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Digital Twin Technology Can Drive Greater Efciency, Support New Business p. 46Where are my Permian Barrels Going?p. 6Oil Ships Which Rule The Wavesp. 26Reections from OTC 2019: Interviews with Newpark Drilling Fluids, Parker Hannin and Brainnwave p. 20THE MAGAZINE FOR LEADERS IN AMERICAN ENERGYJuly / August 2019OilmanMagazine.comMIDSTREAM TECHNOLOGYMaritime Fuel Transportation
SPECIALTY & CUSTOM CHEMICALSMFG 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 DrawdyVP Sales & Business Developmentjdrawdy@mfgchemical.comGROW WITHMFG CHEMICAL
Where are my Permian Barrels Going p 6 Reflections from OTC 2019 Interviews with Newpark Drilling Fluids Parker Hannifin and Brainnwave p 20 Oil Ships Which Rule The Waves p 26 Digital Twin Technology Can Drive Greater Efficiency Support New Business p 46 THE MAGAZINE FOR LEADERS IN AMERICAN ENERGY July August 2019 OilmanMagazine com MIDSTREAM TECHNOLOGY Maritime Fuel Transportation
Oilman Magazine / July-August 2019 / OilmanMagazine.com2Gifford BriggsGifford Briggs joined LOGA in 2007 working closely with the Louisiana Legislature. After nearly a decade serving as LOGA’s 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. StansberryMark 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 ofce 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 SpiessJason 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 RobbinsJosh Robbins is currently the Chief Executive Ofcer 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 efciently.Steve BurnettSteve 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 prot. 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 articial intelligence, data analytics, unmanned aircraft systems, cloud computing and connected devices that were exceedingly impressive. Innovation did not stop with emerging tech startups, established oileld 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 Reections From OTC 2019: Interviews with Newpark Drilling Fluids, Parker Hannin 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 oileld. An insightful set of interviews you don’t want to pass up. JULY — AUGUST 2019PUBLISHER Emmanuel SullivanMANAGING EDITOR Sarah SkinnerASSOCIATE EDITOR Tonae’ HamiltonFEATURES EDITOR Eric EisslerGRAPHIC DESIGNER Kim FischerCONTRIBUTING EDITORS Gifford Briggs Steve Burnett Thomas Ciarlone, Jr. Joshua Robbins Jason Spiess Mark StansberrySALES Eric Freer Diana GeorgeTo 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) 562-2340Original cover photo by Suriyapong Thongsawang www.123RF.comLETTER FROM THE PUBLISHERCONTRIBUTORS — BiographiesEmmanuel Sullivan, Publisher, OILMAN Magazine
Oilman Magazine / July-August 2019 / OilmanMagazine.com3Week Ending June 29, 2019DIGITAL DOWNHOLE DATAGulf of Mexico: 26Last month: 23Last year: 18 New Mexico: 99Last month: 101Last year: 95 Texas: 462Last month: 477Last year: 529 Louisiana: 48Last month: 44Last year: 38 Oklahoma: 102Last month: 102Last year: 140 U.S. Total: 967Last month: 984Last year: 1,047OIL RIG COUNTS*Source: Baker HughesBrent Crude: $64.74Last month: $70.64Last year: $75.89 WTI: $58.47Last month: $58.84Last year: $68.24CRUDE OIL PRICES*Source: U.S. Energy Information Association (EIA)Per BarrelGulf of Mexico: 59,456,000Last month: 59,052,000Last year: 47,498,000 New Mexico: 26,490,000Last month: 27,466,000Last year: 19,488,000 Texas: 149,002,000Last month: 150,647,000Last year: 126,668,000Louisiana: 3,621,000Last month: 3,780,000Last year: 3,850,000Oklahoma: 18,505,000Last month: 18,131,000Last year: 15,941,000 U.S. Total: 364,872,000Last month: 369,403,000Last year: 314,250,000CRUDE OIL PRODUCTION*Source: U.S. Energy Information Association (EIA) – April 2019 Barrels Per MonthGulf of Mexico: 85,064Last month: 89,135Last year: 73,059 New Mexico: 145,891Last month: 149,926Last year: 118,195 Texas: 718,207Last month: 728,974Last year: 618,349Louisiana: 244,757Last month: 259,070Last year: 223,247 Oklahoma: 261,982Last month: 264,199Last year: 235,092 U.S. Total: 2,915,305Last month: 2,988,285Last year: 2,597,880NATURAL GASMARKETED PRODUCTION*Source: U.S. Energy Information Association (EIA) – April 2019Million Cubic Feet Per MonthConnect with OILMAN anytime at OILMANMAGAZINE.com and on social media RETWEETS@OilmanMagazine#OilmanNEWSStay updated between issues with weekly reports delivered online at OilmanMagazine.com SOCIAL STREAMfacebook.com/OilmanMagazine
Oilman Magazine / July-August 2019 / OilmanMagazine.com4OILMAN COLUMNRecent Appellate Decisions on the Obligations of Mineral Executives and the Waiver of Anti-Pooling ProvisionsBy Thomas G. Ciarlone, Jr.In April, the Texas Supreme Court issued a decision—Texas Outtters 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 Outtters, 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 Outtters 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 Outtters 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 prot free of any oil and gas lease.”The Supreme Court of Texas has now afrmed the Fourth Court of Appeals.SCOTX reiterated the general rule that executive rights holders like Texas Outtters 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 specic contours of the duty are “difcult to determine,” “imprecise,” and “unsusceptible to a bright line rule.” As such, the Court more or less conned its holding to the specic 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 benets the surface but not the mineral estate, we conclude that legally sufcient evidence supports the trial court’s nding that Texas Outtters did so in this case.The decision in Texas Outtters 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 ratied 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 ratied 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 ratication of a pooled unit.Tom is a litigation partner in the Houston ofce 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.com5Oil and Gas Companies are Reaching for the SkyBy Sarah SkinnerDrones 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 benets 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 modied 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• Orthorectied Imagery• Area Mapping & Survey• Well Pad Restoration Survey• Flare Tip Inspection• Corrosion Inspection• Construction Project Progress DocumentationThe 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 efcient 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 benet to using UAS. Many locations are difcult 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 Modication 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 benets 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 signicant 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 COLUMNPhoto courtesy of Sutisa Kangvansap – www.123RF.com
