment. Like others, margins have been squeezed.
Despite the pricing challenges, companies recognize technology as a key to Pioneer is reducing wells drilled in 2016, yet increas-
success. Continual progress is essential to remain viable in a competitive world. ing production. Over 2015, drilling cost per lateral
Service companies know that technology is a driver for the business. John foot declined ~30% while cumulative production
Chisholm, CEO of Flotek Industries, Inc. commented, Technology innova- per well increased ~50%. From investor presenta-
tion has always driven our industry. The ultra-tight rocks of unconventional tions, the reason is completion optimization
reservoirs are still primarily produced with conventional reservoir practices. Underlying Pioneers optimization efforts are
Technology to create hydrocarbon mobility in the nano-sized rock pores of good assets and good financials (balance sheet and
shale is understood and becoming a best practice. hedging position). However, the completion opti-
This bodes well for beleaguered shale operators. Getting more oil from a mization program concerns the actual assets. The
well lowers the cost per barrel produced. Despite the weak markets, Flotek current price situation has resulted in less drilling
believes technology is essential for the industry and is opening a new research activity, creating an opportunity for engineers and
geologists to do what they do best; optimize perfor-
FIGURE 2 mance. Pioneers performance in 2016 is accomplish-
ing that, more production and fewer wells.
Business areas - importance Strategic directions Private equity-backed Silverback has been suc-
Respondent rankings Respondent rankings
cessful even in these tough times. They were rate-
of-return driven even before the downturn; their
Data analytics private funding expects a rate of return (ROR). We
& modeling Drilling
18% 24% Prioritize cannot drill average wells; we must have best-
assets
Gathering, 33% in-class wells each time says Stephen Lipari, Chief
processing & Operating Officer. Low prices only make the selec-
transportation Technology,
16% Completions efficiency & tion process more exacting. He noted the selection
21% innovation
67% is not just the best of the opportunities, but is the
Production
21% best of the best opportunities when prices are low.
Silverback achieves this by integrating data, involv-
ing decision makers and leveraging technologies.
A major operating company is following a strat-
Cost efficiency Disciplined decisions egy of knowledge efficiency sharing existing tech-
Apply technology Profit per barrel nologies among business units and searching for new
Optimize performance Leverage knowledge ones ready for use in 2-3 years.
& data
Integrate data & analysis Another example is EOG Resources which is
high-grading its Eagle Ford assets for premium
drilling and completions locations. This process
S4 Business Strategies in a Low-Price Environment
is driven by efficiencies, tech-
nical advancements and geosci- OBSERVATIONLAYOFFS AND GRADUATES
ence breakthroughs. It identified In the press, one of the biggest headlines is the reduction in force announcements. When
over 3,200 premium drilling loca- asked how to achieve lower cost, staff reductions made up only 11% of the responses as a
tions and more than 2 billion strategy and even less in the business areas.
barrels of oil potential with supe- Staff reduction pronouncements are a quick, visible way to demonstrate action to investors
rior returns. and near-term savings. Those who have lived through previous cycles understand there is long-
At a strategic level, companies term risk to losing experienced people. The survey may be showing that concern.
are using technology to survive Responding to the energy boom, petroleum engineering schools expanded. Those
and thrive in todays climate. students are now graduating into a very soft market. This survey identifies the need for

2. Drilling
Drilling is a critical business
technology and innovation. Youthful enthusiasm and unbiased thinking may well be good
prescriptions for the innovation and technology demands of the current environment.
The next few years will be challenging.
process identified by the highest
number of respondents, twenty-
four percent (24%), for potential improvement as a result of low prices. The Geologic understanding and better analysis of
top 3 from the survey were: rock properties 39% of respondents
Reduce non-productive time 23% of respondents Better use of proppants and chemicals 23% of
Drill multiple and longer sections into the pay zone from a single well bore respondents (survey included option to reduce
23% of respondents use to save money which did not attract many
Improved crews, better training 13% of respondents respondents)
Reduce time for a completion 17% of respondents
There are many companies supplying materials and equipment that impact
these three areas. They all recognize the cost pressures the industry is under. Completions are a major expense and can directly
One example is Georgia-Pacific Chemicals, which not only recognized the need affect the revenue generating (production) part of
for reductions, but took action to improve effectiveness and lower cost. They the business. It is critical to get them right, espe-
supply emulsifiers for drilling muds to carry cuttings and provide lubrication cially when margins are tight. Geology, proppants
in well bores. Traditionally, emulsifiers are sold in liquid form. Georgia-Pa- and chemicals were selected by sixty-two percent
cific Chemicals developed technology to produce a dry emulsifier which lowers (62%) of respondents as areas for improvement in
transportation, handling, packaging and disposal cost. The net result is lower these challenging times.
cost. In addition, because of the improved activity with the dry formulation, Pioneers completion optimization process
you can use only the amount of emulsifier required for the job. includes adjusting lateral lengths, stage lengths,
The high ranking of Improved crews, better training recognizes this number of clusters per stage, fluids (volume and
part of the business is about skilled people. Brigham Resources, a private composition) and proppants (volume and composi-
operating company, noted the importance of well-trained, motivated crews. tion). Much of Pioneers success comes from applica-
Drilling crews understand faster drilling allows the operator to be profitable tion of existing technologies and their deep geologic
and drill another well. Their efficiency can make their own jobs more secure. and operational understanding of the basins. Opti-
Despite low prices, Brigham is still drilling and crews recently completed a mization is an iterative process, and so far, adding
21,000 foot well with a 10,000 foot horizontal section in 15 days. Such speed more stages and more clusters, increasing the
is possible with well-trained crews and dual telemetry Measurement While volume of water, and pumping more proppant have
Drilling (MWD). Brigham recognized the accomplishments of the crews and helped improve their well results. They are testing
hopes to have additional profitable wells as a result. Safety is not lost with longer lateral lengths and different fluid composi-
speed because workers know incidents hurt efficiency and operators insist tions. There are many combinations of parameters
on, and often reward, safe performance. to consider for the optimum mix with the various

3. Completions
Twenty-one percent (21%) of respondents identified completions as a busi-
geological reservoir conditions. Pioneers process has
potential for more benefits as additional combina-
tions of parameters and technologies are considered.
ness area for potential improvement. Three surfaced as the most important Silverback Exploration leverages completion
aspects to consider: fluids technology to reduce production risk on each
Business Strategies in a Low-Price Environment S5
well. They have an analytical approach to optimize completions by selecting product optimizes the value chain from reservoir to
the most successful practices. An example is their selection of a robust fluid market. As the industry is facing slimmer margins,
and proppant treatment, coupled with surfactant and solvent technology. This tools like this are more and more important.
approach helps Silverback achieve better performance (i.e. more production) Transportation is often provided by a third
and meet their ROR objectives. party, so it is not surprising renegotiations of con-
Flotek provides a perspective on the completions process which focuses on tracts were a common approach to cut costs. Those
chemistry rather than mechanical aspects. It is about conditioning the reser- providers no doubt would also have equipment reli-
voir to produce the hydrocarbons. The metric is simple and direct; more pro- ability and efficiency high on their priority list of
duction. Unconventional reservoirs are unique in that pore structures in rocks ways to manage their business. They provide ser-
are ultra-tight (often nano-scale) where capillary pressure dominates, result- vices to operators and understand they have cost
ing in primary depletion typically recovering only 8% to 10% of oil in place. pressures. Commercial and regulatory terms will
Technology that can release some of that trapped oil is essential. Chemical be in play, but low prices will drive all value chain
surfactant and solvent technologies can enhance the mobility of all the fluids participants to be efficient.
including injected water. This is the only area where staff reductions
Both operating and service companies recognize the importance of com- made the top 3 list, and even then only a single
pletions to generate more production and better recovery from unconven- digit percentage.
tional reservoirs.

4. Production 6. Data Analytics

Data analytics was the last business area explored
Production responses were varied, but focused on three areas: in the survey. There has been much industry dis-
Technologies to increase recovery from a well including better understand- cussion about the increasing volume and velocity
ing of reservoir data, re-stimulation and artificial lift 50% of respondents of the data from many sensors (downhole and on
Improve reliability and maintenance including better design of equipment, the surface) and how it can be put to use. This data
deferring workovers and maintenance 24% of respondents is far too often underutilized and the value missed.
Well site automation 13% of respondents Eighteen percent (18%) of respondents felt data ana-
lytics offered ways to lower expenses or improve per-
Half of respondents were looking to improve recovery in the production phase, formance or both.
similar to completions. This comes not necessarily as a reduction in spend- The data is spread across drilling, completions,
ing, but, as one operator said, comes by paying attention to cost and using production, and supply and transportation. Each
technology to increase production/recovery thus lowering the cost per barrel. discipline has the potential to improve its own per-
There is an inventory of drilled and uncompleted wells and candidates formance. However, the concept of integration of
for re-stimulation, all which may deliver profitable production even at lower data was raised by many as a way to improve under-
prices. Technology for producing unconventional reservoirs is still very standing and achieve better business results.
early in its lifecycle. Typical recovery in shale wells is less than ten percent of Stochastic Simulation, Ltd, an Australian com-
in-place hydrocarbons leaving opportunities for technology, analytics, and pany, uses data you already have to optimize all the
engineering innovation to increase recovery from the thousands of uncon- aspects of the business we have discussed. Getting
ventional wells. more barrels from investments already made lowers

5. Gathering, processing and transportation

Gathering, processing, and transportation responses emphasized three areas
the cost of a produced barrel, a very nice outcome
in these lean times. In addition, their software uses
geologic data to lower drilling nonproductive time.
of importance in these hard economic times. The top three were: It also uses market and operational data to optimize
Equipment and process efficiency including reliability of equipment, pro- gas production through the entire value chain. In
cess efficiency and energy use 61% of respondents times like these, companies like Stochastic Simula-
Renegotiation of contracts for transportation 25% of respondents tion help you get more from existing assets.
Reductions in staff 8% of respondents A major independent noted they cannot afford
pilots and trials of unproven technology in these
Efficiency is the name of the game here since the entire system is on the surface times. They have decided that using data from
and processes are well understood. Stochastic Simulation provides software thousands of previously drilled wells can teach
which integrates reservoir and surface facility equipment. Their FlowAssure them best practices at a much lower cost. Taking
S6 Business Strategies in a Low-Price Environment
 Custom
Publishing
advantage of available data is not new. It has been an issue for several years.
VP Custom Publishing Roy Markum
However, the price collapse has provided the additional motivation to apply [email protected]
data-driven approaches as low-cost ways to improve performance. Writers Michael Strathman
Stochastic Simulation, Brigham, Pioneer, Silverback, Flotek, Georgia-Pacific, Anthony Strathman, PhD
The Trinity Group, Inc.
and EOG all mention data and the ability to extract understanding as essen- [email protected]
tial in these times. The importance is recognized across the value chain. This Director, PennEnergy Research Matt Dresher

low-price market may finally motivate the industry to optimize value from Art Director Meg Fuschetti

existing data. Production Manager Shirley Gamboa

PennWell Petroleum Group
1455 West Loop South, Suite 400 Houston, TX 77027 U.S.A.
Conclusion 713.621.9720 FAX: 713.963.6285
The oil and gas industry has seen low prices before. The physical and data ana- PennWell Corporate Headquarters
1421 S. Sheridan Rd., Tulsa, OK 74112
lytic technologies available today provide new tools to reduce cost and increase
Chairman Robert F. Biolchini
hydrocarbon recovery. The choice of tactics seen in the survey and the com- Vice Chairman Frank T. Lauinger
pany interviews show the innovative spirit is alive. Times are tough, but the President and
Mark C. Wilmoth
industry is getting stronger. BG CEO Helge Lund said at Gastech on March Chief Executive Officer

29, 2016, As an industry, we face a big and challenging agenda. But this is an Executive Vice President,
Corporate Development Jayne A. Gilsinger
industry that is used to making the impossible, routine. and Strategy
Senior Vice President
Brian Conway
REFERENCES Finance and Chief Financial Officer
1. Cowen and Company Ultimate Energy Conference Patrick Schom, President Operations, Schlumberger December 1, 2015.

