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Oilman Magazine July/August 2019

Digital Twin Technology Can Drive
Greater Efciency, Support New
Business
p. 46
Where are my Permian
Barrels Going?
p. 6
Oil Ships Which
Rule The Waves
p. 26
Reections from OTC 2019: Interviews
with Newpark Drilling Fluids, Parker
Hannin and Brainnwave
p. 20
THE MAGAZINE FOR LEADERS IN AMERICAN ENERGY
July / August 2019
OilmanMagazine.com
MIDSTREAM TECHNOLOGY
Maritime Fuel Transportation
SPECIALTY & CUSTOM CHEMICALS
MFG Chemical is growing fast. Founded in 1979 in Dalton, GA, we now operate 3 plants in North Georgia
and a 25 acre plant in Pasadena, Texas.
Specialty chemical products include Amides, Esters, Imidazolines, Water Soluble Polymers, Rheology
Modifiers, Specialty Anhydrides and Diocytl Sodium Sulfosuccinates.
End-user market applications include agriculture, paints & coatings, lubricants, mining, oilfield, personal
care, pulp & paper, and water treatment among others.
Operating 31 stainless steel, glass-lined and Hastelloy reactors ranging in size from 1,000 to 20,000
gallons, MFG offers a fully equipped pilot testing facility, and world class laboratory for collaborative
development work. We are ISO 9001:2015 and ChemStewards EHS&S Certified. Safety and customer
confidentiality are our core values.
Contact Jack Drawdy
VP Sales & Business Development
jdrawdy@mfgchemical.com
GROW WITH
MFG CHEMICAL
Where are my Permian Barrels Going  p. 6  Reflections from OTC 2019  Interviews with Newpark Drilling Fluids, Parker Hanni...
Oilman Magazine / July-August 2019 / OilmanMagazine.com
2
Gifford Briggs
Gifford Briggs joined LOGA in 2007 working
closely with the Louisiana Legislature. After
nearly a decade serving as LOGAs Vice-
President, Gifford was named President in
2018. Briggs rst joined LOGA (formerly
LIOGA) in 1994 while attending college at
LSU. He served as the Membership Coordinator and helped
organize many rsts for LOGA, including the rst annual
meeting, Gulf Coast Prospect & Shale Expo, and board
meetings. He later moved to Atlanta to pursue a career in
restaurant management. He returned to LOGA in 2007.
Mark A. Stansberry
Mark A. Stansberry, Chairman of The
GTD Group, is an award-winning: author,
columnist, lm and music producer, radio
talk show host and 2009 Western Oklahoma
Hall of Fame inductee. Stansberry has written
ve energy-related books. He has been
active in the oil and gas industry for over 41 years having
served as CEO/President of Moore-Stansberry, Inc., and
The Oklahoma Royalty Company. He is currently serving
as Chairman of the Board of Regents of the Regional
University System of Oklahoma, Chairman Emeritus of the
Gaylord-(Boone) Pickens Museum/Oklahoma Hall of Fame
Board of Directors, Lifetime Trustee of Oklahoma Christian
University, and Board Emeritus of the Oklahoma Governor’s
International Team. He has served on several private and
public boards. He is currently Advisory Board Chairman of
IngenuitE, Inc. and Advisor of Skyline Ink.
Thomas G. Ciarlone, Jr.
Tom is a litigation partner in the Houston
ofce of Kane Russell Coleman Logan PC,
where he serves as the head of the rm’s
energy practice group. Tom is also the host of
a weekly podcast on legal news and develop-
ments in the oil-and-gas industry, available at
www.energylawroundup.com, and a video series on effective
legal writing, available at www.theartofthebrief.com.
Jason Spiess
Jason Spiess is an award winning journalist, talk
show host, publisher and executive producer.
Spiess has worked in both the radio and print
industry for over 20 years. All but three years of
his professional experience, Spiess was involved
in the overall operations of the business as a
principal partner. Spiess is a North Dakota native, Fargo North
Alumni and graduate of North Dakota State University. Spiess
moved to the oil patch in 2012 living and operating a food truck
in the parking lot of Macís Hardware. In addition to running a
food truck, Spiess hosted a daily energy lifestyle radio show from
the Rolling Stove food truck. The show was one-of-a-kind in the
Bakken oil elds with diverse guest ranging from U.S. Senator
Mike Enzi (WY) to the traveling roadside merchant selling ags
to the local high school football coach talking about this week’s
big game.
Joshua Robbins
Josh Robbins is currently the Chief Executive
Ofcer of Beachwood Marketing. He has
consulted and provided solutions for several
industries, however the majority of his consulting
solutions have been in manufacturing, energy
and oil and gas. Mr. Robbins has over 15 years
of excellent project leadership in business development and
is experienced in all aspects of oil and gas acquisitions and
divestitures. He has extensive business relationships with a
demonstrated ability to conduct executive level negotiations. He
has developed sustainable solutions, successfully marketing oil
and natural gas properties cost effectively and efciently.
Steve Burnett
Steve Burnett has been working in the oil
industry since the age of 16. He started out
working construction on a pipeline crew and
after retirement, nishes his career as a Pipeline
Safety Compliance Inspector. He has a degree in
art and watched oil and art collide in his career
to form the “Crude Oil Calendars.” He also taught in the same
two elds and believes that while technology has advanced, the
valuable people at the core of the industry and the attributes they
encompass, remain the same.
Where would the industry be without embracing technology? I’m sure
that question is often asked in the executive suite and in the oil eld
as hard-working individuals go about their daily work contributing
to produce the energy we need to run our modern society. Emerging
technology such as IoT, machine learning and data analytics, and
innovative products are improving productivity in the oil and gas
industry by trimming costs and waste, which in turn increases prot. It’s
hard to imagine where the industry would be had the industry continued
down the path of conducting the same manner of business after the 2014 downturn. During
this tumultuous period, that continues to a degree today, companies have no choice but to
innovate, cut costs, improve processes, or risk closing for good.
At OILMAN we’re amazed at the amount of technology development happening in the industry
right now. There are numerous startups exploring all facets of the industry eager to put their
mark on advancing productivity and the tools of the trade. At OTC we discovered countless
tech companies pushing the boundaries of articial intelligence, data analytics, unmanned
aircraft systems, cloud computing and connected devices that were exceedingly impressive.
Innovation did not stop with emerging tech startups, established oileld service, software and
product companies showcased improvements to their commercial lineup as well. Our reporter
Alan Alexeyev was on the OTC oor and he interviewed several companies. You can hear
interview clips in his article
Reections From OTC 2019: Interviews with Newpark Drilling
Fluids, Parker Hannin and Brainnwave.
He also asked each company representative their
thoughts on how college graduates can enter the industry and succeed in our rapidly changing
digital oileld. An insightful set of interviews you dont want to pass up.
JULY AUGUST 2019
PUBLISHER
Emmanuel Sullivan
MANAGING EDITOR
Sarah Skinner
ASSOCIATE EDITOR
Tonae’ Hamilton
FEATURES EDITOR
Eric Eissler
GRAPHIC DESIGNER
Kim Fischer
CONTRIBUTING EDITORS
Gifford Briggs
Steve Burnett
Thomas Ciarlone, Jr.
Joshua Robbins
Jason Spiess
Mark Stansberry
SALES
Eric Freer
Diana George
To subscribe to Oilman Magazine, please
visit our website, www.oilmanmagazine.
com/subscribe. The contents of this
publication are copyright 2019 by Oilman
Magazine, LLC, with all rights restricted.
Any reproduction or use of content without
written consent of Oilman Magazine, LLC
is strictly prohibited.
All information in this publication is
gathered from sources considered to be
reliable, but the accuracy of the information
cannot be guaranteed. Oilman Magazine
reserves the right to edit all contributed
articles. Editorial content does not
necessarily reflect the opinions of the
publisher. Any advice given in editorial
content or advertisements should be
considered information only.
CHANGE OF ADDRESS
Please send address change to
Oilman Magazine
P.O. Box 771872
Houston, TX 77215
(800) 562-2340
Original cover photo by
Suriyapong Thongsawang
www.123RF.com
LETTER FROM THE PUBLISHER
CONTRIBUTORS — Biographies
Emmanuel Sullivan, Publisher, OILMAN Magazine
Oilman Magazine / July-August 2019 / OilmanMagazine.com
3
Week Ending June 29, 2019
DIGITAL DOWNHOLE DATA
Gulf of Mexico: 26
Last month: 23
Last year: 18
New Mexico: 99
Last month: 101
Last year: 95
Texas: 462
Last month: 477
Last year: 529
Louisiana: 48
Last month: 44
Last year: 38
Oklahoma: 102
Last month: 102
Last year: 140
U.S. Total: 967
Last month: 984
Last year: 1,047
OIL RIG COUNTS
*Source: Baker Hughes
Brent Crude: $64.74
Last month: $70.64
Last year: $75.89
WTI: $58.47
Last month: $58.84
Last year: $68.24
CRUDE OIL PRICES
*Source: U.S. Energy Information Association (EIA)
Per Barrel
Gulf of Mexico: 59,456,000
Last month: 59,052,000
Last year: 47,498,000
New Mexico: 26,490,000
Last month: 27,466,000
Last year: 19,488,000
Texas: 149,002,000
Last month: 150,647,000
Last year: 126,668,000
Louisiana: 3,621,000
Last month: 3,780,000
Last year: 3,850,000
Oklahoma: 18,505,000
Last month: 18,131,000
Last year: 15,941,000
U.S. Total: 364,872,000
Last month: 369,403,000
Last year: 314,250,000
CRUDE OIL PRODUCTION
*Source: U.S. Energy Information Association (EIA) – April 2019
Barrels Per Month
Gulf of Mexico: 85,064
Last month: 89,135
Last year: 73,059
New Mexico: 145,891
Last month: 149,926
Last year: 118,195
Texas: 718,207
Last month: 728,974
Last year: 618,349
Louisiana: 244,757
Last month: 259,070
Last year: 223,247
Oklahoma: 261,982
Last month: 264,199
Last year: 235,092
U.S. Total: 2,915,305
Last month: 2,988,285
Last year: 2,597,880
NATURAL GAS
MARKETED PRODUCTION
*Source: U.S. Energy Information Association (EIA) – April 2019
Million Cubic Feet
Per Month
Connect with OILMAN anytime at
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
4
OILMAN COLUMN
Recent Appellate Decisions on the
Obligations of Mineral Executives and
the Waiver of Anti-Pooling Provisions
By Thomas G. Ciarlone, Jr.
In April, the Texas Supreme Court issued a
decision—
Texas Outtters v. Nicholson
—that
addresses the vexing situation in which the
owner of the executive rights also owns the
surface, but none (or virtually none) of the
minerals. What is the duty of the executive
rights holder in this situation?
Texas Outtters, the surface owner and also the
owner of the executive right, operated a hunting
business on the subject property. To keep the
surface estate pristine, Texas Outtters refused
to exercise the executive right to lease, and, in
response, the mineral owners sued for breach
of duciary duty. The San Antonio Court of
Appeals held that this claim was meritorious
because, by declining to lease, Texas Outtters
was angling to get for itself “unfettered use of
the surface for its hunting operation,” and “the
ability to sell its land at a large prot free of any
oil and gas lease.
The Supreme Court of Texas has now afrmed
the Fourth Court of Appeals.
SCOTX reiterated the general rule that
executive rights holders like Texas Outtters
must act with the “utmost good faith and fair
dealing” when evaluating whether to sign a
lease. Writing for the Court, Justice Lehrmann
explained, however, that the specic contours
of the duty are “difcult to determine,
“imprecise,” and “unsusceptible to a bright line
rule.” As such, the Court more or less conned
its holding to the specic facts before it:
[W]hile we cannot and do not say that an
executive primarily interested in the surface
necessarily breaches his duty by engaging
in conduct that benets the surface but not
the mineral estate, we conclude that legally
sufcient evidence supports the trial court’s
nding that Texas Outtters did so in this
case.
The decision in Texas Outtters is largely
unsatisfying, inasmuch as it offers no new
guidance on when executive rights owners will
cross the line from permissibly acting in their
own interests to improperly engaging in self-
dealing at the non-executive’s expense.
In other news, the San Antonio Court of
Appeals recently determined that the acceptance
of royalty payments will not necessarily operate
as a waiver of a mineral lease’s anti-pooling
provision. The decision is
Strickhausen v.
Petrohawk Operating Company.
The essential facts are as follows:
The mineral owner, Margaret Strickhausen,
signed an oil-and-gas lease with Escondido
Resources.
The lease explicitly forbade pooling without
the lessor’s written consent.
Another lessor in the same tract had no
similar anti-pooling clause in their lease.
BHP acquired the leases from Escondido.
BHP pooled the leased tract with other
properties and commenced drilling.
BHP subsequently asked Strickhausen to ratify
the pooled unit. She refused to consent, citing
her lease’s no-pooling provision. Strickhausen
nevertheless cashed a $270,000 royalty check
from BHP, and she proceeded to cash several
additional royalty checks.
Strickhausen sued BHP in 2014. The trial court
in La Salle County concluded, on a motion
for summary judgment, that Strickhausen had
ratied the pooled unit through her acceptance
of BHP’s royalty payments.
Writing for the undivided San Antonio appellate
panel, Justice Marion reversed the lower court’s
nding based on the Texas Supreme Court’s
2014 opinion in
Hooks v. Samson Lone Star,
LP.
There, the royalty owners had advanced
allegations of wrongful pooling after accepting
royalty payments from the operator. The Hooks
Court held that the plaintiffs had thereby
ratied the pooled unit. Unlike Strickhausen,
however, the plaintiffs in Hooks never lodged
any pooling objections until after they led
suit. Because Strickhausen rst registered her
objection to the pooling of her interest,
before
accepting any royalty payments, Justice Marion
explained that Hooks compels the conclusion
that Strickhausen never relinquished the
protections of the anti-pooling clause in her
lease.
The hard lesson learned is that a lessor’s (or
royalty owner’s) acceptance of royalty payments
will not, in all circumstances, serve as a
ratication of a pooled unit.
Tom is a litigation partner in
the Houston ofce of Kane
Russell Coleman Logan PC,
where he serves as the head
of the rm’s energy practice
group. Tom is also the
host of a weekly podcast on legal news and
developments in the oil-and-gas industry,
available at www.energylawroundup.com,
and a video series on effective legal writing,
available at www.theartofthebrief.com.
Oilman Magazine / July-August 2019 / OilmanMagazine.com
5
Oil and Gas Companies are
Reaching for the Sky
By Sarah Skinner
Drones or UAS (Unmanned Aircraft Systems)
have gained popularity over the years
recreationally, in business and in industry. In
the oil and gas sector, this is no exception.
Companies are only really beginning to utilize
and explore the vast benets these aircrafts
offer to their bottom line. They can go where
humans can’t and they can identify and alert
problems more quickly than it would be to send
someone out to troubleshoot the issue. The
equation is simple really: less manhours equals
more safety and more monetary gain.
In 2006 the FAA issued the rst commercial
drone permits. By doing this, it opened the
door for companies and professionals to use
UAS for business. In 2016, they again modied
guidelines with Part 107, making it easier for
oil and gas companies to use drones as part of
their operation. Drones may have started out as
only being visually capable aerial machines, but
they are rapidly progressing into so much more.
Not only are they able to inspect for a potential
problem, they are using AI and machine
learning to create limitless possibilities.
GIS (Grand Isle Shipyard), based out of
Lafayette, Louisiana, offers an Aerobotics
division that caters to UAS in the oil and
energy sector. Their Aerobotics drone offers
the following capabilities:
Asset Integrity Management Offshore &
Onshore
Thermal Imagery
Insulation Inspection
Remote Area Inspection
Rope Access & Scaffolding Support
3D Modeling
Orthorectied Imagery
Area Mapping & Survey
Well Pad Restoration Survey
Flare Tip Inspection
Corrosion Inspection
Construction Project Progress
Documentation
The fact that drones have the ability to
accomplish such tasks, that were traditionally
only achieved by humans and only at a fraction
of the cost, is incredible to think about. It’s
hard to believe that this technology has proven
itself to be economical and efcient in such a
short amount of time.
DaCoda Bartels, Chief Pilot and Drone
Division Manager at GIS in Lafayette said, “A
recent corrosion inspection job saved one of
our customers more than 75 percent when
compared to using traditional scaffold/rope
access methods.”
The amount of data in real-time that drones
have the ability to process and relay to
companies is informative and comprehensive
– arming them with all the information they
need to make decisions and identify problems.
In addition, by historically storing data, they
can also determine what trends are occurring
and make themselves better prepared in future
circumstances.
In addition to being extremely cost effective,
safety is another huge benet to using UAS.
Many locations are difcult to reach and
also dangerous. With the data being instantly
relayed, they can enable companies to take
precautionary measures immediately. The safety
of employees, structures and facilities is vital
to the organization in general, in addition to
the fact that it affects their EMR (Experience
Modication Rate). The EMR is a number that
insurers use to calculate the premium and it
takes into account the number of claims and
injuries a company has had in the past. This has
serious impact on the workers compensation
insurance premium of a business.
There are a few factors that create problems
for drones. An example would be places such
as Alaska. The machine keeps employees out
of subzero temperatures, but there is also a
wind factor that has to be taken into account.
In addition to this, wireless coverage is a
challenge in extremely remote areas where it
comes to relaying the data back to the operator
in real-time and also controlling the aircraft.
For other problems, such as water and/or
dust protection, drones are produced with a
ruggedized design made to withstand water and
dust ingress and freezing temperatures.
All in all, the benets far outweigh the risks.
The emergence of drones in the oil and energy
sector has created substantial value in so many
ways. The communication and the transfer of
information it provides is priceless. There is
more production, less downtime, which in turn
leads to signicant savings. Cost is reduced
and so are the risks, making it one of the most
attractive and necessary pieces of equipment
to date. As time progresses, they are going
to continue to get smarter, further advancing
their worth. The sky is the limit here (no pun
intended, or maybe so).