Oilman Magazine / July-August 2019 / OilmanMagazine.com6OILMAN COLUMNWhere 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 ConstraintsFor 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 ConcernsPermian 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 satised with the crude they will rene. 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 difcult or more expensive to rene.Vessel ManagementExporting 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 trafc 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 benet 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 efcient capacity utilization. ConclusionAccording 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.orgAssociation of Oil Pipe Lines aopl.orgNational Association of Pipeline Safety Representatives napsr.orgGPA Midstream Association gpamidstream.orgInterstate Natural Gas Association of America ingaa.orgIndependent Petroleum Association of Americaipaa.orgAmerican Petroleum Institute api.orgAmerican Exploration & Production Council axpc.orgNational Stripper Well Association nswa.usPetroleum Equipment & Services Association pesa.orgAssociation of EnergyService Companies aesc.netNational Association of Royalty Owners naro-us.orgUnited States Energy Association usea.orgNatural Gas Supply Associationngsa.orgUS Oil and Gas Associationusoga.orgNATIONAL
Where are my Permian Barrels Going p 6 Reflections from OTC 2019 Interviews with Newpark Drilling Fluids Parker Hannifin and Brainnwave p 20 Oil Ships Which Rule The Waves p 26 Digital Twin Technology Can Drive Greater Efficiency Support New Business p 46 THE MAGAZINE FOR LEADERS IN AMERICAN ENERGY July August 2019 OilmanMagazine com MIDSTREAM TECHNOLOGY Maritime Fuel Transportation
Where are my Permian Barrels Going p 6 Reflections from OTC 2019 Interviews with Newpark Drilling Fluids Parker Hannifin and Brainnwave p 20 Oil Ships Which Rule The Waves p 26 Digital Twin Technology Can Drive Greater Efficiency Support New Business p 46 THE MAGAZINE FOR LEADERS IN AMERICAN ENERGY July August 2019 OilmanMagazine com MIDSTREAM TECHNOLOGY Maritime Fuel Transportation
Oilman Magazine / July-August 2019 / OilmanMagazine.com10Importance of Bolting SystemsBy Sarah SkinnerSo 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, efcient 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 renery 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 renery 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 efciency 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 COLUMNPhoto courtesy of Chitsanupong Katip – www.123RF.com
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Oilman Magazine / July-August 2019 / OilmanMagazine.com12Creating Resilient Operations Through Machine LearningBy Gabriel Prado and Marla RosnerIf 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 efciently 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 inefciencies.As important as they are, though, both predictive maintenance and process optimization are difcult to achieve without machine learning. Predictive maintenance has substantial barriers to implementation. The asset behavior models it uses are difcult 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 inefciencies, 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 BuildingWhile 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 inefciencies far more accurately than manual models can, and can accomplish this feat in far less time.Case study: Improving processes by identifying downhole drill stateIn one case study, a major oil and gas company was attempting to rene 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 classication 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 efciency.Photo courtesy of everythingpossible – www.123RF.comOILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com13SEAL OF DEPENDABILITYWWW.OILCENTER.COMwww.oilcenter.com | 800.256.8977 | email@example.comQUALITY THROUGH RESEARCHENVIRONMENTALLY FRIENDLY PRODUCTSSPECIALTY GREASES & OILSCLEANERS & DEGREASERSTHREAD COMPOUNDSWIRELINE PRODUCTSVALVE PRODUCTSPIPE COATINGSOIL CENTERRESEARCH LLCNatural Language ProcessingThe 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 workows, 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 rigsAn 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 efciency 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 condent 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 benets 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.com14New M&R Software Innovations Keep Fleet Managers in CheckBy Matt HendrixOver 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 signicantly impacts every type of operation and having improper management of M&R can drastically erode prots 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 ChallengesMore 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 benecial in driver recruitment and retention – critical since the driver shortage remains a difcult 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 ResourcesToday’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 signicantly 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 Unied 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 COLUMNPhoto courtesy of nerthuz – www.123RF.com
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Oilman Magazine / July-August 2019 / OilmanMagazine.com16OILMAN COLUMNAddressing Infrastructure Needs in the Permian Basin and Across AmericaBy Ronnie WitherspoonIt’s no surprise that with oil production in the Permian region quadrupling over the past eight years, the trafc 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 ofcials 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 MechanismsProducing 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 efcient as possible. A Nationwide Need for Infrastructure InvestmentThe 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 decient and in poor condition” also created additional costs and inefciencies 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 trafc. 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 trafc, 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 trafc nes. Photo courtesy of Aveda Energy and Transportation, a Daseke Company
