Issue: September 2012

Gastech is the global meeting place for energy professionals working in the natural gas industry. Operating on an 18-month cycle to ensure that issues remain topical, the 26th edition of Gastech will take place at the ExCeL Conference and Exhibition Center in London’s Docklands, Oct. 8-11, 2012.

The 2012 UK national Budget provided the promise of a set level of relief for oil and gas operators, which will assist the whole industry. The changes announced by the UK Treasury in March 2012, regarding tax relief for decommissioning, are expected to provide the certainty of government contribution to each decommissioning project. This should deliver greater assurance over liabilities and help to stimulate late-life acquisition, but it also will give greater confidence to those operators that are approaching the end of economic field life. It is hoped that this announcement will also result in a steadier rate of activity in the North Sea market, provide companies with more confidence, and encourage the pace of investment and innovation within the industry.

World Oil’s annual tabulation of drilling, production and reserve statistics shows that the global upstream oil and gas industry is thriving. Indeed, the worldwide E&P industry during 2011 rang up increases in all three major statistical categories—drilling, production and reserves—and appears headed to do the same thing again this year. Drilling was up 7.5% last year over 2010’s figure, at 103,039 wells. This year, we forecast that the pace of drilling increase will slow just a bit, but it will still be good enough for a 2.2% increase to 105,350 wells.

Since 2011, the LNG sector has continued to demonstrate its global appeal, and its ability to reconfigure and expand gas markets. Furthermore, it has demonstrated a capability to respond to dramatically changing market conditions and redirect cargoes to various destinations, something that cannot be done easily through gas pipeline systems. Consequently LNG’s influence is expanding in all gas-trading continents, albeit in ways not envisaged a few years ago. In North America, LNG provides potential opportunities for gas supplies trapped in an oversupplied market to enter profitable markets through exports. In Asia, it has helped to plug energy shortfalls following the March 2011 Fukushima nuclear accident in Japan and the large-scale outages of nuclear capacity. LNG has also competed effectively in Asia against oil products during sustained periods of high oil prices, providing LNG suppliers with high returns from oil-indexed cargoes. In Northwest Europe, expanded LNG volumes delivered to gas hubs have shaken up gas markets dominated for decades by long-term take-or-pay contracts, indexed mainly to petroleum products by the somewhat complacent pipeline gas suppliers (i.e., Norway and Russia).

Carbon dioxide foam floods are typically conducted via the alternate injection of aqueous surfactant solution slugs and pure CO2 (SAG). The notion of adding surfactant to CO2 for conformance and/or mobility control was suggested decades ago. Recent developments in the identification and design of CO2-soluble surfactants that generate foams via core studies have re-kindled interest in this idea.1,2 Because oil-bearing formations initially contained brine, and decades of waterflooding have added additional fluids, the need for alternating slugs of an aqueous solution can be reduced or possibly eliminated. Further, the dissolution of surfactant in CO2 helps to ensure that surfactant will be available for in-situ foam generation in areas where the CO2 is flowing.

The Niobrara tight oil shale play is the oilfield equivalent of the young athlete, who is built up as having world-class potential, only to struggle in meeting the lofty expectations. To be sure, the near-universal euphoria that accompanied high initial flowrates a couple of years ago has been replaced with cautious optimism, as operators work to further their understanding of the complex organic-rich play in the heart of the U.S. Rockies. Nevertheless, despite a comparatively brief, and at times fickle, horizontal exploration and production history, and ever-increasing environmental challenges, the independent, largely home-grown operators dominating the liquids-rich Niobrara continue to maintain reasonably stable drilling programs. In the meantime, geophysical investigations are underway to get a better grasp of the highly variable natural fracturing, to help operators uncover the secrets to increasing the drainage of horizontal and multi-frac wellbores in what was once hyped as the “Bakken-lite.”

In the International Energy Outlook 2011, the U.S. Energy Information Administration’s (EIA) National Energy Modeling System forecasts that domestic oil (liquid fuels) consumption will increase 5% to 20% in the next 20 years.2 With just 2% of the world’s proven endowment, and despite recent strides in domestic production, half of the 19.5 million bpd of liquids that the U.S. uses is imported from other countries. Canada’s massive oil sands resource in Alberta holds some 180 billion bbl of “free market” oil, but policy, such as the delay of the Keystone XL oil pipeline expansion project, could limit its availability to the U.S. market. Mexico, the next most important U.S. supplier, passed peak production in 2005, and its own growing economy will require greater amounts of fuel. Meanwhile, as demonstrated by the “NOPEC bill,” the national security mission to break the U.S. free from the Organization of the Petroleum Exporting Countries (OPEC) has been a steady drumbeat.