OILMAN COLUMN
Photo courtesy of Sutisa Kangvansap – www.123RF.com
Oilman Magazine / July-August 2019 / OilmanMagazine.com
6
OILMAN COLUMN
Where are my Permian Barrels Going?
By Ryan Cowan
“Capacity” – one of the most aggravating,
yet one of the most common words coming
out of West Texas and Southeastern New
Mexico today. Production is at record highs,
almost doubling within the past ten years, but
exploration and production companies are having
to ask themselves what they are going to do
with the crude coming out of the ground. With
high demand markets in Asia and Europe, the
value of crude sitting in lease tanks is nothing
compared to the price of crude that has made its
way to the Gulf Coast for export. The Permian
pipeline bottleneck, the increased requirements to
provide a quality product, along with port vessel
constraints have created unpredicted challenges
for these companies.
Pipeline Constraints
For starters, they need more pipeline capacity.
Midstream companies are changing the ow
direction of their pipelines to remedy the capacity
issue, transporting imported crude so that these
pipelines are now likely to ow toward the
Gulf Coast. Additionally, some NGL pipelines
have been converted to transport crude oil.
However, this has only functioned as a band-aid
to a broader problem. Currently, over nine new
pipelines have been proposed in the region and
are expected to be completed by 2021. These
pipelines will provide relief with additional
capacity of about 5,000,000 barrels per day.
Quality Concerns
Permian producers are also concerned about
protecting the quality of their crude coming out
of the ground. With
an increase in light
crude coming out of
the Permian recently,
producers are also
asking midstream
companies to keep
intermediate barrels
separate from light
barrels and minimize
the interface between
the two. By not comingling the different grades,
the commodities remain pristine for their
respective downstream markets.
To meet this expectation, midstream companies
need to provide three things to producers:
Consistency: Producers want to know that the
quantity and type of barrels that they put into
the pipeline are consistent with the barrels they
take out of the pipe. This ensures that their
downstream markets are going to be satised
with the crude they will rene.
Accuracy: Producers want to know that a barrel
will reach its
destination
when the
pipeline
company
says it will.
This allows
the producer
to market
the products
more reliably
and schedule
additional
downstream
transportation
as necessary.
Characteristics: Producers want to ensure
barrels they put into the pipeline come out
of the pipeline without excess additives like
drag-reducing agents and other contaminants.
Downstream markets may start declining a
producer’s crude if it’s difcult or more expensive
to rene.
Vessel Management
Exporting crude is the main target for Permian
producers, leading midstream companies to be-
come more and more creative in how they avoid
some of the historical constraints. However, these
types of projects are costly, slow to approve, and
they take several years to build. An example of
these capital-intense projects is modifying ship
channels to become deeper and wider, which al-
lows more trafc and larger vessels to access their
docks. Other companies are evaluating build-
ing offshore docks to
avoid these constraints
altogether. All of these
solutions to the bottle-
necks may take ve
to ten additional years
before they are resolved
entirely, so streamlining
today’s processes will
help Permian suppliers
distribute their product more quickly.
Also, marine terminal and dock owners can
facilitate export services by providing better:
Location Awareness: Ensuring capacity at
marine terminals is critical. Having tankage to
store the abundant supply and being able to load
that volume onto vessels with quick turnaround
is crucial.
Timing: Dock owners need the ability to sched-
ule vessels to the berth accurately. Understanding
the timing of vessels coming in, de-ballasting, and
loading of crude allows their shippers to avoid
idle time in waiting for the berth to become avail-
able. Software companies such as Quorum offer
vessel scheduling to maximize dock usage and
throughput to streamline this process.
Optimization: Terminal operators benet from
tracking incoming volumes along with outbound
vessels to maximize their use of capacity. This
prevents the need to reroute crude, shut-in
production, and leave vessels waiting in the bay.
Software is critical to optimize these processes.
Companies such as Quorum provide solutions
that assist with pipeline scheduling, allowing
shippers to know precisely when their barrels will
arrive. Quorum also offers terminal scheduling
solutions that ensure efcient capacity utilization.
Conclusion
According to Energy Information Administration
data, the United States is now the largest oil
producer in the world. With that achievement
comes many challenges that the industry is
working to overcome. First, much-needed
pipeline capacity is being added to take crude
from the Permian to the Gulf Coast. Second,
higher standards are helping address product
consistency and quality expectations alongside
software that provides better visibility into
processes. Lastly, vessel management, such as size
accessibility, scheduling, and tracking, has become
vital in helping the Permian move their product.
Ryan Cowan is a Senior
Manager in the Solution
Design group at Quorum.
In this role, Mr. Cowan is
responsible for the oversight
of the myQuorum Crude
Transportation program engaging with several
of the largest liquid pipeline and storage
companies in North America. With 8 years of
oil and gas experience, Mr. Cowan has engaged
with over a dozen midstream Fortune 500
companies in both the oil and gas space. Mr.
Cowan has a BBA from the Rawls College of
Business at Texas Tech University.
Oil and Gas Associations
American
Gas Association
aga.org
Association of
Oil Pipe Lines
aopl.org
National Association
of Pipeline Safety
Representatives
napsr.org
GPA Midstream
Association
gpamidstream.org
Interstate Natural Gas
Association of America
ingaa.org
Independent
Petroleum Association
of America
ipaa.org
American Petroleum
Institute
api.org
American
Exploration &
Production Council
axpc.org
National Stripper
Well Association
nswa.us
Petroleum Equipment
& Services Association
pesa.org
Association of Energy
Service Companies
aesc.net
National Association
of Royalty Owners
naro-us.org
United States
Energy Association
usea.org
Natural Gas Supply
Association
ngsa.org
US Oil and Gas
Association
usoga.org
NATIONAL
Where are my Permian Barrels Going  p. 6  Reflections from OTC 2019  Interviews with Newpark Drilling Fluids, Parker Hanni...
Where are my Permian Barrels Going  p. 6  Reflections from OTC 2019  Interviews with Newpark Drilling Fluids, Parker Hanni...
Oilman Magazine / July-August 2019 / OilmanMagazine.com
10
Importance of Bolting Systems
By Sarah Skinner
So many components make up a successful
oil rig or onshore well structure. It’s hard to
place value on which piece of equipment is
the most crucial. However, a betting man may
say that the bolting system would be the most
important mechanism and because of that, it is
absolutely necessary to have the most reliable
equipment possible to ensure those bolts are
adequately secure. Bolt failure could result in
oil, drilling uids or natural gas leaking into the
environment. In addition to the environment
being affected, personnel could also suffer,
as torque wrench accidents and even fatalities
are possible when dealing with bolts and
machinery of that magnitude.
HYTORC is the world’s largest and oldest
manufacturer of industrial bolting systems.
This year, they were one of the recipients of
OTC’s “Spotlight on New Technology™”
award. The award was given for their
LITHIUM SERIES®II Tool, a ground-
breaking innovation with TorcSense™
Technology, an all-new method of direct
torque measurement and closed loop
control to provide more repeatable bolting
performance. The tool has a new brushless
36V motor coupled with a more robust
gearbox optimized to deliver increased strength
and control in heavy industry operations. It has
up to 5000 ft-lbs capacity and is compatible
with conventional sockets, the HYTORC
washer and the HYTORC Nut.
“HYTORC has a deep history of providing
innovative bolting solutions that provide
our clients with greater safety, convenience
and productivity,” HYTORC President
Eric P. Junkers said. “With the launch of
the LITHIUM SERIES II Tool, HYTORC
continues to set the standard with technology
and innovation that provides customers with
the most accurate, efcient and safest bolting
solutions available.
The torque tool has new features, like the
sliding directional switch, snug function, user
access levels and advanced bolting. The nickel
plating improves corrosion resistance and
overall durability. The gearboxes are redesigned
for 20 percent greater strength and reliability.
The user interface and menu structure is
remodeled for ease of use, while presented
on a high resolution display. It is standard
with Bluetooth wireless technology and makes
data acquisition and rmware upgrades easier
than ever. It enhances the overall safety and
productivity of bolting.
“These advancements will keep HYTORC
ahead of the competition in the portable
industrial torque tool space.” said Product
Project Manager Kunal Rana, who is managing
the product launch. “We are excited to get
the tool into the hands of our customers so
they can experience this revolutionary new
product.
The sheer volume of hand and nger
injuries is shocking. The IADC (Industrial
Association of Drilling Contractors) reports
that 43 percent of all oil and gas injuries occur
to workers’ hands and ngers. Post-injury
investigations may impact work productivity
or even shut down a factory or renery for
weeks, even months. The U.S. Bureau of Labor
Statistics reports that the average hand injury
claim has now exceeded $6,000, with each lost-
time workers’ compensation claim reaching
nearly $7,500. In addition, a factory or renery
shut down that is the result of a hand injury
investigation, could cost up to one million
dollars.
HYTORC is also extremely involved and
aware of the importance of hand safety.
They recognize that it’s a major concern
in industrial bolting operations, especially
when using outdated tools and methods
that create hazardous pinch points. Because
of this, they’ve developed the HYTORC
Washer, which is the only bolting system that
reduces the risks of hand injury by completely
eliminating pinch points. This is a game
changer when it comes to safety, as the hands
are the most at risk for injury and suffer the
most abuse.
The HYTORC Reaction Washer features
a smooth side to reduce the friction of
the turning nut, a knurled side to keep the
Washer from rotating, and outer lobes to
brace reaction forces, thus eliminating the
need for reactions and completely eliminating
dangerous pinch points.
The HYTORC Backup Washer features
knurls on both sides to keep the backup-nut
from rotating, thus eliminating the need for
a backup wrench and completely eliminating
dangerous pinch-points on the opposite side
of the ange.
From a safety standpoint and an efciency
standpoint, industrial bolting methods are
of the utmost importance. It’s crucial that
companies recognize the new technologies
available that make bolting faster, safer and
more accurate. As a result, in the long run, will
reduce expensive errors and prevent accidents.
There are training sessions available which will
make the user more educated and comfortable
with the tools at hand. The tools are out
there to improve performance, in less time,
with less accidents. Bolts of that caliber hold
extremely important assets in place and need
to be installed and treated with the utmost
precaution.
OILMAN COLUMN
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
12
Creating Resilient Operations Through
Machine Learning
By Gabriel Prado and Marla Rosner
If there is one true constant in oil and gas, it’s
that prices never stay the same for long.
Analysts have been frantically arguing about
the future of oil prices likely for as long as the
industry has been around, with no signs of
stopping. Does lower for longer, in fact, mean
lower forever? Or does it mean an upward
trajectory is just around the corner? How should
oil and gas operators plan for the next big shift?
The real answer is that short of installing a
crystal ball, oil and gas companies need to focus
less on predicting the future of prices, and
more on establishing resilient and productive
operations that will remain stable regardless of
what tomorrow holds. This means making sure
operations are running as efciently as possible,
while minimizing extraneous and unforeseen
costs and unexpected loss in potential revenue.
How Do You Ensure Stable Operations?
Maintenance is a key area where drilling
operations can lose millions of dollars per
year in lost revenue and extra costs, negatively
impacting both the top and the bottom line. A
critical asset failure on an offshore rig could run
up a tab of almost $8.5 million in just one week.
Predictive maintenance, wherein asset data
is used to model typical asset behavior and
predict impending failures before they occur,
is the best way to avoid these unnecessary
costs. Research by the Electric Power Research
Institute compared the annual cost of scheduled
maintenance, reactive maintenance, and
predictive maintenance, and their ndings were
striking: Scheduled maintenance costs an average
of $24 per horsepower per year. Reactive
maintenance is $17 per horsepower annually,
though that’s before considering the additional
costs that asset failures may incur, such as safety
hazards of operational damage. By contrast,
predictive maintenance generally costs oil and
gas operators no more than $9 per horsepower
each year.
The other crucial way for oil and gas companies
to future-proof their operations is with
process optimization. Research by McKinsey
& Company has uncovered that on average,
offshore platforms only realize 77 percent of
their ll production potential, and the industry
loses about $200 billion annually to operational
inefciencies.
As important as they are, though, both
predictive maintenance and process optimization
are difcult to achieve without machine learning.
Predictive maintenance has substantial barriers
to implementation. The asset behavior models it
uses are difcult and time-consuming to create,
requiring hard-to-come-by data science talent.
The amount of labor involved also means that
scaling predictive maintenance across an entire
operation, and the vast number of individual
assets involved, is often unfeasible. And these
models require constant upkeep and tuning for
even the slightest change in asset conditions, and
struggle to capture edge cases that may occur
under unusual or extreme operating conditions.
Process optimization is equally challenging.
Oil and gas operations are inherently complex,
involving nuanced interactions between
thousands of variables. Discovering the source
of inefciencies, and deciding which controls
should be adjusted to maximize production,
is nearly impossible in the midst of so much
statistical noise, even for experienced subject
matter experts.
Automated Model Building
While humans are unable to deal with the
massive amounts of data, analysis, and upkeep
required for predictive maintenance and process
optimization, machines can ll in the gaps. In
particular, automated model building (AMB)
has the potential to be a massive boon for
the oil and gas industry. AMB solutions are
able to create, deploy, and maintain machine
learning models across an entire organization,
even in the hands of users without any data
science expertise. An AMB platform can ingest
sensor data and automatically build a model
capable of predicting asset behavior or agging
inefciencies far more accurately than manual
models can, and can accomplish this feat in far
less time.
Case study: Improving processes by identifying
downhole drill state
In one case study, a major oil and gas company
was attempting to rene the operation of a
critical subterranean drill by using machine
learning techniques to infer its current operating
state at any given time.
In partnership with SparkCognition, an AI
solutions provider, the company made use of
sensor and operating data from the drill head,
including time-series electric drilling recorder
data from the drill’s operation. An AMB
platform made use of this data in a classication
approach to discover and label seventeen drill
states.
The AMB platform was then able to develop
a deep learning model capable of perfectly
differentiating between different drill operating
modes. This model has allowed the company
to greatly improve production, as it updates
operators on the performance of the drill and
rig, enabling them to set and update KPIs in real
time. By adjusting their approach on the y, the
company has been able to better maximize their
efciency.
Photo courtesy of everythingpossible – www.123RF.com
OILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com
13
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Natural Language Processing
The other machine learning technique
that will be key to oil and gas operations
looking to thrive in the years ahead is natural
language processing (NLP). NLP transforms
unstructured natural language content into
structured data, which can then be used for
process automation, decision support and
analytics, and predictive modeling when paired
with AMB software.
In the case of oil and gas, NLP can ingest
maintenance logs and user manuals, and use
this information to remove bottlenecks in
organizational workows, quickly retrieve
optimal repair solutions for maintenance
issues, and preserve, codify, and continuously
contribute and improve the tribal knowledge
from and for the subject matter experts.
Case study: Identifying non-productive time and
invisible lost time on oil rigs
An E&P operator was struggling to identify
and reduce non-productive time and invisible
lost time, but the work of categorizing and
analyzing rig activities required prohibitive
amounts of time and labor—the equivalent of
one full-time job for the categorization itself,
plus the work required by QA teams to check
over and validate the categorization. To make
this process nancially feasible, the operator
needed a new approach.
The operator partnered with SparkCognition,
and made use of the NLP solution
DeepNLP™ to automatically analyze rig
activity logs, categorizing activities for increased
insight into rig work time and presenting that
information to human users.
In the end, the project was able to automate
the full job of categorizing rig activity. The
accuracy it achieved was on par with manually
categorized data that had been through at
least two rounds of human QA. Using the
information from DeepNLP, the E&P operator
has been able to better pinpoint invisible
lost time and non-productive time, as well as
their causes, and will subsequently be able to
maximize production efciency in entirely new
ways.
It may not be possible to predict what the days
and years ahead will hold for the oil and gas
industry. But we can be fairly condent that
it will continue to require resilient operations.
We know that the keys to that resiliency already
exist, are fully accessible, and will return huge
benets to the operator willing to make the
investment. Leave the predictions to the ma-
chines, and you can instead focus on ensuring
your operations are the best they can be.
OILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com
14
New M&R Software Innovations Keep
Fleet Managers in Check
By Matt Hendrix
Over the last twelve to twenty-four months, it
seems as though topics such as autonomous
driving and ELD mandates have ooded the
news headlines for the eet transportation
industry. And deservedly so, these are no
doubt topical, important issues. However, in
running your eet day-to-day, understanding
the evolution of M&R (Maintenance and
Repair) issues continues to be right up there
in level of importance.
M&R is critical because it signicantly
impacts every type of operation and
having improper management of M&R can
drastically erode prots from the bottom line,
and the older the truck, the costlier it gets.
According to a recent report on lifecycle
strategy, M&R costs on a 2012 sleeper model-
year total $23,100, compared with $2,070 on
a new, 2019 model-year truck, providing a
savings of $21,030.
A shorter lifecycle produces long-term
savings beyond the rst-year. When eets
adopt a three-year lifecycle for their trucks,
replacing with new technology in year four,
they realize a savings of $42,830 in M&R
calculated in years four through seven when
compared to a eet driving the same truck for
the full seven years.
More Trucks Equals More M&R
Challenges
More eet managers are realizing these
numbers, and they’re now placing a higher
emphasis on M&R strategies. According to
a recent survey, 40 percent of respondents
listed M&R as their top motivating factor for
acquiring new trucks. However, the survey
shows that costs are not the only concern
eets have regarding maintenance; 26.7
percent also believe a safe, well-maintained
truck is most benecial in driver recruitment
and retention – critical since the driver
shortage remains a difcult issue for many
eet and transportation companies.
This issue will only grow in the coming years,
as eets look to either replace trucks or add
to their mix to handle more demand for
the economy. FTR reports North American
Class-8 orders for October continued to
surge, registering at 43,000 that month. ACT
Research’s numbers show 43,600 Class 8
trucks in October.