Oilman Magazine / July-August 2019 / OilmanMagazine.com17OILMAN COLUMNThe 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 difcult 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 nation’s 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 nation’s 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 nation’s interstate system?Ronnie Witherspoon is the CEO and president at Aveda Energy and Transportation, a Daseke Company. With over 20 years of oileld 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.com18Salt of the Earth: The U.S. Strategic Petroleum ReserveBy Emmanuel SullivanThe 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 inuence 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 EmbargoIn 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 administration’s strong support of Israel. The Promise of PeaceThe 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 StorageAt 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 EarthStoring 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 reneries. The oil can also be transported by ship or barge to other reneries.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-HealingThe 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 WarOnly 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 dened 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 nation’s 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 NetTest 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, reneries 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 decit. An Abundance of OilAmerica’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 MitigationAlthough it didn’t 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.govOILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com20Reflections from OTC 2019: Interviews with Newpark Drilling Fluids, Parker Hannifin and BrainnwaveBy Alan AlexeyevThis 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 Hannin 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 oileld 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 difcult 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, specically 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 proles. 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 benecial 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 sacrice 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 Hannin, a company specializing in motion OILMAN COLUMNNovember 5-6, 2019VIRTUAL Conference & ExpoDedicated to Oil & Gas Emerging TechnologyREGISTER FOR FREE!Visit www.OilmanConnect.com for more information
Oilman Magazine / July-August 2019 / OilmanMagazine.com21control 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 oileld 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 protably 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 Hannin?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 sufcient 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 ofce 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 COLUMNNo w Av A i l A b l e : Th e Cr u d e li f e Cl o T h i N gw w w . s h i r T s i C l e .C o m /T h e C r u d e l i f e
Oilman Magazine / July-August 2019 / OilmanMagazine.com22OILMAN COLUMNThe Role of Rail Logistics In The Movement Of Oil & Gas Production And Downstream CommoditiesBy Brad HowellSome 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 efcient 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 reneries 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 classication 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 classication 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.com23OILMAN COLUMNSeventy-ve years ago, June 6th, General Dwight D. Eisenhower led troops into what is known as D-Day. His outward display of condence 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 unappable 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 America’s Energy Impact By Mark A. StansberryMark A. Stansberryoil 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.com24FEATUREFleet Performance OptimizationPeople 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 efciency, 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 FUELTRAXFUELTRAX 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 wasn’t 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 efciencies in fuel consumption and fuel quality assurance. In addition to fuel monitoring and reporting, FUELTRAX also offers crude monitoring and transporting for companies that specically request that service. Revolutionizing the Industry with TechnologyTechnology 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, articial intelligence, and the IoT have entirely revolutionized every aspect of this industry, making companies more efcient 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 Verication) 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 efcient 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 efciency 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 efciency savings.Midstream TechnologyMaritime Fuel TransportationBy Sarah SkinnerSchematic of FUELTRAX Mobile - Photos courtesy of FUELTRAX
Oilman Magazine / July-August 2019 / OilmanMagazine.com25FEATUREIt 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’ prole. 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 Union’s 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 MobileFUELTRAX 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 benets 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 specically 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 signicant efciency 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 verication 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 SecurityFUELTRAX 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 NewsMost 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 FutureToday 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.com26On 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 rened 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, classied 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 classied 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 classies 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 difcult 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 rened petroleum products. Their size is measured in deadweight metric tons DWT. Crude carriers are among the largest, ranging Oil Ships Which Rule The WavesBy Eugene M. KhartukovClass Length Beam Draft DeadweightProduct tanker 10,000-60,000 DWTPanamax 205 m 29 m 16 m 60,000-80,000 DWTAframax 245 m 34 m 20 m 80,000-120,000 DWTSuezmax 285 m 45 m 23 m125,000-180,000 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 DWTOILMAN COLUMN(1) Suez Canal can accommodate some in its expanded dimensions