C O M PA N Y P R O F I L E

Better recovery faster decisions

Drastic times require drastic measures. Inno- DrillAssure uses interpreted seismic to
STOCHASTIC SIMULATION LTD
vation in digital information technologies is generate earth stress information prior to www.stochasticsimulation.com/
critical to achieve productivity gains which drilling. It significantly reduces drilling risk
are essential when profitability is under pres- and cost. It also identifies reservoir compart-
sure. The future winners in the oil and gas mentalization due to fault sealing. advancements in the industry with integra-
industry will be information masters. GasAssure is a steady state, fully compo- tion with GasAssure and DrillAssure.
Stochastic Simulation Ltd (Stochastic) is sitional reservoir to market integrated asset FlowAssure combines GasAssure with
that innovation being adopted around the modeling tool. It is the only tool capable of thermodynamic pipeline, and oil and water
world by super majors, NOCs, operators, ser- integrating supply and demand seamlessly, modeling, including integration with third
vice companies, SMEs and consultants. delivering fast, accurate and reliable informa- party engineering software. Steady state,
Its modeling solutions are cloud hosted tion for complex operational, development three phase and compositional solutions
and internet delivered. The models pro- planning and marketing decision-making. enable rapid production forecasts with various
duce uncertainty quantified information for ResAssure is a revolution in reservoir sensitivities. The subsurface can be character-
reserves assurance, history matching, IAM simulation. It solves fully-implicit, dynamic ized as material balance tanks, scalable decline
production, drilling planning, etc. 3-phase fluid flow equations for every geo- curves or a combination of both. FlowAssure
The Stochastic Platform provides easy to logical realization in minutes versus weeks/ integrates with ResAssure fornumerical sub-
use, fast and secure workflows and processes months, faster than conventional reser- surface representation deliveringthe holy
for modeling data you already have to opti- voir simulators. In addition, it enables vastly grail petroleum engineering tool.
mize recovery of hydrocarbons. The Platform faster workflows and improved productiv-
includes the following: ity. It leads technical algorithmic modeling Get started on the future today

Business Strategies in a Low-Price Environment S7

C O M PA N Y P R O F I L E

XPLOR Chemicals
Can Lower Total Cost GEORGIA-PACIFIC CHEMICALS
Atlanta, GA, USA
1-866-4GP-CHEM (447-2436)
www.gp-chemicals.com/LCS
You may not expect to generate cost savings can positively affect operational efficiency
via chemicals, but Georgia-Pacific Chemicals and costs. Less emulsifier is required to treat
can help you do just that. a drilling fluid as a result of a 100% activity
Solution-driven Georgia-Pacific level and higher performance than traditional are an economic alternative and are avail-
Chemicals for years has provided customers liquid emulsifiers. Compatible with diesel, able in mineral oil- and diesel-based
with robust high-performance emulsifiers mineral oil and synthetic solvents, XPLOR dry formulations.
for use in a variety of well types including: emulsifiers also reduce the need to purchase
on-shore; off-shore; deep, high pressure and store multiple types of emulsifiers. Other Georgia-Pacific
and long horizontals. Using our decades of 2. Reduce transportation, drum disposal Chemicals Products
experience, we also have developed emul- and handling costs by using bagged In addition to high performance and rudimen-
sifiers specifically to address the challenges dry emulsifiers. tary liquid emulsifiers and dry emulsifiers, we
of todays oil and gas marketplace by help- Shipped in 25 pound bags, XPLOR dry offer fluid loss additives, rheology modifiers,
ing to control overall costs. emulsifiers are easier to dose correctly; corrosion inhibitors, and proppant coatings
eliminate the need for hot boxing, jacketing that impart enhanced crush resistance and
Savings or steaming in frigid conditions; and elim- can be used on a variety of substrates includ-
Although used in all wells, oil- and synthet- inate drum transportation, cleaning and ing sand, ceramic, and bauxite.
ic-based drilling fluids are the go-to drilling disposal costs.
fluids for long horizontal runs and Research and Development
water-sensitive (shale) formations. Our years of R&D experience result in a com-
The emulsifier is the active ingredient Disposal prehensive understanding of the impact of
Logistics
which enables the drilling fluid and the Emulsifier additives on drilling fluid performance.
well bore to remain oil-wet. This drilling Our in-house testing capabilities include
fluid provides a high level of lubrication HPHT (High Pressure/High Temperature) and
to the drill bit for fast and forma- standard API filtration capabilities for oil- and
tion-safe drilling. water-based muds, variable temperature
So how can you save costs on such rheology testing and electrical stability. Our
an integral system component? Geor- analytical capabilities include the ability
gia-Pacific Chemicals has at least three to test, understand and quantify chemical
ways to save. Our inventive R&D staff Liquid Emulsifier XPLOR Dry Emulsifier structure; characterize physical and mate-
can help match the right product to More than 50% savings in total cost rial properties as well as define macroscopic/
your requirements for effective use of microscopic product features.
your emulsifier budgets. Use New Basic Emulsifiers Our scientists expertise in chemistry
3. If you prefer an emulsifier in the tra- derived from renewable sources and our
Use Dry Emulsifiers ditional liquid form, pay only for the sophisticated testing ability allows us to
1. Use less emulsifier. For example, performance you need. adapt, create and custom-formulate effective
instead of one-half drum (~216 lbs.) Why pay for features you dont need? While products for the oil and gas industry.
of traditional liquid emulsifier for mud Georgia-Pacific Chemicals is known for its Start a dialog to see if an existing product
treatment; you need only add 75 lbs. high-performance emulsifiers, there are will help you or if we can develop the prod-
of XPLOR dry emulsifier. conditions in which a simple, yet quality uct you need. The oil and gas industry has
XPLOR dry emulsifiers provide high perfor- product will meet your requirement at the many challenges; Georgia-Pacific Chemicals
mance in drilling muds with benefits that right value. These liquid basic emulsifiers stands ready to deliver solutions.
JUNE 2016 VOL 62; NO. 7
OGPE.COM

OIL, GAS
&petrochemequipment

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

The Newest Equipment, Products, Systems & Services for:

Upstream & Downstream Oil and Gas
New military-proven gas turbine versions designed for fracing, portable electric power
A new version of military-proven TF Series gas turbine was an-
nounced at the Offshore Technology Conference for pump, com-
pression, and portable power generation including hydraulic
fracturing.
TF50F is rated at over 5,000 hp and declared to radically change
the process of hydraulic fracturing, making it cleaner and more cost
effective. Among important turbine design features: ability of the
engine to operate on both gas and liquid fuel, and to change from
one fuel to another while operating.
As a compact alternative to larger, heavier diesels TF50F is a
two shaft, free power turbine engine designed to accept high torque
necessary for fracing. Complete TF50F details are free.
Vericor Power Systems: Alpharetta GA & Houston
For FREE Information, select #1 at ogpe.hotims.com

Latest frac pump series unveiled at OTC

Thunder Series frac pumps were unveiled at OTC to meet
increasing pressures, 24/7 pumping duty cycles, and longer
maintenance intervals.
Based on the GD-3000
pump platform, Thunder
uses long stroke technology
to operate at lower speeds as
it enhances flow rate capabili-
ties, declares the manufactur-
er. This feature is reported to
extend pump maintenance overhaul life cycle as it also reduces Hot work safety enclosure auto shutdown
consumables and associated labor costs by $250,000 over the ATEX-certified Safe-Stop automatic shutdown system for
life of the pump. Petro-Habitat Hot Work Safety Enclosures was announced at
Thunder Series is designed to improve wear and tear resis- OTC to provide unrivalled safety whenever hot work is con-
tance as it allows the power end maintenance overhaul to be ducted in the vicinity of potential flammables, such as in ATEX
consistent with engine, pump, and transmission service sched- Zone 1 rated hazardous areas as oil rigs and refineries.
ules. The pumps enhanced power end technology makes It continuously monitors pressure inside the HWSE to cre-
maintenance easy and safe to reduce downtime. The series also ate a positive pressure environment, allowing hot work to
includes a triplex pump that reaches 2,550-BHP while a quin- be conducted inside the HWSE only if the air pressure within
tuplex reaches 3,000 BHP. it exceeds the air pressure outside of it. Full specifics are free.
Gardner Denver: Houston PetroHab: Dundee Scotland
For FREE Information, select #2 at ogpe.hotims.com For FREE Information, select #3 at ogpe.hotims.com
OGPE.com

OG&PE

NEW PRODUCTS

Publisher Jim Klingele

Two-piece plunger reduces, eliminates Editor J.B. Avants
shut-in times + maximizes production Production Director Charlie Cole
First Responder two-piece plunger is announced to opti- Digital Product Manager Kristine Duran
mize the highest flowing wells Production Manager Shirley Gamboa
Benefitting from its manu- Art Director Clark Bell
Digital Audience Development Manager Jesse Fyler
facturers 30+ years of Plunger Social Media Marketing Analyst Anna Alaback
Lift expertise, the new design Marketing Manager Daniel Bell
reduces and even eliminates
shut-in times while maximiz-
ing production Plungers make
more trips with faster fall times
EDITORIAL OFFICES
to deliver continuous fluid re- Oil, Gas & Petrochem Equipment
moval They also often help wells achieve a significant increase 1421 S. Sheridan Road, Tulsa OK 74112 PO Box 1260, Tulsa OK 74101-1260
p 918.832.9351 f 918.832.9201 www.OGPE.com
in daily production, its declared
The products name refers to the plungers application, typi-
ADVERTISING SALES OFFICES
cally the first plunger used in a wells life cycle Responder North America Italy
refers to the manufacturers unrivaled, responsive customer 1421 South Sheridan Road, Tulsa OK 74112 Ferruccio Silvera
201-374-1911 Tel. 39 02 28 46716
service Additional First Responder specifics are yours free Ed Tiscornia [email protected]
PCS Ferguson, Dover Artificial Lift: Frederick CO [email protected]
PennWell do Brasil
For FREE Information, select #5 at ogpe.hotims.com United Kingdom, Scandinavia, The Netherlands Deny Tenenblat
and The Middle East 55 21 3932 5557
Drone-enabled services converge with the Graham Hoyle
+ 44 1934 733871
[email protected]

Industrial Internet of Things for many uses [email protected] France, Spain, Portugal, Belgium
and Southern Switzerland
All-inclusive, self-powered DRONEBOX is announced for de- Germany, Switzerland, Russia, Austria, and Daniel Bernard
ployment anywhere including remote areas where industrial Eastern Europe 33 (0) 1 30 71 11 19
Wilhelm Sicking [email protected]
assets, borders, or sensitive 49 0 2903-3385-70
installation require constant [email protected] Stefania Piciotti Thompson
33 4 94 70 82 63
monitoring Singapore [email protected]
Its designed as an evolu- Michael Yee
+65 9616 8080
tion over todays many unat- [email protected]
tended sensors and CCTV
cameras, declares the manu-
facturer It provides sensors For assistance with marketing strategy or ad creation,
please contact PennWell Marketing Solutions
freedom of movement using drones as their vehicles You can Vice President Paul Andrews (240) 595-2352; [email protected]
deploy flying sensor systems to measure just about anything,
anywhere, anytime, its said 24/7 reactivity provides critical in-
formation to operators even those thousands of miles away CORPORATE OFFICERS
Models ease scalability challenges for drone service opera- Chairman Robert F. Biolchini

tors in a broad range of applications including land surveys, Vice Chairman Frank T. Lauinger

infrastructure inspections, or construction site progress President and Chief Executive Officer Mark C. Wilmoth

H3 Dynamics Group Pte. Ltd.: Singapore Executive Vice President, Jayne A. Gilsinger
Corporate Development and Strategy
For FREE Information, select #6 at ogpe.hotims.com
Senior Vice President, Brian Conway
Finance and Chief Financial Officer

AD INDEX JU NE 2016
Need Reprints of your ad or recent editorial?
Magnatrol 4 Pipeline + Energy Expo 12 Contact Foster Printing for a quote:
MOXA 5 Sensonics Ltd 6
866 879 9144 / [email protected]
Oilfield Improvements 8 SICK AG 3 Oil, Gas & Petrochem Equipment makes every reasonable effort to verify its content.
For Print / Online Advertising Information, Assistance: However, neither Oil, Gas & Petrochem Equipment nor our parent firm,
http://www.ogpe.com/index/advertise.html PennWell Corporation, assume responsibility for validity of manufacturer
claims or statements made in published items.

P2 June 2016
 FLOWSIC600-XT: THE PERFECT MATCH

()*+ *+
(

 *+

* 

  
)
) 
)) *)   
)

)
 
  * )! +)+  

* ! )*) 
")

*   *
 !*

*) #  
)
 
* )

) 

* *+

*)
$ % )*+ )* 
)

) (
 )

 )*+ ) *)
)*)) 
& )
)*)TM delivers intelligent appli-
*) )*)  '
 
+!TM *)
 * *



*   * *+



 +
the mains voltage fail. FLOWSIC600-XT delivers the ideal combination of maximum measurement accuracy,
long-term stability, and unrivaled operational safety. We think thats intelligent.  
 