The Permian basin of Texas and southeastern New Mexico has experienced dramatic growth in drilling activity and increased production during the past couple of years. To the north, in the Texas Panhandle and western Oklahoma region of the Anadarko basin, operators have been moving toward more liquids-rich and oily plays with horizontal wells, some of which have laterals approaching 10,000 ft in length. One Anadarko basin field that has seen renewed activity is Hogshooter, a long-time play that has garnered renewed attention, due to its high production rates.

While the term, unconventional, has traditionally been used to describe emerging oil and gas resources, with an abundance of newly discovered formations and advancing technology to bring these resources onstream, what was considered an unconventional resource is now more of a mainstream operation. The SPE Annual Technical Conference and Exhibition (ATCE), 2012, seeks to explore the technology advances, development models, regulatory influences and knowledge transfer for these vast resources.

As the now-extended regulations within the U.S. Safety and Environmental Management Systems (SEMS) approach their first anniversary as official “commandments,” “documented core competency” reigns as the mandate du jour for nearly everyone connected with the offshore oil and gas industry. Not surprisingly, the federal edict has spawned a training cottage industry, as companies scurry to present proof that their rig hands are proficient in all things HSE.

A couple of months ago, I wrote about the ban placed on fracturing in Vermont. It was ludicrous. It was hilarious. It was misguided, based on faulty information. But, I do believe that those who supported and pushed the ban did so out of honest belief. Not so for the latest group of New York lunatics. Here is the deal. A group of chefs and food enthusiasts, who oppose fracturing and gas development in the Marcellus because, they claim, it puts their upstate New York source of vegetables and meats in danger, held an anti-fracturing fundraising dinner at the Brooklyn Winery in late July.

There’s a change taking place in the oil and gas industry. Thousands of geoscientists, petroleum engineers and oilfield workers, who were hired before the 1980s oil bust and recruitment freeze, are now reaching the retirement age. As these professionals leave the industry, they’re taking important knowledge and experience with them, and the current upswing in recruitment isn’t enough to slow the drain. This exodus from the industry is creating a challenging labor and knowledge gap.

People all over the world, and the mainstream news media, do not have a favorable opinion of corporations in general, and oil companies in particular. An ABC News/Washington Post poll taken April 5-8, 2012, asked “Who (sic) do you blame for the recent rise in oil and gasoline prices: other oil-producing countries, U.S. oil companies, or the Obama administration?” The U.S. oil companies received the most blame (28%), other oil-producing countries came in second (25%) and only 21% blamed the Obama administration. While there are complex reasons for the rise in oil and gasoline prices, it is apparent that the public is ever ready to blame the oil companies.

The oil and gas business is built on hits and misses. No major discovery was found with just one exploration well, a mental frame of mind that is familiar to Jim Henry, founder and CEO of Henry Petroleum and Henry Resources. Throughout 40-plus years of drilling in the Permian basin and experimenting with new fracturing techniques, Henry’s patience has certainly paid off. His discovery of Wolfberry field has brought the Permian basin back into the news with an estimated 3-billion-bbl play.

The appointment, last February, by Brazil’s first woman, President Dilma Rousseff, of Maria das Graças Foster as president and CEO of Brazil’s oil giant and the largest company in Latin America, is a Latin American version of the Horatio Alger story. It is particularly impressive, considering the region’s low upward social mobility.

For this month and next month, this column will focus on oil and gas election issues in the U.S., because at no other point in the lifetime of most people in our industry, have the stakes been higher. This might seem of little consequence or interest to some of our readers in other countries, but I would disagree. What happens in this U.S. election cycle this autumn will have significant ramifications for energy policy in this country, and whatever happens on the oil and gas front in the U.S. eventually impacts the global market. This month, the topic centers on a subject that we brought to you six months ago, but which has persisted despite our efforts to set the record straight. What I’m referring to is the chronic habit of President Obama and his White House advisors and surrogates to mis-state, distort and/or twist the facts about oil and gas operations, especially when they do it as a means of pumping up financially disastrous “green energy” schemes.