With the demand for shipping and
transporting goods remaining healthy, and
more trucks coming online in the coming
months, how can innovative software and
data analytics help eets and transportation
companies better manage M&R activities?
Innovative M&R Software Resources
Today’s leading M&R software now enables
private eets and for-hire carriers to leverage
intuitive dashboards instead of complicated
spreadsheets and allows users to create their
own custom view with the information that
interests them most: vehicle performance
for eet managers, M&R data for repair
personnel, and even custom nancial models
for the C-level.
Innovations in M&R software now allow
eets to manage their entire operations,
with views on everything from operational
costs, M&R data, replacement vehicle
savings, vehicle servicing and histories; and
these software platforms are now mobile-
responsive for on-the-go eet management.
Today’s new M&R software can track
expenses for a eet in every aspect of the
truck’s requirements, such as expenditures
that include tires, tubes, liners and valves;
preventative maintenance measures; brakes;
expendable items; exhaust systems; fuel
systems; and more.
Heavy-duty trucks must be well-maintained
throughout the year and be prepared for all
weather patterns. It’s important to take every
precaution necessary, particularly with M&R
to ensure the safety of drivers operating the
trucks as well as other motorists on the roads.
As such, it would be wise for eets and for-
hire carriers to pay particularly close attention
to the latest software innovations that
leverage eet utilization data and analytics
to track all M&R activity to help ensure each
truck is operating at a premium level. This
will not only ensure safety for all on the road,
it will signicantly help the bottom line as
well.
Matt Hendrix, CTP is
the Senior Director of
Fleet Services at Fleet
Advantage, which just
recently unveiled its
ATLAAS Unied eet
management software with key M&R
performance metrics and tracking. Matt has
over 20 years of mechanical, operational
and eet management experience and
provides eet monitoring, technical
expertise and oversees compliance for
Fleet Advantage clients.
OILMAN COLUMN
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
16
OILMAN COLUMN
Addressing Infrastructure Needs in the
Permian Basin and Across America
By Ronnie Witherspoon
It’s no surprise that with oil production in
the Permian region quadrupling over the past
eight years, the trafc in the Permian Basin has
increased exponentially. According to a study
by the Texas A&M Transportation Institute,
there were four times the number of truck
loads on the roadway than ofcials initially
estimated. During this same eight-year period,
Midland, Texas has also become one of the
fastest growing cities in America. The economic
opportunities presented in the region have
caused a population growth of over 25 percent
and there’s no sign of it slowing. Especially if
you factor in that the basin is expected to nearly
double its crude oil output by 2023.
Between the surge in the basin and the
population growth, the state of infrastructure
in Midland has created a tremendous amount
of road congestion. In some areas, certain
segments of the road need to be rehabilitated or
completely rebuilt. The Texas Department of
Transportation has committed to making many
enhancements, and construction is underway.
However, this construction is causing additional
deterioration of the local infrastructure. The
deteriorating road conditions are not only
causing bottlenecks and additional costs for
the trucking and oil industry, but they are now
presenting safety issues for passenger vehicles in
the region. Now, more than ever, is the time to
address the need for infrastructure investment
and repairs. Not just in the Permian, but in all
booming towns and cities across the country.
Coping Mechanisms
Producing an estimated four million barrels
a day, the Permian Basin generates more oil
than the majority of OPEC – excluding Saudi
Arabia and Iraq. Although there are 12 pipelines
currently under construction and an additional
30 in the pre-construction stages, the U.S.
currently lacks the pipeline capacity to transport
all the oil and gas we are rapidly extracting.
Therefore, because the Permian generally has
low production costs, it remains economically
viable to use unconventional means to move
incremental barrels out of the basin – even
at an additional expense. This is not without
consequences and has resulted in an increase in a
level of surface infrastructure congestion never
before seen in the region.
As Aveda specializes in transporting the
equipment required for the exploration,
development and production of petroleum
resources here in the U.S., we’re seeing the issues
mount day after day. Due to these road hazards
and restrictions, many of our trucks are forced
to nd alternate routes, whether on dirt roads
or county roads. These alternate routes increase
the time and distance to transport equipment
and now, what began as a routine move, quickly
becomes a long and cumbersome job. This not
only impacts the costs associated with the move,
but also increases the safety risks.
To combat these risks, Aveda has taken
numerous measures to reduce the number of
trucks that are on the road. To avoid unnecessary
congestion, they not only must conduct
extensive pre-job planning to ensure the proper
staging of trucks, but also increase the safety of
their employees.
Some of the measures they’ve put into place
include centralizing their employees by housing
them in man camps in Midland and Pecos,
Texas. From there, they utilize crew vans to
bus employees to and from their locations.
They’ve also made an aggressive push to
increase the number of owner-operators
to reduce their dependence on third party
providers and to better ensure that Aveda can
uphold homogeneous standards throughout the
company. By constantly being proactive in their
methodologies, they’re doing their part to enact
measures and ensure they are doing everything in
their power to be as safe and efcient as possible.
A Nationwide Need for Infrastructure
Investment
The logistical and safety challenges created
by the state of the infrastructure in the
Permian highlights a larger need for greater
infrastructure investment across the country.
Currently, trucking moves over 10.77 billion
tons of freight every year and accounts for
around 70 percent of all surface freight in
North America. Much like the boom we’ve seen
in the Permian, the recent surge of the U.S.
economy has increased the number of trucks
on the roads across the nation. In fact, last year
was a record-breaking year for the trucking
industry with a 6.6 percent increase in tonnage
transported. However, delays due to congested
bottlenecks found by the American Society of
Civil Engineers to be “structurally decient and
in poor condition” also created additional costs
and inefciencies for the trucking industry. To
put it in perspective, the American Trucking
Associations estimates that the trucking industry
loses approximately $75 billion a year as we all
sit together in trafc.
Addressing the deterioration of roads and
bridges is not the only infrastructure concern for
the trucking industry; the lack of parking and
the need for more rest stops also compound the
issue. Beyond the cost of sitting in trafc, the
current lack of parking is an economic problem
for drivers, as it directly effects their wages.
According to the American Transportation
Research Institute, drivers are spending on
average about 56 minutes a day looking for a
safe place to park – that time results in $4,600
in lost wages annually. In addition to lost wages,
drivers often now have to choose between HOS
(Hours of Service) violations or trafc nes.
Photo courtesy of Aveda Energy and Transportation, a Daseke Company
Oilman Magazine / July-August 2019 / OilmanMagazine.com
17
OILMAN COLUMN
The result is that we’re seeing trucks parked on
the side of highway ramps and road shoulders,
often in high volume regions with zoning
restrictions that make it extremely difcult to
expand parking areas for rigs.
Momentum Gaining
While the trucking industry is encouraged that
President Trump and congressional leaders are
in agreement on a big, bold vision to invest
in our nations infrastructure, it is time for
action. This isn’t simply a highway maintenance
issue we’re talking about. For every day that
we delay repairing and replacing our nations
infrastructure, we’re putting lives in danger.
According to the ATA, in nearly 53 percent
of highway fatalities, the condition of the
roadway was a contributing factor. Through
the implementation of proactive measures and
strategies to ensure the safety of our nation’s
drivers and the communities we serve are
helping, it’s merely a band-aid.
Passing infrastructure legislation will not only
improve the oil and gas industry’s transportation
needs, but it will also improve construction and
domestic manufacturing goods delivery, increase
passenger vehicle safety and support the growth
of middle-class jobs across the U.S. Ultimately,
infrastructure investment is about the American
people and their communities, and our country
needs to move beyond the politics. Bottom line,
if there’s one thing that’s good for every person
in America, it’s investing in our infrastructure.
Can you imagine where we’d be if Eisenhower
hadn’t invested in our nations interstate system?
Ronnie Witherspoon is the
CEO and president at Aveda
Energy and Transportation, a
Daseke Company. With over
20 years of oileld industry
expertise, Ronnie has held
a wide variety of operational, business
development and leadership positions.
Photos courtesy of Aveda Energy and Transportation, a Daseke Company
Oilman Magazine / July-August 2019 / OilmanMagazine.com
18
Salt of the Earth: The U.S. Strategic
Petroleum Reserve
By Emmanuel Sullivan
The U.S. SPR (Strategic Petroleum Reserve) is
an oil reserve created in response to the 1973-
1974 oil embargo. America’s dependence on
OPEC (Organization of the Petroleum Exporting
Countries) revealed the extent to which those
countries could potentially inuence United States
foreign policy. Over the decades, U.S. energy
consumption and production has changed. Today,
the reasons the United States uses the SPR has
also changed.
The Embargo
In October 1973, Arab oil producers within
OPEC retaliated against the United States’
support of Israel during the Yom Kippur War,
when Egypt and Syria attacked Israel. They
placed an embargo on oil. This prohibited the
OPEC members from exporting oil to the U.S.
OPEC also threatened to cut oil production by 25
percent. Their goal was two-fold: 1. To leverage
America’s dependence on foreign oil to weaken
U.S. support of Israel and 2. To raise the price
of oil. One goal was achieved: By December, the
price of oil increased 400 percent. But, long lines
at America’s gas pumps did not change the Nixon
administrations strong support of Israel.
The Promise of Peace
The Nixon administration and Secretary of State
Henry Kissinger simultaneously held negotiations
for peace and an end to the oil embargo. The
First Egyptian-Israeli Disengagement Agreement
reached by the parties in early 1974 was enough
to get the Arab members of OPEC to lift the
embargo. Unfortunately, the peace deal was never
nalized.
Strategic Storage
At the end of 1975, President Ford signed the
EPCA (Energy Policy & Conservation Act).
This created an emergency petroleum reserve. In
April of 1977, The U.S. government bought salt
caverns on the Gulf Coast to store the petroleum.
Construction of the storage facilities began in
June of 1977. By July, 412,000 barrels of Saudi
Arabian light crude were delivered. The act
approved up to 1 billion barrels of oil for storage.
However, as of September of 2018, the maximum
capacity of the SPR is 713.5 million barrels.
Salt of the Earth
Storing the reserve oil in salt mines costs a lot
less than building and maintaining above-ground
storage. The oil is connected to the commercial
oil transport network through interstate pipelines.
This reaches about half of the U.S. oil reneries.
The oil can also be transported by ship or
barge to other reneries.
There are 60 caverns in the SPR distributed
between four locations along the Gulf Coast.
There are two facilities in Louisiana (Bayou
Choctaw and West Hackberry) and two in Texas
(Big Hill and Bryan Mound). Each cavern can
hold from 6 million to 35 million barrels. The
typical cavern is 200 feet in diameter and 2,000
feet high. Enough to store 10 million barrels.
Self-Healing
The caverns are created by drilling a well into a
salt formation and dissolving the salt by injecting
huge amounts of fresh water. This process of
solution mining requires seven gallons of water to
carve out space for each barrel of oil.
At depths of 2,000 to 4,000 feet, extreme geologic
pressures make the salt walls of a cavern hard
as rock. If any cracks develop, they will close on
their own. In addition to the ability to heal itself,
the subsurface temperature differential keeps the
crude circulating. This maintains the quality of
the oil.
It Takes Another War
Only the president can order the drawdown of
the SPR. President George H. W. Bush was the
rst to use the SPR to stabilize world oil markets
during the Persian Gulf War on January 16, 1991.
17.3 million barrels were sold to 13 different
companies.
Use of the SPR is dened in the EPCA. Three
types of drawdowns were anticipated:
1. Full Drawdown. A full drawdown of the
petroleum reserves may be ordered by the
president in several scenarios, including
shortages that are likely to negatively impact the
nations safety or economy.
2. Limited drawdown. A partial drawdown of
under 30 million barrels. This is limited to 60
days. However, there must be more than 500
million barrels still left in reserve.
3. Test Sale or Exchange. Drawdowns and
distribution of crude oil up to 5 million barrels
may be carried out by the Secretary of Energy.
Safety Net
Test sales are periodically conducted to ensure that
the SPR is ready to react to a drawdown in the
event of an emergency. Exchange contracts are
typically used after a natural disaster. It is similar
to a loan. The recipient agrees to return the same
type and amount of crude – plus additional
premium barrels by a certain date. The additional
barrels are similar to paying interest. For example,
reneries entered into exchange contracts after
Hurricane Harvey impacted their operations in
2017.
For the rst time, the SPR will be used as a way
to pay the bills. The 2018 budget deal signed
by President Trump mandates that 100 million
barrels of oil be sold by 2027. The proceeds will
be used to help reduce the decit.
An Abundance of Oil
America’s dependence on foreign oil has reduced
considerably since the 1970s. Consumption is
generally stable and U.S. crude oil production
has been increasing since 2008. In 2005, net
imports were 12 million barrels a day. By 2017,
that number was only 4 million. A whopping 67
percent decrease. It is expected that net imports
of U.S. crude oil and petroleum products will
decline to zero in the late 2020s. Soon after,
the U.S. will become a net exporter of these
products. A 90-day reserve is still required to
respond to supply disruptions. Particularly since
the projection is for the U.S. to again be a net
importer of crude oil between 2040 and 2050.
Risk Mitigation
Although it didnt result in a Middle East peace
agreement, the 1973-1974 oil embargo was in
some ways a blessing. It forced the U.S. to mitigate
the risks associated with an oil shortage and to
nd ways to increase domestic oil production.
The development of the Strategic Petroleum
Reserve has kept the U.S. more secure during wars
and natural disasters. The life blood thousands of
feet below the Earth’s surface.
United States Strategic Petroleum Reserve Well Pad
Aerial View, West Hackberry, Louisiana
Photo courtesy of Energy.gov
OILMAN COLUMN
Where are my Permian Barrels Going  p. 6  Reflections from OTC 2019  Interviews with Newpark Drilling Fluids, Parker Hanni...
Oilman Magazine / July-August 2019 / OilmanMagazine.com
20
Reflections from OTC 2019: Interviews
with Newpark Drilling Fluids,
Parker Hannifin and Brainnwave
By Alan Alexeyev
This year’s Offshore Technology Conference
marks its 50th anniversary. There were many
interesting companies and one day is simply not
enough to go over them all.
I spoke with Newpark Drilling Fluids, Parker
Hannin and Brainwave at this year’s OTC. Every-
one was excited about the opportunities in the oil
and gas industry.
To start, my rst interview is with Tim Armand,
who is a president at Newpark Drilling Fluids,
which is a worldwide provider of value-added
uids and chemistry solutions in the oileld and
engineered worksite, and access solutions used in
various commercial markets.
The company recently won the Shell Award, rec-
ognized for its health, safety and environment and
leadership practices. Newpark assisted Shell with
formations that are historically difcult to manage,
provided waste management and water treatment
including reverse osmosis.
Annually, Shell recognizes suppliers for three
awards. For the 2018 Wells Services Award for
Suppliers with Operating Hours less than 100,000,
Newpark was commended for its superior
management and site leadership, demonstra-
tion of exceptional barrier ownership principles,
responsiveness in incident follow ups, openness to
feedback and positive attitude and participation in
Shell’s Assist and Assure program.
In addition to the companies’ cooperation in
Albania, Shell has enlisted Newpark’s support with
multiple projects in the Gulf of Mexico, which
also require strict operating parameters.
Tim spoke to us about the new software im-
provements and how they are maintaining great
customer solutions.
Alan Alexeyev: How does the hydraulics
modeling software help customers in the
eld?
Tim Armand: We are part of evaluating the
uids systems, specically offshore. We did a
complete upgrade on models, a lot of what was
lacking in other software is the PVT (pressure,
volume, temperature) data and compressibility.
The models for deep water are designed to ac-
commodate for this compressibility, which causes
trouble for the operator – the issues like the loss
circulations, for example. So we have now a new
software and we can model all of geometry of the
well, we work with the drilling engineer, we can
predict where they will nish the well, and if they
need to adjust the density, where they set casing –
the issues like that. We also do something unique,
which is the computational uid dynamics. With
that, we can produce 3D images that incorporate
the rheology of uid and then we can look under
different temperature and pressure proles. We
can look at temperature of up to 500 degrees
F, pressure of 20k psi, plug it in to software to
modify the model, and with that we can plan the
wells forward. Other features include designing a
cleaning of the hole, pumping sweeps, etc. We can
model and measure the rheology and plug into
software and run it. We can thus modify various
input parameters and adjust for the needs.
AA: What are the improvements to the Kronos
drilling uid system that are benecial to
offshore applications?
TA: Improvements are inverted emulsion. Kronos
was designed with next gen of technical needs.
Very fragile gel structure, circulating pressure
through a proprietary chemistry and thinning
agents. We are able to achieve a lower circulating
density under dynamic conditions. Operators also
need a uid that behaves thinner. We designed
the system that does not sacrice SAGD (steam-
assisted gravity drainage). Next generation of
uids that we are working on now is the one that
adapts the system that utilizes different weighting
agents that have lower plastic viscosity and friction
pressure.
AA: What is different about the new
completion uids?
TA: We design some unique chemistry, which is
greener, and helps with wellbore cleaning chemis-
try. For that we have recently invested in a facility
in China.
Next, I interviewed Jason McGuire with Parker
Hannin, a company specializing in motion
OILMAN COLUMN
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
21
control technologies. Jason is the director of
business development for global oil and gas.
He has an engineering degree and started with
the company more than 20 years ago right after
college.
Alan Alexeyev: Tell us a little bit about your
company’s recent achievements.
Jason McGuire: We just had our centennial
anniversary last year. We are the world leader
in motion control and sealing equipment.
We protect the environment with sealing
solutions. We have an instrumentation group,
uid connections, motion systems group, the
ltrations group, which has the technology that
create potable systems to different levels of
purity. Engineering materials group is responsible
for sealing and shielding solutions, which also
provide oileld solutions.
AA: Did the downturn affect you?
JM: It affected a number of divisions, but not
overall, we continued to grow year after year. But
downturn could also be a good thing in terms
of that it allows us to work with engineers of
our clients on better solutions and processes;
it gave us time so that we can look at where we
can improve. We are insulated from any of the
markets cycles because we serve many cycles.