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

160606ogj_REV_3 3 6/3/16 11:29 AM

OGPE.com New Products & Services

Valve, metering control improve chemical Android device solves how can you use a
injection process Wall Reader when there is no wall?
FluidCom chemical injec- A new Android device is added to this software companys
tion valves are newly in- Mobile Access Control systems to help solve the common se-
vented to provide integrated curity problem how can you use a Wall Reader when there
flow control and metering via is no wall?
combined material and ther- Its designed to provide tech-
mal effects. nical innovation to the access
The patented technology with development partners includ- control industry that is currently
ing Statoil Technology Invest and Aarbakke Innovation AS, is dominated by other Windows-
said to reduce both operator cost and capacity plus combine based rugged hand held devices.
the function of multiple devices into one. This modern and discreet mobile
In field tests, FluidCom chemical injection valve and meter- device enables extended access
ing controller offered fully integrated logic controls for local or control to be adopted by other sectors looking to enhance their
optional remote communication by wired or wireless HART. security and safety offering in more urban areas. With increased
Compared to existing valve installations, the configuration security required by corporate companies in city dwellings, the
is also said to reduce on-site capacity relative to current valves devices let you verify access, see cardholder details, and inte-
that are larger in size and reliant on additional devices to per- grate with leading access control systems.
form the same function. SMI Global Ltd.: St Edmunds UK
TechInvent AS: Stavanger For FREE Information, select #9 at ogpe.hotims.com
For FREE Information, select #8 at ogpe.hotims.com
Pulsejet valves designed to reduce
fugitive oil, natural gas pipeline emissions
Fast-acting, high-cycle NexTech pulsejet valve with EcoPack
Need a Rugged, Field-Proven stem packing is introduced to reduce fugitive oil and natural
Solenoid Valve for Oil, gas emissions.
The new design comprises
Gas, or Petrochem a superior stem packing so-
Operations? lution for high-cycle, fast-act-
ing valves.
Magnatrol high quality, two-way bronze and stainless valves Models send a pulse of gas
control the flow of oil/fuel oil, biofuel, natural gas, solvents,
through a pipeline system. As
hot liquids and gases, corrosive fluids, water, steam, and
other sediment-free fluids. a trunnion-mounted ball valve, NexTech accomplishes 90 or
Handle temperatures to 400F and pressures to 500 PSIG 180 rotation in speeds as low as 0.5 sec or faster. This actua-
Flanged ends or NPT threads from 3/8 to 3 tion speed creates the gas pulse through a pipeline system.
Continuous duty coils for all AC/DC voltages Pulsejets are designed to clean system filters, spray chemi-
Options include manual overrides, cals in an injection type system, or pulse debris/media through
position indicators, NEMA 4X, explosion- a pipeline to prevent clogging. Theyre engineered to cycle
proof, water tightand more. thousands of time each day. EcoPack stem packing handles
Fully tested to abuse of fast cycle speed combined with high cycle count.
ensure Magnatrol
quality performance
ValvTechnologies Incorporated: Houston
and supported by For FREE Information, select #10 at ogpe.hotims.com
trained customer
service personnel.
In July OG&PE
and OGPE.com :
For more information call 973-427-4341, E-mail:
[email protected] or visit magnatrol.com. FILTRATION & SEPARATION Equipment, Products, Systems
and Services for Upstream, Midstream & Downstream
Magnatrol Valve Corporation Bonus Distribution at URTeC, San Antonio, August 1-6
67 Fifth Avenue Hawthorne, NJ 07507 Editorial Product/Service Followup to ILTA tradeshow
For FREE Information, select #403 at ogpe.hotims.com

P4 June 2016
For FREE Information, select #404 at ogpe.hotims.com
OGPE.com OTC 16 Followup

Oil & Gas Journal & OG&PE recently exhibited at and covered Society of Petroleum Engineers Offshore Technology
Conference in Houston.
Here are highlights representing over 3,500 equipment manufacturer and service provider exhibitors on which we gathered
information. To request free information or literature on items of interest simply go to OGPE.com Click Product Info
(white typeface) at top. Select by number or click the company name to visit their website. You can also click the items right here
on the pages if you receive OG&PE digitally within the pages of Oil & Gas Journal.

Single string double-grip Precision oil & gas tubing solutions

production packers High performance precision tubing
ASI-X single string double-grip production pack- for supercritical onshore and offshore
ers are mechanically set retrievable designs for use oil and gas are described and illustrat-
in any production application, its announced. ed in this free eight-page brochure.
Models are suited for treating, testing, or injec- An ever-expanding range of stain-
tion as well as in deep or shallow pumping or flow- less steel, nickel, titanium, and zir-
ing wells. They can be left in tension or compres- conium alloy tubing are showcased
sion depending on well conditions. Standard ASI-X for broad applications. These include
is designed for up to 7,000 psi differential pressure downhole, hydraulic, and chemical
and comes in a high-temp 10,000 psi dp version. injection control lines; subsea um-
D&L Oil Tools: Tulsa OK bilical control lines; wellhead control
For FREE Information, select #12 at ogpe.hotims.com panels; well monitoring; flowline con-
trol line tubing; and MWD/LWD tools pressure housing.
A full-page Supercritical Tubing Grade Chart is included.
Fine Tubes & Superior Tube, AMETEK Specialty Metal
Products: Plymouth UK
ne

For FREE Literature, select #250 at ogpe.hotims.com

w

SEISMIC ROAVs = oil / gas inspections and surveys

ROAVs: Remotely Operated Aerial Vehicles from this aerial

SAFETY
inspection and surveying specialist highlight a free, illustrated
16-page brochure.
Since 2008 this company
SWITCH and its ROAVs have conduct-
ed close visual and thermal
inspections of high, live, or
difficult-to-access structures
at onshore and offshore oil
Sensonics SA-3 Seismic Switch and gas installations. These
High integrity, low-noise Piezoelectric seismometers are illustrated and described to include 200+ live flare inspec-
with unique self-testing tions and 2,000+ structural inspections in 20+ countries for
oil and gas supermajors. Specific ROAV inspection and survey
Seismically qualifed,Robust and weatherproof steel enclosure examples and case studies are provided.
Cyberhawk: Livingston UK
For safety applications up to SIL-2 Explosion-proof versions For FREE Literature, select #251 at ogpe.hotims.com
for hazardous areas

Ideal for Oil & Gas applications OGPE.com

Online all the time
While asking for product information or free literature check
out the latest industry news, archived issues and our interactive
AB14-823

Tel: +44 (0) 1442 876833 [email protected] reader response. If it has to do with products, its in here and/or
www.sensonics.co.uk at OGPE.com All Products All The Time
For FREE Information, select #406 at ogpe.hotims.com

P6 June 2016
 OTC 16 Followup OGPE.com

Hazardous area, fire & industrial, wide Shakers employ patented exciters
area signalling products technology, G force
Worldwide approved warning sig- MultiG high G force shak-
nals in three major categories with ers use patented exciters
32 product lines highlight this free technology to generate and
74-page catalog. apply very high forces to the
Application areas are presented in screen surface. This allows for
hazardous area signalling, fire and a very low OOC when used as a cuttings dryer.
industrial signalling, and wide area Among shaker features: up to 50 Gs, high processing capac-
signalling chapters. ity, and better efficiency. Since the exciters also produce multi-
Among 32 audible, visual, and/or frequency, they all but eliminate screen blinding.
combination warning signal prod- MultiG can also be used as a flow line shaker to provide a
ucts described, shown, and speci- much drier discharge.
fied: BEx, D1x, GNEx, D2x, E2x, SpectrAlarm, AlertAlight, Fluid Systems: Houston
AlertAlarm, Sonora, Appello, Hootronic, and Spectra. For FREE Information, select #13 at ogpe.hotims.com
E2S Warning Signals: London & Houston
For FREE Literature, select #252 at ogpe.hotims.com Rugged oil & gas computers info folder
Military-grade custom and COTS rugged computers for mis-
Sensors for oil & gas wells, pipelines, sion-critical oil and gas applications highlight this free infor-
natural gas supply, petrochemicals mation folder.
Vibration and pressure transmit- Designed to excel in harsh up/
ters, accelerometers, and pressure mid/downstream onshore and off-
sensors are described and shown in shore environments, the line in-
this free four-page brochure for use cludes tablets, laptops, flat panel
on oil or gas wells and pipelines. displays and computers, embedded
Designs are cited to offer hazard- systems, as well as rack mount serv-
ous area approvals for a wide range ers and workstations, high perfor-
of petroleum, natural gas, and pet- mance computing, and high density
rochemical duties. storage.
Piezoelectric pressure sensors are Models compute in fracing, well
presented to detect and monitor dy- production monitoring, wireline, as
namic pressure spikes, pulsations, and surges in gaseous or well as data acquisition processing, storage, and protection.
liquid media. Specific sensing instruments are called out for Systel Incorporated: Sugar Land TX
use on motors and pumps, compressors, or wellheads. For FREE Literature, select #255 at ogpe.hotims.com
IMI Sensors A PCB Piezotronics Division: Depew NY
For FREE Literature, select #253 at ogpe.hotims.com Induction heating equipment cited for
pipeline construction
2016 viscometers, rheometers catalog Offshore and onshore pipeline con-
Announcing Brookfield Engineer- struction or spool base activities are
ing Laboratories recent acquisition served by induction heating equip-
by AMETEK, this free 2016 catalog ment presented in this free 12-page
highlights viscometers, rheom- brochure.
eters, texture analyzers, and pow- Fully and semi-automated field
der flow testers. joint coating equipment is cited to
Among new products introduced offer highly repeatable installa-
are DVE Digital Viscometers with tion process to achieve high coating
new user interface and keypad. The production rates, allowing for faster
updated design adopts the look and commissioning and reduced pipe-
feel of DV1, DV2T viscometers and line construction costs.
DV3T rheometer instrumentation. Highlighted are demagnetization and welding pre-heat, sur-
Also featured is a option guide for RST-CC Coaxial Cylinder face preparation blasting, post weld heat treatment, plus off-
and RST-SST soft solids tester rheometers. shore, onshore, and spoolbase equipment field joint coating.
Brookfield AMETEK: Middleboro MA TESI Group LLC: Milan & Conroe TX
For FREE Literature, select #254 at ogpe.hotims.com For FREE Literature, select #256 at ogpe.hotims.com

June 2016 P7
OGPE.com OTC 16 Followup

Free info: Engineering 60-page pipeline pig tracking, signaling,

plastic solutions communications catalog
Enhanced technology via engineer- Offshore, onshore, and subsea-
ing plastic solutions design and applicable pipeline pig tracking,
product development are empha- signaling, and communications
sized in this free brochure. equipment showcase this free 60-
Engineered polymers, besides page product catalog.
offering performance and cost ad- Seven chapters describe, illus-
vantages over conventional me- trate, and specify non-intrusive pig
tallic components are cited to signaling systems, TRAXALL multi-
effectively address and overcome frequency pig tracking systems, 22-
offshore challenges, harsh environ- Hz (legacy) pig tracking and locat-
ments, weight penalties, and difficult maintenance situations. ing systems, above ground markers and satellite notification
Engineered polymer materials and components advantages systems, acoustic tracking systems, inline inspection tool sys-
are cited to include ideal properties for use in salt water, excep- tems, and accessories.
tional wear, abrasion, corrosion, and chemical resistance, plus CD51 Bandit Magnetic Pig Passage Signaler is cited to de-
a weight about 1/7th of steel. tect any pig moving between 0.01 and 20-meters per second.
NYLACAST: Leicester UK CDI: Broken Arrow OK
For FREE Literature, select #258 at ogpe.hotims.com For FREE Literature, select #259 at ogpe.hotims.com

Free Information or literature Click the link

Oilfield Improvements Chem injection pumps for oil, natural gas

ULTRA-FLOW A new line of solar-powered, electrically operated, and
FIELD-INSTALLED pneumatically operated chemical injection pumps and
CENTRALIZERS/ systems are announced in this free 20-page brochure.
PARAFFIN SCRAPERS Specifically designed for oil and natural gas applications,
Full-circle Wiping models are cited to dispense and monitor a large variety of
production chemicals in demanding, remote conditions.
of Tubing I.D.
The manufacturers corrosion protection sprayers, auto-
More Gripping matic lubrication systems, foam and polyurea proportion-
Force on Sucker Rods ing equipment, pressure washers, process pumps, and Pas-
More Fluid Flow-by sive Fire Protection sprayers are also presented.
Volume Its recent acquisition of High Pressure Equipment Company and Alco Valves
Longer Useful LIfe Group is also noted.
from Longer Vanes Graco: Minneapolis MN For FREE Literature, select #260 at ogpe.hotims.com
& Bearing Surfaces
Positive Wear Arc-resistant motor control centers
Indicators Newly introduced FlashGard motor control centers prevent
Amodel with Glass Fill
arc flash events plus protect personnel should they occur.
This arc-preventative and arc-resistant technology combina-
CALL 1-800-LES WEAR tion within a single motor control center delivers preven-
(800-537-9327) OR YOUR tion, insulation, and isolation. This supports safety during rou-
Oilfield Supply Store
tine maintenance in oil and gas or other industrial applications.
www.rodguides.com Unlike conventional motor control centers, FlashGard can be
disconnected and reconnected to the vertical bus with the unit
door closed. This maintains a dead-front barrier during main-
tenance for enhanced operator safety. Models also incorporated RotoTrack racking
1902 N. Yellowood Ave.
Broken Arrow, Oklahoma 74012 U.S.A.
mechanism to provide bus isolation, stab indication, and lockout for proactive arc




FAX 918-250-4666 flash initiation prevention.
Eaton Electrical Incorporated: Arden NC
For FREE Information, select #408 For FREE Information, select #15 at ogpe.hotims.com

P8 June 2016
 OTC 16 Followup OGPE.com

Mission-critical industrial displays, Field-installed sucker rod centralizers /

panel computers paraffin scrapers data
This free brochure presents a com- ULTRA-FLOW field-installed
prehensive range of industrial dis- sucker rod centralizers / paraffin
plays and panel computers that scrapers highlight this free data-
are enriched with an array of critical sheet. They deliver full-circle wip-
features to ensure their durability ing of tubing inside diameter with
and reliability in mission-critical ap- no sucker rod-rotating required.
plications. Complete specs, applications,
Five panel computers and four and installation details are pro-
industrial displays are described, il- vided along with emphasis of such
lustrated, and specified as ruggedly features as more gripping force on
designed for reliable use in harsh oil and gas environments. sucker rods plus more fluid flow-by
Such features as wide operating temperature range, IP66-rated volume than other designs. With larger vanes and bearing sur-
waterproof and dustproof front panel, glove-friendly multi- face, ULTRA-FLOW is cited to deliver longer useful life.
touch screens, and sunlight-readable screens are emphasized. Oilfield Improvements Incorporated: Broken Arrow OK
MOXA: Brea CA For FREE Literature, select #261 at ogpe.hotims.com For FREE Literature, select #264 at ogpe.hotims.com