Oilman Magazine / July-August 2019 / OilmanMagazine.com27OILMAN COLUMNfrom 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 rened 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, signicantly 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 rened 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 specically 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 FinanceChart 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.com28OILMAN COLUMNThe total crude oil tanker eet has grown only slightly in 2018. The VLCC and Aframax eets specically 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 prots.”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 sufcient 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 – reects 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 TankersUntil 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.com29OILMAN COLUMNof 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 efcient 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 trafc through the Suez Canal contributed, as did nationalization of Middle East oil reneries. 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.com30ft) 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.OwnershipAt 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: StatistaOILMAN COLUMN
Oilman Magazine / July-August 2019 / OilmanMagazine.com31Table 1. OPEC-Owned Oil Tanker Fleet in 2012-2016 – Source: Annual Statistical Bulletin 2017 – Vienna: OPEC, 2017, p. 80OILMAN COLUMNinto 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 difcult 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 Japan’s 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.RegistrationTo 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 certied 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.com32OILMAN COLUMNThe Impact of Software on Gas Flaring and Oil RefiningBy Tonae’ HamiltonGas 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 reneries. While aring is a common and efcient process utilized by many oil reneries 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 signicant 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 signicant 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 rening 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 benet on the environment as well as their own bottom line.” Utilizing eco-conscious solutions and software may prove to be benecial to chemical plants and oil reneries 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 rening 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 “benet 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 signicant 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 efciency of the operations, so that the difcult 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 shouldn’t 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 signicant 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 reneries 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.com33#TPS2019 #TURBOPUMP19“TPS offers everything one would hope to expect with the cost of shows. Networking, current and potential customer contact, technical and learning sessions, trend observation, helpful staff and most importantly, targeted exposure to the industry resulting in quality leads. The Turbomachinery Show continues to be one [of our] most successful and beneficial platforms for industry exposure… TPS is relevant and the best show in the industry.”MAEVE MCGOFF Sales & Marketing Coordinator, Cincinnati Gearing Systems48TH TURBOMACHINERY & 35TH PUMP SYMPOSIAREGISTER NOW! SYMPOSIA & EXHIBITION: SEPT. 10‑12SHORT COURSES: SEPT. 9TPS.TAMU.EDU
Oilman Magazine / July-August 2019 / OilmanMagazine.com34Oil and Gas Technology, Full-Speed Ahead!By Eric R. EisslerUntil 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 prots 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 DataThere 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 can’t 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 efcient 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 certication, 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 benet 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 GoneAs 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 identies 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 efciency 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 efciency, 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 efciency, 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 COLUMNPhoto courtesy of Theerapong Jaikaew – www.123RF.com
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Oilman Magazine / July-August 2019 / OilmanMagazine.com37OILMAN COLUMNmodeling involves optimizing the drilling of the well. Experts use sophisticated computer modeling software to simulate down-hole conditions. Well logs specically 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 Benecial?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 efciency, 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 oileld 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 specically 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 oileld 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 benet 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 OperationsAt 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 specically 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 prole, target formation or hole size that the company is planning to drill. It’s vital to utilize historical data more effectively and efciently. This can be achieved when experts know the data that they are evaluating. The data should be organized and objectives should be clearly identied. Without a clear picture of what the objectives are, an oileld 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 pacesettersContinued on next page...