That should help us to protect ourselves from the
often ups and downs in the oil industry.
AA: What is the situation now with the
offshore market after the downturn?
JM: Operators have reduced their expenses, and
maybe we do not need a $100 oil now, we could
operate protably at a lower rate with some of
the improvements we have made over time as an
industry.
AA: Who are your main customers in the oil
sector?
JM: We have more than 6,000 customers around
the world. Companies like Schlumberger,
Halliburton, Baker Hughes, and other major
service companies, amongst others, as well as
some drilling companies. We are every year at
OTC highlighting our technologies applicable to
offshore sector.
AA: How are the on-and-offshore
technologies different from each other?
JM: The rig equipment does not differ, because
they all perform the same or similar actions.
Real difference becomes when we offer subsea
solutions.
AA: What is the next goal for Parker
Hannin?
JM: What is next is that we want to focus to
bring differentiated solutions to the customers.
We are also acquiring spaces where we lacked
presence, meaning acquiring new companies and
it will bring their solutions to our portfolio.
My last interview was with Justin Howat, current
CTO of Brainwave, a data analytics company
based in the U.K.
Alan Alexeyev: Justin, tell us more about your
company.
Justin Howat: We’re here as part of DataLab,
to bring academia and business. Brainnwave has
a cloud platform that helps strategy and business
development, ensuring that the right info is
exposed at the right time to the right people. We
work with companies like Aggreko. They have
access to a lot of data (paid or open source). We
don’t want to spend too much time for bits of
information. We can overlay different layers of
information, we can make the data tell us stories
and support the decision-making. With Aggreko,
we help them qualify the project opportunities.
We look at if the project is at the right stage,
right size, or has a sufcient debt ratio. Another
project is gas ares; we have satellite images and
see ares around the country. Aggreko has a
capacity to transform ared gas into power. If
they can understand where it has been ared, they
can approach those projects and help reduce the
amount of aring.
We have a background in military as well,
and trying to bring this experience to other
businesses.
We’ve been around for three years, HQ in
Edinburgh, and have an ofce in London. This
is our 1st OTC and we’re making good contacts.
We’re mainly a software company that wants to
solve problems.
AA: How do you nd new people to work for
your company?
JH: In Scotland, there’s a big push to help
companies nd the right students. At Brainnwave,
we have access to some very bright PhDs for our
projects. Challenge is matching up supply and
needs for that. We are trying to understand the
needs of the industry and then translate those
needs to developers. It’s great to be a part of a
community, and O&G is built on relationships
and credibility. And we’re demonstrating it
partially by attending O&G conferences.
There is no doubt that people believe in the
oil industry and that it is coming back. It’ll be
exciting to follow it, and conferences provide
a great opportunity to learn more about the
industry. I think it’s also a good opportunity for
the general public to learn more about the oil
and gas industry in general, and attending events
like OTC will help change the perception of an
industry, which some people are worried about.
Perhaps the industry could create some public
awareness sections at such events too.
Alan is a graduate from the
University of North Dakota
with a Master’s degree in
Petroleum Engineering.
He previously earned his
BA in Mathematics from
the University of Houston and a BS in
Petroleum Engineering from the University of
Wyoming. Alan is an active SPE member and
has presented at petroleum conferences and
exhibitions.
OILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com
22
OILMAN COLUMN
The Role of Rail Logistics In The
Movement Of Oil & Gas Production
And Downstream Commodities
By Brad Howell
Some of the very rst barrels of crude oil
produced in this country were transported in a
system designed to move crude from Western
Pennsylvania to markets on the East Coast. Then,
as now, more efcient methods of transportation
were eventually developed and deployed.
However, rail transportation has always played
a key role in moving production from newly
developed oil and gas elds to reneries and
other end use facilities.
Most primary and secondary oil eld production
is suitable for rail transportation, except for
materials that require pressure of over 300 psi.
This could eliminate some Y-grade streams that
have a high ethane content. This also illustrates
the need to use the appropriate type of rail tank
car for shipment of crude oil and natural gas
liquids.
Since an accident involving a crude oil train at
Lac Megantic, Quebec, Canada in 2013 there has
been a series of regulations enacted governing
the type of rail tank car that can be used to ship
crude oil. As such, most of the major railroads
(referred to as the Class I rail carriers) have
required exclusive use of this type of the rail
tank car, the “DOT 117” for most, if not all,
rail movements of crude oil and ethanol. The
supply of DOT 117 tank cars can be variable and
relatively expensive, so a reasonable lead time for
acquiring the cars should be considered.
Natural gas liquids, both Y-grade and purity
products, are shipped in what is commonly called
a pressure or LPG tank car. These are generally
in plentiful supply, but there can be periods of
tightness in the market. Both crude oil tank
cars and LPG tank cars are not supplied by the
railroads hauling the cars and products. These
cars must be procured in the rail car leasing
market; although purchasing the rail cars outright
is also an option. Whether leased or purchased,
a rail tank car capable of hauling 700 barrels of
product is an asset valued at $125,000 - $150,000,
and lease terms are not typically less than three
years. So, high utilization rates for these cars are
required to make the investment worthwhile.
This is often accomplished by shipping as many
cars as possible at one time. This allows the
railroads to bypass some of the classication
and handling events required to move rail cars
through their systems. A popular option is the
use of “unit trains.” A unit train is comprised of
between 80 and 120 similar rail tank cars moving
from one origin to one destination. A unit train
will utilize “dedicated” locomotive power units
and bypass many of the rail system classication
facilities.
However, to utilize unit train service, the loading
facilities at origin and the unloading facilities at
destination must be capable of staging all the rail
tank cars so they can be pulled from the origin
and delivered to the destination at one time. The
capabilities and design of these facilities must
meet exacting standards set by the serving rail-
roads and the process of designing and commis-
sioning a new facility can often take several years.
There is also a regulatory and safety component
involved with the loading and unloading of rail
tank cars. The rail tank cars must be inspected
prior to each movement to make sure the rail car
components are within established compliance
standards. There are also extensive regulations
regarding the product loading process and
securement of the rail tank car.
In addition to everything mentioned above, the
most leveraging element of moving crude oil
and natural gas liquids by rail is the direct cost of
doing so. This is referred to as the “freight rate”
in the rail industry and the process to obtain a
freight rate can be challenging, to say the least.
For all practical purposes, there is no effective
economic regulation of rail freight rates, so a unit
train freight rate from one origin facility to one
destination facility of one product (commodity)
in one type of rail car is negotiated on a single
event basis.
For less than unit trainload quantities, there are so
called “public rates”, which an individual railroad
will make available to anyone who meets the
parameters of that public freight rate. Most of
these freight rates are web site based for ease of
reference, but generally only apply to movements
on a single railroad. Often a movement from a
particular origin facility to a particular destination
facility will require two or more railroads; this
result in what is called a “joint line” rate or
“through rate.” These types of rates are almost
always negotiated on a case-by-case basis.
It should be noted that the railroads have a
variety of drivers that govern the process of
determining a freight rate offer. In general,
the railroads tend to think of opportunities in
the context of how it will impact their current
operations. There has been a trend over the last
few years to adopt and operating philosophy
called PSR (Precision Scheduled Railroading),
which, by its nature, is very short-term focused
and looks to optimize current operations. A new
economic opportunity, like a crude oil unit train,
that can represent a substantial network impact,
may not be looked upon favorably from the
operations point of view.
When you roll all of the above together, it
becomes apparent that movement of crude
Photo courtesy of Lodestar Logistics Corporation
Oilman Magazine / July-August 2019 / OilmanMagazine.com
23
OILMAN COLUMN
Seventy-ve years ago, June 6th, General
Dwight D. Eisenhower led troops into what
is known as D-Day. His outward display of
condence with the troops helped propel
them to victory. In his book Sleeping Giants,
Dr. Nathan Mellor writes, “When General
Eisenhower had been named Supreme
Commander of Allied Forces, he stressed the
importance of morale. He outlawed negativity
and used his formidable skills as a mediator to
keep Allied leadership focused on objectives.
Throughout this time, he had personally set the
pace for his fellow leaders. His unappable and
direct approach to problem solving had been
a source of inspiration. The stress of the job,
however, was taking its toll.” Mellor speaks to
Eisenhower’s dedication as a leader: “It says
a great deal about Eisenhower that when he
made the decision that D-Day was a go, he
spent the nal hours before the invasion with
the men that he knew would pay the ultimate
price for his decision. He wanted to be among
the troops, to see their faces and gauge their
readiness.”
In 1968, I had a cartoon book on the life of
Dwight D. Eisenhower. It highlighted D-Day,
his presidency, childhood and overall life. That
same year, he had a heart attack in Gettysburg,
PA, where he was residing. I heard from my
mom that he had this heart attack, so I sent him
a letter wishing him well. I got a note back from
him, prepared by his staff, signed Dwight D.
Eisenhower, which thrilled this young twelve-
year-old boy.
Fast forward to 1992, I became a delegate to
Russia under the People to People International
program. What I found out is that People to
People International was founded by Dwight
D. Eisenhower the year I was born, 1956, with
the mission of peace through understanding,
and with an emphasis on humanitarian, cultural
and educational efforts worldwide. His legacy
continued to have an effect on my life, when
in 1994, I led a delegation of People to People
International to China. Eventually, I became a
member of the Board of Directors of People
to People International in 2007. From 2009
to 2013 I served as Chairman of Worldwide
Operations for People to People International.
The U.S. Energy Industry was vital to the
success of D-Day and World War II overall.
On the energy front, I was elected President
of The International Society of the Energy
Advocates in 2003. For over 40 years, The
Energy Advocates organization has been an
energy education voice throughout America. A
few years before I became president, the Energy
Advocates was the lead group in remembrance
and establishment of two seven-foot statues for
the Oil Patch Warriors, one in England and one
in Oklahoma.
I tell these stories, because the importance
of the Eisenhower legacy and the oil patch
industry go hand in hand. In my lifetime, energy
needs and energy security have become vital.
As in 1944, to this day, America has needed
America’s energy. We carry on the legacy of
Dwight D. Eisenhower, those that fought in
D-Day, and the Oil Patch Warriors.
Join the effort: Facebook: National Energy
talk.
75th Anniversary of D-Day:
Dwight D. Eisenhower’s Legacy and
Americas Energy Impact
By Mark A. Stansberry
Mark A. Stansberry
oil and natural gas liquids by rail is a complex
undertaking. Also, the time required to put
together all the various components could exceed
the time frame during which the opportunity
exists or when the margins are favorable.
Fortunately, there has been a good deal of
infrastructure developed which will support and
facilitate rail transportation. This infrastructure
exists in many of the producing basins and
selected end use markets. Utilizing one of these
existing facilities can greatly shorten the time to
market if the other factors are favorable.
There are also options available to shippers of
crude oil and natural gas liquids by utilizing
the services of an established rail logistics
services rm. If rail transportation is not a core
competency or an infrequent functional activity,
then building and maintaining the subject matter
expertise and industry relationships can be time
consuming and costly. A rail logistics services
rm that is active in the freight transportation
and rail equipment markets can quickly analyze
the requirements for a new movement of crude
oil or natural gas liquids. With the requirements
determined and timing estimated, a strategy and
implementation plan can be developed.
Rail logistic services providers, such as Lodestar
Rail Services, are experts and leaders in the
industry. They are committed to providing
the highest level of service to their customers
by creating customized solutions. With over
125 years of combined experience in the
transportation, petrochemicals and energy
sectors Lodestar Rail Services is focused on
bringing commodities to their respective markets.
Regardless of the path a potential shipper
may take, it is apparent that timing is key due
to the interrelationships between the various
components. There is no substitute for a well-
thought-out plan, which considers multiple
scenarios. As a market to market spread
opportunity may arise quickly and have a short
window, it would be prudent to develop a rail
logistics plan well in advance of the actual
requirement to move the material. Having some
of the components locked would shorten the
overall time to market.
Mr. Howell is Chairman
of Lodestar Logistics
Corporation, a Houston-
based provider of logistics
and supply chain operations
and advisory services, and
Founder and President of Lodestar Energy
Group, a developer of logistics infrastructure
projects.
Oilman Magazine / July-August 2019 / OilmanMagazine.com
24
FEATURE
Fleet Performance Optimization
People often refer to owning a boat as the
equivalent of having a hole in the water you throw
money into, referring to the consensus that boats
are money pits. Well what if those boats were
massive in size and there were many of them?
What if millions of dollars were potentially at
stake because the cargo was a vital resource that
must be adequately monitored and maintained?
That becomes quite a bit of a game changer.
There are ships all around the world that hold
and transport one of our most valuable resources,
fuel. Because of this, it is critical that the fuel is
measured and analyzed with pinpoint accuracy,
to increase the bottom line, ensure efciency, and
improve the overall performance of a eet.
There are several ways to monitor and optimize
your eet and the cargo it holds, although,
only one company holds the patent for the
apparatus and method of fuel measurement and
accountability – FUELTRAX, the universal fuel
management system that operates on any vessel
and in any location in the world. FUELTRAX is
not only the industry leader in EFMS (Electronic
Fuel Monitoring Systems) using its patented
technology but also the rst to market and the
vanguard in modern Marine Fuel Management.
They are changing the game in fuel monitoring
and reporting.
The Beginning of FUELTRAX
FUELTRAX was initially designed and engineered
in the eld as a project for Kirby Corporation,
the largest inland waterway operator in North
America. Kirby wanted a custom-t system to
measure fuel consumption on their inland push
boats and approached Anthony George at CDI
(Control Dynamics International), an engineering
company that specialized in offshore automation
and control systems.
George realized that he had a unique product
that could make a difference for the commercial
marine market. Nautical Control Solutions, LP
(NCS) was created in 2006 as a spin-off of CDI,
to develop and take this product to market. The
United States patent protection was granted
in 2006 with Canadian and European Union
protection following in 2012.
Today, FUELTRAX has grown into a market-
leading electronic fuel management system,
operating on hundreds of vessels across the
world. It offers secure, smart monitoring with
direct fuel measurements and advanced data
analytics, helping customers reduce costs, ensure
compliance, and enhance performance.
FUELTRAX empowers customers with increased
transparency in reporting, which allows for
improved inventory control and loss prevention,
especially in areas subject to pilferage, piracy, or
other common causes of inventory loss. Before
FUELTRAX, this level of insight to operations
wasnt available to vessel owners. By eliminating
the need for human input, FUELTRAX makes
fuel reporting a trusted, automated, secure,
and reliable solution – all to drive improved
efciencies in fuel consumption and fuel quality
assurance.
In addition to fuel monitoring and reporting,
FUELTRAX also offers crude monitoring and
transporting for companies that specically
request that service.
Revolutionizing the Industry with Technology
Technology is the driving force in the success
of any business in almost any industry in today’s
world to which oil and gas is no exception.
Machine learning, articial intelligence, and the
IoT have entirely revolutionized every aspect of
this industry, making companies more efcient
and improving their bottom line, which was not
lost on FUELTRAX.
With the release of FUELNET Generation 5
(GEN-5), users can now access crucial weather
data metrics, which are activity time-stamped and
linked to vessel geolocation and stored historically
with all-weather parameters.
FUELNET takes the risk of human error out
of the equation. It captures and reports the
needed data to prove full compliance with MRV
(Monitoring, Reporting and Verication) and
DCS (Data Collection System) – with no need for
human intervention. FUELTRAX automatically
generates reports from direct, accurate, and
reliable data tracked on board. All the facts of
the fuel data are historically stored, so that it can
be researched, analyzed, and applied for the most
efcient outcomes.
FUELNET is a self-contained and secure cloud
database, providing automated reporting of
accurate vessel and fuel information. It enables
you to track your assets 24/7, supporting your
future efciency and investment decisions. It is
also a eet-wide data historian, monitoring past
performance and is the most powerful fuel data
processing network in the maritime industry.
Operating hand-in-hand with FUELTRAX, using
extensive real-time data stored in its fully secure
web portal, FUELNET enables vessel owners to
customize their reporting data and make eet-
wide efciency savings.
Midstream Technology
Maritime Fuel Transportation
By Sarah Skinner
Schematic of FUELTRAX Mobile - Photos courtesy of FUELTRAX
Oilman Magazine / July-August 2019 / OilmanMagazine.com
25
FEATURE
It delivers easy-to-use, end-to-end, secure
communications straight to your desktop
while working hand-in-hand with FUELTRAX
technology installed on board. With browser
access to the web portal, FUELNET provides
customized reports and email alerts, enabling you
to respond to data quickly, share detailed reports
across teams, and manage costs and performance.
The data transmission is GPS stamped,
encrypted, and fully SSL secured, bypassing the
vessel’s communication system.
The three-dimensional reporting of fuel
consumption provides insights by usage, asset,
or a customized operational ‘mode’ prole.
FUELTRAX is the rst and market-leading
company to provide such analysis, based on your
eet’s directly recorded operating parameters.
Since most eets are transporting fuel worldwide,
compliance with international regulations is
imperative. All fuel consumption data points
required for the European Unions MRV
emissions validation regulations, and the IMO’s
forthcoming DCS, are already measured,
monitored, and reported by FUELTRAX as
standard.
Since its launch 15 years ago, FUELTRAX and
FUELNET have evolved to become mission-
critical operating tools for maintaining accurate
fuel accountability across hundreds of vessels
worldwide. Through modernizing marine fuel
management, clients can now make fact-based
decisions based on a trusted, automated data
source.
Going Mobile
FUELTRAX has also gone mobile with an
integrated Coriolis mass owmeter in a self-
contained unit, designed to monitor and report
custody transfers that are performed anywhere
in the world. The FUELTRAX MOBILE unit,
built as a standalone alone skid, is light enough
to be pushed around a dock by 1-2 workers
or loaded onto a truck for easy transport. All
owmeter data is securely sent to FUELNET via
an encrypted Iridium signal. By replicating the
benets of the onboard FUELTRAX systems,
it stands up to the challenges of providing fuel
accountability and data transparency in any
location. It is portable and specically designed
to be taken into the eld and placed in line with
existing fuel systems.