Non-contact rotating and reaction type Clamp stud welding system literature
torquemeters showcased SWG Stud Welding system for
A 56-year-old precision torque-me- STAUFF clamps is described and il-
ters manufacturer concisely show- lustrated in this free product overview.
cases 30 non-contact rotating and With diagrams, schematics and
reaction designs in digital, analog, specs SWG is cited to cover all instal-
special purpose configurations in lation options with versatility that in-
its free brochure. cludes fastening elements for conduit
With industries highest overload boxes, clamping belts, and cable ties.
and overrange ratings, each model Besides information on SWG, the
is shown and summarized as to lbf- literature also presents related welder
in. / Nm to kNM range, mechanical inverter, weld gun, distance adaptor,
overload, overrange, speed, accuracy, noise hardening, plus distance tube, stud retainer and the
torque, speed, power, and energy output along with other per- original STAUFF clamps for quick, easy, and safe installation of
tinent torquemeter specifications. pipe, tube, hose, and cable.
S. Himmelstein and Company: Hoffman Estates IL STAUFF: Werdohl Germany & Waldwick NJ
For FREE Literature, select #262 at ogpe.hotims.com For FREE Literature, select #265 at ogpe.hotims.com

Optimized outdoor panel PCs for oil & gas Crude oil transfer, multiphase boosting
Vulcan outdoor panel PC is described, shown, and dia- pumps and systems
grammed as optimized for the rugged demands of the oil and Pumps & systems designed to be
gas industries in this free brochure. crude oil transfer and multiphase
Designs are cited for US/Canada boosting solutions, are presented in
Class I Div. 2 / Zone 2 and ATEX/ this free 14-page brochure.
IECEx Zone 2 areas as they are rug- NEMO progressing cavity pumps
gedized for any onshore or offshore and TORNADO rotary lobe pumps
application over -35 to +60 C. are illustrated, described, and speci-
Vulcan design advantages are cit- fied for a wide range of applications
ed to include integrated Intel i7 3rd that are shear sensitive, low to high
generation processor with LED auto viscosity, with or without solids, dilat-
dimming backlit display. ant or thixotropic, and abrasive.
Computer, display, power, envi- Each pump is showcased with labeled illustrations. Notes
ronmental, standards and certification, and physical character- are given on why you may need multiphase fluid boosting and
istics specifications are provided. advantages. These include ability to handle high sand content.
Strongarm Designs Incorporated: Horsham PA NETZSCH Pumps North America LLC: Exton PA
For FREE Literature, select #263 at ogpe.hotims.com For FREE Literature, select #266 at ogpe.hotims.com

June 2016 P9
OGPE.com Advertiser Product & Service Followup

May Advertiser Product & Service Followup

Companies featured here advertised their equipment, products, or services in May 2 OG&PE products section in Oil & Gas
Journal. These summaries give you an opportunity to receive free information or literature on leading manufacturers and
service providers oil and gas specialties. Go to OGPE.com Click Product Info (white typeface) at top. You will receive
prompt, complete response from these valued OG&PE media partners.

Fit & Forget: High performance Fine and Superior Valves, fittings, tubing proven for extreme
tubing for critical offshore applications oil, gas petrochemical conditions and pressures
Fine Tubes & Superior Tubes each offer 70+ years expertise Count on proven HiP valves, fittings, and tubing to handle
in supplying high quality tubes. extreme conditions and pressures throughout oil, gas, and pet-
They work closely with customers to develop high specifi- rochemical needs.
cation fit & forget tubing solutions for onshore and offshore Our name represents high pressure in all petroleum condi-
oil and gas applications in a wide range of stainless steel, tions, demands, and high pressure applications.
nickel, and titanium alloys. No one does valves, fittings, and tubing better.
Fine Tubes & Superior Tube, AMETEK Specialty Metal High Pressure Equipment Company: Erie PA
Products: Plymouth UK HighPressure.com
FineTubes.com and SuperiorTubes.com For FREE Information, select #22 at ogpe.hotims.com
For FREE Information, select #20 at ogpe.hotims.com
Modbus Gateway = Easier Wi-Fi for more oilfield,
By any measure, AMETEK knows industrial devices, less wiring, space, power
your petroleum process product needs Getting your Modbus devices connected to the network and
AMETEK Chandler Engineering Model 292B portable the Internet is sometimes easy, and it sometimes very difficult.
natural gas chromatographs are compact and lightweight yet What engineers need are flexible, easily deployed solutions
include fully integrated sample handling and onboard storage that meet the needs of multiple scenarios while minimizing
for up to 1,000 sample runs. use of additional wiring, space, and power.
Drexelbrooks new total tank level system (TLS) uses the MGate W5208 Wi-Fi Modbus Gateway provides all func-
latest magnetostrictive technology to provide unparalleled ac- tionality of both a dedicated Wi-Fi client and full-feature Mod-
curacy when measuring total tank level, interface tank level, bus RTU/ASCII to Modbus TCP gateway. It also supports gen-
and temperature. eral serial, DNP3, and I/O connections. This makes life easier
AMETEK Process Instruments Model 5100 Gas Analyz- for control engineers wanting to get connected.
ers measure moisture in bulk gas or hydrocarbon streams via MOXA: Brea CA MOXA.com
Tunable Diode Laser Absorption Spectroscopy. For FREE Information, select #23 at ogpe.hotims.com
Drexelbrook Impulse wave-guided radar level systems
generate total level, distance or volumetric outputs unaffect- TORRENT Deluge Fire Protection Valves:
ed by variations in process material electrical characteristics. Watch demo, request free information
AMETEK PMT IDT intrinsically safe pressure transmit- See how BERMAD TORRENT Deluge Valves deliver uncom-
ters deliver 0.2% full-scale accuracy for critical applications promising performance and reliability in a demonstration
plus meet FM, ATEX, and IECEx. video. You can request free information on TORRENTs capa-
AMETEK Thermox WDG-V Combustion Analyzers offer bilities to deliver high flow capacity and minimum downtime.
improved control and process safety as they measure excess BERMAD UK: Berkshire UK BERMAD.com
oxygen, hydrocarbon, and combustibles in flue gas. For FREE Information, select #24 at ogpe.hotims.com
AMETEK U.S. Gauge all-welded process gauges com-
prise integrated seal for lower cost than gauges and seals pur- SPY Holiday Detectors: Field proven
chased separately. reliable for 60 years in extreme conditions
AMETEK Grabner MINIVAP ON-LINE process analyz- Below zero or insane heat conditions, over and under and
ers automatically monitor vapor pressure of gasoline, crude across some of the worlds most difficult terrain for decades
oil, and liquefied or natural petroleum gas. Pipeline Inspection Company has understood the rigors of
AMETEK Process Instruments new IPS-4 Spectropho- pipeline construction.
tometers detect and quantify thousands of chemical species SPY Holiday Detectors withstand being buried, dropped
up to eight at once to verify feedstock, intermediate, and from great heights, run over, and even submerged during pipe-
final product quality. line holiday detection operations worldwide.
AMETEK: Berwyn PA AMETEK.com Pipeline Inspection Company: Houston PicLtd.com
For FREE Information, select #21 at ogpe.hotims.com For FREE Information, select #25 at ogpe.hotims.com

P10 June 2016

 Advertiser Product & Service Followup + OTC 16 Followup OGPE.com

Optimal filtration for maximum performance: Rugged solenoid valves control oil/fuel
JONELL Filtration Group consistently delivers oil, biofuel, natural gas, hot liquids/gases
Optimize your filtration performance in oil and gas produc- Magnatrol high quality, two-way bronze and stainless steel
tion, refinery and petrochemical, or gas processing and trans- valves control the flow of oil/fuel oil, biofuel, natural gas, sol-
mission operations with JONELL Filtration Group products, vents, hot liquids and gases, corrosive fluids, water, steam, and
technologies, and services. other sediment-free fluids.
Specifically JONELL is available to optimize filtration per- The rugged, field-proven models handle up to 400F. and
formance in refinery fuel gas, catalyst protection, amine gas 500 psig in flanged ends or NPT threads from 3/8 to 3 in. All
treating, compressor protection, final product protection, and feature continuous duty coils for all AC/DC voltages.
glycol dehydration. Magnatrol Valve Corporation: Hawthorne NJ
JONELL Filtration Group: Houston JonellInc.com Magnatrol.com
For FREE Information, select #26 at ogpe.hotims.com For FREE Information, select #27 at ogpe.hotims.com

ATEX & IECEx rugged outdoor computer / display designed for demanding onshore, offshore tasks
Vulcan outdoor computer / display is introduced for ATEX / IECEx Zone 2, Class I Div. 2 / Zone 2.
Rugged NEMA 4X, IP66-rated design serves onshore and offshore demands that include -35 to +60 C., being constructed of
all-corrosion-resistant materials.
Strong Arm Designs Incorporated: Horsham PA strongarmenergy.com For FREE Information, select #28 at ogpe.hotims.com

BOP shutoff, valve control emergency New copper-based drilling compound

power supplies data HONEY KOTE copper-based
ASB Aerospatiale Batteries are pre- drilling compound is introduced
sented in this free datasheet as emer- as specially formulated to provide
gency power supplies. maximum drill collar and drill pipe
For powering BOP shutoff and protection against seizing, galling,
valve control, they typically deliver 5 and load-bearing stress.
to 60 Kw with peaks up to four-times With protection against corro-
the average power value. sion and water wash-out, the new
The batteries are designed to safely formula, subject of this datasheet,
operate in any severe mechanical, applies easily in wide temperatures
temperature, or pressure environ- and working conditions. It will not
ment and to withstand high vibration, shock, or acceleration. run off or bleed at high temperatures or harden in storage.
ASB: Bourges France BESTOLIFE Corporation: Dallas
For FREE Literature, select #268 at ogpe.hotims.com For FREE Literature, select #270 at ogpe.hotims.com

Complete downhole tools HPHT testing Turbine parts and service provider
15 high pressure, high temperature testing services for This free datasheet declares since
downhole tools are summarized and charted in this datasheet. 1999, IMMI Turbines has been the
This 40-year-old company offers supplier of choice for customers
pressure test fully instrumented tools seeking the Best in Class provider
with payloads as well as the ability to of turbine parts and services to the
recertify and/or refurbish in-service world.
tools. Other capabilities include mag- Among major capabilities are field
netic permeability, destructive or non- services, routine maintenance and
destructive tests, helium leak testing, major inspections, plus zero hour
dye penetrant tests, plus inspection engine repairs, exchanges, and over-
with documentation. Design valida- hauls. The company has a full load
tion and prototype verification are of- testing facility up to 5 MW and one of the largest inventories
fered along with testing design. of turbine parts in the world.
National K Works Incorporated: Houston IMMI Turbines: Conroe TX
For FREE Literature, select #269 at ogpe.hotims.com For FREE Literature, select #271 at ogpe.hotims.com

June 2016 P11

 #PipelineExpo

MAKING CONNECTIONS IN THE PIPELINE INDUSTRY

CALL FOR ABSTRACTS DEADLINE EXTENDED!

NEW Deadline to Submit: Friday, July 1, 2016

Abstracts are now being accepted for the Ninth Pipeline + Energy Expo Conference and Exhibition, featuring a three track
Operations, Construction and Integrity Conference Schedule.
The 2017 Pipeline Energy Expo will offer energy transportation professionals a unique opportunity to meet and hear the views of
major North American industry leaders. Delegates will learn about important technical and regulatory developments in construction
and operational management, equipment, and practices.