Frontier basins require broad-brush exploration tools: regional seismic, gravity and magnetic surveys. Gravity measurements provide a direct estimate of mass and can distinguish density anomalies in the subsurface. Gravity gradiometry is used to measure subsurface density by measuring variations in acceleration. In 2009, researchers at Lockheed Martin and Intrepid Geophysics estimated that 2.5 million line-km of gravity surveys have been run worldwide for hydrocarbon and mineral exploration. Recent gravity (and seismic) programs in the Greenland Sea are in preparation for two upcoming licensing rounds.

The Athabasca River in Alberta starts out clean. Most rivers do, too, I suppose, but this one begins as meltwater from the Athabasca Glacier in the Columbia icefields of Jasper National Park. The water reaches a liquid state for the first time since falling as snow thousands of years ago, and is quite pure and drinkable (you can purchase a bottle of Athabasca glacier water, if so inclined). It’s what happens to that water as it flows downstream—to Great Slave Lake and, eventually, the Arctic Ocean—that has been the subject of so much discussion, because its course runs through the bituminous sands, in and around Ft. McMurray, Alberta.

Oil prices continued an upward trend in July and August, although crude from Russia largely offset the loss from the Iranian oil embargo in Europe. Global oil supplies climbed to 90.7 million bpd, with the majority of the increase coming from non-Opec sources. Natural gas prices have staged a tepid recovery in recent months, rising above $3/Mcf, although supplies are still abundant. In the U.S., mostly liquid targets kept demand for drilling rigs strong, although numbers have slipped during the past couple of months. Internationally, drilling has increased modestly to 1,571 rigs, with Canada leading the way, more than making up for falling activity in Latin America.

The GO Range now provides a more compact, reliable solution for automating heavy duty valve applications found in the gathering, transmission, compression and storage of gas. Re-designed to provide longer, more efficient service in the harshest of environments, with a minimum of maintenance, the new generation of actuators has undergone an important upgrade, including streamlined manufacturing and product improvements. As a result, GO actuators are now lighter, more compact and incorporate advanced changes to functional specifications. The improved modular design enables the smallest number of components to meet a wide variety of valve torque and control requirements. The GO range uses the pipeline gas as the motive power source. The gas is delivered to oil tanks that convert the gas into hydraulic pressure. This pressurized hydraulic oil is used to drive industry-preferred Rotork scotch-yoke quarter-turn or linear valve actuators. A complete range of sizes is now available to suit virtually any valve size or class.

International Offshore Rigs            

International Rotary Rig Count

 International Rotary Drilling Rigs Graph            

US Gas Prices ($/MCF) & Production (BCFD)

World Oil Supply & Demand by Quarter

Selected World Oil Prices Graph ($/bbl)                           

U.S. Oil Production

US Rotary Drilling Rigs                                 

Rotary Rigs Running in US                               

Workover Rig Count

World Oil and NGL Production                  

As an industry that never seems to stand still, the upstream oil and gas sector has seen a tremendous amount of growth over the last several years. Given the steady price of oil, as well as advancing technologies to reach resources deeper, hotter, and in locations thought impossible to produce even 10 years ago, it is no surprise that the global industry is clamoring to find new talent.

Younger and locally based workforces in developing nations will likely take on larger roles in the oil and gas industry. Companies will need knowledge transfer, training initiatives and mentorship programs to help smooth this transition. 

The oil and gas industry has pretty much fully recovered from the 2009 recession. Everyone learned a great deal from their mistakes, and companies are now ready for the next surge in the industry.

World Oil turns the spotlight on a select group of oilfield companies competing for college graduates and seasoned professionals. Two recently recruited employees relate their practical work experiences in diverse sectors of the upstream industry.

Today’s competition to recruit and retain both skilled and specially trained employees has become a top priority for oil and gas companies, and will continue to do so as demand increases.

Beginning in the mid-1980s, the price of crude oil plummeted.  International petroleum companies responded by scaling back recruitment and implementing various ways to reduce the workforce through attrition, early retirement and layoffs. Almost immediately, some warned that when the salad days returned for the global petroleum industry, a shortage of skilled personnel was unavoidable.