FUELTRAX MOBILE provides precise,
direct measurement by custody-grade Coriolis
mass owmeter technology with +/-.05
accuracy, which brings signicant efciency
to fuel reporting. The unit is GPS-tracked and
automatically and digitally records all custody
transfers with access to review all reports
remotely. Each unit offers a touchscreen
display to monitor fuel ow rate and total
fuel transferred in real-time, sight glass for
visual verication of ow, density alarm and
immediately printed receipts, with a signature
line direct from unit. It is capable of continuous
operations on battery power for up to 12 hours,
and recharging is simple, as it is compatible with
standard global power sources.
Fuel and Fleet Security
FUELTRAX also launched an IP-video
surveillance system, FUELTRAX VISION, which
gives customers a 360-degree view of vessel
operations, adding yet another layer of security to
the smart monitoring and reporting technology
already delivered.
With strategically placed cameras constantly
working, they provide insights into vessel
activity from anywhere in the world. All video
surveillance collected is coupled with the existing
fuel monitoring data and tracking information,
providing greater transparency of vessel
operations.
Up to 8 marine environment cameras provide
360-degree coverage of the vessel perimeter,
retaining up to 10 weeks of high-quality date/
time/location-stamped footage, with minute-by-
minute snapshots sent to FUELNET. Video is
in full 720p color and accessible by authorized
personnel on board. The remote view of camera
feed helps management verify the weather, HSE,
or other exception claims with a visual reference.
In addition, it provides power-interruption
alerts and built-in backup power supply, with
all components housed securely and monitored
remotely.
In the News
Most recently, FUELTRAX has partnered with
Dataran Elektra, Malaysian trade, and services
provider. Dataran Elektra has been appointed
as the rst PETRONAS-licensed agent for
FUELTRAX in Malaysia. As fuel consumption,
transparent reporting and compliance remain un-
der the spotlight for those operating in Malaysia,
more eets are turning to FUELTRAX for smart,
self-contained fuel monitoring solutions.
This developing partnership continues to
grow from high standards of success for
both companies. “Early on in our pivot to the
Malaysian market, we recognized the need
to partner with a team that was supremely
competent and shared our ‘failure is not an
option’ approach to client support,” says
Global Operations Director, John Donovan,
FUELTRAX. “Dataran Elektra is all of that
and more, with a stellar record in oil & gas
and exceedingly professional customer service.
We look forward to jointly exploring the many
opportunities that Malaysia offers for the
FUELTRAX product line.”
As the requirement for EFMS continues to
expand with increasing charter mandates in Asia,
West Africa, and South America, FUELTRAX
remains the globally accepted standard. “The
transparency of the fuel data allows charterers
and OSV owners to make real, cost-saving
changes to their operations based on accurate
and timely data. It enhances their control over
decisions that affect their compliance and
performance goals,” says CEO and Founder,
Anthony George, FUELTRAX.
Looking to the Future
Today FUELTRAX currently serves over 150
vessels working for oil company charters and has
been deployed on approximately 500 workboats
and commercial vessels worldwide since its
inception in 2004.
They have the most extensive digital eet in
the world, with 15 years of operations covering
384,000 km of the globe and are consistently
looking for cutting-edge ways to use this data,
through advanced benchmarking, predictive
analysis, and expert-built quality data sets. George
says, “We look forward to building partnerships
with industry-leading clients and using our
data to drive insights across their global eets
which enables our clients to make the most
informed decisions and provides a clear return on
investment through increasing fuel controls and
transparency.
A company’s eet is their most prized possession.
It’s not like a regular business where owners
can walk around and monitor employees and
equipment. The equipment could be in any of
the seven seas at any given time. A company
has to make sure that they are covered, all the
way around – guratively and literally. The
transportation of fuel is vital to this industry, and
the fuel contained inside these vessels is precious.
The fuel and vessel itself must be protected
and monitored, what’s inside must be measured
with accuracy and validated. All of which
FUELTRAX offers – ultimately providing ease
for their customers. When you are tasked with
transporting one of the world’s most valuable
resources, ease sounds like a pretty incredible
proposition.
Product Support Director, Ruben DeLeon,
standing in front of 4 views
Oilman Magazine / July-August 2019 / OilmanMagazine.com
26
On January 8, 2019, a Vietnam-registered oil
tanker
Aulac Fortune
has exploded and caught
re off the coast of Hong Kong’s Lamma
Island, killing at least one person and leaving
three missing.
The largest oil tanker shipping companies in
the world facilitate the majority of crude oil
trade globally. They ship hundreds of billions
of barrels of crude oil each year. An oil (or
petroleum) tanker is a ship which is used for
the transportation of oil across oceans. Oil
tankers are of two types – crude tankers and
product tankers. As the name suggests, crude
tankers transport crude oil while product tankers
(generally smaller in size) move rened oil
products. While oil tankers have been around
since the 1850s, supertankers came into vogue
after the 1950s when the Suez Canal was
temporarily closed and it was realized that larger
tankers were more cost effective in transporting
oil (particularly around Africa’s Cape of Good
Hope).
Oil tankers come in a variety of sizes which is
measured in deadweight metric tons (DWT).
[Reminder: Deadweight means the difference
between the displacement of a ship at the
load waterline corresponding to the summer
freeboard assigned for the water with a density
of 1,025 t/m3 and the displacement of a light
ship. In addition, a ship’s carrying capacity,
including bunker oil, fresh water, ballast water,
crew, and provisions is also factored in]. Crude
tankers are among the largest, ranging from
55,000 DWT Pana-max-sized vessels to ULCC
(ultra-large crude carriers) of over 440,000
DWT. The largest ULCCs can range in size
up to half a million DWT and carry 3 million
barrels at one go. Oil tankers are not only the
only option to move oil apart from pipelines but
also the cheapest option at just around 2 cents
per gallon. It is estimated that around 2 billion
barrels of crude oil were transported by oil
tankers in 2018.
Tanker day rates indicate the dynamic between
supply and demand for oil tankers which are
determined by a number of factors. Besides
transportation, oil tankers are also used as
storage by oil traders who can gain from
arbitrage between physical and future oil trades.
The 10 largest oil tanker shipping companies
in the world are a mix of both private and
government owned companies.
At the present time, the oil tankers most often
used to transport crude oil, classied by types,
based on their deadweights. The biggest oil
tankers are the “supertankers” or VLCC and
ULCC. Their capacity exceeds 200,000 DWT.
The smaller oil tankers to 80,000 DWT are used
to transport petroleum products (the product
tankers and Panamax class). The smallest work
only near the coasts. The Aframax and Suezmax
were classied supertankers in the past. Today
they are way smaller than the biggest oil tanker.
In 1954, Shell Oil developed the average
freight rate assessment (AFRA) system, which
classies tankers of different sizes. To make it
an independent instrument, Shell consulted the
LTBP
(London Tanker Brokers’ Panel)
. At rst,
they divided the groups as
General Purpose
for tankers under 25,000
tons DWT;
Medium
Range
for ships between
25,000 and 45,000 DWT
and
Large Range
for the
then-enormous ships
that were larger than 45,000 DWT. The ships
became larger during the 1970s, which prompted
rescaling.
The system was developed for tax reasons as the
tax authorities wanted evidence that the internal
billing records were correct. Before the New
York Mercantile Exchange started trading crude
oil futures in 1983, it was difcult to determine
the exact price of oil, which could change with
every contract. Shell and BP, the rst companies
to use the system, abandoned the AFRA system
in 1983, later followed by the other U.S. oil
companies. However, the system is still used
today. Besides that, there is the exible market
scale, which takes typical routes and lots of
500,000 barrels (79,000 m3).
Merchant oil tankers carry a wide range of
hydrocarbon liquids ranging from crude oil
to rened petroleum products. Their size is
measured in deadweight metric tons DWT.
Crude carriers are among the largest, ranging
Oil Ships Which Rule The Waves
By Eugene M. Khartukov
Class Length Beam Draft Deadweight
Product tanker 10,000-60,000 DWT
Panamax 205 m 29 m 16 m 60,000-80,000 DWT
Aframax 245 m 34 m 20 m 80,000-120,000 DWT
Suezmax 285 m 45 m 23 m
125,000-180,000 DWT
(Suez Canal max capacity)
VLCC 330 m 55 m 28 m 200,000-320,000 DWT (1)
ULCC 415 m 63 m 35 m 320,000-550 DWT
OILMAN COLUMN
(1) Suez Canal can accommodate some in its expanded dimensions
Oilman Magazine / July-August 2019 / OilmanMagazine.com
27
OILMAN COLUMN
from 55,000 DWT Panamax-sized vessels to
ULCCs of over 440,000 DWT.
Smaller tankers, ranging from well under
10,000 DWT to 80,000 DWT Panamax vessels,
generally carry rened petroleum products,
and are known as product tankers. The
smallest tankers, with capacities under 10,000
DWT generally work near-coastal and inland
waterways. Although they were in the past, ships
of the smaller Aframax and Suezmax classes are
no longer regarded as supertankers.
Apart from a short-lived increase towards
the end of 2017, the global orderbook has
continued to shrink. By April 2018, it had
dropped 7 percent year-on-year to just under
77 million cgt (compensated gross tonne for
double-hull oil tankers = 48 gross tonne 0.57)
and just over 3,000 ships, the lowest level since
2004. The orderbook is split between 460 yards,
150 of them second-tier yards scheduled to
deliver their last orders before the end of 2018.
Japan’s orderbook experienced the biggest drop,
declining 20 percent year-on-year, followed by
South Korea which saw its orderbook decline
by 9 percent. China managed to keep its
orderbook constant, while Europe’s grew by 8
percent. The declining orderbook continues to
put pressure on global order cover which has
come down to 1.7 years from 1.9 years at the
start of 2017. First-tier yards – those that have
received new orders in the last 18 months – have
average order cover of 1.8 years and second tier
yards 1.3 years. South Korea and China have
experienced a marginal improvement in their
average order cover, due to a combination of
higher contracting towards the end of 2017 and
a decline in the countries’ active yard capacity.
Japan’s order cover has continued its decline,
which has lasted more than two years. Europe’s
order cover has also experienced a slight decline,
but it remains around three years, signicantly
above any of the other shipbuilding regions, due
to the large increase in Cruise ordering
(Chart 1).
Crude oil tankers come in various sizes, the
biggest standard size being a Very Large Crude
Carrier (or VLCC). These tankers take up to 2
million barrels of crude oil per shipment, while
the second largest size is the ‘Suezmax’ which
takes around half of that amount and is the
largest size ship that can sail through the Suez
Canal fully laden. The smallest size of dedicated
crude oil tankers is an ‘Aframax’ which can carry
around 600,000 barrels of oil. There are smaller
tankers in the market, but these tend to carry
rened oil products and fuel oil, not crude oil.
Euronav depreciates the original cost of a vessel
to zero value over 20 years.
Construction of crude oil tankers takes 9 to
15 months from the time the keel is rst laid.
This means that it will take at least two years
from the time of newbuilding contract signature
(ordering) until the vessel is delivered because
many critical parts are long-lead items that
needs to be ordered and produced before the
construction of the ship can commence. Their
sheer size dictates that there is a limited number
of sites capable of building them and these are
concentrated in Asia, more specically in South
Korea, China and Japan.
Size of World Fleet
Although it is practically impossible to nd out
an exact gure of the current global eet of
oil tankers, we have indirectly concluded that
at the end of 2018 there were almost 15,100
tankers world-wide (against 12,975 oil vessels at
February 1, 2014, and 14,512 oil ships as of the
start of 2017) with combined nearly 661 mln
tonnes of deadweight tonnage (as compared
to 636.4 mln dwt as of January 1, 2017) and
ships’ value, according to the UNCTAD, of U.S.
$130.7.
Chart 1. Global Shipbuilding Orders and Demolitions in 2012-2018, in mln cgt
Source: Danish Ship Finance
Chart 2. Annual Global Deliveries, Demolitions and Growth of Oil Tanker Fleet in 2014-2020,
in mln dwt (according to Clarksons)
Continued on next page...
Oilman Magazine / July-August 2019 / OilmanMagazine.com
28
OILMAN COLUMN
The total crude oil tanker eet has grown only
slightly in 2018. The VLCC and Aframax eets
specically haven’t been growing over the past 12
months. The freight market is severally impacted
by very weak demand growth. “Overall, the
freight market is oversupplied. The key to higher
earnings lies within a very low eet growth and a
return to normalized demand level. The sooner
the better – but patience is required,” Sand
explained. “2018 is set to become another loss-
making year for the cru-de oil tanker industry as
the industry will most likely have to wait until the
second half of 2019 before an improved market
balance will yet again deliver prots.
The result is that the world tanker eet continues
to age at an accelerating rate. In 1993, only 12
percent of that eet was more than 20 years old.
The most recent gures available show this has
now grown to more than 35 percent, with nearly
45 percent of all VLCCs now 20 years of age or
older.
Somerville’s concern stems from a review of the
current order books at all the major shipyards
worldwide, particularly those capable of building
large tankers. “The mean estimated backlog
at the primary tanker new-building yards is 36
months,” he said. “That means we know how
much new tanker tonnage will be delivered
during that period, and we know that it will not
be sufcient to reverse the aging of the eet.”
In 2018, according to the London-based
Clarksons, the world’s biggest shipbroker, owners
of tankers has written off 100 oil ships, including
46 Aframaxes, 34 VLCCs and 20 Suezmaxes.
This was a kind of historical record, including
1985 (when 90 tankers were demolished).
Thomson Reuters Re-search (TRR), which
included coastal tankers, gives even higher gures
for 2018
(Chart 3).
Curtailment of OPEC cargoes and
environmental regulations, that are proving
uneconomical to comply with, have got the
owners purging the supertanker eet at the
fastest pace since the 1980s, according to Global
Marketing Systems Inc., one of the world’s top
buyers of obsolete ships for scrap.
While the demolition surge – sending vessels
to be ripped apart on the beaches of India and
Bangla-desh – reects the worst charter rates
for owners in decades, scrapping often helps set
the stage for market recoveries. Morgan Stanley
estimates that the global eet of so-called very
large crude carriers could lack 100 million barrels
of transportation capacity by late 2020. “It
prolongs the period of pro-tability after the
turnaround,” said Fotis Giannakoulis, a New
York-based shipping analyst at the bank. “The
more you scrap, the more you bring the recovery
forward and accelerate its speed. The market
will strengthen with high scrapping even with
smallest growth in demand.” You can clearly see
on the graphic
(Chart 4)
, the tanker demolition
process is mainly economic.
Average earnings for 2 million barrel-hauling
VLCCs fell by 65 percent to $6,159 a day until
August 2018, the lowest since at least 2009,
according to data from Clarkson Research
Services, Ltd. They were $17,794 a day for
all of 2017, $41,488 for 2016 and $64,846 in
2015. Owners have been hurt by a pact among
members of the Organization of the Petroleum
Exporting Countries, and allies led by Russia,
to restrict crude output by 1.8 million barrels
a day since the start of 2017. About 20 million
barrels, or 10 cargoes, get loaded every day onto
very large crude carriers, or VLCCs, according to
Clarksons.
Before the beginning of this millennium oil
tankers dominated the global marine eet by
tonnage but by today their world share – second
to dry bulk carriers – decreased to less than 30
percent
(Chart 5).
At present, global tanker eet is quite young – on
the average, around 11 years old – inferior only
to dry bulk carriers and container ships, with
over one-fth of existing tankers worldwide
being younger than four years (
Charts 6 and 7).
Largest Tankers
Until 1956, tankers were designed to be able to
navigate the Suez Canal. This size restriction
became much less of a priority after the closing
Chart 3. Annual Global Demolitions of Oil Tankers in 2013-2021 (according to TRR, in numbers)
Source: MarketScreener
Chart 4. Tanker Demolitions and Average Daily Freight Rate (All Classes) of Oil Tankers in 1990-2019
(according to Clarksons) Source: Bunker Ports News Worldwide
Oilman Magazine / July-August 2019 / OilmanMagazine.com
29
OILMAN COLUMN
of the canal during the Suez Crisis of 1956.
Forced to move oil around the Cape of Good
Hope, shipowners realized that bigger tankers
were the key to more efcient transport. While
a typical T2 tanker of the World War II era
was 532 feet (162 m) long and had a capacity
of 16,500 DWT, the ultra-large crude carriers
(ULCC) built in the 1970s were over 1,300 feet
(400 m) long and had a capacity of 500,000
DWT. Several factors encouraged this growth.
Hostilities in the Middle East which interrupted
trafc through the Suez Canal contributed,
as did nationalization of Middle East oil
reneries. Fierce competition among shipowners
also played a part. But apart from these
considerations is a simple economic advantage:
the larger an oil tanker is, the more cheaply it
can move crude oil, and the better it can help
meet growing demands for oil.
In 1955 the world’s largest supertanker was
30,708 GRT and 47,500 LT DWT:
SS Spyros
Niarchos
launched that year by Vickers
Armstrongs Shipbuilders, Ltd in England
for Stavros Niarchos. In 1958 United States
shipping magnate Daniel K. Ludwig broke
the record of 100,000 long tons of heavy
displacement. His
Universe Apollo
displaced
104,500 long tons, a 23 percent increase from
the previous record-holder,
Universe Leader,
which also belonged to Ludwig.
Knock Nevis,
ex
Seawise Giant,
rivaled some of the world’s
largest buildings in size.
The world’s largest supertanker was built in 1979
at the Oppama shipyard by Sumitomo Heavy
Industries, Ltd., named
Seawise Giant.
This ship
was built with a capacity of 564,763 DWT, a
length overall of 458.45 meters (1,504.1 ft) and
a draft of 24.611 meters (80.7ft). She had 46
tanks, 31,541
square meters
(339,500 sq
ft) of deck,
and at her full load draft, could not navigate the
English Channel.