Abstracts should summarize non-commercial presentations about projects and technology in at least one of the following areas:
SCADA Measurement & Instrumentation Hot Tapping
Health and Safety Documentation/Record Keeping Inline Inspection
Risk Assessment ROW Automated Pigging
Consequences of Failure Environmental Remediation Hydrotesting
Cybersecurity Regulatory/Permitting IM System Integration
Valve Automation Directional Drilling Data Management
Compression Trenching Corrosion Control
Rehabilitation Commissioning Direct Assessment
Expansion Line Pipe Cathodic Protection Leak Detection

April 4-6, 2017 // Cox Business Center + Tulsa, Oklahoma

For more information, visit www.pipelineenergyexpo.com

PRODUCED BY HOSTED BY MEDIA SPONSOR IN ASSOCIATION WITH

O L, GA
OI GAS
&petroc
chemequipment

Annual Conference 2017

 SERVICES | SUPPLIERS
P2 ENERGY SOLUTIONS used in a variety of applications where INOVX
P2 Energy Solutions announced the weight savings, emissions reduction, ClearEdge3D Inc. and INOVX Solu-
release of P2 Forecast, a new analytics durability and energy efficiency are key tions Inc. are pleased to announce they
solution that generates unbiased, proba- performance factors. have signed a collaboration agreement
bilistic oil and gas production forecasts to better leverage both companies and
automatically, freeing up engineers time HALLIBURTON their technologies. The key objective is
to focus on other engineering-intensive, Halliburton announced that it worked to increase value in solutions offered by
value-added activities. P2 made the an- with Eclipse Resources Corporation to both ClearEdge3D and INOVX through
nouncement at the Petroleum Network complete hydraulic fracturing of the efficiently creating and better utilizing
Education Conferences (PNEC) 20th extended reach lateral test well known and maintaining intelligent 3D models
International Conference on Petroleum as Purple Hayes. The Utica Shale built from point clouds.
Data Integration, Information and Data well had a lateral length of over 18,500 The Process industry is increasingly
Management. feet and was completed with 124 frac leveraging solutions to achieve better
P2 partnered with BetaZi developer stages in 24 days. The total depth was plant efficiency and asset reliability.
of the BZ Machine, a physics-based 27,046 feet, including the lateral exten- Plant owners are now taking advantage
predictive analytics engine to create sion which Eclipse believes is the longest of 3D models and solutions specifically
P2 Forecast. The BZ Machine generates horizontal onshore lateral ever drilled in designed to interoperate with all of their
a million different physically-plausible the United States. major business applications, which is
curves and groups them into percentiles The fracturing operations performed significantly improving Inspection and
using a companys monthly production by Halliburton utilized the companys Maintenance business execution. This
volumes. The forecasts produced by P2 industry-leading Q10TM pumps has, in turn, led to increased demand for
Forecast are automated so the forecasts equipped with dual fuel technology, the creation of more accurate intelligent
are machine-generated, no engineering which performed with zero down time. models that can be relied upon by these
time or manual intervention of any kind In addition, SandCastle PS-2500 units same Owner/Operators.
is ever required. Blind tests have shown equipped with Halliburton Dust Control
P2 Forecasts projections to be much systems provided superior sand loading SCHLUMBERGER
more accurate than those done by hand. logistics while reducing the environmen- Schlumberger announced the release
P2 Forecast also generates a full tal footprint on site. The efficiencies of the Maze* microfluidic SARA analysis
range of future production possibilities, achieved with this equipment allowed for reservoir fluids characterization. This
from p1 to p99, for every well in which Eclipse to improve its daily completion is the first commercial application of
a company has interest and provides rate by 20 percent over the original plan, microfluidic analysis technology in the oil
unbiased forecasts for tens of thousands lowering their ultimate cost per BOE and gas industry.
of wells that can be produced in a mat- The Maze microfluidic SARA analysis
ter of hours, not the weeks or months PROSEP fully automates the process for testing
traditionally required. ProSep, an industry leading technol- oil samples for saturates, aromatics,
ogy and service provider for integrated resins and asphaltenes (SARA)cou-
AVEVA process solutions, announced that it will pling novel microfluidic technology with
AVEVA announced that DowAksa has supply four ProMix units to a National spectroscopy. This method eliminates
standardised on AVEVAs Integrated En- Oil Company based in the Middle East. human subjectivity enabling precise
gineering & Design solution. Established According to ProSep, the ProMix SARA measurements, while decreasing
in 2012, DowAksa develops and globally technology can generate homoge- turnaround time and use of chemicals by
markets a broad range of products and neous and moderate shear force to more than 85%.
technical services to support the growing the dispersed phase across the cross Results from the Maze microfluidic
carbon-fiber-based composites industry. section of the main flow, providing a SARA analysis have industry-wide appli-
DowAksa needed to increase the narrow uniform droplet size distribution, cations, including validating oil samples
efficiency and integration of engineering significantly increasing interfacial contact prior to PVT analysis, understanding
and design works for its existing facilities area, enhancing mass transfer between physical and refining properties, assess-
and future projects. different flows. This will enable the client ing crude oil value, and supporting flow
DowAksa is a large-scale, full-service, to reduce chemical consumption up to assurance and geochemical studies.
fully integrated provider of carbon fiber 25% compared to conventional technolo- Microfluidic chip technology has been
solutions for industrial applications in gies, while maintaining optimal separa- accepted by ASTM International Stan-
todays transportation, infrastructure and tion performance at its gas oil separation dard D7996 as the industrys best test
energy markets. Very strong and light- plant. procedure for measuring asphaltenes.
weight, carbon-fiber-based materials are More than 1,900 asphaltenes analyses

Oil & Gas Journal | June 6, 2016 89

SERVICES | SUPPLIERS
using the microfluidic chip technology technology has a multitude of uses in- clusive rights to provide the Drill-N-Ream
and 300 SARA analyses have been suc- cluding measuring temperature, torque, to customers in the distribution territory
cessfully completed across Schlumberg- pH and more, its initial primary function are dependent upon achievement of
ers global network of research centers is performing pressure tests. certain sales objectives. The agreement
and reservoir laboratories. The DCS-1200 package includes is a multi-year agreement and will remain
12.1 touch panel PC equipped with in effect subject to the performance
VALLOUREC Windows 7 Prof OS and our customiz- targets being met during the term of the
Vallourec, a world leader in premium able user-friendly charting software agreement.
tubular solutions, announced that it capable of displaying multiple charts
finalized the disposal of Vallourec Heat with multiple pens and simultaneously FUGRO
Exchanger Tubes to American Industrial running tests based on parameters set Fugro has begun a three-year period of
Acquisition Corporation on April 29, by the user. metocean and ice data acquisition as
2016. This fully customizable software and part of the Barents Sea Metocean and
This decision is in line with the hardware package is built for purpose. Ice Network Project. The data will help
Groups transformation plan and, in The UPS and battery system allow for operators to better understand relevant
accordance with the agreements terms, hours of mobile operation in the field operational uncertainties and risk factors
all the employees will be integrated into when power sources are not available. in the region known as The Far North.
AIAC. This mobile system is encased within The Norwegian Petroleum Safety Au-
By joining AIAC, an industrial holding a rugged carrying case with wheels thority has recognized that the Barents
company that currently owns 20 com- and tow-handle for easy transport. Test Sea represents a frontier region for oil
panies in 13 countries and maintains reports are fully customizable by the and gas exploration and in its guidance
a strong presence in France, VHET will user and are presented in PDF format for states that appropriate measures to miti-
be in an optimal position to ensure its easy printing and transferring; data log- gate risk should be undertaken.
growth. From now on, the company will ging and archiving is also integrated. Statoil is leading a Joint Industry
market its products and services under Project (JIP) to gather additional and
the Neotiss brand. SUPERIOR DRILLING necessary metocean and ice data in
Founded in 1976, VHET, whose con- PRODUCTS, INC. the region. Early acquisition of data in
solidated revenue stands at approximate- Superior Drilling Products, Inc. a de- frontier regions is key to reducing risk for
ly 100 million, specializes in producing signer and manufacturer of drilling tool operators which, in turn, offers poten-
titanium and stainless steel welded tubes technologies, and Drilling Tools Interna- tial cost savings, for example through
for secondary systems in conventional tional, Inc. announced the execution of appropriate selection of drilling assets
and nuclear power plants as well as for a distribution agreement, establishing for the metocean regime, and optimiza-
the desalination, chemical, industrial and DTI as the exclusive distributor of SDPs tion of the timing of drilling campaigns.
automotive markets. patented Drill-N-Ream well bore There are also numerous advantages
VHET employs 600 people across conditioning system in North American to the JIP participants related to data
five production sites worldwide: Vena- onshore and offshore markets, excluding sharing across a frontier region, such as
rey les Laumes in France (Burgundy), the Rocky Mountain region. The Drill- increased understanding of metocean
Morristown in the United States (New N-Ream is a unique reaming assembly processes and their spatial extent and
Jersey), Hyderabad in India, and two technology that both widens and condi- an extended data pool against which to
sites in Changzhou, China. In addition, tions the well bore during the drilling validate models.
the company employs 100 people at two process, eliminating the requirement for Having successfully worked with
joint ventures in Korea and China. a dedicated reaming run. Statoil and several of the other JIP par-
DTI is a leading provider of downhole ticipants on a number of complex met-
BRAEDEN ENGINEERING tools for the onshore and offshore drilling ocean measurement projects throughout
AND CONSULTING LLC industry. With nine locations in North Norwegian waters, Fugro was contracted
Braeden Engineering and Consulting America and four international locations, for the project.
LLC, a leading engineering and construc- DTI has been providing products and In October 2015 five Fugro-manufac-
tion firm, has announced the introduc- services to the worlds most prominent tured Wavescan buoys, one current- and
tion of its new Digital Charting System oilfield services and exploration compa- water level-monitoring mooring, and
1200 series (DCS-1200). nies since 1984. five ice thickness and current-profiler
The DCS-1200 records and charts In exchange for the distribution rights, moorings were deployed at offshore sites
data collected from various types of DTI has agreed to purchase a minimum between Hammerfest and Svalbard. The
sensors and performs tests based on operating fleet of robust Wavescan buoys, which are ide-
parameters input by the user. While this Drill-N-Ream tools in 2016. DTIs ex- ally suited for the conditions of the Bar-

90 Oil & Gas Journal | June 6, 2016

 SERVICES | SUPPLIERS
ents Sea, are now collecting raw wave, such as Superior Plus Energy Services 30-percent lighter flexible pipe solution.
current, meteorological and sea-water are meeting the demands of a competi- Composite Flexible Pipe expands the
parameter data, processing the informa- tive market place with technology-driven reach of flexible risers and flowlines into
tion and transmitting the summary data investments into robust and scalable deeper waters and more challenging en-
via satellite link. Real-time data are then systems to improve management of pur- vironments while delivering a 20-percent
displayed on a project-specific webpage chasing, supply and operating leverage. saving on total installed cost.
that can be accessed by the client via This light-weight solution is a step-
secure log-in. Data from the current- and GE OIL & GAS change as global offshore resources shift
water level-monitoring mooring, and the GE Oil & Gas has introduced a series to more remote locations with extremely
five ice measuring rigs are being stored of innovative offshore solutions to lower complex and demanding conditions.
within the instruments internal memo- cost, improve reliability and reduce Flexible risers have been fundamental
ries for download at service visits, which downtime of offshore operations. The to the development and advancement
are scheduled at six-month intervals for technologies, launched at the Offshore of offshore exploration by enabling the
the buoys and annually in the open water Technology Conference in Houston, un- widespread use of cost-efficient floating
season for the ice measuring equipment. derscore the creativity of industry in find- production units, enhancing the versatil-
The first service visit was undertaken ing myriad types of solutions to increase ity of subsea layouts and providing ben-
in March/April 2016, following which efficiencies and reduce costs. efits around installation and logistics plus
Fugro processed, analyzed and reported GE Oil & Gas innovative offshore effectively handling dynamic motion.
data collected over the first phase of solutions and customer partnerships GE Oil & Gas is at the forefront of
measurements. The final dataset will introduced include a Rosneft subsidiary developing the standards and practices
be produced for the JIP partners upon to use latest design in new compres- for the incorporation of carbon-fiber
completion of the measurement cam- sor technology, High Pressure Ratio thermoplastic composites into flexible
paign in autumn 2018. Compression (HPRC) unit. GE Oil & Gas pipe. This development incorporates
will supply UEC-Gas Turbines JSC, an industry-wide collaboration on standards
OPENLINK integrator and supplier of high-efficiency with certification agencies, joint indus-
OpenLink, a global leader in trading power equipment, with three compres- try projects and GEs leading industrial
and risk management solutions for the sor trains equipped with GEs innovative network of Global Research Centers.
energy, commodities, corporate and HPRC units, including gearboxes and
financial services industries, announced dry gas seal consoles. The three trains CRAIG INTERNATIONAL
today that Superior Plus Energy Services will be used as part of the reinjection in Leading procurement services special-
has selected its energy trading and risk the BCS Srednebotuobinskoe oil field ist, Craig International, has launched a
management solution. in East Siberia, Russia, operated by win-win platform to help oil and gas
Superior Plus Energy Services, a Taas - Yuryakh Neftegazodobycha LLC, a companies off-load surplus stock worth
business segment of Superior Plus Corp. Rosneft subsidiary. The compressors will billions of dollars and buy products and
selected OpenLink to better manage be manufactured in Florence, Italy. The equipment they need at competitive
operational efficiency as its US Refined three trains will be delivered from GE Oil prices.
Fuels business reaches more custom- & Gas by December 2016. Craig Collaboration connects com-
ers. Superior Plus Energy Services has GEs HPRC unit, its smallest and panies looking to sell stock with those
expanded its propane, heating oil, diesel lightest compressor yet, requires fewer looking to buy. Oil and gas companies
fuel, gasoline and associated equipment units per train, significantly reducing around the world have billions of pounds
and service business through several overall footprint by up to 50 percent. of surplus stock, much of it sitting in
recent acquisitions, and today serves The HPRC has a shipping weight up costly storage and Craig Collaboration
more than 200,000 Northeast and Mid- to 30-percent lighter and has lower will allow them to realize value from this.
Atlantic US residential and commercial power consumption with 5-percent A radical shift in procurement in the
customers. less installed power. These combined industry, Craig Collaboration represents
As Superior Plus Energy Services innovations allow for easier installa- a major investment by Craig Interna-
manages organic and acquisition driven tion, increased reliability and reduced tional in an immediate, collaborative
growth across the eleven states that they operating costs compared to traditional solution towards increasing efficiency.
serve, the company selected OpenLinks compression trains. It is already gathering momentum with
solution for an integrated approach to GE Oil & Gas Flexible Pipe business several major exploration and produc-
physical and financial deal capture with is undertaking a significant investment tion companies expected to start using it
real-time analysis of risk position report- to develop and manufacture the next following its launch.
ing, logistics, settlement and accounting. generation of flexible risers by utiliz- Craig Collaboration is accessed
Leading US Refined Fuels businesses ing composite technology to create a through a portal and powered by Craig