Oilman Magazine / July-August 2019 / OilmanMagazine.com38OILMAN COLUMNbecause 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 efcient 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 conguration 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 protable and efcient manner.ConclusionIn summary, the ability to access and draw valuable insights from large data sets has made the drilling industry more protable and efcient. 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 specic road-mapping determines performance KPI targetsADVERTISE WITH US!Are you looking to expand your reach in the oil and gas marketplace? Do you have a product or service that would beneﬁt the industry? If so, we would like to speak with you!CALL US (800) 562-2340 EX. 1 We have a creative team that can design your ad! OilmanMagazine.com/advertise • Advertising@OilmanMagazine.com
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Oilman Magazine / July-August 2019 / OilmanMagazine.com40Interview with Michael Jensen, Founder, Midnight ToolsBy Tonae’ HamiltonTonae’ 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 oileld 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 oileld 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 oileld 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 reect 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 difculty is that with these resources comes very signicant 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 signicant 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 congurations 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 rening 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 ofce means that none of our patent IP has made it past the rst ofce 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 efcient 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 signicantly 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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Oilman Magazine / July-August 2019 / OilmanMagazine.com42OILMAN COLUMNComposite Solution Restores Eroded Petrochemical Plant LineBy Andrew PatrickScheduled 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 WorkWhen inspections in a petrochemical plant uncovered a section of 254-mm (10-in) carbon steel pipework that had experienced signicant 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 reneries, 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, reneries, 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 qualication, 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 certied 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 certied 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 AlternativeThe 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 reneries 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.com44OILMAN COLUMNUnderstanding Mineral Rights in Terms of Oil and Gas Extraction By Eric R. EisslerProperty 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 InvolvedWhere 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 specically 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 signicantly 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 Classied’ 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 crewsPhoto courtesy of Gui Yongnian – www.123RF.com
Oilman Magazine / July-August 2019 / OilmanMagazine.com45OILMAN COLUMN• who is responsible for anticipated problems (In other words: lawyer up!)More Mineral Rights Ownership VariationsMineral 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 AboundWhen 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. SUBSCRIBE TODAY!Get the Oil & Gas news and data you need in a magazine you’ll be proud to read. To subscribe, complete a quick form online:OilmanMagazine.com/subscribe Editor@OilmanMagazine.com (800) 562-2340 Ex. 5
Oilman Magazine / July-August 2019 / OilmanMagazine.com46Oilman Magazine / July-August 2019 / OilmanMagazine.com46OILMAN COLUMNDigital Twin Technology Can Drive Greater Efficiency, Support New Business By Dr. Francois LaborieOil and gas industry experts are constantly searching for ways to produce energy more efciently. 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 WorksA 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 OpportunitiesDigital twin technology can drive signicant new efciencies 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 ChallengesBut 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 twin’s 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 reects 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 difcult 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 NextSo 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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Oilman Magazine / July-August 2019 / OilmanMagazine.com48OILMAN COLUMNEnergy Exposition Lights Up the Industry in the Rockies By Jason SpiessThousands 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 ofcials.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 Auick, 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 that keep the industry safer than ever.” Jason Spiess interviewing Bob Donner, Founder of Freedom ManufacturingJeff Zarling, owner of Roughneck Coffee and Athena Borgialli, Lightfoot USAPanel discussion on what happened in Colorado: R-L, Jason Spiess, Dan Haley John Cook, John Robitaille, Harriet-HagemanNathan Winters gets ready to introduce the Wyoming delegation at the Energy Expo dinnerRocky Mountain CMA Entertainer of the Year, Chancey Williams and the Younger Brothers BandGlobal Nitrogen ServicesTeam members from DrillCommTeam members from Red RiverTeam members from Titan Solutions The Entrance to the Energy Expo at the Wyoming CenterStertil Koni demonstrating their skills at the Energy ExpoWY Governor Mark Gordon, Micheala Hager, K9 Pipe Inspections and leak detector dog Yara
Oilman Magazine / January-February 2019 / OilmanMagazine.com1November 5-6, 2019OILMAN CONNECT is a two-day virtual trade show dedicated to connecting businesses in the Oil and Gas Industry.Feature your products, services, and technologies while you network with other industry experts, attend educational seminars, and track all your leads and data.Visit www.OilmanConnect.com for more information800-562-2340 Ext 4 • info@OilmanConnect.comBook Your Virtual Booth Today
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