Seawise Giant
was renamed
Happy Giant
in 1989,
Jahre Viking
in 1991.
Shortly after that she was bought by Jørgen
Jahre and renamed as
Jahre Viking.
First Olsen
Tankers Pte., Ltd. purchased her in 2004 and
she was renamed to Knock Nevis as she was
converted into a permanently moored storage
tanker at Qatar’s Ash-Shaheen oil eld in
the Persian Gulf. Her new owners, Amber
Development Corporation, renamed her as
Mont for her nal voyage to Alang, Gujarat,
India in 2010 where she was scrapped.
The biggest oil tankers in service currently are
the TI Class. TI
Europe
and her sister ships TI
Africa,
TI Oceania and TI
Asia
were the rst
ULCC built for the last 24 years.
These ships were built in 2002 and 2003 as
Hellespont
Alhambra and Hellespont Tara
for
the Greek Hellespont Steamship Corporation.
Hellespont sold these ships to Overseas
Shipholding Group and Euro-nav in 2004. Each
of the sister ships has a capacity of over 441,500
DWT, a length overall of 380.0 meters (1,246.7
Chart 5. Distribution of Global Marine Fleet by Type of Vessels in 1980-2017, in %% of
total deadweight tonnage – Source: The Maritime Executive
Chart 6. Ages of the Global Oil Tankers as of the start of 2018
(distribution by deadweight; according to the UNCTAD)
Source: Drawn by the author based on data from the United
Nations Conference on Trade and Development
Chart 7. Annual Scrapping of Tankers (in mln dwt) and Average Life
of Global Tanker Fleet (in years) in 2000-2017 – Source: Teekay
Continued on next page...
Oilman Magazine / July-August 2019 / OilmanMagazine.com
30
ft) and a cargo capacity of 3,166,353 barrels
(503,409,900 l). They were the rst ULCCs to
be double-hulled. To differentiate them from
smaller ULCCs, these ships are sometimes given
the
V-Plus
size designation.
In 2017, in China’s Qingdao, there was built and
oated the world’s biggest ore-carrier tanker,
which is regarded the largest (after
Knock
Nevis
) marine vessel and was immediately called
“marine giant.” The height of the vessel (30.4
m or almost 100 ft) is that of a typical 10-story
building. The length of it is 362 m (1188 ft), the
water displacement – 400.000 tonnes and its
maximum speed – 14.5 knots. The Chinese plan
to build some 30 such ships in the future.
Ownership
At present, the rst 10 of the world’s biggest
tanker owners (rst of all, Greece and China)
possess some 121.8 mln tons of deadweight
tonnage or over 19.1 percent of global tanker
eet Thus, accor-ding to IHS Markit, almost 30
percent of tankers on order (by tonnage) as of
the start of 2018 was owned by Greece.
Also, tanker eet owned by the OPEC countries
(191 tanker ship with aggregate tonnage of over
30 mln dwt at the start of 2017 against 184
tankers with shipping capacity of 26.6 mln dwt
at the beginning of 2013) is quite impressive
(Table 1 and Chart 8). That, according to OPEC
Secretariat, accounted for nearly 6.6 percent of
global oil tanker deadweight tonnage in 2014.
Everyone talks about Chinese demand for oil.
But the Chinese are also increasing their demand
for the ships that move that oil around. Chinese
companies currently own about 70 very large
crude carriers out of a total global VLCC eet
of 633 units, or about 11 percent of the world’s
working supertankers. In addition, Chinese rms
currently have about 27 new tankers on order
at shipyards, or about one-third of the current
global orderbook. But that is not nearly enough
for Beijing. In June, China Shipping Tanker
Co. announced plans to build up to four new
VLCCs and at the start of this year privately
owned Shandong-based Landbridge Group
ordered three new VLCCs, due to be ready by
2016.
State-owned Sinopec has said that China’s
four state owned tanker companies shipped
47 percent of the crude imported to China
last year, while recent estimates suggest 50-60
percent of the country’s oil imports now arrive
on Chinese tonnage. However, while growing
fast, this still compares unfavorably with Japan,
which moves almost 90 percent of its 3 million
b/d-plus crude
imports on
domestically-
owned tankers.
Until more
ships are built
or bought by
Chinese rms,
the remainder
of China’s oil
imports still has
to be carried on
foreign ships
chartered on the
open market.
An April report
by Poten
& Partners
calculated that
China’s spot
tanker demand
accounted for the
equivalent of the
full utilization of 150 very large crude carriers
in 2013, or 23 percent of the world’s eet of
VLCCs, up from 66 in 2009. State oil company
Sinopec’s trading arm Unipec is reportedly the
world’s biggest spot charterer of VLCCs. For
now, Unipec and other Chinese state-owned
oil company charterers, several of which have
Western-sounding names such as Blue Light
(Sinochem) or Glasford (PetroChina), still have
to charter ships on the spot market. But the
Chinese government wants that to become less
and less necessary as the domestic supertanker
eet grows, according to Ralph Leszczyn-ski,
Singapore-based head of research at Italian
shipbroker Bancosta. “There is the clear
intention for the majority of Chinese oil imports
in the future to be carried by Chinese-owned
ships,” he says. And Beijing dislikes spot market
volatility. For example, VLCC rates on the
Persian Gulf to China route were over $11.40/
mt on August 13, 2018, up from just under
$10/mt, a week earlier. The August 12, 2018
announcement of a new $1.1 billion oil shipping
venture between China Merchants Energy
Shipping and Sinotrans & CSC gave some
indication of the scale of these companies’
existing holdings and their future ambitions.
China Merchants Energy said the new JV aims
to establish one of the world’s leading tanker
eets and will use purchases of secondhand
ships, plus newbuilds to build an oil tanker eet
of “international scale,” thus boosting the JV’s
competitiveness in the international market. By
some estimates the new joint venture will be
among the world’s top three VLCC operators.
China Merchants will hold 51 percent of the
joint venture and will put its nine existing
VLCCs, plus 10 VLCCs currently on order,
Chart 8. Number of Ships in Tanker Fleet Owned by the OPEC
Countries in 2012-2016 – Source: Statista
OILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com
31
Table 1. OPEC-Owned Oil Tanker Fleet in 2012-2016 – Source: Annual Statistical
Bulletin 2017 – Vienna: OPEC, 2017, p. 80
OILMAN COLUMN
into the new company. The deal excludes its
seven Aframax tankers and its growing LNG
eet. Sinotrans & CSC is primarily a dry bulk
and container shipping company and will
not contribute the 19 VLCCs owned by its
subsidiary Nanjing Tanker. Those vessels are
mostly mortgaged to banks or collateralized
for outstanding loans. In April the rm delisted
from the Shanghai stock exchange after posting
losses for four straight years, making it the rst
Chinese state-controlled company to be delisted
from the bourse. Nanjing Tanker’s woes could
explain the rationale for the JV, as Beijing tries
to stem state shipowners’ mounting losses by
forcing more consolidation in the sector. With
oil trade slowing down in the developed world,
China and India will account for the bulk of oil
trade growth.
Given China’s investments in VLCCs it is not
a difcult to see who the losers in this race will
be. “This is certainly bad news for established
independent owners such as the Japanese
(MOL, NYK) and Greeks (such as Anagel) as
they will be left ghting for the spoils of the
shrinking OECD-countries import volumes.
And this in the context when the tanker
shipping market is already suffering from
heavy overcapacity and very low returns for
shipowners,” reasons Bancosta’s Leszczynski.
The one caveat to his prediction on impending
dominance of its VLCC market, Leszczynski
said, was that China’s oil industry may open
up in similar ways as it has with its coal, power
sector or steel industry that are “less regulated
and more open to private and international
competition (also on the shipping side).
As for the largest companies owning oil tankers,
until the 1970s the world’s largest owners of
oil tankers were the so-called Seven Sisters,
including Exxon, RDS, British Petroleum and
other “big-oil” companies. But oil giants started
to sell out their tanker eet and now the largest
oil tanker owners are specialized shipping
companies, including rst of all Teekay, MOL
Tankship Management, NITC (National Iranian
Tanker Co.), National Shipping Company
of Saudi Arabia, Bermudas-headquatered
Frontline, Florida-based Overseas Shipholding
Group, and Belgium’s Euronav.
The biggest out of them surely is Teekay
Group, which is the world’s largest transporter
of hydrocarbons and since 1974 is based in
Hamilton (Bermudas). The tanker eet of this
conglomerate is now consisted of 123 vessels
of various sizes and has total tonnage of 16
mln dwt. The group includes the following
public companies: Teekay Corp., Teekay LNG
Partners, Teekay Offshore Partners, Teekay
Tankers and Teekay Tanker Investments.
The second by a size of deadweight is Japans
MOL (Mitsui O.S.K. Lines), which was founded
in Tokyo as early as in 1884. Originally the
shipping company was called OSK Lines.
However, in 1964 it merged with Mitsui
Steamship and MOL has appeared which now
owns 11.3 mln dwt of oil tankers in addition to
3.6 mln dwt chartered by the company. As of
the start of 2017, the Japanese giant possessed
and managed 163 tankers of various classes.
Registration
To avoid unnecessary state formalities and
taxes most oil tankers are registered under a
ag that differs from the ag of the country of
ownership (or, by other words, under a ag of
convenience, FOC).
The term “ag of convenience” has been used
since the 1950s. A registry which does not
have a nationality or residency requirement
for ship registration is often described as an
open registry. Panama, for example, offers the
advantages of easier registration (often online)
and the ability to employ cheaper foreign labor.
Furthermore, the foreign owners here pay no
income taxes.
Open registries have been criticized, mainly by
trade union organizations based in developed
countries, especially those of Europe. One
criticism is that shipowners who want to
hide their ownership may select a ag-of-
convenience jurisdiction which enables them to
be legally anonymous. Shipowners may select a
jurisdiction with measurement rules that reduce
the certied GRT size of a tanker, so as to
reduce subsequent port of call dock dues.
The three leading ags of registration are
those of countries that are not major shipown-
ers, namely Panama, the Marshall Islands and
Liberia. The Marshall Islands has continued to
increase its market share in recent years and, as
at January 2018, had become the world’s second
largest FOC registry. The fourth and fth
largest registries are Hong Kong (China) and
Singapore, which accommodate both owners
headquartered in each economy and owners
from other economies. With regard to com-
mercial value, almost 24 percent of the world’s
dry bulk carrier eet is registered in Panama; 17
percent of the oil and gas tanker eet – in the
Marshall Islands, including many Greece-owned
tankers; 27 percent of the ferry and passenger
ship eet – in the Bahamas, and 16 percent of
the container ship eet – in Liberia, including
many Germany-owned vessels.
The United States Central Intelligence Agency’s
global statistics count 4,295 oil tankers of 1,000
deadweight tonnes or greater. Panama is the
world’s largest ag state for oil tankers, with 528
of the vessels in its registry. Some other ag
states has more than 200 registered oil tankers:
Liberia (464), Singapore (355), China (252),
the Marshall Islands (234) and the Bahamas
(209). By way of comparison, the United States
and the United Kingdom have only 59 and 27
registered oil tankers, respectively.
Visit OilmanMagazine.com
to read the full article.
Eugene Khartukov is a
Professor at Moscow State
University for International
Relations (MGIMO), Head
of Center for Petroleum
Business Studies (CPBS)
and World Energy Analyses & Forecasting
Group (GAPMER) and Vice President (for
the FSU) of Geneva-based Petro-Logistics
S.A.
Oilman Magazine / July-August 2019 / OilmanMagazine.com
32
OILMAN COLUMN
The Impact of Software on Gas
Flaring and Oil Refining
By Tonae’ Hamilton
Gas aring is the process of burning excess
hydrocarbon gases, which cannot be recovered or
recycled, and combining those gases with steam
or air to produce water vapor and carbon dioxide.
Gas aring is commonly used in industrial plants
such as chemical plants and petroleum reneries.
While aring is a common and efcient process
utilized by many oil reneries to safely dispose
of excess gas, there have been criticisms on the
effects of gas aring, including its impact on the
environment.
With a more environmentally conscious society,
there has been a signicant push for the oil and
gas industry to make operations eco-friendlier.
Steve Coates, CEO of Brainnwave, an oil and
gas software and solution company, provided his
perspective on the effects of gas aring, stating
“The industry is under increasing pressure to
reduce gas aring due to the environmental
impact - and to put the wasted gas to better
use.” According to Coates, The World Bank
has a target to eliminate gas aring by 2030, an
ambition which has had signicant buy in from
industry and major oil producing economies.
With that said, many oil and gas corporations are
turning to oil and gas solutions companies and
integrating rening and processing software to
improve their operations.
Around 150Bn cubic meters of gas is ared
worldwide on a yearly basis. According to Coates,
that is the equivalent of $20bn USD worth of
gas or a third of the EUs total gas production.
As such, aring gas is a very common process
used by oil and chemical plants, and as a result,
unavoidable in certain circumstances. Coates
explained, however, that “there are some
solutions that enable operators to monetize the
gas, which has a direct upward benet on the
environment as well as their own bottom line.
Utilizing eco-conscious solutions and software
may prove to be benecial to chemical plants and
oil reneries that regularly are gas.
Oil and gas solution and data companies, like
Brainnwave, are developing ways to monitor
and track gas ares and make gas aring less
harmful on the environment. Brainnwave, for
example, developed a system for pinpointing
gas aring throughout the world using night-
time satellite imagery. Coates shared how they
have “developed algorithms for quantifying the
volume of gas ared at each site.
Software tools have even been developed to
turn gas ares into electricity, thus making them
useful economically and environmentally. On the
topic of making gas ares useful, Brainnwave
has also developed a unique software, called
Ossian, which scrapes the web to identify who to
approach when a gas aring is pinpointed. “We
embed this all in an end to end digital platform
that enables our clients to take data from space
and, in just a few clicks, identify who they
should speak to in order to present their value
proposition,” Coates explained.
It appears much value is to be found in gas
aring, with the use of proper software
and solutions. Once resistant to change, the
traditional oil and gas industry is beginning to
adopt digital transformation at a much faster rate.
According to Coates, however, the challenge is
to “cut through the hype and buzz words and
identify the viable opportunities to bring about
real change.” The current digital age presents new
opportunities and new discoveries in oil and gas
operations, including technological solutions for
rening and gas aring. The challenge for most
oil and gas companies will be adopting these new
technologies and adapting to change. As Coates
explains, “Technology moves so fast today,
that the old methods of delivering technology
programs are no good.”
With the rise and demand of software in the
industry, oil and gas companies will have to
stay competitive and adopt and adjust to new
technologies at a rapid pace. “By the time the
technology is implemented, it is already out
of date. Any technology that you thought of
as giving you a competitive advantage is being
superseded the minute you implement it,” Coates
explained. With an increase of products coming
to market for gas aring, oil and gas companies
will need to consistently stay up to date with the
latest software and trends in order not to fall
behind.
According to Coates, many oil and gas companies
will need to undergo organizational change and
the methods of agile software development
need to become the methods of doing business.
Architecture needs to be designed as a series of
interconnected micro-services that enable you to
switch out one element without collapsing the
entire project,” Coates explained. With society
migrating to a more eco-conscious future, the
industry needs to develop new ways to make
resources greener. As Coates expresses, the
industry should also, if possible, make resources
“benet local communities.” “Brainnwave can
help support that process by providing the
valuable data insights, which enable companies
to work collaboratively together and deliver
change,” said Coates.
With gas aring marked as one of the
contributors to the release of signicant
amounts of carbon dioxide into the atmosphere,
many oil and gas companies are ready to make
environmentally-driven changes. One major
problem is integrating or developing the software
to do so. As Coates describes, “Digital has the
potential to replace complex analytical processes
but it will never replace human intelligence.” The
industry needs to gure out where AI techniques
can reduce the risk of bad decisions and increase
the efciency of the operations, so that the
difcult tasks that require intuition, empathy,
understanding and heart can be the focus of
the team.” Tackling the issue with oil and gas
solutions companies may be advantageous for
those looking to implement operational change at
a quicker rate.
Coates expressed how companies need to
embrace the concept of ‘agile’ in their business
and set themselves up to be able to make quick
decisions. “Businesses shouldnt be afraid to
partner. The ‘buy v. build’ question will always be
there, but to truly innovate you need to partner
with companies whose only job is to deliver
innovative technology,” Coates explained.
As more oil and gas companies adapt to and
integrate software and technology, the industry
can expect to see signicant changes. In addition,
as more businesses partner with oil and gas
solution and data companies, the industry may
see major enhancements in gas aring in the near
future. Although gas aring has been utilized
in the same manner by chemical plants and
reneries for years, the development of eco-
conscious and value-driven software has opened
the path for change. “We need radical new ideas
to drive the change required and I’m very excited
to be a part of that journey,” said Coates.
Photo courtesy of Choo Poh Guan – www.123RF.com
Oilman Magazine / July-August 2019 / OilmanMagazine.com
33
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
34
Oil and Gas Technology,
Full-Speed Ahead!
By Eric R. Eissler
Until the major downturn of 2014, the
oil and gas industry has been a staunch,
conservative industry that was a behemoth,
slow to change. However, during the
downturn, managers and executives realized
they were on the precipice: continue with the
old ways of doing business or start embracing
technology to cut waste and increase prots
to survive the oil and gas glut? Five years later
and it is obvious that the latter was pursued,
as oil and gas companies are now ush with
technology, all which focus on big data. Big
data has allowed companies in the entire oil
and gas value chain to take advantage of
optimizing processes to save time and money.
Gone are the days of guys driving around in
trucks in oil elds taking measurements. Now
those measurements can be taken in real time
and appear on a screen in a control center.
Sensors Are the Life-Blood of Big Data
There are a lot of unknowns in the well. You
can’t go down there and look around and see
what’s going on and you cant check up on
your equipment that is downhole visually. That
is where sensors are taking the guess work out
of what is going on downhole. As more and
more sensors are being added to downhole
equipment, operators are getting more efcient
at controlling maintenance and keeping
downtime at bay—the bane of the industry!