Oil & Gas Journal | June 6, 2016 91

STATISTICS
Additional analysis of market trends is available
IMPORTS OF CRUDE AND PRODUCTS through OGJ Online, Oil & Gas Journals electronic
information source, at http://www.ogj.com.
Districts 1-4 District 5 Total US
5-20 5-13 5-20 5-13 5-20 5-13 5-22*
2016 2016 2016 2016 2016 2016 2015
1,000 b/d
Total motor gasoline ............. 911 681 23 10 934 691 775
Mo. gas. blending comp..... 849 608 17 10 866 618 742
Distillate............................... 173 49 20 3 193 52 248
Residual ..............................
Jet fuel-kerosine ..................
146
43
130
97
68
87
81
178
214
130
211
275
192
156
OGJ CRACK SPREAD
5-27-16* 5-29-15* Change Change,
Propane-propylene .............. 63 63 20 15 83 78 92 $/bbl %
Other ................................... 962 718 113 85 1,075 803 710
SPOT PRICES
Total products ...................... 2,298 1,738 331 372 2,629 2,110 2,173
Product value 64.68 78.38 (13.70) (17.48)
Total crude ........................... 6,048 6,629 1,267 1,047 7,315 7,676 6,696 Brent crude 47.77 61.57 (13.80) (22.41)
Crack spread 16.91 16.81 0.10 0.58
Total imports ........................ 8,346 8,367 1,598 1,419 9,944 9,786 8,869
FUTURES MARKET PRICES
*Revised. One month
Source: US Energy Information Administration Product value 66.37 82.33 (15.96) (19.39)
Data available at PennEnergy Research Center. Light sweet crude 49.04 58.38 (9.34) (15.99)
Crack spread 17.32 23.95 (6.63) (27.67)
Six month
EXPORTS OF CRUDE AND PRODUCTS Product value
Light sweet crude
62.15
50.70
76.36 (14.22) (18.62)
59.78 (9.08) (15.19)
Total US Crack spread 11.45 16.59 (5.14) (30.97)
5-20-16 5-13-16 *5-22-15
1,000 b/d *Average for week ending.
Finished motor gasoline 413 413 426 Source: Oil & Gas Journal
Jet fuel-kerosine 170 170 160 Data available at PennEnergy Research Center.
Distillate 949 949 1,025
Residual 376 376 380
Propane/propylene 699 699 449
Other oils 1,001 1,001 913
Total products 3,608 3,608 3,353
Total crude 390 390 441
Total exports 3,998 3,998 3,794
NET IMPORTS
Total 5,946 5,789 5,075
Products (979) (1,498) (1,180)
Crude 6,925 7,287 6,255

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

CRUDE AND PRODUCT STOCKS

Motor gasoline
Blending Jet fuel, Fuel oils Propane-
Crude oil Total comp. kerosine Distillate Residual propylene
District 1,000 bbl
PADD 1 ..................................... 18,911 68,276 64,370 10,529 55,940 10,306 3,434
PADD 2 ..................................... 156,898 52,047 45,756 6,256 32,281 1,448 19,461
PADD 3 ..................................... 278,831 82,218 72,319 15,926 46,683 24,833 49,063
1
PADD 4 ..................................... 24,891 7,519 5,378 723 3,239 174 2,171
PADD 5 ..................................... 57,538 30,050 27,947 9,704 12,734 5,012

May 20, 2016 .......................... 537,069 240,110 215,770 43,138 150,877 41,773 74,129
May 13, 2016............................ 541,294 238,068 213,763 43,151 152,161 41,914 74,216
May 22, 20152 .......................... 479,364 220,628 195,539 38,454 128,838 40,324 73,219
1
Includes PADD 5. 2Revised.
Source: US Energy Information Administration
Data available at PennEnergy Research Center.

REFINERY REPORTMAY 20, 2016

REFINERY REFINERY OUTPUT
OPERATIONS Total
Gross Crude oil motor Jet fuel, Fuel oils Propane-
inputs inputs gasoline kerosine Distillate Residual propylene
District 1,000 b/d 1,000 b/d

PADD 1 .............................................. 1,177 1,188 3,259 82 351 43 163

PADD 2 .............................................. 3,528 3,525 2,560 255 944 51 396
PADD 3 .............................................. 8,719 8,663 2,140 837 2,661 219 1,001
1
PADD 4 .............................................. 613 616 327 35 197 12 199
PADD 5 .............................................. 2,396 2,286 1,619 362 508 135
May 20, 2016 ..................................... 16,433 16,278 9,905 1,571 4,661 460 1,759
May 13, 2016 ..................................... 16,571 16,371 10,027 1,634 4,769 438 1,777
May 22, 20152 .................................... 16,727 16,451 9,961 1,636 4,891 397 1,652

18,317 Operable capacity 89.7 utilization rate

1
Includes PADD 5. 2Revised.
Source: US Energy Information Administration
Data available at PennEnergy Research Center.

92 Oil & Gas Journal | June 6, 2016

 STATISTICS
OGJ GASOLINE PRICES BAKER HUGHES RIG COUNT OGJ PRODUCTION REPORT 1 2
5-27-16 5-29-15
Price Pump Pump 5-27-16 5-29-15 1,000 b/d
ex tax price* price
5-25-16 5-25-16 5-27-15 (Crude oil and lease condensate)
Alabama............................................ 2 Alabama ................................. 20 29
/gal Alaska ............................................... 5 10 Alaska .................................... 504 494
Arkansas ........................................... 6 California ............................... 545 616
(Approx. prices for self-service unleaded gasoline) California .......................................... 5 10 Colorado ................................. 306 313
Atlanta .......................... 160.4 209.8 255.1 Land................................................ 5 10 Florida .................................... 5 6
Baltimore ...................... 171.8 222.8 259.1 Offshore .......................................... Illinois .................................... 19 24
Boston ........................... 169.9 214.8 262.1 Colorado ............................................ 16 41 Kansas ................................... 99 132
Buffalo .......................... 164.1 225.1 272.2 Florida ............................................... 1 Louisiana ............................... 1,322 1,367
Miami ............................ 159.2 214.1 265.2 Michigan ................................ 13 19
Illinois ............................................... 1 4 Mississippi ............................. 54 71
Newark .......................... 169.2 202.1 250.1 Indiana.............................................. 1 Montana ................................. 63 87
New York........................ 185.8 246.8 291.1 Kansas .............................................. 2 13 New Mexico............................. 368 400
Norfolk........................... 203.1 243.8 241.2 Kentucky............................................ 3 North Dakota .......................... 1,070 1,169
Philadelphia .................. 153.3 222.1 285.1 Louisiana .......................................... 48 67 Ohio ........................................ 70 60
Pittsburgh ..................... 171.0 239.8 282.1 N. Land ........................................... 16 27 Oklahoma ............................... 350 343
Wash., DC...................... 195.9 237.8 272.2 S. Inland waters .............................. 5 2 Pennsylvania .......................... 15 21
PAD I avg .................. 173.1 225.4 266.9 S. Land............................................ 4 10 Texas ...................................... 3,590 3,758
Utah ....................................... 84 110
Offshore .......................................... 23 28 West Virginia .......................... 18 27
Chicago ......................... 226.9 275.4 299.4 Maryland ........................................... Wyoming ................................. 204 242
Cleveland ...................... 175.1 221.5 261.1 Michigan ........................................... Other states ........................... 50 53
Des Moines .................... 177.1 227.5 265.1 Mississippi ........................................ 3 2
Detroit ........................... 176.6 225.5 261.1 Montana ............................................ Total 8,769 9,341
Indianapolis .................. 179.3 227.6 253.1 Nebraska ........................................... 2
1
OGJ estimate. 2Revised. Source: Oil & Gas Journal.
Kansas City ................... 176.8 212.5 240.1 New Mexico........................................ 18 48 Data available at PennEnergy Research Center.
Louisville ....................... 180.1 224.5 284.0 New York............................................
Memphis ....................... 186.8 226.6 245.1 North Dakota ..................................... 22 77 US CRUDE PRICES
Milwaukee ..................... 165.3 216.6 269.1 Ohio................................................... 11 23 5-27-16
Minn.-St. Paul ............... 171.5 218.5 261.1 Oklahoma .......................................... 59 106 $/bbl*
Oklahoma City ............... 171.3 206.7 248.1 Pennsylvania ..................................... 16 47 Alaska-North Slope 27 ......................................... 30.62
Omaha .......................... 179.5 225.6 256.4 South Dakota..................................... Light Louisiana Sweet ........................................... 44.70
St. Louis ........................ 172.9 208.6 264.0 Texas ................................................. 173 369 California-Midway Sunset 13 .............................. 40.25
Tulsa ............................. 172.3 207.7 245.1 Offshore .......................................... 1 California Buena Vista Hills 26 ........................... 46.83
Wichita .......................... 170.3 212.7 247.1 Inland waters .................................. Wyoming Sweet ..................................................... 45.58
PAD II avg ................. 178.8 222.5 260.0 Dist. 1 ............................................. 15 56 East Texas Sweet ................................................... 43.75
West Texas Sour 34 .............................................. 40.75
Dist. 2 ............................................. 12 43 West Texas Intermediate........................................ 45.75
Albuquerque .................. 170.4 207.7 251.4 Dist. 3 ............................................. 6 19
Birmingham .................. 165.4 204.6 242.1 Oklahoma Sweet.................................................... 45.75
Dist. 4 ............................................. 7 22 Texas Upper Gulf Coast ......................................... 39.50
Dallas-Fort Worth .......... 164.8 203.2 249.8 Dist. 5 ............................................. 1 6 Michigan Sour ....................................................... 37.75
Houston ......................... 165.5 203.9 241.8 Dist. 6 ............................................. 7 17 Kansas Common ................................................... 44.75
Little Rock ..................... 168.5 208.7 241.2 Dist. 7B ........................................... 1 2 North Dakota Sweet ............................................... 36.00
New Orleans .................. 164.9 203.3 238.8 Dist. 7C ........................................... 20 34 *Current major refiners posted prices except N. Slope lags 2 months.
San Antonio ................... 165.5 203.9 236.8 Dist. 8 ............................................. 93 138 40 gravity crude unless differing gravity is shown. Source: Oil & Gas
PAD III avg ................ 166.4 205.1 243.2 Dist. 8A ........................................... 7 14 Journal. Data available at PennEnergy Research Center.
Dist. 9 ............................................. 2 3
Cheyenne.......................
Denver ...........................
179.9
191.2
222.3
231.6
253.8
259.0
Dist. 10 ........................................... 2 14 WORLD CRUDE PRICES
Utah .................................................. 3 7 $/bbl
Salt Lake City ................ 185.6 233.5 291.2 West Virginia ..................................... 10 18 OPEC reference basket Wkly. avg. 5-27-16 44.65
PAD IV avg ................ 185.6 229.1 268.0 Wyoming............................................ 7 22 Mo. avg., $/bbl
Others HI-1........................................ 1 Mar.-16 Apr.-16
Los Angeles ................... 255.0 314.0 396.4
Phoenix.......................... 182.4 219.8 284.8 Total US ........................................ 404 875 OPEC reference basket....................... 34.65 37.86
Portland ........................ 178.5 228.0 310.0 Total Canada ................................ 43 98 Arab light-Saudi Arabia ....................... 34.74 38.22
San Diego ...................... 219.1 278.1 392.1 Grand total ................................... 447 973 Basrah light-Iraq ................................. 33.39 36.62
San Francisco................ 228.9 287.9 396.2 US oil rigs.......................................... 316 646 Bonny light 37o-Nigeria........................ 38.53 41.51
Seattle........................... 198.1 261.0 322.5 US gas rigs........................................ 87 225 Es Sider-Libya ...................................... 37.51 40.48
PAD V avg ................. 210.3 264.8 350.3 Total US offshore ............................... 24 29 Girassol-Angola.................................... 38.42 41.25
Total US cum. avg. YTD ..................... 505 1,209 Iran heavy-Iran..................................... 33.23 36.65
Weeks avg. .................. 180.2 226.9 272.5 Kuwait export-Kuwait ........................... 32.99 36.33
May avg... ..................... 176.1 222.8 267.0 Marine-Qatar........................................ 35.49 38.97
Apr. avg......................... 161.9 208.6 245.7 Rotary rigs from spudding in to total depth.
Definitions, see OGJ Sept. 18, 2006, p. 46. Merey-Venezuela .................................. 25.83 28.84
2016 to date ................. 150.3 197.0 Minas 34o-Indonesia ............................ 34.62 38.52
2015 to date ................ 190.5 236.1 Source: Baker Hughes Inc.
Data available at PennEnergy Research Center. Murban-UAE ......................................... 40.01 42.47
*
Oriente-Ecuador ................................... 31.45 35.04
Includes state and federal motor fuel taxes and state Saharan blend 44o-Algeria ................... 39.41 42.33
sales tax. Local governments may impose additional taxes.
Source: Oil & Gas Journal. Other crudes
Data available at PennEnergy Research Center. Fateh 32o-Dubai ................................... 35.15 39.00
Isthmus 33o-Mexico ............................. 35.45 38.14
Brent 38o-UK ........................................ 38.51 41.48
Urals-Russia ........................................ 36.87 39.89
Differentials
WTI/Brent ............................................. (0.74) (0.53)
Brent/Dubai.......................................... 3.36 2.48
REFINED PRODUCT PRICES IHS PETRODATA RIG COUNT Source: OPEC Monthly Oil Market Report.
Data available at PennEnergy Research Center.
5-20-16 5-20-16 MAY 27, 2016
/gal /gal Total Marketed Marketed US NATURAL GAS STORAGE1
supply supply Marketed utilization 5-20-16 5-13-16 5-20-15 Change,
Spot market product prices of rigs of rigs contracted rate (%) bcf %
US Gulf of
Motor gasoline No. 2 Distillate Mexico. . . . . . 111 61 41 67.2 East.................................... 511 490 395 29.4
(Conventional-regular) Low sulfur diesel fuel South Midwest.............................. 629 606 387 62.5
New York Harbor ......... 161.80 New York Harbor ......... 149.00 America 60 56 46 82.1 Mountain ............................ 171 166 128 33.6
Gulf Coast .................. 147.50 Gulf Coast .................. 145.00 Pacific ................................ 298 293 304 (2.0)
Northwest South Central 1,216 1,199 856 42.1
Los Angeles ................ 154.10 Europe. . . . . 105 86 71 82.6 Salt ................................ 372 371 256 45.3
Motor gasoline West Nonsalt........................... 844 828 598 41.1
(RBOB-regular) Kerosine jet fuel Africa. . . . . . 67 55 29 52.7
New York Harbor ......... 154.50 Gulf Coast .................. 137.80 Middle Total US ............................. 2,825 2,754 2,070 36.5
East. . . . . . . 166 157 121 77.1 Change,
No. 2 heating oil Propane Southeast Mar.-16 Mar.-15 %
New York Harbor ......... 142.30 Mont Belvieu .............. 52.30 Asia. . . . . . . 91 78 38 48.7
Worldwide. . . . 830 705 507 71.9 Total US2 ............................ 2,492 1,483 68.0
1
Working gas. 2At end of period.
Source: EIA Weekly Petroleum Status Report. Source: IHS Petrodata Source: Energy Information Administration
Data available at PennEnergy Research Center. Data available in PennEnergy Research Center Data available at PennEnergy Research Center.

Oil & Gas Journal | June 6, 2016 93

STATISTICS
PACE REFINING MARGINS WORLDWIDE NGL PRODUCTION
Mar. Apr. May May 2 month Change vs.
2016 2016 2016 2015 Change Change, average previous
$/bbl % Feb. Jan. production year
2016 2016 2016 2015 Volume
US Gulf Coast 1,000 b/d %
Composite US Gulf Refinery.............. 9.88 11.48 10.83 14.96 (4.13) (27.6)
Mars (Coking) .................................. 11.13 12.86 11.82 14.86 (3.03) (20.4) Brazil ................................... 89 92 91 111 (20) (18.1)
Mars (Cracking) ............................... 7.53 8.99 8.11 11.29 (3.18) (28.1) Canada................................ 840 804 822 700 122 17.4
Bonny Light ...................................... 6.02 6.83 7.43 10.55 (3.13) (29.6) Mexico ................................. 299 317 308 349 (41) (11.6)
US PADD II United States ...................... 3,329 3,303 3,316 3,040 276 9.1
Chicago (WTI)................................... 11.71 14.59 15.45 19.79 (4.34) (21.9) Venezuela ............................ 206 206 206 212 (6) (2.8)
US East Coast Other Western
Brass River ...................................... 6.27 8.36 9.21 11.91 (2.70) (22.7) Hemisphere ....................... 222 188 205 245 (40) (16.2)
East Coast Comp ............................. 7.84 10.04 10.99 13.23 (2.23) (16.9) Western
US West Coast Hemisphere.................. 4,986 4,909 4,948 4,656 291 6.3
Los Angeles (ANS) ............................ 16.76 14.59 10.63 28.22 (17.59) (62.3)
NW Europe Norway................................. 395 378 387 338 49 14.3
Rotterdam (Brent) ............................ 0.11 3.14 1.63 5.18 (3.55) (68.6) United Kingdom ................... 76 71 73 56 18 32.2
Mediterranean Other Western
Italy (Urals) ...................................... 2.45 4.30 3.96 6.17 (2.21) (35.9) Europe ............................... 13 13 13 13 1 4.0
Far East
Singapore (Dubai) ............................ 4.29 3.07 2.35 5.65 (3.30) (58.4) Western Europe ............. 484 462 473 406 67 16.5

Source: Jacobs Consultancy Inc. Russia ................................. 849 851 850 689 162 23.5
Data available at PennEnergy Research Center. Other FSU ............................ 170 170 170 155 15 9.5
Other Eastern
Europe ............................... 15 15 15 17 (2) (9.1)
Eastern Europe .............. 1,034 1,036 1,035 860 175 20.3
US NATURAL GAS BALANCE
DEMAND/SUPPLY SCOREBOARD Algeria .................................
Egypt ...................................
521
202
521
202
521
202
525
199
(4)
3
(0.8)
1.5
Libya.................................... 50 50 50 50
Mar. Total YTD Other Africa ......................... 144 146 145 130 16 12.0
Mar. Feb. Mar. 2016-2015 YTD 20162015 Africa.............................. 917 919 918 904 15 1.6
2016 2016 2015 change 2016 2015 change
bcf
Saudi Arabia........................ 1,820 1,820 1,820 1,810 10 0.6
DEMAND United Arab Emirates .......... 641 641 641 641
Consumption ................... 2,375 2,697 2,617 (242) 8,201 8,699 (498) Other Middle East ................ 694 694 694 690 5 0.7
Addition to storage .......... 215 111 182 33 392 314 78
Exports ............................ 196 164 164 32 530 454 76 Middle East..................... 3,155 3,155 3,155 3,141 15 0.5
Canada ......................... 81 62 90 (9) 213 240 (27)
Mexico .......................... 105 99 74 31 304 208 96 Australia.............................. 51 53 52 53 (1) (1.0)
LNG ............................... 10 3 10 13 6 7 China................................... 12 12 12 12
Total demand .................. 2,786 2,972 2,963 (177) 9,123 9,467 (344) India .................................... 122 122 122 101 21 20.8
Other AsiaPacific ............... 324 321 323 324 (2) (0.5)
SUPPLY AsiaPacific ................... 509 508 509 490 19 3.9
Production (dry gas) ........ 2,294 2,183 2,291 3 6,773 6,607 166 TOTAL WORLD ................. 11,084 10,989 11,037 10,456 581 5.6
Supplemental gas............ 5 5 5 16 16
Storage withdrawal.......... 274 515 376 (102) 1,583 1,974 (391) Totals may not add due to rounding.
Imports ............................ 240 251 258 (18) 763 790 (27) Source: Oil & Gas Journal.
Canada.......................... 231 241 243 (12) 733 752 (19) Data available at PennEnergy Research Center.
Mexico ...........................
LNG................................ 9 10 15 (6) 30 38 (8)
Total supply ..................... 2,813 2,954 2,930 (117) 9,135 9,387 (252) OXYGENATES
NATURAL GAS IN UNDERGROUND STORAGE Mar. Feb. YTD YTD
Mar. Feb. Jan. Mar.
2016 2016 2016 2015 Change 2016 2016 Change 2016 2015 Change
bcf 1,000 bbl
Base gas 4,354 4,361 4,361 4,360 2,477 Fuel ethanol
Working gas 2,492 2,544 2,948 1,483 1,009 Production .................. 30,812 28,678 2,134 89,809 86,032 3,777
Total gas 6,846 6,905 7,309 5,843 3,486 Stocks ......................... 22,301 23,004 (703) 22,301 20,865 1,436
Source: DOE Monthly Energy Review.
Data available at PennEnergy Research Center. MTBE
Production .................. 1,649 1,196 453 4,145 2,340 1,805
Stocks ......................... 1,183 1,213 (30) 1,183 889 294
Source: DOE Petroleum Supply Monthly.
Data available at PennEnergy Research Center.

US HEATING DEGREEDAYS
Feb. Jan. Feb. Total degree days YTD
2016 2016 2015 % change 2016 2015 % change
New England ................................................................ 954 1,130 1,415 (32.6) 2,084 2,750 (24.2)
Middle Atlantic ............................................................. 901 1,120 1,319 (31.7) 2,019 2,579 (21.7)
East North Central........................................................ 956 1,240 1,404 (31.9) 2,196 2,739 (19.8)
West North Central ....................................................... 936 1,303 1,306 (28.3) 2,238 2,573 (13.0)
South Atlantic .............................................................. 484 662 668 (27.5) 1,146 1,312 (12.7)
East South Central ....................................................... 574 859 865 (33.6) 1,433 1,702 (15.8)
West South Central....................................................... 309 565 499 (38.1) 872 1,122 (22.3)
Mountain ...................................................................... 619 916 601 3.0 1,532 1,419 8.0
Pacific .......................................................................... 343 563 330 3.9 905 798 13.4
US average*............................................................ 628 570 867 (27.6) 1,497 1,757 (14.8)

*Excludes Alaska and Hawaii.

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

94 Oil & Gas Journal | June 6, 2016

 register
by july 18th
to save big!
#PGNG2016

august 23-25, 2016

greater columbus convention center
Columbus, Ohio, USA

MEET OUR KEYNOTERS

Ms. Kathryn Z. Klaber Mr. Lucian Pugliaresi Mr. Roger Lenertz Mr. Dan Lee
Founder President Executive Vice President Senior Vice President
The Klaber Group Energy Policy Research Black & Veatch Power Fossil and Hydro
Foundation Generation
American Electric Power

Meet Our Conference Tracks

Oil and Gas Track Large Frame Gas Turbines Track

Operations and Maintenance Track Siting and Construction Track

Small Gas Turbines and Gas Engines Track

for details on registration types and rates, please visit www.power-gennaturalgas.com.

PRESENTED BY: HOST UTILITY: OWNED & PRODUCED BY:

p o w e r - g e n n a t u r a l g a s . c o m
MARKET
CONNECTION
WHERE THE INDUSTRY GOES TO CLASSIFY
The Oil & Gas Journal has a circulation of over 100,000 readers and has been the worlds most widely read petroleum publication for over 100 years
EM P L O Y MEN T | E QU IP MEN T

SURPLUS GAS PROCESSING/

REFINING EQUIPMENT
25 MMCFD x 1100 PSIG PROPAK
NOW HIRING:
REFRIGERATION PLANT
28 TPD SELECTOX SULFUR
DIRECTOR, REFINING TECHNOLOGY
RECOVERY UNIT
1100 BPD LPG CONTACTOR x 7.5 GPM
CAUSTIC REGEN  (
( (
( (



(
( (
(( 

(
 -
NGL/LPG PLANTS:10 - 600 MMCFD ( 
(
(( (
(
(

 ((( 

( -
AMINE PLANTS:60 - 3300 GPM   ((



(
(" (
(% 

($(
( ( (
(
SULFUR PLANTS:10 - 180 TPD (&(#  (


(((
FRACTIONATION:1000 25,000 BPD
HELIUM RECOVERY: 75 & 80 MMCFD
(( (
(( 
( ( 

( (
NITROGEN REJECTION: 25 100 MMCFD  ( (( ( 
 (
(  ( -
MANY OTHER REFINING/GAS 
((   
(
(  ( 
 
( (   (
PROCESSING UNITS ( (  
  (((   
(
(
We offer engineered surplus (
   !(   
(
( 
 
( -
equipment solutions.
Bexar Energy Holdings, Inc.
(
 !(( 
!((
 ( (
Phone 210 342-7106/ Fax 210 223-0018 
 ((  (  
  (
(
(
 
(
( -
www.bexarenergy.com 
((
 (  (  (  (
  
((  (
Email: [email protected]  " ( "  ( 
(
  ((

 
( ( 
  ( ((
 
 (  (
 (  (
   ( ' (
   (
GAS PROCESSING   (  ( (#
 (
(  (( (
 ( (
-
RECENTLY AVAILABLE:  
(((
 (( (   (
  ( (  (
(

( (( 
(
(  ( 
 
($ (   (  (
20 MM/day Chapman #  (%(
 ((  (
( (&
 ((
Engineering Propane
Refrigeration Plant Candidates should forward cover letter, resume and salary
Complete with: EG System, 2-Refrig-
eration Compressors, Stabilization,
requirements to [email protected].
60,000 Gallon Product Storage Learn more about AFPM at www.afpm.org
Regard Resources Co, Inc. or follow us on LinkedIn, Facebook, or Twitter.
For Details Please Contact Eric:
[email protected] '(
 (


 (
((

!(   (
(
(  ((
(
(
(318) 393-1692 (318) 425-2533 
( (
(
((
( (
(("(

 
( 


Gas Corporation of America

800-762-6015 /[email protected]
www.gas-corp.com
Offshore Catering
WE WANT YOUR Jobs Available
PROPANE/ Offshore Experience Required
BUTANE TANKS Cooks
UTs (Housekeeper/Janitorial)


 

Lead Stewards
We Buy, Sell & Rent Bakers (Pastry Chefs)
Natural Gas Plants How to Apply:
GG in Houston, TX seeks Geosoftware Advisor. Quali-
Online: www.essgulf.com
fied applicants will possess a masters in geoscience or Email: [email protected]
geophysics or closely related field and two years experi-
ence in quantitative methods in geosciences, particularly VALID TWIC CARD IS
stratigraphic inversion, rock physics modeling, geomodel-
ing and azimuthal attributes analysis. In lieu of a Masters REQUIRED TO APPLY
degree and 2 years experience, will accept a Bachelors
degree in geoscience or geophysics or closely related field
and 5 years experience in quantitative methods in geo-
sciences, particularly stratigraphic inversion, rock physics
modeling, geomodeling and azimuthal attributes analy-
sis. Qualified applicants should send resumes to ATTN:
Eve Stoddard, 10300 Town Park Drive, Houston, Texas
77072. Must put job code GAHou2016 on resume.