TessaLink is helping companies to get into
digitalization with its solutions in big data via
RFID edge devices, software, and services
to manage the certication, tracking, and
inspection of industrial assets from start to
nish. By embedding RFID transponders into
metal or high-density synthetic carriers, RFID
can now be used in extreme applications where
the technology would not have worked in the
past.
However, there is more to it than just drilling
data. In fact, TessaLink is taking big data
further, to looking at predictive asset failure
in all segments of the oil and gas industry.
Through a unique platform-as-a-service (PaaS),
which can be leveraged by larger companies
for a complete customized experience by
recording the usage data of any asset in oil
and gas and being able to allow end users to
maximize the usage of an asset, which drives
down costs and allow companies to extract the
complete value out of an asset before repair
of replacement. “What do you really want to
do? You want to maximize the life of your
assets. What is it? How much did it cost?
How much time is left before replacement,
said Jim Stradinger, CSO and Partner of
TessaLink. This allows companies to reduce
their operation expenses by saving on their
assets. Offshore could really benet from this
type of technology, because “You talk to these
operators and they say that so much of the
costs are xed, where they are really not if you
monitor your assets.” He continued, “So many
people operate with a major misunderstanding
of what digital transformation is or they are
only looking at it from the perspective within
their own silo.” So, when it comes down to
it, what is the most important takeaway from
digital transformation? Stradinger said, “It is
making data available to the end user and not
holding it hostage from them.” While big data
is usually the headliner in most technology
stories, the use of robots are growing more
and more within all industries and not just in
the oil and gas industry.
Robots Are Going Where No Man Has
Gone
As robots have gone from simple arms that
do repetitive tasks to the complex machines
of today. Almost like science ction has come
to life! Oil and gas companies are looking
to robots to do jobs humans cannot or are
too dangerous such as monitoring drilling
operations offshore or sending drones out into
harsh climates to inspect ageing equipment.
Robots and automation are here to assist
in oil and gas in a bigger way than thought.
According to GlobalData, the global robotics
industry is set to grow at a compound annual
growth rate of 16 percent from $98.2 billion
in 2018 to $277.8 billion in 2025. The report
identies oil and gas companies such as Shell,
ExxonMobil, Chevron, BP, Gazprom, Repsol,
Equinor, Total, Saudi Aramco, Sinopec and
ADNOC as having considerable exposure to
the robotics theme.
However, there are two foremost challenges
in deploying robotics: cost and reliability.
Robotics are proving to be rather consistent
in enhancing operational efciency in some
applications, such as material handling and
preparation of land for drilling. Nevertheless,
it is yet unclear if the total cost of ownership
of robots and drones has a positive effect on
overall operational expenditure. While it is a
newly implemented technology, there will be
a few more years of monitoring needed until
there will be more data to get a better idea of
what the return on investment will be.
Innovation and Design Continue
While there is a lot of emphasis placed on
big data and using it to increase efciency,
engineering innovation and mechanical tools
are still at the heart of the industry. Lateral
stimulation technology has come a long
way over the years and the results of using
it in production have led to increases in oil
extraction. One Norwegian company has a
stimulation system in place which can increase
well productivity and overcome challenging
reservoir parameters. The reservoir liner string
is equipped with smaller “drills” that extend
from the laterals to bore further into the
reservoir. These lateral drills are powered via
small turbines inside that liner sleeve by the
ow of liquids through the liner. Additionally,
drill bits drill out from the liner penetrate the
reservoir further. This technique can bypass
damaged zones, connect to natural fractures,
faults and sweet spots, penetrate ow barriers,
place laterals accurately, avoid extra uids, and
streamline operations.
With mechanical technology innovations such
as these, it is not only computers and data-
based efciency, but still good old engineering
that can still drive the industry forward.
Together, they are all part of the growing
innovation that drive industry forward and
never ceases to amaze in terms of software
and engineering marvels.
OILMAN COLUMN
Photo courtesy of Theerapong Jaikaew – www.123RF.com
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
37
OILMAN COLUMN
modeling involves optimizing the drilling of
the well. Experts use sophisticated computer
modeling software to simulate down-hole
conditions. Well logs specically provide
knowledge into the formation and geology of
a subsurface area. They are able to characterize
a wellbore, uids and formation. Analysis of
well logs provides engineers with data regarding
porosity, permeability, resistivity, lithology and
uid type. Such analysis can also determine
an estimation of reserves of hydrocarbon
and detect fractures. Engineers use well
logs to conduct qualitative and quantitative
assessments of reservoirs. Based on this data and
assessments, experts also develop an integrated
drilling plan and drilling system with the goal of
achieving maximum performance and optimal
recovery. Well plans typically allow experts to
create effective strategies that lead to the accurate
placement of wells without collisions.
Key Performance Indicators
Key performance indicators (KPI) are another
important aspect of data analytics. Experts utilize
statistical forecasting techniques to build future
trends for KPIs. Features include: a description
of rock property, the orientation of well
trajectory, water volume, chemical composition
as well as the density of wells. Experts also use
a composite similarity matrix to identify wells
that have similar behaviors across an area. KPIs
and drilling data help experts understand how
to improve drilling. They also help identify
risks and opportunities. By utilizing offset well
benchmarks, experts develop a drilling plan.
Once this plan is in place, they continue to gather
and visualize information from the surface and
downhole environments. This allows them to
make recommendations that help to minimize
risks and improve performance.
Why are Analytics Benecial?
Data and analytics help operators gain a better
understanding of their operations so they can
address a wide range of factors, such as design
decisions, ways to improve operational efciency,
ways to develop new strategies, well mechanics as
well as planning and performance.
Due to large volumes of data analytics (which
is also referred to as big data), operators and
oileld service companies have the ability to
focus more on real-time and agile processes
instead of regular monitoring processes. This
allows them to produce key insights that help
to improve the performance of their operations
substantially, while also enabling them to avoid
a wide range of problems. Analytics specically
help improve drilling accuracy because they
identify issues that could have a negative impact
on operations. Additionally, analytics also help
experts predict when drilling maintenance is
going to be needed or when there’s going to
be downtime. Engineers are able to predict
further performance based on historical results.
It’s critical for operators and oileld service
providers to have an understanding of when
maintenance intervals are going to be impacted
by ow rate, pressure, temperature, vibration and
shock. Having a solid understanding of these
factors helps them to prevent failures as well
as associated downtime. Predicting equipment
failures also has the benet of allowing teams to
more effectively schedule maintenance. Because
analytics identify anomalies and issues, they help
prevent nonproductive time, which can increase
operational costs by 30 percent.
Analytics are also ideal for drilling operations
because they facilitate real-time decision making.
Engineers make decisions in real time based off
of formation geology and drilling parameters,
which is used for predictive modeling.
How Gyrodata Utilizes Analytics to Improve
Drilling Operations
At Gyrodata’s ROC, the Guide Center, drilling
engineers deliver 24/7 real-time monitoring
services and support where they analyze a vast
amount of data so operators can make vital
decisions regarding their drilling operations. Our
Guide Center’s well planning, well engineering
and real-time optimization services allow
operators to optimize well performance. Experts
at the Guide Center specically examine the
following:
Is a gyro required in a surface hole due to the
proximity of wells?
Are there any lost circulation zones that will
require lost circulation material?
Will an agitator interfere with the MWD
signal?
Can the MWD handle the planned ow rates
without washing out the tools?
One way that experts at Gyrodata’s Guide Center
utilize analytics is by benchmarking wells. This
data set helps determine how to drill future wells.
Experts also examine large volumes of data to
try to differentiate the wells to group them based
on, for example, different formations or different
hole sizes. They also determine if wells that are
within a reasonable proximity of each other
illustrate similar drilling behaviors. Analytics
allow experts to determine similarities between
wells. By analyzing data, they also expand on
the successes of the pacesetter and focus on
the limitations of the slower drilling of more
challenging wells.
As an oil and gas service provider, Gyrodata is
frequently compared or measured against the
pacesetter wells in an area regardless of the
well, casing prole, target formation or hole size
that the company is planning to drill. It’s vital
to utilize historical data more effectively and
efciently. This can be achieved when experts
know the data that they are evaluating. The
data should be organized and objectives should
be clearly identied. Without a clear picture
of what the objectives are, an oileld service
provider may not be capturing the correct data
to store in their database. Gyrodata also chooses
a criteria range for success. Experts do not just
pick the fastest well and duplicate it because
the one record-breaking well may have been an
exception. Instead, they examine data from ten,
20 or even more wells in an area to identify what
made them successful as a whole.
Experts also analyze data that shows the
performance of the slowest offset wells in a
group to try to gure out why these wells drilled
slower. Previous knowledge and data is crucial
Figure 1: Benchmarking allows grouping of wells to determine pacesetters
Continued on next page...
Oilman Magazine / July-August 2019 / OilmanMagazine.com
38
OILMAN COLUMN
because it allows service providers to create
an effective road map for operators. It’s in
service providers’ best interest to implement
well engineering, data analytics and offset well
data evaluation to determine what parameters
should be selected for the best overall outcome.
At the Guide Center, a drilling services team
constantly updates the latest historical data
while they also monitor the live feeds from
each rig so they can seek optimal drilling and
validate analytical models. The team looks for
the best combination of drilling parameters
that will deliver the fastest rate of penetration
(ROP) with minimal direction control while
also staying within the operating ranges of
the downhole tools. The experts utilize this
knowledge to create efcient road maps and
optimization reports that eld personnel use as
a drilling guide.
Processes and procedures are in place to
minimize tool failures and provide real-time
adjustments to parameters, which keeps tools
in the hole longer. By utilizing these methods,
Gyrodata has optimized and enhanced its
drilling practices to achieve superior results.
In one case study, an optimized bottom hole
assembly was selected to drill a Wolf Camp A
well in the Permian Basin. Based on Gyrodata’s
historical data of conventionally drilled wells in
this formation, experts were able to apply the
knowledge to select the proper conguration
for motor assist, rotary steerable system
(RSS), and MWD. Drilling with road maps
and following parameter recommendations
for the entire well were applied. Gyrodata
drilled a 9,015-foot lateral in one run with the
WellGuide RSS in 43.84 drilling hours. There
was an average ROP of 205.8 feet/hour. The
operator saved about nine days of rig time and
almost half a million in drilling costs.
Overall, Gyrodata’s Guide Center has helped
many operators save millions by improving
drilling times for peak performance and
reducing non-productive time. The center
has a circular process of obtaining and
reviewing data and utilizing it to support
effective decision making so operators can run
operations in a protable and efcient manner.
Conclusion
In summary, the ability to access and draw
valuable insights from large data sets has
made the drilling industry more protable and
efcient. Experts are able to make forecast,
and this allows them to keep costs down. Data
analytics has the ability to improve the way
operators and service companies manage their
entire drilling process. Analytics has improved
their ability to characterize sites, spot trends
and create repeatable solutions with predictable
outcomes. Data from wells, pipeline and other
equipment helps drilling engineers to improve
well productivity and prevent costly equipment
failures as well as HSE risks. Overall, analysis
from data analytics in real time has become a
necessity for oil companies mainly because it
helps to boost drilling performance, improve
decision making and lower cost structures.
Data analytics is arguably a key driver for
drilling a high-quality well on time and under
budget.
John Evans has over 30
years of experience in the
oil and gas industry. He
is the Gyrodata Product
Line Manager for rotary
steerable system (RSS)
and measurement-while-drilling (MWD)
services.
Figure 2: Application specic road-mapping determines performance KPI targets
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
40
Interview with Michael Jensen,
Founder, Midnight Tools
By Tonae’ Hamilton
Tonae’ Hamilton: What sparked your interest
in mechanical engineering and developing
engineering solutions for oil elds?
Michael Jensen: I have
always had an interest in
designing machines and spent
a lot of my free time before
college building things like a
22-foot-tall trebuchet with a
half-ton counterweight and a
competitive racing electric car
so mechanical engineering was a natural choice.
I was drawn to the oileld by the challenges
of designing for the extreme conditions found
downhole, offshore, and subsea as well as the
cultural focus and commitment to research and
development found in many oileld companies
TH: Having worked for Schlumberger, a giant
oil service company, for several years, what
made you decide to leave and start your own
company?
MJ: I enjoyed working for Schlumberger but in
the large company environment people tend to
end up siloed into narrow functional roles and are
generally forced to choose between technical and
leadership roles. I am a rm believer that, especially
in product and development organizations, the
most effective leadership teams remain highly
technical and involved in the creation of the
products they oversee. Starting my own company
provided a way for me to maintain a focus on both
engineering and leadership as I moved forward
with my career.
TH: Can you provide details on how Midnight
Tools started and how the name of the
company came about?
MJ: I had considered starting my own company
since college, but wanted to, at least in the
initial phases, remain internally funded. During
my previous career I built my own personal
prototype machine shop and set aside capital so
when Midnight Tools was launched several key
infrastructure elements were already in place.
Our initial development choices were focused on
products where we believed that new intellectual
property could be developed and protected and
still had low enough initial capital requirements to
make bootstrapping possible.
During our early product brainstorming sessions
one of the things we examined was what sets
oileld operations and tools apart from most other
industries. A feature which stood out is the high
value of time, especially offshore, and the
true 24-hour operating environment which comes
from this. The name Midnight Tools was selected
to reect that our products are designed for this
environment where tools always need to work and
use at midnight is as common as any other hour.
TH: Can you highlight the differences in
working for a large oil service company like
Schlumberger compared to owning a small
local company like Midnight Tools? What
adjustments have you had to make, if any?
MJ: Working for a large multi-national company,
the level of resources and particularly capital
you have access to is dramatically higher, the
difculty is that with these resources comes very
signicant organizational inertia. The current
trends away from vertical integration and towards
global sourcing of everything from project teams
to prototype parts add to this problem. I used
to spend a signicant fraction of my workdays
coordinating with outside companies and remote
resources as well as working on the procedures,
reports, and approvals necessary to move a project
forward.
In the small company environment, we can be
much more agile. At Midnight Tools, decision
making is streamlined and we have the facilities
and knowledge to design, fabricate, and test
internally so we can take an idea from concept
to testing in days instead of months or quarters.
This allows us to take more design risks and go
through more product iterations. The challenge is
that, especially with seeking to remain internally
funded, our resources are much more limited.
This means that while our structure allows us to
‘fail fast’ and quickly develop concepts we need
to be careful that once we move forward with a
product, we don’t have major setbacks since there
are few second chances once we reach that level of
investment.
TH: What is the mission of Midnight Tools
and what are you hoping to accomplish/
continue accomplishing with the company?
MJ: We appreciate well thought out and elegant
engineering solutions and try to develop products
which are novel, useful, and have the hallmark
of elegant engineering: they appear obvious in
retrospect.
TH: Are there any products or software
currently being developed by Midnight
Tools that you can share? Can you also share
information on your patents and the impact
they have made on the oil and gas industry?
MJ: We currently offer several commercial prod-
ucts and continue to develop new congurations
of these tools as well as work on new ideas, but
don’t have anything new on the hardware front
that we are ready to share today. Thus far, our
products have been hardware based, but as part of
our design process we have developed numerous
internal software tools that we are considering
rening into a software product to support and
streamline product development. On the intel-
lectual property front the 24+ month examination
backlog at the U.S. Patent and Trademark ofce
means that none of our patent IP has made it past
the rst ofce action stage yet but we hope to see
this changing later this year or early next year.
TH: In addition, which products or patents are
you most excited for your clients to utilize?
MJ: Currently I am most excited about our Con-
tinuous Spanner. This a product I wish I had dur-
ing my time designing and operating wireline tools.
Today most wireline tools are rigged up with a pin
spanner which has remained effectively unchanged
in a century. The rig up process, especially when a
safety cable is used, requires frequently reposition-
ing the spanner similar to using an open-ended
wrench on a nut in a restricted space. This process
is neither efcient nor ergonomically friendly and
is especially costly in rig environments where day
rates can range from $7 to well over $100 per
minute. The Continuous Spanner is the only tool
of this type that provides 360 degree bi-directional
ratcheting which removes the need to reposition
the tool and signicantly increases the speed of the
operation. Considering the number of tool joints
and the frequency of rig-up and rig-down events
the time savings can add up quickly.
TH: In what ways has Midnight Tools sup-
ported the oil and gas industry thus far? How
do you hope to support or impact the industry
in the future?
MJ: We currently support the oil and gas industry
by developing specialty and niche tools to address
the unique challenges and operating conditions
present in the industry. We have also worked
directly with clients to create customized solutions
for their particular operational needs. Going for-
ward, we plan to expand our commercial product
offerings as well as continuing to provide custom
tool design and fabrication services.
OILMAN COLUMN
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Convention Center
New Orleans, LA
October 28-31
Workshops & Conference
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
42
OILMAN COLUMN
Composite Solution Restores Eroded
Petrochemical Plant Line
By Andrew Patrick
Scheduled plant turnarounds allow owners to
take an entire process unit offstream for main-
tenance, providing time for damaged and worn
equipment and systems to be refurbished or
replaced. When maintenance can be scheduled
and planned, owners can make smart decisions
about how to make repairs and improvements to
get the best results at the lowest cost.
When inspections turn up damage between
scheduled turnarounds, there is less time to
prepare and often more urgency in making
important decisions. Asset owners must deter-
mine quickly how best to address the potential
risks and what actions to take to achieve the
appropriate level of operational safety. In situ-
ations where it is not possible to wait for the
next planned turnaround, owners need to have
reliable and proven solutions at their ngertips
to rapidly restore asset integrity, and ideally, they
want results that will not break the bank.
Advances in composite technology are
introducing a growing range of options for
repairing damage in petrochemical plants. As
materials, designs, and capabilities progress and
more installations are successfully carried out,
there is mounting trust in the effectiveness of
composite repairs, and there are more products
available to asset owners.
One of the most compelling reasons for
selecting a composite solution is that in
many cases, the line can remain in use while
repairs are being made. Unlike other repair
methods that require welding, most composite
installations require no hot work, and because
the components used for these repairs generally
are not heavy, there is no need for heavy-lifting
equipment. The combined appeal of minimal
operational disruption and the reduction of risk
has led asset owners to use composites more
frequently for critical repairs.
Putting Composites to Work
When inspections in a petrochemical plant
uncovered a section of 254-mm (10-in) carbon
steel pipework that had experienced signicant
wall loss resulting from external erosion, the
plant owner wanted an immediate repair. The
inspection revealed that approximately 60
percent of the exterior of a line transporting
butane had eroded in 13 locations along a 23-m
(75.5-ft) section.
Because the pipework was essential to plant
operations, the owner needed a repair solution
that would not require the line to be taken out
of service. Having successfully implemented
repairs in the past using products from
ClockSpring|NRI, the owner looked to
the company for guidance.
Experienced engineers evaluated the damage
and determined that the best solution would
be to use the proprietary Contour composite
solution as a pressure reinforcement and
containment repair. Especially effective in plants
and reneries, Contour is an engineered repair
system featuring quad-axial stitched berglass
cloth applied in a wet-lay system with two-part
epoxy and a ller material. This system is ideal
for repairs that involve complicated geometry
such as tees, anges, and varying diameter pipe
and is used to repair a range of pipe defects,
including leaks, in plants, reneries, tank farms,
terminals, and offshore locations. Available
in multiple kit sizes to t any diameter pipe,
the stitched cloth minimizes creep and can be
installed with negligible disruption to operations.
Installation is simple and generally requires
only a cold-work permit because no cutting or
welding is required.
Working to the ISO 24817:2017 standard, which
outlines requirements and recommendations
for the qualication, design, installation, testing
and inspection of externally applied composite
repair systems to corroded or damaged
pipework, pipelines, tanks and vessels used in
the petroleum, petrochemical and natural gas
industries, the engineering team developed an
engineered composite repair (ECR) to deliver
20 years (lifetime) of service at 27 bar (391 psi)
pressure and 53.7°C (128.6°F) temperature.
When installed, the repair would share the
load with the substrate, assuming an average
remaining wall thickness of 4 mm (0.16 in).
With the decision made to address the damage
using the ECR, trained and certied technicians
were ready to begin the installation. Because
the damaged pipeline was between other lines,
access to the damaged areas was restricted.
While this would have been an obstacle for
other types of repairs, the ECR used in this
application is designed for just such conditions.
Working between the pipes, a team of ve
trained and certied installers prepared the
pipeline for repair to SA2.5/NACE#3,
removing all rust, coating, and mill scale to
produce a near-white surface. With the surface
appropriately prepared, the installation team
washed it with solvent before inspecting the
lines to determine the location of the defects.
The next step was to apply the composite repair.
Applying the quad-axial stitched berglass cloth
by hand, the team covered the damaged areas
with eight layers of the ECR. The entire repair
was completed over the course of two weeks,
restoring the line to safety without interrupting
operations and delivering a safe and reliable
permanent solution within a demanding project
schedule.
Working in tight quarters, installers applied the
Contour engineered composite repair by hand,
installing a safe and reliable permanent solution
in two weeks and restoring the line to safety
without having to interrupt operations.
A Proven Alternative
The extensive testing that has gone into
composite technology development has
produced reliable solutions that have been
proven over three decades in a broad range of
applications. Ongoing R&D efforts continue to
push the boundaries of this technology, and as
more repairs are carried out in the eld, there is
more evidence that composite technology is not
only a reliable alternative to “cut-and-replace”
repairs, but a solution that can be applied safely
and effectively without negatively impacting
operations.
Andrew Patrick’s career
spans more than 30 years
and encompasses all aspects
of pipeline engineering,
from construction to
inspection to repair. He
entered the industry working in offshore
pipeline construction and has extensive
experience with repairs in reneries and
petrochemical plants and on midstream
projects. Andrew began his 20-year career
with ClockSpring|NRI as its sole sales
executive for the western hemisphere
and now manages the global sales team
as executive vice president, strategic
opportunities.
Photo courtesy of ClockSpring | NRI
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Oilman Magazine / July-August 2019 / OilmanMagazine.com
44
OILMAN COLUMN
Understanding Mineral Rights in
Terms of Oil and Gas Extraction
By Eric R. Eissler
Property rights, mineral rights, fee simple, the
long list of various land ownership laws is
extensive and convoluted to say the least. To
make sense of and bring clarity to ownership in
terms of mineral rights, this article will examine
what mineral rights are and why they are so
important to companies working in the oil and
gas industry.
What Are Mineral Rights?
To answer this question, let’s look at the general
property ownership law in the United States.
General ownership is called, fee simple, and state
that the owner controls the surface, sub-surface
and air above the property and is at liberty to
sell, lease, gift or bequeath these rights to other
parties, either wholly or on an individual basis.
For the sake of the oil and gas interests, the
mineral rights, which lie in the sub-surface are
what can be sold or leased to another party while
the primary holder of the surface or physical
land still holds that property but allows others
to search explore and produce oil and gas for
royalty payments, under a lease, or a one-time
payment to the landowner, when mineral rights
are purchased outright and not leased. By
purchasing or leasing mineral rights, the oil and
gas companies need not acquire the surface nor
any structures on the surface. This reduces the
amount of money that one would have to spend
to gain access to the minerals, in this case known
as hydrocarbons.
On Becoming a Land Owner
Many land owners today have their ancestors to
thank for being able to own large swaths of land
in America. The same goes for Vanessa Rankin
the daughter of Terrel Braly, and current trustee
of the Corinne Russell Judkins Trust. She told
OILMAN Magazine that her family acquired
its land from “My great, great grandfather, J.
Oliver Russell and his 3 brothers, [who] made a
gold discovery in what became Denver - which
started the Pikes Peak Gold Rush of 1858.
After the civil war, he came to Menard, Texas
and entered the ranching business. His son (my
great grandfather) Richard Robertson Russell
expanded the ranch holdings to more than 1
million acres. The mineral rights that we now
have and are marketing are what remains of the
original holdings.” When buying property always
make sure to understand what kind of contract
you are going purchase.
To Lease or To Buy?
In the oil and gas industry, it is more common
to lease, rather than buy mineral rights, because
most times, the oil and gas producer is unsure
if there is any oil and gas below the surface
at all, and would rather pay a small amount in
the form of a lease rather than take a risk with
a large purchase, which might not yield any
hydrocarbons.
When the Government Gets Involved
Where there is money to be made, the
government always steps in to take its share even
when it comes to mineral rights ownership and
transfers. Most states have laws that regulate
mining and drilling activity. There are also laws
that regulate the sale of surface and mineral
property. These laws are meant to protect the
environment and all parties involved in property
transactions. These laws are the only protection
available to buyers or sellers on issues that
are not specically addressed in the mineral
transaction agreement.
Although mineral rights laws are similar
from state to state, small variations can
make a difference when applied to individual
transactions. Furthermore, mining and oil and
gas regulations can vary signicantly from
one state to another. These can also have
major differences when applied to individual
transactions. As each transaction is unique
and should be carefully considered before any
permanent agreement is made. An interesting
note about Texas law was made by Vanessa
Rankin, she said, “one of the big things that
affects our Terrell County property is ‘Mineral
Classied’ lands. In effect, the State of Texas
owns the mineral rights on about every 4th
section and the surface owner gets to keep
half of mineral income for essentially acting as
steward in managing the mineral rights for the
State.” In other words, the government takes
50 percent of the mineral income on every 4th
section of land.
If You Are Going to Sign a Gas Lease,
Keep the Following in Mind:
When mineral rights are being sold or leased, the
parties involved in the transaction should be in
full agreement on:
how extraction will occur
what reclamation will be done
what equipment will remain on the property
what access will be needed by the lessee and
crews
Photo courtesy of Gui Yongnian – www.123RF.com
Oilman Magazine / July-August 2019 / OilmanMagazine.com
45
OILMAN COLUMN
who is responsible for anticipated problems
(In other words: lawyer up!)
More Mineral Rights Ownership Variations
Mineral ownership is understood to be the
property rights that provide the access to exploit
an area for the minerals, gas or oil. There are four
types of mineral ownership:
1. Mineral Interest: Interest generated after the
production of oil and gas after the sale of a
deed or a lease.
2. Royalty Interest: Occurs when mineral rights
are leased. Should the property owner enter
into a lease agreement with another party, the
owner of the mineral rights retains royalty
interest.
3. Working Interest: Occurs through leasing
and is associated with any and all exploration,
drilling, development, and operation of the
property.
4. Overriding Royalty Interest: Differs from
the previous types of ownership in that it
does not provide ownership of any materials
under the ground, but rather ownership of a
portion of revenue generated from oil and gas
production.
Each of these ownership options offers a certain
monetary value and should be considered when
you own, lease out, or put your mineral rights up
for sale.
The Old Truths Abound
When it comes down to getting involved with
land, property, money or any assets that generate
substantial income, one should ensure they have
the right legal protection as well as looking into
any family issues that could arise from buying or
selling mineral rights on the family land. While
newfound mineral rights have the potential to
bring wealth and prosperity to a family, it also has
the ability to tear it apart. Sometimes to a degree
beyond repair as Vanessa Rankin tells in her story
about her own family ghts and division of land,
in the short story below.
“Family Feuds Over the Land”
Some family ghts begin with big assets,
sometimes it is the smaller more trivial
possessions that can drive a family apart.
“How dare you! You know how much I love that
rug.”
“Well, if you loved it so much, you would have
picked it sooner.”
“I didn’t think I had to - you knew I wanted it.
Corinne Russell Judkins and Elma Dill Russell
Spencer were 43 and 41 when their mother
Mattie Strickland Russell passed away in 1937.
They had been close their entire life. According
to the will, the two sisters were to each take turns
picking which items of their mother’s estate they
wanted. Picks one through four went without
a hitch. On the fth pick, Corinne selected an
oriental rug. THE oriental rug that Elma Dill
apparently loved so much...but not enough to
feel she had to use one of her four previous
choices to make sure she had it.
In 1922 the Big Canyon Ranch was more than 1
million acres of Texas country. No one knows
exactly what happened to the 925,000 acres from
1922-1937, but the remaining 75,000 acres was
split over the argument over a rug.
So, the 75,000-acre Big Canyon Ranch became
the 37,500-acre Big Canyon Ranch and the
37,500-acre Circle Dot Ranch and they never
spoke to each other again as long as they lived.
The oriental rug remains on the other Corinne
Russell Judkins’ ranch.
Oilman Magazine / July-August 2019 / OilmanMagazine.com
46
Oilman Magazine / July-August 2019 / OilmanMagazine.com
46
OILMAN COLUMN
Digital Twin Technology Can Drive
Greater Efficiency, Support New Business
By Dr. Francois Laborie
Oil and gas industry experts are constantly
searching for ways to produce energy more
efciently. And they are seeking methods
to improve health and safety in their
environments. Digital twin technology, which
creates digital replicas of physical resources, is
here to help.
The industry can apply digital twins to high-
delity equipment. It also can employ digital
twin technology at the asset or system level to
address modeling, simulation and analytics.
Initially, most of the value from digital
twins will come in the form of optimizing
production and maintenance routines. Longer
term, digital twins will be part of a complete
business model transformation that will
change the relationships between suppliers and
operators.
How It Works
A digital twin solution fuses two or more data
sets with a visualization of a physical asset.
That asset could be a single pump, a network
of connected components or even an entire
oil rig.
This makes industrial reality available virtually,
even though the asset itself is physically
located on the seabed or the tip of a are
stack.
A digital twin virtual model replicates reality
through integrated engineering models that
are continuously updated with real-time
conditions. Combined with 3D technology,
a digital twin provides a 360-degree view of
every aspect of the real-world production
asset.
The Opportunities
Digital twin technology can drive signicant
new efciencies for industrial companies.
Here are a few examples of how:
Now engineers can collaborate using the
same 3D model or real-time data, even if
they are located in different time zones.
Maintenance workers can test new routines
on a digital twin before implementing them
in reality.
Maintenance engineers can use oil and
gas operator digital twins to perform
diagnostic health management for predictive
maintenance. That way, they can identify
problems before the
assembly line grinds to
a halt. As a result, they
can avoid millions of
dollars in production
losses.
Digital twins also can
support new business
models. For example,
exploration and
production operators in
the oil and gas industry
can enter performance-
based contracts with
their suppliers by making relevant operational
and contextual data available to their OEM
partners via integrated digital twins.
The Challenges
But while digital twins have great potential,
this technology has its challenges. And digital
twin technology should be part of a larger
digitalization process.
It’s worth mentioning that a digital twin and
its physical counterpart will never be exactly
the same. Just as genomes of identical human
twins sometimes differ, so do digital twins and
the reality they represent. The difference could
be in the quality of data that the digital twin
relies on, the twins inability to integrate with
other twins, or the simple fact that the laws of
physics mean there will always exist some lag
before the digital twin reects a change to the
real asset.
Also, a digital twin can complicate industrial
digitalization efforts. Today, most companies
in heavy-asset industries are grappling with
how to organize and explore their data. Their
digitalization efforts, including digital twins,
often take the form of one-off solutions
such as pilot projects, proof of concepts
and case studies. Every new one-off solution
adds a new data silo, further fragmenting the
company’s data. This piecemeal approach
makes it more difcult to execute a company-
wide digitalization initiative that facilitates
solutions that scale.
When the term digital twin was coined in
2003, it referred to a digital representation
of an individual component or a subsystem.
Technological advances such as the emergence
of the Internet of Things have since expanded
that scope to include layered and interlinked
twins. This expanded concept creates new
challenges for industrial companies. To fully
take advantage of the technology, companies
need to organize and connect their digital
twins to ensure the information they produce
is channeled to stakeholders who can act on it.
What’s Next
So where are we now with digital twin
technology? And where are we going?
More than 15 years after the dawn of the
digital twin, the technology is not widely used.
Just 5 percent of homogenous composite asset
owner-operators created their own digital twins
in 2018, according to Gartner. The consulting
rm forecasts it will not exceed 33 percent by
2023.
Gartner’s analysis contains another important
point. Most companies will acquire rather
than develop their digital twins. Over the next
several years, it will become increasingly com-
mon for manufacturers to throw in a digital
twin when a company orders a physical asset.
They also will provide regular maintenance and
updates as part of these packages.
If this analysis hits the mark, industrial
companies have some important decisions
to make about how and when they approach
digital transformation. Those that lay the
foundation for digital success now will be in a
better position to take advantage of the wealth
of data that is generated when more assets are
connected to the internet.
Francois manages Cognite’s
overall marketing activities,
including Product
Marketing, and builds the
Cognite partner network.
Photo courtesy of wrightstudio – www.123RF.com
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THE ORIGINAL BREAKBULK EVENT
For everyone involved in procurement,
transport and logistics of oversized cargoes
October 8-10, 2019
George R. Brown Convention Center
Houston, Texas, USA
Oilman Magazine / July-August 2019 / OilmanMagazine.com
48
OILMAN COLUMN
Energy Exposition Lights Up the
Industry in the Rockies
By Jason Spiess
Thousands ocked to the 2019 Energy Exposition
this year held in Gillette, Wyoming. The Expo
was by all accounts, a high energy successful event
attended by passionate professionals wanting to
have more purpose in the energy industry.
This year’s speakers and presenters offered a
diverse range of topics and ideas. There were
participants, speakers and attendees from the oil,
natural gas, wind and solar market, and advocacy
and government ofcials.
The event kicked off with the high-energy Jason
Spiess, host of The Crude Life, addressing the
“Cult of Environmentalism.” The following day
Expo participants had an opportunity to see
U.S. Congresswoman Liz Chaney, U.S. Senator
Mike Enzi, U.S. Senator John Barrasso; Wyoming
Governor Mark Gordon; Dan Eberhart, Canary;
Dan Haley, Colorado Oil & Gas Association;
Peter Wold, Wold Energy; Ron Auick, Wold
Energy; Tom Kropatsch, Wyoming Oil and
Gas Conservation Commission; John Robitaille,
Wyoming Petroleum Association; Paul Ulrich,
Johah Energy; Weld County (CO) Senate District
13, James Cook; Conner G. Nicklas, University of
Wyoming College of Law; Michael Von Flatern,
Wyoming State Senate, District 24; Harriet
Hageman, Hageman Law and former Chairman
of the Wyoming House Republican Caucus,
Nathan Winters.
The Energy Exposition offered live music
after speakers and dinner, bringing in the newly
crowned Rocky Mountain CMA Entertainer of the
Year, Chancey Williams and the Younger Brothers
Band.
“This year’s Expo was another fantastic event,”
Austin Jennings, co-organizer of the event said.
“It is always exciting to witness the industry’s
commitment to a cleaner energy future, hearing
strategies employed to position companies for
success, nding out new technological advances
and continuing the practices tha
t keep the industry
safer than ever.”
Jason Spiess interviewing Bob Donner,
Founder of Freedom Manufacturing
Jeff Zarling, owner of Roughneck Coffee and
Athena Borgialli, Lightfoot USA
Panel discussion on what happened in Colorado: R-L, Jason Spiess,
Dan Haley John Cook, John Robitaille, Harriet-Hageman
Nathan Winters gets ready to introduce the Wyoming
delegation at the Energy Expo dinner
Rocky Mountain CMA Entertainer
of the Year, Chancey Williams and
the Younger Brothers Band
Global Nitrogen Services
Team members from DrillComm
Team members from Red River
Team members from Titan Solutions The Entrance to the Energy Expo at the Wyoming CenterStertil Koni demonstrating their skills at the Energy Expo
WY Governor Mark Gordon,
Micheala Hager, K9 Pipe Inspections
and leak detector dog Yara
Oilman Magazine / January-February 2019 / OilmanMagazine.com
1
November 5-6, 2019
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Visit www.OilmanConnect.com for more information
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