96 Oil & Gas Journal | June 6, 2016

MARKET Employment? HIRE
SEE RESULTSAsk me how!
GRACE JORDAN

CONNECTION
WHERE THE INDUSTRY GOES TO CLASSIFY


Services Offered? ACQUIRE
Equipment/Products/Land? SELL
713-963-6291
[email protected]
Twitter: @ogjmarket
The Oil & Gas Journal has a circulation of over 100,000 readers and has been the worlds most widely read petroleum publication for over 100 years
EM P L O Y MEN T | E QU IP MEN T
Cameron International Corporation in Houston,
Texas seeks a Service Line Manager. Qualified
applicants will possess a Bachelors degree in
Mechanical Engineering, Industrial Engineering,
Supply Chain, Business or Finance or closely related
field and five years of experience in services, after-
market or rental/maintenance management in the
upstream oil and gas industry and experience in a
field services role. In lieu of a Bachelors degree and
five years of experience, will accept a Masters degree
in Mechanical Engineering, Industrial Engineering,
Supply Chain, Business or Finance or closely related
field and one year of experience in services, after-
market or rental/maintenance management in the
upstream oil and gas industry and experience in
a field services role. Please email resume to Jenna.
[email protected] .

Subsea 7 (US), LLC in Houston, Texas seeks

Senior Fabrication Engineer. Qualified appli-
cants will possess a Masters degree in Engineering
or related field and three (3) years of experience
in the job offered or three (3) years of subsea con-
struction experience. In lieu, will accept a Bach-
elors degree in Engineering or related field and
six (6) years of experience in the job offered or
six (6) years of subsea construction experience.
Email resume to [email protected]. Re-
sume/cover letter must include job code SFEUM1.

Subsea 7 (US), LLC in Houston, Texas seeks

Senior Welding Engineer. Qualified applicants
will possess seven (7) years of experience in the
job offered or seven (7) years of experience relating
to pipeline installation including flowlines, SCRs,
PLET fabrications, and forging purchase and sup-
ply within the oil and gas industry. Email resume
to [email protected]. Resume/cover letter
must include job code ENGFT1.

Oil & Gas Journal | June 6, 2016 97

 ent.
tion m anagem
and informa
etroleu m data
in global p
ex cellence
moting
and pro
in g trends
g emerg
Explorin
n
i bition o
and Exh

M DATA a t i o n al Conf
e re n c e

21 In
st

TROLEU ter n
GEMENT
PE ATION + INFORMATION + MANA

INTEGR

THE DATE
SAVE

MAY 16 -18, 2017

HOUSTON, TEXAS, USA | MARRIOTT HOUSTON WESTCHASE
www.pnecconferences.com | #PNEC

The 21st Annual PNEC Conference and Exhibition delivers a power-packed, technical program surrounding changes in key
technologies and practical solutions to implement quality, data-driven decisions that meet enterprise-wide technical and
financial interests when millions of invested dollars are at risk. Network with your peers and exhibitors from leading technology
companies at this one-of-a-kind global event.

Owned & Follow us on:

Produced by: Presented by: Supported by:

ADVERTISING SALES ADVERTISERS INDEX
US Sales COMPANY NAME PAGE COMPANY NAME PAGE
Mike Moss, (713) 963-6221, [email protected].
AAPG 20 Oilfield Improvements, Inc. P8
Mike McManus, (713) 963.6254, MMcManus@
www.aapg.org www.rodguides.com
pennwell.com.
Stan Terry, (713) 963-6208, [email protected]. Ariel Corporation 23 ONHYM 43
Grace Jordan, (713) 963-6291, [email protected] www.arielcorp.com www.onhym.com
Australia / New Zealand Boehler Welding Gmbh 13 PennWell
Mike Twiss, Miklin Business Services, Unit 15, www.voestalpine.com/welding Corporation 65, 73, P12, 95, 98
3 Benjamin Way, Rockingham, Western Australia 6168; www.pennwell.com
Tel +61 8 9529 4466, Fax +61 8 9529 4488 C&J Energy Services 9
Email: [email protected] [email protected] PumpWorks Industrial 19
http://pumpworksindustrial.com/
Brazil / South America Cosmodyne, Llc 83
Jim Klingele, (713) 963-6214, [email protected] www.cosmodyne.com RPSEA 11
1455 West Loop South, Suite 400, Houston, TX 77027 www.rpsea.org/events/503
Covestro Deutschland AG 2
Canada www.pasquick.com Ryder System, Inc. C2
Stan Terry, (713) 963-6208, [email protected] www.ryder.com
Egyptian General Petroleum
France / Belgium / Spain / Portugal / Corp., EGPC C3 Sensonics, Ltd. P6
www.egpc.com.eg www.sensonics.co.uk
Southern Switzerland / Monaco
Stefy Picoitti Thompson, Tel: +33(0)4 94 70 82 63; Cell: Flir Intsruments 25 Sick AG P3
+33(0)6 21 23 67 02, [email protected]. http://www.flir.com www.sick.com/flowic600-xt
Germany / Austria / Northern Switzerland / Flotek Industries, Inc. S2 Siemens AG 5
Eastern Europe / Russia / Former Soviet Union www.siemens.com/processinstrumentation
Sicking Industrial Marketing, Kurt-Schumacher-Str. 16,
59872, Freienohl, Germany. Tel: 49(0)2903.3385.70, Georgia Pacific Chemicals LLC S8 Soarus LLC 55
Fax: 49(0)2903.3385.82; E-mail: wilhelms@pennwell. www.soarus.com
com; www.sicking.de <http://www.sicking.de> Andreas
Sicking Greatwall Drilling Company 15 Stochastic Simulation Ltd S7
www.gwdc.com.cn
Italy
Ferruccio Silvera, Viale Monza, 24 20127 Milano Italy; Hi Air Korea Co., LTD. 17 Texas Independent Producers
Tel:+02.28.46 716; E-mail: [email protected] www.hiairkorea.co.kr & Royality Owners C4
www.tipro.org
Japan Magnatrol Valve Corp P4
e.x.press sales division, ICS Convention Design Inc. www.magnatrol.com Vericor Power Systems 7
6F, Chiyoda Bldg., 1-5-18 Sarugakucho, Chiyoda-ku, www.vericor.com
Tokyo 101-8449, Japan, Tel: +81.3.3219.3641, Fax: Moxa Americas, Inc. P5
81.3.3219.3628, Masaki Mori, E-mail: Masaki.Mori@ www.moxa.com Victory Energy Operations LLC 29
www.victoryenegry.com
ex-press.jp National Oilwell Varco 21
China / Korea / Singapore / Asia-Pacific www.nov.com/SmartBoxRig
Michael Yee, 19 Tanglin Road #05-20, Tanglin Shopping
Center, Singapore 247909, Republic of Singapore; Tel: 65 This index is provided as a service. The publisher does not assume any liability for errors or omission.
9616.8080, Fax: 65.6734.0655; E-mail: yfyee@singnet.
com.sg

United Kingdom / Scandinavia / Denmark /

The Netherlands / Middle East
Graham Hoyle, 10 Springfield Close, Cross, Axbridge,
Somerset BS26 2FE, Phone: +44 1934 733871 Mobile:
+44 7927 889916, [email protected] or ghms@
btinternet.com

West Africa
Dele Olaoye, Flat 8, 3rd Floor, Oluwatobi House, 71
Allen Ave., Ikeja Lagos, Nigeria; Tel: +234 805 687 2630;
Tel: +234 802 223 2864; E-mail: [email protected]
OGJ Reprints
Rhonda Brown, Foster Printing Co., Reprint Marketing
Manager; 866.879.9144 ext 194, Fax: 219.561.2023;
4295 Ohio Street, Michigan City, IN 46360;
[email protected]. www.fosterprinting.com

Custom Publishing
Roy Markum, Vice-President/Custom Publishing, roym@
pennwell.com, Phone: 713-963-6220, Fax: 713-963-
6228

PennWell
1455 West Loop South, Suite 400, Houston, TX 77027
www.ogj.com

Oil & Gas Journal | June 6, 2016 99

THE EDITORS PERSPECTIVE WATCHING GOVERNMENT

Iranian moderates
existin fact and
Nick Snow
political marketing Washington Editor
by Bob Tippee, Editor

Controversy over marketing of last years

nuclear deal has revived senseless assertions
that Iran has no moderates.
Information, without politics
Can all of the Islamic Republics 77 million It was not like the usual proceedings A little-known fact, he continued,
citizens be hardliners?
Of course not. The problem is concentration in the Natural Resources Committee is that the Deepwater Horizonthe
of political power in a clerical leader inclined, hearing room on the Longworth House semisubmersible rig destroyed in an
like all authoritarians, to rig elections and incar- Office Buildings third floor. Maybe that explosion at BPs Macondo deepwa-
cerate dissidents. was because no committee members ter well in 2010had successfully
The theocracy has dominated Iranian poli-
tics and oppressed Iranians since the Islamic attended the May 16 event. drilled the Tiger well for BP, which has
Revolution of 1979. Missing were Democrats charges produced millions of barrels of crude,
The Obama administration seemed credu- that the oil and gas industry was immediately before.
lous, therefore, when it asserted the election not doing enough to address global Were finding new resources
of supposedly moderate President Hassan
Rouhani in 2013 created the opportunity to climate change, and Republicans that require wells in greater depths
negotiate a nuclear deal. allegations that the Obama adminis- to reach deeper levels under higher
In fact, negotiations had begun at least a tration was extending its regulatory pressure, said van Oort. The rate of
year before Rouhanis election in line with a
reach too far. offshore technology development is
longstanding goal of Obama for US-Iranian
rapprochement. Instead, four speakers from increasing exponentially.
Ben Rhodes, deputy national security industry, academia, and the adminis-
adviser for strategic communications, delivered tration discussed ways earth science
these revelations in a New York Times profile
advances have changed offshore
Improving spill response
published May 5. Another speaker emphasized
Rather than triggering negotiations, Rou- energy before about 25 congressio-
improvements since the blowout
hanis election gave Rhodes a storyline around nal and other federal staff members.
which to promote a controversial agreement and massive spill. Post-Macondo,
They emphasized information instead
already under development. companies came together to share
In Iran, meanwhile, democracy continues to of politics.
resources so responses can happen
function at the pleasure of ruling clerics. The American Association of
In February, Mehdi Khalaji, a fellow at the more quickly, said Buford Pollett,
Petroleum Geologists helped pull the
Washington Institute for Near East Studies, de- an assistant energy law professor at
event together with 11 other groups
scribed how theocrats seeded a parliamentary the University of Tulsa. The industry
election that month with candidates from the ranging from the US Bureau of Safety
specifically focused on developing
Islamic Revolutionary Guard to keep Rouhani in and Environmental Enforcement and
check (OGJ, Feb. 29, 2016, p. 23). technology and having enough cap-
US Geological Survey to the Associa-
Khalaji also underscored the importance of ping stacks available to be deployed
tion of American State Geologists and
a parallel election for the Assembly of Experts, quickly, van Oort noted.
which will pick the successor to aging Supreme National Ground Water Association.
The advent of Ocean Bottom
Leader Ali Khamenei. Their idea clearly was to brief
This month Khalaji interpreted results of a Sensor Technology produced more
congressional staffers and Depart-
May 24 selection by the assembly of a leader continuous formations in 2008 than 4
ment of Energy specialists on offshore
for a 2-year term, Ahmad Jannati, whom the years earlier, said Kristin Wood, region-
analyst describes as a veteran hardliner not energy technology changes that
al chief geologist for Shells Deepwater
favored by Rouhanis supporters and the most have occurred since 2004 and why
hardline figure among three candidates. North American and Brazil Exploration
they matter. Some of what they said
The outcome, Khalaji says, confirmed what Group. If you compare this to what
was basic, but there were still some
many already knew: that the recent election did could be shown in the 1970s, its like
not change the bodys hardline fabric or the surprises.
night and day, she said.
supreme leaders ability to exert his will over Its an exciting time to be working
supposedly democratic processes. Its not certain whether this brief-
in the Gulf of Mexico. There also are a
For Iranian moderatesyes, some ex- ing, and others that are planned, will
istlittle in politics has changed. But at least lot of challenges, said Eric van Oort, a
lead to more sensible federal energy
sanctions have eased. petroleum engineering professor of at
policies. They might increase the pros-
the University of Texas at Austin. Indus-
(From the subscription area of www.ogj.com, pects of lawmakers and others at least
try is focusing more on human factors,
posted May 27, 2016; authors e-mail: bobt@ having up-to-date information.
particularly well control competence.
ogjonline.com)

100 Oil & Gas Journal | June 6, 2016